BARANGAY CONCILIATION

FIRST DIVISION
[ G.R. No. 211966, August 07, 2017 ]
JOSE AUDIE ABAGATNAN, JOSEPHINE A. PARCE, JIMMY ABAGATNAN, JOHN
ABAGATNAN, JENALYN A. DE LEON, JOEY ABAGATNAN, JOJIE ABAGATNAN,
AND JOY ABAGATNAN, PETITIONERS, VS. SPOUSES JONATHAN CLARITO AND
ELSA CLARITO, RESPONDENTS.

DECISION
DEL CASTILLO, J.:
We resolve the Petition for Review on Certiorari under Rule 45 of the Rules of Court,
assailing the June 20, 2013 Decision[1] and the February 3, 2014 Resolution[2] of the
Court of Appeals (CA) in CA-G.R. SP No. 03283 which dismissed, albeit without
prejudice, the Complaint for Unlawful Detainer and Damages [3] filed by petitioners Jose
Audie Abagatnan, Josephine A. Parce, Jimmy Abagatnan, John Abagatnan, Jenalyn A.
De Leon, Joey Abagatnan, Jojie Abagatnan and Joy Abagatnan against respondents
spouses Jonathan Clarito and Elsa Clarito, for failure to comply with the mandatory
requirement of resorting to prior barangay conciliation, as required under Section 412 of
Republic Act No. 7160, or the Local Government Code (LGC).

The Antecedent Facts

Wenceslao Abagatnan (Wenceslao) and his late wife, Lydia Capote (Lydia), acquired a
parcel of land designated as Lot 1472-B, with a total land area of 5,046 square meters,
and located at Barangay Cogon, Roxas City from Mateo Ambrad (Mateo) and Soteraña
Clarito (Soteraña), by virtue of a Deed of Absolute Sale [4] executed on August 1, 1967.[5]

On October 4, 1999, Lydia died, leaving her children, who are co-petitioners in this
case, to succeed into the ownership of her conjugal share of said property. [6]

In 1990, respondents allegedly approached Wenceslao and asked for permission to

construct a residential house made of light materials on a 480-square meter portion of
Lot 1472-B (subject property). Because respondent Jonathan Clarito (Jonathan) is a
distant relative, Wenceslao allowed them to do so subject to the condition that
respondents will vacate the subject property should he need the same for his own use. [7]

In September 2006, petitioners decided to sell portions of Lot 1472-B, including the
subject property which was then still being occupied by respondents. They offered to
sell said portion to respondents, but the latter declined. [8]

Consequently, petitioners sent respondents a Demand Letter [9] dated October 2, 2006

requiring the latter to vacate the subject property within fifteen (15) days from receipt of
the letter. The respondents, however, refused to heed such demand. [10]

On November 10, 2006, petitioners filed a Complaint for Unlawful Detainer and

1
Damages[11] against respondents before the Municipal Trial Court in Cities (MTCC),
Branch 2, Roxas City, where they claimed to have been unlawfully deprived of the use
and possession of a portion of their land.

Notably, the Complaint alleged that prior barangay conciliation proceedings are not

required as a pre-condition for the filing of the case in court, given that not all petitioners
are residents of Roxas City. Specifically, petitioner Jimmy C. Abagatnan (Jimmy)
resided in Laguna, while petitioner Jenalyn A. De Leon (Jenalyn) resided in Pasig City.
[12]

In their Answer with Counterclaim,[13] respondents argued that

prior barangay conciliation is a mandatory requirement that cannot be dispensed with,
considering that Jimmy and Jenalyn had already executed a Special Power of
Attorney[14] (SPA) in favor of their co-petitioner and sister, Josephine A. Parce
(Josephine), who is a resident of Roxas City. [15]

Respondents also insisted that Lot 1472-B is only a portion of Lot 1472 which is
covered by its mother title, Original Certificate of Title (OCT) No. 9882, under the name
of Nicolas Clarito, et al., Jonathan's predecessors-in-interest. Unfortunately, said title
was lost or destroyed during the war, but a copy of the owner's duplicate copy was
presented before the trial court and made part of the records. [16]

The Municipal Trial Court in Cities Ruling

In its Decision[17] dated August 17, 2007, the MTCC rendered judgment in favor of
petitioners and ordered respondents to remove the structures they erected on the
subject property and to vacate the same. It also directed respondents to pay petitioners
the amount of P500.00 per month as reasonable compensation for the use and
occupancy of the subject property from the date of the filing of the action up to and until
the structures on the property have been removed, as well as the cost of suit. [18]

The MTCC ruled that by preponderance of evidence, petitioners have a better right of
material possession over the subject property. It gave merit to petitioners' proof of
purchase of Lot 1472-B from Mateo and Soterana, the Demand Letter dated October 2,
2006 that they sent to respondents, and respondents' refusal to vacate the property. [19]

Respondents thereafter appealed the MTCC Decision to the Regional Trial Court
(RTC), Branch 19, Roxas City.

The Regional Trial Court Ruling

In its Decision[20] dated January 15, 2008, the RTC denied the appeal for lack of merit. It
ruled that since the parties raised the issue of ownership to justify their claims of
possession, and the evidence of ownership is preponderant on petitioners, the MTCC
was justified in ruling the case in the latter's favor. [21]

2
The RTC, too, held that the lack of barangay conciliation proceedings cannot be brought
on appeal because it was not made an issue in the Pre-Trial Order. [22]

Following the denial, respondents filed a Petition for Review [23] before the CA, assailing
the RTC's January 15, 2008 Decision.

The Court of Appeals Ruling

In its Decision dated June 20, 2013, the CA ruled that the findings of fact of both the
MTCC and the RTC are supported by the evidence on record. It gave more probative
value to the tax declarations and the Deed of Absolute Sale submitted by petitioners,
considering that only a copy of OCT No. 9882 was presented by respondents in court
and said copy contained clouded and blurred characters. The name of the alleged
registered owner, Francisco Clarito (Jonathan's father), is also not decipherable on the
title.[24]

Nevertheless, the CA granted the Petition and dismissed the petitioners' Complaint,
albeit without prejudice, for lack of prior referral to the Katarungang Pambarangay.[25] It
pointed out that majority of petitioners actually resided in Barangay Cogon, Roxas City,
while the two non-residents of Roxas City already executed an SPA in favor of
Josephine, whom they authorized, among others, to enter into an amicable settlement
with respondents. Since respondents also reside in the same barangay, the dispute
between the parties is clearly within the ambit of the Lupon Tagapamayapa's (Lupon)
authority.[26]

The CA thus concluded that petitioners' Complaint had been prematurely filed with the
MTCC, as it should have been first brought before the Lupon for mandatory conciliation
to accord the parties the chance for amicable settlement. [27]

Petitioners moved for reconsideration, but the CA denied the motion in its Resolution
dated February 3, 2014. As a consequence, petitioners filed the present Petition for
Review on Certiorari before the Court on April 14, 2014, assailing the CA's June 20,
2013 Decision and February 3, 2014 Resolution.

The Issue

Petitioners raise the sole issue of whether the CA correctly dismissed the Complaint for
failure to comply with the prior barangay conciliation requirement under Section 412 of
the LGC, despite the fact that not all real parties in interest resided in the same city or
municipality.[28]

The Court's Ruling

The Petition is impressed with merit.

xxx Section 412(a) of the LGC requires the parties to undergo a conciliation process
before the Lupon Chairman or the Pangkat as a pre-condition to the filing of a complaint
in court, thus:

3
SECTION 412. Conciliation. - (a) Pre-condition to Filing of Complaint in Court. No
complaint, petition, action, or proceeding involving any matter within the authority of
the lupon shall be filed or instituted directly in court or any other government office for
adjudication, unless there has been a confrontation between the parties before
the lupon chairman or the pangkat, and that no conciliation or settlement has been
reached as certified by the lupon or pangkat secretary and attested to by
the lupon or pangkat chairman [or unless the settlement has been repudiated by the
parties thereto. xxx][29] (Emphasis supplied)
The LGC further provides that "the lupon of each barangay shall have authority to bring
together the parties actually residing in the same city or municipality for amicable
settlement of all disputes," subject to certain exceptions enumerated in the law. [30]

One such exception is in cases where the dispute involves parties who actually
reside in barangays of different cities or municipalities, unless said barangay units
adjoin each other and the parties thereto agree to submit their differences to amicable
settlement by an appropriate lupon.[31]

Thus, parties who do not actually reside in the same city or municipality or
adjoining barangays are not required to submit their dispute to the lupon as a pre-
condition to the filing of a complaint in court.

In Pascual v. Pascual[32] the Court ruled that the express statutory requirement of actual
residency in the LGC pertains specifically to the real parties in interest in the case. It
further explained that said requirement cannot be construed to apply to the attorney-in-
fact of the party-plaintiff, as doing so would abrogate the meaning of a "real party in
interest" as defined in Section 2,[33] in relation to Section 3, of Rule 3 of the Rules of
Court.

The same ruling was reiterated in Banting v. Spouses Maglapuz[34] where the Court held
that "the requirement under Section 412 of the [LGC] that a case be referred for
conciliation before the Lupon as a precondition to its filing in court applies only to those
cases where the real parties-in-interest actually reside in the same city or
municipality."

In the present case, the Complaint filed before the MTCC specifically alleged that not all
the real parties in interest in the case actually reside in Roxas City: [35] Jimmy resided in
Poblacion, Siniloan, Laguna, while Jenalyn resided in Brgy. de La Paz, Pasig City. [36] As
such, the lupon has no jurisdiction over their dispute, and prior referral of the
case for barangay conciliation is not a precondition to its filing in court.

This is true regardless of the fact that Jimmy and Jenalyn had already authorized their
sister and co-petitioner, Josephine, to act as their attorney-in-fact in the ejectment
proceedings before the MTCC. As previously explained, the residence of the attorney-
in-fact of a real party in interest is irrelevant in so far as the "actual residence"
requirement under the LGC for prior barangay conciliation is concerned.

4
Besides, as the RTC correctly pointed out, the lack of barangay conciliation
proceedings cannot be brought on appeal because it was not included in the Pre-
Trial Order, which only enumerates the following issues to be resolved during the trial:
The following issues to be resolved by plaintiffs:

1. Whether or not the defendants have unlawfully withheld the portion of Lot 1472 over
which were occupied by them, particularly Lot 1472-B;

2. Whether or not the defendants can be lawfully ejected from that portion of Lot 1472-B
which are occupied by them;

3. Whether or not the prevailing parties can recover damages. For the defendants, the
issues to be resolved are as follows:

1. Whether or not the plaintiffs have a cause of action for unlawful detainer against the
defendants; and,

2. Whether or not the prevailing parties are entitled to an award of damages. [37]
On this point, it is important to stress that the issues to be tried between parties in a
case is limited to those defined in the pre-trial order[38] as well as those which may
be implied from those written in the order or inferred from those listed by necessary
implication.[39]

In this case, a cursory reading of the issues listed in the Pre-Trial Order easily shows
that the parties never agreed, whether expressly or impliedly, to include the lack of
prior barangay conciliation proceedings in the list of issues to be resolved before the
MTCC.

In effect, the non-inclusion of this issue in the Pre-Trial Order barred its

consideration during the trial. This is but consistent with the rule that parties are
bound by the delimitation of issues that they agreed upon during the pre-trial
proceedings.[40]

WHEREFORE, we GRANT the Petition for Review on Certiorari. The Decision dated

June 20, 2013 and the Resolution dated February 3, 2014 of the Court of Appeals in
CA-G.R. SP No. 03283 are REVERSED and SET ASIDE. The Decision dated January
15, 2008 of the Regional Trial Court, Branch 19, Roxas City in Civil Case No. V-47-07
is REINSTATED.

SO ORDERED.
THIRD DIVISION
[ G.R. No. 234499, June 06, 2018 ]

5
RUDY L. RACPAN, PETITIONER, VS. SHARON BARROGA-HAIGH, RESPONDENT.

DECISION
VELASCO JR., J.:
Nature of the Case

This treats of the Petition for Review on Certiorari under Rule 45 of the Rules of Court,
assailing the February 13, 2017 Decision[1] and August 17, 2017 Resolution[2] of the
Court of Appeals (CA) in CA G.R. CV No. 04034-MIN. Said rulings affirmed the
dismissal of the petitioner's complaint for improper venue and failure to comply with a
condition precedent to its filing.

Factual Antecedents

Petitioner Rudy Racpan filed a Complaint "For Declaration For Nullity of Deed of Sale
with Right to Repurchase & Attorney's Fees"[3] before the Regional Trial Court of Davao
City, Branch 11 (RTC-Davao). In his Complaint, which was docketed as Civil Case No.
34, 742-2012, petitioner alleged that after his wife's death on November 12, 2011, he
instructed their daughter to arrange his wife's important documents. In so doing, their
daughter discovered a Deed of Sale with Right to Purchase dated March 29, 2011. The
Deed of Sale was purportedly signed by him and his late wife and appeared to convey
to respondent Sharon Barroga-Haigh a real property registered in his name under TCT
No. T-142-2011009374 and located in Bo. Tuganay, Municipality of Carmen, Province
of Davao del Norte.[4] Petitioner maintained that the Deed of Sale was falsified and
fictitious as he never signed any contract, not even any special power of attorney, for
the sale or conveyance of the property which is still in his possession. Thus, he prayed
for the declaration of the Deed of Sale's nullity.

In her Answer with Compulsory Counterclaim,[5] respondent contended, by way of

affirmative defense, that the venue of the Complaint was improperly laid and that the
filing of the case lacks the mandatory requirement of Barangay Clearance.
Subsequently, respondent filed a motion for preliminary hearing on her affirmative
defenses.

Acting on the motion, the RTC-Davao set the case for preliminary hearing and
thereafter issued an Order dated September 18, 2013 [6] dismissing the petitioner's
Complaint as follows:
WHEREFORE, in view of the foregoing, the present case is hereby ORDERED
DISMISSED for being improperly filed before the Regional Trial Court of Davao City and
for failure to comply with a condition precedent prior to its filing.

SO ORDERED.[7]
Petitioner moved for the RTC-Davao to reconsider [8] its Order dismissing the complaint
but the trial court remained steadfast and denied his motion in its June 19, 2004 Order.
[9]
 Hence, the petitioner came to the CA on appeal. [10]

Ruling of the Court of Appeals

6
As stated at the outset hereof, the appellate court affirmed the dismissal of the
petitioner's Complaint as follows:
WHEREFORE, the order dated September 18, 2013 of the Regional Trial Court, Branch
11, Davao City in Civil Case No. 34,742-12 is AFFIRMED.

SO ORDERED.[11]
The CA explained that petitioner's Complaint is a real action as it wants the court to
abrogate and nullify. whatever right or claim the respondent might have on the property
subject of the Deed of Sale. Hence, for the appellate court, Section 1, Rule 4 of the
Rules of Court is applicable. Under this Rule, real actions shall be commenced and tried
in the proper court which has jurisdiction over the area wherein the real property
involved is situated. As the property involved is located in Bo. Tuganay, Municipality of
Cannen, Province of Davao del Norte, the appellate court held that the Complaint
should have been lodged with the RTC of Davao del Norte and not the RTC-Davao.

Further, the CA found that the petitioner's prayer for the issuance of a writ of preliminary
injunction is a mere ploy to avoid the requirement of a barangay conciliation, as a mere
annotation of a notice of lis pendens would achieve the same effect without having to
undergo trial or post a bond.

In a Resolution dated August 17, 2017[12] the CA stood its ground by denying the
petitioner's Motion for Reconsideration.[13]

Hence, the petitioner's present recourse, it being his contention that the Complaint he
interposed with the RTC-Davao is a personal action. He maintains that his Complaint is
not concerned with title to or possession of real property, as in fact, no transfer of
possession or title of the real property to the respondent has occurred. [14] For the
petitioner, the Complaint's venue was properly laid in Davao City where both he and the
respondent reside.

Petitioner likewise reiterated that, as his Complaint was coupled with a prayer for the
issuance of a writ of preliminary injunction, it is exempt from barangay conciliation
proceedings.

Issue

The main and decisive issue for resolution is whether the CA erred in affirming the
dismissal of the petitioner's Complaint.

Our Ruling

The petition is impressed with merit.

The venue was properly laid as the complaint was a personal action.

By weight of jurisprudence, the nature of an action is determined by the allegations in

7
the complaint. In turn, the nature of the action determines its proper venue. Rule 4 of
the Rules of Court provides the rules on the situs for bringing real and personal
actions, viz:
Rule 4

VENUE OF ACTIONS

Section 1. Venue of real actions. - Actions affecting title to or possession of real

property, or interest therein, shall be commenced and tried in the proper court which
has jurisdiction over the area wherein the real property involved, or a portion thereof, is
situated.

Forcible entry and detainer actions shall be commenced and tried in the municipal trial
court of the municipality or city wherein the real property involved, or a portion thereof,
is situated.

Section 2. Venue of personal actions. - All other actions may be commenced and tried
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.
Expounding on the foregoing provisions, the Court delineated the basic distinction
between a real and a personal action and their respective venues in Bank of the
Philippine Islands v. Hontanosas, Jr.,[15] stating that:
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. Such 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. 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. 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, for which
reason the action is considered a transitory one.
Otherwise stated, what determines the venue of a case is the primary objective for the
filing of the case.[16] On one hand, if the plaintiff seeks the recovery of personal property,
the enforcement of a contract or the recovery of damages, his complaint is a personal
action that may be filed in the place of residence of either party. On the other hand, if
the plaintiff seeks the recovery of real property, or if the action affects title to real
property or for the recovery of possession, or for partition or condemnation of, or
foreclosure of mortgage on, real property, then the complaint is a real action that must
be brought before the court where the real property is located. Thus, in Chua v. Total
Office Products and Services, Inc.,[17] this Court ruled that where the action is not

8
intended for the recovery of real property but solely for the annulment of a contract, it is
a personal action that may be filed in the court where the plaintiff or the respondent
resides. It held:
Well-settled is the rule that an action to annul a contract of loan and its accessory real
estate mortgage is a personal action. In a personal action, the plaintiff seeks the
recovery of personal property, the enforcement of a contract or the recovery of
damages. In contrast, in a real action, the plaintiff seeks the recovery of real property,
or, as indicated in Section 2 (a), Rule 4 of the then Rules of Court, a real action is an
action affecting title to real property or for the recovery of possession, or for partition, or
condemnation of, or foreclosure of mortgage on, real property.

In the Pascual case, relied upon by petitioner, the contract of sale of the fishpond was
assailed as fictitious for lack of consideration. We held that there being no contract to
begin with, there is nothing to annul. Hence, we deemed the action for annulment of the
said fictitious contract therein as one constituting a real action for the recovery of the
fishpond subject thereof

We cannot, however, apply the foregoing doctrine to the instant case. Note that
in Pascual, title to and possession of the subject fishpond had already passed to the
vendee. There was, therefore, a need to recover the said fishpond. But in the instant
case, ownership of the parcels of land subject of the questioned real estate
mortgage was never transferred to petitioner, but remained with TOPROS. Thus,
no real action for the recovery of real property is involved. This being the case,
TOPROS' action for annulment of the contracts of loan and real estate mortgage
remains a personal action. (emphasis supplied)
In the Complaint filed with the court a quo, petitioner sought the nullification of the Deed
of Sale with Right to Repurchase on the strength of this claim: he did not sign the same
nor did he execute any special power of attorney in favor of his late wife to do so in his
behalf.[18] But, as there was no allegation that the possession and title to the
property have been transferred to respondent, nowhere in the Complaint did
petitioner allege or pray for the recovery or reconveyance of the real property.
Pertinent parts of the Complaint read thus:
4. Plaintiff was married to Ma. Lucila B. Racpan on 20 December 1978. The latter died
on 13 November 2011 at Oroville, California...

5. Plaintiff Racpan purchased a property from his brother Lorezo L. Racpan formerly
covered by Transfer Certificate of Title No. T-189893 and located at Carmen, Davao del
Norte and the said property is now covered by Transfer Certificate of Title No. T-
142-2011009374. Hereto attached and marked as Annex "B" is a copy of the Transfer
Certificate of Title No. T-142-2011009374 registered under the name of plaintiff
Rudy L. Racpan. Also attached and marked as Annex "C'" is the tax declaration of the
subject property to prove that plaintiff is the owner of the same.

6. Plaintiff's wife died at Oroville, California on 12 November 2011. However, her

remains were returned to Davao City, Philippines. Nonetheless, it was the daughter of
the plaintiff in the person of Lani Racpan who arrived first in Davao City.

9
xxxx

8. On 12 December 2011, plaintiff's daughter showed to him the subject deed of sale
with right to repurchase dated 29 March 2011. Plaintiff was surprised because he did
not know or has NO knowledge of the said deed of sale with right to repurchase. When
plaintiff navigated the Deed of Sale, he was surprised because his signature
appearing on the same is COMPLETELY FALSIFIED....

8.a Moreover, plaintiff did not also execute any special power of attorney in favour
of his deceased wife authoring the latter to [sell] the subject property to the
defendant.

8.b On the other hand, the subject property is registered under the name of plaintiff
Rudy Racpan and NOT TO SPOUSES Racpan. The words "married to Ma. Lucila B.
Racpan" only signified the civil status of plaintiff to the latter.

xxxx

9.d Evidently, from the foregoing the (alleged) subject deed of sale with right to
repurchase is NULL AND VOID as the same contains the falsified signature of the
herein plaintiff.

xxxx

11. Plaintiff before and during the time of the execution of the subject Deed of Sale with
Right to Repurchase dated 29 March 2011 NEVER MET defendant Saigh. It was only
sometime in December 7 or 8, 2011 that he met defendant Saigh during the wake of his
wife wherein he was introduced to the former by Orly Gabriel.

12. To date, plaintiff is in possession of the subject property. However, his daughter

has been receiving text message from defendant requiring him to settle the said alleged
obligation of his deceased wife to her.[19]
Evidently, as the Complaint was not concerned with the title to or recovery of the real
property, it was a personal action. Thus, Davao City, where both the petitioner and the
respondent reside is the proper venue for the complaint. The appellate court therefore
committed a reversible error in affirming the trial court's dismissal of the case for
improper venue.

The Complaint was exempted from Barangay Conciliation Proceedings

As for petitioner's failure to resort to barangay conciliation, Section 412 of the Local

Government Code (LGC) provides that parties may go directly to court where the action
is coupled with provisional remedies:
SEC. 412. Conciliation. - (a) Pre-condition to filing of complaint in court. - No
complaint, petition, action, or proceeding involving any matter within the authority of the

10
lupon shall be filed or instituted directly in court or any other government office for
adjudication, unless there has been a confrontation between the parties before the
lupon chairman or the pangkat, and that no conciliation or settlement has been reached
as certified by the lupon secretary or pangkat secretary as attested to by the lupon
chairman or pangkat chairman or unless the settlement has been repudiated by the
parties thereto.

(b) Where parties may go directly to court. - The parties may go directly to court in the
following instances:

(1) Where the accused is under detention;

(2) Where a person has otherwise been deprived of personal liberty calling for habeas
corpus proceedings;

(3) Where actions are coupled with provisional remedies such as preliminary

injunction, attachment, delivery of personal property, and support pendente lite; and

(4) Where the action may otherwise be barred by the statute of limitations.

(c) Conciliation among members of indigenous cultural communities. - The customs and

traditions of indigenous cultural communities shall be applied in settling disputes
between members of the cultural communities.
While there is no dispute herein that the present case was never referred to
the Barangay Lupon for conciliation before petitioner instituted Civil Case No. 34, 742-
2012, there is likewise no quibbling that his Complaint was coupled with a prayer for the
issuance of a preliminary injunction. [20] Hence, it falls among the exceptions to the rule
requiring the referral to baranggay conciliation.

As good faith is always presumed,[21] in the absence of proof of improper motive on the
part of the petitioner, the Court cannot countenance the appellate court's assumption
that petitioner was solely intent on evading the requirements of the LGC in applying for
a preliminary injunction. This Court cannot sustain a dismissal of an action on account
of an unproven assertion of bad faith.

WHEREFORE, the petition is GRANTED. The February 13, 2017 Decision and August

17, 2017 Resolution of the Court of Appeals in CA-G.R. CV No. 04034-MIN, as well as
the Orders dated September 18, 2013 and June 19, 2004 of the Regional Trial Court of
Davao City, Branch 11, in Civil Case No. 34, 742-2012 are REVERSED and SET
ASIDE. Civil Case No. 34, 742-2012 is hereby ordered REINSTATED. The RTC is
ordered to proceed with dispatch in the disposition of the mentioned case.

SO ORDERED.

DOCKET FEES

11
 SECOND DIVISION

G.R. No. 176339               January 10, 2011

DO-ALL METALS INDUSTRIES, INC., SPS. DOMINGO LIM and LELY KUNG
LIM, Petitioners,
vs.
SECURITY BANK CORP., TITOLAIDO E. PAYONGAYONG, EVYLENE C. SISON,
PHIL. INDUSTRIAL SECURITY AGENCY CORP. and GIL SILOS, Respondents.

DECISION

ABAD, J.:

This case is about the propriety of awarding damages based on claims embodied in the
plaintiff’s supplemental complaint filed without prior payment of the corresponding filing
fees.

The Facts and the Case

From 1996 to 1997, Dragon Lady Industries, Inc., owned by petitioner spouses
Domingo Lim and Lely Kung Lim (the Lims) took out loans from respondent Security
Bank Corporation (the Bank) that totaled ₱92,454,776.45. Unable to pay the loans on
time, the Lims assigned some of their real properties to the Bank to secure the same,
including a building and the lot on which it stands (the property), located at M. de Leon
St., Santolan, Pasig City.1

In 1998 the Bank offered to lease the property to the Lims through petitioner Do-All
Metals Industries, Inc. (DMI) primarily for business although the Lims were to use part of
the property as their residence. DMI and the Bank executed a two-year lease contract
from October 1, 1998 to September 30, 2000 but the Bank retained the right to pre-
terminate the lease. The contract also provided that, should the Bank decide to sell the
property, DMI shall have the right of first refusal.

On December 3, 1999, before the lease was up, the Bank gave notice to DMI that it was
pre-terminating the lease on December 31, 1999. Wanting to exercise its right of first
refusal, DMI tried to negotiate with the Bank the terms of its purchase. DMI offered to
pay the Bank ₱8 million for the property but the latter rejected the offer, suggesting ₱15
million instead. DMI made a second offer of ₱10 million but the Bank declined the same.

While the negotiations were on going, the Lims claimed that they continued to use the
property in their business. But the Bank posted at the place private security guards from
Philippine Industrial Security Agency (PISA). The Lims also claimed that on several
occasions in 2000, the guards, on instructions of the Bank representatives Titolaido
Payongayong and Evylene Sison, padlocked the entrances to the place and barred the
Lims as well as DMI’s employees from entering the property. One of the guards even

12
pointed his gun at one employee and shots were fired. Because of this, DMI was unable
to close several projects and contracts with prospective clients. Further, the Lims
alleged that they were unable to retrieve assorted furniture, equipment, and personal
items left at the property.

The Lims eventually filed a complaint with the Regional Trial Court (RTC) of Pasig City
for damages with prayer for the issuance of a temporary restraining order (TRO) or
preliminary injunction against the Bank and its co-defendants Payongayong, Sison,
PISA, and Gil Silos.2 Answering the complaint, the Bank pointed out that the lease
contract allowed it to sell the property at any time provided only that it gave DMI the
right of first refusal. DMI had seven days from notice to exercise its option. On
September 10, 1999 the Bank gave notice to DMI that it intended to sell the property to
a third party. DMI asked for an extension of its option to buy and the Bank granted it.
But the parties could not agree on a purchase price. The Bank required DMI to vacate
and turnover the property but it failed to do so. As a result, the Bank’s buyer backed-out
of the sale. Despite what happened, the Bank and DMI continued negotiations for the
purchase of the leased premises but they came to no agreement.

The Bank denied, on the other hand, that its guards harassed DMI and the Lims. To
protect its property, the Bank began posting guards at the building even before it leased
the same to DMI. Indeed, this arrangement benefited both parties. The Bank alleged
that in October of 2000, when the parties could not come to an agreement regarding the
purchase of the property, DMI vacated the same and peacefully turned over possession
to the Bank.

The Bank offered no objection to the issuance of a TRO since it claimed that it never
prevented DMI or its employees from entering or leaving the building. For this reason,
the RTC directed the Bank to allow DMI and the Lims to enter the building and get the
things they left there. The latter claimed, however, that on entering the building, they
were unable to find the movable properties they left there. In a supplemental complaint,
DMI and the Lims alleged that the Bank surreptitiously took such properties, resulting in
additional actual damages to them of over ₱27 million.

The RTC set the pre-trial in the case for December 4, 2001. On that date, however,
counsel for the Bank moved to reset the proceeding. The court denied the motion and
allowed DMI and the Lims to present their evidence ex parte. The court eventually
reconsidered its order but only after the plaintiffs had already presented their evidence
and were about to rest their case. The RTC declined to recall the plaintiffs’ witnesses for
cross- examination but allowed the Bank to present its evidence. 3 This prompted the
Bank to seek relief from the Court of Appeals (CA) and eventually from this Court but to
no avail.4

During its turn at the trial, the Bank got to present only defendant Payongayong, a bank
officer. For repeatedly canceling the hearings and incurring delays, the RTC declared
the Bank to have forfeited its right to present additional evidence and deemed the case
submitted for decision.

13
On September 30, 2004 the RTC rendered a decision in favor of DMI and the Lims. It
ordered the Bank to pay the plaintiffs ₱27,974,564.00 as actual damages, ₱500,000.00
as moral damages, ₱500,000 as exemplary damages, and ₱100,000.00 as attorney’s
fees. But the court absolved defendants Payongayong, Sison, Silos and PISA of any
liability.

The Bank moved for reconsideration of the decision, questioning among other things
the RTC’s authority to grant damages considering plaintiffs’ failure to pay the filing fees
on their supplemental complaint. The RTC denied the motion. On appeal to the CA, the
latter found for the Bank, reversed the RTC decision, and dismissed the complaint as
well as the counterclaims.5 DMI and the Lims filed a motion for reconsideration but the
CA denied the same, hence this petition.

The Issues Presented

The issues presented in this case are:

1. Whether or not the RTC acquired jurisdiction to hear and adjudicate plaintiff’s
supplemental complaint against the Bank considering their failure to pay the filing
fees on the amounts of damages they claim in it;

2. Whether or not the Bank is liable for the intimidation and harassment
committed against DMI and its representatives; and

3. Whether or not the Bank is liable to DMI and the Lims for the machineries,
equipment, and other properties they allegedly lost after they were barred from
the property.

The Court’s Rulings

One. On the issue of jurisdiction, respondent Bank argues that plaintiffs’ failure to pay
the filing fees on their supplemental complaint is fatal to their action.

But what the plaintiffs failed to pay was merely the filing fees for their Supplemental
Complaint. The RTC acquired jurisdiction over plaintiffs’ action from the moment they
filed their original complaint accompanied by the payment of the filing fees due on the
same. The plaintiffs’ non-payment of the additional filing fees due on their additional
claims did not divest the RTC of the jurisdiction it already had over the case. 6

Two. As to the claim that Bank’s representatives and retained guards harassed and
intimidated DMI’s employees and the Lims, the RTC found ample proof of such
wrongdoings and accordingly awarded damages to the plaintiffs. But the CA disagreed,
discounting the testimony of the police officers regarding their investigations of the
incidents since such officers were not present when they happened. The CA may be
correct in a way but the plaintiffs presented eyewitnesses who testified out of personal

14
knowledge. The police officers testified merely to point out that there had been trouble
at the place and their investigations yielded their findings.

The Bank belittles the testimonies of the petitioners’ witnesses for having been
presented ex parte before the clerk of court. But the ex parte hearing, having been
properly authorized, cannot be assailed as less credible. It was the Bank’s fault that it
was unable to attend the hearing. It cannot profit from its lack of diligence.

Domingo Lim and some employees of DMI testified regarding the Bank guards’
unmitigated use of their superior strength and firepower. Their testimonies were never
refuted. Police Inspector Priscillo dela Paz testified that he responded to several
complaints regarding shooting incidents at the leased premises and on one occasion,
he found Domingo Lim was locked in the building. When he asked why Lim had been
locked in, a Bank representative told him that they had instructions to prevent anyone
from taking any property out of the premises. It was only after Dela Paz talked to the
Bank representative that they let Lim out. 7

Payongayong, the Bank’s sole witness, denied charges of harassment against the
Bank’s representatives and the guards. But his denial came merely from reports relayed
to him. They were not based on personal knowledge.1avvphil

While the lease may have already lapsed, the Bank had no business harassing and
intimidating the Lims and their employees. The RTC was therefore correct in adjudging
moral damages, exemplary damages, and attorney’s fees against the Bank for the acts
of their representatives and building guards.

Three. As to the damages that plaintiffs claim under their supplemental complaint, their
stand is that the RTC committed no error in admitting the complaint even if they had not
paid the filing fees due on it since such fees constituted a lien anyway on the judgment
award. But this after-judgment lien, which implies that payment depends on a
successful execution of the judgment, applies to cases where the filing fees were
incorrectly assessed or paid or where the court has discretion to fix the amount of the
award.8 None of these circumstances obtain in this case.

Here, the supplemental complaint specified from the beginning the actual damages that
the plaintiffs sought against the Bank. Still plaintiffs paid no filing fees on the same. And,
while petitioners claim that they were willing to pay the additional fees, they gave no
reason for their omission nor offered to pay the same. They merely said that they did
not yet pay the fees because the RTC had not assessed them for it. But a supplemental
complaint is like any complaint and the rule is that the filing fees due on a complaint
need to be paid upon its filing.9 The rules do not require the court to make special
assessments in cases of supplemental complaints.

To aggravate plaintiffs’ omission, although the Bank brought up the question of their
failure to pay additional filing fees in its motion for reconsideration, plaintiffs made no
effort to make at least a late payment before the case could be submitted for decision,

15
assuming of course that the prescription of their action had not then set it in. Clearly,
plaintiffs have no excuse for their continuous failure to pay the fees they owed the court.
Consequently, the trial court should have treated their Supplemental Complaint as not
filed.

Plaintiffs of course point out that the Bank itself raised the issue of non-payment of
additional filing fees only after the RTC had rendered its decision in the case. The
implication is that the Bank should be deemed to have waived its objection to such
omission. But it is not for a party to the case or even for the trial court to waive the
payment of the additional filing fees due on the supplemental complaint. Only the
Supreme Court can grant exemptions to the payment of the fees due the courts and
these exemptions are embodied in its rules.

Besides, as correctly pointed out by the CA, plaintiffs had the burden of proving that the
movable properties in question had remained in the premises and that the bank was
responsible for their loss. The only evidence offered to prove the loss was Domingo
Lim’s testimony and some undated and unsigned inventories. These were self-serving
and uncorroborated.

WHEREFORE, the Court PARTIALLY GRANTS the petition and REINSTATES with
modification the decision of the Regional Trial Court of Pasig City in Civil Case 68184.
The Court DIRECTS respondent Security Bank Corporation to pay petitioners DMI and
spouses Domingo and Lely Kung Lim damages in the following amounts: ₱500,000.00
as moral damages, ₱500,000.00 as exemplary damages, and ₱100,000.00 for
attorney’s fees. The Court DELETES the award of actual damages of ₱27,974,564.00.

SO ORDERED.

THIRD DIVISION

G.R. No. 153690             August 26, 2008

DAVID LU, petitioner,
vs.
PATERNO LU YM, SR., PATERNO LU YM, JR., VICTOR LU YM, ET. AL. & LUYM
DEVELOPMENT CORP., respondents.

x-----------------------x

G.R. No. 157381             August 26, 2008

PATERNO LU YM, SR., PATERNO LU YM, JR., VICTOR LU YM, JOHN LU YM,
KELLY LU YM, and LUDO & LUYM DEVELOPMENT CORP., petitioners,
vs.
DAVID LU, respondent.

16
x-----------------------x

G.R. No. 170889             August 26, 2008

JOHN LU YM and LUDO & LUYM DEVELOPMENT CORPORATION, petitioners,

vs.
THE HON. COURT OF APPEALS OF CEBU CITY (former Twentieth Division),
DAVID LU, ROSA GO, SILVANO LUDO & CL CORPORATION, respondents.

DECISION

NACHURA, J.:

Before us are three consolidated petitions assailing the decisions rendered and the
resolutions issued by the Court of Appeals (CA) in CA-G.R. SP No. 64523, CA-G.R. SP
No. 73383 and CA-G.R. CV No. 81163.

In G.R. No. 153690, David Lu (David) prays that this Court annul and set aside the
Decision1 dated December 20, 2001 in CA-G.R. SP No. 64523 dismissing the initial
complaint filed before the Regional Trial Court (RTC) of Cebu City, Branch 5 2 in Civil
Case No. CEB-25502,3 for non-compliance with the rules on non-forum shopping.
Likewise assailed is the court’s Resolution 4 dated May 28, 2002 denying his motion for
reconsideration.

In G.R. No. 157381, Paterno Lu Ym, Sr. (Paterno Sr.), Paterno Lu Ym, Jr. (Paterno Jr.),
John Lu Ym (John), Kelly Lu Ym (Kelly) (collectively referred to as the Lu Ym father and
sons), and Ludo and Luym Development Corp. (LLDC) assail the CA Decision 5 dated
February 27, 2003 ordering the RTC to desist from conducting any proceeding relating
to the receivership over LLDC.

In G.R. No. 170889, John and LLDC question the CA Resolutions dated September 6,
20046 denying their application for a writ of preliminary injunction; and dated December
8, 20057 denying their motion for reconsideration and further deferring the resolution of
the issue on docket fees.

Factual and Procedural Antecedents

LLDC is a family corporation founded by Paterno Sr. and his brothers (the fathers of
Rosa, Silvano and David), primarily to hold real estate for the family. 8 In 1997, LLDC’s
Board of Directors authorized the issuance of its 600,000 unsubscribed and unissued
shares at par value of P100.00 per share. The Lu Ym father and sons subscribed to and
paid most of such shares. David, et al., however, claimed that the 600,000 LLDC stocks
were issued in favor of the Lu Ym father and sons for less than their real values. Hence,
the complaint9 filed on August 14, 2000, by David, Rosa Go (Rosa), Silvano Ludo
(Silvano) and CL Corporation (CL Corp.) against the Lu Ym father and sons, namely:
Paterno Sr., Paterno Jr., Victor Lu Ym (Victor), John, Kelly, and LLDC, for Declaration

17
of Nullity of Share Issue, Receivership and Dissolution, before the RTC of Cebu City.
The case was raffled to Branch 5 and was docketed as Civil Case No. CEB-25502. In
said complaint, David, et al. asked that the issuance of said shares be nullified. 10 They
further asserted that the Lu Ym father and sons gravely abused their powers as
members of LLDC’s Board of Directors by issuing such shares, to the prejudice of
David, et al. They, therefore, asked for the dissolution of the corporation as their
ultimate remedy to obtain redress for their grievances. 11 To protect the interest of the
corporation during the pendency of the case, David et al. asked that a receiver for the
corporation be appointed.12

On August 25, 2000, the Lu Ym father and sons moved to dismiss 13 the complaint for
non-compliance with the Rules of Court on the required certificate of non-forum
shopping, since only one of the four plaintiffs signed the same, without any showing that
he was authorized to sign on behalf of the other parties. They, likewise, contended that
the case was dismissible because they did not exert earnest efforts toward a
compromise.

In a Resolution14 dated December 4, 2000, the court denied the motion solely on the
ground that the case was exempt from the observance of the Katarungang
Pambarangay Law. In another Resolution15 dated March 2, 2001, the court held that the
signature of only one of the plaintiffs was a substantial compliance with the rules on the
certificate of non-forum shopping.

On February 16, 2001, the court, on motion of David, et al., placed LLDC under
receivership pendente lite.16 Consequently, the court appointed Atty. Edward U. Du and
Mr. Luis A Cañete as receivers.17

Aggrieved, the Lu Ym father and sons elevated the matter to the Court of Appeals
assailing the court’s resolutions denying their motion to dismiss and their motion for
reconsideration; and placing the corporation under receivership and appointing two
persons as receivers. The case was docketed as CA-G.R. SP No. 64154, but the same
was dismissed on the ground that the verification and certification against forum
shopping were signed by only two petitioners.18 They later refiled the case. This time, it
was docketed as CA-G.R. SP No. 64523.

The appellate court initially dismissed19 the petition, finding no grave abuse of discretion
on the part of the RTC when it denied the Lu Ym father and sons’ motion to dismiss and
because of the prematurity of the petition on the issue of receivership (since there was
still a motion for reconsideration pending before the RTC). 20 However, on motion of the
Lu Ym father and sons, the court reconsidered its earlier ruling and, consequently,
reinstated the earlier petition.21 The Lu Yms then filed a Supplement to their petition.

On December 20, 2001, the CA granted22 the Lu Ym father and sons’ petition and, thus,
dismissed the complaint filed by David Lu, et al. for the parties’ (except David Lu) failure
to sign the certificate of non-forum shopping. In ruling for the dismissal of the initiatory
pleading, the court applied Loquias v. Ombudsman.23 As a consequence of the

18
dismissal of the complaint, the appellate court likewise annulled the resolutions placing
the corporation under receivership and appointing the receivers. 24 On May 28, 2002, the
CA denied the motion for reconsideration 25 filed by David Lu, et al. Hence, the petition
for review on certiorari before this Court filed by David Lu alone in G.R. No. 153690.

Meanwhile, the Lu Ym father and sons filed a Motion for Inhibition against the then RTC
Judge Ireneo Gako, Jr., which was granted on October 1, 2002. Thus, the case was re-
raffled to Branch 11, presided by Judge Isaias Dicdican, who directed the parties to
amend their respective pleadings in order to conform with the requirements laid down in
Sections 4(2) and 6(7), Rule 2 of the Interim Rules of Procedure Governing Intra-
Corporate Controversies under Republic Act (R.A.) No. 8799. 26 The case was re-
docketed as SRC Case No. 021-CEB.

On October 8, 2002, the Lu Ym father and sons filed in SRC Case No. 021-CEB a
Manifestation and Motion praying for the immediate lifting of the receivership order over
LLDC which was immediately set for hearing. 27 However, the hearing did not proceed as
scheduled due to the repeated motions of David to stop it. It turned out later that David
instituted a special civil action for Certiorari and Prohibition with the CA, with Urgent
Application for Temporary Restraining Order (TRO) and Writ of Preliminary Injunction,
on the sole issue of whether or not the RTC should proceed to hear the Lu Ym father
and sons’ motion to lift the receivership. The case was docketed as CA-G.R. SP No.
73383.28

On December 4, 2002, the CA issued a Resolution temporarily restraining the RTC from
conducting any proceeding in SRC Case No. 021-CEB. 29 On February 27, 2003, the
appellate court finally resolved to grant the petition and ordered the RTC to desist from
conducting any proceeding relating to the receivership over LLDC. 30 The court
concluded that the proceedings on receivership could not proceed without the parties
complying first with the earlier court order which required the parties to amend their
pleadings. The court ratiocinated that it could not rule on the propriety of the
appointment of a receiver because it would have to base its decision on the pleadings
that were yet to be amended. Besides, the pendency of G.R. No. 153690 before this
Court necessitated the deferment of any action on the lifting of receivership.

Aggrieved, the Lu Ym father and sons instituted the instant petition in G.R. No. 157381.

Meanwhile, Judge Dicdican inhibited himself, and the case was thus transferred from
Branch 11 to Branch 12.

On March 31, 2003, David filed a Motion to Admit Complaint to Conform to the Interim
Rules Governing Intra-Corporate Controversies, which the court admitted on July 18,
2003.31

On January 23, 2004, the Lu Ym father and sons inquired from the Clerk of Court on the
amount of docket fees paid by David, et al. John Lu Ym further inquired from the Office
of the Court Administrator (OCA) as to the correctness of the amount paid by David, et

19
al. After a series of letters sent to the OCA, the latter informed John that the matter of
docket fees should be brought to the attention of the regular courts and not to the OCA
which was not in the position to give an opinion. 32

On March 1, 2004, the RTC rendered a decision 33 on the merits of the case, annulling
the issuance of LLDC’s 600,000 shares of stocks thereby divesting the Lu Ym father
and sons of their shares and canceling their certificates of stocks. The court further
ordered the dissolution of LLDC and the liquidation of its assets. Consequently, a
management committee was created to take over LLDC, and the corporation’s officers
were stripped of their powers as such. 34 The court further declared that the decision was
"immediately executory." Aggrieved, the Lu Ym father and sons seasonably filed a
Notice of Appeal. The case was docketed as CA-G.R. CV No. 81163.

In view of the court’s declaration of the executory nature of the assailed decision, the Lu
Ym father and sons applied for a Writ of Preliminary Injunction and/or Temporary
Restraining Order (TRO),35 which was opposed36 by David.

On January 28, 2004, the appellate court issued a TRO valid for a period of sixty (60)
days.37 However, in a Resolution38 dated September 6, 2004, the court denied the
application for a writ of preliminary injunction. Since the original records had been
transmitted to the appellate court, the RTC was divested of jurisdiction to resolve
pending incidents therein. Thus, it ordered that all motions be filed with the CA.

In their motion for reconsideration, 39 the Lu Ym father and sons assailed the denial of
their application for preliminary injunction and, in addition thereto, they questioned the
sufficiency of the docket fees paid by David, et al. in the RTC where the original
complaint was filed.

On December 8, 2005, the appellate court did not reconsider its earlier resolution. As to
the sufficiency of the docket fees, it ruled that the matter be raised in their appellants’
brief and that the issue be threshed out in the appeal on the merits. 40 Hence, this
special civil action for certiorari and prohibition in G.R. No. 170889.

The Issues

G.R. No. 153690

David Lu raises the following issues for resolution.

[a] WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN

DISREGARDING THE NUMEROUS FATAL DEFECTS AND RULES OF COURT
AND IRCA VIOLATIONS OF RESPONDENTS’ APRIL 30, 2001 PETITION,
MOTION AND SUPPLEMENT.

[b] WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN

DISMISSING THE RTC CASE IN ITS ENTIRETY AND IN REFUSING TO

20
 PERMIT IT TO PROCEED AS TO PETITIONER DESPITE [I] PETITIONER’S
EXECUTION OF A CERTIFICATION AGAINST FORUM SHOPPING FOR THE
COMPLAINT AND [II] THE FACT [THAT] THE RTC CASE INVOLVES ONLY A
PERMISSIVE JOINDER OF PARTIES.41

On August 19, 2003, the Lu Ym father and sons filed an Urgent Motion with Prayer for a
TRO and/or Writ of Preliminary Injunction42 before this Court questioning the RTC’s
admission of David Lu’s amended complaint. They sought to enjoin said admission as it
would render moot and academic the cases pending before this Court.

G.R. No. 157381

The Lu Ym father and sons base their petition on the following alleged errors:

I.

THE JUDGMENT OF THE COURT OF APPEALS IS NULL AND VOID ON ITS

FACE FOR LACK OF JURISDICTION IN ENJOINING THE TRIAL COURT
BECAUSE THE DISMISSAL OF THE CASE BELOW IS ALREADY PENDING
APPEAL WITH THIS HONORABLE COURT AND IT IS, THEREFORE, THIS
HONORABLE COURT THAT HAS EXCLUSIVE JURISDICTION OVER THE
REMEDIES OF CERTIORARI, PROHIBITION AND INJUNCTION GRANTED BY
THE COURT OF APPEALS.

II.

THE PETITION FOR CERTIORARI AND PROHIBITION WAS WRONGFULLY

GRANTED BY THE COURT OF APPEALS BECAUSE ITS DECISION DID NOT
CONTAIN THE BASIC FINDING THAT THE TRIAL COURT COMMITTED A
GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF
JURISDICTION, NOR DID IT EVEN DEFINE IT AS AN ISSUE IN THE CASE,
NOR WAS THERE ANY GRAVE ABUSE OF DISCRETION.

III.

EVEN ASSUMING IN GRATIA ARGUMENTI THAT THE COURT OF APPEALS

HAD JURISDICTION OVER THE CASE, IT HAD ABSOLUTELY NO LEGAL
BASIS IN ENJOINING THE TRIAL COURT FROM ACTING ON THE URGENT
MOTION OF THE PETITIONERS TO LIFT THE HIGHLY OPPRESSIVE ORDER
OF RECEIVERSHIP.43

On June 7, 2006, David filed a Manifestation 44 that the cases pending before this Court
are moot and academic - G.R. No. 153690 for the admission of the amended complaint
which superseded the original complaint; and G.R. No. 157381 for the RTC’s act of
resolving the case on the merits.45 For their part, the Lu Ym father and sons agree on
the mootness of G.R. No. 153690, but not G.R. No. 157381. This is without prejudice to

21
the resolution of the issue they raised on the propriety of the admission of the amended
complaint.46

G.R. No. 170889

In coming before this Court in this special civil action for certiorari and prohibition, John
Lu Ym and LLDC raise the following issues:

I.

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED

GRAVE ABUSE OF DISCRETION IN DENYING PETITIONERS’ MOTION FOR
RECONSIDERATION DESPITE THE FACT THAT THE TRIAL COURT DID NOT
ACQUIRE JURISDICTION OVER THE SUBJECT MATTER OF THE CASE FOR
FAILURE OF THE RESPONDENTS TO PAY THE CORRECT DOCKET FEES
WHEN THE ORIGINAL COMPLAINT WAS FILED.

II.

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED

GRAVE ABUSE OF DISCRETION IN NOT DISMISSING SRC CASE NO. 021-
CEB DESPITE CLEAR SHOWING THAT RESPONDENTS WERE GUILTY OF
BAD FAITH IN AVOIDING PAYMENT OF THE CORRECT DOCKET FEES. 47

On January 23, 2006, we issued a Status Quo Order specifically enjoining the

implementation of the CA resolutions denying the application for a writ of preliminary
injunction.48

Stripped of the non-essentials and combining all the arguments set forth in the
consolidated petitions, the issues for our resolution are as follows:

I. Whether the original complaint filed before the RTC should have been
dismissed for:

A. non-compliance with the rules on certificate of non-forum shopping; and

B. non-payment of the correct docket fees

II. Whether the receivership proceedings were validly suspended pending the
amendment of the initial complaint in compliance with the Interim Rules of
Procedure for Intra-Corporate Controversies

III. Whether a writ of preliminary injunction should have been issued pending the
resolution of the appeal on the merits filed before the Court of Appeals.

The Ruling of This Court

22
In G.R. No. 153690, David claims that the Lu Ym father and sons’ petition (in CA-G.R.
SP No. 64523) before the CA should not have been entertained because of the
following fatal defects: 1) the petition questioning the approval of the receivership was
prematurely filed because of the pendency of their motion for reconsideration before the
RTC; 2) their motion and supplement were filed without asking leave of court to do so;
3) considering that the motion and supplement contained new allegations, there was a
failure to attach a new certificate of non-forum shopping; and 4) the motion and
supplement were filed out of time. 49

At the outset, we find the procedural issues raised by David to be of no moment. Basic
is the rule that a motion for the reconsideration of an assailed order may be filed by an
aggrieved party within the reglementary period. No motion for leave to file such motion
is required under the Rules or in any other circular of the Supreme Court. As long as the
same is filed within fifteen (15) days from receipt of the assailed order, there is no
reason for the courts not to entertain it. In fact, in some exceptional cases as when
substantial justice so requires, a motion belatedly filed may still be taken cognizance of.
As to the supplemental petition filed without leave of court, suffice it to state that the CA
entertained the same, required David to comment thereon, and decided the case on the
basis thereof. Such actions of the appellate court adequately show that the
supplemental petition was admitted. Lastly, as to the lack of certificate of non-forum
shopping in the motion for reconsideration and supplement to the petition, we need only
reiterate that the certificate is required only in cases of initiatory pleadings. 50

Now on the substantial issues.

In G.R. No. 153690, the assailed CA decision dismissed David et al.’s original complaint
for their failure to sign the verification and certification of non-forum shopping.
Subsequent to the aforesaid decision, however, the RTC ordered David et al. to amend
the complaint to conform to the interim rules of procedure for intra-corporate
controversy. In compliance with the order, David, et al. amended the complaint and filed
the same with leave of court. The RTC, thereafter, admitted the amended complaint,
proceeded to hear the case, and decided the same on the merits.

While it is true that the Lu Ym father and sons questioned the admission of the
aforesaid amended complaint before this Court, the same was done only through an
Urgent Motion.51 Under the Rules of Court, the proper mode to challenge such an order,
which undoubtedly is interlocutory, is through a special civil action for certiorari under
Rule 65. This procedural defect, therefore, bars the Court from ruling on the propriety of
such admission. We cannot take cognizance of proceedings before the RTC unless
they are brought before us through the proper mode of review. To be sure, the Urgent
Motion cannot be a substitute for the remedy of a special civil action
for certiorari.52 Consequently, the amended complaint admitted by the RTC stands.

With the issue of admission of the amended complaint resolved, the question of whether
or not the original complaint should have been dismissed was mooted. Section 8, Rule
10 of the Rules of Court specifically provides that an amended pleading supersedes

23
the pleading that it amends. In this case, the original complaint was deemed
withdrawn from the records upon the admission of the amended complaint. 53 This
conclusion becomes even more pronounced in that the RTC already rendered a
decision on the merits of the said amended complaint, not to mention the Lu Ym father
and sons’ concurrence in the mootness of the issue in the instant petition. 54

It is settled that courts do not entertain a moot question. An issue becomes moot and
academic when it ceases to present a justiciable controversy, so that a declaration on
the issue would be of no practical use or value.55 This Court, therefore, abstains from
expressing its opinion in a case where no legal relief is needed or called for. 56

In G.R. No. 157381, the Lu Ym father and sons insist that the CA had no jurisdiction to
issue the writ of preliminary injunction, more so, to make the same permanent, in view
of the pendency of G.R. No. 153690. They argue that the application for a writ should
have been filed before this Court and not through a separate special civil action before
the CA. They further assert that the CA should not have issued a writ as there was no
finding of grave abuse of discretion, to begin with. Lastly, they argue that the order of
the trial court requiring the parties to amend their pleadings did not bar the RTC from
acting on the provisional remedy of receivership. Since this Court did not issue a
restraining order, the receivership proceedings could still proceed. 57

It is noteworthy at this point to reiterate the factual circumstances surrounding the

instant petition. G.R. No. 157381 has its origin in the Lu Ym father and sons’ motion to
lift the receivership over LLDC. David, for his part, went up to the CA and asked that the
RTC be enjoined from hearing said motion pending resolution of his petition before this
Court in G.R. No. 153690 and the amendment of his complaint as ordered by the RTC.
David’s petition was granted by the appellate court in the assailed decision. It
ratiocinated that any matter, principal or collateral, should be held in abeyance pending
the amendment of the original complaint. Besides, said the appellate court, the
dismissal of the original complaint on which the Lu Ym father and sons based their
motion to lift receivership was still the subject of an appeal before this Court.

Again, the propriety of such injunction is mooted by the amendment of the complaint,
and the RTC decision in the case on the merits thereof. The appellate court ordered that
the hearing on the motion to lift the receivership be held in abeyance primarily because
the original complaint was yet to be amended. Upon the amendment of the complaint
and the admission thereof by the RTC, the reason for such injunction ceased to exist.
Thus, the CA could resolve, as it in fact resolved, the question of whether or not the
receivership should be lifted.

The RTC decision on the merits of the case gives this Court more reasons to declare
the mootness of the instant petition. It must be recalled that the motion to lift the
receivership was filed before the RTC ancillary to the principal action, and what was
sought to be enjoined was the hearing on that particular motion. With the decision on
the merits rendered by the RTC, albeit still on appeal, there is nothing more to be
enjoined. More importantly, the RTC ordered that the receivers cease from performing

24
their functions and that a management committee be created. 58 Clearly, these
supervening events mooted the petition. Time and again, we have declared that a
petition should be denied for the sole reason that the act sought to be enjoined is
already fait accompli.59

To reiterate, the trial court’s decision on the merits rendered the issue on the propriety
of the injunction moot and academic, notwithstanding the fact that said decision has
been appealed to the Court of Appeals. 60 Courts are called upon to resolve actual cases
and controversies, not to render advisory opinions.61

It is true that we have held in a number of cases that the moot and academic principle is
not a magical formula that can automatically dissuade the courts from resolving a case.
Courts will still decide cases otherwise, moot and academic if: first, there is a grave
violation of the Constitution; second, the exceptional character of the situation and the
paramount public interest is involved; third, when the constitutional issue raised requires
formulation of controlling principles to guide the bench, the bar, and the public; and,
fourth, the case is capable of repetition yet evading review. 62 However, not one of the
enumerated exceptions obtains in the instant case. Thus, a denial of the instant petition
is warranted.

In G.R. No. 170889, John Lu Ym and LLDC explain that while it may be possible to
raise the issue of docket fees in their appellants’ brief as suggested by the CA, it would
already be too late because the issue would be rendered moot and academic by the
dissolution of the corporation. They further question the propriety of the creation of the
management committee, arguing that there was non-observance of substantive and
procedural rules. As to the issue of estoppel, they claim that they first raised the issue of
docket fees only in their motion for reconsideration before the CA because they had yet
to await the OCA’s response to their inquiry on the correct docket fees. Lastly, they
argue that David et al. are now precluded from paying the correct docket fees by the
lapse of the prescriptive period. Neither can a lien be created on the judgment in lieu of
dismissal.63

In short, John and LLDC seek the dismissal of the initial complaint on the ground of lack
of jurisdiction occasioned by the insufficient payment of docket fees.

A court acquires jurisdiction over a case only upon the payment of the prescribed fees.
The importance of filing fees cannot be gainsaid for these are intended to take care of
court expenses in the handling of cases in terms of costs of supplies, use of equipment,
salaries and fringe benefits of personnel, and others, computed as to man-hours used in
the handling of each case. Hence, the non-payment or insufficient payment of docket
fees can entail tremendous losses to the government in general and to the judiciary in
particular.64

In the instant case, however, we cannot grant the dismissal prayed for because of the
following reasons: First, the case instituted before the RTC is one incapable of
pecuniary estimation. Hence, the correct docket fees were paid. Second, John and

25
LLDC are estopped from questioning the jurisdiction of the trial court because of their
active participation in the proceedings below, and because the issue of payment of
insufficient docket fees had been belatedly raised before the Court of Appeals, i.e., only
in their motion for reconsideration. Lastly, assuming that the docket fees paid were truly
inadequate, the mistake was committed by the Clerk of Court who assessed the same
and not imputable to David; and as to the deficiency, if any, the same may instead be
considered a lien on the judgment that may thereafter be rendered.

The Court had, in the past, laid down the test in determining whether the subject matter
of an action is incapable of pecuniary estimation by ascertaining the nature of the
principal action or remedy sought. If the action is primarily for recovery of a sum of
money, the claim is considered capable of pecuniary estimation. However, where the
basic issue is something other than the right to recover a sum of money, the money
claim being only incidental to or merely a consequence of, the principal relief sought,
the action is incapable of pecuniary estimation. 65

In the current controversy, the main purpose of the complaint filed before the RTC was
the annulment of the issuance of the 600,000 LLDC shares of stocks because they had
been allegedly issued for less than their par value. Thus, David sought the dissolution of
the corporation and the appointment of receivers/management committee. 66 To be sure,
the annulment of the shares, the dissolution of the corporation and the appointment of
receivers/management committee are actions which do not consist in the recovery of a
sum of money. If, in the end, a sum of money or real property would be recovered, it
would simply be the consequence of such principal action. Therefore, the case before
the RTC was incapable of pecuniary estimation. Accordingly, John’s and LLDC’s
contention cannot be sustained. And since David paid the docket fees for an action the
subject of which was incapable of pecuniary estimation, as computed by the Clerk of
Court, the trial court validly acquired jurisdiction over the case.

Even assuming that the subject in the instant case is capable of pecuniary estimation,
still, the case should not be dismissed because the insufficiency of the fees actually
paid was belatedly raised; David relied on the assessment made by the Clerk of Court;
and if there is a deficiency, it may instead be considered a lien on the judgment that
may hereafter be rendered.

We note that the Lu Ym father and sons belatedly raised the issue of insufficient
payment of docket fees in their motion for reconsideration before the CA. A perusal of
the records reveals that the Lu Ym father and sons filed several pleadings before the
RTC, specifically, a Motion to Dismiss and Motion to Lift the Appointment of a Receiver,
among others. They, likewise, filed several pleadings before the Court of Appeals and
before this Court either as initiatory pleadings or in opposition to those filed by the
adverse party. Considering their prompt action and reaction to ensure that their rights
are protected, their belated objection to the payment of docket fees is, therefore,
inexcusable. Well-established is the rule that after vigorously participating in all stages
of the case before the trial court and even invoking the trial court’s authority in order to
ask for affirmative relief, John and LLDC are barred by estoppel from challenging the

26
trial court’s jurisdiction.67 If a party invokes the jurisdiction of a court, he cannot
thereafter challenge the court’s jurisdiction in the same case. To rule otherwise would
amount to speculating on the fortune of litigation, which is against the policy of the
Court.68 Thus, even if, indeed, the docket fees paid were inadequate, this allegation
having been raised for the first time on appeal, should be disallowed. 69

While it is true that this Court had previously dismissed complaints for non-payment of
docket fees, as in the early case of Manchester Development Corporation v. Court of
Appeals,70 these cases uniformly involved bad faith on the part of the plaintiff, such that
the correct amount of damages claimed was not specifically stated. The Court, in such
cases, concluded that there was bad faith on the part of the complainant and a clear
intent to avoid payment of the required docket fee, thus, the dismissal of the cases was
warranted.

It may be recalled that despite the payment of insufficient fees, this Court refrained from
dismissing the complaint/petition in Intercontinental Broadcasting Corporation (IBC-13)
v. Alonzo-Legasto,71 Yambao v. Court of Appeals72 and Ayala Land, Inc. v. Carpo.73 In
those cases, the inadequate payment was caused by the erroneous assessment made
by the Clerk of Court. In Intercontinental,74 we declared that the payment of the docket
fees, as assessed, negates any imputation of bad faith to the respondent or any intent
of the latter to defraud the government. Thus, when insufficient filing fees were initially
paid by the respondent, and there was no intention to defraud the government,
the Manchester rule does not apply. In Yambao,75 this Court concluded that petitioners
cannot be faulted for their failure to pay the required docket fees for, given the prevailing
circumstances, such failure was clearly not a dilatory tactic or intended to circumvent
the Rules of Court. In Ayala Land,76 the Court held that despite the jurisdictional nature
of the rule on payment of docket fees, the appellate court still has the discretion to relax
the rule in meritorious cases.

In the instant case, David paid the docket fees as assessed by the Clerk of Court. Even
if the amount was insufficient, as claimed by John and LLDC, fraud and bad faith cannot
be attributed to David to warrant the dismissal of his complaint. Consistent with the
principle of liberality in the interpretation of the Rules, in the interest of substantial
justice, this Court had repeatedly refrained from dismissing the case on that ground
alone. Instead, it considered the deficiency in the payment of the docket fees as a lien
on the judgment which must be remitted to the Clerk of Court of the court a quo upon
the execution of the judgment.77

Lastly, we now resolve the issue of whether or not the CA abused its discretion in
denying the Lu Ym father and sons’ application for a writ of preliminary injunction.
Section 3, Rule 58 of the Rules of Court sets forth the requisites for the issuance of a
writ of preliminary injunction, 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 act or

27
 acts complained of, or in requiring 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, agency or a person is doing, threatening, or is 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.

In the instant case, John and LLDC failed to satisfy the above requisites. Except for
their claim of nullity of the RTC decision because of insufficient payment of docket fees,
no evidence was offered to establish the existence of a clear and unmistakable right on
their part that must be protected, as well as the serious damage or irreparable loss that
they would suffer if the writ is not granted.

It has been consistently held that there is no power, the exercise of which is more
delicate, which requires greater caution, deliberation and sound discretion, or more
dangerous in a doubtful case than the issuance of an injunction. It is the strong arm of
equity that should never be extended unless to cases of great injury, where courts of
law cannot afford an adequate or commensurate remedy in damages. Every court
should remember that an injunction is a limitation upon the freedom of action of the
defendant and should not be granted lightly or precipitately. It should be granted only
when the court is fully satisfied that the law permits it and the emergency demands it. 78

Clearly then, no grave abuse of discretion can be attributed to the Court of Appeals in
denying the Lu Ym father and sons’ application for a writ of preliminary injunction.

One final note. We observe that these consolidated cases involve interlocutory orders of
the RTC. The delay in the disposition of the main case, which is now pending appeal
before the CA, was occasioned by the actions of all the contending parties in seeking
affirmative relief before the Court of Appeals and before this Court. Our disposition of
these three petitions should now pave the way for the final resolution of the corporate
dispute which started as early as 2000.

In view of the above disquisitions, we deem it proper to lift the status quo order which
this Court issued on January 23, 2006. The CA is directed to proceed to rule on the
appeal with dispatch.

WHEREFORE, premises considered, the petitions in G.R. Nos. 153690 and 157381
are DENIED for being moot and academic; while the petition in G.R. No. 170889
is DISMISSED for lack of merit. Consequently, the Status Quo Order dated January 23,
2006 is hereby LIFTED.

28
The Court of Appeals is DIRECTED to proceed with CA-G.R. CV No. 81163 and to
resolve the same with dispatch.

SO ORDERED.

EN BANC

G.R. No. 202836, June 19, 2018

FIRST SARMIENTO PROPERTY HOLDINGS, INC., Petitioner, v. PHILIPPINE BANK

OF COMMUNICATIONS, Respondent.

DECISION

LEONEN, J.:

To determine the nature of an action, whether or not its subject matter is capable or
incapable of pecuniary estimation, the nature of the principal action or relief sought must
be ascertained. If the principal relief is for the recovery of a sum of money or real
property, then the action is capable of pecuniary estimation. However, if the principal
relief sought is not for the recovery of sum of money or real property, even if a claim
over a sum of money or real property results as a consequence of the principal relief,
the action is incapable of pecuniary estimation.

This resolves the Petition for Review1 filed by First Sarmiento Property Holdings, Inc.
(First Sarmiento) assailing the April 3, 2012 Decision 2 and July 25, 2012 Order3 of
Branch 11, Regional Trial Court, Malolos City, Bulacan in Civil Case No. 04-M-2012.

The facts as established by the parties are as follows:

On June 19, 2002,4 First Sarmiento obtained from Philippine Bank of Communications

(PBCOM) a P40,000,000.00 loan, which was secured by a real estate mortgage 5 over
1,076 parcels of land.6

On March 15, 2003,7 the loan agreement was amended8 with the increase of the loan
amount to P51,200,000.00. On September 15, 2003, the loan agreement was further
amended9 when the loan amount was increased to P100,000,000.00.

On January 2, 2006,10 PBCOM filed a Petition for Extrajudicial Foreclosure of Real

Estate Mortgage.11 It claimed in its Petition that it sent First Sarmiento several demand
letters, yet First Sarmiento still failed to pay the principal amount and accrued interest
on the loan. This prompted PBCOM to resort to extrajudicial foreclosure of the
mortgaged properties, a recourse granted to it under the loan agreement. 12

On December 27, 2011, First Sarmiento attempted to file a Complaint for annulment of
real estate mortgage with the Regional Trial Court. However, the Clerk of Court refused

29
to accept the Complaint in the absence of the mortgaged properties' tax declarations,
which would be used to assess the docket fees.13

On December 29, 2011, Executive Judge Renato C. Francisco (Judge Francisco), First
Vice-Executive Judge Ma. Theresa A. Mendoza Arcega, Second Vice-Executive Judge
Ma. Belen R. Liban, and Third Vice-Executive Judge Basilio R. Gabo, Jr. of the
Regional Trial Court of City of Malolos, Bulacan, granted First Sarmiento's Urgent
Motion to Consider the Value of Subject Matter of the Complaint as Not Capable of
Pecuniary Estimation, and ruled that First Sarmiento's action for annulment of real
estate mortgage was incapable of pecuniary estimation. 14

Also on December 29, 2011, the mortgaged properties were auctioned and sold to
PBCOM as the highest bidder.15

On January 2, 2012, First Sarmiento filed a Complaint for annulment of real estate
mortgage and its amendments, with prayer for the issuance of temporary restraining
order and preliminary injunction.16 It paid a filing fee of P5,545.00.17

First Sarmiento claimed in its Complaint that it never received the loan proceeds of
P100,000,000.00 from PBCOM, yet the latter still sought the extrajudicial foreclosure of
real estate mortgage. It prayed for the issuance of a temporary restraining order and
preliminary injunction to enjoin the Ex-Officio Sheriff from proceeding with the
foreclosure of the real estate mortgage or registering the certificate of sale in PBCOM's
favor with the Registry of Deeds of Bulacan.18

That same day, Judge Francisco issued an ex-parte temporary restraining order for 72
hours, enjoining the registration of the certificate of sale with the Registry of Deeds of
Bulacan.19

On January 4, 2012, the Regional Trial Court directed the parties to observe the status
quo ante.20

On January 24, 2012, the Clerk of Court and Ex-Officio Sheriff of Malolos City, Bulacan
issued a certificate of sale to PBCOM.21

In its Opposition (Re: Application for Issuance of Temporary Restraining

Order),22 PBCOM asserted that the Regional Trial Court failed to acquire jurisdiction
over First Sarmiento's Complaint because the action for annulment of mortgage was a
real action; thus, the filing fees filed should have been based on the fair market value of
the mortgaged properties.23

PBCOM also pointed out that the Regional Trial Court's directive to maintain the status
quo order beyond 72 hours constituted an indefinite extension of the temporary
restraining order, a clear contravention of the rules. 24

30
On April 3, 2012, Branch 11, Regional Trial Court, 25 Malolos City, Bulacan dismissed
the Complaint for lack of jurisdiction:

Following the High Court's ruling in the case of Home Guaranty Corporation v. R. II
Builders, Inc. and National Housing Authority, G.R. No. 192549, March 9, 2011, cited by
the bank in its Rejoinder, which appears to be the latest jurisprudence on the matter to
the effect that an action for annulment or rescission of contract does not operate to
efface the true objective and nature of the action which is to recover real property, this
Court hereby RESOLVES TO DISMISS the instant case for lack of jurisdiction, plaintiff
having failed to pay the appropriate filing fees.

Accordingly, the instant case is hereby DISMISSED.

SO ORDERED.26
On July 25, 2012, the Regional Trial Court 27 denied First Sarmiento's motion for
reconsideration.28

On August 17, 2012, First Sarmiento sought direct recourse to this Court with its
Petition for Review29 under Rule 45. It insists that its Complaint for the annulment of real
estate mortgage was incapable of pecuniary estimation. 30 It points out that the
Executive Judge and Vice-Executive Judges of the Regional Trial Court likewise
acknowledged that its action was incapable of pecuniary estimation. 31

Petitioner highlights that the Supreme Court En Banc in Lu v. Lu Ym held "that an action
for declaration of nullity of issuance of shares or an action questioning the legality of a
conveyance is one not capable of pecuniary estimation." 32 Furthermore, petitioner
maintains that the Supreme Court En Banc in Bunayog v. Tunas also established that a
complaint questioning the validity of a mortgage is an action incapable of pecuniary
estimation.33

It emphasizes that Home Guaranty Corporation v. R-II Builders, which the Regional

Trial Court relied on to dismiss its complaint for lack of jurisdiction, was rendered by a
division of the Supreme Court; hence, it cannot modify or reverse a doctrine or principle
of law laid down by the Supreme Court En Banc.34

On September 19, 2012,35 this Court directed respondent PBCOM to comment on the

petition.

In its Comment,36 respondent contends that petitioner's action to annul the real estate
mortgage and enjoin the foreclosure proceedings did not hide the true objective of the
action, which is to restore petitioner's ownership of the foreclosed properties. 37

Respondent maintains that this Court has already settled that "a complaint for
cancellation of sale which prayed for both permanent and preliminary injunction aimed
at the restoration of possession of the land in litigation is a real action." 38

31
It likewise stresses that since petitioner's primary objective in filing its Complaint was to
prevent the scheduled foreclosure proceedings over the mortgaged properties and the
conveyance of their ownership to the highest bidder, the case was a real action. 39

Finally, it denies that Home Guaranty Corporation modified and reversed Lu v. Lu

Ym because the factual and legal milieus of these two (2) cases were different. 40

On November 26, 2012,41 this Court required petitioner to file a reply to the comment.

On February 1, 2013, petitioner filed its Reply 42 where it denies that its Complaint was
for the annulment of the foreclosure sale, because when it filed its Complaint, the
foreclosure sale had not yet happened.43

It proclaims that its Complaint sought the removal of the lien on the mortgaged
properties and was not intended to recover ownership or possession since it was still
the registered owner with possession of the mortgaged properties when it filed its
Complaint.44

On February 27, 2013,45 this Court noted petitioner's reply and directed the parties to
submit their respective memoranda.

On May 30, 2013, the parties filed their respective memoranda. 46

In its Memorandum,47 petitioner continues to insist that it did not receive the loan
proceeds from PBCOM which is why it filed its Complaint for annulment of real estate
mortgage in response to the latter's Petition for Extrajudicial Foreclosure of Real Estate
Mortgage.48

Petitioner reiterates that its Complaint for annulment of real estate mortgage was an
action incapable of pecuniary estimation because it merely sought to remove the lien on
its properties, not the recovery or reconveyance of the mortgaged properties. 49

It states that it never expressly or impliedly sought the conveyance of the mortgaged
properties because it was still the registered owner of the mortgaged properties when its
Complaint was first presented for filing with the Clerk of Court. 50

On the other hand, respondent in its Memorandum 51 restates its stand that petitioner's
Complaint involved a real action; hence, the estimated value of the mortgaged
properties should have been alleged and used as the basis for the computation of the
docket fees.52

Respondent claims that the allegations in petitioner's Complaint reveal the latter's real
intention to assert its title and recover the real properties sold at the public auction. 53

The only issue for this Court's resolution is whether or not the Regional Trial Court

32
obtained jurisdiction over First Sarmiento Corporation, Inc.'s Complaint for annulment of
real estate mortgage.

Rule 45 of the Rules of Court allows for a direct recourse to this Court by appeal from a
judgment, final order, or resolution of the Regional Trial Court. Rule 45, Section 1
provides:
Section 1. Filing of petition with Supreme Court. — A party desiring to appeal by
certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law,
may file with the Supreme Court a verified petition for review on certiorari. The petition
shall raise only questions of law which must be distinctly set forth.
Rule 41, Section 2(c) likewise provides:
Section 2. Modes of appeal. —

....

(c) Appeal by certiorari. — In all cases where only questions of law are raised or
involved, the appeal shall be to the Supreme Court by petition for review on certiorari in
accordance with Rule 45.
Thus, there is no question that a petitioner may file a verified petition for review directly
with this Court if only questions of law are at issue; however, if both questions of law
and of facts are present, the correct remedy is to file a petition for review with the Court
of Appeals.54

Doña Adela Export International v. Trade and Investment Development

Corp.55 differentiated between a question of law and a question of fact as follows:
We stress that a direct recourse to this Court from the decisions, final resolutions and
orders of the RTC may be taken where only questions of law are raised or involved.
There is a question of law when the doubt or difference arises as to what the law is on a
certain state of facts, which does not call for an examination of the probative value of
the evidence presented by the parties-litigants. On the other hand, there is a question of
fact when the doubt or controversy arises as to the truth or falsity of the alleged facts.
Simply put, when there is no dispute as to fact, the question of whether the conclusion
drawn therefrom is correct or not, is a question of law. 56 (Citation omitted)
In the case at bar, the underlying question for this Court's resolution pertains to
jurisdiction, or to be more precise, whether the Regional Trial Court attained jurisdiction
over petitioner's Complaint with the amount of docket fees paid.

Considering that the issue of jurisdiction is a pure question of law, 57 petitioner did not err
in filing its appeal directly with this Court pursuant to law and prevailing jurisprudence.

II

Petitioner contends that its Complaint for annulment of real estate mortgage has a

33
subject incapable of pecuniary estimation because it was not intended to recover
ownership or possession of the mortgaged properties sold to respondent during the
auction sale.58 It insists that it had ownership and possession of the mortgaged
properties when it filed its Complaint; hence, it never expressly or impliedly sought
recovery of their ownership or possession.59

The petition is meritorious.

Jurisdiction is "the power and authority of a court to hear, try and decide a
case"60 brought before it for resolution.

Courts exercise the powers conferred on them with binding effect if they acquire
jurisdiction over: "(a) the cause of action or the subject matter of the case; (b) the thing
or the res; (c) the parties; and (d) the remedy." 61

Jurisdiction over the thing or the res is a court's authority over the object subject of
litigation.62 The court obtains jurisdiction or actual custody over the object through the
seizure of the object under legal process or the institution of legal proceedings which
recognize the power and authority of the court.63

Jurisdiction over the parties is the court's power to render judgment that are binding on
the parties. The courts acquire jurisdiction over the plaintiffs when they file their initiatory
pleading, while the defendants come under the court's jurisdiction upon the valid service
of summons or their voluntary appearance in court. 64

Jurisdiction over the cause of action or subject matter of the case is the court's authority
to hear and determine cases within a general class where the proceedings in question
belong. This power is conferred by law and cannot be acquired through stipulation,
agreement between the parties,65 or implied waiver due to the silence of a party. 66

Jurisdiction is conferred by the Constitution, with Congress given the plenary power, for
cases not enumerated in Article VIII, Section 5 67 of the Constitution, to define, prescribe,
and apportion the jurisdiction of various courts. 68

Batas Pambansa Blg. 129, or the Judiciary Reorganization Act of 1980 as amended by
Republic Act No. 7691, provided for the jurisdictional division between the first and
second level courts by considering the complexity of the cases and the experience
needed of the judges assigned to hear the cases.

In criminal cases, first level courts are granted exclusive original jurisdiction to hear
complaints on violations of city or municipal ordinances 69 and offenses punishable with
imprisonment not exceeding six (6) years. 70 In contrast, second level courts, with more
experienced judges sitting at the helm, are granted exclusive original jurisdiction to
preside over all other criminal cases not within the exclusive jurisdiction of any other
court, tribunal, or body.71

34
The same holds true for civil actions and probate proceedings, where first level courts
have the power to hear cases where the value of personal property, estate, or amount
of the demand does not exceed P100,000.00 or P200,000.00 if in Metro Manila. 72 First
level courts also possess the authority to hear civil actions involving title to, possession
of, or any interest in real property where the value does not exceed P20,000.00 or
P50,000.00 if the real property is situated in Metro Manila. 73 Second level courts then
assume jurisdiction when the values involved exceed the threshold amounts reserved
for first level courts74 or when the subject of litigation is incapable of pecuniary
estimation.75

First level courts were also conferred with the power to hear the relatively
uncomplicated cases of forcible entry and unlawful detainer, 76 while second level courts
are authorized to hear all actions in admiralty and maritime jurisdiction 77 with claims
above a certain threshold amount. Second level courts are likewise authorized to hear
all cases involving the contract of marriage and marital relations, 78 in recognition of the
expertise and probity required in deciding issues which traverse the marital sphere.

Section 19(1) of Batas Pambansa Blg. 129, as amended, provides Regional Trial Courts
with exclusive, original jurisdiction over "all civil actions in which the subject of the
litigation is incapable of pecuniary estimation."

Lapitan v. Scandia79 instructed that to determine whether the subject matter of an action

is incapable of pecuniary estimation, the nature of the principal action or remedy sought
must first be established. This finds support in this Court's repeated pronouncement that
jurisdiction over the subject matter is determined by examining the material allegations
of the complaint and the relief sought. 80Heirs of Dela Cruz v. Heirs of Cruz81 stated,
thus:
It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or
government agency, over the nature and subject matter of a petition or complaint is
determined by the material allegations therein and the character of the relief prayed for,
irrespective of whether the petitioner or complainant is entitled to any or all such
reliefs.82
However, Lapitan stressed that where the money claim is only a consequence of the
remedy sought, the action is said to be one incapable of pecuniary estimation:
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. If it is primarily for the recovery of a sum of money, the claim is
considered capable of pecuniary estimation, and whether jurisdiction is in the municipal
courts or in the courts of first instance would depend on the amount of the claim.
However, where the basic issue is something other than the right to recover a sum of
money, or where the money claim is purely incidental to, or a consequence of, the
principal relief sought like in suits to have the defendant perform his part of the contract
(specific performance) and in actions for support, or for annulment of a judgment or to
foreclose a mortgage, this Court has considered such actions as cases where the
subject of the litigation may not be estimated in terms of money, and are cognizable

35
exclusively by courts of first instance. The rationale of the rule is plainly that the second
class cases, besides the determination of damages, demand an inquiry into other
factors which the law has deemed to be more within the competence of courts of first
instance, which were the lowest courts of record at the time that the first organic laws of
the Judiciary were enacted allocating jurisdiction (Act 136 of the Philippine Commission
of June 11, 1901).83 (Citation omitted)
Heirs of Sebe v. Heirs of Sevilla84 likewise stressed that if the primary cause of action is
based on a claim of ownership or a claim of legal right to control, possess, dispose, or
enjoy such property, the action is a real action involving title to real property. 85

A careful reading of petitioner's Complaint convinces this Court that petitioner never
prayed for the reconveyance of the properties foreclosed during the auction sale, or that
it ever asserted its ownership or possession over them. Rather, it assailed the validity of
the loan contract with real estate mortgage that it entered into with respondent because
it supposedly never received the proceeds of the P100,000,000.00 loan
agreement.86 This is evident in its Complaint, which read:
GROUNDS FOR THE APPLICATION OF PRELIMINARY INJUNCTION AND
TEMPORARY RESTRAINING ORDER

7. Defendant PBCOM knows fully well that plaintiff did not receive from it the loan it
(PBCOM) alleged to have granted in its favor.

8. Despite this, defendant PBCOM has filed with the Ex-Officio Sheriff of Bulacan, a
petition for extra judicial foreclosure of real estate mortgage, bent on foreclosing the real
estate properties of plaintiff, photocopy of the petition is hereto attached as Annex "F".

9. The auction sale of the properties is set on December 29, 2011.

10. Defendant PBCOM, well knowing the facts narrated above and willfully disregarding
the property rights of plaintiff, wrongfully filed an extra judicial foreclosure of real estate
mortgage and pursuant to said petition, the Ex-Officio Sheriff now does offer for sale,
the real estate properties of the plaintiff as set forth in its (PBCOM) said petition.

11. Unless defendants PBCOM and Ex-Officio Sheriff are restrained by this Honorable
Court, they will infringe the property rights of the plaintiff in the manner herein before
related.87
Far East Bank and Trust Company v. Shemberg Marketing Corporation 88 stated that an
action for cancellation of mortgage has a subject that is incapable of pecuniary
estimation:
Here, the primary reliefs prayed for by respondents in Civil Case No. MAN-4045 is the
cancellation of the real estate and chattel mortgages for want of consideration.
In Bumayog v. Tumas, this Court ruled that where the issue involves the validity of a
mortgage, the action is one incapable of pecuniary estimation. In the more recent case
of Russell v. Vestil, this Court, citing Bumayog, held that an action questioning the
validity of a mortgage is one incapable of pecuniary estimation. Petitioner has not
shown adequate reasons for this Court to revisit Bumayog and Russell. Hence,

36
petitioner's contention [cannot] be sustained. Since respondents paid the docket fees,
as computed by the clerk of court, consequently, the trial court acquired jurisdiction over
Civil Case No. MAN-4045.89
It is not disputed that even if the Complaint were filed a few days after the mortgaged
properties were foreclosed and sold at auction to respondent as the highest bidder, the
certificate of sale was only issued to respondent after the Complaint was filed.

Section 6 of Act No. 3135,90 as amended, provides that a property sold through an
extrajudicial sale may be redeemed "at any time within the term of one year from and
after the date of the sale":
Section 6. In all cases in which an extrajudicial sale is made under the special power
hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or
judgment creditor of said debtor, or any person having a lien on the property
subsequent to the mortgage or deed of trust under which the property is sold, may
redeem the same at any time within the term of one year from and after the date of the
sale; and such redemption shall be governed by the provisions of sections four hundred
and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in
so far as these are not inconsistent with the provisions of this Act.
Mahinay v. Dura Tire & Rubber Industries Inc.91 clarified that "[t]he date of the sale'
referred to in Section 6 is the date the certificate of sale is registered with the Register
of Deeds. This is because the sale of registered land does not 'take effect as a
conveyance, or bind the land' until it is registered." 92

The registration of the certificate of sale issued by the sheriff after an extrajudicial sale
is a mandatory requirement; thus, if the certificate of sale is not registered with the
Registry of Deeds, the property sold at auction is not conveyed to the new owner and
the period of redemption does not begin to run. 93

In the case at bar, the Ex-Officio Sheriff of the City of Malolos, Bulacan was restrained
from registering the certificate of sale with the Registry of Deeds of Bulacan and the
certificate of sale was only issued to respondent after the Complaint for annulment of
real estate mortgage was filed. Therefore, even if the properties had already been
foreclosed when the Complaint was filed, their ownership and possession remained with
petitioner since the certificate of sale was not registered with the Registry of Deeds.
This supports petitioner's claim that it never asked for the reconveyance of or asserted
its ownership over the mortgaged properties when it filed its Complaint since it still
enjoyed ownership and possession over them.

Considering that petitioner paid the docket fees as computed by the clerk of court, upon
the direction of the Executive Judge, this Court is convinced that the Regional Trial
Court acquired jurisdiction over the Complaint for annulment of real estate mortgage.

Furthermore, even if it is assumed that the instant case were a real action and the
correct docket fees were not paid by petitioner, the case should not have been
dismissed; instead, the payment of additional docket fees should have been made a lien
on the judgment award. The records attest that in filing its complaint, petitioner readily

37
paid the docket fees assessed by the clerk of court; hence, there was no evidence of
bad faith or intention to defraud the government that would have rightfully merited the
dismissal of the Complaint.94

III

Although not raised in the Petition, this Court nonetheless deems it proper to pass upon
the legality of the Regional Trial Court January 4, 2012 Order, which directed the parties
to observe the status quo ante,95 effectively extending indefinitely its 72-hour ex-parte
temporary restraining order issued on January 2, 2012. 96

Rule 58, Section 5 of the Rules of Court provides the instances when a temporary
restraining order may be issued:
Section 5. Preliminary injunction not granted without notice; exception. — No
preliminary injunction shall be granted without hearing and prior notice to the party or
person sought to be enjoined. If it shall appear from facts shown by affidavits or by the
verified application that great or irreparable injury would result to the applicant before
the matter can be heard on notice, the court to which the application for preliminary
injunction was made, may issue a temporary restraining order to be effective only for a
period of twenty (20) days from service on the party or person sought to be enjoined,
except as herein provided. Within the said twenty-day period, the court must order said
party or person to show cause, at a specified time and place, why the injunction should
not be granted, determine within the same period whether or not the preliminary
injunction shall be granted, and accordingly issue the corresponding order.

However, and subject to the provisions of the preceding sections, if the matter is of
extreme urgency and the applicant will suffer grave injustice and irreparable injury, the
executive judge of a multiple-sala court or the presiding judge of a single-sala court may
issue ex-parte a temporary restraining order effective for only seventy-two (72) hours
from issuance but he shall immediately comply with the provisions of the next preceding
section as to service of summons and the documents to be served therewith.
Thereafter, within the aforesaid seventy-two (72) hours, the judge before whom the
case is pending shall conduct a summary hearing to determine whether the temporary
restraining order shall be extended until the application for preliminary injunction can be
heard. In no case shall the total period of effectivity of the temporary restraining order
exceed twenty (20) days, including the original seventy-two hours provided herein.

In the event that the application for preliminary injunction is denied or not resolved
within the said period, the temporary restraining order is deemed automatically vacated.
The effectivity of a temporary restraining order is not extendible without need of any
judicial declaration to that effect and no court shall have authority to extend or renew the
same on the same ground for which it was issued.

However, if issued by the Court of Appeals or a member thereof, the temporary

restraining order shall be effective for sixty (60) days from service on the party or person
sought to be enjoined. A restraining order issued by the Supreme Court or a member
thereof shall be effective until further orders.
38
It is clear that a temporary restraining order may be issued by a trial court in only two (2)
instances: first, when great or irreparable injury would result to the applicant even
before the application for writ of preliminary injunction can be heard; and second, if the
matter is of extreme urgency and the applicant will suffer grave injustice and irreparable
injury. The executive judge of a multi-sala court or the presiding judge of a single-sala
court may issue a 72-hour temporary restraining order.

In both instances, the temporary restraining order may be issued ex parte. However, in
the first instance, the temporary restraining order has an effectivity of only 20 days to be
counted from service to the party sought to be enjoined. Likewise, within those 20 days,
the court shall order the enjoined party to show why the injunction should not be granted
and shall then determine whether or not the injunction should be granted.

In the second instance, when there is extreme urgency and the applicant will suffer
grave injustice and irreparable injury, the court shall issue a temporary restraining order
effective for only 72 hours upon issuance. Within those 72 hours, the court shall conduct
a summary hearing to determine if the temporary restraining order shall be extended
until the application for writ of preliminary injunction can be heard. However, in no case
shall the extension exceed 20 days.

If the application for preliminary injunction is denied or not resolved within the given
periods, the temporary restraining order is automatically vacated and the court has no
authority to extend or renew it on the same ground of its original issuance.

Despite the clear wording of the rules, the Regional Trial Court issued a status quo ante
order dated January 4, 2012, indefinitely extending the temporary restraining order on
the registration of the certificate of sale with the Registry of Deeds.

Petitioner applied for a writ of preliminary injunction, yet the Regional Trial Court did not
conduct any hearing for that purpose and merely directed the parties to observe the
status quo ante.

Miriam College Foundation, Inc v. Court of Appeals 97 explained the difference between
preliminary injunction and a restraining order as follows:
Preliminary injunction is an order granted at any stage of an action or proceeding prior
to the judgment or final order, requiring a party or a court, agency or a person to
perform to refrain from performing a particular act or acts. As an extraordinary remedy,
injunction is calculated to preserve or maintain the status quo of things and is generally
availed of to prevent actual or threatened acts, until the merits of the case can be heard.
A preliminary injunction persists until it is dissolved or until the termination of the action
without the court issuing a final injunction.

The basic purpose of restraining order, on the other hand, is to preserve the status quo
until the hearing of the application for preliminary injunction. Under the former A§5, Rule
58 of the Rules of Court, as amended by A§5, Batas Pambansa Blg. 224, a judge (or
justice) may issue a temporary restraining order with a limited life of twenty days from

39
date of issue. If before the expiration of the 20-day period the application for preliminary
injunction is denied, the temporary order would thereby be deemed automatically
vacated. If no action is taken by the judge on the application for preliminary injunction
within the said 20 days, the temporary restraining order would automatically expire on
the 20th day by the sheer force of law, no judicial declaration to that effect being
necessary. In the instant case, no such preliminary injunction was issued; hence, the
TRO earlier issued automatically expired under the aforesaid provision of the Rules of
Court.98 (Citations omitted)
A temporary restraining order cannot be extended indefinitely to take the place of a writ
of preliminary injunction, since a temporary restraining order is intended only to have a
limited lifespan and is deemed automatically vacated upon the expiration of 72 hours or
20 days, as the case may be. As such, the temporary restraining order has long expired
and, in the absence of a preliminary injunction, there was nothing to stop the sheriff
from registering the certificate of sale with the Registry of Deeds.

This Court has repeatedly expounded on the nature of a temporary restraining

order99 and a preliminary injunction.100 Yet lower courts consistently interchange these
ancillary remedies and disregard the sunset clause 101 inherent in a temporary restraining
order by erroneously extending it indefinitely. Such ignorance or defiance of basic
remedial measures is a gross disservice to the public, who look towards the court for
legal guidance and legal remedy. More importantly, this cavalier attitude towards these
injunctive reliefs might even be construed as a deliberate effort to look the other way to
favor a party, which will then sully the image of the entire judiciary. Henceforth, this
Court will demand stricter compliance with the rules from the members of the bench as
regards their issuances of these injunctive reliefs.

IV

Finally, there is a need to reassess the place of Home Guaranty v. R-II Builders102 in our
jurisprudence.

In Home Guaranty, R-II Builders, Inc. (R-II Builders) filed a Complaint for the rescission
of the Deed of Assignment and Conveyance it entered into with Home Guaranty
Corporation and National Housing Authority. The Complaint was initially determined to
have a subject that is incapable of pecuniary estimation and the docket fees were
assessed and paid accordingly.103

R-II Builders later filed a motion to admit its Amended and Supplemental Complaint,
which deleted its earlier prayer for the resolution of its Deed of Assignment and
Conveyance, and prayed for the conveyance of title to and/or possession of the entire
Asset Pool. The Regional Trial Court ruled that the Amended and Supplemental
Complaint involved a real action and directed R-II Builders to pay the correct docket
fees.104

Instead of paying the additional docket fees, R-II Builders withdrew its Amended and
Supplemental Complaint and instead filed a motion to admit its Second Amended

40
Complaint, which revived the prayer in its original Complaint to resolve the Deed of
Assignment and Conveyance and deleted the causes of action for conveyance of title to
and/or possession of the entire Asset Pool in its Amended and Supplemental
Complaint.105 The Regional Trial Court granted the motion to admit the Second
Amended Complaint, ratiocinating that the docket fees to the original Complaint had
been paid; that the Second Amended Complaint was not intended to delay the
proceedings; and that the Second Amended Complaint was consistent with R-II
Builders' previous pleadings.106

The Court of Appeals upheld the ruling of the Regional Trial Court and reiterated that
the case involved a subject that was incapable of pecuniary
estimation.107 However, Home Guaranty reversed the Court of Appeals Decision, ruling
that the Complaint and the Amended and Supplemental Complaint both involved
prayers for the conveyance and/or transfer of possession of the Asset Pool, causes of
action which were undoubtedly real actions. Thus, the correct docket fees had not yet
been paid:108
Although an action for resolution and/or the nullification of a contract, like an action for
specific performance, fall squarely into the category of actions where the subject matter
is considered incapable of pecuniary estimation, we find that the causes of action for
resolution and/or nullification of the [Deed of Assignment and Conveyance] was
erroneously isolated by the [Court of Appeals] from the other causes of action alleged in
R-II Builders' original complaint and Amended and Supplemental Complaint which
prayed for the conveyance and/or transfer of possession of the Asset Pool. In Gochan
v. Gochan, this Court held that an action for specific performance would still be
considered a real action where it seeks the conveyance or transfer of real property, or
ultimately, the execution of deeds of conveyance of real property.

....

Granted that R-II Builders is not claiming ownership of the Asset Pool because its
continuing stake is, in the first place, limited only to the residual value thereof, the
conveyance and/or transfer of possession of the same properties sought in the original
complaint and Amended and Supplemental Complaint both presuppose a real action for
which appropriate docket fees computed on the basis of the assessed or estimated
value of said properties should have been assessed and paid. . . . 109 (Citations omitted)
Home Guaranty stated that to determine whether an action is capable or incapable of
pecuniary estimation, the nature of the principal action or remedy prayed for must first
be determined.110 Nonetheless, in citing Ruby Shelter Builders v. Formaran, Home
Guaranty looked beyond R-II Builder's principal action for annulment or rescission of
contract to purportedly unmask its true objective and nature of its action, which was to
recover real property.111

In a dissenting opinion in the Home Guaranty112 June 22, 2011 Resolution that

dismissed R-II Builders' motion for reconsideration, Associate Justice Presbitero
Velasco, Jr. stressed that one must first look at the principal action of the case to
determine if it is capable or incapable of pecuniary estimation:

41
Whether or not the case is a real action, and whether or not the proper docket fees were
paid, one must look to the main cause of action of the case. In all instances, in the
original Complaint, the Amended and Supplemental Complaint and the Amended
Complaint, it was all for the resolution or rescission of the [Deed of Assignment and
Conveyance], with the prayer for the provisional remedy of injunction and the
appointment of a trustee and subsequently a receiver. In the Second Amended
Complaint, the return of the remaining assets of the asset pool, if any, to respondent R-
II Builders would only be the result of the resolution or rescission of the [Deed of
Assignment and Conveyance].

Even if real property in the Asset Pool may change hands as a result of the case in the
trial court, the fact alone that real property is involved does not make that property the
basis of computing the docket fees. De Leon v. Court of Appeals has already settled the
matter. That case, citing Bautista v, Lim, held that a case for rescission or annulment of
contract is not susceptible of pecuniary estimation. On the other hand, in the Decision
We rendered on July 25, 2005 in Serrano v. Delica, We ruled that the action for
cancellation of contracts of sale and the titles is a real action. Similarly, on February 10,
2009, We ruled in Ruby Shelter Builders and Realty Development Corporation v.
Formaran III (Ruby Shelter) that an action for nullification of a Memorandum of
Agreement which required the lot owner to issue deeds of sale and cancellation of the.
Deeds of Sale is a real action.113 (Citations omitted)
Whatever confusion there might have been regarding the nature of actions for nullity of
contracts or legality of conveyances, which would also involve recovery of sum of
money or real property, was directly addressed by Lu v. Lu Ym.114Lu underscored that
"where the basic issue is something other than the right to recover a sum of money, the
money claim being only incidental to or merely a consequence of, the principal relief
sought, the action is incapable of pecuniary estimation." 115

This finds support in numerous decisions where this Court proclaimed that the test to
determine whether an action is capable or incapable of pecuniary estimation is to
ascertain the nature of the principal action or relief sought. Thus, if the principal relief
sought is the recovery of a sum of money or real property, then the action is capable of
pecuniary estimation. However, if the principal relief sought is not for the recovery of
money or real property and the money claim is only a consequence of the principal
relief, then the action is incapable of pecuniary estimation. 116

Considering that the principal remedy sought by R-II Builders was the resolution of the
Deed of Assignment and Conveyance, the action was incapable of pecuniary estimation
and Home Guaranty erred in treating it as a real action simply because the principal
action was accompanied by a prayer for conveyance of real property.

It is clear that subject matter jurisdiction cannot be dependent on the supposed ultimate
motive or true objective of the complaint because this will require the judge to speculate
on the defenses of the plaintiff beyond the material allegations contained in the
complaint. Likewise, in attempting to pinpoint the true objective of the complaint at the
initial stages of trial, the judge might end up dictating the result outside of the evidence

42
still to be presented during the trial, opening up the judge to charges of partiality and
even impropriety. Furthermore, the judge is not aware of the evidence to be presented
by either party when the complaint is filed; thus, there is no reliable basis that can be
used to infer the true objective of the complaint. It is imperative then that the competing
claims as basis of subject matter jurisdiction be textually based, finding its basis in the
body of the complaint and the relief sought without reference to extraneous facts not
alleged or evidence still to be presented.

Nonetheless, if subject matter jurisdiction is assailed during the course of the trial and
evidence is presented to prove the defense's allegation of lack of jurisdiction, this will
lead to an anomaly where the defense's evidence, instead of the complaint, will
effectively determine the remedy and cause of action.

In the case at bar, petitioner contends that its complaint prayed for the annulment of the
real estate mortgage it entered into with respondent and not for the recovery or
reconveyance of the mortgaged properties because it was still the registered owner
when it filed its complaint. The evidence on record supports petitioner's claim; hence,
there was no reason for the dismissal of its Complaint for lack of jurisdiction.

Home Guaranty likewise erred in dismissing the action because of non-payment of the

correct filing fees. Fedman Development Corporation v. Agcaoili 117 reiterated that where
the assessed docket fees have been paid and the assessment turns out to be
insufficient, the court still acquires jurisdiction over the case, subject to payment of the
deficiency assessment.118 The only exception is when the deficiency in docket fees is
accompanied with bad faith and an intention to defraud the government. 119 It is not
disputed that R-II Builders paid the assessed docket fees when it filed its Complaint,
negating bad faith or intent on its part to defraud the government.

In light of the foregoing, this Court reaffirms that the nature of an action is determined by
the principal relief sought in the complaint, irrespective of the other causes of actions
that may also crop up as a consequence of the principal relief prayed for. The contrary
rule espoused in Home Guaranty is thereby set aside.

WHEREFORE, this Court resolves to GRANT the Petition. The assailed April 3, 2012
Decision and July 25, 2012 Order of Branch 11, Regional Trial Court, City of Malolos,
Bulacan in Civil Case No. 04-M-2012 are REVERSED and SET ASIDE.

The case is ordered REMANDED to Branch 11, Regional Trial Court, City of Malolos,
Bulacan for continued trial on First Sarmiento Property Holdings, Inc.'s Complaint for
annulment of real estate mortgage and its amendments.

SO ORDERED.
FIRST DIVISION

[G.R. No. 192649, March 09 : 2011]

43
 HOME GUARANTY CORPORATION, PETITIONER, VS. R-II BUILDERS INC., AND
NATIONAL HOUSING AUTHORITY, RESPONDENTS.

DECISION

PEREZ, J.:

Primarily assailed in this petition for review filed pursuant to Rule 45 of the 1997 Rules
of Civil Procedure, is the Decision dated 21 January 2010 rendered by the Former
Fifteenth Division of the Court of Appeals (CA) in CA-G.R. SP No. 111153, [1] the
dispositive portion of which states as follows:

WHEREFORE, the petition for certiorari and prohibition is hereby DENIED.

The assailed Orders, dated March 3, 2009 and September 29, 2009, of the Regional
Trial Court of Manila, Branch 22 are hereby AFFIRMED.

Consequently, the injunction earlier issued on December 4, 2009, restraining the

proceedings in Civil Case No. 05-113407, is hereby DISSOLVED.[2]

The Facts

On 19 March 1993, a Joint Venture Agreement (JVA) was entered into between

respondents National Housing Authority (NHA) and R-II Builders, Inc. (R-II Builders) for
the implementation of the Smokey Mountain Development and Reclamation Project
(SMDRP). Amended and restated on 21 February 1994 [3] and 11 August 1994,[4] the
JVA was aimed at implementing a two-phase conversion of the Smokey Mountain
Dumpsite "into a habitable housing project inclusive of the reclamation of the area
across Radial Road 10 (R-10)".[5]  By the terms of the JVA, R-II Builders, as developer,
was entitled to own 79 hectares of reclaimed land and the 2.3 hectare commercial area
at the Smokey Mountain. As landowner/implementing agency, NHA, on the other hand,
was entitled to own the 2,992 temporary housing units agreed to be built in the
premises, the cleared and fenced incinerator site consisting of 5 hectares, 3,520 units of
permanent housing to be awarded to qualified on site residents, the industrial area
consisting of 3.2 hectares and the open spaces, roads and facilities within the Smokey
Mountain Area.[6]

On 26 September 1994, NHA and R-II Builders, alongside petitioner Housing Guaranty
Corporation (HGC) as guarantor and the Philippine National Bank (PNB) as trustee,
entered into an Asset Pool Formation Trust Agreement which provided the mechanics
for the implementation of the project.[7]  To back the project, an Asset Pool was created
composed of the following assets: (a) the 21.2 hectare Smokey Mountain Site in Tondo,
Manila; (b) the 79-hectare Manila Bay foreshore property in the name of the NHA; (c)
the Smokey Mountain Project Participation Certificates (SMPPCs) to be issued, or their
money proceeds; (d) disposable assets due to R-II Builders and/or its proceeds as
defined in the JVA; (e) the resulting values inputted by R-II Builders for pre-

44
implementation activities and some start-up works amounting to P300,000,000.00; (f)
the 2,992 temporary housing facilities/units to be constructed by R-II Builders; and, (g)
all pertinent documents and records of the project. [8]

On the same date, the parties likewise executed a Contract of Guaranty whereby HGC,
upon the call made by PNB and conditions therein specified, undertook to redeem the
regular SMPPCs upon maturity and to pay the simple interest thereon to the extent of
8.5% per annum.[9]  The foregoing agreements led to the securitization of the project
through the issuance of 5,216 SMPPCs upon the Asset Pool, with a par value of 1
Million each, classified and to be redeemed by the trustee or, in case of call on its
guaranty, by HGC, in the following order of priority:

a)  Regular SMPPCs worth P2.519 Billion, issued for value to the general public at
specified interests and maturity dates. These were to be redeemed by the PNB which
was obliged to exhaust all liquid assets of the Asset Pool before calling on the HGC
guarantee;

b) Special SMPPCs worth P1.403 Billion, issued exclusively to the NHA for conveyance
of the Smokey Mountain Site and Manila Bay foreshore property to the Asset Pool,
redeemable upon turnover of the developed project; and

c) Subordinated SMPPCs worth P1.294 Billion, issued exclusively to R-II Builders for its
rights and interests in the JVA, redeemable with the turnover of all residual values,
assets and properties remaining in the Asset Pool after both the Regular and Special
SMPPCs are redeemed and all the obligations of the Asset Pool are settled. [10]

Subsequent to R-II Builders' infusion of P300 Million into the project, the issuance of the
SMPPCs and the termination of PNB's services on 29 January 2001, NHA, R-II Builders
and HGC agreed on the institution of Planters Development Bank (PDB) as trustee on
29 January 2001.[11]  By 24 October 2002, however, all the Regular SMPPCs issued had
reached maturity and, unredeemed, already amounted to an aggregate face value of
P2.513 Billion. The lack of liquid assets with which to effect redemption of the regular
SMPPCs  prompted PDB to make a call on HGC's guaranty and to execute in the
latter's favor a Deed of Assignment and Conveyance (DAC) of the entire Asset Pool,
consisting of: (a) 105 parcels of land comprising the Smokey Mountain Site and the
Reclamation Area, with a total area of 539,471.47 square meters, and all the buildings
and improvements thereon; (b) shares of stock of Harbour Centre Port Terminal, Inc.
(HCPTI); and, (c) other documents.[12]

On 1 September 2005, R-II Builders filed the complaint against HGC and NHA which
was docketed as Civil Case No. 05-113407 before Branch 24 of the Manila Regional
Trial Court, a Special Commercial Court (SCC). Contending that HGC's failure to
redeem the outstanding regular SMPPCs despite obtaining possession of the Asset
Pool ballooned the stipulated interests and materially prejudiced its stake on the
residual values of the Asset Pool, R-II Builders alleged, among other matters, that the
DAC should be rescinded since PDB exceeded its authority in executing the same prior

45
to HGC's redemption and payment of the guaranteed SMPPCs; that while the estimated
value of Asset Pool amounted to P5,919,716,618.62 as of 30 June 2005, its total
liabilities was estimated at P2,796,019,890.41; and, that with the cessation of PDB's
functions as a trustee and HGC's intention to use the Asset Pool to settle its obligations
to the Social Security System (SSS), it was best qualified to be appointed as
new trustee in the event of the resolution of the DAC. Assessed docket fees
corresponding to an action incapable of pecuniary estimation, the complaint sought the
grant of the following reliefs: (a) a temporary restraining order/preliminary and
permanent injunction, enjoining disposition/s of the properties in the Asset Pool; (b) the
resolution or, in the alternative, the nullification of the DAC; (c) R-II Builders'
appointment as trustee pursuant to Rule 98 of the Rules of Court; (d) HGC's rendition of
an accounting of the assets and the conveyance thereof in favor of R-II Builders; and,
(e) P500,000.00 in attorney's fees.[13]

On 26 October 2005, Branch 24 of the Manila RTC issued the writ of preliminary
injunction sought by R-II Builders which, upon the challenge thereto interposed by HGC,
was later affirmed by the CA in the 17 December 2007 decision rendered in CA-G.R.
SP No. 98953.[14]  Having filed its answer to the complaint, in the meantime, HGC went
on to move for the conduct of a preliminary hearing on its affirmative defenses which
included such grounds as lack of jurisdiction, improper venue and the then pendency
before this Court of G.R. No. 164537, entitled Francisco Chavez vs. National Housing
Authority, et al., a case which challenged, among other matters, the validity of the JVA
and its subsequent amendments.[15]  On 2 August 2007, R-II Builders, in turn, filed a
motion to admit[16] its Amended and Supplemental Complaint which deleted the prayer
for resolution of the DAC initially prayed for in its original complaint.  In lieu thereof, said
pleading introduced causes of action for conveyance of title to and/or possession of the
entire Asset Pool, for NHA to pay the Asset Pool the sum of P1,803,729,757.88
representing the cost of the changes and additional works on the project and for an
increased indemnity for attorney's fees in the sum of P2,000,000.00. [17]

Consistent with its joint order dated 2 January 2008 which held that R-II Builders'
complaint was an ordinary civil action and not an intra-corporate controversy, [18] Branch
24 of the Manila RTC issued a clarificatory order dated 1 February 2008 to the effect,
among other matters, that it did not have the authority to hear the case. [19]  As a
consequence, the case was re-raffled to respondent Branch 22 of the Manila RTC
(respondent RTC) which subsequently issued the 19 May 2008 order which, having
determined that the case is a real action, admitted the aforesaid Amended and
Supplemental Complaint, subject to R-II Builders' payment of the "correct and
appropriate" docket fees.[20]  On 15 August 2008, however, R-II Builders filed a motion to
admit it Second Amended Complaint, on the ground that its previous Amended and
Supplemental Complaint had not yet been admitted in view of the non-payment of the
correct docket fees therefor.[21]  Said Second Amended Complaint notably resurrected
R-II Builders' cause of action for resolution of the DAC, deleted its causes of action for
accounting and conveyance of title to and/or possession of the entire Asset Pool,
reduced the claim for attorney's fees to P500,000.00, sought its appointment as
Receiver pursuant to Rule 59 of the Rules of Court and, after an inventory in said

46
capacity, prayed for approval of the liquidation and distribution of the Asset Pool in
accordance with the parties' agreements. [22]

On 2 September 2008, HGC filed its opposition to the admission of R-II

Builders' Second Amended Complaint on the ground that respondent RTC had no
jurisdiction to act on the case until payment of the correct docket fees and that said
pleading was intended for delay and introduced a new theory inconsistent with the
original complaint and the Amended and Supplemental Complaint.  Claiming that R-II
Builders had defied respondent court's 19 May 2008 order by refusing to pay the correct
docket fees, HGC additionally moved for the dismissal of the case pursuant to Section
3, Rule 17 of the 1997 Rules of Civil Procedure.[23]  On 24 November 2008, R-II Builders
also filed an Urgent Ex-Parte Motion for Annotation of Lis Pendens on the titles of the
properties in the Asset Pool, on the ground that HGC had sold and/or was intending to
dispose of portions thereof, in violation of the writ of preliminary injunction issued in the
premises.[24]  Finding that jurisdiction over the case was already acquired upon payment
of the docket fees for the original complaint and that the Second Amended
Complaint was neither intended for delay nor inconsistent with R-II Builders' previous
pleadings, respondent RTC issued its first assailed order dated 3 March 2009 which: (a)
denied HGC's motion to dismiss; (b) granted R-II Builders' motion to admit its Second
Amended Complaint; and, (c) noted R-II Builders' Urgent Ex-Parte Motion for
Annotation of Lis Pendens, to which the attention of the Manila Register of Deeds was
additionally called.[25]

Undaunted, HGC filed its 22 March 2009 motion for reconsideration of the foregoing
order, arguing that: (a) the case is real action and the docket fees paid by R-II Builders
were grossly insufficient because the estimated value of properties in the Asset
Pool exceeds P5,000,000,000.00; (b) a complaint cannot be amended to confer
jurisdiction when the court had none; (c) the RTC should have simply denied the Urgent
Ex-Parte Motion for Annotation of Lis Pendens instead of rendering an advisory opinion
thereon.  In addition, HGC faulted R-II Builders with forum shopping, in view of its 10
September 2008 filing of the complaint docketed as Civil Case No. 08-63416 before
Branch 91 of the Quezon City RTC, involving a claim for receivables from the NHA. [26] 
In turn, R-II Builders opposed the foregoing motion [27] and, on the theory that the Asset
Pool was still in danger of dissipation, filed an urgent motion to resolve its application for
the appointment of a receiver and submitted its nominees for said position. [28]

On 29 September 2009, respondent RTC issued its second assailed order which (a)
denied HGC's motion for reconsideration; (b) granted R-II Builders' application for
appointment of receiver and, for said purpose: [i] appointed Atty. Danilo Concepcion as
Receiver and, [ii] directed R-II Builders to post a bond in the sum of P10,000,000.00. [29] 
Imputing grave abuse of discretion against the RTC for not dismissing the case and for
granting R-II Builders' application for receivership, HGC filed the Rule 65 petition for
certiorari and prohibition docketed as CA-G.R. SP No. 111153 before the CA [30] which,
thru its Former Special Fifteenth Division, rendered the herein assailed 21 January 2010
decision,[31] upon the following findings and conclusions:

47
a) Irrespective of whether it is real or one incapable of pecuniary estimation, the action
commenced by R-II Builders indubitably falls squarely within the jurisdiction of
respondent RTC;

b) From the allegations of R-II Builders' original complaint and amended complaint the
character of the relief primarily sought, i.e., the declaration of nullity of the DAC, the
action before respondent RTC is one where the subject matter is incapable of pecuniary
estimation;

c) R-II Builders need not pay any deficiency in the docket fees considering its
withdrawal of its Amended and Supplemental Complaint;

d) A receiver may be appointed without formal hearing, particularly when it is within the
interest of both parties and does not result in the delay of any government infrastructure
projects or economic development efforts;

e) Respondent RTC's act of calling the attention of the Manila Registrar of Deeds to R-II
Builders' Urgent Ex-Parte Motion for Annotation of Lis Pendens is well-within its residual
power to act on matters before it; and

f) The withdrawal of R-II Builders' Amended and Supplemental Complaint discounted

the forum shopping imputed against it by HGC.[32]

HGC's motion for reconsideration of the foregoing decision [33] was denied for lack of
merit in the CA's resolution dated 21 June 2010, hence, this petition.

The Issues

HGC urges the affirmative of the following issues in urging the grant of its petition, to
wit:

"Did the Honorable Court of

Appeals Seriously Err When It
Failed to Rule That:

I. The Regional Trial Court a quo had no jurisdiction to proceed with the case
considering that:

(1) the original court was without authority to hear the case and;

(2) despite an unequivocal order from the trial court a quo,  Private Respondent
(R-II Builders) failed and refused to pay the correct and proper docket fees,
whether it be for a real or personal action, based on the values of the properties
or claims subject of the complaints.

II. Since the Honorable Court of Appeals had characterized the case as a personal

48
action, the action before the Regional Trial Court a quo should have been
dismissed for improper venue.

III. The order appointing a receiver was made with grave abuse of discretion as
amounting to lack of jurisdiction for having been issued under the following
circumstances:

(1) It was made without a hearing and without any evidence of its necessity;

(2) It was unduly harsh and totally unnecessary in view of other available
remedies, especially considering that Petitioner HGC is conclusively presumed to
be solvent;

(3) It effectively prevented the performance of HGC's functions in recovering

upon its guaranty exposure and was in contravention of Presidential Decree Nos.
385 and 1818, Republic Act No. 8927 and Supreme Court Circular Nos. 2-91, 13-
93, 68-94 and Administrative Circular No. 11-00." [34]

Acting on HGC's motion for resolution of its application for a temporary restraining order
and/or preliminary injunction,[35] the Court issued the resolution dated 23 August 2010,
enjoining the enforcement of respondent RTC's assailed orders. [36]

The Court's Ruling

We find the petition impressed with merit.

Jurisdiction is defined as the authority to hear and determine a cause or the right to act
in a case.[37]  In addition to being conferred by the Constitution and the law, [38] the rule is
settled that a court's jurisdiction over the subject matter is determined by the relevant
allegations in the complaint,[39] the law in effect when the action is filed,[40] and the
character of the relief sought irrespective of whether the plaintiff is entitled to all or some
of the claims asserted.[41]  Consistent with Section 1, Rule 141 of the Revised Rules of
Court which provides that the prescribed fees shall be paid in full "upon the filing of the
pleading or other application which initiates an action or proceeding", the well-
entrenched rule is to the effect that a court acquires jurisdiction over a case only upon
the payment of the prescribed filing and docket fees. [42]

The record shows that R-II Builders' original complaint dated 23 August 2005 was
initially docketed as Civil Case No. 05-113407 before Branch 24 of the Manila, a
designated Special Commercial Court.[43]  With HGC's filing of a motion for a preliminary
hearing on the affirmative defenses asserted in its answer [44] and R-II Builders' filing of
its Amended and Supplemental Complaint dated 31 July 2007,[45] said court issued an
order dated 2 January 2008 ordering the re-raffle of the case upon the finding that the
same is not an intra-corporate dispute.[46]  In a clarificatory order dated 1 February 2008,
[47]
 the same court significantly took cognizance of its lack of jurisdiction over the case in
the following wise:

49
At the outset, it must be stated that this Court is a designated Special Commercial Court
tasked to try and hear, among others, intra-corporate controversies to the exclusion of
ordinary civil cases.

When the case was initially assigned to this Court, it was classified as an intra-corporate
case.  However, in the ensuing proceedings relative to the affirmative defences raised
by defendants, even the plaintiff conceded that the case is not an intra-corporate
controversy or even if it is, this Court is without authority to hear the same as the parties
are all housed in Quezon City.

Thus, the more prudent course to take was for this Court to declare that it does not have
the authority to hear the complaint it being an ordinary civil action.  As to whether it is
personal or civil, this Court would rather leave the resolution of the same to Branch 22
of this Court. (Italics supplied).

We find that, having squarely raised the matter in its Rule 65 petition for certiorari and
prohibition docketed as CA-G.R. SP No. 111153,[48] HGC correctly faults the CA for not
finding that Branch 24 of the Manila RTC had no authority to order the transfer of the
case to respondent RTC.[49]  Being outside the jurisdiction of Special Commercial
Courts, the rule is settled that cases which are civil in nature, like the one commenced
by R-II Builders, should be threshed out in a regular court. [50]  With its acknowledged
lack of jurisdiction over the case, Branch 24 of the Manila RTC should have ordered the
dismissal of the complaint, since a court without subject matter jurisdiction cannot
transfer the case to another court.[51]  Instead, it should have simply ordered the
dismissal of the complaint, considering that the affirmative defenses for which HGC
sought hearing included its lack of jurisdiction over the case.

Calleja v. Panday,[52] while on facts the other way around, i.e., a branch of the RTC
exercising jurisdiction over a subject matter within the Special Commercial Court's
authority, dealt squarely with the issue:

Whether a branch of the Regional Trial Court which has no jurisdiction to try and decide
a case has authority to remand the same to another co-equal Court in order to cure the
defects on venue and jurisdiction.

Calleja ruled on the issue, thus:

Such being the case, RTC Br. 58 did not have the requisite authority or power to order
the transfer of the case to another branch of the Regional Trial Court. The only action
that RTC-Br. 58 could take on the matter was to dismiss the petition for lack of
jurisdiction.

Certainly, the pronouncement of Br. 24, the Special Commercial Court, in its Joint Order
of 2 January 2008 that the case is not an intracorporate controversy, amplified in its
Order of 1 February 2008 that it "does not have the authority to hear the complaint it
being an ordinary civil action" is incompatible with the directive for the re-raffle of the

50
case and to "leave the resolution of the same to Branch 22 of this Court."  Such a
directive is an exercise of authority over the case, which authority it had in the same
breath declared it did not have. What compounds the jurisdictional error is the fact that
at the time of its surrender of jurisdiction, Br. 24 had already acted on the case and had
in fact, on 26 October 2005, issued the writ of preliminary injunction sought by herein
respondent R-II Builders.  At that point, there was absolutely no reason which could
justify a re-raffle of the case considering that the order that was supposed to have
caused the re-raffle was not an inhibition of the judge but a declaration of absence of
jurisdiction.  So faulty was the order of re-raffle that it left the impression that its
previously issued preliminary injunction remained effective since the case from which it
issued was not dismissed but merely transferred to another court.  A re-raffle which
causes a transfer of the case involves courts with the same subject matter jurisdiction; it
cannot involve courts which have different jurisdictions exclusive of the other.  More apt
in this case, a re-raffle of a case cannot cure a jurisdictional defect.

Prescinding from the foregoing considerations, and to show that the proceedings below
was error upon error, we find that the CA also gravely erred in not ruling that respondent
RTC's (Branch 22, the regular court)  jurisdiction over the case was curtailed by R-II
Builders' failure to pay the correct docket fees.  In other words, the jurisdictionally flawed
transfer of the case from Branch 24, the SCC to Branch 22, the regular court, is topped
by another jurisdictional defect which is the non-payment of the correct docket fees.  In
its order dated 19 May 2008 which admitted R-II Builders' Amended and Supplemental
Complaint, respondent RTC distinctly ruled that the case was a real action and ordered
the re-computation and payment of the correct docket fees. [53] In patent circumvention of
said order, however, R-II Builders filed its 14 August 2008 motion to admit its Second
Amended Complaint which effectively deleted its causes of action for accounting and
conveyance of title to and/or possession of the entire Asset Pool and, in addition to
reducing the claim for attorney's fees and seeking its appointment as a receiver,
reinstated its cause of action for resolution of the DAC. [54]  Acting on said motion as well
as the opposition and motion to dismiss interposed by HGC, [55] respondent RTC ruled as
follows in its assailed 3 March 2009 order,[56] to wit:

1. The docket fees of the original complaint has been paid, thus, the Court already
acquired jurisdiction over the instant case.  The admission of the Amended and
Supplemental Complaint, is subject to the payment of docket fees pursuant to the Order
of this Court dated May 18, 2008.  The non-payment of the docket fees stated in the
Order dated May 18, 2008 will result only in the non-admission of the Amended and
Supplemental Complaint, which means that the Original Complaint remains.  However,
since the Amended and Supplemental Complaint is being withdrawn and in lieu thereof
a new Amended Complaint is sought to be admitted, there is no more need to pay the
docket fees as provided for in the said Order.

2.  It is settled that once jurisdiction is acquired and vested in a Court, said Court
maintains its jurisdiction until judgment is had (Aruego, Jr., et al. vs. CA). Such acquired
jurisdiction is not lost by the amendment of a pleading that raises additional/new
cause(s) of action. The jurisdiction of a Court is not even lost even if the additional
docket fees are required by reason of the amendment.
51
Indeed, the Supreme Court held in PNOC vs. Court of Appeals (G.R. No. 107518,
October 8, 1998) that:

            "Its failure to pay the docket fee corresponding to its increased claim for
damages under the amended complaint should not be considered as having curtailed
the lower court's jurisdiction.  Pursuant to the ruling in Sun Insurance Office, Ltd. (SIOL)
v. Asuncion, the unpaid docket fees should be considered as a lien on the judgment
even though private respondent specified the amount of P600,000.00 as its claim for
damages in its amended complaint.

Thus, even on the assumption that additional docket fees are required as a
consequence of any amended complaint, its non-payment will not result in the court's
loss of jurisdiction over the case.[57]

Distinctly, the principal reference remained to be the "original complaint," in which R-II
Builders itself submitted that the case "is a real action as it affects title and possession
of real property or interest therein."  It was precisely this submission which was the
basis of the conclusion of the SCC court, Br. 24 that the case is not an intra-corporate
controversy and therefore is outside its authority.

We see from the assailed Order that the regular court accepted the case on the reason
that "the docket fees of the original complaint has been paid," so that, furthermore, the
Amended and Supplemental Complaint may be admitted "subject to the payment of
docket fees."  When the required fees were not paid, the court considered it as resulting
in the non-admission of the Amended and Supplemental Complaint such that "the
original complaint remains."  That remaining original complaint can then be amended by
"a new Amended Complaint" which is no longer subject to the conditions attached to the
unadmitted Amended and Supplemental Complaint.

The Order of 3 March 2009, with its logic and reason, is wholly unacceptable.

In upholding the foregoing order as well as its affirmance in respondent RTC's 29

September 2009 order,[58] the CA ruled that the case - being one primarily instituted for
the resolution/nullification of the DAC - involved an action incapable of pecuniary
estimation.  While it is true, however, that R-II Builder's continuing stake in the Asset
Pool is "with respect only to its residual value after payment of all the regular SMPPCs
holders and the Asset Pool creditors",[59] the CA failed to take into account the fact that
R-II Builders' original complaint and Amended and Supplemental Complaint both
interposed causes of action for conveyance and/or recovery of possession of the
entire Asset Pool.  Indeed, in connection with its second cause of action for appointment
as trustee in its original complaint,[60] R-II Builders distinctly sought the conveyance of
the entire Asset Pool[61] which it consistently estimated to be valued at
P5,919,716,618.62 as of 30 June 2005.[62]  In its opposition to HGC's motion to dismiss,
R-II Builders even admitted that the case is a real action as it affects title to or
possession of real property or an interest therein. [63]  With R-II Builders' incorporation of

52
a cause of action for conveyance of title to and/or possession of the entire Asset Pool in
its Amended and Supplemental Complaint,[64] on the other hand, no less than
respondent RTC, in its 19 May 2008 order, directed the assessment and payment of
docket fees corresponding to a real action.

Admittedly, this Court has repeatedly laid down the test in ascertaining whether the
subject matter of an action is incapable of pecuniary estimation by determining the
nature of the principal action or remedy sought.  While a claim is, on the one hand,
considered capable of pecuniary estimation if the action is primarily for recovery of a
sum of money, the action is considered incapable of pecuniary estimation where the
basic issue is something other than the right to recover a sum of money, the money
claim being only incidental to or merely a consequence of, the principal relief sought. [65] 
To our mind, the application of foregoing test does not, however, preclude the further
classification of actions into personal actions and real action, for which appropriate
docket fees are prescribed.  In contrast to personal actions where the plaintiff seeks the
recovery of personal property, the enforcement of a contract, or the recovery of
damages, real actions are those which affect title to or possession of real property, or
interest therein.[66] While personal actions should be commenced and tried 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, [67] the venue for real actions is the court of the
place where the real property is located.[68]

Although an action for resolution and/or the nullification of a contract, like an action for
specific performance, fall squarely into the category of actions where the subject matter
is considered incapable of pecuniary estimation,[69] we find that the causes of action for
resolution and/or nullification of the DAC was erroneously isolated by the CA from the
other causes of action alleged in R-II Builders' original complaint and Amended and
Supplemental Complaint which prayed for the conveyance and/or transfer of possession
of the Asset Pool. In Gochan v. Gochan,[70] this Court held that an action for specific
performance would still be considered a real action where it seeks the conveyance or
transfer of real property, or ultimately, the execution of deeds of conveyance of real
property.  More to the point is the case of Ruby Shelter Builders and Realty
Development Corporation v. Hon. Pablo C. Formaran III [71] where, despite the
annulment of contracts sought in the complaint, this Court upheld the directive to pay
additional docket fees corresponding to a real action in the following wise, to wit:

x x x [I]n Siapno v. Manalo, 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
53
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 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. [72]

Granted that R-II Builders is not claiming ownership of the Asset Pool because its
continuing stake is, in the first place, limited only to the residual value thereof, the
conveyance and/or transfer of possession of the same properties sought in the original
complaint and Amended and Supplemental Complaint both presuppose a real action for
which appropriate docket fees computed on the basis of the assessed or estimated
value of said properties should have been assessed and paid.   In support of its original
complaint's second cause of action for appointment as trustee and conveyance of the
properties in the Asset Pool, R-II Builders distinctly alleged as follows:

5.12. As the Court-appointed Trustee, R-II Builders shall have and exercise the same
powers, rights and duties as if [it] had been originally appointed, having the principal
duty of redeeming and buying back the Regular SMPPC's and thereafter liquidating the
Asset Pool, which are also the end goals of the Agreement.

5.12.1. R-II Builders, as the Trustee, shall have the power and right to invest, transfer,
convey or assign any of the assets of the Asset Pool, whether funds, receivables, real
or personal property, in exchange for shares of stocks, bonds, securities, real or
personal properties of any kind, class or nature, provided that any such investment,
transfer, conveyance or assignment shall not impair the value of the Asset Pool.

5.12.2. R-II Builders, as the Trustee, shall have the power and right to sell, change,
assign or otherwise dispose of any stocks, bonds, securities, real or personal properties
or other assets constituting the Asset Pool.

5.12. 3. R-II Builders, as the Trustee, shall have the power and right to enter into lease
agreements as lessor or any other related contract for the benefit of the Asset Pool; and

54
5.12.4. It is understood that the aforecited powers and rights of R-II Builders as the
court-appointed Trustee, are non-exclusive; and is deemed to include all the rights and
powers necessary and incidental to achieve the goals and objectives of the Agreement.
[73]

From the foregoing allegations in its original complaint, it cannot be gainsaid that R-II
Builders was unquestionably seeking possession and control of the properties in
the Asset Pool which predominantly consisted of real properties.  Having admitted that
"the case is a real action as it affects title to or possession of real property or (an)
interest therein",[74] R-II Builders emphasized the real nature of its action by seeking the
grant of the following main reliefs in the Amended and Supplemental Complaint it
subsequently filed, to wit:

5. After trial on the merits, render judgment:

(i) Declaring the annulment of the Deed of Assignment and conveyance executed by

PDB in favor of HGC; or in the alternative, declaring the nullity of the said instrument;

(ii) Appointing R-II Builders as the Trustee of the Asset Pool Properties, with powers
and responsibilities including but not limited to those stated in 5.12.1, 5.12.2, 5.12.3 and
5.12.4 herein and those spelled out in the Re-Stated Smokey Mountain Asset Pool
Formation Trust Agreement;

(iii) Ordering HGC to render an accounting of all properties of the Asset Pool transferred
thereto under the Deed of Assignment and Conveyance and thereafter convey title to
and/or possession of the entire Asset Pool to R-II Builders as the Trustee thereof which
assets consist of, but is not limited to the following:

(a) 105 parcels of land comprising the Smokey Mountain Site, and, the Reclamation
Area, consisting of the 539,471.47 square meters, and all the buildings and
improvements thereon, with their corresponding certificates of title;

(b) shares of stock of Harbour Center Port Terminal, Inc. which are presently registered
in the books of the said company in the name of PDB for the account of the Smokey
Mountain Asset Pool; and

(c) other documents as listed in Annex E of the Contract of Guaranty.

(iv) Ordering NHA to pay the Asset Pool the amount of Php1,803,729,757.88 including
the direct and indirect cost thereon as may be found by this Honorable Court to be due
thereon;

(v) Making the injunction permanent;

(vi) Ordering HGC and the NHA to pay Attorney's fees in the amount of P2,000,000 and
the costs of suit.[75]

55
For failure of R-II Builders to pay the correct docket fees for its original complaint or, for
that matter, its Amended and Supplemental Complaint as directed in respondent RTC's
19 May 2008 order, it stands to reason that jurisdiction over the case had yet to properly
attach.  Applying the rule that "a case is deemed filed only upon payment of the docket
fee regardless of the actual date of filing in court" in the landmark case of Manchester
Development Corporation v. Court of Appeals,[76] this Court ruled that jurisdiction over
any case is acquired only upon the payment of the prescribed docket fee which is both
mandatory and jurisdictional.  To temper said ruling, the Court subsequently issued the
following guidelines in Sun Insurance Office, Ltd. v. Hon. Maximiano Asuncion,[77] viz.:

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.

True to the foregoing guidelines, respondent RTC admitted R-II Builder's Amended and
Supplemental Complaint and directed the assessment and payment of the appropriate
docket fees in the order dated 19 May 2008.  Rather than complying with said directive,
however, R-II Builders manifested its intent to evade payment of the correct docket fees
by withdrawing its Amended and Supplemental Complaint and, in lieu thereof, filed
its Second Amended Complaint which deleted its cause of action for accounting and
conveyance of title to and/or possession of the entire Asset Pool, reduced its claim for
attorney's fees, sought its appointment as Receiver and prayed for the liquidation and
distribution of the Asset Pool.[78] In upholding the admission of said Second Amended
Complaint in respondent RTC's assailed 3 March 2009 Order, however, the CA clearly
lost sight of the fact that a real action was ensconced in R-II Builders' original complaint
and that the proper docket fees had yet to be paid in the premises.  Despite the latter's
withdrawal of its Amended and Supplemental Complaint, it cannot, therefore, be
gainsaid that respondent RTC had yet to acquire jurisdiction over the case for non-
payment of the correct docket fees.

56
In the 15 February 2011 Resolution issued in the case of David Lu v. Paterno Lu Ym,
Sr.,[79] this Court, sitting En Banc, had occasion to rule that an action for declaration of
nullity of share issue, receivership and corporate dissolution is one where the value of
the subject matter is incapable of pecuniary estimation. Subsequent to the trial court's
rendition of a decision on the merits declared to be immediately executory and the CA's
denial of their application for a writ of preliminary injunction and/or temporary restraining
order to enjoin enforcement of said decision, the defendants questioned the sufficiency
of the docket fees paid a quo which supposedly failed take into consideration the value
of the shares as well as the real properties involved for which the plaintiff additionally
caused notices of lis pendens to be annotated.  Finding that defendants were
already estopped in questioning the jurisdiction of the trial court on the ground of non-
payment of the correct docket fees, the Court discounted intent to defraud the
government on the part of the plaintiff who can, at any rate, be required to pay the
deficiency which may be considered a lien on the judgment that may be rendered,
without automatic loss of the jurisdiction already acquired, in the first instance, by the
trial court.

The factual and legal milieus of the case at bench could not, however, be more
different.  While R-II Builders styled its original complaint and Amended and
Supplemental Complaint as one primarily for the resolution and/or declaration of the
DAC, it simultaneously and unmistakably prayed for the conveyance, possession and
control of the Asset Pool.  Alongside the fact that HGC has consistently questioned the
sufficiency of the docket fees paid by R-II Builders, estoppel cannot be said to have set
in since, the lapse of more than five years from the commencement of the complaint
notwithstanding, it appears that the case has yet to be tried on the merits.  Having
admitted that its original complaint partook the nature of a real action and having been
directed to pay the correct docket fees for its Amended and Supplemental Complaint, R-
II Builders is, furthermore, clearly chargeable with knowledge of the insufficiency of the
docket fees it paid.   Unmistakably manifesting its intent to evade payment of the correct
docket fees, moreover, R-II Builders withdrew its Amended and Supplemental
Complaint after its admission and, in lieu thereof, filed its' Second Amended
Complaint on the ground that said earlier pleading cannot be considered admitted in
view of its non-payment of the docket and other fees it was directed to pay.  In so doing,
however, R-II Builders conveniently overlooked the fact that the very same argument
could very well apply to its original complaint for which - given its admitted nature as a
real action - the correct docket fees have also yet to be paid.

The importance of filing fees cannot be over-emphasized for they are intended to take
care of court expenses in the handling of cases in terms of costs of supplies, use of
equipment, salaries and fringe benefits of personnel, and others, computed as to man-
hours used in the handling of each case. The payment of said fees, therefore, cannot be
made dependent on the result of the action taken without entailing tremendous losses to
the government and to the judiciary in particular. [80]  For non-payment of the correct
docket fees which, for real actions, should be computed on the basis of the assessed
value of the property, or if there is none, the estimated value thereof as alleged by the
claimant,[81] respondent RTC should have denied admission of R-II Builders' Second

57
Amended Complaint and ordered the dismissal of the case.  Although a catena of
decisions rendered by this Court eschewed the application of the doctrine laid down in
the Manchester case,[82] said decisions had been consistently premised on the
willingness of the party to pay the correct docket fees and/or absence of intention to
evade payment of the correct docket fees.  This cannot be said of R-II Builders which
not only failed to pay the correct docket fees for its original complaint and Amended and
Supplemental Complaint but also clearly evaded payment of the same by filing
its Second Amended Complaint.

By itself, the propriety of admitting R-II Builders' Second Amended Complaint is also

cast in dubious light when viewed through the prism of the general prohibition against
amendments intended to confer jurisdiction where none has been acquired yet.
Although the policy in this jurisdiction is to the effect that amendments to pleadings are
favored and liberally allowed in the interest of justice, amendment is not allowed where
the court has no jurisdiction over the original complaint and the purpose of the
amendment is to confer jurisdiction upon the court. [83]  Hence, with jurisdiction over the
case yet to properly attach, HGC correctly fault the CA for upholding respondent RTC's
admission of R-II Builders' Second Amended Complaint despite non-payment of the
docket fees for its original complaint and Amended and Supplemental Complaint as well
as the clear intent to evade payment thereof.

With the determination  of the jurisdictional necessity of the dismissal of the complaint of
R-II Builders docketed as Civil Case No. 05-113407, first before Br. 24 and later before
Br. 22 both of the RTC of Manila, we no longer find any reason to go into a discussion
of the remaining issues HGC proffers for resolution.  In view, particularly, of its non-
acquisition of jurisdiction over the case, respondent RTC clearly had no authority to
grant the receivership sought by R-II Builders.  It needs pointing out though that the
prayer for receivership clearly indicates that the R-II Builders sought the transfer of
possession of property consisting of the assets of the JVA from HGC to the former's
named Receiver.  As already noted, said transfer of possession was sought by
respondent R-II Builders since the very start, overtly at the first two attempts, covertly in
the last, the successive amendments betraying the deft maneuverings to evade
payment of the correct docket fees.

WHEREFORE, premises considered, the assailed Decision dated 21 January 2010

is REVERSED and SET ASIDE. In lieu thereof, another is entered NULLIFYING the
regular court's, RTC Branch 22's Orders dated 3 March 2009 and 29 September 2009
as well as the SCC's, RTC Branch 24's Order dated 26 October 2005 which was
rendered void by the SCC's subsequent declaration of absence of authority over the
case.  The complaint of R-II Builders docketed as Civil Case No. 05-113407 first before
Br. 24 and thereafter before Br. 22 both of the RTC of Manila is hereby DISMISSED.

SO ORDERED.

FIRST DIVISION

58
 March 15, 2017

G.R. No. 224834

JONATHAN Y. DEE, Petitioner
vs
HARVEST ALL INVESTMENT LIMITED, VICTORY FUND LIMITED, BOND EAST
PRIVATE LIMITED, and ALBERT HONG HIN KAY, as Minority Shareholders of
ALLIANCE SELECT FOODS INTERNATIONAL, INC., and HEDY S.C. YAP-CHUA, as
Director and Shareholder of ALLIANCE SELECT FOODS INTERNATIONAL, INC.,
Respondents

x-----------------------x

G.R. No. 224871

HARVEST ALL INVESTMENT LIMITED, VICTORY FUND LIMITED, BOND EAST

PRIVATE LIMITED, ALBERT HONG HIN KAY, as Minority Shareholders of Alliance
Select Foods International, Inc., and HEDY S.C. YAP-CHUA, as a Director and
Shareholder of Alliance Select Foods International, Inc., Petitioners,
vs.
ALLIANCE SELECT FOODS INTERNATIONAL, INC., GEORGE E. SYCIP,
JONATHAN Y. DEE, RAYMUND K.H. SEE, MARY GRACE T. VERA-CRUZ,
ANTONIO C. PACIS, ERWIN M. ELECHICON, and BARBARA ANNE C.
MIGALLOS, Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in these consolidated petitions1 for review on certiorari are the Decision2 dated

February 15, 2016 and the Resolution3 dated May 25, 2016 of the Court of Appeals
(CA) in CA-G.R. SP No. 142213, which reversed the Resolution 4 dated August 24, 2015
of the Regional Trial Court of Pasig City, Branch 159 (RTC) in COMM'L. CASE NO. 15-
234 and, accordingly, reinstated the case and remanded the same to the court a quo for
further proceedings after payment of the proper legal fees.

The Facts

Harvest All Investment Limited, Victory Fund Limited, Bondeast Private Limited, Albert
Hong Hin Kay, and Hedy S.C. Yap Chua (Harvest All, et al.) are, in their own capacities,
minority stockholders of Alliance Select Foods International, Inc. (Alliance), with Hedy
S.C. Yap Chua acting as a member of Alliance's Board of Directors. 5 As per Alliance's
by-laws, its Annual Stockholders' Meeting (ASM) is held every June 15. 6 However, in a
Special Board of Directors Meeting held at three (3) o'clock in the afternoon of May 29,
2015, the Board of Directors, over Hedy S.C. Yap Chua's objections, passed a Board

59
Resolution indefinitely postponing Alliance's 2015 ASM pending complete subscription
to its Stock Rights Offering (SRO) consisting of shares with total value of ₱l Billion
which was earlier approved in a Board Resolution passed on February 17, 2015. As per
Alliance's Disclosure dated May 29, 2015 filed before the Philippine Stock Exchange,
such postponement was made "to give the stockholders of [Alliance] better
representation in the annual meeting, after taking into consideration their subscription to
the [SRO] of [Alliance]."7 This prompted Harvest All, et al. to file the instant Complaint
(with Application for the Issuance of a Writ of Preliminary Mandatory Injunction and
Temporary Restraining Order/Writ of Preliminary Injunction) 8 involving an intra-
corporate controversy against Alliance, and its other Board members, namely, George
E. Sycip, Jonathan Y. Dee, Raymund K.H. See, Mary Grace T. Vera-Cruz, Antonio C.
Pacis, Erwin M. Elechicon, and Barbara Anne C. Migallos (Alliance Board). In said
complaint, Harvest All, et al. principally claimed that the subscription to the new shares
through the SRO cannot be made a condition precedent to the exercise by the current
stockholders of their right to vote in the 2015 ASM; otherwise, they will be deprived of
their full voting rights proportionate to their existing shareholdings. 9 Thus, Harvest All, et
al., prayed for, inter alia, the declaration of nullity of the Board Resolution dated May
29, 2015 indefinitely postponing the 2015 ASM, as well as the Board Resolution dated
February 17, 2015 approving the SR0.10 The Clerk of Court of the RTC assessed
Harvest All, et al. with filing fees amounting to ₱8,860.00 which they paid
accordingly.11 Later on, Harvest All, et al. filed an Amended Complaint:12 (a) deleting its
prayer to declare null and void the Board Resolution dated February 17, 2015 approving
the SRO; and (b) instead, prayed that the Alliance Board be enjoined from
implementing and carrying out the SRO prior to and as a condition for the holding of the
2015 ASM.13

For its part, the Alliance Board raised the issue of lack of jurisdiction on the ground of
Harvest All, et al.'s failure to pay the correct filing fees. It argued that the latter should
have paid P20 Million, more or less, in filing fees based on the SRO which was valued
at Pl Billion. However, Harvest All, et al. did not mention such capital infusion in their
prayers and, as such, were only made to pay the measly sum of ₱8,860.00. On the
other hand, Harvest All, et al. maintained that they paid the correct filing fees,
considering that the subject of their complaint is the holding of the 2015 ASM and not a
claim on the aforesaid value of the SRO. Harvest All, et al. likewise pointed out that
they simply relied on the assessment of the Clerk of Court and had no intention to
defraud the government.14

The RTC Ruling

In a Resolution15 dated August 24, 2015, the RTC dismissed the instant complaint for
lack of jurisdiction due to Harvest All, et al.'s failure to pay the correct filing fees.16 Citing
Rule 141 of the Rules of Court, as amended by A.M. No. 04-2-04-SC, 17 and the Court's
pronouncement in Lu v. Lu Ym, Sr. (Lu),18 the RTC found that the basis for the
computation of filing fees should have been the ₱l Billion value of the SRO, it being the
property in litigation. As such, Harvest All, et al. should have paid filing fees in the
amount of more or less ₱20 Million and not just ₱5,860.00. In this regard, the RTC also

60
found that Harvest All, et al.'s payment of incorrect filing fees was done in bad faith and
with clear intent to defraud the government, considering that: (a) when the issue on
correct filing fees was first raised during the hearing on the application for TRO, Harvest
All, et al. never manifested their willingness to abide by the Rules by paying additional
filing fees when so required; (b) despite Harvest All, et al.'s admission in their complaint
that the SRO was valued at Pl Billion, they chose to keep mum on the meager
assessment made by the Clerk of Court; and (c) while Harvest All, et al. made mention
of the SRO in the body of their complaint, they failed to indicate the same in their
prayer, thus, preventing the Clerk of Court from making the correct assessment of filing
fees.19

Aggrieved, Harvest All, et al. appealed20 to the CA.

The CA Ruling

In a Decision21 dated February 15, 2016, the CA reversed the RTC's order of dismissal
and, accordingly, reinstated the case and remanded the same to the court a quo for
further proceedings after payment of the proper legal fees. 22 Also citing Rule 141 of the
Rules of Court, as amended by A.M. No. 04-2-04-SC, and Lu, the CA held that the
prevailing rule is that all intra-corporate controversies always involve a property in
litigation. Consequently, it agreed with the RTC's finding that the basis for the
computation of filing fees should have been the ₱l Billion value of the SRO and, thus,
Harvest All, et al. should have paid filing fees in the amount of more or less ₱20 Million
and not just ₱5,860.00.23 However, in the absence of contrary evidence, the CA held
that Harvest All, et al. were not in bad faith and had no intention of defrauding the
government, as they merely relied in the assessment of the Clerk of Court. Thus, in the
interest of substantial justice, the CA ordered the reinstatement of Harvest All, et al.' s
complaint and the remand of the same to the RTC for further proceedings, provided that
they pay the correct filing fees.24

The parties moved for reconsideration,25 which were, however, denied in a

Resolution26 dated May 25, 2016. Hence, these consolidated petitions.

The Issues Before the Court

The primordial issues raised for the Court's resolution are: (a) whether or not Harvest
All, et al. paid insufficient filing fees for their complaint, as the same should have been
based on the Pl Billion value of the SRO; and (b) if Harvest All, et al. indeed paid
insufficient filing fees, whether or not such act was made in good faith and without any
intent to defraud the government.

The Court's Ruling

The petition in G.R. No. 224834 is denied, while the petition in G.R. No. 224871 is partly
granted.

61
 I.

At the outset, the Court notes that in ruling that the correct filing fees for Harvest All, et
al.'s complaint should be based on the Pl Billion value of the SRO - and, thus,
essentially holding that such complaint was capable of pecuniary estimation - both the
RTC and the CA heavily relied on the

Court's pronouncement in Lu. In Lu, the Court mentioned that in view of A.M. No. 04-2-
04-SC dated July 20, 2004 which introduced Section 21 (k) 27 to Rule 141 of the Rules of
Court, it seemed that "an intra-corporate controversy always involves a property in
litigation" and that "there can be no case of intra-corporate controversy where the value
of the subject matter cannot be estimated." 28

However, after a careful reading of Lu, it appears that Harvest All, et al. correctly
pointed out29 that the foregoing statements were in the nature of an obiter dictum.

To recount, in Lu, the Court ruled, inter alia, that the case involving an intra-corporate

controversy instituted therein, i.e., declaration of nullity of share issuance, is incapable
of pecuniary estimation and, thus, the correct docket fees were paid. 30 Despite such
pronouncement, the Court still went on to say that had the complaint therein been filed
during the effectivity of A.M. No. 04-2-04-SC, then it would have ruled otherwise
because the amendments brought about by the same "seem to imply that there can be
no case of intra-corporate controversy where the value of the subject matter cannot be
estimated,"31 viz.:

The new Section 21 (k) of Rule 141 of the Rules of Court, as amended by A.M. No. 04-
2-04-SC (July 20, 2004), expressly provides that "[f]or petitions for insolvency or other
cases involving intra-corporate controversies, the fees prescribed under Section 7 (a)
shall apply." Notatu dignum is that paragraph (b) 1 & 3 of Section 7 thereof was omitted
from the reference. Said paragraph refers to docket fees for filing "[a]ctions where the
value of the subject matter cannot be estimated" and "all other actions not involving
property."

By referring the computation of such docket fees to paragraph (a) only, it denotes that
an intra-corporate controversy always involves a property in litigation, the value of which
is always the basis for computing the applicable filing fees. The latest amendments
seem to imply that there can be no case of intra-corporate controversy where the value
of the subject matter cannot be estimated. Even one for a mere inspection of corporate
books.

If the complaint were filed today, one could safely find refuge in the express
phraseology of Section 21 (k) of Rule 141 that paragraph (a) alone applies.

In the present case, however, the original Complaint was filed on August 14, 2000
during which time Section 7, without qualification, was the applicable provision. Even
the Amended Complaint was filed on March 31, 2003 during which time the applicable

62
rule expressed that paragraphs (a) and (b) 1 & 3 shall be the basis for computing the
filing fees in intra-corporate cases, recognizing that there could be an intra-corporate
controversy where the value of the subject matter cannot be estimated, such as an
action for inspection of corporate books. The immediate illustration shows that no
mistake can even be attributed to the RTC clerk of court in the assessment of the
docket fees.32 (Emphases and underscoring supplied)

Accordingly, the passages in Lu that "an intra-corporate controversy always involves a

property in litigation" and that "there can be no case of intra-corporate controversy
where the value of the subject matter cannot be estimated" are clearly non-
determinative of the antecedents involved in that case and, hence, cannot be controlling
jurisprudence to bind our courts when it adjudicates similar cases upon the principle
of stare decisis. As it is evident, these passages in Lu only constitute an opinion
delivered by the Court as a "by the way" in relation to a hypothetical scenario (i.e., if the
complaint was filed during the effectivity of A.M. No. 04-2-04-SC, which it was not)
different from the actual case before it.

In Land Bank of the Philippines v. Santos, 33 the Court had the opportunity to define
an obiter dictum and discuss its legal effects as follows:

[An obiter dictum] "x x x is a remark made, or opinion expressed, by a judge, in his
decision upon a cause by the way, that is, incidentally or collaterally, and not directly
upon the question before him, or upon a point not necessarily involved in the
determination of the cause, or introduced by way of illustration, or analogy or argument.
It does not embody the resolution or determination of the court, and is made without
argument, or full consideration of the point. It lacks the force of an adjudication, being a
mere expression of an opinion with no binding force for purposes of res
judicata."34 (Emphasis and underscoring supplied)

For these reasons, therefore, the courts a quo erred in applying the case of Lu.

II.

In any event, the Court finds that the obiter dictum stated in Lu was actually incorrect.
This is because depending on the nature of the principal action or remedy sought, an
intra-corporate controversy may involve a subject matter which is either capable or
incapable of pecuniary estimation.

In Cabrera v. Francisco,35 the Court laid down the parameters in determining whether

an action is considered capable of pecuniary estimation or not:

In determining whether an action is one the subject matter of which is not capable of
pecuniary estimation this Court has adopted the criterion of first ascertaining the nature
of the principal action or remedy sought. If it is primarily for the recovery of a sum of
money, the claim is considered capable of pecuniary estimation, and whether
jurisdiction is in the municipal courts or in the [C]ourts of [F]irst [I]nstance would depend

63
on the amount of the claim. However, where the basic issue is something other than the
right to recover a sum of money, where the money claim is purely incidental to, or a
consequence of, the principal relief sought, this Court has considered such actions as
cases where the subject of the litigation may not be estimated in terms of money, and
are cognizable exclusively by [C]ourts of [F]irst [I]nstance (now Regional Trial
Courts).36 (Emphases and underscoring supplied)

This case is a precise illustration as to how an intra-corporate controversy may be

classified as an action whose subject matter is incapable of pecuniary estimation. A
cursory perusal of Harvest All, et al.'s Complaint and Amended Complaint reveals that
its main purpose is to have Alliance hold its 2015 ASM on the date set in the
corporation's bylaws, or at the time when Alliance's SRO has yet to fully materialize, so
that their voting interest with the corporation would somehow be preserved. Thus,
Harvest All, et al. sought for the nullity of the Alliance Board Resolution passed on May
29, 2015 which indefinitely postponed the corporation's 2015 ASM pending completion
of subscription to the SR0.37 Certainly, Harvest All, et al.'s prayer for nullity, as well as
the concomitant relief of holding the 2015 ASM as scheduled in the by-laws, do not
involve the recovery of sum of money. The mere mention of Alliance's impending SRO
valued at ₱l Billion cannot transform the nature of Harvest All, et al.'s action to one
capable of pecuniary estimation, considering that: (a) Harvest All, et al. do not claim
ownership of, or much less entitlement to, the shares subject of the SRO; and (b) such
mention was merely narrative or descriptive in order to emphasize the severe dilution
that their voting interest as minority shareholders would suffer if the 2015 ASM were to
be held after the SRO was completed. If, in the end, a sum of money or anything
capable of pecuniary estimation would be recovered by virtue of Harvest All, et
al.'s complaint, then it would simply be the consequence of their principal action.

Clearly therefore, Harvest All, et al.'s action was one incapable of pecuniary estimation.

At this juncture, it should be mentioned that the Court passed A.M. No. 04-02-04-
SC38 dated October 5, 2016, which introduced amendments to the schedule of legal
fees to be collected in various commercial cases, including those involving intra-
corporate controversies. Pertinent portions of A.M. No. 04-02-04-SC read:

RESOLUTION

xxxx

Whereas, Rule 141 of the Revised Rules of Court, as amended by A.M. No. 04-2-04-
SC effective 16 August 2004, incorporated the equitable schedule of legal fees
prescribed for petitions for rehabilitation under Section 21 (i) thereof and, furthermore,
provided under Section 21(k) thereof that the fees prescribed under Section 7(a) of the
said rule shall apply to petitions for insolvency or other cases involving intra-corporate
controversies;

xxxx

64
NOW, THEREFORE, the Court resolves to ADOPT a new schedule of filing fees as
follows:

xxxx

4. Section 21 (k) of Rule 141 of the Revised Rules of Court is hereby DELETED as the
fees covering petitions for insolvency are already provided for in this Resolution. As for
cases involving intra-corporate controversies, the applicable fees shall be those
provided under Section 7 (a), 7 (b) (1), or 7 (b) (3) of Rule 141 of the Revised Rules of
Court depending on the nature of the action.

xxxx

This Resolution shall take effect fifteen (15) days following its publication in the Official
Gazette or in two (2) newspapers of national circulation. The Office of the Court
Administrator (OCA) is directed to circularize the same upon its effectivity. (Emphases
and underscoring supplied)

Verily, the deletion of Section 21 (k) of Rule 141 and in lieu thereof, the application of
Section 7 (a) [fees for actions where the value of the subject matter can be
determined/estimated], 7 (b) (1) [fees for actions where the value of the subject matter
cannot be estimated], or 7 (b) (3) [fees for all other actions not involving property] of the
same Rule to cases involving intra-corporate controversies for the determination of the
correct filing fees, as the case may be, serves a dual purpose: on the one hand, the
amendments concretize the Court's recognition that the subject matter of an intra-
corporate controversy may or may not be capable of pecuniary estimation; and on the
other hand, they were also made to correct the anomaly created by A.M. No. 04-2-04-
SC dated July 20, 2004 (as advanced by the Lu obiter dictum) implying that all intra-
corporate cases involved a subject matter which is deemed capable of pecuniary
estimation.

While the Court is not unaware that the amendments brought by A.M. No. 04-02-04-SC
dated October 5, 2016 only came after the filing of the complaint subject of this case,
such amendments may nevertheless be given retroactive effect so as to make them
applicable to the resolution of the instant consolidated petitions as they merely
pertained to a procedural rule, i.e., Rule 141, and not substantive law. In Tan, Jr. v.
CA,39 the Court thoroughly explained the retroactive effectivity of procedural rules, viz.:

The general rule that statutes are prospective and not retroactive does not ordinarily
apply to procedural laws. It has been held that "a retroactive law, in a legal sense, is
one which takes away or impairs vested rights acquired under laws, or creates a new
obligation and imposes a new duty, or attaches a new disability, in respect of
transactions or considerations already past. Hence, remedial statutes or statutes
relating to remedies or modes of procedure, which do not create new or take away
vested rights, but only operate in furtherance of the remedy or confirmation of rights
already existing, do not come within the legal conception of a retroactive law, or the

65
general rule against the retroactive operation of statutes." The general rule against
giving statutes retroactive operation whose effect is to impair the obligations of contract
or to disturb vested rights does not prevent the application of statutes to proceedings
pending at the time of their enactment where they neither create new nor take away
vested rights. A new statute which deals with procedure only is presumptively applicable
to all actions - those which have accrued or are pending.

Statutes regulating the procedure of the courts will be construed as applicable to actions
pending and undetermined at the time of their passage.1âwphi1 Procedural laws are
retroactive in that sense and to that extent. The fact that procedural statutes may
somehow affect the litigants' rights may not preclude their retroactive application to
pending actions. The retroactive application of procedural laws is not violative of any
right of a person who may feel that he is adversely affected. Nor is the retroactive
application of procedural statutes constitutionally objectionable. The reason is that as a
general rule no vested right may attach to, nor arise from, procedural laws. It has been
held that "a person has no vested right in any particular remedy, and a litigant cannot
insist on the application to the trial of his case, whether civil or criminal, of any other
than the existing rules of procedure."40 (Emphases and underscoring supplied)

In view of the foregoing, and having classified Harvest All, et al.'s action as one
incapable of pecuniary estimation, the Court finds that Harvest All, et al. should be
made to pay the appropriate docket fees in accordance with the applicable fees
provided under Section 7 (b) (3) of Rule 141 [fees for all other actions not involving
property] of the Revised Rules of Court, in conformity with A.M. No. 04-02-04-SC dated
October 5, 2016. The matter is therefore remanded to the R TC in order:

(a) to FIRST Determine if Harvest, et al.'s payment of filing fees in the amount of
₱8,860.00, as initially assessed by the Clerk of Court, constitutes sufficient compliance
with A.M. No. 04-02-04-SC;

(b) if Harvest All, et al.'s payment of ₱8,860.00 is insufficient, to require Harvest, et

al.' s payment of any discrepancy within a period of fifteen (15) days from notice, and
after such payment, proceed with the regular proceedings of the case with dispatch; or

(c) if Harvest All, et al.'s payment of ₱8,860.00 is already sufficient, proceed with the
regular proceedings of the case with dispatch.

WHEREFORE, the petition in G.R. No. 224834 is DENIED, while the petition in G.R.

No. 224871 is PARTLY GRANTED. The Decision dated February 15, 2016 and the
Resolution dated May 25, 2016 of the Court of Appeals in CA-G.R. SP No. 142213 are
hereby AFFIRMED with MODIFICATION in that COMM'L. CASE NO. 15-234 is
hereby REMANDED to the Regional Trial Court of Pasig City, Branch 159 for further
proceedings as stated in the final paragraph of this Decision.

SO ORDERED.

66
 SECOND DIVISION

G.R. No. 191641, September 02, 2015

EDMUNDO NAVAREZ, Petitioner, v. ATTY. MANUEL ABROGAR III, Respondent.

DECISION

BRION, J.:

This is a petition for certiorari under Rule 651 of the Rules of Court, filed from the
October 16, 2009 Decision and the March 12, 2010 Resolution of the Court of Appeals
(CA) in CA-G.R. SP No. 108675.2 The CA dismissed the petition for certiorari that the
present petitioner filed against the January 21, 2009 Order of the Regional Trial Court
(RTC).

ANTECEDENTS

On July 30, 2007, petitioner Edmundo Navarez engaged the services of Abrogar Valerio
Maderazo and Associates Law Offices (the Firm) through the respondent, Atty. Manuel
Abrogar III. The Firm was to represent Navarez in Sp. Proc. No. Q-05-59112 entitled
"Apolonio Quesada, Jr. v. Edmundo Navarez" as collaborating counsel of Atty. Perfecto
Laguio. The case involved the settlement of the estate of Avelina Quesada-Navarez that
was then pending before the Regional Trial Court (RTC), Branch 83, Quezon City. The
pertinent portions of the Retainer Agreement read:
Our services as collaborating counsel will cover investigation, research and
representation with local banks, concerns regarding deposits (current and savings) and
investment instruments evidenced by certificate of deposits. Our office may also initiate
appropriate civil and/or criminal actions as well as administrative remedies needed to
adjudicate the Estate of Avelina Quesada-Navarez expeditiously, peacefully and
lawfully.

Effective Date: June 2007

Acceptance Fee: P100,000.00 in an installment basis

Success Fee: 2% of the total money value of your share as co-owner and heir of the
Estate (payable proportionately upon your receipt of any amount)

Appearance Fee: P2,500.00 per Court hearing or administrative meetings and/or other

meetings.

Filing of Motions and/or pleadings at our initiative shall be for your account and you will
be billed accordingly.

OUT-OF-POCKET EXPENSES: Ordinary out-of-pocket expenses such as telex,

facsimile, word processing, machine reproduction, and transportation expenses, as well
67
as per diems and accommodations expenses incurred in undertaking work for you
outside Metro Manila area and other special out-of-pocket expenses as you may
authorized [sic] us to incur (which shall always be cleared with you in advance) shall be
for your account. xxxx
On September 2, 2008, Navarez filed a Manifestation with the RTC that he was
terminating the services of Atty. Abrogar. On the same day, Navarez also caused the
delivery to Atty. Abrogar of a check in the amount of P220,107.51 - allegedly equivalent
to one half of 7.5% of petitioner's P11,200,000.00 share in the estate of his deceased
wife less Atty. Abrogar's cash advances.

On September 9, 2008, Atty. Abrogar manifested that with respect to the petitioner's
one-half (1/2) share in the conjugal partnership, the RTC had already resolved the
matter favorably because it had issued a release order for the petitioner to withdraw the
amount. Atty. Abrogar further declared that the Firm was withdrawing as counsel -
effective upon the appointment of an Administrator of the estate - from the remaining
proceedings for the settlement of the estate of Avelina Quesada-Navarez.

On September 22, 2008, the petitioner wrote to Atty. Abrogar offering to pay his
attorney's fees in accordance with their Retainer Agreement minus the latter's cash
advances - an offer that Atty. Abrogar had previously refused in August 2008.

On October 7, 2008, Atty. Abrogar filed a Motion to Enter into the Records his attorney's
lien pursuant to Rule 138, Section 37 of the Rules of Court.

On November 21, 2008, the motion was submitted for resolution without oral
arguments.

On January 21, 2009, the RTC issued an order granting the motion and directed the
petitioner to pay Atty. Abrogar's attorney's fees. The Order reads:
WHEREFORE, premises considered, it is hereby ordered:

1. That the attorney's lien of Manuel Abrogar III conformably with the
Retainer Agreement dated July 30, 2007, be entered into the records of
this case in consonance with Section 37, Rule 138 of the Rules of
Court;ChanRoblesVirtualawlibrary

2. That oppositor Edmundo Navarez pay the amount of 7.5% of

P11,196,675.05 to Manuel Abrogar III;ChanRoblesVirtualawlibrary

3. That the oppositor pay the administrative costs/expenses of P103,000.00

to the movant; and

4. That the prayers for P100,000.00 as exemplary damages, P200,000.00 as

moral damages and for writ of preliminary attachment be denied.

SO ORDERED.

68
On February 18, 2009, the petitioner filed a Motion for Reconsideration.

On March 17, 2009, the RTC denied the motion for reconsideration and issued a Writ of
Execution of its Order dated January 21, 2009.

The petitioner elevated the case to the CA via a petition for certiorari. He argued that
the RTC committed grave abuse of discretion because: (1) the RTC granted Atty.
Abrogar's claim for attorney's fees despite non-payment of docket fees; (2) the RTC
denied him the opportunity of a full-blown trial to contradict Atty. Abrogar's claims and
prove advance payments; and (3) the RTC issued a writ of execution even before the
lapse of the reglementary period.

In its decision dated October 16, 2009, the CA dismissed the petition and held that the
RTC did not commit grave abuse of discretion.

The petitioner moved for reconsideration which the CA denied in a Resolution dated
March 12, 2010.

On April 6, 2010, and April 26, 2010, the petitioner filed his first and second motions for
extension of time to file his petition for review. This Court granted both motions for
extension totaling thirty (30) days (or until May 5, 2010) in the Resolution dated July 26,
2010.

On May 5, 2010, the petitioner filed the present petition entitled "Petition for Review."
However, the contents of the petition show that it is a petition for certiorari under Rule
65 of the Rules of Court.3

THE PETITION

The petitioner argues that the CA gravely erred in dismissing his petition
for certiorari that challenged the RTC ruling ordering the payment of attorney's fees. He
maintains his argument that the RTC committed grave abuse of discretion because: (1)
it granted Atty. Abrogar's claim for attorney's fees despite lack of jurisdiction due to non-
payment of docket fees; (2) it granted the claim for attorney's fees without requiring a
fullblown trial and without considering his advance payments; and (3) it issued the writ
of execution before the lapse of the reglementary period. The petitioner also points out
that the CA nullified the RTC's release order in CA-G.R. SP No. 108734.

In his Comment dated September 8, 2010, Atty. Abrogar adopted the CA's position in its
October 16, 2009 Decision.

OUR RULING

We observe that the petitioner used the wrong remedy to challenge the CA's decision
and resolution. The petitioner filed a petition for certiorari under Rule 65, not a petition
for review on certiorari under Rule 45. A special civil action for certiorari is a remedy of

69
last resort, available only to raise jurisdictional issues when there is no appeal or any
other plain, speedy, and adequate remedy under the law.

Nonetheless, in the spirit of liberality that pervades the Rules of Court 4 and in the
interest of substantial justice,5 this Court has, on appropriate occasions, treated a
petition for certiorari as a petition for review on certiorari, particularly when: (1) the
petition for certiorari was filed within the reglementary period to file a petition for review
on certiorari;6 (2) the petition avers errors of judgment; 7 and (3) when there is sufficient
reason to justify the relaxation of the rules.8 Considering that the present petition was
filed within the extension period granted by this Court and avers errors of law and
judgment, this Court deems it proper to treat the present petition for certiorari as a
petition for review on certiorari in order to serve the higher ends of justice.

With the procedural issue out of the way, the remaining issue is whether or not the CA
erred when it held that the RTC acted within its jurisdiction and did not commit grave
abuse of discretion when it ordered the payment of attorney's fees.

We find merit in the petition.

An attorney has a right to be paid a fair and reasonable compensation for the services
he has rendered to a client. As a security for his fees, Rule 138, Section 37 of the Rules
of Court grants an attorney an equitable right to a charging lien over money judgments
he has secured in litigation for his client. For the lien to be enforceable, the attorney
must have caused: (1) a statement of his claim to be entered in the record of the case
while the court has jurisdiction over the case and before the full satisfaction of the
judgment;9 and (2) a written notice of his claim to be delivered to his client and to the
adverse party.

However, the filing of the statement of the claim does not, by itself, legally determine the
amount of the claim when the client disputes the amount or claims that the amount has
been paid.10 In these cases, both the attorney and the client have a right to be heard
and to present evidence in support of their claims. 11 The proper procedure for the court
is to ascertain the proper amount of the lien in a full dress trial before it orders the
registration of the charging lien.12 The necessity of a hearing is obvious and beyond
dispute.13

In the present case, the RTC ordered the registration of Atty. Abrogar's lien without a
hearing even though the client contested the amount of the lien. The petitioner had the
right to be heard and to present evidence on the true amount of the charging lien. The
RTC acted with grave abuse of discretion because it denied the petitioner his right to be
heard, i.e., the right to due process.

The registration of the lien should also be distinguished from the enforcement of the
lien. Registration merely determines the birth of the lien. 14 The enforcement of the lien,
on the other hand, can only take place once a final money judgment has been secured
in favor of the client. The enforcement of the lien is a claim for attorney's fees that may

70
be prosecuted in the very action where the attorney rendered his services or in a
separate action.

However, a motion for the enforcement of the lien is in the nature of an action
commenced by a lawyer against his clients for attorney's fees. 15 As in every action for a
sum of money, the attorney-movant must first pay the prescribed docket fees before the
trial court can acquire jurisdiction to order the payment of attorney's fees.

In this case, Atty. Abrogar only moved for the registration of his lien. He did not pay any
docket fees because he had not yet asked the RTC to enforce his lien. However, the
RTC enforced the lien and ordered the petitioner to pay Atty. Abrogar's attorney's fees
and administrative expenses.

Under this situation, the RTC had not yet acquired jurisdiction to enforce the charging
lien because the docket fees had not been paid. The payment of docket fees is
mandatory in all actions, whether separate or an offshoot of a pending proceeding.
In Lacson v. Reyes,16 this Court granted certiorari and annulled the decision of the trial
court granting a "motion for attorney's fees" because the attorney did not pay the docket
fees. Docket fees must be paid before a court can lawfully act on a case and grant
relief. Therefore, the RTC acted without or in excess of its jurisdiction when it ordered
the payment of the attorney's fees.

Lastly, the enforcement of a charging lien can only take place after a final money
judgment has been rendered in favor of the client. 17 The lien only attaches to the money
judgment due to the client and is contingent on the final determination of the main case.
Until the money judgment has become final and executory, enforcement of the lien is
premature.

The RTC again abused its discretion in this respect because it prematurely enforced the
lien and issued a writ of execution even before the main case became final; no money
judgment was as yet due to the client to which the lien could have attached itself.
Execution was improper because the enforceability of the lien is contingent on a final
and executory award of money to the client. This Court notes that in CA-G.R. SP No.
108734, the CA nullified the "award" to which the RTC attached the attorney's lien as
there was nothing due to the petitioner. Thus, enforcement of the lien was premature.

The RTC's issuance of a writ of execution before the lapse of the reglementary period to
appeal from its order is likewise premature. The Order of the RTC dated January 21,
2009, is an order that finally disposes of the issue on the amount of attorney's fees Atty.
Abrogar is entitled to. The execution of a final order issues as a matter of right upon the
expiration of the reglementary period if no appeal has been perfected. 18 Under Rule 39,
Section 2 of the Rules of Court, discretionary execution can only be made before the
expiration of the reglementary period upon a motion of the prevailing party with notice to
the adverse party. Discretionary execution may only issue upon good reasons to be
stated in a special order after due hearing. 19

71
The RTC ordered execution without satisfying the requisites that would have justified
discretionary execution. Atty. Abrogar had not moved for execution and there were no
good reasons to justify the immediate execution of the RTC's order. Clearly, the RTC
gravely abused its discretion when it ordered the execution of its order dated January
21, 2009, before the lapse of the reglementary period.

For these reasons, this Court finds that the CA erred when it held that the RTC did not
commit grave abuse of discretion and acted without jurisdiction.

As our last word, this decision should not be construed as imposing unnecessary
burden on the lawyer in collecting his just fees. But, as in the exercise of any other right
conferred by law, the lawyer - and the courts -must avail of the proper legal remedies
and observe the procedural rules to prevent the possibility, or even just the perception,
of abuse or prejudice.20chanroblesvirtuallawlibrary

WHEREFORE, premises considered, we hereby GRANT the petition. The decision of

the Court of Appeals in CA-G.R. SP No. 108675 dated October 16, 2009, is
hereby REVERSED, and the decision of the Regional Trial Court, Branch 83, Quezon
City in Sp. Proc. No. Q-05-59112 is hereby ANNULLED and SET ASIDE.

SO ORDERED.chanroblesvirtuallawlibrary
RULE 2. CAUSE OF ACTION

FIRST DIVISION

G.R. No. 175151               September 21, 2011

TOBIAS SELGA and CEFERINA GARANCHO SELGA, Petitioners,

vs.
SONY ENTIERRO BRAR, represented by her Attorney-in-Fact MARINA T.
ENTIERRO, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

Before Us is a Petition for Review under Rule 45 of the Rules of Court of the
Decision1 dated May 31, 2006 and Resolution2 dated September 28, 2006 of the Court
Appeals in CA-G.R. CV No. 72987, which reversed the Decision 3 dated July 27, 2001 of
Branch 56, Regional Trial Court (RTC) of Himamaylan City, Negros Occidental (RTC-
Branch 56), in Civil Case No. 573 for Legal Redemption with Damages.

The following facts are not disputed:

Francisco Entierro (Francisco) died intestate on March 7, 1979, and left behind a parcel
of land, identified as Lot 1138-A, located in Himamaylan City, Negros Occidental, with

72
an area of 39,577 square meters, and covered by Transfer Certificate of Title (TCT) No.
T-10273 in his name (subject property).

On May 15, 1985, Francisco’s spouse, Basilia Tabile (Basilia), and legitimate children,
Esteban, Herminia, Elma, Percival, and Gilda, all surnamed Entierro (collectively
referred to as Basilia, et al.), executed a Deed of Sale with Declaration of Heirship. In
said Deed, Basilia, et al., declared themselves to be Francisco’s only heirs who
inherited the subject property; and at the same time, sold the subject property to
petitioners, spouses Tobias Selga and Ceferina Garancho Selga, for ₱120,000.00. By
reason of said sale, TCT No. T-10273 in Francisco’s name was cancelled and replaced
by TCT No. T-134408 in petitioners’ names.

Seven years later, on July 10, 1992, respondent Sony Entierro Brar, represented by her
sister-in-law and attorney-in-fact, Marina T. Entierro, filed before Branch 55 of the RTC
of Himamaylan City, Negros Occidental (RTC-Branch 55) a Complaint for Annulment of
Sale with Damages against petitioners, which was docketed as Civil Case No. 276.
Respondent claimed that she was one of the legitimate children of Francisco and
Basilia, and that she had been preterited and illegally deprived of her rightful share and
interests in the subject property as one of Francisco’s legal heirs. Among respondent’s
allegations in her Complaint was:

10. That as one of the co-heirs of the undivided portion of the questioned lot 1138-A,
[herein respondent] is legally entitled to redeem the said property from the [herein
petitioners] for the price the said [petitioners] have paid her co-heirs as appearing in the
Deed of Sale with Declaration of Heirship, Annex "B." 4

Respondent prayed that RTC-Branch 55 render judgment:

1. Declaring the [herein respondent] as one of the legitimate children and legal
heirs of the late Francisco Entierro and is legally entitled to inherit and share in
Lot No. 1138-A of Himamaylan, which the latter had left behind upon his demise
on March 7, 1979;

2. Declaring the annulment of the Deed of Sale with Declaration of Heirship,

Annex "B", because [respondent] was unduly preterited therein, as one of the
children and heirs of the late Francisco Entierro and consequently, the said
document should be ordered cancelled insofar as [respondent’s] legal share and
participation over the said Lot 1138-A is concerned;

3. Ordering the [respondent] legally entitled to redeem from the [herein

petitioners] the subject Lot 1138-A for the redemption price of ₱52,000.00 as one
of the co-heirs and co-owners proindiviso of the said property at the time, the
same was sold and conveyed in favor of the [petitioners] on May 15, 1985, as
shown in Annex "B" hereof;

73
 4. Ordering the [petitioners] to account to the [respondent] her share in the
produce of the land in question with respect to her legal share on said property is
concerned from May 15, 1985, up to the time, that [respondent’s] legal share and
participation therefrom, shall have been ordered delivered to her;

5. Ordering the [petitioners] to pay the [respondent] the sum of ₱50,000.00 by

way of attorney’s fee and to pay the costs of this suit;

6. [Respondent] further prays for such other reliefs as may be deemed just and
equitable in the premises.5

After trial on the merits, RTC-Branch 55 rendered a Decision dated May 8, 1996.

According to RTC-Branch 55, it was duly proven that respondent is a legitimate

daughter of Francisco and Basilia; a fact admitted by petitioner Tobias Selga himself
during his cross-examination. Upon Francisco’s death, half of the subject property was
inherited by his spouse, Basilia; while the other half was inherited by his children, pro-
indiviso. The property relation of Francisco’s heirs as regards the subject property was
governed by the provisions on co-ownership. Basilia, et al., validly sold all their rights
and interests over the subject property to petitioners, excluding the rights and interests
over the same pertaining to respondent, who did not participate in the execution of the
Deed of Sale. RTC-Branch 55 summed up its findings, thus:

The other heirs have no right to sell the share belonging to the [herein respondent].
Although this fact is known to the [herein petitioners], the [respondent’s] share was
included in the Deed of Sale by selling the entire Lot No. 1138-A. The [petitioners],
knowing that [respondent] Sony Entierro Brar was preterited during the settlement and
disposition of the subject Lot No. 1138-A, was in bad faith when he caused for the
registration of the entire lot in his name. Knowing that there was a flaw in his title, an
implied trust was created with respect to that of the share belonging to respondent Sony
Entierro Brar.6

RTC-Branch 55 finally disposed:

WHEREFORE, based on the foregoing premises and considerations, the Court hereby
renders judgment declaring the annulment of the Deed of Sale with Declaration of
heirship dated May 15, 1985 adjudicating ownership of Lot No. 1138-A in the name of
[herein respondent] Sony Entierro Brar being one of the legitimate heirs of spouses
Francisco Entierro and Basilia Tabile one eleventh (1/11) share and ten eleventh
(10/11) share in the name of [herein petitioner] Tobias Selga married to Ceferina
Garancho and further orders the following:

1. For the relocation survey of Lot No. 1138-A to establish the definite location of
the respective share of the parties, the expenses to be borne by them
proportionately to their share;

74
 2. The Register of Deeds of the Province of Negros Occidental is hereby directed
to cancel Transfer Certificate of Title No. T-134408 and in lieu thereof issue a
new transfer certificate of title in the name of Tobias Selga consisting of an area
of Thirty[-]Seven Thousand Seven Hundred Seventy[-]Eight (37,778) square
meters and another new transfer certificate of title in the name of Sony Entierro
Brar consisting of an area of One Thousand Seven Hundred Ninety[-]Nine
(1,799) square meters upon submission of an approved subdivision plan;

3. For the [petitioners] to account to [respondent] her share in the produce of the
land from May 15, 1985 up to the time that [respondent’s] possession of her
share of Lot No. 1138-A is restored to her; and, finally,

4. For the [petitioners] to pay [respondent] the sum of ₱50,000.00 as attorney’s

fee and to pay the costs of suit.7

Unsatisfied, respondent filed an appeal of the aforequoted judgment of RTC-Branch 55

before the Court of Appeals, where it was docketed as CA-G.R. CV No. 9520A UDK.
However, respondent subsequently moved to withdraw her appeal, which the Court of
Appeals granted in a Resolution dated June 13, 1997. The Decision dated May 8, 1996
of RTC-Branch 55 eventually attained finality.

In a Letter dated August 11, 1997, respondent informed petitioners that she was
exercising her right to redeem petitioners’ ten-eleventh (10/11) share in the subject
property, in accordance with the final and executory Decision dated May 8, 1996 of
RTC-Branch 55 in Civil Case No. 276. In their Reply-Letter dated August 20, 1997,
petitioners’ counsel rejected respondent’s demand for the following reasons:

Please be informed that your claim re redemption is devoid of complete merit.

It must be remembered that in your complaint, you pleaded redemption as one of your
causes of action and even specifically sought the same as a prayer in your complaint.
However, on the basis of the decision of the Regional Trial Court, dated May 8, 1996,
the court did not see fit to grant you the right of redemption.

It is the considered view of the undersigned that in line with established jurisprudence,
you cannot now or in the future, exercise this right. 8

This prompted respondent to institute on January 21, 1998 a Complaint for Legal
Redemption with Damages, which was docketed as Civil Case No. 573 before RTC-
Branch 56.

In their Answer with Counterclaim9 in Civil Case No. 576, petitioners invoked the
defenses of res judicata and/or forum shopping, arguing that the cause of action
pleaded by respondent was among those that had already been litigated in Civil Case
No. 276 before RTC-Branch 55.

75
In its Decision dated July 27, 2001, RTC-Branch 56 agreed with petitioners and
dismissed Civil Case No. 573, ratiocinating that:

The primary issue to be resolved in this case is whether or not the present action is
barred by res judicata in view of the finality of the decision in Civil Case No. 276
involving the same parties herein. Although the prior case was entitled annulment of
sale with damages, yet, the averments in the complaint and the reliefs sought for
included the legal redemption of Lot 1138-A, which is the subject of the present action,
particularly paragraph 10 of the complaint and paragraph 3 of the prayer therein which
were earlier quoted. The elements of res judicata are (1) the judgment bring sought to
bar the new action must be final; (2) the decision must have been rendered by a court
having jurisdiction over the subject matter and the parties; (3) the disposition of the case
must be based on a judgment or order on the merits; and (4) there must be identity of
parties, subject matter and causes of action as between the prior and the subsequent
actions. Clearly, these elements are present. It is an elementary rule that the nature of a
cause of action is determined by the facts alleged in the complaint as constituting a
cause of action. There is, therefore, identity of parties, subject matter and cause of
action between the two (2) cases.

Since the decision in Civil Case No. 276 was silent on the issue of legal redemption, it
can be inferred therefrom that the court did not see it fit to grant the same. Plaintiff
should have moved for the reconsideration thereof or should have appealed to the
Court of Appeals raising this particular issue. It did not do so. Thus, the decision had
become final and executory.

The filing of the present action constitutes forum shopping. "The filing of multiple suits
involving the same parties for the same cause of action, either simultaneously or
successively, for the purpose of obtaining a favorable judgment amounts to forum
shopping. Only when the successive filing of the suits as part of an appeal, or a special
civil action, will there be no forum shopping because the party no longer availed of
different fora but, rather, through a review of a lower tribunal’s decision or order."
(Quinsay v. CA, et al., G.R. No. 127058, Aug. 31, 2000.) 10

Respondent’s appeal of the aforementioned judgment of RTC-Branch 56 was docketed

as CA-G.R. CV No. 72987 before the Court of Appeals.

On May 31, 2006, the Court of Appeals promulgated its Decision in CA-G.R. CV No.
72987, which reversed and set aside the assailed July 27, 2001 Decision of RTC-
Branch 56 in Civil Case No. 573.

The Court of Appeals held that respondent had validly exercised her right to redemption
of the subject property:

As a rule, co-heir/s or co-owner/s of undivided property are required to notify in writing

the other co-heir/s or co-owner/s of the actual sale of the former’s share in the co-
ownership. And, within one (1) month or 30 days from the said notice, a co-heir or co-

76
owner who wish to redeem such property must make a claim for the reconveyance of
the same by either consignation in court or offer to repurchase by tendering the vendor
payment of the redemption money.1âwphi1

A thorough perusal of the records as well as the documentary evidences presented by

both parties reveal that no written notice was given by the heirs of Francisco Entierro to
[herein respondent] regarding the sale of Lot No. 1138-A, because, [respondent] was
preterited or omitted in the inheritance during the settlement and disposition of the
subject lot. She was initially not considered nor included as heir of Francisco Entierro
not until she was judicially declared one. However, despite the absence of a written
notice, [respondent], in her complaint in Civil Case No. 276, impleaded therein her claim
to redeem Lot No. 1138-A sold by her co-heirs to [herein petitioners]. Hence, by such
act, [respondent] had effectively enforced her right. 11

The appellate court further ruled that Civil Case No. 573 before RTC-Branch 56 was not
barred by the final judgment in Civil Case No. 276 of RTC-Branch 55:

What had became final and conclusive in Civil Case No. 276 is only with respect to the
filiation of [herein respondent] and [her] right to inherit, but not as to [respondent’s] right
to redeem the property sold by her co-heirs.

We disagree with the court a quo’s holding which provides, to wit: "Since the decision in
Civil Case No. 276 was silent on the issue of legal redemption, it can be inferred
therefrom that the court did not see it fit to grant the same."

Right of legal redemption is a statutory right provided by law – as long as the

redemptioner possesses all the essential requisites and comply with the requirements,
such right need not be judicially declared in order for it to be enforced. The role of the
court is only to ascertain whether the essential requisites and requirements are properly
complied with. As the right of redemption is inherent to every co-heir or co-owner, denial
of the said right must be explicitly and expressly provided and justified by the court and
not by mere silence only. Silence of the decision in Civil Case No. 276 on the issue of
[respondent’s] right of redemption does not mean that the same was denied. Only the
issues of filiation and the validity of the Deed of Sale with Declaration of Heirship were
judicially determined by the lower court on the said case. Hence, in the instant case, this
Court may rule upon the issue of redemption.12

The Court of Appeals decreed in the end:

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court
of Himamaylan City, Negros Occidental, Branch 56 dated July 27, 2001 is hereby
REVERSED and SET ASIDE and a new one is hereby ENTERED by recognizing
[herein respondent’s] legal right to redeem Lot No. 1138-A of Himamaylan Cadastre,
Negros Occidental from [herein petitioners].

77
[Respondent] is hereby given thirty (30) days from the finality of this Decision within
which to exercise his right of redemption over Lot No. 1138-A by reimbursing
[petitioners] the price of the sale in the amount of ₱120,000.00 plus the total value of the
improvements, if any, on the subject lot based on the current fair market value.

Failure of [respondent] to redeem the property within the period herein provided shall
vest [petitioners] absolute right over subject property. 13

Petitioners now come before this Court via the instant Petition for Review, insisting that
respondent’s right to redemption of the subject property from petitioners was among the
causes of action already litigated in Civil Case No. 276 before RTC-Branch 55; and the
very same cause of action between the same parties involving the same subject matter
was merely duplicated in Civil Case No. 573 before RTC-Branch 56. Thus, the prior final
judgment rendered in Civil Case No. 276 already barred Civil Case No. 573.

Respondent counters that Civil Case No. 573 before RTC-Branch 56 involving her legal
right to redeem the subject property from petitioners cannot be deemed barred by the
final judgment in Civil Case No. 276 rendered by RTC-Branch 55 because said issue
was not explicitly ruled upon in the latter case.

We find merit in the instant Petition.

Res judicata means "a matter adjudged; a thing judicially acted upon or decided; a thing
or matter settled by judgment." It lays the rule that an existing final judgment or decree
rendered on the merits, without fraud or collusion, by a court of competent jurisdiction,
upon any matter within its jurisdiction, is conclusive of the rights of the parties or their
privies, in all other actions or suits in the same or any other judicial tribunal of
concurrent jurisdiction on the points and matters in issue in the first suit. 14

It must be remembered that it is to the interest of the public that there should be an end
to litigation by the parties over a subject fully and fairly adjudicated. The doctrine of res
judicata is a rule that pervades every well-regulated system of jurisprudence and is
founded upon two grounds embodied in various maxims of the common law, namely:
(1) public policy and necessity, which dictates that it would be in the interest of the State
that there should be an end to litigation — republicae ut sit litium; and (2) the hardship
on the individual that he should be vexed twice for the same cause — nemo debet bis
vexari pro una et eadem causa. A contrary doctrine would subject public peace and
quiet to the will and neglect of individuals and prefer the gratification of the litigious
disposition on the part of suitors to the preservation of public tranquility and happiness. 15

Res judicata has two concepts. The first is bar by prior judgment under Rule 39, Section
47(b), and the second is conclusiveness of judgment under Rule 39, Section
47(c).16 These concepts differ as to the extent of the effect of a judgment or final order
as follows:

78
SEC. 47. Effect of judgments or final orders. – The effect of a judgment or final order
rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or
final order, may be as follows:

xxxx

(b) In other cases, the judgment or final order is, with respect to the matter
directly adjudged or as to any other matter that could have been raised in relation
thereto, conclusive between the parties and their successors in interest by title
subsequent to the commencement of the action or special proceeding, litigating
for the same thing and under the same title and in the same capacity; and

(c) In any other litigation between the same parties or their successors in interest,
that only is deemed to have been adjudged in a former judgment or final order
which appears upon its face to have been so adjudged, or which was actually
and necessarily included therein or necessary thereto.

Jurisprudence taught us well that res judicata under the first concept or as a bar against
the prosecution of a second action exists when there is identity of parties, subject matter
and cause of action in the first and second actions. The judgment in the first action is
final as to the claim or demand in controversy, including the parties and those in privity
with them, not only as to every matter which was offered and received to sustain or
defeat the claim or demand, but as to any other admissible matter which might have
been offered for that purpose and of all matters that could have been adjudged in that
case. In contrast, res judicata under the second concept or estoppel by judgment exists
when there is identity of parties and subject matter but the causes of action are
completely distinct. The first judgment is conclusive only as to those matters actually
and directly controverted and determined and not as to matters merely involved
herein.17

The case at bar satisfies the four essential requisites of res judicata under the first
concept, bar by prior judgment, viz:

(a) finality of the former judgment;

(b) the court which rendered it had jurisdiction over the subject matter and the
parties;

(c) it must be a judgment on the merits; and

(d) there must be, between the first and second actions, identity of parties,
subject matter and causes of action.18

It is not disputed that the Decision dated May 8, 1996 of RTC-Branch 55 in Civil Case
No. 276 had become final and executory. Petitioners no longer appealed the said

79
decision, while respondent withdrew her appeal of the same before the Court of
Appeals.

There is also no question that RTC-Branch 55 had jurisdiction over the subject matter
and parties in Civil Case No. 276, and that its Decision dated May 8, 1996 was a
judgment on the merits, i.e., one rendered after a consideration of the evidence or
stipulations submitted by the parties at the trial of the case. 19

Controversy herein arises from the fourth requirement: the identity of parties, subject
matter and, particularly, the causes of action between Civil Case No. 276 and Civil Case
No. 573.

There is identity of parties. Civil Case No. 276 and Civil Case No. 573 were both
instituted by respondent against petitioners.

There is also identity of subject matter. Civil Case No. 276 and Civil Case No. 573 both
involved respondent’s rights and interests over the subject property as Francisco’s
legitimate child and compulsory heir.

Finally, there is identity of causes of action.

Section 2, Rule 2 of the Rules of Court defines a cause of action as "the act or omission
by which a party violates a right of another." The cause of action in Civil Case No. 273
and Civil Case No. 576 is the sale of the entire subject property by Basilia, et al., to
petitioners without respondent’s knowledge and consent, hence, depriving respondent
of her rights and interests over her pro-indiviso share in the subject property as a co-
heir and co-owner. The annulment of the sale of respondent’s share in the subject
property, the legal redemption by respondent of her co-heirs’ share sold to petitioners,
and the claim for damages should not be mistaken to be the causes of action, but they
were the remedies and reliefs prayed for by the respondent to redress the wrong
allegedly committed against her.

The allegations in respondent’s Complaint in Civil Case No. 573 initially give the
impression that the cause of action therein was petitioners’ refusal to heed respondent’s
demand to redeem petitioners’ ten-eleventh (10/11) share in the subject property. But a
closer study of said Complaint, as well as the trial proceedings before RTC-Branch 56,
reveal that respondent’s right to redeem petitioners’ ten-eleventh (10/11) share in the
subject property also arose from the sale of the said subject property to petitioners by
respondent’s co-heirs and co-owners, alleged to be without respondent’s knowledge or
consent – the very same cause of action at the crux of Civil Case No. 276.

In their Memorandum20 filed on September 3, 2007 before this Court, respondent

invoked Articles 1088 and 1620 of the Civil Code of the Philippines in support of their
right to redeem the subject property. The said provisions state:

80
Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the
partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by
reimbursing him for the price of the sale, provided they do so within the period of one
month from the time they were notified in writing of the sale by the vendor.

xxxx

Art. 1620. A co-owner of a thing may exercise the right of redemption in case the shares
of all the other co-owners or of any of them, are sold to a third person. If the price of the
alienation is grossly excessive, the redemptioner shall pay only a reasonable one.

Should two or more co-owners desire to exercise the right of redemption, they may only
do so in proportion to the share they may respectively have in the thing owned in
common.

In her Complaint in Civil Case No. 276, respondent already alleged her right to
redemption and prayed, among others, the RTC-Branch 55 to order respondent legally
entitled to redeem the subject property for the price of ₱52,000.00. The Decision dated
May 8, 1996 of the RTC-Branch 55 neither discussed respondent’s right to redemption
nor ordered in its decretal portion for petitioners to accept respondent’s offer to redeem
the subject property. In consonance with the provisions of Rule 39, Section 47 of the
Rules of Court cited above, we hold that all the matters within the issues raised in Civil
Case No. 276 were laid before RTC-Branch 55 and passed upon by it. Resultantly, the
silence of the Decision dated May 8, 1996 in Civil Case No. 276 on respondent’s right to
redemption invoked by the latter does not mean that RTC-Branch 55 did not take
cognizance of the same, but rather, that RTC-Branch 55 did not deem respondent
entitled to said right.

Regardless of whether or not RTC-Branch 55 erred in not ordering the redemption by

respondent of the subject property in the Decision dated May 8, 1996 in Civil Case No.
276, said judgment can no longer be reviewed or corrected by RTC-Branch 56 in Civil
Case No. 573. Any error committed by RTC-Branch 55 in the Decision dated May 8,
1996 in Civil Case No. 276 could only be reviewed or corrected on appeal. Although
respondent initially filed an appeal of said judgment before the Court of Appeals, she
eventually filed a motion to withdraw the same, which was granted by the appellate
court. Hence, the Decision dated May 8, 1996 attained finality.

As we held in Ram’s Studio and Photographic Equipment, Inc. v. Court of Appeals, 21 a
judgment which has acquired finality becomes immutable and unalterable, hence, may
no longer be modified in any respect except to correct clerical errors or mistakes, all the
issues between the parties being deemed resolved and laid to rest. We added in Manila
Electric Company v. Philippine Consumers Foundation, Inc. 22 that a final and executory
judgment or order can no longer be disturbed or reopened no matter how erroneous it
may be. Although judicial determinations are not infallible, judicial error should be
corrected through appeals, not through repeated suits on the same claim.

81
We rationalized in Navarro v. Metropolitan Bank & Trust Company 23 the doctrine of
immutability of a final judgment as follows:

No other procedural law principle is indeed more settled than that once a judgment
becomes final, it is no longer subject to change, revision, amendment or reversal,
except only for correction of clerical errors, or the making of nunc pro tunc entries which
cause no prejudice to any party, or where the judgment itself is void. The underlying
reason for the rule is two-fold: (1) to avoid delay in the administration of justice and thus
make orderly the discharge of judicial business, and (2) to put judicial controversies to
an end, at the risk of occasional errors, inasmuch as controversies cannot be allowed to
drag on indefinitely and the rights and obligation of every litigant must not hang in
suspense for an indefinite period of time. As the Court declared in Yau v. Silverio:

Litigation must end and terminate sometime and somewhere, and it is essential to an
effective and efficient administration of justice that, once a judgment has become final,
the winning party be, not through a mere subterfuge, deprived of the fruits of the verdict.
Courts must therefore guard against any scheme calculated to bring about that result.
Constituted as they are to put an end to controversies, courts should frown upon any
attempt to prolong them.

Indeed, just as a losing party has the right to file an appeal within the prescribed period,
the winning party also has the correlative right to enjoy the finality of the resolution of his
case by the execution and satisfaction of the judgment. Any attempt to thwart this rigid
rule and deny the prevailing litigant his right to savor the fruit of his victory must
immediately be struck down. Thus, in Heirs of Wenceslao Samper v. Reciproco-Noble,
we had occasion to emphasize the significance of this rule, to wit:

It is an important fundamental principle in our Judicial system that every litigation must
come to an end x x x Access to the courts is guaranteed. But there must be a limit
thereto. Once a litigant's rights have been adjudicated in a valid final judgment of a
competent court, he should not be granted an unbridled license to come back for
another try. The prevailing party should not be harassed by subsequent suits. For, if
endless litigations were to be encouraged, then unscrupulous litigants will multiply in
number to the detriment of the administration of justice. 24

Exceptions to the immutability of final judgment are allowed only under the most
extraordinary of circumstances. The instant case cannot be considered an exception
especially when respondent had the opportunity to appeal the Decision dated May 8,
1996 of RTC-Branch 55 in Civil Case No. 276, but by her own action, desisted from
pursuing the same.

Therefore, Civil Case No. 573 before RTC-Branch 56 should be dismissed, being
barred by res judicata, given the final and executory Decision dated May 8, 1996 of
RTC-Branch 55 in Civil Case No. 276. We stress that res judicata, in the concept of bar
by prior judgment, renders the judgment or final order conclusive between the parties

82
and their privies, not just with respect to a matter directly adjudged, but also any other
matter that could have been raised in relation thereto.

WHEREFORE, the instant Petition is hereby GRANTED. The Decision dated May 31,
2006 and Resolution dated September 28, 2006 of the Court Appeals in CA-G.R. CV
No. 72987 are SET ASIDE. The Decision dated July 27, 2001 of Branch 56 of the
Regional Trial Court of Himamaylan City, Negros Occidental, dismissing Civil Case No.
573, is REINSTATED.

SO ORDERED.

SECOND DIVISION

G.R. No. 189121               July 31, 2013

AMELIA GARCIA-QUIAZON, JENNETH QUIAZON and MARIA JENNIFER

QUIAZON, Petitioners,
vs.
MA. LOURDES BELEN, for and in behalf of MARIA LOURDES ELISE
QUIAZON, Respondent.

DECISION

PEREZ, J.:

This is a Petition for Review on Certiorari filed pursuant to Rule 45 of the Revised Rules
of Court, primarily assailing the 28 November 2008 Decision rendered by the Ninth
Division of the Court of Appeals in CA-G.R. CV No. 88589, 1 the decretal portion of
which states:

WHEREFORE, premises considered, the appeal is hereby DENIED. The assailed

Decision dated March 11, 2005, and the Order dated March 24, 2006 of the Regional
Trial Court, Branch 275, Las Piñas City are AFFIRMED in toto. 2

The Facts

This case started as a Petition for Letters of Administration of the Estate of Eliseo
Quiazon (Eliseo), filed by herein respondents who are Eliseo’s common-law wife and
daughter. The petition was opposed by herein petitioners Amelia Garcia-Quaizon
(Amelia) to whom Eliseo was married. Amelia was joined by her children, Jenneth
Quiazon (Jenneth) and Maria Jennifer Quiazon (Jennifer).

Eliseo died intestate on 12 December 1992.

On 12 September 1994, Maria Lourdes Elise Quiazon (Elise), represented by her

mother, Ma. Lourdes Belen (Lourdes), filed a Petition for Letters of Administration

83
before the Regional Trial Court (RTC) of Las Piñas City. 3 In her Petition docketed as SP
Proc. No. M-3957, Elise claims that she is the natural child of Eliseo having been
conceived and born at the time when her parents were both capacitated to marry each
other. Insisting on the legal capacity of Eliseo and Lourdes to marry, Elise impugned the
validity of Eliseo’s marriage to Amelia by claiming that it was bigamous for having been
contracted during the subsistence of the latter’s marriage with one Filipito Sandico
(Filipito). To prove her filiation to the decedent, Elise, among others, attached to the
Petition for Letters of Administration her Certificate of Live Birth 4 signed by Eliseo as her
father. In the same petition, it was alleged that Eliseo left real properties worth
₱2,040,000.00 and personal properties worth ₱2,100,000.00. In order to preserve the
estate of Eliseo and to prevent the dissipation of its value, Elise sought her appointment
as administratrix of her late father’s estate.

Claiming that the venue of the petition was improperly laid, Amelia, together with her
children, Jenneth and Jennifer, opposed the issuance of the letters of administration by
filing an Opposition/Motion to Dismiss. 5 The petitioners asserted that as shown by his
Death Certificate, 6 Eliseo was a resident of Capas, Tarlac and not of Las Piñas City, at
the time of his death. Pursuant to Section 1, Rule 73 of the Revised Rules of Court, 7 the
petition for settlement of decedent’s estate should have been filed in Capas, Tarlac and
not in Las Piñas City. In addition to their claim of improper venue, the petitioners
averred that there are no factual and legal bases for Elise to be appointed administratix
of Eliseo’s estate.

In a Decision8 dated 11 March 2005, the RTC directed the issuance of Letters of

Administration to Elise upon posting the necessary bond. The lower court ruled that the
venue of the petition was properly laid in Las Piñas City, thereby discrediting the
position taken by the petitioners that Eliseo’s last residence was in Capas, Tarlac, as
hearsay. The dispositive of the RTC decision reads:

Having attained legal age at this time and there being no showing of any disqualification
or incompetence to serve as administrator, let letters of administration over the estate of
the decedent Eliseo Quiazon, therefore, be issued to petitioner, Ma. Lourdes Elise
Quiazon, after the approval by this Court of a bond in the amount of ₱100,000.00 to be
posted by her.9

On appeal, the decision of the trial court was affirmed in toto in the 28 November 2008
Decision10 rendered by the Court of Appeals in CA-G.R.CV No. 88589. In validating the
findings of the RTC, the Court of Appeals held that Elise was able to prove that Eliseo
and Lourdes lived together as husband and wife by establishing a common residence at
No. 26 Everlasting Road, Phase 5, Pilar Village, Las Piñas City, from 1975 up to the
time of Eliseo’s death in 1992. For purposes of fixing the venue of the settlement of
Eliseo’s estate, the Court of Appeals upheld the conclusion reached by the RTC that the
decedent was a resident of Las Piñas City. The petitioners’ Motion for Reconsideration
was denied by the Court of Appeals in its Resolution 11 dated 7 August 2009.

The Issues

84
The petitioners now urge Us to reverse the assailed Court of Appeals Decision and
Resolution on the following grounds:

I. THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THAT ELISEO

QUIAZON WAS A RESIDENT OF LAS PIÑAS AND THEREFORE, THE
PETITION FOR LETTERS OF ADMINISTRATION WAS PROPERLY FILED
WITH THE RTC OF LAS PIÑAS;

II. THE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT

AMELIA GARCIA-QUIAZON WAS NOT LEGALLY MARRIED TO ELISEO
QUIAZON DUE TO PREEXISTING MARRIAGE; AND

III. THE COURT OF APPEALS OVERLOOKED THE FACT THAT ELISE

QUIAZON HAS NOT SHOWN ANY INTEREST IN THE PETITION FOR
LETTERS OF ADMINISTRATION.12

The Court’s Ruling

We find the petition bereft of merit.

Under Section 1, Rule 73 of the Rules of Court, the petition for letters of administration
of the estate of a decedent should be filed in the RTC of the province where the
decedent resides at the time of his death:

Sec. 1. Where estate of deceased persons settled. – If the decedent is an inhabitant of

the Philippines at the time of his death, whether a citizen or an alien, his will shall be
proved, or letters of administration granted, and his estate settled, in the Court of First
Instance now Regional Trial Court in the province in which he resides at the time of his
death, and if he is an inhabitant of a foreign country, the Court of First Instance now
Regional Trial Court of any province in which he had estate. The court first taking
cognizance of the settlement of the estate of a decedent, shall exercise jurisdiction to
the exclusion of all other courts. The jurisdiction assumed by a court, so far as it
depends on the place of residence of the decedent, or of the location of his estate, shall
not be contested in a suit or proceeding, except in an appeal from that court, in the
original case, or when the want of jurisdiction appears on the record. (Emphasis
supplied).

The term "resides" connotes ex vi termini "actual residence" as distinguished from "legal
residence or domicile." This term "resides," like the terms "residing" and "residence," is
elastic and should be interpreted in the light of the object or purpose of the statute or
rule in which it is employed. In the application of venue statutes and rules – Section 1,
Rule 73 of the Revised Rules of Court is of such nature – residence rather than domicile
is the significant factor.13 Even where the statute uses word "domicile" still it is construed
as meaning residence and not domicile in the technical sense. 14 Some cases make a
distinction between the terms "residence" and "domicile" but as generally used in
statutes fixing venue, the terms are synonymous, and convey the same meaning as the

85
term "inhabitant."15 In other words, "resides" should be viewed or understood in its
popular sense, meaning, the personal, actual or physical habitation of a person, actual
residence or place of abode.16 It signifies physical presence in a place and actual stay
thereat.17 Venue for ordinary civil actions and that for special proceedings have one and
the same meaning.18 As thus defined, "residence," in the context of venue provisions,
means nothing more than a person’s actual residence or place of abode, provided he
resides therein with continuity and consistency.19

Viewed in light of the foregoing principles, the Court of Appeals cannot be faulted for
affirming the ruling of the RTC that the venue for the settlement of the estate of Eliseo
was properly laid in Las Piñas City. It is evident from the records that during his lifetime,
Eliseo resided at No. 26 Everlasting Road, Phase 5, Pilar Village, Las Piñas City. For
this reason, the venue for the settlement of his estate may be laid in the said city.

In opposing the issuance of letters of administration, the petitioners harp on the entry in
Eliseo’s Death Certificate that he is a resident of Capas, Tarlac where they insist his
estate should be settled. While the recitals in death certificates can be considered
proofs of a decedent’s residence at the time of his death, the contents thereof, however,
is not binding on the courts. Both the RTC and the Court of Appeals found that Eliseo
had been living with Lourdes, deporting themselves as husband and wife, from 1972 up
to the time of his death in 1995. This finding is consistent with the fact that in 1985,
Eliseo filed an action for judicial partition of properties against Amelia before the RTC of
Quezon City, Branch 106, on the ground that their marriage is void for being
bigamous.20 That Eliseo went to the extent of taking his marital feud with Amelia before
the courts of law renders untenable petitioners’ position that Eliseo spent the final days
of his life in Tarlac with Amelia and her children. It disproves rather than supports
petitioners’ submission that the lower courts’ findings arose from an erroneous
appreciation of the evidence on record. Factual findings of the trial court, when affirmed
by the appellate court, must be held to be conclusive and binding upon this Court. 21

Likewise unmeritorious is petitioners’ contention that the Court of Appeals erred in

declaring Amelia’s marriage to Eliseo as void ab initio. In a void marriage, it was though
no marriage has taken place, thus, it cannot be the source of rights. Any interested
party may attack the marriage directly or collaterally. A void marriage can be questioned
even beyond the lifetime of the parties to the marriage. 22 It must be pointed out that at
the time of the celebration of the marriage of Eliseo and Amelia, the law in effect was
the Civil Code, and not the Family Code, making the ruling in Niñal v.
Bayadog23 applicable four-square to the case at hand. In Niñal, the Court, in no
uncertain terms, allowed therein petitioners to file a petition for the declaration of nullity
of their father’s marriage to therein respondent after the death of their father, by
contradistinguishing void from voidable marriages, to wit:

Consequently, void marriages can be questioned even after the death of either party but
voidable marriages can be assailed only during the lifetime of the parties and not after
death of either, in which case the parties and their offspring will be left as if the marriage
had been perfectly valid. That is why the action or defense for nullity is imprescriptible,

86
unlike voidable marriages where the action prescribes. Only the parties to a voidable
marriage can assail it but any proper interested party may attack a void marriage. 24

It was emphasized in Niñal that in a void marriage, no marriage has taken place and it
cannot be the source of rights, such that any interested party may attack the marriage
directly or collaterally without prescription, which may be filed even beyond the lifetime
of the parties to the marriage.25

Relevant to the foregoing, there is no doubt that Elise, whose successional rights would
be prejudiced by her father’s marriage to Amelia, may impugn the existence of such
marriage even after the death of her father. The said marriage may be questioned
directly by filing an action attacking the validity thereof, or collaterally by raising it as an
issue in a proceeding for the settlement of the estate of the deceased spouse, such as
in the case at bar. Ineluctably, Elise, as a compulsory heir, 26 has a cause of action for
the declaration of the absolute nullity of the void marriage of Eliseo and Amelia, and the
death of either party to the said marriage does not extinguish such cause of action.

Having established the right of Elise to impugn Eliseo’s marriage to Amelia, we now
proceed to determine whether or not the decedent’s marriage to Amelia is void for being
bigamous.

Contrary to the position taken by the petitioners, the existence of a previous marriage
between Amelia and Filipito was sufficiently established by no less than the Certificate
of Marriage issued by the Diocese of Tarlac and signed by the officiating priest of the
Parish of San Nicolas de Tolentino in Capas, Tarlac. The said marriage certificate is a
competent evidence of marriage and the certification from the National Archive that no
information relative to the said marriage exists does not diminish the probative value of
the entries therein. We take judicial notice of the fact that the first marriage was
celebrated more than 50 years ago, thus, the possibility that a record of marriage can
no longer be found in the National Archive, given the interval of time, is not completely
remote. Consequently, in the absence of any showing that such marriage had been
dissolved at the time Amelia and Eliseo’s marriage was solemnized, the inescapable
conclusion is that the latter marriage is bigamous and, therefore, void ab initio. 27

Neither are we inclined to lend credence to the petitioners’ contention that Elise has not
shown any interest in the Petition for Letters of Administration.

Section 6, Rule 78 of the Revised Rules of Court lays down the preferred persons who
are entitled to the issuance of letters of administration, thus:

Sec. 6. When and to whom letters of administration granted. — If no executor is named

in the will, or the executor or executors are incompetent, refuse the trust, or fail to give
bond, or a person dies intestate, administration shall be granted:

87
 (a) To the surviving husband or wife, as the case may be, or next of kin, or both,
in the discretion of the court, or to such person as such surviving husband or
wife, or next of kin, requests to have appointed, if competent and willing to serve;

(b) If such surviving husband or wife, as the case may be, or next of kin, or the
person selected by them, be incompetent or unwilling, or if the husband or
widow, or next of kin, neglects for thirty (30) days after the death of the person to
apply for administration or to request that administration be granted to some
other person, it may be granted to one or more of the principal creditors, if
competent and willing to serve;

(c) If there is no such creditor competent and willing to serve, it may be granted
to such other person as the court may select.

Upon the other hand, Section 2 of Rule 79 provides that a petition for Letters of
Administration must be filed by an interested person, thus:

Sec. 2. Contents of petition for letters of administration. — A petition for letters of

administration must be filed by an interested person and must show, so far as known to
the petitioner:

(a) The jurisdictional facts;

(b) The names, ages, and residences of the heirs, and the names and
residences of the creditors, of the decedent;

(c) The probable value and character of the property of the estate;

(d) The name of the person for whom letters of administration are prayed.

But no defect in the petition shall render void the issuance of letters of administration.

An "interested party," in estate proceedings, is one who would be benefited in the

estate, such as an heir, or one who has a claim against the estate, such as a creditor.
Also, in estate proceedings, the phrase "next of kin" refers to those whose relationship
with the decedent Is such that they are entitled to share in the estate as distributees. 28

In the instant case, Elise, as a compulsory heir who stands to be benefited by the
distribution of Eliseo’s estate, is deemed to be an interested party. With the
overwhelming evidence on record produced by Elise to prove her filiation to Eliseo, the
petitioners’ pounding on her lack of interest in the administration of the decedent’s
estate, is just a desperate attempt to sway this Court to reverse the findings of the Court
of Appeals. Certainly, the right of Elise to be appointed administratix of the estate of
Eliseo is on good grounds. It is founded on her right as a compulsory heir, who, under
the law, is entitled to her legitimate after the debts of the estate are satisfied. 29 Having a

88
vested right in the distribution of Eliseo’s estate as one of his natural children, Elise can
rightfully be considered as an interested party within the purview of the law.

WHEREFORE, premises considered, the petition is DENIED for lack of merit.

Accordingly, the Court of Appeals assailed 28 November 2008 Decision and 7 August
2009 Resolution, arc AFFIRMED in toto.

SO ORDERED.

SECOND DIVISION

G.R. No. 173783               June 17, 2015

RIVIERA GOLF CLUB, INC., Petitioner,

vs.
CCA HOLDINGS, B.V., Respondent.

DECISION

BRION, J.:

Before the Court is the petition for review on certiorari 1 filed by Riviera Golf Club, Inc.
(Riviera Golf) assailing the January 11, 2006 decision 2 and the July 5, 2006
resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 83824.

Background Facts

Riviera Golf, a domestic corporation, is the owner of Riviera Golf Club (Club), a 36-hole
golf course and recreational facility in Silang, Cavite. On October 11, 1996, Riviera Golf
entered into a Management Agreement with CCA Holdings, B.V. (CCA Holdings), a
foreign corporation, for the management and operation of the Club.

The Management Agreement was for a period of five (5) years. Under this agreement,
Riviera Golf would pay CCA Holdings a monthly Base Management Fee of 5.5% of the
Adjusted Gross Revenue equivalent to US$16,500.00 per month, adjusted to4.5% per
month from the opening date, plus an incentive Management Fee of 10% of the Gross
Operating Profit.

The parties also entered into a co-terminous Royalty Agreement that would allow
Riviera Golf and the Club’s developer, Armed Forces of the Philippines’ Retirement and
Separation Benefits System (AFP-RSBS), to use CCA Holdings’ name and facilities to
market the Club’s shares. In consideration of the license to use CCA Holdings’ name,
Riviera Golf and AFP-RSBS will pay CCA Holdings a gross licensing fee of 1% on all
membership fees paid in the sale of shares, an additional gross licensing fee of 4% on
all club shares, and 7% on non-golf memberships sold. Riviera Golf initially paid the
agreed fees, but defaulted in its payment of the licensing fees and the reimbursement

89
claims in September 1997. Riviera Golf likewise failed to pay the monthly management
and incentive fees in June 1999, prompting CCA Holdings to demand the amounts due
under both agreements.

On October 29, 1999, Riviera Golf sent CCA Holdings a letter informing the latter that it
was pre-terminating the Management Agreement purportedly to alleviate the financial
crisis that the AFP-RSBS was experiencing. The Royalty Agreement was also deemed
pre-terminated.

CCA Holdings protested the termination of the agreement and demanded that Riviera
Golf settle its unpaid management and royalty fees. Riviera Golf however refused on
the ground that CCA Holdings violated the terms of the agreement.

In April 2001, CCA Holdings filed before the Regional Trial Court (RTC), Branch 146,
Makati City, a complaint for sum of money with damages docketed as Civil Case No.
01-611 (first complaint) against Riviera Golf. During the pendency of the case, the
parties tried to extrajudicially settle their differences and executed a Compromise
Agreement.

On April 25, 2002, the RTC rendered a decision4 approving the parties’ Compromise
Agreement. Paragraph 4 of the agreement reads:

4) It is understood that the execution of this compromise agreement or the payment of

the aforementioned sum of money shall not be construed as a waiver of or with
prejudice to plaintiff’s rights/cause of action, if any, arising from or relative to the pre-
termination of the parties’ Management and Royalty Agreements by the defendant
subject to whatever claims and defenses may have relative thereto; (Emphasis
supplied.)

Subsequently, or on November 22, 2002, CCA Holdings again sent a letter to Riviera
Golf, this time, demanding the sum of US$390,768.00 representing the projected net
income or expected business profits it was supposed to derive for the unexpired two-
year term of the Management Agreement. As its demands went unheeded, CCA
Holdings filed another complaint for sum of money and damages docketed as Civil
Case No. 03-399 (second complaint) before Branch 57 of the RTC of Makati City.

Noting that the first and second complaints involve the same parties, the same subject
matter, and the same causes of action, Riviera Golf filed on August 6, 2003, a Motion to
Dismiss on the grounds of res judicata and violation of the rule against splitting of
causes of action. CCA Holdings opposed the motion contending that there is no splitting
of causes of action since the two cases are entirely independent of each other. CCA
Holdings also justified its belated filing of the second complaint, arguing that the needed
financial records were in Riviera Golf’s possession.

The RTC Ruling

90
The RTC, Branch 57, Makati City granted the motion to dismiss, holding that the first
and second complaints have identical causes of action and subject matter. Since the
claims in Civil Case No. 01-611 and Civil Case No. 03-399 arose from alleged violations
of the terms and conditions of the Management and Royalty Agreements, the rules on
res judicata and splitting of causes of action apply.

The RTC also noted that CCA Holdings had every opportunity to raise the issue of pre-
termination when it filed Civil Case No. 01-611. That CCA Holdings did not do so and
opted instead to reserve it for future litigation only show that it was speculating on the
results of the litigation.

The RTC likewise pointed out that the reservation clause or the "non-waiver clause" that
the parties inserted in the Compromise Agreement was qualified by the phrase subject
to whatever claims and defenses the defendant may have relative there to. The RTC
held that the defenses that Riviera Golf could raise are not limited only to those relating
to the legality of the pre-termination of the agreements, but could also include all other
claims and defenses such as res judicata and splitting of a single cause of action.

CCA Holdings appealed the dismissal of its complaint to the CA.

The CA Ruling

In its decision dated January 11, 2006, the CA set aside the order granting the motion to
dismiss, and remanded the case to the RTC for adjudication on the merits. The CA held
that res judicata and splitting of a single cause of action were not committed based on
the following reasons: First, there is no identity of causes of action in the two civil cases.
The test to determine the identity of causes of action is to ascertain whether the same
evidence is necessary to sustain the two suits. In this case, the sets of evidence in the
two complaints were different.

Second, there is no splitting of a single cause of action because Riviera Golf violated
separate primary rights of CCA Holdings under the management contract.

Third, Riviera Golf recognized CCA Holdings’ right to seek damages arising from or
relative to the premature termination of the Management Agreement. This view
isevident from the literal interpretation of Paragraph 4 (or the "non waiver clause") of the
parties’ compromise agreement. Riviera Golf moved for the reconsideration of the
decision, but the CA denied its motion in its resolution of July 5, 2006; hence, the
present recourse to us pursuant to Rule 45 of the Rules of Court.

The Petition

Riviera Golf asks the Court to set aside the CA decision, contending that the appellate
court committed a grave error in not holding that the filing of the second complaint
amounted to res judicata and splitting of a single cause of action. Riviera Golf submits
that based on the allegations in the two complaints, the facts that are necessary to

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support the second case (Civil Case No. 03-399) would have been sufficient to
authorize recovery in the first case (Civil Case No. 01-611).

Moreover, the documentary evidence that CCA Holdings submitted to support both
complaints are also the same. Thus, both civil cases involve not only the same facts
and the same subject matter, but also the same cause of action, i.e., breach of the
Management and Royalty Agreements.

Riviera Golf also argued that although there seems to be several rights violated, there is
only one delict or wrong committed and consequently, only one cause of action that
should have been alleged in a single complaint. Since the alleged breach of contract in
this case was already total at the time of the filing of Civil Case No. 01-611, the filing of
the second complaint for the recovery of damages for the pre-termination of the
Management and Royalty Agreements constitutes splitting a single cause of action that
is expressly prohibited by the Rules of Court. Riviera Golf likewise disagrees with the
CA’s interpretation of the non-waiver clause. It argues that the phrase if any and the
condition that the causes of action are subject to whatever claims and defenses the
defendant may have relative thereto in the non-waiver clause limited its recognition of
CCA Holdings’ rights and causes of action. It also maintains that the filing of the motion
to dismiss based on res judicata and splitting of causes of action clearly falls within the
non-waiver clause’s limitation.

The Case for the Respondent

CCA Holdings reiterates that there was absolutely no identity of subject matter and
causes of action because the first case sought the payment for the services it already
rendered, while the second case sought the recovery of damages representing the
projected net income that it failed to realize by reason of the unilateral and premature
termination of the Management and Royalty Agreements. Thus, the principles of res
judicata and splitting of a single cause of action do not apply.

Even assuming that the prohibition against res judicata operates in this case, CCA
Holdings contends that Riviera Golf is already estopped from questioning the filing of
the second complaint in view of the non-waiver clause inserted in the compromise
agreement.

The Issues

As defined by the parties, the issues before us are limited to:

1. Whether the CCA Holdings violated the prohibitions against res judicata and
splitting a single cause of action when it filed the claim for damages for
unrealized profits; and

2. Whether the CA’s interpretation of paragraph 4 of the compromise agreement

is correct. If in the affirmative, whether the parties may stipulate on an agreement

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 violating the prohibitions against res judicata and splitting a single cause of
action.

Our Ruling

We find the petition meritorious.

The Second Complaint is Barred by Res Judicata

Res judicatais defined as a matter adjudged; a thing judicially acted upon or decided; or
a thing or matter settled by judgment. Under this rule, a final judgment or decree on the
merits by a court of competent jurisdiction is conclusive as to the rights of the parties or
their privies in all later suits, and on all points and matters determined in the former
suit.5

The concept of res judicata is embodied in Section 47(b) and (c) of Rule 39 of the Rules
of Court, which reads:

SEC. 47. Effect of judgments or final orders. — The effect of a judgment or final order
rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or
final order, may be as follows:

(a) In case of a judgment or final order against a specific thing or in respect to the
probate of a will, or the administration of the estate of a deceased person, or in
respect to the personal, political, or legal condition or status of a particular person
or his relationship to another, the judgment or final order is conclusive upon the
title to the thing, the will or administration, or the condition, status or relationship
of the person; however, the probate of a will or granting of letters of
administration shall only be prima facie evidence of the death of the testator or
intestate;

(b) In other cases, the judgment or final order is, with respect to the matter
directly adjudged or as to any other matter that could have been raised in relation
thereto, conclusive between the parties and their successors in interest by title
subsequent to the commencement of the action or special proceeding, litigating
for the same thing and under the same title and in the same capacity; and,

(c) In any other litigation between the same parties or their successors in interest,
that only is deemed to have been adjudged in a former judgment or final order
which appears upon its face to have been so adjudged, or which was actually
and necessarily included therein or necessary thereto.

Res judicata requires the concurrence of the following requisites: (1) the former
judgment must be final; (2) it must have been rendered by a court having jurisdiction of
the subject matter and the parties; (3) it must be a judgment on the merits; and (4) there

93
must be, between the first and second actions (a) identity of parties, (b) identity of
subject matter, and (c) identity of causes of action.6

All the Elements of Res Judicata are Present

There is no dispute as to the presence of the first three elements in the present case.
The decision in Civil Case No. 01-611 is a final judgment on the merits rendered by a
court which had jurisdiction over the subject matter and over the parties. Since a judicial
compromise operates as an adjudication on the merits, it has the force of law and the
effect of res judicata.7

With respect to the fourth element, a careful examination of the allegations in the two
complaints shows that the cases involve the same parties and the same subject matter.
While Civil Case No. 01-611 is for the collection of unpaid management and royalty
fees, and Civil Case No. 03-399 on the other hand, is for recovery of damages for the
premature termination of the parties’ agreements, both cases were nevertheless filed on
the basis of the same Management and Royalty Agreements. Thus, we agree that these
two cases refer to the same subject matter.

The Court is also convinced that there is identity of causes of action between the first
and the second complaints.

A cause of action may give rise to several reliefs, but only one action can be filed. 8 A
single cause of action or entire claim or demand cannot be split up or divided into two or
more different actions. The rule on prohibiting the splitting of a single cause of action is
clear. Section 4, Rule 2 of the Rules of Court expressly states:

Section 4. Splitting a single cause of action; effect of. – 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.

In both Civil Case No. 01-611 and Civil Case No. 03-399, CCA Holdings imputed the
same wrongful act – the alleged violations of the terms and conditions of the
Management and Royalty Agreements. In Civil Case No. 01-611, CCA Holdings’ cause
of action rests on Riviera Golf’s failure to pay the licensing fees, reimbursement claims,
and monthly management and incentive fees. In Civil Case No. 03-399 on the other
hand, CCA Holdings’ cause of action hinges on the damages it allegedly incurred as a
result of Riviera Golf’s premature termination of the Management and Royalty
Agreements (i.e., the expected business profits it was supposed to derive for the
unexpired two-year term of the Management Agreement). Although differing in form,
these two cases are ultimately anchored on Riviera Golf’s breach of the Management
and Royalty Agreements. Thus, we conclude that they have identical causes of action.

Same Evidence Support and Establish Both

the Present and the Former Cause of Action

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It is a settled rule that the application of the doctrine of res judicata to identical causes of
action does not depend on the similarity or differences in the forms of the two actions. A
party cannot, by varying the form of the action or by adopting a different method of
presenting his case, escape the operation of the doctrine of res judicata. 9 The test of
identity of causes of action rests on whether the same evidence would support and
establish the former and the present causes of action. 10

We held in Esperas v. The Court of Appeals11 that the ultimate test in determining the
presence of identity of cause of action is to consider whether the same evidence would
support the cause of action in both the first and the second cases. Under the same
evidence test, when the same evidence support and establish both the present and the
former causes of action, there is likely an identity of causes of action. 12

The pleadings and record of the present case show that there is a glaring similarity in
the documentary evidence submitted to prove the claims under the two complaints. The
pieces of evidence both in the collection of unpaid management and royalty fees, and
the recovery of damages for the expected business profits aim at establishing the
breach of the Management and Royalty Agreements.

Furthermore, the evidence in the first complaint will have to be reexamined to support
the cause of action in the second complaint. We specifically note that at least four (4)
documents were presented in both actions, namely:

(1) the Management Agreement between Riviera Golf and CCA Holdings;

(2) the Royalty Agreement between Riviera Golf and CCA Holdings;

(3) the Fees Receivable Report of CCA Holdings as of October 1999, amounting
to USD 97,122.00; and

(4) the letter dated October 29, 1999, stating the termination of the Management
Agreement.

Based on the allegations in the two complaints, the facts that are necessary to support
the second complaint would have been sufficient to allow CCA Holdings to recover in
the first complaint. The similarity in the pieces of evidence in these two cases therefore
strongly suggests the identity of their causes of action.

We held in this regard in Stilianopulos v. The City of Legaspi: 13

The underlying objectives or reliefs sought in both the quieting-of title and the
annulment-of-title cases are essentially the same – adjudication of the ownership of the
disputed lot and nullification of one of the two certificates of title. Thus, it becomes
readily apparent that the same evidence or set of facts as those considered in the
quieting-of-title case would also be used in this Petition. The difference in form and
nature of the two actions is immaterial and is not a reason to exempt petitioner from the

95
effects of res judicata. The philosophy behind this rule prohibits the parties from
litigating the same issue more than once. When a right or fact has been judicially tried
and determined by a court of competent jurisdiction or an opportunity for such trial has
been given, the judgment of the court, as long as it remains unreversed, should be
conclusive upon the parties and those in privity with them. Verily, there should be an
end to litigation by the same parties and their privies over a subject, once it is fully and
fairly adjudicated. (Citations omitted.) At the Time the First Complaint was Filed

The Breach of the Agreements was Already Total

We likewise note that the non-payment of fees and the premature termination of the
contract occurred as early as 1999. In other words, the violation of both the
Management and Royalty Agreements preceded the filing of the first complaint.
Consequently, when CCA Holdings filed its first complaint in 2001, the breach of the
agreements was already complete and total; and the ground for the recovery of
damages was available and in existence. Thus, allowing CCA Holdings now to file two
separate and independent claims anchored on the same breach of contract (i.e., breach
of the Management and Royalty Agreements), constitutes a blatant disregard of our
prohibition against res judicata and splitting of a single cause of action.

In contracts providing several obligations, each obligation may give rise to a single and
independent cause of action.1âwphi1 But if several obligations have matured, or if the
entire contract is breached at the time of the filing of the complaint, all obligations are
integrated into one cause of action. Hence, the claim arising from such cause of action
that is not included in the complaint is barred forever. The Court’s explanation in
Blossom and Company, Inc. v. Manila Gas Corporation, 14 citing US jurisprudence on the
matter, is instructive, viz:

34 Corpus Juris, p. 839, it is said:

As a general rule[,] a contract to do several things at several times in its nature, so as to

authorize successive actions; and a judgment recovered for a single breach of a
continuing contract or covenant is no bar to a suit for a subsequent breach thereof. But
where the covenant or contract is entire, and the breach total, there can be only one
action, and [the] plaintiff must therein recover all his damages.

In the case of Rhoelm v. Horst, 178 U. U., 1; 44 Law. ed., 953, that court said:

An unqualified and positive refusal to perform a contract, though the performance

thereof is not yet due, may, if the renunciation goes to the whole contract, be treated as
a complete breach which will entitle the injured party to bring his action at once.

In the present case, CCA Holdings’ claim for the unpaid management and royalty fees
as well as the damages for its expected business profits constituted an indivisible
demand. Verily, CCA Holdings should have included and alleged the recovery of
damages for its expected business profits as a second cause of action in Civil Case No.

96
01-611. CCA Holdings cannot be permitted to split up a single cause of action and
make that single cause of action the basis of several suits.

All told, the Court finds that the filing of the second complaint is barred by res judicata.

The "Non-Waiver Clause" Stipulated

in the Compromise Agreement is Null and Void

CCA Holdings contends that Riviera Golf is already estopped from questioning the filing
of the second complaint because the non-waiver clause of the Compromise Agreement
recognized CCA Holdings’ prerogative to seek damages arising from the premature
termination of the Management Agreement.

We do not see any merit in this contention.

A compromise is a contract whereby the parties, by making reciprocal concessions,

avoid a litigation or put an end to one already commenced. 15 Like any other contract, a
compromise agreement must be consistent with the requisites and principles of
contracts. While it is true that the agreement is binding between the parties and
becomes the law between them, it is also a rule that to be valid, a compromise
agreement must not be contrary to law, morals, good customs, and public policy. 16

In the present case, a reading of paragraph 4 of the Compromise Agreement shows that
it allows the filing of complaints based on the same cause of action(i.e., breach of the
Management and Royalty Agreements), to wit:

4) It is understood that the execution of this compromise agreement or the payment of

the aforementioned sum of money shall not be construed as a waiver of or with
prejudice to plaintiff’s rights/cause of action, if any, arising from or relative to the pre-
termination of the parties’ Management and Royalty Agreements by the defendant
subject to whatever claims and defenses may have relative thereto; (Emphasis
supplied.)

Since paragraph 4 allows the splitting of causes of action and res judicata, this provision
of the Compromise Agreement should be invalidated for being repugnant to our public
policy.

The well-settled rule is that the principle or rule of res judicata is primarily one of public
policy. It is based on the policy against multiplicity of suits, 17 whose primary objective is
to avoid unduly burdening the dockets of the courts.

Speaking through Justice J.B.L. Reyes, the Court in Aguila v. J.M. Tuason & Co.,
Inc.18 held that:

Public policy is firmly set against unnecessary multiplicity of suits; the rule of res
judicata, like that against splitting causes of action, are all applications of the same

97
policy, that matters once settled by a Court's final judgment should not thereafter be
invoked against. Relitigation of issues already settled merely burdens the Courts and
the taxpayers, creates uneasiness and confusion, and wastes valuable time and energy
that could be devoted to worthier cases. As the Roman maxim goes, Non bis in
idem.19 (Emphasis supplied.)

Because it is contrary to our policy against multiplicity of suits, we cannot uphold

paragraph 4 of the Compromise Agreement to be valid, for we would then render
legitimate the splitting of causes of action and negate the prohibition against res
judicata. Under Article 1409 of the Civil Code, contracts which are contrary to public
policy and those expressly prohibited or declared void by law are considered in existent
and void from the beginning.

In sum, we declare paragraph 4 of the Compromise Agreement null and void for being
contrary to public policy.

WHEREFORE, premises considered, we GRANT the petition. The decision dated

January 11, 2006, of the Court of Appeals in CA-G.R. CV No. 83824 is hereby
REVERSED and SET ASIDE. Accordingly, the decision dated September 29, 2004, of
the Regional Trial Court, Branch 57,

Makati City, in Civil Case No. 03-399 is REINSTATED.

SO ORDERED.

FIRST DIVISION

G.R. No. 201892               JULY 22, 2015

NORLINDA S. MARILAG, Petitioner,
vs.
MARCELINO B. MARTINEZ, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari 1 are the Decision2 dated November 4,
2011 and the Resolution 3 dated May 14, 2012 of the Court of Appeals (CA) in CA-G.R.
CV No. 81258 which recalled and set aside the Orders dated November 3, 2003 4 and
January 14, 2004 5 of the Regional Trial Court (RTC) of Las Piñas City, Branch 202
(court a quo) in Civil Case No. 980156, and reinstated the Decision 6 dated August 28,
2003 directing petitioner Norlinda S. Marilag (petitioner) to return to respondent
Marcelino B. Martinez (respondent) the latter's excess payment, plus interest, and to
pay attorney's fees and the costs of suit.

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 The Facts

On July 30, 1992, Rafael Martinez (Rafael), respondent's father, obtained- from
petitioner a loan in the amount of ₱160,000.00, with a stipulated monthly interest of five
percent ( 5% ), payable within a period of (6) months. The loan was secured by a real
estate mortgage over a parcel of land covered by Transfer Certificate of Title (TCT) No.
T-208400. Rafael failed'. to settle his obligation upon maturity and despite repeated
demands, prompting petitioner to file a Complaint for Judicial Foreclosure of Real Estate
Mortgage before the RTC of Imus, Cavite, Branch 90 7 (RTC-lmus) on November 10,
1995, 8 docketed as Civil Case No. 1208-95 (judicial foreclosure case).

Rafael failed to file his answer and, upon petitioner's motion, was declared in default.
After an ex parte presentation of petitioner's evidence, the RTC-lmus issued a
Decision 9 dated January 30, 1998, (January 30, 1998 Decision) in the foreclosure case,
declaring the stipulated 5% monthly interest to be usurious and reducing the same to
12% per annum (p.a.). Accordingly, it ordered Rafael to pay petitioner the amount of
₱229,200.00, consisting of the principal of ₱160,000.00 and accrued interest of
₱59,200.00 from July 30, 1992 to September 30, 1995. 10 Records do not show that this
Decision had already attained finality.

Meanwhile, prior to Rafael's notice of the above decision, respondent agreed to pay
Rafael's obligation to petitioner which was pegged at ₱689,000.00. After making a total
payment of ₱400,000.00,11 he executed a promissory note 12 dated February 20, 1998
(subject PN), binding himself to pay on or before March 31, 1998 the amount of
₱289,000.00, "representing the balance of the agreed financial obligation of [his] father
to [petitioner]." 13 After learning of the January 30, 1998 Decision, respondent refused to
pay the amount covered by the subject PN despite demands, prompting petitioner to file
a complaint 14 for sum of money and damages before the court a quo on July 2, 1998,
docketed as Civil Case No. 98-0156 (collection case).

Respondent filed his answer, 15 contending that petitioner has no cause of action

against him. He averred that he has fully settled Rafael's obligation and that he
committed a mistake in paying more than the amount due under the loan, i.e., the
amount of ₱229,200.00 as adjudged by the RTC-Imus in the judicial foreclosure case
which, thus, warranted the return of the excess payment. He therefore prayed for the
dismissal of the complaint, and interposed a compulsory counterclaim for the release of
the mortgage, the return of the excess payment, and the payment of moral and
exemplary damages, attorney's fees and litigation expenses. 16

The Court A Quo's Ruling

In a Decision 17 dated August 28, 2003 (August 28, 2003 Decision), the court a quo
denied recovery on the subject PN. It found that the consideration for its execution was
Rafael's indebtedness to petitioner, the extinguishment of which necessarily results in
the consequent extinguishment of the cause therefore. Considering that the RTC-Imus
had adjudged Rafael liable to petitioner only for the amount of ₱229,200.00, for which a

99
total of ₱400,000.00 had already been paid, the court a quo found no valid or
compelling reason to allow petitioner to recover further on the subject PN. There being
an excess payment of Pl 71,000.00, it declared that a quasi-contract (in the concept of
solution indebiti) exists between the parties and, accordingly, directed petitioner to
return the said amount to respondent, plus 6% interest p.a.18 reckoned from the date of
judicial demand 19 on August 6, 1998 until fully paid, and to pay attorney's fees and the
costs of suit. 20

In an Order 21 dated November 3, 2003 (November 3, 2003 Order), however, the court a

quo granted petitioner's motion for reconsideration, and recalled and set aside its
August 28, 2003 Decision. It declared that the causes of action in the collection and
foreclosure cases are distinct, and respondent's failure to comply with his obligation
under the subject PN justifies petitioner to seek judicial relief. It further opined that the
stipulated 5% monthly interest is no longer usurious and is binding on respondent
considering the suspension of the Usury Law pursuant to Central Bank Circular 905,
series of 1982. Accordingly, it directed respondent to pay the amount of ₱289,000.00
due under the subject PN, plus interest at the legal rate reckoned from the last extra
judicial demand on May 15, 1998, until fully paid, as well as attorney's fees and the
costs of suit.22

Aggrieved, respondent filed a motion for reconsideration 23 which was denied in an

Order 24 dated January 14, 2004, prompting him to elevate the matter to the CA. 25

The CA Ruling

In a Decision 26 dated November 4, 2011, the CA recalled and set aside the court a quo
's November 3, 2003 and January 14, 2004 Orders, and reinstated the August 28, 2003
Decision. It held that the doctrine of res judicata finds application in the instant
case, 27 considering that both the judicial foreclosure and collection cases were filed as
a consequence of the non-payment of Rafael's loan, which was the principal obligation
secured by the real estate mortgage and the primary consideration for the execution of
the subject PN. Since res judicata only requires substantial, not actual, identity of
causes of action and/or identity of issue, 28 it ruled that the judgment in the judicial
foreclosure case relating to Rafael's obligation to petitioner is final and conclusive on the
collection case.

Petitioner's motion for reconsideration was denied in a Resolution 29 dated May 14,

2012; hence, this petition.

The Issue before the Court

The essential issue for the Court's resolution is whether or not the CA committed
reversible error in upholding the dismissal of the collection case.

The Court's Ruling

100
The petition lacks merit.

A case is barred by prior judgment or res judicata when the following elements concur:
(a) the judgment sought to bar the new action must be final; ( b) the decision must have
been rendered by a court having jurisdiction over the subject matter and the parties; (c)
the disposition of the case must be a judgment on the merits; and ( d) there must be as
between the first and second action, identity of parties, subject matter, and causes of
action.30

After a punctilious review of the records, the Court finds the principle of res judicata to
be inapplicable to the present case. This is because the records are bereft of any
indication that the August 28, 2003 Decision in the judicial foreclosure case had already
attained finality, evidenced, for instance, by a copy of the entry of judgment in the said
case. Accordingly, with the very first element of res judicata missing, said principle
cannot be made to obtain.

This notwithstanding, the Court holds that petitioner's prosecution of the collection case
was barred, instead, by the principle of litis pendentia in view of the substantial identity
of parties and singularity of the causes of action in the foreclosure and collection cases,
such that the prior foreclosure case barred petitioner's recourse to the subsequent
collection case.

To lay down the basics, litis pendentia, as a ground for the dismissal of a civil
action, refers to that situation where in another action is pending; between the
same parties for the same cause of action, such that the second action becomes
unnecessary and vexatious. For the bar of litis pendentia to be invoked, the following
requisites must concur: (a) identity of parties, or at least such parties as represent the
same interests in both actions; ( b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts; and ( c) the identity of the two preceding
particulars is such that any judgment rendered in the pending case, regardless of which
party is successful would amount to res judicata in the other. 31 The underlying principle
of litis pendentia is the theory that a party is not allowed to vex another more than once
regarding the same subject matter and for the same cause of action. This theory is
founded on the public policy that the same subject matter should not be the subject of
controversy in courts more than once, in order that possible conflicting judgments may
be avoided for the sake of the stability of the rights and status of persons, and also to
avoid the costs and expenses incident to numerous suits. 32 Consequently, a party will
not be permitted to split up a single cause of action and make it a basis for several suits
as the whole cause must be determined in one action. 33 To be sure, splitting a cause
of action is a mode of forum shopping by filing multiple cases based on the same
cause of action, but with different prayers, where the ~round of dismissal is litis
pendentia (or res judicata, as the case may be). 34

In this relation, it must be noted that the question of whether a cause of action is single
and entire or separate is not always easy to determine and the same must often be
resolved, not by the general rules, but by reference to the facts and circumstances of

101
the particular case. The true rule, therefore, is whether the entire amount arises from
one and the same act or contract which must, thus, be sued for in one action, or the
several parts arise from distinct and different acts or contracts, for which a party may
maintain separate suits.35

In loan contracts secured by a real estate mortgage, the rule is that the creditor-
mortgagee has a single cause of action against the debtor-mortgagor, i.e., to recover
the debt, through the filing of a personal action for collection of sum of money or the
institution of a real action to foreclose on the mortgage security. The two remedies are
alternative,36 not cumulative or successive, 37 and each remedy is complete by itself.
Thus, if the creditor-mortgagee opts to foreclose the real estate mortgage, he waives
the action for the collection of the unpaid debt, 38 except only for the recovery of
whatever deficiency may remain in the outstanding obligation of the debtor-mortgagor
after deducting the bid price in the public auction sale of the mortgaged
properties. 39 Accordingly, a deficiency judgment shall only issue after it is established
that the mortgaged property was sold at public auction for an amount less than the
outstanding obligation.

In the present case, records show that petitioner, as creditor-mortgagee, instituted an

action for judicial foreclosure pursuant to the provisions of Rule 68 of the Rules of Court
in order to recover on Rafael's debt. In light of the foregoing discussion, the availment of
such remedy thus bars recourse to the subsequent filing of a personal action for
collection of the same debt, in this case, under the principle of litis pendentia,
considering that the foreclosure case only remains pending as it was not shown to have
attained finality.

While the ensuing collection case was anchored on the promissory note executed by
respondent who was not the original debtor, the same does not constitute a separate
and distinct contract of loan which would have given rise to a separate cause of action
upon breach. Notably, records are bereft of any indication that respondent's agreement
to pay Rafael's loan obligation and the execution of the subject PN extinguished by
novation 40 the contract of loan between Rafael and petitioner, in the absence of
express agreement or any act of equal import. Well-settled is the rule that novation is
never presumed, but must be clearly and unequivocally shown. Thus, in order for a new
agreement to supersede the old one, the parties to a contract must expressly agree that
they are abrogating their old contract in favor of a new one, 41 which was not shown
here.

On the contrary, it is significant to point out that: (a) the consideration for the subject PN
was the same consideration that supported the original loan obligation of Rafael; (b)
respondent merely assumed to pay Rafael's remaining unpaid balance in the latter's
behalf, i.e., as Rafael's agent or representative; 42 and (c) the subject PN was executed
after respondent had assumed to pay Rafael's obligation and made several payments
thereon. Case law states that the fact that the creditor accepts payments from a third
person, who has assumed the obligation, will result merely in the addition of debtors,

102
not novation, and the creditor may enforce the obligation against both debtors. 43 for
ready reference, the subject PN reads in full:

February 20, 1998

PROMISSORY NOTE

₱289, 000.00
===========

I, MARCELINO B. MARTINEZ son of Mr. RAFAEL MARTINEZ, of legal age, Filipino,

married and a resident of No. 091 Anabu I-A, Imus, Cavite, by these presents do hereby
specifically and categorically PROMISE, UNDERTAKE and bind myself in behalf of my
father, to pay to Miss NORLINDA S. MARILAG, Mortgagee-Creditor of my said father,
the sum of TWO HUNDRED EIGHTY NINE THOUSAND PESOS (₱289,000.00),
Philippine Currency, on or before MARCH 31, 1998, representing the balance of the
agreed financial obligation of my said father to her. (Emphases supplied)

Executed at Pamplona I, Las Piñas City, Metro Manila, this 20th day of February, 1998.

Sgd.
MARCELINO B. MARTINEZ
Promissory 44

Petitioner's contention that the judicial foreclosure and collection cases enforce
independent rights 45 must, therefore, fail because the Deed of Real Estate
Mortgage 46 and the subject PN both refer to one and the same obligation, i.e., Rafael's
loan obligation. As such, there exists only one cause of action for a single breach of that
obligation. Petitioner cannot split her cause of action on Rafael's unpaid loan obligation
by filing a petition for the judicial foreclosure of the real estate mortgage covering the
said loan, and, thereafter, a personal action for the collection of the unpaid balance of
said obligation not comprising a deficiency arising from foreclosure, without violating the
proscription against splitting a single cause of action, where the ground for dismissal is
either res judicata or litis pendentia, as in this case.

As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc. v.
lcaranga!. 47

For non-payment of a note secured by mortgage, the creditor has a single cause of
action against the debtor. This single cause of action consists in the recovery of the
credit with execution of the security. In other words, the creditor in his action may make
two demands, the payment of the debt and the foreclosure · of his mortgage. But both
demands arise from the same cause, the nonpayment of the debt, and, for that reason,
they constitute a single cause of action. Though the debt and the mortgage constitute
separate agreements, the latter is subsidiary to the former, and both refer to one and
the same obligation. Consequently, there exists only one cause of action for a single

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breach of that obligation. Plaintiff. then, by applying the rule above stated, cannot split
up his single cause of action by filing a complaint (or payment of the debt, and
thereafter another complaint (or foreclosure of the mortgage. If he does so, the filing of
the first complaint will bar the subsequent complaint. By allowing the creditor to file two
separate complaints simultaneously or successively, one to recover his credit and
another to foreclose his mortgage, we will, in effect, be authorizing him plural redress for
a single breach of contract at so much cost to the courts and with so much vexation and
oppression to the debtor. (Emphases and underscoring supplied)

Further on the point, the fact that no foreclosure sale appears to have been conducted
is of no moment because the remedy of foreclosure of mortgage is deemed chosen
upon the filing of the complaint there for. 48 In Suico Rattan & Buri Interiors, Inc. v.
CA, 49 it was explained:

x x x x In sustaining the rule that prohibits mortgage creditors from pursuing both the
remedies of a personal action for debt or a real action to foreclose the mortgage, the
Court held in the case of Bachrach Motor Co., Inc. v. Esteban Icarangal, et al. that a
rule which would authorize the plaintiff to bring a personal action against the debtor and
simultaneously or successively another action against the mortgaged property, would
result not only in multiplicity of suits so offensive to justice and obnoxious to law and
equity, but also in subjecting the defendant to the vexation of being sued in the place of
his residence or of the residence of the plaintiff, and then again in the place where the
property lies. Hence, a remedy is deemed chosen upon the filing of the suit for
collection or upon the filing of the complaint in an action for foreclosure of mortgage,
pursuant to the provisions of Rule 68 of the Rules of Court. As to extrajudicial
foreclosure, such remedy is deemed elected by the mortgage creditor upon filing of the
petition not with any court of justice but with the office of the sheriff of the province
where the sale is to be made, in accordance with the provisions of Act No. 3135, as
amended by Act No. 4118. (Emphases supplied)

As petitioner had already instituted judicial foreclosure proceedings over the

mortgaged property, she is now barred from availing herself of an ordinary action
for collection, regardless of whether or not the decision in the foreclosure case had
attained finality. In fine, the dismissal of the collection case is in order. Considering,
however, that respondent's claim for return of excess payment partakes of the nature of
a compulsory counterclaim and, thus, survives the dismissal of petitioner's collection
suit, the same should be resolved based on its own merits and evidentiary support. 50

Records show that other than the matter of interest, the principal loan obligation and the
payments made were not disputed by the parties.1âwphi1 Nonetheless, the Court finds
the stipulated 5% monthly interest to be excessive and unconscionable. In a plethora of
cases, the Court has affirmed that stipulated interest rates of three percent (3°/o) per
month and higher are excessive, iniquitous, unconscionable, and exorbitant, 51 hence,
illegal 52 and void for being contrary to morals.53 In Agner v. BPI Family Savings Bank,
Inc., 54 the Court had the occasion to rule:

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Settled is the principle which this Court has affirmed in a number of cases that
stipulated interest rates of three percent (3%) per month and higher are excessive,
iniquitous, unconscionable, and exorbitant. While Central Bank Circular No. 905-82,
which took effect on January 1, 1983, effectively removed the ceiling on interest rates
for both secured and unsecured loans, regardless of maturity, nothing in the said
circular could possibly be read as granting carte blanche authority to lenders to raise
interest rates to levels which would either enslave their borrowers or lead to a
hemorrhaging of their assets. Since the stipulation on the interest rate is void for being
contrary to morals, if not against the law, it is as if there was no express contract on said
interest rate; thus, the interest rate may be reduced as reason and equity demand.
(Emphases supplied)

As such, the stipulated 5% monthly interest should be equitably reduced to l % per

month or 12% p.a. reckoned from the execution of the real estate mortgage on July 30,
1992. In order to determine whether there was any overpayment as claimed by
respondent, we first compute the interest until January 30, 1998 55 when he made a
payment in the amount of ₱300,000.00 on Rafael's loan obligation. Accordingly, the
amount due on the loan as of the latter date is hereby computed as follows:

Principal ₱160, 000.00

Add: Interest from 07/30/1992 to 01/30/1998
(₱160, 000.00 x 12% x 5.5 yrs.) 105,600.00
Amount due on the loan ₱265, 600.00
Less: Payment made on 01/30/98 (300,000.00)
Overpayment as of 01/30/98 (P 34,400.00) 56

Thus, as of January 30, 1998, only the amount of ₱265,600.00 was due under the loan
contract, and the receipt of an amount more than that renders petitioner liable for the
return of the excess. Respondent, however, made further payment in the amount of Pl
00,000.0057 on the belief that the subject loan obligation had not yet been satisfied.
Such payments were, therefore, clearly made by mistake, giving rise to the quasi-
contractual obligation of solutio indebiti under Article 2154 58 in relation to Article
2163 59 of the Civil Code. Not being a loan or forbearance of money, an interest of 6%
p.a. should be imposed on the amount to be refunded and on the damages and
attorney's fees awarded, if any, computed from the time of demand 60 until its
satisfaction. 61 Consequently, petitioner must return to respondent the excess payments
in the total amount of ₱134,400.00, with legal interest at the rate of 6% p.a. from the
filing of the Answer on August 6, 1998 62 interposing a counterclaim for such
overpayment, until fully settled.

However, inasmuch as the court a quo failed to state in the body of its decision the
factual or legal basis for the award of attorney's fees to the respondent, as required
under Article 2208 63 of the New Civil Code, the Court resolves to delete the same. The

105
rule is well-settled that the trial court must clearly state the reasons for awarding
attorney's fees in the body of its decision, not merely in its dispositive portion, as the
appellate courts are precluded from supplementing the bases for such award. 64

Finally, in the absence of showing that the court a quo 's award of the costs of suit in
favor of respondent was patently capricious, 65 the Court finds no reason to disturb the
same.

WHEREFORE, the petition is DENIED. The Decision dated November 4, 2011 and the
Resolution dated May 14, 2012 of the Court of Appeals in CA-G.R. CV No. 81258
reinstating the court a quo's Decision dated August 28, 2003 in Civil Case No. 98-0156
are hereby AFFIRMED with the MODIFICATIONS: (a) directing petitioner Norlinda S.
Marilag to return to respondent Marcelino B. Martinez the latter's excess payments in
the total amount of ₱134,400.00, plus legal interest at the rate of 6% p.a. from the filing
of the Answer on August 6, 1998 until full satisfaction; and (b) deleting the award of
attorney's fees.

SO ORDERED.

FIRST DIVISION

G.R. No. 195834, November 09, 2016

GUILLERMO SALVADOR, REMEDIOS CASTRO, REPRESENTED BY PAZ "CHIT"

CASTRO, LEONILA GUEVARRA, FELIPE MARIANO, RICARDO DE GUZMAN,
VIRGILIO JIMENEZ, REPRESENTED BY JOSIE JIMENEZ, ASUNCION JUAMIZ,
ROLANDO BATANG, CARMENCITA SAMSON, AUGUSTO TORTOSA,
REPRESENTED BY FERNANDO TORTOSA, SUSANA MORANTE, LUZVIMINDA
BULARAN, LUZ OROZCO, JOSE SAPICO, LEONARDO PALAD, ABEL BAKING,
REPRESENTED BY ABELINA BAKING, GRACIANO ARNALDO, REPRESENTED
BY LUDY ARNALDO, JUDITH HIDALGO, AND IGMIDIO JUSTINIANO, CIRIACO
MIJARES, REPRESENTED BY FREDEZWINDA MIJARES, JENNIFER MORANTE,
TERESITA DIALA, AND ANITA P. SALAR, Petitioners, v. PATRICIA, INC.,
RESPONDENT. THE CITY OF MANILA AND CIRIACO C. MIJARES, Intervenors-
Appellees.

DECISION

BERSAMIN, J.:

Jurisdiction over a real action is determined based on the allegations in the complaint of
the assessed value of the property involved. The silence of the complaint on such value
is ground to dismiss the action for lack of jurisdiction because the trial court is not given
the basis for making the determination.

The Case

106
For review is the decision promulgated on June 25, 2010 1 and the resolution
promulgated on February 16, 2011 in CA-G.R. CV No. 86735, 2 whereby the Court of
Appeals (CA) dismissed the petitioners' complaint in Civil Case No. 96-81167, thereby
respectively reversing and setting aside the decision rendered on May 30, 2005 by the
Regional Trial Court (RTC), Branch 32, in Manila, 3 and denying their motion for
reconsideration.

Antecedents

The CA adopted the summary by the RTC of the relevant factual and procedural
antecedents, as follows:

This is an action for injunction and quieting of title to determine who owns the property
occupied by the plaintiffs and intervenor, Ciriano C. Mijares.

Additionally, to prevent the defendant Patricia Inc., from evicting the plaintiffs from their
respective improvements along Juan Luna Street, plaintiffs applied for a preliminary
injunction in their Complaint pending the quieting of title on the merits.

The complaint was amended to include different branches of the Metropolitan Trial
Courts of Manila. A Complaint-in-Intervention was filed by the City of Manila as owner of
the land occupied by the plaintiffs. Another Complaint-in-Intervention by Ciriano Mijares
was also filed alleging that he was similarly situated as the other plaintiffs.

A preliminary injunction was granted and served on all the defendants.

Based on the allegations of the parties involved, the main issue to be resolved is
whether the improvements of the plaintiffs stand on land that belongs to Patricia Inc., or
the City of Manila. Who owns the same? Is it covered by a Certificate of Title?

All parties agreed and admitted in evidence by stipulation as to the authenticity of the
following documents:

(1) Transfer Certificate of Title No. 44247 in the name of the City of Manila;

(2) Transfer Certificate of Title No. 35727 in the name of Patricia Inc.;

(3) Approved Plan PSD-38540; and

(4) Approved Subdivision Plan PCS-3290 for Ricardo Manotok.

The issue as to whether TCT 35727 should be cancelled as prayed for by the plaintiffs
and intervenor, Ciriano C. Mijares is laid to rest by agreement of the parties that this
particular document is genuine and duly executed. Nonetheless, the cancellation of a
Transfer Certificate of Title should be in a separate action before another forum.

107
Since the Transfer Certificates of Title of both Patricia Inc. and the City of Manila are
admitted as genuine, the question now is: Where are the boundaries based on the
description in the respective titles?4

To resolve the question about the boundaries of the properties of the City of Manila and
respondent Patricia, Inc., the RTC appointed, with the concurrence of the parties, three
geodetic engineers as commissioners, namely: Engr. Rosario Mercado, Engr. Ernesto
Pamular and Engr. Delfin Bumanlag.5 These commissioners ultimately submitted their
reports.

On May 30, 2005, the RTC rendered judgment in favor of the petitioners and against
Patricia, Inc., permanently enjoining the latter from doing any act that would evict the
former from their respective premises, and from collecting any rentals from them. The
RTC deemed it more sound to side with two of the commissioners who had found that
the land belonged to the City of Manila, and disposed:

WHEREFORE, it is hereby ORDERED:

1. Defendant Patricia Inc. and other person/s claiming under it,

are PERMANENTLY ENJOINED to REFRAIN and DESIST from any act
of EVICTION OR EJECTMENT of the PLAINTIFFS in the premises they
occupy;ChanRoblesVirtualawlibrary

2. Defendant Patricia Inc. STOP COLLECTING any rentals from the

plaintiffs who may seek reimbursement of previous payments in a
separate action subject to the ownership of the City of Manila
and;ChanRoblesVirtualawlibrary

3. Attorney's fees of P10,000.00 to each plaintiff and intervenor, Ciriano

Mijares; P20,000.00 to the City of Manila. (emphasis ours)

No pronouncement as to costs.

SO ORDERED.6

Decision of the CA

On appeal, the CA, in CA-G.R. CV No. 86735, reversed the RTC's judgment, 7 and
dismissed the complaint. The CA declared that the petitioners were without the
necessary interest, either legal or equitable title, to maintain a suit for quieting of title;
castigated the RTC for acting like a mere rubber stamp of the majority of the
commissioners; opined that the RTC should have conducted hearings on the reports of
the commissioners; ruled as highly improper the adjudication of the boundary dispute in
an action for quieting of title; and decreed:

WHEREFORE, premises considered, We hereby REVERSE and SET ASIDE the

decision dated May 30, 2005 of the Regional Trial Court of Manila, Branch 32. Civil
108
Case No. 96-81167 is hereby DISMISSED for utter want of merit. Accordingly, the
questioned order enjoining Patricia and all other person/s acting on its stead (sic) to
refrain and desist from evicting or ejecting plaintiffs/appellees in Patricia's own land and
from collecting rentals is LIFTED effective immediately.

No costs.

SO ORDERED.8

The CA denied the motions for reconsideration of the petitioners and intervenor Mijares
through the assailed resolution of February 16, 2011. 9

Hence, this appeal by the petitioners.

Issues

The petitioners maintain that the CA erred in dismissing the complaint, arguing that the
parties had openly raised and litigated the boundary issue in the RTC, and had thereby
amended the complaint to conform to the evidence pursuant to Section 5, Rule 10 of
the Rules of Court; that they had the sufficient interest to bring the suit for quieting of
title because they had built their improvements on the property; and that the RTC
correctly relied on the reports of the majority of the commissioners.

On its part, the City of Manila urges the Court to reinstate the decision of the RTC. It
reprises the grounds relied upon by the petitioners, particularly the application of
Section 5, Rule 10 of the Rules of Court.10

In response, Patricia, Inc. counters that the boundary dispute, which the allegations of
the complaint eventually boiled down to, was not proper in the action for quieting of title
under Rule 63, Rules of Court; and that Section 5, Rule 10 of the Rules of Court did not
apply to vest the authority to resolve the boundary dispute in the RTCC. 11

In other words, did the CA err m dismissing the petitioners' complaint?

Ruling of the Court

The appeal lacks merit.

1.
Jurisdiction over a real action depends on
the assessed value of the property involved
as alleged in the complaint

The complaint was ostensibly for the separate causes of action for injunction and for
quieting of title. As such, the allegations that would support both causes of action must

109
be properly stated in the complaint. One of the important allegations would be those
vesting jurisdiction in the trial court.

The power of a court to hear and decide a controversy is called its jurisdiction, which
includes the power to determine whether or not it has the authority to hear and
determine the controversy presented, and the right to decide whether or not the
statement of facts that confer jurisdiction exists, as well as all other matters that arise in
the case legitimately before the court. Jurisdiction imports the power and authority to
declare the law, to expound or to apply the laws exclusive of the idea of the power to
make the laws, to hear and determine issues of law and of fact, the power to hear,
determine, and pronounce judgment on the issues before the court, and the power to
inquire into the facts, to apply the law, and to pronounce the judgment. 12

But judicial power is to be distinguished from jurisdiction in that the former cannot exist
without the latter and must of necessity be exercised within the scope of the latter, not
beyond it.13

Jurisdiction is a matter of substantive law because it is conferred only by law, as

distinguished from venue, which is a purely procedural matter. The conferring law may
be the Constitution, or the statute organizing the court or tribunal, or the special or
general statute defining the jurisdiction of an existing court or tribunal, but it must be in
force at the time of the commencement of the action. 14 Jurisdiction cannot be presumed
or implied, but must appear clearly from the law or it will not be held to exist, 15 but it may
be conferred on a court or tribunal by necessary implication as well as by express
terms.16 It cannot be conferred by the agreement of the parties; 17 or by the court's
acquiescence;18 or by the erroneous belief of the court that it had jurisdiction; 19 or by the
waiver of objections;20 or by the silence of the parties.21

The three essential elements of jurisdiction are: one, that the court must have
cognizance of the class of cases to which the one to be adjudged belongs; two, that the
proper parties must be present; and, three, that the point decided must be, in substance
and effect, within the issue. The test for determining jurisdiction is ordinarily the nature
of the case as made by the complaint and the relief sought; and the primary and
essential nature of the suit, not its incidental character, determines the jurisdiction of the
court relative to it.22

Jurisdiction may be classified into original and appellate, the former being the power to
take judicial cognizance of a case instituted for judicial action for the first time under
conditions provided by law, and the latter being the authority of a court higher in rank to
re-examine the final order or judgment of a lower court that tried the case elevated for
judicial review. Considering that the two classes of jurisdiction are exclusive of each
other, one must be expressly conferred by law. One does not flow, nor is inferred, from
the other.23

Jurisdiction is to be distinguished from its exercise. 24 When there is jurisdiction over the
person and subject matter, the decision of all other questions arising in the case is but

110
an exercise of that jurisdiction.25 Considering that jurisdiction over the subject matter
determines the power of a court or tribunal to hear and determine a particular case, its
existence does not depend upon the regularity of its exercise by the court or
tribunal.26 The test of jurisdiction is whether or not the court or tribunal had the power to
enter on the inquiry, not whether or not its conclusions in the course thereof were
correct, for the power to decide necessarily carries with it the power to decide wrongly
as well as rightly. In a manner of speaking, the lack of the power to act at all results in a
judgment that is void; while the lack of the power to render an erroneous decision
results in a judgment that is valid until set aside. 27 That the decision is erroneous does
not divest the court or tribunal that rendered it of the jurisdiction conferred by law to try
the case.28 Hence, if the court or tribunal has jurisdiction over the civil action, whatever
error may be attributed to it is simply one of judgment, not of jurisdiction; appeal,
not certiorari, lies to correct the error.29

The exclusive original jurisdiction of the RTC in civil cases is conferred and provided for
in Section 19 of Batas Pambansa Blg. 129 (Judiciary Reorganization Act of 1980), viz.:

Sec. 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise exclusive
original jurisdiction:

(1) In all civil actions in which the subject of the litigation is incapable of pecuniary
estimation;

(2) In all civil actions which involve the title to, or possession of, real property, or any
interest therein, except actions for forcible entry into and unlawful detainer of lands or
buildings, original jurisdiction over which is conferred upon Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts;

(3) In all actions in admiralty and maritime jurisdiction where he demand or claim
exceeds twenty thousand pesos (P20,000.00);

(4) In all matters of probate, both testate and intestate, where the gross value of the
estate exceeds twenty thousand pesos (P20,000.00);

(5) In all actions involving the contract of marriage and marital relations;

(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body
exercising judicial or quasi-judicial functions;

(7) In all civil actions and special proceedings falling within the exclusive original
jurisdiction of a Juvenile and Domestic Relations Court and of the Courts of Agrarian
Relations as now provided by law; and

(8) In all other cases in which the demand, exclusive of interest and costs or the value
of the property in controversy, amounts to more than twenty thousand pesos
(P20,000.00).

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For the purpose of determining jurisdiction, the trial court must interpret and apply the
law on jurisdiction in relation to the averments or allegations of ultimate facts in the
complaint regardless of whether or not the plaintiff is entitled to recover upon all or
some of the claims asserted therein.30 Based on the foregoing provision of law,
therefore, the RTC had jurisdiction over the cause of action for injunction because it was
one in which the subject of the litigation was incapable of pecuniary estimation. But the
same was not true in the case of the cause of action for the quieting of title, which had
the nature of a real action — that is, an action that involves the issue of ownership or
possession of real property, or any interest in real property 31 — in view of the expansion
of the jurisdiction of the first level courts under Republic Act No. 7691, which amended
Section 33(3) of Batas Pambansa Blg. 129 effective on April 15, 1994, 32 to now
pertinently provide as follows:

Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and

Municipal Circuit Trial Courts in Civil Cases. -

Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts shall
exercise:

xxxx

(3) Exclusive original jurisdiction in all civil actions which involve title to,
possession of, real property, or any interest therein where the assessed value of
the property or interest therein does not exceed Twenty thousand pesos
(P20,000.00) or, in civil actions in Metro Manila, where such assessed value does
not exceeds (sic) Fifty thousand pesos (P50,000.00) exclusive of interest,
damages of whatever kind, attorneys fees, litigation expenses and costs: x x x

As such, the determination of which trial court had the exclusive original jurisdiction over
the real action is dependent on the assessed value of the property in dispute.

An action to quiet title is to be brought as a special civil action under Rule 63 of

the Rules of Court. Although Section 1 of Rule 63 specifies the forum to be "the
appropriate Regional Trial Court,"33 the specification does not override the statutory
provision on jurisdiction. This the Court has pointed out in Malana v. Tappa,34 to wit:

To determine which court has jurisdiction over the actions identified in the second
paragraph of Section 1, Rule 63 of the Rules of Court, said provision must be read
together with those of the Judiciary Reorganization Act of 1980, as amended.

It is important to note that Section 1, Rule 63 of the Rules of Court does not
categorically require that an action to quiet title be filed before the RTC. It repeatedly
uses the word "may"- that an action for quieting of title "may be brought under [the]
Rule" on petitions for declaratory relief, and a person desiring to file a petition for
declaratory relief "may x x x bring an action in the appropriate Regional Trial Court." The

112
use of the word "may" in a statute denotes that the provision is merely permissive and
indicates a mere possibility, an opportunity or an option.

In contrast, the mandatory provision of the Judiciary Reorganization Act of 1980, as

amended, uses the word shall and explicitly requires the MTC to exercise exclusive
original jurisdiction over all civil actions which involve title to or possession of real
property where the assessed value does not exceed P20,000.00, thus:

xxxx

As found by the RTC, the assessed value of the subject property as stated in Tax
Declaration No. 02-48386 is only P410.00; therefore, petitioners Complaint involving
title to and possession of the said property is within the exclusive original jurisdiction of
the MTC, not the RTC.35

The complaint of the petitioners did not contain any averment of the assessed value of
the property. Such failure left the trial court bereft of any basis to determine which court
could validly take cognizance of the cause of action for quieting of title. Thus, the RTC
could not proceed with the case and render judgment for lack of jurisdiction. Although
neither the parties nor the lower courts raised jurisdiction of the trial court in the
proceedings, the issue did not simply vanish because the Court can hereby motu
proprio consider and resolve it now by virtue of jurisdiction being conferred only by law,
and could not be vested by any act or omission of any party. 36

2.
The joinder of the action for injunction
and the action to quiet title
was disallowed by the Rules of Court

Another noticeable area of stumble for the petitioners related to their having joined two
causes of action, i.e., injunction and quieting of title, despite the first being an ordinary
suit and the latter a special civil action under Rule 63. Section 5, Rule 2 of the Rules of
Court disallowed the joinder, viz.:

Section 5. Joinder of causes of action. — A party may in one pleading assert, in the
alternative or otherwise, as many causes of action as he may have against an opposing
party, subject to the following conditions:

(a) The party joining the causes of action shall comply with the rules on joinder of
parties;

(b) The joinder shall not include special civil actions or actions governed by
special rules;

(c) Where the causes of action arc between the same parties but pertain to different
venues or jurisdictions, the joinder may be allowed in the Regional Trial Court provided

113
one of the causes of action falls within the jurisdiction of said court and the venue lies
therein; and

(d) Where the claims in all the causes of action arc principally for recovery of money,
the aggregate amount claimed shall he the test of jurisdiction.

Consequently, the RTC should have severed the causes of action, either upon motion
or motu proprio, and tried them separately, assuming it had jurisdiction over both. Such
severance was pursuant to Section 6, Rule 2 of the Rules of Court, which expressly
provides:

Section 6. Misjoinder of causes of action. -- Misjoinder of causes of action is not a

ground for dismissal of an action. A misjoined cause of action may, on motion of a party
or on the initiative of the court, be severed and proceeded with separately. (n)

The refusal of the petitioners to accept the severance would have led to the dismissal of
the case conformably with the mandate of Section, Rule 17 of the Rules of Court, to wit:

Section 3. Dismissal due to fault of plaintiff. - If, for no justifiable cause, the plaintiff fails
to appear on the date of the presentation of his evidence in chief on the complaint, or to
prosecute his action for an unreasonable length of time, or to comply with these Rules
or any order of the court, the complaint may be dismissed upon motion of the defendant
or upon the court's own motion, without prejudice to the right of the defendant to
prosecute his counterclaim in the same or in a separate action. This dismissal shall
have the effect of an adjudication upon the merits, unless otherwise declared by the
court. (3a)

3.
The petitioners did not show that they were
real parties in interest to demand
either injunction or quieting of title

Even assuming that the RTC had jurisdiction over the cause of action for quieting of
title, the petitioners failed to allege and prove their interest to maintain the suit. Hence,
the dismissal of this cause of action was warranted.

An action to quiet title or remove the clouds over the title is a special civil action
governed by the second paragraph of Section 1, Rule 63 of the Rules of Court.
Specifically, an action for quieting of title is essentially a common law remedy grounded
on equity. The competent court is tasked to determine the respective rights of the
complainant and other claimants, not only to put things in their proper place, to make
the one who has no rights to said immovable respect and not disturb the other, but also
for the benefit of both, so that he who has the right would see every cloud of doubt over
the property dissipated, and he could afterwards without fear introduce the
improvements he may desire, to use, and even to abuse the property as he deems best.
But "for an action to quiet title to prosper, two indispensable requisites must concur,

114
namely: (1) the plaintiff or complainant has a legal or an equitable title to or interest in
the real property subject of the action; and (2) the deed, claim, encumbrance, or
proceeding claimed to be casting cloud on his title must be shown to be in fact invalid or
inoperative despite its prima facie appearance of validity or legal efficacy.37

The first requisite is based on Article 477 of the Civil Code which requires that the
plaintiff must have legal or equitable title to, or interest in the real property which is the
subject matter of the action. Legal title denotes registered ownership, while equitable
title means beneficial ownership,38 meaning a title derived through a valid contract or
relation, and based on recognized equitable principles; the right in the party, to whom it
belongs, to have the legal title transferred to him. 39

To determine whether the petitioners as plaintiffs had the requisite interest to bring the
suit, a resort to the allegations of the complaint is necessary. In that regard, the
complaint pertinently alleged as follows:

THE CAUSE OF ACTION

5. Plaintiffs are occupants of a parcel of land situated at Juan Luna Street, Gagalangin,
Tondo (hereinafter "subject property");

6. Plaintiffs and their predecessor-in-interest have been in open and notorious

possession of the subject property for more than thirty (30) years;

7. Plaintiffs have constructed in good faith their houses and other improvements on the
subject property;

8. The subject property is declared an Area for Priority Development (APD) under
Presidential Decree No. 1967, as amended;

9. Defendant is claiming ownership of the subject property by virtue of Transfer

Certificate of Title (TCT) No. 35727 of the Registry of Deeds for the City of Manila. x x x

10. Defendant's claim of ownership over the subject property is without any legal or
factual basis because, assuming but not conceding that the TCT No. 35727 covers the
subject property, the parcel of land covered by and embraced in TCT No. 35727 has
already been sold and conveyed by defendant and, under the law, TCT No. 35727
should have been cancelled;

11. By virtue of TCT No. 35727, defendant is evicting, is about to evict or threatening to
evict the plaintiffs from the said parcel of land;

12. Because of the prior sales and conveyances, even assuming but not conceding that
the subject property is covered by and embraced in Transfer Certificate of title No.
35727, defendant cannot lawfully evict the plaintiffs from the subject property since it no
longer owns the subject property;

115
13. Any attempted eviction of the plaintiffs from the subject property would be without
legal basis and consequently, would only be acts of harassment which are contrary to
morals, good customs and public policy and therefore, plaintiffs are entitled to enjoin the
defendant from further harassing them;

14. Plaintiffs recently discovered that the subject property is owned by the City of Manila
and covered by and embraced in Transfer Certificate of Title No. 44247, a copy of which
is attached hereto as Annex "B", of the Registry of Deeds for the City of Manila;

15. TCT No. 35727 which is apparently valid and effective is in truth and in fact invalid,
ineffective, voidable or unenforceable, and constitutes a cloud on the rights and
interests of the plaintiffs over the subject property;

16. Plaintiffs are entitled to the removal of such cloud on their rights and interests over
the subject property;

17. Even assuming, but not admitting, that defendant owns the subject property, it
cannot evict the plaintiffs from the subject property because plaintiffs' right to possess
the subject property is protected by Presidential Decree No. 2016.

18. Even assuming, but not admitting, that defendant owns the subject property, it
cannot evict the plaintiffs from the subject property without reimbursing the plaintiffs for
the cost of the improvements made upon the subject property;

19. Because of defendant's unwarranted claim of ownership over the subject property
and its attempt to evict or disposses the plaintiffs from the subject property, plaintiffs
experienced mental anguish, serious anxiety, social humiliation, sleepless nights and
loss of appetite for which defendant should be ordered to pay each plaintiff the amount
of P20,000.00 as moral damages;

20. Because of defendant's unwarranted claim of ownership over the subject property
and its attempt to evict or disposses the plaintiffs from the subject property, plaintiffs
were constrained to litigate to protect their rights and interests, and hire services of a
lawyer, for which they should each be awarded the amount of P10,000.00.

21. The plaintiffs and the defendants are not required to undergo conciliation
proceeding before the Katarungan Pambarangay prior to the filing of this action. 40

The petitioners did not claim ownership of the land itself, and did not show their
authority or other legal basis on which they had anchored their alleged lawful
occupation and superior possession of the property. On the contrary, they only
contended that their continued possession of the property had been for more than 30
years; that they had built their houses in good faith; and that the area had been
declared an Area for Priority Development (APD) under Presidential Decree No. 1967,
as amended. Yet, none of such reasons validly clothed them with the necessary interest
to maintain the action for quieting of title. For one, the authenticity of the title of the City

116
of Manila and Patricia, Inc. was not disputed but was even admitted by them during trial.
As such, they could not expect to have any right in the property other than that of
occupants whose possession was only tolerated by the owners and rightful possessors.
This was because land covered by a Torrens title cannot b e acquired by prescription or
by adverse possession.41 Moreover, they would not be builders entitled to the protection
of the Civil Code as builders in good faith. Worse for them, as alleged in the
respondent's comments,42 which they did not deny, they had been lessees of Patricia,
Inc. Such circumstances indicated that they had no claim to possession in good faith,
their occupation not being in the concept of owners.

At this juncture, the Court observes that the fact that the area was declared an area for
priority development (APD) under Presidential Decree No. 1967, as amended, did not
provide sufficient interest to the petitioners. When an area is declared as an APD, the
occupants would enjoy the benefits provided for in Presidential Decree No. 1517
(Proclaiming Urban land Reform in the Philippines and Providing for the Implementing
Machinery Thereof). In Frilles v. Yambao,43 the Court has summarized the salient
features of Presidential Decree No. 1517, thus:

P. D. No. 1517, which took effect on June 11, 1978, seeks to protect the rights of bona-
fide tenants in urban lands by prohibiting their ejectment therefrom under certain
conditions, and by according them preferential right to purchase the land occupied by
them. The law covers all urban and urbanizable lands which have been proclaimed as
urban land reform zones by the President of the Philippines. If a particular property is
within a declared Area for Priority Development and Urban Land Reform Zone, the
qualified lessee of the said property in that area can avail of the right of first
refusal to purchase the same in accordance with Section 6 of the same law. Only
legitimate tenants who have resided for ten years or more on specific parcels of
land situated in declared Urban Land Reform Zones or Urban Zones, and who have
built their homes thereon, have the right not to be dispossessed therefrom and the
right of first refusal to purchase the property under reasonable terms and
conditions to be determined by the appropriate government agency. [Bold
emphasis supplied]

Presidential Decree No. 1517 only granted to the occupants of APDs the right of first
refusal, but such grant was true only if and when the owner of the property decided to
sell the property. Only then would the right of first refusal accrue. Consequently, the
right of first refusal remained contingent, and was for that reason insufficient to vest any
title, legal or equitable, in the petitioners.

Moreover, the CA's adverse judgment dismissing their complaint as far as the action to
quiet title was concerned was correct. The main requirement for the action to be brought
is that there is a deed, claim, encumbrance, or proceeding casting cloud on the
plaintiffs' title that is alleged and shown to be in fact invalid or inoperative despite
its prima facie appearance of validity or legal efficacy, the eliminates the existence of
the requirement. Their admission of the genuineness and authenticity of Patricia, Inc.'s

117
title negated the existence of such deed, instrument, encumbrance or proceeding that
was invalid, and thus the action must necessarily fail.

4.
The petitioners did not have
a cause of action for injunction

The petitioners did not also make out a case for injunction in their favor.

The nature of the remedy of injunction and the requirements for the issuance of the
injunctive writ have been expounded in Philippine Economic Zone Authority v.
Carantes,44 as follows:

Injunction is a judicial writ, process or proceeding whereby a party is directed either to

do a particular act, in which case it is called a mandatory injunction or to refrain from
doing a particular act, in which case it is called a prohibitory injunction. As a main
action, injunction seeks to permanently enjoin the defendant through a final injunction
issued by the court and contained in the judgment. Section 9, Rule 58 of the 1997 Rules
of Civil Procedure, as amended, provides,

SEC. 9. When final injunction granted. If after the trial of the action it appears that the
applicant is entitled to have the act or acts complained of permanently enjoined, the
court shall grant a final injunction perpetually restraining the party or person enjoined
from the commission or continuance of the act or acts or confirming the preliminary
mandatory injunction.

Two (2) requisites must concur for injunction to issue: (1) there must be a right to be
protected and (2) the acts against which the injunction is to be directed are
violative of said right. Particularly, in actions involving realty, preliminary injunction will
lie only after the plaintiff has fully established his title or right thereto by a proper action
for the purpose. [Emphasis Supplied]

Accordingly, the petitioners must prove the existence of a right to be protected. The
records show, however, that they did not have any right to be protected because they
had established only the existence of the boundary dispute between Patricia, Inc. and
the City of Manila. Any violation of the boundary by Patricia, Inc., if any, would give rise
to the right of action in favor of the City of Manila only. The dispute did not concern the
petitioners at all.

5.
Section 5, Rule 10 of the Rules of Court
did not save the day for the petitioners

The invocation of Section 5, Rule 10 of the Rules of Court in order to enable the raising
of the boundary dispute was unwarranted. First of all, a boundary dispute should not be
litigated in an action for the quieting of title due to the limited scope of the action. The

118
action for the quieting of title is a tool specifically used to remove of any cloud upon,
doubt, or unce1iainty affecting title to real property; 45 it should not be used for any other
purpose. And, secondly, the boundary dispute would essentially seek to alter or modify
either the Torrens title of the City of Manila or that of Patricia, Inc., but any alteration or
modification either way should be initiated only by direct proceedings, not as an issue
incidentally raised by the parties herein. To allow the boundary dispute to be litigated in
the action for quieting of title would violate Section 48 46 of the Property Registration
Decree by virtue of its prohibition against collateral attacks on Torrens titles. A collateral
attack takes place when, in another action to obtain a different relief, the certificate of
title is assailed as an incident in said action. 47 This is exactly what the petitioners sought
to do herein, seeking to modify or otherwise cancel Patricia, Inc.'s title.

WHEREFORE, the Court AFFIRMS the decision promulgated on June 25, 2010 by the

Court of Appeals in CA-G.R. CV No. 86735; and ORDERS the petitioners to pay the
costs of suit.

SO ORDERED.

RULE 3. PARTIES TO CIVIL ACTIONS

SECOND DIVISION
[ G.R. No. 192450, July 23, 2012 ]
SANTIAGO V. SOQUILLO, PETITIONER, VS. JORGE P. TORTOLA, RESPONDENT.

DECISION
REYES, J.:
Antecedent Facts

On March 28, 1966, Lorenzo Coloso, Jr. (Coloso, Jr.) sold to Ramon Jamis (Jamis) a
1,192 square meter parcel of land (disputed property) situated in Alubijid, Misamis
OrientaL A notarized deed of conditional sale of an unregistered land was thus
executed.

As indicated in a notarized deed of definite sale dated March 29, 1966, Jamis thereafter
sold the disputed property to herein respondent Jorge P. Tortola (Tortola).

Tortola took possession of the disputed property, planted it with fruit- bearing trees, and
built a residential lot thereon. He also paid the realty taxes due from the said property
corresponding to the years 1975 to 2002. However, the receipts for the payments still
stated Coloso, Jr.’s name, with the exception of Tax Declaration Nos. 942443, indicating
“Lorenzo Coloso, Jr. c/o Mr. Tortola” and 026083, bearing the name of “Jorge Tortola”. [1]

In 1977, Tortola and his family moved to Bukidnon. He left Godofredo Villaflores

119
(Villaflores) as his agent and caretaker of the disputed property.

Tortola received from Atty. Rene Artemio Pacana (Atty. Pacana) a letter dated March 1,
1988 informing the former that Arthur Coloso (Coloso) and the other heirs of Coloso, Jr.
had sought his legal services to recover the disputed property. Atty. Pacana requested
from Tortola an explanation as to how the latter acquired the disputed property. In a
reply letter dated March 14, 1988 sent to Atty. Pacana, Tortola attached a copy of the
notarized deed of definite sale executed between the latter and Jamis.

In 1992, Atty. Pacana once again sent a letter reiterating his prior inquiries and
demanding for documents to prove that Coloso, Jr. disposed the disputed property in
Tortola’s favor. Tortola reminded Atty. Pacana of his reply letter in 1988 and again
enclosed copies of the notarized deeds of conditional and definite sale executed in
1966.

On September 21, 1993, Coloso and the other heirs of Coloso, Jr. filed an application
for free patent with the Office of the Community Environment and Natural Resources
(CENRO) of Cagayan de Oro City to obtain a title over the disputed property.

On July 15, 1994, a survey of the disputed property was conducted. The land
investigator reported that the heirs of Coloso, Jr. were in possession and were
cultivating the disputed property, hence, he recommended to the CENRO the issuance
of a free patent in their favor.

On December 14, 1994, Original Certificate of Title (OCT) No. P20825 covering the
disputed property was issued in favor of the Heirs of Coloso, Jr.

On October 11, 2000, Coloso and the other heirs of Coloso, Jr. executed a notarized
deed of absolute sale conveying the disputed property to herein petitioner Santiago V.
Soquillo (Soquillo).

In 2001, Soquillo filed before the Municipal Trial Court (MTC) of Alubijid a complaint for
illegal detainer against Villaflores and his wife. The complaint was docketed as Civil
Case No. 245. Villaflores failed to file an answer thereto, hence, the case was decided
in favor of Soquillo. Villaflores and his wife were ejected from the disputed property.

Tortola discovered Villaflores’ ejectment from the disputed property. On September 16,
2002, Tortola filed before the Regional Trial Court (RTC), Branch 44, Initao, Misamis
Oriental a complaint against Coloso, the Heirs of Coloso, Jr., Soquillo, and the MTC of
Alubijid, Misamis Oriental for annulment of title/sale/judgment with prayers for the
issuance of injunctive reliefs and award of damages. The complaint, origin of the instant
petition, was docketed as Civil Case No. 2002-393.

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 The RTC Decision

On September 18, 2007, the RTC rendered a Decision [2] disposing of the complaint as
follows:

(a) Tortola was declared as the owner and legal possessor of the disputed property.
(b) The deed of sale executed on October 11, 2000 between Coloso and Soquillo was
ordered annulled.
(c) The Register of Deeds (RD) of Misamis Oriental was ordered to annul and cancel
OCT No. P-20825 in the names of the heirs of Coloso, Jr. and to issue a transfer
certificate of title in Tortola’s favor.
(d) The decision of the MTC in Civil Case No. 245 was annulled and set aside.
(e) The defendants in the complaint, among whom was herein petitioner Soquillo, were
ordered to pay Tortola P50,000.00 as moral damages, P10,000.00 as exemplary
damages and P20,000.00 as attorney’s fees. [3]

The RTC ratiocinated that:

[I]t can be established that [Tortola] acquired a right over the subject parcel of land
under a Deed of Definite Sale dated March 29, 1966, which was registered on
September 5, 2002 in the Registry of Deeds, and by the cancellation of Tax Declaration
No. 023086 by Tax Declaration No. 026083 in the name of Jorge Tortola.

Registration of the instrument in the Office of the Register of Deeds constitute[s]

constructive notice to the parties of the transfer of ownership over the subject property.

[Tortola] occupied the said property and constructed his house and resided thereon until
he left for Maramag, Bukidnon sometime in the late 1960’s, leaving the occupation of
the said property to Spouses Villaflores, with his permission, continuously until 2002.

The ownership and possession of the land was admitted and acknowledged by the
herein defendants Heirs of Coloso[,Jr.] in their letters to [Tortola]. Likewise, defendant
Soquillo, admitted the actual occupation of the land by Spouses Villaflores by the fact of
his filing a civil action against them in court.

x x x Under the law, if the property has not yet passed to an innocent purchaser for
value, an action for reconveyance is still available. Defendant Soquillo cannot be
considered as an innocent purchaser for value or that he acquired the subject property
through mistake and fraud. He can only be considered a trustee by implication, for the
benefit of [Tortola], who is the true and lawful owner of the litigated land, pursuant to
Article 1456 of the New Civil Code.

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Defendants assert laches as a defense. Laches cannot prejudice the lawful right of
[Tortola] in its ownership and possession of the subject litigated property. There was no
failure or neglect on the part of [Tortola] in asserting his rights after knowing defendant’s
(sic) conduct, evidenced by all the letters sent to the defendants resulting to their
knowledge of the actual ownership and occupation of the subject land. [Tortola] is not
negligent and has not omitted to assert his right and/or abandoned or declined to assert
his rights, proof of such is the filing of the instant complaint.

The principle of indefeasibillity of title does not apply where fraud attended the issuance
of title, as in this case. The settled rule is that a free patent issued over a private land,
which in this case the subject litigated land belonged to plaintiff-Tortola, is null and void,
and produces no legal effects whatsoever (Heirs of Simplicio Santiago vs. Heirs of
Mariano E. Santiago, 404 SCRA 193).

[Tortola] was compelled to litigate to protect his interests and vindicate his rights.

The issuance of Original Certificate of Title No. P-20825 lacks the required publication,
notice, survey, certification and other mandatory requirements, under the law, which
legally allows such title to be cancelled and transferred to the legal owner, [Tortola],
because there could have been no notice of the application that can be issued or posted
on September 20, 1993 because the application was filed and received by the CENRO
only on September 21, 1993.

Defendant Soquillo purchased the land from the Heirs of Coloso[, Jr.] in spite of his
knowledge that the land is owned by [Tortola] and that the Heirs of Coloso[, Jr.] were
not in actual possession of the subject land, which land was actually occupied, at that
time, by the Spouses Villaflores, the lessee[s] of [Tortola]. Such knowledge of an
unregistered sale is equivalent to registration. Further, the deed of sale in favor of
Soquillo was not registered with the Register of Deeds of Misamis Oriental until today.

xxx

x x x Such proof of ownership and possession of [Tortola] is corroborated by the

testimony and certification of the former Barangay

Captain of Lourdes, Alubijid, Misamis Oriental, attesting to the truth that [Tortola] is the
actual occupant of the litigated land and such occupancy was never questioned,
disturbed, contested or molested until October 18, 2001, where his agents Spouses
Villaflores was (sic) summoned and later on, made the defendants in an illegal detainer
case before the court.[4] (Citations omitted)

Soquillo filed before the Court of Appeals (CA) an appeal to the foregoing. He argued

122
that the RTC erred in not finding that Tortola’s complaint stated no cause of action. He
alleged that since Tortola sought the cancellation of a free patent, not him but the State,
was the real party-in interest. Soquillo likewise averred that he was a purchaser in good
faith and for value, thus, the RTC’s order to reconvey the disputed property and award
damages in Tortola’s favor was improper.

The CA Decision

On April 23, 2010, the CA rendered a Decision [5] denying Soquillo’s appeal. The CA
declared:

The defense that the Complaint below failed to state a cause of action must be raised at
the earliest possible time. In fact, it can be raised as a ground for Motion to Dismiss
under Rule 16 of the Revised Rules of Civil Procedure. Here, [Soquillo], as shown by
the records of the case, neither raised such issue in their Answer nor filed a Motion to
Dismiss raising such issue.

xxxx

x x x [Soquillo] cannot be considered a purchaser in good faith and for value because
defendant Arthur Coloso as Attorney-in-fact of the heirs of Lorenzo Boy Coloso did not
have the right to sell the disputed land to the former.

xxxx

x x x [D]efendant Arthur Coloso had prior knowledge that the disputed land was already
occupied by Mr. Villaflores, as agent of [Tortola]. However, despite such knowledge,
defendant Arthur Coloso as representative of the heirs of Lorenzo Boy Coloso, Jr., filed
an Application for Free Patent, and falsely declared therein that they occupied and
cultivated the disputed land since 1985. By reason of such application and false
declarations, the defendants were issued an Original Certificate of Title No. P-20825.

Such false declarations in the Application, however, constituted concealment of material

facts, which amounted to fraud. This, therefore, inevitably resulted to the cancellation of
title, as is pursuant to Heirs of Carlos Alcaraz vs. Republic of the Philippines, et al.,
where the Supreme Court stated:

“x x x x

Doubtless, petitioner’s (sic) failure to state in their free patent application that
private respondents, as representatives of the heirs of Timotea and Igmedio, are
also in possession of the land subject thereof clearly constitutes a concealment
of a material fact amounting to fraud and misrepresentation within the context of
the aforequoted provision, sufficient enough to cause ipso facto the cancellation

123
of their patent and title. For sure, had only petitioners made such a disclosure, the
Director of Lands would have had second thoughts in directing the issuance of
petitioners’ patent and title.

x x x x”

Consequently, contrary to [Soquillo’s] contention, the principle of indefeasibility of title

cannot be invoked in this case. Public policy demands that one who obtains title to a
public land through fraud should not be allowed to benefit therefrom.

xxxx

Furthermore, defendant-appellant Santiago Soquillo cannot be considered as purchaser

in good faith and for value. The fact that defendants Heirs of Lorenzo Boy Coloso, Jr.
were not in possession of the disputed land should have impelled him to go beyond the
title, as is in harmony with the Supreme Court’s pronouncement in Eagle Realty
Corporation vs. Republic of the Philippines, et al., which reads:

“Indeed, the general rule is that a purchaser may rely on what appears on the face of a
certificate of title. x x x An exception to this rule is when there exist important facts
that would create suspicion in an otherwise reasonable man (and spur him) to go
beyond the present title and to investigate those that preceded it. x x x One who
falls within the exception can neither be denominated an innocent purchaser for
value nor a purchaser in good faith, hence, does not merit the protection of the
law.”

Besides, defendants, Heirs of Lorenzo Coloso, Jr., had not transferred any rights over
the disputed land to [Soquillo], because the former were not owners of the same at the
time they sold the land to [Soquillo]. x x x No one can give what he does not have–x x x.

Moreover, since defendant Arthur Coloso as representative of the Heirs of Lorenzo Boy
Coloso, Jr. acquired OCT No. P-20825 over the disputed land through fraud, We
sustain [the] lower court’s award of moral and exemplary damages pursuant to Articles
21, 2219(10), and 2229 of the New Civil Code. The award of Attorney’s fees is likewise
sustained considering that [Tortola] was compelled to litigate in order to protect his
interest pursuant to Article 2208 (1 and 2) of the New Civil Code. [6] (Citations omitted
and emphasis supplied)

Hence, the instant petition for review[7] raising the following issues:

WHETHER OR NOT THE CA ERRED IN:

(1) NOT FINDING THAT THE COMPLAINT STATES NO CAUSE OF ACTION;

124
(2) NOT FINDING THAT THE PETITIONER IS A PURCHASER IN GOOD FAITH AND
FOR VALUE; and
(3) AWARDING MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES. [8]

In the instant petition, Soquillo reiterates the arguments he had proferred in the
proceedings below. On the other hand, no comment was filed by Tortola as the copy of
the resolution requiring him to file the same had been returned to the court with the
notation “RTS, unknown, insufficient address.” [9]

Our Disquisition

The instant petition is bereft of merit.

Questions of law and not of

facts are the proper subjects of  
a petition for review
on certiorari under Rule 45.

In Cirtek Employees Labor Union-Federation of Free Workers v. Cirtek Electronics, Inc.,

[10]
 we declared:

“This rule [Rule 45 of the Rules of Court through which Soquillo filed the instant petition]
provides that the parties may raise only questions of law, because the Supreme Court is
not a trier of facts. Generally, we are not duty-bound to analyze again and weigh the
evidence introduced in and considered by the tribunals below. When supported by
substantial evidence, the findings of fact of the CA are conclusive and binding on
the parties and are not reviewable by this Court, unless the case falls under any
of the following recognized exceptions[.]”[11] (Emphasis supplied)

In the case at bar, Soquillo raises factual questions which were already resolved in the
proceedings below. Further, the factual findings of the RTC and the CA were in accord
with each other and were supported by substantial evidence.

Even if we were to resolve the  

first issue raised by Soquillo
relative to the alleged lack of
standing of Tortola as the real
party-in-interest, there is still no
ground to dismiss the latter’s
complaint. The action filed by
Tortola was not for reversion,
but for the declaration of nullity
of a free patent and a certificate

125
of title.

In Soquillo’s appeal filed with the CA, he raised for the first time the issue of Tortola’s
complaint allegedly not stating a cause of action for having been filed in the latter’s
name when the State was the real party-in-interest.

If in the interest of sheer liberality, we were to resolve the issue, there is still no ample
ground to dismiss Tortola’s complaint. Banguilan v. Court of Appeals[12] was emphatic
that:

Heirs of Ambrocio Kionisala v. Heirs of Honorio Dacut distinguishes an action for

reversion from an action for declaration of nullity of free patents and certificates of title
as follows:

“An ordinary civil action for declaration of nullity of free patents and certificates of title is
not the same as an action for reversion. The difference between them lies in
the allegations as to the character of ownership of the realty whose title is sought
to be nullified. In an action for reversion, the pertinent allegations in the complaint
would admit State ownership of the disputed land. Hence in Gabila v. Barriga where the
plaintiff in his complaint admits that he has no right to demand the cancellation or
amendment of the defendant’s title because even if the title were cancelled or amended
the ownership of the land embraced therein or of the portion affected by the amendment
would revert to the public domain, we ruled that the action was for reversion and that
the only person or entity entitled to relief would be the Director of Lands.

On the other hand, a cause of action for declaration of nullity of free patent and
certificate of title would require allegations of the plaintiff’s ownership of the contested
lot prior to the issuance of such free patent and certificate of title as well as
the defendant’s fraud or mistake, as the case may be, in successfully obtaining these
documents of title over the parcel of land claimed by plaintiff. In such a case, the nullity
arises strictly not from the fraud or deceit but from the fact that the land is beyond the
jurisdiction of the Bureau of Lands to bestow and whatever patent or certificate of title
obtained therefor is consequently void ab initio. The real party in interest is not the State
but the plaintiff who alleges a pre-existing right of ownership over the parcel of land in
question even before the grant of title to the defendant. x x x[.]” [13] (Citations omitted and
emphasis supplied)

In Tortola’s complaint, he alleged prior ownership of the disputed property and fraud
exercised upon him by the heirs of Coloso, Jr. to obtain a free patent and certificate of
title covering the same. The complaint was not for reversion but for the declaration of
nullity of the free patent and title. Hence, Tortola was the real party-in-interest and the
complaint was properly filed in his name.

126
The second and third issues
raised by Soquillo had already
been exhaustively discussed by
the RTC and the CA. The
disquisitions relative thereto  
made by the courts a quo were
supported by substantial
evidence, hence, they need not
be disturbed.

The second and third issues raised by Soquillo were exhaustively discussed by the RTC
and the CA. Soquillo was not a purchaser in good faith. He and the heirs of Coloso, Jr.
who were his predecessors-in-interest, knew about the sale made to Tortola and the
possession of the disputed property by Villaflores. Besides, Tortola registered the sale,
albeit with much delay, in 2002. As of the time Tortola's complaint was tiled, no
registration was effected by Soquillo.

WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is DENIED. The

Decision dated April 23, 2010 of the Court of Appeals in CA-G.R. CV No. 01476
is AFFIRMED.
SO ORDERED

EN BANC

G.R. No. 180771               April 21, 2015

RESIDENT MARINE MAMMALS OF THE PROTECTED SEASCAPE TAÑON STRAIT,

e.g., TOOTHED WHALES, DOLPHINS, PORPOISES, AND OTHER CETACEAN
SPECIES, Joined in and Represented herein by Human Beings Gloria Estenzo
Ramos and Rose-Liza Eisma-Osorio, In Their Capacity as Legal Guardians of the
Lesser Life-Forms and as Responsible Stewards of God's Creations, Petitioners,
vs.
SECRETARY ANGELO REYES, in his capacity as Secretary of the Department of
Energy (DOE), SECRETARY JOSE L. ATIENZA, in his capacity as Secretary of the
Department of Environment and Natural Resources (DENR), LEONARDO R.
SIBBALUCA, DENR Regional Director-Region VII and in his capacity as
Chairperson of the Tañon Strait Protected Seascape Management Board, Bureau
of Fisheries and Aquatic Resources (BFAR), DIRECTOR MALCOLM J.
SARMIENTO, JR., BFAR Regional Director for Region VII ANDRES M. BOJOS,
JAPAN PETROLEUM EXPLORATION CO., LTD. (JAPEX), as represented by its
Philippine Agent, SUPPLY OILFIELD SERVICES, INC. Respondents.

x-----------------------x

127
G.R. No. 181527

CENTRAL VISAYAS FISHERFOLK DEVELOPMENT CENTER (FIDEC), CERILO D.

ENGARCIAL, RAMON YANONG, FRANCISCO LABID, in their personal capacity
and as representatives of the SUBSISTENCE FISHERFOLKS OF THE
MUNICIPALITIES OF ALOGUINSAN AND PINAMUNGAJAN, CEBU, AND THEIR
FAMILIES, AND THE PRESENT AND FUTURE GENERATIONS OF FILIPINOS
WHOSE RIGHTS ARE SIMILARLY AFFECTED, Petitioners,
vs.
SECRETARY ANGELO REYES, in his capacity as Secretary of the Department of
Energy (DOE), JOSE L. ATIENZA, in his capacity as Secretary of the Department
of Environment and Natural Resources (DENR), LEONARDO R. SIBBALUCA, in
his capacity as DENR Regional Director-Region VII and as Chairperson of the
Tañon Strait Protected Seascape Management Board, ALAN ARRANGUEZ, in his
capacity as Director - Environmental Management Bureau-Region VII, DOE
Regional Director for Region VIII1 ANTONIO LABIOS, JAPAN PETROLEUM
EXPLORATION CO., LTD. (JAPEX), as represented by its Philippine Agent,
SUPPLY OILFIELD SERVICES, INC., Respondents.

CONCURRING OPINION

"Until one has loved an animal,

a part of one 's soul remains unawakened."

Anatole France

LEONEN, J.:

I concur in the result, with the following additional reasons.

In G.R. No. 180771, petitioners Resident Marine Mammals allegedly bring their case in
their personal capacity, alleging that they stand to benefit or be injured from the
judgment on the issues. The human petitioners implead themselves in a representative
capacity "as legal guardians of the lesser life-forms and as responsible stewards of
God's Creations."1 They use Oposa v. Factoran, Jr.2 as basis for their claim, asserting
their right to enforce international and domestic environmental laws enacted for their
benefit under the concept of stipulation pour autrui. 3 As the representatives of Resident
Marine Mammals, the human petitioners assert that they have the obligation to build
awareness among the affected residents of Tañon Strait as well as to protect the
environment, especially in light of the government's failure, as primary steward, to do its
duty under the doctrine of public trust.4

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Resident Marine Mammals and the human petitioners also assert that through this case,
this court will have the opportunity to lower the threshold for locus standi as an exercise
of "epistolary jurisdiction."5

The zeal of the human petitioners to pursue their desire to protect the environment and
to continue to define environmental rights in the context of actual cases is
commendable. However, the space for legal creativity usually required for advocacy of
issues of the public interest is not so unlimited that it should be allowed to undermine
the other values protected by current substantive and procedural laws. Even rules of
procedure as currently formulated set the balance between competing interests. We
cannot abandon these rules when the necessity is not clearly and convincingly
presented.

The human petitioners, in G.R. No. 180771, want us to create substantive and
procedural rights for animals through their allegation that they can speak for them.
Obviously, we are asked to accept the premises that (a) they were chosen by the
Resident Marine Mammals of Tañon Strait; (b) they were chosen by a representative
group of all the species of the Resident Marine Mammals; (c) they were able to
communicate with them; and (d) they received clear consent from their animal principals
that they would wish to use human legal institutions to pursue their interests.
Alternatively, they ask us to acknowledge through judicial notice that the interests that
they, the human petitioners, assert are identical to what the Resident Marine Mammals
would assert had they been humans and the legal strategies that they invoked are the
strategies that they agree with.

In the alternative, they want us to accept through judicial notice that there is a
relationship of guardianship between them and all the resident mammals in the affected
ecology.

Fundamental judicial doctrines that may significantly change substantive and procedural
law cannot be founded on feigned representation.

Instead, I agree that the human petitioners should only speak for themselves and
already have legal standing to sue with respect to the issue raised in their pleading. The
rules on standing have already been liberalized to take into consideration the difficulties
in the assertion of environmental rights. When standing becomes too liberal, this can be
the occasion for abuse.

II

Rule 3, Section 1 of the 1997 Rules of Civil Procedure, in part, provides:

SECTION 1. Who may be parties; plaintiff and defendant. - Only natural or juridical
persons, or entities authorized by law may be parties in a civil action.

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The Rules provide that parties may only be natural or juridical persons or entities that
may be authorized by statute to be parties in a civil action.

Basic is the concept of natural and juridical persons in our Civil Code:

ARTICLE 37. Juridical capacity, which is the fitness to be the subject of legal relations,
is inherent in every natural person and is lost only through death. Capacity to act, which
is the power to do acts with legal effect, is acquired and may be lost.

Article 40 further defines natural persons in the following manner:

ARTICLE 40. Birth determines personality; but the conceived child shall be considered
born for all purposes that are favorable to it, provided it be born later with the conditions
specified 'in the following article.

Article 44, on the other hand, enumerates the concept of a juridical person:

ARTICLE 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2) Other corporations, institutions and entities for public interest or purpose,
created by law; their personality begins as soon as they have been constituted
according to law;

(3) Corporations, partnerships and associations for private interest or purpose to

which the law grants a juridical personality, separate and distinct from that of
each shareholder, partner or member.

Petitioners in G.R. No. 180771 implicitly suggest that we amend, rather than simply
construe, the provisions of the Rules of Court as well as substantive law to
accommodate Resident Marine Mammals or animals. This we cannot do.

Rule 3, Section 2 of the 1997 Rules of Civil Procedure further defines real party in
interest:

SEC. 2. Parties in interest.-A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of the
suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest. (2a) 6

A litigant who stands to benefit or sustain an injury from the judgment of a case is a real
party in interest.7 When a case is brought to the courts, the real party in interest must
show that another party's act or omission has caused a direct injury, making his or her
interest both material and based on an enforceable legal right. 8

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Representatives as parties, on the other hand, are parties acting in representation of the
real party in interest, as defined in Rule 3, Section 3 of the 1997 Rules of Civil
Procedure:

SEC. 3. Representatives as parties. - Where the action is allowed to be prosecuted or

defended by a representative or someone acting in a fiduciary capacity, the beneficiary
shall be included in the title of the case and shall be deemed to be the real party in
interest. A representative may be a trustee of an express rust, a guardian, an executor
or administrator, or a party authorized by law or these Rules. An agent acting in his own
name and for the benefit of an undisclosed principal may sue or be sued without joining
the principal except when the contract involves things belonging to the principal.(3a) 9

The rule is two-pronged. First, it defines .a representative as a party who is not bound to
directly or actually benefit or suffer from the judgment, but instead brings a case in favor
of an identified real party in interest. 10 The representative is an outsider to the cause of
action. Second, the rule provides a list of who may be considered as "representatives."
It is not an exhaustive list, but the rule limits the coverage only to those authorized by
law or the Rules of Court.11

These requirements should apply even in cases involving the environment, which
means that for the Petition of the human petitioners to prosper, they must show that (a)
the Resident Marine Mammals are real parties in interest; and (b) that the human
petitioners are authorized by law or the Rules to act in a representative capacity.

The Resident Marine Mammals are comprised of "toothed whales, dolphins, porpoises,
and other cetacean species inhabiting Tañon Strait." 12 While relatively new in Philippine
jurisdiction, the issue of whether animals have legal standing before courts has been
the subject of academic discourse in light of the emergence of animal and
environmental rights.

In the United States, anim4l rights advocates have managed to establish a system
which Hogan explains as the "guardianship model for nonhuman animals": 13

Despite Animal Lovers, there exists a well-established system by which nonhuman

animals may obtain judicial review to enforce their statutory rights and protections:
guardianships. With court approval, animal advocacy organizations may bring suit on
behalf of nonhuman animals in the same way court-appointed guardians bring suit on
behalf of mentally-challenged humans who possess an enforceable right but lack the
ability to enforce it themselves.

In the controversial but pivotal Should Trees Have Standing?-Toward Legal Rights for
Natural Objects, Christopher D. Stone asserts that the environment should possess the
right to seek judicial redress even though it is incapable of representing itself. While
asserting the rights of

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speechless entities such as the environment or nonhuman animals certainly poses
legitimate challenges - such as identifying the proper spokesman -the American legal
system is already well-equipped with a reliable mechanism by which nonhumans may
obtain standing via a judicially established guardianship. Stone notes that other
speechless - and nonhuman - entities such as corporations, states, estates, and
municipalities have standing to bring suit on their own behalf. There is little reason to
fear abuses under this regime as procedures for removal and substitution, avoiding
conflicts of interest, and termination of a guardianship are well established.

In fact, the opinion in Animal Lovers suggests that such an arrangement is indeed
possible. The court indicated that AL VA might have obtained standing in its own right if
it had an established history of dedication to the cause of the humane treatment of
animals. It noted that the Fund for Animals had standing and indicated that another
more well-known advocacy organization might have had standing as well. The court
further concluded that an organization's standing is more than a derivative of its history,
but history is a relevant consideration where organizations are not well-established prior
to commencing legal action. ALVA was not the proper plaintiff because it could not
identify previous activities demonstrating its recognized activism for and commitment to
the dispute independent of its desire to pursue legal action. The court's analysis
suggests that a qualified organization with a demonstrated commitment to a cause
could indeed bring suit on behalf of the speechless in the form of a court-sanctioned
guardianship.

This Comment advocates a shift in contemporary standing doctrine to empower non-

profit organizations with an established history of dedication to the cause and relevant
expertise to serve as official guardians ad !item on behalf of nonhuman animals
interests. The American legal system has numerous mechanisms for representing the
rights and interests of nonhumans; any challenges inherent in extending these pre-
existing mechanisms to nonhuman animals are minimal compared to an interest in the
proper administration of justice. To adequately protect the statutory rights of nonhuman
animals, the legal system must recognize those statutory rights independent of humans
and provide a viable means of enforcement. Moreover, the idea of a guardianship for
speechless plaintiffs is not new and has been urged on behalf of the natural
environment. 'Such a model is even more compelling as applied to nonhuman animals,
because they are sentient beings with the ability to feel pain and exercise rational
thought. Thus, animals are qualitatively different from other legally protected
nonhumans and therefore have interests deserving direct legal protection.

Furthermore, the difficulty of enforcing the statutory rights of nonhuman animals

threatens the integrity of the federal statutes designed to protect them, essentially
rendering them meaningless. Sensing that laws protecting nonhuman animals would be
difficult to enforce, Congress provided for citizen suit provisions: the most well-known
example is found in the Endangered Species Act (ESA). Such provisions are evidence
of legislative intent to encourage civic participation on behalf of nonhuman animals. Our
law of standing should reflect this intent and its implication that humans are suitable

132
representatives of the natural environment, which includes nonhuman
animals.14 (Emphasis supplied, citation omitted)

When a court allows guardianship as a basis of representation, animals are considered

as similarly situated as individuals who have enforceable rights but, for a legitimate
reason (e.g., cognitive disability), are unable to bring suit for themselves. They are also
similar to entities that by their very nature are incapable of speaking for themselves
(e.g., corporations, states, and others).

In our jurisdiction, persons and entities are recognized both in law and the Rules of
Court as having standing to sue and, therefore, may be properly represented as real
parties in interest. The same cannot be said about animals.

Animals play an important role in households, communities, and the environment. While
we, as humans, may feel the need to nurture and protect them, we cannot go as far as
saying we represent their best interests and can, therefore, speak for them before the
courts. As humans, we cannot be so arrogant as to argue that we know the suffering of
animals and that we know what remedy they need in the face of an injury.

Even in Hogan's discussion, she points out that in a case before the United States
District Court for the Central District of California, Animal Lovers Volunteer Ass'n v.
Weinberger,15 the court held that an emotional response to what humans perceive to be
an injury inflicted on an animal is not within the "zone-of-interest" protected by
law.16 Such sympathy cannot stand independent of or as a substitute for an actual injury
suffered by the claimant.17 The ability to represent animals was further limited in that
case by the need to prove "genuine dedication" to asserting and protecting animal
rights:

What ultimately proved fatal to ALVA 's claim, however, was the court's assertion that
standing doctrine further required ALVA to differentiate its genuine dedication to the
humane treatment of animals from the general disdain for animal cruelty shared by the
public at large. In doing so, the court found ALVA 's asserted organizational injury to be
abstract and thus relegated ALVA to the ranks of the "concerned bystander. "

....

In fact, the opinion in Animal Lovers suggests that such an arrangement is indeed
possible. The court indicated that ALVA might have obtained standing in its own right if
it had an established history of dedication to the cause of the humane treatment of
animals. It noted that the Fund for Animals had standing and indicated that another
more well-known advocacy organization might have had standing as well. The court
further concluded that an organization's standing is more than a derivative of its history,
but history is a relevant consideration where organizations are not well-established prior
to commencing legal action. ALVA was not the proper plaintiff because it could not
identify previous activities demonstrating its recognized activism for and commitment to
the dispute independent of its desire to pursue legal action. The court's analysis

133
suggests that a qualified organization with a demonstrated commitment to a cause
could indeed bring suit on behalf of the speechless in the form of a court-sanctioned
guardianship.18 (Emphasis supplied, citation omitted)

What may be argued as being parallel to this concept of guardianship is the principle of
human stewardship over the environment in a citizen suit under the Rules of Procedure
for Environmental Cases. A citizen suit allows any Filipino to act as a representative of a
party who has enforceable rights under environmental laws before Philippine courts,
and is defined in Section 5: .

SEC. 5. Citizen suit. - Any Filipino citizen in representation of others, including minors or
generations yet unborn, may file an action to enforce rights or obligations under
environmental laws. Upon the filing of a citizen suit, the court shall issue an order which
shall contain a brief description of the cause of action and the reliefs prayed for,
requiring all interested parties to manifest their interest to intervene in the case within
fifteen (15) days from notice thereof. The plaintiff may publish the order once in a
newspaper of a general circulation in the Philippines or furnish all affected barangays
copies of said order.

There is no valid reason in law or the practical requirements of this case to implead and
feign representation on behalf of animals. To have done so betrays a very
anthropocentric view of environmental advocacy. There is no way that we, humans, can
claim to speak for animals let alone present that they would wish to use our court
system, which is designed to ensure that humans seriously carry their responsibility
including ensuring a viable ecology for themselves, which of course includes
compassion for all living things.

Our rules on standing are sufficient and need not be further relaxed.

In Arigo v. Swift,19 I posed the possibility of further reviewing the broad interpretation we
have given to the rule on standing. While representatives are not required to establish
direct injury on their part, they should only be allowed to represent after complying with
the following: [I]t is imperative for them to indicate with certainty the injured parties on
whose behalf they bring the suit. Furthermore, the interest of those they represent must
be based upon concrete legal rights. It is not sufficient to draw out a perceived interest
from a general, nebulous idea of a potential "injury." 20

I reiterate my position in Arigo v. Swift and in Paje v. Casiño 21 regarding this rule
alongside the appreciation of legal standing in Oposa v. Factoran 22 for environmental
cases. In Arigo, I opined that procedural liberality, especially in cases brought by
representatives, should be used with great caution:

Perhaps it is time to revisit the ruling in Oposa v. Factoran.

That case was significant in that, at that time, there was need to call attention to
environmental concerns in light of emerging international legal principles. While

134
"intergenerational responsibility" is a noble principle, it should not be used to obtain
judgments that would preclude future generations from making their own assessment
based on their actual concerns. The present generation must restrain itself from
assuming that it can speak best for those who will exist at a different time, under a
different set of circumstances. In essence, the unbridled resort to representative suit will
inevitably result in preventing future generations from protecting their own rights and
pursuing their own interests and decisions. It reduces the autonomy of our children and
our children 's children. Even before they are born, we again restricted their ability to
make their own arguments.

It is my opinion that, at best, the use of the Oposa doctrine in environmental cases
should be allowed only when a) there is a clear legal basis for the representative suit; b)
there are actual concerns based squarely upon an existing legal right; c) there is no
possibility of any countervailing interests existing within the population represented or
those that are yet to be born; and d) there is an absolute necessity for such standing
because there is a threat of catastrophe so imminent that an immediate protective
measure is necessary. Better still, in the light of its costs and risks, we abandon the
precedent all together.23 (Emphasis in the original)

Similarly, in Paje:

A person cannot invoke the court's jurisdiction if he or she has no right or interest to
protect. He or she who invokes the court's jurisdiction must be the "owner of the right
sought to be enforced." In other words, he or she must have a cause of action. An
action may be dismissed on the ground of lack of cause of action if the person who
instituted it is not the real party in interest. 24 The term "interest" under the Rules of Court
must refer to a material interest that is not merely a curiosity about or an "interest in the
question involved." The interest must be present and substantial. It is not a mere
expectancy or a future, contingent interest.

A person who is not a real party in interest may institute an action if he or she is suing
as representative of a .real party in interest. When an action is prosecuted or defended
by a representative, that representative is not and does not become the real party in
interest. The person represented is deemed the real party in interest. The
representative remains to be a third party to the action instituted on behalf of another.

....

To sue under this rule, two elements must be present: "(a) the suit is brought on behalf
of an identified party whose right has been violated, resulting in some form of damage,
and (b) the representative authorized by law or the Rules of Court to represent the
victim."

The Rules of Procedure for Environmental Cases allows filing of a citizen's suit. A
citizen's suit under this rule allows any Filipino citizen to file an action for the
enforcement of environmental law on behalf of minors or generations yet unborn. It is

135
essentially a representative suit that allows persons who are not real parties in interest
to institute actions on behalf of the real party in interest.

The expansion of what constitutes "real party in interest" to include minors and
generations yet unborn is a recognition of this court's ruling in Oposa v. Factoran. This
court recognized the capacity of minors (represented by their parents) to file a class suit
on behalf of succeeding generations based on the concept of intergenerational
responsibility to ensure the future generation's access to and enjoyment of [the]
country's natural resources.

To allow citizen's suits to enforce environmental rights of others, including future

generations, is dangerous for three reasons:

First, they run the risk of foreclosing arguments of others who are unable to take part in
the suit, putting into. question its representativeness. Second, varying interests may
potentially result in arguments that are bordering on political issues, the resolutions of
which do not fall upon this court. Third, automatically allowing a class or citizen's suit on
behalf of minors and generations yet unborn may result in the oversimplification of what
may be a complex issue, especially in light of the impossibility of determining future
generation's true interests on the matter.

In citizen's suits, persons who may have no interest in the case may file suits for others.
Uninterested persons will argue for the persons they represent, and the court will decide
based on their evidence and arguments. Any decision by the court will be binding upon
the beneficiaries, which in this case are the minors and the future generations. The
court's decision will be res judicata upon them and conclusive upon the issues
presented.25

The danger in invoking Oposa v. Factoran to justify all kinds of environmental claims
lies in its potential to diminish the value of legitimate environmental rights. Extending the
application of "real party in interest" to the Resident Marine Mammals, or animals in
general, through a judicial pronouncement will potentially result in allowing petitions
based on mere concern rather than an actual enforcement of a right. It is impossible for
animals to tell humans what their concerns are. At best, humans can only surmise the
extent of injury inflicted, if there be any. Petitions invoking a right and seeking legal
redress before this court cannot be a product of guesswork, and representatives have
the responsibility to ensure that they bring "reasonably cogent, rational, scientific, well-
founded arguments"26 on behalf of those they represent.

Creative approaches to fundamental problems should be welcome. However, they

should be considered carefully so that no unintended or unwarranted consequences
should follow. I concur with the approach of Madame Justice Teresita J. Leonardo-De
Castro in her brilliant ponencia as it carefully narrows down the doctrine in terms of
standing. Resident Marine Mammals and the human petitioners have no legal standing
to file any kind of petition.

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However, I agree that petitioners in G.R. No. 181527, namely, Central Visayas
Fisherfolk Development Center,. Engarcial, Yanong, and Labid, have standing both as
real parties in interest and as representatives of subsistence fisherfolks of the
Municipalities of Aloguinsan and Pinamungahan, Cebu, and their families, and the
present and future generations of Filipinos whose rights are similarly affected. The
activities undertaken under Service Contract 46 (SC-46) directly affected their source of
livelihood, primarily felt through the significant reduction of their fish harvest. 27 The
actual, direct, and material damage they suffered, which has potential long-term effects
transcending generations, is a proper subject of a legal suit.

III

In our jurisdiction, there is neither reason nor any legal basis for the concept of implied
petitioners, most especially when the implied petitioner was a sitting President of the
Republic of the Philippines. In G.R. No. 180771, apart from adjudicating unto
themselves the status of "legal guardians" of whales, dolphins, porpoises, and other
cetacean species, human petitioners also impleaded Former President Gloria
Macapagal-Arroyo as "unwilling co-petitioner" for "her express declaration and
undertaking in the ASEAN Charter to protect Tañon Strait." 28

No person may implead any other person as a co-plaintiff or co-petitioner without his or
her consent. In our jurisdiction, only when there is a party that should have been a
necessary party but was unwilling to join would there be an allegation as to why that
party has been omitted. In Rule 3, Section 9 of the 1997 Rules of Civil Procedure:

SEC. 9. Non-joinder of necessary parties to be pleaded. -Whenever in any pleading in

which a claim is asserted a necessary party is not joined, the pleader shall set forth his
name, if known, and shall state why he is omitted. Should the court find the reason for
the omission unmeritorious, it may order the inclusion of the omitted necessary party if
jurisdiction over his person may be obtained.

The failure to comply with the order for his inclusion, without justifiable cause, shall be
deemed a waiver of the claim against such party.

The non-inclusion of a necessary party does not prevent the court from proceeding in
the action, and the judgment rendered therein shall be without prejudice to the rights of
such necessary party.29

A party who should have been a plaintiff or petitioner but whose consent cannot be
obtained should be impleaded as a defendant in the nature of an unwilling co-plaintiff
under Rule 3, Section 10 of the 1997 Rules of Civil Procedure:

SEC. 10. Unwilling co-plaintiff. - If the consent of any party who should be joined as
plaintiff can not be obtained, he may be made a defendant and the reason therefor shall
be stated in the complaint.30

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The reason for this rule is plain: Indispensable party plaintiffs who should be part of the
action but who do not consent should be put within the jurisdiction of the court through
summons or other court processes. Petitioners. should not take it upon themselves to
simply imp lead any party who does not consent as a petitioner. This places the
unwilling co-petitioner at the risk of being denied due process.

Besides, Former President Gloria Macapagal-Arroyo cannot be a party to this suit. As a

co-equal constitutional department, we cannot assume that the President needs to
enforce policy directions by suing his or her alter-egos. The procedural situation caused
by petitioners may have gained public attention, but its legal absurdity borders on the
contemptuous. The Former President's name should be stricken out of the title of this
case.

IV

I also concur with the conclusion that SC-46 is both. illegal and unconstitutional.

SC-46 is illegal because it violates Republic Act No. ·7586 or the National Integrated
Protected Areas System Act of 1992, and Presidential Decree No. 1234, 31 which
declared Tañon Strait as a protected seascape. It is unconstitutional because it violates
the fourth paragraph of Article XII, Section 2 of the Constitution.

Petitioner Central Visayas Fisherfolk Development Center asserts that SC-46 violated
Article XII, Section 2, paragraph 1 of the .1987 Constitution because Japan Petroleum
Exploration Co., Ltd. (JAPEX) is 100% Japanese-owned. 32 It further asserts that SC-46
cannot be validly classified as a technical and financial assistance agreement executed
under Article XII, Section 2, paragraph 4 of the 1987 Constitution. 33 Public respondents
counter that SC-46 does not fall under the coverage of paragraph 1, but is a validly
executed contract under paragraph 4.34· Public respondents further aver that SC-46
neither granted exclusive fishing rights to JAPEX nor violated Central Visayas Fisherfolk
Development Center's right to preferential use of communal marine and fishing
resources.35

VI

Article XII, Section 2 of the 1987 Constitution states:

Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State. With the exception. of
agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and
supervision of the State. The State may directly undertake such activities, or it may
enter into co-production, joint venture, or production-sharing agreements with Filipino

138
citizens, or corporations or associations at least sixty per centum of whose capital is
owned by such citizens. Such agreements may be for a period not exceeding twenty-
five years, renewable for not more than twenty-five years, and under such terms and
conditions as may be provided by law. In cases of water rights for irrigation, water
supply fisheries, or industrial uses other than the development of water power,
beneficial use may be the measure and limit of the grant.

The State shall protect the nation's marine wealth in its archipelagic waters, territorial
sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to
Filipino citizens.

The Congress may, by law, allow small-scale utilization of natural resources by Filipino
citizens, as well as cooperative fish farming, with priority to subsistence fishermen and
fish-workers in rivers, lakes, bays, and lagoons.

The President may enter into agreements with foreign-owned corporations involving
either technical or financial assistance for large-scale exploration, development, and
utilization of minerals, petroleum, and other mineral oils according to the general terms
and conditions provided by law, based on real contributions to the economic growth and
general welfare of the country. In such agreements, the State shall promote the
development and use of local scientific and technical resources.

The President shall notify the Congress of every contract entered into in accordance
with this provision, within thirty days from its execution. (Emphasis supplied)

I agree that fully foreign-owned corporations may participate in the exploration,

development, and use of natural resources, but only through either financial agreements
or technical ones. This is the clear import of the words "either financial or technical
assistance agreements." This is also

the clear result if we compare the 1987 constitutional provision with the versions in the
1973 and 1935 Constitution:

1973 CONSTITUTION

ARTICLE XIV
THE NATIONAL ECONOMY AND THE PATRIMONY OF THE NATION

SEC. 9. The disposition, exploration, development, of exploitation, or utilization of any of

the natural resources of the Philippines shall be limited to citizens of the Philippines, or
to corporations or association at least sixty per centum of the capital of which is owned
by such citizens. The Batasang Pambansa, in the national interest, may allow such
citizens, corporations, or associations to enter into service contracts for financial,
technical, management, or other forms of assistance with any foreign person or entity
for the exploitation, development, exploitation, or utilization of any of the natural
resources. Existing valid and binding service contracts for financial, the technical,

139
management, or other forms of assistance are hereby recognized as such. (Emphasis
supplied)

1935 CONSTITUTION

ARTICLE XIII
CONSERVATION AND UTILIZATION OF NATURAL RESOURCES

SECTION 1. All agricultural timber, and mineral. lands of the public domain, waters,
minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and
other natural resources of the Philippines belong to the State, and their disposition,
exploitation, development, or utilization shall be limited to citizens of the Philippines, or
to corporations or associations at least sixty per centum of the capital of which is owned
by such citizens, subject to any existing right, grant, lease, or concession at the time of
the inauguration of the Government established under this Constitution. Natural
resources, with the exception of public agricultural land, shall not be alienated, and no
license, concession, or lease for the exploitation, development, or utilization of any of
the natural resources shall be granted for a period exceeding twenty-five years,
renewable for another twenty-five years, except as to water rights for irrigation, water
supply, fisheries, or industrial uses other than the development of water power, in which
cases beneficial use may be the measure and the limit of the grant.

The clear text of the Constitution in light of its history prevails over any attempt to infer
interpretation from the Constitutional Commission deliberations. The constitutional texts
are the product of a full sovereign act: deliberations in a constituent assembly and
ratification. Reliance on recorded discussion of Constitutional Commissions, on the
other hand, may result in dependence on incomplete authorship; Besides, it opens
judicial review to further subjectivity from those who spoke during the Constitutional
Commission deliberations who may not have predicted how their words will be used. It
is safer that we use the words already in the Constitution. The Constitution was their
product. Its words were read by those who ratified it. The Constitution is what society
relies upon even at present.

SC-46 is neither a financial assistance nor a technical assistance agreement.

Even supposing for the sake of argument that it is, it could not be declared valid in light
of the standards set forth in La Bugal-B'laan Tribal Association, Inc. v. Ramos: 36

Such service contracts may be entered into only with respect to minerals, petroleum
and other mineral oils. The grant thereof is subject to several safeguards, among which
are these requirements:

(1) The service contract shall be crafted m accordance with a general law that
will set standard or uniform terms, conditions and requirements, presumably to
attain a certain uniformity in provisions and avoid the possible insertion of terms
disadvantageous to the country.

140
 (2) The President shall be the signatory for the government because, supposedly
before an agreement is presented to the President for signature, it will have been
vetted several times over at different levels to ensure that it conforms to law and
can withstand public scrutiny.

(3) Within thirty days of the executed agreement, the President shall report it to
Congress to give that branch of government an opportunity to look over the
agreement and interpose timely objections, if any. 37 (Emphasis in the original,
citation omitted)

Based on the standards pronounced in La Bugal, SC-46' S validity must be tested

against three important points: (a) whether SC-46 was crafted in accordance with a
general law that provides standards, terms, and conditions; (b) whether SC-46 was
signed by the President for and on behalf of the government; and (c) whether it was
reported by the President to Congress within 30 days of execution.

VII

The general law referred to as a possible basis for SC-46's validity is Presidential
Decree No. 87 or the Oil Exploration and Development Act of 1972.1âwphi1 It is my
opinion that this law is unconstitutional in that it allows service contracts, contrary to
Article XII, Section 2 of the 1987 Constitution:

The President may enter into agreements with foreign-owned corporations involving
either technical or financial assistance for large-scale exploration, development, and
utilization of minerals, petroleum, and other mineral oils according to the general terms
and conditions provided by law, based on real contributions to the economic growth and
general welfare of the country. In such agreements, the State shall promote the
development and use of local scientific and technical resources. (Emphasis supplied)

The deletion of service contracts from the enumeration of the kind of agreements the
President may enter into with foreign-owned corporations for exploration and utilization
of resources means that service contracts are no longer allowed by the Constitution.
Pursuant to Article XVIII, Section 3 of the 1987 Constitution, 38 this inconsistency renders
the law invalid and ineffective.

SC-46 suffers from the lack of a special law allowing its activities. The Main Opinion
emphasizes an important point, which is that SC-46 did not merely involve exploratory
activities, but also provided the rights and obligations of the parties should it be
discovered that there is oil in commercial quantities in the area. The Tañon Strait being
a protected seascape under Presidential Decree No. 1234 39 requires that the
exploitation and utilization of energy resources from that area are explicitly covered by a
law passed by Congress specifically for that purpose, pursuant to Section 14 of
Republic Act No. 7586 or the National Integrated Protected Areas System Act of 1992:

141
SEC. 14. Survey for Energy R6'sources. - Consistent with the policies declared in
Section 2, hereof, protected areas, except strict nature reserves and natural parks, may
be subjected to exploration only for the purpose of gathering information on energy
resources and only if such activity is carried out with the least damage to surrounding
areas. Surveys shall be conducted only in accordance with a program approved by the
DENR, and the result of such surveys shall be made available to the public and
submitted to the President for recommendation to Congress. Any exploitation and
utilization of energy resources found within NIP AS areas shall be allowed only through
a law passed by Congress.40 (Emphasis supplied)

No law was passed by Congress specifically providing the standards, terms, and
conditions of an oil exploration, extraction, and/or utilization for Tañon Strait and,
therefore, no such activities could have been validly undertaken under SC-46. The
National Integrated Protected Areas System Act of 1992 is clear that exploitation and
utilization of energy resources in a protected seascape such as Tañon Strait shall only
be allowed through a specific law.

VIII

Former President Gloria Macapagal-Arroyo was not the signatory to SC-46, contrary to
the requirement set by paragraph 4 of Article XII, Section 2 for service contracts
involving the exploration of petroleum. SC-46 was entered into by then Department of
Energy Secretary Vicente S. Perez, Jr., on behalf of the government. I agree with the
Main Opinion that in cases where the Constitution or law requires the President to act
personally on the matter, the duty cannot be delegated to another public official. 41 La
Bugal highlights the importance of the President's involvement, being one of the
constitutional safeguards against abuse and corruption, as not mere formality:

At this point, we sum up the matters established, based on a careful reading of the
ConCom deliberations, as follows:

• In their deliberations on what was to become paragraph 4, the framers used the
term service contracts in referring to agreements x x x involving either technical
or financial assistance. • They spoke of service contracts as the concept was
understood in the 1973 Constitution.

• It was obvious from their discussions that they were not about to ban or
eradicate service contracts.

• Instead, they were plainly crafting provisions to. put in place safeguards that
would eliminate or m minimize the abuses prevalent during the marital law
regime.42 (Emphasis in the original)

Public respondents failed to show that. Former President Gloria Macapagal-Arroyo was
involved in the signing or execution of SC-46. The failure to comply with this
constitutional requirement renders SC-46 null and void.

142
 IX

Public respondents also failed to show that Congress was subsequently informed of the
execution and existence of SC-46. The reporting requirement is an equally important
requisite to the validity of any service contract involving the exploration, development,
and utilization of Philippine petroleum. Public respondents' failure to report to Congress
about SC-46 effectively took away any opportunity for the legislative branch to scrutinize
its terms and conditions.

In sum, SC-46 was executed and implemented absent all the requirements provided
under paragraph 4 of Article XII, Section 2. It is, therefore, null and void.

I am of the view that SC-46, aside from not having complied with the 1987 Constitution,
is also null and void for being violative of environmental laws protecting Tañon Strait. In
particular, SC-46 was implemented despite falling short of the requirements of the
National Integrated Protected Areas System Act of 1992.

As a protected seascape under Presidential Decree No. 1234, 43 Tañon Strait is covered
by the National Integrated Protected Areas System Act of 1992. This law declares as a
matter of policy:

SEC. 2. Declaration of Policy. Cognizant of the profound impact of man's activities on all
components of the natural environment particularly the effect of increasing population,
resource exploitation and industrial advancement and recognizing the critical
importance of protecting and maintaining the natural biological and physical diversities
of the environment notably on areas with biologically unique features to sustain human
life and development, as well as plant and animal life, it is hereby declared the policy of
the State to secure for the Filipino people of present and future generations the
perpetual existence of all native plants and animals through the establishment of a
comprehensive system of integrated protected areas within the classification of national
park as provided for in the Constitution.

It is hereby recognized that these areas, although distinct in features, possess common
ecological values that may be incorporated into a holistic plan representative of our
natural heritage; that effective administration of these areas is possible only through
cooperation among national government, local and concerned private organizations;
that the use and enjoyment of these protected areas must be consistent with the
principles of biological diversity and sustainable development.

To this end, there is hereby established a National Integrated Protected Areas System
(NIPAS), which shall encompass outstanding remarkable areas and biologically
important public lands that are habitats of rare and endangered species of plants and
animals, biogeographic zones and related ecosystems, whether terrestrial, wetland or
marine, all of which shall be designated as "protected areas." 44 (Emphasis supplied)

143
Pursuant to this law, any proposed activity in Tañon Strait must undergo an
Environmental Impact Assessment:

SEC. 12. Environmental Impact Assessment. - Proposals for activities which are outside
the scope of the management plan for protected areas shall be subject to an
environmental impact assessment as required by law before they are adopted, and the
results thereof shall be taken into consideration in the decision-making
process.45 (Emphasis supplied)

The same provision further requires that an Environmental Compliance Certificate be

secured under the Philippine Environmental Impact Assessment System before arty
project is implemented:

No actual implementation of such activities shall be allowed without the required

Environmental Compliance Certificate (ECC) under the Philippine Environment Impact
Assessment (EIA) system. In instances where such activities are allowed to be
undertaken, the proponent shall plan and carry them out in such manner as will
minimize any adverse effects and take preventive and remedial action when
appropriate. The proponent shall be liable for any damage due to lack of caution or
indiscretion.46 (Emphasis supplied)

In projects involving the exploration or utilization of energy resources, the National

Integrated Protected Areas System Act of 1992 additionally requires that a program be
approved by the Department of Environment and Natural Resources, which shall be
publicly accessible. The program shall also be submitted to the President, who in turn
will recommend the program to Congress. Furthermore, Congress must enact a law
specifically allowing the exploitation of energy resources found within a protected area
such as Tañon Strait:

SEC. 14. Survey for Energy Resources. - Consistent with the policies declared in
Section 2, hereof, protected areas, except strict nature reserves and natural parks, may
be subjected to exploration only for the purpose of gathering information on energy
resources and only if such activity is carried out with the least damage to surrounding
areas. Surveys shall be conducted only in accordance with a program approved by the
DENR, and the result of such surveys shall be made available to the public and
submitted to the President for recommendation to Congress. Any exploitation and
utilization of energy resources found within NIPAS areas shall be allowed only through a
taw passed by Congress.47 (Emphasis supplied)

Public respondents argue that SC-46 complied with the procedural requirements of
obtaining an Environmental Compliance Certificate. 48 At any rate, they assert that the
activities covered by SC-46 fell under Section 14 of the National Integrated Protected
Areas System Act of 1992, which they interpret to be an exception to Section 12. They
argue that the Environmental Compliance Certificate is not a strict requirement for the
validity of SC-46 since (a) the Tañon Strait is not a nature' reserve or natural park; (b)

144
the exploration was merely for gathering information; and ( c) measures were in place to
ensure that the exploration caused the least possible damage to the area. 49

Section 14 is not an exception to Section 12, but instead provides additional

requirements for cases involving Philippine energy resources. The National Integrated
Protected Areas System Act of 1992 was enacted to recognize the importance of
protecting the environment in light of resource exploitation, among others. 50 Systems
are put in place to secure for Filipinos local resources under the most favorable
conditions. With the status of Tañon Strait as a protected seascape, the institution of
additional legal safeguards is even more significant.

Public respondents did not validly obtain an Environmental Compliance Certificate for
SC-46. Based on the records, JAPEX commissioned an environmental impact
evaluation only in the second subphase of its project, with the Environmental
Management .Bureau of Region

VII granting the project an Environmental Compliance Certificate on March 6, 2007. 51

Despite its scale, the seismic surveys from May 9 to 18, 2005 were conducted without
any environmental assessment contrary to Section 12 of the National Integrated
Protected Areas System Act of 1992.

XI

Finally, we honor every living creature when we take care of our environment. As
sentient species, we do not lack in the wisdom or sensitivity to realize that we only
borrow the resources that we use to survive and to thrive. We are not incapable of
mitigating the greed that is slowly causing the demise of our planet. Thus, there is no
need for us to feign representation of any other species or some imagined unborn
generation in filing any action in our courts of law to claim any of our fundamental rights
to a healthful ecology. In this way and with candor and courage, we fully shoulder the
responsibility deserving of the grace and power endowed on our species.

ACCORDINGLY, I vote:

(a) to DISMISS G.R. No. 180771 for lack of standing and STRIKE OUT the name
of Former President Gloria Macapagal-Arroyo from the title of this case;

(b) to GRANT G.R. No. 181527; and

(c) to DECLARE SERVICE CONTRACT 46 NULL AND VOID for violating the
1987 Constitution, Republic Act No. 7586, and Presidential Decree No. 1234.

MARVIC M.V.F. LEONEN

Associate Justice

145
 SECOND DIVISION

G.R. No. 186993               August 22, 2012

THEODORE and NANCY ANG, represented by ELDRIGE MARVIN B.

ACERON, Petitioners,
vs.
SPOUSES ALAN and EM ANG, Respondents.

VELASCO, JR.,*

LEONARDO-DE CASTRO, **

DECISION

REYES, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision 1 dated August 28, 2008 and the
Resolution2 dated February 20, 2009 rendered by the Court of Appeals (CA) in CA-G.R.
SP No. 101159. The assailed decision annulled and set aside the Orders dated April 12,
20073 and August 27, 20074 issued by the Regional Trial Court (RTC) of Quezon City,
Branch 81 in Civil Case No. Q-06-58834.

The Antecedent Facts

On September 2, 1992, spouses Alan and Em Ang (respondents) obtained a loan in the
amount of Three Hundred Thousand U.S. Dollars (US$300,000.00) from Theodore and
Nancy Ang (petitioners). On even date, the respondents executed a promissory note 5 in
favor of the petitioners wherein they promised to pay the latter the said amount, with
interest at the rate of ten percent (10%) per annum, upon demand. However, despite
repeated demands, the respondents failed to pay the petitioners.

Thus, on August 28, 2006, the petitioners sent the respondents a demand letter asking
them to pay their outstanding debt which, at that time, already amounted to Seven
Hundred Nineteen Thousand, Six Hundred Seventy-One U.S. Dollars and Twenty-
Three Cents (US$719,671.23), inclusive of the ten percent (10%) annual interest that
had accumulated over the years. Notwithstanding the receipt of the said demand letter,
the respondents still failed to settle their loan obligation.

On August 6, 2006, the petitioners, who were then residing in Los Angeles, California,
United States of America (USA), executed their respective Special Powers of
Attorney6 in favor of Attorney Eldrige Marvin B. Aceron (Atty. Aceron) for the purpose of
filing an action in court against the respondents. On September 15, 2006, Atty. Aceron,
in behalf of the petitioners, filed a Complaint 7 for collection of sum of money with the
RTC of Quezon City against the respondents.

146
On November 21, 2006, the respondents moved for the dismissal of the complaint filed
by the petitioners on the grounds of improper venue and prescription. 8 Insisting that the
venue of the petitioners’ action was improperly laid, the respondents asserted that the
complaint against them may only be filed in the court of the place where either they or
the petitioners reside. They averred that they reside in Bacolod City while the petitioners
reside in Los Angeles, California, USA. Thus, the respondents maintain, the filing of the
complaint against them in the RTC of Quezon City was improper.

The RTC Orders

On April 12, 2007, the RTC of Quezon City issued an Order 9 which, inter alia, denied the
respondents’ motion to dismiss. In ruling against the respondents’ claim of improper
venue, the court explained that:

Attached to the complaint is the Special Power of Attorney x x x which clearly states that
plaintiff Nancy Ang constituted Atty. Eldrige Marvin Aceron as her duly appointed
attorney-in-fact to prosecute her claim against herein defendants. Considering that the
address given by Atty. Aceron is in Quezon City, hence, being the plaintiff, venue of the
action may lie where he resides as provided in Section 2, Rule 4 of the 1997 Rules of
Civil Procedure.10

The respondents sought reconsideration of the RTC Order dated April 12, 2007,
asserting that there is no law which allows the filing of a complaint in the court of the
place where the representative, who was appointed as such by the plaintiffs through a
Special Power of Attorney, resides.11

The respondents’ motion for reconsideration was denied by the RTC of Quezon City in
its Order12 dated August 27, 2007.

The respondents then filed with the CA a petition for certiorari 13 alleging in the main that,
pursuant to Section 2, Rule 4 of the Rules of Court, the petitioners’ complaint may only
be filed in the court of the place where they or the petitioners reside. Considering that
the petitioners reside in Los Angeles, California, USA, the respondents assert that the
complaint below may only be filed in the RTC of Bacolod City, the court of the place
where they reside in the Philippines.

The respondents further claimed that, the petitioners’ grant of Special Power of Attorney
in favor of Atty. Aceron notwithstanding, the said complaint may not be filed in the court
of the place where Atty. Aceron resides, i.e., RTC of Quezon City. They explained that
Atty. Aceron, being merely a representative of the petitioners, is not the real party in
interest in the case below; accordingly, his residence should not be considered in
determining the proper venue of the said complaint.

The CA Decision

147
On August 28, 2008, the CA rendered the herein Decision, 14 which annulled and set
aside the Orders dated April 12, 2007 and August 27, 2007 of the RTC of Quezon City
and, accordingly, directed the dismissal of the complaint filed by the petitioners. The CA
held that the complaint below should have been filed in Bacolod City and not in Quezon
City. Thus:

As maybe clearly gleaned from the foregoing, the place of residence of the plaintiff’s
attorney-in-fact is of no moment when it comes to ascertaining the venue of cases filed
in behalf of the principal since what should be considered is the residence of the real
parties in interest, i.e., the plaintiff or the defendant, as the case may be. Residence is
the permanent home – the place to which, whenever absent for business or pleasure,
one intends to return. Residence is vital when dealing with venue. Plaintiffs, herein
private respondents, being residents of Los Angeles, California, U.S.A., which is beyond
the territorial jurisdiction of Philippine courts, the case should have been filed in Bacolod
City where the defendants, herein petitioners, reside. Since the case was filed in
Quezon City, where the representative of the plaintiffs resides, contrary to Sec. 2 of
Rule 4 of the 1997 Rules of Court, the trial court should have dismissed the case for
improper venue.15

The petitioners sought a reconsideration of the Decision dated August 28, 2008, but it
was denied by the CA in its Resolution dated February 20, 2009. 16

Hence, the instant petition.

Issue

In the instant petition, the petitioners submit this lone issue for this Court’s resolution:

WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR

OF LAW WHEN IT RULED THAT THE COMPLAINT MUST BE DISMISSED ON THE
GROUND THAT VENUE WAS NOT PROPERLY LAID.17

The Court’s Ruling

The petition is denied.

Contrary to the CA’s disposition, the petitioners maintain that their complaint for
collection of sum of money against the respondents may be filed in the RTC of Quezon
City. Invoking Section 3, Rule 3 of the Rules of Court, they insist that Atty. Aceron,
being their attorney-in-fact, is deemed a real party in interest in the case below and can
prosecute the same before the RTC. Such being the case, the petitioners assert, the
said complaint for collection of sum of money may be filed in the court of the place
where Atty. Aceron resides, which is the RTC of Quezon City.

On the other hand, the respondents in their Comment 18 assert that the petitioners are
proscribed from filing their complaint in the RTC of Quezon City. They assert that the

148
residence of Atty. Aceron, being merely a representative, is immaterial to the
determination of the venue of the petitioners’ complaint.

The petitioners’ complaint should

have been filed in the RTC of
Bacolod City, the court of the place
where the respondents reside, and
not in RTC of Quezon City.

It is a legal truism that the rules on the venue of personal actions are fixed for the
convenience of the plaintiffs and their witnesses. Equally settled, however, is the
principle that choosing the venue of an action is not left to a plaintiff’s caprice; the
matter is regulated by the Rules of Court.19

The petitioners’ complaint for collection of sum of money against the respondents is a
personal action as it primarily seeks the enforcement of a contract. The Rules give the
plaintiff the option of choosing where to file his complaint. He can file it in the place (1)
where he himself or any of them resides, or (2) where the defendant or any of the
defendants resides or may be found. The plaintiff or the defendant must be residents of
the place where the action has been instituted at the time the action is commenced. 20

However, if the plaintiff does not reside in the Philippines, the complaint in such case
may only be filed in the court of the place where the defendant resides. In Cohen and
Cohen v. Benguet Commercial Co., Ltd., 21 this Court held that there can be no election
as to the venue of the filing of a complaint when the plaintiff has no residence in the
Philippines. In such case, the complaint may only be filed in the court of the place where
the defendant resides. Thus:

Section 377 provides that actions of this character "may be brought in any province
where the defendant or any necessary party defendant may reside or be found, or in
any province where the plaintiff or one of the plaintiffs resides, at the election of the
plaintiff." The plaintiff in this action has no residence in the Philippine Islands. Only one
of the parties to the action resides here. There can be, therefore, no election by plaintiff
as to the place of trial. It must be in the province where the defendant resides. x x
x.22 (Emphasis ours)

Here, the petitioners are residents of Los Angeles, California, USA while the
respondents reside in Bacolod City. Applying the foregoing principles, the petitioners’
complaint against the respondents may only be filed in the RTC of Bacolod City – the
court of the place where the respondents reside. The petitioners, being residents of Los
Angeles, California, USA, are not given the choice as to the venue of the filing of their
complaint.

Thus, the CA did not commit any reversible error when it annulled and set aside the
orders of the RTC of Quezon City and consequently dismissed the petitioners’
complaint against the respondents on the ground of improper venue.

149
In this regard, it bears stressing that the situs for bringing real and personal civil actions
is fixed by the Rules of Court to attain the greatest convenience possible to the litigants
and their witnesses by affording them maximum accessibility to the courts. 23 And even
as the regulation of venue is primarily for the convenience of the plaintiff, as attested by
the fact that the choice of venue is given to him, it should not be construed to unduly
deprive a resident defendant of the rights conferred upon him by the Rules of Court. 24

Atty. Aceron is not a real party in

interest in the case below; thus, his
residence is immaterial to the venue
of the filing of the complaint.

Contrary to the petitioners’ claim, Atty. Aceron, despite being the attorney-in-fact of the
petitioners, is not a real party in interest in the case below. Section 2, Rule 3 of the
Rules of Court reads:

Sec. 2. Parties in interest. – A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of the
suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest. (Emphasis ours)

Interest within the meaning of the Rules of Court means material interest or an interest
in issue to be affected by the decree or judgment of the case, as distinguished from
mere curiosity about the question involved.25 A real party in interest is the party who, by
the substantive law, has the right sought to be enforced. 26

Applying the foregoing rule, it is clear that Atty. Aceron is not a real party in interest in
the case below as he does not stand to be benefited or injured by any judgment therein.
He was merely appointed by the petitioners as their attorney-in-fact for the limited
purpose of filing and prosecuting the complaint against the respondents. Such
appointment, however, does not mean that he is subrogated into the rights of petitioners
and ought to be considered as a real party in interest.

Being merely a representative of the petitioners, Atty. Aceron in his personal capacity
does not have the right to file the complaint below against the respondents. He may
only do so, as what he did, in behalf of the petitioners – the real parties in interest. To
stress, the right sought to be enforced in the case below belongs to the petitioners and
not to Atty. Aceron. Clearly, an attorney-in-fact is not a real party in interest. 27

The petitioner’s reliance on Section 3, Rule 3 of the Rules of Court to support their
conclusion that Atty. Aceron is likewise a party in interest in the case below is
misplaced. Section 3, Rule 3 of the Rules of Court provides that:

Sec. 3. Representatives as parties. – Where the action is allowed to be prosecuted and

defended by a representative or someone acting in a fiduciary capacity, the beneficiary
shall be included in the title of the case and shall be deemed to be the real property in

150
interest. A representative may be a trustee of an expert trust, a guardian, an executor or
administrator, or a party authorized by law or these Rules. An agent acting in his own
name and for the benefit of an undisclosed principal may sue or be sued without joining
the principal except when the contract involves things belonging to the principal.
(Emphasis ours)

Nowhere in the rule cited above is it stated or, at the very least implied, that the
representative is likewise deemed as the real party in interest. The said rule simply
states that, in actions which are allowed to be prosecuted or defended by a
representative, the beneficiary shall be deemed the real party in interest and, hence,
should be included in the title of the case.

Indeed, to construe the express requirement of residence under the rules on venue as
applicable to the attorney-in-fact of the plaintiff would abrogate the meaning of a "real
party in interest", as defined in Section 2 of Rule 3 of the 1997 Rules of Court vis-à-vis
Section 3 of the same Rule.28

On this score, the CA aptly observed that:

As may be unerringly gleaned from the foregoing provisions, there is nothing therein
that expressly allows, much less implies that an action may be filed in the city or
municipality where either a representative or an attorney-in-fact of a real party in interest
resides. Sec. 3 of Rule 3 merely provides that the name or names of the person or
persons being represented must be included in the title of the case and such person or
persons shall be considered the real party in interest. In other words, the principal
remains the true party to the case and not the representative. Under the plain meaning
rule, or verba legis, if a statute is clear, plain and free from ambiguity, it must be given
its literal meaning and applied without interpretation. xxx 29 (Citation omitted)

At this juncture, it bears stressing that the rules on venue, like the other procedural
rules, are designed to insure a just and orderly administration of justice or the impartial
and even-handed determination of every action and proceeding. Obviously, this
objective will not be attained if the plaintiff is given unrestricted freedom to choose the
court where he may file his complaint or petition. The choice of venue should not be left
to the plaintiff's whim or caprice. He may be impelled by some ulterior motivation in
choosing to file a case in a particular court even if not allowed by the rules on venue. 30

WHEREFORE, in consideration of the foregoing disquisitions, the petition is DENIED.

The Decision dated August 28, 2008 and Resolution dated February 20, 2009 rendered
by the Court of Appeals in CA-G.R. SP No. 101159 are AFFIRMED.

SO ORDERED.

THIRD DIVISION

G.R. No. 187869, September 13, 2017

151
TEODULFO E. LAO, JR., ROGER A. ABADAY, ZALDY O. OCON, AND ENRICO D.
SALCEDO, Petitioners, v. LGU OF CAGAYAN DE ORO CITY, MAYOR
CONSTANTINO JARAULA, VICE MAYOR VICENTE T. EMANO, CITY COUNCILOR
RAMON TABOR, CITY COUNCILOR REYNALDO ADVINCULA, CITY COUNCILOR
IAN MARK NACAYA, CITY COUNCILOR PRESIDENT ELIPE, CITY COUNCILOR
EMMANUEL ABEJUELA, CITY COUNCILOR ALFONSO GOKING, CITY
COUNCILOR ALDEN DACAL, CITY COUNCILOR ALEXANDER DACER, CITY
COUNCILOR MARYCOR CALIZO, CITY COUNCILOR AARON NERI, CITY
COUNCILOR ADRIAN BARBA, CITY COUNCILOR IAN CAESAR ACENAS, CITY
COUNCILOR SIMEON LICAYAN, CITY COUNCILOR KAREN VI POQUITA, CITY
COUNCILOR DANTE PAJO, IN THEIR PRIVATE AND/OR OFFICIAL CAPACITIES
AND MEGA INTEGRATED AGRO-LIVESTOCK FARM CORPORATION PRESIDENT
ERWIN BRYAN SEE*, Respondents.

DECISION

LEONEN, J.:

Republic Act No. 7160, otherwise known as the Local Government Code, requires prior
authorization from the sangguniang panlungsod, law, or ordinance, before a city mayor
may sign a contract in behalf of the city. If the city mayor has no authority from the
sangguniang panlungsod to sign a contract, members of the sangguniang panlungsod
have standing to file a case to have this contract declared null and void.

This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court

questioning the March 30, 2009 Resolution 2 and May 11, 2009 Order3 of Branch 17,
Regional Trial Court, Cagayan De Oro City.  This petition is filed by Barangay Captain
Enrico D. Salcedo (Salcedo) of Gusa, Cagayan De Oro City and Cagayan De Oro City
Councilors Teodulfo E. Lao, Jr. (Lao), Roger A. Abaday (Abaday), and Zaldy O. Ocon
(Ocon) (collectively, petitioners).4

The Regional Trial Court denied petitioners' prayer for the issuance of a temporary
restraining order. It likewise dismissed their complaint for declaration of nullity of the
contract for the redevelopment of Agora Market and Terminal entered into by Cagayan
De Oro City Mayor Constantino Jaraula (Mayor Jaraula) and MEGA Integrated Agro-
Livestock Farm Corporation (Mega Farm) through its President Erwin Bryan See (See). 5

On March 19, 2007, the City Council of Cagayan De Oro (City Council) passed City
Ordinance No. 10557-2007,6 which approved See's unsolicited proposal "for the
redevelopment of Agora Complex into a Modern Integrated Terminal, Public Market,
and Vegetable Landing Area."7 The redevelopment would be under a build-operate-
transfer scheme. At the time, the City Mayor was Vicente Y. Emano (Mayor Emano). 8

See's unsolicited proposal was the basis of a draft Build-Operate-Transfer (BOT)

Contract,9 in which the project proponent was Mega Farm. 10 The City Council resolved
not to object to the draft contract in its Resolution No. 8651-2007 dated June 25,

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2007.11 However, the City Council deferred consideration on the proposed Ordinance
No. 2007-210, which authorized the mayor to enter into the contract, and referred it to
the Committee on Economic Enterprises.12

The Cagayan De Oro City Government caused the publication of an Invitation to Qualify
and to Bid for Comparative Proposal for the Agora Complex redevelopment in the
Manila Standard Today on July 2, 2007, July 9, 2007, and July 16, 2007. This Invitation
was signed by Mayor Emano13 and was supposedly based on Resolution No. 8651-
2007.14

On October 24, 2007, the city Bids and Awards Committee issued Resolution No. 41-
2007, declaring that no bid was submitted to compete with Mega Farm's proposal. 15

On January 27, 2009, Mega Farm, through See, and the then newly elected Mayor
Jaraula executed the Build-Operate-Transfer Contract for the Redevelopment of Agora
Cornplex (Agora Complex BOT Contract).16 The terms and conditions of this Contract
were allegedly different from those in the draft contract in Resolution No. 8651-2007.

On March 19, 2009, petitioners filed their Complaint for Declaration of Nullity of the Re-
Development of Agora Market and Terminal Contract Under Build-Operate-Transfer
(BOT) Scheme and All Ordinances, Resolutions and Motions of the City Council
Relative Thereto with Prayer for Temporary Restraining Order (TRO) & Preliminary
Prohibitory Injunction with Damages with the Regional Trial Court of Misamis Oriental. 17

This complaint was filed against City Government of Cagayan De Oro and the
incumbent Cagayan De Oro City officials, in their personal and official capacities: Mayor
Jaraula; Vice Mayor Vicente Y. Emano; Councilors Ramon Tabor, Reynaldo Advincula,
Ian Mark Nacaya, President Elipe, Emmanuel Abejuela, Alfonso Goking, Alden Bacal,
Alexander Dacer, Marycor Calizo, Aaron Neri, Adrian Barba, Ian Caesar Acenas,
Simeon Licayan, Karen Vi Poquita, Dante Pajo; and Mega Farm and See. 18

In their complaint, petitioners, as public officers and in their personal capacity,

questioned the execution and the contents of the Agora Complex BOT Contract. They
alleged that it was issued in bad faith and with fraudulent maneuvers between Mega
Farm and the City Government of Cagayan De Oro. 19

Petitioners further alleged that Mega Farm was unqualified to undertake the
redevelopment of the Agora Complex as the construction and remodeling of structures
were not the primary purposes of the corporation. They added that Mega Farm had no
financial capacity to undertake the P250,000,000.00 project when it only had a paid-up
capital of P625,000.00.20 They also claimed that the provisions of the Agora Complex
BOT Contract were infirm for being disadvantageous to the City Government of
Cagayan De Oro.21

They prayed that the Agora Complex BOT Contract be declared null and void. They
also prayed for moral and exemplary damages due to the other city councilors' insulting

153
behavior toward them during the deliberations for the initial draft of the build-operate-
transfer contract and the Agora Complex BOT Contract, and for attorney's
tees.22 Finally, they prayed for the issuance of a temporary restraining order, alleging
that the Agora Complex BOT Contract would "result to irreparable damage to the [local
government unit] of Cagayan de Oro City and its constituent tax payers." 23

The City Government and the public officials of Cagayan De Oro (collectively, public
respondents) filed an Urgent Omnibus Motion: a) To Dismiss; orb) For a Bill of
Particulars.24 In their Motion, they alleged that the complaint should be dismissed since
the Regional Trial Court had not acquired jurisdiction over the complaint, as petitioners
did not pay the required docket.fees for the damages they had allegedly suffered. 25

Further, they claimed that the Regional Trial Court did not have jurisdiction over the
issue of the complaint. They reasoned that Republic Act No. 8975 26 does not allow the
Regional Trial Court to issue temporary restraining orders against the government or
any entity, acting under the government's direction to stop the following acts:

(a) Acquisition, clearance and development of the right-of-way and/or site or location
of any national government 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.27
Furthermore, the issue did not fall within the exception under Section 3 of Republic Act
No. 8975, as it did not involve a matter of extreme urgency involving a constitutional
issue.28

Public respondents also claimed that petitioners have no cause of action. They argued
that while they were impleaded as the incumbent members of the City Council in their
personal and official capacities, the ultimate facts, as alleged by petitioners, show that
at the time the Ordinances were enacted in 2007, respondent city councilors had not yet
been elected.29

On their alternative prayer for a bill of particulars, public respondents requested for
petitioners to specify the irreparable damage that would happen to the City Government
of Cagayan De Oro City and its taxpayers, and to quantify and define in monetary terms
their ambiguous claim for moral and exemplary damages. 30

On March 25, 2009, the hearing on the prayer for temporary restraining order
commenced. A continuation of the hearing was scheduled on March 30, 2009. 31

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Petitioners objected32 to the Motion to Dismiss, claiming that it was not procedurally
sound. They pointed out that the March 25, 2009 hearing, which was supposedly on the
issuance of the temporary restraining order, became a hearing on the issues raised in
the motion to dismiss.33

Petitioners alleged that Section 3 of Republic Act No. 8975 did not apply to the Agora
Complex BOT Contract as it was not a national government contract but a local
government contract. Further, even if it was not a local government contract, it is within
the exception contemplated in the law, as it involved constitutional
violations.34 Moreover, it was an urgent issue considering that the Agora Complex BOT
Contract had not ripened into a contract because of Mayor Jaraula's lack of authority to
enter into it and because of Mega Farm's lack of financial capacity to undertake the
project.35

On March 30, 2009, the Regional Trial Court issued a Resolution 36 denying the
issuance of a temporary restraining order and dismissing the complaint.

The Regional Trial Court held that the Agora Complex BOT Contract, which was
covered by Republic Act No. 6975, as amended by Republic Act No. 7718, was
considered a national government project under Section 2 37 of Republic Act No. 8975.
Due to this classification of the project and petitioners' failure to prove that the
exceptions applied, the trial court was prohibited from issuing temporary restraining
orders or preliminary injunctions over the project. 38

It found that petitioners' basis in requesting for the issuance of a temporary restraining
order-that the Agora Complex BOT Contract was entered into through gross, wanton,
and fraudulent maneuvers-was not a constitutional issue. There was no showing that
petitioners' rights had been violated and that there was a "possibility of irreparable
damage or injury."39 Furthermore, it held that since petitioners were not parties to the
contract, they could not file the complaint, not even as taxpayers because the Agora
Complex BOT Contract did not involve any appropriation of public funds. 40

Petitioners filed their Motion for Reconsideration, 41 in which they maintained that even if
Republic Act No. 8975 prohibited Regional Trial Courts from ruling on temporary
restraining orders, "the power to try the main case and render judgment remains with
the [Regional Trial Courts]."42 Petitioners also insisted that the Agora Complex BOT
Contract was unconstitutional and that they had locus standi because as elected city
councilors, they were the voice of the people and the "watch-dog" against possible
abuses. Finally, they argued that they could file the complaint as taxpayers since the
Agora Complex BOT Contract involved public funds amounting to P250,000,000.00. 43

Petitioners' Motion for Reconsideration was denied by the Regional Trial Court, which
ruled that the validity of the Agora Complex BOT Contract was not a constitutional issue
and that petitioners were "not parties to the contract where they may suffer actual or
threatened injury."44

155
On June 3, 2009, petitioners filed their Petition for Review 45 on Certiorari under Rule 45
of the Rules of Court directly with this Court.

In their Petition for Review, petitioners claim that the Regional Trial Court erroneously
dismissed their ease on the ground of lack of jurisdiction. 46 They argue that what is
prohibited by Republic Act No. 8975 is only the issuance of temporary restraining orders
or writs of preliminary injunction by the Regional Trial Court. Thus, the Regional Trial
Court still has jurisdiction over the main cause of action, namely, the declaration of
nullity of the Agora Complex BOT Contract.47

Further, petitioners allege that the Agora Complex BOT Contract is unconstitutional as
its terms are monopolistic and is in violation of Article III, Section 1 of the
Constitution48 and the principle of free enterprise. In particular, the provision in the
Agora Complex BOT Contract regarding "the exclusivity of Fruits and Vegetables
Landing and the Bus Terminal"49 is contrary to the rulit1g of this Court in Lucena Grand
Central Terminal, Inc. v. JAC Liner, Inc. 50

Petitioners further aver that the Regional Trial Court failed to find that the Agora
Complex BOT Contract is null and void from the beginning, considering that Mayor
Emano and Mayor Jaraula had no authority to enter into this contract because the City
Council had not issued any ordinance allowing them to do so. 51

Moreover, they claim that Mega Farm lacks financial capability to undergo the project.
The determination of Mega Farm's financial capability should have been detetmined in
the pre-qualification stage, but this was not done. 52

Finally, petitioners argue that they have legal standing to file the complaint. They claim
that "the principle of lack of personality presupposes existence of a valid or voidable
contract and the subject matter of the contract is private in nature." 53 Since the Agora
Complex BOT Contract is null and void from the beginning, then the principle of locus
standi is inapplicable. Petitioners argue that they can file the case not merely as
taxpayers but as elected officers who look out for the funds of the city. Additionally, they
allege that while there is no actual disbursement of P250,000,000.00 for the project, the
money represents the profit that would be generated from the public once the
redeveloped Agora Complex is operational.54

This Court issued a Resolution55 dated June 10, 2009, requiring respondents to

comment on the Petition for Review within 10 days from its notice.

On August 6, 2009, private respondents Mega Farm and See filed their Comment. 56

They argue that it was improper for petitioners to directly file this petition with this Court,
as it involves both questions of fact and law. 57 Moreover, the Verification and
Certification of Non-Forum Shopping attached to this petition is improperly
subscribed.58 They further argue that there was no error on the part of the Regional Trial
Court when it denied the temporary restraining order and dismissed the entire case.

156
Private respondents Mega Farm and See allege that in dismissing the case for the trial
court's lack of jurisdiction and petitioners' lack of legal standing, the Regional Trial Court
in effect dismissed the complaint based on lack of, or failure to state, a cause of
action.59

Furthermore, the constitutionality of the law or the City Ordinance connected to the
Agora Complex BOT Contract is not actually the lis mota of the case but the validity of
the contract itself.60 In addition, they point out that the prayer for temporary restraining
order has already become moot, since ordinances have been issued, the contract has
been signed, and the construction has begun. 61

Private respondents Mega Farm and See claim that petitioners have no locus standi, as
they are not businessmen, fruit or vegetable vendors, or jeepney operators who will be 
directly affected by their alleged unconstitutional part of the contract the exclusive use of
the Eastbound Terminal and the exclusive disposition and drop-off of vegetables in
Agora.62

Neither can they sue as taxpayers, as there is no appropriation of public funds. Instead,
what is apparent in their complaint and in the present petition is that they are filing
based on their positions as city councilors and as barangay captain of Gusa, Cagayan
De Oro City. Private respondents Mega Farm and See allege that petitioners cannot
sue as public officers because they failed to show that they have material interest in the
project.63

Meanwhile, public respondents filed a Motion for Extension of Time, praying for an
additional 20 days to file their comment to the Petition for Review. 64

This Court issued a Resolution65 dated August 26, 2009, noting Mega Farm and See's
Comment and granting public respondents' motion.

On August 24, 2009, public respondents filed their Comment 66 to the petition.

Public respondents allege that Republic Act No. 8975 prohibits the Regional Trial Court
from issuing temporary restraining orders unless an urgent constitutional issue is
involved, which petitioners failed to show. 67 They also claim that petitioners' complaint
was dismissed not exclusively on lack of jurisdiction but on the premise that they failed
to show that they were the proper parties to question the Agora Complex BOT
Contract.68 Because of this, it is misleading for petitioners to claim that the dismissal of
the case was based only on Republic Act No. 8975. 69

They further argue that petitioners failed to show that the execution of the Agora
Complex BOT Contract caused them direct, personal, and substantial injury. They were
not parties to the contract, or fruit or vegetable vendors, or public utility operators who
would be directly affected by the exclusivity of the Eastbound Terminal and of the drop-
off of vegetables in Agora. Neither could they complain as taxpayers, as there was no
disbursement of public funds required for the project. 70

157
On September 2, 2009, petitioners filed their Reply 71 to public respondents' Comment.
On September 18, 2009, they filed their Reply to private respondent's
Comment.72 Petitioners claim that their petition involves only questions of law and is,
thus, cognizable by this Court.73 They also claimed that the Verification and Certification
of Non-Forum Shopping is sufficient, having been duly subscribed and sworn to before
a notary public.74 They reiterate that the Agora Complex BOT Contract is void, there
being no ordinance issued by the City Council of Cagayan De Oro authorizing Mayor
Jaraula to sign it. The contract being void, the principle of standing is inapplicable. Thus,
they may question its validity, even if they are not parties to the contract. 75

This Court issued a Resolution dated October 14, 2009 76 noting public respondents'
Comment and petitioners' Replies to public and private respondents' Comments. This
Court also expunged from the records the rejoinder filed by public respondents since it
lacked a motion for leave to file rejoinder.

The issues for this Court's resolution are:

First, whether or not it was proper for Teodulfo E. Lao, Jr., Roger A. Abaday, Zaldy O.
Ocon, and Enrico D. Salcedo to file a Petition for Review under Rule 45 directly with this
Court;

Second, whether or not Teodulfo E. Lao, Jr., Roger A. Abaday, Zaldy O. Ocon, and
Enrico D. Salcedo's Verification and Certification of Non-Forum Shopping is fatally
defective as to warrant the dismissal of the Petition for Review;

Third, whether or not the Regional Trial Court correctly denied the issuance of the
temporary restraining order against the Agora Complex Build-Operate-Transfer
Contract; and

Finally, whether or not Teodulfo E. Lao, Jr., Roger A. Abaday, Zaldy O. Ocon, and
Enrico D. Salcedo have locus standi to file a complaint to have the Agora Complex
Build-Operate-Transfer Contract declared null and void.

Under Rule 41, Section 2 of the Rules of Court, there are three (3) modes of appeal
from a judgment or final order of the Regional Trial Court:
Section 2. Modes of appeal. -

(a) Ordinary appeal. - The appeal to the Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its original jurisdiction shall be taken by
filing a notice of appeal with the court which rendered the judgment or final order
appealed from and serving a copy thereof upon the adverse party. No record on
appeal shall be required except in special proceedings and other cases of
multiple or separate appeals where the law or these Rules so require. In such

158
 cases, the record on appeal shall be filed and served in like manner.
(b) Petition for review. - The appeal to the Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its appellate jurisdiction shall be by petition
for review in accordance with Rule 42.
(c) Appeal by certiorari. - In all cases where only questions of law are raised or
involved, the appeal shall be to the Supreme Court by petition for review on
certiorari in accordance with Rule 45.
Direct resort to this Court by way of petition for review on certiorari is permitted when
only questions of law are involved.77

There is a question of law when there is doubt as to which law should be applied to a
particular set of facts.78 Questions of law do not require that the truth or falsehood of
facts be determined or evidence be received and examined. 79 Matters of evidence more
properly pertain to the trial courts as the trier of facts and the appellate courts as the
reviewer of facts.80

As correctly pointed out by public respondents, among the four (4) errors that petitioners
assign to the Regional Trial Court, two (2) are questions of fact. The nullity of the Agora
Complex BOT Contract due to the mayor's alleged lack of authority to sign it and the
local government's alleged failure to determine the project proponent's financial capacity
require the reception and examination of evidence. These issues are questions of fact
not cognizable in a petition for review under Rule 45.

Nonetheless, whether or not the Regional Trial Court correctly denied the issuance of
the temporary restraining order and dismissed the complaint due to its lack of
jurisdiction and petitioners' standing is a question of law which may be resolved by this
Court.

II

As pointed out by private respondents,81 the petition's Verification and Certification of

Non-Forum Shopping is improperly notarized, there being no statement that the affiants
were either personally known to the notary public or that competent evidence of their
identities was presented.

Under the 2004 Rules on Notarial Practice (Notarial Rules), an individual who appears
before a notary public to take an oath or affirmation of a document must, among others,
be personally known to or be identified by the notary public through competent evidence
of identity.82 Rule II, Section 12 of the Notarial Rules defines "competent evidence of
identity" as:
Section 12. Competent Evidence of Identity. - The phrase "competent evidence of
identity" refers to the identification of an individual based on:

(a) at least one current identification document issued by an official agency bearing
the photograph and signature of the individual, such as but not limited to,

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 passport, driver's license, Professional Regulations Commission ID, National
Bureau of Investigation clearance, police clearance, postal ID, voter's ID,
Barangay certification, Government Service and Insurance System (GSIS) e-
card, Social Security System (SSS) card, Philhealth card, senior citizen card,
Overseas Workers Welfare Administration (OWWA) ID, OFW ID, seaman's book,
alien certificate of registration/immigrant certificate of registration government
office ID, certification from the National Council for the Welfare of Disabled
Persons (NCWDP), Department of Social Welfare and Development (DSWD)
certification; or
(b) the oath or a:ffinnation of one credible witness not privy to the instrument,
document or transaction who is personally known to the notary public and who
personally knows the individual, or of two credible witnesses neither of whom is
privy to the instrument, document or transaction who each personally knows the
individual and shows to the notary public documentary identification.
Here, neither the petition's Verification and Compliance with Non Forum Shopping
Law83 nor its Affidavit of Proof of Service84 contains any statement that their respective
affiants were personally known to the notary public or have presented competent
evidence of identity pursuant to Rule II, Section 12 of the 2004 Rules on Notarial
Practice. The omission is also evident in the Affidavit of Proof of Service 85 attached to
petitioners' Reply. In all these instances, the notary public was Atty. Manolo Z. Tagarda,
Sr. (Atty. Tagarda), who also serves as counsel for petitioners.

Notaries public must observe "the highest degree of care" in ensuring compliance with
the basic requirements of the Notarial Rules.86 Notaries public who fail to indicate in
notarized documents that the affiants are personally known to them or have presented
competent evidence of their identities violate not only the Notarial Rules, but also Canon
1, Rule 1.01 of the Code of Professional Responsibility:
A notary public exercises duties calling for carefulness and faithfulness. Notaries must
inform themselves of the facts they certify to; most importantly, they should not take part
or allow themselves to be part of illegal transactions. In line with this mandate, a notary
public should not notarize a document unless the person who signed the same is the
very person who executed and personally appeared before him to attest to the contents
and the truth of what are stated therein. By failing in this regard, the notary public
permits a falsehood which does not only transgress the Notarial Rules but also Rule
1.01, Canon 1 of the Code of Professional Responsibility, which provides that "[a]
lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct." Verily, a
notarized document is, by law, entitled to full faith and credit upon its face; and it is for
this reason that a notary public must observe with utmost care the basic requirements in
the performance of his duties; otherwise, the public's confidence in the integrity of a
notarized  document would be undermined.87 (Citations omitted)
Atty. Tagarda should show cause why he should not be made administratively liable for
failure to comply with the Notarial Rules and the Code of Professional Responsibility.

As for the petition itself, the defect of the failure to show that competent evidence of
identity was presented may be overlooked in view of the merits of the case. 88

160
 III

The Regional Trial Court correctly denied the issuance of a temporary restraining order
against the Agora Complex BOT Contract.

Contrary to the claim of petitioners, the Regional Trial Court did not dismiss the
complaint on the basis of lack of jurisdiction pursuant to Republic Act No. 8975. It only
denied the issuance of a temporary restraining order on this basis. It is well settled that
despite the provisions of Republic Act No. 8975, trial courts still retain jurisdiction over
the main cause of action to nullify or implement a national government contract. 89

Republic Act No. 8975 expressly prohibits the issuance by all courts, other than this
Court, of any temporaryrestraining orders, preliminary injunctions, or preliminary
mandatory injunctions against national government projects:
Section 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 national government 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.

161
Among the "national government projects" covered by the prohibition in Section 3 of
Republic Act No. 8975 are projects covered by Republic Act No. 6957, as amended,
othe1wise known as the Build-Operate-Transfer Law:
Section 2. Definition of Terms. -   
 
(a) "National government projects" shall refer to all current and future national
government infrastructure, engineering works and service contracts, including
projects undertaken by government-owned and -controlled corporations, all
projects covered by Republic Act No. 6957, as amended by Republic Act No.
7718, otherwise known as the Build Operate-and-Transfer Law, and other related
and necessary activities, such as site acquisition, supply and/or installation of
equipment and materials, implementation, construction, completion, operation,
maintenance, improvement, repair and rehabilitation, regardless of the source of
funding. (Emphasis supplied)
That Build-Operate-Transfer projects of local government units are covered by Republic
Act No. 8975 was affirmed in GV Diversified International, Inc. v. Court of
Appeals.90 The issuance of a temporary restraining order against the opening of sealed
bids for a "Build and Transfer Contract" with Cagayan De Oro City was found to be in
violation of Republic Act No. 8975:
Based on [Sections 2, 3 and 4 of Republic Act No. 8975], a preliminary injunction issued
by any court, other than the Supreme Court, for the purpose of restraining the bidding or
awarding of a national government projectis void.

In this case, the preliminary injunction issued by the RTC sought to restrain the City of
Cagayan de Oro from opening the sealed bids for the South Diversion Road and PCDG
Cargo Bridge Project. The said venture, which is covered by the Build-Operate-and-
Transfer Law, is clearly a national government project within the meaning of Rep. Act
No. 8975. Therefore, the subject writ of preliminary injunction is, by operation of law,
void and of no force and effect.

Consequently, the Court of Appeals, in lifting the preliminary injunction issued by the
RTC, did not commit grave abuse of discretion. On the contrary, the Court of Appeals in
fact served the purpose of Rep. Act No. 8975. The lifting of the subject preliminary
injunction paved the way for the opening of the sealed bids pursuant to the City's
invitation to qualified bidders. As a result, the implementation of the aforesaid
infrastructure project continued without any undue and costly delay, as expressly
mandated by Rep. Act No. 8975.91
Here, as found by the Regional Trial Court, the Agora Complex BOT Contract falls
within the prohibition in Republic Act No. 8975:
The Jaraula-See BOT Contract must be read in the light of RA 8975 and RA 7718. The
subject project - the redevelopment of the Agora market was admitted by plaintiff to be a
BUILD-OPERATE-TRANSFER scheme between the City Government and that of the
project proponent, hence, the definition of "national government projects" under SEC. 2
of RA 8975 is not limited to current and future national government infrastructure,
engineering works and service contracts including projects undertaken by government-

162
owned or [-]controlled corporations, but ALL PROJECT COVERED by Republic Act No.
6975 as amended by Republic Act No. 7718 otherwise known as Build-Operate-
Transfer Law[.]92 (Emphasis the original)
The only exception when a. court other than this Cmni may grant injunctive relief is if it
involves a matter of extreme urgency, involving a constitutional issue, such that unless
a ternporarestraining order is issued, grave injustice and irreparable injury will arise. 93

The party seeking a writ of preliminary injunction or temporary restraining order as an

exception to Republic Act No. 8975 must discharge the burden of proving a clear and
compelling breach of a constitutional provision:
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 doubtno injunctive relief should issue. In the proper
cases, the aggrieved party may then avail itself of special civil actions and elevate the
matter.94
While conclusive proof of the right to be protected is not necessary, there must still be a
clear presentation of the existing basis of facts which shows the right being threatened:
Conclusive proof of the existence of the right to be protected is not demanded, however,
for, as the Court has held in Saulog v. Court of Appeals, it is enough that:
. . . for the court to act, there must be an existing basis of facts affording a present
right which is directly threatened by an act sought to be enjoined. And while a
clear showing of the right claimed is necessary, its existence need not be
conclusively established. In fact, the evidence to be submitted to justify preliminary
injunction at the hearing thereon need not be conclusive or complete but need only be a
"sampling" intended merely to give the court an idea of the justification for the
preliminary injunction pending the decision of the case on the merits. This should
really be so since our concern here involves only the propriety of the preliminary
injunction and not the merits of the case still pending wjth the trial court.

Thus, to be entitled to the writ of preliminary injunction, the private respondent needs
only to show that it has the ostensible right to the final relief prayed for in its
complaint[.]95 (Emphasis in the original)
Here, the alleged breach of petitioners' ostensible rights was neither clear nor
compelling as to warrant an exception from Republic Act No. 8975. Petitioners' claim
that the Agora Complex BOT Contract would require that the Agora Complex be made
an exclusive terminal for public utility vehicles in violation of the "constitutional right of
citizens to free enterprise"96 does not entitle them to a temporary restraining order. Apart
from mere allegations, they have not pointed to any grave injustice or irreparable injury
to constitutional rights that would be sustained if no injunctive reliefs are issued against
the execution of the Agora Complex BOT Contract. The trial court correctly denied the
prayer for a temporary restraining order.

163
 IV

The dismissal by the trial court of the complaint due to petitioners' lack of personality to
file suit is erroneous. Petitioners, as members of the City Council of Cagayan De Oro,
may file a case to question a contract entered into by the city mayor allegedly without
the City Council's authority.

Rule 3. Section 2 of the Rules of Court defines the real party in interest that may
institute a case:
Section 2. Parties in interest. - A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of the
suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest.
The real party in interest which may file a case, questioning the validity of a contract
entered into by the city mayor, who is alleged to have no authority to do so, is the city
itself. It is the local government unit which stands to be injured or benefited by any
judgment that may be made in this case. The city councilors merely represent the city in
the suit. As explained in City Council of Cebu v. Cuizon:97
It seems clearly self-evident from the foregoing recitation of the undisputed antecedents
and factual background that the lower court gravely erred in issuing its dismissal order
on the ground of plaintiffs' alleged lack of interest or legal standing as city councilors or
as taxpayers to maintain the case at bar. The lower court founded its erroneous
conclusion on the equally erroneous premise of citing and applying Article 1397 of the
Civil Code that "the action for the annulment of contracts may be instituted (only) by all
who are thereby obliged principally or subsidiarily."

The lower court's fundamental error was in treating plaintiffs' complaint as

a personal suit on their own behalf and applying the test in such cases that plaintiffs
should show personal interest as parties who would be benefited or injured by the
judgment sought. Plaintiffs' suit is patently not a personal suit. Plaintiffs clearly and by
the express terms of their complaint filed the suit as a representative suit on behalf and
for the benefit of the city of Cebu.98 (Citation omitted)
City councilors may file a suit for the declaration of nullity of a contract on the basis that
the city mayor had no authority to do so because the city mayor's authority to bind the
city to obligations must emanate from the City Council. Under Title III, Chapter III, Article
I, Section 455(b)(l)(vi) of Republic Act No. 7160, otherwise known as the Local
Government Code, the city mayor may sign all bonds, contracts, and obligations on
behalf of a city only upon authority of the sanggumang panlungsod or pursuant to law or
ordinance:
Section 455. Chief Executive: Powers, Duties and Compensation. -

....

(b) For efficient, effective and economical governance the purpose of which is the
general welfare of the city and its inhabitants pursuant to Section 16 of this Code, the
city mayor shall:

164
(1) Exercise general supervision and control over all programs, projects, services, and
activities of the city government, and in this connection, shall:
    
....

(vi) Represent the city in all its business transactions and sign in its behalf all bonds,
contracts, and obligations, and such other documents upon authority of the
sangguniang panlungsod or pursuant to law or ordinance[.]
The requirement of the sangguniang panlungsod's prior authority is a measure of check
and balance on the powers of the city mayor:
Yet, this is obviously not the effect Congress had in mind when it required, as a
condition to the local chief executive's representation of the local government unit in
business transactions, the prior authorization of the sanggunian concerned. The
requirement was deliberately added as a measure of check and balance, to temper the
authority of the local chief executive, and in recognition of the fact that the corporate
powers of the local government unit are wielded as much by its chief executive as by its
council.99
As the City Council is the source of the mayor's power to execute contracts for the city,
its members have the authority, interest, and even duty to file cases in behalf of the
cityto restrain the execution of contracts entered into in violation of the Local
Government Code:
Under such circumstances. in the same manner that a stockholder of a corporation is
permitted to institute derivative or representative suits as nominal party plaintiff for the
benefit of the corporation which is the real party in interest, more so may plaintiffs as
city councilors exclusively empowered by the city charter to "make all appropriations for
the expenses of the government of the city" and who were the very source of the
authority granted to the city mayor to enter into the questioned transactions which
authority was later revoked by them, as per the allegations of the complaint at bar, be
deemed to possess the necessary authority, and interest, if not duty, to file the present
suit on behalf of the City and to prevent the disbursement of city funds under contracts
impugned by them to have been entered into by the city mayor without lawful authority
and in violation of law.100 (Citations omitted)
Here, it is undisputed that petitioners are members of the City Council of Cagayan De
Oro. They have alleged that public respondent Mayor Jaraula entered into the Agora
Complex BOT Contract without being authorized by the City Cquncil of Cagayan De
Oro, in violation of the requirement in Title III, Chapter III, Article I, Section 455(b)(l)(vi)
of the Local Government Code. Clearly, as they are part of the very body in which
authority is allegedly being undermined by the city mayor, they have the right and duty
to question the basis of the mayor's authority to sign a contract which binds the city.

WHEREFORE, the petition is PARTIALLY GRANTED. On the dismissal of the

Complaint for the Declaration of Nullity of the Redevelopment of Agora Market and
Terminal Contract Under Build-Operate-Transfer Scheme and All Ordinances,
Resolutions and Motions of the City Council Relative Thereto with Prayer for Temporary
Restraining Order and Preliminary Prohibitory Injunction with Damages, the March 30,

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2009 Resolution and May 11, 2009 Order of the Regional Trial Court in Civil Case No.
20090-076 are REVERSED. The denial of the jssuance of a Temporary Restraining
Order and/or Writ of Preliminary Prohibitory Injunction is AFFIRMED. Let this case
be REMANDED to the Regional Trial Court of origin for further proceedings.

Let a copy of this Decision be FURNISHED the Office of the Bar Confidant for the filing
of the appropriate action against Atty. Manalo Z. Tagarda, Sr. for possible violation of
the 2004 Rules of Notarial Practice and the Code of Professional Responsibility, to be
repdocketed as a separate administrative action.

SO ORDERED.

Velasco, Jr., (Chairperson), Bersamin, Martires, and Gesmundo, JJ., concur.

THIRD DIVISION

G.R. No. 196020, April 18, 2018

MANILA ELECTRIC COMPANY, VICENTE MONTERO, MR. BONDOC, AND MR.

BAYONA, Petitioners, v. NORDEC PHILIPPINES AND/OR MARVEX INDUSTRIAL
CORP. REPRESENTED BY ITS PRESIDENT, DR. POTENCIANO R.
MALVAR, Respondents.

G.R. No. 196116, April 18, 2018

NORDEC PHILIPPINES REPRESENTED BY ITS PRESIDENT, DR. POTENCIANO R.

MALVAR, Petitioner, v. MANILA ELECTRIC COMPANY, VICENTE MONTERO, MR.
BONDOC, AND MR. BAYONA, Respondents.

DECISION

LEONEN, J.:

A distribution utility is mandated to strictly comply with the legal requisites before
disconnecting an electric supply due to the serious consequences this disconnection
may have on the consumer.

These are two (2) Petitions for Review on Certiorari 1 under Rule 45 of the Rules of
Court, both assailing the January 21, 2011 Decision 2 and March 9, 2011 Resolution3 of
Court of Appeals in CA-G.R. CV No. 85564. The Court of Appeals reversed and set
aside the June 15, 2005 Decision4 of Branch 85, Regional Trial Court, Quezon City in
Civil Case No. Q-49651. It ordered Manila Electric Company (Meralco) to pay Nordec
Philippines (Nordec) the amounts of P5,625.00, representing overbilling for November
23, 1987; P200,000.00 as exemplary damages; P100,000.00 as attorney's fees; and
costs of suit.

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Meralco was contracted to supply electricity to Marvex Industrial Corporation (Marvex)
under an Agreement for Sale of Electric Energy, with Service Account No. 9396-3422-
15.5 It installed metering devices at Marvex's premises on January 18, 1985. Marvex
was billed according to the monthly electric consumption recorded in its meter. 6

On May 29, 1985, Meralco service inspectors inspected Marvex's electric metering
facilities and found that the main meter terminal and cover seals had been tampered
with. During a second inspection on September 18, 1985, Meralco found that the
metering devices were tampered with again. Subsequently, Meralco assessed Marvex a
differential billing of P371,919.58 for January 18, 1985 to May 29, 1985, and
P124,466.71 for June 17, 1985 to September 18, 1985, in the total amount of
P496,386.29. Meralco sent demand letters dated August 7, 1985 and November 29,
1985, and disconnected Marvex's electric service when it did not pay. 7

On December 23, 1986, Nordec, the new owner of Marvex, 8 sued Meralco for damages
with prayer for preliminary mandatory injunction with Branch 85, Regional Trial Court,
Quezon City.9 Likewise, impleaded as defendants were Meralco's legal officer, Vicente
Montero, and two (2) Meralco employees, Mr. Bondoc and Mr. Bayona. 10 It alleged that
Meralco's service inspectors conducted the 1985 inspections without its consent or
approval. Following the inspections, Meralco's inspectors gave an unnamed Nordec
employee a Power Field Order that did not mention the alleged defects in the metering
devices. Nordec further claimed that the parties exchanged letters on the alleged
unregistered electric bill, and that it requested a recomputation, which Meralco denied in
its April 25, 1986 letter. However, in May 1986, Meralco asked Nordec to show the
basis for its recomputation request, to which Nordec complied in its June 10, 1986
letter. On August 14, 1986, Meralco required Nordec to pay P371,919.58 for the
unregistered electricity bill. Nordec then informed Meralco of the pending resolution of
the recomputation. Nordec claimed that Meralco then disconnected its service without
prior notice on December 18, 1986, resulting to loss of income and cancellation of other
business opportunities.11

In its defense, Meralco claimed that the 1985 inspections had been conducted in the
presence of Nordec's representatives. Further, Meralco had repeatedly warned Nordec
of service disconnection in case of failure to pay the differential bill. Finally, it averred
that there was no contractual relation between Nordec and Marvex, and that Nordec
and its president, Dr. Potenciano Malvar (Dr. Malvar), failed to show proof that they
were authorized to sue on Marvex's behalf. 12

On January 22, 1987, the Regional Trial Court issued a writ of preliminary injunction
directing Meralco to restore Nordec's electric supply. 13

On November 23, 1987, Meralco conducted another inspection of Nordec's premises in

the presence of Nordec's president, Dr. Malvar. The inspecting group observed that
there were irregularities in Nordec's metering devices, as they continued to register
power consumption even though its entire power supply equipment was turned off.
Meralco offered to reimburse Nordec's excess bill of P5,625.10, but Nordec rejected this

167
offer.14

Nordec filed a second supplemental complaint on January 4, 1991, praying that Meralco
be declared guilty of tampering, and be made to refund its excess bill of not less than
P5,625.10.15

In its June 15, 2005 Decision,16 the Regional Trial Court dismissed Nordec's original
complaint and second supplemental complaint. The trial court found that there was
sufficient evidence to prove that the electric meter and metering installation at Marvex
premises had been tampered with.17 It found that Nordec did not dispute that the
inspections of its premises were conducted with the consent and in the presence of its
representatives. Moreover, Nordec failed to prove that Meralco's inspectors had ill
motives to falsify their findings regarding the tampered meter, or that the inspectors
were responsible for the tampering. 18

The trial court further found that Ridjo Tape & Chemical Corporation v. Court of
Appeals was inapplicable to this case, since that case did not involve tampering of
meters. It held Nordec liable for violating its Terms and Conditions of Service with
Meralco, such that Meralco was justified in disconnecting its electric service. 19 Because
it was Nordec which committed the tampering, it was not entitled to the reliefs prayed for
because it did not come to court with clean hands. 20

There was also no contractual relationship between Nordec and Meralco, since the
service contract was between Meralco and Marvex. Thus, Nordec had no cause of
action against Meralco.21

The dispositive portion of the Regional Trial Court June 15, 2005 Decision stated:

WHEREFORE, the original complaint as well as the second supplemental complaint are
hereby DISMISSED.

Anent the second supplemental complaint, the same is found to be without merit, for
failure of plaintiff to substantiate with clear and convincing evidence.

And, finding defendant's counterclaim to be with merit, the same is GRANTED.

Accordingly, plaintiffs are hereby ordered to pay, jointly and severally, defendants the
total amount of FOUR HUNDRED NINETY[]SIX THOUSAND THREE HUNDRED
EIGHTY-SIX PESOS & 29/100 (Php 496,386.29), representing the value of used but
unregistered electric current; the sum of TEN THOUSAND PESOS (Php 10,000.00) as
exemplary damages; and the sum of TWENTY THOUSAND PESOS (Php 20,000.00)
as and for attorney's fees plus costs.

SO ORDERED.22
Nordec appealed to the Court of Appeals, which docketed the case as CA-G.R. CV No.
85564. On January 21, 2011, the Court of Appeals issued its Decision, 23 reversing and
setting aside the Regional Trial Court June 15, 2005 Decision.

168
First, it held that there was a contractual relationship between Nordec and Meralco. It
found that after the service contract between Meralco and Marvex, Nordec bought
Marvex from the Development Bank of the Philippines. Thus, Nordec stepped into
Marvex's shoes and assumed its rights and obligations as its assignee or successor-in-
interest. As Marvex's right to receive electricity is not intransmissible, it was deemed to
have been transmitted to Nordec. Moreover, Meralco's continued supply of electricity to
Nordec and Nordec's payment for this supply indicate that there was an implied contract
existing between these two (2) parties.24

Second, the Court of Appeals found that Meralco was negligent in discovering the
alleged tampering only on May 29, 1985, or four (4) months after it first found
irregularities in the metering devices, despite the monthly meter readings. There was no
evidence that Nordec was responsible for tampering with its own metering devices. The
Court of Appeals found that it was unlikely that a company previously charged with
tampering and had been demanded payment for differential billing would again tamper
with a newly installed meter. On the other hand, there was proof that the new metering
devices were defective, since they continued to run despite a complete power
shutdown. Meralco even offered to refund P5,625.10 due to the defect in the new
meter.25

Third, Meralco did not deny that there was a pending communication on Nordec's
request for recomputation. Citing Spouses Quisumbing v. Manila Electric Company, the
Court of Appeals found that Meralco failed to give the' required 48-hour written notice of
disconnection before disconnecting Nordec's power supply. 26

Finally, the Court of Appeals awarded Nordec exemplary damages and attorney's fees,
but not actual damages. As to actual damages, Nordec failed to prove that it actually
sustained pecuniary losses due to Meralco's disconnection. But Nordec was entitled to
exemplary damages as an example or correction for the public good, and to attorney's
fees since Nordec was forced to litigate to protect its rights. 27 The Court of Appeals
granted only the P5,625.00 refund since there was no proof presented beyond this
amount.28

The dispositive portion of the Court of Appeals January 21, 2011 Decision stated:
Accordingly, the appeal is GRANTED. The Decision dated June 15, 2005 of the
Regional Trial Court (RTC), Quezon City, Branch 85 is REVERSED and SET ASIDE
and a new one rendered ordering [Meralco] to pay [Nordec]:
1.) P5,625.00, representing overbilling for November 23, 1987[;]

2.) P200,000.00 as exemplary damages;

3.) P100,000.00 as attorney's fees; and

4.) Costs of suit.

SO ORDERED.29

169
The Court of Appeals denied Meralco's Motion for Reconsideration 30 and Nordec's
Motion for Partial Reconsideration31 in its March 9, 2011 Resolution.32

On March 29, 2011, Meralco filed a motion for extension of time, praying for additional
30 days within which to file its petition for review. 33

This was docketed as G.R. No. 196020. On April 4, 2011, Nordec filed its motion for
extension of time, likewise praying for additional 30 days within which to file its petition
for review, which was docketed as G.R. No. 196116. 34

This Court consolidated G.R. Nos. 196020 and 196116 in its April 11, 2011
Resolution.35

On May 3, 2011, Meralco filed its Petition for Review in G.R. No. 196020, assailing the
Court of Appeals January 21, 2011 Decision and March 9, 2011 Resolution. 36

Meralco argues that the Court of Appeals erred in making its findings, which were
contrary to the findings of the Regional Trial Court. It claims that the Court of Appeals
relied on Nordec's unsubstantiated arguments; first, in finding that Nordec was Marvex's
assignee or successor-in-interest, and second, that Meralco was inexcusably negligent
in the late discovery of the tampered metering devices. 37

Meralco claims that at the time of the inspections, the applicable law was
Commonwealth Act No. 349, which provided that distribution utilities were required to
discover tampered meters during the prescribed inspections, which were only once
every two (2) years. In contrast, the four (4)-month period as found by the Court of
Appeals was unreasonable, and even contrary to the rules laid down by the Energy
Regulatory Commission on the conduct of meter testing. 38 Meralco argues that
distribution utilities' meter readers are not required to discover any defect or tampering
in the meters installed in their customers' premises, and are only required to test their
customers' meters only once every two (2) years, unless the customer requests
otherwise. It avers that cases of meter tampering should not be equated with cases
involving defective meters, since the former prejudices public utilities like Meralco, due
to consumers' unlawful acts.39

Further, Meralco claims that the inspections conducted on Marvex's metering facilities
were valid and in accordance with Presidential Decree No. 401, as amended. 40 It argues
that this law did not require the presence of the customer during inspections.
Nonetheless, the two (2) inspections in 1985 were conducted with the consent and in
the presence of Nordec's representatives.41

Meralco also claims that it exercised due diligence in maintaining its electric meters,
which was the standard set by law. By applying Ridjo Tape v. Court of Appeals,42 the
Court of Appeals imposed a degree of diligence beyond what Commonwealth Act No.
349 provided.43 Meralco asserts that the imposition of .a degree of diligence beyond
what the law provides its judicial legislation.44

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Moreover, Meralco holds that the demand letter on the assessed value of the differential
billing contained a notice that Marvex's electric service would be disconnected if the
billing was not paid, and that this was sufficient notice. Thus, Marvex, as the registered
customer, was aware that the non-payment of the differential billing would result in the
disconnection of the electric service.45

Meralco argues that Nordec was not Marvex's assignee or successor-in-interest. It

maintains that the service contract was never transferred in Nordec's name. As such, at
the time Nordec filed its complaint against Meralco, it had no authority to act on
Marvex's behalf. Meralco pointed out that the Deed of Absolute Sale between Nordec
and the Development Bank of the Philippines was executed only three (3) years after
the 1985 inspections, or on August 16, 1988. There was also no implied contract
between Meralco and Nordec, since there was no act or conduct on Meralco's part to be
bound to this contract.46

Finally, Meralco contests the awards of refund, exemplary damages, and attorney's fees
to Nordec. It claims that Nordec was not entitled to the refund since it already refused
without just cause to accept it, and thus, had waived its right to accept the payment. 47 It
argues that since the Court of Appeals itself found that Nordec was not entitled to actual
damages, it could not award exemplary damages or attorney's fees to Nordec. 48

In its Comment,49 Nordec argues that Meralco's reliance on Commonwealth Act No. 349
was misplaced, since the two (2)-year period stated in it referred to testing conducted by
the Standardizing Meter Laboratory, and nut by the distribution utilities
themselves.50 Further, Nordec claims that what Meralco failed to comply with was the
48-hour written notice of disconnection rule, and its previous demand letters did not
constitute this notice.51

In its Reply,52 Meralco reiterated its claims that Ridjo Tape v. Court of Appeals was

inapplicable53 and that it gave Nordec due notice of the disconnection. 54

On May 5, 2011, Nordec filed its Petition for Review in G.R. No. 196116, assailing the
Court of Appeals March 9, 2011 Resolution, denying its Motion for Partial
Reconsideration and praying for the modification of the Court of Appeals January 21,
2011 Decision.55

Nordec claims that it should be awarded at least P500,000.00 in temperate damages,

P150,000.00 in moral damages, and legal interest by the Court of Appeals. It argues
that temperate damages are warranted since Meralco's unceremonious and
unreasonable disconnection led to Nordec's inability to fulfill its contractual obligations
and was even forced to cancel its clients' purchase orders. 56

Further, Nordec claims that the Court of Appeals erred in finding that it was entitled to
only P5,625.00 as a refund. It argues that it proved overbilling in excess of P5,625.00,
through a letter showing that Nordec had been charged P103,412.48 by Meralco, when

171
a past billing was only for P78,860.58, which Meralco did not refute. While Nordec
admits that it failed to adduce proof of the accurate amount of damages that it
sustained, it holds that it estimates Meralco's acts to cause at least P1,000,000.00 worth
of damage due to Meralco's electricity disconnection, fraud in downgrading the
overbilling, and installation of defective meters. 57

It its Comment,58 Meralco argues that Nordec's petition should be denied outright for
failing to raise questions of law, but merely prayed for a modification of the Court of
Appeals January 21, 2011 Decision.59 It claims that the Court of Appeals correctly
denied the award of actual and temperate or moderate damages. 60 Further, it asserts
that Nordec, as a corporation, was not entitled to moral damages. 61 Finally, it reiterates
that Nordec was not entitled to any award, since Meralco acted in accordance with the
standard set by law.62

In its Reply,63 Nordec claims that this Court may take cognizance of its petition since
there was no longer any need to examine the probative value of the evidence
presented.64 It argues that corporations may be entitled to damages if their reputations
have been besmirched, such as in this case.65 Nordec reiterates its entitlement to the
damages it prayed for.66

The issues for this Court's resolution are:

First, whether or not the Court of Appeals erred in making findings of fact contrary to
those of the Regional Trial Court;

Second, whether or not Nordec Philippines has a cause of action against Manila Electric
Company;

Third, whether or not Manila Electric Company was inexcusably negligent when it
disconnected Nordec Philippines' electric supply; and

Finally, whether or not Nordec Philippines is entitled to actual, temperate, moral or

exemplary damages, attorney's fees, and legal interest.

In its petition for review, Meralco faults the Court of Appeals for making findings of fact
contrary to those of the Regional Trial Court. It claims that the trial court's findings of
fact should be accorded the highest degree of respect and that the Court of Appeals
failed to find that the trial court's findings were based on mere conjecture, and not
evidence. Thus, Meralco claims that this Court must review the facts and evidence of
this case

Meralco is mistaken in arguing that this Court is duty-bound to review the factual
findings in this case due to the contrary findings of the Regional Trial Court and of the
Court of Appeals. The Court of Appeals has the jurisdiction to review, and even reverse,
the factual findings of the trial court. For the Court of Appeals' factual findings to be
172
reviewed by this Court, it must be shown that it gravely abused its discretion in
appreciating the parties' respective evidence. In Pascual v. Burgos:67
The Court of Appeals must have gravely abused its discretion in its appreciation of the
evidence presented by the parties and in its factual findings to warrant a review of
factual issues by this court. Grave abuse of discretion is defined, thus:
By grave abuse of discretion is meant such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction. The abuse of discretion must be grave
as where the power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility and must be so patent and gross as to amount to an
evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act at
all in contemplation of law.

Grave abuse of discretion refers not merely to palpable errors of jurisdiction; or to

violations of the Constitution, the law and jurisprudence. It refers also to cases which,
for various reasons, there has been a gross misapprehension of facts. (Citations
omitted)
This exception was first laid down in Buyco v. People, et al.:
In the case at bar, the Tenth Amnesty Commission, the court of first instance and the
Court of Appeals found, in effect, that the evidence did not suffice to show that appellant
had acted in the manner contemplated in the amnesty proclamation. Moreover, unlike
the Barrioquinto cases, which were appealed directly to this Court, which, accordingly,
had authority to pass upon the validity of the findings of fact of the court of first instance
and of its conclusions on the veracity of the witnesses, the case at bar is before us on
appeal by certiorari from a decision of the Court of Appeals, the findings and
conclusions of which, on the aforementioned subjects, are not subject to our review,
except in cases of grave abuse of discretion, which has not been shown to
exist.68 (Citations omitted)
Meralco has failed to show how the Court of Appeals acted with grave abuse of
discretion in arriving at its factual findings and conclusions, or how it grossly
misapprehended the evidence presented as to warrant a finding that its review and
reversal of the trial court's findings of fact had been in error.

II

A cause of action "is the act or omission by which a party violates a right of
another."69 For a cause of action to exist, there must be, first, a plaintiff's legal
right; second, defendant's correlative obligation; and third, an injury to the plaintiff as a
result of the defendant's violation of plaintiff's right. 70 Here, the Regional Trial Court
found that Nordec had no cause of action against Meralco since they had no contractual
relationship, as Meralco's service contract was with Marvex.

The beneficial users of an electric service have a cause of action against this
distribution utility. In Manila Electric Company v. Spouses Chua,71 it was the beneficial
users who were awarded damages due to the unjust disconnection of the electric
supply, even though the service contract with Meralco was registered in the name of
another person.

173
Further, Meralco is deemed to have knowledge of the fact that Nordec was the
beneficial user of Marvex's service contract with Meralco. It admits that the inspections
of the metering devices were conducted in the presence of Nordec's maintenance
personnel and with the consent of its manager. 72 It further admits that it corresponded
with Nordec regarding the differential billing, and entertained Nordec's demand for an
explanation on the finding of tampering and the recomputation of the amount to be paid
by Nordec.73 Clearly, Meralco knew that it was dealing with Nordec as the beneficial
user of the electricity supply.

III

It is well-settled that electricity distribution utilities, which rely on mechanical devices

and equipment for the orderly undertaking of their business, are duty-bound to make
reasonable and proper periodic inspections of their equipment. If they are remiss in
carrying out this duty due to their own negligence, they risk forfeiting the amounts owed
by the customers affected.

In Ridjo Tape & Chemical Corporation v. Court of Appeals:74

At this juncture, we hasten to point out that the production and distribution of electricity
is a highly technical business undertaking, and in conducting its operation, it is only
logical for public utilities, such as MERALCO, to employ mechanical devices and
equipment for the orderly pursuit of its business.

It is to be expected that the parties were consciously aware that these devices or
equipment are susceptible to defects and mechanical failure. Hence, we are not
prepared to believe that petitioners were ignorant of the fact that stoppages in electric
meters can also result from inherent defects or flaws and not only from tampering or
intentional mishandling....

....

Corollarily, it must be underscored that MERALCO has the imperative duty to make a
reasonable and proper inspection of its apparatus and equipment to ensure that they do
not malfunction, and the due diligence to discover and repair defects therein. Failure to
perform such duties constitutes negligence.

A review of the records, however, discloses that the unpaid charges covered the
periods from November 7, 1990 to February 13, 1991 for Civil Case No. Q-92-13045
and from July 15, 1991 to April 13, 1992 for Civil Case No. 13879, approximately three
months and nine months, respectively. On such basis, we take judicial notice that during
those periods, personnel representing MERALCO inspected and examined the electric
meters of petitioners regularly for the purpose of determining the monthly dues payable.
So, why were these defects not detected and reported on time?

It has been held that notice of a defect need not be direct and express; it is enough that
the same had existed for such a length of time that it is reasonable to presume that it
174
had been detected, and the presence of a conspicuous defect which has existed for a
considerable length of time will create a presumption of constructive notice thereof.
Hence, MERALCO's failure to discover the defect, if any, considering the length of time,
amounts to inexcusable negligence. Furthermore, we need not belabor the point that as
a public utility, MERALCO has the obligation to discharge its functions with utmost care
and diligence.75 (Citations omitted)
Moreover, the duty of inspecting for defects is not limited to inherent mechanical defects
of the distribution utilities' devices, but extends to intentional and unintentional ones,
such as those, which are due to tampering and mistakes in computation. 76 In Manila
Electric Co. v. Wilcon Builders Supply, Inc.:77
The Ridjo doctrine simply states that the public utility has the imperative duty to make a
reasonable and proper inspection of its apparatus and equipment to ensure that they do
not malfunction. Its failure to discover the defect, if any, considering the length of time,
amounts to inexcusable negligence; its failure to make the necessary repairs and
replace the defective electric meter installed within the consumer's premises limits the
latter's liability. The use of the words "defect" and "defective" in the above-cited case
does not restrict the application of the doctrine to cases of "mechanical defects" in the
installed electric meters. A more plausible interpretation is to apply the rule on
negligence whether the defect is inherent, intentional or unintentional, which therefore
covers tampering, mechanical defects and mistakes in the computation of the
consumers' billing.78 (Citation omitted)
Meralco argues that the degree of diligence imposed upon it was beyond the prevailing
law at the time, namely, Commonwealth Act No. 349. It claims that under this law, it is
only required to test metering devices once every two (2) years. Thus, for it to be
penalized for taking four (4) months to rectify and repair the defective meter, was
tantamount to judicial legislation.

However, as pointed out by Nordec, the two (2)-year period prescribed under
Commonwealth Act No. 34979 is for the testing required of meters and appliances for
measurements used by all public services by a standardized meter laboratory under the
control of the then Public Service Commission. It does not pertain to distribution utilities
inspections of the metering devices installed in their consumers' premises.

Further, contrary to Meralco's claim, the duty imposed upon it pursuant to Ridjo is not
beyond the standard of care imposed by law. Distribution utilities are public utilities
vested with public interest, and thus, are held to a higher degree of diligence. In Ridjo:
The rationale behind this ruling is that public utilities should be put on notice, as a
deterrent, that if they completely disregard their duty of keeping their electric meters in
serviceable condition, they run the risk of forfeiting, by reason of their negligence,
amounts originally due from their customers. Certainly, we cannot sanction a situation
wherein the defects in the electric meter are allowed to continue indefinitely until
suddenly the public utilities concerned demand payment for the unrecorded electricity
utilized when, in the first place, they should have remedied the situation immediately. If
we turn a blind eye on MERALCO's omission, it may encourage negligence on the part
of public utilities, to the detriment of the consuming public.

175
....

To summarize, it is worth emphasizing that it is not our intention to impede or diminish

the business viability of MERALCO, or any public utility company for that matter. On the
contrary, we would like to stress that, being a public utility vested with vital public
interest, MERALCO is impressed with certain obligations towards its customers and any
omission on its part to perform such duties would be prejudicial to its interest. For in the
final analysis, the bottom line is that those who do not exercise such prudence in the
discharge of their duties shall be made to bear the consequences of such oversight. 80
Should a distribution utility not exercise the standard of care required of it due to its
negligence in the inspection and repair of its apparatus, then it can no longer recover
the amounts of allegedly used but uncharged electricity.

The distribution utility's negligence is all the more apparent when it had made prior
findings of tampering, and yet still failed to correct these defects. In Manila Electric
Company v. T.E.A.M. Electronics Corp.,81 Meralco conducted an inspection on
September 28, 1987 and found that the meters therein were tampered, and then
conducted a second inspection on June 7, 1988, which yielded similar evidence of
tampering. Likewise, the respondent in that case was in the midst of a differential billing
dispute with Meralco, and had previously been assessed P7,000,000.00 due to alleged
tampering. There, this Court found that Meralco was negligent for failing to repair the
defects in respondent's meters after the first inspection:
Petitioner likewise claimed that when the subject meters were again inspected on June
7, 1988, they were found to have been tampered anew. The Court notes that prior to the
inspection, [T.E.A.M. Electronics Corporation] was informed about it; and months before
the inspection, there was an unsettled controversy between [T.E.A.M. Electronics
Corporation] and petitioner, brought about by the disconnection of electric power and
the non-payment of differential billing. We are more disposed to accept the trial court's
conclusion that it is hard to believe that a customer previously apprehended for
tampered meters and assessed P7 million would further jeopardize itself in the eyes of
petitioner. If it is true that there was evidence of tampering found on September 28,
1987 and again on June 7, 1988, the better view would be that the defective meters
were not actually corrected after the first inspection. If so, then Manila Electric Company
v. Macro Textile Mills Corporation would apply, where we said that we cannot sanction a
situation wherein the defects in the electric meter are allowed to continue indefinitely
until suddenly, the public utilities demand payment for the unrecorded electricity utilized
when they could have remedied the situation immediately. Petitioner's failure to do so
may encourage neglect of public utilities to the detriment of the consuming public.
Corollarily, it must he underscored that petitioner has the imperative duty to make a
reasonable and proper inspection of its apparatus and equipment to ensure that they do
not malfunction, and the due diligence to discover and repair defects therein. Failure to
perform such duties constitutes negligence. By reason of said negligence, public utilities
run the risk of forfeiting amounts originally due from their customers. 82 (Citations
omitted)
Here, as observed by the Court of Appeals, Meralco itself claimed that the irregularities
in the electricity consumption recorded in Nordec's metering devices started on January

176
18, 1985, as evidenced by their August 7, 1985 demand letter, covering January 18,
1985 to May 29, 1985. However, the alleged tampering was only discovered during the
May 29, 1985 inspection. Considering that Nordec's meters were read monthly,
Meralco's belated discovery of the cause of the alleged irregularities, or four (4) months
after they purportedly started, can only lead to a conclusion of negligence. Notice of a
defect may be constructive when it has conspicuously existed for a considerable length
of time.83 It is also worth noting that during a third inspection on November 23, 1987,
further irregularities in Nordec's metering devices were observed, showing electricity
consumption even when Nordec's entire power supply equipment was switched off.
Clearly, Meralco had been remiss in its duty as required by law and jurisprudence of a
public utility.

Meralco is also duty-bound to explain the basis for its billings, especially when these are
for unregistered consumption, to prevent consumers from being solely at its
mercy.84 Here, the Power Field Orders given to Nordec following the inspections did not
mention the alleged defects that were discovered. Nordec's request for recomputation of
the alleged unregistered electric bill was still pending when its electric supply was
disconnected on December 18, 1986.

Finally, as found by the Court of Appeals, Meralco failed to comply with the 48-hour
disconnection notice rule. Meralco claims that the statements in its demand letters, that
failure to pay would result in disconnection, were sufficient notice. However, pursuant to
Section 97 of Revised General Order No. 1, the governing rule when the disconnection
occurred, disconnection due to non-payment of bills requires that a 48-hour written
notice be given to the customer.85

It must be emphasized that electricity is "a basic necessity whose generation and
distribution is imbued with public interest, and its provider is a public utility subject to
strict regulation by the State in the exercise of police power." 86 The serious
consequences on a consumer, whose electric supply has been cut off, behoove a
distribution utility to strictly comply with the legal requisites before disconnection may be
done.87 This is all the more true considering Meralco's dominant position in the market
compared to its customers' weak bargaining position. 88

IV

At the outset, a party's entitlement to damages is a question of fact not generally

cognizable in a petition for review.89 However, in this case, the Court of Appeals' failure
to apply the applicable law and jurisprudence by awarding damages to Nordec prompts
this Court's review.

The Court of Appeals declined to award actual damages to Nordec as it failed to prove
its pecuniary losses due to Meralco's disconnection:
We concede that MERALCO's service disconnection bore a domino effect on
NORDEC's business but in the absence of actual proof of losses, We cannot award
actual damages to NORDEC. For one is only entitled to adequate compensation for
pecuniary loss that he has duly proven.90
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The Court of Appeals then proceeded to award exemplary damages to Nordec by way
of example or correction for the public good. This is contrary to the requirement in
Article 2234 of the Civil Code, which requires proof of entitlement to moral, temperate or
compensatory damages before exemplary damages may be awarded:
Article 2234. While the amount of the exemplary damages need not be proved, the
plaintiff must show that he is entitled to moral, temperate or compensatory damages
before the court may consider the question of whether or not exemplary damages
should be awarded. In case liquidated damages have been agreed upon, although no
proof of loss is necessary in order that such liquidated damages may be recovered,
nevertheless, before the court may consider the question of granting exemplary in
addition to the liquidated damages, the plaintiff must show that he would be entitled to
moral, temperate or compensatory damages were it not for the stipulation for liquidated
damages.
Exemplary damages, which cannot be recovered as a matter of right, may not be
awarded if no moral, temperate, or compensatory damages have been granted. 91 Since
exemplary damages cannot be awarded, the award of attorney's fees should likewise be
deleted.

Moral damages are also not proper, in line with Manila Electric Company v.
TE.A.M Electronics Corporation:92
We, however, deem it proper to delete the award of moral damages. [T.E.A.M.
Electronics Corporation] claim was premised allegedly on the damage to its goodwill
and reputation. As a rule, a corporation is not entitled to moral damages because, not
being a natural person, it cannot experience physical suffering or sentiments like
wounded feelings, serious anxiety, mental anguish and moral shock. The only exception
to this rule is when the corporation has a reputation that is debased, resulting in its
humiliation in the business realm. But in such a case, it is imperative for the claimant to
present proof to justify the award. It is essential to prove the existence of the factual
basis of the damage and its causal relation to petitioner's acts. In the present case, the
records are bereft of any evidence that the name or reputation of [T.E.A.M. Electronics
Corporation/Technology Electronics Assembly and Management Pacific Corporation]
has been debased as a result of petitioner's acts. Besides, the trial court simply
awarded moral damages in the dispositive portion of its decision without stating the
basis thereof.93 (Citations omitted)
Here, the records are bereft of evidence that would show that Nordec's name or
reputation suffered due to the disconnection of its electric supply.

Moreover, contrary to Nordec's claim, it cannot be awarded temperate or moderate

damages. Under Article 2224 of the Civil Code:
Article 2224. Temperate or moderate damages, which are more than nominal but less
than compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount can not, from the nature of the case, be
proved with certainty.

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When the court finds that a party fails to prove the fact of pecuniary loss, and not just
the amount of this loss, then Article 2224 does not apply. In Seven Brothers Shipping
Corporation v. DMC-Construction Resources, Inc.:94
In contrast, under Article 2224, temperate or moderate damages may be recovered
when the court finds that some pecuniary loss has been suffered but its amount cannot,
from the nature of the case, be provided with certainty. This principle was thoroughly
explained in Araneta v. Bank of America, which cited the Code Commission, to wit:
The Code Commission, in explaining the concept of temperate damages under Article
2224, makes the following comment:
In some States of the American Union, temperate damages are allowed. There are
cases where from the nature of the case, definite proof of pecuniary loss cannot
be offered, although the court is convinced that there has been such loss. For
instance, injury to one's commercial credit or to the goodwill of a business firm is often
hard to show with certainty in terms of money. Should damages be denied for that
reason? The judge should be empowered to calculate moderate damages in such
cases, rather than that the plaintiff should suffer, without redress from the defendant's
wrongful act. (Emphasis ours)
Thus, in Tan v. OMC Carriers, Inc., temperate damages were rightly awarded because
plaintiff suffered a loss, although definitive proof of its amount cannot be presented as
the photographs produced as evidence were deemed insufficient. Established in that
case, however, was the fact that respondent's truck was responsible for the damage to
petitioner's property and that petitioner suffered some form of pecuniary loss. In Canada
v. All Commodities Marketing Corporation, temperate damages were also awarded
wherein respondent's goods did not reach the Pepsi Cola Plant at Muntinlupa City as a
result of the negligence of petitioner in conducting its trucking and hauling services,
even if the amount of the pecuniary loss had not been proven. In Philtranco Services
Enterprises, Inc. v. Paras, the respondent was likewise awarded temperate damages in
an action for breach of contract of carriage, even if his medical expenses had not been
established with certainty. In People v. Briones, in which the accused was found guilty
of murder, temperate damages were given even if the funeral expenses for the victim
had not been sufficiently proven.

Given these findings, we are of the belief that temperate and not nominal damages
should have been awarded, considering that it has been established that respondent
herein suffered a loss, even if the amount thereof cannot be proven with
certainty.95 (Citations omitted)
Here, the Court of Appeals found that Meralco's disconnection had a "domino
effect"96 on Nordec's business, but that Nordec did not offer actual proof of its losses.
Nordec even admitted in its petition for review that there was an "oversight" on its part in
"adducing proof of the accurate amount of damages it sustained" due to Meralco's
acts.97 No pecuniary loss has been established in this case, apart from the claim in
Nordec's complaint that the "serious anxiety" of the disconnection had caused Nordec's
president to cancel business appointments, purchase orders, and fail to fulfill
contractual obligations, among others.98

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In this instance, nominal damages may be awarded. In Philippine Telegraph &
Telephone Corporation v. Court of Appeals:99
Temperate or moderate damages may only be given if the "court finds that some
pecuniary loss has been suffered but that its amount cannot, from the nature of the
case, be proved with certainty." The factual findings of the appellate court that
respondent has failed to establish such pecuniary loss or, if proved, cannot from their
nature be precisely quantified precludes the application of the rule on temperate or
moderate damages. The result comes down to only a possible award of nominal
damages. Nominal damages are adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant, may be vindicated or recognized and
not for the purpose of indemnifying the plaintiff for any loss suffered by him. The court
may award nominal damages in every obligation arising from any source enumerated in
article 1157 of the Civil Code or, generally, in every case where property right is
invaded.100 (Citations omitted)
Nominal damages are awarded to vindicate the violation of a right suffered by a party, in
an amount considered by the courts reasonable under the circumstances. 101 Meralco's
negligence in not providing Nordec sufficient notice of disconnection of its electric
supply, especially when there was an ongoing dispute between them concerning the
recomputation of the electricity bill to be paid, violated Nordec's rights. Because of this,
Nordec is entitled to nominal damages in the amount of P30,000.00.

WHEREFORE, the Petitions for Review on Certiorari in G.R. Nos. 196020 and 196116
are DENIED. The Court of Appeals January 21, 2011 Decision and March 9, 2011
Resolution in CA-G.R. CV No. 85564 are AFFIRMED with MODIFICATION. Manila
Electric Company is ordered to pay Nordec Philippines P5,625.00, representing
overbilling for November 23, 1987; P30,000.00 in nominal damages; and costs of suit.
The awards for exemplary damages and attorney's fees are deleted.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 191128, September 12, 2012 ]
CARMENCITA GUIZANO, SUBSTITUTED BY HER HEIRS, NAMELY: EUGENIO M.
GUIZANO, JR., EMMANUEL M. GUIZANO, EDMUND M. GUIZANO, ERWIN M.
GUIZANO, CARMINA M. GUIZANO, represented by their co-heir and attorney-in-
fact ELMER GUIZANO, AND ELMER M. GUIZANO, PETITIONERS, VS. REYNALDO
S. VENERACION, RESPONDENT.

DECISION
BRION, J.:
We resolve the petition for review on certiorari [1] filed by Carmencita Guizano (now
deceased), substituted by her heirs, namely Eugenir) M. Guizano, Jr., Emmanuel M.
Guizano, Edmund M. Guizano, Erwin M. Guizano, and Carmina M. Guizano,
represented by their co-heir and attorney-in-fact Elmer Guizano, and Elmer M. Guizano
to reverse and set aside the decision[2] dated July 31, 2007 of the Court of Appeals (CA)

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in CA G.R. CV No. 77248, as well as its resolution dated January 27, 2010. [3] These
assailed CA issuances essentially ordered petitioner Carmencita Guizano to reconvey
the subject property to respondent Reynaldo Veneracion.

THE FACTS

The facts of the case, as gathered from the decisions of the CA and the Regional Trial
Court (RTC), are summarized below.

This case involves two parcels of land in Barangay Kapihan, San Rafael, Bulacan that
Lucia Santos (married to David Santos) and her brother, Nicasio Bernardino, inherited
from their mother.

Nicasio sold his share of the property, Lot No. 431 consisting of 6,445 square meters, to
Dr. Eugenio and his wife Carmencita. The property was registered on February 22,
1985 under Transfer Certificate of Title (TCT) No. RT-18578,[4] in the name of
Emmanuel Guizano, the son of the Guizano spouses.

Lucia and her husband, for their part, sold a 656 sqm. portion of their land (subject
property) in September 1995 to Reynaldo.[5]

Since the Santoses did not have any documentary proof of ownership over the subject
property, Reynaldo had to rely on the Santoses’ representation that Lucia inherited the
land from her parents. Before buying the subject property, Reynaldo’s father, Dr.
Veneracion, hired a geodetic engineer to segregate the land being purchased from the
land registered to Emmanuel.

Domingo Santos (son of the Santos spouses), Nicasio and Carmencita were all present
during the survey when Nicasio pointed out the boundaries of his former lot, as well as
Lucia’s share. Carmencita also pointed out the boundaries of her property, which were
marked by bamboo trees, a madre de cacao tree and a pilapil.[6] The geodetic engineer
drew up a sketch plan based on the survey and had all those present, including
Carmencita, affix their signatures thereon.[7]

As an additional precautionary measure, when the Santoses and Reynaldo executed

the deed of sale (Bilihan ng Tuluyan) in September 1995, the parties had Carmencita
affix her signature to the deed of sale under the heading “Walang Tutol,”
signifying that she did not object to the sale.[8]

Thereafter, Carmencita discovered that the property sold to Reynaldo was actually part
of the property that had already been registered in Emmanuel’s name under TCT No.
RT-18578 on February 22, 1985. She thus placed the word “HOLD” on the subdivision
plan signed by the geodetic engineer.[9]

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On June 14, 1999, Reynaldo filed a complaint against Carmencita and the Santos
spouses, praying that Carmencita, as owner or as the lawful attorney-in-fact of her son
Emmanuel, be ordered to reconvey the 656 sqm. parcel of land in his (Reynaldo’s)
favor.[10] The complaint was docketed as Civil Case No. 623-M-99 and raffled to Branch
81 of the RTC of Malolos, Bulacan.

In her Answer, Carmencita claimed that the complaint was without merit since the
property subject of the sale between Reynaldo and the Santos spouses is part of the
property owned and registered in the name of her son Emmanuel, under TCT No. RT-
18578.[11] Reynaldo, thus, had no cause of action against her.

On July 24, 2002, the RTC dismissed Reynaldo’s complaint for lack of merit. The RTC
observed that while the sale between the Santoses and Reynaldo was established,
there was no evidence that the Santoses had the legal right to sell the lot. To begin with,
the property sold to Reynaldo was already covered by TCT No. RT-18578, registered in
the name of Emmanuel. In contrast, the Santoses had no evidence to support their
alleged ownership of the subject property – they never had the property surveyed, they
never paid real estate taxes on the land, and they never declared the property for tax. [12]

The RTC also found that Emmanuel’s title had already attained the status of
indefeasibility at the time Reynaldo filed his action. Furthermore, even if an action for
reconveyance had not yet prescribed as Reynaldo remained in possession of the
property, he is guilty of laches for filing the action 14 years after Emmanuel’s title had
been issued.

THE DECISION OF THE CA

In resolving Reynaldo’s appeal, the CA, in a decision dated July 31, 2007, [13] reversed
the RTC decision and ordered Carmencita to convey the subject property to Reynaldo.

The CA observed that Carmencita told Dr. Veneracion that the small portion of land
immediately adjacent to his property did not belong to her but to Lucia. In the absence
of any document showing the technical description of the respective shares of Nicasio
and Lucia, Lucia and her son Domingo built an earthen dike and planted trees to show
the demarcation line between the properties. This boundary was respected even by
Carmencita when her family bought the property from Nicasio. Carmencita also
participated in the survey conducted by the geodetic engineer by pointing out the
boundaries of her lot, and signed the deed of sale between the Santoses and Reynaldo
to signify her conformity to the sale. From Carmencita’s acts and representations, it is
clear that she believed that the subject property belonged to the Santoses and she was
estopped from claiming ownership over the subject property.

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The dispositive portion of this decision reads:

WHEREFORE, the foregoing considered, the instant appeal is hereby GRANTED and

the assailed decision is REVERSED AND SET ASIDE. Accordingly, a new one is
entered as follows:

1. Ordering defendant-appellee Carmencita Guizano as attorney-in-fact of her son

Emmanuel Guizano to reconvey and execute a “Deed of
Acknowledgement/Reconveyance” over the 656 square meter subject property in
favor of plaintiff-appellant Reynaldo Veneracion, Jr.

2. Declaring as valid and legal the “Bilihan Tuluyan” executed by

vendors/defendant-appellee spouses over the subject property in favor of plaintiff-
appellant.

3. Ordering the Registrar of Deeds of Bulacan to register the “BILIHAN TULUYAN”

as encumbrance in favor of plaintiff-appellant on TCT No. 18578.

4. In the alternative, if the above remedies are no longer possible, ordering

Carmencita Guizano and her principal, Emmanuel Guizano, to pay the fair market
value of the 656 square meter land.

5. Ordering defendant-appellee Carmencita Guizano to pay plaintiff-appellant

P50,000.00 attorney’s fees and cost of suit.
Costs against defendant-appellee Carmencita Guizano. [14] (emphases supplied)

THE PETITION

In their petition, Carmencita’s heirs argue that since Emmanuel’s certificate of title had
attained the status of indefeasibility, it was no longer open to review on the ground of
actual fraud. Neither is the legal remedy of reconveyance available against Carmencita
as laches had already set in when the Santoses, Reynaldo’s predecessors-in-interest,
slept on their right to assert their ownership over the subject property. Lastly, the action
should be dismissed as it was directed against Carmencita, who was not the real
party-in-interest as she was not the registered owner of the property from where
the 656 sqm. lot was taken. Emmanuel, the registered owner, was not even impleaded
in the case.

In his Comment, Reynaldo avers that the petition should be denied for raising a

question of fact, i.e., who is the owner of the subject property. He also insists that the
petitioners are bound by their predecessor-in-interest Carmencita’s acts in relation to

183
the subject property and, thus, they are estopped from questioning his right to the
property.

THE RULING

The Court GRANTS the petition.

Complaint was not filed against the real party-in-interest 

The records from both the RTC and the CA reveal that the courts a quo arrived at the
same factual considerations. Undoubtedly, the subject property that Reynaldo
purchased from the Santos spouses is part of the land registered in the name of
Emmanuel under TCT No. RT-18578. The conflict arises when we take into
consideration the acts and representations of Carmencita regarding the subject
property, which show her recognition that the subject property is not part of her son’s
property, but was actually owned by the Santoses and was later purchased by
Reynaldo.

In determining entitlement to the subject property, the RTC emphasized that the
Santoses never assailed the registration of their property in Emmanuel’s name. The trial
court thus ruled in favor of Emmanuel after determining that the Santoses had been
guilty of laches. In contrast, the CA highlighted the fact that the Santoses had been in
open, peaceful, public, and adverse possession of the subject property in the concept of
owners, and Carmencita never questioned this possession until after the sale to
Reynaldo, when she discovered that this land was actually part of the land registered in
her son’s name.

After examining the records, we find that both the RTC and the CA grievously erred
when they overlooked a basic but fundamental issue that Carmencita timely raised in
her Answer – that the complaint states no cause of action against her. [15]

An action for reconveyance is an action available to a person whose property has been
wrongfully registered under the Torrens system in another’s name.16 While it is a real
action, it is an action in personam, for it binds a particular individual only, although it
concerns the right to an intangible thing. Any judgment in this action is binding only
upon the parties properly impleaded. [17] This is in keeping with the principle that every
action must be prosecuted or defended in the name of the real party-ininterest, i.e., the
party who stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit,[18] as embodied in Section 2, Rule 3 of the Rules of
Court:

Section 2. Parties in interest. – A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of the

184
suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest. [italics supplied]

Any decision rendered against a person who is not a real party-ininterest in the case
cannot be executed. Hence, a complaint filed against such a person should be
dismissed for failure to state a cause of action.[19]

Reynaldo filed the present complaint to compel Carmencita to execute a Deed of

Acknowledgement/Reconveyance over the subject property in his favor. Notably, he
filed the present action only against Carmencita, despite his knowledge that the subject
property is registered in Emmanuel’s name. As he stated in his complaint:

5. That defendant, GUISANO,[20] now refuses to recognize the sale made by

defendants SANTOS to plaintiff, with her consent and connivance, and now claims
the said parcel of land as HERS; having been registered by her, or her deceased
husband in the name of their son, Emmanuel Guisano, under TCT No. RT-18578 of
the Registry of Deeds of Bulacan only for tax purposes;

6. That said defendant GUISANO also refuses to execute the necessary DEED OF
ACKNOWLEDGEMENT/RECONVEYANCE to plaintiff, or cause the same to be
executed by the nominal owner, her son, EMMANUEL, in order to set the record
straight and quiet title to the aforesaid portion of land[.] [21]

In the prayer portion of his complaint, Reynaldo further asserted that he filed the present
action against Carmencita as either the owner of the subject property or the lawful
attorney-in-fact of Emmanuel. We quote the pertinent portion of the complaint:

WHEREFORE, it is respectfully prayed that judgment be rendered:

1. Ordering defendant CARMENCITA GUISANO, as the alleged owner of the property

and/or as the lawful attorney-in-fact of her son Emmanuel Guisano, to execute the
necessary DEED OF ACKNOWLEDGEMENT/RECONVEYANCE over the parcel of
land described in par. 3 of this Complaint, in favor of plaintiff; and/or in the alternative,
ordering defendant GUISANO to pay plaintiff the sum of P330,000.00, equivalent to the
present value of the land, as actual damages[.] [22]

As Reynaldo himself recognized in his complaint, the subject property is registered

under TCT No. RT-18578 in Emmanuel’s name alone; Carmencita’s name does not
appear anywhere on the title. While Reynaldo alleged that Carmencita was the owner of
the property subject of dispute, with Emmanuel acting as a mere nominal owner, a
Torrens certificate is the best evidence of ownership over registered land, 23 and serves
as evidence of an indefeasible title to the property in favor of the person whose name
appears on the title.[24] Absent any evidence to the contrary, Emmanuel is the real party-
in-interest in any action that seeks to challenge ownership of the registered property.

185
Reynaldo should thus have filed his complaint for reconveyance against him.

What makes Reynaldo’s error all the more inexcusable is the fact that Carmencita
repeatedly raised this defect before the lower court in her Answer[25] and Pre-Trial Brief.
[26]
 Given Reynaldo’s awareness of the defect of his complaint, and the opportunities
afforded him to address the defect, his failure to implead Emmanuel in the action is
untenable.

While the lower courts considered Carmencita to be Emmanuel’s attorney-in-fact, we

find no evidence on record that Emmanuel ever authorized his mother to represent him
in this action. Even assuming that Carmencita did act as Emmanuel’s attorney-in-fact, it
is well-established in our jurisdiction that an attorney-in-fact is not the real party-in-
interest. Even if so authorized in the power of attorney, she cannot bring an action in her
own name for an undisclosed principal.[27] Since Reynaldo was obviously aware of the
fact that the subject property was registered in Emmanuel’s name, he should still have
included Emmanuel as a defendant in the aware of the fact that the subject property
was registered in Emmanuel's name, he should still have included Emmanuel as a
defendant in the reconveyance case pursuant to Section 3, Rule 3 of the Rules of Civil
Procedure, which reads:

Section 3. Representatives as parties.-Where the action is allowed to be prosecuted

or defended by a representative or someone acting in a fiduciary capacity, the
beneficiary shall be included in the title of the case and shall be deemed to be the
real party in interest. A representative may be a trustee of an express trust, a
guardian, an executor or administrator, or a party authorized by law or these Rules. An
agent acting in his own name and for the benefit of an undisclosed principal may sue or
be sued without joining the principal except when the contract involves things belonging
to the principal. [emphasis ours]

WHEREFORE, the petition is GRANTED. The Decision of the CA dated July 31, 2007
in CA-G.R. CV No. 77248 is REVERSED and SET ASIDE, and the complaint in Civil
Case No. 623-M-99 is DISMISSED for lack of merit, without pronouncement as to costs.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 186305, July 22, 2015 ]
V-GENT, INC., PETITIONER, VS. MORNING STAR TRAVEL AND TOURS, INC.,
RESPONDENT.

DECISION
BRION, J.:

186
We resolve the petition for review on certiorari filed to challenge the November 11, 2008
Decision and February 5, 2009 Resolution of the Court of Appeals (CA) in CA-G.R. SP
No. 97032.[1]

ANTECEDENTS

Sometime in June and in September 1998, the petitioner V-Gent, Inc. (V-Gent) bought
twenty-six (26)[2] two-way plane tickets (Manila-Europe-Manila) from the respondent
Morning Star Travel and Tours, Inc. (Morning Star).

On June 24, 1998 and September 28, 1998, V-Gent returned a total of fifteen (15)
unused tickets worth $8,747.50 to the defendant. Of the 15, Morning Star refunded only
six (6) tickets worth $3,445.62, Morning Star refused to refund the remaining nine (9)
unused tickets despite repeated demands.

On December 15, 2000, petitioner V-Gent filed a money claim against Morning Star for
payment of the unrefunded $5,301.88 plus attorney's fees. The complaint was raffled to
Branch 2 of the Metropolitan Trial Court (MeTC) of Manila and docketed as Civil Case
No. 169296-CV.

Morning Star countered that V-Gent was not entitled to a refund because the tickets
were bought on the airline company's "buy one, take one" promo. It alleged that there
were only fourteen (14) unused tickets and only seven (7) of these were refundable;
considering that it had already refunded six (6) tickets (which is more or less 50% of
14), then there was nothing else to refund.

Morning Star also questioned V-Gent's personality to file the suit. It asserted that the
passengers, in whose names the tickets were issued, are the real parties-in-interest.

On January 27, 2006, after due proceedings, the MeTC dismissed the complaint for lack
of a cause of action. Citing Rule 3, Section 3 of the Rules of Court, [3] the MeTC declared
that, as agent of the passengers who paid for the tickets, V-Gent stood as the real
party-in-interest. Nevertheless, it still dismissed the complaint because V-Gent failed to
prove its claim by a preponderance of evidence.

V-Gent appealed to the Regional Trial Court (RTC) and the case was docketed as Civil
Case No. 06-115050.

On September 25, 2006, the RTC granted the appeal after finding that V-Gent had
established its claim by a preponderance of evidence. It set aside the MeTC's judgment
and ordered Morning Star to pay V-Gent the value of the nine (9) unrefunded tickets
plus attorney's fees.

Morning Star filed a petition for review with the CA; the case was docketed as CA-G.R.
SP No. 97032. Morning Star questioned the RTC's appreciation of the evidence and
factual conclusions. It also reiterated its question about V-Gent's legal standing,
submitting once again that V-Gent is not the real party-in-interest.
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On November 11, 2008, the CA granted the petition for review and dismissed V-Gent's
complaint. The CA held that V-Gent is not a real party-in-interest because it merely
acted as an agent of the passengers who bought the tickets from Morning Star with their
own money.

V-Gent moved for reconsideration, which motion the CA denied on February 5, 2009,
thus clearing the way for the present petition for review on certiorari.

THE PETITION

V-Gent argues that the CA erred in ruling that it is not the real party-in-interest. It
asserts: (1) that the issue of its legal standing to file the complaint has already become
final because Morning Star did not appeal the MeTC's ruling on the issue; (2) that it is a
real party-in-interest in filing the complaint; and (3) that Morning Star is already
estopped from questioning V-Gent's legal standing to file the complaint.

In its Comment, Morning Star counters: (1) that it had no obligation to appeal the MeTC
judgment dismissing the complaint in its favor; (2) that the MeTC did not specifically
state that V-Gent is the real party-in-interest; (3) that the real parties-in-interest are the
passengers named on the tickets; and (4) that it made no admissions that would estop it
from denying the refund.

OUR RULING

V-Gent maintains that the MeTC determined that it was the real party-in-interest. It
argues that since Morning Star did not appeal this specific finding with the RTC, then
the MeTC's ruling on this point had already become final and conclusive; therefore,
Morning Star can no longer revive the issue before the CA.

We disagree with V-Gent.

The MeTC dismissed V-Gent's complaint against Morning Starrer for failure to prove its
claim. This dismissal meant that the plaintiff did not prove a violation of its right for
which the defendant should be held liable. This ruling was plainly a judgment in Morning
Star's favor and one that it had no cause to question. Indeed, it would be legally illogical
for Morning Star to file an appeal to question a ruling of dismissal in its favor.

V-Gent also argues that it is a real party-in-interest with legal standing to institute the
complaint against Morning Star. In the present petition, it states:
36. The Court of Appeals chose to ignore the fact that while the plane tickets bore the
names of the individual passengers, the respondent admitted that it was the
petitioner that transacted business with it concerning the purchase of these plane
tickets. Both the purchase order and receipt of payments were under the name of the
petitioner. Thus, since it was the petitioner who purchased these plane tickets on
behalf of the passengers, the respondent voluntarily refunded to the former the value

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of six (6) unused return tickets in the total amount of US$3,445.62. Though, for reasons
it did not reveal to petitioner, it refused to refund the rest. [4] (Emphasis supplied.)
V-Gent admits that it purchased the plane tickets on behalf of the passengers as the
latter's agent.[5] The tickets were issued in the name of the passengers and paid for with
the passengers' money. No dispute or conclusion in the lower courts' minds on this
point; hence, both the MeTC[6] and the CA[7] commonly found that V-Gent acted as an
agent of the passengers when it purchased the passengers' plane tickets.

However, while the MeTC held that V-Gent could sue as an agent acting in his own
name on behalf of an undisclosed principal, the CA held that it could not because the
requirements for such a suit by the agent had not been satisfied.

We agree with the Court of Appeals.

Every action must be prosecuted or defended in the name of the real party-in-interest -
the party who stands to be benefited or injured by the judgment in the suit. [8] In suits
where an agent represents a party, the principal is the real party-in-interest; an agent
cannot file a suit in his own name on behalf of the principal.

Rule 3, Section 3 of the Rules of Court provides the exception when an agent may

sue or be sued without joining the principal.
Section 3. Representatives as parties. - Where the action is allowed to be prosecuted
and defended by a representative or someone acting in a fiduciary capacity, the
beneficiary shall be included in the title of the case and shall be deemed to be the real
party-in-interest. A representative may be a trustee of an express trust, a guardian, an
executor or administrator, or a party authorized by law or these Rules. An agent acting
in his own name and for the benefit of an undisclosed principal may sue or be
sued without joining the principal except when the contract involves things
belonging to the principal. (Emphasis supplied.)
Thus an agent may sue or be sued solely in its own name and without joining the
principal when the following elements concur: (1) the agent acted in his own name
during the transaction; (2) the agent acted for the benefit of an undisclosed principal;
and (3) the transaction did not involve the property of the principal.

When these elements are present, the agent becomes bound as if the transaction were
its own. This rule is consistent with Article 1883 of the Civil Code which says:
Art. 1883. If an agent acts in his own name, the principal has no right of action against
the persons with whom the agent has contracted; neither have such persons against the
principal.

In such case, the agent is the one directly bound in favor of the person with whom he
has contracted, as if the transaction were his own, except when the contract involves
things belonging to the principal.

The provisions of this article shall be understood to be without prejudice to the actions
between the principal and agent.

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In the present case, only the first element is present; the purchase order and the receipt
were in the name of V-Gent. However, the remaining elements are absent because: (1)
V-Gent disclosed the names of the passengers to Morning Star — in fact the tickets
were in their names; and (2) the transaction was paid using the passengers' money.
Therefore, Rule 3, Section 3 of the Rules of Court cannot apply.

To define the actual factual situation, V-Gent, the agent, is suing to recover the money
of its principals — the passengers — who are the real parties-in-interest because they
stand to be injured or benefited in case Morning Star refuses or agrees to grant the
refund because the money belongs to them. From this perspective, V-Gent evidently
does not have a legal standing to file the complaint.

Finally, V-Gent argues that by making a partial refund, Morning Star was already
estopped from refusing to make a full refund on the ground that V-Gent is not the real
party-in-interest to demand reimbursement. [9]

We find no merit in this argument.

The power to collect and receive payments on behalf of the principal is an ordinary act
of administration covered by the general powers of an agent. [10] On the other hand, the
filing of suits is an act of strict dominion.

Under Article 1878 (15) of the Civil Code, a duly appointed agent has no power to
exercise any act of strict dominion on behalf of the principal unless authorized by a
special power of attorney. An agent's authority to file suit cannot be inferred from his
authority to collect or receive payments; the grant of special powers cannot be
presumed from the grant of general powers. Moreover, the authority to exercise special
powers must be duly established by evidence, even though it need not be in writing. [11]

By granting the initial refund, Morning Star recognized V-Gent's authority to buy the
tickets and collect refunds on behalf of the passengers. However, Morning Star's
recognition of V-Gent's authority to collect a refund for the passengers is not equivalent
to recognition of V-Gent's authority to initiate a suit on behalf of the passengers.
Morning Star therefore, is not estopped from questioning V-Gent's legal standing to
initiate the suit.

WHEREFORE, premises considered, we DENY the petition for lack of merit.

SO ORDERED.

FIRST DIVISION

G.R. No. 208928               July 8, 2015

ANDY ANG, Petitioner,
vs.

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SEVERINO PACUNIO, TERESITA P. TORRALBA, SUSANA LOBERANES,
CHRISTOPHER N. PACUNIO, and PEDRITO P. AZARCON, represented by their
attorney-in-fact, GALILEO P. TORRALBA, Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari 1 under Rule 45 of the Rules of Court are
the Decision2 dated September 28, 2012 and the Resolution 3 dated August 13, 2013 of
the Court of Appeals (CA) in CA-G.R. CV No. 00992-MIN, which affirmed the Summary
Judgment4 dated September 12, 2006 of the Regional Trial Court of Cagayan de Oro
City, Branch 38 (RTC) in Civil Case No. 2003-115 with modification declaring, inter alia,
the Deed of Absolute Sale between petitioner Andy Ang (petitioner) and Felicisima
Udiaan (Udiaan) null and void.

The Facts

The instant case arose from a Complaint 5 dated March I 9, 2003 for Declaration of
Nullity of Sale, Reconveyance, and Damages filed by Pedrito N. PaGunio, Editha P.
Yaba, and herein respondents Severino Pacunio, Teresita P. Torralba, Susana
Loberanes, Christopher N. Pacunio, and Pedrito P. Azaron (respondents) against
petitioner before the RTC involving a 98,851 square meter (sq. m.) parcel of land
originally registered in Udiaan's name as evidenced by Original Certificate of Title (OCT)
No. T-35936 (subject land). In their Complaint, respondents alleged that they are the
grandchildren and successors-in-interest of Udiaan who died 7 on December 15, 1972 in
Cagayan de Oro City and left the subject land as inheritance to her heirs. However, on
July 12, 1993, an impostor falsely representing herself as Udiaan sold the subject land
to petitioner, as evidenced by a Deed of Absolute Sale 8 of even date (Questioned Deed
of Absolute Sale). Consequently, OCT No. T-3593 was cancelled and Transfer
Certificate of Title (TCT) No. T-790519 was issued in the latter's name. In 1997,
petitioner entered the subject land and used the same in his livestock business.
Respondents then informed petitioner that he did not validly acquire the subject land,
and thereafter, demanded for its return, but to no avail. 10 Hence, they filed the aforesaid
complaint, essentially contending that Udiaan could not have validly sold the subject
land to petitioner considering that she was already dead for more than 20 years when
the sale occurred.11

In his Answer,12 petitioner denied respondents' allegations and countered that: (a) at

first, he bought the subject land from a person representing herself as Udiaan who
showed a community tax certificate as proof of identity, has in her possession OCT No.
T-3593, knew the location of the subject land, and was not afraid to face the notary
public when they executed the Questioned Deed of Absolute Sale; ( b) he was initially
prevented from entering the subject land since it was being occupied by the Heirs of
Alfredo Gaccion (Heirs of Gaccion); (c) in order to buy peace, he had to "buy" the
subject land anew from the Heirs of Gaccion; (d) he was a buyer in good faith, for value,

191
and was without any knowledge or participation in the alleged defects of the title thereof;
and ( e) respondents were never in possession of the subject land and they never paid
real property taxes over the same. Ultimately, petitioner claimed that he was duped and
swindled into buying the subject land twice.13

After the pre-trial conference, the parties submitted the case for summary judgment on
the basis of the documents and pleadings already filed.1awp++i1 The RTC then
ordered the parties to simultaneously submit their memoranda in support of their
respective positions.14

The RTC Ruling

In a Summary Judgment15 dated September 12, 2006, the RTC ruled in petitioner's

favor and accordingly, dismissed the case for lack of merit. 16 It found that while
respondents claimed to be Udiaan's successors-in-interest over the subject land, there
is dearth of evidence proving their successional rights to Udiaan's estate, specifically,
over the subject land. As such, the RTC concluded that respondents are not the real
parties in interest to institute an action against petitioner, warranting the dismissal of
their complaint.17

Dissatisfied, respondents appealed18 to the CA.

The CA Ruling

In a Decision19 dated September 28, 2012, the CA affirmed with modification the RTC
ruling in that: (a) it nullified the Questioned Deed of Absolute Sale; (b) declared valid the
deed of absolute sale between petitioner and the Heirs of Gaccion over a 3,502-sq. m.
portion of the subject land; and ( c) distributed portions of the subject land to the Heirs
of Gaccion and to the children of Udiaan.20

It agreed with the RTC's finding that respondents are not real parties in interest to the
instant case, considering that, as mere grandchildren of Udiaan, they have no
successional rights to Udiaan's estate. In this regard, the CA ratiocinated that
respondents could only succeed from said estate by right of representation if their
mother, who is one of Udiaan's children,21 predeceased Udiaan. However, such fact
was not established.22

This notwithstanding, the CA nullified the Questioned Deed of Absolute Sale because it
was clearly executed by a person other than Udiaan, who died more than 20 years
before such sale occurred.23 Considering, however, that some of Udiaan's heirs had
already sold a 9,900-sq. m. portion of the subject land to the Heirs of Gaccion, who in
turn, sold a 3,502-sq. m. portion to petitioner, the CA apportioned the subject land as
follows: (a) 3,502 sq. m. to petitioner; (b) 6,398 sq. m. to the Heirs of Gaccion; and (c)
the remainder of the subject land to Udiaan's children. 24

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Aggrieved, petitioner moved for reconsideration, 25 but was denied in a
Resolution26 dated August 13, 2013; hence, this petition.

The Issue Before the Court

The core issue for the Court's resolution is whether or not the CA correctly declared the
nullity of the Questioned Deed of Absolute Sale and distributed portions of the subject
land to different parties, among others, despite ruling that respondents are not real
parties in interest to the instant case.

The Court's Ruling

The petition is meritorious.

Section 2, Rule 3 of the Rules of Court lays down the definition of a real party in interest
as follows:

SEC. 2. Parties in interest. - A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of the
suit. Unless otherwise provided by law or these Rules, every action must be prosecuted
or defended in the name of the real party in interest.

The rule on real parties in interest has two (2) requirements, namely: (a) to institute an
action, the plaintiff must be the real party in interest; and (b) the action must be
prosecuted in the name of the real party in interest. Interest within the meaning of the
Rules of Court means material interest or an interest in issue to be affected by the
decree or judgment of the case, as distinguished from mere curiosity about the question
involved. One having no material interest cannot invoke the jurisdiction of the court as
the plaintiff in an action. When the plaintiff is not the real party in interest, the case is
dismissible on the ground of lack of cause of action. 27 In Spouses Oco v.
Limbaring,28 the Court expounded on the purpose of this rule, to wit: Necessarily, the
purposes of this provision are 1) to prevent the prosecution of actions by persons
without any right, title or interest in the case; 2) to require that the actual party entitled to
legal relief be the one to prosecute the action; 3) to avoid multiplicity of suits; and 4)
discourage litigation and keep it within certain bounds, pursuant to public policy. 29

In the instant case, respondents claim to be the successors-in-interest of the subject

land just because they are Udiaan's grandchildren.1âwphi1 Under the law, however,
respondents will only be deemed to have a material interest over the subject land - and
the rest of Udiaan' s estate for that matter - if the right of representation provided under
Article 970,30 in relation to Article 982,31 of the Civil Code is available to them. In this
situation, representatives will be called to the succession by the law and not by the
person represented; and the representative does not succeed the person represented
but the one whom the person represented would have succeeded. 32

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For such right to be available to respondents, they would have to show first that their
mother: (a) predeceased Udiaan; (b) is incapacitated to inherit; or (c) was disinherited, if
Udiaan died testate.33 However, as correctly pointed out by the CA, nothing in the
records would show that the right of representation is available to respondents. Hence,
the RTC and the CA correctly found that respondents are not real parties in interest to
the instant case. It is well-settled that factual findings of the RTC, when affirmed by the
CA, are entitled to great weight and respect by the Court and are deemed final and
conclusive when supported by the evidence on record, 34 as in this case.

Having established that respondents are not the real parties in interest to the instant
suit, the proper course of action was for the CA to merely affirm the RTC's dismissal of
their complaint. It therefore erred in proceeding to resolve the other substantive issues
of the case and granting one of the principal reliefs sought by respondents, which is the
declaration of the nullity of the Questioned Deed of Absolute Sale. 35 In the same vein,
the CA erred in awarding portions of the subject land to various non-parties to the case,
such as the Heirs of Gaccion and Udiaan's children. Basic is the rule that no relief can
be extended in a judgment to a stranger or one who is not a party to a case. 36

In sum, the CA transgressed prevailing law and jurisprudence in resolving the

substantive issues of the instant case despite the fact that respondents are not real
parties in interest to the same. Necessarily, a reinstatement of the R TC ruling is in
order.

WHEREFORE, the petition is GRANTED. Accordingly, the Decision dated September

28, 2012 and the Resolution dated August 13, 2013 of the Court of Appeals in CA-G.R.
CV No. 00992-MIN are hereby REVERSED and SET ASIDE. Accordingly, the Summary
Judgment dated September 12, 2006 of the Regional Trial Court of Cagayan de Oro
City, Branch 38 in Civil Case No. 2003-115 is REINSTATED.

SO ORDERED.

SECOND DIVISION

G.R. No. 224204, August 30, 2017

PHILIPPINE VETERANS BANK, Petitioner, v. SPOUSES RAMON AND ANNABELLE

SABADO, Respondents.

DECISION

PERLAS-BERNABE, J.:

Before the Court is a petition for review on certiorari1 filed by petitioner Philippine

Veterans Bank (petitioner) assailing the Decision 2 dated October 29, 2015 and the
Resolution3 dated April 20, 2016 of the Court of Appeals (CA) in CA-G.R. SP No.
135922, which reversed and set-aside the Decision 4 dated November 28, 2013 and the

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Order5 dated April 28, 2014 of the Regional Trial Court of Antipolo City, Branch 98
(RTC) in SCA Case No. 13-1290 and ordered that Haus Talk Project Managers, Inc.
(HTPMI) be impleaded as an indispensable party to the unlawful detainer case against
respondents spouses Ramon and Annabelle Sabado (respondents).

The Facts

On May 3, 2007, HTPMI and respondents entered into a Contract to Sell 6 whereby
HTPMI agreed to sell a real property located at Lot 26, Block 1, Eastview Homes,
Barangay Balimbing, Antipolo City (subject property) to respondents. In consideration
therefor, respondents paid HTPMI the total amount of P869,400.00, consisting of a
P174,400.00 downpayment and the balance of P695,000.00 payable in 120 equal
monthly instalments. The parties further agreed that respondents' failure to pay any
amount within the stipulated period of time shall mean the forfeiture of the
downpayment and any other payments made in connection thereto, as well as the
cancellation and rescission of the Contract to Sell in accordance with law. 7 Shortly
thereafter, or on August 16, 2007, HTPMI executed a Deed of Assignment 8 in favor of
petitioner assigning, among others, its rights and interests as seller in the aforesaid
Contract to Sell with respondents, including the right to collect payments and execute
any act or deed necessary to enforce compliance therewith. 9

On October 14, 2009, petitioner, through a Notice of Cancellation by Notarial

Act,10 cancelled or rescinded respondents' Contract to Sell due to the latter's failure to
pay their outstanding obligations thereunder. Consequently, petitioner demanded that
respondents vacate the subject property, but to no avail. Thus, petitioner was
constrained to file the Complaint11 dated August 20, 2010 for ejectment or unlawful
detainer against respondents before the Municipal Trial Court in Cities of Antipolo City,
Branch 1 (MTCC), docketed as SCA Case No. 093-10.12

In their defense,13 respondents argued that petitioner is not the real party in interest to
institute such complaint, since ownership over the subject property remained with
HTPMI. They expounded that under the Deed of Assignment, only the rights and
interests pertaining to the receivables under the Contract to Sell were
assigned/transferred to petitioner and not the ownership or the right to the possession of
the subject property.14

The MTCC Ruling

In a Decision15 dated April 3, 2013, the MTCC ruled in favor of petitioner and,

accordingly, ordered respondents to vacate the subject property, and pay petitioner the
amounts of P661,919.47 as rent arrears from July 31, 2008 up to July 31, 2010,
P10,000.00 as attorney's fees, including costs of suit. 16

The MTCC held that by virtue of the Deed of Assignment, petitioner was subrogated to
the rights of HTPMI under the Contract to Sell and, hence, is a real party in interest
entitled to institute the instant suit against respondents for the purpose of enforcing the
provisions of the Contract to Sell. Further, the MTCC found petitioner's claim for

195
compensation in the form of rental just and equitable, pointing out that the same is
necessary to prevent respondents from unjustly enriching themselves at petitioner's
expense. Finally, the MTCC awarded petitioner attorney's fees and costs of suit since it
was compelled to litigate the instant complaint.17

Aggrieved, respondents appealed18 to the RTC.

The RTC Ruling

In a Decision19 dated November 28, 2013, the RTC affirmed the MTCC's ruling in
toto.20 It ruled that by virtue of the Deed of Assignment executed by HTPMI in
petitioner's favor, the latter acquired not only the right to collect the balance of the
purchase price of the subject property, but also all the rights of the assignor, including
the right to sue in its own name as the legal assignee. 21

Respondents moved for reconsideration,22 which was, however, denied in an

Order23 dated April 28, 2014. Undaunted, they elevated the case to the CA. 24

The CA Ruling

In a Decision25 dated October 29, 2015, the CA reversed and set aside the RTC's ruling,
and accordingly: (a) remanded the case to the MTCC for HTPMI to be impleaded
therein; and (b) directed the MTCC to proceed with the trial of the case with
dispatch.26 Initially, it upheld petitioner's right as real party in interest to file the instant
suit as HTPMI's assignee. However, since legal title to the subject property was retained
by HTPMI pursuant to the provisions of the Deed of Assignment, the latter is not only a
real party in interest, but also an indispensible party which should have been impleaded
as a plaintiff thereon and without which no final determination can be had in the present
case.27

Dissatisfied, petitioners moved for reconsideration, 28 which was, however, denied in a

Resolution29 dated April 20, 2016; hence, this petition.

The Issue Before the Court

The primordial issue is whether or not the CA correctly ruled that HTPMI is an
indispensable party to petitioner's ejectment suit against respondents and, thus, must
be impleaded therein.

The Court's Ruling

The petition is meritorious.

Section 7, Rule 3 of the Rules of Court mandates that all indispensable parties should
be joined in a suit, viz.:chanRoblesvirtualLawlibrary

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SEC. 7. Compulsory joinder of indispensable parties. - Parties in interest without whom
no final determination can be had of an action shall be joined either as plaintiffs or
defendants.
Case law defines an indispensable party as "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. The party's interest in the subject 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 cannot be a resolution of the
dispute of the parties before the court which is effective, complete, or
equitable."30 "Thus, 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."31 In Regner v. Logarta,32 the Court laid down the
parameters in determining whether or not one is an indispensable
party, viz.:chanRoblesvirtualLawlibrary
An indispensable party is a party who has x x x an interest in the controversy or
subject matter that a final adjudication cannot be made, in his absence, without
injuring or affecting that interest, a party who has not only an interest in the
subject matter of the controversy, but also has an interest of such nature that a
final decree cannot be made without affecting his interest or leaving the
controversy in such a condition that its final determination may be wholly
inconsistent with equity and good conscience. It has also been considered that an
indispensable party is a person in whose absence there cannot be a determination
between the parties already before the court which is effective, complete, or equitable.
Further, an indispensable party is one who must be included in an action before it may
properly go forward.

A person is not an indispensable party, however, if his interest in the controversy or

subject matter is separable from the interest of the other parties, so that it will not
necessarily be directly or injuriously affected by a decree which does complete
justice between them. Also, a person is not an indispensable party if his presence
would merely permit complete relief between him and those already parties to the
action, or if he has no interest in the subject matter of the action. It is not a sufficient
reason to declare a person to be an indispensable party that his presence will avoid
multiple litigation.33 (Emphases and underscoring supplied)
Guided by the foregoing parameters and as will be explained hereunder, the CA erred
in holding that HTPMI is an indispensable party to the ejectment suit filed by petitioner
against respondents.

Under the Deed of Assignment, HTPMI assigned its rights - save for the right of
ownership - to petitioner under the Contract to Sell:chanRoblesvirtualLawlibrary
2. RIGHTS UNDER THE CONTRACTS TO SELL. By this assignment, the ASSIGNEE
hereby acquires all rights of the ASSIGNOR under the Contracts to Sell and under
the law, including the right to endorse any and all terms and conditions of the
Contracts to Sell and the right to collect the amounts due thereunder from the
purchaser of the Property. The ASSIGNOR for this purpose hereby names,
constitutes and appoints the ASSIGNEE [as its] attorney-in-fact to execute any

197
act and deed necessary in the exercise of all these rights. Notwithstanding the
assignment of the Contracts to Sell and the Receivables thereunder to the ASSIGNEE,
the legal title to the Property and obligations of the ASSIGNOR under the Contracts to
Sell, including the obligation to complete the development of the property and the
warranties of a builder under the law, shall remain the ASSIGNOR'S. x x x. 34 (Emphasis
and underscoring supplied)
Verily, HTPMI's assignment of rights to petitioner must be deemed to include the rights
to collect payments from respondents, and in the event of the latter's default, to cancel
or rescind the Contract to Sell, and resultantly, recover actual possession over the
subject property, as follows:chanRoblesvirtualLawlibrary
TERMS AND CONDITIONS

b) the [respondents] herein agree to perform and undertake the [HTPMI] Payment Plan
with the following terms:

i) Downpayment x x x of ONE HUNDRED SEVENTY FOUR THOUSAND FOUR

HUNDRED PESOS ONLY (P174,400.00) to be paid within twelve (12) months after
payments [sic] of the reservation. Failure to pay two (2) consecutive monthly
installments will mean cancellation of this contract and forfeiture of all
payments. Discount terms shall be based on [HTPMI] Agreed Payment Plan.
 
xxxx

iii) Failure to pay any amount within the stimulated [sic] period of time shall mean
forfeiture of the down payment and any other payments made and the Contract to
Sell shall be cancelled and rescinded in accordance with law. 35 (Emphases and
underscoring supplied)
In view of the foregoing, the Court agrees with the findings of the courts a quo that
petitioner had the right to institute the instant suit against respondents.

However, the Court cannot subscribe to the CA's conclusion that since HTPMI retained
ownership over the subject property pursuant to the Deed of Assignment, it is an
indispensable party to the case. As adverted to earlier, an indispensable party is one
who has an interest in the subject matter of the controversy which is inseparable from
the interest of the other parties, and that a final adjudication cannot be made without
affecting such interest. Here, the only issue in the instant unlawful detainer suit is who
between the litigating parties has the better right to possess de facto the subject
property.36 Thus, HTPMI's interest in the subject property, as one holding legal title
thereto, is completely separable from petitioner's rights under the Contract to Sell, which
include the cancellation or rescission of such contract and resultantly, the recovery of
actual possession of the subject property by virtue of this case. Hence, the courts can
certainly proceed to determine who between petitioner and respondents have a better
right to the possession of the subject property and complete relief can be had even
without HTPMI's participation.

In sum, both the MTCC and the RTC are correct in ruling on the merits of the instant

198
unlawful detainer case even without the participation of HTPMI.

WHEREFORE, the petition is hereby GRANTED. The Decision dated October 29, 2015
and the Resolution dated April 20, 2016 of the Court of Appeals in CA-G.R. SP No.
135922 are hereby REVERSED and SET-ASIDE. The Decision dated November 28,
2013 and the Order dated April 28, 2014 of the Regional Trial Court of Antipolo City,
Branch 98 in SCA Case No. 13-1290, affirming in toto the Decision dated April 3, 2013
of the Municipal Trial Court in Cities of Antipolo City, Branch 1 in SCA Case No. 093-10,
are REINSTATED.

SO ORDERED.
SECOND DIVISION
[ G.R. No. 173336, November 26, 2012 ]
PABLO PUA, PETITIONER, VS. LOURDES L. DEYTO, DOING BUSINESS UNDER
THE TRADE NAME OF “JD GRAINS CENTER”; AND JENNELITA DEYTO ANG
A.K.A. “JANET ANG,” RESPONDENTS.

DECISION
BRION, J.:
Before us is the petition for review on certiorari,[1] filed by Pablo Pua under Rule 45 of
the Rules of Court, assailing the decision[2] dated February 23, 2006 and the
resolution[3] dated June 23, 2006 of the Court of Appeals (CA) in CA-G.R. CV No.
84331. The CA affirmed the order[4] dated January 3, 2005 of the Regional Trial Court
(RTC), Branch 19, Manila, in Civil Case No. 00-99353 which dismissed the case for
failure to prosecute.

The Antecedent Facts

Pua is engaged in the business of wholesale rice trading. Among his clients was
respondent Jennelita Ang, allegedly operating under the business and trade name of JD
Grains Center. In October 2000, Pua delivered to Ang truckloads of rice worth
P766,800.00. Ang paid Pua through two (2) postdated checks dated November 4, 2000
and November 6, 2000. When the checks fell due, Pua tried to encash them, but they
were dishonored because they were drawn from a closed account.

Pua immediately went to Ang’s residence to complain. Unfortunately, he was only able
to talk to Ang’s mother and co-respondent, Lourdes Deyto, who told him that Ang had
been missing. Unable to locate Ang, Pua demanded payment from Deyto, but she
refused to pay.

On November 24, 2000, Pua filed a complaint [5] with the RTC for collection of sum of
money with preliminary attachment against Ang and Deyto, as co-owners of JD
Grains Center. The complaint alleged that the respondents were guilty of fraud in
contracting the obligation, as they persuaded Pua to conduct business with them and
presented documents regarding their financial capacity to fund the postdated checks.

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On November 28, 2000, the RTC issued an order for the issuance of a writ of
preliminary attachment upon an attachment bond of P766,800.00. Since Ang could not
be found and had no available properties to satisfy the lien, the properties of Deyto were
levied upon.

Summons was duly served on Deyto, but not on Ang who had absconded. On April 16,
2001, Deyto submitted her answer with special and affirmative defenses. [6] On May 8,
2001, Deyto filed a “Motion to Set Hearing of Defendant’s Special and Affirmative
Defenses,” which was in the nature of a motion to dismiss. [7] In an order dated July 12,
2001, the RTC denied Deyto’s motion to dismiss, stating that:

The allegations raised by defendant Lourdes Deyto as special and affirmative defenses
are largely evidentiary in nature and therefore can be threshed out in a trial on the merit.
Consequently, the prayer to dismiss the complaint upon these grounds, is hereby
Denied.[8]

After Pua and Deyto filed their respective pre-trial briefs, the case was set for pre-trial
conference on November 13, 2001. On the scheduled date, the RTC ordered the
resetting of the pre-trial conference to January 22, 2002, upon the parties’ agreement.
[9]
 The RTC, upon motion by Pua, also ordered the sheriff to submit the return of
summons for Ang.

The summons by publication to Ang

Since service of summons could not be effected on Ang, Pua moved for leave of court
to serve summons by publication on Ang on January 8, 2002. [10] The RTC granted the
motion in an order dated January 11, 2002. [11]

By March 2002, Pua’s counsel manifested that the summons for Ang remained
unpublished; the RTC accordingly cancelled the pre-trial scheduled on March 5, 2002. [12]

On May 17, 2002, Pua again filed a manifestation that as early as April 17, 2002, he
had already paid P9,500.00 to Manila Standard for the publication of the summons on
Ang, but it failed to do so.[13] This prompted the RTC to issue an order directing Manila
Standard to explain why the summons was not published despite payment of the
corresponding fees.[14] On May 30, 2002, Manila Standard explained [15] to the trial court
that when Pua paid the publication fee, he issued a specific order to hold the publication
until he ordered otherwise. Eventually, the summons for Ang was published in the May
31, 2002 edition of the Manila Standard.

On January 24, 2003, more than (6) months after the publication of summons for
Ang, the case was archived for inactivity.[16] Since neither party filed any further
motions, the RTC dismissed the case for the plaintiff’s lack of interest to prosecute
on October 1, 2004.[17]

On November 3, 2004, Pua submitted a motion for reconsideration and a motion to

declare Ang in default. The RTC, however, denied the motion in an order dated January
200
3, 2005; it added that the dismissal of the main case amounts to the dismissal of the
motion to declare Ang in default.

Pua appealed the case to the CA. He argued that the reason for the delay in
prosecuting the case was the untimely death of his counsel – Atty. Kamid Abdul. He
added that he had shown interest in the case by securing the properties of Deyto;
paying the annual premium of the attachment bond for the years 2002, 2003, and 2004;
and causing the publication of summons on Ang.

On February 23, 2006, the CA denied Pua’s appeal. While the CA recognized some of
Pua’s actions in prosecuting the case, it still found that the totality of the surrounding
circumstances of the case pointed to gross and immoderate delay in the prosecution of
the complaint.[18] Pua moved for reconsideration, which the CA denied in its resolution
dated June 23, 2006.

The Petition

Pua now questions the CA rulings before us. He insists that it was the untimely demise
of his counsel that created the hiatus in the prosecution of the case. He adds that he
has consistently paid the annual premiums of the attachment bond and has also served
summons by publication on Ang. He also questions the delay in the filing of Deyto’s
answer.

Pua pleads that the case be decided on the merits and not on mere technicalities. He
contends that he has adequately shown his interest in pursuing his meritorious claim
against the respondents before the RTC; and the RTC and the CA committed patent
error in dismissing his case for his alleged lack of interest.

For her part, Deyto reiterates that the numerous delays involved in this case warrant its
dismissal for failure to prosecute. First, the motion to serve summons by publication on
Ang was filed about four hundred (400) days after the filing of the complaint; second,
the delay of seventy-seven (77) days before the case was set for pre-trial; and third, the
delay of almost four (4) years in the prosecution of the case.

The Issue

The issue centers on whether the plaintiff incurred unreasonable delay in

prosecuting the present case.

The Court’s Ruling

We deny the petition for lack of merit.

We agree with the finding that Pua committed delay in prosecuting his case against the
respondents. We clarify, however, that Pua’s delay is limited to his failure to move the
case forward after the summons for Ang had been published in the Manila Standard; he
could not be faulted for the delay in the service of summons for Ang.

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A 13-month delay occurred between the filing of the complaint and the filing of the
motion to serve summons by publication on Ang. This delay, however, is attributable to
the failure of the sheriff to immediately file a return of service of summons. The
complaint was filed on November 24, 2000, but the return of service of summons was
filed only on January 3, 2002, after the RTC ordered its submission and upon Pua’s
motion.[19]

Under Section 14, Rule 14 of the Rules of Court, service of summons may be effected
on a defendant by publication, with leave of court, when his whereabouts are unknown
and cannot be ascertained by diligent inquiry. The Rules of Court provides:

SEC. 14. Service upon defendant whose identity or whereabouts are unknown. – In any
action where the defendant is designated as an unknown owner, or the like,
or whenever his whereabouts are unknown and cannot be ascertained by diligent
inquiry, service may, by leave of court, be effected upon him by publication in a
newspaper of general circulation and in such places and for such time as the court may
order. [emphases ours]

In Santos, Jr. v. PNOC Exploration Corporation, [20] the Court authorized resort to service
of summons by publication even in actions in personam, considering that the provision
itself allow this mode in any action, i.e., whether the action is in personam, in rem,
or quasi in rem. The ruling, notwithstanding, there must be prior resort to service in
person on the defendant[21] and substituted service,[22] and proof that service by these
modes were ineffective before service by publication [23] may be allowed for defendants
whose whereabouts are unknown, considering that Section 14, Rule 14 of the Rules of
Court requires a diligent inquiry of the defendant’s whereabouts. [24]

Until the summons has been served on Ang, the case cannot proceed since Ang is an
indispensable party to the case; Pua alleged in his complaint that the respondents are
co-owners of JD Grains Center.[25] An indispensable party is one who must be included
in an action before it may properly go forward. A court must acquire jurisdiction over the
person of indispensable parties before it can validly pronounce judgments personal to
the parties. 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.[26]

After the summons for Ang was published on May 31, 2002 and the Affidavit of Service
was issued by Manila Standard’s Advertising Manager on June 3, 2002, no further
action was taken on the case by Pua. Even after the RTC issued its order dated
January 24, 2003 to archive the case, Pua made no move to have the case reopened.
More than a year after the case was sent to the archives (October 1, 2004), the RTC
decided to dismiss the case for Pua’s lack of interest to prosecute the case. It was only
after Pua received the order of dismissal that he filed his motion for reconsideration and
motion to declare Ang in default. [27]

We give scant consideration to Pua’s claim that the untimely demise of his counsel
202
caused the delay in prosecuting the case. Pua had employed  the services of a law firm;
[28]
 hence, the death of one partner does not excuse such delay; the law firm had other
lawyers who would  take  up the  slack  created by the death of a partner. The more
relevant rule is that a client is bound by the action of his counsel in the conduct of his
case; he cannot complain that the result of the litigation could have been different had
the counsel proceeded differently.[29]

Moreover, Pua had also secured the services of another law firm even before the death
of Atty. Kamid Abdul.[30] In fact, this second law firm signed the formal appearance in
court on October 15, 2001.[31] To our mind, with two (2) law firms collaborating on the
case, no reason exists for delay if only Pua had been more vigilant.

Section 3, Rule 17 of the Revised Rules of Court authorizes the dismissal of a case
when the plaintiff fails to prosecute his action for an unreasonable length of time:

SEC. 3. Dismissal due to fault of plaintiff. — If, for no justifiable cause, the plaintiff fails
to appear on the date of the presentation of his evidence in chief on the complaint, or to
prosecute his action for an unreasonable length of time, or to comply with these
Rules or any order of the court, the complaint may be dismissed upon motion of the
defendant or upon the court’s own motion, without prejudice to the right of the defendant
to prosecute his counterclaim in the same or in a separate action. This dismissal shall
have the effect of an adjudication upon the merits, unless otherwise declared by
the court. [emphases ours; italics supplied]

Once a case is dismissed for failure to prosecute, the dismissal has the effect of an
adjudication on the merits and is understood to be with prejudice to the filing of another
action unless otherwise provided in the order of dismissal. [32]

In this case, Pua failed to take any action on the case after summons was served by
publication on Ang. It took him more than two years to file a motion to declare Ang in
default and only after the RTC has already dismissed his case for failure to prosecute.
That Pua renewed the attachment bond is not an indication of his intention to prosecute.
The payment of an attachment bond is not the appropriate procedure to settle a legal
dispute in court; it could not be considered as a substitute for the submission of
necessary pleadings or motions that would lead to prompt action on the case.

WHEREFORE, the foregoing premise considered, this present petition is DENIED.

Accordingly, the decision and the resolution of the Court of Appeals in CA-G.R. CV No.
84331 are hereby AFFIRMED.

Costs against Pablo Pua.

SO ORDERED.

THIRD DIVISION

G.R. No. 196894               March 3, 2014

203
JESUS G. CRISOLOGO and NANETTE B. CRISOLOGO, Petitioners,
vs.
JEWM AGRO-INDUSTRIAL CORPORATION, Respondent.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court challenging
the May 6, 2011 Decision1 of the Court of Appeals (CA), in CA-G.R. SP No. 03896-MIN,
which affirmed the September 27, 2010,2 October 7, 20103 and November 9,
20104 Orders of the Regional Trial Court, Davao City, Branch 14 (RTC-Br. 14), in Civil
Case No. 33,551-2010, an action for Cancellation of Lien. It is entitled "JEWM Agro-
Industrial Corporation v. The Registry of Deeds for the City of Davao. Sheriff Robert
Medialdea. John & Jane Does. and all persons acting under their directions.

This controversy stemmed from various cases of collection for sum of money filed
against So Keng Kok, the owner of various properties including two (2) parcels of land
covered by TCT Nos. 292597 and 292600 (subject properties), which were attached by
various creditors including the petitioners in this case. As a result, the levies were
annotated on the back of the said titles.

Petitioners Jesus G. Crisologo and Nannette B. Crisologo (Spouses Crisologo) were the
plaintiffs in two (2) collection cases before RTC, Branch 15, Davao City (RTC-Br. 15),
docketed as Civil Case Nos. 26,810-98 and 26,811-98, against Robert Limso, So Keng
Koc, et al. Respondent JEWM Agro-Industrial Corporation (JEWM) was the successor-
in-interest of one Sy Sen Ben, the plaintiff in another collection case before RTC,
Branch 8, Davao City (RTC-Br. 8), docketed as Civil Case No. 26,513-98, against the
same defendants.

On October 19, 1998, RTC-Br. 8 rendered its decision based on a compromise

agreement, dated October 15, 1998, between the parties wherein the defendants in said
case were directed to transfer the subject properties in favor of Sy Sen Ben. The latter
subsequently sold the subject properties to one Nilda Lam who, in turn, sold the same
to JEWM on June 1, 2000. Thereafter, TCT Nos. 325675 and 325676 were eventually
issued in the name of JEWM, both of which still bearing the same annotations as well
as the notice of lis pendens in connection with the other pending cases filed against So
Keng Kok.

A year thereafter, Spouses Crisologo prevailed in the separate collection case filed
before RTC-Br. 15 against Robert Lim So and So Keng Koc (defendants). Thus, on July
1, 1999, the said defendants were ordered to solidarily pay the Spouses Crisologo.
When this decision attained finality, they moved for execution. On June 15, 2010, a writ
was eventually issued.
Acting on the same, the Branch Sheriff issued a notice of sale scheduling an auction on

204
August 26, 2010. The notice of sale included, among others, the subject properties
covered by TCT Nos. 325675 and 325676, now, in the name of JEWM.

In the same proceedings, JEWM immediately filed its Affidavit of Third Party Claim and
the Urgent Motion Ad Cautelam. It prayed for the exclusion of the subject properties
from the notice of sale. In an order, dated August 26, 2010, however, the motion was
denied. In turn, the Spouses Crisologo posted a bond in order to proceed with the
execution.

To protect its interest, JEWM filed a separate action for cancellation of lien with prayer
for the issuance of a preliminary injunction before RTC-Br. 14, docketed as Civil Case
No. 33,551-2010. It prayed for the issuance of a writ of preliminary injunction to prevent
the public sale of the subject properties covered in the writ of execution issued pursuant
to the ruling of RTC-Br. 15; the cancellation of all the annotations on the back of the
pertinent TCTs; and the issuance of a permanent injunction order after trial on the
merits. "The Register of Deeds of Davao City, Sheriff Robert Medialdea, John and Jane
Does and all persons acting under their direction" were impleaded as defendants.

At the scheduled hearing before RTC-Br. 14 on September 22, 2010, Spouses

Crisologo’s counsel appeared and filed in open court their Very Urgent Manifestation
questioning the authority of the said court to restrain the execution proceedings in RTC-
Br. 15. JEWM opposed it on the ground that Spouses Crisologo were not parties in the
case.

On September 24, 2010, Spouses Crisologo filed an Omnibus Motion praying for the
denial of the application for writ or preliminary injuction filed by JEWM and asking for
their recognition as parties. No motion to intervene was, however, filed as the Spouses
Crisologo believed that it was unnecessary since they were already the John and Jane
Does named in the complaint.

In the Order, dated September 27, 2010, RTC-Br. 14 denied Spouses Crisologo’s
Omnibus Motion and granted JEWM’s application for a writ of preliminary injunction.

On October 1, 2010, Spouses Crisologo filed a Very Urgent Omnibus Motion before
RTC-Br. 14 praying for reconsideration and the setting aside of its September 27, 2010
Order. This was denied in the RTC Br.-14’s October 7, 2010 Order for lack of legal
standing in court considering that their counsel failed to make the written formal notice
of appearance. The copy of this order was received by Spouses Crisologo on October
22, 2010. It must be noted, however, that on October 27, 2010, they received another
order, likewise dated October 7, 2010, giving JEWM time to comment on their Very
Urgent Omnibus Motion filed on October 1, 2010. In its Order, dated November 9, 2010,
however, RTC-Br. 14 again denied the Very Urgent Motion previously filed by Spouses
Crisologo.

On November 12, 2010, JEWM moved to declare the "defendants" in default which was
granted in an order given in open court on November 19, 2010.

205
Spouses Crisologo then filed their Very Urgent Manifestation, dated November 30,
2010, arguing that they could not be deemed as defaulting parties because they were
not referred to in the pertinent motion and order of default.

On November 19, 2010, Spouses Crisologo filed with the CA a petition for
certiorari5 under Rule 65 of the Rules of Court assailing the RTC-Br. 14 orders, dated
September 27, 2010, October 7, 2010 and November 9, 2010, all of which denied their
motion to be recognized as parties. They also prayed for the issuance of a Temporary
Restraining Order (TRO) and/or a Writ of Preliminary Injunction.

In its Resolution, dated January 6, 2011, the CA denied the application for a TRO, but
directed Spouses Crisologo to amend their petition. On January 19, 2011, the Spouses
Crisologo filed their Amended Petition6 with prayers for the issuance of a TRO and/or
writ of preliminary injunction, the annulment of the aforementioned orders of RTC Br.
14, and the issuance of an order dissolving the writ of preliminary injunction issued in
favor of JEWM.

Pending disposition of the Amended Petition by the CA, JEWM filed a motion on
December 6, 2010 before RTC-Br. 14 asking for the resolution of the case on the
merits.

On January 10, 2011, RTC-Br. 14 ruled in favor of JEWM, with the dispositive portion of
its Decision7 stating as follows:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the
plaintiff as follows:

1. the preliminary writ of injunction issued on October 5, 2010 is hereby made

permanent;

2. directing herein defendant Registry of Deeds of Davao City where the subject
lands are located, to cancel all existing liens and encumbrances on TCT No. T-
325675 and T-325676 registered in the name of the plaintiff, and pay the

3. cost of suit.

SO ORDERED.8

Spouses Crisologo then filed their Omnibus Motion Ex Abudanti ad Cautelam, asking
RTC- Br. 14 to reconsider the above decision. Because no motion for intervention was
filed prior to the rendition of the judgment, a certificate, dated March 17, 2011, was
issued declaring the January 10, 2011 decision final and executory.

On May 6, 2011, the CA eventually denied the Amended Petition filed by Spouses
Crisologo for lack of merit. It ruled that the writ of preliminary injunction subject of the
petition was already fait accompli and, as such, the issue of grave abuse of discretion

206
attributed to RTC-Br. 14 in granting the relief had become moot and academic. It further
held that the failure of Spouses Crisologo to file their motion to intervene under Rule 19
rendered Rule 65 inapplicable as a vehicle to ventilate their supposed right in the case. 9

Hence, this petition.

ISSUES

I. The Court of Appeals erred in holding that the action for Cancellation of
Annotations may proceed even without notice to and impleading the party/ies
who caused the annotations, in clear contravention of the rule on joinder of
parties and basic due process.

II. The Court of Appeals erred in applying a very constrictive interpretation of the
rules in holding that a motion to intervene is the only way an otherwise real party
in interest could participate.

III. The Court of Appeals erred in denying our application for the issuance of a
temporary restraining order and/or a writ of preliminary injunction.

IV. The Court of Appeals erred in holding that the issues raised by petitioners
before it [had] been mooted by the January 10, 2011 decision of RTC Branch
14.10

Spouses Crisologo submit as error the CA affirmation of the RTC- Br. 14 ruling that the
action for cancellation may proceed without them being impleaded. They allege
deprivation of their right to due process when they were not impleaded in the case
before RTC-Br. 14 despite the claim that they stand, as indispensable parties, to be
benefited or injured by the judgment in the action for the cancellation of annotations
covering the subject properties. They cite Gonzales v. Judge Bersamin, 11 among others,
as authority. In that case, the Court ruled that pursuant to Section 108 of Presidential
Decree (P.D.) No. 1529, notice must be given to all parties in interest before the court
may hear and determine the petition for the cancellation of annotations on the
certificates of title.

The Spouses Crisologo also question the statement of the CA that their failure to file the
motion to intervene under Rule 19 before RTC-Br. 14 barred their participation in the
cancellation proceedings. They put emphasis on the court’s duty to, at the very least,
suspend the proceedings before it and have such indispensable parties impleaded.

As to the ruling on the denial of their application for the issuance of a TRO or writ of
preliminary injunction, Spouses Crisologo claim that their adverse interest, evinced by
the annotations at the back of the certificates of title, warranted the issuance of a TRO
or writ of preliminary injunction against JEWM’s attempt to cancel the said annotations
in violation of their fundamental right to due process.

207
Lastly, Spouses Crisologo cast doubt on the CA ruling that the issues presented in their
petition were mooted by the RTC-Br. 14 Decision, dated January 10, 2011. Having been
rendered without impleading indispensable parties, the said decision was void and
could not have mooted their petition.

In their Comment,12 JEWM asserts that Spouses Crisologo’s failure to file a motion to

intervene, pleadings-in-intervention, appeal or annulment of judgment, which were plain,
speedy and adequate remedies then available to them, rendered recourse to Rule 65 as
improper; that Spouses Crisologo lacked the legal standing to file a Rule 65 petition
since they were not impleaded in the proceedings before RTC-Br. 14; and that Spouses
Crisologo were not indispensable parties since their rights over the properties had been
rendered ineffective by the final and executory October 19, 1998 Decision of RTC-Br. 8
which disposed unconditionally and absolutely the subject properties in favor of its
predecessor-in-interest.

JEWM further argues that, on the assumption that Section 108 of P.D. No. 1529
applies, no notice to Spouses Crisologo was required because they were not real
parties-in-interest in the case before RTC-Br. 14, or even if they were, their non-
participation in the proceedings was because of their failure to properly intervene
pursuant to Rule 19; and, lastly, that the case before RTC-Br. 14 became final and
executory because Spouses Crisologos did not perfect an appeal therefrom, thus,
rendering the issues in the CA petition moot and academic.

In their Reply,13 Spouses Crisologo restate the applicability of Section 108 of P.D. No.
1529 to the effect that any cancellation of annotation of certificates of title must be
carried out by giving notice to all parties-in-interest. This they forward despite their
recognition of the mootness of their assertion over the subject properties, to wit:

Again, we respect JAIC’s position that "the claims of subsequent attaching creditors
(including petitioners’) have been rendered moot and academic, and hence the entries
in favor of said creditors have no more legal basis and therefore must be cancelled." But
we likewise at least ask a modicum of respect by at least being notified and heard. 14

The Ruling of the Court

The crux of this controversy is whether the CA correctly ruled that RTC-Br. 14 acted
without grave abuse of discretion in failing to recognize Spouses Crisologo as
indispensable parties in the case for cancellation of lien.

In this respect, the Court agrees with Spouses Crisologo.

In an action for the cancellation of memorandum annotated at the back of a certificate of

title, the persons considered as indispensable include those whose liens appear as
annotations pursuant to Section 108 of P.D. No. 1529, 15 to wit:

208
Section 108. Amendment and alteration of certificates. -No erasure, alteration or
amendment shall be made upon the registration book after the entry of a certificate of
title or of a memorandum thereon and the attestation of the same by the Register of
Deeds, except by order of the proper Court of First Instance. A registered owner or
other person having an interest in registered property, or, in proper cases, the Register
of Deeds with the approval of the Commissioner of Land Registration, may apply by
petition to the court upon the ground that the registered interests of any description,
whether vested, contingent, expectant inchoate appearing on the certificate, have
terminated and ceased; or that new interest not appearing upon the certificates have
arisen or been created; or that an omission or error was made in entering a certificate or
memorandum thereon, or on any duplicate certificate; x x x or upon any other
reasonable ground; and the court may hear and determine the petition after notice to all
parties in interest, and may order the entry or cancellation of a new certificate, the entry
or cancellation of a memorandum upon a certificate, or grant any other relief upon such
terms and conditions, requiring security or bond if necessary, as it may consider proper.

In Southwestern University v. Laurente, 16 the Court held that the cancellation of the
annotation of an encumbrance cannot be ordered without giving notice to the parties
annotated in the certificate of title itself. It would, thus, be an error for a judge to contend
that no notice is required to be given to all the persons whose liens were annotated at
the back of a certificate of title.

Here, undisputed is the fact that Spouses Crisologo’s liens were indeed annotated at
the back of TCT Nos. 325675 and 325676. Thus, as persons with their liens annotated,
they stand to be benefited or injured by any order relative to the cancellation of
annotations in the pertinent TCTs. In other words, they are as indispensable as JEWM
itself in the final disposition of the case for cancellation, being one of the many lien
holders.

As indispensable parties, Spouses Crisologo should have been joined as defendants in

the case pursuant to Section 7, Rule 3 of the Rules of Court, to wit:

SEC. 7. Compulsory joinder of indispensable parties. – Parties in interest without whom

no final determination can be had of an action shall be joined either as plaintiffs or
defendants.17

The reason behind this compulsory joinder of indispensable parties is the complete
determination of all possible issues, not only between the parties themselves but also
as regards other persons who may be affected by the judgment. 18

In this case, RTC-Br. 14, despite repeated pleas by Spouses Crisologo to be

recognized as indispensable parties, failed to implement the mandatory import of the
aforecited rule.

209
In fact, in Sps. Crisologo v. Judge George E. Omelio, 19 a related administrative case,
the Court found the trial judge guilty of gross ignorance of the law when it disregarded
the claims of Spouses Crisologo to participate. In part, the Court stated:

This is not the first time Judge Omelio has rendered a decision affecting third parties’
interests, without even notifying the indispensable parties. In the first disputed case,
JEWM Agro-Industrial Corporation v. Register of Deeds, Sheriff Medialdea, John &
Jane Does and all persons acting under their directions, Judge Omelio failed to cause
the service of proper summons upon the John and Jane Does impleaded in the
complaint. Even when Sps. Crisologo voluntarily appeared in court to be recognized as
the John and Jane Does, Judge Omelio refused to acknowledge their appearance and
ordered the striking out of Sps. Crisologos' pleadings. For this reason, the Investigating
Justice recommended admonishing Judge Omelio for failing to recognize the
Sps.Crisologo as indispensable parties in that case.

x x x           x x x          x x x

Clearly, the cancellation of the annotation of the sale without notifying the buyers, Sps.
Crisologo, is a violation of the latter’s right to due process. Since this is the second time
that Judge Omelio has issued an order which fails to notify or summon the
indispensable parties, we find Judge Omelio guilty of gross ignorance of the law, with a
warning that repetition of the same or similar act will merit a stiffer penalty in the future.

xxx

WHEREFORE, … We find Judge George E. Omelio GUILTY of four counts of the

serious charge of gross ignorance of the law for the following acts: (a) refusing to
recognize Spouses Jesus G. Crisologo and Nannette B. Crisologo as indispensable
parties; … in violation of the latter's right to due process. Accordingly, we impose upon
Judge George E. Omelio the penalty of fine of Forty Thousand Pesos (₱40,000.00),
with a warning that repetition of the same or similar acts will be dealt with more
severely.

SO ORDERED.20

The trial court should have exercised prudence in denying Spouses Crisologo’s pleas to
be recognized as indispensable parties. In the words of the Court, "Judge Omelio
should be penalized for failing to recognize Sps. Crisologo as indispensable parties and
for requiring them to file a motion to intervene, considering that a simple perusal of the
certificates of title would show Sps. Crisologo’s adverse rights because their liens are
annotated at the back of the titles."21

This manifest disregard of the basic rules and procedures constitutes a grave abuse of
discretion.

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In State Prosecutors II Comilang and Lagman v. Judge Medel Belen, 22 the Court held as
inexcusable abuse of authority the trial judge’s "obstinate disregard of basic and
established rule of law or procedure." Such level of ignorance is not a mere error of
judgment. It amounts to "evasion of a positive duty or to a virtual refusal to perform a
duty enjoined by law, or to act at all in contemplation of law," 23 or in essence, grave
abuse of discretion amounting to lack of jurisdiction.

Needless to say, judges are expected to exhibit more than just a cursory acquaintance
with statutes and procedural laws. They must know the laws and apply them properly in
good faith as judicial competence requires no less. 24

Despite the clear existence of grave abuse of discretion on the part of RTC-Br. 14,
JEWM asserts technical grounds on why the CA did not err in dismissing the petition via
Rule 65. It states that:

a) The Crisologos could have used other available remedies such as intervention
under Rule 19, an appeal of the judgment, or even an annulment of judgment,
which are, by all means, plain, speedy and adequate remedies in the ordinary
course of law;

b) The Crisologos lack legal standing to file the Rule 65 petition since they were
not impleaded in the Branch 14 case.

The rule is that a petition for certiorari under Rule 65 is proper only if there is no appeal,
or any plain speedy, and adequate remedy in the ordinary course of law.

In this case, no adequate recourse, at that time, was available to Spouses Crisologo,
except resorting to Rule 65.

Although Intervention under Rule 19 could have been availed of, failing to use this
remedy should not prejudice Spouses Crisologo. It is the duty of RTC-Br. 14, following
the rule on joinder of indispensable parties, to simply recognize them, with or without
any motion to intervene. Through a cursory reading of the titles, the Court would have
noticed the adverse rights of Spouses Crisologo over the cancellation of any
annotations in the subject TCTs.

Neither will appeal prove adequate as a remedy since only the original parties to an
action can appeal.25 Here, Spouses Crisologo were never impleaded. Hence, they could
not have utilized appeal as they never possessed the required legal standing in the first
place.

And even if the Court assumes the existence of the legal standing to appeal, it must be
remembered that the questioned orders were interlocutory in character and, as such,
Spouses Crisologo would have to wait, for the review by appeal, until the rendition of
the judgment on the merits, which at that time may not be coming as speedy as
practicable. While waiting, Spouses Crisologo would have to endure the denial of their

211
right, as indispensable parties, to participate in a proceeding in which their
indispensability was obvious. Indeed, appeal cannot constitute an adequate, speedy
and plain remedy.

The same is also true if recourse to Annulment of Judgment under Rule 47 is made
since this remedy presupposes a final judgment already rendered by a trial court.

At any rate, the remedy against an interlocutory order, not subject of an appeal, is an
appropriate special civil action under Rule 65, provided that the interlocutory order is
rendered without or in excess of jurisdiction or with grave abuse of discretion. Only then
is certiorari under Rule 65 allowed to be resorted to. 26

This takes particular relevance in this case where, as previously discussed, RTC-Br. 14
acted with grave abuse of discretion in not recognizing Spouses Crisologo as
indispensable parties to the pertinent action.

Based on the above, recourse to the CA via Rule 65 would have already been proper,
except for one last issue, that is, Spouses Crisologo’s legal standing to file the same.
JEWM cites DBP v. COA27 where the Court held:

The petition for certiorari under Rule 65, however, is not available to any person who
feels injured by the decision of a tribunal, board or officer exercising judicial or quasi
judicial functions. The ‘person aggrieved’ under Section 1 of Rule 65 who can avail of
the special civil action of certiorari pertains only to one who was a party in the
proceedings before the court a quo, or in this case before the COA. To hold otherwise
would open the courts to numerous and endless litigations.

Under normal circumstances, JEWM would be correct in their averment that the lack of
legal standing on the part of Spouses Crisologo in the case before RTC-Br. 14 prevents
the latter’s recourse via Rule 65.

This case, however, is an exception. In many instances, the Court has ruled that
technical rules of procedures should be used to promote, not frustrate the cause of
justice. Rules of procedure are tools designed not to thwart but to facilitate the
attainment of justice; thus, their strict and rigid application may, for good and deserving
reasons, have to give way to, and be subordinated by, the need to aptly dispense
substantial justice in the normal cause. 28

Be it noted that the effect of their non-participation as indispensable parties is to

preclude the judgment, orders and the proceedings from attaining finality. Time and
again, the Court has ruled that 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 to those present. Consequently, the proceedings before
RTC-Br. 14 were null and void including the assailed orders, which may be "ignored
wherever and whenever it exhibits its head." 29

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To turn a blind eye to the said nullity and, in turn, rule as improper the recourse to Rule
65 by the lack of legal standing is to prolong the denial of due process to the persons
whose interests are indispensible to the final disposition of the case. It will only result in
a protracted litigation as Spouses Crisologo will be forced to rely on a petition for the
annulment of judgment before the CA (as the last remaining remedy), which may again
reach this Court.1âwphi1 To prevent multiplicity of suits and to expedite the swift
administration of justice, the CA should have applied liberality by striking down the
assailed orders despite the lack of legal standing on the part of Spouses Crisologo to
file the Rule 65 petition before it. Besides, this lacking requirement, of which Spouses
Crisologo were not even at fault, is precisely the reason why this controversy arose.

All told, the CA erred in dismissing the amended petition filed before it and in not finding
grave abuse of discretion on the part of RTC-Br. 14.

WHEREFORE, the petition is GRANTED. The May 6, 2011 Decision of the Court of
Appeals is NULLIFIED and SET ASIDE. The September 27, 2010, October 7, 2010 and
November 9, 2010 Orders of the Regional Trial Court, Branch 14, Davao City, are
likewise NULLIFIED and SET ASIDE. Civil Case No. 33,551-2010 is hereby
REMANDED to the trial court for further proceedings. The respondent is ordered to
implead all parties whose annotations appear at the back of Transfer Certificate of Title
Nos. 325675 and 325676.

SO ORDERED.

SPECIAL SECOND DIVISION

G.R. No. 191667, April 22, 2015

LAND BANK OF THE PHILIPPINES, Petitioner, v. EDUARDO M.

CACAYURAN, Respondent,

MUNICIPALITY OF AGOO, LA UNION, Intervenor.

A M E N D E D    D E C I S I O N

PERLAS-BERNABE, J.:

Before the Court are the following motions: (a) the Motion for Reconsideration1 dated
May 22, 2013, filed by petitioner Land Bank of the Philippines (LBP) assailing the
Decision2 dated April 17, 2013 of the Court (April 17, 2013 Decision), which upheld the
Decision3 dated March 26, 2010 of the Court of Appeals (CA) in CA-G.R. CV. No. 89732
affirming with modification the Decision4 dated April 10, 2007 of the Regional Trial Court
of Agoo, La Union, Branch 31 in Civil Case No. A-2473; (b) the Motion for Leave to
Intervene with Pleading-in-Intervention Attached 5 dated July 8, 2013, filed by the
Municipality of Agoo, La Union (Municipality) praying that it be allowed to intervene in
this case; and (c) the Motion for Reconsideration-in-Intervention 6 dated July 8, 2013,

213
filed by the Municipality seeking that the Court set aside its April 17, 2013 Decision and
promulgate a new one in its stead dismissing the case (subject motions).

The Facts

The instant case arose from two (2) loans (Subject Loans) entered into by the
Municipality with LBP in order to finance the Redevelopment Plan of the Agoo Public
Plaza (Public Plaza). Through Resolution Nos. 68-2005 7 and 139-
2005,8 the Sangguniang Bayan of the Municipality (Sangguniang Bayan) authorized its
then-Mayor Eufranio Eriguel (Mayor Eriguel) to enter into a P4,000,000.00-loan with
LBP, the proceeds of which were used to construct ten (10) kiosks at the Public Plaza.
Around a year later, the SB issued Resolution Nos. 58-2006 9 and 128-2006,10 this time
authorizing Mayor Eriguel to obtain a P28,000,000.00-loan from LBP for the
construction of a commercial center named "Agoo People's Center" within the premises
of the Public Plaza. In order to secure the Subject Loans, the Municipality used as
collateral, among others, a 2,323.75-square meter lot situated at the south eastern
portion of the Public Plaza (Plaza Lot). 11

However, a group of residents, led by respondent Eduardo M. Cacayuran (Cacayuran),

opposed the redevelopment of the Public Plaza, as well as the funding therefor thru the
Subject Loans, claiming that these were "highly irregular, violative of the law, and
detrimental to public interests, and will result to wanton desecration of the [Public
Plaza]."12 Further, Cacayuran requested the municipal officers to furnish him with the
various documents relating to the Public Plaza's redevelopment, which, however, went
unheeded.13 Thus, Cacayuran, invoking his right as a taxpayer, filed a
complaint14 against LBP and various officers of the Municipality, including Mayor Eriguel
(but excluding the Municipality itself as party-defendant), assailing the validity of the
aforesaid loan agreements and praying that the commercialization of the Public Plaza
be enjoined.15

Initially, the municipal officers moved for the outright dismissal of the complaint, which
was denied, thus constraining them to file their respective answers. For its part, LBP
asserted, inter alia, that Cacayuran did not have any cause of action since he was not
privy to the loan agreements entered into by LBP and the Municipality. 16

During the pendency of the proceedings, the construction of the Agoo People's Center
was completed. Later on, the Sangguniang Bayan passed Municipal Ordinance No. 02-
200717 declaring the area where such building stood as patrimonial property of the
Municipality.18

The RTC Ruling

In a Decision19 dated April 10, 2007, the RTC declared the Subject Loans null and void,
finding that the resolutions approving the procurement of the same were passed in a
highly irregular manner and thus, ultra vires. As such, it pronounced that the
Municipality was not bound by the Subject Loans and that the municipal officers should,
instead, be held personally liable for the same. Further, it ruled that since the Plaza Lot

214
is a property for public use, it cannot be used as collateral for the Subject Loans. 20

Aggrieved, LBP and the municipal officers appealed 21 to the CA. However, the appeal of
the municipal officers was deemed abandoned and dismissed for their failure to file an
appellants' brief despite due notice.22 Thus, only LBP's appeal was given due course by
the CA.23

The CA Ruling

In a Decision24 dated March 26, 2010, the CA affirmed the ruling of the RTC, with
modification excluding then-Vice Mayor Antonio Eslao from personal liability arising
from the Subject Loans. It held that: (a) Cacayuran had locus standi to file the instant
complaint, considering that he is a resident of the Municipality and the issue at hand
involved public interest of transcendental importance; (b) Resolution Nos. 68-2005, 138-
2005, 58-2006, 126-2006 were invalidly passed due to non-compliance with certain
provisions of Republic Act No. 7160,25 otherwise known as the Local Government Code
of 1991 (LGC); (c) the Plaza Lot is property of public dominion, and thus, cannot be
used as collateral; and (d) the procurement of the Subject Loans were ultra vires acts
for having been entered into without proper authority and that the collaterals used
therefor constituted improper disbursement of public funds. 26

Dissatisfied, LBP filed a petition for review on certiorari27 before this Court.

Proceedings Before the Court

In a Decision28 dated April 17, 2013 the Court denied LBP's petition, and accordingly,
affirmed the ruling of the CA. Agreeing with the CA, the Court held that: (a) Cacayuran
had legal standing to institute a taxpayer's suit; 29 (b) Resolution Nos. 68-2005, 139-
2005, 58-2006, 126-2006 cannot be relied upon to validate the Subject Loans, as the
LGC requires the passing of an ordinance in order for any loan agreement to be
valid;30 and (c) the procurement of the Subject Loans are ultra vires acts of the
municipal officers who approved the same, and thus, liability therefor shall devolve upon
them.31

Undaunted, LBP moved for reconsideration, basically reiterating its earlier position that
Cacayuran had no legal standing to sue, and that Resolution Nos. 68-2005, 139-2005,
58-2006, and 126-2006 may be relied upon in validating the Subject Loans. 32

Meanwhile, the Municipality filed a Motion for Leave to Intervene with Pleading-In-
Intervention Attached33 dated July 8, 2013 and a Motion for Reconsideration in-
Intervention34 of even date, praying that it be included as a party-litigant to the instant
case. It contends that as a contracting party to the Subject Loans, it is an indispensable
party to the action filed by Cacayuran. As such, there cannot be any "real disposition" of
the instant suit by reason of its exclusion from the same.

In opposition,35 Cacayuran maintains that LBP did not raise any new matter to warrant
reconsideration of the April 17, 2013 Decision. Anent the Municipality's motion to

215
intervene, Cacayuran insists that the Municipality is not a real party-in-interest to the
instant case as his complaint is against the municipal officers in their personal capacity
for their ultra vires acts which are not binding on the Municipality.

Finally, in its Comment on the Motion for Leave to Intervene and Motion for
Reconsideration-in-Intervention36 dated May 6, 2014, LBP agrees with the Municipality
that the latter is an indispensable party to the instant case and as such, should be
included herein.

The Issue Before the Court

The core issue for the Court's resolution is whether or not the Municipality should be
deemed as an indispensable party to the instant case, and thus, be ordered impleaded
herein.

The Court's Ruling

The Court rules in the affirmative.

Section 7, Rule 3 of the Rules of Court mandates that all indispensable parties should
be joined in a suit, viz.:

SEC. 7. Compulsory joinder of indispensable parties. - Parties-in-interest without whom

no final determination can be had of an action shall be joined either as plaintiffs or
defendants.

"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. The party's
interest in the subject 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 cannot be a resolution of the dispute of the
parties before the court which is effective, complete, or equitable." 37 Thus, 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. 38

Nevertheless, it must be stressed that the failure to implead any indispensable party to
a suit does not necessarily result in the outright dismissal of the 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:

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 plaintiffs failure to comply with the order. The

216
remedy is to implead the non-party claimed to be indispensable. 40 (Emphases and
underscoring supplied)

In this case, a judicious review of the records reveals that Cacayuran's complaint
against LBP and the municipal officers primarily prays that the commercialization of the
Public Plaza be enjoined and also, that the Subject Loans be declared null and void for
having been unlawfully entered into by the said officers. However, Cacayuran failed to
implead in his complaint the Municipality, a real party-in-interest 41 and an indispensable
party that stands to be directly affected by any judicial resolution on the case,
considering that: (a) the contracting parties to the Subject Loans are LBP and the
Municipality; and (b) the Municipality owns the Public Plaza as well as the
improvements constructed thereon, including the Agoo People's Center. As the
Municipality aptly points out:42

3. To recapitulate: The case had its beginnings in the two (2) Loans obtained by [the
Municipality] from [LBP] and by the Board Resolutions passed and adopted by the
Sangguniang Bayan of Agoo, La Union, together with the Mayor and Vice-Mayor of the
Municipality.

xxxx

3d. The two (2) Loans were covered and evidenced by separate Loan Agreements and
Mortgage/Assignment Documents. The parties which entered into and executed the
covering documents were [LBP] as lender and [the Municipality] as borrower.

3e. When the construction was about 40% complete, [Cacayuran] as a taxpayer filed
the case against the: (i) Mayor; (ii) Vice-Mayor; and (iii) Ten (10) Members [of] the
Sangguniang Bayan [of] Agoo, La Union, as defendants. [The Municipality] was
excluded, and was not impleaded as a defendant in the case.

xxxx

Indeed, [the Municipality! Ion whose lands stands and is found the Agoo Public
Plaza, where the Kiosks and Commercial Building were under construction and
which constructions were sought to be restrained] stands to be benefited or
injured by the judgment in the case so filed or the party entitled to the avails of
the case and is, therefore, the real party-in-interest.

xxxx

3k. Without having to say so, the RTC dispositions as affirmed with modification
by the CA Decision which, in turn was affirmed by the SC Decision must not be
binding upon [the Municipality], the real party-in-interest, the indispensable party
in fact, not impleaded as defendant in this case.43 (Emphases and underscoring
supplied).

217
The Court observes that it is only now that the issue of the Municipality's exclusion from
the instant case, despite its status as an indispensable party, became apparent. This
recent finding may be credited to the fact that the initial parties before the Court, i.e.,
LBP and Cacayuran, have dissimilar interests from that of the Municipality, and, hence,
had no incentive to raise the issue of the latter's status as an indispensable party. On
the one hand, Cacayuran's interest to the case is centered on the declaration of nullity
of the Subject Loans, as well as the enjoinment of the commercialization of the Public
Plaza; and on the other hand, LBP's interest to the case is anchored on its capacity as
creditor to the Subject Loans. To the mind of the Court, the municipal officers would
have been in the best position to raise this issue; however, they were unable to do so
because their appeal before the CA was deemed abandoned for their failure to file an
appellants' brief on time.

Be that as it may, the Court is not precluded from taking cognizance of the Municipality's
status as an indispensable party even at this stage of the proceedings. Indeed, the
presence of indispensable parties is necessary to vest the court with jurisdiction 44 and,
corollarily, the issue on jurisdiction may be raised at any stage of the
proceedings.45 Thus, as it has now come to the fore that any resolution of this case
would not be possible and, hence, not attain any real finality due to the non-joinder of
the Municipality, the Court is constrained to set aside all subsequent actuations of the
courts a quo in this case, including that of the Court's, and remand the case all the way
back to the RTC for the inclusion of all indispensable parties to the case and its
immediate disposition on the merits. 46 With this, the propriety of the Municipality's
present intervention is now mooted.

WHEREFORE, the subject motions are PARTLY GRANTED. The Decision dated April
17, 2013 of the Court, which upheld the Decision dated March 26, 2010 of the Court of
Appeals in CA-G.R. CV. No. 89732 affirming with modification the Decision dated April
10, 2007 of the Regional Trial Court of Agoo, La Union, Branch 31 in Civil Case No. A-
2473 is hereby SET ASIDE. Accordingly, the instant case is REMANDED to the court a
quo, which is hereby DIRECTED to order respondent Eduardo M. Cacayuran to implead
all indispensable parties and thereafter, PROCEED with the resolution of the case on
the merits WITH DISPATCH.

SO ORDERED.

FIRST DIVISION

G.R. No. 225309, March 06, 2018

ROSARIO ENRIQUEZ VDA. DE SANTIAGO, Petitioner, v. ANTONIO T.

VILAR, Respondent.

G.R. No. 225546, , March 06, 2018

218
 GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Petitioner, v. ANTONIO T.
VILAR, Respondent.

DECISION

TIJAM, J.:

Before this Court is a consolidated Petition for Review on Certiorari1 under Rule 45 of

the Rules of Court, assailing the Decision2 dated February 10, 2014 and Amended
Decision3 dated June 17, 2016 of the Court of Appeals (CA) in CA-G.R. SP No. 117439,
filed by petitioner Rosario Enriquez Vda. de Santiago (Rosario) and petitioner
Government Service Insurance System (GSIS).

Facts of the Case

Spouses Jose C. Zulueta and Soledad Ramos (Spouses Zulueta), registered owners of
several parcels of land covered by Transfer Certificate of Title (TCT) Nos. 26105, 37177
and 50356 (mother titles), obtained various loans secured by the mother titles from the
GSIS. The amount of loans, with the accumulated value of P3,117,000.00 were
obtained from September 1956 to October 1957. 4

From the records, the lot covered by Transfer Certificate of Title (TCT) No. 26105 was
divided into 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 in August 1974 wherein the latter emerged as the highest bidder. A
certificate of sale was then 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

Later, GSIS sold the foreclosed properties to Yorkstown Development Corporation

(YDC). The same, however, was disapproved by the Office of the President.
Accordingly, the TCTs issued in favor of YDC were canceled. 7

When GSIS reacquired the properties sold to YDC, it began to dispose the foreclosed
lots, including those not covered by the foreclosure sale. 8

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 and interests over the excluded lots, Eduardo, through
his counsel, sent a letter to GSIS for the return of the same. 9

In May 1990, Antonio, as represented by Eduardo, filed an Action for Reconveyance of

the excluded lots against the GSIS. Subsequently, Antonio was substituted by Eduardo.
Upon Eduardo's demise, however, he was substituted by his widow, herein petitioner
Rosario.10
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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).
d. Lot Nos. 7, 14 and 20, Block III (New Plan), Block V (Old Plan).
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),
i. Lot Nos. 1, 4 and 6, Block VIII (New Plan), Block X (Old Plan).
j. Lot 5, Block X (New Plan), Block XIII (Old Plan).
k. Lot 6, Block XI (New Plan), Block XII (Old Plan).
l. Lots 2, 5, 12 and 15, Block I.
m. Lots 6, 9 and 11, Block 2.
n. Lots 1, 5, 6, 7, 16 and 23, Block 3.
o. Lot 6, Block 4.
p. Lots 5, 12, 13 and 24, Block 5.
q. Lots 10 and 16, Block 6.
r. Lots 6 and 15, Block 7.
s. Lots 13, 24, 28 and 29, Block 8.
t. Lots 1, 11, 17 and 22, Block 9.
u. Lots 1, 2, 3 and 4, Block 10.
v. Lots 1,2,3 and 5 (New), Block 11.

2. Ordering [GSIS] to pay [Rosario], if the seventy- eight (78) excluded lots could not be
reconveyed; the fair market value of each of said lots.

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 and to issue new titles in [Rosario's] name.

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-12267/T-23554; and TCT No. PT-84913 under Entry No. PT-
12267/T-23554.

220
5. Costs of suit.

Counterclaims filed by [GSIS], intervenors Urbano and intervenors Gonzales are

DISMISSED.

SO ORDERED.12
On appeal, the CA affirmed the trial court's rulings in a Decision dated February 22,
2002.13 The same was affirmed by this Court in a Decision 14 dated October 28, 2003 in
G.R. No. 155206. Accordingly, an entry of judgment was issued. 15 When the decision
became final and executory, Rosario filed a motion for execution. 16

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 enforcement of the writ of execution earlier issued, up to extent allowed per the
CA decision. The 90% of the proceeds of the execution was ordered to be turned over
immediately to Rosario.

The CA, however, in CA-G.R. SP No. 84079, rendered a Decision 22 dated August 3,
2006, wherein it partially granted the petition of GSIS. The CA modified the ruling of the
RTC in that the extent of 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

In the meantime, while resolving several motions filed before the RTC following the CA
decision dated August 3, 2006, the RTC, in an Order 24 dated November 20, 2006 limited
the attorney's fees of Rosario's counsels to the 10% of the P399,828,000 based
on quantum meruit, among others. Likewise, in the same order, the RTC denied GSIS'
motion for reconsideration on the RTC s September 12, 2006 Order. 25

Atty. Jose A. Suing (Atty. Suing), counsel in the reconveyance case for Rosario,
questioned the said Order dated November 20, 2006 by the RTC as it allegedly reduced
his attorney's fee to 6% of the judgment award instead of 35% as stated in the

221
Memorandum of Understanding between him and Rosario. 26 The same, however, was
already resolved by this Court in a Decision27 dated October 21, 2015 in G.R. Nos.
194814 (Rosario Enriquez Vda. De Santiago v. Atty. Jose A. Suing) & 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.

GSIS, for its part, filed a Petition for Certiorari and Prohibition before this Court to annul
the Orders dated September 12, 2006 and November 20, 2006 of the RTC. Also, GSIS
filed a Petition for Review on Certiorari under Rule 45 to reverse and set aside the CA
Decision dated August 3, 2006. These two petitions were subsequently consolidated
upon motion of GSIS.28 The same, however, were later dismissed by this Court in a
Decision29 dated December 18, 2009 in G.R. Nos. 175393 (Government Service
Insurance System v. Regional Trial Court of Pasig City, Branch 71) and 177731
(Government Service Insurance System v. Laviña).

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 Agreement, it was alleged that Rosario assigned to Jaime her share, right,
participation and interest in the reconveyance case equivalent to 50% of whatever
Rosario is entitled to receive 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. 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 ceded to Albert half of the amount ceded by Rosario. 30

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 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 the judgment proceeds of the reconveyance
case. Further, Vilar averred that he and Eduardo agreed that the Deed of Assignment
shall still take effect despite the fact of substitution. 31

In resolving Vilar's motion, the RTC merely noted the same without action in its
Order32 dated December 8, 2010. The dispositive portion thereof reads:
WHEREFORE, premises considered, the dispositive portion of the Order dated 17
September 2010 is hereby AMENDED to read as follows:

"x x x x

1. To issue an alias writ of execution on the partial execution of

Php399,828,000.00;

222
 2. Upon satisfaction/payment by [GSIS] of the aforesaid amount the Branch
Sheriff of this Court is directed to immediately deposit 35% of the said
amount to the account of [Rosario];

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 enter into with [Rosario]; provided, however, that
the sum of Php23,989,680.00 shall be immediately satisfied and released
to Atty. Suing to be taken from said 35% attorney's fees;

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 (Php399,828.00) shall be satisfied immediately
from the remaining 30% of the partial executed amount; and

5. The balance on the remaining 30% shall also remain in custodia legis
subject to any settlement or compromise the claimants may enter with
[Rosario]."

Let an alias writ immediately issue.

SO ORDERED.33
Hence, Vilar filed a Petition for Certiorari before the CA, docketed as CA-G.R. SP No.
117439, ascribing grave abuse of discretion on the part of the RTC in merely noting and
not granting Vilar's motion.34 In a Decision35 dated February 10, 2014, the CA granted
Vilar's petition. The dispositive portion thereof reads:
WHEREFORE, the instant Petition is GRANTED. The Order dated December 8, 2010
of the [RTC], Branch 71, Pasig City is hereby MODIFIED as follows:

1. 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 [Vilar] through counsel is GRANTED;

2. Accordingly, [Vilar] is 1MPLEADED as party-plaintiff in substitution of

[Rosario];

3. And upon satisfaction/payment by [GSIS] of the amount of

P399,828,000.00, the Branch 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].

The Order dated December 8, 2010 is AFFIRMED in all other respects.

SO ORDERED.36
On June 17, 2016, the CA issued its assailed Amended Decision, 37 which in essence,
denied the motion for intervention filed by Atty. Gilberto Alfafara (Atty. Alfafara), former

223
counsel of Vilar and denied GSIS1 partial motion for reconsideration and Rosario's
motion to intervene and to admit motion for reconsideration. The fallo thereof reads:
WHEREFORE, the Court resolves as follows:

1. [Atty. Alfafara's] Motion for Intervention to Protect Attorney's

Rights is DENIED.

2. [Vilar's] Manifestation and Motion dated October 27, 2014 is

likewise DENIED.

3. [Vilar's] Manifestation dated March 14, 2014 is NOTED with

APPROVAL only insofar 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 7, paragraph 2 of
the Decision dated February 10, 2014 is MODIFIED as follows:

"Meanwhile, it appears that Vilar executed on February 15, 2011 a

Deed of Confirmation of Assignment of Rights whereby he
assigned in favor of Harold Cuevas (Harold) 112% participation in
the reconveyance case. By virtue of said Deed of Confirmation of
Assignment of Rights, Harold filed a complaint for breach of
contract, specific 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 and paid."

4. GSIS's Motion for Partial Reconsideration (of the Honorable Court's

Decision dated February 10, 2014) is DENIED.

5. [Rosario's] Ex Abudanti Motion to Intervene and to Admit the Attached

Motion for Reconsideration (Re: Decision dated 10 February
2014) are DENIED.

6. [Rosario's] Motion to Expunge [Vilar's] Comment/Opposition with Motion

to Admit Reply (To: [Vilar's] Comment/Opposition dated 16 June
2014) are EXPUNGED from the records.

SO ORDERED.38
Hence, this petition.

Issue

In sum, the issue in this case is whether or not the CA erred in impleading Vilar as
party-plaintiff in substitution of Rosario.

Ruling of the Court

Both Rosario and GSIS claim that Rosario is an indispensable party in the petition

224
because the same seeks to assail the order of the RTC which involves its action on
Vilar's motion to be substituted in Rosario's stead as regards the implementation of the
writ of execution.

The Court finds the same to be with merit.

The case stemmed from the action for reconveyance filed by Eduardo, husband of
Rosario. To recall, Eduardo was the successor-in-interest of Antonio, who is actually the
successor-in-interest of Spouses Zulueta. Spouses Zulueta are the original owners of
the subject parcels of land. Upon 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 Entry of Judgment was issued in
2004. In all these incidents, Rosario was considered as the party-plaintiff.

By definition, an indispensable party is a party-in-interest without whom no final

determination can be had of an action, and who shall be joined either as plaintiffs or
defendants.39 It is a party whose interest will be affected by the court's action in the
litigation.40

In the Matter of the Heirship (Intestate Estates) of the Late Hermogenes Rodriguez, et
al. v. Robles,41 the Court held that:
The joinder of indispensable parties is mandatory. The presence of indispensable
parties is necessary to vest the court with jurisdiction, which is the authority to hear and
determine a cause, the right to act in a case. Thus, without the presence of
indispensable parties to a suit or proceeding, judgment of a court cannot attain real
finality.42
Verily, Rosario is an indispensable party in the petition before the CA as she is the
widow of the original party-plaintiff Eduardo. The determination of the propriety of the
action of the trial court in merely noting and not granting his motion would necessarily
affect her interest in the subject matter of litigation as the party-plaintiff.

Accordingly, the Court differs with the CA in ruling that the petition for certiorari filed
before it 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 before the lower court who is entitled to the proceeds of
the judgment award. As it is, the CA did 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 Rosario be
awarded instead to Vilar.

Likewise, the Court finds merit in Rosario's contention that her failure to participate in
the proceedings before the CA constitutes a denial of her constitutional right to due
process.43

Hence, failure to implead Rosario as an indispensable party rendered all the

225
proceedings before the CA null and void for want of authority to act. 44

Moreover, even the basis for the substitution of Vilar as pronounced by the CA was
unfounded. In 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

Yet, it is significant to note that the Court already brushed aside said Deeds of
Assignment for being belatedly filed in its Decision dated October 21, 2015 in G.R. Nos.
194814 and 194825. The 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

Considering the foregoing, the Court need not belabor on the other issues raised by
petitioners.

As a final note, it must be considered that this case was extant since 1990. The decision
of the 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 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 in 2004, the case had several
pending incidents which prohibit Rosario, to recover what is rightfully hers. To warrant
the unjustified delay of these proceedings would tantamount to denial of the fruits of the
judgment in her favor.

WHEREFORE, the petition is GRANTED. The Decision dated February 10, 2014 and
Amended Decision dated June 17, 2016 in CA-G.R. S.P. No. 117439 are REVERSED
and SET ASIDE in 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 is DENIED. Accordingly, the impleading of
Antonio Vilar as party-plaintiff in substitution of Rosario Enriquez Vda. De Santiago
is NULLIFIED. The Order dated December 8, 2010 is hereby REINSTATED in toto.

SO ORDERED.

SECOND DIVISION

G.R. No. 200009, January 23, 2017

SPRING HOMES SUBDIVISION CO., INC., SPOUSES PEDRO L. LUMBRES AND

REBECCA T. ROARING, Petitioners, v. SPOUSES PEDRO TABLADA, JR. AND
ZENAIDA TABLADA, Respondent.

DECISION

226
 PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking to reverse and set aside the Decision 1 dated May 31, 2011 and
Resolution2 dated January 4, 2012 of the Court of Appeals (CA) in CA-G.R. CV No.
94352 which reversed and set aside the Decision 3 dated September 1, 2009, of the
Regional Trial Court (RTC), Branch 92, Calamba City.

The factual antecedents are as follows.

On October 12, 1992, petitioners, Spouses Pedro L. Lumbres and Rebecca T.

Roaring, (Spouses Lumbres) entered into a Joint Venture Agreement with Spring
Homes Subdivision Co., Inc., through its chairman, the late Mr. Rolando B. Pasic, for
the development of several parcels of land consisting of an area of 28,378 square
meters. For reasons of convenience and in order to facilitate the acquisition of permits
and licenses in connection with the project, the Spouses Lumbres transferred the titles
to the parcels of land in the name of Spring Homes. 4

On January 9, 1995, Spring Homes entered into a Contract to Sell with respondents,
Spouses Pedro Tablada, Jr. and Zenaida Tablada, (Spouses Tablada) for the sale of a
parcel of land located at Lot No. 8, Block 3, Spring Homes Subdivision, Barangay Bucal,
Calamba, Laguna, covered by Transfer Certificate of Title (TCT) No. T-284037. On
March 20, 1995, the Spouses Lumbres filed with the RTC of Calamba City a complaint
for Collection of Sum of Money, Specific Performance and Damages with prayer for the
issuance of a Writ of Preliminary Attachment against Spring Homes for its alleged
failure to comply with the terms of the Joint Venture Agreement. 5 Unaware of the
pending action, the Spouses Tablada began constructing their house on the subject lot
and thereafter occupied the same. They were then issued a Certificate of Occupancy by
the Office Building Official. Thereafter, on January 16, 1996, Spring Homes executed a
Deed of Absolute Sale in favor of the Spouses Tablada, who paid Spring Homes a total
of P179,500.00, more than the P157,500.00 purchase price as indicated in the Deed of
Absolute Sale.6 The title over the subject property, however, remained with Spring
Homes for its failure to cause the cancellation of the TCT and the issuance of a new
one in favor of the Spouses Tablada, who only received a photocopy of said title.

Subsequently, the Spouses Tablada discovered that the subject property was
mortgaged as a security for a loan in the amount of over P4,000,000.00 with Premiere
Development Bank as mortgagee and Spring Homes as mortgagor. In fact, since the
loan remained unpaid, extrajudicial proceedings were instituted. 7 Meanwhile, without
waiting for trial on the  specific performance and sum of money complaint, the Spouses
Lumbres and Spring Homes entered into a Compromise Agreement, approved by the
Calamba RTC on October 28, 1999, wherein Spring Homes conveyed the subject
property, as well as several others, to the Spouses Lumbres. 8 By virtue of said
agreement, the Spouses Lumbres were authorized to collect Spring Homes' account
receivables arising from the conditional sales of several properties, as well as to cancel
said sales, in the event of default in the payment by the subdivision lot buyers. In its

227
capacity as mortgagee, Premiere Development Bank was included as a party in the
Compromise Agreement.9

In the exercise of the power granted to them, the Spouses Lumbres started collecting
deficiency payments from the subdivision lot buyers. Specifically, they sent demand
letters to the Spouses Tablada for the payment of an alleged outstanding balance of the
purchase price of the subject property in the amount of P230,000.00. When no payment
was received, the Spouses Lumbres caused the cancellation of the Contract to Sell
previously executed by Spring Homes in favor of the Spouses Tablada. On December
22, 2000, the Spouses Lumbres and Spring Homes executed a Deed of Absolute Sale
over the subject property, and as a result, a new title, TCT No. T-473055, was issued in
the name of the Spouses Lumbres.10

On June 20, 2001, the Spouses Tablada filed a complaint for Nullification of Title,
Reconveyance and Damages against Spring Homes and the Spouses Lumbres praying
for the nullification of the second Deed of Absolute Sale executed in favor of the
Spouses Lumbres, as well as the title issued as a consequence thereof, the declaration
of the validity of the first Deed of Absolute Sale executed in their favor, and the issuance
of a new title in their name.11 The Sheriffs Return dated August 1, 2001 indicated that
while the original copy of the complaint and the summons were duly served upon the
Spouses Lumbres, summons was not properly served upon Spring Homes because it
was reportedly no longer existing as a corporate entity. 12

On August 14, 2001, the Spouses Lumbres filed a Motion to Dismiss the case against
them raising as grounds the non-compliance with a condition precedent and lack of
jurisdiction of the RTC over the subject matter. They alleged that the Spouses Tablada
failed to avail of conciliatory proceedings, and that the RTC has no jurisdiction since the
parties, as well as property in question, are all located at Calamba City, and that the
action instituted by the Spouses Tablada praying for the nullification of the Compromise
Agreement actually corresponds to a nullification of a judgement issued by a co-equal
trial court. The Spouses Tablada opposed by alleging that Spring Homes holds office at
Paraiiaque City, falling under the exception from the requirement of barangay
conciliatory proceedings and that the action they filed was for nullification of title issued
to the Spouses Lumbres as a result of a double sale, which is rightly under the
jurisdiction of the trial court. They also emphasized that as non-parties to the
Compromise Agreement, the same is not binding upon them. The Motion to Dismiss
was eventually denied by the trial court on October 2, 2001. 13

Interestingly, on even date, the Spouses Lumbres filed an ejectment suit of their own
before the Municipal Trial Court in Cities (MTCC) of Calamba City demanding that the
Spouses Tablada vacate the subject property and pay rentals due thereon. The MTCC,
however, dismissed the suit ruling that the Spouses Lumbres registered their title over
the subject property in bad faith. Such ruling was reversed by the RTC which found that
there was no valid deed of absolute sale between the Spouses Tablada and Spring
Homes. Nevertheless, the CA, on appeal, agreed with the MTCC and reinstated the
decision thereof. This was affirmed by the Court in Spouses Lumbres v. Spouses

228
Tablada  14 on February 23, 2007.

Meanwhile, on the nullification and reconveyance of title suit filed by the Spouses
Tablada, the RTC noted that Spring Homes has not yet been summoned. This caused
the Spouses Tablada to move for the discharge of Spring Homes as a party on the
ground that the corporation had already ceased to exist. The Spouses Lumbres,
however, opposed said motion claiming that Spring Homes is an indispensable
party.15 The RTC ordered the motion to be held in abeyance until the submission of
proof on Spring Homes' corporate status. In the meantime, trial ensued. Eventually, it
was shown that Spring Homes' certificate of registration was revoked on September 29,
2003.16

On September 1, 2009, the RTC rendered its Decision dismissing the Spouses
Tablada's action for lack of jurisdiction over the person of Spring Homes, an
indispensable party.17 According to the trial court, their failure to cause the service of
summons upon Spring Homes was fatal for Spring Homes was an indispensable party
without whom no complete determination of the case may be reached. 18 In support
thereof, the RTC cited the pronouncement in Uy v. CA, et. al.19 that the absence of an
indispensable party renders all subsequent actuations 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
instant case, the Spouses Tablada prayed that the Deed of Absolute Sale executed by
Spring Homes in favor of the Spouses Lumbres be declared null and void and that
Spring Homes be ordered to deliver the owner's duplicate certificate of title covering the
subject lot. Thus, without jurisdiction over Spring Homes, the case could not properly
proceed.21 The RTC added that the Spouses Tablada's subsequent filing of the motion
to discharge does serve as an excuse for at that time, the certificate of registration of
Spring Homes had not yet been cancelled or revoked by the Securities and Exchange
Commission (SEC). In fact, the assumption that it was already dissolved when the suit
was filed does not cure the defect, because the dissolution of a corporation does not
render it beyond the reach of courts considering the fact that it continues as a body
corporate for the winding up of its affairs.22

In its Decision dated May 31, 2011, however, the CA reversed and set aside the RTC
Decision finding that Spring Homes is not an indispensable party. It held that Spring
Homes may be the vendor of the subject property but the title over the same had
already been issued in the name of the Spouses Lumbres. So any action for nullification
of the said title causes prejudice and involves only said spouses, the registered owners
thereof. Thus, the trial court may very well grant the relief prayed for by the Spouses
Lumbres.23 In support thereof, the appellate court cited the ruling in Seno, et. al. v.
Mangubat, et. al.24 wherein it was held that in the annulment of sale, where the action
was dismissed against defendants who, before the filing of said action, had sold their
interests in the subject land to their co-defendant, the said dismissal against the former,
who are only necessary parties, will not bar the action from proceeding against the latter
as the remaining defendant, having been vested with absolute title over the subject
property.25 Thus, the CA maintained that the RTC's reliance on Uy v. CA is misplaced
for in said case, it was imperative that an assignee of interests in certain contracts be

229
impleaded, and not the assignor, as the RTC interpreted the ruling to mean. Thus, the
doctrine in Uy actually bolsters the finding that it is the Spouses Lumbres, as assignee
of the subject property, and not Spring Homes, as assignor, who are the indispensable
parties.26

Moreover, considering that the RTC had already concluded its trial on the case and the
presentation of evidence by both parties, the CA deemed it proper to proceed to rule on
the merits of the case. At the outset, the appellate court noted that the ruling of the
Court in Spouses Lumbres v. Spouses Tablada back in 2007 cannot automatically be
applied herein for said ruling involves an ejectment case that is effective only with
respect to the issue of possession and cannot be binding as to the title of the subject
property.

This notwithstanding, the CA ruled that based on the records, the first sale between
Spring Homes and the Spouses Tablada must still be upheld as valid, contrary to the
contention of the Spouses Lumbres that the same was not validly consummated due to
the Spouses Tablada's failure to pay the full purchase price of P409,500.00. According
to the appellate court, the first Deed of Absolute Sale clearly indicated that the
consideration for the subject property was P157,500.00. 27 The Spouses Lumbres'
argument that such Deed of Absolute Sale was executed only for the purpose of
securing a loan from PAG-IBIG in favor of the Spouses Tablada was unsubstantiated. In
fact, even the second Deed of Absolute Sale executed by Spring Homes in favor of the
Spouses Lumbres, as well as several receipts presented, indicated the same amount of
P157,500.00 as purchase price. As for the amount of P409,500.00 indicated in the
Contract to Sell executed between Spring Homes and the Spouses Tablada, the CA
adopted the findings of the Court in Spouses Lumbres v. Spouses Tablada in 2007 and
held that the amount of P409,500.00 is actually composed not only of the subject parcel
of land but also the house to be constructed thereon. But since it was proven that it was
through the Spouses Tablada's own hard-earned money that the house was
constructed, there existed no balance of the purchase price in the amount of
P230,000.00 as the Spouses Lumbres vehemently insist, viz.:

Further, the spouses Lumbres alleged that what was legal and binding between Spring
Homes and plaintiffs-appellants [spouses Tablada] was the Contract to Sell which, in
part, reads:chanRoblesvirtualLawlibrary

3. That the SELLER, for and in consideration of the payments and other terms and
conditions hereinafter to be designated, has offered to sell and the BUYER has agreed
to buy certain parcel of land more particularly described as
follows:chanRoblesvirtualLawlibrary

Blk. No. P- 111 Lot No. Area Sq. Meter Price Per sq. Meter Total Selling Price
3 8 105 P1,500  
42 6,000  
P409,500

230
Similar to the ruling of the Supreme Court in Spouses Lumbres v. Spouses Tablada,
despite there being no question that the total land area of the subject property was One
Hundred Five (105) square meters, there appears in the said contract to sell a
numerical value of Forty Two (42) square meters computed at the rate of Six Thousand
Pesos (6,000.00) per square meter. We agree with the findings of the Supreme
Court in this regard that the Forty Two (42) square meters referred only to the
land area of the house to be constructed in the subject property. Since the
spouses Lumbres failed to disprove the plaintiffs-appellants [spouses Tablada]
claim that it was through their own hard earned money that enabled them to fund
the construction and completion of their house and not Spring Homes, there
existed no balance of the purchase price to begin with. It is important to note that
what the plaintiffs-appellants [spouses Tablada] bought from Spring Homes was
a vacant lot. Nowhere in the Deed of Absolute Sale executed between plaintiffs-
appellants [spouses Tablada] and Spring Homes was it indicated that the
improvements found thereon form part of the subject property, lest, that any
improvements existed thereto. It was only through the plaintiffs-appellants
(spouses Tablada] own efforts that a house was constructed on the subject
property.28

The appellate court further stressed that at the time when the Spouses Tablada entered
into a contract of sale with Spring Homes, the title over the subject property was already
registered in the name of Spring Homes. Thus, the Deed of Absolute Sale between
Spring Homes and the Spouses Tablada was valid and with sufficient consideration for
every person dealing with a registered land may safely rely on the correctness of the
certificate of title issued therefor and the law will, in no way, oblige him to go beyond the
certificate to determine the condition of the property. 29

In the end, the CA upheld the ruling of the Court in Spouses Lumbres v. Spouses
Tablada that notwithstanding the fact that the Spouses Lumbres, as the second buyer,
registered their Deed of Absolute Sale, in contrast to the Spouses Tablada who were
not able to register their Deed of Absolute Sale precisely because of Spring Home's
failure to deliver the owner's copy of the TCT, the Spouses Tablada's right could not be
deemed defeated as the Spouses Lumbres were in bad faith for even before their
registration of their title, they were already informed that the subject property was
already previously sold to the Spouses Tablada, who had already constructed their
house thereon.30 Thus, the CA disposed the case as
follows:chanRoblesvirtualLawlibrary

WHEREFORE, in view of the foregoing premises, the instant appeal is hereby

GRANTED. The assailed Decision dated September 1, 2009 in Civil Case No. 3117-
2001-C is hereby ANNULLED AND SET ASIDE. Accordingly, the Register of Deeds of
Calamba, Laguna, is hereby directed to cancel Transfer Certificate of Title No. T-
473055 registered in the name of the defendants-appellees spouses Pedro L. Lurnbres

231
and Rebecca T. Roaring Lurnbres and, in lieu thereof, issue a new one in the name of
plaintiffs-appellants.

SO ORDERED. 31

When their Motion for Reconsideration was denied by the CA in its Resolution dated
January 4, 2012, the Spouses Lumbres filed the instant petition invoking the following
arguments:chanRoblesvirtualLawlibrary

I.
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE APPEAL FOR LACK
OF JURISDICTION OF THE TRIAL COURT OVER THE PERSON OF SPRING
HOMES AS AN INDISPENSABLE PARTY.

II.
THE COURT OF APPEALS ERRED IN ORDERING THAT RESPONDENTS, NOT
PETITIONERS, WERE PURCHASERS OF THE PROPERTY IN GOOD FAITH, WHICH
IS NOT IN ACCORD WITH ESTABLISHED FACTS, LAW, AND JURISPRUDENCE.

In the instant petition, the Spouses Lumbres insist that the Spouses Tablada have not
yet paid the balance of the purchase price of the subject property in the amount of
P230,000.00 despite repeated demands.32 They also insist that since Spring Homes, an
indispensable party, was not duly summoned, the CA should have affirmed the RTC's
dismissal of the instant complaint filed by the Spouses Tablada for lack of
jurisdiction.33 Citing the RTC's Decision, the Spouses Lumbres reiterated that even
assuming that Spring Homes had been dissolved at the time of the filing of the
complaint, the same does not excuse the failure to implead it for it still continues as a
body corporate for three (3) years after revocation of its certificate of incorporation. 34

Moreover, the Spouses Lumbres faulted the CA in upholding the findings of the Court in
·the 2007 case entitled Spouses Lumbres v. Spouses Tablada for the issue therein only
involves physical possession and not ownership. Contrary to the findings of the CA, the
Spouses Lumbres claim that the Spouses Tablada were not purchasers in good faith for
their failure to react to their repeated demands for the payment of the P230,000.00. 35 In
fact, the Spouses Tablada even admitted that they would pay the P230,000.00 upon the
release of the PAG-IBIG loan.36 Thus, the purported Deed of Absolute Sale between
Spring Homes and the Spouses Tablada is void for having no valuable consideration,
especially since it was issued merely for purposes of the loan application from PAG-
IBIG. On the other hand, the Spouses Lumbres claim that they were in good faith since
the First Deed of Absolute Sale between Spring Homes and the Spouses Tablada was
not annotated at the back of the subject property's title. 37

The petition is bereft of merit.

232
At the outset, it must be noted that Spring Homes is not an indispensable party. Section
7,38 Rule 3 of the Revised Rules of Court defines indispensable parties as parties-in-
interest without whom there can be no final determination of an action and who, for this
reason, must be joined either as plaintiffs or as defendants. 39 Time and again, the Court
has held that a party is indispensable, not only if he has an interest in the subject matter
of the controversy, but also if his interest is such that a final decree cannot be made
without affecting this interest or without placing the controversy in a situation where the
final determination may be wholly inconsistent with equity and good conscience. 40 He is
a person whose absence disallows the court from making an effective, complete, or
equitable determination of the controversy between or among the contending
parties.41 Conversely, 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.42 If his presence would merely permit complete relief
between him and those already parties to the action or will simply avoid multiple
litigation, he is not indispensable.

In dismissing the complaint for lack of jurisdiction, the trial court relied on Uy v. CA, et.
al.43 and held that since Spring Homes, an indispensable party, was not summoned, it
had no authority to proceed. But as aptly observed by the CA, the doctrine in Uy hardly
serves as basis for the trial court's conclusions and actually even bolsters the finding
that it is the Spouses Lumbres, as assignee of the subject property, and not Spring
Homes, as assignor, who are the indispensable parties. In said case, the Public Estates
Authority (PEA), tasked to complete engineering works on the Heritage Memorial Park
project, assigned all of its interests therein to Heritage Park Management
Corporation (HPMC). When a complaint was filed against the PEA in connection with
the project, the Court affirmed the dismissal thereof holding that HPMC, as assignee of
PEA's interest, should have been impleaded, being the indispensable party therein. The
pertinent portion of the Decision states:chanRoblesvirtualLawlibrary

Based on the Constmction Agreement, PEA entered into it in its capacity as Project
Manager, pursuant to the PFTA. According to the provisions of the PFTA, upon the
formation of the HPMC, the PEA would turn over to the HPMC all the contracts
relating to the Heritage Park. At the time of the filing of the CIAC Case on May 31,
2001, PEA ceased to be the Project Manager of the Heritage Park Project,
pursuant to Section 11 of the PFTA. Through a Deed of Assignment, PEA
assigned its interests in all the existing contracts it entered into as the Project
Manager for Heritage Park to HPMC. As early as March 17, 2000, PEA officially
turned over to HPMC all the documents and equipment in its possession related to the
Heritage Park Project. Petitioner was duly informed of these incidents through a letter
dated March 13, 2000. Apparently, as of the date of the filing of the CIAC Case,
PEA is no longer a party-in-interest. Instead, it is now CIAC Case, PEA is no
longer a party-in-interest. Instead, it is now private respondent HPMC, as the
assignee, who stands to be benefited or injured by the judgment in the suit. In its
absence, there cannot be a resolution of the dispute of the parties before the
court which is effective, complete or equitable. We thus reiterate that HPMC is an
indispensable party.44
233
Moreover, as held by the CA, the pronouncement in Seno, et. al. v. Mangubat, et. al.45 is
instructive. In said case, the petitioner therein entered into an agreement with certain
respondents over a parcel of land, which agreement petitioner believed to be merely an
equitable mortgage but respondents insisted to be a sale. The agreement, however,
was embodied in a document entitled "Deed of Absolute Sale." Consequently,
respondents were able to obtain title over the property in their names. When two of the
three respondents sold their shares to the third respondent, the third respondent
registered the subject property solely in his name. Thereafter, the third respondent
further sold said property to another set of persons. Confronted with the issue of
whether the two respondents who sold their shares to the third respondent should be
impleaded as indispensable parties in an action filed by petitioner to reform the
agreement and to annul the subsequent sale, the Court ruled in the negative, viz.:

The first issue We need to resolve is whether or not defendants Andres

Evangelista and Bienvenido Mangubat are indispensable parties. Plaintiffs contend
that said defendants being more dummies of defendant Marcos Mangubat and therefore
not real parties in interest, there is no room for the application of Sec. 7, Rule 3 of the
Revised Rules of Court.

xxxx

In the present case, there are no rights of defendants Andres Evangelista and
Bienvenido Mangubat to be safeguarded if the sale should be held to be in fact an
absolute sale nor if the sale is held to be an equitable mortgage. Defendant
Marcos Mangubat became the absolute owner of the subject property by virtue of
the sale to him of the shares of the aforementioned defendants in the property.
Said defendants no longer have any interest in the subject property. However,
being parties to the instrument sought to be reformed, their presence is necessary in
order to settle all the possible issues of tile controversy. Whether the disputed sale be
declared an absolute sale or an equitable mortgage, the rights of all the defendants will
have been amply protected. Defendants-spouses Luzame in any event may enforce
their rights against defendant Marcos Mangubat. 46

Similarly, by virtue of the second Deed of Absolute Sale between Spring Homes and the
Spouses Lumbres, the Spouses Lumbres became the absolute and registered owner of
the subject property herein. As such, they possess that certain interest in the property
without which, the courts cannot proceed for settled is the doctrine that registered
owners of parcels of land whose title is sought to be nullified should be impleaded as an
indispensable party.47 Spring Homes, however, which has already sold its interests in
the subject land, is no longer regarded as an indispensable party, but is, at best,
considered to be a necessary party whose presence is necessary to adjudicate the
whole controversy, but whose interests are so far separable that a final decree can be
made in- its absence without affecting it.48 This is because when Spring Homes sold the

234
property in question to the Spouses Lumbres, it practically transferred all its interests
therein to the said Spouses. In fact, a new title was already issued in the names of the
Spouses Lumbres. As such, Spring Homes no longer stands to be directly benefited or
injured by the judgment in the instant suit regardless of whether the new title registered
in the names of the Spouses Lumbres is cancelled in favor of the Spouses Tablada or
not. Thus, contrary to the ruling of the RTC, the failure to summon Spring Homes does
not deprive it of jurisdiction over the instant case for Spring Homes is not an
indispensable party.

On the merits of the case, the Court likewise affirms the findings of the CA. The issue
here involves what appears to be a double sale. First, the Spouses Tablada entered into
a Contract to Sell with Spring Homes in 1995 which was followed by a Deed of Absolute
Sale in 1996. Second, in 2000, the Spouses Lumbres and Spring Homes executed a
Deed of Absolute Sale over the same property. The Spouses Lumbres persistently
insist that the first Deed of Sale executed by the Spouses Tablada is void for having no
valuable consideration. They argue that out of the P409,500.00 purchase price under
the Contract to Sell, the Spouses Tablada merely paid P179,500.00, failing to pay the
rest in the amount of P230,000.00 despite demands.

There is no merit in the contention.

As the CA held, it is clear from the first Deed of Absolute Sale that the consideration for
the subject property is P157,500.00. In fact, the same amount was indicated as the
purchase price in the second Deed of Absolute Sale between Spring Homes and the
Spouses Lumbres. As for the varying amounts contained in the Contract to Sell, the
Court notes that the same has already been duly addressed by the Court in the
2007 Spouses Lumbres v. Spouses Tablada49 case, the pertinent portions of which
states:chanRoblesvirtualLawlibrary

In claiming their right of possession over the subject lot, petitioners made much of the
judicially approved Compromise Agreement in Civil Case No. 2194-95-C, wherein
Spring Homes' rights and interests over the said lot under its Contract to Sell with the
respondents were effectively assigned to them. Petitioners argue that out of the
whole P409,500.00 purchase price under the respondents Contract to Sell with
Spring Homes, the respondents were able to pay only P179,500.00, leaving a
balance of P230,000.00.

Upon scrutiny, however, the CA astutely observed that despite there being no question
that the total land area of the subject lot is 105 square meters, the Contract to Sell
executed and entered into by Spring Homes and the respondent spouses
states:chanRoblesvirtualLawlibrary

3. That the SELLER, for and in consideration of the payments and other terms and
conditions hereinafter to be designated, has offered to sell and the BUYER has agreed
to buy certain parcel of land more particularly described as
follows:chanRoblesvirtualLawlibrary

235
 Blk. No. P- 111 Lot No. Area Sq. Meter Price Per sq. Meter Total Selling Price
3 8 105 P1,500  
42 6,000  
P409,500

The two deeds of absolute sale as well as the respondents' Tax Declaration No.
019-1342 uniformly show that the land area of the property covered by TCT No. T-
284037 is 105 square meters.The parties never contested its actual land area.

However, while there is only one parcel of land being sold, which is Lot 8, Blk. 3,
paragraph "1" above of the Contract to Sell speaks of two (2) land areas, namely,
"105" and "42," and two (2) prices per square meter, to wit: "P1,500" and
"P6,000."As correctly observed by the CA:chanRoblesvirtualLawlibrary

It does not require much imagination to understand why figures "3," "8," "105" and
"P1,500" appear in the paragraph "1" of the Contract to Sell. Certainly "3" stands for
"Blk. No.," "8" stands for "Lot No.," "105" stands for the land area and "P1,500" stands
for the price per square meter. However, this Court is perplexed as regards figures "42"
and "6,000" as they are not accompanied by any "Blk. No." and/or "Lot No." In other
words, while there is only one parcel of land being sold, paragraph "1" of the Contract to
Sell contains two land areas and two prices per square meter. There is no reason for
the inclusion of land area in the computation when it was established beyond cavil that
the total area being sold is only 105 square meters. Likewise, there is no explanation
why there is another rate for the additional 42 square meters, which was pegged at
P6,000 per square meter, while that of 105 square meters was only P1,500.00.

The CA could only think of one possible explanation: the Contract to Sell refers only
to a single lot with a total land area of 105 square meters. The 42 square meters
mentioned in the same contract and therein computed at the rate of 116,000 per
square meter refer to the cost of the house which would be constructed by the
respondents on the subject lot through a Pag-Ibig loan. The land area of the house
to be constructed was pegged at 42 square meters because of the following restrictions
in the Contract to Sell:chanRoblesvirtualLawlibrary

9. The lot(s) subject matter of this contract are subject to the following
restrictions:chanRoblesvirtualLawlibrary

a) Any building which may be constructed at anytime in said lot(s) must be strong x x x.
Said building must not be constructed at a distance of less than (2) meters from any
boundaries of the lot(s).

236
b) The total area to be voted to buildings or structures shall not exceed eighty percent
(80%) of the total area of the lot(s).50

Thus, while the Spouses Lumbres would like Us to believe that based on the Contract to
Sell, the total selling price of the subject property is P409,500.00, the contract itself, as
well as the surrounding circumstances following its execution, negate their argument.
As appropriately found by the Court, said amount actually pertains to the sum of: (1) the
cost of the land area of the lot at 105 square meters priced at P1,500 per square meter;
and (2) the cost of the house to be constructed on the land at 42 square meters priced
at P6,000 per square meter. But it would be a grave injustice to hold the Spouses
Tablada liable for more than the cost of the land area when it was duly proven that they
used their own funds in the construction of the house. As shown by the records, the
Spouses Tablada was forced to use their own money since their PAG-IBIG loan
application did not materialize, not through their own fault, but because Spring Homes
failed, despite repeated demands, to deliver to them the owner's duplicate copy of the
subject property's title required by the loan application. In reality, therefore, what Spring
Homes really sold to the Spouses Tablada was only the lot in the amount of
P157,500.00, since the house was constructed thereon using the Spouses Tablada's
own money. In fact, nowhere in the Contract to Sell was it stated that the subject
property includes any improvement thereon or that the same even exists. Moreover, as
previously mentioned, in both the first and second Deeds of Absolute Sale, it was
indicated that the amount of the property subject of the sale is only P157,500.00.
Accordingly, the Court held further in Spouses Lumbres v. Spouses Tablada:

Looking at the above-quoted portion of the Contract to Sell, the CA found merit in
the respondents' contention that the total selling price of P409,500 includes not
only the price of the lot but also the cost of the house that would be constructed
thereon. We are incline to agree. The CA went on to say:chanRoblesvirtualLawlibrary

It could be argued that the contract to sell never mentions the construction of any
house or building on the subject property. Had it been the intention of the parties
that the total selling price would include the amount of the house that would be
taken from a loan to be obtained from Pag Ibig, they could have specified so.
However, one should not lose sight of the fact that the contract to sell is an
accomplished form. [Respondents,] trusting Spring Homes, could not be expected to
demand that another contract duly reflective of their agreements be utilized instead of
the accomplished form. The terms and conditions of the contract may not contemplate
the inclusion of the cost of the house in the total selling price, but the entries typewritten
thereon sufficiently reveal the intentions of the parties.

The position of the [respondents] finds support in the documents and

subsequent actuations of Bertha Pasic, the representative of Spring Homes.
[Respondents] undeniably proved that they spent their own hard earned money
to construct a house thereon after their Pag-Ibig loan did not materialize. It is
highly unjust for the [respondents] to pay for the amount of the house when the

237
loan did not materialize due to the failure of Spring Homes to deliver the owner's
duplicate copy of TCT No. T 284037.

xxxx

If the total selling price was indeed P409,500.00, as [petitioners] would like to
poster, said amount should have appeared as the consideration in the deed of
absolute sale dated January 15, 1996. However, only P157,500.00 was stated. The
amount stated in the Deed of Absolute Sale dated January 15, 1996 was not only a
portion of the selling price, because the Deed of Sale dated December 22, 2000 also
reflected P157,500.00 as consideration. It is not shown that [petitioners] likewise applied
for a loan with Pag-Ibig. The reasonable inference is that the consistent amount
stated in the two Deeds of Absolute Sale was the true selling price as it perfectly
jibed with the computation in the Contract to Sell.

We find the CA's reasoning to be sound. At any rate, the execution of the January 16,
1996 Deed of Absolute Sale in favor of the respondents effectively rendered the
previous Contract to Sell ineffective and canceled. Furthermore, we find no merit in
petitioners' contention that the first sale to the respondents was void for want of
consideration. As the CA pointed out in its assailed
decision:chanRoblesvirtualLawlibrary

Other than the [petitioners'] self-serving assertion that the Deeds of Absolute
Sale was executed solely for the purpose of obtaining a Pag-Ibig loan, no other
concrete evidence was tendered to justify the execution of the deed of absolute
sale. They failed to overcome the clear and convincing evidence of the [respondents]
that as early as July 5, 1995 the latter had already paid the total amount of
P179,500.00, much bigger than the actual purchase price for the subject land. 51

There is, therefore, no factual or legal basis for the Spouses Lumbres to claim that since
the Spouses Tablada still had an outstanding balance of P230,000.00 from the total
purchase price, the sale between Spring Homes and the Spouses Tablada was void,
and consequently, they were authorized to unilaterally cancel such sale, and thereafter
execute another one transferring the subject property in their names. As correctly held
by the Court in Spouses Lumbres v. Spouses Tablada,52 the first Deed of Sale executed
in favor of the Spouses Tablada is valid and with sufficient consideration. Thus, in view
of this validity of the sale subject of the first Deed of Absolute Sale between Spring
Homes and the Spouses Tablada, the Court shall now determine who, as between the
two spouses herein, properly acquired ownership over the subject property. In this
regard, Article 1544 of the Civil Code reads:chanRoblesvirtualLawlibrary

Art. 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good
faith, if it should be movable property.

238
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession, and, in the absence thereof, to the person who
presents the oldest title, provided there is good faith. (Emphasis supplied)

The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of a double sale of immovable property. 53 Thus, the Court has
consistently ruled that ownership of an immovable property which is the subject of a
double sale shall be transferred: (1) to the person acquiring it who in good faith first
recorded it in the Registry of Property; (2) in default thereof, to the person who in good
faith was first in possession; and (3) in default thereof, to the person who presents the
oldest title, provided there is good faith.54 The requirement of the law then is two-fold:
acquisition in good faith and registration in good faith. Good faith must concur with the
registration that is, the registrant must have no knowledge of the defect or lack of title of
his vendor or must not have been aware of facts which should have put him upon such
inquiry and investigation as might be necessary to acquaint him with the defects in the
title of his vendor. If it is shown that a buyer was in bad faith, the alleged registration
they have made amounted to no registration at all. 55

Here, the first buyers of the subject property, the Spouses Tablada, were able to take
said property into possession but failed to register the same because of Spring Homes'
unjustified failure to deliver the owner's copy of the title whereas the second buyers, the
Spouses Lumbres, were able to register the property in their names. But while said the
Spouses Lumbres successfully caused the transfer of the title in their names, the same
was done in bad faith. As correctly observed by the Court in Spouses Lumbres v.
Spouses Tablada,56 the Spouses Lumbres cannot claim good faith since at the time of
the execution of their Compromise Agreement with Spring Homes, they were
indisputably and reasonably informed that the subject lot was previously sold to the
Spouses Tablada. They were also already aware that the Spouses Tablada had
constructed a house thereon and were in physical possession thereof. They cannot,
therefore, be permitted to freely claim good faith on their part for the simple reason that
the First Deed of Absolute Sale between Spring Homes and the Spouses Tablada was
not annotated at the back of the subject property's title. It is beyond the Court's
imagination how spouses Lumbres can feign ignorance to the first sale when the
records clearly reveal that they even made numerous demands on the Spouses
Tablada to pay, albeit erroneously, an alleged balance of the purchase price.

Indeed, knowledge gained by the first buyer of the second sale cannot defeat the first
buyer's rights except only as provided by law, as in cases where the second buyer first
registers in good faith the second sale ahead of the first. 57 Such knowledge of the first
buyer does bar her from availing of her rights under the law, among them, first her
purchase as against the second buyer. But conversely, knowledge gained by the

239
second buyer of the first sale defeats his rights even if he is first to register the second
sale, since such knowledge taints his prior registration with bad faith. 58

Accordingly, in order for the Spouses Lumbres to obtain priority over the Spouses
Tablada, the law requires a continuing good faith and innocence or lack of knowledge of
the first sale that would enable their contract to ripen into full ownership through prior
registration.59 But from the very beginning, the Spouses Lumbres had already known of
the fact that the subject property had previously been sold to the Spouses Tablada, by
virtue of a valid Deed of Absolute Sale. In fact, the Spouses Tablada were already in
possession of said property and had even constructed a house thereon. Clearly then,
the Spouses Lumbres were in bad faith the moment they entered into the second Deed
of Absolute Sale and thereafter registered the subject property in their names. For this
reason, the Court cannot, therefore, consider them as the true and valid owners of the
disputed property and permit them to retain title thereto.

WHEREFORE, premises considered, the instant petition is DENIED. The assailed

Decision dated May 31, 2011 and Resolution dated January 4, 2012 of the Court of
Appeals in CA-G.R. CV No. 94352 are hereby AFFIRMED.

SO ORDERED.chanroblesvirtuallawlibrary

FIRST DIVISION

G.R. No. 221047, September 14, 2016

MICHAEL A. ONSTOTT, Petitioner, v. UPPER TAGPOS NEIGHBORHOOD

ASSOCIATION, INC., Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated May 7, 2015
and the Resolution3 dated October 8, 2015 rendered by the Court of Appeals (CA) in
CA-G.R. CV No. 98383, which reversed and set aside the Order 4 dated January 3, 2012
of the Regional Trial Court of Binangonan, Rizal, Branch 67 (RTC), insofar as it ordered
the Register of Deeds of Binangonan, Rizal to cancel Transfer Certificate of Title (TCT)
No. B-9655 in the name of respondent Upper Tagpos Neighborhood Association, Inc.
(UTNAI) and to reinstate Original Certificate of Title (OCT) No. (-2645-) M-556 in the
name of Albert W. Onstott (Albert).

The Facts

Albert, an American citizen, was the registered owner of a parcel of land with an
approximate area of 18,589 square meters, covered by OCT No. (-2645-) M-
5565 situated in the Province of Rizal (subject property). Due to non-payment of realty
taxes, the Provincial Government of Rizal sold the subject property at public auction to
240
one Amelita A. De Serra (De Serra), the highest bidder, as evidenced by the Certificate
of Sale6 dated June 29, 2004.7 Respondent UTNAI, an association representing the
actual occupants of the subject property, subsequently redeemed 8 the same from De
Sena.9chanrobleslaw

Thereafter, or on March 31, 2008, UTNAI filed a complaint 10 for cancellation of OCT No.
(-2645-) M-556 and for the issuance of a new title in its name before the RTC against
Albert and Federico M. Cas (Cas), the Register of Deeds for the Province of Rizal. 11 It
alleged, among others, that it became the owner of the subject property upon
redemption thereof from De Sena and that, consequently, it must be issued a new title.
Moreover, Albert was an American citizen who, under Philippine law, is not allowed to
own a parcel of land in the Philippines.12chanrobleslaw

Efforts to serve summons upon Albert proved futile as he was not a resident of the
Philippines. Thus, summons was served through publication. 13 Nonetheless, Albert still
failed to file his answer. Hence, upon the motion of UTNAI, Albert was declared in
default and UTNAI was allowed to present evidence ex parte.14chanrobleslaw

The RTC Ruling and Subsequent Proceedings

In a Decision15 dated March 30, 2009, the RTC found that UTNAI was able to prove, by
a preponderance of evidence, that it is the owner of the subject property after having
legally redeemed the same from De Serra, the highest bidder at a public auction.
Accordingly, it directed Cas to: (1) annotate its Decision on OCT No. (-2645-) M-556; (2)
cancel the same; and (3) issue a new title in the name of UTNAI. 16chanrobleslaw

In an Order17 dated June 16, 2009, the RTC clarified that its March 30, 2009 Decision
directing the cancellation of OCT No. (-2645-) M-556 and the issuance of a new one in
its stead in the name of UTNAI necessarily includes a declaration that the owner's
duplicate copy of OCT No. (-2645-) M-556 is void and of no effect.

The RTC Decision lapsed into finality. As a consequence, TCT No. B-9655 was issued
in favor of UTNAI.18chanrobleslaw

On August 26, 2009, herein petitioner Michael Onstott (Michael), claiming to be the
legitimate son19 of Albert with a certain Josephine Arrastia Onstott (Josephine) filed a
Petition for Relief from Judgment (Petition for Relief), 20 alleging that UTNAI, in its
complaint, impleaded only Albert, notwithstanding knowledge of the latter's death. 21 He
averred that, as parties to the case, UTNAI fraudulently and intentionally failed to
implead him and Josephine in order to prevent them from participating in the
proceedings and to ensure a favorable judgment. 22 He contended that his mother
Josephine was an indispensable party to the present case, being the owner of half of
the subject property, which he claimed to be conjugal in nature. 23 Moreover, he argued
that UTNAI had no legal personality to redeem the subject property as provided for in
Section 26124 of Republic Act No. (RA) 7160, otherwise known as the "Local
Government Code of 1991."25cralawredchanrobleslaw

241
Later, Michael filed an Omnibus Motion:26 (1) to recall and/or set aside the Certification
of Finality of Judgment; (2) to set aside the Order dated June 16, 2009; and (3) to
cancel TCT No. B-9655 and reinstate OCT No. (-2645-) M-556. He maintained that,
based on the records, the Decision dated March 30, 2009 of the RTC was not served
upon the defendant, Albert, by publication, as required under Section 9, 27 Rule 13 of the
Rules of Court; hence, the same has not yet attained finality. 28 Accordingly, the
Certification of Finality of the said Decision was prematurely issued and must therefore
be set aside.29 In addition, TCT No. B-9655 in favor of UTNAI must be cancelled and
OCT No. (-2645-) M-556 in the name of Albert should be reinstated.

Treating the Petition for Relief as a motion for reconsideration 30 of its Decision, the RTC,
in an Order31 dated January 3, 2012, denied the same and ruled that UTNAI, having
legal interest in the subject property and having redeemed the same from the highest
bidder in a tax auction, must be issued a new title in its name. It added that the matters
raised by Michael are best ventilated in a separate case for reconveyance. However,
while the RTC denied the petition, it found that its March 30, 2009 Decision never
attained finality for not having been served upon Albert by publication in accordance
with Section 9, Rule 13 of the Rules of Court. Thus, the issuance of the certificate of
finality was erroneous. Consequently, the cancellation of OCT No. (-2645-) M-556 in
Albert's name and the issuance of TCT No. B-9655 in UTNAI's name were premature;
hence, it directed the Register of Deeds to cancel TCT No. B-9655 and to reinstate OCT
No. (-2645-) M-556.32chanrobleslaw

Dissatisfied, both parties separately appealed 33 to the CA. In its appeal, UTNAI ascribed
error to the RTC in finding that its March 30, 2009 Decision never attained finality for
failure to publish the same and that it also erred in declaring that the cancellation of
OCT No. (-2645-) M-556 in Albert's name and the issuance of TCT No. B-9655 in its
name were premature.34chanrobleslaw

On the other hand, Michael insisted that at the time of the filing of the instant case in
2008, Albert was already dead, which means that the ownership of the subject property
had already devolved to his compulsory heirs. Consequently, the latter should have
been impleaded as defendants, failing which, the Decision rendered by the RTC was
null and void for lack of jurisdiction. Moreover, he asserted that his mother Josephine
was an indispensable party to this case, being a compulsory heir and the owner of the
half portion of the subject property, which he claimed was conjugal in nature. He
reiterated that UTNAI had no legal interest to redeem the subject
property.35chanrobleslaw

The CA Ruling

In a Decision36 dated May 7, 2015, the CA found UTNAI's appeal meritorious. Although

it found that the March 30, 2009 Decision of the RTC did not attain finality, not having
been served upon Albert by publication, the CA also held that UTNAI was entitled to the
issuance of a new title in its name as a matter of right. It concurred with UTNAI's
contention that the cancellation of Albert's OCT No. (-2645-) M-556 is the direct legal
consequence of UTNAI's redemption of the subject property from the highest bidder at
242
the public auction sale. Thus, as the absolute owner of the subject property, UTNAI has
the right to be placed in possession thereof following the consolidation of ownership in
its name and the issuance of the corresponding title. 37chanrobleslaw

On the other hand, the CA dismissed Michael's appeal and rejected his theory that his
mother Josephine was an indispensable party to the complaint filed by UTNAI against
Albert. It found that the subject property was registered in the name of "Albert Onstott,
American citizen, married to Josephine Arrastia" which is merely descriptive of the civil
status of Albert and does not show that Josephine co-owned the subject property.
Hence, contrary to Michael's stance, the subject property was not conjugal in nature and
it cannot be presumed to be conjugal in the absence of evidence showing that it was
acquired during their marriage.38chanrobleslaw

Furthermore, the CA pointed out that if Michael were indeed Albert's compulsory heir,
he could have transferred the subject property in his name by right of succession upon
his father's death, or redeemed the same in 2005 after it was sold at public auction in
2004, or intervened in the proceedings before the RTC. Having failed to avail of any of
the said legal remedies, he can no longer claim ownership of the subject property by the
simple expedient of filing a petition for relief. Parenthetically, considering that the March
30, 2009 Decision of the RTC had not yet attained finality as of the filing of said petition
for relief, the same was without legal basis.39chanrobleslaw

Meanwhile, it appears that UTNAI published a copy of the March 30, 2009 Decision of
the RTC for two (2) consecutive weeks in a newspaper of general
circulation.40chanrobleslaw

In view of its findings, the CA reversed and set aside the Order dated January 3, 2012
rendered by the RTC, insofar as it directed the Register of Deeds to cancel TCT No. B-
9655 issued in UTNAI's name and reinstate OCT No. (-2645-) M-556 in the name of
Albert. It likewise declared the March 30, 2009 Decision of the RTC final and
executory.41chanrobleslaw

Michael's motion for reconsideration42 was denied in a Resolution43 dated October 8,

2015; hence, this petition.

The Issue Before the Court

The issue to be resolved by the Court is whether or not the CA erred in directing the
issuance of a title in favor of UTNAI notwithstanding (a) the lack of jurisdiction over the
person of Albert, the registered owner of the subject property who has been dead prior
to the institution of UTNAI'S complaint; (b) the failure to implead his mother, Josephine,
as an indispensable party, since the subject property was allegedly conjugal in nature;
and (c) the lack of legal interest on the part of UTNAI to redeem the subject property.

The Court's Ruling

The petition is partly meritorious.

243
Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint. On the
other hand, jurisdiction over the defendants in a civil case is acquired either through the
service of summons upon them or through their voluntary appearance in court and their
submission to its authority.44chanrobleslaw

In Philippine Commercial International Bank v. Spouses Dy Hong Pi,45 it was ruled that
"[a]s a general proposition, one who seeks an affirmative relief is deemed to have
submitted to the jurisdiction of the court. It is by reason of this rule that we have had
occasion to declare that the filing of motions to admit answer, for additional time to file
answer, for reconsideration of a default judgment, and to lift order of default with motion
for reconsideration, is considered voluntary submission to the court's jurisdiction. This,
however, is tempered by the concept of conditional appearance, such that a p who
makes a special appearance to challenge, among others, the court's jurisdiction over his
person cannot be considered to have submitted to its authority. Prescinding from the
foregoing, it is thus clear that:

chanRoblesvirtualLawlibrary
(1) Special appearance operates as an exception to the general rule on voluntary
appearance;

(2) Accordingly, objections to the jurisdiction of the court over the person of the
defendant must be explicitly made, i.e., set forth in an unequivocal manner;
and cralawlawlibrary

(3) Failure to do so constitutes voluntary submission to the jurisdiction of the court,

especially in instances where a pleading or motion seeking affirmative relief is filed and
submitted to the court for resolution."46

In this case, records show that Albert, the defendant in UTNAI's complaint, died in the
United States of America in 2004.47 Thus, on the strength of his right as Albert's
compulsory heir who has an interest in the subject property, Michael filed the Petition for
Relief before the RTC, assailed the proceedings therein for failure to implead him and
his mother, Josephine, as an indispensable party, and sought affirmative relief, i.e., the
reversal of the RTC's March 30, 2009 Decision and the reinstatement of OCT No. (-
2645-) M-556.48 The RTC, holding that its own Decision never attained finality for failure
to publish the same, treated the Petition for Relief as a motion for reconsideration and
after due proceedings, ruled upon its merits.

Based on the foregoing factual milieu, the Court finds that although it may be true that
jurisdiction was not initially acquired over the person of the defendant, 49i.e., Albert in this
case whose death, notably, was never brought to the attention of the RTC until after it
rendered judgment the defect in the lack of jurisdiction over his person was effectively
cured by the voluntary appearance of his successor-in-interest/compulsory heir,
Michael, who sought affirmative relief before the RTC through the filing of the Petition
for Relief which the RTC treated as a motion for reconsideration of its judgment.

244
Michael voluntarily submitted to the jurisdiction of the RTC when, without any
qualification, he directly and squarely challenged the RTC's March 30, 2009 Decision as
aforementioned. Having sought positive relief from an unfavorable judgment, the RTC,
therefore, acquired jurisdiction over his person, and the due process requirements of
the law have been satisfied.

That the RTC Decision was null and void for failure to implead an indispensable party,
Josephine, on the premise that the subject property is conjugal in nature, is likewise
specious. Michael posits that Josephine, being Albert's wife, was entitled to half of the
portion of the subject property, which was registered as "Albert Onstott, American
citizen, married to Josephine Arrastia."

The Court is not convinced.

Article 160 of the New Civil Code50 provides that all property of the marriage is
presumed to belong to the conjugal partnership, unless it is proved that it pertains
exclusively to the husband or to the wife. However, the p who invokes this presumption
must first prove that the property in controversy was acquired during the marriage. Proof
of acquisition during the coverture is a condition sine qua non for the operation of the
presumption in favor of the conjugal partnership. The party who asserts this
presumption must first prove the said time element. Needless to say, the presumption
refers only to the property acquired during the marriage and does not operate
when there is no showing as to when the property alleged to be conjugal was
acquired. Moreover, this presumption in favor of conjugality is rebuttable, but only with
strong, clear and convincing evidence; there must be a strict proof of exclusive
ownership of one of the spouses.51chanrobleslaw

As Michael invokes the presumption of conjugality, he must first establish that the
subject property was acquired during the marriage of Albert and Josephine, failing in
which, the presumption cannot stand. Indeed, records are bereft of any evidence from
which the actual date of acquisition of the subject property can be ascertained.
Considering that the presumption of conjugality does not operate if there is no showing
when the property alleged to be conjugal was acquired, 52 the subject property is
therefore considered to be Albert's exclusive property. Consequently, Michael's
insistence that Josephine who, the Court notes, has never personally appeared in these
proceedings to directly challenge the disposition of the subject property sans her
participation is a co-owner thereof and necessarily, an indispensable party to the instant
case, must therefore fail.

With respect, however, to the question of whether UTNAI has legal interest to redeem
the subject property from the highest bidder at the tax delinquency public auction sale,
the Court finds that the CA erred in its disquisition. Section 261 of RA 7160
provides:ChanRoblesVirtualawlibrary
Section 261. Redemption of Property Sold. - Within one (1) year from the date of
sale, the owner of the delinquent real property or person having legal interest
therein, or his representative, shall have right to redeem the property upon

245
payment to the local treasurer of the amount of the delinquent tax, including the
interest due thereon, and the expenses of sale from the date of delinquency to the date
of sale, plus interest of not more than two percent (2%) per month on the purchase price
from the date of the sale to the date of redemption. Such payment shall invalidate the
certificate of sale issued to the purchaser and the owner of the delinquent real property
or person having legal interest therein shall be entitled to a certificate of redemption
which shall be issued by the local treasurer or his deputy.

From the date of sale until expiration of the period of redemption, the delinquent real
property shall remain in the possession of the owner or person having legal interest
therein who shall be entitled to the income and other fruits thereof.

The local treasurer or his deputy, upon receipt from the purchaser of the certificate of
sale, shall forthwith return to the latter the entire amount paid by him plus interest of not
more than two percent (2%) per month. Thereafter, the property shall be free from the
lien of such delinquent tax, interest due thereon and expenses of sale. (Emphasis
supplied)
"Legal interest" is defined as interest in property or a claim cognizable at law, equivalent
to that of a legal owner who has legal title to the property.53 It must be one that is actual
and material, direct and immediate, not simply contingent or expectant. 54 Moreover,
although the taxable person who has actual and beneficial use and possession of a
property may be charged with the payment of unpaid realty tax due thereon, such
assumption of liability does not clothe the said person with the legal title or interest over
the property.55chanrobleslaw

In this case and based on the above-given definition, UTNAI, whose members are
the occupants of the subject property, has no legal interest to redeem the same. Mere
use or possession of the subject property alone does not vest them with legal interest
therein sufficient to clothe them with the legal personality to redeem it, in accordance
with Section 261 above-quoted. To rule otherwise would be to defeat the true owner's
rights by allowing lessees or other occupants of a property to assert ownership by the
simple expedient of redeeming the same at a tax delinquency sale. Consequently,
UTNAI's redemption of the subject property as well as the issuance of a Certificate of
Redemption56 in its favor was erroneous. Since the redemption is of no legal effect, the
said Certificate of Redemption must therefore be cancelled, without prejudice to the
right of UTNAI to recover the full amount of the redemption price paid by it in the
appropriate proceeding therefor.

As things stand, UTNAI's redemption should be deemed void for being contrary to law.
As a result, all proceedings springing from the redemption ought to be nullified 57 and
the status quo prior thereto should revert. Thus, as previously stated, UTNAI may
recover the full amount it had paid for the redemption of the property subject of the
public auction in the appropriate proceeding therefor. In the same vein, De Sena and
the Provincial Government of Rizal, who have not been impleaded as parties in this
case, may commence the appropriate proceedings to assert their rights under the law
consequent to this disposition.

246
WHEREFORE, the petition is PARTLY GRANTED. The Certificate of Redemption
issued by the Provincial Treasurer of the Provincial Government of Rizal in favor of
respondent Upper Tagpos Neighborhood Association, Inc. is hereby declared VOID and
of no legal effect, and Transfer Certificate of Title No. B-9655 issued in the latter's name
shall be permanently CANCELLED.

SO ORDERED.chanRoblesvirtualLawlibrary

THIRD DIVISION

G.R. No. 222740, September 28, 2016

ST. LUKE'S COLLEGE OF MEDICINE-WILLIAM H. QUASHA MEMORIAL

FOUNDATION, DR. BRIGIDO L. CARANDANG, AND DR. ALEJANDRO P.
ORTIGAS Petitioners, v. SPOUSES MANUEL AND ESMERALDA PEREZ AND
SPOUSES ERIC AND JURISITA QUINTOS, Respondents.

DECISION

PEREZ, J.:

Assailed in the present petition for review on certiorari is the Decision1 dated September
30, 2015 and the Resolution2 dated February 2, 2016 of the Court of Appeals (CA) in
CA-G.R. CV No. 103529, which rulings reversed the Decision dated July 7, 2014 3 of the
Regional Trial Court (RTC), Branch 84, Malolos City, Bulacan in Civil Case No. 145-M-
2012 and remanded the case to the trial court for reception of evidence on the amount
of damages to be awarded.

As a backgrounder, in 2006, the Commission on Higher Education issued Memorandum

Order No. 10, series of 2006 which required medical students to undergo rotating
clinical clerkship in their fourth year. As such, petitioner St. Luke's College of Medicine
(St. Luke's) entered into a Memorandum of Intent with the Municipality of Cabiao, Nueva
Ecija for the construction of a community clinic. The said facility consisted of a six-bed
medical facility in the ground floor, and a residential space for the medical staff in the
second floor.

The undisputed facts, as amply summarized by the CA, are as

follows:ChanRoblesVirtualawlibrary

In February 2010, St. Luke's sent four (4) of its 4th year medical students to the clinic,
namely: plaintiffs-appellants Spouses Perez's daughter Jessa, plaintiffs-appellants
Spouses Quintos' daughter Cecille, Jerillie Ann Murillo (Murillo) and Miguel Rafael
Ramos (Ramos). They were tasked to complete a four-week clerkship rotation at the
clinic and like the previous batches, they were housed in the second floor of the clinic.

247
According to Ramos, he and his groupmates reported for duty at the Cabiao clinic at
approximately 10 o'clock in the morning of February 8, 2010. When their shift ended at
5 o'clock that afternoon, the group went for a jog and returned to the clinic at around 7
o'clock in the evening. They again went out at 9 o'clock in the evening to buy
beverages, cooking oil and other items needed for their breakfast the next day and went
to sleep sometime after midnight. Ramos admitted that one of the beverages they
bought was an alcoholic beverage called The Bar, which consisted of either vodka or
gin. He also admitted that only he and Cecille drank the alcoholic beverage which they
mixed with the soda and that they did not consume the whole bottle.

Ramos was awakened sometime between 3 o'clock and 3:30 in the morning of
February 9, 2010 when he heard Murillo shouting from the other side of the room that
there was a fire. Ramos immediately ran to the door which led to the living room and
when he opened the same, he saw thick smoke coming from the left portion of the living
room where there was a glow. He also felt extreme heat, prompting him to run to the
bathroom to get a pail of water with which he tried to extinguish the fire. The girls, who
had followed him to the bathroom, stayed behind. When Ramos' attempt to put out the
fire proved to be futile, he went back to the bathroom and poured water on the girls in
an attempt to alleviate the extreme heat coming from the fire.

According to Ramos, the smoke started to seep through the bathroom door and the
group had started shouting for help. After a considerable amount of time, he heard
somebody outside instructing him to get back from the window. When he did so,
somebody broke the window and started to dismantle the iron grills barring the same.
By that time, Ramos had started losing consciousness due to smoke inhalation and only
remembered that he was being pulled out of the building through the window.

Unfortunately, the fire resulted in the deaths of the female medical students, including
the daughters of plaintiffs-appellants due to smoke inhalation resulting" to asphyxia.

As a result of the deaths, defendant-appellee St. Luke's compensated the parents of the
three deceased students in the amount of PhP300,000.00 each from insurance
proceeds. (Citations omitted)
The Bureau of Fire Protection (BFP) conducted an investigation on the incident, and in
a Certification dated April 18, 2011, it certified that the fire was "purely accidental in
nature due to unattended cooking," to wit:4
THIS IS TO CERTIFY THAT as appearing on The Blotter Book No. 0304-0287, pages
17 and 18, the two storey Institutional building owned by Local Government Unit (LGU)
Cabiao, Nueva Ecija was partially razed by fire including all the contents of the second
floor that transpired on or about 090245H February 2010. The estimated cost of
damage is two Million pesos (P2,000,000.00) more or less.

Result of investigation conducted by the Investigator on Case of this station, Bureau of

Fire Protection, Cabiao, Nueva Ecija, disclosed that the fire was purely ACCIDENTAL
IN NATURE due to UNATTENDED COOKING that occurred at the kitchen of said floor

248
and no evidence were gathered to show that the fire was intentionally, deliberately or
maliciously set.
Respondents had their doubts. Thus:5
xxx. xxx, plaintiffs-appellants, requested for a meeting with defendant-appellee Dr.
Alejandro Ortigas, Associate Dean for Faculty and Student Affairs of St. Luke's. During
the meeting, plaintiffs-appellants were surprised by the presence of defendants-
appellees Dr. Brigido Carandang, St. Luke's Dean of Medicine, the Municipal Health
Officer of Cabiao Dr. De Leon, as well as Municipal Fire Marshall of Cabiao Baby Boy
Esquivel, a Cabiao police officer and its barangay captain.

The officials informed plaintiffs-appellants that the fire was caused by the gas burner left
open by the victims which greatly disturbed plaintiffs-appellants. In a subsequent
meeting, they were informed that there was also evidence that the victims were drinking
alcoholic beverages on the night of the fire which plaintiffs-appellants refused to accept.

Convinced that there was a cover-up, plaintiffs-appellants continued to question

individual defendants-appellees. Exasperated, defendant-appellee Dr. Carandang
allegedly asked "Ano pa bang gusto ninyo sa amin? Nakiramay na kami."
Offended and still unconvinced, respondent Spouses Manuel and Esmeralda Perez, the
parents of Jessa, and respondent Spouses Eric and Jurisita Quintos, the parents of
Cecille, sought the help of the National Bureau of Investigation (NBI). In its Resolution
dated August 3, 2010, the existence of which is expressly admitted by petitioners,
having quoted the contents6 and having attached a copy thereof to the present
petition,7 the NBI declared that the construction of the Cabiao Community Clinic building
was in violation of the provisions of Republic Act No. 9514 (R.A. No. 9514) or
the Revised Fire Code of the Philippines, that the cause of the fire was due to faulty
electrical wiring, and that St. Luke's negligence is criminal in nature. The pertinent parts
of the said Resolution reads:8
xxxx

2. The building structure of Cabiao Community Center

The Cabiao Community Clinic/Center is a two-storey concrete building. The ground floor
is used as the municipality's lie-in clinic or hospital during day time. The students and in
particular the victims use this facility together with the. medical complement of the
municipality for their community medical service.

On the 2nd floor was the office of Dr. LEON DE LEON, Cabiao Municipal Health Officer,
adjacent was a storage room for office and medical supplies and documents, the
bedrooms for the medical students rendering community service, a dining area, a
kitchen, and the living-room. The second floor, it may be said, is virtually dedicated for
the board and lodging of the students while on mission. These rooms and areas are
separated from each other by wood panels made of plywood including the wall in which
the gas stove was located. All the windows at the second floor are also covered by
permanent iron grills. There are no fire exits, fire alarms, fire extinguishers,
sprinklers, emergency lights.

249
The community center is a virtual fire/death trap. During night time, medical
students were left alone inside the 2nd floor with the main gate locked from the
outside and with no apparent signs of fire alarms, fire sprinklers, fire exit plan,
emergency lights, provisions of confining the fire to its source, among others, for
the occupants fire safety and protection system. They were on their own at the
second floor, without anyone (maid or security guard) to attend to their needs while the
ground floors and the adjoining building were uninhabited.

3. The electrical system of Cabiao Community Clinic;

Engr. DAVID R. AOANAN, Chief Electrical Section of the (sic) and member of the NBI
investigating team observed that the facility has a main circuit breaker and the two
distribution panels, located at the ground floor, just above the comfort room of the
2nd floor. The main breaker has a 500 amp capacity while the two distribution panels
serving the 1st floor and the 2nd floor has 200 amp capacity, each, as against the main
electrical service wire with the size 14 mm.

The ratio between the capacity of the circuit breaker and the electrical service
wire is out of proportion and became electrically insensitive to overload and wire
short circuits; thereby negating the very purpose the circuit breaker was
designed.

The size of service wire is Small, suitable only for lighting purposes and not to supply
two buildings, dedicated for public use. Six years of use in overload capacity would
have worn out the wire and its strength and vitality, hence it will readily overheat,
notwithstanding at the time short circuits, only few bulbs were in use.

The electrical meter used is appropriate only to residential units and not to service the
two buildings intended for public which are [equipped] with modern medical equipment;
the old NFA and the [Cabiao] Community Clinic.

Both live service wire and secondary electrical wires were bundled together inside the
same tube. At the 2nd floor, visible signs of cut wires were found inside a tube,
including the service wire as it pass through going down to the main panel board
and several cut wires of the secondary breaker going to the second floor for
power distribution.

The main and secondary panel boards were wrongly situated at the ground floor,
above which is the location of a comfort room, where water could easily slip to
the panel boards.

The installation of the secondary panel board at the ground floor distributing
power to the 2nd floor defeats its purpose, considering that if electrical trouble
happens at the 2nd floor one has to go to the 1st floor to shut off the power.

250
4. The construction of the Cabiao Community Center building was in violation of the
provision of Republic Act No. 9514 (Revised Fire Code of the Philippines)

Owners, occupants or administrator of buildings or structures are required to

incorporate and provide fire safety construction, protective and warning systems.
Investigation shows that a) there were no fire protection features such as sprinkler
systems, hose boxes, hose reels or standpipe systems and other firefighting equipment;
fire alarm systems; b) no fire exit, fire exit plan for each floor of the building showing the
routes from each other [sic] room to appropriate exits, displayed prominently on the
door of such room; c) no properly marked and lighted exits with provision for emergency
light to adequately illuminate exit ways in case of power failure, and d) no provisions for
confining the fire at its source such as fire resistive floors and walls.

5. The Cabiao Bureau of Fire Protection failed to perform its mandate pursuant to
RA 9514.

Under the Fire Code, the Bureau of Fire Protection is required to conduct fire safety
inspections as pre-requisite to the grant of licenses and permits for the use and
occupancy of buildings, structures, facilities and their premises including the installation
of fire protections and fire safety equipment and electrical systems in any building
structure or facility; and the storage of explosives or combustible, flammable, toxic and
other hazardous materials.

The BFP is likewise responsible for designating fire inspectors who shall inspect every
building at least once a year, and every time the owner, administrator or occupant
[renews] its business permit or permit to occupy; to issue a business permit or permit to
operate only after securing a Fire Safety Inspection Certification (FSIC); require the
building owner occupant to submit plans and specifications and other pertinent
documents of building/structure in order to ensure compliance of applicable codes and
standards and issue a written notice to the owner and/or contractor to stop work on
portion of any work due to absence or in violation of approved plans and specifications;
to inspect at reasonable time, any building, structure or premises and order the
owner/occupant to remove hazardous materials and/or stop operation if the standards
are not met; to declare and summarily abate hazardous conditions of the buildings or
structures and/or declare the same as fire hazards.

It is worthy to note that despite the long period of time from the occurrence of the fire
until the termination of this investigation, the Cabiao BFP headed by FO3 ESQUIVEL
has yet to submit its report and findings. However, inasmuch as FO3 ESQUIVEL has
bungled the investigation of the fire by removing items from the scene of the fire
and his failure to explain the disappearance of other electrical debris, the opening
and enlargement of the iron grill where the sole survivor passed, the back door
broken, and the non-recording of the investigations, FO3 Esquivel's action and
behaviors are highly suspect of a massive cover up of the real cause of the fire.

xxxx

251
7. St. Luke's negligence is criminal in nature.

St. Luke's College of Medicine - William H. Quasha Memorial, Inc., being the owner and
operator of the Cabiao Community Clinic is not without liability for the fate of the fire
victims. As a learning institution, which sends out its students to rural areas to
comply with its curriculum requirement, St. Luke's has the duty and responsibility
to see to it that the premises to where it sends its students are safe. It is significant
to stress that the Cabiao Community Clinic was established by the Municipality of
Cabiao and the St. Luke's College of Medicine in line with the latter's expansion of its
Community Medicine undertaking to the rural areas in order to train its students in
health promotion and disease prevention as well as to provide medical service to
deserving population and to undertake clinical research on various health practices.

The victims were sent there as part of their community medicine module in the
curriculum and their assignments were determined by the officials of the College of
Medicine.

8. The origin of fire.

The Cabiao BFP has manifested its prejudice and bias and thus, cannot be an
independent, reliable and credible investigator of this fire incident. They could not
even entertain any theory, other than the gas burner, because in doing so would place
themselves in jeopardy. They even resorted to tampering of premises by removing
all electrical wire debris, thinking that in its absence, fire caused by short circuits
cannot be proven.

It is highly probable that the origin of fire is electrical based on the Electrical Report
No. 04-10-001 submitted by Engr. DAVID R. AOANAN, Chief, Electrical Section, NBI
because of the following.

i. Presence of thick black smoke that indicates heat caused by short-

circuit

ii. Explosion or tripping off of the transformer, then a black out -

showing therefore that the circuit breaker did not trip off

iii. Inspection of the main circuit breaker and the secondary breakers
show that these did not trip off

iv. Presence of short circuited wires located at the 2 nd floor, where

buddle wires were found

v. Presence of numerous spliced wires or jumped wires in three

different convenient outlets

vi. Mainboard panel is mismatched with the service wire

252
 vii. Other defective wirings

It is a well done theory that the cause of the fire was due to faulty electrical wiring
with two reasons to support it, first is the physical manifestation as mentioned by
Engr. DAVE AOANAN who conducted evaluation/investigation on what is left on
the building of the Cabiao Community Clinic; second is the personal experience
of MIGUEL RAFAEL RAMOS y DAVID the lone survivor of the incident [who]
narrated what he perceived during last hour before he was rescued. MIGUEL['s]
narration contradict the theories laid down by Fire Marshall BABY BOY ESQUIVEL that
the fire was by the negligence of the victims [whom] he suspect[s] to have left [burning
a] gas stove. MIGUEL'S narration specifically pointed out that the fire was primarily
coming from the living room and not at the kitchen which is directly in front of their door
way. (Emphasis supplied.)
Respondents then filed a Complaint for damages against petitioners St. Luke's College
of Medicine-William H. Quasha Memorial Foundation, Dean of Medicine Brigido L.
Carandang, and Associate Dean for Faculty and Student Affairs Alejandro P. Ortigas,
claiming that their negligence caused the deaths of respondents' daughters.
Respondents maintained that, as a learning institution which sends out its medical
students to rural areas to comply with its curriculum requirement, St. Luke's has the
contractual duty and legal responsibility to see to it that the premises to where it sends
its students are safe and that, in the case at bar, St. Luke's refused to recognize its
obligations/liabilities.9 Respondents thus prayed as follows:10
WHEREFORE, premises considered, it is respectfully prayed that judgment be
rendered in favor of plaintiffs -
1. Finding the defendants negligent and liable under their contractual and legal
obligations to Jessa and Cecille;

2. Directing defendants to pay plaintiffs, jointly and severally, actual, moral and
exemplary damages; and cralawlawlibrary

3. Ordering defendants to pay the cost of suits and attorney's fees.

Plaintiffs further pray for such other reliefs as the Honorable Court may deem just and
equitable under the premises.
The RTC dismissed the complaint for lack of merit.11 It held that the Cabiao Community
Clinic was not a fire trap as there were two (2) fire exits, and that respondents failed to
present any report or finding by a competent authority that the said Clinic was not a safe
and secure place for the conduct of St. Luke's clerkship program. The RTC did not take
into consideration the NBI Report as it was allegedly not presented. 12chanrobleslaw

The RTC further held that the Clinic is owned by the Municipality of Cabiao, and that the
latter and/or its responsible officials should have been impleaded as indispensable
parties.13chanrobleslaw

The RTC summarized its findings in this manner:14

253
Albeit the Court is saddened by what happened with the untimely death of Perez and
Quintos who are both very bright with promising future in the field of medicine, it cannot
however close its eyes on the evidence submitted before it by placing the blame on the
cause of their death[s] to the defendants just to put the fault on anybody in order to
appease their grieving love[d] ones. For in the mind of the Court, the omission of the
defendants to secure a copy of the fire safety license of the Clinic or verify if it has one
prior to its construction before allowing their senior medical students to occupy and
reside therein is not per se a negligent act. Neither is the failure of the defendants to
orient their senior medical students, who obviously are of legal ages already such as the
deceased, on how to take the necessary measures for their safety and security before
retiring to sleep in the night considered negligent. Likewise, the failure of the dialogue
between the parties is not a legitimate ground to declare the defendants negligent. Put
differently, the Court is not persuaded that there is basis or justification to adjudge the
defendants negligent for the accidental death of Perez and Quintos.
Upon appeal, the CA reversed the RTC Decision and remanded the case to the RTC for
reception of evidence on the amount of damages to be awarded. 15 Addressing the
.preliminary issues, the CA held that the Municipality of Cabiao was not an
indispensable party as the Complaint was one for damages based on the allegations in
the enrollment contract. It explained that:16
While there was indeed an allegation of St. Luke's ownership of the clinic, bulk of the
arguments in the complaint were based on St. Luke's duty to ensure its students' safety
based on its obligation as a school. Not being contractually obligated to keep plaintiffs-
appellants' children safe from any risk as a result of school-sanctioned activities, the
Municipality of Cabiao cannot be considered an indispensable party to the action as it
was not a participant in the contract of enrollment.
Moreover, the CA held that although schools cannot be insurers of its students against
all risks, in the case at bar, the safety of the victims was within the reach of petitioners
and the hazard of a fire was not unforeseeable. 17 Also, while the fire was beyond the
control of petitioners, their decision to house their students in a place where there are
no means of escape in case of such an emergency shows a blatant disregard for the
students' welfare.18chanrobleslaw

The CA elucidated as follows:19

The testimonies of Dr. Ortigas, Dr. Carandang and Dr. Macabulos all show a lack of
effort on their part to thoroughly inspect the conditions of the building in relation to the
safety of their enrolled medical student-clerks.

According to Dr. Ortigas and Dr. Macabulos,20 they considered the doors leading out
from the pantry and the bedrooms as fire exits. However, as doctors who presumably
have a wider degree of foresight than most, they failed to consider that a fire might
break out in areas which would block these doors that are merely ordinary exits.
Further, Dr. Ortigas himself testified that permits are not part of their consideration for
safety and that they do not specifically look for the same [xxx.]

xxxx

254
Dr. Ortigas admitted that, as a doctor, he was not concerned with the permits issued
regarding the construction and safety of the building. However, at the time he conducted
the inspections of the clinic, he was also the Associate Dean of St. Luke's College of
Medicine with the duty to ensure that the building was safe for the security of the
enrolled students of St. Luke's College of Medicine who would be assigned to the clinic
during their clerkship and he admittedly did not consider the same.

As Associate Dean for Student Affairs, it would be reasonable to expect Dr. Ortigas
to show concern for the safety and security of the students enrolled in the institution
thus, ensure that the premises they were to reside in would be properly equipped in
case of fires and other calamities. He himself stated that his position as such put him "in
charge of student and student affairs, xxx and in general, the non-academic matters
involving students and the faculty." Consequently, it is safe to conclude that his task
included the safety and welfare of the students enrolled at St. Luke's College of
Medicine, one which he miserably failed to discharge.

Defendants-appellees also made a big deal out of the procedure of asking feedback
from students which led to the assumption that the clinic was safe and habitable.
However, it must be remembered that the students that gave the feedback were more
concerned with passing their course and presumably trusted that the school would not
send them to a location which it has independently determined to be unsafe.

xxxx

In relation, defendants-appellees defend their judgment to send plaintiffs-appellants'

daughters to the community clinic by contending that there has been no untoward
incident since the program began in 2004. xxx.

xxxx

The same argument also runs contrary to defendants-appellees' acceptance of the

construction of iron grills on the second floor windows of the clinic. According to Dr.
Ortigas, the same were constructed in order to prevent people from using the same to
enter the building and not designed to prevent egress therefrom. Dr. Ortigas was
specificallly questioned if there were prior incidents of intrusion into the clinic to which
he replied in the negative. If defendants-appellees' logic of "no untoward incident has
happened" is to be applied then, the presence of the grills was unnecessary in the same
way that they found the inspection of fire safety permits to be unnecessary. It baffles the
Court, therefore, that defendants-appellees would accept the precaution against an
admittedly unlikely intrusion but ignore any safety measures against a fire which was a
great possibility given that the clinic had flammable equipment such as a gas burner for
cooking. (Citations omitted)
Hence, the present petition for review on certiorari alleging that the CA committed
reversible error when it: (a) held that the Municipality of Cabiao was not an
indispensable party,21 (b) disregarded the findings of the BFP that the fire was purely
accidental and caused by unattended cooking, 22 and (c) ruled that petitioners were

255
negligent.23chanrobleslaw

We deny the petition.

A perusal of the Complaint readily shows that respondents base their cause of action on
petitioners' breach of the contractual obligation, as an educational institution, of
ensuring that their students, in the performance of a required school activity, would be
safe and secure. The Municipality of Cabiao, not being a party to said enrollment
contract, is not an indispensable party to the case.

An indispensable party is defined by the Rules of Court as a party-in-interest without

whom no final determination can be had of an action. 24 In the present case, respondents
premise petitioners' liability on their contractual obligation to their students and,
certainly, complete relief and a final judgment can be arrived at by weighing the claims
and defenses of petitioners and respondents, without need of evaluating the claims and
defenses of the Municipality of Cabiao. If at all, the Municipality of Cabiao is a
necessary party25cralawred whose non-inclusion in the case at bar shall not prevent the
court from proceeding with the action.

Indeed, the present case is one between a school and its students, with their
relationship being based on the enrollment contracts. In the illuminating case of PSBA,
et al. v. CA, et al.,26 the Court had the opportunity to lay down the principle
that:ChanRoblesVirtualawlibrary
When an academic institution accepts students for enrollment, there is established
a contract between them, resulting in bilateral obligations which both parties are bound
to comply with. For its part, the school undertakes to provide the student with an
education that would presumably suffice to equip him with the necessary tools and skills
to pursue higher education or a profession. On the other hand, the student covenants to
abide by the school's academic requirements and observe its rules and regulations.

Institutions of learning must also meet the implicit or "built-in" obligation of providing
their students with an atmosphere that promotes or assists in attaining its primary
undertaking of imparting knowledge. Certainly, no student can absorb the intricacies of
physics or higher mathematics or explore the realm of the arts and other sciences when
bullets are flying or grenades exploding in the air or where there looms around the
school premises a constant threat to life and limb. Necessarily, the school must ensure
that adequate steps are taken to maintain peace and order within the campus premises
and to prevent the breakdown thereof.
Indubitably, institutions of learning have the "built-in" obligation of providing a conducive
atmosphere for learning, an atmosphere where there are no constant threats to life and
limb, and one where peace and order are maintained.

In the case at bar, the Cabiao Community Clinic is to be considered as part of the
campus premises of St. Luke's. In the course description of the clerkship program in
preventive and community medicine, it is stated that the Cabiao Community Clinic
serves as the base operation of the clerkship program. 27 As such, petitioner had the

256
same obligation to their students, even though they were stationed in the Cabiao
Community Clinic, and it was incumbent upon petitioners to ensure that said Clinic was
conducive for learning, that it had no constant threats to life and limb, and that peace
and order was maintained thereat. After all, although away from the main campus of St.
Luke's, the students were still under the same protective and supervisory custody of
petitioners as the ones detailed in the main campus.

In the performance of its contractual and inherent obligations, the Court is mindful of the
attendant difficulties on the part of institutions of learning, and the Court recognizes that
the latter cannot be an insurer of its students against all risks. Thus, as also laid out in
the PSBA case, "the school may still avoid liability by proving that the breach of its
contractual obligation to the students was not due to its negligence, here statutorily
defined to be the 'omission of that degree of diligence which is required by the nature of
the obligation and corresponding to the circumstances of persons, time and
place."28chanrobleslaw

Our next query, then, is, in relation to the fire incident, did petitioners commit a breach
of contract through negligence?

A review of the records compels the Court to answer in the affirmative.

In Mendoza, et al. v. Sps. Gomez,29 we defined negligence as "the failure to observe for
the protection of the interests of another person, that degree of care, precaution and
vigilance which the circumstances justly demand, whereby such other person suffers
injury."

In Gaid v. People,30 we enumerated the elements of simple negligence as follows: (1)

that there is lack of precaution on the part of the offender, and (2) that the damage
impending to be caused is not immediate or the danger is not clearly manifest. We
explained that:ChanRoblesVirtualawlibrary
The standard test in determining whether a person is negligent in doing an act whereby
injury or damage results to the person or property of another is this: could a prudent
man, in the position of the person to whom negligence is attributed, foresee harm to the
person injured as a reasonable consequence of the course actually pursued? If so, the
law imposes a duty on the actor to refrain from that course or to take precautions to
guard against its mischievous results, and the failure to do so constitutes negligence.
Reasonable foresight of harm, followed by the ignoring of the admonition born of this
provision, is always necessary before negligence can be held to
exist.31chanroblesvirtuallawlibrary
In the case at bar, it is well to remember that the victims were in the Cabiao Community
Clinic because it was a requirement of petitioners. The students were complying with an
obligation under the enrollment contract — they were rendering medical services in a
community center as required by petitioners. It was thus incumbent upon petitioners to
comply with their own obligations under the enrollment contract - to ensure that the
community center where they would designate their students is safe and secure, among
others.

257
Petitioners failed to take the necessary precautions to guard their students against
foreseeable harm. As correctly found by the CA, petitioners were remiss in inspecting
the premises of the Cabiao Community Clinic and in ensuring that the necessary
permits were in order. These precautions could have minimized the risk to the safety of
the victims. Indeed, the CA had basis in making the following pronouncement: 32
In the instant case, as previously emphasized, defendants-appellees were aware that its
medical students were residing at the second floor of the clinic. At the very least, during
inspection, they should have thoroughly inspected the building's physical appearance
and the documents pertinent to the premises to make sure that the same minimized the
risk to the safety of the students. There is no record that any inquiry on the condition of
the premises was even made by defendants-appellees prior to the implementation of
the program. In addition to such failure, defendants-appellees would have this Court
believe that their participation in the clinic was limited to providing the same with
medical personnel without considering that such personnel also included its students
which St. Luke's was obliged to protect from unnecessary danger.
The petitioners were obviously negligent in detailing their students to a virtual fire trap.
As found by the NBI, the Clinic was unsafe and was constructed in violation of
numerous provisions of the Revised Fire Code of the Philippines. It had no emergency
facilities, no fire exits, and had no permits or clearances from the appropriate
government offices.

Petitioners additionally aver that the Clinic was built under the direction, supervision,
management and control of the Municipality of Cabiao, 33 and that it ensured that there
was an agreement for the Municipality of Cabiao to provide 24-hour security to the
Clinic.34chanrobleslaw

Petitioners, however, cannot escape liability based on these arguments. As held

in Saludaga v. FEU, et al.,35 a learning institution should not be allowed to completely
relinquish or abdicate matters of safety and security to a third party as to do so would
result to contracting away its inherent obligation of ensuring a safe learning environment
for its students.

In Saludaga, the Court chastised therein respondent Far Eastern University (FEU) for its
total reliance on a security agency as to the qualifications of its security guards, viz:36
Respondents also failed to show that they undertook steps to ascertain and confirm that
the security guards assigned to them actually possess the qualifications required in the
Security Service Agreement. It was not proven that they examined the clearances,
psychiatric test results, 201 files, and other vital documents enumerated in its contract
with Galaxy. Total reliance on the security agency about these matters or failure to
check the papers stating the qualifications of the guards is negligence on the part of
respondents. A learning institution should not be allowed to completely relinquish or
abdicate security matters in its premises to the security agency it hired. To do so would
result to contracting away its inherent obligation to ensure a safe learning environment
for its students.

258
Similarly, we cannot turn; a blind eye on petitioners' total reliance on the Municipality of
Cabiao in ensuring the safety and security of their students. The enrollment contract is
between petitioners and the victims, and petitioners cannot abdicate' on their
contractual obligation to provide their students a safe learning environment, nor can it
pass or contract away such obligation to a third party.

Moreover, as to the stipulation of 24-hour security in the Clinic, petitioners failed to

present evidence that this stipulation was actually enforced or that they took measures
to ensure that it was enforced. This, once more, shows petitioners' propensity of relying
on third parties in carrying out its obligations to its students.

It is settled that in culpa contractual, the mere proof of the existence of the contract and
the failure, of its compliance justify, prima facie, a corresponding right of relief.37 In Gilat
Satellite Networks, Ltd. v. UCPB General Insurance Co., Inc.,38 the Court
expounded:ChanRoblesVirtualawlibrary
xxx. The law, recognizing the obligatory force of contracts, will not permit a party to be
set free from liability for any kind of misperformance of the contractual undertaking or a
contravention of the tenor thereof. A breach upon the contract confers upon the injured
party a valid cause for recovering that which may have been lost or suffered. The
remedy serves to preserve the interests of the promissee that may include his
"expectation interest," which is his interest in having the benefit of his bargain by being
put in as good a position as he would have been in had the contract been performed, or
his "reliance interest," which is his interest in being reimbursed for loss caused by
reliance on the contract by being put in as good a position as he would have been in
had the contract not been made; or his "restitution interest," which is his interest in
having restored to him any benefit that he has conferred on the other party. Indeed,
agreements can accomplish little, either for their makers or for society, unless they are
made the basis for action. The effect of every infraction is to create a new duty, that is,
to make RECOMPENSE to the one who has been injured by the failure of another to
observe his contractual obligation unless he can show extenuating circumstances, like
proof of his exercise of due diligence x x x or of the attendance of fortuitous event, to
excuse him from his ensuing liability. xxx. (Emphasis omitted)
In the case at bar, it was amply shown that petitioners and the victims were bound by
the enrollment contracts, and that petitioners were negligent in complying with their
obligation under the said contracts to ensure the safety and security of their students.
For this contractual breach, petitioners should be held liable.

WHEREFORE, in view of the foregoing, the Court resolves to DENY the petition for
review on certiorari and AFFIRM the Court of Appeals' Decision and Resolution.

SO ORDERED.chanRoblesvirtualLawlibrary

SECOND DIVISION

June 5, 2017

259
G.R. No. 208450

SPS. ROBERTO ABOITIZ AND MARIA CRISTINA CABARRUS, Petitioners

vs.
SPS. PETER L. PO AND VICTORIA L. PO, Respondents

x-----------------------x

G.R. No. 208497

SPS. PETER L. PO AND VICTORIA L. PO, Petitioners,

vs.
SPS. ROBERTO ABOITIZ AND MARIA CRISTINA CABARRUS, JOSE MARIA
MORAZA, AND ERNESTO ABOITIZ AND ISABEL ABOITIZ, Respondents

DECISION

LEONEN, J.:

This resolves two (2) Petitions for Review on Certiorari 1 assailing the Court of Appeals'
October 31, 2012 Decision2 and its June 17, 2013 Resolution3 in CA-G.R. CV No.
03803. The assailed decision affirmed the Regional Trial Court's Decision, 4 which
declared the spouses Peter Po and Victoria Po (Spouses Po) as the rightful owners of
the parcel of land. However, the Court of Appeals ruled that respondents Jose Maria
Moraza (Jose), spouses Ernesto Aboitiz (Ernesto), and Isabel Aboitiz (Isabel) were
innocent buyers in good faith whose titles were entitled to protection. 5 The assailed
resolution denied the Motion for Partial Reconsideration of the spouses Roberto Aboitiz
and Maria Cristina Cabarrus (Spouses Aboitiz).6

The Spouses Aboitiz filed the Petition7 docketed as G.R. No. 208450. The Spouses Po
filed the Petition8 docketed as G.R. No. 208497. These cases are consolidated in the
case at bar.

This case involves a parcel of land located in Cabancalan, Mandaue City, 9 initially
registered as Original Certificate of Title No. 0-887, and titled under the name of
Roberto Aboitiz (Roberto). 10 The land is referred to as Lot No. 2835. 11

This parcel of land originally belonged to the late Mariano Seno (Mariano). 12

On July 31, 1973, Mariano executed a Deed of Absolute Sale in favor of his son, Ciriaco
Seno (Ciriaco), over a 1.0120-hectare land in Cebu covered by Tax Declaration No.
43358. 13 This property included two (2)

lots: Lot No. 2807 and the land subject of this case, Lot No. 2835. 14

260
On May 5, 1978, Ciriaco sold the two (2) lots to Victoria Po (Victoria). 15 The parties
executed a Deed of Absolute Sale. 16

On July 15, 1982, Mariano died and was survived by his five (5) children (Mariano
Heirs): Esperanza Seno V da. De Kuizon, Ramon Seno, 17 Benita Seno Vda. De Lim,
Simeon Seno,18 and Ciriaco.19

In 1990, Peter Po (Peter) discovered that Ciriaco "had executed a [q]uitclaim dated
August 7, 1989 renouncing [his] interest over Lot [No.] 2807 in favor of [petitioner]
Roberto."20 In the quitclaim, Ciriaco stated that he was "the declared owner of Lot [Nos.]
2835 and 2807."21

The Spouses Po confronted Ciriaco.22 By way of remedy, Ciriaco and the Spouses Po
executed a Memorandum of Agreement dated June 28, 1990 in which Ciriaco agreed to
pay Peter the difference between the amount paid by the Spouses Po as consideration
for the entire property and the value of the land the Spouses Po were left with after the
quitclaim. 23

However, also in 1990, Lot No. 2835 was also sold to Roberto. 24 The Mariano Heirs,
including Ciriaco, executed separate deeds of absolute sale in favor of
Roberto.25 Thereafter, Roberto immediately developed the lot as part of a subdivision
called North Town Homes.26

In 1991, the Spouses Po declared Lot No. 2835 for taxation purposes and was issued
Tax Declaration No. 0634-A.27

In 1992, Roberto also declared Lot No. 2835 for taxation purposes and was issued Tax
Declaration No. 1100, annotated with: "This tax declaration is also declared in the name
of Mrs. VICTORIA LEE PO married to PETER PO under [T]ax [Declaration] [N]o. 0634-
A so that one may be considered a duplicate to the other. "28

On April 19, 1993, Roberto filed an application for original registration of Lot No. 2835
with the Mandaue City Regional Trial Court, acting as land registration court. 29 The
case was raffled to Branch 28 and docketed as LRC Case No. N-208. 30

In its Decision dated October 28, 1993, the trial court granted the issuance of Original
Certificate of Title No. 0-887 in the name of Roberto. 31 The lot was immediately
subdivided with portions sold to Ernesto and Jose. 32

On November 19, 1996, the Spouses Po filed a complaint to recover the land and to
declare nullity of title with damages. 33

The complaint was docketed in Branch 55, Regional Trial Court of Mandaue City. 34

The trial court ruled in favor of the Spouses Po in its Decision dated November 23,
2009:

261
WHEREFORE, premises considered, judgment is rendered in favor of plaintiffs, and
against defendants, declaring the plaintiffs as owner of subject land and ordering the
defendants reconvey and/or return to plaintiffs Lot No. 2835; declaring as absolute
nullity all the documents of sale involving Lot 283 5 executed by the Heirs of Mariano
Seno in favor of defendant Roberto Aboitiz and such other documents used in the
improvident issuance of titles in the name of defendants, and to cancel the said titles. 35

The Spouses Aboitiz appealed to the Court of Appeals. The Court of Appeals, in its
Decision dated October 31, 2012, partially affirmed the trial court decision, declaring the
Spouses Po as the rightful owner of the land. However, it ruled that the titles issued to
respondents Jose, Ernesto, and Isabel should be respected. 36

The Court of Appeals discussed the inapplicability of the rules on double sale and the
doctrine of buyer in good faith since the land was not yet registered when it was sold to
the Spouses Po.37 However, it ruled in favor of the Spouses Po on the premise that
registered property may be reconveyed to the "rightful or legal owner or to the one with
a better right if the title [was] wrongfully or erroneously registered in another person's
name."38 The Court of Appeals held that the Mariano Heirs were no longer the owners of
the lot at the time they sold it to Roberto in 1990 because Mariano, during his lifetime,
already sold this to Ciriaco in 1973. 39

It found that the Deed of Absolute Sale between Ciriaco and the Spouses Po was duly
notarized and was thus presumed regular on its face. 40 Their Memorandum of
Agreement did not cancel or rescind the Deed of Absolute Sale but rather strengthened
their claim that they "entered into a contract of [s]ale. " 41

It likewise ruled that, contrary to the assertion of the Spouses Aboitiz, there was no
showing that Ciriaco merely held the property in trust for the Mariano Heirs. 42

It held that the action of the Spouses Po had not yet prescribed because their complaint
in 1996 was within the 10-year prescriptive period as the title in favor of the Spouses
Aboitiz was issued in 1994.43

However, the Court of Appeals ruled that the certificates of title of Jose, Ernesto, and
Isabel were valid as they were innocent buyers in good faith. 44

The Spouses Aboitiz thus filed their Petition for Review, which was docketed as G.R.
No. 208450.1âwphi1
45
 They argue that the Decision of Branch 55, Regional Trial Court of Mandaue City
granting the complaint of the Spouses Po is void for lack of jurisdiction over the
matter.46 They claim that a branch of the Regional Trial Court has no jurisdiction to
nullify a final and executory decision of a co-equal branch; 47 it is the Court of Appeals
that has this jurisdiction. 48

262
They likewise assert that the Spouses Po's cause of action has prescribed 49 and
allegedly accrued when the Deed of Absolute Sale between the Spouses Po and
Ciriaco was executed on May 5, 1978.50 They maintain that more than 10 years had
elapsed when the complaint was filed on November 12, 1996, thus barring the action
through prescription.51

The Spouses Aboitiz further insist that "estoppel and laches have already set in." 52 They
claim that they have been "in open, public, continuous, uninterrupted, peaceful[,] and
adverse possession" in the concept of owners over the property for "46 years as of
1993," without the Spouses Po acting on the Deed of Absolute Sale. 53 They attest that
the development of North Town Homes Subdivision "was covered by utmost publicity,"
but the Spouses Po did not immediately question the development or interpose any
objection during the registration proceedings. 54

They posit that the Deed of Absolute Sale between Ciriaco and the Spouses Po is
"clearly fake and fraudulent" 55 as evidenced by certifications of its non-existence in the
notarial books and the Spouses Po's failure to enforce their rights over the property until
18 years later. 56 They also affirm that the Deed of Absolute Sale between Ciriaco and
the Spouses Po is inadmissible as no documentary stamp was paid and affixed. 57

Lastly, they contend that the Mariano Heirs should have been impleaded in the action
as they are indispensable parties. 58

The Spouses Po filed a Comment59 where they argued that the Regional Trial Court had
jurisdiction when it granted their complaint because the case filed by the Spouses
Aboitiz was for the registration of the land, while the case they filed was for
reconveyance.60 They insisted that their action had not prescribed because an action for
reconveyance prescribes in 10 years from the "date of issuance of the certificate of title
over the property."61 They argued that "laches ha[d] not set in." 62 They claimed that the
notarized Deed of Absolute Sale between them and Ciriaco was not fake or fraudulent
and was admissible in evidence63 whereas the Spouses Aboitiz failed "to overcome [its]
presumption of regularity and due execution." 64 They asserted that "the documentary
stamps tax ha[d] been paid"65 and that the Mariano Heirs were not indispensable
parties.66

Spouses Aboitiz filed a Reply67 reiterating their arguments in the Petition.

The Spouses Po also filed a Petition for Review, which was docketed as G.R. No.
208497. They claim that respondents Jose, Ernesto, and Isabel are not "innocent
purchasers for value."68 They allegedly knew of the defective title of Roberto because
his tax declaration had the following annotation: "This tax declaration is also declared in
the name of Mrs. VICTORIA LEE PO, married to PETER PO under tax dec. No. 0634-A
so that one may be considered a duplicate to the other. (Section 89 Paragraph H PD
464)."69

263
Spouses Aboitiz filed a Comment.70 Aside from reiterating their assertions in their
Petition for Review in G.R No. 208450, they argued that there was no evidence that
they acted in bad faith as "subdivision lot buyers [were] not obliged to go beyond the
[T]orrens title."71

Spouses Po filed a Reply. 72

For resolution are the following issues:

First, whether the Regional Trial Court has jurisdiction over the Spouses Peter and
Victoria Po's complaint;

Second, whether the action is barred by prescription,

Third, whether the doctrines of estoppel and laches apply;

Fourth, whether the land registration court's finding that Ciriaco Seno only held the
property in trust for the Mariano Heirs is binding as res judicata in this case;

Fifth, whether the Deed of Absolute Sale between Ciriaco Seno and the Spouses Peter
and Victoria Po should be considered as evidence of their entitlement to the property;

Sixth, whether the Mariano Heirs, as sellers in a deed of conveyance of realty, are

indispensable parties; and

Finally, whether the respondents Jose Maria Moraza, Ernesto Aboitiz, and Isabel
Aboitiz are innocent purchasers in good faith.

The Spouses Aboitiz argue that Branch 55, Regional Trial Court did not have jurisdiction
to nullify the final and executory Decision of Branch 28, Regional Trial Court in LRC
Case No. N-208.73 They claim that that it is the Court of Appeals that has jurisdiction to
annul judgments of the Regional Trial Court. 74

However, the instant action is not for the annulment of judgment of a Regional Trial
Court. It is a complaint for reconveyance, cancellation of title, and damages. 75

A complaint for reconveyance is an action which admits the registration of title of

another party but claims that such registration was erroneous or wrongful. 76 It seeks the
transfer of the title to the rightful and legal owner, or to the party who has a superior
right over it, without prejudice to innocent purchasers in good faith. 77 It seeks the
transfer of a title issued in a valid proceeding. The relief prayed for may be granted on
the basis of intrinsic fraud-fraud committed on the true owner instead of fraud committed
on the procedure amounting to lack of jurisdiction.

264
An action for annulment of title questions the validity of the title because of lack of due
process of law. There is an allegation of nullity in the procedure and thus the invalidity of
the title that is issued.

The complaint of the Spouses Po asserted that they were the true owners of the parcel
of land which was registered in the name of the

Spouses Aboitiz.78 They alleged that they acquired the property from Ciriaco, who
acquired it from Mariano. 79 They claimed that the Spouses Aboitiz had the property
registered without their knowledge and through fraud. 80 Thus, they sought to recover
the property and to cancel the title of the Spouses Aboitiz. 81 Thus the prayer in their
Complaint stated:

WHEREFORE, premises considered, this Honorable Court is respectfully prayed to

render judgment in favor of plaintiffs and against defendants, ordering the latter as
follows:

1. To reconvey and/or return to plaintiffs Lot No. 2835 which is the subject
matter of this complaint;

2. To declare as absolute nullity all the documents of sale involving Lot

2835 in favor of defendants and such other documents used in the
improvident issuance of the Title in the name of defendants, and to cancel
said Title;

3. To pay jointly and severally the amount of ₱ 1,000,000.00 as moral

damages; ₱500,000.00 as actual damages; ₱ 100,000.00 as attorneys
fees and ₱ 20,000.00 as litigation expenses.

Plaintiffs further pray for such other reliefs and remedies just and equitable in the
premises. 82

Except for actions falling within the jurisdiction of the Municipal Trial Courts, the
Regional Trial Courts have exclusive original jurisdiction over actions involving "title to,
or possession of, real property." 83 Section 19 of Batas Pambansa Blg. 129 provides:

Section 19. Jurisdiction in Civil Cases. - Regional Trial Courts shall exercise exclusive
original jurisdiction:

(2) In all civil actions which involve the title to, or possession of, real property, or any
interest therein, except actions for forcible entry into and unlawful detainer of lands or
buildings, original jurisdiction over which is conferred upon Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts[.]

An action for reconveyance and annulment of title is an action involving the title to real
property. 84

265
The complaint of the Spouses Po is clearly an action for reconveyance and annulment
of title. Thus, the Regional Trial Court has jurisdiction to hear the case.

The Spouses Aboitiz claim that it is the Court of Appeals that has jurisdiction over the
annulment of Regional Trial Court judgments. 85

The jurisdiction of the Court of Appeals is provided in Section 9 of Batas Pambansa Blg.
129:

Section 9. Jurisdiction. - The Intermediate Appellate Court shall exercise:

(2) Exclusive original jurisdiction over actions for annulment of judgments of Regional
Trial Courts[.]

While the Court of Appeals has jurisdiction to annul judgments of the Regional Trial
Courts, the case at bar is not for the annulment of a judgment of a Regional Trial Court.
It is for reconveyance and the annulment of title.

The difference between these two (2) actions was discussed in Toledo l  86 v. Court of
Appeals:

An action for annulment of judgment is a remedy in equity so exceptional in nature that

it may be availed of only when other remedies are wanting, and only if the judgment,
final order or final resolution sought to be annulled was rendered by a court lacking
jurisdiction or through extrinsic fraud. An action for reconveyance, on the other hand, is
a legal and equitable remedy granted to the rightful owner of land which has been
wrongfully or erroneously registered in the name of another for the purpose of
compelling the latter to transfer or reconvey the land to him. The Court of Appeals has
exclusive original jurisdiction over actions for annulment of judgments of Regional Trial
Courts whereas actions for reconveyance of real property may be filed before the
Regional Trial Courts or the Municipal Trial Courts, depending on the assessed value of
the property involved.

Petitioners allege that: first, they are the owners of the land by virtue of a sale between
their and respondents' predecessors-in-interest; and second, that respondents
Ramoses and ARC Marketing illegally dispossessed them by having the same property
registered in respondents' names. Thus, far from establishing a case for annulment of
judgment, the foregoing allegations clearly show a case for reconveyance. 87 (Citations
omitted)

As stated, a complaint for reconveyance is a remedy where the plaintiff argues for an
order for the defendant to transfer its title issued in a proceeding not otherwise invalid.
The relief prayed for may be granted on the basis of intrinsic rather than extrinsic fraud;
that is, fraud committed on the real owner rather than fraud committed on the procedure
amounting to lack of jurisdiction.

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An action for annulment of title, on the other hand, questions the validity of the grant of
title on grounds which amount to lack of due process of law. The remedy is premised in
the nullity of the procedure and thus the invalidity of the title that is issued. Title that is
invalidated as a result of a successful action for annulment against the decision of a
Regional Trial Court acting as a land registration court may still however be granted on
the merits in another proceeding not infected by lack of jurisdiction or extrinsic fraud if
its legal basis on the merits is properly alleged and proven.

Considering the Spouses Aboitiz's fraudulent registration without the Spouses Po's
knowledge and the latter's assertion of their ownership of the land, their right to recover
the property and to cancel the Spouses Aboitiz' s88 title, the action is for reconveyance
and annulment of title and not for annulment of judgment.

Thus, the Regional Trial Court has jurisdiction to hear this case.

II

The Spouses Aboitiz argue that the Spouses Po's cause of action has
prescribed.89 They claim that prescription has set in because the original complaint was
filed only on November 12, 1996, after more than 10 years after the Deed of Absolute
Sale between Ciriaco and Spouses Po was executed on May 5, 1978. 90

The Spouses Po's action has not prescribed.

"[A]n action for reconveyance ... prescribes in [10] years from the issuance of the
Torrens title over the property." 91 The basis for this is Section 53, Paragraph 392 of
Presidential Decree No. 152993 in relation to Articles 145694 and 1144(2)95 of the Civil
Code.96

Under Presidential Decree No. 1529 (Property Registration Decree), the owner of a
property may avail of legal remedies against a registration procured by fraud:

SECTION 53. Presentation of Owner's Duplicate Upon Entry of New Certificate. - ...

In all cases of registration procured by fraud, the owner may pursue all his legal and
equitable remedies against the parties to such fraud without prejudice, however, to the
rights of any innocent holder for value of a certificate of title ...

Article 1456 of the Civil Code provides that a person acquiring a property through fraud
becomes an implied trustee of the property's true and lawful owner. 97

An implied trust is based on equity and is either (i) a constructive trust, or (ii) a resulting
trust.98 A resulting trust is created by implication of law and is presumed as intended by
the parties.99 A constructive trust is created by force of law 100 such as when a title is
registered in favor of a person other than the true owner. 101

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The implied trustee only acquires the right "to the beneficial enjoyment of [the]
property." 102 The legal title remains with the true owner. 103 In Crisostomo v. Garcia,
J,r., .:  104

Art. 1456 of the Civil Code provides:

Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of the person from
whom the property comes.

Thus, it was held that when a party uses fraud or concealment to obtain a certificate of
title of property, a constructive trust is created in favor of the defrauded party.

Constructive trusts are "created by the construction of equity in order to satisfy the
demands of justice and prevent unjust enrichment. They arise contrary to intention
against one who, by fraud, duress or abuse of confidence, obtains or holds the legal
right to property which he ought not, in equity and good conscience, to hold."

When property is registered in another's name, an implied or constructive trust is

created by law in favor of the true owner. The action for reconveyance of the title to the
rightful owner prescribes in 10 years from the issuance of the title. 105 (Citations
omitted)

Thus, the law creates a trust in favor of the property's true owner.

The prescriptive period to enforce this trust is 10 years from the time the right of action
accrues. Article 1144 of the Civil Code provides:

Article 1144. The following actions must be brought within ten years from the time the
right of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

In an action for reconveyance, the right of action accrues from the time the property is
registered . 106

In Crisostomo,  107 the petitioners were able to transfer the property under their names
without knowledge of the respondent. 108 The respondent filed an action for
reconveyance. 109 In arguing that the action for reconveyance had prescribed, the
petitioners claimed that the cause of action of the respondent should be based on the
latter's Deed of Sale and thus the respondent's right of action should have accrued from
its execution.110 This Court, however, ruled that the right of action accrued from the time

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the property was registered because registration is the act that signifies that the adverse
party repudiates the implied trust:

In the case at bar, respondent's action which is for Reconveyance and Cancellation of
Title is based on an implied trust under Art. 1456 of the Civil Code since he averred in
his complaint that through fraud petitioners were able to obtain a Certificate of Title over
the property. He does not seek the annulment of a voidable contract whereby Articles
1390 and 1391 of the Civil Code would find application such that the cause of action
would prescribe in four years.

An action for reconveyance based on implied or constructive trust prescribes in ten

years from the alleged fraudulent registration or date of issuance of the certificate of title
over the property.

It is now well-settled that the prescriptive period to recover property obtained by fraud or
mistake, giving rise to an implied trust under Art. 1456 of the Civil Code, is 10 years
pursuant to Art. 1144. This tenyear prescriptive period begins to run from the date the
adverse party repudiates the implied trust, which repudiation takes place when the
adverse party registers the land.  111 (Citations omitted, emphasis supplied)

Likewise, in Duque v. Domingo:  112

The registration of an instrument in the Office of the Register of Deeds constitutes

constructive notice to the whole world, and, therefore, discovery of the fraud is deemed
to have taken place at the time of registration. Such registration is deemed to be a
constructive notice that the alleged fiduciary or trust relationship has been repudiated. It
is now settled that an action on an implied or constructive trust prescribes in ten (10)
years from the date the right of action accrued. The issuance of Transfer Certificate of
Title No. 7501 in 1931 to Mariano Duque commenced the effective assertion of adverse
title for the purpose of the statute of limitations. 113 (Citations omitted)

Registration of the property is a "constructive notice to the whole world." 114 Thus, in

registering the property, the adverse party repudiates the implied trust. 115 Necessarily,
the cause of action accrues upon registration. 116

An action for reconveyance and annulment of title does not seek to question the
contract which allowed the adverse party to obtain the title to the property. 117 What is
put on issue in an action for reconveyance an d cancellation of title is the ownership of
the property and its registration. 118 It does not question any fraudulent contract. 119
Should that be the case, the applicable provisions are Articles 1390 120 and 1391 121 of
the Civil Code. 122

Thus, an action for reconveyance and cancellation of title prescribes in 10 years from
the time of the issuance of the Torrens title over the property. 123

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Considering that the Spouses Po's complaint was filed on November 19, 1996, less
than three (3) years from the issuance of the Torrens title over the property on April 6,
1994, it is well within the 10-year prescriptive period imposed on an action for
reconveyance.

III

The Spouses Aboitiz insist that estoppel and laches have already set in. 124 They claim
that they have been in "open, continuous, public, peaceful, [and] adverse" possession in
the concept of owners over the property for "46 years as of 1993," without the Spouses
Po acting on their Deed of Absolute Sale. 125 Moreover, the development of North Town
Homes Subdivision "was covered by utmost publicity" but the Spouses Po did not
promptly question the development. 126 In fact, they did not interpose any objection
during the registration proceedings. 127

There is laches when a party was negligent or has failed "to assert a right within a
reasonable time," thus giving rise to the presumption that he or she has abandoned
it. 128 Laches has set in when it is already inequitable or unfair to allow the party to
assert the right. 129 The elements of laches were enumerated in Ignacio v. Basilio:

There is laches when: (1) the conduct of the defendant or one under whom he claims,
gave rise to the situation complained of; (2) there was delay in asserting a right after
knowledge of the defendant's conduct and after an opportunity to sue; (3) defendant
had no knowledge or notice that the complainant would assert his right; (4) there is
injury or prejudice to the defendant in the event relief is accorded to the
complainant. 130 (Citation omitted)

"Laches is different from prescription."131 Prescription deals with delay itself and thus is
an issue of how much time has passed. 132 The time period when prescription is deemed
to have set in is fixed by law. 133 Laches, on the other hand, concerns itself with the
effect of delay and not the period of time that has lapsed. 134 It asks the question whether
the delay has changed "the condition of the property or the relation of the parties" such
that it is no longer equitable to insist on the original right. 135 In Nielson & Co., Inc. v.
Lepanto Consolidated Mining Co.: 136

Appellee is correct in its contention that the defense of laches applies independently of
prescription. Laches is different from the statute of limitations. Prescription is concerned
with the fact of delay. Whereas laches is concerned with the effect of delay. Prescription
is a matter of time; laches is principally a question of inequity of permitting a claim to be
enforced, this inequity being founded on some change in the condition of the property or
the relation of the parties. Prescription is statutory; laches is not. Laches applies in
equity, whereas prescription applies at law. Prescription is based on fixed time, Laches
is not. 137

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The defense of laches is based on equity. 138 It is not based on the title of the party
invoking it, but on the right holder's "long inaction or inexcusable neglect" to assert his
claim. 139

This Court rules that the Spouses Po is not barred by laches. There is no showing that
they abandoned their right to the property. The factual findings reveal that the Spouses
Po had their rights over the property registered in the assessor's office. 140 They testified
that they introduced improvements by cultivating fruit trees after they purchased the
lots.141 When the Spouses Po discovered that Ciriaco executed a quitclaim renouncing
his interest over Lot No. 2807 in favor of Roberto, the Spouses Po executed a
Memorandum of Agreement with Ciriaco to protect their interest in Lot No. 2835. 142

The Spouses Po also had the property declared for taxation purposes in their names
and Tax Declaration No. 0634-A was issued. 143 Thus, when the Spouses Aboitiz also
had the property declared for taxation purposes, it had the annotation: "This tax
declaration is also declared in the name of Mrs. Victoria Lee Po, married to Peter Po
under tax dee. no. 0634-A so that one may be considered a duplicate to the other." 144

The Spouses Aboitiz only acquired their alleged rights over the property in 1990, when
the Mariano Heirs executed the Deeds of Sale in their favor. 145 Assuming the Spouses
Aboitiz immediately took possession and began construction in 1990, it cannot be said
that the Spouses Po were in delay in asserting their right. In the Spouses Po's
complaint, they asserted that they made demands upon the Spouses Aboitiz to
reconvey to them the property. 146 They also referred the matter to the barangay for
conciliation:

11) That demands were made upon the defendants to reconvey to plaintiffs Lot 2835
unlawfully and feloniously acquired by defendants, but to no avail, thereby compelling
the plaintiffs to elevate the matter for barangay conciliation, and for failure of the parties
to effect a settlement, the proper Certification to file action was then issued, a copy of
which is hereto attached as Annex "L." 147

In their Answer with Counterclaim, the Spouses Aboitiz did not deny that demands were
made upon them and that the matter was elevated for barangay conciliation:

8. Par. 11 is denied as regards the all[e]gation that Lot 2835 was feloniously and
un[l]awfully acquired by defendants, for being false. The truth is that defendants were in
good faith in acquiring same property. Defendants refused to meet the demands of
settlement by plaintiffs because they are strangers to the property in question. 148

When they discovered that the property was registered in the name of the Spouses
Aboitiz in 1993, the Spouses Po then filed the instant complaint to recover the property
sold to them by Ciriaco, alleging that it was done without their knowledge, through
evident bad faith and fraud. 149 The Spouses Po filed this case in less than three (3)
years from the time of registration.

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Based on these circumstances, the elements of laches are clearly lacking in this case.
There was no delay in asserting their right over the property, and the Spouses Aboitiz
had knowledge that the Spouses Po would assert their right.

Thus, it cannot be said that they are barred by laches.

IV

The Spouses Aboitiz insist that there is already a finding by the Regional Trial Court in
LRC Case No. N-208 that Ciriaco merely held the property "in trust for the [Mariano
Heirs]." 150 Thus, Ciriaco could not have validly sold the property to the Spouses
Po. 151 They claim that these findings are binding on the whole world because land
registration proceedings are actions in rem. 152

In the Decision in LRC Case No. N-208, no one opposed the application for
registration.153 Moreover, the Spouses Aboitiz presented only one (I) witness, Gregorio
Espina (Espina), an employee of Roberto, 154 whotestified:

That this parcel of land is covered by tax declarations, to wit: 1) Tax Dec. No. 43174 in
the name of Ciriaco Seno for the year 1953 (Exh. "T");

11) Tax Dec. No. 2835 in the name of applicant, Roberto Aboitiz for the year 1991 (Exh.
"DD").

That the tax declarations covering Lot No. 2835 are in the name of Ciriaco Seno
because the heirs of Mariano Seno have agreed that Lot No. 2835 be held in trust by
Ciriaco Seno in favor of the heirs. 155

This Court rules that this cannot be binding in this action for reconveyance.

Res judicata embraces two (2) concepts: (i) bar by prior judgment and (ii)
conclusiveness of judgment, respectively covered under Rule 39, Section 47 of the
Rules of Court, paragraphs (b) and (c): 156

Section 47. Effect of judgments or final orders. - The effect of a judgment or final order
rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or
final order, may be as follows:

(b) In other cases, the judgment or final order is, with respect to the matter directly
adjudged or as to any other matter that could have been raised in relation thereto,
conclusive between the parties and their successors in interest by title subsequent to
the commencement of the action or special proceeding, litigating for the same thing and
under the same title and in the same capacity; and

(c) In any other litigation between the same parties or their successors in interest, that
only is deemed to have been adjudged in a former judgment or final order which

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appears upon its face to have been so adjudged, or which was actually and necessarily
included therein or necessary thereto.

Res judicata in the concept of bar by prior judgment proscribes the filing of another
action based on "the same claim, demand, or cause of action." 157 It applies when the
following are present: (a) there is a final judgment or order; (b) it is a judgment or order
on the merits; (c) it was "rendered by a court having jurisdiction over the subject matter
and parties"; and (d) there is "identity of parties, of subject matter, and of causes of
action" between the first and second actions. 158

Res judicata in the concept of conclusiveness of judgment applies when there is an

identity of issues in two (2) cases between the same parties involving different causes
of action.159 Its effect is to bar "the relitigation of particular facts or issues" which have
already been adjudicated in the other case. 160 In Calalang v. Register of Deeds of
Quezon City:161

The second concept - conclusiveness of judgment - states that a fact or question which
was in issue in a former suit and was there judicially passed upon and determined by a
court of competent jurisdiction, is conclusively settled by the judgment therein as far as
the parties to that action and persons in privity with them are concerned and cannot be
again litigated in any future action between such parties or their privies, in the same
court or any other court of concurrent jurisdiction on either the same or different cause
of action, while the judgment remains unreversed by proper authority. It has been held
that in order that a judgment in one action can be conclusive as to a particular matter in
another action between the same parties or their privies, it is essential that the issue[s]
be identical. If a particular point or question is in issue in the second action, and the
judgment will depend on the determination of that particular point or question, a former
judgment between the same parties or their privies will be final and conclusive in the
second if that same point or question was in issue and adjudicated in the first
suit (Nabus vs. Court of Appeals, 193 SCRA 732 [1991]). Identity of cause of action is
not required but merely identity of issues. 162

However, in Racoma v. Fortich,  163 this Court held that res judicata could not be a

defense in an action for reconveyance based on fraud where the complainant had no
knowledge of the application for registration:

The other ground upon which the lower court dismissed the complaint is res judicata. It
is stated in the order of dismissal that the plaintiff had admitted that the property in
controversy was applied for by defendant Maximina Fortich in a cadastral proceeding
and under Act 496; that the proceedings were in rem and, therefore, the whole world,
including the plaintiff, were parties thereto and bound by the judgment thereon ... [I]t is
obvious that the lower court was referring to the legal effect of the conclusiveness
against all persons of the in rem decision in the cadastral case rather than the actual
fact that the plaintiff was a claimant who appeared in the said case, for he alleged in his
complaint that he "has no knowledge whatsoever of the application for registration filed
by defendant Maximina Fortich and the order of decree of registration issued in favor of

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the defendant Maximina Fortich by this Honorable Court until on February 25, 1967 ... "
(Record on Appeal, page 30). Such being the case, then an action for reconveyance is
available to the plaintiff, the decree of registration notwithstanding, for ...

" ... , it is now a well-settled doctrine in this jurisdiction that the existence of a decree of
registration in favor of one party is no bar to an action to compel reconveyance of the
property to the true owner, which is an action in personam, even if such action be
instituted after the year fixed by Section 38 of the Land Registration Act as a limit to the
review of the registration decree, provided it is shown that the registration is wrongful
and the property sought to be reconveyed has not passed to an innocent third party
holder for value.["] 164 (Emphasis supplied)

The reason for this rule is to prevent the unjust deprivation of rights over real property.
As discussed in People v. Cainglet: 165

It is fundamental and well-settled that a final judgment in a cadastral proceeding - a

proceeding in rem - is binding and conclusive upon the whole world.1âwphi1 Reason is
that public policy and public order demand not only that litigations must terminate at
some definite point but also that titles over lands under the Torrens system should be
given stability for on it greatly depends the stability of the country's economy. Interest
republicae ut sit finis litium. However, this conclusiveness of judgment in the registration
of lands is not absolute. It admits of exception. Public policy also dictates that those
unjustly deprived of their rights over real property by reason of the operation of our
registration laws be afforded remedies. Thus, the aggrieved party may file a suit for
reconveyance of property or a personal action for recovery of damages against the
party who registered his property through fraud, or in case of insolvency of the party
who procured the registration through fraud, an action against the Treasurer of the
Philippines for recovery of damages from the Assurance Fund. Through these remedial
proceedings, the law, while holding registered titles indefeasible, allows redress
calculated to prevent one from enriching himself at the expense of other. Necessarily,
without setting aside the decree of title, the issues raised in the previous registration
case are relit1ated, for purposes of reconveyance of said title or recovery of
damages.  166 (Citations omitted, emphasis supplied)

In this case, the Spouses Po allege that the registration was done through fraud. They
contend that they were unaware and were thus unable to contest the registration and
prove their claim over the property. Aside from several tax receipts, the Spouses Po
formally offered as evidence, among others, the Deed of Sale executed by Mariano in
Ciriaco's favor, the Deed of Absolute Sale executed by Ciriaco in their favor, and the
Tax Declaration under Victoria's name. Additionally, they also submitted their
Memorandum of Agreement with Ciriaco and the Quitclaim executed by Ciriaco in favor
of the Spouses Aboitiz.167 These documents were not considered by the land
registration court when it issued the title in favor of the Spouses Aboitiz. The Spouses
Po also offered the Application of Original Registration of Title of the Spouses Aboitiz to
prove that the Spouses Aboitiz only submitted to the land registration court the

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cancelled tax declarations of Ciriaco, instead of the tax declaration of the Spouses
Po. 168

Thus, the ruling of the land registration court cannot be so conclusive as to deny the
Spouses Po the remedy afforded to them by law. The action for reconveyance allows
them to prove their ownership over the property. Hence, they are not precluded from
presenting evidence that is contrary to the findings in the land registration case.

The factual findings of the land registration court are not being questioned. An action for
reconveyance based on an implied trust seeks to compel the registered owner to
transfer the property to its true owner. 169 In Hortizuela v. Tagufa:  170

[A]n action for reconveyance is a recognized remedy, an action in personam, available

to a person whose property has been wrongfully registered under the Torrens system in
another's name. In an action for reconveyance, the decree is not sought to be set
aside. It does not seek to set aside the decree but, respecting it as incontrovertible and
no longer open to review, seeks to transfer or reconvey the land from the registered
owner to the rightful owner. Reconveyance is always available as long as the property
has not passed to an innocent third person for value.

There is no quibble that a certificate of title, like in the case at bench, can only be
questioned through a direct proceeding. The MCTC and the CA, however, failed to take
into account that in a complaint for reconveyance, the decree of registration is
respected as incontrovertible and is not being questioned. What is being sought is the
transfer of the property wrongfully or erroneously registered in another's name to its
rightful owner or to the one with a better right. If the registration of the land is fraudulent,
the person in whose name the land is registered holds it as a mere trustee, and the real
owner is entitled to file an action for reconveyance of the property. 171 (Citations omitted,
emphasis supplied)

Likewise in Naval v. Court of Appeals:172

Ownership is different from a certificate of title. The fact that petitioner was able to
secure a title in her name did not operate to vest ownership upon her of the subject
land. Registration of a piece of land under the Torrens System does not create or vest
title, because it is not a mode of acquiring ownership. A certificate of title is merely an
evidence of ownership or title over the particular property described therein. It cannot be
used to protect a usurper from the true owner; nor can it be used as a shield for the
commission of fraud; neither does it permit one to enrich himself at the expense of
others. Its issuance in favor of a particular person does not foreclose the possibility that
the real property may be coowned with persons not named in the certificate, or that it
may be held in trust for another person by the registered owner.

As correctly held by the Court of Appeals, notwithstanding the indefeasibility of the

Torrens title, the registered owner may still be compelled to reconvey the registered
property to its true owners. The rationale for the rule is that reconveyance does not set

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aside or re-subject to review the findings of fact of the Bureau of Lands. In an action for
reconveyance, the decree of registration is respected as incontrovertible. What is
sought instead is the transfer of the property or its title which has been wrongfully or
erroneously registered in another person's name, to its rightful or legal owner, or to the
one with a better right. 173 (Citations omitted, emphasis supplied)

The rationale for allowing reconveyance despite the finality of the registration is that the
issuance of a certificate of title does not create or vest ownership to a person over the
property. 174 Registration under the Torrens system "is not a mode of acquiring
ownership."175 A certificate is only a proof of ownership. 176 Thus, its issuance does not
foreclose the possibility of having a different owner, and it cannot be used against the
true owner as a shield for fraud. 177

In an action for reconveyance, the parties are obliged to prove their ownership over the
property. Necessarily, the parties may present evidence to support their claims. The
court must weigh these pieces of evidence and decide who between the parties the true
owner is. Therefore, it cannot be bound simply by the factual findings of the land
registration court alone.

An exception to this rule is if the party claiming ownership has already had the
opportunity to prove his or her claim in the land registration case. 178 In such a case, res
judicata will then apply. 179 When an issue of ownership has been raised in the land
registration proceedings where the adverse party was given full opportunity to present
his or her claim, the findings in the land registration case will constitute a bar from any
other claim of the adverse party on the property. 180

However, this is not the circumstance in the case at bar. The Spouses Po were not able
to prove their claim in the registration proceedings. Thus, res judicata cannot apply to
their action for reconveyance.

The Spouses Aboitiz posit that the Deed of Absolute Sale between Ciriaco and the
Spouses Po is fake and fraudulent. 181 They argue that this is evidenced by certifications
of the document's non-existence in the notarial books and the Spouses Po's failure to
enforce their rights over the property until 18 years later. 182 They also claim that the
Deed of Absolute Sale is inadmissible as no documentary stamp was paid and
affixed. 183

This Court notes that the Spouses Aboitiz are raising questions of fact which are not
within the scope of a review on certiorari under Rule 45 of the Rules of Court. 184 An
appeal under Rule 45 must raise only questions of law, unless the factual findings are
not supported by evidence or the judgment is based on a misapprehension of
facts. 185 Absent these exceptions, the factual findings of the lower courts are accorded
respect and are beyond the review of this Court. 186

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The Spouses Aboitiz failed to prove that these exceptions exist in the case at bar. The
Regional Trial Court lent credence to documents presented by the Spouses Po, Peter's
testimony about Mariano's sale of the property to Ciriaco, 187 Ciriaco's sale of the
property to the Spouses Po, and the issuance of a Tax Declaration in the name of
Victoria. 188

During trial, Peter also testified that after they bought the land, they had a caretaker who
cultivated the property by planting fruit trees. 189 He claimed that when they
subsequently discovered the quitclaim executed by Ciriaco in favor of the Spouses
Aboitiz, they executed a Memorandum of Agreement to protect their interests in the
property. 190 He stated that they filed a complaint in the barangay when the Spouses
Aboitiz started cutting down their improvements and that they subsequently discovered
that Ciriaco was forced by the Mariano Heirs to sell the property to the Spouses
Aboitiz. 191

The Spouses Aboitiz presented as their first witness Armando Avenido, who testified
according to the records only. 192 He claimed that he was familiar with the land which
was being developed by Aboitiz Land. He testified that Roberto acquired the land
through separate Deeds of Sale from the Mariano Heirs, had the tax declaration
transferred in his name, paid the taxes on the property, applied for the property's
registration, and developed the property into a subdivision. 193 During cross-examination
it was revealed that the tax declaration of the Spouses Po was issued before the tax
declaration of the Spouses Aboitiz and that the Spouses Po acquired from Ciriaco the
entire land, while the Spouses Aboitiz purchased only one-fifth (1/5) of the property. 194

The Spouses Aboitiz's second witness, Bienvenido Escoton, testified that he was a
mason working in the subdivision on the road lot and that he knew no person claiming
ownership of the land since 1989. 195

The Regional Trial Court thus held:

Analyzing the adduced and admitted evidence of both parties, Art. 1544 of the Civil
Code cannot be aptly applied in the case at bar, for reason that only the sale of Ciriaco
Seno (Exh. "A" Exh. All" Exh. 2"/ A, A-1 and A-2) has the validating elements of sale,
whereas the rest of the Deeds of Sale (Exhs 1 to 5) executed by the Heirs of Mariano
Seno in favor of the Defendants are void, for containing untruthful statements as
pleaded and proven. They are no longer the owners of the subject property when they
executed the several Deeds of Conveyance to defendant Roberto Aboitiz.

On the first issue on the identity and location of the land, the sale of Ciriaco Seno to
Plaintiffs (Exh. "A") reflected in the Tax Declarations that the Defendants used in their
titling proceeding is the very same lot as certified by the Barangay Captain dated July
28, 1999 under Plaintiff's Request for Admission. Concerning the second formulated
issue, only the Deed of Sale executed by Ciriaco Seno was valid with all the attending
requisites of sale. It was sold by the legitimate owner of the land, Ciriaco Seno to the
Plaintiffs. The sale (Exh. A, Exhibit "X") enjoyed preferential date of execution, being

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dated or executed in 1978 by the lawful owner Ciriaco Seno who was first to register the
sale in the Registry of Property office, and due to such registration, the Tax Declaration
of Ciriaco Seno, was cancelled and a new Tax Declaration was issued in the name of
Victoria Po for as shown in Exh. E the said tax declaration succeeded in canceling the
Tax Declaration of Mariano Seno (Exh. C) and was issued thereafter a Tax Declaration
in the name of C[i]riaco Seno (Exh. D). So, when the latter sold the subject land to
plaintiffs in 1978, the same was already owned by C[i]riaco Seno.

When Mariano Seno died in 1982, the subject land owned by C[i]riaco Seno, naturally,
is not part of the estate of Mariano Seno, for at that point in time, the subject land is now
owned by plaintiffs Sps. Po, and the same was declared in their names (Exh. "D" "E" &
"E-1 ").

As to the issue whether defendant Roberto Aboitiz was a purchaser in good faith and for
value, the Court holds that defendant Roberto Aboitiz was not a purchaser in good faith
and for value for he was already informed of the ownership of plaintiffs over the subject
land during the conciliation proceedings before the barangay official when plaintiffs filed
a barangay case against him.

In this case, the Court believes that defendant Roberto Aboitiz is aware of the
proprietary rights of the plaintiffs considering the land was already declared for taxation
purposes in plaintiffs' names after the tax declaration of said land, first in the name of
Mariano Seno was cancelled and another one issued in the name of C[i]riaco Seno
when the latter bought the said land from his father Mariano Seno, and after the said tax
declaration in the name of C[i]riaco Seno was cancelled and another one issued in the
name of plaintiffs herein.

So, defendant Roberto Aboitiz purchased the subject land from the Heirs of Mariano
Seno who are no longer the owners thereof and the tax declaration of subject land was
no longer in the name of Mariano Seno nor in the name of Heirs of Mariano Seno.

The City Assessor of Mandaue City even issued a Certification (Exh. X) to the effect
that Tax Declaration No. 0634-A in the name of Mrs. Victoria Lee Po married to Peter
Po was issued prior to the issuance of T.D. No. 1100 in the name of Roberto Aboitiz
married to Maria Cristina Cabarruz.

Buyers of any untitled parcel of land for that matter, to protect their interest, will first
verify from the Assessor's Office that status of said land whether it has clean title or
not. 196

With the exception of its ruling regarding respondents Jose, Ernesto, and Isabel being
purchasers in good faith, these factual findings were affirmed by the Court of Appeals.

Thus, there is no showing that the factual findings are not supported by evidence or that
the judgment seems to be based on a misapprehension of facts. Therefore, the factual
findings of the lower courts are binding.

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Furthermore, this Court finds that the Spouses Aboitiz failed to prove their claim of
fraud. The Spouses Aboitiz attempted to prove that the Deed of Absolute Sale between
Ciriaco and the Spouses Po was fake and fraudulent by presenting certifications of its
non-existence in the notarial books of the notary public who notarized the document. 197

However, a review of the certifications does not even state that the document does not
exist in the notarial books.

The Certification dated April 1, 1997 of the Records Management and Archives Office of
the Department of Education, Culture and Sports states:

This is to certify that per records of this Office, Deed of Sale executed by and between
Ciriaco Seno and Victoria Lee known as Doc. No. 66; Page No. 14; Book No. I; Series
of 1978 entered in the Notarial Register of Notary Public Jesus Pono is not among the
documents transferred by the Regional Trial Court of Cebu for safekeeping. 198

Likewise, the Certification dated April 4, 1997 of the Office of the Clerk of Court of the
Regional Trial Court of Cebu, 7th Judicial Region, Cebu City provides:

This is to certify that as per notarial records on file with this office, available and found
as of this date, Atty. Jesus M. Pono had been issued a Notarial Commission for the
term 1978-1979.

It is further certifie[d] that said Notary Public has not submitted his notarial reports for
the year 1978-1979 in this office wherein the Deed of Sale as stated on the letter dated
March 31, 1997 designated as Doc. no. 66; Page no. 14; Book no. I and Series of 1978
is allegedly included. 199 (Emphasis supplied)

These Certifications do not declare that the Deed of Absolute Sale does not exist. They
only state that at the time of their issuance, the Notary Public had not submitted his
notarial reports or that the document had not been transferred to the archives for
safekeeping. It cannot logically be concluded from these certifications that the document
is inexistent, false, or fraudulent. In any case, the Notary Public's failure to submit his or
her notarial report does not affect the act of notarization. 200

Rule 132, Section 30 of the Rules of Court provides that:

Section 30. Proof of notarial documents. - Every instrument duly acknowledged or

proved and certified as provided by law, may be presented in evidence without further
proof, the certificate of acknowledgment being prima facie evidence of the execution of
the instrument or document involved.

When a private document is notarized, the document is converted to a public document

which is presumed regular, admissible in evidence without need for proof of its
authenticity and due execution, and entitled to full faith and credit upon its face. 201

279
To overturn the presumption in favor of a notarized document, the party questioning it
must present "clear, convincing, and more than merely preponderant evidence." 202

Thus, parties who appear before a Notary Public should not be prejudiced by the failure
of the Notary Public to follow rules imposed by the Notarial Law. 203 They are not obliged
to ensure that the Notary Public submits his or her notarial reports. 204

The Spouses Aboitiz failed to present clear and convincing evidence to overturn the
presumption. The notarized Deed of Absolute Sale between Ciriaco and the Spouses
Po is, thus, presumed regular and authentic.

Consequently, this Court can affirm the finding that the property was sold to Ciriaco in
1973, and that Ciriaco, as the owner of the property, had the right to sell it to the
Spouses Po. Hence, the lot did not form part of the estate of Mariano, and the Mariano
Heirs did not have the capacity to sell the property to the Spouses Aboitiz later on.

VI

The Spouses Aboitiz argue that the Mariano Heirs are indispensable parties who should
have been impleaded in this case.205

The Mariano Heirs are not indispensable parties.

Rule 3, Section 7 of the Revised Rules of Court provides:

Section 7. Compulsory Joinder of Indispensable Parties. - Parties in interest without

whom no final determination can be had of an action shall be joined either as plaintiffs
or defendants.

An indispensable party is the party whose legal presence in the proceeding is so

necessary that "the action cannot be finally determined" without him or her because his
or her interests in the matter and in the relief "are so bound up with that of the other
parties."206

The property owners against whom the action for reconveyance is filed are
indispensable parties.207 No relief can be had, and the court cannot render a valid
judgment, without them. 208 The property has been sold to respondents Jose, Ernesto,
and Isabel.209 Thus, they are indispensable parties.

However, the seller of the property is not an indispensable party. 210 In Spring Homes
Subdivision Co., Inc. v. Spouses Tablada, Jr.: 211

Similarly, by virtue of the second Deed of Absolute Sale between Spring Homes and the
Spouses Lumbres, the Spouses Lumbres became the absolute and registered owner of
the subject property herein. As such, they possess that certain interest in the property
without which, the courts cannot proceed for settled is the doctrine that registered

280
owners of parcels of land whose title is sought to be nullified should be impleaded as an
indispensable party. Spring Homes, however, which has already sold its interests in the
subject land, is no longer regarded as an indispensableparty, but is, at best, considered
to be a necessary party whose presence is necessary to adjudicate the whole
controversy, but whose interests are so far separable that a final decree can be made in
its absence without affecting it. This is because when Spring Homes sold the property
in question to the Spouses Lumbres, it practically transferred all its interests therein to
the said Spouses. In fact, a new title was already issued in the names of the Spouses
Lumbres. As such, Spring Homes no longer stands to be directly benefited or injured by
the judgment in the instant suit regardless of whether the new title registered in the
names of the Spouses Lumbres is cancelled in favor of the Spouses Tablada or not.
Thus, contrary to the ruling of the RTC, the failure to summon Spring Homes does not
deprive it of jurisdiction over the instant case for Spring Homes is not an indispensable
party.  212 (Citations omitted, emphasis supplied).

The Mariano Heirs, as the alleged sellers of the property, are not indispensable parties.
They are at best necessary parties, which are covered by Rule 3, Section 8 of the Rules
of Court:

Section 8. Necessary Party. - A necessary party is one who is not indispensable but
who ought to be joined as a party if complete relief is to be accorded as to those already
parties, or for a complete determination or settlement of the claim subject of the action.

Necessary parties may be joined in the case "to adjudicate the whole controversy," but
the case may go on without them because a judgment may be rendered without any
effect on their rights and interests. 213

The Mariano Heirs may likewise be considered material witnesses to the action. A
material matter to which a witness can testify on can be a "main fact which was the
subject of the inquiry" or any circumstance or fact "which tends to prove" the fact subject
of the inquiry, "which tends to corroborate or strengthen the testimony relative to such
inquiry," and "which legitimately affects the credit of any witness who testifies." 214

The validity of the Deeds of Sale allegedly executed by the parties in this case is a
material matter in determining who the true owner of the property is. Thus, the Mariano
Heirs, including Ciriaco, may testify as to the Deeds of Sale they executed to prove
which sale is the valid one.

However, it is clear that the Mariano Heirs are not indispensable parties. They have
already sold all their interests in the property to the Spouses Aboitiz. They will no longer
be affected, benefited, or injured byany ruling of this Court on the matter, whether it
grants or denies the complaint for reconveyance. The ruling of this Court as to whether
the Spouses Po are entitled to reconveyance will not affect their rights. Their interest
has, thus, become separable from that of Jose, Ernesto, and Isabel.

281
Thus, the Court of Appeals correctly ruled that the Mariano Heirs are not indispensable
parties.

VII

Despite these findings, the Spouses Po cannot recover the property. Respondents
Jose, Ernesto, and Isabel are innocent purchasers for value.

An innocent purchaser for value refers to the buyer of the property who pays for its full
and fair price without or before notice of another person's right or interest in it. 215 He or
she buys the property believing that "the [seller] [i]s the owner and could [transfer] the
title to the property."216

The Spouses Po argue that respondents Jose, Ernesto, and Isabel are not innocent
purchasers for value because the tax declaration over the property has the following
annotation:

This tax declaration is also declared in the name of Mrs. Victoria Lee Po, married to
Peter Po under tax dee. no. 0634-A so that one may be considered a duplicate to the
other.

However, if a property is registered, the buyer of a parcel of land is not obliged to look
beyond the transfer certificate of title to be considered a purchaser in good faith for
value.217

Section 44 of Presidential Decree No. 1529 218 states:

Section 44. Statutory liens affecting title. - Every registered owner receiving a certificate
of title in pursuance of a decree of registration, and every subsequent purchaser of
registered land taking a certificate of title for value and in good faith, shall hold the same
free from all encumbrances except those noted in said certificate and any of the
following encumbrances which may be subsisting, namely:

First. Liens, claims or rights arising or existing under the laws and Constitution of the
Philippines which are not by law required to appear ofrecord in the Registry of Deeds in
order to be valid against subsequent purchasers or encumbrancers of record.

Second. Unpaid real estate taxes levied and assessed within two years immediately
preceding the acquisition of any right over the land by an innocent purchaser for value,
without prejudice to the right of the government to collect taxes payable before that
period from the delinquent taxpayer alone.

Third. Any public highway or private way established or recognized by law, or any
government irrigation canal or lateral thereof, if the certificate of title does not state that
the boundaries of such highway or irrigation canal or lateral thereof have been
determined.

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Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or
pursuant to, Presidential Decree No. 27 or any other law or regulations on agrarian
reform. (Emphasis supplied)

In Cruz v. Court of Appeals:219

The real purpose of the Torrens system of registration is to quiet title to land and to put
a stop to any question of legality of the title except claims which have been recorded in
the certificate of title at the time of registration or which may arise subsequent thereto.
Every registered owner and every subsequent purchaser for value in good faith holds
the title to the property free from all encumbrances except those noted in the certificate.
Hence, a purchaser is not required to explore further what the Torrens title on its face
indicates in quest for any hidden defect or inchoate right that may subsequently defeat
his right thereto.

Where innocent third persons, relying on the correctness of the certificate of title thus
issued, acquire rights over the property the court cannot disregard such rights and order
the total cancellation of the certificate. The effect of such an outright cancellation would
be to impair public confidence in the certificate of title, for everyone dealing with
property registered under the Torrens system would have to inquire in every instance
whether the title has been regularly or irregularly issued. This is contrary to the evident
purpose of the law. Every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way oblige him
to go behind the certificate to determine the condition of the property. Even if a decree
in a registration proceeding is infected with nullity, still an innocent purchaser for value
relying on a Torrens title issued in pursuance thereof is protected. 220

The rationale for this rule is the public's interest in sustaining "the indefeasibility of a
certificate of title, as evidence of the lawful ownership of the land or of any
encumbrance" on it.221 In Leong v. See:222

One need not inquire beyond the four comers of the certificate of title when dealing with
registered property ...

The protection of innocent purchasers in good faith for value grounds on the social
interest embedded in the legal concept granting indefeasibility of titles.1âwphi1 Between
the third party and the owner, the latter would be more familiar with the history and
status of the titled property. Consequently, an owner would incur less costs to discover
alleged invalidities relating to the property compared to a third party. Such costs are,
thus, better borne by the owner to mitigate costs for the economy, lessen delays in
transactions, and achieve a less optimal welfare level for the entire society. 223 (Citations
omitted)

Thus, respondents were not obliged to look beyond the title before they purchased the
property. They may rely solely on the face of the title.

283
The only exception to the rule is when the purchaser has actual knowledge of any
defect or other circumstance that would cause "a reasonably cautious man" to inquire
into the title of the seller.224 If there is anything which arouses suspicion, the vendee is
obliged to investigate beyond the face of the title. 225 Otherwise, the vendee cannot be
deemed a purchaser in good faith entitled to protection under the law. 226

In this case, there is no showing that respondents Jose, Ernesto, and Isabel had any
knowledge of the defect in the title. Considering that the annotation that the Spouses Po
are invoking is found in the tax declaration and not in the title of the property,
respondents Jose, Ernesto, and Isabel cannot be deemed purchasers in bad faith.

WHEREFORE, the Court of Appeals' October 31, 2012 Decision 227 and its June 17,
2013 Resolution228 in CA-G.R. CV No. 03803 is AFFIRMED.

SO ORDERED.

FIRST DIVISION

G.R. No. 214934, April 12, 2016

PACIFIC REHOUSE CORPORATION, Petitioner, v. JOVEN L. NGO, AS

REPRESENTED BY OSCAR J. GARCIA, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated March 20, 2014
and the Resolution3 dated October 8, 2014 of the Court of Appeals (CA) in CA-G.R. SP.
No. 122222, which set aside the Omnibus Order 4 dated April 7, 2011 and the
Order5 dated September 30, 2011 of the Regional Trial Court of Imus, Cavite, Branch
20 (RTC), in consolidated Civil Case No. 2031-08 and LRC Case No. 1117-09 and
consequently dismissed the complaint for specific performance and damages docketed
as Civil Case No. 2031-08.

The Facts

On February 17, 1994, petitioner Pacific Rehouse Corporation (petitioner) entered into a
Deed of Conditional Sale6 with Benjamin G. Bautista (Bautista) for the purchase of a
52,341-square meter parcel of land located in Imus, Cavite and covered by Transfer
Certificate of Title (TCT) No. T-800 issued by the Registry of Deeds of the Province of
Cavite (subject property), for a total consideration of P7,327,740.00. Under the contract,
petitioner was to make a down payment of P2,198,322.00 upon its execution, with the
balance to be paid upon completion by Bautista of the pertinent documents necessary
for the transfer of the said property.7ChanRoblesVirtualawlibrary

284
However, despite receipt of payment in the total amount of P6,598,322.00 and repeated
offers to pay the balance in full, Bautista failed and refused to comply with his obligation
to execute the corresponding deed of absolute sale and deliver the certificate of title of
the subject property, and even sold the property to another buyer. 8 Hence, on April 30,
2008, petitioner filed a complaint9 for specific performance and damages against
Bautista, docketed as Civil Case No. 2031-08, praying for the delivery of a deed of
transfer and other documents necessary to transfer the title in its favor, as well as the
Owner's Copy of TCT No. T-800.10 Further, on May 9, 2008, petitioner caused the
annotation of a Notice of Lis Pendens on TCT No. T-800 under Entry No. 940511 in
order to protect its rights over the subject property pending
litigation.12ChanRoblesVirtualawlibrary

After the parties had filed their respective responsive pleadings, 13 the case was set for
pre-trial. However, before the same could proceed, Bautista's counsel filed a
Manifestation and Notice of Death14 informing the RTC that Bautista had died on
February 14, 2009. Thus, in an Order15 dated May 19, 2009, the RTC directed Bautista's
counsel to substitute the latter's heirs and/or representatives in the action pursuant to
Section 16, Rule 3 of the Rules of Court. Unfortunately, said counsel failed to comply
due to lack of personal knowledge of the identities of the heirs of Bautista and their
respective residences.16ChanRoblesVirtualawlibrary

On the other hand, petitioner manifested that it had located Bautista's surviving spouse,
Rosita Bautista, and as a result, was directed to amend the complaint to implead her as
such.17 For failure of petitioner to comply with the foregoing directive, however, the RTC
issued an Order18dated February 23, 2010 dismissing Civil Case No. 2031-
08 pursuant to Section 3, Rule 17 of the Rules of Court.

Upon petitioner's motion for reconsideration, 19 the RTC issued an Order20dated

September 20, 2010 setting aside its earlier Order dismissing Civil Case No. 2031-08.
However, it held in abeyance the proceedings in said case until petitioner procures the
appointment of an executor or administrator for the estate of Bautista pursuant to
Section 16, Rule 3 of the Rules of Court.21ChanRoblesVirtualawlibrary

Meanwhile, on May 6, 2009, respondent Joven L. Ngo, represented 22 by Oscar J.

Garcia (respondent), filed a Verified Petition for Cancellation of Notice of Lis
Pendens23 against petitioner and the Register of Deeds of the Province of Cavite before
the RTC, docketed as LRC Case No. 1117-09. Respondent alleged, inter alia, that on
July 23, 2007, Bautista obtained a loan from him in the amount of P8,000,000.00
secured by a real estate mortgage over the subject property, and that the mortgage was
registered with the Registry of Deeds of Cavite and annotated on TCT No. T-800 on
July 24, 2007.24 Upon Bautista's default, the mortgage was foreclosed and the subject
property was sold at a public auction, with respondent emerging as the highest bidder.
Accordingly, a Certificate of Sale25 was issued in his favor, which was likewise
registered and annotated26 on TCT No. T-800 on January 27, 2009. According to
respondent, it was only on May 9, 2008 that he discovered petitioner's claimed interest
over the subject property when he saw the latter's Notice of Lis Pendens in TCT No. T-

285
800 under Entry No. 9405.27 In view of the said averments, respondent contended that
Entry No. 9405 should be removed. He maintained that petitioner was aware of the real
estate mortgage that was annotated on TCT No. T-800 in his favor as early as July 24,
2007 and that petitioner may no longer recover the subject property, considering that
Bautista had lost ownership thereof when it was sold at a public auction and a certificate
of sale was issued in respondent's favor.28 On February 11, 2010, TCT No. T-
132274829 was issued in his name with Entry No. 9405 carried over as an annotation.

In its opposition to LRC Case No. 1117-09,30 petitioner countered that respondent was
not a mortgagee in good faith, having knowledge of the sale of the subject property to
petitioner as early as November 2007 or even prior to the foreclosure
proceedings.31 Likewise, asserting that the petition for cancellation of the notice lis
pendens should have been filed instead in Civil Case No. 2031-08 and not in a land
registration case where the RTC exercised limited jurisdiction, petitioner moved for the
consolidation of Civil Case No. 2031-08 and LRC Case No. 1117-
09.32ChanRoblesVirtualawlibrary

In an Order33 dated February 24, 2010, the RTC denied petitioner's motion to

consolidate Civil Case No. 2031-08 and LRC Case No. 1117-09, holding that while
both cases involved the same property and, as such, would adversely affect their
respective claims, the former case had already been dismissed in an Order dated
February 23, 2010.34ChanRoblesVirtualawlibrary

Thereafter, on November 3, 2010, respondent filed an Urgent Motion for Cancellation of

Notice of Lis Pendens35 praying for the cancellation of Entry No. 9405 carried over to
TCT No. T-1322748. Petitioner opposed the said urgent motion 36 and reiterated its
prayer for the consolidation of Civil Case No. 2031-08 and LRC Case No. 1117-
09.37ChanRoblesVirtualawlibrary

In an Omnibus Order38dated April 7, 2011 (April 7, 2011 Omnibus Order), the RTC

denied respondent's motion for being premature and for lack of legal basis, and instead,
ordered the consolidation of Civil Case No. 2031-08 and LRC Case No. 1117-09. The
RTC ruled that while it had initially denied the consolidation, it was premised on an
order of dismissal that was subsequently set aside. 39 In this regard, the RTC opined that
the consolidation was necessary in order to fully adjudicate the issues of the two cases,
noting that the outcome in Civil Case No. 2031-08 would adversely affect LRC Case
No. 1117-09 which involved the same subject property; conversely, a decision in the
latter case would pre-empt the outcome of the former case. Further, the RTC ruled
that Civil Case No. 2031-08 would survive Bautista's death since it primarily involved
property and property rights. Thus, the RTC directed petitioner to comply with its
previous Order dated September 20, 2010 to procure the appointment of an
administrator pursuant to Section 16, Rule 3 of the Rules of Court within a period of
thirty (30) days.40ChanRoblesVirtualawlibrary

Respondent's motion for reconsideration41 therefrom was denied in an Order42dated

September 30, 2011.

286
Accordingly, in compliance with the April 7, 2011 Omnibus Order, petitioner filed on July
20, 2011 a petition43 for the appointment of an administrator over the estate of Bautista
before the RTC, docketed as Sp. Proc. Case No. 1075-11. Finding the petition to be
sufficient in form and substance, the RTC issued a Notice of Hearing 44 dated September
12, 2011, setting the case for initial hearing on November 14,
2011.45ChanRoblesVirtualawlibrary

On November 8, 2011, respondent filed an Omnibus Motion to Dismiss 46Sp. Proc.

Case No. 1075-11 on the grounds that: (a) the RTC has no jurisdiction over the subject
matter of the case, over the person of Bautista's surviving spouse, and over his
person;47 (b) the petition failed to state a proper cause of action; 48 (c) petitioner failed to
comply with Rule 78 of the Rules of Court; 49 and (d) the petition violated the rule on
forum shopping and litis pendentia.50ChanRoblesVirtualawlibrary

Thereafter, respondent also filed on December 2, 2011 a petition for certiorari51 before

the CA, docketed as CA-G.R. SP No. 122222, claiming that the following orders of the
RTC were issued without or in excess of its jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction: (a) Order dated February 24, 2010
initially denying the consolidation of Civil Case No. 2031-08 and LRC Case No. 1117-
09; (b) Order dated September 20, 2010 reinstating Civil Case No. 2031-08; (c) April 7,
2011 Omnibus Order consolidating Civil Case No. 2031-08 and LRC Case No. 1117-
09 and ordering the petitioner to procure the appointment of an executor or
administrator for the estate of Bautista; (d) Order dated September 30, 2011 upholding
the April 7, 2011 Omnibus Order upon motion for reconsideration, and (e) the Notice of
Hearing dated September 12, 2011 in Sp. Proc. Case No. 1075-11.

The CA Ruling

In a Decision52 dated March 20, 2014, the CA gave due course to the petition only with
respect to the assailed April 7, 2011 Omnibus Order which ordered the consolidation
of Civil Case No. 2031-08 and LRC Case No. 1117-09 and dismissed the petition as to
the four (4) other assailed orders of the RTC due to procedural lapses. 53 Nevertheless,
the CA ruled in favor of respondent and accordingly, set aside the April 7, 2011
Omnibus Order of the RTC and ordered the dismissal of Civil Case No. 2031-
08.54ChanRoblesVirtualawlibrary

The CA held that the complaint for specific performance and damages in Civil Case
No. 2031-08 was an action in personam since its object was to compel Bautista to
perform his obligations under the Deed of Conditional Sale and hence, rendered him
pecuniarily liable. As such, the obligations in the contract attached to him alone and did
not burden the subject property. Since the action was founded on a personal obligation,
it did not survive Bautista's death. Hence, the CA concluded that the dismissal of the
complaint by reason thereof, and not a resort to Section 16, Rule 3 of the Rules of
Court, was the proper course of action. Consequently, the CA opined that the issue
involving the propriety of the consolidation of the two cases had become moot and
academic.55ChanRoblesVirtualawlibrary
287
Petitioner moved for reconsideration56 but was denied in a Resolution57 dated October 8,
2014; hence, this petition.

The Issue Before the Court

The primordial issue for the Court's resolution is whether or not the CA correctly
dismissed Civil Case No. 2031-08 in view of Bautista's death.

The Court's Ruling

The petition is meritorious.

Section 16, Rule 3 of the Rules of Court governs the rule on substitution in case of
death of any of the parties to a pending suit. It reads in full:chanRoblesvirtualLawlibrary
SEC. 16. Death of party; duty of counsel. - Whenever a party to a pending action dies,
and the claim is not thereby extinguished, it shall be the duty of his counsel to inform the
court within thirty (30) days after such death of the fact thereof, and to give the name
and address of his legal representative or representatives. Failure of counsel to comply
with this duty shall be a ground for disciplinary action.

The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint a
guardian ad litem for the minor heirs.

The court shall forthwith order said legal representative or representatives to appear
and be substituted within a period of thirty (30) days from notice.

If no legal representative is named by the counsel for the deceased party, or if the one
so named shall fail to appear within the specified period, the court may order the
opposing party, within a specified time, to procure the appointment of an executor or
administrator for the estate of the deceased and the latter shall immediately appear for
and on behalf of the deceased. The court charges in procuring such appointment, if
defrayed by the opposing party, may be recovered as costs. (Emphasis and
underscoring supplied)cralawred
Section 16, Rule 3 of the Rules of Court allows the substitution of a party-litigant who
dies during the pendency of a case by his heirs, provided that the claim subject of
said case is not extinguished by his death. As early as in Bonilla v. Barcena,58 the
Court has settled that if the claim in an action affects property and property rights, then
the action survives the death of a party-litigant, viz.:chanRoblesvirtualLawlibrary
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 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. x x x.59 (Emphasis and underscoring supplied)cralawred

288
In the instant case, although the CA correctly pointed out that Civil Case No. 2031-
08 involves a complaint for specific performance and damages, a closer perusal of
petitioner's complaint reveals that it actually prays for, inter alia, the delivery of
ownership of the subject land through Bautista's execution of a deed of sale and the
turnover of TCT No. T-800 in its favor. This shows that the primary objective and nature
of Civil Case No. 2031-08 is to recover the subject property itself and thus, is deemed
to be a real action.60ChanRoblesVirtualawlibrary

In Gochan v. Gochan,61 the Court explained that complaints like this are in the nature of
real actions, or actions affecting title to or recovery of possession of real property, to
wit:chanRoblesvirtualLawlibrary
In this jurisdiction, the dictum adhered to is that the nature of an action is determined by
the allegations in the body of the pleading or complaint itself, rather than by its title or
heading. The caption of the complaint below was denominated as one for
"specific performance and damages." The relief sought, however, is the
conveyance or transfer of real property, or ultimately, the execution of deeds of
conveyance in their favor of the real properties enumerated in the provisional
memorandum of agreement. Under these circumstances, the case below was
actually a real action, affecting as it does title to or possession of real property.

In the case of Hernandez v. Rural Bank of Lucena, this Court held that a real action is
one where the plaintiff seeks the recovery of real property or, as indicated in Section
2(a) of Rule 4 (now Section 1, Rule 4 of the 1997 Rules of Civil Procedure), a real
action is an action affecting title to or recovery of possession of real property.

It has also been held that where a complaint is entitled as one for specific
performance but nonetheless prays for the issuance of a deed of sale for a parcel
of land, its primary objective and nature is one to recover the parcel of land itself
and, thus, is deemed a real action. x x x.

xxxx

In the case at bar, therefore, the complaint filed with the trial court was in the nature of a
real action, although ostensibly denominated as one for specific
performance.62 (Emphases and underscoring supplied)cralawred
Evidently, Civil Case No. 2031-08 is a real action affecting property and property rights
over the subject land. Therefore, the death of a party-litigant, i.e., Bautista, did not
render the case dismissible on such ground, but rather, calls for the proper application
of Section 16, Rule 3 of the Rules of Court on substitution of party-litigants. Similarly,
in Carabeo v. Spouses Dingco,63 the Court held that an action for specific performance
based on the "Kasunduan sa Bilihan ng Karapatan sa Lupa" was in pursuit of a property
right and, as such, survives the death of a party thereto.

In sum, the CA erred in dismissing Civil Case No. 2031-08 based solely on Bautista's

death. As such, it should be reinstated and consolidated with LRC Case No. 1117-09,
considering that the two cases involve the same property and, as correctly opined by

289
the court a quo, any adjudication in either case would necessarily affect the other. 64 In
this relation, case law states that consolidation of cases, when proper, results in the
simplification of proceedings, which saves time, the resources of the parties and the
courts, and a possible major abbreviation of trial. It is a desirable end to be achieved,
within the context of the present state of affairs where court dockets are full and
individual and state finances are limited. It contributes to the swift dispensation of
justice, and is in accord with the aim of affording the parties a just, speedy, and
inexpensive determination of their cases before the courts. Likewise, it avoids the
possibility of conflicting decisions being rendered by the courts in two or more cases
which would otherwise require a single judgment. 65ChanRoblesVirtualawlibrary

WHEREFORE, the petition is GRANTED. The Decision dated March 20, 2014 and the
Resolution dated October 8, 2014 of the Court of Appeals in CA-G.R. SP No. 122222,
dismissing Civil Case No. 2031-08 are hereby REVERSED and SET ASIDE.
Accordingly, the Omnibus Order dated April 7, 2011 and the Order dated September 30,
2011 of the Regional Trial Court of Imus, Cavite, Branch 20, in consolidated cases
docketed as Civil Case No. 2031-08 and LRC Case No. 1117-09 are REINSTATED.

SO ORDERED.chanroblesvirtuallawlibrary
RULE 4. VENUE
THIRD DIVISION
[ G.R. No. 234499, June 06, 2018 ]
RUDY L. RACPAN, PETITIONER, VS. SHARON BARROGA-HAIGH, RESPONDENT.

DECISION
VELASCO JR., J.:
Nature of the Case

This treats of the Petition for Review on Certiorari under Rule 45 of the Rules of Court,
assailing the February 13, 2017 Decision[1] and August 17, 2017 Resolution[2] of the
Court of Appeals (CA) in CA G.R. CV No. 04034-MIN. Said rulings affirmed the
dismissal of the petitioner's complaint for improper venue and failure to comply with a
condition precedent to its filing.

Factual Antecedents

Petitioner Rudy Racpan filed a Complaint "For Declaration For Nullity of Deed of Sale
with Right to Repurchase & Attorney's Fees"[3] before the Regional Trial Court of Davao
City, Branch 11 (RTC-Davao). In his Complaint, which was docketed as Civil Case No.
34, 742-2012, petitioner alleged that after his wife's death on November 12, 2011, he
instructed their daughter to arrange his wife's important documents. In so doing, their
daughter discovered a Deed of Sale with Right to Purchase dated March 29, 2011. The
Deed of Sale was purportedly signed by him and his late wife and appeared to convey
to respondent Sharon Barroga-Haigh a real property registered in his name under TCT
No. T-142-2011009374 and located in Bo. Tuganay, Municipality of Carmen, Province

290
of Davao del Norte.[4] Petitioner maintained that the Deed of Sale was falsified and
fictitious as he never signed any contract, not even any special power of attorney, for
the sale or conveyance of the property which is still in his possession. Thus, he prayed
for the declaration of the Deed of Sale's nullity.

In her Answer with Compulsory Counterclaim,[5] respondent contended, by way of

affirmative defense, that the venue of the Complaint was improperly laid and that the
filing of the case lacks the mandatory requirement of Barangay Clearance.
Subsequently, respondent filed a motion for preliminary hearing on her affirmative
defenses.

Acting on the motion, the RTC-Davao set the case for preliminary hearing and
thereafter issued an Order dated September 18, 2013 [6] dismissing the petitioner's
Complaint as follows:
WHEREFORE, in view of the foregoing, the present case is hereby ORDERED
DISMISSED for being improperly filed before the Regional Trial Court of Davao City and
for failure to comply with a condition precedent prior to its filing.

SO ORDERED.[7]
Petitioner moved for the RTC-Davao to reconsider [8] its Order dismissing the complaint
but the trial court remained steadfast and denied his motion in its June 19, 2004 Order.
[9]
 Hence, the petitioner came to the CA on appeal. [10]

Ruling of the Court of Appeals

As stated at the outset hereof, the appellate court affirmed the dismissal of the
petitioner's Complaint as follows:
WHEREFORE, the order dated September 18, 2013 of the Regional Trial Court, Branch
11, Davao City in Civil Case No. 34,742-12 is AFFIRMED.

SO ORDERED.[11]
The CA explained that petitioner's Complaint is a real action as it wants the court to
abrogate and nullify. whatever right or claim the respondent might have on the property
subject of the Deed of Sale. Hence, for the appellate court, Section 1, Rule 4 of the
Rules of Court is applicable. Under this Rule, real actions shall be commenced and tried
in the proper court which has jurisdiction over the area wherein the real property
involved is situated. As the property involved is located in Bo. Tuganay, Municipality of
Cannen, Province of Davao del Norte, the appellate court held that the Complaint
should have been lodged with the RTC of Davao del Norte and not the RTC-Davao.

Further, the CA found that the petitioner's prayer for the issuance of a writ of preliminary
injunction is a mere ploy to avoid the requirement of a barangay conciliation, as a mere
annotation of a notice of lis pendens would achieve the same effect without having to
undergo trial or post a bond.

In a Resolution dated August 17, 2017[12] the CA stood its ground by denying the
petitioner's Motion for Reconsideration.[13]
291
Hence, the petitioner's present recourse, it being his contention that the Complaint he
interposed with the RTC-Davao is a personal action. He maintains that his Complaint is
not concerned with title to or possession of real property, as in fact, no transfer of
possession or title of the real property to the respondent has occurred. [14] For the
petitioner, the Complaint's venue was properly laid in Davao City where both he and the
respondent reside.

Petitioner likewise reiterated that, as his Complaint was coupled with a prayer for the
issuance of a writ of preliminary injunction, it is exempt from barangay conciliation
proceedings.

Issue

The main and decisive issue for resolution is whether the CA erred in affirming the
dismissal of the petitioner's Complaint.

Our Ruling

The petition is impressed with merit.

The venue was properly laid as the complaint was a personal action.

By weight of jurisprudence, the nature of an action is determined by the allegations in

the complaint. In turn, the nature of the action determines its proper venue. Rule 4 of
the Rules of Court provides the rules on the situs for bringing real and personal
actions, viz:
Rule 4

VENUE OF ACTIONS

Section 1. Venue of real actions. - Actions affecting title to or possession of real

property, or interest therein, shall be commenced and tried in the proper court which
has jurisdiction over the area wherein the real property involved, or a portion thereof, is
situated.

Forcible entry and detainer actions shall be commenced and tried in the municipal trial
court of the municipality or city wherein the real property involved, or a portion thereof,
is situated.

Section 2. Venue of personal actions. - All other actions may be commenced and tried
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.
Expounding on the foregoing provisions, the Court delineated the basic distinction
between a real and a personal action and their respective venues in Bank of the
Philippine Islands v. Hontanosas, Jr.,[15] stating that:

292
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. Such 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. 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. 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, for which
reason the action is considered a transitory one.
Otherwise stated, what determines the venue of a case is the primary objective for the
filing of the case.[16] On one hand, if the plaintiff seeks the recovery of personal property,
the enforcement of a contract or the recovery of damages, his complaint is a personal
action that may be filed in the place of residence of either party. On the other hand, if
the plaintiff seeks the recovery of real property, or if the action affects title to real
property or for the recovery of possession, or for partition or condemnation of, or
foreclosure of mortgage on, real property, then the complaint is a real action that must
be brought before the court where the real property is located. Thus, in Chua v. Total
Office Products and Services, Inc.,[17] this Court ruled that where the action is not
intended for the recovery of real property but solely for the annulment of a contract, it is
a personal action that may be filed in the court where the plaintiff or the respondent
resides. It held:
Well-settled is the rule that an action to annul a contract of loan and its accessory real
estate mortgage is a personal action. In a personal action, the plaintiff seeks the
recovery of personal property, the enforcement of a contract or the recovery of
damages. In contrast, in a real action, the plaintiff seeks the recovery of real property,
or, as indicated in Section 2 (a), Rule 4 of the then Rules of Court, a real action is an
action affecting title to real property or for the recovery of possession, or for partition, or
condemnation of, or foreclosure of mortgage on, real property.

In the Pascual case, relied upon by petitioner, the contract of sale of the fishpond was
assailed as fictitious for lack of consideration. We held that there being no contract to
begin with, there is nothing to annul. Hence, we deemed the action for annulment of the
said fictitious contract therein as one constituting a real action for the recovery of the
fishpond subject thereof

We cannot, however, apply the foregoing doctrine to the instant case. Note that
in Pascual, title to and possession of the subject fishpond had already passed to the
vendee. There was, therefore, a need to recover the said fishpond. But in the instant
case, ownership of the parcels of land subject of the questioned real estate
mortgage was never transferred to petitioner, but remained with TOPROS. Thus,
no real action for the recovery of real property is involved. This being the case,

293
TOPROS' action for annulment of the contracts of loan and real estate mortgage
remains a personal action. (emphasis supplied)
In the Complaint filed with the court a quo, petitioner sought the nullification of the Deed
of Sale with Right to Repurchase on the strength of this claim: he did not sign the same
nor did he execute any special power of attorney in favor of his late wife to do so in his
behalf.[18] But, as there was no allegation that the possession and title to the
property have been transferred to respondent, nowhere in the Complaint did
petitioner allege or pray for the recovery or reconveyance of the real property.
Pertinent parts of the Complaint read thus:
4. Plaintiff was married to Ma. Lucila B. Racpan on 20 December 1978. The latter died
on 13 November 2011 at Oroville, California...

5. Plaintiff Racpan purchased a property from his brother Lorezo L. Racpan formerly
covered by Transfer Certificate of Title No. T-189893 and located at Carmen, Davao del
Norte and the said property is now covered by Transfer Certificate of Title No. T-
142-2011009374. Hereto attached and marked as Annex "B" is a copy of the Transfer
Certificate of Title No. T-142-2011009374 registered under the name of plaintiff
Rudy L. Racpan. Also attached and marked as Annex "C'" is the tax declaration of the
subject property to prove that plaintiff is the owner of the same.

6. Plaintiff's wife died at Oroville, California on 12 November 2011. However, her

remains were returned to Davao City, Philippines. Nonetheless, it was the daughter of
the plaintiff in the person of Lani Racpan who arrived first in Davao City.

xxxx

8. On 12 December 2011, plaintiff's daughter showed to him the subject deed of sale
with right to repurchase dated 29 March 2011. Plaintiff was surprised because he did
not know or has NO knowledge of the said deed of sale with right to repurchase. When
plaintiff navigated the Deed of Sale, he was surprised because his signature
appearing on the same is COMPLETELY FALSIFIED....

8.a Moreover, plaintiff did not also execute any special power of attorney in favour
of his deceased wife authoring the latter to [sell] the subject property to the
defendant.

8.b On the other hand, the subject property is registered under the name of plaintiff
Rudy Racpan and NOT TO SPOUSES Racpan. The words "married to Ma. Lucila B.
Racpan" only signified the civil status of plaintiff to the latter.

xxxx

9.d Evidently, from the foregoing the (alleged) subject deed of sale with right to
repurchase is NULL AND VOID as the same contains the falsified signature of the
herein plaintiff.

294
xxxx

11. Plaintiff before and during the time of the execution of the subject Deed of Sale with
Right to Repurchase dated 29 March 2011 NEVER MET defendant Saigh. It was only
sometime in December 7 or 8, 2011 that he met defendant Saigh during the wake of his
wife wherein he was introduced to the former by Orly Gabriel.

12. To date, plaintiff is in possession of the subject property. However, his daughter

has been receiving text message from defendant requiring him to settle the said alleged
obligation of his deceased wife to her.[19]
Evidently, as the Complaint was not concerned with the title to or recovery of the real
property, it was a personal action. Thus, Davao City, where both the petitioner and the
respondent reside is the proper venue for the complaint. The appellate court therefore
committed a reversible error in affirming the trial court's dismissal of the case for
improper venue.

The Complaint was exempted from Barangay Conciliation Proceedings

As for petitioner's failure to resort to barangay conciliation, Section 412 of the Local

Government Code (LGC) provides that parties may go directly to court where the action
is coupled with provisional remedies:
SEC. 412. Conciliation. - (a) Pre-condition to filing of complaint in court. - No
complaint, petition, action, or proceeding involving any matter within the authority of the
lupon shall be filed or instituted directly in court or any other government office for
adjudication, unless there has been a confrontation between the parties before the
lupon chairman or the pangkat, and that no conciliation or settlement has been reached
as certified by the lupon secretary or pangkat secretary as attested to by the lupon
chairman or pangkat chairman or unless the settlement has been repudiated by the
parties thereto.

(b) Where parties may go directly to court. - The parties may go directly to court in the
following instances:

(1) Where the accused is under detention;

(2) Where a person has otherwise been deprived of personal liberty calling for habeas
corpus proceedings;

(3) Where actions are coupled with provisional remedies such as preliminary

injunction, attachment, delivery of personal property, and support pendente lite; and

(4) Where the action may otherwise be barred by the statute of limitations.

(c) Conciliation among members of indigenous cultural communities. - The customs and

traditions of indigenous cultural communities shall be applied in settling disputes
between members of the cultural communities.

295
While there is no dispute herein that the present case was never referred to
the Barangay Lupon for conciliation before petitioner instituted Civil Case No. 34, 742-
2012, there is likewise no quibbling that his Complaint was coupled with a prayer for the
issuance of a preliminary injunction. [20] Hence, it falls among the exceptions to the rule
requiring the referral to baranggay conciliation.

As good faith is always presumed,[21] in the absence of proof of improper motive on the
part of the petitioner, the Court cannot countenance the appellate court's assumption
that petitioner was solely intent on evading the requirements of the LGC in applying for
a preliminary injunction. This Court cannot sustain a dismissal of an action on account
of an unproven assertion of bad faith.

WHEREFORE, the petition is GRANTED. The February 13, 2017 Decision and August

17, 2017 Resolution of the Court of Appeals in CA-G.R. CV No. 04034-MIN, as well as
the Orders dated September 18, 2013 and June 19, 2004 of the Regional Trial Court of
Davao City, Branch 11, in Civil Case No. 34, 742-2012 are REVERSED and SET
ASIDE. Civil Case No. 34, 742-2012 is hereby ordered REINSTATED. The RTC is
ordered to proceed with dispatch in the disposition of the mentioned case.

SO ORDERED.

Bersamin, Leonen, Martires, and Gesmundo, JJ., concur.

July 2, 2018

NOTICE OF JUDGMENT

Sirs / Mesdames:

Please take notice that on June 6, 2018 a Decision, copy attached hereto, was
rendered by the Supreme Court in the above-entitled case, the original of which was
received by this Office on July 2, 2018 at 1:38 p.m.

Very truly yours,

(SGD)
WILFREDO V.
LAPITAN
Division Clerk of
 
Court

FIRST DIVISION

296
 G.R. No. 175796, July 22, 2015

BPI FAMILY SAVINGS BANK, INC., Petitioner, v. SPOUSES BENEDICTO &

TERESITA YUJUICO, Respondents.

DECISION

BERSAMIN, J.:

An action to recover the deficiency after extrajudicial foreclosure of a real property

mortgage is a personal action because it does not affect title to or possession of real
property, or any interest therein.

The Case

This appeal is taken by the petitioner to overturn the decision promulgated on March 31,
2006,1 whereby the Court of Appeals (CA) set aside the orders issued by the Regional
Trial Court, Branch 60, in Makati City (Makati RTC) on October 17, 2003 2 and February
1, 20053 dismissing 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.

Antecedents

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 respondent Teresita Yujuico. Two of the parcels of land, covered by Transfer
Certificate of Title (TCT) No. 261331 and TCT No. 261332, were previously mortgaged
to Citytrust Banking Corporation, the petitioner’s predecessor-in-interest, under a First
Real Estate Mortgage Contract.4 On 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 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 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 auction, the sheriff awarded the two lots to the petitioner as the highest bidder at
P10,000,000.00.6redarclaw

Claiming a deficiency amounting to P18,522.155.42, the petitioner sued the

respondents to recover such deficiency in the Makati RTC (Civil Case No. 03-450). The
respondents moved to dismiss the complaint on several grounds, namely: that the suit
was barred by res judicata; that the complaint stated no cause of action; and that the
plaintiff’s claim had been waived, abandoned, or extinguished. 7redarclaw

In its order issued on October 17, 2003, the Makati RTC denied the respondents’

297
motion to dismiss, ruling that there was no res judicata; that the complaint stated a
sufficient cause of action to recover the deficiency; and that there was nothing to
support the claim that the obligation had been abandoned or extinguished apart from
the respondents’ contention that the properties had been subjected to expropriation by
the City of Manila.8redarclaw

On November 4, 2003, the respondents moved for reconsideration, reiterating their

grounds earlier made in their motion to dismiss.9redarclaw

In turn, the petitioner adopted its comment/opposition to the motion to

dismiss.10redarclaw

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 were located. 12redarclaw

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:LawlibraryofCRAlaw

ChanRoblesVirtualawlibrary
It would be improper for this Court to dismiss the plaintiff’s complaint on the ground of
improper venue, assuming that the venue is indeed improperly laid, since the said
ground was not raised in the defendant’s Motion to Dismiss. On this point, it was held in
the case of Malig, et al. vs. Bush, 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

Decision of the CA

Not satisfied, the respondents assailed the orders dated October 17, 2003 and February
1, 2005 by petition for certiorari.14 They submitted for consideration by the CA the
following issues, namely:LawlibraryofCRAlaw

ChanRoblesVirtualawlibrary
x x x (WHETHER OR NOT) RESPONDENT TRIAL COURT COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
WHEN IT ISSUED ITS ASSAILED ORDERS CONSIDERING
THAT:LawlibraryofCRAlaw

A. THE COMPLAINT A QUO IS BARRED BY RES JUDICATA.

B. THE COMPLAINT STATED NO CAUSE OF ACTION.

298
C. PRIVATE RESPONDENT’S CLAIM HAS BEEN WAIVED, ABANDONED OR
OTHERWISE EXTINGUISHED.

D. VENUE WAS IMPROPERLY LAID.15

On March 31, 2006, the CA granted the petition for certiorari of the respondents on the
basis of the fourth issue, opining:LawlibraryofCRAlaw

ChanRoblesVirtualawlibrary
xxxx

Thus, a suit for 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; it is upon a written contract and upon an obligation of the
mortgage-debtor to pay the deficiency which is 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.

xxxx

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 RTC of Manila on 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 x16

The CA denied the respondents’ Motion for Partial Reconsideration and the

petitioner’s Partial Motion for Reconsideration on December 7, 2006.17redarclaw

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:LawlibraryofCRAlaw

ChanRoblesVirtualawlibrary
I.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS’ DENIAL OF THE

PETITIONER’S PARTIAL MOTION FOR RECONSIDERATION ON THE GROUND OF

299
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
Court24 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

300
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.

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.
SECOND DIVISION

[G.R. No. 192877, March 23 : 2011] BR>

SPOUSES HERMES P. OCHOA AND ARACELI D. OCHOA, PETITIONERS, VS.
CHINA BANKING CORPORATION, RESPONDENT.

RESOLUTION

NACHURA, J.:

For resolution is petitioners' motion for reconsideration [1] of our January 17, 2011
Resolution[2] denying their petition for review on certiorari[3] for failing to sufficiently show
any reversible error in the assailed judgment[4] of the Court of Appeals (CA).

Petitioners insist that it was error for the CA to rule that the stipulated exclusive venue of
Makati City is binding only on petitioners' complaint for Annulment of Foreclosure, Sale,
and Damages filed before the Regional Trial Court of Parañaque City, but not on
respondent bank's Petition for Extrajudicial Foreclosure of Mortgage, which was filed

301
with the same court.

We disagree.

The extrajudicial foreclosure sale of a real estate mortgage is governed by Act No.
3135, as amended by Act No. 4118, otherwise known as "An Act to Regulate the Sale
of Property Under Special Powers Inserted In or Annexed to Real-Estate Mortgages."
Sections 1 and 2 thereof clearly state:

Section 1. When a sale is made under a special power inserted in or attached to any
real-estate mortgage hereafter made as security for the payment of money or the
fulfillment of any other obligation, the provisions of the following sections shall govern
as to the manner in which the sale and redemption shall be effected, whether or not
provision for the same is made in the power.

Sec. 2. Said sale cannot be made legally outside of the province in which the property
sold is situated; and in case the place within said province in which the sale is to be
made is the subject of stipulation, such sale shall be made in said place or in the
municipal building of the municipality in which the property or part thereof is situated. [5]

The case at bar involves petitioners' mortgaged real property located in Parañaque
City over which respondent bank was granted a special power to foreclose extra-
judicially. Thus, by express provision of Section 2, the sale can only be made in
Parañaque City.

The exclusive venue of Makati City,  as stipulated by the parties[6] and sanctioned by

Section 4, Rule 4 of the Rules of Court, [7] cannot be made to apply to the Petition for
Extrajudicial Foreclosure filed by respondent bank because the provisions of Rule 4
pertain to venue of actions, which an extrajudicial foreclosure is not.

Pertinent are the following disquisitions in Supena v. De la Rosa:[8]

Section 1, Rule 2 [of the Rules of Court] defines an action in this wise:

"Action means an ordinary suit in a court of justice, by which one party prosecutes
another for the enforcement or protection of a right, or the prevention or redress of a
wrong."

Hagans v. Wislizenus does not depart from this definition when it states that "[A]n action
is a formal demand of one's legal rights in a court of justice in the manner prescribed by
the court or by the law. x x x." It is clear that the determinative or operative fact which
converts a claim into an "action or suit" is the filing of the same with a "court of justice."
Filed elsewhere, as with some other body or office not a court of justice, the claim may
not be categorized under either term. Unlike an action, an extrajudicial foreclosure of
real estate mortgage is initiated by filing a petition not with any court of justice but with
the office of the sheriff of the province where the sale is to be made. By no stretch of the

302
imagination can the office of the sheriff come under the category of a court of justice.
And as aptly observed by the complainant, if ever the executive judge comes into the
picture, it is only because he exercises administrative supervision over the sheriff. But
this administrative supervision, however, does not change the fact that extrajudicial
foreclosures are not judicial proceedings, actions or suits. [9]

These pronouncements were confirmed on August 7, 2001 through A.M. No. 99-10-05-
0, entitled "Procedure in Extra-Judicial Foreclosure of Mortgage," the significant portions
of which provide:

In line with the responsibility of an Executive Judge under Administrative Order No.

6, date[d] June 30, 1975, for the management of courts within his administrative
area, included in which is the task of supervising directly the work of the Clerk of
Court, who is also the Ex-Office Sheriff, and his staff, and the issuance of
commissions to notaries public and enforcement of their duties under the law, the
following procedures are hereby prescribed in extra-judicial foreclosure of mortgages:

1.  All applications for extrajudicial foreclosure of mortgage whether under the direction
of the sheriff or a notary public, pursuant to Act 3135, as amended by Act 4118, and Act
1508, as amended, shall be filed with the Executive Judge, through the Clerk of Court
who is also the Ex-Officio Sheriff.

Verily then, with respect to the venue of extrajudicial foreclosure sales, Act No. 3135, as
amended, applies, it being a special law dealing particularly with extrajudicial
foreclosure sales of real estate mortgages, and not the general provisions of the Rules
of Court on Venue of Actions.

Consequently, the stipulated exclusive venue of Makati City is relevant only

to actions arising from or related to the mortgage, such as petitioners' complaint
for Annulment of Foreclosure, Sale, and Damages.

The other arguments raised in the motion are a mere reiteration of those already raised
in the petition for review. As declared in this Court's Resolution on January 17, 2011,
the same failed to show any sufficient ground to warrant the exercise of our appellate
jurisdiction.

WHEREFORE, premises considered, the motion for reconsideration is hereby DENIED.

SO ORDERED.

SECOND DIVISION

G.R. No. 179018               June 18, 2012

PAGLAUM MANAGEMENT & DEVELOPMENT CORP. and HEALTH MARKETING

TECHNOLOGIES, INC., Petitioners,

303
vs.
UNION BANK OF THE PHILIPPINES, NOTARY PUBLIC JOHN DOE, and REGISTER
OF DEEDS of Cebu City and Cebu Province Respondents.
J. KING & SONS CO., INC. Intervenor.

DECISION

SERENO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, assailing the Decision dated 31 May 2007 1 and Resolution dated 24 July
20072 issued by the Court of Appeals (CA).

Petitioner Paglaum Management and Development Corporation (PAGLAUM) is the

registered owner of three parcels of land located in the Province of Cebu 3 and covered
by Transfer Certificate of Title (TCT) Nos. 112488,4 112489,5 and T-68516.6 These lots
are co-owned by Benjamin B. Dy, the president of petitioner Health Marketing
Technologies, Inc. (HealthTech), and his mother and siblings. 7

On 3 February 1994, respondent Union Bank of the Philippines (Union Bank) extended
HealthTech a credit line in the amount of ₱ 10,000,000. 8 To secure this obligation,
PAGLAUM executed three Real Estate Mortgages on behalf of HealthTech and in favor
of Union Bank.9 It must be noted that the Real Estate Mortgage, on the provision
regarding the venue of all suits and actions arising out of or in connection therewith,
originally stipulates:

Section 9. Venue. – The venue of all suits and actions arising out of or in connection
with this Mortgage shall be in Makati, Metro Manila or in the place where any of the
Mortgaged Properties is located, at the absolute option of the Mortgagee, the parties
hereto waiving any other venue.10 (Emphasis supplied.)

However, under the two Real Estate Mortgages dated 11 February 1994, the following
version appears:

Section 9. Venue. – The venue of all suits and actions arising out of or in connection
with this Mortgage shall be in Cebu City Metro Manila or in the place where any of the
Mortgaged Properties is located, at the absolute option of the Mortgagee, the
xxxxxxxxxxxxx any other venue.11 (Emphasis supplied.)

Meanwhile, the same provision in the Real Estate Mortgage dated 22 April 1998
contains the following:

Section 9. Venue. – The venue of all suits and actions arising out of or in connection
with this Mortgage shall be in _________ or in the place where any of the Mortgaged
Properties is located, at the absolute option of the Mortgagee, the parties hereto waiving
any other venue.12

304
HealthTech and Union Bank agreed to subsequent renewals and increases in the credit
line,13 with the total amount of debt reaching ₱ 36,500,000. 14 Unfortunately, according to
HealthTech, the 1997 Asian financial crisis adversely affected its business and caused it
difficulty in meeting its obligations with Union Bank. 15 Thus, on 11 December 1998, both
parties entered into a Restructuring Agreement, 16 which states that any action or
proceeding arising out of or in connection therewith shall be commenced in Makati City,
with both parties waiving any other venue.17

Despite the Restructuring Agreement, HealthTech failed to pay its obligation, prompting
Union Bank to send a demand letter dated 9 October 2000, stating that the latter would
be constrained to institute foreclosure proceedings, unless HealthTech settled its
account in full.18

Since HealthTech defaulted on its payment, Union Bank extra-judicially foreclosed the
mortgaged properties.19 The bank, as the sole bidder in the auction sale, was then
issued a Certificate of Sale dated 24 May 2001. 20 Thereafter, it filed a Petition for
Consolidation of Title.21

Consequently, HealthTech filed a Complaint for Annulment of Sale and Titles with
Damages and Application for Temporary Restraining Order and Writ of Injunction dated
23 October 2001, praying for: (a) the issuance of a temporary restraining order, and
later a writ of preliminary injunction, directing Union Bank to refrain from exercising acts
of ownership over the foreclosed properties; (b) the annulment of the extra-judicial
foreclosure of real properties; (c) the cancellation of the registration of the Certificates of
Sale and the resulting titles issued; (d) the reinstatement of PAGLAUM’s ownership
over the subject properties; and (e) the payment of damages. 22 The case was docketed
as Civil Case No. 01-1567 and raffled to the Regional Trial Court, National Capital
Judicial Region, Makati City, Branch 134 (RTC Br. 134), which issued in favor of
PAGLAUM and HealthTech a Writ of Preliminary Injunction restraining Union Bank from
proceeding with the auction sale of the three mortgaged properties. 23

On 23 November 2001, Union Bank filed a Motion to Dismiss on the following grounds:
(a) lack of jurisdiction over the issuance of the injunctive relief; (b) improper venue; and
(c) lack of authority of the person who signed the Complaint. 24 RTC Br. 134 granted this
Motion in its Order dated 11 March 2003, resulting in the dismissal of the case, as well
as the dissolution of the Writ of Preliminary Injunction. 25 It likewise denied the
subsequent Motion for Reconsideration filed by PAGLAUM and HealthTech. 26

PAGLAUM and HealthTech elevated the case to the CA, which affirmed the Order
dated 11 March 200327 and denied the Motion for Reconsideration.28

In the instant Petition, PAGLAUM and HealthTech argue that: (a) the Restructuring
Agreement governs the choice of venue between the parties, and (b) the agreement on
the choice of venue must be interpreted with the convenience of the parties in mind and
the view that any obscurity therein was caused by Union Bank. 29

305
On the other hand, Union Bank contends that: (a) the Restructuring Agreement is
applicable only to the contract of loan, and not to the Real Estate Mortgage, and (b) the
mortgage contracts explicitly state that the choice of venue exclusively belongs to it. 30

Meanwhile, intervenor J. King & Sons Company, Inc. adopts the position of Union Bank
and reiterates the position that Cebu City is the proper venue. 31

The sole issue to be resolved is whether Makati City is the proper venue to assail the
foreclosure of the subject real estate mortgage. This Court rules in the affirmative.

Civil Case No. 01-1567, being an action for Annulment of Sale and Titles resulting from
the extrajudicial foreclosure by Union Bank of the mortgaged real properties, is
classified as a real action. In Fortune Motors v. Court of Appeals, 32 this Court held that a
case seeking to annul a foreclosure of a real estate mortgage is a real action, viz:

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. 33

Being a real action, the filing and trial of the Civil Case No. 01-1567 should be governed
by the following relevant provisions of the Rules of Court (the Rules):

Rule 4
VENUE OF ACTIONS

Section 1. Venue of real actions. – Actions affecting title to or possession of real

property, or interest therein, shall be commenced and tried in the proper court which
has jurisdiction over the area wherein the real property involved, or a portion thereof, is
situated.

Forcible entry and detainer actions shall be commenced and tried in the municipal trial
court of the municipality or city wherein the real property involved, or a portion thereof,
is situated.

Sec. 3. When Rule not applicable. – This Rule shall not apply –

(a) In those cases where a specific rule or law provides otherwise; or

306
 (b) Where the parties have validly agreed in writing before the filing of the action
on the exclusive venue thereof. (Emphasis supplied.)

In Sps. Lantin v. Lantion,34 this Court explained that a venue stipulation must contain
words that show exclusivity or restrictiveness, as follows:

At the outset, we must make clear that under Section 4 (b) of Rule 4 of the 1997 Rules
of Civil Procedure, the general rules on venue of actions shall not apply where the
parties, before the filing of the action, have validly agreed in writing on an exclusive
venue. The mere stipulation on the venue of an action, however, is not enough to
preclude parties from bringing a case in other venues. The parties must be able to show
that such stipulation 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 venue to the specified place.

x x x           x x x          x x x

Clearly, the words "exclusively" and "waiving for this purpose any other venue" are
restrictive and used advisedly to meet the requirements. 35 (Emphasis supplied.)

According to the Rules, real actions shall be commenced and tried in the court that has
jurisdiction over the area where the property is situated. In this case, all the mortgaged
properties are located in the Province of Cebu. Thus, following the general rule,
PAGLAUM and HealthTech should have filed their case in Cebu, and not in Makati.

However, the Rules provide an exception, in that real actions can be commenced and
tried in a court other than where the property is situated in instances where the parties
have previously and validly agreed in writing on the exclusive venue thereof. In the case
at bar, the parties claim that such an agreement exists. The only dispute is whether the
venue that should be followed is that contained in the Real Estate Mortgages, as
contended by Union Bank, or that in the Restructuring Agreement, as posited by
PAGLAUM and HealthTech. This Court rules that the venue stipulation in the
Restructuring Agreement should be controlling.

The Real Estate Mortgages were executed by PAGLAUM in favor of Union Bank to
secure the credit line extended by the latter to HealthTech. All three mortgage contracts
contain a dragnet clause, which secures succeeding obligations, including renewals,
extensions, amendments or novations thereof, incurred by HealthTech from Union
Bank, to wit:

Section 1. Secured Obligations. – The obligations secured by this Mortgage (the

"Secured Obligations") are the following:

a) All the obligations of the Borrower and/or the Mortgagor under: (i) the Notes,
the Agreement, and this Mortgage; (ii) any and all instruments or documents
issued upon the renewal, extension, amendment or novation of the Notes, the

307
 Agreement and this Mortgage, irrespective of whether such obligations as
renewed, extended, amended or novated are in the nature of new, separate or
additional obligations; and (iii) any and all instruments or documents issued
pursuant to the Notes, the Agreement and this Mortgage;

b) All other obligations of the Borrower and/or the Mortgagor in favor of the
Mortgagee, whether presently owing or hereinafter incurred and whether or not
arising from or connected with the Agreement, the Notes and/or this Mortgage;
and

c) Any and all expenses which may be incurred in collecting any and all of the
above and in enforcing any and all rights, powers and remedies of the Mortgagee
under this Mortgage.36

On the other hand, the Restructuring Agreement was entered into by HealthTech and
Union Bank to modify the entire loan obligation. Section 7 thereof provides:

Security. – The principal, interests, penalties and other charges for which the
BORROWER may be bound to the BANK under the terms of this Restructuring
Agreement, including the renewal, extension, amendment or novation of this
Restructuring Agreement, irrespective of whether the obligations arising out of or in
connection with this Restructuring Agreement, as renewed, extended, amended or
novated, are in the nature of new, separate or additional obligations, and all other
instruments or documents covering the Indebtedness or otherwise made pursuant to
this Restructuring Agreement (the "Secured Obligations"), shall continue to be secured
by the following security arrangements (the "Collaterals"):

a. Real Estate Mortgage dated February 11, 1994 executed by Paglaum

Management and Development Corporation over a 474 square meter property
covered by TCT No. 112489;

b. Real Estate Mortgage dated February 11, 1994 executed by Paglaum

Management and Development Corporation over a 2,796 square meter property
covered by TCT No. T-68516;

c. Real Estate Mortgage dated April 22, 1998 executed by Paglaum Management
and Development Corporation over a 3,711 square meter property covered by
TCT No. 112488;

d. Continuing Surety Agreement of Benjamin B. Dy;

Without need of any further act and deed, the existing Collaterals, shall remain in full
force and effect and continue to secure the payment and performance of the obligations
of the BORROWER arising from the Notes and this Restructuring
Agreement.37 (Emphasis supplied.)

308
Meanwhile, Section 20 of the Restructuring Agreement as regards the venue of actions
state:

20. Venue – Venue of any action or proceeding arising out of or connected with this
Restructuring Agreement, the Note, the Collateral and any and all related documents
shall be in Makati City, [HealthTech] and [Union Bank] hereby waiving any other
venue.38 (Emphasis supplied.)

These quoted provisions of the Real Estate Mortgages and the later Restructuring
Agreement clearly reveal the intention of the parties to implement a restrictive venue
stipulation, which applies not only to the principal obligation, but also to the mortgages.
The phrase "waiving any other venue" plainly shows that the choice of Makati City as
the venue for actions arising out of or in connection with the Restructuring Agreement
and the Collateral, with the Real Estate Mortgages being explicitly defined as such, is
exclusive.

Even if this Court were to consider the venue stipulations under the Real Estate
Mortgages, it must be underscored that those provisions did not contain words showing
exclusivity or restrictiveness. In fact, in the Real Estate Mortgages dated 11 February
1994, the phrase "parties hereto waiving" – from the entire phrase "the parties hereto
waiving any other venue" – was stricken from the final executed contract. Following the
ruling in Sps. Lantin as earlier quoted, in the absence of qualifying or restrictive words,
the venue stipulation should only be deemed as an agreement on an additional forum,
and not as a restriction on a specified place.1âwphi1

Considering that Makati City was agreed upon by the parties to be the venue for all
actions arising out of or in connection with the loan obligation incurred by HealthTech,
as well as the Real Estate Mortgages executed by PAGLAUM, the CA committed
reversible error in affirming the dismissal of Civil Case No. 01-1567 by RTC Br. 134 on
the ground of improper venue.

WHEREFORE, the Petition for Review is GRANTED. The Decision dated 31 May 2007
and Resolution dated 24 July 2007 in CA-G.R. CV No. 82053 of the Court of Appeals,
as well as the Orders dated 11 March 2003 and 19 September 2003 issued by the
Regional Trial Court, Makati City, Branch 134, are REVERSED and SET ASIDE. The
Complaint in Civil Case No. 01-1567 is hereby REINSTATED.

SO ORDERED.

SECOND DIVISION

August 23, 2017

G.R. No. 222711

309
LEY CONSTRUCTION AND DEVELOPMENT CORPORATION, represented by its
President, JANET C. LEY, Petitioner,
vs.
MARVIN MEDEL SEDANO, doing business under the name and style "LOLA
TABA LOLO PATO PALENGKE AT PALUTO SA SEASIDE,", Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Orders dated June 15,
20152 and January 27, 20163 of the Regional Trial Court (RTC) of Valenzuela City,
Branch 75 (Valenzuela-RTC) in Civil Case No. 40-V-12, which dismissed petitioner Ley
Construction and Development Corporation's (as represented by its President, Janet C.
Ley; petitioner) complaint for collection of sum of money and damages, without
prejudice, on the ground of improper venue.

The Facts

On March 13, 2012, petitioner filed a Complaint for Collection of Sum of Money and
Damages4 against respondent Marvin Medel Sedano (respondent), doing business
under the name and style "Lola Taha Lalo Pata Palengke at Paluto sa Seaside," before
the Valenzuela-RTC, docketed as Civil Case No. 40-V-12. In its complaint, petitioner
alleged that on January 14, 2005, it leased 5 a 50,000-square meter (sq.m.) parcel of
land located at Financial Center Area, Pasay City (now, Lot 5-A Diosdado Macapagal
Boulevard, Pasay City) from respondent third-party defendant, the Philippine National
Construction Corporation (PNCC).6 On September 11, 2006, petitioner subleased 7 the
14,659.80-sq.m. portion thereof to respondent for a term often (10) years beginning
November 15, 2005, for a monthly rent of ₱1,174,780.00, subject to a ten percent (10%)
increase beginning on the third year and every year thereafter (lease
contract).8 Respondent allegedly failed to pay the rent due for the period August 2011 to
December 2011, amounting to a total of P8,828,025.46, and despite demands, 9 refused
to settle his obligations;10 hence, the complaint.

In his Answer with Third-Party Complaint,11 respondent countered that he religiously

paid rent to petitioner until PNCC demanded 12 that the rent be paid directly to it, in view
of the petitioner's eviction from the subject property by virtue of a court order. 13 Thus,
during the period from August 2011 until December 2011, he remitted the rentals to
PNCC.14 Should he be found liable to petitioner, respondent maintained that the RTC
should hold PNCC liable to reimburse to him the amounts he paid as rentals; hence, the
third-party complaint.15

Respondent likewise pointed out that the venue was improperly laid since Section
2116 of the lease contract provides that "[a]ll actions or case[s] filed in connection with
this case shall be filed with the Regional Trial Court of Pasay City, exclusive of all
others."17 Hence, the complaint should be dismissed on the ground of improper venue.

310
Finally, respondent argued that he paid petitioner the amounts of ₱3,518,352.00 as
deposit and advance rentals under the lease contract, and that he made a ₱400,000.00
overpayment, all of which amounts were not liquidated or credited to respondent during
the subsistence of the lease contract. Thus, respondent interposed a counterclaim,
seeking petitioner to reimburse the said amounts to him, and to pay him moral and
exemplary damages, including litigation expenses, in view of petitioner's filing of such
baseless suit.18

In its Comment/Opposition19 to respondent's affirmative defense of improper venue,

petitioner argued that Section 21 of the lease contract is not a stipulation as to venue,
but a stipulation on jurisdiction which is void. 20 This is because such stipulation deprives
other courts, i.e., the Municipal Trial Courts, of jurisdiction over cases which, under the
law, are within its exclusive original jurisdiction, such as an action for unlawful
detainer.21 Petitioner further posited that respondent had already submitted himself to
the jurisdiction of the Valenzuela-RTC and had waived any objections on venue, since
he sought affirmative reliefs from the said court when he asked several times for
additional time to file his responsive pleading, set-up counterclaims against petitioner,
and impleaded PNCC as a third-party defendant. 22

Meanwhile, in its Answer to Third Party Complaint with Counterclaim, 23 PNCC

contended that respondent has no cause of action against it, since he acknowledged
PNCC’s right to receive rent, as evidenced by his direct payment thereof to
PNCC.24 Respondent also entered into a contract of lease with PNCC after learning that
petitioner had been evicted from the premises by virtue of a court ruling. 25

The Valenzuela-RTC Ruling

In an Order26 dated June 15, 2015, the Valenzuela-RTC granted respondent's motion

and dismissed the complaint on the ground of improper venue. It held that Section 21 of
the lease contract between petitioner and respondent is void insofar as it limits the filing
of cases with the R TC of Pasay City, even when the subject matter jurisdiction over the
case is with the Metropolitan Trial Courts.27 However, with respect to the filing of cases
cognizable by the RTCs, the stipulation validly limits the venue to the RTC of Pasay
City.28 Since petitioner's complaint is one for collection of sum of money in an amount
that is within the jurisdiction of the R TC, petitioner should have filed the case with the
RTC of Pasay City.29

The Valenzuela-RTC also found no merit in petitioner's claim that respondent waived
his right to question the venue when he filed several motions for extension of time to file
his answer. It pointed out that improper venue was among the defenses raised in
respondent's Answer. As such, it was timely raised and, therefore, not waived. 30

Aggrieved, petitioner moved for reconsideration 31 which was, however, denied by the
Valenzuela-RTC in its Order32 dated January 27, 2016; hence, the present petition.

The Issue Before the Court

311
The sole issue for the Court's resolution is whether or not the Valenzuela-RTC erred in
ruling that venue was improperly laid.

The Court's Ruling

The petition has no merit.

Rule 4
VENUE OF ACTIONS

Section 1. Venue of real actions. - Actions affecting title to or possession of real

property, or interest therein, shall be commenced and tried in the proper court which
has jurisdiction over the area wherein the

real property involved, or a portion thereof, is situated.

Forcible entry and detainer actions shall be commenced and tried in the municipal trial
court of the municipality or city wherein the real property involved, or a portion thereof,
is situated.

Section 2. Venue of personal actions. -All other actions may be commenced and

tried 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.

Section 3. Venue of actions against nonresidents. - If any of the defendants does not
reside and is not found in the Philippines, and the action affects the personal status of
the plaintiff, or any property of said defendant located in the Philippines, the action may
be commenced and tried in the court of the place where the plaintiff resides, or where
the property or any portion thereof is situated or found.

Section 4. When Rule not applicable. - This Rule shall not apply -

(a) In those cases where a specific rule or law provides otherwise; or

(b) Where the parties have validly agreed in writing before the filing of the action
on the exclusive venue thereof. (Emphases supplied)

Based on these provisions, the venue for personal actions shall - as a general rule - lie
with the court which has jurisdiction where the plaintiff or the defendant resides, at the
election of the plaintiff.33 As an exception, parties may, through a written instrument,
restrict the filing of said actions in a certain exclusive venue. 34 In Briones v. Court of
Appeals,35 the Court explained:

Written stipulations as to venue may be restrictive in the sense that the suit may be filed
only in the place agreed upon, or merely permissive in that the parties may file their suit

312
not only in the place agreed upon but also in the places fixed by law. As in any other
agreement, what is essential is the ascertainment of the intention of the parties
respecting the matter.

As regards restrictive stipulations on venue, jurisprudence instructs that it must be

shown that such stipulation is exclusive. In the absence of qualifying or restrictive
words, such as "exclusively," "waiving for this purpose any other venue," "shall only"
preceding the designation of venue, "to the exclusion of the other courts," or words of
similar import, the stipulation should be deemed as merely an agreement on an
additional forum, not as limiting venue to the specified place. 36

In Pilipino Telephone Corporation v. Tecson, 37 the Court held that an exclusive venue
stipulation is valid and binding, provided that: (a) the stipulation on the chosen venue is
exclusive in nature or in intent; (b) it is expressed in writing by the parties thereto; and
(c) it is entered into before the filing of the suit. 38

After a thorough study of the case, the Court is convinced that all these elements are
present and that the questioned stipulation in the lease contract, i.e., Section 21 thereof,
is a valid venue stipulation that limits the venue of the cases to the courts of Pasay City.
It states:

21. Should any of the party (sic) renege or violate any terms and conditions of
this lease contract, it shall be liable for damages.1âwphi1 All actions or case[s]
filed in connection with this lease shall be filed with the Regional Trial Court of
Pasay City, exclusive of all others.39 (Emphases and underscoring supplied)

The above provision clearly shows the parties' intention to limit the place where actions
or cases arising from a violation of the terms and conditions of the contract of
lease may be instituted. This is evident from the use of the phrase "exclusive of all
others" and the specification of the locality of Pasay City as the place where such cases
may be filed.

Notably, the fact that this stipulation generalizes that all actions or cases of the
aforementioned kind shall be filed with the RTC of Pasay City, to the exclusion of all
other courts, does not mean that the same is a stipulation which attempts to curtail the
jurisdiction of all other courts. It is fundamental that jurisdiction is conferred by law and
not subject to stipulation of the parties.40 Hence, following the rule that the law is
deemed written into every contract,41 the said stipulation should not be construed as a
stipulation on jurisdiction but rather, one which merely limits venue. Moreover, "[t]he
parties are charged with knowledge of the existing law at the time they enter into the
contract and at the time it is to become operative." 42 Thus, without any clear showing in
the contract that the parties intended otherwise, the questioned stipulation should be
considered as a stipulation on venue (and not on jurisdiction), consistent with the basic
principles of procedural law.

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In this case, it is undisputed that petitioner's action was one for collection of sum of
money in an amount43 that falls within the exclusive jurisdiction of the RTC. 44 Since the
lease contract already provided that all actions or cases involving the breach thereof
should be filed with the RTC of Pasay City, and that petitioner’s complaint purporting the
said breach fell within the RTC's exclusive original jurisdiction, the latter should have
then followed the contractual stipulation and filed its complaint before the RTC of Pasay
City. However, it is undeniable that petitioner filed its complaint with the Valenzuela-
RTC; hence, the same is clearly dismissible on the ground of improper venue, without
prejudice, however, to its refiling in the proper court.

That respondent had filed several motions for extension of time to file a responsive
pleading, or that he interposed a counterclaim or third-party complaint in his answer
does not necessarily mean that he waived the affirmative defense of improper venue.
The prevailing rule on objections to improper venue is that the same must be raised at
the earliest opportunity, as in an answer or a motion to dismiss; otherwise, it is deemed
waived.45 Here, respondent timely raised the ground of improper venue since it was one
of the affirmative defenses raised in his Answer with Third-Party Complaint. 46 As such, it
cannot be said that he had waived the same.

Further, it should be pointed out that the case of Pangasinan Transportation Co., Inc. v.
Yatco (Pantranco) 47 cited in the instant petition48 should not apply to this case,
considering that the invocation of the ground of improper venue therein was not based
on a contractual stipulation, but rather on respondent Elpidio O. Dizon's alleged violation
of the Rules of Court, as he filed his case for damages before the Court of First Instance
of Rizal, Branch IV (Quezon City), despite testifying that he was actually a resident of
Dagupan City. In that case, the Court ruled that the filing of a counterclaim and third
party-complaint, and additionally, the introduction of evidence of petitioner Pantranco
(respondent in the case for damages) after the denial of its motion to dismiss on the
ground of improper venue, "necessarily implied a submission to the jurisdiction of [the
trial court therein], and, accordingly, a waiver of such right as Pantranco may have had
to object to the venue, upon the ground that it had been improperly laid." 49 The rationale
for the Pantranco ruling is that a party cannot invoke a violation of a rule on venue
against his counter-party, when he himself is bound by the same rule, but nonetheless,
seeks his own relief and in so doing, violates it.

In contrast, the counterclaim of respondent was alleged to be a compulsory

counterclaim,50 which he was prompted to file only because of petitioner's complaint for
collection of sum of money, else the same would be barred. 51 In fact, his counterclaim
only sought reimbursement of his overpayment to petitioner in the amount of
₱400,000.00, as well as damages for the filing of a purported baseless suit. Thus, his
counterclaim is not covered by the venue stipulation, since he is not asserting a
violation of the terms and conditions of the lease contract, but rather an independent
right which arose only because of the complaint. The same goes for his third-party
complaint, whereby he only pleaded that the rental payments remitted to PNCC for the
period August 2011 to December 2011 be reimbursed to him in the event that
petitioner's complaint is found to be meritorious. Since his counterclaim and third-party

314
complaint are not covered by the venue stipulation, respondent had, therefore, every
right to invoke the same whilst raising the ground of improper venue against petitioner's
complaint, which action was, on the contrary, covered by the stipulation. Thus, there is
no inconsistency in respondent's posturing, which perforce precludes the application of
the Pantranco ruling, as well as negates the supposition that he had waived the defense
of improper venue.

WHEREFORE, the petition is DENIED. Accordingly, the Orders dated June 15, 2015

and January 27, 2016 of the Regional Trial Court of Valenzuela City, Branch 75 in Civil
Case No. 40-V-12 are hereby AFFIRMED.

SO ORDERED.

SECOND DIVISION

January 27, 2016

G.R. No. 217694

FAIRLAND KNITCRAFT CORPORATION, Petitioner,

vs.
ARTURO LOO PO, Respondent.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari1 seeking to reverse and set aside the October
31, 2014 Decision2 and the March 6, 2015 Resolution3 of the Court of Appeals (CA), in
CA-G.R. SP No. 134701 which affirmed the September 16, 2013 Decision 4 of the
Regional Trial Court of Pasig City, Branch 67 (RTC) in SCA Case No. 3831. The RTC
decision, in turn, sustained the March 21, 2013 Decision 5 of the Metropolitan Trial Court,
Branch 72, Pasig City (MeTC), which dismissed the unlawful detainer case filed by
petitioner Fairland Knitcraft Corporation (Fairland) against respondent Arturo Loo
Po (Po) for failure to prove its case by preponderance of evidence.

The Antecedents

In a complaint6 for unlawful detainer, docketed as Civil Case No. 19429, filed before the
MeTC, Fairland alleged that it was the owner of Condominium Unit No. 205 in Cedar
Mansion II on Ma. Escriba Street, Pasig City. The said unit was leased by Fairland to Po
by verbal agreement, with a rental fee of P20,000.00 a month, to be paid by Po at the
beginning of each month. From March 2011, Po had continuously failed to pay rent. For
said reason, Fairland opted not to renew the lease agreement anymore.

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On January 30, 2012, Fairland sent a formal letter 7 to Po demanding that he pay the
amount of P220,000.00, representing the rental arrears, and that he vacate the leased
premises within fifteen (15) days from the receipt of the letter. Despite receipt of the
demand letter and the lapse of the said 15-day period to comply, Po neither tendered
payment for the unpaid rent nor vacated the premises. Thus, on December 12, 2012,
Fairland was constrained to file the complaint for unlawful detainer before the MeTC. Po
had until January 7, 2013 to file his answer but he failed to do so. Hence, on February
6, 2013, Fairland filed a motion to render judgment. 8

In its February 21, 2013 Order,9 the MeTC considered the case submitted for decision.

On March 1, 2013, Po’s counsel filed his Entry of Appearance with Motion for Leave of
Court to file Comment/Opposition to Motion to Render Judgment. 10 In the attached
Comment/Opposition, Po denied the allegations against him and commented that there
was no supporting document that would show that Fairland owned the property; that
there was no lease contract between them; that there were no documents attached to
the complaint which would show that previous demands had been made and received
by him; that the alleged unpaid rental was P220,000.00, but the amount of damages
being prayed for was P440,000.00; that the issue in the case was one of ownership;
and that it was the RTC which had jurisdiction over the case.

The MeTC treated the comment/opposition as Po’s answer to the complaint.

Considering, however, that the case fell under the Rules of Summary Procedure, the
same was deemed filed out of time. Hence, the motion was denied. 11

The Ruling of the Metropolitan Trial Court

In its March 21, 2013 Decision, the MeTC dismissed the complaint for lack of merit due
to Fairland’s failure to prove its claim by preponderance of evidence. The MeTC
explained that although the complaint sufficiently alleged a cause of action, Fairland
failed to prove that it was entitled to the possession of the subject property. There was
no evidence presented to support its claim against Po either.

Aggrieved, Fairland seasonably filed its appeal before the RTC under Rule 40 of the
Rules of Court. Being an appealed case, the RTC required the parties to submit their
respective memoranda.

In its memorandum,12 Fairland argued that an unlawful detainer case was a special civil
action governed by summary procedure. In cases where a defendant failed to file his
answer, there was no need for a declaration of default. Fairland claimed that the Rules
stated that in such cases, judgment should be based on the “facts alleged in the
complaint,”13 and that there was no requirement that judgment must be based on facts
proved by preponderance of evidence. Considering that the presentation of evidence
was not required when a defendant in an ejectment case failed to appear in a
preliminary conference, the same should be applied when no answer had been filed.

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Fairland continued that the failure to file an answer in an ejectment case was
tantamount to an admission by the defendant of all the ultimate facts alleged in the
complaint. There was no more need for evidence in such a situation as every allegation
of ultimate facts in the complaint was deemed established by the defendant’s
acquiescence.

On July 18, 2013, Po filed his memorandum14 and countered that there was no merit in
Fairland’s insistence that evidence was unnecessary when no answer had been filed.
The facts stated in the complaint did not warrant a rendition of judgment in the plaintiff’s
favor. The court had the discretion to rule on the pleadings based on its evaluation of
the allegation of facts.

Further, all the statements in the complaint were mere allegations which were not
substantiated by any competent evidence. Po asserted that there was no proof
presented to show that the subject property was indeed owned by Fairland; that there
was no lease contract between the parties; that he never received the demand letter,
dated January 30, 2012; and that the amount stated in the prayer of the complaint did
not coincide with the amount of unpaid rent. Po also reiterated that the case involved an
issue of ownership over the condominium unit he was occupying.

The Ruling of the Regional Trial Court

On September 16, 2013, the RTC affirmed the MeTC ruling and agreed that Fairland
failed to establish its case by preponderance of evidence. There was nothing on record
that would establish Fairland’s right over the property subject of the complaint. Though it
had been consistently ruled that the only issue for resolution in an ejectment case was
the physical or material possession of the property involved, independent of any claim
of ownership by any of the party-litigants, the court may go beyond the question of
physical possession provisionally. The RTC concluded that even assuming that Po was
not the lawful owner, his actual physical possession of the subject property created the
presumption that he was entitled to its possession thereof.

Fairland filed a motion for reconsideration 15 attaching its condominium certificate of

title16 over the subject property, but it was denied by the RTC in its Order, 17 dated
February 24, 2014.

Undaunted, Fairland filed a petition for review 18 under Rule 42 of the Rules of Court
before the CA.

The Ruling of the Court of Appeals

In the assailed Decision, dated October 31, 2014, the CA dismissed the petition and
ruled that an action for unlawful detainer would not lie against Po. Notwithstanding the
abbreviated proceeding it ordained and the limited pleadings it allowed, the Rules on
Summary Procedure did not relax the rules on evidence. In order for an action for
recovery of possession to prosper, it was indispensable that he who brought the action

317
should prove not only his ownership but also the identity of the property claimed. The
CA concluded, however, that Fairland failed to discharge such bounden duty.

Fairland filed its motion for reconsideration, but it was denied by the CA in its assailed
Resolution, dated March 6, 2015.

Hence, this petition.

ARGUMENTS/DISCUSSIONS

IN AN EJECTMENT CASE WHEREIN NO ANSWER WAS SEASONABLY FILED, IT

IS AN ERROR OF LAW TO BASE JUDGMENT ON PREPONDERANCE OF
EVIDENCE

II

HOLDING THAT EVIDENCE IN AN EJECTMENT CASE SHOULD HAVE BEEN

ATTACHED TO THE COMPLAINT IS AN ERROR OF LAW.19

Fairland argues that in ejectment cases, presentation of evidence was undertaken

through the submission of position papers but the same was dispensed with when the
defendant failed to file an answer or when either party failed to appear during the
preliminary conference. In an ejectment case, the scope of inquiry should be limited to
the sufficiency of the cause of action stated in the complaint when no seasonable
answer was filed. The attachment of documentary evidence to the Complaint was not a
requirement and was even proscribed by law.

In his Comment,20 Po countered that the present petition raised a question of fact.
Although couched in different words, the issues raised here were substantially the same
as the issues raised before the CA. There was no legal basis in Fairland’s assertion that
evidence was dispensed with when no answer to the complaint had been filed. Such
argument would undermine the inherent authority of the courts to resolve legal issues
based on the facts of the case and on the rules on evidence. Contrary to Fairland’s
position, the court decided the case on the basis of the complaint which was found
wanting in preponderance of evidence.

In its Reply,21 Fairland posited that the petition did not raise mere questions of fact but
one of law as what was being sought for review was the erroneous dismissal of the
ejectment case for lack of preponderance of evidence. Since no answer was filed and
the complaint sufficiently alleged a cause of action for unlawful detainer, it became the
duty of the MeTC to decide the case in its favor.

The Court’s Ruling

318
The petition is meritorious.

Complaint has a valid cause of action for Unlawful Detainer

Section 1 of Rule 70 of the Rules of Court lays down the requirements for filing a
complaint for unlawful detainer, to wit:

Section 1. – Who may institute proceedings, and when. – Subject to the provision
of the next succeeding section, a person deprived of the possession of any land
or building by force, intimidation, threat, strategy, or stealth, or a lessor, vendor,
vendee, or other person against whom the possession of any land or building is
unlawfully withheld after the expiration or termination of the right to hold
possession, by virtue of any contract, express or implied, or the legal
representatives or assigns of any such lessor, vendor, vendee, or other person,
may, at any time within one (1) year after such unlawful deprivation or
withholding of possession, bring an action in the proper Municipal Trial Court
against the person or persons unlawfully withholding or depriving of possession,
or any person or persons claiming under them, for the restitution of such
possession, together with damages and costs.1âwphi1

Stated differently, unlawful detainer is a summary action for the recovery of possession
of real property. This action may be filed by a lessor, vendor, vendee, or other person
from whom the possession of any land or building is unlawfully withheld after the
expiration or termination of the right to hold possession by virtue of any contract,
express or implied. The possession of the defendant was originally legal, as his
possession was permitted by the plaintiff on account of an express or implied contract
between them. The defendant’s possession, however, became illegal when the plaintiff
demanded that the defendant vacate the subject property due to the expiration or
termination of the right to possess under the contract, and the defendant refused to
heed such demand. A case for unlawful detainer must be instituted one year from the
unlawful withholding of possession.22

A complaint sufficiently alleges a cause of action for unlawful detainer if it recites the
following: (1) initially, possession of the property by the defendant was by contract with
or by tolerance of the plaintiff; (2) eventually, such possession became illegal upon
notice by the plaintiff to the defendant of the termination of the latter’s right of
possession; (3) thereafter, the defendant remained in possession of the property, and
deprived the plaintiff of the enjoyment thereof; and (4) within one (1) year from the last
demand on defendant to vacate the property, the plaintiff instituted the complaint for
ejectment.23

There is no question that the complaint filed by Fairland adequately alleged a cause of
action for unlawful detainer. The pertinent portion of the said complaint reads:

xxx

319
 3. Plaintiff is the owner of, and had been leasing to the defendant, the premises
mentioned above as the residence of the latter;

4. There is no current written lease contract between plaintiff and the defendant,
but the latter agreed to pay the former the amount of Php20,000.00 as rent at the
beginning of each month. Thus, the term of the lease agreement is renewable on
a month-to-month basis;

5. Since March 2011, defendant has not been paying the aforesaid rent despite
plaintiff’s repeated demands;

6. Due to defendant’s continuous failure to pay rent, plaintiff reached a decision

not to renew the lease agreement. It sent a formal letter, x x x demanding
defendant to pay the amount of Php220,000.00, representing defendant’s twelve
month rental arrears beginning January 2011, and to vacate the leased
premises, both within fifteen (15) days from receipt of said letter;

7. Despite receipt of the aforesaid demand letter and lapse of the fifteen day
period given to comply with plaintiff’s demand, defendant neither tendered
payment for the unpaid rent nor vacated the leased premises. Worse, defendant
has not been paying rent up to now;

x x x24

The above-cited portions of the complaint sufficiently alleged that Fairland was the
owner of the subject property being leased to Po by virtue of an oral agreement. There
was a demand by Fairland for Po to pay rent and vacate before the complaint for
unlawful detainer was instituted. The complaint was seasonably filed within the one-year
period prescribed by law. With all the elements present, there was clearly a cause of
action in the complaint for unlawful detainer.

Under the Rules of Summary Procedure, the weight of evidence is not considered when
a judgment is rendered based on the complaint

The question now is whether the MeTC correctly dismissed the case for lack of
preponderance of evidence. Fairland posits that judgment should have been rendered
in its favor on the basis of the complaint itself and not on its failure to adduce proof of
ownership over the subject property.

The Court agrees with Fairland’s position.

The summons, together with the complaint and its annexes, was served upon Po on
December 28, 2012. This presupposes that the MeTC found no ground to dismiss the
action for unlawful detainer.25 Nevertheless, Po failed to file his answer on time and the
MeTC had the option to render judgment motu proprio or on motion of the plaintiff. In
relation thereto, Sections 5 and 6 of the Rules on Summary Procedure provide:

320
Sec. 5. Answer. – Within ten (10) days from service of summons, the defendant shall
file his answer to the complaint and serve a copy thereof on the plaintiff. Affirmative and
negative defenses not pleaded therein shall be deemed waived, except for lack of
jurisdiction over the subject matter. Cross-claims and compulsory counterclaims not
asserted in the answer shall be considered barred. The answer to counterclaims or
cross-claims shall be filed and served within ten (10) days from service of the answer in
which they are pleaded.

Sec. 6. Effect of failure to answer. – Should the defendant fail to answer the complaint
within the period above provided, the court, motu proprio or on motion of the
plaintiff, shall render judgment as may be warranted by the facts alleged in the
complaint and limited to what is prayed for therein. The court may in its discretion
reduce the amount of damages and attorney’s fees claimed for being excessive or
otherwise unconscionable, without prejudice to the applicability of Section 4, Rule 18 of
the Rules of Court, if there are two or more defendants.

[Emphasis Supplied]

Section 6 is clear that in case the defendant failed to file his answer, the court shall
render judgment, either motu proprio or upon plaintiff’s motion, based solely on the
facts alleged in the complaint and limited to what is prayed for. The failure of the
defendant to timely file his answer and to controvert the claim against him constitutes
his acquiescence to every allegation stated in the complaint. Logically, there is nothing
to be done in this situation26 except to render judgment as may be warranted by the
facts alleged in the complaint.27

Similarly, under Section 7, Rule 70 of the Rules of Court, which governs the rules for
forcible entry and unlawful detainer, if the defendant fails to answer the complaint within
the period provided, the court has no authority to declare the defendant in default.
Instead, the court, motu proprio or on motion of the plaintiff, shall render judgment as
may be warranted by the facts alleged in the complaint and limited to what is prayed
for.28

This has been enunciated in the case of Don Tino Realty and Development Corporation
v. Florentino,29 citing Bayog v. Natino,30 where the Court held that there was no
provision for an entry of default under the Rules of Summary Procedure if the defendant
failed to file his answer.

In this case, Po failed to file his answer to the complaint despite proper service of
summons. He also failed to provide a sufficient justification to excuse his
lapses.1âwphi1 Thus, as no answer was filed, judgment must be rendered by the court
as may be warranted by the facts alleged in the complaint.

Failure to attach annexes is not fatal if the complaint alleges a sufficient cause of action;
evidence need not be attached to the complaint

321
The lower courts erroneously dismissed the complaint of Fairland simply on the ground
that it failed to establish by preponderance of evidence its ownership over the subject
property. As can be gleaned above, the rules do not compel the plaintiff to attach his
evidence to the complaint because, at this inception stage, he only has to file his
complaint to establish his cause of action. Here, the court was only tasked to determine
whether the complaint of Fairland alleged a sufficient cause of action and to render
judgment thereon.

Also, there was no need to attach proof of ownership in the complaint because the
allegations therein constituted a sufficient cause of action for unlawful detainer. Only
when the allegations in the complaint are insufficient to form a cause of action shall the
attachment become material in the determination thereof. Even under Section 4 of the
Rules of Summary Procedure,31 it is not mandatory to attach annexes to the complaint.

In the case of Lazaro v. Brewmaster32 (Lazaro), where judgment was rendered based

on the complaint due to the failure of the defendant to file an answer under the Rules of
Summary Procedure, it was written that:

xxx To determine whether the complaint states a cause of action, all documents
attached thereto may, in fact, be considered, particularly when referred to in the
complaint. We emphasize, however, that the inquiry is into the sufficiency, not the
veracity of the material allegations in the complaint. Thus, consideration of the
annexed documents should only be taken in the context of ascertaining the
sufficiency of the allegations in the complaint.

[Emphasis Supplied]

In Lazaro, the assailed invalid invoices attached to the complaint were not considered
because the complaint already alleged a sufficient cause of action for collection of sum
of money. Those assailed documents were not the bases of the plaintiff’s action for sum
of money, but were only attached to the complaint to provide evidentiary details on the
alleged transactions.

Similarly, in the case at bench, there was no need for documentary attachments to
prove Fairland’s ownership over the subject property. First, the present action is an
action for unlawful detainer wherein only de facto or material possession is required to
be alleged. Evidently, the attachment of any deed of ownership to the complaint is not
indispensable because an action for unlawful detainer does not entirely depend on
ownership.

Second, Fairland sufficiently alleged ownership and superior right of possession over

the subject property. These allegations were evidently manifest in the complaint as
Fairland claimed to have orally agreed to lease the property to Po. The Court is of the
view that these allegations were clear and unequivocal and did not need supporting
attachments to be considered as having sufficiently established its cause of action.
Even the MeTC conceded that the complaint of Fairland stated a valid cause of action

322
for unlawful detainer.33 It must be stressed that inquiry into the attached documents in
the complaint is for the sufficiency, not the veracity, of the material allegations in the
complaint.

Third, considering that Po failed to file an answer within the prescribed period, he was
deemed to have admitted all the allegations in the complaint including Fairland’s claim
of ownership. To reiterate, the failure of the defendant to timely file his answer and
controvert the claim against him constituted his acquiescence to every allegation stated
in the complaint.

In the Entry of Appearance with Motion for Leave of Court to file Comment/Opposition to
Motion to Render Judgment, which was belatedly filed and so was denied by the MeTC,
Po merely denied the allegations against him without even bothering to aver why he
claimed to have a superior right of possession of the subject property. 34

Fourth, it is only at the later stage of the summary procedure when the affidavits of
witnesses and other evidence on factual issues shall be presented before the court.
Sections 8 and 9 of the Rules on Summary Procedure state:

Sec. 8. Record of preliminary conference. – Within five (5) days after the termination of
the preliminary conference, the court shall issue an order stating the matters taken up
therein, x x x

Sec. 9. Submission of affidavits and position papers. – Within ten (10) days from receipt
of the order mentioned in the next preceding section, the parties shall submit
the affidavits of their witnesses and other evidence on the factual issues defined in
the order, together with their position papers setting forth the law and the facts relied
upon by them.

[Emphasis Supplied]

Again, it is worth stressing that these provisions are exactly Sections 9 and 10 under
Rule 70 of the Rules of Court.

Accordingly, it is only at this part of the proceedings that the parties will be required to
present and offer their evidence before the court to establish their causes and defenses.
Before the issuance of the record of preliminary conference, the parties are not yet
required to present their respective evidence.

These specific provisions under the Rules of Summary Procedure which are also
reflected in Rule 70 of the Rules of Court, serve their purpose to immediately settle
ejectment proceedings. “Forcible entry and unlawful detainer cases are summary
proceedings designed to provide for an expeditious means of protecting actual
possession or the right to possession of the property involved. It does not admit of a
delay in the determination thereof. It is a ‘time procedure’ designed to remedy the
situation.35 Thus, as a consequence of the defendant’s failure to file an answer, the

323
court is simply tasked to render judgment as may be warranted by the facts alleged in
the complaint and limited to what is prayed for therein.

As the complaint contains a valid cause of action, a judgment can already be rendered

In order to achieve an expeditious and inexpensive determination of unlawful detainer

cases, a remand of this case to the lower courts is no longer necessary and the case
can be determined on its merits by the Court.

To recapitulate, as Po failed to file his answer on time, judgment shall be rendered

based only on the complaint of Fairland without the need to consider the weight of
evidence. As discussed above, the complaint of Fairland had a valid cause of action for
unlawful detainer.

Consequently, there is no more need to present evidence to establish the allegation of

Fairland of its ownership and superior right of possession over the subject property.
Po’s failure to file an answer constitutes an admission of his illegal occupation due to his
non-payment of rentals, and of Fairland’s rightful claim of material possession. Thus,
judgment must be rendered finding that Fairland has the right to eject Po from the
subject property.

The Judicial Affidavit Rule

On a final note, the Court deems it proper to discuss the relevance of the Judicial
Affidavit Rule or A.M. No. 12-8-8-SC, where documentary or object evidence are
required to be attached. To begin with, the rule is not applicable because such evidence
are required to be attached to a judicial affidavit, not to a complaint. Moreover, as the
rule took effect only on January 1, 2013, it cannot be required in this case because this
was earlier filed on December 12, 2012.

Granting that it can be applied retroactively, the rule being essentially remedial, still it
has no bearing on the ruling of this Court.

In the Judicial Affidavit Rule, the attachments of documentary or object evidence to the
affidavits is required when there would be a pre-trial or preliminary conference or the
scheduled hearing. As stated earlier, where a defendant fails to file an answer, the
court shall render judgment, either motu proprio or upon plaintiff’s motion, based solely
on the facts alleged in the complaint and limited to what is prayed for. Thus, where there
is no answer, there is no need for a pre-trial, preliminary conference or hearing. Section
2 of the Judicial Affidavit Rule reads:

Section 2. Submission of Judicial Affidavits and Exhibits in lieu of direct testimonies. -

(a) The parties shall file with the court and serve on the adverse party, personally or by
licensed courier service, not later than five days before pre-trial or preliminary
conference or the scheduled hearing with respect to motions and incidents, the
following:

324
 (1) The judicial affidavits of their witnesses, which shall take the place of such
witnesses' direct testimonies; and

(2) The parties' docun1entary or object evidence, if any, which shall be attached
to the judicial affidavits and marked as Exhibits A, B, C, and so on in the case of
the complainant or the plaintiff, and as Exhibits 1, 2, 3, and so on in the case of
the respondent or the defendant.

(b) Should a party or a witness desire to keep the original document or object evidence
in his possession, he may, after the same has been identified, marked as exhibit, and
authenticated, warrant in his judicial affidavit that the copy or reproduction attached to
such affidavit is a faithful copy or reproduction of that original. In addition, the party or
witness shall bring the original document or object evidence for comparison during the
preliminary conference with the attached copy, reproduction, or pictures, failing which
the latter shall not be admitted.

This is without prejudice to the introduction of secondary evidence in place of the

original when allowed by existing rules.

WHEREFORE, the petition is GRANTED. The October 31, 2014 Decision and the

March 6, 2015 Resolution of the Court of Appeals in CAG. R. SP No. 134701 are
hereby REVERSED and SET ASIDE. Respondent Arturo Loo Po is ORDERED TO
VACATE Condominium Unit No. 205 located in Cedar Mansion II on Ma. Escriba
Street, Pasig City.

Respondent Po is further ORDERED TO PAY the rentals-in-arrears, as well as the

rentals accruing in the interim until he vacates the property. The unpaid rentals shall
incur a legal interest of six percent (6%) per annum from January 30, 2012, when the
demand to pay and to vacate was made, up to the finality of this decision. Thereafter,
an interest of six percent (6%) per annum shall be imposed on the total amount due
until full payment is made.

SO ORDERED.

RULE 6. KINDS OF PLEADINGS

FIRST DIVISION

G.R. No. 159746               July 18, 2012

SPOUSES RAMON MENDIOLA and ARACELI N. MENDIOLA, Petitioners,

vs.
THE HON. COURT OF APPEALS, PILIPINAS SHELL PETROLEUM CORPORATION,
and TABANGAO REALTY, INC., Respondents.

DECISION

325
BERSAMIN, J.:

Through their petition for certiorari, mandamus and prohibition, petitioners assail the
resolutions promulgated on November 22, 2002 1 and July 31, 2002,2 whereby the Court
of Appeals (CA) respectively denied petitioners' motion to dismiss the appeal and
motion for reconsideration. They allege that the CA thereby committed grave abuse of
discretion amounting to lack or excess of jurisdiction.

Antecedents

On July 31, 1985, Pilipinas Shell Petroleum Corporation (Shell) entered into an
agreement for the distribution of Shell petroleum products (such as fuels, lubricants and
allied items) by Pacific Management & Development (Pacific), a single proprietorship
belonging to petitioner Ramon G. Mendiola (Ramon). To secure Pacific’s performance
of its obligations under the agreement, petitioners executed on August 1, 1985 a real
estate mortgage in favor of Shell3 covering their real estate and its improvements,
located in the then Municipality of Parañaque, Rizal, and registered under Transfer
Certificate of Title No. S-59807 of the Registry of Deeds of Rizal (in the name of
"Ramon Mendiola, married to Araceli Mendoza"). 4

Pacific ultimately defaulted on its obligations, impelling Shell to commence extrajudicial

foreclosure proceedings in April 1987. Having received a notice of the extrajudicial
foreclosure scheduled to be held at the main entrance of the Parañaque Municipal Hall
on May 14, 1987,5 petitioners proceeded to the announced venue on the scheduled date
and time but did not witness any auction being conducted and did not meet the sheriff
supposed to conduct the auction despite their being at the lobby from 9:00 am until
11:30 am of May 14, 1987.6 They later learned that the auction had been held as
scheduled by Deputy Sheriff Bernardo San Juan of the Regional Trial Court (RTC) in
Makati, and that their mortgaged realty had been sold to Tabangao Realty, Inc.
(Tabangao), as the corresponding certificate of sale bears out. 7 They further learned
that Tabangao’s winning bidder bid of P670,000.00 had topped Shell’s bid of
P660,000.00.8

After application of the proceeds of the sale to the obligation of Pacific, a deficiency of
P170,228.00 (representing the foreclosure expenses equivalent of 25% of the amount
claimed plus interest) remained. The deficiency was not paid by Ramon. Thus, on
September 2, 1987, Shell sued in the RTC in Manila to recover the deficiency, docketed
as Civil Case No. 87-41852 entitled Pilipinas Shell Petroleum Corporation v. Ramon G.
Mendiola, doing business under the name and style Pacific Management &
Development (Manila case).9

In his answer with counterclaim filed on October 28, 1987, Ramon asserted that the
extra-judicial foreclosure of the mortgage had been devoid of basis in fact and in law;
and that the foreclosure and the filing of the action were made in bad faith, with malice,
fraudulently and in gross and wanton violation of his rights.

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On March 22, 1988, petitioners commenced in the RTC in Makati an action to annul the
extrajudicial foreclosure docketed as Civil Case No. 88-398 entitled Ramon G. Mendiola
and Araceli N. Mendiola v. Pilipinas Shell Petroleum Corporation, Tabangao Realty,
Inc., and Maximo C. Contreras, as Clerk of Court and Ex Oficio Sheriff of Rizal, 10 which
was assigned to Branch 134 (Makati case).

As defendants in the Makati case, Shell and Tabangao separately moved for
dismissal,11 stating similar grounds, namely: (a) that the Makati RTC had no jurisdiction
due to the pendency of the Manila case; (b) that the complaint stated no cause of
action, the Makati case having been filed more than a year after the registration of the
certificate of sale; (c) that another action (Manila case) involving the same subject
matter was pending; (d) that the venue was improperly laid; and (e) that the Makati case
was already barred by petitioners’ failure to raise its cause of action as a compulsory
counterclaim in the Manila case.

After the Makati RTC denied both motions on September 23, 1988, 12 Shell filed its
answer ad cautelam,13 whereby it denied petitioners’ allegation that no auction had been
held; insisted that there had been proper accounting of the deliveries made to Pacific
and its clients; and averred that petitioners’ failure to file their compulsory counterclaim
in the Manila case already barred the action.

Pending the trial of the Makati case, the Manila RTC rendered its judgment in favor of
Shell on May 31, 1990, viz:

WHEREFORE, IN VIEW OF THE FOREGOING, defendants (sic) is ordered to pay

plaintiffs as follows:

1. On the First Cause of Action –

a) P167,585.50 representing the deficiency as of the date of the

foreclosure sale;

b) P2,643.26 representing the interest due on the unpaid principal as of 30

June 1987; and

c) The sum corresponding to the interest due on the unpaid principal from
30 June 1987 to date.

2. On the Second Cause of Action – attorney’s fees and expenses of litigation to

(sic) the amount of P15,000.00; and finally,

3. Costs of suit.

SO ORDERED.14

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As sole defendant in the Manila case, Ramon appealed (C.A.-G.R. No. CV-28056), but
his appeal was decided adversely to him on July 22, 1994, 15 with the CA affirming the
Manila RTC’s decision and finding that he was guilty of forum shopping for instituting
the Makati case.

Undaunted, he next appealed to the Court (G.R. No. 122795), which denied his petition
for review on February 26, 1996,16 and upheld the foreclosure of the mortgage. The
decision of the Court became final and executory, as borne out by the entry of judgment
issued on June 10, 1996.17

Nonetheless, on February 3, 1998, the Makati RTC resolved the Makati case, 18 finding
that there had been no auction actually conducted on the scheduled date; that had such
auction taken place, petitioners could have actively participated and enabled to raise
their objections against the amount of their supposed obligation; and that they had been
consequently deprived of notice and hearing as to their liability. The Makati RTC
disposed as follows:

WHEREFORE, premises considered, plaintiffs having duly established their case that
the SHERIFF’s Certificate of Sale of May 14, 1987, is void for lack of actual auction sale
and lack of valid consideration as the amount utilized by the SHERIFF was based on an
invalid amount as a basis of an Extra-Judicial Foreclosure of Mortgage where the
amount of the mortgage is based on a future obligation unilaterally adjudicated by
SHELL alone in violation of MENDIOLA’s right of due process, and judgment is hereby
rendered as follows:

1. Declaring as NULL and VOID the Extra-Judicial Foreclosure of Mortgage of

plaintiff’s house and lot under TCT No. T-59807 issued by the Register of Deeds
of Rizal;

2. Declaring as NULL and VOID the Certificate of Sale issued by Maximo C.

Contreras on May 14, 1987 in favor of TABANGAO REALTY, INC.;

3. Ordering defendant PILIPINAS SHELL PETROLEUM CORPORATION to

make a full accounting of the extent of the future obligation of plaintiff MENDIOLA
in the Mortgage Contract before any foreclosure proceedings are initiated;

4. Ordering defendants PILIPINAS SHELL PETROLEUM CORPORATION and

TABANGAO REALTY INC. to pay the amount of P20,000.00 as and by way of
attorney’s fees; and

5. To pay the costs.

SO ORDERED.

Shell sought the reconsideration of the decision, 19 maintaining that the issues raised on
the validity of the foreclosure sale and on the amount of the outstanding obligation of

328
Pacific had been settled in the Manila case; and that the Makati RTC became bereft of
jurisdiction to render judgment on the same issues pursuant to the principle of res
judicata.

Tabangao adopted Shell’s motion for reconsideration.

On October 5, 1999, however, the Makati RTC denied Shell’s motion for
reconsideration,20 to wit:

WHEREFORE, premises considered, there is NO RES JUDICATA to speak of in this

case. Consequently, the "Motion for Reconsideration" filed by defendant Pilipinas Shell
Petroleum Corporation, which was later adopted by defendant Tabangao Realty, Inc., is
hereby DENIED. Plaintiff’s "Motion for Execution" is likewise DENIED for reasons as
stated above.

SO ORDERED.21

Aggrieved by the decision of the Makati RTC, Shell and Tabangao filed a joint notice of
appeal.22 The appeal was docketed in the CA as C.A.-G.R. No. 65764.

In their appellants’ brief filed in C.A.-G.R. No. 65764, 23 Shell and Tabangao assigned
the following errors, namely:

THE COURT A QUO COMMITTED GRAVE ERROR IN NOT DISMISSING THE

CASE ON THE GROUND OF LITIS PENDENTIA AND, SUBSEQUENTLY, ON
THE GROUND OF RES JUDICATA.

II

THE COURT A QUO COMMITTED MANIFEST ERROR IN DISREGARDING

THAT THE LEGAL REQUIREMENTS FOR A VALID EXTRAJUDICIAL
FORECLOSURE WERE SATISFIED.

III

THE COURT A QUO COMMITTED SERIOUS ERROR IN RENDERING THE

ASSAILED DECISION AND ASSAILED RESOLUTION IN CONTRAVENTION
OF THE RULINGS OF A CO-EQUAL COURT AND SUPERIOR COURTS.

Instead of filing their appellees’ brief, petitioners submitted a motion to dismiss

appeal,24 mainly positing that Section 1, Rule 41 of the Rules of Court prohibited an
appeal of the order denying a motion for reconsideration.

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On November 22, 2002, the CA denied petitioners’ motion to dismiss appeal through
the first assailed resolution, stating: 25

For consideration is the Motion to Dismiss Appeal dated August 6, 2002 filed by counsel
for plaintiffs-appellees praying for the dismissal of the appeal on the grounds that the
Notice of Appeal filed by defendants-appellants was specifically interposed solely
against the Resolution of the trial court dated October 20, 1999 which merely denied
defendant-appellants’ Motion for Reconsideration of the trial court’s decision, dated
February 3, 1998.

Upon perusal of the records of the case, it seems apparent that herein defendants-
appellants intended to appeal not only the Resolution dated October 2, 1999 but also
the Decision dated February 3, 1998. Assuming arguendo that defendants-appellants
indeed committed a technical error, it is best that the parties be given every chance to
fight their case fairly and in the open without resort to technicality to afford petitioners
their day in court (Zenith Insurance vs. Purisima, 114 SCRA 62).

The Motion to Dismiss Appeal must not be granted if only to stress that the rules of
procedure may not be misused as instruments for the denial of substantial justice. We
must not forget the plain injunction of Section 2 of (now Sec. 6 of Rule 1, 1997 Revised
Rules of Civil Procedure) Rule 1 that the "rules shall be liberally construed in order to
promote their object and to assist the parties in obtaining not only speedy, but more
imperatively just and inexpensive determination of justice in every action and
proceeding" (Lim Tanhu vs. Ramolete 66 SCRA 425).

WHEREFORE, in view of the foregoing, the Motion to Dismiss Appeal is hereby

DENIED.

SO ORDERED.

On July 31, 2002, the CA denied petitioners’ motion for reconsideration through the
second assailed resolution.26

Hence, petitioners brought these special civil actions for certiorari, mandamus and
prohibition, insisting that the CA committed grave abuse of discretion amounting to lack
or excess of jurisdiction in denying their motion to dismiss appeal and their motion for
reconsideration.

Issue

Petitioners contend that the CA committed grave abuse of discretion in entertaining the
appeal of Shell and Tabangao in contravention of Section 1, Rule 41 of the Rules of
Court, which proscribes an appeal of the denial of a motion for reconsideration.

Shell and Tabangao counter that their appeal was not proscribed because the action
could be said to be completely disposed of only upon the rendition on October 5, 1999

330
of the assailed resolution denying their motion for reconsideration; that, as such, the
decision of February 3, 1998 and the denial of their motion for reconsideration formed
one integrated disposition of the merits of the action; and that the CA justifiably applied
the rules of procedure liberally.

Two issues have to be determined. The first is whether or not an appeal may be taken
from the denial of a motion for reconsideration of the decision of February 3, 1998. The
determination of this issue necessarily decides whether the petitions for certiorari,
prohibition and mandamus were warranted. The second is whether the Makati case
could prosper independently of the Manila case. The Court has to pass upon and
resolve the second issue without waiting for the CA to decide the appeal on its merits in
view of the urging by Shell and Tabangao that the Makati case was barred due to litis
pendentia or res judicata.

Ruling

The petition for certiorari, mandamus and prohibition lacks merit.

1.

Appeal by Shell and Tabangao of the denial of their motion for reconsideration was not
proscribed

Petitioners’ contention that the appeal by Shell and Tabangao should be rejected on the
ground that an appeal of the denial of their motion for reconsideration was prohibited
cannot be sustained.

It is true that the original text of Section 1, Rule 41 of the 1997 Rules of Civil Procedure
expressly limited an appeal to a judgment or final order, and proscribed the taking of an
appeal from an order denying a motion for new trial or reconsideration, among others,
viz:

Section 1. Subject of appeal. — An appeal may be taken from a judgment or final order
that completely disposes of the case, or of a particular matter therein when declared by
these Rules to be appealable.

No appeal may be taken from:

(a) An order denying a motion for new trial or reconsideration;

(b) An order denying a petition for relief or any similar motion seeking relief from
judgment;

(c) An interlocutory order;

(d) An order disallowing or dismissing an appeal;

331
 (e) An order denying a motion to set aside a judgment by consent, confession or
compromise on the ground of fraud, mistake or duress, or any other ground
vitiating consent;

(f) An order of execution;

(g) A judgment or final order for or against one or more of several parties or in
separate claims, counterclaims, cross-claims and third-party complaints, while
the main case is pending, unless the court allows an appeal therefrom; and

(h) An order dismissing an action without prejudice.

In all the above instances where the judgment or final order is not appealable, the
aggrieved party may file an appropriate special civil action under Rule 65. (n)

The inclusion of the order denying a motion for new trial or a motion for reconsideration
in the list of issuances of a trial court not subject to appeal was by reason of such order
not being the final order terminating the proceedings in the trial court. This nature of the
order is reflected in Section 9 of Rule 37 of the 1997 Rules of Civil Procedure, which
declares that such order denying a motion for new trial or reconsideration is not
appealable, "the remedy being an appeal from the judgment or final order."

In Heirs of Spouses Teofilo M. Reterta and Elisa Reterta v. Spouses Lorenzo Mores
and Virginia Lopez,27 the Court further expounded:

The restriction against an appeal of a denial of a motion for reconsideration

independently of a judgment or final order is logical and reasonable. A motion for
reconsideration is not putting forward a new issue, or presenting new evidence, or
changing the theory of the case, but is only seeking a reconsideration of the judgment
or final order based on the same issues, contentions, and evidence either because: (a)
the damages awarded are excessive; or (b) the evidence is insufficient to justify the
decision or final order; or (c) the decision or final order is contrary to law.

By denying a motion for reconsideration, or by granting it only partially, therefore, a trial

court finds no reason either to reverse or to modify its judgment or final order, and
leaves the judgment or final order to stand. The remedy from the denial is to assail the
denial in the course of an appeal of the judgment or final order itself.

In Quelnan v. VHF Philippines, Inc.,28 however, the Court has interpreted the

proscription against appealing the order denying a motion for reconsideration to refer
only to a motion for reconsideration filed against an interlocutory order, not to a motion
for reconsideration filed against a judgment or final order, to wit:

This Court finds that the proscription against appealing from an order denying a motion
for reconsideration refers to an interlocutory order, and not to a final order or judgment.
That that was the intention of the above-quoted rules is gathered from Pagtakhan v.

332
CIR, 39 SCRA 455 (1971), cited in above-quoted portion of the decision in Republic, in
which this Court held that an order denying a motion to dismiss an action is
interlocutory, hence, not appealable.

The rationale behind the rule proscribing the remedy of appeal from an interlocutory
order is to prevent undue delay, useless appeals and undue inconvenience to the
appealing party by having to assail orders as they are promulgated by the court, when
they can be contested in a single appeal. The appropriate remedy is thus for the party to
wait for the final judgment or order and assign such interlocutory order as an error of the
court on appeal.

The denial of the motion for reconsideration of an order of dismissal of a complaint is

not an interlocutory order, however, but a final order as it puts an end to the particular
matter resolved, or settles definitely the matter therein disposed of, and nothing is left
for the trial court to do other than to execute the order.

Not being an interlocutory order, an order denying a motion for reconsideration of an

order of dismissal of a complaint is effectively an appeal of the order of dismissal itself.

The reference by petitioner, in his notice of appeal, to the March 12, 1999 Order
denying his Omnibus Motion—Motion for Reconsideration should thus be deemed to
refer to the January 17, 1999 Order which declared him non-suited and accordingly
dismissed his complaint.

If the proscription against appealing an order denying a motion for reconsideration is

applied to any order, then there would have been no need to specifically mention in both
above-quoted sections of the Rules "final orders or judgments" as subject of appeal. In
other words, from the entire provisions of Rule 39 and 41, there can be no mistaking
that what is proscribed is to appeal from a denial of a motion for reconsideration of an
interlocutory order.29

In Apuyan v. Haldeman,30 too, the Court categorized an order denying the motion for
reconsideration as the final resolution of the issues a trial court earlier passed upon and
decided, and accordingly held that the notice of appeal filed against the order of denial
was deemed to refer to the decision subject of the motion for reconsideration. 31

Subsequently, in Neypes v. Court of Appeals,32 where the decisive issue was whether or

not the appeal was taken within the reglementary period, with petitioners contending
that they had timely filed their notice of appeal based on their submission that the period
of appeal should be reckoned from July 22, 1998, the day they had received the final
order of the trial court denying their motion for reconsideration (of the order dismissing
their complaint), instead of on March 3, 1998, the day they had received the February
12, 1998 order dismissing their complaint, the Court, citing Quelnan v. VHF Philippines,
Inc. and Apuyan v. Haldeman, ruled that the receipt by petitioners of the denial of their
motion for reconsideration filed against the dismissal of their complaint, which was a
final order, started the reckoning point for the filing of their appeal, to wit:

333
Rule 41, Section 3 of the 1997 Rules of Civil Procedure states:

SEC. 3. Period of ordinary appeal. ― The appeal shall be taken wi thin fifteen (15) days
from the notice of the judgment or final order appealed from. Where a record on appeal
is required, the appellant shall file a notice of appeal and a record on appeal within thirty
(30) days from the notice of judgment or final order.

The period to appeal shall be interrupted by a timely motion for new trial or
reconsideration. No motion for extension of time to file a motion for new trial or
reconsideration shall be allowed. (emphasis supplied)

Based on the foregoing, an appeal should be taken within 15 days from the notice of
judgment or final order appealed from. A final judgment or order is one that finally
disposes of a case, leaving nothing more for the court to do with respect to it. It is an
adjudication on the merits which, considering the evidence presented at the trial,
declares categorically what the rights and obligations of the parties are; or it may be an
order or judgment that dismisses an action.

As already mentioned, petitioners argue that the order of July 1, 1998 denying their
motion for reconsideration should be construed as the "final order," not the February 12,
1998 order which dismissed their complaint. Since they received their copy of the denial
of their motion for reconsideration only on July 22, 1998, the 15-day reglementary
period to appeal had not yet lapsed when they filed their notice of appeal on July 27,
1998.

What therefore should be deemed as the "final order," receipt of which triggers the start
of the 15-day reglementary period to appeal – the February 12, 1998 order dismissing
the complaint or the July 1, 1998 order dismissing the MR?

In the recent case of Quelnan v. VHF Philippines, Inc., the trial court declared petitioner
Quelnan non-suited and accordingly dismissed his complaint. Upon receipt of the order
of dismissal, he filed an omnibus motion to set it aside. When the omnibus motion was
filed, 12 days of the 15-day period to appeal the order had lapsed. He later on received
another order, this time dismissing his omnibus motion. He then filed his notice of
appeal. But this was likewise dismissed ― for having been filed out of time.

The court a quo ruled that petitioner should have appealed within 15 days after the
dismissal of his complaint since this was the final order that was appealable under the
Rules. We reversed the trial court and declared that it was the denial of the motion for
reconsideration of an order of dismissal of a complaint which constituted the final order
as it was what ended the issues raised there.

This pronouncement was reiterated in the more recent case of Apuyan v. Haldeman et
al. where we again considered the order denying petitioner Apuyan’s motion for
reconsideration as the final order which finally disposed of the issues involved in the
case.

334
Based on the aforementioned cases, we sustain petitioners’ view that the order dated
July 1, 1998 denying their motion for reconsideration was the final order contemplated
in the Rules.33

As the aftermath of these rulings, the Court issued its resolution in A.M. No. 07-7-12-SC
to approve certain amendments to Rules 41, 45, 58 and 65 of the Rules of Court
effective on December 27, 2007. Among the amendments was the delisting of an order
denying a motion for new trial or motion for reconsideration from the enumeration found
in Section 1, Rule 41 of the 1997 Rules of Civil Procedure of what are not appealable.
The amended rule now reads:

Section 1. Subject of appeal.— An appeal may be taken from a judgment or final order
that completely disposes of the case, or of a particular matter therein when declared by
these Rules to be appealable.

No appeal may be taken from:

(a) An order denying a petition for relief or any similar motion seeking relief from
judgment;

(b) An interlocutory order;

(c) An order disallowing or dismissing an appeal;

(d) An order denying a motion to set aside a judgment by consent, confession or

compromise on the ground of fraud, mistake or duress, or any other ground
vitiating consent;

(e) An order of execution;

(f) A judgment or final order for or against one or more of several parties or in
separate claims, counterclaims, cross-claims and third-party complaints, while
the main case is pending, unless the court allows an appeal therefrom; and

(g) An order dismissing an action without prejudice.

In any of the foregoing circumstances, the aggrieved party may file an appropriate
special civil action as provided in Rule 65.

Based on the foregoing developments, Shell and Tabangao’s appeal, albeit seemingly
directed only at the October 5, 1999 denial of their motion for reconsideration, was
proper. Thus, we sustain the CA’s denial for being in accord with the rules and pertinent
precedents. We further point out that for petitioners to insist that the appeal was limited
only to the assailed resolution of October 5, 1999 was objectively erroneous, because
Shell and Tabangao expressly indicated in their appellant’s brief that their appeal was
directed at both the February 3, 1998 decision and the October 5, 1999 resolution. 34

335
The petition cannot prosper if the CA acted in accordance with law and jurisprudence.
Certiorari, prohibition and mandamus are extraordinary remedies intended to correct
errors of jurisdiction and to check grave abuse of discretion. The term grave abuse of
discretion connotes capricious and whimsical exercise of judgment as is equivalent to
excess, or a lack of jurisdiction.35 The abuse must be so patent and gross as to amount
to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, or
to act at all in contemplation of law as where the power is exercised in an arbitrary and
despotic manner by reason of passion or hostility. 36 Yet, here, petitioners utterly failed to
establish that the CA abused its discretion, least of all gravely.

2. Makati case is barred and should be dismissed on ground of res judicata and waiver

The dismissal of the petition should ordinarily permit the CA to resume its proceedings
in order to enable it to resolve the appeal of Shell and Tabangao. But the Court deems
itself bound to first determine whether the Makati case could still proceed by virtue of
their insistence that the cause of action for annulment of the foreclosure sale in the
Makati case, which was intimately intertwined with the cause of action for collection of
the deficiency amount in the Manila case, could not proceed independently of the
Manila case.

Shell and Tabangao’s insistence has merit. The Makati case should have been earlier
disallowed to proceed on the ground of litis pendentia, or, once the decision in the
Manila case became final, should have been dismissed on the ground of being barred
by res judicata.

In the Manila case, Ramon averred a compulsory counterclaim asserting that the
extrajudicial foreclosure of the mortgage had been devoid of basis in fact and in law;
and that the foreclosure and the filing of the action had been made in bad faith, with
malice, fraudulently and in gross and wanton violation of his rights. His pleading thereby
showed that the cause of action he later pleaded in the Makati case - that of annulment
of the foreclosure sale - was identical to the compulsory counterclaim he had set up in
the Manila case.

Rule 6 of the 1997 Rules of Civil Procedure defines a compulsory counterclaim as

follows:

Section 7. Compulsory counterclaim. — 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. Such a counterclaim must be within the jurisdiction of the
court both as to the amount and the nature thereof, except that in an original action
before the Regional Trial Court, the counterclaim may be considered compulsory
regardless of the amount. (n)

336
Accordingly, a counterclaim is compulsory if: (a) it arises out of or is necessarily
connected with the transaction or occurrence which is the subject matter of the
opposing party’s claim; (b) it does not require for its adjudication the presence of third
parties of whom the court cannot acquire jurisdiction; and (c) the court has jurisdiction to
entertain the claim both as to its amount and nature, except that in an original action
before the RTC, the counterclaim may be considered compulsory regardless of the
amount.

A compulsory counterclaim that a defending party has at the time he files his answer
shall be contained therein.37 Pursuant to Section 2, Rule 9 of the 1997 Rules of Civil
Procedure, a compulsory counterclaim not set up shall be barred.

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?38 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. 39 If these tests
result in affirmative answers, the counterclaim is compulsory.

The four tests are affirmatively met as far as the Makati case was concerned. The
Makati case had the logical relation to the Manila case because both arose out of the
extrajudicial foreclosure of the real estate mortgage constituted to secure the payment
of petitioners’ credit purchases under the distributorship agreement with Shell.
Specifically, the right of Shell to demand the deficiency was predicated on the validity of
the extrajudicial foreclosure, such that there would not have been a deficiency to be
claimed in the Manila case had Shell not validly foreclosed the mortgage. As earlier
shown, Ramon’s cause of action for annulment of the extrajudicial foreclosure was a
true compulsory counterclaim in the Manila case. Thus, the Makati RTC could not have
missed the logical relation between the two actions.

We hold, therefore, that the Makati case was already barred by res judicata. Hence, its
immediate dismissal is warranted.

Bar by res judicata avails if the following elements are present, to wit: (a) the former
judgment or order must be final; (b) the judgment or order must be on the merits; (c) it
must have been rendered by a court having jurisdiction over the subject matter and the

337
parties; (d) there must be, between the first and the second action, identity of parties, of
subject matter and cause of action.40

The Manila RTC had jurisdiction to hear and decide on the merits Shell’s complaint to
recover the deficiency, and its decision rendered on May 31, 1990 on the merits already
became final and executory. Hence, the first, second and third elements were present.

Anent the fourth element, the Makati RTC concluded that the Manila case and the
Makati case had no identity as to their causes of action, explaining that the former was
a personal action involving the collection of a sum of money, but the latter was a real
action affecting the validity of the foreclosure sale, stating in its order of October 5, 1999
denying Shell’s motion for reconsideration as follows:

Finally, as to whether there is identity of causes of action between the two (2) cases,
this Court finds in negative.

xxxx

True, the test of identity of causes of action lies not in the form of an action but on
whether the same evidence would support and establish the former and the present
causes of action. The difference of actions in the aforesaid cases is of no moment. It
has been held that a party cannot by varying the form of action or adopting a different
method of presenting his case, escape the operation of the principle that one and the
same cause of action shall not be twice litigated between the same parties and their
privies. (Sangalang vs. Caparas, 151 SCRA 53; Gutierrez vs. Court of Appeals, 193
SCRA 437. This ruling however does not fall squarely on the present controversy.

Civil Case No. 42852 is for collection of sum of money, a personal action where what is
at issue is whether spouses Mendiola have indebtedness to Pilipinas Shell. There is no
concrete findings on questions regarding the validity of sale affecting the mortgaged
property, otherwise, there would be a determination of transferring of title over the
property which is already a real action. In the latter action, Manila courts has no
jurisdiction considering that the property is located in Paranaque, then sitting under
Makati RTC. At any rate, this Court is not unmindful of series of cases which state that
from an otherwise rigid rule outlining jurisdiction of courts being limited in character,
deviations have been sanctioned where the (1) parties agreed or have acquiesced in
submitting the issues for determination by the court; (2) the parties were accorded full
opportunity in presenting their respective arguments of the issues litigated and of the
evidence in support thereof; and (3) the court has already considered the evidence on
record and is convinced that the same is sufficient and adequate for rendering a
decision upon the issues controverted. xxx. While there is a semblance of substantial
compliance with the aforesaid criteria, primarily because the issue of validity of
foreclosure proceedings was submitted for determination of RTC Manila when this was
stated as an affirmative defense by spouses Mendiola in their Answer to the complaint
in Civil Case No. 42852, however it appears from the Decision rendered in said case
that the issue on validity of foreclosure sale was not fully ventilated before the RTC

338
Manila because spouses Mendiola’s right to present evidence in its behalf was declared
waived. Naturally, where this issue was not fully litigated upon, no resolution or
declaration could be made therein.

On the other hand, Civil Case No. 88-398 is an action for declaration of nullity or
annulment of foreclosure sale, a real action where the location of property controls the
venue where it should properly be filed. This Court undoubtedly has jurisdiction to
adjudicate this case. Plaintiff spouses Mendiola merely claimed that no actual
foreclosure sale was conducted, and if there was, the same was premature for lack of
notice and hearing. Take note that plaintiffs do not deny their indebtedness to Pilipinas
Shell although the amount being claimed is disputed. They are simply asserting their
rights as owners of the mortgaged property, contending that they were not afforded due
process in the course of foreclosure proceedings. And based mainly on the testimonial
and documentary evidence presented, as well as the postulations, expositions and
arguments raised by all parties in this case, it is the Court’s considered view that
spouses Mendiola have established the material allegations in their complaint and have
convincingly shown to the satisfaction of the Court that they are entitled to the reliefs
prayed for. With these findings and adjudications, the Court does not find inconsistency
with those held in Civil Case No. 42852. As to whether spouses Mendiola is still
indebted to Pilipinas Shell is not in issue here, and not even a single discussion touched
that matter as this would tantamount to encroaching upon the subject matter litigated in
Civil Case No. 42852.41

The foregoing conclusion of the Makati RTC on lack of identity between the causes of
action was patently unsound. The identity of causes of action does not mean absolute
identity; otherwise, a party may easily escape the operation of res judicata by changing
the form of the action or the relief sought. The test to determine whether the causes of
action are identical is to ascertain whether the same evidence will sustain the actions, or
whether there is an identity in the facts essential to the maintenance of the actions. If
the same facts or evidence will sustain the actions, then they are considered identical,
and a judgment in the first case is a bar to the subsequent action. 42 Petitioners’ Makati
case and Shell’s Manila case undeniably required the production of the same evidence.
In fact, Shell’s counsel faced a dilemma upon being required by the Makati RTC to
present the original copies of certain documents because the documents had been
made part of the records of the Manila case elevated to the CA in connection with the
appeal of the Manila RTC’s judgment.43 Also, both cases arose from the same
transaction (i.e., the foreclosure of the mortgage), such that the success of Ramon in
invalidating the extrajudicial foreclosure would have necessarily negated Shell’s right to
recover the deficiency.

Apparently, the Makati RTC had the erroneous impression that the Manila RTC did not
have jurisdiction over the complaint of petitioners because the property involved was
situated within the jurisdiction of the Makati RTC. Thereby, the Makati RTC confused
venue of a real action with jurisdiction. Its confusion was puzzling, considering that it
was well aware of the distinction between venue and jurisdiction, and certainly knew
that venue in civil actions was not jurisdictional and might even be waived by the

339
parties.44 To be clear, venue related only to the place of trial or the geographical location
in which an action or proceeding should be brought and does not equate to the
jurisdiction of the court. It is intended to accord convenience to the parties, as it relates
to the place of trial, and does not restrict their access to the courts. 45 In contrast,
jurisdiction refers to the power to hear and determine a cause, 46 and is conferred by law
and not by the parties.47

By virtue of the concurrence of the elements of res judicata, the immediate dismissal of
the Makati case would have been authorized under Section 1, Rule 9 of the 1997 Rules
of Civil Procedure, which provides:

Section 1. Defenses and objections not pleaded. — Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived. However,
when it appears from the pleadings or the evidence on record that the court has no
jurisdiction over the subject matter, that there is another action pending between the
same parties for the same cause, or that the action is barred by a prior judgment or by
statute of limitations, the court shall dismiss the claim. (2a)

The rule expressly mandated the Makati RTC to dismiss the case motu proprio once the
pleadings or the evidence on record indicated the pendency of the Manila case, or, later
on, disclosed that the judgment in the Manila case had meanwhile become final and
executory.

Yet, we are appalled by the Makati RTC's flagrant disregard of the mandate.1âwphi1 Its
reason for the disregard was not well-founded. We stress that its disregard cannot be
easily ignored because it needlessly contributed to the clogging of the dockets of the
Judiciary. Thus, we deem it to be imperative to again remind all judges to consciously
heed any clear mandate under the Rules of Court designed to expedite the disposition
of cases as well as to declog the court dockets.

WHEREFORE, we DISMISS the petition for certiorari, prohibition and mandamus for
lack of merit; CONSIDER Civil Case No. 88-398 dismissed with prejudice on the.
ground of res judicata; and ORDER petitioners to pay the costs of suit to respondents.

The Office of the Court Administrator is DIRECTED to disseminate this decision to all
trial courts for their guidance.

SO ORDERED.

SECOND DIVISION

G.R. Nos. 158090               October 4, 2010

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Petitioner,

vs.

340
HEIRS OF FERNANDO F. CABALLERO, represented by his daughter, JOCELYN
G. CABALLERO, Respondents.

DECISION

PERALTA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to set aside the Decision1 and the Resolution,2 dated December 17, 2002
and April 29, 2003, respectively, of the Court of Appeals (CA) in CA-G.R. CV. No.
49300.

The antecedents are as follows:

Respondent Fernando C. Caballero (Fernando) was the registered owner of a

residential lot designated as Lot No. 3355, Ts-268, covered by TCT No. T-16035 of the
Register of Deeds of Cotabato, containing an area of 800 square meters and situated at
Rizal Street, Mlang, Cotabato. On the said lot, respondent built a residential/commercial
building consisting of two (2) stories.

On March 7, 1968, Fernando and his wife, Sylvia Caballero, secured a loan from
petitioner Government Service Insurance System (GSIS) in the amount of ₱20,000.00,
as evidenced by a promissory note. Fernando and his wife likewise executed a real
estate mortgage on the same date, mortgaging the afore-stated property as security.

Fernando defaulted on the payment of his loan with the GSIS. Hence, on January 20,
1973, the mortgage covering the subject property was foreclosed, and on March 26,
1973, the same was sold at a public auction where the petitioner was the only bidder in
the amount of ₱36,283.00. For failure of Fernando to redeem the said property within
the designated period, petitioner executed an Affidavit of Consolidation of Ownership on
September 5, 1975. Consequently, TCT No. T-16035 was cancelled and TCT No. T-
45874 was issued in the name of petitioner.

On November 26, 1975, petitioner wrote a letter to Fernando, informing him of the
consolidation of title in its favor, and requesting payment of monthly rental in view of
Fernando's continued occupancy of the subject property. In reply, Fernando requested
that he be allowed to repurchase the same through partial payments. Negotiation as to
the repurchase by Fernando of the subject property went on for several years, but no
agreement was reached between the parties.

On January 16, 1989, petitioner scheduled the subject property for public bidding. On
the scheduled date of bidding, Fernando's daughter, Jocelyn Caballero, submitted a bid
in the amount of ₱350,000.00, while Carmelita Mercantile Trading Corporation (CMTC)
submitted a bid in the amount of ₱450,000.00. Since CMTC was the highest bidder, it
was awarded the subject property. On May 16, 1989, the Board of Trustees of the GSIS
issued Resolution No. 199 confirming the award of the subject property to CMTC for a

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total consideration of ₱450,000.00. Thereafter, a Deed of Absolute Sale was executed
between petitioner and CMTC on July 27, 1989, transferring the subject property to
CMTC. Consequently, TCT No. T-45874 in the name of GSIS was cancelled, and TCT
No. T-76183 was issued in the name of CMTC.

Due to the foregoing, Fernando, represented by his daughter and attorney-in-fact,

Jocelyn Caballero, filed with the Regional Trial Court (RTC) of Kabacan, Cotabato a
Complaint3 against CMTC, the GSIS and its responsible officers, and the Register of
Deeds of Kidapawan, Cotabato. Fernando prayed, among others, that judgment be
rendered: declaring GSIS Board of Trustees Resolution No. 199, dated May 16, 1989,
null and void; declaring the Deed of Absolute Sale between petitioner and CMTC null
and void ab initio; declaring TCT No. 76183 of the Register of Deeds of Kidapawan,
Cotabato, likewise, null and void ab initio; declaring the bid made by Fernando in the
amount of ₱350,000.00 for the repurchase of his property as the winning bid; and
ordering petitioner to execute the corresponding Deed of Sale of the subject property in
favor of Fernando. He also prayed for payment of moral damages, exemplary damages,
attorney's fees and litigation expenses.

In his complaint, Fernando alleged that there were irregularities in the conduct of the
bidding. CMTC misrepresented itself to be wholly owned by Filipino citizens. It
misrepresented its working capital. Its representative Carmelita Ang Hao had no prior
authority from its board of directors in an appropriate board resolution to participate in
the bidding. The corporation is not authorized to acquire real estate or invest its funds
for purposes other than its primary purpose. Fernando further alleged that the GSIS
allowed CMTC to bid despite knowledge that said corporation has no authority to do so.
The GSIS also disregarded Fernando's prior right to buy back his family home and lot in
violation of the laws. The Register of Deeds of Cotabato acted with abuse of power and
authority when it issued the TCT in favor of CMTC without requiring the CMTC to submit
its supporting papers as required by the law.

Petitioner and its officers filed their Answer with Affirmative Defenses and
Counterclaim.4 The GSIS alleged that Fernando lost his right of redemption. He was
given the chance to repurchase the property; however, he did not avail of such option
compelling the GSIS to dispose of the property by public bidding as mandated by law.
There is also no "prior right to buy back" that can be exercised by Fernando. Further, it
averred that the articles of incorporation and other papers of CMTC were all in order. In
its counterclaim, petitioner alleged that Fernando owed petitioner the sum of
₱130,365.81, representing back rentals, including additional interests from January
1973 to February 1987, and the additional amount of ₱249,800.00, excluding applicable
interests, representing rentals Fernando unlawfully collected from Carmelita Ang Hao
from January 1973 to February 1988.

After trial, the RTC, in its Decision5 dated September 27, 1994, ruled in favor of
petitioner and dismissed the complaint. In the same decision, the trial court granted
petitioner's counterclaim and directed Fernando to pay petitioner the rentals paid by
CMTC in the amount of ₱249,800.00. The foregoing amount was collected by Fernando

342
from the CMTC and represents payment which was not turned over to petitioner, which
was entitled to receive the rent from the date of the consolidation of its ownership over
the subject property.

Fernando filed a motion for reconsideration, which was denied by the RTC in an Order
dated March 27, 1995.

Aggrieved by the Decision, respondent filed a Notice of Appeal. 6 The CA, in its Decision
dated December 17, 2002, affirmed the decision of the RTC with the modification that
the portion of the judgment ordering Fernando to pay rentals in the amount of
₱249,800.00, in favor of petitioner, be deleted. Petitioner filed a motion for
reconsideration, which the CA denied in a Resolution dated April 29, 2003. Hence, the
instant petition.

An Ex Parte Motion for Substitution of Party,7 dated July 18, 2003, was filed by the
surviving heirs of Fernando, who died on February 12, 2002. They prayed that they be
allowed to be substituted for the deceased, as respondents in this case.

Petitioner enumerated the following grounds in support of its petition:

THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR OF LAW

IN HOLDING THAT GSIS' COUNTERCLAIM, AMONG OTHERS, OF
₱249,800.00 REPRESENTING RENTALS COLLECTED BY PRIVATE
RESPONDENT FROM CARMELITA MERCANTILE TRADING CORPORATION
IS IN THE NATURE OF A PERMISSIVE COUNTERCLAIM WHICH REQUIRED
THE PAYMENT BY GSIS OF DOCKET FEES BEFORE THE TRIAL COURT
CAN ACQUIRE JURISDICTION OVER SAID COUNTERCLAIM.

II

THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR OF LAW

IN HOLDING THAT GSIS' DOCUMENTARY EVIDENCE SUPPORTING ITS
CLAIM OF ₱249,800.00 LACKS PROPER IDENTIFICATION. 8

The petition of the GSIS seeks the review of the CA's Decision insofar as it deleted the
trial court's award of ₱249,800.00 in its favor representing rentals collected by Fernando
from the CMTC.

In their Memorandum, respondents’ claim that CMTC cannot purchase real estate or
invest its funds in any purpose other than its primary purpose for which it was organized
in the absence of a corporate board resolution; the bid award, deed of absolute sale and
TCT No. T-76183, issued in favor of the CMTC, should be nullified; the trial court erred
in concluding that GSIS personnel have regularly performed their official duty when they
conducted the public bidding; Fernando, as former owner of the subject property and

343
former member of the GSIS, has the preemptive right to repurchase the foreclosed
property.

These additional averments cannot be taken cognizance by the Court, because they
were substantially respondents’ arguments in their petition for review on certiorari earlier
filed before Us and docketed as G.R. No. 156609. Records show that said petition was
denied by the Court in a Resolution9 dated April 23, 2003, for petitioners’ (respondents
herein) failure to sufficiently show that the Court of Appeals committed any reversible
error in the challenged decision as to warrant the exercise by this Court of its
discretionary appellate jurisdiction.10 Said resolution became final and executory on
June 9, 2003.11 Respondents’ attempt to re-litigate claims already passed upon and
resolved with finality by the Court in G.R. No. 156609 cannot be allowed.

Going now to the first assigned error, petitioner submits that its counterclaim for the
rentals collected by Fernando from the CMTC is in the nature of a compulsory
counterclaim in the original action of Fernando against petitioner for annulment of bid
award, deed of absolute sale and TCT No. 76183. Respondents, on the other hand,
alleged that petitioner's counterclaim is permissive and its failure to pay the prescribed
docket fees results into the dismissal of its claim.

To determine whether a counterclaim is compulsory or not, the Court has devised the
following tests: (a) Are the issues of fact and law raised by the claim and by 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? A positive answer to all four questions would indicate that the
counterclaim is compulsory.12

Tested against the above-mentioned criteria, this Court agrees with the CA's view that
petitioner's counterclaim for the recovery of the amount representing rentals collected
by Fernando from the CMTC is permissive. The evidence needed by Fernando to cause
the annulment of the bid award, deed of absolute sale and TCT is different from that
required to establish petitioner's claim for the recovery of rentals.

The issue in the main action, i.e., the nullity or validity of the bid award, deed of absolute
sale and TCT in favor of CMTC, is entirely different from the issue in the
counterclaim, i.e., whether petitioner is entitled to receive the CMTC's rent payments
over the subject property when petitioner became the owner of the subject property by
virtue of the consolidation of ownership of the property in its favor.

The rule in permissive counterclaims is that for the trial court to acquire jurisdiction, the
counterclaimant is bound to pay the prescribed docket fees. 13 This, petitioner did not do,
because it asserted that its claim for the collection of rental payments was a compulsory
counterclaim. Since petitioner failed to pay the docket fees, the RTC did not acquire
jurisdiction over its permissive counterclaim. The judgment rendered by the RTC,

344
insofar as it ordered Fernando to pay petitioner the rentals which he collected from
CMTC, is considered null and void. Any decision rendered without jurisdiction is a total
nullity and may be struck down at any time, even on appeal before this Court. 14

Petitioner further argues that assuming that its counterclaim is permissive, the trial court
has jurisdiction to try and decide the same, considering petitioner's exemption from all
kinds of fees.

In In Re: Petition for Recognition of the Exemption of the Government Service
Insurance System from Payment of Legal Fees,15 the Court ruled that the provision in
the Charter of the GSIS, i.e., Section 39 of Republic Act No. 8291, which exempts it
from "all taxes, assessments, fees, charges or duties of all kinds," cannot operate to
exempt it from the payment of legal fees. This was because, unlike the 1935 and 1973
Constitutions, which empowered Congress to repeal, alter or supplement the rules of
the Supreme Court concerning pleading, practice and procedure, the 1987 Constitution
removed this power from Congress. Hence, the Supreme Court now has the sole
authority to promulgate rules concerning pleading, practice and procedure in all courts.

In said case, the Court ruled that:

The separation of powers among the three co-equal branches of our government has
erected an impregnable wall that keeps the power to promulgate rules of pleading,
practice and procedure within the sole province of this Court. The other branches
trespass upon this prerogative if they enact laws or issue orders that effectively repeal,
alter or modify any of the procedural rules promulgated by this Court. Viewed from this
perspective, the claim of a legislative grant of exemption from the payment of legal fees
under Section 39 of RA 8291 necessarily fails.

Congress could not have carved out an exemption for the GSIS from the payment of
legal fees without transgressing another equally important institutional safeguard of the
Court's independence − fiscal autonomy. Fiscal autonomy recognizes the power and
authority of the Court to levy, assess and collect fees, including legal fees. Moreover,
legal fees under Rule 141 have two basic components, the Judiciary Development Fund
(JDF) and the Special Allowance for the Judiciary Fund (SAJF). The laws which
established the JDF and the SAJF expressly declare the identical purpose of these
funds to "guarantee the independence of the Judiciary as mandated by the Constitution
and public policy." Legal fees therefore do not only constitute a vital source of the
Court's financial resources but also comprise an essential element of the Court's fiscal
independence. Any exemption from the payment of legal fees granted by Congress to
government-owned or controlled corporations and local government units will
necessarily reduce the JDF and the SAJF. Undoubtedly, such situation is
constitutionally infirm for it impairs the Court's guaranteed fiscal autonomy and erodes
its independence.

Petitioner also invoked our ruling in Sun Insurance Office, Ltd. v. Judge
Asuncion,16 where the Court held that:

345
xxxx

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 Ayala Corporation v. Madayag,17 the Court, in interpreting the third rule laid down in
Sun Insurance Office, Ltd. v. Judge Asuncion regarding awards of claims not specified
in the pleading, 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. (Emphasis supplied.)1avvphi1

Petitioner's claim for payment of rentals collected by Fernando from the CMTC did not
arise after the filing of the complaint; hence, the rule laid down in Sun Insurance finds
no application in the present case.

Due to the non-payment of docket fees on petitioner's counterclaim, the trial court never
acquired jurisdiction over it and, thus, there is no need to discuss the second issue
raised by petitioner.

WHEREFORE, the petition is DENIED. The Decision and the Resolution, dated
December 17, 2002 and April 29, 2003, respectively, of the Court of Appeals in CA-G.R.
CV. No. 49300, are AFFIRMED.

SO ORDERED.

THIRD DIVISION

G.R. No. 200567               June 22, 2015

METOROPLITAN BANK AND TRUST COMPANY, Petitioner,

vs.

346
CPR PROMOTIONS AND MARKETING, INC. and SPOUSES CORNELIO P.
REYNOSO, JR. and LEONIZA* F. REYSONO, Respondents.

DECISION

VELASCO, JR., J.:

The Case

Before Us is a petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the September 28, 2011 Decision 1 and February 13, 2012 Resolution2 of the
Court of Appeals (CA) rendered in CA-G.R. CV No. 91424. Said ruling dismissed
petitioner Metropolitan Banking and Trust Company’s (MBTC’s) claim for deficiency
payment upon foreclosing respondents’ mortgaged properties and ordered the bank,
instead, to return to respondent mortgagors the excess amount of PhP 722,602.22.

The Facts

The facts of the case, as culled from the records, are as follows:

From February to October 1997, respondent CPR Promotions and Marketing, Inc. (CPR
Promotions) obtained loans from petitioner MBTC. These loans were covered by fifteen
(15) promissory note (PNs) all signed by respondents, spouses Leoniza F. Reynoso
and Cornelio P. Reynoso, Jr. (spouses Reynoso), as Treasurer and President of CPR
Promotions, respectively. The issued PNs are as follows:

PN No. Date Amount

1. 277894 (BDS-143/97) February 7, 1997 P 6,500,000.00
2. 281728 (BD-216/97) July 21, 1997 P 959,034.20
3. 281735 (BD-222/97) July 31, 1997 P 508,580.83
4. 281736 (BD-225/97) August 12, 1997 P 291,732.50
5. 281737 (BD-226/97) August 12 , 1997 P 157,173.12
6. 281745 (BD-229/97) August 22, 1997 P 449,812.25
7. 281747 (BDS-94854.696.00.999) September 3, 1997 P 105,000.00
8. 281749 (BD-236/97) September 11, 1997 P 525,233.93
9. 281750 (BD-238/97) September 12, 1997 P 1,313,099.36
10. 473410 (BD-239/97) September 19, 1997 P 251,725.00
11. 473414 (BD-240/97) September 19, 1997 P 288,975.66
12. 473412 (BD-244/97) September 26, 1997 P 62,982.53

347
 13. 473411 (BD-245/97) September 26, 1997 P 156,038.85
14. 473413 (BD-251/97) October 3, 1997 P 767,512.30
15. 473431 (BD-252/97) October 6, 1997 P 557,497.45
TOTAL PRINCIPAL AMOUNT 12,891,397.78

To secure the loans, the spouses Reynoso executed two deeds of real estate mortgage
on separate dates. The first mortgage, securing the amount of PhP 6,500,000, was
executed on February 2, 1996 over real estate covered by Transfer Certificate of Title
(TCT) No. 624835;3 the other was executed on July 18, 1996 over properties covered
by TCT Nos. 565381,4 263421,5 and 2746826 to secure the amount of PhP 2,500,000.
All of the mortgaged properties are registered under the spouses Reynoso’s names,
except for TCT No. 565381, which is registered under CPR Promotions. 7

Thereafter, on December 8, 1997, the spouses Reynoso executed a continuing surety

agreement8 binding themselves solidarily with CPR Promotions to pay any and all loans
CPR Promotions may have obtained from petitioner MBTC, including those covered by
the said PNs, but not to exceed PhP 13,000,000.

Upon maturity of the loans, respondents defaulted, prompting MBTC to file a petition for
extra-judicial foreclosure of the real estate mortgages, pursuant to Act No. 3135, 9 as
amended. MBTC’s request for foreclosure, 10 dated March 6, 1998, pertinently reads:

We have the honor to request your good Office to conduct/undertake extra-judicial

foreclosure sale proceedings under Act No. 3135, as amended, and other applicable
laws on the properties covered by two Real Estate Mortgages executed by CPR
PROMOTIONS & MARKETING INC., represented by its President Mr. Cornelio P.
Reynoso and Treasurer Leoniza F. Reynoso and SPOUSES CORNELIO P.
REYNOSO, JR., AND LEONIZA F. REYNOSO in favour of the mortgagee,
METROPLITAN BANK AND TRUST COMPANY, to secure fifteen (15) loans with a total
principal amount of TWELVE MILLION EIGHT HUNDRED NINETY ONE THOUSAND
THREE HUNDRED NINETY SEVEN PESOS AND SEVENTY EIGHT CENTAVOS
(₱12,891,397.78), for breach of the terms of said mortgage. 11

As Annex "R", a copy of the Statement of Account, showing that the total amount due
on the loans of the borrowers/mortgagers which remains unpaid and outstanding as a
February 10, 1998 was ELEVEN MILLION TWO HUNDRED SIXTEEN THOUSAND
SEVEN HUNDRED EIGHTY THREE PESOS AND NINETY NIN CENTAVOR
(₱11,216,783.99)

Subsequently, on May 5, 1998, the mortgaged covered by TCT Nos. 624835 and
565381 were sold at a public auction sale. MBTC participated therein and submitted the
highest bid in the amount of PhP 10,374,000. The day after, on May 6, 1998, petitioner
again participated and won in the public auction sake of the remaining mortgaged
properties, having submitted the highest bid amounting to PhP 3,240,000. As a result

348
petitioner was issued the corresponding Certificates of Sale on July 15 and 16, 1998,
covering the properties subjected to the first and second public auctions, respectively.

Notwithstanding the foreclosure of the mortgaged properties for the total amount of PhP
13, 614,000, petitioner MBTC alleged that there remained a deficiency balance of PhP
2,628,520.73, plus interest and charges as stipulated and agreed upon in the PNs and
deeds of real estate mortgages. Despite petitioner’s repeated demands, however,
respondents failed to settle the alleged deficiency. Thus, petitioner filed an action for
collection of sum of money against respondents, docketed as Civil Case No. 99-230,
entitled Metropolitan Bank and Trust Company v. CPR Promotions and Marketing, Inc.
and Spouses Cornelio Reynoso, Jr. and Leoniza F. Reynoso.

Ruling of the Regional Trial Court

In its Decision13 dated October 11, 2007, the Regional Trial Court, Branch 59 in Makati
City (RTC) ruled in favor of petitioner that there, indeed, was a balance of Php
2,628,520.73, plus interest and charges, as of September 18, 1998, and that
respondents are liable for the said amount, as part of their contractual obligation. 14 The
court disposed of the case in this wise:

WHEREFORE, premises considered, judgment is hereby rendered ordering

[respondents], jointly and severally, to pay [petitioner] Metrobank, as follows:

a] the amount of PhP 2,628,520.73 plus stipulated interest and penalty charges
stipulated in the Promissory Notes marked as Exhibits A to O until full payment
thereof; and

b] the costs of the suit.

SO ORDERED.

Respondents timely moved for reconsideration of the RTC’s Decision, which was
denied through the trial court’s February 7, 2008 Order. Aggrieved, respondents
elevated the case to the CA.

Ruling of the Court of Appeals

The appellate court, through the assailed Decision, reversed the court a quo and ruled
in favor of respondents. The fallo of the said Decision reads:

Wherefore, in view of the foregoing, the decision appealed from is reversed, and the
plaintiff-appallee Metrobank is ordered to refund or return to the defendants-appellants
Cornelio and Leoniza Reynoso the amount of Ph₱722,602.22 representing the
remainder of the proceeds of the foreclosure sale, with legal interest of six percent per
annum from the date of filing the answer with counterclaim on March 26, 1999, until
paid.

349
SO ORDERED.15

Supporting the reversal is the CA’s finding that there was a sudden change in the
terminology used, from "total amount due" to "principal amount." 16 According to the CA,
from February to May 1998, the amount sought to be collected ballooned from PhP
11,216,783.99 to PhP 12,891,397.78. From this apparently unexplained increase, the
CA deduced that the increased amount must mean the principal and interest and other
charges. Furthermore, the appellate court found that petitioner failed to prove that there
was a deficiency, since the records failed to corroborate the claimed amount. As noted
by the CA, "[Petitioner] did not even introduce the continuing surety agreement on which
the trial court gratuitously based its decision."

On October 24, 2011, petitioner filed a motion for reconsideration of the assailed
Decision, which the appellate court denied in its assailed February 13, 2012 Resolution.

The Issues

Hence this recourse, on the following issues:

Whether or not the CA gravely abused its discretion when it failed to consider the
continuing surety agreement presented in evidence and in ruling that petitioner MBTC
failed to prove that the spouses Reynoso are solidarily liable with respondent CPR
Promotions.

Whether or not the CA gravely abused its discretion when it grossly misappreciated the
promissory notes, real estate mortgages, petition for extrajudicial foreclosure of
mortgage, certificates of sale and statement of account marked in evidence and ruled
that petitioner MBTC failed to prove that a deficiency balance resulted after conducting
the extrajudicial foreclosure sales of the mortgaged properties.

The Arguments

Anent the first issue, MBTC faults the appellate court for finding that it did not introduce
the continuing surety agreement on which the RTC based its ruling that respondent
spouses are solidarily liable with respondent CPR Promotions. 17

As regards the second issue, petitioner asserts that the CA’s grant of a refund valued at
PhP 722,602.22 plus legal interest of six percent (6%) in favor of respondents is
erroneous for two reasons: first, respondents never set up a counterclaim for refund of
any amount18 and second, the total outstanding obligation as of February 10, 1998, to
which the full amount of the bid prices was applied, is PhP 11,216,783.99 and not
Ph₱12,891,397.78, which was used by the CA in its computation. 19

Lastly, petitioner claims that respondents should be made to answer for certain specific
expenses connected with the foreclosure, i.e., filing fees, publication expense, Sheriff’s
Commission on Sale, stipulated attorney’s fee, registration fee for the Certificate of

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Sale, insurance premium and other miscellaneous expenses, in the amounts of PhP
1,373,238.04 and PhP 419,166.67 for the first and second foreclosure sales,
respectively.20

In their Comment,21 respondents maintained the propriety of the CA’s grant of a refund,

arguing that in their Answer with Compulsory Counterclaim, they laid-down in detail the
excess of the prices of the foreclosed properties over their obligation. 22 Respondents
then went on and argued that "from the beginning of the instant case in the trial court,
[they] have already raised in issue the fact of [petitioner’s] taking-over of [their] lands
with values over and above the latter’s financial liabilities." 23 Thus, they postulate that
the CA did right when it touched on the issue and ruled thereon. 24

Furthermore, respondents insist that there is actually no difference between the PhP
12,891,397.78 and the PhP 11,261,783.99 amounts except for the accumulated
interest, penalties, and other charges.25 Too, according to them, this is the reason why
what respondent CPR owed petitioner at that time increased substantially from that on
February 10, 1998, when the amount was just PhP 11,216,783.99. 26

The Court's Ruling

We partially grant the petition. While We fully agree with the CA that MBTC was not
able to prove the amount claimed, We however, find that neither were respondents able
to timely setup their claim for refund.

Respondents belatedly raised their compulsory counterclaim

Rule 6 of the Rules of Court denies a compulsory counterclaim as follows:

Section 7. Compulsory counterclaim. – 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. Such a counterclaim must be within the jurisdiction of the
court both as to the amount and the nature thereof. Except that in an original action
before the Regional Trial Court, the counterclaim may be considered compulsory
regardless of the amount.

Accordingly, a counterclaim is compulsory if: (a) it arises out of or is necessarily

connected with the transaction or occurrence which is the subject matter of the
opposing party’s claim; (b) it does not require for its adjudication the presence of third
parties of whom the court cannot acquire jurisdiction; and (c) the court has jurisdiction to
entertain the claim both as to its amount and nature, except that in an original action
before the RTC, the counterclaim may be considered compulsory regardless of the
amount.27

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In determining whether a counterclaim is compulsory or permissive, We have, in several
cases, utilized the following tests:28

(1) Are the issues of fact or law raised by the claim and the counterclaim largely
the same?

(2) Would res judicata bar a subsequent suit on defendant’s claims, absent the
compulsory counterclaim rule?

(3) Will substantially the same evidence support or refute plaintiff’s claim as well
as the defendant’s counterclaim?

(4) 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? This test
is the "compelling test of compulsoriness."29

Based on the above tests, it is evident that a claim for recovery of the excess in the bid
price vis-à-vis the amount due should be interposed as a compulsory counterclaim in an
action for recovery of a deficiency filed by the mortgagee against the debtor-mortgagor.
First, in both cases, substantially the same evidence is needed in order to prove their
respective claim. Second, adjudication in favor of one will necessarily bar the other
since these two actions are absolutely incompatible with each other; a debt cannot be
fully paid and partially unpaid at the same time. Third, these two opposing claims arose
from the same set of transactions. And finally, if these two claims were to be the subject
of separate trials, it would definitely entail a substantial and needless duplication of
effort and time by the parties and the court, for said actions would involve the same
parties, the same transaction, and the same evidence. The only difference here would
be in the findings of the courts based on the evidence presented with regard to the
issue of whether or not the bid prices substantially cover the amounts due.

Having determined that a claim for recovery of an excess in the bid price should be set
up in the action for payment of a deficiency as a compulsory counterclaim, We rule that
respondents failed to timely raise the same.

It is elementary that a defending party’s compulsory counterclaim should be interposed

at the time he files his Answer,30 and that failure to do so shall effectively bar such
claim.31 As it appears from the records, what respondents initially claimed herein were
moral and exemplary damages, as well as attorney’s fees. 32 Then, realizing, based on
its computation, that it should have sought the recovery of the excess bid price,
respondents set up another counterclaim, this time in their Appellant’s Brief filed before
the CA.33 Unfortunately, respondents’ belated assertion proved fatal to their cause as it
did not cure their failure to timely raise such claim in their Answer. Consequently,
respondents’ claim for the excess, if any, is already barred. With this, we now resolve
the substantive issues of this case.

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The CA erred in ruling that the total amount due was PhP 12,891,397.78

Basic is the rule that a Petition for Review on Certiorari under Rule 45 of the Rules of
Court should only cover questions of law.34 Moreover, findings of fact of the CA are
generally final and conclusive and this Court will not review them on appeal. 35 This rule,
however, admits of several exceptions36 such as when the findings of fact are
conflicting, manifestly mistaken, unsupported by evidence or the result of a
misapprehension of acts, or when the findings are contrary to that of the trial court, as in
this case.

To recall, the CA, in its assailed Decision, made the following findings as regards the
amount due on the loan against which the proceeds from the auction sales are to be
applied:

In the application for extrajudicial foreclosure sale dated March 6, 1998, the total
amount due as of February 10, 1998 was stated to be ₱11,216,783.99. The plaintiff
categorically declared that ₱11,216,783.99 was the total amount due on February 10,
1998. By the time the auction sales were conducted, in May 1998, as reflected in the
certificate of Sale, the principal amount was said to be ₱12,891,397.78. What is the
meaning of the change from total amount due to principal amount? If from February to
May 1998, a matter of three months, the amount sought to be collected ballooned to
₱12,891,397.78, the increase could have resulted from no other source that the interest
and other charges under the promissory notes after the defendants incurred in default.
Thus, the amount of ₱12,891,397.78 as of May 1998, must mean the principal and
interest and other charges. The statement in the certificates of sale that it is the principal
amount is a subtle change in language, a legerdemain to suggest that thte amount does
not include the interest and other charges.37

In short, the CA concluded that the amount of PhP 12,891,397.78 is actually comprised
of the PhP 11,216,783.99 due as of February 10, 1998, plus additional interest and
other charges that became due from February 10, 1998 until the date of foreclosure on
May 5, 1998.

The appellate court is mistaken.

By simply adding the figures stated in the PNs as the principal sum, it can readily be
seen that the amount of PhP 12,891,397.78 actually pertains to the aggregate value of
the fifteen (15) PNs, viz:

  PN No. Amount
1. 277894 (BDS-143/97)38 P 6,500,000.00
2. 281728 (BD-216/97)39 P 959,034.20
3. 281735 (BD-222/97)40 P 508,580.83
4. 281736 (BD-225/97)41 P 291,732.50

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 5. 281737 (BD-226/97)42 P 157,173.12
6. 281745 (BD-229/97)43 P 449,812.25
7. 281747 (BDS-94854.696.00.999)44 P 105,000.00
8. 281746 (BD-236/97)45 P 525,233.93
9. 281750 (BD-238/97)46 P 1,31,099.36
10. 473410 (BD-239/97)47 P 251,725.00
11. 473414 (BD-240/97)48 P 288,975.66
12. 473412 (BD-244/97)49 P 62,982.53
13. 473411 (BD-245/97)50 P 156,038.85
14. 473413 (BD-251/97)51 P 767,512.30
15. 473431 (BD-252/97)52 P 557,497.45
TOTAL PRINCIPAL AMOUNT 12,897,397.78

This belies the findings of the CA that PhP 12, 891,397.78 is the resulting value of PhP
11,216,783.99 plus interest and other charges. Consequently, the CA’s conclusion that
there is an excess of PhP 722,602.22, after deducting the amount of PhP
12,891,397.78 from the total bid price of PhP 13,614,000, is erroneous.

Nevertheless, while the CA’s factual finding as to the amount due is flawed, petitioner,
as discussed below, is still not entitled to the alleged deficiency balance of PhP
2,628,520.73.

MBTC failed to prove that there is a deficiency balance of PhP 2,628,520.73

To support its deficiency claim, petitioner presented a Statement of Account, 53 which

referes to the amounts due as of May 5, 1998, the date of the first foreclosure sale, to
wit:

Statement of Account as of May 05, 1998

PN No. Principal Amt Outs. PDI Penalty
1 BD#216/97 489,219.20 54,808.77 49,166.53
2 BD#222/97 167,289.35 18,613.61 16,310.71
3 BD#225/97 291,732.50 32,683.72 27,422.86
4 BD#226/97 44,694.50 5,007.24 4,201.28
5 BD#229/97 435,229.25 48,760.10 44,393.38
6 BD#238/97 365,238.55 40,918.83 33,236.71

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 7 BD#233/97 105,000.00 11,763.50 9,082.50
8 BD#244/97 62,982.53 7,056.13 5,290.53
9 BD#236/97 497,649.70 56,135.10 38,070.20
10 BD#240/97 145,950.00 16,463.20 11,165.18
11 BD#245/97 156,038.85 17,481.55 11,897.43
12 BD#239/97 210,421.50 22,605.52 15,360.77
13 BD#251/97 572,470.15 64,574.86 38,232.57
14 BD#252/97 557,497.45 47,896.46 31,110.63
16 BDS#143/97 6,500,000.00 573,681.89 336,818.28
17 BDS#218/97 1,800,000.00 93,536.05 74,401.15
18 Fire Insurance 49,238.69 0.00 1,698.73
TOTAL 12,450,652.22 1,111,986.53 747,859.44
GRAND TOTAL 14,310,498.19

Applying the proceeds from the auction sales to the foregoing amount, according to
petitioner, would result in a deficiency balance of PhP 2,443,143.43. Afterwards, the
amount allegedly earned interest for four (4) months in the amount of PhP
185,337.30,54 bringing petitioner’s claim for deficiency judgment to a total of PhP
2,628,520.73.55

We are not convinced.

We have already ruled in several cases56 that in extrajudicial foreclosure of mortgage,

where the proceeds of the sale are insufficient to pay the debt, the mortgagee has the
right to recover the deficiency from the debtor. 57 In ascertaining the deficit amount, Sec.
4, Rule 68 of the Rules of Court is elucidating, to wit:

Section 4. Disposition of proceeds of sale. – The amount realized from the foreclosure
sale of the mortgaged property shall, after deducting the costs of the sale, be paid to the
person foreclosing the mortgage, and when there shall be any balance or residue, after
paying off the mortgage debt due, the same shall be paid to junior encumbrancers in the
order of their priority, to be ascertained by the court, or if there be no such
encumbrancers or there be a balance or residue after payment to them, then to the
mortgagor or his duly authorized agent, or to the person entitled to it.

Verily, there can only be a deficit when the proceeds of the sale is not sufficient to cover
(1) the costs of foreclosure proceedings; and (2) the amount due to the creditor,
inclusive of interests and penalties, if any, at the time of foreclosure.

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a. Petitioner failed to prove the amount due at the time of foreclosure

Having alleged the existence of a deficiency balance, it behooved petitioner to prove, at

the very least, the amount due at the date of foreclosure against which the proceeds
from the auction sale would be applied. Otherwise, there can be no basis for awarding
the claimed deficiency balance. Unfortunately for petitioner, it failed to substantiate the
amount due as of May 5, 1998 as appearing in its Statement of Account.

To recall, MBTC admitted that the amount due as of February 10, 1998 is PhP
11,216,783.99, inclusive of interests and charges. As alleged in the petition:

57. Firstly, it should be noted that respondents’ total unpaid obligations inclusive of
interest and penalties as of 10 February 1998 amounted to Php
11,216,783.99.1âwphi1 This amount was the subject of petitioner Metrobank’s
Petitioners for Extrajudicial Foreclosure of Mortgage and NOT Php 12,891,397.78 which
is the total principal amount of respondents’ loan obligations at the time when they
obtained said loans as shown in the Promissory Notes and the Certificates of Sale. After
the execution of the Promissory Notes, payments were made, although insufficient,
which resulted in the balance of PhP 11,216,783.99 as of February 1998 inclusive
of interest and penalties.58

If the total amount due as of February 10, 1998 is PhpP 11,216,783.99 is already
inclusive of interests and penalties, the principal amount, exclusive of interests and
charges, would naturally be lower than the PhP 11,216,783.99 threshold. How petitioner
made the determination in its Statement of Account that the principal amount due on the
date of the auction sale is PhP 12,450,652.22 is then questionable, nay impossible,
unless respondents contracted another loan anew.

Moreover, the amounts petitioner itself supplied would result in the following
computation:

PhP Total outstanding obligation as of February 10,

11,216,783.99 1998
Add: Alleged May 5, 1998 public auction sale
1,373,238.04
expenses
(no consistent Add: Additional interests and charges earned
data) between February 10, 1998 to May 5, 1998
(no consistent
Subtotal: Amount due as of May 5, 1998
data)
Less: May 5 Bid Price to be applied to the
10,374,000.00
amount due
Add: Alleged May 6, 1998 public auction sale
419,166.67
expenses

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 (no consisted Add: Interests and charges earned from May
data) 5 to 6, 1998
Less: May 6 Bid Price to be applied to the
3,240,000.00
amount due
PhP Total: Deficiency reflected in the Statement of
2,443,143.43 Account from May 5 to September 18, 1998

As can be gleaned, petitioner failed to sufficiently explain during the proceedings how it
came up with the alleged "deficiency" in the amount of PhP 2,443,143.43, as per the
Statement of Account. Reversing the formula, petitioner’s claim would only be
mathematically possible if the missing interest and penalties for the three-month
period-from February 10, 1998 to May 6, 1998-amounted to PhP
3,047,954,73,59 which is inconsistent with MBTC’s declaration in its Statement of
Account as of May 5, 1998.60 Needless to say, this amount is not only unconscionable, it
also finds no support from any of the statement of accounts and loan stipulations
agreed upon by the parties.

Given MBTC’s conflicting, if not irreconcilable, allegations as to the amount due as of

the date of foreclosure-as noted in the statement of accounts, the petition for
foreclosure, and the promissory notes-the computation offered by MBTC cannot be
accepted at face value. Consequently, there can then be no basis for determining the
value of the additional interests and penalty charges that became due, and, more
importantly, whether or not there was indeed a deficiency balance at the time the
mortgaged properties were foreclosed.

In addition, it is noticeable that petitioner’s presentation of the computation is circuitous

and needlessly lengthened.1âwphi1 As a matter of fact, nowhere in the petition, in its
complaint,61 reply.62 pre-trial brief,63 among others, did it make a simple computation of
respondents’ obligation as well as the amounts to be applied to it, or even a summary
thereof, when it could have easily done so.

b. Petitioner failed to prove the amount of expenses incurred in foreclosing the

mortgaged properties

another obstacle against petitioner’s claim for deficiency balance is the burden of
proving the amount of expenses incurred during the foreclosure sales. To recall,
petitioner alleged that it incurred expenses totaling PhP 1,373,238.04 and PhP
419,166.67 for the first and second public auction sales, respectively. However, in
claiming that there is a deficiency, petitioner only submitted the following pieces of
evidence, to wit:

1. The fifteen (15) promissory notes (Exhibits A to O);

2. Continuing Surety Agreement (Exhibit P);

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 3. Real Estate Mortgage (Exhibits Q & R);

4. Petition for Sale under Act. No. 3135, as amended (Exhibit S);

5. Notices of Sheriff’s Sale (Exhibits T & U);

6. Affidavit of Publication (Exhibits V & W);

7. Certificates of Posting and a Xerox copy thereof (exhibits X & Y);

8. Certificates of Sale (Exhibits Z & AA);

9. Demand Letters (Exhibits BB & CC); and

10. Statement of Account (Exhibit DD).

Curiously, petitioner never offered as evidence receipts proving payment of filing fees,
publication expenses, Sheriff’s Commission on Sale, attorney’s fee, registration fee for
the Certificate of Sale, insurance premium and other miscellaneous expenses, all of
which MBTC claims that it incurred. Instead, petitioner urges the Court to take judicial
notice of the following expenses:64

May 5, 1998 auction sale expenses

Filing Fee PhP 52,084.00
Publication Expenses 24,267.75
Sheriff’s Commission on Sale 207,560.00
Registration fee and other Miscellaneous
32,644.50
Expenses
Attorney’s Fees (10% of total amount claimed) 1,005,744.37
Fire Insurance 50,937.42
Sub-total PhP 1,373,238.04
May 6, 1998 auction sale expenses
Publication Expenses 24,267.75
Sheriff’s Commission on Sale 64,880.00
Registration fee and other Miscellaneous Expenses 16,593.00
Attorney’s Fees (10% of total amount claimed) 313,425.92
Sub-total 419,166.67

Petitioner’s argument is untenable.

First, the Court cannot take judicial notice of the attorney’s fees being claimed by
petitioner because although 10% was the rate agreed upon by the parties, We have, in
a line of cases, held that the percentage to be charged can still be fixed by the Court.
For instance, in Mambulao Lumber Company v. Philippine National Bank, 65 the Court
held:

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In determining the compensation of an attorney, the following circumstances should be
considered: the amount and character of the services rendered; the responsibility
imposed; the amount of money or the value of the property affected by the controversy,
or involved in the employment; the skill and experience called for in the performance of
the service; the professional standing of the attorney; the results secured; and whether
or not the fee is contingent or absolute, it being a recognized rule that an attorney may
properly charge a much larger fee when it is to be contingent that when it is not. From
the stipulation in the mortgage contract earlier quoted, it appears that the agreed fee is
10% of the total mortgage is to be effected. The agreement is perhaps fair enough in
case the foreclosure proceedings is prosecuted judicially but, surely, it is unreasonable
when, as in this case, the mortgage was foreclosed extra-judicially, and all that the
attorney did was to file a petition for foreclosure with the sheriff concerned.

Similarly, in Bank of the Philippine Islands, Inc. v. Spouses Norman and Angelina
Yu,66 the Court reduced the claim for attorney’s fees from 10% to 1% based on the
following reasons: (1) attorney’s fee is not essential to the cost of borrowing, but a mere
incident of collection; (2) 1% is just and adequate because the mortgagee bank had
already charged foreclosure expenses; (3) attorney’s fee of 10% of the total amount due
is onerous considering the rote effort that goes into extrajudicial foreclosures.

Second, the Court cannot also take judicial notice of the expenses incurred by petitioner
in causing the publication of the notice of foreclosure and the cost of insurance. This is
so because there are no standard rates cited or mentioned by petitioner that would
allow Us to take judicial notice of such expenses. It is not unthinkable that the cost of
publication would vay from publisher to publisher, and would depend on several factors,
including the size of the publication space. Insurance companies also have their own
computations on the insurance premiums to be paid by the insurer, which the courts
cannot be expected to be knowledgeable of. To be sure, in arguing the Court to take
judicial notice of the alleged expenses, MBTC merely cited Sec. 3 of Act 3135 requiring
publication and the mortgage agreement provision on the insurance requirement,
without more.67 Said provisions never expressly provided for the actual cost of
publication and insurance, nor any formulae for determining the same. Thus, the claims
for publication and insurance expenses ought to be disallowed.

Third, the claims for registration fees and miscellaneous expenses were also never
substantiated by receipts.

Conclusion

In demanding payment of a deficiency in an extrajudicial foreclosure of mortgage,

proving that there is indeed one and what its exact amount is, is naturally a precondition
thereto. The same goes with a claim for reimbursement of foreclosure expenses, as
here. In this regard, it is elementary that the burden to prove a claim rests on the party
asserting such. Ei incumbit probation qui dicit, non qui negat. He who asserts, not he
who denies, must prove.68 For having failed to adequately substantiate its claims, We
cannot sustain the finding of the trial court that respondents are liable for the claimed

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deficiency, inclusive of foreclosure expenses. Neither can We sustain the CA’s finding
that respondents are entitled to the recovery of the alleged excess payment.

In light of the foregoing, the Court need not belabor the other assigned errors.

WHEREFORE, premises considered, the instant petition is hereby PARTIALLY

GRANTED. Accordingly, the Decision of the Court of Appeals dated September 28,
2011 in CA-G.R. CV No. 91424 and its February 13, 2012 Resolution are hereby
AFFIRMED with MODIFICATION. The award of refund in favor of respondents in the
amount of ₱722,602.22 with legal interest of six percent (6%) per annum is hereby
DELETED.

No pronouncement as to costs.

SO ORDERED.

FIRST DIVISION

G.R. No. 161431               October 13, 2010

CALIBRE TRADERS, INC., MARIO SISON SEBASTIAN, and MINDA BLANCO

SEBASTIAN, Petitioners,
vs.
BAYER PHILIPPINES, INC., Respondent.

DECISION

DEL CASTILLO, J.:

This petition for review on certiorari1 assails the July 31, 2002 Decision2 and the
December 19, 2003 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 45546,
that denied petitioners’ action for damages against respondent Bayer Philippines Inc.
(Bayerphil) and instead granted the latter’s counterclaim for ₱1,272,103.07,
representing unpaid purchases of Bayerphil’s products.

Factual Antecedents

Calibre Traders, Inc. (Calibre) was one of Bayerphil’s distributors/dealers of its

agricultural chemicals within the provinces of Pangasinan and Tarlac. 4 Their last
distributorship agreement was effective from June 1989 to June 1991. 5 However,
Bayerphil stopped delivering stocks to Calibre on July 31, 1989 after the latter failed to
settle its unpaid accounts in the total amount of ₱1,751,064.56. 6

As Bayerphil’s authorized dealer, Calibre then enjoyed discounts and rebates.

Subsequently, however, the parties had a disagreement as to the entitlement and
computations of these discounts. Calibre, although aware of the deadline to pay its

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debts with Bayerphil, nevertheless withheld payment to compel Bayerphil to reconcile its
accounts.7

In a letter dated August 16, 1989, Calibre requested Bayerphil for a reconciliation of
accounts. It enumerated the following claims that amounted to ₱968,265.82:

1. Interest charged to our 1984-1985 Volume Rebate. These were charged to us

without our acknowledgment and was under protest since your people were not
serving our account during that period. This amounts to ₱60,000.00 more or less.

2. Request for retroactive application of your special rebate as per our letter
dated August 29, 1988 and your reply dated September 3, 1988. The reply is not
acceptable to us. This amounts to ₱33,127.26.

3. Special rebates of Machete EC and EN for CY 1988 which [were] not granted
to us, [but were] given to the other distributors after we have withdrawn a
sizeable quantity. This amounts to ₱68,244.30.

4. The difference between our claim dated March 31, 1989 amounting to
₱47,746.30 against your Credit Memo 11868 dated April 28, 1989 amounting to
₱21,214.85. The amount of difference is ₱26,531.47.

5. The difference between our claim dated October 31, 1988 amounting to
₱23,342.09 against your Credit Memo 11693 dated January 31, 1989 amounting
to ₱21,222.48. The amount of difference is ₱2,119.61.

6. Sales Returns as per your CRR 2159 dated December 19, 1988 amounting to
₱8,047.71.

7. Special rebates of 8% for Machete 5G as per Invoice No. 834159 dated

February 14, 1989. This amounts to [₱1,376.80].

8. Request for Sales returns due to overdelivery as per our letter dated April 3,
1989 amounting to ₱147,108.86.

9. Request for Sales returns due to leakage as per our letter dated April 3, 1989
amounting to ₱8,681.24.

10. 1988-1989 Volume Rebate amounting to ₱520,548.41.

11. 5% Prompt Payment on ₱1,839,603.15 amounting to ₱92,480.16 since your

Sales Representative was not servicing our account due to his [forth]coming
resignation.8

Calibre sent follow-up letters dated September 17, October 13, and November 16,
1989.9

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On September 29, 1989, Bayerphil’s credit and collection officer, Leon Abesamis,
conferred with Calibre’s General Manager Mario Sebastian (Sebastian). The attempt to
settle failed. Again, on October 27, 1989, Bayerphils’ Sales Manager of the Agro
Division, Vidal Lingan, met with Sebastian. The results of their discussion were put in
writing in Bayerphil’s letter dated November 10, 1989, to wit:

xxxx

Gentlemen:

Following our October 27, 1989 discussions with yourself for the final resolution of your
overdue accounts with our company in the amount of exactly ₱1,718,822.57, we have
arrived at a final arrangement which will no doubt be more than fair specially for your
firm.

We will now go by your claims per your letter of August 16, 1989[. We] now confirm the
following:

1. The alleged interest charges of ₱60,000.00 x x x for unpaid invoices

against your volume rebate for the year 1984-1985 was not charged at all.
Our records show that we granted your year-end rebate per our

Credit Note #9089 of July 1985 - ₱ 973,511.56

and
Credit Note #9149 of September 1985 - 181,441.15
Total rebate from retention scheme
1984-1985 ₱1,154,952.71

These credit notes do not bear any interest charges as you claimed during
that discussion. It means you were not charged any penalty on delayed
payments of subject invoices.

2. Retroactive application against inventory of special deal rebates have

never been paid to any of our distributors nationwide since we began
business operations in this country. As a matter of policy, we regret that
we cannot grant this request.

3. Special rebates on Machete EN and Machete EC on the basis of 30-

day COD arrangement were granted during the last quarter of 1988. This
agreement did not apply to your purchases on the same products from
January 1, 1988 to September 30, 1988. We found your claim difficult to
accept.

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4. Your claim for ₱26,531.47 from our 30-day COD terms with 5% rebate
on selected products only, i.e., Gusathion, Folidol, Machete EC & EN. You
have, in your claim included other products than those listed. Inasmuch as
our former Sales Representative agreed to the inclusion of the other
[products], we will grant that claim for ₱26,531.47 net of our earlier issued
CM #11868, as an honorable business organization is expected to act.

5. Your claim on the difference of ₱2,119.61 [as stated in] your letter of
October 31, 1988 in the amount of ₱23,342.09 and our Credit Note
#11693 dated January 31, 1989, is granted. Our computations are
absolutely correct but we shall not argue over a trivial figure.

6. Your claims on returned stocks on December 19, 1988 per CRR No.
2159 for ₱8,047.71. We issued the corresponding credit note dated July
25, 1989 in the amount of ₱7,242.26, which is based on the prices of the
returned goods at the time you acquired them, not at the time when you
returned them when there was a corresponding increase in prices. The
difference is ₱805.45. Any business house will reluctantly consider this
claim but we thought we should gallantly grant you that oversight. We are
sure you did not intend to do that.

7. Special 8% rebates on Machete 5G in the amount of ₱1,376.80. We

have given you a Credit Note #12160 to offset that claim.

8. Your volume rebate claim for the year 1988-1989 is in the sum of
₱520,548.41, however, our computation stands at ₱479,326.49. Enclosed
herewith please find our CM#12250 in the amount of ₱320,849.42
representing your volume rebate for 1988-1989 on the paid portion of your
volume rebate year purchases. As soon as payment is received on your
balance of ₱1,042,248.16 (net of additional volume rebate of ₱158,477.07
on the unpaid portion and prompt payment rebate of ₱63,196.06), we shall
issue you the aforementioned additional volume rebate and prompt
payment rebate CMs.

9. Your claim of 5% prompt payment rebate per your note dated June 30,
1989 has been computed to amount to ₱63,196.06 in view of the returns
and application of your volume rebate against the total outstanding unpaid
balances.

10. Your intention to return stocks per your letter of April 3, 1989. We have
withdrawn the following products on October 28, 1989, as follows:

Basagran 250 ml. - 230 bottles

  500 ml. - 102 bottles
Baycarb 1000 ml. - 64 ‫״‬

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 Baythroid 100 ml. - 373 ‫״‬
  250 ml. - 336 ‫״‬
Gusacarb 500 ml. - 20 ‫״‬
Roundup 250 ml. - 30 ‫״‬
Machete EC 500 ml. - 12 ‫״‬
  1000 ml. - 12 ‫״‬

The net value of the above materials has been computed at ₱124,493.28, [for which]a
credit note will be issued shortly.

We believe that we have been more than fair in meeting your claims. We granted your
requests as a gesture of benevolence in assisting your firm in softening the burdens as
inevitable consequences of business difficulties.

And as the time tested physical law rightly states – for every action, there must be an
equal positive reaction. We feel that you now react favorably in the final and complete
resolution of your main problem.

Yours faithfully,

BAYER PHILIPPINES, INC.10

Bayerphil’s Assistant Sales Manager Rene Garcia (Garcia) gave this letter to
Sebastian11 on November 17, and offered to grant Calibre’s claims just so that it may
finally settle all its unpaid accounts with Bayerphil. Sebastian wrote Bayerphil to confirm
Garcia’s offer.12 In reply, Bayerphil specified in its November 24, 1989 letter the
additional claims it granted and clarified the other claims:

xxxx

[Gentlemen]:

We have your letter of November 22, 1989 with your request that we confirm or deny
the verbal offer of our Mr. Renato G. Garcia granting all your claims with us per your
letter of August 16, 1989.

Please be informed that we confirm that offer subject to the conditions hereunder made
explicit, to wit:

1. We will grant you a credit note for ₱33,127.26 referring to your Item #2
in your letter dated August 16, 1989.

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 2. We will also grant you a credit note for ₱68,244.30 referring to your
Item #3 in your above-named letter.

3. We will likewise grant the amount of ₱6,572.29 by CM to cover your

Item #4 in your above-named letter. We have excluded the free goods
portion in your claim.

4. We will further grant the sum of ₱2,119.61 by CM as claimed in Item #5

of your above-named letter.

5. We will also grant ₱805.45 through a CM to complete our CM #4975 as

per your Item #6 in your said letter.

6. Items 7, 8 & 9 in your letter has [sic] been earlier granted by our CM
Nos. 12160 and 5263.

7. We will also grant your additional volume rebate amounting to

₱147,590.03 (see also CM#12250 – ₱320,849.42 VR earlier granted upon
full payment of the hereunder mentioned net payable to us).

8. Lastly, we will grant you under Item #11 of your August 16 letter, the
sum of ₱79,557.21 (credited free goods and volume rebate which shall be
applied against outstanding account are excluded).

All the foregoing are premised on our receipt of your full payment of the sum of
₱934,086.92, in full and total settlement of your outstanding account after the crediting
of the eight (8) above-named concessions totaling to ₱338,016.15.

We strongly urge you to accept and adhere to the foregoing offer by remitting to us the
said sum of ₱934,086.92 through a bank demand draft on or before close of business
hours of December 8, 1989. Your failure to remit the said demand draft within the
allotted time shall effectively cancel our herein offer, and much to our regret we shall be
left with no other recourse but to protect our interests by and through an appropriately
more drastic legal action.

Yours faithfully,

BAYER PHILIPPINES, INC.13

In his December 8, 1989 letter, Sebastian expressed discontent in Bayerphil’s refusal to

credit his claims in full and underscored the alleged inaction of Bayerphil in reconciling
Calibre’s accounts.14

This was followed by a demand letter requiring Bayerphil to pay the sum of
₱10,000,000.00 for the damages it had allegedly caused to Calibre. 15 Bayerphil replied,
reminding that Calibre owed it ₱1,272,103.07 as of December 31, 1989. 16

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Accusing Bayerphil of maliciously breaching the distributorship agreement by
manipulating Calibre’s accounts, withholding discounts and rebates due it, charging
unwarranted penalties, refusing to supply goods, and favoring the new
distributors/dealers to drive it out of business, Calibre, on March 14, 1990, filed a suit for
damages, docketed as Civil Case No. 59258, before the Regional Trial Court (RTC) of
Pasig.17 Calibre prayed for ₱8,000,000.00 actual damages, representing alleged actual
losses and profits;18 ₱2,000,000.00 award as alleged damage to its goodwill and
business reputation; ₱3,500,000.00 as exemplary damages; and, attorney’s fees of
₱1,500,000.00.

In its Answer with Counterclaim,19 Bayerphil denied its alleged wanton appointment of

other distributors, reasoning that it could not be faulted for a difference in treatment
between a paying dealer and a non-paying one. It maintained that Calibre filed the
damage suit to avoid paying its overdue accounts. Considering that those purchased on
credit remained unpaid, Bayerphil had to refuse to further supply Calibre with its
products.

Bayerphil also averred that the dealership agreement provides that rebates and
discounts would only be granted if the previous purchases had been first fully paid. It
denied that it failed to reconcile Calibre’s accounts since it conferred with Calibre, and
even acceded to a number of deductions demanded by Calibre subject to the latter’s
settlement of accounts. Bayerphil thus prayed for the collection of ₱1,272,103.07, with
interest of 14% per annum accruing daily and compounded monthly from the date of
default (as provided in the dealership agreement); ₱1,000,000.00 exemplary damages;
and, ₱200,000.00 attorney’s fees and costs of suit.

Bayerphil also moved that Mario Sebastian and his wife Minda (Sebastians) be
impleaded as co-defendants, considering that the Sebastians bound themselves as
solidary debtors under the distributorship/dealership agreement. 20

Calibre opposed Bayerphil’s motion to implead the Sebastians and moved to strike out
the counterclaim, reasoning that the spouses are not parties in its suit against Bayerphil
and thus are not the proper parties to the counterclaim. It stressed that the issues
between the damages suit it filed and Bayerphil’s counterclaim for collection of money
are totally unrelated.21

On the other hand, Bayerphil contended that both causes of action arose from the same
contract of distributorship, and that the Sebastians’ inclusion is necessary for a full
adjudication of Bayerphil’s counterclaim to avoid duplication of suits. 22

In its October 24, 1990 Resolution,23 the trial court rejected Calibre’s arguments and
granted the motion to implead the Sebastians as co-defendants in the counterclaim.
The spouses then filed their answer to Bayerphil’s counterclaim, 24 adopting all the
allegations and defenses of Calibre. They raised the issue that the counterclaim against
them is permissive, and since Bayerphil failed to pay the required docket fees, the trial
court has no jurisdiction over the counterclaim.

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Ruling of the Regional Trial Court

On December 6, 1993, the trial court rendered judgment 25 favoring Calibre. It held that
Calibre was justified in withholding payment because there was deliberate
inaction/employment of dilatory tactics on the part of Bayerphil to reconcile accounts
making it liable for damages for ‘abuse of rights’ and ‘unfair competition’ under Articles
19, 20, and 28 of the Civil Code.26 It opined that Bayerphil unfairly favored other dealers
and deliberately refused to supply the plaintiff with its products to drive it out of
business. As for Bayerphil’s counterclaim, the court a quo adjudged that aside from
being unmeritorious for lack of valid demand, the counterclaim was permissive in
character. Therefore, it must be dismissed for Bayerphil’s failure to pay the required
docket fees. The dispositive portion of the Decision states:

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant

Bayer Philippines, Inc., ordering said defendant to pay to plaintiff the amounts of
₱8,000,000.00 as actual damages, plus ₱80,000.00 as attorney’s fees, plus costs.

The "Counter-Complaint" of defendant against the spouses Mario and Minda Sebastian
is DISMISSED, for defendant’s failure to pay the required docket and filing fees,
considering that the counterclaim is permissive in character, and not compulsory.
Defendant’s counterclaim is likewise DISMISSED for lack of merit.

SO ORDERED.27

Ruling of the Court of Appeals

The CA reversed the trial court’s factual findings. In its July 31, 2002 Decision, the CA
found no reason to award Calibre anything as it has no cause of action against
Bayerphil. The CA said:

We agree with the appellant that nothing in the evidence suggests that it deliberately
and maliciously withheld approval of Calibre’s claims. Indeed, the correspondences
between the parties show that either there was an honest difference in the computation
of the amount, and/or a variance in opinion as to the validity of the claims. There is
abundant evidence that Bayer actually examined its records so much so that through a
letter dated November 10, 1989, it gave its explanation why it was denying certain
claims. Bayer sent its representatives to discuss the matter with Calibre’s General
Manager Mario Sebastian. Bayer exerted efforts to arrive at a compromise with Calibre,
and expressed its willingness to grant several concessions to plaintiff-appellee (Exhibit
"N", Record, pp. 256-257)

Parenthetically, Bayer’s offer of compromise cannot be taken as an admission of liability

on its part for the entire claim of appellee Calibre. In civil cases, an offer of compromise
is not an admission of any liability. The compromise settlement of a claim or cause of
action is not an admission that the claim is valid, but merely admits that there is a
dispute, and that the amount is being paid just to buy peace. (Servicewide Specialists,

367
Inc. vs. Court of Appeals, G.R. No. 117728, June 26, 1996, 257 SCRA 643) After all, it
is the policy of the law to encourage compromises.

xxxx

It must also be noted that plaintiff-appellee was not entitled to be the sole distributor
within its area of coverage for Bayer. Under number 3, Part III of the latest
Distributorship/Dealership Agreement (p. 231, Record) between the parties, it was
stipulated that unless otherwise agreed upon, formally and in writing, plaintiff-appellee’s
appointment as distributor/dealer was to be on a non-exclusive basis. The agreement
expressly reserved Bayer’s right to appoint other distributors and/or dealers, in any
number desired and anywhere in the appointed area. There is no evidence of a formal
and written agreement appointing plaintiff-appellee as sole distributor in Pangasinan
and Tarlac. Hence, it cannot validly claim that Bayer caused its business injury by
appointing other dealers and distributors within its area.

Significantly, the Distributorship/Dealership Agreement also reserved to both parties the

right to cancel the agreement at any time. Under the circumstances obtaining, Bayer
was justified, in the exercise of sound business decision, to stop supplying goods to
plaintiff-appellee until the latter’s outstanding account had been finally settled. 28

Furthermore, the CA favored Bayerphil’s counterclaim. It ruled that Bayerphil’s

counterclaim was compulsory hence it need not pay the docket and filing fees. It noted
that it arose out of the same dealership agreement from which the claims of Calibre in
its complaint were likewise based. Finding that Calibre never denied that it owes
Bayerphil, and that the evidence of Bayerphil regarding the amount owed by Calibre
was unrebutted, the CA deemed justified the award of actual damages. Hence:

WHEREFORE, premises considered, the Decision of the lower court is hereby

REVERSED and SET ASIDE and a new one is entered ordering plaintiff-appellee
Calibre Traders and/or Mario Sison Sebastian and Minda Blanco Sebastian to pay
defendant-appellant the amount of One Million Two Hundred Seventy-Two Thousand
One Hundred Three Pesos and Seven Centavos (₱1,272,103.07) with interest thereon
at the rate of 14% per annum compounded from December 31, 1989 until fully paid.

Without pronouncement as to costs.

SO ORDERED.29

In its December 19, 2003 Resolution,30 the CA denied the motion for reconsideration.

Issues

Based on the parties’ contentions, the Court should now resolve the following issues: a)
Calibre’s entitlement to an award of damages; and, b) the propriety of granting relief to
Bayerphil’s counterclaim.

368
 Our Ruling

No form of damages can be awarded to Calibre for it miserably failed to prove its right to
the reliefs it sought.

While only questions of law are reviewed in petitions for review on certiorari, the Court
shall delve into the factual milieu of this case in view of the conflicting findings of facts
by the trial court and the CA.31 The question arises whether Calibre has a cause of
action against Bayerphil. The records before us though, highlight the lack of it.

The lower court’s ruling against the latter is premised on a finding of malice or bad faith,
i.e., a finding of an abuse of right on Bayerphil’s part in exercising inimical acts that
prejudiced Calibre’s business. However, we agree with the CA’s conclusion that there is
no adequate proof that Bayerphil was guilty of abusing its rights. "[G]ood faith is
presumed and that the burden of proving bad faith rests upon a party alleging the
same."32 "In civil cases, the law requires that the party who alleges a fact and
substantially asserts the affirmative of the issue has the burden of proving it." 33 This is
where Calibre failed.1avvphi1

As regards the allegations of inaction/refusal to reconcile accounts, accounts

manipulation by withholding discounts/rebates, imposition of penalties, and refusal to
supply goods, the records reveal that Bayerphil never ignored the request for accounts
reconciliation. Bayerphil acted on Calibre’s letter and sent its representatives to meet
with Sebastian. It wrote a letter answering point-by-point why some demands for
discounts and rebates had to be refused. Bayerphil’s second letter, wherein some
claims were additionally granted, was on Bayerphil’s part an act of concession in its
desire to be paid since Calibre remained adamant in not paying its accounts. If ever
Calibre found the second letter to be apparently inconsistent with the first letter, bad
faith cannot be immediately imputed to Bayerphil since the latter is not precluded from
making prompt corrections in its computations.

We cannot subscribe to the accusation of accounts manipulation. As the CA had found,

this matter involves an "honest difference in the computation of the amount, and/or a
variance in opinion as to the validity of the claims." Moreover, Bayerphil could not be
blamed for disallowing some of the claimed discounts and rebates. Under the latest
dealership agreement and the volume rebate agreement executed, payment is a
precondition for the discounts and rebates. 34 Bayerphil, to minimize further losses, was
justified in stopping the supply of its products when its dealer still had outstanding
accounts. Lastly, Calibre did not specify during the trial the unwarranted penalties
Bayerphil had allegedly imposed.

Neither do we find any abuse in Bayerphil’s exercise of appointing other distributors

within Calibre’s area. The fact that the distributors appointed were Calibre’s former
customers or salesmen or their relatives does not prove any ill intention to drive Calibre
out of business. Notably, the distributorship/dealership agreement was on a non-
exclusive basis. Bayerphil merely accorded the same business opportunities to others

369
to better themselves. Naturally, an increase in the number of distributors in an area will
entail corresponding decline in volume sales of the individual distributors. Even then
Bayerphil’s assistant sales manager for internal administration Ofelia Castillo, who
named during the trial the other distributors Bayerphil appointed in Pangasinan, not only
acknowledged that Bayerphil’s former salesmen had resigned to be dealers, but also
admitted that competition is part of business risk:

Q You said in Manaoag, this Rosalyn Agricultural Supply was there as early as
1980 is that correct?

A At about.

Q But somehow, it was a distributor for only 2 or 3 years?

A Yes, shortly, unlike those dealers who have several years.

Q This Samson in Urdaneta was also short lived?

A It began in the area and operating until now.

Q Would you know when Samson began as a distributor?

A Between the period ’82 and ’85.

Q This San Carlos Agricultural Center owned by William.

A It is owned by Ricardo Rule. There are two operating in San Carlos.

Q There are two dealers operating in San Carlos?

A Yes, Sir.

Q How many in Urdaneta?

A Calibre and Samson. Only those two.

Q You would admit Mrs. Castillo that the Bayer Phils. Salesmen of agro
chemicals are experienced in the products of Bayer Philippines?

A Having worked and dealt with Bayer chemicals, with the training they got, I
suppose they get that experience.

Q And this experience would be invaluable in their distributorship?

A Valuable.

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 Q Very valuable?

A Very valuable.

Q And in fact, you know of many salesmen of Bayer Phils who resigned?

A Yes, sir.

Q Because the chances of getting more is there if you are an independent

distributor?

A Yes, sir.

Q In fact, this is true not only in Pangasinan but all over the country, Mrs.
Castillo?

A Yes, because we have mentioned one in Cotabato, in San Jose, Nueva Ecija,
in Tuguegarao.

Q And from the records that you mentioned earlier on, it would seem some of
them succeeded beautifully and some closed shop afterwards?

A Yes, sir.

Q It is just a matter of luck and yes, business luck?

A Yes, sir.35

Incidentally, under actual or compensatory damages, indemnification comprises not

only the value of the loss suffered, but likewise the profits the obligee failed to
obtain.36 In its attempt to support this claim for compensatory damages, Calibre, based
its computation of more or less a loss of ₱8 million on a 10-year sales projection. 37 But
as could be gleaned from Sebastian’s testimony, there is no solid evidence upon which
this sales projection was based:

Q You prepared a projection of your total sales for another ten (10) years from
1989.

A Yes, sir.

Q In the preparation of your projection, I assume that you based it on the records
of your sales of previous years?

A No.

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Q You did not in preparing your projection of sales to determine your alleged lost
profits refer at all to your previous records?

A No.

Q What then was the basis of your projection?

A The basis of my projection is, as one of the valued clients of Bayer Philippines
which is a member of the World Club, we are in the bracket of 10 million per year
sales.

Q So you only had capability to sell?

A Yes.

Q Have you ever sold before in the 10 million per year sales?

A Yes.

Q That is why I am asking you, you did not at all base your assumption on your
prior sales record of Bayer Philippines products?

A I cannot possibly base it on the past sales. Cost of money is going up so I

based it on a bracket that Bayer Philippines put us which is in the 10 million per
year sales that is projected for another 10 years because we are the valued
clients of Bayer.

Q You also projected your profits for the next 10 years?

A Yes, sir.

Q And you did not consider the profits from the Bayer business of the prior years
in making your projection?

A Yes, sir.

Q I assume then that in determining your profits for the previous years you used
the figures of the summary Exhibit O as to your sales from 1977 to 1989?

A No, sir.

Q You did not refer at all to your profits for the previous years?

A No, sir.

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 Q Why did you not refer to your previous profits to determine your projection of
probable profits?

A We projected our projection based on our being a valued client of Bayer

Philippines, and based on the contract of the minimum 5% profit. 38

To justify a grant of actual or compensatory damages, the amount of loss must be

proved with a reasonable degree of certainty, based upon competent proof and the best
evidence obtainable by the injured party.39 The projected sum of ₱10 million sales
cannot thus be the proper base in computing actual damages. Calibre computed its lost
income based only on its capability to sell around ₱10 Million, not on the actual income
earned in the past years to properly compute the average income/profit.

At any rate, since Calibre had no cause of action at all against Bayerphil, there can be
no basis to award it with damages.

Bayerphil’s counterclaim is permissive, but the trial court should have given it the
opportunity to pay the docket fees since it did not avoid paying said fees.

"A compulsory counterclaim is any claim for money or other relief, which a defending
party may have against an opposing party, which at the time of suit arises out of, or is
necessarily connected with, the same transaction or occurrence that is the subject
matter of plaintiff’s complaint. It is compulsory in the sense that it is within the
jurisdiction of the court, does not require for its adjudication the presence of third parties
over whom the court cannot acquire jurisdiction, and will be barred x x x if not set up in
the answer to the complaint in the same case. Any other claim is permissive." 40 "[The]
Court has already laid down the following tests to determine whether a counterclaim is
compulsory or not, to wit: (1) Are the issues of fact or law raised by the claim and the
counterclaim largely the same? (2) Would res judicata bar a subsequent suit on
defendant's claims, absent the compulsory counterclaim rule? (3) Will substantially the
same evidence support or refute plaintiff's claim as well as the defendant's
counterclaim? and (4) 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?"41 The fourth test is the ‘compelling test of compulsoriness’. 42

Bayerphil’s suit may independently proceed in a separate action. Although the rights
and obligations of the parties are anchored on the same contract, the causes of action
they filed against each other are distinct and do not involve the same factual issues. We
find no logical relationship between the two actions in a way that the recovery or
dismissal of plaintiff’s suit will establish a foundation for the other’s claim. The
counterclaim for collection of money is not intertwined with or contingent on Calibre’s
own claim for damages, which was based on the principle of abuse of rights. Both
actions involve the presentation of different pieces of evidence. Calibre’s suit had to
present evidence of malicious intent, while Bayerphil’s objective was to prove
nonpayment of purchases. The allegations highlighting bad faith are different from the

373
transactions constituting the subject matter of the collection suit. Respondent’s
counterclaim was only permissive. Hence, the CA erred in ruling that Bayerphil’s claim
against the petitioners partakes of a compulsory counterclaim.

Be that as it may, the trial court was incorrect in dismissing Bayerphil’s counterclaim for
non-payment of docket fees.

All along, Bayerphil has never evaded payment of the docket fees on the honest belief
that its counterclaim was compulsory. It has always argued against Calibre’s contention
that its counterclaim was permissive ever since the latter opposed Bayerphil’s motion
before the RTC to implead the Sebastian spouses. Lastly, Bayerphil’s belief was
reinforced by Judge Claravall’s October 24, 1990 Resolution when she denied Calibre’s
motion to strike out Bayerphil’s counterclaim. Thus:

With respect to the motion to strike out the counterclaim, the Rejoinder and Reply of
CALIBRE mentioned two reasons to support it. These are: 1) that the counterclaim is
not against the opposing party only, and 2) that the plaintiff’s claim against the
defendant is totally unrelated to the latter’s claim against the Sebastian spouses
because they are "not the same."

To resolve the issues abovementioned, the elements of a compulsory counterclaim are

thus given:

A counterclaim is compulsory and is considered barred if not set up where the following
circumstances are present: 1) that it arises out of the, or is necessarily connected with
the transaction or occurrence that is the subject matter of the opposing party’s claim, 2)
that it does not require for its adjudication the presence of third parties of whom the
court cannot acquire jurisdiction, and 3) that the court has jurisdiction to entertain the
claim. (Javier vs. IAC, 171 SCRA 605)

The provisions of Section 8, Rule 6 must necessarily be mentioned also. To wit:

Sec. 8, Rule 6. Counterclaim or cross-claim in the answer. – The answer may contain
any counterclaim or crossclaim which a party may have at the time against the opposing
party or a co-defendant provided, that the court has jurisdiction to entertain the claim
and can, if the presence of third parties is essential for its adjudication, acquire
jurisdiction of such parties.

The rules and jurisprudence do not require that the parties to the counterclaim be the
original parties only. In fact, the presence of third parties is allowed, the only provision
being their capacity to be subjected under the court’s jurisdiction. As regards the nature
of the claims of the parties, neither is it required that they be of the same nature, only
that they arise from the same transaction or occurrence. 43

It cannot be gainsaid that the emerging trend in the rulings of this Court is to afford
every party litigant the amplest opportunity for the proper and just determination of his

374
cause, free from the constraints of technicalities.44 Rules on the payment of filing fees
have already been relaxed:

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.45

It is a settled doctrine that "although the payment of the prescribed docket fees is a
jurisdictional requirement, its non-payment x x x should not result in the automatic
dismissal of the case provided the docket fees are paid within the applicable
prescriptive period."46 "The prescriptive period therein mentioned refers to the period
within which a specific action must be filed. It means that in every case, the docket fee
must be paid before the lapse of the prescriptive period. Chapter 3, Title V, Book III of
the Civil Code is the principal law governing prescription of actions." 47

In accordance with the aforementioned rules on payment of docket fees, the trial court
upon a determination that Bayerphil’s counterclaim was permissive, should have
instead ordered Bayerphil to pay the required docket fees for the permissive
counterclaim, giving it reasonable time but in no case beyond the reglementary
period.48 At the time Bayerphil filed its counter-claim against Calibre and the spouses
Sebastian without having paid the docket fees up to the time the trial court rendered its
Decision on December 6, 1993, Bayerphil could still be ordered to pay the docket fees
since no prescription has yet set in.49 Besides, Bayerphil should not suffer from the
dismissal of its case due to the mistake of the trial court.

Considering the foregoing discussion, we find no need to remand the case to the trial
court for the resolution of Bayerphil’s counterclaim. In Metromedia Times Corporation v.
Pastorin,50 we discussed the rule as to when jurisdiction by estoppel applies and when it
does not, thus:

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Lack of jurisdiction over the subject matter of the suit is yet another matter. Whenever it
appears that the court has no jurisdiction over the subject matter, the action shall be
dismissed (Section 2, Rule 9, Rules of Court). This defense may be interposed at any
time, during appeal (Roxas vs. Rafferty, 37 Phil. 957) or even after final judgment
(Cruzcosa vs. Judge Concepcion, et al., 101 Phil. 146). Such is understandable, as this
kind of jurisdiction is conferred by law and not within the courts, let alone the parties, to
themselves determine or conveniently set aside. In People vs. Casiano (111 Phil. 73,
93-94), this Court, on the issue of estoppel, held:

"The operation of the principle of estoppel on the question of jurisdiction seemingly

depends upon whether the lower court actually had jurisdiction or not. If it had no
jurisdiction, but the case was tried and decided upon the theory that it had jurisdiction,
the parties are not barred, on appeal, from assailing such jurisdiction, for the same
‘must exist as a matter of law, and may not be conferred by consent of the parties or by
estoppel’ (5 C.J.S., 861-863). However, if the lower court had jurisdiction, and the case
was heard and decided upon a given theory, such, for instance, as that the court had no
jurisdiction, the party who induced it to adopt such theory will not be permitted, on
appeal, to assume an inconsistent position – that the lower court had jurisdiction. Here,
the principle of estoppel applies. The rule that jurisdiction is conferred by law, and does
not depend upon the will of the parties, has no bearing thereon."

In this case, the trial court had jurisdiction over the counterclaim although it erroneously
ordered its automatic dismissal. As already discussed, the trial court should have
instead directed Bayerphil to pay the required docket fees within a reasonable time.
Even then, records show that the trial court heard the counterclaim although it again
erroneously found the same to be unmeritorious. Besides, it must also be mentioned
that Bayerphil was lulled into believing that its counterclaim was indeed compulsory and
thus there was no need to pay docket fees by virtue of Judge Claravall’s October 24,
1990 Resolution. Petitioners also actively participated in the adjudication of the
counterclaim which the trial court adjudge to be unmeritorious.

However, we are more inclined to affirm the CA’s ruling anent Bayerphil’s counterclaim.
It held thus:

What remains to be determined now is whether or not defendant-appellant is entitled to

its counterclaim. On this score, We note that plaintiff-appellee never denied that it still
owes defendant-appellant for purchases it had made. Bayer had already recognized
that Calibre was entitled to a volume rebate for the years 1988-1989 in the amount of
₱320,849.42 on paid purchases, and a 5% prompt payment rebate of ₱63,196.06 in
view of the application of the volume rebate to Calibre’s outstanding balance, or a total
of P384,045.48, as stated in Bayer’s letter dated November 10, 1989 (Exhibit "10",
Record, pp. 373-375) earlier quoted.

Since no evidence was presented by plaintiff-appellee to rebut the correctness of

Bayer’s computation. We therefore assume it to be correct. Moreover, We note that the
stocks Bayer had withdrawn per plaintiff-appellee’s request under Claims 10 and 11

376
amounting to ₱124,493.28 had been credited to plaintiff-appellee as shown by the
Statement of Account (Exhibit "4", Record, pp. 366-367) which shows that Calibre’s
outstanding indebtedness as of December 31, 1989 was One million Two Hundred
Seventy-Two Thousand, One Hundred Three Pesos and Seventeen Centavos
(₱1,272,103.17) (Exhibit "4-E", p. 367). We also note that the Distributorship/Dealership
Agreement entered into by the parties provides that default in payment on any account
by the DISTRIBUTOR/DEALER when and as they fall due shall entitle BAYERPHIL to
interests thereon at the then maximum lawful interest rates which in no case shall be
lower than twelve per cent (12%) per annum for accounts fully secured by a mortgage
on realty or fourteen per cent (14%) per annum when otherwise unsecured. (Exhibit "1-
F", Record, p. 328).51

WHEREFORE, the July 31, 2002 Decision of the Court of Appeals in CA-G.R. CV No.
45546 is AFFIRMED. Considering that the counterclaim is permissive, respondent
Bayer Philippines, Inc. is ORDERED to pay the prescribed docket fees with the
Regional Trial Court of Pasig City within fifteen (15) days from receipt of this Decision.

SO ORDERED.

FIRST DIVISION

G.R. No. 221062, October 05, 2016

ELIZABETH SY-VARGAS, Petitioner, v. THE ESTATE OF ROLANDO OGSOS, SR.

AND ROLANDO OGSOS, JR., Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated February 28,
2014 and the Resolution3 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),

377
represented by their Attorney-in-Fact, Catalino V. Noel, entered into a Contract of
Lease5 (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.6chanrobleslaw

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-
1997.8chanrobleslaw

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 Complaint10 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.11chanrobleslaw

Summons was served in May 2000, but respondent Ogsos, Jr. only filed a motion to
admit answer12 and answer13 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. 15chanrobleslaw

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.16chanrobleslaw

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

378
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.23chanrobleslaw

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. 25cralawredchanrobleslaw

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. 26chanrobleslaw

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.27chanrobleslaw

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. 28chanrobleslaw

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.29chanrobleslaw

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.32chanrobleslaw

The RTC Ruling

In a Decision33 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
379
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
199735 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.37chanrobleslaw

Dissatisfied, petitioner and Kathryn appealed to the CA. 38chanrobleslaw

The CA Ruling

In a Decision39 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.40chanrobleslaw

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. 42chanrobleslaw

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 Resolution45 dated October 1, 2015 for being
filed out of time; hence, the instant petition solely filed by petitioner. 46chanrobleslaw

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.

380
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:ChanRoblesVirtualawlibrary
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 to resolve the substantive issues of this case.

II.

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.50chanrobleslaw

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. 51chanrobleslaw

On the other hand, a counterclaim is permissive if it does not arise out of or is not

381
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.52chanrobleslaw

In Spouses Mendiola v. CA,53 the Court had devised tests m determining whether or not
a counterclaim is compulsory or permissive:ChanRoblesVirtualawlibrary
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 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

382
the government.55chanrobleslaw

Here, respondents cannot be faulted for non-payment of docket fees in connection with
their 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 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 14158 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
383
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.
(respondents) the amount of P900,000.00, which represents the unpaid lease rentals for
the crop years 1999 to 2004 as above-discussed. Moreover, a judgment lien shall be
imposed on the monetary award given to respondents corresponding to the unpaid
docket fees on the permissive 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 assess and collect the appropriate
docket fees from respondents.

SO ORDERED.chanroblesvirtuallawlibrary
FIRST DIVISION

[G.R. No. 161909 : April 25, 2012]

PHILTRANCO SERVICE ENTERPRISES, INC., PETITIONER, VS. FELIX PARAS

AND INLAND TRAILWAYS, INC., AND HON. COURT OF APPEALS,
RESPONDENTS.

DECISION

BERSAMIN, J.:

In an action for breach of contract of carriage commenced by a passenger against his

common carrier, the plaintiff can recover damages from a third-party defendant brought
into the suit by the common carrier upon a claim based on tort or quasi-delict. The
liability of the third-party defendant is independent from the liability of the common
carrier to the passenger.cralaw

Philtranco Service Enterprises, Inc. (Philtranco) appeals the affirmance with

modifications by the Court of Appeals (CA) of the decision of the Regional Trial Court
(RTC) awarding moral, actual and temperate damages, as well as attorney's fees and
costs of suit, to respondent Felix Paras (Paras), and temperate damages to respondent
Inland Trailways, Inc. (Inland), respectively the plaintiff and the defendant/third-party
plaintiff in this action for breach of contract of carriage, upon a finding that the
negligence of the petitioner and its driver had caused the serious physical injuries Paras
sustained and the material damage Inland's bus suffered in a vehicular accident.

Antecedents
384
The antecedent facts, as summarized by the CA, are as follows:

Plaintiff-appellant [respondent] Felix Paras (Paras for brevity), who hails from Cainta.
Rizal is engaged in the buy and sell of fish products. Sometime on 08 February 1987,
on his way home to Manila from Bicol Region, he hoarded a bus with Body No. 101 and
Plate No. EVE 508, owned and operated- by Inland Trailways. Inc. (Inland for brevity)
and driven by its driver Calvin Coner (Coner for brevity).

At approximately 3:50 o'clock in the morning of 09 February 1987, while the said bus
was travelling along Maharlika Highway, Tiaong, Quezon, it was bumped at the rear by
another bus with Plate No. 1-VB 259. owned and operated by Philtranco Service
Enterprises, Inc. (Philtranco for brevity). As a result of the strong and violent impact, the
Inland bus was pushed forward and smashed into a cargo truck parked along the outer
right portion of the. highway and the shoulder thereof. Consequently, the said accident
bought considerable damage to the vehicles involved and caused physical injuries to
the passengers and crew of the two buses, including the death of Coner who was the
driver of the Inland Bus at the time of the incident.

Paras was not spared from the pernicious effects of the accident. After an emergency
treatment at the San Pablo Medical Center, San Pablo City. Laguna. Paras was taken
to the National Orthopedic Hospital. At the latter hospital, he was found and diagnosed
by Dr. Antonio Tanchuling, Jr. to be affected with the following injuries: a)
contusion/hematoma: b) dislocation of hip upon fracture of the fibula on the right leg; c)
fractured small bone on the right leg: and d) close fracture on the tibial plateau of the left
leg. (Exh. "A", p. 157. record)

On 04 March 1987 and 15 April 1987. Paras underwent two (2) operations affecting the
fractured portions of his body. (Exhs. "A-2" and "A-3", pp. 159 and 160 respectively,
record)

Unable to obtain sufficient financial assistance from Inland for the costs of his
operations, hospitalization, doctors' fees and other miscellaneous expenses, on 31 July
1989. Paras filed a complaint for damages based on breach of contract of carriage
against Inland.

In its answer, defendant Inland denied responsibility, by alleging, among others, that its
driver Coner had observed an utmost and extraordinary care and diligence to ensure
the safety of its passengers. In support of its disclaimer of responsibility. Inland invoked
the Police Investigation Report which established the fact that the Philtranco bus driver
of [sic] Apolinar Miralles was the one which violently bumped the rear portion of the
inland bus. and therefore, the direct and proximate cause of Paras' injuries.

On 02 March 1990. upon leave of court. Inland Hied a third-party complaint against
Philtranco and Apolinar Miralles (Third Party defendants). In this third-party complaint.
Inland, sought for exoneration of its liabilities to Paras, asserting that the latter's cause
of action should be directed against Philtranco considering that the accident was
385
caused by Miralles' lack of care, negligence and reckless imprudence, (pp. 50 to 56,
records).

After trial, the RTC (Branch 71) in Antipolo, Rizal rendered its judgment on July 18,
1997,[1] viz:

WHEREFORE, third-party defendant Philtranco and Apolinar Miralles are hereby

ordered to pay plaintiff jointly and severally, the following amounts:

1. P54.000.00 as actual damages;

2. P50,000.00 as moral damages;
3. P20.000.00 as attorney's fees and costs.

SO ORDERED.

All the parties appealed to the CA on different grounds.

On his part, Paras ascribed the following errors to the RTC, to wit:

I. THE TRIAL COURT ERRED IN HOLDING THAT ONLY THIRD-PARTY

DEFENDANT-APPELLANT PHILTRANCO IS LIABLE FOR THE DAMAGES
SUFFERED BY APPELLANT PARAS.

II. THE TRIAL COURT ERRED IN NOT HOLDING APPELLANT INLAND TRAILWAYS
INC. TO BE JOINTLY AND SEVERALLY LIABLE FOR THE DAMAGES SUFFERED
BY PARAS.

III. THE TRIAL COURT ERRED IN NOT AWARDING UNEARNED INCOME AS

ADDITIONAL ACTUAL DAMAGES SUFFERED BY APPELLANT PARAS AS HIS
PHYSICAL DISABILITY IS PERMANENT IN NATURE.

IV. THE TRIAL COURT ERRED IN NOT AWARDING EXEMPLARY DAMAGES IN

FAVOR OF APPELLANT PARAS.

On the other hand. Inland assigned the following errors to the RTC, namely;

THE TRIAL COURT ERRED WHEN IT FAILED TO AWARD DAMAGES UNTO THE
THIRD PARTY PLAINTIFF NOTWITHSTANDING CLEAR FINDING THAT:

'It is clear from the evidence that the plaintiff sustained injuries because of the reckless,
negligence, and lack of precaution of third party defendant Apolinar Miralles, an
employee of Philtranco. '

AND, COMPLETELY DISREGARDED "THE UNCONTROVERTED ORAL AND

DOCUMENTARY EVIDENCES ESTABLISHING THE EXTENT AND DEGREE OF
DAMAGES SUSTAINED BY THE THIRD PARTY PLAINTIFF.
386
Lastly, Philtranco stated that the RTC erred thuswise:

THE COURT A QUO MISERABLY ERRED IN AWARDING ACTUAL DAMAGES

GREATER THAN WHAT WAS ALLEGED IN THE COMPLAINT ITSELF, AND EVEN
MUCH MORE GREATER THAN WHAT WERE PROVED DURING HIE TRIAL, HENCE,
PERPETUATING UNJUST ENRICHMENT.

II

THE COURT A QUO SERIOUSLY ERRED IN AWARDING MORAL DAMAGES TO A

CAUSE OF ACTION OF CULPA-CONTRACTUAL EVEN WITHOUT ANY EVIDENCE
OF GROSS BAD FAITH; HENCE, CONTRARY TO THE ESTABLISHED DOCTRINE IN
THE CASES OF PHIL. RABBIT BUS LINES VS. ESGUERRA; SOBERANO VS.
BENGUET AUTO LINE AND FLORES VS. MIRANDA.

III

THE COURT A QUO MISERABLY ERRED IN HOLDING THAT MIRALLES WAS THE
ONE AT FAULT MERELY ON THE STRENGTH OF THE TESTIMONY OF THE
POLICE INVESTIGATOR WHICH IS IN TURN BASED ON THE STATEMENTS OF
ALLEGED WITNESSES WHO WERE NEVER PRESENTED ON 'THE WITNESS
STAND.

THE COURT A QUO COMMITTED A GRIEVOUS ERROR IN DISREGARDING THE

TESTIMONY OF APPELLANTS' WITNESSES WHO TESTIFIED AS TO THE
DEFENSE OP EXERCISE OF DUE DILIGENCE IN THE SELECTION AND
SUPERVISION OF EMPLOYEES PURSUANT TO ART. 2180, LAST PARAGRAPH,
NEW CIVIL CODE.

On September 25, 2002, the CA promulgated its decision, [2] disposing:

WHEREFORE, in consideration of the foregoing premises, the assailed decision dated

18 July 19(9)7 is perforce affirmed with the following modifications:

1. Third party defendants-appellants Philtranco and Apolinar Miralles are ordered to pay
plaintiff-appellant Felix Paras jointly and severally the following amounts:
a) P1,397.95 as actual damages;
b) P50.000.00 as temperate damages;
c) P50,000.00 as moral damages; and
d) P20,000.00 as attorney's fees and costs of suit.
2. On the third party plaintiff-appellant Inland's claims, the third party defendant-
appellants Philtranco and Apolinar Miralles are hereby ordered to pay the former
(Inland) jointly and severally the amount of P250.000.00 as and by way of temperate

387
damages.

SO ORDERED.

The CA agreed with the RTC's finding that no trace of negligence at the time of the
accident was attributable to Inland's driver, rendering Inland not guilty of breach of
contract of carriage; that faulty brakes had caused Philtranco's bus to forcefully bump
Inland's bus from behind, making it hit the rear portion of a parked cargo truck; that the
impact had resulted in considerable material damage to the three vehicles; and that
Paras and others had sustained various physical injuries.

Accordingly, the CA:- (a) sustained the award of moral damages of P50,000.00 in favor
of Paras pursuant to Article 2219 of the Civil Code based on quasi-delict committed by
Philtranco and its driver; (b) reduced the actual damages to be paid by Philtranco to
Paras from P54,000.00 to P1,397.95 because only the latter amount had been duly
supported by receipts; (c) granted temperate damages of P50,000.00 (in lieu of actual
damages in view of the absence of competent proof of actual damages for his
hospitalization and therapy) to be paid by Philtranco to Paras; and (d) awarded
temperate damages of P250,000.00 under the same premise to be paid by Philtranco to
Inland for the material damage caused to Inland's bus.

Philtranco moved for reconsideration,[3] but the CA denied its motion for reconsideration
on January 23, 2004.[4]

Issues

Hence, this appeal, in which the petitioner submits that the CA committed grave abuse
of discretion amounting to lack of jurisdiction in awarding moral damages to Paras
despite the fact that the complaint had been anchored on breach of contract of carriage;
and that the CA committed a reversible error in substituting its own judgment by motu
proprio awarding temperate damages of P250,000.00 to Inland and P50,000.00 to
Paras despite the clear fact that temperate damages were not raised on appeal by
Paras and Inland.

Ruling

The appeal lacks merit.

The Court does not disturb the unanimous findings by the CA and the RTC on the
negligence of Philtranco and its driver being the direct cause of the physical injuries of
Paras and the material damage of Inland.

Nonetheless, we feel bound to pass upon the disparate results the CA and the RTC
reached on the liabilities of Philtranco and its driver.

388
 1.
Paras can recover moral damages
in this suit based on quasi-delict

Philtranco contends that Paras could not recover moral damages because his suit was
based on breach of contract of carriage, pursuant to which moral damages could be
recovered only if he had died, or if the common carrier had been guilty of fraud or bad
faith. It argues that Paras had suffered only physical injuries; that he had not adduced
evidence of fraud or bad faith on the part of the common carrier; and that, consequently,
Paras could not recover moral damages directly from it (Philtranco), considering that it
was only being subrogated for Inland.

The Court cannot uphold the petitioner's contention.

As a general rule, indeed, moral damages are not recoverable in an action predicated
on a breach of contract. This is because such action is not included in Article 2219 of
the Civil Code[5] as one of the actions in which moral damages may be recovered.  By
way of exception, moral damages are recoverable in an action predicated on a breach
of contract: (a) where the mishap results in the death of a passenger, as provided in
Article 1764,[6] in relation to Article 2206, (3),[7] of the Civil Code; and (b) where the
common carrier has been guilty of fraud or bad faith, [8] as provided in Article 2220[9] of
the Civil Code.

Although this action does not fall under either of the exceptions, the award of moral
damages to Paras was nonetheless proper and valid. There is no question that Inland
filed its third-party complaint against Philtranco and its driver in order to establish in this
action that they, instead of Inland, should he directly liable to Paras for the physical
injuries he had sustained because of their negligence. To be precise. Philtranco and its
driver were brought into the action on the theory of liability that the proximate cause of
the collision between Inland's bus and Philtranco's bus had been "the negligent,
reckless and imprudent manner defendant Apolinar Miralles drove and operated his
driven unit, the Philtranco-Bus with Plate No. 259, owned and operated by third-party
defendant Philtranco Service Enterprises, Inc." [10] The apparent objective of Inland was
not to merely subrogate the third-party defendants for itself, as Philtranco appears to
suggest,[11] but, rather, to obtain a different relief whereby the third-party defendants
would be held directly, fully and solely liable to Paras and inland for whatever
damages each had suffered from the negligence committed by Philtranco and its driver.
In other words, Philtranco and its driver were charged here as joint tortfeasors who
would be jointly and severally be liable to Paras and Inland.

Impleading Philtranco and its driver through the third-party complaint filed on March 2,
1990 was correct. The device of the third-party action, also known as impleader, was in
accord with Section 12, Rule 6 of the Revised Rules of Court, the rule then
applicable, viz:

Section 12. Third-party complaint. — A third-party complaint is a claim that a defending

party may, with leave of court, file against a person not a party to the action, called the
389
third-party defendant, for contribution, indemnity, subrogation or any other relief, in
respect of his opponent's claim.[12]

Explaining the application of Section 12, Rule 6, supra, the Court said in Balbastro v.
Court of Appeals,[13] to wit:

Section 12 of Rule 6 of the Revised Rules of Court authorizes a defendant to bring into
a lawsuit any person "not a party to the action . . . for contribution, indemnity,
subrogation or any other relief in respect of his opponent's claim." From its explicit
language it does not compel the defendant to bring the third-parties into the litigation,
rather it simply permits the inclusion of anyone who meets the standard set forth in the
rule. The secondary or derivative liability of the third-party is central — whether the
basis is indemnity, subrogation, contribution, express or implied warranty or some other
theory. The impleader of new parties under this rule is proper only when a right to
relief exists under the applicable substantive law. This rule is merely a procedural
mechanism, and cannot be utilized unless there is some substantive basis under
applicable law.

Apart from the requirement that the third-party complainant should assert a
derivative or secondary claim for relief from the third-party defendant there arc
other limitations on said party's ability to implead. The rule requires that the third-
party defendant is "not a party to the action" for otherwise the proper procedure
for asserting a claim against one who is already a party to the suit is by means of
counterclaim or cross-claim under sections 6 and 7 of Rule 6.  In addition to the
aforecited requirement, the claim against the third-party defendant must be based
upon plaintiffs claim against the original defendant (third-party claimant).  The
crucial characteristic of a claim under section 12 of Rule 6, is that the original
"defendant is attempting to transfer to the third-party defendant the liability
asserted against him by the original plaintiff."

Accordingly, the requisites for a third-party action are, firstly, that the party to be
impleaded must not yet be a party to the action; secondly, that the claim against the
third-party defendant must belong to the original defendant; thirdly, the claim of the
original defendant against the third-party defendant must be based upon the plaintiffs
claim against the original defendant; and, fourthly, the defendant is attempting to
transfer to the third-party defendant the liability asserted against him by the original
plaintiff.[14]

As the foregoing indicates, the claim that the third-party complaint asserts against the
third-party defendant must be predicated on substantive law. Here, the substantive law
on which the riojit of Inland to seek such other relief through its third-party complaint
rested were Article 2176 and Article 2180 of the Civil Code, which read:

Article 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if there
is no pre-existing contractual relation between the parties, is called a quasi-delict and is

390
governed by the provisions of this chapter. (1902a)

Article 2180. The obligation imposed by article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is responsible.

xxx

Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not
engaged in any business or industry.

xxx

The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage. (1903a)

Paras' cause of action against Inland (breach of contract of carriage) did not need to be
the same as the cause of action of Inland against Philtranco and its driver (tort or quasi-
delict) in the impleader. It is settled that a defendant in a contract action may join as
third-party defendants those who may be liable to him in tort for the plaintiffs claim
against him, or even directly to the plaintiff [15] Indeed, Prof. Wright, el al., commenting on
the provision of the Federal Rules of Procedure of the United States from which Section
12, supra, was derived, observed so, to wit:[16]

The third-party claim need not be based on the same theory as the main claim. For
example, there arc cases in which the third-party claim is based on an express
indemnity contract and the original complaint is framed in terms of negligence. Similarly,
there need not be any legal relationship between the third-party defendant and any of
the other parties to the action. Impleader also is proper even though the third party's
liability is contingent, and technically does not come into existence until the original
defendant's liability has been established. In addition, the words Ms or may be liable' in
Rule 14(a) make it clear that impleader is proper even though the third-party
defendant's liability is not automatically established once the third-party plaintiffs liability
to the original plaintiff has been determined.

Nor was it a pre-requisite Tor attachment of the liability to Philtranco and its driver that
Inland be first declared and found liable to Paras for the breach of its contract of
carriage with him.[17] As the Court has cogently discoursed in Samala v. Judge Vidor:[18]

Appellants argue that since plaintiffs filed a complaint for damages against the
defendants on a breach of contract of carriage, they cannot recover from the third-party
defendants on a cause of action based on quasi-delict. The third party defendants, they
allege, are never parties liable with respect to plaintiffs claim although they are with
respect to the defendants for indemnification, subrogation, contribution or other reliefs.
Consequently, they are not directly liable to the plaintiffs. Their liability commences only

391
when the defendants are adjudged liable and not when they are absolved from liability
as in the case at bar.

Quite apparent from these arguments is the misconception entertained by appellants

with respect to the nature and office of a third party complaint.

Section 16. Rule 6 of the Revised Rules of Court defines a third party complaint as a
"claim that a defending party may, with leave of court, file against a person not a party
to the action, called the third-party defendant, for contribution, indemnification,
subrogation, or any other relief, in respect of his opponent's claim."  In the case
of Viluan vs. Court of Appeals, et al, 16 SCRA 742 [I966|. this Court had occasion to
elucidate on the subjects covered by this Rule, thus:

... As explained in the Atlantic Coast Line R. Co. vs. U.S. Fidelity & Guaranty Co., 52 F.
Supp. 177(1943:)

'From the sources of Rule 14 and the decisions herein cited, it is clear that this rule, like
the admiralty rule, 'covers two distinct subjects, the addition of parties defendant to the
main cause of action, and the bringing in of a third party for a defendant's remedy over",
xxx

'If the third party complaint alleges facts showing a third party's direct liability to
plaintiff on the claim set out in plaintiffs petition, then third party 'shall' make his
defenses as provided in Rule 12 and his counterclaims against plaintiff as
provided in Rule 13.  In the case of alleged direct liability, no amendment (to the
complaint) is necessary or required. The subject-matter of the claim is contained
in plaintiffs complaint, the ground of third party's liability on that claim is alleged
in third party complaint, and third party's defense to set up in his answer to
plaintiffs complaint. At that point and without amendment, the plaintiff and third
party are at issue as to their rights respecting the claim.

The provision in the rule that, 'The third-party defendant may assert any defense which
the third-party plaintiff may assert to the plaintiffs claim,' applies to the other subject,
namely, the alleged liability of third party defendant.  The next sentence in the rule, 'The
third-party defendant is bound by the adjudication of the third party plaintiffs liability to
the plaintiff, as well as of his own to the plaintiff or to the third-party plaintiff applies to
both subjects. If third party is brought in as liable only to defendant and judgment is
rendered adjudicating plaintiffs right to recover against defendant and defendant's rights
to recover against third party, he is bound by both adjudications.That part of the
sentence refers to the second subject. If third party is brought in as liable to plaintiff,
then third party is bound by the adjudication as between him and plaintiff. That refers to
the first subject. If third party is brought in as liable to plaintiff and also over to
defendant, then third party is bound by both adjudications.

xxx

392
Under this Rule, a person not a party to an action may be impleaded by the defendant
either (a) on an allegation of liability to the latter; (b) on the ground of direct liability to
the plaintiff-; or, (c) both (a) and (b). The situation in (a) is covered by the phrase "for
contribution. indemnity or subrogation;" while (b) and (c) are subsumed under the catch
all "or any other relief, in respect of his opponent's claim."

The case at bar is one in which the third party defendants are brought into the
action as directly liable to the plaintiffs upon the allegation that "the primary and
immediate cause as shown by the police investigation of said vehicular collision
between (sic) the above-mentioned three vehicles was the recklessness and
negligence and lack of imprudence (sic) of the third-party defendant Virgilio
(should be Leonardo) Esguerra y Ledesma then driver of the passenger bus." The
effects are that "plaintiff and third party arc at issue as to their rights respecting
the claim" and "the third party is bound by the adjudication as between him and
plaintiff." It is not indispensable in the premises that the defendant be first
adjudged liable to plaintiff before the third-party defendant may he held liable to
the plaintiff, as precisely, the theory of defendant is that it is the third party
defendant, and not he, who is directly liable to plaintiff. The situation
contemplated by appellants would properly pertain to situation (a) above wherein
the third party defendant is being sued for contribution, indemnity or
subrogation, or simply stated, for a defendant's "remedy over".[19]

It is worth adding that allowing the recovery of damages by Paras based on quasi-delict,
despite his complaint being upon contractual breach,
served the judicial policy of avoiding multiplicity of suits and circuity of actions by
disposing of the entire subject matter in a single litigation. [20]

2.
Award of temperate damages was in order

Philtranco assails the award of temperate damages by the CA considering that, firstly,

Paras and Inland had not raised the matter in the trial court and in their respective
appeals; secondly, the CA could not substitute the temperate damages-granted to
Paras if Paras could not properly establish his actual damages despite evidence of his
actual expenses being easily available to him; and, thirdly, the CA gravely abused its
discretion in granting motu proprio the temperate damages of P250.000.00 to Inland
although Inland had not claimed temperate damages in its pleading or during trial and
even on appeal.

The Court cannot side with Philtranco.

Actual damages, to be recoverable, must not only be capable of proof, but must actually
be proved with a reasonable degree of certainty. The reason is that the court "cannot
simply rely on speculation, conjecture or guesswork in determining the fact and amount
of damages/' but "there must be competent proof of the actual amount of loss, credence

393
can be given only to claims which are duly supported by receipts." [21]

The receipts formally submitted and offered by Paras were limited to the costs of
medicines purchased on various times in the period from February 1987 to July 1989
(Exhibits E to E-35, inclusive) totaling only P1,397.95. [22] The receipts by no means
included hospital and medical expenses, or the costs of at least two surgeries as well as
rehabilitative therapy. Consequently, the CA fixed actual damages only at that small
sum of P1,397.95.  On its part, Inland offered no definite proof on the repairs done on its
vehicle, or the extent of the material damage except the testimony of its witness,
Emerlinda Maravilla, to the effect that the bus had been damaged beyond economic
repair.[23] The CA rejected Inland's showing of unrealized income worth P3,945,858.50
for 30 months (based on alleged average, weekly income of P239,143.02 multiplied by
its guaranteed revenue amounting to 55% thereof, then spread over a period of 30
months, the equivalent to the remaining 40% of the vehicle's un-depreciated or net book
value), finding such showing arbitrary, uncertain and speculative. [24] As a result, the CA
allowed no compensation to Inland for unrealized income.

Nonetheless, the CA was convinced that Paras should not suffer from the lack of
definite proof of his actual expenses for the surgeries and rehabilitative therapy; and
that Inland should not be deprived of recourse to recover its loss of the economic value
of its damaged vehicle. As the records indicated.  Paras was first rushed for emergency
treatment to the San Pablo Medical Center in San Pablo City, Laguna, and was later
brought to the National Orthopedic Hospital in Quezon City where he was diagnosed to
have suffered a dislocated hip, fracture of the fibula on the right leg, fracture of the small
bone of the right leg, and closed fracture on the tibial plateau of the left leg. He
underwent surgeries on March 4, 1987 and April 15, 1987 to repair the fractures.
[25]
 Thus, the CA awarded to him temperate damages of P50,000.00 in the absence of
definite proof of his actual expenses towards that end.  As to Inland, Maravilla's
testimony of the bus having been damaged beyond economic repair showed a definitely
substantial pecuniary loss, for which the CA fixed temperate damages of P250,000.00. 
We cannot disturb the CA's determination, for we are in no position today to judge its
reasonableness on account of the lapse of a long time from when the accident
occurred.[26]

In awarding temperate damages in lieu of actual damages, the CA did not err, because
Paras and Inland were definitely shown to have sustained substantial pecuniary losses. 
It would really be a travesty of justice were the CA now to be held bereft of the
discretion to calculate moderate or temperate damages, and thereby leave Paras and
Inland without redress from the wrongful act of Philtranco and its driver. [27] We are
satisfied that the CA exerted effort and practiced great care to ensure that the causal
link between the physical injuries of Paras and the material loss of Inland, on the one
hand, and the negligence of Philtranco and its driver, on the other hand, existed in fact.
It also rejected arbitrary or speculative proof of loss. Clearly, the costs of Paras'
surgeries and consequential rehabilitation, as well as the fact that repairing Inland's
vehicle would no longer be economical justly warranted the CA to calculate temperate
damages of P50,000.00 and P250,000.00 respectively for Paras and Inland.

394
There is no question .that Article 2224 of the Civil Code expressly authorizes the courts
to award temperate damages despite the lack of certain proof of actual damages, to wit:

Article 2224. Temperate or moderate damages, which are more than nominal but less
than compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the case, be
proved with certainty.

The rationale for Article 2224 has been stated in Premiere Development Bank v. Court
of Appeals[28] in the following manner:

Even if not recoverable as compensatory damages. Panacor may still be awarded

damages in the concept of temperate or moderate damages. When the court finds that
some pecuniary loss has been suffered but the amount cannot, from the nature of the
case, be proved with certainty, temperate damages may be recovered. Temperate
damages may be allowed in cases where from the nature of the case, definite proof of
pecuniary loss cannot be adduced, although the court is convinced that the aggrieved
party suffered some pecuniary loss.

The Code Commission, in explaining the concept of temperate damages under Article
2224. makes the following comment:

In some States of the American Union, temperate damages are allowed. There are
cases where from the nature of the case, definite proof of pecuniary loss cannot be
offered, although the court is convinced that there has been such loss. For instance,
injury to one's commercial credit or to the goodwill of a business firm is often hard to
show with certainty in terms of money.  Should damages be denied for that reason? The
judge should be empowered to calculate moderate damages in such cases, rather than
that the plaintiff should suffer, without redress from the defendant's wrongful act.

3.
Paras' loss of earning capacity
must be compensated

In the body of its decision, the CA concluded that considering that Paras had a
minimum monthly income of P8,000.00 as a trader he was entitled to recover
compensation for unearned income during the 3-month period of his hospital
confinement and the 6-month period of his recovery and rehabilitation; and aggregated
his unearned income for those periods to P72,000.00. [29] Yet, the CA omitted the
unearned income from the dispositive portion.

The omission should be rectified, for there was credible proof of Paras' loss of income
during his disability: According to Article 2205, (1), of the Civil Code, damages may be
recovered for loss or impairment of earning capacity in cases of temporary or
permanent personal injury. Indeed, indemnification for damages comprehends not only

395
the loss suffered (actual damages or damnum emergens) but also the claimant's lost
profits (compensatory damages or lucrum cessans).[30] Even so, the formula that has
gained acceptance over time has limited recovery to net earning capacity; hence, the
entire amount of P72,000.00 is not allowable.  The premise is obviously that net earning
capacity is the person's capacity to acquire money, less the necessary expense for his
own living.[31] To simplify the determination, therefore, the net earning capacity of Paras
during the 9-month period of his confinement, surgeries and consequential therapy is
pegged at only half of his unearned monthly gross income of P8,000.00 as a trader, or a
total of P36,000.00 for the 9-month period, the other half being treated as the necessary
expense for his own living in that period.

It is relevant to clarify that awarding the temperate damages (for the substantial
pecuniary losses corresponding to Paras's surgeries and rehabilitation and for the
irreparability of Inland's damaged bus) and the actual damages to compensate lost
earnings and costs of medicines give rise to no incompatibility. These damages cover
distinct pecuniary losses suffered by Paras and Inland. [32] and do not infringe the
statutory prohibition against recovering damages twice for the same act or omission. [33]

4.
Increase in award of attorney's fees

Although it is a sound policy not to set a premium on the right to litigate, [34] we consider
the grant to Paras and Inland of reasonable attorney's fees warranted. Their entitlement
to attorney's fees was by virtue of their having been compelled to litigate or to incur
expenses to protect their interests,[35] as well as by virtue of the Court now further
deeming attorney's fees to be just and equitable. [36]

In view of the lapse of a long time in the prosecution of the claim, [37] the Court considers
it reasonable and proper to grant attorney's fees to each of Paras and Inland equivalent
to 10% of the total amounts hereby awarded to them, in lieu of only P20,000.00 for that
purpose granted to Paras.

5.
Legal interest on the amounts awarded

Pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals,[38] legal interest at the rate
of 6% per annum accrues on the amounts adjudged reckoned from July 18, 1997, the
date when the RTC rendered its judgment; and legal interest at the rate of 12% per
annum shall be imposed from the finality of the judgment until its full satisfaction, the
interim period being regarded as the equivalent of a forbearance of credit.cralaw

WHEREFORE, the Court AFFIRMS WITH MODIFICATION the decision of the Court of

Appeals promulgated on September 25, 2002. by ordering PHILTRANCO SERVICE
ENTERPRISES, INC. and APOLINAR MIRALLES to pay, jointly and severally, as
follows:

1. To Felix Paras:

396
(a) P1,397.95, as reimbursement for the costs of medicines purchased between
February 1987 and July 1989;

(b) P50,000.00 as temperate damages;

(c) P50,000.00 as moral damages;

(d) P36.000.00 for lost earnings;

(e) 10% of the total of items (a) to (d) hereof as attorney's fees; and

(f) Interest of 6% per annum from July 18, 1997 on the total o[ items (a) to (d) hereof
until finality of this decision, and 12% per annum thereafter until full payment.

2. To Inland Trail ways, Inc.:

(a) P250,000.00 as temperate damages;

(b) 10% of item (a) hereof; and

(c) Interest of 6% per annum on item (a) hereof from July 18, 1997 until finality of this
decision, and 12% per annum thereafter until full payment.

3. The petitioner shall pay the costs of suit.

SO ORDERED.
RULE 7. PARTS OF PLEADINGS

THIRD DIVISION

G.R. No. 190814, October 09, 2013

MICHELLE LANA BROWN-ARANETA, FOR HERSELF AND REPRESENTING HER

MINOR DAUGHTERS, ARABELLA MARGARITA B. ARANETA AND AVANGELINA
MYKAELA B. ARANETA, Petitioners, v. JUAN IGNACIO ARANETA, Respondent.

DECISION

VELASCO JR., J.:

The Case

Assailed and sought to be set aside in this Petition for Review on Certiorari under Rule
45 are the May 11, 2009 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No.
105442 and its Resolution2 of December 28, 2009 denying petitioner’s motion for

397
reconsideration of said decision.

The assailed decision ordered the dismissal of Civil Case No. 08-023 of the Regional
Trial Court (RTC), Branch 207 in Muntinlupa City and nullified all the issuances it made
in that case, a petition for protection order under Republic Act No. (RA) 9262, otherwise
known as the Anti-Violence Against Women and Their Children Act of 2004,
commenced by petitioner Michelle Lana Brown-Araneta (Michelle) against respondent
Juan Ignacio Araneta (Juan Ignacio) before that court.

The Facts

On April 14, 2000, Juan Ignacio and Michelle were married in Las Vegas, Nevada, USA.
The union produced two (2) children, namely: Arabella Margarita (Ara) and Avangelina
Mykaela (Ava), born on February 22, 2003 and April 15, 2005, respectively. After a little
over seven years of disharmonious relationship, husband and wife separated. Since the
couple’s estrangement and de facto separation, Ara and Ava have remained in
Michelle’s custody.

In November 2007 before the RTC of Makati City, Juan Ignacio filed, pursuant to A.M.
No. 03-04-04-SC3 or The Rule on Custody of Minors and Writ of Habeas Corpus in
Relation to Custody of Minors (Rule on Custody of Minors), a Petition for the Custody
of the Minors Arabella Margarita Araneta and Avangelina Mykaela
Araneta (Petition for Custody), with prayer for visitation rights against Michelle and her
mother, Glenda B. Santos (Santos). Docketed as SP PROC. Case No. M-6543, this
petition was eventually raffled to Branch 60 of the Makati City RTC (Makati RTC),
presided over by Judge Marissa Macaraig-Guillen (Judge Macaraig-Guillen).

Juan Ignacio invoked, as main basis for his petition, his right as father of Ava and Ara to
have custody of and to exercise parental authority over them, albeit both were below
seven (7) years of age. In this regard, he claimed that, apart from refusing to
communicate with him, both Michelle and Santos have completely barred him from
seeing or getting in touch with his daughters despite repeated requests. He thus prayed
the court to:chanroblesvirtualawlibrary
1. Immediately issue a Provisional Order granting [him] visitation rights with respect to
the minors [Ava and Ara] x x x during the pendency of these proceedings;

2. Immediately issue an ex parte Hold Departure Order preventing the departure of

[both] minors x x x from the country; and

3. After appropriate proceedings, render judgment granting [him] joint custody, or

alternatively, granting him permanent visitation rights, over [both] his legitimate children
x x x.4
To facilitate service of summons, Juan Ignacio, via a Motion and Urgent Manifestation
of November 27, 2007, would inform the Makati RTC that Michelle and Santos may
have transferred to No. 408 Anonas Street, Ayala Alabang Village, Muntinlupa City
(Anonas residence), an address different from what he provided in his basic petition,

398
referring to the Molave Drive residence in the same village. In her Officer’s Return dated
December 10, 2007,5 process server Linda Fallorin stated the following: (1) she initially
attempted to serve the summons upon Michelle and Santos on December 7, 2007 at
the Anonas residence, only to be told by one Roberto Anonas, who refused to receive
the summons, that both were out at that time; and (2) on December 10, 2007, she was
finally able to serve the summons upon Michelle and Santos by substituted service
through the driver of Santos’ husband.

In her Answer,6 Santos disclaimed knowledge of Michelle’s present address, or her

whereabouts, adding in this regard that the adverted Molave Drive residence was being
rented out. As to be expected, Santos traversed Juan Ignacio’s insinuation that she has
conspired with Michelle to keep Ara and Ava out of his reach, or worse, hide them from
him. And in an obvious bid to deny Juan Ignacio of visitation rights, Santos raised the
question of the court’s jurisdiction over Michelle and then rattled off negative habits and
character traits of Juan Ignacio as husband and father.

On December 18, 2007, Juan Ignacio moved for the issuance of provisional visitorial
order. After a hearing on this motion, the Makati RTC issued on December 21, 2007 an
Order7 allowing Juan Ignacio to visit her daughters on Christmas Day and New Year’s
Day. The visiting grant came after the court, taking stock of the Officer’s Return,
declared that it has acquired jurisdiction over the person of Michelle, but despite being
given the opportunity to file a responsive pleading, she has failed to do so.

Christmas and New Year’s Day 2008 came and went, but Juan Ignacio was unable to
see his little girls in those days for reasons of little materiality to this narration.

On January 2, 2008, Michelle filed in SP PROC. Case No. M-6543 a Motion to Admit
Answer and an Answer (with Affirmative Defenses and With Very Urgent Ex-Parte
Motion for Issuance of Protection Order).8cralawlibrary

In her Motion to Admit Answer, Michelle acknowledged learning from her mother about
the delivery of the summons and a copy of the petition for custody to their Anonas
Residence. She, however, disregarded said summons thinking, so she claimed, that it
was improperly served upon her person. It was, she added, only upon learning of the
issuance of the provisional order of visitation rights that she gathered enough courage
to come out to present her side.9cralawlibrary

In her Answer, on the other hand, Michelle owned up sole responsibility for the decision
not to allow her husband to see their daughters. In support of her plea for the dismissal
of his petition for custody, the denial of visitation rights pendente lite, and in the
meanwhile the ex parte issuance in her favor of a temporary protection order
(TPO),10 she recounted in lurid details incidents characterizing the painful life she and
her children allegedly had to endure from her husband whom she tagged as a drug
user, sexual pervert, emotionally unstable and temperamental, among other names. In
her words, Juan Ignacio’s “wild, decadent, irresponsible lifestyle makes him unfit to
exercise parental authority and even enjoy visitation rights.” 11cralawlibrary

399
During the January 4, 2008 hearing on Michelle’s prayer for a TPO, Judge Macaraig-
Guillen expressed her bent to maintain her jurisdiction over SP PROC. Case No. M-
6543 and her disinclination to issue the desired TPO. In her Order of even date, she
directed that the ensuing observations she earlier made be entered into the
records:chanroblesvirtualawlibrary
1. She is not inclined to issue a [TPO] in favor of respondent at this time because she
initially questioned the jurisdiction of this Court over her person and only resorted to this
Urgent Ex-Parte Motion for a Protective Order after she realized that the Court had
every intention of maintaining jurisdiction over this case x x x. It was emphasized that
the Court does not issue Protective Orders over a person who has not bothered to
appear in Court x x x. Until the respondent herself shows up in order to recognize the
jurisdiction of this Court over her and in order to substantiate the allegations in her
Urgent Motion, there is no basis for this Court to address the matters contained in the
said Urgent Ex-Parte Motion.

2. Secondly, x x x even assuming for the sake of argument that the petitioner is, as
respondent described him to be, temperamental, violent, a habitual drug user and a
womanizer, these qualities cannot, per se, prevent him from exercising visitation rights
over his children because these are rights due to him inherently, he being their
biological father.12
During the same hearing, the Makati RTC granted Juan Ignacio visitation rights on one
(1) Saturday and Sunday in January 2008 considering that he was unable to see his
children on the days granted under the December 21, 2007 Order.

Subsequently, by its Order of January 21, 2008, as would later be effectively reiterated
by another Order13 of March 7, 2008, the Makati RTC resolved to deny admission of
Michelle’s answer to the petition for custody and declared her in default, pertinently
disposing thusly:chanroblesvirtualawlibrary
WHEREFORE, in view of the foregoing, respondent Araneta’s Motion to Admit Answer
of January 2, 2008 is herein DENIED for lack of merit.

Because of respondent Araneta’s failure to file her responsive pleading within the
reglementary period, x x x respondent Araneta is herein declared in DEFAULT in this
proceedings.

As a consequence of this ruling, x x x the petitioner is allowed to present evidence ex-

parte to substantiate the allegation in his Petition x x x. 14
On January 21, 2008 also, Michelle interposed a Motion to Withdraw Urgent Ex-Parte
Motion for Protective Order, there pointing out that no right of Juan Ignacio, if any, will
be affected if the said urgent motion is withdrawn or expunged from her answer. And
obviously to sway the Makati RTC’s mind of the resulting insignificance of such
withdrawal, if approved, Michelle cited the ensuing observation thus made by the court
during the hearing on January 4, 2008:chanroblesvirtualawlibrary
COURT:chanroblesvirtualawlibrary

400
Well, I agree, she should really appear but whether or not she should really appear here
and substantiate her allegations for the issuance of a protective order as far as I am
concerned is irrelevant insofar as the enforcement of petitioner’s visitation rights are
concerned, this case is for custody, this is not a case for the issuance of protective
orders that is only a counter manifestation that she is seeking. 15
It is upon the foregoing set of events and proceedings that Michelle, on March 25, 2008,
instituted, pursuant to RA 9262, a Petition For Temporary and Permanent Protection
Order16 (Petition for Protection Order) before the RTC in Muntinlupa City, docketed
as Civil Case No. 08-023. Thereat, Michelle claimed, among other things, that in the
course of their marriage, Juan Ignacio made her and their children engage in sexual
acts inimical to their emotional, physical and psychological development and well-being;
that he engaged in perverted sexual acts with friends, victimizing her and the children;
that he has consistently failed and refused to support their family; and that he has a
violent temper and was consistently harassing and threatening her to get sole custody
of the children. Michelle volunteered the information that, per her therapist, she is
suffering from Battered Woman’s Syndrome.17cralawlibrary

In the verification portion of her petition for protection order, Michelle stated that “[t]here
is x x x a pending petition for the custody of our children in the [RTC] Br. 60, Makati
City, x x x Civil Case No. M-6543.”18cralawlibrary

The following events and proceedings then transpired:chanroblesvirtualawlibrary

1. On March 31, 2008, the Muntinlupa RTC granted Michelle’s prayer for a TPO which,

at its most basic, ordered Juan Ignacio (1) to stay away at a specified distance from
Michelle and the children, inclusive of their present residence and other places they
frequent; and (2) to desist from calling or otherwise communicating with Michelle.

(2) On April 14, 2008, Juan Ignacio filed in Civil Case No. M-6543 a “Motion to
Dismiss [Petition] with Prayer to Lift [TPO]”19 anchored on several grounds, foremost
of which are the following: (a) litis pendentia, Juan Ignacio noting in this regard that the
Makati RTC is competent to grant in its SP PROC. Case No. M-6543 the very same
reliefs Michelle seeks in Civil Case No. M-6543, pursuant to Sections 17 and 18 of the
Rule on Custody of Minors;20 (b) in view of item (a) above, the Makati RTC, having first
assumed jurisdiction over identical subject matters, issues and parties, does so to the
exclusion of the Muntinlupa RTC; and (c) Michelle’s act of filing her petition for
protection order before the Muntinlupa RTC constitutes, under the premises, forum
shopping, a practice proscribed owing to the possibility of different courts arriving at
conflicting decisions. Juan Ignacio would in fact stress that the TPO thus issued by the
Muntinlupa RTC directing him to stay at least a kilometer away from his children already
conflicted with the Makati RTC-issued provisional orders granting him visitation rights
over them.

(3) By Order of May 12, 2008, the Muntinlupa RTC, conceding the exclusionary effect of
the assumption at the first instance by the Makati RTC of jurisdiction on the issue of
custody on Ava and Ara and the likelihood of the issuance by either court of clashing

401
decisions, partially granted Juan Ignacio’s motion to dismiss and accordingly modified
the TPO issued on March 31, 2008. As thus modified, the protection order, or to be
precise, the reliefs provided in favor of Michelle in said TPO shall exclude from its
coverage the orders issued by the Makati RTC in the exercise of its jurisdiction on the
pending custody case.

In another Order of June 30, 2008, the Muntinlupa RTC denied Juan Ignacio’s Motion
for Reconsideration of the earlier May 12, 2008 Order on the ground that such a motion
is a prohibited pleading.21cralawlibrary

(4) Meanwhile, Michelle, in connection with certain orders of the Makati RTC in the
custody case, denying her motion to admit answer and its jurisdictional issue
pronouncements, went to the CA on certiorari via a petition docketed as CA-G.R. SP
No. 103392.

On August 28, 2008, in CA-G.R. SP No. 103392, the CA rendered a judgment finding
partly for Michelle, as petitioner, it being the appellate court’s determination that the
substituted service of summons upon her in the custody suit was defective and
irregular. Accordingly, the period within which Michelle was to file an answer, so the CA
declared, did not start to run and, hence, the denial by the Makati RTC of her motion to
admit answer in the custody case and corollarily, its holding that she is in default, by
virtue of its Orders dated January 21, 2008 and March 7, 2008, were unwarranted and
ought to be nullified. Neither of the parties appealed the foregoing Decision. The CA
Decision, thus, became final. The fallo of the said CA Decision
reads:chanroblesvirtualawlibrary
WHEREFORE, the foregoing considered, the instant petition is hereby PARTLY
GRANTED. Accordingly, the assailed Orders of 21 January 2008 and 7 March 2008
are REVERSED and SET ASIDE while the Orders of 29 February 2008 and 31 March
2008, in so far as the denial of petitioner’s Motion for Inhibition is concerned,
are AFFIRMED. No costs.

SO ORDERED.22
Partly, the CA wrote:chanroblesvirtualawlibrary
x x x [T]he pivotal issue x x x is whether the [Makati RTC] had acquired jurisdiction over
the person of the petitioner, and if so, whether the disposition of the respondent [Makati
RTC] judge in declaring her in default has factual and legal basis. Admittedly, the
summons and the copy of the petition were not personally served upon the petitioner as
explicitly required under Section 5 of A.M. No. 03-04-04-SC x x x.

Indeed, the records would show that the summons and the petition were served upon
the petitioner x x x by substituted service as they were received by x x x a certain Nilo
Santos at said Anonas residence, an address belatedly supplied by private respondent
himself. However, x x x petitioner had actually been informed of such substituted
service sometime in the second week of December 2007 and that she had opted to
simply disregard the same since she had thought that such service is invalid x x x.

402
Despite the fact that she had known of the existence of the petition a quo and the fact
that the service of summons had been made upon her by substituted service, petitioner
made a decision whether it be an informed one or not, not to move for its dismissal on
the ground of lack of jurisdiction over her person x x x. It was only upon the issuance of
the Provisional Order that she had opted to participate in the proceeding by filing her
responsive pleading to the petition. Unfortunately though, the respondent [Makati RTC]
judge denied her motion to admit and declared her in default on the basis of its
disquisition that the failure of the petitioner to file her responsive pleading is not due to
excusable negligence or other circumstances beyond her control.

Still and all, it cannot be denied that the trial court, previous to or at the time the
petitioner had filed her responsive pleading, has yet to acquire jurisdiction over the
person of the latter. The Rule on Custody of Minors specifically requires that
service of summons be made personally on the respondent and yet the trial court
served the same upon the person of the petitioner by substituted service without proof
of exhaustion of means to personally serve the same or the impossibility thereof to
warrant the extraordinary method of substituted service.

Surely, while the Rule on Custody of Minors provides that the Rules of Court shall
apply suppletorily in custody proceedings, the express provision requiring personal
service and the very nature of custody cases should have caused the respondent judge
x x x to adhere to the evident intention of the rules, that is to have both parties in a
custody case participate therein.

Regrettably, the respondent judge, relying on the Officer’s Return x x x, precipitately

declared x x x that the trial court had already acquired jurisdiction over the person of the
petitioner. x x x

Sadly though, respondent judge, in grave abuse of discretion, assumed jurisdiction over
the person of the petitioner and proceeded to act on the petition. Worse, x x x the
respondent judge denied the motion to admit filed by the petitioner and declared the
latter in default. While the petitioner had already submitted herself to the
jurisdiction of the trial court by way of her voluntary act of filing a responsive pleading
to the petition a quo, the period to file said responsive pleading, as already stated, in so
far as the petitioner is concerned has yet to commence, and thus, the filing of her
motion to admit answer cannot plausibly be considered as to have been filed beyond
the reglementary period. In this light, the denial of said motion and the issuance of the
default order are unwarranted and are reversible errors of jurisdiction x x x. 23 (Emphasis
added.)
(5) From the adverse May 12, 2008 and June 30, 2008 Orders of the Muntinlupa RTC in
Civil Case No. M-6543, Juan Ignacio also repaired to the CA on a petition for certiorari.
Docketed as CA-G.R. SP. No. 105442, the petition prayed that the Muntinlupa RTC be
enjoined from further taking cognizance of Michelle’s protection order petition as the
said case will infringe or intrude upon the Makati RTC’s disposition of the custody
case.24cralawlibrary

403
Michelle opposed and sought the dismissal of the certiorari petition on the ground that it
is a prohibited pleading under Sec. 22(j) of RA 9262.

Eventually, the CA issued, on May 11, 2009, the assailed Decision which, on one hand,
found Michelle guilty of forum shopping, a sufficient cause for summary dismissal of a
case, but viewed, on the other, Juan Ignacio’s petition for certiorari as a prohibited
pleading which, ordinarily, would then render it dismissible. In the veritable clash under
the premises of the effects of forum shopping and the rule on prohibited pleading, the
CA nonetheless ruled for Juan Ignacio, as petitioner, pertinently disposing as
follows:chanroblesvirtualawlibrary
ACCORDINGLY, the petition is GIVEN DUE COURSE. Civil Case No. 08-023
is ORDERED DISMISSED and all issuances made by [RTC], Branch 207, Muntinlupa
City, are declared void. The [RTC] Branch 60, Makati City is DIRECTED to proceed with
the case with dispatch.25
The CA extricated itself from the foregoing legal bind on the basis of the following
ratiocination and the plausible suppositions interjected
thereat:chanroblesvirtualawlibrary
In resolving the present petition, the Court had to consider two (2) things. First, pursuant
to Section 22 (j) of A.M. No. 04-10-11-SC, a petition for certiorari against any
interlocutory order issued by a family court is a prohibited pleading. Accordingly, if this
Court were to strictly follow [said] Section 22 (j) x x x, then the present petition for
certiorari must be dismissed. Second, the Private Respondent had first moved that the
Makati RTC issue a TPO and that when her motion was denied, she filed a petition
before the Muntinlupa RTC asking that the said court issue a TPO. In short, the Private
Respondent committed forum-shopping. And when forum-shopping is committed, the
case(s) must be dismissed with prejudice.

Thus, it falls upon this Court to balance the conflict.

This Court notes that the Muntinlupa RTC tried to balance out the conflicting
jurisdictional issues with the Makati RTC by stating in its first assailed Order that the
reliefs provided in favor of [herein private respondent] in the [TPO] x x x are
modified, to exclude from its coverage those Orders issued by the Makati Court in
the exercise of its jurisdiction on the pending custody case. Be that as it may, the
Muntinlupa RTC itself recognized the jurisdiction of the Makati RTC and that the case
before it would, in fact, impinge upon the jurisdiction of the latter court when it stated
that the disposition on the matter by this Court may result in the possibility of
conflicting decisions/orders. In short, the Muntinlupa RTC itself acknowledges the
fact that any future issuances, including its eventual decision on the petition
before it, would affect the custody case pending before the Makati RTC and might
even result to conflicting decisions. Thus, in the interest of judicial stability, it is
incumbent upon this Court to ensure that this eventuality will not come to pass.

xxxx

To test the argument that a petition for certiorari is an absolutely prohibited pleading, let

404
us push the present case to its logical extreme.

What if a woman claiming to be a battered wife leaves one of her children with her
parents and another with a sibling of hers? She then went to another place, transferred
residency, and filed a petition for TPO. Her parents [and sibling], who reside in another
locality, likewise files a petition for TPO in behalf of the grandchild [and nephew/niece
entrusted] in their custody. x x x What if the family courts refuse consolidation? Is the
man devoid of any remedy and would have to spend his time shuttling between three
(3) localities since a petition for certiorari is a prohibited pleading?

What if the woman went to another locality purposely in order to find a friendly venue x x
x? Again, if we are to strictly construe Section 22 (j) of A.M. No. 04-10-11-SC that man
would just have to bear the consequences since he cannot seek the extraordinary writ
of certiorari. Or, what if both of the spouses do not reside within the court’s jurisdiction,
but the judge refuses to grant a motion to dismiss due to his zeal? What remedy would
a man have since he cannot resort to a petition for certiorari?

The rules are not sacrosanct. If they go in the way of the smooth and orderly
administration of justice, then magistrates should apply their best judgment. If not,
courts would be so hideously bound or captives to the stern and literal provisions of the
law that they themselves would, wittingly or otherwise, become administrators of
injustice.

On the one hand, this Court hereby notes that Private Respondent herself
recognizes the jurisdiction of the Makati RTC to issue a TPO. It was only after the
Makati RTC denied her prayer for a TPO when she filed a petition before the
Muntinlupa RTC asking for the issuance of a TPO. It is thus highly disturbing that the
Private Respondent sought another forum in order to try to obtain a favorable judgment.
Thus, as aptly pointed out by the Petitioner, some sort of forum-shopping was
committed.

On the other hand, if the Court were to dismiss the present petition on the ground that a
petition for certiorari is a prohibited pleading, it would have to close its eyes to the fact
that the Private Respondent wilfully committed forum-shopping. To dismiss the present
petition would, in effect, “reward” her for this negative act. This, the Court cannot
countenance.

xxxx

Accordingly, x x x Civil Case No. 08-023 must not be allowed to proceed any further.
Imperatively, to ensure that the jurisdiction of the Makati RTC remains unshackled, all of
the issuances of the Muntinlupa RTC should, by all means, be nullified. 26 (Emphasis
added.)
The CA denied Michelle’s motion for reconsideration per its equally assailed Resolution
of December 28, 2009.

405
Aggrieved, Michelle, for herself and for her minor daughters, filed the instant recourse,
her submissions revolving on the twin issues of forum shopping and the prohibition
under Sec. 22 of the Rule on Violence Against Women and Children 27 against the filing
of petitions for certiorari to defeat TPOs issued to promote the protection of victims of
violence against women and their children.

Michelle presently argues that the assailed Decision of the CA is based on an

erroneous appreciation of the facts of the case. To her, there was no forum shopping
when she filed her Petition for Protection Order in the Muntinlupa RTC while the custody
case was pending in the Makati RTC. Her stated reason: the absence in both cases of
identity of parties and rights asserted, on top of which the reliefs sought and prayed for
are different and not founded on the same set of facts.

To downplay the application of the litis pendentia principle, she argues that it was

impossible for her to apply for and secure a protective order under RA 9262 in the
custody case before the Makati RTC being, first, a respondent, not a petitioner in the
Makati case; and second, the venue for an application for protection order is, under RA
9262, the place where the woman or the offended party resides, which in her case is
Muntinlupa.28cralawlibrary

Michelle would invite attention to her having withdrawn her motion for protective order in
the custody case before the Makati RTC before she filed her Petition for Protective
Order with the Muntinlupa RTC. Additionally, she points to the CA’s Decision of August
28, 2008 in CA-G.R. SP No. 103392 (2008 CA Decision), which held that the Makati
RTC did not acquire jurisdiction over her so that all issuances of the Makati RTC were
void. All these, Michelle claims, argue against the existence of litis pendentia.

The Issue

The issue to be resolved in this case is whether or not petitioner, in filing her Petition for
Protection Order before the Muntinlupa RTC, violated the rule on forum shopping, given
the pendency of the respondent’s Petition for Custody before the Makati RTC and
considering incidentally that she filed said petition for protection order after the Makati
RTC had denied her application for protection order in the custody case.

The Court’s Ruling

Before anything else, however, the Court wishes to point out disturbing developments in
this proceeding which ought not to be swept under the rug on the simplistic pretext that
they may not be determinative of the outcome of this case. But first, some basic
premises on record.

First, as correctly stated in this petition, Michelle withdrew her Ex Parte Motion for
Issuance of Protective Order in the custody case prior to her filing of her Petition for
Protection Order with the Muntinlupa RTC. It should be made clear, however, that she
filed said motion to withdraw on January 21, 2008, or after the Makati RTC, in its Order
dated January 4, 2008, had, for all intents and purposes, denied the said ex

406
parte motion. To recapitulate, the Makati RTC judge made it of record that she was not
inclined to issue a protective order in favor of a person, i.e., petitioner Michelle, who has
not bothered to appear in court, even assuming, she adds, that the person against
whom the protection order is directed, i.e., Juan Ignacio, is prone to violence, a drug
user and a womanizer.

Second, there is absolutely nothing in the 2008 CA Decision declaring that all issuances
of the Makati RTC were void. In order to bolster her position that the rule against forum
shopping was not breached in this case, Michelle matter-of-factly alleged in this
recourse that since in the 2008 CA Decision it was ruled that the Makati RTC did not
acquire jurisdiction over her person due to the irregularity in the service of summons,
then “all the issuances or orders of [the Makati RTC in the custody case] were
void;”29 and “[t]herefore, there was no litis pendentia to begin with since the RTC of
Makati City Branch 60 had no jurisdiction from the start.” 30cralawlibrary

For perspective, the 2008 CA Decision did not rule that the Makati RTC did not acquire
jurisdiction over Michelle. Quite the contrary. As a matter of record, the CA in that
disposition found and thus declared Michelle to have voluntarily submitted herself to the
jurisdiction of the Makati RTC when she filed her Answer in SP. PROC. Case No. 6543
on January 2, 2008. But to be precise about things, the CA in that 2008 Decision found,
as having been tainted with of grave abuse of discretion, only that part of the Makati
RTC’s disposition denying Michelle’s motion to admit answer for belated filing and the
consequent default order. Along this line, the CA merely nullified the Makati RTC’s
Orders dated January 21, 2008 and March 7, 2008 which declared Michelle in default
and denied her motion for reconsideration, respectively. The ensuing excerpts of the
2008 CA Decision speak for themselves:chanroblesvirtualawlibrary
Sadly though, respondent judge, in grave abuse of discretion, assumed jurisdiction over
the person of the petitioner and proceeded to act on the petition. Worse, without due
regard to the plain intention of the rule in ensuring the adjudication of the controversy
surrounding a custody case based on its merits, the respondent judge denied the
motion to admit filed by the petitioner and declared the latter in default. While the
petitioner had already submitted herself to the jurisdiction of the trial court by
way of her voluntary act of filing a responsive pleading to the petition a quo, the
period to file said responsive pleading, as already stated, in so far as the
petitioner is concerned has yet to commence, and thus, the filing of her motion to
admit answer cannot plausibly be considered as to have been filed beyond the
reglementary period. In this light, the denial of said motion and the issuance of
the default order are unwarranted and are reversible errors of jurisdiction,
therefore correctible by a writ of certiorari. (Emphasis supplied.)

xxxx

WHEREFORE, the foregoing considered, the instant petition is hereby PARTLY

GRANTED. Accordingly, the assailed Orders of 21 January 2008 and 7 March 2008
are REVERSED and SET ASIDE while the Orders of 29 February 2008 and 31 March
2008, in so far as the denial of petitioner’s Motion for Inhibition is concerned,

407
are AFFIRMED. No costs.

SO ORDERED.31
Withal, the Court finds it downright offensive and utterly distasteful that petitioner raised
the following as one of the issues in this appellate
proceeding:chanroblesvirtualawlibrary
Whether or not the petitioners are guilty of forum-shopping when the Petition for
Custody of private respondent Araneta was dismissed by the Court of Appeals on the
ground that the RTC of Makati City Branch 60 did not acquire jurisdiction because the
summons was not served personally upon herein Petitioner Michelle Lana Brown
Araneta.32 (Emphasis supplied.)
Petitioner’s above posture smacks of bad faith, taken doubtless to deceive and mislead
the Court. Indeed, nothing in either the body or the fallo of the 2008 CA Decision would
yield the conclusion that the petition for custody is being dismissed, as petitioner
unabashedly would have the Court believe.

Was there forum shopping? Did petitioner forum shop?

A circumstance of forum shopping occurs when, as a result or in anticipation of an

adverse decision in one forum, a party seeks a favorable opinion in another forum
through means other than appeal or certiorari by raising identical causes of action,
subject matter and issues. Stated a bit differently, forum shopping is the institution of
two or more actions involving the same parties for the same cause of action, either
simultaneously or successively, on the supposition that one or the other court would
come out with a favorable disposition. 33 An indicium of the presence of, or the test for
determining whether a litigant violated the rule against, forum shopping is where the
elements of litis pendentia are present or where a final judgment in one case will
amount to res judicata in the other case.34cralawlibrary

Litis pendentia,35 as a ground for the dismissal of a civil suit, refers to that situation
wherein another action is pending between the same parties for the same cause of
action, such that the second action becomes vexatious and unnecessary. 36 For the bar
of litis pendentia to be invoked, the concurring requisites must be present: (1) identity of
parties, or at least such parties as represent the same interests in both actions; (2)
identity of rights asserted and relief prayed for, the relief being founded on the same
facts; and (3) the identity of the two preceding particulars is such that any judgment
rendered in the pending case, regardless of which party is successful would amount
to res judicata in the other.37cralawlibrary

Thus, it has been held that there is forum shopping (1) whenever as a result of an
adverse decision in one forum, a party seeks a favorable decision (other than by appeal
or certiorari) in another; or (2) if, after he has filed a petition before the Supreme Court,
a party files another before the CA since in such case said party deliberately splits
appeals “in the hope that even as one case in which a particular remedy is sought is
dismissed, another case (offering a similar remedy) would still be open”; or (3) where a
party attempts to obtain a preliminary injunction in another court after failing to obtain it

408
from the original court.38cralawlibrary

The evil sought to be avoided by the rule against forum shopping is the rendition by two
competent tribunals of two separate and contradictory decisions. Unscrupulous party
litigants, taking advantage of a variety of competent tribunals, may repeatedly try their
luck in several different fora until a favorable result is reached. To avoid the resultant
confusion, the Court adheres to the rules against forum shopping, and a breach of these
rules results in the dismissal of the case. 39cralawlibrary

Considering the above doctrinal pronouncements on forum shopping, We find all the
badges of this deplorable, docket-clogging practice present in this case.

As a result or in anticipation of an adverse ruling of the Makati RTC, petitioner

sought the favorable opinion of the Muntinlupa RTC 

As discussed above, the presiding judge of the Makati RTC, in the custody case, made
of record that she was not inclined to issue a protection order in favor of Michelle
because she did not bother to appear in Court and that the allegations against Juan
Ignacio cannot, per se, prevent him from exercising visitation rights over his children.
After this adverse ruling, Michelle sought the favorable opinion of the Muntinlupa RTC
by filing an independent Petition for Protection Order.

The cases have identical parties 

Clearly, the Petition for Custody and the Petition for Protection Order have the same
parties who represent the same interests. The fact that Ava and Ara, who are parties in
the Petition for Protection Order, are not impleaded in the Petition for Custody is of no
moment because they are precisely the very subjects of the Petition for Custody and
their respective rights are represented by their mother, Michelle. In a long line of cases
on forum shopping, the Court has held that absolute identity of the parties is not
required, it being enough that there is substantial identity of the parties 40 or at least such
parties represent the same interests in both actions. It does not matter, as here, that in
the Petition for Custody, Juan Ignacio is the petitioner and Michelle is the respondent
while in the Petition for Protection Order, their roles are reversed. That a party is the
petitioner in one case and at the same time, the respondent in the other case does not,
without more, remove the said cases from the ambit of the rules on forum shopping. So
did the Court hold, for example in First Philippine International Bank v. Court of Appeals,
that forum shopping exists even in cases like this where petitioners or plaintiffs in one
case were impleaded as respondents or defendants in another. 41 Moreover, this Court
has constantly held that the fact that the positions of the parties are reversed, i.e., the
plaintiffs in the first case are the defendants in the second case or vice versa, does not
negate the identity of parties for purposes of determining whether the case is
dismissible on the ground of litis pendentia.42cralawlibrary

The rights asserted and reliefs prayed for are based on the same facts   

409
Further, the rights asserted and reliefs prayed for in Civil Case No. 08-023 are
practically based on the same facts and are so intertwined with that in SP. PROC. Case
No. 6543, such that any judgment rendered in the pending cases, regardless of which
party is successful, will amount to res judicata.

In the custody case, Juan Ignacio mainly asserted his right, as father, to visit his
children and enjoy joint custody over them. He prayed for a judgment granting him joint
custody, or alternatively, permanent visitation rights over Ava and Ara.

In disposing of the custody case, the Makati RTC is expected, following the rationale
behind the issuance of the Rule on Custody of Minors, to consider, among others, the
best interest of the children,43 any threat or danger of physical, mental, sexual or
emotional violence which endangers their safety and best interest, their health, safety
and welfare,44 any history of child or spousal abuse by the person seeking
custody,45 habitual use of alcohol, dangerous drugs or regulated substances, 46 marital
misconduct,47 and the most suitable physical, emotional, spiritual, psychological and
educational environment for the holistic development and growth of the
minor.48cralawlibrary

Michelle’s answer and motion for issuance of protection order in the custody case
contained allegations of psychological, sexual, emotional and economic abuse she and
her children suffered at the hands of Juan Ignacio to defeat his asserted right to have
joint custody over Ava and Ara and as argument that the grant of visitation rights in his
favor will not be in the best interest of the children. These allegations of abuse were in
substance the very same ones she made in her Petition for Protection Order.

Juan Ignacio’s rights and reliefs prayed for are dependent on and, to be sure, would be
predicated on the question of whether or not granting him the desired custody or at least
visitations rights over the children are in their best interest. In deciding this issue, the
Makati RTC will definitely have to reckon with and make a finding on Michelle’s
allegations of psychological, sexual, emotional and economic abuse.

Similarly, the Muntinlupa RTC must necessarily consider and make a determination
based on the very same facts and allegations on whether or not Michelle shall be
entitled to the relief she prayed for in her own petition, in particular, a permanent
protection order against Juan Ignacio.

Elements of litis pendentia are present and any judgment in the pending cases
would amount to res judicata 

Any judgment rendered in the pending cases, regardless of which party is successful,
would amount to res judicata. Consider: If the Makati RTC were to grant Juan Ignacio’s
petition for custody, this would necessarily mean that it would be in the best interest of
the children if he were allowed to visit and spend time with them and that granting Juan
Ignacio visitation rights would not pose any danger or threat to the children.

410
On the other hand, a grant by the Muntinlupa RTC of Michelle’s prayer for a permanent
protection order would presuppose at the minimum that it would be to the children’s best
interest if Juan Ignacio is directed to keep away from them, necessary implying that he
is unfit even to visit Ara and Ava. Conversely, if Juan Ignacio’s Petition for Custody were
denied, then it would mean that the Makati RTC gave weight and credence to Michelle’s
allegations of abuse and found them to be in the best interest of the children to bar Juan
Ignacio from visiting them. Thus, the Muntinlupa RTC should have no ground to deny
Michelle’s Petition for Protection Order pending before it.

The evil sought to be avoided by the rule against forum shopping is present in
this case 

The grave mischief sought to be avoided by the rule against forum shopping, i.e., the
rendition by two competent tribunals of two separate and contradictory decisions, is
well-nigh palpable in this case. If the Muntinlupa RTC were to rule that Michelle was
entitled to a Protection Order, this would necessarily conflict with any order or decision
from the Makati RTC granting Juan Ignacio visitation rights over Ava and Ara.  As aptly
pointed out by Juan Ignacio in his Comment such a conflict had already occurred, as
the TPO issued by the Muntinlupa RTC actually conflicted with the Orders issued by the
Makati RTC granting Juan Ignacio temporary visitation rights over his children. There
now exists an Order from the Muntinlupa RTC which, among others, directed Juan
Ignacio to stay at least one (1) kilometer away from Ava and Ara, even as the Makati
RTC recognized, in two (2) separate Orders, that he had the right, albeit temporarily to
see his children.49cralawlibrary

In fact, Michelle was very much aware of the possible conflicts between the orders of
Makati RTC and Muntinlupa RTC. In her Opposition (to Urgent Motion for Immediate
Enforcement of Visitation Orders dated December 21, 2007 and January 4, 2008), she
recognized that the granting of visitation rights in favor of Juan Ignacio would conflict the
TPO and, therefore, the Makati Court would be rendering a conflicting decision with that
of the Muntinlupa RTC, viz:chanroblesvirtualawlibrary
x x x There is therefore, no conflict of jurisdiction in this case but since the petitioner
filed a Petition for Certiorari in the Court of Appeals, which includes the issue of
custody, we submit that the matter of custody pendente lite including visitation,
should not and can not be resolved by this Honorable Court without conflicting
with the Temporary Protection Order of a co-equal court, the RTC of Muntinlupa
City. x x x

xxxx

If the petitioner is granted visitation rights, the Honorable Court, with due respect would
be allowing him to violate the TPO against him; the Honorable Court would then be
rendering a conflicting decision.50 (Emphasis supplied.)
No less than the Muntinlupa RTC itself recognized the resulting aberration of its orders
conflicting with that/those of the Makati RTC. As it were, the former, in its Order of May
12, 2008, resolving Juan Ignacio’s Motion to Dismiss with Prayer to Lift Temporary

411
Protection Order, categorically stated that there may be orders in the protection order
case that would possibly conflict with the orders issued by the Makati RTC in the
custody case. So it was that to address these possible conflicts, the Muntinlupa RTC
partially granted Juan Ignacio’s Motion to Dismiss by modifying the reliefs provided
under the TPO by excluding from its coverage those orders issued by the Makati RTC in
the exercise of its jurisdiction over the custody case. Pursuant to the foregoing Order of
the Muntinlupa RTC, the December 21, 2007 and January 4, 2008 Orders of the Makati
RTC, granting Juan Ignacio visitation rights on Christmas Day and New Year’s Day and
one (1) Saturday and Sunday in January 2008, are not covered by the reliefs under the
TPO.  Hence, despite the TPO directing Juan Ignacio to stay at least one (1) kilometer
away from Ava and Ara, Juan Ignacio would still have the right to see his children by
virtue of the orders issued by the Makati RTC granting him temporary visitation rights.
The said Muntinlupa RTC Order reads:chanroblesvirtualawlibrary
Based on the pleadings filed, this (Muntinlupa) Court holds that since the Makati Court
first acquired jurisdiction over the issue of custody, the latter continues to exercise it, so
that any disposition on the matter by this Court may result in the possibility of
conflicting decisions/orders.

Wherefore, this Court partially grants respondent’s Motion to Dismiss insofar as those
matters covered by A.M. No. 03-04-04-SC, Rule on Custody of Minors and Writ of
Habeas corpus in Relation to Custody of Minors are concerned, which are within the
jurisdiction of the Makati Court, but continues to take cognizance on matters not
included therein (A.M. No. 03-04-04-SC) but within the protective mantle of R.A. No.
9262.

Consequently, the reliefs provided in favor of the petitioner in the Temporary Protection
Order dated March 31, 2008 are modified, to exclude from its coverage those Orders
issued by the Makati Court in the exercise of its jurisdiction on the pending custody
case.

The motions to lift the temporary protection order (except on those matter stated above)
and to cite petitioner in contempt of court are denied for lack of merit. 51 (Emphasis
supplied.)
Verily, the Muntinlupa RTC was aware that its issuances and its eventual final
disposition on the Petition for Protection Order would affect the custody case before the
Makati RTC, if not totally clash with the latter court’s decision. We agree with the CA’s
ensuing observation:chanroblesvirtualawlibrary
This Court notes that the Muntinlupa RTC tried to balance out the conflicting
jurisdictional issues with the Makati RTC by stating in its first assailed Order that the
reliefs provided in favor of [herein private respondent] in the [TPO] dated March
31, 2008 are modified, to exclude from its coverage those Orders issued by the
Makati Court in the exercise of its jurisdiction on the pending custody case. Be
that as it may, the Muntinlupa RTC itself recognized the jurisdiction of the Makati RTC
and that the case before it would, in fact, impinge upon the jurisdiction of the latter court
when it stated that the disposition on the matter by this Court may result in the
possibility of conflicting decisions/orders. In short, the Muntinlupa RTC itself

412
acknowledges the fact that any future issuances, including its eventual decision
on the petition before it, would affect the custody case pending before the Makati
RTC and might even result to conflicting decisions. Thus, in the interest of judicial
stablility, it is incumbent upon this Court to ensure that this eventuality will not come to
pass.52
Civil Case No. 08-023 should, thus, be dismissed with prejudice for being a clear case
of forum shopping.

WHEREFORE, premises considered, the appealed May 11, 2009 Decision and the
December 28, 2009 Resolution of the Court of Appeals in CA-G.R. SP. No. 105442,
particularly insofar as these ordered the dismissal of subject Civil Case No. 08-023 and
the nullification of the orders made in that case, are hereby AFFIRMED.

No costs.

SO ORDERED.

THIRD DIVISION

G.R. NO. 156797               July 6, 2010

IN RE: RECONSTITUTION OF TRANSFER CERTIFICATES OF TITLE NOS. 303168

AND 303169 AND ISSUANCE OF OWNER'S DUPLICATE CERTIFICATES OF TITLE
IN LIEU OF THOSE LOST, ROLANDO EDWARD G. LIM, Petitioner.

DECISION

BERSAMIN, J.:

Petitioner Rolando Edward Lim (Lim) seeks to reverse the decision rendered on
November 23, 2000 in LRC Case No. Q-11099 (98) by the Regional Trial Court (RTC),
Branch 226, in Quezon City,1 dismissing his petition for judicial reconstitution of Transfer
Certificate of Title (TCT) No. 303168 and TCT No. 303169 of the Registry of Deeds for
Quezon City, and for the issuance of owner’s duplicate copies of said TCTs upon a
finding that Lim was guilty of forum-shopping. The RTC likewise denied Lim’s motion for
reconsideration.

We hold that the dismissal was unwarranted and arbitrary for emanating from an
erroneous application of the rule against forum shopping. Thus, we undo the dismissal
and reinstate the application for judicial reconstitution.

Antecedents

On December 29, 1998, Lim filed in the RTC his petition for judicial reconstitution of
TCT No. 303168 and TCT No. 303169 of the Registry of Deeds for Quezon City, and for
the issuance of owner’s duplicate copies of said TCTs. He alleged that he was a

413
registered co-owner of the parcels of land covered by the TCTs, and that he was filing
the petition for the beneficial interest of all the registered owners thereof; that the
original copies of the TCTs kept in the custody of the Registry of Deeds for Quezon City
had been lost or destroyed as a consequence of the fire that had burned certain
portions of the Quezon City Hall, including the Office of said Registry of Deeds, on July
11, 1988; that the originals of the owner’s duplicates of the TCTs kept in his custody
had also been lost or destroyed in a fire that had gutted the commercial establishment
located at 250 Villalobos Street, Quiapo, Manila on February 24, 1998; and that no co-
owner’s, mortgagee’s, or lessee’s TCTs had ever been issued.

The petition prayed thus:

(1) to declare null and void, the originals of the OWNER'S DUPLICATE of
TRANSFER CERTIFICATE OF TITLE nos. 303168 and 303169 which are lost;

(2) xxx after due adjudication and hearing, order and direct the Register of Deeds
for Quezon City to reconstitute the original copy of Transfer Certificate Title Nos.
303168 and 303169 in the name of the registered owners, in exactly the same
terms and conditions and on the basis of (i) the copies of the same Certificates of
Title as previously issued by the Register of Deeds for Quezon City attached to
the petition and (ii) the separate relocation plans and technical descriptions
pertaining to the real estate properties covered by the Transfer Certificates of
Title No. 303168 and 303169, duly approved by the Lands Management Services
of the Department of Environmental and Natural Resources and once
accomplished;

(3) the Registry of Deeds for Quezon City be further ordered and directed to
issue OWNER’S DUPLICATES of the reconstituted Certificates of Title to the
Petitioner in lieu of the ones that were lost and/or destroyed. 2

On April 27, 1999, the RTC issued an order, setting the petition for hearing on
September 3, 1999. As the RTC required, a copy of the order was published in the
Official Gazette on July 19, 1999 and July 26, 1999; and posted at the main entrance of
the Quezon City Hall, and in other specified places. The Office of the Register of Deeds
for Quezon City, the Land Registration Authority (LRA), the Department of Environment
and Natural Resources, the Office of the City Attorney of Quezon City, the Office of the
City Prosecutor of Quezon City, the Office of the Solicitor General, and the owners of
the adjoining properties were each similarly duly furnished a copy of the order.

On October 15, 1999, when the petition was called for hearing, no oppositors appeared
despite notice. Whereupon, Lim was allowed to present evidence ex parte before the
Branch Clerk of Court whom the RTC appointed as commissioner for that purpose.

On November 4, 1999, Lim formally offered his documentary exhibits to prove: (a) his
compliance with the jurisdictional requirements; (b) his authority to represent the
registered co-owners of the parcels of land covered by the TCTs; (c) his and his wife’s

414
co-ownership of the parcels of land; (d) the facts and circumstances surrounding the
loss of the originals of the owner’s duplicate copies; and (e) the fact that the TCTs were
among the records burned during the fire that razed the Quezon City Hall.

On August 23, 2000, the RTC received the report from the LRA that relevantly stated:

xxx

(2) Our record shows that Transfer Certificates of Title Nos. 303168 and 303169,
covering Lot 7, Block 586 and Lot 5, Block 585 respectively, both of the subdivision plan
Psd-38199 are also applied for reconstitution of titles under Administrative
Reconstitution Proceedings, (Republic Act 6732). The aforesaid TCTs are included in
Administrative Reconstitution Order No. Q-577 (98) dated November 3, 1998, however,
they were not reconstituted administratively, it appearing that their owner's duplicate
were likewise lost.3

xxx

On the basis of the LRA report, the RTC dismissed Lim’s petition on November 23,
2000, viz:

In view of the report of the LRA that the subject titles are also applied for reconstitution
of titles under Administrative Reconstitution Proceedings, the Court resolves to dismiss
the instant petition, it appearing that there is forum-shopping in the instant case,
considering further the strict requirements of the law on the reconstitution of titles.

Petitioner failed to disclose that he also applied for administrative reconstitution and in
fact stated in his Petition that:

x x x           x x x          x x x

4. To the best of the Petitioner's knowledge, no such action or proceeding is

pending in the Supreme Court, the Court of Appeals, or any other tribunal or
agency; and

5. If the Petitioner should thereafter learn that a similar action or proceeding has
been filed or is pending before the Supreme Court, the Court of Appeals or any
other tribunal or agency, the Petitioner undertakes to report that fact within five
(5) days therefrom to this Court wherein the original pleading and Sworn
Certification contemplated herein has been filed.

x x x           x x x          x x x

WHEREFORE, premises considered, the instant action is hereby DISMISSED. 4

Lim’s motion for reconsideration filed on January 3, 2001 was denied for lack of merit.

415
Hence, this appeal directly to the Court via petition for review on certiorari.

Issues

Lim poses several questions of law, namely: 5

I.

Whether or not the subsequent filing by the petitioner of his petition for judicial
reconstitution of the originals of Transfer Certificates of Title Nos. 303168 and 303169
after the said loss of the exclusive sources from which certificates of title may be
administratively reconstituted under Republic Act No. 6732 is the proper legal
alternative under Section 110 of Presidential Decree No. 1529 and is in accordance with
the procedure under Republic Act No. 26;

II.

Whether or not under the stated facts and circumstances, petitioner can be deemed to
have engaged in forum shopping;

III.

Whether or not under the stated facts and circumstances, the non-disclosure by the
petitioner of the previous filing of the application for administrative reconstitution of the
originals of Transfer Certificates of Title Nos. 303168 and 303169 in his Certification
against Forum Shopping incorporated in the petition for judicial reconstitution is a
violation of Section 5, Rule 7 of the 1997 Rules of Civil Procedure; and

IV.

Whether or not the petitioner, who had no fault at all in the destruction of the original
certificates of title safekept in the Registry of Deeds for Quezon City may be unjustly
deprived of his proprietary right to obtain and possess reconstituted certificates of title
over the real estate properties covered by Transfer Certificates of Title Nos. 303168 and
303169 specially where he complied with all the strict requirements of judicial
reconstitution under Presidential Decree No. 1529 and in accordance with the
procedure under and requirements of Republic Act No. 26.

The foregoing issues may be restated thus: Did the RTC correctly dismiss the petition of
Lim on the ground of forum shopping?

Ruling

Forum shopping is the act of a party litigant against whom an adverse judgment has
been rendered in one forum seeking and possibly getting a favorable opinion in another
forum, other than by appeal or the special civil action of certiorari, or the institution of

416
two or more actions or proceedings grounded on the same cause or supposition that
one or the other court would make a favorable disposition. 6 Forum shopping happens
when, in the two or more pending cases, there is identity of parties, identity of rights or
causes of action, and identity of reliefs sought. 7 Where the elements of litis
pendentia are present, and where a final judgment in one case will amount to res
judicata in the other, there is forum shopping.8 For litis pendentia to be a ground for the
dismissal of an action, there must be: (a) identity of the parties or at least such as to
represent the same interest in both actions; (b) identity of rights asserted and relief
prayed for, the relief being founded on the same acts; and (c) the identity in the two
cases should be such that the judgment which may be rendered in one would,
regardless of which party is successful, amount to res judicata in the other. 9

For forum shopping to exist, both actions must involve the same transaction, same
essential facts and circumstances and must raise identical causes of action, subject
matter and issues. Clearly, it does not exist where different orders were questioned, two
distinct causes of action and issues were raised, and two objectives were sought. 10

The petition has merit.

Lim was not guilty of forum shopping, because the factual bases of his application for
the administrative reconstitution of the TCTs and of his petition for their judicial
reconstitution, and the reliefs thereby sought were not identical.

When he applied for the administrative reconstitution in the LRA on July 21,1988, 11 he
still had his co-owner’s duplicate copies of the TCTs in his possession, but by the time
the LRA resolved his application on November 3, 1998, allowing the relief prayed
for,12 his co-owner’s duplicate copies of the TCTs had meanwhile been destroyed by fire
on February 24, 1998, a fact that he had duly reported in an affidavit dated May 29,
1998 presented on June 1, 1998 to the Office of the Register of Deeds for Quezon
City.13 The loss by fire was corroborated by the certification issued by the Chief of Fire
District I of Manila to the effect that the commercial establishment for Cheer-up Foods
Corporation, the petitioner’s company, had been gutted by fire on February 24,
1998.14 Thus, the intervening loss of the owner’s duplicate copies that left the favorable
ruling of the LRA no longer implementable gave rise to his need to apply for judicial
reconstitution in the RTC pursuant to Section 12 of Republic Act No. 26. 15

The RTC should have easily discerned that forum shopping did not characterize the
petitioner’s resort to judicial reconstitution despite the previous proceeding for
administrative reconstitution. Although the bases for the administrative reconstitution
were the owner’s duplicate copies of TCT No. 303168 and TCT No. 303169, those for
judicial reconstitution would be other documents that "in the judgment of the court, are
sufficient and proper

basis for reconstituting the lost or destroyed certificate of title." 16 The RTC should have
also noted soon enough that his resort to judicial reconstitution was not because his
earlier resort to administrative reconstitution had been denied (in fact, the LRA had

417
resolved in his favor),17 but because the intervening loss to fire of the only permissible
basis for administrative reconstitution of the TCTs mandated his resort to the
RTC.18 Indeed, he came to court as the law directed him to do, unlike the litigant
involved in the undesirable practice of forum shopping who would go from one court to
another to secure a favorable relief after being denied the desired relief by another
court.19

Neither did the petitioner’s omission from the petition for judicial reconstitution of a
reference to the application for administrative reconstitution in the LRA justify the
dismissal of the petition. The petition for judicial reconstitution and the application for
administrative reconstitution addressed different situations and did not have identical
bases. Besides, only the RTC could grant or deny any relief to him at that point.1avvph!
1

The motu proprio dismissal of the petition for judicial reconstitution by the RTC although
the Government did not file a motion to dismiss grounded on the petitioner’s supposed
failure to comply with the contents of the required certification was yet another glaring
error of the RTC. A violation of the rule against forum-shopping other than a willful and
deliberate forum shopping did not authorize the RTC to dismiss the proceeding without
motion and hearing. Specifically, the submission of a false certification of non-forum
shopping did not automatically warrant the dismissal of the proceeding, even if it might
have constituted contempt of court, for Section 5, Rule 7, of the 1997 Rules of Civil
Procedure, has been clear and forthright, to wit:

Section 5. Certification against forum shopping.--The plaintiff or principal party shall

certify under oath in the complaint or other initiatory pleading asserting a claim for relief,
or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he
has not theretofore commenced any action or filed any claim involving the same issues
in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such
other action or claim is pending therein; (b) if there is such other pending action or
claim, a complete statement of the present status thereof; and (c) if he should thereafter
learn that the same or similar action or claim has been filed or is pending, he shall
report that fact within five (5) days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and
after hearing. The submission of a false certification or non-compliance with any of the
undertakings therein shall constitute indirect contempt of court, without prejudice to the
corresponding administrative and criminal actions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum shopping, the same shall be ground for
summary dismissal with prejudice and shall constitute direct contempt, as well as cause
for administrative sanctions.1avvphi1

418
In Young v Keng Seng,20 which involved a false certification of non-forum shopping, the
Court cogently held that:

The foregoing certification is obviously inaccurate, if not downright false, because it

does not disclose the filing of the First Case. Had this violation been appropriately
brought up in the Motion to Dismiss, it could have resulted in the abatement of the
Second case.

Nonetheless, strengthening our ruling on the First issue, we hold that substantial justice
requires the resolution of the present controversy on its merits.

By its outright and undiscerning application of the sanction against forum shopping, the
RTC plunged into an unwanted limbo the petitioner’s and his co-owners’ ownership of
the realties. A modicum of care and discernment could have avoided such a prejudicial
result. We now put an end to such limbo by cautioning all judges to exercise care and
discernment in their enforcement of the rule against forum shopping, that they may not
unduly trench on the valuable rights of litigants.

WHEREFORE, the decision dated November 23, 2000 is set aside.

The petition for the judicial reconstitution of the petitioner’s Transfer Certificate of Title
No. 303168 and Transfer Certificate of Title No. 303169 of the Registry of Deeds for
Quezon City, and for the issuance of the owner’s duplicate copies thereof, is reinstated.

The Regional Trial Court, Branch 226, in Quezon City is directed to forthwith resume
proceedings thereon, and to render its decision on the merits as soon as practicable.

No pronouncement on costs of suit.

SO ORDERED.

FIRST DIVISION

G.R. No. 191699, April 19, 2016

WILLIAM GO QUE CONSTRUCTION AND/OR WILLIAM GO

QUE, Petitioner, v. COURT OF APPEALS AND DANNY SINGSON, RODOLFO
PASAQUI,1 LENDO LOMINIQUI,2 AND JUN ANDALES, Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for certiorari3 are the Resolutions dated November 12,

20094 and February 5, 20105 of the Court of Appeals (CA) in CA-G.R. SP No. 109427,
holding that the photocopies of the identification cards (ID) submitted by private

419
respondents Danny Singson (Singson), Rodolfo Pasaqui (Pasaqui), and Lendo
Lominiqui (Lominiqui), as well as their Joint Affidavit 6 attesting to the identity of private
respondent Jun Andalos (Andales) and the fact that he was a co-petitioner in the case,
served as competent evidence of private respondents' identities and, thus, cured the
defect in the Verification/Certification of Non-Forum Shopping of their petition
for certiorari before the CA.

The Facts

Private respondents filed complaints7 for illegal dismissal against petitioner William Go

Que Construction and/or William Go Que (petitioner) before the National Labor
Relations Commission (NLRC), National Capital Region-North Sector Arbitration
Branch, claiming that they were hired as steelmen on various dates, and were regular
employees of petitioner until their illegal dismissal on June 3, 2006. Moreover, they
alleged that petitioner failed to pay their monetary benefits, such as service incentive
leave pay, holiday pay, and 13th month pay.8

For his part, petitioner averred that private respondents were hired as project
employees, and were informed of the specific period or phase of construction wherein
their services were needed. Sometime in May 2006, petitioner learned that some
workers were getting excess and cutting unused steel bars, and selling them to junk
shops, prompting him to announce that he will bring the matter to the proper authorities.
Thereafter, private respondents no longer reported for work, and were identified by the
other workers as the thieves.9

Meanwhile, petitioner filed a complaint for theft against private respondents and a
certain Jimmy Dulman before the Office of the City Prosecutor, Quezon City. 10 After
preliminary investigation, the investigating prosecutor found probable cause against
them11 and filed the corresponding Information 12 before the Regional Trial Court of
Quezon City, docketed as Criminal Case No. Q-07-149245.

The LA Ruling

In a Decision13 dated March 23, 2007, the Labor Arbiter (LA) found petitioner to have
illegally dismissed private respondents, and declared them to be regular employees
entitled to reinstatement to their former positions without loss of seniority rights and
backwages.14

The LA rejected petitioner's claim that private respondents were contractual or project
employees, considering that petitioner: (a) failed to present any written contract duly
signed by private respondents containing details such as the work or service to be
rendered, the place of work, the wage rate, and the term or duration of employment; (b)
continuously employed private respondents to perform the same tasks for a period of
two (2) to eight (8) years; and (c) failed to comply with the mandatory requirement of
submitting termination reports to the appropriate Department of Labor and Employment
(DOLE). The LA likewise rejected petitioner's claim that private respondents have
abandoned their jobs in the absence of written notice requiring them to explain why they

420
should not be dismissed on the ground of abandonment. 15

On the other hand, the LA denied private respondents' monetary claims for lack of
factual basis.16

Aggrieved, petitioner appealed17 to the NLRC, arguing, among others, that Andales
should not have been included as party litigant, considering the apparent falsification of
his signature in the complaint and Verification 18 attached to their Position Paper,19 and
the fact that he could not be contacted. 20

The NLRC Ruling

In a Decision21 dated December 8, 2008 (December 8, 2008 Decision), the NLRC

reversed and set aside the LA ruling, holding that private respondents were validly
dismissed as they stole from petitioner. It noted the Resolution of the Quezon City
Prosecutor's Office finding probable cause for theft against the private respondents and
that the latter abandoned their employment after they were identified by their former co-
workers as the thieves. However, considering petitioner's failure to accord them
procedural due process, the NLRC ordered him to pay each of the private respondents
the amount of P5,000.00 as nominal damages. 22

Dissatisfied, private respondents moved for reconsideration, 23 which the NLRC denied
in a Resolution24 dated March 31, 2009, prompting them to elevate their case to the
CA via a petition for certiorari,25 docketed as CA-G.R. SP No. 109427,26 with Motion to
Litigate as Pauper27 (motion).

The CA Proceedings

In a Resolution28 dated July 3, 2009, the CA granted private respondents' motion but

noted that the Affidavit of Service29 and the Verification/Certification of Non-Forum
Shopping30 contained a defective jurat. Thus, private respondents were directed to cure
the defects within five (5) days from notice.31

Meanwhile, the NLRC issued an entry of judgment 32 in the case on July 15, 2009.

Petitioner filed an Urgent Manifestation 33 before the CA pointing out the variance and
dissimilarities in the signatures of private respondents as appearing in the annexes to
their petition for certiorari.34

Private respondents submitted their Manifestation and Compliance 35 dated July 21,
2009, wherein they admitted that Andales could not be located as he was purportedly
on vacation in Samar,36 but they attached (a) a verification37 dated December 7, 2006
bearing their signatures including Andales's; (b) a photocopy38 of private subdivision IDs
of Singson, Pasaqui, and Lominiqui; and (c) a photocopy of the driver's license39 of the
affiant in the Affidavit of Service.

In a Resolution40 dated August 13, 2009, the CA required private respondents anew to

421
submit a Verification/Certification of Non-Forum Shopping with a properly
accomplished jurat indicating competent evidence of their identities.

On September 10, 2009, private respondents submitted a Manifestation and

Compliance and Submission of Joint Affidavit 41 wherein Singson, Pasaqui, and
Lominiqui stated that: (a) they personally knew Andales who used to be their co-
worker42 and one of the original complainants in the illegal dismissal case; (b) Andales
is in the province and is not in a position to submit his ID; (c) despite Andales's absence
and failure to submit his ID, he should be maintained as a petitioner before the CA; and
(d) they had already submitted their IDs.43

Thereafter, in a Resolution44 dated November 12, 2009, the CA held that the

photocopies of the IDs submitted by Singson, Pasaqui, and Lominiqui, as well as their
Joint-Affidavit45 attesting to the identity of Andales who was unable to submit his ID,
served as competent evidence of private respondents' identities and cured the defect in
the Affidavit of Service, and Verification/Certification of Non-Forum Shopping. Without
giving due course to the petition, the CA directed petitioner to submit his Comment
within ten (10) days from receipt of the Resolution, and private respondents to file their
Reply within five (5) days from receipt of the said Comment. 46

Unperturbed, petitioner moved for reconsideration, 47 which the CA denied in a

Resolution48 dated February 5, 2010; hence, the instant petition.

On June 15, 2010, Singson and Pasaqui, assisted by their counsel, Atty. Ricardo M.
Perez (Atty. Perez), amicably settled with petitioner, and executed a Satisfaction of
Judgment/Release of Claim49 in the latter's favor, and, thereafter, filed the
corresponding Motion to Withdraw Petition50 (motion to withdraw) before the CA. On the
other hand, the adjudged amount in favor of Lominiqui and Andales were deposited with
the NLRC51 because of their inability to show up and receive the amounts.

In a Resolution52 dated July 15, 2010, the CA partially granted the motion to withdraw
and dismissed the petition insofar as Singson and Pasaqui are concerned.

On the other hand, the NLRC issued an Order 53 dated July 20, 2010 directing the
release of the surety bond posted by petitioner.

Subsequently, the CA issued a Resolution54 dated November 4, 2010 suspending the

proceedings in view of the pendency of the petition for certiorari before the Court.

The Issue Before the Court

The issue for the Court's resolution is whether or not the CA acted with grave abuse of
discretion in refusing to dismiss the petition for certiorari before it on the ground of non-
compliance with the requirements of verification and certification against forum
shopping.

The Court's Ruling

422
The petition is meritorious.

At the outset, it should be pointed out that in a Resolution 55 dated July 15, 2010, the CA
had already dismissed the petition for certiorari in CA-G.R. SP No. 109427 with respect
to private respondents Singson and Pasaqui on account of the Satisfaction of
Judgment/Release of Claim56 they executed in petitioner's favor subsequent to the filing
of the instant case. Notably, Singson and Pasaqui, thru their counsel, Atty. Perez,
moved that the instant petition be dismissed, without prejudice to the claims of the other
private respondents, Lominiqui and Andales, who are "on the run." 57 The settled rule is
that legitimate waivers resulting from voluntary settlements of laborers' claims should be
treated and upheld as the law between the parties. 58 In view of the foregoing
developments, there is no longer any justiciable controversy between petitioner and
private respondents Singson and Pasaqui, rendering the instant case moot and
academic, and dismissible59 with respect to them.

On the other hand, private respondents Lominiqui and Andales do not appear to have
any proper representation before the Court in view of Atty. Perez's denial of any
subsisting lawyer-client relationship with them. In fact, it was disclosed that they were
reportedly in hiding for fear of being arrested. 60 Thus, in a Resolution61 dated July 24,
2013, they were deemed to have waived the filing of their comment to the instant
petition since the notices addressed to them were returned unserved.

The foregoing circumstances notwithstanding, the Court delved on the merits of the
instant petition, and found the same to be well taken.

The instant controversy revolves on whether or not the CA gravely abused its discretion
in holding that private respondents substantially complied with the requirements of a
valid verification and certification against forum shopping.

Section 4, Rule 7 of the Rules of Civil Procedure states that "[a] pleading is verified by
an affidavit that the affiant has read the pleading and that the allegations therein are
true and correct of his personal knowledge or based on authentic records." "A pleading
required to be verified which x x x lacks a proper verification, shall be treated as an
unsigned pleading."

On the other hand, Section 5, Rule 7 of the Rules of Civil Procedure provides that "[t]he
plaintiff or principal party shall certify under oath in the complaint or other initiatory
pleading asserting a claim for relief, or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore commenced any action or
filed any claim involving the same issues in any court, tribunal or quasi-judicial agency
and, to the best of his knowledge, no such other action or claim is pending therein; (b) if
there is such other pending action or claim, a complete statement of the present status
thereof; and (c) if he should thereafter learn that the same or similar action or claim has
been filed or is pending, he shall report that fact within five (5) days therefrom to the
court wherein his aforesaid complaint or initiatory pleading has been filed." "Failure to

423
comply with the foregoing requirements shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall be cause for the dismissal of the case
without prejudice, unless otherwise provided x x x."

In this case, it is undisputed that the Verification/Certification against Forum

Shopping62 attached to the petition for certiorari in CA-G.R. SP No. 109427 was not
accompanied with a valid affidavit/properly certified under oath. This was because
the jurat thereof was defective in that it did not indicate the pertinent details regarding
the affiants' (i.e., private respondents) competent evidence of identities.

Under Section 6, Rule II of A.M. No. 02-8-13-SC 63 dated July 6, 2004, entitled the "2004
Rules on Notarial Practice" (2004 Rules on Notarial Practice), & jurat refers to an act in
which an individual on a single occasion:

(a) appears in person before the notary public and presents an instrument or document;

(b) is personally known to the notary public or identified by the notary public through
competent evidence of identity as defined by these Rules;

(c) signs the instrument or document in the presence of the notary; and

(d) takes an oath or affirmation before the notary public as to such instrument or
document.

Under Section 12, Rule II of the 2004 Rules on Notarial Practice, "competent evidence
of identity" as used in the foregoing provision refers to the identification of an individual
based on:

(a) at least one current identification document issued by an official agency

bearing the photograph and signature of the individual, such as but not limited to,
passport, driver's license, Professional Regulations Commission ID, National Bureau of
Investigation clearance, police clearance, postal ID, voter's ID, Barangay certification,
Government Service and Insurance System (GSIS) e-card, Social Security System
(SSS) card, Philhealth card, senior citizen card, Overseas Workers Welfare
Administration (OWWA) ID, OFW ID, seaman's book, alien certificate of
registration/immigrant certificate of registration, government office ID, certification from
the National Council for the Welfare of Disabled Persons (NCWDP), Department of
Social Welfare and Development (DSWD) certification; or

(b) the oath or affirmation of one credible witness not privy to the instrument,

document or transaction who is personally known to the notary public and who
personally knows the individual, or of two credible witnesses neither of whom is privy to
the instrument, document or transaction who each personally knows the individual and
shows to the notary public documentary identification.

Evidently, not being documents of identification issued by an official agency, the

424
photocopies of the IDs64 of private respondents Singson, Pasaqui, and Lominiqui from
La Vista Association, Inc., R.O. Barra Builders & Electrical Services, and St. Charbel
Executive Village, respectively, do not constitute competent evidence of their identities
under Section 12 (a), Rule II of the 2004 Rules on Notarial Practice. In the same vein,
their Joint-Affidavit65 identifying Andales and assuring the CA that he was a party-litigant
is not competent evidence of Andales's identity under Section 12 (b), Rule II of the
same rules, considering that they (i.e., Singson, Pasaqui, and Lominiqui) themselves
are privy to the instrument, i.e., the Verification/Certification of Non-Forum Shopping, in
which Andales's participation is sought to be proven. To note, it cannot be presumed
that an affiant is personally known to the notary public; the jurat must contain a
statement to that effect.66 Tellingly, the notarial certificate of the Verification/Certification
of Non-Forum Shopping67 attached to private respondents' petition before the CA did
not state whether they presented competent evidence of their identities, or that they
were personally known to the notary public, and, thus, runs afoul of the requirements of
verification and certification against forum shopping under Section 1, 68 Rule 65, in
relation to Section 3,69 Rule 46, of the Rules of Court.

In Fernandez v. Villegas70 (Fernandez), the Court pronounced that non-compliance with

the verification requirement or a defect therein "does not necessarily render the
pleading fatally defective. The court may order its submission or correction or act on the
pleading if the attending circumstances are such that strict compliance with the Rule
may be dispensed with in order that the ends of justice may be served
thereby."71 "Verification is deemed substantially complied with when one who has ample
knowledge to swear to the truth of the allegations in the complaint or petition signs the
verification, and when matters alleged in the petition have been made in good faith or
are true and correct."72 Here, there was no substantial compliance with the verification
requirement as it cannot be ascertained that any of the private respondents actually
swore to the truth of the allegations in the petition for certiorari in CA-G.R. SP No.
109427 given the lack of competent evidence of any of their identities. Because of this,
the fact that even one of the private respondents swore that the allegations in the
pleading are true and correct of his knowledge and belief is shrouded in doubt.

For the same reason, neither was there substantial compliance with the certification
against forum shopping requirement. In Fernandez, the Court explained that "non-
compliance therewith or a defect therein, unlike in verification, is generally not curable
by its subsequent submission or correction thereof, unless there is a need to relax the
Rule on the ground of 'substantial compliance' or presence of'special circumstances or
compelling reasons.'"73 Here, the CA did not mention - nor does there exist - any
perceivable special circumstance or compelling reason which justifies the rules'
relaxation. At all events, it is uncertain if any of the private respondents certified under
oath that no similar action has been filed or is pending in another forum.

In fact, on both procedural aspects, the CA failed to address the evident variance in the
signatures74 of the remaining private respondents, i.e., Lominiqui and Andales, in their
petition for certiorari and their previous pleadings. Earlier, petitioner had already
questioned Andales's participation in the case as he was already missing when the

425
complaint was filed, and his signature in the Verification attached to private
respondents' Position Paper did not match those in the payroll documents. 75 In sum, the
authenticity of the signatures of Lominiqui and Andales, and their participation in the
instant case were seriously put into question.

Case law states that "[v]erification is required to secure an assurance that the
allegations in the petition have been made in good faith or are true and correct, and not
merely speculative."76 On the other hand, "[t]he certification against forum shopping is
required based on the principle that a party-litigant should not be allowed to pursue
simultaneous remedies in different fora." 77 The important purposes behind these
requirements cannot be simply brushed aside absent any sustainable explanation
justifying their relaxation. In this case, proper justification is especially called for in light
of the serious allegations of forgery as to the signatures of the remaining private
respondents, i.e., Lominiqui and Andales. Thus, by simply treating the insufficient
submissions before it as compliance with its Resolution 78 dated August 13, 2009
requiring anew the submission of a proper verification/certification against forum
shopping, the CA patently and grossly ignored settled procedural rules and, hence,
gravely abused its discretion. All things considered, the proper course of action was for
it to dismiss the petition.

As a final word, it is well to stress that "procedural rules are not to be disdained as mere
technicalities that may be ignored at will to suit the convenience of a party, x x x. Justice
has to be administered according to the Rules in order to obviate arbitrariness, caprice,
or whimsicality."79 Resort to the liberal application of procedural rules remains the
exception rather than the rule; it cannot be made without any valid reasons
underpinning the said course of action. To merit liberality, the one seeking such
treatment must show reasonable cause justifying its non-compliance with the Rules,
and must establish that the outright dismissal of the petition would defeat the
administration of substantial justice. 80 Procedural rules must, at all times, be followed,
save for instances when a litigant must be rescued from an injustice far graver than the
degree of his carelessness in not complying with the prescribed procedure. 81 The limited
exception does not obtain in this case.chanrobleslaw

WHEREFORE, the petition is GRANTED. The Resolutions dated November 12, 2009
and February 5, 2010 of the Court of Appeals in CA-G.R. SP No. 109427 are
hereby REVERSED and SET ASIDE. Accordingly, the petition for certiorari in CA-G.R.
SP No. 109427 is DISMISSED.

SO ORDERED.cralawlawlibrary
SECOND DIVISION
[ G.R. No. 154704, June 01, 2011 ]
NELLIE VDA. DE FORMOSO AND HER CHILDREN, NAMELY, MA. THERESA
FORMOSO-PESCADOR, ROGER FORMOSO, MARY JANE FORMOSO, BERNARD
FORMOSO AND PRIMITIVO MALCABA, PETITIONERS, VS. PHILIPPINE
NATIONAL BANK, FRANCISCO ARCE, ATTY. BENJAMIN BARBERO, AND

426
 ROBERTO NAVARRO, RESPONDENTS.

DECISION
MENDOZA, J.:
Assailed in this petition are the January 25, 2002 Resolution [1] and the August 8, 2002
Resolution[2] of the Court of Appeals (CA) which dismissed the petition for certiorari filed
by the petitioners on the ground that the verification and certification of non-forum
shopping was signed by only one of the petitioners in CA G.R. SP No. 67183, entitled
"Nellie P. Vda. De Formoso, et al. v. Philippine National Bank, et al."

The Factual and

Procedural Antecedents

Records show that on October 14, 1989, Nellie Panelo Vda. De Formoso (Nellie) and
her children namely: Ma. Theresa Formoso-Pescador, Roger Formoso, Mary Jane
Formoso, Bernard Formoso, and Benjamin Formoso, executed a special power of
attorney in favor of Primitivo Malcaba (Malcaba) authorizing him, among others, to
secure all papers and documents including the owner's copies of the titles of real
properties pertaining to the loan with real estate mortgage originally secured by Nellie
and her late husband, Benjamin S. Formoso, from Philippine National Bank, Vigan
Branch (PNB) on September 4, 1980.

On April 20, 1990, the Formosos sold the subject mortgaged real properties to Malcaba
through a Deed of Absolute Sale. Subsequently, on March 22, 1994, Malcaba and his
lawyer went to PNB to fully pay the loan obligation including interests in the amount of ?
2,461,024.74.

PNB, however, allegedly refused to accept Malcaba's tender of payment and to release
the mortgage or surrender the titles of the subject mortgaged real properties.

On March 24, 1994, the petitioners filed a Complaint for Specific Performance against
PNB before the Regional Trial Court of Vigan, Ilocos Sur (RTC) praying, among others,
that PNB be ordered to accept the amount of ?2,461,024.74 as full settlement of the
loan obligation of the Formosos.

After an exchange of several pleadings, the RTC finally rendered its decision [3] on
October 27, 1999 favoring the petitioners. The petitioners' prayer for exemplary or
corrective damages, attorney's fees, and annual interest and daily interest, however,
were denied for lack of evidence.

PNB filed a motion for reconsideration but it was denied for failure to comply with Rule
15, Section 5 of the 1997 Rules of Civil Procedure.  PNB then filed a Notice of Appeal
but it was dismissed for being filed out of time.

The petitioners received their copy of the decision on November 26, 1999, and on
January 25, 2001, they filed their Petition for Relief from Judgment [4] questioning the

427
RTC decision that there was no testimonial evidence presented to warrant the award for
moral and exemplary damages. They reasoned out that they could not then file a motion
for reconsideration because they could not get hold of a copy of the transcripts of
stenographic notes. In its August 6, 2001 Order, the RTC denied the petition for lack of
merit.[5]

On September 7, 2001, the petitioners moved for reconsideration but it was denied by
the RTC in its Omnibus Order of September 26, 2001. [6]

Before the Court of Appeals 

On November 29, 2001, the petitioners filed a petition for certiorari before the CA
challenging the RTC Order of August 6, 2001 and its Omnibus Order dated September
26, 2001.

In its January 25, 2002 Resolution, the CA dismissed the petition stating that:

The verification and certification of non-forum shopping was signed by only one (Mr.
Primitivo Macalba) of the many petitioners. In Loquias v. Office of the Ombudsman,
G.R. No. 139396, August 15, 2000, it was ruled that all petitioners must be signatories
to the certification of non-forum shopping unless the one who signed it is authorized by
the other petitioners. In the case at bar, there was no showing that the one who signed
was empowered to act for the rest. Therefore, it cannot be presumed that the one who
signed knew to the best of his knowledge whether his co-petitioners had the same or
similar claims or actions filed or pending. The ruling in Loquias further declared that
substantial compliance will not suffice in the matter involving strict observance of the
Rules. Likewise, the certification of non-forum shopping requires personal knowledge of
the party who executed the same and that petitioners must show reasonable cause for
failure to personally sign the certification. Utter disregard of the Rules cannot just be
rationalized by harping on the policy of liberal construction.

Aggrieved, after the denial of their motion for reconsideration, the petitioners filed this
petition for review anchored on the following

GROUNDS

THE COURT OF APPEALS PATENTLY ERRED IN RULING THAT ALL THE

PETITIONERS MUST SIGN THE VERIFICATION AND CERTIFICATION OF NON-
FORUM SHOPPING IN A PETITION FOR CERTIORARI WHEREIN ONLY
QUESTIONS OF LAW ARE INVOLVED.

ALTERNATIVELY, THE COURT OF APPEALS PATENTLY ERRED IN DISMISSING

THE WHOLE PETITION WHEN AT THE VERY LEAST THE PETITION INSOFAR AS
PETITIONER MALCABA IS CONCERNED BEING THE SIGNATORY THEREOF
SHOULD HAVE BEEN GIVEN DUE COURSE.

THE COURT OF APPEALS PATENTLY ERRED IN GIVING MORE WEIGHT ON

428
TECHNICALITIES WHEN THE PETITION BEFORE IT WAS CLEARLY
MERITORIOUS.[7]

The petitioners basically argue that they have substantially complied with the
requirements provided under the 1997 Rules of Civil Procedure on Verification and
Certification of Non-Forum Shopping. The petitioners are of the view that the rule on
Verification and Certification of Non-Forum Shopping that all petitioners must sign
should be liberally construed, since only questions of law are raised in a petition for
certiorari and no factual issues that require personal knowledge of the petitioners.

The petitioners further claim that they have a meritorious petition because contrary to
the ruling of the RTC, their Petition for Relief clearly showed that, based on the
transcript of stenographic notes, there was enough testimonial evidence for the RTC to
grant them damages and attorney's fees as prayed for.

On the other hand, PNB counters that the mandatory rule on the certification against
forum shopping requires that all of the six (6) petitioners must sign, namely: Nellie Vda.
De Formoso and her children Ma. Theresa Formoso-Pescador, Roger Formoso, Mary
Jane Formoso, and Bernard Formoso, and Primitivo Malcaba. Therefore, the signature
alone of Malcaba on the certification is insufficient.

PNB further argues that Malcaba was not even a party or signatory to the contract of
loan entered into by his co-petitioners. Neither was there evidence that Malcaba is a
relative or a co-owner of the subject properties.  It likewise argues that, contrary to the
stance of the petitioners, the issue raised before the CA, as to whether or not the
petitioners were entitled to moral and exemplary damages as well as attorney's fees, is
a factual one.

Finally, PNB asserts that the body of the complaint filed by the petitioners failed to show
any allegation that Macalba alone suffered damages for which he alone was entitled to
reliefs as prayed for. PNB claims that the wordings of the complaint were clear that all
the petitioners were asking for moral and exemplary damages and attorney's fees.

OUR RULING

The petition lacks merit.

Certiorari is an extraordinary, prerogative remedy and is never issued as a matter of

right. Accordingly, the party who seeks to avail of it must strictly observe the rules laid
down by law.[8] Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides:

SECTION 1. Petition for certiorari.- When any tribunal, board or officer exercising
judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction,
or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is
no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court, alleging the
facts with certainty and praying that judgment be rendered annulling or modifying the

429
proceedings of such tribunal, board or officer, and granting such incidental reliefs as law
and justice may require.

The petition shall be accompanied by a certified true copy of the judgment, order or
resolution subject thereof, copies of all pleadings and documents relevant and pertinent
thereto, and a sworn certification of non-forum shopping as provided in the third
paragraph of Section 3, Rule 46. [Emphasis supplied]

Under Rule 46, Section 3, paragraph 3 of the 1997 Rules of Civil Procedure, as
amended, petitions for certiorari must be verified and accompanied by a sworn
certification of non-forum shopping.

SECTION 3. Contents and filing of petition; effect of non-compliance with requirements.

- The petition shall contain the full names and actual addresses of all the petitioners and
respondents, a concise statement of the matters involved, the factual background of the
case, and the grounds relied upon for the relief prayed for.

In actions filed under Rule 65, the petition shall further indicate the material dates
showing when notice of the judgment or final order or resolution subject thereof was
received, when a motion for new trial or reconsideration, if any, was filed and when
notice of the denial thereof was received.

It shall be filed in seven (7) clearly legible copies together with proof of service thereof
on the respondent with the original copy intended for the court indicated as such by the
petitioner, and shall be accompanied by a clearly legible duplicate original or certified
true copy of the judgment, order, resolution, or ruling subject thereof, such material
portions of the record as are referred to therein, and other documents relevant or
pertinent thereto.  The certification shall be accomplished by the proper clerk of court or
his duly authorized representative, or by the proper officer of the court, tribunal, agency
or office involved or by his duly authorized representative.  The other requisite number
of copies of the petition shall be accompanied by clearly legible plain copies of all
documents attached to the original.

The petitioner shall also submit together with the petition a sworn
certification that he has not theretofore commenced any other action involving the
same issues in the Supreme Court, the Court of Appeals or different divisions thereof,
or any other tribunal or agency; if there is such other action or proceeding, he must
state the status of the same; and if he should thereafter learn that a similar action or
proceeding has been filed or is pending before the Supreme Court, the Court of
Appeals, or different divisions thereof, or any other tribunal or agency, he undertakes to
promptly inform the aforesaid courts and other tribunal or agency thereof within five (5)
days therefrom.

The petitioner shall pay the corresponding docket and other lawful fees to the clerk of
court and deposit the amount of P500.00 for costs at the time of the filing of the petition.

430
The failure of the petitioner to comply with any of the foregoing requirements
shall be sufficient ground for the dismissal of the petition. [Emphases supplied]

The acceptance of a petition for certiorari as well as the grant of due course thereto is,
in general, addressed to the sound discretion of the court.  Although the Court has
absolute discretion to reject and dismiss a petition for certiorari, it does so only (1) when
the petition fails to demonstrate grave abuse of discretion by any court, agency, or
branch of the government; or  (2) when there are procedural errors, like violations of
the Rules of Court or Supreme Court Circulars.[9] [Emphasis supplied]

In the case at bench, the petitioners claim that the petition for certiorari that they filed
before the CA substantially complied with the requirements provided for under the 1997
Rules of Civil Procedure on Verification and Certification of Non-Forum Shopping.

The Court disagrees.

Sections 4 and 5 of Rule 7 of the 1997 Rules of Civil Procedure provide:

SEC. 4. Verification. - Except when otherwise specifically required by law or rule,

pleadings need not be under oath, verified or accompanied by affidavit.

A pleading is verified by an affidavit that the affiant has read the pleadings and that the
allegations therein are true and correct of his personal knowledge or based on authentic
records.

A pleading required to be verified which contains a verification based on "information

and belief" or upon "knowledge, information and belief" or lacks a proper verification,
shall be treated as an unsigned pleading.

SEC. 5. Certification against forum shopping. - The plaintiff or principal party shall
certify under oath in the complaint or other initiatory pleading asserting a claim for relief,
or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he
has not theretofore commenced any action or filed any claim involving the same issues
in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such
other action or claim is pending therein; (b) if there is such other pending action or
claim, a complete statement of the present status thereof; and (c) if he should thereafter
learn that the same or similar action or claim has been filed or is pending, he shall
report that fact within five (5) days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and
after hearing. The submission of a false certification or non-compliance with any of the
undertakings therein shall constitute indirect contempt of court, without prejudice to the
corresponding administrative and criminal actions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum shopping, the same shall be ground for
431
summary dismissal with prejudice and shall constitute direct contempt, as well as a
cause for administrative sanctions. x x x.

In this regard, the case of Oldarico S. Traveno v. Bobongon Banana Growers Multi-
Purpose Cooperative,[10] is enlightening:

Respecting the appellate court's dismissal of petitioners' appeal due to the failure of
some of them to sign the therein accompanying verification and certification against
forum-shopping, the Court's guidelines for the bench and bar in Altres v. Empleo, which
were culled "from jurisprudential pronouncements," are instructive:

For the guidance of the bench and bar, the Court restates in capsule form the
jurisprudential pronouncements already reflected above respecting non-compliance with
the requirements on, or submission of defective, verification and certification against
forum shopping:

1)  A distinction must be made between non-compliance with the requirement on or

submission of defective verification, and non-compliance with the requirement on or
submission of defective certification against forum shopping.

2) As to verification, non-compliance therewith or a defect therein does not necessarily

render the pleading fatally defective. The Court may order its submission or correction
or act on the pleading if the attending circumstances are such that strict compliance with
the Rule may be dispensed with in order that the ends of justice may be served thereby.

3) Verification is deemed substantially complied with when one who has ample
knowledge to swear to the truth of the allegations in the complaint or petition signs the
verification, and when matters alleged in the petition have been made in good faith or
are true and correct.

4) As to certification against forum shopping, non-compliance therewith or a defect

therein, unlike in verification, is generally not curable by its subsequent submission or
correction thereof, unless there is a need to relax the Rule on the ground of "substantial
compliance" or presence of "special circumstances or compelling reasons."

5)  The certification against forum shopping must be signed by all the plaintiffs or
petitioners in a case; otherwise, those who did not sign will be dropped as parties to the
case. Under reasonable or justifiable circumstances, however, as when all the plaintiffs
or petitioners share a common interest and invoke a common cause of action or
defense, the signature of only one of them in the certification against forum shopping
substantially complies with the Rule.

6) Finally, the certification against forum shopping must be executed by the party-
pleader, not by his counsel. If, however, for reasonable or justifiable reasons, the party-
pleader is unable to sign, he must execute a Special Power of Attorney designating his
counsel of record to sign on his behalf.

432
The petition for certiorari filed with the CA stated the following names as petitioners:
Nellie Panelo Vda. De Formoso, Ma. Theresa Formoso-Pescador, Roger Formoso,
Mary Jane Formoso, Bernard Formoso, Benjamin Formoso, and Primitivo Malcaba.

Admittedly, among the seven (7) petitioners mentioned, only Malcaba signed the
verification and certification of non-forum shopping in the subject petition. There was no
proof that Malcaba was authorized by his co-petitioners to sign for them. There was no
special power of attorney shown by the Formosos authorizing Malcaba as their
attorney-in-fact in filing a petition for review on certiorari. Neither could the petitioners
give at least a reasonable explanation as to why only he signed the verification and
certification of non-forum shopping.  In Athena Computers, Inc. and Joselito R. Jimenez
v. Wesnu A. Reyes, the Court explained that:

The verification of the petition and certification on non-forum shopping before the Court
of Appeals were signed only by Jimenez.  There is no showing that he was authorized
to sign the same by Athena, his co-petitioner.

Section 4, Rule 7 of the Rules states that a pleading is verified by an affidavit that the
affiant has read the pleading and that the allegations therein are true and correct of his
knowledge and belief.  Consequently, the verification should have been signed not only
by Jimenez but also by Athena's duly authorized representative.

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

be signed by all the petitioners or plaintiffs in a case, and that the signing by only
one of them is insufficient.  The attestation on non-forum shopping
requires personal knowledge by the party executing the same, and the lone
signing petitioner cannot be presumed to have personal knowledge of the filing
or non-filing by his co-petitioners of any action or claim the same as similar to the
current petition.

The certification against forum shopping in CA-G.R. SP No. 72284 is fatally

defective, not having been duly signed by both petitioners and thus warrants the
dismissal of the petition for certiorari.  We have consistently held that the
certification against forum shopping must be signed by the principal parties. With
respect to a corporation, the certification against forum shopping may be signed for and
on its behalf, by a specifically authorized lawyer who has personal knowledge of the
facts required to be disclosed in such document.

While the Rules of Court may be relaxed for persuasive and weighty reasons to relieve
a litigant from an injustice commensurate with his failure to comply with the prescribed
procedures, nevertheless they must be faithfully followed. In the instant case, petitioners
have not shown any reason which justifies relaxation of the Rules.  We have held that
procedural rules are not to be belittled or dismissed simply because their non-
observance may have prejudiced a party's substantive rights. Like all rules, they are
required to be followed except for the most persuasive of reasons when they may be
relaxed. Not one of these persuasive reasons is present here.
433
In fine, we hold that the Court of Appeals did not err in dismissing the petition
for certiorari in view of the procedural lapses committed by petitioners. [11] [Emphases
supplied]

Furthermore, the petitioners argue that the CA should not have dismissed the whole
petition but should have given it due course insofar as Malcaba is concerned because
he signed the certification. The petitioners also contend that the CA should have been
liberal in the application of the Rules because they have a meritorious case against
PNB.

The Court, however, is not persuaded.

The petitioners were given a chance by the CA to comply with the Rules when they filed
their motion for reconsideration, but they refused to do so. Despite the opportunity given
to them to make all of them sign the verification and certification of non-forum shopping,
they still failed to comply. Thus, the CA was constrained to deny their motion and affirm
the earlier resolution.[12]

Indeed, liberality and leniency were accorded in some cases. [13]  In these cases,
however, those who did not sign were relatives of the lone signatory, so unlike in this
case, where Malcaba is not a relative who is similarly situated with the other petitioners
and who cannot speak for them. In the case of Heirs of Domingo Hernandez, Sr. v.
Plaridel Mingoa, Sr.,[14] it was written:

In the instant case, petitioners share a common interest and defense inasmuch as they
collectively claim a right not to be dispossessed of the subject lot by virtue of their and
their deceased parents' construction of a family home and occupation thereof for more
than 10 years. The commonality of their stance to defend their alleged right over the
controverted lot thus gave petitioners xxx authority to inform the Court of Appeals in
behalf of the other petitioners that they have not commenced any action or claim
involving the same issues in another court or tribunal, and that there is no other pending
action or claim in another court or tribunal involving the same issues.

Here, all the petitioners are immediate relatives who share a common interest in the
land sought to be reconveyed and a common cause of action raising the same
arguments in support thereof.  There was sufficient basis, therefore, for Domingo
Hernandez, Jr. to speak for and in behalf of his co-petitioners when he certified that they
had not filed any action or claim in another court or tribunal involving the same issues.
Thus, the Verification/Certification that Hernandez, Jr. executed constitutes substantial
compliance under the Rules. [Emphasis supplied]

The same leniency was accorded to the petitioner in the case of Oldarico S. Traveno v.
Bobongon Banana Growers Multi-Purpose Cooperative, [15] where it was stated:

434
The same leniency was applied by the Court in Cavile v. Heirs of Cavile, because the
lone petitioner who executed the certification of non-forum shopping was a relative and
co-owner of the other petitioners with whom he shares a common interest.  x x x[16]

Considering the above circumstances, the Court does not see any similarity at all in the
case at bench to compel itself to relax the requirement of strict compliance with the rule
regarding the certification against forum shopping.

At any rate, the Court cannot accommodate the petitioners' request to re-examine the
testimony of Malcaba in the transcript of stenographic notes of the April 25, 1999
hearing concerning his alleged testimonial proof of damages for obvious reasons.

Primarily, Section 1, Rule 45 of the Rules of Court categorically states that the petition
filed shall raise only questions of law, which must be distinctly set forth.  A question of
law arises when there is doubt as to what the law is on a certain state of facts, while
there is a question of fact when the doubt arises as to the truth or falsity of the alleged
facts.  For a question to be one of law, the same must not involve an examination of the
probative value of the evidence presented by the litigants or any of them.  The
resolution of the issue must rest solely on what the law provides on the given set of
circumstances.  Once it is clear that the issue invites a review of the evidence
presented, the question posed is one of fact. [17]

In this case, the petition clearly raises a factual issue. As correctly argued by PNB, the
substantive issue of whether or not the petitioners are entitled to moral and exemplary
damages as well as attorney's fees is a factual issue which is beyond the province of a
petition for review on certiorari.

Secondly, even if the Court glosses over the technical defects, the petition for relief
cannot be granted.  A perusal of the Petition for Relief of Judgment discloses that there
is no fact constituting fraud, accident, mistake or excusable negligence which are the
grounds therefor.  From the petition itself, it appears that the petitioners' counsel had a
copy of the transcript of stenographic notes which was in his cabinet all along and only
discovered it when he was disposing old and terminated cases. [18]  If he was only
attentive to his records, he could have filed a motion for reconsideration or a notice of
appeal in behalf of the petitioners.

WHEREFORE, the petition is DENIED.

SO ORDERED.
SECOND DIVISION
[ G.R. No. 157867, December 15, 2009 ]
METROPOLITAN BANK & TRUST COMPANY, PETITIONER, VS. HON. SALVADOR
ABAD SANTOS, PRESIDING JUDGE, RTC, BR. 65, MAKATI CITY AND MANFRED
JACOB DE KONING, RESPONDENTS.

435
 DECISION
BRION, J.:
This petition for review on certiorari,[1] seeks to reverse and set aside the decision dated
November 21, 2002 and subsequent ruling on motion for reconsideration of the Court of
Appeals (CA) in CA-G.R. SP No. 62325.[2] The CA decision affirmed the order of the
Regional Trial Court (RTC) of Makati City, Branch 65,[3] dismissing the petition filed by
Metropolitan Bank & Trust Company (Metrobank) for the issuance of a writ of
possession of a condominium unit it had previously foreclosed. This dismissal was
based on the finding that the petition contained a false certification against forum
shopping.

FACTUAL ANTECEDENTS

Respondent Manfred Jacob De Koning (De Koning) obtained a loan from Metrobank in
the principal amount of Two Million, Nineteen Thousand Pesos (P2,019,000.00),
evidenced by promissory note No. TLS/97-039/382599 dated July 24, 1997. To secure
the payment of this loan, De Koning executed a real estate mortgage (REM) in favor of
Metrobank dated July 22, 1996 over a condominium unit and all its improvements. The
unit is located at Unit 1703 Cityland 10 Tower 1, H.V. Dela Costa Street, Makati City,
and is covered by Condominium Certificate of Title No. 10681.

When De Koning failed to pay his loan despite demand, Metrobank instituted
extrajudicial foreclosure proceedings against the REM. Metrobank was the highest
bidder at the public auction of the condominium unit held on November 24, 1998 and a
Certificate of Sale was issued in the bank's favor. Metrobank duly registered this
Certificate of Sale with the Registry of Deeds for Makati City on January 18, 2000.

The redemption period lapsed without De Koning redeeming the property. Thus,
Metrobank demanded that he turn over possession of the condominium unit. When De
Koning refused, Metrobank filed on July 28, 2000 with the RTC Makati, Branch 65,
an ex parte petition for a writ of possession over the foreclosed property, pursuant to
Act No. 3135, as amended.

On August 1, 2000, the lower court issued an order setting the ex parte hearing of
Metrobank's petition and directing that a copy of the order be given to De Koning to
inform him of the existence of the proceedings.

During the scheduled ex parte hearing on August 18, 2000, De Koning's counsel

appeared and manifested that he filed a motion to dismiss on the ground that
Metrobank's petition violated Section 5, Rule 7 of the Rules of Court (Rules)[4] which
requires the attachment of a certification against forum shopping to a complaint or other
initiatory pleading. According to De Koning, Metrobank's petition for the issuance of a
writ of possession involved the same parties, the same issues and the same subject
matter as the case he had filed on October 30, 1998 with the RTC of Makati, [5] to
question Metrobank's right to foreclose the mortgage. De Koning also had a pending

436
petition for certiorari with the CA,[6] which arose from the RTC case he filed. When
Metrobank failed to disclose the existence of these two pending cases in the
certification attached to its petition, it failed to comply with the mandatory requirements
of the Rules so that its petition should be dismissed.

The RTC agreed with De Koning and dismissed Metrobank's petition in its September
18, 2000 order on the ground De Koning cited, i.e.,for having a false certification of non-
forum shopping. The lower court denied Metrobank's motion for reconsideration.
Metrobank thus elevated the matter to the CA on a petition for certiorari on January 5,
2001.

The CA affirmed the dismissal of Metrobank's petition. It explained that Section 5, Rule
7 of the Rules is not limited to actions, but covers any "initiatory pleading" that asserts a
claim for relief. Since Metrobank's petition for writ of possession is an initiatory pleading,
it must perforce be covered by this rule. Thus, Metrobank's failure to disclose in the
verification and certification the existence of the two cases filed by De Koning, involving
the issue of Metrobank's right to foreclose on the property, rendered the petition
dismissible.

The CA denied Metrobank's subsequent motion for reconsideration. Hence, this petition
for review on certiorari, raising the following issues:

ISSUES

I.
THE COURT OF APPEALS AND THE LOWER COURT, CONTRARY TO THE
APPLICABLE DECISIONS OF THIS HONORABLE COURT, RULED THAT THE EX
PARTE PETITION FOR THE ISSUANCE OF A WRIT OF POSSESSION IS AN
INITIATORY PLEADING ASSERTING A CLAIM.

II.
THE COURT OF APPEALS, IN UPHOLDING THE RULING OF THE LOWER COURT,
DELIBERATELY IGNORED THE FACT THAT THE PETITION FOR THE ISSUANCE
OF A WRIT OF POSSESSION IS EX PARTE IN NATURE.

III.
THE COURT OF APPEALS COMMITTED A MISAPPREHENSION OF FACTS.

Metrobank claims that an ex parte petition for the issuance of a writ of possession is not
an initiatory pleading asserting a claim. Rather, it is a mere incident in the transfer of
title over the real property which was acquired by Metrobank through an extrajudicial
foreclosure sale, in accordance with Section 7 of Act No. 3135, as amended. Thus, the
petition is not covered by Section 5, Rule 7 of the Rules and a certification against
forum shopping is not required.

Metrobank further argues that considering the ex parte nature of the proceedings, De

437
Koning was not even entitled to be notified of the resulting proceedings, and the lower
court and the CA should have disregarded De Koning's motion to dismiss.

Lastly, Metrobank posits that the CA misapprehended the facts of the case when it
affirmed the lower court's finding that Metrobank's petition and the two cases filed by De
Koning involved the same parties. There could be no identity of parties in these cases
for the simple reason that, unlike the two cases filed by De Koning, Metrobank's petition
is a proceeding ex parte which did not involve De Koning as a party. Nor could there be
an identity in issues or subject matter since the only issue involved in Metrobank's
petition is its entitlement to possess the property foreclosed, whereas De Koning's civil
case involved the validity of the terms and conditions of the loan documents.
Furthermore, the extra-judicial foreclosure of the mortgaged property and De Koning's
petition for certiorari with the CA involved the issue of whether the presiding judge in the
civil case acted with grave abuse of discretion when he denied De Koning's motion to
set for hearing the application for preliminary injunction.

De Koning, in opposition, maintains that Metrobank's petition was fatally defective for
violating the strict requirements of Section 5, Rule 7 of the Rules. As noted by both the
lower court and the CA's ruling that Metrobank failed to disclose the two pending cases
he previously filed before the RTC and the CA, which both involved the bank's right to
foreclose and, ultimately, the bank's right to a writ of possession by virtue of foreclosure.

De Koning also asserts that Metrobank should have appealed the lower court's decision
and not filed a special civil action for certiorari since the order being questioned is one
of dismissal and not an interlocutory order. According to De Koning, since the filing of a
petition for certiorari cannot be a substitute for a lost appeal and does not stop the
running of the period of appeal, the questioned RTC order has now become final and
executory and the present petition is moot and academic.

THE COURT'S RULING

We find Metrobank's petition meritorious.

Procedural Issue

Section 1, Rule 65 of the Rules, clearly provides that a petition for certiorari is available
only when "there is no appeal, or any plain, speedy and adequate remedy in the
ordinary course of law." A petition for certiorari cannot coexist with an appeal or any
other adequate remedy. The existence and the availability of the right to appeal are
antithetical to the availment of the special civil action for certiorari. As we have long
held, these two remedies are "mutually exclusive."[7]

Admittedly, Metrobank's petition for certiorari before the CA assails the dismissal order

of the RTC and, under normal circumstances, Metrobank should have filed an appeal.

However, where the exigencies of the case are such that the ordinary methods of

438
appeal may not prove adequate -- either in point of promptness or completeness, so
that a partial if not a total failure of justice could result - a writ of certiorari may still be
issued.[8] Other exceptions, Justice Florenz D. Regalado listed are as follows:

(1) where the appeal does not constitute a speedy and adequate

remedy (Salvadades vs. Pajarillo, et al., 78 Phil. 77), as where 33 appeals were
involved from orders issued in a single proceeding which will inevitably result in a
proliferation of more appeals (PCIB vs. Escolin, et al., L-27860 and 27896, Mar. 29,
1974); (2) where the orders were also issued either in excess of or without
jurisdiction (Aguilar vs. Tan, L-23600, Jun 30, 1970, Cf. Bautista, et al. vs. Sarmiento,
et al., L-45137, Sept. 231985); (3) for certain special consideration, as public welfare or
public policy (See Jose vs. Zulueta, et al. -16598, May 31, 1961 and the cases cited
therein); (4) where in criminal actions, the court rejects rebuttal evidence for the
prosecution as, in case of acquittal, there could be no remedy (People vs. Abalos,
L029039, Nov. 28, 1968); (5) where the order is a patent nullity (Marcelo vs. De
Guzman, et al., L-29077, June 29, 1982); and (6) where the decision in the certiorari
case will avoid future litigations (St. Peter Memorial Park, Inc. vs. Campos, et al., L-
38280, Mar. 21, 1975).[9] [Emphasis supplied.]

Grave abuse of discretion may arise when a lower court or tribunal violates or
contravenes the Constitution, the law or existing jurisprudence. [10] As will be discussed
in greater detail below, the RTC decision dismissing Metrobank's petition was patently
erroneous and clearly contravened existing jurisprudence. For this reason, we cannot
fault Metrobank for resorting to the filing of a petition for certiorari with the CA to remedy
a patent legal error in the hope of obtaining a speedy and adequate remedy.

Nature of a petition for a writ of possession

A writ of possession is defined as "a writ of execution employed to enforce a judgment

to recover the possession of land. It commands the sheriff to enter the land and give its
possession to the person entitled under the judgment."[11]

There are three instances when a writ of possession may be issued: (a) in land
registration proceedings under Section 17 of Act No. 496; (b) in judicial foreclosure,
provided the debtor is in possession of the mortgaged realty and no third person, not a
party to the foreclosure suit, had intervened; and (c) in extrajudicial foreclosure of a real
estate mortgage under Section 7 of Act No. 3135, as amended by Act No. 4118. [12] The
present case falls under the third instance.

The procedure for obtaining a writ of possession in extrajudicial foreclosure cases is

found in Section 7 of Act No. 3135, as amended by Act No. 4118, which states:

Section 7. In any sale made under the provisions of this Act, the purchaser may petition
the Court of First Instance of the province or place where the property or any part
thereof is situated, to give him possession thereof during the redemption period,
furnishing bond in an amount equivalent to the use of the property for a period of twelve
months, to indemnify the debtor in case it be shown that the sale was made without

439
violating the mortgage or without complying with the requirements of this Act. Such
petition shall be made under oath and filed in form of an ex parte motion in the
registration or cadastral proceedings if the property is registered, or in special
proceedings in the case of property registered under the Mortgage Law or under section
one hundred and ninety-four of the Administrative Code, or of any other real property
encumbered with a mortgage duly registered in the office of any register of deeds in
accordance with any existing law, and in each case the clerk of the court shall, upon the
filing of such petition, collect the fees specified in paragraph eleven of section one
hundred and fourteen of Act Numbered Four hundred and ninety-six, as amended by
Act Numbered Twenty-eight hundred and sixty-six, and the court shall, upon approval of
the bond, order that a writ of possession issue, addressed to the sheriff of the province
in which the property is situated, who shall execute said order immediately.

Based on this provision, a writ of possession may issue either (1) within the one year
redemption period, upon the filing of a bond, or (2) after the lapse of the redemption
period, without need of a bond.[13] In order to obtain a writ of possession, the
purchaser in a foreclosure sale must file a petition, in the form of an ex
parte  motion, in the registration or cadastral proceedings of the registered
property. The reason why this pleading, although denominated as a petition, is actually
considered a motion is best explained in Sps. Arquiza v. CA,[14] where we said:

The certification against forum shopping is required only in a complaint or

other initiatory pleading. The ex parte petition for the issuance of a writ of
possession filed by the respondent is not an initiatory pleading. Although the
private respondent denominated its pleading as a petition, it is, nonetheless, a motion.
What distinguishes a motion from a petition or other pleading is not its form or the title
given by the party executing it, but rather its purpose. The office of a motion is not to
initiate new litigation, but to bring a material but incidental matter arising in the progress
of the case in which the motion is filed. A motion is not an independent right or
remedy, but is confined to incidental matters in the progress of a cause. It relates
to some question that is collateral to the main object of the action and is
connected with and dependent upon the principal remedy. An application for a
writ of possession is a mere incident in the registration proceeding. Hence,
although it was denominated as a "petition," it was in substance merely a motion. Thus,
the CA correctly made the following observations:

Such petition for the issuance of a writ of possession is filed in the form of an ex
parte motion, inter alia, in the registration or cadastral proceedings if the property is
registered. Apropos, as an incident or consequence of the original registration or
cadastral proceedings, the motion or petition for the issuance of a writ of possession,
not being an initiatory pleading, dispels the requirement of a forum-shopping
certification. Axiomatic is that the petitioner need not file a certification of non-forum
shopping since his claims are not initiatory in character (Ponciano vs. Parentela, Jr.,
331 SCRA 605 [2000]) [Emphasis supplied.]

The right to possess a property merely follows the right of ownership. Thus, after the
consolidation of title in the buyer's name for failure of the mortgagor to redeem, the writ
440
of possession becomes a matter of right and its issuance to a purchaser in an
extrajudicial foreclosure is merely a ministerial function. [15] Sps. Arquiza v. CA further
tells us:[16]

Indeed, it is well-settled that an ordinary action to acquire possession in favor of the

purchaser at an extrajudicial foreclosure of real property is not necessary. There is no
law in this jurisdiction whereby the purchaser at a sheriff's sale of real property is
obliged to bring a separate and independent suit for possession after the one-year
period for redemption has expired and after he has obtained the sheriff's final certificate
of sale. The basis of this right to possession is the purchaser's ownership of the
property. The mere filing of an ex parte motion for the issuance of the writ of
possession would suffice, and no bond is required. [Emphasis supplied.]

Since a petition for a writ of possession under Section 7 of Act No. 3135, as amended,
is neither a complaint nor an initiatory pleading, a certificate against non-forum shopping
is not required. The certificate that Metrobank attached to its petition is thus a superfluity
that the lower court should have disregarded.

No intervention allowed in ex parte proceedings

We also find merit in Metrobank's contention that the lower court should not have
allowed De Koning to intervene in the proceedings.

A judicial proceeding, order, injunction, etc., is ex parte when it is taken or granted at

the instance and for the benefit of one party only, and without notice to, or contestation
by, any person adversely interested.[17]

Given that the proceeding for a writ of possession, by the terms of Section 7 of Act No.
3135, is undoubtedly ex parte in nature, the lower court clearly erred not only when it
notified De Koning of Metrobank's ex parte petition for the writ of possession, but also
when it allowed De Koning to participate in the proceedings and when it took
cognizance and upheld De Koning's motion to dismiss.

As we held in Ancheta v. Metropolitan Bank and Trust Company, Inc.:[18]

In GSIS v. Court of Appeals, this Court discussed the inappropriateness of intervening

in a summary proceeding under Section 7 of Act No. 3135:

The proceedings in which respondent Knecht sought to intervene is an ex

parte proceeding pursuant to Sec. 7 of Act No. 3135, and, as pointed out by petitioner,
is a "judicial proceeding brought for the benefit of one party only, and without notice to,
or consent by any person adversely interested (Stella vs. Mosele, 19 N.E., 2d. 433, 435,
299 III App. 53; Imbrought v. Parker, 83 N.E. 2d 42, 43, 336 III App. 124; City Nat. Bank
& Trust Co. v. Aavis Hotel Corporation, 280 III App. 247), x x x or a proceeding wherein
relief is granted without an opportunity for the person against whom the relief is sought
to be heard" (Restatement, Torts, S 674, p. 365, Rollo).

441
xxx

Intervention is defined as "a proceeding in a suit or action by which a third person is

permitted by the court to make himself a party, either joining plaintiff in claiming what is
sought by the complaint, or uniting with defendant in resisting the claims of plaintiff, or
demanding something adversely to both of them; the act or proceeding by which a third
person becomes a party in a suit pending between others; the admission, by leave of
court, of a person not an original party to pending legal proceedings, by which such
person becomes a party thereto for the protection of some right of interest alleged by
him to be affected by such proceedings" (33 C.J., 477, cited in Eulalio Garcia, et al. vs.
Sinforoso David, et al., 67 Phil. 279, at p. 282).

Action, under Rule 2, Sec. 1, is defined as an ordinary suit in a court of justice, by which
one party prosecutes another for the enforcement or protection of a right, or the
prevention or redress of a wrong.

From the aforesaid definitions, it is clear that intervention contemplates a suit, and is

therefore exercisable during a trial and, as pointed out by petitioner is one which
envisions the introduction of evidence by the parties, leading to the rendition of
the decision in the case (p. 363, Rollo). Very clearly, this concept is not that
contemplated by Sec. 7 of Act No. 3135, whereby, under settled jurisprudence,
the Judge has to order the immediate issuance of a writ of possession 1) upon
the filing of the proper motion and 2) the approval of the corresponding bond. The
rationale for the mandate is to allow the purchaser to have possession of the foreclosed
property without delay, such possession being founded on his right of ownership. A trial
which entails delay is obviously out of the question. [Emphasis supplied.]

WHEREFORE, premises considered, we GRANT the petition. The Decision of the

Court of Appeals in CA-G.R. SP No. 62325 dated November 21, 2002, as well as the
orders of the Regional Trial Court of Makati City, Branch 65 in LRC Case No. M-4068
dated September 18, 2000 and October 23, 2000, is REVERSED and SET ASIDE. LRC
Case No. M-4068 is ordered remanded to the Regional Trial Court of Makati City,
Branch 65, for further proceedings and proper disposition. Costs against respondent
Manfred Jacob De Koning.

SO ORDERED.

THIRD DIVISION

G.R. No.195445, December 07, 2016

ANGELINA DE GUZMAN, GILBERT DE GUZMAN, VIRGILIO DE GUZMAN, JR., AND

ANTHONY DE GUZMAN, Petitioners, v. GLORIA A. CHICO, Respondent.

DECISION

442
 JARDELEZA, J.:

Before us is a petition for review1 under Rule 45 of the Rules of Court. Petitioners seek
the review of the January 31, 2011 Decision2 of the Court of Appeals (CA) in CA-G.R.
SP No. 114103 for being contrary to law and jurisprudence. The CA affirmed the
Order3 of the Regional Trial Court (RTC), Branch 59, Makati City in LRC Case No. M-
5188 dated January 19, 2010 which denied the petitioners' Urgent Motion to Cite
Petitioner in Contempt and to Nullify Proceedings, and the Order 4 of the RTC dated
April 19, 2010 which denied petitioners' Motion for Reconsideration.

The Facts

The subject of this case is a property situated at 7-A 32 A. Bonifacio Street, Bangkal,
Makati City, previously registered under the name of petitioners, and covered by
Transfer Certificate of Title (TCT) No. 164900.5

On May 24, 2006, the property was sold at a public auction of tax delinquent properties
conducted by the City Government of Makati City pursuant to Sections 254 to 260 of the
Local Government Code. Respondent was the winning bidder at the public auction, and
the City Government of Makati executed a Certificate of Sale in her favor on even date. 6

Petitioners failed to redeem the property within the one-year period. Thus, on July 12,
2007, respondent filed with the RTC of Makati City an application for new certificate of
title under Section 757 in relation to Section 1078 of Presidential Decree (PD) No. 1529
or the Property Registration Decree (LRC Case No. M-4992). 9 On December 28, 2007,
after hearing, the RTC ordered that the title over the property be consolidated and
transferred in the name of respondent. The Register of Deeds of Makati consequently
cancelled TCT No. 164900 and issued a new one, TCT No. T-224923, in favor of
respondent.10 Afterwards, in the same court, respondent moved for the issuance of a
writ of possession. The motion was, however, denied by the court for failure to set the
motion for hearing.11

On January 14, 2009, respondent, once again, filed (for the same property), an Ex
Parte Petition for the Issuance of a Writ of Possession 12 (LRC Case No. M-5188) with
the RTC of Makati City. This ex parte petition was raffled to Branch 59 (court a quo).13

On April 1, 2009, the court a quo issued an Order14 granting respondent's ex

parte petition and ordered the issuance of a writ of possession in her favor. The writ was
subsequently issued on August 7, 2009. 15

On August 28, 2009, petitioners filed an urgent motion to cite respondent in contempt,
and to nullify the proceedings on the ground that LRC Case No. M-5188 contained a
defective/false verification/certification of non-forum shopping. 16

443
On September 11, 2009, respondent filed her comment/opposition. She alleged that
petitioner's objection to the certification against forum shopping was deemed waived for
failure to timely object thereto. She also claimed that forum shopping does not exist. 17

On January 19, 2010, the court a quo issued an Order18 denying petitioners' motion. It

ruled that the ex parte petition for the issuance of a writ of possession filed by
respondent in LRC Case No. M-5188, although denominated as a petition, is not an
initiatory pleading, and, thus, does not require a certificate of non-forum shopping. Thus,
in the same Order, the court a quo ruled that petitioners' motion to present respondent
and her counsel as witnesses is without merit. 19 Petitioner filed a motion for
reconsideration, but it was denied in an Order 20 dated Apri1 19, 2010.

Aggrieved, petitioners filed a special civil action for certiorari before the CA to annul the
January 19, 2010 and April 19, 2010 Orders of the court a quo. They averred that it
acted with grave abuse of discretion in issuing the assailed orders. 21 Petitioners further
alleged that the tax auction sale proceeding is governed by Sections 246 to 270 of the
Local Government Code, and not by Act No. 3135 22 as relied upon by respondent.23

On January 31, 2011, the CA rendered a Decision dismissing the petition and affirming
the challenged Orders of the court a quo, to wit:

WHEREFORE, the instant petition is DISMISSED for lack of merit. The

challenged orders dated January 19, 2010 and April 19, 2010 are hereby AFFIRMED.24

The CA ruled that there is no forum shopping. Prior to the filing of the ex parte petition in
LRC Case No. M-5188, RTC Branch 62 has already denied respondent's motion for
issuance of a writ of possession in LRC Case No. M-4992. The CA added that there can
be no forum shopping because the issuance of a writ of possession is a ministerial
function and is summary in nature, thus, it cannot be said to be a judgment on the
merits but simply an incident in the transfer of title. 25

The CA also said that a certificate of non-forum shopping is required only in complaints
or other initiatory pleadings. A petition or motion for issuance of a writ of possession is
not a complaint or initiatory pleading which requires a verification and certificate of non-
forum shopping.26

Lastly, the CA rejected petitioners' argument that the tax auction sale proceeding is
governed by Sections 246 to 270 of the Local Government Code, and not by Act No.
3135. It explained that the issue was raised by petitioners for the first time on appeal,
and the decision finding the respondent as the lawful and registered owner of the
property by virtue of the public auction has long become final and executory and beyond
the ambit of judicial review.27

Petitioners appealed the Decision of the CA to this Court by way of a petition for review
on certiorari.

444
 Petitioners' Arguments

Petitioners aver that the CA committed reversible error in:

(a) Ruling that because of Section 7 of Act No. 3135, a certification of non-forum
shopping was unnecessary in the ex parte petition, and thus it was unnecessary
to examine respondent Chico and her counsel on said certification; and
   
(b) Not ruling conformably with Article 433 of the Civil Code and the cases of Factor
v. Martel, Jr.,28Serra Serra v. Court of Appeals,29 and Maglente v. Baltazar-
Padilla30 that:
(i) The certification of non-forum shopping was required in the ex-
parte petition;
     
(ii) All proceedings in LRC Case No. M-5188 should have been in the nature of
an accion reivindicatoria; and
     
(iii) Consequently, said proceedings were void, being summary and in the
nature of proceedings for an ex parte motion.31

Respondent's Arguments

In her Comment,32 respondent insists that a certification of non-forum shopping is not

necessary in this case because an ex parte petition for the issuance of a writ of
possession is not an action, complaint, or an initiatory pleading. She avers that although
denominated as a petition, the ex parte petition is actually in the nature of a motion,
whose office is not to initiate new litigation, but to bring a material but incidental matter
arising in the progress of the case, in this case, the registration
proceedings.33 Respondent also denies committing forum shopping, and instead posits
that it is petitioners who are guilty of forum shopping. Respondent notes that in this
petition, petitioners' arguments center on the alleged nullity of the writ of possession
itself which is likewise subject of another petition before the Court of Appeals docketed
as CA-G.R SP No. 110654.34

Respondent likewise argues that Article 433 of the New Civil Code has no application to
a buyer of property in a tax delinquency sale. Respondent contends that the cases
petitioner cited do not involve actions pertaining to tax delinquency sales, and that they
could not, in fact, identify a particular provision of law or jurisprudence saying that a
buyer in a tax delinquency sale has to file an independent action to be able to take
possession of the property he bought in a tax delinquency sale. 35

The Court's Ruling

445
We deny the petition.

No certificate against forum shopping

is required in a petition or motion for
issuance of a writ of possession.

We affirm the ruling of the CA that a certificate against forum shopping is not a
requirement in an ex parte petition for the issuance of a writ of possession. An ex
parte petition for the issuance of writ of possession is not a complaint or other initiatory
pleading as contemplated in Section 5,36 Rule 7 of the 1997 Rules of Civil Procedure. 37

The non-initiatory nature of an ex parte motion or petition for the issuance of a writ of
possession is best explained in Arquiza v. Court of Appeals.38 In that case we ruled that
the ex parte petition for the issuance of a writ of possession filed by the respondent is
not an initiatory pleading. Although the private respondent denominated its pleading as
a petition, it is, nonetheless, a motion. What distinguishes a motion from a petition or
other pleading is not its form or the title given by the party executing it, but rather its
purpose.39 A petition for the issuance of a writ of possession does not aim to initiate new
litigation, but rather issues as an incident or consequence of the original registration or
cadastral proceedings. As such, the requirement for a forum shopping certification is
dispelled.40

We also cannot subscribe to petitioners' narrow view that only cases covered by
foreclosure sales under Act No. 3135 are excused from the requirement of a certificate
against forum shopping.

Based on jurisprudence, a writ of possession may be issued in the following instances:

(a) land registration proceedings under Section 17 of Act No. 496, otherwise known as
The Land Registration Act; (b) judicial foreclosure, provided the debtor is in possession
of the mortgaged realty and no third person, not a party to the foreclosure suit, had
intervened; (c) extrajudicial foreclosure of a real estate mortgage under Section 7 of Act
No. 3135, as amended by Act No. 4118; and (d) in execution sales. 41

We note that there is no law or jurisprudence which provides that the petition for the
issuance of a writ of possession depends on the nature of the proceeding in which it is
filed. Thus, we find no logical reason for petitioners' contention that only cases covered
by Act No. 3135 are exempt from the requirement of a certificate against forum
shopping. As explained in the previous paragraphs, by its very nature, a writ of
possession is a mere incident in the transfer of title. It is an incident of ownership, and
not a separate judgment. It would thus be absurd to require that a petition for the
issuance of this writ to be accompanied by a certification against forum shopping.

The issuance of a writ of possession is

warranted.

446
Petitioners cite the rulings in Factor v. Martel, Jr., Serra Serra v. Court of Appeals,
and Maglente v. Baltazar-Padilla to justify their position that respondent availed of the
wrong remedy when she filed an ex parte petition for issuance of a writ of possession.
Petitioners contend that this is a departure from the proper procedure which required
the filing of an appropriate case for accion reivindicatoria.

Respondent, on the other hand, argues that the cases petitioner cited do not involve
actions pertaining to tax delinquency sales. Respondent adds that petitioners could not,
in fact, identify a particular provision of law or jurisprudence saying that a buyer in a tax
delinquency sale has to file an independent action to be able to take possession of the
property he brought in a tax delinquency sale.

We agree with respondent.

Factor involves the issuance of a writ of possession pursuant to an original action for

registration; Serra Serra involves a petition for reconstitution; while Maglente involves
an action for interpleader. These rulings cannot apply in this case. For one, none of
them contemplate the present situation where the action is between, on the one hand,
the previous registered owner of the parcel of land; and on the other, the buyer in a tax
delinquency sale. Second, none of these cases involves the right of a purchaser in a tax
delinquency sale for the issuance of a writ of possession after the redemption period.

Contrary therefore, to petitioners' contentions, the CA did not err in upholding the writ of
possession in this case. In St. Raphael Montessori School, Inc. v. Bank of the
Philippine Islands,42 an action involving the application of Act No. 3135, this Court
recognized that the writ of possession was warranted not merely on the basis of the law,
but ultimately on the right to possess as an incident of ownership. The right to possess
a property merely follows the right of ownership, and it would be illogical to hold that a
person having ownership of a parcel of land is barred from seeking
possession.43 Precisely, the basis for the grant of the writ of possession in this case is
respondent's ownership of the property by virtue of a tax delinquency sale in her favor,
and by virtue of her absolute right of ownership arising from the expiration of the period
within which to redeem the property.44

In Cloma v. Court of Appeals,45 the City of Pasay sold the property of Spouses Cloma at
public auction for tax delinquency. Private respondent Nocom was declared the winning
bidder of the sale, for which he was issued a certificate of sale. The spouses failed to
redeem the property within the prescribed period, and a final deed of sale was issued in
favor of Nocom. Thus, Nocom filed a petition invoking Section 75 of PD No. 1529 (as in
this case),46 which was granted. Accordingly, Nocom applied for a writ of possession
over the property, and was eventually granted by the trial court. The spouses argued
that the trial court cannot issue the writ of possession. This Court rejected this
argument, citing Section 2 of PD No. 1529. This Court said:

Section 2 of PD 1529 also clearly rejects the thesis of petitioners that the trial court
cannot issue a writ of possession to effectuate the result of a tax sale, thus:

447
"Sec 2. Nature of registration of proceedings; jurisdiction of courts. — x x x Courts of
First Instance shall have exclusive jurisdiction over all applications for original
registration of title, to land, including improvements and interests therein, and over all
petitions filed after original registration of title, with power to hear and determine all
questions arising upon such applications or petitions. x x x" (Emphasis in the original.) 47

More, respondent's ownership over the property is affirmed by the final and executory
judgment in LRC Case No. M-4992.48 To be clear, a writ of possession is defined as
a writ of execution employed to enforce a judgment to recover the possession of land,
commanding the sheriff to enter the land and give its possession to the person entitled
under the judgment.49

In the same vein, we note the finding of the court a quo in granting the ex parte petition
for the issuance of writ of possession of respondent, thus:

Facts of the case reveal that the Regional Trial Court of Makati City, Branch 62,
rendered a Decision under LRC Case No. M-4992 which granted Chico's Petition for
Application for a New Certificate of Title under Sec. 75 in relation to Sec. 107 of the
Property Registration Decree. Said Decision became final and executory on 27
February 2008.

Sec. 6, Rule 135 of the Rules of Court succinctly provides that when by law jurisdiction
is conferred on a court or judicial officer, all ancilliary writs, processes and other means
necessary to carry it into effect may be employed by such court or officer, and if the
procedure to be followed in the exercise of such jurisdiction is not specifically pointed
out by law or by these rules, any suitable process or mode of proceeding may be
adopted which appears conformable to the spirit of said law or rules. 50

The reason for the premature issuance of the writ of possession

in Republic (Department of Transportation and Communication [DOTC]) v. City of
Mandaluyong51 does not obtain in this case. In Republic, the Metro Rail Transit
Corporation failed to pay the real property taxes due to the City of Mandaluyong, hence
a public auction was conducted. For lack of bidders, the real properties were forfeited in
favor of the city. The period for the redemption of the real properties expired, thus a final
deed of sale was issued in the city's favor. By virtue of this final deed of sale, the city
filed an ex parte petition for the issuance of a writ of possession, which the regional trial
court granted. The DOTC questioned the propriety of the issuance of the writ of
possession. While this Court held that a writ of possession is a mere incident in the
transfer of title, and which may arise from ownership by virtue of a tax delinquency sale,
we nonetheless ruled that the issuance of the writ was premature. The reason being,
there was still a pending issue on whether the auction sale should proceed, in the first
place.52

This impediment does not exist in this case precisely because title has already been
consolidated, and a new certificate of title has already been issued in the name of
respondent in LRC Case No. M-4992. More, unlike in Republic, records of this case

448
already established that the Decision in LRC Case No. M-4992 has long become final
and executory, as evidenced by the Entry of Judgment issued on March 3,
2008.53 Hence, the issuance of a writ of possession is warranted. As the trial court ruled,
"[a]ll things considered, the petitioner is now the lawful registered owner of the subject
property and by virtue of law, is entitled to the issuance of a Transfer Certificate of Title
in her name."54

Finally, petitioners cannot attack the validity of the proceedings in LRC Case No. M-
4992. Having become final and executory, the judgment in LRC Case No. M-4992 can
only be nullified in a petition for annulment of judgment, which petitioner did not do. The
general rule is that a final and executory judgment can no longer be disturbed, altered,
or modified in any respect, and that nothing further can be done but to execute it. A final
and executory decision may, however, be invalidated via a petition for relief or a petition
to annul the same under Rules 38 or 47, respectively, of the Rules of Court. 55

WHEREFORE, the petition is DENIED. The Decision dated January 31, 2011 of the
Court of Appeals in CA-G.R. SP No. 114103 is hereby AFFIRMED.

SO ORDERED.

THIRD DIVISION

[G.R. No. 162924 : February 04, 2010]

MID-PASIG LAND DEVELOPMENT CORPORATION, PETITIONER, VS. MARIO

TABLANTE, DOING BUSINESS UNDER THE NAME AND STYLE ECRM
ENTERPRISES; ROCKLAND CONSTRUCTION COMPANY; LAURIE LITAM; AND
MC HOME DEPOT, INC., RESPONDENTS.

DECISION

NACHURA, J.:

Assailed in the instant petition are the two (2) Resolutions [1] of the Court of Appeals (CA)
dated November 20, 2003 and March 22, 2004, dismissing the petition
for certiorari before it on technical grounds and denying the motion for reconsideration
thereof, respectively.

The background facts are as follows:

Petitioner is the registered owner of a piece of land situated in Pasig City, bounded by
Meralco Avenue, Ortigas Avenue, Doña Julia Vargas Avenue, and Valle Verde
Subdivision. On December 6, 1999, petitioner, represented by its Chairman and
President, Ronaldo Salonga, and ECRM Enterprises, represented by its proprietor,
Mario P. Tablante, executed an agreement whereby the former would lease to the latter
an area, approximately one (1) hectare, of the aforesaid land, for a period of three (3)

449
months, to be used as the staging area for the Home and Garden Exhibition Fair. On
March 6, 2000, the date of the expiration of the Lease Agreement, Tablante assigned all
his rights and interests under the said agreement to respondents Laurie M. Litam and/or
Rockland Construction Company, Inc. (Rockland) under a Deed of Assignment of the
same date. Petitioner eventually learned that respondent Tablante had executed a
Contract of Lease with respondent MC Home Depot, Inc. on November 26, 1999 over
the same parcel of land. Thereafter, respondent MC Home Depot, Inc. constructed
improvements on the land and subdivided the area into fifty-nine (59) commercial stalls,
which it leased to various entities. Upon the expiration of the lease on March 6, 2000,
petitioner demanded that respondents vacate the land. A final demand was made in a
letter dated December 20, 2000.[2]

In order to forestall ejectment from the premises, respondent Rockland filed a case for
Specific Performance with the Regional Trial Court (RTC), Branch 266, Pasig City, on
January 11, 2001, compelling petitioner to execute a new lease contract for another
three (3) years, commencing in July 2000. This was docketed as Civil Case No. 68213.
Petitioner moved to dismiss the complaint on the ground that it was anticipatory in
nature.

Consequently, on August 22, 2001, petitioner filed Civil Case No. 8788 for unlawful
detainer against herein respondents, raffled to the Municipal Trial Court (MTC), Pasig
City, Branch 70. Simultaneously, petitioner filed a supplemental motion to dismiss Civil
Case No. 68213, on the ground of litis pendentia. Petitioner's motion to dismiss was
denied. The denial was questioned and eventually elevated to the Supreme Court. [3]

Meantime, on April 29, 2002, the MTC rendered judgment in the unlawful detainer
(ejectment) case. In the main, the trial court ruled that the issue did not involve material
or physical possession, but rather, whether or not ECRM had the right to exercise an
option to renew its lease contract. The MTC stated that, considering that this issue was
incapable of pecuniary estimation, jurisdiction over the case was vested in the RTC.
The trial court, therefore, disposed, as follows:

WHEREFORE, judgment is hereby rendered DISMISSING the complaint for lack of

merit. In the meantime, the plaintiff is hereby ordered to pay the defendants attorney's
fees and expenses of litigation in the amount of TWENTY THOUSAND PESOS
(P20,000.00).[4]

On appeal, the RTC, Pasig City, Branch 160, affirmed in toto. In its decision dated July
10, 2003, the RTC ruled that:

Relative to the issue raised by the appellant that the lower court erred in finding it had
no jurisdiction over the subject matter of this case as the question of whether or not
ECRM under the provisions of the lease agreement (pars. 3 and 13) has the right to
exercise an option to renew its lease contract is one incapable of pecuniary estimation
and therefore jurisdiction is vested in the Regional Trial Court. Republic Act No. 7691
grants Metropolitan Trial Courts the exclusive jurisdiction over cases of forcible entry

450
and unlawful detainer. Since it has been sufficiently established under the facts
obtaining that the contract of lease has been renewed before the expiration of the lease
period, and the appellant has consented to the renewal and assignment of the lease, it
necessarily follows that the issue on whether the lower court erred in finding that it did
not have jurisdiction over the subject matter raised by the appellant, deserves scant
consideration and this court need not delve into it anymore. [5]

A petition for certiorari was consequently filed with the CA.

In the assailed resolution dated November 20, 2003, the CA resolved to dismiss the
petition on the following grounds:

1) The verification and certification against non-forum shopping was signed by a certain
Antonio A. Merelos as General Manager of the petitioner-corporation without attaching
therewith a Corporate Secretary's certificate or board resolution that he is authorized to
sign for and on behalf of the petitioner; and

2) Lack of pertinent and necessary documents which are material portions of the record
as required by Section 2, Rule 42 of the Rules of Civil Procedure. [6]

The motion for reconsideration was denied;[7] hence, the instant petition assigning the
following errors:

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING THAT

THE VERIFICATION AND CERTIFICATION AGAINST FORUM-SHOPPING IN THE
PETITION FAILED TO ATTACH THE BOARD RESOLUTION SHOWING THE
AUTHORITY OF THE AFFIANT.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING THAT

THE PETITION LACKED THE PERTINENT AND NECESSARY DOCUMENTS
REQUIRED BY THE RULES.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN DISMISSING THE

PETITION THUS EFFECTIVELY UPHOLDING THE DECISION OF THE REGIONAL
TRIAL COURT, TO WIT: (a) THAT THE LEASE AGREEMENT WAS UNILATERALLY
RENEWED AND THAT PETITIONER IS ESTOPPED FROM DENYING SUCH
UNILATERAL RENEWAL; (b) THAT RESPONDENTS TABLANTE/ECRM, ROCKLAND
AND MC HOME DEPOT COULD VALIDLY OCCUPY THE PROPERTY IN THE
ABSENCE OF ANY VALID LEASE AGREEMENT CONSENTED TO BY PETITIONER;
(c) PETITIONER [IS] LIABLE FOR ATTORNEY'S FEES AND COSTS OF SUIT. [8]
The petition is granted.

In Cagayan Valley Drug Corporation v. Commissioner of Internal Revenue,[9] the Court

had occasion to explain that:

451
It must be borne in mind that Sec. 23, in relation to Sec. 25 of the Corporation Code,
clearly enunciates that all corporate powers are exercised, all business conducted, and
all properties controlled by the board of directors. A corporation has a separate and
distinct personality from its directors and officers and can only exercise its corporate
powers through the board of directors. Thus, it is clear that an individual corporate
officer cannot solely exercise any corporate power pertaining to the corporation without
authority from the board of directors. This has been our constant holding in cases
instituted by a corporation.

In a slew of cases, however, we have recognized the authority of some corporate

officers to sign the verification and certification against forum shopping. In Mactan-
Cebu International Airport Authority v. CA, we recognized the authority of a general
manager or acting general manager to sign the verification and certificate against forum
shopping; x x x.

In sum, we have held that the following officials or employees of the company
can sign the verification and certification without need of a board resolution: (1)
the Chairperson of the Board of Directors, (2) the President of a corporation, (3) the
General Manager or Acting General Manager, (4) Personnel Officer, and (5) an
Employment Specialist in a labor case.

While the above cases do not provide a complete listing of authorized signatories to the
verification and certification required by the rules, the determination of the sufficiency of
the authority was done on a case to case basis. The rationale applied in the foregoing
cases is to justify the authority of corporate officers or representatives of the corporation
to sign the verification or certificate against forum shopping, being "in a position to verify
the truthfulness and correctness of the allegations in the petition." [10]

From the foregoing, it is thus clear that the failure to attach the Secretary's Certificate,
attesting to General Manager Antonio Merelos's authority to sign the Verification and
Certification of Non-Forum Shopping, should not be considered fatal to the filing of the
petition. Nonetheless, the requisite board resolution was subsequently submitted to the
CA, together with the pertinent documents. [11] Considering that petitioner substantially
complied with the rules, the dismissal of the petition was, therefore, unwarranted. Time
and again, we have emphasized that dismissal of an appeal on a purely technical
ground is frowned upon especially if it will result in unfairness. The rules of procedure
ought not to be applied in a very rigid, technical sense for they have been adopted to
help secure, not override, substantial justice. For this reason, courts must proceed with
caution so as not to deprive a party of statutory appeal; rather, they must ensure that all
litigants are granted the amplest opportunity for the proper and just ventilation of their
causes, free from the constraint of technicalities.[12]

After a finding that the CA erred in dismissing the petition before it, a remand of the
case is in order. However, a perusal of the records reveals that this is no longer
necessary in light of relevant developments obtaining in the case at bar.

452
Petitioner, in its Memorandum dated October 28, 2005, alleged that respondents'
possessory claims had lapsed and, therefore, had become moot and academic.
Respondent Rockland prayed that a three-year lease period be granted to it in order
that it would be able to plan its activities more efficiently. Since the claimed "lease
contract" had already expired as of July or August 2003, there appears no reason why
respondents should continue to have any claim to further possession of the property. [13]

Respondent Rockland also stated in its Memorandum dated March 16, 2006 that it was
no longer in possession of the subject property considering that:

50. In a Resolution dated 17 September 2004, in the case of "Rockland Construction

Company, Inc. vs. Mid-Pasig Land Development Corporation, et al.," docketed as SCA
No. 2673, and the Omnibus Order dated 12 November 2004, affirming the aforesaid
Resolution, Branch 67 Pasig City Regional Trial Court Presiding Judge Mariano M.
Singzon awarded possession (albeit erroneously) of subject property to Pasig Printing
Corporation, an intervenor in the SCA case.

51. At present, petitioner does not have a cause of action against herein respondent
Rockland. Respondent is not unlawfully withholding possession of the property in
question as in fact respondent is not in possession of the subject property. The issue of
possession in this ejectment case has therefore been rendered moot and academic. [14]

This allegation was confirmed by respondent MC Home Depot, Inc. in its

Comment/Memorandum dated May 22, 2007 submitted to the Court. It stated therein
that "the passage of time has rendered the issue of possession moot and academic with
respect to respondent Rockland, as the three-year period has long been expired in
2003."[15] Furthermore, respondent MC Home Depot, Inc. asserts that it is in rightful
possession of the land on the strength of a Memorandum of Agreement dated
November 22, 2004 between the latter and Pasig Printing Corporation. By petitioner's
admission that while it remains the registered owner of the land, possession of the
same had been adjudicated in favor of Pasig Printing Corporation, another entity without
any contractual relationship with petitioner, on the strength of an Order from the RTC of
Pasig City. Considering that Pasig Printing Corporation has the jus possessionis over
the subject property, it granted the MC Home Depot, Inc. actual occupation and
possession of the subject property for a period of four (4) years, renewable for another
four (4) years upon mutual agreement of the parties. [16]

WHEREFORE, the petition is GRANTED. The assailed Resolutions of the Court of

Appeals are REVERSED and SET ASIDE. However, in view of the developments which
have rendered the issue of the right of possession over the subject property moot and
academic, the main case is hereby considered CLOSED AND TERMINATED.

No pronouncement as to costs.

SO ORDERED.
SECOND DIVISION

453
 [ G.R. No. 151369, March 23, 2011 ]
ANITA MONASTERIO-PE AND THE SPOUSES ROMULO TAN AND EDITHA PE-
TAN, PETITIONERS, VS. JOSE JUAN TONG, HEREIN REPRESENTED BY HIS
ATTORNEY-IN-FACT, JOSE Y. ONG, RESPONDENT.

DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking the reversal and nullification of the Decision [1] and Order,[2] respectively dated
October 24, 2001 and January 18, 2002, of the Regional Trial Court (RTC) of Iloilo City,
Branch 24.

The instant petition stemmed from an action for ejectment filed by herein respondent
Jose Juan Tong (Tong) through his representative Jose Y. Ong (Ong) against herein
petitioners Anita Monasterio-Pe (Anita) and the spouses Romulo Tan and Editha Pe-
Tan (Spouses Tan). The suit was filed with the Municipal Trial Court in Cities (MTCC),
Branch 3, Iloilo City and docketed as Civil Case No. 2000(92).

In the Complaint, it was alleged that Tong is the registered owner of two parcels of land
known as Lot Nos. 40 and 41 and covered by Transfer Certificate of Title (TCT) Nos. T-
9699 and T-9161, together with the improvements thereon, located
at Barangay Kauswagan, City Proper, Iloilo City; herein petitioners are occupying the
house standing on the said parcels of land without any contract of lease nor are they
paying any kind of rental and that their occupation thereof is simply by mere tolerance of
Tong; that in a letter dated December 1, 1999, Tong demanded that respondents vacate
the house they are occupying, but despite their receipt of the said letter they failed and
refused to vacate the same; Tong referred his complaint to the Lupon of Barangay
Kauswagan, to no avail.[3]

In their Answer with Defenses and Counterclaim, herein petitioners alleged that Tong is
not the real owner of the disputed property, but is only a dummy of a certain alien
named Ong Se Fu, who is not qualified to own the said lot and, as such, Tong's
ownership is null and void; petitioners are the true and lawful owners of the property in
question and by reason thereof they need not lease nor pay rentals to anybody; a case
docketed as CA-G.R. CV No. 52676 (RTC Civil Case No. 20181) involving herein
petitioner Pe and respondent is pending before the Court of Appeals (CA) where the
ownership of the subject property is being litigated; respondent should wait for the
resolution of the said action instead of filing the ejectment case; petitioners also claimed
that there was, in fact, no proper barangay conciliation as Tong was bent on filing the
ejectment case before conciliation proceedings could be validly made. [4]

On March 19, 2001, the MTCC rendered judgment in favor of herein respondent, the
dispositive portion of which reads as follows:

WHEREFORE, judgment is rendered, finding the defendants Anita Monasterio-Pe, and

Spouses Romulo Tan and Editha Pe-Tan to be unlawfully withholding the property in

454
litigation, i.e., Lot. Nos. 40 and 41 covered by TCT Nos. T-9699 and 9161, respectively,
together with the buildings thereon, located at Brgy. Kauswagan, Iloilo City Proper, and
they are hereby ordered together with their families and privies, to vacate the premises
and deliver possession to the plaintiff and/or his representative.

The defendants are likewise ordered to pay plaintiff reasonable compensation for the
use and occupancy of the premises in the amount of P15,000.00 per month starting
January, 2000 until they actually vacate and deliver possession to the plaintiff and
attorney's fees in the amount of P20,000.00.

Costs against the defendants.

SO DECIDED.[5]

Aggrieved by the above-quoted judgment, petitioners appealed the decision of the

MTCC with the RTC of Iloilo City.

In its presently assailed Decision, the RTC of Iloilo City, Branch 24 affirmed in its
entirety the appealed decision of the MTCC.

Hence, the instant petition for review on certiorari.

At the outset, it bears emphasis that in a petition for review on certiorari under Rule 45
of the Rules of Court, only questions of law may be raised by the parties and passed
upon by this Court.[6] It is a settled rule that in the exercise of this Court's power of
review, it does not inquire into the sufficiency of the evidence presented, consistent with
the rule that this Court is not a trier of facts. [7] In the instant case, a perusal of the errors
assigned by petitioners would readily show that they are raising factual issues the
resolution of which requires the examination of evidence. Certainly, issues which are
being raised in the present petition, such as the questions of whether the issue of
physical possession is already included as one of the issues in a case earlier filed by
petitioner Anita and her husband, as well as whether respondent complied with the law
and rules on barangay conciliation, are factual in nature.

Moreover, the appeal under Rule 45 of the said Rules contemplates that the RTC
rendered the judgment, final order or resolution acting in its original jurisdiction. [8] In the
present case, the assailed Decision and Order of the RTC were issued in the exercise
of its appellate jurisdiction.

Thus, petitioners pursued the wrong mode of appeal when they filed the present petition
for review on certiorari with this Court. Instead, they should have filed a petition for
review with the CA pursuant to the provisions of Section 1, [9] Rule 42 of the Rules of
Court.

On the foregoing bases alone, the instant petition should be denied.

455
In any case, the instant petition would still be denied for lack of merit, as discussed
below.

In their first assigned error, petitioners contend that the RTC erred in holding that the
law authorizes an attorney-in-fact to execute the required certificate against forum
shopping in behalf of his or her principal. Petitioners argue that Tong himself, as the
principal, and not Ong, should have executed the certificate against forum shopping.

The Court is not persuaded.

It is true that the first paragraph of Section 5,[10] Rule 7 of the Rules of Court, requires
that the certification should be signed by the "petitioner or principal party" himself. The
rationale behind this is because only the petitioner himself has actual knowledge of
whether or not he has initiated similar actions or proceedings in different courts or
agencies.[11] However, the rationale does not apply where, as in this case, it is the
attorney-in-fact who instituted the action.[12] Such circumstance constitutes reasonable
cause to allow the attorney-in-fact to personally sign the Certificate of Non-Forum
Shopping. Indeed, the settled rule is that the execution of the certification against forum
shopping by the attorney-in-fact is not a violation of the requirement that the parties
must personally sign the same.[13] The attorney-in-fact, who has authority to file, and
who actually filed the complaint as the representative of the plaintiff, is a party to the
ejectment suit.[14] In fact, Section 1,[15] Rule 70 of the Rules of Court includes the
representative of the owner in an ejectment suit as one of the parties authorized to
institute the proceedings. In the present case, there is no dispute that Ong is
respondent's attorney-in-fact. Hence, the Court finds that there has been substantial
compliance with the rules proscribing forum shopping.

Petitioners also aver that the certificate against forum shopping attached to the
complaint in Civil Case No. 2000(92) falsely stated that there is no other case pending
before any other tribunal involving the same issues as those raised therein, because at
the time the said complaint was filed, Civil Case No. 20181 was, in fact, still pending
with the CA (CA-G.R. CV No. 52676), where the very same issues of ejectment and
physical possession were already included.

Corollarily, petitioners claim that the MTCC has no jurisdiction over Civil Case No.
2000(92) on the ground that the issue of physical possession raised therein was already
included by agreement of the parties in Civil Case No. 20181. As such, petitioners
assert that respondent is barred from filing the ejectment case, because in doing so he
splits his cause of action and indirectly engages in forum shopping.

The Court does not agree.

The Court takes judicial notice of the fact that the disputed properties, along with three
other parcels of land, had been the subject of two earlier cases filed by herein petitioner
Anita and her husband Francisco against herein respondent and some other persons.
The first case is for specific performance and/or rescission of contract and

456
reconveyance of property with damages. It was filed with the then Court of First
Instance (CFI) of Iloilo City and docketed as Civil Case No. 10853. The case was
dismissed by the CFI. On appeal, the Intermediate Appellate Court (IAC) upheld the
decision of the trial court. When the case was brought to this Court, [16] the decision of
the IAC was affirmed. Subsequently, the Court's judgment in this case became final and
executory per Entry of Judgment issued on May 27, 1991.

Subsequently, in 1992, the Spouses Pe filed a case for nullification of contract,

cancellation of titles, reconveyance and damages with the RTC of Iloilo City. This is the
case presently cited by petitioners. Eventually, the case, docketed as Civil Case No.
20181, was dismissed by the lower court on the ground of res judicata. The RTC held
that Civil Case No. 10853 serves as a bar to the filing of Civil Case No. 20181, because
both cases involve the same parties, the same subject matter and the same cause of
action. On appeal, the CA affirmed the dismissal of Civil Case No. 20181. Herein
petitioner Anita assailed the judgment of the CA before this Court, but her petition for
review on certiorari was denied via a Resolution[17] dated January 22, 2003. On June 25,
2003, the said Resolution became final and executory. The Court notes that the case
was disposed with finality without any showing that the issue of ejectment was ever
raised. Hence, respondent is not barred from filing the instant action for ejectment.

In any case, it can be inferred from the judgments of this Court in the two
aforementioned cases that respondent, as owner of the subject lots, is entitled to the
possession thereof. Settled is the rule that the right of possession is a necessary
incident of ownership.[18] Petitioners, on the other hand, are consequently barred from
claiming that they have the right to possess the disputed parcels of land, because their
alleged right is predicated solely on their claim of ownership, which is already effectively
debunked by the decisions of this Court affirming the validity of the deeds of sale
transferring ownership of the subject properties to respondent.

Petitioners also contend that respondent should have filed an accion publiciana and not
an unlawful detainer case, because the one-year period to file a case for unlawful
detainer has already lapsed.

The Court does not agree.

Sections 1 and 2, Rule 70 of the Rules of Court provide:

Section 1. Who may institute proceedings and when. - Subject to the provisions of the
next succeeding section, a person deprived of the possession of any land or building by
force, intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee, or other
person against whom the possession of any land or building is unlawfully withheld after
the expiration or termination of the right to hold possession, by virtue of any contract,
express or implied, or the legal representatives or assigns of any such lessor, vendor,
vendee, or other person, may, at any time within one (1) year after such unlawful
deprivation or withholding of possession, bring an action in the proper Municipal Trial
Court against the person or persons unlawfully withholding or depriving of possession,
or any person or persons claiming under them, for the restitution of such possession,
457
together with damages and costs.

Section 2. Lessor to proceed against lessee only after demand. - Unless otherwise
stipulated, such action by the lessor shall be commenced only after demand to pay or
comply with the conditions of the lease and to vacate is made upon the lessee, or by
serving written notice of such demand upon the person found on the premises, or by
posting such notice on the premises if no person be found thereon, and the lessee fails
to comply therewith after fifteen (15) days in the case of land or five (5) days in the case
of buildings.

Respondent alleged in his complaint that petitioners occupied the subject property by
his mere tolerance. While tolerance is lawful, such possession becomes illegal upon
demand to vacate by the owner and the possessor by tolerance refuses to comply with
such demand.[19] Respondent sent petitioners a demand letter dated December 1, 1999
to vacate the subject property, but petitioners did not comply with the demand. A person
who occupies the land of another at the latter's tolerance or permission, without any
contract between them, is necessarily bound by an implied promise that he will vacate
upon demand, failing which a summary action for ejectment is the proper remedy
against him.[20] Under Section 1, Rule 70 of the Rules of Court, the one-year period
within which a complaint for unlawful detainer can be filed should be counted from the
date of demand, because only upon the lapse of that period does the possession
become unlawful.[21] Respondent filed the ejectment case against petitioners on March
29, 2000, which was less than a year from December 1, 1999, the date of formal
demand. Hence, it is clear that the action was filed within the one-year period
prescribed for filing an ejectment or unlawful detainer case.

Neither is the Court persuaded by petitioners' argument that respondent has no cause
of action to recover physical possession of the subject properties on the basis of a
contract of sale because the thing sold was never delivered to the latter.

It has been established that petitioners validly executed a deed of sale covering the
subject parcels of land in favor of respondent after the latter paid the outstanding
account of the former with the Philippine Veterans Bank.

Article 1498 of the Civil Code provides that when the sale is made through a public
instrument, the execution thereof shall be equivalent to the delivery of the thing which is
the object of the contract, if from the deed the contrary does not appear or cannot
clearly be inferred. In the instant case, petitioners failed to present any evidence to
show that they had no intention of delivering the subject lots to respondent when they
executed the said deed of sale. Hence, petitioners' execution of the deed of sale is
tantamount to a delivery of the subject lots to respondent. The fact that petitioners
remained in possession of the disputed properties does not prove that there was no
delivery, because as found by the lower courts, such possession is only by respondent's
mere tolerance.

Lastly, the Court does not agree with petitioners' assertion that the filing of the unlawful

458
detainer case was premature, because respondent failed to comply with the provisions
of the law on barangay conciliation. As held by the RTC, Barangay Kauswagan City
Proper, through its Pangkat Secretary and Chairman, issued not one but two certificates
to file action after herein petitioners and respondent failed to arrive at an amicable
settlement. The Court finds no error in the pronouncement of both the MTCC and the
RTC that any error in the previous conciliation proceedings leading to the issuance of
the first certificate to file action, which was alleged to be defective, has already been
cured by the MTCC's act of referring back the case to the Pangkat Tagapagkasundo of
Barangay Kauswagan for proper conciliation and mediation proceedings. These
subsequent proceedings led to the issuance anew of a certificate to file action.

WHEREFORE, the instant petition is DENIED. The assailed Decision and Order of the
Regional Trial Court of Iloilo City, Branch 24, are AFFIRMED.

SO ORDERED.
THIRD DIVISION

[G.R. No. 179488 : April 23, 2012]

COSCO PHILIPPINES SHIPPING, INC., PETITIONER, VS. KEMPER INSURANCE

COMPANY, RESPONDENT.

DECISION

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
reverse and set aside the Decision[1] and Resolution[2] of the Court of Appeals (CA), in
CA-G.R. CV No. 75895, entitled Kemper Insurance Company v. Cosco Philippines
Shipping, Inc.  The CA Decision reversed and set aside the Order dated March 22,
2002 of the Regional Trial Court (RTC), Branch 8, Manila, which granted the Motion to
Dismiss filed by petitioner Cosco Philippines Shipping, Inc., and ordered that the case
be remanded to the trial court for further proceedings.cralaw

The antecedents are as follows:

Respondent Kemper Insurance Company is a foreign insurance company based in

Illinois, United States of America (USA) with no license to engage in business in the
Philippines, as it is not doing business in the Philippines, except in isolated transactions;
while petitioner is a domestic shipping company organized in accordance with Philippine
laws.

In 1998, respondent insured the shipment of imported frozen boneless beef (owned by
Genosi, Inc.), which was loaded at a port in Brisbane, Australia, for shipment to Genosi,
Inc. (the importer-consignee) in the Philippines.  However, upon arrival at the Manila
port, a portion of the shipment was rejected by Genosi, Inc. by reason of spoilage

459
arising from the alleged temperature fluctuations of petitioner's reefer containers.

Thus, Genosi, Inc. filed a claim against both petitioner shipping company and
respondent Kemper Insurance Company.  The claim was referred to McLarens
Chartered for investigation, evaluation, and adjustment of the claim.  After processing
the claim documents, McLarens Chartered recommended a settlement of the claim in
the amount of $64,492.58, which Genosi, Inc. (the consignee-insured) accepted.

Thereafter, respondent paid the claim of Genosi, Inc. (the insured) in the amount of
$64,492.58. Consequently, Genosi, Inc., through its General Manager, Avelino S.
Mangahas, Jr., executed a Loss and Subrogation Receipt [3] dated September 22, 1999,
stating that Genosi, Inc. received from respondent the amount of $64,492.58 as the full
and final satisfaction compromise, and discharges respondent of all claims for losses
and expenses sustained by the property insured, under various policy numbers, due to
spoilage brought about by machinery breakdown which occurred on October 25,
November 7 and 10, and December 5, 14, and 18, 1998; and, in consideration thereof,
subrogates respondent to the claims of Genosi, Inc. to the extent of the said amount. 
Respondent then made demands upon petitioner, but the latter failed and refused to
pay the said amount.

Hence, on October 28, 1999, respondent filed a Complaint for Insurance Loss and
Damages[4] against petitioner before the trial court, docketed as Civil Case No. 99-
95561, entitled Kemper Insurance Company v. Cosco Philippines Shipping, Inc. 
Respondent alleged that despite repeated demands to pay and settle the total amount
of  US$64,492.58, representing the value of the loss, petitioner failed and refused to pay
the same, thereby causing damage and prejudice to respondent in the amount of
US$64,492.58; that the loss and damage it sustained was due to the fault and
negligence of petitioner, specifically, the fluctuations in the temperature of the reefer
container beyond the required setting which was caused by the breakdown in the
electronics controller assembly; that due to the unjustified failure and refusal to pay its
just and valid claims, petitioner should be held liable to pay interest thereon at the legal
rate from the date of demand; and that due to the unjustified refusal of the petitioner to
pay the said amount, it was compelled to engage the services of a counsel whom it
agreed to pay 25% of the whole amount due as attorney's fees.  Respondent prayed
that after due hearing, judgment be rendered in its favor and that petitioner be ordered
to pay the amount of US$64,492.58, or its equivalent in Philippine currency at the
prevailing foreign exchange rate, or a total of P2,594,513.00, with interest thereon at the
legal rate from date of demand, 25% of the whole amount due as attorney's fees, and
costs.

In its Answer[5] dated November 29, 1999, petitioner insisted, among others, that
respondent had no capacity to sue since it was doing business in the Philippines without
the required license; that the complaint has prescribed and/or is barred by laches; that
no timely claim was filed; that the loss or damage sustained by the shipments, if any,
was due to causes beyond the carrier's control and was due to the inherent nature or
insufficient packing of the shipments and/or fault of the consignee or the hired

460
stevedores or arrastre operator or the fault of persons whose acts or omissions cannot
be the basis of liability of the carrier; and that the subject shipment was discharged
under required temperature and was complete, sealed, and in good order condition.

During the pre-trial proceedings, respondent's counsel proffered and marked its
exhibits, while petitioner's counsel manifested that he would mark his client's exhibits on
the next scheduled pre-trial. However, on November 8, 2001, petitioner filed a Motion to
Dismiss,[6] contending that the same was filed by one Atty. Rodolfo A. Lat, who failed to
show his authority to sue and sign the corresponding certification against forum
shopping.  It argued that Atty. Lat's act of signing the certification against forum
shopping was a clear violation of Section 5, Rule 7 of the 1997 Rules of Court.

In its Order[7] dated March 22, 2002, the trial court granted petitioner's Motion to Dismiss
and dismissed the case without prejudice, ruling that it is mandatory that the certification
must be executed by the petitioner himself, and not by counsel.  Since respondent's
counsel did not have a Special Power of Attorney (SPA) to act on its behalf, hence, the
certification against forum shopping executed by said counsel was fatally defective and
constituted a valid cause for dismissal of the complaint.

Respondent's Motion for Reconsideration[8] was denied by the trial court in an

Order[9] dated July 9, 2002.

On appeal by respondent, the CA, in its Decision [10] dated March 23, 2007, reversed and
set aside the trial court's order.  The CA ruled that the required certificate of non-forum
shopping is mandatory and that the same must be signed by the plaintiff or principal
party concerned and not by counsel; and in case of corporations, the physical act of
signing may be performed in behalf of the corporate entity by specifically authorized
individuals. However, the CA pointed out that the factual circumstances of the case
warranted the liberal application of the rules and, as such, ordered the remand of the
case to the trial court for further proceedings.

Petitioner's Motion for Reconsideration[11] was later denied by the CA in the

Resolution[12] dated September 3, 2007.

Hence, petitioner elevated the case to this Court via Petition for Review

on Certiorari under Rule 45 of the Rules of Court, with the following issues:

THE COURT OF APPEALS SERIOUSLY ERRED IN RULING THAT ATTY. RODOLFO

LAT WAS PROPERLY AUTHORIZED BY THE RESPONDENT TO SIGN THE
CERTIFICATE AGAINST FORUM SHOPPING DESPITE THE UNDISPUTED FACTS
THAT:

A)  THE PERSON WHO EXECUTED THE SPECIAL POWER OF ATTORNEY (SPA)
APPOINTING ATTY. LAT  AS RESPONDENT'S ATTORNEY-IN-FACT WAS MERELY
AN UNDERWRITER OF THE RESPONDENT WHO HAS NOT SHOWN PROOF THAT
HE WAS AUTHORIZED BY THE BOARD OF DIRECTORS OF RESPONDENT TO DO
SO.
461
B)  THE POWERS GRANTED TO ATTY. LAT REFER TO [THE AUTHORITY TO
REPRESENT DURING THE] PRE-TRIAL [STAGE] AND DO NOT COVER THE
SPECIFIC POWER TO SIGN THE CERTIFICATE. [13]

Petitioner alleged that respondent failed to submit any board resolution or secretary's
certificate authorizing Atty. Lat to institute the complaint and sign the certificate of non-
forum shopping on its behalf. Petitioner submits that since respondent is a juridical
entity, the signatory in the complaint must show proof of his or her authority to sign on
behalf of the corporation.  Further, the SPA[14] dated May 11, 2000, submitted by Atty.
Lat, which was notarized before the Consulate General of Chicago, Illinois, USA,
allegedly authorizing him to represent respondent in the pre-trial and other stages of the
proceedings was signed by one Brent Healy (respondent's underwriter), who lacks
authorization from its board of directors.

In its Comment, respondent admitted that it failed to attach in the complaint a concrete
proof of Atty. Lat's authority to execute the certificate of non-forum shopping on its
behalf. However, there was subsequent compliance as respondent submitted an
authenticated SPA empowering Atty. Lat to represent it in the pre-trial and all stages of
the proceedings. Further, it averred that petitioner is barred by laches from questioning
the purported defect in respondent's certificate of non-forum shopping.

The main issue in this case is whether Atty. Lat was properly authorized by respondent
to sign the certification against forum shopping on its behalf.

The petition is meritorious.

We have consistently held that the certification against forum shopping must be signed
by the principal parties.[15]  If, for any reason, the principal party cannot sign the petition,
the one signing on his behalf must have been duly authorized. [16] With respect to a
corporation, the certification against forum shopping may be signed for and on its
behalf, by a specifically authorized lawyer who has personal knowledge of the facts
required to be disclosed in such document. [17] A corporation has no power, except those
expressly conferred on it by the Corporation Code and those that are implied or
incidental to its existence. In turn, a corporation exercises said powers through its board
of directors and/or its duly authorized officers and agents. Thus, it has been observed
that the power of a corporation to sue and be sued in any court is lodged with the board
of directors that exercises its corporate powers. In turn, physical acts of the corporation,
like the signing of documents, can be performed only by natural persons duly authorized
for the purpose by corporate by-laws or by a specific act of the board of directors. [18]

In Philippine Airlines, Inc. v. Flight Attendants and Stewards Association of the

Philippines (FASAP),[19] we ruled that only individuals vested with authority by a valid
board resolution may sign the certificate of non-forum shopping on behalf of a
corporation. We also required proof of such authority to be presented. The petition is
subject to dismissal if a certification was submitted unaccompanied by proof of the

462
signatory's authority.

In the present case, since respondent is a corporation, the certification must be

executed by an officer or member of the board of directors or by one who is duly
authorized by a resolution of the board of directors; otherwise, the complaint will have to
be dismissed.[20]  The lack of certification against forum shopping is generally not
curable by mere amendment of the complaint, but shall be a cause for the dismissal of
the case without prejudice.[21]  The same rule applies to certifications against forum
shopping signed by a person on behalf of a corporation which are unaccompanied by
proof that said signatory is authorized to file the complaint on behalf of the corporation.
[22]

There is no proof that respondent, a private corporation, authorized Atty. Lat, through a
board resolution, to sign the verification and certification against forum shopping on its
behalf.  Accordingly, the certification against forum shopping appended to the complaint
is fatally defective, and warrants the dismissal of respondent's complaint for Insurance
Loss and Damages (Civil Case No. 99-95561) against petitioner.

In Republic v. Coalbrine International Philippines, Inc.,[23] the Court cited instances

wherein the lack of authority of the person making the certification of non-forum
shopping was remedied through subsequent compliance by the parties therein.  Thus,

[w]hile there were instances where we have allowed the filing of a certification against
non-forum shopping by someone on behalf of a corporation without the accompanying
proof of authority at the time of its filing, we did so on the basis of a special
circumstance or compelling reason. Moreover, there was a subsequent compliance by
the submission of the proof of authority attesting to the fact that the person who signed
the certification was duly authorized.

In China Banking Corporation v. Mondragon International Philippines, Inc., the CA

dismissed the petition filed by China Bank, since the latter failed to show that its bank
manager who signed the certification against non-forum shopping was authorized to do
so. We reversed the CA and said that the case be decided on the merits despite the
failure to attach the required proof of authority, since the board resolution which was
subsequently attached recognized the pre-existing status of the bank manager as an
authorized signatory.

In Abaya Investments Corporation v. Merit Philippines, where the complaint before the
Metropolitan Trial Court of Manila was instituted by petitioner's Chairman and President,
Ofelia Abaya, who signed the verification and certification against non-forum shopping
without proof of authority to sign for the corporation, we also relaxed the rule. We did so
taking into consideration the merits of the case and to avoid a re-litigation of the issues
and further delay the administration of justice, since the case had already been decided
by the lower courts on the merits. Moreover, Abaya's authority to sign the certification
was ratified by the Board.[24]

463
Contrary to the CA's finding, the Court finds that the circumstances of this case do not
necessitate the relaxation of the rules.  There was no proof of authority submitted, even
belatedly, to show subsequent compliance with the requirement of the law.  Neither was
there a copy of the board resolution or secretary's certificate subsequently submitted to
the trial court that would attest to the fact that Atty. Lat was indeed authorized to file said
complaint and sign the verification and certification against forum shopping, nor did
respondent satisfactorily explain why it failed to comply with the rules.  Thus, there
exists no cogent reason for the relaxation of the rule on this matter.  Obedience to the
requirements of procedural rules is needed if we are to expect fair results therefrom,
and utter disregard of the rules cannot justly be rationalized by harking on the policy of
liberal construction.[25]

Moreover, the SPA dated May 11, 2000, submitted by respondent allegedly authorizing
Atty. Lat to appear on behalf of the corporation, in the pre-trial and all stages of the
proceedings, signed by Brent Healy, was fatally defective and had no evidentiary value. 
It failed to establish Healy's authority to act in behalf of respondent, in view of the
absence of a resolution from respondent's board of directors or secretary's certificate
proving the same.  Like any other corporate act, the power of Healy to name, constitute,
and appoint Atty. Lat as respondent's attorney-in-fact, with full powers to represent
respondent in the proceedings, should have been evidenced by a board resolution or
secretary's certificate.

Respondent's allegation that petitioner is estopped by laches from raising the defect in

respondent's certificate of non-forum shopping does not hold water.

In Tamondong v. Court of Appeals,[26] we held that if a complaint is filed for and in behalf
of the plaintiff who is not authorized to do so, the complaint is not deemed filed. An
unauthorized complaint does not produce any legal effect. Hence, the court should
dismiss the complaint on the ground that it has no jurisdiction over the complaint and
the plaintiff.[27]  Accordingly, since Atty. Lat was not duly authorized by respondent to file
the complaint and sign the verification and certification against forum shopping, the
complaint is considered not filed and ineffectual, and, as a necessary consequence, is
dismissable due to lack of jurisdiction.

Jurisdiction is the power with which courts are invested for administering justice; that is,
for hearing and deciding cases. In order for the court to have authority to dispose of the
case on the merits, it must acquire jurisdiction over the subject matter and the parties. 
Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint, and to be
bound by a decision, a party should first be subjected to the court's jurisdiction.
[28]
 Clearly, since no valid complaint was ever filed with the RTC, Branch 8, Manila, the
same did not acquire jurisdiction over the person of respondent.

Since the court has no jurisdiction over the complaint and respondent, petitioner is not
estopped from challenging the trial court's jurisdiction, even at the pre-trial stage of the
proceedings.  This is so because the issue of jurisdiction may be raised at any stage of

464
the proceedings, even on appeal, and is not lost by waiver or by estoppel.[29]

In Regalado v. Go,[30] the Court held that laches should be clearly present for the
Sibonghanoy[31] doctrine to apply, thus:

Laches is defined as 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 length of time,
warranting a presumption that the party entitled to assert it either has abandoned it or
declined to assert it.”

The ruling in People v. Regalario that was based on the landmark doctrine enunciated
in Tijam v. Sibonghanoy on the matter of jurisdiction by estoppel is the exception rather
than the rule. Estoppel by laches may be invoked to bar the issue of lack of jurisdiction
only in cases in which the factual milieu is analogous to that in the cited case. In such
controversies, laches should have been clearly present; that is, lack of jurisdiction must
have been raised so belatedly as to warrant the presumption that the party entitled to
assert it had abandoned or declined to assert it.

In Sibonghanoy, the defense of lack of jurisdiction was raised for the first time in a
motion to dismiss filed by the Surety almost 15 years after the questioned ruling had
been rendered. At several stages of the proceedings, in the court a quo as well as in the
Court of Appeals, the Surety invoked the jurisdiction of the said courts to obtain
affirmative relief and submitted its case for final adjudication on the merits. It was only
when the adverse decision was rendered by the Court of Appeals that it finally woke up
to raise the question of jurisdiction.[32]

The factual setting attendant in Sibonghanoy is not similar to that of the present case so
as to make it fall under the doctrine of estoppel by laches.  Here, the trial court's
jurisdiction was questioned by the petitioner during the pre-trial stage of the
proceedings, and it cannot be said that considerable length of time had elapsed
for laches to attach.cralaw

WHEREFORE, the petition is GRANTED. The Decision and the Resolution of the Court
of Appeals, dated March 23, 2007 and September 3, 2007, respectively, in CA-G.R. CV
No. 75895 are REVERSED and SET ASIDE. The Orders of the Regional Trial Court,
dated March 22, 2002 and July 9, 2002, respectively, in Civil Case No. 99-95561,
are REINSTATED.

SO ORDERED.

THIRD DIVISION

G.R. No. 201816               April 8, 2013

465
HEIRS OFF AUSTINO MESINA and GENOVEVA S. MESINA, rep. by NORMAN
MESINA, Petitioners,
vs.
HEIRS OF DOMINGO FIAN, SR., rep. by THERESA FIAN YRAY, ET
AL., Respondents.

DECISION

VELASCO, JR. J.:

The Case

Before Us is a Petition for Review under Rule 45 of the Decision 1 dated April 29, 2011
of the Court of Appeals (CA) in CA-G.R. CV No. 01366 and its Resolution dated April
12, 2012 denying reconsideration.

The Facts

The late spouses Faustino and Genoveva Mesina (spouses Mesina), during their
lifetime, bought from the spouses Domingo Fian Sr. and MariaFian (spouses Fian) two
parcels of land on installment. The properties maybe described as follows:

Parcel 1 – A parcel of land, Cadastral Lot No. 6791-Rem. situated in the Brgy. Of
Gungab, Poblacion, Albuera, Leyte. x x x Containing an area of ONE THOUSAND SIX
HUNDRED THIRTY TWO (1,632) SQUARE METERS x x x.

Parcel 2 – A parcel of land, Cadastral Lot No. 6737-Rem, situated in the Brgy. of
Gungab, Poblacion, Albuera, Leyte. x x x Containing an area of THREE THOUSAND
SEVEN HUNDRED THIRTY (3,730) SQUARE METERS x x x.2

Upon the death of the spouses Fian, their heirs––whose names do not appear on the
records, claiming ownership of the parcels of land and taking possession of them––
refused to acknowledge the payments for the lots and denied that their late parents sold
the property to the spouses Mesina. Meanwhile, the spouses Mesina passed away.

Notwithstanding repeated demands, the Heirs of Fian refused to vacate the lots and to
turn possession over to the heirs of the spouses Mesina, namely: Norman S. Mesina
(Norman), Victor S. Mesina (Victor), Maria Divina S. Mesina (Maria) and Lorna Mesina-
Barte (Lorna). Thus, on August 8, 2005, Norman, as attorney-in-fact of his siblings
Victor, Maria and Lorna, filed an action for quieting of title and damages before the
Regional Trial Court (RTC), Branch 14 in Baybay, Leyte against the Heirs of Fian,
naming only Theresa Fian Yray (Theresa) as the representative of the Heirs of Fian.
The case, entitled Heirs of Sps. Faustino S. Mesina & Genoveva S. Mesina,
represented by Norman Mesina v. Heirs of Domingo Fian, Sr., represented by Theresa
Fian Yray, was docketed as Civil Case No. B-05-08-20. The allegations of the
Complaint on the parties read:

466
1. Plaintiffs are the HEIRS OF SPS. FAUSTINO S. MESINO and GENOVEVA S.
MESINA, and represented in this instance by NORMAN MESINA as shown by the
Special Power of Attorneys x x x, of legal age, married, Filipino, and a resident of
Poblacion Albuera, Leyte, where he may be served with court orders, notices, and other
processes, while defendants are the HEIRS OF DOMINGO FIAN, SR., likewise of legal
ages, Filipinos, and residents of Poblacion Albuera, Leyte, and respresented in this
instance of THERESA FIAN YRAY, where she may be served with summons, court
orders, notices, and other processes.3

Thereafter, or on September 5, 2005, respondent Theresa filed a Motion to Dismiss the

complaint, arguing that the complaint states no cause of action and that the case should
be dismissed for gross violation of Sections 1 and 2, Rule 3 of the Rules of Court, which
state in part:

Section 1. Who may be parties; plaintiff and defendant. – Only natural or juridical
persons, or entities authorized by law may be parties in a civil action. x x x

Section 2. Parties in interest. – A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of the
suit. x x x

She claims that the "Heirs of Mesina" could not be considered as a juridical person or
entity authorized by law to file a civil action. Neither could the "Heirs of Fian" be made
as defendant, not being a juridical person as well. She added that since the names of all
the heirs of the late spouses Mesina and spouses Fian were not individually named, the
complaint is infirmed, warranting its dismissal.

On November 24, 2005, petitioners filed their Opposition to the Motion to Dismiss.

Ruling of the RTC

Finding merit in the motion to dismiss, the RTC, on November 22, 2005, granted the
motion and dismissed the complaint, ruling that the Rules of Court is explicit that only
natural or juridical persons or entities authorized by law may be parties in a civil action.
Also, nowhere in the complaint are the Heirs of Fian individually named. The RTC Order
reads:

Anent the Motion to Dismiss filed by defendant, Theresa Fian Yray through counsel,
finding merit in such motion, the same is granted.

The Rules of Court is explicit that only natural or juridical persons or entities authorized
by law may be parties in a civil action (Section 1, Rule 3, Revised Rules of Court).
Certainly, the Heirs of Faurstino s. Mesina and Genoveva S. Mesina, represented by
Norman Mesina as plaintiffs as well as Heirs of Domingo Fian, Sr. represented by
Theresa Fian Yray as defendants, do not fall within the category as natural or juridical
persons as contemplated by law to institute or defend civil actions. Said heirs not having

467
been individually named could not be the real parties in interest. Hence, the complaint
states no cause of action.

Accordingly, the case is hereby dismissed.

SO ORDERED.4

On December 27, 2005, petitioners moved for reconsideration of the November 22,
2005 Order of the RTC. The next day, or on December 28, 2005, respondent Theresa
filed her Vehement Opposition to the motion for reconsideration.

On February 29, 2006, the RTC issued its Resolution denying the motion for
reconsideration. The dispositive portion of the Resolution reads:

WHEREFORE, the motion prayed for must necessary fail.

SO ORDERED.5

Aggrieved, petitioners appealed to the CA.

Ruling of the CA

In affirming the RTC, the CA, on April 29, 2011, rendered its Decision, ruling that all the
heirs of the spouses Fian are indispensable parties and should have been impleaded in
the complaint. The appellate court explained that this failure to implead the other heirs
of the late spouses Fian is a legal obstacle to the trial court’s exercise of judicial power
over the case and any order or judgment that would be rendered is a nullity in view of
the absence of indispensable parties. The CA further held that the RTC correctly
dismissed the complaint for being improperly verified. The CA disposed of the appeal in
this wise:

WHEREFORE, in view of all the foregoing, the appeal of petitioners is DENIED for lack
of merit. The assailed November 22, 2005 Order and February 28, 2006 Resolution
both issued by the Regional Trial Court, Branch 14 of Baybay, Leyte are AFFIRMED.

SO ORDERED.6

Petitioners filed their Motion for Reconsideration, which was denied by the CA in its
Resolution dated April 12, 2012.

Hence, this petition.

Assignment of Errors

Petitioner now comes before this Court, presenting the following assigned errors, to wit:

468
A. THE CA ERRED IN AFFIRMING THE ORDER AND RESOLUTION X X X OF RTC,
BAYBAY, LEYTE IN DISMISSING THE CASE ON THE GROUND THAT THE
COMPLAINT STATES NO CAUSE OF ACTION;

B. PETITIONERS HAVE SUBSTANTIALLY COMPLIED WITH THE RULE ON

VERIFICATION AND CERTIFICATION AGAINST FORUM SHOPPING; AND

C. CASES SHOULD BE DECIDED ON THE MERITS AND NOT ON MERE

TECHNICALITIES.7

The Court’s Ruling

The petition is meritorious.

As regards the issue on failure to state a cause of action, the CA ruled that the
complaint states no cause of action because all the heirs of the spouses Fian are
indispensable parties; hence, they should have been impleaded in the complaint.

The CA, affirming the RTC, held that the dismissal of the complaint is called for in view
of its failure to state a cause of action. The CA reasoned that:

Without the presence of all the heirs of spouses Fian as defendants, the trial court could
not validly render judgment and grant relief to petitioners. x x x 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. Hence,
the court a quo correctly ordered for the dismissal of the action on the ground that the
complaint failed to name or implead all the heirs of the late spouses Fian. 8

Failure to state a cause of action refers to the insufficiency of the pleading. A complaint
states a cause of action if it avers the existence of the three essential elements of a
cause of action, namely:

(a) The legal right of the plaintiff;

(b) The correlative obligation of the defendant; and

(c) The act or omission of the defendant in violation of said right. 9

By a simple reading of the elements of a failure to state a cause of action, it can be

readily seen that the inclusion of Theresa’s co-heirs does not fall under any of the above
elements. The infirmity is, in fact, not a failure to state a cause of action but a non-
joinder of an indispensable party.

Non-joinder means the "failure to bring a person who is a necessary party or in this case
an indispensable party into a lawsuit." 10 An indispensable party, on the other hand, is a

469
party-in-interest without whom no final determination can be had of the action, and who
shall be joined either as plaintiff or defendant. 11

As such, this is properly a non-joinder of indispensable party, the indispensable parties

who were not included in the complaint being the other heirs of Fian, and not a failure of
the complaint to state a cause of action.

Having settled that, Our pronouncement in Pamplona Plantation Company, Inc. v.

Tinghil is instructive as regards the proper course of action on the part of the courts in
cases of non-joinder of indispensable parties, viz:

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. 12 x x x (Emphasis
Ours.)

Thus, the dismissal of the case for failure to state a cause of action is improper. What
the trial court should have done is to direct petitioner Norman Mesina to implead all the
heirs of Domingo Fian, Sr. as defendants within a reasonable time from notice with a
warning that his failure to do so shall mean dismissal of the complaint.

Anent the issue on defective verification, Section 4, Rule 7 of the Rules of Court
provides as follows:

Sec. 4. Verification. – Except when otherwise specifically required by law or rule,

pleadings need not be under oath, verified or accompanied by affidavit.

A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his personal knowledge or based on authentic
records. (Emphasis Ours.)

The alleged defective verification states that:

I, NORMAN S. MESINA, legal age, married, Filipino, and a resident of Poblacion,

Albuera, Leyte, after having been duly sworn to in accordance with law, hereby depose
and say that:

xxxx

2. The allegations herein are true and correct to the best of our knowledge; 13 x x x

470
Both the RTC and the CA found said verification defective, since the phrase "or based
on authentic records," as indicated under the second paragraph of Sec. 4, Rule 7 as
afore-quoted, was omitted.

We do not agree.

That the verification of the complaint does not include the phrase "or based on authentic
records" does not make the verification defective. Notably, the provision used the
disjunctive word "or." The word "or" is a disjunctive article indicating an alternative. 14 As
such, "personal knowledge" and "authentic records" need not concur in a verification as
they are to be taken separately.

Also, verification, like in most cases required by the rules of procedure, is a formal
requirement, not jurisdictional. It is mainly intended to secure an assurance that matters
which are alleged are done in good faith or are true and correct and not of mere
speculation. Thus, when circumstances so warrant, as in the case at hand, "the court
may simply order the correction of unverified pleadings or act on it and waive strict
compliance with the rules in order that the ends of justice may thereby be served." 15

WHEREFORE, premises considered, the petition is GRANTED. The assailed April 29,
2011 Decision and April 12, 2012 Resolution of the CA in CA-G.R. CV No. 01366, and
the November 22, 2005 Order and February 29,2006 Resolution of the RTC, Branch 14
in Baybay, Leyte, dismissing the complaint in Civil Case No. 8-05-08-20, are hereby
REVERSED and SET ASIDE. Petitioner Norman Mesina is ORDERED to implead all
the Heirs of Domingo Fian, Sr. as defendants in said civil case within thirty (30) days
from notice of finality of this Decision. Failure on the part of petitioner Mesina to comply
with this directive shall result in the dismissal of Civil Case No. B-05-08-20. Upon
compliance by petitioner Mesina with this directive, the RTC, Branch 14 in Baybay,
Leyte is ORDERED to undertake appropriate steps and proceedings to expedite
adjudication of the case.

SO ORDERED.

RULE 8
SECOND DIVISION
[ G.R. No. 183869, August 03, 2015 ]
LEONARDO L. VILLALON, PETITIONER, VS. RENATO E. LIRIO, RESPONDENT.

DECISION
BRION, J.:
This appeal by certiorari[1] assails the March 31, 2008 Decision[2] and the July 21, 2008
Resolution[3] of the Court of Appeals (CA) in CA-G.R. No. SP No. 94154.

The CA reversed and set aside the October 17, 2005 [4] and February 14, 2006[5] Orders

471
of the Regional Trial Court (RTQ,[6] which dismissed the complaint[7] filed by respondent
Renato E. Lirio (Lirio) against petitioner Leonardo L. Villalon (Villalon).

The Factual Antecedents

Lirio and Semicon Integrated Electronics Corporation (Semicon) entered into a contract
of lease[8] covering Lirio's properties[9] in Pasig City. Villalon, who was then Semicon's
president and chairman of the board, represented the lessee corporation in the lease
contract.

Prior to the expiration of the lease, Semicon terminated the contract and allegedly left
unpaid rentals, damages, and interest. Lirio demanded payment but Semicon and
Villalon failed to pay.[10]

As a result, Lirio filed on May 17, 2005 a complaint for sum of money with prayer for
preliminary attachment against Semicon and Villalon. [11]

In his complaint, Lirio alleged that Semicon and Villalon unjustly pre-terminated the
lease and failed to pay the unpaid rentals despite demand. In praying for the issuance
of a preliminary attachment, Lirio claimed that Villalon fraudulently and surreptitiously
removed Semicon's equipment, merchandise, and other effects from the leased
premises, preventing him to exercise his right, among others, to take inventories of
these effects, merchandise, and equipment. [12]

In response, Villalon filed a motion to dismiss [13] on the ground that the complaint failed
to state a cause of action against him. He argued that he is not a real party-in-interest in
the action as he is merely an officer of Semicon. Villalon further contended that there
was no competent allegation in the complaint about any supposed wrongdoing on his
part to warrant his inclusion as a party defendant.

The Ruling of the Regional Trial Court

The RTC granted Villalon's motion to dismiss. It held that under the theory of separate
corporate entity, the action should be limited against Semicon, the lessee; it cannot be
expanded against Villalon, a mere corporate officer.

The RTC concluded that the allegations clearly showed that the collection of unpaid
rentals and damages arose from the alleged breach of the lease contract executed and
entered into by Lirio and Semicon, and that the conflict was between Lirio and Semicon
only and did not include Villalon.

The RTC denied Lirio's motion for reconsideration.

Lirio responded to the grant of the motion to dismiss and the denial of reconsideration
with the CA, by filing a petition for certiorari under Rule 65 of the Rules of Court.

The Ruling of the Court of Appeals

472
The CA nullified the RTC's dismissal order and ruled that the RTC gravely abused its
discretion.

It held that the RTC completely ignored the fact that the case "might possibly" and
properly call for the application of the doctrine of piercing the veil of corporate entity.
Further, the CA found that Villalon "played an active role in removing and transferring
Semicon's merchandise, chattels and equipment from the leased premises. This
deprived Lirio of his preferred lien over the said merchandise, chattels, and equipment
for the satisfaction of Semicon's obligation under the lease contract."

The dispositive portion of the CA decision reads:

"WHEREFORE, premises considered, the instant petition is GRANTED, the

assailed ORDER of the Regional Trial Court, Branch 157, Pasig City dated 17 October
2005 is NULLIFIED."

The CA denied Villalon's motion for reconsideration; thus, he came to us for relief via
the present petition.

The Petition[14]

Villalon claims that the CA erred in giving due course to Lirio's petition
for certiorari considering that appeal became available after the RTC dismissed the
complaint.

Villalon asserts that an order granting a motion to dismiss is final and appealable. He
argues that a petition for certiorari under Rule 65 of the Rules of Court prospers only
when there is neither appeal, nor any plain, speedy, and adequate remedy in the
ordinary course of law.

Thus, Villalon insists that Lirio should have appealed the order of dismissal since a
petition for certiorari is not a substitute for a lost appeal. Moreover, Villalon notes that
Lirio failed to show how an appeal could have been inadequate.

Villalon further posits that the RTC did not gravely abuse its discretion, even assuming
that certiorari was proper.  He avers that the trial court properly dismissed the complaint
because the allegations failed to show a cause of action against him.

Villalon likewise alleges that the CA erred when, in order to apply the doctrine of
piercing the veil of corporate entity, it had to add allegations not found in the complaint.

The Respondent's Case[15] 

Lirio argues that certiorari is allowed even if appeal is available where appeal does not
constitute a speedy and adequate remedy.

473
Although Lirio agrees that he could have appealed the RTC's order dismissing the
complaint against Villalon, he contends that appeal was not speedy and adequate
because the RTC gravely abused its discretion when it whimsically and arbitrarily
ignored existing doctrines on piercing the veil of corporate fiction.

Lirio insists that Villalon had a role in the surreptitious and fraudulent removal of
Semicon's merchandise, effects, and various equipment from the leased premises and
their transfer to another location, which deprived him of his preferred lien over the said
merchandise, effects, and equipment.

Lirio further argues that there is a sufficient cause of action to hold Villalon personally
liable for Semicon's liability because the allegations of fraud and evasion of contractual
obligations were clearly spelled out in the complaint.

The Issues

Based on the foregoing, we resolve: (1) whether the petition for certiorari to the CA was
the proper remedy; and (2) whether the complaint failed to state a cause of action
against Villalon.

The Court's Ruling

We grant the petition.

Specifically, we rule that (1) Lirio's resort to certiorari with the CA was improper; and (2)
the complaint failed to state a cause of action.

A petition for certiorari is not

a substitute for a lost appeal.

This Court has repeatedly held that a special civil action for certiorari under Rule 65 is
proper only when there is neither appeal, nor plain, speedy, and adequate remedy in
the ordinary course of law.  The extraordinary remedy of certiorari is not a substitute for
a lost appeal; it is not allowed when a party to a case fails to appeal a judgment to the
proper forum, especially if one's own negligence or error in one's choice of remedy
occasioned such loss or lapse.[16]

In Madrigal Transport Inc. v. Lapanday Holdings Corporation, [17] we ruled that because
an appeal was available to the aggrieved party, the action for certiorari would not be
entertained. We emphasized in that case that the remedies of appeal and certiorari are
mutually exclusive, not alternative or successive. Where an appeal is available,
certiorari will not prosper, even if the ground is grave abuse of discretion.

In Cathay Pacific Steel Corporation v. Court of Appeals, [18] we held that even if, in the
greater interest of substantial justice, certiorari may be availed of, it must be shown that
the [lower court] acted with grave abuse of discretion amounting to lack or excess of
jurisdiction. The court must have exercised its powers in an arbitrary or despotic manner

474
by reason of passion or personal hostility, so patent and gross as to amount to an
evasion or virtual refusal to perform the duty enjoined or to act in contemplation of law.

In the present case, Lirio failed to satisfactorily explain why he did not appeal the
dismissal order although he admitted that he could have done so. Neither did he
claim that he was prevented, legally or physically, from appealing.

Strikingly, Lirio did nothing during the period within which he should have filed an
appeal. While he admits that he could have appealed the dismissal to the CA, he insists
that appeal could not have been speedy and adequate because the RTC gravely
abused its discretion. Lirio cites the case of Luna v. Court of Appeals[19] to justify his
resort to certiorari despite the availability of appeal.

We find no merit in Lirio's argument.

The case of Luna involved a suit for damages filed against an airline company by
passengers whose baggage was undelivered at the designated time and place. In this
case, the liability of the airline company was established as the airline company
impliedly admitted that it failed to duly deliver the passengers' baggage.

We held that since the passengers suffered an injury for which compensation was due,
the airline company could not be allowed to escape liability by arguing that the trial
court's orders had attained finality due to the passengers' failure to move for
reconsideration or to file a timely appeal.[20]

In Luna, we allowed the occasional departure from the general rule that the

extraordinary writ of certiorari cannot substitute for a lost appeal only because the rigid
application of the rule would have resulted in injustice to the passengers. [21]

We find no basis to relax the rules of procedure in the present case.

While it is true that liberal application of the rules of procedure is allowed to avoid
manifest failure or miscarriage of justice, it is equally true that a party invoking liberality
must explain his failure to abide by the rules. [22]

To reiterate, Lirio failed to explain why he did not appeal the dismissal order while
admitting that he could have done so. Rather, he clung to his argument that he had
correctly filed a petition for certiorari because of the alleged grave abuse of discretion
on the part of the RTC.

Lirio's reasoning is faulty.

We do not see why appeal could not have been speedy and adequate. As admitted by
Lirio himself, he received the RTC's final dismissal order on February 24, 2006,[23] yet,
he waited for two months before he took action by filing the petition for certiorari on April
20, 2006.[24]

475
Indeed, if speed had been Lirio's concern, he should have appealed within fifteen days
from his receipt of the final order denying his motion for reconsideration, and not waited
for two months before taking action.[25] Moreover, an appeal would have adequately
resolved his claim that the RTC erred in dismissing his complaint against Villalon, an
order granting a motion to dismiss being final and appealable.

Further, we are not convinced that Lirio filed the petition for certiorari because the RTC
allegedly gravely abused its discretion. The more tenable explanation for his wrong
choice of remedy is that the period to appeal simply lapsed without an appeal
having been filed.

Having lost his right to appeal, Lirio instituted the only remedy that he thought was still
available. This is contrary to the basic rule that the remedies of appeal and certiorari are
mutually exclusive, not alternative or successive.[26]

Finally, unlike in Luna where the airline's liability was clearly shown, Villalon's liability
arising from his purported fraudulent acts was not established at all. As will be further
discussed, the allegations in the complaint failed to particularly state how Villalon
committed fraud. For this reason, the RTC could not have resolved whether Villalon
could be made personally accountable for Semicon's liabilities.

For all these reasons, we rule that Lirio's resort to the extraordinary writ of certiorari was
improper.

The complaint failed to state

a cause of action court.

Even if we are to relax the rules of procedure and allow certiorari to substitute for the
lost appeal, we still grant Villalon's appeal and reverse the CA's decision.

To recall, Lirio claims that the RTC gravely abused its discretion when it dismissed the
complaint against Villalon by "whimsically and arbitrarily ignoring the basic doctrines in
piercing the veil of corporate fiction."

A review of the allegations of the complaint, however, would show that the RTC did not
gravely abuse its discretion when it dismissed the complaint.

Rule 8,[27] Section 5[28] of the Rules of Court requires that in all averments of fraud or
mistake, the circumstances constituting fraud or mistake must be stated with
particularity, unlike in cases of malice, knowledge, or other conditions of the mind
which may be averred generally.

In Luistro v. Court of Appeals,[29] we ruled that the following allegation fell short of the
requirement that fraud must be stated with particularity.

476
"That sometime in the year of 1997, the consolidator-facilitator of the Defendants FGPC
and Balfour by means of fraud and machinations of words were able to convince the
plaintiff to enter into 'CONTRACT OF EASEMENT OF RIGHT OF WAY' wherein the
latter granted in favor of the defendant FGPC the right to erect [its] Tower No. 98 on the
land of the plaintiff situated at Barangay Maigsing Dahilig, Lemery 4209 Batangas
including the right to Install Transmission Lines over a portion of the same property for a
consideration therein stated, a xerox copy of said contract is hereto attached as
ANNEXES "A" up to "A-4" of the complaint;

That the said contract, (Annexes "A" up to "A-4") was entered into by the plaintiff under
the "MISREPRESENTATION, PROMISES, FALSE AND FRAUDULENT
ASSURANCES AND TRICKS" of the defendants."[30] [emphasis ours]

In the present case, the only allegation of fraud in the complaint reads:

"With intent to defraud the plaintiff and to prevent the plaintiff from exercising his right
[to be constituted or appointed as attorney-in-fact of the defendant with power and
authority to cause the premises to be opened, to take inventories of all the defendants'
merchandise, effects, furniture, fixtures and/or equipment therein and transfer the same
to the plaintiffs bodega], the defendants surreptitiously and fraudulently removed
their merchandise, effects, and equipment from the lease premises and transferred
them to another location." [emphasis ours]

Lirio's mere invocation of the words "surreptitiously and fraudulently" does not make the
allegation particular without specifying the circumstances of Villalon's commission and
employment of fraud, and without delineating why it was fraudulent for him to remove
Semicon's properties in the first place.

The allegation of fraud would have been averred with particularity had Lirio alleged, for
example, that Villalon removed the equipment under the false pretense that they
needed repair and refurbishing but the equipment were never returned; or that Villalon
removed the merchandise because Semicon needed to sell them in exchange for new
supplies but no new supplies were bought. No such allegation was ever made.

Thus, the RTC could not have properly ruled on whether there was a need to pierce the
veil of corporate entity precisely because the complaint failed to state with particularity
how Villalon committed and employed fraud.

Finally, even if we grant that the allegations of fraud were averred with particularity, the
RTC's finding that the complaint failed to state a cause of action against Villalon was
only an error of judgment and did not constitute grave abuse of discretion. An error of
judgment, which is properly reviewed through an appeal, is not necessarily equivalent to
grave abuse of discretion.[31]

WHEREFORE, in view of the foregoing findings and legal premises, we GRANT the

petition and REVERSE and SET ASIDE the March 31, 2008 Decision and July 21, 2008
Resolution of the Court of Appeals.
477
SO ORDERED.

SECOND DIVISION

G.R. No. 200868               November 12, 2012

ANITA A. LEDDA, Petitioner,
vs.
BANK OF THE PHILIPPINE ISLANDS, Respondent.

DECISION

CARPIO, J.:

The Case

This petition for rebiew1 assails the 15 July 2011 Decision2 and 9 February 2012
Resolution3 of the Court of Appeals in CA-G.R. CV No. 93747. The Court of Appeals
partially granted the appeal filed by petitioner Anita A. Ledda (Ledda) and modified the 4
June 2009 Decision4 of the Regional Trial Court, Makati City, Branch 61. The Court of
Appeals denied the motion for reconsideration.

The Facts

This case arose from a collection suit filed by respondent Bank of the Philippine Islands
(BPI) against Ledda for the latter’s unpaid credit card obligation.

BPI, through its credit card system, extends credit accommodations to its clientele for
the purchase of goods and availment of various services from accredited merchants, as
well as to secure cash advances from authorized bank branches or through automated
teller machines.

As one of BPI’s valued clients, Ledda was issued a pre-approved BPI credit card under
Customer Account Number 020100-9-00-3041167. The BPI Credit Card Package,
which included the Terms and Conditions governing the use of the credit card, was
delivered at Ledda’s residence on 1 July 2005. Thereafter, Ledda used the credit card
for various purchases of goods and services and cash advances.

Ledda defaulted in the payment of her credit card obligation, which BPI claimed in their
complaint amounted to P548,143.73 per Statement of Account dated 9 September
2007.5 Consequently, BPI sent letters6 to Ledda demanding the payment of such
amount, representing the principal obligation with 3.25% finance charge and 6% late
payment charge per month.

478
Despite BPI’s repeated demands, Ledda failed to pay her credit card obligation
constraining BPI to file an action for collection of sum of money with the Regional Trial
Court, Makati City, Branch 61. The trial court declared Ledda in default for failing to file
Answer within the prescribed period, despite receipt of the complaint and summons.
Upon Ledda’s motion for reconsideration, the trial court lifted the default order and
admitted Ledda’s Answer Ad Cautelam.

While she filed a Pre-Trial Brief, Ledda and her counsel failed to appear during the
continuation of the Pre-Trial. Hence, the trial court allowed BPI to present its evidence
ex-parte.

In its Decision of 4 June 2009, the trial court ruled in favor of BPI, thus:

WHEREFORE, premises duly considered, the instant "Complaint" of herein plaintiff

Bank of the Philippine Islands (BPI) is hereby given DUE COURSE/GRANTED.

Accordingly, judgment is hereby rendered against herein defendant ANITA A. LEDDA

and in favor of the plaintiff.

Ensuably, the herein defendant ANITA A. LEDDA is hereby ordered to pay the herein
plaintiff Bank of the Philippine Islands (BPI) the following sums, to wit:

1. Five Hundred Forty-Eight Thousand One Hundred Forty-Three Pesos and Seventy-
Three Centavos (P548,143.73) as and for actual damages, with finance and late-
payment charges at the rate of three and one-fourth percent (3.25%) and six percent
(6%) per month, respectively, to be counted from 19 October 2007 until the amount is
fully paid;

2. Attorney’s fees equivalent to twenty-five percent (25%) of the total obligation due and
demandable, exclusive of appearance fee for every court hearing, and

3. Costs of suit.

SO ORDERED.7 (Emphasis in the original)

The Ruling of the Court of Appeals

The Court of Appeals rejected Ledda’s argument that the document containing the
Terms and Conditions governing the use of the BPI credit card is an actionable
document contemplated in Section 7, Rule 8 of the 1997 Rules of Civil Procedure. The
Court of Appeals held that BPI’s cause of action is based on "Ledda’s availment of the
bank’s credit facilities through the use of her credit/plastic cards, coupled with her
refusal to pay BPI’s outstanding credit for the cost of the goods, services and cash
advances despite lawful demands."

479
Citing Macalinao v. Bank of the Philippine Islands, 8 the Court of Appeals held that the
interest rates and penalty charges imposed by BPI for Ledda’s non-payment of her
credit card obligation, totalling 9.25% per month or 111% per annum, are exorbitant and
unconscionable. Accordingly, the Court of Appeals reduced the monthly finance charge
to 1% and the late payment charge to 1%, or a total of 2% per month or 24% per
annum.

The Court of Appeals recomputed Ledda’s total credit card obligation by deducting
P226,000.15, representing interests and charges, from P548,143.73, leaving a
difference of P322,138.58 as the principal amount, on which the reduced interest rates
should be imposed.

The Court of Appeals awarded BPI P10,000 attorney’s fees, pursuant to the ruling in
Macalinao.

The dispositive portion of the Court of Appeals’ Decision reads:

WHEREFORE, premises considered, the appeal is PARTLY GRANTED, and

accordingly the herein assailed June 4, 2009 Decision of the trial court is hereby
MODIFIED, ordering defendant-appellant Anita Ledda to pay plaintiff-appellee BPI the
amount of Php322,138.58, with 1% monthly finance charges from date of availment of
the plaintiff’s credit facilities, and penalty charge at 1% per month of the amount due
from the date the amount becomes due and payable, until full payment. The award of
attorney’s fees is fixed at Php10,000.00.

SO ORDERED.9 (Emphasis in the original)

The Issues

Ledda raises the following issues:

1. Whether the Court of Appeals erred in holding that the document containing
the Terms and Conditions governing the issuance and use of the credit card is
not an actionable document contemplated in Section 7, Rule 8 of the 1997 Rules
of Civil Procedure.

2. Whether the Court of Appeals erred in applying Macalinao v. Bank of the

Philippine Islands instead of Alcaraz v. Court of Appeals 10 as regards the
imposition of interest and penalty charges on the credit card obligation.

3. Whether the Court of Appeals erred in awarding attorney’s fees in favor of BPI.

The Ruling of the Court

The petition is partially meritorious.

480
 I.
Whether the document containing the
Terms and Conditions is an actionable document.

Section 7, Rule 8 of the 1997 Rules of Civil Procedure provides:

SEC. 7. Action or defense based on document. — Whenever an action or defense is

based upon a written instrument or document, the substance of such instrument or
document shall be set forth in the pleading, and the original or a copy thereof shall be
attached to the pleading as an exhibit, which shall be deemed to be a part of the
pleading, or said copy may with like effect be set forth in the pleading.

Clearly, the above provision applies when the action is based on a written instrument or
document.

In this case, the complaint is an action for collection of sum of money arising from
Ledda’s default in her credit card obligation with BPI. BPI’s cause of action is primarily
based on Ledda’s (1) acceptance of the BPI credit card, (2) usage of the BPI credit card
to purchase goods, avail services and secure cash advances, and (3) non-payment of
the amount due for such credit card transactions, despite demands. 11 In other words,
BPI’s cause of action is not based only on the document containing the Terms and
Conditions accompanying the issuance of the BPI credit card in favor of Ledda.
Therefore, the document containing the Terms and Conditions governing the use of the
BPI credit card is not an actionable document contemplated in Section 7, Rule 8 of the
1997 Rules of Civil Procedure. As such, it is not required by the Rules to be set forth in
and attached to the complaint.

At any rate, BPI has sufficiently established a cause of action against Ledda, who
admits having received the BPI credit card, subsequently used the credit card, and
failed to pay her obligation arising from the use of such credit card. 12

II.
Whether Alcaraz v. Court of Appeals,
instead of Macalinao v. BPI, is applicable.

Ledda contends that the case of Alcaraz v. Court of Appeals, 13 instead of Macalinao v.
Bank of the Philippine Islands14 which the Court of Appeals invoked, is applicable in the
computation of the interest rate on the unpaid credit card obligation. Ledda claims that
similar to Alcaraz, she was a "pre-screened" client who did not sign any credit card
application form or terms and conditions prior to the issuance of the credit card. Like
Alcaraz, Ledda asserts that the provisions of the Terms and Conditions, particularly on
the interests, penalties and other charges for non-payment of any outstanding
obligation, are not binding on her as such Terms and Conditions were never shown to
her nor did she sign it.

481
We agree with Ledda. The ruling in Alcaraz v. Court of Appeals 15 applies squarely to the
present case. In Alcaraz, petitioner there, as a pre-screened client of Equitable Credit
Card Network, Inc., did not submit or sign any application form or document before the
issuance of the credit card. There is no evidence that petitioner Alcaraz was shown a
copy of the terms and conditions before or after the issuance of the credit card in his
name, much less that he has given his consent thereto.

In this case, BPI issued a pre-approved credit card to Ledda who, like Alcaraz, did not
sign any credit card application form prior to the issuance of the credit card. Like the
credit card issuer in Alcaraz, BPI, which has the burden to prove its affirmative
allegations, failed to establish Ledda’s agreement with the Terms and Conditions
governing the use of the credit card. It must be noted that BPI did not present as
evidence the Terms and Conditions which Ledda allegedly received and
accepted.16 Clearly, BPI failed to prove Ledda’s conformity and acceptance of the
stipulations contained in the Terms and Conditions. Therefore, as the Court held in
Alcaraz, the Terms and Conditions do not bind petitioner (Ledda in this case) "without a
clear showing that x x x petitioner was aware of and consented to the provisions of such
document."17

On the other hand, Macalinao v. Bank of the Philippine Islands, 18 which the Court of
Appeals cited, involves a different set of facts. There, petitioner Macalinao did not
challenge the existence of the Terms and Conditions Governing the Issuance and Use
of the BPI Credit Card and her consent to its provisions, including the imposition of
interests and other charges on her unpaid BPI credit card obligation. Macalinao simply
questioned the legality of the stipulated interest rate and penalty charge, claiming that
such charges are iniquitous. In fact, one of Macalinao’s assigned errors before this
Court reads: "The reduction of interest rate, from 9.25% to 2%, should be upheld since
the stipulated rate of interest was unconscionable and iniquitous, and thus
illegal."19 Therefore, there is evidence that Macalinao was fully aware of the stipulations
contained in the Terms and Conditions Governing the Issuance and Use of the Credit
Card, unlike in this case where there is no evidence that Ledda was aware of or
consented to the Terms and Conditions for the use of the credit card.

Since there is no dispute that Ledda received, accepted and used the BPI credit card
issued to her and that she defaulted in the payment of the total amount arising from the
use of such credit card, Ledda is liable to pay BPI P322,138.58 representing the
principal amount of her unpaid credit card obligation. 20

Consistent with Alcaraz, Ledda must also pay interest on the total unpaid credit card
amount at the rate of 12% per annum since her credit card obligation consists of a loan
or forbearance of money.21 In Eastern Shipping Lines, Inc. v. Court of Appeals, 22 the
Court explained:

1. When an obligation is breached, and it consists in the payment of a sum of money,

i.e., a loan or forbearance of money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due shall itself earn legal interest

482
from the time it is judicially demanded. In the absence of stipulation, the rate of interest
shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil Code.

We reject Ledda’s contention that, since there was no written agreement to pay a higher
interest rate, the interest rate should only be 6%. Ledda erroneously invokes Article
2209 of the Civil Code.23 Article 2209 refers to indemnity for damages and not interest
on loan or forbearance of money, which is the case here. In Sunga-Chan v. Court of
Appeals,24 the Court held:

Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if
proper, and the applicable rate, as follows: The 12% per annum rate under CB Circular
No. 416 shall apply only to loans or forbearance of money, goods, or credits, as well as
to judgments involving such loan or forbearance of money, goods, or credit, while the
6% per annum under Art. 2209 of the Civil Code applies "when the transaction involves
the payment of indemnities in the concept of damage arising from the breach or a delay
in the performance of obligations in general," with the application of both rates reckoned
"from the time the complaint was filed until the adjudged amount is fully paid." In either
instance, the reckoning period for the commencement of the running of the legal interest
shall be subject to the condition "that the courts are vested with discretion, depending
on the equities of each case, on the award of interest. (Emphasis supplied)

In accordance with Eastern Shipping Lines, Inc., the 12% legal interest shall be
reckoned from the date BPI extrajudicially demanded from Ledda the payment of her
overdue credit card obligation. Thus, the 12% legal interest shall be computed from 2
October 2007, when Ledda, through her niece Sally D. Ganceña, 25 received BPI’s
letter26 dated 26 September 2007 demanding the payment of the alleged overdue
amount of P548,143.73.

III.
Whether the award of attorney’s fees is proper.

Ledda assails the award of attorney’s fees in favor of BPI on the grounds of (1)
erroneous reliance by the Court of Appeals on the case of Macalinao and (2) failure by
the trial court to state the reasons for the award of attorney’s fees.

Settled is the rule that the trial court must state the factual, legal or equitable justification
for the award of attorney’s fees.27 The matter of attorney’s fees cannot be stated only in
the dispositive portion of the decision. 28 The body of the court’s decision must state the
reasons for the award of attorney’s fees. 29 In Frias v. San Diego-Sison,30 the Court held:

Article 2208 of the New Civil Code enumerates the instances where such may be
awarded and, in all cases, it must be reasonable, just and equitable if the same were to
be granted. Attorney’s fees as part of damages are not meant to enrich the winning
party at the expense of the losing litigant. They are not awarded every time a party
prevails in a suit because of the policy that no premium should be placed on the right to

483
litigate. The award of attorney’s fees is the exception rather than the general
rule.1âwphi1 As such, it is necessary for the trial court to make findings of facts and law
that would bring the case within the exception and justify the grant of such award. The
matter of attorney’s fees cannot be mentioned only in the dispositive portion of the
decision. They must be clearly explained and justified by the court in the body of its
decision. On appeal, the CA is precluded from supplementing the bases for awarding
attorney’s fees when the trial court failed to discuss in its Decision the reasons for
awarding the same. Consequently, the award of attorney’s fees should be
deleted.1âwphi1

In this case, the trial court failed to state in the body of its decision the factual or legal
reasons for the award of attorney’s fees in favor of BPI. Therefore, the same must be
deleted.

WHEREFORE, we GRANT the petition IN PART. Petitioner Anita A. Ledda is

ORDERED to pay respondent Bank of the Philippine Islands the amount of .P322,
138.58, representing her unpaid credit card obligation, with interest thereon at the rate
of 12% per annum to be computed from 2 October 2007, until full payment thereof. The
award of attorney's fees is DELETED for lack of basis.

SO ORDERED.

SECOND DIVISION

February 6, 2017

G.R. No. 214406

BP OIL AND CHEMICALS INTERNATIONAL PHILIPPINES, INC., Petitioner

vs.
TOTAL DISTRIBUTION & LOGISTIC SYSTEMS, INC., Respondents

DECISION

PERALTA, J.:

Before this Court is the Petition for Review on Certiorari under Rule 45, dated
November 10, 2014 of petitioner BP Oil and Chemicals International Philippines,
Inc. (BP Oil) that seeks to reverse and set aside the Decision 1 dated April 30, 2014 of
the Court of Appeals (CA) which, in turn, reversed and set aside the Decision 2 dated
January 21, 2011 of the Regional Trial Court (RTC), Branch 148, Makati City, in a case
for a collection of sum of money.

The antecedent facts follow.

484
A Complaint for Sum of Money was filed by petitioner BP Oil against respondent Total
Distribution & Logistic Systems, Inc. (TDLSI) on April 15, 2002, seeking to recover the
sum of ₱36,440,351.79 representing the total value of the moneys, stock and accounts
receivables that TDLSI has allegedly refused to return to BP Oil.

The allegations of the parties, as summarized by the RTC, are as follows:

According to the allegations in the complaint, the defendant entered into an Agency
Agreement (the Agreement) with BP Singapore on September 30, 1997, whereby it was
given the right to act as the exclusive agent of the latter for the sales and distribution of
its industrial lubricants in the Philippines. The agency was for a period of five years from
1997 to 2002. In return, the defendant was supposed to meet the target sales volume
set by BP Singapore for each year of the Agreement. As agreed in the Supplemental
Agreement they executed on January 6, 1998, the defendant was supposed to deposit
the proceeds of the sales it made to a depositary account that the defendant will open
for the purpose. On April 27, 1998, BP Singapore assigned its rights under the
Agreement to the plaintiff effective March 1, 1998.

When the defendant did not meet its target sales volume for the first year of the
Agreement, the plaintiff informed the defendant that it was going to appoint other
distributors to sell the BP's industrial lubricant products in the Philippines. The
defendant did not object to the plan of the plaintiff but asked for ₱10,000,000.00 as
compensation for the expenses. The plaintiff did not agree to the demand made by the
defendant.

On August 19, 1999, the defendant through its lawyer, wrote the plaintiff a letter where it
demanded that it be paid damages in the amount of ₱40,000,000.00 and announced
that it was withholding remittance of the sales until it was paid by the plaintiff. On
September 1, 1999, the plaintiff wrote the defendant back to give notice that it was
terminating the Agreement unless the defendant rectified the breaches it committed
within a period of 30 days. The plaintiff also demanded that the defendant pay the
plaintiff its outstanding obligations and return the unsold stock in its possession.

On October 11, 1999, the plaintiff gave the defendant formal notice of [sic] that it was
terminating the Agreement after it did not hear from the defendant. The plaintiff would
find out that the defendant had filed a request for arbitration with the Philippine Dispute
Resolution Center, Inc. (PDRCI).

On October 9, 2000, the plaintiff, through Mr. Lau Hock Lee, sent the defendant another
letter to reiterate its demand for the defendant to return the unremitted collections and
stocks in its possession.

On April 30, 2001, the defendant, through Mr. Miguel G. de Asis, its Chief Finance
Officer, wrote the plaintiff a letter admitting that as of the said date, it had in its
possession collections against sales in the amount of ₱27,261,305.75, receivables in
the amount of ₱8,767,656.26 and stocks valued at ₱1,155,000.00.

485
On July 9, 2001, the law firm of Siguion Reyna Montecillo & Ongsiako sent the
defendant a formal demand letter for the payment of the total amount of ₱36,440,351.79
representing the total amount of the collections, receivables and stocks that defendant
should have returned to the plaintiff as of May 31, 2001. The amount was based on a
summary of account prepared by Ms. Aurora B. Osanna, plaintiffs Business
Development Supervisor.

On April 15, 2002, the plaintiff filed the instant complaint for collection against the
defendant. The defendant initially filed a Motion to Dismiss the complaint on the ground
for [sic] lack of cause of action because of the existence of an arbitration agreement, as
well as a previously filed arbitration proceeding between the parties. This Court denied
the defendant's Motion to Dismiss for lack of merit in its Order dated February 21, 2003.
The Motion for Reconsideration filed by the defendant was likewise denied by this Court
on April 30, 2003. The Defendant went up to the Court of Appeals to question the denial
of its Motion to Dismiss via a Petition for Certiorari and Prohibition.

On June 9, 2003, the Defendant filed its Answer Ad Cautelam with Compulsory

Counterclaim Ad Cautelam.

In its answer, the defendant alleged that it was appointed as the exclusive agent of the
plaintiff to sell BP brand industrial lubricants in the Philippines. The agency was to last
for five years from signing of the Agreement, or until September 29, 2001. As the
exclusive agent of BP products, the defendant was tasked to promote, market, distribute
and sell the BP products supplied the plaintiff.

The defendant further alleged that it did not fail to meet the sales target for Year I.
Delays on the part of the plaintiff in shipping the products moved the commencement of
the Agreement from January 1997 to August 1997, making the stipulated sales target
no longer applicable.

On June 8, 1999, the plaintiff unexpectedly informed the defendant of its intention to
assume more control of Philippine operations, including the appointment of a full-time
representative in the Philippines and new distributors. No reason was given for this
policy change.

Although the defendant pointed out to the plaintiff that the appointment of a new
distributor would violate the Agency Agreement, the plaintiff ignored the defendant's
protests and affirmed that it would proceed with taking over control of the distribution in
the Philippines of BP products and with appointing additional distributors.

While business proceeded, the defendant's counsel, Atty. Eugeniano E. Perez III, sent
the plaintiff a letter dated August 19, 1999 pointing out, among others, that: a) The
plaintiffs plan to take over the lubricant business and appoint other distributors was in
breach of the Agency Agreement; b) the defendant incurred losses because of the
plaintiffs non-compliance with the Agreement and lack of support; and c) the defendant

486
would be carrying on the business would be withholding any funds to be collected
pending compliance with the demand.

Instead of heeding the consequences of its proposed illegal acts, the plaintiffs took
steps to take over the distribution of BP Products in the Philippines and to appoint new
agents for this purpose. Even before the termination of the Agreement, the plaintiff cut
off the supply of BP products to the defendant, and even tried to sell directly to the
defendant's customers, without the defendant's knowledge. To protect its rights, and
pursuant to the arbitration clause under the Agreement, the defendant filed a Request
for Arbitration before the Philippine Dispute Resolution Center, Inc. (PDRCI) on 5
October 1999.

By way of affirmative defenses, the defendant argued that: 1.) it has the right to retain in
pledge objects subject of the agency until it is indemnified by the plaintiff for the
damages it suffered under Article 1914 in relation to Articles 1912 and 1913 of the Civil
Code; 2.) the complaint is dismissible on the ground of lack of cause of action for being
prematurely filed and/or litis pendencia because the issue in the case is already a sub-
issue in the arbitration proceedings; and 3.) the action should be stayed in accordance
with Republic Act No. 876.

On March 21, 2004, the Court of Appeals came out with its Decision affirming this
Court's denial of the defendant's Motion to Dismiss after the defendant filed it
Answer Ad Cautelam. The Court of Appeals also denied the defendant's Motion for
Reconsideration on August 16, 2004. The Decision of the Court of Appeals sustaining
this Court attained finality with the denial by the Supreme Court on November 10, 2004
of the Petition for Review on Certiorari filed by the defendant as well as its Motion for
Reconsideration from the said denial.

In light of the finality of the decision of the Court of Appeals, the defendant lost its right
to invoke the pendency of the arbitration proceedings as part of its affirmative defenses.
The defendant is therefore left with only one affirmative defense to the complaint of the
plaintiff, and this is the right of retention given to an agent under Article 1912, 1913 and
1914 of the Civil Code.

This makes the issue to be resolved by this Court uncomplicated: 1) whether the plaintiff
has the right to collect the amount of ₱36,440,35 l. 79 from the defendant together with
legal interest computed from September 1, 1999, attorney's fees and costs of suit; and
2) whether the defendant is justified in retaining the amounts and stocks in its
possession by virtue of the aforementioned provisions of the Civil Code on agency. 3

In its Decision dated January 21, 2011, the RTC ruled in favor of the petitioner, the
dispositive portion of which reads as follows:

WHEREFORE, premises considered, judgment is hereby rendered, granting the claim

of the plaintiff and directing the defendant to pay the plaintiff the sum of:

487
(1) Thirty-Six Million Nine Hundred Forty-Three Thousand Eight Hundred Twenty-Nine
Pesos and Thirteen Centavos (₱36,943,829.13) for the value of the stocks and the
moneys received and retained by the defendant in its possession pursuant to the
Agreement with legal interest computed at 6% per annum from July 19, 2001 up to the
finality of this decision and at 12% per annum from finality of this decision up to the date
of payment.

(2) Attorney's fees in the amount of One Million Five Hundred Thousand Pesos
(₱1,500,000.00) and costs of suit amounting to Four Hundred Thirty-Nine Thousand
Eight Hundred Forty Pesos (₱439,840.00).

SO ORDERED.4

After the respondent elevated the case to the CA, the latter court reversed and set aside
the decision of the RTC and found in favor of the respondent in its Decision dated April
30, 2014, thus:

WHEREFORE, the instant appeal is GRANTED. The assailed Decision dated January
21, 2011 of the Regional Trial Court of Makati City, Branch 148 is REVERSED and SET
ASIDE. The instant complaint is DISMISSED.

SO ORDERED.5

The CA ruled, among others, that the admission made by respondent in Exhibit "J ," that
it was withholding moneys, receivables and stocks respectively valued at
₱27,261,305.75, ₱8,767,656.26 and ₱1,155,000.00 from petitioner, has no evidentiary
weight, thus, petitioner was not able to preponderantly establish its claim.

Hence, the present petition where petitioner states the following grounds:

THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN

RENDERING ITS DECISION AS WELL AS IN DENYING BP OIL'S MOTION FOR
RECONSIDERATION.SPECIFICALLY:

THE COURT OF APPEALS ERRED IN NOT RULING THAT TDLSI HAS MADE A
JUDICIAL ADMISSION THAT IT HAS POSSESSION OF THE STOCKS, MONEYS
AND RECEIVABLES THAT BP OIL SEEKS TO RECOVER IN THE COMPLAINT
BELOW, CONSIDERING THAT:

a. EXHIBIT "J' QUALIFIES AS AN ACTIONABLE DOCUMENT WHOSE

AUTHENTICITY AND DUE EXECUTION WERE DEEMED ADMITTED BY TDLSI
FOLLOWING ITS FAIL URE TO SPECIFICALLY DENY THE SAME UNDER OATH IN
ITS ANSWER.

488
b. REGARDLESS OF WHETHER EXHIBIT "J" MAY BE CONSIDERED AS AN
ACTIONABLE DOCUMENT, THE FACT REMAINS THAT TD LSI HAD ACTUALLY
ADMITTED PREPARING AND SENDING THE SAME TO BP OIL IN ITS ANSWER.

i. NO RESERVATION WAS EVER MADE BY TD LSI REGARDING THE

AUTHENTICITY OF ITS CONTENTS AND NO WITNESS WAS EVER PRESENTED
BY TDLSI TO DISOWN ITS DUE EXECUTION.

ii. ASIDE FROM BEING SELF-SERVING, THE ANSWER TO WRITTEN

INTERROGATORIES GIVEN BY TDLSI'S MR. MIGUEL DE ASIS AND CITED IN THE
DECISION AS A BASIS TO NEGATE TDLSI'S ADMISSION OF EXHIBIT "J" WAS
NEVER OFFERED IN EVIDENCE. THE COURT OF APPEALS SHOULD NOT HAVE
EVEN CONSIDERED THE SAME IN RENDERING ITS DECISION.

c. THE RIGHT OF RETENTION INVOKED BY TDLSI IN ITS ANSWER CARRIES WITH

IT THE ADMISSION: (i) THAT BP OIL IS ENTITLED TO THE STOCKS, MONEYS AND
RECEIVABLES SUBJECT OF THE COMPLAINT BELOW, AND (ii) THAT TDLSI IS
WITHHOLDING THE SAME FROM BP OIL.

II

THE COURT OF APPEALS SERIOUSLY ERRED IN NOT RULING THAT WITH OR

WITHOUT EXHIBIT "J," BP OIL HAS MET THE QUANTUM OF PROOF REQUIRED
BY LAW TO PROVE ITS CLAIM.

a. CIVIL CASES ONLY REQUIRE A PREPONDERANCE OF EVIDENCE AND BP OIL

HAS DISCHARGED ITS BURDEN OF MEETING THIS STANDARD OF PROOF.

b. THE REFUSAL OF THE COURT TO GIVE WEIGHT TO SOME OF THE PIECES OF

EVIDENCE PRESENTED BY BP OIL HAS NO LEGAL BASIS.

c. THE DENIAL OF TDLSI'S DEMURRER TO EVIDENCE SHOWS THAT BP OIL HAS

MADE OUT A PRIMA F ACIE CASE IN SUPPORT OF ITS CLAIMS AGAINST TDLSI
AND TDLSI'S FAILURE TO CONTROVERT THIS PRIMA F ACIE CASE JUSTIFIES A
RULING IN FAVOR OF BP OIL.

According to petitioner, Exhibit "J" qualifies as an actionable document whose

authenticity and due execution were deemed admitted by respondent or TDLSI
following its failure to specifically deny the same under oath. Petitioner insists that it has
met the quantum of proof required by law.

In its Comment dated March 24, 2015, respondent reiterates the ruling of the CA that
Exhibit "J" is not an actionable document and cannot be considered a judicial admission
on its part.

The petition is devoid of any merit.

489
The Rules of Court require that only questions of law should be raised in petitions filed
under Rule 45.6 This court is not a trier of facts. It will not entertain questions of fact as
the factual findings of the appellate courts are "final, binding[,] or conclusive on the
parties and upon this [c]ourt"7 when supported by substantial evidence.8 Factual findings
of the appellate courts will not be reviewed nor disturbed on appeal to this court. 9

This Court's Decision in Cheesman v. Intermediate Appellate Court10distinguished

questions of law from questions of fact:

As distinguished from a question of law - which exists "when the doubt or difference
arises as to what the law is on a certain state of facts" - "there is a question of fact when
the doubt or difference arises as to the truth or the falsehood of alleged facts;" or when
the "query necessarily invites calibration of the whole evidence considering mainly the
credibility of witnesses, existence and relevancy of specific surrounding circumstances,
their relation to each other and to the whole and the probabilities of the situation." 11

Seeking recourse from this court through a petition for review on certiorari under Rule
45 bears significantly on the manner by which this court shall treat findings of fact and
evidentiary matters. As a general rule, it becomes improper for this court to consider
factual issues: the findings of fact of the trial court, as affirmed on appeal by the Court of
Appeals, are conclusive on this court. "The reason behind the rule is that [this] Court is
not a trier of facts and it is not its duty to review, evaluate, and weigh the probative
value of the evidence adduced before the lower courts." 12

However, these rules do admit exceptions. 13 Over time, the exceptions to these rules
have expanded. At present, there are 10 recognized exceptions that were first listed
in Medina v. Mayor Asistio, Jr.:14

(1) When the conclusion is a finding grounded entirely on speculation, surmises or

conjectures; (2) When the inference made is manifestly mistaken, absurd or impossible;
(3) Where there is a grave abuse of discretion; (4) When the judgment is based on a
misapprehension of facts; (5) When the findings of fact are conflicting; (6) When the
Court of Appeals, in making its findings, went beyond the issues of the case and the
same is contrary to the admissions of both appellant and appellee; (7) The findings of
the Court of Appeals are contrary to those of the trial court; (8) When the findings of fact
are conclusions without citation of specific evidence on which they are based; (9) When
the facts set forth in the petition as well as in the petitioner's main and reply briefs are
not disputed by the respondents; and (10) The finding of fact of the Court of Appeals is
premised on the supposed absence of evidence and is contradicted by the evidence on
record.15

A close reading of the present petition shows that what this Court is being asked to
resolve is, what should prevail - the findings of facts of the RTC or the findings of facts
of the CA on the alleged misapprehension of facts of the RTC. The findings of facts of
both Courts are obviously conflicting, hence, the need for this Court to rule on the
present petition.

490
On the issue of whether Exhibit "J" is an actionable document, the CA ruled:

Here, plaintiff-appellee relies heavily on its Exhibit "J", defendant-appellant's purported

letter dated April 30, 2001, which it alleged to be an "actionable document" which
defendant-appellant failed to deny under oath. It does amounts to a judicial admission
on the part of defendant-appellant that it has possession of its stocks, moneys and
receivables belonging to plaintiff-appellee.

x x xx

Here, the purported April 30, 2001 letter is not an actionable document per se. The
present complaint is an action for collection of sum of money arising from the
termination of the Agency Agreement between the parties. Plaintiff-appellee's cause of
action is primarily based on the alleged non-payment of outstanding debts of defendant-
appellant as well as the unremitted collections/payments and unsold stocks, despite
demand. In other words, plaintiff-appellee's cause of action is not based solely on the
April 30, 2001 letter allegedly stating the "present value of stocks, collections and
accounts receivables" of defendant-appellant. Clearly, said document is not an
actionable document contemplated in Section 7, Rule 8 of the 1997 Rules of Court but
is merely evidentiary in nature. As such, there was no need for defendant-appellant to
deny its genuineness and due execution under oath. We thus cannot sustain plaintiff-
appellee' s contention that the aforesaid Exhibit "J" amounted to a judicial admission
because it's due execution and authenticity was never denied under oath by defendant
appellant.

Verily, an admission is any statement of fact made by a party against its interest or
unfavorable to the conclusion for which he contends or is inconsistent with the facts
alleged by him. To be admissible, an admission must (a) involve matters of fact, and not
of law; (b) be categorical and definite; (c) be knowingly and voluntarily made; and (d) be
adverse to the admitter' s interests, otherwise it would be self-serving and inadmissible.

In this case, the alluded Exhibit "J" was introduced in evidence by plaintiff-appellee
alleging in its Complaint that:

"18. Under date of 30 April 2001, TDLSI wrote BP Oil a letter admitting that the following
stocks, collections and accounts receivable were still in their possession as of even
date:

Amount collected against sales ₱27,261,305.75

Accounts Receivable 8,767,656.26
Estimated Value of Stocks 1,155,000.00

A copy of the 30 April 2001 letter of TDLSI is hereto attached as Annex "J" and made
an integral part hereof."

491
In its Answer Ad Cautelam with Compulsory Counterclaim Ad Cautelam, defendant-
appellant TDLSI averred, viz.:

"17. Paragraph 18 is admitted, with qualification [that] TDLSI's letter dated 30 April 2001
was prepared and sent to BP Oil solely on the latter's representations that the figures
were being sought only to negotiate a settlement of the parties' dispute and end the
pending arbitration. Instead, in shocking bad faith, BP Oil refused to settle and made
TDLSI's letter the basis of the instant Complaint."

Hence, while defendant-appellant admitted said Exhibit "J'', it nevertheless qualified and
limited said admission to, merely, the existence thereof. In fact, in its Comment to
Plaintiff's Exhibits, defendant clearly stated:

"(9) EXH. "J" - only the existence of the letter sent by Defendant to Plaintiff dated April
30, 2001, signed by Miguel de Asis and addressed to Hok Lee Hau, is admitted. The
contents as well as the factual basis thereof, are not admitted. Besides, the
circumstances leading to the sending of this letter were thoroughly explained by Miguel
de Asis in his answer to Plaintiffs written interrogatories."

x x xx

Evidently, the afore-quoted letter does not, in any way, categorically declare that the
figures stated therein are "still in [the] possession of' or, in the hands of, defendant-
appellant TDLSI. The "present value" of the accounts receivables, collections and
stocks is one thing, the "value in possession or on hand" of said accounts is another.

Sans the above-discussed Exhibit "J", therefore, this Court is not convinced that
plaintiff-appellee BP Oil was able to preponderantly establish its claim against
defendant-appellant TDLSI in the amount of ₱36,440,351.79 for the value of the
moneys, stock and accounts receivables which the latter allegedly refused to deliver to
the former. As aptly argued by defendant-appellant TDLSI, the purported
Acknowledgment Receipts and Delivery Receipts presented by plaintiffappellee BP Oil
the purpose of which is "to prove that TD LSI, through its General manager, Mr. Ivor
Williams, acknowledged receipt and delivery of the stocks" are totally baseless since the
same were never signed as having been "received by" said Mr. Ivor Williams. Hence,
without the latter's signature, the purpose for which said documents were offered
becomes nil.

The above findings of the CA are partially correct.

Exhibit "J" reads as follows:

Mr. Lau,

Some considerable time has passed since either party had the opportunity to review
their respective position (sic) on the disagreement between us. It was pleasing to note

492
that a discussion has now started between us again and you give the impression that a
settlement is a better solution for both parties than to continue through the legal route.

The present value of stocks, collections and accounts receivable was requested. As of
today, we can state the following:

Amount Collected against Sales ₱27,261,305.75

Accounts receivables ₱8,767,656.26
Estimated Value of Stocks ₱1,155,000.00

Please note that the stock value is estimated because the drums are no longer sealable
due to their condition. However, this is not significant in number.

To the mind of the Court, Exh. "J" is not an actionable document but is an evidence that
may be admissible and; hence, need not be denied under oath. Sections 7 and 8 of the
1997 Rules of Court provide:

Section 7. Action or defense based on document. - Whenever an action or defense is

based upon a written instrument or document, the substance of such instrument or
document shall be set forth in the pleading, and the original or a copy thereof shall be
attached to the pleading as an exhibit, which shall be deemed to be a part of the
pleading, or said copy may with like effect be set forth in the pleading.

Section 8. How to contest such documents. - When an action or defense is founded

upon a written instrument, copied in or attached to the corresponding pleading as
provided in the preceding Section, the genuineness and due execution of the instrument
shall be deemed admitted unless the adverse party, under oath, specifically denied
them, and sets forth what he claims to be the facts, but the requirement of an oath does
not apply when the adverse party does not appear to be a party to the instrument or
when compliance with an order for an inspection of the original instrument is refused.

A document, therefore, is actionable when an action or defense is grounded upon such

written instrument or document. The complaint filed by petitioner is an action for
collection of sum of money arising from the termination of the Agency Agreement with
TDLSI. The CA, therefore, was correct when it stated that petitioner's cause of action is
primarily based on the alleged non-payment of outstanding debts of respondent as well
as the unremitted collections/payments and unsold stocks, despite demand. Thus,
petitioner's cause of action is not based solely on the April 30, 2001 letter allegedly
stating the "present value of stocks, collections and accounts receivables" of TDLSI.
Noteworthy is the denial of respondent TDLSI' s Demurrer to Evidence by the RTC
because it clearly discussed petitioner's cause of action and the sufficiency of the
evidence it presented, thus:

Upon consideration of the pleadings and arguments filed by the parties, the Court is
convinced to DENY the demurrer.

493
The record shows that the plaintiff presented sufficient evidence that will preponderantly
establish its claim against the defendant. Among the evidence presented which might
prove the claim or right to relief of the plaintiff against the defendant include (I) the
purchase orders of TDLSI's third party customers; (2) original approved copies of the
requests for approval sent by TDLSI to BP Oil from May 21, 1998 to August 14, 1999;
(3)TDLSI invoices covering the products subject of the purchase orders and requests
for approval; and (4) The sales invoices issued by BP Oil to TDLSI to its customers.

The aforesaid evidence presented was to the mind of the Court contain pertinent
facts and such evidence will prove that the plaintiff has a cause of action against
the defendant. As correctly pointed out by the plaintiff, TDLSI cannot premise its
demurrer on any supposed lack of proof of delivery by BP Oil of certain moneys and
receivables. The allegations in the complaint, as well as the evidence presented by BP
Oil, establish that generated as they were by the sales made by TDLSI, the moneys and
receivables have always been in TDLSI's possession and it is the obligation of the latter
to deliver them to BP Oil.

The Court is of the view that the better way to weigh and decide this case based on
merits is for the defendant to present its own evidence to refute the plaintiff's
allegations. It is better that the defendant be given a day in court to prove its defenses in
a full-blown trial.

The Court cannot just dismiss the case on the ground that upon the facts and law
presented by the plaintiff it was not able to show a right to relief when in fact the
evidence presented, testimonial and documentary, show otherwise and its claim
appears to be meritorious. To ensure that justice would be served and that the case
be decided on its real merits upon a careful review and appreciation of facts and
evidence presented it would be best that defendant should instead present its own
defenses in a formal trial and not just to dismiss the case allegedly in the absence of
clear proof that plaintiff has no right to the reliefs prayed for.

Moreover, the Court noted that this case has been prolonged for so long and this Court
can no longer allow any more delay to this case.1âwphi1

WHEREFORE, premises considered, the Demurrer to Evidence is hereby DENIED for

lack of merit.16

It is basic that whoever alleges a fact has the burden of proving it because a mere
allegation is not evidence.17 In civil cases, the burden of proof is on the party who would
be defeated if no evidence is given on either side. 18 The RTC's denial of TDLSI's
Demurrer to Evidence shows and proves that petitioner had indeed laid a prima
facie case in support of its claim. Having been ruled that petitioner's claim is
meritorious, the burden of proof, therefore, was shifted to TDLSI to controvert
petitioner's prima facie case.

494
The CA, however, ruled that while TDLSI admitted Exhibit "J", it nevertheless qualified
and limited said admission to, merely, the existence thereof, thus, without Exhibit "J" the
same court was not convinced that petitioner was able to preponderantly establish its
claim against TDLSI in the amount of ₱36,440,351.79 for the value of the moneys, stock
and accounts receivables which TDLSI allegedly refused to deliver to petitioner. This is
erroneous. The fact is, TDLSI indeed admitted the existence of Exhibit "J." Thus, Exhibit
"J" can be considered as an admission against interest. Admissions against interest are
those made by a party to a litigation or by one in privity with or identified in legal interest
with such party, and are admissible whether or not the declarant is available as a
witness.19 An admission against interest is the best evidence that affords the greatest
certainty of the facts in dispute, based on the presumption that no man would declare
anything against himself unless such declaration is true. 20 It is fair to presume that the
declaration corresponds with the truth, and it is his fault if it does not. 21 No doubt,
admissions against interest may be refuted by the declarant. 22 In this case, however,
respondent failed to refute the contents of Exhibit "J."

Be that as it may, the qualification made by respondent in the admission of Exhibit "J" is
immaterial as the contents thereof were merely corroborative of the other pieces of
evidence presented by petitioner and that respondent failed in its defense, to present
evidence to defeat the claim of petitioner. As aptly ruled by the RTC:

After going over the allegations and the evidence presented by the parties, the Court
finds as it did in its Order denying the Demurrer to Evidence of the defendant that the
plaintiff presented sufficient evidence that will preponderantly establish its claim against
the defendant. The Court notes that apart from not presenting any evidence in
support of its defense, the defendant did not really put up any serious defense to
defeat the claim of the plaintiff, and its only remaining defense consisting of the
right of retention given to agents under Articles 1912, 1913 and 1914 of the Civil
Code, even if proven to exist, will not negate the finding that the plaintiff is
entitled to the value of the moneys and stocks in the defendant's possession.

To the mind of the court, the evidence presented by the plaintiff, unrebutted by
any evidence on the part of the defendant and even aided by the admissions
made by the defendant in its letter dated April 30, 2001 to the plaintiff (Exhibit
"J"), proves that the plaintiff has a cause of action for the payment of the amount
of Thirty-Six Million Nine Hundred Forty-Three Thousand Eight Hundred Twenty-
Nine Pesos and Thirteen Centavos (₱36,943,829.13) for the value of the stocks
and the moneys received and retained by the defendant in its possession
pursuant to the Agreement with legal interest computed at 6% per annum from
July 19, 2001, when formal demand (Exhibit "L") was made by the plaintiff for the
liquidatedamount of ₱36,943,829.13, up to the finality of this decision up to the
date of payment thereof.

Considering that the plaintiff was compelled to engage in litigation for almost 10 years, it
must also be indemnified for the costs of suit corresponding to filing fees in the amount
of ₱429,840.00 and attorney's fees equivalent to ₱1,500,000.00. 23

495
Section 1,24 Rule 133 of the Rules of Court mandates that in civil cases, the party
having the burden of proof must establish his case by a preponderance of evidence. By
preponderance of evidence, according to Raymundo v. Lunaria,25 [means] that the
evidence as a whole adduced by one side is superior to that of the other. It refers to the
weight, credit and value of the aggregate evidence on either side and is usually
considered to be synonymous with the term "greater weight of evidence" or "greater
weight of the credible evidence." It is evidence which is more convincing to the court as
worthy of belief than that which is offered in opposition thereto.

Upon close analysis, therefore, this Court is inclined to believe the findings of the RTC
that petitioner was able to prove its case by a preponderance of evidence and that
respondent failed to disprove petitioner's claim. As such, the CA gravely erred in
reversing the decision of the RTC.

A modification, however, must be made as to the rate of interest applied by the RTC.
The RTC ordered the respondent to pay the amount adjudged "with legal interest
computed at 6% per annum from July 19, 2001 up to the finality of the decision and at
12% per annum from finality of the decision up to the date of payment." Now, the
interest imposed should be 12% per annum from July 19, 2001 until June 30, 2013 and
6% per annum from July 1, 2013 until full satisfaction per decision of this Court
in Secretary of the Department of Public Works and Highways, et al. v. Spouses
Heracleo and Ramona Tecson26 which set forth the following guidelines:

In summary, the interest rates applicable to loans and forbearance of money, in the
absence of an express contract as to such rate of interest, for the period of 1940 to
present are as follows:

Law, Rule and Date of Effectivity Interest Rate

Regulations, BSP
Issuances
Act No. 2655 May 1, 1916 6%
CB Circular No. 416 July 29, 1974 12%
CB Circular No. 905 December 22, 1982 12%
CB Circular No. 799 July 1, 2013 6%

It is important to note, however, that interest shall be compounded at the time judicial
demand is made pursuant to Article 221227 of the Civil Code of the Philippines, and
sustained in Eastern Shipping Lines v. Court of Appeals, 28 then later on in Nacar v.
Gallery Frames,29 save for the reduction of interest rate to 6% for loans or forbearance
of money, thus:

1. When the obligation is breached, and it consists in the payment of a sum of

money, i.e., a loan or forbearance of money, the interest due should be that which may

496
have been stipulated in writing. Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 6% per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.30

WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of Court
dated November 10, 2014 of BP Oil and Chemicals International Philippines, Inc.
is GRANTED. Consequently, the Decision dated April 30, 2014 of the Court of Appeals
is REVERSED and SET ASIDE and the Decision dated January 21, 2011 of the
Regional Trial Court, Branch 148, Makati City is AFFIRMED and REINSTATED, with
the MODIFICATION that the interest imposed should be 12% per annum from July 19,
2001 until June 30, 2013 and 6% per annum from July 1, 2013 until fully paid.

SO ORDERED.

SECOND DIVISION

G.R. No. 169548               March 15, 2010

TITAN CONSTRUCTION CORPORATION, Petitioner,

vs.
MANUEL A. DAVID, SR. and MARTHA S. DAVID, Respondents.

DECISION

DEL CASTILLO, J.:

The review of factual matters is not the province of this Court. 1 The Supreme Court is
not a trier of facts, and is not the proper forum for the ventilation and substantiation of
factual issues.2

This Petition for Review assails the July 20, 2004 Decision 3 of the Court of Appeals
(CA) in CA-G.R. CV No. 67090 which affirmed with modification the March 7, 2000
Decision4 of the Regional Trial Court (RTC) of Quezon City, Branch 80. Also assailed is
the August 31, 2005 Resolution5 of the CA denying the motion for reconsideration.

Factual Antecedents

Manuel A. David, Sr. (Manuel) and Martha S. David (Martha) were married on March
25, 1957. In 1970, the spouses acquired a 602 square meter lot located at White Plains,
Quezon City, which was registered in the name of "MARTHA S. DAVID, of legal age,
Filipino, married to Manuel A. David" and covered by Transfer Certificate of Title (TCT)
No. 156043 issued by the Register of Deeds of Quezon City. 6 In 1976, the spouses
separated de facto, and no longer communicated with each other. 7

497
Sometime in March 1995, Manuel discovered that Martha had previously sold the
property to Titan Construction Corporation (Titan) for ₱1,500,000.00 through a Deed of
Sale8 dated April 24, 1995, and that TCT No. 156043 had been cancelled and replaced
by TCT No. 130129 in the name of Titan.

Thus, on March 13, 1996, Manuel filed a Complaint 9 for Annulment of Contract and
Recovenyance against Titan before the RTC of Quezon City. Manuel alleged that the
sale executed by Martha in favor of Titan was without his knowledge and consent, and
therefore void. He prayed that the Deed of Sale and TCT No. 130129 be invalidated,
that the property be reconveyed to the spouses, and that a new title be issued in their
names.

In its Answer with Counterclaim,10 Titan claimed that it was a buyer in

good faith and for value because it relied on a Special Power of Attorney (SPA) 11 dated
January 4, 1995 signed by Manuel which authorized Martha to dispose of the property
on behalf of the spouses. Titan thus prayed for the dismissal of the complaint.

In his unverified Reply,12 Manuel claimed that the SPA was spurious, and that the
signature purporting to be his was a forgery; hence, Martha was wholly without authority
to sell the property.

Subsequently, Manuel filed a Motion for Leave to File Amended Complaint 13 which was
granted by the trial court. Thus, on October 15, 1996, Manuel filed an Amended
Complaint14 impleading Martha as a co-defendant in the proceedings. However, despite
personal service of summons15 upon Martha, she failed to file an Answer. Thus, she
was declared in default.16 Trial then ensued.

Ruling of the Regional Trial Court

On March 7, 2000, the RTC issued a Decision which (i) invalidated both the Deed of
Sale and TCT No. 130129; (ii) ordered Titan to reconvey the property to Martha and
Manuel; (iii) directed the Register of Deeds of Quezon City to issue a new title in the
names of Manuel and Martha; and (iv) ordered Titan to pay ₱200,000.00 plus
₱1,000.00 per appearance as attorney’s fees, and ₱50,000.00 as costs of suit.

The RTC found that:

1) The property was conjugal in character since it was purchased by Manuel

and Martha with conjugal funds during their marriage. The fact that TCT No.
156043 was registered in the name of "MARTHA S. DAVID x x x married to
Manuel A. David" did not negate the property’s conjugal nature.

2) The SPA professing to authorize Martha to sell the property on behalf of the
spouses was spurious, and did not bear Manuel’s genuine signature. This was

498
 the subject of expert testimony, which Titan failed to rebut. In addition, despite
the fact that the SPA was notarized, the genuineness and due execution of the
SPA was placed in doubt since it did not contain Manuel’s residence certificate,
and was not presented for registration with the Quezon City Register of Deeds, in
violation of Section 64 of Presidential Decree No. 1529. 17

3) The circumstances surrounding the transaction with Martha should have put
Titan on notice of the SPA’s dubious veracity. The RTC noted that aside from
Martha’s failure to register the SPA with the Register of Deeds, it was doubtful
that an SPA would have even been necessary, since the SPA itself indicated that
Martha and Manuel lived on the same street in Navotas.

The dispositive portion of the trial court’s Decision reads:

Wherefore, judgment is hereby rendered:

1.) Declaring the Deed of Sale dated April 24, 1995 as void ab initio and without
force and effect.

2.) Declaring null and void TCT No. 130129 issued by the Register of Deeds of
Quezon City in the name of defendant Titan Construction Corporation.

3.) Ordering defendant Titan Construction Corporation to reconvey the subject

property to plaintiff and his spouse.

4.) Ordering the Register of Deeds of Quezon City to make and issue a new title
in the name of plaintiff Manuel David and his Spouse, Martha David.

5.) Ordering defendant to pay ₱200,000.00 plus ₱1,000.00 per appearance as

attorney’s fees and ₱50,000.00 as costs of suit.

SO ORDERED.18

Ruling of the Court of Appeals

In its Decision dated July 20, 2004, the CA affirmed the Decision of the trial court but
deleted the award of attorney’s fees and the amount of ₱50,000.00 as costs.

The dispositive portion of the Decision reads:

WHEREFORE, with the MODIFICATION by deleting the award of attorney’s fees in

favor of plaintiff-appellee Manuel A. David, Sr. and the amount of ₱50,000.00 as costs,
the Decision appealed from is AFFIRMED in all other respects, with costs against
defendant-appellant Titan Construction Corporation. 19

Titan moved for reconsideration but the motion was denied on August 31, 2005.

499
Hence, this petition.

Issues

Titan raises the following assignment of errors:

A. THE COURT OF APPEALS PATENTLY ERRED IN DECLARING THE SUBJECT

DEED OF SALE NULL AND VOID AND FAILED TO APPLY TO THIS CASE THE
PERTINENT LAW AND JURISPRUDENCE ON THE TORRENS SYSTEM OF LAND
REGISTRATION.

B. THE COURT OF APPEALS PATENTLY ERRED IN RULING THAT TITAN WAS

NOT A BUYER IN GOOD FAITH CONTRARY TO THE STANDARDS APPLIED BY
THIS HONORABLE COURT IN CASES INVOLVING SIMILAR FACTS.

C. THE COURT OF APPEALS PATENTLY ERRED BY DISCARDING THE NATURE

OF A NOTARIZED SPECIAL POWER OF ATTORNEY CONTRARY TO
JURISPRUDENCE AND BY GIVING UNDUE WEIGHT TO THE ALLEGED EXPERT
TESTIMONY VIS-À-VIS THE CONTESTED SIGNATURES AS THEY APPEAR TO THE
NAKED EYE CONTRARY TO JURISPRUDENCE.

D. THE COURT OF APPEALS PATENTLY ERRED BY FAILING TO DETECT

BADGES OF CONNIVANCE BETWEEN RESPONDENTS.

E. THE COURT OF APPEALS PATENTLY ERRED BY NOT RULING THAT

ASSUMING THE SPA WAS NULL AND VOID, THE SAME IS IMMATERIAL SINCE
THE RESPONDENTS SHOULD BE CONSIDERED ESTOPPED FROM DENYING
THAT THE SUBJECT PROPERTY WAS SOLELY THAT OF RESPONDENT MARTHA
S. DAVID.

F. THE COURT OF APPEALS PATENTLY ERRED BY NOT RULING THAT

ASSUMING THE SALE WAS VOID, ON GROUNDS OF EQUITY MARTHA S. DAVID
SHOULD REIMBURSE PETITIONER OF HIS PAYMENT WITH LEGAL INTEREST. 20

Petitioner’s Arguments

Titan is claiming that it was a buyer in good faith and for value, that the property was
Martha’s paraphernal property, that it properly relied on the SPA presented by Martha,
and that the RTC erred in giving weight to the alleged expert testimony to the effect that
Manuel’s signature on the SPA was spurious. Titan also argues, for the first time, that
the CA should have ordered Martha to reimburse the purchase price paid by Titan.

Our Ruling

The petition is without merit.

500
The property is part of the spouses’ conjugal partnership.

The Civil Code of the Philippines,21 the law in force at the time of the celebration of the
marriage between Martha and Manuel in 1957, provides:

Article 160. All property of the marriage is presumed to belong to the conjugal
partnership, unless it be proved that it pertains exclusively to the husband or to the wife.

Article 153 of the Civil Code also provides:

Article 153. The following are conjugal partnership property:

(1) That which is acquired by onerous title during the marriage at the expense of the
common fund, whether the acquisition be for the partnership, or for only one of the
spouses;

xxxx

These provisions were carried over to the Family Code. In particular, Article 117 thereof
provides:

Art. 117. The following are conjugal partnership properties:

(1) Those acquired by onerous title during the marriage at the expense of the common
fund, whether the acquisition be for the partnership, or for only one of the spouses;

xxxx

Article 116 of the Family Code is even more unequivocal in that "[a]ll property acquired
during the marriage, whether the acquisition appears to have been made, contracted or
registered in the name of one or both spouses, is presumed to be conjugal unless the
contrary is proved."

We are not persuaded by Titan’s arguments that the property was Martha’s exclusive
property because Manuel failed to present before the RTC any proof of his income in
1970, hence he could not have had the financial capacity to contribute to the purchase
of the property in 1970; and that Manuel admitted that it was Martha who concluded the
original purchase of the property. In consonance with our ruling in Spouses Castro v.
Miat,22 Manuel was not required to prove that the property was acquired with funds of
the partnership. Rather, the presumption applies even when the manner in which the
property was acquired does not appear.23 Here, we find that Titan failed to overturn the
presumption that the property, purchased during the spouses’ marriage, was part of the
conjugal partnership.

In the absence of Manuel’s consent, the Deed of Sale is void.

501
Since the property was undoubtedly part of the conjugal partnership, the sale to Titan
required the consent of both spouses. Article 165 of the Civil Code expressly provides
that "the husband is the administrator of the conjugal partnership". Likewise, Article 172
of the Civil Code ordains that "(t)he wife cannot bind the conjugal partnership without
the husband’s consent, except in cases provided by law".

Similarly, Article 124 of the Family Code requires that any disposition or encumbrance
of conjugal property must have the written consent of the other spouse, otherwise, such
disposition is void. Thus:

Art. 124. The administration and enjoyment of the conjugal partnership shall belong to
both spouses jointly. In case of disagreement, the husband's decision shall prevail,
subject to recourse to the court by the wife for proper remedy, which must be availed of
within five years from the date of the contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include disposition or encumbrance without
authority of the court or the written consent of the other spouse. In the absence of such
authority or consent, the disposition or encumbrance shall be void. However, the
transaction shall be construed as a continuing offer on the part of the consenting
spouse and the third person, and may be perfected as a binding contract upon the
acceptance by the other spouse or authorization by the court before the offer is
withdrawn by either or both offerors.

The Special Power of Attorney purportedly signed by Manuel is spurious and void.

The RTC found that the signature of Manuel appearing on the SPA was not his genuine
signature.

As to the issue of the validity or invalidity of the subject Special Power of Attorney x x x
the Court rules that the same is invalid. As aptly demonstrated by plaintiff’s evidence
particularly the testimony of expert witness Atty. Desiderio Pagui, which the defense
failed to rebut and impeach, the subject Special Power of Attorney does not bear the
genuine signature of plaintiff Manuel David thus rendering the same as without legal
effect.

Moreover, the genuineness and the due execution of the Special Power of Attorney was
placed in more serious doubt as the same does not contain the Residence Certificate of
the plaintiff and most importantly, was not presented for registration with the Quezon
City Register of Deeds which is a clear violation of Sec. 64 of P.D. No. 1529.

As regards defendant Titan Construction Corporation’s assertion that plaintiff’s failure to

verify his Reply (wherein the validity of the Special Power of Attorney is put into
question) is an implied admission of its genuineness and due execution, [this] appears
at first blush a logical conclusion. However, the Court could not yield to such an

502
argument considering that a rigid application of the pertinent provisions of the Rules of
Court will not be given premium when it would obstruct rather than serve the broader
interest of justice.24

Titan claims that the RTC gave undue weight to the testimony of Manuel’s witness, and
that expert testimony on handwriting is not conclusive.

The contention lacks merit. The RTC’s ruling was based not only on the testimony of
Manuel’s expert witness finding that there were significant differences between the
standard handwriting of Manuel and the signature found on the SPA, but also on
Manuel’s categorical denial that he ever signed any document authorizing or ratifying
the Deed of Sale to Titan.25

We also note that on October 12, 2004, Titan filed before the CA a Manifestation with
Motion for Re-Examination of Another Document/ Handwriting Expert 26 alleging that
there is "an extreme necessity"27 for a conduct of another examination of the SPA by a
handwriting expert "as it will materially affect and alter the final outcome" 28 of the case.
Interestingly, however, Titan filed on January 6, 2005 a Manifestation/Motion to
Withdraw Earlier Motion for Re-Examination of PNP Laboratory Expert 29 this time
praying that its motion for re-examination be withdrawn. Titan claimed that "after a
circumspect evaluation, deemed it wise not to pursue anymore said request (re-
examination) as there is a great possibility that the x x x [PNP and the NBI] might come
out with two conflicting opinions and conclusions x x x that might cause some confusion
to the minds of the Honorable Justices in resolving the issues x x x as well as the waste
of material time and resources said motion may result". 30

In any event, we reiterate the well-entrenched rule that the factual findings of trial
courts, when adopted and confirmed by the CA, are binding and conclusive and will
generally not be reviewed on appeal.31 We are mandated to accord great weight to the
findings of the RTC, particularly as regards its assessment of the credibility of
witnesses32 since it is the trial court judge who is in a position to observe and examine
the witnesses first hand.33 Even after a careful and independent scrutiny of the records,
we find no cogent reason to depart from the rulings of the courts below. 34

Furthermore, settled is the rule that only errors of law and not of fact are reviewable by
this Court in a petition for review on certiorari under Rule 45 of the Rules of Court. This
applies with even greater force here, since the factual findings by the CA are in full
agreement with those of the trial court. 35

Indeed, we cannot help but wonder why Martha was never subpoenaed by Titan as a
witness to testify on the character of the property, or the circumstances surrounding the
transaction with Titan. Petitioner’s claim that she could not be found is belied by the
RTC records, which show that she personally received and signed for the summons at
her address in Greenhills, San Juan. Titan neither filed a cross claim nor made any
adverse allegation against Martha.

503
On the Failure to Deny the Genuineness and Due Execution of the SPA

Titan claimed that because Manuel failed to specifically deny the genuineness and due
execution of the SPA in his Reply, he is deemed to have admitted the veracity of said
document, in accordance with Rule 8, Sections 7 and 8, 36 of the Rules of Court.

On this point, we fully concur with the findings of the CA that:

It is true that the reply filed by Manuel alleging that the special power of attorney is a
forgery was not made under oath. However, the complaint, which was verified by
Manuel under oath, alleged that the sale of the subject property executed by his wife,
Martha, in favor of Titan was without his knowledge, consent, and approval, express or
implied; and that there is nothing on the face of the deed of sale that would show that he
gave his consent thereto. In Toribio v. Bidin, it was held that where the verified
complaint alleged that the plaintiff never sold, transferred or disposed their share in the
inheritance left by their mother to others, the defendants were placed on adequate
notice that they would be called upon during trial to prove the genuineness or due
execution of the disputed deed of sale. While Section 8, Rule 8 is mandatory, it is a
discovery procedure and must be reasonably construed to attain its purpose, and in a
way as not to effect a denial of substantial justice. The interpretation should be one
which assists the parties in obtaining a speedy, inexpensive, and most important, a just
determination of the disputed issues.1avvphi1

Moreover, during the pre-trial, Titan requested for stipulation that the special power of
attorney was signed by Manuel authorizing his wife to sell the subject property, but
Manuel refused to admit the genuineness of said special power of attorney and stated
that he is presenting an expert witness to prove that his signature in the special power
of attorney is a forgery. However, Titan did not register any objection x x x. Furthermore,
Titan did not object to the presentation of Atty. Desiderio Pagui, who testified as an
expert witness, on his Report finding that the signature on the special power of attorney
was not affixed by Manuel based on his analysis of the questioned and standard
signatures of the latter, and even cross-examined said witness. Neither did Titan object
to the admission of said Report when it was offered in evidence by Manuel on the
ground that he is barred from denying his signature on the special power of attorney. In
fact, Titan admitted the existence of said Report and objected only to the purpose for
which it was offered. In Central Surety & Insurance Company v. C.N. Hodges, it was
held that where a party acted in complete disregard of or wholly overlooked Section 8,
Rule 8 and did not object to the introduction and admission of evidence questioning the
genuineness and due execution of a document, he must be deemed to have waived the
benefits of said Rule. Consequently, Titan is deemed to have waived the mantle of
protection given [it] by Section 8, Rule 8.37

It is true that a notarial document is considered evidence of the facts expressed

therein.38 A notarized document enjoys a prima facie presumption of authenticity and
due execution39 and only clear and convincing evidence will overcome such legal
presumption.40 However, such clear and convincing evidence is present here.1avvph!

504
1 While it is true that the SPA was notarized, it is no less true that there were defects in
the notarization which mitigate against a finding that the SPA was either genuine or duly
executed. Curiously, the details of Manuel’s Community Tax Certificate are
conspicuously absent, yet Martha’s are complete. The absence of Manuel’s data
supports his claim that he did not execute the same and that his signature thereon is a
forgery. Moreover, we have Manuel’s positive testimony that he never signed the SPA,
in addition to the expert testimony that the signature appearing on the SPA was not
Manuel’s true signature.

Moreover, there were circumstances which mitigate against a finding that Titan was a
buyer in good faith.

First, TCT No. 156043 was registered in the name of "MARTHA S. DAVID, of legal age,
Filipino, married to Manuel A. David" but the Deed of Sale failed to include Martha’s civil
status, and only described the vendor as "MARTHA S. DAVID, of legal age, Filipino
citizen, with postal address at 247 Governor Pascual, Navotas, Rizal." And it is quite
peculiar that an SPA would have even been necessary, considering that the SPA itself
indicated that Martha and Manuel lived on the same street (379 and 247 Governor
Pascual Street, respectively).

Second, Titan’s witness Valeriano Hernandez, the real estate agent who brokered the
sale between Martha and Titan, testified that Jerry Yao (Yao), Titan’s Vice President for
Operations (and Titan’s signatory to the Deed of Sale), specifically inquired why the
name of Manuel did not appear on the Deed of Sale. 41 This indicates that Titan was
aware that Manuel’s consent may be necessary. In addition, Titan purportedly sent their
representative to the Register of Deeds of Quezon City to verify TCT No. 156043, so
Titan would have been aware that the SPA was never registered before the Register of
Deeds.

Third, Valeriano Hernandez also testified that during the first meeting between Martha
and Yao, Martha informed Yao that the property was mortgaged to a casino for
₱500,000.00. Without even seeing the property, the original title, or the SPA, and
without securing an acknowledgment receipt from Martha, Titan (through Yao) gave
Martha ₱500,000.00 so she could redeem the property from the casino. 42 These are
certainly not actions typical of a prudent buyer.

Titan cannot belatedly claim that the RTC should have ordered Martha to reimburse the
purchase price.

Titan argues that the CA erred in not ruling that, even assuming the sale was void, on
grounds of equity, Martha should reimburse petitioner its payment with legal interest.
We note that this equity argument was raised for the first time before the CA, which
disposed of it in this manner:

Anent defendant-appellant’s claim that the court a quo and this Court never considered
the substantial amount of money paid by it to Martha David as consideration for the sale

505
of the subject property, suffice it to say that said matter is being raised for the first time
in the instant motion for reconsideration. If well-recognized jurisprudence precludes
raising an issue only for the first time on appeal proper, with more reason should such
issue be disallowed or disregarded when initially raised only in a motion for
reconsideration of the decision of the appellate court.

Nonetheless, record shows that only defendant-appellant was initially sued by plaintiff-
appellee in his complaint for annulment of contract and reconveyance upon the
allegation that the sale executed by his wife, Martha David, of their conjugal property in
favor of defendant-appellant was without his knowledge and consent and, therefore, null
and void. In its answer, defendant-appellant claimed that it bought the property in good
faith and for value from Martha David and prayed for the dismissal of the complaint and
the payment of his counterclaim for attorney’s fees, moral and exemplary damages.
Subsequently, plaintiff-appellee filed a motion for leave to file amended complaint by
impleading Martha David as a defendant, attaching the amended complaint thereto,
copies of which were furnished defendant-appellant, through counsel. The amended
complaint was admitted by the court a quo in an Order dated October 23, 1996. Martha
David was declared in default for failure to file an answer. The record does not show
[that] a cross-claim was filed by defendant-appellant against Martha David for the return
of the amount of PhP1,500,000.00 it paid to the latter as consideration for the sale of
the subject property. x x x Thus, to hold Martha David liable to defendant-appellant for
the return of the consideration for the sale of the subject property, without any claim
therefore being filed against her by the latter, would violate her right to due process.  The
essence of due process is to be found in the reasonable opportunity to be heard and
submit any evidence one may have in support of his defense. It is elementary that
before a person can be deprived of his property, he should be first informed of the claim
against him and the theory on which such claim is premised. 43 (Emphasis supplied)

While it is true that litigation is not a game of technicalities, 44 it is equally true that
elementary considerations of due process require that a party be duly apprised of a
claim against him before judgment may be rendered. Thus, we cannot, in these
proceedings, order the return of the amounts paid by Titan to Martha. However, Titan is
not precluded by this Decision from instituting the appropriate action against Martha
before the proper court.

WHEREFORE, the petition is DENIED. The July 20, 2004 Decision of the Court of

Appeals in CA-G.R. CV No. 67090 which affirmed with modifications the March 7, 2000
Decision of the Regional Trial Court of Quezon City, Branch 80, and its August 31, 2005
Resolution denying the motion for reconsideration, are AFFIRMED, without prejudice to
the recovery by petitioner Titan Construction Corporation of the amounts it paid to
Martha S. David in the appropriate action before the proper court.

SO ORDERED.

FIRST DIVISION

506
 G.R. No. 207970, January 20, 2016

FERNANDO MEDICAL ENTERPRISES, INC., Petitioner, v. WESLEYAN UNIVERSITY

PHILIPPINES, INC., Respondent.

DECISION

BERSAMIN, J.:

The trial court may render a judgment on the pleadings upon motion of the claiming
party when the defending party's answer fails to tender an issue, or otherwise admits
the material allegations of the adverse party's pleading. For that purpose, only the
pleadings of the parties in the action are considered. It is error for the trial court to deny
the motion for judgment on the pleadings because the defending party's pleading in
another case supposedly tendered an issue of fact.chanRoblesvirtualLawlibrary

The Case

The petitioner appeals the decision promulgated on July 2, 2013, 1 whereby the Court of
Appeals (CA) affirmed the order issued on November 23, 2011 by the Regional Trial
Court (RTC), Branch 1, in Manila, denying its motion for judgment on the pleadings in
Civil Case No. 09-122116 entitled Fernando Medical Enterprises, Inc. v. Wesleyan
University-Philippines.2chanRoblesvirtualLawlibrary

Antecedents

From January 9, 2006 until February 2, 2007, the petitioner, a domestic corporation
dealing with medical equipment and supplies, delivered to and installed medical
equipment and supplies at the respondent's hospital under the following contracts:

a. Memorandum of Agreement dated January 9, 2006 for the supply ol'

medical equipment in the total amount of
P18,625,000.00;3chanroblesvirtuallawlibrary

b. Deed of Undertaking dated July 5, 2006 for the installation of medical gas
pipeline system valued at P8,500,000.00;4chanroblesvirtuallawlibrary

c. Deed of Undertaking dated July 27, 2006 for the supply of one unit of
Diamond Select Slice CT and one unit of Diamond Select CV-P costing
P65,000,000.00;5 and

d. Deed of Undertaking dated February 2, 2007 for the supply of furnishings

and equipment worth P32,926,650.00.6

According to the petitioner, the respondent paid only P67,3 57,683.23 of its total
obligation of P123,901,650.00, leaving unpaid the sum of P54,654,195.54. 7 However,

507
on February 11, 2009, the petitioner and the respondent, respectively represented by
Rafael P. Fernando and Guillermo T. Maglaya, Sr., entered into an
agreement,8 whereby the former agreed to reduce its claim to only P50,400,000.00, and
allowed the latter to pay the adjusted obligation on installment basis within 36
months.9chanroblesvirtuallawlibrary

In the letter dated May 27, 2009,10 the respondent notified the petitioner that its new
administration had reviewed their contracts and had found the contracts defective and
rescissible due to economic prejudice or lesion; and that it was consequently declining
to recognize the February 11, 2009 agreement because of the lack of approval by its
Board of Trustees and for having been signed by Maglaya whose term of office had
expired.

On June 24, 2009, the petitioner sent a demand letter to the

respondent.11chanroblesvirtuallawlibrary

Due to the respondent's failure to pay as demanded, the petitioner filed its complaint for
sum of money in the RTC,12 averring as follows:

xxxx

2. On January 9, 2006, plaintiff supplied defendant with hospital medical equipment for
an in consideration of P18,625,000.00 payable in the following manner: (2.1) For nos. 1
to 9 of items to be sourced from Fernando Medical Equipment, Inc. (FMEI) - 30% down
payment of P17,475,000 or P5,242,500 with the balance of PI2,232,500 or 70% payable
in 24 equal monthly instalments of P509,687.50 and (2.2.) cash transaction amounting
to P1,150,000.00 (2.3) or an initial cash payment of P6,392,500.00 with the remaining
balance payable in 24 equal monthly installments every 20 th day of each month until
paid, as stated in the Memorandum of Agreement, copy of which is hereto attached as
Annex "A";

3. On July 5, 2006, plaintiff installed defendants medical gas pipeline system in the
latter's hospital building complex for and in consideration of P8,500,000.00 payable
upon installation thereof under a Deed of Undertaking, copy of which is hereto attached
as Annex "B";

4. On July 27, 2006, plaintiff supplied defendant one (1) unit Diamond Select Slice CT
and one (1) unit Diamond Select CV-9 for and in consideration of P65,000,000.00 thirty
percent (30%) of which shall be paid as down payment and the balance in 30 equal
monthly instalments as provided in that Deed of Undertaking, copy of which is hereto
attached as Annex "C";

5. On February 2, 2007, plaintiff supplied defendants hospital furnishings and

equipment for an in consideration of P32,926,650.00 twenty percent (20%) of which was
to be paid as downpayment and the balance in 30 months under a Deed of
Undertaking, copy of which is hereto attached as Annex "D";

508
6. Defendant's total obligation to plaintiff was P123,901,650.00 as of February 15, 2009,
but defendant was able to pay plaintiff the sum of P67,357,683.23 thus leaving a
balance P54,654,195.54 which has become overdue and demandable;

7. On February 11, 2009, plaintiff agreed to reduce its claim to only P50,400,000.00 and
extended its payment for 36 months provided defendants shall pay the same within 36
months and to issue 36 postdated checks therefor in the amount of P1,400,000.00 each
to which defendant agreed under an Agreement, copy of which is hereto attached
as Annex "E";

8. Accordingly, defendant issued in favor of plaintiff 36 postdated checks each in the

[a]mount of P1,400,000.00 but after four (4) of the said checks in the sum of
P5,600,000.00 were honored defendant stopped their payment thus making the entire
obligation of defendant due and demandable under the February 11, 2009 agreement;

9. In a letter dated May 27, 2009, defendant claimed that all of the first four (4)
agreements may be rescissible and one of them is unenforceable while the Agreement
dated February 11, 2009 was without the requisite board approval as it was signed by
an agent whose term of office already expired, copy of which letter is hereto attached
as Annex "F";

10. Consequently, plaintiff told defendant that if it does not want to honor the February
11, 2009 contract then plaintiff will insists [sic] on its original claim which is
P54,654,195.54 and made a demand for the payment thereof within 10 days from
receipt of its letter copy of which is hereto attached as Annex "G";

11. Defendant received the aforesaid letter on July 6, 2009 but to date it has not paid
plaintiff any amount, either in the first four contracts nor in the February 11, 2009
agreement, hence, the latter was constrained to institute the instant suit and thus
incurred attorney's fee equivalent to 10% of the overdue account but only after
endeavouring to resolve the dispute amicable and in a spirit of friendship[;]

12. Under the February 11, 2009 agreement the parties agreed to bring all actions or
proceedings thereunder or characterized therewith in the City of Manila to the exclusion
of other courts and for defendant to pay plaintiff 3% per months of delay without need of
demand;13chanroblesvirtuallawlibrary

xxxx

The respondent moved to dismiss the complaint upon the following grounds, 14 namely:
(a) lack of jurisdiction over the person of the defendant; (b) improper venue; (c) litis
pendentia; and (d) forum shopping. In support of the ground of litis pendentia, it stated
that it had earlier filed a complaint for the rescission of the four contracts and of the
February 11, 2009 agreement in the RTC in Cabanatuan City; and that the resolution of
that case would be determinative of the petitioner's action for
collection.15chanroblesvirtuallawlibrary

509
After the RTC denied the motion to dismiss on July 19, 2009, 16 the respondent filed its
answer (ad cautelam),17 averring thusly:

xxxx

2. The allegations in Paragraphs Nos. 2, 3, 4, and 5 of the complaint are ADMITTED

subject to the special and affirmative defenses hereafter pleaded;

3. The allegations in Paragraphs Nos. 6, 7 and 8 of the complaint are DENIED for lack
of knowledge or information sufficient to form a belief as to the truth or falsity thereof,
inasmuch as the alleged transactions were undertaken during the term of office of the
past officers of defendant Wesleyan University-Philippines. At any rate, these
allegations are subject to the special and affirmative defenses hereafter pleaded;

4. The allegations in Paragraphs Nos. 9 and 10 of the complaint are ADMITTED subject
to the special and affirmative defenses hereafter pleaded;

5. The allegations in Paragraphs Nos. 11 and 12 of the complaint are DENIED for being
conclusions of law.18chanroblesvirtuallawlibrary

xxxx

The petitioner filed its reply to the answer. 19chanroblesvirtuallawlibrary

On September 28, 2011, the petitioner filed its Motion for Judgment Based on the
Pleadings,20 stating that the respondent had admitted the material allegations of its
complaint and thus did not tender any issue as to such allegations.

The respondent opposed the Motion for Judgment Based on the Pleadings, arguing that
it had specifically denied the material allegations in the complaint, particularly
paragraphs 6, 7, 8, 11 and 12.21chanroblesvirtuallawlibrary

On November 23, 2011, the RTC issued the order denying the Motion for Judgment
Based on the Pleadings of the petitioner, to wit:

At the hearing of the "Motion for Judgment Based on the Pleadings" filed by the plaintiff
thru counsel, Atty. Jose Mañacop on September 28, 2011, the court issued an Order
dated October 27, 2011 which read in part as follows:

xxxx

Considering that the allegations stated on the Motion for Judgment Based on the
Pleadings, are evidentiary in nature, the Court, instead of acting on the same, hereby
sets this case for pre-trial, considering that with the Answer and the Reply, issues have
been joined.

510
xxxx

In view therefore of the Order of the Court dated October 27, 2011. let the Motion for
Judgment Based on the Pleadings be hereby ordered DENIED on reasons as
abovestated and hereto reiterated.

xxxx

SO ORDERED.22chanroblesvirtuallawlibrary

The petitioner moved for reconsideration, 23 but its motion was denied on December 29,
2011.24chanroblesvirtuallawlibrary

The petitioner assailed the denial in the CA on certiorari.25cralawred

Judgment of the CA

On July 2, 2013, the CA promulgated its decision. Although observing that the
respondent had admitted the contracts as well as the February 11, 2009
agreement, viz.:

It must be remembered that Private Respondent admitted the existence of the subject
contracts, including Petitioner's fulfilment of its obligations under the same, but
subjected the said admission to the "special and affirmative defenses" earlier raised in
its Motion to Dismiss.

xxxx

Obviously, Private Respondent's special and affirmative defenses are not of such
character as to avoid Petitioner's claim. The same special and affirmative defenses
have been passed upon by the RTC in its Order dated July 19, 2010 when it denied
Private Respondent's Motion to Dismiss. As correctly found by the RTC, Private
Respondent's special and affirmative defences of lack of jurisdiction over its person,
improper venue, litis pendentia and wilful and deliberate forum shopping are not
meritorious and cannot operate to dismiss Petitioner's Complaint. Hence, when Private
Respondent subjected its admission to the said defenses, it is as though it raised no
defense at all.

Not even is Private Respondent's contention that the rescission case must take
precedence over Petitioner's Complaint for Sum of Money tenable. To begin with.
Private Respondent had not yet proven that the subject contracts are rescissible. And
even if the subject contracts are indeed rescissible, it is well-settled that rescissible
contracts are valid contracts until they are rescinded. Since the subject contracts have
not yet been rescinded, they are deemed valid contracts which may be enforced in legal
contemplation.

511
In effect, Private Respondent admitted that it entered into the subject contracts and that
Petitioner had performed its obligations under the same.

As regards Private Respondent's denial by disavowal of knowledge of the Agreement

dated February 11, 2009, We agree with Petitioner that such denial was made in bad
faith because such allegations are plainly and necessarily within its knowledge.

In its letter dated May 27, 2009, Private Respondent made reference to the Agreement
dated February 11, 2009, viz.:ChanRoblesVirtualawlibrary
"The Agreement dated 11 February 2009, in particular, was entered into by an Agent of
the University without the requisite authority from the Board of Trustees, and executed
when said agent's term of office had already expired. Consequently, such contract is,
being an unenforceable contract."
Also, Private Respondent averred in page 5 of its Complaint for Rescission, which it
attached to its Motion to Dismiss, that:

"13. On 6 February 2009, when the terms of office of plaintiffs Board of Trustess chaired
by Dominador Cabasal, as well as of Atty. Guillermo C. Maglaya as President, had
already expired, thereby rendering them on a hold-over capacity, the said Board once
again authorized Atty. Maglaya to enter into another contract with defendant FMEI,
whereby the plaintiff was obligated to pay and deliver to defendant FMEI the amount of
Fifty Million Four Hundred Thousand Pesos (Php50,400,000.00) in thirty five (35)
monthly instalments of One Million Four Hundred Thousand Pesos (Phpl,400,000.00),
representing the balance of the payment for the medical equipment supplied under the
afore-cited rescissible contracts. This side agreement, executed five (5) days later, or
on 11 February 2009, and denominated as "AGREEMENT", had no object as a
contract, but was entered into solely for the purpose of getting the plaintiff locked-in to
the payment of the balance price under the rescissible contracts; x x x"
From the above averments, Private Respondent cannot deny knowledge of the
Agreement dated February 11, 2009. In one case, it was held that when a respondent
makes a "specific denial" of a material allegation of the petition without setting forth the
substance of the matters relied upon to support its general denial, when such
matters where plainly within its knowledge and the defendant could not logically pretend
ignorance as to the same, said defendant fails to properly tender an
issue."26chanroblesvirtuallawlibrary

the CA ruled that a judgment on the pleadings would be improper because the
outstanding balance due to the petitioner remained to be an issue in the face of the
allegations of the respondent in its complaint for rescission in the RTC in Cabanatuan
City, to wit:

However, Private Respondent's disavowal of knowledge of its outstanding balance is

well-taken. Paragraph 6 of Petitioner's Complaint states that Private Respondent was
able to pay only the amount of P67,357,683.23. Taken together with paragraph 8, which
states that Private Respondent was only able to make good four (4) check payments

512
worth P1,400,000.00 or a total of P5,600,000.00, Private Respondent's total payments
would be, in Petitioner's view, P72,957,683.23. However, in its Complaint for
Rescission, attached to its Motion to Dismiss Petitioner's Complaint for Sum of Money,
Private Respondent alleged that:ChanRoblesVirtualawlibrary
"16. To date, plaintiff had already paid defendant the amount of Seventy Eight Million
Four Hundred One Thousand Six Hundred Fifty Pesos (P78,401,650.00)"
It is apparent that Private Respondent's computation and Petitioner's computation of the
total payments made by Private Respondent are different. Thus, Private Respondent
tendered an issue as to the amount of the balance due to Petitioner under the subject
contracts.27chanrobleslaw

Hence, this appeal.chanRoblesvirtualLawlibrary

Issue

The petitioner posits that the CA erred in going outside of the respondent's answer by
relying on the allegations contained in the latter's complaint for rescission; and insists
that the CA should have confined itself to the respondent's answer in the action in order
to resolve the petitioner's motion for judgment based on the pleadings.

In contrast, the respondent contends that it had specifically denied the material
allegations of the petitioner's complaint, including the amount claimed; and that the CA
only affirmed the previous ruling of the RTC that the pleadings submitted by the parties
tendered an issue as to the balance owing to the petitioner.

Did the CA commit reversible error in affirming the RTC's denial of the petitioner's
motion for judgment on the pleadings?chanRoblesvirtualLawlibrary

Ruling of the Court

The appeal is meritorious.

The rule on judgment based on the pleadings is Section 1, Rule 34 of the Rules of

Court, which provides thus:

Section 1. Judgment on the pleadings. - Where an answer fails to tender an issue, or

otherwise admits the material allegations of the adverse party's pleading, the court may,
on motion of that party, direct judgment on such pleading, x x x

The essential query in resolving a motion for judgment on the pleadings is whether or
not there are issues of fact generated by the pleadings. 28 Whether issues of fact exist in
a case or not depends on how the defending party's answer has dealt with the ultimate
facts alleged in the complaint. The defending party's answer either admits or denies the
allegations of ultimate facts in the complaint or other initiatory pleading. The allegations
of ultimate facts the answer admit, being undisputed, will not require evidence to
establish the truth of such facts, but the allegations of ultimate facts the answer properly

513
denies, being disputed, will require evidence.

The answer admits the material allegations of ultimate facts of the adverse party's
pleadings not only when it expressly confesses the truth of such allegations but also
when it omits to deal with them at all.29 The controversion of the ultimate facts must only
be by specific denial. Section 10, Rule 8 of the Rules of Court recognizes only three
modes by which the denial in the answer raises an issue of fact. The first is by the
defending party specifying each material allegation of fact the truth of which he does not
admit and, whenever practicable, setting forth the substance of the matters upon which
he relies to support his denial. The second applies to the defending party who desires to
deny only a part of an averment, and the denial is done by the defending party
specifying so much of the material allegation of ultimate facts as is true and material
and denying only the remainder. The third is done by the defending party who is without
knowledge or information sufficient to form a belief as to the truth of a material averment
made in the complaint by stating so in the answer. Any material averment in the
complaint not so specifically denied are deemed admitted except an averment of the
amount of unliquidated damages.30chanroblesvirtuallawlibrary

In the case of a written instrument or document upon which an action or defense is

based, which is also known as the actionable document, the pleader of such document
is required either to set forth the substance of such instrument or document in the
pleading, and to attach the original or a copy thereof to the pleading as an exhibit, which
shall then be deemed to be a part of the pleading, or to set forth a copy in the
pleading.31 The adverse party is deemed to admit the genuineness and due execution of
the actionable document unless he specifically denies them under oath, and sets forth
what he claims to be the facts, but the requirement of an oath does not apply when the
adverse party does not appear to be a party to the instrument or when compliance with
an order for an inspection of the original instrument is
refused.32chanroblesvirtuallawlibrary

In Civil Case No. 09-122116, the respondent expressly admitted paragraphs no. 2, 3, 4,
5, 9 and 10 of the complaint. The admission related to the petitioner's allegations on: (a)
the four transactions for the delivery and installation of various hospital equipment; (b)
the total liability of the respondent; (c) the payments made by the respondents; (d) the
balance still due to the petitioner; and (e) the execution of the February 11, 2009
agreement. The admission of the various agreements, especially the February 11, 2009
agreement, significantly admitted the petitioner's complaint. To recall, the petitioner's
cause of action was based on the February 1 1, 2009 agreement, which was the
actionable document in the case. The complaint properly alleged the substance of the
February 11, 2009 agreement, and contained a copy thereof as an annex. Upon the
express admission of the genuineness and due execution of the February 11, 2009
agreement, judgment on the pleadings became proper. 33 As held in Santos v.
Alcazar:34chanroblesvirtuallawlibrary

There is no need for proof of execution and authenticity with respect to documents the
genuineness and due execution of which are admitted by the adverse party. With the
consequent admission engendered by petitioners' failure to properly deny the
514
Acknowledgment in their Answer, coupled with its proper authentication, identification
and offer by the respondent, not to mention petitioners' admissions in paragraphs 4 to 6
of their Answer that they are indeed indebted to respondent, the Court believes that
judgment may be had solely on the document, and there is no need to present receipts
and other documents to prove the claimed indebtedness. The Acknowledgment, just as
an ordinary acknowledgment receipt, is valid and binding between the parties who
executed it, as a document evidencing the loan agreement they had entered into. The
absence of rebutting evidence occasioned by petitioners' waiver of their right to present
evidence renders the Acknowledgment as the best evidence of the transactions
between the parties and the consequential indebtedness incurred. Indeed, the effect of
the admission is such that a prima facie case is made for the plaintiff which dispenses
with the necessity of evidence on his part and entitled him to a judgment on the
pleadings unless a special defense of new matter, such as payment, is interposed by
the defendant.35 (citations omitted)

The respondent denied paragraphs no. 6, 7 and 8 of the complaint "for lack of

knowledge or information sufficient to form a belief as to the truth or falsity thereof,
inasmuch as the alleged transactions were undertaken during the term of office of the
past officers of defendant Wesleyan University-Philippines." Was the manner of denial
effective as a specific denial?

We answer the query in the negative. Paragraph no. 6 alleged that the respondent's
total obligation as of February 15, 2009 was P123,901,650.00, but its balance thereafter
became only P54,654,195.54 because it had since then paid P67,357,683.23 to the
petitioner. Paragraph no. 7 stated that the petitioner had agreed with the respondent on
February 11, 2009 to reduce the balance to only P50,400,000.00, which the respondent
would pay in 36 months through 36 postdated checks of P1,400,000.00 each, which the
respondent then issued for the purpose. Paragraph no. 8 averred that after four of the
checks totalling P5,600,000.00 were paid the respondent stopped payment of the rest,
rendering the entire obligation due and demandable pursuant to the February 11, 2009
agreement. Considering that paragraphs no. 6, 7 and 8 of the complaint averred matters
that the respondent ought to know or could have easily known, the answer did not
specifically deny such material averments. It is settled that denials based on lack of
knowledge or information of matters clearly known to the pleader, or ought to be known
to it, or could have easily been known by it are insufficient, and constitute ineffective 36 or
sham denials.37chanroblesvirtuallawlibrary

That the respondent qualified its admissions and denials by subjecting them to its
special and affirmative defenses of lack of jurisdiction over its person, improper
venue, litis pendentia and forum shopping was of no consequence because the
affirmative defenses, by their nature, involved matters extrinsic to the merits of the
petitioner's claim, and thus did not negate the material averments of the complaint.

Lastly, we should emphasize that in order to resolve the petitioner's Motion for

Judgment Based on the Pleadings, the trial court could rely only on the answer of the
respondent filed in Civil Case No. 09-122116. Under Section 1, Rule 34 of the Rules of

515
Court, the answer was the sole basis for ascertaining whether the complaint's material
allegations were admitted or properly denied. As such, the respondent's averment of
payment of the total of P78,401,650.00 to the petitioner made in its complaint for
rescission had no relevance to the resolution of the Motion for Judgment Based on the
Pleadings. The CA thus wrongly held that a factual issue on the total liability of the
respondent remained to be settled through trial on the merits. It should have openly
wondered why the respondent's answer in Civil Case No. 09-122116 did not allege the
supposed payment of the P78,401,650.00, if the payment was true, if only to buttress
the specific denial of its alleged liability. The omission exposed the respondent's denial
of liability as insincere.

WHEREFORE, the Court REVERSES and SETS ASIDE the decision promulgated on

July 2, 2013; DIRECTS the Regional Trial Court, Branch 1, in Manila to resume its
proceedings in Civil Case No. 09-122116 entitled Fernando Medical Enterprises, Inc. v.
Wesleyan University-Philippines, and to forthwith act on and grant the Motion for
Judgment Based on the Pleadings by rendering the proper judgment on the pleadings;
and ORDERS the respondent to pay the costs of suit.

SO ORDERED.cralawlawlibrary

THIRD DIVISION

January 10, 2018

G.R. No. 192971

FLORO MERCENE, Petitioner
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, Respondent

DECISION

MARTIRES, J.:

This petition for review on certiorari seeks to reverse and set aside the 29 April 2010
Decision1 and 20 July 2010 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No.
86615 which reversed the 15 September 2005 Decision 3 of the Regional Trial Court,
Branch 220, Quezon City (RTC).

THE FACTS

On 19 January 1965, petitioner Floro Mercene (Mercene) obtained a loan from

respondent Government Service Insurance System (GSIS) in the amount of
₱29,500.00. As security, a real estate mortgage was executed over Mercene's property
in Quezon City, registered under Transfer Certificate of Title No. 90535. The mortgage
was registered and annotated on the title on 24 March 1965. 4

516
On 14 May 1968, Mercene contracted another loan with GSIS for the amount of
₱14,500.00. The loan was likewise secured by a real estate mortgage on the same
parcel of land. The following day, the loan was registered and duly annotated on the
title.5

On 11 June 2004, Mercene opted to file a complaint for Quieting of Title 6 against GSIS.
He alleged that: since 1968 until the time the complaint was filed, GSIS never exercised
its rights as a mortgagee; the real estate mortgage over his property constituted a cloud
on the title; GSIS' right to foreclose had prescribed. In its answer, 7 GSIS assailed that
the complaint failed to state a cause of action and that prescription does not run against
it because it is a government entity.

During the pre-trial conference, Mercene manifested that he would file a motion for
judgment on the pleadings. There being no objection, the RTC granted the motion for
judgment on the pleadings.8

The RTC Decision

In its 15 September 2005 decision, the RTC granted Mercene's complaint and ordered
the cancellation of the mortgages annotated on the title. It ruled that the real estate
mortgages annotated on the title constituted a cloud thereto, because the annotations
appeared to be valid but was ineffective and prejudicial to the title. The trial court opined
that GSIS' right as a mortgagee had prescribed because more than ten (10) years had
lapsed from the time the cause of action had accrued. The R TC stated that prescription
ran against GSIS because it is a juridical person with a separate personality, and with
the power to sue and be sued. The dispositive portion reads:

WHEREFORE, premises considered, judgment is hereby rendered:

1) Declaring the Real Estate Mortgage dated January 19, 1965, registered on
March 24, 1965 and Real Estate Mortgage dated May 14, 1965 registered on
May 15, 1968, both annotated at the back of Transfer Certificate of Title No.
90435 of the Registry of Deeds of Quezon City, registered in the name of plaintiff
Floro Mercene married to Felisa Mercene, to be ineffective.

2) Ordering the Registry of Deeds of Quezon City to cancel the following entries
annotated on the subject title 1) Entry No. 4148/90535: mortgage to GSIS and; 2)
Entry No. 4815/90535: mortgage to GSIS.

3) The other claims and counter-claims are hereby denied for lack of merit. 9

Aggrieved, GSIS appealed before the CA.

The CA Ruling

517
In its 30 January 2015 decision, the CA reversed the RTC decision. The appellate court
posited that the trial court erred in declaring that GSIS' right to foreclose the mortgaged
properties had prescribed. It highlighted that Mercene's complaint neither alleged the
maturity date of the loans, nor the fact that a demand for payment was made. The CA
explained that prescription commences only upon the accrual of the cause of action,
and that a cause of action in a written contract accrues only when there is an actual
breach or violation. Thus, the appellate court surmised that no prescription had set in
against GSIS because it has not made a demand to Mercene. It ruled:

WHEREFORE, the appeal is GRANTED. The decision appealed from is REVERSED

and SET ASIDE. The complaint for Quieting of Title is hereby DISMISSED. 10

Mercene moved for reconsideration, but the same was denied by the CA in its assailed
7 April 2011 resolution.

Hence, this present petition raising the following:

ISSUES

WHETHER THE COURT OF APPEALS ERRED IN CONSIDERING ISSUES NOT

RAISED BEFORE THE TRIAL COURT;

II

WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING THE JUDICIAL

ADMISSION ALLEGEDLY MADE BY GSIS; AND

III

WHETHER THE COURT OF APPEALS ERRED IN RULING THAT THE REAL

ESTATE MORTGAGES HAD YET TO PRESCRIBE.

THE COURTS RULING

The petition has no merit.

Related issues addressed by the trial courts

Mercene assails the CA decision for entertaining issues that were not addressed by the
trial court. He claims that for the first time on appeal, GSIS raised the issue on whether
the loans were still effective in view of his nonpayment. A reading of the CA decision,
however, reveals that the appellate court did not dwell on the issue of nonpayment, but
instead ruled that prescription had not commenced because the cause of action had not
yet accrued. Hence, it concluded that the complaint failed to state a cause of action.

518
The appellate court did not focus on the question of payment precisely because it was
raised for the first time on appeal. It is noteworthy that, in its answer, GSIS raised the
affirmative defense that Mercene's complaint failed to state a cause of action.

Only ultimate facts need be specifically denied

Further, Mercene insists that GSIS had judicially admitted that its right to foreclose the
mortgage had prescribed. He assails that GSIS failed to specifically deny the allegations
in his complaint, particularly paragraphs 11.1 and 11.2 which read:

11.1. The right of the defendant GSIS, to institute the necessary action in court, to
enforce its right as a mortgagee, under Real Estate Mortgages dated January 19, 1965
and May 14, 1968, respectively, by filing a complaint for judicial foreclosure of Real
Estate Mortgage, with the Regional Trial Court of Quezon City, against the plaintiff, as
the mortgagor, pursuant to Rule 68 of the 1997 Rules of Civil Procedures (Rules, for
brevity); or by filing a petition for extra-judicial foreclosure of real estate mortgage, under
Act. 3135, as amended, with the Sheriff, or with the Notary Public, of the place where
the subject property is situated, for the purpose of collecting the loan secured by the
said real estate mortgages, or in lieu thereof, for the purpose of consolidating title to the
parcel of land xxx in the name of the defendant GSIS, has already prescribed, after ten
(10) years from May 15, 1968. More particularly, since May 15, 1968, up to the present,
more than thirty-five (35) years have already elapsed, without the mortgagee defendant
GSIS, having instituted a mortgage action[s] against the herein plaintiff-mortgagor.

xxx

11.2. Since the defendant GSIS has not brought any action to foreclose either the first
or the second real estate mortgage on the subject real property, so as to collect the loan
secured by the said real estate mortgages, or in lieu thereof, to consolidate title to the
said parcel of land, covered by the documents entitled, first and second real estate
mortgages, in the name of the defendant GSIS, notwithstanding the lapse of ten (10)
years from the time the cause of action accrued, either then (10) years after May 15,
1968, or after the alleged violation by the plaintiff of the terms and conditions of his real
estate mortgages, therefore, the said defendant GSIS, has lost its aforesaid
mortgagee's right, not only by virtue of Article 1142, N.C.C., but also under Article 476,
N.C.C., which expressly provides that there may also be an action to quiet title, or
remove a cloud therefrom, when the contract, instrument or other obligation has been
extinguished or has terminated, or has been barred by extinctive prescription; 11

The Court agrees with Mercene that material averments not specifically denied are
deemed admitted.12 Nonetheless, his conclusion that GSIS judicially admitted that its
right to foreclose had prescribed is erroneous. It must be remembered that conclusions
of fact and law stated in the complaint are not deemed admitted by the failure to make a
specific denial.13 This is true considering that only ultimate facts must be alleged in any
pleading and only material allegation of facts need to be specifically denied. 14

519
A conclusion of law is a legal inference on a question of law made as a result of a
factual showing where no further evidence is required. 15 The allegation of prescription in
Mercene's complaint is a mere conclusion of law. In Abad v. Court of First Instance of
Pangasinan, 16 the Court ruled that the characterization of a contract as void or voidable
is a conclusion of law, to wit:

A pleading should state the ultimate facts essential to the rights of action or defense
asserted, as distinguished from mere conclusions of fact, or conclusions of law. General
allegations that a contract is valid or legal, or is just, fair and reasonable, are mere
conclusions of law. Likewise, allegations that a contract is void, voidable, invalid,
illegal, ultra vires, or against public policy, without stating facts showing its invalidity, are
mere conclusions of law.

In the same vein, labelling-an obligation to have prescribed without specifying the
circumstances behind it is a mere conclusion of law. As would be discussed further, the
fact that GSIS had not instituted any action within ten (10) years after the loan had been
contracted is insufficient to hold that prescription had set in. Thus, even if GSIS' denial
would not be considered as a specific denial, only the fact that GSIS had not
commenced any action, would be deemed admitted at the most. This is true considering
that the circumstances to establish prescription against GSIS have not been alleged
with particularity.

Commencement of the prescriptive period for real estate mortgages material in

determining cause of action

In its answer, GSIS raised the affirmative defense, among others, that the complaint
failed to state a cause of action.1âwphi1 In turn, the CA ruled that Mercene's complaint
did not state a cause of action because the maturity date of the loans, or the demand for
the satisfaction of the obligation, was never alleged.

In order for cause of action to arise, the following elements must be present: (1) a right
in favor of the plaintiff by whatever means and under whatever law it arises or is
created; (2) an obligation on the part of the named defendant to respect or not to violate
such right; and (3) an act or omission on the part of such defendant violative of the right
of the plaintiff or constituting a breach of obligation of the defendant to the plaintiff. 17

In University of Mindanao, Inc. v. Bangko Sentral ng Pilipinas, et al., 18 the Court

clarified that prescription runs in mortgage contract from the time the cause of action
arose and not from the time of its execution, to wit:

The prescriptive period neither runs from the date of the execution of a contract nor
does the prescriptive period necessarily run on the date when the loan becomes due
and demandable. Prescriptive period runs from the date of demand, subject to certain
exceptions.

520
In other words, ten (10) years may lapse from the date of the execution of contract,
without barring a cause of action on the mortgage when there is a gap between the
period of execution of the contract and the due date or between the due date and the
demand date in cases when demand is necessary.

The mortgage contracts in this case were executed by Saturnino Petalcorin in 1982.
The maturity dates of FISLAI's loans were repeatedly extended until the loans became
due and demandable only in 1990. Respondent informed petitioner of its decision to
foreclose its properties and demanded payment in 1999.

The running of the prescriptive period of respondent's action on the mortgages did not
start when it executed the mortgage contracts with Saturnino Petalcorin in
1982.1âwphi1

The prescriptive period for filing an action may run either (1) from 1990 when the loan
became due, if the obligation was covered by the exceptions under Article 1169 of the
Civil Code; (2) or from 1999 when respondent demanded payment, if the obligation was
not covered by the exceptions under Article 1169 19 of the Civil Code. [emphasis
supplied]

In Maybank Philippines, Inc. v. Spouses Tarrosa, 20 the Court explained that the right to
foreclose prescribes after ten (10) years from the time a demand for payment is made,
or when then loan becomes due and demandable in cases where demand is
unnecessary, viz:

An action to enforce a right arising from a mortgage should be enforced within ten (10)
years from the time the right of action accrues, i.e., when the mortgagor defaults in the
payment of his obligation to the mortgagee; otherwise, it will be barred by prescription
and the mortgagee will lose his rights under the mortgage. However, mere delinquency
in payment does not necessarily mean delay in the legal concept. To be in default is
different from mere delay in the grammatical sense, because it involves the beginning of
a special condition or status which has its own peculiar effects or results.

In order that the debtor may be in default, it is necessary that: (a) the obligation be

demandable and already liquidated; (b) the debtor delays performance; and (c) the
creditor requires the performance judicially or extrajudicially, unless demand is not
necessary - i.e., when there is an express stipulation to that effect; where the law so
provides; when the period is the controlling motive or the principal inducement for the
creation of the obligation; and where demand would be useless. Moreover, it is not
sufficient that the law or obligation fixes a date for performance; it must further state
expressly that after the period lapses, default will commence. Thus, it is only when
demand to pay is unnecessary in case of the aforementioned circumstances, or when
required, such demand is made and subsequently refused that the mortgagor can be
considered in default and the mortgagee obtains the right to file an action to collect the
debt or foreclose the mortgage.

521
Thus, applying the pronouncements of the Court regarding prescription on the right to
foreclose mortgages, the Court finds that the CA did not err in concluding that
Mercene's complaint failed to state a cause of action. It is undisputed that his complaint
merely stated the dates when the loan was contracted and when the mortgages were
annotated on the title of the lot used as a security. Conspicuously lacking were
allegations concerning: the maturity date of the loan contracted and whether demand
was necessary under the terms and conditions of the loan.

As such, the RTC erred in ruling that GSIS' right to foreclose had prescribed because
the allegations in Mercene's complaint were insufficient to establish prescription against
GSIS. The only information the trial court had were the dates of the execution of the
loan, and the annotation of the mortgages on the title. As elucidated in the above-
mentioned decisions, prescription of the right to foreclose mortgages is not reckoned
from the date of execution of the contract. Rather, prescription commences from the
time the cause of action accrues; in other words, from the time the obligation becomes
due and demandable, or upon demand by the creditor/mortgagor, as the case may be.

In addition, there was no judicial admission on the part of GSIS with regard to
prescription because treating the obligation as prescribed, was merely a conclusion of
law. It would have been different if Mercene's complaint alleged details necessary to
determine when GSIS' right to foreclose arose, i.e., date of maturity and whether
demand was necessary.

WHEREFORE, the petition is DENIED. The 29 April 2010 Decision and 20 July 2010
Resolution of the Court of Appeals (CA) in CAG. R. CV No. 86615 are AFFIRMED in
toto.

SO ORDERED.

RULE 9

SECOND DIVISION

G.R. No. 168979, December 02, 2013

REBECCA PACAÑA–CONTRERAS AND ROSALIE PACAÑA, Petitioners, v. ROVILA

WATER SUPPLY, INC., EARL U. KOKSENG, LILIA TORRES, DALLA P.
ROMANILLOS AND MARISA GABUYA, Respondents.

DECISION

BRION, J.:

Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of
Court seeking the reversal of the decision2 dated January 27, 2005 and the
resolution3 dated June 6, 2005 of the Court of Appeals (CA) in CA–G.R. SP No. 71551.

522
The CA set aside the orders dated February 28, 2002 4 and April 1, 20025 of the
Regional Trial Court (RTC), Branch 8, Cebu City, which denied the motion to dismiss
and the motion for reconsideration, respectively, of respondents Rovila Water Supply,
Inc. (Rovila Inc.), Earl U. Kokseng, Lilia Torres, Dalla P. Romanillos and Marisa
Gabuya.

THE FACTUAL ANTECEDENTS

Petitioners Rebecca Pacaña–Contreras and Rosalie Pacaña, children of Lourdes Teves

Pacaña and Luciano Pacaña, filed the present case against Rovila Inc., Earl, Lilia, Dalla
and Marisa for accounting and damages.6 The petitioners claimed that their family has
long been known in the community to be engaged in the water supply business; they
operated the “Rovila Water Supply” from their family residence and were engaged in the
distribution of water to customers in Cebu City.

The petitioners alleged that Lilia was a former trusted employee in the family business
who hid business records and burned and ransacked the family files. Lilia also allegedly
posted security guards and barred the members of the Pacaña family from operating
their business. She then claimed ownership over the family business through a
corporation named “Rovila Water Supply, Inc.” (Rovila Inc.) Upon inquiry with the
Securities and Exchange Commission (SEC), the petitioners claimed that Rovila Inc.
was surreptitiously formed with the respondents as the majority stockholders. The
respondents did so by conspiring with one another and forming the respondent
corporation to takeover and illegally usurp the family business’ registered
name.7cralawred

In forming the respondent corporation, the respondents allegedly used the name of
Lourdes as one of the incorporators and made it appear in the SEC documents that the
family business was operated in a place other than the Pacaña residence. Thereafter,
the respondents used the Pacaña family’s receipts and the deliveries and sales were
made to appear as those of the respondent Rovila Inc. Using this scheme, the
respondents fraudulently appropriated the collections and payments. 8cralawlawlibrary

The petitioners filed the complaint in their own names although Rosalie was authorized
by Lourdes through a sworn declaration and special power of attorney (SPA). The
respondents filed a first motion to dismiss on the ground that the RTC had no
jurisdiction over an intra–corporate controversy. 9 The RTC denied the motion.

On September 26, 2000, Lourdes died10 and the petitioners amended their complaint,
with leave of court, on October 2, 2000 to reflect this development. 11 They still attached
to their amended complaint the sworn declaration with SPA, but the caption of the
amended complaint remained the same.12 On October 10, 2000, Luciano also died. 13

The respondents filed their Answer on November 16, 2000. 14 The petitioners’ sister,
Lagrimas Pacaña–Gonzales, filed a motion for leave to intervene and her answer–in–
intervention was granted by the trial court. At the subsequent pre–trial, the respondents
manifested to the RTC that a substitution of the parties was necessary in light of the
523
deaths of Lourdes and Luciano. They further stated that they would seek the dismissal
of the complaint because the petitioners are not the real parties in interest to prosecute
the case. The pre–trial pushed through as scheduled and the RTC directed the
respondents to put into writing their earlier manifestation. The RTC issued a pre–trial
order where one of the issues submitted was whether the complaint should be
dismissed for failure to comply with Section 2, Rule 3 of the Rules of Court which
requires that every action must be prosecuted in the name of the real party in interest. 15

On January 23, 2002,16 the respondents again filed a motion to dismiss on the grounds,
among others, that the petitioners are not the real parties in interest to institute and
prosecute the case and that they have no valid cause of action against the respondents.

THE RTC RULING

The RTC denied the respondents’ motion to dismiss. It ruled that, save for the grounds
for dismissal which may be raised at any stage of the proceedings, a motion to dismiss
based on the grounds invoked by the respondents may only be filed within the time for,
but before, the filing of their answer to the amended complaint. Thus, even granting that
the defenses invoked by the respondents are meritorious, their motion was filed out of
time as it was filed only after the conclusion of the pre–trial conference. Furthermore,
the rule on substitution of parties only applies when the parties to the case die, which is
not what happened in the present case.17 The RTC likewise denied the respondents’
motion for reconsideration.18

The respondents filed a petition for certiorari under Rule 65 of the Rules of Court with
the CA, invoking grave abuse of discretion in the denial of their motion to dismiss. They
argued that the deceased spouses Luciano and Lourdes, not the petitioners, were the
real parties in interest. Thus, the petitioners violated Section 16, Rule 3 of the Rules of
Court on the substitution of parties.19 Furthermore, they seasonably moved for the
dismissal of the case20 and the RTC never acquired jurisdiction over the persons of the
petitioners as heirs of Lourdes and Luciano. 21

THE CA RULING

The CA granted the petition and ruled that the RTC committed grave abuse of discretion
as the petitioners filed the complaint and the amended complaint as attorneys–in–fact of
their parents. As such, they are not the real parties in interest and cannot bring an
action in their own names; thus, the complaint should be dismissed 22 pursuant to the
Court’s ruling in Casimiro v. Roque and Gonzales.23

Neither are the petitioners suing as heirs of their deceased parents. Pursuant to
jurisprudence,24 the petitioners should first be declared as heirs before they can be
considered as the real parties in interest. This cannot be done in the present ordinary
civil case but in a special proceeding for that purpose.

The CA agreed with the respondents that they alleged the following issues as
affirmative defenses in their answer: 1) the petitioners are not the real parties in interest;

524
and 2) that they had no legal right to institute the action in behalf of their parents. 25 That
the motion to dismiss was filed after the period to file an answer has lapsed is of no
moment. The RTC judge entertained it and passed upon its merit. He was correct in
doing so because in the pre–trial order, one of the submitted issues was whether the
case must be dismissed for failure to comply with the requirements of the Rules of
Court. Furthermore, in Dabuco v. Court of Appeals,26 the Court held that the ground of
lack of cause of action may be raised in a motion to dismiss at anytime. 27

The CA further ruled that, in denying the motion to dismiss, the RTC judge acted
contrary to established rules and jurisprudence which may be questioned via a petition
for certiorari. The phrase “grave abuse of discretion” which was traditionally confined to
“capricious and whimsical exercise of judgment” has been expanded to include any
action done “contrary to the Constitution, the law or jurisprudence[.]” 28

THE PARTIES’ ARGUMENTS

The petitioners filed the present petition and argued that, first, in annulling the
interlocutory orders, the CA unjustly allowed the motion to dismiss which did not
conform to the rules.29 Specifically, the motion was not filed within the time for, but
before the filing of, the answer to the amended complaint, nor were the grounds raised
in the answer. Citing Section 1, Rule 9 of the Rules of Court, the respondents are
deemed to have waived these grounds, as correctly held by the RTC. 30

Second, even if there is non–joinder and misjoinder of parties or that the suit is not
brought in the name of the real party in interest, the remedy is not outright dismissal of
the complaint, but its amendment to include the real parties in interest. 31

Third, the petitioners sued in their own right because they have actual and substantial
interest in the subject matter of the action as heirs or co–owners, pursuant to Section 2,
Rule 3 of the Rules of Court.32 Their declaration as heirs in a special proceeding is not
necessary, pursuant to the Court’s ruling in Marabilles, et al. v. Quito.33 Finally, the
sworn declaration is evidentiary in nature which remains to be appreciated after the trial
is completed.34

The respondents reiterated in their comment that the petitioners are not the real parties
in interest.35 They likewise argued that they moved for the dismissal of the case during
the pre–trial conference due to the petitioners’ procedural lapse in refusing to comply
with a condition precedent, which is, to substitute the heirs as plaintiffs. Besides, an
administrator of the estates of Luciano and Lourdes has already been appointed. 36

The respondents also argued that the grounds invoked in their motion to dismiss were
timely raised, pursuant to Section 2, paragraphs g and i, Rule 18 of the Rules of Court.
Specifically, the nature and purposes of the pre–trial include, among others, the
dismissal of the action, should a valid ground therefor be found to exist; and such other
matters as may aid in the prompt disposition of the action. Finally, the special civil action
of certiorari was the proper remedy in assailing the order of the RTC. 37

525
 THE COURT’S RULING

We find the petition meritorious.

Petition for certiorari under Rule 65 is a proper remedy for a denial of a motion to
dismiss attended by grave abuse of discretion

In Barrazona v. RTC, Branch 61, Baguio City,38 the Court held that while an order
denying a motion to dismiss is interlocutory and non–appealable, certiorari and
prohibition are proper remedies to address an order of denial made without or in excess
of jurisdiction. The writ of certiorari is granted to keep an inferior court within the bounds
of its jurisdiction or to prevent it from committing grave abuse of discretion amounting to
lack or excess of jurisdiction.

The history and development of the ground “fails to state a cause of action” in the 1940,
1964 and the present 1997 Rules of Court

Preliminarily, a suit that is not brought in the name of the real party in interest is
dismissible on the ground that the complaint “fails to state a cause of action.” 39 Pursuant
to jurisprudence,40 this is also the ground invoked when the respondents alleged that
the petitioners are not the real parties in interest because: 1) the petitioners should not
have filed the case in their own names, being merely attorneys–in–fact of their mother;
and 2) the petitioners should first be declared as heirs.

A review of the 1940, 1964 and the present 1997 Rules of Court shows that the
fundamentals of the ground for dismissal based on “failure to state a cause of action”
have drastically changed over time. A historical background of this particular ground is
in order to preclude any confusion or misapplication of jurisprudence decided prior to
the effectivity of the present Rules of Court.

The 1940 Rules of Court provides under Section 10, Rule 9

that:chanRoblesvirtualLawlibrary
Section 10. Waiver of defenses – Defenses and objections not pleaded either in a
motion to dismiss or in the answer are deemed waived; except the defense of failure to
state a cause of action, which may be alleged in a later pleading, if one is permitted, or
by motion for judgment on the pleadings, or at the trial on the merits; but in the last
instance, the motion shall be disposed of as provided in section 5 of Rule 17 in the light
of any evidence which may have been received. Whenever it appears that the court has
no jurisdiction over the subject–matter, it shall dismiss the action. [underscoring
supplied]
This provision was essentially reproduced in Section 2, Rule 9 of the 1964 Rules of
Court, and we quote:chanRoblesvirtualLawlibrary
Section 2. Defenses and objections not pleaded deemed waived.— Defenses and
objections not pleaded either in a motion to dismiss or in the answer are deemed
waived; except the failure to state a cause of action which may be alleged in a later
pleading, if one is permitted, or by motion for judgment on the pleadings, or at the trial

526
on the merits; but in the last instance, the motion shall be disposed of as provided in
section 5 of Rule 10 in the light of any evidence which may have been received.
Whenever it appears that the court has no jurisdiction over the subject–matter, it shall
dismiss the action. [underscoring supplied]
Under the present Rules of Court, this provision was reflected in Section 1, Rule 9, and
we quote:

Section 1. Defenses and objections not pleaded. — Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived. However,
when it appears from the pleadings or the evidence on record that the court has no
jurisdiction over the subject matter, that there is another action pending between the
same parties for the same cause, or that the action is barred by a prior judgment or by
statute of limitations, the court shall dismiss the claim. [underscoring supplied]

Notably, in the present rules, there was a deletion of the ground of “failure to state a
cause of action” from the list of those which may be waived if not invoked either in a
motion to dismiss or in the answer.

Another novelty introduced by the present Rules, which was totally absent in its two
precedents, is the addition of the period of time within which a motion to dismiss should
be filed as provided under Section 1, Rule 16 and we
quote:chanRoblesvirtualLawlibrary
Section 1. Grounds. — Within the time for but before filing the answer to the complaint
or pleading asserting a claim, a motion to dismiss may be made on any of the following
grounds: xxx [underscoring supplied]
All these considerations point to the legal reality that the new Rules effectively restricted
the dismissal of complaints in general, especially when what is being invoked is the
ground of “failure to state a cause of action.” Thus, jurisprudence governed by the 1940
and 1964 Rules of Court to the effect that the ground for dismissal based on failure to
state a cause of action may be raised anytime during the proceedings, is already
inapplicable to cases already governed by the present Rules of Court which took effect
on July 1, 1997.

As the rule now stands, the failure to invoke this ground in a motion to dismiss or in the
answer would result in its waiver. According to Oscar M. Herrera, 41 the reason for the
deletion is that failure to state a cause of action may be cured under Section 5, Rule 10
and we quote:chanRoblesvirtualLawlibrary
Section 5. Amendment to conform to or authorize presentation of evidence. — When
issues not raised by the pleadings are tried with the express or implied consent of the
parties they shall be treated in all respects as if they had been raised in the pleadings.
Such amendment of the pleadings as may be necessary to cause them to conform to
the evidence and to raise these issues may be made upon motion of any party at any
time, even after judgment; but failure to amend does not effect the result of the trial of
these issues. If evidence is objected to at the trial on the ground that it is not within the
issues made by the pleadings, the court may allow the pleadings to be amended and
shall do so with liberality if the presentation of the merits of the action and the ends of

527
substantial justice will be subserved thereby. The court may grant a continuance to
enable the amendment to be made.
With this clarification, we now proceed to the substantial issues of the petition.

The motion to dismiss in the present case based on failure to state a cause of action
was not timely filed and was thus waived

Applying Rule 16 of the Rules of Court which provides for the grounds for the dismissal
of a civil case, the respondents’ grounds for dismissal fall under Section 1(g) and (j),
Rule 16 of the Rules of Court, particularly, failure to state a cause of action and failure
to comply with a condition precedent (substitution of parties), respectively.

The first paragraph of Section 1,42 Rule 16 of the Rules of Court provides for the period
within which to file a motion to dismiss under the grounds enumerated. Specifically, the
motion should be filed within the time for, but before the filing of, the answer to the
complaint or pleading asserting a claim. Equally important to this provision is Section
1,43 Rule 9 of the Rules of Court which states that defenses and objections not pleaded
either in a motion to dismiss or in the answer are deemed waived, except for the
following grounds: 1) the court has no jurisdiction over the subject matter; 2) litis
pendencia; 3) res judicata; and 4) prescription.

Therefore, the grounds not falling under these four exceptions may be considered as
waived in the event that they are not timely invoked. As the respondents’ motion to
dismiss was based on the grounds which should be timely invoked, material to the
resolution of this case is the period within which they were raised.

Both the RTC and the CA found that the motion to dismiss was only filed after the filing
of the answer and after the pre–trial had been concluded. Because there was no motion
to dismiss before the filing of the answer, the respondents should then have at least
raised these grounds as affirmative defenses in their answer. The RTC’s assailed
orders did not touch on this particular issue but the CA ruled that the respondents did,
while the petitioners insist that the respondents did not. In the present petition, the
petitioners reiterate that there was a blatant non–observance of the rules when the
respondents did not amend their answer to invoke the grounds for dismissal which were
raised only during the pre–trial and, subsequently, in the subject motion to dismiss. 44

The divergent findings of the CA and the petitioners’ arguments are essentially factual
issues. Time and again, we have held that the jurisdiction of the Court in a petition for
review on certiorari under Rule 45, such as the present case, is limited only to questions
of law, save for certain exceptions. One of these is attendant herein, which is, when the
findings are conclusions without citation of specific evidence on which they are based. 45

In the petition filed with the CA, the respondents made a passing allegation that, as
affirmative defenses in their answer, they raised the issue that the petitioners are not
the real parties in interest.46 On the other hand, the petitioners consistently argued
otherwise in their opposition47 to the motion to dismiss, and in their comment48 and in

528
their memorandum49 on the respondents’ petition before the CA.

Our examination of the records shows that the CA had no basis in its finding that the
respondents alleged the grounds as affirmative defenses in their answer. The
respondents merely stated in their petition for certiorari that they alleged the subject
grounds in their answer. However, nowhere in the petition did they support this
allegation; they did not even attach a copy of their answer to the petition. It is basic that
the respondents had the duty to prove by substantial evidence their positive assertions.
Considering that the petition for certiorari is an original and not an appellate action, the
CA had no records of the RTC’s proceedings upon which the CA could refer to in order
to validate the respondents’ claim. Clearly, other than the respondents’ bare allegations,
the CA had no basis to rule, without proof, that the respondents alleged the grounds for
dismissal as affirmative defenses in the answer. The respondents, as the parties with
the burden of proving that they timely raised their grounds for dismissal, could have at
least attached a copy of their answer to the petition. This simple task they failed to do.

That the respondents did not allege in their answer the subject grounds is made more
apparent through their argument, both in their motion to dismiss 50 and in their
comment,51 that it was only during the pre–trial stage that they verbally manifested and
invited the attention of the lower court on their grounds for dismissal. In order to justify
such late invocation, they heavily relied on Section 2(g) and (i), Rule 18 52 of the Rules of
Court that the nature and purpose of the pre–trial include, among others, the propriety
of dismissing the action should there be a valid ground therefor and matters which may
aid in the prompt disposition of the action.

The respondents are not correct. The rules are clear and require no interpretation.
Pursuant to Section 1, Rule 9 of the Rules of Court, a motion to dismiss based on the
grounds invoked by the respondents may be waived if not raised in a motion to dismiss
or alleged in their answer. On the other hand, “the pre–trial is primarily intended to make
certain that all issues necessary to the disposition of a case are properly raised. The
purpose is to obviate the element of surprise, hence, the parties are expected to
disclose at the pre–trial conference all issues of law and fact which they intend to raise
at the trial, except such as may involve privileged or impeaching matter.” 53 The issues
submitted during the pre–trial are thus the issues that would govern the trial proper. The
dismissal of the case based on the grounds invoked by the respondents are specifically
covered by Rule 16 and Rule 9 of the Rules of Court which set a period when they
should be raised; otherwise, they are deemed waived.

The Dabuco ruling is inapplicable in the present case; the ground for dismissal “failure
to state a cause of action” distinguished from “lack of cause of action”

To justify the belated filing of the motion to dismiss, the CA reasoned out that the
ground for dismissal of “lack of cause of action” may be raised at any time during the
proceedings, pursuant to Dabuco v. Court of Appeals.54 This is an erroneous
interpretation and application of I>Dabuco as will be explained below.

529
First, in Dabuco, the grounds for dismissal were raised as affirmative defenses in the
answer which is in stark contrast to the present case. Second, in Dabuco, the Court
distinguished between the dismissal of the complaint for “failure to state a cause of
action” and “lack of cause of action.” The Court emphasized that in a dismissal of action
for lack of cause of action, “questions of fact are involved, [therefore,] courts hesitate to
declare a plaintiff as lacking in cause of action. Such declaration is postponed until the
insufficiency of cause is apparent from a preponderance of evidence. Usually, this is
done only after the parties have been given the opportunity to present all relevant
evidence on such questions of fact.” 55 In fact, in Dabuco, the Court held that even the
preliminary hearing on the propriety of lifting the restraining order was declared
insufficient for purposes of dismissing the complaint for lack of cause of action. This is
so because the issues of fact had not yet been adequately ventilated at that preliminary
stage. For these reasons, the Court declared in Dabuco that the dismissal by the trial
court of the complaint was premature.

In the case of Macaslang v. Zamora,56 the Court noted that the incorrect appreciation
by both the RTC and the CA of the distinction between the dismissal of an action,
based on “failure to state a cause of action” and “lack of cause of action,” prevented it
from properly deciding the case, and we quote:chanRoblesvirtualLawlibrary
Failure to state a cause of action and lack of cause of action are really different from
each other. On the one hand, failure to state a cause of action refers to the insufficiency
of the pleading, and is a ground for dismissal under Rule 16 of the Rules of Court. On
the other hand, lack of cause [of] action refers to a situation where the evidence does
not prove the cause of action alleged in the pleading. Justice Regalado, a recognized
commentator on remedial law, has explained the
distinction:chanRoblesvirtualLawlibrary
xxx What is contemplated, therefore, is a failure to state a cause of action which is
provided in Sec. 1(g) of Rule 16. This is a matter of insufficiency of the pleading. Sec. 5
of Rule 10, which was also included as the last mode for raising the issue to the court,
refers to the situation where the evidence does not prove a cause of action. This is,
therefore, a matter of insufficiency of evidence. Failure to state a cause of action is
different from failure to prove a cause of action. The remedy in the first is to move for
dismissal of the pleading, while the remedy in the second is to demur to the evidence,
hence reference to Sec. 5 of Rule 10 has been eliminated in this section. The
procedure would consequently be to require the pleading to state a cause of action, by
timely objection to its deficiency; or, at the trial, to file a demurrer to evidence, if such
motion is warranted. [italics supplied]
Based on this discussion, the Court cannot uphold the dismissal of the present case
based on the grounds invoked by the respondents which they have waived for failure to
invoke them within the period prescribed by the Rules. The Court cannot also dismiss
the case based on “lack of cause of action” as this would require at least a
preponderance of evidence which is yet to be appreciated by the trial court.

Therefore, the RTC did not commit grave abuse of discretion in issuing the assailed
orders denying the respondents’ motion to dismiss and motion for reconsideration. The
Court shall not resolve the merits of the respondents’ grounds for dismissal which are

530
considered as waived.

Other heirs of the spouses Pacaña to be impleaded in the case

It should be emphasized that insofar as the petitioners are concerned, the respondents
have waived the dismissal of the complaint based on the ground of failure to state a
cause of action because the petitioners are not the real parties in interest.

At this juncture, a distinction between a real party in interest and an indispensable party
is in order. In Carandang v. Heirs of de Guzman, et al., 57 the Court clarified these two
concepts and held that “[a] real party in interest is the party who stands to be
benefited or injured by the judgment of the suit, or the party entitled to the avails of the
suit. On the other hand, an indispensable party is a party in interest without whom no
final determination can be had of an action, in contrast to a necessary party, which is
one who is not indispensable but who ought to be joined as a party if complete relief is
to be accorded as to those already parties, or for a complete determination or
settlement of the claim subject of the action. xxx If a suit is not brought in the name of or
against the real party in interest, a motion to dismiss may be filed on the ground that the
complaint states no cause of action. However, the dismissal on this ground entails an
examination of whether the parties presently pleaded are interested in the outcome of
the litigation, and not whether all persons interested in such outcome are actually
pleaded. The latter query is relevant in discussions concerning indispensable and
necessary parties, but not in discussions concerning real parties in interest. Both
indispensable and necessary parties are considered as real parties in interest, since
both classes of parties stand to be benefited or injured by the judgment of the suit.”

At the inception of the present case, both the spouses Pacaña were not impleaded as
parties–plaintiffs. The Court notes, however, that they are indispensable parties to the
case as the alleged owners of Rovila Water Supply. Without their inclusion as parties,
there can be no final determination of the present case. They possess such an interest
in the controversy that a final decree would necessarily affect their rights, so that the
courts cannot proceed without their presence. Their interest in the subject matter of the
suit and in the relief sought is inextricably intertwined with that of the other parties. 58

Jurisprudence on the procedural consequence of the inclusion or non–inclusion of an

indispensable party is divided in our jurisdiction. Due to the non–inclusion of
indispensable parties, the Court dismissed the case in Lucman v. Malawi, et
al.59 and Go v. Distinction Properties Development Construction, Inc., 60 while in Casals,
et al. v. Tayud Golf and Country Club et al., 61 the Court annulled the judgment which
was rendered without the inclusion of the indispensable parties.

In Arcelona et al. v. Court of Appeals62 and Bulawan v. Aquende,63 and Metropolitan

Bank & Trust Company v. Alejo et al.64 the Court ruled that the burden to implead or
order the impleading of an indispensable party rests on the plaintiff and on the trial
court, respectively. Thus, the non–inclusion of the indispensable parties, despite notice
of this infirmity, resulted in the annulment of these cases.

531
In Plasabas, et al. v. Court of Appeals, et al., 65 the Court held that the trial court and the
CA committed reversible error when they summarily dismissed the case, after both
parties had rested their cases following a protracted trial, on the sole ground of failure to
implead indispensable parties. Non–joinder of indispensable parties is not a ground for
the dismissal of an action. The remedy is to implead the non–party claimed to be
indispensable.

However, in the cases of Quilatan, et al. v. Heirs of Quilatan, et al.66 and Lagunilla, et

al. v. Monis, et al.,67 the Court remanded the case to the RTC for the impleading of
indispensable parties. On the other hand, in Lotte Phil. Co., Inc. v. Dela
Cruz,68PepsiCo, Inc. v. Emerald Pizza,69 and Valdez–Tallorin, v. Heirs of Tarona, et
al.,70 the Court directly ordered that the indispensable parties be impleaded.

Mindful of the differing views of the Court as regards the legal effects of the non–
inclusion of indispensable parties, the Court clarified in Republic of the Philippines v.
Sandiganbayan, et al.71 , that the failure to implead indispensable parties is a curable
error and the foreign origin of our present rules on indispensable parties permitted this
corrective measure. This cited case held:chanRoblesvirtualLawlibrary
Even in those cases where it might reasonably be argued that the failure of the
Government to implead the sequestered corporations as defendants is indeed a
procedural aberration xxx, slight reflection would nevertheless lead to the conclusion
that the defect is not fatal, but one correctible under applicable adjective rules – e.g.,
Section 10, Rule 5 of the Rules of Court [specifying the remedy of amendment during
trial to authorize or to conform to the evidence]; Section 1, Rule 20 [governing
amendments before trial], in relation to the rule respecting omission of so–called
necessary or indispensable parties, set out in Section 11, Rule 3 of the Rules of Court.
It is relevant in this context to advert to the old familiar doctrines that the omission to
implead such parties “is a mere technical defect which can be cured at any stage of the
proceedings even after judgment” ; and that, particularly in the case of indispensable
parties, since their presence and participation is essential to the very life of the action,
for without them no judgment may be rendered, amendments of the complaint in order
to implead them should be freely allowed, even on appeal, in fact even after rendition of
judgment by this Court, where it appears that the complaint otherwise indicates their
identity and character as such indispensable parties."

Although there are decided cases wherein the non–joinder of indispensable parties in
fact led to the dismissal of the suit or the annulment of judgment, such cases do not jibe
with the matter at hand. The better view is that non–joinder is not a ground to dismiss
the suit or annul the judgment. The rule on joinder of indispensable parties is founded
on equity. And the spirit of the law is reflected in Section 11, Rule 3 of the 1997 Rules of
Civil Procedure. It prohibits the dismissal of a suit on the ground of non–joinder or
misjoinder of parties and allows the amendment of the complaint at any stage of the
proceedings, through motion or on order of the court on its own initiative.

Likewise, jurisprudence on the Federal Rules of Procedure, from which our Section 7,

532
Rule 3 on indispensable parties was copied, allows the joinder of indispensable parties
even after judgment has been entered if such is needed to afford the moving party full
relief. Mere delay in filing the joinder motion does not necessarily result in the waiver of
the right as long as the delay is excusable.
In Galicia, et al. v. Vda. De Mindo, et al., 72 the Court ruled that in line with its policy of
promoting a just and inexpensive disposition of a case, it allowed the intervention of the
indispensable parties instead of dismissing the complaint. Furthermore,
in Commissioner Domingo v. Scheer,73 the Court cited Salvador, et al. v. Court of
Appeals, et al.74 and held that the Court has full powers, apart from that power and
authority which are inherent, to amend the processes, pleadings, proceedings and
decisions by substituting as party–plaintiff the real party in interest. The Court has the
power to avoid delay in the disposition of this case, and to order its amendment in order
to implead an indispensable party.

With these discussions as premises, the Court is of the view that the proper remedy in
the present case is to implead the indispensable parties especially when their non–
inclusion is merely a technical defect. To do so would serve proper administration of
justice and prevent further delay and multiplicity of suits. Pursuant to Section 9, Rule 3
of the Rules of Court, parties may be added by order of the court on motion of the party
or on its own initiative at any stage of the action. If the plaintiff refuses to implead an
indispensable party despite the order of the court, then the court may dismiss the
complaint for the plaintiff’s failure to comply with a lawful court order. 75 The operative
act that would lead to the dismissal of the case would be the refusal to comply with the
directive of the court for the joinder of an indispensable party to the case. 76

Obviously, in the present case, the deceased Pacañas can no longer be included in the
complaint as indispensable parties because of their death during the pendency of the
case. Upon their death, however, their ownership and rights over their properties were
transmitted to their heirs, including herein petitioners, pursuant to Article 774 77 in
relation with Article 77778 of the Civil Code. In Orbeta, et al. v. Sendiong,79 the Court
acknowledged that the heirs, whose hereditary rights are to be affected by the case, are
deemed indispensable parties who should have been impleaded by the trial court.

Therefore, to obviate further delay in the proceedings of the present case and given the
Court’s authority to order the inclusion of an indispensable party at any stage of the
proceedings, the heirs of the spouses Pacaña, except the petitioners who are already
parties to the case and Lagrimas Pacaña–Gonzalez who intervened in the case, are
hereby ordered impleaded as parties–plaintiffs.

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

533
SO ORDERED.

SECOND DIVISION

G.R. No. 200134               August 15, 2012

ROBERTO OTERO, Petitioner,
vs.
ROGER TAN, Respondent.

VILLARAMA, JR.,*

RESOLUTION

REYES, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision 1 dated April 29, 2011 rendered by the
Court of Appeals (CA) in CA-G.R. SP No. 02244, which affirmed the Judgment 2 dated
December 28, 2007 issued by the Regional Trial Court (RTC), Cagayan de Oro City,
Branch 23 in Civil Case No. 2007-90.

The Antecedent Facts

A Complaint3 for collection of sum of money and damages was filed by Roger Tan (Tan)
with the Municipal Trial Court in Cities (MTCC), Cagayan de Oro City on July 28, 2005
against Roberto Otero (Otero). Tan alleged that on several occasions from February
2000 to May 2001, Otero purchased on credit petroleum products from his Petron outlet
in Valencia City, Bukidnon in the aggregate amount of ₱ 270,818.01. Tan further
claimed that despite several verbal demands, Otero failed to settle his obligation.

Despite receipt of the summons and a copy of the said complaint, which per the records
of the case below were served through his wife Grace R. Otero on August 31, 2005,
Otero failed to file his answer with the MTCC.

On November 18, 2005, Tan filed a motion with the MTCC to declare Otero in default
for his failure to file his answer. Otero opposed Tan’s motion, claiming that he did not
receive a copy of the summons and a copy of Tan’s complaint. Hearing on the said
motion was set on January 25, 2006, but was later reset to March 8, 2006, Otero
manifesting that he only received the notice therefor on January 23, 2006. The hearing
on March 8, 2006 was further reset to April 26, 2006 since the presiding judge was
attending a convention. Otero failed to appear at the next scheduled hearing, and the
MTCC issued an order declaring him in default. A copy of the said order was sent to
Otero on May 9, 2006. Tan was then allowed to present his evidence ex parte.

534
Tan adduced in evidence the testimonies of Rosemarie Doblado and Zita Sara, his
employees in his Petron outlet who attended Otero when the latter made purchases of
petroleum products now the subject of the action below. He likewise presented various
statements of account4 showing the petroleum products which Otero purchased from his
establishment. The said statements of account were prepared and checked by a certain
Lito Betache (Betache), apparently likewise an employee of Tan.

The MTCC Decision

On February 14, 2007, the MTCC rendered a Decision 5 directing Otero to pay Tan his
outstanding obligation in the amount of ₱ 270,818.01, as well as attorney’s fees and
litigation expenses and costs in the amounts of ₱ 15,000.00 and ₱ 3,350.00,
respectively. The MTCC opined that Otero’s failure to file an answer despite notice is a
tacit admission of Tan’s claim.

Undeterred, Otero appealed the MTCC Decision dated February 14, 2007 to the RTC,
asserting that the MTCC’s disposition is factually baseless and that he was deprived of
due process.

The RTC Decision

On December 28, 2007, the RTC rendered a Judgment 6 affirming the MTCC Decision
dated February 14, 2007. The RTC held that the statements of account that were
presented by Tan before the MTCC were overwhelming enough to prove that Otero is
indeed indebted to Tan in the amount of ₱ 270,818.01. Further, brushing aside Otero’s
claim of denial of due process, the RTC pointed out that:

As to the second assignment of error, suffice to say that as borne out by the record of
the case, defendant-appellant was given his day in Court contrary to his claim. His wife,
Grace R. Otero received a copy of the summons together with a copy of the Complaint
and its corresponding annexes on August 31, 2005, per Return of Service made by
Angelita N. Bandoy, Process Server of OCC-MTCC of Davao City. He was furnished
with a copy of the Motion to Declare Defendant in Default on November 18, 2005, per
Registry Receipt No. 2248 which was received by the defendant. Instead of filing his
answer or any pleading to set aside the Order of default, he filed his Comment to the
Motion to Declare Defendant in Default of which plaintiff filed his Rejoinder to
Defendant’s Comment.

The case was set for hearing on January 23, 2006, but defendant through counsel sent
a telegram that he only received the notice on the day of the hearing thereby he was
unable to appear due to his previous scheduled hearings. Still, for reasons only known
to him, defendant failed to lift the Order of Default.

The hearing on January 23, 2006 was reset on March 8, 2006 and again reset on April
26, 2006 by agreement of counsels x x x.

535
It is not therefore correct when defendant said that he was deprived of due process. 7

Otero sought reconsideration of the Judgment dated December 28, 2007 but it was
denied by the RTC in its Order8 dated February 20, 2008.

Otero then filed a petition for review9 with the CA asserting that both the RTC and the
MTCC erred in giving credence to the pieces of evidence presented by Tan in support
of his complaint. Otero explained that the statements of account, which Tan adduced
during the ex parte presentation of his evidence, were prepared by a certain Betache
who was not presented as a witness by Tan. Otero avers that the genuineness and due
execution of the said statements of account, being private documents, must first be
established lest the said documents be rendered inadmissible in evidence. Thus, Otero
asserts, the MTCC and the RTC should not have admitted in evidence the said
statements of account as Tan failed to establish the genuineness and due execution of
the same.

The CA Decision

On April 29, 2011, the CA rendered the assailed Decision 10 which denied the petition for
review filed by Otero. In rejecting Otero’s allegation with regard to the genuineness and
due execution of the statements of account presented by Tan, the CA held that any
defense which Otero may have against Tan’s claim is already deemed waived due to
Otero’s failure to file his answer. Thus:

Otero never denied that his wife received the summons and a copy of the complaint. He
did not question the validity of the substituted service. Consequently, he is charged with
the knowledge of Tan’s monetary claim. Section 1, Rule 9 of the Rules of Court
explicitly provides that defenses and objections not pleaded are deemed waived.
Moreover, when the defendant is declared in default, the court shall proceed to render
judgment granting the claimant such relief as his pleading may warrant.

Due to Otero’s failure to file his Answer despite being duly served with summons
coupled with his voluntary appearance in court, he is deemed to have waived whatever
defenses he has against Tan’s claim. Apparently, Otero is employing dilatory moves to
defer the payment of his obligation which he never denied. 11 (Citation omitted)

Otero’s Motion for Reconsideration12 was denied by the CA in its Resolution13 dated

December 13, 2011.

Hence, the instant petition.

Issues

Essentially, the fundamental issues to be resolved by this Court are the following: first,
whether Otero, having been declared in default by the MTCC, may, in the appellate
proceedings, still raise the failure of Tan to authenticate the statements of account

536
which he adduced in evidence; and second, whether Tan was able to prove the material
allegations of his complaint.

The Court’s Ruling

The petition is denied.

First Issue: Authentication of the Statements of Account

The CA, in denying the petition for review filed by Otero, held that since he was
declared in default by the MTCC, he is already deemed to have waived whatever
defenses he has against Tan’s claim. He is, thus, already barred from raising the
alleged infirmity in the presentation of the statements of account.

We do not agree.

A defendant who fails to file an

answer loses his standing in court.

The effect of a defendant’s failure to file an answer within the time allowed therefor is
primarily governed by Section 3, Rule 9 of the Rules of Court, viz:

Sec. 3. Default; declaration of. – If the defending party fails to answer within the time
allowed therefor, the court shall, upon motion of the claiming party with notice to the
defending party, and proof of such failure, declare the defending party in default.
Thereupon, the court shall proceed to render judgment granting the claimant such relief
as his pleading may warrant, unless the court in its discretion requires the claimant to
submit evidence. Such reception of evidence may be delegated to the clerk of court. x x
x (Emphasis ours)

A defendant who fails to file an answer may, upon motion, be declared by the court in
default. Loss of standing in court, the forfeiture of one’s right as a party litigant,
contestant or legal adversary, is the consequence of an order of default. A party in
default loses his right to present his defense, control the proceedings, and examine or
cross-examine witnesses. He has no right to expect that his pleadings would be acted
upon by the court nor may be object to or refute evidence or motions filed against him. 14

A defendant who was declared in

default may nevertheless appeal
from the judgment by default,
albeit on limited grounds.

Nonetheless, the fact that a defendant has lost his standing in court for having been
declared in default does not mean that he is left sans any recourse whatsoever. In Lina
v. CA, et al.,15 this Court enumerated the remedies available to party who has been
declared in default, to wit:

537
a) The defendant in default may, at any time after discovery thereof and before
judgment, file a motion, under oath, to set aside the order of default on the ground that
his failure to answer was due to fraud, accident, mistake or excusable neglect, and that
he has meritorious defenses; (Sec 3, Rule 18)

b) If the judgment has already been rendered when the defendant discovered the
default, but before the same has become final and executory, he may file a motion for
new trial under Section 1(a) of Rule 37;

c) If the defendant discovered the default after the judgment has become final and
executory, he may file a petition for relief under Section 2 of Rule 38; and

d) He may also appeal from the judgment rendered against him as contrary to the
evidence or to the law, even if no petition to set aside the order of default has been
presented by him. (Sec. 2, Rule 41)16 (Emphasis ours)

Indeed, a defending party declared in default retains the right to appeal from the
judgment by default. However, the grounds that may be raised in such an appeal are
restricted to any of the following: first, the failure of the plaintiff to prove the material
allegations of the complaint; second, the decision is contrary to law; and third, the
amount of judgment is excessive or different in kind from that prayed for. 17 In these
cases, the appellate tribunal should only consider the pieces of evidence that were
presented by the plaintiff during the ex parte presentation of his evidence.

A defendant who has been declared in default is precluded from raising any other
ground in his appeal from the judgment by default since, otherwise, he would then be
allowed to adduce evidence in his defense, which right he had lost after he was
declared in default.18 Indeed, he is proscribed in the appellate tribunal from adducing
any evidence to bolster his defense against the plaintiff’s claim. Thus, in Rural Bank of
Sta. Catalina, Inc. v. Land Bank of the Philippines, 19 this Court explained that:

It bears stressing that a defending party declared in default loses his standing in court
and his right to adduce evidence and to present his defense. He, however, has the right
to appeal from the judgment by default and assail said judgment on the ground, inter
alia, that the amount of the judgment is excessive or is different in kind from that prayed
for, or that the plaintiff failed to prove the material allegations of his complaint, or that
the decision is contrary to law. Such party declared in default is proscribed from seeking
a modification or reversal of the assailed decision on the basis of the evidence
submitted by him in the Court of Appeals, for if it were otherwise, he would thereby be
allowed to regain his right to adduce evidence, a right which he lost in the trial court
when he was declared in default, and which he failed to have vacated. In this case, the
petitioner sought the modification of the decision of the trial court based on the evidence
submitted by it only in the Court of Appeals.20 (Citations omitted and emphasis ours)

Here, Otero, in his appeal from the judgment by default, asserted that Tan failed to
prove the material allegations of his complaint. He contends that the lower courts should

538
not have given credence to the statements of account that were presented by Tan as
the same were not authenticated. He points out that Betache, the person who appears
to have prepared the said statements of account, was not presented by Tan as a
witness during the ex parte presentation of his evidence with the MTCC to identify and
authenticate the same. Accordingly, the said statements of account are mere hearsay
and should not have been admitted by the lower tribunals as evidence.

Thus, essentially, Otero asserts that Tan failed to prove the material allegations of his
complaint since the statements of account which he presented are inadmissible in
evidence. While the RTC and the CA, in resolving Otero’s appeal from the default
judgment of the MTCC, were only required to examine the pieces of evidence that were
presented by Tan, the CA erred in brushing aside Otero’s arguments with respect to the
admissibility of the said statements of account on the ground that the latter had already
waived any defense or objection which he may have against Tan’s claim.

Contrary to the CA’s disquisition, it is not accurate to state that having been declared in
default by the MTCC, Otero is already deemed to have waived any and all defenses
which he may have against Tan’s claim.

While it may be said that by defaulting, the defendant leaves himself at the mercy of the
court, the rules nevertheless see to it that any judgment against him must be in
accordance with the evidence required by law. The evidence of the plaintiff, presented
in the defendant’s absence, cannot be admitted if it is basically incompetent. Although
the defendant would not be in a position to object, elementary justice requires that only
legal evidence should be considered against him. If the same should prove insufficient
to justify a judgment for the plaintiff, the complaint must be dismissed. And if a favorable
judgment is justifiable, it cannot exceed in amount or be different in kind from what is
prayed for in the complaint.21

Thus, in SSS v. Hon. Chaves,22 this Court emphasized that:

We must stress, however, that a judgment of default against the petitioner who failed to
appear during pre-trial or, for that matter, any defendant who failed to file an answer,
does not imply a waiver of all of their rights, except their right to be heard and to present
evidence to support their allegations. Otherwise, it would be meaningless to request
presentation of evidence every time the other party is declared in default. If it were so, a
decision would then automatically be rendered in favor of the non-defaulting party and
exactly to the tenor of his prayer. The law also gives the defaulting parties some
measure of protection because plaintiffs, despite the default of defendants, are still
required to substantiate their allegations in the complaint. 23 (Citations omitted and
emphasis ours)

The statements of account

presented by Tan were merely
hearsay as the genuineness and due

539
execution of the same were not
established.

Anent the admissibility of the statements of account presented by Tan, this Court rules
that the same should not have been admitted in evidence by the lower tribunals.

Section 20, Rule 132 of the Rules of Court provides that the authenticity and due
execution of a private document, before it is received in evidence by the court, must be
established. Thus:

Sec. 20. Proof of private document. – Before any private document offered as authentic
is received in evidence, its due execution and authenticity must be proved either:

a) By anyone who saw the document executed or written; or

b) By evidence of the genuineness of the signature or handwriting of the maker.

Any other private document need only be identified as that which it is claimed to be.

A private document is any other writing, deed, or instrument executed by a private

person without the intervention of a notary or other person legally authorized by which
some disposition or agreement is proved or set forth. Lacking the official or sovereign
character of a public document, or the solemnities prescribed by law, a private
document requires authentication in the manner allowed by law or the Rules of Court
before its acceptance as evidence in court. The requirement of authentication of a
private document is excused only in four instances, specifically: (a) when the document
is an ancient one within the context of Section 21, Rule 132 of the Rules of Court; (b)
when the genuineness and authenticity of an actionable document have not been
specifically denied under oath by the adverse party; (c) when the genuineness and
authenticity of the document have been admitted; or (d) when the document is not being
offered as genuine.24

The statements of account which Tan adduced in evidence before the MTCC
indubitably are private documents. Considering that these documents do not fall among
the aforementioned exceptions, the MTCC could not admit the same as evidence
against Otero without the required authentication thereof pursuant to Section 20, Rule
132 of the Rules of Court. During authentication in court, a witness positively testifies
that a document presented as evidence is genuine and has been duly executed, or that
the document is neither spurious nor counterfeit nor executed by mistake or under
duress.25

Here, Tan, during the ex parte presentation of his evidence, did not present anyone who
testified that the said statements of account were genuine and were duly executed or
that the same were neither spurious or counterfeit or executed by mistake or under
duress. Betache, the one who prepared the said statements of account, was not

540
presented by Tan as a witness during the ex parte presentation of his evidence with the
MTCC.

Considering that Tan failed to authenticate the aforesaid statements of account, the said
documents should not have been admitted in evidence against Otero. It was thus error
for the lower tribunals to have considered the same in assessing the merits of Tan’s
Complaint.

Second Issue: The Material Allegations of the Complaint

In view of the inadmissibility of the statements of account presented by Tan, the

remaining question that should be settled is whether the pieces of evidence adduced by
Tan during the ex parte presentation of his evidence, excluding the said statements of
account, sufficiently prove the material allegations of his complaint against Otero.

We rule in the affirmative.

In civil cases, it is a basic rule that the party making allegations has the burden of
proving them by a preponderance of evidence. The parties must rely on the strength of
their own evidence and not upon the weakness of the defense offered by their
opponent.26 This rule holds true especially when the latter has had no opportunity to
present evidence because of a default order. Needless to say, the extent of the relief
that may be granted can only be so much as has been alleged and proved with
preponderant evidence required under Section 1 of Rule 133. 27

Notwithstanding the inadmissibility of the said statements of account, this Court finds
that Tan was still able to prove by a preponderance of evidence the material allegations
of his complaint against Otero.

First, the statements of account adduced by Tan during the ex parte presentation of his
evidence are just summaries of Otero's unpaid obligations, the absence of which do not
necessarily disprove the latter's liability.

Second, aside from the statements of account, Tan likewise adduced in evidence the
testimonies of his employees in his Petron outlet who testified that Otero, on various
occasions, indeed purchased on credit petroleum products from the former and that he
failed to pay for the same. It bears stressing that the MTCC, the R TC and the CA all
gave credence to the said testimonial evidence presented by Tan and, accordingly,
unanimously found that Otero still has unpaid outstanding obligation in favor of Tan in
the amount of ₱ 270,818.01.

Well-established is the principle that factual findings of the trial court, when adopted and
confirmed by the CA, are binding and conclusive on this Court and will generally not be
reviewed on appeal.28 The Court sees no compelling reason to depart from the
foregoing finding of fact of the lower courts.

541
WHEREFORE, in consideration of the foregoing disquisitions, the petition is DENIED.
The Decision dated April 29, 2011 rendered by the Court of Appeals in CA-G.R. SP No.
02244 is AFFIRMED.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 181235, July 22, 2009 ]
BANCO DE ORO-EPCI, INC. (FORMERLY EQUITABLE PCI BANK), PETITIONER,
VS. JOHN TANSIPEK, RESPONDENT.

DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari assailing the Decision[1] of the Court of
Appeals in CA-G.R. CV No. 69130 dated 18 August 2006 and the Resolution of the
same court dated 9 January 2008.

The facts of the case are as follows:

J. O. Construction, Inc. (JOCI), a domestic corporation engaged in the construction

business in Cebu City, filed a complaint against Philippine Commercial and Industrial
Bank (PCIB) in the Regional Trial Court (RTC) of Makati City docketed as Civil Case
No. 97-508. The Complaint alleges that JOCI entered into a contract with Duty Free
Philippines, Inc. for the construction of a Duty Free Shop in Mandaue City. As actual
construction went on, progress billings were made. Payments were received by JOCI
directly or through herein respondent John Tansipek, its authorized collector. Payments
received by respondent Tansipek were initially remitted to JOCI. However, payment
through PNB Check No. 0000302572 in the amount of P4,050,136.51 was not turned
over to JOCI. Instead, respondent Tansipek endorsed said check and deposited the
same to his account in PCIB, Wilson Branch, Wilson Street, Greenhills, San Juan,
Metro Manila. PCIB allowed the said deposit, despite the fact that the check was
crossed for the deposit to payee's account only, and despite the alleged lack of authority
of respondent Tansipek to endorse said check. PCIB refused to pay JOCI the full
amount of the check despite demands made by the latter. JOCI prayed for the payment
of the amount of the check (P4,050,136.51), P500,000.00 in attorney's fees,
P100,000.00 in expenses, P50,000.00 for costs of suit, and P500,000.00 in exemplary
damages.

PCIB filed a Motion to Dismiss the Complaint on the grounds that (1) an indispensable
party was not impleaded, and (2) therein plaintiff JOCI had no cause of action against
PCIB. The RTC denied PCIB's Motion to Dismiss.

PCIB filed its answer alleging as defenses that (1) JOCI had clothed Tansipek with
authority to act as its agent, and was therefore estopped from denying the same; (2)
JOCI had no cause of action against PCIB ; (3) failure to implead Tansipek rendered the

542
proceedings taken after the filing of the complaint void; (4) PCIB's act of accepting the
deposit was fully justified by established bank practices; (5) JOCI's claim was barred by
laches; and (6) the damages alleged by JOCI were hypothetical and speculative. PCIB
incorporated in said Answer its counterclaims for exemplary damages in the amount of
P400,000.00, and litigation expenses and attorney's fees in the amount of P400,000.00.

PCIB likewise moved for leave for the court to admit the former's third-party complaint
against respondent Tansipek. The third-party complaint alleged that respondent
Tansipek was a depositor at its Wilson Branch, San Juan, Metro Manila, where he
maintained Account No. 5703-03538-3 in his name and/or that of his wife, Anita.
Respondent Tansipek had presented to PCIB a signed copy of the Minutes of the
meeting of the Board of Directors of JOCI stating the resolution that -

Checks payable to J.O. Construction, Inc. may be deposited to Account No. 5703-
03538-3 under the name of John and/or Anita Tansipek, maintained at PCIB, Wilson
Branch.[2]

Respondent Tansipek had also presented a copy of the Articles of Incorporation of JOCI
showing that he and his wife, Anita, were incorporators of JOCI, with Anita as
Treasurer. In the third-party complaint, PCIB prayed for subrogation and payment of
attorney's fees in the sum of P400,000.00.

PCIB filed a Motion to Admit Amended Third-Party Complaint. The amendment

consisted in the correction of the caption, so that PCIB appeared as Third-Party Plaintiff
and Tansipek as Third-Party Defendant.

Upon Motion, respondent Tansipek was granted time to file his Answer to the Third-
Party Complaint. He was, however, declared in default for failure to do so. The Motion
to Reconsider the Default Order was denied.

Respondent Tansipek filed a Petition for Certiorari with the Court of Appeals assailing

the Default Order and the denial of the Motion for Reconsideration. The Petition was
docketed as CA-G.R. SP No. 47727. On 29 May 1998, the Court of Appeals dismissed
the Petition for failure to attach the assailed Orders. On 28 September 1998, the Court
of Appeals denied respondent Tansipek's Motion for Reconsideration for having been
filed out of time.

Pre-trial on the main case ensued, wherein JOCI and PCIB limited the issues as
follows:

1. Whether or not the defendant bank erred in allowing the deposit of Check No.
0302572 (Exh. "A") in the amount of P4,050,136.51 drawn in favor of plaintiff JO
Construction, Inc. in John Tansipek's account when such check was crossed and clearly
marked for payee's account only.

2. Whether the alleged board resolution and the articles of Incorporation are genuine
and a valid defense against plaintiff's effort to collect the amount of P4,050,136.51.

543
On 14 July 2000, the RTC promulgated its Decision in Civil Case No. 97-508, the
dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff [JOCI] and against
the defendant bank [PCIB] ordering the latter to pay to the plaintiff the sum of
P4,050,136.51 with interest at the rate of twelve percent (12%) per annum from the
filing of this complaint until fully paid plus costs of suit. The other damages claimed by
the plaintiff are denied for being speculative.

On the third party complaint, third-party defendant John Tansipek is ordered to pay the
third-party plaintiff Philippine Commercial and Industrial Bank all amounts said
defendant/third-party plaintiff shall have to pay to the plaintiff on account of this case. [3]

Respondent Tansipek appealed the Decision to the Court of Appeals. The case was
docketed as CA-G.R. CV No. 69130. Respondent Tansipek assigned the following
alleged errors:

a) The trial court's decision upholding the order of default and the consequent ex-parte
reception of appellee's evidence was anchored on erroneous and baseless conclusion
that:

1) The original reglementary period to plead has already expired.

2) The ten day extended period to answer has likewise expired.

3) There is no need to pass upon a second motion to plead much less, any need for a
new motion for extended period to plead.

b) The trial court erred in utterly depriving the appellant of his day in court and in
depriving constitutional, substantive and procedural due process premised solely on
pure and simple technicality which never existed and are imaginary and illusory.

c) The trial court erred in ordering the third-party defendant-appellant John Tansipek to
pay the third party plaintiff-appellee PCIBank all amounts said bank shall have to pay to
the plaintiff-appellee by way of subrogation since appellant if allowed to litigate in the
trial court, would have obtained a favorable judgment as he has good, valid and
meritorious defenses.[4]

On 18 August 2006, the Court of Appeals issued the assailed Decision finding that it
was an error for the trial court to have acted on PCIB's motion to declare respondent
Tansipek in default. The Court of Appeals thus remanded the case to the RTC for
further proceedings, to wit:

WHEREFORE, premises considered, the appeal is GRANTED. The decision relative to

the third party complaint is REVERSED and SET ASIDE. The case is ordered
REMANDED to the trial court for further proceedings on the third party complaint. [5]

544
The Court of Appeals denied the Motion for Reconsideration of PCIB in a Resolution
dated 9 January 2008.

Petitioner Banco de Oro-EPCI, Inc., as successor-in-interest to PCIB, filed the instant

Petition for Review on Certiorari, assailing the above Decision and Resolution of the
Court of Appeals, and laying down a lone issue for this Court's consideration:

WHETHER OR NOT THE COURT OF APPEALS CAN REVERSE ITS DECISION

HANDED DOWN EIGHT YEARS BEFORE.[6]

To recapitulate, upon being declared in default, respondent Tansipek filed a Motion for
Reconsideration of the Default Order. Upon denial thereof, Tansipek filed a Petition
for Certiorari with the Court of Appeals, which was dismissed for failure to attach the
assailed Orders. Respondent Tansipek's Motion for Reconsideration with the Court of
Appeals was denied for having been filed out of time. Respondent Tansipek did not
appeal said denial to this Court.

Respondent Tansipek's remedy against the Order of Default was erroneous from the
very beginning. Respondent Tansipek should have filed a Motion to Lift Order of
Default, and not a Motion for Reconsideration, pursuant to Section 3(b), Rule 9 of the
Rules of Court:

(b) Relief from order of default.--A party declared in default may at any time after notice
thereof and before judgment file a motion under oath to set aside the order of default
upon proper showing that his failure to answer was due to fraud, accident, mistake or
excusable negligence and that he has a meritorious defense. In such case, the order of
default may be set aside on such terms and conditions as the judge may impose in the
interest of justice.

A Motion to Lift Order of Default is different from an ordinary motion in that the Motion
should be verified; and must show fraud, accident, mistake or excusable neglect, and
meritorious defenses.[7] The allegations of (1) fraud, accident, mistake or excusable
neglect, and (2) of meritorious defenses must concur. [8]

Assuming for the sake of argument, however, that respondent Tansipek's Motion for
Reconsideration may be treated as a Motion to Lift Order of Default, his Petition
for Certiorari on the denial thereof has already been dismissed with finality by the Court
of Appeals. Respondent Tansipek did not appeal said ruling of the Court of Appeals to
this Court. The dismissal of the Petition for Certiorari assailing the denial of respondent
Tansipek's Motion constitutes a bar to the retrial of the same issue of default under the
doctrine of the law of the case.

In People v. Pinuila,[9] we held that:

"Law of the case" has been defined as the opinion delivered on a former appeal. More
specifically, it means that whatever is once irrevocably established as the controlling

545
legal rule of decision between the same parties in the same case continues to be the
law of the case, whether correct on general principles or not, so long as the facts on
which such decision was predicated continue to be the facts of the case before the
court.

It may be stated as a rule of general application that, where the evidence on a second

or succeeding appeal is substantially the same as that on the first or preceding
appeal, all matters, questions, points, or issues adjudicated on the prior appeal
are the law of the case on all subsequent appeals and will not be considered or
readjudicated therein.

xxxx

As a general rule a decision on a prior appeal of the same case is held to be the law of
the case whether that decision is right or wrong, the remedy of the party deeming
himself aggrieved being to seek a rehearing.

Questions necessarily involved in the decision on a former appeal will be regarded as

the law of the case on a subsequent appeal, although the questions are not expressly
treated in the opinion of the court, as the presumption is that all the facts in the case
bearing on the point decided have received due consideration whether all or none of
them are mentioned in the opinion. (Emphasis supplied.)

The issue of the propriety of the Order of Default had already been adjudicated in
Tansipek's Petition for Certiorari with the Court of Appeals. As such, this issue cannot
be readjudicated in Tansipek's appeal of the Decision of the RTC on the main case.
Once a decision attains finality, it becomes the law of the case, whether or not said
decision is erroneous.[10] Having been rendered by a court of competent jurisdiction
acting within its authority, the judgment may no longer be altered even at the risk of
legal infirmities and errors it may contain. [11]

Respondent Tansipek counters that the doctrine of the law of the case is not applicable,
inasmuch as a Petition for Certiorari is not an appeal. Respondent Tansipek further
argues that the Doctrine of the Law of the Case applies only when the appellate court
renders a decision on the merits, and not when such appeal was denied due to
technicalities.

We are not persuaded.

In Buenviaje v. Court of Appeals,[12] therein respondent Cottonway Marketing

Corporation filed a Petition for Certiorari with this Court assailing the Decision of the
National Labor Relations Commission (NLRC) ordering, inter alia, the reinstatement of
therein petitioners and the payment of backwages from the time their salaries were
withheld up to the time of actual reinstatement. The Petition for Certiorari was dismissed
by this Court. The subsequent Motion for Reconsideration was likewise denied.
However, the Labor Arbiter then issued an Order limiting the amount of backwages that

546
was due to petitioners. The NLRC reversed this Order, but the Court of Appeals
reinstated the same. This Court, applying the Doctrine of the Law of the Case, held:

The decision of the NLRC dated March 26, 1996 has become final and executory
upon the dismissal by this Court of Cottonway's petition for certiorari assailing
said decision and the denial of its motion for reconsideration. Said judgment may
no longer be disturbed or modified by any court or tribunal. It is a fundamental rule that
when a judgment becomes final and executory, it becomes immutable and unalterable,
and any amendment or alteration which substantially affects a final and executory
judgment is void, including the entire proceedings held for that purpose. Once a
judgment becomes final and executory, the prevailing party can have it executed as a
matter of right, and the issuance of a writ of execution becomes a ministerial duty of the
court. A decision that has attained finality becomes the law of the case regardless
of any claim that it is erroneous. The writ of execution must therefore conform to the
judgment to be executed and adhere strictly to the very essential particulars.
[13]
 (Emphases supplied.)

Furthermore, there is no substantial distinction between an appeal and a Petition

for Certiorari when it comes to the application of the Doctrine of the Law of the Case.
The doctrine is founded on the policy of ending litigation. The doctrine is necessary to
enable the appellate court to perform its duties satisfactorily and efficiently, which would
be impossible if a question once considered and decided by it were to be litigated anew
in the same case upon any and every subsequent appeal. [14]

Likewise, to say that the Doctrine of the Law the Case applies only when the appellate
court renders a decision on the merits would be putting a premium on the fault or
negligence of the party losing the previous appeal. In the case at bar, respondent
Tansipek would be awarded (1) for his failure to attach the necessary requirements to
his Petition for Certiorari with the Court of Appeals; (2) for his failure to file a Motion for
Reconsideration in time; and (3) for his failure to appeal the Decision of the Court of
Appeals with this Court. The absurdity of such a situation is clearly apparent.

It is important to note that a party declared in default - respondent Tansipek in this case
- is not barred from appealing from the judgment on the main case, whether or not he
had previously filed a Motion to Set Aside Order of Default, and regardless of the result
of the latter and the appeals therefrom. However, the appeal should be based on the
Decision's being contrary to law or the evidence already presented, and not on the
alleged invalidity of the default order.[15]

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 69130 dated 18
August 2006 and the Resolution of the same court dated 9 January 2008 are
hereby REVERSED and SET ASIDE. The Decision of the Regional Trial Court of
Makati City in Civil Case No. 97-508 dated 14 July 2000 is hereby REINSTATED. No
pronouncement as to costs.

SO ORDERED.

547
 SECOND DIVISION

G.R. No. 173559               January 7, 2013

LETICIA DIONA, represented by her Attorney-in-Fact, MARCELINA

DIONA, Petitioner,
vs.
ROMEO A. BALANGUE, SONNY A. BALANGUE, REYNALDO A. BALANGUE, and
ESTEBAN A. BALANGUE, JR., Respondents.

DECISION

DEL CASTILLO, J.:

The great of a relief neither sought by the party in whose favor it was given not
supported by the evidence presented violates the opposing party’s right to due process
and may be declared void ab initio in a proper proceeding.

This Petition for Review on Certiorari1 assails the November 24, 2005 Resolution2 of the
Court of Appeals (CA) issued in G.R. SP No. 85541 which granted the Petition for
Annulment of Judgment3 filed by the respondents seeking to nullify that portion of the
October 17, 2000 Decision4 of the Regional Trial Court (RTC), Branch 75, Valenzuela
City awarding petitioner 5% monthly interest rate for the principal amount of the loan
respondent obtained from her.

This Petition likewise assails the CA’s June 26, 2006 Resolution 5 denying petitioner’s
Motion for Reconsideration.

Factual Antecedents

The facts of this case are simple and undisputed.

On March 2, 1991, respondents obtained a loan of ₱45,000.00 from petitioner payable

in six months and secured by a Real Estate Mortgage 6 over their 202-square meter
property located in Marulas, Valenzuela and covered by Transfer Certificate of Title
(TCT) No. V-12296.7 When the debt became due, respondents failed to pay
notwithstanding demand. Thus, on September 17, 1999, petitioner filed with the RTC a
Complaint8 praying that respondents be ordered:

(a) To pay petitioner the principal obligation of ₱45,000.00, with interest thereon
at the rate of 12% per annum, from 02 March 1991 until the full obligation is paid.

(b) To pay petitioner actual damages as may be proven during the trial but shall
in no case be less than ₱10,000.00; ₱25,000.00 by way of attorney’s fee, plus
₱2,000.00 per hearing as appearance fee.

548
 (c) To issue a decree of foreclosure for the sale at public auction of the
aforementioned parcel of land, and for the disposition of the proceeds thereof in
accordance with law, upon failure of the respondents to fully pay petitioner within
the period set by law the sums set forth in this complaint.

(d) Costs of this suit.

Other reliefs and remedies just and equitable under the premises are likewise prayed
for.9 (Emphasis supplied)

Respondents were served with summons thru respondent Sonny A. Balangue (Sonny).
On October 15, 1999, with the assistance of Atty. Arthur C. Coroza (Atty. Coroza) of the
Public Attorney’s Office, they filed a Motion to Extend Period to Answer. Despite the
requested extension, however, respondents failed to file any responsive pleadings.
Thus, upon motion of the petitioner, the RTC declared them in default and allowed
petitioner to present her evidence ex parte.10

Ruling of the RTC sought to be annulled.

In a Decision11 dated October 17, 2000, the RTC granted petitioner’s Complaint. The
dispositive portion of said Decision reads:

WHEREFORE, judgment is hereby rendered in favor of the petitioner, ordering the

respondents to pay the petitioner as follows:

a) the sum of FORTY FIVE THOUSAND (₱45,000.00) PESOS, representing the

unpaid principal loan obligation plus interest at 5% per month [sic] reckoned from
March 2, 1991, until the same is fully paid;

b) ₱20,000.00 as attorney’s fees plus cost of suit;

c) in the event the [respondents] fail to satisfy the aforesaid obligation, an order
of foreclosure shall be issued accordingly for the sale at public auction of the
subject property covered by Transfer Certificate of Title No. V-12296 and the
improvements thereon for the satisfaction of the petitioner’s claim.

SO ORDERED.12 (Emphasis supplied)

Subsequently, petitioner filed a Motion for Execution, 13 alleging that respondents did not
interpose a timely appeal despite receipt by their former counsel of the RTC’s Decision
on November 13, 2000. Before it could be resolved, however, respondents filed a
Motion to Set Aside Judgment14 dated January 26, 2001, claiming that not all of them
were duly served with summons. According to the other respondents, they had no
knowledge of the case because their co-respondent Sonny did not inform them about it.
They prayed that the RTC’s October 17, 2000 Decision be set aside and a new trial be
conducted.

549
But on March 16, 2001, the RTC ordered15 the issuance of a Writ of Execution to
implement its October 17, 2000 Decision. However, since the writ could not be satisfied,
petitioner moved for the public auction of the mortgaged property, 16 which the RTC
granted.17 In an auction sale conducted on November 7, 2001, petitioner was the only
bidder in the amount of ₱420,000.00. Thus, a Certificate of Sale 18 was issued in her
favor and accordingly annotated at the back of TCT No. V-12296.

Respondents then filed a Motion to Correct/Amend Judgment and To Set Aside

Execution Sale19 dated December 17, 2001, claiming that the parties did not agree in
writing on any rate of interest and that petitioner merely sought for a 12% per annum
interest in her Complaint. Surprisingly, the RTC awarded 5% monthly interest (or 60%
per annum) from March 2, 1991 until full payment. Resultantly, their indebtedness
inclusive of the exorbitant interest from March 2, 1991 to May 22, 2001 ballooned from
₱124,400.00 to ₱652,000.00.

In an Order20 dated May 7, 2002, the RTC granted respondents’ motion and accordingly
modified the interest rate awarded from 5% monthly to 12% per annum. Then on August
2, 2002, respondents filed a Motion for Leave To Deposit/Consign Judgment
Obligation21 in the total amount of ₱126,650.00.22

Displeased with the RTC’s May 7, 2002 Order, petitioner elevated the matter to the CA
via a Petition for Certiorari23 under Rule 65 of the Rules of Court. On August 5, 2003,
the CA rendered a Decision24 declaring that the RTC exceeded its jurisdiction in
awarding the 5% monthly interest but at the same time pronouncing that the RTC
gravely abused its discretion in subsequently reducing the rate of interest to 12% per
annum. In so ruling, the CA ratiocinated:

Indeed, We are convinced that the Trial Court exceeded its jurisdiction when it granted
5% monthly interest instead of the 12% per annum prayed for in the complaint.
However, the proper remedy is not to amend the judgment but to declare that portion as
a nullity. Void judgment for want of jurisdiction is no judgment at all. It cannot be the
source of any right nor the creator of any obligation (Leonor vs. CA, 256 SCRA 69). No
legal rights can emanate from a resolution that is null and void (Fortich vs. Corona, 312
SCRA 751).

From the foregoing, the remedy of the respondents is to have the Court declare the
portion of the judgment providing for a higher interest than that prayed for as null and
void for want of or in excess of jurisdiction. A void judgment never acquire[s] finality and
any action to declare its nullity does not prescribe (Heirs of Mayor Nemencio Galvez vs.
CA, 255 SCRA 672).

WHEREFORE, foregoing premises considered, the Petition having merit, is hereby

GIVEN DUE COURSE. Resultantly, the challenged May 7, 2002 and September 5,
2000 orders of Public Respondent Court are hereby ANNULLED and SET ASIDE for
having been issued with grave abuse of discretion amounting to lack or in excess of
jurisdiction. No costs.

550
SO ORDERED.25 (Emphases in the original; italics supplied.)

Proceedings before the Court of Appeals

Taking their cue from the Decision of the CA in the special civil action for certiorari,
respondents filed with the same court a Petition for Annulment of Judgment and
Execution Sale with Damages.26 They contended that the portion of the RTC Decision
granting petitioner 5% monthly interest rate is in gross violation of Section 3(d) of Rule 9
of the Rules of Court and of their right to due process. According to respondents, the
loan did not carry any interest as it was the verbal agreement of the parties that in lieu
thereof petitioner’s family can continue occupying respondents’ residential building
located in Marulas, Valenzuela for free until said loan is fully paid.

Ruling of the Court of Appeals

Initially, the CA denied due course to the Petition. 27 Upon respondents’ motion,
however, it reinstated and granted the Petition. In setting aside portions of the RTC’s
October 17, 2000 Decision, the CA ruled that aside from being unconscionably
excessive, the monthly interest rate of 5% was not agreed upon by the parties and that
petitioner’s Complaint clearly sought only the legal rate of 12% per annum. Following
the mandate of Section 3(d) of Rule 9 of the Rules of Court, the CA concluded that the
awarded rate of interest is void for being in excess of the relief sought in the Complaint.
It ruled thus:

WHEREFORE, respondents’ motion for reconsideration is GRANTED and our

resolution dated October 13, 2004 is, accordingly, REVERSED and SET ASIDE. In lieu
thereof, another is entered ordering the ANNULMENT OF:

(a) public respondent’s impugned October 17, 2000 judgment, insofar as it

awarded 5% monthly interest in favor of petitioner; and

(b) all proceedings relative to the sale at public auction of the property titled in
respondents’ names under Transfer Certificate of Title No. V-12296 of the
Valenzuela registry.

The judgment debt adjudicated in public respondent’s impugned October 17, 2000
judgment is, likewise, ordered RECOMPUTED at the rate of 12% per annum from
March 2, 1991. No costs.

SO ORDERED.28 (Emphases in the original.)

Petitioner sought reconsideration, which was denied by the CA in its June 26, 2006
Resolution.29

Issues

551
Hence, this Petition anchored on the following grounds:

I. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND

SERIOUS ERROR OF LAW WHEN IT GRANTED RESPONDENTS’ PETITION
FOR ANNULMENT OF JUDGMENT AS A SUBSTITUTE OR ALTERNATIVE
REMEDY OF A LOST APPEAL.

II. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND

SERIOUS ERROR AND MISAPPREHENSION OF LAW AND THE FACTS
WHEN IT GRANTED RESPONDENTS’ PETITION FOR ANNULMENT OF
JUDGMENT OF THE DECISION OF THE REGIONAL TRIAL COURT OF
VALENZUELA, BRANCH 75 DATED OCTOBER 17, 2000 IN CIVIL CASE NO.
241-V-99, DESPITE THE FACT THAT SAID DECISION HAS BECOME FINAL
AND ALREADY EXECUTED CONTRARY TO THE DOCTRINE OF
IMMUTABILITY OF JUDGMENT.30

Petitioner’s Arguments

Petitioner claims that the CA erred in partially annulling the RTC’s October 17, 2000
Decision. She contends that a Petition for Annulment of Judgment may be availed of
only when the ordinary remedies of new trial, appeal, petition for relief or other
appropriate remedies are no longer available through no fault of the claimant. In the
present case, however, respondents had all the opportunity to question the October 17,
2000 Decision of the RTC, but because of their own inaction or negligence they failed to
avail of the remedies sanctioned by the rules. Instead, they contented themselves with
the filing of a Motion to Set Aside Judgment and then a Motion to Correct/Amend
Judgment and to Set Aside Execution Sale.

Petitioner likewise argues that for a Rule 47 petition to prosper, the same must either be
based on extrinsic fraud or lack of jurisdiction. However, the allegations in respondents’
Rule 47 petition do not constitute extrinsic fraud because they simply pass the blame to
the negligence of their former counsel. In addition, it is too late for respondents to pass
the buck to their erstwhile counsel considering that when they filed their Motion to
Correct/Amend Judgment and To Set Aside Execution Sale they were already assisted
by their new lawyer, Atty. Reynaldo A. Ruiz, who did not also avail of the remedies of
new trial, appeal, etc. As to the ground of lack of jurisdiction, petitioner posits that there
is no reason to doubt that the RTC had jurisdiction over the subject matter of the case
and over the persons of the respondents.

While conceding that the RTC patently made a mistake in awarding 5% monthly
interest, petitioner nonetheless invokes the doctrine of immutability of final judgment
and contends that the RTC Decision can no longer be corrected or modified since it had
long become final and executory. She likewise points out that respondents received a
copy of said Decision on November 13, 2000 but did nothing to correct the same. They
did not even question the award of 5% monthly interest when they filed their Motion to

552
Set Aside Judgment which they anchored on the sole ground of the RTC’s lack of
jurisdiction over the persons of some of the respondents.

Respondents’ Arguments

Respondents do not contest the existence of their obligation and the principal amount
thereof. They only seek quittance from the 5% monthly interest or 60% per annum
imposed by the RTC. Respondents contend that Section (3)d of Rule 9 of the Rules of
Court is clear that when the defendant is declared in default, the court cannot grant a
relief more than what is being prayed for in the Complaint. A judgment which
transgresses said rule, according to the respondents, is void for having been issued
without jurisdiction and for being violative of due process of law.

Respondents maintain that it was through no fault of their own, but through the gross
negligence of their former counsel, Atty. Coroza, that the remedies of new trial, appeal
or petition for relief from judgment were lost. They allege that after filing a Motion to
Extend Period to Answer, Atty. Coroza did not file any pleading resulting to their being
declared in default. While the said lawyer filed on their behalf a Motion to Set Aside
Judgment dated January 26, 2001, he however took no steps to appeal from the
Decision of the RTC, thereby allowing said judgment to lapse into finality. Citing
Legarda v. Court of Appeals,31 respondents aver that clients are not always bound by
the actions of their counsel, as in the present case where the clients are to lose their
property due to the gross negligence of their counsel.

With regard to petitioner’s invocation of immutability of judgment, respondents argue

that said doctrine applies only to valid and not to void judgments.

Our Ruling

The petition must fail.

We agree with respondents that the award of 5% monthly interest violated their right to
due process and, hence, the same may be set aside in a Petition for Annulment of
Judgment filed under Rule 47 of the Rules of Court.

Annulment of judgment under Rule 47; an exception to the final judgment rule; grounds
therefor.

A Petition for Annulment of Judgment under Rule 47 of the Rules of Court is a remedy
granted only under exceptional circumstances where a party, without fault on his part,
has failed to avail of the ordinary remedies of new trial, appeal, petition for relief or other
appropriate remedies. Said rule explicitly provides that it is not available as a substitute
for a remedy which was lost due to the party’s own neglect in promptly availing of the
same. "The underlying reason is traceable to the notion that annulling final judgments
goes against the grain of finality of judgment. Litigation must end and terminate
sometime and somewhere, and it is essential to an effective administration of justice

553
that once a judgment has become final, the issue or cause involved therein should be
laid to rest."32

While under Section 2, Rule 4733 of the Rules of Court a Petition for Annulment of
Judgment may be based only on the grounds of extrinsic fraud and lack of jurisdiction,
jurisprudence recognizes lack of due process as additional ground to annul a
judgment.34 In Arcelona v. Court of Appeals,35 this Court declared that a final and
executory judgment may still be set aside if, upon mere inspection thereof, its patent
nullity can be shown for having been issued without jurisdiction or for lack of due
process of law.

Grant of 5% monthly interest is way beyond the 12% per annum interest sought in the
Complaint and smacks of violation of due process.

It is settled that courts cannot grant a relief not prayed for in the pleadings or in excess
of what is being sought by the party. They cannot also grant a relief without first
ascertaining the evidence presented in support thereof. Due process considerations
require that judgments must conform to and be supported by the pleadings and
evidence presented in court. In Development Bank of the Philippines v. Teston, 36 this
Court expounded that:

Due process considerations justify this requirement. It is improper to enter an order

which exceeds the scope of relief sought by the pleadings, absent notice which affords
the opposing party an opportunity to be heard with respect to the proposed relief. The
fundamental purpose of the requirement that allegations of a complaint must provide the
measure of recovery is to prevent surprise to the defendant.

Notably, the Rules is even more strict in safeguarding the right to due process of a
defendant who was declared in default than of a defendant who participated in trial. For
instance, amendment to conform to the evidence presented during trial is allowed the
parties under the Rules.37 But the same is not feasible when the defendant is declared
in default because Section 3(d), Rule 9 of the Rules of Court comes into play and limits
the relief that may be granted by the courts to what has been prayed for in the
Complaint. It provides:

(d) Extent of relief to be awarded. – A judgment rendered against a party in default shall
not exceed the amount or be different in kind from that prayed for nor award
unliquidated damages.

The raison d’être in limiting the extent of relief that may be granted is that it cannot be
presumed that the defendant would not file an Answer and allow himself to be declared
in default had he known that the plaintiff will be accorded a relief greater than or
different in kind from that sought in the Complaint. 38 No doubt, the reason behind
Section 3(d), Rule 9 of the Rules of Court is to safeguard defendant’s right to due
process against unforeseen and arbitrarily issued judgment. This, to the mind of this
Court, is akin to the very essence of due process. It embodies "the sporting idea of fair

554
play"39 and forbids the grant of relief on matters where the defendant was not given the
opportunity to be heard thereon.

In the case at bench, the award of 5% monthly interest rate is not supported both by the
allegations in the pleadings and the evidence on record. The Real Estate
Mortgage40 executed by the parties does not include any provision on interest. When
petitioner filed her Complaint before the RTC, she alleged that respondents borrowed
from her "the sum of FORTY-FIVE THOUSAND PESOS (₱45,000.00), with interest
thereon at the rate of 12% per annum" 41 and sought payment thereof. She did not allege
or pray for the disputed 5% monthly interest. Neither did she present evidence nor
testified thereon. Clearly, the RTC’s award of 5% monthly interest or 60% per annum
lacks basis and disregards due process. It violated the due process requirement
because respondents were not informed of the possibility that the RTC may award 5%
monthly interest. They were deprived of reasonable opportunity to refute and present
controverting evidence as they were made to believe that the complainant petitioner
was seeking for what she merely stated in her Complaint.

Neither can the grant of the 5% monthly interest be considered subsumed by

petitioner’s general prayer for "other reliefs and remedies just and equitable under the
premises x x x."42 To repeat, the court’s grant of relief is limited only to what has been
prayed for in the Complaint or related thereto, supported by evidence, and covered by
the party’s cause of action.43 Besides, even assuming that the awarded 5% monthly or
60% per annum interest was properly alleged and proven during trial, the same remains
unconscionably excessive and ought to be equitably reduced in accordance with
applicable jurisprudence. In Bulos, Jr. v. Yasuma, 44 this Court held:

In the case of Ruiz v. Court of Appeals, citing the cases of Medel v. Court of Appeals,
Garcia v. Court of Appeals, Spouses Bautista v. Pilar Development Corporation and the
recent case of Spouses Solangon v. Salazar, this Court considered the 3% interest per
month or 36% interest per annum as excessive and unconscionable. Thereby, the
Court, in the said case, equitably reduced the rate of interest to 1% interest per month
or 12% interest per annum. (Citations omitted)

It is understandable for the respondents not to contest the default order for, as alleged
in their Comment, "it is not their intention to impugn or run away from their just and valid
obligation."45 Nonetheless, their waiver to present evidence should never be construed
as waiver to contest patently erroneous award which already transgresses their right to
due process, as well as applicable jurisprudence.

Respondents’ former counsel was grossly negligent in handling the case of his clients;
respondents did not lose ordinary remedies of new trial, petition for relief, etc. through
their own fault.

Ordinarily, the mistake, negligence or lack of competence of counsel binds the

client.1âwphi1 This is based on the rule that any act performed by a counsel within the
scope of his general or implied authority is regarded as an act of his client. A recognized

555
exception to the rule is when the lawyers were grossly negligent in their duty to maintain
their client’s cause and such amounted to a deprivation of their client’s property without
due process of law.46 In which case, the courts must step in and accord relief to a client
who suffered thereby.47

The manifest indifference of respondents’ former counsel in handling the cause of his
client was already present even from the beginning. It should be recalled that after filing
in behalf of his clients a Motion to Extend Period to Answer, said counsel allowed the
requested extension to pass without filing an Answer, which resulted to respondents
being declared in default. His negligence was aggravated by the fact that he did not
question the awarded 5% monthly interest despite receipt of the RTC Decision on
November 13, 2000.48 A simple reading of the dispositive portion of the RTC Decision
readily reveals that it awarded exorbitant and unconscionable rate of interest. Its
difference from what is being prayed for by the petitioner in her Complaint is so blatant
and very patent. It also defies elementary jurisprudence on legal rate of interests. Had
the counsel carefully read the judgment it would have caught his attention and
compelled him to take the necessary steps to protect the interest of his client. But he did
not. Instead, he filed in behalf of his clients a Motion to Set Aside Judgment 49 dated
January 26, 2001 based on the sole ground of lack of jurisdiction, oblivious to the fact
that the erroneous award of 5% monthly interest would result to his clients’ deprivation
of property without due process of law. Worse, he even allowed the RTC Decision to
become final by not perfecting an appeal. Neither did he file a petition for relief
therefrom. It was only a year later that the patently erroneous award of 5% monthly
interest was brought to the attention of the RTC when respondents, thru their new
counsel, filed a Motion to Correct/Amend Judgment and To Set Aside Execution Sale.
Even the RTC candidly admitted that it "made a glaring mistake in directing the
defendants to pay interest on the principal loan at 5% per month which is very different
from what was prayed for by the plaintiff."50

"A lawyer owes entire devotion to the interest of his client, warmth and zeal in the
maintenance and defense of his rights and the exertion of his utmost learning and
ability, to the end that nothing can be taken or withheld from his client except in
accordance with the law."51 Judging from how respondents’ former counsel handled the
cause of his clients, there is no doubt that he was grossly negligent in protecting their
rights, to the extent that they were deprived of their property without due process of law.

In fine, respondents did not lose the remedies of new trial, appeal, petition for relief and
other remedies through their own fault. It can only be attributed to the gross negligence
of their erstwhile counsel which prevented them from pursuing such remedies. We
cannot also blame respondents for relying too much on their former counsel. Clients
have reasonable expectations that their lawyer would amply protect their interest during
the trial of the case.52 Here,

"respondents are plain and ordinary people x x x who are totally ignorant of the
intricacies and technicalities of law and legal procedures. Being so, they completely

556
relied upon and trusted their former counsel to appropriately act as their interest may
lawfully warrant and require."53

As a final word, it is worth noting that respondents’ principal obligation was only
₱45,000.00. Due to their former counsel’s gross negligence in handling their cause,
coupled with the RTC’s erroneous, baseless, and illegal award of 5% monthly interest,
they now stand to lose their property and still owe petitioner a large amount of money.
As aptly observed by the CA:

x x x If the impugned judgment is not, therefore, rightfully nullified, petitioners will not
only end up losing their property but will additionally owe private respondent the sum of
₱232,000.00 plus the legal interest said balance had, in the meantime, earned. As a
court of justice and equity, we cannot, in good conscience, allow this unconscionable
situation to prevail.54

Indeed, this Court is appalled by petitioner’s invocation of the doctrine of immutability of

judgment. Petitioner does not contest as she even admits that the RTC made a glaring
mistake in awarding 5% monthly interest. 55 Amazingly, she wants to benefit from such
erroneous award. This Court cannot allow this injustice to happen.

WHEREFORE, the instant Petition is hereby DENIED and the assailed November 24,
2005 and June 26, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 85541
are AFFIRMED.

SO ORDERED.

RULE 10
SECOND DIVISION
[ G.R. NO. 137882, February 04, 2005 ]
SPS. ELIZABETH DE LA CRUZ AND ALFREDO DE LA CRUZ, PETITIONERS, VS.
OLGA RAMISCAL REPRESENTED BY ENRIQUE MENDOZA, RESPONDENT.

DECISION
CHICO-NAZARIO, J.:
This petition for review assails (1) the Resolution [1] dated 11 September 1998 of the
Court of Appeals which dismissed the appeal filed by petitioners from the Decision
dated 31 July 1997 of the Regional Trial Court (RTC), Branch 91, Quezon City, for
Demolition of Illegally Constructed Structure, and (2) the Resolution [2] dated    05 March
1999 denying the subsequent motion for reconsideration.

The following facts, as recapitulated by the trial court, are undisputed.

Respondent OLGA RAMISCAL is the registered owner of a parcel of land located at the
corner of 18th Avenue and Boni Serrano Avenue, Murphy, Quezon City, covered by

557
Transfer Certificate of Title (TCT) No. 300302 of the Register of Deeds for Quezon City.
[3]
 Petitioners SPS. ELIZABETH and ALFREDO DE LA CRUZ are occupants of a parcel
of land, with an area of eighty-five (85) square meters, located at the back of Ramiscal’s
property, and covered by TCT No. RT-56958 (100547) in the name of Concepcion de la
Peña, mother of petitioner Alfredo de la Cruz. [4]

The subject matter of this case is a 1.10-meter wide by 12.60-meter long strip of land
owned by respondent which is being used by petitioners as their pathway to and from
18th Avenue, the nearest public highway from their property. Petitioners had enclosed
the same with a gate, fence, and roof.[5]

In 1976, respondent leased her property, including the building thereon, to Phil. Orient
Motors. Phil. Orient Motors also owned a property adjacent to that of respondent’s. In
1995, Phil. Orient Motors sold its property to San Benito Realty. After the sale, Engr.
Rafael Madrid prepared a relocation survey and location plan for both contiguous
properties of respondent and San Benito Realty. It was only then that respondent
discovered that the aforementioned pathway being occupied by petitioners is part of her
property.[6]

Through her lawyer, respondent immediately demanded that petitioners demolish the
structure constructed by them on said pathway without her knowledge and consent. As
her letter dated 18 February 1995 addressed to petitioners went unheeded, the former
referred the matter to the Barangay for conciliation proceedings, but the parties arrived
at no settlement. Hence, respondent filed this complaint with the RTC in Civil Case No.
Q-95-25159, seeking the demolition of the structure allegedly illegally constructed by
petitioners on her property. Respondent asserted in her complaint that petitioners have
an existing right of way to a public highway other than the current one they are using,
which she owns. She prayed for the payment of damages. [7]

In support of the complaint, respondent presented TCT No. RT-56958 (100547)

covering the property denominated as Lot 1-B in the name of Concepcion de la Peña,
mother of petitioner herein Alfredo de la Cruz. The aforesaid TCT reveals that a portion
of Lot 1-B, consisting of 85 square meters and denominated as Lot 1-B-2, is being
occupied by petitioners. To prove that petitioners have an existing right of way to a
public highway other than the pathway which respondent owns, the latter adduced in
evidence a copy of the plan of a subdivision survey for Concepcion de la Peña and
Felicidad Manalo prepared in 1965 and subdivision plan for Concepcion de la Peña
prepared in 1990. These documents establish an existing 1.50-meter wide alley,
identified as Lot 1-B-1, on the lot of Concepcion de la Peña, which serves as
passageway from the lot being occupied by petitioners (Lot 1-B-2), to Boni Serrano
Avenue.[8]

On the other hand, petitioners, in their Answer, admitted having used a 1.10-meter wide

558
by 12.60-meter long strip of land on the northern side of respondent’s property as their
pathway to and from 18th Avenue, the nearest public highway from their property, but
claimed that such use was with the knowledge of respondent. [9]

Petitioners alleged in their Answer that in 1976, respondent initiated the construction on
her property of a motor shop known as Phil. Orient Motors and they, as well as the other
occupants of the property at the back of respondent’s land, opposed the construction of
the perimeter wall as it would enclose and render their property without any adequate
ingress and egress. They asked respondent to give them a 1.50-meter wide and 40.15-
meter long easement on the eastern side of her property, which would be reciprocated
with an equivalent 1.50-meter wide easement by the owner of another adjacent estate.
Respondent did not want to give them the easement on the eastern side of her property,
towards Boni Serrano Avenue but, instead, offered to them the said 1.10-meter wide
passageway along the northern side of her property towards 18 th Avenue, which offer
they had accepted. [10]

Petitioners additionally averred in their Answer that they were made to sign a document
stating that they waived their right to ask for an easement along the eastern side of
respondent’s property towards Boni Serrano Avenue, which document was among
those submitted in the application for a building permit by a certain “Mang Puling,” [11] the
person in charge of the construction of the motor shop. That was why, according to
petitioners, the perimeter wall on respondent’s property was constructed at a distance of
1.10-meters offset and away from respondent’s property line to provide a passageway
for them to and from 18th Avenue. They maintained in their Answer that respondent
knew all along of the 1.10-meter pathway and had, in fact, tolerated their use thereof.

On 31 July 1997, the RTC handed down a decision, [12] giving probative weight to the
evidence adduced by respondent. The decretal portion enunciates:
Plaintiff’s claim for moral damages must be denied as no evidence in support thereof
was presented at all by her. Consequently, plaintiff is not entitled to exemplary
damages.[13] However, for having been compelled to file this suit and incur expenses to
protect her interest, plaintiff is entitled to an attorney’s fees in the amount of P10,000.00.

WHEREFORE, premises considered, judgment is hereby rendered in favor of the

plaintiff and ordering the defendants to demolish the structure built by them along the
pathway on the eastern side of plaintiff’s property towards 18 th Avenue, Murphy,
Quezon City and to pay [the] plaintiff the amount of P10,000.00 as and by way of
attorney’s fees.

Costs against the defendants.[14]

559
The Court of Appeals dismissed the appeal filed by petitioners from the RTC decision
for failure to file brief within the reglementary period. The fallo of the Court of Appeals
decision, provides:
WHEREFORE, for failure of the defendants-appellants to file brief within the
reglementary period, the instant appeal is hereby DISMISSED pursuant to Section 1(e),
Rule 50 of the 1997 Rules of Civil Procedure.

The Compliance/Explanation filed by defendants-appellants, submitting the Letter-

withdrawal of Atty. Judito Tadeo addressed to the said defendants-appellants is
NOTED.

Let a copy of this Resolution be likewise served on defendants-appellants themselves.

[15]

The motion for reconsideration filed by petitioners met the same fate in the Resolution
of the Court of Appeals dated 05 March 1999.

Petitioners now lay their cause before us through the present petition for review, raising
the following issues:    
A. WHETHER OR NOT THE DENIAL OF THE COURT OF APPEALS OF THE
PETITIONERS’ MOTION FOR RECONSIDERATION OF ITS RESOLUTION DATED
SEPTEMBER 11, 1998 IS SANCTIONED BY THE RULINGS AND LEGAL
PRONOUNCEMENTS OF THE HONORABLE SUPREME COURT?
    
B. WHETHER OR NOT THE PETITIONERS ARE NONETHELESS ENTITLED TO
A LEGAL EASEMENT OF RIGHT OF WAY, ASSUMING NO VOLUNTARY RIGHT
OF WAY WAS GRANTED THEM BY THE RESPONDENT?
    
C. WHETHER OR NOT OPERATIVE EQUITABLE PRINCIPLE OF LACHES TO
BAR THE RESPONDENT FROM DEPRIVING THE PETITIONERS CONTINUED
USE OF THE SAID RIGHT OF WAY?[16]
The issues rivet on the adjective as well as on the substantive law, specifically: (1)
whether or not the Court Appeals erred in dismissing the    appeal filed by petitioners for
failure to file appellants’ brief on time, (2) whether or not petitioners are entitled to a
voluntary or legal easement of right of way, and (3) whether or not respondent is barred
by laches from closing the right of way being used by petitioners.

On the first issue, petitioners assert positively that the petition was filed on time on 30
April 1998, which is well within the 45-day period reckoned from 17 March 1998, when
the secretary of their former counsel received the notice to file appeal.

Petitioners’ arguments fail to persuade us.

560
Press earnestly as they would, the evidence on record, nevertheless, evinces
contrariety to petitioners’ assertion that they have beat the 45-day period to file
appellants’ brief before the appellate court. It is clear from the registry return receipt
card[17] that the Notice to File Brief was received on 12 March 1998 by one May Tadeo
from the Office of Atty. Judito Angelo C. Tadeo, petitioners’ previous counsel. Thus, on
30 April 1998, when their new counsel entered his appearance and at the same time
filed an appellants’ brief, the 45 days have run out. For failure of petitioners to file brief
within the reglementary period, the Court of Appeals correctly dismissed said appeal
pursuant to Section 1(b), Rule 50 of the 1997 Rules of Civil Procedure. [18]

Neither can the members of this Court lend credence to petitioners’ contention that the
written note of Atty. Tadeo’s office on the face of the Order reads that the said office
received it on 17 March 1998.[19]

It is a rule generally accepted that when the service is to be made by registered mail,
the service is deemed complete and effective upon actual receipt by the addressee as
shown by the registry return card.[20] Thus, between the registry return card and said
written note, the former commands more weight. Not only is the former considered as
the official record of the court, but also as such, it is presumed to be accurate unless
proven otherwise, unlike a written note or record of a party, which is often self-serving
and easily fabricated. Further, this error on the part of the secretary of the petitioners’
former counsel amounts to negligence or incompetence in record-keeping, which is not
an excuse for the delay of filing.

Petitioners’ justification that their former counsel belatedly transmitted said order to
them only on 20 March 1998 is not a good reason for departing from the established
rule. It was the responsibility of petitioners and their counsel to devise a system for the
receipt of mail intended for them.[21] Rules on procedure cannot be made to depend on
the singular convenience of a party.

Petitioners next take the stand that even assuming the brief was filed late, the Court of
Appeals still erred in dismissing their petition in light of the rulings of this Court allowing
delayed appeals on equitable grounds.[22] Indeed, in certain special cases and for
compelling causes, the Court has disregarded similar technical flaws so as to correct an
obvious injustice made.[23] In this case, petitioners, however, failed to demonstrate any
justifiable reasons or meritorious grounds for a liberal application of the rules. We must
remind petitioners that the right to appeal is not a constitutional, natural or inherent right
- it is a statutory privilege and of statutory origin and, therefore, available only if granted
or provided by statute.[24] Thus, it may be exercised only in the manner prescribed by,
and in accordance with, the provisions of the law.[25]

Anent the second issue, an easement or servitude is a real right, constituted on the
corporeal immovable property of another, by virtue of which the owner has to refrain

561
from doing, or must allow someone to do, something on his property, for the benefit of
another thing or person.[26] The statutory basis for this right is Article 613, in connection
with Article 619, of the Civil Code, which states:
Art. 613. An easement or servitude is an encumbrance imposed upon an immovable for
the benefit of another immovable belonging to a different owner.

The immovable in favor of which the easement is established is called the dominant
estate; that which is subject thereto, the servient estate.

Art. 619. Easements are established either by law or by the will of the owners. The
former are called legal and the latter voluntary easements.
Did respondent voluntarily accord petitioners a right of way?

We rule in the negative. Petitioners herein failed to show by competent evidence other
than their bare claim that they and their tenants, spouses Manuel and Cecilia Bondoc
and Carmelino Masangkay, entered into an agreement with respondent, through her
foreman, Mang Puling, to use the pathway to 18 th Avenue, which would be reciprocated
with an equivalent 1.50-meter wide easement by the owner of another adjacent estate.
The hands of this Court are tied from giving credence to petitioners’ self-serving claim
that such right of way was voluntarily given them by respondent for the following
reasons:

First, petitioners were unable to produce any shred of document evidencing such
agreement. The Civil Code is clear that any transaction involving the sale or disposition
of real property must be in writing.[27] Thus, the dearth of corroborative evidence opens
doubts on the veracity of the naked assertion of petitioners that indeed the subject
easement of right of way was a voluntary grant from respondent. Second, as admitted
by the petitioners, it was only the foreman, Mang Puling, who talked with them regarding
said pathway on the northern side of respondent’s property. Thus, petitioner Elizabeth
de la Cruz testified that she did not talk to respondent regarding the arrangement
proposed to them by Mang Puling despite the fact that she often saw respondent. [28] It
is, therefore, foolhardy for petitioners to believe that the alleged foreman of respondent
had the authority to bind the respondent relating to the easement of right of way. Third,
their explanation that said Mang Puling submitted said agreement to the Quezon City
Engineer’s Office, in connection with the application for a building permit but said office
could no longer produce a copy thereof, does not inspire belief. As correctly pointed out
by the trial court,[29] petitioners should have requested a subpoena duces tecum from
said court to compel the Quezon City Engineer’s Office to produce said document or to
prove that such document is indeed not available.

The fact that the perimeter wall of the building on respondent’s property was
constructed at a distance of 1.10 meters away from the property line, does not by itself

562
bolster the veracity of petitioners’ story that there was indeed such an agreement.
Further, as noted by the trial court, it was Atty. Federico R. Onandia, counsel of Phil.
Orient Motors, who wrote petitioners on 25 August 1994 advising them that his client
would close the pathway along 18th Avenue, thereby implying that it was Phil. Orient
Motors, respondent’s lessee, which tolerated petitioners’ use of said pathway. [30]

Likewise futile are petitioners’ attempts to show that they are legally entitled to the
aforesaid pathway under Article 649 of the Civil Code, to wit:
Art. 649. The owner, or any person who by virtue of a real right may cultivate or use any
immovable, which is surrounded by other immovables pertaining to other persons, and
without adequate outlet to a public highway, is entitled to demand a right of way through
the neighboring estates, after payment of the proper indemnity.
The conferment of a legal easement of right of way under Article 649 is subject to proof
of the following requisites: (1) it is surrounded by other immovables and has no
adequate outlet to a public highway; (2) payment of proper indemnity; (3) the isolation is
not the result of its own acts; (4) the right of way claimed is at the point least prejudicial
to the servient estate; and (5) to the extent consistent with the foregoing rule, where the
distance from the dominant estate to a public highway may be the shortest. [31] The first
three requisites are not obtaining in the instant case.

Contrary to petitioners’ contention, the trial court found from the records that
Concepcion de la Peña had provided petitioners with an adequate ingress and egress
towards Boni Serrano Avenue. The trial court, gave weight to TCT No. RT-56958
(100547) covering the property denominated as Lot 1-B in the name of Concepcion de
la Peña, mother of petitioner herein Alfredo de la Cruz. Said TCT indicates that a
portion of Lot 1-B, consisting of 85 square meters and denominated as Lot 1-B-2, is the
one being occupied by petitioners. [32] In this connection, a copy of the plan of a
subdivision survey for Concepcion de la Peña and Felicidad Manalo prepared in 1965
and subdivision plan for Concepcion de la Peña prepared in 1990 revealed an existing
1.50-meter wide alley, identified as Lot 1-B-1, on the lot of Concepcion de la Peña,
which serves as passageway from the lot being occupied by petitioners (Lot 1-B-2) to
Boni Serrano Avenue.[33] During the trial, petitioner Elizabeth de la Cruz herself admitted
knowledge of the existence of the subdivision plan of Lot 1-B prepared for Concepcion
de la Peña by Engr. Julio Cudiamat in 1990. The Subdivision Plan subdivided Lot 1-B
into three portions, namely:
(1) Lot 1-B-1, which is an existing alley, consisting of 59.60 square meters, towards
Boni Serrano Avenue;

(2) Lot 1-B-2, consisting of 85.20 square meters, which is being occupied by petitioners;
and

563
(3) Lot 1-B-3, consisting also of 85.20 square meters, which is being occupied by the
sister of petitioner Alfredo dela Cruz.[34]
From petitioner Elizabeth de la Cruz’s own admission, Lot 1-B-1 was intended by the
owner, Concepcion de la Peña, to serve as an access to a public highway for the
occupants of the interior portion of her property. [35] Inasmuch as petitioners have an
adequate outlet to a public highway (Boni Serrano Avenue), they have no right to insist
on using a portion of respondent’s property as pathway towards 18 th Avenue and for
which no indemnity was being paid by them.

Petitioner Elizabeth de la Cruz claimed before the trial court that although there was
indeed a portion of land allotted by Concepcion de la Peña to serve as their ingress and
egress to Boni Serrano Avenue, petitioners can no longer use the same because de la
Peña had constructed houses on it. As found by the trial court, the isolation of
petitioners’ property was due to the acts of Concepcion de la Peña, who is required by
law to grant a right of way to the occupants of her property. In the trial court’s rationale:
…Article 649 of the Civil Code provides that the easement of right of way is not
compulsory if the isolation of the immovable is due to the proprietor’s own acts. To allow
defendants access to plaintiff’s property towards 18 th Avenue simply because it is a
shorter route to a public highway, despite the fact that a road right of way, which is even
wider, although longer, was in fact provided for them by Concepcion de la Peña towards
Boni Serrano Avenue would ignore what jurisprudence has consistently maintained
through the years regarding an easement of right of way, that “mere convenience for the
dominant estate is not enough to serve as its basis. To justify the imposition of this
servitude, there must be a real, not a fictitious or artificial necessity for it.”… In
Francisco vs. Intermediate Appellate Court, 177 SCRA 527, it was likewise held that a
person who had been granted an access to the public highway through an adjacent
estate cannot claim a similar easement in an alternative location if such existing
easement was rendered unusable by the owner’s own act of isolating his property from
a public highway, such as what Concepcion de la Peña allegedly did to her property by
constructing houses on the 1.50 meter wide alley leading to Boni Serrano Avenue. And,
if it were true that defendants had already bought Lot 1-B-2, the portion occupied by
them, from Concepcion de la Peña, then the latter is obliged to grant defendants a right
of way without indemnity.[36]
We hasten to add that under the above-quoted Article 649 of the Civil Code, it is
the owner, or any person who by virtue of a real right may cultivate or use any
immovable surrounded by other immovable pertaining to other persons, who is entitled
to demand a right of way through the neighboring estates. In this case, petitioners fell
short of proving that they are the owners of the supposed dominant estate. Nor were
they able to prove that they possess a real right to use such property. The petitioners
claim to have acquired their property, denominated as Lot 1-B-2, from Concepcion de la
Peña, mother of defendant Alfredo de la Cruz, who owns Lot 1-B-3, an adjacent lot.

564
However, as earlier noted, the trial court found that the title to both lots is still registered
in the name of Concepcion de la Peña under TCT No. RT-56958 (100547). [37] Neither
were petitioners able to produce the Deed of Sale evidencing their alleged purchase of
the property from de la Peña. Hence, by the bulk of evidence, de la Peña, not
petitioners, is the real party-in-interest to claim a right of way although, as explained
earlier, any action to demand a right of way from de la Peña’s part will not lie inasmuch
as by her own acts of building houses in the area allotted for a pathway in her property,
she had caused the isolation of her property from any access to a public highway.

On the third issue, petitioners cannot find sanctuary in the equitable principle of laches
under the contention that by sleeping on her right to reclaim the pathway after almost
twenty years, respondent has, in effect, waived such right over the same. It is not just
the lapse of time or delay that constitutes laches. The essence of laches is the failure or
neglect, for an unreasonable and unexplained length of time, to do that which, through
due diligence, could or should have been done earlier, thus giving rise to a presumption
that the party entitled to assert it had either abandoned or declined to assert it. [38]

The essential elements of laches are: (a) conduct on the part of the defendant, or of one
under whom he claims, giving rise to the situation complained of; (b) delay in asserting
complainant’s rights after he had knowledge of defendant’s acts and after he has had
the opportunity to sue; (c) lack of knowledge or notice by defendant that the
complainant will assert the right on which he bases his suit; and (d) injury or prejudice to
the defendant in the event the relief is accorded to the complainant. [39]

The second and third elements, i.e., knowledge of defendant's acts and delay in the
filing of such suit are certainly lacking here. As borne by the records, it was only in 1995
that respondent found out that the pathway being used by petitioners was part of her
property when a relocation survey and location plan of her property and the adjacent
land bought by San Benito Realty were prepared. [40] She immediately demanded
petitioners to demolish the structure illegally constructed by them on her property
without her knowledge and consent. As her letter dated 18 February 1995 addressed to
petitioners fell on deaf ears, and as no settlement was arrived at by the parties at
the Barangay level, respondent seasonably filed her complaint with the RTC in the
same year.[41]

Respondent, in her Comment,[42] brings the Court’s attention to petitioners’ conversion of

the pathway, subject matter of this case, into a canteen and videoke bar, as shown by
the pictures[43] showing the property bearing the signage,
“FRED’S[44] CANTEEN/VIDEOKE KAMBINGAN.” Respondent, likewise, complains in
her Comment about the structures installed by petitioners that encroached on
respondent’s property line as a result of the commercial activities by petitioners on the
disputed property. Petitioners have implicitly admitted this conversion of the property’s
use by their silence on the matter in their Reply [45] and Memorandum.[46] Such

565
conversion is a telltale sign of petitioners’ veiled pecuniary interest in asserting a right
over the litigated property under the pretext of an innocuous claim for a right of way.

Viewed from all angles, from the facts and the law, the Court finds no redeeming value
in petitioners’ asseverations that merit the reversal of the assailed resolutions.

WHEREFORE, the instant petition is DENIED. The Resolutions dated 11 September

1998 and 5 March 1999 of the Court of Appeals in CA-G.R. SP No. 68216
are AFFIRMED. The Decision dated 31 July 1997 of the Regional Trial Court is
likewise UPHELD. Costs against petitioners.

SO ORDERED.

THIRD DIVISION

G.R. No. 215640, November 28, 2016

NESTOR CABRERA, Petitioner, v. ARNEL CLARIN AND WIFE; MILAGROS

BARRIOS AND HUSBAND; AURORA SERAFIN AND HUSBAND; AND BONIFACIO
MORENO AND WIFE, Respondents.

DECISION

PERALTA, J.:

For resolution of this Court is a petition for review on certiorari under Rule 45 of the
Rules of Court filed by petitioner Nestor Cabrera (Cabrera) assailing the Decision1 dated
July 25, 2014 and Resolution2 dated November 21, 2014 of the Court of Appeals (CA) in
CA-G.R. CV No. 100950, which reversed and set aside the Decision 3 of the Regional
Trial Court (RTC) of Malolos, Bulacan, Branch 10, in Civil Case No. 752-M-2006.

The facts are as follows:cralawlawlibrary

The instant petition originated from a Complaint 4 for accion publiciana with damages

filed before the RTC by Cabrera5 against respondents Arnel Clarin (Clarin) and wife,
Milagros Barrios (Barrios) and husband, Aurora Serafin (Serafin) and husband, and
Bonifacio Moreno (Moreno) and wife.6 Cabrera alleged that he is the lawful and
registered owner of a parcel of agricultural land located at Barangay Maysulao,
Calumpit, Bulacan, with a total area of 60,000 square meters (sq. m.) covered by
Transfer Certificate of Title (TCT) No. T-4439. He was in actual and physical possession
of the land until he discovered the encroachment of respondents sometime in
December 2005. By means of fraud, strategy and stealth, respondents usurped and
occupied portions of the said property, viz.: Clarin with 63 sq. m. thereof, Barrios with 41
sq. m. thereof, Serafin with 30 sq. m. thereof, and Moreno with 11 sq. m. thereof. He
made numerous oral and written demands to vacate the premises but the respondents

566
refused to heed. They also tailed to settle amicably when the case was brought before
the barangay for conciliation.

In their Motion to Dismiss,7 respondents claimed that the complaint failed to state the
assessed value of the property which is needed in determining the correct amount of
docket fees to be paid. Also, Cabrera did not fulfill an essential condition prior to the
filing of the complaint which was submission of a government approved technical survey
plan to prove the alleged encroachment. Cabrera anchors his claim of ownership in the
certificate of title registered in his and his father Ciriaco Cabrera's name. Cabrera did
not aver that it was his portion of property that respondents have intruded as there was
no proof of partition of the property since his father who was an American citizen died in
the United States of America.8

In an Order dated June 19, 2007, the RTC denied respondents' motion, and directed
them to file their Answer.9 The RTC cited the case of Aguilon v. Bohol10 in ruling that
based on the allegations in the complaint, the case is the plenary action of accion
publiciana which clearly falls within its jurisdiction. The trial court, in an Order 11 dated
October 19, 2007, declared respondents in default upon tailing to file their Answer, and
allowed Cabrera to present his evidence ex parte. On February 5, 2009, respondents
filed an Omnibus Motion12 to set aside the order of default, to admit Answer, and to set
the hearing for the presentation of their evidence.

In a Decision dated May 30, 2012, the RTC ruled in favor of Cabrera. The dispositive
portion reads:chanRoblesvirtualLawlibrary

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the
[petitioner]:cralawlawlibrary

1. ORDERING the [respondents] and all other persons claiming rights under them to
vacate the subject portions of [the] land and surrender possession thereof to the
plaintiff;ChanRoblesVirtualawlibrary

2. ORDERING the [respondents] to pay attorney's fees in the amount of Fifty Thousand
Pesos ([P]50,000.00) and Ten Thousand Pesos ([P]10,000.00) litigation expenses.

SO ORDERED.13
Aggrieved, respondents elevated the case before the CA which then reversed and set
aside the decision of the RTC in a Decision dated July 25, 2014. The fallo of the
decision reads:chanRoblesvirtualLawlibrary
WHEREFORE, the appeal is hereby GRANTED. The Decision dated May 30, 2012 of
the Regional Trial Court, Branch 10, Malolos, Bulacan is REVERSED and SET ASIDE.
In lieu thereof, the complaint for accion publiciana with damages filed by [petitioner]
Nestor Cabrera is DISMISSED without prejudice for lack of jurisdiction.

SO ORDERED.14

567
Finding no cogent reason to deviate from its previous ruling, the CA denied the Motion
for Reconsideration filed by Cabrera.

Hence, the instant petition raising the following issues:chanRoblesvirtualLawlibrary

A. The Honorable Court of Appeals committed a reversible error when it held

that "since [petitioner] failed to allege the assessed value of the subject
property, the court a quo has not acquired jurisdiction over the action and
all proceedings thereat are null and void," as such conclusion is
contradictory to the doctrine of estoppel.

B. The Honorable Court of Appeals committed a reversible error when it

failed to take into consideration the tax declaration annexed to the
Appellee's Brief which provided the assessed value of the property subject
matter of the case.

The instant petition lacks merit.

In essence, the issue presented before this Court is whether or not estoppel bars
respondents from raising the issue of lack of jurisdiction.

Batas Pambansa Bilang 129, (the Judiciary Reorganization Act of 1980), as amended
by Republic Act (R.A.) No. 7691 provides:chanRoblesvirtualLawlibrary
xxxx

Section 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise exclusive
original jurisdiction.

(2) In all civil actions which involve the title to, or possession of, real property, or
any interest therein, where the assessed value of the property involved exceeds
Twenty thousand pesos (P20,000,00) or, for civil actions in Metro Manila, where
such value exceeds Fifty thousand pesos (P50,000.00) except actions for forcible
entry into and unlawful detainer of lands or buildings, original jurisdiction over which is
conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal
Circuit Trial Courts;ChanRoblesVirtualawlibrary

xxxx

Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts, and Municipal
Circuit Trial Courts in Civil Cases. - Metropolitan Trial Courts, Municipal Trial Courts,
and Municipal Circuit Trial Courts shall exercise:cralawlawlibrary

(3) Exclusive original jurisdiction in all civil actions which involve title to, or
possession of, real property, or any interest therein where the  assessed value of
the property or interest therein docs not exceed Twenty thousand pesos
(P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not
exceed Fifty thousand pesos (P50,000.00) exclusive of interest, damages of whatever
568
kind, attorney's fees, litigation expenses and costs: Provided, That in cases of land not
declared for taxation purposes, the value of such property shall be determined by the
assessed value of the adjacent lots.

x x x15
Before the amendments, the plenary action of accion publiciana was to be brought
before the RTC regardless of the value of the property. With the modifications
introduced by R.A. No. 7691 in 1994, the jurisdiction of the first level courts has been
expanded to include jurisdiction over other real actions where the assessed value does
not exceed P20,000.00, P50,000.00 where the action is filed in Metro Manila.
Accordingly, the jurisdictional element is the assessed value of the property.16

A perusal of the complaint readily shows that Cabrera failed to state the assessed value
of the disputed land, thus:chanRoblesvirtualLawlibrary
xxxx

[T]he plaintiffs are the lawful and the registered owner of a parcel of agricultural land
and more particularly described under Transfer Certificate of Title No. T-4439, a copy of
which is hereto attached and marked as Annex "A" and made an integral part
hereof;ChanRoblesVirtualawlibrary

[T]he defendants had illegally encroached the property of the plaintiff by means of fraud
and stealth and with force and intimidation. Defendant Arnel Clarin had encroached an
approximate area of SIXTY THREE (63) SQUARE METERS, while defendant Milagros
Barrios had encroached an approximate area of FORTY-ONE (41) SQUARE METERS,
defendant Aurora Serafin had encroached an approximate area of THIRTY (30)
SQUARE METERS while defendant Bonifacio Moreno had encroached an approximate
area of ELEVEN (11) SQUARE METERS, copy of the relocation plan is hereto attached
and marked as Annex "B" and made an integral part of this
complaint;ChanRoblesVirtualawlibrary

The plaintiffs had already informed the defendants of the illegal encroachment but the
defendants refused to heed the call of the plaintiffs to vacate the land in question and
threaten plaintiff with bodily harm;ChanRoblesVirtualawlibrary

That prior to the discovery of the encroachment on or about December 2005, plaintiff
was in actual and physical possession of the premises.

That this matter was referred to the attention of the Office of the Barangay Chairman of
Barangay Maysulao, Calumpit, Bulacan and a Lupong Tagapamayapa was constituted
but no conciliation was reached and the Lupon issued a Certificate to File Action, copy
of the Certificate to File Action is hereto attached and marked as Annex "C" and made
an integral part hereof;ChanRoblesVirtualawlibrary

That notwithstanding numerous and persistent demands, both oral and written,
extended upon the defendants to vacate the subject parcel of land, they failed and

569
refused and still fail and refuse to vacate and surrender possession of the subject parcel
of land to the lawful owner who is plaintiff in this case. Copy of the last formal demand
dated January 18, 2006 is hereto attached and marked as Annex " " and the registry
receipt as well as the registry return card as "D" Annexes "D-1," and "D-2,"
respectively;ChanRoblesVirtualawlibrary

That because of this unjustifiable refusal of the defendants to vacate the premises in
question which they now unlawfully occupy, plaintiffs [were] constrained to engage the
services of counsel in an agreed amount of FIFTY THOUSAND PESOS ([P]50,000.00)
Philippine Currency, as acceptance fee and THREE THOUSAND PESOS ([P]3,000.00)
Philippine Currency, per day of Court appearance, which amount the defendants should
jointly and solidarity pay the plaintiffs, copy of the retaining contract is hereto attached
and marked as Annex "E" and made an integral part of this
complaint;ChanRoblesVirtualawlibrary

That in order to protect the rights and interest of the plaintiffs, litigation expenses will be
incurred in an amount no less than TEN THOUSAND PESOS ([P]10,000.00), which
amount the defendants should jointly and solidarily pay the
plaintiffs;ChanRoblesVirtualawlibrary

That the amount of THREE THOUSAND PESOS ([P]3,000.00) per month should be
adjudicated in favor of the plaintiff as against the defendants by way of beneficial use, to
be counted from the day the last formal demand until they fully vacate and surrender
possession of the premises in question to the plaintiffs. x x x. 17
In dismissing the case, the CA noted such fact, to wit:chanRoblesvirtualLawlibrary
In the case at bench, the complaint for accion publiciana filed by [Cabrera] failed to
allege the assessed value of the real property subject of the complaint or the interest
therein. Not even a tax declaration was presented before the court a quo that would
show the valuation of the subject property. As such, there is no way to determine which
court has jurisdiction over the action or whether the court a quo has exclusive
jurisdiction over the same. Verily, the court a quo erred in denying the motion to dismiss
filed by [respondents] and in taking cognizance of the instant case. 18
Indeed, nowhere in the complaint was the assessed value of the subject property ever
mentioned. On its face, there is no showing that the RTC has jurisdiction exclusive of
the MTC. Absent any allegation in the complaint of the assessed value of the property, it
cannot readily be determined which court had original and exclusive jurisdiction over the
case at bar. The courts cannot take judicial notice of the assessed or market value of
the land.19

We note that Cabrera, in his Comment/Opposition to the Motion to

Dismiss,20 maintained that the accion publiciana is an action incapable of pecuniary
interest under the exclusive jurisdiction of the RTC. 21 Thereafter, he admitted in his Brief
before the CA that the assessed value of the subject property now determines which
court has jurisdiction over accion publiciana cases. In asse1iing the trial court's
jurisdiction, petitioner averred that his failure to allege the assessed value of the
property in his Complaint was merely innocuous and did not affect the jurisdiction of the

570
RTC to decide the case.

Cabrera alleges that the CA erred in concluding that the RTC has not acquired
jurisdiction over the action in the instant case being contrary to the doctrine of estoppel
as elucidated in Honorio Bernardo v. Heirs of Villegas.22 Estoppel sets in when
respondents participated in all stages of the case and voluntarily submitting to its
jurisdiction seeking affirmative reliefs in addition to their motion to dismiss due to lack of
jurisdiction.

We are not persuaded. It is axiomatic that the nature of an action and the jurisdiction of
a tribunal are determined by the material allegations of the complaint and the law at the
time the action was commenced.23 A court's jurisdiction may be raised at any stage of
the proceedings, even on appeal for the same is conferred by law, and lack of it affects
the very authority of the court to take cognizance of and to render judgment on the
action.24 It applies even if the issue on jurisdiction was raised for the first time on appeal
or even after final judgment.

The exception to the basic rule mentioned operates on the principle of estoppel by
laches whereby a party may be barred by laches from invoking the lack of jurisdiction at
a late hour for the purpose of annulling everything done in the case with the active
participation of said party invoking the plea. In the oft-cited case of Tijam
v. Sibonghanoy,25 the party-surety invoked the jurisdictions of both the trial and
appellate courts in order to obtain affirmative relief, and even submitted the case for
final adjudication on the merits. It was only after the CA had rendered an adverse
decision that the party-surety raised the question of jurisdiction for the first time in a
motion to dismiss almost fifteen (15) years later. Hence, the Court adjudicated a party
estopped from assailing the court's jurisdiction, to wit:chanRoblesvirtualLawlibrary
xxxx

[a] party cannot invoke the jurisdiction of a court to secure affirmative relief against

his opponent and, after obtaining or failing to obtain such relief, repudiate or
question that same jurisdiction. . . ., it was further said that the question whether the
court had jurisdiction either of the subject matter of the action or of the parties was not
important in such cases because the party is barred from such conduct not because the
judgment or order of the court is valid and conclusive as an adjudication, but for the
reason that such practice cannot be tolerated - obviously for reasons of public policy.

x x x26
However, it was explicated in Calimlim v. Ramirez27 that Tijam is an exceptional case
because of the presence of laches. Thus:chanRoblesvirtualLawlibrary
The lack of jurisdiction of a court may be raised at any stage of the proceedings, even
on appeal. This doctrine has been qualified by recent pronouncements which stemmed
principally from the ruling in the cited case of Sibonghanoy. It is to be regretted,
however, that the holding in said case had been applied to situations which were
obviously not contemplated therein. The exceptional circumstance involved
in Sibonghanoy which justified the departure from the accepted concept of non-

571
waivability of objection to jurisdiction has been ignored and, instead a blanket doctrine
had been repeatedly upheld that rendered the supposed ruling in Sibonghanoy not as
the exception, but rather the general rule, virtually overthrowing altogether the time-
honored principle that the issue of jurisdiction is not lost by waiver or by estoppel.

In Sibonghanoy, the defense of lack of jurisdiction of the court that rendered the
questioned ruling was held to be barred by estoppel by laches. It was ruled that
the lack of judsdictiou having been raised for the first time in a motion to dismiss
filed almost fifteen (15) years after the questioned ruling had been rendered, such
a plea may no longer be raised for being barred by laches. As defined in said
case, laches is 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 has abandoned it
or declined to assert it.28
In the case of La Naval Drug Corporation v. Court of Appeals,29 We illustrated the rule
as to when jurisdiction by estoppel applies and when it does not, as
follows:chanRoblesvirtualLawlibrary
xxxx

Lack of jurisdiction over the subject matter of the suit is yet another matter. Whenever it
appears that the court has no jurisdiction over the subject matter, the action shall be
dismissed (Section 2, Rule 9, Rules of Court). This defense may be interposed at any
time, during appeal (Roxas vs. Rafferty, 37 Phil. 957) or even after final
judgment (Cruzcosa vs. Judge Concepcion, et al., 101 Phil. 146). Such is
understandable, as this kind of jurisdiction is conferred by law and not within the
courts, let alone the parties, to themselves determine or conveniently set aside.
In People vs. Casiano (111 Phil. 73, 93-94), this Court, on the issue or estoppel,
held:chanRoblesvirtualLawlibrary
The operation of the principle of estoppel on the question of jurisdiction seemingly
depends upon whether the lower court actually had jurisdiction or not. If it had no
jurisdiction, but the case was tried and decided upon the theory that it had
jurisdiction, the parties are not barred, on appeal, from assailing such
jurisdiction, for the same 'must exist as a matter of law, and may not be conferred
by consent of the parties or by estoppel' (5 C.J.S., 861-863).

However, if the lower court had jurisdiction, and the case was heard and decided
upon a given theory, such, for instance, as that the court had no jurisdiction, the
party who induced it to adopt such theory will not be permitted, on appeal, to
assume an inconsistent position - that the lower court had jurisdiction. Here, the
principle of estoppel applies. The rule that jurisdiction is conferred by law, and does
not depend upon the will of the parties, has no bearing thereon. x x x. 30
Guided by the abovementioned jurisprudence, this Court rules that respondents are not
estopped from assailing the jurisdiction of the RTC over the subject civil case. Records
reveal that even before filing their Answer, respondents assailed the jurisdiction of the
RTC through a motion to dismiss as there was no mention of the assessed value of the

572
property in the complaint. We note that the RTC anchored its denial of respondents'
motion to dismiss on the doctrine enunciated in a 1977 case - that all cases of recovery
of possession or accion publiciana lie with the RTC regardless of the value - which no
longer holds true. Thereafter, the respondents filed their Answer through an omnibus
motion to set aside order of default and to admit Answer.

The circumstances of the present case are different from the Heirs of Villegas31 case.
First, petitioner Bernardo in the Heirs of Villegas case actively participated during the
trial by adducing evidence and filing numerous pleadings, none of which mentioned any
defect in the jurisdiction of the RTC, while in this case, respondents already raised the
issue of lack of jurisdiction in their Motion to Dismiss filed before their Answer. Second,
it was only on appeal before the CA, after he obtained an adverse judgment in the trial
court, that Bernardo, for the first time, came up with the argument that the decision is
void because there was no allegation in the complaint about the value of the property;
on the other hand, herein respondents raised the issue before there was judgment on
the merits in the trial court. Respondents never assumed inconsistent position in their
appeal before the CA.

Furthermore, the unfairness and inequity that the application of estoppel seeks to avoid
espoused in the Tijam case, which the Heirs of Villegas adheres to, are not present.
The instant case does not involve a situation where a party who, after obtaining
affirmative relief from the court, later on turned around to assail the jurisdiction of
the same court that granted such relief by reason of an unfavorable judgment.
Respondents did not obtain affirmative relief from the trial court whose jurisdiction they
are assailing, as their motion to dismiss was denied and they eventually lost their case
in the proceedings below.

Anent the issue of the CA's failure to consider the tax declaration annexed in the
Appellee's Brief, Cabrera insists that its attachment in his Brief without objection from
the other party sealed the issue of the RTC's jurisdiction, and cured the defect of failure
to allege the assessed value of the property in the complaint as provided in Section
5,32 Rule 10 of the Rules of Court.

Such averments lack merit. The Rules of Court provides that the court shall consider no
evidence which has not been formally offered.33 A formal offer is necessary because
judges are mandated to rest their findings of facts and their judgment only and strictly
upon the evidence offered by the parties at the trial. Its function is to enable the trial
judge to know the purpose or purposes for which the proponent is presenting the
evidence. Conversely, this allows opposing parties to examine the evidence and object
to its admissibility. Moreover, it facilitates review as the appellate court will not be
required to review documents not previously scrutinized by the trial court.34 We
relaxed the foregoing rule and allowed evidence not formally offered to be admitted and
considered by the trial court provided the following requirements are present, viz.: first,
the same must have been duly identified by testimony duly recorded and, second, the
same must have been incorporated in the records of the case. 35

573
Based on the petitioner's admission, he presented the Tax Declaration 2006-07016-
0039436 dated November 13, 2006 purporting to prove the assessed value of the
property for the first time on appeal before the CA in his Brief. 37 There was no proof or
allegation that he presented the same during the trial or that the court examined such
document.38 Since the tax declaration was never duly identified by testimony during the
trial albeit incorporated in the Appellee's Brief, the CA will not be required to review such
document that was not previously scrutinized by the RTC. As the assessed value is a
jurisdictional requirement, the belated presentation of document proving such value
before the appellate court will not cure the glaring defect in the complaint. Thus,
jurisdiction was not acquired.

We find Cabrera's application of Section 5, Rule 10 of the Rules of Court to support his
claim that failure of the respondents to object to his presentation of the tax declaration
before the CA constitutes an implied consent which then treated the issue of assessed
value as if it had been raised in the pleadings specious. Such rule contemplates an
amendment to conform to or authorize presentation of evidence before the trial court
during the trial on the merits of the case. As held in Bernardo, Sr. v. Court of
Appeals,39 this Court expounded:chanRoblesvirtualLawlibrary
It is settled that even if the complaint he defective, but the parties go to trial thereon,
and the plaintiff, without objection, introduces sufficient evidence to constitute
the particular cause of action which it intended to allege in the original complaint,
and the defendant voluntarily produces witnesses to meet the cause of action thus
established, an issue is joined as fully and as effectively as if it had been
previously joined by the most perfect pleadings. Likewise, when issues not raised
by the pleadings are tried by express or implied consent of the parties, they shall be
treated in all respects as if they had been raised in the pleadings. 40 (Emphases
supplied)
It bears emphasis that the ruling in Tijam establishes an exception which is to be
applied only under extraordinary circumstances or to those cases similar to its factual
situation.41 The general rule is that the lack of a court's jurisdiction is a non-waivable
defense that a party can raise at any stage of the proceedings in a case, even on
appeal; the doctrine of estoppel, being the exception to such non-waivable defense,
must be applied with great care and the equity must be strong in its favor. 42

All told, We find no error on the part of the CA in dismissing the Complaint for lack of
jurisdiction and for not reviewing the document belatedly filed. Consequently, all
proceedings in the RTC are null and void. Indeed, a void judgment for want of
jurisdiction is no judgment at all, and cannot be the source of any right nor the creator of
any obligation. All acts performed pursuant to it and all claims emanating from it have
no legal effect.43

WHEREFORE, petition for review on certiorari filed by petitioner Nestor Cabrera is

hereby DENIED. The assailed Decision dated July 25, 2014 and Resolution dated
November 21, 2014 of the Court of Appeals in CA-G.R. CV No. 100950 are
hereby AFFIRMED.

574
SO ORDERED.ChanRoblesVirtualawlibrary
RULE 13. FILING AND SERVICE OF PLEADINGS
SECOND DIVISION
[ G.R. No. 193650, October 08, 2014 ]
GEORGE PHILIP P. PALILEO AND JOSE DE LA CRUZ, PETITIONERS, VS.
PLANTERS DEVELOPMENT BANK, RESPONDENT.

DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari[1] assails the July 28, 2009 Amended Decision[2] of
the Court of Appeals (CA) in CA-G.R. SP No. 01317-MIN, entitled “Planters
Development Bank, Petitioner, versus Hon. Eddie R. Roxas (in his capacity as the
former Pairing Judge), Hon. Panambulan M. Mimbisa (in his capacity as the Presiding
Judge of RTC, Branch 37, General Santos City), Sheriff Marilyn P. Alano, Sheriff
Ramon A. Castillo, George Philip P. Palileo, and Jose Dela Cruz, Respondents,” as well
as its August 23, 2010 Resolution[3] denying reconsideration of the assailed amended
judgment.

Factual Antecedents

In a June 15, 2006 Decision[4] rendered by the Regional Trial Court (RTC) of General
Santos City, Branch 37, in an action for specific performance/sum of money with
damages docketed as Civil Case No. 6474 and entitled “George Philip P. Palileo and
Jose Dela Cruz, Plaintiffs, versus, Planters Development Bank, Engr. Edgardo R.
Torcende, Arturo R. delos Reyes, Benjamin N. Tria, Mao Tividad and Emmanuel
Tesalonia, Defendants,” it was held thus:

Before this Court is a complaint for specific performance and/or sum of money and
damages with prayer for the issuance of writs of preliminary attachment and preliminary
injunction filed by Plaintiff George Philip Palileo and Jose L. Dela Cruz against Engr.
Edgardo R. Torcende, Planters Development Bank (defendant Bank), Arturo R. Delos
Reyes, Benjamin N. Tria, Mao Tividad, and Emmanuel Tesalonia on 22 December
1998.

After summons together with the verified Complaint and its annexes were duly served
upon defendants, the latter answered. During Pre-Trial conference defendant Bank
manifested [its] intention of settling the case amicably and several attempts to explore
the said settlement [were] made as per records of this case. In the last pre-trial hearing
dated 17 November 2000, only plaintiffs[,] George Philip Palileo and Jose L. Dela
Cruz[,] and their counsel appeared, thus, the latter move [sic] for the presentation of
evidence ex-parte, which was granted by the Court with the reservation of verifying the
return card [to determine] whether the order for the pre-trial was indeed received by
defendants. Finally, [at the] 21 November 2001 hearing, x x x defendants [again] failed
to appear and their failure to file pre-trial brief was noted; thus [plaintiffs were] allowed to

575
present evidence ex-parte before the Clerk of Court.

xxxx

IN LIGHT OF THE FOREGOING, defendants are hereby ORDERED to jointly and

severally PAY plaintiffs as follows:

i) Actual Damages;

a) Plaintiff George Philip Palileo[,] the amount of Two Million Six Hundred Five
Thousand Nine [sic] Seventy Two Pesos and Ninety Two Centavos (P2,605,972.92),
with 12% compounded interest [per annum] reckoned from the filing of this case until full
settlement thereof;

b) Plaintiff Jose R. Dela Cruz[,] the amount of One Million Five Hundred Twenty Nine
Thousand Five Hundred Eight Thousand [sic] and Eighty Centavos (P1,529,508.80),
with 12% compounded interest [per annum] reckoned from the filing of this case until full
settlement thereof;

ii) Moral damages in the amount of Five Hundred Thousand Pesos (P500,000.00) each;

iii) Exemplary Damages in the amount of Five Hundred Thousand Pesos (P500,000.00)
each;

iv) Attorney’s Fees in the amount of Five Hundred Thousand [Pesos] (P500,000.00)
each x x x and to pay the costs.

SO ORDERED.[5]

Respondent Planters Development Bank (PDB) received a copy of the RTC Decision on
July 17, 2006.

On July 31, 2006, PDB filed by private courier service – specifically LBC [6] – an
Omnibus Motion for Reconsideration and for New Trial, [7] arguing therein that the trial
court’s Decision was based on speculation and inadmissible and self-serving pieces of
evidence; that it was declared in default after its counsel failed to attend the pre-trial
conference on account of the distance involved and difficulty in booking a flight to
General Santos City; that it had adequate and sufficient defenses to the petitioners’
claims; that petitioners’ claims are only against its co-defendant, Engr. Edgardo R.
Torcende [Torcende]; that the award of damages and attorney’s fees had no basis; and
that in the interest of justice, it should be given the opportunity to cross-examine the
petitioners’ witnesses, and thereafter present its evidence.

Petitioners’ copy of the Omnibus Motion for Reconsideration and for New Trial was
likewise sent on July 31, 2006 by courier service through LBC, but in their address of
record – Tupi, South Cotabato – there was no LBC service at the time.

576
On August 2, 2006, PDB filed with the RTC another copy of the Omnibus Motion for
Reconsideration and for New Trial via registered mail; another copy thereof was
simultaneously sent to petitioners by registered mail as well.

Meanwhile, petitioners moved for the execution of the Decision pending appeal.

In an August 30, 2006 Order,[8] the RTC denied the Omnibus Motion for
Reconsideration and for New Trial, while it granted petitioners’ motion for execution
pending appeal, which it treated as a motion for the execution of a final and executory
judgment. The trial court held, as follows:

Anent the first motion, records show that the Omnibus Motion for Reconsideration and
for New Trial dated 28 July 2006 was initially filed via an LBC courier on 28 July 2006
and was actually received by the Court on 31 July 2006, which was followed by filing of
the same motion thru registered mail on 2 August 2006. Said motion was set for hearing
by the movant on 18 August 2006 or 16 days after its filing.

The motion fails to impress. Section 5, Rule 15 [9] of the 1997 Rules of Civil Procedure as
amended is pertinent thus:
Section 5. Notice of hearing. – The notice of hearing shall be addressed to all parties
concerned, and shall specify the time and date of the hearing which must not be later
than ten (10) days after the filing of the motion. (Underscoring and italics supplied)
The aforesaid provision requires [that] every motion shall be addressed to all parties
concerned, and shall specify the time and date of the hearing NOT later than ten (10)
days after the filing of the motion. Being a litigated motion, the aforesaid rule should
have been complied [with]. Its noncompliance renders it defective.

[The] Rule is settled that a motion in violation thereof is pro forma and a mere scrap of
paper. It presents no question which the court could decide [upon]. In fact, the court has
NO reason to consider it[;] neither [does] the clerk of court [have] the right to receive the
same. Palpably, the motion is nothing but an empty formality deserving no judicial
cognizance. Hence, the motion deserves a short shrift and peremptory denial for being
procedurally defective.

As such, it does not toll the running of the reglementary period thus making the assailed
decision final and executory. This supervening situation renders the Motion for
Execution pending appeal academic but at the same time it operates and could serve
[as] well as a motion for execution of the subject final and executory decision.
Corollarily, it now becomes the ministerial duty of this Court to issue a writ of execution
thereon.

IN LIGHT OF THE FOREGOING, the Omnibus Motion for Reconsideration and New
Trial is hereby DENIED, and the Motion for Execution Pending Appeal (which is treated
as a motion for execution of a final and executory judgment) is also GRANTED as
explained above. Accordingly, let A WRIT OF EXECUTION be issued against herein
defendants to enforce the FINAL and EXECUTORY Decision dated 15 June 2006.
577
SO ORDERED.[10]

PDB received a copy of the above August 30, 2006 Order on September 14, 2006. [11]

On August 31, 2006, a Writ of Execution[12] was issued. PDB filed an Urgent Motion to
Quash Writ of Execution,[13] arguing that it was prematurely issued as the June 15, 2006
Decision was not yet final and executory; that its counsel has not received a copy of the
writ; and that no entry of judgment has been made with respect to the trial court’s
Decision. Later on, it filed a Supplemental Motion to Quash Writ of Execution,
[14]
 claiming that the writ was addressed to its General Santos branch, which had no
authority to accept the writ.

On September 7, 2006, PDB filed a Notice of Appeal. [15]

In an October 6, 2006 Order,[16] the RTC denied the motion to quash the writ of
execution.

On October 9, 2006, the RTC issued a second Writ of Execution. [17]

Ruling of the Court of Appeals

On October 11, 2006, PDB filed with the CA an original Petition for Certiorari, which was
later amended,[18] assailing 1) the trial court’s August 30, 2006 Order – which denied the
omnibus motion for reconsideration of the RTC Decision and for new trial; 2) its October
6, 2006 Order – which denied the motion to quash the writ of execution; and 3) the
August 31, 2006 and October 9, 2006 writs of execution.

On May 31, 2007, the CA issued a Decision[19] dismissing PDB’s Petition for lack of
merit. It sustained the trial court’s pronouncement, that by setting the hearing of the
Omnibus Motion for Reconsideration and for New Trial on August 18, 2006 – or 16 days
after its filing on August 2, 2006 – PDB violated Section 5, Rule 15 of the Rules of Court
which categorically requires that the notice of hearing shall specify the time and date of
the hearing which must not be later than 10 days after the filing of the motion. Citing this
Court’s ruling in Bacelonia v. Court of Appeals,[20] the CA declared that the 10-day
period prescribed in Section 5 is mandatory, and a motion that fails to comply therewith
is pro forma and presents no question which merits the attention and consideration of
the court.

The appellate court further characterized PDB’s actions as indicative of a deliberate

attempt to delay the proceedings, noting that it did not timely move to reconsider the
trial court’s November 17, 2000 ruling[21] allowing petitioners to present their
evidence ex parte, nor did it move to be allowed to present evidence in support of its
defense. It was only after the RTC rendered its June 15, 2006 Decision that PDB moved
to be allowed to cross-examine petitioners’ witnesses and to present its evidence on
defense.

578
The CA likewise held that the RTC did not err in ruling that the omnibus motion for
reconsideration did not toll the running of the prescriptive period, which thus rendered
the June 15, 2006 Decision final and executory. It noted as well that PDB’s September
7, 2006 notice of appeal was tardy.

The CA found no irregularity with respect to the writs of execution, which contained
the fallo of the June 15, 2006 Decision of the RTC – thus itemizing the amount of the
judgment obligation. Additionally, it held that the fact that the judgment debtors are held
solidarily liable does not require that the writs should be served upon all of the
defendants; that it is not true that the sheriffs failed to make a demand for the
satisfaction of judgment upon PDB, as the mere presentation of the writ to it operated
as a demand to pay; and that PDB failed to attach the Sheriff’s Return to its Petition,
which thus prevents the appellate court from resolving its claim that the writs were not
validly served.

PDB filed a Motion for Reconsideration, [22] arguing that Rule 15, Section 5 of the Rules
of Court should be relaxed in view of the fact that judgment against it was based on a
technicality – and not on a trial on the merits; that there was no deliberate intention on
its part to delay the proceedings; that the court acted with partiality in declaring that the
Omnibus Motion for Reconsideration and for New Trial was pro forma; that its notice of
appeal was timely; and that the writs of execution are null and void.

On July 28, 2009, the CA made a complete turnaround and issued the assailed
Amended Decision, which decreed thus:

WHEREFORE, the motion for reconsideration is GRANTED. This Court’s May 31, 2007
Decision is SET ASIDE and a new one is rendered GRANTING the petition
for certiorari. The trial court’s Order dated August 30, 2006 is SET ASIDE and the Writ
of Execution issued by the trial court is QUASHED. The trial court is ORDERED to hear
and rule on the merits of petitioner’s “Omnibus Motion for Reconsideration and New
Trial.”

SO ORDERED.[23]

The CA reversed its original finding that the Omnibus Motion for Reconsideration and
for New Trial was pro forma. This time, it held just the opposite, ruling that PDB’s “tacit
argument” that the “distances involved in the case at bench call for a relaxation of the
application of Section 5, Rule 15 of the Rules of Court” deserved consideration. It held
that Section 5 should be read together with Section 4 [24] of the same Rule, thus:

When a pleading is filed and served personally, there is no question that the
requirements in Sections 4 and 5 of Rule 15 of the Revised Rules of Civil Procedure
pose no problem to the party pleading. Under this mode of service and filing of
pleadings, the party pleading is able to ensure receipt by the other party of his pleading
at least three days prior to the date of hearing while at the same time setting the hearing
on a date not later than ten days from the filing of the pleading.

579
When, as in the case at bench, the address of the trial court as well as that of the
opposing counsel is too distant from the office of the counsel of the party pleading to
personally effect the filing and service of the pleading, the latter counsel faces a real
predicament. In a perfect world with the best postal service possible, it would be
problematic enough to ensure that both requisites are fully met: that opposing counsel
receives the pleading at least three days before the date of hearing and that the date of
hearing is no more than ten days after the filing (mailing) of the pleading. But, as a
matter of fact, given the state of the postal service today – a matter the Court takes
judicial notice of – the party pleading often finds himself [locked] between the horns of a
dilemma.

The case at bench presents the Court with the novel issue of whether the same rigid
application of the cited Sections-and-Rule is warranted when the filing and service of
pleadings is by mail. The Court is of the opinion that when confronted between [sic] the
demands of sufficient notice and due process on the one hand and the requirement that
the date of hearing be set no later than ten days from filing, the stringent application of
the Rules is not warranted and a liberal posture is more in keeping with Section 6, Rule
1 of the 1997 Rules of Civil Procedure which provides:

SECTION 6. Construction. - These Rules shall be liberally construed in order to

promote their objective of securing a just, speedy, and inexpensive disposition of every
action and proceeding.[25]

The CA further sustained PDB’s argument that since judgment against it was arrived at
by mere default or technicality, it is correspondingly entitled to a relaxation of the Rules,
in line with the principles of substantial justice. It likewise held that PDB counsel’s act of
setting the hearing of the Omnibus Motion for Reconsideration and for New Trial 16
days after its filing was an excusable lapse; that no scheme to delay the case is evident
from PDB’s actions; that more telling is the trial court’s “blurring in cavalier fashion” the
distinction between Sections 1 and 2 of Rule 39 of the Rules of Court, [26] as well as its
unequal treatment of the parties from its strict application of Section 5, Rule 15 against
respondent, while it bent backward to accommodate petitioners by converting the
latter’s motion for execution pending appeal into a motion for execution of a final and
executory judgment.

Lastly, the appellate court concluded that the trial court committed grave abuse of
discretion, which thus warrants the grant of PDB’s Petition for Certiorari.

Petitioners filed their Urgent Motion for Reconsideration, [27] which the CA denied through
its assailed August 23, 2010 Resolution. Hence, the instant Petition.

Issues

Petitioners frame the issues involved in this Petition, as follows:

580
Being assailed herein is the refusal of the Court of Appeals, which is a patent error, for
not giving credence to petitioners-appellants’ arguments that the respondent-appellees’
special civil action for certiorari before it is clearly devoid of merit as (i) the Decision
dated June 15, 2006 of the RTC, Branch 37, General Santos City had become final and
executory before the special civil action for Certiorari was filed before it which should
have been dismissed outright, and which issue of “finality” was never ruled upon, (ii)
granting arguendo that a certiorari proceeding could still be had, the same should be
filed under Rule 45 instead of Rule 65 of the 1997 Rules of Civil Procedure, (iii) the
alleged attendant abuse of discretion on the part of the public respondent judges, even
granting arguendo that it exist [sic], were [sic] not grave but on the contrary were purely
errors of judgment and, (iv) the substantial and glaring defects of the petition in the
special civil action for certiorari before the Court of Appeals were consistently and
clearly called to its attention but were unjustifiably ignored by it. [28]

Petitioners’ Arguments

In their Petition and Reply,[29] petitioners seek to reverse the assailed CA dispositions

and to reinstate the appellate court’s original May 31, 2007 Decision, arguing that the
trial court’s June 15, 2006 Decision became final and executory on account of PDB’s
failure to timely file its Omnibus Motion for Reconsideration and for New Trial, as it
properly filed the same only on August 2, 2006 – or beyond the 15-day period allowed
by the Rules of Court.

Petitioners argue that PDB’s filing of its Omnibus Motion for Reconsideration and for
New Trial on July 31, 2006 by courier service through LBC was improper, since there
was no LBC courier service in Tupi, South Cotabato at the time; naturally, they did not
receive a copy of the omnibus motion. This is precisely the reason why PDB re-filed its
omnibus motion on August 2, 2006 through registered mail, that is, to cure the defective
service by courier; but by then, the 15-day period within which to move for
reconsideration or new trial, or to file a notice of appeal, had already expired, as the last
day thereof fell on August 1, 2006 – counting from PDB’s receipt of the trial court’s
Decision on July 17, 2006.

Petitioners add that PDB’s notice of appeal – which was filed only on September 7,
2006 – was tardy as well; that PDB’s resort to an original Petition for Certiorari to assail
the trial court’s August 30, 2006 Order denying the Omnibus Motion for Reconsideration
and for New Trial was improper, for as provided under Section 9, Rule 37 of the Rules
of Court,[30] an order denying a motion for new trial or reconsideration is not appealable,
the remedy being an appeal from the judgment or final order; that certiorari was
resorted to only to revive PDB’s appeal, which was already lost; and that it was merely a
face-saving measure resorted to by PDB to recover from its glaring blunders, as well as
to delay the execution of the RTC Decision. They also assert that certiorari is not an
available remedy, since PDB did not file a motion for reconsideration with respect to the
other assailed orders of the trial court.

Petitioners maintain as well that the CA erred in relaxing the application of the Rules of

581
Court as to PDB, a banking institution with adequate resources to engage counsel
within General Santos City and not relegate Civil Case No. 6474 to its Manila lawyers
who are thus constrained by the distance involved.

Respondent’s Arguments

Seeking the denial of the Petition, PDB in its Comment [31] maintains that the CA did not
err in declaring that its Omnibus Motion for Reconsideration and for New Trial was
not pro forma; that there are justifiable grounds to move for reconsideration and/or new
trial; that it had no intention to delay the proceedings; that it was correct for the
appellate court to relax the application of Section 5, Rule 15; and that the CA is correct
in finding that the trial court committed grave abuse of discretion in misapplying the
Rules and in exhibiting partiality.

Our Ruling

The Court grants the Petition.

The proceedings in the instant case would have been greatly abbreviated if the court a
quo and the CA did not overlook the fact that PDB’s Omnibus Motion for
Reconsideration and for New Trial was filed one day too late. The bank received a copy
of the trial court’s June 15, 2006 Decision on July 17, 2006; thus, it had 15 days – or up
to August 1, 2006 – within which to file a notice of appeal, motion for reconsideration, or
a motion for new trial, pursuant to the Rules of Court. [32] Yet, it filed the omnibus motion
for reconsideration and new trial only on August 2, 2006.

Indeed, its filing or service of a copy thereof to petitioners by courier service cannot be
trivialized. Service and filing of pleadings by courier service is a mode not provided in
the Rules.[33] This is not to mention that PDB sent a copy of its omnibus motion to an
address or area which was not covered by LBC courier service at the time. Realizing its
mistake, PDB re-filed and re-sent the omnibus motion by registered mail, which is the
proper mode of service under the circumstances. By then, however, the 15-day period
had expired.

PDB’s Notice of Appeal, which was filed only on September 7, 2006, was tardy; it had
only up to August 1, 2006 within which to file the same. The trial court therefore acted
regularly in denying PDB’s notice of appeal.

Since PDB’s Omnibus Motion for Reconsideration and for New Trial was filed late and
the 15-day period within which to appeal expired without PDB filing the requisite notice
of appeal, it follows that its right to appeal has been foreclosed; it may no longer
question the trial court’s Decision in any other manner. “Settled is the rule that a party is
barred from assailing the correctness of a judgment not appealed from by him.” [34] The
“presumption that a party who did not interject an appeal is satisfied with the
adjudication made by the lower court”[35] applies to it. There being no appeal taken by
PDB from the adverse judgment of the trial court, its Decision has become final and can
no longer be reviewed, much less reversed, by this Court. “Finality of a judgment or
582
order becomes a fact upon the lapse of the reglementary period to appeal if no appeal
is perfected, and is conclusive as to the issues actually determined and to every matter
which the parties might have litigated and have x x x decided as incident to or
essentially connected with the subject matter of the litigation, and every matter coming
within the legitimate purview of the original action both in respect to matters of claim and
of defense.”[36] And “[i]n this jurisdiction, the rule is that when a judgment becomes final
and executory, it is the ministerial duty of the court to issue a writ of execution to
enforce the judgment;”[37] “execution will issue as a matter of right x x x (a) when the
judgment has become final and executory; (b) when the judgment debtor has
renounced or waived his right of appeal; [or] (c) when the period for appeal has lapsed
without an appeal having been filed x x x.”[38]

Neither can the Court lend a helping hand to extricate PDB from the effects of its
mistake; indeed, PDB erred more than once during the course of the proceedings. For
one, it did not attempt to set right its failure to appear during pre-trial, which prompted
the court to allow petitioners to present evidence ex parte and obtain a favorable default
judgment. Second, assuming for the sake of argument that it timely filed its Omnibus
Motion for Reconsideration and for New Trial, it nonetheless violated the ten-day
requirement on the notice of hearing under Section 5 of Rule 15. Third, even before it
could be notified of the trial court’s resolution of its omnibus motion on September 14,
2006 – assuming it was timely filed, it filed a notice of appeal on September 7, 2006 –
which thus implies that it abandoned its bid for reconsideration and new trial, and
instead opted to have the issues resolved by the CA through the remedy of appeal. If
so, then there is no Omnibus Motion for Reconsideration and for New Trial that the trial
court must rule upon; its August 30, 2006 Order thus became moot and academic and
irrelevant. “[W]here [an action] or issue has become moot and academic, there is no
justiciable controversy, so that a declaration thereon would be of no practical use or
value.”[39]

Fourth, instead of properly pursuing its appeal to free itself from the unfavorable effects
of the trial court’s denial of its notice of appeal, PDB chose with disastrous results to
gamble on its Omnibus Motion for Reconsideration and for New Trial by filing an original
Petition for Certiorari to assail the trial court’s denial thereof. Time and again, it has
been said that certiorari is not a substitute for a lost appeal, especially if one’s own
negligence or error in one’s choice of remedy occasioned such loss. [40]

What remains relevant for this Court to resolve, then, is the issue relative to the trial
court’s October 6, 2006 Order – which denied the motion to quash the writ of execution
– and the August 31, 2006 and October 9, 2006 writs of execution. The Court observes
that the October 6, 2006 Order and the August 31, 2006 and October 9, 2006 writs of
execution were set aside and quashed merely as a necessary consequence of the CA’s
directive in the Amended Decision for the trial court to hear and rule on the merits of
PDB’s Omnibus Motion for Reconsideration and for New Trial. Other than this singular
reason, the CA would have sustained them, and this is clear from a reading of both its
original May 31, 2007 Decision and its subsequent Amended Decision. Now, since the
Court has herein declared that PDB’s omnibus motion may not be considered for being

583
tardy and for having been superseded by the bank’s filing of a notice of appeal, then the
CA’s original pronouncement regarding the October 6, 2006 Order and the August 31,
2006 and October 9, 2006 writs of execution should necessarily be reinstated as well.

In light of the above conclusions, the Court finds no need to further discuss the other
issues raised by the parties. They are rendered irrelevant by the above
pronouncements.

WHEREFORE, the Petition is GRANTED. The assailed July 28, 2009 Amended

Decision and August 23, 2010 Resolution of the Court of Appeals in CA-G.R. SP No.
01317-MIN are REVERSED and SET ASIDE. The Regional Trial Court of General
Santos City, Branch 37 is ORDERED to proceed with the execution of its June 15, 2006
Decision in Civil Case No. 6474.

SO ORDERED.

THIRD DIVISION

G.R. No. 200469, January 15, 2018

PHILIPPINE SAVINGS BANK, Petitioner, v. JOSEPHINE L. PAPA, Respondent.

DECISION

MARTIRES, J.:

This is a petition for review on certiorari seeking to reverse and set aside the 21 July
2011 Decision1 and the 1 February 2012 Resolution2 of the Court of Appeals (CA) in
CA-G.R. SP No. 112611, which affirmed the 14 October 2009 Decision 3 and the 14
January 2010 Order of the Regional Trial Court of Makati City, Branch 65 (RTC), in Civil
Case No. 09-545, which in turn reversed and set aside the 23 December 2008
Decision4 of the Metropolitan Trial Court of Makati City, Branch 65 (MeTC) in Civil Case
No. 90987.

THE FACTS

On 30 March 2006, petitioner Philippine Savings Bank (PSB) filed before the MeTC a

complaint5 for collection of sum of money against respondent Josephine L.
Papa (Papa). In its complaint, PSB alleged that Papa obtained a flexi-loan with a face
amount of P207,600.00, payable in twenty-four (24) monthly installments of P8,650.00
with interest at 38.40% per annum. For the said loan, Papa executed a promissory note
dated 26 July 2005. PSB further alleged that the promissory note provides additional
charges in case of default, to wit: Three percent (3%) late payment charge per month of
the total amount until the amount is fully paid; Twenty-Five percent (25%) Attorney's
Fees, but not less than P5,000.00; Ten percent (10%) liquidated damages, but not less
than P1,000.00; and costs of suit. When the obligation fell due, Papa defaulted in her

584
payment. PSB averred that as of 27 March 2006, Papa's total obligation amounted to
P173,000.00; and that despite repeated demands, Papa failed to meet her obligation.

On 26 October 2006, Papa filed her Answer.6 She alleged that PSB had no cause of
action against her as her liability had already been extinguished by the several
staggered payments she made to PSB, which payments she undertook to prove. She
likewise claimed that there was no basis for the interest and damages as the principal
obligation had already been paid.

During the trial on the merits, PSB introduced in evidence a photocopy of the
promissory note,7 which the MeTC admitted despite the vehement objection by Papa.
Meanwhile, Papa chose to forego with the presentation of her evidence and manifested
she would instead file a memorandum.

After the parties had submitted their respective memoranda, the case was submitted for
decision.

The MeTC Ruling

On 23 December 2008, the MeTC rendered a decision in favor of PSB and against
Papa. The MeTC was convinced that PSB was able to establish its cause of action
against Papa by preponderance of evidence. It also emphasized the fact that other than
her bare allegation, Papa never adduced any evidence regarding the payments she had
allegedly made. The MeTC, however, deemed it equitable to award interest at the rate
of twelve percent (12%) per annum only instead of the stipulated interest, penalty, and
charges. The dispositive portion of the MeTC Decision provides:

WHEREFORE, premises considered, judgment is hereby rendered ordering defendant

JOSEPHINE L. PAPA to pay plaintiff the amount of P173,000.00 plus interest at the rate
of 12% per annum from February 9, 2006 until the whole amount is fully paid; the
amount of P20,000.00 as and by way of attorney's fees; and the costs.

SO ORDERED.8

Papa moved for reconsideration, but the same was denied by the MeTC in its Order,
dated 14 May 2009.

Aggrieved, Papa elevated an appeal before the RTC.

The RTC Ruling

In its decision, dated 14 October 2009, the RTC reversed and set aside the MeTC
decision. The trial court ruled that PSB failed to prove its cause of action due to its
failure to prove the existence and due execution of the promissory note. It opined that
Papa's apparent admission in her Answer could not be taken against her as, in fact, she
denied any liability to PSB, and she never admitted the genuineness and due execution

585
of the promissory note. It explained that the fact that Papa interposed payment as a
mode of extinguishing her obligation should not necessarily be taken to mean that an
admission was made regarding the contents and due execution of the promissory note;
specifically the amount of the loan, interests, mode of payment, penalty in case of
default, as well as other terms and conditions embodied therein. The dispositive portion
of the RTC decision reads:

WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The

decision dated December 23, 2008 in Civil Case No. 09-945 is reversed and set aside.

SO ORDERED.9

On 10 November 2009, PSB filed its motion for reconsideration, 10 wherein it admitted
that it received the copy of the 14 October 2009 RTC decision on 26 October 2009.

In its opposition to PSB's motion for reconsideration, Papa posited, among others, that
the RTC decision had already attained finality. Papa explained that although PSB filed
the motion for reconsideration on 10 November 2009, it appears that service of the said
motion was made one (1) day late as PSB availed of a private courier service instead of
the modes of service prescribed under the Rules of Court. As such, PSB's motion for
reconsideration is deemed not to have been made on the date it was deposited to the
private courier for mailing but rather on 11 November 2009, the date it was actually
received by Papa.

In its Order, dated 14 January 2010, the RTC denied PSB's motion for reconsideration
ratiocinating that its 14 October 2009 decision had already attained finality, among
others.

Aggrieved, PSB filed a petition for review under Rule 42 of the Revised Rules of Court
before the CA.

In her comment,11 Papa reiterated her position that the 14 October 2009 RTC decision
had already attained finality.

The CA Ruling

In its assailed decision, dated 21 July 2011, the CA affirmed the 14 October 2009
decision and the 14 January 2010 order of the RTC.

The appellate court ruled that the RTC decision had already attained finality due to
PSB's failure to serve on Papa a copy of its motion for reconsideration within the
prescribed period. The appellate court noted that in its motion for reconsideration, PSB
did not offer any reasonable explanation why it availed of private courier service instead
of resorting to the modes recognized by the Rules of Court.

586
The appellate court further agreed with the RTC that PSB failed to prove its cause of
action. It concurred with the RTC that Papa made no admission relative to the contents
and due execution of the promissory note; and that PSB failed to prove that Papa
violated the terms and conditions of the promissory note, if any.

The dispositive portion of the assailed decision reads:

WHEREFORE, premises considered, the Decision of the Makati Regional Trial Court,
Branch 65 dated 14 October 2009 and its subsequent Order dated 14 January 2010
denying petitioner's Motion for Reconsideration in Civil Case No. 09-545 are hereby
AFFIRMED in toto. With costs against the petitioner.

SO ORDERED.12

PSB moved for reconsideration, but the same was denied by the CA in its resolution,
dated 1 February 2012.

Hence, this petition.

THE ISSUES

I.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE

ERROR WHEN IT DISMISSED PETITIONER'S APPEAL BY REASON OF PURE
TECHNICALITY THEREBY PREJUDICING THE SUBSTANTIAL RIGHT OF THE
PETITIONER TO RECOVER THE UNPAID LOAN OF THE RESPONDENT.

II.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE

ERROR WHEN IT AFFIRMED THE LOWER COURTS DECISION DATED 14
OCTOBER 2009 ON THE GROUND THAT PETITIONER FAILED TO PROVE ITS
CAUSE OF ACTION WHEN IT FAILED TO PRESENT THE ORIGINAL OF THE
PROMISSORY NOTE THEREBY FAILING TO ESTABLISH THE DUE EXISTENCE
AND EXECUTION OF THE PROMISSORY NOTE.

III.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE

ERROR WHEN IT DISMISSED PETITIONER'S APPEAL RESULTING IN UNJUST
ENRICHMENT IN FAVOR OF THE RESPONDENT.13

Stated differently, PSB argues that the appellate court erred when it ruled that the RTC
decision had already attained finality; and that the appellate court erred when it ruled

587
that it failed to prove its cause of action despite Papa's admission regarding the
existence of the loan.

OUR RULING

PSB insists that it timely filed its motion for reconsideration. It stresses that the records
of the case would disclose that it personally filed the subject motion before the RTC on
10 November 2009, or the last day of the 15-day prescriptive period. PSB also claims
that, although it deviated from the usual mode of service as prescribed by the Rules of
Court when it served the copy of the aforesaid motion by private courier service, there
was still effective service upon Papa considering that she received the motion for
reconsideration through her counsel, on 11 November 2009, and nine (9) days prior to
its intended hearing date. Additionally, PSB contends that the timeliness of the filing of
the motion for reconsideration should not be reckoned from the date of the actual
receipt by the adverse party, but on the actual receipt thereof by the RTC, pointing out
that filing and service of the motion are two different matters.

PSB further argues that, notwithstanding the said deviation, a liberal construction of the
rules is proper under the circumstances and that the Court has the power to suspend its
own rules especially when there appears a good and efficient cause to warrant such
suspension.

These arguments deserve scant consideration.

PSB is correct that filing and service are distinct from each other. Indeed, filing is the act
of presenting the pleading or other paper to the clerk of court; whereas, service is the
act of providing a party with a copy of the pleading or paper concerned. 14

Nevertheless, although they pertain to different acts, filing and service go hand-in-hand
and must be considered together when determining whether the pleading, motion, or
any other paper was filed within the applicable reglementary period. Precisely, the
Rules require every motion set for hearing to be accompanied by proof of service
thereof to the other parties concerned; otherwise, the court shall not be allowed to act
on it,15 effectively making such motion as not filed.

The kind of proof of service required would depend on the mode of service used by the
litigant. Rule 13, Section 13 of the Rules of Court provides:

SECTION 13. Proof of Service. - Proof of personal service shall consist of a written

admission of the party served, or the official return of the server, or the affidavit of the
party serving, containing a full statement of the date, place and manner of service. If the
service is by ordinary mail, proof thereof shall consist of an affidavit of the
person mailing of facts showing compliance with section 7 of this Rule. If service
is made by registered mail, proof shall be made by such affidavit and the registry receipt
issued by the mailing office. The registry return card shall be filed immediately upon its

588
receipt by the sender, or in lieu thereof the unclaimed letter together with the certified or
sworn copy of the notice given by the postmaster to the addressee. [emphasis supplied]

In some decided cases, the Court considered filing by private courier as equivalent to
filing by ordinary mail.16 The Court opines that this pronouncement equally applies to
service of pleadings and motions. Hence, to prove service by a private courier or
ordinary mail, a party must attach an affidavit of the person who mailed the motion or
pleading. Further, such affidavit must show compliance with Rule 13, Section 7 of the
Rules of Court, which provides:

Section 7. Service by mail. — Service by registered mail shall be made by depositing

the copy in the post office in a sealed envelope, plainly addressed to the party or his
counsel at his office, if known, otherwise at his residence, if known, with postage fully
prepaid, and with instructions to the postmaster to return the mail to the sender after ten
(10) days if undelivered. If no registry service is available in the locality of either
the senders or the addressee, service may be done by ordinary mail. [emphasis
supplied]

This requirement is logical as service by ordinary mail is allowed only in instances

where no registry service exists either in the locality of the sender or the
addressee.17 This is the only credible justification why resort to service by ordinary mail
or private courier may be allowed.

In this case, PSB admits that it served the copy of the motion for reconsideration to
Papa's counsel via private courier. However, said motion was not accompanied by an
affidavit of the person who sent it through the said private messengerial service.
Moreover, PSB's explanation why it resorted to private courier failed to show its
compliance with Rule 13, Section 7. PSB's explanation merely states:

Greetings:

Kindly set the instant motion on 20 November 2009 at 8:30 o'clock in the morning or
soon thereafter as matter and counsel may be heard. Copy of this pleading was served
upon defendant's counsel by private registered mail for lack of material time and
personnel to effect personal delivery. 18

Very clearly, PSB failed to comply with the requirements under Rule 13, Section 7 for an
effective service by ordinary mail. While PSB explained that personal service was not
effected due to lack of time and personnel constraints, it did not offer an acceptable
reason why it resorted to "private registered mail" instead of by registered mail. In
particular, PSB failed to indicate that no registry service was available in San Mateo,
Rizal, where the office of Papa's counsel is situated, or in Makati City, where the office
of PSB's counsel is located. Consequently, PSB failed to comply with the required proof
of service by ordinary mail. Thus, the RTC is correct when it denied PSB's motion for
reconsideration, which, for all intents and purposes, can be effectively considered as not
filed.

589
Since PSB's motion for reconsideration is deemed as not filed, it did not toll the running
of the 15-day reglementary period for the filing of an appeal; and considering that PSB's
appeal was filed only after the expiration of the 15-day period on 10 November 2009,
such appeal has not been validly perfected. As such, the subject 14 October 2009
decision of the RTC had already attained finality as early as 11 November 2009.

It is well-settled that judgments or orders become final and executory by operation of

law and not by judicial declaration. The finality of a judgment becomes a fact upon the
lapse of the reglementary period of appeal if no appeal is perfected or no motion for
reconsideration or new trial is filed. The court need not even pronounce the finality of
the order as the same becomes final by operation of law. 19

At this juncture, the Court stresses that the bare invocation of "the interest of substantial
justice" or, in this case, "good or efficient case" is not a magic wand that will
automatically compel this Court to suspend procedural rules. 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 except only for
the most persuasive of reasons when they may be relaxed to relieve a litigant of an
injustice not commensurate with the degree of his thoughtlessness in not complying
with the procedure prescribed.20

Time and again, the Court has reiterated that rules of procedure, especially those
prescribing the time within which certain acts must be done, are absolutely
indispensable to the prevention of needless delays and to the orderly and speedy
discharge of business.21 While procedural rules may be relaxed in the interest of justice,
it is well-settled that these are tools designed to facilitate the adjudication of cases. The
relaxation of procedural rules in the interest of justice was never intended to be a
license for erring litigants to violate the rules with impunity. Liberality in the interpretation
and application of the rules can be invoked only in proper cases and under justifiable
causes and circumstances. While litigation is not a game of technicalities, every case
must be prosecuted in accordance with the prescribed procedure to ensure an orderly
and speedy administration of justice. 22

Considering that the RTC decision had already attained finality, there is no longer need
to discuss whether the RTC and the CA erred in ruling that PSB failed to prove its cause
of action. A decision that has acquired finality becomes immutable and unalterable, and
may no longer be modified in any respect, even if the modification is meant to correct
erroneous conclusions of fact and law, and whether it be made by the court that
rendered it or by the Highest Court of the land. Any act which violates this principle must
immediately be struck down.23

WHEREFORE, the present petition is DISMISSED for lack of merit. The 21 July 2011
Decision and the 1 February 2012 Resolution of the Court of Appeals in CA-G.R. SP
No. 112611 are AFFIRMED.

SO ORDERED.

590
 FIRST DIVISION

G.R. No. 182814               July 15, 2015

LIGAYA MENDOZA and ADELIA MENDOZA, Petitioners,

vs.
THE HONORABLE COURT OF APPEALS (EIGHT DIVISION), HONORABLE JUDGE
LIBERATO C. CORTEZ and BANGKO KABAYAN (Formerly IBAAN RURAL BANK,
INC.,) Respondents.

DECISION

PEREZ, J.:

This is a Petition for Certiorari1 pursuant to Rule 65 of the Revised Rules of Court,

assailing the 29 November 2007 Decision2 rendered by the Eighth Division of the Court
of Appeals in CA-G.R. SP No. 86745. In its assailed decision, the appellate court
affirmed the 28 May 2003 Order3 of the Regiorial Trial Court (RTC) of Batangas City,
Branch 8 denying the Opposition to the Motion for Execution filed by petitioners Ligaya
Mendoza and Adelia Mendoza.

In a Resolution4 dated 28 April 2008, the Court of Appeals denied the Motion for
Reconsideration of the petitioners.

The Facts

On 4 September 1997, petitioners obtained a loan from private respondent Bangko

Kabayan (formerly Ibaan Rural Bank) in the amount of ₱12,000,000.00, as evidenced
by a Promissory Note5 executed by petitioners.

As security for the said obligation, petitioners executed a Deed of Real Estate Mortgage
(REM)6 over 71 parcels of land registered under their names and located in Mabini,
Batangas. Subsequently, however, petitioners incurred default and therefore the loan
obligation became due and demandable.

On 21 May 1998, private respondent filed a Complaint for Judicial Foreclosure 7 of the
REM over the subject properties before the RTC of Batangas City.

After petitioners admitted the material allegations in the Complaint, the RTC, on 7
March 2002, rendered a Judgment8 on the Pleadings, the dispositive portion of which
reads: "WHEREFORE, on the basis of the pleadings, judgment is hereby rendered in
favor of the [private respondent] and against the [petitioners] ordering the [petitioners] to
pay to the court or to [private respondent] within a period of ninety (90) days from the
entry of this judgment the amounts hereunder set forth, and in default of such payment,
the [properties] shall be sold at the public auction to satisfy this judgment:

591
 a. The principal sum of TWELVE MILLION PESOS (₱12,000,000.00) with
interest thereon at the rate of 30% per annum and penalty computed from
September 4, 1997 until fully paid;

b. Attorney's fees equivalent to 10% of the total amount due, and cost of suit. 9

After petitioners failed to timely interpose an appeal or a motion for reconsideration,

private respondent filed a Motion for Execution to enforce the above judgment which
was duly opposed by the petitioners on the ground that they were not duly served with a
copy of the R TC Decision. It was argued by the petitioners that it was only on 13 June
2002 that their counsel was able to receive a copy of the said judgment prompting them
to immediately file a Notice of Appeal on the following day, 14 June 2002.

On 28 May 2003 the RTC issued an Order10 denying due course to petitioners' Notice of
Appeal for being filed out of time. The court a quo declared that petitioners' counsel was
negligent in handling her mails and that negligence is binding upon petitioners.
Accordingly, the RTC forthwith . directed the issuance of the motion for execution, to
wit:

WHEREFORE, the [c]ourt declares that the [petitioners'] notice of appeal cannot be
given due course as having been filed out of time, and the opposition to the motion for
execution is hereby DENIED. Accordingly, let the corresponding writ of execution
issue.11

In an Order12 dated 13 July 2004, the RTC denied petitioners' Motion for

Reconsideration and thereby ordered the Sheriff to proceed with the sale of the
foreclosed properties at the public auction, thus:

WHEREFORE, the [petitioners'] Motion for Reconsideration is hereby DENIED and,

accordingly –

The Order of this [c]ourt dated May 28, 2003; the writ of execution issued on September
25, 2003; and the order dated October 20, 2003 directing the Sheriff of this [c]ourt to
proceed with the sale at public auction of the mortgaged properties subject matter of
this case remain undisturbed and shall be implemented.

Sheriff Rosalinda G. Aguado shall proceed without further delay with the sale [and]
execution of the mortgaged properties.13

On Certiorari, the Court of Appeals affirmed the assailed RTC Orders after finding that
there was a valid service of the notice of judgment to petitioners' counsel as attested by
the postmaster who enjoys the presumption of regularity in the performance of his
official duty and which presumption was not satisfactorily rebutted by the petitioners in
the instant14 case.

592
Similarly ill-fated was petitioners' Motion for Reconsideration which was denied by the
Court of Appeals in a Resolution15 dated 28 April 2008.

Arguing that the Court of Appeals gravely abused its discretion in rendering the assailed
Decision, petitioners filed this instant Petition for Certiorari seeking the reversal of the
appellate court's decision and resolution on the following grounds:

I.

WITH DUE RESPECT TO THE HONORABLE COURT OF APPEALS, THE

HONORABLE COURT COMMITTED GRAVE ABUSE OF ITS DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION WHEN IT AFFIRMED
THE FINDING OF THE HONORABLE REGIONAL TRIAL COURT OF BATANGAS,
BRANCH 8 THAT THERE WAS VALID SERVICE OF THE NOTICE OF JUDGMENT
DATED 7 MARCH . 2002, INSPITE OF THE OVERWHELMING PIECES OF
EVIDENCE TO THE CONTRARY SINCE THE SECURITY GUARD ASSIGNED IN THE
LOBBY OF THE LPL MANSIONS WAS NOT AUTHORIZED TO RECEIVE ANY MAIL
MATTERS OF THE PETITIONERS' COUNSEL OF RECORD ATTY. MINERVA C.
GENOVEA.

II.

WITH DUE RESPECT TO THE HONORABLE COURT OF APPEALS THE

HONORABLE COURT, ERRED AND COMMITTED GRAVE ABUSE OF ITS
DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN RULING
THAT ATTY. MINERY A C. GENOVEA IS AT FAULT SINCE SHE FAILED TO ADOPT
MEASURES TO ENSURE NOTICES AND DOCUMENTS INTENDED FOR HER WILL
BE DULY RECEIVED BY HER OR HER STAFF.

III.

WITH DUE RESPECT TO THE HONORABLE COURT OF APPEALS, IT COMMITTED

GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF
JUDRISDICTION WHEN IT UPHELD THE DECISION OF THE HONORABLE
REGIONAL TRIAL COURT PRESIDING JUDGE .WHEN THE LATTER
PRECIPITATELY DENIED DUE COURSE [TO] THE NOTICE OF APPEAL
SEASONABLY FILED BY THE PETITIONERS ON 14 JUNE 2002 OR ONE (1) DAY
FOLLOWING ACTUAL RECEIPT OF THE JUDGEMENT (sic) DATED 7 MARCH 2002
BY THE PETITIONERS.

IV.

GRANTING ARGUENDO, THAT INDEED THERE WAS VALID SERVICE OF

JUDGMENT ON THE PETITIONERS, STILL THE HONORABLE COURT HAS THE
POWER AND DISCRETION TO EXTEND THE PERIOD FOR FILING THE RECORD
ON APPEAL IN THE INTEREST OF JUSTICE; BESIDES AS REVEALED AND BASED

593
ON RECORDS OF THE CASE, IT IS APP ARENT THAT THE JUDGMENT WAS
RENDERED THROUGH A MERE MOTION ON JUDGMENT ON THE PLEADINGS,
WHICH WAS FROWNED UPON BY NO LEES THAN THIS HONORABLE COURT,
PROPHETICALLY EMPHASIZED IN ITS NUMEROUS PRONOUNCEMENTS, THAT
SHORT-CUTS IN JUDICIAL PROCESSES ARE TO BE A VOIDED WHERE THEY
IMPEDE RATHER THAN PROMOTE A JUDICIOUS DISPENSATION OF JUSTICE.

V.

WITH DUE RESPECT TO THE HONORABLE COURT OF APPEALS, THE

HONORABLE COURT COMMITTED GRAVE ABUSE OF ITS DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF DISCRETION WHEN IT STATED THAT
NOTICE SENT TO THE COLLABORATING COUNSEL ATTY. JUANITO L. VELASCO,
JR. WAS VALID SERVICE UPON THE PETITIONERS.

VI.

WITH DUE RESPECT TO THE HONORABLE OF APPEALS, THE HONORABLE

COURT ERRED AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION WHEN
IT FAILEP TO RULE THAT NO VALID EXECUTION CAN BE EFFECTED SEEING AS
THERE WAS ABSENCE OF ACTUAL NOTICE TO HEREIN PETITIONERS. 16

The Court's Ruling

The crux of the entire controversy is nestled on the issue of whether or not there was a
valid service of the 7 March 2002 RTC Judgment to the petitioners.

As a rule where a party appears by attorney in an action or proceeding in a court of

record, all notices or orders required to be given therein must be given to the attorney of
record. Accordingly, notices to counsel should be properly sent to his address of record,
and, unless the counsel files a notice o f change of address, his official address remains
to be that his address of

Record.17

There is no question that in this case, petitioners' counsel was able to receive a copy of
the judgment, as evidenced by the Certification 18 issued by the Postmaster General. As
borne by the Certification, the said copy of the judgment was duly delivered to the
address on record of the petitioners' counsel at 2/F LPC Mansion, 122 L.P. Leviste St.,
Salcedo Village, Makati City and was received by Daniel Soriano, the security guard on
15 March 2002.

While petitioners impliedly admitted the fact that the security guard in the building where
their counsel's office is located received the copy of the judgment, they argued,
however, that such receipt is not valid under the law,. a contention which pulled the rug
from under their feet exposing the utter frailty of their position. In Balgami v. Court of

594
Appeals,19 the Court instructed the counsels to device a system to ensure that official
communications would be promptly received by them, lest, they will be chargeable with
negligence, thus:

x x x. The law office is mandated to adopt and arrange matters in order to ensure that
official or judicial communications sent by mail would reach the lawyer assigned to the
case. The court has time and again emphasized that the negligence of the clerks, which
adversely affect the cases handled by lawyers, is binding upon the latter. The doctrinal
rule is that negligence of the counsel binds the client because, otherwise, there would
never be an end to a suit so long as new counsel could be employed who could allege
and [prove] that prior counsel had not been sufficiently diligent, or experienced, or
learned.

Evidently, petitioners' counsel was wanting on this respect. Not only did petitioners'
counsel fail to device a system for the prompt and efficient receipt of mails intended for
her, she also failed to ensure that she could be notified of the decision as soon as
possible. As a practicing lawyer, petitioners' counsel should have been more
circumspect in monitoring official communications intended for her so as to avoid
situations like this, where a mail matter was inexplicably lost after delivery thereby
running the risk of losing a client's case on technicality. Petitioners' counsel cannot hide
behind the security guard's negligence to shield her even professional negligence in an
effort to seek reversal of a decision that has long attained finality. It bears stressing that
a decision had become final and executory without any party perfecting an appeal or
filing a motion for reconsideration within the reglementary period. It was only months
after its finality that questions assailing the Decision were raised.

Neither can petitioners exempt themselves or their properties from the operation of a
final and executory judgment by harping on their counsel's · negligence. Jurisprudence
is replete with pronouncements that clients are bound by the actions of their counsel in
the conduct of their case. If it were otherwise, and a lawyer's mistake or negligence was
admitted as a reason for the opening of the case, there would be no end to litigation so
long as counsel had not been sufficiently diligent or experienced or learned. 20 The only
exception to the general rule is when the counsel's actuations are gross or palpable,
resulting in serious injustice to client, that courts should accord relief to the
party.21 Indeed, if the error or negligence of the counsel did not result in the deprivation
of due process to the client, nullification of the decision grounded on grave abuse of
discretion is not warranted.22 The instant case does not fall within the exception since
petitioners were duly given their day in court.

Furthermore, it is a well-settled principle in this jurisdiction that a client is bound by the

action of his counsel in the conduct of the case and cannot be heard to complain that
the result might have been different had he · proceeded differently. 23 Every counsel has
the implied authority to do all acts which are necessary or, at least, incidental to the
prosecution and management of the suit in behalf of his client. And, any act performed
by · counsel within the scope of his general and implied authority is, in the eyes of law,
regarded as the act of the client himself and consequently, the mistake or negligence of

595
the client's counsel may result in the rendition of unfavorable judgment against him. 24 To
rule otherwise would result to a situation that every defeated party, in order to salvage
his case, would just have to claim neglect or mistake on the part of his counsel as a
ground for reversing an adverse judgment. There would be no end to litigation if this
were allowed as every shortcoming of counsel could be the subject of challenge of his
client through another counsel who, if he is also found wanting, would likewise be
disowned by the same client through another counsel, and so on ad infinitum. This
would render court proceedings indefinite, tentative and subject to reopening at any
time by the mere subterfuge of replacing counsel. 25

In fact, this is not the first time that the Court dismissed the claim of litigants that they
were denied their day in court by conveniently invoking the mistake of their counsel in
their vain effort to seek reversal of a judgment that has long become final and
executory. In Juani v. Alarcon,26 We struck down the ploy of the petitioner to prolong the
court process by unduly harping on his counsel's negligence to evade a valid obligation,
thus:

Clearly, this is an instance where the due process routine vigorously pursued by
Bienvenido Juani and his successor-in-interest is but a clear-cut afterthought meant to
delay the settlement of uncomplicated legal dispute. Aside from clogging the court
dockets, the strategy is deplorably a common curse resorted to by losing litigants in the
hope of evading manifest obligations. This Court will ever be vigilant to nip [in] the bud
any dilatory maneuver calculated to defeat or frustrate the ends of justice, fair play and
the prompt .implementation of final and executory judgments.

Truly, a litigant bears the responsibility to monitor the status of his case,. for no prudent
party leaves the fate of his case entirely in the hands of his lawyer.1âwphi1 It is the
client's duty to be in contact with his lawyer from time to time in order to be informed of
the progress and developments of his case; hence, .to merely rely on the bare
reassurance of his lawyer that everything is being taken care of is not enough. 27 Where
the party failed to act with prudence and diligence, its plea that it was not accorded the
right to due process cannot elicit this court's approval or even sympathy. 28

When a party lost the right to appeal on account of his own and his counsel's
negligence, and, as a result of which, a judgment has attained. finality, such party
cannot thereafter unduly burden the courts by endlessly pursuing the due process
routine in . an effort to frustrate the prompt implementation of final and executory
judgment. It must be emphasized that . the instant case stemmed from a simple judicial
foreclosure proceeding involving several parcels of land where the trial court, after
finding that petitioners admitted the material allegations in the complaint, rendered a
judgment on the pleadings.

Litigation must end and terminate sometime and somewhere, and it is essential to an
effective administration of justice that once a judgment has · become final the issue or
the cause involved therein should be laid to rest. This doctrine of finality of judgment is
grounded on fundamental consideration of public policy and sound practice. In fact,

596
nothing is more settled in law than that once a judgment attains finality it thereby
becomes immutable and unalterable. It may no longer be modified in any respect, even
if the modification is meant to correct what is perceived to be an erroneous conclusion
of fact and law, and regardless of whether the modification is attempted to be made by
the court rendering it or by the highest court of the land. 29 Just as a losing party has the
right to file an appeal within the' prescribed period, the winning party has the correlative
right to enjoy the finality of the resolution of his case by the execution and satisfaction of
the judgment, which is the "life of the law." 30 To frustrate it by dilatory scheme on the
part of the losing party is to frustrate all efforts, time and expenditure of the courts. It is
in the best interest of justice that this court write finis to this litigation. 31

WHEREFORE, premises considered, the petition is hereby DISMISSED. The assailed

Decision dated 29 November 2007 and · Resolution dated 28 April 2008 of the Court of
Appeals in CA-G.R. SP No. 86745 are hereby AFFIRMED.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 180993, January 27, 2016 ]
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE LAND REGISTRATION
AUTHORITY PETITIONER, VS. RAYMUNDO VIAJE, ET AL., RESPONDENTS.

DECISION
REYES, J.:
The Republic of the Philippines (Republic) filed the present Petition for Review
on Certiorari[1] under Rule 45 of the Rules of Court assailing the Court of Appeals' (CA)
Decision[2] dated November 28, 2007 in CA-G.R. SP No. 90102, dismissing its petition
for certiorari.

Facts

The Office of the Solicitor General (OSG), on behalf of the Republic and as represented
by the Land Registration Authority (LRA), filed on July 10, 2000 a complaint [3] for
Cancellation of Title and Reconveyance with the Regional Trial Court (RTC) of Trece
Martires City, docketed as Civil Case No. TM-1001 and raffled to Branch 23. The action
mainly sought the nullity of the transfer certificate of title (TCT) individually issued in the
name of the defendants therein, for having been issued in violation of law and for having
dubious origins. The titles were allegedly derived from TCT No. T-39046 issued on
October 1, 1969. TCT No. T-39046, in turn, was derived from Original Certificate of Title
(OCT) No. 114 issued on March 9, 1910 covering 342,842 square meters. The Republic
alleged, among others, that OCT No. 114 and the documents of transfer of TCT No. T-
39046 do not exist in the records of the Registers of Deeds of Cavite and Trece Martires
City.[4]

The OSG entered its appearance on August 7, 2001 and deputized Atty. Artemio C.

597
Legaspi and the members of the LRA legal staff to appear in Civil Case No. TM-1001,
with the OSG exercising supervision and control over its deputized counsel. [5] The OSG
also requested that notices of hearings, orders, decisions and other processes be
served on both the OSG and the deputized counsel. [6] The Notice of Appearance,
however, stated that "only notices of orders, resolutions, and decisions served on him
will bind the party represented."[7] Subsequently, Atty. Alexander N.V. Acosta (Atty.
Acosta) of the LRA entered his appearance as deputized LRA lawyer, pursuant to the
OSG Letter[8] dated August 7, 2001.[9] The letter also contained the statement, "only
notices of orders, resolutions and decisions served on him will bind the [Republic], the
entity, agency and/or official represented." [10]

Thereafter, several re-settings of the pre-trial date were made due to the absence of
either the counsel for the Republic or the counsel of one of the defendants, until finally,
on April 11, 2003, the RTC dismissed the complaint due to the non-appearance of the
counsel for the Republic.[11]

The OSG filed a motion for reconsideration,[12] which was granted by the RTC in its
Order dated July 22, 2003.[13] Pre-trial was again set and re-set, and on January 23,
2004, the RTC finally dismissed Civil Case No. TM-1001 with prejudice. [14] The order
reads, in part:
WHEREFORE, in view of the above, and upon motion of the defendants through
counsel, Atty. Eufracio C. Fortuno, let this case be, as it is hereby, DISMISSED with
prejudice.

SO ORDERED.[15]
Having been informed of this, the OSG forthwith filed a Manifestation and Motion,
[16]
 informing the RTC that Atty. Acosta was not given notice of the pre-trial schedule.
The OSG also stated that such lack of notice was pursuant to a verbal court order that
notice to the OSG is sufficient notice to the deputized counsel, it being the lead counsel,
and that they were not formally notified of such order. The OSG argued that its
deputized counsel should have been notified of the settings made by the trial court as it
is not merely a collaborating counsel who appears with an OSG lawyer during hearing;
rather, its deputized counsel appears in behalf of the OSG and should be separately
notified. Aside from this, the OSG pointed out that it particularly requested for a
separate notice for the deputy counsel. [17]

The RTC denied the OSG's Manifestation and Motion in its Order [18] dated May 31,
2004, from which the OSG filed a Notice of Appeal, [19] which was given due course by
the RTC.[20] Subsequently, the RTC, on motion of the defendants, issued Order [21] dated
October 4, 2004 recalling its previous order that gave due course to the OSG's appeal.
The ground for the recall was the OSG's failure to indicate in its notice of appeal the
court to which the appeal was being directed.[22] The OSG moved for the
reconsideration[23] of the order but it was denied by the RTC on March 16, 2005. [24]

Thus, the OSG filed a special civil action for certiorari with the CA. On November 28,
2007, the CA rendered the assailed decision dismissing the OSG's petition on the

598
grounds that the petition was filed one day late and the RTC did not commit any grave
abuse of discretion when it dismissed Civil Case No. TM-1001 and the OSG's notice of
appeal. It ruled that the OSG's failure to indicate in its notice of appeal the court to
which the appeal is being taken violated Section 5, Rule 41 of the Rules of Civil
Procedure, which provides, among others, that "[t]he notice of appeal shall x x x specify
the court to which the appeal is being taken x x x." The CA also ruled that the OSG
cannot claim lack of due process when its deputized counsel was not served a notice of
the pre-trial schedule. The CA disagreed with the OSG's contention that its deputized
counsel should have been notified. According to the CA, the OSG remains the principal
counsel of the Republic and it is service on them that is decisive, and having received
the notice of pre-trial, it should have informed its deputized counsel of the date. Aside
from this, the authority given by the OSG to its deputized counsel did not include the
authority to enter into a compromise agreement, settle or stipulate on facts and
admissions, which is a part of the pre-trial; hence, even if the deputized counsel was
present, the case would still be dismissed. [25]

The OSG is now before the Court arguing that:

THE APPELLATE COURT ERRED IN NOT HOLDING THAT RESPONDENT JUDGE
COMMITTED GRAVE ABUSE OF DISCRETION IN DISMISSING THE COMPLAINT
DESPITE THE JUSTIFIED FAILURE OF THE DEPUTIZED COUNSEL TO ATTEND
THE PRE-TRIAL.

THE APPELLATE COURT ERRED IN NOT HOLDING THAT RESPONDENT JUDGE

COMMITTED GRAVE ABUSE OF DISCRETION IN DISMISSING THE NOTICE OF
APPEAL.[26]
The OSG contends that the rule that notice to the OSG is sufficient notice to its
deputized counsel applies only to collaborating counsels who appear with the lead
counsel. In case of deputized counsels, a separate notice is necessary since they
appear in behalf of the OSG. Also, the OSG pointed out that it specifically requested
that separate notices be furnished to its deputized counsel. [27]

The OSG also argues that the RTC committed grave abuse of discretion when it
dismissed the notice of appeal despite the fact that the defendants did not ask for its
recall and merely sought clarification as to which court the case was being appealed to.
Moreover, the OSG maintains that its inadvertence is not fatal as it did not create any
ambiguity as to which court the appeal shall be made, and that the interest of due
process should prevail over an inadvertent violation of procedural rules. [28]

Ruling of the Court

The power of the OSG to deputize legal officers of government departments, bureaus,
agencies and offices to assist it in representing the government is well settled. The
Administrative Code of 1987 explicitly states that the OSG shall have the power to
"deputize legal officers of government departments, bureaus, agencies and offices to
assist the Solicitor General and appear or represent the Government in cases involving
their respective offices, brought before the courts and exercise supervision and control
over such legal officers with respect to such cases." [29] But it is likewise settled that the
599
OSG's deputized counsel is "no more than the 'surrogate' of the Solicitor General
in any particular proceeding" and the latter remains the principal counsel entitled
to be furnished copies of all court orders, notices, and decisions.[30] In this case,
records show that it was the OSG that first entered an appearance in behalf of the
Republic; hence, it remains the principal counsel of record. The appearance of the
deputized counsel did not divest the OSG of control over the case and did not make the
deputized special attorney the counsel of record. [31] Thus, the RTC properly acted within
bounds when it relied on the rule that it is the notice to the OSG that is binding. [32]

Nonetheless, the OSG also pointed out that it specifically requested the RTC to likewise
furnish its deputized counsel with a copy of its notices. Records show that the deputized
counsel also requested that copies of notices and pleadings be furnished to him.
[33]
 Despite these requests, it was only the OSG that the RTC furnished with copies of its
notices. It would have been more prudent for the RTC to have furnished the deputized
counsel of its notices. All the same, doing so does not necessarily clear the OSG from
its obligation to oversee the efficient handling of the case. And even if the deputized
counsel was served with copies of the court's notices, orders and decisions, these will
not be binding until they are actually received by the OSG. More so in this case where
the OSG's Notice of Appearance and its Letter deputizing the LRA even contained
the caveat that it is only notices of orders, resolutions and decisions served on the
OSG that will bind the Republic, the entity, agency and/or official represented.
[34]
 In fact, the proper basis for computing a reglementary period and for determining
whether a decision had attained finality is service on the OSG. [35] As was stated
in National Power Corporation v. National Labor Relations Commission:[36]
The underlying justification for compelling service of pleadings, orders, notices and
decisions on the OSG as principal counsel is one and the same. As the lawyer for the
government or the government corporation involved, the OSG is entitled to the
service of said pleadings and decisions, whether the case is before the courts or
before a quasi-judicial agency such as respondent commission. Needless to say,
a uniform rule for all cases handled by the OSG simplifies procedure, prevents
confusion and thus facilitates the orderly administration of justice.[37] (Emphasis
ours)
The CA, therefore, cannot be limited for upholding the RTC's dismissal of Civil Case No.
TM-1001 due to the failure of the counsel for the Republic to appear during pre-trial
despite due notice.

The Court, likewise, cannot attribute error to the CA when it affirmed the RTC's recall of
its order granting the OSG's notice of appeal. The RTC simply applied the clear
provisions of Section 5, Rule 41 of the Rules of Court, which mandated that a "notice of
appeal shall x x x specify the court to which the appeal is being taken x x x."

Nevertheless, under the circumstances obtaining in this case, the Court resolves to
relax the stringent application of the rules, both on the matter of service of notices to the
OSG and its deputized counsel, and on the notice of appeal. Such relaxation of the
rules is not unprecedented.

600
In Cariaga v. People of the Philippines,[38] the Court ruled that rules of procedure must
be viewed as tools to facilitate the attainment of justice such that its rigid and strict
application which results in technicalities tending to frustrate substantial justice must
always be avoided.[39] In Ulep v. People of the Philippines,[40] meanwhile, the Court
ordered the remand of the case to the proper appellate court, stating that the
"petitioner's failure to designate the proper forum for her appeal was inadvertent," and
that "[t]he omission did not appear to be a dilatory tactic on her part." [41]

Similarly in this case, the OSG's omission should not work against the Republic. For
one, the OSG availed of the proper remedy in seeking a review of the RTC's order of
dismissal by pursuing an ordinary appeal and filing a notice of appeal, albeit without
stating where the appeal will be taken. For another, it is quite elementary that an
ordinary appeal from a final decision/order of the RTC rendered in the exercise of its
original jurisdiction can only be elevated to the CA under Rule 41 of the Rules of Court.
[42]
 Moreover, as in Ulep, the OSG's failure to designate where the appeal will be taken
was a case of inadvertence and does not appear to be a dilatory tactic on its part. More
importantly, the OSG's omission should not redound to the Republic's disadvantage for
it is a well-settled principle that the Republic is never estopped by the mistakes or error
committed by its officials or agents.[43]

Finally, the subject matter of the case before the RTC - the recovery by the Republic of
a 342,842-sq m property in Cavite covered by an allegedly non-existent title -
necessitates a full-blown trial. To sustain the peremptory dismissal of Civil Case No.
TM-1001 due to the erroneous appreciation by the Republic's counsel of the applicable
rules of procedure is an abdication of the State's authority over lands of the public
domain.[44] Under the Regalian doctrine, "all lands of the public domain belong to the
State, and the State is the source of any asserted right to ownership in land and
charged with the conservation of such patrimony." The Court, therefore, must exercise
its equity jurisdiction and relax the rigid application of the rules where strong
considerations of substantial justice are manifest.[45]

WHEREFORE, the petition is GRANTED. The Decision dated November 28, 2007 of
the Court of Appeals in CA-G.R. SP No. 90102 is REVERSED and SET ASIDE. Civil
Case No. TM-1001 and all its records are REMANDED to the Regional Trial Court of
Trece Martires City, Branch 23, for further disposition on the merits.

The Office of the Solicitor General and its deputized counsel/s are advised to be more
circumspect in the performance of their duties as counsels for the Republic of the
Philippines.

SO ORDERED.

Velasco, Jr., (Chairperson), Peralta, Perez, and Jardeleza, JJ., concur.

February 16, 2016

601
 NOTICE OF JUDGMENT

Sirs / Mesdames:

Please take notice that on January 27, 2016 a Decision, copy attached hereto, was
rendered by the Supreme Court in the above-entitled case, the original of which was
received by this Office on February 16, 2016 at 10:00 a.m.

Very truly yours,

(SGD)WILFREDO V. LAPITAN
Division Clerk of Court

FIRST DIVISION

G.R. No. 206528, June 28, 2016

PHILIPPINE ASSET GROWTH TWO, INC. (SUCCESSOR-IN-INTEREST OF

PLANTERS DEVELOPMENT BANK) AND PLANTERS DEVELOPMENT
BANK, Petitioners, v. FASTECH SYNERGY PHILIPPINES, INC. (FORMERLY FIRST
ASIA SYSTEM TECHNOLOGY, INC.), FASTECH MICROASSEMBLY & TEST, INC.,
FASTECH ELECTRONIQUE, INC., AND FASTECH PROPERTIES,
INC., Respondents.

DECISION

PERLAS-BERNABE, J.:

For the Court's resolution is a petition for review on certiorari1 assailing the

Decision2 dated September 28, 2012 and the Resolution 3 dated March 5, 2013 of the
Court of Appeals (CA) in CA-G.R. SP No. 122836 which: (a) approved the
Rehabilitation Plan4 of respondents Fastech Synergy Philippines, Inc. (formerly First
Asia System Technology, Inc.) (Fastech Synergy), Fastech Microassembly & Test, Inc.
(Fastech Microassembly), Fastech Electronique, Inc. (Fastech Electronique), and
Fastech Properties, Inc. (Fastech Properties; collectively, respondents); (b) enjoined
petitioner Planters Development Bank (PDB) from effecting the foreclosure of
respondents' properties during the implementation thereof; and (c) remanded the case
to the Regional Trial Court (RTC) of Makati City, Branch 149 (RTC-Makati) to supervise
its implementation.

The Facts

On April 8, 2011, respondents filed a verified Joint Petition 5 for corporate rehabilitation
(rehabilitation petition) before the RTC-Makati, with prayer for the issuance of a Stay or
Suspension Order,6 docketed as SP Case No. M-7130. They claimed that: (a) their
business operations and daily affairs are being managed by the same individuals; 7 (b)

602
they share a majority of their common assets; 8 and (c) they have common creditors and
common liabilities.9chanrobleslaw

Among the common creditors listed in the rehabilitation petition was PDB, 10 which had
earlier filed a petition11 for extrajudicial foreclosure of mortgage over the two (2) parcels
of land, covered by Transfer Certificate of Title (TCT) Nos. T-458102 12 and T-
45810313 and registered in the name of Fastech Properties (subject properties), 14 listed
as common assets of respondents in the rehabilitation petition. 15 The foreclosure sale
was held on April 13, 2011, with PDB emerging as the highest bidder. 16 Respondents
claimed that this situation has impacted on their chance to recover from the losses they
have suffered over the years, since the said properties are being used by Fastech
Microassembly and Fastech Electronique17 in their business operations, and a source of
significant revenue for their owner-lessor, Fastech Properties. 18 Hence, respondents
submitted for the court's approval their proposed Rehabilitation Plan, 19 which sought: (a)
a waiver of all accrued interests and penalties; (b) a grace period of two (2) years to pay
the principal amount of respondents' outstanding loans, with the interests accruing
during the said period capitalized as part of the principal, to be paid over a twelve (12)-
year period after the grace period; and (c) an interest rate of four percent (4%) and two
percent (2%) per annum (p.a.) for creditors whose credits are secured by real estate
and chattel mortgages, respectively.20chanrobleslaw

On April 19, 2011, the RTC-Makati issued a Commencement Order with Stay
Order,21 and appointed Atty. Rosario S. Bernaldo as Rehabilitation Receiver, which the
latter subsequently accepted.22chanrobleslaw

After the initial hearing on May 18, 2011, and the filing of the comments/oppositions on
the rehabilitation petition,23 the RTC-Makati gave due course to the said petition, and,
thereafter, referred the same to the court-appointed Rehabilitation Receiver, who
submitted in due time her preliminary report,24 opining that respondents may be
rehabilitated, considering that their assets appear to be sufficient to cover their liabilities,
but reserved her comment to the Rehabilitation Plan's underlying assumptions, financial
goals, and procedures to accomplish said goals after the submission of a revised
rehabilitation plan as directed by the RTC-Makati, 25cralawred which respondents
subsequently complied.26chanrobleslaw

After the creditors had filed their respective comments and/or oppositions to the revised
Rehabilitation Plan, and respondents had submitted their consolidated reply 27 thereto,
the court-appointed Rehabilitation Receiver submitted her comments, 28 opining that
respondents may be successfully rehabilitated, considering the sufficiency of their
assets to cover their liabilities and the underlying assumptions, financial projections and
procedures to accomplish said goals in their Rehabilitation Plan. 29chanrobleslaw

The RTC-Makati Ruling

In a Resolution30 dated December 9, 2011, the RTC-Makati dismissed the rehabilitation

petition despite the favorable recommendation of its appointed Rehabilitation Receiver.
It found the facts and figures submitted by respondents to be unreliable in view of the
603
disclaimer of opinion of the independent auditors who reviewed respondents' 2009
financial statements,31 which it considered as amounting to a "straightforward
unqualified adverse opinion."32 In the same vein, it did not give credence to the
unaudited 2010 financial statements as the same were mere photocopied documents
and unsigned by any of respondents' responsible officers. 33 It also observed that
respondents added new accounts and/or deleted/omitted certain
accounts.34 Furthermore, it rejected the revised financial projections as the bases for
which were not submitted for its evaluation on the ground of
confidentiality.35chanrobleslaw

Aggrieved, respondents appealed36 to the CA, with prayer for the issuance of a
temporary restraining order (TRO) and/or a writ of preliminary injunction (WPI),
docketed as CA-G.R. SP No. 122836.

The Proceedings Before the CA

In a Resolution dated January 24, 2012, the CA issued a TRO 37 so as not to render
moot and academic the case before it in view of PDB's pending Ex-Parte Petition for
Issuance of a Writ of Possession over the subject properties before the RTC of Biñan,
Laguna, docketed as LRC Case No. B-5141.38 Thereafter, the CA issued a WPI39 on
March 22, 2012.

On April 30, 2012, the court-appointed Rehabilitation Receiver submitted a

manifestation40 before the CA, maintaining that the rehabilitation of respondents is
viable since the financial projections and procedures set forth to accomplish the goals in
their Rehabilitation Plan are attainable.41chanrobleslaw

After the creditors and respondents had filed their respective comments and reply to the
manifestation, the CA rendered a Decision42 dated September 28, 2012 (September 28,
2012 Decision), reversing and setting aside the RTC-Makati ruling. 43 It ruled that the
RTC-Makati grievously erred in disregarding the report/opinion of the Rehabilitation
Receiver that respondents may be successfully rehabilitated, despite being highly
qualified to make an opinion on accounting in relation to rehabilitation matters. 44 It
likewise observed that the RTC-Makati failed to distinguish the difference between an
adverse or negative opinion and a disclaimer or when an auditor cannot formulate an
opinion with exactitude for lack of sufficient data. 45 Finally, the CA declared that the
Rehabilitation Plan is feasible and should be approved, finding that respondents would
be able to meet their obligations to their creditors within their operating cash profits and
other assets without disrupting their business operations, which will be beneficial to their
creditors, employees, stockholders, and the economy. 46chanrobleslaw

Accordingly, the CA reinstated the rehabilitation petition, approved respondents'

Rehabilitation Plan, and remanded the case to the RTC-Makati to supervise its
implementation. Considering that respondents' creditors are placed in equal footing as a
necessary consequence, it permanently enjoined PDB from "effecting the foreclosure"
of the subject properties during the implementation of the Rehabilitation
Plan.47chanrobleslaw
604
Dissatisfied, PDB filed a motion for reconsideration 48 which was, however, denied in a
Resolution49 dated March 5, 2013 (March 5, 2013 Resolution).

In the interim, DivinaLaw entered50 its appearance as the new lead counsel of PDB, in
collaboration51 and with the conformity of its counsel of record, Janda Asia &
Associates.52 On April 3, 2013, DivinaLaw, on behalf of petitioner Philippine Asset
Growth Two, Inc. (PAGTI), filed a Motion for Substitution of Parties (motion for
substitution),53 averring that PAGTI had acquired PDB's claims and interests in the
instant case, hence, should be substituted as a party therein.

The Proceedings Before the Court

On April 18, 2013, PAGTI and PDB (petitioners), represented by DivinaLaw, filed the
instant petition, claiming that PDB received a copy of the March 5, 2013 Resolution on
April 3, 2013.54chanrobleslaw

On July 10, 2013, respondents filed their Urgent Motion to Dismiss Petition for Review
on Certiorari for Being Filed Out of Time55 (urgent motion), positing that contrary to
petitioners' claim that PDB received notice of the March 5, 2013 Resolution on April 3,
2013, its counsel, Janda Asia & Associates, already received a Copy of the said
resolution on March 12, 2013. Thus, petitioners only had until March 27, 2013 to file a
petition for review on certiorari before the Court, and the petition filed on April 18, 2013
was filed out of time.56chanrobleslaw

Meanwhile, the Court required respondents to file their comment 57 to the petition, and
subsequently directed petitioners to submit their comment on respondents' urgent
motion, and reply to the latter's comment. 58chanrobleslaw

In their Comment,59 respondents prayed for the dismissal of the petition and reiterated
their stand that the same was filed out of time, arguing that the receipt of the March 5,
2013 Resolution on March 12, 2013 by Janda Asia & Associates, which remained as
collaborating counsel of PDB, binds petitioners and started the running of the fifteen
(15)-day period within which to file a petition for review on certiorari before the Court.
Thus, the petition filed on April 18, 2013 was filed beyond the reglementary
period.60 Respondents likewise maintained the viability of the rehabilitation plan, which
will benefit not only their employees, but their stockholders, creditors, and the general
public.61chanrobleslaw

For their part, petitioners contended62 that: (a) the date of receipt of petitioners' lead
counsel, i.e., DivinaLaw's receipt of the March 5, 2013 Resolution, should be the
reckoning point of the fifteen (15)-day period within which to file the instant petition,
since only the lead counsel is entitled to service of court processes, 63 citing the case
of Home Guaranty Corporation v. R-II Builders, Inc.;64 and (b) the CA erred in not
upholding the dismissal of the rehabilitation petition despite the insufficiency of the
Rehabilitation Plan which was based on financial statements that contained misleading
statements, and financial projections that are mere unfounded
605
assumptions/speculations.65chanrobleslaw

Thereafter, respondents filed a Manifestation and Update (Re: Compliance to [the CA]
Decision dated September 28, 2012)66 before the Court, stating that it had achieved the
EBITDA67 requirement of the Rehabilitation Plan and made quarterly payments in favor
of the bank and non-bank creditors from December 28, 2014 to September 28, 2015,
totalling P27,119,481.79.68 However, the amount of P8,364,836.53 in favor of PDB was
not accepted, and is being held by respondents. 69chanrobleslaw

The Issues Before the Court

The essential issues for the Court's resolution are: (a) whether or not the petition for
review on certiorari was timely filed; and (b) the Rehabilitation Plan is feasible.
The Court's Ruling

I.
The Court first resolves the procedural issue anent the timeliness of the petition's filing.

It is a long-standing doctrine that where a party is represented by several counsels,

notice to one is sufficient, and binds the said party. 70 Notice to any one of the several
counsels on record is equivalent to notice to all, and such notice starts the running of
the period to appeal notwithstanding that the other counsel on record has not received a
copy of the decision or resolution.71chanrobleslaw

In the present case, PDB was represented by both Janda Asia & Associates and
DivinaLaw. It was not disputed that Janda Asia & Associates, which remained a counsel
of record, albeit, as collaborating counsel, received notice of the CA's March 5, 2013
Resolution on March 12, 2013. As such, it is from this date, and not from DivinaLaw's
receipt of the notice of said resolution on April 3, 2013 that the fifteen (15)-day
period72 to file the petition for review on certiorari before the Court started to run.

Hence, petitioners only had until March 27, 2013 to file a petition for review
on certiorari before the Court, and the petition filed on April 18, 2013 was filed out of
time. Notably, there is no showing that the CA had already resolved PAGTI's motion for
substitution;73 hence, it remained bound by the proceedings and the judgment rendered
against its transferor, PDB.

Generally, the failure to perfect an appeal in the manner and within the period provided
for by law renders the decision appealed from final and executory, 74 and beyond the
competence of the Court to review. However, the Court has repeatedly relaxed this
procedural rule in the higher interest of substantial justice. In Barnes v. Padilla,75 it was
held that:ChanRoblesVirtualawlibrary
[A] final and executory judgment can no longer be attacked by any of the parties or be
modified, directly or indirectly, even by the highest court of the land.

However, this Court has relaxed this rule in order to serve substantial justice[,]

606
considering (a) matters of life, liberty, honor or property, (b) the existence of special or
compelling circumstances, (c) the merits of the case, (d) a cause not entirely attributable
to the fault or negligence of the party favored by the suspension of the rules, (e) a lack
of any showing that the review sought is merely frivolous and dilatory, and (f) the other
party will not be unjustly prejudiced thereby. 76chanroblesvirtuallawlibrary
After a meticulous scrutiny of this case, the Court finds that the unjustified rehabilitation
of respondents, by virtue of the CA ruling if so allowed to prevail, warrants the relaxation
of the procedural rule violated by petitioners in the higher interest of substantial justice.
The reasons therefor are hereunder explained.

II.

Rehabilitation is statutorily defined under Republic Act No. 10142, 77 otherwise known as
the "Financial Rehabilitation and Insolvency Act of 2010" (FRIA), as
follows:ChanRoblesVirtualawlibrary
Section 4. Definition of Terms. - As used in this Act, the term: x x x x

(gg) Rehabilitation shall refer to the restoration of the debtor to a condition of

successful operation and solvency, if it is shown that its continuance of operation is
economically feasible and its creditors can recover by way of the present value of
payments projected in the plan, more if the debtor continues as a going concern than if
it is immediately liquidated. (Emphasis supplied)
Case law explains that corporate rehabilitation contemplates a continuance of corporate
life and activities in an effort to restore and reinstate the corporation to its former
position of successful operation and solvency, the purpose being to enable the
company to gain a new lease on life and allow its creditors to be paid their claims
out of its earnings.78 Thus, the basic issues in rehabilitation proceedings concern the
viability and desirability of continuing the business operations of the distressed
corporation,79 all with a view of effectively restoring it to a state of solvency or to its
former healthy financial condition through the adoption of a rehabilitation plan.

III.

In the present case, however, the Rehabilitation Plan failed to comply with the minimum
requirements, i.e.: (a) material financial commitments to support the rehabilitation plan;
and (b) a proper liquidation analysis, under Section 18, Rule 3 of the 2008 Rules of
Procedure on Corporate Rehabilitation 80 (Rules), which Rules were in force at the time
respondents' rehabilitation petition was filed on April 8,
2011:ChanRoblesVirtualawlibrary
Section 18. Rehabilitation Plan. - The rehabilitation plan shall include (a) the desired
business targets or goals and the duration and coverage of the rehabilitation; (b) the
terms and conditions of such rehabilitation which shall include the manner of its
implementation, giving due regard to the interests of secured creditors such as, but not
limited, to the non-impairment of their security liens or interests; (c) the material
financial commitments to support the rehabilitation plan; (d) the means for the
execution of the rehabilitation plan, which may include debt to equity conversion,

607
restructuring of the debts, dacion en pago or sale or exchange or any disposition of
assets or of the interest of shareholders, partners or members; (e) a liquidation
analysis setting out for each creditor that the present value of payments it would
receive under the plan is more than that which it would receive if the assets of the
debtor were sold by a liquidator within a six-month period from the estimated
date of filing of the petition; and (f) such other relevant information to enable a
reasonable investor to make an informed decision on the feasibility of the rehabilitation
plan. (Emphases supplied)
The Court expounds.

A. Lack of Material Financial Commitment to Support the Rehabilitation Plan.

A material financial commitment becomes significant in gauging the resolve,

determination, earnestness, and good faith of the distressed corporation in financing the
proposed rehabilitation plan. This commitment may include the voluntary
undertakings of the stockholders or the would-be investors of the debtor-corporation
indicating their readiness, willingness, and ability to contribute funds or property to
guarantee the continued successful operation of the debtor-corporation during
the period of rehabilitation.81chanrobleslaw

In this case, respondents' Chief Operating Officer, Primo D. Mateo, Jr., in his executed
Affidavit of General Financial Condition82 dated April 8, 2011, averred that
respondents will not require the infusion of additional capital as he, instead, proposed to
have all accrued penalties, charges, and interests waived, and a reduced interest rate
prospectively applied to all respondents' obligations, in addition to the implementation of
a two (2)-year grace period.83 Thus, there appears to be no concrete plan to build on
respondents' beleaguered financial position through substantial investments as the plan
for rehabilitation appears to be pegged merely on financial reprieves. Anathema to the
true purpose of rehabilitation, a distressed corporation cannot be restored to its former
position of successful operation and regain solvency by the sole strategy of delaying
payments/waiving accrued interests and penalties at the expense of the creditors.

The Court also notes that while respondents have substantial total assets, a large
portion of the assets of Fastech Synergy84 and Fastech Properties85 is comprised of
noncurrent assets,86 such as advances to affiliates which include Fastech
Microassembly,87 and investment properties which form part of the common assets of
Fastech Properties, Fastech Electronique, and Fastech Microassembly. 88 Moreover,
while there is a claim that unnamed customers have made investments by way of
consigning production equipment, and advancing money to fund procurement of various
equipment intended to increase production capacity, 89 this can hardly be construed as a
material financial commitment which would inspire confidence that the rehabilitation
would turn out to be successful. Case law holds that nothing short of legally binding
investment commitment/s from third parties is required to qualify as a material financial
commitment.90 Here, no such binding investment was presented.

B. Lack of Liquidation Analysis.

608
Respondents likewise failed to include any liquidation analysis in their Rehabilitation
Plan. The total liquidation assets and the estimated liquidation return to the creditors, as
well as the fair market value vis-a-vis the forced liquidation value of the fixed assets
were not shown. As such, the Court could not ascertain if the petitioning debtor's
creditors can recover by way of the present value of payments projected in the plan,
more if the debtor continues as a going concern than if it is immediately liquidated. This
is a crucial factor in a corporate rehabilitation case, which the CA, unfortunately, failed
to address.

C. Effect of Non-Compliance.

The failure of the Rehabilitation Plan to state any material financial commitment to
support rehabilitation, as well as to include a liquidation analysis, renders the CA's
considerations for approving the same, i.e., that: (a) respondents would be able to meet
their obligations to their creditors within their operating cash profits and other assets
without disrupting their business operations; (b) the Rehabilitation Receiver's opinion
carries great weight; and (c) rehabilitation will be beneficial for respondents' creditors,
employees, stockholders, and the economy,91 as actually unsubstantiated, and hence,
insufficient to decree the feasibility of respondents' rehabilitation. It is well to emphasize
that the remedy of rehabilitation should be denied to corporations that do not qualify
under the Rules. Neither should it be allowed to corporations whose sole purpose is to
delay the enforcement of any of the rights of the creditors.

Even if the Court were to set aside the failure of the Rehabilitation Plan to comply with
the fundamental requisites of material financial commitment to support the rehabilitation
and an accompanying liquidation analysis, a review of the financial documents
presented by respondents fails to convince the Court of the feasibility of the proposed
plan.

IV.

The test in evaluating the economic feasibility of the plan was laid down in Bank of the
Philippine Islands v. Sarabia Manor Hotel Corporation 92 (Bank of the Philippine Islands),
to wit:ChanRoblesVirtualawlibrary
In order to determine the feasibility of a proposed rehabilitation plan, it is imperative that
a thorough examination and analysis of the distressed corporation's financial data must
be conducted. If the results of such examination and analysis show that there is a real
opportunity to rehabilitate the corporation in view of the assumptions made and financial
goals stated in the proposed rehabilitation plan, then it may be said that a rehabilitation
is feasible. In this accord, the rehabilitation court should not hesitate to allow the
corporation to operate as an on-going concern, albeit under the terms and conditions
stated in the approved rehabilitation plan. On the other hand, if the results of the
financial examination and analysis clearly indicate that there lies no reasonable
probability that the distressed corporation could be revived and that liquidation would, in
fact, better subserve the interests of its stakeholders, then it may be said that a

609
rehabilitation would not be feasible. In such case, the rehabilitation court may convert
the proceedings into one for liquidation.93chanroblesvirtuallawlibrary
In the recent case of Viva Shipping Lines, Inc. v. Keppel Philippines Mining, Inc.,94 the
Court took note of the characteristics of an economically feasible rehabilitation plan as
opposed to an infeasible rehabilitation plan:ChanRoblesVirtualawlibrary
Professor Stephanie V. Gomez of the University of the Philippines College of Law
suggests specific characteristics of an economically feasible rehabilitation plan:

a. The debtor has assets that can generate more cash if used in its daily
operations than if sold.

b. Liquidity issues can be addressed by a practicable business plan that will

generate enough cash to sustain daily operations.

c. The debtor has a definite source of financing for the proper and full
implementation of a Rehabilitation Plan that is anchored on realistic
assumptions and goals.

These requirements put emphasis on liquidity: the cash flow that the distressed
corporation will obtain from rehabilitating its assets and operations. A corporation's
assets may be more than its current liabilities, but some assets may be in the form of
land or capital equipment, such as machinery or vessels. Rehabilitation sees to it that
these assets generate more value if used efficiently rather than if liquidated.

On the other hand, this court enumerated the characteristics of a rehabilitation plan that
is infeasible:

chanRoblesvirtualLawlibrary
(a) the absence of a sound and workable business plan;
(b) baseless and unexplained assumptions, targets and goals;
(c) speculative capital infusion or complete lack thereof for the execution of the
business plan;
(d) cash flow cannot sustain daily operations; and
(e) negative net worth and the assets are near full depreciation or fully depreciated.

In addition to the tests of economic feasibility, Professor Stephanie V. Gomez also

suggests that the Financial and Rehabilitation and Insolvency Act of 2010 emphasizes
on rehabilitation that provides for better present value recovery for its creditors.

Present value recovery acknowledges that, in order to pave way for rehabilitation, the
creditor will not be paid by the debtor when the credit falls due. The court may order a
suspension of payments to set a rehabilitation plan in motion; in the meantime, the
creditor remains unpaid. By the time the creditor is paid, the financial and economic

610
conditions will have been changed. Money paid in the past has a different value in the
future. It is unfair if the creditor merely receives the face value of the debt. Present value
of the credit takes into account the interest that the amount of money would have
earned if the creditor were paid on time.

Trial courts must ensure that the projected cash flow from a business' rehabilitation plan
allows for the closest present value recovery for its creditors. If the projected cash flow
is realistic and allows the corporation to meet all its obligations, then courts should favor
rehabilitation over liquidation. However, if the projected cash flow is unrealistic, then
courts should consider converting the proceedings into that for liquidation to protect the
creditors.95chanroblesvirtuallawlibrary
A perusal of the 2009 audited financial statements shows that respondents' cash
operating position96 was not even enough to meet their maturing obligations. Notably,
their current assets were materially lower than their current liabilities, 97 and consisted
mostly of advances to related parties in the case of Fastech Microassembly, Fastech
Electronique, and Fastech Properties.98 Moreover, the independent auditors recognized
the absence of available historical or reliable market information to support the
assumptions made by the management to determine the recoverable amount (value in
use) of respondents' properties and equipment. 99chanrobleslaw

On the other hand, respondents' unaudited financial statements for the year 2010, and
the months of February and March 2011 were unaccompanied by any notes or
explanation on how the figures were arrived at. Besides, respondents' cash operating
position remained insufficient to meet their maturing obligations as their current assets
are still substantially lower than their current liabilities. 100 The Court also notes the RTC-
Makati's observation that respondents added new accounts and/or deleted/omitted
certain accounts,101 but failed to explain or justify the same.

Verily, respondents' Rehabilitation Plan should have shown that they have enough
serviceable assets to be able to continue its business operation. In fact, as opposed to
this objective, the revised Rehabilitation Plan still requires "front load Capex spending"
to replace common equipment and facility equipment to ensure sustainability of capacity
and capacity robustness,102 thus, further sacrificing respondents' cash flow. In addition,
the Court is hard-pressed to see the effects of the outcome of the streamlining of
respondents' manufacturing operations on the carrying value of their existing properties
and equipment.

In fine, the Rehabilitation Plan and the financial documents submitted in support thereof
fail to show the feasibility of rehabilitating respondents' business.

V.

The CA's reliance on the expertise of the court-appointed Rehabilitation Receiver, who
opined that respondents' rehabilitation is viable, in order to justify its finding that the
financial statements submitted were reliable, overlooks the fact that the determination of
the validity and the approval of the rehabilitation plan is not the responsibility of the

611
rehabilitation receiver, but remains the function of the court. The rehabilitation receiver's
duty prior to the court's approval of the plan is to study the best way to rehabilitate the
debtor, and to ensure that the value of the debtor's properties is reasonably maintained;
and after approval, to implement the rehabilitation plan. 103 Notwithstanding the
credentials of the court-appointed rehabilitation receiver, the duty to determine the
feasibility of the rehabilitation of the debtor rests with the court. While the court may
consider the receiver's report favorably recommending the debtor's rehabilitation, it is
not bound thereby if, in its judgment, the debtor's rehabilitation is not feasible.

The purpose of rehabilitation proceedings is not only to enable the company to gain a
new lease on life, but also to allow creditors to be paid their claims from its earnings
when so rehabilitated. Hence, the remedy must be accorded only after a judicious
regard of all stakeholders' interests; it is not a one-sided tool that may be graciously
invoked to escape every position of distress.104 Thus, the remedy of rehabilitation should
be denied to corporations whose insolvency appears to be irreversible and whose sole
purpose is to delay the enforcement of any of the rights of the creditors, which is
rendered obvious by: (a) the absence of a sound and workable business plan; (b)
baseless and unexplained assumptions, targets, and goals; and (c) speculative capital
infusion or complete lack thereof for the execution of the business plan, 105 as in this
case.

VI.

In view of all the foregoing, the Court is therefore constrained to grant the instant
petition, notwithstanding the preliminary technical error as above-discussed. A
distressed corporation should not be rehabilitated when the results of the financial
examination and analysis clearly indicate that there lies no reasonable probability that it
may be revived, to the detriment of its numerous stakeholders which include not only
the corporation's creditors but also the public at large. In Bank of the Philippine
Islands:106
Recognizing the volatile nature of every business, the rules on corporate rehabilitation
have been crafted in order to give companies sufficient leeway to deal with debilitating
financial predicaments in the hope of restoring or reaching a sustainable operating form
if only to best accommodate the various interests of all its stakeholders, may it be the
corporation's stockholders, its creditors, and even the general
public.107chanroblesvirtuallawlibrary
Thus, the higher interest of substantial justice will be better subserved by the reversal of
the CA Decision. Since the rehabilitation petition should not have been granted in the
first place, it is of no moment that the Rehabilitation Plan is currently under
implementation. While payments in accordance with the Rehabilitation Plan were
already made, the same were only possible because of the financial reprieves and
protracted payment schedule accorded to respondents, which, as above-intimated, only
works at the expense of the creditors and ultimately, do not meet the true purpose of
rehabilitation.

WHEREFORE, the petition is GRANTED. The Decision dated September 28, 2012 and

612
the Resolution dated March 5, 2013 of the Court of Appeals in CA-G.R. SP No. 122836
are hereby REVERSED and SET ASIDE. Accordingly, the Joint Petition for corporate
rehabilitation filed by respondents Fastech Synergy Philippines, Inc. (formerly First Asia
System Technology, Inc.), Fastech Microassembly & Test, Inc., Fastech Electronique,
Inc., and Fastech Properties, Inc., before the Regional Trial Court of Makati City, Branch
149 in SP Case No. M-7130 is DISMISSED.

SO ORDERED.chanRoblesvirtualLawlibrary
RULE 14. SERVICE OF SUMMONS
SECOND DIVISION
[ G.R. No. 183182, September 01, 2010 ]
GENTLE SUPREME PHILIPPINES, INC., PETITIONER, VS. RICARDO F.
CONSULTA, RESPONDENT.

DECISION
ABAD, J.:
This case is about the service of summons on a corporation and its officers, allegedly
done improperly, resulting in the failure of the trial court to acquire jurisdiction over the
persons of the defendants and in the nullity of its proceedings.

The Facts and the Case

On September 29, 2005 petitioner Gentle Supreme Philippines, Inc. (GSP) filed a
collection case with application for a writ of preliminary attachment [1] against Consar
Trading Corporation (CTC), its president, respondent Ricardo Consulta (Consulta), and
its vice-president, Norberto Sarayba (Sarayba) before the Regional Trial Court (RTC) of
Pasig City, Branch 68, in Civil Case 70544.  GSP alleged that CTC, through Consulta
and Sarayba, bought certain merchandise from it but refused to pay for them.

Before summons could be served, the RTC issued a writ of preliminary

attachment[2] against the defendants after GSP filed the required bond. [3]  Afterwards,
the RTC issued summons against the defendants.

On October 11, 2005 as the sheriff failed to serve the summons and copies of the
complaint on any of CTC's authorized officers as well as on Consulta and Sarayba, he
left copies of such documents with Agnes Canave (Canave) who, according to the
sheriff's return,[4] was Sarayba's secretary and an authorized representative of both
Sarayba and Consulta.

None of the defendants filed an answer to the complaint.  Thus, upon motion,[5] on
November 18, 2005 the RTC declared them in default [6] and proceeded to hear GSP's
evidence ex parte.  Meanwhile, the sheriff attached a registered land [7] belonging to
Consulta.[8]  After trial, the RTC ruled that having defrauded GSP, defendants CTC,
Consulta, and Sarayba were solidarily liable for the value of the supplied goods plus
attorney's fees and costs of the suit.[9]  And upon motion, on January 25, 2006 the RTC

613
issued a writ of execution against the defendants. [10]

On June 9, 2006 respondent Consulta filed a petition for annulment of the RTC decision
before the Court of Appeals (CA) in CA-G.R. SP 94817. [11]  He alleged 1) that he found
out about the case against him only on May 19, 2006 when he received a notice of sale
on execution of his house and lot in Marikina City; and 2) that he was not properly
served with summons because, although his address stated in the complaint was his
regular place of business, Canave, who received the summons, was not in charge of
the matter.

Consulta invoked the Court's ruling in Keister v. Judge Navarro,[12] that "the rule (on
substituted service) presupposes that such relation of confidence exists between the
person with whom the copy is left and the defendant and, therefore, assumes that such
person will deliver the process to defendant or in some way give him notice thereof." 
Consulta claimed that Canave was only Sarayba's secretary.  Thus, neither the sheriff
nor the RTC had basis for assuming that Canave would find a way to let Consulta know
of the pending case against him. Consulta concluded that the RTC did not acquire
jurisdiction over his person.

In its answer to the petition,[13] GSP insisted on the validity of the service of summons on
Consulta.  Also, assuming that summons was not properly served, Consulta's ignorance
was contrived. His knowledge of the case against him may be proved by the following
circumstances:

1. On February 25, 2006 CTC faxed GSP a letter proposing a schedule of payment for
the adjudged amounts in the RTC decision. Admittedly, it was only Sarayba who signed
the letter. By the rules of evidence, however, the act and declaration of a joint debtor is
binding upon a party.[14]  This means that Sarayba's knowledge and admission of the
case and the defendants' corresponding liability to GSP was binding on Consulta.
Besides, Consulta, together with Sarayba, signed the postdated checks as partial
payment of CTC's obligation to GSP;

2. The RTC's sheriff garnished CTC's bank accounts on the day the summons was
served.  As company president, it was incredulous that Consulta was unaware of the
garnishment and the reason for it;

3. Consulta admitted that CTC was properly served with summons through Canave.  By
that statement, it can be deduced that Canave was in charge of the office, Consulta's
regular place of business, signifying proper service of the summons on him.

On March 18, 2008 the CA rendered a decision, holding that the RTC sheriff did not
properly serve summons on all the defendants.  It ordered the remand of the case to the
trial court, enjoining it to take steps to insure the valid service of summons on them. [15]

Respondent Consulta filed a motion for partial reconsideration of the decision but the
CA denied it for being late. Petitioner GSP also filed a motion for

614
reconsideration[16] which the CA denied on May 29, 2008 for lack of merit, [17] hence, this
petition.

The Issue Presented

The sole issue presented in this case is whether the CA correctly ruled that summons
had not been properly served on respondent Consulta with the result that the RTC did
not acquire jurisdiction over his person and that the judgment against him was void.

The Ruling of the Court

First of all, only Consulta brought an action for the annulment of the RTC decision.  CTC
and Sarayba did not. Consequently, the CA had no business deciding whether or not
the latter two were properly served with summons. The right to due process must be
personally invoked and its circumstances specifically alleged by the party claiming to
have been denied such. [18]

Second, there is valid substituted service of summons on Consulta at his place of

business with some competent person in charge thereof. According to the sheriff's
return, which is prima facie evidence of the facts it states,[19] he served a copy of the
complaint on Canave, an authorized representative of both Consulta and Sarayba.
[20]
 Besides Consulta's bare allegations, he did not present evidence to rebut the
presumption of regularity on the manner that the sheriff performed his official duty.
[21]
 Nor did Consulta present clear and convincing evidence that Canave was not
competent to receive the summons and the attached documents for him.

In fact, in his petition for annulment of judgment, Consulta said that CTC had been
apprised of the civil action through Canave. [22] In other words, Canave was a person
charged with authority to receive court documents for the company as well as its officers
who held office in that company. Absent contrary evidence, the veracity of the return's
content and its effectiveness stand.

Further, this Court has ruled that "it is not necessary that the person in charge of the
defendant's regular place of business be specifically authorized to receive the
summons.  It is enough that he appears to be in charge." [23] In this case, Canave, a
secretary whose job description necessarily includes receiving documents and other
correspondence, would have the semblance of authority to accept the court documents.

It is true that this Court emphasized the importance of strict and faithful compliance in
effecting substituted service.[24] It must, however, be reiterated that when the rigid
application of rules becomes a conduit for escaping one's responsibility, the Court will
intervene to set things right according to the rules. [25]

Further, Consulta does not deny a) that summons had been properly served on
Sarayba, his vice-president, through Canave at the company's office; b) that the
summons on him was served on the same occasion also through Canave; c) that the
sheriff had succeeded in garnishing his company's bank deposits; and d) that his

615
company subsequently made an offer to settle the judgment against it.  The Court is not
dumb as to believe that Consulta became aware of the suit only when the sheriff served
a notice of execution sale covering his house and lot.

WHEREFORE, premises considered, the Court REVERSES the Court of Appeals'

Decision in CA-G.R. SP 94817 dated March 17, 2008 and REINSTATES the Regional
Trial Court's Decision in Civil Case 70544 dated December 14, 2005.

SO ORDERED.
SECOND DIVISION
[ G.R. No. 200693, April 18, 2016 ]
NENA C. ANG, SPOUSES RENATO C. ANG AND PAULINE ANG, SPOUSES
GUILLERMO SY AND ALISON ANG-SY, NELSON C. ANG, RICKY C. ANG, AS
SUBSTITUTED BY HIS HEIRS, AND MELINDA C. ANG, PETITIONERS, VS.
CHINATRUST (PHILIPPINES) COMMERCIAL BANK CORPORATION AND THE
ASIAN DEBT FUND, RESPONDENTS.

DECISION
BRION, J.:
This petition for review on certiorari seeks to reverse the April 29, 2011 decision and
January 30, 2012 resolution of the Court of Appeals (CA) in CA-G.R. SP No. 99391.
[1]
 The CA only partly granted the petitioners' petition for certiorari against the May 17,
2007 order of the Regional Trial Court of Makati City (RTC), Branch 56 in Civil Case
No. 06-872.[2] The RTC denied the petitioners' motion to dismiss the complaint for lack
of jurisdiction over their person.

ANTECEDENTS

On October 11, 2006, respondent Chinatrust (Philippines) Banking Corporation

(Chinatrust) filed a money claim (with an application for the issuance of a writ of
preliminary attachment) amounting to US $458,614.84 against Nation Petroleum
Corporation (Nation) and petitioners Mario Ang, Nena Ang, Renato Ang, Pauline Ang,
Guillermo Sy, Alison Ang-Sy, Nelson Ang, Ricky Ang, and Melinda Ang (collectively the
defendants). The complaint was filed before the RTC and docketed as Civil Case No.
06-872.

On October 12, 2006, the RTC, through its Branch Clerk of Court Atty. Richard C.
Jamora issued summonses to the defendants. The summonses indicated Nation's
address as "Ground Floor, BPI Building, Rizal Street, Candelaria Quezon and/or
39th Floor, Yuchengco Tower, RCBC Plaza, 6819 Ayala Avenue corner Sen. Gil J.
Puyat Avenue, Makati City." It also indicated the address of the individual defendants as
"39th Floor, Yuchengco Tower, RCBC Plaza, 6819 Ayala Avenue corner Sen. Gil J.
Puyat Avenue, Makati City."

The RTC heard ex parte the application for a preliminary attachment on October 18,
2006. On October 27, 2006, the RTC granted Chinatrust's application for a writ of
616
attachment conditioned on its posting of a P25,000,000.00 bond.

On November 6, 2006, Process Server Joseph R. Dela Cruz and Assisting Sheriff
Robert V. Alejo executed an Officer's Return reporting their service of the summons. It
reads:
That on 30 October 2006, the undersigned Process Server of this Court together with
one of the assisting Sheriff Robert V. Alejo, and plaintiffs counsel and its representative
served the copy of summons together with complaint, its annexes, writ, order and bond,
upon defendants at 39th Floor, Yuchengco Tower, RCBC Plaza, 6819 Ayala Ave. cor.
Sen. Gil J. Puyat Ave., Makati City, thru Mr. RICKY ANG, personally, who
acknowledged receipt thereof but refused to sign in the original copy of summons, and
the receptionist of the said firm informed that the other defendants have not yet arrived
and it would be better if we will return in the afternoon.

That in the afternoon on even date, said processes were served thru Ms. MELINDA
ANG, Corporate Secretary of defendant NATION PETROLEUM CORPORATION and
instructed Ms. Charlotte Magpayo, Administrative Assistant of the said corporation to
received [sic] the same.

That despite diligent efforts to locate the whereabouts of the other defendants MARIO
ANG, NENA ANG, RENATO ANG, PAULINE ANG, GUILLERMO SY, ALISON ANG-SY
and NELSON ANG outside the premises of their office, considering that said process
server and his group were not allowed to enter, substituted service was made by
leaving their respective court processes at their office or regular place of business
through the same Ms. Charlotte Magpayo by affixing the "receiving stamp" of Nation
Petroleum and her notation, as shown in the original copy of summons. [3]
On November 21, 2006, the defendants entered a Special Appearance with a Motion to
Dismiss the case for lack of jurisdiction. [4] The defendants argued: (1) that the RTC
failed to acquire jurisdiction over Nation because service of summons was made on
Charlotte Magpayo, a mere property supply custodian, [5] instead of the president,
managing partner, general manager, corporate secretary, or in-house counsel; [6] and (2)
that the individual defendants were not validly served summons [7] because (3) the
process server improperly resorted to substituted service and failed to comply with its
strict requirements.[8]

Chinatrust opposed the Motion to Dismiss,[9] insisting: (1) that Nation was validly served
summons because as a property supply custodian, Magpayo occupies a very
responsible position that enjoys the highest degree of trust and confidence; [10] (2) that
the individual defendants likewise authorized Magpayo to receive the summons on their
behalf;[11] (3) that the process server properly resorted to substituted service; [12] and (4)
that Ricky Ang is estopped from contesting the validity of substituted service because
he was served in person.[13]

On May 17, 2007, the RTC denied the defendants' Motion to Dismiss. The RTC held
that Nation's corporate secretary Melinda Ang authorized Charlotte Magpayo as her
agent for the limited purpose of receiving the summons. [14] It further held that Melinda's

617
denial of this fact is self-serving as she was never presented in court for cross-
examination.

The RTC also held that Ricky Ang was validly served summons because he
acknowledged receipt of the process even though he refused to sign the original copy.
[15]

With respect to the remaining defendants, the RTC held that the process server's resort
to substituted service on Charlotte Magpayo was warranted. The Court found: (1) that
the process server and his group attempted to serve summons on the defendants on
the morning of October 30, 2006 at their place of work; (2) that aside from Mr. Ricky
Ang, the defendants had not yet arrived; (3) that the process server left and exerted
diligent efforts to locate the defendants' whereabouts; (4) that he returned to the
defendants' office on the afternoon of the same day but was denied entry to the
defendants' offices; and (5) therefore, he was forced to resort to substituted service
through Charlotte Magpayo.[16]

On June 22, 2007, the defendants filed a petition for certiorari before the CA challenging
the RTC's jurisdiction over them. The petition was docketed as CA-G.R. SP No. 99391.

In the meantime, Chinatrust assigned its rights to the trust receipt subject of Civil Case
No. 06-872 to respondent The Asian Debt Fund, Ltd. (ADF). Thus, the CA allowed ADF
to be substituted for Chinatrust on March 9, 2010.

On April 29, 2011, the CA affirmed the RTC's May 17, 2007 order but dismissed the suit
as against Nation.[17] The CA held that RTC did not acquire jurisdiction over Nation
because the list of corporate officers authorized to receive summons for a corporation is
exclusive.[18] The CA found insufficient evidence to support the RTC's conclusion that
Nation's corporate secretary granted Charlotte Magpayo, a property supply custodian, a
special power of attorney to receive summons for the corporation on her behalf. [19]

However, the CA upheld the process server's resort to substituted service with respect
to the individual defendants.[20] The CA held that the process server exerted efforts to
personally serve the summons on the individual defendants but was prohibited from
entering their individual offices. This made personal service impossible, leaving the
process server no choice but to resort to substituted service by leaving a copy of the
summons with Charlotte Magpayo, a competent person of sufficient age and discretion
in the defendants' office.[21]

On April 4, 2012, the individual defendants, now petitioners, filed the present petition for
review on certiorari.

THE PETITION

The petitioners argue: (1) that the Officer's return failed to establish the impossibility of
personal service;[22] (2) that Charlotte Magpayo is not a competent person in charge of
their business;[23] and (3) that the failure to comply with the strict requirements of
618
substituted service renders the service of summons void. [24]

On the other hand, ADF maintains that the questions of the impossibility of personal
service and whether diligent efforts were exerted to locate the petitioners are factual
matters that should not be passed upon in a petition for review on certiorari.[25] ADF
continues that nevertheless, circumstances showed an impossibility of service because
upon the server's return to the office, the petitioners' staff prevented them from entering
the offices;[26] thus, the officers resorted to service of summons to a Charlotte Magpayo,
a competent person authorized to receive summons in the Nation Petroleum office. [27]

ADF also insists that Ricky Ang was personally tendered summons despite his refusal
to sign the original.[28]

OUR RULING

We find the petition partly meritorious.

In civil cases, jurisdiction over a party is acquired either through his voluntary
appearance in court or upon a valid service of summons. When a party was not validly
served summons and did not voluntarily submit to the court's jurisdiction, the court
cannot validly grant any relief against him.

In an action strictly in personam, summons shall be served personally on the defendant

whenever practicable.[29] Personal service is made by personally handing a copy of the
summons to the defendant or by tendering it to him if he refuses to receive and sign for
it.

While personal service is the preferred method of serving summons, the Rules of Court
are also mindful that this is sometimes impracticable or even impossible. Thus, Rule 14
also allows the sheriff (or other proper court officer) to resort to substituted service
instead:
SEC. 7. Substituted service.—If, for justifiable causes, the defendant cannot be served
within a reasonable time as provided in the preceding section, service may be effected
(a) by leaving copies of the summons at the defendant's residence with some person of
suitable age and discretion then residing therein, or (b) by leaving the copies at
defendant's office or regular place of business with some competent person in charge
thereof.[30]
But while the Rules permit substituted service, they also require strict compliance with
its statutory requirements because of its extraordinary character. [31] After all, substituted
service is in derogation of the usual method of service. [32]

In Manotoc v. Court of Appeals,[33] we dissected Rule 14, Section 8 and distilled the
following elements of a valid substituted service:

First, the party relying on substituted service or the sheriff must establish the
impossibility of prompt personal service.[34] Before substituted service of summons can
be resorted to, the sheriff must have made several attempts to personally serve the
619
summons within a reasonable period of one month. And by "several attempts," the
sheriff is expected to have tried at least thrice on at least two different dates.[35]

Second, there must be specific details in the return describing the circumstances
surrounding the attempted personal service.[36] The sheriff must describe the efforts he
took and the circumstances behind the failure of his attempts. The details in the return
serve as evidence to prove the impossibility of prompt personal service.

Nevertheless, the sheriffs failure to make such a disclosure in the return does not
conclusively prove that the service is invalid. The plaintiff may still establish the
impossibility of service during the hearing of any incident assailing the validity of the
substituted service.[37]

Further, if there is a defect in the service of summons that is apparent on the face of the
return, the trial court must immediately determine whether the defect is real or not. [38] If
the defect is real, the court is obliged to issue new summonses and cause their service
on the defendants.

Third, if substituted service is made at the defendant's house or residence, the sheriff
must leave a copy of the summons with a person of "suitable age and discretion
residing therein"[39] This refers to a person who has reached the age of full legal capacity
and has sufficient discernment to comprehend the importance of a summons and his
duty to deliver it immediately to the defendant.

Finally, if substituted service is made at the defendant's office or regular place of

business, the sheriff must instead leave a copy of the summons with a "competent
person in charge thereof." This refers to the person managing the office or the business
of the defendant, such as the president or the manager. [40]

A serving officer's failure to comply with any of these elements results in the court's
failure to acquire jurisdiction over the person of the defendant. However, proof that the
defendant actually received the summons in a timely manner or his failure to deny the
same (which amounts to voluntary appearance)[41] would satisfy the requirements of due
process. The constitutional requirement of due process requires that the service be
such as may be reasonably expected to give the notice desired. [42] Once the service
reasonably accomplishes that end, the requirement of justice is answered, traditional
notions of fair play are satisfied, and due process is served. [43]

The impossibility of prompt personal service was not established.

In the present case, the return failed to establish the impossibility of prompt personal
service. The return stated that the process server and the assisting sheriffs made two
attempts at personal service on the morning and the afternoon of October 30, 2006. The
server claims that in between the two attempts, he made diligent efforts to locate the
whereabouts of the other defendants outside their office.

620
The process server only made two attempts at Nation's office and both attempts were
made on the same date. He did not even attempt to serve the defendants at their
homes. This does not even meet the bare minimum requirements in Manotoc. This does
not establish the impossibility of personal service within a reasonable period of time; this
only shows a halfhearted attempt that hardly satisfies the diligence and best efforts
required from a serving officer. We reiterate that the server must have made at least
three attempts on two different dates within a reasonable period of one month before
substituted service becomes available.

We cannot give credence to the server's general and sweeping claim that he exerted
"diligent efforts" to locate the defendants' whereabouts outside the premises of the
Nation Petroleum Office in between his attempts. That he exerted "diligent efforts" is a
conclusion of fact which can only be made after examining the details of his efforts
which were omitted from the return. Without the narration of these particular efforts, the
courts cannot sufficiently conclude whether or not the efforts taken were, in fact,
diligent.

While defendants are expected to avoid and evade service of summons, a serving
officer is likewise expected to be resourceful, persevering, canny, and diligent in serving
the process on a defendant.[44] Given the circumstances, we find that immediate resort
to substituted service was unwarranted for failure to establish the impossibility of
personal service.

A property custodian is not a competent person in charge of the defendant's

workplace.

Moreover, even assuming that Chinatrust were able to establish the impossibility of
personal service, the substituted service through Charlotte Magpayo was invalid. A
"competent person in charge" refers to one managing the office or the business, such
as the president, manager, or the officer-in-charge. The rule presupposes the existence
of a relation of confidence between such person and the defendant.

Charlotte Magpayo is a Property Custodian at Nation Petroleum. Her position denotes

limited responsibility to office equipment, inventory, and supplies. Chinatrust did not
submit any evidence that Magpayo's job description includes the management of Nation
Petroleum's Makati office. We do not see how she can be considered as the competent
person in charge of the defendants' business or office and the respondents failed to
prove otherwise.

The statutory requirements of substituted service must be followed strictly, faithfully and
fully, and any substituted service other than that authorized by statute is considered
ineffective.[45] We find that the RTC failed to acquire jurisdiction over petitioners Mario
Ang, Nena Ang, Renato Ang, Pauline Ang, Guillermo Sy, Alison Ang-Sy, Nelson Ang,
and Melinda Ang for failure to comply with the rules on substituted service under Rule
14, Section 8.

621
However, with respect to petitioner Ricky Ang, we sustain the lower courts' conclusion
that he was personally served summons. Personal service may be effected by handing
a copy of the summons to the defendant in person or, if he refuses to receive and
sign for it, by tendering it to him.[46]

The return indicates that Ricky Ang personally received a copy of the summons and the
complaint despite his refusal to sign the original copy. This constitutes valid tender of
the summons and the complaint.

This Court cannot tolerate - or worse, validate - laxity and laziness of judicial serving
officers. And while this rule may seem unduly harsh on litigants, they too have a duty to
be vigilant in the enforcement of their rights. A plaintiffs counsel has the duty to inspect
the return to ensure that the rules on substituted service have been complied with. He
cannot take legal shortcuts and gain advantage from an improperly served summons.
He must satisfy himself that the court regularly acquired jurisdiction over the other party.
Otherwise, he must move for the issuance of alias summons as there is a failure of
service.[47]

We empathize with the situation of the ADF, but as an assignee of rights, it is bound by
the actions (and inaction) of Chinatrust. We further note that the lawyer for Chinatrust
was part of the serving entourage and should have known that the resort to substituted
service was premature. Thus, we have no choice but to grant the petition and dismiss
the complaint in Civil Case No. 06-872 against all the petitioners, except for Ricky Ang,
for failure of the RTC to acquire jurisdiction over their persons. As a consolation to ADF,
this dismissal is without prejudice to the re-filing of the complaint against the
petitioners or their subsequent inclusion in the same case upon a valid service of
summons.

WHEREFORE, premises considered, we partly GRANT the petition.

The April 29, 2011 decision of the Court of Appeals in CA-G.R. SP No.
99391 is MODIFIED and the complaint against Mario Ang, Nena C. Ang, Renato C.
Ang, Pauline Ang, Guillermo Sy, Alison Ang-Sy, Nelson C. Ang, and Melinda C. Ang
in Civil Case No. 06-872 is hereby DISMISSED for lack of jurisdiction over their
persons WITHOUT PREJUDICE to its refiling in court.

The Regional Trial Court of Makati City, Branch 56

is DIRECTED to PROCEED with Civil Case No. 06-872 against Ricky C. Ang.

SO ORDERED.

FIRST DIVISION

G.R. No. 156759               June 5, 2013

622
ALLEN A. MACASAET, NICOLAS V. QUIJANO, JR., ISAIAS ALBANO, LILY REYES,
JANET BAY, JESUS R. GALANG, AND RANDY HAGOS, Petitioners,
vs.
FRANCISCO R. CO, JR., Respondent.

DECISION

BERSAMIN, J.:

To warrant the substituted service of the summons and copy of the complaint, the
serving officer must first attempt to effect the same upon the defendant in person. Only
after the attempt at personal service has become futile or impossible within a
reasonable time may the officer resort to substituted service.

The Case

Petitioners – defendants in a suit for libel brought by respondent – appeal the decision
promulgated on March 8, 20021 and the resolution promulgated on January 13,
2003,2 whereby the Court of Appeals (CA) respectively dismissed their petition for
certiorari, prohibition and mandamus and denied their motion for reconsideration.
Thereby, the CA upheld the order the Regional Trial Court (RTC), Branch 51, in Manila
had issued on March 12, 2001 denying their motion to dismiss because the substituted
service of the summons and copies of the complaint on each of them had been valid
and effective.3

Antecedents

On July 3, 2000, respondent, a retired police officer assigned at the Western Police
District in Manila, sued Abante Tonite, a daily tabloid of general circulation; its Publisher
Allen A. Macasaet; its Managing Director Nicolas V. Quijano; its Circulation Manager
Isaias Albano; its Editors Janet Bay, Jesus R. Galang and Randy Hagos; and its
Columnist/Reporter Lily Reyes (petitioners), claiming damages because of an allegedly
libelous article petitioners published in the June 6, 2000 issue of Abante Tonite. The
suit, docketed as Civil Case No. 00-97907, was raffled to Branch 51 of the RTC, which
in due course issued summons to be served on each defendant, including Abante
Tonite, at their business address at Monica Publishing Corporation, 301-305 3rd Floor,
BF Condominium Building, Solana Street corner A. Soriano Street, Intramuros, Manila. 4

In the morning of September 18, 2000, RTC Sheriff Raul Medina proceeded to the
stated address to effect the personal service of the summons on the defendants. But his
efforts to personally serve each defendant in the address were futile because the
defendants were then out of the office and unavailable. He returned in the afternoon of
that day to make a second attempt at serving the summons, but he was informed that
petitioners were still out of the office. He decided to resort to substituted service of the
summons, and explained why in his sheriff’s return dated September 22, 2005, 5 to wit:

623
 SHERIFF’S RETURN

This is to certify that on September 18, 2000, I caused the service of summons together
with copies of complaint and its annexes attached thereto, upon the following:

1. Defendant Allen A. Macasaet, President/Publisher of defendant AbanteTonite,

at Monica Publishing Corporation, Rooms 301-305 3rd Floor, BF Condominium
Building, Solana corner A. Soriano Streets, Intramuros, Manila, thru his secretary
Lu-Ann Quijano, a person of sufficient age and discretion working therein, who
signed to acknowledge receipt thereof. That effort (sic) to serve the said
summons personally upon said defendant were made, but the same were
ineffectual and unavailing on the ground that per information of Ms. Quijano said
defendant is always out and not available, thus, substituted service was applied;

2. Defendant Nicolas V. Quijano, at the same address, thru his wife Lu-Ann
Quijano, who signed to acknowledge receipt thereof. That effort (sic) to serve the
said summons personally upon said defendant were made, but the same were
ineffectual and unavailing on the ground that per information of (sic) his wife said
defendant is always out and not available, thus, substituted service was applied;

3. Defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy Hagos and Lily
Reyes, at the same address, thru Rene Esleta, Editorial Assistant of defendant
AbanteTonite, a person of sufficient age and discretion working therein who
signed to acknowledge receipt thereof. That effort (sic) to serve the said
summons personally upon said defendants were made, but the same were
ineffectual and unavailing on the ground that per information of (sic) Mr. Esleta
said defendants is (sic) always roving outside and gathering news, thus,
substituted service was applied.

Original copy of summons is therefore, respectfully returned duly served.

Manila, September 22, 2000.

On October 3, 2000, petitioners moved for the dismissal of the complaint through
counsel’s special appearance in their behalf, alleging lack of jurisdiction over their
persons because of the invalid and ineffectual substituted service of summons. They
contended that the sheriff had made no prior attempt to serve the summons personally
on each of them in accordance with Section 6 and Section 7, Rule 14 of the Rules of
Court. They further moved to drop Abante Tonite as a defendant by virtue of its being
neither a natural nor a juridical person that could be impleaded as a party in a civil
action.

At the hearing of petitioners’ motion to dismiss, Medina testified that he had gone to the
office address of petitioners in the morning of September 18, 2000 to personally serve
the summons on each defendant; that petitioners were out of the office at the time; that
he had returned in the afternoon of the same day to again attempt to serve on each

624
defendant personally but his attempt had still proved futile because all of petitioners
were still out of the office; that some competent persons working in petitioners’ office
had informed him that Macasaet and Quijano were always out and unavailable, and that
Albano, Bay, Galang, Hagos and Reyes were always out roving to gather news; and
that he had then resorted to substituted service upon realizing the impossibility of his
finding petitioners in person within a reasonable time.

On March 12, 2001, the RTC denied the motion to dismiss, and directed petitioners to
file their answers to the complaint within the remaining period allowed by the Rules of
Court,6 relevantly stating:

Records show that the summonses were served upon Allen A. Macasaet,
President/Publisher of defendant AbanteTonite, through LuAnn Quijano; upon
defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy Hagos and Lily Reyes,
through Rene Esleta, Editorial Assistant of defendant Abante Tonite (p. 12, records). It
is apparent in the Sheriff’s Return that on several occasions, efforts to served (sic) the
summons personally upon all the defendants were ineffectual as they were always out
and unavailable, so the Sheriff served the summons by substituted service.

Considering that summonses cannot be served within a reasonable time to the persons
of all the defendants, hence substituted service of summonses was validly applied.
Secretary of the President who is duly authorized to receive such document, the wife of
the defendant and the Editorial Assistant of the defendant, were considered competent
persons with sufficient discretion to realize the importance of the legal papers served
upon them and to relay the same to the defendants named therein (Sec. 7, Rule 14,
1997 Rules of Civil Procedure).

WHEREFORE, in view of the foregoing, the Motion to Dismiss is hereby DENIED for
lack of merit..

Accordingly, defendants are directed to file their Answers to the complaint within the
period still open to them, pursuant to the rules.

SO ORDERED.

Petitioners filed a motion for reconsideration, asserting that the sheriff had immediately
resorted to substituted service of the summons upon being informed that they were not
around to personally receive the summons, and that Abante Tonite, being neither a
natural nor a juridical person, could not be made a party in the action.

On June 29, 2001, the RTC denied petitioners’ motion for reconsideration. 7 It stated in
respect of the service of summons, as follows:

The allegations of the defendants that the Sheriff immediately resorted to substituted
service of summons upon them when he was informed that they were not around to
personally receive the same is untenable. During the hearing of the herein motion,

625
Sheriff Raul Medina of this Branch of the Court testified that on September 18, 2000 in
the morning, he went to the office address of the defendants to personally serve
summons upon them but they were out. So he went back to serve said summons upon
the defendants in the afternoon of the same day, but then again he was informed that
the defendants were out and unavailable, and that they were always out because they
were roving around to gather news. Because of that information and because of the
nature of the work of the defendants that they are always on field, so the sheriff resorted
to substituted service of summons. There was substantial compliance with the rules,
considering the difficulty to serve the summons personally to them because of the
nature of their job which compels them to be always out and unavailable. Additional
matters regarding the service of summons upon defendants were sufficiently discussed
in the Order of this Court dated March 12, 2001.

Regarding the impleading of Abante Tonite as defendant, the RTC held, viz:

"Abante Tonite" is a daily tabloid of general circulation. People all over the country could
buy a copy of "Abante Tonite" and read it, hence, it is for public consumption. The
persons who organized said publication obviously derived profit from it. The information
written on the said newspaper will affect the person, natural as well as juridical, who
was stated or implicated in the news. All of these facts imply that "Abante Tonite" falls
within the provision of Art. 44 (2 or 3), New Civil Code. Assuming arguendo that "Abante
Tonite" is not registered with the Securities and Exchange Commission, it is deemed a
corporation by estoppels considering that it possesses attributes of a juridical person,
otherwise it cannot be held liable for damages and injuries it may inflict to other
persons.

Undaunted, petitioners brought a petition for certiorari, prohibition, mandamusin the CA

to nullify the orders of the RTC dated March 12, 2001 and June 29, 2001.

Ruling of the CA

On March 8, 2002, the CA promulgated its questioned decision, 8 dismissing the petition
for certiorari, prohibition, mandamus, to wit:

We find petitioners’ argument without merit. The rule is that certiorari will prosper only if
there is a showing of grave abuse of discretion or an act without or in excess of
jurisdiction committed by the respondent Judge. A judicious reading of the questioned
orders of respondent Judge would show that the same were not issued in a capricious
or whimsical exercise of judgment. There are factual bases and legal justification for the
assailed orders. From the Return, the sheriff certified that "effort to serve the summons
personally xxx were made, but the same were ineffectual and unavailing xxx.

and upholding the trial court’s finding that there was a substantial compliance with the
rules that allowed the substituted service.

Furthermore, the CA ruled:

626
Anent the issue raised by petitioners that "Abante Tonite is neither a natural or juridical
person who may be a party in a civil case," and therefore the case against it must be
dismissed and/or dropped, is untenable.

The respondent Judge, in denying petitioners’ motion for reconsideration, held that:

xxxx

Abante Tonite’s newspapers are circulated nationwide, showing ostensibly its being a
corporate entity, thus the doctrine of corporation by estoppel may appropriately apply.

An unincorporated association, which represents itself to be a corporation, will be

estopped from denying its corporate capacity in a suit against it by a third person who
relies in good faith on such representation.

There being no grave abuse of discretion committed by the respondent Judge in the
exercise of his jurisdiction, the relief of prohibition is also unavailable.

WHEREFORE, the instant petition is DENIED. The assailed Orders of respondent

Judge are AFFIRMED.

SO ORDERED.9

On January 13, 2003, the CA denied petitioners’ motion for reconsideration. 10

Issues

Petitioners hereby submit that:

1. THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN HOLDING

THAT THE TRIAL COURT ACQUIRED JURISDICTION OVER HEREIN
PETITIONERS.

2. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR BY

SUSTAINING THE INCLUSION OF ABANTE TONITE AS PARTY IN THE
INSTANT CASE.11

Ruling

The petition for review lacks merit.

Jurisdiction over the person, or jurisdiction in personam –the power of the court to
render a personal judgment or to subject the parties in a particular action to the
judgment and other rulings rendered in the action – is an element of due process that is
essential in all actions, civil as well as criminal, except in actions in rem or quasi in rem.
Jurisdiction over the defendantin an action in rem or quasi in rem is not required, and

627
the court acquires jurisdiction over an actionas long as it acquires jurisdiction over the
resthat is thesubject matter of the action. The purpose of summons in such action is not
the acquisition of jurisdiction over the defendant but mainly to satisfy the constitutional
requirement of due process.12

The distinctions that need to be perceived between an action in personam, on the one
hand, and an action inrem or quasi in rem, on the other hand, are aptly delineated in
Domagas v. Jensen,13 thusly:

The settled rule is that the aim and object of an action determine its character. Whether
a proceeding is in rem, or in personam, or quasi in rem for that matter, is determined by
its nature and purpose, and by these only. A proceeding in personam is a proceeding to
enforce personal rights and obligations brought against the person and is based on the
jurisdiction of the person, although it may involve his right to, or the exercise of
ownership of, specific property, or seek to compel him to control or dispose of it in
accordance with the mandate of the court. The purpose of a proceeding in personam is
to impose, through the judgment of a court, some responsibility or liability directly upon
the person of the defendant. Of this character are suits to compel a defendant to
specifically perform some act or actions to fasten a pecuniary liability on him. An action
in personam is said to be one which has for its object a judgment against the person, as
distinguished from a judgment against the property to determine its state. It has been
held that an action in personam is a proceeding to enforce personal rights or
obligations; such action is brought against the person. As far as suits for injunctive relief
are concerned, it is well-settled that it is an injunctive act in personam. In Combs v.
Combs, the appellate court held that proceedings to enforce personal rights and
obligations and in which personal judgments are rendered adjusting the rights and
obligations between the affected parties is in personam. Actions for recovery of real
property are in personam.

On the other hand, a proceeding quasi in rem is one brought against persons seeking to
subject the property of such persons to the discharge of the claims assailed. In an
action quasi in rem, an individual is named as defendant and the purpose of the
proceeding is to subject his interests therein to the obligation or loan burdening the
property. Actions quasi in rem deal with the status, ownership or liability of a particular
property but which are intended to operate on these questions only as between the
particular parties to the proceedings and not to ascertain or cut off the rights or interests
of all possible claimants. The judgments therein are binding only upon the parties who
joined in the action.

As a rule, Philippine courts cannot try any case against a defendant who does not
reside and is not found in the Philippines because of the impossibility of acquiring
jurisdiction over his person unless he voluntarily appears in court; but when the case is
an action in rem or quasi in rem enumerated in Section 15, Rule 14 of the Rules of
Court, Philippine courts have jurisdiction to hear and decide the case because they
have jurisdiction over the res, and jurisdiction over the person of the non-resident
defendant is not essential. In the latter instance, extraterritorial service of summons can

628
be made upon the defendant, and such extraterritorial service of summons is not for the
purpose of vesting the court with jurisdiction, but for the purpose of complying with the
requirements of fair play or due process, so that the defendant will be informed of the
pendency of the action against him and the possibility that property in the Philippines
belonging to him or in which he has an interest may be subjected to a judgment in favor
of the plaintiff, and he can thereby take steps to protect his interest if he is so minded.
On the other hand, when the defendant in an action in personam does not reside and is
not found in the Philippines, our courts cannot try the case against him because of the
impossibility of acquiring jurisdiction over his person unless he voluntarily appears in
court.14

As the initiating party, the plaintiff in a civil action voluntarily submits himself to the
jurisdiction of the court by the act of filing the initiatory pleading. As to the defendant, the
court acquires jurisdiction over his person either by the proper service of the summons,
or by a voluntary appearance in the action. 15

Upon the filing of the complaint and the payment of the requisite legal fees, the clerk of
court forthwith issues the corresponding summons to the defendant. 16 The summons is
directed to the defendant and signed by the clerk of court under seal. It contains the
name of the court and the names of the parties to the action; a direction that the
defendant answers within the time fixed by the Rules of Court; and a notice that unless
the defendant so answers, the plaintiff will take judgment by default and may be granted
the relief applied for.17 To be attached to the original copy of the summons and all
copies thereof is a copy of the complaint (and its attachments, if any) and the order, if
any, for the appointment of a guardian ad litem. 18

The significance of the proper service of the summons on the defendant in an action in
personam cannot be overemphasized. The service of the summons fulfills two
fundamental objectives, namely: (a) to vest in the court jurisdiction over the person of
the defendant; and (b) to afford to the defendant the opportunity to be heard on the
claim brought against him.19 As to the former, when jurisdiction in personam is not
acquired in a civil action through the proper service of the summons or upon a valid
waiver of such proper service, the ensuing trial and judgment are void. 20 If the defendant
knowingly does an act inconsistent with the right to object to the lack of personal
jurisdiction as to him, like voluntarily appearing in the action, he is deemed to have
submitted himself to the jurisdiction of the court. 21 As to the latter, the essence of due
process lies in the reasonable opportunity to be heard and to submit any evidence the
defendant may have in support of his defense. With the proper service of the summons
being intended to afford to him the opportunity to be heard on the claim against him, he
may also waive the process.21 In other words, compliance with the rules regarding the
service of the summons is as much an issue of due process as it is of jurisdiction. 23

Under the Rules of Court, the service of the summons should firstly be effected on the
defendant himself whenever practicable. Such personal service consists either in
handing a copy of the summons to the defendant in person, or, if the defendant refuses
to receive and sign for it, in tendering it to him. 24 The rule on personal service is to be

629
rigidly enforced in order to ensure the realization of the two fundamental objectives
earlier mentioned. If, for justifiable reasons, the defendant cannot be served in person
within a reasonable time, the service of the summons may then be effected either (a) by
leaving a copy of the summons at his residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copy at his office or regular place
of business with some competent person in charge thereof. 25 The latter mode of service
is known as substituted service because the service of the summons on the defendant
is made through his substitute.

It is no longer debatable that the statutory requirements of substituted service must be

followed strictly, faithfully and fully, and any substituted service other than that
authorized by statute is considered ineffective. 26 This is because substituted service,
being in derogation of the usual method of service, is extraordinary in character and
may be used only as prescribed and in the circumstances authorized by statute. 27 Only
when the defendant cannot be served personally within a reasonable time may
substituted service be resorted to. Hence, the impossibility of prompt personal service
should be shown by stating the efforts made to find the defendant himself and the fact
that such efforts failed, which statement should be found in the proof of service or
sheriff’s return.28 Nonetheless, the requisite showing of the impossibility of prompt
personal service as basis for resorting to substituted service may be waived by the
defendant either expressly or impliedly. 29

There is no question that Sheriff Medina twice attempted to serve the summons upon
each of petitioners in person at their office address, the first in the morning of
September 18, 2000 and the second in the afternoon of the same date. Each attempt
failed because Macasaet and Quijano were "always out and not available" and the other
petitioners were "always roving outside and gathering news." After Medina learned from
those present in the office address on his second attempt that there was no likelihood of
any of petitioners going to the office during the business hours of that or any other day,
he concluded that further attempts to serve them in person within a reasonable time
would be futile. The circumstances fully warranted his conclusion. He was not expected
or required as the serving officer to effect personal service by all means and at all times,
considering that he was expressly authorized to resort to substituted service should he
be unable to effect the personal service within a reasonable time. In that regard, what
was a reasonable time was dependent on the circumstances obtaining. While we are
strict in insisting on personal service on the defendant, we do not cling to such
strictness should the circumstances already justify substituted service instead. It is the
spirit of the procedural rules, not their letter, that governs. 30

In reality, petitioners’ insistence on personal service by the serving officer was

demonstrably superfluous. They had actually received the summonses served through
their substitutes, as borne out by their filing of several pleadings in the RTC, including
an answer with compulsory counterclaim ad cautelam and a pre-trial brief ad cautelam.
They had also availed themselves of the modes of discovery available under the Rules
of Court. Such acts evinced their voluntary appearance in the action.

630
Nor can we sustain petitioners’ contention that Abante Tonite could not be sued as a
defendant due to its not being either a natural or a juridical person. In rejecting their
contention, the CA categorized Abante Tonite as a corporation by estoppel as the result
of its having represented itself to the reading public as a corporation despite its not
being incorporated. Thereby, the CA concluded that the RTC did not gravely abuse its
discretion in holding that the non-incorporation of Abante Tonite with the Securities and
Exchange Commission was of no consequence, for, otherwise, whoever of the public
who would suffer any damage from the publication of articles in the pages of its tabloids
would be left without recourse. We cannot disagree with the CA, considering that the
editorial box of the daily tabloid disclosed that basis, nothing in the box indicated that
Monica Publishing Corporation had owned Abante Tonite.

WHEREFORE, the Court AFFIRMS the decision promulgated on March 8, 2002; and
ORDERS petitioners to pay the costs of suit.

SO ORDERED.

FIRST DIVISION

September 6, 2017

G.R. No. 202505

EXPRESS PADALA (ITALIA) S.P.A., now BDO REMITTANCE (ITALIA)

S.P.A., Petitioner
vs.
HELEN M. OCAMPO, Respondent

DECISION

JARDELEZA, J.:

This is a petition for review on certiorari1 challenging the Decision2 dated January 5,

2012 and Resolution3 dated June 27, 2012 of the Court of Appeals (CA) in CA-G.R. SP
No. 113475. The CA granted the petition for certiorari filed by respondent Helen M.
Ocampo (Ocampo) and set aside the Decision4 dated September 14, 2009 of the
Regional Trial Court (RTC) in Civil Case No. MC08-3775 which granted BDO
Remittance (Italia) S.P.A. 's (BDO Remittance) petition for recognition of foreign
judgment.

The core issue being raised is whether service of summons was validly effected upon
respondent, who lives in Italy, through substituted service.

BDO Remittance, a corporation with principal office in Italy, hired respondent Ocampo
as a remittance processor in September 2002. She was dismissed in February 2004 for

631
misappropriating the sum of €24,035.60 by falsifying invoices of money payments
relating to customers' money transfer orders from February to December 2003. 5

Accordingly, BDO Remittance filed a criminal complaint against Ocampo for the same
acts before the Court of Turin, Italy. Ocampo pleaded guilty to the offense charged. On
April 13, 2005, the Honorable Court of Turin convicted and sentenced her to suffer
imprisonment of six months and a penalty of €300.00, but granted her the benefit of
suspension of the enforcement of sentence on account of her guilty plea (the Court of
Turin Decision).6

On September 22, 2008, BDO Remittance filed a petition for recognition of foreign
judgment7 with the RTC of Mandaluyong City. BDO Remittance prayed for the
recognition of the Court of Turin Decision and the cancellation or restriction of Ocampo'
s Philippine passport by the Department of Foreign Affairs (DFA). 8

On November 21, 2008, the sheriff attempted to personally serve the summons on
Ocampo in her local address alleged in the petition located in San Bernardo Village,
Darasa, Tanauan, Batangas. However, since the address was incomplete, the sheriff
sought the help of barangay officials, who pointed him to the house belonging to
Ocampo's father, Nicasio Ocampo, Victor P. Macahia (Macahia), uncle of Ocampo and
present occupant, informed the sheriff that Ocampo and her family were already in Italy,
and that he was only a caretaker of the house. The sheriff then proceeded to serve the
summons upon Macahia.9 After Ocampo failed to file an answer, BDO Remittance filed
a motion to declare Ocampo in default. The RTC granted the motion and allowed BDO
Remittance to present evidence ex parte.10

On September 14, 2009, the RTC rendered a Decision 11 in favor of BDO Remittance
(RTC Decision). It recognized as valid and binding in the Philippines the Court of Turin
Decision and ordered the DFA to cancel or restrict Ocampo's Philippine passport and
not to allow its renewal until she has served her sentence. 12

On February 11, 2010, Ocampo's mother, Laureana Macahia, received a copy of the
RTC Decision and forwarded it to Ocampo.13 Not having been represented by counsel a
quo, the period of appeal lapsed. Ocampo was later able to engage the services of
counsel who filed a petition for certiorari under Rule 65 with the CA on April 12,
2010.14 Ocampo principally argued that the RTC acted in grave abuse of discretion in
recognizing and ordering the enforcement of the Court of Turin Decision. 15

In its now assailed Decision,16 the CA set aside the RTC Decision and revoked the
order to cancel or restrict Ocampo's Philippine passport (CA Decision). The CA first
settled the issue of procedural due process, particularly whether Ocampo was properly
served with summons. It held that since Ocampo's whereabouts were unknown,
summons should have been served in accordance with Section 14, Rule 14 of the Rules
of Civil Procedure. The sheriff however, erroneously effected the substituted service of
summons under Section 7 of Rule 14. Thus, the CA concluded that the RTC did not
acquire jurisdiction over Ocampo, and the RTC Decision against her is null and void. It

632
also found that the RTC acted in grave abuse of discretion when it recognized a foreign
judgment of a criminal case and ordered the DFA to restrict or cancel Ocampo's
passport.17

After the CA denied its motion for reconsideration, BDO Remittance filed the present
petition for review under Rule 45 arguing that: (1) Ocampo availed of the wrong remedy;
and (2) the RTC did not gravely abuse its discretion in granting the petition for
recognition of foreign judgment and ordering the DFA to restrict or cancel Ocampo's
passport.18

In her comment,19 Ocampo explained that BDO Remittance's insistence on the

enforcement of Court of Turin Decision is misleading because, by availing of the benefit
of suspension of the enforcement, the penalty of confinement will not be enforced upon
her. She also presented a decree20 from the High Court of Turin dated June 29, 2010
which stated that her criminal liability has been extinguished.

We deny the petition.

The general rule in this jurisdiction is that summons must be served personally on the
defendant. Section 6, Rule 14 of the Rules of Court provides:

Sec. 6. Service in person on defendant. - Whenever practicable, the summons shall be

served by handing a copy thereof to the defendant in person, or, if he refuses to receive
and sign for it, by tendering it to him.

For justifiable reasons, however, other modes of serving summons may be resorted to.
When the defendant cannot be served personally within a reasonable time after efforts
to locate him have failed, the rules allow summons to be served by substituted service.
Substituted service is effected by leaving copies of the summons at the defendant's
residence with some person of suitable age and discretion then residing therein, or by
leaving the copies at defendant's office or regular place of business with some
competent person in charge thereof. 21

When the defendant's whereabouts are unknown, the rules allow service of summons
by publication.22 As an exception to the preferred mode of service, service of summons
by publication may only be resorted to when the whereabouts of the defendant are not
only unknown, but cannot be ascertained by diligent inquiry. The diligence requirement
means that there must be prior resort to personal service under Section 7 and
substituted service under Section 8, and proof that these modes were ineffective before
summons by publication may be allowed.23 This mode also requires the plaintiff to file a
written motion for leave of court to effect service of summons by publication, supported
by affidavit of the plaintiff or some person on his behalf, setting forth the grounds for the
application.24

In the present case, the sheriff resorted to substituted service upon Ocampo through
her uncle, who was the caretaker of Ocampo's old family residence in Tanauan,

633
Batangas. The CA held that substituted service was improperly resorted to. It found that
since Ocampo' s "whereabouts are unknown and cannot be ascertained by diligent
inquiry x x x service may be effected only by publication in a newspaper of general
circulation."25

We agree with the CA that substituted service is improper under the facts of this case.
Substituted service presupposes that the place where the summons is being served is
the defendant's current residence or office/regular place of business. Thus, where
the defendant neither resides nor holds office in the address stated in the summons,
substituted service cannot be resorted to. As we explained in Keister v. Navarro: 26

Under the Rules, substituted service may be effect[ed] (a) by leaving copies of the
summons at the defendant's dwelling house or residence with some person of suitable
age and discretion then residing therein, or (b) by leaving the copies at
defendant's office or regular place of business with some competent person in charge
thereof. The terms "dwelling house" or "residence" are generally held to refer to the time
of service, hence it is not sufficient "to leave the copy at defendant's former dwelling
house, residence, or place of abode, as the case may be, after his removal therefrom."
They refer to the place where the person named in the summons is living at the time
when the service is made, even though he may be temporarily out of the country at the
time. Similarly, the terms "office" or "regular place of business" refer to the office or
place of business of defendant at the time of service. Note that the rule designates the
persons to whom copies of the process may be left. The rule presupposes that such a
relation of confidence exists between the person with whom the copy is left and the
defendant and, therefore, assumes that such person will deliver the process to
defendant or in some way give him notice thereof. 27 (Italics in the original, citations
omitted.)

Based on the sheriffs report, it is clear that Ocampo no longer resides in San Bernardo
Village, Darasa, Tanauan, Batangas. The report categorically stated that "defendant
Helen M. Ocampo and her family were already in Italy," 28 without, however, identifying
any specific address. Even BDO Remittance itself admitted in its petition for recognition
that Ocampo' s "whereabouts in Italy are no longer certain." 29 This, we note, is the
reason why in alleging the two addresses of Ocampo, one in Italy and one in the
Philippines, BDO Remittance used the phrase "last known [address ]" 30 instead of the
usual "resident of." Not being a resident of the address where the summons was
served, the substituted service of summons is ineffective. Accordingly, the RTC did not
acquire jurisdiction over the person of Ocampo.

BDO Remittance's reliance on Palma v. Galvez31 is misplaced for the simple reason that
the case involved service of summons to a person who is temporarily out of the country.
In this case, however, Ocampo's sojourn in Italy cannot be classified as temporary
considering that she already resides there, albeit her precise address was not known.
Modes of service of summons must be strictly followed in order that the court may
acquire jurisdiction over the person of the defendant. The purpose of this is to afford the
defendant an opportunity to be heard on the claim against him. 32 BDO Remittance is not

634
totally without recourse, as the rules allow summons by publication and extraterritorial
service.33 Unlike substituted service, however, these are extraordinary modes which
require leave of court.

The service of summons is a vital and indispensable ingredient of a defendant's

constitutional right to due process. As a rule, if a defendant has not been validly
summoned, the court acquires no jurisdiction over his person, and a judgment rendered
against him is void.34 Since the RTC never acquired jurisdiction over the person of
Ocampo, the judgment rendered by the court could not be considered binding upon her.

Consequently, it is no longer necessary to delve into the other issues raised in the
petition. These issues can be resolved by the trial court upon acquiring jurisdiction over
Ocampo and giving her an opportunity to be heard. It is in a better position to receive
and assess the evidence that may be presented by Ocampo, including the decree dated
June 29, 2010 issued by the High Court of Turin, to the effect that her liability has been
extinguished. While such claim would tend to render the case moot, we refuse to
consider the argument at the first instance on two grounds: first, we are not a trier of
facts; and second, the document submitted has not been authenticated in accordance
with the rules on evidence.

WHEREFORE, the petition is DENIED. The Decision dated January 5, 2012 and
Resolution dated June 27, 2012 of the Court of Appeals in CA-G.R. SP No. 113475
are AFFIRMED insofar as there was no valid service of summons. The Decision dated
September 14, 2009 of the Regional Trial Court, Branch 212, Mandaluyong City in Civil
Case No. MCOS-3775 is declared VOID.

SO ORDERED.

SECOND DIVISION

G.R. No. 182153, April 07, 2014

TUNG HO STEEL ENTERPRISES CORPORATION, Petitioner, v. TING GUAN

TRADING CORPORATION, Respondent.

DECISION

BRION, J.:

We resolve the petition for review on certiorari1 filed by petitioner Tung Ho Steel

Enterprises Corp. (Tung Ho) to challenge the July 5, 2006 decision2 and the March 12,
2008 resolution3 of the Court of Appeals (CA) in CA–G.R. SP No. 92828.

The Factual Antecedents

Tung Ho is a foreign corporation organized under the laws of Taiwan, Republic of

635
China.4 On the other hand, respondent Ting Guan Trading Corp. (Ting Guan) is a
domestic corporation organized under the laws of the Philippines. 5

On January 9, 2002, Ting Guan obligated itself under a contract of sale to deliver heavy
metal scrap iron and steel to Tung Ho. Subsequently, Tung Ho filed a request for
arbitration before the ICC International Court of Arbitration (ICC) in Singapore after Ting
Guan failed to deliver the full quantity of the promised heavy metal scrap iron and steel. 6

The ICC ruled in favor of Tung Ho on June 18, 2004 and ordered Ting Guan to pay
Tung Ho the following: (1) actual damages in the amount of US$ 659,646.15 with
interest of 6% per annum from December 4, 2002 until final payment; (2) cost of
arbitration in the amount of US $ 47,000.00; and (3) legal costs and expenses in the
amount of NT $ 761,448.00 and US $ 34,552.83. 7

On October 24, 2004, Tung Ho filed an action against Ting Guan for the recognition and
enforcement of the arbitral award before the Regional Trial Court (RTC) of Makati,
Branch 145. Ting Guan moved to dismiss the case based on Tung Ho’s lack of capacity
to sue and for prematurity. Ting Guan subsequently filed a supplemental motion to
dismiss based on improper venue. Ting Guan argued that the complaint should have
been filed in Cebu where its principal place of business was located. 8

The Proceedings before the RTC

The RTC denied Ting Guan’s motion to dismiss in an order dated May 11, 2005. Ting
Guan moved to reconsider the order and raised the RTC’s alleged lack of jurisdiction
over its person as additional ground for the dismissal of the complaint. Ting Guan
insisted that Ms. Fe Tejero, on whom personal service was served, was not its
corporate secretary and was not a person allowed under Section 11, Rule 14 of the
Rules of Court to receive a summons. It also asserted that Tung Ho cannot enforce the
award in the Philippines without violating public policy as Taiwan is not a signatory to
the New York Convention.9

The RTC denied the motion in an order dated November 21, 2005 and ruled that Ting
Guan had voluntarily submitted to the court’s jurisdiction when it raised other arguments
apart from lack of jurisdiction in its motion to dismiss.

The Proceedings before the CA

Ting Guan responded to the denials by filing a petition for certiorari before the CA with
an application for the issuance of a temporary restraining order and a writ of preliminary
injunction.10

In its Memorandum, Tung Ho argued that a Rule 65 petition is not the proper remedy to

assail the denial of a motion to dismiss. It pointed out that the proper recourse for Ting
Guan was to file an answer and to subsequently appeal the case.  It also posited that
beyond the reglementary period for filing an answer, Ting Guan was barred from raising
other grounds for the dismissal of the case. Tung Ho also claimed that the RTC

636
acquired jurisdiction over the person of Ting Guan since the return of service of
summons expressly stated that Tejero was a corporate secretary. 11

In its decision dated July 5, 2006, the CA dismissed the complaint for lack of
jurisdiction over the person of Ting Guan. The CA held that Tung Ho failed to
establish that Tejero was Ting Guan’s corporate secretary. The CA also ruled that a
petition for certiorari is the proper remedy to assail the denial of a motion to dismiss if
the ground raised in the motion is lack of jurisdiction. Furthermore, any of the grounds
for the dismissal of the case can be raised in a motion to dismiss provided that the
grounds were raised before the filing of an answer. The CA likewise ruled that Tung Ho
properly filed the complaint before the RTC–Makati. 12

Subsequently, both parties moved to partially reconsider the CA decision. Tung Ho

reiterated that there was proper service of summons.  On the other hand, Ting Guan
sought to modify the CA decision with respect to the proper venue of the case. The CA
denied Ting Guan’s motion for partial reconsideration in an order dated December 5,
2006.13

Ting Guan immediately proceeded to file a petition for review on certiorari before this
Court to question the CA’s rulings as discussed below.  In the interim (on February 11,
2008), Tung Ho (whose motion for reconsideration of the CA decision was still pending
with that court) filed a “Motion to Supplement and Resolve Motion for Reconsideration”
before the CA. In this motion, Tung Ho prayed for the issuance of an alias summons if
the service of summons had indeed been defective, but its motion proved
unsuccessful.14

It was not until March 12, 2008, after the developments described below, that the CA
finally denied Tung Ho’s partial motion for reconsideration for lack of merit.

Ting Guan’s Petition before this Court

(G.R. No. 176110)

Ting Guan’s petition before this Court was docketed as G.R. No. 176110.  Ting
Guan argued that the dismissal of the case should be based on the following additional
grounds: first, the complaint was prematurely filed; second, the foreign arbitral award is
null and void; third, the venue was improperly laid in Makati; and lastly, the enforcement
of the arbitral award was against public policy. 15

On April 24, 2007, Tung Ho filed its Comment dated April 24, 2007 in G.R. No. 176110,
touching on the issue of jurisdiction, albeit lightly. Tung Ho complained in its Comment
that Ting Guan engaged in dilatory tactics when Ting Guan belatedly raised the issue of
jurisdiction in the motion for reconsideration before the RTC. However, Tung Ho did not
affirmatively seek the reversal of the July 5, 2006 decision. Instead, it merely stated that
Ting Guan’s petition “cannot be dismissed on the ground that the summons was
wrongfully issued as the petitioner can always move for the issuance of an alias
summons to be served”. Furthermore, Tung Ho only prayed that Ting Guan’s petition be
637
denied in G.R. No. 176110 and for other just and equitable reliefs. In other words, Tung
Ho failed to effectively argue its case on the merits before the Court in G.R. No. 176110.

On June 18, 2007, we issued our Resolution denying Ting Guan’s petition for lack of
merit.  On November 12, 2007, we also denied Ting Guan’s motion for
reconsideration.  On January 8, 2008, the Court issued an entry of judgment in Ting
Guan’s petition, G.R. No. 176110.

After the entry of judgment, we referred the matter back to the RTC for further
proceedings.  On January 16, 2008, the RTC declared the case closed and
terminated.  Its order stated:chanRoblesvirtualLawlibrary

Upon examination of the entire records of this case, an answer with caution was
actually filed by the respondent to which a reply was submitted by the petitioner. Since
the answer was with the qualification that respondent is not waiving its claim of lack of
jurisdiction over its person on the ground of improper service of summons upon it and
that its petition to this effect filed before the Court of Appeals was acted favorably and
this case was dismissed on the aforementioned ground and it appearing that the
Decision as well as the Order denying the motion for reconsideration of the petitioner
now final and executory, the Order of November 9, 2007 referring this petition to the
Court Annexed Mediation for possible amicable settlement is recalled it being moot and
academic. This case is now considered closed and terminated.

On February 6, 2008, Tung Ho moved to reconsider the RTC order.  Nothing in the
records shows whether the RTC granted or denied this motion for reconsideration.

Tung Ho’s Petition before this Court

(G.R. No. 182153)

On May 7, 2008, Tung Ho seasonably filed a petition for review on certiorari to seek the
reversal of the July 5, 2006 decision and the March 12, 2008 resolution of the
CA.  This is the present G.R. No. 182153 now before us.

Tung Ho reiterates that the RTC acquired jurisdiction over the person of Ting Guan.  It
also claims that the return of service of summons is a prima facie evidence of the
recited facts i.e., that Tejero is a corporate secretary as stated therein and that the
sheriff is presumed to have regularly performed his official duties in serving the
summons. In the alternative, Tung Ho argues that Ting Guan’s successive motions
before the RTC are equivalent to voluntary appearance. Tung Ho also prays for the
issuance of alias summons to cure the alleged defective service of summons. 16

Respondent Ting Guan’s Position

(G.R. No. 182153)

In its Comment, Ting Guan submits that the appeal is already barred by res judicata. It
also stresses that the Court has already affirmed with finality the dismissal of the

638
complaint.17 Ting Guan also argues that Tung Ho raises a factual issue that is beyond
the scope of a petition for review on certiorari under Rule 45 of the Rules of Court.18

The Issues

This case presents to us the following issues:chanRoblesvirtualLawlibrary

1)  Whether the present petition is barred by res judicata; and

2)  Whether the trial court acquired jurisdiction over the person of Ting Guan,
specifically:
a)   Whether Tejero was the proper person to receive the summons; and
b)  Whether Ting Guan made a voluntary appearance before the trial court.

The Court’s Ruling

We find the petition meritorious.

I. The Court is not precluded from

ruling on the jurisdictional issue
raised in the petition

A. The petition is not barred by

res judicata

Res judicata refers to the rule that a final judgment or decree on the merits by a court of
competent jurisdiction is conclusive on the rights of the parties or their privies in all later
suits on all points and matters determined in the former suit. 19 For res judicata to apply,
the final judgment must be on the merits of the case which means that the court has
unequivocally determined the parties’ rights and obligations with respect to the causes
of action and the subject matter of the case. 20

Contrary to Ting Guan’s position, our ruling in G.R. No. 176110 does not operate as res
judicata on Tung Ho’s appeal; G.R. No. 176110 did not conclusively rule on all issues
raised by the parties in this case so that this Court would now be barred from taking
cognizance of Tung Ho’s petition. Our disposition in G.R. No. 176110 only dwelt on
technical or collateral aspects of the case, and not on its merits.  Specifically, we did not
rule on whether Tung Ho may enforce the foreign arbitral award against Ting Guan in
that case.

B. The appellate court cannot be

ousted of jurisdiction until it finally
disposes of the case 

The court’s jurisdiction, once attached, cannot be ousted until it finally disposes of the
case. When a court has already obtained and is exercising jurisdiction over a

639
controversy, its jurisdiction to proceed to the final determination of the case is
retained.21 A judge is competent to act on the case while its incidents remain pending
for his disposition.

The CA was not ousted of its jurisdiction with the promulgation of G.R. No. 176110. The
July 5, 2006 decision has not yet become final and executory for the reason that there
remained a pending incident before the CA – the resolution of Tung Ho’s motion for
reconsideration – when this Court promulgated G.R. No. 176110.  In this latter case, on
the other hand, we only resolved procedural issues that are divorced from the present
jurisdictional question before us. Thus, what became immutable in G.R. No. 176110
was the ruling that Tung Ho’s complaint is not dismissible on grounds of prematurity,
nullity of the foreign arbitral award, improper venue, and the foreign arbitral award’s
repugnance to local public policy.  This leads us to the conclusion that in the absence of
any ruling on the merits on the issue of jurisdiction, res judicata on this point could not
have set in.

C. Tung Ho’s timely filing of a motion

for reconsideration and of a petition
for review on certiorari prevented the
July 5, 2006 decision from attaining
finality

Furthermore, under Section 2, Rule 45 of the Rules of Court, Tung Ho may file a petition
for review on certiorari before the Court within (15) days from the denial of its motion for
reconsideration filed in due time after notice of the judgment. Tung Ho’s timely filing of a
motion for reconsideration before the CA and of a Rule 45 petition before this Court
prevented the July 5, 2006 CA decision from attaining finality. For this Court to deny
Tung Ho’s petition would result in an anomalous situation where a party litigant is
penalized and deprived of his fair opportunity to appeal the case by faithfully complying
with the Rules of Court.

II. The trial court acquired jurisdiction

over the person of Ting Guan
A. Tejero was not the proper person
to receive the summons 
Nonetheless, we see no reason to disturb the lower courts’ finding that Tejero was not a
corporate secretary and, therefore, was not the proper person to receive the summons
under Section 11, Rule 14 of the Rules of Court. This Court is not a trier of facts; we
cannot re–examine, review or re–evaluate the evidence and the factual review made by
the lower courts. In the absence of compelling reasons, we will not deviate from the rule
that factual findings of the lower courts are final and binding on this Court. 22

B.  Ting Guan voluntarily appeared

before the trial court 

However, we cannot agree with the legal conclusion that the appellate court reached,

640
given the established facts.23 To our mind, Ting Guan voluntarily appeared before the
trial court in view of the procedural recourse that it took before that court. Its voluntary
appearance is equivalent to service of summons. 24

As a basic principle, courts look with disfavor on piecemeal arguments in motions filed
by the parties. Under the omnibus motion rule, a motion attacking a pleading, order,
judgment, or proceeding shall include all objections then available.25 The purpose of
this rule is to obviate multiplicity of motions and to discourage dilatory motions and
pleadings. Party litigants should not be allowed to reiterate identical motions,
speculating on the possible change of opinion of the courts or of the judges thereof.

In this respect, Section 1, Rule 16 of the Rules of Court requires the defendant to file a
motion to dismiss within the time for, but before filing the answer to the complaint or
pleading asserting a claim. Section 1, Rule 11 of the Rules of Court, on the other hand,
commands the defendant to file his answer within fifteen (15) days after service of
summons, unless a different period is fixed by the trial court. Once the trial court denies
the motion, the defendant should file his answer within the balance of fifteen (15) days
to which he was entitled at the time of serving his motion, but the remaining period
cannot be less than five (5) days computed from his receipt of the notice of the denial. 26

Instead of filing an answer, the defendant may opt to file a motion for reconsideration.
Only after the trial court shall have denied the motion for reconsideration does the
defendant become bound to file his answer.27  If the defendant fails to file an answer
within the reglementary period, the plaintiff may file a motion to declare the defendant in
default. This motion shall be with notice to the defendant and shall be supported by
proof of the failure.28

The trial court’s denial of the motion to dismiss is not a license for the defendant to file a
Rule 65 petition before the CA. An order denying a motion to dismiss cannot be the
subject of a petition for certiorari as the defendant still has an adequate remedy before
the trial court – i.e., to file an answer and to subsequently appeal the case if he loses
the case.29 As exceptions, the defendant may avail of a petition for certiorari if the
ground raised in the motion to dismiss is lack of jurisdiction over the person of the
defendant30 or over the subject matter.31

We cannot allow and simply passively look at Ting Guan’s blatant disregard of the rules
of procedure in the present case. The Rules of Court only allows the filing of a motion to
dismiss once.32  Ting Guan’s filing of successive motions to dismiss, under the guise of
“supplemental motion to dismiss” or “motion for reconsideration”, is not only improper
but also dilatory.33  Ting Guan’s belated reliance on the improper service of summons
was a mere afterthought, if not a bad faith ploy to avoid the foreign arbitral award’s
enforcement which is still at its preliminary stage after the lapse of almost a decade
since the filing of the complaint.

Furthermore, Ting Guan’s failure to raise the alleged lack of jurisdiction over its person
in the first motion to dismiss is fatal to its cause. Ting Guan voluntarily appeared before

641
the RTC when it filed a motion to dismiss and a “supplemental motion to dismiss”
without raising the RTC’s lack of jurisdiction over its person. In Anunciacion v.
Bocanegra,34 we categorically stated that the defendant should raise the affirmative
defense of lack of jurisdiction over his person in the very first motion to dismiss.
Failure to raise the issue of improper service of summons in the first motion to dismiss
is a waiver of this defense and cannot be belatedly raised in succeeding motions and
pleadings.

Even assuming that Ting Guan did not voluntarily appear before the RTC, the CA
should have ordered the RTC to issue an alias summons instead. In Lingner & Fisher
GMBH vs. Intermediate Appellate Court35, we enunciated the policy that the courts
should not dismiss a case simply because there was an improper service of summons.
The lower courts should be cautious in haphazardly dismissing complaints on this
ground alone considering that the trial court can cure this defect and order the issuance
of alias summons on the proper person in the interest of substantial justice and to
expedite the proceedings.

III. A Final Note

As a final note, we are not unaware that the present case has been complicated by its
unique development.  The complication arose when the CA, instead of resolving the
parties’ separate partial motions for reconsideration in one resolution, proceeded to first
resolve and to deny Ting Guan’s partial motion.  Ting Guan, therefore, went to this
Court via a petition for review on certiorari while Tung Ho’s partial motion for
reconsideration was still unresolved.

Expectedly, Ting Guan did not question the portions of the CA decision favorable to it
when it filed its petition with this Court.  Instead, Ting Guan reiterated that the CA
should have included additional grounds to justify the dismissal of Tung Ho’s complaint
with the RTC.  The Court denied Ting Guan’s petition, leading to the entry of judgment
that improvidently followed.  Later, the CA denied Tung Ho’s partial motion for
reconsideration, prompting Tung Ho’s own petition with this Court, which is the present
G.R. No. 182153.

Under the Rules of Court, entry of judgment may only be made if no appeal or motion
for reconsideration was timely filed.36  In the proceedings before the CA, if a motion for
reconsideration (including a partial motion for reconsideration 37) is timely filed by the
proper party, execution of the CA’s judgment or final resolution shall be stayed. 38  This
rule is applicable even to proceedings before the Supreme Court, as provided in Section
4, Rule 56 of the Rules of Court. 39

In the present case, Tung Ho timely filed its motion for reconsideration with the CA and
seasonably appealed the CA’s rulings with the Court through the present petition (G.R.
No. 182153).

To now recognize the finality of the Resolution of Ting Guan petition (G.R. No. 176110)

642
based on its entry of judgment and to allow it to foreclose the present meritorious
petition of Tung Ho, would of course cause unfair and unjustified injury to Tung
Ho.  First, as previously mentioned, the Ting Guan petition did not question or assail the
full merits of the CA decision.  It was Tung Ho, the party aggrieved by the CA decision,
who substantially questioned the merits of the CA decision in its petition; this petition
showed that the CA indeed committed error and Tung Ho’s complaint before the RTC
should properly proceed.  Second, the present case is for the enforcement of an arbitral
award involving millions of pesos.  Tung Ho already won in the foreign arbitration and
the present case is simply for the enforcement of this arbitral award in our
jurisdiction. Third, and most importantly, Tung Ho properly and timely availed of the
remedies available to it under the Rules of Court, which provide that filing and pendency
of a motion for reconsideration stays the execution of the CA judgment.  Therefore, at
the time of the entry of judgment in G.R. No. 176110 in the Supreme Court on January
8, 2008, the CA decision which the Court affirmed was effectively not yet be final.

Significantly, the rule that a timely motion for reconsideration stays the execution of the
assailed judgment is in accordance with Rule 51, Section 10 (Rules governing the CA
proceedings) which provides that “entry of judgments may only be had if there is no
appeal or motion for reconsideration timely filed.  The date when the judgment or final
resolution becomes executory shall be deemed as the date of its entry.”  Incidentally,
this procedure also governs before Supreme Court proceedings. 40  Following these
rules, therefore, the pendency of Tung Ho’s MR with the CA made the entry of the
judgment of the Court in the Ting Guan petition premature and inefficacious for not
being final and executory.

Based on the above considerations, the Court would not be in error if it applies its ruling
in the case of Realty Sales Enterprises, Inc. and Macondray Farms, Inc. v. Intermediate
Appellate Court, et al.41 where the Court, in a per curiam resolution, ruled that an entry
of judgment may be recalled or lifted motu proprio when it is clear that the decision
assailed of has not yet become final under the rules:chanRoblesvirtualLawlibrary

The March 6, 1985 resolution denying reconsideration of the January 30, 1985
resolution was, to repeat, not served on the petitioners until March 20, 1985 – and
therefore the Jan. 30, 1985 resolution could not be deemed final and executory until one
(1) full day (March 21) had elapsed, or on March 22, 1985 (assuming inaction on
petitioners' part.) The entry of judgment relative to the January 30, 1985 resolution,
made on March 18, 1985, was therefore premature and inefficacious. An entry of
judgment does not make the judgment so entered final and executory when it is
not so in truth. An entry of judgment merely records the fact that a judgment,
order or resolution has become final and executory; but it is not the operative act
that makes the judgment, order or resolution final and executory. In the case at
bar, the entry of judgment on March 18, 1985 did not make the January 30, 1985
resolution subject of the entry, final and executory. As of the date of entry, March 18,
1985, notice of the resolution denying reconsideration of the January 30, 1985
resolution had not yet been served on the petitioners or any of the parties, since March
18, 1985 was also the date of the notice (and release) of the March 6, 1985 resolution
denying reconsideration.
643
According to this ruling, the motu proprio recall or setting aside of the entry of final
judgment was proper and “entirely consistent with the inherent power of every
court inter alia to amend and control its process and orders so as to make them
conformable to law and justice [Sec. 5(g), Rule 135, Rules of Court,]. That the recall has
in fact served to achieve a verdict consistent with law and justice is clear from the
judgment subsequently rendered on the merits.”  This course of action is effectively
what the Court undertook today, adapted of course to the circumstances of the present
case.

In light of these premises, we hereby REVERSE and SET ASIDE the July 5, 2006

decision and the March 12, 2008 resolution of the Court of Appeals in CA–G.R. SP No.
92828.  SP. Proc. No. M.–5954 is hereby ordered reinstated. Let the records of this
case be remanded to the court of origin for further proceedings.  No costs.

SO ORDERED.

THIRD DIVISION

G.R. No. 165273               March 10, 2010

LEAH PALMA, Petitioner,
vs.
HON. DANILO P. GALVEZ, in his capacity as PRESIDING JUDGE of the
REGIONAL TRIAL COURT OF ILOILO CITY, BRANCH 24; and PSYCHE ELENA
AGUDO, Respondents.

DECISION

PERALTA, J.:

Assailed in this petition for certiorari under Rule 65 of the Rules of Court are the Orders
dated May 7, 20041 and July 21, 20042 of the Regional Trial Court (RTC) of Iloilo City,
Branch 24, granting the motion to dismiss filed by private respondent Psyche Elena
Agudo and denying reconsideration thereof, respectively.

On July 28, 2003, petitioner Leah Palma filed with the RTC an action for damages
against the Philippine Heart Center (PHC), Dr. Danilo Giron and Dr. Bernadette O.
Cruz, alleging that the defendants committed professional fault, negligence and
omission for having removed her right ovary against her will, and losing the same and
the tissues extracted from her during the surgery; and that although the specimens were
subsequently found, petitioner was doubtful and uncertain that the same was hers as
the label therein pertained that of somebody else. Defendants filed their respective
Answers. Petitioner subsequently filed a Motion for Leave to Admit Amended
Complaint, praying for the inclusion of additional defendants who were all nurses at the

644
PHC, namely, Karla Reyes, Myra Mangaser and herein private respondent Agudo.
Thus, summons were subsequently issued to them.

On February 17, 2004, the RTC's process server submitted his return of summons
stating that the alias summons, together with a copy of the amended complaint and its
annexes, were served upon private respondent thru her husband Alfredo Agudo, who
received and signed the same as private respondent was out of the country. 3

On March 1, 2004, counsel of private respondent filed a Notice of Appearance and a

Motion for Extension of Time to File Answer4 stating that he was just engaged by private
respondent's husband as she was out of the country and the Answer was already due.

On March 15, 2004, private respondent's counsel filed a Motion for Another Extension
of Time to File Answer,5 and stating that while the draft answer was already finished, the
same would be sent to private respondent for her clarification/verification before the
Philippine Consulate in Ireland; thus, the counsel prayed for another 20 days to file the
Answer.

On March 30, 2004, private respondent filed a Motion to Dismiss 6 on the ground that the
RTC had not acquired jurisdiction over her as she was not properly served with
summons, since she was temporarily out of the country; that service of summons on her
should conform to Section 16, Rule 14 of the Rules of Court. Petitioner filed her
Opposition7 to the motion to dismiss, arguing that a substituted service of summons on
private respondent's husband was valid and binding on her; that service of summons
under Section 16, Rule 14 was not exclusive and may be effected by other modes of
service, i.e., by personal or substituted service. Private respondent filed a Comment 8 on
petitioner's Opposition, and petitioner filed a Reply 9 thereto.

On May 7, 2004, the RTC issued its assailed Order granting private respondent's
motion to dismiss. It found that while the summons was served at private respondent's
house and received by respondent's husband, such service did not qualify as a valid
service of summons on her as she was out of the country at the time the summons was
served, thus, she was not personally served a summons; and even granting that she
knew that a complaint was filed against her, nevertheless, the court did not acquire
jurisdiction over her person as she was not validly served with summons; that
substituted service could not be resorted to since it was established that private
respondent was out of the country, thus, Section 16, Rule 14 provides for the service of
summons on her by publication.

Petitioner filed a motion for reconsideration, which the RTC denied in its Order dated
July 21, 2004.

Petitioner is now before us alleging that the public respondent committed a grave abuse
of discretion amounting to lack or excess of jurisdiction when he ruled that:

645
 I. Substituted service of summons upon private respondent, a defendant residing
in the Philippines but temporarily outside the country is invalid;

II. Section 16, Rule 14, of the 1997 Rules of Civil Procedure limits the mode of
service of summons upon a defendant residing in the Philippines, but temporarily
outside the country, exclusively to extraterritorial service of summons under
section 15 of the same rule;

III. In not ruling that by filing two (2) motions for extension of time to file Answer,
private respondent had voluntarily submitted herself to the jurisdiction of
respondent court, pursuant to Section 20, Rule 14 of the 1997 Rules of Civil
Procedure, hence, equivalent to having been served with summons;

IV. The cases cited in his challenged Order of May 7, 2004 constitute stare
decisis despite his own admission that the factual landscape in those decided
cases are entirely different from those in this case.10

Petitioner claims that the RTC committed a grave abuse of discretion in ruling that
Section 16, Rule 14, limits the service of summons upon the defendant-resident who is
temporarily out of the country exclusively by means of extraterritorial service, i.e., by
personal service or by publication, pursuant to Section 15 of the same Rule. Petitioner
further argues that in filing two motions for extension of time to file answer, private
respondent voluntarily submitted to the jurisdiction of the court.

In her Comment, private respondent claims that petitioner's certiorari under Rule 65 is

not the proper remedy but a petition for review under Rule 45, since the RTC ruling
cannot be considered as having been issued with grave abuse of discretion; that the
petition was not properly verified because while the verification was dated September
15, 2004, the petition was dated September 30, 2004. She insists that since she was
out of the country at the time the service of summons was made, such service should
be governed by Section 16, in relation to Section 15, Rule 14 of the Rules of Court; that
there was no voluntary appearance on her part when her counsel filed two motions for
extension of time to file answer, since she filed her motion to dismiss on the ground of
lack of jurisdiction within the period provided under Section 1, Rule 16 of the Rules of
Court.

In her Reply, petitioner claims that the draft of the petition and the verification and
certification against forum shopping were sent to her for her signature earlier than the
date of the finalized petition, since the petition could not be filed without her signed
verification. Petitioner avers that when private respondent filed her two motions for
extension of time to file answer, no special appearance was made to challenge the
validity of the service of summons on her.

The parties subsequently filed their respective memoranda as required.

We shall first resolve the procedural issues raised by private respondent.

646
Private respondent's claim that the petition for certiorari under Rule 65 is a wrong
remedy thus the petition should be dismissed, is not persuasive. A petition
for certiorari is proper when any tribunal, board or officer exercising judicial or quasi-
judicial functions has acted without or in excess of jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction and there is no appeal, or any
plain, speedy, and adequate remedy at law.11 There is "grave abuse of discretion" when
public respondent acts in a capricious or whimsical manner in the exercise of its
judgment as to be equivalent to lack of jurisdiction.

Section 1, Rule 41 of the 1997 Rules of Civil Procedure states that an appeal may be
taken only from a final order that completely disposes of the case; that no appeal may
be taken from (a) an order denying a motion for new trial or reconsideration; (b) an
order denying a petition for relief or any similar motion seeking relief from judgment; (c)
an interlocutory order; (d) an order disallowing or dismissing an appeal; (e) an order
denying a motion to set aside a judgment by consent, confession or compromise on the
ground of fraud, mistake or duress, or any other ground vitiating consent; (f) an order of
execution; (g) a judgment or final order for or against one or more of several parties or
in separate claims, counterclaims, cross-claims and third-party complaints, while the
main case is pending, unless the court allows an appeal therefrom; or (h) an order
dismissing an action without prejudice. In all the above instances where the judgment or
final order is not appealable, the aggrieved party may file an appropriate special civil
action for certiorari under Rule 65.

In this case, the RTC Order granting the motion to dismiss filed by private respondent is
a final order because it terminates the proceedings against her, but it falls within
exception (g) of the Rule since the case involves several defendants, and the complaint
for damages against these defendants is still pending. 12 Since there is no appeal, or any
plain, speedy, and adequate remedy in law, the remedy of a special civil action for
certiorari is proper as there is a need to promptly relieve the aggrieved party from the
injurious effects of the acts of an inferior court or tribunal. 13

Anent private respondent's allegation that the petition was not properly verified, we find
the same to be devoid of merit. The purpose of requiring a verification is to secure an
assurance that the allegations of the petition have been made in good faith, or are true
and correct, not merely speculative. 14 In this instance, petitioner attached a verification
to her petition although dated earlier than the filing of her petition. Petitioner explains
that since a draft of the petition and the verification were earlier sent to her in New York
for her signature, the verification was earlier dated than the petition for certiorari filed
with us. We accept such explanation. While Section 1, Rule 65 requires that the petition
for certiorari be verified, this is not an absolute necessity where the material facts
alleged are a matter of record and the questions raised are mainly of law. 15 In this case,
the issue raised is purely of law.

Now on the merits, the issue for resolution is whether there was a valid service of
summons on private respondent.

647
In civil cases, the trial court acquires jurisdiction over the person of the defendant either
by the service of summons or by the latter’s voluntary appearance and submission to
the authority of the former.16 Private respondent was a Filipino resident who was
temporarily out of the Philippines at the time of the service of summons; thus, service of
summons on her is governed by Section 16, Rule 14 of the Rules of Court, which
provides:

Sec. 16. Residents temporarily out of the Philippines. – When an action is commenced

against a defendant who ordinarily resides within the Philippines, but who is temporarily
out of it, service may, by leave of court, be also effected out of the Philippines, as under
the preceding section. (Emphasis supplied)

The preceding section referred to in the above provision is Section 15, which speaks of
extraterritorial service, thus:

SEC. 15. Extraterritorial service. ─ When the defendant does not reside and is not
found in the Philippines, and the action affects the personal status of the plaintiff or
relates to, or the subject of which is, property within the Philippines, in which the
defendant has or claims a lien or interest, actual or contingent, or in which the relief
demanded consists, wholly or in part, in excluding the defendant from any interest
therein, or the property of the defendant has been attached within the Philippines,
service may, by leave of court, be effected out of the Philippines by personal service as
under section 6; or by publication in a newspaper of general circulation in such places
and for such time as the court may order, in which case a copy of the summons and
order of the court shall be sent by registered mail to the last known address of the
defendant, or in any other manner the court may deem sufficient. Any order granting
such leave shall specify a reasonable time, which shall not be less than sixty (60) days
after notice, within which the defendant must answer.

The RTC found that since private respondent was abroad at the time of the service of
summons, she was a resident who was temporarily out of the country; thus, service of
summons may be made only by publication.

We do not agree.

In Montefalcon v. Vasquez,17 we said that because Section 16 of Rule 14 uses the

words "may" and "also," it is not mandatory. Other methods of service of summons
allowed under the Rules may also be availed of by the serving officer on a defendant-
resident who is temporarily out of the Philippines. Thus, if a resident defendant is
temporarily out of the country, any of the following modes of service may be resorted to:
(1) substituted service set forth in section 7 ( formerly Section 8), Rule 14; (2) personal
service outside the country, with leave of court; (3) service by publication, also with
leave of court; or (4) in any other manner the court may deem sufficient. 18

In Montalban v. Maximo,19 we held that substituted service of summons under the

present Section 7, Rule 14 of the Rules of Court in a suit in personam against residents

648
of the Philippines temporarily absent therefrom is the normal method of service of
summons that will confer jurisdiction on the court over such defendant. In the same
case, we expounded on the rationale in providing for substituted service as the normal
mode of service for residents temporarily out of the Philippines.

x x x A man temporarily absent from this country leaves a definite place of residence, a
dwelling where he lives, a local base, so to speak, to which any inquiry about him may
be directed and where he is bound to return. Where one temporarily absents himself, he
leaves his affairs in the hands of one who may be reasonably expected to act in his
place and stead; to do all that is necessary to protect his interests; and to communicate
with him from time to time any incident of importance that may affect him or his
business or his affairs. It is usual for such a man to leave at his home or with his
business associates information as to where he may be contacted in the event a
question that affects him crops up. If he does not do what is expected of him, and a
case comes up in court against him, he cannot just raise his voice and say that he is not
subject to the processes of our courts. He cannot stop a suit from being filed against
him upon a claim that he cannot be summoned at his dwelling house or residence or his
office or regular place of business.

Not that he cannot be reached within a reasonable time to enable him to contest a suit
against him. There are now advanced facilities of communication. Long distance
telephone calls and cablegrams make it easy for one he left behind to communicate
with him.20

Considering that private respondent was temporarily out of the country, the summons
and complaint may be validly served on her through substituted service under Section
7, Rule 14 of the Rules of Court which reads:

SEC. 7. Substituted service. — If, for justifiable causes, the defendant cannot be served
within a reasonable time as provided in the preceding section, service may be effected
(a) by leaving copies of the summons at the defendant’s residence with some person of
suitable age and discretion then residing therein, or (b) by leaving the copies at
defendant’s office or regular place of business with some competent person in charge
thereof.

We have held that a dwelling, house or residence refers to the place where the person
named in the summons is living at the time when the service is made, even though he
may be temporarily out of the country at the time. 21 It is, thus, the service of the
summons intended for the defendant that must be left with the person of suitable age
and discretion residing in the house of the defendant. Compliance with the rules
regarding the service of summons is as important as the issue of due process as that of
jurisdiction.221avvphi1

Section 7 also designates the persons with whom copies of the process may be left.
The rule presupposes that such a relation of confidence exists between the person with

649
whom the copy is left and the defendant and, therefore, assumes that such person will
deliver the process to defendant or in some way give him notice thereof. 23

In this case, the Sheriff's Return stated that private respondent was out of the country;
thus, the service of summons was made at her residence with her husband, Alfredo P.
Agudo, acknowledging receipt thereof. Alfredo was presumably of suitable age and
discretion, who was residing in that place and, therefore, was competent to receive the
summons on private respondent's behalf.

Notably, private respondent makes no issue as to the fact that the place where the
summons was served was her residence, though she was temporarily out of the country
at that time, and that Alfredo is her husband. In fact, in the notice of appearance and
motion for extension of time to file answer submitted by private respondent's counsel,
he confirmed the Sheriff's Return by stating that private respondent was out of the
country and that his service was engaged by respondent's husband. In his motion for
another extension of time to file answer, private respondent's counsel stated that a draft
of the answer had already been prepared, which would be submitted to private
respondent, who was in Ireland for her clarification and/or verification before the
Philippine Consulate there. These statements establish the fact that private respondent
had knowledge of the case filed against her, and that her husband had told her about
the case as Alfredo even engaged the services of her counsel.

In addition, we agree with petitioner that the RTC had indeed acquired jurisdiction over
the person of private respondent when the latter's counsel entered his appearance on
private respondent's behalf, without qualification and without questioning the propriety of
the service of summons, and even filed two Motions for Extension of Time to File
Answer. In effect, private respondent, through counsel, had already invoked the RTC’s
jurisdiction over her person by praying that the motions for extension of time to file
answer be granted. We have held that the filing of motions seeking affirmative relief,
such as, to admit answer, for additional time to file answer, for reconsideration of a
default judgment, and to lift order of default with motion for reconsideration, are
considered voluntary submission to the jurisdiction of the court. 24 When private
respondent earlier invoked the jurisdiction of the RTC to secure affirmative relief in her
motions for additional time to file answer, she voluntarily submitted to the jurisdiction of
the RTC and is thereby estopped from asserting otherwise. 25

Considering the foregoing, we find that the RTC committed a grave abuse of discretion
amounting to excess of jurisdiction in issuing its assailed Orders.

WHEREFORE, the petition is GRANTED. The Orders dated May 7, 2004 and July 21,
2004 of the Regional Trial Court of Iloilo City, Branch 24, are hereby SET ASIDE.
Private respondent is DIRECTED to file her Answer within the reglementary period from
receipt of this decision.

SO ORDERED.

650
 FIRST DIVISION
[ G.R. No. 175799, November 28, 2011 ]
NM ROTHSCHILD & SONS (AUSTRALIA) LIMITED, PETITIONER, VS. LEPANTO
CONSOLIDATED MINING COMPANY, RESPONDENT.

DECISION
LEONARDO-DE CASTRO, J.:
This is a Petition for Review on Certiorari assailing the Decision[1] of the Court of
Appeals dated September 8, 2006 in CA-G.R. SP No. 94382 and its Resolution [2] dated
December 12, 2006, denying the Motion for Reconsideration.

On August 30, 2005, respondent Lepanto Consolidated Mining Company filed with the
Regional Trial Court (RTC) of Makati City a Complaint [3] against petitioner NM
Rothschild & Sons (Australia) Limited praying for a judgment declaring the loan and
hedging contracts between the parties void for being contrary to Article 2018 [4] of the
Civil Code of the Philippines and for damages.  The Complaint was docketed as Civil
Case No. 05-782, and was raffled to Branch 150.  Upon respondent’s (plaintiff’s)
motion, the trial court authorized respondent’s counsel to personally bring the summons
and Complaint to the Philippine Consulate General in Sydney, Australia for the latter
office to effect service of summons on petitioner (defendant).

On October 20, 2005, petitioner filed a Special Appearance With Motion to

Dismiss[5] praying for the dismissal of the Complaint on the following grounds: (a) the
court has not acquired jurisdiction over the person of petitioner due to the defective and
improper service of summons; (b) the Complaint failed to state a cause of action and
respondent does not have any against petitioner; (c) the action is barred by estoppel;
and (d) respondent did not come to court with clean hands.

On November 29, 2005, petitioner filed two Motions: (1) a Motion for Leave to take the
deposition of Mr. Paul Murray (Director, Risk Management of petitioner) before the
Philippine Consul General; and (2) a Motion for Leave to Serve Interrogatories on
respondent.

On December 9, 2005, the trial court issued an Order [6] denying the Motion to Dismiss. 
According to the trial court, there was a proper service of summons through the
Department of Foreign Affairs (DFA) on account of the fact that the defendant has
neither applied for a license to do business in the Philippines, nor filed with the
Securities and Exchange Commission (SEC) a Written Power of Attorney designating
some person on whom summons and other legal processes maybe served.  The trial
court also held that the Complaint sufficiently stated a cause of action.  The other
allegations in the Motion to Dismiss were brushed aside as matters of defense which
can best be ventilated during the trial.

On December 27, 2005, petitioner filed a Motion for Reconsideration. [7]  On March 6,
2006, the trial court issued an Order denying the December 27, 2005 Motion for

651
Reconsideration and disallowed the twin Motions for Leave to take deposition and serve
written interrogatories.[8]

On April 3, 2006, petitioner sought redress via a Petition for Certiorari[9] with the Court of
Appeals, alleging that the trial court committed grave abuse of discretion in denying its
Motion to Dismiss.  The Petition was docketed as CA-G.R. SP No. 94382.

On September 8, 2006, the Court of Appeals rendered the assailed Decision dismissing
the Petition for Certiorari.  The Court of Appeals ruled that since the denial of a Motion
to Dismiss is an interlocutory order, it cannot be the subject of a Petition for Certiorari,
and may only be reviewed in the ordinary course of law by an appeal from the judgment
after trial.  On December 12, 2006, the Court of Appeals rendered the assailed
Resolution denying the petitioner’s Motion for Reconsideration.

Meanwhile, on December 28, 2006, the trial court issued an Order directing respondent
to answer some of the questions in petitioner’s Interrogatories to Plaintiff dated
September 7, 2006.

Notwithstanding the foregoing, petitioner filed the present petition assailing the
September 8, 2006 Decision and the December 12, 2006 Resolution of the Court of
Appeals.  Arguing against the ruling of the appellate court, petitioner insists that (a) an
order denying a motion to dismiss may be the proper subject of a petition for certiorari;
and (b) the trial court committed grave abuse of discretion in not finding that it had not
validly acquired jurisdiction over petitioner and that the plaintiff had no cause of action.

Respondent, on the other hand, posits that: (a) the present Petition should be dismissed
for not being filed by a real party in interest and for lack of a proper verification and
certificate of non-forum shopping; (b) the Court of Appeals correctly ruled
that certiorari was not the proper remedy; and (c) the trial court correctly denied
petitioner’s motion to dismiss.

Our discussion of the issues raised by the parties follows:

Whether petitioner is a real party in interest

Respondent argues that the present Petition should be dismissed on the ground that
petitioner no longer existed as a corporation at the time said Petition was filed on
February 1, 2007.  Respondent points out that as of the date of the filing of the Petition,
there is no such corporation that goes by the name NM Rothschild and Sons (Australia)
Limited.  Thus, according to respondent, the present Petition was not filed by a real
party in interest, citing our ruling in Philips Export B.V. v. Court of Appeals,[10] wherein
we held:

A name is peculiarly important as necessary to the very existence of a corporation

(American Steel Foundries vs. Robertson, 269 US 372, 70 L ed 317, 46 S Ct 160;
Lauman vs. Lebanon Valley R. Co., 30 Pa 42; First National Bank vs. Huntington
Distilling Co., 40 W Va 530, 23 SE 792).  Its name is one of its attributes, an element of
652
its existence, and essential to its identity (6 Fletcher [Perm Ed], pp. 3-4). The general
rule as to corporations is that each corporation must have a name by which it is to sue
and be sued and do all legal acts. The name of a corporation in this respect designates
the corporation in the same manner as the name of an individual designates the person
(Cincinnati Cooperage Co. vs. Bate, 96 Ky 356, 26 SW 538; Newport Mechanics Mfg.
Co. vs. Starbird, 10 NH 123); and the right to use its corporate name is as much a part
of the corporate franchise as any other privilege granted (Federal Secur. Co. vs.
Federal Secur. Corp., 129 Or 375, 276 P 1100, 66 ALR 934; Paulino vs. Portuguese
Beneficial Association, 18 RI 165, 26 A 36).[11]

In its Memorandum[12] before this Court, petitioner started to refer to itself as Investec

Australia Limited (formerly “NM Rothschild & Sons [Australia] Limited”) and captioned
said Memorandum accordingly.  Petitioner claims that NM Rothschild and Sons
(Australia) Limited still exists as a corporation under the laws of Australia under said
new name.  It presented before us documents evidencing the process in the Australian
Securities & Investment Commission on the change of petitioner’s company name from
NM Rothschild and Sons (Australia) Limited to Investec Australia Limited. [13]

We find the submissions of petitioner on the change of its corporate name satisfactory
and resolve not to dismiss the present Petition for Review on the ground of not being
prosecuted under the name of the real party in interest.  While we stand by our
pronouncement in Philips Export on the importance of the corporate name to the very
existence of corporations and the significance thereof in the corporation’s right to sue,
we shall not go so far as to dismiss a case filed by the proper party using its former
name when adequate identification is presented.  A real party in interest is the party
who stands to be benefited or injured by the judgment in the suit, or the party entitled to
the avails of the suit.[14]  There is no doubt in our minds that the party who filed the
present Petition, having presented sufficient evidence of its identity and being
represented by the same counsel as that of the defendant in the case sought to be
dismissed, is the entity that will be benefited if this Court grants the dismissal prayed for.

Since the main objection of respondent to the verification and certification against forum
shopping likewise depends on the supposed inexistence of the corporation named
therein, we give no credit to said objection in light of the foregoing discussion.

Propriety of the Resort to a Petition for Certiorari with the Court of Appeals

We have held time and again that an order denying a Motion to Dismiss is an
interlocutory order which neither terminates nor finally disposes of a case as it leaves
something to be done by the court before the case is finally decided on the merits.  The
general rule, therefore, is that the denial of a Motion to Dismiss cannot be questioned in
a special civil action for Certiorari which is a remedy designed to correct errors of
jurisdiction and not errors of judgment. [15]  However, we have likewise held that when the
denial of the Motion to Dismiss is tainted with grave abuse of discretion, the grant of the
extraordinary remedy of Certiorari may be justified.  By “grave abuse of discretion” is
meant:

653
[S]uch capricious and whimsical exercise of judgment that is equivalent to lack of
jurisdiction.  The abuse of discretion must be grave as where the power is exercised in
an arbitrary or despotic manner by reason of passion or personal hostility, and must be
so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to
perform the duty enjoined by or to act all in contemplation of law. [16]

The resolution of the present Petition therefore entails an inquiry into whether the Court
of Appeals correctly ruled that the trial court did not commit grave abuse of discretion in
its denial of petitioner’s Motion to Dismiss.  A mere error in judgment on the part of the
trial court would undeniably be inadequate for us to reverse the disposition by the Court
of Appeals.

Issues more properly ventilated during the trial of the case

As previously stated, petitioner seeks the dismissal of Civil Case No. 05-782 on the
following grounds: (a) lack of jurisdiction over the person of petitioner due to the
defective and improper service of summons; (b) failure of the Complaint to state a
cause of action and absence of a cause of action; (c) the action is barred by estoppel;
and (d) respondent did not come to court with clean hands.

As correctly ruled by both the trial court and the Court of Appeals, the alleged absence
of a cause of action (as opposed to the failure to state a cause of action), the alleged
estoppel on the part of petitioner, and the argument that respondent is in pari delicto in
the execution of the challenged contracts, are not grounds in a Motion to Dismiss as
enumerated in Section 1, Rule 16[17] of the Rules of Court. Rather, such defenses raise
evidentiary issues closely related to the validity and/or existence of respondent’s alleged
cause of action and should therefore be threshed out during the trial.

As regards the allegation of failure to state a cause of action, while the same is usually
available as a ground in a Motion to Dismiss, said ground cannot be ruled upon in the
present Petition without going into the very merits of the main case.

It is basic that “[a] cause of action is the act or omission by which a party violates a right
of another.”[18]  Its elements are the following: (1) a right existing in favor of the plaintiff,
(2) a duty on the part of the defendant to respect the plaintiff's right, and (3) an act or
omission of the defendant in violation of such right. [19]  We have held that to sustain a
Motion to Dismiss for lack of cause of action, the complaint must show that the claim for
relief does not exist and not only that the claim was defectively stated or is ambiguous,
indefinite or uncertain.[20]

The trial court held that the Complaint in the case at bar contains all the three elements
of a cause of action, i.e., it alleges that: (1) plaintiff has the right to ask for the
declaration of nullity of the Hedging Contracts for being null and void and contrary to
Article 2018 of the Civil Code of the Philippines; (2) defendant has the corresponding
obligation not to enforce the Hedging Contracts because they are in the nature of
wagering or gambling agreements and therefore the transactions implementing those

654
contracts are null and void under Philippine laws; and (3) defendant ignored the advice
and intends to enforce the Hedging Contracts by demanding financial payments due
therefrom.[21]

The rule is that in a Motion to Dismiss, a defendant hypothetically admits the truth of the
material allegations of the ultimate facts contained in the plaintiff's complaint. [22] 
However, this principle of hypothetical admission admits of exceptions.  Thus, in Tan v.
Court of Appeals,  [23] we held:

The flaw in this conclusion is that, while conveniently echoing the general rule that
averments in the complaint are deemed hypothetically admitted upon the filing of a
motion to dismiss grounded on the failure to state a cause of action, it did not take into
account the equally established limitations to such rule, i.e., that a motion to dismiss
does not admit the truth of mere epithets of fraud; nor allegations of legal
conclusions; nor an erroneous statement of law; nor mere inferences or conclusions
from facts not stated; nor mere conclusions of law; nor allegations of fact the falsity of
which is subject to judicial notice; nor matters of evidence; nor surplusage and irrelevant
matter; nor scandalous matter inserted merely to insult the opposing party; nor to legally
impossible facts; nor to facts which appear unfounded by a record incorporated in the
pleading, or by a document referred to; and, nor to general averments contradicted by
more specific averments.  A more judicious resolution of a motion to dismiss, therefore,
necessitates that the court be not restricted to the consideration of the facts alleged in
the complaint and inferences fairly deducible therefrom.  Courts may consider other
facts within the range of judicial notice as well as relevant laws and jurisprudence which
the courts are bound to take into account, and they are also fairly entitled to examine
records/documents duly incorporated into the complaint by the pleader himself in
ruling on the demurrer to the complaint.[24] (Emphases supplied.)

In the case at bar, respondent asserts in the Complaint that the Hedging Contracts are
void for being contrary to Article 2018[25] of the Civil Code.  Respondent claims that
under the Hedging Contracts, despite the express stipulation for deliveries of gold, the
intention of the parties was allegedly merely to compel each other to pay the difference
between the value of the gold at the forward price stated in the contract and its market
price at the supposed time of delivery.

Whether such an agreement is void is a mere allegation of a conclusion of law, which

therefore cannot be hypothetically admitted.  Quite properly, the relevant portions of the
contracts sought to be nullified, as well as a copy of the contract itself, are incorporated
in the Complaint.  The determination of whether or not the Complaint stated a cause of
action would therefore involve an inquiry into whether or not the assailed contracts are
void under Philippine laws.  This is, precisely, the very issue to be determined in Civil
Case No. 05-782.  Indeed, petitioner’s defense against the charge of nullity of the
Hedging Contracts is the purported intent of the parties that actual deliveries of gold be
made pursuant thereto.  Such a defense requires the presentation of evidence on the
merits of the case.  An issue that “requires the contravention of the allegations of the
complaint, as well as the full ventilation, in effect, of the main merits of the case, should
not be within the province of a mere Motion to Dismiss.” [26]  The trial court, therefore,
655
correctly denied the Motion to Dismiss on this ground.

It is also settled in jurisprudence that allegations of estoppel and bad faith require proof. 
Thus, in Parañaque Kings Enterprises, Inc. v. Court of Appeals,[27] we ruled:

Having come to the conclusion that the complaint states a valid cause of action for
breach of the right of first refusal and that the trial court should thus not have dismissed
the complaint, we find no more need to pass upon the question of whether the
complaint states a cause of action for damages or whether the complaint is barred by
estoppel or laches. As these matters require presentation and/or determination of
facts, they can be best resolved after trial on the merits.[28] (Emphases supplied.)

On the proposition in the Motion to Dismiss that respondent has come to court with
unclean hands, suffice it to state that the determination of whether one acted in bad
faith and whether damages may be awarded is evidentiary in nature.  Thus, we have
previously held that “[a]s a matter of defense, it can be best passed upon after a full-
blown trial on the merits.”[29]

Jurisdiction over the person of petitioner

Petitioner alleges that the RTC has not acquired jurisdiction over its person on account
of the improper service of summons.  Summons was served on petitioner through the
DFA, with respondent’s counsel personally bringing the summons and Complaint to the
Philippine Consulate General in Sydney, Australia.

In the pleadings filed by the parties before this Court, the parties entered into a lengthy
debate as to whether or not petitioner is doing business in the Philippines.  However,
such discussion is completely irrelevant in the case at bar, for two reasons.  Firstly,
since the Complaint was filed on August 30, 2005, the provisions of the 1997 Rules of
Civil Procedure govern the service of summons.  Section 12, Rule 14 of said rules
provides:

Sec. 12.  Service upon foreign private juridical entity. – When the defendant is a foreign
private juridical entity which has transacted business in the Philippines, service may
be made on its resident agent designated in accordance with law for that purpose, or, if
there be no such agent, on the government official designated by law to that effect, or
on any of its officers or agents within the Philippines. (Emphasis supplied.)

This is a significant amendment of the former Section 14 of said rule which previously
provided:

Sec. 14. Service upon private foreign corporations. — If the defendant is a foreign

corporation, or a nonresident joint stock company or association, doing business in
the Philippines, service may be made on its resident agent designated in accordance
with law for that purpose, or if there be no such agent, on the government official
designated by law to that effect, or on any of its officers or agents within the Philippines.
(Emphasis supplied.)

656
The coverage of the present rule is thus broader. [30]  Secondly, the service of summons
to petitioner through the DFA by the conveyance of the summons to the Philippine
Consulate General in Sydney, Australia was clearly made not through the above-quoted
Section 12, but pursuant to Section 15 of the same rule which provides:

Sec. 15. Extraterritorial service. – When the defendant does not reside and is not found
in the Philippines, and the action affects the personal status of the plaintiff or relates to,
or the subject of which is property within the Philippines, in which the defendant has or
claims a lien or interest, actual or contingent, or in which the relief demanded consists,
wholly or in part, in excluding the defendant from any interest therein, or the property of
the defendant has been attached within the Philippines, service may, by leave of court,
be effected out of the Philippines by personal service as under section 6; or by
publication in a newspaper of general circulation in such places and for such time as the
court may order, in which case a copy of the summons and order of the court shall be
sent by registered mail to the last known address of the defendant, or in any other
manner the court may deem sufficient.  Any order granting such leave shall specify a
reasonable time, which shall not be less than sixty (60) days after notice, within which
the defendant must answer.

Respondent argues[31] that extraterritorial service of summons upon foreign private

juridical entities is not proscribed under the Rules of Court, and is in fact within the
authority of the trial court to adopt, in accordance with Section 6, Rule 135:

Sec. 6. Means to carry jurisdiction into effect. – When by law jurisdiction is conferred on
a court or judicial officer, all auxiliary writs, processes and other means necessary to
carry it into effect may be employed by such court or officer; and if the procedure to be
followed in the exercise of such jurisdiction is not specifically pointed out by law or by
these rules, any suitable process or mode of proceeding may be adopted which
appears comformable to the spirit of said law or rules.

Section 15, Rule 14, however, is the specific provision dealing precisely with the service
of summons on a defendant which does not reside and is not found in the Philippines,
while Rule 135 (which is in Part V of the Rules of Court entitled Legal Ethics) concerns
the general powers and duties of courts and judicial officers.

Breaking down Section 15, Rule 14, it is apparent that there are only four instances
wherein a defendant who is a non-resident and is not found in the country may be
served with summons by extraterritorial service, to wit: (1) when the action affects the
personal status of the plaintiffs; (2) when the action relates to, or the subject of which is
property, within the Philippines, in which the defendant claims a lien or an interest,
actual or contingent; (3) when the relief demanded in such action consists, wholly or in
part, in excluding the defendant from any interest in property located in the Philippines;
and (4) when the defendant non-resident's property has been attached within the
Philippines.  In these instances, service of summons may be effected by (a) personal
service out of the country, with leave of court; (b) publication, also with leave of court; or
(c) any other manner the court may deem sufficient. [32]

657
Proceeding from this enumeration, we held in Perkin Elmer Singapore Pte Ltd. v. Dakila
Trading Corporation[33] that:

Undoubtedly, extraterritorial service of summons applies only where the action is in rem
or quasi in rem, but not if an action is in personam.

When the case instituted is an action in rem or quasi in rem, Philippine courts already
have jurisdiction to hear and decide the case because, in actions in rem and 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.  Thus,
in such instance, extraterritorial service of summons can be made upon the defendant.
The said extraterritorial service of summons is not for the purpose of vesting the court
with jurisdiction, but for complying with the requirements of fair play or due process, so
that the defendant will be informed of the pendency of the action against him and the
possibility that property in the Philippines belonging to him or in which he has an interest
may be subjected to a judgment in favor of the plaintiff, and he can thereby take steps
to protect his interest if he is so minded.  On the other hand, when the defendant or
respondent does not reside and is not found in the Philippines, and the action
involved is in personam, Philippine courts cannot try any case against him
because of the impossibility of acquiring jurisdiction over his person unless he
voluntarily appears in court.[34] (Emphases supplied.)

In Domagas v. Jensen,[35] we held that:

[T]he aim and object of an action determine its character.  Whether a proceeding is in
rem, or in personam, or quasi in rem for that matter, is determined by its nature and
purpose, and by these only.  A proceeding in personam is a proceeding to enforce
personal rights and obligations brought against the person and is based on the
jurisdiction of the person, although it may involve his right to, or the exercise of
ownership of, specific property, or seek to compel him to control or dispose of it in
accordance with the mandate of the court.  The purpose of a proceeding in personam is
to impose, through the judgment of a court, some responsibility or liability directly upon
the person of the defendant.  Of this character are suits to compel a defendant to
specifically perform some act or actions to fasten a pecuniary liability on him. [36]

It is likewise settled that “[a]n action in personam is lodged against a person based on
personal liability; an action in rem is directed against the thing itself instead of the
person; while an action quasi in rem names a person as defendant, but its object is to
subject that person’s interest in a property to a corresponding lien or obligation.” [37]

The Complaint in the case at bar is an action to declare the loan and Hedging
Contracts between the parties void with a prayer for damages.  It is a suit in which
the plaintiff seeks to be freed from its obligations to the defendant under a contract and
to hold said defendant pecuniarily liable to the plaintiff for entering into such contract.  It
is therefore an action in personam, unless and until the plaintiff attaches a property
within the Philippines belonging to the defendant, in which case the action will be

658
converted to one quasi in rem.

Since the action involved in the case at bar is in personam and since the defendant,
petitioner Rothschild/Investec, does not reside and is not found in the Philippines, the
Philippine courts cannot try any case against it because of the impossibility of acquiring
jurisdiction over its person unless it voluntarily appears in court. [38]

In this regard, respondent vigorously argues that petitioner should be held to have
voluntarily appeared before the trial court when it prayed for, and was actually afforded,
specific reliefs from the trial court.[39]  Respondent points out that while petitioner’s
Motion to Dismiss was still pending, petitioner prayed for and was able to avail of modes
of discovery against respondent, such as written interrogatories, requests for admission,
deposition, and motions for production of documents. [40]

Petitioner counters that under this Court’s ruling in the leading case of La Naval Drug
Corporation v. Court of Appeals,[41] a party may file a Motion to Dismiss on the ground of
lack of jurisdiction over its person, and at the same time raise affirmative defenses and
pray for affirmative relief, without waiving its objection to the acquisition of jurisdiction
over its person.[42]

It appears, however, that petitioner misunderstood our ruling in La Naval.  A close
reading of La Naval reveals that the Court intended a distinction between the raising
of affirmative defenses in an Answer (which would not amount to acceptance of the
jurisdiction of the court) and the prayer for affirmative reliefs (which would be
considered acquiescence to the jurisdiction of the court):

In the same manner that a plaintiff may assert two or more causes of action in a
court suit, a defendant is likewise expressly allowed, under Section 2, Rule 8, of
the Rules of Court, to put up his own defenses alternatively or even
hypothetically. Indeed, under Section 2, Rule 9, of the Rules of Court, defenses and
objections not pleaded either in a motion to dismiss or in an answer, except for the
failure to state a cause of action, are deemed waived. We take this to mean that a
defendant may, in fact, feel enjoined to set up, along with his objection to the court's
jurisdiction over his person, all other possible defenses. It thus appears that it is not the
invocation of any of such defenses, but the failure to so raise them, that can result in
waiver or estoppel. By defenses, of course, we refer to the grounds provided for in
Rule 16 of the Rules of Court that must be asserted in a motion to dismiss or by
way of affirmative defenses in an answer.

Mindful of the foregoing, in Signetics Corporation vs. Court of Appeals and

Freuhauf Electronics Phils., Inc. (225 SCRA 737, 738), we lately ruled:

“This is not to say, however, that the petitioner's right to question the jurisdiction
of the court over its person is now to be deemed a foreclosed matter. If it is true,
as Signetics claims, that its only involvement in the Philippines was through a passive
investment in Sigfil, which it even later disposed of, and that TEAM Pacific is not its
agent, then it cannot really be said to be doing business in the Philippines. It is a

659
defense, however, that requires the contravention of the allegations of the complaint, as
well as a full ventilation, in effect, of the main merits of the case, which should not thus
be within the province of a mere motion to dismiss. So, also, the issue posed by the
petitioner as to whether a foreign corporation which has done business in the country,
but which has ceased to do business at the time of the filing of a complaint, can still be
made to answer for a cause of action which accrued while it was doing business, is
another matter that would yet have to await the reception and admission of
evidence. Since these points have seasonably been raised by the petitioner, there
should be no real cause for what may understandably be its apprehension, i.e.,
that by its participation during the trial on the merits, it may, absent an invocation
of separate or independent reliefs of its own, be considered to have voluntarily
submitted itself to the court's jurisdiction.” [43] (Emphases supplied.)

In order to conform to the ruling in La Naval, which was decided by this Court in 1994,
the former Section 23, Rule 14[44] concerning voluntary appearance was amended to
include a second sentence in its equivalent provision in the 1997 Rules of Civil
Procedure:

SEC. 20.  Voluntary appearance. – The defendant's voluntary appearance in the action

shall be equivalent to service of summons. The inclusion in a motion to dismiss of
other grounds aside from lack of jurisdiction over the person of the defendant
shall not be deemed a voluntary appearance. (Emphasis supplied.)

The new second sentence, it can be observed, merely mentions other grounds in a

Motion to Dismiss aside from lack of jurisdiction over the person of the defendant.  This
clearly refers to affirmative defenses, rather than affirmative reliefs.

Thus, while mindful of our ruling in La Naval and the new Section 20, Rule 20, this
Court, in several cases, ruled that seeking affirmative relief in a court is tantamount to
voluntary appearance therein.[45]  Thus, in Philippine Commercial International Bank v.
Dy Hong Pi,[46] wherein defendants filed a “Motion for Inhibition without submitting
themselves to the jurisdiction of this Honorable Court” subsequent to their filing of a
“Motion to Dismiss (for Lack of Jurisdiction),” we held:

Besides, any lingering doubts on the issue of voluntary appearance dissipate when the
respondents' motion for inhibition is considered. This motion seeks a sole relief:
inhibition of Judge Napoleon Inoturan from further hearing the case. Evidently, by
seeking affirmative relief other than dismissal of the case, respondents
manifested their voluntary submission to the court's jurisdiction. It is well-settled
that the active participation of a party in the proceedings is tantamount to an invocation
of the court's jurisdiction and a willingness to abide by the resolution of the case, and
will bar said party from later on impugning the court's jurisdiction. [47] (Emphasis
supplied.)

In view of the above, we therefore rule that petitioner, by seeking affirmative reliefs from
the trial court, is deemed to have voluntarily submitted to the jurisdiction of said court.  A
party cannot invoke the jurisdiction of a court to secure affirmative relief against his

660
opponent and after obtaining or failing to obtain such relief, repudiate or question that
same jurisdiction.[48]  Consequently, the trial court cannot be considered to have
committed grave abuse of discretion amounting to lack or excess of jurisdiction in the
denial of the Motion to Dismiss on account of failure to acquire jurisdiction over the
person of the defendant.

WHEREFORE, the Petition for Review on Certiorari is DENIED.  The Decision of the

Court of Appeals dated September 8, 2006 and its Resolution dated December 12,
2006 in CA-G.R. SP No. 94382 are hereby AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

FIRST DIVISION

October 18, 2017

G.R. No. 201378

G.V. FLORIDA TRANSPORT, INC., Petitioner

vs.
TIARA COMMERCIAL CORPORATION, Respondent

DECISION

JARDELEZA, J.:

This is a petition for review on certiorari1 under Rule 45 of the Rules of Court filed by
petitioner G.V. Florida Transport Inc. (GV Florida) to challenge the Decision of the Court
of Appeals (CA) in CA-G.R. SP No. 110760 dated October 13, 2011 (Decision) 2 and its
Resolution dated March 26, 2012 (Resolution) 3 which denied GV Florida's subsequent
motion for reconsideration. The CA granted respondent Tiara Commercial Corporation's
(TCC) petition for certiorari and prohibition under Rule 65 of the Rules of Court. It found
that Branch 129 of the Regional Trial Court (RTC), Caloocan City, acted with grave
abuse of discretion when it refused to grant TCC's motion to dismiss GV Florida's third-
party complaint in an action for damages pending before the RTC.

The bus company Victory Liner, Inc. (VLI) filed an action for damages 4 against GV
Florida and its bus driver Arnold Vizquera (Vizquera) before the RTC. This action arose
out of a vehicle collision between the buses of VLI and GV Florida along Capirpiwan,
Cordon, Isabela on May I, 2007. In its complaint, VLI claimed that Vizquera's negligence
was the proximate cause of the collision and GV Florida failed to exercise due diligence
in supervising its employee.5

661
In its Answer,6 GV Florida alleged that the Michelin tires of its bus had factory and
mechanical defects which caused a tire blow-out. This, it claimed, was the proximate
cause of the vehicle collision.7

On April 8, 2008, GV Florida instituted a third-party complaint 8 against TCC. According

to GV Florida, on March 23, 2007, it purchased from TCC fifty (50) brand new Michelin
tires, four (4) of which were installed into the bus that figured in the collision. It claimed
that though Vizquera exerted all efforts humanly possible to avoid the accident, the bus
nevertheless swerved to the oncoming south-bound lane and into the VLI bus. GV
Florida maintains that the '"proximate cause of the accident is the tire blow out which
was brought about by factory and mechanical defects in the Michelin tires which third-
party plaintiff GV Florida absolutely and totally had no control over." 9

The RTC ordered the service of summons on TCC. In the return of summons, it appears
that the sheriff served the summons to a certain Cherry Gino-gino (Gino-gino) who
represented herself as an accounting manager authorized by TCC to receive summons
on its behalf.10

TCC filed a Special Entry of Appearance with an Ex-parte Motion for Extension of Time
to File Responsive Pleading and/or Motion to Dismiss. 11 Therein, it stated that the
summons was received by Gino-gino, its financial supervisor. The RTC granted TCC's
prayer for extension of time to file a responsive pleading or a motion to dismiss.

TCC eventually filed a motion to dismiss12 GV Florida's third-party complaint. First, it

argued that the RTC never acquired jurisdiction over it due to improper service of
summons. Under Section 11 of Rule 14, there is an exclusive list of the persons upon
whom service of summons on domestic juridical entities may be made. As the summons
in this case was not served on any of the persons listed in Section 11 of Rule 14, there
was no proper service of summons on TCC that would vest the RTC with jurisdiction
over it. Second, TCC stated that the purported cause of action in the third-party
complaint is a claim for an implied warranty which has already prescribed, having been
made beyond the six-month period allowed in the Civil Code. Third, the third-party
complaint failed to state a cause of action against TCC. TCC harped on the fact that GV
Florida did not mention in the third-party complaint that the tires that blew out were
purchased from it. Moreover, a tire blow-out does not relieve a common carrier of its
liability. Fourth, TCC argues that there is a condition precedent which the law requires
before a claim for implied warranty may be made. The party claiming must submit a
warranty claim and demand. GV Florida failed to do so in this case. Fifth, GV Florida
has the burden of first establishing that the cause of the accident was not its own
negligence before it can be allowed to file a third-party complaint against TCC. Sixth,
venue was improperly laid since TCC's principal place of business is in Makati. And
finally, TCC states that the third-party complaint should be dismissed due to GV
Florida's failure to implead Michelin as an indispensable party. 13

The RTC denied TCC's motion to dismiss in an Order 14 dated March 2, 2009. It also
denied TCC's subsequent motion for reconsideration in an Order 15 dated July 16, 2009.

662
On October 5, 2009, TCC filed before the CA a petition for certiorari and prohibition
under Rule 65 of the Rules of Court challenging the RTC's denial of its motion to
dismiss and motion for reconsideration.

In the meantime, TCC filed its Answer Ad Cautelam 16 which repeated its arguments
pertaining to jurisdiction, the prescription of the implied warranty claim, the impropriety
of the third-party complaint and the venue of the action, and the failure to implead
Michelin. Upon order of the RTC, the case was set for pre-trial 17 and the parties
submitted their respective pretrial briefs. Notably, TCC filed its pre-trial brief without any
reservations as to the issue of jurisdiction. Moreover, not only did it fail to include in its
identification of issues the question of the RTC's jurisdiction, TCC even reserved the
option to present additional evidence. 18

On October 13, 2011, the CA rendered its Decision granting TCC's petition and
reversing the Orders of the RTC. Emphasizing that the enumeration in Section 11 of
Rule 14 of the Rules of Court is exclusive, the CA found that the RTC never acquired
jurisdiction over TCC because of the improper service of summons upon a person not
named in the enumeration.19 It then proceeded to rule that GV Florida's third-party
complaint against TCC is a claim for implied warranty which, under Article 1571 of the
Civil Code, must be filed within six months from delivery. While the CA noted that the
delivery receipt for the tires is not in the records of the case, it may be assumed that the
tires were delivered a few days after the purchase date of March 23, 2007. Since GV
Florida only filed the third-party complaint on April 8, 2008, the action has prescribed. 20

GV Florida thus filed this petition for review on certiorari under Rule 45 of the Rules of
Court seeking the reversal of the CA's Decision.

GV Florida argues that the RTC acquired jurisdiction over TCC. While it agrees that the
enumeration in Section 11 of Rule 14 of the Rules of Court is exclusive, GV Florida
argues that service of summons is not the only means through which a court acquires
jurisdiction over a party. Under Section 20 of Rule 14, voluntary appearance of a
defendant is equivalent to service of summons, which then gives a court jurisdiction
over such defendant. In this case, GV Florida claims that TCC voluntarily appeared and
submitted to the jurisdiction of the RTC when it filed motions and pleadings seeking
affirmative relief from said court. It adds that Section 11 of Rule 14 is only a general rule
which allows for substantial compliance when there is clear proof that the domestic
juridical entity in fact received the summons. Moreover, GV Florida argues that improper
service of summons is not a ground for dismissal of the third-party complaint since the
RTC has the authority to issue alias summons.21

GV Florida also challenges the CA's ruling that its third-party complaint against TCC
should be dismissed on the ground of prescription. It claims that prescription cannot be
the basis of a dismissal when the issue involves evidentiary matters that can only be
threshed out during trial. In this case, GV Florida asserts that the issue of whether its
action has prescribed requires a determination of when the Michelin tires were

663
delivered. Thus, there is a need to examine the delivery receipts which, as GV Florida
highlights, are not in the records of the CA as stated in the Decision itself. 22

In its Comment, TCC raises the procedural defense that GV Florida's petition was filed
out of time. It insists that GV Florida's motion for extension of time to file its petition is no
longer allowed by virtue of AM No. 7-7-12-SC which prohibits the filing of motions for
extension of time in petitions filed under Rule 45 and Rule 65 of the Rules of
Court.23 Further, TCC repeats its position that the RTC did not acquire jurisdiction over it
due to improper service of summons. It also disputes GV Florida's argument that it
voluntarily appeared. TCC insists that it initially filed a Special Entry of Appearance to
apprise the RTC that "[TCC] is represented without necessarily waiving any right/s of
the latter."24 TCC adds that in its motion to dismiss and Answer Ad Cautelam, it
consistently raised the question of the propriety of the service of summons and the
RTC's lack of jurisdiction over it.25

Moreover, TCC insists that GV Florida's implied warranty claim has prescribed and that
the latter has, in any case, failed to comply with a condition precedent-the filing of a
warranty claim or demand. TCC also insists that GV Florida has never complained
about the other Michelin tires it purchased. This, in TCC's view, belies GV Florida's
claim that the tires are defective.26

TCC also contends that GV Florida's filing of the third-party complaint is improper. It
explains that the test for ascertaining whether a third-party complaint may be filed is
whether the third-party defendant may assert any defense which the third-party plaintiff
may have against the original plaintiff in the original case. However, GV Florida's
defense against VLI, which is lack of negligence, is personal to GV Florida and cannot
be raised by TCC for its own benefit. TCC also asserts that in any case, the venue of
the third-party complaint is improperly laid since TCC's principal place of business is in
Makati.27

Finally, TCC claims that the third-party complaint should be dismissed for failure to
implead an indispensable party-Michelin, the manufacturer of the tires which GV Florida
claims are defective.28

We GRANT the petition.

We emphasize that GV Florida's appeal came from an original special civil action
for certiorari and prohibition under Rule 65 filed before the CA. In cases such as this,
the question of law presented before us is whether the CA was correct in its ruling that
the lower court acted with grave abuse of discretion amounting to lack or excess of
jurisdiction.29

In particular, the main issue we must resolve is whether the CA correctly found that the
RTC's Order dismissing GV Florida's third-party complaint is tainted with grave abuse of

664
discretion which, in turn, merits its reversal and the reinstitution of the third-party
complaint.

However, we shall first resolve the procedural issue raised by TCC pertaining to the
timeliness of this petition.

Section 2 of Rule 45 of the Rules of Court governing the procedure for filing an appeal
through a petition for review on certiorari expressly allows the filing of a motion for
extension of time. Under the Rules, the period to file a petition for review on certiorari is
fifteen (15) days from receipt of the judgment, resolution, or final order appealed from.
Nevertheless, on motion of the party filed before the reglementary period, this Court
may grant extension for a period not exceeding thirty (30) days. In a Resolution 30 dated
July 16, 2012, we granted Florida's motion for extension of time. We thus find GV
Florida's petition to be timely filed.

The central issue in this case arose from the RTC's Order dated March 2, 2009 denying
TCC's motion to dismiss GV Florida's third-party complaint. In remedial law, an order
denying a motion to dismiss is classified as an interlocutory order. 31 This classification is
vital because the kind of court order determines the particular remedy that a losing party
may pursue. In the case of a final order-one that finally disposes of a case-the proper
remedy is an appeal. On the other hand, when an order is merely interlocutory-one
which refers to something between the commencement and end of the suit which
decides some point or matter but is not the final decision of the whole controversy, 32 -
Section 1 of Rule 41 provides that an appeal cannot be had. In this instance, a party's
recourse is to file an answer, with the option to include grounds stated in the motion to
dismiss, and proceed to trial. In the event that an adverse judgment is rendered, the
party can file an appeal and raise the interlocutory order as an error. 33

This general rule is subject to a narrow exception. A party may question an interlocutory
order without awaiting judgment after trial if its issuance is tainted with grave abuse of
discretion amounting to lack or excess of jurisdiction. 34 In this case, the party can file a
special civil action for certiorari under Rule 65.

A special civil action for certiorari is an original civil action and not an appeal. An appeal
aims to correct errors in judgment and rectify errors in the appreciation of facts and law
which a lower court may have committed in the proper exercise of its jurisdiction. 35 A
special civil action for certiorari, on the other hand, is used to correct errors
in jurisdiction. We have defined an error in jurisdiction as "one where the officer or
tribunal acted without or in excess of its jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction." 36

665
This distinction finds concrete significance when a party pleads before a higher court
seeking the correction of a particular order. When a party seeks an appeal of a final
order, his or her petition must identify the errors in the lower court's findings of fact and
law. Meanwhile, when a party files a special civil action for certiorari, he or she must
allege the acts constituting grave abuse of discretion.

Grave abuse of discretion has a precise meaning in remedial law. It is not mere abuse
of discretion but must be grave "as when the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility, and must be so patent and
so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform
the duty enjoined or to act at all in contemplation of law." 37 In more concrete terms, not
every error committed by a tribunal amounts to grave abuse of discretion. A
misappreciation of the facts or a misapplication of the law does not, by itself, warrant the
filing of a special civil action for certiorari. There must be a clear abuse of the authority
vested in a tribunal. This abuse must be so serious and so grave that it warrants the
interference of the court to nullify or modify the challenged action and to undo the
damage done.38

In Pahila-Garrido v. Tortogo,39 we found grave abuse of discretion when a trial court

judge issued a temporary restraining order to prevent the implementation of a writ of
execution for an indefinite period. There, we declared that .the blatant violation of the
Rules of Court is clearly grave abuse of discretion. 40 In Belongilot v. Cua,41 we also ruled
that the Ombudsman's dismissal of a complaint for a violation of Republic Act No. 3019
was attended with grave abuse of discretion because it used irrelevant considerations
and refused to properly examine pertinent facts in arriving at its decision on the issue of
probable cause.42 We held that "an examination of the records reveal a collective
pattern of action--done capriciously, whimsically and without regard to existing rules and
attendant facts."43

There are instances when litigants file a petition seeking the reversal of an interlocutory
order yet their pleadings fail to allege any grave abuse of discretion on the part of the
lower tribunal. Instead, these petitions merely identify errors of fact and law and seek
their reversal. In such a case, the higher court must dismiss the petition because it fails
to allege the core requirement of a Rule 65 petition-the allegation of the presence of
grave abuse of discretion. Without this requirement, litigants can easily circumvent the
rule that an interlocutory order cannot be appealed. They will simply file a pleading
denominated as a special civil action for certiorari, but which instead raises errors in
judgment and is, in truth, an appeal. An appeal and a special civil action
for certiorari are, however, not interchangeable remedies.44

In the present case, TCC's petition for certiorari did not identify the RTC's specific acts
constituting grave abuse of discretion. Rather, it imputed errors in the RTC's proper
interpretation of the law. Further, the CA's Decision makes no finding of any grave
abuse of discretion on the part of the RTC. The penultimate paragraph of the Decision,
which summarizes the basis for its ruling, states:

666
In fine, the RTC failed to acquire jurisdiction over the person of [TCC] since the service
of summons to its Account Manager is not binding on the corporation. Furthermore, the
action brought by [GV Florida] against [TCC] is already barred by prescription having
filed beyond the six-month prescriptive period. Having settled the pivotal issues in this
case, We find that it is no longer necessary to address other arguments raised by the
petitioner since those questions, if considered, would not alter the outcome of this
case.45

The CA, in choosing to reverse the RTC in a special civil action for certiorari, based its
decision on its disagreement with the RTC as to the correct application of the law. This
is not an error in jurisdiction but merely an error in judgment. Instead of granting the
petition and reversing the RTC, what the CA should have done was to dismiss the
petition for certiorari for failing to allege grave abuse of discretion. We further note that
the RTC Order challenged before the CA through the petition for certiorari is an
interlocutory order. As there was no showing of grave abuse of discretion, TCC's
recourse is to proceed to trial and raise this error in its appeal in the event of an adverse
judgment.

II

Nevertheless, we have examined the errors raised by GV Florida in the appeal filed
before us and hold that the CA erred in its conclusions of law as well.

We agree that there was improper service of summons on TCC. We, however, apply
jurisprudence and rule that in cases of improper service of summons, courts should not
automatically dismiss the complaint by reason of lack of jurisdiction over the person of
the defendant. The remedy is to issue alias summons and ensure that it is properly
served.46

Service of summons is the main mode through which a court acquires jurisdiction over
the person of the defendant in a civil case. Through it, the defendant is informed of the
action against him or her and he or she is able to adequately prepare his or her course
of action. Rules governing the proper service of summons are not mere matters of
procedure. They go into a defendant's right to due process. 47 Thus, strict compliance
with the rules on service of summons is mandatory.

Section 11, Rule 14 of the Rules of Court provides the procedure for the issuance of
summons to a domestic private juridical entity. It states:

Sec. 11. Service upon domestic private juridical entity. - When the defendant is a
corporation, partnership or association organized under the laws of the Philippines with
a juridical personality, service may be made on the president, managing partner,
general manager, corporate secretary, treasurer, or in-house counsel.

This enumeration is exclusive. Section 11 of Rule 14 changed the old rules pertaining to
the service of summons on corporations. While the former rule allowed service on an

667
agent of a corporation, the current rule has provided for a list of specific persons to
whom service of summons must be made.

In Nation Petroleum Gas, Incorporated v. Rizal Commercial Banking Corporation, 48 we

explained that the purpose of this rule is "to insure that the summons be served on a
representative so integrated with the corporation that such person will know what to do
with the legal papers served on him."49 This rule requires strict compliance; the old
doctrine that substantial compliance is sufficient no longer applies. 50 In E.B. Villarosa &
Partner Co., Ltd. v. Benito,51 we ruled that the liberal construction of the rules cannot be
invoked as a substitute for the plain requirements stated in Section 11 of Rule
14.52 In Mason v. Court of Appeals,53 we definitively ruled that Villarosa settled the
question of the application of the rule on substantial compliance. It does not apply in the
case of Section 11 of Rule 14. We said:

The question of whether the substantial compliance rule is still applicable under Section
11, Rule 14 of the 1997 Rules of Civil Procedure has been settled in Villarosa which
applies squarely to the instant case. In the said case, petitioner E. B. Villarosa &
Partner Co. Ltd. (hereafter Villarosa) with principal office address at l 02 Juan Luna St.,
Davao City and with branches at 2492 Bay View Drive, Tambo, Parañaque, Metro
Manila and Kolambog, Lapasan, Cagayan de Oro City, entered into a sale with
development agreement with private respondent Imperial Development Corporation. As
Villarosa failed to comply with its contractual obligation, private respondent initiated a
suit for breach of contract and damages at the Regional Trial Court of Makati.
Summons, together with the complaint, was served upon Villarosa through its branch
manager at Kolambog, Lapasan, Cagayan de Oro City. Villarosa filed a Special
Appearance with Motion to Dismiss on the ground of improper service of summons and
lack of jurisdiction. The trial court denied the motion and ruled that there was substantial
compliance with the rule, thus, it acquired jurisdiction over Villarosa. The latter
questioned the denial before us in its petition for certiorari. We decided in Villarosa's
favor and declared the trial court without jurisdiction to take cognizance of the case. We
held that there was no valid service of summons on Villarosa as service was made
through a person not included in the enumeration in Section 11, Rule 14 of the 1997
Rules of Civil Procedure, which revised [ ] Section 13, Rule 14 of the 1964 Rules of
Court. We discarded the trial court's basis for denying the motion to dismiss, namely,
private respondent's substantial compliance with the rule on service of summons, and
fully agreed with petitioner's assertions that the enumeration under the new rule is
restricted, limited and exclusive, following the rule in statutory construction
that expressio unios est exclusio alterius. Had the Rules of Court Revision Committee
intended to liberalize the rule on service of summons, we said, it could have easily done
so by clear and concise language. Absent a manifest intent to liberalize the rule, we
stressed strict compliance with Section 11, Rule 14 of the 1997 Rules of Civil
Procedure.54 (Italics in the original.)

Service of summons, however, is not the only mode through which a court acquires
jurisdiction over the person of the defendant. Section 20 of Rule 14 of the Rules of
Court states:

668
Sec. 20. Voluntary appearance. - The defendant's voluntary appearance in the action
shall be equivalent to service of summons. The inclusion in a motion to dismiss of other
grounds aside from lack of jurisdiction over the person of the defendant shall not be
deemed a voluntary appearance.

There is voluntary appearance when a party, without directly assailing the court's lack of
jurisdiction, seeks affirmative relief from the court. 55 When a party appears before the
court without qualification, he or she is deemed to have waived his or her objection
regarding lack of jurisdiction due to improper service of summons. 56 When a defendant,
however, appears before the court for the specific purpose of questioning the court's
jurisdiction over him or her, this is a special appearance and does not vest the court
with jurisdiction over the person of the defendant. 57 Section 20 of Rule 14 of the Rules
of Court provides that so long as a defendant raises the issue of lack of jurisdiction, he
or she is allowed to include other grounds of objection. In such case, there is no
voluntary appearance.

Still, improper service of summons and lack of voluntary appearance do not

automatically warrant the dismissal of the complaint.1âwphi1 In Lingner & Fisher
GMBH v. Intermediate Appellate Court,58 we held:

A case should not be dismissed simply because an original summons was wrongfully
served. It should be difficult to conceive, for example, that when a defendant personally
appears before a Court complaining that he had not been validly summoned, that the
case filed against him should be dismissed. An alias summons can be actually served
on said defendant.59 (Italics in the original)

We repeated this doctrine in later cases such as Tung Ho Steel Enterprises Corporation
v. Ting Guan Trading Corporation,60 Spouses Anuncacion v. Bocanegra,61 and Teh v.
Court of Appeals.62

In Philippine American Life & General Insurance Company v. Breva,63 we even said that
there is no grave abuse of discretion when a trial court refuses to dismiss a complaint
solely on the ground of lack of jurisdiction over the person of the defendant because of
improper service of summons.64

Thus, when there is improper service of summons and the defendant makes a special
appearance to question this, the proper and speedy remedy is for the court to
issue alias summons.

In the present case, the summons was served to Gino-gino, a financial supervisor of
TCC. While she is not one of the officers enumerated in Section 11 of Rule 14, we find
that TCC has voluntarily appeared before (and submitted itself to) the RTC when it filed
its pre-trial brief without any reservation as to the court's jurisdiction over it. At no point
in its pre-trial brief did TCC raise the issue of the RTC's jurisdiction over it. In fact, it
even asked the RTC that it be allowed to reserve the presentation of additional
evidence through documents and witnesses. While it is true that TCC initially filed an

669
Answer Ad Cautelam, we rule that TCC waived any objection raised therein as to the
jurisdiction of the court when it subsequently filed its pre-trial brief without any
reservation and even prayed to be allowed to present additional evidence. This, to this
Court's mind, is an unequivocal submission to the jurisdiction of the RTC to conduct the
trial.

Moreover, we apply the doctrine in Lingner & Fisher GMBI-J and hold that the mere fact
of improper service of summons does not lead to the outright dismissal of the third-party
complaint. While the RTC should issue an alias summons to remedy the error, its
refusal to dismiss GV Florida's third-party complaint on the ground of lack of jurisdiction
(over TCC due to improper service of summons) does not constitute grave abuse of
discretion.

III

We also disagree with the CA that GV Florida's third-party complaint should be

dismissed on the ground of prescription.

Prescription is a ground for the dismissal of a complaint without going to trial on the
merits. Under Rule 16 of the Rules of Court, it is raised in a motion to dismiss which is
filed before the answer. It may also be raised as an affirmative defense in the answer.
At the discretion of the court, a preliminary hearing on the affirmative defense may be
conducted as if a motion to dismiss was filed. 65 Nevertheless, this is only a general rule.
When the issue of prescription requires the detcn11ination of evidentiary matters, it
cannot be the basis of an outright dismissal without hearing.

In Sanchez v. Sanchez (Sanchez),66we held that the trial court erred when it dismissed
an action on the ground of prescription on the basis of the pleadings filed and without
requiring any trial. The issue of prescription in Sanchez required the prior determination
of whether the sale subject of the case was valid, void or voidable. This is a matter that
requires the presentation of evidence since the fact of prescription is not apparent in the
pleadings. We said:

The Court has consistently held that the affirmative defense of prescription does not
automatically warrant the dismissal of a complaint under Rule 16 of the Rules of Civil
Procedure. An allegation of prescription can effectively be used in a motion to dismiss
only when the complaint on its face shows that indeed the action has already
prescribed. If the issue of prescription is one involving evidentiary matters requiring a
full-blown trial on the merits, it cannot be determined in a motion to dismiss x x
x.67 (Citations omitted.)

Here, TCC alleges that GY Florida's third-party complaint (which it argues is essentially
an action for implied warranty) has already prescribed. The Civil Code states that this
claim must be made within six months from the time of the delivery of the thing sold.
Without preempting the RTC's findings on the validity of the argument that this is a
warranty claim, a finding that the action has prescribed requires the ascertainment of

670
the delivery date of the tires in question. This, in turn, requires the presentation of the
delivery receipts as well as their identification and authentication. Under the Rules of
Court, a party presenting a document as evidence must first establish its due execution
and authenticity as a preliminary requirement for its admissibility. 68

We find that the reckoning date from which the prescriptive period may be ascertained
is not apparent from the pleadings themselves. We agree with GY Florida's observation
that the CA itself admitted in its Decision that the delivery receipts do not appear in the
records. A finding of fact as to the date of delivery can only be made after hearing and
reception of evidence. Thus, the CA erred in ruling that GV Florida's third-party
complaint should be dismissed on the ground of prescription.

We further note that the CA based its finding on the delivery date on mere
presumptions. The assailed Decision states that since Florida purchased the Michelin
tires on March 23, 2007, it may be presumed that the delivery was made in the ensuing
days. Since the third-party complaint was filed only on April 8, 2008, or more than one
year from the date of purchase, it concluded that the claim on the implied warranty has
prescribed.69 Findings of fact, however, cannot be based on mere assumptions. The
Rules of Court provide the process through which factual findings are arrived at. This
procedure must be followed as it is the means chosen by law to ascertain judicial truth.
Relying on probabilities, when the rules provide for a specific procedure to ascertain
facts, cannot be countenanced.

Since we cannot proceed to rule beyond the question of whether the CA correctly ruled
that the RTC committed grave abuse of discretion, this being the only question of law
presented before us in this petition for review on certiorari, we shall withhold ruling on
the other issues raised by TCC in its Comment which have not been discussed by the
CA in its Decision. In any case, we find that the other matters raised by TCC in its
Comment are questions that should first be threshed out before the RTC.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated
October 13, 2011 and its Resolution dated March 26, 2012 are REVERSED. The Order
dated March 2, 2009 of Branch 129 of the Regional Trial Court of Caloocan City is
REINSTATED.

SO ORDERED.

RULE 15. MOTIONS

FIRST DIVISION

G.R. No. 170292               June 22, 2011

HOME DEVELOPMENT MUTUAL FUND (HDMF), Petitioner,

vs.

671
Spouses FIDEL and FLORINDA R. SEE and Sheriff MANUEL L.
ARIMADO, Respondents.

DECISION

DEL CASTILLO, J.:

A party that loses its right to appeal by its own negligence cannot seek refuge in the
remedy of a writ of certiorari.

This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assailing
the August 31, 2005 Decision,2 as well as the October 26, 2005 Resolution,3 of the
Court of Appeals (CA) in CA-G.R. SP No. 70828. The dispositive portion of the assailed
CA Decision reads thus:

WHEREFORE, premises considered, the instant petition is DENIED DUE COURSE and
is accordingly DISMISSED. The assailed Decision of the Regional Trial Court, Branch 6,
Legazpi City dated February 21, 2002 and its Order dated March 15, 2002 are
AFFIRMED.

SO ORDERED.4

Factual Antecedents

Respondent-spouses Fidel and Florinda See (respondent-spouses) were the highest

bidders in the extrajudicial foreclosure sale of a property 5 that was mortgaged to
petitioner Home Development Mutual Fund or Pag-ibig Fund (Pag-ibig). They paid the
bid price of ₱272,000.00 in cash to respondent Sheriff Manuel L. Arimado (Sheriff
Arimado). In turn, respondent-spouses received a Certificate of Sale wherein Sheriff
Arimado acknowledged receipt of the purchase price, and an Official Receipt No.
11496038 dated January 28, 2000 from Atty. Jaime S. Narvaez, the clerk of court with
whom Sheriff Arimado deposited the respondent-spouses’ payment. 6

Despite the expiration of the redemption period, Pag-ibig refused to surrender its
certificate of title to the respondent-spouses because it had yet to receive the
respondent-spouses’ payment from Sheriff Arimado 7 who failed to remit the same
despite repeated demands.8 It turned out that Sheriff Arimado withdrew from the clerk of
court the ₱272,000.00 paid by respondent-spouses, on the pretense that he was going
to deliver the same to Pag-ibig. The money never reached Pag-ibig and was spent by
Sheriff Arimado for his personal use.9

Considering Pag-ibig’s refusal to recognize their payment, respondent-spouses filed a

complaint for specific performance with damages against Pag-ibig and Sheriff Arimado
before Branch 3 of the Regional Trial Court (RTC) of Legazpi City. The complaint
alleged that the law on foreclosure authorized Sheriff Arimado to receive, on behalf of
Pag-ibig, the respondent-spouses’ payment. Accordingly, the payment made by

672
respondent-spouses to Pag-ibig’s authorized agent should be deemed as payment to
Pag-ibig.10 It was prayed that Sheriff Arimado be ordered to remit the amount of ₱
272,000.00 to Pag-ibig and that the latter be ordered to release the title to the auctioned
property to respondent-spouses.11

Pag-ibig admitted the factual allegations of the complaint (i.e., the bid of respondent-
spouses,12 their full payment in cash to Sheriff Arimado,13 and the fact that Sheriff
Arimado misappropriated the money14) but maintained that respondent-spouses had no
cause of action against it. Pag-ibig insisted that it has no duty to deliver the certificate of
title to respondent-spouses unless Pag-ibig actually receives the bid price. Pag-ibig
denied that the absconding sheriff was its agent for purposes of the foreclosure
proceedings.15

When the case was called for pre-trial conference, the parties submitted their
Compromise Agreement for the court’s approval. The Compromise Agreement reads:

Undersigned parties, through their respective counsels[,] to this Honorable Court

respectfully submit this Compromise Agreement for their mutual interest and benefit that
this case be amicably settled, the terms and conditions of which are as follows:

1. [Respondent] Manuel L. Arimado, Sheriff IV RTC, Legazpi acknowledges his

obligation to the Home Development Mutual Fund (PAG-IBIG), Regional Office
V, Legazpi City and/or to [respondent-spouses] the amount of ₱300,000.00,
representing payment for the bid price and other necessary expenses incurred by
the [respondent-spouses], the latter being the sole bidder of the property subject
matter of the Extrajudicial Foreclosure Sale conducted by Sheriff Arimado on
January 14, 2000, at the Office of the Clerk of Court, RTC, Legazpi;

xxxx

3. Respondent Manuel L. Arimado due to urgent financial need acknowledge[s]

that he personally used the money paid to him by [respondent-spouses] which
represents the bid price of the above[-]mentioned property subject of the
foreclosure sale. The [money] should have been delivered/paid by Respondent
Arimado to Home Development Mutual Fund (PAG-IBIG) as payment and in
satisfaction of its mortgage claim.

4. Respondent Manuel L. Arimado obligates himself to pay in cash to [petitioner]

Home Development Mutual Fund (PAG-IBIG) the amount of ₱272,000.00
representing full payment of its claim on or before October 31, 2001 [so] that the
title to the property [could] be released by PAG-IBIG to [respondent-spouses]. An
additional amount of ₱28,000.00 shall likewise be paid by [respondent] Arimado
to the [respondent-spouses] as reimbursement for litigation expenses;

5. [Petitioner] Home Development Mutual Fund (PAG-IBIG) shall upon receipt of

the ₱272,000.00 from [respondent] Manuel L. Arimado release immediately

673
 within a period of three (3) days the certificate of title of the property above-
mentioned to [respondent-spouses] being the rightful buyer or owner of the
property;

6. In the event [respondent] Manuel L. Arimado fails to pay [petitioner] Home

Development Mutual Fund (PAG-IBIG), or, [respondent-spouses] the amount of
₱272,000.00 on or before October 31, 2001, the [respondent-spouses] shall be
entitled to an immediate writ of execution without further notice to respondent
Manuel L. Arimado and the issue as to whether [petitioner] Home Development
Mutual Fund (PAG-IBIG) shall be liable for the release of the title to [respondent
spouses] under the circumstances or allegations narrated in the complaint shall
continue to be litigated upon in order that the Honorable Court may resolve the
legality of said issue;

7. In the event [respondent] Manuel L. Arimado complies with the payment as

above-stated, the parties mutually agree to withdraw all claims and
counterclaim[s] they may have against each other arising out of the above-
entitled case.16

The trial court approved the compromise agreement and incorporated it in its Decision
dated October 31, 2001. The trial court stressed the implication of paragraph 6 of the
approved compromise agreement:

Accordingly, the parties are enjoined to comply strictly with the terms and conditions of
their Compromise Agreement.

In the event that [respondent] Manuel L. Arimado fails to pay [petitioner] HDMF (Pag-
ibig), or [respondent-spouses] the amount of ₱272,000.00 on October 31, 2001, the
Court, upon motion of [respondent-spouses], may issue the necessary writ of execution.

In this connection, with respect to the issue as to whether or not [petitioner] HDMF
(Pag-ibig) shall be liable for the release of the title of the [respondent-spouses] under
the circumstances narrated in the Complaint which necessitates further litigation in
court, let the hearing of the same be set on December 14, 2001 at 9:00 o’clock in the
morning.

SO ORDERED.17

None of the parties sought a reconsideration of the aforequoted Decision.

When Sheriff Arimado failed to meet his undertaking to pay on or before October 31,
2001, the trial court proceeded to rule on the issue of whether Pag-ibig is liable to
release the title to respondent-spouses despite non-receipt of their payment. 18

Ruling of the Regional Trial Court19

674
The trial court rendered its Decision dated February 21, 2002 in favor of respondent-
spouses, reasoning as follows: Under Article 1240 of the Civil Code, payment is valid
when it is made to a person authorized by law to receive the same. In foreclosure
proceedings, the sheriff is authorized by Act No. 3135 and the Rules of Court to receive
payment of the bid price from the winning bidder. When Pag-ibig invoked the provisions
of these laws by applying for extrajudicial foreclosure, it likewise constituted the sheriff
as its agent in conducting the foreclosure and receiving the proceeds of the auction.
Thus, when the respondent-spouses paid the purchase price to Sheriff Arimado, a
legally authorized representative of Pag-ibig, this payment effected a discharge of their
obligation to Pag-ibig.

The trial court thus ordered Pag-ibig to deliver the documents of ownership to the
respondent-spouses. The dispositive portion reads thus:

WHEREFORE, premises considered, decision is hereby rendered in favor of the

[respondent-spouses] and against the [petitioner] HDMF, ordering said [petitioner] to
execute a Release and/or Discharge of Mortgage, and to deliver the same to the
[respondent-spouses] together with the documents of ownership and the owner’s copy
of Certificate of Title No. T-78070 covering the property sold [to respondent-spouses] in
the auction sale within ten (10) days from the finality of this decision.

Should [petitioner] HDMF fail to execute the Release and/or Discharge of Mortgage and
to deliver the same together with the documents of ownership and TCT No. T-78070
within ten (10) days from the finality of this decision, the court shall order the Clerk of
Court to execute the said Release and/or Discharge of Mortgage and shall order the
cancellation of TCT No. T-78070 and the issuance of a second owner’s copy thereof.

SO ORDERED.20

Pag-ibig filed a motion for reconsideration on the sole ground that "[Pag-ibig] should not
be compelled to release the title to x x x [respondent-spouses] See because Manuel
Arimado [has] yet to deliver to [Pag-ibig] the sum of ₱272,000.00." 21

The trial court denied the motion on March 15, 2002. It explained that the parties’
compromise agreement duly authorized the court to rule on Pag-ibig’s liability to
respondent-spouses despite Sheriff Arimado’s non-remittance of the proceeds of the
auction.22

Pag-ibig received the denial of its motion for reconsideration on March 22, 2002 23 but
took no further action. Hence, on April 23, 2002, the trial court issued a writ of execution
of its February 21, 2002 Decision.24

On May 24, 2002,25 Pag-ibig filed before the CA a Petition for Certiorari under Rule 65
in order to annul and set aside the February 21, 2002 Decision of the trial court. Pag-
ibig argued that the February 21, 2002 Decision, which ordered Pag-ibig to deliver the
title to respondent-spouses despite its non-receipt of the proceeds of the auction, is void

675
because it modified the final and executory Decision dated October 31, 2001. 26 It
maintained that the October 31, 2001 Decision already held that Pag-ibig will deliver its
title to respondent-spouses only upon receipt of the proceeds of the auction from Sheriff
Arimado. Since Sheriff Arimado did not remit the said amount to Pag-ibig, the latter has
no obligation to deliver the title to the auctioned property to respondent-spouses. 27

Further, Pag-ibig contended that the February 21, 2002 Decision was null and void
because it was issued without affording petitioner the right to trial. 28

Ruling of the Court of Appeals29

The CA denied the petition due course. The CA noted that petitioner’s remedy was to
appeal the February 21, 2002 Decision of the trial court and not a petition for certiorari
under Rule 65. At the time the petition was filed, the Decision of the trial court had
already attained finality. The CA then held that the remedy of certiorari was not a
substitute for a lost appeal.30

The CA also ruled that petitioner’s case fails even on the merits. It held that the
February 21, 2002 Decision did not modify the October 31, 2001 Decision of the trial
court. The latter Decision of the trial court expressly declared that in case Sheriff
Arimado fails to pay the ₱272,000.00 to Pag-ibig, the court will resolve the remaining
issue regarding Pag-ibig’s obligation to deliver the title to the respondent-spouses. 31

As to the contention that petitioner was denied due process when no trial

was conducted for the reception of evidence, the CA held that there was no need for the
trial court to conduct a full-blown trial given that the facts of the case were already
admitted by Pag-ibig and what was decided in the February 21, 2002 Decision was only
a legal issue.32

Petitioner filed a motion for reconsideration 33 which was denied for lack of merit in the
Resolution dated October 26, 2005.34

Issues

Petitioner then raises the following issues for the Court’s consideration:

1. Whether certiorari was the proper remedy;

2. Whether the February 21, 2002 Decision of the trial court modified its October
31, 2001 Decision based on the compromise agreement;

3. Whether petitioner was entitled to a trial prior to the rendition of the February
21, 2002 Decision.

Our Ruling

676
Petitioner argues that the CA erred in denying due course to its petition for certiorari and
maintains that the remedy of certiorari is proper for two reasons: first, the trial court
rendered its February 21, 2002 Decision without the benefit of a trial; and second, the
February 21, 2002 Decision modified the October 31, 2001 Decision, which has already
attained finality. These are allegedly two recognized instances where certiorari lies to
annul the trial court’s Decision because of grave abuse of discretion amounting to lack
of jurisdiction.35

The argument does not impress.

"[C]ertiorari is a limited form of review and is a remedy of last recourse." 36 It is proper
only when appeal is not available to the aggrieved party. 37 In the case at bar, the
February 21, 2002 Decision of the trial court was appealable under Rule 41 of the Rules
of Court because it completely disposed of respondent-spouses’ case against Pag-ibig.
Pag-ibig does not explain why it did not resort to an appeal and allowed the trial court’s
decision to attain finality. In fact, the February 21, 2002 Decision was already at the
stage of execution when Pag-ibig belatedly resorted to a Rule 65 Petition for Certiorari.
Clearly, Pag-ibig lost its right to appeal and tried to remedy the situation by resorting to
certiorari. It is settled, however, that certiorari is not a substitute for a lost appeal,
"especially if the [party’s] own negligence or error in [the] choice of remedy occasioned
such loss or lapse."38

Moreover, even assuming arguendo that a Rule 65 certiorari could still be resorted to,
Pag-ibig’s petition would still have to be dismissed for having been filed beyond the
reglementary period of 60 days from notice of the denial of the motion for
reconsideration.39 Pag-ibig admitted receiving the trial court’s Order denying its Motion
for Reconsideration on March 22, 2002; 40 it thus had until May 21, 2002 to file its
petition for certiorari. However, Pag-ibig filed its petition only on May 24, 2002, 41 which
was the 63rd day from its receipt of the trial court’s order and obviously beyond the
reglementary 60-day period.

Pag-ibig stated that its petition for certiorari was filed "within sixty (60) days from receipt
of the copy of the writ of execution by petitioner [Pag-ibig] on 07 May 2002," which writ
sought to enforce the Decision assailed in the petition. 42 This submission is beside the
point. Rule 65, Section 4 is very clear that the reglementary 60-day period is counted
"from notice of the judgment, order or resolution" being assailed, or "from notice of the
denial of the motion [for reconsideration]," and not from receipt of the writ of execution
which seeks to enforce the assailed judgment, order or resolution. The date of Pag-
ibig’s receipt of the copy of the writ of execution is therefore immaterial for purposes of
computing the timeliness of the filing of the petition for certiorari.1avvphi1

Since Pag-ibig’s petition for certiorari before the CA was an improper remedy and was
filed late, it is not even necessary to look into the other issues raised by Pag-ibig in
assailing the February 21, 2002 Decision of the trial court and the CA’s rulings
sustaining the same. At any rate, Pag-ibig’s arguments on these other issues are devoid
of merit.

677
As to Pag-ibig’s argument that the February 21, 2002 Decision of the RTC is null and
void for having been issued without a trial, it is a mere afterthought which deserves
scant consideration. The Court notes that Pag-ibig did not object to the absence of a
trial when it sought a reconsideration of the February 21, 2002 Decision. Instead, Pag-
ibig raised the following lone argument in their motion:

3. Consequently, [Pag-ibig] should not be compelled to release the title to other

[respondent-spouses] See because Manuel Arimado [has] yet to deliver to [Pag-ibig] the
sum of ₱ 272,000.00.43

Under the Omnibus Motion Rule embodied in Section 8 of Rule 15 of the Rules of
Court, all available objections that are not included in a party’s motion shall be deemed
waived.

Pag-ibig next argues that the February 21, 2002 Decision of the trial court, in ordering
Pag-ibig to release the title despite Sheriff Arimado’s failure to remit the ₱272,000.00 to
Pag-ibig, "modified" the October 31, 2001 Decision. According to Pag-ibig, the October
31, 2001 Decision allegedly decreed that Pag-ibig would deliver the title to respondent-
spouses only after Sheriff Arimado has paid the ₱272,000.00. 44 In other words, under its
theory, Pag-ibig cannot be ordered to release the title if Sheriff Arimado fails to pay the
said amount.

The Court finds no merit in this argument. The October 31, 2001 Decision (as well as
the Compromise Agreement on which it is based) does not provide that Pag-ibig cannot
be ordered to release the title if Sheriff Arimado fails to pay. On the contrary, what the
Order provides is that if Sheriff Arimado fails to pay, the trial court shall litigate (and,
necessarily, resolve) the issue of whether Pag-ibig is obliged to release the title. This is
based on paragraph 6 of the Compromise Agreement which states that in the event
Sheriff Arimado fails to pay, "the [respondent-spouses] shall be entitled to an immediate
writ of execution without further notice to [Sheriff] Arimado and the issue as to whether
[Pag-ibig] shall be liable for the release of the title to [respondent spouses] under the
circumstances or allegations narrated in the complaint shall continue to be litigated
upon in order that the Honorable Court may resolve the legality of said issue." In fact,
the trial court, in its October 31, 2001 Decision, already set the hearing of the same "on
December 14, 2001 at 9:00 o’clock in the morning." 45

It is thus clear from both the October 31, 2001 Decision and the Compromise
Agreement that the trial court was authorized to litigate and resolve the issue of whether
Pag-ibig should release the title upon Sheriff Arimado’s failure to pay the ₱272,000.00.
As it turned out, the trial court eventually resolved the issue against Pag-ibig, i.e., it
ruled that Pag-ibig is obliged to release the title. In so doing, the trial court simply
exercised the authority provided in the October 31, 2001 Decision (and stipulated in the
Compromise Agreement). The trial court did not thereby "modify" the October 31, 2001
Decision.

678
WHEREFORE, premises considered, the petition is DENIED. The assailed August 31,
2005 Decision, as well as the October 26, 2005 Resolution, of the Court of Appeals in
CA-G.R. SP No. 70828 are AFFIRMED.

SO ORDERED.

THIRD DIVISION

G.R. No. 219815, September 14, 2016

J.O.S. MANAGING BUILDERS, INC. AND EDUARDO B.

OLAGUER, Petitioners, v. UNITED OVERSEAS BANK PHILIPPINES (FORMERLY
KNOWN AS WESTMONT BANK), EMMANUEL T. MANGOSING AND DAVID GOH
CHAI ENG, Respondents.

DECISION

JARDELEZA, J.:

Before us is a Petition for Review1 assailing the October 7, 20142 and July 20,

20153 Orders of the Regional Trial Court (RTC) of Quezon City (RTC-QC), Branch 87
(RTC Br. 87) in Civil Case No. Q-11-69413. The first Order dismissed the petition for
contempt filed by J.O.S. Managing Builders, Inc. (J.O.S.) and Eduardo B.
Olaguer4 (collectively, petitioners) against United Overseas Bank Philippines (UOBP),
Emmanuel T. Mangosing and David Goh Chai Eng 5 (collectively, respondents) on the
ground of mootness. The second Order expunged petitioners' motion for
reconsideration of the October 7, 2014 Order from the record of the case due to
violation of the three-day notice rule on motions.

Facts

On September 10, 1999, petitioners filed a Petition for Annulment of Extrajudicial

Foreclosure Sale (annulment case) against UOBP and Atty. Ricardo F. De Guzman in
RTC-QC.6 The case was raffled to RTC-QC, Branch 98 (RTC Br. 98) and docketed as
Civil Case No. Q-99-38701.7 On May 17, 2000, RTC Br. 98 issued a writ of preliminary
injunction (2000 writ) against respondents prohibiting them from: (a) consolidating title
to the subject properties; and (b) committing any acts prejudicial to
petitioners.8 Eventually, on June 12, 2008, it also issued a decision annulling the
extrajudicial foreclosure and public auction sale of the properties. 9 Respondents filed an
appeal to the Court of Appeals (CA) docketed as CA-G.R. CV No. 92414. 10

On May 5, 2008, while the annulment case was still pending, respondents sold the
properties to Onshore Strategic Assets, Inc. 11 Thus, petitioners filed a Petition to
Declare Respondents in Contempt of Court12 (contempt case) in RTC-QC. The case
was docketed as Civil Case No. Q-11-69413 and raffled to RTC, Branch 220 (RTC Br.
220). Petitioners averred that respondents' sale of the properties constitutes indirect

679
contempt of court because it was done in violation of the 2000 writ issued by RTC Br.
98. Additionally, they prayed that respondents be ordered to pay actual, moral and
exemplary damages including attorney's fees and cost of suit.

Respondents filed a Motion to Dismiss on the ground of failure to state a cause of

action. They countered that the sale of the properties did not violate the 2000 writ
because petitioners did not plead that the sale was prejudicial to them. Further, the
petition did not allege that respondents consolidated title to the properties. RTC Br. 220
denied the motion to dismiss. Respondents moved for reconsideration, but it was
denied.13 They elevated the case to the CA via a petition for certiorari, but the CA also
dismissed it.14

Respondents then filed an Answer Ad Cautelam15 in RTC Br. 220, contending that the
2000 writ merely prohibited UOBP from consolidating title to the properties and did not
enjoin it from selling or transferring them to any person or entity. 16 Respondents also
asserted that the sale is not prejudicial to the interest of petitioners because the 1997
Rules of Civil Procedure (the Rules) recognizes and allows transfers pendente lite.17 By
way of counterclaim, respondents prayed that petitioners be ordered to pay moral and
exemplary damages and attorney's fees.18

In another turn of events, the contempt case was re-raffled to RTC Br. 87. 19 On May 8,
2014, respondents filed its second motion to dismiss. 20 They argued that the decision of
RTC Br. 98 in the annulment case was reversed by the CA in its Decision dated
November 28, 2013. They claimed that the CA's dismissal of the annulment case
automatically dissolved or set aside the 2000 writ because a writ of preliminary
injunction is merely ancillary to the main case. 21 Therefore, the contempt case which
seeks to punish them for the alleged violation of the 2000 writ had become moot and
academic.22 Petitioners opposed the motion but RTC Br. 87, in its first assailed Order,
granted respondent's motion and dismissed the case. It ruled that "the writ of
preliminary injunction was rendered moot and academic with the [CA's dismissal of the
annulment case] on the merits, which in effect automatically terminated the writ of
preliminary injunction issued therein, even if an appeal is taken from said judgment." 23

Petitioners filed a Motion for Reconsideration 24 (MR) of the order of dismissal.

Respondents filed a Motion to Expunge25cralawred the MR on the ground that
petitioners violated the three-day notice rule under Section 4, Rule 15 of the Rules.
Respondents alleged that the hearing for petitioners' MR was set on November 7, 2014
but they received the notice only on November 6 or one (1) day before the scheduled
hearing. In its second assailed Order, RTC Br. 87 granted respondent's motion to
expunge.26

Petitioners now directly seek recourse to us via this petition for review
on certiorari raising the following issues:

1. Whether RTC Br. 87 erred in expunging petitioners' MR from the record of the
case;

680
 2. Whether RTC Br. 87 erred in giving due course to respondents' motion to dismiss
filed after their answer ad cautelam; and cralawlawlibrary

3. Whether RTC Br. 87 erred in dismissing the contempt case on the ground of
mootness.

Petitioners pray that we set aside the October 7, 2014 and July 20, 2015 Orders of RTC
Br. 87, declare respondents guilty of contempt of court, and order them to pay
damages.27

Our Ruling

We partially grant the petition and reverse the challenged Orders of RTC Br. 87.

At the outset, we find no merit in the claim of respondents that petitioners' direct resort
to us violates the hierarchy of courts. Section 2(c), Rule 41 of the Rules provides that in
all cases where only questions of law are raised or involved, the appeal shall be before
us.28 Petitioners question the grant of due course to respondents' motion to dismiss filed
after the filing of their Answer Ad Cautelam, the grant of respondents' motion to dismiss
the contempt case on the ground of mootness, and the grant of respondents' motion to
expunge petitioners' MR on the ground of violation of the three-day notice rule. In order
to resolve these issues, we need not examine or evaluate the evidence of the parties,
but rely solely on what the law provides on the given set of undisputed
facts.29 Consequently, petitioners' remedy for assailing the correctness of the Orders of
RTC Br. 87, involving as it does a pure question of law, indeed lies with us. 30

RTC Br. 87 erred when it granted

respondent's motion to expunge
petitioner's MR from the records.

Section 4, Rule 15 of the Rules, provides that:

Sec. 4. Hearing of motion. — Except for motions which the court may act upon without
prejudicing the rights of the adverse party, every written motion shall be set for hearing
by the applicant.

Every written motion required to be heard and the notice of the hearing thereof shall be
served in such a manner as to ensure its receipt by the other party at least three (3)
days before the date of hearing, unless the court for good cause sets the hearing on
shorter notice.

The general rule is that the three-day notice requirement in motions under Section 4 of
the Rules is mandatory. It is an integral component of procedural due process. The
purpose of the three-day notice requirement, which was established not for the benefit
of the movant but rather for the adverse party, is to avoid surprises upon the latter and

681
to grant it sufficient time to study the motion and to enable it to meet the arguments
interposed therein.31

In Cabrera v. Ng,32 the facts of which are analogous to the present petition, we held that
the three-day notice requirement is not a hard-and-fast rule. A liberal construction of the
procedural rules is proper where the lapse in the literal observance of a rule of
procedure has not prejudiced the adverse party and has not deprived the court of its
authority.33 We ruled:

It is undisputed that the hearing on the motion for reconsideration filed by the spouses
Cabrera was reset by the RTC twice with due notice to the parties; it was only on
October 26, 2007 that the motion was actually heard by the RTC. At that time, more
than two months had passed since the respondent received a copy of the said motion
for reconsideration on August 21, 2007. The respondent was thus given sufficient time
to study the motion and to enable him to meet the arguments interposed therein.
Indeed, the respondent was able to file his opposition thereto on September 20, 2007.

Notwithstanding that the respondent received a copy of the said motion for
reconsideration four days after the date set by the spouses Cabrera for the hearing
thereof, his right to due process was not impinged as he was afforded the chance to
argue his position. Thus, the RTC erred in denying the spouses Cabrera's motion for
reconsideration based merely on their failure to comply with the three-day notice
requirement.34

Thus, the test is the presence of opportunity to be heard, as well as to have time to
study the motion and meaningfully oppose or controvert the grounds upon which it is
based.35 When the adverse party had been afforded such opportunity, and has been
indeed heard through the pleadings filed in opposition to the motion, the purpose behind
the three-day notice requirement is deemed realized. In such case, the requirements of
procedural due process are substantially complied with. 36

Here, respondents claimed to have actually received the notice for the November 7,
2014 hearing only on November 6, 2014.37 On the supposed day of hearing, however,
RTC Br. 87 issued a Constancia38 resetting the hearing to December 5, 2014.
Thereafter, on November 11, 2014, respondent filed a motion to expunge petitioners'
MR.39 Clearly, respondents' right to due process was not violated as they were able to
oppose petitioner's MR in the form of their motion to expunge.

RTC Br. 87 did not err in giving due

course to respondents' motion to
dismiss.

Petitioners fault RTC Br. 87 for giving due course to respondents' motion to dismiss.
Respondents filed their second motion to dismiss almost one (1) year and six (6)
months after they submitted their Answer Ad Cautelam.40 Thus, petitioners aver that
respondents violated Section 1, Rule 16 of the Rules, stating that a motion to dismiss

682
must be filed "within the time for but before filing the answer to the complaint or pleading
asserting a claim."

Petitioners are incorrect. In Obando v. Figueras,41 we held that the period to file a
motion to dismiss depends upon the circumstances of the case:

x x x Section 1 of Rule 16 of the Rules of Court requires that, in general, a motion to

dismiss should be filed within the reglementary period for filing a responsive pleading.
Thus, a motion to dismiss alleging improper venue cannot be entertained unless made
within that period.

However, even after an answer has been filed, the Court has allowed a defendant
to file a motion to dismiss on the following grounds: (1) lack of jurisdiction, (2) litis
pendentia, (3) lack of cause of action, and (4) discovery during trial of evidence that
would constitute a ground for dismissal. Except for lack of cause of action or lack of
jurisdiction, the grounds under Section 1 of Rule 16 may be waived. If a particular
ground for dismissal is not raised or if no motion to dismiss is filed at all within the
reglementary period, it is generally considered waived under Section 1, Rule 9 of the
Rules.

Applying this principle to the case at bar, the respondents did not waive their right to
move for the dismissal of the civil case based on Petitioner Obando's lack of legal
capacity. It must be pointed out that it was only after he had been convicted of
estafa through falsification that the probate court divested him of his
representation of the Figueras estates. It was only then that this ground became
available to the respondents. Hence, it could not be said that they waived it by
raising it in a Motion to Dismiss filed after their Answer was submitted. Verily, if
the plaintiff loses his capacity to sue during the pendency of the case, as in the
present controversy, the defendant should be allowed to file a motion to dismiss,
even after the lapse of the reglementary period for filing a responsive
pleading.42 (Emphasis supplied.)

In the same manner, respondents' motion to dismiss was based on an event that
transpired after it filed its Answer Ad Cautelam. Consequently, there was no violation of
Section 1, Rule 16 of the Rules as they could not have possibly raised it as an
affirmative defense in their answer.

While RTC Br. 87 did not err in giving due course to respondents' motion to dismiss, the
propriety of granting it is an entirely different matter.

RTC Br. 87 erred when it dismissed

the contempt case for being moot and
academic.

In their motion to dismiss, respondents advance that the CA's reversal of RTC Br. 98's
ruling is a supervening event that renders the contempt case moot and academic. They

683
argue that it would now be absurd to restrain UOBP from exercising its rights under the
Deed of Real Estate Mortgage when it was found to have proceeded lawfully in the
foreclosure proceedings. Respondents maintain that it would be illogical to hold them in
contempt for a lawful act.43

RTC Br. 87 agreed,44 citing the cases of Golez v. Leonidas45 and Buyco v.

Baraquia,46 where we held that a writ of preliminary injunction is deemed lifted upon
dismissal of the main case, its purpose as a provisional remedy having been served,
despite the filing of an appeal.

We are not persuaded. A case is moot when it ceases to present a justiciable

controversy by virtue of supervening events so that a declaration thereon would be of
no practical value.47 Courts decline jurisdiction over it as there is no substantial relief to
which petitioner will be entitled and which will anyway be negated by the dismissal of
the petition.48 Here, the consequent dissolution of the 2000 writ did not render the
contempt case moot and academic. Foremost, RTC Br. 87's reliance
in Golez and Buyco is misplaced. As correctly pointed out by petitioners, the facts and
circumstances in the two cases differ from the present petition. In Golez and Buyco, the
alleged acts in violation of the writ of preliminary injunction were committed AFTER the
writ was lifted upon the dismissal of the main action, such that a case for contempt on
the ground of violation of the writ would be unavailing. In the case before us, the sale of
the properties—which is the act alleged to be in violation of the 2000 writ—was
conducted while the 2000 writ was still subsisting. In fact, the 2000 writ was issued on
May 17, 2000, while the sale was made on May 5, 2008. RTC Br. 98 annulled the sale
in favor of petitioners on June 12, 2008. 49

The reversal by the CA of the ruling of RTC Br. 98 in the annulment case and the
automatic dissolution of the 2000 writ will not protect respondents from an action
ascribing a violation of the 2000 writ, which was committed while it was still in full force
and effect. In Lee v. Court of Appeals,50 we explained that:

An injunction or restraining order which is not void must be obeyed while it remains in
full force and effect, and has not been overturned, that is, in general, until the injunction
or restraining order has been set aside, vacated, or modified by the court which granted
it, or until the order or decree awarding it has been reversed on appeal or error. The
injunction must be obeyed irrespective of the ultimate validity of the order, and no
matter how unreasonable and unjust the injunction may be in its terms. Defendant
cannot avoid compliance with the commands, or excuse his violation, of the injunction
by simply moving to dissolve it, or by the pendency of a motion to modify it. The fact that
an injunction or restraining order has been dissolved or terminated, or has expired, does
not necessarily protect a person in a proceeding against him for a violation of the
injunction or order while it was in force, as by acts between granting of the injunction
and its termination, at least where the proceeding is one to punish for a criminal
contempt.51

684
Notably, this is not to say that respondents are already guilty of indirect contempt.
Whether respondents violated the 2000 writ is not for us to decide. Section 5, Rule 71 of
the Rules provides that where the charge for indirect contempt has been committed
against a Regional Trial Court or a court of equivalent or higher rank, or against an
officer appointed by it, the charge may be filed with such court. Here, the petition for
indirect contempt was correctly filed with the RTC. The contempt case was however
dismissed while it was only in the pre-trial stage and clearly before the parties could
present their evidence. Proceedings for indirect contempt of court require normal
adversarial procedures. It is not summary in character. The proceedings for the
punishment of the contumacious act committed outside the personal knowledge of the
judge generally need the observance of all the elements of due process of law, that is,
notice, written charges, and an opportunity to deny and to defend such charges before
guilt is adjudged and sentence imposed.52

In this regard, we cannot grant petitioners' prayer to declare respondents guilty of

contempt of court and order them to pay damages.

WHEREFORE, the petition is PARTIALLY GRANTED. The October 7, 2014 and July
20, 2015 Orders of the Regional Trial Court of Quezon City, Branch 87 in Civil Case No.
Q-11-69413 are hereby REVERSED. The case is REMANDED to the court a quo for
continuance of the trial of the case.

SO ORDERED.

RULE 16. MOTION TO DISMISS

THIRD DIVISION

G.R. No. 171219               September 3, 2012

ATTY. FE Q. PALMIANO-SALVADOR, Petitioner,
vs.
CONSTANTINO ANGELES, substituted by LUZ G. ANGELES*, Respondent.

DECISION

PERALTA, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court,
praying that the Decision1 of the Court of Appeals (CA) promulgated on September 16,
2005 dismissing the petition before it, and its Resolution 2 dated January 13, 2006,
denying petitioner's Motion for Reconsideration, be reversed and set aside.

The records reveal the CA's narration of facts to be accurate, to wit:

xxxx

685
Respondent-appellee ANGELES is one of the registered owners of a parcel of land
located at 1287 Castanos Street, Sampaloc, Manila, evidenced by Transfer Certificate
of Title No. 150872. The subject parcel of land was occupied by one Jelly Galiga
(GALIGA) from 1979 up to 1993, as a lessee with a lease contract. Subsequently, Fe
Salvador (SALVADOR) alleged that she bought on September 7, 1993 the subject
parcel of land from GALIGA who represented that he was the owner, being one in
possession. Petitioner-appellant SALVADOR remained in possession of said subject
property from November 1993 up to the present.

On November 18, 1993, the registered owner, the respondentappellee ANGELES, sent
a letter to petitioner-appellant SALVADOR demanding that the latter vacate the subject
property, which was not heeded by petitioner-appellant SALVADOR. Respondent-
appellee ANGELES, thru one Rosauro Diaz, Jr. (DIAZ), filed a complaint for ejectment
on October 12, 1994 with the Metropolitan Trial Court [MeTC] of Manila, Branch 16,
docketed as Civil Case No. 146190-CV.

The Assailed Decision of the Trial Courts

The [MeTC] rendered its decision on November 29, 1999 in favor of herein respondent-
appellee ANGELES, the dispositive portion of which reads, to wit:

WHEREFORE, judgment is hereby rendered for the plaintiff and against the defendant
ordering the latter and all persons claiming under her to:

1) vacate the parcel of land located at 1287 Castanos Street, Sampaloc, Manila,
and surrender the same to the plaintiff;

2) pay the plaintiff the sum of Php1,000.00 monthly as reasonable compensation

for her use and occupancy of the above parcel of land beginning November 1993
up to the time she has actually vacated the premises;

3) pay the plaintiff the sum of Php5,000.00 as attorney's fees and the cost of suit.

SO ORDERED.

In the appeal filed by petitioner-appellant SALVADOR, she alleged, among others, that
DIAZ, who filed the complaint for ejectment, had no authority whatsoever from
respondent-appellee ANGELES at the time of filing of the suit. Petitioner-appellant
SALVADOR's appeal was denied by the [Regional Trial Court] RTC in a Decision dated
March 12, 2003. The Motion for Reconsideration filed by SALVADOR was denied in an
Order dated March 16, 2004.3

Petitioner elevated the case to the CA via a petition for review, but in a Decision dated
September 16, 2005, said petition was dismissed for lack of merit. The CA affirmed the
factual findings of the lower courts that Galiga, the person who supposedly sold the
subject premises to petitioner, was a mere lessee of respondent, the registered owner

686
of the land in question. Such being the case, the lower court ruled that Galiga could not
have validly transferred ownership of subject property to herein petitioner. It was ruled
by the CA that there were no significant facts or circumstances that the trial court
overlooked or misinterpreted, thus, it found no reason to overturn the factual findings of
the MeTC and the RTC. A motion for reconsideration of said Decision was denied in a
Resolution dated January 13, 2006.

Hence, the present petition, where one of the important issues for resolution is the effect
of Rosauro Diaz's (respondent's representative) failure to present proof of his authority
to represent respondent (plaintiff before the MeTC) in filing the complaint. This basic
issue has been ignored by the MeTC and the RTC, while the CA absolutely failed to
address it, despite petitioner's insistence on it from the very beginning, i.e., in her
Answer filed with the MeTC. This is quite unfortunate, because this threshold issue
should have been resolved at the outset as it is determinative of the court's jurisdiction
over the complaint and the plaintiff.

Note that the complaint before the MeTC was filed in the name of respondent, but it was
one Rosauro Diaz who executed the verification and certification dated October 12,
1994, alleging therein that he was respondent's attorney-in-fact. There was, however,
no copy of any document attached to the complaint to prove Diaz's allegation regarding
the authority supposedly granted to him. This prompted petitioner to raise in her Answer
and in her Position Paper, the issue of Diaz's authority to file the case. On December
11, 1995, more than a year after the complaint was filed, respondent attached to his
Reply and/or Comment to Respondent's (herein petitioner) Position Paper,4 a document
entitled Special Power of Attorney (SPA)5 supposedly executed by respondent in favor
of Rosauro Diaz. However, said SPA was executed only on November 16, 1994, or
more than a month after the complaint was filed, appearing to have been notarized
by one Robert F. McGuire of Santa Clara County. Observe, further, that there was no
certification from the Philippine Consulate General in San Francisco, California, U.S.A,
that said person is indeed a notary public in Santa Clara County, California. Verily, the
court cannot give full faith and credit to the official acts of said Robert McGuire, and
hence, no evidentiary weight or value can be attached to the document designated as
an SPA dated November 16, 1994. Thus, there is nothing on record to show that Diaz
had been authorized by respondent to initiate the action against petitioner.1âwphi1

What then, is the effect of a complaint filed by one who has not proven his authority to
represent a plaintiff in filing an action? In Tamondong v. Court of Appeals,6 the Court
categorically stated that "[i]f a complaint is filed for and in behalf of the plaintiff [by one]
who is not authorized to do so, the complaint is not deemed filed. An unauthorized
complaint does not produce any legal effect. Hence, the court should dismiss the
complaint on the ground that it has no jurisdiction over the complaint and the
plaintiff."7 This ruling was reiterated in Cosco Philippines Shipping, Inc. v. Kemper
Insurance Company,8 where the Court went on to say that "[i]n order for the court to
have authority to dispose of the case on the merits, it must acquire jurisdiction over the
subject matter and the parties. Courts acquire jurisdiction over the plaintiffs upon the
filing of the complaint, and to be bound by a decision, a party should first be subjected

687
to the court's jurisdiction. Clearly, since no valid complaint was ever filed with the
[MeTC], the same did not acquire jurisdiction over the person of respondent [plaintiff
before the lower court]."9

Pursuant to the foregoing rulings, therefore, the MeTC never acquired jurisdiction over
this case and all proceedings before it were null and void. The courts could not have
delved into the very merits of the case, because legally, there was no complaint to
speak of. The court's jurisdiction cannot be deemed to have been invoked at all.

IN VIEW OF THE FOREGOING, the Petition is GRANTED. The Decision of the

Metropolitan Trial Court in Civil Case No. 146190, dated November 29, 1999; the
Decision of the Regional Trial Court in Civil Case No. 00-96344, dated March 12, 2003;
and the Decision of the Court of Appeals in CA-G.R. SP No. 83467, are SET ASIDE
AND NULLIFIED. The complaint filed by respondent before the Metropolitan Trial Court
is hereby DISMISSED.

SO ORDERED.

SECOND DIVISION

G.R. No. 185922, January 15, 2014

HEIRS OF DR. MARIANO FAVIS, SR., REPRESENTED BY THEIR CO–HEIRS AND

ATTORNEYS–IN–FACT MERCEDES A. FAVIS AND NELLY FAVIS–
VILLAFUERTE, Petitioners, v. JUANA GONZALES, HER SON MARIANO G. FAVIS,
MA. THERESA JOANA D. FAVIS, JAMES MARK D. FAVIS, ALL MINORS
REPRESENTED HEREIN BY THEIR PARENTS, SPS. MARIANO FAVIS AND
LARCELITA D. FAVIS, Respondents.

DECISION

PEREZ, J.:

Before this Court is a petition for review assailing the 10 April 2008 Decision 1 and 7
January 2009 Resolution2 of the Court of Appeals in CA–G.R. CV No. 86497 dismissing
petitioners’ complaint for annulment of the Deed of Donation for failure to exert earnest
efforts towards a compromise.

Dr. Mariano Favis, Sr. (Dr. Favis) was married to Capitolina Aguilar (Capitolina) with
whom he had seven children named Purita A. Favis, Reynaldo Favis, Consolacion
Favis–Queliza, Mariano A. Favis, Jr., Esther F. Filart, Mercedes A. Favis, and Nelly
Favis–Villafuerte.  When Capitolina died in March 1944, Dr. Favis took Juana Gonzales
(Juana) as his common–law wife with whom he sired one child, Mariano G. Favis
(Mariano). When Dr. Favis and Juana got married in 1974, Dr. Favis executed an
affidavit acknowledging Mariano as one of his legitimate children.  Mariano is married to
Larcelita D. Favis (Larcelita), with whom he has four children, named Ma. Theresa

688
Joana D. Favis, Ma. Cristina D. Favis, James Mark D. Favis and Ma. Thea D. Favis.

Dr. Favis died intestate on 29 July 1995 leaving the following properties:

1.  A parcel of residential land located at Bonifacio St. Brgy. 1, Vigan, Ilocos Sur,
consisting an area of 898 square meters, more or less, bounded on the north by
Salvador Rivero; on the East by Eleutera Pena; on the South by Bonifacio St., and on
the West by Carmen Giron; x x x;

2.  A commercial building erected on the aforesaid parcel of land with an assessed
value of P126,000.00; x x x;

3.  A parcel of residential land located in Brgy. VII, Vigan, Ilocos Sur, containing an area
of 154 sq. ms., more or less, bounded on the North by the High School Site; on the East
by Gomez St., on the South by Domingo [G]o; and on the West by Domingo Go; x x x;

4.  A house with an assessed value of P17,600.00 x x x;

5.  A parcel of orchard land located in Brgy. VI, Vigan, Ilocos Sur, containing an area of
2,257 sq. ma. (sic) more or less, bounded on the North by Lot 1208; on the East by
Mestizo River; on the South by Lot 1217 and on the West by Lot 1211–B, 1212 and
1215 x x x.3

Beginning 1992 until his death in 1995, Dr. Favis was beset by various illnesses, such
as kidney trouble, hiatal hernia, congestive heart failure, Parkinson’s disease and
pneumonia.  He died of “cardiopulmonary arrest secondary to multi–organ/system
failure secondary to sepsis secondary to pneumonia.” 4

On 16 October 1994, he allegedly executed a Deed of Donation 5 transferring and

conveying properties described in (1) and (2) in favor of his grandchildren with Juana.

Claiming that said donation prejudiced their legitime, Dr. Favis’ children with Capitolina,
petitioners herein, filed an action for annulment of the Deed of Donation, inventory,
liquidation and partition of property before the Regional Trial Court (RTC) of Vigan,
Ilocos Sur, Branch 20 against Juana, Spouses Mariano and Larcelita and their
grandchildren as respondents.

In their Answer with Counterclaim, respondents assert that the properties donated do
not form part of the estate of the late Dr. Favis because said donation was made inter
vivos, hence petitioners have no stake over said properties. 6

The RTC, in its Pre–Trial Order, limited the issues to the validity of the deed of donation
and whether or not respondent Juana and Mariano are compulsory heirs of Dr.
Favis.7cralawred

In a Decision dated 14 November 2005, the RTC nullified the Deed of Donation and

689
cancelled the corresponding tax declarations.  The trial court found that Dr. Favis, at the
age of 92 and plagued with illnesses, could not have had full control of his mental
capacities to execute a valid Deed of Donation.   Holding that the subsequent marriage
of Dr. Favis and Juana legitimated the status of Mariano, the trial court also declared
Juana and Mariano as compulsory heirs of Dr. Favis.  The dispositive portion reads:

WHEREFORE, in view of all the foregoing considerations, the Deed of Donation dated
October 16, 1994 is hereby annulled and the corresponding tax declarations issued on
the basis thereof cancelled.  Dr. Mariano Favis, Sr. having died without a will, his estate
would result to intestacy.  Consequently, plaintiffs Heirs of Dr. Mariano Favis, Sr.,
namely Purita A. Favis, Reynaldo A. Favis, Consolacion F. Queliza, Mariano A. Favis,
Jr., Esther F. Filart, Mercedes A. Favis, Nelly F. Villafuerte and the defendants Juana
Gonzales now deceased and Mariano G. Favis, Jr. shall inherit in equal shares in the
estate of the late Dr. Mariano Favis, Sr. which consists of the following:

1.      A parcel of residential land located at Bonifacio St. Brgy. 1, Vigan City, Ilocos Sur,
consisting an area of 89 sq. meters more or less, bounded on the north by Salvador
Rivero; on the East by Eleutera Pena; on the South by Bonifacio St., and on the West
by Carmen Giron;

2.      A commercial building erected on the aforesaid parcel of land with an assessed
value of P126,000.00;

3.      One–half (1/2) of the house located in Brgy. VI, Vigan City, Ilocos Sur[,] containing
an area of 2,257 sq. meters more or less, bounded on the north by Lot 1208; on the
east by Mestizo River; on the South by Lot 1217 and on the West by Lot 1211–B, 1212
and 1215.

4.      The accumulated rentals of the new Vigan Coliseum in the amount of One
Hundred Thirty [Thousand] (P130,000.00) pesos per annum from the death of Dr.
Mariano Favis, Sr.8

Respondents interposed an appeal before the Court of Appeals challenging the trial
court’s nullification, on the ground of vitiated consent, of the Deed of Donation in favor
of herein respondents.  The Court of Appeals ordered the dismissal of the petitioners’
nullification case.  However, it did so not on the grounds invoked by herein respondents
as appellant.

The Court of Appeals motu proprio ordered the dismissal of the complaint for failure of
petitioners to make an averment that earnest efforts toward a compromise have been
made, as mandated by Article 151 of the Family Code.  The appellate court justified its
order of dismissal by invoking its authority to review rulings of the trial court even if they
are not assigned as errors in the appeal.

Petitioners filed a motion for reconsideration contending that the case is not subject to
compromise as it involves future legitime.

690
The Court of Appeals rejected petitioners’ contention when it ruled that the prohibited
compromise is that which is entered between the decedent while alive and compulsory
heirs.  In the instant case, the appellate court observed that while the present action is
between members of the same family it does not involve a testator and a compulsory
heir.  Moreover, the appellate court pointed out that the subject properties cannot be
considered as “future legitime” but are in fact, legitime, as the instant complaint was
filed after the death of the decedent.

Undaunted by this legal setback, petitioners filed the instant petition raising the following
arguments:

1.      The Honorable Court of Appeals GRAVELY and SERIOUSLY ERRED in

DISMISSING the COMPLAINT.

2.      Contrary to the finding of the Honorable Court of Appeals, the verification of the
complaint or petition is not a mandatory requirement.

3.      The Honorable Court of Appeals seriously failed to appreciate that the filing of an
intervention by Edward Favis had placed the case beyond the scope of Article 151 of
the Family Code.

4.      Even assuming arguendo without admitting that the filing of intervention by
Edward Favis had no positive effect to the complaint filed by petitioners, it is still a
serious error for the Honorable Court of Appeals to utterly disregard the fact that
petitioners had substantially complied with the requirements of Article 151 of the Family
Code.

5.      Assuming arguendo that petitioners cannot be construed as complying

substantially with Article 151 of the Family Code, still, the same should be considered
as a non–issue considering that private respondents are in estoppel.

6.      The dismissal of the complaint by the Honorable Court of Appeals amounts to
grave abuse of discretion amounting to lack and excess of jurisdiction and a complete
defiance of the doctrine of primacy of substantive justice over strict application of
technical rules.

7.      The Honorable Court of Appeals gravely and seriuosly erred in not affirming the
decision of the Court a quo that the Deed of Donation is void. 9

In their Comment, respondents chose not to touch upon the merits of the case, which is
the validity of the deed of donation.  Instead, respondents defended the ruling the Court
of Appeals that the complaint is dismissible for failure of petitioners to allege in their
complaint that earnest efforts towards a compromise have been exerted.

The base issue is whether or not the appellate court may dismiss the order of dismissal

691
of the complaint for failure to allege therein that earnest efforts towards a compromise
have been made.

The appellate court committed egregious error in dismissing the complaint.  The
appellate courts’ decision hinged on Article 151 of the Family Code, viz:

Art. 151.  No suit between members of the same family shall prosper unless it should
appear from the verified complaint or petition that earnest efforts toward a compromise
have been made, but that the same have failed.  If it is shown that no such efforts were
in fact made, the case must be dismissed.

This rule shall not apply to cases which may not be the subject of compromise under
the Civil Code.

The appellate court correlated this provision with Section 1, par. (j), Rule 16 of the 1997
Rules of Civil Procedure, which provides:

Section 1.  Grounds. — Within the time for but before filing the answer to the complaint
or pleading asserting a claim, a motion to dismiss may be made on any of the following
grounds:

xxx

(j) That a condition precedent for filing the claim has not been complied with.

The appellate court’s reliance on this provision is misplaced.  Rule 16 treats of the
grounds for a motion to dismiss the complaint.  It must be distinguished from the
grounds provided under Section 1, Rule 9 which specifically deals with dismissal of the
claim by the court motu proprio. Section 1, Rule 9 of the 1997 Rules of Civil Procedure
provides:

Section 1.  Defenses and objections not pleaded. – Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived. However,
when it appears from the pleadings or the evidence on record that the court has no
jurisdiction over the subject matter, that there is another action pending between the
same parties for the same cause, or that the action is barred by a prior judgment or by
statute of limitations, the court shall dismiss the claim.

Section 1, Rule 9 provides for only four instances when the court may motu
proprio dismiss the claim, namely: (a) lack of jurisdiction over the subject matter; (b) litis
pendentia; (c) res judicata; and (d) prescription of action. 10   Specifically in Gumabon v.
Larin,11 cited in Katon v. Palanca, Jr.,12 the Court held:

x x x [T]he motu proprio dismissal of a case was traditionally limited to instances when

the court clearly had no jurisdiction over the subject matter and when the plaintiff did not
appear during trial, failed to prosecute his action for an unreasonable length of time or

692
neglected to comply with the rules or with any order of the court.  Outside of these
instances, any motu proprio dismissal would amount to a violation of the right of the
plaintiff to be heard.  Except for qualifying and expanding Section 2, Rule 9, and Section
3, Rule 17, of the Revised Rules of Court, the amendatory 1997 Rules of Civil
Procedure brought about no radical change.  Under the new rules, a court may motu
proprio dismiss a claim when it appears from the pleadings or evidence on record that it
has no jurisdiction over the subject matter; when there is another cause of action
pending between the same parties for the same cause, or where the action is barred by
a prior judgment or by statute of limitations.  x x x. 13

The error of the Court of Appeals is evident even if the consideration of the issue is kept
within the confines of the language of Section 1(j) of Rule 16 and Section 1 of Rule 9. 
That a condition precedent for filing the claim has not been complied with, a ground for
a motion to dismiss emanating from the law that no suit between members from the
same family shall prosper unless it should appear from the verified complaint that
earnest efforts toward a compromise have been made but had failed, is, as the Rule so
words, a ground for a motion to dismiss.  Significantly, the Rule requires that such a
motion should be filed “within the time for but before filing the answer to the complaint or
pleading asserting a claim.”  The time frame indicates that thereafter, the motion to
dismiss based on the absence of the condition precedent is barred.  It is so inferable
from the opening sentence of Section 1 of Rule 9 stating that defense and objections
not pleaded either in a motion to dismiss or in the answer are deemed waived.  There
are, as just noted, only four exceptions to this Rule, namely, lack of jurisdiction over the
subject matter; litis pendentia; res judicata; and prescription of action.  Failure to allege
in the complaint that earnest efforts at a compromise has been made but had failed is
not one of the exceptions.  Upon such failure, the defense is deemed waived.

It was in Heirs of Domingo Valientes v. Ramas14 cited in P.L. Uy Realty Corporation v.

ALS Management and Development Corporation 15 where we noted that the second
sentence of Section 1 of Rule 9 does not only supply exceptions to the rule that
defenses not pleaded either in a motion to dismiss or in the answer are deemed waived,
it also allows courts to dismiss cases motu propio on any of the enumerated grounds. 
The tenor of the second sentence of the Rule is that the allowance of a motu
propio dismissal can proceed only from the exemption from the rule on waiver; which is
but logical because there can be no ruling on a waived ground.

Why the objection of failure to allege a failed attempt at a compromise in a suit among
members of the same family is waivable was earlier explained in the case of Versoza v.
Versoza,16 a case for future support which was dismissed by the trial court upon the
ground that there was no such allegation of infringement of Article 222 of the Civil Code,
the origin of Article 151 of the Family Code.  While the Court ruled that a complaint for
future support cannot be the subject of a compromise and as such the absence of the
required allegation in the complaint  cannot be a ground for objection against the suit,
the decision went on to state thus:

693
The alleged defect is that the present complaint does not state a cause of action.  The
proposed amendment seeks to complete it.  An amendment to the effect that the
requirements of Article 222 have been complied with does not confer jurisdiction upon
the lower court.  With or without this amendment, the subject–matter of the action
remains as one for support, custody of children, and damages, cognizable by the court
below.

To illustrate, Tamayo v. San Miguel Brewery, Inc.,17 allowed an amendment which

“merely corrected a defect in the allegation of plaintiff–appellant’s cause of action,
because as it then stood, the original complaint stated no cause of action.”  We there
ruled out as inapplicable the holding in Campos Rueda Corporation v. Bautista,18 that an
amendment cannot be made so as to confer jurisdiction on the court x x x.  (Italics
supplied).

Thus was it made clear that a failure to allege earnest but failed efforts at a compromise
in a complaint among members of the same family, is not a jurisdictional defect but
merely a defect in the statement of a cause of action.  Versoza was cited in a later case
as an instance analogous to one where the conciliation process at the barangay level
was not priorly resorted to.  Both were described as a “condition precedent for the filing
of a complaint in Court.”19   In such instances, the consequence is precisely what is
stated in the present Rule.  Thus:

x x x The defect may however be waived by failing to make seasonable objection, in a

motion to dismiss or answer, the defect being a mere procedural imperfection which
does not affect the jurisdiction of the court. 20   (Underscoring supplied).

In the case at hand, the proceedings before the trial court ran the full course.  The
complaint of petitioners was answered by respondents without a prior motion to dismiss
having been filed.  The decision in favor of the petitioners was appealed by respondents
on the basis of the alleged error in the ruling on the merits, no mention having been
made about any defect in the statement of a cause of action.  In other words, no motion
to dismiss the complaint based on the failure to comply with a condition precedent was
filed in the trial court; neither was such failure assigned as error in the appeal that
respondent brought before the Court of Appeals.

Therefore, the rule on deemed waiver of the non–jurisdictional defense or objection is

wholly applicable to respondent.  If the respondents as parties–defendants could not,
and did not, after filing their answer to petitioner’s complaint, invoke the objection of
absence of the required allegation on earnest efforts at a compromise, the appellate
court unquestionably did not have any authority or basis to motu propio order the
dismissal of petitioner’s complaint.

Indeed, even if we go by the reason behind Article 151 of the Family Code, which
provision as then Article 222 of the New Civil Code was described as “having been
given more teeth”21   by Section 1(j), Rule 16 of the Rule of Court, it is safe to say that

694
the purpose of making sure that there is no longer any possibility of a compromise, has
been served.  As cited in commentaries on Article 151 of the Family Code –

This rule is introduced because it is difficult to imagine a sudden and more tragic
spectacle than a litigation between members of the same family.  It is necessary that
every effort should be made towards a compromise before a litigation is allowed to
breed hate and passion in the family.  It is known that a lawsuit between close relatives
generates deeper bitterness than between strangers. 22

The facts of the case show that compromise was never an option insofar as the
respondents were concerned.  The impossibility of compromise instead of litigation was
shown not alone by the absence of a motion to dismiss but on the respondents’
insistence on the validity of the donation in their favor of the subject properties.  Nor
could it have been otherwise because the Pre–trial Order specifically limited the issues
to the validity of the deed and whether or not respondent Juana and Mariano are
compulsory heirs of Dr. Favis.  Respondents not only confined their arguments within
the pre–trial order; after losing their case, their appeal was based on the proposition that
it was error for the trial court to have relied on the ground of vitiated consent on the part
of Dr. Favis.

The Court of Appeals ignored the facts of the case that clearly demonstrated the refusal
by the respondents to compromise.  Instead it ordered the dismissal of petitioner’s
complaint on the ground that it did not allege what in fact was shown during the trial. 
The error of the Court of Appeals is patent.

Unfortunately for respondents, they relied completely on the erroneous ruling of the
Court of Appeals even when petitioners came to us for review not just on the basis of
such defective motu propio action but also on the proposition that the trial court
correctly found that the donation in question is flawed because of vitiated consent. 
Respondents did not answer this argument.

The trial court stated that the facts are:

x x x To determine the intrinsic validity of the deed of donation subject of the action for
annulment, the mental state/condition of the donor Dr. Mariano Favis, Sr. at the time of
its execution must be taken into account.  Factors such as his age, health and
environment among others should be considered.  As testified to by Dr. Mercedes
Favis, corroborated by Dr. Edgardo Alday and Dra. Ofelia Adapon, who were all
presented as expert witnesses, Dr. Mariano Favis, Sr. had long been suffering from
Hiatal Hernia and Parkinson’s disease and had been taking medications for years.  That
a person with Parkinson’s disease for a long time may not have a good functioning brain
because in the later stage of the disease, 1/3 of death develop from this kind of disease,
and or dementia.  With respect to Hiatal Hernia, this is a state wherein organs in the
abdominal cavity would go up to the chest cavity, thereby occupying the space for the
lungs causing the lungs to be compromised.  Once the lungs are affected, there is less
oxygenation to the brain.  The Hernia would cause the heart not to pump enough

695
oxygen to the brain and the effect would be chronic, meaning, longer lack of
oxygenation to the brain will make a person not in full control of his faculties.  Dr. Alday
further testified that during his stay with the house of Dr. Mariano Favis, Sr. (1992–
1994), he noticed that the latter when he goes up and down the stairs will stop after few
seconds, and he called this pulmonary cripple – a very advanced stage wherein the
lungs not only one lung, but both lungs are compromised.  That at the time he operated
on the deceased, the left and right lung were functioning but the left lung is practically
not even five (5%) percent functioning since it was occupied by abdominal organ.  x x x.

Dr. Mariano Favis, Sr. during the execution of the Deed of Donation was already 92
years old; living with the defendants and those years from 1993 to 1995 were the critical
years when he was sick most of the time. In short, he’s dependent on the care of his
housemates particularly the members of his family.  It is the contention of the
defendants though that Dr. Mariano Favis, Sr. had full control of his mind during the
execution of the Deed of Donation because at that time, he could go on with the regular
way of life or could perform his daily routine without the aid of anybody like taking a
bath, eating his meals, reading the newspaper, watching television, go to the church on
Sundays, walking down the plaza to exercise and most importantly go to the cockpit
arena and bet.  Dr. Ofelia Adapon, a neurology expert however, testified that a person
suffering from Parkinson’s disease when he goes to the cockpit does not necessarily
mean that such person has in full control of his mental faculties because anyone, even
a retarded person, a person who has not studied and have no intellect can go to the
cockpit and bet.  One can do everything but do not have control of his mind. x x x That
Hiatal Hernia creeps in very insidiously, one is not sure especially if the person has not
complained and no examination was done.  It could be there for the last time and no
one will know.  x x x.

The Deed of Donation in favor of the defendants Ma. Theresa, Joana D. Favis, Maria
Cristina D. Favis, James Mark D. Favis and Maria Thea D. Favis, all of whom are the
children of Mariano G. Favis, Jr. was executed on [16 October] 1994, seven (7) months
after Dra. Mercedes Favis left the house of Dr. Favis, Sr. at Bonifacio St., Vigan City,
Ilocos Sur, where she resided with the latter and the defendants.

Putting together the circumstances mentioned, that at the time of the execution of the
Deed of Donation, Dr. Mariano Favis, Sr. was already at an advanced age of 92,
afflicted with different illnesses like Hiatal hernia, Parkinsons’ disease and pneumonia,
to name few, which illnesses had the effects of impairing his brain or mental faculties
and the deed being executed only when Dra. Me[r]cedes Favis had already left his
father’s residence when Dr. Mariano Favis, Sr. could have done so earlier or even in the
presence of Dra. Mercedes Favis, at the time he executed the Deed of Donation was
not in full control of his mental faculties.  That although age of senility varies from one
person to another, to reach the age of 92 with all those medications and treatment one
have received for those illnesses, yet claim that his mind remains unimpaired, would be
unusual. The fact that the Deed of Donation was only executed after Dra. Mercedes
Favis left his father’s house necessarily indicates that they don’t want the same to be

696
known by the first family, which is an indicia of bad faith on the part of the defendant,
who at that time had influence over the donor. 23

The correctness of the finding was not touched by the Court of Appeals.  The
respondents opted to rely only on what the appellate court considered, erroneously
though, was a procedural infirmity.  The trial court’s factual finding, therefore, stands
unreversed; and respondents did not provide us with any argument to have it reversed.

WHEREFORE, the Decision of the Court of Appeals is REVERSED and SET

ASIDE and the Judgment of the Regional Trial Court of Vigan, Ilocos Sur, Branch 20
is AFFIRMED.chanroblesvirtualawlibrary ChanRoblesVirtualawlibrary

SO ORDERED.

SECOND DIVISION

[G.R. NO. 162084 : June 28, 2005]

APRIL MARTINEZ, FRITZ DANIEL MARTINEZ and MARIA OLIVIA

MARTINEZ, Petitioners, v. RODOLFO G. MARTINEZ, Respondent.

DECISION

CALLEJO, SR., J.:

This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA)
in CA-G.R. SP No. 59420 setting aside and reversing the decision of the Regional Trial
Court (RTC) of Manila, Branch 30, in Civil Case No. 00-96962 affirming, on appeal, the
decision of the Metropolitan Trial Court (MTC) of Manila in Civil Case No. 164761 (CV)
for ejectment.

The Antecedents

The spouses Daniel P. Martinez, Sr. and Natividad de Guzman-Martinez were the
owners of a parcel of land identified as Lot 18-B-2 covered by Transfer Certificate of
Title (TCT) No. 54334, as well as the house constructed thereon. 2 On March 6, 1993,
Daniel, Sr. executed a Last Will and Testament 3 directing the subdivision of the property
into three lots, namely, Lots 18-B-2-A, 18-B-2-B and 18-B-2-C. He then bequeathed the
three lots to each of his sons, namely, Rodolfo, Manolo and Daniel, Jr.; Manolo was
designated as the administrator of the estate.

In May 1995, Daniel, Sr. suffered a stroke which resulted in the paralysis of the right
side of his body. Natividad died on October 26, 1996. 4 Daniel, Sr. passed away on
October 6, 1997.5

697
On September 16, 1998, Rodolfo found a deed of sale purportedly signed by his father
on September 15, 1996, where the latter appears to have sold Lot 18-B-2 to Manolo
and his wife Lucila.6 He also discovered that TCT No. 237936 was issued to the
vendees based on the said deed of sale.7

Rodolfo filed a complaint8 for annulment of deed of sale and cancellation of TCT No.
237936 against his brother Manolo and his sister-in-law Lucila before the RTC. He also
filed a criminal complaint for estafa through falsification of a public document in the
Office of the City Prosecutor against Manolo, which was elevated to the Department of
Justice.9

On motion of the defendants, the RTC issued an Order 10 on March 29, 1999, dismissing
the complaint for annulment of deed of sale on the ground that the trial court had no
jurisdiction over the action since there was no allegation in the complaint that the last
will of Daniel Martinez, Sr. had been admitted to probate. Rodolfo appealed the order to
the CA.11

On October 4, 1999, Rodolfo filed a Petition with the RTC of Manila for the probate of
the last will of the deceased Daniel Martinez, Sr. 12

In the meantime, the spouses Manolo and Lucila Martinez wrote Rodolfo, demanding
that he vacate the property. Rodolfo ignored the letter and refused to do so. This
prompted the said spouses to file a complaint for unlawful detainer against Rodolfo in
the MTC of Manila. They alleged that they were the owners of the property covered by
TCT No. 237936, and that pursuant to Presidential Decree (P.D.) No. 1508, the matter
was referred to the barangay for conciliation and settlement, but none was reached.
They appended the certification to file action executed by the barangay chairman to the
complaint.

In his Answer13 to the complaint filed on October 11, 1999, Rodolfo alleged, inter alia,
that the complaint failed to state a condition precedent, namely, that earnest efforts for
an amicable settlement of the matter between the parties had been exerted, but that
none was reached. He also pointed out that the dispute had not been referred to
the barangay before the complaint was filed.

On October 20, 1999, the spouses Martinez filed an Amended Complaint in which they
alleged that earnest efforts toward a settlement had been made, but that the same
proved futile. Rodolfo filed his opposition thereto, on the ground that there was no
motion for the admission of the amended complaint. The trial court failed to act on the
matter.

The spouses Martinez alleged in their position paper that earnest efforts toward a
compromise had been made and/or exerted by them, but that the same proved
futile.14 No amicable settlement was, likewise, reached by the parties during the
preliminary conference because of irreconcilable differences. The MTC was, thus,
impelled to terminate the conference.15

698
On February 21, 2000, the trial court rendered judgment in favor of the spouses
Martinez. The fallo of the decision reads:

WHEREFORE, premises considered, judgment is rendered in favor of plaintiff. The

defendant, including any person claiming right under him, is ordered:

1) To vacate the subject premises;

2) To pay plaintiff the sum of P10,000.00 a month starting July 17, 1999, the date of last
demand until he vacates the same;

3) To pay the sum of P10,000.00 as and for attorney's fees; andcralawlibrary

4) Costs of suit.

SO ORDERED.16

The trial court declared that the spouses Martinez had substantially complied with
Article 151 of the Family Code of the Philippines 17 based on the allegations of the
complaint and the appended certification to file action issued by the barangay captain.

Rodolfo appealed the decision to the RTC. On May 31, 2000, the RTC rendered
judgment affirming the appealed decision. He then filed a Petition for Review of the
decision with the CA, alleging that:

1. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH FOUND
WITHOUT MERIT THE DEFENSE OF PETITIONER THAT THERE IS NO
ALLEGATION IN THE COMPLAINT THAT PETITIONER HAS UNLAWFULLY
WITHHELD POSSESSION OF THE PROPERTY FROM RESPONDENTS - A
REQUIREMENT IN [AN] UNLAWFUL DETAINER SUIT.

2. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH FOUND
THAT PETITIONER'S POSSESSION OF THE PROPERTY IS BY MERE TOLERANCE
OF RESPONDENTS.

3. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH FOUND
THAT THE RESPONDENTS HAVE A CAUSE OF ACTION.

4. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH DID NOT
RESOLVE THE SIXTH ISSUE, TO WIT, "Whether or not this Court has jurisdiction over
this case considering that the allegations in the complaint makes out a case of accion
publiciana."

5. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH HAS NO
JURISDICTION OVER THE CASE.

699
6. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH FOUND
THAT THE MANDATORY REQUIREMENT OF CONCILIATION HAS BEEN
COMPLIED WITH.

7. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH FOUND
THAT THERE WAS SUBSTANTIAL COMPLIANCE WITH THE KATARUNGANG
PAMBARANGAY LAW.

8. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH FOUND
THAT THE PENDENCY OF CIVIL CASE NO. 98-91147 AND SPECIAL
PROCEEDINGS NO. 99-95281, INVOLVING THE PETITIONER AND RESPONDENTS
AND INVOLVING THE SAME PROPERTY DID NOT DIVEST THE MTC OF
AUTHORITY TO DECIDE THE CASE.

9. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH GRANTED
THE RELIEF PRAYED FOR BY THE RESPONDENTS.

10. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC. 18

On November 27, 2003, the CA rendered judgment granting the petition and reversing
the decision of the RTC. The appellate court ruled that the spouses Martinez had failed
to comply with Article 151 of the Family code. The CA also held that the defect in their
complaint before the MTC was not cured by the filing of an amended complaint because
the latter pleading was not admitted by the trial court.

Upon the denial of their motion for reconsideration of the said decision, the spouses
Martinez filed the present Petition for Review on Certiorari, in which they raise the
following issues:

I.

WHETHER OR NOT THE CERTIFICATION TO FILE ACTION AND THE

ALLEGATIONS IN THE COMPLAINT THAT THE CASE PASSED [THROUGH] THE
BARANGAY BUT NO SETTLEMENT WAS REACHED, ARE SUFFICIENT
COMPLIANCE TO PROVE THAT, INDEED, EARNEST EFFORTS WERE, IN FACT,
MADE BUT THE SAME HAVE FAILED PRIOR TO THE FILING OF THE COMPLAINT.

II.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY AND SERIOUSLY

ERRED IN FINDING THAT THERE WAS NON-COMPLIANCE WITH THE
REQUIREMENT PROVIDED FOR UNDER ARTICLE 151 OF THE FAMILY CODE,
CONSIDERING THAT ONE OF THE PARTIES TO A SUIT IN THIS CASE IS NOT A
MEMBER OF THE SAME FAMILY.19

700
The petitioners alleged that they substantially complied with Article 151 of the Family
Code, since they alleged the following in their original complaint:

2. In compliance with P.D. 1508, otherwise known as the "Katarungang

Pambarangay," this case passed [through] the Barangay and no settlement was forged
between plaintiffs and defendant as a result of which Certification to File Action was
issued by Barangay 97, Zone 8, District I, Tondo, Manila. xxx" (Underscoring supplied)20

Further, the petitioners averred, they alleged in their position paper that they had
exerted earnest efforts towards a compromise which proved futile. They also point out
that the MTC resolved to terminate the preliminary conference due to irreconcilable
difference between the parties. Besides, even before they filed their original complaint,
animosity already existed between them and the respondent due to the latter's filing of
civil and criminal cases against them; hence, the objective of an amicable settlement
could not have been attained. Moreover, under Article 150 of the Family Code,
petitioner Lucila Martinez had no familial relations with the respondent, being a mere
sister-in-law. She was a stranger to the respondent; hence, there was no need for the
petitioners21 to comply with Article 151 of the Family Code.

The petition is meritorious.

Article 151 of the Family Code provides:

Art. 151. No suit between members of the same family shall prosper unless it should
appear from the verified complaint or petition that earnest efforts toward a compromise
have been made, but that the same have failed. If it is shown that no such efforts were,
in fact, made, the case must be dismissed.

This rule shall not apply to cases which may not be the subject of compromise under
the Civil Code.

The phrase "members of the family" must be construed in relation to Article 150 of the
Family Code, to wit:

Art. 150. Family relations include those:

(1) Between husband and wife;

(2) Between parents and children;

(3) Among other ascendants and descendants; andcralawlibrary

(4) Among brothers and sisters, whether of the full or half-blood.

701
Article 151 of the Family code must be construed strictly, it being an exception to the
general rule. Hence, a sister-in-law or brother-in-law is not included in the
enumeration.22

As pointed out by the Code Commission, it is difficult to imagine a sadder and more
tragic spectacle than a litigation between members of the same family. It is necessary
that every effort should be made toward a compromise before a litigation is allowed to
breed hate and passion in the family and it is known that a lawsuit between close
relatives generates deeper bitterness than between strangers. 23

Thus, a party's failure to comply with Article 151 of the Family Code before filing a
complaint against a family member would render such complaint premature.

In this case, the decision of the CA that the petitioners were mandated to comply with
Article 151 of the Family code and that they failed to do so is erroneous.

First. Petitioner Lucila Martinez, the respondent's sister-in-law, was one of the plaintiffs
in the MTC. The petitioner is not a member of the same family as that of her deceased
husband and the respondent:

As regards plaintiff's failure to seek a compromise, as an alleged obstacle to the present

case, Art. 222 of our Civil Code provides:

"No suit shall be filed or maintained between members of the same family unless it
should appear that earnest efforts toward a compromise have been made, but that the
same have failed, subject to the limitations in Article 2035."

It is noteworthy that the impediment arising from this provision applies to suits "filed or
maintained between members of the same family." This phrase, "members of the same
family," should, however, be construed in the light of Art. 217 of the same Code,
pursuant to which:

"Family relations shall include those:

(1) Between husband and wife;

(2) Between parent and child;

(3) Among other ascendants and their descendants;

(4) Among brothers and sisters."

Mrs. Gayon is plaintiff's sister-in-law, whereas her children are his nephews and/or
nieces. Inasmuch as none of them is included in the enumeration contained in said Art.
217 - which should be construed strictly, it being an exception to the general rule - and
Silvestre Gayon must necessarily be excluded as party in the case at bar, it follows that

702
the same does not come within the purview of Art. 222, and plaintiff's failure to seek a
compromise before filing the complaint does not bar the same. 24

Second. The petitioners were able to comply with the requirements of Article 151 of the
Family Code because they alleged in their complaint that they had initiated a
proceeding against the respondent for unlawful detainer in the Katarungang
Pambarangay, in compliance with P.D. No. 1508; and that, after due proceedings, no
amicable settlement was arrived at, resulting in the barangay chairman's issuance of a
certificate to file action.25 The Court rules that such allegation in the complaint, as well
as the certification to file action by the barangay chairman, is sufficient compliance with
article 151 of the Family Code. It bears stressing that under Section 412(a) of Republic
Act No. 7160, no complaint involving any matter within the authority of the Lupon shall
be instituted or filed directly in court for adjudication unless there has been a
confrontation between the parties and no settlement was reached. 26

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the
Court of Appeals in CA-G.R. SP No. 59420 is REVERSED AND SET ASIDE. The
Decision of the Metropolitan Trial Court of Manila, as affirmed on appeal by the
Regional Trial Court of Manila, Branch 30, in Civil Case No. 164761(CV) is
REINSTATED. No costs.

SO ORDERED.

SECOND DIVISION

SPS. ENRIQUETA RASDAS, G.R. No. 157605

and TOMAS RASDAS, SPS.

ESPERANZA A. VILLA, and

ERNESTO VILLA, and LOLITA ' Present:

GALLEN,

Petitioners,

- versus' - PUNO,

Chairman,

AUSTRIA-MARTINEZ,

JAIME ESTENOR, ' CALLEJO, SR.,

703
Respondent. TINGA, and

CHICO-NAZARIO,

December 13, 2005

DECISION

TINGA, J. :

The main issue in this Petition for Review under Rule 45 is whether the complaint below
is barred by res judicata. We find that res judicata indeed obtains in this case, albeit of a
mode different from that utilized by the trial court and the Court of Appeals in dismissing
the complaint.

The antecedent facts, as culled from the assailed Decision [1] of the Court of Appeals
Tenth Division, follow.

The dispute centers on a parcel of land with an area of 703 square meters, situated in
Ilagan, Isabela. On 29 October 1992, respondent as plaintiff filed a Complaint For
Recovery Of Ownership And Possession With Damages against petitioners as
defendants. The complaint was' docketed as Civil Case No. 673 and tried by the

704
Regional Trial Court (RTC) of Ilagan, Isabela, Branch 16. In the same complaint,
respondent asserted that he was the owner of the subject property, which was then in
the possession of petitioners.

On 6 November 1995, the RTC decided Civil Case No. 673 in favor of petitioners.
Respondent appealed the RTC decision before the Court of Appeals, and his appeal
was docketed as CA-G.R. No. 52338.

On 25 September 1997, the Court of Appeals reversed the judgment of the RTC, and
declared respondent as the owner of the subject property. As a result, petitioners were
ordered to vacate the land. The dispositive portion of the appellate court's decision
reads:

WHEREFORE, the Decision of the trial court dated November 6, 1995

is REVERSED and SET ASIDE, and a new one is rendered declaring the
plaintiff as the owner of the land in question; and ordering the defendants-
appellees to vacate the same and jointly and severally to pay the plaintiff
reasonable compensation of P300.00 a month for the use and enjoyment of
the land from June 1991 up to the time the land is vacated; attorney's fees
of P10,000.00 and litigation expenses of P5,000.00.
 
Costs against the defendants-appellees.
 
SO ORDERED. [2]
 

The decision became final and executory after a petition for certiorari assailing its validity
was dismissed by this Court. [3] Thereafter, a Writ of Execution and Writ of
Demolition was issued against petitioners, who were ordered to demolish their houses,
structures, and improvements on the property.

705
Petitioners as plaintiffs then filed a Complaint dated 6 July 1999 against respondent for
just compensation and preliminary injunction with temporary restraining order. The case
was docketed as Civil Case No. 1090, and heard by the same RTC Branch 16 that ruled
on the first complaint. Notwithstanding the earlier pronouncement of the Court of
Appeals, petitioners asserted therein that they were the lawful owners of the subject
property [4], although they ultimately conceded the efficacy of the appellate court's final
and executory decision. Still, they alleged that they were entitled to just compensation
relating to the value of the houses they had built on the property, owing to their
purported status as builders in good faith. They claimed that the Court of Appeals
decision did not declare them as builders in bad faith, and thus, they were entitled to be
reimbursed of the value of their houses before these could be demolished. [5] They
posited that without such reimbursement, they could not be ejected from their houses.

Respondent as defendant countered with a Motion to Dismiss , arguing that petitioners'

complaint was barred by res judicata , owing to the final and executory judgment of the
Court of Appeals. The Motion to Dismiss was initially denied by the RTC in
an Order dated 4 August 1999 [6] , and pre-trial ensued. However, before trial proper
could begin, respondent filed a motion for preliminary hearing on the affirmative defense
of lack of jurisdiction and res judicata .

This motion was resolved in an Order dated 16 February 2000, wherein the RTC
declared itself 'constrained to apply the principle of res judicata, thus reversing its earlier
order. In doing so, the RTC concluded that the earlier decision of the Court of Appeals
had already effectively settled that petitioners were in fact builders in bad faith.
Citing Mendiola v. Court of Appeals, [7] the RTC held that the causes of action between
the final judgment and the instant complaint of petitioners were identical, as it would
entail the same evidence that would support and establish the former and present
causes of action. Accordingly, the RTC ordered the dismissal of petitioners' complaint.
The counsel for petitioners was likewise issued a warning for having violated the
prohibition on forum-shopping on account of the filing of the complaint barred by res
judicata .

706
The finding of res judicata was affirmed by the Court of Appeals in its assailed Decision .
It is this finding that is now subject to review by this Court. Petitioners argue that since
respondents' Motion to Dismiss on the ground of res judicata had already been denied,
the consequent preliminary hearing on the special defenses which precluded the
dismissal of the complaint was null and void. [8] Petitioners also claim that there was no
identity of causes of action in Civil Case No. 673, which concerned the ownership of the
land, and in Civil Case No. 1090, which pertained to just compensation under Article 448
of the Civil Code. Even assuming that res judicata obtains, petitioners claim that the said
rule may be disregarded if its application would result in grave injustice.

We observe at the onset that it does appear that the RTC's act of staging preliminary
hearing on the affirmative defense of lack of jurisdiction and res judicata is not in regular
order. Under Section 6, Rule 16 of the 1997 Rules of Civil Procedure, the allowance for
a preliminary hearing, while left in the discretion of the court, is authorized only if no
motion to dismiss has been filed but any of the grounds for a motion to dismiss had been
pleaded as an affirmative defense in the answer. In this case, respondents had filed a
motion to dismiss on the ground of res judicata , but the same was denied. They thus
filed an answer alleging res judicata as a special affirmative defense, but later presented
a Motion for Preliminary Hearing which was granted, leading to the dismissal of the
case.

The general rule must be reiterated that the preliminary hearing contemplated under
Section 6, Rule 16 applies only if no motion to dismiss has been filed. This is expressly
provided under the rule, which relevantly states '[i]f no motion to dismiss has been filed,
any of the grounds for dismissal provided for in [Rule 16] may be pleaded as an
affirmative defense in the answer and, in the discretion of the court, a preliminary
hearing may be had thereon as if a motion to dismiss had been filed. An exception was
carved out in California and Hawaiian Sugar Company v. Pioneer Insurance, [9] wherein
the Court noted that while Section 6 disallowed a preliminary hearing of affirmative
defenses once a motion to dismiss has been filed, such hearing could nonetheless be
had if the trial court had not categorically resolved the motion to dismiss. [10] Such
circumstance does

707
 

not obtain in this case, since the trial court had already categorically denied the motion
to dismiss prior to the filing of the answer and the motion for preliminary hearing.

We observe in this case that the judge who had earlier denied the motion to dismiss,
Hon. Teodulo E. Mirasol, was different from the judge who later authorized the
preliminary hearing, [11] Hon. Isaac R. de Alban, a circumstance that bears some light
on why the RTC eventually changed its mind on the motion to dismiss. Still, this fact
does not sanction the staging of a preliminary hearing on affirmative defenses after the
denial of the motion to dismiss. If a judge disagrees with his/her predecessor's previous
ruling denying a motion to dismiss, the proper recourse is not to conduct a preliminary
hearing on affirmative defenses, but to utilize the contested ground as part of the basis
of the decision on the merits

On the part of the movant whose motion to dismiss had already been filed and denied,
the proper remedy is to file a motion for reconsideration of the denial of the motion. If
such motion for reconsideration is denied, the ground for the dismissal of the complaint
may still be litigated at the trial on the merits.

Clearly, the denial of a motion to dismiss does not preclude any future reliance on the
grounds relied thereupon. However, nothing in the rules expressly authorizes a
preliminary hearing of affirmative defenses once a motion to dismiss has been filed and
denied. Thus, the strict application of Section 6, Rule 16 in this case should cause us to
rule that the RTC erred in conducting the preliminary hearing.

708
However, there is an exceptional justification for us to overlook this procedural error and
nonetheless affirm the dismissal of the complaint. The complaint in question is so
evidently barred by res judicata , it would violate the primordial objective of procedural
law to secure a just, speedy and inexpensive disposition of every action and
proceeding [12] should the Court allow this prohibited complaint from festering in our
judicial system. Indeed, the rule sanctioning the liberal construction of procedural rules is
tailor-made for a situation such as this, when a by-the-numbers application of the rule
would lead to absurdity, such as the continued litigation of an obviously barred
complaint.

Why is the subject complaint barred by res judicata ? It is uncontroverted that in the
decision by the Court of Appeals in Civil Case No. 673, it was observed:

When the occupancy of the lot by Luis Aggabao which was transmitted to his
son Vivencio Aggabao, and later transmitted to the latter's children . . .
expired in April 1965, the late Vivencio Aggabao verbally begged and pleaded
to plaintiff-appellant that he be allowed to stay on the premises of the land in
question as his children, herein appellees, were still studying and it would be
very hard fro them to transfer residence at that time. The plaintiff, out of
Christian fellowship and compassion, allowed the appellees to stay
temporarily on the land in question.
 
....
 
In this case, the possession of the land by the appellees derived from their
father Luis Aggabao from March 31, 1955 to March 31, 1965 was by virtue of
a stipulation in the deed of sale (exh. G), while their possession derived from
their father, Vivencio Aggabao, from March 31, 1965 to 1982 (the latter died in
1982) was only by tolerance because of the pleading of Vivencio Aggabao to
the plaintiff-appellant that he be allowed to stay because of the children going
to school. . . . [13]

709
Evidently, the Court of Appeals had previously ruled in the first case that as early as
1965, the father of the petitioners (and their predecessor-in-interest) had already known
that he did not own the property, and that his stay therein was merely out of tolerance.
Such conclusion in fact bolstered the eventual conclusion that respondents were the
owners of the land and that petitioners should vacate the same.

This fact should be seen in conjunction with the findings of the RTC and the Court of
Appeals in this case that the structures for which petitioners sought to be compensated
were constructed in 1989 and 1990, or long after they had known they were not the
owners of the subject property.

These premises remaining as they are, it is clear that petitioners are not entitled to the
just compensation they seek through the present complaint. Under Article 448 of the
Civil Code, the builder in bad faith on the land of another loses what is built without right
to indemnity. [14] Petitioners were in bad faith when they built the structures as they had
known that the subject property did not belong to them. Are these conclusions though
sufficient to justify dismissal on the ground of res judicata ?

The doctrine of res judicata has two aspects. [15] The first, known as "bar by prior
judgment," or 'estoppel by verdict, is the effect of a judgment as a bar to the prosecution
of a second action upon the same claim, demand or cause of action. The second, known
as "conclusiveness of judgment" or otherwise known as the rule of auter action
pendant, ordains that issues actually and directly resolved in a former suit cannot again
be raised in any future case between the same parties involving a different cause of
action. [16] It has the effect of preclusion of issues only. [17]

It appears that both the RTC and the Court of Appeals deemed that the first aspect
of res judicata , 'bar by prior judgment, applied in this case. [18] We hold that it is the
second kind of res judicata , 'conclusiveness of judgment, that barred the instant
complaint. As previously explained by this Court:

710
 [C]onclusiveness of judgment ' states that a fact or question which was in
issue in a former suit and there was judicially passed upon and determined by
a court of competent jurisdiction, is conclusively settled by the judgment
therein as far as the parties to that action and persons in privity with them are
concerned and cannot be again litigated in any future action between such
parties or their privies, in the same court or any other court of concurrent
jurisdiction on either the same or different cause of action, while the judgment
remains unreversed by proper authority. It has been held that in order that a
judgment in one action can be conclusive as to a particular matter in another
action between the same parties or their privies, it is essential that the issue
be identical. If a particular point or question is in issue in the second action,
and the judgment will depend on the determination of that particular point or
question, a former judgment between the same parties or

 
their privies will be final and conclusive in the second if that same point or
question was in issue and adjudicated in the first suit. Identity of cause of
action is not required but merely identity of issues. [19]

Stated differently, any right, fact, or matter in issue directly adjudicated or necessarily
involved in the determination of an action before a competent court in which judgment is
rendered on the merits is conclusively settled by the judgment therein and cannot again
be litigated between the parties and their privies whether or not the claim, demand,
purpose, or subject matter of the two actions is the same. [20]

Indeed, in cases wherein the doctrine of 'conclusiveness of judgment is

applicable, there is, as in the two cases subject of this petition, identity of parties but not
of causes of action. The judgment is conclusive in the second case, only as to those
matters actually and directly controverted and determined, and not as to matters merely
involved therein. [21] Herein, the fact that petitioners were in possession in bad faith as
early as 1965 was already determined in the first case. In order that they could
successfully litigate their second cause of action, petitioners will have to convince that
they were in possession in good faith at the time they built their structures, an argument

711
that deviates the previous determination made in the final judgment that resolved the
first case.

The reasons for establishing the principle of 'conclusiveness of judgment are

founded on sound public policy, and to grant this petition would have the effect of
unsettling this well-settled doctrine. It is allowable to reason back from a judgment to the
basis on which it stands, upon the obvious principle that where a conclusion is
indisputable, and could have been drawn only from certain premises, the premises are
equally indisputable with the conclusion. [22] When a fact has been once determined in
the course of a judicial proceeding, and a final judgment has been rendered in
accordance therewith, it cannot be again litigated between the same parties without
virtually impeaching the correctness of the former decision, which, from motives of public
policy, the law does not permit to be done. [23]

Contrary to the holdings of both courts below, in the case of Mendiola v. Court of
Appeals [24] which they relied upon, this Court observed that the causes of action in the
two cases involved were so glaringly similar that it had to affirm the dismissal of the
second case by virtue of the 'bar of former judgment rule.

One final note. Petitioners, in their Reply before this Court, raise the argument
that assuming that they were builders in bad faith, respondents should likewise be
considered as being in bad faith, as the structures were built with their knowledge and
without their opposition. That being the case, Article 453 of the Civil Code would apply to
the effect both parties could thus be deemed as being in good faith. Accordingly,
petitioners would still be entitled to compensation on the structures they built.

We are disinclined to accord merit to this argument. For one, it was raised for the
first time in the Reply before this Court. It was not even raised in the Complaint filed with
the RTC, hence it could not be said that petitioners' cause of action is grounded on
Article 453. Issues not previously ventilated cannot be raised for the first time on
appeal [25], much less when first proposed in the reply to the comment on the petition
for review. Even assuming the issue is properly litigable, the Court can find no basis to

712
declare that respondents were in bad faith as a matter of fact. Certainly, nothing in the
first decision of the Court of Appeals conclusively establishes that claim, its factual
determination being limited to the finding that petitioners' alonewere had been in
possession of the property in bad faith. We are not wont to ascribe points of fact in the
said decision which were not expressly established or affirmed.

WHEREFORE, the petition is DENIED. Costs against petitioners.

SO ORDERED.

RULE 17

SECOND DIVISION

G.R. No. 175507               October 8, 2014

RAMON CHING AND POWING PROPERTIES, INC., Petitioners,

vs.
JOSEPH CHENG, JAIME CHENG, MERCEDES IGNE1 AND LUCINA
SANTOS, Respondents.

DECISION

LEONEN, J.:

Rule 17 of the Rules of Civil Procedure governs dismissals of actions at the instance of
the plaintiff. Hence, the "two-dismissal rule" under Rule 17, Section 1 of the Rules of
Civil Procedure will not apply if the prior dismissal was done at the instance of the
defendant.

This is a petition for review on certiorari assailing the decision 2 and resolution3 of the
Court of Appeals in CA-G.R. SP. No. 86818, which upheld the (1) order 4 dated
November 22, 2002 dismissing Civil Case No. 02-103319 without prejudice, and (2) the
omnibus order5 dated July 30, 2004, which denied petitioners’ motion for
reconsideration. Both orders were issued by the Regional Trial Court of Manila, Branch
6.6

The issues before this court are procedural. However, the factual antecedents in this
case, which stemmed from a complicated family feud, must be stated to give context to
its procedural development.

713
It is alleged that Antonio Ching owned several businesses and properties, among which
was Po Wing Properties, Incorporated (Po Wing Properties). 7 His total assets are
alleged to have been worth more than 380 million. 8 It is also alleged that whilehe was
unmarried, he had children from two women.9

Ramon Ching alleged that he was the only child of Antonio Ching with his common-law
wife, Lucina Santos.10 She, however, disputed this. She maintains that even ifRamon
Ching’s birth certificate indicates that he was Antonio Ching’s illegitimate child, she and
Antonio Ching merely adopted him and treated him like their own. 11

Joseph Cheng and Jaime Cheng, on the other hand, claim to be Antonio Ching’s
illegitimate children with his housemaid, Mercedes Igne. 12 While Ramon Ching disputed
this,13 both Mercedes and Lucina have not. 14

Lucina Santos alleged that when Antonio Ching fell ill sometime in 1996, he entrusted
her with the distribution of his estate to his heirs if something were to happen to him.
She alleged that she handed all the property titles and business documents to Ramon
Ching for safekeeping.15 Fortunately, Antonio Ching recovered from illness and
allegedly demanded that Ramon Ching return all the titles to the properties and
business documents.16

On July 18, 1996, Antonio Ching was murdered. 17 Ramon Ching allegedly induced
Mercedes Igne and her children, Joseph Cheng and Jaime Cheng, to sign an
agreement and waiver18 to Antonio Ching’s estate in consideration of ₱22.5 million.
Mercedes Igne’s children alleged that Ramon Ching never paid them. 19 On October 29,
1996, Ramon Ching allegedly executed an affidavit of settlement of estate, 20 naming
himself as the sole heir and adjudicating upon himself the entirety of Antonio Ching’s
estate.21

Ramon Ching denied these allegationsand insisted that when Antonio Ching died, the
Ching family association, headed by Vicente Cheng, unduly influenced him to give
Mercedes Igne and her children financial aid considering that they served Antonio Ching
for years. It was for this reason that an agreement and waiver in consideration of 22.5
million was made. He also alleged that hewas summoned by the family association to
execute an affidavit of settlement of estate declaring him to be Antonio Ching’s sole
heir.22

After a year of investigating Antonio Ching’s death, the police found Ramon Ching to be
its primary suspect.23 Information24 was filed against him, and a warrant of arrest25 was
issued.

On October 7, 1998, Joseph Cheng, Jaime Cheng, and Mercedes Igne (the Chengs)
filed a complaint for declaration of nullity of titles against Ramon Ching before the
Regional Trial Court of Manila. This case was docketed as Civil Case No. 98-91046 (the
first case).26

714
On March 22, 1999, the complaint was amended, with leave of court, to implead
additional defendants, including Po Wing Properties, of which Ramon Ching was a
primary stockholder.The amended complaint was for "Annulment of Agreement, Waiver,
Extra-Judicial Settlement of Estate and the Certificates of Title Issued by Virtue of Said
Documents with Prayer for Temporary Restraining Order and Writ of Preliminary
Injunction."27 Sometime after, Lucina Santos filed a motion for intervention and was
allowed to intervene.28

After the responsive pleadings had been filed, Po Wing Properties filed a motion to
dismiss on the ground of lack of jurisdiction of the subject matter. 29

On November 13, 2001, the Regional Trial Court of Manila, Branch 6, granted the
motion to dismiss on the ground of lack of jurisdiction over the subject matter. 30 Upon
motion of the Chengs’ counsel, however, the Chengs and Lucina Santos were given
fifteen (15) days to file the appropriate pleading. They did not do so. 31

On April 19, 2002, the Chengs and Lucina Santos filed a complaint for "Annulment of
Agreement, Waiver, Extra-Judicial Settlement of Estate and the Certificates of Title
Issued by Virtue of Said Documents with Prayer for Temporary Restraining Order and
Writ of Preliminary Injunction" against Ramon Ching and Po Wing Properties. 32 This
case was docketed as Civil Case No. 02-103319 (the second case) and raffled to
Branch 20 of the Regional Trial Court of Manila. 33 When Branch 20 was made aware of
the first case, it issued an order transferring the case to Branch 6, considering that the
case before it involved substantially the same parties and causes of action. 34

On November 11, 2002, the Chengs and Lucina Santos filed a motion to dismiss their
complaint in the second case, praying that it be dismissed without prejudice. 35

On November 22, 2002, Branch 6 issued an order granting the motion to dismiss on the
basis that the summons had not yet been served on Ramon Ching and Po Wing
Properties, and they had not yet filed any responsive pleading. The dismissal of the
second case was made without prejudice. 36

On December 9, 2002, Ramon Ching and Po Wing Properties filed a motion for
reconsideration of the order dated November 22, 2002. They argue that the dismissal
should have been with prejudice under the "two dismissal rule" of Rule 17, Section 1 of
the 1997 Rules of Civil Procedure, in view of the previous dismissal of the first case. 37

During the pendency of the motion for reconsideration, the Chengs and Lucina Santos
filed a complaint for "Disinheritance and Declaration of Nullity of Agreement and Waiver,
Affidavit of Extra judicial Agreement, Deed of Absolute Sale, and Transfer Certificates of
Title with Prayer for TRO and Writ of Preliminary Injunction" against Ramon Ching and
Po Wing Properties. This case was docketed as Civil Case No. 02-105251(the third
case) and was eventually raffled to Branch 6.38

715
On December 10, 2002, Ramon Ching and Po Wing Properties filed their
comment/opposition to the application for temporary restraining order in the third case.
They also filed a motion to dismiss on the ground of res judicata, litis pendencia, forum-
shopping, and failure of the complaint to state a cause of action. A series of responsive
pleadings were filed by both parties.39

On July 30, 2004, Branch 6 issued an omnibus order 40 resolving both the motion for
reconsideration in the second case and the motion to dismiss in the third case. The trial
court denied the motion for reconsideration and the motion to dismiss, holding that the
dismissal of the second case was without prejudice and, hence, would not bar the filing
of the third case.41 On October 8, 2004, while their motion for reconsideration in the third
case was pending, Ramon Ching and Po Wing Properties filed a petition for certiorari
(the first certiorari case) with the Court of Appeals, assailing the order dated November
22,2002 and the portion of the omnibus order dated July 30, 2004, which upheldthe
dismissal of the second case.42

On December 28, 2004, the trial court issued an order denying the motion for
reconsideration in the third case. The denial prompted Ramon Ching and Po Wing
Properties to file a petition for certiorari and prohibition with application for a writ of
preliminary injunction or the issuance of a temporary restraining order (the second
certiorari case) with the Court of Appeals. 43

On March 23, 2006, the Court of Appeals rendered the decision 44 in the first certiorari
case dismissing the petition. The appellate court ruled that Ramon Ching and Po Wing
Properties’ reliance on the "two-dismissal rule" was misplaced since the rule involves
two motions for dismissals filed by the plaintiff only. In this case, it found that the
dismissal of the first case was upon the motion of the defendants, while the dismissal of
the second case was at the instance of the plaintiffs. 45

Upon the denial of their motion for reconsideration, 46 Ramon Ching and Po Wing
Properties filed this present petition for review 47 under Rule 45 of the Rules of Civil
Procedure.

Ramon Ching and Po Wing Properties argue that the dismissal of the second case was
with prejudice since the non-filing of an amended complaint in the first case operated as
a dismissal on the merits.48 They also argue that the second case should be dismissed
on the ground of res judicata since there was a previous final judgment of the first case
involving the same parties, subject matter, and cause of action. 49

Lucina Santos was able to file a comment50 on the petition within the period
required.51 The Chengs, however, did not comply.52 Upon the issuance by this court of a
show cause order on September 24, 2007, 53 they eventually filed a comment with
substantially the same allegations and arguments as that of Lucina Santos’. 54

In their comment, respondents allege that when the trial court granted the motion to
dismiss, Ramon Ching’s counsel was notified in open court that the dismissal was

716
without prejudice. They argue that the trial court’s order became final and executory
whenhe failed to file his motion for reconsideration within the reglementary period. 55

Respondents argue that the petition for review should be dismissed on the ground of
forum shopping and litis pendencia since Ramon Ching and Po Wing Properties are
seeking relief simultaneously in two forums by filing the two petitions for certiorari, which
involved the same omnibus order by the trial court. 56 They also argue that the "two-
dismissal rule" and res judicata did not apply since (1) the failure to amend a complaint
is not a dismissal, and (2) they only moved for dismissal once in the second case. 57

In their reply,58 petitioners argue that they did not commit forum shopping since the
actions they commenced against respondents stemmed from the complaints filed
against them in the trial courts.59 They reiterate that their petition for review is only about
the second case; it just so happened that the assailed omnibus order resolved both the
second and third cases.60

Upon the filing of the parties’ respective memoranda, 61 the case was submitted for
decision.62

For this court’s resolution are the following issues:

I. Whether the trial court’s dismissal of the second case operated as a bar to the
filing of a third case, asper the "two-dismissal rule"; and

II. Whether respondents committed forum shopping when they filed the third case
while the motion for reconsideration of the second case was still pending.

The petition is denied.

The "two-dismissal rule" vis-à-vis

the Rules of Civil Procedure

Dismissals of actions are governed by Rule 17 of the 1997 Rules of Civil Procedure.
The pertinent provisions state:

RULE 17
DISMISSAL OF ACTIONS

SEC. 1. Dismissal upon notice by plaintiff. — A complaint may be dismissed by the

plaintiff by filing a notice of dismissal at any time before service of the answer or of a
motion for summary judgment. Upon such notice being filed, the court shall issue an
order confirming the dismissal. Unless otherwise stated in the notice, the dismissal is
without prejudice, except that a notice operates as an adjudication upon the merits
when filed by a plaintiff who has once dismissed in a competent court an action based
on or including the same claim.

717
SEC. 2. Dismissal upon motion of plaintiff. — Except as provided in the preceding
section, a complaint shall not be dismissed at the plaintiff's instance save upon approval
of the court and upon such terms and conditions as the court deems proper. If a
counterclaim has been pleaded by a defendant prior to the service upon him of the
plaintiff’s motion for dismissal, the dismissal shall be limited to the complaint. The
dismissal shall be without prejudice to the right of the defendant to prosecute his
counterclaim in a separate action unless within fifteen (15) days from notice of the
motion he manifests his preference to have his counterclaim resolved in the same
action. Unless otherwise specified in the order, a dismissal under this paragraph shall
be without prejudice. A class suit shall not be dismissed or compromised without the
approval of the court.

SEC. 3. Dismissal due to fault of plaintiff. — If, for no justifiable cause, the plaintiff fails
to appear on the date of the presentation of his evidence in chief on the complaint, or to
prosecute his action for an unreasonable length of time, or to comply with these Rules
or any order of the court, the complaint may be dismissed upon motion of the defendant
or upon the court's own motion, without prejudice to the right of the defendant to
prosecute his counterclaim in the same or in a separate action. This dismissal shall
have the effect of an adjudication upon the merits, unless otherwise declared by the
court. (Emphasis supplied)

The first section of the rule contemplates a situation where a plaintiff requests the
dismissal of the case beforeany responsive pleadings have been filed by the defendant.
It is donethrough notice by the plaintiff and confirmation by the court. The dismissal is
without prejudice unless otherwise declared by the court.

The second section of the rule contemplates a situation where a counterclaim has been
pleaded by the defendant before the service on him or her of the plaintiff’s motion to
dismiss. It requires leave of court, and the dismissal is generally without prejudice
unless otherwise declared by the court.

The third section contemplates dismissals due to the fault of the plaintiff such as the
failure to prosecute. The case is dismissed either upon motion of the defendant or by
the court motu propio. Generally, the dismissal is with prejudice unless otherwise
declared by the court.

In all instances, Rule 17 governs dismissals at the instance of the plaintiff, not of the
defendant. Dismissals upon the instance of the defendant are generally governed by
Rule 16, which covers motions to dismiss.63

In Insular Veneer, Inc. v. Hon. Plan,64 Consolidated Logging and Lumber Mills filed a
complaint against Insular Veneer to recover some logs the former had delivered to the
latter. It also filed ex partea motion for issuance of a restraining order. The complaint
and motion were filed in a trial court in Isabela. 65

718
The trial court granted the motion and treated the restraining order as a writ of
preliminary injunction. When Consolidated Logging recovered the logs, it filed a notice
of dismissal under Rule 17, Section 1 of the 1964 Rules of Civil Procedure. 66

While the action on its notice for dismissal was pending, Consolidated Logging filed the
same complaint against Insular Veneer, this time in a trial court in Manila. It did not
mention any previous action pending in the Isabela court. 67

The Manila court eventually dismissed the complaint due to the nonappearance of
Consolidated Logging’s counsel during pre-trial. Consolidated Logging subsequently
returned to the Isabela court to revive the same complaint. The Isabela court apparently
treated the filing of the amended complaint as a withdrawal of its notice of dismissal. 68

Insular Veneer also filed in the Isabela court a motion to dismiss, arguing that the
dismissal by the Manila court constituted res judicataover the case. The Isabela court,
presided over by Judge Plan, denied the motion to dismiss. The dismissal was the
subject of the petition for certiorari and mandamus with this court. 69

This court stated that:

In resolving that issue, we are confronted with the unarguable fact that Consolidated
Logging on its volition dismissed its action for damages and injunction in the Isabela
court and refiled substantially the same action in the Manila court. Then, when the
Manila court dismissed its action for failure to prosecute, it went hack [sic] to the Isabela
court and revived its old action by means of an amended complaint.

Consolidated Logging would liketo forget the Manila case, consign it to oblivion as if it
were a bad dream, and prosecute its amended complaint in the Isabela court as if
nothing had transpired in the Manila court. We hold that it cannot elude the effects of its
conduct in junking the Isabela case and in giving that case a reincarnation in the Manila
court.

Consolidated Logging’ [sic] filed a new case in Manila at its own risk. Its lawyer at his
peril failed toappear at the pre-trial. 70

This court ruled that the filing of the amended complaint in the Isabela court was barred
by the prior dismissal of the Manila court, stating that:

The provision in section 1(e), Rule 16 of the Rules of Court that an action may be
dismissed because "there is another action pending between the same parties for the
same cause" presupposes that two similar actions are simultaneously pending in two
different Courts of First Instance. Lis pendensas a ground for a motion to dismiss has
the same requisites as the plea of res judicata.

On the other hand, when a pleading is amended, the original pleading is deemed
abandoned. The original ceases to perform any further function as a pleading. The case

719
stands for trial on the amended pleading only. So, when Consolidated Logging filed its
amended complaint dated March 16, 1970 in Civil Case No. 2158, the prior dismissal
order dated January 5, 1970 in the Manila case could he [sic] interposed in the Isabela
court to support the defense of res judicata. 71

As a general rule, dismissals under Section 1 of Rule 17 are without prejudice except
when it is the second time that the plaintiff caused its dismissal. Accordingly, for a
dismissal to operate as an adjudication upon the merits, i.e, with prejudice to the re-
filing of the same claim, the following requisites must be present:

(1) There was a previous case that was dismissed by a competent court;

(2) Both cases were based on or include the same claim;

(3) Both notices for dismissal werefiled by the plaintiff; and

(4) When the motion to dismiss filed by the plaintiff was consented to by the
defendant on the ground that the latter paid and satisfied all the claims of the
former.72

The purpose of the "two-dismissal rule" is "to avoid vexatious litigation." 73 When a
complaint is dismissed a second time, the plaintiff is now barred from seeking relief on
the same claim.

The dismissal of the second case was without prejudice in view of the "two-dismissal
rule"

Here, the first case was filed as an ordinary civil action. It was later amended to include
not only new defendants but new causes of action that should have been adjudicated in
a special proceeding. A motion to dismiss was inevitably filed by the defendants onthe
ground of lack of jurisdiction.

The trial court granted that motion to dismiss, stating that:

A careful perusal of the allegations of the Amended Complaint dated February 10, 1999,
filed by Plaintiff Joseph Cheng, show that additional causes of action were incorporated
i.e. extra-judicial settlement of the intestate estate of Antonio Ching and receivership,
subject matters, which should be threshed out in a special proceedings case. This is a
clear departure from the main cause of action in the original complaint which is for
declaration of nullity of certificate of titles with damages. And the rules of procedure
which govern special proceedings case are different and distinct from the rules of
procedure applicable in an ordinary civil action.

In view of the afore-going, the court finds the Motion to Dismiss filed by Atty. Maria Lina
Nieva S. Casals to be meritorious and the Court is left with no alternative but to dismiss
as it hereby dismisses the Amended Complaint.

720
However, on motion of Atty. Mirardo Arroyo Obias, counsel for the plaintiffs, he is given
a period of fifteen (15) days from today, within which to file an appropriate pleading,
copy furnished to all the parties concerned.

....

SO ORDERED.74

Petitioners are of the view that when Atty. Mirardo Arroyo Obias failed to file the
appropriate pleading within fifteen (15) days, he violated the order of the court. This,
they argue, made the original dismissal an adjudication upon the merits, in accordance
with Rule 17, Section 3, i.e., a dismissal through the default of the plaintiff. Hence, they
argue that when respondents filed the second case and then caused its dismissal, the
dismissal should have been with prejudice according to Rule 17, Section 1, i.e., two
dismissals caused by the plaintiff on the same claim. Unfortunately, petitioners’ theory is
erroneous.

The trial court dismissed the first case by granting the motion to dismiss filed by the
defendants. When it allowed Atty. Mirardo Arroyo Obias a period of fifteen (15) days
tofile an appropriate pleading, it was merely acquiescing to a request made bythe
plaintiff’s counsel that had no bearing on the dismissal of the case.

Under Rule 17, Section 3, a defendant may move to dismiss the case if the plaintiff
defaults; it does not contemplate a situation where the dismissal was due to lack of
jurisdiction. Since there was already a dismissal prior to plaintiff’s default, the trial
court’s instruction to file the appropriate pleading will not reverse the dismissal. If the
plaintiff fails to file the appropriate pleading, the trial court does not dismiss the case
anew; the order dismissing the case still stands.

The dismissal of the first case was done at the instance of the defendant under Rule 16,
Section 1(b) of the Rules of Civil Procedure, which states:

SECTION 1. Grounds.— Within the time for but before filing the answer to the complaint
or pleading asserting a claim, a motion to dismiss may be made on any of the following
grounds:

....

(b) That the court has no jurisdiction over the subject matter of the claim;

....

Under Section 5 of the same rule,75 a party may re-file the same action or claim subject
to certain exceptions.

721
Thus, when respondents filed the second case, they were merely refiling the same
claim that had been previously dismissed on the basis of lack of jurisdiction. When they
moved to dismiss the second case, the motion to dismiss can be considered as the first
dismissal at the plaintiff’s instance.

Petitioners do not deny that the second dismissal was requested by respondents before
the service of any responsive pleadings. Accordingly, the dismissal at this instance is a
matter of right that is not subject to the trial court’s discretion. In O.B. Jovenir
Construction and Development Corporation v. Macamir Realty and Development
Corporation:76

[T]he trial court has no discretion or option to deny the motion, since dismissal by the
plaintiff under Section 1, Rule 17 is guaranteed as a matter of right to the plaintiffs. Even
if the motion cites the most ridiculous of grounds for dismissal, the trial court has no
choice but to consider the complaint as dismissed, since the plaintiff may opt for such
dismissal as a matter of right, regardless of ground. 77 (Emphasis supplied)

For this reason, the trial court issued its order dated November 22, 2002 dismissing the
case, without prejudice. The order states:

When this Motion was called for hearing, all the plaintiffs namely, Joseph Cheng, Jaime
Cheng, Mercedes Igne and Lucina Santos appeared without their counsels. That they
verbally affirmed the execution of the Motion to Dismiss, as shown by their signatures
over their respective names reflected thereat. Similarly, none of the defendants
appeared, except the counsel for defendant, Ramon Chang [sic], who manifested that
they have not yet filed their Answer as there was a defect in the address of Ramon
Cheng [sic] and the latter has not yet been served with summons.

Under the circumstances, and further considering that the defendants herein have not
yet filed their Answers nor any pleading, the plaintiffs has [sic] the right to out rightly [sic]
cause the dismissal of the Complaint pursuant to Section 2, Rule 17 of the 1997 Rules
of Civil Procedure without prejudice. Thereby, and as prayed for, this case is hereby
ordered DISMISSED without prejudice.

SO ORDERED.78 (Emphasis supplied)

When respondents filed the third case on substantially the same claim, there was
already one prior dismissal at the instance of the plaintiffs and one prior dismissal at the
instance of the defendants. While it is true that there were two previous dismissals on
the same claim, it does not necessarily follow that the re-filing of the claim was barred
by Rule 17, Section 1 of the Rules of Civil Procedure. The circumstances surrounding
each dismissal must first be examined to determine before the rule may apply, as in this
case.

Even assuming for the sake of argument that the failure of Atty. Mirardo Arroyo Obias to
file the appropriate pleading in the first case came under the purview of Rule 17,

722
Section 3 of the Rules of Civil Procedure, the dismissal in the second case is still
considered as one without prejudice. In Gomez v. Alcantara: 79

The dismissal of a case for failure to prosecute has the effect of adjudication on the
merits, and is necessarily understood to be with prejudice to the filing of another action,
unless otherwise provided in the order of dismissal. Stated differently, the general rule is
that dismissal of a case for failure to prosecute is to be regarded as an adjudication on
the merits and with prejudice to the filing of another action, and the only exception is
when the order of dismissal expressly contains a qualification that the dismissal is
without prejudice.80 (Emphasis supplied)

In granting the dismissal of the second case, the trial court specifically orders the
dismissal to be without prejudice. It is only when the trial court’s order either is silent on
the matter, or states otherwise, that the dismissal will be considered an adjudication on
the merits.

However, while the dismissal of the second case was without prejudice, respondents’
act of filing the third case while petitioners’ motion for reconsideration was still pending
constituted forum shopping.

The rule against forum shopping and the "twin-dismissal rule"

In Yap v. Chua:81

Forum shopping is the institution of two or more actions or proceedings involving the
same parties for the same cause of action, either simultaneously or successively, on the
supposition that one or the other court would make a favorable disposition. Forum
shopping may be resorted to by any party against whom an adverse judgment or order
has been issued in one forum, in an attempt to seek a favorable opinion in another,
other than by appeal or a special civil action for certiorari. Forum shopping trifles with
the courts, abuses their processes, degrades the administration of justice and congest
court dockets. What iscritical is the vexation brought upon the courts and the litigants by
a party who asks different courts to rule on the same or related causes and grant the
same or substantially the same reliefs and in the process creates the possibility of
conflicting decisions being renderedby the different fora upon the same issues. Willful
and deliberate violation of the rule against forum shopping is a ground for summary
dismissal of the case; it may also constitute direct contempt.

To determine whether a party violated the rule against forum shopping, the most
important factor toask is whether the elements of litis pendentiaare present, or whether
a final judgment in one case will amount to res judicatain another; otherwise stated, the
test for determining forum shopping is whether in the two (or more) cases pending,
there is identity of parties, rights or causes of action, and reliefs sought. 82 (Emphasis
supplied)

723
When respondents filed the third case, petitioners’ motion for reconsideration of the
dismissal of the second case was still pending. Clearly, the order of dismissal was not
yet final since it could still be overturned upon reconsideration, or even on appeal to a
higher court.

Moreover, petitioners were not prohibited from filing the motion for reconsideration. This
court has already stated in Narciso v. Garcia83 that a defendant has the right to file a
motion for reconsideration of a trial court’s order denying the motion to dismiss since
"[n]o rule prohibits the filing of such a motion for reconsideration." 84 The second case,
therefore, was still pending when the third case was filed.

The prudent thing that respondents could have done was to wait until the final
disposition of the second case before filing the third case. As it stands, the dismissal of
the second case was without prejudice to the re-filing of the same claim, in accordance
with the Rules of Civil Procedure. In their haste to file the third case, however, they
unfortunately transgressed certain procedural safeguards, among which are the rules
on litis pendentiaand res judicata.

In Yap:

Litis pendentiaas a ground for the dismissal of a civil action refers to that situation
wherein another action is pending between the same parties for the same cause of
action, such that the second action becomes unnecessary and vexatious. The
underlying principle of litis pendentia is the theory that a party is not allowed to vex
another more than once regarding the same subject matter and for the same cause of
action. This theory is founded on the public policy that the same subject matter should
not be the subject of controversy incourts more than once, in order that possible
conflicting judgments may be avoided for the sake of the stability of the rights and status
of persons.

The requisites of litis pendentiaare: (a) the identity of parties, or at least such as
representing the same interests in both actions; (b) the identity of rights asserted and
relief prayed for, the relief being founded on the same facts; and (c) the identity of the
two cases such that judgment in one, regardless ofwhich party is successful, would
amount to res judicatain the other.85 (Emphasis supplied)

There is no question that there was an identity of parties, rights, and reliefs in the
second and third cases. While it may be true that the trial court already dismissed the
second case when the third case was filed, it failed to take into account that a motion for
reconsideration was filed in the second case and, thus, was still pending. Considering
that the dismissal of the second case was the subject of the first certiorari case and this
present petition for review, it can be reasonably concluded that the second case, to this
day, remains pending.

724
Hence, when respondents filed the third case, they engaged in forum shopping. Any
judgment by this court on the propriety of the dismissal of the second case will inevitably
affect the disposition of the third case.

This, in fact, is the reason why there were two different petitions for certiorari before the
appellate court. The omnibus order dated July 30, 2004 denied two pending motions by
petitioners: (1) the motion for reconsideration in the second case and (2) the motion to
dismiss in the third case. Since petitioners are barred from filing a second motion for
reconsideration of the second case, the first certiorari case was filed before the
appellate court and is now the subject of this review. The denial of petitioners’ motion
for reconsideration in the third case, however, could still be the subject of a separate
petition for certiorari. That petition would be based now on the third case, and not on the
second case.

This multiplicity of suits is the veryevil sought to be avoided by the rule on forum
shopping. In Dy v. Mandy Commodities Co., Inc., 86 the rule is that:

Once there is a finding of forum shopping, the penalty is summary dismissal not only of
the petition pending before this Court, but also of the other case that is pending in a
lower court. This is so because twin dismissal is a punitive measure to those who trifle
with the orderly administration of justice.87 (Emphasis supplied)

The rule originated from the 1986 case of Buan v. Lopez, Jr. 88 In Buan, petitioners filed
a petition for prohibition with this court while another petition for prohibition with
preliminary injunction was pending before the Regional Trial Court of Manila involving
the same parties and based on the same set of facts. This court, in dismissing both
actions, stated:

Indeed, the petitioners in both actions . . . have incurred not only the sanction of
dismissal oftheir case before this Court in accordance with Rule 16 of the Rules of
Court, but also the punitive measure of dismissal of both their actions, that in this Court
and that in the Regional Trial Court as well. Quite recently, upon substantially identical
factual premises, the Court en banchad occasion to condemn and penalize the act of
litigants of filing the same suit in different courts, aptly described as "forum shopping[.]" 89

The rule essentially penalizes the forum shopper by dismissing all pending actions on
the same claim filed in any court. Accordingly, the grant of this petition would inevitably
result in the summary dismissal of the third case. Any action, therefore, which originates
from the third case pending with any court would be barred by res judicata.

Because of the severity of the penalty of the rule, an examination must first be made on
the purpose of the rule.1âwphi1 Parties resort to forum shopping when they file several
actions of the same claim in different forums in the hope of obtaining a favorable result.
It is prohibited by the courts as it "trifle[s] with the orderly administration of justice." 90

725
In this case, however, the dismissal of the first case became final and executory upon
the failure of respondents’counsel to file the appropriate pleading. They filed the correct
pleading the second time around but eventually sought its dismissal as they"[suspected]
that their counsel is not amply protecting their interests as the case is not moving for
almost three (3) years."91 The filing of the third case, therefore, was not precisely for the
purpose of obtaining a favorable result butonly to get the case moving, in an attempt to
protect their rights.

It appears that the resolution on the merits of the original controversy between the
parties has long beenmired in numerous procedural entanglements. While it might be
more judicially expedient to apply the "twin-dismissal rule" and disallow the proceedings
in the third case to continue, it would not serve the ends of substantial justice. Courts of
justice must always endeavor to resolve cases on their merits, rather than summarily
dismiss these on technicalities: [C]ases should be determined on the merits, after all
parties have been given full opportunity to ventilate their causes and defenses, rather
than on technicalities or procedural imperfections. In that way, the ends of justice would
be served better. Rules of procedure are mere tools designed to expedite the decision
or resolution of cases and other matters pending in court. A strict and rigid application of
rules, resulting in technicalities that tend to frustrate rather than promote substantial
justice, must be avoided.In fact, Section 6 of Rule 1 states that the Rules [on Civil
Procedure] shall be liberally construed in order to promote their objective of ensuring
the just, speedy and inexpensive disposition of every action and
proceeding.92 (Emphasis supplied)

The rule on forum shopping will not strictly apply when it can be shown that (1) the
original case has been dismissed upon request of the plaintiff for valid procedural
reasons; (2) the only pending matter is a motion for reconsideration; and (3) there are
valid procedural reasons that serve the goal of substantial justice for the fresh new·
case to proceed.

The motion for reconsideration filed in the second case has since been dismissed and is
now the subject of a petition for certiorari. The third case filed apparently contains the
better cause of action for the plaintiffs and is now being prosecuted by a counsel they
are more comfortable with. Substantial justice will be better served if respondents do not
fall victim to the labyrinth in the procedures that their travails led them. It is for this
reason that we deny the petition. WHEREFORE, the petition is DENIED. The Regional
Trial Court of Manila, Branch 6 is ordered to proceed with Civil Case No. 02-105251
with due and deliberate dispatch.

SO ORDERED.

SECOND DIVISION

March 7, 2018

G.R. No. 232189

726
ALEX RAUL B. BLAY, Petitioner
vs.
CYNTHIA B. BANA, Respondent

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated February 23,
2017 and the Resolution3 dated June 6, 2017 of the Court of Appeals (CA) in CA-G.R.
SP No. 146138, which affirmed the Orders dated May 29, 2015 4 and March 3, 20165 of
the Regional Trial Court of Pasay City, Branch 109 (RTC) in Civil Case No. R-PSY-14-
17714-CV that: (a) granted petitioner Alex Raul B. Blay’s (petitioner) Motion to
Withdraw; and (b) declared respondent Cynthia B. Baña’s (respondent) Counterclaim
for independent adjudication.

The Facts

On September 17, 2014, petitioner filed before the RTC a Petition for Declaration of
Nullity of Marriage,6 seeking that his marriage to respondent be declared null and void
on account of his psychological incapacity pursuant to Article 36 of the Family
Code.7 Subsequently, respondent filed her Answer with Compulsory
Counterclaim8 dated December 5, 2014.

However, petitioner later lost interest over the case, and thus, filed a Motion to
Withdraw9 his petition. In her comment/opposition10 thereto, respondent invoked Section
2, Rule 17 of the Rules of Court (alternatively, Section 2, Rule 1 7), and prayed that her
counterclaims be declared as remaining for the court's independent adjudication. 11 In
turn, petitioner filed his reply,12 averring that respondent's counterclaims are barred from
being prosecuted in the same action due to her failure to file a manifestation therefor
within fifteen (15) days from notice of the Motion to Withdraw, which - according to
petitioner - was required under the same Rules of Court provision. In particular,
petitioner alleged that respondent filed the required manifestation only on March 30,
2015. However, respondent's counsel received a copy of petitioner's Motion to
Withdraw on March 11, 2015; hence, respondent had only until March 26, 2015 to
manifest before the trial court her desire to prosecute her counterclaims in the same
action.13

The RTC Ruling

In an Order14 dated May 29, 2015, the RTC granted petitioner’s Motion to Withdraw
petition.15 Further, it declared respondent's counterclaim "as remaining for independent
adjudication" and as such, gave petitioner fifteen (15) days to file his answer thereto. 16

Dissatisfied, petitioner filed a motion for reconsideration, 17 which was denied in an

Order18 dated March 3, 2016. Thus, he elevated the matter to the CA via a petition

727
for certiorari, 19 praying that the RTC Orders be set aside to the extent that they allowed
the counterclaim to remain for independent adjudication before the same trial court. 20

The CA Ruling

In a Decision21 dated February 23, 2017, the CA dismissed the petition for lack of
merit.22 It found no grave abuse of discretion on the part of the RTC, holding that under
Section 2, Rule 17 of the Rules of Court, if a counterclaim has been filed by the
defendant before the service upon him of the petitioner’s motion for dismissal, the
dismissal shall be limited to the complaint. 23

Aggrieved, petitioner moved for reconsideration, 24 which was denied in a

Resolution25 dated June 6, 2017; hence, this petition.

The Issue Before the Court

The issue for the Court's resolution is whether or not the CA erred in upholding the RTC
Orders declaring respondent's counterclaim for independent adjudication before the
same trial court.

The Court’s Ruling

The petition is meritorious.

Section 2, Rule 17 of the Rules of Court provides for the procedure relative to
counterclaims in the event that a complaint is dismissed by the court at the plaintiffs
instance, viz. :

Section 2. Dismissal upon motion of plaintiff. - Except as provided in the preceding

section, a complaint shall not be dismissed at the plaintiffs instance save upon approval
of the court and upon such terms and conditions as the court deems proper. If a
counterclaim has been pleaded by a defendant prior to the service upon him of
the plaintiff's motion for dismissal, the dismissal shall be limited to the complaint.
The dismissal shall be without prejudice to the right of the defendant to
prosecute his counterclaim in a separate action unless within fifteen (15) days
from notice of the motion he manifests his preference to have his counterclaim
resolved in the same action. Unless otherwise specified in the order, a dismissal
under this paragraph shall be without prejudice. A class suit shall not be dismissed or
compromised without the approval of the court.1âwphi1

As per the second sentence of the provision, if a counterclaim has been pleaded by the
defendant prior to the service upon him of the plaintiff's motion for the dismissal - as in
this case - the rule is that the dismissal shall be limited to the
complaint. Commentaries on the subject elucidate that "[i]nstead of an ‘action’ shall not
be dismissed, the present rule uses the term ‘complaint’. A dismissal of an action is
different from a mere dismissal of the complaint. For this reason, since only the

728
complaint and not the action is dismissed, the defendant inspite of said dismissal may
still prosecute his counterclaim in the same acton." 26

However, as stated in the third sentence of Section 2, Rule 17, if the defendant desires
to prosecute his counterclaim in the same action, he is required to file a manifestation
within fifteen (15) days from notice of the motion. Otherwise, his counterclaim may be
prosecuted in a separate action. As explained by renowned remedial law expert, former
Associate Justice Florenz D. Regalado, in his treatise on the matter:

Under this revised section, where the plaintiff moves for the dismissal of the complaint
to which a counterclaim has been interpose, the dismissal shall be limited to the
complaint. Such dismissal shall be without prejudice to the right of the defendant to
either prosecute his counterclaim in a separate action or to have the same resolved in
the same action. Should he opt for the first alternative, the court should render the
corresponding order granting and reserving his right to prosecute his claim in a
separate complaint. Should he choose to have his counterclaim disposed of in
the same action wherein the complaint had been dismissed, he must manifest
within 15 days from notice to him of plaintiff's motion to dismiss. x x x27

In this case, the CA confined the application of Section 2, Rule 17 to that portion of its
second sentence which states that the "dismissal shall be limited to the complaint."
Evidently, the CA ignored the same provision's third sentence, which provides for the
alternatives available to the defendant who interposes a counterclaim prior to the
service upon him of the plaintiff's motion for dismissal. As may be clearly inferred
therefrom, should the defendant desire to prosecute his counterclaim, he is required to
manifest his preference therefor within fifteen (15) days from notice of the plaintiff's
motion to dismiss. Failing in which, the counterclaim may be prosecuted only in a
separate action.

The rationale behind this rule is not difficult to discern: the passing of the fifteen (15)-
day period triggers the finality of the court's dismissal of the complaint and hence, bars
the conduct of further proceedings, i.e., the prosecution of respondent's counterclaim, in
the same action. Thus, in order to obviate this finality, the defendant is required to file
the required manifestation within the aforesaid period; otherwise, the counterclaim may
be prosecuted only in a separate action.

It is hornbook doctrine in statutory construction that "[t]he whole and every part of the
statute must be considered in fixing the meaning of any of its parts and in order to
produce a harmonious whole. A statute must be so construed as to harmonize and give
effect to all its provisions whenever possible. In short, every meaning to be given to
each word or phrase must be ascertained from the context of the body of the statute
since a word or phrase in a statute is always used in association with other words or
phrases and its meaning may be modified or restricted by the latter." 28

By narrowly reading Section 2, Rule 1 7 of the Rules of Court, the CA clearly violated
the foregoing principle and in so doing, erroneously sustained the assailed RTC Orders

729
declaring respondent’s counterclaim "as remaining for independent adjudication"
despite the latter's failure to file the required manifestation within the prescribed fifteen
(15)-day period. As petitioner aptly points out:

[I]f the intention of the framers of the Rules of Court is a blanket dismissal of the
complaint ALONE if a counterclaim has been pleaded prior to the service of the notice
of dismissal then there is NO EVIDENT PURPOSE for the third (3rd) sentence of Sec.
2, Rule 17.

x x x x29

[I]t is clearly an ABSURD conclusion if the said provision will direct the defendant to
manifest within fifteen (15) days from receipt of the notice of dismissal his preference to
prosecute his counterclaim in the SAME ACTION when the same AUTOMATICALLY
REMAINS. If the automatic survival of the counterclaim and the death of the complaint
as being ruled by the Court of Appeals in its questioned Decision is indeed true, then
the third sentence should have required defendant to manifest that he will prosecute his
counterclaim in a SEPARATE [and not - as the provision reads - in the
same] ACTION.30 (Emphases and underscoring in the original)

Petitioner's observations are logically on point. Consequently, the CA rulings, which

affirmed the patently erroneous R TC Orders, must be reversed. As it should be, the
RTC should have only granted petitioner's Motion to Withdraw and hence, dismissed his
Petition for Declaration of Nullity of Marriage, without prejudice to, among others, the
prosecution of respondent's counterclaim in a separate action.

WHEREFORE, the petition is GRANTED. The Decision dated February 23, 2017 and

the Resolution dated June 6, 2017 of the Court of Appeals in CA-G.R. SP No. 146138
are hereby REVERSED and SET ASIDE. A new one is ENTERED solely granting
petitioner Alex Raul B. Blay’s Motion to Withdraw his Petition for Declaration of Nullity of
Marriage in Civil Case No. R-PSY-14-17714-CV. The aforesaid dismissal is, among
others, without prejudice to the prosecution of respondent Cynthia B. Baña's
counterclaim in a separate action.

SO ORDERED.

THIRD DIVISION

G.R. No. 210252               June 16, 2014

VILMA QUINTOS, represented by her Attorney-in-Fact FIDEL I. QUINTOS, JR.;

FLORENCIA I. DANCEL, represented by her Attorney-in-Fact FLOVY I. DANCEL;
and CATALINO L. IBARRA, Petitioners,
vs.
PELAGIA I. NICOLAS, NOLI L. IBARRA, SANTIAGO L. IBARRA, PEDRO L.
IBARRA, DAVID L. IBARRA, GILBERTO L. IBARRA, HEIRS OF AUGUSTO L.

730
IBARRA, namely CONCHITA R., IBARRA, APOLONIO IBARRA, and NARCISO
IBARRA, and the spouses RECTO CANDELARIO and ROSEMARIE
CANDELARIO, Respondents.

DECISION

VELASCO, JR., J.:

The Case

Before the Court is a Petition for Review on Certiorari filed under Rule 45 challenging
the Decision1 and Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 98919
dated July 8, 2013 and November 22, 2013, respectively. The challenged rulings
affirmed the May 7, 2012 Decision3 of the Regional Trial Court (RTC), Branch 68 in
Camiling, Tarlac that petitioners and respondents are co-owners of the subject property,
which should be partitioned as per the subdivision plan submitted by respondent
spouses Recto and Rosemarie Candelario.

The Facts

As culled from the records, the facts of the case are as follows:

Petitioners Vilma Quintos, Florencia Dancel, and Catalino Ibarra, and respondents
Pelagia Nicolas, Noli Ibarra, Santiago Ibarra, Pedro Ibarra, David Ibarra, Gilberto Ibarra,
and the late Augusto Ibarra are siblings. Their parents, Bienvenido and Escolastica
Ibarra, were the owners of the subject property, a 281 sqm. parcel of land situated along
Quezon Ave., Poblacion C, Camiling, Tarlac, covered by Transfer Certificate Title (TCT)
No. 318717.

By 1999, both Bienvenido and Escolastica had already passed away, leaving to their
ten (10) children ownership over the subject property. Subsequently, sometime in 2002,
respondent siblings brought an action for partition against petitioners. The case was
docketed as Civil Case No. 02-52 and was raffled to the RTC, Branch 68, Camiling,
Tarlac. However, in an Order4 dated March 22, 2004, the trial court dismissed the case
disposing as follows:

For failure of the parties, as well as their counsels, to appear despite due notice, this
case is hereby DISMISSED.

SO ORDERED.

As neither set of parties appealed, the ruling of the trial court became final, as
evidenced by a Certificate of Finality5 it eventually issued on August 22, 2008.

Having failed to secure a favorable decision for partition, respondent siblings instead
resorted to executing a Deed of Adjudication 6 on September 21, 2004 to transfer the

731
property in favor of the ten (10) siblings. As a result, TCT No. 318717 was canceled and
in lieu thereof, TCT No. 390484 was issued in its place by the Registry of Deeds of
Tarlac in the names of the ten (10) heirs of the Ibarra spouses.

Subsequently, respondent siblings sold their 7/10 undivided share over the property in
favor of their co-respondents, the spouses Recto and Rosemarie Candelario. By virtue
of a Deed of Absolute Sale7 dated April 17, 2007 executed in favor of the spouses
Candelario and an Agreement of Subdivision 8 purportedly executed by them and
petitioners, TCT No. 390484 was partially canceled and TCT No. 434304 was issued in
the name of the Candelarios, covering the 7/10portion.

On June 1, 2009, petitioners filed a complaint for Quieting of Title and Damages against
respondents wherein they alleged that during their parents’ lifetime, the couple
distributed their real and personal properties in favor of their ten (10) children. Upon
distribution, petitioners alleged that they received the subject property and the house
constructed thereon as their share. They likewise averred that they have been in
adverse, open, continuous, and uninterrupted possession of the property for over four
(4) decades and are, thus, entitled to equitable title thereto. They also deny any
participation in the execution of the aforementioned Deed of Adjudication dated
September 21, 2004 and the Agreement of Subdivision. Respondents countered that
petitioners’ cause of action was already barred by estoppel when sometime in 2006,
one of petitioners offered to buy the 7/10 undivided share of the respondent siblings.
They point out that this is an admission on the part of petitioners that the property is not
entirely theirs. In addition, they claimed that Bienvenido and Escolastica Ibarra
mortgaged the property but because of financial constraints, respondent spouses
Candelario had to redeem the property in their behalf. Not having been repaid by
Bienvenido and Escolastica, the Candelarios accepted from their co-respondents their
share in the subject property as payment. Lastly, respondents sought, by way of
counterclaim, the partition of the property.

Docketed as Civil Case No. 09-15 of the RTC of Camiling, Tarlac, the quieting of title
case was eventually raffled to Branch 68 of the court, the same trial court that dismissed
Civil Case No. 02-52. During pre-trial, respondents, or defendants a quo, admitted
having filed an action for partition, that petitioners did not participate in the Deed of
Adjudication that served as the basis for the issuance of TCT No. 390484, and that the
Agreement of Subdivision that led to the issuance of TCT No. 434304 in favor of
respondent spouses Candelario was falsified.9 Despite the admissions of respondents,
however, the RTC, through its May 27, 2012 Decision, dismissed petitioners’ complaint.
The court did not find merit in petitioners’ asseverations that they have acquired title
over the property through acquisitive prescription and noted that there was no document
evidencing that their parents bequeathed to them the subject property. Finding that
respondent siblings were entitled to their respective shares in the property as
descendants of Bienvenido and Escolastica Ibarra and as co-heirs of petitioners, the
subsequent transfer of their interest in favor of respondent spouses Candelario was
then upheld by the trial court. The dispositive portion of the Decision reads:

732
WHEREFORE, premises considered, the above-entitled case is hereby Dismissed.

Also, defendants-spouses Rosemarie Candelario and Recto Candelario are hereby

declared as the absolute owners of the 7/10 portion of the subject lot.

Likewise, the court hereby orders the partition of the subject lots between the herein
plaintiffs and the defendants-spouses Candelarios.

SO ORDERED.

Aggrieved, petitioners appealed the trial court’s Decision to the CA, pleading the same
allegations they averred in their underlying complaint for quieting of title. However, they
added that the partition should no longer be allowed since it is already barred by res
judicata, respondent siblings having already filed a case for partition that was dismissed
with finality, as admitted by respondents themselves during pre-trial.

On July 8, 2013, the CA issued the assailed Decision denying the appeal. The fallo
reads: WHEREFORE, premises considered, the Decision dated May 7, 2012 of the
Regional Trial Court of Camiling, Tarlac, Branch 68, in Civil Case No. 09-15, is hereby
AFFIRMED.

SO ORDERED.

Similar to the trial court, the court a quo found no evidence on record to support
petitioners’ claim that the subject property was specifically bequeathed by Bienvenido
and Escolastica Ibarra in their favor as their share in their parents’ estate. It also did not
consider petitioners’ possession of the property as one that is in the concept of an
owner. Ultimately, the appellate court upheld the finding that petitioners and respondent
spouses Candelario co-own the property, 30-70 in favor of the respondent spouses.

As regards the issue of partition, the CA added:

x x x Since it was conceded that the subject lot is now co-owned by the plaintiffs-
appellants, (with 3/10 undivided interest) and defendants-appellees Spouses
Candelarios (with 7/10 undivided interest) and considering that plaintiffs-appellants had
already constructed a 3-storey building at the back portion of the property, then
partition, in accordance with the subdivision plan (records, p. 378) undertaken by
defendants-appellants [sic] spouses, is in order.10

On November 22, 2013, petitioners’ Motion for Reconsideration was denied. Hence, the
instant petition.

Issues

In the present petition, the following errors were raised:

733
 I. THE COURT OF APPEALS MANIFESTLY OVERLOOKED RELEVANT AND
UNDISPUTED FACTS WHICH, IF PROPERLY CONSIDERED, WOULD
JUSTIFY PETITIONERS’ CLAIM OF EQUITABLE TITLE.

II. THE COURT OF APPEALS ERRED WHEN IT AFFIRMED THE ORDER OF

PARTITION DESPITE THE FACT THAT THE COUNTERCLAIM FOR
PARTITION, BASED ON THE DEED OF ABSOLUTE SALE EXECUTED IN
2007, IS BARRED BY LACHES.

III. THE COURT OF APPEALS RENDERED A SUBSTANTIALLY FLAWED

JUDGMENT WHEN IT NEGLECTED TO RULE ON PETITIONERS’
CONTENTION THAT THE COUNTERCLAIM FOR PARTITION IS ALSO
BARRED BY PRIOR JUDGMENT, DESPITE ITS HAVING BEEN
SPECIFICALLY ASSIGNED AS ERROR AND PROPERLY ARGUED IN THEIR
BRIEF, AND WHICH, IF PROPERLY CONSIDERED, WOULD JUSTIFY THE
DISMISSAL OF THE COUNTERCLAIM.

IV. THE COURT OF APPEALS ERRED WHEN IT ORDERED PARTITION IN

ACCORDANCE WITH THE SUBDIVISION PLAN MENTIONED IN ITS
DECISION, IN CONTRAVENTION OF THE PROCEDURE ESTABLISHED IN
RULE 69 OF THE RULES OF CIVIL PROCEDURE. 11

To simplify, the pertinent issues in this case are as follows:

1. Whether or not the petitioners were able to prove ownership over the property;

2. Whether or not the respondents’ counterclaim for partition is already barred by

laches or res judicata; and

3. Whether or not the CA was correct in approving the subdivision agreement as

basis for the partition of the property.

The Court’s Ruling

The petition is meritorious in part.

Petitioners were not able to prove equitable title or ownership over the property

Quieting of title is a common law remedy for the removal of any cloud, doubt, or
uncertainty affecting title to real property.12 For an action to quiet title to prosper, two
indispensable requisites must concur, namely: (1) the plaintiff or complainant has a
legal or equitable title to or interest in the real property subject of the action; and (2) the
deed, claim, encumbrance, or proceeding claimed to be casting cloud on the title must
be shown to be in fact invalid or inoperative despite its prima facie appearance of
validity or efficacy.13 In the case at bar, the CA correctly observed that petitioners’ cause
of action must necessarily fail mainly in view of the absence of the first requisite.

734
At the outset, it must be emphasized that the determination of whether or not petitioners
sufficiently proved their claim of ownership or equitable title is substantially a factual
issue that is generally improper for Us to delve into. Section 1, Rule 45 of the Rules of
Court explicitly states that the petition for review on certiorari "shall raise only questions
of law, which must be distinctly set forth." In appeals by certiorari, therefore, only
questions of law may be raised, because this Court is not a trier of facts and does not
normally undertake the re-examination of the evidence presented by the contending
parties during the trial.14 Although there are exceptions15 to this general rule as
eloquently enunciated in jurisprudence, none of the circumstances calling for their
application obtains in the case at bar. Thus, We are constrained to respect and uphold
the findings of fact arrived at by both the RTC and the CA.

In any event, a perusal of the records would readily show that petitioners, as aptly
observed by the courts below, indeed, failed to substantiate their claim. Their alleged
open, continuous, exclusive, and uninterrupted possession of the subject property is
belied by the fact that respondent siblings, in 2005, entered into a Contract of Lease
with the Avico Lending Investor Co. over the subject lot without any objection from the
petitioners.16 Petitioners’ inability to offer evidence tending to prove that Bienvenido and
Escolastica Ibarra transferred the ownership over the property in favor of petitioners is
likewise fatal to the latter’s claim. On the contrary, on May 28, 1998, Escolastica Ibarra
executed a Deed of Sale covering half of the subject property in favor of all her 10
children, not in favor of petitioners alone.17

The cardinal rule is that bare allegation of title does not suffice. The burden of proof is
on the plaintiff to establish his or her case by preponderance of evidence. 18 Regrettably,
petitioners, as such plaintiff, in this case failed to discharge the said burden imposed
upon them in proving legal or equitable title over the parcel of land in issue. As such,
there is no reason to disturb the finding of the RTC that all 10 siblings inherited the
subject property from Bienvenido and Escolastica Ibarra, and after the respondent
siblings sold their aliquot share to the spouses Candelario, petitioners and respondent
spouses became co-owners of the same.

The counterclaim for partition is not barred by prior judgment

This brings us to the issue of partition as raised by respondents in their counterclaim. In

their answer to the counterclaim, petitioners countered that the action for partition has
already been barred by res judicata.

The doctrine of res judicata provides that the judgment in a first case is final as to the
claim or demand in controversy, between the parties and those privy with them, not only
as to every matter which was offered and received to sustain or defeat the claim or
demand, but as to any other admissible matter which must have been offered for that
purpose and all matters that could have been adjudged in that case. 19 It precludes
parties from relitigating issues actually litigated and determined by a prior and final
judgment.20 As held in Yusingco v. Ong Hing Lian:21

735
It is a rule pervading every well-regulated system of jurisprudence, and is put upon two
grounds embodied in various maxims of the common law; the one, public policy and
necessity, which makes it to the interest of the state that there should be an end to
litigation — republicae ut sit finis litium; the other, the hardship on the individual that he
should be vexed twice for the same cause — nemo debet bis vexari et eadem causa. A
contrary doctrine would subject the public peace and quiet to the will and neglect of
individuals and prefer the gratitude identification of a litigious disposition on the part of
suitors to the preservation of the public tranquility and happiness. 22

The rationale for this principle is that a party should not be vexed twice concerning the
same cause. Indeed, res judicata is a fundamental concept in the organization of every
jural society, for not only does it ward off endless litigation, it ensures the stability of
judgment and guards against inconsistent decisions on the same set of facts. 23

There is res judicata when the following requisites are present: (1) the formal judgment
or order must be final; (2) it must be a judgment or order on the merits, that is, it was
rendered after a consideration of the evidence or stipulations submitted by the parties at
the trial of the case; (3) it must have been rendered by a court having jurisdiction over
the subject matter and the parties; and (4) there must be, between the first and second
actions, identity of parties, of subject matter and of cause of action. 24

In the case at bar, respondent siblings admit that they filed an action for partition
docketed as Civil Case No. 02-52, which the RTC dismissed through an Order dated
March 22, 2004 for the failure of the parties to attend the scheduled hearings.
Respondents likewise admitted that since they no longer appealed the dismissal, the
ruling attained finality. Moreover, it cannot be disputed that the subject property in Civil
Case No. 02-52 and in the present controversy are one and the same, and that in both
cases, respondents raise the same action for partition. And lastly, although respondent
spouses Candelario were not party-litigants in the earlier case for partition, there is
identity of parties not only when the parties in the case are the same, but also between
those in privity with them, such as between their successors-in-interest. 25

With all the other elements present, what is left to be determined now is whether or not
the dismissal of Civil case No. 02-52 operated as a dismissal on the merits that would
complete the requirements of res judicata.

In advancing their claim, petitioners cite Rule 17, Sec. 3 of the Rules of Court, to wit:

Section 3. Dismissal due to fault of plaintiff. — If, for no justifiable cause, the plaintiff
fails to appear on the date of the presentation of his evidence in chief on the complaint,
or to prosecute his action for an unreasonable length of time, or to comply with these
Rules or any order of the court, the complaint may be dismissed upon motion of the
defendant or upon the court’s own motion, without prejudice to the right of the defendant
to prosecute his counterclaim in the same or in a separate action. This dismissal shall
have the effect of an adjudication upon the merits, unless otherwise declared by the
court.

736
The afore-quoted provision enumerates the instances when a complaint may be
dismissed due to the plaintiff's fault: (1) if he fails to appear on the date for the
presentation of his evidence in chief on the complaint; (2) if he fails to prosecute his
action for an unreasonable length of time; or (3) if he fails to comply with the Rules or
any order of the court. The dismissal of a case for failure to prosecute has the effect of
adjudication on the merits, and is necessarily understood to be with prejudice to the
filing of another action, unless otherwise provided in the order of dismissal. Stated
differently, the general rule is that dismissal of a case for failure to prosecute is to be
regarded as an adjudication on the merits and with prejudice to the filing of another
action, and the only exception is when the order of dismissal expressly contains a
qualification that the dismissal is without prejudice. 26 In the case at bar, petitioners claim
that the Order does not in any language say that the dismissal is without prejudice and,
thus, the requirement that the dismissal be on the merits is present.

Truly, We have had the occasion to rule that dismissal with prejudice under the above-
cited rule amply satisfies one of the elements of res judicata. 27 It is, thus,
understandable why petitioners would allege res judicata to bolster their claim.
However, dismissal with prejudice under Rule 17, Sec. 3 of the Rules of Court cannot
defeat the right of a co-owner to ask for partition at any time, provided that there is no
actual adjudication of ownership of shares yet. Pertinent hereto is Article 494 of the Civil
Code, which reads:

Article 494. No co-owner shall be obliged to remain in the co-ownership. Each co-owner
may demand at any time the partition of the thing owned in common, insofar as his
share is concerned.

Nevertheless, an agreement to keep the thing undivided for a certain period of time, not
exceeding ten years, shall be valid. This term may be extended by a new agreement.

A donor or testator may prohibit partition for a period which shall not exceed twenty
years. Neither shall there be any partition when it is prohibited by law. No prescription
shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so long as
he expressly or impliedly recognizes the co-ownership. (emphasis supplied)

From the above-quoted provision, it can be gleaned that the law generally does not
favor the retention of co-ownership as a property relation, and is interested instead in
ascertaining the co-owners’ specific shares so as to prevent the allocation of portions to
remain perpetually in limbo. Thus, the law provides that each co-owner may demand at
any time the partition of the thing owned in common.

Between dismissal with prejudice under Rule 17, Sec. 3 and the right granted to co-
owners under Art. 494 of the Civil Code, the latter must prevail. To construe otherwise
would diminish the substantive right of a co-owner through the promulgation of
procedural rules. Such a construction is not sanctioned by the principle, which is too
well settled to require citation, that a substantive law cannot be amended by a
procedural rule.28 This further finds support in Art. 496 of the New Civil Code, viz:

737
Article 496.Partition may be made by agreement between the parties or by judicial
proceedings.1âwphi1 Partition shall be governed by the Rules of Court insofar as they
are consistent with this Code.

Thus, for the Rules to be consistent with statutory provisions, We hold that Art. 494, as
cited, is an exception to Rule 17, Sec. 3 of the Rules of Court to the effect that even if
the order of dismissal for failure to prosecute is silent on whether or not it is with
prejudice, it shall be deemed to be without prejudice.

This is not to say, however, that the action for partition will never be barred by res
judicata. There can still be res judicata in partition cases concerning the same parties
and the same subject matter once the respective shares of the co-owners have been
determined with finality by a competent court with jurisdiction or if the court determines
that partition is improper for co-ownership does not or no longer exists.

So it was that in Rizal v. Naredo,29 We ruled in the following wise:

Article 484 of the New Civil Code provides that there is co-ownership whenever the
ownership of an undivided thing or right belongs to different persons. Thus, on the one
hand, a co-owner of an undivided parcel of land is an owner of the whole, and over the
whole he exercises the right of dominion, but he is at the same time the owner of a
portion which is truly abstract. On the other hand, there is no co-ownership when the
different portions owned by different people are already concretely determined and
separately identifiable, even if not yet technically described.

Pursuant to Article 494 of the Civil Code, no co-owner is obliged to remain in the co-
ownership, and his proper remedy is an action for partition under Rule 69 of the Rules
of Court, which he may bring at anytime in so far as his share is concerned. Article 1079
of the Civil Code defines partition as the separation, division and assignment of a thing
held in common among those to whom it may belong. It has been held that the fact that
the agreement of partition lacks the technical description of the parties’ respective
portions or that the subject property was then still embraced by the same certificate of
title could not legally prevent a partition, where the different portions allotted to each
were determined and became separately identifiable.

The partition of Lot No. 252 was the result of the approved Compromise Agreement in
Civil Case No. 36-C, which was immediately final and executory. Absent any showing
that said Compromise Agreement was vitiated by fraud, mistake or duress, the court
cannot set aside a judgment based on compromise. It is axiomatic that a compromise
agreement once approved by the court settles the rights of the parties and has the force
of res judicata. It cannot be disturbed except on the ground of vice of consent or forgery.

Of equal significance is the fact that the compromise judgment in Civil Case No. 36-C
settled as well the question of which specific portions of Lot No. 252 accrued to the
parties separately as their proportionate shares therein. Through their subdivision
survey plan, marked as Annex "A" of the Compromise Agreement and made an integral

738
part thereof, the parties segregated and separately assigned to themselves distinct
portions of Lot No. 252. The partition was immediately executory, having been
accomplished and completed on December 1, 1971 when judgment was rendered
approving the same. The CA was correct when it stated that no co-ownership exist
when the different portions owned by different people are already concretely determined
and separately identifiable, even if not yet technically described. (emphasis supplied)

In the quoted case, We have held that res judicata applied because after the parties
executed a compromise agreement that was duly approved by the court, the different
portions of the owners have already been ascertained. Thus, there was no longer a co-
ownership and there was nothing left to partition. This is in contrast with the case at bar
wherein the co-ownership, as determined by the trial court, is still subsisting 30-70 in
favor of respondent spouses Candelario. Consequently, there is no legal bar preventing
herein respondents from praying for the partition of the property through counterclaim.

The counterclaim for partition is not barred by laches

We now proceed to petitioners’ second line of attack. According to petitioners, the claim
for partition is already barred by laches since by 1999, both Bienvenido and Escolastica
Ibarra had already died and yet the respondent siblings only belatedly filed the action for
partition, Civil Case No. 02-52, in 2002. And since laches has allegedly already set in
against respondent siblings, so too should respondent spouses Candelario be barred
from claiming the same for they could not have acquired a better right than their
predecessors-in-interest.

The argument fails to persuade.

Laches is the failure or neglect, for an unreasonable and unexplained length of time, to
do that which––by the exercise of due diligence––could or should have been done
earlier. It is the negligence or omission to assert a right within a reasonable period,
warranting the presumption that the party entitled to assert it has either abandoned or
declined to assert it.30 The principle is a creation of equity which, as such, is applied not
really to penalize neglect or sleeping upon one’s right, but rather to avoid recognizing a
right when to do so would result in a clearly inequitable situation. As an equitable
defense, laches does not concern itself with the character of the petitioners’ title, but
only with whether or not by reason of the respondents’ long inaction or inexcusable
neglect, they should be barred from asserting this claim at all, because to allow them to
do so would be inequitable and unjust to petitioners. 31

As correctly appreciated by the lower courts, respondents cannot be said to have

neglected to assert their right over the subject property. They cannot be considered to
have abandoned their right given that they filed an action for partition sometime in 2002,
even though it was later dismissed. Furthermore, the fact that respondent siblings
entered into a Contract of Lease with Avico Lending Investor Co. over the subject
property is evidence that they are exercising rights of ownership over the same.

739
The CA erred in approving the Agreement for Subdivision

There is merit, however, in petitioners’ contention that the CA erred in approving the
proposal for partition submitted by respondent spouses. Art. 496, as earlier cited,
provides that partition shall either be by agreement of the parties or in accordance with
the Rules of Court. In this case, the Agreement of Subdivision allegedly executed by
respondent spouses Candelario and petitioners cannot serve as basis for partition, for,
as stated in the pre-trial order, herein respondents admitted that the agreement was a
falsity and that petitioners never took part in preparing the same. The "agreement" was
crafted without any consultation whatsoever or any attempt to arrive at mutually
acceptable terms with petitioners. It, therefore, lacked the essential requisite of consent.
Thus, to approve the agreement in spite of this fact would be tantamount to allowing
respondent spouses to divide unilaterally the property among the co-owners based on
their own whims and caprices. Such a result could not be countenanced.

To rectify this with dispatch, the case must be remanded to the court of origin, which
shall proceed to partition the property in accordance with the procedure outlined in Rule
69 of the Rules of Court.

WHEREFORE, premises considered, the petition is hereby PARTLY GRANTED. The

assailed Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 98919
dated July 8, 2013 and November 22, 2013, respectively, are hereby AFFIRMED with
MODIFICATION. The case is hereby REMANDED to the RTC, Branch 68 in Camiling,
Tarlac for purposes of partitioning the subject property in accordance with Rule 69 of
the Rules of Court.

SO ORDERED.

RULE 18

SECOND DIVISION

G.R. No. 208792               July 22, 2015

BANK OF THE PHILIPPINES, Petitioner,

vs.
SPOUSES ROBERTO AND TERESITA GENUINO, Respondents.

DECISION

LEONEN, J.:

A.M. No. 03-l-09-SC1 does not remove the plaintiff's duty under Rule 18, Section 1 of
the Rules of Court to promptly move ex-parte to set his or her case for pre-trial after the
last pleading has been served and filed.2 While pre-trial promotes efficiency in court

740
proceedings and aids in decongesting dockets, A.M. No. 03-1-09-SC did not give sole
burden on the courts to set cases for pre-trial.

A.M. No. 03-1-09-SC, providing that "[w]ithin five (5) days from date of filing of the reply,
the plaintiff must promptly move ex parte that the case be set for pre-trial conference
[and] [i}f the plaintiff fails to file said motion within the given period, the Branch COC
shall issue a notice of pre-trial,"3 must be read together with Rule 17,Section 3 of the
Rules of Court on dismissals due to plaintiff’s fault. Plaintiff should thus sufficiently show
justifiable cause for its failure to set the case for pre-trial; otherwise, the court can
dismiss the complaint outright.

The trial court dismissed without prejudice the Bank of the Philippine Islands' Complaint
against Spouses Roberto and Teresita Genuino for failure to prosecute under Rule 17,
Section 3 of the Rules of Court.4 The Bank of the Philippine Islands concedes that
dismissal is justified under the Rules of Court, but submits that dismissal for non-filing of
a Motion to Set Case for Pre-trial Conference is no longer proper beginning August 16,
2004 when A.M. No. 03-1-09-SC was issued. 5

This Petition6 assails the Court of Appeals February 26, 2013 Decision 7 that dismissed
Bank of the Philippine Islands’ Petition for Certiorari, and August 13, 2013
Resolution8 that denied reconsideration.9

On October 6, 2009, Bank of the Philippine Islands filed a Complaint for Sum of
Money/Judgment on the Deficiency against the Spouses Genuino before the Regional
Trial Court of Makati.10

The Complaint alleged that on May 27, 1997 and May 11, 1999, the Spouses Genuino
executed a Deed of Real Estate Mortgage over a 10,000-square-meter 11 parcel of land
in General Trias, Cavite City, together with its improvements, to secure loans and other
credit accommodations obtained or to be obtained from the bank. 12

The Spouses Genuino availed themselves of this credit accommodation in the amount
of ₱8,840,000.00 as evidenced by various promissory notes. They defaulted in their
installment payments, and their failure to pay despite demand resulted in the entire
outstanding balance of the loan, plus interests and other charges, becoming due and
demandable.13

On April 18, 2004, Bank of the Philippine Islands foreclosed the mortgaged property
after due notice and publication, and sold it to the highest bidder at the public auction for
₱2,900,000.00. A deficiency of ₱27,744,762.49 remained after the tendered bid price
had been deducted from the Spouses Genuino’s total obligation of ₱30,644,762.49. The
Spouses Genuino failed to pay the deficiency despite written demands by the bank. 14

Thus, Bank of the Philippine Islands filed the Complaint. It prayed for the reduced
amount of 10,626,121.69, waiving partly the stipulated interest, and waiving totally the
late payment charges and attorney’s fees. 15

741
On November 25, 2009, the Spouses Genuino filed their Answer with Special and
Affirmative Defenses. They argued nullity of the auction sale for lack of notice or
demand made to them before and after the alleged foreclosure. Even assuming the
auction sale was valid, they argued that Bank of the Philippine Islands waived the
remedy of collection when it chose to foreclose the security. The Spouses Genuino
included a Compulsory Counterclaim for moral damages, exemplary damages, and
attorney’s fees.16

On December 2, 2009, Bank of the Philippine Islands received a copy of the Answer
and opted not to file any Reply.17

The Regional Trial Court, in its Order18 dated May 17, 2010, dismissed the case without
prejudice for lack of interest to prosecute under Rule 17, Section 3 of the Rules of
Court. The Spouses Genuino’s counterclaim was also dismissed without prejudice
pursuant to Rule 17, Section 4 of the Rules of Court. 19

In its Motion for Reconsideration,20 Bank of the Philippine Islands explained that the
case folder was misplaced in the office bodega together with the records of terminated
cases. The assigned secretary of counsel had already left the firm, and the bank could
no longer seek an explanation for the misfiling of the case after it had been unloaded by
previous counsel. The bank argued for the application of A.M. No. 03-1-09-SC. The
court denied reconsideration.21

The Court of Appeals, in its Decision dated February 26, 2013, denied due course and
dismissed Bank of the Philippine Islands’ Petition for Certiorari. 22 It found no grave
abuse of discretion by the trial court in dismissing without prejudice the bank’s
Complaint.23

Hence, Bank of the Philippine Islands filed this Petition.

The bank submits that with the issuance of A.M. No. 03-1-09-SC, "it is no longer proper
to dismiss a case for failure to prosecute starting August 16, 2004 due to the non-filing
by the plaintiff of a Motion to Set Case for Pre Trial Conference but instead the Clerk of
Court should issue an Order setting the case for Pre Trial Conference." 24 It quotes
Espiritu, et al. v. Lazaro, et al.25 that "clarified the application of [A.M.] No. 03-1-09[-SC]
to cases filed after its effectivity on August 16, 2004[.]" 26 Cases should also be resolved
based on its merits and not on mere technicalities. 27

The Spouses Genuino counter that "[w]hile the clerk of court has the duty to include a
case in the trial calendar after the issues are joined and to fix the date for trial as well as
to notify the parties of the same, plaintiff may not rely upon said duty of the clerk, nor is
it relieved of its own duty to prosecute the case diligently, calling if necessary the
attention of the court to the need of putting the case back to its calendar if the court,
because of numerous cases, has neglected to attend thereto." 28 They cite Olave v.
Mistas29 where the trial court dismissed the case with prejudice when plaintiff failed to
move for pre-trial after more than three months. 30

742
The Spouses Genuino submit that "notwithstanding A.M. No. 03-1-09-SC . . . it is the
duty of the plaintiff . . . to prosecute its action within a reasonable length of time and the
failure to do so would justify the dismissal of the case." 31

The issue for resolution is whether the trial court acted with grave abuse of discretion in
dismissing the case without prejudice on the ground of failure to prosecute when Bank
of the Philippine Islands failed to file a motion to set case for pre-trial conference.

We deny this Petition by Bank of the Philippine Islands.

The trial court dismissed the Complaint pursuant to Rule 17, Section 3 of the Rules of
Court. This dismissal operated as an adjudication on the merits:

SEC. 3. Dismissal due to fault of plaintiff. — If, for no justifiable cause, the plaintiff fails
to appear on the date of the presentation of his evidence in chief on the complaint, or to
prosecute his action for an unreasonable length of time, or to comply with these Rules
or any order of the court, the complaint may be dismissed upon motion of the defendant
or upon the court’s own motion without prejudice to the right of the defendant to
prosecute his counterclaim in the same or in a separate action. This dismissal shall
have the effect of an adjudication upon the merits, unless otherwise declared by the
court. (Emphasis supplied)

A.M. No. 03-1-09-SC entitled Re: Proposed Rule on Guidelines to be Observed by Trial
Court Judges and Clerks of Court in the Conduct of Pre-Trial and Use of Deposition-
Discovery Measures took effect on August 16, 2004. This provides that:

I. Pre-Trial

A. Civil Cases

1. . . .

....

Within five (5) days from date of filing of the reply, the plaintiff must promptly move ex
parte that the case be set for pre-trial conference.1âwphi1 If the plaintiff fails to file said
motion within the given period, the Branch COC shall issue a notice of pre-
trial.32 (Emphasis supplied, citations omitted)

Respondents Spouses Genuino cannot rely on Olave v. Mistas as this involved a trial
court Order dated October 20, 1997 dismissing the Complaint with prejudice. 33 The facts
in Olavetook place before the effectivity of A.M. No. 03-1-09-SC on August 16, 2004.

Espiritu, et al. v. Lazaro, et al. quoted by petitioner Bank of the Philippine Islands
"clarified the application of [A.M.] No. 03-1-09[-SC] to cases filed after its effectivity on
August 16, 2004":34

743
In every action, the plaintiffs are duty-bound to prosecute their case with utmost
diligence and with reasonable dispatch to enable them to obtain the relief prayed for
and, at the same time, to minimize the clogging of the court dockets. Parallel to this is
the defendants’ right to have a speedy disposition of the case filed against them,
essentially, to prevent their defenses from being impaired.

Since the incidents occurred prior to the effectivity of A.M. No. 03-1-09-SC on August
16, 2004, the guidelines stated therein should not be made applicable to this case.
Instead, the prevailing rule and jurisprudence at that time should be utilized in resolving
the case.

Section 1 of Rule 18 of the Rules of Court imposes upon the plaintiff the duty to set the
case for pre-trial after the last pleading is served and filed. Under Section 3 of Rule 17,
failure to comply with the said duty makes the case susceptible to dismissal for failure to
prosecute for an unreasonable length of time or failure to comply with the
rules.35 (Emphasis supplied, citation omitted)

Nevertheless, nowhere in the text of A.M. No. 03-1-09-SC does it remove the plaintiff’s
duty under Rule 18,Section 1 of the Rules of Court to set the case for pre-trial after the
last pleading has been served and filed. Nowhere does it repeal Rule 17, Section 3 of
the Rules of Court that allows dismissals due to plaintiff’s fault, including plaintiff’s
failure to comply with the Rules for no justifiable cause. Nowhere does it impose a sole
burden on the trial court to set the case for pre-trial.

Reading A.M. No. 03-1-09-SC together with Rule 17, Section 3 and Rule 18, Section 1
of the Rules of Court accommodates the outright dismissal of a complaint upon
plaintiff’s failure to show justifiable reason for not setting the case for pre-trial within the
period provided by the Rules. Thus, trial courts must consider the facts of each case

This court has allowed cases to proceed despite failure by the plaintiff to promptly move
for pre-trial when it finds that "the extreme sanction of dismissal of the complaint might
not be warranted":36

It must be stressed that even if the plaintiff fails to promptly move for pre-trial without
any justifiable cause for such delay, the extreme sanction of dismissal of the complaint
might not be warranted if no substantial prejudice would be caused to the defendant,
and there are special and compelling reasons which would make the strict application of
the rule clearly unjustified.

....

While "heavy pressures of work" was not considered a persuasive reason to justify the
failure to set the case for pre-trial in Olave v. Mistas, however, unlike the respondents in
the said case, herein respondent never failed to comply with the Rules of Court or any
order of the trial court at any other time. Failing to file a motion to set the case for pre-
trial was her first and only technical lapse during the entire proceedings. Neither has

744
she manifested an evident pattern or a scheme to delay the disposition of the case nor
a wanton failure to observe the mandatory requirement of the rules. Accordingly, the
ends of justice and fairness would best be served if the parties are given the full
opportunity to litigate their claims and the real issues involved in the case are threshed
out in a full-blown trial. Besides, petitioners would not be prejudiced should the case
proceed as they are not stripped of any affirmative defenses nor deprived of due
process of law. This is not to say that adherence to the Rules could be dispensed with.
However, exigencies and situations might occasionally demand flexibility in their
application. Indeed, on several occasions, the Court relaxed the rigid application of the
rules of procedure to afford the parties opportunity to fully ventilate the merits of their
cases. This is in line with the time-honored principle that cases should be decided only
after giving all parties the chance to argue their causes and defenses. Technicality and
procedural imperfection should thus not serve as basis of decisions.

Finally, A.M. No. 03-1-09-SC or the new Guidelines To Be Observed By Trial Court
Judges And Clerks Of Court In The Conduct Of Pre-Trial And Use Of Deposition-
Discovery Measures, which took effect on August 16, 2004, aims to abbreviate court
proceedings, ensure prompt disposition of cases and decongest court dockets, and to
further implement the pre-trial guidelines laid down in Administrative Circular No. 3-99
dated January 15, 1999. A.M. No. 03-1-09-SC states that: "Within five (5) days from
date of filing of the reply, the plaintiff must promptly move ex-parte that the case be set
for pre-trial conference. If the plaintiff fails to file said motion within the given period, the
Branch COC shall issue a notice of pre-trial." As such, the clerk of court of Branch 17 of
the Regional Trial Court of Malolos should issue a notice of pre-trial to the parties and
set the case for pre-trial.37 (Emphasis supplied, citations omitted)

On the other hand, this court has sustained dismissals due to plaintiff’s fault after finding
that plaintiff’s failure to prosecute or comply with the rules was without justifiable reason.
The Court of Appeals Decision cited Spouses Zarate v. Maybank Philippines, Inc. 38 and
Eloisa Merchandising, Inc. v. Banco de Oro Universal Bank 39 on the need for vigilance
in prosecuting one’s case, and Regner v. Logarta 40 on the right to speedy trial.41

In Zarate, the trial court "dismiss[ed] the complaint for lack of interest to prosecute the
case."42 Pre-trial and presentation of evidence-in-chief were reset several times due to
plaintiff spouses’ and/or their counsel’s failure to appear, without offering any
explanation for most of their absences. 43 This court sustained the trial court’s dismissal
of the complaint after finding that "petitioners inexorably delayed the trial of the case
without any justifiable reasons[.]" 44

In Eloisa Merchandising, Inc., the case "had been at the pre-trial stage for more than
two years and petitioners have not shown special circumstances or compelling reasons
to convince [this court] that the dismissal of their complaint for failure to prosecute was
unjustified."45 The case remained at pre-trial stage when A.M. No. 03-1-09-SC took
effect.46 The trial court already dismissed the complaint twice due to petitioners’
nonappearance at pre-trial.47 This court sustained the third dismissal since "despite the

745
trial court’s leniency and admonition, petitioners continued to exhibit laxity and
inattention in attending to their case." 48

This court discussed that "[w]hile under the present Rules, it is now the duty of the clerk
of court to set the case for pre-trial if the plaintiff fails to do so within the prescribed
period, this does not relieve the plaintiff of his own duty to prosecute the case
diligently."49

Regner does not involve the non-filing of a motion to set case for pretrial, but the failure
to serve summons on respondents in a Complaint for declaration of nullity of deed of
donation filed in June 1999.50

Nevertheless, we can apply by analogy Regner’s ruling that "[a]lthough Section 1, Rule
14 of the Rules . . . imposes upon the clerk of court the duty to serve summons, this
does not relieve the petitioner of her own duty as the plaintiff in a civil case to prosecute
the case diligently[,] [and] [i]f the clerk had been negligent, it was petitioner’s duty to call
the court’s attention to that fact."51 A plaintiff’s failure to vigilantly pursue his or her case
also affects respondent’s right to speedy trial. 52

The Court of Appeals Decision discussed that petitioner Bank of the Philippine Islands
"cannot simply ‘fold its hands’ and say that it was the duty of the clerk of court to set the
case for pre-trial for the prompt disposition of its case." 53

Trial courts should be more proactive in ensuring the progression of cases to pre-trial
considering the significance of this stage in civil actions:

Pre-trial is an answer to the clarion call for the speedy disposition of cases. Although it
was discretionary under the 1940 Rules of Court, it was made mandatory under the
1964 Rules and the subsequent amendments in 1997. Hailed as "the most important
procedural innovation in Anglo-Saxon justice in the nineteenth century," pre-trial seeks
to achieve the following:

(a) The possibility of an amicable settlement or of a submission to alternative

modes of dispute resolution;

(b) The simplification of the issues;

(c) The necessity or desirability of amendments to the pleadings;

(d) The possibility of obtaining stipulations or admissions of facts and of

documents to avoid unnecessary proof;

(e) The limitation of the number of witnesses;

(f) The advisability of a preliminary reference of issues to a commissioner;

746
 (g) The propriety of rendering judgment on the pleadings, or summary judgment,
or of dismissing the action should a valid ground therefor be found to exist;

(h) The advisability or necessity of suspending the proceedings; and

(i) Such other matters as may aid in the prompt disposition of the action. 54

Pre-trial promotes efficiency of case proceedings by allowing the parties to stipulate on

facts and admissions that no longer need proof, and to agree on key issues, among
others. It protects the right to speedy trial without compromising substantive justice.

A.M. No. 03-1-09-SC upholds this purpose in requiring the Clerk of Court to issue a
notice of pre-trial "[i]f the plaintiff fails to file [the] said motion [to set case for pre-trial]
within the given period[.]"55

However, petitioner Bank of the Philippine Islands also has the duty to set the case for
pre-trial after the last pleading has been served and filed, 56 and to diligently pursue its
case and comply with the rules. Failure to do so without justifiable cause warrants an
outright dismissal of the Complaint.57

Petitioner Bank of the Philippine Islands’ explanation of misfiling by previous counsel’s

secretary of the case records together with terminated cases in the office bodega
cannot be considered as justifiable cause for its failure to set the case for pre-trial. This
court has held that "a counsel is required to inquire, from time to time, and whenever
necessary, about the status of handled cases, as well as motions filed for a
client."58 Also, petitioner Bank of the Philippine Islands is one of the oldest and more
established banks in the country. There is reasonable expectation that it has the
necessary organizational structures, system flows, and procedures to address urgent
matters and meet litigation deadlines.

Between the parties, petitioner Bank of the Philippine Islands is in a better position to
bear the costs of a procedural misstep of its own doing as compared with respondents
Spouses Genuino. The bank may have had its reasons to waive payment or the pursuit
of its claims. For instance, it could have weighed that the costs of pursuing its litigation
against respondents Spouses Genuino outweigh the potential benefits. It could be that
their business with the bank was far more valuable than the incidental rupture in their
relationship caused by this transaction. In all these possible cases, respondents
Spouses Genuino and other debtors have a right to rely on the non-action of the
plaintiff. In their view, the non-filing of the basic motion for setting of pre-trial would have
been, at best, a reasonable economic signal that the bank was no longer interested. At
worse, it was clearly negligence of an entity with enough institutional resources to
maintain a large arsenal of in-house and external counsel. The bank’s explanation for its
own negligence is unavailing. While it is true that A.M. No. 03-1-09-SC does provide
that the Clerk of Court set the date of pre-trial, 59 plaintiff should not be rewarded for his
or her negligence.

747
WHEREFORE, the Petition is DENIED.

SO ORDERED.

FIRST DIVISION

[G.R. No. 182075 : September 15, 2010]

THE PHILIPPINE AMERICAN LIFE & GENERAL INSURANCE COMPANY,

PETITIONER, VS. JOSEPH ENARIO, RESPONDENT.

DECISION

PEREZ, J.:

The consequences of the failure of defendant to  attend the pre-trial is the central issue
in this case.

Assailed in this petition is the Decision[1] dated 28 September 2007, as well as the

Resolution[2]  dated 6 March 2008 of the Court of Appeals in CA-G.R. CV No. 82353,
vacating and setting aside the orders dated 3 June 2003[3] (June Order) and 24
November 2003[4], and the decision dated 24 February 2004 [5] of the Regional Trial
Court of Manila[6] declaring respondent Joseph Enario in default and ordering him to pay
Philamlife P1,122,781.66.

Respondent was appointed as agent of Philamlife on 12 November 1991. [7]  Aside from
being an active agent of Philamlife, respondent was appointed unit manager where he
also regularly received his override commissions. He was afforded the privilege of
receiving cash advances from Philamlife, which the latter charges or debits against
future commissions due respondent, and the arrangement continued until his
resignation in February 2000.[8]

At the time of respondent's resignation, Philamlife allegedly discovered that respondent

had an outstanding debit balance of P1,237,336.20, which he was obligated to settle
and liquidate pursuant to the Revised Agency Contract he signed at the time of his
employment, the pertinent portion of which provides:

35. The Agent shall immediately at any time upon demand or without necessity of
demand upon termination of this Contract, return to the Company and all documents,
agency materials, paraphernalia, and such other properties which he may have
received therefrom to effectively discharge and perform his duties and obligations. [9]

Philamlife sent three (3) successive demand letters to respondent for the settlement of
his outstanding debit account.[10]  On 31 October 2000, respondent requested that he be
given time to review and settle his accountabilities as he was still trying to reconcile his
records. [11]

748
When the parties failed to reach an agreement regarding the settlement of the
outstanding debit balance, Philamlife filed a complaint for collection of a sum of money
against respondent before the Regional Trial Court (RTC) of Manila on 22 June 2001.

In his Answer, respondent denied the allegations that he had an outstanding debit
balance of P1,237,336.20 considering that he and Philamlife had yet to reconcile the
records of remittances with his compensation, as well as overriding commissions. 
Respondent prayed for the dismissal of the complaint and counterclaimed for damages.
[12]

On 30 October 2002, the RTC set the pre-trial conference on 3 and 17 December
2002.  The parties were directed to file their respective pre-trial briefs before the date of
the pre-trial conference.[13]  Respondent moved for the postponement of the pre-trial to
14 January 2003 due to conflict of schedule, [14] which motion the RTC received on 2
December 2002.[15]

On 14 January 2003, the opposing counsels agreed to amicably settle the case,
prompting the RTC to reset the pre-trial to 8 May, 3 June and 1 July 2003. [16]

On 7 May 2003, respondent sent a telegram requesting for another postponement of

the pre-trial scheduled on the following day due to medical reasons.

On 3 June 2003, respondent failed to appear.  Consequently, Philamlife manifested that

respondent be declared in default for failure to appear at the pre-trial. The RTC granted
the manifestation and allowed Philamlife to present its evidence on 1 July 2003. [17] The
June Order reads:

Appearance by Atty. Marivel A. Bautista Deodores, for the plaintiff.  No appearance by

Atty. Casiano C. Vailoces, for the defendant.

Atty. Bautista-Deodores manifested that defendant be declared in default for failure to

appear four (4) times and that she be given 15 days from today to file a memorandum.

All manifestations, GRANTED.  Plaintiff is allowed to present their evidence on July 1,

2003 at 8:30 in the morning as previously scheduled.

SO ORDERED.[18]

It was only on the following day, 4 June, that the RTC received respondent's motion for
postponement of the 3 June 2003 hearing, which was mailed on 30 May 2003. [19]

The 1 July 2003 hearing was reset to 28 August 2003 and Philamlife was ordered to
present its evidence ex parte.[20]

Respondent filed a motion for reconsideration of the June Order.

749
Despite notice, respondent still failed to appear on the 28 August 2003 pre-trial. 
Philamlife was then allowed to present its evidence ex parte, which it did on that same
hearing.  Meanwhile, Philamlife was also ordered to comment on the motion for
reconsideration of the order of default filed by respondent. [21]  Respondent denied
receiving a notice of hearing for 28 August 2003. [22]

In its Formal Offer of Evidence, Philamlife submitted statements of account to prove that
respondent has an outstanding debit account balance amounting to P1,237,390.26; and
a summary of sale underwriter vouchers (SUV) as evidence of cash advances, among
others.[23]

On 24 November 2003, the trial court issued an Order denying the motion for
reconsideration of the order of default and admitted Philamlife's Formal Offer of
Evidence.[24]

On 24 February 2004, the trial court rendered judgment ordering respondent to pay the
following amount to Philamlife:

1. One Million One Hundred Twenty-two Thousand Seven Hundred  Eighty- 

One and 66/100 (P1,122,781.66);

2. P10,000 as attorney's fees;

3. Costs of Suit.[25]

Respondent elevated the case to the Court of Appeals via petition for certiorari under
Rule 65 of the Rules of Court.  On 28 September 2007, the Court of Appeals reversed
the trial court's decision and ruled, thus:

WHEREFORE, the orders dated June 3, 2003 and November 24, 2003 and the decision
dated February 24, 2004 of the Regional Trial Court of Manila (Branch 8) are VACATED
and SET ASIDE and the case REMANDED to that court for pre-trial and other
proceedings.

SO ORDERED.[26]

The appellate court found that "respondent's failure to appear for pre-trial on 3 June
2003 does not constitute obstinate refusal to comply with the lower court's order." [27] 
Further, the appellate court held that the trial court erred in issuing an Order of Default
since Section 5, Rule 18 of the Rules of Court explicitly provides that failure to appear
for pre-trial on the part of the defendant shall be cause to allow the plaintiff to present
evidence ex parte and the court to render judgment on the basis thereof. [28]

Philamlife filed a motion for reconsideration, which was denied by the Court of Appeals

750
in its Resolution dated 6 March 2008.

Hence, this petition for certiorari was filed by Philamlife which attributes error on the part
of the Court of Appeals in vacating and setting aside the RTC's default order as a
consequence of respondent's failure to appear during pre-trial. Philamlife concedes that
the Court of Appeals correctly relied on Justice Florenz Regalado's annotation in his
book, REMEDIAL LAW COMPENDIUM, that instead of defendant being declared in
default by reason of his non-appearance, Section 5 Rule 18 of the Rules of Court spells
out that the procedure will be to allow the ex parte presentation of plaintiff's evidence
and the rendition of judgment on the basis thereof.  Likewise from Justice Regalado,
Philamlife argues that the reference to the word "default" which had been deleted in the
present rules solely for semantical propriety and terminological accuracy, is not an error
as the standing procedure was followed by the trial court in allowing the ex
parte presentation of Philamlife's evidence.  Philamlife insists that since pre-trial is
mandatory in any action, when a party fails to appear therein, he may be non-suited or
declared in default.[29]

On the other hand, respondent maintains that the RTC committed an egregious error
when it issued an order of default against him for failure to appear for pre-trial on 3 June
2003.

The fundamental issue is whether or not the RTC erred in declaring respondent in
default and allowing Philamlife to present its evidence ex parte.

The resolution of this issue hinges on the interpretation and application of Section 5,
Rule 18 of the Rules of Court, which states:

Section 5. Effect of failure to appear. -- The failure of the plaintiff to appear when so
required pursuant to the next preceding section shall be cause for dismissal of the
action. The dismissal shall be with prejudice, unless otherwise ordered by the court. A
similar failure on the part of the defendant shall be cause to allow the plaintiff to present
his evidence ex parte and the court to render judgment on the basis thereof.

The "next preceding" section mandates that:

Section 4. Appearance of parties. - It shall be the duty of the parties and their counsel to
appear at the pre-trial. The non-appearance of a party may be excused only if a valid
cause is shown therefor or if a representative shall appear in his behalf fully authorized
in writing to enter into an amicable settlement, to submit to alternative modes of dispute
resolution, and to enter into stipulations or admissions of facts and of documents.

Note that nowhere in the first aforementioned provision was the word "default"
mentioned.  Prior to the 1997 Revised Rules of Civil Procedure, the phrase "as in
default" was initially included in Rule 20 of the old rules, and which read as follows:

751
Sec. 2. A party who fails to appear at a pre-trial conference may be non-suited or
considered as in default.

It was however amended in the 1997 Revised Rules of Civil Procedure.  Justice
Regalado, in his book REMEDIAL LAW COMPENDIUM, explained the rationale for the
deletion of the phrase "as in default" in the amended provision, to wit:

1. This is a substantial reproduction of Section 2 of the former Rule 20 with

the change that, instead of defendant being declared "as in default" by
reason of his non-appearance, this section now spells out that the
procedure will be to allow the ex parte presentation of plaintiff's evidence
and the rendition of judgment on the basis thereof. While actually the
procedure remains the same, the purpose is one of semantical propriety
or terminological accuracy as there were criticisms on the use of the word
"default" in the former provision since that term is identified with the failure
to file a required answer, not appearance in court. [30]

Still, in the same book, Justice Regalado clarified that while the order of default no
longer obtains, its effects were retained, thus:

Failure to file a responsive pleading within the reglementary period, and not failure to
appear at the hearing, is the sole ground for an order of default, except the failure to
appear at a pre-trial conference wherein the effects of a default on the part of the
defendant are followed, that is, the plaintiff shall be allowed to present evidence ex
parte and a judgment based thereon may be rendered against defendant. [31]

As the rule now stands, if the defendant fails to appear for pre-trial, a default order is no
longer issued.  Instead, the trial court may allow the plaintiff to proceed with his
evidence ex parte and the court can decide the case based on the evidence presented
by plaintiff.

The position of Philamlife is in accord with the Rule.  Indeed, the amendment did not
change the essence of the original provision.  The legal ramification of defendant's
failure to appear for pre-trial is still detrimental to him while beneficial to the plaintiff. 
The plaintiff is given the privilege to present his evidence without objection from the
defendant, the likelihood being that the court will decide in favor of the plaintiff, the
defendant having forfeited the opportunity to rebut or present its own evidence.

Therefore, the June Order cannot be completely vacated because semantics aside, the
order substantially complied with Section 5 in relation to Section 4, Rule 18 of the Rules
of Court.

The importance of pre-trial in civil actions cannot be overemphasized.  In Balatico v.

Rodriguez[32], the Court, citing Tiu v. Middleton[33], delved on the significance of pre-trial,
thus:

752
Pre-trial is an answer to the clarion call for the speedy disposition of cases. Although it
was discretionary under the 1940 Rules of Court, it was made mandatory under the
1964 Rules and the subsequent amendments in 1997. Hailed as "the most important
procedural innovation in Anglo-Saxon justice in the nineteenth century," pre-trial seeks
to achieve the following:

(a) The possibility of an amicable settlement or of a submission  to alternative modes of

dispute resolution;

(b) The simplification of the issues;

(c) The necessity or desirability of amendments to the pleadings;

(d) The possibility of obtaining stipulations or admissions of facts and of documents to

avoid unnecessary proof;

(e) The limitation of the number of witnesses;

(f) The advisability of a preliminary reference of issues to a commissioner;

(g) The propriety of rendering judgment on the pleadings, or  summary judgment, or of
dismissing the action should a valid ground therefor be found to exist;

(h) The advisability or necessity of suspending the proceedings; and

(i)  Such other matters as may aid in the prompt disposition of the action. [34]

Therefore, "pre-trial cannot be taken for granted.  It is not a mere technicality in court
proceedings for it serves a vital objective: the simplification, abbreviation and expedition
of the trial, if not indeed its dispensation." [35]  This considered, it is required in Section 4
of Rule 20 of the Rules of Court that:

Section 4. Appearance of parties. - It shall be the duty of the parties and their counsel
to appear at the pre-trial. The non-appearance of a party may be excused only if a
valid cause is shown therefor or if a representative shall appear in his behalf fully
authorized in writing to enter into an amicable settlement, to submit to alternative modes
of dispute resolution, and to enter into stipulations or admissions of facts and of
documents. [Emphasis supplied]

Definitely, non-appearance of a party may only be excused for a valid cause.  We see
none in this case even if the positions of the parties are given a second consideration.

Philamlife claims that respondent was absent the four (4) times that the case was called
for pre-trial on 3 and 17 December 2002, 8 May 2003 and 3 June 2003.  Philamlife
underlines the belated filing of respondent of his motions for postponement. The motion
for the postponement of the 3 and 17 December 2002 pre-trial was received by the trial

753
court on 3 December 2002 while that for 8 May and 3 June 2003 pre-trial was received
on 4 June 2003 or the day after the pre-trial, where and when respondent was declared
in default.  Philamlife considers the manner by which respondent moved for
postponements, as well as his claim that he was not notified of the 28 August 2003
when records show that he was in fact notified, as clear demonstration of negligence,
irresponsibility and contumacy.

Respondent counters that he moved for the postponement of the 3 and 17 December
2002 pre-trial due to a conflict of schedule while the 14 January 2003 pre-trial was reset
on account of the parties' agreement to settle the case amicably.  The 8 May 2003 pre-
trial was also postponed due to medical reasons.  While he did not appear on the pre-
trial of 3 June 2003, he filed on 30 May 2003 a motion for postponement, although
received by the trial court only on 4 June 2003.  Respondent added that on 3 June and
1 July 2003 pre-trial days, petitioner was not even ready to present its evidence.  It was
only on 28 August 2003 that Philamlife presented its evidence ex parte, despite the
unresolved motion for reconsideration of the 3 June 2003 order.

The Court of Appeals dismissed Philamlife's contention and declared that "respondent's
failure to appear for pre-trial on 3 June 2003 does not constitute obstinate refusal to
comply with the lower court's order and that only on that date was respondent absent
when the case was actually called for pre-trial." [36]

Respondent undeniably sought for postponement of the pre-trial at least three (3) times.
First, he cited conflict in schedule as reason to seek postponement of the 3 and 17
December 2002 pre-trial. Second, the 8 May 2003 pre-trial was reset upon motion of
respondent through a telegram due to medical reasons. Third, respondent also filed a
motion to postpone the pre-trial for 3 June 2003 and he explained that "defendant and
plaintiff's Cebu Office are still negotiating the ways for the projected settlement on
possible monthly basis with property as guarantee to be embodied in their Compromise
Agreement, and since plaintiff's Cebu Officer could not always be available they have
not yet wind-up to bring matters to plaintiff's Manila Office through their counsel." [37]

The first two (2) motions for postponement were granted by the trial court.  Only the 3
June 2003 pre-trial proceeded in the absence of respondent during which the trial court
issued the default order.  The trial court's denial of the motion for reconsideration of the
June Order amounted to a denial of his motion for postponement of the 3 June 2003
pre-trial date.

A motion for postponement is a privilege and not a right. A movant for postponement
should not assume beforehand that his motion will be granted. The grant or denial of a
motion for postponement is a matter that is addressed to the sound discretion of the trial
court. Indeed, an order declaring a party to have waived the right to present evidence
for performing dilatory actions upholds the trial court's duty to ensure that trial proceeds
despite the deliberate delay and refusal to proceed on the part of one party. [38]

In deciding whether to grant or deny a motion for postponement of pre-trial, the court

754
must take into account the following factors: (a) the reason for the postponement, and
(b) the merits of the case of movant.[39]

The trial court correctly saw the reason proffered by respondent as insufficient to
excuse his non-appearance.  Indeed, when the 14 January 2003 pre-trial was
postponed to 8 May 2003, the parties were in fact given the opportunity to settle the
case amicably, as there was ample time for both parties to reconcile their records and
agree on compromise figures. We cannot see how, inspite of  the length of time given to
him, respondent can still use as reason a possible settlement, about which Philamlife
even denies having any knowledge.

Notably, the trial court could not have acted timely in his favor because the trial court
received the motion one day after the pre-trial schedule.  About this, we note further the
practice of respondent in filing his motions for postponement close to the scheduled pre-
trial date.  In his motion to reset the 8 May 2003 pre-trial, his motion was mailed on 7
May 2003.  Likewise, his motion for postponement for the 3 June 2003 pre-trial was
mailed on 30 May 2003.  In those occasions, the trial court either received his motions
on the day of pre-trial or a day after the pre-trial date.  The trial court, which at the day
of the 3 June 2003 pre-trial has not received any word from the respondent would
logically, as it did, proceed with the hearing.

Respondent tries in vain to reason out that by allowing Philamlife to present its
evidence ex parte, his right to due process was denied.

"The essence of due process is to be found in the reasonable opportunity to be heard

and submit any evidence one may have in support of one's defense. Where the
opportunity to be heard, either through verbal arguments or pleadings, is accorded, and
the party can present its side or defend its interest in due course, there is no denial of
procedural due process."[40]

Respondent had been given more than enough time to present his evidence.  The pre-
trial date was reset four (4) times for a total period of 6 months before the trial court
allowed Philamlife to present its evidence ex parte when respondent failed to appear on
the scheduled date.

With respect to the trial court's order for respondent to pay P1,122,781.66 representing
the amount of his outstanding debit balance, we affirm its findings which were based on
records presented by Philamlife.  As a consequence of respondent's non-appearance,
he was deemed to have waived his right to present his own evidence, if there was any.

We overturn the ruling of the Court of Appeals on the foregoing basis.

WHEREFORE, the Decision dated 28 September 2007, as well as the Resolution dated
6 March 2008 of the Court of Appeals in CA-G.R. CV No. 82353
are REVERSED and SET ASIDE.  The Orders dated 3 June 2003 and 24 November
2003 and the Decision dated 24 February 2004 of the Regional Trial Court of Manila

755
ordering respondent Joseph Enario to pay Philamlife P1,122,781.66 are REINSTATED.

SO ORDERED.
FIRST DIVISION

[G.R. No. 187640 : June 15, 2011]

PHILIPPINE NATIONAL BANK, PETITIONER, VS. THE SPS. ANGELITO PEREZ

AND JOCELYN PEREZ, RESPONDENTS.

[G.R. NO. 187687]

SPS. ANGELITO PEREZ AND JOCELYN PEREZ, PETITIONERS, VS. PHILIPPINE

NATIONAL BANK, RESPONDENT.

DECISION

VELASCO JR., J.:

Before Us are two Petitions for Review on Certiorari under Rule 45 docketed as G.R.
No. 187640 and G.R. No. 187687, seeking the review of the Decision and Resolution of
the Court of Appeals (CA) dated October 23, 2008 and April 28, 2009, respectively, in
CA-G.R. SP No. 96534. We consolidated the two cases as they involve identical
parties, arose from the same facts, and raise interrelated issues.

The Facts

In 1988, spouses Angelito Perez and Jocelyn Perez (Spouses Perez) obtained a
revolving credit line from Philippine National Bank's (PNB's) branch in Cauayan City,
Province of Isabela. The credit line was secured by several chattel mortgages
over palay stocks inventory and real estate mortgages over real properties.

Sometime in 2001, Spouses Perez defaulted on their financial obligations, prompting

PNB to institute extra-judicial foreclosure proceedings over the aforementioned
securities on November 13 of that year. On November 19, 2001, the sheriff instituted a
Notice of Extra-Judicial Sale for the mortgaged properties by public auction on
December 20, 2001.

Meanwhile, on November 26, 2001, Spouses Perez filed an Amended Complaint for
Release or Discharge of Mortgaged Properties, Breach of Contract, Declaration of
Correct Amount of Obligation, Injunction, Damages, Annulment of Sheriff's Notice of
Extra-Judicial Sale, with a Prayer for the Issuance of a Preliminary Mandatory Injunctive
Writ and a Temporary Restraining Order docketed as Civil Case No. 20-1155. [1]

At the hearing of the application for the issuance of a writ of preliminary mandatory
injunction on April 19, 2002, Spouses Perez and their counsel failed to appear. As a
result, the prayer for injunctive relief was denied.
756
Similarly, at the pre-trial conference scheduled on September 19, 2002, Spouses Perez
and their counsel again failed to appear. Spouses Perez alleged that they previously
filed a Motion for Postponement dated August 28, 2002. On the same date, the trial
court issued an Order denying the Motion for Postponement and, accordingly,
dismissed the case.

Spouses Perez then filed a Motion for Reconsideration which was subsequently denied.
They also filed a Second Motion for Reconsideration dated January 16, 2003 which was
also denied by the trial court.

After this, Spouses Perez filed a Notice of Appeal. It was also denied by the trial court in
an Order dated April 11, 2003 for being filed out of time. Spouses Perez then filed
a Motion for Reconsideration dated April 29, 2003 seeking the reconsideration of
the Order dismissing the appeal.

The Motion for Reconsideration dated April 29, 2003 was originally set for hearing on
July 30, 2003. However, Spouses Perez filed five (5) motions to postpone the hearing.
The trial court granted the first four (4) motions but denied the fifth one. Spouses Perez
filed a Motion for Reconsideration of the Order denying the fifth Motion for
Postponement which was also subsequently denied.

Consequently, Spouses Perez appealed the denial of their Motion for

Reconsideration to the CA. The petition was docketed as CA-G.R. SP No. 85491. On
January 25, 2005, the CA rendered a Decision denying the petition filed by Spouses
Perez. It reasoned:

Neither did respondent court gravely abuse its discretion in resolving to dismiss Civil
Case No. 20-1155 for failure of the plaintiffs and their time, allegedly because their
counsel had to attend a pre-trial hearing in another case. True is it that procedural rules
may be relaxed to relieve a litigant of an injustice not commensurate with the degree of
his noncompliance with the procedure required. But equally true is it that the law
mandates that the appearance of parties at the pre-trial conference is mandatory. Here,
as borne out by the records of this case, counsel for petitioners received the notice of
pre-trial conference in another case a long while before they were notified of the pre-trial
conference in the case at bench. As shown in the notice dated August 15, 2002,
counsel already knew that the pre-trial conference in the present case was set for
September 19, 2002. By the time he received the notice of pre-trial hearing in the case
at bench on August 22, 2002, counsel thus must have seen and realized the obvious
conflict in schedules between the two cases. However, instead of taking timely
measures to prevent an impending snafu, it took counsel more than a week to file a
motion for postponement of the pre-trial conference in Civil Case No. 20-1155. Worse,
although received by respondent court on September 3, 2002, that motion did not
contain any request that said motion be scheduled for hearing. Equally distressing, it is
not clearly shown that the requirement on notice to the other party was likewise
complied with. Counsel evidently failed to take into account the fact that, just like him,
the court must need also to calendar its own cases. Further, as stressed by respondent
757
court in its challenged order of September 19, 2002, petitioners' counsel works for a law
firm staffed by several lawyers, and any of these lawyers could have represented
petitioners at the pre-trial conference in this case. That counsel had to allegedly appear
in another case (which purportedly explained his inability to appear in the present case)
is a stale, banal, and prosaic excuse. Some such flimsy ratiocination, added to
counsel's filing of an erroneous pleading (the second motion for reconsideration), which
because it is a prohibited pleading, unfortunately did not toll the running of the
prescriptive period for filing a notice of appeal, did prove fatal to petitioner's cause.
Settled is the rule that parties are bound by the action or inaction of their counsel; this
rule extends even to the mistakes and simple negligence committed by their counsel.

Simply put, petitioners trifled with the mandatory character of a pre-trial conference in
the speedy disposition of cases. Petitioners should have known that pre-trial in civil
actions has been peremptorily required these many years. It is a procedural device
intended to clarify and limit the basic issues between the parties and paves the way for
a less cluttered trial and resolution of the case. Its main objective is to simplify,
abbreviate and expedite the trial, or, propitious circumstance permitting (as when the
parties can compound or compromise their differences), even to totally dispense with it
altogether. Thus, it should never be taken lightly - or for granted! A party trifles with it at
his peril.

UPON THE VIEW WE TAKE OF THIS CASE, THUS, the petition at bench must be, as
it hereby, is DENIED and consequently DISMISSED, for lack of merit. Costs shall be
assessed against the petitioners.

SO ORDERED. [2]

Spouses Perez filed a Motion for Reconsideration of the aforementioned decision.

Surprisingly, on April 14, 2005, the CA issued an Amended Decision  [3] granting the
Motion for Reconsideration citing that the higher interest of substantial justice should
prevail and not mere technicality. The dispositive part of the Amended Decision reads:

WHEREFORE, finding merit in the motion for reconsideration, we hereby resolve, to wit:

(1) To SET ASIDE and VACATE our Decision of January 25, 2005;

(2) To GRANT this petition. Consequently we hereby direct the annulment or

invalidation of the following orders issued by the respondent court, to wit:
1. The April 11, 2003 order, denying petitioners' notice of appeal; and the
March 17, 2004 order, denying petitioners' motion for reconsideration
thereon;
2. The September 19, 2002 order, denying petitioners' motion for
postponement in Civil Case No. 20-1155 entitled "Sps. Angelito A. Perez v.
Philippine National Bank, et al." thereby resulting in the dismissal of the
said case;
3. The January 6, 2003 order, denying petitioners' motion for reconsideration

758
 in the above mentioned case; and
4. The February 7, 2003 order, denying petitioners' second motion for
reconsideration in the above stated case.
(3) To REINSTATE Civil Case No. 20-1155 in the docket of respondent court, the
Regional Trial Court of Cauayan City, Branch 20, which is now hereby ordered
to conduct the pre-trial therein, and thereafter to proceed to try the case on the
merits.

Without costs.

SO ORDERED. [4]

Accordingly, the case was remanded to the trial court. On January 20, 2006, the trial
court issued an Order setting the case for hearing on March 8, 2006. The
said Order reads in full:

On October 20, 2005, [Spouses Perez] filed their motion to require [PNB] to submit [its]
statement of account for the period beginning 1995 to 2000.

The motion was heard on November 7, 2005 but only the counsel for [Spouses Perez]
appeared. On December 9, 2005, [PNB] also filed a motion for the production or
inspection of books of accounts regarding payments in the years 1997 to 2000 and
thereafter, if any. The same motion was heard on December 15, 2005 but again,
despite due notice, only the counsel for [Spouses Perez] appeared and reiterated his
motions.

WHEREFORE, there being no opposition to the twin motion of [Spouses Perez], the
same are hereby granted. Accordingly, let this case be set for hearing on March 8, 2006
at 8:30 o'clock in the morning. [PNB] is hereby directed to prepare and complete within
thirty (30) days from receipt of this order a statement of account for [Spouses Perez]
covering payments made for the period beginning 1995 to 2000, allowing [Spouses
Perez] or their duly authorized representatives to inspect the same at the bank premises
during regular banking hours.

SO ORDERED. [5]

PNB, however, failed to receive a copy of the aforementioned order and was, thus,
unable to attend the hearing on March 8, 2006. Questionably, on said date, the trial
court issued an Order allowing Spouses Perez to adduce evidence and considered the
hearing as a pre-trial conference, to wit:

WHEREFORE, for failure to appear in today's pre-trial and for failure to comply with the
order of this Court dated January 20, 2006, [Spouses Perez] are hereby allowed to
adduce evidence before the Branch Clerk of Court and the Branch Clerk of Court is
ordered to submit her report within ten (10) days.

759
SO ORDERED. [6]

On March 15, 2006, PNB filed a Motion for Reconsideration[7] of the said Order.

Nevertheless, on July 5, 2006, the trial court decided in favor of Spouses Perez. In
its Decision, the trial court denied PNB's Motion for Reconsideration but failed to
mention such denial in the dispositive portion of the Decision, viz:

WHEREFORE, premises considered, judgment is hereby rendered:

1. Declaring that due and full payments were made by [Spouses Perez] on their
principal obligation to [PNB] including interest and directing the release and discharge of
all the properties covered by the real estate mortgages executed by [Spouses Perez];

2. Declaring the Sheriff's Notice of Extrajudicial Sale as null and void, and enjoining
defendant from foreclosing any and all of the properties mortgaged by [Spouses Perez]
as collateral for the said loan obligations;

3. Ordering [PNB] to pay [Spouses Perez] the sum of:

a. ONE HUNDRED FORTY FIVE MILLION ONE HUNDRED SEVENTEEN

THOUSAND THREE HUNDRED SIX PESOS AND SIXTY SEVEN
CENTAVOS (PHP145,117,306.67) representing the amount overpaid by
[Spouses Perez] under the revolving credit loan facility and promissory
notes executed between the parties;

b. TWO MILLION PESOS (PHP2,000,000.00) as moral damages;

c. ONE MILLION FIVE HUNDRED THOUSAND PESOS as Exemplary

damages;

[d.] ONE MILLION PESOS (PHP1,000,000.00) as Attorney's Fees and

[e.]  Costs of suit.

SO ORDERED. [8]

PNB again filed a Motion for Reconsideration dated July 24, 2006 but due to certain
reasons, the counsel for PNB failed to send a copy of the said motion to the trial court.
As a result, the trial court denied the Motion for Reconsideration for having been filed
outside the reglementary period and concluded that the Decision already became "final
and executory by operation of law." [9] Accordingly, the trial court issued an Order of
Execution dated August 14, 2006. [10] The very next day, a Writ of Execution was issued
to implement the aforesaid order and to demand payment from PNB.

On August 15, 2006, PNB filed a Petition for Relief from Judgment/Order of

760
Execution  [11] with a prayer for the issuance of a writ of preliminary injunction, alleging
that the failure to file the Motion for Reconsideration was due to mistake and/or
excusable negligence. Afterwards, on August 16, 2006, the trial court issued
an Order denying the prayer for preliminary injunction. Also, on August 17, 2006, the
trial court issued an Order annulling the certificates of title issued to PNB covering the
properties subject of the case and directed the Register of Deeds of Isabela to issue
new certificates of title in the names of Spouses Perez.

On October 18, 2006, PNB filed a Petition for Certiorari (with Prayer for the Issuance of
an Ex-Parte Temporary Restraining Order/Writ of Preliminary Injunction) [12] before the
CA docketed as CA-G.R. SP No. 96543 seeking the annulment of the Order of
Execution dated August 14, 2006, the Writ of Execution dated August 15,
2006, Order dated August 16, 2006 and the Order dated August 17, 2006. Similarly, on
October 30, 2006 and November 6, 2006, PNB filed a Supplement to the Petition for
Certiorari (with Urgent Prayer for the Issuance of an Ex-Parte Temporary Restraining
Order/Writ of Preliminary Injunction)  [13] and an Urgent Motion for the Issuance of an
Ex-Parte Temporary Restraining Order with Supplement to Petition, [14] respectively.

Consequently, the CA issued a Resolution dated November 7, 2006, which was

received by PNB on November 8, 2006, granting the prayer for a temporary restraining
order (TRO) and, likewise, issued a Temporary Restraining Order on the same date.
The Resolution reads:

On account of the extreme urgency of the matter and in order not to frustrate the ends
of justice, or to render the issues raised herein moot and academic, this Court, pending
the resolution of the instant petition, hereby resolves to GRANT [PNB's] prayer for
issuance of a temporary restraining order within a period of sixty (60) days from notice
hereof or until earlier terminated by this Court, thereby directing public respondent, or
any person acting for and on his behalf, to CEASE and DESIST from IMPLEMENTING
the assailed Orders dated August 16 and 17, 2006 in Civil Case No. Br. 19-1155 or
otherwise ENFORCING the Order of Execution dated August 14, 2006 or the Writ of
Execution dated August 15, 2006 in said case.

[Spouses Perez] are, in the meantime, required to file their COMMENT (and not a
motion to dismiss) on the petition within ten (10) days from notice hereof and SHOW
cause within the same period why a writ of preliminary injunction should not issue.

SO ORDERED. [15]

Despite the issuance of the TRO, Spouses Perez were able to garnish Two Million Six
Hundred Seventy-Six Thousand One Hundred Forty Pesos and Seventy Centavos (Php
2,676,140.70) from PNB's account with Equitable PCI Bank (EPCIB) on the same date
the TRO was issued, November 7, 2006. In a letter dated November 8, 2006, from Atty.
Gerardo I. Banzon, EPCIB's Head of Legal Advisory and Research Department, Legal
Services Division, informed PNB regarding this, viz:

761
As much as we would like to heed to your request for the lifting and that a STOP
PAYMENT ORDER of the check issued in favor of the Spouses Perez, be issued
immediately, we regret to inform you that Sheriff Asirit, together with the Spouses
Perez, went to our Salcedo St. - Legaspi Village at about 10:30am yesterday to
pick-up the check. Proceeds of the said check were credited to the account of the
Spouses Perez, who has an account with our Cauayan - Isabela branch, before noon
yesterday. Regrettably, we were only informed of the existence of the TRO at about
4:49pm yesterday. Moreover, we only received the copy of the TRO itself at 2:07pm
today. Sad to say but all matters are already moot and academic. [16] (Emphasis
supplied.)

In view of this development, PNB filed a Supplemental Petition for Certiorari (with
Urgent Prayer for the Issuance of an Ex-Parte Writ of Preliminary Injunction) [17] seeking
additional reliefs for the return or reinstatement of the garnished amount and/or the
appointment of a receiver over the said funds to administer and preserve the same
pending the final disposition of the case.

The Decision of the Court of Appeals

On October 23, 2008, the CA issued the assailed Decision in CA-G.R. SP No.

96534, [18] granting the petition of PNB. It ruled that the sending of a notice of pre-trial is
mandatory and that the Order dated March 8, 2006 issued by the trial court cannot be
considered as such. Therefore, the CA held that all orders issued subsequent to the
said order are, likewise, null and void. It disposed of the case as follows:

It is not only the Order of March 8, 2006 which allowed the presentation of [Spouses
Perez's] evidence ex parte which is null and void. All the Orders assailed in the instant
petition, as follows:

a) Order of Execution dated August 14, 2006;

b) Writ of Execution dated August 15, 2006;
c) Order dated August 16, 2006 which denied PNB's application for TRO/preliminary
injunction; and
d) the Order of August 17, 2006 which annulled PNB's fourteen (14) titles and directed
issuance of new titles to herein private respondents;

having been issued subsequent to the pre-trial improperly conducted on March 8, 2006
are declared voided and nullified for having been issued with grave abuse of discretion
amounting to lack or excess of jurisdiction.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The assailed Orders
are declared void and nullified. The trial court is directed to conduct the pre-trial therein
after proper notice had been served on both parties and thereafter to proceed to try the
case on the merits.

SO ORDERED. [19]

762
The Decision of the CA, however, failed to address PNB's prayer for the issuance of a
writ of mandatory injunction and the return/reinstatement of the Php 2,676,140.70.
Thus, PNB filed a Motion for Clarificatory Order and/or Ad Cautelam Motion for Partial
Reconsideration. [20] In support of its motion, PNB argued that considering the
garnishment of the amount of money was based on the orders already voided by the
CA, it is entitled to the return/reinstatement of the garnished amount. On the other hand,
Spouses Perez also filed their Motion for Reconsideration. [21]

In a Resolution dated April 28, 2009, the CA denied both motions. Hence, PNB and
Spouses Perez filed their separate petitions with this Court assailing both the decision
and the resolution of the CA.

The Issues

In G.R. No. 187640, PNB raises the following arguments in support of its petition:

Whether the [CA] has decided a question of substance in a way not in accord with law
or with the applicable decisions of this Honorable Court on the following issues:

I. Whether a garnishment/execution erected on the same day and date that

a TRO is issued to enjoin the garnishment/execution is valid.

II. Whether an earlier garnishment effected pursuant to a writ of execution

survives the subsequent annulment of the writ.

III. Whether the dissipation/loss of, or inability to return/recover the property,

constitutes an irreparable injury to warrant the issuance of a mandatory
injunction.[22]

In G.R. No. 187687, Spouses Perez raise the following issues for our consideration:

I.

The Respondent Honorable [CA] committed a reversible error on [a] question of law in
not dismissing the petition for certiorari outrightly on [the] ground that a petition for
certiorari under Rule 65 of [the] 1997 Rules on Civil Procedure is not a substitute for [a]
lost appeal[;]

II.

The Respondent Honorable [CA] committed a reversible error on [a] question of law in
not dismissing the petition for certiorari on the ground that the decision of the lower
court has already become final and executory; in fact, a writ of execution was already
issued and the respondent [PNB] has already partially satisfied the money judgment at
its branch of P10,000.00 and then at the Equitable Bank Manila in the sum of

763
P2,676,140.70 and the certificates of title in the name of respondent bank was ordered
cancelled and the certificates of titles of the petitioners to the subject properties were
reinstated in the name of petitioners who already sold the same to innocent purchasers
for value and therefore, by estoppel respondent bank is precluded to assail by petition
for certiorari the final and executory decision, writ of execution and partial satisfaction of
the money judgment[;]

III.

The Respondent Honorable [CA] committed a reversible error on [a] question of law in
not dismissing [the] petition for certiorari outrightly on [the] ground that there are
pending petition for relief from judgment and motion for [reconsideration] with the lower
court[;]

IV.

The Respondent Honorable [CA] committed a reversible error on [a] question of law in
not dismissing the petition for certiorari on [the] ground that the order of the lower
court[,] although [it] did not state [the] notice of pre-trial, the respondent bank and its
counsel knew that the Honorable [CA] in its Amended Decision in remanding the case
to the lower court is to conduct a pre-trial and therefore, there was nothing to suppose
that the scheduled hearing was anything other than pre-trial as enunciated by this
Honorable Court in the case of Bembo et. al. vs. Court of Appeals, et. al. G.R. No.
116845, November 29, 1995. [23]

The issues presented can be summarized as follows: (1) Whether a petition

for certiorari is a proper remedy; and (2) Whether a pre-trial notice is mandatory and, as
a consequence, whether the lack of notice of pre-trial voids a subsequently issued
decision.

Petition for Certiorari is the Proper Remedy

In their petition, Spouses Perez argue that the filing of a petition for certiorari by PNB
before the CA was improper for two reasons: (a) a petition for certiorari is not a
substitute for a lost appeal; and (b) there were other pending petitions for relief from
judgment and a motion for reconsideration with the lower court.

The argument is bereft of merit.

A special petition for certiorari under Rule 65 of the Rules of Court is availed of when a

"tribunal, board or officer exercising judicial or quasi-judicial functions has acted without
or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack
or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate
remedy in the ordinary course of law." [24]

It is intended to correct errors of jurisdiction only or grave abuse of discretion amounting

764
to lack or excess of jurisdiction. Its primary purpose is to keep an inferior court within the
parameters of its jurisdiction or to prevent it from committing such grave abuse of
discretion amounting to lack or excess of jurisdiction. [25]

The essential requisites for a petition for certiorari under Rule 65 are: (1) the writ is
directed against a tribunal, a board, or an officer exercising judicial or quasi-judicial
functions; (2) such tribunal, board, or officer has acted without or in excess of
jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction;
and (3) there is no appeal or any plain, speedy, and adequate remedy in the ordinary
course of law. [26]

In Chamber of Real Estate and Builders Associations, Inc. v. The Secretary of Agrarian
Reform, the Court discussed the differences between "excess of jurisdiction", "without
jurisdiction" and "grave abuse of discretion", to wit:

Excess of jurisdiction as distinguished from absence of jurisdiction means that an act,

though within the general power of a tribunal, board or officer, is not authorized and
invalid with respect to the particular proceeding, because the conditions which alone
authorize the exercise of the general power in respect of it are wanting. Without
jurisdiction means lack or want of legal power, right or authority to hear and determine a
cause or causes, considered either in general or with reference to a particular matter.  It
means lack of power to exercise authority. Grave abuse of discretion implies such
capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction or,
in other words, where the power is exercised in an arbitrary manner by reason of
passion, prejudice, or personal hostility, and it must be so patent or gross as to amount
to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to
act at all in contemplation of law. [27]

In Agulto v. Tecson, We likewise discussed that an order by the trial court allowing a
party to present his evidence ex-parte without due notice of pre-trial to the other party
constitutes grave abuse of discretion. [28]

Here, the trial court failed to issue a proper notice of pre-trial to PNB. Thus, it committed
grave abuse of discretion when it issued the Order dated March 8, 2006 allowing
Spouses Perez to present their evidence ex-parte.

Considering that the trial court's action in issuing such order constituted grave abuse of
its discretion, PNB availed of the proper remedy when it filed a petition for certiorari with
the CA.

Nevertheless, even with the existence of the remedy of appeal, this Court has, in certain
cases, allowed a writ of certiorari where the order complained of is a patent nullity. [29] In
the instant case, the lack of notice of pre-trial rendered all subsequent proceedings null
and void. Hence, the CA was correct in not dismissing the petition for certiorari.

Moreover, it is a basic tenet that a petition for certiorari under Rule 65 is an original and

765
independent action. It is not a part or a continuation of the trial which resulted in the
rendition of the judgment complained of.[30]  Neither does it "interrupt the course of the
principal action nor the running of the reglementary periods involved in the proceedings,
unless an application for a restraining order or a writ of preliminary injunction to the
appellate court is granted."[31]

Evidently, the argument that the petition for certiorari is precluded by the motion for
reconsideration and the petition for relief from judgment filed before the trial court is
untenable.

Pre-trial Notice is Mandatory

Spouses Perez further contend that the Order dated January 8, 2006 setting the case
for hearing cannot be interpreted any other way except as a notice for pre-trial. They
assert that the Amended Decision of the CA dated April 14, 2005 remanded the case to
the lower court to conduct a pre-trial; therefore, the hearing in question was just
following the order of the CA to set the case for a pre-trial.

We do not agree.

Section 3, Rule 18 of the 1997 Rules on Civil Procedure unequivocally requires that
"[t]he notice of pre-trial shall be served on counsel, or on the party who has no
counsel." [32] It is elementary in statutory construction that the word "shall" denotes the
mandatory character of the rule. Thus, it is without question that the language of the rule
undoubtedly requires the trial court to send a notice of pre-trial to the parties.

More importantly, the notice of pre-trial seeks to notify the parties of the date, time and
place of the pre-trial and to require them to file their respective pre-trial briefs within the
time prescribed by the rules. Its absence, therefore, renders the pre-trial and all
subsequent proceedings null and void. [33]

In Pineda v. Court of Appeals, [34] the Court therein discussed the importance of the

notice of pre-trial. It pointed out that the absence of the notice of pre-trial constitutes a
violation of a person's constitutional right to due process. Further, the Court ruled that all
subsequent orders, including the default judgment, are null and void and without
effect, viz:

Reason and justice ordain that the court a quo should have notified the parties in the
case at bar. Otherwise, said parties without such notice would not know when to
proceed or resume proceedings. With due notice of the proceedings, the fate of a party
adversely affected would not be adjudged ex parte and without due process, and he
would have the opportunity of confronting the opposing party, and the paramount public
interest which calls for a proper examination of the issues in any justiciable case would
be subserved. The absence, therefore, of the requisite notice of pre-trial to private
respondents through no fault or negligence on their part, nullifies the order of
default issued by the petitioner Judge for denying them their day in court -- a
constitutional right. In such, the order suffers from an inherent procedural defect and

766
is null and void. Under such circumstance, the granting of relief to private respondents
becomes a matter of right; and the court proceedings starting from the order of
default to the default judgment itself should be considered null and void and of
no effect. (Emphasis supplied.)

More recently, in Agulto, [35] this Court again had the chance to rule upon the same issue
and reiterated the importance of the notice of pre-trial, to wit:

The failure of a party to appear at the pre-trial has adverse consequences. If the absent
party is the plaintiff, then he may be declared non-suited and his case dismissed. If it is
the defendant who fails to appear, then the plaintiff may be allowed to present his
evidence ex parte and the court to render judgment on the basis thereof.

Thus, sending a notice of pre-trial stating the date, time and place of pre-trial is
mandatory. Its absence will render the pre-trial and subsequent proceedings void.
This must be so as part of a party's right to due process. (Emphasis supplied.)

In the case at bar, the order issued by the trial court merely spoke of a "hearing on
March 8, 2006" [36] and required PNB "to prepare and complete x x x a statement of
account." [37] The said order does not mention anything about a pre-trial to be conducted
by the trial court.

In contrast, the Notice of Pre-trial dated August 22, 2002 issued by the trial court
categorically states that a pre-trial is to be conducted, requiring the parties to submit
their respective pre-trial briefs. It reads:

NOTICE OF PRE-TRIAL

You are hereby notified that the Pre-trial of this case will be held on September
19, 2002 at 8:30 o'clock in the morning.

Pursuant to the Supreme Court Circular No. 1-89, you are requested to submit Pre-trial
brief, at least three (3) days before said date, containing the following:

A. Brief Statement of the parties respective claims and defenses;

B. The number of witnesses to be presented;

C. An abstract of the testimonies of witnesses to be presented by the parties

and approximate number of hours that will be required for the presentation
of their respective evidence;

D. Copies of all document intended to be presented;

E. Admission;

F. Applica[ble] laws and jurisprudence;

767
 G. The parties['] respective statement of the issues; and

H. The available trial dates of counsel for complete evidence presentation,

which must be within a period of three (3) months from the first day of trial.

You are further warned that the failure to submit said brief could be a ground for non-
suit or declaration of default.

Cauayan City, Isabela, this 19th day of August 2002. [38] (Emphasis supplied.)

What is more, PNB even claims that it failed to receive a copy of the said order. Clearly,
no amount of reasoning will logically lead to the conclusion that the trial court issued, or
that PNB received, a notice of pre-trial.

As such, We find that the CA aptly held that the Order dated March 8, 2006, which
declared the hearing to be a pre-trial and allowed Spouses Perez to adduce
evidence ex parte, is void. Similarly, its ruling that the Decision dated July 5, 2006 and
all subsequent orders [39] issued pursuant to the said judgment are also null and void, is
proper.

In Padre v. Badillo, it was held that "[a] void judgment is no judgment at all. It cannot be
the source of any right nor the creator of any obligation. All acts performed pursuant
to it and all claims emanating from it have no legal effect." [40]

Necessarily, it follows that the nullity of the Writ of Execution carries with it the nullity of
all acts done which implemented the writ. This includes the garnishment of Php
2,676,140.70 from PNB's account. Its return to PNB's account is but a necessary
consequence of the void writ.

Similarly, the nullity of the Order dated August 17, 2006, [41]  which cancelled PNB's
fourteen (14) titles and directed the issuance of new titles to Spouses Perez, has the
effect of annulling all the fourteen (14) titles issued in the name of Spouses Perez. The
titles should revert back to PNB.

The argument that the subject properties were sold to certain innocent purchasers for
value cannot stand. First of all, such allegation is a question of fact, not a question of
law. Time and again, this Court has pronounced that the issues that can be raised in a
petition for review on certiorari under Rule 45 are limited only to questions of
law. [42] The test of whether the question is one of law or of fact is whether the appellate
court can determine the issue raised without reviewing or evaluating the evidence, in
which case, it is a question of law; otherwise, it is a question of fact. [43]

Furthermore, it is settled that matters not raised in the trial court or lower courts cannot
be raised for the first time on appeal. "They must be raised seasonably in the
proceedings before the lower courts. Questions raised on appeal must be within the

768
issues framed by the parties; consequently, issues not raised before the trial court
cannot be raised for the first time on appeal." [44] Spouses Perez never raised this issue
before the CA. Hence, they cannot raise it before this Court now.

WHEREFORE, the petition in G.R. No. 187640 is GRANTED.  The Decision of the

Court of Appeals (CA) in CA-G.R. SP No. 96534 dated October 23, 2008
is AFFIRMED with the MODIFICATION that the July 5, 2006 Decision of the Regional
Trial Court of Isabela in Civil Case No. 20-1155 is NULLIFIED and SET ASIDE, the
titles issued to Spouses Angelito Perez and Jocelyn Perez by virtue of the aforesaid
August 17, 2006 Order and all derivative titles emanating thereon are cancelled and
declared null and void and directing the Register of Deeds of Isabela to issue new
certificates of title in the name of the Philippine National Bank (PNB) to replace the
fourteen (14) titles previously issued to Spouses Angelito and Jocelyn Perez pursuant to
the August 17, 2006 Order and for Spouses Angelito and Jocelyn Perez to pay to PNB
the amount of PhP 2,676,140.70 representing the amount garnished from PNB's
account with Equitable PCI Bank (EPCIB) by virtue of the August 15, 2006 Writ of
Execution issued pursuant to the July 5, 2006 Decision.

As modified, the CA Decision shall read:

WHEREFORE, in view of the foregoing, the petition is GRANTED. The following orders
and writ issued by the Regional Trial Court of Isabela in Civil Case No. 20-1155 are
declared null and void:

a. Order dated March 8, 2006 which allowed the presentation of [Spouses

Perez's] evidence ex parte;
b. Order of Execution dated August 14, 2006;
c. Writ of Execution dated August 15, 2006;
d. Order dated August 16, 2006 which denied PNB's application for
TRO/preliminary injunction; and
e. the Order of August 17, 2006 which annulled PNB's fourteen (14) titles
and directed issuance of new titles to herein private respondents;

The July 5, 2006 Decision of the Isabela RTC is nullified and set aside.

The fourteen (14) new titles issued to Spouses Angelito Perez and Jocelyn Perez by
virtue of the August 17, 2006 Order and all derivative titles issued therefrom are
declared null and void and cancelled. The Register of Deeds of Isabela are directed to
cancel said titles issued to Spouses Perez and issue new certificates of titles in the
name of Philippine National Bank (PNB) which shall contain a memorandum of the
annulment of the outstanding duplicate certificates issued to said spouses.

Spouses Angelito Perez and Jocelyn Perez are ordered to pay PNB the amount of
P2,767,140.70 representing the amount illegally garnished from PNB's account with
Equitable PCI Bank (EPCIB) by virtue of the August 15, 2006 writ of execution with
interest thereon at six percent (6%) per annum from August 15, 2006 up to the finality of
769
judgment and at twelve percent (12%) per annum from the date of finality of judgment
until paid.

The trial court is directed to conduct further proceedings in Civil Case No. 20-1155 with
dispatch.

The petition in G.R. No. 187687 is DENIED for lack of merit.

No costs.

SO ORDERED.

SECOND DIVISION

G.R. No. 168979               December 2, 2013

REBECCA PACAÑA-CONTRERAS and ROSALIE PACAÑA, Petitioners,

vs.
ROVILA WATER SUPPLY, INC., EARL U KOKSENG, LILIA TORRES, DALLA P.
ROMANILLOS and MARISSA GABUYA, Respondents.

DECISION

BRION, J.:

Before the Court is a petition for review on certiorari 1 under Rule 4 of the Rules of Court
seeking the reversal of the decision2 dated January 27, 2005 and the resolution 3 dated
June 6, 2005 of the Courts of Appeals (CA) in CA-G.R. SP No. 71551. The CA set aside
the orders dated February 28, 20024 and April 1, 20025 of the Regional Trial Court
(RTC), Branch 8, Cebu City, which denied the motion to dismiss for reconsideration
respectively, of respondents Rovila Water Supply, Inc. (Rovilla, Inc.), Earl U. Kokseng,
Lialia Torres, Dalla P. Romanillos and Marissa Gabuya.

THE FACTUAL ANTECEDENTS

Petitioners Rebecca Pacaña-Contreras and Rosalie Pacaña, children of Lourdes Teves

Pacaña and Luciano Pacaña, filed the present case against Rovila Inc., Earl, Lilia, Dalla
and Marisa for accounting and damages.6

The petitioners claimed that their family has long been known in the community to be
engaged in the water supply business; they operated the "Rovila Water Supply" from
their family residence and were engaged in the distribution of water to customers in
Cebu City. The petitioners alleged that Lilia was a former trusted employee in the family
business who hid business records and burned and ransacked the family files. Lilia also
allegedly posted security guards and barred the members of the Pacaña family from
operating their business. She then claimed ownership over the family business through

770
a corporation named "Rovila Water Supply, Inc." (Rovila Inc.) Upon inquiry with the
Securities and Exchange Commission (SEC), the petitioners claimed that Rovila Inc.
was surreptitiously formed with the respondents as the majority stockholders. The
respondents did so by conspiring with one another and forming the respondent
corporation to takeover and illegally usurp the family business’ registered name. 7

In forming the respondent corporation, the respondents allegedly used the name of
Lourdes as one of the incorporators and made it appear in the SEC documents that the
family business was operated in a place other than the Pacaña residence. Thereafter,
the respondents used the Pacaña family’s receipts and the deliveries and sales were
made to appear as those of the respondent Rovila Inc. Using this scheme, the
respondents fraudulently appropriated the collections and payments. 8

The petitioners filed the complaint in their own names although Rosalie was authorized
by Lourdes through a sworn declaration and special power of attorney (SPA). The
respondents filed a first motion to dismiss on the ground that the RTC had no
jurisdiction over an intra-corporate controversy.9

The RTC denied the motion. On September 26, 2000, Lourdes died 10 and the
petitioners amended their complaint, with leave of court, on October 2, 2000 to reflect
this development.11

They still attached to their amended complaint the sworn declaration with SPA, but the
caption of the amended complaint remained the same. 12

On October 10, 2000, Luciano also died.13

The respondents filed their Answer on November 16, 2000. 14

The petitioners’ sister, Lagrimas Pacaña-Gonzales, filed a motion for leave to intervene
and her answer-in-intervention was granted by the trial court. At the subsequent pre-
trial, the respondents manifested to the RTC that a substitution of the parties was
necessary in light of the deaths of Lourdes and Luciano. They further stated that they
would seek the dismissal of the complaint because the petitioners are not the real
parties in interest to prosecute the case. The pre-trial pushed through as scheduled and
the RTC directed the respondents to put into writing their earlier manifestation. The RTC
issued a pre-trial order where one of the issues submitted was whether the complaint
should be dismissed for failure to comply with Section 2, Rule 3 of the Rules of Court
which requires that every action must be prosecuted in the name of the real party in
interest.15

On January 23, 2002,16 the respondents again filed a motion to dismiss on the grounds,
among others, that the petitioners are not the real parties in interest to institute and
prosecute the case and that they have no valid cause of action against the respondents.

THE RTC RULING

771
The RTC denied the respondents’ motion to dismiss. It ruled that, save for the grounds
for dismissal which may be raised at any stage of the proceedings, a motion to dismiss
based on the grounds invoked by the respondents may only be filed within the time for,
but before, the filing of their answer to the amended complaint. Thus, even granting that
the defenses invoked by the respondents are meritorious, their motion was filed out of
time as it was filed only after the conclusion of the pre-trial conference. Furthermore, the
rule on substitution of parties only applies when the parties to the case die, which is not
what happened in the present case.17

The RTC likewise denied the respondents’ motion for reconsideration. 18

The respondents filed a petition for certiorari under Rule 65 of the Rules of Court with
the CA, invoking grave abuse of discretion in the denial of their motion to dismiss. They
argued that the deceased spouses Luciano and Lourdes, not the petitioners, were the
real parties in interest. Thus, the petitioners violated Section 16, Rule 3 of the Rules of
Court on the substitution of parties.19

Furthermore, they seasonably moved for the dismissal of the case 20 and the RTC never
acquired jurisdiction over the persons of the petitioners as heirs of Lourdes and
Luciano.21

THE CA RULING

The CA granted the petition and ruled that the RTC committed grave abuse of discretion
as the petitioners filed the complaint and the amended complaint as attorneys-in-fact of
their parents. As such, they are not the real parties in interest and cannot bring an
action in their own names; thus, the complaint should be dismissed 22 pursuant to the
Court’s ruling in Casimiro v. Roque and Gonzales. 23

Neither are the petitioners suing as heirs of their deceased parents.1awp++i1 Pursuant

to jurisprudence,24 the petitioners should first be declared as heirs before they can be
considered as the real parties in interest. This cannot be done in the present ordinary
civil case but in a special proceeding for that purpose. The CA agreed with the
respondents that they alleged the following issues as affirmative defenses in their
answer: 1) the petitioners are not the real parties in interest; and 2) that they had no
legal right to institute the action in behalf of their parents. 25

That the motion to dismiss was filed after the period to file an answer has lapsed is of
no moment. The RTC judge entertained it and passed upon its merit. He was correct in
doing so because in the pre-trial order, one of the submitted issues was whether the
case must be dismissed for failure to comply with the requirements of the Rules of
Court. Furthermore, in Dabuco v. Court of Appeals,26 the Court held that the ground of
lack of cause of action may be raised in a motion to dismiss at anytime. 27

The CA further ruled that, in denying the motion to dismiss, the RTC judge acted
contrary to established rules and jurisprudence which may be questioned via a petition

772
for certiorari. The phrase "grave abuse of discretion" which was traditionally confined to
"capricious and whimsical exercise of judgment" has been expanded to include any
action done "contrary to the Constitution, the law or jurisprudence[.]" 28

THE PARTIES’ ARGUMENTS

The petitioners filed the present petition and argued that, first, in annulling the
interlocutory orders, the CA unjustly allowed the motion to dismiss which did not
conform to the rules.29

Specifically, the motion was not filed within the time for, but before the filing of, the
answer to the amended complaint, nor were the grounds raised in the answer. Citing
Section 1, Rule 9 of the Rules of Court, the respondents are deemed to have waived
these grounds, as correctly held by the RTC.30

Second, even if there is non-joinder and misjoinder of parties or that the suit is not
brought in the name of the real party in interest, the remedy is not outright dismissal of
the complaint, but its amendment to include the real parties in interest. 31

Third, the petitioners sued in their own right because they have actual and substantial
interest in the subject matter of the action as heirs or co-owners, pursuant to Section 2,
Rule 3 of the Rules of Court.32

Their declaration as heirs in a special proceeding is not necessary, pursuant to the

Court’s ruling in Marabilles, et al. v. Quito.33

Finally, the sworn declaration is evidentiary in nature which remains to be appreciated

after the trial is completed.34

The respondents reiterated in their comment that the petitioners are not the real parties
in interest.35

They likewise argued that they moved for the dismissal of the case during the pre-trial
conference due to the petitioners’ procedural lapse in refusing to comply with a
condition precedent, which is, to substitute the heirs as plaintiffs. Besides, an
administrator of the estates of Luciano and Lourdes has already been appointed. 36

The respondents also argued that the grounds invoked in their motion to dismiss were
timely raised, pursuant to Section 2, paragraphs g and i, Rule 18 of the Rules of Court.
Specifically, the nature and purposes of the pre-trial include, among others, the
dismissal of the action, should a valid ground therefor be found to exist; and such other
matters as may aid in the prompt disposition of the action. Finally, the special civil action
of certiorari was the proper remedy in assailing the order of the RTC. 37

THE COURT’S RULING

773
We find the petition meritorious.

Petition for certiorari under Rule 65 is a proper remedy for a denial of a motion to
dismiss attended by grave abuse of discretion

In Barrazona v. RTC, Branch 61, Baguio City, 38 the Court held that while an order
denying a motion to dismiss is interlocutory and non-appealable, certiorari and
prohibition are proper remedies to address an order of denial made without or in excess
of jurisdiction. The writ of certiorari is granted to keep an inferior court within the bounds
of its jurisdiction or to prevent it from committing grave abuse of discretion amounting to
lack or excess of jurisdiction.

The history and development of the ground "fails to state a cause of action" in the 1940,
1964 and the present 1997 Rules of Court Preliminarily, a suit that is not brought in the
name of the real party in interest is dismissible on the ground that the complaint "fails to
state a cause of action."39

Pursuant to jurisprudence,40 this is also the ground invoked when the respondents

alleged that the petitioners are not the real parties in interest because: 1) the petitioners
should not have filed the case in their own names, being merely attorneys-in-fact of their
mother; and 2) the petitioners should first be declared as heirs. A review of the 1940,
1964 and the present 1997 Rules of Court shows that the fundamentals of the ground
for dismissal based on "failure to state a cause of action" have drastically changed over
time. A historical background of this particular ground is in order to preclude any
confusion or misapplication of jurisprudence decided prior to the effectivity of the
present Rules of Court. The 1940 Rules of Court provides under Section 10, Rule 9
that:

Section 10. Waiver of defenses- Defenses and objections not pleaded either in a motion
to dismiss or in the answer are deemed waived; except the defense of failure to state a
cause of action, which may be alleged in a later pleading, if one is permitted, or by
motion for judgment on the pleadings, or at the trial on the merits; but in the last
instance, the motion shall be disposed of as provided in section 5 of Rule 17 in the light
of any evidence which may have been received. Whenever it appears that the court has
no jurisdiction over the subject-matter, it shall dismiss the action. [underscoring
supplied]

This provision was essentially reproduced in Section 2, Rule 9 of the 1964 Rules of
Court, and we quote:

Section 2. Defenses and objections not pleaded deemed waived. — Defenses and
objections not pleaded either in a motion to dismiss or in the answer are deemed
waived; except the failure to state a cause of action which may be alleged in a later
pleading, if one is permitted, or by motion for judgment on the pleadings, or at the trial
on the merits; but in the last instance, the motion shall be disposed of as provided in
section 5 of Rule 10 in the light of any evidence which may have been received.

774
Whenever it appears that the court has no jurisdiction over the subject-matter, it shall
dismiss the action. [underscoring supplied]

Under the present Rules of Court, this provision was reflected in Section 1, Rule 9, and
we quote:

Section 1. Defenses and objections not pleaded. — Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived. However,
when it appears from the pleadings or the evidence on record that the court has no
jurisdiction over the subject matter, that there is another action pending between the
same parties for the same cause, or that the action is barred by a prior judgment or by
statute of limitations, the court shall dismiss the claim. [underscoring supplied]

Notably, in the present rules, there was a deletion of the ground of "failure to state a
cause of action" from the list of those which may be waived if not invoked either in a
motion to dismiss or in the answer. Another novelty introduced by the present Rules,
which was totally absent in its two precedents, is the addition of the period of time within
which a motion to dismiss should be filed as provided under Section 1, Rule 16 and we
quote:

Section 1. Grounds. — Within the time for but before filing the answer to the complaint
or pleading asserting a claim, a motion to dismiss may be made on any of the following
grounds: xxx [underscoring supplied]

All these considerations point to the legal reality that the new Rules effectively restricted
the dismissal of complaints in general, especially when what is being invoked is the
ground of "failure to state a cause of action." Thus, jurisprudence governed by the 1940
and 1964 Rules of Court to the effect that the ground for dismissal based on failure to
state a cause of action may be raised anytime during the proceedings, is already
inapplicable to cases already governed by the present Rules of Court which took effect
on July 1, 1997. As the rule now stands, the failure to invoke this ground in a motion to
dismiss or in the answer would result in its waiver. According to Oscar M. Herrera, 41 the
reason for the deletion is that failure to state a cause of action may be cured under
Section 5, Rule 10 and we quote:

Section 5. Amendment to conform to or authorize presentation of evidence. — When

issues not raised by the pleadings are tried with the express or implied consent of the
parties they shall be treated in all respects as if they had been raised in the pleadings.
Such amendment of the pleadings as may be necessary to cause them to conform to
the evidence and to raise these issues may be made upon motion of any party at any
time, even after judgment; but failure to amend does not effect the result of the trial of
these issues. If evidence is objected to at the trial on the ground that it is not within the
issues made by the pleadings, the court may allow the pleadings to be amended and
shall do so with liberality if the presentation of the merits of the action and the ends of
substantial justice will be subserved thereby. The court may grant a continuance to
enable the amendment to be made.

775
With this clarification, we now proceed to the substantial issues of the petition.1âwphi1

The motion to dismiss in the present case based on failure to state a cause of action
was not timely filed and was thus waived

Applying Rule 16 of the Rules of Court which provides for the grounds for the dismissal
of a civil case, the respondents’ grounds for dismissal fall under Section 1(g) and (j),
Rule 16 of the Rules of Court, particularly, failure to state a cause of action and failure
to comply with a condition precedent (substitution of parties), respectively. The first
paragraph of Section 1,42

Rule 16 of the Rules of Court provides for the period within which to file a motion to
dismiss under the grounds enumerated. Specifically, the motion should be filed within
the time for, but before the filing of, the answer to the complaint or pleading asserting a
claim. Equally important to this provision is Section 1, 43

Rule 9 of the Rules of Court which states that defenses and objections not pleaded
either in a motion to dismiss or in the answer are deemed waived, except for the
following grounds: 1) the court has no jurisdiction over the subject matter; 2) litis
pendencia; 3) res judicata; and 4) prescription. Therefore, the grounds not falling under
these four exceptions may be considered as waived in the event that they are not timely
invoked. As the respondents’ motion to dismiss was based on the grounds which should
be timely invoked, material to the resolution of this case is the period within which they
were raised. Both the RTC and the CA found that the motion to dismiss was only filed
after the filing of the answer and after the pre-trial had been concluded. Because there
was no motion to dismiss before the filing of the answer, the respondents should then
have at least raised these grounds as affirmative defenses in their answer. The RTC’s
assailed orders did not touch on this particular issue but the CA ruled that the
respondents did, while the petitioners insist that the respondents did not. In the present
petition, the petitioners reiterate that there was a blatant non-observance of the rules
when the respondents did not amend their answer to invoke the grounds for dismissal
which were raised only during the pre-trial and, subsequently, in the subject motion to
dismiss.44

The divergent findings of the CA and the petitioners’ arguments are essentially factual
issues. Time and again, we have held that the jurisdiction of the Court in a petition for
review on certiorari under Rule 45, such as the present case, is limited only to questions
of law, save for certain exceptions. One of these is attendant herein, which is, when the
findings are conclusions without citation of specific evidence on which they are based. 45

In the petition filed with the CA, the respondents made a passing allegation that, as
affirmative defenses in their answer, they raised the issue that the petitioners are not
the real parties in interest.46

On the other hand, the petitioners consistently argued otherwise in their opposition 47 to
the motion to dismiss, and in their comment48 and in their memorandum49 on the

776
respondents’ petition before the CA. Our examination of the records shows that the CA
had no basis in its finding that the respondents alleged the grounds as affirmative
defenses in their answer. The respondents merely stated in their petition for certiorari
that they alleged the subject grounds in their answer. However, nowhere in the petition
did they support this allegation; they did not even attach a copy of their answer to the
petition. It is basic that the respondents had the duty to prove by substantial evidence
their positive assertions. Considering that the petition for certiorari is an original and not
an appellate action, the CA had no records of the RTC’s proceedings upon which the
CA could refer to in order to validate the respondents’ claim. Clearly, other than the
respondents’ bare allegations, the CA had no basis to rule, without proof, that the
respondents alleged the grounds for dismissal as affirmative defenses in the answer.
The respondents, as the parties with the burden of proving that they timely raised their
grounds for dismissal, could have at least attached a copy of their answer to the
petition. This simple task they failed to do. That the respondents did not allege in their
answer the subject grounds is made more apparent through their argument, both in their
motion to dismiss50 and in their comment,51 that it was only during the pre-trial stage that
they verbally manifested and invited the attention of the lower court on their grounds for
dismissal. In order to justify such late invocation, they heavily relied on Section 2(g) and
(i), Rule 1852 of the Rules of Court that the nature and purpose of the pre-trial include,
among others, the propriety of dismissing the action should there be a valid ground
therefor and matters which may aid in the prompt disposition of the action. The
respondents are not correct. The rules are clear and require no interpretation. Pursuant
to Section 1, Rule 9 of the Rules of Court, a motion to dismiss based on the grounds
invoked by the respondents may be waived if not raised in a motion to dismiss or
alleged in their answer. On the other hand, "the pre-trial is primarily intended to make
certain that all issues necessary to the disposition of a case are properly raised. The
purpose is to obviate the element of surprise, hence, the parties are expected to
disclose at the pre-trial conference all issues of law and fact which they intend to raise
at the trial, except such as may involve privileged or impeaching matter." 53

The issues submitted during the pre-trial are thus the issues that would govern the trial
proper. The dismissal of the case based on the grounds invoked by the respondents are
specifically covered by Rule 16 and Rule 9 of the Rules of Court which set a period
when they should be raised; otherwise, they are deemed waived.

The Dabuco ruling is inapplicable in the present case; the ground for dismissal "failure
to state a cause of action" distinguished from "lack of cause of action"

To justify the belated filing of the motion to dismiss, the CA reasoned out that the
ground for dismissal of "lack of cause of action" may be raised at any time during the
proceedings, pursuant to Dabuco v. Court of Appeals. 54

This is an erroneous interpretation and application of Dabuco as will be explained

below.

777
First, in Dabuco, the grounds for dismissal were raised as affirmative defenses in the
answer which is in stark contrast to the present case.

Second, in Dabuco, the Court distinguished between the dismissal of the complaint for
"failure to state a cause of action" and "lack of cause of action." The Court emphasized
that in a dismissal of action for lack of cause of action, "questions of fact are involved,
[therefore,] courts hesitate to declare a plaintiff as lacking in cause of action. Such
declaration is postponed until the insufficiency of cause is apparent from a
preponderance of evidence.

Usually, this is done only after the parties have been given the opportunity to present all
relevant evidence on such questions of fact." 55

In fact, in Dabuco, the Court held that even the preliminary hearing on the propriety of
lifting the restraining order was declared insufficient for purposes of dismissing the
complaint for lack of cause of action. This is so because the issues of fact had not yet
been adequately ventilated at that preliminary stage. For these reasons, the Court
declared in Dabuco that the dismissal by the trial court of the complaint was premature.
In the case of Macaslang v. Zamora,56 the Court noted that the incorrect appreciation by
both the RTC and the CA of the distinction between the dismissal of an action, based on
"failure to state a cause of action" and "lack of cause of action," prevented it from
properly deciding the case, and we quote:

Failure to state a cause of action and lack of cause of action are really different from
each other. On the one hand, failure to state a cause of action refers to the insufficiency
of the pleading, and is a ground for dismissal under Rule 16 of the Rules of Court. On
the other hand, lack of cause [of] action refers to a situation where the evidence does
not prove the cause of action alleged in the pleading. Justice Regalado, a recognized
commentator on remedial law, has explained the distinction: xxx What is contemplated,
therefore, is a failure to state a cause of action which is provided in Sec. 1(g) of Rule 16.
This is a matter of insufficiency of the pleading. Sec. 5 of Rule 10, which was also
included as the last mode for raising the issue to the court, refers to the situation where
the evidence does not prove a cause of action. This is, therefore, a matter of
insufficiency of evidence. Failure to state a cause of action is different from failure to
prove a cause of action. The remedy in the first is to move for dismissal of the pleading,
while the remedy in the second is to demur to the evidence, hence reference to Sec. 5
of Rule 10 has been eliminated in this section. The procedure would consequently be to
require the pleading to state a cause of action, by timely objection to its deficiency; or, at
the trial, to file a demurrer to evidence, if such motion is warranted. [italics supplied]

Based on this discussion, the Court cannot uphold the dismissal of the present case
based on the grounds invoked by the respondents which they have waived for failure to
invoke them within the period prescribed by the Rules. The Court cannot also dismiss
the case based on "lack of cause of action" as this would require at least a
preponderance of evidence which is yet to be appreciated by the trial court. Therefore,
the RTC did not commit grave abuse of discretion in issuing the assailed orders denying

778
the respondents’ motion to dismiss and motion for reconsideration. The Court shall not
resolve the merits of the respondents’ grounds for dismissal which are considered as
waived.

Other heirs of the spouses Pacaña to be impleaded in the case.

It should be emphasized that insofar as the petitioners are concerned, the respondents
have waived the dismissal of the complaint based on the ground of failure to state a
cause of action because the petitioners are not the real parties in interest. At this
juncture, a distinction between a real party in interest and an indispensable party is in
order. In Carandang v. Heirs of de Guzman, et al., 57 the Court clarified these two
concepts and held that "[a] real party in interest is the party who stands to be benefited
or injured by the judgment of the suit, or the party entitled to the avails of the suit. On
the other hand, an indispensable party is a party in interest without whom no final
determination can be had of an action, in contrast to a necessary party, which is one
who is not indispensable but who ought to be joined as a party if complete relief is to be
accorded as to those already parties, or for a complete determination or settlement of
the claim subject of the action. xxx If a suit is not brought in the name of or against the
real party in interest, a motion to dismiss may be filed on the ground that the complaint
states no cause of action. However, the dismissal on this ground entails an examination
of whether the parties presently pleaded are interested in the outcome of the litigation,
and not whether all persons interested in such outcome are actually pleaded. The latter
query is relevant in discussions concerning indispensable and necessary parties, but
not in discussions concerning real parties in interest. Both indispensable and necessary
parties are considered as real parties in interest, since both classes of parties stand to
be benefited or injured by the judgment of the suit."

At the inception of the present case, both the spouses Pacaña were not impleaded as
parties-plaintiffs. The Court notes, however, that they are indispensable parties to the
case as the alleged owners of Rovila Water Supply. Without their inclusion as parties,
there can be no final determination of the present case. They possess such an interest
in the controversy that a final decree would necessarily affect their rights, so that the
courts cannot proceed without their presence. Their interest in the subject matter of the
suit and in the relief sought is inextricably intertwined with that of the other parties. 58

Jurisprudence on the procedural consequence of the inclusion or non-inclusion of an

indispensable party is divided in our jurisdiction. Due to the non-inclusion of
indispensable parties, the Court dismissed the case in Lucman v. Malawi, et al. 59 and
Go v. Distinction Properties Development Construction, Inc., 60 while in Casals, et al. v.
Tayud Golf and Country Club et al.,61 the Court annulled the judgment which was
rendered without the inclusion of the indispensable parties. In Arcelona et al. v. Court of
Appeals62 and Bulawan v. Aquende,63 and Metropolitan Bank & Trust Company v. Alejo
et al.64 the Court ruled that the burden to implead or order the impleading of an
indispensable party rests on the plaintiff and on the trial court, respectively. Thus, the
non-inclusion of the indispensable parties, despite notice of this infirmity, resulted in the
annulment of these cases. In Plasabas, et al. v. Court of Appeals, et al., 65 the Court held

779
that the trial court and the CA committed reversible error when they summarily
dismissed the case, after both parties had rested their cases following a protracted trial,
on the sole ground of failure to implead indispensable parties. Non-joinder of
indispensable parties is not a ground for the dismissal of an action. The remedy is to
implead the non-party claimed to be indispensable. However, in the cases of Quilatan,
et al. v. Heirs of Quilatan, et al.66 and Lagunilla, et al. v. Monis, et al., 67 the Court
remanded the case to the RTC for the impleading of indispensable parties. On the other
hand, in Lotte Phil. Co., Inc. v. Dela Cruz,68 PepsiCo, Inc. v. Emerald Pizza, 69 and
Valdez Tallorin, v. Heirs of Tarona, et al., 70 the Court directly ordered that the
indispensable parties be impleaded. Mindful of the differing views of the Court as
regards the legal effects of the non-inclusion of indispensable parties, the Court clarified
in Republic of the Philippines v. Sandiganbayan, et al., 71 that the failure to implead
indispensable parties is a curable error and the foreign origin of our present rules on
indispensable parties permitted this corrective measure. This cited case held:

Even in those cases where it might reasonably be argued that the failure of the
Government to implead the sequestered corporations as defendants is indeed a
procedural aberration xxx, slight reflection would nevertheless lead to the conclusion
that the defect is not fatal, but one correctible under applicable adjective rules – e.g.,
Section 10, Rule 5 of the Rules of Court [specifying the remedy of amendment during
trial to authorize or to conform to the evidence]; Section 1, Rule 20 [governing
amendments before trial], in relation to the rule respecting omission of so-called
necessary or indispensable parties, set out in Section 11, Rule 3 of the Rules of Court.
It is relevant in this context to advert to the old familiar doctrines that the omission to
implead such parties "is a mere technical defect which can be cured at any stage of the
proceedings even after judgment"; and that, particularly in the case of indispensable
parties, since their presence and participation is essential to the very life of the action,
for without them no judgment may be rendered, amendments of the complaint in order
to implead them should be freely allowed, even on appeal, in fact even after rendition of
judgment by this Court, where it appears that the complaint otherwise indicates their
identity and character as such indispensable parties." Although there are decided cases
wherein the non-joinder of indispensable parties in fact led to the dismissal of the suit or
the annulment of judgment, such cases do not jibe with the matter at hand. The better
view is that non-joinder is not a ground to dismiss the suit or annul the judgment. The
rule on joinder of indispensable parties is founded on equity. And the spirit of the law is
reflected in Section 11, Rule 3 of the 1997 Rules of Civil Procedure. It prohibits the
dismissal of a suit on the ground of non-joinder or misjoinder of parties and allows the
amendment of the complaint at any stage of the proceedings, through motion or on
order of the court on its own initiative. Likewise, jurisprudence on the Federal Rules of
Procedure, from which our Section 7, Rule 3 on indispensable parties was copied,
allows the joinder of indispensable parties even after judgment has been entered if such
is needed to afford the moving party full relief. Mere delay in filing the joinder motion
does not necessarily result in the waiver of the right as long as the delay is excusable.

In Galicia, et al. v. Vda. De Mindo, et al.,72 the Court ruled that in line with its policy of
promoting a just and inexpensive disposition of a case, it allowed the intervention of the

780
indispensable parties instead of dismissing the complaint. Furthermore, in
Commissioner Domingo v. Scheer,73 the Court cited Salvador, et al. v. Court of Appeals,
et al.74 and held that the Court has full powers, apart from that power and authority
which are inherent, to amend the processes, pleadings, proceedings and decisions by
substituting as party-plaintiff the real party in interest. The Court has the power to avoid
delay in the disposition of this case, and to order its amendment in order to implead an
indispensable party. With these discussions as premises, the Court is of the view that
the proper remedy in the present case is to implead the indispensable parties especially
when their non-inclusion is merely a technical defect. To do so would serve proper
administration of justice and prevent further delay and multiplicity of suits. Pursuant to
Section 9, Rule 3 of the Rules of Court, parties may be added by order of the court on
motion of the party or on its own initiative at any stage of the action. If the plaintiff
refuses to implead an indispensable party despite the order of the court, then the court
may dismiss the complaint for the plaintiff’s failure to comply with a lawful court order. 75

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

Obviously, in the present case, the deceased Pacañas can no longer be included in the
complaint as indispensable parties because of their death during the pendency of the
case. Upon their death, however, their ownership and rights over their properties were
transmitted to their heirs, including herein petitioners, pursuant to Article 774 77 in
relation with Article 77778 of the Civil Code.

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

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

SO ORDERED.

RULE 19. INTERVENTION

FIRST DIVISION
[ G.R. No. 171805, May 30, 2011 ]
781
PHILIPPINE NATIONAL BANK, PETITIONER, VS. MERELO B. AZNAR; MATIAS B.
AZNAR III; JOSE L. AZNAR (DECEASED), REPRESENTED BY HIS HEIRS; RAMON
A. BARCENILLA; ROSARIO T. BARCENILLA; JOSE B. ENAD (DECEASED),
REPRESENTED BY HIS HEIRS; AND RICARDO GABUYA (DECEASED),
REPRESENTED BY HIS HEIRS, RESPONDENTS.

[G.R. NO. 172021]

MERELO B. AZNAR AND MATIAS B. AZNAR III, PETITIONERS, VS. PHILIPPINE

NATIONAL BANK, RESPONDENT.

DECISION
LEONARDO-DE CASTRO, J.:
Before the Court are two petitions for review on certiorari under Rule 45 of the Rules of
Court both seeking to annul and set aside the Decision [1] dated September 29, 2005 as
well as the Resolution[2] dated March 6, 2006 of the Court of Appeals in CA-G.R. CV No.
75744, entitled "Merelo B. Aznar, Matias B. Aznar III, Jose L. Aznar (deceased)
represented by his heirs, Ramon A. Barcenilla (deceased) represented by his heirs,
Rosario T. Barcenilla, Jose B. Enad (deceased) represented by his heirs, and Ricardo
Gabuya (deceased) represented by his heirs v. Philippine National Bank, Jose Garrido
and Register of Deeds of Cebu City."  The September 29, 2005 Decision of the Court of
Appeals set aside the Decision[3] dated November 18, 1998 of the Regional Trial Court
(RTC) of Cebu City, Branch 17, in Civil Case No. CEB-21511.  Furthermore, it ordered
the Philippine National Bank (PNB) to pay Merelo B. Aznar; Matias B. Aznar III; Jose L.
Aznar (deceased), represented by his heirs; Ramon A. Barcenilla (deceased),
represented by his heirs; Rosario T. Barcenilla; Jose B. Enad (deceased), represented
by his heirs; and Ricardo Gabuya (deceased), represented by his heirs (Aznar, et al.),
the amount of their lien based on the Minutes of the Special Meeting of the Board of
Directors[4] (Minutes) of the defunct Rural Insurance and Surety Company, Inc. (RISCO)
duly annotated on the titles of three parcels of land, plus legal interests from the time of
PNB's acquisition of the subject properties until the finality of the judgment but
dismissing all other claims of Aznar, et al.  On the other hand, the March 6, 2006
Resolution of the Court of Appeals denied the Motion for Reconsideration subsequently
filed by each party.

The facts of this case, as stated in the Decision dated September 29, 2005 of the Court
of Appeals, are as follows:

In 1958, RISCO ceased operation due to business reverses. In plaintiffs' desire to

rehabilitate RISCO, they contributed a total amount of P212,720.00 which was used in
the purchase of the three (3) parcels of land described as follows:

"A parcel of land (Lot No. 3597 of the Talisay-Minglanilla Estate, G.L.R.O. Record No.
3732) situated in the Municipality of Talisay, Province of Cebu, Island of Cebu. xxx

782
containing an area of SEVENTY[-]EIGHT THOUSAND ONE HUNDRED EIGHTY[-]FIVE
SQUARE METERS (78,185) more or less. x x x" covered by Transfer Certificate of Title
No. 8921 in the name of Rural Insurance & Surety Co., Inc.";

"A parcel of land (Lot 7380 of the Talisay Minglanilla Estate, G.L.R.O. Record No.
3732), situated in the Municipality of Talisay, Province of Cebu, Island of Cebu. xxx
containing an area of THREE HUNDRED TWENTY[-]NINE THOUSAND FIVE
HUNDRED FORTY[-]SEVEN SQUARE METERS (329,547), more or less. xxx" covered
by Transfer Certificate of Title No. 8922 in the name of Rural Insurance & Surety Co.,
Inc." and

"A parcel of land (Lot 1323 of the subdivision plan Psd-No. 5988), situated in the District
of Lahug, City of Cebu, Island of  Cebu. xxx containing  an  area  of FIFTY[-]FIVE
THOUSAND SIX  HUNDRED FIFTY[-]THREE (55,653) SQUARE METERS, more or
less." covered by Transfer Certificate of Title No. 24576 in the name of Rural Insurance
& Surety Co., Inc."

After the purchase of the above lots, titles were issued in the name of RISCO. The
amount contributed by plaintiffs constituted as liens and encumbrances on the
aforementioned properties as annotated in the titles of said lots. Such annotation was
made pursuant to the Minutes of the Special Meeting of the Board of Directors of
RISCO (hereinafter referred to as the "Minutes") on March 14, 1961, pertinent portion of
which states:

xxxx

3. The President then explained that in a special meeting of the stockholders previously
called for the purpose of putting up certain amount of P212,720.00 for the rehabilitation
of the Company, the following stockholders contributed the amounts indicated opposite
their names:

CONTRIBUTED SURPLUS

MERELO B. AZNAR P50,000.00

MATIAS B. AZNAR 50,000.00
JOSE L. AZNAR 27,720.00
RAMON A. BARCENILLA 25,000.00
ROSARIO T. BARCENILLA 25,000.00
JOSE B. ENAD 17,500.00
RICARDO GABUYA 17,500.00
783
 212,720.00

xxxx

And that the respective contributions above-mentioned shall constitute as their lien or

interest on the property described above, if and when said property are titled in the
name of RURAL INSURANCE & SURETY CO., INC., subject to registration as their
adverse claim in pursuance of the Provisions of Land Registration Act, (Act No. 496, as
amended) until such time their respective contributions are refunded to them
completely.

x x x x"
Thereafter, various subsequent annotations were made on the same titles, including the
Notice of Attachment and Writ of Execution both dated August 3, 1962 in favor of herein
defendant PNB, to wit:

On TCT No. 8921 for Lot 3597:

Entry No. 7416-V-4-D.B. - Notice of Attachment - By the Provincial Sheriff of Cebu, Civil
Case No. 47725, Court of First Instance of Manila, entitled "Philippine National Bank,
Plaintiff, versus Iluminada Gonzales, et al., Defendants", attaching all rights, interest
and participation of the defendant Iluminada Gonzales and Rural Insurance & Surety
Co., Inc. of the two parcels of land covered by T.C.T. Nos. 8921, Attachment No. 330
and 185.

Date of Instrument - August 3, 1962.

Date of Inscription - August 3, 1962, 3:00 P.M.

Entry No. 7417-V-4-D.B. - Writ of Execution - By the Court of First Instance of Manila,
commanding the Provincial Sheriff of Cebu, of the lands and buildings of the
defendants, to make the sum of Seventy[-]One Thousand Three Hundred Pesos
(P71,300.00) plus interest etc., in connection with Civil Case No. 47725, File No. T-
8021.

Date of Instrument - July 21, 1962.

Date of Inscription - August 3, 1962, 3:00 P.M.

Entry No. 7512-V-4-D.B. - Notice of Attachment - By the Provincial Sheriff of Cebu, Civil
Case Nos. IV-74065, 73929, 74129, 72818, in the Municipal Court of the City of Manila,
entitled "Jose Garrido, Plaintiff, versus Rural Insurance & Surety Co., Inc., et als.,

784
Defendants", attaching all rights, interests and participation of the defendants, to the
parcels of land covered by T.C.T. Nos. 8921 & 8922 Attachment No. 186, File No. T-
8921.

Date of the Instrument - August 16, 1962.

Date of Inscription - August 16, 1962, 2:50 P.M.

Entry No. 7513-V-4-D.B. - Writ of Execution - By the Municipal Court of the City of
Manila, commanding the Provincial Sheriff of Cebu, of the lands and buildings of the
defendants, to make the sum of Three Thousand Pesos (P3,000.00), with interest at
12% per annum from July 20, 1959, in connection with  Civil Case Nos. IV-74065,
73929, 74613 annotated above.

File No. T-8921

Date of the Instrument - August 11, 1962.
Date of the Inscription - August 16, 1962, 2:50  P.M.

On TCT No. 8922 for Lot 7380:

(Same as the annotations on TCT 8921)

On TCT No. 24576 for Lot 1328 (Corrected to Lot 1323-c per court order):

Entry No. 1660-V-7-D.B. - Notice of Attachment - by the Provincial Sheriff of Cebu, Civil
Case No. 47725, Court of First Instance of Manila, entitled "Philippine National Bank,
Plaintiff, versus, Iluminada Gonzales, et al., Defendants", attaching all rights, interest,
and participation of the defendants Iluminada Gonzales and Rural Insurance & Surety
Co., Inc. of the parcel of land herein described.

Attachment No. 330 & 185.

Date of Instrument - August 3, 1962.

Date of Inscription - August 3, 1962, 3:00 P.M.

Entry No. 1661-V-7-D.B. - Writ of Execution by the Court of First Instance of Manila
commanding the Provincial Sheriff of Cebu, of the lands and buildings of the defendants
to make the sum of Seventy[-]One Thousand Three Hundred Pesos (P71,300.00), plus
interest, etc., in connection with Civil Case No. 47725.

File No. T-8921.

Date of the Instrument - July 21, 1962.
Date of the Inscription - August 3, 1962 3:00 P.M.

785
Entry No. 1861-V-7-D.B. - Notice of Attachment - By the Provincial Sheriff of Cebu, Civil
Case Nos. IV-74065, 73929, 74129, 72613 & 72871, in the Municipal Court of the City
of Manila, entitled "Jose Garrido, Plaintiff, versus Rural Insurance & Surety Co., Inc., et
als., Defendants", attaching all rights, interest and participation of the defendants, to the
parcel of land herein described.

Attachment No. 186.

File No. T-8921.

Date of the Instrument - August 16, 1962.
Date of the Instription - August 16, 1962 2:50 P.M.

Entry No. 1862-V-7-D.B. - Writ of Execution - by the Municipal Court of Manila,

commanding the Provincial Sheriff of Cebu, of the lands and buildings of the
Defendants, to make the sum of Three Thousand Pesos (P3,000.00), with interest at
12% per annum from July 20, 1959, in connection with Civil Case Nos. IV-74065,
73929, 74129, 72613 & 72871 annotated above.

File No. T-8921.

Date of the Instrument - August 11, 1962.
Date of the Inscription - August 16, 1962 at 2:50 P.M.

As a result, a Certificate of Sale was issued in favor of Philippine National Bank, being
the lone and highest bidder of the three (3) parcels of land known as Lot Nos. 3597 and
7380, covered by T.C.T. Nos. 8921 and 8922, respectively, both situated at Talisay,
Cebu, and Lot No. 1328-C covered by T.C.T. No. 24576 situated at Cebu City, for the
amount of Thirty-One Thousand Four Hundred Thirty Pesos (P31,430.00). Thereafter, a
Final Deed of Sale dated May 27, 1991 in favor of the Philippine National Bank was also
issued and Transfer Certificate of Title No. 24576 for Lot 1328-C (corrected to 1323-C)
was cancelled and a new certificate of title, TCT 119848 was issued in the name of PNB
on August 26, 1991.

This prompted plaintiffs-appellees to file the instant complaint seeking the quieting of
their supposed title to the subject properties, declaratory relief, cancellation of TCT and
reconveyance with temporary restraining order and preliminary injunction. Plaintiffs
alleged that the subsequent annotations on the titles are subject to the prior annotation
of their liens and encumbrances. Plaintiffs further contended that the subsequent writs
and processes annotated on the titles are all null and void for want of valid service upon
RISCO and on them, as stockholders. They argued that the Final Deed of Sale and TCT
No. 119848 are null and void as these were issued only after 28 years and that any right
which PNB may have over the properties had long become stale.

Defendant PNB on the other hand countered that plaintiffs have no right of action for
786
quieting of title since the order of the court directing the issuance of titles to PNB had
already become final and executory and their validity cannot be attacked except in a
direct proceeding for their annulment. Defendant further asserted that plaintiffs, as mere
stockholders of RISCO do not have any legal or equitable right over the properties of
the corporation. PNB posited that even if plaintiff's monetary lien had not expired, their
only recourse was to require the reimbursement or refund of their contribution. [5]

Aznar, et al., filed a Manifestation and Motion for Judgment on the Pleadings [6] on
October 5, 1998.  Thus, the trial court rendered the November 18, 1998 Decision, which
ruled against PNB on the basis that there was an express trust created over the subject
properties whereby RISCO was the trustee and the stockholders, Aznar, et al., were the
beneficiaries or the cestui que trust.  The dispositive portion of the said ruling reads:

WHEREFORE, judgment is hereby rendered as follows:

a) Declaring the Minutes of the Special Meeting of the Board of Directors of RISCO
approved on March 14, 1961 (Annex "E," Complaint) annotated on the titles to
subject properties on May 15, 1962 as an express trust whereby RISCO was a
mere trustee and the above-mentioned stockholders as beneficiaries being the true
and lawful owners of Lots 3597, 7380 and 1323;
b) Declaring all the subsequent annotations of court writs and processes, to wit: Entry
No. 7416-V-4-D.B., 7417-V-4-D.B., 7512-V-4-D.B., and 7513-V-4-D.B. in TCT No.
8921 for Lot 3597 and TCT No. 8922 for Lot 7380; Entry No. 1660-V-7-D.B., Entry
No. 1661-V-7-D.B., Entry No. 1861-V-7-D.B., Entry No. 1862-V-7-D.B., Entry No.
4329-V-7-D.B., Entry No. 3761-V-7-D.B. and Entry No. 26522 v. 34, D.B. on TCT
No. 24576 for Lot 1323-C, and all other subsequent annotations thereon in favor of
third persons, as null and void;
c) Directing the Register of Deeds of the Province of Cebu and/or the Register of
Deeds of Cebu City, as the case may be, to cancel all these annotations mentioned
in paragraph b) above the titles;
d) Directing the Register of Deeds of the Province of Cebu to cancel and/or annul
TCTs Nos. 8921 and 8922 in the name of RISCO, and to issue another titles in the
names of the plaintiffs; and
e) Directing Philippine National Bank to reconvey TCT No. 119848 in favor of the
plaintiffs.[7]

PNB appealed the adverse ruling to the Court of Appeals which, in its September 29,
2005 Decision, set aside the judgment of the trial court. Although the Court of Appeals
agreed with the trial court that a judgment on the pleadings was proper, the appellate

787
court opined that the monetary contributions made by Aznar, et al., to RISCO can only
be characterized as a loan secured by a lien on the subject lots, rather than an express
trust.  Thus, it directed PNB to pay Aznar, et al., the amount of their contributions plus
legal interest from the time of acquisition of the property until finality of judgment.  The
dispositive portion of the decision reads:

WHEREFORE, premises considered, the assailed Judgment is hereby SET ASIDE.

A new judgment is rendered ordering Philippine National Bank to pay plaintiffs-

appellees the amount of their lien based on the Minutes of the Special Meeting of the
Board of Directors duly annotated on the titles, plus legal interests from the time of
appellants' acquisition of the subject properties until the finality of this judgment.

All other claims of the plaintiffs-appellees are hereby DISMISSED. [8]

Both parties moved for reconsideration but these were denied by the Court of Appeals. 
Hence, each party filed with this Court their respective petitions for review
on certiorari under Rule 45 of the Rules of Court, which were consolidated in a
Resolution[9] dated October 2, 2006.

In PNB's petition, docketed as G.R. No. 171805, the following assignment of errors
were raised:

THE COURT OF APPEALS ERRED IN AFFIRMING THE FINDINGS OF THE TRIAL

COURT THAT A JUDGMENT ON THE PLEADINGS WAS WARRANTED DESPITE
THE EXISTENCE OF GENUINE ISSUES OF FACTS ALLEGED IN PETITIONER
PNB'S ANSWER.

II

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE RIGHT

OF RESPONDENTS TO REFUND OR REPAYMENT OF THEIR CONTRIBUTIONS
HAD NOT PRESCRIBED AND/OR THAT THE MINUTES OF THE SPECIAL MEETING
OF THE BOARD OF DIRECTORS OF RISCO CONSTITUTED AS AN EFFECTIVE
ADVERSE CLAIM.

III

THE COURT OF APPEALS ERRED IN NOT CONSIDERING THE DISMISSAL OF THE

COMPLAINT ON GROUNDS OF RES JUDICATA AND LACK OF CAUSE OF ACTION
ALLEGED BY PETITIONER IN ITS ANSWER.[10]

788
On the other hand, Aznar, et al.'s petition, docketed as G.R. No. 172021, raised the
following issue:

THE COURT OF APPEALS ERRED IN CONCLUDING THAT THE CONTRIBUTIONS

MADE BY THE STOCKHOLDERS OF RISCO WERE MERELY A LOAN SECURED BY
THEIR LIEN OVER THE PROPERTIES, SUBJECT TO REIMBURSEMENT OR
REFUND, RATHER THAN AN EXPRESS TRUST. [11]

Anent the first issue raised in G.R. No. 171805, PNB argues that a judgment on the
pleadings was not proper because its Answer, [12] which it filed during the trial court
proceedings of this case, tendered genuine issues of fact since it did not only deny
material allegations in Aznar, et al.'s Complaint[13] but also set up special and affirmative
defenses.  Furthermore, PNB maintains that, by virtue of the trial court's judgment on
the pleadings, it was denied its right to present evidence and, therefore, it was denied
due process.

The contention is meritorious.

The legal basis for rendering a judgment on the pleadings can be found in Section 1,
Rule 34 of the Rules of Court which states that "[w]here an answer fails to tender an
issue, or otherwise admits the material allegations of the adverse party's pleading, the
court may, on motion of that party, direct judgment on such pleading. x x x."

Judgment on the pleadings is, therefore, based exclusively upon the allegations
appearing in the pleadings of the parties and the annexes, if any, without consideration
of any evidence aliunde.[14]  However, when it appears that not all the material
allegations of the complaint were admitted in the answer for some of them were either
denied or disputed, and the defendant has set up certain special defenses which, if
proven, would have the effect of nullifying plaintiff's main cause of action, judgment on
the pleadings cannot be rendered.[15]

In the case at bar, the Court of Appeals justified the trial court's resort to a judgment on
the pleadings in the following manner:

Perusal of the complaint, particularly, Paragraph 7 thereof reveals:

"7. That in their desire to rehabilitate RISCO, the above-named stockholders contributed
a total amount of PhP212,720.00 which was used in the purchase of the above-
described parcels of land, which amount constituted liens and encumbrances on subject
properties in favor of the above-named stockholders as annotated in the titles adverted
to above, pursuant to the Minutes of the Special Meeting of the Board of Directors of
RISCO approved on March 14, 1961, a copy of which is hereto attached as Annex "E".

789
On the other hand, defendant in its Answer, admitted the aforequoted allegation with the
qualification that the amount put up by the stockholders was "used as part payment" for
the properties. Defendant further averred that plaintiff's liens and encumbrances
annotated on the titles issued to RISCO constituted as "loan from the stockholders to
pay part of the purchase price of the properties" and "was a personal obligation of
RISCO and was thus not a claim adverse to the ownership rights of the corporation."
With these averments, We do not find error on the part of the trial court in rendering a
judgment on the pleadings. For one, the qualification made by defendant in its answer is
not sufficient to controvert the allegations raised in the complaint. As to defendants'
contention that the money contributed by plaintiffs was in fact a "loan" from the
stockholders, reference can be made to the Minutes of the Special Meeting of the Board
of Directors, from which plaintiffs-appellees anchored their complaint, in order to
ascertain the true nature of their claim over the properties. Thus, the issues raised by
the parties can be resolved on the basis of their respective pleadings and the annexes
attached thereto and do not require further presentation of evidence aliunde.[16]

However, a careful reading of Aznar, et al.'s Complaint and of PNB's Answer would
reveal that both parties raised several claims and defenses, respectively, other than
what was cited by the Court of Appeals, which requires the presentation of evidence for
resolution, to wit:

Complaint (Aznar, et al.) Answer (PNB)

11. That these subsequent annotations on the 10) Par. 11 is denied as the loan from
titles of the properties in question are subject to the stockholders to pay part of the
the prior annotation of liens and encumbrances purchase price of the properties was a
of the above-named stockholders per Entry No. personal obligation of RISCO and was
458-V-7-D.B. inscribed on TCT No. 24576 thus not a claim adverse to the
on May 15, 1962 and per Entry No. 6966-V-4- ownership rights of the corporation;
D.B. on TCT No. 8921 and TCT No. 8922
on May 15, 1962;
12. That these writs and processes annotated 11) Par. 12 is denied as in fact notice
on the titles are all null and void for total want of to RISCO had been sent to its last
valid service upon RISCO and the above- known address at Plaza Goite, Manila;
named stockholders considering that as early
as sometime in 1958, RISCO ceased
operations as earlier stated, and as early as
May 15, 1962, the liens and encumbrances of
the above-named stockholders were annotated
in the titles of subject properties;
13. That more particularly, the Final Deed of 12) Par. 13 is denied for no law

790
Sale (Annex "G") and TCT No. 119848 are null
and void as these were issued only after 28
years and 5 months (in the case of the Final
Deed of Sale) and 28 years, 6 months and 29
days (in the case of TCT 119848) from the
invalid auction sale on December 27, 1962,
hence, any right, if any, which PNB had over
subject properties had long become stale;
14. That plaintiffs continue to have possession
of subject properties and of their corresponding
titles, but they never received any process
concerning the petition filed by PNB to have
TCT 24576 over Lot 1323-C surrendered and/or
cancelled;
15. That there is a cloud created on the
aforementioned titles of RISCO by reason of the orders directing the issuance of titles
annotate writs, processes and proceedings
caused by Jose Garrido and PNB which were 8922 are valid judgments which
apparently valid or effective, but which are in
truth and in fact invalid and ineffective, and
prejudicial to said titles and to the rights of the
plaintiffs, which should be removed and the
titles quieted.[17]
requires the final deed of sale to be
executed immediately after the end of
the redemption period. Moreover,
another court of competent jurisdiction
has already ruled that PNB was
entitled to a final deed of sale;
13) Par. 14 is denied as plaintiffs are
not in actual possession of the land
and if they were, their possession was
as trustee for the creditors of RISCO
like PNB;
14) Par. 15 is denied as the court
to PNB in lieu of TCT 24576 and TCT
cannot be set aside in a collateral
proceeding like the instant case.[18]

Furthermore, apart from refuting the aforecited material allegations made by Aznar, et
al., PNB also indicated in its Answer the special and affirmative defenses of (a)
prescription; (b) res judicata; (c) Aznar, et al., having no right of action for quieting of
title; (d) Aznar, et al.'s lien being ineffective and not binding to PNB; and (e) Aznar, et
al.'s having no personality to file the suit.[19]

From the foregoing, it is indubitably clear that it was error for the trial court to render a
judgment on the pleadings and, in effect, resulted in a denial of due process on the part
of PNB because it was denied its right to present evidence.  A remand of this case
would ordinarily be the appropriate course of action.  However, in the interest of justice
and in order to expedite the resolution of this case which was filed with the trial court
way back in 1998, the Court finds it proper to already resolve the present controversy in
light of the existence of legal grounds that would dispose of the case at bar without
necessity of presentation of further evidence on the other disputed factual claims and
defenses of the parties.

A thorough and comprehensive scrutiny of the records would reveal that this case

791
should be dismissed because Aznar, et al., have no title to quiet over the subject
properties and their true cause of action is already barred by prescription.

At the outset, the Court agrees with the Court of Appeals that the agreement contained
in the Minutes of the Special Meeting of the RISCO Board of Directors held on March
14, 1961 was a loan by the therein named stockholders to RISCO.  We quote with
approval the following discussion from the Court of Appeals Decision dated September
29, 2005:

Careful perusal of the Minutes relied upon by plaintiffs-appellees in their claim, showed
that their contributions shall constitute as "lien or interest on the property" if and when
said properties are titled in the name of RISCO, subject to registration of their adverse
claim under the Land Registration Act, until such time their respective contributions are
refunded to them completely.

It is a cardinal rule in the interpretation of contracts that if the terms of a contract are
clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulation shall control. When the language of the contract is explicit
leaving no doubt as to the intention of the drafters thereof, the courts may not read into
it any other intention that would contradict its plain import.

The term lien as used in the Minutes is defined as "a discharge on property usually for
the payment of some debt or obligation. A lien is a qualified right or a proprietary
interest which may be exercised over the property of another. It is a right which the law
gives to have a debt satisfied out of a particular thing. It signifies a legal claim or charge
on property; whether real or personal, as a collateral or security for the payment of
some debt or obligation." Hence, from the use of the word "lien" in the Minutes, We find
that the money contributed by plaintiffs-appellees was in the nature of a loan, secured
by their liens and interests duly annotated on the titles. The annotation of their lien
serves only as collateral and does not in any way vest ownership of property to
plaintiffs.[20] (Emphases supplied.)

We are not persuaded by the contention of Aznar, et al., that the language of the
subject Minutes created an express trust.

Trust is the right to the beneficial enjoyment of property, the legal title to which is vested
in another.  It is a fiduciary relationship that obliges the trustee to deal with the property
for the benefit of the beneficiary.  Trust relations between parties may either be express
or implied.  An express trust is created by the intention of the trustor or of the parties. 
An implied trust comes into being by operation of law. [21]

Express trusts, sometimes referred to as direct trusts, are intentionally created by the
direct and positive acts of the settlor or the trustor - by some writing, deed, or will or oral

792
declaration.  It is created not necessarily by some written words, but by the direct and
positive acts of the parties.[22] This is in consonance with Article 1444 of the Civil Code,
which states that "[n]o particular words are required for the creation of an express trust,
it being sufficient that a trust is clearly intended."

In other words, the creation of an express trust must be manifested with reasonable
certainty and cannot be inferred from loose and vague declarations or from ambiguous
circumstances susceptible of other interpretations. [23]

No such reasonable certitude in the creation of an express trust obtains in the case at
bar.  In fact, a careful scrutiny of the plain and ordinary meaning of the terms used in the
Minutes does not offer any indication that the parties thereto intended that Aznar, et al.,
become beneficiaries under an express trust and that RISCO serve as trustor.

Indeed, we find that Aznar, et al., have no right to ask for the quieting of title of the
properties at issue because they have no legal and/or equitable rights over the
properties that are derived from the previous registered owner which is RISCO, the
pertinent provision of the law is Section 2 of the Corporation Code (Batas Pambansa
Blg. 68), which states that "[a] corporation is an artificial being created by operation of
law, having the right of succession and the powers, attributes and properties expressly
authorized by law or incident to its existence."

As a consequence thereof, a corporation has a personality separate and distinct from

those of its stockholders and other corporations to which it may be connected. [24]  Thus,
we had previously ruled in Magsaysay-Labrador v. Court of Appeals[25] that the interest
of the stockholders over the properties of the corporation is merely inchoate and
therefore does not entitle them to intervene in litigation involving corporate property, to
wit:

Here, the interest, if it exists at all, of petitioners-movants is indirect, contingent, remote,

conjectural, consequential and collateral. At the very least, their interest is purely
inchoate, or in sheer expectancy of a right in the management of the corporation and to
share in the profits thereof and in the properties and assets thereof on dissolution, after
payment of the corporate debts and obligations.

While a share of stock represents a proportionate or aliquot interest in the property of

the corporation, it does not vest the owner thereof with any legal right or title to any of
the property, his interest in the corporate property being equitable or beneficial in
nature. Shareholders are in no legal sense the owners of corporate property, which is
owned by the corporation as a distinct legal person. [26]

In the case at bar, there is no allegation, much less any proof, that the corporate
existence of RISCO has ceased and the corporate property has been liquidated and

793
distributed to the stockholders.  The records only indicate that, as per Securities and
Exchange Commission (SEC) Certification[27] dated June 18, 1997, the SEC merely
suspended RISCO's Certificate of Registration beginning on September 5, 1988 due to
its non-submission of SEC required reports and its failure to operate for a continuous
period of at least five years.

Verily, Aznar, et al., who are stockholders of RISCO, cannot claim ownership over the
properties at issue in this case on the strength of the Minutes which, at most, is merely
evidence of a loan agreement between them and the company.  There is no indication
or even a suggestion that the ownership of said properties were transferred to them
which would require no less that the said properties be registered under their names. 
For this reason, the complaint should be dismissed since Aznar, et al., have no cause to
seek a quieting of title over the subject properties.

At most, what Aznar, et al., had was merely a right to be repaid the amount loaned to
RISCO.  Unfortunately, the right to seek repayment or reimbursement of their
contributions used to purchase the subject properties is already barred by prescription.

Section 1, Rule 9 of the Rules of Court provides that when it appears from the pleadings
or the evidence on record that the action is already barred by the statute of limitations,
the court shall dismiss the claim, to wit:

Defenses and objections not pleaded either in a motion to dismiss or in the answer are
deemed waived. However, when it appears from the pleadings or the evidence on
record that the court has no jurisdiction over the subject matter, that there is another
action pending between the same parties for the same cause, or that the action is
barred by a prior judgment or by statute of limitations, the court shall dismiss the
claim. (Emphasis supplied.)
In Feliciano v. Canoza,[28] we held:

We have ruled that trial courts have authority and discretion to dismiss an action on the
ground of prescription when the parties' pleadings or other facts on record show it to be
indeed time-barred x x x; and it may do so on the basis of a motion to dismiss, or an
answer which sets up such ground as an affirmative defense; or even if the ground is
alleged after judgment on the merits, as in a motion for reconsideration; or even if the
defense has not been asserted at all, as where no statement thereof is found in the
pleadings, or where a defendant has been declared in default. What is essential only,
to repeat, is that the facts demonstrating the lapse of the prescriptive period, be
otherwise sufficiently and satisfactorily apparent on the record; either in the
averments of the plaintiffs complaint, or otherwise established by the evidence.
[29]
 (Emphasis supplied.)

794
The pertinent Civil Code provision on prescription which is applicable to the issue at
hand is Article 1144(1), to wit:

The following actions must be brought within ten years from the time the right of action
accrues:
1. Upon a written contract;
2. Upon an obligation created by law;
3. Upon a judgment. (Emphasis supplied.)

Moreover, in Nielson & Co., Inc. v. Lepanto Consolidated Mining Co.,[30] we held that the
term "written contract" includes the minutes of the meeting of the board of directors of a
corporation, which minutes were adopted by the parties although not signed by them, to
wit:

Coming now to the question of prescription raised by defendant Lepanto, it is contended

by the latter that the period to be considered for the prescription of the claim regarding
participation in the profits is only four years, because the modification of the sharing
embodied in the management contract is merely verbal, no written document to that
effect having been presented. This contention is untenable. The modification appears in
the minutes of the special meeting of the Board of Directors of Lepanto held on August
21, 1940, it having been made upon the authority of its President, and in said minutes
the terms of modification had been specified. This is sufficient to have the agreement
considered, for the purpose of applying the statute of limitations, as a written contract
even if the minutes were not signed by the parties (3 A.L.R., 2d, p. 831). It has been
held that a writing containing the terms of a contract if adopted by two persons may
constitute a contract in writing even if the same is not signed by either of the parties (3
A.L.R., 2d, pp. 812-813). Another authority says that an unsigned agreement the terms
of which are embodied in a document unconditionally accepted by both parties is a
written contract (Corbin on Contracts, Vol. I, p. 85). [31]

Applied to the case at bar, the Minutes which was approved on March 14, 1961 is
considered as a written contract between Aznar, et al., and RISCO for the
reimbursement of the contributions of the former.  As such, the former had a period of
ten (10) years from 1961 within which to enforce the said written contract.  However, it
does not appear that Aznar, et al., filed any action for reimbursement or refund of their
contributions against RISCO or even against PNB.  Instead the suit that Aznar, et al.,
brought before the trial court only on January 28, 1998 was one to quiet title over the
properties purchased by RISCO with their contributions.  It is unmistakable that their
right of action to claim for refund or payment of their contributions had long prescribed. 
Thus, it was reversible error for the Court of Appeals to order PNB to pay Aznar, et al.,
the amount of their liens based on the Minutes with legal interests from the time of
PNB's acquisition of the subject properties.

795
In view of the foregoing, it is unnecessary for the Court to pass upon the other issues
raised by the parties.

WHEREFORE, the petition of Aznar, et al., in G.R. No. 172021 is DENIED for lack of
merit.  The petition of PNB in G.R. No. 171805 is GRANTED.  The Complaint, docketed
as Civil Case No. CEB-21511, filed by Aznar, et al., is hereby DISMISSED.  No costs.

SO ORDERED.
FIRST DIVISION
[ G.R. No. 165770, August 09, 2010 ]
HEIRS OF FRANCISCA MEDRANO, NAMELY YOLANDA R. MEDRANO, ALFONSO
R. MEDRANO, JR., EDITA M. ALFARO, MARITES M. PALENTINOS, AND
GIOVANNI MEDRANO, REPRESENTED BY THEIR LEGAL REPRESENTATIVE,
MARITES MEDRANO-PALENTINOS, PETITIONERS, VS. ESTANISLAO DE VERA,
RESPONDENT.

DECISION
In cases where the subject property is transferred by the defendant during the pendency
of the litigation, the interest of the transferee pendente lite cannot be considered
independent of the interest of his transferors.  If the transferee files an answer while the
transferor is declared in default, the case should be tried on the basis of the transferee's
answer and with the participation of the transferee.

This Petition for Review on Certiorari[1] assails the June 25, 2004 Decision[2] of the Court
of Appeals (CA) in CA-G.R. SP No. 80053, which contained the following dispositive
portion:

WHEREFORE, premises considered, the petition is hereby GRANTED and this Court
orders that the case be remanded to the court a quo for further trial.

SO ORDERED.[3]

Likewise assailed is the appellate court's October 6, 2004 Resolution [4] denying

petitioners' Motion for Reconsideration.

Factual Antecedents

This case concerns a 463-square meter parcel of land [5] covered by Transfer Certificate
of Title (TCT) No. 41860 in the name of Flaviana De Gracia (Flaviana).  In 1980,
Flaviana died[6] intestate, leaving her half-sisters Hilaria Martin-Paguyo (Hilaria) and
Elena Martin-Alvarado (Elena) as her compulsory heirs.

In September 1982, Hilaria and Elena, by virtue of a private document denominated

"Tapno Maamoan ti Sangalobongan,"[7] waived all their hereditary rights to Flaviana's

796
land in favor of Francisca Medrano (Medrano).  It stated that the waiver was done in
favor of Medrano in consideration of the expenses that she incurred for Flaviana's
medication, hospitalization, wake and burial.  In the same year, Medrano built her
concrete bungalow on the land in question without any objection from Hilaria and Elena
or from their children.

When Hilaria and Elena died, some of their children affirmed the contents of the private
document executed by their deceased mothers.  To that end, they executed separate
Deeds of Confirmation of Private Document and Renunciation of Rights in favor of
Medrano.[8]  They likewise affirmed in said documents that Medrano had been
occupying and possessing the subject property as owner since September 1982.

Due to the refusal of the other children[9] to sign a similar renunciation, Medrano filed a
Complaint[10] on April 27, 2001 for quieting of title, reconveyance, reformation of
instrument, and/or partition with damages against Pelagia M. Paguyo-Diaz (Pelagia),
Faustina Paguyo-Asumio (Faustina), Jesus Paguyo (Jesus), Veneranda Paguyo-
Abrenica, Emilio a.k.a. Antonio Alvarado, Francisca Alvarado-Diaz (Francisca) and
Estrellita Alvarado-Cordero (Estrellita).  The case was docketed as Civil Case No. U-
7316 and raffled to Branch 48 of the Regional Trial Court (RTC) of Urdaneta,
Pangasinan.  Medrano then caused the annotation of a notice of lis pendens on TCT
No. 41860[11] on May 3, 2001.

Summons upon the original complaint was duly served upon Pelagia and Estrellita . [12]

On August 29, 2001, Medrano filed an Amended Complaint [13] impleading the widow and
children of Antonio Alvarado, in view of the latter's death. [14]  Summons upon the
amended complaint was served upon the other defendants, [15] but no longer served
upon Pelagia and Estrellita.

On April 2, 2002, respondent Estanislao D. De Vera (De Vera) filed an Answer with
Counterclaim.[16]  De Vera presented himself as the real party-in-interest on the ground
that some of the named defendants (Faustina, Pelagia, Francisca, Elena Kongco-
Alvarado, Jesus, and Estrellita) had executed a Deed of Renunciation of Rights [17] in his
favor  on March 23, 2002.  He maintained that the "Tapno Maamoan ti Sangalobongan"
that was executed by the defendants' predecessors in favor of Medrano was null and
void for want of consideration.  Thus, while some children affirmed the renunciation of
their deceased mothers' rights in the lot in favor of Medrano, the other children
renounced their hereditary rights in favor of De Vera.

Medrano filed a Motion to Expunge Answer with Counterclaim of Estanislao D. De Vera

and to Declare Defendants in Default. [18]  She argued that respondent De Vera had no
personality to answer the complaint since he was not authorized by the named
defendants to answer in their behalf.

In an Order,[19] dated July 30, 2002, the trial court disagreed with Medrano's argument
and admitted De Vera's Answer with Counterclaim.  The trial court opined that De Vera

797
did not need a special power of attorney from the defendants because he did not
answer the complaint in their behalf.  De Vera made a voluntary appearance in the case
as the transferee of the defendants' rights to the subject property.  The trial court further
explained that when the presence of other parties is required for granting complete
relief, the court shall order them to be brought in as defendants.  While it was unsure
whether De Vera was an indispensable party to the case, the trial court opined that at
the very least he was a necessary party for granting complete relief.  It thus held that
the admission of De Vera's Answer with Counterclaim is proper in order to avoid
multiplicity of suits.[20]  In the same Order, the court declared the named defendants in
default for not answering the complaint despite valid service of summons.  Thus, it
appears that the court a quo treated the named defendants and De Vera as distinct and
separate parties.

Medrano's response to the aforesaid order was two-fold.  With regard to the order
declaring the named defendants in default, Medrano filed on February 13, 2003 a
Motion to Set Reception of Evidence Before the Branch Clerk of Court. [21]  She argued
that she could present evidence ex parte against the defaulting defendants on the
ground that she presented alternative causes of action against them in her complaint. 
Her cause of action on the basis of acquisitive prescription can be raised solely against
the defaulting original defendants. [22]  She thus prayed to be allowed to present
evidence ex parte with respect to her claim of acquisitive prescription against the
defaulting defendants.  As for the order admitting De Vera's Answer with Counterclaim,
Medrano filed on February 21, 2003 a Motion for Reconsideration of Order dated July
30, 2002.[23]  She asked the court to order De Vera to file a pleading-in-intervention so
that he could be properly named as a defendant in the case.

In an Order[24] dated March 6, 2003, the trial court resolved to grant Medrano's Motion to
Set Reception of Evidence.  It ordered the conduct of ex parte presentation of evidence
on the same day and the continuation thereof to proceed on March 10, 2003.  Thus,
Medrano presented her evidence ex parte on the set dates. On March 10, 2003, the
case was submitted for resolution.[25]

Given the court's standing order which admitted De Vera's Answer with Counterclaim,
De Vera filed a Motion to Set the Case for Preliminary Conference on March 27, 2003.
[26]

The trial court resolved petitioners' and De Vera's respective pending motions in its
March 31, 2003 Order.[27]  The trial court granted Medrano's motion and set aside its
Order which admitted De Vera's Answer with Counterclaim.  Citing Rule 19 of the Rules
of Court, the court ordered De Vera to file a pleading-in-intervention so that he could be
recognized as a party-defendant.  As a necessary consequence to this ruling, the trial
court denied De Vera's motion to set the case for preliminary conference for
prematurity.

De Vera did not comply with the court's order despite service upon his lawyer, Atty.
Simplicio M. Sevilleja, on April 2, 2003.

798
Ruling of the Regional Trial Court

The RTC rendered its Decision[28] on April 21, 2003.  It ruled that ownership over the
titled property has vested in petitioners by virtue of good faith possession for more than
10 years; thus, it was no longer necessary to compel the defendants - heirs of Hilaria
and Elena - to execute an instrument to confirm Medrano's rightful ownership over the
land.

The trial court likewise held that the private document denominated as "Tapno
Maamoan Ti Sangalobongan" sufficiently conveyed to Medrano the subject property. 
The court held that the conveyance was done in consideration of the various expenses
that Medrano incurred for Flaviana's benefit.  While the court conceded that the parcel
of land was not adequately described in the "Tapno Maamoan ti Sangalobongan," its
location, metes and bounds were nonetheless confirmed by the defendants' siblings in
their respective deeds of confirmation.

The dispositive portion of the Decision reads, in toto:

WHEREFORE, judgment is hereby rendered:

(1) Declaring [Medrano], substituted by her heirs, as the rightful and lawful owner of the
land covered by T.C.T. No. 41860;[29]

(2) Ordering the Register of Deeds of Tayug, Pangasinan to cancel T.C.T. No. 41860
and to issue another Transfer Certificate of Title in the name of [Medrano];

All other claims are hereby denied for lack of merit.

SO ORDERED.[30]
De Vera filed a Motion for Reconsideration [31] arguing that he was an indispensable
party who was not given an opportunity to present his evidence in the case.  He also
maintained that Medrano was not the owner of the property, but a mere administratrix of
the land as evidenced by the records in SP Proc. No. 137577. [32]

De Vera's motion was denied[33] for lack of merit on July 22, 2003.  The court noted that
De Vera had no legal personality to file a motion for reconsideration because he did not
file a pleading-in-intervention.  The trial court explained it would have allowed De Vera
to present his evidence in the case had he complied with the court's order to file a
pleading-in-intervention.

On September 10, 2003, De Vera filed a Manifestation [34] informing the trial court of his
intention to file a petition for certiorari and mandamus before the CA, pursuant to Rule
41, Section 1, second paragraph and Rule 65 of the Rules of Court.

On October 7, 2003, petitioners filed a Motion for Entry of Judgment and

Execution[35] before the trial court.  They also filed a Counter-Manifestation[36] to De
799
Vera's Manifestation.  Petitioners insisted that De Vera, as a transferee pendente lite,
was bound by the final judgment or decree rendered against his transferors.  Even
assuming that De Vera had a right to appeal, the period therefor had already lapsed on
August 12, 2003.

In its Order[37] dated December 10, 2003, the court a quo maintained that De Vera was
not a party to the suit, hence his appeal would not stay the finality and execution of
judgment.  Thus the trial court ordered the entry of judgment in Civil Case No. U-7316.
The writ of execution was issued on December 12, 2003.

De Vera sought reconsideration[38] of the above order but the same was denied [39] on the
basis that De Vera had no personality to assail any order, resolution, or decision of the
trial court in Civil Case No. U-7316.

The Register of Deeds of Tayug, Pangasinan complied with the writ by canceling TCT
No. 41860 in the name of Flaviana De Gracia and issuing TCT No. 65635 in the names
of petitioners[40] on April 19, 2004.

Proceedings before the Court of Appeals

De Vera argued in his Petition for Certiorari and Mandamus[41] before the CA that the

trial court erred in declaring the defendants in default and sought a writ compelling the
trial court to try the case anew.  He insisted that he stepped into the shoes of the
defendants with regard to the subject property by virtue of the quitclaim that the
defendants executed in his favor. Thus, the trial court should have considered the
defendants as properly substituted by De Vera when he filed his Answer.

The standing order of the trial court with regard to De Vera at the time that it allowed
Medrano to present her evidence was to admit De Vera's Answer with Counterclaim. 
Thus, De Vera argued that it was improper for the trial court to have allowed Medrano to
present her evidence ex parte because it had yet to rule on whether De Vera had
personality to participate in the proceedings.

Ruling of the Court of Appeals

The appellate court agreed with De Vera.  The CA noted that the ex parte presentation
of evidence took place on March 6 and 10, 2003; while the Motion to Expunge Answer
and Require Filing of Pleading-in-Intervention was granted much later on March 31,
2003.  The CA held that the trial court gravely abused its discretion by allowing Medrano
to present her evidence ex parte while De Vera's personality to participate in the case
still remained unresolved.  The premature ex parte presentation of evidence rendered a
pleading-in-intervention moot and academic.

The CA pointed out that the trial court should have exercised its authority to order the
substitution of the original defendants instead of requiring De Vera to file a pleading-in-
intervention.  This is allowed under Rule 3, Section 19 of the Rules of Court.  Since a

800
transferee pendente lite is a proper party[42] to the case, the court can order his outright
substitution for the original defendants.

The CA further held that De Vera's failure to file the necessary pleading-in-intervention
was a technical defect that could have been easily cured.  The trial court could have
settled the controversy completely on its merits had it admitted De Vera's Answer with
Counterclaim. Not affording De Vera his right to adduce evidence is not only a manifest
grave abuse of discretion amounting to lack or excess of jurisdiction but also runs
counter to the avowed policy of avoiding multiplicity of suits.

The appellate court then ordered the case remanded to the trial court to afford De Vera
an opportunity to present his evidence.

Petitioners filed a Motion for Reconsideration, [43] which motion was denied[44] for lack of
merit on October 6, 2004.

Issues

Whether De Vera could participate in Civil Case No. U-7316

without filing a motion to intervene

II

Whether De Vera is bound by the judgment against his transferors

III

Whether it was proper for the CA to take cognizance of

respondent's Petition for Certiorari and Mandamus

Our Ruling

We sustain the CA's ruling that the trial court gravely abused its discretion in refusing to
allow De Vera to participate in the case and requiring him to file a motion to intervene.

The trial court misjudged De Vera's interest in Civil Case No. U-7316.  It held that De
Vera's right to participate in the case was independent of the named defendants. 
Because of its ruling that De Vera had an "independent interest," the trial court
considered his interest as separate from Medrano's claims against the named
defendants, and allowed the latter to be tried separately.  Thus, it admitted De Vera's
Answer with Counterclaim but declared the named defendants in default and allowed
the ex parte presentation of evidence by Medrano against the named defendants.

The trial court's approach is seriously flawed because De Vera's interest is not
independent of or severable from the interest of the named defendants. De Vera is a
801
transferee pendente lite of the named defendants (by virtue of the Deed of Renunciation
of Rights that was executed in his favor during the pendency of Civil Case No. U-7316). 
His rights were derived from the named defendants and, as transferee pendente lite, he
would be bound by any judgment against his transferors under the rules of res judicata.
[45]
  Thus, De Vera's interest cannot be considered and tried separately from the interest
of the named defendants.

It was therefore wrong for the trial court to have tried Medrano's case against the named
defendants (by allowing Medrano to present evidence ex parte against them) after it had
already admitted De Vera's answer.  What the trial court should have done is to treat De
Vera (as transferee pendente lite) as having been joined as a party-defendant, and to
try the case on the basis of the answer De Vera had filed and with De Vera's
participation.  As transferee pendente lite, De Vera may be allowed to join the original
defendants under Rule 3, Section 19:

SEC. 19.  Transfer of interest.  - In case of any transfer of interest, the action may be
continued by or against the original party, unless the court upon motion directs the
person to whom the interest is transferred to be substituted in the action or joined with
the original party.  (Emphasis supplied)

The above provision gives the trial court discretion to allow or disallow the substitution
or joinder by the transferee. Discretion is permitted because, in general, the transferee's
interest is deemed by law as adequately represented and protected by the participation
of his transferors in the case.  There may be no need for the transferee pendente lite to
be substituted or joined in the case because, in legal contemplation, he is not really
denied protection as his interest is one and the same as his transferors, who are
already parties to the case.[46]

While the rule allows for discretion, the paramount consideration for the exercise thereof
should be the protection of the parties' interests and their rights to due process.  In the
instant case, the circumstances demanded that the trial court exercise its discretion in
favor of allowing De Vera to join in the action and participate in the trial.  It will be
remembered that the trial court had already admitted De Vera's answer when it declared
the original defendants in default.  As there was a transferee pendente lite whose
answer had already been admitted, the trial court should have tried the case on the
basis of that answer, based on Rule 9, Section 3(c):

Effect of partial default. - When a pleading asserting a claim states a common cause of
action against several defending parties, some of whom answer and the others fail to do
so, the court shall try the case against all upon the answers thus filed and render
judgment upon the evidence presented.

Thus, the default of the original defendants should not result in the ex parte presentation
of evidence because De Vera (a transferee pendente lite who may thus be joined as
defendant under Rule 3, Section 19) filed an answer.  The trial court should have tried
the case based on De Vera's answer, which answer is deemed to have been adopted
by the non-answering defendants.[47]

802
To proceed with the ex parte presentation of evidence against the named defendants
after De Vera's answer had been admitted would not only be a violation of Rule 9,
Section 3(c), but would also be a gross disregard of De Vera's right to due process. This
is because the ex parte presentation of evidence would result in a default judgment
which would bind not just the defaulting defendants, but also De Vera, precisely
because he is a transferee pendente lite.[48]  This would result in an anomaly wherein De
Vera would be bound by a default judgment even if he had filed an answer and
expressed a desire to participate in the case.

We note that under Rule 3, Section 19, the substitution or joinder of the transferee is
"upon motion", and De Vera did not file any motion for substitution or joinder.  However,
this technical flaw may be disregarded for the fact remains that the court had already
admitted his answer and such answer was on record when the ex parte presentation of
evidence was allowed by the court.  Because De Vera's answer had already been
admitted, the court should not have allowed the ex parte presentation of evidence.

We are not persuaded by petitioners' insistence that De Vera could not have
participated in the case because he did not file a motion to intervene.  The purpose of
intervention is to enable a stranger to an action to become a party in order for him to
protect his interest and for the court to settle all conflicting claims.  Intervention is
allowed to avoid multiplicity of suits more than on due process considerations.  The
intervenor can choose not to participate in the case and he will not be bound by the
judgment.

In this case, De Vera is not a stranger to the action but a transferee pendente lite.  As
mentioned, a transferee pendente lite is deemed joined in the pending action from the
moment when the transfer of interest is perfected.[49]  His participation in the case should
have been allowed by due process considerations. [50]

We likewise adopt with approval the appellate court's observation that De Vera's failure
to file a pleading-in-intervention will not change the long foregone violation of his right to
due process.  The ex parte presentation of evidence had already been terminated when
the trial court required De Vera to file his pleading-in-intervention. Even if he complied
with the order to file a pleading-in-intervention, the damage had already been done. 
The precipitate course of action taken by the trial court rendered compliance with its
order moot.

Given the Court's finding that the ex parte presentation of evidence constituted a

violation of due process rights, the trial court's judgment by default cannot bind De
Vera.  A void judgment cannot attain finality and its execution has no basis in law.  The
case should be remanded to the trial court for trial based on De Vera's answer and with
his participation.

Certiorari petition before the CA proper

803
Petitioners point out that De Vera admitted receiving the trial court's Order denying his
motion for reconsideration on July 28, 2003.  Thus he only had until August 12, 2003 to
file an appeal of the decision.  Having lost his right to appeal by allowing the period
therefor to lapse, respondent has also lost his right to file a petition for certiorari before
the CA. A special civil action for certiorari is not a substitute for the lost remedy of
appeal.

Respondent argues that a Rule 65 certiorari petition before the CA is proper because an

ordinary appeal would not have been speedy and adequate remedy to properly relieve
him from the injurious effects of the trial court's orders.

We agree with respondent that ordinary appeal was not an adequate remedy under the
circumstances of the case.  An appeal seeks to correct errors of judgment committed by
a court, which has jurisdiction over the person and the subject matter of the dispute.  In
the instant case, the trial court maintained that it had no jurisdiction over De Vera
because it did not consider him a party to the case.  Its stance is that De Vera, as a
non-party to the case, could not participate therein, much less assail any of the orders,
resolutions, or judgments of the trial court. An appeal would have been an illusory
remedy in this situation because his notice of appeal would have certainly been denied
on the ground that he is not a party to the case.

On the other hand, certiorari is an extraordinary remedy for the correction of errors of

jurisdiction.  It is proper if the court acted without or in grave abuse of discretion
amounting to lack or excess of jurisdiction and there is no appeal or any plain, speedy,
and adequate remedy in law.  Given the circumstance that the final decision in Civil
Case No. U-7316 prejudices De Vera's rights despite the fact that he was not
recognized as a party thereto and was not allowed to assail any portion thereof, De
Vera's remedy was to annul the trial court proceedings on the ground that it was
conducted with grave abuse of discretion amounting to lack of jurisdiction.  With such
annulment, the trial court should hear the case anew with De Vera fully participating
therein.

WHEREFORE, the petition is DENIED.  The June 25, 2004 Decision of the Court of
Appeals in CA-G.R. SP No. 80053 and its October 6, 2004 Resolution are AFFIRMED.

Costs against petitioners.

SO ORDERED.

FIRST DIVISION

G.R. No. 183952               September 9, 2013

CZARINA T. MALVAR, Petitioner,
vs.

804
KRAFT FOOD PHILS., INC. and/or BIENVENIDO BAUTISTA, KRAFT FOODS
INTERNATIONAL, Respondents.

DECISION

BERSAMIN, J.:

Although the practice of law is not a business, an attorney is entitled to be properly

compensated for the professional services rendered for the client, who is bound by her
express agreement to duly compensate the attorney. The client may not deny her
attorney such just compensation.

The Case

The case initially concerned the execution of a final decision of the Court of Appeals
(CA) in a labor litigation, but has mutated into a dispute over attorney's fees between
the winning employee and her attorney after she entered into a compromise agreement
with her employer under circumstances that the attorney has bewailed as designed to
prevent the recovery of just professional fees.

Antecedents

On August 1, 1988, Kraft Foods (Phils.), Inc. (KFPI) hired Czarina Malvar (Malvar) as its
Corporate Planning Manager. From then on, she gradually rose from the ranks,
becoming in 1996 the Vice President for Finance in the Southeast Asia Region of Kraft
Foods International (KFI),KFPI’s mother company. On November 29, 1999, respondent
Bienvenido S. Bautista, as Chairman of the Board of KFPI and concurrently the Vice
President and Area Director for Southeast Asia of KFI, sent Malvar a memo directing
her to explain why no administrative sanctions should be imposed on her for possible
breach of trust and confidence and for willful violation of company rules and regulations.
Following the submission of her written explanation, an investigating body was formed.
In due time, she was placed under preventive suspension with pay. Ultimately, on
March 16, 2000, she was served a notice of termination.

Obviously aggrieved, Malvar filed a complaint for illegal suspension and illegal dismissal
against KFPI and Bautista in the National Labor Relations Commission (NLRC). In a
decision dated April 30, 2001,1 the Labor Arbiter found and declared her suspension
and dismissal illegal, and ordered her reinstatement, and the payment of her full
backwages, inclusive of allowances and other benefits, plus attorney’s fees.

On October 22, 2001, the NLRC affirmed the decision of the Labor Arbiter but
additionally ruled that Malvar was entitled to "any and all stock options and bonuses she
was entitled to or would have been entitled to had she not been illegally dismissed from
her employment," as well as to moral and exemplary damages. 2

805
KFPI and Bautista sought the reconsideration of the NLRC’s decision, but the NLRC
denied their motion to that effect.3

Undaunted, KFPI and Bautista assailed the adverse outcome before the CA on
certiorari (CA-G.R. SP No. 69660), contending that the NLRC thereby committed grave
abuse of discretion. However, the petition for certiorari was dismissed by the CA on
December 22, 2004, but with the CA reversing the order of reinstatement and instead
directing the payment of separation pay to Malvar, and also reducing the amounts
awarded as moral and exemplary damages.4

After the judgment in her favor became final and executory on March14, 2006, Malvar
moved for the issuance of a writ of execution.5 The Executive Labor Arbiter then
referred the case to the Research and Computation Unit (RCU) of the NLRC for the
computation of the monetary awards under the judgment. The RCU’s computation
ultimately arrived at the total sum of ₱41,627,593.75. 6

On November 9, 2006, however, Labor Arbiter Jaime M. Reyno issued an

order,7 finding that the RCU’s computation lacked legal basis for including the salary
increases that the decision promulgated in CA-G.R. SP No. 69660 did not include.
Hence, Labor Arbiter Reyno reduced Malvar’s total monetary award to ₱27,786,378.11,
viz:

WHEREFORE, premises considered, in so far as the computation of complainant’s

other benefits and allowances are concerned, the same are in order. However, insofar
as the computation of her backwages and other monetary benefits (separation pay,
unpaid salary for January 1 to 26, 2005,holiday pay, sick leave pay, vacation leave pay,
13th month pay), the same are hereby recomputed as follows:

1. Separation Pay
8/1/88-1/26/05 = 16 yrs
₱344,575.83 x 16 = 5,513,213.28
2. Unpaid Salary
1/1-26/05 = 87 mos.
₱344,575.83 x 87 = 299,780.97
3. Holiday Pay
4/1/00-1/26/05 = 55 holidays
₱4,134,910/12 mos/20.83 days x 55 days 909,825.77
4. Unpaid 13th month pay for Dec 2000 344,575.83
5. Sick Leave Pay
Year 1999 to 2004 = 6 yrs

806
 ₱344,575.88/20.83 x 15 days x 6 = 1,488,805.79
Year 2005
₱344,575.83/20.83 x 15/12 x 1 20,677.86 1,509,483.65
6. Vacation Leave Pay
Year 1999 to 2004 = 6 years
₱344,575.88/20.83 x 22 days x 6 = 2,183,581.83
Year 2005
₱344,575.83/20.83 x 22/12 x 1 30,327.55 2,213,909.36

10,790,788.86
Backwages (from 3/7/00-4/30/01, award in LA Sytian’s
4,651,773.75
Decision
Allowances & Other Benefits:
Management Incentive Plan 7,355,166.58
Cash Dividend on Philip Morris Shares 2,711,646.00
Car Maintenance 381,702.92
Gas Allowance 198,000.00
Entitlement to a Company Driver 438,650.00
Rice Subsidy 58,650.00
Moral Damages 500,000.00
Exemplary Damages 200,000.00
Attorney’s Fees 500,000.00
Entitlement to Philip Sch G Subject to
"Share Option Grant" Market Price

27,786,378.11

SO ORDERED.

Both parties appealed the computation to the NLRC, which, on April19, 2007, rendered
its decision setting aside Labor Arbiter Reyno’s November 9, 2006 order, and adopting
the computation by the RCU.8

807
In its resolution dated May 31, 2007,9 the NLRC denied the respondents’ motion for
reconsideration.

Malvar filed a second motion for the issuance of a writ of execution to enforce the
decision of the NLRC rendered on April 19, 2007. After the writ of execution was issued,
a partial enforcement as effected by garnishing the respondents’ funds deposited with
Citibank worth 37,391,696.06.10

On July 27, 2007, the respondents went to the CA on certiorari (with prayer for the
issuance of a temporary restraining order (TRO) or writ of preliminary injunction),
assailing the NLRC’s setting aside of the computation by Labor Arbiter Reyno (CA-G.R.
SP No. 99865). The petition mainly argued that the NLRC had gravely abused its
discretion in ruling that: (a) the inclusion of the salary increases and other monetary
benefits in the award to Malvar was final and executory; and (b) the finality of the ruling
in CA-G.R. SP No. 69660 precluded the respondents from challenging the inclusion of
the salary increases and other monetary benefits. The CA issued a TRO, enjoining the
NLRC and Malvar from implementing the NLRC’s decision. 11

On April 17, 2008, the CA rendered its decision in CA-G.R. SP No. 99865, 12 disposing
thusly:

WHEREFORE, premises considered, the herein Petition is GRANTED and the 19 April
2007 Decision of the NLRC and the 31May 2007 Resolution in NLRC NCR 30-07-
02316-00 are hereby REVERSED and SET ASIDE.

The matter of computation of monetary awards for private respondent is hereby

REMANDED to the Labor Arbiter and he is DIRECTED to recompute the monetary
award due to private respondent based on her salary at the time of her termination,
without including projected salary increases. In computing the said benefits, the Labor
Arbiter is further directed to DISREGARD monetary awards arising from: (a) the
management incentive plan and (b) the share option grant, including cash dividends
arising therefrom without prejudice to the filing of the appropriate remedy by the private
respondent in the proper forum. Private respondent’s allowances for car maintenance
and gasoline are likewise DELETED unless private respondent proves, by appropriate
receipts, her entitlement thereto.

With respect to the Motion to Exclude the Undisputed Amount of ₱14,252,192.12 from
the coverage of the Writ of Preliminary Injunction and to order its immediate release, the
same is hereby GRANTED for reasons stated therefor, which amount shall be deducted
from the amount to be given to private respondent after proper computation.

As regards the Motions for Reconsideration of the Resolution denying the Motion for
Voluntary Inhibition and the Omnibus Motion dated 30 October 2007, both motions are
hereby DENIED for lack of merit.

SO ORDERED.13

808
Malvar sought reconsideration, but the CA denied her motion on July30, 2008. 14

Aggrieved, Malvar appealed to the Court, assailing the CA’s decision.

On December 9, 2010, while her appeal was pending in this Court, Malvar and the
respondents entered into a compromise agreement, the pertinent dispositive portion of
which is quoted as follows:

NOW, THEREFORE, for and in consideration of the covenants and understanding

between the parties herein, the parties hereto have entered into this Agreement on the
following terms and conditions:

1. Simultaneously upon execution of this Agreement in the presence of Ms. Malvar’s

attorney, KFPI shall pay Ms. Malvar the amount of Philippine Pesos Forty Million (Php
40,000,000.00), which is in addition to the Philippine Pesos Fourteen Million Two
Hundred Fifty-Two Thousand One Hundred Ninety-Two and Twelve Centavos
(Php14,252,192.12) already paid to and received by Ms. Malvar from KFPI in
August2008 (both amounts constituting the "Compromise Payment").

The Compromise Payment includes full and complete payment and settlement of Ms.
Malvar’s salaries and wages up to the last day of her employment, allowances, 13th and
14th month pay, cash conversion of her accrued vacation, sick and emergency leaves,
separation pay, retirement pay and such other benefits, entitlements, claims for stock,
stock options or other forms of equity compensation whether vested or otherwise and
claims of any and all kinds against KFPI and KFI and Altria Group, Inc., their
predecessors-in-interest, their stockholders, officers, directors, agents or successors-in-
interest, affiliates and subsidiaries, up to the last day of the aforesaid cessation of her
employment.

2. In consideration of the Compromise Payment, Ms. Malvar hereby freely and

voluntarily releases and forever discharges KFPI and KFI and Altria Group, Inc., their
predecessors or successors-in-interest, stockholders, officers, including Mr. Bautista
who was impleaded in the Labor Case as a party respondent, directors, agents or
successors-in-interest, affiliates and subsidiaries from any and all manner of action,
cause of action, sum of money, damages, claims and demands whatsoever in law or in
equity which Ms. Malvar or her heirs, successors and assigns had, or now have against
KFPI and/or KFI and/or Altria Group, Inc., including but not limited to, unpaid wages,
salaries, separation pay, retirement pay, holiday pay, allowances, 13th and 14th month
pay, claims for stock, stock options or other forms of equity compensation whether
vested or otherwise whether arising from her employment contract, company grant,
present and future contractual commitments, company policies or practices, or
otherwise, in connection with Ms. Malvar’s employment with KFPI. 15

xxxx

809
Thereafter, Malvar filed an undated Motion to Dismiss/Withdraw Case, 16 praying that the
appeal be immediately dismissed/withdrawn in view of the compromise agreement, and
that the case be considered closed and terminated.

Intervention

Before the Court could act on Malvar’s Motion to Dismiss/Withdraw Case, the Court
received on February 15, 2011 a so-called Motion for Intervention to Protect Attorney’s
Rights17 from The Law Firm of Dasal, Llasos and Associates, through its Of Counsel
Retired Supreme Court Associate Justice Josue N. Bellosillo 18 (Intervenor), whereby the
Intervenor sought, among others, that both Malvar and KFPI be held and ordered to pay
jointly and severally the Intervenor’s contingent fees.

The Motion for Intervention relevantly averred:

xxxx

Lawyers, oftentimes, are caricatured as alligators or some other specie of voracious

carnivore; perceived also as leeches sucking dry the blood of their adversaries, and
even their own clients they are sworn to serve and protect! As we lay down the facts in
this case, this popular, rather unpopular, perception will be shown wrong. This case is a
reversal of this perception.

xxxx

Here, it is the lawyer who is eaten up alive by the warring but conspiring litigants who
finally settled their differences without the knowledge, much less, participation, of
Petitioner’s counsel that labored hard and did everything to champion her cause.

xxxx

This Motion for Intervention will illustrate an aberration from the norm where the lawyer
ends up seeking protection from his client’s and Respondents’ indecent and cunning
maneuverings. x x x.

xxxx

On 18 March 2008 Petitioner engaged the professional services of Intervenor x x x on a

contingency basis whereby the former agreed in writing to pay the latter contingency
fees amounting to almost ₱19,600,000.00 (10% of her total claim of almost
₱196,000,000.00 in connection with her labor case against Respondents. x x x.

xxxx

According to their agreement (Annex "A"), Petitioner bound herself to pay Intervenor
contingency fees as follows (a) 10% of ₱14,252, 192.12 upon its collection; (b) 10% of

810
the remaining balance of ₱41,627,593.75; and (c)10% of the value of the stock options
Petitioner claims to be entitled to, or roughly ₱154,000,000.00 as of April 2008.

xxxx

Intervenor’s efforts resulted in the award and partial release of Petitioner’s claim
amounting to ₱14,252,192.12 out of which Petitioner paid Intervenor 10% or
₱1,425,219.21 as contingency fees pursuant to their engagement agreement (Annex
"A"). Copy of the check payment of Petitioner payable to Intervenor’s Of Counsel is
attached as Annex "C".

xxxx

On 12 September 2008 Intervenor filed an exhaustive Petition for Review with the
Supreme Court containing 70 pages, including its Annexes "A" to "R", or a total of 419
pages against Respondents to collect on the balance of Petitioner’s claims amounting to
at least ₱27,000,000.00 and ₱154,000,000.00 the latter representing the estimated
value of Petitioner’s stock options as of April 2008.

xxxx

On 15 January 2009 Respondents filed their Comment to the Petition for Review.

xxxx

On 13 April 2009 Intervenor, in behalf of Petitioner, filed its Reply to the Comment.

xxxx

All the pleadings in this Petition have already been submitted on time with nothing more
to be done except to await the Resolution of this Honorable Court which, should the
petition be decided in her favor, Petitioner would stand to gain ₱182,000,000.00, more
or less, which victory would be largely through the efforts of Intervenor. 19 (Bold
emphasis supplied).

xxxx

It appears that in July 2009, to the Intervenor’s surprise, Malvar unceremoniously and
without any justifiable reason terminated its legal service and required it to withdraw
from the case.20 Hence, on October 5,2009, the Intervenor reluctantly filed a
Manifestation (With Motion to Withdraw as Counsel for Petitioner), 21 in which it spelled
out: (a) the terms of and conditions of the Intervenor’s engagement as counsel; (b) the
type of legal services already rendered by the Intervenor for Malvar; (c) the absence of
any legitimate reason for the termination of their attorney-client relationship; (d) the
reluctance of the Intervenor to withdraw as Malvar’s counsel; and (e) the desire of the
Intervenor to assert and claim its contingent fee notwithstanding its withdrawal as

811
counsel. The Intervenor prayed that the Court furnish it with copies of resolutions,
decisions and other legal papers issued or to be issued after its withdrawal as counsel
of Malvar in the interest of protecting its interest as her attorney.

The Intervenor indicated that Malvar’s precipitate action had baffled, shocked and even
embarrassed the Intervenor, because it had done everything legally possible to serve
and protect her interest. It added that it could not recall any instance of conflict or
misunderstanding with her, for, on the contrary, she had even commended it for its
dedication and devotion to her case through her following letter to Justice Bellosillo, to
wit:

July 16, 2008

Justice Josue Belocillo (sic)

Dear Justice,

It is almost morning of July 17 as I write this letter to you. Let me first thank you for your
continued and unrelenting lead, help and support in the case. You have been our "rock"
as far as this case is concerned. Jun and I are forever grateful to you for all your help. I
just thought I’d express to you what is in the innermost of my heart as we proceed in the
case. It has been around four months now since we met mid-March early this year.

The most important and immediate aspect of the case at this time for me is the
collection of the undisputed amount of Pesos 14million which the Court has clearly
directed and ordered the NLRC to execute. The only impending constraint for NLRC to
execute and collect this amount from the already garnished amount of Pesos 41 million
at Citibank is the MR of Kraft on the Order of the Court (CA) to execute collection. We
need to get a denial of this motion for NLRC to execute immediately. We already
obtained commitment from NLRC that all it needed to execute collection is the denial of
the MR. Jun and I applaud your initiative and efforts to mediate with Romulo on
potential settlement. However, as I expressed to you in several instances, I have
serious reservations on the willingness of Romulo to settle within reasonable amounts
specifically as it relates to the stock options. Let us continue to pursue this route
vigorously while not setting aside our efforts to influence the CA to DENY their Motion
on the Undisputed amount of Pesos 14million.

At this point, I cannot overemphasize to you our need for funds. We have made
financial commitments that require us to raise some amount. But we can barely meet
our day to day business and personal requirements given our current situation right
now.

Thank you po for your understanding and support. 22

According to the Intervenor, it was certain that the compromise agreement was
authored by the respondents to evade a possible loss of ₱182,000,000.00 or more as a

812
result of the labor litigation, but considering the Intervenor’s interest in the case as well
as its resolve in pursuing Malvar’s interest, they saw the Intervenor as a major
stumbling block to the compromise agreement that it was then brewing with her.
Obviously, the only way to remove the Intervenor was to have her terminate its services
as her legal counsel. This prompted the Intervenor to bring the matter to the attention of
the Court to enable it to recover in full its compensation based on its written agreement
with her, averring thus:

xxxx

28. Upon execution of the Compromise Agreement and pursuant thereto, Petitioner
immediately received (supposedly) from Respondents₱40,000,000.00. But despite the
settlement between the parties, Petitioner did not pay Intervenor its just compensation
as set forth in their engagement agreement; instead, she immediately moved to
Dismiss/Withdraw the Present Petition.

29. To parties’ minds, with the dismissal by Petitioner of Intervenor as her counsel, both
Petitioner and Respondents probably thought they would be able to settle the case
without any cost to them, with Petitioner saving on Intervenor’s contingent fees while
Respondents able to take advantage of the absence of Intervenor in determining the
settlement price.

30. The parties cannot be any more mistaken. Pursuant to the Second Paragraph of
Section 26, Rule 138, of the Revised Rules of Court quoted in paragraph 3 hereof,
Intervenor is still entitled to recover from Petitioner the full compensation it deserves as
stipulated in its contract.

31. All the elements for the full recovery of Intervenor’s compensation are present. First,
the contract between the Intervenor and Petitioner is reduced into writing. Second,
Intervenor is dismissed without justifiable cause and at the stage of proceedings where
there is nothing more to be done but to await the Decision or Resolution of the Present
Petition.23

xxxx

In support of the Motion for Intervention, the Intervenor cites the rulings in Aro v.
Nañawa24 and Law Firm of Raymundo A. Armovit v. Court of Appeals, 25 particularly the
following passage:

x x x. While We here reaffirm the rule that "the client has an undoubted right to
compromise a suit without the intervention of his lawyer," We hold that when such
compromise is entered into in fraud of the lawyer, with intent to deprive him of the fees
justly due him, the compromise must be subject to the said fees and that when it is
evident that the said fraud is committed in confabulation with the adverse party who had
knowledge of the lawyer’s contingent interest or such interest appears of record and
who would benefit under such compromise, the better practice is to settle the matter of

813
the attorney’s fees in the same proceeding, after hearing all the affected parties and
without prejudice to the finality of the compromise agreement in so far as it does not
adversely affect the right of the lawyer.26 x x x.

The Intervenor prays for the following reliefs:

a) Granting the Motion for Intervention to Protect Attorney’s Rights in favor of the
Intervenor;

b) Directing both Petitioner and Respondents jointly and severally to pay

Intervenor its contingent fees;

c) Granting a lien upon all judgments for the payment of money and executions
issued in pursuance of such judgments; and

d) Holding in Abeyance in the meantime the Resolution of the Motion to

Dismiss/Withdraw Case filed by Petitioner and granting the Motion only after
Intervenor has been fully paid its just compensation; and

e) Other reliefs just and equitable.27

Opposing the Motion for Intervention,28 Malvar stresses that there was no truth to the
Intervenor’s claim to defraud it of its professional fees; that the Intervenor lacked the
legal capacity to intervene because it had ceased to exist after Atty. Marwil N. Llasos
resigned from the Intervenor and Atty. Richard B. Dasal became barred from private
practice upon his appointment as head of the Legal Department of the Small Business
Guarantee and Finance Corporation, a government subsidiary; and that Atty. Llasos
and Atty. Dasal had personally handled her case.

Malvar adds that even assuming, arguendo, that the Intervenor still existed as a law
firm, it was still not entitled to intervene for the following reasons, namely: firstly, it failed
to attend to her multiple pleas and inquiries regarding the case, as when
communications to the Intervenor through text messages were left unanswered;
secondly, maintaining that this was a justifiable cause to dismiss its services, the
Intervenor only heeded her repeated demands to withdraw from the case when Atty.
Dasal was confronted about his appointment to the government subsidiary; thirdly, it
was misleading and grossly erroneous for the Intervenor to claim that it had rendered to
her full and satisfactory services when the truth was that its participation was strictly
limited to the preparation, finalization and submission of the petition for review with the
Supreme Court; and finally, while the Intervenor withdrew its services on October 5,
2009, the compromise agreement was executed with the respondents on December
9,2010 and notarized on December 14, 2010, after more than a year and two months,
dispelling any badge of bad faith on their end.

On June 21, 2011, the respondents filed their comment to the Intervenor’s Motion for
Intervention.

814
On November 18, 2011, the Intervenor submitted its position on the respondent’s
comment dated June 21, 2011,29 and thereafter the respondents sent in their reply. 30

Issues

The issues for our consideration and determination are two fold, namely: (a) whether or
not Malvar’s motion to dismiss the petition on the ground of the execution of the
compromise agreement was proper; and (b) whether or not the Motion for Intervention
to protect attorney’s rights can prosper, and, if so, how much could it recover as
attorney’s fees.

Ruling of the Court

We shall decide the issues accordingly.

1.

Client’s right to settle litigation

by compromise agreement, and
to terminate counsel; limitations

A compromise agreement is a contract, whereby the parties undertake reciprocal

obligations to avoid litigation, or put an end to one already commenced. 31 The client
may enter into a compromise agreement with the adverse party to terminate the
litigation before a judgment is rendered therein. 32 If the compromise agreement is found
to be in order and not contrary to law, morals, good customs and public policy, its
judicial approval is in order.33 A compromise agreement, once approved by final order of
the court, has the force of res judicata between the parties and will not be disturbed
except for vices of consent or forgery.34

A client has an undoubted right to settle her litigation without the intervention of the
attorney, for the former is generally conceded to have exclusive control over the subject
matter of the litigation and may at anytime, if acting in good faith, settle and adjust the
cause of action out of court before judgment, even without the attorney’s
intervention.35 It is important for the client to show, however, that the compromise
agreement does not adversely affect third persons who are not parties to the
agreement.36

By the same token, a client has the absolute right to terminate the attorney-client
relationship at any time with or without cause. 37 But this right of the client is not
unlimited because good faith is required in terminating the relationship. The limitation is
based on Article 19 of the Civil Code, which mandates 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." The right is also subject to the
right of the attorney to be compensated. This is clear from Section 26, Rule 138 of the
Rules of Court, which provides:

815
Section 26. Change of attorneys. - An attorney may retire at anytime from any action or
special proceeding, by the written consent of his client filed in court. He may also retire
at any time from an action or special proceeding, without the consent of his client,
should the court, on notice to the client and attorney, and on hearing, determine that he
ought to be allowed to retire. In case of substitution, the name of the attorney newly
employed shall be entered on the docket of the court in place of the former one, and
written notice of the change shall be given to the adverse party.

A client may at any time dismiss his attorney or substitute another in his place, but if the
contract between client and attorney has been reduced to writing and the dismissal of
the attorney was without justifiable cause, he shall be entitled to recover from the client
the full compensation stipulated in the contract. However, the attorney may, in the
discretion of the court, intervene in the case to protect his rights. For the payment of his
compensation the attorney shall have a lien upon all judgments for the payment of
money, and executions issued in pursuance of such judgment, rendered in the case
wherein his services had been retained by the client. (Bold emphasis supplied)

In fine, it is basic that an attorney is entitled to have and to receive a just and
reasonable compensation for services performed at the special instance and request of
his client. The attorney who has acted in good faith and honesty in representing and
serving the interests of the client should be reasonably compensated for his service. 38

2.

Compromise agreement is to be approved

despite favorable action on the
Intervenor’s Motion for Intervention

On considerations of equity and fairness, the Court disapproves of the tendencies of

clients compromising their cases behind the backs of their attorneys for the purpose of
unreasonably reducing or completely setting to naught the stipulated contingent
fees.39 Thus, the Court grants the Intervenor’s Motion for Intervention to Protect
Attorney’s Rights as a measure of protecting the Intervenor’s right to its stipulated
professional fees that would be denied under the compromise agreement. The Court
does so in the interest of protecting the rights of the practicing Bar rendering
professional services on contingent fee basis.

Nonetheless, the claim for attorney’s fees does not void or nullify the compromise
agreement between Malvar and the respondents. There being no obstacles to its
approval, the Court approves the compromise agreement. The Court adds, however,
that the Intervenor is not left without a remedy, for the payment of its adequate and
reasonable compensation could not be annulled by the settlement of the litigation
without its participation and conformity. It remains entitled to the compensation, and its
right is safeguarded by the Court because its members are officers of the Court who are
as entitled to judicial protection against injustice or imposition of fraud committed by the
client as much as the client is against their abuses as her counsel. In other words, the

816
duty of the Court is not only to ensure that the attorney acts in a proper and lawful
manner, but also to see to it that the attorney is paid his just fees. Even if the
compensation of the attorney is dependent only on winning the litigation, the
subsequent withdrawal of the case upon the client’s initiative would not deprive the
attorney of the legitimate compensation for professional services rendered. 40

The basis of the intervention is the written agreement on contingent fees contained in
the engagement executed on March 19, 2008 between Malvar and the Intervenor, 41 the
pertinent portion of which stipulated that the Intervenor would "collect ten percent (10%)
of the amount of Ph₱14,252,192.12 upon its collection and another ten percent (10%) of
the remaining balance of Ph₱41,627,593.75 upon collection thereof, and also ten
percent (10%) of whatever is the value of the stock option you are entitled to under the
Decision." There is no question that such arrangement was a contingent fee agreement
that was valid in this jurisdiction, provided the fees therein fixed were reasonable. 42

We hold that the contingent fee of 10% of ₱41,627,593.75 and 10% of the value of the
stock option was reasonable. The ₱41,627,593.75 was already awarded to Malvar by
the NLRC but the award became the subject of the appeal in this Court because the CA
reversed the NLRC. Be that as it may, her subsequent change of mind on the amount
sought from the respondents as reflected in the compromise agreement should not
negate or bar the Intervenor’s recovery of the agreed attorney’s fees.

Considering that in the event of a dispute between the attorney and the client as to the
amount of fees, and the intervention of the courts is sought, the determination requires
that there be evidence to prove the amount of fees and the extent and value of the
services rendered, taking into account the facts determinative thereof, 43 the history of
the Intervenor’s legal representation of Malvar can provide a helpful predicate for
resolving the dispute between her and the Intervenor.

The records reveal that on March 18, 2008, Malvar engaged the professional services
of the Intervenor to represent her in the case of illegal dismissal. At that time, the case
was pending in the CA at the respondents’ instance after the NLRC had set aside the
RCU’s computation of Malvar’s backwages and monetary benefits, and had upheld the
computation arrived at by the NLRC Computation Unit. On April 17, 2008, the CA set
aside the assailed resolution of the NLRC, and remanded the case to the Labor Arbiter
for the computation of her monetary awards. It was at this juncture that the Intervenor
commenced its legal service, which included the following incidents, namely:

a) Upon the assumption of its professional duties as Malvar’s counsel, a Motion

for Reconsideration of the Decision of the Court of Appeals dated April 17, 2008
consisting of thirty-eight pages was filed before the Court of Appeals on May 6,
2008.

b) On June 2, 2009, Intervenors filed a Comment to Respondents’ Motion for

Partial Reconsideration, said Comment consisted 8 pages.

817
 c) In the execution proceedings before Labor Arbiter Jaime Reyno, Intervenor
prepared and filed on Malvar’s behalf an "Ex-Parte Motion to Release to
Complainant the Undisputed amount of ₱14,252,192.12" in NLRC NCR Case No.
30-07-02716-00.

d) On July 29, 2000, Intervenor prepared and filed before theLabor Arbiter a
Comment to Respondents’ Opposition to the "Ex-Parte Motion to Release" and a
"Motion Reiterating Immediate Implementation of the Writ of Execution"

e) On August 6, 2008, Intervenor prepared and filed before the Labor Arbiter
Malvar’s Motion Reiterating Motion to Release the Amount of ₱14,252,192.12. 44

The decision promulgated on April 17, 2008 45 and the resolution promulgated on July
30, 200846 by the CA prompted Malvar to appeal on August 15, 2008 to this Court with
the assistance of the Intervenor. All the subsequent pleadings, including the reply of
April 13, 2009,47 were prepared and filed in Malvar’s behalf by the Intervenor.

Malvar should accept that the practice of law was not limited to the conduct of cases or
litigations in court but embraced also the preparation of pleadings and other papers
incidental to the cases or litigations as well as the management of such actions and
proceedings on behalf of the clients. 48 Consequently, fairness and justice demand that
the Intervenor be accorded full recognition as her counsel who discharged its
responsibility for Malvar’s cause to its successful end.

But, as earlier pointed out, although a client may dismiss her lawyer at any time, the
dismissal must be for a justifiable cause if a written contract between the lawyer and the
client exists.49

Considering the undisputed existence of the written agreement on contingent fees, the
question begging to be answered is: Was the Intervenor dismissed for a justifiable
cause?

We do not think so.

In the absence of the lawyer’s fault, consent or waiver, a client cannot deprive the
lawyer of his just fees already earned in the guise of a justifiable reason. Here, Malvar
not only downplayed the worth of the Intervenor’s legal service to her but also attempted
to camouflage her intent to defraud her lawyer by offering excuses that were not only
inconsistent with her actions but, most importantly, fell short of being justifiable.

The letter Malvar addressed to Retired Justice Bellosillo, who represented the
Intervenor, debunked her allegations of unsatisfactory legal service because she
thereby lavishly lauded the Intervenor for its dedication and devotion to the prosecution
of her case and to the protection of her interests. Also significant was that the attorney-
client relationship between her and the Intervenor was not severed upon Atty. Dasal’s
appointment to public office and Atty. Llasos’ resignation from the law firm. In other

818
words, the Intervenor remained as her counsel of record, for, as we held in Rilloraza,
Africa, De Ocampo and Africa v. Eastern Telecommunication Philippines, Inc., 50 a client
who employs a law firm engages the entire law firm; hence, the resignation, retirement
or separation from the law firm of the handling lawyer does not terminate the
relationship, because the law firm is bound to provide a replacement.

The stipulations of the written agreement between Malvar and the Intervenors, not being
contrary to law, morals, public policy, public order or good customs, were valid and
binding on her. They expressly gave rise to the right of the Intervenor to demand
compensation. In a word, she could not simply walk away from her contractual
obligations towards the Intervenor, for Article 1159 of the Civil Code provides that
obligations arising from contracts have the force of law between the parties and should
be complied with in good faith.

To be sure, the Intervenor’s withdrawal from the case neither cancelled nor terminated
the written agreement on the contingent attorney’s fees. Nor did the withdrawal
constitute a waiver of the agreement. On the contrary, the agreement continued
between them because the Intervenor’s Manifestation (with Motion to Withdraw as
Counsel for Petitioner)explicitly called upon the Court to safeguard its rights under the
written agreement, to wit:

WHEREFORE, premises considered, undersigned counsel respectfully pray that instant

Motion to Withdraw as Counsel for Petitioner be granted and their attorney’s lien
pursuant to the written agreement be reflected in the judgment or decision that may be
rendered hereafter conformably with par. 2, Sec. 26, Rule 138 of the Rules of Court.

Undersigned counsel further requests that they be furnished copy of the decision,
resolutions and other legal processes of this Honorable Court to enable them to protect
their interests.51

Were the respondents also liable?

The respondents would be liable if they were shown to have connived with Malvar in the
execution of the compromise agreement, with the intention of depriving the Intervenor of
its attorney’s fees. Thereby, they would be solidarily liable with her for the attorney’s
fees as stipulated in the written agreement under the theory that they unfairly and
unjustly interfered with the Intervenor’s professional relationship with Malvar.

The respondents insist that they were not bound by the written agreement, and should
not be held liable under it.1âwphi1

We disagree with the respondents’ insistence. The respondents were complicit in

Malvar’s move to deprive the Intervenor of its duly earned contingent fees.

First of all, the unusual timing of Malvar’s letter terminating the Intervenor’s legal
representation of her, of her Motion to Dismiss/Withdraw Case, and of the execution of

819
compromise agreement manifested her desire to evade her legal obligation to pay to the
Intervenor its attorney’s fees for the legal services rendered. The objective of her
withdrawal of the case was to release the respondents from all her claims and causes of
action in consideration of the settlement in the stated amount of ₱40,000.000.00, a sum
that was measly compared to what she was legally entitled to, which, to begin with,
already included the ₱41,627,593.75 and the value of the stock option already awarded
to her. In other words, she thereby waived more than what she was lawfully expected to
receive from the respondents.

Secondly, the respondents suddenly turned around from their strong stance of berating
her demand as offensive to all precepts of justice and fair play and as a form of unjust
enrichment for her to a surprisingly generous surrender to her demand, allowing to her
through their compromise agreement the additional amount of ₱40,000,000.00 on top of
the₱14,252,192.12 already received by her in August 2008. The softening unavoidably
gives the impression that they were now categorically conceding that Malvar deserved
much more. Under those circumstances, it is plausible to conclude that her termination
of the Intervenor’s services was instigated by their prodding in order to remove the
Intervenor from the picture for being a solid obstruction to the settlement for a much
lower liability, and thereby save for themselves and for her some more amount.

Thirdly, the compromise agreement was silent on the Intervenor’s contingent fee,
indicating that the objective of the compromise agreement was to secure a huge
discount from its liability towards Malvar.

Finally, contrary to the stipulation in the compromise agreement, only Malvar, minus the
respondents, filed the Motion to Dismiss/Withdraw Case.

At this juncture, the Court notes that the compromise agreement would have Malvar
waive even the substantial stock options already awarded by the NLRC’s
decision,52 which ordered the respondents to pay to her, among others, the value of the
stock options and all other bonuses she was entitled to or would have been entitled to
had she not been illegally dismissed from her employment. This ruling was affirmed by
the CA.53 But the waiver could not negate the Intervenor’s right to 10% of the value of
the stock options she was legally entitled to under the decisions of the NLRC and the
CA, for that right was expressly stated in the written agreement between her and the
Intervenor. Thus, the Intervenor should be declared entitled to recover full
compensation in accordance with the written agreement because it did not assent to the
waiver of the stock options, and did not waive its right to that part of its compensation.

These circumstances show that Malvar and the respondents needed an escape from
greater liability towards the Intervenor, and from the possible obstacle to their plan to
settle to pay. It cannot be simply assumed that only Malvar would be liable towards the
Intervenor at that point, considering that the Intervenor, had it joined the negotiations as
her lawyer, would have tenaciously fought all the way for her to receive literally
everything that she was entitled to, especially the benefits from the stock option. Her
rush to settle because of her financial concerns could have led her to accept the

820
respondents’ offer, which offer could be further reduced by the Intervenor’s expected
demand for compensation. Thereby, she and the respondents became joint tort-feasors
who acted adversely against the interests of the Intervenor. Joint tort-feasors are those
who command, instigate, promote, encourage, advise, countenance, cooperate in, aid
or abet the commission of a tort, or who approve of it after it is done, if done for their
benefit.54

They are also referred to as those who act together in committing wrong or whose acts,
if independent of each other, unite in causing a single injury. 55 Under Article 2194 of the
Civil Code, joint tort-feasors are solidarily liable for the resulting damage. As regards the
extent of their respective liabilities, the Court said in Far Eastern Shipping Company v.
Court of Appeals:56

x x x. Where several causes producing an injury are concurrent and each is an efficient
cause without which the injury would not have happened, the injury may be attributed to
all or any of the causes and recovery may be had against any or all of the responsible
persons although under the circumstances of the case, it may appear that one of them
was more culpable, and that the duty owed by them to the injured person was not same.
No actor’s negligence ceases to be a proximate cause merely because it does not
exceed the negligence of other acts. Each wrongdoer is responsible for the entire result
and is liable as though his acts were the sole cause of the injury.

There is no contribution between joint tort-feasors whose liability is solidary since both
of them are liable for the total damage. Where the concurrent or successive negligent
acts or omissions of two or more persons, although acting independently, are in
combination the direct and proximate cause of a single injury to a third person, it is
impossible to determine in what proportion each contributed to the injury and either of
them is responsible for the whole injury. x x x

Joint tort-feasors are each liable as principals, to the same extent and in the same
manner as if they had performed the wrongful act themselves. It is likewise not an
excuse for any of the joint tort-feasors that individual participation in the tort was
insignificant as compared to that of the other. 57 To stress, joint tort-feasors are not liable
pro rata. The damages cannot be apportioned among them, except by themselves.
They cannot insist upon an apportionment, for the purpose of each paying an aliquot
part. They are jointly and severally liable for the whole amount. 58 Thus, as joint tort-
feasors, Malvar and the respondents should be held solidarily liable to the Intervenor.
There is no way of appreciating these circumstances except in this light.

That the value of the stock options that Malvar waived under the compromise
agreement has not been fixed as yet is no hindrance to the implementation of this
decision in favor of the Intervenor. The valuation could be reliably made at a
subsequent time from the finality of this adjudication. It is enough for the Court to hold
the respondents and Malvar solidarily liable for the 10% of that value of the stock
options.

821
As a final word, it is necessary to state that no court can shirk from enforcing the
contractual stipulations in the manner they have agreed upon and written. As a rule, the
courts, whether trial or appellate, have no power to make or modify contracts between
the parties. Nor can the courts save the parties from disadvantageous provisions. 59 The
same precepts hold sway when it comes to enforcing fee arrangements entered into in
writing between clients and attorneys. In the exercise of their supervisory authority over
attorneys as officers of the Court, the courts are bound to respect and protect the
attorney’s lien as a necessary means to preserve the decorum and respectability of the
Law Profession.60 Hence, the Court must thwart any and every effort of clients already
served by their attorneys’ worthy services to deprive them of their hard-earned
compensation. Truly, the duty of the courts is not only to see to it that attorneys act in a
proper and lawful manner, but also to see to it that attorneys are paid their just and
lawful fees.61

WHEREFORE, the Court APPROVES the compromise agreement; GRANTS the

Motion for Intervention to Protect Attorney's Rights; and ORDERS Czarina T. Malvar
and respondents Kraft Food Philippines Inc. and Kraft Foods International to jointly and
severally pay to Intervenor Law Firm, represented by Retired Associate Justice Josue
N. Bellosillo, its stipulated contingent fees of 10% of ₱41,627,593.75, and the further
sum equivalent to 10% of the value of the stock option. No pronouncement on costs of
suit.

SO ORDERED.

FIRST DIVISION

G.R. No. 157583               September 10, 2014

FRUMENCIO E. PULGAR, Petitioner,
vs.
THE REGIONAL TRIAL COURT OF MAUBAN, QUEZON, BRANCH 64, QUEZON
POWER (PHILIPPINES) LIMITED, CO., PROVINCE OF QUEZON, and
DEPARTMENT OF FINANCE, Respondents.

RESOLUTION

PERLAS-BERNABE, J.:

This is a direct recourse to the Court via a petition for review on Certiorari 1 assailing the
Orders dated December 2, 20022 and March 13, 20033 issued by the Regional Trial
Court of Mauban, Quezon, Branch 64 (RTC) which dismissed Civil Case No. 0587-M on
jurisdictional grounds and, concomitantly, petitioner Frumencio E. Pulgar's (Pulgar)
motion for intervention therein.

The Facts4

822
Sometime in 1999, the Municipal Assessor of Mauban, Quezon issued 34 tax
declarations on the buildings and machinery comprising the Mauban Plant – a coal-fired
electric generation facility owned and operated by respondent Quezon Power
(Philippines) Limited, Co. (QPL) – and thereby assessed it with a total market value of
29,626,578,291.00 and, hence, 500 Million, more or less, in realty taxes per annum.
The Municipal Assessor maintained that the Mauban Plant was completed and already
operational in October 1999.Subsequently, or on May 18, 2000, QPL filed with the
Municipal Assessor a sworn statement declaring that the said properties had a value
ofonly ₱15,055,951,378.00.5

On March 16 and 23, 2001, QPL tendered to the Municipal Assessor the amount of
₱60,223,805.51 as first quarter installment of the realty taxes on the plant, which the
latter rejected.6 Hence, QPL filed a Complaint for Consignation and Damages 7 before
the RTC against the Province of Quezon, the Municipal Assessor and Municipal
Treasurer of Mauban, Quezon, and the Provincial Assessor and Provincial Treasurer of
Quezon (defendants), docketed as Civil Case No. 0587-M, depositing to the RTC the
above-stated amount in payment of the first quarter realty tax for 2001. 8 Albeit classified
as a consignation and damages case, QPL essentially protested the Municipal
Assessor’s assessment for,among others, its lack of legal authority to make such
assessment and its supposed non-compliance with the prescribed valuation process. 9

For their part,10 defendants averred, among others, that QPL was estopped from
denying the authority of the Municipal Assessor since it previously paid realty taxes for
its properties for the year 2001 based on the assessment of the latter.

On January 28, 2002, Pulgar filed a Motion for Leave to Admit Answer-in-
Intervention11 and Answer-in-Intervention12 (motion for intervention), alleging, among
others, that as a resident and taxpayer of Quezon Province, he has an interest inthe
aggressive collection of realty taxes against QPL. By way of counterclaim, he prayed for
the award of moral damages and attorney’s fees, anchoring the same on the "mindless
disturbance of the forest and marineenvironment whereon the power plant of [QPL]
stands."13 Pulgar’s motion was initiallygranted and his Answer-inIntervention was
admitted.14

Sometime in June 2002, QPL and the Province of Quezon agreed to submit their
dispute before the Secretary of Finance, which resulted in a Resolution 15 dated August
30, 2002 where the basic issues between the principal parties were passed upon.

The RTC Ruling

In an Order16 dated December 2, 2002, the RTC dismissed Civil Case No. 0587-M for
lack of jurisdiction in the absence of a payment of the tax assessed under protest, which
requirement QPL attempted to skirt by alleging in its complaint that it is the very
authority of the Municipal Assessor to impose the assessment and the treasurer to
collect the tax that it was questioning. Declaring that QPL’s complaint essentially
challenged the amount of the taxes assessed, the RTC ruled that it is the Local Board of

823
Assessment Appeals that had jurisdiction over the complaint. Consequently, it also
dismissed Pulgar’s motion for intervention since with the dismissal of the main case, the
samehad no leg to stand on.17

Aggrieved, Pulgar filed a motion for reconsideration which was, however, denied in an
Order18 dated March 13, 2003, hence, this petition.

The Issue Before The Court

The issue advanced before the Court is whether or not the RTC erred in dismissing
Pulgar’s motion for intervention as a consequence of the dismissal of the main case.
Whileacknowledging the RTC’s lack of jurisdiction, Pulgar nonetheless prays that the
Court pass upon the correctness of the Municipal Assessor’s assessment of QPL’s
realty taxes, among others.

The Court’s Ruling

The petition lacks merit.

Jurisdiction over an intervention is governed by jurisdiction over the main

action.19 Accordingly, an intervention presupposes the pendency of a suit in a court of
competent jurisdiction.20

In this case, Pulgar does not contest the RTC's dismissal of Civil Case No. 0587-M for
lack of jurisdiction, but oddly maintains his intervention by asking in this appeal a review
of the correctness of the subject realty tax assessment. This recourse, the Court,
however, finds to be improper since the RTC's lack of jurisdiction over the main case
necessarily resulted in the dismissal of his intervention.1âwphi1 In other words, the
cessatiori of the principal litigation - on jurisdictional grounds at that - means that Pulgar
had, as a matter of course, lost his right to intervene. Verily, it must be borne in mind
that:

[I]ntervention is never an independent action, but is ancillary and supplemental to the

existing litigation. Its purpose is not to obstruct nor x x x unnecessarily delay the placid
operation of the machinery of trial, but merely to afford one not an original party, yet
having a certain right or interest in the pending case, the opportunity to appear and be
joined so he could assert or protect such right or interests.

Otherwise stated, the right of an intervenor should only be in aid of the right of the
original party. Where the right of the latter has ceased to exist, there is nothing to aid or
fight for; hence, the right of intervention ceases. 21

WHEREFORE, the petition is DENIED.

SO ORDERED.

824
 THIRD DIVISION

G.R. No. 178789 : November 14, 2012

NATIVIDAD LIM, Petitioner, v. NATIONAL POWER CORPORATION, SPOUSES

ROBERTO LL. ARCINUE and ARABELA ARCINUE, Respondents.

DECISION

ABAD, J.:

This case is about the consequence of a party's failure to explain in his motion why he
served a copy of it on the adverse party by registered mail rather than by personal
service.

The Facts and the Case

On February 8, 1995 respondent National Power Corporation (NPC) filed an

expropriation suit1Ï‚rνll against petitioner Natividad B. Lim (Lim) before the Regional
Trial Court (RTC) of Lingayen, Pangasinan, Branch 37 in Civil Case 17352 covering
Lots 2373 and 2374 that the NPC needed for its Sual Coal-Fired Thermal Power
Project. Since Lim was residing in the United States, the court caused the service of
summons on her on February 20, 1995 through her tenant, a certain Wilfredo
Tabongbong.2Ï‚rνll On March 1, 1995, upon notice to Lim and the deposit of the
provisional value of the property, the RTC ordered the issued writ of possession in
NPCs favor that would enable it to cause the removal of Lim from the land. 3ςrνll

On April 24, 1995, however, Lim, represented by her husband Delfin, filed an omnibus
motion to dismiss the action and to suspend the writ of possession, 4Ï‚rνll questioning
the RTCs jurisdiction over Lims person and the nature of the action. She also assailed
the failure of the complaint to state a cause of action. The RTC denied the
motions.5ςrνll

On December 6, 1996 respondent spouses Roberto and Arabela Arcinue (the Arcinues)
filed a motion for leave to admit complaint in intervention, 6Ï‚rνll alleging that they
owned and were in possession of Lot 2374, one of the two lots subject of the
expropriation. On January 7, 1997 the RTC granted the Arcinues motion and required
both the NPC and Lim to answer the complaint-in-intervention within 10 days from
receipt of its order.7ςrνll

When Lim and the NPC still did not file their answers to the complaint-in-intervention
after 10 months, on December 7, 1998 the Arcinues filed a motion for judgment by
default.8Ï‚rνll Lim sought to expunge the motion on the ground that it lacked the
requisite explanation why the Arcinues resorted to service by registered mail rather than
to personal service. At the scheduled hearing of the motion, Lims counsel did not
appear. The NPC for its part manifested that it did not file an answer since its interest
lay in determining who was entitled to just compensation.

825
On March 1, 1999 the RTC issued an order of default9 against both Lim and the NPC.
The RTC pointed out that the Arcinues failure to explain their resort to service by
registered mail had already been cured by the manifestation of Lims counsel that he
received a copy of the Arcinues motion on December 7, 1998 or 10 days before its
scheduled hearing. Lim filed a motion for reconsideration 10Ï‚rνll to lift the default order
but the Court denied the motion,11Ï‚rνll prompting Lim to file a petition for
certiorari12Ï‚rνll before the Court of Appeals (CA) in CA-G.R. SP 52842.

On March 23, 2007 the CA rendered a decision 13Ï‚rνll that affirmed the RTCs order of
default. Lim filed a motion for reconsideration 14Ï‚rνll but the CA denied
it,15Ï‚rνll prompting her to file the present petition for review. 16Ï‚rνll On September 24,
2007 the Court initially denied Lims petition 17Ï‚rνll but on motion for reconsideration, the
Court reinstated the same.18ςrνll

Issue Presented

The only issue presented in this case is whether or not the CA gravely abused its
discretion in affirming the order of default that the RTC entered against Lim.

Ruling of the Court

Lim points out that an answer-in-intervention cannot give rise to default since the filing
of such an answer is only permissive. But Section 4, Rule 19 19Ï‚rνll of the 1997 Rules
of Civil Procedure requires the original parties to file an answer to the complaint-in-
intervention within 15 days from notice of the order admitting the same, unless a
different period is fixed by the court. This changes the procedure under the former rule
where such an answer was regarded as optional. 20Ï‚rνll Thus, Lims failure to file the
required answer can give rise to default.

The trial court had been liberal with Lim. It considered her motion for reconsideration as
a motion to lift the order of default and gave her an opportunity to explain her side. The
court set her motion for hearing but Lims counsel did not show up in court. She
remained unable to show that her failure to file the required answer was due to fraud,
accident, mistake, or excusable negligence. And, although she claimed that she had a
meritorious defense, she was unable to specify what constituted such defense. 21ςrνll

Lim points out that the RTC should have ordered the Arcinues motion for judgment by
default expunged from the records since it lacked the requisite explanation as to why
they resorted to service by registered mail in place of personal service.

There is no question that the Arcinues motion failed to comply with the requirement of
Section 11, Rule 13 of the 1997 Rules of Civil Procedure which
provides:chanroblesvirtuallawlibrary

SECTION 11. Priorities in modes of service and filing. Whenever practicable, the
service and filing of pleadings and other papers shall be done personally. Except with
respect to papers emanating from the court, a resort to other modes must be

826
accompanied by a written explanation, why the service or filing was not done
personally. A violation of this Rule may be cause to consider the paper as not filed.

But the above does not provide for automatic sanction should a party fail to submit the
required explanation. It merely provides for that possibility considering its use of the
term "may." The question is whether or not the RTC gravely abused its discretion in not
going for the sanction of striking out the erring motion.

The Court finds no such grave abuse of discretion here. As the RTC pointed out,
notwithstanding that the Arcinues' failed to explain their resort to service by registered
mail rather than by personal service, the fact is that Lim's counsel expressly admitted
having received a copy of the Arcinues' motion for judgment by default on December 7,
1998 or I 0 days before its scheduled hearing. This means that the Arcinues were
diligent enough to file their motion by registered mail long before the scheduled hearing.

Personal service is required precisely because it often happens that hearings do not
push through because, while a copy of the motion may have been served by registered
mail before the date of the hearing, such is received by the adverse party already after
the hearing. Thus, the rules prefer personal service. But it does not altogether prohibit
service by registered mail when such service, when adopted, ensures as in this case
receipt by the adverse party.ςηαοblενιrυαllαωlιbrαr

WHEREFORE, the Court DENIES the petition and AFFIRMS the Court of Appeals
Decision in CA-G.R. SP 52842 dated March 23, 2007 and Resolution dated July 5,
2007 that upheld the orders of the Regional Trial Court in Civil Case 17352. The Court
DIRECTS the RTC to proceed with its hearing and adjudication of the case.Ï‚rαlαÏ
‰lιbrαr

SO ORDERED.

DISCOVERY

EN BANC

[G.R. No. 152375 : December 16, 2011]

REPUBLIC OF THE PHILIPPINES, PETITIONER, VS SANDIGANBAYAN (FOURTH

DIVISION), JOSE L. AFRICA (SUBSTITUTED BY HIS HEIRS), MANUEL H. NIETO,
JR., FERDINAND E. MARCOS (SUBSTITUTED BY HIS HEIRS), IMELDA R.
MARCOS, FERDINAND R. MARCOS, JR., JUAN PONCE ENRILE, AND
POTENCIANO ILUSORIO (SUBSTITUTED BY HIS HEIRS), RESPONDENTS.

DECISION

BRION, J.:

827
Before us is the petition for certiorari[1] filed by the Republic of the Philippines (petitioner)
to set aside the February 7, 2002 resolution (2002 resolution)[2] of the
Sandiganbayan[3] denying the  petitioner's Motion  to Admit Supplemental Offer of
Evidence (Re: Deposition of Maurice V. Bane) (3 rd motion).cralaw

THE ANTECEDENTS

On July 22, 1987, the petitioner Republic of the Philippines, through the Presidential
Commission on Good Government (PCGG), filed a complaint (docketed as Civil Case
No. 0009) against Jose L. Africa, Manuel H. Nieto, Jr., Ferdinand E. Marcos, Imelda R.
Marcos, Ferdinand R. Marcos, Jr., Juan Ponce Enrile, and Potenciano Ilusorio
(collectively, the respondents) for reconveyance, reversion, accounting,
restitution, and damages before the Sandiganbayan. The petitioner alleged, inter alia,
that the respondents illegally manipulated the purchase of the major shareholdings of
Cable and Wireless Limited in Eastern Telecommunications Philippines, Inc. (ETPI),
which shareholdings respondents Jose Africa and Manuel Nieto, Jr. held for themselves
and, through their holdings and the corporations they organized, beneficially for
respondents Ferdinand E. Marcos and Imelda R. Marcos. [4]

Civil Case No. 0009 is the main case subject of the present petition. Victor Africa
(Africa), son of the late Jose L. Africa, was not impleaded in and so is plainly not
a party to Civil Case No. 0009.[5]

Civil Case No. 0009 spawned numerous incidental cases, [6] among them, Civil Case No.
0130.[7] The present respondents were not made parties either in Civil Case No.
0130.

I.  Civil Case No. 0130

In the August 7, 1991 PCGG-conducted ETPI stockholders meeting, a PCGG-controlled

board of directors was elected. Later, the registered ETPI stockholders convened a
special stockholders meeting wherein another set of board of directors was elected. As
a result, two sets of ETPI board and officers were elected. [8]

Thereafter, Africa, as an ETPI stockholder, filed a petition for certiorari, with prayer for a
temporary restraining order/preliminary injunction with the Sandiganbayan (docketed
as Civil Case No. 0130), seeking to nullify the August 5, 1991 and August 9, 1991
Orders of the PCGG.  These Orders directed Africa:

[T]o account for his sequestered shares in ETPI and to cease and desist from
exercising voting rights on the sequestered shares in the special stockholder' meeting to
be held on August 12, 1991, from representing himself as a director, officer, employee
or agent of ETPI, and from participating, directly or indirectly[,] in the management of
ETPI.[9]

During the pendency of Africa's petition, Civil Case No. 0130, Africa filed a motion with

828
the Sandiganbayan, alleging that since January 29, 1988 the PCGG had been 'illegally
'exercising' the rights of stockholders of ETPI,' [10] especially in the election of the
members of the board of directors. Africa prayed for the issuance of an order for the
'calling and holding of [ETPI] annual stockholders meeting for 1992 under the [c]ourt's
control and supervision and prescribed guidelines.' [11]

In its November 13, 1992 resolution, the Sandiganbayan favored Africa's motion in this
wise:

WHEREFORE, it is ordered that an annual stockholders meeting of the [ETPI], for 1992
be held on Friday, November 27, 1992, at 2:00 o'clock in the afternoon, at the ETPI
Board Room, Telecoms Plaza, 7th Floor, 316 Gil J. Puyat Avenue, Makati, Metro Manila.
x x x The stockholders meeting shall be conducted under the supervision and control of
this Court, through Mr. Justice Sabino R. de Leon, Jr. [O]nly the registered owners, their
duly authorized representatives or their proxies may vote their corresponding shares.

The following minimum safeguards must be set in place and carefully maintained until
final judicial resolution of the question of whether or not the sequestered shares of stock
(or in a proper case the underlying assets of the corporation concerned) constitute ill-
gotten wealth[.][12]

The PCGG assailed this resolution before this Court via a petition for certiorari docketed
as G.R. No. 107789[13] (PCGG's petition), imputing grave abuse of discretion on the
Sandiganbayan for holding, inter alia, that the registered stockholders of ETPI had the
right to vote.[14] In our November 26, 1992 Resolution, we enjoined the Sandiganbayan
from implementing its assailed resolution.

In the meantime, in an April 12, 1993 resolution, the Sandiganbayan ordered

the consolidation of Civil Case No. 0130, among others, with Civil Case No. 0009,
with the latter as the main case and the former merely an incident. [15]

During the pendency of PCGG's petition (G.R. No. 107789), the PCGG filed with this
Court a 'Very Urgent Petition for Authority to Hold Special Stockholders' Meeting for
[the] Sole Purpose of Increasing [ETPI's] Authorized Capital Stock' (Urgent Petition). In
our May 7, 1996 Resolution, we referred this Urgent Petition to the Sandiganbayan for
reception of evidence and immediate resolution.[16] The Sandiganbayan included the
Urgent Petition in Civil Case No. 0130.[17]cralaw

In the proceedings to resolve the Urgent Petition, the testimony of Mr. Maurice V. Bane
(former director and treasurer-in-trust of ETPI) was taken'“ at the petitioner's instance
and after serving notice of the deposition-taking on the respondents [18] '“ on October 23
and 24, 1996 by way of deposition upon oral examination (Bane deposition) before
Consul General Ernesto Castro of the Philippine Embassy in London, England.

Invoking Section 1, Rule 24 (of the old Rules of Court), purportedly allowing the
petitioner to depose Bane without leave of court, i.e., as a matter of right after the

829
defendants have filed their answer, the notice stated that '[t]he purpose of the
deposition is for [Bane] to identify and testify on the facts set forth in his affidavit [19] x x x
so as to prove the ownership issue in favor of [the petitioner] and/or establish the prima
facie factual foundation for sequestration of [ETPI's] Class A stock in support of the
[Urgent Petition].'[20] The notice also states that the petitioner shall use the Bane
deposition 'in evidence'¦ in the main case of Civil Case No. 0009.' [21] On the scheduled
deposition date, only Africa was present and he cross-examined Bane.

On December 13, 1996, the Sandiganbayan resolved the Urgent Petition by granting
authority to the PCGG (i) 'to cause the holding of a special stockholder' meeting of ETPI
for the sole purpose of increasing ETPI's authorized capital stock' and (ii) 'to vote
therein the sequestered Class 'A' shares of stock.' [22] Thus, a special stockholders
meeting was held, as previously scheduled, on March 17, 1997 and the increase in
ETPI's authorized capital stock was 'unanimously approved.' [23] From this ruling, Africa
went to this Court via a petition for certiorari[24] docketed as G.R. No. 147214 (Africa's
petition).

We jointly resolved the PCGG's and Africa's petitions, and ruled:

This Court notes that, like in Africa's motion to hold a stockholders meeting (to elect a
board of directors), the Sandiganbayan, in the PCGG's petition to hold a stockholders
meeting (to amend the articles of incorporation to increase the authorized capital stock),
again failed to apply the two-tiered test. On such determination hinges the validity of the
votes cast by the PCGG in the stockholders meeting of March 17, 1997. This lapse by
the Sandiganbayan leaves this Court with no other choice but to remand these
questions to it for proper determination.

xxxx

WHEREFORE, this Court Resolved to REFER the petitions at bar to the

Sandiganbayan for reception of evidence to determine whether there is a prima facie
evidence showing that the sequestered shares in question are ill-gotten and there is an
imminent danger of dissipation to entitle the PCGG to vote them in a stockholders
meeting to elect the ETPI Board of Directors and to amend the ETPI Articles of
Incorporation for the sole purpose of increasing the authorized capital stock of ETPI.

The Sandiganbayan shall render a decision thereon within sixty (60) days from receipt
of this Resolution and in conformity herewith.

II. Civil Case No. 0009

Although Civil Case No. 0009 was filed on July 22, 1987, it was only on November 29,
1996 and March 17, 1997 that the first pre-trial conference was scheduled and
concluded.[25]

830
In its Pre-Trial Brief[26] dated August 30, 1996, the petitioner offered to present the
following witnesses:

WITNESSES TO BE PRESENTED AND A BRIEF DESCRIPTION OF THEIR

TESTIMONIES

(1) Maurice V. Bane '“ representative of Cable and Wireless Limited (C & W) at the time
ETPI was organized.

xxxx

(2) Mr. Manuel H. Nieto '“ x x x

(3) Ms. Evelyn Singson '“ x x x

(4) Mr. Severino P. Buan, Jr. '“ x x x

(5) Mr. Apolinario K. Medina - x x x

(6) Mr. Potenciano A. Roque '“ x x x

(7) Caesar Parlade - x x x

IIa.  Motion to Admit the Bane Deposition

At the trial of Civil Case No. 0009, the petitioner filed a Motion[27] (1st motion), stating
that '“

1. In the hearings of the incidents of [Civil Case No. 0009], i.e., Civil Case
Nos. 0048, 0050, 0130, 0146[28] the following witnesses were presented
therein:

a.   Cesar O.V. Parlade

b.  Maurice Bane
c.   Evelyn Singson
d.  Leonorio Martinez
e.   Ricardo Castro; and
f.   Rolando Gapud

2. [The petitioner] wishes to adopt in [Civil Case No. 0009] their testimonies
and the documentary exhibits presented and identified by them, since their
testimonies and the said documentary exhibits are very relevant to prove
the case of the [petitioner] in [Civil Case No. 0009].

3. The adverse parties in the aforementioned incidents had the opportunity to

cross-examine them.

831
The respondents filed their respective Oppositions to the 1st motion; [29] in turn, the
petitioner filed a Common Reply[30] to these Oppositions.

On April 1, 1998, the Sandiganbayan[31] promulgated a resolution[32] (1998 resolution)

denying the petitioner's 1st motion, as follows:

Wherefore, the [petitioner's] Motion x x x is '“

1. partly denied insofar as [the petitioner] prays therein to adopt the

testimonies on oral deposition of Maurice V. Bane and Rolando Gapud as
part of its evidence in Civil Case No. 0009 for the reason that said
deponents according to the [petitioner] are not available for cross-
examination in this Court by the [respondents]. (emphasis added)

2. partly Granted, in the interest of speedy disposition of this long pending

case, insofar as plaintiff prays therein to adopt certain/particular
testimonies of Cesar O. Parlade, Evelyn Singson, Leoncio Martinez, and
Ricardo Castro and documentary exhibits which said witnesses have
identified in incident Civil Case Nos. xxx 0130 xxx, subject to the following
conditions :

1.  xxx
2.  xxx
3. That the said witnesses be presented in this Court so that they can
be cross-examined on their particular testimonies in incident Civil
Cases xxx [by the respondents].

IIb. Urgent Motion and/or Request for Judicial Notice

The petitioner did not in any way question the 1998 resolution, and instead made
its Formal Offer of Evidence on December 14, 1999.[33]  Significantly, the Bane
deposition was not included as part of its offered exhibits. Rectifying the omission,
the petitioner filed an Urgent Motion and/or Request for Judicial Notice [34] (2nd motion)
dated February 21, 2000, with the alternative prayer that:

1. An order forthwith be issued re-opening the plaintiff's case and setting the

same for trial any day in April 2000 for the sole purpose of introducing
additional evidence and limited only to the marking and offering of the
[Bane deposition] which already forms part of the records and used in Civil
Case No. 0130 x x x;

2. In the alternative, x x x the [Sandiganbayan] to take judicial notice of the

facts established by the [Bane deposition], together with the marked
exhibits appended thereto. [emphasis ours]

832
On August 21, 2000, the Sandiganbayan promulgated a resolution [35] (2000 resolution)
denying the petitioner's 2nd motion:

Judicial notice is found under Rule 129 which is titled 'What Need Not Be Proved.'
Apparently, this provision refers to the Court's duty to consider admissions made by the
parties in the pleadings, or in the course of the trial or other proceedings in resolving
cases before it. The duty of the Court is mandatory and in those cases where it is
discretionary, the initiative is upon the Court. Such being the case, the Court finds the
Urgent Motion and/or Request for Judicial Notice as something which need not be acted
upon as the same is considered redundant.

On the matter of the [Bane deposition], [its] admission is done through the
ordinary formal offer of exhibits wherein the defendant is given ample
opportunity to raise objection on grounds provided by law. Definitely, it is not under
Article (sic) 129 on judicial notice. [Emphasis ours]

On November 6, 2000 and on several dates thereafter, the respondents separately filed
their respective demurrers to evidence.[36] On the other hand, the petitioner moved for
the reconsideration of the 2000 resolution, but was rebuffed by the Sandiganbayan in its
April 3, 2001 resolution[37] (2001 resolution).

IIc. Motion to Admit Supplemental Offer of

Evidence (Re: Deposition of Maurice Bane)

On November 16, 2001, the petitioner filed its 3rd Motion, seeking once more the
admission of the Bane deposition. [38] On February 7, 2002 (pending resolution of the
respondents' demurrers to evidence),[39] the Sandiganbayan promulgated the
assailed 2002 resolution,[40] denying the petitioner's 3rd motion. The Sandiganbayan
ruled:

But in the court's view, it is not really a question of whether or not plaintiff has already
rested its case as to obviate the further presentation of evidence. It is not even a
question of whether the non-appearing defendants are deemed to have waived their
right to cross-examine Bane as to qualify the admission of the deposition sans such
cross-examination. Indeed, We do not see any need to dwell on these matters in view of
this Court's Resolution rendered on April 1, 1998 which already denied the introduction
in evidence of Bane's deposition and which has become final in view of plaintiff's
failure to file any motion for reconsideration or appeal within the 15-day
reglementary period. Rightly or wrongly, the resolution stands and for this court to
grant plaintiff's motion at this point in time would in effect sanction plaintiff's disregard
for the rules of procedure. Plaintiff has slept on its rights for almost two years and it was
only in February of 2000 that it sought to rectify its ineptitude by filing a motion to
reopen its case as to enable it to introduce and offer Bane's deposition as additional
evidence, or in the alternative for the court to take judicial notice of the allegations of the
deposition. But how can such a motion be granted when it has been resolved as early

833
as 1998 that the deposition is inadmissible. Without plaintiff having moved for
reconsideration within the reglementary period, the resolution has attained
finality and its effect cannot be undone by the simple expedient of filing a motion, which
though purporting to be a novel motion, is in reality a motion for reconsideration of
this court's 1998 ruling. [emphases ours]

The resolution triggered the filing of the present petition.

THE PETITION

The petitioner filed the present petition claiming that the Sandiganbayan committed
grave abuse of discretion:

I.

x x x IN HOLDING THAT ITS INTERLOCUTORY ORDER IN 1998 HAD BECOME

FINAL.

II.

x x x IN x x x REFUSING TO ADMIT THE BANE DEPOSITION '“WHICH WAS

ALREADY ADMITTED AS EVIDENCE IN AN INCIDENT CASE (CIVIL CASE NO.
0130) '“ AS PART OF PETITIONER'S EVIDENCE IN THE MAIN x x x CASE (CIVIL
CASE NO. 0009).

III.

x x x IN REFUSING TO ADMIT A HIGHLY RELEVANT AND IMPORTANT PIECE OF

EVIDENCE FOR THE PETITIONER ON THE BASIS OF FLIMSY AND TENUOUS
TECHNICAL GROUNDS.

The petitioner[41] argues that the 1998 resolution of the Sandiganbayan is merely an

interlocutory order; thus, the petitioner's failure to question this 1998 resolution could not
have given it a character of 'finality' so long as the main case remains pending. [42] On
this basis, the petitioner concludes that the Sandiganbayan's denial of its 3 rd motion was
plainly tainted with grave abuse of discretion.

On the issue of the Sandiganbayan's refusal (in its 2002 resolution) either to take
judicial notice of or to admit the Bane deposition as part of its evidence, the petitioner
asserts that Civil Case No. 0130 (where the Bane deposition was originally taken,
introduced and admitted in evidence) is but a 'child' of the 'parent' case, Civil Case No.
0009; under this relationship, evidence offered and admitted in any of the 'children'
cases should be considered as evidence in the 'parent' case.

Lastly, the petitioner claims that given the crucial importance of the Bane deposition, the

834
Sandiganbayan should not have denied its admission on 'flimsy grounds,' considering
that:

1. It was also already stated in the notice (of the taking of the Bane deposition) that
it would be used as evidence in Civil Case No. 0009.  Notices having been
duly served on all the parties concerned, they must accordingly be deemed to
have waived their right to cross-examine the witness when they failed to show
up.

2. The Bane deposition was a very vital cog in the case of the petitioner relative to
its allegation that the respondents' interest in ETPI and related firms properly
belongs to the government.br>
3. The non-inclusion of the Bane deposition in the petitioner's formal offer of
evidence was obviously excusable considering the period that had lapsed from
the time the case was filed and the voluminous records that the present case has
generated.[43]

THE RESPONDENTS' COMMENTS

and THE PETITIONER'S REPLY

In the respondents' Comments[44] (filed in compliance with our Resolution of April 10,

2002[45]), they claim that the present petition was filed out of time - i.e., beyond the 60-
day reglementary period prescribed under Section 4, Rule 65 of the Rules of Court.
[46]
 This assertion proceeds from the view that the petitioner's 3 rd motion, being a mere
rehash of similar motions earlier filed by the petitioner, likewise simply assails the
Sandiganbayan's 1998 resolution.  Along the same line, they posit that the petitioner's
3rd motion actually partakes of a proscribed third motion for reconsideration of the
Sandiganbayan's 1998 resolution.[47] They likewise assert, on the assumption that the
1998 resolution is interlocutory in character, that the petitioner's failure to contest the
resolution by way of certiorari within the proper period gave the 1998 resolution a
character of 'finality.'

The respondents further claim that after a party has rested its case, the admission of a
supplemental offer of evidence requires the reopening of the case at the discretion of
the trial court; the Sandiganbayan simply exercised its sound discretion in refusing to
reopen the case since the evidence sought to be admitted was 'within the knowledge of
the [petitioner] and available to [it] before [it] rested its case.' [48]  The respondents also
advert to the belated filing of the petitioner's 3rd motion '“ i.e., after the respondents had
filed their respective demurrers to evidence.

On the petitioner's claim of waiver, the respondents assert that they have not waived
their right to cross-examine the deponent; the Sandiganbayan recognized this right in its
1998 resolution and the petitioner never questioned this recognition. They also assert
that the allegations in the Bane deposition cannot be a proper subject of judicial notice
under Rule 129 of the Rules of Court. The respondents lastly submit that the Bane
835
deposition is inadmissible in evidence because the petitioner failed to comply with the
requisites for admission under Section 47, Rule 130 of the Rules of Court.

In its Reply,[49] the petitioner defends the timeliness of the present petition by arguing

that a party may opt to wait out and collect a pattern of questionable acts before
resorting to the extraordinary remedy of certiorari. The petitioner stresses that it filed the
3rd motion precisely because of the Sandiganbayan's 2000 resolution, which held that
the admission of the Bane deposition should be done through the ordinary formal offer
of evidence. Thus, the Sandiganbayan seriously erred in considering the petitioner's 3rd
motion as a proscribed motion for reconsideration.  The petitioner generally submits that
the dictates of substantial justice should have guided the Sandiganbayan to rule
otherwise.

The petitioner also clarifies that it has not yet rested its case although it has filed a
formal offer of evidence. A party normally rests his case only after the admission of the
pieces of evidence he formally offered; before then, he still has the opportunity to
present further evidence to substantiate his theory of the case should the court reject
any piece of the offered evidence. [50]

The petitioner further maintains that the mere reasonable opportunity to cross-examine
the deponent is sufficient for the admission of the Bane deposition considering that the
deponent is not an ordinary witness who can be easily summoned by our courts in light
of his foreign residence, his citizenship, and his advanced age. The petitioner asserts
that Rule 24 (now Rule 23), and not Section 47, Rule 130, of the Rules of Court should
apply to the present case, as explicitly stated in the notice of the deposition-taking.

To date, respondents Imelda Marcos and the heirs of Potenciano Ilusorio have yet to file
their respective comments on the petition. Given the time that had lapsed since we
required their comments, we resolve to dispense with the filing of these comments and
to consider this petition submitted for decision.

THE ISSUES

On the basis of the pleadings, we summarize the pivotal issues for our resolution, as
follows:

1. Whether the petition was filed within the required period.

2. Whether the Sandiganbayan committed grave abuse of discretion '“

i. In holding that the 1998 resolution has already attained finality;

ii. In holding that the petitioner's 3rd motion partakes of a prohibited

motion for reconsideration;

iii. In refusing to re-open the case given the critical importance of the
Bane deposition to the petitioner's cause; and

836
 iv. In refusing to admit the Bane deposition notwithstanding the prior
consolidation of Civil Case No. 0009 and Civil Case No. 0130.

3. Whether the Bane deposition is admissible under -

i. Rule 23, Section 4, par. (c) alone or in relation to Section 47, Rule
130 of the Rules of Court; and

ii. The principle of judicial notice.

THE COURT'S RULING

We deny the petition for lack of merit.

I.  Preliminary Considerations

I (a). The interlocutory nature of

the Sandiganbayan's 1998 resolution.

In determining the appropriate remedy or remedies available, a party aggrieved by a

court order, resolution or decision must first correctly identify the nature of the order,
resolution or decision he intends to assail. [51]  In this case, we must preliminarily
determine whether the 1998 resolution is 'final' or 'interlocutory' in nature.

Case law has conveniently demarcated the line between a final judgment or order and
an interlocutory one on the basis of the disposition made. [52] A judgment or order is
considered final if the order disposes of the action or proceeding completely, or
terminates a particular stage of the same action; in such case, the remedy available to
an aggrieved party is appeal. If the order or resolution, however, merely resolves
incidental matters and leaves something more to be done to resolve the merits of the
case, the order is interlocutory[53] and the aggrieved party's remedy is a petition for
certiorari under Rule 65.  Jurisprudence pointedly holds that:

As distinguished from a final order which disposes of the subject matter in its entirety or
terminates a particular proceeding or action, leaving nothing else to be done but to
enforce by execution what has been determined by the court, an interlocutory order
does not dispose of a case completely, but leaves something more to be adjudicated
upon. The term 'final' judgment or order signifies a judgment or an order which disposes
of the case as to all the parties, reserving no further questions or directions for future
determination.

On the other hand, a court order is merely interlocutory in character if it leaves

substantial proceedings yet to be had in connection with the controversy.  It does not
837
end the task of the court in adjudicating the parties' contentions and determining their
rights and liabilities as against each other.  In this sense, it is basically provisional in
its application.[54] (emphasis supplied)

Under these guidelines, we agree with the petitioner that the 1998 resolution is
interlocutory.  The Sandiganbayan's denial of the petitioner's 1st motion through the
1998 Resolution came at a time when the petitioner had not even concluded the
presentation of its evidence. Plainly, the denial of the motion did not resolve the merits
of the case, as something still had to be done to achieve this end.

We clarify, too, that an interlocutory order remains under the control of the court until the
case is finally resolved on the merits. The court may therefore modify or rescind the
order upon sufficient grounds shown at any time before final judgment. [55]  In this light,
the Sandiganbayan's 1998 resolution '“ which merely denied the adoption of the Bane
deposition as part of the evidence in Civil Case No. 0009 '“ could not have attained
finality (in the manner that a decision or final order resolving the case on the merits
does) despite the petitioner's failure to move for its reconsideration or to appeal. [56]

I (b). The 3rd motion was not

prohibited by the Rules.

We also agree with the petitioner that its 3 rd motion cannot be considered as a
proscribed third (actually second) motion for reconsideration of the Sandiganbayan's
1998 resolution. As Section 5, Rule 37 of the Rules of Court clearly provides, the
proscription against a second motion for reconsideration is directed against 'a judgment
or final order.' Although a second motion for reconsideration of an interlocutory order
can be denied on the ground that it is a mere "rehash" of the arguments already passed
upon and resolved by the court, it cannot be rejected on the ground that it is forbidden
by the law or by the rules as a prohibited motion. [57]

I (c).  The 1998 resolution was not ripe

for a petition for certiorari.

Under Section 1, Rule 41 of the Rules of Court, an aggrieved party may appeal from a
judgment or final order which completely disposes of a case or from an order that the
Rules of Court declares to be appealable. While this provision prohibits an appeal from
an interlocutory order, the aggrieved party is afforded the chance to question an
interlocutory order through a special civil action of certiorari under Rule 65; the petition
must be filed within sixty days from notice of the assailed judgment, order, resolution, or
denial of a motion for reconsideration.

On the premise that the 1998 resolution is interlocutory in nature, the respondents insist
that the 60-day period for filing a petition for certiorari should be reckoned from the
petitioner's notice of the Sandiganbayan's 1998 resolution. They argue that since this
ruling had long been rendered by the court, the petitioner's subsequent filing of similar
motions was actually a devious attempt to resuscitate the long-denied admission of the

838
Bane deposition.

We do not find the respondents' submission meritorious.  While the 1998 resolution is
an interlocutory order, as correctly argued by the petitioner and impliedly conceded by
the respondents, the claim that the 1998 resolution should have been immediately
questioned by the petitioner on certiorari is not totally correct as a petition for certiorari
is not grounded solely on the issuance of a disputed interlocutory ruling. [58] For a petition
for certiorari to prosper, Section 1, Rule 65 of the Rules of Court requires, among
others, that neither an appeal nor any plain, speedy and adequate remedy in the
ordinary course of law is available to the aggrieved party. As a matter of exception, the
writ of certiorari may issue notwithstanding the existence of an available alternative
remedy, if such remedy is inadequate or insufficient in relieving the aggrieved party of
the injurious effects of the order complained of. [59]

We note that at the time of its 1st motion in Civil Case No. 0009, the petitioner had not
yet concluded the presentation of its evidence, much less made any formal offer of
evidence. At this stage of the case, the prematurity of using the extraordinary remedy
of certiorari to question the admission of the Bane deposition is obvious.  After the
denial of the 1st motion, the plain remedy available to the petitioner was to move for a
reconsideration to assert and even clarify its position on the admission of the Bane
deposition. The petitioner could introduce [60] anew the Bane deposition and include this
as evidence in its formal offer[61] '“ as the petitioner presumably did in Civil Case No.
0130.

Thus, at that point, the case was not yet ripe for the filing of a petition for certiorari, and
the denial of the 1st motion could not have been the reckoning point for the period of
filing such a petition.

II. The Sandiganbayan's ruling on the finality

of its 1998 resolution was legally erroneous but
did not constitute grave abuse of discretion

In light of the above discussions and conclusions, the Sandiganbayan undoubtedly

erred on a question of law in its ruling, but this legal error did not necessarily amount to
a grave abuse of discretion in the absence of a clear showing that its action was a
capricious and whimsical exercise of judgment affecting its exercise of jurisdiction. [62] 
Without this showing, the Sandiganbayan's erroneous legal conclusion was only
an error of judgment, or, at best, an abuse of discretion but not a grave one.  For this
reason alone, the petition should be dismissed.

Despite this conclusion, however, we opt not to immediately dismiss the petition in light
of the unique circumstances of this case where the petitioner cannot entirely be faulted
for not availing of the remedy at the opportune time, and where the case, by its nature,
is undoubtedly endowed with public interest and has become a matter of public
concern.[63]  In other words, we opt to resolve the petition on the merits to lay the issues
raised to rest and to avoid their recurrence in the course of completely resolving the

839
merits of Civil Case No. 0009.

Although the word 'rested' nowhere appears in the Rules of Court, ordinary court
procedure has inferred it from an overview of trial sequence under  Section  5,  Rule 30 
(which  capsulizes  the order of presentation of a party's evidence during trial), read in
relation to Rule 18 on Pre-Trial,[64] both of the Rules of Court.  Under Section 5, Rule 30,
after a party has adduced his direct evidence in the course of discharging the burden of
proof,[65] he is considered to have rested his case, and is thereafter allowed to offer
rebutting evidence only.[66] Whether a party has rested his case in some measure
depends on his manifestation in court on whether he has concluded his presentation of
evidence.[67]

In its second and third motions, respectively, the petitioner expressly admitted that 'due
to oversight, [the petitioner] closed and rested its case';[68] and that it 'had terminated
the presentation of its evidence in x x x Civil Case No. 0009.'[69]  In the face of these
categorical judicial admissions,[70] the petitioner cannot suddenly make an about-face
and insist on the introduction of evidence out of the usual order. Contrary to the
petitioner's assertion, the resting of its case could not have been conditioned on the
admission of the evidence it formally offered. To begin with, the Bane deposition, which
is the lone piece of evidence subject of this present petition, was not among the pieces
of evidence included in its formal offer of evidence and thus could not have been
admitted or rejected by the trial court.

The Court observes with interest that it was only in this present petition for certiorari that
the petitioner had firmly denied having rested its case. [71]  Before then, the petitioner
never found it appropriate to question on certiorari the Sandiganbayan's denial of its
2nd motion which prayed, inter alia, for the reopening of the case. This is a fatal defect
in the petitioner's case.

Although the denial of the petitioner's first motion did not necessitate an immediate
recourse to the corrective writ of certiorari, the denial of the 2nd motion dictated a
different course of action. The petitioner's non-observance of the proper procedure for
the admission of the Bane deposition, while seemingly innocuous, carried fatal
implications for its case.  Having been rebuffed on its first attempt to have the Bane
deposition adopted in Civil Case No. 0009, and without seeking reconsideration of the
denial, the petitioner presented its other pieces of evidence and eventually rested its
case. This time, the petitioner forgot about the Bane deposition and so failed to include
that piece of evidence in its formal offer of evidence.

More than two years later, the petitioner again tried to squeeze in the Bane deposition
into its case. In resolving the petitioner's motion for reconsideration of the
Sandiganbayan's 2000 resolution, the Sandiganbayan held that the Bane deposition
has 'become part and parcel' of Civil Case No. 0009. This pronouncement has obscured
the real status of the Bane deposition as evidence (considering that, earlier, the
Sandiganbayan already denied the petitioner's attempt to adopt the Bane deposition as
evidence in Civil Case No. 0009 for the deponent cannot be cross-examined in court).

840
Nevertheless, the Sandiganbayan ultimately denied the petitioner's motion to reopen
the case. Having judicially admitted the resting of its case, the petitioner should have
already questioned the denial of its 2nd motion by way of certiorari, since the denial of
its attempt to reopen the case effectively foreclosed all avenues available to it for the
consideration of the Bane deposition. Instead of doing so, however, the petitioner
allowed the 60-day reglementary period, under Section 4, Rule 65 of the Rules of
Court, to lapse, and proceeded to file its 3rd motion.

Significantly, the petitioner changed its legal position in its 3 rd motion by denying having
rested its case and insisting on the introduction of the Bane deposition. Rebuffed once
more, the petitioner filed the present petition, inviting our attention to the
Sandiganbayan's resolutions,[72] which allegedly gave it 'mixed signals.'[73] By pointing to
these resolutions, ironically, even the petitioner impliedly recognized that they were then
already ripe for review on certiorari. What the petitioner should have realized was that
its 2nd motion unequivocally aimed to reopen the case for the introduction of further
evidence consisting of the Bane deposition. Having been ultimately denied by the court,
the petitioner could not have been prevented from taking the proper remedy
notwithstanding any perceived ambiguity in the resolutions.

On the other end, though, there was nothing intrinsically objectionable in the petitioner's
motion to reopen its case before the court ruled on its formal offer of evidence. The
Rules of Court does not prohibit a party from requesting the court to allow it to present
additional evidence even after it has rested its case. Any such opportunity, however, for
the ultimate purpose of the admission of additional evidence is already addressed to
the sound discretion of the court.  It is from the prism of the exercise of this discretion
that the Sandiganbayan's refusal to reopen the case (for the purpose of introducing,
'marking and offering' additional evidence) should be viewed.  We can declare this
Sandiganbayan action invalid if it had acted with grave abuse of discretion.

III.  The Sandiganbayan gravely abused its

discretion in ultimately refusing to reopen
the case for the purpose of introducing and
admitting in evidence the Bane deposition

The basis for a motion to reopen a case to introduce further evidence is Section 5, Rule
30 of the Rules of Court, which reads:

Sec. 5. Order of trial. '“ Subject to the provisions of section 2 of Rule 31, and unless the
court for special reasons otherwise directs, the trial shall be limited to the issues stated
in the pre-trial order and shall proceed as follows:

xxxx

(f) The parties may then respectively adduce rebutting evidence only, unless the court,
for good reasons and in the furtherance of justice, permits them to adduce
evidence upon their original case[.]  [emphases ours]

841
Under this rule, a party who has the burden of proof must introduce, at the first instance,
all the evidence he relies upon[74] and such evidence cannot be given piecemeal. [75] The
obvious rationale of the requirement is to avoid injurious surprises to the other party and
the consequent delay in the administration of justice. [76]

A party's declaration of the completion of the presentation of his evidence prevents him
from introducing further evidence;[77] but where the evidence is rebuttal in character,
whose necessity, for instance, arose from the shifting of the burden of evidence from
one party to the other;[78] or where the evidence sought to be presented is in the nature
of newly discovered evidence,[79] the party's right to introduce further evidence must be
recognized. Otherwise, the aggrieved party may avail of the remedy of certiorari.

Largely, the exercise of the court's discretion [80] under the exception of Section 5(f), Rule
30 of the Rules of Court depends on the attendant facts '“ i.e., on whether the
evidence would qualify as a 'good reason' and be in furtherance of 'the interest of
justice.'  For a reviewing court to properly interfere with the lower court's exercise of
discretion, the petitioner must show that the lower court's action was attended by grave
abuse of discretion.  Settled jurisprudence has defined this term as the capricious and
whimsical exercise of judgment, equivalent to lack of jurisdiction; or, the exercise of
power in an arbitrary manner by reason of passion, prejudice, or personal hostility, so
patent or so gross as to amount to an evasion of a positive duty, to a virtual refusal to
perform the mandated duty, or to act at all in contemplation of the law. [81]  Grave abuse
of discretion goes beyond the bare and unsupported imputation of caprice, whimsicality
or arbitrariness, and beyond allegations that merely constitute errors of judgment [82] or
mere abuse of discretion.[83]

In Lopez v. Liboro,[84] we had occasion to make the following pronouncement:

After the parties have produced their respective direct proofs, they are allowed to offer
rebutting evidence only, but, it has been held, the court, for good reasons, in the
furtherance of justice, may permit them to offer evidence upon their original case, and
its ruling will not be disturbed in the appellate court where no abuse of discretion
appears. So, generally, additional evidence is allowed when it is newly discovered,
or where it has been omitted through inadvertence or mistake, or where the
purpose of the evidence is to correct evidence previously offered. The omission to
present evidence on the testator's knowledge of Spanish had not been deliberate. It was
due to a misapprehension or oversight. (citations omitted; emphases ours)

Likewise, in Director of Lands v. Roman Archbishop of Manila,[85] we ruled:

The strict rule is that the plaintiff must try his case out when he commences.
Nevertheless, a relaxation of the rule is permitted in the sound discretion of the court.
'The proper rule for the exercise of this discretion,' it has been said by an eminent
author, 'is, that material testimony should not be excluded because offered by the
plaintiff after the defendant has rested, although not in rebuttal, unless it has

842
been kept back by a trick, and for the purpose of deceiving the defendant and
affecting his case injuriously.'

These principles find their echo in Philippine remedial law. While the general rule is
rightly recognized, the Code of Civil Procedure authorizes the judge 'for special
reasons,' to change the order of the trial, and "for good reason, in the furtherance of
justice," to permit the parties 'to offer evidence upon their original case.' These
exceptions are made stronger when one considers the character of registration
proceedings and the fact that where so many parties are involved, and action is taken
quickly and abruptly, conformity with precise legal rules should not always be
expected. Even at the risk of violating legal formulæ, an opportunity should be
given to parties to submit additional corroborative evidence in support of their
claims of title, if the ends of justice so require. (emphases ours)

In his commentaries, Chief Justice Moran had this to say:

However, the court for good reasons, may, in the furtherance of justice, permit the
parties to offer evidence upon their original case, and its ruling will not be disturbed
where no abuse of discretion appears, Generally, additional evidence is allowed when
x x x; but it may be properly disallowed where it was withheld deliberately and
without justification.[86]

The weight of the exception is also recognized in foreign jurisprudence. [87]

Under these guidelines, we hold that the Sandiganbayan gravely abused its
discretion in refusing to reopen the case. Instead of squarely ruling on the
petitioner's 2nd motion to avoid any uncertainty on the evidentiary status of the Bane
deposition, the Sandiganbayan's action actually left the petitioner's concern in limbo by
considering the petitioner's motion 'redundant.' This is tantamount to a refusal to
undertake a positive duty as mandated by the circumstances and is equivalent to an act
outside the contemplation of law.

It has not escaped our notice that at the time the petitioner moved to re-open its case,
the respondents had not yet even presented their evidence in chief. The respondents,
therefore, would not have been prejudiced by allowing the petitioner's introduction of the
Bane deposition, which was concededly omitted 'through oversight.' [88]  The higher
interest of substantial justice, of course, is another consideration that cannot be taken
lightly.[89]

In light of these circumstances, the Sandiganbayan should not have perfunctorily

applied Section 5, Rule 30 of the Rules of Court on the petitioner's request to reopen
the case for the submission of the Bane deposition.

On the basis of this conclusion, a remand of this case should follow as a matter of
course.  The state of the parties' submissions and the delay that has already attended
this aspect of Civil Case No. 0009, however, dictate against this obvious course of

843
action. At this point, the parties have more than extensively argued for or against the
admission of the Bane deposition.  Civil Case No. 0009 is a 25-year old sequestration
case that is now crying out for complete resolution.  Admissibility, too, is an issue that
would have again been raised on remand and would surely stare us in the face after
remand.[90] We are thus left with no choice but to resolve the issue of admissibility of the
Bane deposition here and now.

IV.  The admissibility of the Bane deposition

IV (a). The consolidation of Civil Case No. 0009 and Civil Case No. 0130 did not
dispense with the usual requisites of admissibility

In support of its 3rd motion, the petitioner argues that the Bane deposition can be
admitted in evidence without observing the provisions of Section 47, Rule 130 of the
Rules of Court.[91] The petitioner claims that in light of the prior consolidation of Civil
Case No. 0009 and Civil Case No. 0130, among others, [92]  the 'former case or
proceeding' that Section 47, Rule 130 speaks of no longer exists.

Rule 31 of the old Rules of Court[93]  '“ the rule in effect at the time Civil Case Nos. 0009
and 0130 were consolidated '“ provided that:

Rule 31
Consolidation or Severance

Section 1. Consolidation. '“ When actions involving a common question of law or fact

are pending before the court, it may order a joint hearing or trial of any or all the
matters in issue in the actions; it may order all the actions consolidated; and it may
make such orders concerning proceedings therein as may tend to avoid unnecessary
costs or delay.[94] (emphases ours)

Consolidation is a procedural device granted to the court as an aid in deciding how

cases in its docket are to be tried so that the business of the court may be dispatched
expeditiously and with economy while providing justice to the parties. To promote this
end, the rule permits the consolidation and a single trial of several cases in the court's
docket, or the consolidation of issues within those cases. [95]

A reading of Rule 31 of the Rules of Court easily lends itself to two observations. First,
Rule 31 is completely silent on the effect/s of consolidation on the cases consolidated;
on the parties and the causes of action involved; and on the evidence presented in the
consolidated cases. Second, while Rule 31 gives the court the discretion either to order
a joint hearing or trial, or to order the actions consolidated, jurisprudence will show that
the term 'consolidation' is used generically and even synonymously with joint hearing or
trial of several causes.[96]  In fact, the title 'consolidation' of Rule 31 covers all the
different senses of consolidation, as discussed below.

These observations are not without practical reason. Considering that consolidation is

844
basically a function given to the court, the latter is in the best position to determine for
itself (given the nature of the cases, the complexity of the issues involved, the parties
affected, and the court's capability and resources vis-Ã -vis all the official business
pending before it, among other things) what 'consolidation' will bring, bearing in mind
the rights of the parties appearing before it.

To disregard the kind of consolidation effected by the Sandiganbayan on the

simple and convenient premise that the deposition-taking took place after the
Sandiganbayan ordered the consolidation is to beg the question. It is precisely
the silence of our Rules of Procedure and the dearth of applicable case law on
the effect of 'consolidation' that strongly compel this Court to determine the kind
of 'consolidation' effected to directly resolve the very issue of admissibility in this
case.

In the context of legal procedure, the term 'consolidation' is used in three different
senses:[97]

(1) Where all except one of several actions are stayed until one is tried, in which
case the judgment in the one trial is conclusive as to the others. This
is not actually consolidation but is referred to as such. (quasi-consolidation)[98]
(2) Where several actions are combined into one, lose their separate identity, and
become a single action in which a single judgment is rendered. This is
illustrated by a situation where several actions are pending between the same
parties stating claims which might have been set out originally in one
complaint. (actual consolidation)[99]
(3) Where several actions are ordered to be tried together but each retains its
separate character and requires the entry of a separate judgment. This type of
consolidation does not merge the suits into a single action, or cause the parties
to one action to be parties to the other. (consolidation for trial)[100]

Considering that the Sandiganbayan's order [101] to consolidate several incident cases
does not at all provide a hint on the extent of the court's exercise of its discretion as to
the effects of the consolidation it ordered '“ in view of the function of this procedural
device to principally aid the court itself in dealing with its official business '“ we are
compelled to look deeper into the voluminous records of the proceedings conducted
below. We note that there is nothing that would even suggest that the Sandiganbayan in
fact intended a merger of causes of action, parties and evidence. [102] To be sure, there
would have been no need for a motion to adopt (which did not remain unopposed) the
testimonies in the incident cases had a merger actually resulted from the order of
consolidation, for in that case, the Sandiganbayan can already take judicial notice of the
same.

Significantly, even the petitioner itself viewed consolidation, at most, to be merely

a consolidation for trial.[103] Accordingly, despite the consolidation in 1993, the
petitioner acceded to the Sandiganbayan's 1998 Resolution (which denied the
petitioner's 1st Motion on the ground that the witnesses, whose testimony in the incident
cases is sought to be adopted, 'are not available for cross-examination in' the
845
Sandiganbayan) by presenting these other witnesses again in the main case, so that
the respondents can cross-examine them.

These considerations run counter to the conclusion that the Sandiganbayan's order of
consolidation had actually resulted in the complete merger of the incident cases with the
main case, in the sense of actual consolidation, and that the parties in these
consolidated cases had (at least constructively) been aware of and had allowed actual
consolidation without objection.[104]

Considering, too, that the consolidated actions were originally independent of one
another and the fact that in the present case the party respondents to Civil Case No.
0009 (an action for reconveyance, accounting, restitution and damages) are not parties
to Civil Case No. 0130 (a special civil action filed by an ETPI stockholder involving a
corporate squabble within ETPI), the conclusion that the Sandiganbayan in fact
intended an actual consolidation and, together with the parties affected,[105] acted
towards that end - where the actions become fused and unidentifiable from one another
and where the evidence appreciated in one action is also appreciated in another action
'“ must find support in the proceedings held below. This is particularly true in a case with
the magnitude and complexity of the present case. Otherwise, to impose upon the
respondents the effects of an actual consolidation (which find no clear support in the
provisions of the Rules of Court, jurisprudence,[106] and even in the proceedings before
the Sandiganbayan itself and despite the aforementioned considerations) results in an
outright deprivation of the petitioner's right to due process. We reach this conclusion
especially where the evidence sought to be admitted is not simply a testimony taken in
one of the several cases, but a deposition upon oral examination taken in another
jurisdiction and whose admission is governed by specific provisions on our rules on
evidence.

We stress on this point, too, that while the Sandiganbayan ordered the consolidation in
1993 (that is, before the deposition was taken), neither does the Pre-Trial
Order[107] issued by the Sandiganbayan in 1997 in Civil Case No. 0009 contain any
reference, formal or substantive, to Civil Case No. 0130. [108] Interestingly, in its Pre-Trial
Brief dated August 30, 1996,[109] the petitioner even made a representation to present
Bane as one of its witnesses.

IV (b).  Use of deposition under Section 4,

Rule 23 and as a former testimony under
Section 47, Rule 130

Since the present consolidation did not affect Civil Case No. 0130 as an original, albeit
incidental, case, the admissibility of the Bane deposition cannot avoid being measured
against the requirements of Section 47, Rule 130 of the Rules of Court '“ the rule on the
admissibility of testimonies or deposition taken in a different proceeding.  In this regard,
the petitioner argues that Section 4, Rule 23 of the Rules of Court (then Rule 24)
[110]
 must, at any rate, prevail over Section 47, Rule 130 [111] of the same Rules.

846
At the outset, we note that when the petitioner's motion to adopt the testimonies taken in
the incident cases drew individual oppositions from the respondents, the petitioner
represented to the Sandiganbayan its willingness to comply with the provisions of
Section 47, Rule 130 of the Rules of Court, [112] and, in fact, again presented some of the
witnesses. The petitioner's about-face two years thereafter even contributed to the
Sandiganbayan's own inconsistency on how to treat the Bane deposition, in particular,
as evidence.

Section 4, Rule 23 of the Rules of Court on 'Deposition Pending Action' (deposition de

bene esse) provides for the circumstances when depositions may be used in the trial, or
at the hearing of a motion or an interlocutory proceeding.

SEC. 4. Use of depositions. '” At the trial or upon the hearing of a motion or an
interlocutory proceeding, any part or all of a deposition, so far as admissible under the
rules of evidence, may be used against any party who was present or represented at
the taking of the deposition or who had due notice thereof, in accordance with any one
of the following provisions:

xxxx

(c) The deposition of a witness, whether or not a party, may be used by any party for
any purpose if the court finds: (1) that the witness is dead; or (2) that the witness
resides at a distance more than one hundred (100) kilometers from the place of trial or
hearing, or is out of the Philippines, unless it appears that his absence was procured by
the party offering the deposition; or (3) that the witness is unable to attend or testify
because of age, sickness, infirmity, or imprisonment; or (4) that the party offering the
deposition has been unable to procure the attendance of the witness by subpoena; or
(5) upon application and notice, that such exceptional circumstances exist as to make it
desirable, in the interest of justice and with due regard to the importance of presenting
the testimony of witnesses orally in open court, to allow the deposition to be used[.] 
[emphasis ours]

On the other hand, Section 47, Rule 130 of the Rules of Court provides:

SEC. 47. Testimony or deposition at a former proceeding. '“ The testimony or

deposition of a witness deceased or unable to testify, given in a former case or
proceeding, judicial or administrative, involving the same parties and subject
matter, may be given in evidence against the adverse party who had the opportunity
to cross-examine him.

A plain reading of Rule 23 of the Rules of Court readily rejects the petitioner's position
that the Bane deposition can be admitted into evidence without observing the
requirements of Section 47, Rule 130 of the Rules of Court.

Before a party can make use of the deposition taken at the trial of a pending action,
Section 4, Rule 23 of the Rules of Court does not only require due observance of its

847
sub-paragraphs (a) to (d); it also requires, as a condition for admissibility, compliance
with 'the rules on evidence.'  Thus, even Section 4, Rule 23 of the Rules of Court makes
an implied reference to Section 47, Rule 130 of the Rules of Court before the deposition
may be used in evidence. By reading Rule 23 in isolation, the petitioner failed to
recognize that the principle conceding admissibility to a deposition under Rule 23
should be consistent with the rules on evidence under Section 47, Rule 130. [113] In
determining the admissibility of the Bane deposition, therefore, reliance cannot be given
on one provision to the exclusion of the other; both provisions must be considered. 
This is particularly true in this case where the evidence in the prior proceeding does not
simply refer to a witness' testimony in open court but to a deposition taken under
another and farther jurisdiction.

A common thread that runs from Section 4, Rule 23 of the Rules of Court and Section
47, Rule 130 of the same Rules is their mutual reference to depositions.

A deposition is chiefly a mode of discovery whose primary function is to supplement the

pleadings for the purpose of disclosing the real points of dispute between the parties
and affording an adequate factual basis during the preparation for trial. [114] Since
depositions are principally made available to the parties as a means of informing
themselves of all the relevant facts, depositions are not meant as substitute for the
actual testimony in open court of a party or witness. Generally, the deponent must
be presented for oral examination in open court at the trial or hearing. This is a
requirement of the rules on evidence under Section 1, Rule 132 of the Rules of Court.
[115]

Examination to be done in open court. '” The examination of witnesses presented in

a trial or hearing shall be done in open court, and under oath or affirmation. Unless the
witness is incapacitated to speak, or the question calls for a different mode of answer,
the answers of the witness shall be given orally.

Indeed, any deposition offered to prove the facts set forth therein, in lieu of the actual
oral testimony of the deponent in open court, may be opposed by the adverse party and
excluded under the hearsay rule '“ i.e., that the adverse party had or has no opportunity
to cross-examine the deponent at the time that his testimony is offered. That
opportunity for cross-examination was afforded during the taking of the
deposition alone is no argument, as the opportunity for cross-examination must
normally be accorded a party at the time that the testimonial evidence is actually
presented against him during the trial or hearing of a case.[116] However, under
certain conditions and for certain limited purposes laid down in Section 4, Rule 23 of
the Rules of Court, the deposition may be used without the deponent being actually
called to the witness stand.[117]

Section 47, Rule 130 of the Rules of Court is an entirely different provision. While
a former testimony or deposition appears under the Exceptions to the Hearsay Rule, the
classification of former testimony or deposition as an admissible hearsay is not
universally conceded.[118] A fundamental characteristic of hearsay evidence is the

848
adverse party's lack of opportunity to cross-examine the out-of-court declarant.
However, Section 47, Rule 130 explicitly requires, inter alia, for the admissibility of a
former testimony or deposition that the adverse party must have had an opportunity to
cross-examine the witness or the deponent in the prior proceeding.

This opportunity to cross-examine though is not the ordinary cross-

examination[119] afforded an adverse party in usual trials regarding 'matters stated in the
direct examination or connected therewith.' Section 47, Rule 130 of the Rules of Court
contemplates a different kind of cross-examination, whether actual or a mere
opportunity, whose adequacy depends on the requisite identity of issues in the former
case or proceeding and in the present case where the former testimony or deposition is
sought to be introduced.

Section 47, Rule 130 requires that the issues involved in both cases must, at least, be
substantially the same; otherwise, there is no basis in saying that the former statement
was - or would have been - sufficiently tested by cross-examination or by an opportunity
to do so.[120] (The requirement of similarity though does not mean that all the issues in
the two proceedings should be the same. [121] Although some issues may not be the
same in the two actions, the admissibility of a former testimony on an issue which is
similar in both actions cannot be questioned. [122])

These considerations, among others, make Section 47, Rule 130 a distinct rule on
evidence and therefore should not be confused with the general provisions on
deposition under Rule 23 of the Rules of Court. In other words, even if the petitioner
complies with Rule 23 of the Rules of Court on the use of depositions, the observance
of Section 47, Rule 130 of the Rules of Court cannot simply be avoided or disregarded.

Undisputably, the Sandiganbayan relied on the Bane deposition, taken in Civil Case No.
0130, for purposes of this very same case. Thus, what the petitioner
established and what the Sandiganbayan found, for purposes of using the Bane
deposition, refer only to the circumstances laid down under Section 4(c), Rule 23 of the
Rules of Court, not necessarily to those of Section 47, Rule 130 of the Rules of Court,
as a distinct rule on evidence that imposes further requirements in the use of
depositions in a different case or proceeding.  In other words, the prior use of the
deposition under Section 4(c), Rule 23 cannot be taken as compliance with Section 47,
Rule 130 which considers the same deposition as hearsay, unless the requisites for its
admission under this rule are observed. The aching question is whether the petitioner
complied with the latter rule.

Section 47, Rule 130 of the Rules of Court lays down the following requisites for
the admission of a testimony or deposition given at a former case or proceeding.

1.  The testimony or deposition of a witness deceased or otherwise unable to testify;

2.  The testimony was given in a former case or proceeding, judicial or administrative;
3.  Involving the same parties;
4.  Relating to the same matter;
5.  The adverse party having had the opportunity to cross-examine him. [123]
849
The reasons for the admissibility of testimony or deposition taken at a former trial or
proceeding are the necessity for the testimony and its trustworthiness. [124]  However,
before the former testimony or deposition can be introduced in evidence, the proponent
must first lay the proper predicate therefor,[125] i.e., the party must establish the basis for
the admission of the Bane deposition in the realm of admissible evidence.  This basis is
the prior issue that we must now examine and resolve.

IV (c). Unavailability of witness

For the admission of a former testimony or deposition, Section 47, Rule 130 of the
Rules of Court simply requires, inter alia, that the witness or deponent be 'deceased or
unable to testify.' On the other hand, in using a deposition that was taken during the
pendency of an action, Section 4, Rule 23 of the Rules of Court provides several
grounds that will justify dispensing with the actual testimony of the deponent in open
court and specifies, inter alia, the circumstances of the deponent's inability to attend or
testify, as follows:

(3) that the witness is unable to attend or testify because of age, sickness, infirmity, or
imprisonment[.] [emphases ours][126]

The phrase 'unable to testify' appearing in both Rule 23 and Rule 130 of the Rules of
Court refers to a physical inability to appear at the witness stand and to give a
testimony.[127] Hence notwithstanding the deletion of the phrase 'out of the Philippines,'
which previously appeared in Section 47, Rule 130 of the Rules of Court, absence from
jurisdiction[128] - the petitioner's excuse for the non-presentation of Bane in open court -
may still constitute inability to testify under the same rule. This is not to say, however,
that resort to deposition on this instance of unavailability will always be upheld. Where
the deposition is taken not for discovery purposes, but to accommodate the
deponent, then the deposition should be rejected in evidence. [129]

Although the testimony of a witness has been given in the course of a former
proceeding between the parties to a case on trial, this testimony alone is not a ground
for its admission in evidence. The witness himself, if available, must be produced in
court as if he were testifying de novo since his testimony given at the former trial is
mere hearsay.[130] The deposition of a witness, otherwise available, is also inadmissible
for the same reason.

Indeed, the Sandiganbayan's reliance on the Bane deposition in the other case (Civil

Case No. 0130) is an argument in favor of the requisite unavailability of the witness. For
purposes of the present case (Civil Case No. 0009), however, the Sandiganbayan
would have no basis to presume, and neither can or should we, that the previous
condition, which previously allowed the use of the deposition, remains and would
thereby justify the use of the same deposition in another case or proceeding, even if the
other case or proceeding is before the same court. Since the basis for the admission of
the Bane deposition, in principle, being necessity, [131] the burden of establishing its

850
existence rests on the party who seeks the admission of the evidence. This burden
cannot be supplanted by assuming the continuity of the previous condition or conditions
in light of the general rule against the non-presentation of the deponent in court. [132]

IV (d).  The requirement of opportunity of

the adverse party to cross-examine; identity
of parties; and identity of subject matter

The function of cross-examination is to test the truthfulness of the statements of a

witness made on direct examination. [133] The opportunity of cross-examination has been
regarded as an essential safeguard of the accuracy and completeness of a testimony.
In civil cases, the right of cross-examination is absolute, and is not a mere privilege of
the party against whom a witness may be called.[134] This right is available, of course, at
the taking of depositions, as well as on the examination of witnesses at the trial. The
principal justification for the general exclusion of hearsay statements and for the
admission, as an exception to the hearsay rule, of reported testimony taken at a former
hearing where the present adversary was afforded the opportunity to cross-examine, is
based on the premise that the opportunity of cross-examination is an essential
safeguard[135] against falsehoods and frauds.

In resolving the question of whether the requirement of opportunity to cross-examine

has been satisfied, we have to consider first the required identity of parties as the
present opponent to the admission of the Bane deposition to whom the opportunity to
cross-examine the deponent is imputed may not after all be the same 'adverse party'
who actually had such opportunity.

To render the testimony of a witness admissible at a later trial or action, the parties to
the first proceeding must be the same as the parties to the later proceeding. Physical
identity, however, is not required; substantial identity [136] or identity of
interests[137] suffices, as where the subsequent proceeding is between persons who
represent the parties to the prior proceeding by privity in law, in blood, or in estate. The
term 'privity' denotes mutual or successive relationships to the same rights of property.
[138]

In the present case, the petitioner failed to impute, much less establish, the identity of
interest or privity between the then opponent, Africa, and the present opponents, the
respondents. While Africa is the son of the late respondent Jose Africa, at most, the
deposition should be admissible only against him as an ETPI stockholder who filed the
certiorari petition docketed as Civil Case No. 0130 (and, unavoidably, as successor-in-
interest of the late respondent Jose Africa). While Africa and the respondents are all
ETPI stockholders, this commonality does not establish at all any privity between them
for purposes of binding the latter to the acts or omissions of the former respecting the
cross-examination of the deponent. The sequestration of their shares does not result in
the integration of their rights and obligations as stockholders which remain distinct and
personal to them, vis-a-vis other stockholders.[139]

851
IV (d1). The respondents' notice of taking of
Bane deposition is insufficient evidence of waiver

The petitioner staunchly asserts that the respondents have waived their right to cross-
examine the deponent for their failure to appear at the deposition-taking despite
individual notices previously sent to them.[140]

In its first Notice to Take Oral Deposition of Mr. Maurice V. Bane dated August 30,
1996,[141] the petitioner originally intended to depose Mr. Bane on September 25-26
1996.  Because it failed to specify in the notice the purpose for taking Mr. Bane's
deposition, the petitioner sent a Second Amended Notice to Take Deposition of Mr.
Maurice V. Bane Upon Oral Examination where it likewise moved the scheduled
deposition-taking to October 23-26, 1996.

The records show that Africa moved several times for protective orders against the
intended deposition of Maurice Bane.[142] On the other hand, among the respondents,
only respondent Enrile appears to have filed an Opposition [143] to the petitioner's first
notice, where he squarely raised the issue of reasonability of the petitioner's nineteen-
day first notice. While the Sandiganbayan denied Africa's motion for protective orders,
[144]
 it strikes us that no ruling was ever handed down on respondent Enrile's Opposition.
[145]

It must be emphasized that even under Rule 23, the admission of the deposition upon
oral examination is not simply based on the fact of prior notice on the individual sought
to be bound thereby. In Northwest Airlines v. Cruz, [146] we ruled that -

The provision explicitly vesting in the court the power to order that the deposition shall
not be taken connotes the authority to exercise discretion on the matter. However, the
discretion conferred by law is not unlimited. It must be exercised, not arbitrarily or
oppressively, but in a reasonable manner and in consonance with the spirit of he
law. The courts should always see to it that the safeguards for the protection of
the parties and deponents are firmly maintained. As aptly stated by Chief Justice
Moran:

. . . . (T)his provision affords the adverse party, as well as the deponent, sufficient
protection against abuses that may be committed by a party in the exercise of his
unlimited right to discovery. As a writer said: "Any discovery involves a prying into
another person's affairs '” prying that is quite justified if it is to be a legitimate aid to
litigation, but not justified if it is not to be such an aid." For this reason, courts are given
ample powers to forbid discovery which is intended not as an aid to litigation, but merely
to annoy, embarrass or oppress either the deponent or the adverse party, or both. 
(emphasis ours)

In the present case, not only did the Sandiganbayan fail to rule on respondent Enrile's
Opposition (which is equally applicable to his co-respondents), it also failed to provide
even the bare minimum 'safeguards for the protection of,' (more so) non-parties,[147] and

852
to ensure that these safeguards are firmly maintained. Instead, the Sandiganbayan
simply bought the petitioner's assertion (that the taking of Bane deposition is a matter of
right) and treated the lingering concerns '“ e.g., reasonability of the notice; and the non-
party status of the respondents in Civil Case No. 0130 - at whose incident (docketed as
G.R. No. 107789) the Bane deposition was taken - rather perfunctorily to the prejudice
of the respondents.

In conjunction with the order of consolidation, the petitioner's reliance on the prior notice
on the respondents, as adequate opportunity for cross-examination, cannot override
the non-party status of the respondents in Civil Case No. 0130 '“ the effect of
consolidation being merely for trial. As non-parties, they cannot be bound by
proceedings in that case.  Specifically, they cannot be bound by the taking of the Bane
deposition without the consequent impairment of their right of cross-examination.
[148]
  Opportunity for cross-examination, too, even assuming its presence, cannot be
singled out as basis for the admissibility of a former testimony or deposition since such
admissibility is also anchored on the requisite identity of parties. To reiterate, although
the Sandiganbayan considered the Bane deposition in resolving Civil Case No. 0130, its
action was premised on Africa's status as a party in that case where the Bane
deposition was taken.

Corollarily, the idea of privity also permeates Rule 23 of the Rules of Court through its
Section 5 which provides:

Effect of substitution of parties. '” Substitution of parties does not affect the right to
use depositions previously taken; and, when an action has been dismissed and another
action involving the same subject is afterward brought between the same parties or
their representatives or successors in interest, all depositions lawfully taken and duly
filed in the former action may be used in the latter as if originally taken therefor. [italics
and underscoring ours]

In light of these considerations, we reject the petitioner's claim that the respondents
waived their right to cross-examination when they failed to attend the taking of the Bane
deposition. Incidentally, the respondents' vigorous insistence on their right to cross-
examine the deponent speaks loudly that they never intended any waiver of this right.

Interestingly, the petitioner's notice of the deposition-taking relied on Rule 23 of the

Rules of Court. Section 15 of this rule reads:

Deposition upon oral examination; notice; time and place. '” A party desiring to take
the deposition of any person upon oral examination shall give reasonable notice in
writing to every other party to the action. The notice shall state the time and place for
taking the deposition and the name and address of each person to be examined, if
known, and if the name is not known, a general description sufficient to identify him or
the particular class or group to which he belongs. On motion of any party upon whom
the notice is served, the court may for cause shown enlarge or shorten the time.

853
Under this provision, we do not believe that the petitioner could reasonably expect that
the individual notices it sent to the respondents would be sufficient to bind them to the
conduct of the then opponent's (Africa's) cross-examination since, to begin with, they
were not even parties to the action.  Additionally, we observe that in the notice of the
deposition taking, conspicuously absent was any indication sufficient to forewarn the
notified persons that their inexcusable failure to appear at the deposition taking would
amount to a waiver of their right of cross-examination, without prejudice to the right of
the respondents to raise their objections at the appropriate time. [149] We would be
treading on dangerous grounds indeed were we to hold that one not a party to an
action, and neither in privity nor in substantial identity of interest with any of the
parties in the same action, can be bound by the action or omission of the latter,
by the mere expedient of a notice. Thus, we cannot simply deduce a resultant waiver
from the respondents' mere failure to attend the deposition-taking despite notice sent by
the petitioner.

Lastly, we see no reason why the Bane deposition could not have been taken earlier in
Civil Case No. 0009 '“ the principal action where it was sought to be introduced '“ while
Bane was still here in the Philippines. We note in this regard that the Philippines was no
longer under the Marcos administration and had returned to normal democratic
processes when Civil Case No. 0009 was filed. In fact, the petitioner's notice itself
states that the 'purpose of the deposition is for Mr. Maurice Bane to identify and testify
on the facts set forth in his Affidavit,' which Mr. Bane had long executed in 1991 in
Makati, Metro Manila.[150] Clearly, a deposition could then have been taken - without
compromising the respondents' right to cross-examine a witness against them -
considering that the principal purpose of the deposition is chiefly a mode of discovery.
These, to our mind, are avoidable omissions that, when added to the deficient handling
of the present matter, add up to the gross deficiencies of the petitioner in the
handling of Civil Case No. 0009.

After failing to take Bane's deposition in 1991 and in view of the peculiar circumstances
of this case, the least that the petitioner could have done was to move for the taking of
the Bane deposition and proceed with the deposition immediately upon securing a
favorable ruling thereon. On that occasion, where the respondents would have a chance
to be heard, the respondents cannot avoid a resultant waiver of their right of cross-
examination if they still fail to appear at the deposition-taking. Fundamental fairness
dictates this course of action. It must be stressed that not only were the respondents
non-parties to Civil Case No. 0130, they likewise have no interest in
Africa's certiorari petition asserting his right as an ETPI stockholder.

Setting aside the petitioner's flip-flopping on its own representations, [151] this Court can
only express dismay on why the petitioner had to let Bane leave the Philippines before
taking his deposition despite having knowledge already of the substance of what he
would testify on. Considering that the testimony of Bane is allegedly a 'vital cog' in the
petitioner's case against the respondents, the Court is left to wonder why the petitioner
had to take the deposition in an incident case (instead of the main case) at a time when

854
it became the technical right of the petitioner to do so.

V.  The petitioner cannot rely on principle of judicial notice

The petitioner also claims that since the Bane deposition had already been previously
introduced and admitted in Civil Case No. 0130, then the Sandiganbayan should have
taken judicial notice of the Bane deposition as part of its evidence.

Judicial notice is the cognizance of certain facts that judges may properly take and act
on without proof because these facts are already known to them. [152] Put differently, it is
the assumption by a court of a fact without need of further traditional evidentiary
support. The principle is based on convenience and expediency in securing and
introducing evidence on matters which are not ordinarily capable of dispute and are
not bona fide disputed.[153]

The foundation for judicial notice may be traced to the civil and canon law
maxim, manifesta (or notoria) non indigent probatione. [154] The taking of judicial notice
means that the court will dispense with the traditional form of presentation of evidence.
In so doing, the court assumes that the matter is so notorious that it would not be
disputed.

The concept of judicial notice is embodied in Rule 129 of the Revised Rules on
Evidence. Rule 129 either requires the court to take judicial notice, inter alia, of 'the
official acts of the x x x judicial departments of the Philippines,' [155] or gives the court the
discretion to take judicial notice of matters 'ought to be known to judges because of their
judicial functions.'[156] On the other hand, a party-litigant may ask the court to take
judicial notice of any matter and the court may allow the parties to be heard on the
propriety of taking judicial notice of the matter involved. [157] In the present case, after the
petitioner filed its Urgent Motion and/or Request for Judicial Notice, the respondents
were also heard through their corresponding oppositions.

In adjudicating a case on trial, generally, courts are not authorized to take judicial notice
of the contents of the records of other cases, even when such cases have been tried or
are pending in the same court, and notwithstanding that both cases may have been
tried or are actually pending before the same judge. [158] This rule though admits of
exceptions.

As a matter of convenience to all the parties, a court may properly treat all or any part of
the original record of a case filed in its archives as read into the record of a case
pending before it, when, with the knowledge of, and absent an objection from, the
adverse party, reference is made to it for that purpose, by name and number or in
some other manner by which it is sufficiently designated; or when the original record of
the former case or any part of it, is actually withdrawn from the archives at the court's
direction, at the request or with the consent of the parties, and admitted as a part of
the record of the case then pending.[159]

855
Courts must also take judicial notice of the records of another case or cases, where
sufficient basis exists in the records of the case before it, warranting the dismissal of the
latter case.[160]

The issue before us does not involve the applicability of the rule on mandatory taking of
judicial notice; neither is the applicability of the rule on discretionary taking of judicial
notice seriously pursued. Rather, the petitioner approaches the concept of judicial
notice from a genealogical perspective of treating whatever evidence offered in any of
the 'children' cases '“ Civil Case 0130 '“ as evidence in the 'parent' case '“ Civil Case
0009 - or 'of the whole family of cases.'[161] To the petitioner, the supposed relationship
of these cases warrants the taking of judicial notice.

We strongly disagree. First, the supporting cases[162] the petitioner cited are inapplicable

either because these cases involve only a single proceeding or an exception to the rule,
which proscribes the courts from taking judicial notice of the contents of the records of
other cases.[163] Second, the petitioner's proposition is obviously obnoxious to a system
of orderly procedure. The petitioner itself admits that the present case has generated a
lot of cases, which, in all likelihood, involve issues of varying complexity. If we follow the
logic of the petitioner's argument, we would be espousing judicial confusion by
indiscriminately allowing the admission of evidence in one case, which was presumably
found competent and relevant in another case, simply based on the supposed lineage
of the cases. It is the duty of the petitioner, as a party-litigant, to properly lay before the
court the evidence it relies upon in support of the relief it seeks, instead of imposing that
same duty on the court. We invite the petitioner's attention to our prefatory
pronouncement in Lopez v. Sandiganbayan:[164]

Down the oft-trodden path in our judicial system, by common sense, tradition and the
law, the Judge in trying a case sees only with judicial eyes as he ought to know nothing
about the facts of the case, except those which have been adduced judicially in
evidence. Thus, when the case is up for trial, the judicial head is empty as to facts
involved and it is incumbent upon the litigants to the action to establish by evidence the
facts upon which they rely. (emphasis ours)

We therefore refuse, in the strongest terms, to entertain the petitioner's argument that
we should take judicial notice of the Bane deposition.

VI. Summation

To recapitulate, we hold that: (1) the Sandiganbayan's denial of the petitioner's

3rd motion '“ the Motion to Admit Supplemental Offer of Evidence (Re: Deposition of
Maurice Bane) '“ was a legal error that did not amount to grave abuse of discretion; (2)
the Sandiganbayan's refusal to reopen the case at the petitioner's instance was tainted
with grave abuse of discretion; and (3) notwithstanding the grave abuse of
discretion, the petition must ultimately fail as the Bane deposition is not admissible
under the rules of evidence.[165]

856
VII. Refutation of Justice Carpio's
Last Minute Modified Dissent

At the last minute, Justice Carpio circulated a modified dissent, quoting the Bane
deposition.  His covering note states:

I have revised my dissenting opinion to include the Bane deposition so that the Court
and the public will understand what the Bane deposition is all about. (underlining added)

In light of this thrust, a discussion refuting the modified dissent is in order.

First: Contents of the Bane deposition not an Issue.  The dissent perfectly identified
what is at issue in this case '“ i.e., the admissibility of the Bane deposition.
Admissibility is concerned with the competence and relevance[166] of the evidence,
whose admission is sought. While the dissent quoted at length the Bane deposition, it
may not be amiss to point out that the relevance of the Bane deposition (or, to adopt
the dissent's characterization, whether 'Maurice V. Bane is a vital witness') is not an
issue here unless it can be established first that the Bane deposition is a competent
evidence.

Second: Misrepresentation of Cited Authority. The dissent insists that 'in Philippine

Jurisprudence, the consolidation of cases merges the different actions into one and the
rights of the parties are adjudicated in a single judgment,' citing Vicente J. Francisco. In
our discussion on consolidation, we footnoted the following in response to the dissent's
position, which we will restate here for emphasis:

In the 1966 edition of Vicente J. Francisco's Revised Rules of Court, Francisco wrote:

The effect of consolidation of actions is to unite and merge all of the different actions
consolidated into a single action, in the same manner as if the different causes of
actions involved had originally been joined in a single action, and the order of
consolidation, if made by a court of competent jurisdiction, is binding upon all the parties
to the different actions until it is vacated or set aside. After the consolidation there can
be no further proceedings in the separate actions, which are by virtue of the
consolidation discontinued and superseded by a single action, which should be entitled
in such manner as the court may direct, and all subsequent proceedings therein be
conducted and the rights of the parties adjudicated in a single action (1 C.J.S., 113, pp.
1371-1372).

At the very beginning of the discussion on consolidation of actions in the Corpus Juris

Secundum, the following caveat appears:

The term consolidation is used in three different senses. First, where several actions are
combined into one and lose their separate identity and become a single action in which
a single judgment is rendered; second, where all except one of several actions are
stayed until one is tried, in which case the judgment in the one is conclusive as to the

857
others; third, where several actions are ordered to be tried together but each retains its
separate character and requires the entry of a separate judgment. The failure to
distinguish between these methods of procedure, which are entirely distinct, the
two latter, strictly speaking, not being consolidation, a fact which has not always
been noted, has caused some confusion and conflict in the cases. (1 C.J.S., 107,
pp. 1341-1342) (Emphasis added).

In defining the term 'consolidation of actions,' Francisco provided a colatilla that the

term 'consolidation' is used in three different senses, citing 1 C.J.S. 1341 and 1
Am. Jur. 477 (Francisco, Revised Rules of Court, p. 348).

From the foregoing, it is clear that the dissent appears to have quoted Francisco's
statement out of context. As it is, the issue of the effect of consolidation on evidence is
at most an unsettled matter that requires the approach we did in the majority's
discussion on consolidation.[167]cralaw

Third: Misappreciation of the Purpose of Consolidation. The dissent then turns to

the purpose of consolidation '“ to 'expeditiously settle the interwoven issues involved in
the consolidated cases' and 'the simplification of the proceedings.' It argues that this can
only be achieved if the repetition of the same evidence is dispensed with.

It is unfortunate that the dissent refuses to recognize the fact that since consolidation is
primarily addressed to the court concerned to aid it in dispatching its official business, it
would be in keeping with the orderly trial procedure if the court should have a say on
what consolidation would actually bring[168] (especially where several cases are involved
which have become relatively complex). In the present case, there is nothing in the
proceedings below that would suggest that the Sandiganbayan or the parties
themselves (the petitioner and the respondents) had in mind a
consolidation beyond joint hearing or trial. Why should this Court '“ which is not a trial
court '“ impose a purported effect that has no factual or legal grounds?

Fourth: The Due Process Consideration. The dissent argues that even if the
consolidation only resulted in a joint hearing or trial, the 'respondents are still bound by
the Bane deposition considering that they were given notice of the deposition-
taking.' The issue here boils down to one of due process '“ the fundamental reason
why a hearsay statement (not subjected to the rigor of cross-examination) is generally
excluded in the realm of admissible evidence '“  especially when read in light of
the general rule that depositions are not meant as substitute for the actual testimony,
in open court, of a party or witness.

Respondent Enrile had a pending Opposition to the notice of deposition-taking

(questioning the reasonableness thereof '“ an issue applicable to the rest of the
respondents) which the Sandiganbayan failed to rule on. To make the Sandiganbayan's
omission worse, the Sandiganbayan blindly relied on the petitioner's assertion that the
deposition-taking was a matter of right and, thus, failed to address the consequences
and/or issues that may arise from the apparently innocuous statement of the petitioner

858
(that it intends to use the Bane deposition in Civil Case No. 0009, where only the
respondents, and not Africa, are the parties).[169] There is simply the absence of 'due' in
due process.

Fifth: Misstatement of the Sandiganbayan's Action. The dissent repeatedly

misstates that the Sandiganbayan 'granted' the request for the deposition-taking.  For
emphasis, the Sandiganbayan did not 'grant' the request since the petitioner
staunchly asserted that the deposition-taking was a matter of right.  No one can deny
the complexity of the issues that these consolidated cases have reached.  Considering
the consolidation of cases of this nature, the most minimum of fairness demands
upon the petitioner to move for the taking of the Bane deposition and for the
Sandiganbayan to make a ruling thereon (including the opposition filed by
respondent Enrile which equally applies to his co-respondents). The burgeoning
omission and failures that have prevailed in this case cannot be cured by this Court
without itself being guilty of violating the constitutional guarantee of due process.

Sixth: Issues Posed and Resolved Go Beyond Technicalities. The above

conclusions, contrary to the petitioner's claim, are not only matters of technicality. 
Admittedly, rules of procedure involve technicality, to which we have applied the
liberality that technical rules deserve.  But the resolution of the issues raised goes
beyond pure or mere technicalities as the preceding discussions show. They involve
issues of due process and basic unfairness to the respondents, particularly to
respondent Enrile, who is portrayed in the Bane deposition to be acting in behalf of the
Marcoses so that these shares should be deemed to be those of the Marcoses. They
involved, too, principles upon which our rules of procedure are founded and which we
cannot disregard without flirting with the violation of guaranteed substantive rights and
without risking the disorder that these rules have sought to avert in the course of their
evolution.

In the Court En Banc deliberations of December 6, 2011, the Court failed to arrive at a

conclusive decision because of a tie vote (7-7, with one Justice taking no part). The
same vote resulted in the re-voting of December 13, 2011. In this light, the ponencia is
deemed sustained.

WHEREFORE, premises considered, we DISMISS the petition for lack of merit. No

costs.

SO ORDERED.
SECOND DIVISION
[ G.R. No. 197122, June 15, 2016 ]
INGRID SALA SANTAMARIA AND ASTRID SALA BOZA, PETITIONERS, VS.
THOMAS CLEARY, RESPONDENT.

[G.R. No. 197161]

859
 KATHRYN GO-PEREZ, PETITIONER, VS. THOMAS CLEARY, RESPONDENT.

DECISION
LEONEN, J.:
This case stems from a motion for court authorization to take deposition in Los Angeles
by respondent Thomas Cleary, an American citizen and Los Angeles resident who filed
a civil suit against petitioners Ingrid Sala Santamaria, Astrid Sala Boza, and Kathryn
Go-Perez before the Regional Trial Court of Cebu.

We resolve whether a foreigner plaintiff residing abroad who chose to file a civil suit in
the Philippines is allowed to take deposition abroad for his direct testimony on the
ground that he is "out of the Philippines" pursuant to Rule 23, Section 4(c)(2) of the
Rules of Court.

These two separate Petitions[1] assail the Court of Appeals' (1) August 10, 2010
Decision[2] that granted Thomas Cleary's (Cleary) Petition for Certiorari and reversed the
trial court's Orders[3] denying Cleary's Motion for Court Authorization to Take
Deposition[4] before the Consulate- General of the Philippines in Los Angeles; and (2)
May 11, 2011 Resolution[5] that denied reconsideration.

On January 10, 2002, Cleary, an American citizen with office address in California, filed
a Complaint[6] for specific performance and damages against Miranila Land
Development Corporation, Manuel S. Go, Ingrid Sala Santamaria (Santamaria), Astrid
Sala Boza (Boza), and Kathyrn Go-Perez (Go-Perez) before the Regional Trial Court of
Cebu.

The Complaint involved shares of stock of Miranila Land Development Corporation, for
which Cleary paid US$191,250.00.[7] Cleary sued in accordance with the Stock
Purchase and Put Agreement he entered into with Miranila Land Development
Corporation, Manuel S. Go, Santamaria, Boza, and Go-Perez. Paragraph 9.02 of the
Agreement provides:
Any suit, action or proceeding with respect to this Agreement may be brought in (a) the
courts of the State of California, (b) the United States District Court for the Central
District of California, or (c) the courts of the country of Corporation's incorporation, as
Cleary may elect in his sole discretion, and the Parties hereby submit to any such suit,
action proceeding or judgment and waives any other preferential jurisdiction by reason
of domicile.[8]
Cleary elected to file the case in Cebu.

Santamaria, Boza, and Go-Perez filed their respective Answers with Compulsory
Counterclaims.[9] The trial court then issued a notice of pre-trial conference dated July 4,
2007.[10]

In his pre-trial brief, Cleary stipulated that he would testify "in support of the allegations
of his complaint, either on the witness stand or by oral deposition." [11] Moreover, he
expressed his intent in availing himself "of the modes of discovery under the rules." [12]

860
On January 22, 2009, Cleary moved for court authorization to take deposition. [13] He
prayed that his deposition be taken before the Consulate-General of the Philippines in
Los Angeles and be used as his direct testimony. [14]

Santamaria and Boza opposed[15] the Motion and argued that the right to take deposition
is not absolute.[16] They claimed that Cleary chose the Philippine system to file his suit,
and yet he deprived the court and the parties the opportunity to observe his demeanor
and directly propound questions on him. [17]

Go-Perez filed a separate Opposition,[18] arguing that the oral deposition was not
intended for discovery purposes if Cleary deposed himself as plaintiff. [19] Since he
elected to file suit in the Philippines, he should submit himself to the procedures and
testify before the Regional Trial Court of Cebu. [20] Moreover, Go-Perez argued that oral
deposition in the United States would prejudice, vex, and oppress her and her co-
petitioners who would need to incur costs to attend. [21]

The trial court denied Cleary's Motion for Court Authorization to Take Deposition in the
Order[22] dated June 5, 2009. It held that depositions are not meant to be a substitute for
actual testimony in open court. As a rule, a deponent must be presented for oral
examination at trial as required under Rule 132, Section 1 of the Rules of Court. "As the
supposed deponent is the plaintiff himself who is not suffering from any impairment,
physical or otherwise, it would be best for him to appear in court and testify under
oath[.]"[23] The trial court also denied reconsideration.[24]

Cleary elevated the case to the Court of Appeals.

On August 10, 2010, the Court of Appeals granted Cleary's Petition for Certiorari and
reversed the trial court's ruling.[25] It held that Rule 23, Section 1 of the Rules of Court
allows the taking of depositions, and that it is immaterial that Cleary is the plaintiff
himself.[26] It likewise denied reconsideration. [27]

Hence, the present Petitions were filed.

Petitioners Ingrid Sala Santamaria and Astrid Sala Boza maintain in their appeal that
the right of a party to take the deposition of a witness is not absolute. [28] Rather, this right
is subject to the restrictions provided by Rule 23, Section 16 [29] of the Rules of Court and
jurisprudence.[30] They cite Northwest Airlines v. Cruz,[31] in that absent any compelling
or valid reason, the witness must personally testify in open court according to the
general rules on examination of witnesses under Rule 132 of the Rules of Court. [32]

Likewise, petitioners Santamaria and Boza submit that Cleary cannot, for his sole
convenience, substitute his open-court testimony by having his deposition taken in the
United States.[33] This will be very costly, time-consuming, disadvantageous, and
extremely unfair to petitioners and their counsels who are based in the Philippines. [34]

861
Petitioners Santamaria and Boza argue that the proposed deposition in this case is not
for discovery purposes as Cleary is the plaintiff himself. [35] The Court of Appeals
Decision gives foreigners undue advantage over Filipino litigants in cases under similar
circumstances, where the parties and the presiding judge do not have the opportunity to
personally examine and observe the conduct of the testifying witness. [36] Thus, the
court's suggestion for written interrogatories is also not proper as open-court testimony
is different from mere serving of written interrogatories. [37]

Lastly, petitioners Santamaria and Boza claim that Cleary's sole allegation that he is a
resident "out of the Philippines" does not warrant departure from open-court trial
procedure under Rule 132, Section 1 of the Rules of Court. [38]

In her Petition, petitioner Kathryn Go-Perez makes two (2) arguments. First, she
contends that granting a petition under Rule 65 involves a finding of grave abuse of
discretion, but the Court of Appeals only found "error" in the trial court orders. [39] She
cites Triplex Enterprises v. PNB-Republic Bank[40] and Yu v. Reyes-Carpio,[41] in that a
writ of certiorari is restricted to extraordinary cases where the act of the lower court is
void.[42] It is designed to correct errors of jurisdiction and not errors of judgment.
[43]
 People v. Hubert Webb[44] has held that the use of discovery procedures is directed to
the sound discretion of the trial judge and certiorari will be issued only to correct errors
of jurisdiction.[45] It cannot correct errors of procedure or mistakes in the findings or
conclusions by the lower court.[46]

Second, petitioner Go-Perez submits that the Court of Appeals erred in disregarding
Rule 23, Section 16 of the Rules of Court, which imposes limits on the right to take
deposition.[47] Cleary's self-deposition in the United States, which is not for discovery
purposes, is oppressive, vexatious, and bordering on harassment. [48] The Court of
Appeals also erred in ignoring applicable jurisprudence such as Northwest, where this
Court found that the deposition taken in the United States was to accommodate the
petitioner's employee who was there, and not for discovery purposes. Thus, the general
rules on examination of witnesses under Rule 132 of the Rules of Court should be
observed.[49]

Lastly, petitioner Go-Perez contends that the Court of Appeals ignored Rule 132,
Section 1 of the Rules of Court, which provides that a witness must testify in open court.
[50]
 That Cleary is the plaintiff himself is material as there is nothing for him to discover
when he deposes himself.[51]

On the other hand, respondent Thomas Cleary maintains that Rule 23, Section 4 of the
Rules of Court on the taking of deposition applies. [52] He is "out of the Philippines" as an
American citizen residing in the United States. This is true even when he entered the
Stock Purchase and Put Agreement with petitioners in 1999 and filed the case in 2009.
[53]
 Cleary cites Dasmariñas Garments v. Reyes[54] and San Luis v. Rojas.[55] The trial
court even "previously scheduled the hearing subject to the notice from the Department
of Foreign Affairs for the taking of deposition." [56] However, this was later disallowed
upon petitioners' opposition.[57]

862
Respondent submits that the rules on depositions do not authorize nor contemplate any
intervention by the court in the process. All that is required under the rules is that
"reasonable notice" be given "in writing to every other party to the action[.]" [58] Thus, the
trial court's discretion in ruling on whether a deposition may be taken is not unlimited. [59]

Respondent adds that this Court has allowed the taking of testimonies through
deposition in lieu of their actual presence at trial. [60] He argues that with the new rules,
depositions serve as both a method of discovery and a method of presenting testimony.
[61]
 That the court cannot observe a deponent's demeanor is insufficient justification to
disallow deposition. Otherwise, no deposition can ever be taken as this objection is
common to all depositions.[62]

Respondent contends that Northwest does not apply as the deposition in that case was
found to have been improperly and irregularly taken. [63]

Lastly, respondent argues that the presiding judge of the trial court acted with grave
abuse of discretion in denying his Motion for Court Authorization to Take Deposition.
[64]
 That he is an American residing in the United States is undisputed. The trial court
even issued the Order dated January 13, 2009 directing him to inform the court of the
"steps he . . . has taken and the progress of his request for a deposition taking filed, if
any, with the Department of Justice."[65] In later disallowing the deposition as he is "not
suffering from any impairment, physical or otherwise," the presiding judge acted in an
arbitrary manner amounting to lack of jurisdiction. [66] The deposition sought is in
accordance with the rules. The expenses in attending a deposition proceeding in the
United States cannot be considered as a substantial reason to disallow deposition since
petitioners may send cross-interrogatories.[67]

These consolidated Petitions seek a review of the Court of Appeals Decision reversing
the trial court's ruling and allowing Cleary to take his deposition in the United States.
Thus, the issues for resolution are:

First, whether the limitations for the taking of deposition under Rule 23, Section 16 of
the Rules of Court apply in this case; and

Second, whether the taking of deposition under Rule 23, Section 4(c)(2) of the Rules of
Court applies to a non-resident foreigner plaintiff's direct testimony.

Utmost freedom governs the taking of depositions to allow the widest scope in the
gathering of information by and for all parties in relation to their pending case. [68] The
relevant section in Rule 23 of the Rules of Court provides:
RULE 23
DEPOSITIONS PENDING ACTION

SECTION 1. Depositions pending action, when may be taken. - By leave of court after
863
jurisdiction has been obtained over any defendant or over property which is the subject
of the action, or without such leave after an answer has been served, the testimony of
any person, whether a party or not, may be taken, at the instance of any party, by
deposition upon oral examination or written interrogatories. The attendance of
witnesses may be compelled by the use of a subpoena as provided in Rule 21.
Depositions shall be taken only in accordance with these Rules. The deposition of a
person confined in prison may be taken only by leave of court on such terms as the
court prescribes. (Emphasis supplied)
As regards the taking of depositions, Rule 23, Section 1 is clear that the testimony of
any person may be taken by deposition upon oral examination or written interrogatories
at the instance of any party.

San Luis explained that this provision "does not make any distinction or restriction as to
who can avail of deposition."[69] Thus, this Court found it immaterial that the plaintiff was
a non-resident foreign corporation and that all its witnesses were Americans residing in
the United States.[70]

On the use of depositions taken, we refer to Rule 23, Section 4 of the Rules of Court.
This Court has held that "depositions may be used without the deponent being actually
called to the witness stand by the proponent, under certain conditions and for certain
limited purposes."[71] These exceptional cases are enumerated in Rule 23, Section 4(c)
as follows:
SEC 4. Use of depositions. - At the trial or upon the hearing of a motion or an
interlocutory proceeding, any part or all of a deposition, so far as admissible under the
rules of evidence, may be used against any party who was present or represented at
the taking of the deposition or who had due notice thereof, in accordance with any one
of the following provisions:

....

(c) The deposition of a witness, whether or not a party, may be used by any party for
any purpose if the court finds: (1) that the witness is dead; or (2) that the witness
resides at distance more than one hundred (100) kilometers from the place of trial
or hearing, or is out of the Philippines, unless it appears that his absence was
procured by the party offering the deposition; or (3) that the witness is unable to
attend or testify because of age, sickness, infirmity, or imprisonment; or (4) that the
party offering the deposition has been unable to procure the attendance of the witness
by subpoena; or (5) upon application and notice, that such exceptional circumstances
exist as to make it desirable, in the interest of justice and with due regard to the
importance of presenting the testimony of witnesses orally in open court, to allow the
deposition to be used[.] (Emphasis supplied)
The difference between the taking of depositions and the use of depositions taken is
apparent in Rule 23, which provides separate sections to govern them. Jurisprudence
has also discussed the importance of this distinction and its implications:
The availability of the proposed deponent to testify in court does not constitute "good
cause" to justify the court's order that his deposition shall not be taken. That the witness

864
is unable to attend or testify is one of the grounds when the deposition of a witness may
be used in court during the trial. But the same reason cannot be successfully invoked to
prohibit the taking of his deposition.

The right to take statements and the right to use them in court have been kept
entirely distinct. The utmost freedom is allowed in taking depositions;
restrictions are imposed upon their use. As a result, there is accorded the widest
possible opportunity for knowledge by both parties of all the facts before the
trial. Such of this testimony as may be appropriate for use as a substitute for viva
voce examination may be introduced at the trial; the remainder of the testimony, having
served its purpose in revealing the facts to the parties before trial, drops out of the
judicial picture.

. . . [U]nder the concept adopted by the new Rules, the deposition serves the double
function of a method of discovery — with use on trial not necessarily contemplated —
and a method of presenting testimony. Accordingly, no limitations other than relevancy
and privilege have been placed on the taking of depositions, while the use at the trial is
subject to circumscriptions looking toward the use of oral testimony wherever
practicable.[72] (Emphasis supplied)
The rules and jurisprudence support greater leeway in allowing the parties and their
witnesses to be deposed in the interest of collecting information for the speedy and
complete disposition of cases.

In opposing respondent's Motion for Court Authorization to Take Deposition, petitioners

contest at the deposition-taking stage. They maintain that the right to take deposition is
subject to the restrictions found in Rule 23, Section 16 of the Rules of Court on orders
for the protection of parties and deponents. [73]

II

Rule 23, Section 16 of the Rules of Court is on orders for the protection of parties and
deponents from annoyance, embarrassment, or oppression. The provision reads:
SEC. 16. Orders for the protection of parties and deponents. — After notice is served
for taking a deposition by oral examination, upon motion seasonably made by any party
or by the person to be examined and for good cause shown, the court in which the
action is pending may make an order that the deposition shall not be taken, or that it
may be taken only at some designated place other than that stated in the notice, or that
it may be taken only on written interrogatories, or that certain matters shall not be
inquired into, or that the scope of the examination shall be held with no one present
except the parties to the action and their officers or counsel, or that after being sealed
the deposition shall be opened only by order of the court, or that secret processes,
developments, or research need not be disclosed, or that the parties shall
simultaneously file specified documents or information enclosed in sealed envelopes to
be opened as directed by the court or the court may make any other order which justice
requires to protect the party or witness from annoyance, embarrassment, or
oppression. (Emphasis supplied)

865
The provision includes a full range of protective orders, from designating the place of
deposition, limiting those in attendance, to imposing that it be taken through written
interrogatories. At the extreme end of this spectrum would be a court order that
completely denies the right to take deposition. This is what the trial court issued in this
case.

While Section 16 grants the courts power to issue protective orders, this grant involves
discretion on the part of the court, which "must be exercised, not arbitrarily, capriciously
or oppressively, but in a reasonable manner and in consonance with the spirit of the
law, to the end that its purpose may be attained." [74]

A plain reading of this provision shows that there are two (2) requisites before a court
may issue a protective order: (1) there must be notice; and (2) the order must be for
good cause shown. In Fortune Corporation v. Court of Appeals,[75] this Court discussed
the concept of good cause as used in the rules:
The matter of good cause is to be determined by the court in the exercise of judicial
discretion. Good cause means a substantial reason—one that affords a legal
excuse. Whether or not substantial reasons exist is for the court to determine, as there
is no hard and fast rule for determining the question as to what is meant by the term "for
good cause shown."

The requirement, however, that good cause be shown for a protective order puts
the burden on the party seeking relief to show some plainly adequate reasons for
the order. A particular and specific demonstration of facts, as distinguished from
conclusory statements, is required to establish good cause for the issuance of a
protective order. What constitutes good cause furthermore depends upon the kind
of protective order that is sought.

In light of the general philosophy of full discovery of relevant facts and the board
statement of scope in Rule 24, and in view of the power of the court under Sections 16
and 18 of said Rule to control the details of time, place, scope, and financing for the
protection of the deponents and parties, it is fairly rare that it will be ordered that a
deposition should not be taken at all. All motions under these subparagraphs of the
rule must be supported by "good cause" and a strong showing is required before a party
will be denied entirely the right to take a deposition. A mere allegation, without proof,
that the deposition is being taken in bad faith is not a sufficient ground for such an
order. Neither is an allegation that it will subject the party to a penalty or forfeiture. The
mere fact that the information sought by deposition has already been obtained through
a bill of particulars, interrogatories, or other depositions will not suffice, although if it is
entirely repetitious a deposition may be forbidden. The allegation that the deponent
knows nothing about the matters involved does not justify prohibiting the taking of a
deposition, nor that whatever the witness knows is protected by the "work product
doctrine," nor that privileged information or trade secrets will be sought in the course of
the examination, nor that all the transactions were either conducted or confirmed in
writing.[76] (Emphasis supplied, citations omitted)

866
Thus, we consider the trial court's explanation for its denial of respondent's Motion for
Court Authorization to Take Deposition. The trial court's Order was based on two (2)
premises: first, that respondent should submit himself to our court processes since he
elected to seek judicial relief with our courts; and second, that respondent is not
suffering from any impairment and it is best that he appear before our courts
considering he is the plaintiff himself. [77]

III

On the first premise, apparent is the concern of the trial court in giving undue advantage
to non-resident foreigners who file suit before our courts but do not appear to testify.
Petitioners support this ruling. They contend that the open-court examination of
witnesses is part of our judicial system. Thus, there must be compelling reason to
depart from this procedure in order to avoid suits that harass Filipino litigants before our
courts.[78] Moreover, they argue that it would be costly, time-consuming, and
disadvantageous for petitioners and their counsels to attend the deposition to be taken
in Los Angeles for the convenience of respondent. [79]

In the Stock Purchase and Put Agreement, petitioners and respondent alike agreed that
respondent had the sole discretion to elect the venue for filing any action with respect to
it.

Paragraph 9.02 of the Agreement is clear that the parties "waive any other preferential
jurisdiction by reason of domicile."[80] If respondent filed the suit in the United States—
which he had the option to do under the Agreement—this would have been even more
costly, time-consuming, and disadvantageous to petitioners who are all Filipinos
residing in the Philippines.

There is no question that respondent can file the case before our courts. With
respondent having elected to file suit in Cebu, the bone of contention now is on whether
he can have his deposition taken in the United States. The trial court ruled that
respondent should consequently submit himself to the processes and procedures under
the Rules of Court.

Respondent did avail himself of the processes and procedures under the Rules of Court
when he filed his Motion. He invoked Rule 23, Section 4(c)(2) of the Rules of Court and
requested to have his deposition taken in Los Angeles as he was "out of the
Philippines."

Moreover, Rule 23, Section 1 of the Rules of Court no longer requires leave of court for
the taking of deposition after an answer has been served. According to respondent, he
only sought a court order when the Department of Foreign Affairs required one so that
the deposition may be taken before the Philippine Embassy or Consulate. [81]

That neither the presiding judge nor the parties will be able to personally examine and
observe the conduct of a deponent does not justify denial of the right to take deposition.
This objection is common to all depositions.[82] Allowing this reason will render nugatory
867
the provisions in the Rules of Court that allow the taking of depositions.

As suggested by the Court of Appeals, the parties may also well agree to take
deposition by written interrogatories[83] to afford petitioners the opportunity to cross-
examine without the need to fly to the United States. [84]

The second premise is also erroneous. That respondent is "not suffering from any
impairment, physical or otherwise" does not address the ground raised by respondent in
his Motion. Respondent referred to Rule 23, Section 4(c)(2) of the Rules of Court, in that
he was "out of the Philippines."[85] This Section does not qualify as to the condition of the
deponent who is outside the Philippines.

IV

Petitioners argue that the deposition sought by respondent is not for discovery purposes
as he is the plaintiff himself.[86] To support their contention, they cite Northwest, where
this Court held that Rule 132 of the Rules of Court—on the examination of witnesses in
open court—should be observed since the deposition was only to accommodate the
petitioner's employee who was in the United States, and not for discovery purposes. [87]

Jurisprudence has discussed how "[u]nder the concept adopted by the new Rules, the
deposition serves the double function of a method of discovery—with use on trial not
necessarily contemplated—and a method of presenting testimony." [88] The taking of
depositions has been allowed as a departure from open-court testimony. Jonathan
Landoil International Co. Inc. v. Spouses Mangundadatu [89] is instructive:
The Rules of Court and jurisprudence, however, do not restrict a deposition to the sole
function of being a mode of discovery before trial. Under certain conditions and for
certain limited purposes, it may be taken even after trial has commenced and may be
used without the deponent being actually called to the witness stand. In Dasmariñas
Garments v. Reyes, we allowed the taking of the witnesses' testimonies through
deposition, in lieu of their actual presence at the trial.

Thus, "[d]epositions may be taken at any time after the institution of any action,
whenever necessary or convenient. There is no rule that limits deposition-taking only
to the period of pre-trial or before it; no prohibition against the taking of depositions after
pre-trial." There can be no valid objection to allowing them during the process of
executing final and executory judgments, when the material issues of fact have become
numerous or complicated.

In keeping with the principle of promoting the just, speedy and inexpensive disposition
of every action and proceeding, depositions are allowed as a "departure from the
accepted and usual judicial proceedings of examining witnesses in open
court where their demeanor could be observed by the trial judge." Depositions are
allowed, provided they are taken in accordance with the provisions of the Rules of
Court (that is, with leave of court if the summons have been served, without leave of
court if an answer has been submitted); and provided, further, that a circumstance for
their admissibility exists.
868
....

When a deposition does not conform to the essential requirements of law and may
reasonably cause material injury to the adverse party, its taking should not be allowed.
This was the primary concern in Northwest Airlines v. Cruz. In that case, the ends of
justice would be better served if the witness was to be brought to the trial court to testify.
The locus of the oral deposition therein was not within the reach of ordinary citizens, as
there were time constraints; and the trip required a travel visa, bookings, and a
substantial travel fare. In People v. Webb, the taking of depositions was unnecessary,
since the trial court had already admitted the Exhibits on which the witnesses would
have testified. (Emphasis supplied)[90]
Petitioners rely on Northwest in that absent any compelling or valid reason, the witness
must personally testify in open court.[91] They add that the more recent Republic v.
Sandiganbayan[92] reiterated the rulings in Northwest,[93] specifically, that Northwest
emphasized that the "court should always see to it that the safeguards for the protection
of the parties and deponents are firmly maintained." [94] Moreover, "[w]here the
deposition is taken not for discovery purposes, but to accommodate the deponent, then
the deposition should be rejected in evidence." [95] Northwest and Republic are not on all
fours with this case.

Northwest involved a deposition in New York found to have been irregularly taken. The
deposition took place on July 24, 1995, two (2) days before the trial court issued the
order allowing deposition.[96] The Consul that swore in the witness and the stenographer
was different from the Consulate Officer who undertook the deposition proceedings.
[97]
 In this case, on the other hand, deposition taking was not allowed by the trial court to
begin with.

In Northwest, respondent Camille Cruz's opposition to the notice for oral deposition
included a suggestion for written interrogatories as an alternative. [98] This would have
allowed cross-interrogatories, which would afford her the opportunity to rebut matters
raised in the deposition in case she had contentions. However, this suggestion was
denied by the trial court for being time-consuming. [99] In this case, petitioners argued
even against written interrogatories for being a mile of difference from open-court
testimony.[100]

In Republic, the issue involved Rule 23, Section 4(c)(3) of the Rules of Court in relation
to Rule 130, Section 47 on testimonies and depositions at a former proceeding. [101] The
deposition of Maurice Bane was taken in London for one case, and what the court
disallowed was its use in another case.[102]

In sum, Rule 23, Section 1 of the Rules of Court gives utmost freedom in the taking of
depositions. Section 16 on protection orders, which include an order that deposition not
be taken, may only be issued after notice and for good cause shown. However,
petitioners' arguments in support of the trial court's Order denying the taking of
deposition fails to convince as good cause shown.

869
The civil suit was filed pursuant to an agreement that gave respondent the option of
filing the case before our courts or the courts of California. It would have been even
more costly, time-consuming, and disadvantageous to petitioners had respondent filed
the case in the United States.

Further, it is of no moment that respondent was not suffering from any impairment. Rule
23, Section 4(c)(2) of the Rules of Court, which was invoked by respondent, governs the
use of depositions taken. This allows the use of a deposition taken when a witness is
"out of the Philippines."

In any case, Rule 23 of the Rules of Court still allows for objections to admissibility
during trial. The difference between admissibility of evidence and weight of evidence
has long been laid down in jurisprudence. These two are not to be equated.
Admissibility considers factors such as competence and relevance of submitted
evidence. On the other hand, weight is concerned with the persuasive tendency of
admitted evidence.[103]

The pertinent sections of Rule 23 on admissibility are:

SEC. 6. Objections to admissibility. - Subject to the provisions of section 29 of this Rule,
objection may be made at the trial or hearing to receiving in evidence any deposition or
part thereof for any reason which would require the exclusion of the evidence if the
witness were then present and testifying.

....

SEC. 29. Effect of errors and irregularities in depositions. . . .

....

(c) As to competency and relevancy of evidence. — Objections to the competency of a

witness or the competency, relevancy [sic], or materiality of testimony are not waived by
failure to make them before or during the taking of the deposition, unless the ground of
the objection is one which might have been obviated or removed if presented at that
time[.]
As regards weight of evidence, "the admissibility of the deposition does not preclude the
determination of its probative value at the appropriate time." [104] In resorting to
depositions, respondent takes the risk of not being able to fully prove his case.

Thus, we agree with the Court of Appeals in granting the Petition for Certiorari and
reversing the trial court's denial of respondent's Motion for Court Authorization to Take
Deposition.

WHEREFORE, the Petitions are DENIED for lack of merit.

870
SO ORDERED.

THIRD DIVISION

G.R. No. 190408, July 20, 2016

BENJIE B. GEORG REPRESENTED BY BENJAMIN C. BELARMINO,

JR., Petitioner, v. HOLY TRINITY COLLEGE, INC., Respondent.

DECISION

PEREZ, J.:

This petition for review seeks to reverse the 17 November 2009 Decision 1 of the Court
of Appeals in CA-G.R. CV No. 89990 and reinstate the 29 November 2006 Decision 2 of
the Regional Trial Court (RTC), Branch 15, Tabaco City in Civil Case No. T-2161.

The Holy Trinity College Grand Chorale and Dance Company (the Group) was
organized in 1987 by Sister Teresita Medalle (Sr. Medalle), the President of respondent
Holy Trinity College in Puerto Princesa City. The Grand Chorale and Dance Company
were two separate groups but for the purpose of performing locally or abroad, they were
usually introduced as one entity. The Group was composed of students from Holy
Trinity College.

In 2001, the Group was slated to perform in Greece, Italy, Spain and Germany. Edward
Enriquez (Enriquez), who allegedly represented Sr. Medalle, contacted petitioner Benjie
B. Georg to seek assistance for payment of the Group's international airplane tickets.
Petitioner is the Filipino wife of a German national Heinz Georg. She owns a German
travel agency named DTravellers Reiseburo Georg. Petitioner, in turn, requested her
brother, Atty. Benjamin Belarmino, Jr. (Atty. Belarmino), to represent her in the
negotiation with Enriquez. Enriquez was referred to petitioner by Leonora Dietz (Dietz),
another Filipino-German who has helped Philippine cultural groups obtain European
engagements, including financial assistance.

On 24 April 2001, a Memorandum of Agreement with Deed of Assignment 3 (MOA) was

executed between petitioner, represented by Atty. Belarmino, as first party-assignee;
the Group, represented by Sr. Medalle, O.P. and/or its Attorney-in-Fact Enriquez, as
second-party assignor and S.C. Roque Group of Companies Holding Limited
Corporation and S.C. Roque Foundation Incorporated, represented by Violeta P.
Buenaventura, as foundation-grantor. Under the said Agreement, petitioner, through her
travel agency, will advance the payment of international airplane tickets amounting to
P4,624,705.00 in favor of the Group on the assurance of the Group represented by Sr.
Medalle through Enriquez that there is a confirmed financial allocation of P4,624,705.00
from the foundation-grantor, S.C. Roque Foundation (the Foundation). The second-
party assignor assigned said amount in favor of petitioner. Petitioner paid for the

871
Group's domestic and international airplane tickets.

In an Amended Complaint4 dated 15 August 2001 for a Sum of Money with Damages

filed before the RTC, Branch 18, Tabaco City, petitioner claimed that the second-party
assignor/respondent and the foundation-grantor have not paid and refused to pay their
obligation under the MOA. Petitioner prayed that they be ordered to solidarily pay the
amount of P4,624,705.00 representing the principal amount mentioned in the
Agreement, moral, exemplary, and actual damages, legal fees, and cost of suit. 5 The
corresponding summonses were served.

On 14 September 2001, respondent filed a motion to dismiss on the ground that

petitioner had no cause of action against it. On 6 November 2001, petitioner filed a
Petition for Issuance of a Writ of Attachment.

On 21 April 2003, the trial court issued an Order denying the motion to dismiss, as well
as the petition for issuance of a writ of attachment against respondent. A Preliminary
Attachment against the foundation-grantor has previously been issued.

An Order of Default has been pronounced by the trial court against the foundation-
grantor and its responsible officers for the latter's failure to file its answer despite service
of summons.

During the pre-trial, the following facts were stipulated:

chanRoblesvirtualLawlibrary

1. Sr. Teresita Mcdalle, OP, [placed her thumbmark] in the subject MO A at

the University of Sto. Tomas on 24 April 2001 in Espana, Manila.

2. At the time Sr. Teresita Medalle, O.P. [placed her thumbmark] in the
subject MOA, she was still suffering from stroke.

3. The subject MOA was notarized in Makati City.6

and the following issues were submitted for resolution:

chanRoblesvirtualLawlibrary

1. Whether or not when Sr. Teresita Medalle affixed her thumbmark in the
MOA, she is affixing her thumbmark as President of the Holy Trinity
College.

2. Whether or not Holy Trinity College is in estoppel?

3. Whether or not the Holy Trinity College may be bound by the acts of Sr.
Teresita Medalle.

872
 4. Whether or not the principle piercing the veil of corporate fiction may be
applied in this case.

5. Whether or not Holy Trinity College may be considered a party in the

MOA.

6. Whether or not defendant may be held liable to pay the sum due in the
MOA plus damages and litigation expenses.

7. Whether or not [respondent] is entitled to the relief sought for the

Complaint.

8. Whether or not the school is entitled to its counterclaim. 7

On 4 August 2005, the trial court reconsidered its Order of 21 April 2003 and issued a
Writ of Attachment against respondent.

In their Answer with Counterclaim, respondent argued that the MOA on which petitioner
based its cause of action does not state that respondent is a party. Neither was
respondent obligated to pay the amount of P4,624,705.00 for the European Tour of the
Group nor did it consent to complying with the terms of the MOA. Respondent asserted
that the thumbmark of Sr. Medalle was secured without her consent. Respondent
maintained that since it was not a party to the MOA, it is not bound by the provisions
stated therein. Respondent counterclaimed for damages. 8chanrobleslaw

On 29 November 2006, the RTC ruled in favor of petitioner. The dispositive portion of
the Decision reads:

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WHEREFORE, PREMISES CONSIDERED, Judgment is hereby rendered:

1. Ordering the defendants (1) S.C. Group of Companies Holding Limited

Corporation, (2) S.C. Roque Foundation, Inc., (3) Holy Trinity College,
Inc., (4) Holy Trinity College Grand Chorale, (5) Holy Trinity Dance
Company and (5) Sister Teresita M. Medalle, O.P., to jointly and severally
pay the Plaintiff Benjie B. Georg the following:

chanRoblesvirtualLawlibrary1 .a. The amount equivalent to Euro Currency

of One Hundred Eight-Five Thousand Five Hundred Seventy-Six and
Thiry-Seven Deutschmark (DM 185,576.37) with the legal interest thereon
from May 21, 2001 until fully paid, by depositing the same at the
designated account as provided in the Memorandum of Agreement as
follows:

chanRoblesvirtualLawlibrary

873
 Account Name Heinz Georg Gmbh
Name of Bank Volksbank Sud Siegerland eG
In Neunkirchen, Germany
Account Number 210507600

2.
1.b. The amount equivalent to eighteen percent (18%) of the principal
amount due in the amount of One Hundred Eight-Five Thousand Five
Hundred Seventy-Six and Thirty-Seven Deutschmark (DM 186,576.37)
plus the accrued interest thereon until fully paid;

1.c. The amount equivalent to ten percent (10%) of the total amount
above-mentioned under paragraph 1.b. as attorney's fees;

1.d The amount of One Million Pesos (P1,000,000.00) by way of Moral

Damages;

1.e. The amount of One Million Pesos (P1,000,000.00) as Exemplary

Damages;

1.f. Litigation expenses incurred by the Plaintiff which includes Exhibits

S,T,U,V,W,AA-2-d, AA-2-e, AA-2-f, AA-2-G, AA-2-I, AA-2-J, AA-2-k, AA-2-
1 to AA-2-1-5, AA-2-m to AA-2-m-7, AA-2-N to AA-2-N-3, BB, CC, DD,
EE, FF, GG, HH, II, JJ, KK, LL, MM, NN, OO, PP, QQ, RR, SS, TT, UU,
VV, WW, XX, YY, AAA, BBB, CCC.

Cost against the defendants.9

Summed up, the findings of the trial court are:

chanRoblesvirtualLawlibrary1. The thumbmark appearing in the MOA is that of Sr.

Medalle.

2. The Group was formed and organized by Sr. Medalle, in her capacity as the
President of the Holy Trinity College, Inc. Said group is subject to the full control and
supervision of the school administration, including selection and hiring of trainers, as
well as their termination.

3. Sr. Medalle initiated the European Tour of the group in 2001. She even contacted
one Dietz in Germany for the arrangement of the tour schedule and accomodation. She
also was directly responsible for the procurement of the visa of the Group.

4. Even prior to and at the time of the departure of the Group, Sr. Lina Tuyac (Sr.

874
Tuyac) and Sr. Estrella Tangan (Sr. Tangan), officers of Holy Trinity College, were
already aware of the MOA.

5. During the pre-trial, the lawyer of respondent denied that Sr. Medalle's act of affixing
her thumbmark was ultra vires. The trial court construed this denial as admission that
Sr. Medalle acted within the scope of her authority.

6. When Sr. Medalle affixed her thumbmark in the MOA, it was in her capacity as
President of Holy Trinity College and not of the Group.

7. Respondent is deemed to have admitted the genuineness and due execution of the
MOA when it failed to specifically make any denial under oath.

8. The doctrine of Corporation by Estoppel operates against respondent. The school

administration had itself allowed the existence of the Group and much more allowed its
President, Sr. Medalle to operate the same under that calling before the general public
and petitioner had truly acted in good faith in dealing with it.

9. The personality of the Holy Trinity College Grand Chorale, the Holy Trinity College
Dance Company, Holy Trinity College, Inc. and Sr. Medalle may be disregarded and
may well be considered as identical.

10. There was a clear breach of and delay in the performance of the contractual
obligation of respondent under the MOA.

On 5 January 2007, petitioner filed a motion for execution pending appeal. Said motion
was granted and a correspoding writ was issued by the trial court. This decision was
sustained by the Court of Appeals, and later on affirmed by this Court in G.R. No.
180787.

On 9 January 2007, respondent filed a notice of appeal. 10chanrobleslaw

In a Decision dated 17 November 2009, the Court of Appeals relieved respondent of

any liability for petitioner's monetary claims. The Court of Appeals synthesized the
issues into three, thus:

chanRoblesvirtualLawlibrary

1. Respondent's privity to the loan extended by petitioner and the MOA sued
upon;

2. Sr. Medalle's capacity and/or authority to act for and in behalf of appellant
in respect to the subject MOA; and cralawlawlibrary

3. The applicability of the doctrines of apparent authority and/or corporation

by estoppel to the factual and legal millieux of the case. 11

875
The Court of Appeals held that the record is bereft of any showing that Sr. Medalle
participated in the negotiation, perfection and partial consummation of the contract
whereby petitioner advanced the payment of international and domestic tickets required
for the Group's European tour. The Court of Appeals found that petitioner had agreed to
advance the payment based on the following considerations: 1) the representation
made by Enriquez that he was respondent's employee/representative and that the funds
were available for said tickets; 2) the supposed confirmation from Dietz that Enriquez
was an employee/representative of respondent and that she had been in contact with
Sr. Medalle regarding the Group's European tour; and 3) the assurance given by Fr.
Vincent Brizuela that Sr. Medalle was, indeed, respondent's President. Petitioner relied
on the confirmation of Dietz and did not even contact Sr. Medalle. The Court of Appeals
held that petitioner failed to exercise reasonable diligence in ascertaining the existence
and extent of Enriquez's authority to act for and in behalf of the Group or for that matter,
respondent. The Court of Appeals noted the absence of respondent's name in the MOA,
thus it concluded that respondent was clearly not a party to the MOA. The Court of
Appeals took exception to the trial court's ruling that respondent admitted the
genuineness and due execution of the MOA when it failed to deny the same under oath.
The Court of Appeals, citing Section 8, Rule 8 of the Rules of Court, ruled that the
requirement of an oath does not apply when the adverse party does not appear to be a
party to the instrument upon which an action or defense is founded. The Court of
Appeals also pointed out that Sr. Medalle affixed her thumbmark on the MOA under the
mistaken belief that said agreement would facilitate the release of the donation from the
foundation-grantor. The Court of Appeals added that the trial court should have
considered that Sr. Medalle was confined at the hospital at that time. In addition, the
Court of Appeals ruled that there was no showing that Sr. Medalle was duly authorized
by respondent to enter into the subject MOA. According to the Court of Appeals, the
Group's general affiliation with respondent cannot be used by petitioner to justify her
failure to exercise reasonable diligence in the conduct of her own travel agency
business. The doctrine of corporation by estoppel cannot apply to respondent in
absence of any showing that it was complicit to or had benefited from said
mispresentations.

Aggrieved, petitioner elevated the case to this Court via a petition for review.

First, petitioner questions the admission of the alleged deposition conducted upon Sr.
Medalle when the same was not presented in evidence by respondent's counsel.
Petitioner adds that there was no order from the trial court allowing such deposition.
Petitioner also claims that the requisite certification that should accompany the
deposition is defective.

Second, petitioner insists that Sr. Medalle was in full possession of her mental faculties
when she affixed her thumbmark on the MOA and that the same was read in full to Sr.
Medalle. Petitioner asserts that no single witness was presented to prove that Sr.
Medalle's illness had impaired her judgment.

876
Third, petitioner argues that the Court of Appeals merely relied on respondent's
assertion that it is not a party to the MOA without considering the evidence presented by
petitioner. Petitioner avers that respondent's counsel had acknowledged during pre-trial
that respondent is deemed to have admitted the genuineness and due execution of the
MOA. Thus, respondent cannot be allowed for the first time on appeal to claim that it is
not a party to the MOA.

Fourth, petitioner contends that the Holy Trinity College Grand Chorale and Holy Trinity
College Dance Company were both created by Sr. Medalle in her capacity as President
of respondent. These groups were also under the dominion and control of Sr. Medalle
and/or respondent. Petitioner refutes the assertion of respondent that Sr. Medalle was
no longer the President of Holy Trinity College when the MOA was executed in view of
the conflicting statements of respondent's witnesses.

Fifth, petitioner opposes the consideration given by the appellate court to the
appointment papers of Sr. Tangan as President of the Holy Trinity College to prove that
Sr. Medalle is only allowed to spend P30,000.00 worth of non-budgeted and
extraordinary expenses, thereby proving that she was not authorized by respondent to
enter into an MOA. Petitioner cites instances where Sr. Medalle acted in her capacity as
President of Holy Trinity College without the imprimatur of respondent.

Sixth, petitioner claims that the appellate court cannot absolve respondent from liability
while affirming the decision of the trial court with respect to the foundation-grantor
because the liability of the latter is joint and solidary with respondent.

The primordial issue is whether respondent is liable under the MOA. Respondent
primarily argues that it is not a party to the MOA. Petitioner claims otherwise because
Sr. Medalle, in her capacity as President of Holy Trinity College, affixed her thumbmark
in the MOA. Two sub-issues necessarily arise therefrom: 1) whether Sister Medalle
freely gave her full consent to the MOA by affixing her thumbmark and 2) whether she is
authorized by respondent to enter into the MOA.

The issues presented involve questions of fact. A question of fact exists when a doubt
or difference arises as to the truth or the falsehood of alleged facts; and when there is
need for a calibration of the evidence, considering mainly the credibility of witnesses
and the existence and the relevancy of specific surrounding circumstances, their
relation to each other and to the whole, and the probabilities of the
situation.12chanrobleslaw

As a rule, the findings of fact of the Court of Appeals are final and conclusive and this
Court will not review them on appeal,13 subject to the following exceptions: (1) when the
findings are grounded entirely on speculations, surmises or conjectures; (2) when the
inference made is manifestly mistaken, absurd or impossible; (3) when there is grave
abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5)
when the findings of fact are conflicting; (6) when in making its findings the Court of
Appeals went beyond the issues of the case, or its findings are contrary to the

877
admissions of both the appellant and the appellee; (7) when the findings are contrary to
that of the trial court; (8) when the findings are conclusions without citation of specific
evidence on which they are based; (9) when the facts set forth in the petition as well as
in the petitioners main and reply briefs are not disputed by the respondent; (10) when
the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; or (11) when the Court of Appeals manifestly
overlooked certain relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion. 14chanrobleslaw

Exception No. 7 obtains in this case. The findings of the RTC are contrary to those of
the Court of Appeals.

The essential requisites of a contract under Article 1318 of the New Civil Code are:

chanRoblesvirtualLawlibrary
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.

The validity of the MOA is being assailed for a defect in consent. Under Article 1330 of
the Civil Code, consent may be vitiated by any of the following: (1) mistake, (2) violence,
(3) intimidation, (4) undue influence, and (5) fraud. Under the same provision, the
contract becomes voidable.

Petitioner claims that Sr. Medalle knew fully well the import of the MOA when she
affixed her thumbmark therein while respondent alleges that fraud was employed to
induce Sr. Medalle to affix her thumbmark.

There is fraud when one party is induced by the other to enter into a contract, through
and solely because of the latter's insidious words or machinations. But not all forms of
fraud can vitiate consent. Under Article 1330, fraud refers to dolo causante or causal
fraud, in which, prior to or simultaneous with execution of a contract, one party secures
the consent of the other by using deception, without which such consent would not have
been given.15chanrobleslaw

Between the two parties, we are inclined to give credence to petitioner. First, the trial
court did not give probative weight to the deposition of Sr. Medalle basically stating that
respondent's counsel failed to conform to Section 20, Rule 23 of the Rules of Court
which provides that:

chanRoblesvirtualLawlibrary
Section 20. Certification, and filing by officer. — The officer shall certify on the
deposition that the witness was duly sworn to by him and that the deposition is a true
record of the testimony given by the witness. He shall then securely seal the deposition
in an envelope indorsed with the title of the action and marked "Deposition of (here

878
insert the name of witness)" and shall promptly file it with the court in which the action is
pending or send it by registered mail to the clerk thereof for filing.

Indeed, there is no record of any certification from Notary Public Romeo Juayno stating
that the witness, Sr. Medalle in this case, was sworn to by him and that the deposition is
a true record of the testimony given by Sr. Medalle. Furthermore, petitioner correctly
noted that respondent's counsel did not seek a leave of court to conduct a deposition in
violation of Section 1, Rule 23 of the Rules of Court:

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Section 1. Depositions pending action, when may be taken. — By leave of court after
jurisdiction has been obtained over any defendant or over property which is the subject
of the action, or without such leave after an answer has been served, the testimony of
any person, whether a party or not, may be taken, at the instance of any party, by
deposition upon oral examination or written interrogatories. The attendance of
witnesses may be compelled by the use of a subpoena as provided in Rule 21.
Depositions shall be taken only in accordance with these rules. The deposition of a
person confined in prison may be taken by leave of court on such terms as the court
prescribes.

In Republic of the Phils, v. Sandiganbayan,16 we held that:

chanRoblesvirtualLawlibrary
Depositions pending action may be conducted by oral examination or written
interrogatories, and may be taken at the instance of any party, with or without leave of
court. Leave of court is not necessary to take a deposition after an answer to the
complaint has been served. It is only when an answer has not yet been filed (but
jurisdiction has been obtained over any defendant or over property subject of the action)
that prior leave of court is required. The reason for this is that before filing of the
answer, the issues are not yet joined and the disputed facts are not clear. 17

In this case, respondent's counsel filed a Notice of Deposition for the Taking of
Deposition on 28 October 2002. The Answer with Counterclaim was only filed on 21
February 2005. In this instance, respondent should have asked for leave of court.
Considering that the trial court has the discretion to decide whether a deposition may or
may not be taken, it follows that it also has the discretion to disregard a deposition for
non-compliance with the rules.

Second, Sr. Medalle is presumed to know the import of her thumbmark in the MOA.
While she was indeed confined at the UST Hospital at that time, respondent however
failed to prove that Sr. Medalle was too ill to comprehend the terms of the contract.
True, Sr. Medalle suffered a stroke but respondent did not present any evidence to
show that her mental faculty was impaired by her illness.

Moreover, there is nothing in the deposition that tends to prove that Sr. Medalle's

879
consent was vitiated.

Sr. Medalle claimed that she affixed her thumbmark on the MOA on the basis of
Enriquez's representation that her signature/thumbmark is necessary to facilitate the
release of the loan. As intended, the affixing of her thumbmark in fact caused the
immediate release of the loan. Petitioner's claim that the provisions of the MOA were
read to Sr. Medalle was found credible by the Court of Appeals. The Court of Appeals
discussed at length how proper care and caution was taken by Atty. Belarmino to verify
what the Groups's trip was all about and the extent of the authority of Sr. Medalle
regarding the project. Thus:

chanRoblesvirtualLawlibrary
It was in connection with the [Group's] 2001 European tour that, on April 21, 2001, one
Edward or "Jojo" Enriquez contacted [petitioner] Benjie Georg, a Filipina, who as the
wife of the German national Heinz Georg. owned and operated the travel agency D'
Travellers Reiseburo Georg in Germany. Claiming to have been referred by Leonora
Dietz, another Filipina-German who has gained prominence for helping various cultural
groups from the Philippines in obtaining engagements, financial assistance, travel
requirements and accommodations in Europe, Edward Enriquez represented himself as
an employee of appellant, duly authorized by Sr. [Medalle] to arrange [the Group's]
impending engagements in Greece, Italy, Spain and Germany. Given the group's fixed
schedule and the 2 weeks purportedly received by the bank for clearing the money
allotted therefor, Edward Enriquez sought [petitioner's] assistance in advancing the
payment of the reserved airline tickets of 48 people composed of 6 [of the Group's] staff,
25 choral[e] members and 17 dancers.

After talking to Leonora Dietz who confirmed the fact that she had been communicating
with Sr. [Medalle] regarding [the Group's] approaching European tour and verifying from
a priest that said nun, was, indeed [respondent's] President, [petitioner] decided to help
the group and, accordingly, contacted her brother, Atty. Benjamin Belarmino, Jr., (Atty.
Belarmino) who happened to be in Manila in the morning of April 24. 2001, a Saturday.
Apprised of the situation by his sister, it appears that Atty. Belarmino received a phone
call from Edward Enriquez who requested for a meeting at a coffee shop in Century
Park Hotel in Malate. Repairing to said place at around 11:00 a.m. of the same day,
Atty. Belarmino was introduced by Edward Enriquez, to one Violcta Buenaventura, the
Vice-President of S.C. Roque Foundation, Inc. (SRFI), an employee of said Foundation
and one Gardenia Banez. Assured by Edward Enriquez that he was duly authorized to
arrange [the Groups] tour by Sr. [Medalle] who was, however, confined at the University
of Sto. Tomas (UST) Hospital at the time, Atty. Belarmino was further informed that the
group was going to receive a donation of about P20.000,000.00 from SRFI.

Told that the reservation for the domestic and airline tickets of the group will be forfeited
if not paid at 12:00 o'clock noon of the same day, Atty. Belarmino asked for the
telephone number of Sr. [Medalle] but was instead given [respondent's] number in
Palawan. Receiving no answer at said number, Atty. Belarmino was assured by Edward
Enriquez that he was willing to accompany him to the UST Hospital after the subject

880
tickets were paid as per deadline. For added assurance, it appears that Atty. Belarmino
asked for a talk with Solminio Roque, the President of SRFI, who was supposed to be at
a Makati branch of Union Bank, processing the clearing of the P20,000,000.00 donation
to [the Group]. While he was able to talk to Solminio Roque who confirmed that he was
indeed processing the donation at said bank. Atty. Belarmino was advised that a
meeting between them just then was not feasible in view of the aforesaid deadline. The
latter's request for a talk with an employee of the bank to ascertain the veracity of the
former's whereabouts was likewise thwarted on the supposed ground that the same
would be violative of the "Bank Secrecy Law".

As further precaution, Atty. Belarmino asked for the verification of the reservation with
the Saudia Airlines and the Philippine Airlines which confirmed the group's booking for
international and domestic flights. Shown a brochure which detailed the artistic
achievements and charitable vision-mission of the [Group], Atty. Belarmino was not only
impressed but became concerned that the cancellation of the group's imminent
European tour would - as he was made to understand - mean the end of the scholarship
for the participants who were mostly graduating students. Upon the understanding that
the money advanced would be paid within 15 days or even on the same day should
Solminio Roque be able to cause the bank's release of the intended donation, Atty.
Belarmino approved [petitioner's] accomodation of the group's domestic and
international airline tickets at about 12:30 p.m. and, because of Edward Enriquez' added
entreaties, even used his personal money in advancing payment of the domestic airline
tickets for Palawan-Iloilo leg o[ the group's travel. As a final precaution, Atty. Belarmino
likewise confirmed with the aforesaid airline companies that the subject tickets had,
indeed, been paid already.

xxxx

Forthwith, Atty. Belarmino and Edward Enriquez proceeded to the UST Hospital where
he was introduced to Sr. [Medalle] who was confined thereat following a stroke she
appears to have suffered. Although unable to speak clearly, Atty. Belarmino claimed
that Sr. [Medalle] had full mental capacity and was even able to acknowledge that she
was, indeed, [respondent's] incumbent President and to confirm that the students
named in the documents used in requesting visas from the Spanish Embassy were
participants in [the Group's] European Tour. At the latter's room were 2 or 3 nuns and
several students, from whose conversation regarding the tour Atty. Belarmino learned
that the same was not the first of its kind authorized by Sr. [Medalle]. After perusing the
MOA which was additionally read to her in full by Edward Enriquez, Sr. [Medalle]
reported said "Yes" in a soft voice and nodded her head before affixing her thumbmark
on the document to signify her assent thereto.18

It simply defies logic that Atty. Belarmino would employ fraud just so Sr. Medalle could
affix her thumbmark to facilitate the release of the loan coming from Atty. Belarmino
himself.

At this juncture, it should be emphasized that a notarized document enjoys the

881
presumption of regularity and is conclusive as to the truthfulness of its contents absent
any clear and convincing proof to the contrary.19chanrobleslaw

Third, respondent claims that Sr. Medalle was not authorized by the corporation to enter
into any loan agreement thus the MOA executed was null and void for being ultra vires.
Petitioner invokes, as refutation, the doctrine of apparent authority.

Respondent's denial of privity to the loan contract was based on the following reasons:
1) that respondent's name does not appear on the MOA; 2) that Sr. Medalle was no
longer the President of Holy Trinity College when she affixed her thumbmark on the
MOA; and 3) that Sr. Medalle was not authorized by respondent through a board
resolution to enter into such agreement.

The trial court categorically ruled that Sr. Medalle affixed her thumbmark as President of
Holy Trinity College and therefore, respondent is a party to the MOA, viz:

chanRoblesvirtualLawlibrary
From the foregoing discussion and gathering also from the circumstances that is more
or less contemporaneous and subsequent to the execution of the Memorandum of
Agreement, this [c]ourt holds the view that when Sr. Teresita Medalle, O.P. affixed her
thumb mark in the Memorandum of Agreement, that it was in her capacity as the
President of the Holy Trinity College and not that of the Holy Trinity College Grand
Chorale and Dance Company.

As aptly found the adjective "ITS" in the Memorandum of Agreement which describes
the Parties thereat as:

chanRoblesvirtualLawlibrary
HOLY TRINITY COLLEGE GRAND CHORALE & DANCE COMPANY Co., with postal
address at Holy Trinity College. Puerto Princesa City, Palawan, herein represented by
its President Sister TERESITA M. MEDALLE, O.P. and/or its attorney-in-fact EDWARD
V. ENRIQUEZ...

is descriptive that the entity being referred to is indeed the Holy Trinity College.
Otherwise, if what were represented to by Sr. Teresita Medalle, O.P. was the Holy
Trinity College Grand Chorale and Dance Co., it might have been written as:

chanRoblesvirtualLawlibrary
Holy Trinity College Grand Chorale & Dance Company., represented by its President
Sister Medalle, O.P., and/or its attorney-in-fact Edward V. Enriquez, with postal address
at Holy Trinity College, Puerto Princesa City Palawan

The [c]ourt gives credence though to the testimony of Jearold Loyola that indeed the
said Grand Chorale and Dance Company are not registered with the Securities and
Exchange Commission and is therefore possessing no juridical personality and merely
owe its life and existence through the school administration of the Holy Trinity College

882
through its President, Holy Trinity College. There is no doubt indeed, that Sister Teresita
Medalle was the President of the Holy Trinity College. She was never at any given time
the President of the Holy Trinity Collge Grand Chorale & Dance Company, which is just
similar to any science or math club in the school. We do not expect much less find it
absurb that Sister Teresita Medalle, O.P. being the school President and Vice Chairman
of the Board of Trustees would allow herself to go down to her level and hold a position
as a President of student organization.

With the foregoing disquisitions, the import of the participation of Sister Teresita
Medalle. O.P. in that Memorandum of Agreement, was in her capacity as the Holy
Trinity College, Inc., Puerto Princesa City, Palawan. This Court cannot isolate the fact
that right at the very commencement of conceptualization of the said European Tour
2001 sometime in 2001, it was Sister Teresita Medalle who spearheaded the whole
activity. As above-mentioned, Sister Teresita Medalle personally communicated with
Leonor Dietz, their coordinator in Germany and has herself made arrangement for the
procurement of the visa of the group. The Grand Chorale and Dance Co., as testified to
by Jearold Loyola have no hands (sic) at all in the financial aspect of the group. It was
also Sister Teresita Medalle who arranges for the itinerary of the group and they have
no discretion of disobeying. This makes clear to the understanding of the [cjourt that
[njot all contracts are drawn in perfection. Otherwise, there would have been no case at
all that reached the courts of law.20chanroblesvirtuallawlibrary

Per records, it appears that the Holy Trinity Grand Chorale and Dance Company were
actually two separate entities formed and organized by Sr. Medalle in her capacity as
President of Holy Trinity College. Sr. Medalle made the following admission in her
deposition:

chanRoblesvirtualLawlibrary
Q: Sister, do you know or are you familiar with [the] group named Holy Trinity
College Dance and Grand Choral[e]?
A: Yes.
Q: Why do you know that group?
A: I was the one who organized this group.
Q: When did you organize this group?
A: In 1987 when I assumed my presidency at Holy Trinity.
Q: How did you organize the group, sister?
A: I selected the members from the different departments of the school.
Q: Who gave the name Holy Trinity College Dance and Grand Choral [e] Group?
A: I am the one.
Q: Why did you give them this name Holy Trinity College Dance Grand and Choral[e]

883
 Group?
A: Because the members belong to the school.21

Moreover, it was established, through the testimonies of the Group's Artistic Director,
Jearold Loyola, the Musical Director, and Vocal Coach Errol Gallespen, that they were
hired and given honorarium by Sr. Medalle. The costumes of the Group were financed
by respondent. They also testified that all the performances of the group were directly
under the supervision of the school administration. Effectively, respondent has control
and supervision of the Group particularly in the selection, hiring and termination of the
members. The trial court was convinced that the Group derived its existence and
continuous operation from the school administration. Pertinently, the Court found:

chanRoblesvirtualLawlibrary
The [c]ourt also found from the testimony of Jearold Loyola that in fact, the name Holy
Trinity College Grand Chorale and Dance Company, is a joint common calling of two (2)
separate performing groups, that is:ChanRoblesVirtualawlibrary
Holy Trinity College Grand Chorale, and
Holy Trinity College Dance Company.
The Holy Trinity College Grand Chorale is being headed by Errol Gallespen as the
Musical Director while the Holy Trinity College Dance Company is headed by Jearold
Loyola as the Artistic Director. Because they usually perform together; that for brevity
they were commonly called as Holy Trinity College Grand Chorale and Dance
Company.

The nature of the said performing groups as well as their relation with the Memorandum
of Agreement under consideration, is briefly described by Jearold Loyola (TSN,
November 19, 2001, page 17-21) as follows:

chanRoblesvirtualLawlibrary
Q You are not aware whether the Holy Trinity College Grand Chorale and Dance
Company has registration to vest it with juridical personality. What is the status of
this in the school?
A It is an organization under the Holy Trinity College. It is like a Chemistry Group, or
like a Math group.
Q You mean to say that they are the official Dance Company of the Holy Trinity
College?
A Yes, sir.
Q Who conducts the administration of the activities, the itineraries, how and when
you are going to perform?
A It is basically under the office of Sister Tess.
Q What is basically the function or responsibility of the group? I am referring to the

884
 Grand Chorale and Dance Company?
A Both performing groups represent the school in any endeavor that is in the fields
of arts, like music, and in the field of dance.
Q Does the Holy Trinity College Grand Chorale & Dance Company have, in any
manner, the power to control its own activity if the administration of the Holy Trinity
College, particularly the President, Sister Teresita Medalle, would say otherwise?
A The administration has full control of the group.
Q So, you cannot make any performance, except with the approval of the
administration?
A Yes, precisely.
Q You made mention that the Holy Trinity College Grand Chorale and Dance
Company performed abroad on April to September this year. Do you know who
initiated this trip to Europe?
A Who decides for that trip?
Q Yes
A The administration.
Q Who in particular[?]
A Sister Teresita Medalle.
Q You are referring to the President, Sister Teresita Medalle
A Yes, sir.
Q How about the funding for this European Tour of this year, do you know whom the
funding came from?
A I do not have any idea.
Q Attached to the record as Annex "A" of the Complaint is a Memorandum of
Agreement with Deed of Assignment, consisting of six (6) pages. Can you go over
the same for a while?
A Yes, this is the Memorandum of Agreement.
Q When, for the first time, have you seen a copy of this Memorandum of
Agreement?
A I cannot tell the exact date, but 1 think it is between August and September of this
year.
Q Under what circumstances did you come to a knowledge of that Memorandum of
Agreement?
A I think the new President was sent by the Court these materials, and she
photocopied it and sent it to us.

885
Q You are telling us that the Holy Trinity College Grand Chorale and Dance
Company does not have knowledge or participation in the execution of this
Memorandum of Agreement?
A Yes. That was the first time I saw this paper when it was sent from here.
Not only that the said Holy Trinity College Grand Chorale and Dance Company were
formed and organized by Sr. Teresita Medalle, O.P. during her incumbency and
capacity as the President of the Holy Trinity College, but the said performing groups
were likewise subject to the full control and supervision of the school administration as
well as payment of Honorarium of Jearold Loyola, Errol Gallespen and John Pamintuan.
Thusly, the tertimony of Jearold Loyola is quite revealing, as follows (TSN, November
19, 2001, pages 7 to 11):

chanRoblesvirtualLawlibrary
Q Mister witness, you said that you are the Artistic Director of the Holy Trinity
College Grand Chorale. Since when have you been connected with this group as
the Artistic Director?
A Early 1997, I usually come and visit the school, but I worked there full time since
1998.
Q In your capacity as the Artistic Director of the Holy Trinity College Dance
Company, what compensation if any, do you have from the school?
A They only gave me honorarium. I was not teaching there, [s]o I was given only
honorarium.
Q When you say you were receiving Honorarium, how much did you receive?
A In the beginning, I received P20,000.00 a month, but it was raised to P40,000.00
when we went abroad.
Q Since when were you given honorarium?
A Based on my recollection, around August-September of 1999.
Q You said you are the Artistic Director of the Holy Trinity College Dance Company.
Can you inform the court of the activity and your responsibility in such a group?
A Basically, I handled the rehearsals and the concept of the production. After
making the concept, we do the rehearsals and then the performance. I also handle
the lights and other things needed for the production.
Q Where do you get the fundings for these activities?
A I just got if from the school.
Q When you say from the school, who in particular gave you funding?
A Directly from the Secretary of Sister Tess.
Q How about the expenses for the rehearsals?

886
A I do not have any idea where they get it, but if we require some things to buy, they
usually give us the things but I do not have the money for that.
Q You mean to say these are from the school administration?
A Yes, sir,
Q How about the performances, can you tell the Honorable Court when and where
you have been performing?
A We performed locally upon invitations of the Mayor and Governor in Puerto
Princesa. We also performed at the Cultural Center of the Philippines, and also in
Manila and abroad.
Q In these performances, who gave the finances for these performances in Palawan,
Manila and abroad?
A I do not know who usually give the fundings, but they subsidize the trip. They only
give P20,000.00 for the performance and I do not know where they get the other
money.
Q When you performed in Palawan or Manila or even abroad, what are you
representing?
A Holy Trinity College Grand Chorale and Dance Company.
Q When you say this, you are in effect representing the Holy Trinity College?
A Yes, sir.
xxxx

The Musical Director of the Holy Trinity College Grand Chorale on the other hand
testified as follows (TSN, January 16, 2002, pp. 80-83):

chanRoblesvirtualLawlibrary
Q Mr. Gallespen, you said that you are from Puerto Princesa City Palawan. Do you
know a person by the name of Sister Teresita Medalle?
A I am not from Puerto Princesa, Palawan, I am from Quezon City, sir.
Q Yes, I got confused, your Honor. Do you know a person by the name of Sister
Teresita Medalle in Puerto Princesa Medalle in Puerto Princesa City, Palawan.
A Yes. sir.
Q Can you tell us why and how you came to know her?
A  
She was the one who got me where I was working before.
Q As what?
A As Musical Director of the school's chorale group of Puerto Princesa City.

887
Q Can you tell the Court the name of that particular group wherein you were
engaged by Sister Teresita Medalle as Musical Director?
A The Holy Trinity College Grand Chorale and Dance Company, Sir.
Q Can you inform this Honorable Court if this Holy Trinity College Grand Chorale &
Dance Co. was registered with the Securities and Exchange Commission (SEC)?
A I am not sure, Sir. I don't think it was registered. But I know of a foundation which
registered the same.
Q Since when have you been engaged as the Musical Director of the Holy Trinity
College?
A Since 1993. sir.
Q And since 1993, what compensation if any, did you receive from the Holy Trinity
College?
A When I started, I was receiving a thousand pesos a day. And that time, I was then
already receiving P50,000.00 a month.
Q Who paid you that P50,000.00 a month[?]
A The school [,] sir.
Q Who directly pays you?
A Sister Tess, sir. And she has a secretary.

In the same manner that the Vocal Coach John Pamintuan was also being employed
and was paid compensation for his services by the school administration, as testified to
by Leonor Dietz, as follows (TSN, Leonor Dietz, June 3, 2002, page 3):

chanRoblesvirtualLawlibrary
ATTY. BELARMINO: What is the position if you know, of John Pamintuan in reference
to Holy Trinity College in Puerto Princesa City, Palawan, Philippines?
MRS. DIETZ: He was a Vocal Coach for the Choir and I think he was under the payroll
of the University

ATTY. BELARMINO: I see. When you say that he is under the payroll of the school, he
is receiving a regular compensation as a vocal coach. MRS. DIETZ: Yes.

ATTY. BELARMINO: I see.

MRS. DIETZ: According to him.

In fine, the school administration of the Holy Trinity College has control and supervision
of the Grand Chorale and Dance Company particularly in the selection and hiring of its
trainers but as to their termination as well. A fortiori, Jearold Loyola and Errol Gallespen
were formally severed per April 30, 2001 Letter of Sr. Estrella Tangan. This clearly
shows that indeed, the Holy Trinity College Grand Chorale and Dance Company were
888
both under the power of the school administration. Moreover, it is also clear that the
costumes were likewise financed by the school administration (Exhibit 1; TSN, January
16, 2002, page 22):

chanRoblesvirtualLawlibrary
1. The list of members of the Chorale & Dance Troupe

2. Inventory of the costumes which are financed by the school & turn-over of the same
to the Office of the Acting President, Sr. Lina Tuyac, O.P.
xxxx

Q Mr. Witness, you have mentioned during the last hearing that the manner of
the operation of the Holy Trinity College Grand Chorale & Dance Co. is
under the control and administration of the Holy Trinity College. And in that
letter of April 13, 2001, it mentions that you were required to submit an
inventory of costumes which were financed by the school. Will you tell us
whether those costumes used by the Holy Trinity College Grand Chorale &
Dance Co., are owned by the Holy Trinity College?
A Yes, sir.
Q It is mentioned in this letter that the said group is being financed by the
Holy Trinity College Administration, will you tell us whether all the expenses
were really shouldered or financed by the Holy Trinity College?
A Yes. sir, they were, because we got the money from them. If we wanted to
buy our costumes or anything else, we ask it from Sister Tess.
Q And this Sister Tess you are referring to is Sister Teresita Medalle?
A Yes, sir.
Q And she was giving that to you in her capacity as President of the Holy
Trinity College?
A Yes, sir.
Q Mr. witness, in those instances when you had performances, etc., and
wherein it was being financed by the school, you also derived income. Who
t[h]en took custody or possession of the income, if any?
A All the financial matters were handled by Sister Tess because we did not
question, or talk about financial matters of the group. Whenever we receive
donation or something, it was given directly to Sister Tess.
Q Can you give example to this Honorable Court wherein a certain person,
entity or organization had invited you to perform?
A All the letters and invitations for us to perform were coursed thru the Office
of the President.

889
COURT:
President of what?
WITNESS:
A Of the Holy Trinity College and addressed to Sister Tess, Your Honor.
ATTY. BELARMINO
Q This letter or invitation was addressed to the Holy Trinity College. How then
did your group able to manifest its consent or disagreement to the
invitation?
A Usually, they just give instructions if they had accepted the invitation. If they
did not overlap with our other schedules, then they would tell us what
performances they preferred. They have the options to choose what
performances we have to do.
Q Are you telling us that whatever performances you would have undertaken
was coursed thru the President of the Holy Trinity College?
A Yes, Sir.
Q Did you have any discretion or option in rejecting those invitations?
A We didn't have any option. But we tell them if we can do it. We can give our
opinion but we have no right to refuse.
Q Was there any instance wherein an invitation was accepted by the
President of the Holy Trinity College but the Holy Trinity College Grand
Chorale & Dance Co. refused to perform?
A None. sir.
Q Was there also any instance wherein you performed either in Palawan, in
the Philippines, or abroad wherein it was without the knowledge of the
President of the Holy Trinity College?
A Never, because all of our performances were official. Since we are
practicing and rehearsing in school then we could not perform without the
school's knowledge.
Q You have mentioned that you were practicing and rehearing in school?
A Yes, sir.
Q Are you trying to tell to the Court that you had a particular place given by
the school were you made your practice or rehearsals?
A We rehearse at the lobby at 8:30 after the last class until 11:00 or 12:00,
everyday.
Q Your place of rehearsal was then at the lobby of the school?

890
A [Y]es, sir.
Q Was there any instance in the course of those practices that your group
was prohibited by any officer or official of the school?
A The only instance or time when we were not allowed to rehearse in the
lobby was when there was a General PTA Meeting or any other activity that
needed the lobby, or was being used by any department. Nevertheless, we
also had to get the approval of Sister Tess.
Q Mr. Witness, prior to or sometime in April 2001, will you inform the Court as
to how many performances have you conducted, both local and abroad?
A We had a lot, sir.
Q More or less, would it be 20, 30 or 50?
A Maybe, from 20 to 30 performances in a year.
Q You also mentioned that you were indeed with Holy Trinity College since
1997?
A Yes, sir.
Q From 1997 and until April 2001, but before that European Tour, could you
inform the [c]ourt how many performances were done by your group.
A More than a hundred, sir.
Q More than a hundred, Mr. Witness? Of this more than a hundred
performances both local and abroad, arc you aware of any communication,
memorandum, or order from any officer of the Holy Trinity College or
congregation where you were denied recognition or permission to conduct
performances?
A None, sir. They always recognized us as the official group of the Holy
Trinity College.
Q Was there any instance wherein any officer of the Holy Trinity College or
congregation sent you communication of whatever nature wherein they
said that your prior performances were not official in the name of the Holy
Trinity College after you had that performance?
A None, sir.
xxxx
Q Mr. Witness, of all those over a hundred performances with the Holy Trinity
College, can you inform the [c]ourt where did you get the finances?
A What do you mean, sir?
Q Okay, let me elaborate. Can you inform the Court as to who financed those
more than a hundred performances you had?

891
A All the things were shouldered by the Holy Trinity College. That is what I
know, sir.
Q Mr. Witness, what was the general purpose why the Holy Trinity College
was maintaining the performances of the Holy Trinity College Grand
Chorale & Dance Co.?
A The purpose of the Grand Chorale was to give the students some
scholarships. That was basically the main purpose why we advertised. The
income we got from our performances were for the maintenance of the
group and also of the scholarship of the children.
Q Can you tell us how those children became scholars?
A We based it on their performances. They were evaluated based on their
performances. When we say performances, this includes their schedules
and attendance, including their attitudes. They would also undergo a series
of auditions in order to be taken in as trainees, and then end up as a
regular scholars.
Q When you say scholar, are you telling us of a full scholar?
A Not actually, sir, because they were paying P500.00 for the internet
services.
Q Can you tell the Court if you know, that by reason of this scholarship, how
many students had finished college?
A There had been so many graduates, sir. During my stint with the school, we
had 3 to 6 students in year.
Q That was around 1997?
A Up to 2001, sir.
(TSN, Jearold Loyola, January 16, 2001, pages 26 to 41)

With the foregoing, the [c]ourt is convinced that the indeed the Holy Trinity College
Grand Chorale and Dance Company do not have a life of its own and merely derive its
creation, existence and continued operation or performance at the hands of the school
administration. Without the decision of the school administration, the said Chorale and
Dance Company is completely inoperative.22

Sr. Aurelia Navarro (Sr. Navarro) claimed that she was appointed as Acting President
on 21 March 2001. The trial court correctly observed some inconsistencies in the
statements of Sr. Tangan and Sr. Navarro, to wit:

chanRoblesvirtualLawlibrary
This [c]ourt also finds it confusing as well, when and if at all Sister Teresita Medalle,
ceased to be the President of the Holy Trinity College. The own testimonial and
documentary evidence of the [respondent] Holy Trinity College is seemingly conflicting

892
and more so that the defense is conflicting.

It was admitted, though by both parties that the thumb mark in the Memorandum of
Agreement dated April 24, 2001, was that of Sister Teresita Medalle during which period
Sister Aurelia Navarro so testified that Sister Teresita Medalle was the President per
appointment dated March 27, 2001 issued by Sr. Ma. Aurora R. Villanueva, Prioress
General of Congregation of St. Catherine of Siena (Exhibit 1). She knows this because
she was the Secretary attesting to the said appointment and considering that she was
still a member of the Board of Trustees during that date and until the year 2003.

The said appointment letter states, thus:ChanRoblesVirtualawlibrary

I direct you to accept the office of President of the Holy Trinity College and to full your
duties with love and diligence for the good of the congregation and for the welfare of our
Holy Mother Church.

It did not appear though that Sister Estrella Tangan accepted (as required) the said
appointment. No evidence was on this matter was presented.
On the other hand, the April 23, 2001 Letter of Estrella Tangan (Exhibit G) herself to
Jearold Loyola and Errol Gallespen, was clear to say that, it was not Sister Estrella
Tangan who succeeded as the President or acted as President but Sister Lina Tuyac,
O.P. (TSN, Jearold Loyola, January 16, 2002, page 22):ChanRoblesVirtualawlibrary
2. Inventory of the costumes which are financed by the school & turn-over of the same
to the Office of the Acting President, Sr. Lina Tuyac, O.P.
From the testimony of Sister Estrella Tangan (TSN, November 20, 2002, page 12),
Sister Lina Tuyac was then the Acting President from March 22, 2001 until the end of
May 2001, as follows:

chanRoblesvirtualLawlibrary
Q Sister, you mentioned that it was Sister Lina Tuyac who was acting president, can
you tell this Honorable Court from what time she was acting president of the Holy
Trinity College?
A From [M]arch 22 until I formally to assume responsibility.
Q Until what time?
A When I reported to Palawan sometime last week of May.

However, when Sister Aurelia Navarro was presented on February 2, 2006 she
declared among others (TSN, Aurelia Navarro, February 2, 2006, page 43):

chanRoblesvirtualLawlibrary
Q Until today, Sister Teresita Medalle still the President of the Holy Trinity College?
A Yes, sir.23 (Emphasis omitted)

893
Sr. Medalle, as President of Holy Trinity, is clothed with sufficient authority to enter into
a loan agreement. As held by the trial court, the Holy Trinity College's Board of Trustees
never contested the standing of the Dance and Chorale Group and had in fact lent its
support in the form of sponsoring uniforms or freely allowed the school premises to be
used by the group for their practice sessions. In addition, petitioner was correct in citing
snippets of Sr. Navarro's testimony to prove that the Board of Trustees, the
administration, as well as the congregation to which they belong have consented or
ratified the actions of Sr. Medalle, thus:

chanRoblesvirtualLawlibrary

1. The [Group] was created and initiated by Sr. Teresita Medalle as

President of the Holy Trinity College. This was her project and she was in
charge.

2. The Board of Trustees of the Holy Trinity College came to know about the
creation of the [Group], but they did not discuss it in the Board Meeting.

3. Sr. Teresita Medalle was never asked of the reason why she created the
[Group];

4. Sr. Aurelia Navarro as well as the Board of Trustee, has not in any
instance since the creation of the Holy Trinity College, objected to
questioned Sr. Teresita Medalle to refrain from performing any act which
refers to the activity of the [Group];

5. The Board of Trustees has not in any instance called the attention or
enjoined Sr. Teresita Medalle in the furtherance of all the activities of the
[Group];

6. The Board of Trustees never questioned Sr. Teresita Medalle;

7. The Dominican Order for St. Catherine of Siena is the congregation which
runs the Holy Trinity College. It did not disown Sr. Teresita Medalle or the
[Group].

8. The Board of Trustees of the Holy Trinity College did not release written
board resolution wherein the Board is expressly not recognizing and not in
any manner owning responsibility arising from the existence or
performance activity of the [Group]. It was not even the subject of any
agenda.

9. Not even one Member of the Board of Trustees offered or suggested at

the very least the propriety or legality or the responsibility of the [Group] in
any of the board meeting.

894
 10. The members of the [Group] are being made scholars of the Holy Trinity
College.

11. The practice of the [Group] are being made inside the premises of the
Holy Trinity College and were made during class hours, but they were
never questioned;

12. Edward Enrique/ is an employee of the Holy Trinity College, a faculty

member;

13. The General Lake headed by the Mother General has the authority to
amend or modify, revoke any activity which was performed by its
subordinates which includes Sr. Teresita Medalle in her capacity as the
President as well as Sr. Estrclla Tangan.

14. The General Lake knew about the Memorandum of Agreement subject of
this case but this matter was never discussed in any of its meeting.

15. The Board of Trustees of the Holy Trinity College did not pass or adopt a
Board Resolution wherein they are not recognizing or they repudiating the
Memorandum of Agreement after they came to know about its existence.

16. The General Lake has not come out with any document wherein [they]
repudiated or revoke the Memorandum of Agreement.

17. According to the witness, the manner by the Memorandum of Agreement

was executed or entered into by Sr. Teresita Medalle was not in
accordance with the rules and regulations of the [Group] as well as that of
the Congregation of Siena and notwithstanding the fact that the General
lake came to know about this contravention of the rules, nothing was done
officially to vindicate the legality or violation committed against its own
rules and regulations.24

Assuming arguendo that Sr. Medalle was not authorized by the Holy Trinity College
Board, the doctrine of apparent authority applies in this case.

The doctrine of apparent authority provides that a corporation will be estopped from
denying the agent's authority if it knowingly permits one of its officers or any other agent
to act within the scope of an apparent authority, and it holds him out to the public as
possessing the power to do those acts.25cralawredchanrobleslaw

The existence of apparent authority may be ascertained through (1) the general manner
in which the corporation holds out an officer or agent as having the power to act or, in
other words, the apparent authority to act in general, with which it clothes him; or (2) the
acquiescence in his acts of a particular nature, with actual or constructive knowledge
thereof, whether within or beyond the scope of his ordinary powers. 26chanrobleslaw

895
In this case, Sr. Medalle formed and organized the Group. She had been giving
financial support to the Group, in her capacity as President of Holy Trinity College. Sr.
Navarro admitted that the Board of Trustees never questioned the existence and
activities of the Group. Thus, any agreement or contract entered into by Sr. Medalle as
President of Holy Trinity College relating to the Group bears the consent and approval
of respondent. It is through these dynamics that we cannot fault petitioner for relying on
Sr. Medalle's authority to transact with petitioner.

Finding that Sr. Medalle possessed full mental faculty in affixing her thumbmark in the
MOA and that respondent is hereby bound by her actions, we reverse the ruling of the
Court of Appeals.

WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals
dated 17 November 2009 in CA-G.R. CV No. 89990 is REVERSED and SET
ASIDE. The Decision dated 29 November 2006 of the Regional Trial Court, Branch 15,
Tabaco City in Civil Case No. T-2161 is hereby REINSTATED in toto.

SO ORDERED.chanRoblesvirtualLawlibrary
SECOND DIVISION
[ G.R. No. 185145, February 05, 2014 ]
SPOUSES VICENTE AFULUGENCIA AND LETICIA AFULUGENCIA, PETITIONERS,
VS. METROPOLITAN BANK & TRUST CO. AND EMMANUEL L. ORTEGA, CLERK
OF COURT, REGIONAL TRIAL COURT AND EX-OFFICIO SHERIFF, PROVINCE OF
BULACAN, RESPONDENTS.

DECISION
DEL CASTILLO, J.:
Section 6,[1] Rule 25 of the Rules of Court (Rules) provides that “a party not served with
written interrogatories may not be compelled by the adverse party to give testimony in
open court, or to give a deposition pending appeal.” The provision seeks to prevent
fishing expeditions and needless delays. Its goal is to maintain order and facilitate the
conduct of trial.

Assailed in this Petition for Review on Certiorari[2] are the April 15, 2008 Decision[3] of
the Court of Appeals (CA) in CA-G.R. SP No. 99535 which dismissed petitioners’
Petition for Certiorari for lack of merit and its October 2, 2008 Resolution [4] denying
petitioners’ Motion for Reconsideration. [5]

Factual Antecedents

Petitioners, spouses Vicente and Leticia Afulugencia, filed a Complaint [6] for nullification
of mortgage, foreclosure, auction sale, certificate of sale and other documents, with
damages, against respondents Metropolitan Bank & Trust Co. (Metrobank) and
Emmanuel L. Ortega (Ortega) before the Regional Trial Court (RTC) of Malolos City,

896
where it was docketed as Civil Case No. 336-M-2004 and assigned to Branch 7.

Metrobank is a domestic banking corporation existing under Philippine laws, while

Ortega is the Clerk of Court and Ex-Officio Sheriff of the Malolos RTC.

After the filing of the parties’ pleadings and with the conclusion of pre-trial, petitioners
filed a Motion for Issuance of Subpoena Duces Tecum Ad Testificandum[7] to require
Metrobank’s officers[8] to appear and testify as the petitioners’ initial witnesses during
the August 31, 2006 hearing for the presentation of their evidence-in-chief, and to bring
the documents relative to their loan with Metrobank, as well as those covering the
extrajudicial foreclosure and sale of petitioners’ 200-square meter land in Meycauayan,
Bulacan covered by Transfer Certificate of Title No. 20411 (M). The Motion contained a
notice of hearing written as follows:
NOTICE

The Branch Clerk of Court

Regional Trial Court
Branch 7, Malolos, Bulacan

Greetings:

Please submit the foregoing motion for the consideration and approval of the Hon. Court
immediately upon receipt hereof.

(signed)
Vicente C. Angeles[9]
Metrobank filed an Opposition[10] arguing that for lack of a proper notice of hearing, the
Motion must be denied; that being a litigated motion, the failure of petitioners to set a
date and time for the hearing renders the Motion ineffective and pro forma; that
pursuant to Sections 1 and 6[11] of Rule 25 of the Rules, Metrobank’s officers – who are
considered adverse parties – may not be compelled to appear and testify in court for the
petitioners since they were not initially served with written interrogatories; that
petitioners have not shown the materiality and relevance of the documents sought to be
produced in court; and that petitioners were merely fishing for evidence.

Petitioners submitted a Reply[12] to Metrobank’s Opposition, stating that the lack of a

proper notice of hearing was cured by the filing of Metrobank’s Opposition; that applying
the principle of liberality, the defect may be ignored; that leave of court is not necessary
for the taking of Metrobank’s officers’ depositions; that for their case, the issuance of a
subpoena is not unreasonable and oppressive, but instead favorable to Metrobank,
since it will present the testimony of these officers just the same during the presentation
of its own evidence; that the documents sought to be produced are relevant and will
prove whether petitioners have paid their obligations to Metrobank in full, and will settle
the issue relative to the validity or invalidity of the foreclosure proceedings; and that the
Rules do not prohibit a party from presenting the adverse party as its own witness.

Ruling of the Regional Trial Court 

897
On October 19, 2006, the trial court issued an Order [13] denying petitioners’ Motion for
Issuance of Subpoena Duces Tecum Ad Testificandum, thus:
The motion lacks merit.

As pointed out by the defendant bank in its opposition, the motion under consideration
is a mere scrap of paper by reason of its failure to comply with the requirements for a
valid notice of hearing as specified in Sections 4 and 5 of Rule 15 of the Revised Rules
of Court. Moreover, the defendant bank and its officers are adverse parties who cannot
be summoned to testify unless written interrogatories are first served upon them, as
provided in Sections 1 and 6, Rule 25 of the Revised Rules of Court.

In view of the foregoing, and for lack of merit, the motion under consideration is hereby
DENIED.

SO ORDERED.[14]
Petitioners filed a Motion for Reconsideration [15] pleading for leniency in the application
of the Rules and claiming that the defective notice was cured by the filing of
Metrobank’s Opposition, which they claim is tantamount to notice. They further argued
that Metrobank’s officers – who are the subject of the subpoena – are not party-
defendants, and thus do not comprise the adverse party; they are individuals separate
and distinct from Metrobank, the defendant corporation being sued in the case.

In an Opposition[16] to the Motion for Reconsideration, Metrobank insisted on the

procedural defect of improper notice of hearing, arguing that the rule relative to motions
and the requirement of a valid notice of hearing are mandatory and must be strictly
observed. It added that the same rigid treatment must be accorded to Rule 25, in that
none of its officers may be summoned to testify for petitioners unless written
interrogatories are first served upon them. Finally, it said that since a corporation may
act only through its officers and employees, they are to be considered as adverse
parties in a case against the corporation itself.

In another Order[17] dated April 17, 2007, the trial court denied petitioners’ Motion for
Reconsideration. The trial court held, thus:
Even if the motion is given consideration by relaxing Sections 4 and 5, Rule 15 of the
Rules of Court, no such laxity could be accorded to Sections 1 and 6 of Rule 25 of the
Revised Rules of Court which require prior service of written interrogatories to adverse
parties before any material and relevant facts may be elicited from them more so if the
party is a private corporation who could be represented by its officers as in this case. In
other words, as the persons sought to be subpoenaed by the plaintiffs-movants are
officers of the defendant bank, they are in effect the very persons who represent the
interest of the latter and necessarily fall within the coverage of Sections 1 and 6, Rule
25 of the Revised Rules of Court.

In view of the foregoing, the motion for reconsideration is hereby denied.

898
SO ORDERED.[18]
Ruling of the Court of Appeals

Petitioners filed a Petition for Certiorari[19] with the CA asserting this time that their
Motion for Issuance of Subpoena Duces Tecum Ad Testificandum is not a litigated
motion; it does not seek relief, but aims for the issuance of a mere process. For these
reasons, the Motion need not be heard. They likewise insisted on liberality, and the
disposition of the case on its merits and not on mere technicalities. [20] They added that
Rule 21[21] of the Rules requires prior notice and hearing only with respect to the taking
of depositions; since their Motion sought to require Metrobank’s officers to appear and
testify in court and not to obtain their depositions, the requirement of notice and hearing
may be dispensed with. Finally, petitioners claimed that the Rules – particularly Section
10,[22] Rule 132 – do not prohibit a party from presenting the adverse party as its own
witness.

On April 15, 2008, the CA issued the questioned Decision, which contained the
following decretal portion:
WHEREFORE, the petition is DISMISSED for lack of merit. The assailed orders dated
October 19, 2006 and April 17, 2007 in Civil Case No. 336-M-2004 issued by the RTC,
Branch 7, Malolos City, Bulacan, are AFFIRMED. Costs against petitioners.

SO ORDERED.[23]
The CA held that the trial court did not commit grave abuse of discretion in issuing the
assailed Orders; petitioners’ Motion is a litigated motion, especially as it seeks to require
the adverse party, Metrobank’s officers, to appear and testify in court as petitioners’
witnesses. It held that a proper notice of hearing, addressed to the parties and
specifying the date and time of the hearing, was required, consistent with Sections 4
and 5,[24] Rule 15 of the Rules.

The CA held further that the trial court did not err in denying petitioners’ Motion to
secure a subpoena duces tecum/ad testificandum, ratiocinating that Rule 25 is quite
clear in providing that the consequence of a party’s failure to serve written
interrogatories upon the opposing party is that the latter may not be compelled by the
former to testify in court or to render a deposition pending appeal. By failing to serve
written interrogatories upon Metrobank, petitioners foreclosed their right to present the
bank’s officers as their witnesses.

The CA declared that the justification for the rule laid down in Section 6 is that by failing
to seize the opportunity to inquire upon the facts through means available under the
Rules, petitioners should not be allowed to later on burden Metrobank with court
hearings or other processes. Thus, it held:
x x x Where a party unjustifiedly refuses to elicit facts material and relevant to his case
by addressing written interrogatories to the adverse party to elicit those facts, the latter
may not thereafter be compelled to testify thereon in court or give a deposition pending
appeal. The justification for this is that the party in need of said facts having foregone

899
the opportunity to inquire into the same from the other party through means available to
him, he should not thereafter be permitted to unduly burden the latter with courtroom
appearances or other cumbersome processes. The sanction adopted by the Rules is
not one of compulsion in the sense that the party is being directly compelled to avail of
the discovery mechanics, but one of negation by depriving him of evidentiary sources
which would otherwise have been accessible to him. [25]
Petitioners filed their Motion for Reconsideration, [26] which the CA denied in its assailed
October 2, 2008 Resolution. Hence, the present Petition.

Issues

Petitioners now raise the following issues for resolution:

I

THE COURT OF APPEALS COMMITTED REVERSIBLE ERRORS IN REQUIRING

NOTICE AND HEARING (SECS. 4 AND 5, RULE 15, RULES OF COURT) FOR A
MERE MOTION FOR SUBPOENA OF RESPONDENT BANK’S OFFICERS WHEN
SUCH REQUIREMENTS APPLY ONLY TO DEPOSITION UNDER SEC. 6, RULE 25,
RULES OF COURT.

II

THE COURT OF APPEALS COMMITTED (REVERSIBLE) ERROR IN HOLDING THAT

THE PETITIONERS MUST FIRST SERVE WRITTEN INTERROGATORIES TO
RESPONDENT BANK’S OFFICERS BEFORE THEY CAN BE SUBPOENAED. [27]
Petitioners’ Arguments

Praying that the assailed CA dispositions be set aside and that the Court allow the
issuance of the subpoena duces tecum/ad testificandum, petitioners assert that the
questioned Motion is not a litigated motion, since it seeks not a relief, but the issuance
of process. They insist that a motion which is subject to notice and hearing under
Sections 4 and 5 of Rule 15 is an application for relief other than a pleading; since no
relief is sought but just the process of subpoena, the hearing and notice requirements
may be done away with. They cite the case of Adorio v. Hon. Bersamin,[28] which held
that –
Requests by a party for the issuance of subpoenas do not require notice to other parties
to the action. No violation of due process results by such lack of notice since the other
parties would have ample opportunity to examine the witnesses and documents
subpoenaed once they are presented in court. [29]
Petitioners add that the Rules should have been liberally construed in their favor, and
that Metrobank’s filing of its Opposition be considered to have cured whatever defect
the Motion suffered from.

Petitioners likewise persist in the view that Metrobank’s officers – the subject of the
Motion – do not comprise the adverse party covered by the rule; they insist that these
bank officers are mere employees of the bank who may be called to testify for them.

900
Respondents’ Arguments

Metrobank essentially argues in its Comment[30] that the subject Motion for the issuance
of a subpoena duces tecum/ad testificandum is a litigated motion, especially as it is
directed toward its officers, whose testimony and documentary evidence would affect it
as the adverse party in the civil case. Thus, the lack of a proper notice of hearing
renders it useless and a mere scrap of paper. It adds that being its officers, the persons
sought to be called to the stand are themselves adverse parties who may not be
compelled to testify in the absence of prior written interrogatories; they are not ordinary
witnesses whose presence in court may be required by petitioners at any time and for
any reason.

Finally, Metrobank insists on the correctness of the CA Decision, adding that since
petitioners failed up to this time to pay the witnesses’ fees and kilometrage as required
by the Rules,[31] the issuance of a subpoena should be denied.

Our Ruling

The Court denies the Petition.

On the procedural issue, it is quite clear that Metrobank was notified of the Motion for
Issuance of Subpoena Duces Tecum Ad Testificandum; in fact, it filed a timely
Opposition thereto. The technical defect of lack of notice of hearing was thus cured by
the filing of the Opposition.[32]

Nonetheless, contrary to petitioners’ submission, the case of Adorio cannot apply

squarely to this case. In Adorio, the request for subpoena duces tecum was sought
against bank officials who were not parties to the criminal case for violation of Batas
Pambansa Blg. 22. The situation is different here, as officers of the adverse party
Metrobank are being compelled to testify as the calling party’s main witnesses; likewise,
they are tasked to bring with them documents which shall comprise the petitioners’
principal evidence. This is not without significant consequences that affect the interests
of the adverse party, as will be shown below.

As a rule, in civil cases, the procedure of calling the adverse party to the witness stand
is not allowed, unless written interrogatories are first served upon the latter. This is
embodied in Section 6, Rule 25 of the Rules, which provides –
Sec. 6. Effect of failure to serve written interrogatories.

Unless thereafter allowed by the court for good cause shown and to prevent a failure of
justice, a party not served with written interrogatories may not be compelled by the
adverse party to give testimony in open court, or to give a deposition pending appeal.
One of the purposes of the above rule is to prevent fishing expeditions and needless
delays; it is there to maintain order and facilitate the conduct of trial. It will be presumed
that a party who does not serve written interrogatories on the adverse party beforehand
will most likely be unable to elicit facts useful to its case if it later opts to call the adverse

901
party to the witness stand as its witness. Instead, the process could be treated as a
fishing expedition or an attempt at delaying the proceedings; it produces no significant
result that a prior written interrogatories might bring.

Besides, since the calling party is deemed bound by the adverse party’s testimony,
[33]
 compelling the adverse party to take the witness stand may result in the calling party
damaging its own case. Otherwise stated, if a party cannot elicit facts or information
useful to its case through the facility of written interrogatories or other mode of
discovery, then the calling of the adverse party to the witness stand could only serve to
weaken its own case as a result of the calling party’s being bound by the adverse
party’s testimony, which may only be worthless and instead detrimental to the calling
party’s cause.

Another reason for the rule is that by requiring prior written interrogatories, the court
may limit the inquiry to what is relevant, and thus prevent the calling party from straying
or harassing the adverse party when it takes the latter to the stand.

Thus, the rule not only protects the adverse party from unwarranted surprises or
harassment; it likewise prevents the calling party from conducting a fishing expedition or
bungling its own case. Using its own judgment and discretion, the court can hold its own
in resolving a dispute, and need not bear witness to the parties perpetrating unfair court
practices such as fishing for evidence, badgering, or altogether ruining their own cases.
Ultimately, such unnecessary processes can only constitute a waste of the court’s
precious time, if not pointless entertainment.

In the present case, petitioners seek to call Metrobank’s officers to the witness stand as
their initial and main witnesses, and to present documents in Metrobank’s possession
as part of their principal documentary evidence. This is improper. Petitioners may not be
allowed, at the incipient phase of the presentation of their evidence-in-chief at that, to
present Metrobank’s officers – who are considered adverse parties as well, based on
the principle that corporations act only through their officers and duly authorized
agents[34] – as their main witnesses; nor may they be allowed to gain access to
Metrobank’s documentary evidence for the purpose of making it their own. This is
tantamount to building their whole case from the evidence of their opponent. The
burden of proof and evidence falls on petitioners, not on Metrobank; if petitioners cannot
prove their claim using their own evidence, then the adverse party Metrobank may not
be pressured to hang itself from its own defense.

It is true that under the Rules, a party may, for good cause shown and to prevent a
failure of justice, be compelled to give testimony in court by the adverse party who has
not served written interrogatories. But what petitioners seek goes against the very
principles of justice and fair play; they would want that Metrobank provide the very
evidence with which to prosecute and build their case from the start. This they may not
be allowed to do.

Finally, the Court may not turn a blind eye to the possible consequences of such a

902
move by petitioners. As one of their causes of action in their Complaint, petitioners
claim that they were not furnished with specific documents relative to their loan
agreement with Metrobank at the time they obtained the loan and while it was
outstanding. If Metrobank were to willingly provide petitioners with these documents
even before petitioners can present evidence to show that indeed they were never
furnished the same, any inferences generated from this would certainly not be useful for
Metrobank. One may be that by providing petitioners with these documents, Metrobank
would be admitting that indeed, it did not furnish petitioners with these documents prior
to the signing of the loan agreement, and while the loan was outstanding, in violation of
the law.

With the view taken of the case, the Court finds it unnecessary to further address the
other issues raised by the parties, which are irrelevant and would not materially alter the
conclusions arrived at.

WHEREFORE, the Petition is DENIED. The assailed April 15, 2008 Decision and
October 2, 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 99535
are AFFIRMED.

SO ORDERED.

THIRD DIVISION

G.R. No. 214054, August 05, 2015

NG MENG TAM, Petitioner, v. CHINA BANKING CORPORATION, Respondent.

DECISION

VILLARAMA, JR., J.:

Before this Court is a direct recourse from the Regional Trial Court (RTC) via
petition1 for review on the question of whether Section 5 2 of the Judicial Affidavit Rule
(JAR) applies to hostile or adverse witnesses.  The petition seeks to annul and set aside
the May 28, 20143 and August 27, 20144 Orders of the RTC, Branch 139, Makati City in
Civil Case No. 08-1028.

This case stemmed from a collection suit filed by China Banking Corporation (China
Bank) against Ever Electrical Manufacturing Company Inc. (Ever), the heirs of Go Tong,
Vicente Go, George Go and petitioner Ng Meng Tam sometime in December 2008. 
China Bank alleged that it granted Ever a loan amounting to P5,532,331.63.  The loan
was allegedly backed by two surety agreements executed by Vicente, George and
petitioner in its favor, each for P5,000,000.00, and dated December 9, 1993 and May 3,
1995, respectively.  When Ever defaulted in its payment, China Bank sent demand
letters collectively addressed to George, Vicente and petitioner.  The demands were
unanswered.  China Bank filed the complaint for collection docketed as Civil Case No.

903
08-1028, which was raffled off to RTC Branch 62, Makati City.

In his Answer, petitioner alleged that the surety agreements were null and void since
these were executed before the loan was granted in 2004. Petitioner posited that the
surety agreements were contracts of adhesion to be construed against the entity which
drafted the same.  Petitioner also alleged that he did not receive any demand letter.

In the course of the proceedings, petitioner moved that his affirmative defenses be
heard by the RTC on the ground that the suit is barred by the statute of limitations and
laches.5 The motion was denied by the court.6 On appeal, the Court of Appeals (CA) in
its December 22, 2010 Decision7 ruled that a preliminary hearing was proper pursuant
to Section 6,8 Rule 16 of the Rules of Court due to the grounds cited by petitioner. 
There being no appeal, the decision became final and executory on August 28,
2011.9redarclaw

On March 15, 2011, petitioner served interrogatories to parties 10 pursuant to Sections

111 and 6,12 Rule 25 of the Rules of Court to China Bank and required Mr. George C.
Yap, Account Officer of the Account Management Group, to answer.

On June 22, 2011, George Yap executed his answers to interrogatories to

parties.13redarclaw

In the meantime, having failed mediation and judicial dispute resolution, Civil Case No.
08-1028 was re-raffled off to RTC Branch 139, Makati City.

Petitioner again moved for the hearing of his affirmative defenses.  Because he found
Yap’s answers to the interrogatories to parties evasive and not responsive, petitioner
applied for the issuance of a subpoena duces tecum and ad testificandum against
George Yap pursuant to Section 6,14 Rule 25 of the Revised Rules of Court.

On April 29, 2014, when the case was called for the presentation of George Yap as a
witness, China Bank objected citing Section 5 of the JAR.  China Bank said that Yap
cannot be compelled to testify in court because petitioner did not obtain and present
George Yap’s judicial affidavit.  The RTC required the parties to submit their motions on
the issue of whether the preparation of a judicial affidavit by George Yap as an adverse
or hostile witness is an exception to the judicial affidavit rule. 15redarclaw

Petitioner contended that Section 5 does not apply to Yap because it specifically
excludes adverse party witnesses and hostile witnesses from its application.  Petitioner
insists that Yap needed to be called to the stand so that he may be qualified as a hostile
witness pursuant to the Rules of Court.

China Bank, on the other hand, stated that petitioner’s characterization of Yap’s
answers to the interrogatories to parties as ambiguous and evasive is a declaration of
what type of witness Yap is.  It theorizes that the interrogatories to parties answered by
Yap serve as the judicial affidavit and there is no need for Yap to be qualified as a

904
hostile witness.

In its May 28, 2014 Order, the RTC denied for lack of merit petitioner’s motion to
examine Yap without executing a judicial affidavit.  The RTC in interpreting Section 5 of
the JAR stated:LawlibraryofCRAlaw

x x x  The aforementioned provision, which allows the requesting party to avail himself
of the provisions of Rule 21 of the Rules of Court finds applicability to: (a) a government
employee or official, or the requested witness, who is neither the witness of the adverse
party nor a hostile witness and (b) who unjustifiably declines to execute a judicial
affidavit or refuses without just cause to make the relevant books, documents, or other
things under his control available for copying, authentication, and eventual production in
court.

In the case at bar, witness George Yap is being utilized as an adverse witness for the
[petitioner].  Moreover, there was no showing that he unjustifiably declines to execute a
judicial affidavit.  In fact, it was [China Bank]’s counsel who insisted that said witness’
judicial affidavit be taken. Thus, Section 5 of the [JAR] which [petitioner] invoked to
exempt him from the Rule finds no application.  Unless there is contrary ruling on the
matter by the Supreme Court, this court has no choice but to implement the rule as
written.

On this note, this Court also finds no merit on the contention of [China Bank] that the
answer to the written interrogatories by witness George Yap already constitutes his
judicial affidavit. Inasmuch as the Court strictly implemented the [JAR] on the part of
[petitioner], so shall it rule in the same manner on the part of [China Bank].  As correctly
pointed out by [petitioner], the said answer to interrogatories does not comply with
Section 3 of the [JAR] which provides for the contents of the judicial affidavit. 16

In essence, the RTC ruled that Section 5 did not apply to Yap since he was an adverse
witness and he did not unjustifiably decline to execute a judicial affidavit.  It
stated:LawlibraryofCRAlaw

In view of the foregoing, the motion of the [petitioner] that witness George Yap be
examined without executing a Judicial Affidavit is hereby DENIED FOR LACK OF
MERIT.17

Petitioner moved for reconsideration but it was denied by the RTC in its August 27,
2014 Order.18  The RTC reiterated its position and stated:LawlibraryofCRAlaw

It must be pointed out that the [petitioner] [was] the [one] who invoked the provisions of
Section 5 of the [JAR] to compel the attendance of witness George Yap and as such, it
is their duty to show the applicability of the said provisions to the case at bar.  As stated
in the challenged Order, Section 5 of the [JAR] finds applicability to: (a) a government
employee or official, or the requested witness, who is neither the witness of the adverse
party nor a hostile witness and (b) who unjustifiably declines to execute a judicial

905
affidavit or refuses without just cause to make the relevant books, documents, or other
things under his control available for copying, authentication, and eventual production in
court.  In the case at bar, [petitioner] [does] not deny that witness George Yap is to be
utilized as [his] adverse witness.  On this score alone, it is clear that the provisions
invoked do not apply.19

The RTC stressed that Section 5 of the JAR required the requested witness’ refusal to
be unjustifiable. It stated:LawlibraryofCRAlaw

x x x the [JAR] requires that the refusal must be unjustifiable and without just cause.  It
must be pointed out that [China Bank]’s previous motions to quash the subpoena was
grounded on the claim that having already submitted to this court his sworn written
interrogatories, his being compelled to testify would be unreasonable, oppressive and
pure harassment. Thus, witness’ refusal to testify cannot be considered unjustifiable
since he raised valid grounds.20

Hence, this petition.

Petitioner contends that the RTC committed a grave error when it interpreted Section 5
to include adverse party and hostile witnesses.  Based on the wording of Section 5,
adverse party and hostile witnesses are clearly excluded.

China Bank asserts that Yap neither refused unjustifiably nor without just cause refused
to a judicial affidavit.  It cited the RTC’s August 27, 2014 Order where the court said that
Yap had answered the interrogatories and to compel him to testify in open court would
be “unreasonable, oppressive and pure harassment.”  Moreover, it stated that based on
the language used by Section 2 of the JAR the filing of judicial affidavits is mandatory.

The petition is anchored on the following arguments:LawlibraryofCRAlaw

RTC BR. 139-MAKATI COMMITTED AN ERROR OF LAW WHEN IT INTERPRETED

SEC. 5 OF THE [JAR] CONTRARY TO ITS WORDINGS.

II

RTC BR. 139-MAKATI COMMITTED AN ERROR OF LAW WHEN IT INTERPRETED

SEC. 5 [OF THE JAR] CONTRARY TO ITS PRACTICAL INTENTION AND COMMON
SENSE.

III

RTC BR. 139-MAKATI COMMITTED AN ERROR OF LAW WHEN IT EFFECTIVELY

DISREGARDED THE RELEVANT RULES ON MODE OF DISCOVERY WHICH
GOVERN THE PRESENTATION OF ADVERSE WITNESSES.

906
 IV

ON A POLICY LEVEL AND IN THE EVENT RTC BR. 139-MAKATI’S

INTERPRETATION AND APPLICATION OF SEC. 5 OF THE [JAR] IS CORRECT (I.E.,
THAT OPPOSING PARTY WHO INTENDS TO PRESENT ADVERSE OR HOSTILE
WITNESS MUST GET AND SUBMIT THAT WITNESS’ JUDICIAL AFFIDAVIT NO
MATTER WHAT) IT IS HUMBLY SUBMITTED, WITH THE UTMOST INDULGENCE OF
THE HONORABLE SUPREME COURT, THAT THE SAME RULE BE IMPROVED OR
AMENDED BY PROVIDING SANCTIONS IN THE EVENT THE ADVERSE OR
HOSTILE WITNESS REFUSES TO ANSWER OR EXECUTE JUDICIAL AFFIDAVIT AS
REQUIRED BY THE OPPOSING PARTY.21

We grant the petition.

THE JUDICIAL AFFIDAVIT RULE

APPLIES TO PENDING CASES

On September 4, 2012, the JAR was promulgated to address case congestion and
delays in courts.  To this end, it seeks to reduce the time needed to take witnesses’
testimonies.22  The JAR took effect on January 1, 2013 and would also apply to pending
cases pursuant to Section 12 to wit:LawlibraryofCRAlaw

Sec. 12. Effectivity. – This rule shall take effect on January 1, 2013 following its
publication in two newspapers of general circulation not later than September 15,
2012.  It shall also apply to existing cases.  (Emphasis supplied)

The Court En Banc gave public prosecutors in first and second level courts one year of
modified compliance.23  The JAR thus took full effect on January 1, 2014.

Here, parties were presenting their evidence for the RTC’s consideration when the JAR
took effect.  Therefore, pursuant to Section 12 the JAR applies to the present collection
suit.

SECTION 5 OF THE JAR DOES NOT

APPLY TO ADVERSE PARTY WITNESSES

The JAR primarily affects the manner by which evidence is presented in court.  Section
2(a) of the JAR provides that judicial affidavits are mandatorily filed by parties to a case
except in small claims cases.  These judicial affidavits take the place of direct testimony
in court.  It provides:LawlibraryofCRAlaw

Sec. 2. Submission of Judicial Affidavits and Exhibits in lieu of direct testimonies. –  (a)
The parties shall file with the court and serve on the adverse party, personally or by
licensed courier service, not later than five days before pre-trial or preliminary
conference or the scheduled hearing with respect to motions and incidents, the
following:LawlibraryofCRAlaw

907
(1) The judicial affidavits of their witnesses, which shall take the place of such
witnesses’ direct testimonies; and

(2) The parties’ documentary or object evidence, if any, which shall be attached to the
judicial affidavits and marked as Exhibits A, B, C, and so on in the case of the
complainant or the plaintiff, and as Exhibits 1, 2, 3, and so on in the case of the
respondent or the defendant.

xxxx

Section 324  of the JAR enumerates the content of a judicial affidavit.

Under Section 10,25 parties are to be penalized if they do not conform to the provisions
of the JAR. Parties are however allowed to resort to the application of a subpoena
pursuant to Rule 21 of the Rules of Court in Section 5 of the JAR in certain situations. 
Section 5 provides:LawlibraryofCRAlaw

Sec. 5. Subpoena. – If the government employee or official, or the requested witness,

who is neither the witness of the adverse party nor a hostile witness, unjustifiably
declines to execute a judicial affidavit or refuses without just cause to make the relevant
books, documents, or other things under his control available for copying,
authentication, and eventual production in court, the requesting party may avail himself
of the issuance of a subpoena ad testificandum or duces tecum under Rule 21 of the
Rules of Court. The rules governing the issuance of a subpoena to the witness in this
case shall be the same as when taking his deposition except that the taking of a judicial
affidavit shal1 be understood to be ex parte.

While we agree with the RTC that Section 5 has no application to Yap as he was
presented as a hostile witness we cannot agree that there is need for a finding that
witness unjustifiably refused to execute a judicial affidavit.

Section 5 of the JAR contemplates a situation where there is a (a) government

employee or official or (b) requested witness who is not the (1) adverse party’s witness
nor (2) a hostile witness.  If this person either (a) unjustifiably declines to execute a
judicial affidavit or (b) refuses without just cause to make the relevant documents
available to the other party and its presentation to court, Section 5 allows the requesting
party to avail of issuance of subpoena ad testificandum or duces tecum under Rule 21
of the Rules of Court.  Thus, adverse party witnesses and hostile witnesses being
excluded they are not covered by Section 5.  Expressio unius est exclusion alterius: the
express mention of one person, thing, or consequence implies the exclusion of all
others.26redarclaw

Here, Yap is a requested witness who is the adverse party’s witness.  Regardless of
whether he unjustifiably declines to execute a judicial affidavit or refuses without just
cause to present the documents, Section 5 cannot be made to apply to him for the

908
reason that he is included in a group of individuals expressly exempt from the
provision’s application.

The situation created before us begs the question: if the requested witness is the
adverse party’s witness or a hostile witness, what procedure should be followed?

The JAR being silent on this point, we turn to the provisions governing the rules on
evidence covering hostile witnesses specially Section 12, Rule 132 of the Rules of
Court which provides:LawlibraryofCRAlaw

SEC. 12.  Party may not impeach his own witness. – Except with respect to witnesses
referred to in paragraphs (d) and (e) of Section 10, the party producing a witness is not
allowed to impeach his credibility.

A witness may be considered as unwilling or hostile only if so declared by the court

upon adequate showing of his adverse interest, unjustified reluctance to testify, or his
having misled the party into calling him to the witness stand.

The unwilling or hostile witness so declared, or the witness who is an adverse party,
may be impeached by the party presenting him in all respects as if he had been called
by the adverse party, except by evidence of his bad character. He may also be
impeached and cross-examined by the adverse party, but such cross-examination must
only be on the subject matter of his examination-in-chief.

Before a party may be qualified under Section 12, Rule 132 of the Rules of Court, the
party presenting the adverse party witness must comply with Section 6, Rule 25 of the
Rules of Court which provides:LawlibraryofCRAlaw

SEC. 6.  Effect of failure to serve written interrogatories. – Unless thereafter allowed by

the court for good cause shown and to prevent a failure of justice, a party not served
with written interrogatories may not be compelled by the adverse party to give testimony
in open court, or to give a deposition pending appeal.

In Afulugencia v. Metropolitan Bank & Trust Co.,27 this Court stated that “in civil cases,
the procedure of calling the adverse party to the witness stand is not allowed, unless
written interrogatories are first served upon the latter.” 28  There petitioners Spouses
Afulugencia sought the issuance of a subpoena duces tecum and ad testificandum to
compel the officers of the bank to testify and bring documents pertaining to the
extrajudicial foreclosure and sale of a certain parcel of land.  Metrobank moved to
quash the issuance of the subpoenas on the ground of non-compliance with Section 6,
Rule 25 of the Rules of Court.  In quashing the issuance of the subpoena, the Court
reminded litigants that the depositions are a mechanism by which fishing expeditions
and delays may be avoided. Further written interrogatories aid the court in limiting
harassment and to focus on what is essential to a case. The Court
stated:LawlibraryofCRAlaw

909
One of the purposes of the above rule is to prevent fishing expeditions and needless
delays; it is there to maintain order and facilitate the conduct of trial.  It will be presumed
that a party who does not serve written interrogatories on the adverse party beforehand
will most likely be unable to elicit facts useful to its case if it later opts to call the adverse
party to the witness stand as its witness. Instead, the process could be treated as a
fishing expedition or an attempt at delaying the proceedings; it produces no significant
result that a prior written interrogatories might bring.

Besides, since the calling party is deemed bound by the adverse party’s testimony,
compelling the adverse party to take the witness stand may result in the calling party
damaging its own case. Otherwise stated, if a party cannot elicit facts or information
useful to its case through the facility of written interrogatories or other mode of
discovery, then the calling of the adverse party to the witness stand could only serve to
weaken its own case as a result of the calling party’s being bound by the adverse
party’s testimony, which may only be worthless and instead detrimental to the calling
party’s cause.

Another reason for the rule is that by requiring prior written interrogatories, the court
may limit the inquiry to what is relevant, and thus prevent the calling party from straying
or harassing the adverse party when it takes the latter to the stand.

Thus, the rule not only protects the adverse party from unwarranted surprises or
harassment; it likewise prevents the calling party from conducting a fishing expedition or
bungling its own case. Using its own judgment and discretion, the court can hold its own
in resolving a dispute, and need not bear witness to the parties perpetrating unfair court
practices such as fishing for evidence, badgering, or altogether ruining their own cases.
Ultimately, such unnecessary processes can only constitute a waste of the court’s
precious time, if not pointless entertainment.29 (Citation omitted)

In this case, parties, with the approval of the Court, furnished and answered
interrogatories to parties pursuant to Rule 25 of the Rules of Court.  They therefore
complied with Section 6 of Rule 25 of the Rules of Court. Before the present
controversy arose, the RTC had already issued subpoenas for Yap to testify and
produce documents.  He was called to the witness stand when China Bank interposed
its objection for non-compliance with Section 5 of the JAR.  Having established that
Yap, as an adverse party witness, is not within Section 5 of the JAR’s scope, the rules
in presentation of adverse party witnesses as provided for under the Rules of Court
shall apply.  In keeping with this Court’s decision in Afulugencia, there is no reason for
the RTC not to proceed with the presentation of Yap as a witness.

In sum, Section 5 of the JAR expressly excludes from its application adverse party and
hostile witnesses.  For the presentation of these types of witnesses, the provisions on
the Rules of Court under the Revised Rules of Evidence and all other correlative rules
including the modes of deposition and discovery rules shall apply.

WHEREFORE, the petition is GRANTED.  The May 28, 2014 and August 27, 2014

910
Orders of the Regional Trial Court, Branch 139, Makati City are
hereby ANNULLED and SET ASIDE.

No pronouncement as to costs.

SO ORDERED.cralawlawlibrary

THIRD DIVISION

G.R. No. 226130, February 19, 2018

LILIA S. DUQUE AND HEIRS OF MATEO DUQUE, NAMELY: LILIA S. DUQUE,

ALMA D. BALBONA, PERPETUA D. HATA, MARIA NENITA D. DIENER, GINA D.
YBAÑEZ, AND GERVACIO S. DUQUE, Petitioners, v. SPOUSES BARTOLOME D.
YU, JR. AND JULIET O. YU AND DELIA DUQUE CAPACIO, Respondents.

DECISION

VELASCO JR., J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the
Decision1 and the Resolution2 dated September 30, 2014 and July 14, 2016,
respectively, of the Court of Appeals (CA) in CA-G.R. CV No. 04197.

The facts are undisputed.

The herein petitioner Lilia S. Duque and her late husband, Mateo Duque (Spouses
Duque), were the lawful owners of a 7,000-square meter lot in Lambug, Badian, Cebu,
covered by Tax Declaration (TD) No. 05616 (subject property). On August 28, 1995,
Spouses Duque allegedly executed a Deed of Donation over the subject property in
favor of their daughter, herein respondent Delia D. Capacio (Capacio), who, in turn, sold
a portion thereof, i.e., 2,745 square meters, to her herein co-respondents Spouses
Bartolome D. Yu, Jr. and Juliet O. Yu (Spouses Yu). 3

With that, Spouses Duque lodged a Verified Complaint for Declaration of Non-
Existence and Nullity of a Deed of Donation and Deed of Absolute Sale and
Cancellation of TD (Complaint) against the respondents before the Regional Trial
Court (RTC) of Barili, Cebu, docketed as Civil Case No. CEB-BAR-469, claiming that
the signature in the Deed of Donation was forged. Spouses Duque then prayed (1) to
declare the Deeds of Donation and of Absolute Sale null and void; (2) to cancel TD No.
01-07-05886 in the name of respondent Juliet Yu (married to respondent Bartolome
Yu); and (3) to revive TD No. 05616 in the name Mateo Duque (married to petitioner
Lilia Duque).4

In her Answer, respondent Capacio admitted that the signature in the Deed of Donation
was, indeed, falsified but she did not know the author thereof. Respondents Spouses

911
Yu, for their part, refuted Spouses Duque's personality to question the genuineness of
the Deed of Absolute Sale for it was their daughter who forged the Deed of Donation.
They even averred that Spouses Duque's action was already barred by prescription. 5

On September 26, 2008, a Motion for Admission by Adverse Party under Rule 26 of the
Rules of Court (Motion for Admission) was filed by respondents Spouses Yu requesting
the admission of these documents: (1) Real Estate Mortgage (REM); (2) Deed of
Donation; (3) Contract of Lease; (4) TD No. 07-05616; (5) TD No. 14002-A; (6) Deed
of Absolute Sale; and (7) TD No. 01-07-05886. In an Order dated October 3,
2008,6 Spouses Duque were directed to comment thereon but they failed to do so. By
their silence, the trial court, in an Order dated November 24, 2008, 7 pronounced that
they were deemed to have admitted the same. 8

Thus, during trial, instead of presenting their evidence, respondents Spouses Yu moved
for demurrer of evidence in view of the aforesaid pronouncement. Spouses Duque
vehemently opposed such motion. In an Order dated January 5, 2011, 9 the trial court
granted the demurrer to evidence and, thereby, dismissed the Complaint. Spouses
Duque sought reconsideration, which was denied in an Order dated September 21,
2011.10

On appeal, the CA, in its now assailed Decision dated September 30, 2014, affirmed in
toto the aforesaid Orders. It agreed with the trial court that Spouses Duque's non-
compliance with the October 3, 2008 Order resulted in the implied admission of the
Deed of Donation's authenticity, among other documents. Notably, Spouses Duque did
not even seek reconsideration thereof. With such admission, the trial court ruled that
Spouses Duque have nothing more to prove or disprove and their entire evidence has
been rendered worthless.11 Spouses Duque moved for reconsideration but was denied
for lack of merit in the questioned CA Resolution dated July 14, 2016. Meanwhile, in
view of Mateo Duque's demise, his heirs substituted for him as petitioners in this case.

Hence, this petition imputing errors on the part of the CA (1) in holding that petitioners'
failure to reply to the request for admission is tantamount to an implied admission of the
authenticity and genuineness of the documents subject thereof; and (2) in not ruling that
the dismissal of the petitioners' Complaint based on an improper application of the rule
on implied admission will result in unjust enrichment at the latter's expense. 12

The petition is impressed with merit.

The scope of a request for admission under Rule 26 of the Rules of Court and a party's
failure to comply thereto are respectively detailed in Sections 1 and 2 thereof, which
read:

SEC. 1. Request for admission. - At any time after issues have been joined, a party may
file and serve upon any other party a written request for the admission by the latter of
the genuineness of any material and relevant document described in and exhibited with
the request or of the truth of any material and relevant matter of fact set forth in the

912
request. Copies of the documents shall be delivered with the request unless copies
have already been furnished.

SEC. 2. Implied admission. - Each of the matters of which an admission is

requested shall be deemed admitted unless, within a period designated in the
request, which shall not be less than fifteen (15) days after service thereof, or within
such further time as the court may allow on motion, the party to whom the request is
directed files and serves upon the party requesting the admission a sworn
statement either denying specifically the matters of which an admission is
requested or setting forth in detail the reasons why he cannot truthfully either
admit or deny those matters.

Objections to any request for admission shall be submitted to the court by the party
requested within the period for and prior to the filing of his sworn statement as
contemplated in the preceding paragraph and his compliance therewith shall be
deferred until such objections are resolved, which resolution shall be made as early as
practicable. (Emphases supplied.)
Clearly, once a party serves a request for admission as to the truth of any material and
relevant matter of fact, the party to whom such request is served has 15 days within
which to file a sworn statement answering it. In case of failure to do so, each of the
matters of which admission is requested shall be deemed admitted. This rule,
however, admits of an exception, that is, when the party to whom such request for
admission is served had already controverted the matters subject of such request
in an earlier pleading. Otherwise stated, if the matters in a request for admission have
already been admitted or denied in previous pleadings by the requested party, the latter
cannot be compelled to admit or deny them anew. In turn, the requesting party
cannot reasonably expect a response to the request and, thereafter, assume or
even demand the application of the implied admission rule in Section 2, Rule
26.13 The rationale is that "admissions by an adverse party as a mode of discovery
contemplates of interrogatories that would clarify and tend to shed light on the truth or
falsity of the allegations in a pleading, and does not refer to a mere reiteration of what
has already been alleged in the pleadings; or else, it constitutes an utter redundancy
and will be a useless, pointless process which petitioner should not be subjected to." 14

Here, the respondents served the request for admission on the petitioners to admit the
genuineness and authenticity of the Deed of Donation, among other documents. But as
pointed out by petitioners, the matters and documents being requested to be admitted
have already been denied and controverted in the previous pleading, that is, Verified
Complaint for Declaration of Non-Existence and Nullity of a Deed of Donation and Deed
of Absolute Sale and Cancellation of TD. In fact, the forgery committed in the Deed of
Donation was the very essence of that Complaint, where it was alleged that being a
forged document, the same is invalid and without force and legal effect. Petitioners,
therefore, need not reply to the request for admission. Consequently, they cannot be
deemed to have admitted the Deed of Donation's genuineness and authenticity for their
failure to respond thereto.

913
Moreover, in respondents Spouses Yu's criminal case for estafa 15 against respondent
Capacio, which they filed immediately upon receipt of a summon in relation to the
Complaint of Spouses Duque, one of the allegations therein was the forgery committed
in the very same Deed of Donation, which authenticity and genuineness they want
petitioners to admit in their request for admission. In support thereof, respondents
Spouses Yu even utilized the questioned document report of the Philippine National
Police (PNP) Regional Crime Laboratory Office certifying that the signature in the Deed
of Donation is a forgery. Thus, it is then safe to conclude that their request for admission
is a sham.

Having said that there was no implied admission of the genuineness and authenticity of
the Deed of Donation, this Court, thus, holds that it was also an error for the trial court to
grant the demurrer to evidence.

To recapitulate, the demurrer to evidence was anchored on the alleged implied

admission of the Deed of Donation's genuineness and authenticity. The trial court
granted the demurrer holding that with the said implied admission, respondents
Spouses Yu's claim became undisputed and Spouses Duque have nothing more to
prove or disprove. This is despite its own fmdings that the opinion of the handwriting
expert and the Answer of respondent Capacio, both confirmed the fact of forgery. The
trial court easily disregarded this on account of the said implied admission. The CA, on
appeal, affirmed the trial court.

But in view of this Court's findings that there was no implied admission to speak of, the
demurrer to evidence must, therefore, be denied and the Orders granting it shall be
considered void.

Section 1, Rule 33 of the Rules of Court provides for the consequences of a reversal on
appeal of a demurrer to evidence, thus:
SECTION 1. Demurrer to evidence. After the plaintiff has completed the presentation of
his evidence, the defendant may move for dismissal on the ground that upon the facts
and the law the plaintiff has shown no right to relief If his motion is denied, he shall have
the right to present evidence. If the motion is granted but on appeal the order of
dismissal is reversed he shall be deemed to have waived the right to present evidence.
Citing Generoso Villanueva Transit Co., Inc. v. Javellana,16 this Court in Radiowealth
Finance Company v. Spouses Del Rosario17 explained the consequences of a demurrer
to evidence in this wise:
The rationale behind the rule and doctrine is simple and logical. The defendant is
permitted, without waiving his right to offer evidence in the event that his motion is not
granted, to move for a dismissal (i.e., demur to the plaintiffs evidence) on the ground
that upon the facts as thus established and the applicable law, the plaintiff has shown
no right to relief. If the trial court denies the dismissal motion, i.e., finds that plaintiffs
evidence is sufficient for an award of judgment in the absence of contrary evidence, the
case still remains before the trial court which should then proceed to hear and receive
the defendants evidence so that all the facts and evidence of the contending parties
may be properly placed before it for adjudication as well as before the appellate courts,

914
in case of appeal. Nothing is lost. The doctrine is but in line with the established
procedural precepts in the conduct of trials that the trial court liberally receive all
proffered evidence at the trial to enable it to render its decision with all possibly relevant
proofs in the record, thus assuring that the appellate courts upon appeal have all the
material before them necessary to make a correct judgment, and avoiding the need of
remanding the case for retrial or reception of improperly excluded evidence, with the
possibility thereafter of still another appeal, with all the concomitant delays. The rule,
however, imposes the condition by the same token that if his demurrer is  granted by the
trial court, and the order of dismissal is reversed on appeal, the movant loses his right to
present evidence in his behalf and he shall have been deemed to have elected to stand
on the insufficiency of plaintiffs case and evidence. In such event, the appellate court
which reverses the order of dismissal shall proceed to render judgment on the merits on
the basis of plaintiffs evidence. (Underscoring in the original, italics partly in the original
and partly supplied.)
In short, defendants who present a demurrer to the plaintiffs' evidence retain the right to
present their own evidence, if the trial court disagrees with them; if it agrees with them,
but on appeal, the appellate court disagrees and reverses the dismissal order, the
defendants lose the right to present their own evidence. The appellate court shall, in
addition, resolve the case and render judgment on the merits, inasmuch as a demurrer
aims to discourage prolonged litigations.18

With this Court's denial of the demurrer to evidence, it will now proceed to rule on the
merits of the Complaint solely on the basis of the petitioners' evidence on record.

Here, it would appear from the trial court's January 5, 2011 Order that the evidence for
the petitioners consists mainly of the testimony of the handwriting expert witness and
the Answer of respondent Capacio, which both confirmed that the signature in the Deed
of Donation was, indeed, falsified. With these pieces of evidence and nothing more, this
Court is inclined to grant the petitioners' Complaint. Being a falsified document, the
Deed of Donation is void and inexistent. As such, it cannot be the source of respondent
Capacio's transferable right over a portion of the subject property. Being a patent nullity,
respondent Capacio could not validly transfer a portion of the subject property in favor
of respondents Spouses Yu under the principle of "Nemo dat quod non habet," which
means "one cannot give what one does not have." 19 As a consequence, the subsequent
Deed of Absolute Sale executed by respondent Capacio in favor of respondents
Spouses Yu has no force and effect as the former is not the owner of the property
subject of the sale contract. In effect, the tax declarations in the respective names of
respondents Capacio and Juliet O. Yu are hereby ordered cancelled and the tax
declaration in the name of Mateo Duque, et al. is ordered restored.

WHEREFORE, premises considered, the petition is GRANTED.

The CA Decision and Resolution dated September 30, 2014 and July 14, 2016,
respectively, in CA-G.R. CV No. 04197 are hereby REVERSED and SET ASIDE and a
new judgment is hereby rendered as follows: (1) the petitioners' Complaint is
hereby GRANTED; (2) both the Deeds of Donation and of Absolute Sale are

915
declared VOID; (3) Tax Declaration Nos. 14002-A and 01-07-05886 in the names of
respondents Capacio and Juliet O. Yu, respectively, are hereby CANCELLED; and (4)
Tax Declaration No. 05616 in the name of Mateo Duque, et al. is hereby RESTORED.

SO ORDERED.

SPECIAL THIRD DIVISION

G.R. No. 204700               November 24, 2014

EAGLERIDGE DEVELOPMENT CORPORATION, MARCELO N. NAVAL and

CRISPIN I. OBEN, Petitioners,
vs.
CAMERON GRANVILLE 3 ASSET MANAGEMENT, INC., Respondent.

RESOLUTION

LEONEN, J.:

For resolution is respondent Cameron Granville 3 Asset Management, Inc. 's motion for
reconsideration1 of our April 10, 2013 decision,2 which reversed and set aside the Court
of Appeals' resolutions3 and ordered respondent to produce the Loan Sale and
Purchase Agreement (LSPA) dated April 7, 2006, including its annexes and/or
attachments, if any, in order that petitioners may inspect or photocopy the same.

Petitioners Eagleridge Development Corporation, Marcelo N. Naval, and Crispin I. Oben

filed on June 7, 2013 their motion to ad.mit attached opposition. 4 Subsequently,
respondent filed its reply5 and petitioners their motion to admit attached rejoinder. 6

The motion for reconsideration raises the following points:

(1) The motion for production was filed out of time; 7

(2) The production of the LSPA would violate the parol evidence rule; and 8

(3) The LSPA is a privileged and confidential document. 9

Respondent asserts that there was no "insistent refusal" on its part to present the LSPA,
but that petitioners filed their motion for production way out of time, even beyond the
protracted pre-trial period from September 2005 to 2011. 10 Hence, petitioners had no
oneto blame but themselves when the trial court denied their motion as it was filed only
during the trial proper.11

Respondent further submits that "Article 1634 [of the] Civil Code had been
inappropriately cited by [p]etitioners"12 inasmuch as it is Republic Act No. 9182 (Special
Purpose Vehicle Act) that is applicable. 13 Nonetheless, even assuming that Article 1634

916
is applicable, respondent argued that petitioners are: 1) still liable to pay the whole of
petitioner Eagleridge Development Corporation’s (EDC) loanobligation, i.e.,
₱10,232,998.00 exclusive of interests and/or damages; 14 and 2) seven (7) years late in
extinguishing petitioner EDC’s loan obligation because pursuant to Article 1634, they
should have exercised their right of extinguishment within 30 days from the substitution
of Export and Industry Bank or EIB (the original creditor) by respondent in December
2006.15 According to respondent, the trial court order "granting the substitution
constituted sufficient judicial demand as contemplated under Article 1634." 16 Also,
maintaining that the LSPA is immaterial or irrelevant to the case, respondent contends
that the "[o]rder of substitution settled the issue of [respondent’s] standing before the
[c]ourt and its right to fill in the shoes of [EIB]." 17 It argues that the production of the
LSPA will neither prevent respondent from pursuing its claim of 10,232,998.00,
exclusive of interests and penalties, from petitioner EDC, nor write off petitioner EDC’s
liability to respondent.18 The primordial issue of whether petitioners owe respondent a
sum of money via the deed of assignment can allegedly "be readily resolved by
application of Civil Code provisions and/or applicable jurisprudence and not by the
production/inspection of the LSPA[.]" 19 Respondent also argues that "a consideration is
not always a requisite [in assignment of credits, and] an assignee may maintain an
action based on his title and it is immaterial whether ornot he paid any consideration
[therefor][.]"20

Respondent also contends that: (1) the production of the LSPA will violate the parol
evidence rule21 under Rule 130, Section 9 of the Rules of Court; (2) the LSPA is a
privileged/confidential bank document; 22 and (3) under the Special Purpose Vehicle Act,
"the only obligation of both the assignor (bank) and the assignee (the SPV; respondent
Cameron) is to give notice to the debtor (Eagleridge, Naval,and Oben) that its account
has been assigned/transferred to a special purpose vehicle (Sec. 12, R.A. 9182) [and]
[i]t does not require of the special purpose vehicle or the bank to disclose all financial
documents included in the assignment/sale/transfer[.]" 23

Finally, respondent points out that the deed of assignment is a contested document.
"Fair play would be violated if the LSPA is produced without [p]etitioners acknowledging
that respondent Cameron Granville 3 Asset Management, Inc. is the real party-in-
interest because petitioners . . . would [thereafter] use . . . the contents of a document
(LSPA) to its benefit while at the same time" 24 refuting the integrity of the deed and the
legal personality of respondent to sue petitioners. 25

For their part, petitioners counter that their motion for production was not filed out of
time, and "[t]here is no proscription, under Rule 27 or any provision of the Rules of
Court, from filing motions for production, beyond the pre-trial." 26

Further, assuming that there was a valid transfer of the loan obligation of petitioner
EDC, Article 1634 is applicable and, therefore, petitioners must be informed of the
actual transfer price, which information may only be supplied by the LSPA. 27 Petitioners
argue that the substitution of respondent in the case a quowas "not sufficient
‘demand’as contemplated under Article 1634 of the Civil Code inasmuch asrespondent

917
Cameron failed . . . to inform petitioner EDC of the price it paid for the [transfer of the]
loan obligation,"28 which made it "impossible for petitioners to reimburse what was paid
for the acquisition of the . . . loan obligation [of EDC]." 29 Additionally, petitioners contend
that respondent was not a party to the deed of assignment, but Cameron Granville
Asset Management (SPV-AMC), Inc., hence, "as [to] the actual parties to the Deed of
Assignment are concerned, no such demand has yet been made." 30

Petitioners add that the amount of their liability to respondent is one of the factual issues
to be resolved as stated in the November 21, 2011 pretrial order of the Regional Trial
Court, which makes the LSPA clearly relevant and material to the disposition of the
case.31

Petitioners next argue that the parol evidence rule is not applicable to them because
they were not parties tothe deed of assignment, and "they cannot be prevented from
seeking evidence to determine the complete terms of the Deed of
Assignment."32 Besides, the deedof assignment made express reference to the LSPA,
hence,the latter cannot be considered as extrinsic to it. 33

As to respondent’s invocation that the LSPA is privileged/confidential, petitioners

counter that "it has not been shown that the parties fall under . . . or, at the very
least . . . analogous to [any of the relationships enumerated in Rule 130, Section 124]
that would exempt [respondent] from disclosing information as to their transaction." 34

In reply, respondent argues that "[petitioners] cannot accept and reject the same
instrument at the same time."35 According to respondent, by allegedly "uphold[ing] the
truth of the contents as well as the validity of [the] Deed of Assignment [in] seeking the
production of the [LSPA],"36 petitioners could no longer be allowed to impugn the validity
of the same deed.37

In their rejoinder, petitioners clarified that their consistent position was always to assail
the validity of the deed of assignment; that alternatively, they invoked the application of
Article 1634 should the court uphold the validity of the transfer of their alleged loan
obligation; and that Rule 8, Section 2 of the Rules of Court "permits parties to set forth
alternative causes of action or defenses."38

We deny the motion for reconsideration.

Discovery mode of
production/inspection of
document may be availed of
even beyond pre-trial upon a
showing of good cause

The availment of a motion for production, as one of the modes of discovery, is not
limited to the pre-trial stage. Rule 27 does not provide for any time frame within which
the discovery mode of production or inspection of documents can be utilized. The rule

918
only requires leave of court "upon due application and a showing of due cause." 39 Rule
27, Section 1 of the 1997 Rules of Court, states:

SECTION 1. Motion for production or inspection order — Upon motion of any party
showing good cause therefor the court in which an action is pending may (a) order any
party to produce and permit the inspection and copying or photographing, by or on
behalf of the moving party, of any designated documents, papers, books, accounts,
letters, photographs, objects or tangible things, not privileged, which constitute or
contain evidence material to any matter involved in the action and which are in his
possession, custody or control[.] (Emphasis supplied)

In Producers Bank of the Philippines v. Court of Appeals, 40 this court held that since the
rules are silent asto the period within which modes of discovery (in that case, written
interrogatories) may still be requested, it is necessary to determine: (1) the purposeof
discovery; (2) whether, based on the stage of the proceedings and evidence presented
thus far, allowing it is proper and would facilitate the disposition of the case; and (3)
whether substantial rights of parties would be unduly prejudiced. 41 This court further
held that "[t]he use of discovery is encouraged, for it operates with desirable flexibility
under the discretionary control of the trial court." 42

In Dasmariñas Garments, Inc. v. Reyes,43 this court declared that depositions, as a

mode ofdiscovery, "may be taken at any time after the institution of any action [as there
is] no prohibition against the taking of depositions after pre-trial." 44 Thus:

Dasmariñas also contends that the "taking of deposition is a mode of pretrial discovery
to be availed of before the action comes to trial." Not so. Depositions may be taken at
any time after the institution of any action, whenever necessary or convenient. There is
no rule that limits deposition-taking only to the period of pre-trial or before it; no
prohibition against the taking of depositions after pre-trial. Indeed, the law authorizes
the taking of depositions of witnesses before or after an appeal is taken from the
judgment of a Regional Trial Court "to perpetuate their testimony for use in the event of
further proceedings in the said court" (Rule 134, Rules of Court), and even during the
process of execution of a final and executory judgment (East Asiatic Co. v. C.I.R., 40
SCRA 521, 544).45

"The modes of discovery are accorded a broad and liberal treatment." 46 The evident
purpose of discovery procedures is "to enable the parties, consistent with recognized
privileges, to obtain the fullest possible knowledge of the issues and facts before civil
trials"47 and, thus, facilitating an amicable settlement or expediting the trial of the case. 48

Technicalities in pleading should be avoided in order to obtain substantial justice. In

Mutuc v. Judge Agloro,49 this court directed the bank to give Mutuc a complete
statement asto how his debt was computed, and should he be dissatisfied with that
statement, pursuant to Rule 27 of the Rules of Court, to allow him to inspect and copy
bank records supporting the items in that statement. 50 This was held to be "in
consonance with the rules on discovery and the avowed policy of the Rules of Court . . .

919
to require the parties to lay their cards on the table to facilitate a settlement of the case
before the trial."51

We have determined that the LSPA isrelevant and material to the issue on the validity of
the deed of assignment raised by petitioners in the court a quo, and allowing its
production and inspection by petitioners would be more in keeping with the objectives of
the discovery rules. We find no great practical difficulty, and respondent continuously
fails to allege any, in presenting the document for inspection and copying of petitioners.
On the other hand, to deny petitioners the opportunity to inquire into the LSPA would
bar their access to relevant evidence and impair their fundamental right to due
process.52

Article 1634 of the New Civil Code is applicable

Contrary to respondent’s stance, Article 1634 of the Civil Code on assignment of credit
in litigation is applicable.

Section 13 of the Special Purpose Vehicle Act clearly provides that in the transfer of the
non-performing loans to a special purpose vehicle, "the provisions on subrogation and
assignment of credits under the New Civil Code shall apply." Thus:

Sec. 13. Nature of Transfer. – All sales or transfers of NPAs to an SPV shall be in the
nature of a true sale after proper notice in accordance with the procedures asprovided
for in Section 12: Provided, That GFIs and GOCCs shall be subject to existing law on
the disposition of assets: Provided, further, That in the transfer of the NPLs, the
provisions on subrogation and assignment of credits under the New Civil Code shall
apply.

Furthermore, Section 19 of the Special Purpose Vehicle Act expressly states that
redemption periods allowed to borrowers under the banking law, the Rules of Court,
and/or other laws are applicable. Hence, the right of redemption allowed to a debtor
under Article 1634 of the Civil Code is applicable to the case a quo.

Accordingly, petitioners may extinguish their debt by paying the assignee-special

purpose vehicle the transfer price plus the cost of money up to the time of redemption
and the judicial costs.

Petitioners’ right to
extinguish their debt has not
yet lapsed

Petitioners’ right to extinguish their debt under Article 1634 on assignment of credits has
not yet lapsed. The pertinent provision is reproduced here:

Art. 1634. When a credit or other incorporeal right in litigation is sold, the debtor shall
have a right to extinguish it by reimbursing the assignee for the price the latter paid

920
therefor, the judicial costs incurred by him, and the interest on the price from the day on
which the same was paid. A credit or other incorporeal right shall be considered in
litigation from the time the complaint concerning the same is answered.

The debtor may exercise his right within thirty days from the date the assignee demands
payment from him. (Emphasis supplied)

Under the last paragraph of Article 1634, the debtor may extinguish his or her debt
within 30 days from the date the assignee demands payment. In this case, insofar as
the actual parties to the deed of assignment are concerned, no demand has yet been
made, and the 30-day period did not begin to run. Indeed, petitioners assailed before
the trial court the validity of the deed of assignment on the groundsthat it did not comply
with the mandatory requirements of the Special Purpose Vehicle Act, 53 and it referred to
Cameron Granville Asset Management (SPV-AMC), Inc., as the assignee, and not
respondent Cameron Granville 3 Asset Management, Inc. 54 The law requires that
payment should be made only "to the person in whose favor the obligation has been
constituted, or his [or her] successor in interest, or any person authorized to receive
it."55 It was held that payment made to a person who is not the creditor, his or her
successor-in-interest, or a person who is authorized to receive payment, even through
error or good faith, is not effective payment which will bind the creditor or release the
debtor from the obligation to pay.56 Therefore, it was important for petitioners to
determine for sure the proper assignee of the EIB credit or who to pay, in order to
effectively extinguish their debt.

Moreover, even assuming that respondent is the proper assignee of the EIB credit,
petitioners could not exercise their right of extinguishment because they were not
informed of the consideration paid for the assignment. 57

Respondent must, pursuant to Article 1634 of the Civil Code, disclose how much it paid
to acquire the EIB credit, so that petitioners could make the corresponding offer to pay,
by way of redemption, the same amount in final settlement of their obligation.

Respondent insists that the transfer price of the EIB credit is ₱10,232,998.00 (the actual
amount and value of the credit), and that petitioners should have paid the said amount
within 30 days from the December 8, 2006 order of the Regional Trial Court approving
its substitution of EIB.58 Petitioners believe otherwise, and as the deed of assignment
was silent on the matter, it becomes necessary to verify the amount of the consideration
from the LSPA.

Assuming indeed that respondent acquired the EIB credit for a lesser consideration, it
cannot compel petitioners to pay or answer for the entire original EIB credit, or more
thanwhat it paid for the assignment.

Under the circumstances of this case, the 30-day period under Article 1634 within which
petitioners could exercise their right to extinguish their debt should begin to run only

921
from the time they were informed of the actual price paid by the assignee for the
transfer of their debt. Parol evidence rule is not applicable

Claiming further the impropriety of allowing the production of the LSPA, respondent
contends that the presentation of the document and its annexes would violate the parol
evidence rule in Rule 130, Section 9:

SEC. 9. Evidence of written agreements.—When the terms of an agreement have been

reduced to writing, it is considered as containing all the terms agreed upon and there
can be, between the parties and their successors in interest, no evidence of such terms
other than the contents of the written agreement.

However, a party may present evidence to modify, explain or add to the terms of the
written agreement ifhe puts in issue in his pleading:

(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;

(b) The failure of the written agreement to express the true intent and agreement
of the parties thereto;

(c) The validity of the written agreement; or

(d) The existence of other terms agreed to by the parties or their successors in
interest after the execution of the written agreement.

The term "agreement" includes wills.

We disagree.

The parol evidence rule does notapply to petitioners who are not parties to the deed of
assignment and do not base a claim on it.59 Hence, they cannot be prevented from
seeking evidence to determine the complete terms of the deed of assignment.

Even assuming that Rule 130, Section 9 is applicable, an exception to the rule under
the second paragraph iswhen the party puts in issue the validity of the written
agreement, as in the case a quo.

Besides, what is forbidden under the parol evidence rule is the presentation of oral or
extrinsic evidence, not those expressly referred to in the written agreement.
"[D]ocuments canbe read together when one refers to the other." 60 By the express terms
of the deed of assignment, it is clear that the deed of assignment was meant to be read
in conjunction with the LSPA.

As we have stated in our decision, Rule 132, Section 17 61 of the Rules of Court allows a
party to inquire into the whole of the writing or record when a part of it is given in
evidence by the other party. Since the deed of assignment was produced in court by

922
respondent and marked as one of its documentary exhibits, the LSPA which was made
a part thereof by explicit reference and which is necessary for its understanding may
also be inquired into by petitioners.

The LSPA is not privileged

and confidential in nature

Respondent’s contention that the LSPAis privileged and confidential is likewise

untenable.

Indeed, Rule 27 contains the proviso that the documents sought to be produced and
inspected must not be privileged against disclosure. Rule 130, Section 24 describes the
types of privileged communication. These are communication between or involving the
following: (a) between husband and wife; (b) between attorney and client; (c) between
physician and patient; (d) between priest and penitent; and (e) public officers and public
interest.

Privileged communications under the rules of evidence is premised on an accepted

need to protect a trust relationship. It has not been shown that the parties to the deed of
assignment fall under any of the foregoing categories.

This court has previously cited other privileged matters such as the following: "(a)
editors may not be compelled to disclose the source of published news; (b) voters may
not be compelled to disclose for whom they voted; (c) trade secrets; (d) information
contained in tax census returns; . . . (d) bank deposits" 62 (pursuant to the Secrecy of
Bank Deposits Act); (e) national security matters and intelligence information; 63 and (f)
criminal matters.64 Nonetheless, the LSPA does not fall within any of these classes of
information. Moreover, the privilegeis not absolute, and the court may compel disclosure
where it is indispensable for doing justice.

At any rate, respondent failed to discharge the burden of showing that the LSPA is a
privileged document.1âwphi1 Respondent did not present any law or regulation that
considers bank documents such as the LSPA as classified information. Its contention
that the Special Purpose Vehicle Act65 only requires the creditor-bank to give notice to
the debtor of the transfer of his or her account to a special purpose vehicle, and that the
assignee-special purpose vehicle has no obligation to disclose other financial
documents related to the sale, is untenable. The Special Purpose Vehicle Act does not
explicitly declare these financial documents as privileged matters. Further, as
discussed, petitioners are not precluded from inquiring as to the true consideration of
the assignment, precisely because the same law in relation to Article 1634 allows the
debtor to extinguish its debt by reimbursing the assignee-special purpose vehicle of the
actual price the latter paid for the assignment.

An assignment of a credit "produce[s] no effect as against third persons, unless it

appears ina public instrument[.]" 66 It strains reason why the LSPA, which by law must be

923
a publicinstrument to be binding against third persons such as petitioners-debtors, is
privileged and confidential.

Alternative defenses are

allowed under the Rules

Finally, respondent’s contention that petitioners cannot claim the validity and invalidity of
the deed ofassignment at the same time is untenable.

The invocation by petitioners of Article 1634, which presupposes the validity of the deed
of assignment orthe transfer of the EIB credit to respondent, even if it would run counter
to their defense on the invalidity of the deed of assignment, is proper and sanctioned by
Rule 8, Section 2 of the Rules of Court, which reads:

SEC. 2. Alternative causes of action or defenses. — A party may set forth two or more
statements of a claim or defense alternatively or hypothetically, either in one causeof
action or defense or in separate causes of action or defenses. When two or more
statements are made in the alternative and one of them if made independently would be
sufficient, the pleading is not made insufficient by the insufficiency of one or more of the
alternative statements. (Emphasis supplied)

All told, respondent failed to allege sufficient reasons for us to reconsider our decision.
Verily, the production and inspection of the LSPA and its annexes fulfill the discovery-
procedures objective of making the trial "less a game of blind man’s buff and morea fair
contest with the basic issues and facts disclosed to the fullest practicable extent." 67

WHEREFORE, the motion for reconsideration is DENIED WITH FINALITY.

SO ORDERED.

SECOND DIVISION

G.R. Nos. 205045 & 205723, January 25, 2017

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. SAN MIGUEL

CORPORATION, Respondent.

DECISION

LEONEN, J.:

These consolidated cases consider whether "San Mig Light" is a new brand or
a variant of one of San Miguel Corporation's existing beer brands, and whether the
Bureau of Internal Revenue may issue notices of discrepancy that effectively changes
"San Mig Light" 's classification from new brand to variant. The issues involve an
application of Section 143 of the 1997 National Internal Revenue Code (Tax Code), as

924
amended, on the definition of a variant, which is subject to a higher excise tax rate than
a new brand. This case also applies the requirement in Rep. Act No. 9334 that
reclassification of certain fermented liquor products introduced between January 1,
1997 and December 31, 2003 can only be done by an act of Congress.

The Petition1 docketed as G.R. No. 205045 assails the Court of Tax Appeals En Banc's
September 20, 2012 Decision2 affirming the Third Division's grant of San Miguel
Corporation's refund claim in CTA Case No. 7708, and the December 11, 2012
Resolution3 denying reconsideration. The Commissioner of Internal Revenue prays for
the reversal and setting aside of the assailed Decision and Resolution, as well as the
issuance of a new one denying San Miguel Corporation's claim for tax refund or credit. 4

On the other hand, the Petition5 docketed as GR. No. 205723 and consolidated with
G.R. No. 205045 assails the Court of Tax Appeals En Banc's October 24, 2012
Decision6 dismissing the Commissioner of Internal Revenue's appeal, and the February
4, 2013 Resolution7 denying reconsideration. The Commissioner of Internal Revenue
prays for the reversal and setting aside of the assailed Decision and Resolution, the
issuance of a new one remanding the case to the Court of Tax Appeals for the
production of evidence in San Miguel Corporation's possession, or, in the alternative,
the dismissal of the Petitions in CTA Case Nos. 7052, 7053, and 7405. 8

On October 19, 1999, Virgilio S. De Guzman (De Guzman), San Miguel Corporation's
Former Assistant Vice President for Finance, wrote the Bureau of Internal Revenue
Excise Tax Services Assistant Commissioner Leonardo B. Albar (Assistant
Commissioner Albar) to request the registration of and authority to manufacture "San
Mig Light," to be taxed at P12.15 per liter.9 The letter dated October 27, 1999 granted
this request.10

On November 3, 1999, De Guzman advised Assistant Commissioner Albar that "San

Mig Light" would be sold at a suggested net retail price of P21.15 per liter or P6.98 per
bottle, less value-added tax and specific tax. "San Mig Light" would also be classified
under "Medium Priced Brand" to be taxed at P9.15 per liter. 11

On January 28, 2002, Alfredo R. Villacorte (Villacorte), San Miguel Corporation's Vice
President and Manager of the Group Tax Services, wrote the Bureau of Internal
Revenue Chief of the Large Taxpayers Assistance Division II (LTAD II) to request
information on the tax rate and classification of "San Mig Light" and another beer
product named "Gold Eagle King."12

On February 7, 2002, LTAD II Acting Chief Conrado P. Item replied to Villacorte's

letter.13 He confirmed that based on the submitted documents, San Miguel Corporation
was allowed to register, manufacture, and sell "San Mig Light" as a new brand, had
been paying its excise tax for a considerable length of time, and that the tax
classification and rate of "San Mig Light" as a new brand were in order. 14

925
However, on May 28, 2002, Edwin R. Abella (Assistant Commissioner Abella), Bureau
of Internal Revenue Large Taxpayers Service Assistant Commissioner, issued a Notice
of Discrepancy against San Miguel Corporation. The Notice stated that "San Mig Light"
was a variant of its existing beer products and must, therefore, be subjected to the
higher excise tax rate for variants.15 Specifically, for the year 1999, "San Mig Light"
should be taxed at the rate of P19.91 per liter instead of P9.15 per liter; and for the year
2000, the 12% increase should be based on the rate of P19.91 per liter under Section
143(C)(2) of the Tax Code.16 Hence, the Notice demanded payments of deficiency
excise tax in the amount of P824,750,204.97, exclusive of increments for years 1999 to
April 2002.17

The Finance Manager of San Miguel Corporation's Beer Division wrote a letter-reply
dated July 9, 2002 requesting the withdrawal of the Notice of Discrepancy. 18 San Miguel
Corporation stated, among other things, that "San Mig Light" was not a variant of any of
its existing beer brands because of "the distinctive shape, color scheme[,] and general
appearance"; and the "different alcohol content and innovative low calorie
formulation."19 It also emphasized that the Escudo logo was not a beer brand logo but a
corporate logo.20

On October 14, 2002, Assistant Commissioner Abella wrote a letter-rejoinder reiterating

its finding that "San Mig Light Pale Pilsen" was truly a variant of "San Miguel Pale
Pilsen."21 The letter-rejoinder cited certain statements in San Miguel Corporation's
publication, "Kaunlaran," and the corporation's Annual Report as support for its finding. 22

On November 20, 2002, Villacorte replied by requesting that "San Mig Light be
reconfirmed as a new brand . . . the deficiency assessment be set aside and the
demand for payment be withdrawn."23

Subsequently, three (3) conferences were held on the "San Mig Light" tax classification
issue. At the conference held on December 16, 2003, Commissioner Guillermo
Parayno, Jr. (Commissioner Parayno) informed San Miguel Corporation that five (5)
members of the Bureau of Internal Revenue Management Committee voted that "San
Mig Light" was a variant of "Pale Pilsen in can," while two (2) members voted that it was
a variant of "Premium," a high-priced beer product of San Miguel Corporation. 24

On January 6, 2004, Commissioner Parayno wrote San Miguel Corporation and

validated the findings that "San Mig Light" was a variant of "San Miguel Pale Pilsen in
can," subject to the same excise tax rate of the latter—that is, P13.61 per liter—and that
an assessment for deficiency excise tax against San Miguel Corporation was
forthcoming.25

On January 28, 2004, a Preliminary Assessment Notice (PAN) was issued against San
Miguel Corporation for deficiency excise tax in the amount of P852,039,418.15,
inclusive of increments, purportedly for the removals of "San Mig Pale Pilsen Light,"
from 1999 to January 7, 2004.26

926
On February 4, 2004, a Notice of Discrepancy was issued against San Miguel
Corporation on an alleged deficiency excise tax in the amount of P28,876,108.84, from
January 8, 2004 to January 29, 2004. 27

Accordingly, on March 24, 2004, Bureau of Internal Revenue Deputy Commissioner

Estelita C. Aguirre (Deputy Commissioner Aguirre) issued a PAN against San Miguel
Corporation for P29,967,465.37 representing deficiency excise tax, inclusive of
increments, from January 8, 2004 to January 29, 2004. 28

On April 12, 2004 and May 26, 2004, Deputy Commissioner Aguirre issued two (2)
Formal Letters of Demand29 to San Miguel Corporation with the accompanying Final
Assessment Notice (FAN) Nos. LTS TF 004-06-02 and LTS TF 129-05-04, respectively,
directing San Miguel Corporation to pay deficiency excise taxes in the amounts of:

(a) P876,098,898.83, inclusive of interest until April 30, 2004, for the period of
November to December 1999 at P12.52 per liter, and January 2000 to January 7,
2004 at P13.61 per liter;30 and
(b) P30,763,133.68, inclusive of interest until June 30, 2004, for the period January
8, 2004 to January 29, 2004.31

San Miguel filed a Protest/Request for Reconsideration against each FAN. 32

On August 17, 2004 and August 20, 2004, Former Large Taxpayers Service Officer-in-
Charge Deputy Commissioner Kim S. Jacinto-Henares informed San Miguel
Corporation of the denial of the Protest/Request for Reconsiderations against the two
(2) FANs "for lack of legal and factual basis." 33

G.R. No. 205723

On September 17, 2004 and September 22, 2004, San Miguel Corporation filed before
the Court of Tax Appeals Petitions for Review, docketed as CTA Case Nos. 7052 and
7053, assailing the denials of its Protest/Request for Reconsiderations of the deficiency
excise tax assessments.34

To prevent the issuance of additional excise tax assessments on San Mig Light
products and the disruption of its operations, San Miguel Corporation paid excise taxes
at the rate of P13.61 beginning February 1, 2004. 35

On December 28, 2005, San Miguel Corporation filed with the Bureau of Internal
Revenue its first refund claim. The claim sought the refund of P782,238,161.47 for
erroneous excise taxes collected on San Mig Light products from February 2, 2004 to
November 30, 2005.36

Due to inaction on its claim, on January 31, 2006, San Miguel Corporation filed before
the Court Tax Appeals a Petition for Review docketed as CTA Case No. 7405. 37 The

927
Court of Tax Appeals, upon motion, later consolidated CTA Case No. 7405 with CTA
Case Nos. 7052 and 7053.38

The Court of Tax Appeals First Division, in its Decision 39 dated October 18, 2011,
granted the Petitions in CTA Case Nos. 7052 and 7053 and partially granted the
Petition in CTA Case No. 7405.40 The Decision's dispositive portion reads:

WHEREFORE, in view of the foregoing considerations, the consolidated Petitions for

Review in CTA Case Nos. 7052 and 7053 are hereby GRANTED. The (1) [sic] letters
dated August 17, 2004 and August 20, 2004 of respondents, denying petitioner's
Protest/Request for Reconsideration dated May 12, 2004 and July 7, 2004, respectively,
and (2) Assessment Notice Nos. LTS TF 004-06-02 and LTS TF 129-05-04 issued by
respondent against petitioner for the periods of November 1999 to January 7, 2004 and
January 8, 2004 to January 29, 2004, are hereby CANCELLED and SET ASIDE.

Moreover, the Petition for Review in CTA Case No. 7405 is hereby PARTIALLY
GRANTED. Respondent CIR is hereby ORDERED to REFUND petitioner, or to ISSUE
A TAX CREDIT CERTIFICATE in its favor in, the amount of SEVEN HUNDRED
EIGHTY ONE MILLION FIVE HUNDRED FOURTEEN THOUSAND SEVEN HUNDRED
SEVENTY TWO PESOS AND FIFTY SIX CENTAVOUS [sic] (P781,514,772.56), as
determined below:

Claims for Over-Payment of

P782,238,161.47
Excise Taxes per Petition

Less: Deductions from claims:

Excise taxes due on SML

1. removals per ODI which were P420,252.62
not paid per Returns Polo Plant
Excise taxes due per Excise Tax
2. Returns were Lesser than [the] 121,975.00
amounts per ODI Polo Plant
SML Removals per shipping
3. Memorandum were Greater  
than ODIs
 
San Fernando Plant 181,080.11
Bacolod Plant 81.18 723,388.91
Recomputed Excise Taxes P781,514,772.56
for Refund/Issuance of Tax

928
Credit Certificate

SO ORDERED.41 (Emphasis in the original)

The Commissioner filed a Motion for Reconsideration with Motion for Production of
Documents praying that San Miguel Corporation be compelled to produce the following:
(a) "Kaunlaran" publication for the months of October 1999 and January 2000; (b) 1999
Annual Report to stockholders; and (c) copies of the video footage of two (2) San Mig
Light commercials as seen in its website. 42 The Commissioner claimed "that the
admission of said documents would lead to a better illumination of the outcome of the
case."43

The Court of Appeals First Division denied the Motions in its Resolution 44 dated
February 6, 2012:

WHEREFORE, premises considered, respondent's [CIR's] MOTION FOR

RECONSIDERATION WITH MOTION FOR PRODUCTION OF DOCUMENTS (Re:
Decision promulgated 18 October 2011) and SUPPLEMENTAL MOTION FOR
PRODUCTION OF DOCUMENTS are hereby DENIED for lack of merit.

SO ORDERED.45 (Emphasis in the original)

The Court of Tax Appeals En Banc, in its Decision46 dated October 24, 2012, dismissed
the Petition and affirmed the Division.47 It also denied reconsideration through the
Resolution48 dated February 4, 2013.

Hence, the Commissioner on Internal Revenue filed the Petition for Review on
Certiorari49 docketed as G.R. No. 205723.

G.R. No. 205045

On August 30, 2007, San Miguel Corporation filed its second refund claim with the
Bureau of Internal Revenue in the amount of P926,389,172.02. 50 Due to inaction on its
claim, San Miguel Corporation filed before the Court Tax Appeals a Petition for Review,
docketed as CTA Case No. 7708, on November 27, 2007. 51

The Court of Tax Appeals Third Division, in its Decision dated January 7, 2011, partially
granted the Petition.52 It also denied reconsideration.53 The Decision's dispositive portion
reads:

WHEREFORE, the Petition for Review is hereby PARTIALLY GRANTED. Accordingly,

respondent is hereby ORDERED TO REFUND or ISSUE A TAX CREDIT
CERTIFICATE in favor [of] petitioner in the amount of P926,169,056.74, representing
erroneously, or excessively and/or illegally collected, and overpaid excise taxes on "San
Mig Light" during the period from December 1, 2005 up to July 31, 2007.

929
SO ORDERED.54 (Emphasis in the original)

On September 20, 2012, the Court of Tax Appeals En Banc55 affirmed the Division and
thereafter also denied reconsideration. The Decision's dispositive portion reads:

WHEREFORE, the present Petition for Review is hereby DENIED for lack of merit. The
assailed decision and resolution of the Third Division of this Court promulgated on
January 7, 2011 and. March 23, 2011, respectively, in CTA Case No. 7708 entitled
"SAN MIGUEL CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE[“], are
hereby AFFIRMED.

Accordingly, petitioner is ORDERED TO REFUND or ISSUE A TAX CREDIT

CERTIFICATE in favor of respondent in the amount of P926,169,056.74, representing
erroneously, excessively and/or illegally collected and overpaid excise taxes on "San
Mig Light" during the period December 1, 2005 to July 31, 2007.

SO ORDERED.56 (Emphasis in the original)

Hence, the Commissioner on Internal Revenue filed the Petition for Review on
Certiorari57 docketed as G.R. No. 205045. The two (2) cases were consolidated.

Respondent San Miguel Corporation filed its Comment 58 on the Petitions, to which
petitioner filed its Reply.59 The parties then filed their respective memoranda. 60

The issues for resolution are:

First, whether a motion for production of documents and objects may be availed of after
the court has rendered judgment;

Second, whether petitioner complied with all requisites of a motion for production of
documents and objects under Rule 27, such as a showing of good cause;

Third, whether "San Mig Light" is a new brand and not a variant of "San Miguel Pale
Pilsen";

Fourth, whether the "classification freeze" in Rep. Act No. 9334 refers to the freezing of
classification of brands, and not to the freezing of net retail prices of brands;

Fifth, whether the deficiency excise tax assessments issued by the Bureau of Internal
Revenue against respondent dated April 12, 2004 and May 26, 2004 are valid; and

Lastly, whether respondent is entitled to a refund of excess payment of excise taxes on

"San Mig Light" in the amount of P781,514,772.56 for the period from February 1, 2004
up to November 30, 2005, and in the amount of P926,169,056.74 for the period from
December 1, 2005 up to July 31, 2007.

930
 I

Petitioner questions the denial of its Motion for Production of Documents and Objects. It
argues that this motion may be filed after pre-trial or during the pendency of the action
since Rule 27, Section 1 of the Revised Rules of Civil Procedure does not explicitly
provide that it must be availed of before trial or pre-trial. 61 Petitioner contends that all
requisites for filing the motion were satisfied. 62 Assuming the Motion was belatedly filed,
it should have been granted in the higher interest of justice. 63

Respondent counters that the Motions, which were filed only after the Court of Tax
Appeals Division rendered judgment, were belatedly filed since this mode of discovery
must be availed of before trial.64 Rule 27, Section 1 used the phrase, "in which an action
is pending"; thus, this defines which court has authority to resolve the motion and does
not define when the motion must be made. 65 Respondent contends that this remedy
must be availed of before trial in order to facilitate and expedite case
preparations.66 Respondent adds that petitioner also failed to comply with the requisites
for the motion. Specifically, the Motion did not adequately describe the contents of the
documents to be produced to show their materiality and relevance to the case. 67

Respondent further submits that the documents and objects are immaterial and
irrelevant to the issues. The documents petitioner sought to have respondent produce
are referred to as having to do with the taste, alcohol content, and calories of "San Mig
Light," when the Tax Code definition of variant has nothing to do with these
matters.68 Respondent submits that in filing the Motions after judgment, petitioner was
effectively seeking new trial, which it may only avail itself of with "newly discovered"
evidence.69

Rule 27, Section 1 of the Revised Rules of Civil Procedure provides:

SECTION 1. Motion for production or inspection; order. - Upon motion of any

party showing good cause therefore, the court in which an action is pending may
(a) order any party to produce and permit the inspection and copying or photographing,
by or on behalf of the moving party, of any designated documents, papers, books,
accounts, letters, photographs, objects or tangible things, not privileged, which
constitute or contain evidence material to any matter involved in the action and
which are in his possession, custody or control; or (b) order any party to permit entry
upon designated land or other property in his possession or control for the purpose of
inspecting, measuring, surveying, or photographing the property or any designated
relevant object or operation thereon. The order shall specify the time, place and manner
of making the inspection and taking copies and photographs, and may prescribe such
terms and conditions as are just. (Emphasis supplied)

Rule 18, Section 6 of the Rules of Court on Pre-Trial requires that the pre-trial briefs
shall include "[a] manifestation of their having availed or intention to avail themselves of
discovery procedures."

931
On July 13, 2004, this Court approved A.M. No. 03-1-09-SC, otherwise known as the
Rule on Guidelines to be Observed by Trial Court Judges and Clerks of Court in the
Conduct of Pre-Trial and Use of Deposition - Discovery Measures. Among other things,
these rules direct trial courts to require parties to submit, at least three (3) days before
pre-trial, pre-trial briefs containing "[a] manifestation of the parties of their having availed
or their intention to avail themselves of discovery procedures or referral to
commissioners."70

Republic v. Sandiganbayan71 explained the purpose and policy behind modes of

discovery:

The truth is that "evidentiary matters" may be inquired into and learned by the parties
before the trial. Indeed, it is the purpose and policy of the law that the parties —
before the trial if not indeed even before the pre-trial — should discover or inform
themselves of all the facts relevant to the action, not only those known to them
individually, but also those known to their adversaries; in other words, the desideratum
is that civil trials should not be carried on in the dark; and the Rules of Court make this
ideal possible through the deposition-discovery mechanism set forth in Rules 24 to 29.
The experience in other jurisdictions has been that ample discovery before trial, under
proper regulation, accomplished one of the most necessary ends of modern
procedure: it not only eliminates unessential issues from trials thereby shortening
them considerably, but also requires parties to play the game with the cards on
the table so that the possibility of fair settlement before trial is measurably
increased...

As just intimated, the deposition-discovery procedure was designed to remedy the

conceded inadequacy and cumbersomeness of the pre-trial functions of notice-giving,
issue-formulation and fact revelation theretofore performed primarily by the pleadings.

The various modes or instruments of discovery are meant to serve (1) as a device,
along with the pre-trial hearing under Rule 20, to narrow and clarify the basic issues
between the parties, and (2) as a device for ascertaining the facts relative to those
issues. The evident purpose is, to repeat, to enable the parties, consistent with
recognized privileges, to obtain the fullest possible knowledge of the issues and
facts before civil trials and thus prevent that said trials are carried on in the
dark.72 (Emphasis supplied, citations omitted)

Specifically, this Court discussed the importance of a motion for production of

documents under Rule 27 of the Rules of Court in expediting time-consuming trials:

This remedial measure is intended to assist in the administration of justice

by facilitating and expediting the preparation of cases for trial and guarding
against undesirable surprise and delay; and it is designed to simplify procedure and
obtain admissions of facts and evidence, thereby shortening costly and time-
consuming trials. It is based on ancient principles of equity. More specifically, the
purpose of the statute is to enable a party-litigant to discover material information which,

932
by reason of an opponent's control, would otherwise be unavailable for judicial scrutiny,
and to provide a convenient and summary method of obtaining material and competent
documentary evidence in the custody or under the control of an adversary. It is a further
extension of the concept of pretrial.73 (Emphasis supplied)

Consistent with litigation's quest for truth, parties should welcome every opportunity in
attaining this objective, such as acting in good faith to reveal material documents. 74

The scope of discovery must be liberally construed, as a general rule, to serve its
purpose of providing the parties with essential information to reach an amicable
settlement or to expedite trial.75 "Courts, as arbiters and guardians of truth and justice,
must not countenance any technical ploy to the detriment of an expeditious settlement
of the case or to a fair, full and complete determination on its merits." 76

Rule 27, Section 1 of the Rules of Court does not provide when the motion may be
used. Hence, the allowance of a motion for production of document rests on the sound
discretion of the court where the case is pending, with due regard to the rights of the
parties and the demands of equity and justice. 77

In Eagleridge Development Corporation v. Cameron Granville 3 Asset Management,

Inc.,78 we held that a motion for production of documents may be availed of even
beyond the pre-trial stage, upon showing of good cause as required under Rule
27.79 We allowed the production of documents because the petitioner was able to show
"good cause" and relevance of the documents sought to be produced, and the trial court
had not yet rendered its judgment.

In this case, petitioner filed its Motion for Production of Documents after the Court of
Tax Appeals Division had rendered its judgment. According to the Court of Tax Appeals
Division, the documents sought to be produced were already discussed in the
Commissioner's Memorandum dated October 21, 2010 and were already considered by
the tax court when it rendered its Decision.80 If petitioner believed that the evidence in
the custody and control of respondent "would provide a better illumination of the
outcome of the case," it should have sought their production at the earliest opportunity
as it had been already aware of their existence.81 Petitioner's laxity is inexcusable and is
a fatal omission.

Under these circumstances, there was indeed no further need for the production of
documents and objects desired by petitioner. These pieces of evidence could have
served no useful purpose. On the contrary, the production of those documents after
judgment defeats the purpose of modes of discovery in expediting case preparation and
shortening trials.

We find no reversible error on the part of the Court of Tax Appeals En Banc in affirming
the Division's denial of petitioner's Motion for Production of Documents.

II

933
These consolidated cases involve the Tax Code provision defining new brand as
opposed to variant of brand, as these two are treated differently for excise tax on
fermented liquor.

Effective January 1, 1998, Republic Act No. 8424, otherwise known as the Tax Reform
Act of 1997, reproduced as Section 143 the provisions of Section 140 of the old Tax
Code, as amended by Republic Act No. 8240, governing excise taxes on fermented
liquor. Section 143 distinguishes a new brand from a variant of brand:

Sec. 143. Fermented Liquor. - There shall be levied, assessed and collected an excise
tax on beer, lager beer, ale, porter and other fermented liquors except tuba, basi, tapuy
and similar domestic fermented liquors in accordance with the following schedule:

(a) If the net retail price (excluding the excise tax and value-added tax) per liter of
volume capacity is less than Fourteen pesos and fifty centavos (P14.50), the tax shall
be Six pesos and fifteen centavos (P6.15) per liter;

(b) If the net retail price (excluding the excise tax and the value-added tax) per liter of
volume capacity is Fourteen pesos and fifty centavos (P14.50) up to Twenty-two pesos
(P22.00), the tax shall be Nine pesos and fifteen centavos (P9.15) per liter;

(c) If the net retail price (excluding the excise tax and the value-added tax) per liter of
volume capacity is more than Twenty-two pesos (P22.00), the tax shall be Twelve
pesos and fifteen centavos (P12.15) per liter.

Variants of existing brands which are introduced in the domestic market after the
effectivity of Republic Act No. 8240 shall be taxed under the highest classification
of any variant of that brand.

Fermented liquor which are brewed and sold at micro-breweries or small establishments
such as pubs and restaurants shall be subject to the rate in paragraph (c) hereof.

The excise tax from any brand of fermented liquor within the next three (3) years from
the effectivity of Republic Act No. 8240 shall not be lower than the tax which was due
from each brand on October 1, 1996.

The rates of excise tax on fermented liquor under paragraphs (a), (b) and (c) hereof
shall be increased by twelve percent (12%) on January 1, 2000.

New brands shall be classified according to their current net retail price.

For the above purpose, 'net retail price' shall mean the price at which the fermented
liquor is sold on retail in twenty (20) major supermarkets in Metro Manila (for brands of
fermented liquor marketed nationally), excluding the amount intended to cover the
applicable excise tax and the value-added tax. For brands which are marketed only
outside Metro Manila, the 'net retail price' shall mean the price at which the fermented

934
liquor is sold in five (5) major supermarkets in the region excluding the amount intended
to cover the applicable excise tax and the value-added tax.

The classification of each brand of fermented liquor based on its average net retail price
as of October 1, 1996, as set forth in Annex 'C,' shall remain in force until revised by
Congress.

A 'variant of brand' shall refer to a brand on which a modifier is prefixed and/or

suffixed to the root name of the brand and/or a different brand which carries the
same logo or design of the existing brand.

Every brewer or importer of fermented liquor shall, within thirty (30) days from the
effectivity of R.A. No. 8240, and within the first five (5) days of every month thereafter,
submit to the Commissioner a sworn statement of the volume of sales for each
particular brand of fermented liquor sold at his establishment for the three-month period
immediately preceding.

Any brewer or importer who, in violation of this Section, knowingly misdeclares or

misrepresents in his or its sworn statement herein required any pertinent data or
information shall be penalized by a summary cancellation or withdrawal of his or its
permit to engage in business as brewer or importer of fermented liquor.

Any corporation, association or partnership liable for any of the acts or omissions in
violation of this Section shall be fined treble the amount of deficiency taxes, surcharges
and interest which may be assessed pursuant to this Section.

Any person liable for any of the acts or omissions prohibited under this Section shall be
criminally liable and penalized under Section 254 of this Code. Any person who willfully
aids or abets in the commission of any such act or omission shall be criminally liable in
the same manner as the principal.

If the offender is not a citizen of the Philippines, he shall be deported immediately after
serving the sentence, without further proceedings for deportation. (Emphasis supplied)

On January 1, 2005, Republic Act No. 933482 took effect, amending Section 143 of the
Tax Code to read:

Sec. 143. Fermented Liquors. — There shall be levied, assessed and collected an

excise tax on beer, lager beer, ale, porter and other fermented liquors except tuba,
basi, tapuy and similar fermented liquors in accordance with the following schedule:

(a) If the net retail price (excluding the excise tax and the value-added tax) per liter of
volume capacity is less than Fourteen pesos and fifty centavos (P14.50), the tax shall
be Eight pesos and twenty-seven centavos (P8.27) per liter;

935
(b) If the net retail price (excluding the excise tax and the value-added tax) per liter of
volume capacity is Fourteen pesos and fifty centavos (P14.50) up to Twenty-two pesos
(P22.00), the tax shall be Twelve pesos and thirty centavos (P12.30) per liter;

(c) If the net retail price (excluding the excise tax and the value-added tax) per liter of
volume capacity is more than Twenty-two pesos (P22.00), the tax shall be Sixteen
pesos and thirty-three centavos (P16.33) per liter.

Variants of existing brands and variants of new brands which are introduced in the
domestic market after the effectivity of this Act shall be taxed under the proper
classification thereof based on their suggested net retail price: Provided, however, That
such classification shall not, in any case, be lower than the highest classification of any
variant of that brand.

A 'variant of a brand' shall refer to a brand on which a modifier is prefixed and/or

suffixed to the root name of the brand.

Fermented liquors which are brewed and sold at micro-breweries or small

establishments such as pubs and restaurants shall be subject to the rate in paragraph
(c) hereof.

New brands, as defined in the immediately following paragraph, shall initially be

classified according to their suggested net retail price.

'New brand' shall mean a brand registered after the date of effectivitv of R.A. No.
8240.

'Suggested net retail price' shall mean the net retail price at which new brands, as
defined above, of locally manufactured or imported fermented liquor are intended by the
manufacturer or importer to be sold on retail in major supermarkets or retail outlets in
Metro Manila for those marketed nationwide, and in other regions, for those with
regional markets. At the end of three (3) months from the product launch, the Bureau of
Internal Revenue shall validate the suggested net retail price of the new brand against
the net retail price as defined herein and determine the correct tax bracket to which a
particular new brand of fermented liquor, as defined above, shall be classified. After the
end of eighteen (18) months from such validation, the Bureau of Internal Revenue shall
revalidate the initially validated net retail price against the net retail price as of the time
of revalidation in order to finally determine the correct tax bracket which a particular new
brand of fermented liquors shall be classified: Provided, however, That brands of
fermented liquors introduced in the domestic market between January 1, 1997
and December 31, 2003 shall remain in the classification under which the Bureau
of Internal Revenue has determined them to belong as of December 31, 2003.
Such classification of new brands and brands introduced between January 1,
1997 and December 31, 2003 shall not be revised except by an act of Congress.

936
'Net retail price', as determined by the Bureau of Internal Revenue through a price
survey to be conducted by the Bureau of Internal Revenue itself, or the National
Statistics Office when deputized for the purpose by the Bureau of Internal Revenue,
shall mean the price at which the fermented liquor is sold on retail in at least twenty (20)
major supermarkets in Metro Manila (for brands of fermented liquor marketed
nationally), excluding the amount intended to cover the applicable excise tax and the
value-added tax. For brands which are marketed outside Metro Manila, the 'net retail
price' shall mean the price at which the fermented liquor is sold in at least five (5) major
supermarkets in the region excluding the amount intended to cover the applicable
excise tax and the value-added tax.

The classification of each brand of fermented liquor based on its average net
retail price as of October 1, 1996, as set forth in Annex 'C', including the
classification of brands for the same products which, although not set forth in
said Annex 'C', were registered and were being commercially produced and
marketed on or after October 1, 1996, and which continue to be commercially
produced and marketed after the effectivity of this Act, shall remain in force until
revised by Congress.

The rates of tax imposed under this Section shall be increased by eight percent (8%)
every two years starting on January 1, 2007 until January 1, 2011.

Any downward reclassification of present categories, for tax purposes, of existing

brands of fermented liquor duly registered at the time of the effectivity of this Act which
will reduce the tax imposed herein, or the payment thereof, shall be prohibited.

Every brewer or importer of fermented liquor shall, within thirty (30) days from the
effectivity of this Act, and within the first five (5) days of every month thereafter, submit
to the Commissioner a sworn statement of the volume of sales for each particular brand
of fermented liquor sold at his establishment for the three-month period immediately
preceding.

Any brewer or importer who, in violation of this Section, knowingly misdeclares or

misrepresents in his or its sworn statement herein required any pertinent data or
information shall be penalized by a summary cancellation or withdrawal of his or its
permit to engage in business as brewer or importer of fermented liquor.

Any corporation, association or partnership liable for any of the acts or omissions in
violation of this Section shall be fined treble the amount of deficiency taxes, surcharges
and interest which may be assessed pursuant to this Section.

Any person liable for any of the acts or omissions prohibited under this Section shall be
criminally liable and penalized under Section 254 of this Code. Any person who willfully
aids or abets in the commission of any such act or omission shall be criminally liable in
the same manner as the principal.

937
If the offender is not a citizen of the Philippines, he shall be deported immediately after
serving the sentence, without further proceedings for deportation. (Emphasis supplied)

On December 19, 2012, Rep. Act No. 10351, otherwise known as the Sin Tax
Law,83 was promulgated to further amend certain provisions on excise taxes on alcohol
and tobacco products. Among the amendments to Section 143 were:

Increase in the excise tax rates and transition from three (3)-tiered to two (2)-
tiered tax rates starting January 1, 2014 until December 31, 2016; and to a single
(1)
tax rate beginning January 1, 2017, irrespective of the price levels at which the
products were sold in the market;
All fermented liquors existing in the market at the time of the effectivity of the Act
shall be classified according to the net retail prices and the tax rates provided,
(2) based on the latest price survey of the fermented liquors conducted by the
Bureau of Internal Revenue. However, any downward reclassification is
prohibited;
Fermented liquors introduced in the domestic market after the effectivity of the
Act shall be initially tax-classified according to their suggested net retail prices
(3)
until such time that their correct tax bracket is finally determined under a
specified period; and
The proper tax classification of fermented liquors, whether registered before or
(4) after the effectivity of the Act, shall be determined every two (2) years from the
date of effectivity of the Act.

Excise taxes are imposed on the production, sale, or consumption of specific goods.
Generally, excise taxes on domestic products are paid by the manufacturer or producer
before removal of those products from the place of production. 84 The excise tax based
on weight, volume capacity, or any other physical unit of measurement is referred to as
"specific tax." If based on selling price or other specified value, it is referred to as "ad
valorem" tax.85

The excise tax on beer is a specific tax based on volume, or on a per liter basis. Before
its amendment, Section 143 provided for three (3) layers of tax rates, depending on the
net retail price per liter. How a new beer product is taxed depends on its classification,
i.e. whether it is a variant of an existing brand or a new brand. Variants of a brand that
were introduced in the market after January 1, 1997 are taxed under the highest tax
classification of any variant of the brand. On the other hand, new brands are Initially
classified and taxed according to their suggested net retail price, until a survey is
conducted by the Bureau of Internal Revenue to determine their current net retail price
in accordance with the specified procedure.

III

938
Petitioner argues that "San Mig Light," launched in November 1999, is not a new
brand but merely a low-calorie variant of "San Miguel Pale Pilsen."86 Thus, the
application of the higher excise tax rate for variant products is appropriate and
respondent should not be entitled to a refund or issuance of a tax credit certificate. 87

Respondent counters that "San Mig Light" is a new brand; the classification of "San Mig
Light" as a new and medium-priced brand may not be revised except by an act of
Congress;88 and the Court of Tax Appeals did not err in granting its claim for refund or
issuance of tax credit certificate.

The refund claim in CTA Case No. 7405, subject of the Petition docketed as G.R. No.
205723, covers the period from February 2, 2004 to November 30, 2005, while the
refund claim in CTA Case No. 7708, subject of the Petition docketed as G.R. No.
205045, covers the period from December 1, 2005 up to July 31, 2007.

We find for respondent.

Parenthetically, the Bureau of Internal Revenue's actions reflect its admission and
confirmation that "San Mig Light" is a new brand.

When respondent's October 19, 1999 letter requested the registration and authority to
manufacture "San Mig Light," to be taxed at P12.15 per liter, 89 the Bureau of Internal
Revenue granted the request.90

The response dated February 7, 2002 of the LTAD II Acting Chief confirmed that
respondent was allowed to register, manufacture, and sell "San Mig Light" as a new
brand.91

The Joint Stipulation of Facts, Documents and Issues in CTA Cases Nos. 7052 and
7053 dated July 29, 2005,92 signed by both parties, includes paragraph 1.08, which
reads:

1.08. From the time of its registration as a new brand in October 1999 and its
production in November 1999, "San Mig Light" products have been withdrawn and sold,
and taxes have been paid on such removals, on the basis of its registration and tax rate
as a new brand. (CTA No. 7052: Petition, par. 5.06; Answer, par. 2[e]; CTA No. 7053:
Petition, par. 5.06; Answer, par. 2[e]).93 (Emphasis supplied)

The May 28, 2002 Notice of Discrepancy was effectively nullified by the subsequent
issuance of Revenue Memorandum Order No. 6-2003, which included "San Mig Light”
as a new brand.

The Bureau of Internal Revenue issued Revenue Memorandum Order No. 6-2003 dated
March 11, 2003 with the subject, Prescribing the Guidelines and Procedures in the
Establishment of Current Net Retail Prices of New Brands of Cigarettes and Alcohol
Products Pursuant to Revenue Regulations No. 9-2003. Annex "A-3" is the Master List

939
of Registered Brands of Locally Manufactured Alcohol Products as of February 28,
2003, and the list includes "San Mig Light," 94 classified as "NB" or "new brand registered
on or after January 1, 1997":95

  INTENDED
REMARKS
MARKET
BRAND CLAS SPECIFICATI PACKA Date of
NAME S ON GE Domest Expo Statu Last
ic Sale rt s Producti
  on
B.
FERMENTED  
LIQUOR
1. SAN
MIGUEL
 
CORPORATI
ON
....  
"San Mig 330ml flint Active
NB 24 bots x x 96  
Light" bottle

IV

Any reclassification of fermented liquor products should be by act of Congress. Section

143 of the Tax Code, as amended by Rep. Act No. 9334, provides for this classification
freeze referred to by the parties:

Provided, however, That brands of fermented liquors introduced in the domestic market
between January 1, 1997 and December 31, 2003 shall remain in the classification
under which the Bureau of Internal Revenue has determined them to belong as of
December 31, 2003. Such classification of new brands and brands introduced
between January 1, 1997 and December 31, 2003 shall not be revised except by
an act of Congress.

....

The classification of each brand of fermented liquor based on its average net retail price
as of October 1, 1996, as set forth in Annex ‘C’, including the classification of brands for
the same products which, although not set forth in said Annex 'C’, were registered and
were being commercially produced and marketed on or after October 1, 1996, and
which continue to be commercially produced and marketed after the effectivity of this
Act, shall remain in force until revised by Congress.97 (Emphasis supplied)

940
In her Dissenting Opinion, Court of Tax Appeals Associate Justice Cielito N. Mindaro-
Grulla discussed that British American Tobacco v. Camacho98 explained the purpose
and application of the classification freeze.99 Her Dissenting Opinion concludes that the
classification freeze does not apply when a brand is a variant erroneously determined
as a new brand.100

British American Tobacco involves Section 145 of the Tax Code governing excise taxes
for cigars and cigarettes.

This Court in British American Tobacco discussed that Rep. Act No. 9334 includes,
among other things, the legislative freeze on cigarette brands introduced between
January 2, 1997 and December 31, 2003, in that these cigarette brands will remain in
the classification determined by the Bureau of Internal Revenue as of December 31,
2003 until revised by Congress.101 In other words, after a cigarette brand is classified
under the low-priced, medium-priced, high-priced, or premium-priced tax bracket based
on its current net retail price, its classification is frozen unless Congress reclassifies it. 102

The petitioner in British American Tobacco questioned this legislative freeze under

Section 145 for creating a "grossly discriminatory classification scheme between old and
new brands."103 This Court ruled that the classification freeze provision does not violate
the constitutional provisions on equal protection. 104

This Court discussed the legislative intent behind the classification freeze, that is, to
deter the potential for abuse if the power to reclassify is delegated and much discretion
is given to the Department of Finance and Bureau of Internal Revenue:

To our mind, the classification freeze provision was in the main the result of Congress'
earnest efforts to improve the efficiency and effectivity of the tax administration over sin
products while trying to balance the same with other state interests. In particular, the
questioned provision addressed Congress' administrative concerns regarding
delegating too much authority to the DOF and BIR as this will open the tax system to
potential areas of abuse and corruption. Congress may have reasonably conceived that
a tax system which would give the least amount of discretion to the tax implementers
would address the problems of tax avoidance and tax evasion. 105

British American Tobacco discussed the legislative history of the classification freeze,

but it did not explicitly rule that the classification freeze only refers to retail price tax
brackets.

In any event, petitioner's letters and Notices of Discrepancy, which effectively changed
San Mig Light's brand's classification from "new brand to variant of existing brand,"
necessarily changes San Mig Light's tax bracket. Based on the legislative intent behind
the classification freeze provision, petitioner has no power to do this.

941
A reclassification of a fermented liquor brand introduced between January 1, 1997 and
December 31, 2003, such as "San Mig Light," must be by act of Congress. There was
none in this case.

Before Rep. Act No. 9334 was passed, the Tax Code under Republic Act No. 8240
defined a "variant of a brand" as follows:

A variant of a brand shall refer to a brand on which a modifier is prefixed and/or suffixed
to the root name of the brand and/or a different brand which carries the same logo or
design of the existing brand.106

This definition includes two (2) types of "variants." The first involves the use of a
modifier that is prefixed and/or suffixed to a brand root name, and the second involves
the use of the same logo or design of an existing brand.

Rep. Act No. 9334 took effect on January 1, 2005 and deleted the second type of
"variant" from the definition:

A 'variant of a brand' shall refer to a brand on which a modifier is prefixed and/or

suffixed to the root name of the brand.107

Revenue Regulations No. 3-2006, with the subject: "Prescribing the Implementing
Guidelines of the Revised Tax Rates on Alcohol and Tobacco Products Pursuant to the
Provisions of Republic Act No. 9334, and Clarifying Certain Provisions of Existing
Revenue Regulations Relative Thereto" reiterated the deletion of the second type of
"variant":

SEC. 2. DEFINITION OF TERMS. - For purposes of these Regulations, the following

words and phrases shall have the meaning indicated below:

....

(d) VARIANT OF A BRAND - shall refer to a brand of alcohol or tobacco products

on which a modifier is prefixed and/or suffixed to the root name of the
brand. (Emphasis supplied)

For this purpose, the term "root name" shall refer to a letter, word, number, symbol, or
character; or a combination of letters, words, numbers, symbols, and/or characters that
may or may not form a word; or shall consist of a word or group of words, which may or
may not describe the other word or words: Provided, That the root name has been
originally registered as such with the Bureau of Internal Revenue (BIR).

Examples of root name: "L & M", " ß?", "10", "Pall Mall", "Blue Ice", "Red Horse", etc.

942
The term "modifier" shall refer to a word, a number or a combination of words and/or
numbers that specifically describe the root name to distinguish one variant from another
whether or not the use of such modifier is a common industry practice. The root name,
although accompanied by a modifier at the time of the original brand registration, shall
be the basis in determining the tax classification of subsequent variants of such brands.

Examples of modifiers:...

For beer: "Light", "Dry", "Ice", "Lager", "Hard", "Premium",

 
etc.

Any variation in the color and/or design of the label (such as logo, font, picturegram, and
the like), manner and/or form of packaging or size of container of the brand originally
registered with the BIR shall not, by itself, be deemed an introduction of a new brand or
a variant of a brand: Provided, That all instances of such variation shall require a prior
written permit from the BIR.

In case such BIR-registered brand has more than one (1) tax classification as a result of
the shift in the manner of taxation from ad valorem tax to specific tax under R.A. No.
8240, the highest tax classification shall be applied to such brand bearing a new label,
package, or volume content per package, subject to the provisions of the immediately
preceding paragraph.

ILLUSTRATION:

No. 1. —

....

In case a letter(s), number(s), symbols(s) or word(s) is/are deleted from or replaced by

another letter(s), number(s), symbol(s) or word(s) in the root name of a previously BIR-
registered brand, such that the introduction of the said brand bearing such change(s)
shall ride on the popularity of the said previously registered brand, the same shall be
classified as a variant of such previously registered brand: Provided, That where the
introduction of such brand by another manufacturer or importer will give rise to any legal
action with respect to infringement of patent or unfair competition, such brand shall be
considered a variant of such previously registered brand.

ILLUSTRATION:

No. 2. —

MODIFIER IS MODIFIER IS MODIFIED ROOT

ROOT NAME
PREFIXED SUFFIXED NAME
L&M Kings L & M L & M Lights M&L

943
 10 Perfect 10 10 Menthols Ten
Blue Ice Wild Blue Ice Blue Ice Supreme Blue Iced
Red Horse Flying Red Horse Red Horse Premium Reddish Horse
Pall Mall Long Pall Mall Pall Mall Filter Pal Mall

Petitioner submits that the complete name of "San Mig Light" is "San Mig Light Pale
Pilsen," and Section 143 of the Tax Code, in relation to its Annexes C-1 and C-2, show
that the parent brands of San Mig Light are RPT 108 in cans or San Miguel Beer Pale
Pilsen in can 330 ml, Pale Pilsen, and Super Dry. 109 It contends that the root name of
the existing brand is "Pale Pilsen," and RPT had the highest tax classification at the
time "San Mig Light" was introduced.110 "San Miguel Beer Pale Pilsen" and "San Mig
Light" have almost identical labels, and only these two labels bear the same "Pale
Pilsen."111

Respondent counters that petitioner changed its theory of the case on appeal, and this
should not be allowed.112 It argues that petitioner categorically invoked the second part
of the definition of variant in Section 143, and this part of the definition has been
deleted by Rep. Act No. 9334.113 Moreover, petitioner made no categorical assertion on
the first part of the definition, but only a vague statement that "the root name of the
existing brand is 'Pale Pilsen.'"114 Respondent adds that petitioner "has not specified
which type of 'San Mig Light', in bottle or in can, is a variant of 'RPT' in can (San Miguel
Beer Pale Pilsen)."115

Petitioner, on the other hand, maintains that even during the trial stage, its theory has
always been that "San Mig Light" falls under both first and second parts of Section 143,
before its amendment by Rep. Act No. 9334.116

A change of theory on appeal is generally disallowed in this jurisdiction for being unfair
to the adverse party.117

Even then, the Court of Tax Appeals En Banc, in both assailed Decisions, quoted with
approval the First Division's finding that "San Mig Light" does not fall under both first
and second parts of the definition of variant:

The fact that "San Mig Light" is a "new brand" and not merely a variant of an existing
brand is bolstered by the fact that Annexes "C-1" and "C-2" of RA No. 8240, which
enumerated the fermented liquors registered with the BIR do not include the brand
name "San Mig Light". Instead, what were listed, as existing brands of petitioner, as of
the effectivity of RA No. 8240, were as follows: "Pale Pilsen 320 ml.", "Super Dry 355
ml." and "Premium Can 330 ml." Even in Section 4 of RR No. 2-97, which provides for
the classification and manner of taxation of existing brands, new brands and variants of
existing brands, the list of existing brands of fermented liquors of petitioner does not
include the brand "San Mig Light", but merely "RPT in cans 330 ml", "Premium Bottles
355 ml.", "Premium Bottles 355 ml." and "Premium Bottle Can 330 ml." for high priced

944
brands; and "Super Dry 355 ml.", "Pale Pilsen 320 ml.", and "Grande" for medium-
priced brands.118

Thus, it is clear that when the product "San Mig Light" was introduced in 1999, it was
considered as an entirely new product and a new brand of petitioner's fermented
liquor, there being no root name of "San Miguel" or "San Mig” in its existing brand
names. The existing registered and classified brand name of petitioner at that
time was "Pale Pilsen." Therefore, the word "Light" cannot be considered as a
mere suffix to the word "San Miguel," but it is part and parcel of an entirely new
brand name, "San Mig Light." Evidently, as correctly pointed out by petitioner, "San
Mig Light" is not merely a variant of an existing brand, but an entirely new brand:

Anent the second type of "variant of brand," i.e., when a different brand carries the
same logo or design of an existing brand, records show that there are marked
differences in the designs of the existing brand "Pale Pilsen " and the new brand
"San Mig Light":

a) as to "Pale Pilsen" and "San Mig Light" in bottles:

1. the size, shape and color of the respective bottles are different. Each brand has a
distinct design in its packaging. "Pale Pilsen" is in a steiny bottle, while "San Mig Light"
is packed in a tall and slim transparent bottle;

2. the design and color of the inscription on the bottles are different from each other.
"Pale Pilsen" has its label encrypted or embossed on the bottle itself, while "San Mig
Light" has a silver and blue label of distinctive design that is printed on paper pasted on
the bottle; and

3. the color of the letters in the "Pale Pilsen" brand is white against the color of the
bottle, while that of the words "San Mig" is white against a blue background and the
word "Light" is blue against a silver background.

b) As to "Pale Pilsen" and "San Mig Light" in cans:

1. the words "Pale Pilsen" are in ordinary font printed horizontally in black on the can
against a diagonally striped light yellow gold background, while the words "San Mig" are
in Gothic font printed diagonally on the can against a blue background and the word
"Light" in ordinary font printed diagonally against a diagonally striped silver background;
and

2. the general color scheme of "Pale Pilsen" is light yellow gold, while that of "San Mig
Light" is silver.

Though the "escudo" logo appears on both "Pale Pilsen" bottle and "San Mig Light"
bottle and can, the same cannot be considered as an indication that "San Mig Light" is
merely a variant of the brand "Pale Pilsen", since the said "escudo" insignia is the

945
corporate logo of petitioner. It merely identifies the products, as having been
manufactured by petitioner, but does not form part of its brand. In fact, it appears not
only in petitioner's beer products, but even in its non-beer products. 119

VI

A variant under the Tax Code has a technical meaning. It is determined by the brand
(name) or logo of the beer product.

To be sure, all beers are composed of four (4) raw materials: barley, hops, yeast, and
water.120 Barley grain has always been used and associated with brewing beer, while
hops act as the bittering substance.121 Yeast plays a role in alcoholic fermentation, with
bottom-fermenting yeasts resulting in light lager and top-fermenting ones producing the
heavy and rich ale.122 With only four (4) ingredients combined and processed in varying
quantities, all beer are essentially related variants of these mixtures.

A manufacturer of beer may produce different versions of its products, distinguished by

features such as flavor, quality, or calorie content, to suit the tastes and needs of
specific segments of the domestic market. It can also leverage on the popularity of its
existing brand and sell a lower priced version to make it affordable for the low-income
consumers. These strategies are employed to gain a higher overall level of share or
profit from the market.

In intellectual property law, a registered trademark owner has the right to prevent others
from the use of the same mark (brand) for identical goods or services. The use of an
identical or colorable imitation of a registered trademark by a person for the same goods
or services or closely related goods or services of another party constitutes
infringement. It is a form of unfair competition 123 because there is an attempt to get a
free ride on the reputation and selling power of another manufacturer by passing of
one's goods as identical or produced by the same manufacturer as those carrying the
other mark (brand).124

The variant contemplated under the tax Code has a technical meaning. A variant is

determined by the brand (name) of the beer product, whether it was formed by prefixing
or suffixing a modifier to the root name of the alleged parent brand, or whether it carries
the same logo or design. The purpose behind the definition was to properly tax brands
that were presumed to be riding on the popularity of previously registered brands by
being marketed under an almost identical name with a prefix, suffix, or a variant. 125 It
seeks to address price differentials employed by a manufacturer on similar products
differentiated only in brand or design. Specifically, the provision was meant to obviate
any tax avoidance by manufacturing firms from the sale of lower priced variants of its
existing beer brands, thus, falling in the lower tax bracket with lower excise tax rates. To
favor government, a variant of a brand is taxed according to the highest rate of tax for
that particular brand.

946
"San Mig Light" and "Pale Pilsen" do not share a root word. Neither is there an existing
brand in the list (Annexes C-1 and C-2 of the Tax Code) called "San Mig" to conclude
that "Light" is a suffix rendering "San Mig Light" as its "variant." 126 As discussed in the
Court of Tax Appeals Decision, "San Mig Light" should be considered as one brand
name.127

Respondent's statements describing San Mig Light as a low-calorie variant is not

conclusive of its classification as a variant for excise tax purposes. Burdens are not to
be imposed nor presumed to be imposed beyond the plain and express terms of the
law.128 "The general rule of requiring adherence to the letter in construing statutes
applies with peculiar strictness to tax laws and the provisions of a taxing act are not to
be extended by implication."129

Furthermore, respondent's payment of the higher taxes starting January 30, 2004 after
deficiency assessments were made cannot be considered as an admission that its San
Mig Light is a variant. Section 130(A)(2) of the Tax Code requires payment of excise tax
"before removal of domestic products from place of production." 130 These payments
were made in protest as respondent subsequently filed refund claims.

VII

Petitioner argues that although the Bureau of Internal Revenue erroneously allowed
San Miguel Corporation to manufacture and sell "San Mig Light" in 1999 as a "new
brand" with the lower excise tax rate for "new brands," government is not estopped from
correcting previous errors by its agents. 131

Petitioner submits that the Notice of Discrepancy was to remedy the

"misrepresentation"132 of "San Mig Light" as new brand. It submits that respondent's
self-assessment of excise taxes as a new brand was without approval:

San Mig Light was never registered with BIR as a new brand but always as a variant.
Thus, petitioner's payment of excise taxes on San Mig Light as a new brand is based on
its own classification of San Mig Light as a new brand without approval of the BIR.
Under existing procedures in the payment of excise taxes, taxpayers are required to pay
their taxes based on self-assessment system with the government relying heavily on the
honesty of taxpayers. Such being the case, any payments made, even those allegedly
made as a condition for the withdrawal of the product from the place of production,
cannot be considered as a confirmation by the BIR of the correctness of such
payment.133

Section 143 of the Tax Code, as amended by Rep. Act No. 9334, provides for the
Bureau of Internal Revenue's role in validating and revalidating the suggested net retail
price of a new brand of fermented liquor for purposes of determining its tax bracket:

'Suggested net retail price' shall mean the net retail price at which new brands, as
defined above, of locally manufactured or imported fermented liquor are intended by the

947
manufacturer or importer to be sold on retail in major supermarkets or retail outlets in
Metro Manila for those marketed nationwide, and in other regions, for those with
regional markets. At the end of three (3) months from the product launch, the
Bureau of Internal Revenue shall validate the suggested net retail price of the
new brand against the net retail price as defined herein and determine the correct
tax bracket to which a particular new brand of fermented liquor, as defined
above, shall be classified. After the end of eighteen (18) months from such
validation, the Bureau of Internal Revenue shall revalidate the initially validated
net retail price against the net retail price as of the time of revalidation in order to
finally determine the correct tax bracket which a particular new brand of
fermented liquors shall be classified: Provided, however, That brands of fermented
liquors introduced in the domestic market between January 1, 1997 and December 31,
2003 shall remain in the classification under which the Bureau of Internal Revenue has
determined them to belong as of December 31, 2003. Such classification of new brands
and brands introduced between January 1, 1997 and December 31, 2003 shall not be
revised except by an act of Congress.

When respondent launched "San Mig Light" in 1999, it wrote the Bureau of Internal
Revenue on October 19, 1999 requesting registration and authority to manufacture "San
Mig Light" to be taxed as P12.15.

The Bureau of Internal Revenue granted this request in its October 27, 1999 letter.
Contrary to petitioner's contention, the registration granted was not merely for
intellectual property protection134 but "for internal revenue purposes only":

Your request dated October 19, 1999, for the registration of San Miguel Corporation
commercial label for beer bearing the trade mark "San Mig Light" Pale Pilsen, for
domestic sale or export, 24 bottles in a case, each flint bottle with contents of 330 ml., is
hereby granted.

....

Please follow strictly the requirements of internal revenue laws, rules and regulations
relative to the marks to be placed on each case, cartons or box used as secondary
containers. It is understood that the said brand be brewed and bottled in the
breweries at Polo, Valenzuela (A-2-21).

You are hereby informed that the registration of commercial labels in this Office
is for internal revenue purposes only and does not give you protection against any
person or entity whose rights may be prejudiced by infringement or unfair competition
resulting from your use of the above indicated trademark. 135 (Emphasis supplied)

Because the Bureau of Internal Revenue granted respondent's request in its October
27, 1999 letter and confirmed this grant in its subsequent letters, respondent cannot be
faulted for relying on these actions by the Bureau of Internal Revenue.

948
While estoppel generally does not apply against government, especially when the case
involves the collection of taxes, an exception can be made when the application of the
rule will cause injustice against an innocent party. 136

Respondent had already acquired a vested right on the tax classification of its San Mig
Light as a new brand. To allow petitioner to change its position will result in deficiency
assessments in substantial amounts against respondent to the latter's prejudice.

The authority of the Bureau of Internal Revenue to overrule, correct, or reverse the
mistakes or errors of its agents is conceded. However, this authority must be exercised
reasonably,137 i.e., only when the action or ruling is patently erroneous 138 or patently
contrary to law.139 For the presumption lies in the regularity of performance of official
duty,140 and reasonable care has been exercised by the revenue officer or agent in
evaluating the facts before him or her prior to rendering his or her decision or ruling—in
this case, prior to the approval of the registration of San Mig Light as a new brand for
excise tax purposes. A contrary view will create disorder and confusion in the
operations of the Bureau of Internal Revenue and open the administrative agency to
inconsistencies in the administration and enforcement of tax laws.

In Commissioner v. Algue:141

It is said that taxes are what we pay for civilized society. Without taxes, the government
would be paralyzed for lack of the motive power to activate and operate it. Hence,
despite the natural reluctance to surrender part of one's hard-earned income to the
taxing authorities, every person who is able to must contribute his share in the running
of the government. The government for its part, is expected to respond in the form of
tangible and intangible benefits intended to improve the lives of the people and enhance
their moral and material values. This symbiotic relationship is the rationale of taxation
and should dispel the erroneous notion that it is an arbitrary method of exaction by
those in the seat of power.

But even as we concede the inevitability and indispensability of taxation, it is a

requirement in all democratic regimes that it be exercised reasonably and in accordance
with the prescribed procedure. If it is not, then the taxpayer has a right to complain and
the courts will then come to his succor. For all the awesome power of the tax collector,
he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that
the law has not been observed.142

VIII

The Tax Code includes remedies for erroneous collection and overpayment of taxes.
Under Sections 229 and 204(C) of the Tax Code, a taxpayer may seek recovery of
erroneously paid taxes within two (2) years from date of payment:

SEC. 229. Recovery of tax Erroneously or Illegally Collected. — No suit or proceeding

shall be maintained in any court for the recovery of any national internal revenue tax

949
hereafter alleged to have been erroneously or illegally assessed or collected, or of any
penalty claimed to have been collected without authority, of any sum alleged to have
been excessively or in any manner wrongfully collected, until a claim for refund or credit
has been duly filed with the Commissioner; but such suit or proceeding may be
maintained, whether or not such tax, penalty, or sum has been paid under protest or
duress.

In any case, no such suit or proceeding shall be filed after the expiration of two (2) years
from the date of payment of the tax or penalty-regardless of any supervening case that
may arise after payment: Provided, however, That the Commissioner may, even without
a written claim therefor, refund or credit any tax, where on the face of the return upon
which payment was made, such payment appears clearly to have been erroneously
paid.

....

SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit

Taxes. — The Commissioner may -

...

(C) Credit or refund taxes erroneously or illegally received or penalties imposed without
authority, refund the value of internal revenue stamps when they are returned in good
condition by the purchaser, and, in his discretion, redeem or change unused stamps
that have been rendered unfit for use and refund their value upon proof of destruction.
No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in
writing with the Commissioner a claim for credit or refund within two (2) years after the
payment of the tax or penalty: Provided, however, That a return filed showing an
overpayment shall be considered as a written claim for credit or refund.

A Tax Credit Certificate validly issued under the provisions of this Code may be applied
against any internal revenue tax, excluding withholding taxes, for which the taxpayer is
directly liable. Any request for conversion into refund of unutilized tax credits may be
allowed, subject to the provisions of Section 230 of this Code: Provided, That the
original copy of the Tax Credit Certificate showing a creditable balance is surrendered
to the appropriate revenue officer for verification and cancellation: Provided, further,
That in no case shall a tax refund be given resulting from availment of incentives
granted pursuant to special laws for which no actual payment was made.

The Commissioner shall submit to the Chairmen of the Committee on Ways and Means
of both the Senate and House of Representatives, every six (6) months, a report on the
exercise of his powers under this Section, stating therein the following facts and
information, among others: names and addresses of taxpayers whose cases have been
the subject of abatement or compromise; amount involved; amount compromised or
abated; and reasons for the exercise of power: Provided, That the said report shall be
presented to the Oversight Committee in Congress that shall be constituted to

950
determine that said powers are reasonably exercised and that the Government is not
unduly deprived of revenues.

In G.R. No. 205045, the Court of Tax Appeals En Banc ruled that "San Mig Light" is a
new brand and not a variant of an existing brand. Accordingly, it ordered the refund of
erroneously collected excise taxes on "San Mig Light" products in the amount of
P926,169,056.74 for the period of December 1, 2005 to July 31, 2007. 143

In G.R. No. 205723, the Court of Tax Appeals En Banc found proper the refund of
erroneously collected excise taxes on "San Mig Light" products in the amount of
P781,514,772.56 for the period of February 2, 2004 to November 30, 2005. 144 It referred
to, and agreed with, the findings of the Court-commissioned Independent Certified
Public Accountant Normita L. Villaruz on reaching this amount. 145 The Court of Tax
Appeals also found, from the records, that respondent timely filed its administrative
claim for refund on December 28, 2005, and its judicial claim on January 31, 2006. 146

This Court accords the highest respect to the factual findings of the Court of Tax
Appeals. We recognize its developed expertise on the subject as it is the court
dedicated solely to considering tax issues, unless there is a showing of abuse in the
exercise of authority.147 We find no reason to overturn the factual findings of the Court of
Tax Appeals on the amounts allowed for refund.

WHEREFORE, the Petitions are DENIED. The assailed Decisions and Resolutions of

the Court of Tax Appeals En Banc in CTA Case Nos. 7052, 7053, 7405, and 7708
are AFFIRMED.

SO ORDERED.

THIRD DIVISION

G.R. No. 179786               July 24, 2013

JOSIELENE LARA CHAN, Petitioner,

vs.
JOHNNY T. CHAN, Respondent.

DECISION

ABAD, J.:

This case is about the propriety of issuing a subpoena duces tecum for the production
and submission in court of the respondent husband's hospital record in a case for
declaration of nullity of marriage where one of the issues is his mental fitness as a
husband.

The Facts and the Case

951
On February 6, 2006 petitioner Josielene Lara Chan (Josielene) filed before the
Regional Trial Court (RTC) of Makati City, Branch 144 a petition for the declaration of
nullity of her marriage to respondent Johnny Chan (Johnny), the dissolution of their
conjugal partnership of gains, and the award of custody of their children to her.
Josielene claimed that Johnny failed to care for and support his family and that a
psychiatrist diagnosed him as mentally deficient due to incessant drinking and
excessive use of prohibited drugs. Indeed, she had convinced him to undergo hospital
confinement for detoxification and rehabilitation.

Johnny resisted the action, claiming that it was Josielene who failed in her wifely duties.
To save their marriage, he agreed to marriage counseling but when he and Josielene
got to the hospital, two men forcibly held him by both arms while another gave him an
injection. The marriage relations got worse when the police temporarily detained
Josielene for an unrelated crime and released her only after the case against her
ended. By then, their marriage relationship could no longer be repaired.

During the pre-trial conference, Josielene pre-marked the Philhealth Claim Form 1 that
Johnny attached to his answer as proof that he was forcibly confined at the
rehabilitation unit of a hospital. The form carried a physician’s handwritten note that
Johnny suffered from "methamphetamine and alcohol abuse." Following up on this
point, on August 22, 2006 Josielene filed with the RTC a request for the issuance of a
subpoena duces tecum addressed to Medical City, covering Johnny’s medical records
when he was there confined. The request was accompanied by a motion to "be allowed
to submit in evidence" the records sought by subpoena duces tecum. 2

Johnny opposed the motion, arguing that the medical records were covered by
physician-patient privilege. On September 13, 2006 the RTC sustained the opposition
and denied Josielene’s motion. It also denied her motion for reconsideration, prompting
her to file a special civil action of certiorari before the Court of Appeals (CA) in CA-G.R.
SP 97913, imputing grave abuse of discretion to the RTC.

On September 17, 2007 the CA3 denied Josielene’s petition. It ruled that, if courts were
to allow the production of medical records, then patients would be left with no assurance
that whatever relevant disclosures they may have made to their physicians would be
kept confidential. The prohibition covers not only testimonies, but also affidavits,
certificates, and pertinent hospital records. The CA added that, although Johnny can
waive the privilege, he did not do so in this case. He attached the Philhealth form to his
answer for the limited purpose of showing his alleged forcible confinement.

Question Presented

The central question presented in this case is:

Whether or not the CA erred in ruling that the trial court correctly denied the issuance of
a subpoena duces tecum covering Johnny’s hospital records on the ground that these
are covered by the privileged character of the physician-patient communication.

952
 The Ruling of the Court

Josielene requested the issuance of a subpoena duces tecum covering the hospital
records of Johnny’s confinement, which records she wanted to present in court as
evidence in support of her action to have their marriage declared a nullity. Respondent
Johnny resisted her request for subpoena, however, invoking the privileged character of
those records. He cites Section 24(c), Rule 130 of the Rules of Evidence which reads:

SEC. 24. Disqualification by reason of privileged communication.— The following

persons cannot testify as to matters learned in confidence in the following cases:

xxxx

(c) A person authorized to practice medicine, surgery or obstetrics cannot in a civil case,
without the consent of the patient, be examined as to any advice or treatment given by
him or any information which he may have acquired in attending such patient in a
professional capacity, which information was necessary to enable him to act in that
capacity, and which would blacken the reputation of the patient.

The physician-patient privileged communication rule essentially means that a physician

who gets information while professionally attending a patient cannot in a civil case be
examined without the patient’s consent as to any facts which would blacken the latter’s
reputation. This rule is intended to encourage the patient to open up to the physician,
relate to him the history of his ailment, and give him access to his body, enabling the
physician to make a correct diagnosis of that ailment and provide the appropriate cure.
Any fear that a physician could be compelled in the future to come to court and narrate
all that had transpired between him and the patient might prompt the latter to clam up,
thus putting his own health at great risk.4

1. The case presents a procedural issue, given that the time to object to the admission
of evidence, such as the hospital records, would be at the time they are offered. The
offer could be made part of the physician’s testimony or as independent evidence that
he had made entries in those records that concern the patient’s health problems.

Section 36, Rule 132, states that objections to evidence must be made after the offer of
such evidence for admission in court. Thus:

SEC. 36. Objection.— Objection to evidence offered orally must be made immediately
after the offer is made.

Objection to a question propounded in the course of the oral examination of a witness

shall be made as soon as the grounds therefor shall become reasonably apparent.

An offer of evidence in writing shall be objected to within three (3) days after notice of
the offer unless a different period is allowed by the court.

953
In any case, the grounds for the objections must be specified.

Since the offer of evidence is made at the trial, Josielene’s request for subpoena duces
tecum is premature. She will have to wait for trial to begin before making a request for
the issuance of a subpoena duces tecum covering Johnny’s hospital records. It is when
those records are produced for examination at the trial, that Johnny may opt to object,
not just to their admission in evidence, but more so to their disclosure. Section 24(c),
Rule 130 of the Rules of Evidence quoted above is about non-disclosure of privileged
matters.

2. It is of course possible to treat Josielene’s motion for the issuance of a subpoena

duces tecum covering the hospital records as a motion for production of documents, a
discovery procedure available to a litigant prior to trial. Section 1, Rule 27 of the Rules
of Civil Procedure provides:

SEC. 1. Motion for production or inspection; order.— Upon motion of any party showing
good cause therefor, the court in which an action is pending may (a) order any party to
produce and permit the inspection and copying or photographing, by or on behalf of the
moving party, of any designated documents, papers, books, accounts, letters,
photographs, objects or tangible things, not privileged, which constitute or contain
evidence material to any matter involved in the action and which are in his possession,
custody or control; or (b) order any party to permit entry upon designated land or other
property in his possession or control for the purpose of inspecting, measuring,
surveying, or photographing the property or any designated relevant object or operation
thereon. The order shall specify the time, place and manner of making the inspection
and taking copies and photographs, and may prescribe such terms and conditions as
are just. (Emphasis supplied)

But the above right to compel the production of documents has a limitation: the
documents to be disclosed are "not privileged."

Josielene of course claims that the hospital records subject of this case are not
privileged since it is the "testimonial" evidence of the physician that may be regarded as
privileged. Section 24(c) of Rule 130 states that the physician "cannot in a civil case,
without the consent of the patient, be examined" regarding their professional
conversation. The privilege, says Josielene, does not cover the hospital records, but
only the examination of the physician at the trial.

To allow, however, the disclosure during discovery procedure of the hospital records—
the results of tests that the physician ordered, the diagnosis of the patient’s illness, and
the advice or treatment he gave him—would be to allow access to evidence that is
inadmissible without the

patient’s consent. Physician memorializes all these information in the patient’s records.
Disclosing them would be the equivalent of compelling the physician to testify on

954
privileged matters he gained while dealing with the patient, without the latter’s prior
consent.

3. Josielene argues that since Johnny admitted in his answer to the petition before the
RTC that he had been confined in a hospital against his will and in fact attached to his
answer a Philhealth claim form covering that confinement, he should be deemed to
have waived the privileged character of its records. Josielene invokes Section 17, Rule
132 of the Rules of Evidence that provides:

SEC. 17. When part of transaction, writing or record given in evidence, the remainder
admissible.— When part of an act, declaration, conversation, writing or record is given
in evidence by one party, the whole of the same subject may be inquired into by the
other, and when a detached act, declaration, conversation, writing or record is given in
evidence, any other act, declaration, conversation, writing or record necessary to its
understanding may also be given in evidence.1âwphi1

But, trial in the case had not yet begun. Consequently, it cannot be said that Johnny had
already presented the Philhealth claim form in evidence, the act contemplated above
which would justify Josielene into requesting an inquiry into the details of his hospital
confinement. Johnny was not yet bound to adduce evidence in the case when he filed
his answer. Any request for disclosure of his hospital records would again be
premature.

For all of the above reasons, the CA and the RTC were justified in denying Josielene
her request for the production in court of Johnny’s hospital records.

ACCORDINGLY, the Court DENIES the petition and AFFIRMS the Decision of the
Court of Appeals in CA-G.R. SP 97913 dated September 17, 2007.

SO ORDERED.

THIRD DIVISION

January 17, 2018

G.R. No. 233395

NORLINA G. SIBAYAN, Petitioner
vs.
ELIZABETH O. ALDA, through her Attorney-in-Fact, RUBY O. ALDA, Respondent

DECISION

VELASCO, JR., J.:

Nature of the Case

955
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court assailing the October 25, 2016 Decision 1 and the August 9, 2017 Resolution2 of
the Court of Appeals (CA) in CA-G.R. SP No. 137921. The challenged rulings affirmed
the June 9, 2014 and August 26, 2014 Orders 3 of the Office of the General Counsel and
Legal Services of the Bangko Sentral ng Pilipinas (OGCLS-BSP) denying herein
petitioner Norlina G. Sibayan's (Norlina) resort to modes of discovery in connection with
an administrative case filed against her.

The Facts

The case stemmed from a letter-complaint filed by respondent Elizabeth O. Alda

(Elizabeth), through her daughter and attorney-in-fact, Ruby O. Alda (Ruby), with the
Office of Special Investigation of the Bangko Sentral ng Pilipinas (OSI-BSP). Elizabeth
charged Norlina, who was then the Assistant Manager and Marketing Officer of Banco
De OroUnibank, Inc. (BDO) San Fernando, La Union Branch, with unauthorized
deduction of her BDO Savings Account with Account Number 0970097875, as well as
for failure to post certain check deposits to the said account. 4

The complaint alleged that while Elizabeth did not make any withdrawals from her BDO
savings account from 2008-2009, its balance of One Million Seventy One Thousand
Five Hundred Sixty One and 73/100 Pesos (₱l,071,561.73) as of July 22, 2008 was
reduced to only Three Hundred Thirty Four and 47/100 Pesos (₱334.47) by October 31,
2008.5

Further, Elizabeth claimed that two crossed manager's checks, to wit: 1) United Coconut
Planters Bank (UCPB) Check No. 0000005197 in the amount of Two Million Seven
Hundred Forty Three Thousand Three Hundred Forty Six Pesos (₱2,743,346) issued to
her by Ferdinand Oriente (Ferdinand), and 2) Bank of the Philippine Islands (BPI)
Check No. 0000002688 in the amount of Two Million Two Hundred Thirty Seven
Thousand Three Hundred Forty One and 89/100 Pesos (₱2,237,341.89) issued to her
by Jovelyn Oriente (Jovelyn) were not posted on her BDO savings account despite the
fact that the said checks were deposited on October 27, 2008. 6

As for Norlina's defense, she argued that the charges were only meant to harass her
and BDO as the latter previously filed a criminal case against Elizabeth, Ruby, and their
·cohorts, for theft, estafa, and violation of Republic Act No. 8484, otherwise known as
the Access Devise Regulation Act of 1998.7 The said case proceeded from the acts of
Elizabeth and her codefendants therein of withdrawing and laundering various amounts
erroneously credited by BDO to Ruby's Visa Electron Fast Card Account (Fastcard) with
Account Number 4559-6872-3866-2036, which Elizabeth opened for and in the name of
Ruby on April 21, 2006.8

According to Norlina, when BDO merged with Equitable PCI Bank in May 2007, the
former acquired all of the latter's accounts, products and services, including the
Fastcard, which functions the same way as a regular Automated Teller Machine (ATM)
card but with an added feature that allows its holders to withdraw local currencies from

956
ATMs overseas bearing the Visa Plus logo. Thus, using her Fastcard at various ATMs
in Dubai, United Arab Emirates, where she was based, Ruby was able to withdraw the
funds sent to her by Elizabeth, who was then working in Taiwan. 9

Sometime in September 2008, BDO, however, discovered that from November 15, 2007
to September 20, 2008, Ruby was able to withdraw the total amount of Sixty Four
Million Two Hundred Twenty Nine Thousand Two Hundred Ninety Seven and 50/100
Pesos (₱64,229,297.50) despite Elizabeth only having remitted the amount of One
Million Six Hundred Forty Five Thousand Four Hundred Eighty Six Pesos (₱l,645,486).
BDO conducted an investigation and discovered that Ruby learned of the erroneous
crediting of funds as early as November 2007 and utilized BDO's system error to
successfully launder money by transferring funds withdrawn from Ruby's Fastcard
Account to various bank accounts in the Philippines under the names of Elizabeth, Ruby
and their friends and relatives.10

The foregoing facts were allegedly admitted by Ruby, as evidenced by her execution
before the Philippine Consulate in Dubai of certain documents in BDO's favor, to wit:

1. Undertaking with Authorization11 dated October 21, 2008 promising to pay BDO the
total amount of money erroneously credited to her Fastcard account, including all
charges, and authorizing BDO to setoff and apply as payment whatever monies or
properties to her credit or account on the books of BDO or any other entity; .

2. Special Power of Attomey12 dated October 22, 2008 authorizing BDO to setoff and
apply any money or other property on the books of BDO and/or other entities, banks,
and financial institutions under her mime or account for the payment of her obligation;
and

3. Deed of Dation in Payment13 dated October 22, 2008 acknowledging her debt to BDO
in the amount of Php62,670,681.60 and conveying to BDO all of her interests, rights
and title in the properties described under the List of Properties 14 attached in the said
Deed

Included in the afore-stated List of Properties purportedly ceded by Ruby to BDO are
the following bank accounts:

Bank/ Account Name

Account Number
BDO
Elizabeth O. Alda
Account No.0970097875
UCPB
Ferdinand Oriente
Account No. 2351047157
BPI
Jovelyn Oriente
Account No. 85890237923

957
Pursuant to the foregoing documents executed by Ruby, BDO debited Elizabeth's
savings account and the proceeds thereof were applied to Ruby's outstanding obligation
to BDO. Thereafter, Ferdinand and Jovelyn, who are relatives of Elizabeth and Ruby,
went to BDO San Fernando, La Union branch and presented to Norlina the above-
mentioned UCPB and BPI manager's checks, the proceeds of which were also
purportedly applied as payment by Ruby to BDO.

After the parties' submission of their respective pleadings, the OSIBSP issued a
Resolution15 dated June 13, 2012 finding a prima facie case against Norlina for
Conducting Business in an Unsafe or Unsound Manner under Section 56.2 16of
Republic Act No. 8791 ("The General Banking Law of 2000"), punishable under Section
37 of Republic Act No. 7653 ("The New Central Bank Act"). The OGCLS-BSP then
directed Norlina to submit her sworn answer to the formal charge filed by the OSI-BSP.

Meanwhile, on October 19, 2012, Norlina filed a Request to Answer Written

Interrogatories17 addressed to Elizabeth, Jovelyn, and Ferdinand. Norlina also filed a
Motion for Production of Documents18 praying that UCPB and BPI be ordered to
produce and allow the inspection and copying or photographing of the Statements of
Account pertaining to UCPB Account No. 2351047157 and BPI Account No.
85890237923, respectively, alleging that Ruby is the legal and beneficial owner of both
accounts.

Elizabeth, through Ruby, and Ferdinand filed their respective Objections 19 to Norlina's
request, while Jovelyn's counsel filed a Manifestation 20 stating that the former could not
submit her answer since she is working overseas.

OGCLS-BSP Ruling

In its June 9, 2014 Order,21 the OGCLS-BSP denied Norlina's motions, ruling as follows:

Motion for Production of Bank Documents

xxxx

The respondent also alleged that the examination is exempted from the rule on secrecy
of bank deposit because the money deposited in the subject bank accounts is the
subject matter of litigation. This Office rules otherwise. The present action is an
administrative proceeding aimed at determining respondent's liability, if any, for violation
of banking laws. A deposit account may be examined or looked into if it is the subject
matter of a pending litigation. The phrase "subject matter of the action" pertains to
physical facts, things, real or personal, money, lands, chattels, and the like by which the
suit is prosecuted. It does not refer to the delict or wrong committed by the defendant.

Hence, the Motion for Production of Bank Documents filed by the respondent is
DENIED.

958
Request to Answer Written Interrogatories

With respect to respondent's Request to Answer Written Interrogatories addressed to

Mr. Ferdinand Oriente, Ms. Jovelyn Oriente, and Ms. Elizabeth Alda, the same is
DENIED due to the fact that the aforementioned persons are all witnesses for the
prosecution. Respondent will be afforded the right to confront these witnesses during
the presentation of the prosecution's evidence. Moreover, this Office cannot compel
Elizabeth Alda and Jovelyn Oriente to answer the written interrogatories since they are
out of the country as manifested by the prosecution.

SO ORDERED.22

Norlina's motion for reconsideration was likewise denied by the OGCLS-BSP in its
August 26, 2014 Order.23

Assailing that the OGCLS-BSP committed grave abuse of discretion in denying her
motions, Norlina filed a petition for certiorari before the CA.

CA Ruling

In its October 25, 2016 Decision, the CA upheld the OGCLS-BSP's rulings, viz:

WHEREFORE, premises considered, the Petition for Certiorari is DENIED. The Orders

of Public Respondent dated June 9, 2014 and August 26, 2014 in Administrative Case
No. 2012-047 are hereby AFFIRMED.

SO ORDERED.24

The CA found that the OGCLS-BSP did not commit grave abuse of discretion when it
denied Norlina's motion for the production of bank documents and requests to answer
written interrogatories. It highlighted the fact that the proceedings before the OGCLS-
BSP is summary in nature and to grant Norlina's motions would merely delay the
resolution of the case. The CA ruled that Norlina's persistence to utilize modes of
discovery will be futile since the information she supposedly seeks to elicit are
sufficiently contained in the pleadings and attachments submitted by the parties to aid
the OGCLS-BSP in resolving the case before it.25

Norlina then filed a motion for reconsideration but the same was denied by the CA in its
August 9, 2017 Resolution.

Hence, the instant petition.

The Issue

Norlina anchors her plea for the reversal of the assailed Decision on the following
grounds:26

959
I.

THERE EXISTS NO SUBSTANTIAL GROUNDS FOR THE DENIAL OF PETITIONER

SIBAYAN' S REQUESTS TO ANSWER WRITTEN INTERROGATORIES.

A. REQUESTS TO ANSWER WRITTEN INTERROGATORIES MAY BE

SERVED ON ANY PERSON, INCLUDING WITNESSES FOR THE
PROSECUTION, SUCH AS RESPONDENT ELIZABETH, FERDINAND
AND JOVELYN.

B. PETITIONER SIBAYAN'S REQUESTS FOR WRITTEN

INTERROGATORIES ARE RELEVANT AND MATERIAL TO THE
CASE A QUO.

II.

PETITIONER SIBAYAN IS ENTITLED TO THE PRODUCTION OF BANK

DOCUMENTS PURSUANT TO SECTION 1, RULE 27 OF THE RULES OF COURT.

Succinctly put, the pivotal issue to be resolved is whether or not grave abuse of
discretion can be attributed to the OGCLS-BSP in denying Norlina's resort to modes of
discovery.

The Court's Ruling

We find no error in the ruling of the Court of Appeals.

Technical rules of procedure and evidence are not strictly adhered to in administrative
investigations

Throughout the petition, Norlina persistently relies and quotes the provisions of the
Rules of Court27 on modes of discovery and argues her right to utilize the same. To her
eyes, the denial of her requests to answer written interrogatories and motion for
production of bank documents deprived her of availing of the rightful remedies which
shall bring to the fore material and relevant facts for the OGCLS-BSP's
consideration.28 Thus, Norlina postulates that the OGCLS-BSP would now be forced to
resolve the case against her in an arbitrary manner. 29

We disagree.

At the outset, it bears stressing that the proceeding involved in the present case is
administrative in nature. Although trial courts are enjoined to observe strict enforcement
of the rules on evidence, the same does not hold true for administrative bodies. The
Court has consistently held that technical rules applicable to judicial proceedings are not
exact replicas of those in administrative investigations. 30 Recourse to discovery
procedures as sanctioned by the Rules of Court is then not mandatory for the

960
OGCLSBSP. Hence, We cannot subscribe to Norlina's tenacious insistence for the
OGCLS-BSP to strictly adhere to the Rules of Court so as not to purportedly defeat her
rights.

Furthermore, it is important to emphasize that the nature of the proceedings before the
OGCLS-BSP is summary in nature. Section 3, Rule I of the BSP Rules of Procedure on
Administrative Cases,31 states:

Section 3. Nature of Proceedings. - The proceedings under these Rules shall be

summary in nature and shall be conducted without necessarily adhering to the technical
rules of procedure and evidence applicable to judicial trials. Proceedings under these
Rules shall be confidential and shall not be subject to disclosure to third parties, except
as may be provided under existing laws.

The rationale and purpose of the summary nature of administrative proceedings is to

achieve an expeditious and inexpensive determination of cases without regard to
technical rules.32 As such, in proceedings before administrative or quasi-judicial bodies,
like the OGCLS-BSP, decisions may be reached on the basis of position papers or
other documentary evidence only. They are not bound by technical rules of procedure
and evidence.33 To require otherwise would negate the summary nature of the
proceedings which could defeat its very purpose.

In this light, OGCLS-BSP did not gravely abuse its discretion in denying Norlina' s
request for written interrogatories as the allowance of the same would not practically
hasten, as it would in fact delay, the early disposition of the instant case. We agree with
the CA's discussion on this matter, to wit:

Further to grant the written interrogatories would merely delay the resolution of the issue
brought before [the OGCLS-BSP]. The fraud purportedly executed by [Elizabeth], along
with her daughter, her attorney-in-fact, assuming as true, is plain and clear from the
records of the case, specifically the Undertaking and Authorization allegedly executed
by Ruby admitting the erroneous withdrawal of various amounts from her peso FAST
CARD account, to wit:

xxxx

In Our minds, the defense of fraud[,] is sufficiently contained in the pleadings and
attachments of the parties as to aid the Public Respondent in resolving the case before
it.

We note that at the time of resolution of [Norlina's] motions, Jovelyn Oriente, one of the
persons requested to answer the written interrogatories, was already out of the country.
While her deposition may nevertheless be taken outside of the country, the same will
definitely delay the resolution of an otherwise summary case. 34

961
Additionally, the denial of the motion for production of bank documents pertaining to 1)
UCPB Account No. 2351047157 and 2) BPI Account No. 85890237923 35 is justified as
the bank accounts sought to be examined are privileged. Section 2 of Republic Act No.
1405, otherwise known as The Law on Secrecy of Bank Deposit, provides:

Section 2. All deposits of whatever nature with banks or banking institutions in the
Philippines including investments in bonds issued by the Government of the Philippines,
its political subdivisions and its instrumentalities, are hereby considered as of an
absolutely confidential nature and may not be examined, inquired or looked into by any
person, government official, bureau or office, except upon written permission of the
depositor, or in cases of impeachment, or upon order of a competent court in cases of
bribery or dereliction of duty of public officials, or in cases where the money deposited
or invested is the subject matter of the litigation.

Norlina contends, however, that Ruby is the legal and beneficial owner of the foregoing
accounts and that the latter gave her permission to look into the said accounts as stated
in the Undertaking with Authorization,36 Special Power of Attorney,37 and Deed of Dation
in Payment38 executed by her in BDO's favor.

We are not convinced.

Records show that the account holder or depositor of UCPB Account No. 2351047157
is Ferdinand Oriente while the account holder or depositor of BPI Account No.
85890237923 is Jovelyn Oriente.39 Perforce, the documents executed by Ruby
purportedly granting BDO access to the foregoing accounts do not equate to Ferdinand
and Jovelyn's permissions. Based on this alone, the denial for Norlina to gain access to
these bank accounts is warranted.

Clearly then, the Requests to Answer Written Interrogatories and Motion for Production
of Documents were both unnecessary and improper.

Norlina was not denied due process of law

Norlina bemoans that by suppressing her right to avail of discovery measures, the
OGCLS-BSP violated her right to due process. She maintains that the administrative
character of the proceedings involved is not sufficient to defeat such right. 40

Norlina's claims are without merit.

Administrative due process cannot be fully equated with due process in its strict judicial
sense. It is enough that the party is given the chance to be heard before the case
against him is decided.41 This was further expounded in the recent case of Prudential
Bank v. Rapanot,42 viz:

"The essence of due process is to be heard." In administrative proceedings, due

process entails "a fair and reasonable opportunity to explain one's side, or an

962
opportunity to seek a reconsideration of the action or ruling complained of
Administrative due process cannot be fully equated with due process in its strict judicial
sense, for in the former a formal or trial-type hearing is not always necessary, and
technical rules of procedure are not strictly applied."

As established by the facts, Norlina was afforded the opportunity to be heard and to
explain her side before the OGCLS-BSP. She was allowed to submit her answer and all
documents in support of her defense. In fact, her defense of fraud committed by
Elizabeth and Ruby is sufficiently contained in the pleadings and attachments submitted
by the parties to aid the OGCLSBSP in resolving the case before it.

Evidently, the information sought to be elicited from the written interrogatories, as well
as the bank documents, are already available in the records of the case. As correctly
pointed out by the CA, the grant of Norlina's motions would merely delay the resolution
of the case. In fine, the OGCLS-BSP's issuance of the assailed orders did not violate
Norlina' s right to due process and was in accord with the summary nature of
administrative proceedings before the BSP. The opportunity accorded to Norlina was
enough to comply with the requirements of due process in an administrative case. The
formalities usually attendant in court hearings need not be present in an administrative
investigation, as long as the parties are heard and given the opportunity to adduce their
respective sets of evidence.43

Further, even assuming that the pleadings and attachments on record are not sufficient
for the just resolution of the case against Norlina, the facts, arguments, and defenses
put forward in the pleadings of the parties, as well as the information Norlina seeks to
obtain from Elizabeth, Ruby and other witnesses, may be brought to light in a
clarificatory hearing under Section 7 of the BSP Rules of Procedure on Administrative
Cases,44 to wit:

Section 7. Hearing. - After the submission by the parties of their position papers, the
Hearing Panel or Hearing Officer shall determine whether or not there is a need for a
hearing for the purpose of cross-examination of the affiant(s).

If the Hearing Panel or Hearing Officer finds no necessity for conducting a hearing, he
shall issue an Order to that effect.

In cases where the Hearing Panel or Hearing Officer deems it necessary to allow the
parties to conduct cross-examination, the case shall be set for hearing. The affidavits of
the parties and their witnesses shall take the place of their direct testimony.

All told, the denial of Norlina's motions to resort to modes of discovery did not, and will
definitely not, equate to a denial of her right to due process.1âwphi1 It must be stressed
that Norlina's fear of being deprived of such right and to put up a proper defense is more
imagined than real. Norlina was properly notified of the charges against her and she
was given a reasonable opportunity to answer the accusations against her. As correctly

963
ruled by the lower tribunals, Norlina's attempt to resort to modes of discovery is frivolous
and would merely cause unnecessary delay in the speedy disposition of the case.

Thus, no error or grave abuse of discretion can be ascribed to the OGCLS-BSP in not
granting Norlina's plea for written interrogatories and production of bank documents.
Absent any showing that the OGCLS-BSP had acted without jurisdiction or in excess
thereof or with such grave abuse of discretion as would amount to lack of jurisdiction, as
in the present case, its orders dispensing with the need to resort to modes of discovery
may not be corrected by certiorari.

WHEREFORE, in view of the foregoing, the petition is hereby DENIED. The Decision
dated October 25, 2016 and the Resolution dated August 9, 2017 of the Court of
Appeals in CA-G.R. SP No. 137921 are hereby AFFIRMED.

SO ORDERED.

RULE 33. DEMURER TO EVIDENCE

THIRD DIVISION
[ G.R. No. 173008, February 22, 2012 ]
NENITA GONZALES, SPOUSES GENEROSA GONZALES AND RODOLFO
FERRER, SPOUSES FELIPE GONZALES AND CAROLINA SANTIAGO, SPOUSES
LOLITA GONZALES AND GERMOGENES GARLITOS, SPOUSES DOLORES
GONZALES AND FRANCISCO COSTIN, SPOUSES CONCHITA GONZALES AND
JONATHAN CLAVE, AND SPOUSES BEATRIZ GONZALES AND ROMY CORTES,
REPRESENTED BY THEIR ATTORNEY-IN-FACT AND CO-PETITIONER NENITA
GONZALES, PETITIONERS, VS. MARIANO BUGAAY AND LUCY BUGAAY,
SPOUSES ALICIA BUGAAY AND FELIPE BARCELONA, CONEY “CONIE”
BUGAAY, JOEY GATAN, LYDIA BUGAAY, SPOUSES LUZVIMINDA BUGAAY AND
REY PAGATPATAN AND BELEN BUGAAY, RESPONDENTS.

DECISION
PERLAS-BERNABE, J.:
Assailed in this Petition for Review on Certiorari under Rule 45 is the Decision [1] of the
Court of Appeals (CA) dated March 23, 2006 in CA-G.R. SP No. 91381 as well as the
Resolution[2] dated June 2, 2006 dismissing petitioners' motion for reconsideration. The
CA reversed and set aside the assailed Orders[3] of the Regional Trial Court (RTC) of
Lingayen, Pangasinan, Branch 39, dated April 13, 2005 and August 8, 2005,
respectively, in Civil Case No. 16815, denying the demurrer to evidence filed by herein
respondents and instead dismissed petitioners' complaint.

The Facts

The deceased spouses Bartolome Ayad and Marcelina Tejada (“Spouses Ayad”) had
five (5) children: Enrico, Encarnacion, Consolacion, Maximiano and Mariano. The latter,
who was single, predeceased his parents on December 4, 1943. Marcelina died in

964
September 1950 followed by Bartolome much later on February 17, 1964.

Enrico has remained single. Encarnacion died on April 8, 1966 and is survived by her
children, Nenita Gonzales, Generosa Gonzales, Felipe Gonzales, Lolita Gonzales,
Dolores Gonzales, Conchita Gonzales and Beatriz Gonzales, the petitioners in this
case. Consolacion, meanwhile, was married to the late Imigdio Bugaay. Their children
are Mariano Bugaay, Alicia Bugaay, Amelita Bugaay, Rodolfo Bugaay, Letecia Bugaay,
Lydia Bugaay, Luzviminda Bugaay and Belen Bugaay, respondents herein. Maximiano
died single and without issue on August 20, 1986. The spouses of petitioners, except
Nenita, a widow, and those of the respondents, except Lydia and Belen, were joined as
parties in this case.

In their Amended Complaint[4] for Partition and Annulment of Documents with Damages

dated February 5, 1991 against Enrico, Consolacion and the respondents, petitioners
alleged, inter alia, that the only surviving children of the Spouses Ayad are Enrico and
Consolacion, and that during the Spouses Ayad's lifetime, they owned several
agricultural as well as residential properties.

Petitioners averred that in 1987, Enrico executed fraudulent documents covering all the
properties owned by the Spouses Ayad in favor of Consolacion and respondents,
completely disregarding their rights. Thus, they prayed, among others, for the partition
of the Spouses Ayad's estate, the nullification of the documents executed by Enrico,
and the award of actual, moral and exemplary damages, as well as attorney's fees.

As affirmative defenses[5], Enrico, Consolacion and respondents claimed that petitioners

had long obtained their advance inheritance from the estate of the Spouses Ayad, and
that the properties sought to be partitioned are now individually titled in respondents'
names.

After due proceedings, the RTC rendered a Decision [6] dated November 24, 1995,
awarding one-fourth (¼) pro-indiviso share of the estate each to Enrico, Maximiano,
Encarnacion and Consolacion as the heirs of the Spouses Ayad, excluding Mariano
who predeceased them. It likewise declared the Deed of Extrajudicial Settlement and
Partition executed by Enrico and respondents, as well as all other documents and
muniments of title in their names, as null and void. It also directed the parties to submit
a project of partition within 30 days from finality of the Decision.

On December, 13, 1995,[7] respondents filed a motion for reconsideration and/or new

trial from the said Decision. On November 7, 1996, the RTC, through Judge Eugenio
Ramos, issued an Order which reads: “in the event that within a period of one (1) month
from today, they have not yet settled the case, it is understood that the motion for
reconsideration and/or new trial is submitted for resolution without any further
hearing.”[8]

Without resolving the foregoing motion, the RTC, noting the failure of the parties to
submit a project of partition, issued a writ of execution [9] on February 17, 2003 giving

965
them a period of 15 days within which to submit their nominees for commissioner, who
will partition the subject estate.

Subsequently, the RTC, through then Acting Presiding Judge Emilio V. Angeles,
discovered the pendency of the motion for reconsideration and/or new trial and set the
same for hearing. In the Order[10] dated August 29, 2003, Judge Angeles granted
respondents' motion for reconsideration and/or new trial for the specific “purpose of
receiving and offering for admission the documents referred to by the [respondents].” [11]

However, instead of presenting the documents adverted to, consisting of the documents
sought to be annulled, respondents demurred [12] to petitioners' evidence on December
6, 2004 which the RTC, this time through Presiding Judge Dionisio C. Sison, denied in
the Order[13] dated April 13, 2005 as well as respondents' motion for reconsideration in
the August 8, 2005 Order.[14]

Aggrieved, respondents elevated their case to the CA through a petition for certiorari,
imputing grave abuse of discretion on the part of the RTC in denying their demurrer
notwithstanding petitioners' failure to present the documents sought to be annulled. On
March 23, 2006, the CA rendered the assailed Decision reversing and setting aside the
Orders of the RTC disposing as follows:

“WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the assailed

Orders of the trial court dated April 13, 2006 and August 8, 2005 are hereby both SET
ASIDE and in lieu thereof, another Order is hereby issued DISMISSING the Complaint,
as amended.

No pronouncement as to costs.

SO ORDERED.”[15]

In dismissing the Amended Complaint, the appellate court ratiocinated in the following
manner:

“In the light of the foregoing where no sufficient evidence was presented to grant the
reliefs being prayed for in the complaint, more particularly the absence of the
documents sought to be annulled as well as the properties sought to be partitioned,
common sense dictates that the case should have been dismissed outright by the trial
court to avoid unnecessary waste of time, money and efforts.” [16]

Subsequently, the CA denied petitioners' motion for reconsideration in its

Resolution[17] dated June 2, 2006.

The Issues

In this petition for review, petitioners question whether the CA's dismissal of the
Amended Complaint was in accordance with law, rules of procedure and jurisprudence.

966
The Ruling of the Court

The RTC Orders assailed before the CA basically involved the propriety of filing a
demurrer to evidence after a Decision had been rendered in the case.

Section 1, Rule 33 of the Rules of Court provides:

“SECTION 1. Demurrer to evidence. - After the plaintiff has completed the presentation
of his evidence, the defendant may move for dismissal on the ground that upon the
facts and the law the plaintiff has shown no right to relief. If his motion is denied, he
shall have the right to present evidence. If the motion is granted but on appeal the order
of dismissal was reversed he shall be deemed to have waived the right to present
evidence.”

The Court has previously explained the nature of a demurrer to evidence in the case
of Celino v. Heirs of Alejo and Teresa Santiago [18] as follows:

“A demurrer to evidence is a motion to dismiss on the ground of insufficiency of

evidence and is presented after the plaintiff rests his case. It is an objection by one of
the parties in an action, to the effect that the evidence which his adversary produced is
insufficient in point of law, whether true or not, to make out a case or sustain the issue.
The evidence contemplated by the rule on demurrer is that which pertains to the merits
of the case.”

In passing upon the sufficiency of the evidence raised in a demurrer, the court is merely
required to ascertain whether there is competent or sufficient proof to sustain the
judgment.[19] Being considered a motion to dismiss, thus, a demurrer to evidence must
clearly be filed before the court renders its judgment.

In this case, respondents demurred to petitioners' evidence after the RTC promulgated
its Decision. While respondents' motion for reconsideration and/or new trial was
granted, it was for the sole purpose of receiving and offering for admission the
documents not presented at the trial. As respondents never complied with the directive
but instead filed a demurrer to evidence, their motion should be deemed abandoned.
Consequently, the RTC's original Decision stands.

Accordingly, the CA committed reversible error in granting the demurrer and dismissing
the Amended Complaint a quo for insufficiency of evidence. The demurrer to evidence
was clearly no longer an available remedy to respondents and should not have been
granted, as the RTC had correctly done.

WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the
CA are SET ASIDE and the Orders of the RTC denying respondents' demurrer are
REINSTATED. The Decision of the RTC dated November 24, 1995 STANDS.

SO ORDERED.

967
 SECOND DIVISION

G.R. No. 176694, July 18, 2014

GMA NETWORK, INC., Petitioner, v. CENTRAL CATV, INC., Respondent.

DECISION

BRION, J.:

We resolve the challenge, under the standards of a Rule 45 petition for review, to the
decision1 dated November 14, 2006 and the resolution 2 dated February 15, 2007 of the
Court of Appeals (CA) in CA-G.R. SP No. 93439 affirming the order3 dated December
10, 2004 of the National Telecommunications Commission (NTC)4  that dismissed the
complaint of petitioner GMA Network, Inc. based on the motion to dismiss by way of
demurrer to evidence of respondent Central CATV, Inc.

THE FACTUAL ANTECEDENTS

Sometime in February 2000, the petitioner, together with the Kapisanan ng mga
Brodkaster ng Pilipinas, Audiovisual Communicators, Incorporated, Filipinas
Broadcasting Network and Rajah Broadcasting Network, Inc. (complainants), filed with
the NTC a complaint against the respondent to stop it from soliciting and showing
advertisements in its cable television (CATV) system, pursuant to Section 2 of
Executive Order (EO) No. 205.5 Under this provision, a grantee’s authority to operate a
CATV system shall not infringe on the television and broadcast markets.  The petitioner
alleged that the phrase “television and broadcast markets” includes the commercial or
advertising market.

In its answer, the respondent admitted the airing of commercial advertisement on its
CATV network but alleged that Section 3 of EO No. 436, which was issued by former
President Fidel V. Ramos on September 9, 1997, expressly allowed CATV providers to
carry advertisements and other similar paid segments provided there is consent from
their program providers.6

After the petitioner presented and offered its evidence, the respondent filed a motion to
dismiss by demurrer to evidence claiming that the evidence presented by the
complainants failed to show how the respondent’s acts of soliciting and/or showing
advertisements infringed upon the television and broadcast market. 7

THE NTC RULING

The NTC granted the respondent’s demurrer to evidence and dismissed the complaint.
It ruled that since EO No. 205 does not define “infringement,” EO No. 436 merely
clarified or filled-in the details of the term to mean that the CATV operators may show
advertisements, provided that they secure the consent of their program providers.  In
the present case, the documents attached to the respondent’s demurrer to evidence

968
showed that its program providers have given such consent.  Although the respondent
did not formally offer these documents as evidence, the NTC could still consider them
since they formed part of the records and the NTC is not bound by the strict application
of technical rules.8

The NTC added that since the insertion of advertisements under EO No. 436 would
result in the alteration or deletion of the broadcast signals of the consenting television
broadcast station, its ruling necessarily results in the amendment of these provisions. 
The second paragraph9 of Section 3 of EO No. 436 is deemed to amend the previous
provisional authority issued to the respondent, as well as Sections 6.2.1 and 6.4 of the
NTC’s Memorandum Circular (MC) 4-08-88.  Sections 6.2.1 and 6.4 require the CATV
operators within the Grade A or B contours of a television broadcast station to carry the
latter’s television broadcast signals in full, without alteration or deletion. This is known
as the “must-carry-rule.”10

With the denial of its motion for reconsideration, 11 the petitioner went to the CA, alleging
that the NTC committed grave procedural and substantive errors in dismissing the
complaint.

THE CA RULING

The CA upheld the NTC ruling. The NTC did not err in considering the respondent’s
pieces of evidence that were attached to its demurrer to evidence since administrative
agencies are not bound by the technical rules of procedure. 12

Due to the failure of EO No. 205 to define what constitutes “infringement,” EO No. 436
merely filled-in the details without expanding, modifying and/or repealing EO No. 205. 13 
The NTC was also correct in modifying or amending the must-carry rule under MC 4-08-
88 as the NTC merely implemented the directive of EO No. 436. 14

Hence, this present petition for review on certiorari.

THE PARTIES’ ARGUMENTS

On the procedural issues, the petitioner argues that the NTC erred in: (i) granting the
demurrer to evidence based only on the insufficiency of the complaint and not on the
insufficiency of evidence; and (ii) considering the evidence of the respondent in its
demurrer to evidence on top of the petitioner’s evidence. 15

On the substantive issue, the petitioner alleges that the NTC gravely erred in failing to
differentiate between EO No. 205, which is a law, and EO No. 436 which is merely an
executive issuance. An executive issuance cannot make a qualification on the clear
prohibition in the law, EO No. 205.16  In allowing infringement under certain conditions,
EO No. 436 overturned EO No. 205 which prohibits, without qualification, the
infringement on the markets of free TV networks, such as the petitioner.  In doing so,
the Executive arrogated upon itself the power of subordinate legislation that Congress
has explicitly reserved to the NTC.17

969
Too, in granting the demurrer to evidence, the NTC effectively revised EO No. 205,
contrary to the basic rule that in the exercise of quasi-legislative power, the delegate
cannot supplant and modify its enabling statute. 18

On the other hand, the respondent agrees with the CA that the NTC properly
considered the certifications attached to the respondent’s demurrer to evidence 19 since
the petitioner had the chance to peruse these certifications in the course of the
presentation of its evidence.

EO No. 205 does not expressly prohibit CATV operators from soliciting and showing
advertisements.  The non-infringement limitation under Section 2 thereof, although
couched in general terms, should not be interpreted in such a way as to deprive CATV
operators of legitimate business opportunities. 20  Also, EO No. 436, being an executive
issuance and a valid administrative legislation, has the force and effect of a law and
cannot be subject to collateral attack. 21

THE ISSUES

1) Whether the CA erred in affirming the order of the NTC which granted the
respondent’s motion to dismiss by demurrer to evidence.

2) Whether the respondent is prohibited from showing advertisements under Section 2

of EO No. 205, in relation to paragraph 2, Section 3 of EO No. 436.

THE COURT’S RULING

We deny the petition for lack of merit.

Procedural Issues

The remedy of a demurrer to evidence is applicable in the proceedings before the NTC,
pursuant to Section 1, Rule 9, Part 9 of its Rules of Practice and Procedure which
provides for the suppletory application of the Rules of Court.

Rule 3322 of the Rules of Court provides for the rule on demurrer to
evidence:chanroblesvirtuallawlibrary

Section 1. Demurrer to evidence. — After the plaintiff has completed the presentation
of his evidence, the defendant may move for dismissal on the ground that upon the
facts and the law the plaintiff has shown no right to relief. If his motion is denied he shall
have the right to present evidence. If the motion is granted but on appeal the order of
dismissal is reversed he shall be deemed to have waived the right to present evidence.

In other words, the issue to be resolved in a motion to dismiss based on a demurrer to

evidence is whether the plaintiff is entitled to the relief prayed for based on the facts

970
and the law.23  In Casent Realty Development Corp. v. Philbanking Corp.,24 the Court
explained that these facts and law do not include the defendant’s
evidence:chanroblesvirtuallawlibrary

What should be resolved in a motion to dismiss based on a demurrer to evidence is

whether the plaintiff is entitled to the relief based on the facts and the law.  The
evidence contemplated by the rule on demurrer is that which pertains to the merits of
the case, excluding technical aspects such as capacity to sue. However, the plaintiff’s
evidence should not be the only basis in resolving a demurrer to evidence.  The “facts”
referred to in Section 8 should include all the means sanctioned by the Rules of Court
in ascertaining matters in judicial proceedings.  These include judicial admissions,
matters of judicial notice, stipulations made during the pre-trial and trial, admissions,
and presumptions, the only exclusion being the defendant’s evidence.

In granting the demurrer to evidence in the present case, the NTC considered both the
insufficiency of the allegations in the complaint and the insufficiency of the
complainants’ evidence in light of its interpretation of the provisions of EO No. 205 and
EO No. 436.  The NTC ruled that the complainants, including the petitioner, failed to
prove by substantial evidence that the respondent aired the subject advertisements
without the consent of its program providers, as required under EO No. 436. The NTC,
therefore, has issued the assailed order upon a consideration of the applicable laws and
the evidence of the petitioner.  On this score, the grant of the demurrer suffers no
infirmity.

However, the NTC further extended its consideration of the issue to the respondent’s
pieces of evidence that were attached to its demurrer to evidence. On this score, we
agree with the petitioner that the NTC erred.

Rule 33 of the Rules of Court, as explained in our ruling in Casent, proscribes the court
or the tribunal from considering the defendant’s evidence in the resolution of a motion to
dismiss based on a demurrer to evidence.

While an administrative agency is not strictly bound by technical rules of procedure in

the conduct of its administrative proceedings, the relaxation of the rules should not
result in violating fundamental evidentiary rules, including due process. 25  In the present
case, the NTC proceeded against the very nature of the remedy of demurrer to
evidence when it considered the respondent’s evidence, specifically the certifications
attached to the respondent’s demurrer to evidence.  Despite the petitioner’s
objections,26 the NTC disregarded the rule on demurrer by allowing the submission of
the respondent’s evidence while depriving the petitioner of the opportunity to question,
examine or refute the submitted documents. 27

That the petitioner had the chance to peruse these documents is of no moment. In a
demurrer to evidence, the respondent’s evidence should not have been considered in
the first place. As the NTC opted to consider the respondent’s evidence, it should not
have resolved the case through the remedy of demurrer but instead allowed the

971
respondent to formally present its evidence where the petitioner could properly raise its
objections.  Clearly, there was a violation of the petitioner’s due process right.

Substantive Issues

The primary issue in the present case is whether the respondent, as a CATV operator,
could show commercial advertisements in its CATV networks.  The petitioner anchors
its claim on Section 228 of EO No. 205 while the respondent supports its defense from
paragraph 2, Section 329 of EO No. 436.  The Court finds, however, that both the NTC
and the CA failed to correctly appreciate EO No. 205 and EO No. 436 in resolving the
present case.

1.  EO No. 205 is a law while EO No. 436 is an executive issuance

For one, we agree with the petitioner that the NTC and the CA proceeded from the
wrong premise that both EO No. 205 and EO No. 436 are statutes.  This is a critical
point to consider since the NTC and the CA rulings on the merits would have no leg to
stand on had they properly appreciated the nature of these two executive issuances.

EO No. 205 was issued by President Corazon Aquino on June 30, 1987.  Under Section
6, Article 18 of the 1987 Constitution, the incumbent President shall continue to exercise
legislative powers until the first Congress is convened.  The Congress was convened
only on July 27, 1987.30 Therefore, at the time of the issuance of EO No. 205, President
Aquino was still exercising legislative powers. In fact, the intent to regard EO No. 205 as
a law is clear under Section 7 thereof which provides for the repeal or modification of all
inconsistent laws, orders, issuances and rules and regulations, or parts thereof.

EO No. 436, on the other hand, is an executive order which was issued by President
Ramos in the exercise purely of his executive power.  In short, it is not a law.

The NTC and the CA, however, failed to consider the distinction between the two
executive orders.  In considering EO No. 436 as a law, the NTC and the CA hastily
concluded that it has validly qualified Section 2 of EO No. 205 and has amended the
provisions of MC 4-08-88.  Following this wrong premise, the NTC and the CA ruled that
the respondent has a right to show advertisements under Section 3 of EO No. 436.

The incorrect interpretation by the NTC and the CA led to the erroneous resolution of
the petitioner’s complaint and appeal.  While the respondent indeed has the right to
solicit and show advertisements, as will be discussed below, the NTC and the CA
incorrectly interpreted and appreciated the relevant provisions of the law and rules.  We
seek to correct this error in the present case by ruling that MC 4-08-88 alone sufficiently
resolves the issue on whether the respondent could show advertisements in its CATV
networks.  In other words, EO No. 436 is not material in resolving the substantive issue
before us.

2.  The CATV operators are not prohibited from showing advertisements under

972
EO No. 205 and its implementing rules and regulations, MC 4-08-88

Section 631 of EO No. 205 expressly and unequivocally vests with the NTC the
delegated legislative authority to issue its implementing rules and regulations. 32

Following this authority, the NTC has issued the implementing rules and regulations of
EO No. 205 through MC 4-08-88.  Its whereas clause provides that it was issued
pursuant to Act No. 384633 and EO No. 205 which granted the NTC the authority to set
down rules and regulations on CATV systems.

MC 4-08-88 has sufficiently filled-in the details of Section 2 of EO No. 205, specifically
the contentious proviso that “the authority to operate [CATV] shall not infringe on the
television and broadcast markets.”

First, Section 6.1 of MC 04-08-88 clarifies what the phrase “television and
broadcast markets” covers, when it identified the major television markets as
follows:chanroblesvirtuallawlibrary

SECTION 6 CARRIAGE OF TELEVISION

BROADCAST SIGNALS

6.1 Major Television Markets

For purposes of the cable television rules, the following is a list of the major television
markets:

a. Naga
b. Legaspi
c. Metro Manila
d. Metro Cebu
e. Bacolod
f. Iloilo
g. Davao
h. Cagayan de Oro
i. Zamboanga34

It is clear from this provision that the phrase “television market” connotes “audience” or
“viewers” in geographic areas and not the commercial or advertising market as what the
petitioner claims.

Second, the kind of infringement prohibited by Section 2 of EO No. 205 was particularly

clarified under Sections 6.2, 6.2.1, 6.4(a)(1) and 6.4(b) of MC 04-08-88, which embody
the “must-carry rule.” This rule mandates that the local TV broadcast signals of an
authorized TV broadcast station, such as the petitioner, should be carried in full by the
CATV operator, without alteration or deletion. These sections provide as
follows:chanroblesvirtuallawlibrary

973
6.2  Mandatory Coverage

6.2.1 A cable TV system operating in a community which is within the Grade A or Grade
B contours of an authorized TV broadcast station or stations must carry the TV signals
of these stations.

6.4  Manner of Carriage

a. Where a television broadcast signal is required to be carried by a community unit,

pursuant to the rules in this sub-part:

1. The signal shall be carried without material degradation in quality (within the

limitations imposed by the technical state of the art), and where applicable, in
accordance with the technical standards[.]

xxxx

b. Where a television broadcast signal is carried by a community unit, pursuant to the

rules in the CATV standards the program broadcast shall be carried in full, without
deletion or alternation of any except as required by this part.35

An understanding of the “must-carry rule” would show how it carries out the directive of
Section 2 of EO No. 205 that the CATV operation must not infringe upon the broadcast
television markets, specifically the audience market.  In ABS-CBN Broadcasting
Corporation v. Philippine Multi-Media System, Inc.,36 the Court clarified the “must-carry
rule” and its interplay in the free-signal TV, such as the petitioner, and the CATV
operators, such as the respondent, and to quote:chanroblesvirtuallawlibrary

Anyone in the country who owns a television set and antenna can receive ABS-CBN’s
signals for free.  Other broadcasting organizations with free-to-air signals such as GMA-
7, RPN-9, ABC-5, and IBC-13 can likewise be accessed for free.  No payment is
required to view the said channels because these broadcasting networks do not
generate revenue from subscription from their viewers but from airtime revenue
from contracts with commercial advertisers and producers, as well as from direct
sales.

In contrast, cable and DTH television earn revenues from viewer subscription.  In
the case of PMSI, it offers its customers premium paid channels from content providers
like Star Movies, Star World, Jack TV, and AXN, among others, thus allowing its
customers to go beyond the limits of “Free TV and Cable TV.” It does not advertise itself
as a local channel carrier because these local channels can be viewed with or without
DTH television.

Relevantly, PMSI’s carriage of Channels 2 and 23 is material in arriving at the ratings

and audience share of ABS-CBN and its programs.  These ratings help commercial
advertisers and producers decide whether to buy airtime from the network.   Thus,

974
the must-carry rule is actually advantageous to the broadcasting networks
because it provides them with increased viewership which attracts commercial
advertisers and producers.

On the other hand, the carriage of free-to-air signals imposes a burden to cable

and DTH television providers such as PMSI.  PMSI uses none of ABS-CBN’s
resources or equipment and carries the signals and shoulders the costs without
any recourse of charging.  Moreover, such carriage of signals takes up channel
space which can otherwise be utilized for other premium paid channels.

Contrary to the petitioner’s claim, EO No. 205 was not issued solely for the benefit of
the free-signal TV networks.  In fact, it was issued to end the monopoly of Sining
Makulay, Inc. which was granted by then President Ferdinand Marcos an exclusive
franchise, through Presidential Decree (PD) No. 1512, to operate CATV system
anywhere within the Philippines.37  EO No. 205 encouraged the growth of CATV
operation when it expressly repealed PD No. 1512 38 thus encouraging competition in
the CATV industry.  As stated in the whereas clause of EO No. 205, the primary
purpose of the law in regulating the CATV operations was for the protection of the public
and the promotion of the general welfare.

MC 4-08-88 mirrored the legislative intent of EO No. 205 and acknowledged the
importance of the CATV operations in the promotion of the general welfare.  The
circular provides in its whereas clause that the CATV has the ability to offer additional
programming and to carry much improved broadcast signals in the remote areas,
thereby enriching the lives of the rest of the population through the dissemination of
social, economic and educational information, and cultural programs.

Unavoidably, however, the improved broadcast signals that CATV offers may infringe or
encroach upon the audience or viewer market of the free-signal TV.  This is so because
the latter’s signal may not reach the remote areas or reach them with poor signal
quality.  To foreclose this possibility and protect the free-TV market (audience market),
the must-carry rule was adopted to level the playing field.  With the must-carry rule in
place, the CATV networks are required to carry and show in full the free-local TV’s
programs, including advertisements, without alteration or deletion.  This, in turn, benefits
the public who would have a wide-range of choices of programs or broadcast to watch. 
This also benefits the free-TV signal as their broadcasts are carried under the CATV’s
much-improved broadcast signals thus expanding their viewer’s share.

In view of the discussion above, the Court finds that the quoted sections of MC 4-08-
88, i.e., 6.2, 6.2.1, 6.4(a)(1) and 6.4(b) which embody the “must-carry rule,” are the
governing rules in the present case.  These  provisions sufficiently and fairly implement
the intent of Section 2 of EO No. 205 to protect the broadcast television market vis-à-
vis the CATV system.  For emphasis, under these rules, the phrase “television and
broadcast markets” means viewers or audience market and not commercial
advertisement market as claimed by the petitioner.  Therefore, the respondent’s act of
showing advertisements does not constitute an infringement of the “television and

975
broadcast markets” under Section 2 of EO No. 205.

The implementing rules and regulations embodied in this circular, whose validity is
undisputed by the parties, “partake of the nature of a statute and are just as binding as if
they have been written in the statute itself. As such, they have the force and effect of
law and enjoy the presumption of constitutionality and legality until they are set aside
with finality in an appropriate case by a competent court.” 39

The Court further finds that the NTC also erred in ruling that EO No. 436 has deemed to
amend Sections 6.2.1 and 6.4 of MC 4-08-88.  In arriving at this ruling, the NTC
proceeded from the wrong interpretation of EO No. 436 as a law, resulting in the
consequent erroneous conclusion that EO No. 436 could amend MC 4-08-88. The Court
cannot uphold these patently incorrect findings of the NTC even though it is a
specialized implementing agency.

Since the right of the respondent to show advertisements is clearly supported by EO

No. 205 and MC 4-08-88, the Court finds no necessity to pass upon the issue on the
validity of EO No. 436, specifically Section 3 thereof.

WHEREFORE, we DENY the petition and, accordingly, AFFIRM the decision and

resolution of the Court of Appeals dated November 14, 2006 and February 15, 2007,
respectively.  Costs against petitioner GMA Network, Inc.

SO ORDERED.
RULE 34. JUDGMENT ON THE PLEADINGS

THIRD DIVISION

February 8, 2017

G.R. No. 202597

SPOUSES SERGIO C. PASCUAL and EMMA SERVILLION PASCUAL, Petitioners

vs.
FIRST CONSOLIDATED RURAL BANK (BOHOL), INC., ROBINSONS LAND
CORPORATION and ATTY. ANTONIO P. ESPINOSA, Register of Deeds, Butuan
City, Respondents

DECISION

BERSAMIN, J.:

On February 14, 2011, the petitioners filed a petition for annulment of judgment in the
Court of Appeals (CA) in order to nullify and set aside the decision rendered in Special
Proceedings Case No. 4577 by the Regional Trial Court in Butuan City (RTC) ordering

976
the cancellation of their notice of lis pendens recorded in Transfer Certificate of Title No.
RT-42190 of the Register of Deeds of Butuan City. 1

After the responsive pleadings to the petition were filed, the CA scheduled the
preliminary conference on October 4, 2011, and ordered the parties to file their
respective pre-trial briefs.2 Instead of filing their pre-trial brief, the petitioners filed
a Motion for Summary Judgment and a Motion to Hold Pre-Trial in Abeyance.3 At the
scheduled preliminary conference, the petitioners and their counsel did not appear. 4

On November 16, 2011, the CA promulgated the first assailed resolution dismissing the
petition for annulment of judgment,5 stating:

Section 4 through 6 of Rule 18 of the Rules of Court provide, viz:

Sec. 4. Appearance of parties. - It shall be the duty of the parties and their counsel to
appear at the pre-trial. The non-appearance of a party may be excused only if a valid
cause is shown therefor or if a representative shall appear in his behalf fully authorized
in writing to enter into an amicable settlement, to submit to alternative modes of dispute
resolution, and to enter into stipulations or admission of facts and of documents.

Sec. 5. Effect of failure to appear.- The failure of the plaintiff to appear when so required
pursuant to the next preceding section shall be cause for dismissal of the action. The
dismissal shall be with prejudice, unless otherwise ordered by the court. A similar failure
on the part of the defendant shall be cause to allow the plaintiff to present his
evidence ex parte and the court to render judgment on the basis thereof.

Sec. 6. Pre-trial brief - x x x

Failure to file the pre-trial brief shall have the same effect as failure to appear at the pre-
trial.

Petitioners, instead of complying with our order, filed the twin motions, averring that it
behooves us to rule first on their motions before pre-trial could be conducted,
"especially with the incompatibility of a pending Motion for Summary Judgment vis-a-vis
the conduct of pre-trial conference."

Considering that a Petition for Annulment of Judgment is an original action before the
Court of Appeals, pre-trial is mandatory, per Section 6 of Rule 47 of the Rules of Court,
whereby the failure of the plaintiff to appear would mean dismissal of the action with
prejudice. The filing of a pre-trial brief has the same import.

In fact, contrary to petitioners' assertion, it is only at the pre-trial that the rules allow the
courts to render judgment on the pleadings and summary judgment, as provided by
Section 2 (g) of Rule 18 of the Rules of Court, viz:

Sec. 2. Nature and purpose. - The pre-trial is mandatory. The court shall consider:

977
x x xx

(g) The propriety of rendering judgment on the pleadings, or summary judgment, or of

dismissing the action should a valid ground therefor be found to exist.

Moreover, in an Order dated October 20, 2011, we noted petitioners and counsel's

special appearance via a new counsel, but failed to accept the same as the latter was
not armed with the appropriate documents to appear as such. Therefore, it was as if
petitioners did not appear during the Preliminary Conference.

It is not for the petitioners to arrogate whether or not pre-trial may be suspended or
dispensed with, or that their motions be resolved first, as the same are discretionary
upon the court taking cognizance of the petition. Furthermore, their failure to furnish
private respondent Robinsons Land Corporation a copy of their Motion for
Reconsideration of our denial of their TRO and/or WPI, and to submit proof of service
thereof to this court is tantamount to failure to obey lawful orders of the court.1âwphi1

This we cannot countenance. Strict compliance with the Rules is indispensable for the
prevention of needless delays and the promotion of orderly and expeditious dispatch of
judicial business. Hence, petitioners' failure to comply with our directives merits
dismissal of their petition. We find support in the provision of Section 1 of Rule 50 of the
Rules of Court, viz:

Sec. 1. Grounds for dismissal of appeal.

x x xx

(h) Failure of the appellant to appear at the preliminary conference under Rule 48, or to
comply with orders, circulars, or directives of the court without justifiable cause ...

The Supreme Court has invariably ruled that while "litigation is not a game of
technicalities," it is equally important that every case must be prosecuted in accordance
with the procedure to insure an orderly and speedy administration of justice. 6

Aggrieved, the petitioners filed their Motion for Reconsideration (on the Resolution
dated 16 November 2011),7 which the CA denied on January 9, 2012 for being filed out
of time.8 Unrelenting, they presented a Respectful Motion for Reconsideration (on the
Resolution dated 9 January 2012), which the CA also denied on June 20, 2012. 9

Hence, this appeal by petition for review on certiorari.

Ruling of the Court

We deny the petition for review for its lack of merit.

1.

978
Motions and other papers sent to the CA
by private messengerial services arc deemed
filed on the date of the CA's actual receipt

The petitioners received the assailed resolution of November 16, 2011 on November
24, 2011.10 Under Section l, Rule 52 of the Rules of Court,11 they had 15 days from
receipt (or until December 9, 2011) within which to move for its reconsideration or to
appeal to the Supreme Court. They dispatched the Motion for Reconsideration (on the
Resolution dated 16 November 2011) on December 9, 2011 through private courier
(LBC). The CA actually received the motion on December 12, 2011. 12 Considering that
Section 1 (d) of Rule III of the 2009 Internal Rules of the Court of Appeals provided that
motions sent through private messengerial services are deemed filed on the date of the
CA's actual receipt of the same,13 the motion was already filed out of time by December
12, 2011.

Needless to remind, the running of the period of appeal of the final resolution
promulgated on November 16, 2011 was not stopped, rendering the assailed resolution
final and executory by operation of law. 14

2.

Although motions for summary judgment

can be filed before the pre-trial, their
non-resolution prior to the pre-trial should
not prevent the holding of the pre-trial

The petitioners contend that their Motion for Summary Judgment and Motion to Hold

Pre-Trial in Abeyance needed to be first resolved before the pre-trial could proceed;
that the CA erred in declaring that "it is only at the pre-trial that the rules allow the courts
to render judgment on the pleadings and summary judgment, as provided by Section
2(g) of Rule 18 of the Rules of Court;" and that the CA overlooked their submission in
their Opposition with Explanation to the effect that Section 2(g), Rule 18 of the Rules of
Court was superseded by Administrative Circular No. 3-99 dated January 15, 1999 and
A.M. No. 03-1-09-SC dated August 16, 2004.

The petitioners' contentions have no merit.

We consider it erroneous on the part of the CA to declare that "it is only at the pre-trial
that the rules allow the courts to render judgment on the pleadings and summary
judgment, as provided by Section 2(g) of Rule 18 of the Rules of Court." The filing of the
motion for summary judgment may be done prior to the pre-trial. Section 1, Rule 3 5 of
the Rules of Court permits a party seeking to recover upon a claim, counterclaim, or
cross-claim or seeking declaratory relief to file the motion for a summary judgment upon
all or any part thereof in his favor (and its supporting affidavits, depositions or
admissions) "at any time after the pleading in answer thereto has been served;" while
Section 2 of Rule 35 instructs that a party against whom a claim, counterclaim, or cross-

979
claim is asserted or a declaratory relief is sought may file the motion for summary
judgment (and its supporting affidavits, depositions or admissions) upon all or any part
thereof "at any time." As such, the petitioners properly filed their motion for summary
judgment prior to the pre-trial (assuming that they thereby complied with the
requirement of supporting affidavits, depositions or admissions).

We remind that the summary judgment is a procedural technique that is proper under
Section 3, Rule 35 of the Rules of Court only if there is no genuine issue as to the
existence of a material fact, and that the moving party is entitled to a judgment as a
matter of law.15 It is a method intended to expedite or promptly dispose of cases where
the facts appear undisputed and certain from the pleadings, depositions, admissions,
and affidavits on record.16 The term genuine issue is defined as an issue of fact that
calls for the presentation of evidence as distinguished from an issue that is sham,
fictitious, contrived, set up in bad faith and patently unsubstantial so as not to constitute
a genuine issue for trial. The court can determine this on the basis of the pleadings,
admissions, documents, affidavits, and/or counter-affidavits submitted by the parties to
the court. Where the facts pleaded by the parties are disputed or contested,
proceedings for a summary judgment cannot take the place of a trial. 17 The party
moving for the summary judgment has the burden of clearly demonstrating the absence
of any genuine issue of fact.18 Upon the plaintiff rests the burden to prove the cause of
action, and to show that the defense is interposed solely for the purpose of delay. After
the plaintiffs burden has been discharged, the defendant has the burden to show facts
sufficient to entitle him to defend.19

The CA could have misconceived the text of Section 2(g), Rule 18 of the Rules of
Court, to wit:

Section 2. Nature and purpose. - The pre-trial is mandatory. The court shall consider:

x x xx

(g) The propriety of rendering judgment on the pleadings, or summary judgment, or of

dismissing the action should a valid ground therefor be found to exist;

x x xx

To be clear, the rule only spells out that unless the motion for such judgment has earlier
been filed the pre-trial may be the occasion in which the court considers the propriety of
rendering judgment on the pleadings or summary judgment. If no such motion was
earlier filed, the pre-trial judge may then indicate to the proper party to initiate the
rendition of such judgment by filing the necessary motion. Indeed, such motion is
required by either Rule 3420 (Judgment on the Pleadings) or Rule 3521 (Summary
Judgment) of the Rules of Court. The pre-trial judge cannot motu proprio render the
judgment on the pleadings or summary judgment. In the case of the motion for
summary judgment, the adverse party is entitled to counter the motion.

980
Even so, the petitioners cannot validly insist that the CA should have first resolved
their Motion for Summary Judgment before holding the pretrial.1âwphi1 They could not
use the inaction on their motion to justify their nonappearance with their counsel at the
pre-trial, as well as their inability to file their pre-trial brief. In that regard, their
appearance at the pre-trial with their counsel was mandatory.

The petitioners argue that their non-appearance was not mandatory, positing that
Section 2(g), Rule 18 of the Rules of Court had been amended by Administrative
Circular No. 3-99 and A.M. No. 03-1-09-SC issued on July 13, 2004 but effective on
August 16, 2004.

The petitioners' argument was unwarranted.

Administrative Circular No. 3-99 dated January 15, 1999 still affirmed the mandatory
character of the pre-trial, to wit:

x x xx

V. The mandatory continuous trial system in civil cases contemplated in Administrative

Circular No. 4, dated 22 September 1988, and the guidelines provided for in Circular
No. 1-89, dated 19 January 1989, must be effectively implemented. For expediency,
these guidelines in civil cases are hereunder restated with modifications, taking into
account the relevant provisions of the 1997 Rules of Civil Procedure:

A. Pre-Trial

x x xx

6. Failure of the plaintiff to appear at the pre-trial shall be a cause for dismissal of the
action. A similar failure of the defendant shall be a cause to allow the plaintiff to present
his evidence ex-parte  and the court to render judgment on the basis
thereof. (Underlining supplied for emphasis)

A.M. No. 03-1-09-SC (Guidelines to be Observed by Trial Court Judges and Clerks of

Court in the Conduct of Pre-Trial and Use of Deposition-Discovery Measures) - adopted
for the purpose of abbreviating court proceedings, ensuring the prompt disposition of
cases, decongesting court dockets, and further implementing the pre-trial guidelines laid
down in Administrative Circular No. 3-99 - similarly underscored the mandatory
character of the pre-trial, and reiterated under its heading Pre-Trial in civil cases that,
among others, the trial court could then determine "the propriety of rendering a
summary judgment dismissing the case based on the disclosures made at the pre-trial
or a judgment based on the pleadings, evidence identified and admissions made during
pre-trial."22 As such, they could have urged the trial court to resolve their
pending Motion for Summary Judgment during the pre-trial..

981
WHEREFORE, the Court AFFIRMS the assailed resolutions of the Court of Appeals
promulgated in CA-G.R. SP No. 04020-MIN; and ORDERS the petitioners to pay the
costs of suit.

SO ORDERED.

FIRST DIVISION

G.R. No. 184036               October 13, 2010

PACIFIC REHOUSE CORPORATION, PACIFIC CONCORDE CORPORATION,

MIZPAH HOLDINGS, INC., FORUM HOLDINGS CORPORATION, and EAST ASIA
OIL COMPANY,INC., Petitioners,
vs.
EIB SECURITIES, INC., Respondent.

DECISION

VELASCO, JR., J.:

The Case

Via this Petition for Review on Certiorari under Rule 45, petitioners seek reversal of the
Decision1 dated April 11, 2008 of the Court of Appeals (CA) in CA-G.R. CV No. 87713
which revoked the October 18, 2005 Resolution,2 a judgment on the pleadings, of the
Regional Trial Court (RTC), Branch 66 in Makati City, in Civil Case No. 05-178 entitled
Pacific Rehouse Corporation, Pacific Concorde Corporation, Mizpah Holdings, Inc., et
al. v. EIB Securities, Inc., and remanded the case for further proceedings. Also assailed
is the CA Resolution3 dated August 5, 2008 denying petitioners’ motion for
reconsideration.

Petitioners’ initiatory pleading in Civil Case No. 05-178 reveals the following averments:

COMMON ALLEGATIONS FOR ALL CAUSES OF ACTION

1. On various dates during the period June 2003 to March 2004, plaintiffs bought
60,790,000 Kuok Properties, Inc. ("KPP") shares of stock through the Philippine
Stock Exchange ("PSE"). The KPP shares were acquired by plaintiffs through
their broker, defendant EIB.

2. The KPP shares of stock were bought by plaintiffs at an average price of

P0.22 per share.

3. Also on various dates in July and August 2003, plaintiffs bought/acquired

32,180,000 DMCI shares of stock through the PSE. Of these shares, 16,180,000
were likewise acquired by the plaintiffs through their broker, defendant EIB, while

982
the remaining 16,000,000 DMCI shares were transferred from Westlink Global
Equities, Inc.

4. The DMCI shares of stock were bought by plaintiffs at an average price of

P0.38 per share.

5. On 01 April 2004, plaintiffs and defendant EIB agreed to sell the 60,790,000
KPP shares of plaintiffs to any party for the price of P0.14 per share. Attached as
Annexes "A" to "A-6" are copies of the notices of sales sent by defendant EIB to
the plaintiffs, which bear the conformity of plaintiffs’ representative.

6. As agreed by plaintiffs and defendant, the sale of the KPP shares of plaintiffs
was made with an option on the part of the plaintiffs to buy back or reacquire the
said KPP shares within a period of thirty (30) days from the transaction date, at
the buy-back price of P0.18 per share (See Annexes "A" to "A-6").

7. When the last day of the 30-day buy back period for the KPP shares came,
plaintiff were undecided on whether or not to exercise their option to reacquire
said shares. Thus, plaintiffs and defendant EIB agreed that plaintiffs would have
an extended period of until 03 June 2004 to exercise their option to buy
back/reacquire the KKP shares that had been sold.

8. Eventually, plaintiffs decided not to exercise their option to buy back the KPP
shares and did not give any buy-back instruction/s to their broker, defendant EIB.

9. On various dates in June 2004, without plaintiffs’ prior knowledge and consent,
defendant EIB sold plaintiffs 32,180,000 DMCI shares of stock for an average
price of P0.24 per share. Defendant EIB sold the DMCI shares of plaintiffs for an
average price of only P0.24 per share despite full knowledge by defendant EIB
that the sale would result in a substantial loss to the plaintiffs of around P4.5
Million since plaintiffs acquired the DMCI shares at P0.38 per share. (cf. Article
1888, Civil Code). Attached Annexes "B" to "B-7" are the Sell Confirmation slips
issued by defendant EIB showing the unauthorized sale of plaintiffs’ 32,180,000
DMCI shares.

9.1 The proceeds of said DMCI shares sold by defendant EIB without
plaintiffs’ knowledge and consent were used by defendant EIB to buy back
61,100,000 KPP shares earlier sold by plaintiffs on 01 April 2004.
Attached as Annexes "C" to "C-5" are the Buy Confirmation slips issued by
defendant showing the unauthorized "buy back" of KPP shares.

9.2 Defendant EIB sold without authority plaintiffs’ 32,180,000 DMCI

shares and used the proceeds thereof to buy back 61,000,000 KPP
shares because defendant EIB made an unauthorized promise and
commitment to the buyer/s of plantiffs’ KPP shares in April 2004 that
plaintiffs would buy back the KPP shares.

983
 9.3 Plaintiffs learned of the unauthorized sale of their 32,180,000 DMCI
shares and the unauthorized "buy back" of 61,000,000 KPP shares only
much later. Upon further inquiry, plaintiffs also learned that all throughout
their business dealings, defendant EIB had surreptitiously charged and
collected from plaintiffs exorbitant interest amounting to thirty percent
(30%) of all amounts owing from the plaintiffs.

10. On 05 January 2005, plaintiffs wrote to defendant EIB to demand that their
32,180,000 DMCI shares be transferred to Westlink Global Equities Inc.
("Westlink"). Copies of the demand letters, all dated 05 January 2005, are
attached as Annex "D" to "D-4" respectively.

11. Since the 32,180,000 DMCI shares belonging to plaintiffs had already been
sold by defendant EIB without plaintiffs’ prior knowledge and consent as early as
June 2004, defendant EIB could not comply with the demand of plaintiffs as
stated in their demand letters dated 05 January 2005.

12. In his letters to the plaintiffs dated 12 January 2005, defendant EIB admitted
having sold the 32,180,000 DMCI shares of stock of plaintiffs without the latter’s
prior knowledge and consent. Copies of defendant EIB’s letters to plaintiffs, all
dated 12 January 2005, are attached as Annexes "E" to "E-4", respectively.

12.1 Defendant EIB states in its aforesaid letters that it sent statements of
account to plaintiffs in July 2004. Defendant EIB claims, albeit
erroneously, that since plaintiffs made no exceptions to the statements of
account, the sale of plaintiffs’ DMCI shares in June 2004 [was] supposedly
"validly executed".

13. Hence, this Complaint.

xxxx

SECOND CAUSE OF ACTION

17. Plaintiffs replead all of the foregoing allegations.

18. The sale by defendant EIB of the 32,180,000 DMCI shares of plaintiffs was
done with malice and fraudulent intent. As such, defendant should be directed to
pay plaintiffs the amount of at least PhP3,000,000.00 as moral damages. 4

In response, respondent EIB Securities, Inc. (EIB) submitted its Answer which
contained the following averments:

ADMISSIONS AND DENIALS:

984
1. Defendant admits the allegations contained in paragraphs under the heading
The Parties. Likewise, defendant admits the allegations contained in paragraph
1.

2. Paragraph 2 of the Complaint is specifically denied, the truth of the matter is

that the KPP shares of stock were bought by plaintiffs at an average price of only
18 centavos per share.

3. Paragraph 3 is admitted, qualified, however, that the remaining 16,000,000

DMCI shares of plaintiffs were transferred by Westlink Global Equities, Inc. and
other brokerages firms to the defendant primarily to serve as a collateral in the
cash account obligations of the plaintiffs to the defendant.

4. Paragraph 4 of the Complaint is specifically denied, the truth of the matter

being the DMCI shares of stock were bought by the plaintiffs at an approximate
average price of only 25 centavos per share.

5. Defendant admits paragraph 5 of the Complaint insofar as the allegation that

plaintiffs and defendant agreed to sell the 60,790,000 KPP share of plaintiffs to
any party for the price of 14 centavos per share, qualified, however, by the
presence of a provision "Full Cross to Seller" meaning that the Sellers (who are
the plaintiffs) have the obligation to buy back or reacquire the shares from the
buyers.

6. Defendant specifically denies paragraph 6 of the Complaint, the truth of the

matter and as evidenced by the same Notices of Sale (Annex"A" to "A-6" of the
Complaint), plaintiffs have no option to buy back or reacquire the said KPP
shares, the nature or kind of transaction agreement is Full Cross to seller which
is an obligation and not merely an option on the part of the plaintiffs to buy back
or reacquire the said KPP shares sold to buyers.

7. Defendant specifically and vehemently denies the allegations of paragraphs 7

and 8 of the Complaint. The truth of the matter is that there was no extension
agreed upon by the parties for the plaintiffs to exercise option to buy
back/reacquire the Kuok Properties, Inc. shares of stocks (KKP). The Contracts
for the sale of KPP shares of stocks as already stated above and as clearly
shown from the same Annexes "A" to "A-6" of the Complaint was an obligation
that there was no extension period given to the plaintiffs.

8. Defendant also specifically and vehemently denies the allegations of

paragraphs 9 of the Complaint and its sub-paragraphs. The truth of the matter
being that under the trading rules, honoring one’s obligation is a sacred
commitment of stocks and market traders. Considering that in the sale of the
KPP shares there is an obligation as certified by the word Full Cross to Seller,
the KPP shares of stocks that were sold to buyers have to be bought back 30
days from the transaction date at the Buy Back Amount of 18 centavos per share

985
 and that plaintiffs and defendant have to honor the said buy back obligation.
Considering, however, that plaintiffs were not delivering funds to the defendant in
order to honor the said buy back obligation, not to mention the Cash account
obligations of the plaintiffs to the defendant amounting to more or less 70 Million
Pesos, defendant had no more recourse but to buy back the KPP shares from
the buyers by selling the DMCI shares of the plaintiffs under the defendant’s
possession, and thus, enforcing the provisions of the Securities Dealing
Accounts Agreements that was signed by the plaintiffs in favor of the defendant,
a copy of which is hereto attached and made an integral part hereof as Annex
"1". Section 7 of the aforesaid Securities Dealing Accounts Agreements states:

"7. Lien

The client agrees that all monies and/or securities and/or all other property of the Client
(plaintiffs) in the Company’s (defendant) custody or control held from time to time shall
be subject to a general lien in favour of Company for the discharge of all or any
indebtedness of the Client to the Company. The Client shall not be entitled to withdraw
any monies or securities held by the Company pending the payment in full to the
Company of any indebtedness of the Client to the Company. The company shall be
entitled at any time and without notice to the Client to retain, apply, sell or dispose of all
or any of the [client’s] property if any such obligation or liability is not discharged in full
by the client when due or on demand in or towards the payment and discharge of such
obligation or liability and the Company shall be under no duty to the client as to the price
obtained or any losses or liabilities incurred or arising in respect of any such sale or
disposal. Subject to the relevant law and regulation on the matter, the client hereby
authorizes the Company, on his/its behalf, at any time and without notice to the client’s
property if any such obligation or liability is not discharged." [Emphasis in the original.]

[Defendant] specifically denies the allegation of the plaintiffs that defendant sold the
DMCI shares of plaintiffs for an average price of only 24 centavos for the truth of the
matter being the average price those DMCI shares were sold was P0.2565 centavos
per share and likewise, that price was the controlling market price of DMCI share at the
time of the transaction. Defendant likewise, specifically denies the allegation that
defendant surreptitiously charged and collected an interest of 30% from the plaintiff for
the truth of the matter is that what defendant did not charge such interest.

Moreoever, and contrary to the allegations of the Complaint, plaintiffs are fully aware
and knowledgeable of the sale of their DMCI shares as early as June 2004 and that the
proceeds thereof were not even enough to fully pay the buy back obligation of the
plaintiffs to the buyers of KPP shares of stocks.

Plaintiffs, in order to feign ignorance of the sale of their DMCI shares had attached in
the Complaint various Sales Confirmations Receipts which were marked thereto as
Annexes "B" to "B-7". Wittingly or unwittingly, plaintiffs attached only the Receipts that
do not bear the corresponding acknowledgement signatures of their respective officers.
As averred by the defendant, plaintiffs were fully aware and knowledgeable of the sale

986
of their DMCI shares as early June 2004, and to expose the real truth, defendant hereto
attaches the identical Sales Confirmation Receipts hereto marked as Annexes "2" to "2-
G".

In the same manner that in each and every Sales Confirmation Receipts (Annexes "2"
to "2-G") the following IMPORTANT NOTICE is written:

"All transaction are subject to the rules and customs of the Exchange and its Clearing
House. It is agreed that all securities shall secure all my/our liabilities to e.securities and
is authorized in their discretion to all or any of them without notice to we/us whenever in
the opinion of e.securities my/our account is not properly secured." [Emphasis in the
original.]

Likewise, after each and every transaction, defendant sent Statement of Accounts
showing a detailed transaction that were entered into and that plaintiffs duly received
aforesaid Statement of Accounts from the defendants as evidenced by the signatures of
plaintiffs’ respective officers hereto marked as Annexes "3" to "3-G".

In each and every Statements of Accounts the following Notice is clearly printed therein:

"This statement will be considered correct unless we receive notice in writing of any
exceptions within 5 days from receipt. Please address all correspondence concerning
exceptions to our OPERATIONS DEPARTMENT. Kindly notify us in writing of any
changes in your address."

Hence, plaintiffs, may have other ulterior motives in filing this baseless Complaint since
they fully knew and consented almost a year ago of the nature of their transactions with
the defendant.

9. Defendant admits paragraphs 10 to 12 inclusive of the subparagraphs only to the

existence of the plaintiffs’ demand letters all dated January 5, 20[0]5, but qualifies that
the aforesaid letters had been answered by the defendant on January 12, 2005. The
rest of the allegations are being specifically denied. In defendant’s reply to the said
letters, defendant clearly pointed out that plaintiffs had been duly notified of the subject
transactions as early as June 9, 2004. That defendant had furnished the plaintiffs as
early as July 14, 2004 Statements of Accounts of all their transactions for the period of
June 1-20, 2004 which included the sale of the subject shares with a clear instruction to
notify the defendant in writing within five (5) days from receipt thereof of any exception
therein. That if no correspondence was received by the defendant from the plaintiffs, the
sale shall be considered as validly executed. 5

On July 19, 2005, petitioners registered a Motion for Judgment on the

Pleadings,6 asserting that EIB materially admitted the allegations of their complaint by
not tendering any genuine issue in its answer. This was opposed 7 by EIB, with both
parties subsequently filing their respective reply and rejoinder. On October 7, 2005,
petitioners moved that the trial court resolve their motion for judgment on the pleadings.

987
 The Ruling of the RTC

On October 18, 2005, the RTC rendered its judgment on the pleadings through a
Resolution, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered directing the

defendant [EIB] to return the plaintiffs’ [petitioners] 32,180,000 DMCI shares, as of
judicial demand.

On the other hand, plaintiffs are directed to reimburse the defendant the amount of
P10,942,200.00, representing the buy back price of the 60,790,000 KPP shares of
stocks at P0.18 per share.

Defendant’s Motion to Discharge Writ of Preliminary Attachment, based on the

submitted counter bond issued by Intra Strata Assurance Corporation is hereby
GRANTED.

SO ORDERED.8

The trial court found merit in rendering a judgment on the pleadings: first, the assailed
transactions were all documented; second, the transactions were admitted by the
parties; and third, the main issues can be resolved based on the parties’ documentary
evidence appended to the pleadings.

The RTC, interpreting the agreement agreed upon by the parties, held that the sale of
the Kuok Properties, Inc. (KKP) shares was with a buy-back obligation and not an
option as petitioners argued. However, it found that, as per their notices of sale
agreements, the collateral for the sale transactions is the same KKP shares. Thus, it
held that EIB erred in selling the DMCI shares instead of the KKP shares which served
as collateral. It ruled that Section 7 of the Securities Dealings Account Agreement
(SDAA) does not apply, since it provided for a general agreement executed prior to the
subsequent and specific agreements entered into by the parties specifically for the sale
and repurchase of the KKP shares. Thus, the trial court concluded that EIB went
beyond its authority in selling petitioners’ DMCI shares in order to buy back the KKP
shares.

Anent petitioners’ apparent lack of objection to the account statements issued by EIB
and the sales confirmation receipts covering the sale of DMCI shares, the RTC viewed it
as not constituting ratification by petitioners for said documents did not disclose the
purpose of the sale, applying the rule that any ambiguity in a written document should
be strictly construed against the party who caused its preparation. In fine, it held that
since the parties’ relation is fiduciary in nature, with more reason that EIB should have
been more forthright in getting the prior consent of petitioners before selling the DMCI
shares.

988
EIB timely filed its motion for partial reconsideration of the RTC Resolution dated
October 18, 2005. In the meantime, EIB moved to inhibit Judge Rommel O. Baybay
from further handling the case. Both motions of EIB were opposed by petitioners.

On April 28, 2006, RTC Judge Baybay inhibited himself. 9

Subsequently, on July 26, 2006, the RTC, Branch 66, through its new Presiding Judge,
Joselito C. Villarosa, denied EIB’s motion for partial reconsideration. 10 After oral
arguments on June 23, 2006, the RTC affirmed the propriety of the judgment on the
pleadings rendered by Pairing Judge Baybay. Citing Savellano v. Northwest
Airlines,11 on the strict construal of any ambiguity on a written document on the party
issuing it, the trial court reiterated its ruling that petitioners are not estopped from
assailing the sale by EIB of their DMCI shares, for the sale confirmation receipts do not
disclose the purpose of the sales made.

The Ruling of the CA

On April 11, 2008, the appellate court rendered the assailed decision, revoking the
RTC’s judgment on the pleadings and remanding the case back to the RTC for further
proceedings. The fallo reads:

WHEREFORE, premises considered, the instant appeal is GRANTED. Accordingly, the

Court a quo’s Resolution dated 18 October 2005 is REVOKED and SET ASIDE and this
case is ordered remanded to the Court a quo which is directed to conduct further
proceedings hereof with dispatch.

SO ORDERED.12

While EIB raised six issues on appeal, the CA resolved––what it considered the pivotal
issue––the propriety of the rendition by the trial court of a judgment on the pleadings.
The CA found that while some material allegations in petitioners’ complaint were
admitted by EIB, the latter’s answer nonetheless raised other genuine issues which it
viewed can only be threshed out in a full-blown trial, like "the average price of the KPP
shares of stock, the scope of the collaterals stated in the Notices of Sale and the
monetary claims of the Appellant [EIB] against the Appellees [petitioners]." 13

Petitioners filed their motion for reconsideration, while EIB filed a Manifestation with
Motion for Clarification/Deletion which was opposed by petitioners. In its motion for
clarification/deletion, EIB took exception to the appellate court’s pronouncement that it
(EIB) admitted the sale of petitioners’ DMCI shares for the purpose of buying back the
KKP shares, which strengthened petitioners’ claim of the nullity of the sale. Both
motions were denied by the assailed resolution issued on August 5, 2008.

Thus, we have this petition.

The Issues

989
 I

CONTRARY TO THE RULING OF THE COURT OF APPEALS, THE TRIAL COURT

WAS CORRECT IN RENDERING JUDGMENT ON THE PLEADINGS IN THE CASE
BEFORE IT.

II

THE TRIAL COURT WAS CORRECT IN RULING THAT PETITIONERS’ DMCI

SHARES COULD NOT BE SOLD BY RESPONDENT EIB UNDER THE NOTICES OF
SALE.

III

THE TRIAL COURT WAS CORRECT IN HOLDING THAT RESPONDENT EIB COULD
NOT INVOKE SECTION 7 OF THE SECURITIES DEALINGS ACCOUNT
AGREEMENT AS BASIS FOR THE SALE OF PETITIONERS’ DMCI SHARES.

IV

THE TRIAL COURT WAS CORRECT IN HOLDING THAT PETITIONERS WERE NOT
BARRED BY RATIFICATION, LACHES OR ESTOPPEL FROM QUESTIONING THE
UNAUTHORIZED SALE OF THEIR DMCI SHARES.

THE TRIAL COURT HAD JURISDICTION OVER THE CASE FILED BEFORE IT BY
PETITIONERS WHO HAD FULLY PAID THE DOCKET FEES ASSESSED BY THE
CLERK OF COURT.

VI

UNDER PREVAILING JURISPRUDENCE, THE PAIRING JUDGE DID NOT COMMIT

GRAVE ABUSE OF DISCRETION. IN ANY EVENT, THE APPOINTMENT OF A
PRESIDING JUDGE WHO EVENTUALLY DENIED RESPONDENT’S MOTION FOR
RECONSIDERATION RENDERED THE MATTER MOOT AND ACADEMIC. 14

The Court’s Ruling

We grant the petition.

Threshold Issue: Proper Payment of Docket Fees

EIB asserts that the trial court has no jurisdiction over the complaint on account of
insufficient dockets fees. Although petitioners paid a total of PhP 120,758.80 15 in legal
fees with the RTC, EIB argues that what was paid is based merely on petitioners’ prayer

990
for moral damages of PhP 3 million, exemplary damages of PhP 3 million, and
attorney’s fees of PhP 2 million, but not including petitioners’ claim for PhP 4.5 million
as actual damages as averred in paragraph 9 of the complaint. Thus, EIB, relying
on Manchester Development Corporation v. Court of Appeals 16 (Manchester) and Sun
Insurance Office, Ltd. v. Asuncion,17 maintains that the RTC should not have
entertained the case.

It is hornbook law that courts acquire jurisdiction over a case only upon payment of the
prescribed docket fee. A plain reading of the prayer does not show that petitioners
asked for the payment of actual damages of PhP 4.5 million. The reliefs asked by
petitioners in the prayer are:

1. Upon the filing of the Complaint, a writ of preliminary attachment be issued ex

parte against defendant pursuant to Section 2, Rule 57 of the 1997 Rules of Civil
Procedure;

2. After trial, judgment rendered in favor of plaintiffs and against defendant as

follows:

On the FIRST CAUSE OF ACTION – declaring void the sale by defendant of the
32,180,000 DMCI shares of stock of plaintiffs and directing defendant to return to
plaintiffs the latter’s 32,180,000 DMCI shares of stock, or in the event the return thereof
is not possible, holding defendant liable under Articles 1888,1889,1909 and other
pertinent provisions of the Civil Code.

On the SECOND CAUSE OF ACTION – directing defendant to pay plaintiffs moral

damages in the amount of at least P3,000,000.00;

On the THIRD CAUSE OF ACTION – directing defendant to pay plaintiffs exemplary

damages in the amount of at least P3,000,000.00; and

On the FOURTH CAUSE OF ACTION – directing defendant to pay plaintiffs attorney’s

fees in the amount of P2,000,000.00 and such amounts as may be proven at the trial as
litigation expenses.

Other just and equitable relief are likewise prayed for. 18

Since the prayer did not ask for the payment of actual damages of PhP 4.5 million, the
clerk of court correctly assessed the amount of PhP 120,758.80 as docket fees based
on the total amount of PhP 8 million consisting of PhP 3 million as moral damages, PhP
3 million as exemplary damages, and PhP 2 million as attorney’s fees.

In disputing the fees paid by petitioners, respondent relies on our ruling in Manchester,
where we said that "all complaints, petitions, answers and other similar pleadings
should specify the amount of damages being prayed for not only in the body of the

991
pleading but also in the prayer, and said damages shall be considered in the
assessment of the filing fees in any case."19

EIB insinuates that petitioners, by alleging the substantial loss of PhP 4.5 million from
the sale of the DMCI shares but not specifying the amount in their prayer, circumvented
the Manchester ruling to evade the payment of the correct filing fees. This postulation is
incorrect. It is clear that petitioners demanded the return of the DMCI shares in the
prayer of the complaint and NOT the alleged loss in the value of the shares. If the DMCI
shares are returned, then no actual damages are suffered by petitioners. A recall of the
averment in par. 9 of the complaint shows that the alleged loss of PhP 4.5 million to
petitioners resulted from the sale of DMCI shares at PhP 0.24 per share when they
acquired it at PhP 0.38 per share. More importantly, the court was proscribed by the
Manchester ruling from granting actual damages of PhP 4.5 million to petitioners,
because precisely the alleged damages were never sought in the prayer. Ergo, EIB’s
attack on the trial court’s assumption of jurisdiction must fail.

Procedural Issue: Judgment on the Pleadings

At the outset, we lay stress on the Court’s policy that cases should be promptly and
expeditiously resolved. The Rules of Court seeks to abbreviate court procedure in order
to allow the swift disposition of cases. Specifically, special strategies like demurrer to
evidence, judgment on the pleadings, and summary judgment were adopted to attain
this avowed goal. Full-blown trial is dispensed with and judgment is rendered on the
basis of the pleadings, supporting affidavits, depositions, and admissions of the parties.

In the instant petition, the Court is confronted with the propriety of the judgment on the
pleadings rendered by the Makati City RTC. Petitioners claim such adjudication on said
papers and attachments is proper.

The petitioner’s position is impressed with merit.

Rule 34 of the Rules of Court provides that "where an answer fails to tender an issue or
otherwise admits the material allegations of the adverse party’s pleading, the court may,
on motion of that party, direct judgment on such pleading." Judgment on the pleadings
is, therefore, based exclusively upon the allegations appearing in the pleadings of the
parties and the annexes, if any, without consideration of any evidence aliunde. 20

When what is left are not genuinely issues requiring trial but questions concerning the
proper interpretation of the provisions of some written contract attached to the
pleadings, judgment on the pleadings is proper. 21

From the pleadings, the parties admitted the following facts:

(1) EIB is the stockbroker of petitioners.

992
(2) Petitioners and EIB entered into a SDAA, Annex "1" of EIB’s answer, which
governed the relationship between petitioners as clients and EIB as stockbroker.
Sec. 7 of the SDAA provides:

7. Lien

The client agrees that all monies and/or securities and/or all other property of the
Client (plaintiffs) in the Company’s (defendant) custody or control held from time
to time shall be subject to a general lien in favour of Company for the discharge
of all or any indebtedness of the Client to the Company. The Client shall not be
entitled to withdraw any monies or securities held by the Company pending the
payment in full to the Company of any indebtedness of the Client to the
Company. The company shall be entitled at any time and without notice to the
Client to retain, apply, sell or dispose of all or any of the [client’s] property if any
such obligation or liability is not discharged in full by the client when due or on
demand in or towards the payment and discharge of such obligation or liability
and the Company shall be under no duty to the client as to the price obtained or
any losses or liabilities incurred or arising in respect of any such sale or disposal.
Subject to the relevant law and regulation on the matter, the client hereby
authorizes the Company, on his/its behalf, at any time and without notice to the
client’s property if any such obligation or liability is not discharged. 22 (Emphasis
supplied.)

It is clear from the SDAA that all monies, securities, and other properties of
petitioners in EIB’s custody or control shall be subject to a general lien in favor of
the latter solely for the discharge of all or any indebtedness to EIB.

(3) From June 2003 to March 2004, petitioners, through their broker, EIB, bought
60,790,000 KKP shares of stock at the Philippine Stock Exchange (PSE).

(4) On various dates in July and August 2003, petitioners bought 16,180,000
DMCI shares of stock through EIB likewise at the PSE, while 16,000,000 DMCI
shares of petitioners were transferred to EIB by Westlink Global Equities, Inc.
Thus, a total of 32,180,000 DMCI shares of stock owned by petitioners were
placed in the custody or control of EIB.

(5) On April 1, 2004, petitioners ordered the sale of 60,790,000 KPP shares to
any buyer at the price of PhP 0.14 per share. The KPP shares were eventually
sold at PhP 0.14 per share to interested buyers.

(6) Petitioners failed to reacquire or buy back the KPP shares at PhP 0.18 per
share after 30 days from date of transaction.

(7) As petitioners failed to deliver funds to EIB to honor the buy-back obligation,
not to mention the cash account obligations of petitioners in the amount of PhP

993
 70 million to EIB, EIB had no recourse but to sell the DMCI shares of petitioners
to reacquire the KPP shares.

(8) Thus, on various dates in June 2004, EIB, without petitioners’ knowledge and
consent, sold petitioners’ 32,180,000 DMCI shares at the controlling market
price. EIB later sent sales confirmation receipts to petitioners regarding the sale
of their DMCI shares, said receipts containing the common notice, which reads:

All transaction[s] are subject to the rules and customs of the Exchange and its
Clearing House. It is agreed that all securities shall secure all my/our liabilities to
e.securities and is authorized in their discretion to sell all or any of them without
notice to we/us whenever in the opinion of e.securities my/our account is not
properly secured.23 (Emphasis supplied.)

(9) EIB sent statements of accounts to petitioners showing the sale of the DMCI
shares which uniformly contained the following notice:

This statement will be considered correct unless we receive notice in writing of

any exceptions within 5 days from receipt. Please address all correspondence
concerning exceptions to our OPERATIONS DEPARTMENT. Kindly notify us in
writing of any changes in your address. 24

(10) On January 12, 2005, petitioners wrote EIB demanding the return of the
32,180,000 DMCI shares.

(11) On January 12, 2005, EIB rejected petitioners demand for the return of the
DMCI shares, as those were already sold to cover the buy back of the KPP
shares.

(12) Petitioners’ prayer is the return of the 32,180,000 DMCI shares by EIB to
them.

The principal issue in petitioners’ complaint is whether EIB can be compelled to return
DMCI shares to petitioners based on the alleged unauthorized disposal or sale of said
shares to comply with the buy back of the KKP shares. The threshold issue raised in the
answer is the lack of jurisdiction over the complaint due to the alleged nonpayment of
the proper docket fees. Affirmative defenses presented are that EIB disposed of the
DMCI shares pursuant to Sec. 7 of the SDAA, and the notices of sale, ratification and
laches.

Based on the admissions in the pleadings and documents attached, the Court finds that
the issues presented by the complaint and the answer can be resolved within the four
corners of said pleadings without need to conduct further hearings. As explained by the
Court in Philippine National Bank v. Utility Assurance & Surety Co., Inc., 25 when what
remains to be done is the proper interpretation of the contracts or documents attached
to the pleadings, then judgment on the pleadings is proper. In the case at bar, the issue

994
of whether the sale of DMCI shares to effectuate the buy back of the KKP shares is
valid can be decided by the trial court based on the SDAA, Notices of Sale, Sales
Confirmation Receipts, the letters of the parties, and other appendages to the pleadings
in conjunction with the allegations or admissions contained in the pleadings without
need of trial. The Makati City RTC is, therefore, correct in issuing the October 18, 2005
Resolution granting the Motion for Judgment on the Pleadings.

The CA nullified the October 18, 2005 Resolution on the ground that there are other
issues that must be resolved during a full-blown trial, ratiocinating this way:

While it may be true that the Appellant has already admitted that the sale of the DMCI
shares was for the purpose of buying back the KPP shares and that such admission
strengthened Appellees’ claim that the sale of the DMCI shares is a nullity, there were
other issues raised by the Appellant that can only be threshed out during a full blown
trial, viz: the average price of the KPP shares of stock, the scope of the collaterals
stated in the Notices of Sale and the monetary claims of the Appellant against the
Appellees.26

To the mind of the Court, these matters are not genuinely triable issues but actually
minor issues or mere incidental questions that can be resolved by construing the
statements embodied in the appendages to the pleadings. The facts that gave rise to
the side issues are undisputed and were already presented to the trial court rendering
trial unnecessary.

On the disparity in the average price of KPP shares of stock, petitioners claim that the
average purchase price of the KPP share is PhP 0.22 per share (par. 2 of the
complaint), while EIB claims it is only PhP 0.18 per share (par. 2 of the answer). The
dissimilarity in the acquisition price paid by petitioners for the KPP shares is a non-
issue, since the relief prayed for is the return of the DMCI shares and not the KPP
shares. Petitioners did not even claim actual damages in the prayer of the complaint.

On the scope of the collaterals stated in the Notices of Sale, it is clear from the notices
that the collateral is "KPP Shares/Property":

April 01, 2004

PACIFIC REHOUSE CORP.

Makati City
Philippine[s]

RE: SALE OF KUOK PROPERTIES INC., (KPP)

As agreed upon the above mentioned stock will be sold to a party with the

995
following conditions attached:

NUMBER OF SHARES : 5,800,000/SHARES

AMOUNT @ SHARE : PHP 0.14

CHARGES : Sellers Account

BUY BACK DATE : after 30 days (used on transaction date)

BUY BACK AMOUNT : PHP 0.18

DATE OF EXECUTION : APRIL 01, 200[4]

KIND OF TRANSACTION : FULL CROSS TO SELLER

COLLATERAL : KPP SHARES/PROPERTY

For and behalf of EIB Securities.

[Signed]
PAULINE TAN27

April 01, 2004

FORUM HOLDINGS CORP.

Makati City
Philippine[s]

RE: SALE OF KUOK PROPERTIES INC., (KPP)

As agreed upon the above mentioned stock will be sold to a party with the
following conditions attached:

NUMBER OF SHARES : 15,560,000/SHARES

AMOUNT @ SHARE : PHP 0.14

CHARGES : Sellers Account

996
BUY BACK DATE : after 30 days (used on transaction date)

BUY BACK AMOUNT : PHP 0.18

DATE OF EXECUTION : APRIL 01, 200[4]

KIND OF TRANSACTION : FULL CROSS TO SELLER

COLLATERAL : KPP SHARES/PROPERTY

For and behalf of EIB Securities.

[Signed]
PAULINE TAN28

April 01, 2004

MIZPAH HOLDINGS INC.

Makati City
Philippine[s]

RE: SALE OF KUOK PROPERTIES INC., (KPP)

As agreed upon the above mentioned stock will be sold to a party with the
following conditions attached:

NUMBER OF SHARES : 8,430,000/SHARES

AMOUNT @ SHARE : PHP 0.14

CHARGES : Sellers Account

BUY BACK DATE : after 30 days (used on transaction date)

BUY BACK AMOUNT : PHP 0.18

DATE OF EXECUTION : APRIL 01, 200[4]

KIND OF TRANSACTION : FULL CROSS TO SELLER

997
COLLATERAL : KPP SHARES/PROPERTY

For and behalf of EIB Securities.

[Signed]
PAULINE TAN29

April 01, 2004

REXLON REALTY GROUP INC.

Makati City
Philippine[s]

RE: SALE OF KUOK PROPERTIES INC., (KPP)

As agreed upon the above mentioned stock will be sold to a party with the
following conditions attached:

NUMBER OF SHARES : 5,000,000/SHARES

AMOUNT @ SHARE : PHP 0.14

CHARGES : Sellers Account

BUY BACK DATE : after 30 days (used on transaction date)

BUY BACK AMOUNT : PHP 0.18

DATE OF EXECUTION : APRIL 01, 200[4]

KIND OF TRANSACTION : FULL CROSS TO SELLER

COLLATERAL : KPP SHARES/PROPERTY

For and behalf of EIB Securities.

[Signed]
PAULINE TAN30

998
April 01, 2004

RECOVERY DEVELOPMENT CORP.

Makati City
Philippine[s]

RE: SALE OF KUOK PROPERTIES INC., (KPP)

As agreed upon the above mentioned stock will be sold to a party with the
following conditions attached:

NUMBER OF SHARES : 12,350,000/SHARES

AMOUNT @ SHARE : PHP 0.14

CHARGES : Sellers Account

BUY BACK DATE : after 30 days (used on transaction date)

BUY BACK AMOUNT : PHP 0.18

DATE OF EXECUTION : APRIL 01, 200[4]

KIND OF TRANSACTION : FULL CROSS TO SELLER

COLLATERAL : KPP SHARES/PROPERTY

For and behalf of EIB Securities.

[Signed]
PAULINE TAN31

April 01, 2004

PACIFIC WIDE REALTY DEVELOPMENT CORP.

Makati City
Philippine[s]

RE: SALE OF KUOK PROPERTIES INC., (KPP)

As agreed upon the above mentioned stock will be sold to a party with the

999
 following conditions attached:

NUMBER OF SHARES : 9,000,000/SHARES

AMOUNT @ SHARE : PHP 0.14

CHARGES : Sellers Account

BUY BACK DATE : after 30 days (used on transaction date)

BUY BACK AMOUNT : PHP 0.18

DATE OF EXECUTION : APRIL 01, 200[4]

KIND OF TRANSACTION : FULL CROSS TO SELLER

COLLATERAL : KPP SHARES/PROPERTY

For and behalf of EIB Securities

[Signed]
PAULINE TAN32

The determination of the collateral in said notices can easily be made from the notices
itself and Sec. 7 of the SDAA. The KPP shares stated in the notices refer to the KPP
shares owned by the "Petitioners" and sold to third parties by EIB. The word "Property"
in the notices is elucidated in the aforementioned Sec. 7 as "all monies and/or securities
and/or all other property of the Client in the company’s custody or control held from time
to time (Client’s Property) x x x." These properties shall be subject to "a general lien in
favour of the Company for the discharge of all or any indebtedness and other
obligations of the client to [EIB]." 33 Thus, the DMCI shares owned by petitioners are
covered by the word "Property" in the Notices of Sale.

On the monetary claims by petitioners against EIB, said claims are not a bar to a
judgment on the pleadings. While it was averred by petitioners under par. 9 of the
complaint that they suffered a loss of PhP 4.5 million from the sale of the DMCI shares,
the claim for actual damages was not set up as a relief in the prayer and, therefore, the
Manchester doctrine precludes such award to petitioners. Anent the claim for moral
damages of PhP 3 million, exemplary damages of PhP 3 million, and attorney’s fees of
PhP 2 million, the claim is not proper in a judgment on the pleadings in the absence of
proof.34 Sans such proof extent on record, the claim for damages is a non-issue.

1000
In sum, there are no genuine issues that cannot be determined based on the pleadings.
Ergo, the assailed October 18, 2005 Resolution of the Makati City RTC granting
judgment on the pleadings is in accord with Rule 34 of the Rules of Court and settled
jurisprudence.

Authority of EIB to Sell DMCI Shares of Petitioners

Petitioners assert the inapplicability of Sec. 7 of the SDAA to their liability to reacquire
the KKP shares, as the DMCI shares were not sold to pay for their PhP 70 million
obligation to EIB but to settle their obligation to the buyers of their KKP shares.

Petitioners’ position is impressed with merit. We rule that EIB has no legal authority to
sell the DMCI shares for the purpose or reacquiring the KKP shares.

Sec. 7 of the SDAA pertains to outstanding obligations or indebtedness of petitioners to

EIB but does not cover any obligation of petitioners to third-party purchasers to
reacquire its KKP shares under the "full cross to seller" buy-back obligation subject of
the various notices of sale.

Let us scrutinize anew Sec. 7 of the SDAA:

7. Lien

The client agrees that all monies and/or securities and/or all other property of the Client
(plaintiffs) in the Company’s (defendant) custody or control held from time to time shall
be subject to a general lien in favour of Company for the discharge of all or any
indebtedness of the Client to the Company. The Client shall not be entitled to withdraw
any monies or securities held by the Company pending the payment in full to the
Company of any indebtedness of the Client to the Company. The company shall be
entitled at any time and without notice to the Client to retain, apply, sell or dispose of all
or any of the [client’s] property if any such obligation or liability is not discharged in full
by the client when due or on demand in or towards the payment and discharge of such
obligation or liability and the Company shall be under no duty to the client as to the price
obtained or any losses or liabilities incurred or arising in respect of any such sale or
disposal. Subject to the relevant law and regulation on the matter, the client hereby
authorizes the Company, on his/its behalf, at any time and without notice to the client’s
property if any such obligation or liability is not discharged. (Emphasis supplied.)

As couched, the lien in favor of EIB attaches to any money, securities, or properties of
petitioners which are in EIB’s possession for the discharge of all or any indebtedness
and obligations of petitioners to EIB. For this, petitioners are also barred from
withdrawing its assets that are in the possession of EIB pending full payment by
petitioners of their indebtedness to EIB. The above proviso also gives EIB the authority
to sell or dispose of petitioners’ securities or properties in its possession to pay for
petitioners’ indebtedness to EIB. It is, thus, evident from the above SDAA provision that
said lien and authority granted to EIB to dispose of petitioners’ securities or

1001
properties in the former’s possession apply only to discharge and pay off
petitioners’ indebtedness to EIB and nothing more.

Sec. 7 of the SDAA does not apply to petitioners’ obligations to third-party purchasers of
their KKP shares under the "full cross to seller" obligation, and certainly EIB could not
use said provision for the repurchase of the KKP shares. Indubitably, the sale of the
DMCI shares made by EIB is null and void for lack of authority to do so, for petitioners
never gave their consent or permission to the sale.

Moreover, Article 1881 of the Civil Code provides that "the agent must act within the
scope of his authority." Pursuant to the authority given by the principal, the agent is
granted the right "to affect the legal relations of his principal by the performance of acts
effectuated in accordance with the principal’s manifestation of consent." 35 In the case at
bar, the scope of authority of EIB as agent of petitioners is "to retain, apply, sell or
dispose of all or any of the client’s [petitioners’] property," if all or any indebtedness or
other obligations of petitioners to EIB are not discharged in full by petitioners "when due
or on demand in or towards the payment and discharge of such obligation or liability."
The right to sell or dispose of the properties of petitioners by EIB is unequivocally
confined to payment of the obligations and liabilities of petitioners to EIB and none
other. Thus, when EIB sold the DMCI shares to buy back the KKP shares, it paid the
proceeds to the vendees of said shares, the act of which is clearly an obligation to a
third party and, hence, is beyond the ambit of its authority as agent. Such act is surely
illegal and does not bind petitioners as principals of EIB.

As a last-ditch effort, EIB seeks refuge from the notices of sales it issued to petitioners:

Let us scrutinize a typical notice of sale issued to petitioners, thus:

RE: SALE OF KUOK PROPERTIES INC. (KPP)

As agreed upon the above mentioned stock will be sold to a party with the following
conditions attached:

NUMBER OF SHARES : x x x/SHARES

AMOUNT @ SHARE : PHP 0.14

CHARGES : Sellers Account

BUY BACK DATE : After 30 days [based on transaction Date]

BUY BACK AMOUNT : PHP 0.18

DATE OF EXECUTION : APRIL 1, 200[4]

KIND OF TRANSACTION : FULL CROSS TO SELLER

1002
COLLATERAL : KPP SHARES/PROPERTY

For and behalf of EIB Securities.

[Signed]
PAULINE TAN

The above notice states that the collateral is KPP Shares/Property.

EIB asserts that the word "Property" refers to all the "monies and/or securities and/or all
other property" of petitioners in EIB’s custody or control pursuant to Sec. 7 of the SDAA.
This postulation is correct. The DMCI shares are included in the word "Property" under
Sec. 7 of the SDAA. However, EIB’s theory stops there. As earlier explained, the SDAA,
more particularly its Sec. 7, cannot be made the legal basis for EIB to sell petitioners’
properties in its possession or custody to pay petitioners’ obligations to third parties.
The SDAA is confined only to obligations of petitioners to EIB and not to third parties
like the purchases of the KKP shares. Thus, the sale of the DMCI shares to buy back
the KPP shares is illegal and ineffective, since it is only answerable for the liabilities of
petitioners to EIB and no one else.

The notices of sale issued by EIB covering the sale of the KKP shares of petitioners
clearly show that the very same KKP shares sold to third parties albeit under a buy-back
arrangement and the "Property" of petitioners were made the collaterals to secure the
payment of the reacquisition. Since the possession of the KKP shares and the
"Property" were placed in EIB, a third party by common agreement, then the accessory
contract in the case at bar is a contract of pledge governed by Arts. 2085 to 2092 of the
Civil Code, which are provisions common to pledge and mortgage, and Arts. 2093 to
2139 on pledge.

The query is whether or not the pledge on "KKP Shares/Property" is valid. The answer
is no.

Art. 2085 of the Civil Code provides:

Art. 2085. The following requisites are essential to the contracts of pledge and
mortgage:

(1) That they be constituted to secure the fulfillment of a principal obligation;

(2) That the pledgor or mortgator be the absolute owner of the thing pledged or
mortgaged;

(3) That the persons constituting the pledge or mortgage have the free disposal
of their property, and in the absence thereof, that they be legally authorized for
the purpose.

1003
Third persons who are not parties to the principal obligation may secure the latter by
pledging or mortgaging their own property.

It is indispensable that the pledgor is the absolute owner of the thing pledged (second
element). In the case at bar, the KKP shares were sold to third parties by EIB at PhP
0.14 and, as a result, petitioners lost their right of ownership over the KKP shares.
Hence, from the time of the sale, petitioners were no longer the absolute owners of said
shares, making the pledge constituted over said KKP shares null and void. 36

Also, it is necessary under Art. 2085 that the person constituting the pledge has the free
disposal of his or her property, and in the absence of that free disposal, that he or she
be legally authorized for the purpose (third element). This element is absent in the case
at bar. Petitioners no longer have the free disposal of the KKP shares when EIB sold
said shares at the stock exchange as they are no longer the owners of the shares.
Thus, there was no valid pledge constituted on the KKP shares.

The notice of sale, assuming it incorporates the accessory contract of pledge, merely
stated "Property" as collateral in addition to KKP shares. This is a blatant violation of
Art. 2096, which provides that "a pledge shall not take effect against third persons if
description of the thing pledged and the date of the pledge do not appear in a public
instrument." The thing pledged must be amply and clearly described and specifically
identified. Evidently, the word "Property" is vague, broad, and confusing as to the
ownership. Hence, it does not satisfy the prescription under Art. 2096 of the Code.
Worse, the notice of sale is not in a public instrument as required by said legal
provision; therefore, the pledge on "property" is void and without legal effect.

Moreover, the notices of sale must be construed against EIB. Any ambiguity in a
contract whose terms are susceptible of different interpretations must be read against
the party who drafted it.371avvphi1

The DMCI shares which EIB construed to be included within the ambit of the word
"property" cannot be considered the thing pledged to secure the buy back of the KKP
shares in view of the vagueness of the word "Property" and the non-applicability of the
SDAA to the sale of the KKP shares.

Lastly, the appellate court ruled that the affirmative defense of estoppel was raised by
EIB due to the alleged failure of petitioners to object to the sale of the DMCI shares.

The principle of estoppel rests on the rule that:

[W]here a party, by his or her deed or conduct, has induced another to act in particular
manner, estoppel effectively bars the former from adopting an inconsistent position,
attitude or course of conduct that causes loss or injury to the latter. The doctrine of
estoppel is based upon the grounds of public policy, fair dealing, good faith and justice,
and its purpose is to forbid one to speak against his own act, representations, or

1004
commitments to the injury of one whom they were directed and who reasonably relied
thereon.38

The essential elements of estoppel as related to the party estopped are: (1) conduct
which amounts to a false representation or concealment of material facts, or, at least,
which calculated to convey the impression that the facts are otherwise than, and
inconsistent with, those which the party subsequently attempts to assert; (2) intention,
or at least expectation, that such conduct shall be acted upon by the other party; and (3)
knowledge, actual or constructive, of the actual facts. 39

Reliance by respondent EIB on estoppel is misplaced. The first element does not obtain
from the factual setting presented by the pleadings, attachments, and admissions.
There is no allegation that petitioners performed an act which can be considered as
false representation that EIB can sell their DMCI shares to reacquire the KKP shares, or
concealed a material fact. Sec. 7 of the SDAA is unequivocal that EIB can only sell the
shares of petitioners for payment of any indebtedness to EIB. There was no act or
concealment on the part of petitioners that made known or conveyed the impression to
EIB that it can sell the DMCI shares of petitioners for the latter’s indebtedness or
obligation to a third party in contravention of EIB’s authority under Sec. 7 of the SDAA.
Moreover, the second element is also absent. There was no showing that petitioners
authorized EIB to pay a third party from the proceeds of the sale of their DMCI shares.
Lastly, on the third element, petitioners had no knowledge of the fact that the proceeds
of the sale of DMCI shares were paid to buy back the KPP shares. Reliance of EIB on
the sales confirmation receipts40 issued to petitioners does not help any. The condition
printed on said receipts explicitly states that the "securities shall secure [petitioners’]
liabilities to e.securities." Even the account statements 41 issued by EIB do not reflect the
payment of the proceeds of the sale of DMCI shares owned by petitioners to buy back
the KKP shares previously owned by petitioners. All that these accounts show is the
crediting of the proceeds of the sale of DMCI shares to petitioners and nothing more.
There was no disclosure of the purpose of the sale of the DMCI shares. Clearly, there is
no estoppel.

WHEREFORE, the petition is GRANTED. The CA Decision dated April 11, 2008 in CA-
G.R. CV No. 87713 is REVERSED and SET ASIDE. The RTC Resolution dated
October 18, 2005 in Civil Case No. 05-178 is hereby REINSTATED.

No costs.

SO ORDERED.

THIRD DIVISION

March 25, 2015

G.R. No. 202989

1005
COMGLASCO CORPORATION/AGUILA GLASS, Petitioner,
vs.
SANTOS CAR CHECK CENTER CORPORATION, Respondent.

DECISION

REYES, J.:

On August 16, 2000, respondent Santos Car Check Center Corporation (Santos), owner
of a showroom located at 75 Delgado Street, in Iloilo City, leased out the said space to
petitioner Comglasco Corporation (Comglasco), an entity engaged in the sale,
replacement and repair of automobile windshields, for a period of five years at a
monthly rental of P60,000.00 for the first year, P66,000.00 on the second year, and
P72,600.00 on the third through fifth years.1

On October 4, 2001, Comglasco advised Santos through a letter 2 that it was pre-
terminating their lease contract effective December 1, 2001. Santos refused to accede
to the pre-termination, reminding Comglasco that their contract was for five years. On
January 15, 2002, Comglasco vacated the leased premises and stopped paying any
further rentals. Santos sent several demand letters, which Comglasco completely
ignored. On September 15, 2003, Santos sent its final demand letter, 3 which Comglasco
again ignored. On October 20, 2003, Santos filed suit for breach of contract. 4

Summons and a copy of the complaint, along with the annexes, were served on
Comglasco on January 21, 2004, but it moved to dismiss the complaint for improper
service. The Regional Trial Court (RTC) of Iloilo City, Branch 37, dismissed the motion
and ordered the summons served anew. On June 28, 2004, Comglasco filed its
Answer.5 Santos moved for a judgment on the pleadings, which the RTC granted. On
August 18, 2004, the trial court rendered its judgment, 6 the dispositive portion of which
reads:

WHEREFORE, judgment is hereby rendered in favor of [Santos] and against

[Comglasco]:

1.Ordering [Comglasco] to faithfully comply with [its] obligation under the Contract of
Lease and pay its unpaid rentals starting January 16, 2002 to August 15, 2003 in the
total amount of Php1,333,200.00, plus 12% interest per annum until fully paid;

2.To pay [Santos]:

a)Php200,000.00 as attorney’s fees;

b)[Php]50,000.00 as litigation expenses;

c)[Php]400,000.00 as exemplary damages.

1006
3.Costs of the suit.

SO ORDERED.7

On February 14, 2005, Santos moved for execution pending Comglasco’s appeal, which
the trial court granted on May 12, 2005. In its appeal, Comglasco interposed the
following issues for resolution:

1.Whether or not judgment on the pleadings was properly invoked by the trial court as
basis for rendering its decision;

2.Whether or not material issues were raised in [Comglasco’s] Answer;

3.Whether or not damages may be granted by the trial court without proof and legal
basis.8

In its Decision9 dated August 10, 2011, the Court of Appeals (CA) affirmed the judgment
of the RTC but reduced the award of attorney’s fees to ?100,000.00 and deleted the
award of litigation expenses and exemplary damages.

Petition for Review to the Supreme Court

In this petition, Comglasco raises the following issues:

1.Whether or not judgment on the pleadings was properly invoked by the trial
court as basis for rendering its decision?

2.Whether or not material issues were raised in [Comglasco’s] answer?

3.Whether or not summary judgment or judgment on the pleadings is the proper

remedy for [Santos] under the circumstances of the present case?

4.Whether or not the amount deposited for advance rental and deposit should be
credited to [Comglasco’s] account?

5.Whether or not attorney’s fees may be granted by the trial court without proof
and legal basis?10

Paragraph 15 of the parties’ lease contract11 permits pre-termination with cause in the

first three years and without cause after the third year. Citing business reverses which it
ascribed to the 1997 Asian financial crisis, Comglasco insists that under Article 1267 of
the Civil Code it is exempted from its obligation under the contract, because its business
setback is the "cause" contemplated in their lease which authorized it to pre-terminate
the same. Article 1267 provides:

1007
Art. 1267. When the service has become so difficult as to be manifestly beyond the
contemplation of the parties, the obligor may also be released therefrom, in whole or in
part.

Comglasco argues that it cannot be said to have admitted in its Answer the material
allegations of the complaint precisely because it invoked therein a valid cause for its
decision to pre-terminate the lease before the lapse of three years; that therefore, in
view of its pleaded "cause" for reneging on its rentals (the 1997 Asian financial crisis),
the RTC should have ordered the reception of evidence for this purpose, after which a
summary judgment would then have been proper, not a judgment on the pleadings.
After all, Santos has claimed in its Motion for Summary Judgment that Comglasco’s
cited "cause" for pre-termination was fictitious or a sham, whereas in truth the prevailing
business climate which ensued after the 1997 currency crisis resulted in great difficulty
on its part to comply with the terms of the lease "as to be manifestly beyond the
contemplation of the parties"; thus, Comglasco should be deemed released from the
lease.

Next, Comglasco insists that its advance rentals and deposit totaling ?309,000.00
should be deducted from any sum awarded to Santos while it also insists that there is
no factual and legal basis for the award of damages.

Ruling of the Court

The petition is denied.

The first three issues being related will be discussed together.

Comglasco maintains that the RTC was wrong to rule that its answer to Santos’
complaint tendered no issue, or admitted the material allegations therein; that the court
should have heard it out on the reason it invoked to justify its action to pre-terminate the
parties’ lease; that therefore a summary judgment would have been the proper
recourse, after a hearing.

In Philippine National Construction Corporation v. CA 12 (PNCC), which also involves the

termination of a lease of property by the lessee "due to financial, as well as technical,
difficulties,"13 the Court ruled:

The obligation to pay rentals or deliver the thing in a contract of lease falls within the
prestation "to give"; hence, it is not covered within the scope of Article 1266. At any rate,
the unforeseen event and causes mentioned by petitioner are not the legal or physical
impossibilities contemplated in said article. Besides, petitioner failed to state specifically
the circumstances brought about by "the abrupt change in the political climate in the
country" except the alleged prevailing uncertainties in government policies on
infrastructure projects.1âwphi1

1008
The principle of rebus sic stantibus neither fits in with the facts of the case. Under this
theory, the parties stipulate in the light of certain prevailing conditions, and once these
conditions cease to exist, the contract also ceases to exist. This theory is said to be the
basis of Article 1267 of the Civil Code, which provides:

Art. 1267. When the service has become so difficult as to be manifestly beyond the
contemplation of the parties, the obligor may also be released therefrom, in whole or in
part.

This article, which enunciates the doctrine of unforeseen events, is not, however, an
absolute application of the principle of rebus sic stantibus, which would endanger the
security of contractual relations. The parties to the contract must be presumed to have
assumed the risks of unfavorable developments. It is therefore only in absolutely
exceptional changes of circumstances that equity demands assistance for the debtor.

In this case, petitioner wants this Court to believe that the abrupt change in the political
climate of the country after the EDSA Revolution and its poor financial condition
"rendered the performance of the lease contract impractical and inimical to the
corporate survival of the petitioner."

This Court cannot subscribe to this argument. As pointed out by private respondents:

xxxx

Anent petitioner’s alleged poor financial condition, the same will neither release
petitioner from the binding effect of the contract of lease. As held in Central Bank v.
Court of Appeals, cited by private respondents, mere pecuniary inability to fulfill an
engagement does not discharge a contractual obligation, nor does it constitute a
defense to an action for specific performance. 14

Relying on Article 1267 of the Civil Code to justify its decision to pre-terminate its lease
with Santos, Comglasco invokes the 1997 Asian currency crisis as causing it much
difficulty in meeting its obligations. But in PNCC,15 the Court held that the payment of
lease rentals does not involve a prestation "to do" envisaged in Articles 1266 and 1267
which has been rendered legally or physically impossible without the fault of the obligor-
lessor. Article 1267 speaks of a prestation involving service which has been rendered
so difficult by unforeseen subsequent events as to be manifestly beyond the
contemplation of the parties. To be sure, the Asian currency crisis befell the region from
July 1997 and for sometime thereafter, but Comglasco cannot be permitted to blame its
difficulties on the said regional economic phenomenon because it entered into the
subject lease only on August 16, 2000, more than three years after it began, and by
then Comglasco had known what business risks it assumed when it opened a new shop
in Iloilo City.

This situation is no different from the Court’s finding in PNCC wherein PNCC cited the
assassination of Senator Benigno Aquino Jr. (Senator Aquino) on August 21, 1983 and

1009
the ensuing national political and economic crises as putting it in such a difficult
business climate that it should be deemed released from its lease contract. The Court
held that the political upheavals, turmoils, almost daily mass demonstrations,
unprecedented inflation, and peace and order deterioration which followed Senator
Aquino’s death were a matter of judicial notice, yet despite this business climate, PNCC
knowingly entered into a lease with therein respondents on November 18, 1985, doing
so with open eyes of the deteriorating conditions of the country. The Court rules now, as
in PNCC, that there are no "absolutely exceptional changes of circumstances that equity
demands assistance for the debtor."16

As found by the CA, Comglasco’s Answer admitted the material allegations in the
complaint, to wit: a) that Santos holds absolute title to a showroom space; b) that
Comglasco leased the said showroom from Santos; c) that after a little over a year,
Comglasco pre-terminated the lease; d) that, disregarding Santos’ rejection of the pre-
termination of their lease, Comglasco vacated the leased premises on January 15,
2002; e) that Comglasco never denied the existence and validity of the parties’ lease
contract. Specifically, the CA noted that Paragraph 2 of the Answer admitted the
allegations in Paragraphs 2, 3 and 4 of the complaint that the lease was for five years,
starting on August 16, 2000 and to expire on August 15, 2005, at a monthly rental of ?
60,000.00 on the first year, ?66,000.00 on the second year, and ?72,600.00 on the third
up to the fifth year.

The RTC acted correctly in resorting to Section 1 of Rule 34, on Judgment on the
Pleadings, to cut short a needless trial.1âwphi1 This Court agrees with the CA that
Comglasco cannot cite Article 1267 of the Civil Code, and that it must be deemed to
have admitted the material allegations in the complaint. Section 1, Rule 34 reads:

Sec. 1. Judgment on the pleadings. - Where an answer fails to tender an issue, or

otherwise admits the material allegations of the adverse party’s pleading, the court may,
on motion of that party, direct judgment on such pleading. However, in actions for
declaration of nullity or annulment of marriage or for legal separation, the material facts
alleged in the complaint shall always be proved.

A judgment on the pleadings is a judgment on the facts as pleaded, 17 and is based

exclusively upon the allegations appearing in the pleadings of the parties and the
accompanying annexes.18 It is settled that the trial court has the discretion to grant a
motion for judgment on the pleadings filed by a party if there is no controverted matter in
the case after the answer is filed.19 A genuine issue of fact is that which requires the
presentation of evidence, as distinguished from a sham, fictitious, contrived or false
issue.20 Come to think of it, under Rule 35, on Summary Judgments, Comglasco had
recourse to move for summary judgment, wherein it could have adduced supporting
evidence to justify its action on the parties' lease, but it did not do so. Section 2 of Rule
35 provides:

Sec. 2. Summary judgment for defending party. - A party against whom a claim,

counterclaim, or cross-claim is asserted or a declaratory relief is sought may, at any

1010
time, move with supporting affidavits, depositions or admissions for a summary
judgment in his favor as to all or any part thereof.

Concerning, now, whether Comglasco's alleged rental deposit and advance rentals of
P309,000.00 should be credited to Comglasco's account, let it suffice to state that it
never raised this matter in its answer to the complaint, nor in its appeal to the CA.
Certainly, it cannot do so now.

Finally, as to whether attorney's fees may be recovered by Santos, Article 2208(2) of

the Civil Code justifies the award thereof, in the absence of stipulation, where the
defendant's act or omission has compelled the plaintiff to incur expenses to protect his
interest. The pre-termination of the lease by Comglasco was not due to any fault of
Santos, and Comglasco completely ignored all four demands of Santos to pay the
rentals due from January 16, 2002 to August 15, 2003, thereby compelling Santos to
sue to obtain relief. It is true that the policy of the Court is that no premium should be
placed on the right to litigate,21 but it is also true that attorney's fees are in the nature of
actual damages, the reason being that litigation costs money. 22 But the Court agrees
with the CA that the lesser amount of Pl 00,000.00 it awarded to Santos instead of
P200,000.00 adjudged by the RTC, is more reasonable.

WHEREFORE, premises considered, the petition is DENIED for lack of merit.

SO ORDERED.

RULE 35. SUMMARY JUDGMENTS

THIRD DIVISION

G.R. No. 178899               November 15, 2010

PHILIPPINE BUSINESS BANK, Petitioner,

vs.
FELIPE CHUA, Respondent.

DECISION

BRION, J.:

We resolve the petition for review on certiorari 1 filed by Philippine Business Bank (PBB)
challenging the decision of the Court of Appeals (CA) in CA-G.R. SP No. 94883 dated
February 8, 2007,2 insofar as it overturned the Regional Trial Court’s (RTC’s) order
dated December 16, 2005 declaring the finality of its Partial Summary Judgment and
granting the issuance of a writ of execution against respondent Felipe Chua
(respondent Chua). PBB also seeks to overturn the resolution of the CA dated July 18,
2007, which denied its motion for reconsideration.

1011
 FACTUAL ANTECEDENTS

From the records, the following facts are not in dispute.

On March 22, 2002, Tomas Tan (Tan), a stockholder and director/Treasurer of CST
Enterprises, Inc. (CST), filed a derivative suit for the Declaration of Unenforceability of
Promissory Notes and Mortgage, Nullity of Secretary’s Certificate, Injunction, Damages
with Prayer for the Issuance of Temporary Restraining Order/Writ of Preliminary
Injunction against PBB, Francis Lee, Alfredo Yao, Rodulfo Besinga, Stephen Taala,
Rose Robles, Henry Ramos, Yu Heng, Mabuhay Sugar Central, Inc., Nancy Chan,
Henry Chan, John Dennis Chua, Jaime Soriano, Voltaire Uychutin, Peter Salud, Edgar
Lo, respondent Felipe Chua, and John Does before the Makati City Regional Trial
Court.3

In Tan’s amended complaint dated January 9, 2003, he alleged that sometime in

February 2001, before he went abroad for medical treatment, he turned over to
respondent Chua, a director and the President of CST, the original copies of Transfer
Certificate of Title Nos. 124275 and 157581, titles to lands owned by, and registered in
the name of, CST. In January 2002, the respondent informed him that CST’s properties
had been fraudulently used as collateral for loans allegedly taken out in CST’s name,
but without proper authority from CST stockholders and/or the Board of Directors. 4

From his investigation, Tan discovered that a certain Atty. Jaime Soriano had issued a
Secretary’s certificate, which stated that John Dennis Chua was authorized during a
duly constituted CST board meeting to open a bank account and obtain credit facilities
under the name of CST with PBB. This Secretary’s Certificate also authorized John
Dennis Chua to use CST’s properties as security for these loans. 5 Using this Secretary’s
Certificate, John Dennis Chua took out loans with PBB in the total amount of Ninety-
One Million One Hundred Thousand Pesos (₱91,100,000.00), 6 and used CST
properties as collateral.7 Respondent Chua signed as co-maker with John Dennis Chua,
who signed both as the representative of CST, as well as in his personal capacity, on
six promissory notes to PBB to evidence parts of this loan. 8

When PBB threatened to foreclose the mortgage on these properties after CST
defaulted,9 Tan filed the present complaint, essentially arguing that the loans/promissory
notes and mortgage made out in CST’s name are unenforceable against it, since they
were entered into by persons who were unauthorized to bind the company. 10

In its Amended Answer,11 PBB claimed that the loans to CST, as well as the
corresponding mortgage over CST properties, were all valid and binding since the loan
applications and documents accomplished by John Dennis Chua were supported by the
duly accomplished secretary’s certificate, which authorized him to obtain credit facilities
in behalf of CST. In addition, the original copies of the titles to the properties were
offered to PBB as collaterals.

1012
PBB’s Amended Answer also included a cross-claim against respondent Chua,
demanding payment of the promissory notes he signed as co-maker with John Dennis
Chua.12

In respondent Chua’s Answer to the Cross-Claim of PBB, 13 he claimed that he never
applied for a loan with the PBB. He further denied authorizing John Dennis Chua to
apply for any loans in CST’s name, or to use CST properties as security for any
loans.14 Nevertheless, he admitted that he signed, as co-maker, six promissory notes
covering the loans obtained by John Dennis Chua with PBB. According to respondent
Chua, he executed these promissory notes after the loans had already been
consummated, "in a sincere effort to persuade John Dennis Chua to pay off the
unauthorized loan and retrieve from cross-claimant PBB the CST titles." 15

PBB subsequently filed a Motion for Partial Summary Judgment based on Section 1,
Rule 35 of the 1997 Rules of Civil Procedure (Rules), claiming that since respondent
Chua already admitted the execution of the promissory notes in favor of PBB amounting
to Seventy Five Million Pesos (₱75,000,000.00), 16 insofar as its cross-claim against him
was concerned, there was no genuine issue on any material fact on the issue of his
liability to PBB. PBB argued that although respondent Chua claimed that he signed the
promissory notes merely to persuade John Dennis Chua to pay off his loan to PBB, he
was still liable as an accommodation party under Section 29 of the Negotiable
Instruments Law.17

THE RTC’S PARTIAL SUMMARY JUDGMENT

Acting on PBB’s motion, the RTC issued a partial summary judgment on PBB’s cross-
claim on July 27, 2005, finding respondent Chua liable as a signatory to the promissory
notes amounting to Seventy-Five Million Pesos (₱75,000,000.00). The RTC reasoned
that by signing as a co-maker, he obligated himself to pay the amount indicated in the
promissory notes, even if he received no consideration in return. Thus, the RTC ordered
him to pay PBB the amount of ₱75,000,000.00, plus interests and costs. 18

In its order dated December 16, 2005, the RTC resolved respondent Chua’s Notice of
Appeal, as well as PBB’s Motion to Disallow Appeal and to Issue Execution. Citing
Section 1, Rule 41 of the Rules, the RTC ruled that respondent Chua could not file a
notice of appeal. Instead, he should have filed a special civil action for certiorari under
Rule 65 of the Rules. However, since the period for filing a certiorari petition had already
lapsed without respondent filing any petition, the partial summary judgment had become
final and executory. Thus, it ordered the issuance of a writ of execution for the
satisfaction of the partial summary judgment in favor of PBB. 19

On December 21, 2005, the RTC issued an order appointing Renato Flora as the
special sheriff to implement the writ of execution. In line with this order, Renato Flora,
on December 23, 2005, issued a Notice of Levy and Sale on Execution of Personal
Properties, addressed to respondent Chua. He proceeded with the execution sale, and
on December 28, 2005, he issued a certificate of sale over respondent Chua’s 900

1013
shares of stock in CST in favor of PBB. He also posted a notice of sheriff’s sale on
January 10, 2006 over respondent Chua’s five parcels of land located in Las Pinas,
Pasay City, and Muntinlupa.20

THE COURT OF APPEALS DECISION

Respondent Chua filed a petition for certiorari and mandamus with the CA to challenge:
(a) the December 16, 2005 order, granting PBB’s motion to disallow his appeal; (b) the
December 21, 2005 order, granting PBB’s motion to appoint Renato Flora as special
sheriff to implement the writ of execution; and (c) the February 16, 2006 order denying
his motion for reconsideration and to suspend execution. In essence, respondent Chua
alleged that the RTC acted with grave abuse of discretion in disallowing his appeal of
the partial summary judgment, and in issuing a writ of execution. Significantly,
respondent Chua did not question the propriety of the partial summary judgment.

On February 8, 2007, the CA issued the assailed decision, partly affirming the RTC
order dated December 16, 2005 on the matter of the disallowance of respondent Chua’s
appeal. The CA held that respondent Chua could not appeal the partial summary
judgment while the main case remained pending, in keeping with Section 1(g), Rule 41
of the Rules.

However, the CA held that the RTC committed grave abuse of discretion when it issued
the writ of execution against respondent Chua. As found by the CA, the RTC grievously
erred when it held that the partial judgment had become final and executory when
respondent Chua failed to avail of the proper remedy of certiorari within the 60 day
reglementary period under Rule 65. Since a partial summary judgment does not finally
dispose of the action, it is merely an interlocutory, not a final, order. Thus, it could not
attain finality.

The CA further noted that certiorari is an independent action and not part of the appeal
proceedings, and failure to file a certiorari petition would not result in the finality of the
judgment or final order. The RTC, thus, committed grave abuse of discretion amounting
to lack of jurisdiction when it granted the issuance of a writ of execution, and the
corresponding writ of execution issued by the court a quo, as well as the subsequent
implementing proceedings, were void.

THE PETITION

PBB submits two issues for our resolution:

I.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED

AN ERROR IN APPLYING JURISPRUDENCE NOT ON ALL FOURS [WITH]
THE FACTUAL BACKDROP OF THE CASE.

1014
 II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED

AN ERROR IN RECALLING AND SETTING ASIDE THE WRIT OF EXECUTION
AND ALL THE PROCEEDINGS TAKEN FOR ITS IMPLEMENTATION ON THE
WRONG NOTION THAT THE PARTIAL SUMMARY JUDGMENT HAS NOT
BECOME FINAL AND EXECUTORY.

THE RULING

We DENY the petition for being unmeritorious.

Nature of Partial Summary Judgment

PBB’s motion for partial summary judgment against respondent Chua was based on
Section 1, Rule 35 of the Rules, which provides:

Section 1. Summary Judgment for claimant. - A party seeking to recover upon a claim,
counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the
pleading in answer thereto has been served, move with supporting affidavits,
depositions or admissions for a summary judgment in his favor upon all or any part
thereof.

A summary judgment, or accelerated judgment, is a procedural technique to promptly

dispose of cases where the facts appear undisputed and certain from the pleadings,
depositions, admissions and affidavits on record, or for weeding out sham claims or
defenses at an early stage of the litigation to avoid the expense and loss of time
involved in a trial.21 When the pleadings on file show that there are no genuine issues of
fact to be tried, the Rules allow a party to obtain immediate relief by way of summary
judgment, that is, when the facts are not in dispute, the court is allowed to decide the
case summarily by applying the law to the material facts. 22

The rendition by the court of a summary judgment does not always result in the full
adjudication of all the issues raised in a case. For these instances, Section 4, Rule 35 of
the Rules provides:

Section 4. Case not fully adjudicated on motion. – If on motion under this Rule,
judgment is not rendered upon the whole case or for all the reliefs sought and a trial is
necessary, the court at the hearing of the motion, by examining the pleadings and the
evidence before it and by interrogating counsel shall ascertain what material facts exist
without substantial controversy and what are actually and in good faith controverted. It
shall thereupon make an order specifying the facts that appear without substantial
controversy, including the extent to which the amount of damages or other relief is not in
controversy, and directing such further proceedings in the action as are just. The facts
so specified shall be deemed established, and the trial shall be conducted on the
controverted facts accordingly.

1015
This is what is referred to as a partial summary judgment. A careful reading of this
section reveals that a partial summary judgment was never intended to be considered a
"final judgment," as it does not "[put] an end to an action at law by declaring that the
plaintiff either has or has not entitled himself to recover the remedy he sues for." 23 The
Rules provide for a partial summary judgment as a means to simplify the trial process
by allowing the court to focus the trial only on the assailed facts, considering as
established those facts which are not in dispute.

After this sifting process, the court is instructed to issue an order, the partial summary
judgment, which specifies the disputed facts that have to be settled in the course of trial.
In this way, the partial summary judgment is more akin to a record of pre-trial, 24 an
interlocutory order, rather than a final judgment.

The differences between a "final judgment" and an "interlocutory order" are well-
established. We said in Denso (Phils.) Inc. v. Intermediate Appellate Court 25 that:

[A] final judgment or order is one that finally disposes of a case, leaving nothing more to
be done by the Court in respect thereto, e.g., an adjudication on the merits which, on
the basis of the evidence presented at the trial, declares categorically what the rights
and obligations of the parties are and which party is in the right; or a judgment or order
that dismisses an action on the ground, for instance, of res judicata or prescription.
Once rendered, the task of the Court is ended, as far as deciding the controversy or
determining the rights and liabilities of the litigants is concerned. Nothing more remains
to be done by the Court except to await the parties' next move . . . and ultimately, of
course, to cause the execution of the judgment once it becomes "final" or, to use the
established and more distinctive term, "final and executory."

xxxx

Conversely, an order that does not finally dispose of the case, and does not end the
Court's task of adjudicating the parties' contentions and determining their rights and
liabilities as regards each other, but obviously indicates that other things remain to be
done by the Court, is "interlocutory", e.g., an order denying a motion to dismiss under
Rule 16 of the Rules x x x Unlike a 'final judgment or order, which is appealable, as
above pointed out, an 'interlocutory order may not be questioned on appeal except only
as part of an appeal that may eventually be taken from the final judgment rendered in
the case.26

Bearing in mind these differences, there can be no doubt that the partial summary
judgment envisioned by the Rules is an interlocutory order that was never meant to be
treated separately from the main case. As we explained in Guevarra v. Court of
Appeals:27

It will be noted that the judgment in question is a "partial summary judgment." It was
rendered only with respect to the private respondents’ first and second causes of action
alleged in their complaint. It was not intended to cover the other prayers in the said

1016
complaint, nor the supplementary counterclaim filed by the petitioners against the
private respondents, nor the third-party complaint filed by the petitioners against the
Security Bank and Trust Company. A partial summary judgment "is not a final or
appealable judgment." (Moran, Vol. 2, 1970 Edition, p. 189, citing several cases.) "It is
merely a pre-trial adjudication that said issues in the case shall be deemed established
for the trial of the case." (Francisco, Rules of Court, Vol. II, p. 429.)

xxxx

The partial summary judgment rendered by the trial court being merely interlocutory and
not ‘a final judgment’, it is puerile to discuss whether the same became final and
executory due to the alleged failure to appeal said judgment within the supposed period
of appeal. What the rules contemplate is that the appeal from the partial summary
judgment shall be taken together with the judgment that may be rendered in the entire
case after a trial is conducted on the material facts on which a substantial controversy
exists. This is on the assumption that the partial summary judgment was validly
rendered, which, as shown above, is not true in the case at bar. 28

We reiterated this ruling in the cases of Province of Pangasinan v. Court of

Appeals29 and Government Service Insurance System v. Philippine Village Hotel, Inc. 30

Applicability of Guevarra

PBB asserts that our pronouncement in the cases of Guevarra, Province of Pangasinan,
and Government Service Insurance System cannot be applied to the present case
because these cases involve factual circumstances that are completely different from
the facts before us. While the partial summary judgments in the cited cases decided
only some of the causes of action presented, leaving other issues unresolved, PBB
insists that as far as its cross-claim against respondent Chua is concerned, the court a
quo’s partial summary judgment is a full and complete adjudication because the award
is for the whole claim.31 According to PBB, whatever the court decides as regards the
main case, this will not affect the liability of respondent Chua as a solidary debtor in the
promissory notes, since the creditor can proceed against any of the solidary debtors. In
other words, no substantial controversy exists between PBB and respondent Chua, and
there is nothing more to be done on this particular issue.

We do not agree with PBB’s submission.

In the Guevarra case, the Court held that the summary judgment rendered by the lower
court was in truth a partial summary judgment because it failed to resolve the other
causes of action in the complaint, as well as the counterclaim and the third party
complaint raised by the defendants.

Contrary to PBB’s assertions, the same could be said for the case presently before us.
The partial summary judgment in question resolved only the cross-claim made by PBB
against its co-defendant, respondent Chua, based on the latter’s admission that he

1017
signed promissory notes as a co-maker in favor of PBB. This is obvious from the
dispositive portion of the partial summary judgment, quoted below for convenient
reference:

WHEREFORE, a partial summary judgment is hereby rendered on the cross-claim of

cross-defendant Philippine Business Bank against cross-defendant Felipe Chua,
ordering the latter to pay the former as follows:

1. The amount of Ten Million (₱10,000,000.00) Pesos, representing the value of

the Promissory Note dated April 17, 2001, plus interest thereof at the rate of 16%
from April 12, 2002, until fully paid;

2. The amount of Twelve Million (₱12,000,000.00) Pesos, representing the value

of the Promissory Note dated April 5, 2001, plus interest thereon at the rate of
17% from April 1, 2002, until fully paid;

3. The amount of Twenty Three Million (₱23,000,000.00) Pesos, representing the

value of the Promissory Note dated April 25, 2001, plus interest thereon at the
rate of 16% from April 19, 2002, until fully paid;

4. The amount of Eight Million (₱8,000,000.00) Pesos, representing the value of

the Promissory Note dated June 20, 2001, plus interest thereon at the rate of
17% from June 20, 2001, until fully paid;

5. The amount of Seven Million (₱7,000,000.00) Pesos, representing the value of

the Promissory Note dated June 22, 2001, plus interest thereon at the rate of
17% from June 17, 2002, until fully paid;

6. The amount of Fifteen Million (₱15,000,000.00) Pesos, representing the value

of the Promissory Note dated June 28, 2001, plus interest thereon at the rate of
17% from June 24, 2002, until fully paid;

7. Plus cost of suit.

SO ORDERED. 32

Clearly, this partial summary judgment did not dispose of the case as the main issues
raised in plaintiff Tomas Tan’s complaint, i.e., the validity of the secretary’s certificate
which authorized John Dennis Chua to take out loans, and execute promissory notes
and mortgages for and on behalf of CST, as well as the validity of the resultant
promissory notes and mortgage executed for and on behalf of CST, remained
unresolved.

Chua shares common interest with co-defendant- debtors

1018
Still, PBB insists that the partial summary judgment is a final judgment as regards PBB’s
cross-claim against respondent Chua since respondent Chua’s liability will not be
affected by the resolution of the issues of the main case.

On its face, the promissory notes were executed by John Dennis Chua in two capacities
– as the alleged representative of CST, and in his personal capacity. Thus, while there
can be no question as to respondent Chua’s liability to PBB (since he already admitted
to executing these promissory notes as a co-maker), still, the court a quo’s findings on:
(a) whether John Dennis Chua was properly authorized to sign these promissory notes
on behalf of CST, and (b) whether John Dennis Chua actually signed these promissory
notes in his personal capacity, would certainly have the effect of determining whether
respondent Chua has the right to go after CST and/or John Dennis Chua for
reimbursement on any payment he makes on these promissory notes, pursuant to
Article 1217 of the Civil Code, which states:

Article 1217. Payment made by one of the solidary debtors extinguishes the obligation.
If two or more solidary debtors offer to pay, the creditor may choose which offer to
accept.

He who made the payment may claim from his co-debtors only the share which
corresponds to each, with the interest for the payment already made. If the payment is
made before the debt is due, no interest for the intervening period may be demanded.

When one of the solidary debtors cannot, because of his insolvency, reimburse his
share to the debtor paying the obligation, such share shall be borne by all his co-
debtors, in proportion to the debt of each.

In other words, PBB has a common cause of action against respondent Chua with his
alleged co-debtors, John Dennis Chua and CST, it would simply not be proper to treat
respondent Chua separately from his co-debtors.

Moreover, we cannot turn a blind eye to the clear intention of the trial court in rendering
a partial summary judgment. Had the trial court truly intended to treat PBB’s cross-claim
against respondent Chua separately, it could easily have ordered a separate trial via
Section 2, Rule 31 of the Rules, which states:

Section 2. Separate trials. – The court, in furtherance of convenience or to avoid

prejudice, may order a separate trial of any claim, cross-claim, counterclaim, or third-
party complaint, or of any separate issue or of any number of claims, cross-claims,
counterclaims, third-party complaints or issues.

That the trial court did not do so belies PBB’s contention.

It has also not escaped our attention that PBB, in its Motion to Disallow Appeal and to
Issue Execution Against Cross-Defendant Felipe Chua, 33 already admitted that the

1019
partial summary judgment is not a judgment or final order that completely disposes of
the case. In its own words:

xxxx

3. However, the remedy availed of by [respondent Chua] is patently erroneous

because under Rule 41 Section 1 of the Rules of Court, an appeal may be taken
only from a judgment or final order that completely disposes the case;

4. The judgment rendered by [the RTC] dated July 27, 2005 is only a partial
summary judgment against [respondent Chua], on the crossclaim of cross-
claimant Philippine Business Bank. The main case which involves the claim of
plaintiffs against the principal defendants is still pending and has not yet been
adjudged by [the RTC].34

Thus, PBB cannot now be allowed to deny the interlocutory nature of the partial
summary judgment.

Certiorari not the proper remedy

PBB also maintains that the partial summary judgment attained finality when respondent
Chua failed to file a certiorari petition, citing the last paragraph of Section 1, Rule 41 of
the Rules as basis. We quote:

Section 1. Subject of appeal. – An appeal maybe taken from a judgment or final order
that completely disposes of the case, or of a particular matter therein when declared by
these Rules to be appealable.

No appeal may be taken from:

xxxx

(g) A judgment or final order for or against one or more of several parties or in separate
claims, counterclaims, cross-claims and third party complaints, while the main case is
pending, unless the court allows an appeal therefrom;

xxxx

In all the above instances where the judgment, or final order is not appealable, the
aggrieved party may file an appropriate special civil action under Rule 65.

Contrary to PBB’s contention, however, certiorari was not the proper recourse for
respondent Chua. The propriety of the summary judgment may be corrected only on
appeal or other direct review, not a petition for certiorari, 35 since it imputes error on the
lower court’s judgment. It is well-settled that certiorari is not available to correct errors of

1020
procedure or mistakes in the judge’s findings and conclusions of law and fact. 36 As we
explained in Apostol v. Court of Appeals:37

As a legal recourse, the special civil action of certiorari is a limited form of review. The
jurisdiction of this Court is narrow in scope; it is restricted to resolving errors of
jurisdiction, not errors of judgment. Indeed, as long as the courts below act within their
jurisdiction, alleged errors committed in the exercise of their discretion will amount to
mere errors of judgment correctable by an appeal or a petition for review. 38

In light of these findings, we affirm the CA’s ruling that the partial summary judgment is
an interlocutory order which could not become a final and executory judgment,
notwithstanding respondent Chua’s failure to file a certiorari petition to challenge the
judgment. Accordingly, the RTC grievously erred when it issued the writ of execution
against respondent Chua.

In view of this conclusion, we find it unnecessary to resolve the issue raised by

respondent Chua on the validity of the RTC’s appointment of a special sheriff for the
implementation of the execution writ.

Propriety of Summary Judgment Reserved for Appeal

As a final point, we note that respondent Chua has raised with this Court the issue of
the propriety of the partial summary judgment issued by the RTC. Notably, respondent
Chua never raised this issue in his petition for certiorari before the CA. It is well settled
that no question will be entertained on appeal unless it has been raised in the
proceedings below.39 Basic considerations of due process impel the adoption of this
rule.40

Furthermore, this issue would be better resolved in the proper appeal, to be taken by
the parties once the court a quo has completely resolved all the issues involved in the
present case in a final judgment.1avvphi1 If we were to resolve this issue now, we
would be preempting the CA, which has primary jurisdiction over this issue.

Lastly, taking jurisdiction over this issue now would only result in multiple appeals from
a single case which concerns the same, or integrated, causes of action. As we said in
Santos v. People:41

Another recognized reason of the law in permitting appeal only from a final order or
judgment, and not from an interlocutory or incidental one, is to avoid multiplicity of
appeals in a single action, which must necessarily suspend the hearing and decision on
the merits of the case during the pendency of the appeal. If such appeal were allowed,
the trial on the merits of the case would necessarily be delayed for a considerable
length of time, and compel the adverse party to incur unnecessary expenses, for one of
the parties may interpose as many appeals as incidental questions may be raised by
him, and interlocutory orders rendered or issued by the lower court.

1021
WHEREFORE, premises considered, we DENY the petition for lack of merit and
AFFIRM the Decision of the Court of Appeals in CA-G.R. SP No. 94883 dated February
8, 2007, as well as its Resolution dated July 18, 2007. Costs against the petitioner,
Philippine Business Bank.

SO ORDERED.

RULE 36. JUDGMENTS

SECOND DIVISION

G.R. No. 170026               June 20, 2012

SHIMIZU PHILIPPINES CONTRACTORS, INC., Petitioner,

vs.
MRS. LETICIA B. MAGSALIN, doing business under the trade name "KAREN'S
TRADING," FGU INSURANCE CORPORATION, GODOFREDO GARCIA,
CONCORDIA GARCIA, and REYNALDO BAETIONG, Respondents.

DECISION

BRION, J.:

We resolve the petition for review on certiorari1 filed by Shimizu Philippines Contractors,

Inc. (petitioner) to challenge the twin resolutions of the Court of Appeals (CA)2 in CA-
G.R. CV No. 83096 which dismissed the appeal of the petitioner on the ground of lack
of jurisdiction3 and denied the petitioner’s subsequent motion for reconsideration. 4 The
appeal in CA-G.R. CV No. 83096 had sought to nullify the December 16, 2003 order 5 of
the Regional Trial Court (RTC) dismissing the petitioner’s complaint for sum of money
and damages on the ground of non prosequitur.

The Antecedents

The antecedent facts of the petition before us are not disputed.

An alleged breach of contract was the initial event that led to the present petition. The
petitioner claims that one Leticia Magsalin, doing business as "Karen’s Trading," had
breached their subcontract agreement for the supply, delivery, installation, and finishing
of parquet tiles for certain floors in the petitioner’s Makati City condominium project
called "The Regency at Salcedo." The breach triggered the agreement’s termination.
When Magsalin also refused to return the petitioner’s unliquidated advance payment
and to account for other monetary liabilities despite demand, the petitioner sent a notice
to respondent FGU Insurance Corporation (FGU Insurance) demandi

1022
ng damages pursuant to the surety and performance bonds the former had issued for
the subcontract.

On April 30, 2002, the petitioner filed a complaint docketed as Civil Case No. 02-488
against both Magsalin and FGU Insurance. It was raffled to Branch 61 of the RTC of
Makati City. The complaint sought Two Million Three Hundred Twenty-Nine Thousand
One Hundred Twenty Four Pesos and Sixty Centavos (₱2,329,124.60) as actual
damages for the breach of contract.

FGU Insurance was duly served with summons. With respect to Magsalin, however, the
corresponding officer’s return declared that both she and "Karen’s Trading" could not be
located at their given addresses, and that despite further efforts, their new addresses
could not be determined.

In August 2002, FGU Insurance filed a motion to dismiss the complaint. The petitioner
filed its opposition to the motion. The motion to dismiss was denied as well as the
ensuing motion for reconsideration, and FGU Insurance was obliged to file an answer.

In October 2002, in an effort to assist the RTC in acquiring jurisdiction over Magsalin,
the petitioner filed a motion for leave to serve summons on respondent Magsalin by way
of publication. In January 2003, the petitioner filed its reply to FGU Insurance’s answer.

In February 2003, FGU Insurance filed a motion for leave of court to file a third-party
complaint. Attached to the motion was the subject complaint, 6 with Reynaldo Baetiong,
Godofredo Garcia and Concordia Garcia named as third-party defendants. FGU
Insurance claims that the three had executed counter-guaranties over the surety and
performance bonds it executed for the subcontract with Magsalin and, hence, should be
held jointly and severally liable in the event it is held liable in Civil Case No. 02-488.

The RTC admitted the third-party complaint and denied the motion to serve summons
by publication on the ground that the action against respondent Magsalin was in
personam.

In May 2003, the RTC issued a notice setting the case for hearing on June 20, 2003.
FGU Insurance filed a motion to cancel the hearing on the ground that the third-party
defendants had not yet filed their answer. The motion was granted.

In June 2003, Baetiong filed his answer to the third-party complaint. He denied any
personal knowledge about the surety and performance bonds for the subcontract with
Magsalin.7 Of the three (3) persons named as third-party defendants, only Baetiong filed
an answer to the third-party complaint; the officer’s returns on the summons to the
Garcias state that both could not be located at their given addresses. Incidentally, the
petitioner claims, and Baetiong does not dispute, that it was not served with a copy of
Baetiong’s answer. The petitioner now argues before us that FGU Insurance, which is
the plaintiff in the third-party complaint, had failed to exert efforts to serve summons on
the Garcias. It suggests that a motion to serve summons by publication should have

1023
been filed for this purpose. The petitioner also asserts that the RTC should have
scheduled a hearing to determine the status of the summons to the third-party
defendants.8

The Order Of Dismissal

With the above procedural events presented by both parties as the only backdrop, on
December 16, 2003 the RTC issued a tersely worded order 9 dismissing Civil Case No.
02-488. For clarity, we quote the dismissal order in full:

ORDER

For failure of [petitioner] to prosecute, the case is hereby DISMISSED.

SO ORDERED.

The RTC denied the petitioner’s motion for reconsideration, 10 prompting the latter to
elevate its case to the CA via a Rule 41 petition for review. 11

The Ruling of the Appellate Court

FGU Insurance moved for the dismissal of the appeal on the ground of lack of
jurisdiction. It argued that the appeal raised a pure question of law as it did not dispute
the proceedings before the issuance of the December 16, 2003 dismissal order.

The petitioner, on the other hand, insisted that it had raised questions of fact in the
appeal.12 Thus -

While, the instant appeal does not involve the merits of the case, the same
involves questions of fact based on the records of the case. It must be emphasized
that the lower court’s dismissal of the case based on alleged failure to prosecute on the
part of plaintiff-appellant was too sudden and precipitate. This being the case, the facts
[sic] to be determined is whether based on the records of the case, was there a definite
inaction on the part of plaintiff-appellant? A careful examination of all pleadings filed as
well as the orders of the lower court vis-à-vis the rules should now be made in order to
determine whether there was indeed a "failure to prosecute" on the part of plaintiff-
appellant[.]13 (emphases supplied)

The CA agreed with FGU Insurance and dismissed the appeal, and denied as well the
subsequent motion for reconsideration.14 The petitioner thus filed the present petition for
review on certiorari.

The Present Petition

The petitioner pleads five (5) grounds to reverse the CA’s resolutions and to reinstate
Civil Case No. 02-488. In an effort perhaps to make sense of the dismissal of the case

1024
(considering that the trial court had not stated the facts that justify it), the petitioner
draws this Court’s attention to certain facts and issues that we find to be of little
materiality to the disposition of this petition:

Grounds/ Statement of Matters Involved

I. The Appellate Court has jurisdiction to determine the merits of the Appeal as
the matters therein involve both questions of law and fact.

II. The lower court erred in declaring that petitioner failed to prosecute the case
despite the fact that petitioner never received a copy of the Answer of Third-party
defendant-respondent Reynaldo Baetiong.

III. The lower court erred in declaring that petitioner failed to prosecute the case
despite the fact that there is no joinder of indispensable parties and issues yet
because defendant-respondent Leticia B. Magsalin as well as third-party
defendant-respondents Godofredo and Concordia Garcia’s whereabouts were
unknown, hence no service yet on them of the copy of the summons and
complaint with annexes[.]

IV. The lower court erred in declaring that Petitioner failed to prosecute the case
despite the fact that it was party respondent FGU which caused the cancellation
of the hearing.

V. It is evident that the lower court’s dismissal of the case is a clear denial of due
process.15

In our Resolution dated February 13, 2006,16 we required the respondents to comment.

FGU Insurance’s comment17 alleges that the present petition is "fatally defective" for
being unaccompanied by material portions of the record. It reiterates that the appeal in
CA-G.R. CV No. 83096 was improperly filed under Rule 41 and should have been filed
directly with this Court under Rule 45 of the Rules of Court. Baetiong, in his
comment,18 asserts that the dismissal of the appeal was in accord with existing laws and
applicable jurisprudence.

The Ruling Of The Court

Preliminarily, we resolve the claim that the petition violates Rule 45 of the Rules of
Court on the attachment of material portions of the record. We note that FGU Insurance
fails to discharge its burden of proving this claim by not specifying the material portions
of the record the petitioner should have attached to the petition. At any rate, after a
careful perusal of the petition and its attachments, the Court finds the petition to be
sufficient. In other words, we can judiciously assess and resolve the present petition on
the basis of its allegations and attachments.

1025
After due consideration, we resolve to grant the petition on the ground that the
December 16, 2003 dismissal order is null and void for violation of due process. We are
also convinced that the appeal to challenge the dismissal order was properly filed under
Rule 41 of the Rules of Court. We further find that the dismissal of Civil Case No. 02-
488 for failure to prosecute is not supported by facts, as shown by the records of the
case.

The Dismissal Order is Void

The nullity of the dismissal order is patent on its face. It simply states its conclusion that
the case should be dismissed for non prosequitur, a legal conclusion, but does not state
the facts on which this conclusion is based.

Dismissals of actions for failure of the plaintiff to prosecute is authorized under Section
3, Rule 17 of the Rules of Court. A plain examination of the December 16, 2003
dismissal order shows that it is an unqualified order and, as such, is deemed to be a
dismissal with prejudice. "Dismissals of actions (under Section 3) which do not
expressly state whether they are with or without prejudice are held to be with
prejudice[.]"19 As a prejudicial dismissal, the December 16, 2003 dismissal order is also
deemed to be a judgment on the merits so that the petitioner’s complaint in Civil Case
No. 02-488 can no longer be refiled on the principle of res judicata. Procedurally, when
a complaint is dismissed for failure to prosecute and the dismissal is unqualified, the
dismissal has the effect of an adjudication on the merits. 20

As an adjudication on the merits, it is imperative that the dismissal order conform with
Section 1, Rule 36 of the Rules of Court on the writing of valid judgments and final
orders. The rule states:

RULE 36
Judgments, Final Orders and Entry Thereof

Section 1. Rendition of judgments and final orders. — A judgment or final order

determining the merits of the case shall be in writing personally and directly prepared by
the judge, stating clearly and distinctly the facts and the law on which it is based, signed
by him, and filed with the clerk of the court.

The December 16, 2003 dismissal order clearly violates this rule for its failure to
disclose how and why the petitioner failed to prosecute its complaint. Thus, neither the
petitioner nor the reviewing court is able to know the particular facts that had prompted
the prejudicial dismissal. Had the petitioner perhaps failed to appear at a scheduled trial
date? Had it failed to take appropriate actions for the active prosecution of its complaint
for an unreasonable length of time? Had it failed to comply with the rules or any order of
the trial court? The December 16, 2003 dismissal order does not say.

We have in the past admonished trial courts against issuing dismissal orders similar to
that appealed in CA-G.R. CV No. 83096. A trial court should always specify the reasons

1026
for a complaint’s dismissal so that on appeal, the reviewing court can readily determine
the prima facie justification for the dismissal.21 A decision that does not clearly and
distinctly state the facts and the law on which it is based leaves the parties in the dark
and is especially prejudicial to the losing party who is unable to point the assigned error
in seeking a review by a higher tribunal.22

We thus agree with the petitioner that the dismissal of Civil Case No. 02-488 constituted
a denial of due process. Elementary due process demands that the parties to a litigation
be given information on how the case was decided, as well as an explanation of the
factual and legal reasons that led to the conclusions of the court. 23 Where the reasons
are absent, a decision (such as the December 16, 2003 dismissal order) has absolutely
nothing to support it and is thus a nullity. 24

For this same reason, we are not moved by respondent FGU Insurance’s statement that
the disposition of the present petition must be limited to the issue of whether the CA had
correctly dismissed the appeal in CA-G.R. CV No. 83096. 25 This statement implies that
we cannot properly look into the validity of the December 16, 2003 dismissal order in
this Rule 45 petition. A void decision, however, is open to collateral attack. While we
note that the validity of the dismissal order with respect to Section 1, Rule 36 of the
Rules of Court was never raised by the petitioner as an issue in the present petition, the
Supreme Court is vested with ample authority to review an unassigned error if it finds
that consideration and resolution are indispensable or necessary in arriving at a just
decision in an appeal.26 In this case, the interests of substantial justice warrant the
review of an obviously void dismissal order.

The appeal was properly filed

under Rule 41 of the Rules of Court

While the nullity of the December 16, 2003 dismissal order constitutes the ratio

decidendi for this petition, we nevertheless rule on the contention that the appeal was
erroneously filed.27

In dismissing the appeal, the CA relied on the premise that since the facts presented in
the petitioner’s appeal were admitted and not disputed, the appeal must thereby raise a
pure question of law proscribed in an ordinary appeal. This premise was effectively the
legal principle articulated in the case of Joaquin v. Navarro,28 cited by the CA in its April
8, 2005 resolution. Respondent FGU Insurance thus contends that the proper remedy to
assail the dismissal of Civil Case No. 02-488 was an appeal filed under Rule 45 of the
Rules of Court.

The reliance on Joaquin is misplaced as it is based on the conclusion the appellate

court made in its April 8, 2005 resolution — i.e., that the pleading of undisputed facts is
equivalent to a prohibited appeal. The reliance is inattentive to both the averments of
the subject appeal and to the text of the cited case. The operative legal principle
in Joaquin is this: "[W]here a case is submitted upon an agreement of facts, or where
all the facts are stated in the judgment and the issue is the correctness of the

1027
conclusions drawn therefrom, the question is one of law which [is properly subject to the
review of this Court.]"29 In this case, as already pointed out above, the facts supposedly
supporting the trial court’s conclusion of non prosequitur were not stated in the
judgment. This defeats the application of Joaquin.

At any rate, we believe that the filing of the appeal in CA-G.R. CV No. 83096 under Rule
41 of the Rules of Court was proper as it necessarily involved questions of fact.

An authority material to this case is the case of Olave v. Mistas.30 Directly addressed

in Olave was the CA’s jurisdiction over an ordinary appeal supported
by undisputed facts and seeking the review of a prejudicial order of dismissal. In this
case, a complaint was filed before the RTC in Lipa City to nullify an instrument titled
"Affidavit of Adjudication By The Heirs of the Estate of Deceased Persons With Sale."
The RTC dismissed the complaint, with prejudice, after the plaintiffs had moved to set
the case for pre-trial only after more than three (3) months had lapsed from the service
and filing of the last pleading in the case. The plaintiffs thereafter went to the CA on a
Rule 41 petition, contending, among others, that the trial court had erred and abused its
discretion. As in the present case, the defendants moved to dismiss the appeal on the
ground that the issues therein were legal; they pointed out that the circumstances on
record were admitted.31 They argued that the proper remedy was a petition for review on
certiorari under Rule 45 of the Rules of Court.

The CA denied the motion and entertained the appeal. It rendered a decision reinstating
the complaint on the ground that there was no evidence on record that the plaintiffs had
deliberately failed to prosecute their complaint.

When the case was elevated to this court on a Rule 45 petition, we squarely addressed
the propriety of the plaintiffs’ appeal. Though mindful that the circumstances pleaded in
the appeal were all admitted, we categorically held in Olave that the appeal was
correctly filed. We observed that despite undisputed records, the CA, in its review, still
had to respond to factual questions such as the length of time between the plaintiffs’
receipt of the last pleading filed up to the time they moved to set the case for pre-trial,
whether there had been any manifest intention on the plaintiffs’ part not to comply with
the Rules of Court, and whether the plaintiffs’ counsel was negligent.

Significantly, in Olave, we agreed with the plaintiffs that among the critical factual
questions was whether, based on the records, there had been factual basis for the
dismissal of the subject complaint. This same question is particularly significant in the
present case given that the order appealed from in CA-G.R. CV No. 83096 does not
even indicate the factual basis for the dismissal of Civil Case No. 02-488. Due to the
absence of any stated factual basis, and despite the admissions of the parties, the CA,
in CA-G.R. CV No. 83096, still had to delve into the records to check whether facts to
justify the prejudicial dismissal even exist. Since the dismissal of Civil Case No. 02-488
appears to have been rendered motu proprio (as the December 16, 2003 dismissal
order does not state if it was issued upon the respondents’ or the trial court’s motion),
the facts to be determined by the CA should include the grounds specified under

1028
Section 3, Rule 17 of the Rules of Court. A court could only issue a motu proprio
dismissal pursuant to the grounds mentioned in this rule and for lack of jurisdiction over
the subject matter.32 These grounds are matters of facts. Thus, given that the dismissal
order does not disclose its factual basis, we are thus persuaded that the petitioner had
properly filed its appeal from the dismissal order under Rule 41 of the Rules of Court.

The Dismissal of Civil Case No. 02-488 is not Supported by the Facts of the Case

We also find that the dismissal of Civil Case No. 02-488 is not warranted. Based on
available records and on the averments of the parties, the following events were
chronologically proximate to the dismissal of Civil Case No. 02-488: (a) on March 24,
2003, the court admitted FGU Insurance’s third-party complaint; (b) the trial court
cancelled the June 20, 2003 hearing upon FGU Insurance’s motion; and (c) on June 16,
2003, Baetiong filed his Answer to the third-party complaint but did not serve it upon
the petitioner.

None of these events square with the grounds specified by Section 3, Rule 17 of the
Rules of Court for the motu proprio dismissal of a case for failure to prosecute. These
grounds are as follows:

(a) Failure of the plaintiff, without justifiable reasons, to appear on the date of the
presentation of his evidence in chief;

(b) Failure of the plaintiff to prosecute his action for an unreasonable length of
time;

(c) Failure of the plaintiff to comply with the Rules of Court; or

(d) Failure of the plaintiff to obey any order of the court.

In our view, the developments in the present case do not satisfy the stringent standards
set in law and jurisprudence for a non prosequitur.33 The fundamental test for non
prosequitur is whether, under the circumstances, the plaintiff is chargeable with want of
due diligence in failing to proceed with reasonable promptitude. 34 There must be
unwillingness on the part of the plaintiff to prosecute. 35

In this case, the parties’ own narrations of facts demonstrate the petitioner’s willingness
to prosecute its complaint.1âwphi1 Indeed, neither respondents FGU Insurance nor
Baetiong was able to point to any specific act committed by the petitioner to justify the
dismissal of their case.

While it is discretionary on the trial court to dismiss cases, dismissals of actions should
be made with care. The repressive or restraining effect of the rule amounting to
adjudication upon the merits may cut short a case even before it is fully litigated; a ruling
of dismissal may forever bar a litigant from pursuing judicial relief under the same cause
of action. Hence, sound discretion demands vigilance in duly recognizing the

1029
circumstances surrounding the case to the end that technicality shall not prevail over
substantial justice.36

This court is thus of the opinion that the dismissal of Civil Case No. 02-488 is not
warranted. Neither facts, law or jurisprudence supports the RTC’s finding of failure to
prosecute on the part of the petitioner.

Wherefore, premises considered, the instant petition is Granted. The resolutions of the
Court of Appeals dated April 8, 2005 and October 4, 2005 are REVERSED and SET
ASIDE. The order dated December 16, 2003 of the Regional Trial Court, Branch 61,
Makati City, in Civil Case No. 02-488 is declared NULL and VOID, and the petitioner’s
complaint therein is ordered REINSTATED for further proceedings. No costs.

SO ORDERED.

SECOND DIVISION

G.R. No. 215072, September 07, 2016

PHILIPPINE NATIONAL BANK, Petitioner, v. HEIRS OF THE LATE IRENEO AND

CARIDAD ENTAPA, NAMELY: ROSARIO ENTAPA-ORPEZA, JULIANNE E.
HAMM,1 CERINA G. ENTAPA, WINSTON G. ENTAPA (DECEASED) REPRESENTED
BY HIS SPOUSE, NINFA LAMISTOZA-ENTAPA, FRANKLIN G. ENTAPA, MARINA
E. SCHACHT, AND ELVIRA G. ENTAPA, Respondents.

DECISION

LEONEN, J.:

The Constitution requires that a court must state the factual and legal grounds on which
its decisions are based. Any decision that fails to adhere to this mandate is void.

The Philippine National Bank, through a Petition for Review on Certiorari, 2 assails the
Decision3 dated June 4, 2013 and Resolution4 dated October 2, 2014 of the Court of
Appeals, which nullified the Decision5 of Branch 54 of the Regional Trial Court of
Bacolod City. The Court of Appeals nullified the Regional Trial Court Decision for failing
to state the facts and law on which it was based. 6chanrobleslaw

On December 5, 1973, Caridad Entapa (Entapa) and her children, Julianna E. Hamm
and Winston Entapa, executed a Special Power of Attorney authorizing Joseph
Gonzaga (Gonzaga) to enter into legal transactions on their behalf. 7chanrobleslaw

Entapa owned Lot No. 2665 with an area of 16.067 hectares and covered by Original
Certificate of Title No. P-6497.8 On January 3, 1974,9 Gonzaga executed a real estate
mortgage over Lot No. 2665 in favor of the Philippine National Bank to guarantee his
loan of P30,600.00.10chanrobleslaw

1030
Gonzaga failed to pay the loan.11 The property was foreclosed and was sold at a public
auction. The Philippine National Bank emerged as the winning bidder. 12 A Certificate of
Sale was issued in the bank's favor on December 29, 1983. 13chanrobleslaw

Entapa's other heirs had no knowledge of Gonzaga's Special Power of Attorney. They
learned of the foreclosure sale only after the public auction. 14chanrobleslaw

Rosario Entapa Orpeza (Orpeza), representing Entapa's other heirs, went to the
Philippine National Bank at Lacson Street, Bacolod City to ask about the repurchase of
the property.15 Despite knowledge that the property had already been foreclosed, she
wrote a letter dated March 15, 1995 to Raul Topacio, Assistant Vice President and
Branch Manager, requesting a restructuring and recomputation of Gonzaga's loan in
accordance with the guidelines of Republic Act No. 7202. 16chanrobleslaw

On May 2, 1996, the Philippine National Bank informed Orpeza that its Branch Credit
Committee approved her request and stated the terms and conditions of the Thirteen-
Year Plan of Payment.17 Two (2) of the seven (7) conditions were to deposit 20% of the
total recomputed amount and to pay the arrears of the realty taxes on the
property.18chanrobleslaw

In compliance, Orpeza sent a bank transfer of 9,797 German Deutschmark equivalent

to P178,336.19, 20% of the recomputed amount. 19 She also paid the realty taxes on the
property.20chanrobleslaw

Orpeza alleged that after she deposited the amount, she discovered that five (5)
families were already residing and planting crops on Lot No. 2665, by virtue of
Certificates of Land Ownership (CLOA) issued by the Department of Agrarian
Reform.21 She went to the Philippine National Bank to ask for an explanation and to
request the bank to file a case to annul the CLOAs. 22 The bank did not offer an
explanation but only issued a certification declaring that according to their records, there
had been no transfer of Lot No. 2665 to the Department of Agrarian
Reform.23chanrobleslaw

Orpeza went to the Department of Agrarian Reform, where she was able to secure
copies of the Deed of Sale, Deed of Transfer, and Voluntary Offer of Sale of Lot No.
2665 by the Philippine National Bank to the Department of Agrarian
Reform.24 Moreover, she was informed by Assistant Regional Director Homer Tobias
that Lot No. 2665 was already covered by the Comprehensive Agrarian Reform
Program, and CLOAs had been issued according to the law. 25cralawred He also
explained that the lot was voluntarily offered for Comprehensive Agrarian Reform
Program coverage by Philippine National Bank on September 30, 1989. 26chanrobleslaw

As a result, Orpeza demanded the return of the downpayment she made with the
Philippine National Bank and asked for the annulment of the CLOAs. 27 "[The Philippine
National Bank] did not take any action."28 As the bank still refused to refund the amount

1031
despite demand, Orpeza and her siblings instituted a complaint for collection of sum of
money against the Philippine National Bank on October 5, 1998. 29chanrobleslaw

In its defense, the Philippine National Bank insisted that before it approved Orpeza's
request for restructuring and recomputation, it verified that Lot No. 2665 was not
included in the transfer of properties to the Department of Agrarian Reform. 30 It also
alleged that when Lot No. 2665 was offered to the Department of Agrarian Reform on
September 30, 1989, it had no knowledge nor information as to the status of its
application as it had not received any payment from the Land Bank of the
Philippines.31chanrobleslaw

The Philippine National Bank alleged that while there was a Voluntary Offer to Sell Lot
No. 2665, it did not acquire a record of the Voluntary Offer to Sell until 1998 and only
came to know of the existence of the CLOAs when Orpeza informed its
officers.32chanrobleslaw

On April 31, 2006, the Regional Trial Court of Bacolod City ordered the Philippine
National Bank to return the initial downpayment of P178,336.10, realty taxes of
P56,421.30, exemplary damages at P50,000.00, moral damages at P50,000.00, and
attorney's fees of 15% of the amount due, with legal interest. 33chanrobleslaw

The Regional Trial Court Decision reads:ChanRoblesVirtualawlibrary

This is a case for collection of sum of money with claims for damages, instituted by the
heirs of Ireneo and Caridad Entapa, namely: Rosario Entapa-Oropeza [sic], Julianna E.
Warn, Cerina G. Entapa, Winston G. Entapa represented . . . by his Spouse Ninfa
Lamistoza-Entapa, Franklin G. Entapa, Marina E. Schacht and Elvira Entapa.

Ireneo Entapa, deceased, died on December 7, 1967 in the city of Bago, survived by his
widow, Caridad Entapa and legitimate children herein before named. Ireneo Entapa was
the registered owner of two parcels of lands located in Barangay Ilijan, City of Bago,
denominated as Lot No. 2664 covered by TCT No. T- and Lot No. 2666 covered by TCT
No. T-[sic]. The wife and widow, Caridad Entapa, now deceased was also a registered
owner of Lot No. 2665, covered by TCT OCT No. R-6497.

When Ireneo Entapa died, the lands devolved upon his heirs, the surviving wife,
Caridad Entapa, and their children.

During the lifetime of the wife, Caridad Entapa, together with the children: namely,
Juliana E. Ham and Winston Entapa as heirs-owners of the aforementioned lots,
executed a Special Power of Attorney in favor of Joseph Gonzaga, to mortgage the lot
to banking institutions.

Joseph Gonzaga mortgaged the properties to the Philippine National Bank-Bacolod

Branch.

1032
The other children except the two who signed the Special Power of Attorney were
working abroad and they were unaware of the execution of the Special Power of
Attorney in favor of Joseph Gonzaga.

The loan was not paid by Joseph Gonzaga and the Philippine National Bank sold the
lands in a public auction. The bid was awarded to the mortgagee-bank, the Philippine
National Bank. A certificate of Sale issued to the Philippine National Bank marked in
evidence as Exhibit [sic].

When the children heirs learned of the foreclosure of the properties while they were
abroad, the heirs headed by Rosario Entapa Orpeza, made representation with the
Philippine National Bank to purchase back the properties via restructuring of the loan
under Republic Act No. 7202 otherwise known as the Sugar Restitution Law.

Pursuant to the Sugar Restitution Law, the Philippine National Bank through its Vice
President[,] Mr. Topaciof,] accepted in principle the restructuring of the loan and for the
heirs to purchase back the properties with 20% percent [sic] down payment of the
recomputed value which amounted to Php 178,336.50. In addition, the heirs were also
required to update the realty taxes of the lots. The heirs obliged by paying the realty
taxes. The heirs through Rosario Entapa Orpeza paid the required deposit of Php
178,336.50. It was paid in German Currency converted to Philippine peso prevailing at
the time. The heirs were happy that they could get back their ancestral lots where they
grew up.

Rosario Entapa Orpeza who spearheaded the repurchase of the properties was based
in the United States of America working as an accountant. She stayed in the country
abandoning meanwhile her work in the USA just to consummate the repurchase of the
properties and she lost income while staying in the Philippines.

When Rosario Entapa Orpeza had paid for the realty taxes and the 20% downpayment
for the repurchase, she wanted to visit the lands located on the mountainside in Upper
Maao, Bago City. She discovered that the properties are occupied by several families
who are CARP beneficiaries and are holding CLOA[s] issued by the Department of
Agrarian Reform.

She confronted the PNB official, Mr. Raul Topacio on the alleged CARP coverage of the
lots but she was reassured that the PNB shall take care of it.

It was sometime on March 15, 1995 when Rosario Entapa Orpeza formally applied for
restructuring under the Sugar Restitution Law. On May 22, 1995, the Assistant Vice
President Raul G. Topacio informed Rosario Entapa Orpeza of the total obligations
which required twenty (20%) percent down payment and the account shall be payable
in[ ] 13 years.

The restructuring of the loan was officially approved by the Branch Committee on April
16, 1996.

1033
Before approving the restructuring of the Entapa loan, the PNB verified if the properties
have been turned over to the Department of Agrarian Reform as required by[ ] law on
acquired agricultural assets of the bank. There was a list of properties transferred to the
DAR (Exhibit 7) and the properties of Caridad Entapa were not in the list indicating that
the subject properties have not been transferred for CARP coverage. The owner's
duplicate of the title is still with the PNB.

Rosario Entapa Orpeza signed "ACCEPTANCE" in the May 1996 letter of the PNB on
the terms of restructuring of the loan.

When the alleged CARP coverage was verified with the Department of Agrarian
Reform, documents cropped up indicating that the lot was sold by the PNB to the
Department of Agrarian Reform way back on September 30, 1989. The DAR sent a
notice of Land Valuation (Exhibit 0) dated March 6, 1992. The Department of Agrarian
Reform processed the awards of the land and CLOA[s] were issued and given to the
beneficiaries.

From the evidence adduced, it appears that the Philippine National Bank was not
meticulous in allowing the Entapa Heirs to avail of the Sugar Restitution Law to
repurchase their property. The PNB agreed to grant the restitution because from the
record they looked into, the Entapa property was not among those transferred to the
Department of Agrarian Reform, actually the property had been offered to the DAR
under the Voluntary Offer to Sell (VOS), and the valuation [had] been determined and
communicated to the Philippine National Bank as shown by subsequent check of
record.

The Certificate of Land Ownership Award (CLOA) have [sic] been issued and distributed
to the awardees; thus, it became legally impossible to go on with the repurchase of the
property by the Entapa Heirs under the Sugar Restitution Law or plain repurchase of the
property.

With the situation that the Entapa Heirs could no longer work and hope to reacquire
their property, the plaintiffs-heirs formally demanded for the return of the 20% initial
deposit paid to the PNB and also the real property taxes paid when the property had
already been divided and awarded to the beneficiaries covered by CLOA[s].

The Philippine National Bank did not return the amount paid by the Entapa Heirs which
led to the filing of the instant case. Likewise, the Entapa Heirs suffered for the vain hope
that they could get back the properties with so much attachment or sentimental value.

The repurchase had not materialized; thus, the demand to return the amounts paid.

In a nutshell, the Entapa Heirs, who were working abroad in the United States and
Germany, came to know that the lot of the mother had been foreclosed and the
redemption period had lapsed. The heirs wanted to recover the property and one option

1034
was to repurchase the property under the Sugar Restitution Law. The heirs were
allowed in principle to repurchase the property under the Restitution Law. The Philippine
National Bank was under the impression that the subject property still belonged to the
PNB because the owner's duplicate of the title was still on file and a check on the list of
properties transferred to the Department of Agrarian Reform, the Entapa property was
not among them — the acquired agricultural lands shall be turned over to the DAR for
purposes of the Land Reform program. The Philippine National Bank formally
communicated to the Entapa Heirs of the approval of the repurchase and the valuation
wherein the former owners were required initially the 20% of the valuation and the
Entapa heirs did pay. The heirs were likewise required to update the real property taxes
which they complied.

When the Entapa heirs came to know that the subject lot had been earlier offered to the
Department of Agrarian Reform under the Voluntary Offer to Sell (VOS) scheme of the
CARP, they were aghast and their hope to be able to get back the property came to
naught. The PNB tried to reassure the heirs that the Certificate of Title is still in the
name of the PNB and it would push through the repurchase under the Sugar Restitution
Law.

With the granting of the CLOA[s] to the beneficiaries who had been in actual occupation
and cultivation, there was no more possibility for the heirs to get back the land.

The Entapa heirs demanded for the return of the money they had paid for the value of
the land and the real property taxes they paid, for they could not repurchase the land.
The PNB refused to timely return the amounts paid by the heirs which finally led to the
instant suit. Rosario Entapa Orpeza had to delay her return to her work to the United
States of America in order to consummate the repurchase and getting back of the
property. In the USA, she had a work which earned regularly for her in dollars. Rosario
claims moral and actual damages for the failure to get back the property which has
sentimental value to the children.

With the repurchase not carried, there is the duty to return the amounts paid by the
Entapa heirs.

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendant:

1. The defendant is ordered to return to the plaintiff the following amounts:

a. Php 178,336.10 - representing initial downpayment for the
repurchase of the lot plus legal interests until paid;

b. Php 56,421.30 representing realty taxes paid on the lot plus legal
interests until paid;

c. Php 50,000.00 as exemplary damages;

d. Php 50,000.00 as moral damages; and cralawlawlibrary

1035
 e. Attorney's fees of 15% of the amount due; and cralawlawlibrary

f. To pay the costs of suit.

SO ORDERED.34chanroblesvirtuallawlibrary
The Philippine National Bank appealed to the Court of Appeals and argued that (1) the
trial court's Decision violated the Constitution and the Rules of Civil Procedure when it
failed to state the facts and law on which its ruling was based, and (2) the trial court
erred in ordering it to return the payments. 35chanrobleslaw

On June 4, 2013, the Court of Appeals nullified the Regional Trial Court Decision and
remanded the case to it for the rendition of judgment under the Constitution and Rules
of Court.36chanrobleslaw

The Court of Appeals found that after a careful reading of the trial court's Decision, the
Decision did not contain analysis of the evidence of the parties or reference to any legal
basis to reach its conclusions, contrary to the requirements of Article VIII, Section
1437 of the Constitution and Rule 36, Section 1 38 of the Rules of Court.39chanrobleslaw

However, the Court of Appeals also pointed out that the Philippine National Bank could
not raise new arguments on appeal as its argument that it was entitled to apply
Orpeza's downpayment to Gonzaga's outstanding loan constituted a change of theory,
which should be disallowed on appeal. 40 The dispositive portion of the Court of Appeals
Decision reads:ChanRoblesVirtualawlibrary
WHEREFORE, in view of all the foregoing, the appeal is GRANTED. The assailed 31
August 2006 Decision of the Regional Trial Court Branch 54 of Bacolod City in Civil
Case No. 98-10510 is NULLIFIED as it does not conform with Section 14 Article VII [sic]
of the 1987 Constitution and Section 1 Rule 36 of the Rules of Court.

The records of the case are hereby remanded to the said Regional Trial Court for the
rendition of judgment in accordance with the mandate of the Constitution and the Rules
of Court, with dispatch.

SO ORDERED.41 (Emphasis in the original)

The Philippine National Bank moved for reconsideration, but the Motion was denied in
the Resolution dated October 2, 2014. 42chanrobleslaw

Aggrieved, petitioner Philippine National Bank filed before this Court a Petition for
Review on Certiorari arguing that the Court of Appeals erred in rendering judgment on
the merits despite nullifying the Regional Trial Court Decision and remanding the
case.43 It also argues that the Court of Appeals should not have held them liable to pay
respondents Heirs of Ireneo and Caridad Entapa:ChanRoblesVirtualawlibrary
II. The Court of Appeals seriously erred when it held petitioner PNB liable to return the
amount of Phpl78,336.10 representing initial downpayment of respondents plus legal
interest effective 14 October 1998 until paid.

1036
III.  The Court of Appeals seriously erred when it held petitioner PNB liable to return the
amount of Php56,421.30 representing the realty taxes paid by respondents plus legal
interest until paid.

....

IV. The Court of Appeals seriously erred when it held the Bank liable to pay moral
damages, exemplary damages, attorney's fees and cost of suit to
respondents.44chanroblesvirtuallawlibrary
In their Comment,45 respondents argue that the Court of Appeals did not make any
adjudication on the merits of the case since the dispositive portion of the Decision did
not actually state that petitioner was liable to respondents for the stated
amounts.46 Respondents further assert that the Court of Appeals discussed the other
issues because petitioner raised these issues before the Court of Appeals, and if
petitioner did not want the Court of Appeals to discuss these issues, then it should not
have raised them.47 Respondents argue that even assuming that there was an
adjudication on the merits, the Court of Appeals would not have erred in finding
petitioner liable since its bad faith was clear from the facts and the
evidence.48chanrobleslaw

The issues before this Court are:

chanRoblesvirtualLawlibraryFirst, whether the Court of Appeals erred in nullifying the

Regional Trial Court Decision; and cralawlawlibrary

Second, whether the Court of Appeals adjudicated on the merits of the case despite
ordering its remand to the trial court.

The Petition is denied.

A court must state the factual and legal basis for its decisions; otherwise, its decisions
are void.

Article VIII, Section 14 of the Constitution provides:

chanRoblesvirtualLawlibrary
ARTICLE VIII
Judicial Department
....

SECTION 14. No decision shall be rendered by any court without expressing therein
clearly and distinctly the facts and the law on which it is based.

No petition for review or motion for reconsideration of a decision of the court shall be
refused due course or denied without stating the legal basis therefor.
Rule 36, Section 1 of the Rules of Court provides:ChanRoblesVirtualawlibrary

1037
 RULE 36
Judgments, Final Orders and Entry Thereof

SECTION 1. Rendition of judgments and final orders. — A judgment or final order

determining the merits of the case shall be in writing personally and directly prepared by
the judge, stating clearly and distinctly the facts and the law on which it is based, signed
by him, and filed with the clerk of the court.
The Court of Appeals, in nullifying the Decision of the trial court, stated that it "contained
no reference to any legal basis in reaching its conclusions" 49 nor did it "cite any legal
authority or principle to support its conclusion that [the] bank is liable." 50 The Court of
Appeals found that the "trial court merely narrated the factual circumstances of the case
and directly declared the liability of the [bank] to pay [respondents] the amount she paid
as downpayment for the re-purchase of the subject land." 51chanrobleslaw

The Regional Trial Court Decision52 dated August 31, 2006 is four (4) pages long. Its
first three (3) pages state the facts of the case. The fourth page
states:ChanRoblesVirtualawlibrary
The Entapa heirs demanded for the return of the money they had paid for the value of
the land and the real property taxes they paid, for they could not repurchase the land.
The PNB refused to timely return the amounts paid by the heirs which finally led to the
instant suit. Rosario Entapa Orpeza had to delay her return to her work to the United
States of America in order to consummate the repurchase and getting back of the
property. In the USA, she had a work which earned regularly for her in dollars. Rosario
claims moral and actual damages for the failure to get back the property which has
sentimental value to the children.

With the repurchase not carried, there is the duty to return the amounts paid by the
Entapa heirs.

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendant:

1. The defendant is ordered to return to the plaintiff the following amounts:

a. Php 178,336.10 — representing initial downpayment for the
repurchase of the lot plus legal interests until paid;

b. Php 56,421.30 representing realty taxes paid on the lot plus legal
interests until paid;

c. Php 50,000.00 as exemplary damages;

d. Php 50,000.00 as moral damages; and cralawlawlibrary

e. Attorney's fees of 15% of the amount due; and cralawlawlibrary

f. To pay the costs of suit.

1038
SO ORDERED.53chanroblesvirtuallawlibrary
The trial court failed to cite any legal basis for declaration of petitioner's liability. The
Decision merely contained a recitation of facts and a dispositive portion. Yao v. Court of
Appeals54 nullified a similar decision for failure of the court to state the legal basis for its
ruling:ChanRoblesVirtualawlibrary
Faithful adherence to the requirements of Section 14, Article VIII of the Constitution is
indisputably a paramount component of due process and fair play. It is likewise
demanded by the due process clause of the Constitution. The parties to a litigation
should be informed of how it was decided, with an explanation of the factual and legal
reasons that led to the conclusions of the court. The court cannot simply say that
judgment is rendered in favor of X and against Y and just leave it at that without any
justification whatsoever for its action. The losing party is entitled to know why he lost, so
he may appeal to the higher court, if permitted, should he believe that the decision
should be reversed. A decision that does not clearly and distinctly state the facts and
the law on which it is based leaves the parties in the dark as to how it was reached and
is precisely prejudicial to the losing party, who is unable to pinpoint the possible errors
of the court for review by a higher tribunal. More than that, the requirement is an
assurance to the parties that, in reaching judgment, the judge did so through the
processes of legal reasoning. It is, thus, a safeguard against the impetuosity of the
judge, preventing him from deciding ipse dixit. Vouchsafed neither. the sword nor the
purse by the Constitution but nonetheless vested with the sovereign prerogative of
passing judgment on the life, liberty or property of his fellowmen, the judge must
ultimately depend on the power of reason for sustained public confidence in the
justness of his decision.

Thus the Court has struck down as void, decisions of lower courts and even of the
Court of Appeals whose careless disregard of the constitutional behest exposed their
sometimes cavalier attitude not only to their magisterial responsibilities but likewise to
their avowed fealty to the Constitution.55 (Emphasis supplied, citations omitted)
In Yao, the assailed decision was nullified and the records of the case were remanded
to the trial court. The Court of Appeals in this case did the same.

The constitutional requirement that the basis of the decision of our courts should be
clearly articulated and made legible to the parties does not merely assure fairness . . . .
It is likewise crucial to assure the public that the judiciary arrives at its conclusions on
the basis of reasonable inference from credible and admissible evidence and the text of
law and our jurisprudence. Decisions of all courts should not be based on any other
considerations. Not only will fully coherent and cogent reasons have greater chances to
convince the litigants of their chances on appeal; they also make appeals possible. After
all, appellate courts cannot be assumed to have so much omniscience that they can
read what the trial judge has not written.

Petitioner likewise argues that the Court of Appeals should not have ruled that it was
liable to respondents.

This is erroneous.

1039
Nothing in the Court of Appeals Decision ordered petitioner to return to respondents
their downpayment and pay: them damages. Petitioner brought the appeal before the
Court of Appeals, arguing, among others, that it should not have been held liable since
it already applied Orpeza's downpayment to Gonzaga's outstanding loan. 56 The Court of
Appeals, in addressing petitioner's arguments, explained that it could not rule on these
arguments since it was brought for the first time on appeal:ChanRoblesVirtualawlibrary
While it is true that [petitioner] has the right to recover the deficiency of Gonzaga's loan
obligation under the well-entrenched rule that a creditor is not precluded from
recovering any unpaid balance on the principal obligation if the extrajudicial foreclosure
sale of the property subject of the real estate mortgage results in a deficiency, still, such
defenses could not be countenanced because it was belatedly raised only on appeal,
not during the trial before the court a quo.

Added to that, [petitioner] did not present any proof to substantiate its allegations. Their
factual allegations clearly required the presentation of additional evidence in order to
properly address the issues raised in the new theory. This, [petitioner] failed to do.
Hence, this Court cannot give due course to the new issues raised in the appeal for lack
of evidence. Justice and fair play dictate that [petitioner's] change of theory of their case
on appeal be disallowed.57 (Emphasis supplied)
Strangely, petitioner now comes before this Court and argues that the Court of Appeals
should not have adjudicated on the arguments that it had raised before it.

Even if the Court of Appeals had adjudicated upon the merits of the case, any
discussion would have been considered obiter dictum since the entire case was
remanded to the trial court.

Obiter dictum is "an opinion expressed by a court upon some question of law which is
not necessary to the decision of the case before it." 58 It is a "a remark made, or opinion
expressed . . . upon a point not necessarily involved in the determination of the cause,
or introduced by way of illustration, or analogy or argument." 59 It "lacks the force of an
adjudication and should not ordinarily be regarded as such." 60chanrobleslaw

It was not necessary for the Court of Appeals to discuss the other issues that petitioner
raised in order to determine that the case must be remanded to the trial court. In any
case, petitioner is not precluded from presenting the same arguments before the trial
court.

We take this opportunity to remind judges and justices of their solemn duty to uphold
and defend the Constitution and the principles it embodies. This duty is so basic that it
appears in the Oath of Office of every public officer and employee 61 and is stated only in
the third whereas clause of the New Code of Judicial Conduct. 62 When the law is basic
and the rules are elementary, the duty of a judge is simply to apply it. 63 Failure to do so
constitutes gross ignorance of the law. 64 It entails additional expenses on the part of the
party-litigants and creates an undeserved public impression of the lack of competence
of the entire judiciary.

1040
WHEREFORE, the Petition is DENIED. The Decision dated June 4, 2013 and the
Resolution dated October 2, 2014 of the Court of Appeals in CA-G.R. CV No. 01895
are AFFIRMED.

A copy of this Decision shall be served on the Office of the Court Administrator, who
is DIRECTED to initiate proceedings against Presiding Judge Demosthenes L.
Magallanes of Branch 54 of the Regional Trial Court of Bacolod City for gross ignorance
of the law and any other violation of our Rules.

SO ORDERED.chanRoblesvirtualLawlibrary

THIRD DIVISION

G.R. No. 206451, August 17, 2016

ELPIDIO MAGNO, HEIRS OF ISIDRO M. CABATIC, NAMELY: JOSE CABATIC,

RODRIGO CABATIC, AND MELBA CABATIC; AND ODELITO M. BUGAYONG, AS
HEIR OF THE LATE AURORA MAGNO, Petitioners, v. LORENZO MAGNO, NICOLAS
MAGNO, PETRA MAGNO, MARCIANO MAGNO, ISIDRO MAGNO, TEODISTA
MAGNO, ESTRELLA MAGNO, BIENVENIDO M. DE GUZMAN, CONCHITA M. DE
GUZMAN, SILARY M. DE GUZMAN, MANUEL M. DE GUZMAN AND MANOLO M.
DE GUZMAN, Respondents.

DECISION

PERALTA, J.:

This is a petition for review on certiorari, assailing the Decision1 dated July 23, 2012 of
the Court of Appeals in CA-G.R. CV- No. 90846, which reversed and set aside the
Decision2 dated November 15,2007 of the Regional Trial Court of Alaminos City,
Pangasinan, Branch 54, in Civil Case No. A-1850, and dismissed the complaint for
partition on the ground of res judicata.

The facts are as follows:

chanRoblesvirtualLawlibraryPetitioners Elpidio Magno, heirs of Isidro M. Cabatic,

namely: Jose Cabatic, Rodrigo Cabatic, and Melba Cabatic, and Odelito M. Bugayong,
as heir of the late Aurora Magno, (Elpidio Magno, et al. ) are the successors-in-interest
of Doroteo Magno, who is the legitimate child of Nicolas Magno by his first wife,
Eugenia Recaido. On the other hand, respondents Lorenzo, Nicolas, Petra, Marciano,
Isidro, Teodista, Estrella, all surnamed Magno, and Bienvenido M., Conchita M., Silary
M., Manuel M. and Manolo, all surnamed De Guzman, are the successors-in-interest of
Nicetas Magno, Gavino Magno and Nazaria Magno, (Lorenzo Magno, et al. ), who are
the legitimate children of Nicolas by her second wife, Camila Asinger.

1041
For easy reference, the following are the successors-in-interest of the late Nicolas
Magno:3

I. Children of the First Marriage with Eugenia Recaido (+)

A. Doroteo Magno, survived by:
1. Teofilo Magno, survived by Jacinta Magno (wife)
2. Jose Magno, survived by Nicanor and Lolita Magno
3. Angela Magno, survived by:
a. Isidro M. Cabatic, survived by
i. Jose Cabatic
ii. Rodrigo Cabatic
iii. Melba Cabatic
b. Felicitas Cabatic
c. Milagros Cabatic
d. Herminio Cabatic.
4. Espiridion Magno, survived by:
a. Tomas Magno
b. Elpidio Magno
c. Aurora Magno, survived by:
i. Odelito M. Bugayong
B. Eduardo Magno (died without issue)

II. Children of the Second Marriage with Camila Asinger (+)

A. Nicetas Magno,  survived by Lorenzo Magno, who was in turn survived by:

1. Antonia Magno (widow)
2. Sheila Magno-Arandia (daughter)
3. Lorelyn Magno-Benas (daughter)
4. Arvin Ray M. delos Santos (grandson)
B. Gavino Magno, survived by:
1. Nicolas Magno, survived by:
a. Teresita M. Magno (widow)
b. Joselito Magno (son)
2. Petra Magno
3. Marciano Magno, survived by:
a. Rolando Magno (son)
b. Rosita M. Fernandez (daughter)
c. George Magno (son)
d. Gloria M. Ocampo (daughter)
e. Josefa M. Garcia (daughter)
f. Perlita M. Abarra (daughter)
g. Nenita Magno (daughter)
4. Leonido Magno
5. Isidro Magno
6. Teodista Magno
7. Estrella Magno
C. Nazaria Magno, survived by:
1042
 1. Bienvenido M. de Guzman
2. Conchita M. de Guzman-Lopez, survived by:
a. Benjamin Lopez (widower)
b. Leila Lopez Tamina (daughter)
c. Edgar Lopez (son)
d. Joshua Lopez (son)
e. Daisy Lopez (daughter)
f. Bernardino Lopez (son)
g. Abes Lopez (son)
h. Dejobe Lopez (son)
3. Silary M. de Guzman
4. Manuel M. de Guzman
5. Manolo M. de Guzman

Gavino Magno, Nicetas, and Nazaria,4 all surnamed Magno, (Gavino Magno, et al.),
who are the predecessors-in-interest of Lorenzo Magno, et al, filed an Amended
Complaint dated January 30, 1964 before the Court of First Instance (CFI) of Alaminos,
Pangasinan, which was docketed as Civil Case No. A-413. In their complaint for
partition with damages, Gavino Magno, et al. sought the partition of the following
properties left by Nicolas Magno who died intestate in 1907:
(a) A parcel of land (unirrigated riceland) located at Lucap, Cayucay, Alaminos,
Pangasinan, bounded by the properties of the following: x x x; consisting of Two
Hundred Seventy-Seven Thousand Twenty-Six (277,026) Square Meters, more or less,
and declared for taxation purposes under Tax Declaration No. 4236 in 1951 in the
Office of the Provincial Assessor of Pangasinan, in the name of Doroteo Magno;

(b) A parcel  of land  (unirrigated riceland)  located at Lucap, Alaminos, Pangasinan,

bounded by the properties of the following: x x x; consisting of Four Thousand Four
Hundred Seventeen (4,417) Square Meters, more or less, and declared for taxation
purposes under Tax Declaration No. 4235 in 1951 in the Office of the Provincial
Assessor of Pangasinan, in the name of Doroteo Magno;

(c) A parcel of land (residential lot) located at Poblacion, Alaminos, Pangasinan,

bounded by the properties of the following: x x x; consisting of Two Thousand Seven
Hundred Five (2,705) Square Meters, more or less, and declared for taxation purposes
under Tax Declaration No. 4238, in 1951 in the Office of the Provincial Assessor of
Pangasinan, in the name of Doroteo Magno;

(d) A parcel of land (unirrigated riceland) located at San Jose Dive, Poblacion,
Pangasinan, bounded by the properties of the following: x x x; consisting of Five
Thousand Four Hundred (5,400) Square Meters, more or less, and declared for taxation
purposes under Tax Declaration No. 4237 in 1951 in the Office of the Provincial
Assessor of Pangasinan, in the name of Doroteo Magno;

(e) A parcel of land (unirrigated rice, sugar, and forest lands), located at Lucap,
Alaminos, Pangasinan, bounded by the properties of the following: x x x; consisting of

1043
One Hundred Fifty-Six Thousand Five Hundred Forty (156,540) Square Meters, more or
less, and declared for taxation purposes under Tax Declaration No. 4233 in 1951 in the
Office of the Provincial Assessor of Pangasinan, in the name of Doroteo Magno;

(f) A parcel of land (coconut land) located at Lucap, Cayucay, Alaminos, Pangasinan,
bounded by the properties of the following: x x x; consisting of Three Thousand Two
Hundred Forty-Five (3,245) Square Meters, more or less, and declared for taxation
purposes under Tax Declaration No. 4234 in 1951 in the Office of the Provincial
Assessor of Pangasinan, in the name of Doroteo Magno;

(g) A parcel of land (unirrigated Riceland) located at Balangobong, Alaminos,

Pangasinan, bounded by the properties of the following: x x x; consisting of Eleven
Thousand One Hundred Thirty-Two (11,132) Square Meters, more or less, and declared
for taxation purposes under Tax Declaration No. 4241 in 1951 in the Office of the
Provincial Assessor ofPangasinan, in the name of Espiridion Magno; 5
In their Amended Answer to the Amended Complaint with a Counter-claim 6 dated March
4, 1964, Teofilo Magno, Isidro, Herminio and Felicidad, all surnamed Cabatic, Aurora,
Elpidio, Tomas, Nicanor and Lolita, all surnamed Magno (Teofilo Magno, et  al. ), who
are the predecessors-in-interest of Elpidio Magno, et al, denied the material allegations
of the amended complaint. By way of counterclaim, Teofilo Magno, et al. also sought
the partition of three (3) parcels of land originally owned by Nicolas Magno, as shown by
Original Tax Declaration No. 2221 in his name, and described as
follows:ChanRoblesVirtualawlibrary
Tax Declaration No. 4246 in the name of GAVINO MAGNO and is actually in the
possession of Gavino Magno, plaintiff:

chanRoblesvirtualLawlibraryA parcel of land containing an area of 84,988 square

meters in area situated in the Barrio Lucap, Municipality of Alaminos, Pangasinan,
Philippines, x x x.

Tax Declaration No. 13385 assessed at P390.00 in the name of

plaintiff, Necitas Magno described as follows:

chanRoblesvirtualLawlibraryA parcel of land situated in the Barrio of Lucap, Municipality

of Alaminos, Pangasinan, containing an area of about 38,385 sq. m. x x x.

Tax Declaration No. 4249 in the name of plaintiff NAZARIA MAGNO and also under
her actual possession, to wit:

chanRoblesvirtualLawlibraryA parcel of land situated in the Barrio of Lucap, Mun. of

Alaminos, Pangasinan containing an area of 41,023 sq. m. more or less, x x x. 7
On October 5, 1972, CFI of Pangasinan, Branch VII, 8 granted the amended complaint of
Gavino Magno, et al., but failed to include in the dispositive portion of its Decision 9 three
(3) real properties covered by Tax Declaration Nos. 4246, 4249, and 13385 subject of
the counterclaim of Teofilo Magno, et al. The fallo of the Decision
reads:ChanRoblesVirtualawlibrary

1044
WHEREFORE,  in view of all the  foregoing  considerations, judgment is hereby
declared as follows:

chanRoblesvirtualLawlibrary
  a) Declaring the plaintiffs  [Gavino Magno, et al. ] and the defendants
[Teofilo Magno, et al. ] as legal heirs of the deceased Nicolas Magno
and consequently, the absolute and exclusive owners of the properties
described in the amended complaint, except the parcel of land
described in paragraph (3), sub-paragraph (e) of said amended
complaint.
     
  b) Ordering the partition of said properties in four (4) equal parts as follows:
one share each of the plaintiffs, Gavino, Nicetas and Nazaria, all surnamed
Magno, and the fourth share to thedefendants who represent the deceased
Doroteo Magno;
     
  c) Declaring the property described in paragraph (3), sub-paragraph (e) as the
exclusive property of the heirs of the deceased spouses, Doroteo Magno
and Monica Romero;
     
  d) Ordering the defendants to account for the annual income or produce of the
above-mentioned properties with the exception of the property described in
the preceding paragraph, and to divide the same into four (4) equal parts in
the manner above-described, commencing from 1957 until the accounting is
made and the shares corresponding to the plaintiffs delivered;
     
  e) Ordering the defendants to pay, jointly and severally, the plaintiffs in the
sum of P3,000.00 as attorney's fees. And the costs.
     
  SO ORDERED.10
On June 30, 1981, the Court of Appeals (CA), 9th Division, rendered a
Decision11 affirming the decision of the CFI. The CA ruled, among other matters, that
the lands covered by Tax Declaration Nos. 4246, 4249, and 13385 were owned by the
late Nicolas Magno and must be brought into the mass of his estate. But, the CA also
failed to order their partition in the dispositive portion of its decision which
reads:ChanRoblesVirtualawlibrary
WHEREFORE, the Decision appealed from, being in accord with evidence and law, is
hereby affirmed in all parts. With costs against the defendants-appellants.

SO ORDERED.12

1045
In an Entry of Judgment13 dated September 25, 1981, the Clerk of Court certified that
the CA Decision has become final and executory on September 22, 1981.

Meanwhile, on October 14, 1981, Gavino Magno, et al. filed a Motion for Execution,
which the CFI granted. Teofilo Magno, et al. filed a motion for reconsideration which the
CFI denied on October 19, 1981.

Aggrieved, Teofilo Magno, et al. filed a petition for certiorari with preliminary injunction

before the Supreme Court which issued a temporary restraining order against the CA
and Gavino Magno, et al. on January 6, 1982. In a Decision14 dated July 31, 1987, the
Court dismissed the petition for lack of merit and lifted its restraining order. The Court
ruled that the CA committed no error in ordering the issuance of the entry of judgment,
and that the CA decision has become final and executory, there being no appeal taken
therefrom. On November 2, 1987, it issued an Entry of Judgment in G.R. No. 58781
entitled Teofilo Magno, et al. v. Court of Appeals, et al.

On December 8,1987, Gavino Magno, et  al. filed a Motion for Issuance of Alias Writ of
Execution. On December 15, 1987, the Regional Trial Court (RTC) of Pangasinan,
Branch 54,15 ordered the issuance of an alias writ of execution.

On January 27, 1988, Gavino Magno, et al. filed an Urgent Motion for Partition and
Accounting. On May 4, 1989, the RTC ordered the setting of the case for hearing on the
urgent motion for partition and accounting, and for purposes of appointing
commissioners which shall make the necessary partition of the lands.

On August 23, 1989, Teofilo Magno, et al. filed a Motion to Reopen, alleging that there
are real properties of Nicolas Magno in the possession of Gavino Magno, et al. that
have not been reported to the court, and should be collated so that the whole
inheritance can be partitioned by the heirs. On February 8, 1990, Teofilo Magno, et al.
filed an Urgent Motion for Reconsideration with respect to the true nature of the
inventory of the properties left by Nicolas Magno, and for them to be allowed to submit
an inventory thereof.

On June 8, 1990, the RTC issued an Order which, among other matters, ruled that the
only portion of the decision that becomes the subject of execution, is that ordained in
the dispositive portion of the decision; thus, he denied the motion for reconsideration
filed by Teofilo Magno, et al. On June 11, 1990, the RTC also denied for lack of merit
the motion to reopen filed by them.

Meanwhile, Elpidio Magno, et al. ,16 the successors-in-interest of Teofilo Magno, et

al, filed before the RTC of Alaminos, Pangasinan, a Complaint 17 dated May 24, 1990 for
partition, accounting and damages. In their complaint docketed as Civil Case No. A-
1850, Elpidio Magno, et al. alleged that aside from the real properties subject of Civil
Case No. A-413, Nicolas Magno also left three (3) real properties covered by Tax
Declaration Nos. 4246, 4249 and 13385, which were in the possession of Gavino,
Nazaria and Necitas, all surnamed Magno, and now in possession of their respective

1046
successors-in-interest, Lorenzo Magno, et al.  18 Claiming to be among the coheirs of
Nicolas Magno, Elpidio Magno, et al. averred that Lorenzo Magno, et al. refused to
partition the said three (3) properties, and to account for their fruits since 1957 up to
present, despite repeated demands.

In their Motion to Dismiss19 dated August 4, 1990, Lorenzo Magno, et al. contended that

the cause of action of Elpidio Magno, et al. is barred by a prior final judgment in Civil
Case No. A-413, prescription and laches. In an Order 20 dated April 3, 1991, the RTC
denied the motion for lack of merit.

In their Answer with Counterclaim21 dated September 3, 1991, Lorenzo Magno, et

al. averred that their refusal to partition the properties is founded on the open,
continuous, exclusive and adverse possession in the concept of owner by their
predecessor-in-interest, Gavino, Nazaria and Necitas, all surnamed Magno. By way of
special defense, Lorenzo Magno, etal. reiterated that the cause of action of Elpidio
Magno, et al. is barred by res judicata, prescription and laches.

In the Amended Complaint22 dated July 1, 1992, Elpidio Magno, et al. stressed that the
three (3) real properties described in their complaint were all acquired during the first
marriage of Nicolas with Eugenia Recaido.

In their Motion to Dismiss23 dated December 7, 1995, Lorenzo Magno, et al. argued that

the trial court has no jurisdiction to correct or amend the decision in Civil Case No. A-
413 which had already become final and executory, pursuant to the doctrine of res
judicata.

On November 15, 2007, the RTC of Alaminos City, Pangasinan, Branch 54, granted the
amended complaint of Elpidio Magno, et al. The fallo of its Decision
reads:ChanRoblesVirtualawlibrary
WHEREFORE, in consideration of the foregoing premises, considering that these three
parcels of land were acquired by the deceased Nicolas Magno and his first wife,
Eugenia Recaido, the plaintiffs, therefore, are entitled to one-half of each of the three
parcels of land as the share of his first wife, Eugenia Recaido, or her heirs while the
other half owned by Nicolas Magno be divided into four shares, three shares to the
defendants and one share to the plaintiffs.

Further, the Court finally orders the accounting of all the total value of fruits and produce
of the three described parcels of land from 1957 up to the present time and to deliver to
the plaintiffs their respective shares pertaining to them.

Finally, the court orders the defendants to pay severally and jointly the plaintiffs actual
damages and attorney's fees in the total sum of ONE HUNDRED THOUSAND
(Php100,000.00) PESOS.

IT IS SO ORDERED.24

1047
On July 23, 2012, the CA Sixth Division rendered a Decision in CA-G.R. CV No. 90846,
the dispositive portion of which states:ChanRoblesVirtualawlibrary
WHEREFORE, the instant appeal is GRANTED and the appealed Decision
is REVERSED and SET ASIDE. A new one is entered DISMISSING the complaint.

SO ORDERED.25cralawred
Aggrieved, Elpidio Magno, et al. filed this petition for review on certiorari.

Elpidio Magno, et al. submit that the CA committed grave and serious reversible errors,
thus:ChanRoblesVirtualawlibrary
a- in holding that the finality of the decision in Civil Case No. A-413 operates as res
judicata in the second case (Civil Case No. A-1850), despite that there is no
identity of the subject matter between the two cases.
   
b-   in concluding that the decision in the first case, which has become final and
executory, should have been executed to effect the partition of the subject
properties, notwithstanding that only the dispositive portion, of the fallo is its
decisive resolution, and is thus the subject of execution.
   
c- in dismissing Civil Case No. A-1850, without regard to the right to demand
partition of the thing owned in common, as mandated in Art. 494 of the New Civil
Code.26
Elpidio Magno, et al. admit that the subject three (3) properties covered by Tax
Declaration Nos. 13385, 4246 and 4249 were among those stipulated as properties of
Nicolas Magno, and lengthily discussed in the body of the CFI Decision in Civil Case
No. A-413, but were not included in the dispositive portion of its decision. They stress
that while the said decision was affirmed by the CA in G.R. CV No. 52655-R when it
ruled inter alia that such properties ought to be brought into the mass of Nicolas
Magno's estate, the CA likewise failed to include the said properties in the dispositive
portion of its decision. Thus, Elpidio Magno, et al. submit that res judicata cannot be
applied because there is no identity of subject matter between Civil Case No. A-413
where their predecessors-in-interest, Teofilo Magno, et al. had sought by way of
counterclaim for partition of the said properties, and Civil Case No. 1850 where they
prayed for partition of the same properties, which were omitted in the dispositive portion
of the decisions of the CFI and the CA.

Elpidio Magno, et al. further argue that to deny their right to demand partition of
properties which remain co-owned by them and Lorenzo Magno, et al. on the ground
of res judicata would sacrifice justice to technicality. Citing Article 494 27 of the New Civil
Code, they also claim to have the right to demand partition of said properties at any
time. They likewise invoke Article 110328 of the same Code in support of their claim that
a decision or order of partition does not really become final in the sense that it leaves
something more to be done for the complete disposition of the case. They insist that

1048
Lorenzo Magno, et al. should not be allowed to exclusively appropriate the properties
owned in common for they hold the same in trust for the other co-owners; otherwise,
there would be unjust enrichment at the expense of their co-owners. Finally, they submit
that the finding of the CA to the effect that the subject properties were owned by the late
Nicolas Magno and must be brought to the mass of his estate, becomes the law of the
present case which must not be disturbed as a matter of judicial comity.

On the other hand, respondents argue that the filing of another complaint for partition
[Civil Case No. A-1850] cannot be sanctioned without doing violence to the doctrine
of res judicata, but also to the rule on immutability of judgments.

The petition lacks merit.

The Court has explained29 the doctrine of res judicata and its two (2) concepts, thus:
Res judicata means "a matter adjudged; a thing judicially acted upon or decided; a thing
or matter settled by judgment." It lays the rule that an existing final judgment or decree
rendered on the merits, without fraud or collusion, by a court of competent jurisdiction,
upon any matter within its jurisdiction, is conclusive of the rights of the parties or their
privies, in all other actions or suits in the same or any other judicial tribunal of
concurrent jurisdiction on the points and matters in issue in the first suit.

It must be remembered that it is to the interest of the public that there should be an end
to litigation by the parties over a subject fully and fairly adjudicated. The doctrine of res
judicata is a rule that pervades every well-regulated system of jurisprudence and is
founded upon two grounds embodied in various maxims of the common law, namely:
(1) public policy and necessity, which dictates that it would be in the interest of the State
that there should be an end to litigation — republicae ut sit litium; and (2) the hardship
on the individual that he should be vexed twice for the same cause — nemo debet bis
vexari pro una et eadem causa. A contrary doctrine would subject public peace and
quiet to the will and neglect of individuals and prefer the gratification of the litigious
disposition on the part of suitors to the preservation of public tranquility and happiness.

Res judicata has two concepts. The first is bar by prior judgment under Rule 39, Section
47(b), and the second is conclusiveness of judgment under Rule 39, Section 47(c).
These concepts differ as to the extent of the effect of a judgment or final order as
follows:ChanRoblesVirtualawlibrary
SEC. 47. Effect of judgments or final orders. – The effect of a judgment or final order
rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or
final order, may be as follows:

chanRoblesvirtualLawlibraryx x x x

(b) In other cases, the judgment or final order is, with respect to the matter directly
adjudged or as to any other matter that could have been raised in relation thereto,
conclusive between the parties and their successors-in-interest by title subsequent to
the commencement of the action or special proceeding, litigating for the same thing

1049
andunder the same title and in the same capacity; and cralawlawlibrary

(c) In any other litigation between the same parties or their successors-in-interest, that
only is deemed to have been adjudged in a former judgment or final order which
appears upon its face to have been so adjudged, or which was actually and necessarily
included therein or necessarythereto.
Jurisprudence taught us well that res judicata under the first concept or as a bar against
the prosecution of a second action exists when there is identity of parties, subject matter
and cause of action in the first and second actions. The judgment in the first action is
final as to the claim or demand in controversy, including the parties and those in privity
with them, not only as to every matter which was offered and received to sustain or
defeat the claim or demand, but as to any other admissible matter which might have
been offered for that purpose and of all matters that could have been adjudged in that
case. In contrast, res judicata under the second concept or estoppel by judgment exists
when there is identity of parties and subject matter but the causes of action are
completely distinct. The first judgment is conclusive only as to those matters actually
and directly controverted and determined and not as to matters merely involved
herein.30
In order for res judicata to bar the institution of a subsequent action, the following
requisites must concur: (1) the judgment sought to bar the new action must be final; (2)
the decision must have been rendered by a court having jurisdiction over the subject
matter and the parties; (3) the disposition of the case must be a judgment on the merits;
and (4) there must be, as between the first and second actions, identity of parties,
subject matter, causes of action as are present in the civil cases below. 31 All four
requisites of res judicata under the concept of bar by prior judgment are present in this
case.

As correctly noted by the CA, the presence of the first two requisites of res judicata, as
well as the requisite identity of parties in the first action (Civil Case No. A-413) and the
second action (Civil Case No. A-1850), are undisputed:
xxx [R]ecords show that herein parties do not dispute the fact that the trial court has
jurisdiction over the first case (Civil Case No. A-413) and that such decision in the
first case has long become final and executory on September 22, 1981 by virtue of
the Entry of Judgment dated September 25, 1981. There is also no question with
respect to the identity of parties in both civil cases. Obviously there is also a
community of interest between the parties in both the first and the present
case [Civil Case No. A-1850], being the legitimate heirs of Nicolas Magno, although, the
parties in the present case, by right of representation, merely substituted some of the
original parties in the first case who already died, x x x. 32
With respect to the third requisite of res judicata, there is no question that the
Decision33 of the CFI, dated October 5, 1972, granting the amended complaint for
partition docketed as Civil Case No. A-413, is a judgment on the merits, because it was
rendered based on the evidence and stipulations submitted by the parties and the
witnesses they presented at the trial of the case.

1050
Anent the fourth requisite of res judicata, there is also no doubt as to the identity of the
subject matter and causes of action between the first action and the second action.
Contrary to the contention of Elpidio Magno, et al., the subject matters of partition in
both actions are the same three (3) real properties originally owned by the late Nicolas
Magno, and later declared for taxation purposes under Tax Declaration Nos. 4246, 4249
and 13385. In their Amended Answer to the Amended Complaint with a Counterclaim in
Civil Case No. A-413, Teofilo Magno, etal., the predecessors-in-interest of Elpidio
Magno, et al., alleged by way of counterclaim as follows:
2. That the deceased NICOLAS MAGNO was the original owner of the following parcels
of land as shown by Original Tax Declaration No. 2221 in his name, and which parcels
of lands are hereby described as follows:
Tax Declaration No. 4246 in the name of GAVINO MAGNO and is actually in the
possession of Gavino Magno, plaintiff:

chanRoblesvirtualLawlibraryA parcel of land containing an area of 84,988 square

meters in area situated in the Barrio of Lucap, Municipality of Alaminos, Pangasinan,
Philippines, x x x.

Tax Declaration No. 13385 assessed at P390.00 in the name of

plaintiff, Necitas Magno described as follows:

chanRoblesvirtualLawlibraryA parcel of land situated in the Barrio of Lucap, Municipality

of Alaminos, Pangasinan, containing an area of about 38,385 sq. m. x x x.

Tax Declaration No. 4249 in the name of plaintiff NAZARIA MAGNO and also under
her actual possession, to wit:

chanRoblesvirtualLawlibraryA parcel of land situated in the Barrio of Lucap, Mun. of

Alaminos, Pangasinan containing an area of 41,023 sq. m. more or less, x x x. 34
3. That the three parcels of land of about 16 hectares total area being the original
property of the deceased NICOLAS MAGNO common ancestor of both parties in this
case, under law, should be divided into four equal parts, and all the defendants, being
descendants by the first wedlock, and therefore should be considered full blood and
entitled to double that of the descendants of the second wedlock, it being now difficult to
determine under which wedlock, the said properties were acquired, the partition
therefrom which would equitative (sic) to the parties would be that 3/4 pro-indiviso to the
defendants; and 1/4 pro-indiviso thereof to the plaintiffs. 35
On the other hand, in their Amended Complaint in Civil Case No. A-1850, Elpidio
Magno, et al, as successors-in-interest of Teofilo Magno, et al., prayed, among other
matters, that judgment be rendered "[o]rdering the partition of the above-described
parcels of land among the plaintiffs and the defendants, taking into consideration that
these parcels of land were acquired during the first marriage; x x x." 36 Indeed, the
subject matters of the first and second actions for partition, accounting and damages,
docketed as Civil Case Nos. A-413 and A-1850, respectively, are the three (3) real
properties originally owned by the late Nicolas Magno, which were later declared for
taxation purposes under Tax Declaration Nos. 4246, 4249 and 13385. Since all the

1051
requisites of res judicata under the concept of bar by prior judgment are present, the CA
correctly dismissed the amended complaint for partition docketed as Civil Case No. A-
1850.

However, while the CA correctly ruled that res judicata has already set in, it erred in
stating that what Elpidio Magno, et al. should have done is to file a writ of execution in
the trial court to enforce its final and executory decision in Civil Case No. A-413. It is
well settled that a writ of execution must substantially conform to the dispositive portion
of the promulgated decision, and cannot vary or go beyond the terms of the judgment;
otherwise, it becomes null and void.37 Here, it is undisputed that both the bodies of the
CFI Decision in Civil Case No. A-413 and the CA Decision upholding the CFI, confirmed
that the three (3) undivided properties belong to the late Nicolas Magno, but they were
not included in the dispositive portions of said decisions as part of the properties that
were ordered to be partitioned among his heirs. Thus, it would be pointless to require
Elpidio Magno, et al. to file a motion for execution, because the trial court will simply
deny it for the reason that the only portion of its final decision that becomes the subject
of execution, is that ordained in the dispositive portion.

Needless to state, when a final judgment becomes executory, it thereby becomes

immutable and unalterable. The judgment may no longer be modified in any respect,
even if the modification is meant to correct what is perceived to be an erroneous
conclusion of fact or law, and regardless of whether the modification is attempted to be
made by the court rendering it or by the highest Court of the land. 38 The underlying
reason for the rule is two-fold: (1) to avoid delay in the administration of justice and thus
make orderly the discharge of judicial business, and (2) to put judicial controversies to
an end, at the risk of occasional errors, inasmuch as controversies cannot be allowed to
drag on indefinitely and the rights and obligations of every litigant must not hang in
suspense for an indefinite period of time.39 Be that as it may, there are three (3)
recognized exceptions to the rule on the immutability of final and executory judgments,
namely, (a) the correction of clerical error; (b) the making of so-called nunc pro
tunc entries which cause no prejudice to any party; and (c) where the judgment is
void.40chanrobleslaw

The Court explained the concept of nunc pro tunc judgment in this wise:
The office of a judgment nunc pro tunc is to record some act of the court done at a
former time which was not then carried into the record, and the power of a court to
make such entries is restricted to placing upon the record evidence of judicial action
which has been actually taken. It may be used to make the record speak the truth, but
not to make it speak what it did not speak but ought to have spoken. If the court has not
rendered a judgment that it might or should have rendered, or if it has rendered an
imperfect or improper judgment, it has no power to remedy these errors or omissions by
ordering the entry nunc pro tune of a proper judgment. Hence a court in entering a
judgment nunc pro tune has no power to construe what the judgment means, but only
to enter of record such judgment as had been formerly rendered, but which had not
been entered of record as rendered. In all cases the exercise of the power to enter
judgments nunc pro tunc presupposes the actual rendition of a judgment, and a mere

1052
right to a judgment will not furnish the basis for such an entry. (15 R. C. L., pp. 622-
623.)

xxx                                        xxx                                        xxx

The object of a judgment nunc pro tunc is not the rendering of a new judgment and the
ascertainment and determination of new rights, but is one placing in proper form on the
record, the judgment that had been previously rendered, to make it speak the truth, so
as to make it show what the judicial action really was, not to correct judicial errors, such
as to render a judgment which the court ought to have rendered, in place of the one it
did erroneously render, nor to supply nonaction by the court, however erroneous the
judgment may have been. (Wilmerding vs. Corbin Banking Co., 28 South., 640, 641;
126 Ala., 268.)

A nunc pro tunc entry in practice is an entry made now of something which was actually
previously done, to have effect as of the former date. Its office is not to supply omitted
action by the court, but to supply an omission in the record of action really had, but
omitted through inadvertence or mistake. (Perkins vs. Haywood, 31 N. E., 670, 672.)

xxx                                        xxx                                        xxx

It is competent for the court to make an entry nunc pro tunc after the term at which the
transaction occurred, even though the rights of third persons may be affected. But
entries nunc pro tunc will not be ordered except where this can be done without
injustice to either party, and as a nunc pro tuncorder is to supply on the record
something which has actually occurred, it cannot supply omitted action by the court. . .  
(15 C.J., pp. 972-973 .)41]
Guided by the foregoing principles, the Court finds that the interest of justice would be
best served if a nunc pro tunc judgment would be entered in Civil Case No. A-413 by
ordering the partition and accounting of income and produce of the three (3) properties
covered by Tax Declaration Nos. 4246, 4249 and 13385, under the same terms as
those indicated in the dispositive portion the CFI Decision dated October 5, 1972. It is
undisputed that the said properties are still undivided and considered as part of the
estate of Nicolas Magno, pursuant to the final decision in Civil Case No. A-413. There is
also no doubt that the CFI failed to include in the dispositive portion of its Decision
dated October 5, 1972 in Civil Case No. A-413 its ruling that the said three (3)
properties remain undivided and should be partitioned among the heirs of Nicolas
Magno. Pertinent portions of the CFI Decision state:
The following facts are undisputed: that Nicolas Magno, common ancestor of the
parties died in 1907; that he died intestate, leaving properties one of which is
described under Tax Declaration No. 2221; that Nicolas Magno married twice; that
during his first marriage with one Eugenia Recaido, he had two sons, Doroteo Magno
and Eduardo Magno but the latter died without issue; that Doroteo Magno died in 1937;
that he had four children, namely: Teofllo, Jose, Angela and Esperidion, all surnamed
Magno; that of the four, only Teofilo is still living. While Jose was survived by one
daughter Lolita and one son, Nicolas Magno. Angela was survived by three children,

1053
Isidro, Herminio, and Felicidad, all surnamed Cabatic; Espiridion Magno who is also
deceased was survived by his three children Tomas, Elpidio and Aurora, all surnamed
Magno. While in his second marriage with Camila Asinger, said Nicolas Magno had
three children, Gavino, Nicetas and Nazaria, all surnamed Magno.

The principal issue in this case is whether the properties of the deceased Nicolas
Magno have been partitioned.

From the evidence thus adduced, the Court is convinced that said properties of
the deceased Nicolas Magno, common ancestor of the parties remain undivided
up to present. This view is supported by the testimonies of the plaintiffs and their
witnesses, as well as that of the defendants and their witnesses. Custodio Rabina,
a witness for the plaintiffs testified that after the death of Nicolas Magno, his son,
Doroteo Magno took possession of the twenty-seven hectare Lucap property on
condition that he would give three "baars" to the plaintiffs in the form of rentals; that
Rabina used to see Doroteo deliver the shares of the plaintiffs; that after the death of
Doroteo Magno in 1937, his son Teofilo continued in the possession of the same under
the same condition as his father until 1957; that on the said date, Teofilo failed to deliver
the shares of the plaintiffs, hence, the latter demanded the return of the land. That in
view, thereof, plaintiffs went to Atty. Tomas Rapatalo who advised them to divide the
properties in question instead of fighting each other. However, no partition was effected.

Nicolas Magno, another witness for the plaintiffs declared that in 1957, he went to Atty.
Rapatalo together with Teofilo Magno, purposely to effect the partition of the properties
in question, but no partition was effected due to the refusal of Teofilo's nephews and
nieces.

Isidro Cabatic, one of the defendants testified that the properties of Nicolas Magno have
not been partitioned and that is the reason why the heirs have no titles in their
respective names. He further declared that while they agreed to divide the properties in
1946, nevertheless, since some of them were in Mindanao and others in Quezon City,
the partition was not effected, that instead an oral partition was made, but as the
witness himself said, it was not approved. Cabatic also declared that subsequently, the
heirs from Mindanao came but insisted on the partition according to the Certeza Survey.
It is to be noted that in their proposed partition, the heirs hires the services of Surveyor
de Asis.

The mere fact that the Lucap property is covered by four tax declarations (Exhibits G, F,
E and D) is not evidence to show that it has been partitioned. Mere tax declarations are
not evidence of ownership.

Likewise, the fact that the plaintiffs possessed certain portions of the Lucap property
does not prove that said property had been partitioned because, as satisfactorily
explained by Nicetas Magno, it was the practice of the heirs to occupy portions of the
hereditary estate and harvest the corresponding produce thereof. This has not been
contradicted or rebutted by the defendants.

1054
The inequality of the areas possessed by the plaintiffs and Doroteo Magno involving the
Lucap property which was not explained by the defendants is another irrefutable sign of
non-partition. Defendants failed to explain satisfactorily why twenty-seven (27) hectares
would belong to Doroteo Magno while the plaintiffs should have only sixteen (16)
hectares among themselves from the Lucap property.

Another evidence to show that the properties of Nicolas Magno are still undivided is the
testimony of the defendant Teofilo Magno that in 1957, he went to see Atty. Rapatalo for
the purpose of asking him to register the properties in Lucap and Kiskis in the name of
Doroteo Magno, however, Atty. Rapatalo was not able to file the supposed application
for land registration because of the objections of the plaintiffs who were also present
when he (Teofilo) approached Atty. Rapatalo. Teofilo also declared that the plaintiffs
objected because they claimed they are co-owners of the same; that due to the same
objections of the plaintiffs, Teofilo was not able to get the tax declaration in his name
covering the Lucap property.

Defendants claimed and they tried to prove that the properties in litigation are the
exclusive properties of Doroteo Magno and therefore, they are entitled to inherit the
same to the exclusion of the plaintiffs. This contention of the defendants is untenable.
Defendants in the course of the trial, have failed to present any document or writing to
show that Nicolas Magno conveyed the properties in question solely to Doroteo.

No partition having been effected among the heirs, it follows that the pro-indiviso
character of the lands in question continue. It is a familiar doctrine that when an
inheritance is undivided, possession by one of the co-heirs, and prescription, however
long may be the lapse, do not run against the latter's right of action to demand the
partition of the pro-indiviso property, for the simple reason that the possessor thereof is
not a third person, nor does he hold it by such adverse possession as will become
legalized by prescription. (Dimagiba vs, Dimagiba, 34 Phil. 357). Such possession is
always understood to be exercised by the heir himself and in the name of his co-heirs
(Lampitoc vs. Lampitoc, CA-G.R. No. 9200-R, April 30, 1953).

The only exception to the rule that prescription does not run against the co-heirs is
when the co-heirs or co-owners, having possession of the hereditary community
property, hold the same in his own name, that is, under claim of exclusive ownership. In
such case, he may acquire the property by prescription if his possession meets the
other requirements of the law (De los Santos vs. Sta. Teresa, 44 Phil. 811). However,
this exception does not apply in this case. In the first place, neither the defendant
Teofilo Magno nor his father Doroteo Magno could be considered to have possessed
the lands in question in the concept of an owner to the exclusion of his co-heirs. The
evidence to the effect is insufficient and inconclusive. As can be clearly gleaned from
the evidence, the defendants were all the while aware of the plaintiffs' claim of
ownership over said properties.

In view of the foregoing, there is nothing more left for the Court to resolve than to

1055
order the partition of the properties in question except the parcel of land
described in par. 3, sub-par, (e) of the amended complaint, otherwise, denominated
as Kiskis property, the same having been satisfactorily shown by the defendants to be
the paraphernal property of Monica Romero, wife of Doroteo Magno (Exhibit 6). Clearly
therefore, plaintiffs have no right to inherit any portion thereof.

In effecting the partition among the heirs of the decedent, Article 2263 of the New Civil
Code should be applied. Under the said provision, rights to an inheritance of a person
who dies, with or without a will, before the effectivity of this code, shall be [governed] by
the Civil Code of Spain of 1889, by other [previous] laws, and by the Rules of Court. In
other words, Nicolas Magno, having died in 1907, the distribution of his estate shall be
[governed] by the Civil Code of Spain of 1889.

To properly distribute his estate, the important consideration should be to determine the
date of the acquisition of the properties subject of partition in order to be able to
[pinpoint] which properties belong to his first marriage and which properties pertain to
his second marriage. In this case, however, evidence is clear that all the properties
subject of partition belong to both marriages of the decedent, Nicolas Magno,
with the exception of that parcel described in paragraph (3), sub-paragraph (e) of
the amended complaint as previously stated. Therefore, applying Article 931 of the
Civil Code of Spain of 1889, the law [in force] at the time of the decedent's death, his
children, Doroteo, Gavino, Nicetas and Nazaria should inherit in equal shares.
Accordingly, the children of the late Doroteo Magno, namely: Teofilo, Angela, Jose and
Espiridion should succeed to the estate of Nicolas Magno by right of representation and
pursuant to law, they cannot inherit more than what their father would inherit if alive.

As regards the disposition made by Doroteo Magno during his lifetime, the same are
valid to the extent of his share and insofar as the same are not inofficious.

In brief, the properties in question which by agreed preponderance of evidence were

shown to be owned by the decedent, Nicolas Magno, except parcel (e) under par.
3 of the amended complaint as previously mentioned, should be partitioned as
follows: one fourth (1/4) share each child shall be for the three-plaintiffs, and the fourth
share shall pertain to the defendant to represent the deceased, Doroteo
Magno.42chanroblesvirtuallawlibrary
In affirming in toto the CFI Decision, the CA likewise failed to indicate in the dispositive
portion of its Decision dated June 30, 1981 in CA-G.R. No. 52655-R, its definitive ruling
that the said three (3) real properties were owned by Nicolas Magno and must be
brought into the mass of his estate for partition, thus:
What are the lands inherited by the parties from the common ancestor, the late Nicolas
Magno, and what are the lands, if any, not owned by Nicolas Magno but inherited by the
defendants-appellants [Teofilo Magno, et al. ] from their respective parents, as alleged
in their answer? Were some of these lands including those described in the
counterclaim, acquired by either party through acquisitive prescription or adverse
possession after the required number of years? We decide.

1056
Land subject-matter of defendants' [Teofilo Magno, et al. ] counterclaim. - As  admitted
by the defendants in their answer, there existed a property used to be covered by Tax
Declaration No. 2221 in the name of Nicolas Magno. In the pre-trial conference of
October 8, 1964, the parties stipulated that the land covered by Tax Declaration No.
2221 was one of the properties left by Nicolas Magno (pp. 14-15,20-21, R.A.). In the
stipulation of the parties, dated November 16, 1965, the parties admitted that Tax No.
2221 was revised in 1917 and four tax declarations were issued in lieu of Tax No. 2221
to wit: Tax No. 7819, in the name of Doroteo Magno; Tax No. 7820 in the name of
Nicetas Magno; Tax No. 7821 in the name of Gavino Magno, and Tax No. 7822 in the
name of Nazaria Magno (see also Exh. A.) In their counterclaim, defendants disclosed
that the same land originally declared under Tax No. 2221 are now covered by Tax No.
4246 in the name of Gavino Magno, No. 13385, in the name of Nicetas Magno, and No.
4249, in the name of Nazario Magno (pp. 15-16 Record on Appeal).

The lands covered by Tax Declaration Nos. 4246, 4249 and 13385 were owned by
the late Nicolas Magno and must be brought into the mass of his estate.

xxxx

After a careful analysis of the evidence, We uphold the lower court's findings. We
repeat, in 1946, according to defendant Isidro Cabatic, all the heirs have demanded the
division of their common properties; and in 1957 another defendant, Teofilo Magno,
disclosed that plaintiffs [Gavino Magno, et al. ] have asked for partition of the lands in
question. There is no evidence to show that between 1946 and 1957, defendants have
categorically apprised the plaintiffs of their repudiation of the co-ownership because
they have found out that the late Doroteo Magno was the exclusive owner of all the
properties by valuable or other considerations from Nicolas Magno and/or they and their
predecessors have acquired ownership over the lands in question through adverse
possession to the exclusion of plaintiffs and their mother. The complaint for partition
was filed on January 23, 1963 or before the lapse often (10) years from 1957 when a
chance confrontation between Teofilo Magno and plaintiffs took place in the office of
Atty. Tomas Rapatalo and when defendants refused to share with the plaintiffs the
harvest of the properties.43
Concededly, Elpidio Magno, et al. failed to raise the issue of nunc pro tunc entry at any
stage of the proceeding, in order to include the subject three (3) properties among the
other real properties of Nicolas Magno subject to partition, pursuant to the CFFs final
decision in Civil Case No. A-413. The interest of justice, however, impels the Court to
consider and resolve an issue even though not particularly raised, because it is
necessary for the complete adjudication of the rights and obligations of the parties and it
falls within the issues already found by them. 44 Such omission on the part of Elpidio
Magno, et al. does not preclude the Court from appreciating the said issue, because to
ignore the same would result in a situation where the said three (3) properties would
remain under co-ownership, despite the clear intention of the successors-in-interest of
Nicolas Magno to partition them among themselves.

Elpidio Magno, et al. and Lorenzo Magno, et al, as successors-in-interest of Teofilo

1057
Magno, et al. and Gavino Magno, et al., respectively, cannot be compelled to remain in
the co-ownership, pursuant to Article 49445 of the New Civil Code. There being neither
an agreement or condition to keep the three (3) real properties undivided, nor a law
prohibiting partition of the said properties, much less a showing that any of the co-
owners has acquired them by prescription, each co-owner may demand at any time the
partition of the things owned in common, insofar as her share is concerned. No
prejudice to any party would be caused by a nunc pro tunc entry in this case inasmuch
as Article 494 of the same Code explicitly states that no co-owner shall be obliged to
remain in the co-ownership, and each co-owner may demand at any time the partition of
the thing owned in common, insofar as his share is concerned. Having in mind the
concept of a nunc pro tunc entry, it bears stressing that the said properties should be
subject to partition and accounting of fruits and income, strictly under the same terms as
those applied to the other real properties of Nicolas Magno, as stated in the dispositive
portion of the CFI Decision in Civil Case No. A-413, namely:
b) Ordering the partition of said properties in four (4) equal parts as follows: one share
each of the plaintiffs, Gavino, Nicetas and Nazaria, all surnamed Magno, and the fourth
share to the defendants who represent the deceased Doroteo Magno;

xxxx

d) Ordering the defendants to account for the annual income or produce of the above-
mentioned properties with the exception of the property described in the preceding
paragraph, and to divide the same into four (4) equal parts in the manner above-
described, commencing from 1957 until the accounting is made and the shares
corresponding to the plaintiffs delivered;46
On a final note, partition is a right much favored, because it not only secures peace, but
also promotes industry and enterprise. 47 The rule of the civil as of the common law that
no one should be compelled to hold property in common with another grew out of a
purpose to prevent strife and disagreement, to facilitate transmission of titles and avoid
the inconvenience of joint holding.48 The reason of the law in recognizing in favor of a
co-owner the right to ask under certain limitations the partition of the property held in
common is that the good faith and harmony which the law regards as necessary to exist
among co-owners may sometimes be broken by one who, against the wish of others, is
opposed to the further continuance of the co-ownership. 49 By reason thereof, the law
allows, as a general rule, the pro-indiviso condition to cease and to proceed with the
partition of the party, adjudicating as a result thereof to each of the co-owners their
respective interest in the community property. 50chanrobleslaw

WHEREFORE, premises considered, the petition for review on certiorari is DENIED for

lack of merit, and the Decision dated July 23, 2012 of the Court of Appeals in CA-G.R.
CV No. 90846 is AFFIRMED. In the interest of justice, however, the Decision of the
Regional Trial Court of Alaminos City, Pangasinan, Branch 54, in Civil Case No. A-
1850, is MODIFIED in the sense that a nunc pro tunc judgment is hereby entered as
follows:

chanRoblesvirtualLawlibrarya) Declaring petitioners Elpidio Magno, et al. 51  and

1058
respondents Lorenzo Magno, et al.52 as the respective successors-in-interest of Teofilo
Magno, et al. and Gavino Magno, et al., who are the legal heirs of Nicolas Magno and,
thus, the absolute and exclusive owners of the three (3) real properties covered by Tax
Declaration Nos. 4246, 4249 and 13385; and cralawlawlibrary

b) Ordering the said three (3) properties to be subject of partition and accounting of
annual income and produce, in accordance with the terms of the dispositive portion of
the Decision dated October 5, 1972 of the Court of First Instance of Pangasinan in Civil
Case No. A-413.

SO ORDERED.chanRoblesvirtualLawlibrary
RULE 37. NEW TRIAL OR RECONSIDERATION

SECOND DIVISION

G.R. No. 212860, March 14, 2018

REPUBLIC OF THE PHILIPPINES, Petitioner, v. FLORIE GRACE M.

COTE, Respondent.

DECISION

REYES, JR., J.:

This is a Petition for Review under Rule 45 of the Rules of Court which seeks to reverse
and set aside the Decision1 dated January 21, 2014 and Resolution2 dated June 11,
2014 of the Court of Appeals (CA) in CA-G.R. SP No. 122313.

The Facts

As culled from the records, the antecedent facts are as follows:

On July 31, 1995, Rhomel Gagarin Cote (Rhomel) and respondent Florie Grace
Manongdo-Cote (Florie) were married in Quezon City. At the time of their marriage, the
spouses were both Filipinos and were already blessed with a son, Christian Gabriel
Manongdo who was born in Honolulu, Hawaii, United States of America (USA). 3

On August 23, 2002, Rhomel filed a Petition for Divorce before the Family Court of the
First Circuit of Hawaii on the ground that their marriage was irretrievably broken. This
was granted on August 23, 2002 by the issuance of a decree that states among others:
A decree of absolute divorce is hereby granted to [Rhomel], the bonds of matrimony
between [Rhomel] and [Florie] are hereby dissolved and the parties hereto are restored
to the status of single persons, and either party is permitted to marry from and after the
effective date of this decree.4
Seven years later, Florie commenced a petition for recognition of foreign judgment
granting the divorce before the Regional Trial Court (RTC). Florie also prayed for the

1059
cancellation of her marriage contract, hence, she also impleaded the Civil Registry of
Quezon City and the National Statistics Office (NSO). The Office of the Solicitor
General, representing Republic of the Philippines (petitioner), deputized the Office of
the City Prosecutor to appear on behalf of the State during the trial. 5

On April 7, 2011, the RTC granted the petition and declared Florie to be capacitated to
remarry after the RTC's decision attained finality and a decree of absolute nullity has
been issued. The RTC ruled, inter alia, that Rhomel was already an American citizen
when he obtained the divorce decree,6viz.:
[Florie] has sufficiently established that she is a Filipino citizen and married to an
American citizen. Her husband obtained a Divorce Decree on 22 August 2002 and was
authenticated and registered by the Consulate General to the Philippines in Honolulu,
Hawaii, U.S.A. [Florie] being a Filipino citizen and is governed by Philippine laws, she is
placed in an absurd, if not awkward situation where she is married to somebody who is
no longer married to her. This is precisely the circumstances contemplated under Article
26, paragraph 2 of the Family Code which provides a remedy for Filipino spouses like
[Florie].

Under the above-cited provision, [Florie] is allowed to contract a subsequent marriage

since the divorce had been validly obtained abroad by her American husband,
capacitating her to remarry. In this line, the court holds that this petition be, as it is,
hereby GRANTED.

WHEREFORE, in view of the foregoing, judgment is hereby rendered declaring [Florie]

capacitated to remarry pursuant to Article 26 paragraph 2 of the Family Code, in view of
the Divorce Decree which had been validly obtained abroad by her American spouse,
dissolving their marriage solemnized on 31 July 1995 in Quezon City, Philippines. 7
Petitioner filed a Notice of Appeal on May 17, 2011. However, the RTC, believing that
the petition was covered by A.M. No. 02-11-10-SC or the Rule on Declaration of
Absolute Nullity of Void Marriages and Annulment of Voidable Marriages, applied
Section 20 of said Rule and denied the appeal because the notice was not preceded by
a motion for reconsideration.8

Petitioner then filed a petition for certiorari with the CA claiming that the RTC committed
grave abuse of discretion.

In a Decision9 dated January 21, 2014, the CA denied the petition. The pertinent
portions read as follows:
The fact that even the Solicitor General and private respondent were confused as to the
true nature of the petition and the procedure that must be followed only shows that We
cannot attribute a whimsical and capricious exercise of judgment to the RTC.

xxxx

Besides, petitioner's omission, by itself, is a ground for dismissing the petition. The last
paragraph of Section 3, Rule 46 of the Rules of Court allows the dismissal of a petition

1060
for certiorari if the material parts of the records were not attached to the petition.
"Certiorari, being an extraordinary remedy, the party seeking it must strictly observe the
requirements for its issuance." Although it has been ruled that the better policy is for
petitioner to be accorded, in the interest of substantial justice, "a chance to submit the
same instead of dismissing the petition" We cannot allow petitioner to benefit from this
rule because the need to submit the transcript of stenographic notes and all other
pieces of evidence is quite obvious for petitioner which is questioning the sufficiency of
the evidence presented. Hence, it would be bending the rules too far if We still allow
petitioner to be excused from this lapse. 10
Hence, this present petition.

The Issues

I. THE CA ERRED IN FINDING THAT THE TRIAL COURT JUDGE DID

NOT COMMIT GRAVE ABUSE OF DISCRETION IN APPLYING THE
PROCEDURAL RULES FOR NULLITY OF MARRIAGE PROCEEDINGS
UNDER A.M. NO. 02-11-10-SC IN A PROCEEDING FOR RECOGNITION
OF FOREIGN DECREE OF DIVORCE;

II. THE CA GRAVELY ERRED IN RULING THAT THE STATE HAS NO

PERSONALITY TO INTERVENE IN PROCEEDINGS FOR
RECOGNITION OF FOREIGN DECREE OF DIVORCE;

III. THE CA ERRED IN FINDING THAT THE FAILURE OF THE

PETITIONER TO APPEND COPIES OF THE TRANSCRIPT OF
STENOGRAPHIC NOTES OF FLORIE'S DIRECT EXAMINATION AND
HER JUDICIAL AFFIDAVIT IS FATAL, NOTWITHSTANDING THAT THE
VERY SAME DOCUMENTS WERE INCORPORATED AND QUOTED BY
FLORIE IN HER COMMENT; and

IV. THE CA ERRED IN AFFIRMING THE TRIAL COURT'S DECISION

DATED APRIL 7, 2011 GRANTING FLORIE'S PETITION FOR
RECOGNITION OF FOREIGN DECREE OF DIVORCE DESPITE LACK
OF SHOWING THAT HER FORMER FILIPINO HUSBAND WAS
ALREADY AN AMERICAN CITIZEN AT THE TIME HE PROCURED THE
DECREE OF DIVORCE.11

Ruling of the Court

The core issue for the Court's resolution is whether or not the provisions of A.M. No. 02-
11-10-SC12 applies in a case involving recognition of a foreign decree of divorce.

It bears stressing that as of present, our family laws do not recognize absolute divorce
between Filipino husbands and wives. Such fact, however, do not prevent our family
courts from recognizing divorce decrees procured abroad by an alien spouse who is
married to a Filipino citizen.
1061
Article 26 of the Family Code states:
Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in
force in the country where they were solemnized, and valid there as such, shall also be
valid in this country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37
and 38.

Where a marriage between a Filipino citizen and a foreigner is validly celebrated

and a divorce is thereafter validly obtained abroad by the alien spouse
capacitating him or her to remarry, the Filipino spouse shall likewise have
capacity to remarry under Philippine law.
The wordings of the second paragraph of Article 26 initially spawned confusion as to
whether or not it covers even those marriages wherein both of the spouses were
Filipinos at the time of marriage and then one of them eventually becomes a naturalized
citizen of another country.

In the landmark case of Republic v. Orbecido III,13 the Court ruled that the reckoning
point is not the citizenship of the parties at the time of the celebration of the marriage,
but their citizenship at the time a valid divorce is obtained abroad by the alien spouse
capacitating the latter to remarry.14

Although the Court has already laid down the rule regarding foreign divorce involving
Filipino citizens, the Filipino spouse who likewise benefits from the effects of the divorce
cannot automatically remarry. Before the divorced Filipino spouse can remarry, he or
she must file a petition for judicial recognition of the foreign divorce.

The starting point in any recognition of a foreign divorce judgment is the

acknowledgment that our courts do not take judicial notice of foreign judgments and
laws. Justice Herrera explained that, as a rule, "no sovereign is bound to give effect
within its dominion to a judgment rendered by a tribunal of another country." This means
that the foreign judgment and its authenticity must be proven as facts under our rules on
evidence, together with the alien's applicable national law to show the effect of the
judgment on the alien himself or herself. The recognition may be made in an action
instituted specifically for the purpose or in another action where a party invokes the
foreign decree as an integral aspect of his claim or defense. 15

To clarify, respondent filed with the RTC a petition to recognize the foreign divorce
decree procured by her naturalized (originally Filipino) husband in Hawaii, USA. By
impleading the Civil Registry of Quezon City and the NSO, the end sought to be
achieved was the cancellation and or correction of entries involving her marriage status.

In Corpuz v. Sto. Tomas, et al.,16 the Court briefly explained the nature of recognition
proceedings vis-a-vis cancellation of entries under Rule 108 of the Rules of Court, viz.:
Article 412 of the Civil Code declares that no entry in a civil register shall be changed or
corrected, without judicial order. The Rules of Court supplements Article 412 of the Civil
Code by specifically providing for a special remedial proceeding by which entries in the

1062
civil registry may be judicially cancelled or corrected. Rule 108 of the Rules of Court
sets in detail the jurisdictional and procedural requirements that must be complied with
before a judgment, authorizing the cancellation or correction, may be annotated in the
civil registry. It also requires, among others, that the verified petition must be filed with
the RTC of the province where the corresponding civil registry is located; that the civil
registrar and all persons who have or claim any interest must be made parties to the
proceedings; and that the time and place for hearing must be published in a newspaper
of general circulation. x x x.

We hasten to point out, however, that this ruling should not be construed as requiring
two separate proceedings for the registration of a foreign divorce decree in the civil
registry one for recognition of the foreign decree and another specifically for
cancellation of the entry under Rule 108 of the Rules of Court. The recognition of the
foreign divorce decree may be made in a Rule 108 proceeding itself, as the object of
special proceedings (such as that in Rule 108 of the Rules of Court) is precisely to
establish the status or right of a party or a particular fact. Moreover, Rule 108 of the
Rules of Court can serve as the appropriate adversarial proceeding by which the
applicability of the foreign judgment can be measured and tested in terms of
jurisdictional infirmities, want of notice to the party, collusion, fraud, or clear mistake of
law or fact.17
The RTC, in its Decision18 dated January 21, 2014 ruled that Florie had sufficiently
established that she is married to an American citizen and having proven compliance
with the legal requirements, is declared capacitated to remarry.

The confusion arose when the RTC denied petitioner's appeal on the ground that no
prior motion for reconsideration was filed as required under Section 20 of A.M. No. 02-
11-10-SC. Petitioner posits that A.M. No. 02-11-10-SC do not cover cases involving
recognition of foreign divorce because the wording of Section 1 thereof clearly states
that it shall only apply to petitions for declaration of absolute nullity of void marriages
and annulment of voidable marriages, viz.:
Section 1. Scope - This Rule shall govern petitions for declaration of absolute nullity of
void marriages and annulment of voidable marriages under the Family Code of the
Philippines. [Underscoring Ours]
Rule 41 of the Rules of Court applies; Motion for Reconsideration not a condition
precedent to the filing of an appeal

The CA is correct when it ruled that the trial court misapplied Section 20 of A.M. No. 02-
11-10-SC.

A decree of absolute divorce procured abroad is different from annulment as defined by

our family laws. A.M. No. 02-11-10-SC only covers void19and voidable20marriages that
are specifically cited and enumerated in the Family Code of the Philippines. Void and
voidable mmTiages contemplate a situation wherein the basis for the judicial declaration
of absolute nullity or annulment of the marriage exists before or at the time of the
marriage. It treats the marriage as if it never existed. Divorce, on the other hand, ends a
legally valid marriage and is usually due to circumstances arising after the marriage.

1063
It was error for the RTC to use as basis for denial of petitioner's appeal Section 20 of
A.M. No. 02-11-10-SC. Since Florie followed the procedure for cancellation of entry in
the civil registry, a special proceeding governed by Rule 108 of the Rules of Court, an
appeal from the RTC decision should be governed by Section 3 21 of Rule 41 of the
Rules of Court and not A.M. No. 02-11-10-SC.

As culled from the records, petitioner received a copy of the RTC Decision on May 5,
2011. It filed a Notice of Appeal22 on May 17, 2011, thus complying with the 15-day
reglementary period for filing an appeal.

An appeal is a statutory right that must be exercised only in the manner and in
accordance with the provisions of law. Having satisfactorily shown that they have
complied with the rules on appeal, petitioners are entitled to the proper and just
disposition of their cause.23

This now brings the Court to the issue whether or not the RTC's denial of petitioner's
appeal is tantamount to grave abuse of discretion. The Court rules in the negative.

No grave abuse of discretion

Although the Court agrees with petitioner that the RTC erroneously misapplied A.M. No.
02-11-10-SC, such error does not automatically equate to grave abuse of discretion.
The Court has ruled time and again that not all errors attributed to a lower court or
tribunal fall under the scope of a Rule 65 petition for certiorari.

Jurisprudence has defined grave abuse of discretion amounting to lack or excess of

jurisdiction in this wise:
Grave abuse of discretion is defined as capricious or whimsical exercise of judgment as
is equivalent to lack of jurisdiction. The abuse of discretion must be patent and gross as
to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined
by law, or to act at all in contemplation of law, as where the power is exercised in an
arbitrary and despotic manner by reason of passion and hostility. 24
After a careful consideration of the evidence presented and Florie having sufficiently
complied with the jurisdictional requirements, judgment was rendered by the lower court
recognizing the decree of foreign divorce. It likewise declared Florie legally capacitated
to remarry citing the second paragraph of Article 26 of the Family Code. Thus, the CA is
correct in denying the Rule 65 petition for certiorari, notwithstanding the RTC's dismissal
of petitioner's appeaL The dismissal, albeit erroneous, is not tainted with grave abuse of
discretion.

The Court finds no indication from the records that the RTC acted arbitrarily,
capriciously and whimsically in arriving at its decision. A petition for certiorari will
prosper only if grave abuse of discretion is alleged and proved to exist. The burden is
on the part of the petitioner to prove not merely reversible error on the part of private
respondent, but grave abuse of discretion amounting to lack or excess of jurisdiction.

1064
WHEREFORE, premises considered, the petition is hereby DENIED. The Decision
dated January 21, 2014 and Resolution dated June 11, 2014 of the Court of Appeals in
CA-G.R. SP No. 122313 are hereby AFFIRMED.

SO ORDERED.
RULE 39

SECOND DIVISION

G.R. No. 195654, November 25, 2015

REYNALDO INUTAN, HELEN CARTE, NOEL AYSON, IVY CABARLE, NOELJAMILI,

MARITES HULAR, ROLITOAZUCENA, RAYMUNDO TUNOG, ROGER BERNAL,
AGUSTEV ESTRE, MARILOU SAGUN, AND ENRIQUE LEDESMA,
JR., Petitioners, v. NAPAR CONTRACTING & ALLIED SERVICES, NORMAN
LACSAMANA,*** JONAS INTERNATIONAL, INC., AND PHILIP YOUNG, Respondent.

DECISION

DEL CASTILLO, J.:

A judicially approved compromise agreement has the effect and authority of res
judicata.2 It is final, binding on the parties, and enforceable through a writ of execution.
Article 2041 of the Civil Code, however, allows the aggrieved party to rescind the
compromise agreement and insist upon his original demand upon failure and refusal of
the other party to abide by the compromise agreement.

This Petition for Review on Certiorari2 assails the August 27, 2010 Decision3 of the
Court of Appeals (CA) in CA-G.R. SP No. 106724, which dismissed the Petition
for Certiorari filed by Reynaldo Inutan (Inutan), Helen Carte (Carte), Noel Ayson
(Ayson), Ivy Cabarle (Cabarle), Noel Jamili (Jamili), Maritess Hular (Hular), Rolito
Azucena (Azucena), Raymundo Tunog (Tunog), Jenelyn Sancho, Wilmar Bolonias,
Roger Bernal (Bernal), Agustin Estre (Estre), Marilou Sagun (Sagun), and Enrique
Ledesma, Jr. (Ledesma), against respondents Napar Contracting & Allied Services
(Napar), Norman Lacsamana (Lacsamana), Jonas International, Inc. (Jonas), and Philip
Young (Young), and affirmed the June 26, 2008 Decision 4 and October 14, 2008
Resolution5 of the National Labor Relations Commission (NLRC) in NLRC CA No.
041474-04 dismissing the consolidated complaints against respondents for illegal
dismissal with money claims on the ground of res judicata. Likewise assailed is the CA's
February 10, 2011 Resolution6 which denied the Motion for Reconsideration.

Factual Antecedents

Petitioners Inutan, Carte, Ayson, Cabarle, Jamili, Hular, Azucena, Tunog, Bernal, Estre,
Sagun, and Ledesma were employees of respondent Napar, a recruitment agency

1065
owned and managed by respondent Lacsamana. Napar assigned petitioners at
respondent Jonas, a corporation engaged in the manufacture of various food products
with respondent Young as its President, to work as factory workers, machine operator,
quality control inspector, selector, mixer, and warehouseman.

Sometime in September of 2002, petitioners and other co-workers (complainants) filed

before the Arbitration Branch of the NLRC three separate complaints for wage
differentials, 13th month pay, overtime pay, holiday pay, premium pay for holiday and
rest day, service incentive leave pay, and unpaid emergency cost of living allowance
(ECOLA) against respondents, docketed as NLRC NCR Case Nos. 09-76698-2002, 09-
08152-2002, and 09-08046-2002, which complaints were consolidated before Labor
Arbiter Jaime M. Reyno (LA Reyno).

On January 13, 2003, complainants and respondents entered into a Joint Compromise
Agreement7 which reads:chanRoblesvirtualLawlibrary

JOINT COMPROMISE AGREEMENT

COMPLAINANTS and the RESPONDENTS, through their' respective counsel,

respectfully submit the following Compromise Agreement.

WHEREAS, the parties (except Susana Larga) deciding to finally write "finis" to the
instant case, have agreed to settle the instant case and to enter into a Compromise
Agreement.

NOW THEREFORE, for and in consideration of the terms and conditions herein below
stipulated, the parties do hereby agree:

1. That the complainants should be considered regular employees of Napar

Contracting and Allied Services reckoned from their date of hire and are
entitled to all the benefits under the law due to regular employees;

2. That the complainants shall be re-assigned by Napar Contracting and

Allied Services and shall ensure that they will be given work within forty
five days (45) or until February 26,2002;

3. That in case Napar Contracting and Allied Services failed to re assign or

provide them work, complainants shall be reinstated in their payroll or be
given their salary equivalent to the existing minimum wage x x x;

4. That the complainants shall each receive the amount of SEVEN

THOUSAND PESOS as payment for their monetary claims and which
amount shall be considered in any future litigation;

5. That upon signing of this agreement and compliance with the stipulations
herein provided, the cases shall be deemed and considered fully and
completely satisfied and the complainants hereby release, remiss and

1066
 forever discharge the herein respondents, from any and all claims arising
from the above cases;

6. The parties herein respectfully pray unto this Honorable Commission to

approve this Compromise Agreement and thereafter an Order be issued
declaring the judgment in the above-entitled cases fully and completely
satisfied.

IN WITNESS WHEREFORE, the parties have hereunto set their hands this 13 th day of
January 2003.8ChanRoblesVirtualawlibrary
cralawlawlibrary

In an Order9 dated January 16, 2003, LA Reyno approved the Joint Compromise

Agreement, enjoined the parties to fully comply with its terms and dismissed the case
without prejudice.

In accordance with the Joint Compromise Agreement, complainants, on several

instances, reported to Napar. They were paid P7,000.00 each as part of the agreement
but were required by Napar; (1) to submit their respective bio-data/resume and several
documents such as Police Clearance, NBI Clearance, Barangay Clearance, Mayor's
Permit, Health Certificate, drug test results, community tax certificate, eye test results
and medical/physical examination results; (2) to attend orientation seminars; (3) to
undergo series of interviews; and (4) to take and pass qualifying examinations, before
they could be posted to their new assignments. These requirements, according to
Napar, are needed to properly assess complainants' skills for new placement with the
agency's other clients.

Complainants failed to fully comply, hence they were not given new assignments.

Proceedings before the Labor Arbiter

Sensing Napar's insincerity in discharging its obligation in reassigning them,

complainants filed anew before the Arbitration Branch of the NLRC four separate
Complaints10 for illegal dismissal, non-payment of 13th month pay, wage differentials,
overtime pay, service incentive leave pay, holiday pay, premium pay for holiday and rest
day, and moral and exemplary damages against respondents, docketed as NLRC NCR
Case Nos. 00-0505557-2003, 00-05-06187-2003, 00-05-06605-2003, 11 and 00-07-
07792-2003. These complaints were consolidated.

In their Position Paper,12 complainants averred that Napar's failure to reinstate or

provide them work without any condition, in consonance with the terms of the Joint
Compromise Agreement, constitutes illegal constructive dismissal. They prayed for
backwages plus separation pay in lieu of reinstatement.

Respondents, in their Position Paper, 13 claimed that they have fulfilled their obligation
under the agreement when Napar required complainants to report for work, to submit

1067
documentary requirements, to undergo seminars and training, and to pass qualifying
exams. They contended that complainants were the ones who violated the agreement
when they refused to comply with the foregoing requirements in order to assess their
working capabilities and skills for their next posting. As such, they were deemed to have
waived their right to be reassigned. They argued that complainants should not have filed
new complaints but should have instead moved for the execution of the Joint
Compromise Agreement. They then argued that the Labor Arbiter who approved the
said Joint Compromise Agreement or LA Reyno has exclusive jurisdiction to act on the
complaints.

In a Decision14 dated July 29, 2004, Labor Arbiter Pablo C. Espiritu, Jr. (LA Espiritu)
held that the conditions of the Joint Compromise Agreement particularly regarding
reinstatement/reassignment of complainants were violated thereby justifying rescission
of the Joint Compromise Agreement. LA Espiritu noted that complainants were correct
in re-filing the complaints as this was an available remedy under the NLRC Rules of
Procedure when their previous complaints were dismissed without prejudice. He struck
down respondents' contention that a motion for execution of the compromise agreement
was the proper remedy, ratiocinating that the dismissal of the cases was approved
without prejudice and therefore cannot be the subject of an execution.

LA Espiritu then ruled that complainants were constructively dismissed as they were
placed on temporary off-detail without any work for more than six months despite being
regular employees of Napar. Doubting respondents' intention of reinstating
complainants, LA Espiritu observed that the submission of requirements and
compliance with the procedures for rehiring should not be imposed on complainants
who are not newly-hired employees. Thus, Napar and Lacsamana were held jointly and
severally liable to pay complainants their separation pay in lieu of reinstatement due to
the already strainedrelations of the parties.

Respondents Jonas/Young, as indirect employers of complainants, were held jointly and

severally liable with Napar/Lacsamana for wage differentials, 13 month pay differentials,
service incentive leave pay, unpaid ECOLA, and holiday pay to some complainants,
less the P7,000.00 already received from respondents. The claims for premium pay for
holiday, rest day, overtime pay, and moral and exemplary damages were denied for
lack of merit.

Proceedings before the National Labor Relations Commission

All parties appealed to the NLRC.

Complainants filed a partial appeal, arguing that LA Espiritu erred in not awarding
backwages as well as wage and 13th month pay differentials to nine of them.

Respondents, for their part, argued that LA Espiritu erred in failing to recognize the final
and binding effect of the Joint Compromise Agreement, contending that complainants
are barred from rescinding the agreement for having received P7,000.00 each as partial

1068
compliance and refusing to comply with the requirements for their reassignment.
Respondents Napar and Lacsamana, in their Memorandum on Appeal, 15 vehemently
denied having illegally dismissed complainants and averred that they have the
prerogative to impose certain requirements in order to determine their working skills vis-
a-vis their new postings. And since they refused to comply, they have waived their right
to be reassigned. Respondents Jonas/Young, meanwhile, in its Notice of Appeal
Memorandum of Appeal,16 asserted that they cannot be held solidarity liable with
respondents Napar and Lacsamana since only Napar is obligated to reassign
complainants under the Joint Compromise Agreement.

In a Decision17 dated June 26, 2008, the NLRC granted respondents' appeal. It ruled
that the approval of the Joint Compromise Agreement by LA Reyno operates as res
judicata between the parties and renders it unappealable and immediately executory. It
held that complainants had no cause of action when they re-filed their complaints for
being barred by res judicata. The NLRC, in disposing of the case, ordered the issuance
of a writ of execution to enforce the Joint Compromise Agreement,
thus:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the appeal of respondents is GRANTED, while

that of the complainants is DISMISSED for lack of merit. The Decision of Labor Arbiter
Pablo C. Espiritu, Jr. dated July 29, 2004 is REVERSED and SET ASIDE, and a new
one is rendered DISMISSING the above-entitled complaints for having been barred by
res judicata. The Order of Labor Arbiter Jaime Reyno dated January 16, 2003 finding
the Compromise Agreement entered into by the parties on January 13, 2003 to be in
order and not contrary to law and approving the same, stands valid, effective and
should be enforced. Let the records of this case be forwarded to the Labor Arbiter for
the issuance of a writ of execution to enforce the said Compromise Agreement.

SO ORDERED.18ChanRoblesVirtualawlibrary
cralawlawlibrary

Complainants filed a Motion for Reconsideration, 19 averring that the NLRC gravely erred
in ordering the issuance of a writ of execution despite the absence of a final judgment or
a judgment on the merits. They stand on their right to rescind the Joint Compromise
Agreement and to insist on their original demands when respondents violated the
compromise agreement and on their right to re-file their cases as sanctioned by the
rules in cases of provisional dismissal of cases,

Napar and Lacsamana, on the other hand, filed a Motion for Partial
Reconsideration20 praying for the modification of the NLRC Decision in that
complainants be declared to have waived their right to their claims under the Joint
Compromise Agreement for likewise violating the agreement.

Both motions were denied in the NLRC Resolution 21 dated October 14, 2008.

Proceedings before the Court of Appeals

1069
In their Petition for Certiorari22 filed before the CA, complainants insisted on their right to
rescind the Joint Compromise Agreement under Article 2041 23 of the Civil Code and on
their right to re-file their complaints under Section 16, Rule V of the NLRC Rules of
Procedure.24

Napar and Lacsamana filed a Comment 25 on the Petition. Jonas and Young, however,
failed to file a comment. As the CA did not acquire jurisdiction over Jonas and Young
and on the basis of complainants' manifestation that Jonas and Young had already
ceased operation, Jonas and Young were dropped as party respondents by the CA in
its Resolution26 of December 16, 2009.

On August 27, 2010, the CA rendered a Decision 27 affirming the NLRC. The CA
considered the January 16, 2003 Order of LA Reyno, which approved the Joint
Compromise Agreement, as a judgment on the merits, and held that the second set of
complaints was barred by res judicata. According to the C A, the complainants, in re-
filing their complaints due to respondents' unwarranted refusal to provide them work,
were essentially seeking to enforce the compromise agreement and were not insisting
on their original demands that do not even include a claim for illegal dismissal. Thus, the
CA ruled that complainants should have moved for the execution of the Joint
Compromise Agreement instead of filing a separate and independent action for illegal
dismissal. The CA dismissed the Petition, viz.:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the instant petition for certiorari is DISMISSED for
lack of merit. Accordingly, the June 26, 2008 Decision and October 14, 2008 Resolution
of public respondent National Labor Relations Commission are AFFIRMED.

SO ORDERED.28cralawlawlibrary

Complainants filed a Motion for Reconsideration 29 but it was likewise denied by the CA
in its Resolution30 dated February 10, 2011.

Twelve of the complainants, herein petitioners, instituted the present Petition for Review
on Certiorari.

Issues

Petitioners presented the following issues:chanRoblesvirtualLawlibrary

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT

PETITIONERS' COMPLAINT IS ALREADY BARRED BY RES JUDICATA.

II

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT, IN

1070
FILING THE SECOND COMPLAINT, THE PETITIONERS ARE ENFORCING THE
JOINT COMPROMISE AGREEMENT AND NOT RESCINDING IT. THUS, THE
PETITIONERS SHOULD HAVE MOVED FOR THE ISSUANCE OF A WRIT OF
EXECUTION BEFORE THE LABOR ARBITER INSTEAD OF FILING A SECOND
COMPLAINT.

III

WHETHER THE PETITIONERS ARE ENTITLED TO SEPARATION PAY IN LIEU OF

REINSTATEMENT AND FULL BACKWAGES.31cralawlawlibrary

Petitioners argue that the CA, in ordering the execution of the Joint Compromise
Agreement, has deprived them of their right of rescission under Article 2041 of the Civil
Code. They posit that due to the blatant violation by the respondents of the provisions of
the Joint Compromise Agreement, they only exercised the option accorded to them by
law of rescinding the agreement and of insisting upon their original demands by filing
anew their Complaints. The inclusion of illegal dismissal in their causes of action is, for
petitioners, a necessary consequence of their subsequent dismissal and the blatant
omission of respondents' commitment to reinstate them. Petitioners thus pray for the
payment of separation pay in lieu of reinstatement and full backwages as a
consequence of their illegal dismissal.

Napar and Lacsamana on the other hand, aver that petitioners' sole remedy was to
move for the execution of the Joint Compromise Agreement. They aver that petitioners
cannot be allowed to rescind the agreement after having violated the same and having
already enjoyed its benefits. After all, the Joint Compromise Agreement is final, binding
and constitutes as res judicata between them.

Our Ruling

The Petition has merit. Petitioners' right to rescind the Joint Compromise Agreement
and right to re-file their complaints must prevail.

Petitioners validly exercised the

option of rescinding the Joint
CompromiseAgreement under
Article 2041 of the Civil Code

Article 2028 of the Civil Code defines a compromise agreement as a contract whereby
the parties make reciprocal concessions in order to avoid litigation or put an end to one
already commenced. If judicially approved, it becomes more than a binding contract; it
is a determination of a controversy and has the force and effect of a judgment. 32 Article
227 of the Labor Code provides that any compromise settlement voluntarily agreed
upon by the parties with the assistance of the Bureau of Labor Relations or the regional
office of the Department of Labor and Employment shall be final and binding upon the

1071
parties. Compromise agreements between employers and workers have often been
upheld as valid and accepted as a desirable means of settling disputes. 33

Thus, a compromise agreement, once approved, has the effect of res judicata between
the parties and should not be disturbed except for vices of consent, forgery, fraud,
misrepresentation, and coercion.34 A judgment upon compromise is therefore not
appealable, immediately executory, and can be enforced by a writ of
execution.35 However, this broad precept enunciated under Article 2037 36 of the Civil
Code has been qualified by Article 2041 of the same Code which recognizes the right of
an aggrieved party to either (1) enforce the compromise by a writ of execution, or (2)
regard it as rescinded and insist upon his original demand, upon the other party's failure
or refusal to abide by the compromise. In a plethora of cases, 37 the Court has
recognized the option of rescinding a compromise agreement due to non-compliance
with its terms. We explained in Chavez v. Court of Appeals:38chanroblesvirtuallawlibrary

A compromise has upon the parties the effect and authority of res judicata; but there
shall be no execution except in compliance with a judicial compromise.cralawlawlibrary

Thus, we have held that a compromise agreement which is not contrary to law, public
order, public policy, morals or good customs is a valid contract which is the law between
the parties themselves. It has upon them the effect and authority of res judicata even if
not judicially approved, and cannot be lightly set aside or disturbed except for vices of
consent and forgery.
However, in Heirs of Zari, et al v. Santos, we clarified that the broad precept enunciated
in Art, 2037 is qualified by Art. 2041 of the same Code, which provides:
If one of the parties fails or refuses to abide by the compromise, the other party may
either enforce the compromise or regard it as rescinded and insist upon his original
demand.
We explained, viz.:
[B]efore the onset of the new Civil Code, there was no right to rescind compromise
agreements. Where a party violated the terms of a compromise agreement, the only
recourse open to the other party was to enforce the terms thereof.

When the new Civil Code came into being, its Article 2041 xxx created for the first
time the right of rescission. That provision gives to the aggrieved party the right to
"either enforce the compromise or regard it as rescinded and insist upon his original
demand." Article 2041 should obviously be deemed to qualify the broad precept
enunciated in Article 2037 that "[a] compromise has upon the parties the effect and
authority of res judicata.
In exercising the second option under Art. 2041, the aggrieved party may, if he chooses,
bring the suit contemplated or involved in his original demand, as if there had never
been any compromise agreement, without bringing an action for rescission. This is
because he may regard the compromise as already rescinded by the breach thereof of
the other party.cralawlawlibrary

1072
To reiterate, Article 2041 confers upon the party concerned the authority, not only to
regard the compromise agreement as rescinded but also, to insist upon his original
demand. We find that petitioners validly exercised this option as there was breach and
non-compliance of the Joint Compromise Agreement by respondents.

It is undisputed that Napar failed to reassign and provide work to petitioners. Napar,
however, puts the blame on petitioners for their alleged deliberate refusal to comply with
the requirements for reassignment to other clients. Napar claims that the imposition of
these so-called "reassessment procedures" will efficiently guide them on where to
assign petitioners; it likewise posits that it is a valid exercise of its management
prerogative to assign workers to their principal employer.

At the outset, it must be emphasized that there was no indication that petitioners
deliberately refused to comply with the procedures prior to their purported
reassignment. Petitioners alleged that they reported to Napar several times waiting for
tlieir assignment and that Napar was giving them a run-around even as they tried to
comply with the requirements. These matters were not disputed by respondents. Thus,
we cannot agree with respondents were the ones who violated the compromise
agreement. Moreover, we are not persuaded by Napar's assertion that petitioners'
reassignment cannot be effected without compliance with the requirements set by it.
Petitioners are regular employees of Napar; thus, their reassignment should not involve
any reduction in rank, status or salary.39 As aptly noted by LA Espiritu, petitioners are
not newly-hired employees. Considering further that they are ordinary factory workers,
they do not need special training or any skills assessment procedures for proper
placement. While we consider Napar's decision to require petitioners to submit
documents and employment clearances, to attend seminars and interviews and take
examinations, which according to Napar is imperative in order for it to effectively carry
out its business objective, as falling within the ambit of management prerogative, this
undertaking should not, however, deny petitioners their constitutional right of tenure.
Besides, there is no evidence nor any allegation proffered that Napar has no available
clients where petitioners can be assigned to work in the same position they previously
occupied. Plainly, Napar's scheme of requiring petitioners to comply with reassessment
procedures only seeks to prevent petitioners' immediate reassignment.

"We have held that management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments, working
methods, time, place and manner of work, processes to be followed, supervision of
workers, working regulations, transfer of employees, work supervision, lay off of workers
and discipline, dismissal and recall of workers. The exercise of management
prerogative, however, is not absolute as it must be exercised in good faith and with due
regard to the rights of labor."40 Such "cannot be used as a subterfuge by the employer to
rid himself of an undesirable worker."41

Respondents' non-compliance with the strict terms of the Joint Compromise Agreement
of reassigning petitioners and ensuring that they will be given work within the required

1073
time constitutes repudiation of the agreement. As such, the agreement is considered
rescinded in accordance with Article 2041 of the Civil Code. Petitioners properly chose
to rescind the compromise agreement and exercised the option of filing anew their
complaints, pursuant to Art. 2041. It was error on the part of the CA to deny petitioners
the right of rescission.

Still, respondents insist that petitioners cannot seek rescission for they have already
enjoyed the benefits of the Joint Compromise Agreement. According to respondents,
petitioners' acceptance of the amount of P7,000.00 each bars them from repudiating
and rescinding the agreement.

The contention lacks merit for the following reasons. First, petitioners never accepted
the meager amount of P7,000.00 as full satisfaction of their claims as they also
expected to be reassigned and reinstated in their jobs. In other words, their acceptance
of the amount of P7,000.00 each should not be interpreted as full satisfaction of all their
claims, which included reinstatement in their jobs. The amount of P7,000.00 is measly
compared to the amount of monetary award granted by LA Espiritu and therefore makes
the agreement unconscionable and against public policy, 42 At this point, it is worth
noting that even quitclaims are ineffective in barring recovery for the full measure of the
worker's rights and that acceptance of benefits therefrom does not amount to
estoppel.43 Lastly, it must be emphasized that the Joint Compromise Agreement
expressly provided that each of the complainants shall receive P7,000.00 as payment
for their monetary claims and "which amount shall be considered in any future
litigation."44 By virtue of this stipulation, the parties in entering into the agreement did not
rule out the possibility of any future claims in the event of non-compliance. As correctly
ruled by LA Espiritu, this proviso showed that petitioners were not barred from raising
their money claims in the future.

Section 16 of Rule V of the NLRC Rules

of Procedure allows petitioners to re-file their
complaints which were previously dismissed
without prejudice

The Court also takes into account the circumstance that petitioners' previous complaints
were dismissed without prejudice. "A dismissal without prejudice does not operate as a
judgment on the merits."45 As contrasted from a dismissal with prejudice which disallows
and bars the filing of. a complaint, a dismissal without prejudice "does not bar another
action involving the same parties, on the same subject matter and theory." 46 The NLRC
Rules of Procedure, specifically Section 16 of Rule V thereof, provides the remedy of
filing for a revival or re-opening of a case which was dismissed without prejudice within
10 days from receipt of notice of the order of dismissal and of re-filing the case after the
lapse of the 10-day period. Petitioners are thus not barred from re-filing their
Complaints.

In choosing to rescind the Joint Compromise Agreement and re-file their complaints,
petitioners can rightfully include their claim of illegal dismissal. The CA took off from the

1074
wrong premise that petitioners, in re-filing their case, cannot be said to have opted to
rescind the compromise agreement since they were not insisting on their original claim.
It must be noted that when petitioners initially filed their first set of complaints for wage
differentials, 13th month pay, overtime pay, holiday pay, premium pay for holiday and
rest day, service incentive leave pay, and unpaid ECOLA (that does not include the
claim of illegal dismissal), subsequent events transpired which brought about their
unceremonious suspension and dismissal from work. This then led to the parties
entering into the Joint Compromise Agreement whereby respondents undertook to
reinstate petitioners and pay them the sum of P7,000.00 in partial satisfaction of their
claims. The compromise agreement evinces and shows that petitioners' reinstatement
was part of their original demands. Besides, respondents acknowledged that the first
and second sets of Complaints filed by petitioners are similar in nature. Respondents
even admitted that the issues raised in the first set of Complaints were similar to the
issues raised by petitioners when they filed anew their Complaints. Nevertheless, the
filing of a separate action for illegal dismissal shall only go against the rule on
multiplicity of suits. It is settled that a plaintiff may join several distinct demands,
controversies or rights of action in one declaration, complaint or petition. 47 This is to
avert duplicity and multiplicity of suits that would farther delay the disposition of the
case.

In view of the foregoing, we find that both the NLRC and CA gravely erred in dismissing
petitioners' Complaints on the ground of res judicata. LA Espiritu correctly assumed
jurisdiction and properly took cognizance of petitioners' consolidated complaints for
illegal dismissal and other monetary claims.

Petitioners are entitled to separation pay

and full backwages as well as to the other
monetary awards granted by the
Labor Arbiter

We, likewise, subscribe to LA Espiritu's ruling that petitioners, as regular employees, are
deemed to have been constructively and illegally dismissed by respondents. Being on
floating status and off-detailed for more than six months, not having been reinstated and
reassigned by respondents, petitioners are considered to have been constructively
dismissed.48 Settled is the rule that an employee who is unjustly dismissed from work
shall be entitled to reinstatement, or separation pay if reinstatement is no longer viable,
and to his full backwages.49

LA Espiritu awarded petitioners separation pay in lieu of reinstatement. The Court

agrees that the award of separation pay is warranted due to the already strained
relations between the parties.50 However, aside from separation pay, petitioners, for
having been illegally dismissed, should also be awarded full backwages, inclusive of
allowances and their other benefits or their monetary equivalent computed from
November 9, 2002 (the date of their last work assignment or from the time
compensation was withheld from them) up to the date of finality of this Decision.

1075
While petitioners failed to raise the matter of entitlement to backwages before the CA,
this does not prevent the Court from considering their entitlement to the same. The
Court has discretionary authority to take up new issues on appeal if it finds that their
consideration is necessary in arriving at a just decision.

Anent the other monetary claims in petitioners' complaints, the awards granted to them
by LA Espiritu stand undisturbed for petitioners' failure to question the same on appeal
before the CA and even before this Court. Hence, we sustain the award of wage
differentials, 13th month pay differentials, service incentive leave pay, unpaid ECOLA,
and holiday pay less the P7;000.00 already received by them.

WHEREFORE, the Petition is GRANTED. The August 27, 2010 Decision and February
10, 2011 Resolution of the Court of Appeals in CA-G.R. SP No. 106724
are REVERSED and SET ASIDE. The July 29, 2004 Decision of the Labor Arbiter
Pablo C. Espiritu, Jr. in NLRC NCR Case Nos. 00-05-05557-2003, 00-05-06187-2003,
00-05-06605-2003 and 00-07-07792-2003 is REINSTATED. In addition, respondents
Napar Contracting & Allied Services and Norman Lacsamana are held jointly and
severally liable to pay petitioners Reynaldo Inutan, Helen Carte, Noel Ayson, Ivy
Cabarle, Noel Jamili, Maritess Hular, Rolito Azucena, Raymundo Tunog, Roger Bernal,
Agustin Estre, Marilou Sagun, and Enrique Ledesma, Jr. full backwages, inclusive of
allowances and their other benefits or their monetary equivalent computed from
November 9, 2002 up to the date of finality of this Decision.

SO ORDERED.chanroblesvirtuallawlibrary
THIRD DIVISION
[ G.R. No. 185746, January 20, 2016 ]
LUCITA TIOROSIO-ESPINOSA, PETITIONER, VS. HONORABLE PRESIDING
JUDGE VIRGINIA HOFILEÑA-EUROPA, IN HER CAPACITY AS PRESIDING JUDGE
OF THE REGIONAL TRIAL COURT OF DAVAO CITY, BRANCH 11, 11 TH JUDICIAL
REGION, DAVAO CITY, NICOLAS L. SUMAPIG, IN HIS CAPACITY AS SHERIFF IV
OF THE OFFICE OF THE PROVINCIAL SHERIFF, OFFICE OF THE CLERK OF
COURT, 11TH JUDICIAL REGION, DAVAO CITY AND NECEFERO JOVERO,
RESPONDENTS.

DECISION
JARDELEZA, J.:
We consider the propriety of the Court of Appeals' outright dismissal of a petition
for certiorari on procedural grounds and whether the awards of moral damages,
exemplary damages, and attorney's fees may be included in an execution pending
appeal.

Private respondent Necefero Jovero (Jovero) filed an action for damages against
spouses Pompiniano Espinosa[1] and petitioner Lucita Tiorosio-Espinosa[2] (Spouses

1076
Espinosa) before the Regional Trial Court of Davao City (RTC). In the complaint, Jovero
alleged that Spouses Espinosa maliciously filed several cases for theft, estafa and
perjury against him for the sole purpose of vexing, harassing, and humiliating him.
Accordingly, Jovero prayed that Spouses Espinosa be ordered to pay compensatory
damages, moral damages, exemplary damages, attorney's fees, and costs of suit. [3]

After trial, the RTC rendered a decision[4] dated November 21, 2005 in favor of Jovero.
The dispositive portion reads:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the
plaintiff Necefero Jovero, ordering defendants to pay Jovero:
1. The sum of One Hundred Thousand Pesos (P100,000.00) as compensatory
damages;

2. The sum of Five Hundred Thousand Pesos (P500,000.00) as moral damages;

3. The sum of One Hundred Thousand Pesos (P100,000.00) as exemplary

damages;

4. The sum of One Hundred Thousand Pesos (P100,000.00) for and as attorney's
fees; and

5. The costs of suit.

SO ORDERED.[5]
Consequently, Jovero moved for execution pending appeal, citing his advanced age
and failing health.[6] Meanwhile, Spouses Espinosa moved for reconsideration of the
RTC decision.[7] On April 12, 2007, the RTC granted Jovero's motion for execution
pending appeal and denied Spouses Espinosa's motion for reconsideration. [8] The RTC
subsequently issued a writ of execution pending appeal on April 19, 2007 which
covered the entire amount stated in the decision. [9]

Aggrieved by the denial of their motion for reconsideration, Spouses Espinosa filed their
notice of appeal of the main RTC decision. [10]

They also filed a separate motion to stay execution pending appeal and to approve/fix
the supersedeas bond. They contended that execution pending appeal involving awards
of moral and exemplary damages is improper because it is contrary to the decisions of
the Supreme Court.[11] The RTC denied the motion to stay execution pending appeal in
an order dated September 14, 2007.[12]

On November 19, 2007,[13] Spouses Espinosa filed a petition for certiorari with the Court

of Appeals (CA) assailing the September 14, 2007 order. [14] in a resolution dated
December 14, 2007, the CA dismissed outright the petition for certiorari for failure to
state the date when the assailed order was received. [15] Spouses Espinosa filed their

1077
motion for reconsideration alleging that their previous counsel received the assailed
order on October 4, 2007, attaching as proof a certified photocopy of postal registry
return card.[16] Thus, they filed the petition for certiorari on time. They explained that the
return card was not yet available with the RTC at the time they filed the petition
for certiorari, and that they disclosed this fact to the CA in the petition with an
undertaking to submit it as soon as it was available. On November 18, 2008, however,
the CA denied the motion for reconsideration. This time, it cited Spouses Espinosa's
failure to file a motion for reconsideration of the RTC's September 14, 2007 order to
sustain its earlier dismissal of the petition for certiorari.[17]

Lucita Tiorosio-Espinosa (Lucita) filed this petition for review on certiorari under Rule 45
to appeal the CA's dismissal of the case. [18] She argues that the motion to stay
execution was in fact a motion for reconsideration of the RTC's grant of Jovero's motion
for execution pending appeal. She also reiterates that the petition for certiorari with the
CA was timely filed, and that the reason for the omission of the date of receipt of the
assailed RTC order in the petition was the unavailability of the registry return card at
that time. On the substantive aspect, Lucita asserts that the RTC acted with grave
abuse of discretion when it ordered the execution pending appeal of the awards of
moral and exemplary damages. Lucita also questions the sheriffs issuance of the notice
of public sale because the properties to be levied were excessive, and were part of the
pool of properties that included their family home. [19] She likewise prayed for the
issuance of a temporary restraining order, which we granted on February 9, 2009. [20] At
the time she posted the surety bond, Lucita concurrently filed an amended petition [21] for
the purpose of converting the petition for review to a petition for certiorari and
impleading thereto as public respondents the presiding RTC judge and sheriff. [22] We
admitted the amended petition on April 20, 2009. [23]

In his comment, Jovero claims that the issues raised by Lucita are not germane to the
CA resolutions subject of the present petition. He posits that the issues being raised in
the petition for review properly pertain to the alleged errors of the RTC, not the CA. In
any case, Jovero maintains that the RTC correctly granted the motion for execution
pending appeal because of his advanced age and frail health. [24]

II

The CA erred in dismissing outright the petition for certiorari on tenuous procedural

grounds.

Under Section 3 of Rule 46[25] of the Rules of Court, the CA has the prerogative to
dismiss the case outright for failure to comply with the formal requirements of an action
filed under Rule 65. The formal requirements include, among others, a statement by the

1078
petitioner indicating the material dates when the order or resolution subject of the
petition was received. The CA identified Spouses Espinosa's failure to comply with this
requirement as the primary ground for dismissing the petition outright.

An examination of the petition for certiorari filed with the CA shows that the CA is

technically correct with respect to its finding that Spouses Espinosa failed to indicate the
exact date of receipt of the assailed RTC order. However, the CA should have
considered Spouses Espinosa's explanation regarding this omission, which was
apparent on the face of the petition. In paragraph 8(g), Spouses Espinosa stated:
On 18 September 2007, the Regional Trial Court. Branch II, Davao City, has released
for mailing to petitioners' former counsel, Atty. Eufracio Dayaday, the Order dated 14
September 2007, denying their "Motion To Stay Execution Pending Appeal and to
Approve/Fix Supersedeas Bond"... The records surrendered by Atty. Eufracio Dayaday
to petitioners after he withdrew his appearance as counsel for the latter does not bear
the Order dated 14 September 2007. Upon verification made by petitioners, the records
of the said case with the Regional Trial Court, Branch 11, Davao City, do not have the
Postal Registry Return Card for the mailing of the Order dated 14 September 2007.
Nevertheless, petitioners herein undertake lo submit a certified photocopy of the postal
registry return card, as soon as the same be made available in the records of the case.
[26]

Spouses Espinosa likewise executed a "Joint-Affidavit of Material Dates," [27] which was

attached to the petition for certiorari filed with the CA, attesting to the fact that the
September 14, 2007 order was not among the documents turned over to them by their
former counsel, and that the registry return card had not been returned to the RTC. [28]

It is therefore apparent that Spouses Espinosa attempted to comply with the material
date requirement. Unfortunately, they themselves could not ascertain when the subject
order was received by their former counsel and thereby make an accurate statement as
to such fact. Moreover, the best evidence to prove receipt of the RTC order, i.e., the
registry return card, was not yet available when they elevated the case to the CA. But,
as a sign of good faith, Spouses Espinosa undertook to submit the return card as soon
as it was available—which they subsequently did on January 30, 2008. [29] Given the
foregoing circumstances, it may be deduced that the basic reason why no precise date
of receipt was given by Spouses Espinosa is because they did not want to misrepresent
the date in their petition. In fine, we find Spouses Espinosa's failure to indicate the date
of receipt excusable; the CA's outright dismissal of their petition is not commensurate
with the degree of their non-compliance with the prescribed procedure. In any case, the
return card showed that the order was received on October 4, 2007, which means that
when Spouses Espinosa filed the petition for certiorari on November 19, 2007, they did
so well within the sixty (60) day reglementary period.

Although it is true that procedural rules should be treated with utmost respect and due

1079
regard, since they are designed to facilitate the adjudication of cases to remedy the
worsening problem of delay in the resolution of rival claims and in the administration of
justice, this is not an inflexible tenet. After all, rules of procedure are mere tools
designed to facilitate the attainment of justice. Their strict and rigid application
especially on technical matters, which tends to frustrate rather than promote substantial
justice, must be avoided.[30]

In denying Spouses Espinosa's motion for reconsideration of the dismissal of their

petition for certiorari, the CA held that their failure to first file a motion for
reconsideration of the RTC order, which denied their motion to stay execution, was fatal
to their petition. While the CA's legal proposition is correct, the rule was misapplied in
the present case.

A petition for certiorari before a higher court will generally not prosper unless the inferior
court has been given, through a motion for reconsideration, a chance to correct the
errors imputed to it. This is because a motion for reconsideration is the plain, speedy,
and adequate remedy in the ordinary course of law alluded to in Section 1, Rule 65 of
the 1997 Rules of Civil Procedure.[31] A motion for reconsideration is required in order to
grant the lower court an opportunity to correct any actual or perceived error attributed to
it by the re-examination of the legal and factual circumstances of the case. [32] Contrary
to the CA's findings, however, Spouses Espinosa already complied with this
requirement. Their motion to stay execution is, in fact, a motion for reconsideration of
the RTC order dated April 12, 2007 which granted Jovero's motion for execution
pending appeal.

Although not captioned as a "motion for reconsideration," Spouses Espinosa's motion to

stay execution directly challenged the RTC's order of execution pending appeal insofar
as it allowed the inclusion of the awards for moral and exemplary damages. [33] Thus,
when the RTC denied Spouses Espinosa's motion to stay execution on September 14,
2007, it was already the second time the trial court had passed upon the issue of
execution pending appeal. Both the April 12, 2007 and September 14, 2007 orders dealt
with the same issue, i.e., the propriety of execution pending appeal. In the first instance,
the RFC allowed the execution pending appeal; in the latter, it denied Spouses
Espinosa's motion to stay execution and, thus, sustained its earlier ruling. On both
occasions, the parties had been accorded ample opportunity to squarely argue their
positions and the RTC more than enough opportunity to study the matter and to
deliberate upon the issues raised by the parties. Under these circumstances, the filing
of a motion for reconsideration of the order denying the stay of execution pending
appeal by Spouses Espinosa could not be considered a plain and adequate remedy but
a mere superfluity.[34]

1080
 III

Having disposed of the procedural issues, we now proceed to the main substantive
issue of whether the awards of moral and exemplary damages, as well as attorney's
fees, may be the subject of execution pending appeal. [35]

The resolution of this issue is straightforward. Jurisprudence is replete with

pronouncements that execution pending appeal of awards of moral and exemplary
damages, and attorney's fees is not allowed. In Radio Communications of the
Philippines, Inc. (RCPI) v. Lantin;[36] we explained why these cannot be the subject of
execution pending appeal:
...The execution of any award for moral and exemplary damages is dependent on the
outcome of the main case. Unlike actual damages for which the petitioners may
clearly be held liable if they breach a specific contract and the amounts of which
are fixed and certain, liabilities with respect to moral and exemplary damages as
well as the exact amounts remain uncertain and indefinite pending resolution by
the Intermediate Appellate Court and eventually the Supreme Court. The
existence of the factual bases of these types of damages and their causal relation
to the petitioners' act will have to be determined in the light of the assignments of
errors on appeal. It is possible that the petitioners, alter all, while liable for actual
damages may not be liable for moral and exemplary damages. Or as in some cases
elevated to the Supreme Court, the awards may be reduced. [37] (Emphasis supplied.)
In Engineering Construct ion Inc. v. National Power Corporation,[38] we expanded the
RCPI doctrine to likewise exclude consequential damages and attorney's fees from
execution pending appeal.[39] The doctrine has since been reiterated in Heirs of
Santiago C. Divinagracia v. Ruiz,[40] International School, Inc. (Manila) v. Court of
Appeals,[41] Echauz v. Court of Appeals,[42] and Valencia v. Court of Appeals.[43] Clearly,
the RTC committed legal error when it ordered the premature execution of the awards
of moral damages, exemplary damages, and attorney's fees. Nonetheless, we
recognize that the RTC had the power to order the execution pending appeal of actual
or compensatory damages in accordance with the cited authorities.

IV

The rest of petitioner's arguments are devoted to assailing the sheriffs levy of her
properties. However, a petition for certiorari is not the proper remedy to question the
sheriffs actions. The special civil action of certiorari is directed only against a tribunal,
board or officer exercising judicial or quasi-judicial functions. [44] It is not available as a
remedy for the correction of acts performed by a sheriff during the execution process,
which acts are neither judicial nor quasi-judicial but are purely ministerial functions.
[45]
 The more appropriate remedy would have been a petition for prohibition filed under
Section 2 of Rule 65. Moreover, the matters being raised by the petitioner are factual in

1081
nature and, hence, not proper for this Court to resolve at the first instance.

WHEREFORE, the petition is PARTIALLY GRANTED. The resolutions dated

December 14, 2007 and November 18, 2008 of the Court of Appeals in CA-G.R. SP No.
02061-MIN are SET ASIDE. The orders dated April 12, 2007 and September 14, 2007
of the Regional Trial Court, Branch 11, Davao City are MODIFIED to exclude moral
damages, exemplary damages, and attorney's fees in the execution pending appeal.
The temporary restraining order issued on February 9, 2009 is LIFTED.

SO ORDERED.

THIRD DIVISION

G.R. No. 150462               June 15, 2011

TOP MANAGEMENT PROGRAMS CORPORATION, Petitioner,

vs.
LUIS FAJARDO AND THE REGISTER OF DEEDS OF LAS PIÑAS
CITY, Respondents.

DECISION

VILLARAMA, JR., J.:

Before us is a petition for review on certiorari under Rule 45 seeking the reversal of the
Decision1 dated May 30, 2001 and Resolution2 dated October 23, 2001 of the Court of
Appeals (CA) in CA-G.R. CV No. 60712 which affirmed the Order 3 of the Regional Trial
Court (RTC) of Las Piñas City, Branch 275 in Civil Case No. 94-564 dismissing
petitioner’s complaint for quieting of title and damages against private respondent.

The factual antecedents:

On December 31, 1964, Emilio Gregorio (Gregorio) filed an application for registration
of title over Lots 1 to 4 of Plan Psu-204785 situated at Mag-asawang Mangga, Las
Piñas, Rizal, before the then Court of First Instance (CFI) of Rizal, Branch II (LRC Case
No. N-5053, LRC Rec. No. N-27523). On January 4, 1966, said court issued an order
declaring as abandoned the reserved oppositions of Jose T. Velasquez and Pablo
Velasquez. Thereafter, the case proceeded to trial.

Meanwhile, on July 29, 1965, Jose T. Velasquez (Velasquez) filed an application for
registration of title over six lots denominated as Lots 7 and 9 of Psu-80886, Ap-5538,
and Lots 1, 7, 9 and 11 of Psu-56007 Amd., Ap-11135, situated at Almanza, Las Piñas,
Rizal, in LRC Case No. N-5416, LRC Rec. No. N-28735, before the same court.

On January 31, 1966, the CFI rendered a decision 4 in LRC Case No. N-5053 declaring
Gregorio to be the absolute owner of Lots 1, 2, 3 and 4 described in Plan Psu-204785.
1082
On March 9, 1966, an order was issued by said court for the issuance of the decree of
registration, stating that the January 31, 1966 had become final.

On March 30, 1966, the same court promulgated a decision in LRC Case No. N-5416
adjudicating Lots 1, 7, 9 and 11 of Psu-56007-Amd, plan Ap-11135, and Lots 7 and 9 of
Psu-80886 (Ap-5538) to Jose T. Velasquez. On May 3, 1966, said court ordered the
issuance of a decree of registration in view of the finality of the March 30, 1966
decision.

In the meantime, on July 25, 1966, the LRA called the attention of the Director of Lands
regarding the overlapping of Lots 1, 7 and 11 of Psu-56007-Amd awarded to Velasquez,
with Lots 1 to 4 of Psu-204785 adjudicated to Gregorio, and requested that portions of
these lots that are not in conflict be segregated. On September 16, 1966, the LRA
informed the CFI that Lots 1 and 7 of Psu-56007-Amd (Ap-11135) had been amended
by the Bureau of Lands to exclude therefrom portions covered by Lot 2, Psu-64894,
Psu-96904, and Lots 1 to 4, Psu-204785 of Gregorio. 5 On the basis of the LRA report,
Velasquez petitioned the CFI to set aside the award earlier made in favor of Gregorio in
LRC Case No. N-5035 on the ground of lack of jurisdiction and to give due course to his
application over the said lots in LRC Case No. N-5416. On November 23, 1966, the CFI
issued an Order in LRC Case Nos. N-5053 and N-5416 declaring that the application of
Velasquez be given due course insofar as Lots 1 and 7 of Ap-11135 which are identical
to Lots 1 to 4, Plan Psu-204785, and the January 31, 1966 decision in LRC Case No. N-
5053 in favor of Gregorio respecting the same lots as null and void. 6 On December 6,
1966, Decree Nos. N-111862 to N-111865 and the corresponding certificates OCT Nos.
5677, 5678, 5679 and 5680 were issued in favor of Velasquez.

On January 7, 1967, Gregorio appealed the November 23, 1966 decision of the CFI to
the CA (CA-G.R. No. 40739-40-R). On July 30, 1971, the CA rendered its
Decision7 reversing the CFI, as follows:

WHEREFORE, the order appealed from is hereby reversed and, in lieu thereof, another
is hereby rendered declaring null and void the Decision of the Court of First Instance of
Rizal, dated March 30, 1966, in Land Registration Case No. N-5416, LRC Rec. No. N-
28735, insofar as it adjudicates in favor of appellee Jose T. Velasquez Lots Nos. 1 and
7 of Plan Ap-11315; and directing that the Order of March 9, 1966 for the issuance of
the decree in Land Registration Case No. N-5053, LRC Rec. No. N-27523, over Lots 1,
2, 3 and 4 of Plan Psu-204785, in the name of appellant Emilio Gregorio, be given due
course.

No costs.

IT IS SO ORDERED.8

Per entry of judgment issued by the CA, the above decision became final and executory
on February 1, 1972.9 It appears, however, that a petition for review had been filed by
Velasquez with this Court, docketed as G.R. Nos. L-34239-40 ("Jose T. Velasquez v.

1083
Emilio Gregorio"), which was given due course per Resolution dated March 7, 1972 of
the Second Division. Eventually, this Court denied the petition under Resolution 10 dated
February 8, 1984 stating that:

We have carefully scrutinized the arguments of the parties stated in their respective
briefs as well as the reasons adduced by the Court of Appeals to support its decision
sought to be reviewed and We have Resolved to RECONSIDER the resolution of March
7, 1972, and enter instead another resolution DENYING the petition for lack of merit
with COSTS against the petitioners.11

The above resolution became final and executory on March 2, 1984 as per entry of
judgment12 issued by this Court. Prior to this however, on October 31, 1972, Decree No.
N-141990 over Lots 1, 3 and 4 of Plan Psu-204785 were issued by the LRA and the
corresponding OCT No. 9587 in the name of Gregorio, was subsequently issued on
November 21, 1972.13

Lots 1, 3 and 4, Plan Psu-204785 covered by OCT No. 9587 also became the subject of
Civil Case No. 16977 of the CFI of Rizal. Gregorio sought the annulment of the deed of
sale over the said lots in favor of Luciana Parami. The CFI dismissed the complaint of
Gregorio in a decision rendered on May 8, 1974. Gregorio appealed to the CA (CA-G.R.
No. 56015-R, entitled "Emilio Gregorio v. Spouses Luciana and Corpus Parami and the
Register of Deeds of Rizal") which reversed the CFI. In its decision dated February 7,
1978, the CA declared the aforesaid deed of sale null and void, and ordered the
cancellation of certificate of title (No. 38433) in the name of the Paramis and issuance of
an OCT in favor of Gregorio covering Lots 1, 3 and 4, Plan Pasu-204785. On November
20, 1979, the court in the same case issued an order declaring the children (Ana, Paz,
Carmen, Remedios and Rolando, all surnamed Gregorio) of the deceased Emilio
Gregorio "as his compulsory heirs to substitute the said plaintiff." 14 Pursuant to the said
decision, OCT No. 9587 in the name of Emilio Gregorio was cancelled and a new
certificate of title, TCT No. S-91911 in favor of his heirs was issued. 15

In a Report dated September 12, 1984, the LRA informed the CFI in LRC Case No. N-
5416 that compliance with the July 30, 1971 CA decision in CA-G.R. No. 40739-40-R
adjudicating Lots 1, 3 and 4 of Plan Psu-204785 in favor of Gregorio will result in
duplication of titles over the said properties. The report further stated:

21. That based on the records of this Commission, Lots 1, 3 and 4 of plan Psu-
204785 were already covered by TCT No. S-91911 in the name of the Heirs of
Emilio Gregorio with several annotations of encumbrances x x x;

22. That among those encumbrances are the deeds of sale executed by them in
favor of Herminia Galman covering an undivided portion of aforesaid Lot 1, and
of Everlita Talusan of the whole Lots 3 and 4 denominated as Entry No. 21079/S-
97421, and that the latter vendee E. Talusan had already acquire[d] TCT No. S-
97421 over said two lots in her name also with several annotation of
encumbrances x x x;

1084
 23. That as per our verification from the Registry of Deeds of Makati,
corresponding titles were issued in the name of J.T. Velasquez denominated as
OCT Nos. 5678, 5677, 5679 and 5680 x x x;

24. And that these certificates of title were all cancelled and assigned in favor of
J.V. Development Corporation as per Entry Nos. 99377/T-195606, 195605,
195605 and 19505 all inscribed on July 27, 1967.

WHEREFORE, these facts are respectfully brought to the attention of this Honorable
Court with the recommendation:

That Decree Nos. N-111862 to N-111865 issued on December 6, 1966 over Lots 1 to 4,
Psu-204785, in favor of Jose T. Velasquez, as well as existing subsequent titles
emanating from the same shall be declared null and void and ordered cancelled. 16

On April 9, 1984, the heirs of Emilio Gregorio filed an ex-parte motion for execution
before the RTC of Pasig, Metro Manila, Branch 152 in LRC Case Nos. N-5053 and N-
5416. On March 21, 1986, the RTC of Pasig issued the following Order 17:

Considering that the Resolution issued on February 8, 1984 by the Supreme Court in
G.R. No. L-34239-40, entitled "Jose T. Velasquez vs. Emilio Gregorio", denying the
petition for review on certiorari of the judgment of the Court of Appeals in CA-G.R. No.
40739-40-R, had on March 2, 1984 become final and executory in favor of Emilio
Gregorio, and considering further the recommendation contained in the Report dated
September 12, 1984 of the Acting Commissioner of Land Registration thru Silverio G.
Perez, Chief, Division of Original Registration, relative to LRC Case No. N-5053, LRC
Record No. N-27523, wherein Emilio Gregorio is the applicant and in LRC Case No. N-
5416, LRC Record No. N-28735, wherein Jose T. Velasquez is the applicant, which
report is hereby approved, the Court declares as null and void Decree Nos. N-111862 to
N-111865, inclusive, issued on December 6, 1966, covering Lots 1, 2, 3 and 4, Psu-
204785 in favor of Jose T. Velasquez in LRC Case No. No. 5416 as well as all existing
subsequent titles emanating therefrom, and any and all encumbrances constituted
against said Lots 1, 2, 3 and 4, Psu-204785 and other acts of disposition affecting the
same.

WHEREFORE, the Register of Deeds of Pasay City is hereby directed to cancel

Original Certificates of Title Nos. 5677, 5678, 5679 and 5680 issued in the name of
Jose T. Velasquez and all titles and transactions emanating therefrom and which are
annotated at the back of the said Certificates of Title, and to issue, in lieu thereof, new
Certificates of Title in the name of the Heirs of Emilio Gregorio, after paying the
prescribed fees therefor, pursuant to the Order for issuance of a decree dated March 9,
1966 in the LRC Case No. N-5053, Record No. N-27523.

SO ORDERED.18

1085
On April 29, 1986, TCT Nos. 107727, 107728 and 107729 (covering Lot 1) 19 was issued
by the Register of Deeds of Pasay City in the name of the Heirs of Emilio Gregorio.
Subsequently, by virtue of a Partition Agreement with Herminia Galman, the property
was subdivided into two lots between the heirs of Gregorio (Lot 1-A consisting of 20,000
sq. ms.) and Galman (Lot 1-B consisting of 27,536 sq. ms.). Consequently, TCT No.
107729 was cancelled and in lieu thereof TCT No. 4635 in the name of the heirs of
Gregorio and TCT No. 4636 in the name of Herminia Galman, were issued by the
Register of Deeds of Las Piñas.20

Undeniably, the duplication of titles over Lot 1, Psu-204785 with the issuance of TCT
No. S-91911 (transfer from OCT No. 9587) and TCT No. 107729 and its derivative title,
TCT No. 4635, both in the name of the same owners, gave rise to the present
controversy.

The Claim of Luis Fajardo

(TCT No. 27380, now
TCT No. T-34923)

As earlier mentioned, Gregorio appealed the November 23, 1966 CFI decision in LRC
Case Nos. N-5053 and N-5416 awarding Lots 1 to 4 of Psu-204785 in favor of
Velasquez, docketed as CA-G.R. No. 40739-40-R. Sometime after this, he entered into
an agreement with Tomas Trinidad (Trinidad) and Luis Fajardo (Fajardo) entitled
"Kasunduan na may Pambihirang Kapangyarihan." By virtue of this agreement, Fajardo
would finance the cost of the litigation and in return he would be entitled to one-half of
the subject property after deducting twenty per cent (20%) of the total land area as
attorney’s fees for Trinidad if the appeal is successful.

After the CA rendered a favorable ruling on Gregorio’s appeal, Fajardo and Trinidad
filed Civil Case No. 35305 before the RTC of Pasig, Branch 164 to enforce their
agreement with Gregorio. On May 8, 1986, said court rendered judgment in their favor,
as follows:

WHEREFORE, premises considered, judgment is hereby rendered ordering herein

defendants:

(1) to convey to Atty. Tomas Trinidad as honorarium for his services an area of
14,684 sq.m. which is twenty percent (20%) of 72,424 sq.m. the total area of Lots
1, 2, 3 and 4;

(2) to convey to Luis Fajardo an area of 29,369 sq.m. representing fifty percent
(50%) of the remainder of the property after deducting the honorarium of Atty.
Trinidad.

(3) to pay the cost of suit and litigation expenses.

SO ORDERED.21

1086
The heirs of Gregorio appealed the above decision but their appeal was declared
abandoned and dismissed by the CA. By virtue of an Entry of Judgment issued by the
CA dated December 8, 1988, Trinidad and Fajardo filed a motion for the issuance of a
writ of execution. However, the writ issued remained unsatisfied as per the Return filed
by the Sheriff on April 10, 1989. On August 14, 1989, the court appointed Deputy Sheriff
Marcial Estrellado to execute the deed of conveyance in favor of the plaintiffs.

Deputy Sheriff Estrellado executed the Officer’s Deed of Conveyance 22 dated August
15, 1989 in favor of Trinidad and Fajardo. While the plaintiffs moved for the approval of
the subdivision plan needed for the transfer and issuance of separate titles as per
decision, the Register of Deeds of Las Piñas wrote a letter-reply 23 to the Deputy Sheriff
indicating that the deed of conveyance and Order of the Court dated August 14, 1989
entered as Entry No. 6503 and 6504 in their docket book could not be pursued because
the subject property was already sold to other parties.

In compliance with the order of the CFI, then Register of Deeds of Las Piñas Alejandro
R. Villanueva submitted an official report24 stating that TCT No. S-91911, still existing in
their records, should have been cancelled when TCT Nos. 107727, 107728 and 107729
were issued in compliance with the Order dated March 21, 1986 of the RTC of Pasig,
and that such caused an anomalous situation of having two separate and distinct
certificates of title covering the same parcels of land although in the name of the same
registered owners. Villanueva opined that the issuance of TCT Nos. 107727, 107728
and 107729 covering Lots 1, 3 and 4 of Psu-204785, "placed TCT No. S-91911, as
deemed cancelled, inasmuch as the latter certificate of title covers one and the same
parcels of land" and hence TCT No. S-91911 should not anymore be subject of any
transactions.

The CFI initially withdrew its Order dated August 14, 1989 but eventually reinstated the
same and ordered the Register of Deeds to annotate the Deed of Conveyance at the
back of TCT No. S-91911 within 24 hours upon receipt of the order. Said directive was
reiterated by the CFI on June 7, 1991. On June 26, 1991, the court authorized the
subdivision of Lot 1, Psu-204785 and directed the Register of Deeds to issue separate
titles in favor of plaintiffs Trinidad and Fajardo. Consequently, TCT No. T-
2738025 covering 29,369 sq. ms. portion of Lot 1, Psu-204785 in the name of Luis
Fajardo was issued on December 12, 1991. On April 26, 1993, said TCT No. T-27380
was cancelled per Order26 of the court dated March 13, 1992 and in lieu thereof, TCT
No. T-3492327 was issued, still in the name of Luis Fajardo and without any of the
encumbrances carried over from TCT No. S-91911.

The Claim of Top Management

Programs Corporation
(TCT No. T-8129)

On September 24, 1991, herein petitioner Top Management Programs Corporation

sought the annulment of the CFI orders in Civil Case No. 35305 reinstating the August
14, 1989 order and directing the issuance of new certificates of title in the name of

1087
Trinidad and Fajardo, on the ground of extrinsic fraud. Petitioner claimed that by virtue
of a Deed of Absolute Sale28 dated November 29, 1988 which was notarized on January
9, 1989, the heirs of Gregorio sold to it a parcel of land with an area of 20,000 sq. ms.,
located at Las Piñas and identified as Lot 1-A Psd-293076, being a portion of Lot 1,
Psu-204785 covered by TCT No. T-4635, and that on February 20, 1989, TCT No. T-
812929 covering the said property was issued in its name.

On November 28, 1991, the CA rendered its decision dismissing the petition for
annulment (CA-G.R. SP No. 26100). It held that there existed no extrinsic fraud which
would justify the annulment of the questioned orders. Petitioner sought the reversal of
the CA ruling before this Court via a petition for certiorari. By Decision 30 dated May 28,
1993, this Court dismissed the petition and affirmed the CA judgment. On the issue
raised by petitioner as to whether the CA erred in holding that petitioner’s claim of title to
Lot 1-A should be served as third-party claim on the Deputy Sheriff who executed the
Deed of Conveyance and caused its registration, or to vindicate the claim to the
property through a separate independent action, the Court refrained from discussing the
same since its resolution is inconsequential and would not alter in any way the outcome
of the petition.31

Civil Case No. 94-564

Thus, on February 10, 1994, petitioner filed before the RTC of Makati Civil Case No. 94-
564 for Quieting of Title With Damages. Petitioner alleged that the issuance of TCT No.
T-27380 in the name of Fajardo -- who obtained the same from the court in a case
without the knowledge of petitioner who was not a party therein -- despite the existence
of TCT No. T-8129 in its name constitutes a cloud upon the title of petitioner. Petitioner
claimed that it acquired the same property in good faith and for value from the original
owners thereof.

In his Answer, private respondent Fajardo asserted that it is the title of petitioner which
originated from a void title. OCT No. 5678 from which TCT No. 4635 was derived, was
in effect declared null and void under this Court’s Resolution dated February 8, 1984 in
G.R. No. L-34239-40 which dismissed petitioner’s appeal from the July 30, 1971 CA
Decision in CA-G.R. No. 40739-40-R. The CA had nullified the CFI decision dated
March 30, 1966 in LRC Case No. N-5416 insofar as it adjudicates the subject lots to
Velasquez.

After petitioner’s formal offer of evidence, private respondent filed a demurrer to

evidence, which the trial court granted in its Order 32 dated June 8, 1998, as follows:

WHEREFORE, premises considered, the case is hereby DISMISSED. No

pronouncement as to costs. The Register of Deeds of Las Piñas City is hereby ordered
to cancel TCT No. T-8129 in the name of plaintiff Top Management Programs
Corporation.

SO ORDERED.33

1088
Petitioner appealed to the CA and on May 30, 2001 said court rendered the assailed
Decision34 affirming the trial court’s dismissal of petitioner’s complaint. The CA held that
petitioner cannot invoke the rule that the title which bears the earlier date should prevail
in view of the infirmity in TCT No. 107729 which on its face shows that its origin was a
title already voided by the appellate court. Petitioner’s motion for reconsideration was
likewise denied by the CA.

Hence, this petition alleging that the CA erred in (a) declaring TCT No. T-8129 as
defective based on a mere clerical error despite acknowledgment of its issuance
resulting from a final determination by this Court of the validity of Emilio Gregorio’s claim
over the subject property, and (b) affirming the validity of private respondent’s TCT No.
T-27380 despite the clear nullity of its mother title (OCT No. 9587) which was issued
pending the appeal filed by Velasquez from the decision of the appellate court in CA-
G.R. No. 40739-40-R to this Court.

Petitioner reiterates that an error was made on the entries in TCT No. 107729. Instead
of providing that said title, as well as TCT Nos. 107727 and 107728 issued in the name
of the Heirs of Emilio Gregorio, emanated from the application for registration of Emilio
Gregorio in LRC Case No. N-5053, LRC Rec. No. N-27523 pursuant to the Order of the
RTC in LRC Case Nos. N-5416 and N-5053, the Register of Deeds of Pasay City
annotated on the face of said titles that these were derived from Jose T. Velasquez’s
OCT No. 5678 under Decree No. N-111862. Petitioner laments that deplorable situation
of the legitimate successor of the winning litigant holding a title wrongly annotated to
have been derived from the voided title of the loser in the case. The winning party was
then given a title registered as derived from the title he fought so hard to set aside.
Moreover, there is no logic in the appellate court’s conclusion that petitioner’s title traces
its origin to a mother title already voided, when in fact it is undisputed that TCT No.
107729 was issued pursuant to the March 21, 1986 order of the RTC of Pasig in LRC
Case Nos. N-5416 and N-5053 implementing the final and executory February 8, 1984
decision of this Court in G.R. Nos. L-34239-40 denying Velasquez’s appeal.

Petitioner further claims that it is a buyer in good faith who had no knowledge of any
defect in the title of his predecessor-in-interest. It paid the purchase price and acquired
its title long before it discovered the right to compensation of private respondent through
the Officer’s Deed of Conveyance.

Finally, petitioner argues that the issuance of OCT No. 9587 during the pendency of
Velasquez’s appeal to this Court renders said title null and void ab initio, citing the ruling
in Director of Lands v. Reyes35. Since OCT No. 9587 is a nullity, it follows that its
derivative title, private respondent’s TCT No. T-27380, is likewise a nullity.

Private respondent counters that petitioner’s assertion of the existence of clerical errors
in the annotations of the entries in TCT No. 8129 is, at the very least, an admission that
said title is indeed defective. Obviously, petitioner may not file a petition to quiet its title
and at the same time seek, in the same proceeding, the corrections of the entries
therein.

1089
As to the issue of premature issuance of OCT No. 9587, private respondent points out
that the decision in LRC Case No. N-5053 dated January 31, 1966 as a consequence of
which Decree of Registration No. 141990 was issued, has already attained finality even
before Velasquez sought the annulment of the award in favor of Emilio Gregorio utilizing
the Report of the Commissioner of Land Registration dated September 16, 1966, to the
effect, among others, that a portion of the land awarded in his favor overlapped with that
adjudicated to Gregorio. Hence, the prohibition mentioned in the case of Director of
Lands v. Reyes (supra) has no application to the case at bar, and therefore could not
serve as basis to nullify OCT No. 9587, the mother title of TCT No. T-27380 in the name
of private respondent.

We deny the petition.

Quieting of title is a common law remedy for the removal of any cloud, doubt, or
uncertainty affecting title to real property. In an action for quieting of title, the plaintiffs
must show not only that there is a cloud or contrary interest over the subject real
property, but that they have a valid title to it. 36 The court is tasked to determine the
respective rights of the complainant and the other claimants, not only to place things in
their proper places, and to make the claimant, who has no rights to said immovable,
respect and not disturb the one so entitled, but also for the benefit of both, so that
whoever has the right will see every cloud of doubt over the property dissipated, and he
can thereafter fearlessly introduce the improvements he may desire, as well as use, and
even abuse the property as he deems fit.37

Petitioner anchors its claim over the disputed lot on TCT No. T-8129 issued on February
20, 1989 which is a transfer from TCT No. 107729 in the name of the Heirs of Emilio
Gregorio, from whom it bought the property in January 1989. On the other hand, private
respondent acquired the same land by virtue of the Officer’s Deed of Conveyance dated
August 15, 1989 executed in their favor pursuant to the final judgment in Civil Case No.
35305 of the RTC of Pasig, Branch 164 and was issued TCT No. T-27380 in his name
on December12, 1991.

In Degollacion v. Register of Deeds of Cavite 38 we held that if two certificates of title
purport to include the same land, whether wholly or partly, the better approach is to
trace the original certificates from which the certificates of title were derived. Citing our
earlier ruling in Mathay v. Court of Appeals39 we declared:

x x x where two transfer certificates of title have been issued on different dates, to two
different persons, for the same parcel of land even if both are presumed to be title
holders in good faith, it does not necessarily follow that he who holds the earlier title
should prevail. On the assumption that there was regularity in the registration leading to
the eventual issuance of subject transfer certificates of title, the better approach is to
trace the original certificates from which the certificates of title in dispute were derived.
Should there be only one common original certificate of title, x x x, the transfer
certificate issued on an earlier date along the line must prevail, absent any anomaly or
irregularity tainting the process of registration. 40

1090
From the recitals in the transfer certificates of title respectively held by petitioner and
private respondent, as well as the records of the LRA, there appears not just one but
two different original certificates. TCT No. T-8129 on its face shows that the land
covered was originally registered as OCT No. 5678 under Decree No. N-111862
(Velasquez), while TCT No. T-27380 indicates the original registration as OCT No. 9587
under Decree No. N-141990 (Gregorio). Both the LRC and CA found TCT No. 107729
and its derivative titles TCT Nos. 4635 and T-8129 as void and inexistent since OCT
No. 5678 in the name of Velasquez had been nullified under the order for execution of
the final judgment in LRC Case Nos. N-5053 and N-5416 in which Gregorio prevailed.
Consequently, the lower courts upheld the title of private respondent which alone can
be traced to the original certificate in the name of Emilio Gregorio (OCT No. 9578).

Petitioner, however, asserts that the entries in his TCT contain errors and insists that
TCT Nos. 107729, 4635 and T-8129 actually emanated from the application for
registration of Emilio Gregorio in LRC Case No. N-5053, LRC Record No. N-27523
pursuant to the Order of the Regional Trial Court in LRC Case Nos. N-5053 and N-
5416, as in fact TCT No. 107729 were issued along with TCT Nos. 107727 and 107728
covering two other lots also in the name of the Heirs of Emilio Gregorio by way of
implementing the final judgment of said court in the case between Gregorio and
Velasquez, as affirmed by the CA and this Court.

We disagree.

TCT No. 107729 in the name of the heirs of Emilio Gregorio issued on April 29, 1986,
on its face showed badges of irregularity in its issuance. First, the technical description
stated that it covers a portion of Lot 1, plan Psu-204785, LRC Case No. N-5416 instead
of N-5053. Second, the decree number and date of issuance, as well as OCT number
clearly indicate that the original decree pertained to Velasquez and not Gregorio. Third,
the name of the registered owner in the original certificate is not Velasquez or Gregorio
but "Delta Motor Corp." And fourth, the certificate from which TCT No. 107729 was
supposedly a transfer should have been the OCT (of Gregorio) and not those unfamiliar
TCT numbers indicated therein. The annotations regarding the supposed original
registration of TCT No. 107729 read as follows:

IT IS FURTHER CERTIFIED that said land was originally registered on the 12th day

of December in the year nineteen hundred and sixty-six in the Registration Book of the
Office of the Register of Deeds of Rizal Volume A-69 page 78 as Original Certificate of
Title No. 5678 pursuant to Decree No. N-111862 issued in L.R.C. _____________
Record No. N-28735 Case No. N-5416 in the name of Delta Motor Corp. .

This certificate is a transfer from Transfer Certificate of Title No. 27737/A/T-145-A S-

8722/T-41 which is cancelled by virtue hereof in so far as the above-described land is
concerned.41 (Emphasis supplied.)

The foregoing errors are not mere typographical as petitioner claims, but serious
discrepancies in the registration process. In fact, it is not far-fetched that the erroneous

1091
entries could have been intended to create the impression that TCT No. 107729 was a
separate and distinct title from the previously issued TCT No. S-91911 even if they
pertain to one and the same lot adjudicated to Emilio Gregorio. Such conclusion is
reinforced by the unexplained inaction or failure of the heirs of Gregorio to rectify the
alleged errors in their title before selling the property to petitioner. The heirs of Gregorio
knew that their TCT No. S-91911 bore encumbrances in favor of third parties, notably
the notice of pending litigation (Lis Pendens) involving the property covered by said title
before the CFI of Pasig, Metro Manila in Civil Case No. 35305, which Trinidad caused to
be annotated thereon. The issuance of a new certificate with exactly identical entries as
that of TCT No. S-91911 (as to its original registration) would mean that the aforesaid
annotations had to be carried over to such new certificate. Strangely, it is TCT No.
107729 which RD Alejandro R.Villanueva upheld in his February 5, 1989 Report
notwithstanding its later issuance and the glaring errors in the entries of its original
registration. It must be stressed that OCT No. 5677, 5678, 5679 and 5680 and its
derivative titles were ordered cancelled precisely because they were issued pursuant to
Decree Nos. N-111862 to N-111865 issued in LRC Case No. N-5416 in the name of
Velasquez, who lost in the final judgment rendered in CA-G.R. No. 40739-40-R, and
whose claim to the lots covered thereby were declared null and void. Logically,
therefore, any new certificate of title to be issued to the heirs of Gregorio by virtue of the
aforesaid final judgment adjudicating the land to Emilio Gregorio, could not possibly be
a transfer or replacement of the aforesaid void OCTs in the name of Velasquez.

But even granting that the subject entries in TCT No. 107729 were mere clerical errors
and assuming arguendo that said certificate was issued to implement the final judgment
in CA-G.R. No. 40739-40-R, such execution is tainted with infirmity. The March 21,
1986 order issued by the RTC of Pasig did not only cancel OCT No. 5678 (and other
titles in the name of Velasquez covering the same lots adjudicated to Gregorio), it also
ordered the issuance of new certificates of title in the name of the heirs of Emilio
Gregorio despite having been informed by the LRA and the Register of Deeds that there
was already issued OCT No. 9587 over the same lot in the name of Emilio Gregorio,
which was replaced with TCT No. S-91911 in the name of the heirs of Emilio Gregorio
following the decision rendered by the appellate court (CA-G.R. No. 56015-R) in
another case filed by Gregorio against spouses Parami (Civil Case No. 16977).

At this point, it serves well to emphasize that upon finality of judgment in land
registration cases, the winning party does not file a motion for execution as in ordinary
civil actions. Instead, he files a petition with the land registration court for the issuance
of an order directing the Land Registration Authority to issue a decree of registration, a
copy of which is then sent to the Register of Deeds for inscription in the registration
book, and issuance of the original certificate of title. 42 The LRC upon the finality of the
judgment adjudicating the land to an applicant shall, following the prescribed procedure,
merely issues an order for the issuance of a decree of registration and the
corresponding certificate of title in the name of such applicant. 43

In this case, the RTC of Pasig, cognizant of a previous decree of registration instead
ordered the Register of Deeds to issue new certificates in favor of the heirs of Gregorio,

1092
erroneously declaring that such certificates are in lieu of OCT Nos. 5677, 5678, 5679
and 5680. Said court exceeded its authority when it ordered the issuance of transfer
certificates in the name of the heirs of Gregorio despite the existence of TCT No. S-
91911 already issued to them covering the sae parcel of land. This caused the
duplication of titles held by the heirs of Gregorio over Lot 1. Thus, while there was only
one decree and original certificate issued to the common predecessor-in-interest of
petitioner and private respondent, Emilio Gregorio, the latter’s heirs were able to secure
two transfer certificates covering the same land. Indeed it could not order the issuance
of another OCT as it would result to duplication of titles or "double titling." 44 A land
registration court has no jurisdiction to order the registration of land already decreed in
the name of another in an earlier land registration case. 45 Issuance of another decree
covering the same land is therefore null and void. 46

In the light of the LRA Report dated September 12, 1984 stating that compliance with
the July 30, 1971 final judgment rendered by the CA which reversed the LRC decision
and adjudicated Lots 1, 3 and 4 in favor of Emilio Gregorio, would result in duplication of
titles, it was grave error for the RTC of Pasig to grant the motion for execution filed by
the heirs of Emilio Gregorio who sought, -- in the guise of implementing the July 30,
1971 CA decision -- the issuance of new titles in their name notwithstanding the
existence of OCT No. 9587 and TCT No. S-91911. Given such vital information, there
exists a compelling need for the land registration court to ascertain the facts and
"address the likelihood of duplication of titles x x x, an eventuality that will undermine the
Torrens system of land registration."47

Petitioner nonetheless assails OCT No. 9587 as null and void, having been issued
when the adverse decision of the appellate court in CA-G.R. No. 40739-40-R was
elevated by it to this Court. Following the doctrine in Director of Lands v. Reyes (supra),
it is asserted that OCT No. 9587 should not have been issued because the decision in
CA-G.R. No. 40739-40-R was not yet final at the time, pending resolution by this Court
of the appeal by Velasquez (G.R. No. L-34239-40).

In Director of Lands v. Reyes (supra), this Court laid down the rule that execution
pending appeal is not applicable in a land registration proceeding and the certificate of
title thereby issued is null and void. In that case, the assignee of the original applicant
applied for a motion for issuance of a decree of registration before the lower court
pending the approval of the Record on Appeal. The motion was opposed by the
Government which appealed the lower court’s decision adjudicating the land to the said
assignee. We thus ruled:

Under the circumstances of this case, the failure of the appellants to serve a copy of
their Notice of Appeal to the counsel for the adjudicatee Roman C. Tamayo is not fatal
to the appeal because, admittedly, he was served with a copy of the original, as well as
the Amended Record on Appeal in both of which the Notice of Appeal is embodied.
Hence, such failure cannot impair the right of appeal.

1093
What is more, the appeal taken by the Government was from the entire decision, which
is not severable. Thus, the appeal affects the whole decision.

In any event, We rule that execution pending appeal is not applicable in a land
registration proceeding. It is fraught with dangerous consequences. Innocent
purchasers may be misled into purchasing real properties upon reliance on a judgment
which may be reversed on appeal.

A Torrens title issued on the basis of a judgment that is not final is a nullity, as it is
violative of the explicit provisions of the Land Registration Act which requires that a
decree shall be issued only after the decision adjudicating the title becomes final and
executory, and it is on the basis of said decree that the Register of Deeds concerned
issues the corresponding certificate of title.

Consequently, the lower court acted without jurisdiction or exceeded its jurisdiction in
ordering the issuance of a decree of registration despite the appeal timely taken from
the entire decision a quo.481auuphi1

OCT No. 9587 on its face showed that its basis was Decree No. N-141990 issued on
October 31, 1972 pursuant to the January 31, 1966 decision of the CFI in Land Reg.
Case No. N-5053 and CA decision dated July 30, 1971. Per records of this Court,
however, Velasquez had filed a petition for review of the CA decision. Be that as it may,
the premature issuance of the decree in favor of Emilio Gregorio and the corresponding
original certificate of title in his name did not affect his acquisition of title over the subject
land considering that Velasquez’s petition was eventually dismissed. Neither can
petitioner, by reason alone of defective issuance of OCT No. 9587, claim a right over
the subject land superior to that acquired by the private respondent.

A reading of the annotations of encumbrances at the back of TCT No. T-27380 which
were carried over from TCT No. S-91911 in the name of the Heirs of Gregorio, would
show that during the pendency of Civil Case No. 35305 filed before the CFI of Rizal by
private respondent and Trinidad, the latter caused the annotation of a Notice of Lis
Pendens involving the same properties of the defendants therein, the heirs of Emilio
Gregorio. The notice of lis pendens was registered as Entry No. 2139849 on TCT No. S-
91911.

Lis pendens, which literally means pending suit, refers to the jurisdiction, power or
control which a court acquires over property involved in a suit, pending the continuance
of the action, and until final judgment. Founded upon public policy and necessity, lis
pendens is intended to keep the properties in litigation within the power of the court until
the litigation is terminated, and to prevent the defeat of the judgment or decree by
subsequent alienation. Its notice is an announcement to the whole world that a
particular property is in litigation and serves as a warning that one who acquires an
interest over said property does so at his own risk or that he gambles on the result of
the litigation over said property.50

1094
The filing of a notice of lis pendens has a two-fold effect: (1) to keep the subject matter
of the litigation within the power of the court until the entry of the final judgment to
prevent the defeat of the final judgment by successive alienations; and (2) to bind a
purchaser, bona fide or not, of the land subject of the litigation to the judgment or
decree that the court will promulgate subsequently. 51 Once a notice of lis pendens has
been duly registered, any subsequent transaction affecting the land involved would
have to be subject to the outcome of the litigation. 52

Petitioner being a mere transferee at the time the decision of the RTC of Pasig in Civil
Case No. 35305 had become final and executory on December 6, 1988, it is bound by
the said judgment which ordered the heirs of Emilio Gregorio to convey Lots 1, 2, 3 & 4,
Psu-204875 in favor of private respondent and Trinidad. As such buyer of one of the
lots to be conveyed to private respondent pursuant to the court’s decree with notice that
said properties are in litigation, petitioner merely stepped into the shoes of its vendors
who lost in the case. Such vested right acquired by the private respondent under the
final judgment in his favor may not be defeated by the subsequent issuance of another
certificate of title to the heirs of Gregorio respecting the same parcel of land. For it is
well-settled that being an involuntary transaction, entry of the notice of lis pendens in
the primary entry book of the Register of Deeds is sufficient to constitute registration
and such entry is notice to all persons of such claim.53

"It is to be noted that the notation of the lis pendens on the back of the owner’s duplicate
is not mentioned for the purpose of constituting a constructive notice because usually
such owner’s duplicate certificate is presented for the purpose of the annotation later,
and sometimes not at all until [it is] ordered by the court." 54 Strictly speaking, the lis
pendens annotation is not to be referred to "as a part of the doctrine of notice; the
purchaser pendente lite is affected, not by notice, but because the law does not allow
litigating parties to give to others, pending the litigation, rights to the property in dispute
so as to prejudice the opposite party. The doctrine rests upon public policy, not
notice."55 Thus we have held that one who buys land where there is a pending notice of
lis pendens cannot invoke the right of a purchaser in good faith; neither can he have
acquired better rights than those of his predecessor in interest. 56

In view of the foregoing, we hold that the CA did not err in affirming the trial court’s order
dismissing petitioner’s complaint for quieting of title and ordering the cancellation of its
TCT No. T-8129.

WHEREFORE, the petition is DENIED. The Decision dated May 30, 2001 and
Resolution dated October 23, 2001 of the Court of Appeals in CA-G.R. CV No. 60712
are AFFIRMED.

With costs against the petitioner.

SO ORDERED.

THIRD DIVISION

1095
 [ G.R. No. 157644, November 17, 2010 ]
SPOUSES ERNESTO AND VICENTA TOPACIO, AS REPRESENTED BY THEIR
ATTORNEY-IN-FACT MARILOU TOPACIO-NARCISO, PETITIONERS, VS. BANCO
FILIPINO SAVINGS AND MORTGAGE BANK, RESPONDENT.

DECISION
BRION, J.:
Before the Court is a petition for review on certiorari,[1] filed by petitioner spouses
Ernesto and Vicenta Topacio (petitioners), assailing the August 26, 2002 Decision[2] of
the Court of Appeals (CA) in CA-G.R. SP No. 32389, as well as its March 17, 2003
Resolution[3] denying the petitioners' motion for reconsideration.  The CA Decision and
Resolution affirmed in toto the October 1, 1993 Order of the Regional Trial Court of
Valenzuela City, Branch 75, which issued an alias writ of possession in favor of the
respondent Banco Filipino Savings and Mortgage Bank (respondent).

THE BACKGROUND FACTS

The backgrounds facts, as culled from the records, are summarized below.

The petitioners obtained a loan amounting to P400,000.00 from the respondent. To

secure the loan, the petitioners executed on May 8, 1980, a real estate mortgage over
Lot 1224-B-1 LRC Psd-15436, covered by TCT No. T-191117 (now 13554) of the
Registry of Deeds of Bulacan, in favor of the respondent.  The petitioners failed to pay
the loan, prompting the respondent to file a Petition for Extrajudicial Foreclosure of
Mortgage, pursuant to Act No. 3135.  To satisfy the obligation, the Provincial Sheriff of
Bulacan, on November 8, 1982, sold the mortgaged property at public auction, where
the respondent emerged as the highest bidder. Accordingly, a Certification of Sale was
issued in favor of the respondent and registered with the Registry of Deeds. [4]

On May 26, 1983, the respondent filed a Petition for the Issuance of a Writ of
Possession[5] over the mortgaged property before the Regional Trial Court, Branch 172,
Valenzuela City (RTC).  In an Order[6] dated December 12, 1983, the RTC granted the
petition, conditioned on the posting of a P100,000.00 bond. Upon posting of the
required bond, the RTC issued, on February 16, 1984, a writ of possession,
commanding the sheriff to place the respondent in possession of the property.

The writ of possession was not implemented[7] because, on  February  27, 1984, the
petitioners, filed with the RTC, a petition to set aside the auction sale and the writ of
possession (with application for a temporary restraining order and a writ of preliminary
injunction).[8]  In an Order dated  February 28, 1984, the RTC issued a temporary
restraining order enjoining the respondent and the Deputy Sheriff from implementing the
writ of possession it previously issued. [9] After hearing, the RTC, issued on March 13,
1984, a writ of preliminary injunction ordering the respondent and the Provincial Sheriff
to desist from implementing the writ of possession and to refrain from interfering with
and disrupting the possession of the petitioners over the subject parcel of land. [10]

1096
Sometime in April 1984, the respondent filed with the RTC its Motion to Admit Answer
with Opposition to the Petition to Set Aside Auction Sale and Writ of Possession with
Motion to Dissolve or Lift Preliminary Injunction (Answer) which was granted on April 26,
1984.[11]  On May 21, 1984, the petitioners filed their Reply thereto, praying that the writ
of preliminary injunction previously issued be maintained. [12]

More than two years after the filing of the Answer and the Reply, and after a series of
postponements at the instance of both parties, then Presiding Judge Teresita D.
Capulong issued an Order dated December 16, 1986, dismissing the respondent's
petition for the issuance of a writ of possession on the ground of "failure to
prosecute."[13]  The Order reads in full:

When this case was called for hearing, counsel for the oppositors [now petitioners], Atty.
Constancio R. Gallamos, was present. Atty. Francisco Rivera [counsel for the
respondent] was absent despite notice.  Upon petition of the counsel for the oppositors,
this case is hereby ordered dismissed for failure to prosecute.

SO ORDERED.

No copy of the above Order was served on the respondent [14] whose operations the
Monetary Board (Central Bank of the Philippines) shut down on January 25, 1985, for
reasons not relevant to the present case.[15]

Nearly six (6) years later (after the Court ordered the reorganization and resumption of
the respondent's operations in G.R. No. 70054) [16] or on August 19, 1992, the
respondent filed a Motion to Clarify the Order of December 16, 1986.  In the same
motion, the respondent likewise moved for the issuance of an alias writ of
possession. [17]

In an Order[18] dated September 18, 1992, the RTC made a clarification that the Order of
Dismissal of December 16, 1986 refers to the dismissal of the "main case for issuance
of a writ of possession."  In that same Order, the RTC denied the respondent's motion
for the issuance of an alias writ of possession.

On May 18, 1993, the respondent moved for the reconsideration [19] of the September 18,
1992 Order.  In an Order[20] dated June 2, 1993, the RTC, this time presided by Judge
Emilio L. Leachon, Jr., reconsidered and set aside the Order of December 16, 1986 and
granted the respondent's prayer for the issuance of an alias writ of possession.  The
petitioners moved for a reconsideration of the June 2, 1993 Order and prayed that the
implementation of the alias writ of possession be held in abeyance.

The RTC Ruling

On October 1, 1993, the RTC, now presided by Judge Jaime F.

Bautista, issued the assailed Order[21] which denied the petitioners' motion for
reconsideration and reiterated its order for the issuance of an alias writ of possession in
favor of the respondent. The assailed RTC Order is summarized below.
1097
First, the RTC ruled that the Order of Dismissal was granted on a "technicality" and that
"[t]he ground of failure to prosecute is manifestly unfounded." [22]  The RTC held that "the
power of the trial court to dismiss an action on the ground of non prosequitur is not
unbounded. The real test x x x is whether under the facts and circumstances, the
plaintiff is chargeable with want of due diligence in [failing] to proceed with reasonable
promptitude."[23]  In the present case, the RTC noted that the records show that the case
dragged on for years because of several postponements at the request of both parties,
particularly petitioner Ernesto Topacio who went abroad for a long time during the
pendency of the case.[24]

Second, the RTC held that the December 16, 1986 Dismissal Order cannot be
considered a dismissal on the merits as it was founded not on a substantial ground but
on a technical one; it does not amount to a "declaration of the law [on] the respective
rights and duties of the parties, based upon the ultimate x x x facts disclosed by the
pleadings and evidence, and upon which the right of recovery depends, irrespective of
formal, technical or dilatory objectives or contentions." [25]

Third, the RTC ruled that the revival by a motion for reconsideration (filed on May 18,
1993) of the February 16, 1984 Order, granting the writ of possession, was seasonably
filed by the respondent, pursuant to the period allowed under Section 6, Rule 39 of the
Rules of Court. Citing National Power Corporation v. Court of Appeals,[26] the RTC held
that "[i]n computing the time [limit] for suing out an execution, x x x the general rule is
that there should not be included the time when execution is stayed, either by
agreement of the parties for a definite time, by injunction, by the taking of an appeal or
writ of error so as to operate as a supersedeas, by the death of a party, or otherwise." 
The RTC noted that the running of the five-year period under Section 6 of the Rules of
Court had been interrupted by the erroneous issuance of a writ of preliminary injunction;
the February 16, 1984 Order never attained finality and was overtaken by the issuance
of the Order dated June 2, 1993, granting the issuance of an alias writ of execution.[27]

Finally, the RTC held that the respondent, as the winning bidder, "has an absolute right
to a writ of possession,"[28] considering that: (1) a writ of possession had been issued on
February 16, 1984 and the corresponding bond had already been posted, although the
writ was not enforced because of the erroneous injunction issued by Judge Capulong;
and (2) there was no redemption by the petitioners. [29]

On October 20, 1993, the petitioners filed their Petition for Certiorari and Prohibition
under Rule 65 of the 1997 Rules of Court with prayer for the issuance of a preliminary
injunction (petition), docketed as CA-G.R. SP No. 32389.[30]  Before the CA, the
petitioners argued that the RTC acted without jurisdiction or with grave abuse of
discretion when it: (1) reinstated the respondent's case more than seven (7) years after
the December 16, 1986 Dismissal Order became final and executory, and (2) issued
an alias writ of execution upon a mere motion for reconsideration and not by an
independent action pursuant to Section 6, Rule 39 of the Rules of Court.

1098
The CA Ruling

On August 26, 2002, the CA denied the petitioners' petition and affirmed in toto the June
2, 1993 and October 1, 1993 Orders of the RTC.  The CA found that the December 16,
1986 Order of the RTC does not amount to a dismissal on the merits as it was based on
purely technical grounds. It noted that the records show that the respondent was not
furnished a copy of the Dismissal Order; hence, the case cannot be deemed to be final
with respect to the respondent.  The CA also agreed with the RTC's conclusion that the
delay in the resolution of the case cannot be solely attributed to the respondent and did
not warrant its outright dismissal.[31]

The CA held that an independent action for the revival of the writ of possession need
not be filed in order to enforce the writ of possession issued on December 12, 1983
since Section 6, Rule 39 of the Rules of Court applies only to civil actions and not to
special proceedings,[32] citing Heirs of Cristobal Marcos v. de Banuvar.[33]

The Petition

In the present petition,[34] the petitioners contend that the CA erred in affirming the
October 1, 1993 Order of the RTC considering that:

1) the December 16, 1986 Dismissal Order constitutes an adjudication on the merits
which has already attained finality, and

2) a writ of possession may not be enforced upon mere motion of the applicant after the
lapse of more than five (5) years from the time of its issuance.

On the first assignment of error, the petitioners submit that the December 16, 1986
Dismissal Order for failure to prosecute constitutes adjudication upon the merits,
considering that the RTC did not declare otherwise, pursuant to Section 3, Rule 17 of
the Rules of Court.  The petitioners further contend that the Dismissal Order has
become final and executory since the respondent belatedly filed the Motion to Clarify
the Order of December 16, 1986 on August 19, 1992 or almost six years later.  On
these premises, the petitioners argue that res judicata has set in and consequently, the
RTC had no jurisdiction to grant the motion for reconsideration and to issue an alias writ
of possession in favor of the respondent. [35]

On the second assignment of error, the petitioners contend that pursuant to Section 6,
Rule 39 of the Rules of Court, the writ of possession issued on February 16, 1984 may
no longer be enforced by a mere motion but by a separate action, considering that more
than five years had elapsed from its issuance.  The petitioners also argue that Section
6, Rule 39 of the Rules of Court applies to the present case since a petition for the
issuance of a writ of possession is neither a special proceeding nor a land registration
case.[36]

In their Memorandum, the petitioners additionally submit that they do not dispute that

1099
the CA made a finding that the December 16, 1986 Dismissal Order was not properly
served.  They, however, point out that the CA made no such finding with respect to the
September 18, 1992 Order of the RTC.  The petitioners contend that the Motion for
Reconsideration, filed on May 18, 1993 or eight months later from the September 18,
1992 Order by the respondent, was filed out of time.  Thus, they conclude that any
subsequent ruling of the RTC, including the June 2, 1993 and October 1, 1993 Orders,
is barred by res judicata.[37]

OUR RULING

We deny the petition for lack of merit.

A. Preliminary Considerations

Our review of the records, particularly the CA decision, indicates that the CA did not
determine the presence or absence of grave abuse of discretion in the RTC decision
before it. Given that the petition before the CA was a petition for certiorari and
prohibition under Rule 65 of the Rules of Court, it appears that the CA instead
incorrectly reviewed the case on the basis of whether the RTC decision on the merits
was correct.

To put the case in its proper perspective, the task before us is to examine the CA
decision from the prism of whether it correctly determined the presence or absence of
grave abuse of discretion in the RTC decision before it. Stated otherwise, did the CA
correctly determine whether the RTC committed grave abuse of discretion amounting to
lack or excess of jurisdiction in ruling on the case?

As discussed below, our review of the records and the CA decision shows that the RTC
did not commit grave abuse of discretion in issuing an alias writ of possession in favor
of the respondent.

B. Applicability of Res Judicata

Under the rule of res judicata, a final judgment or decree on the merits by a court of
competent jurisdiction is conclusive of the rights of the parties or their privies, in all later
suits and on all points and matters determined in the previous suit.  The term literally
means a "matter adjudged, judicially acted upon, or settled by judgment." [38]  The
principle bars a subsequent suit involving the same parties, subject matter, and cause
of action. The rationale for the rule is that "public policy requires that controversies must
be settled with finality at a given point in time." [39]

The doctrine of res judicata embraces two (2) concepts:  the first is "bar by prior
judgment" under paragraph (b) of Rule 39, Section 47 of the Rules of Court, and the
second is "conclusiveness of judgment" under paragraph (c) thereof. Res
judicata applies in the concept of "bar by prior judgment" if the following requisites
concur: (1) the former judgment or order must be final; (2) the judgment or order must
be on the merits; (3) the decision must have been rendered by a court having
1100
jurisdiction over the subject matter and the parties; and (4) there must be, between the
first and the second action, identity of parties, of subject matter and of causes of action.
[40]

The petitioners claim that res judicata under the first concept applies in the present
case because all of the elements thereof are present.  In response, the respondent
argues that res judicata did not set in as the first element is lacking.

We agree with the respondent.

The December 16, 1986 Dismissal Order never attained finality as it was not
properly served

The following provisions under Rule 13 of the Rules of Court define the proper modes of
service of judgments:[41]

SEC. 2. Filing and service, defined. - x x x

Service is the act of providing a party with a copy of the pleading or paper concerned. x
xx

SEC. 5. Modes of service. - Service of pleadings, motions, notices, orders, judgments

and other papers shall be made either personally or by mail.

SEC. 6. Personal service. - Service of the papers may be made by delivering personally
a copy to the party or his counsel, or by leaving it in his office with his clerk or with a
person having charge thereof. If no person is found in his office, or his office is not
known, or he has no office, then by leaving the copy, between the hours of eight in the
morning and six in the evening, at the party's or counsel's residence, if known, with a
person of sufficient age and discretion then residing therein.

SEC. 7. Service by mail. - Service by registered mail shall be made by depositing the
copy in the office, in a sealed envelope, plainly addressed to the party or his counsel at
his office, if known, otherwise at his residence, if known, with postage fully pre-paid, and
with instructions to the postmaster to return the mail to the sender after ten (10) days if
undelivered. If no registry service is available in the locality of either the sender or the
addressee, service may be done by ordinary mail.

SEC. 8. Substituted service. - If service of pleadings, motions, notices, resolutions,

orders and other papers cannot be made under the two preceding sections, the office
and place of residence of the party or his counsel being unknown, service may be made
by delivering the copy to the clerk of court, with proof of failure of both personal service
and service by mail. The service is complete at the time of such delivery.

SEC. 9. Service of judgments, final orders or resolutions. -Judgments, final orders or

resolutions shall be served either personally or by registered mail. When a party
summoned by publication has failed to appear in the action, judgments, final orders or
1101
resolutions against him shall be served upon him also by publication at the expense of
the prevailing party.

As a rule, judgments are sufficiently served when they are delivered personally, or
through registered mail to the counsel of record, or by leaving them in his office with his
clerk or with a person having charge thereof.  After service, a judgment or order which is
not appealed nor made subject of a motion for reconsideration within the prescribed 15-
day period attains finality.[42]

In Philemploy Services and Resources, Inc. v. Rodriguez, [43] the Court ruled that the
Resolution of the National Labor Relations Commission, denying the respondent's
motion for reconsideration, cannot be deemed to have become final and executory as
there is no conclusive proof of service of the said resolution.  In the words of the Court,
"there was no proof of actual receipt of the notice of the registered mail by the
respondent's counsel."[44] Based on these findings, the Court concluded that the CA
properly acquired jurisdiction over the respondent's petition for certiorari filed before it;
in the absence of a reckoning date of the period provided by law for the filing of the
petition, the Court could not assume that it was improperly or belatedly filed.

Similarly, in Tomawis v. Tabao-Cudang,[45] the Court held that the decision of the

Regional Trial Court did not become final and executory where, from the records, the
respondent had not received a copy of the resolution denying her motion for
reconsideration.[46]  The Court also noted that there was no sufficient proof that the
respondent actually received a copy of the said Order or that she indeed received a first
notice. Thus, the Court concluded that there could be no valid basis for the issuance of
the writ of execution as the decision never attained finality.

In the present case, we note that the December 16, 1986 Dismissal Order cannot be
deemed to have become final and executory in view of the absence of a valid service,
whether personally or via registered mail, on the respondent's counsel.  We note in this
regard that the petitioners do not dispute the CA finding that the "records failed to show
that the private respondent was furnished with a copy of the said order of
dismissal[.]"[47]  Accordingly, the Dismissal Order never attained finality.

The petitioners now claim that the Motion for Reconsideration, filed by the respondent
on May 18, 1993 from the September 18, 1992 Order of the RTC, was filed out of time.
The petitioners make this claim to justify their contention that the subsequent rulings of
the RTC, including the June 2, 1993 and October 1, 1993 Orders, are barred by res
judicata.

We reject this belated claim as the petitioners raised this only for the first time on
appeal, particularly, in their Memorandum.  In fact, the petitioners never raised this
issue in the proceedings before the court a quo or in the present petition for review.

As a rule, a party who deliberately adopts a certain theory upon which the case is tried
and decided by the lower court will not be permitted to change the theory on appeal.

1102
[48]
 Points of law, theories, issues and arguments not brought to the attention of the
lower court need not be, and ordinarily will not be, considered by a reviewing court, as
these cannot be raised for the first time at such late stage. It would be unfair to the
adverse party who would have no opportunity to present further evidence material to the
new theory, which it could have done had it been aware of it at the time of the hearing
before the trial court.[49] Thus, to permit the petitioners in this case to change their theory
on appeal would thus be unfair to the respondent and offend the basic rules of fair play,
justice and due process.[50]

C. Applicability of the Rule on Execution

by Motion or by Independent Action

The petitioners finally submit that the writ of possession, issued by the RTC on February
16, 1984, may no longer be enforced by a mere motion, but by a separate action,
considering that more than five years had elapsed from its issuance, pursuant to
Section 6, Rule 39 of the Rules of Court, which states:

Sec. 6. Execution by motion or by independent action. - A final and executory judgment

or order may be executed on motion within five (5) years from the date of its entry. After
the lapse of such time, and before it is barred by the statute of limitations, a judgment
may be enforced by action. The revived judgment may also be enforced by motion
within five (5) years from the date of its entry and thereafter by action before it is barred
by the statute of limitations.

Section 6, Rule 39 of the Rules of Court only applies to civil actions

In rejecting a similar argument, the Court held in Paderes v. Court of Appeals[51] that

Section 6, Rule 39 of the Rules of Court finds application only to civil actions and not to
special proceedings.  Citing Sta. Ana v. Menla,[52] which extensively discussed
the rationale behind the rule, the Court held:

In a later case [Sta. Ana v. Menla, 111 Phil. 947 (1961)], the Court also ruled that the
provision in the Rules of Court to the effect that judgment may be enforced within
five years by motion, and after five years but within ten years by an action
(Section 6, Rule 39) refers to civil actions and is not applicable to special
proceedings, such as land registration cases.  x x x x

We fail to understand the arguments of the appellant in support of the above

assignment, except in so far as it supports his theory that after a decision in a land
registration case has become final, it may not be enforced after the lapse of a period of
10 years, except by another proceeding to enforce the judgment or decision. Authority
for this theory is the provision in the Rules of Court to the effect that judgment may be
enforced within 5 years by motion, and after five years but within 10 years, by an action
(Sec. 6, Rule 39). This provision of the Rules refers to civil actions and is not
applicable to special proceedings, such as a land registration case. This is so
because a party in a civil action must immediately enforce a judgment that is

1103
secured as against the adverse party, and his failure to act to enforce the same
within a reasonable time as provided in the Rules makes the decision
unenforceable against the losing party. In special proceedings the purpose is to
establish a status, condition or fact; in land registration proceedings, the
ownership by a person of a parcel of land is sought to be established. After the
ownership has been proved and confirmed by judicial declaration, no further
proceeding to enforce said ownership is necessary, except when the adverse or
losing party had been in possession of the land and the winning party desires to
oust him therefrom.

Subsequently, the Court, in Republic v. Nillas,[53] affirmed the dictum in Sta. Ana and

clarified that "Rule 39 x x x applies only to ordinary civil actions, not to other or
extraordinary proceedings not expressly governed by the Rules of Civil Procedure but
by some other specific law or legal modality," viz:

Rule 39, as invoked by the Republic, applies only to ordinary civil actions, not to other or
extraordinary proceedings not expressly governed by the Rules of Civil Procedure but
by some other specific law or legal modality such as land registration cases. Unlike in
ordinary civil actions governed by the Rules of Civil Procedure, the intent of land
registration proceedings is to establish ownership by a person of a parcel of land,
consistent with the purpose of such extraordinary proceedings to declare by judicial fiat
a status, condition or fact. Hence, upon the finality of a decision adjudicating such
ownership, no further step is required to effectuate the decision and a ministerial duty
exists alike on the part of the land registration court to order the issuance of, and the
LRA to issue, the decree of registration.

In the present case, Section 6, Rule 39 of the Rules of Court is not applicable to an ex
parte petition for the issuance of the writ of possession as it is not in the nature of a civil
action[54] governed by the Rules of Civil Procedure but a judicial proceeding governed
separately by Section 7 of Act No. 3135 which regulates the methods of effecting an
extrajudicial foreclosure of mortgage. The provision states:

Section 7. Possession during redemption period. In any sale made under the provisions
of this Act, the purchaser may petition the [Regional Trial Court] where the property or
any part thereof is situated, to give him possession thereof during the redemption
period, furnishing bond in an amount equivalent to the use of the property for a period of
twelve months, to indemnify the debtor in case it be shown that the sale was made
without violating the mortgage or without complying with the requirements of this Act.
Such petition shall be made under oath and filed in form of an ex parte motion in the
registration or cadastral proceedings if the property is registered, or in special
proceedings in the case of property registered under the Mortgage Law or under section
one hundred and ninety-four of the Administrative Code, or of any other real property
encumbered with a mortgage duly registered in the office of any register of deeds in
accordance with any existing law, and in each case the clerk of the court shall, upon the
filing of such petition, collect the fees specified in paragraph eleven of section one
hundred and fourteen of Act Numbered Four hundred and ninety-six, as amended by
Act Numbered Twenty-eight hundred and sixty-six, and the court shall, upon approval

1104
of the bond, order that a writ of possession issue, addressed to the sheriff of the
province in which the property is situated, who shall execute said order
immediately.

The above-cited provision lays down the procedure that commences from the filing of a
motion for the issuance of a writ of possession, to the issuance of the writ of possession
by the Court, and finally to the execution of the order by the sheriff of the province in
which the property is located.  Based on the text of the law, we have also consistently
ruled that the duty of the trial court to grant a writ of possession is ministerial; the writ
issues as a matter of course upon the filing of the proper motion and the approval of the
corresponding bond.[55]  In fact, the issuance and the immediate implementation of the
writ are declared ministerial and mandatory under the law.

Thus, in Philippine National Bank v. Adil,[56] we emphatically ruled that "once the writ of
possession has been issued, the trial court has no alternative but to enforce the writ
without delay."  The issuance of a writ of possession to a purchaser in an extrajudicial
foreclosure is summary and ministerial in nature as such proceeding is merely an
incident in the transfer of title.  The trial court does not exercise discretion in the
issuance thereof;[57] it must grant the issuance of the writ upon compliance with the
requirements set forth by law, and the provincial sheriff is likewise mandated to
implement the writ immediately.

Clearly, the exacting procedure provided in Act No. 3135, from the moment of the
issuance of the writ of possession, leaves no room for the application of Section 6, Rule
39 of the Rules of Court which we consistently ruled, as early as 1961 in Sta. Ana, to be
applicable only to civil actions. From another perspective, the judgment or the order
does not have to be executed by motion or enforced by action within the purview of
Rule 39 of the Rules of Court. [58]

D. Conclusion

In sum, based on these considerations, we find that the RTC committed no grave abuse
of discretion in issuing an alias writ of possession in favor of the respondent.

WHEREFORE, the present petition is DENIED. The August 26, 2002 Decision and the
March 17, 2003 Resolution of the Court of Appeals in CA-G.R. SP No. 32389
are AFFIRMED.  Costs against the petitioners.

SO ORDERED.

THIRD DIVISION

February 7, 2018

G.R. No. 231116

1105
REPUBLIC OF THE PHILIPPINES, Petitioner
vs.
CLARO YAP, Respondent

DECISION

VELASCO, JR., J.:

Nature of the Case

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court assailing the March 16, 2017 Decision1 of the Court of Appeals (CA) in CA-G.R.
CV No. 05491. The CA affirmed the October 20, 2011 Decision 2 of the Regional Trial
Court (RTC) of Cebu City, Branch 6, granting respondent's petition for registration of a
parcel of land located in Carcar, Cebu.

The Facts

On July 28, 2010, respondent Claro Yap (Yap) filed a petition 3 for cancellation and re-
issuance of Decree No. 99500 covering Lot No. 922 of the Carcar Cadastre, and for the
issuance of the corresponding Original Certificate of Title (OCT) pursuant to the re-
issued decree. His petition alleged the following:

1. Lot No. 922 with an area of thirty four (34) square meters is covered by Decree
No. 99500 issued on November 29, 1920 in the name of Andres Abellana, as
Administrator of the Estate of Juan Rodriguez;

2. Ownership over Lot No. 922 was vested upon Yap by virtue of inheritance and
donation and that he and his predecessors-in-interest have been in open,
continuous, exclusive and notorious possession of the said lot since June 12,
1945, or earlier, and/or by acquisitive prescription being possessors in good faith
in the concept of an owner for more than thirty (30) years;

3. While a valid decree was issued for Lot No. 922, based on the certification
from the Register of Deeds of the Province of Cebu, there is no showing or proof
that an OCT was ever issued covering the said lot;

4. Lot No. 922 was registered for taxation purposes in the name of Heirs of
Porfirio Yap; and

5. There is no mortgage or encumbrance of any kind affecting Lot No. 922, or

any other person having any interest therein, legal or equitable, in possession,
reversion or expectancy, other than Yap. 4

Finding the petition sufficient in form and substance, the RTC issued an Order 5 dated
August 3, 2010 setting the case for hearing on August 3, 2011 and ordering the

1106
requisite publication thereof. Since no oppositors appeared before the court during the
said scheduled hearing, the R TC issued another Order 6 setting the case for hearing on
petitioner's presentation of evidence.

During the ex parte hearing held on August 8, 2011, Yap presented the following
documents, among others, as proof of his claim:

1. Certified true copy of Decree No. 99500 issued by the authorized officer of the Land
Registration Authority (LRA);7

2. Index of decree showing that Decree No. 99500 was issued for Lot No. 922; 8

3. Certification from the Register of Deeds of Cebu that no certificate of title covering Lot
No. 922, Cad. 30 has been issued;9

4. Extrajudicial Settlement of the Estate of the Late Porfirio C. Yap with Deed of
Donation;10

5. Certification from the Office of the City Assessor of Carcar indicating that the heirs of
Porfirio Yap had been issued Tax Declarations for Lot No. 922 since 1948;

6. Tax Declarations covering Lot No. 922 from 1948 up to 2002; 11

7. Blueprint of the approved consolidation and subdivision plan; and

8. Certification from Community Environment and Natural Resources Office (CENRO),

Cebu City stating that there is no existing public land application for Lot No. 922. 12

In its September 20, 2011 Order,13 the RTC admitted petitioner's evidence and deemed
the case submitted for decision.

RTC Ruling

The RTC found that Yap had sufficiently established his claims and was able to prove
his ownership and possession over Lot No. 922. As such, it granted the petition and
ordered the Register of Deeds of the Province of Cebu to cancel Decree No. 99500, re-
issue a new copy thereof, and on the basis of such new copy, issue an Original
Certificate of Title in the name of Andres Abellana, as administrator of the Estate of
Juan Rodriguez. The dispositive portion of the October 20, 2011 Decision states:

WHEREFORE, the court grants the petition in favor of the petitioner Claro Yap. The
Land Registration Authority thru the Register of Deeds of the Province of Cebu is
hereby directed to cancel Decree No. 99500 issued on November 29, 1920 and to re-
issue a new copy thereof in the name of Andres Abellana, as Administrator of the Estate
of Juan Rodriguez, and on the bases of the new copy of Decree No. 99500, to issue an

1107
Original Certificate of Title covering Lot No. [922] in the name of Andres Abellana, as
administrator of the Estate of Juan Rodriguez.

Further, the Register of Deeds is directed to furnish the petitioner, Claro Yap, with the
re-issued copy of Decree No. 99500 and the copy of its title upon payment of any
appropriate fees.

SO ORDERED.14

Since the order of the RTC was for the re-issuance of the decree under the name of its
original adjudicate, Yap filed a Partial Motion for Reconsideration 15 stating that the new
decree and OCT should be issued under his name instead of Andres Abellana.

On the other hand, petitioner, through the Office of the Solicitor General (OSG), filed its
Comment16 mainly arguing that Yap's petition and motion should be denied since the
Republic was not furnished with copies thereof.

In its Joint Order17 dated August 26, 2014, the RTC denied Yap's motion ruling that the
law provides that the decree, which would be the basis for the issuance of the OCT,
should be issued under the name of the original adjudicate. Likewise, the RTC also
denied the OSG's motion finding that the records of the case show that it was furnished
with copies of the Petition as well as the Partial Motion for Reconsideration. 18

The OSG then interposed an appeal before the CA arguing that Yap's petition should
have been denied due to insufficiency of evidence and failure to implead indispensable
parties such as the heirs of Juan Rodriguez and/or Andres Abellana.

CA Ruling

In its March 16, 2017 Decision, the CA upheld the RTC's ruling finding that the pieces of
evidence submitted by Yap were sufficient to support the petition. It ruled that since it
has been established that no certification of title or patent had been issued over Lot No.
922, the RTC did not err in ordering the re-issuance of Decree No. 99500 in the name of
Andres Abellana, as Administrator of the Estate of Juan Rodriguez. 19

As regards the OSG's argument on non-joinder of indispensable parties, the CA

highlighted that it is not a ground for dismissal of an action. Nevertheless, it ruled that
the heirs of either Andres Abellana or Juan Rodriguez were not deprived of the
opportunity to be heard as the proceeding before the R TC was -an in rem proceeding.
Thus, when the petition was published, all persons including the said heirs were
deemed notified.20

Lastly, while the CA delved into the issues ventilated by the OSG on appeal, it also
noted that it was too late to raise the same due to the latter's failure to file a motion for
reconsideration of the RTC's decision or submit a comment on the merits of Yap's
Partial Motion for Reconsideration.21 The dispositive portion of the CA decision reads:

1108
WHEREFORE, the appeal is DENIED. The assailed Decision dated October 20, 2011
of the Regional Trial Court, Branch 06, Cebu City, in LRC REC. NO. Lot No. 922, Cad.
30, Carcar City, Cebu, is hereby AFFIRMED in toto.

SO ORDERED.22

Thus, the OSG filed the instant petition raising essentially the same arguments but this
time also advancing the theory that Yap's action had already prescribed.

The Issue

The principal issue before this Court is whether or not the R TC correctly ordered the
cancellation of Decree No. 99500, the re-issuance thereof, and the issuance of the
corresponding Original Certificate of Title covering Lot No. 922.

The Court's Ruling

We deny the petition.

At the threshold, settled is the rule that prescription cannot be raised for the first time on
appeal;23 the general rule being that the appellate court is not authorized to consider
and resolve any question not properly raised in the courts below. 24

In any event, prescription does not lie in the instant case.

There is nothing in the law that

limits the period within which the
court may order or issue a decree

The OSG now postulates that the petition should be denied due to Yap and his
predecessors' failure to file the proper motion to execute Decree No. 99500 as
prescribed under Section 6, Rule 39 of the Rules of Court. 25 It also subscribes that the
petition is now barred by the statute of limitations 26 since nine (9) decades had already
passed after the issuance of the said decree in November 1920 without any action
brought upon by Yap or his predecessors-in-interest. 27

Further, the OSG asseverates that there is no proof that Decree No. 99500 has attained
finality and the decision granting the issuance thereof was not appealed or modified.

The foregoing arguments are specious.

Decree No. 99500 covering Lot No. 922 had been issued on November 29, 1920 by the
Court of First Instance, Province of Cebu pursuant to the court's decision in Cadastral
Case No. 1, GLRO Cadastral Record No. 58.28 The issuance of the said decree creates
a strong presumption that the decision in Cadastral Case No. 1 had become final and
executory. Thus, it is incumbent upon the OSG to prove otherwise. However, no

1109
evidence was presented to support its claims that the decision in Cadastral Case No. 1
and the issuance of Decree No. 99500 had not attained finality.

The fact that the ownership over Lot No. 922 had been confirmed by judicial declaration
several decades ago does not, however, give room for the application of the statute of
limitations or laches, nor bars an application for the re-issuance of the corresponding
decree.

In the landmark case of Sta. Ana v. Menla,29 the Court elucidated the raison d'etre why
the statue of limitations and Section 6, Rule 39 of the Rules of Court do not apply in
land registration proceedings, viz:

We fail to understand the arguments of the appellant in support of the above

assignment, except in so far as it supports his theory that after a decision in a land
registration case has become final, it may not be enforced after the lapse of a period of
10 years, except by another proceeding to enforce the judgment, which may be
enforced within 5 years by motion, and after five years but within 10 years, by an action
(Sec. 6, Rule 39.) This provision of the Rules refers to civil actions and is not applicable
to special proceedings, such as a land registration case. This is so because a party in a
civil action must immediately enforce a judgment that is secured as against the adverse
party, and his failure to act to enforce the same within a reasonable time as provided in
the Rules makes the decision unenforceable against the losing party. In special
proceedings the purpose is to establish a status, condition or fact; in land registration
proceedings, the ownership by a person of a parcel of land is sought to be established.
After the ownership has been proved and confirmed by judicial declaration, no further
proceeding to enforce said ownership is necessary, except when the adverse or losing
party had been in possession of the land and the winning party desires to oust him
therefrom.

Furthermore, there is no provision in the Land Registration Act similar to Sec. 6, Rule
39, regarding the execution of a judgment in a civil action, except the proceedings to
place the winner in possession by virtue of a writ of possession. The decision in a land
registration case, unless the adverse or losing party is in possession, becomes final
without any further action, upon the expiration of the period for perfecting an appeal.

The third assignment of error is as follows:

THAT THE LOWER COURT ERRED IN ORDERING THE ISSUANCE OF A DECREE

OF REGISTRATION IN THE NAMES OF THE OPPOSITORS-APPELLEES BASED ON
A DECISION WIDCH HAS ALLEGEDLY NOT YET BECOME FINAL, AND IN ANY
CASE ON A DECISION THAT HAS BEEN BARRED BY THE STATUTE OF
LIMITATIONS.

We also find no merit in the above contention. There is nothing in the law that limits the
period within which the court may order or issue a decree. The reason is what is stated
in the consideration of the second assignment error, that the judgment is merely

1110
declaratory in character and does not need to be asserted or enforced against the
adverse party. Furthermore, the issuance of a decree is a ministerial duty both of the
judge and of the Land Registration Commission; failure of the court or of the clerk to
issue the decree for the reason that no motion therefore has been filed cannot prejudice
the owner, or the person in whom the land is ordered to be registered. (Emphasis
supplied)

The foregoing pronouncements were echoed in Heirs of Cristobal Marcos v. de

Banuvar30 and reiterated by the Court in the more recent Ting v. Heirs of Diego
Lirio31 wherein We ruled that a final judgment confirming land title and ordering its
registration constitutes res judicata against the whole world and the adjudicate need not
file a motion to execute the same, thus:

In a registration proceeding instituted for the registration of a private land, with or

without opposition, the judgment of the court confirming the title of the applicant or
oppositor, as the case may be, and ordering its registration in his name constitutes,
when final, res judicata against the whole world. It becomes final when no appeal within
the reglementary period is taken from a judgment of confirmation and registration.

The land registration proceedings being in rem, the land registration court's approval in
LRC No. N-983 of spouses Diego Lirio and Flora Atienza's application for registration of
the lot settled its ownership, and is binding on the whole world including petitioner.

xx xx

The December 10, 1976 decision became "extinct" in light of the failure of respondents
and/or of their predecessors-in-interest to execute the same within the prescriptive
period, the same does not lie.

For the past decades, the Sta. Ana doctrine on the inapplicability of the rules on
prescription and lacl1es to land registration cases has been repeatedly affirmed.
Clearly, the peculiar procedure provided in the Property Registration Law 32 from the
time decisions in land registration cases become final is complete in itself and does not
need to be filled in. From another perspective, the judgment does not have to be
executed by motion or enforced by action within the purview of Rule 39 of the 1997
Rules of Civil Procedure.33

The propriety of cancellation and reissuance

of Decree No. 99500, to
serve as basis for the issuance of an
OCT covering Lot No. 922, had been
sufficiently proven in the instant case

The OSG maintains that even assuming that Yap's petition is not barred by the statute
of limitations, the re-issuance of Decree No. 99500 is still improper due to the total lack
of evidence presented before the court. 34

1111
We disagree.

At the outset, the Court need not belabor itself by enumerating and discussing in detail,
yet again, the pieces of evidence proffered in the instant case. This matter had already
been passed upon and settled by the courts a quo and it is not our function to analyze
or weigh evidence all over again. Yet, even if We take a second look at the facts of the
case, the Court is still inclined to deny the petition.

Records show that Yap sufficiently established that Decree No. 99500 was issued on
November 29, 1920 in the name of Andres Abellana, as Administrator of the Estate of
Juan Rodriguez. Further, it was also proven during the proceedings before the court
that no OCT was ever issued covering the said lot. In this regard, Section 39 of
Presidential Decree No. 152935 or the "Property Registration Decree" provides that the
original certificate of title shall be a true copy of the decree of registration. There is,
therefore, a need to cancel the old decree and a new one issued in order for the decree
and the OCT to be exact replicas of each other.

In Republic v. Heirs of Sanchez,36 the Court enunciated the necessity of the petition for
cancellation of the old decree and its re-issuance, if no OCT had been issued pursuant
to the old decree:

1. Under the premises, the correct proceeding is a petition for cancellation of the old
decree, re-issuance of decree and for issuance of OCT pursuant to that re-issued
decree.

In the landmark decision of Teofilo Cacho vs. Court of Appeals, et al., G.R No. 123361,
March 3, 1997, our Supreme Court had affirmed the efficacy of filing a petition for
cancellation of the old decree; the reissuance of such decree and the issuance of OCT
corresponding to that reissued decree.

"Thus, petitioner filed an omnibus motion for leave of court to file and to admit amended
petition, but this was denied. Petitioner elevated the matter to his Court (docketed
as Teofilo Cacho vs. Hon. Manindiara P. Mangotara, G.R. No. 85495) but we resolved
to remand the case to the lower court, ordering the latter to accept the amended petition
and to hear it as one for reissuance of decree under the following guidelines:

Considering the doctrines in Sta. Ana vs. Menla, 1 SCRA 1297 (1961) and Heirs of
Cristobal Marcos vs. de Banuvar, 25 SCRA 315 [1968], and the lower court findings that
the decrees had in fact been issued, the omnibus motion should have been heard as a
motion to reissue the decrees in order to have a basis for the issuance of the titles and
the respondents being heard in their opposition.

Considering the foregoing, we resolve to order the lower court to accept the amended
petition subject to the private respondent's being given the opportunity to answer and to
present their defenses. The evidence already on record shall be allowed to stand but
opportunity to controvert existing evidence shall be given the parties."

1112
Following the principle laid down in the above-quoted case, a question may be asked:
Why should a decree be canceled and re-issued when the same is valid and intact?
Within the context of this discussion, there is no dispute that a decree has been validly
issued. And in fact, in some instances, a copy of such decree is intact. What is not
known is whether or not an OCT is issued pursuant to that decree. If such decree is
valid, why is there a need to have it cancelled and re-issued?

Again, we invite you back to the highlighted provision of Section 39 of PD 1529 which
states that: "The original certificate of title shall be a true copy of the decree of
registration." This provision is significant because it contemplates an OCT which is an
exact replica of the decree. If the old decree will not be canceled and no new decree
issued, the corresponding OCT issued today will bear the signature of the present
Administrator while the decree upon which it was based shall bear the signature of the
past Administrator. This is not consistent with the clear intention of the law which states
that the OCT shall be true copy of the decree of registration. Ostensibly, therefore, the
cancellation of the old decree and the issuance of a new one is necessary.

xx xx

4. The heirs of the original adjudicate may file the petition in representation of the
decedent and the re-issued decree shall still be under the name of the original
adjudicate.

It is a well settled rule that succession operates upon the death of the decedent. The
heirs shall then succeed into the shoes of the decedent. The heirs shall have the legal
interest in the property, thus, they cannot be prohibited from filing the necessary
petition.

As the term connotes, a mere re-issuance of the decree means that the new decree
shall be issued which shall, in all respects, be the same as that of the original decree.
Nothing in the said decree shall be amended nor modified; hence, it must be under the
name of the original adjudicate. (Emphasis and underscoring in the original)

Based from the foregoing, the R TC correctly ordered the cancellation of Decree No.
99500, the re-issuance thereof, and the issuance of the corresponding OCT covering
Lot No. 922 in the name of its original adjudicate, Andres Abellana, as Administrator of
the Estate of Juan Rodriguez.

Verily, this Court sees no reason to overturn the factual findings and the ruling of the
CA. Petitioner failed to show that the CA's decision was arbitrarily made or that
evidence on record was disregarded.

IN VIEW OF THE FOREGOING, the petition is DENIED. The Decision dated March 16,
2017 of the Court of Appeals in CA-G.R. CV No. 05491 is hereby AFFIRMED.

SO ORDERED.

1113
 SECOND DIVISION

G.R. No. 187512               June 13, 2012

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
YOLANDA CADACIO GRANADA, Respondent.

DECISION

SERENO, J.:

This is a Rule 45 Petition seeking the reversal of the Resolutions dated 23 January
20091 and 3 April 20092 issued by the Court of Appeals (CA), which affirmed the grant by
the Regional Trial Court (RTC) of the Petition for Declaration of Presumptive Death of
the absent spouse of respondent.

In May 1991, respondent Yolanda Cadacio Granada (Yolanda) met Cyrus Granada
(Cyrus) at Sumida Electric Philippines, an electronics company in Paranaque where
both were then working. The two eventually got married at the Manila City Hall on 3
March 1993. Their marriage resulted in the birth of their son, Cyborg Dean Cadacio
Granada.

Sometime in May 1994, when Sumida Electric Philippines closed down, Cyrus went to
Taiwan to seek employment. Yolanda claimed that from that time, she had not received
any communication from her husband, notwithstanding efforts to locate him. Her brother
testified that he had asked the relatives of Cyrus regarding the latter’s whereabouts, to
no avail.

After nine (9) years of waiting, Yolanda filed a Petition to have Cyrus declared
presumptively dead. The Petition was raffled to Presiding Judge Avelino Demetria of
RTC Branch 85, Lipa City, and was docketed as Sp. Proc. No. 2002-0530.

On 7 February 2005, the RTC rendered a Decision declaring Cyrus as presumptively

dead.

On 10 March 2005, petitioner Republic of the Philippines, represented by the Office of

the Solicitor General (OSG), filed a Motion for Reconsideration of this Decision.
Petitioner argued that Yolanda had failed to exert earnest efforts to locate Cyrus and
thus failed to prove her well-founded belief that he was already dead. However, in an
Order dated 29 June 2007, the RTC denied the motion.

Petitioner filed a Notice of Appeal to elevate the case to the CA, presumably under Rule
41, Section 2(a) of the Rules of Court. Yolanda filed a Motion to Dismiss on the ground
that the CA had no jurisdiction over the appeal. She argued that her Petition for
Declaration of Presumptive Death, based on Article 41 of the Family Code, was a

1114
summary judicial proceeding, in which the judgment is immediately final and executory
and, thus, not appealable.

In its 23 January 2009 Resolution, the appellate court granted Yolanda’s Motion to
Dismiss on the ground of lack of jurisdiction. Citing Republic v. Bermudez-Lorino, 3 the
CA ruled that a petition for declaration of presumptive death under Rule 41 of the Family
Code is a summary proceeding. Thus, judgment thereon is immediately final and
executory upon notice to the parties.

Petitioner moved for reconsideration, but its motion was likewise denied by the CA in a
Resolution dated 3 April 2009.4

Hence, the present Rule 45 Petition.

Issues

1. Whether the CA seriously erred in dismissing the Petition on the ground that
the Decision of the RTC in a summary proceeding for the declaration of
presumptive death is immediately final and executory upon notice to the parties
and, hence, is not subject to ordinary appeal

2. Whether the CA seriously erred in affirming the RTC’s grant of the Petition for
Declaration of Presumptive Death under Article 41 of the Family Code based on
the evidence that respondent presented

Our Ruling

1. On whether the CA seriously erred in dismissing the Petition on the ground that the
Decision of the RTC in a summary proceeding for the declaration of presumptive death
is immediately final and executory upon notice to the parties and, hence, is not subject
to ordinary appeal

In the assailed Resolution dated 23 January 2009, the CA dismissed the Petition
assailing the RTC’s grant of the Petition for Declaration of Presumptive Death of the
absent spouse under Article 41 of the Family Code. Citing Republic v. Bermudez-
Lorino,5 the appellate court noted that a petition for declaration of presumptive death for
the purpose of remarriage is a summary judicial proceeding under the Family Code.
Hence, the RTC Decision therein is immediately final and executory upon notice to the
parties, by express provision of Article 247 of the same Code. The decision is therefore
not subject to ordinary appeal, and the attempt to question it through a Notice of Appeal
is unavailing.

We affirm the CA ruling.

Article 41 of the Family Code provides:

1115
Art. 41. A marriage contracted by any person during the subsistence of a previous
marriage shall be null and void, unless before the celebration of the subsequent
marriage, the prior spouse had been absent for four consecutive years and the spouse
present has a well-founded belief that the absent spouse was already dead. In case of
disappearance where there is danger of death under the circumstances set forth in the
provisions of Article 391 of the Civil Code, an absence of only two years shall be
sufficient.

For the purpose of contracting the subsequent marriage under the preceding paragraph
the spouse present must institute a summary proceeding as provided in this Code for
the declaration of presumptive death of the absentee, without prejudice to the effect of
reappearance of the absent spouse. (Underscoring supplied.)

Clearly, a petition for declaration of presumptive death of an absent spouse for the
purpose of contracting a subsequent marriage under Article 41 of the Family Code is a
summary proceeding "as provided for" under the Family Code.

Further, Title XI of the Family Code is entitled "Summary Judicial Proceedings in the
Family Law." Subsumed thereunder are Articles 238 and 247, which provide:

Art. 238. Until modified by the Supreme Court, the procedural rules in this Title shall
apply in all cases provided for in this Code requiring summary court proceedings. Such
cases shall be decided in an expeditious manner without regard to technical rules.

x x x           x x x          x x x

Art. 247. The judgment of the court shall be immediately final and executory.

Further, Article 253 of the Family Code reads:

ART. 253. The foregoing rules in Chapters 2 and 3 hereof shall likewise govern
summary proceedings filed under Articles 41, 51, 69, 73, 96, 124 and 217, insofar as
they are applicable.

Taken together, Articles 41, 238, 247 and 253 of the Family Code provide that since a
petition for declaration of presumptive death is a summary proceeding, the judgment of
the court therein shall be immediately final and executory.

In Republic v. Bermudez-Lorino,6 the Republic likewise appealed the CA’s affirmation of

the RTC’s grant of respondent’s Petition for Declaration of Presumptive Death of her
absent spouse. The Court therein held that it was an error for the Republic to file a
Notice of Appeal when the latter elevated the matter to the CA, to wit:

In Summary Judicial Proceedings under the Family Code, there is no reglementary

period within which to perfect an appeal, precisely because judgments rendered

1116
thereunder, by express provision of Section 247, Family Code, supra, are "immediately
final and executory."

x x x           x x x          x x x

But, if only to set the records straight and for the future guidance of the bench and the
bar, let it be stated that the RTC’s decision dated November 7, 2001, was immediately
final and executory upon notice to the parties. It was erroneous for the OSG to file a
notice of appeal, and for the RTC to give due course thereto. The Court of Appeals
acquired no jurisdiction over the case, and should have dismissed the appeal outright
on that ground.

Justice (later Chief Justice) Artemio Panganiban, who concurred in the result reached
by the Court in Republic v. Bermudez-Lorino, additionally opined that what the OSG
should have filed was a petition for certiorari under Rule 65, not a petition for review
under Rule 45.

In the present case, the Republic argues that Bermudez-Lorino has been superseded
by the subsequent Decision of the Court in Republic v. Jomoc, 7 issued a few months
later.

In Jomoc, the RTC granted respondent’s Petition for Declaration of Presumptive Death
of her absent husband for the purpose of remarriage. Petitioner Republic appealed the
RTC Decision by filing a Notice of Appeal. The trial court disapproved the Notice of
Appeal on the ground that, under the Rules of Court, 8 a record on appeal is required to
be filed when appealing special proceedings cases. The CA affirmed the RTC ruling. In
reversing the CA, this Court clarified that while an action for declaration of death or
absence under Rule 72, Section 1(m), expressly falls under the category of special
proceedings, a petition for declaration of presumptive death under Article 41 of the
Family Code is a summary proceeding, as provided for by Article 238 of the same
Code. Since its purpose was to enable her to contract a subsequent valid marriage,
petitioner’s action was a summary proceeding based on Article 41 of the Family Code,
rather than a special proceeding under Rule 72 of the Rules of Court. Considering that
this action was not a special proceeding, petitioner was not required to file a record on
appeal when it appealed the RTC Decision to the CA.

We do not agree with the Republic’s argument that Republic v. Jomoc superseded our
ruling in Republic v. Bermudez-Lorino. As observed by the CA, the Supreme Court in
Jomoc did not expound on the characteristics of a summary proceeding under the
Family Code. In contrast, the Court in Bermudez-Lorino expressly stated that its ruling
on the impropriety of an ordinary appeal as a vehicle for questioning the trial court’s
Decision in a summary proceeding for declaration of presumptive death under Article 41
of the Family Code was intended "to set the records straight and for the future guidance
of the bench and the bar."

1117
At any rate, four years after Jomoc, this Court settled the rule regarding appeal of
judgments rendered in summary proceedings under the Family Code when it ruled in
Republic v. Tango:9

This case presents an opportunity for us to settle the rule on appeal of judgments
rendered in summary proceedings under the Family Code and accordingly, refine our
previous decisions thereon.

Article 238 of the Family Code, under Title XI: SUMMARY JUDICIAL PROCEEDINGS
IN THE FAMILY LAW, establishes the rules that govern summary court proceedings in
the Family Code:

ART. 238. Until modified by the Supreme Court, the procedural rules in this Title shall
apply in all cases provided for in this Code requiring summary court proceedings. Such
cases shall be decided in an expeditious manner without regard to technical rules.

In turn, Article 253 of the Family Code specifies the cases covered by the rules in
chapters two and three of the same title. It states:

ART. 253. The foregoing rules in Chapters 2 and 3 hereof shall likewise govern
summary proceedings filed under Articles 41, 51, 69, 73, 96, 124 and 217, insofar as
they are applicable. (Emphasis supplied.)

In plain text, Article 247 in Chapter 2 of the same title reads:

ART 247. The judgment of the court shall be immediately final and executory.

By express provision of law, the judgment of the court in a summary proceeding shall be
immediately final and executory. As a matter of course, it follows that no appeal can be
had of the trial court's judgment in a summary proceeding for the declaration of
presumptive death of an absent spouse under Article 41 of the Family Code. It goes
without saying, however, that an aggrieved party may file a petition for certiorari to
question abuse of discretion amounting to lack of jurisdiction. Such petition should be
filed in the Court of Appeals in accordance with the Doctrine of Hierarchy of Courts. To
be sure, even if the Court's original jurisdiction to issue a writ of certiorari is concurrent
with the RTCs and the Court of Appeals in certain cases, such concurrence does not
sanction an unrestricted freedom of choice of court forum. From the decision of the
Court of Appeals, the losing party may then file a petition for review on certiorari under
Rule 45 of the Rules of Court with the Supreme Court. This is because the errors which
the court may commit in the exercise of jurisdiction are merely errors of judgment which
are the proper subject of an appeal.

In sum, under Article 41 of the Family Code, the losing party in a summary proceeding
for the declaration of presumptive death may file a petition for certiorari with the CA on
the ground that, in rendering judgment thereon, the trial court committed grave abuse of
discretion amounting to lack of jurisdiction. From the decision of the CA, the aggrieved

1118
party may elevate the matter to this Court via a petition for review on certiorari under
Rule 45 of the Rules of Court.

Evidently then, the CA did not commit any error in dismissing the Republic’s Notice of
Appeal on the ground that the RTC judgment on the Petition for Declaration of
Presumptive Death of respondent’s spouse was immediately final and executory and,
hence, not subject to ordinary appeal.

2. On whether the CA seriously erred in affirming the RTC’s grant of the Petition for
Declaration of Presumptive Death under Article 41 of the Family Code based on the
evidence that respondent had presented

Petitioner also assails the RTC’s grant of the Petition for Declaration of Presumptive
Death of the absent spouse of respondent on the ground that she had not adduced the
evidence required to establish a well-founded belief that her absent spouse was already
dead, as expressly required by Article 41 of the Family Code. Petitioner cites Republic
v. Nolasco,10 United States v. Biasbas11 and Republic v. Court of Appeals and
Alegro12 as authorities on the subject.

In Nolasco, petitioner Republic sought the reversal of the CA’s affirmation of the RTC’s
grant of respondent’s Petition for Declaration of Presumptive Death of his absent
spouse, a British subject who left their home in the Philippines soon after giving birth to
their son while respondent was on board a vessel working as a seafarer. Petitioner
Republic sought the reversal of the ruling on the ground that respondent was not able to
establish his "well-founded belief that the absentee is already dead," as required by
Article 41 of the Family Code. In ruling thereon, this Court recognized that this provision
imposes more stringent requirements than does Article 83 of the Civil Code. 13 The Civil
Code provision merely requires either that there be no news that the absentee is still
alive; or that the absentee is generally considered to be dead and is believed to be so
by the spouse present, or is presumed dead under Articles 390 and 391 of the Civil
Code. In comparison, the Family Code provision prescribes a "well-founded belief" that
the absentee is already dead before a petition for declaration of presumptive death can
be granted. As noted by the Court in that case, the four requisites for the declaration of
presumptive death under the Family Code are as follows:

1. That the absent spouse has been missing for four consecutive years, or two
consecutive years if the disappearance occurred where there is danger of death
under the circumstances laid down in Article 391, Civil Code;

2. That the present spouse wishes to remarry;

3. That the present spouse has a well-founded belief that the absentee is dead;
and

4. That the present spouse files a summary proceeding for the declaration of
presumptive death of the absentee.

1119
In evaluating whether the present spouse has been able to prove the existence of a
"well-founded belief" that the absent spouse is already dead, the Court in Nolasco cited
United States v. Biasbas,14 which it found to be instructive as to the diligence required in
searching for a missing spouse.

In Biasbas, the Court held that defendant Biasbas failed to exercise due diligence in
ascertaining the whereabouts of his first wife, considering his admission that that he
only had a suspicion that she was dead, and that the only basis of that suspicion was
the fact of her absence.

Similarly, in Republic v. Court of Appeals and Alegro, petitioner Republic sought the
reversal of the CA ruling affirming the RTC’s grant of the Petition for Declaration of
Presumptive Death of the absent spouse on the ground that the respondent therein had
not been able to prove a "well-founded belief" that his spouse was already dead. The
Court reversed the CA, granted the Petition, and provided the following criteria for
determining the existence of a "well-founded belief" under Article 41 of the Family Code:

For the purpose of contracting the subsequent marriage under the preceding paragraph,
the spouse present must institute a summary proceeding as provided in this Code for
the declaration of presumptive death of the absentee, without prejudice to the effect of
reappearance of the absent spouse.

The spouse present is, thus, burdened to prove that his spouse has been absent and
that he has a well-founded belief that the absent spouse is already dead before the
present spouse may contract a subsequent marriage. The law does not define what is
meant by a well-grounded belief. Cuello Callon writes that "es menester que su creencia
sea firme se funde en motivos racionales."

Belief is a state of the mind or condition prompting the doing of an overt act.1âwphi1 It
may be proved by direct evidence or circumstantial evidence which may tend, even in a
slight degree, to elucidate the inquiry or assist to a determination probably founded in
truth. Any fact or circumstance relating to the character, habits, conditions, attachments,
prosperity and objects of life which usually control the conduct of men, and are the
motives of their actions, was, so far as it tends to explain or characterize their
disappearance or throw light on their intentions, competence [sic] evidence on the
ultimate question of his death.

The belief of the present spouse must be the result of proper and honest to goodness
inquiries and efforts to ascertain the whereabouts of the absent spouse and whether the
absent spouse is still alive or is already dead. Whether or not the spouse present acted
on a well-founded belief of death of the absent spouse depends upon the inquiries to be
drawn from a great many circumstances occurring before and after the disappearance
of the absent spouse and the nature and extent of the inquiries made by present
spouse. (Footnotes omitted, underscoring supplied.)

1120
Applying the foregoing standards to the present case, petitioner points out that
respondent Yolanda did not initiate a diligent search to locate her absent husband.
While her brother Diosdado Cadacio testified to having inquired about the whereabouts
of Cyrus from the latter’s relatives, these relatives were not presented to corroborate
Diosdado’s testimony. In short, respondent was allegedly not diligent in her search for
her husband. Petitioner argues that if she were, she would have sought information
from the Taiwanese Consular Office or assistance from other government agencies in
Taiwan or the Philippines. She could have also utilized mass media for this end, but she
did not. Worse, she failed to explain these omissions.

The Republic’s arguments are well-taken. Nevertheless, we are constrained to deny the
Petition.

The RTC ruling on the issue of whether respondent was able to prove her "well-founded
belief" that her absent spouse was already dead prior to her filing of the Petition to
declare him presumptively dead is already final and can no longer be modified or
reversed. Indeed, "[n]othing is more settled in law than that when a judgment becomes
final and executory, it becomes immutable and unalterable. The same may no longer be
modified in any respect, even if the modification is meant to correct what is perceived to
be an erroneous conclusion of fact or law." 15

WHEREFORE, premises considered, the assailed Resolutions of the Court of Appeals

dated 23 January 2009 and 3 April 2009 in CA-G.R. CV No. 90165 are AFFIRMED.

SO ORDERED.

SECOND DIVISION

G.R. No. 195443, September 17, 2014

JUANARIO G. CAMPIT, Petitioner, v. ISIDRA B. GRIPA, PEDRO BARDIAGA, AND

SEVERINO BARDIAGA, REPRESENTED BY HIS SON ROLANDO
BARDIAGA, Respondents.

DECISION

BRION, J.:

We review in this petition for review on certiorari1 the decision2 dated May 13, 2010 and
resolution3 dated January 27, 2011 of the Court of Appeals (CA) in CA-G.R. CV No.
92356.  The CA dismissed the appeal filed by petitioner Juanario Campit to the
decision4 of the Regional Trial Court (RTC), Branch 38, Lingayen, Pangasinan, which
ordered him to surrender a Transfer Certificate of Title (TCT) that was found to have
been fraudulently issued in his name.

Factual Antecedents

1121
Subject of this case is a 2.7360-hectare agricultural land situated in Umangan,
Mangatarem, Pangasinan, presently occupied by  respondents Isidra B. Gripa, Pedro
Bardiaga, and Severino Bardiaga, represented by his son Rolando Bardiaga, but
covered by TCT No. 122237 issued in the petitioner’s name. 5   The petitioner claimed to
have purchased the property from his father Jose Campit in 1977. 6cralawlawlibrary

On the other hand, respondents Isidra Gripa, Pedro Bardiaga and Severino Bardiaga
(as represented by his son, Rolando Bardiaga) claimed to be the rightful owners of the
subject property, as earlier adjudged by the court in Civil Case No. 11858 decided on
June 12, 1961, and in Civil Case No. 15357 decided on August 8,
1978.7cralawlawlibrary

The Court, in these cases, cancelled the titles of the petitioner and his father Jose
because they were obtained through the misrepresentation of the petitioner’s
grandfather, Isidro Campit.8   The respondents further contended that they have long
desired to divide the subject property among themselves, but the petitioner adamantly
refused to surrender his title to the property to them, or to the Register of Deeds,
despite their formal demand.9cralawlawlibrary

Due to the petitioner’s continued refusal to surrender the subject TCT, the respondents
filed anew an action for annulment and cancellation of title with the RTC on August 15,
2003, docketed as Civil Case No. 18421.10cralawlawlibrary

The petitioner opposed the respondents’ action and argued that the August 8, 1978
decision in Civil Case No. 15357, which declared his title null and void, could no longer
be enforced because its execution was already barred by the Statute of Limitations, as
the said decision was never executed within 10 years from July 19, 1979 - the date of
finality of the judgment.11cralawlawlibrary

Noting that the action filed by the respondents was not one for revival of judgment, the
RTC proceeded to hear the case and, in a decision dated August 13, 2008, ruled in the
respondents’ favor, in this wise:chanRoblesvirtualLawlibrary

WHEREFORE, considering that the Transfer of Certificate of Title No. 122237 issued in
the name of defendant Juanario Campit had earlier been declared null and void in the
decision of the Court of First Instance of Pangasinan (sic) Civil Case No. 15357,
judgment is hereby rendered in favor of the plaintiffs, as
follows:chanroblesvirtuallawlibrary
a) Ordering the defendant Juanario Campit to surrender the said Transfer of
Certificate of Title No. 122237 within a period of fifteen (15) days from finality of this
decision to the Register of (sic) Pangasinan for its cancellation;
b) Ordering the Register of Deeds of Pangasinan to cancel TCT No. 122237 in the
event that Juanario Campit fails to surrender the same within the period given to
him, and to revive the title issued in the name of Mariano Campit.

1122
Costs against the defendant.

SO ORDERED.

On appeal, the CA, in a decision dated May 13, 2010, affirmed the RTC and held
that:chanRoblesvirtualLawlibrary

Not being the true owner of the subject property, the subsequent issuance of a
certificate of title to the defendant-appellant does not vest him ownership over the
subject land. Registration of real property under the Torrens System does not create or
vest title because it is not a mode of acquiring ownership.

The petitioner moved to reconsider, but the CA denied his motion in a resolution dated
January 27, 2011, hence, the filing of the present petition for review on certiorari with
this Court.

The Petition

In his petition before this Court, the petitioner argues that his title to the subject property
must prevail not only because the August 8, 1978 decision in Civil Case No. 15357,
which declared his title null and void, was never executed, but also because, under the
Torrens system of registration, a certificate of title is an indefeasible and incontrovertible
proof of ownership of the person, in whose favor it was issued, over the land described
therein.  He now contends that he had acquired the property in good faith and for
valuable consideration and, thus, entitled to own and possess the subject property.

Our Ruling

We find no merit in the petitioner’s arguments.

The issue on the validity of the petitioner’s title to the subject property has long been
settled in Civil Case No. 15357, where the court, in its decision dated August 8, 1978,
which became final and executory on July 19, 1979, had found and declared the
petitioner’s title null and void by reason of fraud and misrepresentation.

A matter adjudged with finality by a competent court having jurisdiction over the parties
and the subject matter already constitutes res judicata in another action involving the
same cause of action, parties and subject matter.  The doctrine of res judicata provides
that a final judgment on the merits rendered by a court of competent jurisdiction, is
conclusive as to the rights of the parties and their privies and constitutes as an absolute
bar to subsequent actions involving the same claim, demand, or cause of
action.12   Thus, the validity of petitioner’s title, having been settled with finality in
Civil Case No. 15357, could no longer be reviewed in the present case.

The August 8, 1978 decision in Civil Case No. 15357, however, was not executed or
enforced within the time allowed under the law.  Under Section 6, Rule 39 of the Rules

1123
of Court, a final and executory judgment may be executed by the prevailing party as a
matter of right by mere motion within five (5) years from the entry of judgment, failing
which the judgment is reduced to a mere right of action which must be enforced by the
institution of a complaint in a regular court within ten (10) years from finality of the
judgment.13cralawlawlibrary

It appears that no motion or action to revive judgment was ever filed by the respondents
- the prevailing party in Civil Case No. 15357, to execute and enforce the August 8,
1978 decision.  The title to the subject property, therefore, remained registered under
the petitioner’s name.  As the petitioner argued, his title had already become
incontrovertible since the Torrens system of land registration provides for the
indefeasibility of the decree of registration and the certificate of title issued upon the
expiration of one (1) year from the date of entry of the registration
decree.14cralawlawlibrary

We cannot, however, allow the petitioner to maintain his title and benefit from the fruit of
his and his predecessors’ fraudulent acts at the expense of the respondents who are
the rightful owners of the subject property. The Torrens system of registration cannot
be used to protect a usurper from the true owner, nor can it be used as a shield
for the commission of fraud, or to permit one to enrich oneself at the expense of
others.15cralawlawlibrary

Notwithstanding the indefeasibility of the Torrens title, the registered owner can still be
compelled under the law to reconvey the property registered to the rightful
owner16 under the principle that the property registered is deemed to be held in trust for
the real owner by the person in whose name it is registered. 17   The party seeking to
recover title to property wrongfully registered in another person’s name must file an
action for reconveyance within the allowed period of time.

An action for reconveyance based on an implied or constructive trust prescribes in ten

(10) years from the issuance of the Torrens title over the property. 18   There is, however,
an exception to this rule where the filing of such action does not prescribe, i.e. when
the plaintiff is in possession of the subject property, the action, being in effect
that of quieting of title to the property, does not prescribe. 19cralawlawlibrary

In the present case, the respondents, who are the plaintiffs in Civil Case No. 18421 (the
action for annulment and cancellation of title filed in 2013), have always been in
possession of the subject property. Worth noting are the CA’s findings on this
respect:chanRoblesvirtualLawlibrary

xxx Of course, the defendant-appellant (petitioner herein) has a certificate of title in his
favor. But it cannot be denied that he has never been in possession of the subject
property. Neither did he exercise acts of ownership over the said land since the time he
allegedly purchased it from his father in 1977. Similarly, the defendant-appellant was
not able to show that his predecessor-in-interest, Jose Campit, claimed ownership or
was ever in possession of the said land. The defendant-appellant has admitted that he

1124
has paid realty tax covering the subject land only once when he applied for the issuance
of title in his favor.

xxxx

On the other hand, the continuous possession of the subject premises by the

plaintiffs-appellees has not been denied or disputed by the defendants-appellants
(sic). The possession in the concept of an owner by the plaintiffs-appellees has also
been confirmed by witness Charlie Martin.20 (Emphasis ours)

Considering that the action for annulment and cancellation of title filed by the
respondents is substantially in the nature of an action for reconveyance based on an
implied or constructive trust, combined with the fact that the respondents have always
been in possession of the subject property, we shall treat Civil Case No. 18421 as an
action to quiet title, the filing of which does not prescribe.  Thus, we find the
respondents’ filing of Civil Case No.18421 to be proper and not barred by the time
limitations set forth under the Rules of Court in enforcing or executing a final and
executory judgment.

WHEREFORE, premises considered, we DENY the present petition for review

on certiorari and consequently AFFIRM the decision dated May 13, 2010 and resolution
dated January 27, 2011 of the Court of Appeals in CA-G.R. CV No. 92356.

Costs against petitioner Juanario G. Campit.

SO ORDERED.cralawred

THIRD DIVISION

G.R. Nos. 191370-71, August 10, 2015

RODOLFO BASILONIA, LEODEGARIO CATALAN AND JOHN

BASILONIA, Petitioners, v. HON. DELANO F. VLLLARUZ, ACTING IN HIS
CAPACITY AS PRESIDING JUDGE OF THE REGIONAL TRIAL COURT, ROXAS
CITY, BRANCH 16, AND DIXON ROBLETE, Respondents.

DECISION

PERALTA, J.:

The lone issue for resolution in this petition for certiorari under Rule 65 of the 1997
Revised Rules of Civil Procedure (Rules) with prayer for the issuance of preliminary
injunction and/or temporary restraining order is the applicability of Section 6, Rule 39 of
the Rules in criminal cases. Specifically, does a trial court have jurisdiction to grant a
motion for execution which was filed almost twenty (20) years after the date of entry of
judgment? In his Orders dated December 3, 2009 1 and January 4, 2010,2 respondent

1125
Judge Delano F. Vi11aruz of the Regional Trial Court (RTC), Roxas City, Branch 16,
held in the affirmative.3 We sustain in part.

The Facts

On June 19, 1987, a Decision4 was promulgated against petitioners in Criminal Case

Nos. 1773, 1774 and 1775, the dispositive portion of which states:LawlibraryofCRAlaw

WHEREFORE, and in view of the foregoing considerations, this court finds the
[accused] Rodolfo Basilonia, Leodegario Catalan, and John "Jojo" Basilonia, GUILTY
BEYOND REASONABLE DOUBT, as principals in Criminal Case No. 1773 for the
murder of Atty. Isagani Roblete on September 15, 1983 in Roxas City, Philippines,
defined under Article 248 of the Revised Penal Code of the Philippines, without any
aggravating or mitigating circumstance, and sentences the said [accused] to suffer an
indeterminate sentence of 12 years, 1 month and 1 day of reclusion temporal as
minimum, to 20 years, and 1 day of reclusion temporal as maximum, and the accessory
penalties thereto; to pay and [indemnify], jointly and severally, the heirs of the deceased
Atty. Isagani Roblete the sum of 1!32,100.00 representing funeral expenses, tomb,
burial, and expenses for wake; the sum of 1!30,000.00 as indemnity for the death of
Atty. Isagani Roblete; the amount of lost income cannot be determined as the net
income of the deceased cannot be ascertained; and to pay the costs of suit. [Accused]
Vicente Catalan and Jory Catalan are ACQUITTED for lack of evidence.

In Criminal Case No. 1775 for Frustrated Murder, this court finds the accused John
"Jojo" Basilonia GUlLTY BEYOND REASONABLE DOUBT of the crime of Frustrated
Homicide, as principal, committed against the person of Rene Gonzales on September
15, 1983, defined under Article 249, in relation to Articles 6 and 50 of the Revised Penal
Code and sentences the said accused to suffer an indeterminate sentence of 2 years, 4
months and 1 day of prision [correccional] as minimum, to 6 years, and 1 day of prision
mayor as maximum; and to pay the costs. [Accused] Rodolfo Basilonia, Leodegario
Catalan, Vicente Catalan and Jory Catalan are ACQUITTED for lack of evidence.

In Criminal Case No. 1774 for Illegal Possession of Firearm, all [accused] are
ACQUITTED for insufficiency of evidence.

SO ORDERED.5

Petitioners filed a Notice of Appeal on July 30, 1987, which the trial court granted on
August 3, 1987.6redarclaw

On January 23, 1989, the Court of Appeals (CA) dismissed the appeal for failure of
petitioners to file their brief despite extensions of time given. 7redarclaw

The Resolution was entered in the Book of Entries of Judgment on September 18,
1989.8 Thereafter, the entire case records were remanded to the trial court on October
4, 1989.9redarclaw

1126
Almost two decades passed from the entry of judgment, on May 11, 2009, private
respondent Dixon C. Roblete, claiming to be the son of the deceased victim, Atty.
Roblete, filed a Motion for Execution of Judgment. 10redarclaw

He alleged, among others, that despite his request to the City Prosecutor to file a
motion for execution, the judgment has not been enforced because said prosecutor has
not acted upon his request.

Pursuant to the trial court's directive, the Assistant City Prosecutor filed on May 22,
2009 an Omnibus Motion for Execution of Judgment and Issuance of Warrant of
Arrest.11redarclaw

On July 24, 2009, petitioners filed before the CA a Petition for Relief of Judgment
praying to set aside the June 19, 1987 trial court Decision and the January 23, 1989 CA
Resolution.12 Further, on September 1, 2009, they filed before the trial court a
Manifestation and Supplemental Opposition to private respondent Roblete's
motion.13redarclaw

The trial court granted the motion for execution on December 3, 2009 and ordered the
bondsmen to surrender petitioners within ten (10) days from notice of the Order. The
motion for reconsideration14 filed by petitioners was denied on January 4, 2010.

Due to petitioners' failure to appear in court after the expiration of the period granted to
their bondsmen, the bail for their provisional liberty was ordered forfeited on January 25,
2010.15 On even date, the sheriff issued the writ of execution. 16redarclaw

The Court's Ruling

The determination of whether respondent trial court committed grave abuse of

discretion amounting to lack or excess of jurisdiction in granting a motion for execution
which was filed almost twenty (20) years after a judgment in a criminal case became
final and executory necessarily calls for the resolution of the twin issues of whether the
penalty of imprisonment already prescribed and the civil liability arising from the crime
already extinguished. In both issues, petitioners vehemently assert that respondent trial
court has no more jurisdiction to order the execution of judgment on the basis of Section
6, Rule 39 of the Rules.

We consider the issues separately.

Prescription of Penalty

With respect to the penalty of imprisonment, Act No. 3815, or the Revised Penal Code
(RPC)17 governs. Articles 92 and 93 of which provide:LawlibraryofCRAlaw

ARTICLE 92. When and How Penalties Prescribe. - The penalties imposed by final
sentence prescribe as follows:LawlibraryofCRAlaw

1127
1. Death and reclusion perpetua, in twenty years;
2. Other afflictive penalties, in fifteen years;
3. Correctional penalties, in ten years; with the exception of the penalty of arresto
mayor, which prescribes in five years;
4. Light penalties, in one year.

ARTICLE 93. Computation of the Prescription of Penalties.- The period of prescription

of penalties shall commence to run from the date when the culprit should evade the
service of his sentence, and it shall be interrupted if the defendant should give himself
up, be captured, should go to some foreign country with which this Government has no
extradition treaty, or should commit another crime before the expiration of the period of
prescription.

As early as 1952, in Infante v. Provincial Warden of Negros Occidental,18 the Court

already opined that evasion of service of sentence is an essential element of
prescription of penalties. Later, Tanega v. Masakayan, et al.19 expounded on the rule
that the culprit should escape during the term of imprisonment in order for prescription
of penalty imposed by final sentence to commence to run, thus:LawlibraryofCRAlaw

x x x The period of prescription of penalties- so the succeeding Article 93 provides -

"shall commence to run from the date when the culprit should evade the service of his
sentence."

What then is the concept of evasion of service of sentence? Article 157 of the Revised
Penal Code furnishes the ready answer. Says Article 157:LawlibraryofCRAlaw
ART. 157. Evasion of service of sentence. - The penalty of prision correccional in its
medium and maximum periods shall be imposed upon any convict who shall evade
service of his sentence by escaping during the term of his imprisonment by reason of
final judgment. However, if such evasion or escape shall have taken place by means of
unlawful entry, by breaking doors, windows, gates, walls, roofs, or floors, or by using
picklocks, false keys, disguise, deceit, violence or intimidation, or through connivance
with other convicts or employees of the penal institution, the penalty shall be prision
correccional in its maximum period.

Elements of evasion of service of sentence are: (1) the offender is a convict by final
judgment; (2) he "is serving his sentence which consists in deprivation of liberty"; and
(3) he evades service of sentence by escaping during the term of his sentence. This
must be so. For, by the express terms of the statute, a convict evades "service of his
sentence" by "escaping during the term of his imprisonment by reason of final
judgment." That escape should take place while serving sentence, is emphasized by the
provisions of the second sentence of Article 157 which provides for a higher penalty if
such "evasion or escape shall have taken place by means of unlawful entry, by breaking
doors, windows, gates, walls, roofs, or floors, or by using picklocks, false keys, disguise,
deceit, violence or intimidation, or through connivance with other convicts or employees

1128
of the penal institution, * * *" Indeed, evasion of sentence is but another expression of
the term "jail breaking."
A dig into legal history confirms the views just expressed. The Penal Code of Spain of
1870 in its Article 134 - from whence Articles 92 and 93 of the present Revised Penal
Code originated- reads:LawlibraryofCRAlaw
"Las penas impuestas por sentencia firme prescriben: Las de muerte y cadena
perpetua, a los veinte años.

***

Las leves, al año.

El tiempo de esta prescripcion comenzara a correr desde el dia en que se notifique

personalmente al reo la sentencia firme, o desde el quebrantamiento de la condena, si
hubiera esta comenzado a cumplirse. * * *" Note that in the present Article 93 the words
"desde el dia en que se notifique personalmente al reo la sentencia firme", written in the
old code, were deleted. The omission is significant. What remains reproduced in Article
93 of the Revised Penal Code is solely "quebrantamiento de Ia condena". And,
"quebrantamiento" or "evasion" means escape. Reason dictates that one can escape
only after he has started service of sentence.

Even under the old law, Viada emphasizes, where the penalty consists of imprisonment,
prescription shall only begin to run when he escapes from confinement. Says
Viada:LawlibraryofCRAlaw
"El tiempo de la prescripcion empieza a contarse desde el dia en que ha tenido Iugar la
notificacion personal de la sentencia firme al reo: el Codigo de 1850 no expresaba que
la notificacion hubiese de ser personal, pues en su art. 126 se consigna que el termino
de Ia prescripcion se cuenta desde que se notifique la sentencia, causa de la ejecutoria
en que se imponga le pena respectiva. Luego ausente el reo, ya no podra prescribir
hoy Ia pena, pues que Ia notificacion personal no puede ser sup/ida por Ia notificacion
hecha en estrados. Dada la imprescindible necesidad del requisito de la notificacion
personal, es obvio que en las penas que consisten en privacion de libertad solo podra
existir Ia prescripcion quebrantando el reo Ia condena, pues que si no se hallare ya
preso preventivamente, debera siempre procederse a su encerrarniento en el acto de
serle notificada personalmente la sentencia."
We, therefore, rule that for prescription of penalty of imprisonment imposed by final
sentence to commence to run, the culprit should escape during the term of such
imprisonment.20

Following Tanega, Del Castillo v. Hon. Torrecampo21 held that one who has not been
committed to prison cannot be said to have escaped therefrom. We agree with the
position of the Solicitor General that "escape" in legal parlance and for purposes of
Articles 93 and 157 of the RPC means unlawful departure of prisoner from the limits of
his custody.

Of more recent vintage is Our pronouncements in Pangan v. Hon. Gatbalite,22 which

1129
cited Tanega and Del Castillo, that the prescription of penalties found in Article 93 of the
RPC applies only to those who are convicted by final judgment and are serving
sentence which consists in deprivation of liberty, and that the period for prescription of
penalties begins only when the convict evades service of sentence by escaping during
the term of his sentence.

Applying existing jurisprudence in this case, the Court, therefore, rules against
petitioners. For the longest time, they were never brought to prison or placed in
confinement despite being sentenced to imprisonment by final judgment. Prescription of
penalty of imprisonment does not run in their favor. Needless to state, respondent trial
court did not commit grave abuse of discretion in assuming jurisdiction over the motion
for execution and in eventually granting the same.

Extinction of Civil Liability

The treatment of petitioners' civil liability arising from the offense committed is different.

Elementary is the rule that every person criminally liable for a felony is also civilly
liable.23 We said in one case:LawlibraryofCRAlaw

It bears repeating that "an offense as a general rule causes two (2) classes of injuries -
the first is the social injury produced by the criminal act which is sought to be repaired
thru the imposition of the corresponding penalty and the second is the personal injury
caused to the victim of the crime which injury is sought to be compensated thru
indemnity, which is civil in nature." (Ramos v. Gonong, 72 SCRA 559). As early as
1913, this Court in US. v. Heery (25 Phil. 600) made it clear that the civil liability of the
accused is not part of the penalty for the crime committed. It is personal to the victim. x
x x.

Under Article 112 of the RPC, civil liability established in Articles 100, 25 101,26 102,27 and
10328 of the Code shall be extinguished in the same manner as other obligations, in
accordance with the provisions of the Civil Law. Since the Civil Code is the governing
law, the provisions of the Revised Rules of Civil Procedure, particularly Section 6, Rule
39 thereof, is applicable. It states:LawlibraryofCRAlaw

Section 6. Execution by motion or by independent action. - A final and executory

judgment or order may be executed on motion within five (5) years from the date of its
entry. After the lapse of such time, and before it is barred by the statute of limitations, a
judgment may be enforced by action. The revived judgment may also be enforced by
motion within five (5) years from the date of its entry and thereafter by action before it is
barred by the statute of limitations. (6a)
Section 6, Rule 39 of the Rules must be read in conjunction with

Articles 1144 (3) and 1152 of the Civil Code, which provide:LawlibraryofCRAlaw

Art. 1144. The following actions must be brought within ten years from the time the right
of action accrues:LawlibraryofCRAlaw
1130
xxxx

(3) Upon a judgment

Art. 1152. The period for prescription of actions to demand the fulfillment of obligations
declared by a judgment commences from the time the judgment became final.

Based on the foregoing, there are two (2) modes of enforcing a final and executory
judgment or order: through motion or by independent action.

These two modes of execution are available depending on the timing when the
judgment creditor invoked its right to enforce the court's judgment. Execution by
motion is only available if the enforcement of the judgment was sought within five
(5) years from the date of its entry. On the other hand, execution by independent
action is mandatory if the five-year prescriptive period for execution by motion had
already elapsed. However, for execution by independent action to prosper - the Rules
impose another limitation - the action must be filed before it is barred by the statute of
limitations which, under the Civil Code, is ten (10) years from the finality of the
judgment.29

An action for revival of judgment is not intended to reopen any issue affecting the merits
of the case or the propriety or correctness of the first judgment. 30 The purpose is not to
re-examine and re-try issues already decided but to revive the judgment; its cause of
action is the judgment itself and not the merits of the original action. 31 However, being a
mere right of action, the judgment sought to be revived is subject to defenses and
counterclaims like matters of jurisdiction and those arising after the finality of the first
judgment or which may have arisen subsequent to the date it became effective such as
prescription, payment, or counterclaims arising out of transactions not connected with
the former controversy.32redarclaw

Once a judgment becomes final, the prevailing party is entitled as a matter of right to a
writ of execution the issuance of which is the trial court's ministerial duty, compellable by
mandamus.33 Yet, a writ issued after the expiration of the period is null and void. 34 The
limitation that a judgment be enforced by execution within the stated period, otherwise it
loses efficacy, goes to the very jurisdiction of the court. Failure to object to a writ issued
after such period does not validate it, for the reason that jurisdiction of courts is solely
conferred by law and not by express or implied will of the parties. 35redarclaw

Nonetheless, jurisprudence is replete with a number of exceptions wherein the Court,

on meritorious grounds, allowed execution of judgment despite non-observance of the
time bar. In Lancita, et al. v. Magbanua, et al.36 it was held:LawlibraryofCRAlaw

ChanRoblesVirtualawlibrary

1131
In computing the time limited for suing out an execution, although there is authority to
the contrary, the general rule is that there should not be included the time when
execution is stayed, either by agreement of the parties for a definite time, by injunction,
by the taking of an appeal or writ of error so as to operate as a supersedeas, by the
death of a party, or otherwise. Any interruption or delay occasioned by the debtor will
extend the time within which the writ may be issued without scire facias. x x x.37

Thus, the demands of justice and fairness were contemplated in the following instances:
dilatory tactics and legal maneuverings of the judgment obligor which redounded to its
benefit;38 agreement of the parties to defer or suspend the enforcement of the
judgment;39 strict application of the rules would result in injustice to the prevailing party
to whom no fault could be attributed but relaxation thereof would cause no prejudice to
the judgment obligor who did not question the judgment sought to be executed; 40 and
the satisfaction of the judgment was already beyond the control of the prevailing party
as he did what he was supposed to do.41 Essentially, We allowed execution even after
the prescribed period elapsed when the delay is caused or occasioned by actions of the
judgment debtor and/or is incurred for his benefit or advantage. 42redarclaw

In the instant case, it is obvious that the heirs of Atty. Roblete did not file a motion for
execution within the five-year period or an action to revive the judgment within the ten-
year period. Worse, other than the bare allegation that the judgment has not been
enforced because the public prosecutor has not acted on the request to file a motion for
execution, no persuasive and compelling reason was presented to warrant the exercise
of Our equity jurisdiction. Unfortunately for private respondent Roblete, the instant case
does not fall within the exceptions afore-stated. It cannot be claimed that the delay in
execution was entirely beyond their control or that petitioners have any hand in causing
the same.43 As regards the civil aspect of a criminal case is concerned, it is apt to point
that —

ChanRoblesVirtualawlibrary
Litigants represented by counsel should not expect that all they need to do is sit back
and relax, and await the outcome of their case. They should give the necessary
assistance to their counsel, for at stake is their interest in the case. While lawyers are
expected to exercise a reasonable degree of diligence and competence in handling
cases for their clients, the realities of law practice as well as certain fortuitous events
sometimes make it almost physically impossible for lawyers to be immediately updated
on a particular client's case.44

Aside from the civil indemnity arising from the crime, costs and incidental expenses of
the suit are part of the judgment and it is incumbent upon the prevailing party in whose
favor they are awarded to submit forthwith the itemized bill to the clerk of
court.45 Manifestly, the heirs of Atty. Roblete failed to do so. Their indifference, if not
negligence, is indicative of lack of interest in executing the decision rendered in their
favor. To remind, the purpose of the law in prescribing time limitations for executing
judgments or orders is to prevent obligors from sleeping on their rights. 46 Indeed,
inaction may be construed as a waiver.47redarclaw

1132
To close, the Court cannot help but impress that this case could have been averted had
the lower court been a competent dispenser of justice. It is opportune to remind judges
that once a judgment of conviction becomes final and executory, the trial court has the
ministerial duty to immediately execute the penalty of imprisonment and/or pecuniary
penalty (fine). A motion to execute judgment of conviction is not necessary. With
respect to the penalty of imprisonment, the trial court should cancel the bail bond and
issue a warrant of arrest, if the accused is not yet under detention. If the convicted
accused is already under detention by virtue of the warrant of arrest issued, the trial
court should immediately issue the corresponding mittimus or commitment order for the
immediate transfer of the accused to the National Penitentiary to serve his sentence, if
the penalty imposed requires the service of sentence in the National Penitentiary. The
commitment order should state that an appeal had been filed, but the same had been
withdrawn/dismissed/decided with finality.

If aside from the penalty of imprisonment the penalty of fine is likewise imposed, the trial
court should issue at once an order requiring the payment of fine within a reasonable
period of time and, in case of nonpayment and subsidiary imprisonment is imposed, he
should likewise serve the subsidiary imprisonment. If, however, the penalty is only fine
and the judgment has become final and executory, an order should be issued by the
trial court at once for the payment of the fine. And in case of non-payment, the bail bond
previously issued for his provisional liberty should be cancelled and a warrant of arrest
should be issued to serve the subsidiary imprisonment, if there is any.

In cases where the accused is a detention prisoner, i.e., those convicted of capital
offenses or convicted of non-capital offenses where bail is denied, or refused to post
bail, a mittimus or commitment order should be immediately issued after the
promulgation of judgment by the trial court as long as the penalty imposed requires the
service of sentence in the National Penitentiary. The filing of a motion for
reconsideration, motion for new trial, or notice of appeal should not stop the lower court
from performing its ministerial duty in issuing the commitment order, unless a special
order has been issued by the Court in specific cases - to the effect that the convicted
accused shall remain under detention in the provincial jail or city jail while the motion is
being heard or resolved.

In so far as the civil liability arising from the offense is concerned, a motion for execution
should be filed in accordance with Section 6, Rule 39 of the Rules and existing
jurisprudence.

WHEREFORE, the foregoing considered, the instant petition

for certiorari is PARTIALLY GRANTED. The Orders dated December 3, 2009 and
January 25, 2010 of Presiding Judge Delano F. Villaruz, Regional Trial Court, Roxas
City, Branch 16, are AFFIRMED IN PART only insofar as to the execution of the penalty
of imprisonment is concerned. Let the records of this case be REMANDED to the trial
court for the immediate issuance of mittimus, pursuant to OCA Circular No. 40-2013, in
relation to OCA Circular No. 4-92-A.

1133
The Office of the Court Administrator is hereby DIRECTED to conduct an investigation
on the possible culpability of those responsible for the unreasonable delay in the
execution of the judgment of conviction.

SO ORDERED.cralawlawlibrary
THIRD DIVISION
[ G.R. No. 176598, July 09, 2014 ]
PETRONIO CLIDORO, DIONISIO CLIDORO, LOLITA CLIDORO, CALIXTO
CARDANO, JR., LOURDES CLIDORO-LARIN, MATEO CLIDORO AND MARLIZA
CLIDORO-DE UNA, PETITIONERS, VS. AUGUSTO JALMANZAR, GREGORIO
CLIDORO, JR., SENECA CLIDORO-CIOCSON, MONSERAT CLIDORO-QUIDAY,
CELESTIAL CLIDORO-BINASA, APOLLO CLIDORO, ROSALIE CLIDORO-
CATOLICO, SOPHIE CLIDORO, AND JOSE CLIDORO, JR., RESPONDENTS.

DECISION
PERALTA, J.:
This deals with the Petition for Review on Certiorari under Rule 45 of the Rules of Court
praying that the Decision[1] of the Court of Appeals (CA), dated October 17, 2006, and
its Resolution[2] dated February 6, 2007, denying herein petitioner's motion for
reconsideration of the Decision, be reversed and set aside.

The antecedent facts, as set forth in the CA Decision, are undisputed, to wit:

The instant appeal stemmed from a complaint, docketed as Civil Case No. T-2275 for
revival of judgment filed by Rizalina Clidoro, et al. against Onofre Clidoro, et al., praying
that the Decision dated November 13, 1995 of the Court of Appeals (CA) in CA-G.R. CV
No. 19831, which affirmed with modification the RTC Decision dated March 10, 1988 in
Civil Case No. T-98 for partition, be revived and that the corresponding writ of execution
be issued. The dispositive portion of the CA Decision reads:
The estate of the late Mateo Clidoro, excepting that described in paragraph (i) of the
Complaint, is hereby ordered partitioned in the following manner:

1. One-fifth portion to the Plaintiffs-Appellees, by right of representation to the hereditary

share of Gregorio Clidoro, Sr.;
2. One-fifth portion to Defendant-Appellant Antonio Clidoro or his legal heirs;
3. One-fifth portion to Appellant Josaphat Clidoro;
4. One-fifth portion to Appellant Aida Clidoro;
5. One-tenth portion to Gregoria Clidoro, as her legitime in the hereditary share of
Onofre Clidoro; and
6. One-tenth portion to Catalino Morate, as successor-in-interest to the legitime of
Consorcia Clidoro.

SO ORDERED.

On September 3, 2003, defendants-appellees except Gregoria Clidoro-Palanca, moved

1134
to dismiss the said complaint on the following grounds: “1.) The petition, not being
brought up against the real parties-in-interest, is dismissible for lack of cause of action;
2.) The substitution of the parties defendant is improper and is not in accordance with
the rules; 3.) Even if the decision is ordered revived, the same cannot be executed
since the legal requirements of Rule 69, Section 3 of the 1997 Rules of Civil Procedure
has not been complied with; and 4.) The Judgment of the Honorable Court ordering
partition is merely interlocutory as it leaves something more to be done to complete the
disposition of the case.”

After the filing of plaintiffs-appellants' Comment/Opposition to the Motion to Dismiss,

defendants-appellees' Reply, plaintiffs-appellants' Rejoinder and defendants-interested
parties' Sur-Rejoinder, the RTC issued the assailed Order dated December 8, 2003
dismissing the instant complaint for lack of cause of action, the pertinent portion of
which reads:
“xxx

The complaint shows that most of the parties-plaintiffs, parties-defendants and

interested parties are already deceased and have no more natural or material
existence. This is contrary to the provision of the Rules (Sec. 1, Rule 3, 1997 Rules of
Civil Procedure). They could no longer be considered as the real parties-in-interest.
Besides, pursuant to Sec. 3, Rule 3 (1997 Rules of Civil Procedure), where the action is
allowed to be prosecuted or defended by a representative or someone acting in
fiduciary capacity, the beneficiary shall be included in the title of the case. In the instant
case the beneficiaries are already deceased persons. Also, the Complaint states that
they were the original parties in Civil Case No. T-98 for Partition, but this is not so
(paragraph 2). Some of the parties are actually not parties to the original case, but
representing the original parties who are indicated as deceased.

From the foregoing, the Court finds the instant complaint to be flawed in form and
substance. The suit is not brought by the real parties-in-interest, thus a motion to
dismiss on the ground that the complaint states no cause of action is proper (Section
1(g), Rule 16).

WHEREFORE, the instant complaint is ordered DISMISSED for lack of cause of action.

SO ORDERED.”
Plaintiffs-appellants moved for reconsideration of the foregoing Order with prayer to
admit the attached Amended Complaint impleading the additional heirs of the interested
party Josaphat Clidoro and the original plaintiffs Rizalina Clidoro-Jalmanzar, Cleneo
Clidoro and Aristoteles Clidoro. The same was, however, denied in the second assailed
order. x x x [3]

Respondents then appealed to the CA, and on October 17, 2006, the CA promulgated
its Decision reversing and setting aside the Orders of the RTC, and remanding the case
to the RTC for further proceedings. Petitioners’ motion for reconsideration of the
Decision was denied per Resolution dated February 6, 2007.

1135
Hence, the present petition where the following issues are raised:

A. THE HONORABLE COURT OF APPEALS FAILED TO CONSIDER THAT THERE

WAS NO PROPER SUBSTITUTION OF PARTIES IN THE INSTANT ACTION FOR
REVIVAL OF JUDGMENT.

B. THE HONORABLE COURT OF APPEALS ERRED IN CONSIDERING THE

RESPONDENTS AS WELL AS THE PETITIONERS AS THE REAL PARTIES-IN-
INTEREST.

C. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT AMENDMENT

TO PLEADINGS WAS PROPERLY MADE AND IS APPLICABLE TO THE INSTANT
ACTION.

D. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THERE WAS

MERE MISJOINDER OF PARTIES IN THE INSTANT ACTION. [4]

The petition deserves scant consideration.

Reduced to its essence, the pivotal issue here is whether the complaint for revival of
judgment may be dismissed for lack of cause of action as it was not brought by or
against the real parties-in-interest.

First of all, the Court emphasizes that lack of cause of action is not enumerated under
Rule 16 of the Rules of Court as one of the grounds for the dismissal of a complaint. As
explained in Vitangcol v. New Vista Properties, Inc.,[5] to wit:

Lack of cause of action is, however, not a ground for a dismissal of the complaint
through a motion to dismiss under Rule 16 of the Rules of Court, for the determination
of a lack of cause of action can only be made during and/or after trial. What is
dismissible via that mode is failure of the complaint to state a cause of action. Sec. 1(g)
of Rule 16 of the Rules of Court provides that a motion may be made on the ground
"that the pleading asserting the claim states no cause of action."

The rule is that in a motion to dismiss, a defendant hypothetically admits the truth
of the material allegations of the ultimate facts contained in the plaintiff's
complaint. When a motion to dismiss is grounded on the failure to state a cause
of action, a ruling thereon should, as rule, be based only on the facts alleged in
the complaint. x x x

xxxx

In a motion to dismiss for failure to state a cause of action, the focus is on the
sufficiency, not the veracity, of the material allegations. The test of sufficiency of facts
alleged in the complaint constituting a cause of action lies on whether or not the

1136
court, admitting the facts alleged, could render a valid verdict in accordance with
the prayer of the complaint. x x x[6]

Again, in Manaloto v. Veloso III,[7] the Court reiterated as follows:

When the ground for dismissal is that the complaint states no cause of action,
such fact can be determined only from the facts alleged in the complaint and from
no other, and the court cannot consider other matters aliunde. The test, therefore,
is whether, assuming the allegations of fact in the complaint to be true, a valid judgment
could be rendered in accordance with the prayer stated therein. [8]

In this case, it was alleged in the complaint for revival of judgment that the parties
therein were also the parties in the action for partition. Applying the foregoing test of
hypothetically admitting this allegation in the complaint, and not looking into the veracity
of the same, it would then appear that the complaint sufficiently stated a cause of action
as the plaintiffs in the complaint for revival of judgment (hereinafter respondents), as the
prevailing parties in the action for partition, had a right to seek enforcement of the
decision in the partition case.

It should be borne in mind that the action for revival of judgment is a totally separate
and distinct case from the original Civil Case No. T-98 for Partition. As explained
in Saligumba v. Palanog,[9] to wit:

An action for revival of judgment is no more than a procedural means of securing the
execution of a previous judgment which has become dormant after the passage of five
years without it being executed upon motion of the prevailing party. It is not intended to
re-open any issue affecting the merits of the judgment debtor's case nor the propriety or
correctness of the first judgment. An action for revival of judgment is a new and
independent action, different and distinct from either the recovery of property case
or the reconstitution case [in this case, the original action for partition], wherein the
cause of action is the decision itself and not the merits of the action upon which
the judgment sought to be enforced is rendered. x x x [10]

With the foregoing in mind, it is understandable that there would be instances where the
parties in the original case and in the subsequent action for revival of judgment would
not be exactly the same. The mere fact that the names appearing as parties in the the
complaint for revival of judgment are different from the names of the parties in the
original case would not necessarily mean that they are not the real parties-in-interest.
What is important is that, as provided in Section 1, Rule 3 of the Rules of Court, they
are “the party who stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit.” Definitely, as the prevailing parties in the previous
case for partition, the plaintiffs in the case for revival of judgment would be benefited by
the enforcement of the decision in the partition case.

Moreover, it would appear that petitioners are mistaken in alleging that respondents are
not the real parties-in-interest. The complaint for revival of judgment impleaded the
following parties:
1137
 PLAINTIFFS DEFENDANTS
1.Rizalina Clidoro (deceased) rep. herein 1. Onofre Clidoro (deceased) rep. by
by Augusto Jalmanzar Gregoria Clidoro-Palanca (daughter)
2.Gregorio Clidoro, Jr. 2. Antonio Clidoro (deceased) herein rep.
by Petronio Clidoro,
3.Urbana Costales (deceased) 3. Carmen Clidoro-Cardano, rep. by Calixto
Cardano, Jr. (husband)
4.Cleneo Clidoro (deceased) 4. Dionisio Clidoro
5.Seneca Clidoro Ciocson 5. Lourdes Clidoro-Larin
6.Monserrat Clidoro 6. Lolita Clidoro
7.Celestial Clidoro 7. Mateo Clidoro
8.Aristoteles Clidoro (deceased) INTERESTED PARTIES
9.Apollo Clidoro 1. Aida Clidoro (deceased)
10. Rosalie Clidoro 2. Josaphat Clidoro (deceased), herein rep.
by Marliza Clidoro-De Una
11. Sophie Clidoro
12. Jose Clidoro, Jr.

On the other hand, the parties to the original case for partition are named as follows:

PLAINTIFFS DEFENDANTS
1. Rizalina Clidoro 1. Onofre Clidoro
2. Gregorio Clidoro, Jr. 2. Antonio Clidoro
3. Sofia Cerdena INTERESTED PARTIES
4. Urbana Costales 1. Aida Clidoro
5. Cleneo Seneca 2. Josaphat Clidoro
6. Monserrat Clidoro
7. Celestial Clidoro
8. Aristoteles Clidoro
9. Apollo Clidoro
10. Rosalie Clidoro
11. Sophie Clidoro

1138
12. Jose Clidoro, Jr.

A comparison of the foregoing would show that almost all of the plaintiffs in the original
case for partition, in whose favor the court adjudged certain shares in the estate of
deceased Mateo Clidoro, are also the plaintiffs in the action for revival of judgment.
Meanwhile, the defendants impleaded in the action for revival are allegedly the
representatives of the defendants in the original case, and this appears to hold water,
as Gregoria Clidoro-Palanca, named as the representative of defendant Onofre Clidoro
in the complaint for revival of judgment, was also mentioned and awarded a portion of
the estate in the judgment in the original partition case. In fact, the trial court itself stated
in its Order[11] of dismissal dated December 8, 2003, that “[s]ome of the parties are
actually not parties to the original case, but representing the original parties who are
indicated as deceased.”

In Basbas v. Sayson,[12] the Court pointed out that even just one of the co-owners, by
himself alone, can bring an action for the recovery of the co-owned property, even
through an action for revival of judgment, because the enforcement of the judgment
would result in such recovery of property. Thus, as in Basbas, it is not necessary in this
case that all of the parties, in whose favor the case for partition was adjudged, be made
plaintiffs to the action for revival of judgment. Any which one of said prevailing parties,
who had an interest in the enforcement of the decision, may file the complaint for revival
of judgment, even just by himself.

Verily, the trial court erred in dismissing the complaint for revival of judgment on the
ground of lack of, or failure to state a cause of action. The allegations in the complaint,
regarding the parties' interest in having the decision in the partition case executed or
implemented, sufficiently state a cause of action. The question of whether respondents
were the real parties-in-interest who had the right to seek execution of the final and
executory judgment in the partition case should have been threshed out in a full-blown
trial.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals, dated

October 17, 2006, and its Resolution dated February 6, 2007 in CA-G.R. No. 82209, are
hereby AFFIRMED in toto.

SO ORDERED.

FIRST DIVISION

December 13, 2017

G.R. No. 192048

DOUGLAS F. ANAMA, Petitioner,
vs.
CITIBANK, N.A. (formerly First National City Bank), Respondent.

1139
 DECISION

JARDELEZA, J.:

This is a petition for review on certiorari1 under Rule 45 of the Revised Rules of Court
seeking to reverse and set aside the Decision 2 dated November 19, 2009 (assailed
Decision) and the Resolution3 dated April 20, 2010 (assailed Resolution) of the Court of
Appeals (CA) in CA-G.R. SP No. 1077 48, denying petitioner's action for revival of
judgment.

In consideration for a loan obtained from respondent First National City Bank of New
York (now Citibank, N.A.) (Citibank), on November 10, 1972, petitioner Douglas F.
Anama (Anama) executed a promissory note in the amount of ₱418,000.00 in favor of
Citibank.4 To secure payment of the obligation, Anama also executed in favor of
Citibank a chattel mortgage over various industrial machineries and equipment located
on his property at No. 1302, E. de los Santos Avenue, Quezon City. 5 For Anama's
failure to pay the monthly installments due on the promissory note starting January
1974, Citibank filed a complaint for sum of money and replevin 6 dated November 13,
1974 (docketed as Civil Case No. 95991) with the Court of First Instance of Manila (now
Regional Trial Court), Branch 11. Anama filed his answer with counterclaim 7 and his
amended answer with counterclaim,8 alleging, among others, that his failure to pay the
monthly installments was due to the fault of Citibank as it refused to receive the checks
he issued, and that the chattel mortgage was defective and void. 9

On December 2, 1974, the Regional Trial Court (RTC), upon proof of default of Anama
in the payment of his loan, issued an Order of Replevin over the machineries and
equipment covered by the chattel mortgage.10

On January 29, 1977, Citibank, alleging that the properties subject of the Order of
Replevin which were taken by the Sheriff under his custody were not delivered to it, filed
a motion for [issuance of] alias writ of seizure.11 Citibank prayed that an alias writ of
seizure be issued directing the Sheriff to seize the properties and to dispose them in
accordance with Section 6, Rule 60 of the Revised Rules of Court. The RTC granted the
motion through its Resolution12 dated February 28, 1977. The Ex-Officio Sheriff of
Quezon City issued three receipts for the seized properties on March 1 7, 18, and 19,
1977.13 Anama filed a motion for reconsideration but this was denied by the RTC in a
Resolution14 dated March 18, 1977.

Anama then filed a petition for certiorari and prohibition with writ of preliminary injunction
with the CA on March 21, 1977 (docketed as CAG. R. SP No. 06499) on the ground that
the above resolutions of the trial court were issued in excess of jurisdiction and with
grave abuse of discretion because of the lack of evidence proving Citibank's right to
possession over the properties subject of the chattel mortgage. 15

1140
On July 30, 1982, the CA rendered a Decision 16 (July 30, 1982 Decision) granting
Anama's petition for certiorari and prohibition and nullifying the RTC's orders of seizure,
to wit:

WHEREFORE, the petition is granted. The questioned resolutions issued by the

respondent judge in Civil Case No. 95991, dated February 28, 1977, and March 18,
1977, together with the writs and processes emanating or deriving therefrom, are
hereby declared null and void ab initio.

The respondent ex-of[f]icio sheriff of Quezon City and the respondent First National City
Bank are hereby ordered to return all the machineries and equipments with their
accessories seized, dismantled and hauled, to their original and respective places and
positions in the shop flooring of the petitioner's premises where these articles were,
before they were dismantled, seized and hauled at their own expense. The said
respondents are further ordered to cause the repair of the concrete foundations
destroyed by them including the repair of the electrical wiring and facilities affected
during the seizure, dismantling and hauling.

The writ of preliminary injunction heretofore in effect is hereby made permanent. Costs
against the private respondents.

SO ORDERED.17

On August 25, 1982, Citibank filed its petition for review on certiorari with this Court
(docketed as G.R. No. 61508) assailing the July 30, 1982 Decision of the CA.18 On
March 17, 1999, we promulgated a Decision19 dismissing Citibank's petition for lack of
merit and affirming the July 30, 1982 Decision of the CA. An Entry of Judgment20 was
subsequently issued on April 12, 1999.

Meanwhile, on November 19, 1981, during the pendency of CA-G.R. SP No. 06499 in
the CA, the fourth floor of the Manila City Hall, where Branch 11 of the R TC of Manila
and its records, including the records of Civil Case No. 95991 were located, was
destroyed by fire.21

On February 10, 1982, Anama filed a petition for reconstruction of record 22 in the RTC,
which the latter granted in an Order23 dated May 3, 1982. On December 2, 1982,
considering that G.R. No. 61508 was already pending before this Court, the R TC
issued an Order24 directing that all pending incidents in Civil Case No. 95991 be
suspended until G.R. No. 61508 has been resolved.

On March 12, 2009, Anama filed a petition for revival of judgment with the CA (docketed
as CA-G.R. SP No. 107748).25 Anama sought to revive the CA's July 30, 1982 Decision
in CA-G.R. SP No. 06499 and argued that Citibank's failure to file an action for the
reconstitution of the records in the RTC in Civil Case No. 95991 constituted
abandonment of its cause of action and complaint against Anama. 26 In addition to the
revival of the CA's July 30, 1982 Decision in CA-G.R. SP No. 06499, Anama sought to

1141
remand the case to the RTC for further proceedings in Civil Case No. 95991,
particularly his counterclaims against Citibank. 27

In its comment, Citibank argued that the petition should be dismissed as an action for
revival of judgment is within the exclusive original jurisdiction of the RTC. It also argued
that laches has set in against Anama for having slept on his rights for almost 10 years.
Lastly, Citibank claimed that it did not abandon its money claim against Anama when it
did not initiate the reconstitution proceedings in the RTC. 28

On November 19, 2009, the CA denied the petition for lack of jurisdiction. Pertinent
portions of the assailed Decision reads:

[W]e find that respondent bank correctly question (sic) this Court's jurisdiction to

entertain the instant petition to revive the July 30, 1982 decision in CA-G.R. SP No.
06499. While concededly filed within 10 years from the April 12, 1999 entry of the
decision rendered in G.R. No. 61508, the petition should have been filed with the
appropriate Regional Trial Court which has exclusive original jurisdiction over all civil
actions in which the subject of the litigation is incapable of pecuniary estimation and/or
all cases not within the exclusive jurisdiction of any court, tribunal, person or body
exercising judicial or quasijudicial functions. x x x 29

Anama filed his motion for reconsideration which the CA denied through its assailed
Resolution30 dated April 20, 2010.

On June 10, 2010, Anama filed this petition 31 and argued that his petition for revival of
judgment should be filed in the court that issued the judgment sought to be revived, the
CA in this case.32

In its comment,33 Citibank agrees with the CA that jurisdiction over actions for revival of
judgments is with the R TC.34 Citibank also argues that Anama's petition to revive
judgment is already barred by laches and that it did not waive or abandon its claim
against Anama in Civil Case No. 95991. 35

On December 30, 2010, Anama filed his reply.36

On August 25, 2016, Anama filed a manifestation 37 reiterating the arguments on his
petition. On February 17, 2017, Citibank filed its comment 38 stressing that the CA did
not err in dismissing the petition to revive judgment on the ground of lack of jurisdiction.
On March 16, 2017, Anama filed his reply. 39

We deny the petition.

An action to revive a judgment is an action whose exclusive purpose is to enforce a

judgment which could no longer be enforced by mere motion. 40 Section 6, Rule 39 of the
Revised Rules of Court provides:

1142
Sec. 6. Execution by motion or by independent action. - A final and executory judgment
or order may be executed on motion within five (5) years from the date of its entry. After
the lapse of such time, and before it is barred by the statute of limitations, a judgment
may be enforced by action. The revived judgment may also be enforced by motion
within five (5) years from the date of its entry and thereafter by action before it is barred
by the statute of limitations.

Section 6 is clear. Once a judgment becomes final and executory, the prevailing party
can have it executed as a matter of right by mere motion within five years from the date
of entry of judgment. If the prevailing party fails to have the decision enforced by a
motion after the lapse of five years, the said judgment is reduced to a right of action
which must be enforced by the institution of a complaint in a regular court within 10
years from the time the judgment becomes final.41

Further, a revival suit is a new action, having for its cause of action the judgment sought
to be revived.42 It is different and distinct from the original judgment sought to be revived
or enforced.43 It is a new and independent action, wherein the cause of action is the
decision itself and not the merits of the action upon which the judgment sought to be
enforced is rendered. Revival of judgment is premised on the assumption that the
decision to be revived, either by motion or by independent action, is already final and
executory.44

As an action for revival of judgment is a new action with a new cause of action, the rules
on instituting and commencing actions apply, including the rules on jurisdiction. Its
jurisdictional requirements are not dependent on the previous action and the petition
does not necessarily have to be filed in the same court which rendered judgment. 45

Jurisdiction is defined as the power and authority of the courts to hear, try and decide
cases. What determines the jurisdiction of the court is the nature of the action pleaded
as appearing from the allegations in the complaint. The averments and the character of
the relief sought are the ones to be consulted. 46

The principle is that jurisdiction over the subject matter of a case is conferred by law
and determined by the allegations in the complaint which comprise a concise statement
of the ultimate facts constituting the plaintiffs cause of action. The nature of an action,
as well as which court or body has jurisdiction over it, is determined based on the
allegations contained in the complaint of the plaintiff, irrespective of whether or not the
plaintiff is entitled to recover upon all or some of the claims asserted. 47 Jurisdiction
being a matter of substantive law, the established rule is that the statute in force at the
time of the commencement of the action determines the jurisdiction of the court. 48

Batas Pambansa Bilang 129 (BP 129), otherwise known as the Judiciary

Reorganization Act of 1980 and its amendments, is the law which confers jurisdiction to
the courts. Section 19 of BP 129, as amended by Republic Act No. 7691, 49 provides:

1143
Sec. 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise exclusive
original jurisdiction:

(1) In all civil actions in which the subject of the litigation is incapable of pecuniary
estimation;

In determining the jurisdiction of an action whose subject is incapable of pecuniary

estimation, the nature of the principal action or remedy sought must first be ascertained.
If it is primarily for the recovery of a sum of money, the claim is considered capable of
pecuniary estimation and the jurisdiction of the court depends on the amount of the
claim. But, where the primary issue is something other than the right to recover a sum of
money, where the money claim is purely incidental to, or a consequence of, the
principal relief sought, such are actions whose subjects are incapable of pecuniary
estimation, hence cognizable by the RTCs. 50

As an action to revive judgment raises issues of whether the petitioner has a right to
have the final and executory judgment revived and to have that judgment enforced and
does not involve recovery of a sum of money, we rule that jurisdiction over a petition to
revive judgment is properly with the R TCs. Thus, the CA is correct in holding that it
does not have jurisdiction to hear and decide Anama's action for revival of judgment.

A reading of the CA's jurisdiction also highlights the conclusion that an action for revival
of judgment is outside the scope of jurisdiction of the CA. Section 9 of BP 129 provides:

Sec. 9. Jurisdiction. -The Court of Appeals shall exercise:

1. Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus,

and quo warranto, and auxiliary writs or processes, whether or not in aid of its appellate
jurisdiction;

2. Exclusive original jurisdiction over actions for annulment of judgments of Regional

Trial Courts; and

3. Exclusive appellate jurisdiction over all final judgments, resolutions, orders or awards
of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or
commission, including the Securities and Exchange Commission, the Social Security
Commission, the Employees Compensation Commission and the Civil Service
Commission, except those falling within the appellate jurisdiction of the Supreme Court
in accordance with the Constitution, the Labor Code of the Philippines under
Presidential Decree No. 442, as amended, the provisions of this Act, and of
subparagraph (1) of the third paragraph and subparagraph 4 of the fourth paragraph of
Section 17 of the Judiciary Act of 1948.

The CA also has concurrent original jurisdiction over petitions for issuance of writ
of amparo,51 writ of habeas data,52 and writ of kalikasan. 53

1144
Not being one of the enumerated cases above, it is clear that the CA is without
jurisdiction to hear and decide an action for revival of judgment.

Anama's reliance on Aldeguer v. Gemelo54 to justify his filing with the CA is

misplaced.1avvphi1 The issue in Aldeguer is not jurisdiction but venue. The issue was
which between the RTC of Iloilo and RTC of Negros Occidental was the proper court to
hear the action.

However, venue and jurisdiction are entirely distinct matters. Jurisdiction may not be
conferred by consent or waiver upon a court which otherwise would have no jurisdiction
over the subject matter of an action; but the venue of an action as fixed by statute may
be changed by the consent of the parties and an objection that the plaintiff brought his
suit in the wrong county may be waived by the failure of the defendant to make a timely
objection. In either case, the court may render a valid judgment. Rules as to jurisdiction
can never be left to the consent or agreement of the parties, whether or not a prohibition
exists against their alteration.55 Venue is procedural, not jurisdictional, and hence may
be waived.56

As we have already ruled on jurisdiction, there is no more reason to discuss whether

laches has set in against Anama.

Considering, however, that the proceedings in Civil Case No. 95991 have been
suspended and remains pending since 1982, we deem it necessary to lift the order of
suspension and instruct the trial court to hear and try the case with deliberate dispatch.

WHEREFORE, the petition is DENIED. The Decision dated November 19, 2009 and
Resolution dated April 20, 2010 of the Court of Appeals in CA-G.R. SP No. 107748
are AFFIRMED.

We direct the trial court to proceed with the hearing and disposition in Civil Case No.
95991 with all deliberate dispatch.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 191594, October 16, 2013 ]
DAVID A. RAYMUNDO, PETITIONER, VS. GALEN REALTY AND MINING
CORPORATION, RESPONDENT.

DECISION
REYES, J.:
Assailed in the present Petition for Review on Certiorari under Rule 45[1] of the Rules of
Court is the Decision[2] dated October 30, 2009 and Resolution[3] dated March 10, 2010
of the Court of Appeals (CA) in CA-G.R. SP No. 105401, which dismissed petitioner
David A. Raymundo’s (Raymundo) special civil action for certiorari for lack of merit.

1145
 Facts of the Case

Civil Case No. 18808 is an action for Reconveyance with Damages filed by respondent
Galen Realty and Mining Corporation (Galen) against Raymundo and Tensorex
Corporation (Tensorex). Subject of the case was a transaction between Galen and
Raymundo over a house and lot located in Urdaneta Village, Makati City originally
covered by Transfer Certificate of Title (TCT) No. S-105-651 in the name of Galen. By
virtue of a Deed of Sale dated September 9, 1987 executed between Galen and
Raymundo, title to the property was transferred to the latter, who later on sold the
property to Tensorex, which caused the issuance of TCT No. 149755 in its name.

In a Decision dated April 12, 2000, the Regional Trial Court (RTC) of Makati City,
Branch 62, in Civil Case No. 18808, ruled that the transaction between Raymundo and
Galen was actually an equitable mortgage. [4] On appeal, the CA upheld the RTC
decision but modified the loan obligation of Galen and reduced the same to
P3,865,000.00. The dispositive portion of the CA Decision [5] dated May 7, 2004
provides:

WHEREFORE, PREMISES CONSIDERED, the Assailed Decision is hereby MODIFIED

as follows:
V) the Deed of Absolute Sale between plaintiff-appellant and defendant-appellant David
Raymundo is declared null and void, being a Deed of Equitable Mortgage;

VI)  the Deed of Sale between defendant-appellant David Raymundo and defendant-
appellant Tensorex [is] declared null and void;

VII) defendant-appellant David Raymundo to reconvey the subject property to

plaintiff-appellant’s [sic] upon plaintiff-appellant[’s] payment to defendant-
appellant David Raymundo of [P]3,865,000.00 plus legal interest thereon from the
date of filing of the complaint, until it is fully paid, or if reconveyance is no longer
feasible, for defendants-appellants Raymundo and Tensorex to solidarily pay
plaintiff-appellant the fair market value of the subject property by expert
appraisal;

VIII)  defendants-appellants Raymundo and Tensorex to solidarily pay plaintiff-

appellant, as follows:
a) [P]100,000.00 in exemplary damages;
b) [P]100,000.00 in attorney’s fees;
c) Cost[s] of suit.
Defendants-appellant’s COUNTERCLAIM is hereby DISMISSED.

SO ORDERED.[6] (Emphasis ours)

Said CA decision eventually became final and executory on January 11, 2005, and
entry of judgment was made.[7]

Galen moved for the execution of the CA decision, submitting that the writ of execution
1146
should order Raymundo and Tensorex to solidarily pay the following: (1) the current fair
market value of the property less Galen’s mortgage debt of P3,865,000.00 with legal
interest; and (2) the award of damages and costs of suit. Raymundo and Tensorex
opposed the motion, arguing that the CA decision provides for two alternatives – one,
for Raymundo to reconvey the property to Galen after payment of P3,865,000.00 with
legal interest or, two, if reconveyance is no longer feasible, for Raymundo and Tensorex
to solidarily pay Galen the fair market value of the property. [8]

In its Order[9] dated February 3, 2006, the RTC granted Galen’s motion and ordered the
issuance of a writ of execution. The property (land and improvements) was appraised
by Asian Appraisal, Inc. at P49,470,000.00.[10] Subsequently, the appointed special
sheriff issued a Notice of Reconveyance/Notice of Demand to Pay [11] on March 8, 2007.
The sheriff also issued on April 4, 2007 a Notice of Levy on Execution [12] to the Register
of Deeds of Makati City over the rights and interest of Tensorex over the property,
including all buildings and improvements covered by TCT No. 149755.

On July 16, 2007, the special sheriff issued a Notice of Sheriff’s Sale of Real Estate
Property,[13] stating that “the total outstanding balance of mortgage indebtedness as of
January 25, 1988 and interest for 225 months with 2.25% interest is [P]37,108,750.00
plus costs x x x,”[14] and sale at public auction was set on August 8, 2007. Raymundo
filed a Manifestation and Urgent Motion[15] objecting to the auction sale and expressing
his willingness to reconvey the property upon payment in full by Galen of its
indebtedness. Galen filed a Counter Manifestation and Opposition [16] claiming that
reconveyance is no longer feasible as the property is heavily encumbered and title to
the property is still in the name of Tensorex which had already gone out of operations
and whose responsible officers are no longer accessible.

Raymundo also submitted on August 6, 2007 a duplicate copy of the Cancellation of the
Real Estate Mortgages[17] over the property. As regards the other entries on the title,
Raymundo stated that these do not affect his rights, interests and participation over the
property as the Notice of Lis Pendens of Civil Case No. 18808 inscribed on September
27, 1990 was superior to these entries.[18] On the same date, the RTC issued an
Order[19] noting Raymundo’s motions, ordering him to show proof how his willingness to
reconvey the property can be realized, and holding the auction sale in abeyance. The
order also provided that “[c]ompliance herein is enjoined x x x, which proof shall consist
primarily of a submission of the Transfer Certificate of Title covering the subject property
duly registered in Raymundo’s name.” [20]

Raymundo filed a Compliance/Comment[21] to the RTC’s order, contending that his

obligation to reconvey is not yet due pending payment of Galen’s own obligation.

On December 12, 2007, the RTC issued an Order [22] lifting the suspension of the auction
sale and directing Galen to coordinate with the deputy sheriff for the enforcement of the
decision. The RTC ruled that Raymundo failed to show proof that the title was already
registered in his name and thus, it resolves to deny his compliance/comment.

1147
Raymundo filed a Motion for Reconsideration [23] of the RTC’s order but it was denied per
Order[24] dated August 15, 2008. As a result, the property was sold at a public auction on
November 26, 2008 for P37,108,750.00, with Galen as the highest bidder, and a
certificate of sale[25] was issued by the sheriff.

Raymundo then filed a special civil action for certiorari with the CA. In the assailed
Decision[26] dated October 30, 2009, the petition was dismissed for lack of merit. His
motion for reconsideration having been denied in the assailed CA Resolution [27] dated
March 10, 2010, Raymundo is now seeking recourse with the Court on petition for
review under Rule 45 of the Rules of Court.

Raymundo contends that the CA committed an error in upholding the validity of RTC’s
writ of execution. He argues that the writ changed the tenor of the final and executory
CA decision as his obligation under said decision is to reconvey the property upon
Galen’s payment of its obligation. Raymundo also argues that the sale on public auction
of the property was void inasmuch as the RTC’s conclusion, as affirmed by the CA, that
reconveyance is no longer feasible has no basis. [28]

Galen, on the other hand, claims that Raymundo was given the option to choose
between reconveyance and payment of the fair market value of the property but did not
manifest his choice. It was only when the property was set for sale at public auction that
Raymundo manifested his choice of reconveyance, which was opposed by Galen
because by that time, the property was still in the name of Tensorex and was already
heavily encumbered.[29] Galen maintains that the writ of execution and the auction sale
was valid inasmuch as payment of the fair market value of the property is the only
feasible way to satisfy the judgment.

Ruling of the Court

The manner of execution of a final judgment is not a matter of “choice”. It does not
revolve upon the pleasure or discretion of a party as to how a judgment should be
satisfied, unless the judgment expressly provides for such discretion. Foremost rule in
execution of judgments is that “a writ of execution must conform strictly to every
essential particular of the judgment promulgated, and may not vary the terms of the
judgment it seeks to enforce, nor may it go beyond the terms of the judgment sought to
be executed.”[30] As a corollary rule, the Court has clarified that “a judgment is not
confined to what appears on the face of the decision, but extends as well to those
necessarily included therein or necessary thereto.” [31]

In this case, the writ of execution issued by the RTC originated from Civil Case No.
18808, which is an action for Reconveyance with Damages filed by Galen against
Raymundo and Tensorex, where Galen sought recovery of the property subject of the
Deed of Absolute Sale between Galen and Raymundo. The RTC ruled in favor of
Galen, finding that the transaction between them is an equitable mortgage, which was
affirmed by the CA. Both the RTC and the CA, in the dispositive portions of their
respective decisions, ordered Raymundo to “reconvey the subject property to
[Galen] upon [Galen’s] payment to x x x Raymundo x x x plus legal interest thereon
1148
from the date of [the] filing of the complaint, until it is fully paid, or if reconveyance is
no longer feasible, for x x x Raymundo and Tensorex to solidarily pay [Galen] the
fair market value of the subject property by expert appraisal.”[32] In implementing said
judgment, the RTC should have considered the nature of the agreement between Galen
and Raymundo. The rule is that in case of ambiguity or uncertainty in the dispositive
portion of a decision, the body of the decision may be scanned for guidance in
construing the judgment.[33]

Nevertheless, the import of the dispositive portion of the CA Decision dated May 7,
2004 is clear. The principal obligation of Raymundo under the judgment is to reconvey
the property to Galen; on the other hand, Galen’s principal obligation is to pay its
mortgage obligation to Raymundo. Performance of Raymundo’s obligation to reconvey
is upon Galen’s payment of its mortgage obligation in the amount of P3,865,000.00 plus
legal interest thereon from the date of the filing of the complaint, until fully paid. This is
in accord with the nature of the agreement as an equitable mortgage where the real
intention of the parties is to charge the real property as security for a debt. [34] It was
wrong for the RTC to require Raymundo to show proof of his “willingness” to reconvey
the property because as stressed earlier, their agreement was an equitable mortgage
and as such, Galen retained ownership of the property. [35] In Montevirgen, et al. v. CA,
et al.,[36] the Court was emphatic in stating that “the circumstance that the original
transaction was subsequently declared to be an equitable mortgage must mean that the
title to the subject land which had been transferred to private respondents actually
remained or is transferred back to [the] petitioners herein as owners-mortgagors,
conformably to the well-established doctrine that the mortgagee does not become the
owner of the mortgaged property because the ownership remains with the
mortgagor.”[37] Thus, it does not devolve upon Raymundo to determine whether he is
willing to reconvey the property or not because it was not his to begin with. If Raymundo
refuses to reconvey the property, then the court may direct that the act be done by
some other person appointed by it as authorized by Section 10 of Rule 39 of the Rules
of Court, to wit:

Sec. 10. Execution of judgments for specific act. (a) conveyance, delivery of deeds, or
other specific acts; vesting title.—If a judgment directs a party to execute a conveyance
of land or personal property, or to deliver deeds or other documents, or to perform any
other specific act in connection therewith, and the party fails to comply within the
time specified, the court may direct the act to be done at the cost of the
disobedient party by some other person appointed by the court and the act when
so done shall have like effect as if done by the party. If real or personal property is
situated within the Philippines, the court in lieu of directing a conveyance thereof may by
an order divest the title of any party and vest it in others, which shall have the force and
effect of a conveyance executed in due form of law. (Emphasis and underscoring ours)

The “some other person appointed by the court” can be the Branch Clerk of Court, [38] the
Sheriff,[39] or even the Register of Deeds,[40] and their acts when done under such
authority shall have the effect of having been done by Raymundo himself. A party
cannot frustrate execution of a judgment for a specific act on the pretext of inability to do
so as the Rules provide ample means by which it can be satisfied.
1149
Conversely, Galen’s obligation to pay the mortgage obligation is not subject to
Raymundo’s reconveyance of the property. If Galen refuses to pay, it is only then that
the court may direct the foreclosure of the mortgage on the property and order its sale
at public auction to satisfy Galen’s judgment debt against Raymundo, pursuant to Rule
68 of the Rules of Court on Foreclosure.[41] If Raymundo, meanwhile, unjustly refuses to
accept Galen’s payment, the latter’s remedy is to consign the payment with the court in
accordance with the Civil Code provisions on consignment.

It is only when reconveyance is no longer feasible that Raymundo and Tensorex

should pay Galen the fair market value of the property. In other words, it is when the
property has passed on to an innocent purchaser for value and in good faith, has been
dissipated, or has been subjected to an analogous circumstance which renders the
return of the property impossible that Raymundo and/or Tensorex, is obliged to pay
Galen the fair market value of the property.

In this case, it appears that the RTC accommodated Galen’s choice of payment of the
fair market value of the property and it became the main obligation of Raymundo as well
as Tensorex instead of being the alternative. Worse, it even considered the subject
property as absolutely owned by Tensorex and levied upon the same to satisfy payment
of the fair market value of the very property that has only been pledged as security of
Galen’s loan. While it indeed appears that Raymundo was able to transfer title of the
property to Tensorex, it should be noted that the latter is a party to Civil Case No. 18808
and is necessarily bound by the judgment. The dissolution of Tensorex is not a valid
reason to avoid reconveyance inasmuch as the court may order the transfer of title to
Galen by some other person appointed by the court in accordance with Section 10, Rule
39 of the Rules of Court.

The existence of subsequent encumbrances on the property is also not a sufficient

ground to insist on the payment of its fair market value. To begin with, it was Galen
which sought the return of the property by filing the civil case. Moreover, as correctly
pointed out by Raymundo, whatever transactions Tensorex entered into is subject to the
notice of lis pendens which serves as a constructive notice to purchasers or other
persons subsequently dealing with the same property. [42] Further, having Raymundo
and/or Tensorex keep the property (and later on levy upon the same) and order the
payment of its fair market value virtually amounts to a sale, which goes against the RTC
and CA’s conclusion that the transaction subject of Civil Case No. 18808 is not a sale
but an equitable mortgage. It also violates the very public policy that prohibits pactum
commissorium.[43] In the early case of Guanzon v. Hon. Argel,[44] which also involves an
equitable mortgage, the Court ruled –

In no way can the judgment at bar be construed to mean that should the Dumaraogs fail
to pay the money within the specified period then the party would be conveyed by the
Sheriff to Guanzon. Any interpretation in that sense would contradict the declaration
made in the same judgment that the contract between the parties was in fact a
mortgage and not a pacto de retro sale. x x x The mortgagor’s default does not operate
to vest in the mortgagee the ownership of the encumbered property, for any such effect
1150
is against public policy, as enunciated by the Civil Code. The court can not be
presumed to have adjudged what would be contrary to law, unless it be plain and
inescapable from its final judgment. No such purport appears or is legitimately
inferable from the terms of the judgment aforequoted. x x x.[45] (Citation omitted and
emphasis ours)

The RTC, therefore, committed grave abuse of discretion in ordering the payment of the
fair market value of the subject property despite the fact that reconveyance is still
feasible under the circumstances of this case. Consequently, the CA committed a
reversible error in sustaining the assailed RTC orders and in dismissing Raymundo’s
special civil action for certiorari for lack of merit.

In Muñoz v. Ramirez,[46] the Court stated:

In Lustan v. CA, where we established the reciprocal obligations of the parties under an
equitable mortgage, we ordered the reconveyance of the property to the rightful owner
therein upon the payment of the loan within 90 days from the finality of this
decision.[47] (Emphasis ours)

Before concluding, the Court notes that under the final and executory CA Decision
dated May 7, 2004, Galen was adjudged to pay Raymundo the sum of P3,865,000.00
with legal interest from the date of the filing of the complaint until fully paid. Raymundo,
meanwhile, was ordered to pay damages, attorney’s fees and costs of suit.

In Sunga-Chan v. Court of Appeals,[48] the Court, citing Eastern Shipping Lines, Inc. v.

Court of Appeals,[49] reiterated the rule on the rates and application of interests, viz:

Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if
proper, and the applicable rate, as follows: The 12% per annum rate under CB
Circular No. 416 shall apply only to loans or forbearance of money, goods, or
credits, as well as to judgments involving such loan or forbearance of money,
goods, or credit, while the 6% per annum under Art. 2209 of the Civil Code applies
“when the transaction involves the payment of indemnities in the concept of
damage arising from the breach or a delay in the performance of obligations in
general,” with the application of both rates reckoned “from the time the complaint was
filed until the [adjudged] amount is fully paid.” In either instance, the reckoning period for
the commencement of the running of the legal interest shall be subject to the condition
“that the courts are vested with discretion, depending on the equities of each case, on
the award of interest.”

Otherwise formulated, the norm to be followed in the future on the rates and application
thereof is:

“x x x x

II.?With regard particularly to an award of interest in the concept of actual and

compensatory damages, the rate of interest, as well as the accrual thereof, is imposed,

1151
as follows:

1.  When the obligation [is] breached[, and it] consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which may
have been stipulated in writing. Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. In the absence of stipulation, the rate
of interest shall be 12% per annum to be computed from default, i.e., from judicial
or extrajudicial demand under and subject to the provisions of Article 1169 of the
Civil Code.

xxxx

3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.”[50] (Citations omitted and emphases and underscoring ours)

Recently, the Monetary Board of the Bangko Sentral ng Pilipinas issued Resolution No.
796 dated May 16, 2013, revising the interest rate to be imposed for the loan or
forbearance of any money, goods or credits, in the absence of an express contract, to
six percent (6%) per annum. This was implemented by BSP Circular No. 799 dated
June 21, 2013 and effective July 1, 2013.

Applying the foregoing guidelines, the following rates are to be imposed on the parties’
respective obligations:

(a) Galen’s mortgage indebtedness shall earn interest at the rate of 12% per
annum from the date of the filing of the complaint on January 25, 1988 [51] until June 30,
2013; thereafter, it shall earn six percent (6%) interest per annum until fully paid. The
Court is constrained to retain the application of the interest rate from the filing of the
complaint until full payment because the CA’s judgment on this score has already
attained finality and cannot be disturbed at this stage; [52] and

(b) The damages, attorney’s fees and costs to be paid by Raymundo shall earn interest
at the rate of six percent (6%) per annum from the date of finality of the CA Decision on
May 7, 2004 until fully paid.

WHEREFORE, the petition is GRANTED. The Decision dated October 30, 2009 and
Resolution dated March 10, 2010 of the Court of Appeals in CA-G.R. SP No. 105401
are REVERSED and SET ASIDE. Accordingly, the assailed Orders dated August 6,
2007, December 12, 2007 and August 15, 2008 of the Regional Trial Court of Makti
City, Branch 62, as well as the writ of execution dated January 10, 2007 and all other
orders, writs and processes issued pursuant thereto are NULLIFIED.

The RTC of Makati City, Branch 62 is DIRECTED to implement the Decision dated May
7, 2004 of the Court of Appeals in accordance with this Decision, and subject to the
1152
interest rates discussed herein.

SO ORDERED.

SECOND DIVISION

February 8, 2017

G.R. No. 215933

POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION

(PSALM), Petitioner
vs.
MAUNLAD HOMES, INC., Respondent

DECISION

PERALTA, J.:

Assailed in this petition for review on certiorari are the Decision1 dated July 30, 2012
and the Resolution2 dated December 10, 2014 issued by the Court of Appeals (CA) in
CA-G.R. SP No. 118302.

The antecedent facts are as follows:

Respondent Maunlad Homes, Inc. filed with the Municipal Trial Court in Cities (MTCC),
Malolos City, Bulacan, an unlawful detainer case with damages against National Power
Corporation (NPC), raffled-off to Branch 1. After trial, the MTCC issued its
Decision3 dated October 26, 2009, ordering NPC to vacate the subject premises and
surrender physical possession thereof to respondent; to pay reasonable compensation
equivalent to Php20.00 per square meter per month of respondent's 25,896-sq. m.
properties, reckoned from the date of demand on October 6, 2008, until complete
vacation and surrender of the subject premises; and to pay Php20,000.00 as and for
attorney's fees and cost of suit.

The NPC appealed the decision to the Regional Trial Court (RTC) of Malolos City,
Bulacan, and was raffled-off to Branch 78. The RTC rendered its Decision 4 dated May
18, 2010 affirming in toto the MTCC decision.

Respondent filed a Motion for Execution which was opposed by the NPC. The NPC also
filed a motion for reconsideration of the RTC decision. In an Order dated August 5,
2010, the RTC denied the NPC's motion for reconsideration and granted respondent's
motion for execution. On August 25, 2010, a Writ of Execution pending appeal was
issued.5 And on September 6, 2010, the sheriff served a Notice of Demand 6 of payment
to the NPC.

1153
Respondent then filed an urgent motion for issuance of a Break Open Order since the
sheriff who tried to implement the writ of execution, by serving the notice of levy on the
NPC Warehouse at Barangay Lagundi, Mexico, Pampanga, was prevented by the
security guards assigned therein. The NPC argued that the warehouse is being used
both by it and the Power Sector Assets and Liabilities Management Corporation (herein
petitioner PSALM), an entity created and existing by virtue of Republic Act No. 9136,
the Electric Power Industry Reform Act of 2001 (EPIRA Law); that the said law provides
that the ownership and all generation assets, IPP contracts and other NPC disposable
assets are transferred to PSALM; and that as of the moment, the ownership of the said
items stored in the said warehouse cannot be established with certainty as they are in
the process of determining what properties may be retained by the latter.

On October 26, 2010, the RTC issued a Break Open Order 7 authorizing the sheriff and
his deputies, police officers/escorts, representatives from both parties to enter/break
open into the NPC's warehouse facilities located at Barangay Lagundi, Mexico,
Pampanga.

On November 4, 2010, the sheriff issued a Notice of Levy 8 on execution pending appeal
of personal properties/sale of seven (7) units transformer radiator fins, one (1) unit
power transformer with Serial No. 77740395, and four (4) pieces angle bars.

The fallo of the notice states:

NOW WHEREFORE, by virtue of said writ of execution pending appeal and in

accordance with Rule 39, Section 9 of the Rules of Court, the undersigned sheriff IV will
sell at public auction to the highest bidder for CASH and in Philippine Currency, on
November 12, 2010 at 10:00 in the morning or soon thereafter, at No. 120 Gapan
Olongapo Road, Barangay Lagundi, Mexico, Pampanga, the above- described
properties to satisfy the said Writ of Execution pending Appeal. 9

On November 9, 2010, petitioner filed an Affidavit 10 of third-party claim with the sheriff
pursuant to Section 16, Rule 39 of the Rules of Court, and alleging that it is the owner of
the levied properties pursuant to the EPIRA Law. On November 10, 2010, petitioner
filed a Manifestation11 with Urgent Ex Parte Motion for Issuance of Status Quo Order
with the RTC arguing that it is the owner of the subject properties pulled out by the
sheriff by operation of law; that it is not a party to the instant case and therefore cannot
be bound by the judgment therein; that the obligation to pay respondent had not been
transferred to it. Petitioner also prayed for the nullification of the levy of its properties
and restoring their immediate possession to it.

On November 11, 2010, the RTC issued an Order 12 holding in abeyance the public sale
of the subject levied properties until further orders.

On February 1, 2011, the RTC issued an Order, 13 the dispositive portion of which reads:

1154
WHEREFORE, the foregoing considered, the motion for issuance of Status Quo Order
is hereby DENIED. The third-party claim filed by PSALM is likewise denied.

Further PSALM's prayer to nullify the levy of seven units transformers radiator fins, one
unit power transformer with serial number E-77740395 and four pieces of angle bars
and restoring its immediate possession to the same is DENIED.

Accordingly, the Sheriff of this Court is DIRECTED to proceed with the implementation
of the writ of execution issued in this case in accordance with law and without further
delay.

SO ORDERED.14

On February 21, 2011, the sheriff issued a notice 15 of sale on execution of personal
properties.

Petitioner filed with the CA a petition for certiorari assailing the October 26, 2010 Break
Open Order, the November 4, 2010 notice of levy on execution pending appeal, the
Order dated February 1, 2011 denying the motion for issuance of Status Quo Order and
the third-party claim, and the February 21, 2011 notice of sale on execution of personal
properties. It alleged that it has no adequate remedy available from the writs and
processes issued by the RTC, and that it acted without or in excess of jurisdiction in
issuing the assailed orders despite the fact that petitioner is the owner of the subject
properties.

On July 30, 2012, the CA issued its assailed Decision dismissing the petition
for certiorari for being an incorrect remedy.

The CA found, among others, that contrary to the allegation of petitioner that there
exists no plain, speedy and adequate remedy obtaining under the circumstances,
Section 16, Rule 3 9 of the Rules of Court provides a more expeditious and
encompassing recourse in case a property belonging to a third person is placed under
the coverage of the writ of execution and, thereafter, sold at public auction.

Petitioner filed a motion for reconsideration, which was denied by the CA in a

Resolution dated December 10, 2014.

Petitioner filed the instant petition for review on certiorari alleging the following:

THE CA, IN DISMISSING PSALM'S PETITION ON PROCEDURAL GROUNDS,

OVERLOOKED PSALM'S PREVIOUSLY FILED THIRD PARTY CLAIM.

II

1155
PSALM OWNS THE PROPERTIES SUBJECT MATTER OF THE ORDERS OF JUDGE
SAMPAGA ISSUED AND THE PROCESSES SHERIFF ESGUERRA ISSUED.

III

THE JUDGMENT OBLIGATION IS NOT AMONG THE OBLIGATIONS PSALM

ASSUMED.

IV

PSALM WAS NOT A PARTY TO THE CASE IN WHICH THE DECISION THEREIN IS
THE SUBJECT OF THE EXECUTION PROCEEDINGS.16

Petitioner claims that the CA erred in overlooking the fact that it filed a third party claim
as provided under Section 16 of Rule 39 of the 1997 Rules of Civil Procedure. Petitioner
contends that the CA should have taken consideration of the substantive issues raised
in its petition reiterating its ownership of the levied properties. It claims that upon the
effectivity of the EPIRA law on June 26, 2001, the ownership of all existing generation
assets, IPP contracts, real estate and all other disposable assets of NPC were
transferred to it; and that all existing liabilities and outstanding financial obligations of
NPC as of June 26, 200 I arising from loans, issuance of bonds, securities and other
instrument of indebtedness were then and there likewise legally transferred and
assumed by it. However, since respondent's claim is not among those existing
obligations that were transferred to it upon the effectivity of the EPIRA law, it cannot be
held liable for the claim even if it were made a party in the case. It contends that there is
sufficient ground to annul the levy and sale made by the sheriff since it is not a party in
the case, and therefore, not bound by the judgment rendered.

The pivotal issue for resolution is whether the CA erred in dismissing petitioner's petition
for certiorari assailing the denial of the latter's third party claim for being a wrong
remedy.

We find no merit in the petition.

The power of the court in executing judgments extends only to properties

unquestionably belonging to the judgment debtor alone. 17 An execution can be issued
only against a party and not against one who did not have his day in court. 18 The duty of
the sheriff is to levy the property of the judgment debtor not that of a third person. For,
as the saying goes, one man's goods shall not be sold for another man's debts. 19 Thus,
if the property levied by virtue of a writ of execution is claimed by a third person who is
not the judgment obligor, Section 16 of Rule 39 of the 1997 Rules of Civil Procedure
provides for the remedy of such third party claimant, to wit:

Sec. 16. Proceedings where property claimed by third person. - If the property levied on
is claimed by any person other than the judgment obligor or his agent, and such person
makes an affidavit of his title thereto or right to the possession thereof, stating the

1156
grounds of such right or title, and serves the same upon the officer making the levy and
a copy thereof upon the judgment obligee, the officer shall not be bound to keep the
property, unless such judgment obligee, on demand of the officer, files a bond approved
by the court to indemnify the third-party claimant in a sum not less than the value of the
property levied on. In case of disagreement as to such value, the same shall be
determined by the court issuing the writ of execution. No claim for damages for the
taking or keeping of the property may be enforced against the bond unless the action
therefor is filed within one hundred twenty (120) days from the date of the filing of the
bond.

The officer shall not be liable for damages for the taking or keeping of the property, to
any third-party claimant if such bond is filed. Nothing herein contained shall prevent
such claimant or any third person from vindicating his claim to the property in a separate
action, or prevent the judgment obligee from claiming damages in the same or a
separate action against a third-party claimant who filed a frivolous or plainly spurious
claim.

When the writ of execution is issued in favor of the Republic of the Philippines, or any
officer duly representing it, the filing of such bond shall not be required, and in case the
sheriff or levying officer is sued for damages as a result of the levy, he shall be
represented by the Solicitor General and if held liable therefor, the actual damages
adjudged by the court shall be paid by the National Treasurer out of such funds as may
be appropriated for the purpose.

Under the above-quoted provision, the third-party claimant may execute an affidavit of
his title or right to the possession of the property levied, and serve the same to the
officer making the levy and a copy thereof to the judgment creditor. This remedy is
known as terceria.20 The officer shall not be bound to keep the property, unless the
judgment creditor files a bond approved by the court to indemnify the third-party
claimant in a sum not less than the value of the property levied on. An action for
damages may be brought against the officer within one hundred twenty (120) days from
the date of the filing of the bond. The same section also provides that a third-party
claimant may file a proper action to vindicate his claim to the levied property. The proper
action mentioned in Section 16 would have for its object the recovery of ownership or
possession of the property seized by the sheriff, as well as damages resulting from the
allegedly wrongful seizure and detention thereof despite the third party claim and it may
be brought against the sheriff and such other parties as may be alleged to have
colluded with him in the supposedly wrongful execution proceedings, such as the
judgment creditor himself. If instituted by a stranger to the suit in which execution has
issued, such proper action should be a totally separate and distinct action from the
former suit.21

In this case, petitioner had filed an affidavit of third-party claim with the sheriff and a
motion for issuance of status quo order with the RTC to prevent the sale of the levied
properties at public auction, nullification of the levy and restoration of the subject

1157
properties to it, which were denied by the RTC and, consequently, the sheriff was
directed to proceed with the implementation of the issued writ of execution.

The RTC denied the third-party claim as follows:

As to the third-party claim by movant PSALM, this Court also resolves to deny the same
for lack of merit.

Section 16 of Rule 39 of the Rules of Court provides:

xxx

In this present case, aside from serving said affidavit of third-party claim to the Sheriff of
this Court, claimant PSALM also filed this instant motion for issuance of status
quo order to prevent the sale of the levied properties at public auction, nullification of
the levy and restoration of the subject properties in the possession of PSALM. In effect,
instead of the Sheriff requiring the plaintiff-obligee to file an indemnity bond, the Court is
constrained to resolve the merit of the third-party claim filed by PSALM.

However, it must be emphasized that the resolution of this Court is limited only to a
determination of whether the Sheriff acted correctly in the performance of his duties. It
cannot pass upon the question of title to the property, with any character of finality. It
only treats of that matter in so far as may be necessary to decide if the sheriff acted
correctly or not.

After giving an opportunity to vindicate their claim and after a judicious examination of
the arguments posed by all of the parties, this Court finds that PSALM has not been
able to satisfactorily establish their claim of ownership over the subject properties.

First, claimant PSALM has not presented sufficient proof of ownership over the said
levied properties.1âwphi1 It merely claimed that the subject properties were transferred
by operation of law in view of the passage of EPIRA in 2001. It did not submit any
document evidencing ownership. It even failed to present any document that the levied
property is among those included in the inventoried property of PSALM. The doctrine of
"Ei incumbit probatio qui dicit, non qui negat" or "He who asserts, not he who denies,
must prove" is applicable in this present case.

Second, a careful perusal of EPIRA, particularly Sections 49, 50, 51 and 56, in relation
to Section 1 of Rule 21 of its Implementing Rules and Regulations, would show that
ownership of NPC's assets, herein levied properties included, is not ipso jure or by
operation of law as there is the need to execute certain documents evidencing transfer
of ownership and possession. This Court agrees with the plaintiff-appellee that these
documents are conditions precedent that are needed to be performed and executed in
order to have a valid transfer.

Section 1, Rule 21 of the IRR provides:

1158
NPC and PSALM shall take such measures and execute such documents to effect the
transfer of ownership and possession of all assets, rights and privileges, liabilities
required by the Act to be transferred by NPC to PSALM.

Third, even if the transfer is by operation of law, it would be an injustice and inequitable,
to say the least, to interpret the aforesaid provision as to effect the transfer only of the
assets and properties of NPC but not its obligation and liabilities. The assets and
properties transferred should also account for the liabilities and obligations incurred by
NPC. In fact, Section 49 of the said law explicitly states that PSALM should not only
assume and take ownership of all existing NPC generations assets, liabilities and IPP
contracts, real estate and other disposable assets.

In the instant case, plaintiff Maunlad Homes, Inc. is already on the stage of reaping the
fruits of its labor after it had judiciously battled the case with the court a quo and this
Court. Injustice is manifest if they would not be awarded what is due them merely on the
ground of technicalities and evasive measures undertaken by its adversary. 22

In Spouses Sy v. Hon. Discaya,23 We held that for the remedy of terceria to prosper, the
claim of ownership or right of possession to the levied property by the third-party
claimant must first be unmistakably established, thus:

x x x A third person whose property was seized by a sheriff to answer for the obligation
of the judgment debtor may invoke the supervisory power of the court which authorized
such execution. Upon due application by the third person and after summary hearing,
the court may command that the property be released from the mistaken levy and
restored to the rightful owner or possessor. What said court can do in these instances,
however, is limited to a determination of whether the sheriff has acted rightly or wrongly
in the performance of his duties in the execution of judgment, more specifically, if he
has indeed taken hold of property not belonging to the judgment debtor. The court does
not and cannot pass upon the question of title to the property, with any character of
finality.1âwphi1 It can treat of the matter only insofar as may be necessary to decide if
the sheriff has acted correctly or not. It can require the sheriff to restore the property to
the claimant's possession if warranted by the evidence. However, if the claimant's
proofs do not persuade the court of the validity of his title or right of possession thereto,
the claim will be denied.24

Independent of the above-stated recourse, a third-party claimant may also avail of the
remedy known as "terceria, " provided in Section 17, Rule 39, by serving on the officer
making the levy an affidavit of his title and a copy thereof upon the judgment creditor.
The officer shall not be bound to keep the property, unless such judgment creditor or his
agent, on demand of the officer, indemnifies the officer against such claim by a bond in
a sum not greater than the value of the property levied on. An action for damages may
be brought against the sheriff within one hundred twenty (120) days from the filing of the
bond.

1159
The aforesaid remedies are nevertheless without prejudice to "any proper action" that a
third-party claimant may deem suitable to vindicate "his claim to the property." Such a
"proper action" is, obviously, entirely distinct from that explicitly prescribed in Section 17
of Rule 39, which is an action for damages brought by a third-party claimant against the
officer within one hundred twenty (120) days from the date of the filing of the bond for
the taking or keeping of the property subject of the "terceria."

Since the RTC denied the third-party claim for failure of petitioner to satisfactorily
establish its claim of ownership over the subject properties, the latter filed with the CA a
petition for certiorari assailing such denial and claimed that there is no plain, speedy
and adequate remedy in the ordinary course of law. The petition for certiorari was
dismissed by the CA for being a wrong remedy.

We affirm the dismissal.

A petition for certiorari under Rule 65 of the Rules of Court may be filed when any
tribunal, board or officer exercising judicial or quasi-judicial functions has acted without
or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack
or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate
remedy in the ordinary course of law. An adequate remedy has been defined as a
remedy which is equally beneficial, speedy and sufficient, not merely a remedy which at
some time in the future will bring about a revival of the judgment of the lower court
complained of in the certiorari proceeding, but a remedy which will promptly relieve the
petitioner from the injurious effects of that judgment and the acts of the inferior court or
tribunal.25

Notably, petitioner cannot appeal from the denial of its third-party claim since it is not
one of the parties in the action where the writ of execution was issued, 26 as the unlawful
detainer case was between respondent and the NPC. Also, the denial of the third-party
claim is not appealable as provided under the above-quoted Section 16, Rule 39 of the
Rules of Court since the remedy of a third party claimant is to file a separate and
independent action to vindicate his claim of ownership or right of possession of the
levied properties against the judgment creditor or the purchaser of the property at the
public auction sale. It is in this separate and independent action that the issue of the
third-party claimant's title to the levied properties can be resolved with finality.

In Queblar v. Garduno,27 we declared:

The appeal interposed by the third-party claimant-appellant is improper, because she

was not one of the parties in the action who were exclusively Venancio Queblar as
plaintiff and Leonardo Garduno as defendant. Considering the provisions of said section
451 of the Code of Civil Procedure, as amended by Act No. 4108, 28 the appealed order
was not appealable. The appeal that should have been interposed by her, if the term
"appeal" may properly be employed, is a separate reinvidicatory action against the
execution creditor or the purchaser of her property after the sale at public auction, or a

1160
complaint for damages to be charged against the bond filed by the judgment creditor in
favor of the sheriff.29

Hence, petitioner's claim in their jurisdictional allegations in its petition for certiorari filed

with the CA that it was constrained to file the petition for certiorari under Rule 65 to
protect its rights and interest over the subject properties because of the absence of a
plain, speedy and adequate remedy, is contradicted by the procedure laid down under
Section 16 of Rule 39, i.e., the third-party claimant may file an independent action to
vindicate its claim of ownership to the levied property. Where a specific remedy has
been laid down by our rules for the protection or enforcement of rights, the same should
be resorted to. In Solidum v. CA,30 We held:

We have held that neither an appeal nor a petition for certiorari is the proper remedy
from the denial of a third-party claim. In the case of Northern Motors, Inc. v. Coquia, the
petitioner filed, among others, a third-party claim which was denied by the respondent
judge in the disputed resolution. Northern Motors, Inc. thereafter filed a petition
for certiorari to nullify the resolution and order of the respondent judge. In resolving
whether the respondent judge acted with grave abuse of discretion in denying
petitioner's third-party claim, the Court held:

Pursuant to [Section 17, Rule 39 of the Revised Rules of Court], a third-party claimant
has two remedies, such as, an action for damages against the sheriff to be brought
within 120 days from the filing of the bond, and a separate and independent action to
vindicate his claim to the property. In the case at bar, petitioner's and intervenor's
remedy against the bond proved to be unavailing because of the disputed order of the
respondent Judge canceling the indemnity bond. Such an order as well as the order
denying a motion to reconsider the same in effect discarded or quashed the third-party
claims. What then would the remedy be of the third-party claimants?

In the recent case of Serra vs. Rodriguez, xxx this Court (First Division), thru Mr. Justice
Makasiar, ruled:

From the denial of a third-party claim to defeat the attachment caused to be levied by a
creditor, neither an appeal nor a petition for certiorari is the proper remedy. The remedy
of petitioner would be to file a separate and independent action to determine the
ownership of the attached property or to file a complaint for damages chargeable
against the bond filed by the judgment creditor in favor of the provincial sheriff.

In Lara vs. Bayona, L-7920, May 10, 1955, this Court, thru Mr. Justice Concepcion, later
Chief Justice, in denying the petition for certiorari to set aside the order of the lower
court quashing the third-party claim of a chattel mortgagee, held:

Pursuant to this provision, nothing contained therein shall prevent petitioner "from
vindicating his claim to the property by any proper action." Neither does the order
complained of deprive petitioner herein of the opportunity to enforce his alleged rights
by appropriate proceedings. In short, he has another "plain, speedy and adequate

1161
remedy in the ordinary course of law," and, hence is not entitled either to a writ
of certiorari or to a writ of prohibition.

The Court further held that since the third-party claimant is not one of the parties to the
action, he could not, strictly speaking, appeal from the order denying its claim, but
should file a separate reinvidicatory action against the execution creditor or a complaint
for damages against the bond filed by the judgment creditor in favor of the sheriff. The
rights of a third-party claimant should be decided in a separate action to be instituted by
the third person. In fine, the appeal that should be interposed, if the term appeal may be
properly employed, is a separate reinvidicatory action against the execution creditor or
complaint for damages to be charged against the bond filed by the judgment creditor in
favor of the sheriff.31

And in such separate action, the court may issue a writ of preliminary injunction against
the sheriff enjoining him from proceeding with the execution sale, 32 which is a speedy
and adequate remedy to immediately relieve petitioner from the adverse effects of the
lower court's judgment. Thus, the CA did not err in saying that Section 16 of Rule 39
provides a more expeditious and encompassing recourse from the denial of its third-
party claim.

Considering our foregoing discussions, We need not address the other issues raised by
petitioner regarding its right to ownership and possession of the levied properties.

WHEREFORE, the petition is DENIED. The Decision dated July 30, 2012 and the
Resolution dated December 10, 2014 issued by the Court of Appeals in CA-G.R. SP
No. 118302 are hereby AFFIRMED.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 182571, September 02, 2013 ]
LIGAYA ESGUERRA, LOWELL ESGUERRA AND LIESELL ESGUERRA,
PETITIONERS, VS. HOLCIM PHILIPPINES, INC., RESPONDENT.

DECISION
REYES, J.:
The present petition is an offshoot of our final and executory decision promulgated on
December 27, 2002 in G.R. No. 120004, entitled “Iluminada de Guzman v. Court of
Appeals and Jorge Esguerra.”[1] Ligaya Esguerra (Ligaya), Lowell Esguerra (Lowell),
and Liesell Esguerra (Liesell) (petitioners) are heirs of Jorge Esguerra (Esguerra) while
herein respondent, HOLCIM Philippines, Inc. (HOLCIM) is the successor-in-interest of
Iluminada de Guzman (de Guzman).

In the instant petition, the petitioners assail the Decision [2] dated August 31, 2007 and
Resolution[3] dated April 14, 2008 of the Court of Appeals (CA) in CA-G.R. SP No.

1162
94838 which reversed and set aside the: (a) Order [4] dated December 1, 2005 of the
Regional Trial Court (RTC) of Malolos, Bulacan, Branch 16 granting the petitioners’
motion for the issuance of the alias writ of execution of the Decision dated December
27, 2002 in G.R. No. 120004, which ordered HOLCIM to pay the amount equivalent to
the total volume of limestones extracted from the subject property in the sum of
P91,872,576.72; (b) Order[5] dated December 20, 2005, which reiterated the issuance of
the alias writ of execution; and (c) Order[6] dated June 7, 2006, which denied the motion
for reconsideration of the above-mentioned orders and the manifestation and motion for
ocular inspection filed by HOLCIM. The CA’s Resolution dated April 14, 2008 denied
herein petitioners’ motion for reconsideration of the CA’s Decision dated August 31,
2007.

Antecedent Facts

As a backgrounder and as stated in our Decision dated December 27, 2002 in G.R. No.
120004, therein respondent Esguerra filed on December 12, 1989 with the RTC,
Malolos, Bulacan, Branch 16 an action to annul the Free Patent in the name of de
Guzman. Esguerra claimed that he was the owner of Lot 3308-B, located at Matiktik,
Norzagaray, Bulacan, covered by Transfer Certificate of Title No. T-1685-P (M) of the
Registry of Deeds of Bulacan, with an approximate area of 47,000 square meters.
Esguerra learned that the said parcel of land was being offered for sale by de Guzman
to Hi-Cement Corporation (now named HOLCIM Philippines, Inc.). The former
possessor of the land, Felisa Maningas, was issued Free Patent No. 575674 which was
subsequently issued in the name of de Guzman over said parcel of land located at
Gidgid, Norzagaray, Bulacan with an area of 20.5631 hectares and described in Psu-
216349, covered by Original Certificate of Title (OCT) No. P-3876. Esguerra also
demanded that the portion of his property, which has been encroached upon and
included in de Guzman’s Free Patent, be excluded. He later amended his complaint to
implead Hi-Cement as a co-defendant since the latter was hauling marble from the
subject land. He also prayed that Hi-Cement be ordered to desist from hauling marble,
to account for the marble already hauled and to pay him. [7]

The RTC dismissed Esguerra’s complaint but on appeal, the CA reversed in the
Decision dated February 28, 1995 in CA-G.R. CV No. 40140. The dispositive portion
reads as follows:
“WHEREFORE, premises considered, the decision appealed from is REVERSED and
SET ASIDE and another judgment is hereby rendered:

“1. Declaring [de Guzman’s] OCT No. P-3876 (Exh. B) null and void insofar as the
disputed area of 38,641 square meters, which is part of Lot 3308-B, covered by TCT
No. 1685-p (Exh. C) in the name of [Esguerra];

“2. Ordering [de Guzman] to cause the segregation, at his expense, of the disputed area
of 38,641 square meters from OCT No. P-3876;

“3. Ordering [de Guzman] to surrender her owner’s copy of OCT No. P-3876 to the
Register of Deeds of Bulacan who is in turn ordered to exclude from said OCT No. P-
1163
3876 the disputed area of 38,641 square meters included in [Esguerra’s] TCT No. T-
1685;

“4. Ordering [de Guzman] to immediately vacate and surrender to [Esguerra]

possession of the disputed area of 38,641 square meters;

“5. Ordering defendant-appellee Hi-Cement Corporation to immediately cease and

desist from quarrying or extracting marble from the disputed area;

“6. Ordering defendant-appellee Hi-Cement Corporation to make an accounting of the

compensation or royalty it has paid to defendant-appellee Iluminada de Guzman for
marbles quarried from the disputed area of 38,451 square meters from the time of the
filing of the amended complaint on March 23, 1990.

“7. Ordering and sentencing defendant-appellee Iluminada de Guzman to pay and turn
over to [Esguerra] all such amounts that she has received from her co-defendant Hi-
Cement Corporation as compensation or royalty for marbles extracted or quarried from
the disputed area of 38,451 square meters beginning March 23, 1990; and

“8. Ordering defendant-appellee Iluminada de Guzman to pay the costs.

“SO ORDERED.”[8]
In our Decision dated December 27, 2002 in G.R. No. 120004, the Court affirmed in
toto the aforesaid CA’s decision. After attaining finality, the case was remanded to the
RTC for execution.[9]

Thereafter, the heirs of Esguerra, herein petitioners, filed an Omnibus Motion [10] dated
September 28, 2004 with the RTC, manifesting that the Court’s decision in G.R. No.
120004 has yet to be executed,[11] and thus prayed:
xxxx

1. That Sheriff Perlito Dimagiba be directed to submit his Return on the execution of the
judgment;

2. That defendant Iluminada de Guzman and Hi-Cement (now Union Cement

Corporation Matictic, Sapang Kawayn [sic], Norzagaray, Bulacan) be diverted [sic] to
appear before this Honorable Court x x x;

3. That the plaintiffs be granted other legal and equitable reliefs. [12]
On December 1, 2004, the RTC issued an Order [13], to wit:
Acting on the Omnibus Motion filed by the Heirs of Jorge Esguerra, through counsel,
Atty. Orlando Lambino, and pursuant to Secs. 36 and 37, Rule 39 of [the] 1997 Rules of
Civil Procedure, the Court hereby GRANTS the same

AS PRAYED FOR, x x x Sheriff Perlito Dimagiba is hereby directed to submit his return
of a Writ of Execution dated October 28, 2003 within five (5) days from receipt of this

1164
Order.

Accordingly, defendant Iluminada de Guzman of Tanza, Malabon, Metro Manila and the
Hi-Cement (now Union Cement Corporation, Matictic, Sapang Kawayan, Norzagaray,
Bulacan) are hereby ordered to appear before this Court on December 6, 2004 at 8:30
o’clock in the morning to be examined on the dispositive portion of the judgment of the
Court of Appeals, affirmed by the Supreme Court. [14]
However, contrary to the Order dated December 1, 2004, de Guzman and HOLCIM
were not examined. Rather, the petitioners presented Engineer Louie Balicanta who
testified that upon an examination of the topographical maps covering the land of the
deceased Esguerra, the estimated volume of limestone hauled or quarried therefrom
covering the years 1990 to 2003 was 3,535,020.471 cubic meters. On May 16, 2005,
the petitioners filed their Formal Offer of Exhibits. [15]

Later, the petitioners filed a Supplement to the Motion for Execution [16] dated August 16,
2005 and a Motion for Alias Writ of Execution [17] dated November 9, 2005. They claimed
that the royalties due them amounted to P10.00 per metric ton. Thus, for the
9,187,257.67 metric tons[18] of limestone which HOLCIM allegedly acquired, the
petitioners should receive a total royalty of P91,872,576.72. [19]

On December 1, 2005, the RTC made a finding that the total volume of limestone which
HOLCIM allegedly quarried from the subject land amounted to P91,872,576.72. It also
ordered the issuance of an Alias Writ of Execution for the royalties which were
purportedly due to the petitioners.[20] The said order states:
Acting on the motion for alias writ of execution filed by the [petitioners], through counsel,
to be meritorious, the same is hereby granted, it appearing that the decision subject
matter of the writ of execution has not been satisfied by [de Guzman] and Hi-Cement
Corporation, and considering, further, that the Total Volume Extracted Materials
(LIMESTONE) at Lot #3308-B PSD-102661 (Annex A) was properly proven during the
hearing for the examination of judgment debtors showing the claim of
Php91,872,576.72 to be substantiated based on the Monthly Mineral Commodity Price
Monitor for January 2005 (Annex B), together with the O.R. for Certification fee (Annex
C).

AS PRAYED FOR, let an alias writ of execution be issued for the implementation of the
Decision of the Supreme Court in relation to the total volume extracted by Hi-Cement
(now HOLCIM) which is now the successor of defendant Iluminada de Guzman. [21]
On December 8, 2005, the petitioners filed an Urgent Motion for Clarification [22] praying
that the alias writ of execution be clarified for the purpose of directing [de Guzman]
and/or Hi-Cement Corporation and/or HOLCIM to pay the petitioners the amount of
P91,872,576.72.

As prayed for, the RTC issued an Order[23] on December 20, 2005, stating thus:
In view of the Urgent Motion for Clarification filed by the [petitioners], through counsel,
and there being no comment/opposition filed by [de Guzman], let an alias writ of
execution be issued directing [de Guzman] and/or Hi-Cement Corporation and/or

1165
HOLCIM to pay the [petitioners] the amount of Php 91,872,576.72 representing their
liability for the minerals extracted from the subject property pursuant to the Order of the
Court, dated December 01, 2005.[24]
Subsequently, an alias writ of execution and notices of garnishment on several banks,
garnishing all amounts that may have been deposited or owned by HOLCIM, were
issued on December 20, 2005 and December 21, 2005 respectively. [25]

On January 5, 2006, HOLCIM filed a motion for reconsideration. [26] It alleged that it did
not owe any amount of royalty to the petitioners for the extracted limestone from the
subject land. HOLCIM averred that it had actually entered into an Agreement [27] dated
March 23, 1993 (Agreement) with the petitioners governing their respective rights and
obligations in relation to the limestone allegedly extracted from the land in question.
HOLCIM further asserted that it had paid advance royalty to the petitioners from year
1993, in an aggregate sum of P694,184.22, an amount more than the P218,693.10
which the petitioners were entitled under the Agreement. [28]

On January 13, 2006, the petitioners filed its Opposition to [the] Motion for
Reconsideration[29] dated January 7, 2006, claiming that the Motion for Reconsideration
is barred by the omnibus motion rule because HOLCIM failed to question the
petitioners’ motion for execution of this Court’s decision in G.R. No. 120004. The
petitioners also averred that HOLCIM is barred by estoppel to question the execution of
the decision based on the Agreement, because said Agreement is in contravention with
the trial court’s previous orders which required HOLCIM to deposit to the clerk of court
the royalties due the deceased Esguerra. The petitioners also argued that the
Agreement is a way to evade the trial court’s orders and has been procured by taking
advantage of the petitioners’ financial distress after Esguerra died. [30]

On February 21, 2006, HOLCIM filed a Manifestation and Motion (for Ocular
Inspection).[31] It asked the court to conduct an ocular inspection, advancing the
argument that HOLCIM did not extract limestone from any portion of the 47,000-sq m
property which Esguerra owned; and that the pictures, which the petitioners presented
to prove that HOLCIM has been extracting limestone from the subject land until year
2005, were actually photographs of areas outside the contested land.

On June 7, 2006, the RTC denied HOLCIM’s motion for reconsideration and motion for
ocular inspection. It held that the petitioners proved their entitlement to the royalties
totaling to P91,872,576.72. The RTC also blamed HOLCIM for not presenting its own
witnesses and evidence. It further stated that to grant the motions for reconsideration
and ocular inspection is to reopen the case despite the fact that the trial court has no
more power to do so since the execution of this Court’s decision in G.R. No. 120004 is
now a matter of right on the petitioners’ part. [32]

On June 13, 2006, HOLCIM filed a Petition for Certiorari (with Urgent Applications for
Temporary Restraining Order and/or Writ of Preliminary Injunction) [33] with the CA. On
June 30, 2006, the petitioners filed their Comment on [the] “Petition for Certiorari” and
Opposition,[34] to which HOLCIM filed a Reply[35] on July 25, 2006. On August 31, 2007,

1166
the CA promulgated the now assailed decision finding merit in HOLCIM’s petition. [36] The
dispositive portion states:
WHEREFORE, the foregoing considered, the instant petition is hereby GRANTED and
the assailed Orders REVERSED and SET ASIDE. No costs.

SO ORDERED.[37]
The motion for reconsideration thereof was denied in the CA’s Resolution [38] dated April
14, 2008.

Issues

Thus, the petitioners filed the present petition for review under Rule 45 of the 1997
Rules of Civil Procedure, raising the following assignment of errors:
A. THE [CA] GRAVELY ERRED IN NOT HOLDING THAT [HOLCIM] IS ESTOPPED TO
QUESTION THE JURISDICTION OF THE TRIAL COURT TO CONDUCT A HEARING
ON THE EXACT PAYMENT WHICH [HOLCIM] WAS SUPPOSED TO PAY TO THE
PETITIONERS;

B. THE [CA] GRAVELY ERRED IN NOT DISMISSING [HOLCIM’S] PETITION FOR

CERTIORARI ON [THE] GROUND OF LACK OF BOARD RESOLUTION
AUTHORIZING THE FILING OF THE PETITION;

C. THE [CA] GRAVELY ERRED IN NOT DISMISSING THE PETITION FOR

[CERTIORARI], IT BEING NOT THE PROPER REMEDY, BUT AN APPEAL;

D. THE [CA] GRAVELY ERRED IN HOLDING THAT THE TRIAL COURT GRAVELY
ABUSED ITS DISCRETION IN THE EXECUTION OF THE DECISION BY CALLING
FOR EVIDENCE TO PROVE THE EXACT AMOUNT WHICH [HOLCIM] HAS TO PAY
TO THE PETITIONERS;

E. THE [CA] GRAVELY ERRED IN HOLDING THAT THE ORDERS OF THE TRIAL
COURT OF DECEMBER 1, 2005, DECEMBER 20, 2005, AND JUNE 7, 2006
MODIFIED THE DECISION OF THE CA G.R. CV NO. 40140 OF FEBRUARY 28,
1995[.][39]
Our Ruling

The present petition has substantially complied with the requirements.

HOLCIM alleged that the present petition is fatally defective since all of the most
important pleadings before the RTC and the CA have not been attached to the present
petition. However, a review of the records of the case shows that the petitioners
attached to their petition the following: (a) the CA’s Decision in CA-G.R. SP No. 94838
dated August 31, 2007;[40] (b) the CA’s Resolution in CA-G.R. SP No. 94838 dated April
14, 2008;[41] (c) the RTC’s Order in Civil Case No. 725-M-89 dated December 1, 2005;
[42]
 (d) the RTC’s Order in Civil Case No. 725-M-89 dated December 20, 2005; [43] (e) the
RTC’s Order in Civil Case No. 725-M-89 dated June 7, 2006; [44] (f) HOLCIM’s
Manifestation and Motion (for Ocular Inspection) in Civil Case No. 725-M-89 dated
1167
February 21, 2006 and its attachments;[45] (g) the Memorandum of Agreement between
Republic Cement Corporation and Spouses Juan and Maria Bernabe dated December
1, 1991;[46] (h) the Price Monitor of the Department of Environment and Natural
Resources (DENR) on the price per metric ton of non-metallic mines; [47] and (i) the
Special Power of Attorney executed by Ligaya and Liesell appointing Lowell as their
attorney-in-fact.[48]

From the foregoing, the Court finds the same substantially compliant with the
requirements of Section 4, Rule 45 of the 1997 Rules of Civil Procedure. All of the
pertinent documents necessary for the Court to appreciate the circumstances
surrounding the case and to resolve the issues at hand were attached. Furthermore, the
parties’ subsequent comment and reply have sufficiently provided the Court the needed
information regarding the proceedings and acts of the trial court during the execution of
the final and executory decision of this Court in G.R. No. 120004 which are the matters
being questioned. In Shimizu Philippines Contractors, Inc. v. Magsalin,[49] the Court
proceeded to give due course to the petition when it found the same and its
attachments sufficient for the Court to access and resolve the controversy. [50]

On the other hand, the petitioners claim that HOLCIM’s petition for certiorari in the CA
failed to comply with the rules on Verification and Certification of Non-Forum Shopping
because the latter did not secure and/or attach a certified true copy of a board
resolution authorizing any of its officers to file said petition. [51] Thus, the CA should have
dismissed outright HOLCIM’s petition before it.

The general rule is that a corporation can only exercise its powers and transact its
business through its board of directors and through its officers and agents when
authorized by a board resolution or its bylaws. The power of a corporation to sue and be
sued is exercised by the board of directors. The physical acts of the corporation, like the
signing of documents, can be performed only by natural persons duly authorized for the
purpose by corporate bylaws or by a specific act of the board. Absent the said board
resolution, a petition may not be given due course. [52]

In Bank of the Philippine Islands v. Court of Appeals,[53] the Court held that the
application of the rules must be the general rule, and the suspension or even mere
relaxation of its application, is the exception. This Court may go beyond the strict
application of the rules only on exceptional cases when there is truly substantial
compliance with the rule.[54]

In the case at bar, HOLCIM attached to its Petition for Certiorari before the CA a

Secretary’s Certificate authorizing Mr. Paul M. O’Callaghan (O’Callaghan), its Chief
Operating Officer, to nominate, designate and appoint the corporation’s authorized
representative in court hearings and conferences and the signing of court pleadings. [55] It
also attached the Special Power of Attorney dated June 9, 2006, signed by
O’Callaghan, appointing Sycip Salazar Hernandez & Gatmaitan and/or any of its
lawyers to represent HOLCIM;[56] and consequently, the Verification and Certification of
Non Forum Shopping signed by the authorized representative. [57] To be sure, HOLCIM,

1168
in its Reply filed in the CA, attached another Secretary’s Certificate, designating and
confirming O’Callaghan’s power to authorize Sycip Salazar Hernandez & Gatmaitan
and/or any of its lawyers to file for and on behalf of HOLCIM, the pertinent civil and/or
criminal actions in Civil Case No. 725-M-89 pending before the RTC, including any
petition to be filed with the CA and/or the Supreme Court in connection with the Orders
dated December 1, 2005, December 20, 2005 and June 7, 2006. [58]

The foregoing convinces the Court that the CA did not err in admitting HOLCIM’s
petition before it. HOLCIM attached all the necessary documents for the filing of a
petition for certiorari before the CA. Indeed, there was no complete failure to attach a
Certificate of Non-Forum Shopping. In fact, there was such a certificate. While the board
resolution may not have been attached, HOLCIM complied just the same when it
attached the Secretary’s Certificate dated July 17, 2006, thus proving that O’Callaghan
had the authority from the board of directors to appoint the counsel to represent them in
Civil Case No. 725-M-89. The Court recognizes the compliance made by HOLCIM in
good faith since after the petitioners pointed out the said defect, HOLCIM submitted the
Secretary’s Certificate dated July 17, 2006, confirming the earlier Secretary’s Certificate
dated June 9, 2006. For the Court, the ruling in General Milling Corporation v.
NLRC[59] is applicable where the Court rendered a decision in favor of the petitioner
despite its failure to attach the Certification of Non- Forum Shopping. The Court held
that there was substantial compliance when it eventually submitted the required
documents. Substantial justice dictates that technical and procedural rules must give
way because a deviation from the rigid enforcement of the rules will better serve the
ends of justice. The Court ratiocinated:
The rules of procedure are intended to promote, rather than frustrate, the ends of
justice, and while the swift unclogging of court dockets is a laudable objective, it,
nevertheless, must not be met at the expense of substantial justice. Technical and
procedural rules are intended to help secure, not suppress, the cause of justice and a
deviation from the rigid enforcement of the rules may be allowed to attain that prime
objective for, after all, the dispensation of justice is the core reason for the existence of
courts.[60] (Citation omitted)
HOLCIM’s filing in the CA of a petition for certiorari under Rule 65 of the 1997
Rules of Civil Procedure is proper.

The petitioners also argue that the CA gravely erred when it did not dismiss HOLCIM’s
petition for certiorari on the ground of improper remedy. The petitioners contend that
HOLCIM should have filed an appeal because when the RTC allowed the petitioners to
adduce evidence to determine the exact amount to be paid by HOLCIM during the
execution stage, it was implementing the dispositive portion of the decision of the CA in
CA-G.R. CV No. 40140 as affirmed by the Court. As ruled by the trial court, a case in
which an execution has been issued is regarded as still pending so that all proceedings
on the execution are proceedings in the suit. Accordingly, the court that rendered the
judgment maintains a general supervisory control over its process of execution, and this
power carries with it the right to determine questions of fact and law, which may be
involved in the execution.[61] Thus, for the petitioners, the RTC neither acted in excess of
its jurisdiction nor with grave abuse of discretion, which would call for HOLCIM to file a

1169
petition for certiorari.[62]

The Court disagrees with the petitioners’ mental acrobatics. Their arguments are
contrary to Section 1(f), Rule 41 of the Rules of Court, which provides:
Sec. 1. Subject of appeal.—An appeal may be taken from a judgment or final order that
completely disposes of the case, or of a particular matter therein when declared by
these Rules to be appealable.
No appeal may be taken from:

xxxx

(f) an order of execution;

xxxx
In all the above instances where the judgment or final order is not appealable, the
aggrieved party may file an appropriate special civil action under Rule 65.
The foregoing provision is explicit that no appeal may be taken from an order of
execution and a party who challenges such order may file a special civil action
for certiorari under Rule 65 of the Rules of Court. [63] An order of execution, when issued
with grave abuse of discretion amounting to lack or excess of jurisdiction, may be the
subject of a petition for certiorari under Rule 65.[64] Thus, HOLCIM did not err in filing a
petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.

HOLCIM is not estopped to question the jurisdiction of the trial court to conduct a
hearing and to accept evidence on the exact amount of royalty HOLCIM should
pay the petitioners.

The petitioners argue that HOLCIM is estopped from questioning the jurisdiction of the
RTC in conducting a hearing on the exact amount of royalty that HOLCIM must pay the
petitioners. They allege that: (a) HOLCIM expressed willingness to pay the royalty to
whoever would be adjudged the rightful owner of the subject land; (b) HOLCIM and de
Guzman did not appear in the hearing nor oppose the Omnibus Motion dated
September 28, 2004; (c) HOLCIM did not file any opposition or comment on the
petitioners’ Formal Offer of Evidence, Supplement to the Motion for Execution and
Motion for Alias Writ of Execution; and (d) HOLCIM is now the new owner of de
Guzman’s property. As such, it has acquired the rights, interests and liabilities of de
Guzman. The petitioners insist that HOLCIM must not only account for the royalty it paid
de Guzman, but it must also turn over said payments to the petitioners. [65]

HOLCIM counter-argues that when it expressed willingness to pay the royalties to

whoever would be declared the rightful owner of the subject land, it simply manifested
its good faith in fulfilling its obligations. It adds that the petitioners and HOLCIM entered
into an Agreement regarding the amount of royalty it should pay to the landowner; and
subsequently, the petitioners voluntarily accepted and retained the amount of
P694,184.22 paid by HOLCIM. In fact, HOLCIM stresses that the said amount was
more than what was stipulated in the Agreement. HOLCIM also asserts that jurisdiction

1170
is conferred by law, and not by laches, estoppel or by agreement among the parties and
such lack of jurisdiction may be raised at any stage of the proceedings. [66] Furthermore,
HOLCIM avers that it is even the DENR panel of arbitrators which has jurisdiction over
the case pursuant to Section 77 of the Philippine Mining Act of 1995. [67] Lastly, HOLCIM
claims that it eventually acquired de Guzman’s property, maintaining that the said
property did not overlap with Esguerra’s property. Thus, HOLCIM’s ownership and
quarrying operations on lands outside the disputed area would have no bearing
whatsoever on the petitioners’ claim for royalties on extractions done within the disputed
area. HOLCIM also asseverates that the obligation to turn over any royalty paid to de
Guzman is not a real obligation which attaches to the disputed area or to the land itself
or which follows the property to whoever might subsequently become its owner; rather,
HOLCIM argues that the obligation is purely a personal obligation of de Guzman and
thus, not transferable to HOLCIM.

What is clear is that the present case emanates from the petitioners’ desire to
implement the CA decision in CA-G.R. CV No. 40140 which was affirmed by the Court
in the Decision of December 27, 2002 in G.R. No. 120004. At the execution stage, the
only thing left for the trial court to do is to implement the final and executory judgment;
and the dispositive portion of the decision controls the execution of judgment. The final
judgment of this Court cannot be altered or modified, except for clerical errors,
misprisions or omissions.[68]

In the instant case, the CA’s decision which this Court affirmed in G.R. No. 120004
rendered, among others, the following judgment:

(a) Insofar as then defendant-appellee de Guzman is concerned, the CA declared OCT

No. P-3876 in her possession null and void in relation to the disputed area of 38,641 sq
m; the same CA’s decision subsequently ordered de Guzman –
[i] to segregate at her expense the disputed area of 38,641 sq m from OCT No. P-3876;

[ii] to surrender her owner’s copy of OCT No. P-3876 to the Register of Deeds of
Bulacan;

[iii] to immediately vacate and surrender to then plaintiff-appellant Esguerra possession

of the disputed area;

[iv] to pay and turn over to plaintiff-appellant Esguerra all the amount she received from
her co-defendant Hi-Cement Corporation (now HOLCIM) as compensation or royalty for
marbles extracted or quarried from the disputed area of 38,451 sq m beginning March
23, 1990; and

[v] to pay the costs.

(b) Insofar as HOLCIM is concerned, the CA’s decision ordered HOLCIM –
[i] to immediately cease and desist from quarrying or extracting marble from the
disputed area; and

1171
[ii] to make an accounting of the royalty it paid to de Guzman.
Indeed, the final judgment does not direct HOLCIM nor its predecessor Hi-Cement to
pay a certain amount to Esguerra and his heirs. What was required from HOLCIM to do
was merely to account for the payments it made to de Guzman. Apparently, this was not
enforced. It may be deduced from the records that when the petitioners filed the
Omnibus Motion dated September 28, 2004, they asked for the examination of de
Guzman and Hi-Cement (HOLCIM) under Sections 36 and 37 of Rule 39 of the Rules of
Court. This motion was subsequently granted by the trial court.

Sections 36[69] and 37[70] of Rule 39 of the Rules of Court are resorted to only when the
judgment remains unsatisfied, and there is a need for the judgment obligor to appear
and be examined concerning his property and income for their application to the
unsatisfied amount in the judgment. In the instant case, the decision in CA-G.R. CV No.
40140 as affirmed by the Court calls on HOLCIM to simply make an accounting of the
royalty paid to de Guzman. Unfortunately, the trial court, instead of facilitating the
accounting of payments made by HOLCIM to de Guzman, proceeded to adduce
evidence on the amount of limestone extracted from the disputed area and imposed the
monetary liability on HOLCIM.

It is rather unfortunate that HOLCIM did not register a whimper upon petitioners’
presentation of evidence. Notwithstanding, it cannot be denied that the trial court
committed grave abuse of discretion in issuing the questioned orders without giving
HOLCIM the chance to be heard. Indeed, when the decision has been rendered
unenforceable on account of the undetermined amount to be awarded, it was incumbent
upon the trial court to receive evidence from both parties to determine the exact amount
due to the petitioners.[71] Since HOLCIM was not given an opportunity to rebut the
petitioners’ evidence, considering that the former’s Manifestation and Motion for Ocular
Inspection was denied, justice will be better served if the trial court determines first the
existence of documents relative to HOLCIM’s payments made to de Guzman, and if the
same is not done, to receive further evidence, this time, from both parties. It must be
emphasized, however, that the evidence to be adduced here is in relation to the amount
of royalty paid to de Guzman by HOLCIM for marbles extracted from the disputed area
of 38,451 sq m beginning March 23, 1990 up to the time HOLCIM ceased to operate in
the subject area. In the event that the petitioners’ claim is beyond the subject area and
period, and HOLCIM denies such indebtedness, the governing rule should be Section
43, Rule 39 of the Rules of Court, to wit:
SEC. 43. Proceedings when indebtedness denied or another person claims the
property.— If it appears that a person or corporation, alleged to have property of
the judgment obligor or to be indebted to him, claims an interest in the property
adverse to him or denies the debt, the court may authorize, by an order made to
that effect, the judgment obligee to institute an action against such person or
corporation for the recovery of such interest or debt, forbid a transfer or other
disposition of such interest or debt within one hundred twenty (120) days from notice of
the order, and may punish disobedience of such order as for contempt. Such order may

1172
be modified or vacated at any time by the court which issued it, or by the court in which
the action is brought, upon such terms as may be just. (Emphasis ours)
Pursuant to this Rule, in the examination of a person, corporation, or other juridical
entity who has the property of such judgment obligor or is indebted to him (Rule 39,
Section 37), and such person, corporation, or juridical entity denies an indebtedness,
the court may only authorize the judgment obligee to institute an action against such
person or corporation for the recovery of such interest or debt. Nothing in the Rules
gives the court the authority to order such person or corporation to pay the judgment
obligee and the court exceeds its jurisdiction if it orders the person who denies the
indebtedness to pay the same. In Atilano II v. Asaali,[72] the Court held that an
“[e]xecution of a judgment can only be issued against one who is a party to the action,
and not against one who, not being a party thereto, did not have his day in court. Due
process dictates that a court decision can only bind a party to the litigation and not
against innocent third parties.”[73]

Finally, the Court does not agree with petitioners’ argument that the person of de
Guzman is “now merged in the person of HOLCIM or that HOLCIM has assumed her
personal liability or the judgment rendered against her.” [74] Nothing in the records shows
that HOLCIM admitted of assuming all the liabilities of de Guzman prior to the sale of
the subject property. HOLCIM, however, expresses its willingness to pay royalty only to
the rightful owner of the disputed area. Thus, in the event that the amount paid by
HOLCIM to de Guzman has been proven, de Guzman is ordered to turn over the
payment to the petitioners.[75] If the petitioners insist that HOLCIM owed them more than
what it paid to de Guzman, the petitioners cannot invoke the CA’s decision which was
affirmed by the Court in G.R. No. 120004 to ask for additional royalty. As earlier
discussed, this must be addressed in a separate action for the purpose. All told, the
Court finds no reversible error with the decision of the CA in nullifying the orders of the
RTC for having been issued in excess of its jurisdiction.

WHEREFORE, the Decision dated August 31, 2007 and the Resolution dated April 14,
2008 of the Court of Appeals in CA-G.R. SP No. 94838 are hereby AFFIRMED.

SO ORDERED.

FIRST DIVISION

G.R. No. 186322, July 08, 2015

ENRICO S. EULOGIO AND NATIVIDAD V. EULOGIO, Petitioners, v. PATERNO C.

BELL, SR., ROGELIA CALINGASAN-BELL, PATERNO WILLIAM BELL, JR.,
FLORENCE FELICIA VICTORIA BELL, PATERNO FERDINAND BELL III, AND
PATERNO BENERAÑO BELL IV, Respondents.

DECISION

SERENO, C.J.:

1173
This is a Petition for Review on Certiorari assailing the Court of Appeals (CA)
Decision1 in CA-G.R. SP No. 87531 which granted the Petition for Certiorari filed by
respondents and enjoined the execution sale of their family home for the satisfaction of
the money judgment awarded to petitioners in Civil Case No. 4581, and the
Resolution2 which denied petitioners' Motion for Reconsideration.

Antecedent Facts

Respondents Paterno William Bell, Jr., Florence Felicia Victoria Bell, Paterno Ferdinand
Bell III, and Paterno Benerano IV (the Bell siblings) are the unmarried children of
respondent Spouses Paterno C. Bell and Rogelia Calingasan-Bell (Spouses Bell). In
1995, the Bell siblings lodged a Complaint for annulment of documents, reconveyance,
quieting of title and damages against petitioners Enrico S. Eulogio and Natividad
Eulogio (the Eulogios). It was docketed as Civil Case No. 4581 at the Regional Trial
Court (RTC) of Batangas City, Branch 84. The Complaint sought the annulment of the
contract of sale executed by Spouses Bell over their 329-square-meter residential
house and lot, as well as the cancellation of the title obtained by petitioners by virtue of
the Deed.

The RTC granted respondents' prayers, but declared Spouses Bell liable to petitioners
in the amount of PI million plus 12% interest per annum. The dispositive portion of the
Decision dated 15 July 1998 reads as follows:chanRoblesvirtualLawlibrary
WHEREFORE, prescinding from all the foregoing, the Court hereby
declares:ChanRoblesVirtualawlibrary

1. That the sale of the subject house and lot under Deed of Sale marked as Exhibit "F"
is only an equitable mortgage in favor of the defendants Enrico Eulogio and Natividad
Eulogio. However, the mortgage cannot bind the property in question for being violative
of Chapter 2, Title 4 of the Family Code, its encumbrance not having been consented to
in writing by a majority of the beneficiaries who are the plaintiffs herein;

2. The said equitable mortgage is deemed to be an unsecured mortgage [sic] for which
the Spouses Paterno C. Bell, Sr. and Rogelia Calingasan Bell as mortgagors are liable
to the defendants-spouses Enrico Eulogio and Natividad Eulogio in the amount of
P1,000,000 plus interest of 12% per annum. However, under the Fourth Party
Complaint Sps. Paterno C. Bell, Sr. and Rogelia Calingasan Bell have the right of
reimbursement from fourth party defendants Nicolas Moraña and Julieta Moraña for
whom their loan of P1,000,000 was secured by Sps. Paterno C. Bell, Sr. and Rogelia
Calingasan Bell. Accordingly, the fourth party defendants Nicolas Moraña and Julieta
Moraña are hereby ordered to reimburse Paterno C. Bell, Sr. and Rogelia Calingasan
Bell the loan of P1,000,000 plus interest of 12% per annum to be paid by the latter to
defendants Enrico and Natividad Eulogio;

3. The house and lot in question is free from any and all encumbrances by virtue of said
equitable mortgage or the purported sale; and

4. The Deed of Sale (Exhibit "F") is null and void for being contrary to law and public
1174
policy.

Accordingly, (1) the Register of Deeds of Batangas City is hereby ordered to cancel
Transfer Certificate of Title No. T-131472 in the name of defendants Enrico S. Eulogio
and Natividad Eulogio and to reconstitute (sic) Transfer Certificate of Title No. RT-680-
(5997) as "family home" of the plaintiffs Florence Felicia Victoria C. Bell, Paterno
William C. Bell Jr., Paterno Ferdinand C. Bell III, Paterno Benerano C. Bell IV and fourth
party plaintiffs Paterno C. Bell Sr. and Rogelia Calingasan Bell; or in the alternative to
issue a new Transfer Certificate of Title under the same tenor;

2. The City Assessor of Batangas City is hereby directed to issue a tax declaration
covering the said subject property as family home for the said plaintiffs and fourth party
plaintiffs Paterno C. Bell and Rogelia Calingasan Bell; and

3. Defendants Enrico Eulogio and Natividad Eulogio are ordered to pay the plaintiffs
attorney's fees and litigation expenses of P35,000.00, as the plaintiffs have been
compelled to litigate to protect their property rights, and costs. 3
Both petitioners and respondents appealed to the CA, but the trial court's Decision was
affirmed en toto. Spouses Bell later brought the case to this Court to question their
liability to petitioners in the amount of P1 million plus interest. The Court, however,
dismissed their Petition for failure to show any reversible error committed by the
CA.4 Thereafter, entry of judgment was made. 5chanrobleslaw

On 9 June 2004 the RTC issued a Writ of Execution, as a result of which respondents'
property covered by the newly reconstituted Transfer Certificate of Title (TCT) No.
54208 [formerly RT-680 (5997)] was levied on execution. Upon motion by respondents,
the trial court, on 31 August 2004, ordered the lifting of the writ of execution on the
ground that the property was a family home.6chanrobleslaw

Petitioners filed a Motion for Reconsideration of the lifting of the writ of execution.
Invoking Article 160 of the Family Code, they posited that the current market value of
the property exceeded the statutory limit of P300,000 considering that it was located in
a commercial area, and that Spouses Bell had even sold it to them for P1
million.7chanrobleslaw

The RTC, on 13 October 2004, set the case for hearing to determine the present value
of the family home of respondents. It also appointed a Board of Appraisers to conduct a
study on the prevailing market value of their house and lot. 8chanrobleslaw

Respondents sought reconsideration of the above directives and asked the RTC to cite
petitioners for contempt because of forum-shopping. 9 They argued that petitioners' bid
to determine the present value of the subject property was just a ploy to re-litigate an
issue that had long been settled with finality.

The RTC, however, denied the Motion for Reconsideration 10 of respondents and
directed the commissioners to canvass prospective buyers of their house and

1175
lot.11chanrobleslaw

On 23 November 2004, respondents filed a Petition for Certiorari and Injunction before

the CA,12 where it was docketed as CA-G.R. SP No. 87531.

Subsequently, the RTC issued on 25 November 2004 an Order 13 dispensing with the
valuation report of the commissioners and directing the issuance of a writ of execution.
Consequently, respondents filed before the CA a Supplemental Petition with an urgent
prayer for a temporary restraining order.14chanrobleslaw

The CA eventually enjoined15 the execution sale set on 22 December 2004 16 by the
RTC.

On 31 July 2008, the CA rendered its Decision granting respondents' Petition

for Certiorari, but it rejected their theory that res judicata had already set in.

The appellate court ruled that the RTC Decision, which had become final and executory,
only declared respondents' house and lot as a family home. Since the issue of whether
it may be sold in execution was incidental to the execution of the aforesaid Decision,
there was as yet no res judicata.

Still, the CA found that the trial court committed grave abuse of discretion in ordering
the execution sale of the subject family home after finding that its present
value exceeded the statutory limit. The basis for the valuation of a family home under
Article 160, according to the appellate court, is its actual value at the time of its
constitution and not the market/present value; therefore, the trial court's order was
contrary to law.17chanrobleslaw

On 09 February 2009,18 the CA denied petitioners' Motion for Reconsideration. Hence,

this Petition.

Issues

The issues to be resolved are: (1) whether petitioners are guilty of forum-shopping; (2)
whether a hearing to determine the value of respondents' family home for purposes of
execution under Article 160 of the Family Code is barred under the principle of res
judicata; and (3) whether respondents' family home may be sold on execution under
Article 160 of the Family Code.

The Court's Ruling

The Court denies the Petition for lack of merit.

Petitioners are not guilty of forum-shopping.

Forum shopping can be committed in three ways: (1) by filing multiple cases based on
the same cause of action and with the same prayer, the previous case not having been

1176
resolved yet (where the ground for dismissal is litis pendentia); (2) by filing multiple
cases based on the same cause of action and with the same prayer, the previous case
having been finally resolved (where the ground for dismissal is res judicata); and (3) by
filing multiple cases based on the same cause of action but with different prayers, or by
splitting of causes of action (where the ground for dismissal is also either litis
pendentia or res judicata).19chanrobleslaw

The essence of forum shopping is the filing of multiple suits involving the same parties
for the same cause of action, either simultaneously or successively, for the purpose of
obtaining a favorable judgment through means other than by appeal or
certiorari.20 Forum shopping does not apply to cases that arise from an initiatory or
original action that has been elevated by way of appeal or certiorari to higher or
appellate courts or authorities. This is so because the issues in the appellate courts
necessarily differ from those in the lower court, and the appealed cases are but a
continuation of the original case and treated as only one case. 21chanrobleslaw

Respondents contend that the Decision in Civil Case No. 4581, which declared that
property in dispute was a family home, had long attained finality. Accordingly,
respondents maintain that petitioners' bid to re-litigate the present value of the property
in the course of the execution proceedings is barred by res judicata, and that petitioners
should be cited for contempt of court because of forum-shopping. 22chanrobleslaw

Recall that although the trial court had nullified the Deed of Sale over respondents'
family home in Civil Case No. 4581 for lack of a written consent from its beneficiaries as
required under Article 158 of the Family Code,23 the court still recognized the validity of
the transaction as an unsecured loan. Hence, it declared Spouses Bell liable to
petitioners in the amount of PI million plus 12% interest per annum.

Petitioners' bid to satisfy the above judgment cannot be considered an act of forum
shopping. Simply, the execution of a decision is just the fruit and end of a suit and is
very aptly called the life of the law.24 It is not separate from the main case. Similarly, the
filing of the instant Petition as a continuation of the execution proceedings does not
constitute forum shopping. Seeking a reversal of an adverse judgment or order by
appeal or certiorari does not constitute forum shopping. Such remedies are sanctioned
and provided for by the rules.25chanrobleslaw

Indeed, as will be presently discussed, the causes of action in the main proceedings in
Civil Case No. 4581 and the consequent execution proceedings are identical. Suffice it
to say, however, that the danger of a multiplicity of suits upon one and the same cause
of action, which the judicial policy against forum shopping seeks to prevent, does not
exist in this case.

Re-litigating the issue of the value of respondents' family home is barred by res
judicata.

Res judicata (meaning, a "matter adjudged") is a fundamental principle of law that

1177
precludes parties from re-litigating issues actually litigated and determined by a prior
and final judgment.26 Under the 1997 Rules of Court, there are two aspects of res
judicata, namely: bar by prior judgment27 and conclusiveness of
judgment.28chanrobleslaw

There is "bar by prior judgment" when, as between the first case in which the judgment
has been rendered and the second case that is sought to be barred, there is an identity
of parties, subject matter, and causes of action. In this instance, the judgment in the first
case constitutes an absolute bar to the second action. The judgment or decree on the
merits of the court of competent jurisdiction concludes the litigation between the parties,
as well as their privies, and constitutes a bar to a new action or suit involving the same
cause of action before the same or any other tribunal. 29chanrobleslaw

On the other hand, there is "conclusiveness of judgment" where there is an identity of

parties in the first and second cases, but no identity of causes of action. Under this rule,
the first judgment is conclusive only as to those matters actually and directly
controverted and determined and not as to matters merely involved therein. Stated
differently, any right, fact, or matter in issue directly adjudicated or necessarily
involved in the determination of an action before a competent court in which judgment
is rendered on the merits is conclusively settled by the judgment therein and cannot
again be litigated between the parties and their privies whether or not the claim,
demand, purpose, or subject matter of the two actions is the same. 30chanrobleslaw

In this case, the trial court's final decision in Civil Case No. 4581 bars petitioners' move
to have the property in dispute levied on execution.

There is no question that the main proceedings in Civil Case No. 4581 and the
subsequent execution proceedings involved the same parties 31 and subject matter.32 For
these reasons, respondents argue that the execution sale of the property in dispute
under Article 160 of the Family Code is barred by res judicata, since the trial court has
already determined that the value of the property fell within the statutory limit.

The CA held that the trial court's Decision, which is indisputably final, only settled the
issue of whether the property in dispute was a family home. The CA ruled
thus:chanRoblesvirtualLawlibrary
We rule that there is no res judicata.

At the outset, let it be emphasized that the decision of the trial court dated July 15,
1998, which has become final and executory, only declares the subject property as a
family home. As a matter of fact, private respondents never questioned that such
property is a family home, and consequently, the issue as to whether or not the property
is family home is settled and res judicata lies only with respect to this issue.

But the issue as to whether or not a family home could be the subject of an execution
sale was not resolved by the trial court. This issue[was] raised only when the writ of
execution was issued and hence, [was not] resolved with finality. Thus, the issue before

1178
this Court is whether or not the [f]amily [h]ome of petitioners under the facts and
circumstances of the case could be the subject of a writ of execution and sold at public
auction.33
The Court disagrees with the CA.

"Cause of action" is the act or omission by which a party violates the right of another. 34 It
may be argued that the cause of action in the main proceedings was the sale of the
property in dispute, while in the execution proceedings it was the indebtedness of
Spouses Bell to petitioners.

The settled rule, however, is that identity of causes of action does not mean absolute
identity. Otherwise, a party could easily escape the operation of res judicata by
changing the form of the action or the relief sought. 35 The test to determine whether the
causes of action are identical is to ascertain whether the same evidence will sustain
both actions, or whether there is an identity of the facts essential to the
maintenance of the two actions. If the same facts or evidence would sustain both, the
two actions are considered the same, and a judgment in the first case would be a bar to
the subsequent action. Hence, a party cannot, by varying the form of action or adopting
a different method of presenting the case, escape the operation of the principle that one
and the same cause of action shall not be twice litigated between the same parties or
their privies.36chanrobleslaw

Among several tests resorted to in ascertaining whether two suits relate to a single or
common cause of action are: (1) whether the same evidence would support and sustain
both the first and the second causes of action; and (2) whether the defenses in one
case may be used to substantiate the complaint in the other. Also fundamental is the
test for determining whether the cause of action in the second case existed at the time
of the filing of the first complaint.37chanrobleslaw

Applying the above guidelines, the Court finds that the entirety of Civil Case No. 4581 -
including the bid of petitioners to execute the money judgment awarded to them by the
trial court - is founded on a common cause of action. Records show that the sole
evidence submitted by petitioners during the execution proceedings was the Deed of
Sale, which the trial court had nullified in the main proceedings. Concomitantly, the very
same defense raised by petitioners in the main proceedings, i.e., that they had bought
the property from Spouses Bell for P1 million - was utilized to substantiate the claim that
the current value of respondents' family home was actually PI million. In fact, the trial
court's order for respondents' family home to be levied on execution was solely based
on the price stated in the nullified Deed of Sale.

Res judicata applies, considering that the parties are litigating over the same property.
Moreover, the same contentions and evidence advanced by the petitioners to
substantiate their claim over respondents' family home have already been used to
support their arguments in the main proceedings.

Any lingering doubt on the application of res judicata to this case should be put to rest

1179
by the trial court's discussion of the nature and alienability of the property in dispute, to
wit:chanRoblesvirtualLawlibrary
The second issue is about the allegation of the plaintiffs that the family home which has
been constituted on the house and lot in question is exempt from alienation and that its
value does not exceed P300,000. Paterno Bell, Sr. testified that the two-storey house
was built in 1947 and was made of wood and hollow blocks. He inherited it in 1976 from
his parents and has been living there with his family. In 1976, when an extra-judicial
settlement was made of the estate of his parents, the fair market value of the house was
P70,000.

City Assessor Rodezinda Pargas testified and presented Tax Declaration and others,
(Exhibit "J", Tax Declaration No. 005-047) beginning 1985 showing that the subject lot
with an area of 329 sq. m. had a fair market value of P76,000.00 and the residential
house located thereon of P50,000.00, for a total value of P126,000.00. She testified that
during the prior years the assessed values were lower. This shows that the limit of the
value of P300,000.00 under Article 157, Title 5 of the Family Code has not been
exceeded. The testimonies of the plaintiffs who are children of Sps. Paterno Bell, Sr.
and Rogelia Calingasan Bell show that they had lived in that house together with their
said parents. The Court therefore concludes that the said house is a family home under
Chapter 2, Title 5 of the Family Code. Its alienation by the said Spouses without the
written consent of the majority of the children/plaintiffs is null and void for being contrary
to law and public policy as enunciated in Art. 158 of the Family Code. 38 [Underscoring
supplied]
The foregoing points plainly show that the issue of whether the property in dispute
exceeded the statutory limit of P300,000 has already been determined with finality by
the trial court. Its finding necessarily meant that the property is exempt from execution.
Assuming for the sake of argument that causes of action in the main proceedings and in
the execution proceedings are different, the parties are still barred from litigating the
issue of whether respondents' family home may be sold on execution sale under the
principle of conclusiveness of judgment.

Respondents' family home cannot be sold on execution under Article 160 of the
Family Code.

Unquestionably, the family home is exempt from execution as expressly provided for in
Article 153 of the Family Code.39chanrobleslaw

It has been said that the family home is a real right that is gratuitous, inalienable and
free from attachment.40 The great controlling purpose and policy of the Constitution is
the protection or the preservation of the homestead - the dwelling place. A houseless,
homeless population is a burden upon the energy, industry, and morals of the
community to which it belongs. No greater calamity, not tainted with crime, can befall a
family than to be expelled from the roof under which it has been gathered and
sheltered.41 The family home cannot be seized by creditors except in special
cases.42chanrobleslaw

1180
The nature and character of the property that debtors may claim to be exempt, however,
are determined by the exemption statute. The exemption is limited to the particular kind
of property or the specific articles prescribed by the statute; the exemption cannot
exceed the statutory limit.43chanrobleslaw

Articles 155 and 160 of the Family Code specify the exceptions mentioned in Article
153, to wit:chanRoblesvirtualLawlibrary
ARTICLE 155. The family home shall be exempt from execution, forced sale or
attachment except:ChanRoblesVirtualawlibrary

(1) For nonpayment of taxes;

(2) For debts incurred prior to the constitution of the family home;

(3) For debts secured by mortgages on the premises before or after such constitution;
and

(4) For debts due to laborers, mechanics, architects, builders, materialmen and others
who have rendered service or furnished material for the construction of the building.

ARTICLE 160. When a creditor whose claims is not among those mentioned in Article
155 obtains a judgment in his favor, and he has reasonable grounds to believe that the
family home is actually worth more than the maximum amount fixed in Article 157, he
may apply to the court which rendered the judgment for an order directing the sale of
the property under execution. The court shall so order if it finds that the actual value of
the family home exceeds the maximum amount allowed by law as of the time of its
constitution. If the increased actual value exceeds the maximum allowed in Article 157
and results from subsequent voluntary improvements introduced by the person or
persons constituting the family home, by the owner or owners of the property, or by any
of the beneficiaries, the same rule and procedure shall apply.

At the execution sale, no bid below the value allowed for a family home shall be
considered. The proceeds shall be applied first to the amount mentioned in Article 157,
and then to the liabilities under the judgment and the costs. The excess, if any, shall be
delivered to the judgment debtor.chanroblesvirtuallawlibrary
Related to the foregoing is Article 157 of the Family Code, which
provides:chanRoblesvirtualLawlibrary
ARTICLE 157. The actual value of the family home shall not exceed, at the time of its
constitution, the amount of three hundred thousand pesos in urban areas, and two
hundred thousand pesos in rural areas, or such amounts as may hereafter be fixed by
law.

In any event, if the value of the currency changes after the adoption of this Code, the
value most favorable for the constitution of a family home shall be the basis of
evaluation.

1181
For purposes of this Article, urban areas are deemed to include chartered cities and
municipalities whose annual income at least equals that legally required for chartered
cities. All others are deemed to be rural areas. [Underscoring supplied]
The minutes of the deliberation by the drafters of Family Code on Article 160 are
enlightening, to wit:chanRoblesvirtualLawlibrary
Justice Puno inquired if the above Article [160] is still necessary. In reply, Judge Diy
opined that the above Article is intended to cover a situation where the family home is
already worth P500,000 or P1M. Justice Reyes stated that it is possible that a family
home, originally valued at P300,000. later appreciated to almost P1M because of
improvements made, like roads and plazas. Justice Caguioa, however, made a
distinction between voluntary and involuntary improvements in the sense that if the
value of the family home exceeded the maximum amount because of voluntary
improvements by the one establishing the family home, the Article will apply; but if it is
through an involuntary improvement, like the conversion into a residential area or the
establishment of roads and other facilities, the one establishing the family home should
not be punished by making his home liable to creditors. He suggested that the matter be
clarified in the provision.

xxxx

Prof. Bautista objected to the phrase "is worth" since if they will specify that the family
home is worth more than the maximum amount at the time it was constituted, they will
avoid the suit because the creditor will be given proper warning. Justice Puno opined
that this is a question of fact. Justice Caguioa added that, under the second sentence,
there will be a preliminary determination as to whether the family home exceeds the
maximum amount allowed by law.
xxxx

Justice Caguia accordingly modified the last sentence as

follows:ChanRoblesVirtualawlibrary

If the excess in actual value over that allowed in Article 157 is due to subsequent
voluntary improvements by the person or persons constituting the family home or by the
owner or owners of the property, the same rules and procedure shall
apply.chanroblesvirtuallawlibrary
Prof. Bautista objected to the above provision, because it will in effect penalize the
owner for improving the family home. On the other hand, Justice Puno opined that the
provision covers only the excess in actual value over that allowed by law. Judge Diy
added that the owner may improve the family home up to P300,000. Justice Caguioa
stated that without the above provision, one can borrow money, put it all on
improvement of the family home even beyond the maximum value of a family home
and, thereby, exempt it from levy on the part of the creditor. He added that anyway, if
one voluntarily improves his family home out of his money, nobody can complain
because there are no creditors.

Justice Puno posed the question: What is "due to the subsequent improvement?" Is it

1182
the "excess" or is it the "increase", or is it the "increase", which constitutes the
"excess"? In reply. Justice Reyes opined that it is the "increase" which constituted the
"excess". Justice Puno, Justice Reyes and Justice Caguioa modified the last sentence
as follows:chanRoblesvirtualLawlibrary
If the increase in actual value exceeds that maximum allowed in Article 157 and results
from subsequent voluntary improvements introduced by the person or persons
constituting the family home or by the owner or owners of the property, the same rule
and procedure shall apply.chanroblesvirtuallawlibrary
Prof. Bautista commented that the phrase "increase in actual value" does not include
the original value. Justice Puno suggested that they just say "increased actual value",
which the Committee approved.44 [Underscoring supplied]
To summarize, the exemption of the family home from execution, forced sale or
attachment is limited to P300,000 in urban areas and P200,000 in rural areas, unless
those maximum values are adjusted by law. If it is shown, though, that those amounts
do not match the present value of the peso because of currency fluctuations, the
amount of exemption shall be based on the value that is most favorable to the
constitution of a family home. Any amount in excess of those limits can be applied to the
payment of any of the obligations specified in Articles 155 and 160.

Any subsequent improvement or enlargement of the family home by the persons

constituting it, its owners, or any of its beneficiaries will still be exempt from execution,
forced sale or attachment provided the following conditions obtain: (a) the actual value
of the property at the time of its constitution has been determined to fall below the
statutory limit; and (b) the improvement or enlargement does not result in an increase in
its value exceeding the statutory limit. 45 Otherwise, the family home can be the subject
of a forced sale, and any amount above the statutory limit is applicable to the
obligations under Articles 155 and 160.

Certainly, the humane considerations for which the law surrounds the family home with
immunities from levy do not include the intent to enable debtors to thwart the just claims
of their creditors.46chanrobleslaw

Petitioners maintain that this case falls under the exceptions to the exemption of the
family home from execution or forced sale. They claim that the actual value of
respondents' family home exceeds the P300,000 limit in urban areas. This fact is
supposedly shown by the Deed of Sale whereby private respondents agreed to sell the
property for PI million way back in 1995. Therefore, the RTC only properly ordered the
execution sale of the property under Article 160 to satisfy the money judgment awarded
to them in Civil Case No. 4581.47chanrobleslaw

As earlier discussed, it has been judicially determined with finality that the property in
dispute is a family home, and that its value at the time of its constitution was within the
statutory limit. Moreover, respondents have timely claimed the exemption of the
property from execution.48 On the other hand, there is no question that the money
judgment awarded to petitioners falls under the ambit of Article 160.

1183
Notwithstanding petitioners' right to enforce the trial court's money judgment, however,
they cannot obtain its satisfaction at the expense of respondents' rights over their family
home. It is axiomatic that those asserting the protection of an exception from an
exemption must bring themselves clearly within the terms of the exception and satisfy
any statutory requirement for its enforcement. 49chanrobleslaw

To warrant the execution sale of respondents' family home under Article 160, petitioners
needed to establish these facts: (1) there was an increase in its actual value; (2) the
increase resulted from voluntary improvements on the property introduced by the
persons constituting the family home, its owners or any of its beneficiaries; and (3) the
increased actual value exceeded the maximum allowed under Article 157.

During the execution proceedings, none of those facts was alleged - much less proven -
by petitioners. The sole evidence presented was the Deed of Sale, but the trial court
had already determined with finality that the contract was null, and that the actual
transaction was an equitable mortgage. Evidently, when petitioners and Spouses Bell
executed the Deed of Sale in 1990, the price stated therein was not the actual value of
the property in dispute.

The Court thus agrees with the CA's conclusion that the trial court committed grave
abuse of discretion in ordering the sale on execution of the property in dispute under
Article 160. The trial court had already determined with finality that the property was a
family home, and there was no proof that its value had increased beyond the statutory
limit due to voluntary improvements by respondents. Yet, it ordered the execution sale
of the property. There is grave abuse of discretion when one acts in a capricious,
whimsical, arbitrary or despotic manner in the exercise of one's judgment, as in this
case in which the assailed order is bereft of any factual or legal
justification.50chanrobleslaw

WHEREFORE, the Petition for Review on Certiorari is hereby DENIED for lack of merit.

Accordingly, the Decision of the Court of Appeals in CA-G.R. SP No. 87531, enjoining
the trial court from proceeding with the sale of the family home of respondents,
is AFFIRMED.

SO ORDERED.cralawlawlibrary

SECOND DIVISION

G.R. No. 200751, August 17, 2015

MONICO LIGTAS, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

LEONEN, J.:

1184
"Bakit niya babawiin ang aking saka?" tanong ni Tata Selo. "Dinaya ko na ba siya sa
partihan? Tinuso ko na ba siya? Siya ang may-ari ng lupa at kasama lang niya ako.
Hindi ba't kaya maraming nagagalit sa akin ay dahil sa ayaw kong magpamigay ng
kahit isang pinangko kung anihan?"

Hindi pa rin umaalis sa harap ng istaked si Tata Selo. Nakahawak pa rin siya sa rehas.
Nakatingin siya sa labas ngunit wala siyang sino mang tinitingnan.

"Binabawi po niya ang aking saka," sumbong ni Tata Selo. "Saan papo ako pupunta
kung wala na akong saka?"

Habang nakakapit sa rehas at nakatingin sa labas, sinasabi niyang lahat ay kinuha na

sa kanila, lahat, ay! ang lahat ay kinuha na sa kanila.

- "TataSelo" (1963) by Rogelio R. Sikat

The uncontested declaration of the Department of Agrarian Reform Adjudication Board
that Monico Ligtas was a tenant negates a finding of theft beyond reasonable doubt.
Tenants having rights to the harvest cannot be deemed to have taken their own
produce.

This is a Petition for Review on Certiorari 1 under Rule 45 of the Rules of Court,

assailing the Court of Appeals Decision2 dated March 16, 2010 and the
Resolution3 dated February 2, 2012.4 The Court of Appeals affirmed the Decision5 of the
Regional Trial Court finding Monico Ligtas (Ligtas) guilty beyond reasonable doubt of
theft.6

Ligtas was charged with the crime of theft under Article 308 of the Revised Penal
Code.7 The Information provides:chanRoblesvirtualLawlibrary
That on or about the 29th day of June 2000 at Sitio Lamak, Barangay San Juan,
Municipality of Sogod, Province of Southern Leyte, Philippines and within the jurisdiction
of this Honorable Court, the above-named accused, with intent of gain, entered into the
abaca plantation belonging to one Anecita Pacate, and once inside the plantation, did
then and there willfully, unlawfully and feloniously harvested 1,000 kilos of abaca fibers,
valued at Php29,000.00 at Php29.00 per kilo, without the consent of said owner,
Anecita Pacate, to her damage and prejudice in the aforestated amount of Twenty Nine
Thousand Pesos (Php29,000.00), Philippine currency.

CONTRARY TO LAW.8ChanRoblesVirtualawlibrary
Ligtas pleaded not guilty.9

The prosecution presented five (5) witnesses during trial: Efren Cabero (Cabero),
Modesto Cipres (Cipres), Anecita Pacate, SPO2 Enrique Villaruel, and Ernesto
Pacate.10

According to the prosecution witnesses, Anecita Pacate was the owner of an abaca
plantation situated at Sitio Lamak, Barangay San Juan, Sogod, Southern Leyte. On

1185
June 29, 2000, Cabero, the plantation's administrator, and several men, including
Cipres, went to the plantation to harvest abaca upon Anecita Pacate's instructions. At
about 10:00 a.m., Cabero and his men were surprised to find Ligtas harvesting abaca at
the plantation. Ligtas was accompanied by three (3) unidentified men. Allegedly, Ligtas
threatened that there would be loss of life if they persisted in harvesting the abaca.
Cabero reported the incident to Anecita Pacate and the police. 11

On July 2, 2000, Cabero and Cipres went back to the plantation and conducted a
survey on the condition of the plantation. They found that 1,000 kilos of abaca, valued at
P28.00 per kilo, were harvested by Ligtas.12

On July 3, 2000, Ligtas and Anecita Pacate confronted each other before the Sogod
Police Station.13 Ligtas admitted to harvesting the abaca but claimed that he was the
plantation owner.14

The defense presented three (3) witnesses during trial: Ligtas; Pablo Palo, his neighbor;
and Delia Ligtas, his wife.15 According to Ligtas, he had been a tenant of Anecita Pacate
and her late husband, Andres Pacate since 1993. 16 Andres Pacate installed him as
tenant of the 1.5 to two hectares of land involved in the criminal case. 17

Ligtas allegedly "made his first harvest in 1997." 18 He then gave Anecita Pacate her
share to the harvest.19 However, he could not remember the exact amount
anymore.20 Previously, Ligtas and Pablo Palo were workers in another land, around 15
hectares, owned by Anecita Pacate and Andres Pacate. 21

Ligtas alleged that on June 28, 2000, Anecita Pacate sent workers to harvest abaca
from the land he cultivated. Ligtas prevented the men from harvesting the abaca since
he was the rightful tenant of the land.22

Furthermore, Ligtas denied harvesting abaca at the plantation on June 29, 2000. He
claimed that he was with Cabero and Cipres attending a barangay fiesta at Sitio
Hubasan, San Juan, Sogod, Southern Leyte, when the alleged harvesting happened. 23

Meanwhile, Ligtas filed a Complaint before the Department of Agrarian Reform

Adjudication Board (DARAB) of Sogod, Southern Leyte for Maintenance of Peaceful
Possession on November 21, 2000.24 On January 22, 2002, the DARAB rendered the
Decision25 ruling that Ligtas was a bona fide tenant of the land. 26

While records are bereft as to when the DARAB Decision was formally offered as
evidence before the trial court, records are clear that the DARAB Decision was
considered by both the trial court27 and Court of Appeals28 and without any objection on
the part of the People of the Philippines. 29

In the Decision dated August 16, 2006, the Regional Trial Court held that "the
prosecution was able to prove the elements of theft[.]" 30 Ligtas' "defense of tenancy was
not supported by concrete and substantial evidence nor was his claim of harvest

1186
sharing between him and [Anecita Pacate] duly corroborated by any witness." 31 His
"defense of alibi cannot prevail over the positive identification ... by prosecution
witnesses."32

The dispositive portion of the Decision reads:chanRoblesvirtualLawlibrary

WHEREFORE, finding the accused Monico Ligtas guilty beyond reasonable doubt of
the crime of Theft, this court hereby renders judgment, sentencing him:

1. To suffer the indeterminate penalty of four (4) years, nine (9) months and
ten (10) days as minimum to eight (8) years and eight (8) months as
maximum;cralawlawlibrary

2. To indemnify the offende[d] party:

a. The amount of P29,000.00 for the value of the abaca
stole[n];cralawlawlibrary

b. The amount of P5000.00 as moral damages;cralawlawlibrary

c. The amount of P10,000.00 as litigation expenses/attorney's

fees;cralawlawlibrary

3. To pay the costs.

SO ORDERED.33ChanRoblesVirtualawlibrary
ChanRoblesVirtualawlibrary
I

The Court of Appeals affirmed the ruling of the trial court. 34 According to it, "the burden
to prove the existence of the tenancy relationship" 35 belonged to Ligtas. He was not able
to establish all the essential elements of a tenancy agreement. 36

The Court of Appeals declared that Ligtas' reliance on the DARAB Decision "declaring
him as a bonafide tenant of the . . . land is irrelevant in the case at bar": 37
Jurisprudence is replete with cases declaring that "findings of or certifications issued by
the Secretary of Agrarian Reform, or his authorized representative, in a given locality
concerning the presence or absence of a tenancy relationship between the contending
parties, are merely preliminary or provisional and are not binding upon the courts.
["]38ChanRoblesVirtualawlibrary
As to the ownership of the land, the Court of Appeals held that Ligtas had taken
conflicting positions. While he claimed to be a legitimate tenant, Ligtas also assailed
Anecita Pacate's title over the land. Under Rule 131, Section 2 of the Rules of Court, a
tenant cannot deny the title of his or her landlord at the time of the commencement of
the tenancy relation.39

1187
The Court of Appeals remained unconvinced as to Ligtas' allegations on ownership. "He
claims that the parcel of land owned by [Anecita Pacate] is different from the subject
abaca land. However, such assertion was based merely on the testimony of the
municipal assessor, not an expert competent to identify parcels of land." 40

More importantly, the Court of Appeals ruled that Ligtas committed theft by harvesting
abaca from Anecita Pacate's plantation.41 Ligtas had constructive possession of the
subject of the theft without the owner's consent. 42 "The subject of the crime need not be
carried away or actually taken out from the land in order to consummate the crime of
theft."43

Furthermore, Ligtas' argument that the abaca did not constitute as personal property
under the meaning of Article 308 of the Revised Penal Code was erroneous. 44 Following
the definition of personal property, the abaca hemp was "capable of appropriation [and]
[could] be sold and carried away from one place to another." 45 The Court of Appeals
affirmed the trial court's finding that about 1,000 kilos of abaca were already
harvested.46 Hence, all the elements of theft under Article 308 of the Revised Penal
Code were sufficiently established by the prosecution.

The Court of Appeals ruled that Ligtas' defense of alibi could not excuse him from
criminal liability.47 His alibi was doubtfully established. "[W]here an accused's alibi is
established only by himself, his relatives and friends, his denial of culpability should be
accorded the strictest scrutiny."48

Ligtas' attack on the credibility of the witnesses did not prosper. 49 He failed to show that
the case was initiated only through Anecita Pacate's quest for revenge or to ensure that
Ligtas would be evicted from the land.50

The Court of Appeals dismissed Ligtas' appeal and affirmed the trial court's Decision
finding Ligtas guilty beyond reasonable doubt of theft under Article 308 of the Revised
Penal Code.51 The dispositive portion of the Decision reads:chanRoblesvirtualLawlibrary
WHEREFORE, the instant Appeal is DISMISSED. Accordingly, the assailed Decision
dated . . . August 16, 2006 of the Regional Trial Court of Sogod, Southern Leyte,
Branch 39, in Criminal Case No. R-225, finding accused-appellant Monico Ligtas guilty
beyond reasonable doubt of Theft under Article 308 of the Revised Penal Code, is
hereby AFFIRMED in all respects.

SO ORDERED.52ChanRoblesVirtualawlibrary
Ligtas filed a Motion for Reconsideration,53 which the Court of Appeals denied on
February 2, 2012.54

II

On April 4, 2012, Ligtas filed this Petition assailing the Court of Appeals Decision and
Resolution.55 This court required People of the Philippines to file its Comment on the
Petition within 10 days from notice.56

1188
The issues for consideration of this court are:

First, whether questions of fact may be raised in a petition for review on certiorari under
Rule 45 of the Rules of Court;cralawlawlibrary

Second, whether the DARAB Decision, finding petitioner Monico Ligtas as tenant of the
land owned by private complainant Anecita Pacate and located at Sitio Lamak,
Barangay San Juan, Sogod, Southern Leyte is conclusive or can be taken judicial notice
of in a criminal case for theft; and

Third, whether the Court of Appeals committed reversible error when it upheld the
conviction of petitioner Monico Ligtas for theft under Article 308 of the Revised Penal
Code.

The Petition is meritorious.

III

Petitioner argues that the findings of fact of both the trial court and Court of Appeals
must be revisited for being "conclusions without citation of specific evidence on record
and premised on the supposed absence of evidence on the claim of petitioner [as]
tenant."57

Only questions of law are allowed in a petition for review under Rule 45 58 of the Rules of
Court.59 Factual findings of the Regional Trial Court are conclusive and binding on this
court when affirmed by the Court of Appeals.60 This court has differentiated between a
question of law and question of fact:chanRoblesvirtualLawlibrary
A question of law exists when the doubt or controversy concerns the correct application
of law or jurisprudence to a certain set of facts; or when the issue does not call for an
examination of the probative value of the evidence presented, the truth or falsehood of
facts being admitted. A question of fact exists when the doubt or difference arises as to
the truth or falsehood of facts or when the query invites calibration of the whole
evidence considering mainly the credibility of the witnesses, the existence and
relevancy of specific surrounding circumstances as well as their relation to each other
and to the whole, and the probability of the situation. 61 (Emphasis
supplied)ChanRoblesVirtualawlibrary
Petitioner admits that the Petition raises substantially factual issues that are beyond the
scope of the Rule he seeks redress from.62 However, there are exceptions to the rule
that only questions of law should be the subject of a petition for review under Rule
45:chanRoblesvirtualLawlibrary
(1) when the findings are grounded entirely on speculation, surmises or conjectures, (2)
when the inference made is manifestly mistaken, absurd or impossible, (3) when there
is grave abuse of discretion, (4) when the judgment is based on misapprehension of
facts, (5) when the findings of fact are conflicting, (6) when in making its findings, the
CA went beyond the issues of the case, or its findings are contrary to the admissions of

1189
both the appellant and the appellee, (7) when the CA's findings are contrary to those by
the trial court, (8) when the findings are conclusions without citation of specific evidence
on which they are based, (9) when the acts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the respondent, (10) when the
findings of fact are premised on the supposed absence of evidence and contradicted by
the evidence on record, or (11) when the CA manifestly overlooked certain relevant
facts not disputed by the parties, which, if properly considered, would justify a different
conclusion.63 (Emphasis supplied, citation omitted)ChanRoblesVirtualawlibrary
This court has held before that a re-examination of the facts of the case is justified
"when certain material facts and circumstances had been overlooked by the trial court
which, if taken into account, would alter the result of the case in that they would
introduce an element of reasonable doubt which would entitle the accused to
acquittal."64

The issue of tenancy, in that whether a person is an agricultural tenant or not, is

generally a question of fact.65 To be precise, however, the existence of a tenancy
relationship is a legal conclusion based on facts presented corresponding to the
statutory elements of tenancy.66

The Court of Appeals committed reversible error in its assailed Decision when it held
that all the essential elements of the crime of theft were duly proven by the prosecution
despite petitioner having been pronounced a bona fide tenant of the land from which he
allegedly stole.67 A review of the records of the case is, thus, proper to arrive at a just
and equitable resolution.

IV

Petitioner claims that private complainant's filing of criminal charges was motivated by ill
will and revenge.68 The charges were designed to remove petitioner from the land he
has legitimately occupied as tenant. 69 Telling is the fact that petitioner filed his
Complaint before the DARAB on November 21, 2000, while the Information for Theft
was filed on December 8, 2000.70

Petitioner argues that he has sufficiently established his status as private complainant's
tenant.71 The DARAB Decision is entitled to respect, even finality, as the Department of
Agrarian Reform is the administrative agency vested with primary jurisdiction and has
acquired expertise on matters relating to tenancy relationship. 72

The findings of the DARAB were also supported by substantial evidence. 73 To require
petitioner to prove tenancy relationship through evidence other than the DARAB
Decision and the testimonies of the witnesses is absurd and goes beyond the required
quantum of evidence, which is substantial evidence. 74

Also, according to petitioner, the DARAB Decision has attained finality since private
complainant did not file an appeal. The DARAB's finding as to the parties' tenancy
relationship constitutes as res judicata.75

1190
On the other hand, respondent argues that the Court of Appeals correctly disregarded
the DARAB Decision.76 The trial court could not have taken judicial notice of the DARAB
Decision:chanRoblesvirtualLawlibrary
While the DARAB . . . ruled that petitioner is a bonafide tenant of Pacate, courts are not
authorized to take judicial notice of the contents of the records of other cases even
when such cases have been tried or are pending in the same court, and notwithstanding
the fact that both cases may have been heard or are actually pending before the same
judge.77 (Citation omitted)ChanRoblesVirtualawlibrary
Moreover, according to respondent, petitioner invokes conflicting defenses: that there is
a legitimate tenancy relationship between him and private complainant and that he did
not take the abaca hemp.78 Nevertheless, respondent maintains that petitioner failed to
prove all the essential elements of a tenancy relationship between him and private
complainant.79 Private complainant did not consent to the alleged tenancy
relationship.80 Petitioner also failed to provide evidence as to any sharing of harvest
between the parties.81

We hold that a DARAB decision on the existence of a tenancy relationship is conclusive

and binding on courts if supported by substantial evidence.

Generally, decisions in administrative cases are not binding on criminal proceedings.

This court has ruled in a number of cases that:chanRoblesvirtualLawlibrary
It is indeed a fundamental principle of administrative law that administrative cases are
independent from criminal actions for the same act or omission. Thus, an absolution
from a criminal charge is not a bar to an administrative prosecution, or vice versa. One
thing is administrative liability; quite another thing is the criminal liability for the same
act.

....

Thus, considering the difference in the quantum of evidence, as well as the procedure
followed and the sanctions imposed in criminal and administrative proceedings, the
findings and conclusions in one should not necessarily be binding on the other. Notably,
the evidence presented in the administrative case may not necessarily be the same
evidence to be presented in the criminal cases.82 (Emphasis supplied, citations
omitted)ChanRoblesVirtualawlibrary
However, this case does not involve an administrative charge stemming from the same
set of facts involved in a criminal proceeding. This is not a case where one act results in
both criminal and administrative liability. DARAB Case No. VIII-319-SL-2000 involves a
determination of whether there exists a tenancy relationship between petitioner and
private complainant, while Criminal Case No. R-225 involves determination of whether
petitioner committed theft. However, the tenancy relationship is a factor in determining
whether all the elements of theft were proven by the prosecution.

In its Decision dated January 22, 2002, the DARAB found:chanRoblesvirtualLawlibrary

1191
All the necessary requisites in order to establish tenancy relationship as required in the
above-quoted Supreme Court ruling, has been established by the evidence submitted
by plaintiff; And these evidences were not controverted by any evidence submitted by
the respondent.

In fine, this board found plaintiff a bonafide tenant of the land in question and as such is
entitled to a security of tenure, in which case he shall not be dispossessed of his
holdings by the landowner except for any of the causes provided by law and only after
the same has been proved before, and the dispossession is authorized by the Court
and in the judgment that is final and executory[.] 83 (Citations
omitted)ChanRoblesVirtualawlibrary
The dispositive portion of the DARAB Decision provides:chanRoblesvirtualLawlibrary
WHEREFORE, premises being considered, judgment is hereby rendered, finding
Monico Ligtas a bonafide tenant of the land subject in this case and well described in
paragraph three (3) in the complaint, and ordering as follows, to wit:

1. The respondent and all other persons acting for and in her behalf to
maintain plaintiff in the peaceful possession of the land in
dispute;cralawlawlibrary

2. The MARO of Sogod, Southern Leyte, and concurrently the cluster

Manager of Sogod Bay DAR Cluster to call the parties and assist them in
the execution of a leasehold contract covering the land in dispute, and for
the parties to respect and obey such call of the said MARO in compliance
with the legal mandate.

3. Ordering the respondent to pay plaintiff the amount of Five Thousand

(P5,000.00) Pesos representing the expenses incurred by plaintiff in
vindicating his right and other actual expenses incurred in this litigation.

Other relief sought are hereby ordered dismissed for lack of evidence.

No cost.

SO DECIDED.84ChanRoblesVirtualawlibrary
Private complainant did not appeal the DARAB's findings.

Findings of fact of administrative agencies in the exercise of their quasi-judicial powers

are entitled to respect if supported by substantial evidence. 85 This court is not tasked to
weigh again "the evidence submitted before the administrative body and to substitute its
own judgment [as to] the sufficiency of evidence." 86

The DARAB is the quasi-judicial tribunal that has the primary jurisdiction to determine
whether there is a tenancy relationship between adverse parties. 87 This court has held

1192
that "judicial determinations [of the a DARAB] have the same binding effect as
judgments and orders of a regular judicial body." 88 Disputes under the jurisdiction of the
DARAB include controversies relating to:chanRoblesvirtualLawlibrary
tenurial arrangements, whether leasehold, tenancy, stewardship or otherwise, over
lands devoted to agriculture, including disputes concerning farmworkers associations or
representation of persons in negotiating, fixing, maintaining, changing or seeking to
arrange terms or conditions of such tenurial arrangements. 89ChanRoblesVirtualawlibrary
In Salazar v. De Leon,90 this court upheld the Department of Agrarian Reform's primary
jurisdiction over agrarian disputes, which includes the relationship between landowners
and tenants.91 The DARAB Decision is conclusive and binding on courts when
supported by substantial evidence.92 This court ruled that administrative res
judicata exists in that case:chanRoblesvirtualLawlibrary
Significantly, respondent did not appeal the Decision dated 17 November 1995 of the
DARAB in DARAB Case # II-380-ISA'94; consequently, the same has attained finality
and constitutes res judicata on the issue of petitioner's status as a tenant of respondent.

Res judicata is a concept applied in the review of lower court decisions in accordance
with the hierarchy of courts. But jurisprudence has also recognized the rule of
administrative res judicata: "The rule which forbids the reopening of a matter once
judicially determined by competent authority applies as well to the judicial and quasi-
judicial facts of public, executive or administrative officers and boards acting within their
jurisdiction as to the judgments of courts having general judicial powers. It has been
declared that whenever final adjudication of persons invested with power to decide on
the property and rights of the citizen is examinable by the Supreme Court, upon a writ of
error or a certiorari , such final adjudication may be pleaded as res judicata." To be
sure, early jurisprudence was already mindful that the doctrine of res judicata cannot be
said to apply exclusively to decisions rendered by what are usually understood as
courts without unreasonably circumscribing the scope thereof; and that the more
equitable attitude is to allow extension of the defense to decisions of bodies upon whom
judicial powers have been conferred.93 (Emphasis supplied, citations
omitted)ChanRoblesVirtualawlibrary
In Encinas v. Agustin, Jr.,94 this court clarified that res judicata applies only to decisions
rendered by agencies in judicial or quasi-judicial proceedings and not to purely
administrative proceedings:chanRoblesvirtualLawlibrary
The CA was correct in ruling that the doctrine of res judicata applies only to judicial or
quasi-judicial proceedings, and not to the exercise of administrative powers.
Administrative powers here refer to those purely administrative in nature, as opposed to
administrative proceedings that take on a quasi-judicial character.

In administrative law, a quasi-judicial proceeding involves (a) taking and evaluating

evidence; (b) determining facts based upon the evidence presented; and (c) rendering
an order or decision supported by the facts proved. The exercise of quasi-judicial
functions involves a determination, with respect to the matter in controversy, of what the
law is; what the legal rights and obligations of the contending parties are; and based
thereon and the facts obtaining, the adjudication of the respective rights and obligations
of the parties.95 (Citations omitted)ChanRoblesVirtualawlibrary

1193
We find it necessary to clarify the two concepts of res judicata: bar by prior judgment
and conclusiveness of judgment. In Social Security Commission v. Rizal Poultry and
Livestock Association, Inc., et al.,96 this court discussed and differentiated the two
concepts of res judicata:chanRoblesvirtualLawlibrary
Res judicata embraces two concepts: (1) bar by prior judgment as enunciated in Rule
39, Section 47(b) of the Rules of Civil Procedure; and (2) conclusiveness of judgment in
Rule 39, Section 47(c).

There is "bar by prior judgment" when, as between the first case where the judgment
was rendered and the second case that is sought to be barred, there is identity of
parties, subject matter, and causes of action. In this instance, the judgment in the first
case constitutes an absolute bar to the second action.

But where there is identity of parties in the first and second cases, but no identity of
causes of action, the first judgment is conclusive only as to those matters actually and
directly controverted and determined and not as to matters merely involved therein. This
is the concept of res judicata known as "conclusiveness of judgment." Stated differently,
any right, fact or matter in issue directly adjudicated or necessarily involved in the
determination of an action before a competent court in which judgment is rendered on
the merits is conclusively settled by the judgment therein and cannot again be litigated
between the parties and their privies, whether or not the claim, demand, purpose, or
subject matter of the two actions is the same.

Thus, if a particular point or question is in issue in the second action, and the judgment
will depend on the determination of that particular point or question, a former judgment
between the same parties or their privies will be final and conclusive in the second if
that same point or question was in issue and adjudicated in the first suit. Identity of
cause of action is not required but merely identity of issue.

The elements of res judicata are: (1) the judgment sought to bar the new action must be
final; (2) the decision must have been rendered by a court having jurisdiction over the
subject matter and the parties; (3) the disposition of the case must be a judgment on the
merits; and (4) there must be as between the first and second action, identity of parties,
subject matter, and causes of action. Should identity of parties, subject matter, and
causes of action be shown in the two cases, then res judicata in its aspect as a "bar by
prior judgment" would apply. If as between the two cases, only identity of parties can be
shown, but not identical causes of action, then res judicata as "conclusiveness of
judgment" applies.97 (Emphasis supplied, citations omitted)ChanRoblesVirtualawlibrary
In Martillano v. Court of Appeals,98 the DARAB Decision finding for the existence of a
tenancy relationship between the parties was declared by this court as conclusive on
the parties.99 As in this case, the DARAB Decision100 in Martillano attained finality when
the landowner did not appeal the Decision. 101 This court ruled that the doctrine of res
judicata applies:chanRoblesvirtualLawlibrary
Under the afore-cited sections of RA 6657, the Department of Agrarian Reform is
empowered, through its adjudicating arm the regional and provincial adjudication
boards, to resolve agrarian disputes and controversies on all matters pertaining to the

1194
implementation of the agrarian law. Section 51 thereof provides that the decision of the
DARAB attains finality after the lapse of fifteen (15) days and no appeal was interposed
therefrom by any of the parties.

In the instant case, the determination of the DARAB in DARAB Case No. 062-Bul '89,
there being no appeal interposed therefrom, attained finality. Accordingly, the matter
regarding the status of Martillano as a tenant farmer and the validity of the CLT and
Emancipation Patents issued in his favor are settled and no longer open to doubt and
controversy.

....

We recall that DARAB Case 062-Bul '89 was for the cancellation of petitioner's CLT and
Emancipation patents. The same effect is sought with the institution of DARAB Case
No. 512-Bul '94, which is an action to withdraw and/or cancel administratively the CLT
and Emancipation Patents issued to petitioner. Considering that DARAB Case 062-Bul
'89 has attained finality prior to the filing of DARAB Case No. 512-Bul '94, no strenuous
legal interpretation is necessary to understand that the issues raised in the prior case,
i.e., DARAB Case No. 062-Bul '89, which have been resolved with finality, may not be
litigated anew.

The instant case is complicated by the failure of the complainant to include Martillano as
party-defendant in the case before the adjudication board and the DARAB, although he
was finally impleaded on appeal before the Court of Appeals.

The belated inclusion of Martillano as respondent in the petition will not affect the
applicability of the doctrine of bar by prior judgment. What is decisive is that the issues
which have already been litigated in a final and executory judgment precludes, by the
principle of bar by prior judgment, an aspect of the doctrine of res judicata, and even
under the doctrine of "law of the case," the re-litigation of the same issue in another
action. It is well established that when a right or fact has been judicially tried and
determined by a court of competent jurisdiction, so long as it remains unreversed, it
should be conclusive upon the parties and those in privity with them. The dictum therein
laid down became the law of the case and what was once irrevocably established as
the controlling legal rule or decision, continues to be binding between the same parties
as long as the facts on which the decision was predicated, continue to be the facts of
the case before the court. Hence, the binding effect and enforceability of that dictum can
no longer be resurrected anew since said issue had already been resolved and finally
laid to rest, if not by the principle of res judicata, at least by conclusiveness of
judgment.102 (Emphasis supplied, citations omitted)ChanRoblesVirtualawlibrary
In Co v. People, et al.,103 this court held that "the doctrine of conclusiveness of judgment
also applies in criminal cases."104 Petitioner in that case was charged with the violation
of Republic Act No. 1161, as amended, for the alleged non-remittance of Social Security
System contributions.105 This court upheld the findings of the National Labor Relations
Commission in a separate case, which declared the absence of an employer-employee
relationship and had attained finality. 106 This court held that:chanRoblesvirtualLawlibrary

1195
The reasons for establishing the principle of "collusiveness of judgment" are founded on
sound public policy. ... It is allowable to reason back from a judgment to the basis on
which it stands, upon the obvious principle that where a conclusion is indisputable, and
could have been drawn only from certain premises, the premises are equally
indisputable with the conclusion. When a fact has been once determined in the course
of a judicial proceeding, and a final judgment has been rendered in accordance
therewith, it cannot be again litigated between the same parties without virtually
impeaching the correctness of the former decision, which, from motives of public policy,
the law does not permit to be done.

Res judicata has two concepts. The first is bar by prior judgment under Rule 39, Section
47 (b), and the second is conclusiveness of judgment under Rule 39, Section 47 (c).
Both concepts are founded on the principle of estoppel, and are based on the salutary
public policy against unnecessary multiplicity of suits. Like the splitting of causes of
action, res judicata is in pursuance of such policy. Matters settled by a Court's final
judgment should not be litigated upon or invoked again. Relitigation of issues already
settled merely burdens the Courts and the taxpayers, creates uneasiness and
confusion, and wastes valuable time and energy that could be devoted to worthier
cases.107 (Citations omitted)ChanRoblesVirtualawlibrary
In VHJ Construction and Development Corporation v. Court of Appeals,108 this court
ruled that tenancy relationship must be duly proven:chanRoblesvirtualLawlibrary
[A] tenancy relationship cannot be presumed. There must be evidence to prove this
allegation. The principal factor in determining whether a tenancy relationship exists is
intent. Tenancy is not a purely factual relationship dependent on what the alleged tenant
does upon the land. It is also a legal relationship. 109 (Citation
omitted)ChanRoblesVirtualawlibrary
The DARAB, in DARAB Case No. VIII-319-SL-2000, held that all the essential elements
of a tenancy relationship were proven by petitioner. 110 It found that there was substantial
evidence to support petitioner's claim as tenant of the land. 111 In rendering the Decision,
the DARAB examined pleadings and affidavits of both petitioner and private
complainant.112 It was convinced by petitioner's evidence, which consisted of sworn
statements of petitioner's witnesses that petitioner was installed as tenant by Andres
Pacate sometime in 1993.113 Petitioner and Andres Pacate had an agreement to share
the produce after harvest.114 However, Andres Pacate had died before the first
harvest.115 Petitioner then gave the landowner's share to private complainant, and had
done so every harvest until he was disturbed in his cultivation of the land on June 29,
2000.116

We emphasize that after filing her Answer before the DARAB, private complainant failed
to heed the Notices sent to her and refused to attend the scheduled hearings. 117 The
DARAB even quoted in its Decision the reason offered by private complainant's counsel
in his Motion to Withdraw as counsel:chanRoblesvirtualLawlibrary
That as early as the preliminary hearings of the case, the respondent has already
shown her intention not to participate the proceedings of the case for reasons known
only to her;cralawlawlibrary

1196
That despite the advi[c]e of the undersigned, respondent stood pat with her decision not
to participate in the proceedings of the case;cralawlawlibrary

That in view of this predicament, the undersigned can do nothing except to withdraw as
he is now withdrawing as counsel for the respondent of the above-entitled
casef.]118ChanRoblesVirtualawlibrary
It is true that trial courts are not mandated to take judicial notice of decisions of other
courts or even records of other cases that have been tried or are pending in the same
court or before the same judge.119 In declaring that the DARAB's findings on the tenancy
relationship between petitioner and private complainant are immaterial to the criminal
case for theft, the Court of Appeals120 relied on Rollo, et al. v. Leal Realty Centrum Co.,
Inc., et al.121

In Rollo, petitioners, who were farmers of a 21-hectare agricultural land in Tarlac that
was principally devoted to sugar and rice and who claim the rights of their
predecessors-in-interest, filed separate Complaints before the Provincial Adjudication
Board of Region III in Tarlac, Tarlac. They claimed that when the registered owner of
the land, Josefina Roxas Omaña, sold the land to respondents, respondents were
aware of the tenancy relationship between petitioners and Josefina Roxas Omaña. 122

Respondents offered a compensation package to petitioners in exchange for the

renunciation of their tenancy rights under the Comprehensive Agrarian Reform Law.
However, they failed to comply with their obligations under the terms of the
compensation package.123 Petitioners then filed a series of Complaints before the
DARAB. The cases were consolidated and resolved by the Provincial Adjudicator. 124

The Provincial Adjudicator ruled, among other things, that "there was no tenancy
relationship [that] existed between the parties." 125 He found that petitioners and their
predecessors-in-interest were mere hired laborers, not tenants. Tenancy cannot be
presumed from respondents' offer of a compensation package. 126

On appeal, the DARAB reversed the Decision of the Provincial Adjudicator. It found that
there was an implied tenancy between the parties. Petitioners were deemed tenants of
the land for more than 30 years. They were entitled to security of tenure. 127

The Court of Appeals reversed the DARAB Decision and reinstated the Provincial
Adjudicator's Decision. It held that there was no substantial evidence to prove that all
the requisites of tenancy relationship existed. However, despite the lack of tenancy
relationship, the compensation package agreement must be upheld. 128

This court affirmed the Court of Appeals Decision.129 It held that petitioners failed to
overcome the burden of proving the existence of a tenancy
relationship:chanRoblesvirtualLawlibrary
At the outset, the parties do not appear to be the landowner and the tenants. While it
appears that there was personal cultivation by petitioners and their predecessors-in-
interest of the subject landholding, what was established was that petitioners' claim of

1197
tenancy was founded on the self-serving testimony of petitioner Rodolfo Rollo that his
predecessors-in-interest had been in possession of the landholding for more than 30
years and had engaged in a "50-50" sharing scheme with JOSEFINA and JOSEFINA's
grandmother, the previous owner thereof. Self-serving statements in pleadings are
inadequate; proof must be adduced. Such claims do not suffice absent concrete
evidence to support them. The burden rests on the shoulders of petitioners to prove
their affirmative allegation of tenancy, which burden they failed to discharge with
substantial evidence. Such a juridical tie must be aptly shown. Simply put, he who
alleges the affirmative of the issue has the burden of proof, and from the plaintiff in a
civil case, the burden of proof never parts. The same rule applies to administrative
cases. In fact, if the complainant, upon whom rests the burden of proving his cause of
action, fails to show in a satisfactory manner the facts upon which he bases his claim,
the respondent is under no obligation to prove his exception or defense....

Neither was it shown to the satisfaction of this Court that there existed a sharing of
harvests in the context of a tenancy relationship between petitioners and/or their
predecessors-in-interest and JOSEFINA. Jurisprudence is illuminating to the effect that
to prove such sharing of harvests, a receipt or any other evidence must be presented.
None was shown. No receipts were presented as testaments to the claimed sharing of
harvests. The only evidence submitted to establish the purported sharing of harvests
was the testimony of petitioner Rodolfo Rollo. The sharing arrangement cannot be
deemed to have existed on the basis alone of petitioner Rodolfo Rollo's claim. It is self-
serving and is without evidentiary value. Self-serving statements are deemed
inadequate; competent proof must be adduced. If at all, the fact alone of sharing is not
sufficient to establish a tenancy relationship.

We also sustain the conclusion reached by the Provincial Adjudicator and the Court of
Appeals that the testimony of Araceli Pascua, an employee of the DAR in Victoria,
Tarlac, that the subject landholding was tenanted cannot overcome substantial
evidence to the contrary. To prove the alleged tenancy no reliance may be made upon
the said public officer's testimony. What cannot be ignored is the precedent ruling of this
Court that the findings of or certifications issued by the Secretary of Agrarian Reform, or
his authorized representative, in a given locality concerning the presence or absence of
a tenancy relationship between the contending parties, are merely preliminary or
provisional and are not binding upon the courts. This ruling holds with greater effect in
the instant case in light of the fact that petitioners, as herein shown, were not able to
prove the presence of all the indispensable elements of tenancy. 130 (Emphasis supplied,
citations omitted)ChanRoblesVirtualawlibrary
Thus, in Rollo, this court did not categorically hold that the DARAB's findings were
merely provisional and, thus, not binding on courts. What was deemed as a preliminary
determination of tenancy was the testimony of the Department of Agrarian Reform
employee stating that the land involved was tenanted. Further, the tribunals had
conflicting findings on whether petitioners were bona fide tenants.

In this case, records are bereft as to whether private complainant appealed the DARAB
Decision. Thus, it is presumed that the Decision has long lapsed into finality. 131 It is also

1198
established that private complainant participated in the initial stages of the DARAB
proceedings.132 Therefore, the issue of the existence of a tenancy relationship is final as
between the parties. We cannot collaterally review the DARAB's findings at this stage.
The existence of the final Decision that tenancy exists creates serious doubts as to the
guilt of the accused.

VI

According to petitioner, the elements of theft under Article 308 of the Revised Penal
Code were not established since he was a bona fide tenant of the land. 133 The DARAB's
recognition of petitioner as a legitimate tenant necessarily "implie[d] that he ha[d] the
authority to harvest the abaca hemp from [private complainant's land]." 134 This shows
that petitioner had no criminal intent.

As to the existence of another element of theft—that the taking was done without the
consent of the owner—petitioner argues that this, too, was negated by his status as
private complainant's tenant:chanRoblesvirtualLawlibrary
The purported lack of consent on the part of the private complainant as alleged by the
prosecution, is misplaced. In fact, it was even improper for Anecita Pacate to stop or
prevent petitioner from harvesting the produce of the landholding because as tenant,
petitioner is entitled to security of tenure. This right entitled him to continue working on
his landholding until the leasehold relation is terminated or until his eviction is
authorized by the DARAB in a judgment that is final and executory. 135 (Citation
omitted)ChanRoblesVirtualawlibrary
Petitioner argues that the constitutional presumption of innocence must be
upheld:chanRoblesvirtualLawlibrary
Well-settled is the rule that where "inculpatory facts and circumstances are capable of
two or more explanations, one of which is consistent with the innocence of the accused
and the other consistent with his guilt, then the evidence does not fulfill the test of moral
certainty and is not sufficient to support a conviction." In acquitting an appellant, we are
not saying that he is lily-white, or pure as driven snow. Rather, we are declaring his
innocence because the prosecution's evidence failed to show his guilt beyond
reasonable doubt. For that is what the basic law requires. Where the evidence is
insufficient to overcome the presumption of innocence in favour of the accused, then his
"acquittal must follow in faithful obeisance to the fundamental law." 136 (Citations
omitted)ChanRoblesVirtualawlibrary
The Court of Appeals erred when it affirmed the findings of the trial court finding
petitioner guilty beyond reasonable doubt of theft.

Article 308 of the Revised Penal Code provides:chanRoblesvirtualLawlibrary

ARTICLE. 308. Who are Liable for Theft. — Theft is committed by any person who, with
intent to gain but without violence against or intimidation of persons nor force upon
things, shall take personal property of another without the latter's consent.

Theft is likewise committed by:

1199
 1. Any person who, having found lost property, shall fail to deliver the same
to the local authorities or to its owner;cralawlawlibrary

2. Any person who, after having maliciously damaged the property of

another, shall remove or make use of the fruits or object of the damage
caused by him; and

3. Any person who shall enter an enclosed estate or a field where trespass is
forbidden or which belongs to another and without the consent of its
owner, shall hunt or fish upon the same or shall gather fruits, cereals, or
other forest or farm products.

The essential elements of theft are: (1) taking of personal property; (2) the property
taken belongs to another; (3) the taking was done without the owner's consent; (4) there
was intent to gain; and (5) the taking was done without violence against or intimidation
of the person or force upon things.137

Tenants have been defined as:chanRoblesvirtualLawlibrary

persons who — in themselves and with the aid available from within their immediate
farm households — cultivate the land belonging to or possessed by another, with the
latter's consent, for purposes of production, sharing the produce with the landholder
under the share tenancy system, or paying to the landholder a price certain or
ascertainable in produce or money or both under the leasehold tenancy
system.138 (Citation omitted)ChanRoblesVirtualawlibrary
Under this definition, a tenant is entitled to the products of the land he or she cultivates.
The landowner's share in the produce depends on the agreement between the parties.
Hence, the harvesting done by the tenant is with the landowner's consent.

The existence of the DARAB Decision adjudicating the issue of tenancy between
petitioner and private complainant negates the existence of the element that the taking
was done without the owner's consent. The DARAB Decision implies that petitioner had
legitimate authority to harvest the abaca. The prosecution, therefore, failed to establish
all the elements of theft.

In Pit-og v. People,139 this court acquitted petitioner of theft of sugarcane and banana

crops on the basis of reasonable doubt. 140 The prosecution failed to prove lack of
criminal intent on petitioner's part.141 It failed to clearly identify "the person who, as a
result of a criminal act, without his knowledge and consent, was wrongfully deprived of a
thing belonging to him."142 There were doubts as to whether the plants taken by
petitioner were indeed planted on private complainant's lot when petitioner had planted
her own plants adjacent to it.143 Thus, it was not proven beyond reasonable doubt that
the property belonged to private complainant. This court found that petitioner "took the
sugarcane and bananas believing them to be her own. That being the case, she could
not have had a criminal intent."144

In this case, petitioner harvested the abaca, believing that he was entitled to the

1200
produce as a legitimate tenant cultivating the land owned by private complainant.
Personal property may have been taken, but it is with the consent of the owner.

No less than the Constitution provides that the accused shall be presumed innocent of
the crime until proven guilty.145 "[I]t is better to acquit ten guilty individuals than to
convict one innocent person."146 Thus, courts must consider "[e]very circumstance
against guilt and in favor of innocence[.]" 147 Equally settled is that "[w]here the evidence
admits of two interpretations, one of which is consistent with guilt, and the other with
innocence, the accused must be given the benefit of doubt and should be acquitted." 148

In view of petitioner's acquittal based on reasonable doubt, we find it unnecessary to

discuss further the other errors raised by petitioner.

WHEREFORE, the Petition is GRANTED. The Court of Appeals Decision dated March
16, 2010 and the Resolution dated February 2, 2012 are REVERSED and SET ASIDE.
Petitioner Monico Ligtas is ACQUITTED of the crime of theft under Article 308 of the
Revised Penal Code. If detained, he is ordered immediately RELEASED, unless he is
confined for any other lawful cause. Any amount paid by way of a bailbond is
ordered RETURNED.

SO ORDERED.chanroblesvirtuallawlibrary

SECOND DIVISION

April 13, 2016

G.R. No. 217930

SPOUSES JORGE NAVARRA and CARMELITA NAVARRA, Petitioners,

vs.
YOLANDA LIONGSON, Respondent.

DECISION

MENDOZA, J:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the August 28, 2014 Amended Decision 1 and the April 16, 2015 Resolution2 of the
Court of Appeals (CA) in CA-G.R. SP No. 105568, which reversed its December 8,
2011 Decision3 and recalled and set aside the entry of judgment issued on January 6,
2012.

The Antecedents:

On September 23, 1993, Jose Liongson (Jose), the deceased husband of respondent

Yolanda Liongson (Yolanda), filed a complaint for damages based on malicious

1201
prosecution against spouses Jorge and Carmelita Navarra (Spouses Navarra) and
spouses Ruben and Cresencia Bernardo (Spouses Bernardo) [collectively referred as
defendant spouses], before the Regional Trial Court, Branch 255, Las Piñas City (RTC).

After the presentation and formal offer of their respective evidence, the parties were
required to file their respective memoranda.

On January 4, 2001, Atty. Salvador B. Aguas (Atty. Aguas), counsel of Jose, filed the

Motion for Time to Submit Motion for Substitution of Plaintiff with Motion For
Suspension/Commencement of Counting of Period in Filing Pleadings 4 informing the
RTC of the death of Jose and praying for time to submit a motion for substitution
pending receipt of the death certificate.

On May 2, 2001, a Decision5 was rendered in favor of Jose ordering defendant spouses

to pay P500,000.00 for moral damages; P200,000.00 for exemplary damages;
P20,000.00 for reimbursement of expenses; P35,000.00 for substantial number of
appearance, P50,000.00 for attorney’s fees; and the costs of suit.

On July 13, 2001, defendant spouses filed their Motion for Declaration of Nullity of the
Decision and/or Notice of Appeal6 based on the absence of a valid substitution of Jose.

Consequently, Atty. Aguas filed the Motion for Substitution, 7 dated July 30, 2001,
praying that Jose be substituted by his surviving wife, Yolanda.

In its Order,8 dated May 13, 2002, the RTC denied the motion for declaration of nullity of
the May 2, 2001 decision. Defendant spouses then elevated the matter before the CA,
docketed as CA-G.R. CV No. 74988. In a Resolution[[,9]] dated July 30, 2004, the CA
dismissed the petition for want of appellant’s brief. On August 30, 2004, an entry of
judgment10 was issued.

Thereafter, Atty. Aguas filed a motion for execution, 11 but it was opposed by defendant
spouses on the ground that no valid substitution had been made, and that the continued
appearance of Atty. Aguas was ultra vires.12

In the Order,13 dated October 28, 2005, the motion for execution was deemed
withdrawn upon motion of Atty. Aguas.

On November 20, 2005, Atty. Aguas filed a pleading denominated as Motions to

Resolve Motion for Substitution of Parties, dated July 31, 2001 or Considered it
Deemed Admitted, and Thereafter Issue Writ of Execution of the Judgment, dated May
2, 2001, in the name of Yolanda Liongson as Substituting Party for Plaintiff Jose
Liongson.14 In the said motion, it was prayed that Yolanda be allowed to substitute her
deceased husband and that a writ of execution be issued in her favor. Attached to the
motion was a copy of the death certificate15 of Jose indicating that the latter died on
November 28, 2000.

1202
In the Order,16 dated March 17, 2006, the RTC denied the motion to resolve the motion
for substitution of parties and the motion for issuance of a writ of execution for lack of
merit.

In the meantime, Yolanda filed a petition for issuance of letters of administration of the
estate of Jose, her deceased husband, before the Regional Trial Court, Branch 274,
Parañaque City. In the December 29, 2006 Order, the Letter of Administration was
issued appointing Yolanda as administratix of the estate of Jose.

Thus, acting as the administratix of the estate of Jose, Yolanda filed a motion for
execution of the May 2, 2001 decision.[[ 17]] It was, however, denied in an
Order,18 dated September 14, 2007, on the ground that no proper substitution had been
made yet.

Unperturbed, Yolanda, thru her new counsel, Atty. Bonifacio G. Caboboy (Atty.

Caboboy), filed her Motion to Substitute the Plaintiff Jose Liongson 19 which was finally
granted by the RTC in the Order,20 dated January 25, 2008.

Defendant spouses then filed a motion for reconsideration of the January 25, 2008
Order.21 On May 22, 2008, the RTC denied the said motion. 22

Defendant spouses then filed a petition for certiorari before the CA, docketed as CA-
G.R. SP No. 104667, assailing the January 25, 2008 and May 22, 2008 orders of the
RTC. They insisted that the issue of substitution had been laid to rest by the RTC on
three (3) occasions and Yolanda did not question the propriety of its denial. Hence, she
was forever barred from effecting the substitution.

Meanwhile, Yolanda filed her Motion for Execution of Judgment 23 which was granted by
the RTC in its Order,24 dated July 25, 2008. On August 1, 2008, a writ of
execution25 was issued and the Notice to Pay,26 dated August 5, 2008, was served upon
defendant spouses. The latter then filed a motion to recall or hold in abeyance the
implementation of the writ of execution and the sheriff’s notice to pay.

Without waiting for the RTC to rule on the said motion, defendant spouses filed another
petition for certiorari under Rule 65 of the Rules of Court before the CA, docketed
as CA-G.R. SP No. 105568, this time questioning the July 25, 2008 Order and the
August 1, 2008 Writ of Execution issued by the RTC. Defendant spouses insisted that
the RTC gravely abused its discretion when it allowed the substitution and then issued
the writ of execution.

In its January 16, 2009 Order,27 the RTC denied the motion to recall or hold in abeyance
the implementation of the August 1, 2008 writ of execution and the August 5, 2008
sheriff’s notice to pay for lack of merit. Thereafter, the notice of garnishment and the
notice of levy were issued. Spouses Navarra’s property, covered by TCT No. 103473,
was levied and subsequently sold in a public auction pursuant to the writ of execution. 28

1203
Meanwhile, on October 28, 2009, the CA rendered a Decision, 29 in CA-G.R. SP No.
104667, dismissing the petition for certiorari and declaring the substitution of plaintiff in
order. The CA held that the rule on substitution was not a matter of jurisdiction but a
requirement of due process; and that considering that both parties had already
completed the presentation of their evidence in chief before Jose died, neither of them
was denied due process of law. Thus, the CA stated that the belated substitution of
Jose as plaintiff to the case did not affect the validity of the final and executory
judgment.

On December 8, 2011, a decision30 was rendered in CA-G.R. SP No. 105568, in favor

of defendant spouses. The CA reversed and set aside the questioned RTC order
granting the motion for execution and the issuance of the writ of execution. The CA held
that the complaint for damages, arising from malicious prosecution filed by Jose against
defendant spouses was a purely personal action that did not survive upon his death;
and because the action was deemed abated upon his death, the RTC was found to
have gravely abused its discretion when it allowed the substitution of Jose and issued
the writ of execution. The CA further stated that upon the death of Jose, the RTC lost
jurisdiction over the case and the decision rendered therein was a void judgment;
hence, all acts performed pursuant thereto and all claims emanating therefrom had no
legal effect.

On January 6, 2012, the December 8, 2011 decision of the CA in CAG. R. SP No.

105568 became final and executory and the entry of judgment 31 was issued.

On December 16, 2013, almost two years later, Yolanda filed her Urgent Omnibus
Motion 32 praying for the recall/lifting of the entry of judgment and for the admission of
the attached motion for reconsideration. Yolanda contended that she was totally
unaware of this petition for certiorari filed before the CA and docketed as CA-G.R. SP
No. 105568; that although notices were sent to her counsel, Atty. Caboboy, the latter
did not inform or furnish her with copies of the notices and the petition; that Atty.
Caboboy did not file any comment on the petition or a motion for reconsideration; and
that Atty. Caboboy’s gross negligence and mistake should not bind her because the
said negligence and mistake would amount to deprivation of her property without due
process of law.

On August 28, 2014, the CA promulgated an amended decision in CA-G.R. SP No.

105568. While the CA took note that no comment was filed by defendant spouses
despite notice, it granted the omnibus motion and the motion for reconsideration filed by
Yolanda. The appellate court recalled and set aside the entry of judgment and reversed
its December 8, 2011 decision in the interest of substantial justice. The CA discovered
that the appellate court rendered two conflicting decisions in CA-G.R. SP No. 104667
and CA-G.R. SP No. 105568. In CA-G.R. SP No. 104667, earlier filed by defendant
spouses, the appellate court arrived at a decision allowing the substitution of Jose. The
same issue of substitution was debunked in the December 8, 2011 CA decision in CA-
G.R. SP No. 105568.

1204
In its amended decision, the CA did not apply the general rule that the negligence of
counsel would bind the client so as not to deprive Yolanda of her right to due process of
law. On the merits, the CA ruled that the action filed by Jose before the RTC was not
extinguished upon his death as it was one for recovery of damages for injury to his
person caused by defendant spouses’ tortuous conduct of maliciously filing an
unfounded suit.

Spouses Navarra (petitioners) filed their separate motions for reconsideration, but both

were denied by the CA in a Resolution,33 dated April 16, 2015.

Hence, this petition anchored on the following –

GROUNDS FOR THE PETITION

THE COURT OF APPEALS DECIDED THE INSTANT CASE IN A WAY NOT IN

ACCORD WITH LAW AND WITH THE APPLICABLE DECISIONS OF THE SUPREME
COURT.

A. THE COURT OF APPEALS BREACHED THE WELLSETTLED RULE THAT

A FINAL AND EXECUTORY JUDGMENT MAY NO LONGER BE MODIFIED IN
ANY RESPECT, EVEN IF THE MODIFICATION IS MEANT TO CORRECT
WHAT IS PERCEIVED TO BE AN ERRONEOUS CONCLUSION OF LAW OR
FACT.

B. THE COURT OF APPEALS ERRED WHEN IT AMENDED A FINAL AND

EXECUTORY DECISION UPON PRIVATE RESPONDENT’S MERE MOTION
FOR RECONSIDERATION.

C. THE COURT OF APPEALS LEGALLY ERRED IN EXCEPTING THE

INSTANT CASE FROM THE RULE THAT THE MISTAKE OR NEGLIGENCE
OF COUNSEL BINDS THE CLIENT.

D. AT ALL EVENTS, THE COURT OF APPEALS LEGALLY ERRED IN

DISMISSING THE PETITION IN CA-G.R. SP NO.105568.[[34]]

Petitioners argue that it is beyond the power of the CA to amend its original decision in
this case, dated December 8, 2011, for it violates the principle of finality of judgment
and its immutability. They point out that the said CA decision had acquired finality,
hence, it could no longer be modified in any respect even if the modification was meant
to correct erroneous conclusions of fact or law, or it would be made by the court that
rendered it or by the highest court of the land.

Petitioners also aver that there was no conflict in the decisions rendered by the CA in
CA-G.R. SP No. 104667 and in the present case as the two cases involved different
issues. The former case ruled on the validity of the January 25, 2008 Order of the RTC
which granted the substitution of Jose by Yolanda, while the present case questioned

1205
the July 25, 2008 Order of the RTC which granted the motion for execution of judgment
filed by Yolanda.

Finally, petitioners assert that the CA erred when it granted the motion for
reconsideration filed by Yolanda after almost two years from the time the decision was
rendered. They point out that Yolanda did not even indicate in

her motion for reconsideration the exact date of her receipt of the copy of the December
8, 2011 decision and that it could not be presumed that she learned of it only
two (2) years after its issuance. They contend that the respondent was negligent
because she waited for two long years before she filed a motion for reconsideration.
They added that she should have made efforts to ascertain the status of the case
considering that she was appointed administratix of the estate of Jose.

Respondent Yolanda counters that the CA was correct when it reversed and set aside
its December 8, 2011 decision and dismissed the petition for certiorari as the issues
therein had already been laid to rest in the October 28, 2009 CA decision in CA- G.R.
SP No. 104667. She argues that because the petitions in both CA- G.R. SP No. 104667
and CA- G.R. SP No. 105568, involved the same issues and parties under similar
factual and legal settings, the decision rendered in the first case became final and could
no longer be changed, revised or reversed.

All the arguments by both parties boil down to the lone issue of whether or not the CA
erred and violated the principle of immunity of judgment when it amended its December
8, 2011 decision.

The Court’s Ruling

The petition is not meritorious.

Well-settled is the rule that a judgment that has acquired finality "becomes immutable
and unalterable, and may no longer be modified in any respect, even if the modification
is meant to correct erroneous conclusions of fact and law, and whether it be made by
the court that rendered it or by the Highest Court of the land." 35 The rationale of this
doctrine is to avoid delay in the administration of justice and in order to put an end to
judicial controversies. In the case of Manotok Realty, Inc. v. CLT Realty Development
Corp.,36 the Court explained the principle of immunity of judgment in this wise:

The doctrine of finality of judgment is grounded on fundamental considerations of public

policy and sound practice,

and that, at the risk of occasional errors, the judgments or orders of courts must
become final at some definite time fixed by law; otherwise, there would be no end to
litigations, thus setting to naught the main role of courts of justice which is to assist in
the enforcement of the rule of law and the maintenance of peace and order by settling
justiciable controversies with finality.37

1206
Nonetheless, this doctrine may be relaxed in order to serve substantial justice in case
compelling circumstances that clearly warrant the exercise of the Court’s equity
jurisdiction are extant.38 Thus, like any other rule, it has exceptions, such as: (1) the
correction of clerical errors; (2) the so-called nunc pro tunc entries which cause no
prejudice to any party; (3) void judgments; and (4) whenever circumstances transpire
after the finality of the decision rendering its execution unjust and inequitable. 39 After all,
the rules of procedure intend to promote the ends of justice, thus, their strict and rigid
application must always be eschewed when it would subvert its primary objective. 40

The issue posed before the Court is not of first impression. It involves three conflicting
final and executory judgments rendered by the RTC and the CA. The first is the May 2,
2001 RTC decision which granted the complaint

for damages. The second is the October 28, 2009 CA decision in CA-G.R. SP No.
104667 which granted the motion for substitution and the motion for execution. The
third, which is obviously in conflict with the first and second judgment, is the December
8, 2011 CA decision in CA-G.R. SP No. 105568 which not only reversed and set
aside the motion for execution but also declared the May 2, 2001 RTC decision a void
judgment.

Where a certain case comprises two or more conflicting judgments which are final and
executory, the Court, in the case of Collantes v. Court of Appeals41 (Collantes), offered
three (3) options in resolving the same. First, the court may opt to require the parties to
assert their claims anew; second, to determine which judgment came first; and third, to
determine which of the judgments had been rendered by a court of last resort.

In the case of Heirs of Maura So v. Obliosco,42 the Court stated that it was more
equitable to apply the second and third options mentioned in Collantes. It, thus,
sustained the earlier decisions over the current ones, as they already had vested rights
over the winning party, and accorded more respect to the decisions of this Court than
those made by the lower courts.

The Court, in Government Service Insurance System v. Group Management

Corporation,43 also resorted to the second and third options and affirmed the finality of
the earlier decisions rendered by the Court. The Court held that:

In Collantes, this Court applied the first option and resolved the conflicting issues anew.
However, resorting to the first solution in the case at bar would entail disregarding not
only the final and executory decisions of the Lapu-Lapu RTC and the Manila RTC, but
also the final and executory decisions of the Court of Appeals and this Court. Moreover,
it would negate two decades worth of litigating. Thus, we find it more
equitable and practicable to apply

the second and third options consequently maintaining the finality of one of the
conflicting judgments. The primary criterion under the second option is the time when
the decision was rendered and became final and executory, such that earlier decisions

1207
should prevail over the current ones since final and executory decisions vest rights in
the winning party. In the third solution, the main criterion is the determination of which
court or tribunal rendered the decision. Decisions of this Court should be accorded more
respect than those made by the lower courts.44

Guided by these jurisprudence, the Court agrees with the CA that it would be more
equitable to make use of the second option mentioned in Collantes and sustain the
finality of the earlier decisions rendered by the RTC and the CA in CA-G.R. SP No.
104667. To recall, the RTC decision in the complaint for damages was promulgated as
early as May 2, 2001 and became final and executory on August 30, 2004. 45 The only
reason why the said decision was not immediately executed was the petitioners’
insistence on the improper substitution of plaintiff. This issue, however, was laid to rest
on October 8, 2009 by the CA when it rendered its decision in CA-G.R. SP

No. 104667. The CA declared that the decision and the proceedings in the said case
were not rendered nugatory notwithstanding the belated compliance with the rules on
substitution as none of the parties was denied

due process. The appellate court further stated that the rule on the substitution by heirs
was not a matter of jurisdiction, but a requirement of due process. It follows therefore,
that when due process is not violated as when the right of the representative or heir is
recognized and protected, noncompliance or belated formal compliance with the rules
cannot affect the validity of a promulgated decision. 46 Moreover, the Court notes that
petitioners did not question the propriety of the May 2, 2001 decision in their petition in
CA-G.R. SP No. 104667 but even admitted the finality and executory nature of the said
decision and their only concern was how the said decision would be executed without a
valid substitution of the plaintiff.

Clearly, the October 28, 2009 decision of the CA in CA-G.R. SP No. 104667
constituted res judicata with respect to the latter case in CA-G.R. SP No.
105568.1âwphi1 "Res judicata is defined as ‘a matter adjudged; a thing judicially acted
upon or decided; a thing or matter settled by judgment.’ 47" Based on this principle, a
final judgment or order on the merits, rendered by a competent court on any matter
within its jurisdiction, "is conclusive in a subsequent case between the same parties and
their successor-in-interest by title subsequent to the commencement of the action or
special proceeding, litigating for the same thing and under the same title and in the
same capacity."48 Simply put, "a final judgment on the merits rendered by a court of
competent jurisdiction, is conclusive as to the rights of the parties and their privies and
constitutes an absolute bar to subsequent actions involving the same claim, demand, or
cause of action."49

For res judicata to serve as an absolute bar to a subsequent action, the following

requisites must concur: (a) the former judgment is final; (b) it was rendered by a court
having jurisdiction over the subject matter and the parties; (c) it is a judgment on the
merits; and, (d) there is, between the first and second actions, identity of parties, of
subject matter and of cause of action.50

1208
In the present case, there is no quibble that all the elements adverted to above obtain in
this case. There is no dispute that the December 2, 2001 RTC decision had become
final and executory and the entry of judgment was issued on August 30, 2004. There is
no question either that the RTC had jurisdiction over the subject matter and the parties,
and that the decision was a judgment on the merits.

The controversy arose when petitioners questioned the propriety of the substitution of
Jose before the CA in CA-G.R. SP No. 104667 and subsequently the July 25, 2008
RTC order and its August 1, 2008 writ of execution in CA-G.R. SP No. 105568, which
was raffled to a different division of the CA. Although petitioners would like to impress to
this Court that the issues raised in two cases before the CA were anchored on different
causes of action, the Court rules otherwise. Under the doctrine of conclusiveness of
judgment, facts and issues actually and directly resolved in a former suit can never
again be raised in any future case between the same parties even involving a different
cause of action.51 The CA decision in CA-G.R. SP No. 104667 concerning the validity of
plaintiffs substitution became conclusive on the parties. Thus, petitioners cannot again
seek refuge by filing their second petition (CA-G.R. SP No. 105568) in the guise of
questioning the order of execution but actually invoking the alleged nullity of the
substitution of plaintiff. Petitioners cannot evade or avoid the application of res
judicata by· simply varying· the form of his action or adopting a different method of
presenting their case.52

Indeed, it is time to put an end to this litigation as the enforcement of the final judgment
has long been delayed. In the interest of justice, petitioners are ordered to respect and
comply with the final and executor judgment of the Court. As stated in the case
of Selga v. Sony Entierro Brar :53

It must be remembered that it is to the interest of the public thatthere should be an end
to litigation by the parties over a subject fully and fairly adjudicated. The doctrine of res
judicata is a rule that pervades every well-regulated system of jurisprudence and is
founded upon two grounds ·embodied in various maxims of the common law, namely:
(1) public policy and necessity, which dictates that it would be in the interest of the State
that there should be an end to litigation republicae ut sit litium; and (2) the hardship on
the individual that he should be vexed twice for the same cause nemo debet bis vexari
pro una et eadem causa. A contrary doctrine would subject public peace and quiet to
the will and neglect of individuals and prefer the gratification of the litigious disposition
on the part of suitors to the preservation of public tranquility and happiness. 54

WHEREFORE, the petition is DENIED. The August 28, 2014 Amended Decision and

the April 16, 2015 Resolution of the· Court of Appeals in CA-G.R. SP No. 105568
are AFFIRMED.

SO ORDERED.

THIRD DIVISION

1209
G.R. No. 186571               August 11, 2010

GERBERT R. CORPUZ, Petitioner,
vs.
DAISYLYN TIROL STO. TOMAS and The SOLICITOR GENERAL, Respondents.

DECISION

BRION, J.:

Before the Court is a direct appeal from the decision 1 of the Regional Trial Court (RTC)
of Laoag City, Branch 11, elevated via a petition for review on certiorari 2 under Rule 45
of the Rules of Court (present petition).

Petitioner Gerbert R. Corpuz was a former Filipino citizen who acquired Canadian
citizenship through naturalization on November 29, 2000. 3 On January 18, 2005,
Gerbert married respondent Daisylyn T. Sto. Tomas, a Filipina, in Pasig City. 4 Due to
work and other professional commitments, Gerbert left for Canada soon after the
wedding. He returned to the Philippines sometime in April 2005 to surprise Daisylyn, but
was shocked to discover that his wife was having an affair with another man. Hurt and
disappointed, Gerbert returned to Canada and filed a petition for divorce. The Superior
Court of Justice, Windsor, Ontario, Canada granted Gerbert’s petition for divorce on
December 8, 2005. The divorce decree took effect a month later, on January 8, 2006. 5

Two years after the divorce, Gerbert has moved on and has found another Filipina to
love. Desirous of marrying his new Filipina fiancée in the Philippines, Gerbert went to
the Pasig City Civil Registry Office and registered the Canadian divorce decree on his
and Daisylyn’s marriage certificate. Despite the registration of the divorce decree, an
official of the National Statistics Office (NSO) informed Gerbert that the marriage
between him and Daisylyn still subsists under Philippine law; to be enforceable, the
foreign divorce decree must first be judicially recognized by a competent Philippine
court, pursuant to NSO Circular No. 4, series of 1982. 6

Accordingly, Gerbert filed a petition for judicial recognition of foreign divorce and/or
declaration of marriage as dissolved (petition) with the RTC. Although summoned,
Daisylyn did not file any responsive pleading but submitted instead a notarized
letter/manifestation to the trial court. She offered no opposition to Gerbert’s petition and,
in fact, alleged her desire to file a similar case herself but was prevented by financial
and personal circumstances. She, thus, requested that she be considered as a party-in-
interest with a similar prayer to Gerbert’s.

In its October 30, 2008 decision,7 the RTC denied Gerbert’s petition. The RTC
concluded that Gerbert was not the proper party to institute the action for judicial
recognition of the foreign divorce decree as he is a naturalized Canadian citizen. It ruled
that only the Filipino spouse can avail of the remedy, under the second paragraph of

1210
Article 26 of the Family Code,8 in order for him or her to be able to remarry under
Philippine law.9 Article 26 of the Family Code reads:

Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in
force in the country where they were solemnized, and valid there as such, shall also be
valid in this country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37
and 38.

Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a
divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her
to remarry, the Filipino spouse shall likewise have capacity to remarry under Philippine
law.

This conclusion, the RTC stated, is consistent with the legislative intent behind the
enactment of the second paragraph of Article 26 of the Family Code, as determined by
the Court in Republic v. Orbecido III; 10 the provision was enacted to "avoid the absurd
situation where the Filipino spouse remains married to the alien spouse who, after
obtaining a divorce, is no longer married to the Filipino spouse." 11

THE PETITION

From the RTC’s ruling,12 Gerbert filed the present petition.13

Gerbert asserts that his petition before the RTC is essentially for declaratory relief,
similar to that filed in Orbecido; he, thus, similarly asks for a determination of his rights
under the second paragraph of Article 26 of the Family Code. Taking into account the
rationale behind the second paragraph of Article 26 of the Family Code, he contends
that the provision applies as well to the benefit of the alien spouse. He claims that the
RTC ruling unduly stretched the doctrine in Orbecido by limiting the standing to file the
petition only to the Filipino spouse – an interpretation he claims to be contrary to the
essence of the second paragraph of Article 26 of the Family Code. He considers himself
as a proper party, vested with sufficient legal interest, to institute the case, as there is a
possibility that he might be prosecuted for bigamy if he marries his Filipina fiancée in the
Philippines since two marriage certificates, involving him, would be on file with the Civil
Registry Office. The Office of the Solicitor General and Daisylyn, in their respective
Comments,14 both support Gerbert’s position.

Essentially, the petition raises the issue of whether the second paragraph of Article 26
of the Family Code extends to aliens the right to petition a court of this jurisdiction for
the recognition of a foreign divorce decree.

THE COURT’S RULING

The alien spouse can claim no right under the second paragraph of Article 26 of the
Family Code as the substantive right it establishes is in favor of the Filipino spouse

1211
The resolution of the issue requires a review of the legislative history and intent behind
the second paragraph of Article 26 of the Family Code.

The Family Code recognizes only two types of defective marriages – void 15 and
voidable16 marriages. In both cases, the basis for the judicial declaration of absolute
nullity or annulment of the marriage exists before or at the time of the marriage. Divorce,
on the other hand, contemplates the dissolution of the lawful union for cause arising
after the marriage.17 Our family laws do not recognize absolute divorce between Filipino
citizens.18

Recognizing the reality that divorce is a possibility in marriages between a Filipino and
an alien, President Corazon C. Aquino, in the exercise of her legislative powers under
the Freedom Constitution,19 enacted Executive Order No. (EO) 227, amending Article
26 of the Family Code to its present wording, as follows:

Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in
force in the country where they were solemnized, and valid there as such, shall also be
valid in this country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37
and 38.

Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a
divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her
to remarry, the Filipino spouse shall likewise have capacity to remarry under Philippine
law.

Through the second paragraph of Article 26 of the Family Code, EO 227 effectively
incorporated into the law this Court’s holding in Van Dorn v. Romillo, Jr. 20 and Pilapil v.
Ibay-Somera.21 In both cases, the Court refused to acknowledge the alien spouse’s
assertion of marital rights after a foreign court’s divorce decree between the alien and
the Filipino. The Court, thus, recognized that the foreign divorce had already severed
the marital bond between the spouses. The Court reasoned in Van Dorn v. Romillo that:

To maintain x x x that, under our laws, [the Filipino spouse] has to be considered still
married to [the alien spouse] and still subject to a wife's obligations x x x cannot be just.
[The Filipino spouse] should not be obliged to live together with, observe respect and
fidelity, and render support to [the alien spouse]. The latter should not continue to be
one of her heirs with possible rights to conjugal property. She should not be
discriminated against in her own country if the ends of justice are to be served. 22

As the RTC correctly stated, the provision was included in the law "to avoid the absurd
situation where the Filipino spouse remains married to the alien spouse who, after
obtaining a divorce, is no longer married to the Filipino spouse." 23 The legislative intent
is for the benefit of the Filipino spouse, by clarifying his or her marital status, settling the
doubts created by the divorce decree. Essentially, the second paragraph of Article 26 of
the Family Code provided the Filipino spouse a substantive right to have his or her
marriage to the alien spouse considered as dissolved, capacitating him or her to

1212
remarry.24 Without the second paragraph of Article 26 of the Family Code, the judicial
recognition of the foreign decree of divorce, whether in a proceeding instituted precisely
for that purpose or as a related issue in another proceeding, would be of no significance
to the Filipino spouse since our laws do not recognize divorce as a mode of severing
the marital bond;25 Article 17 of the Civil Code provides that the policy against absolute
divorces cannot be subverted by judgments promulgated in a foreign country. The
inclusion of the second paragraph in Article 26 of the Family Code provides the direct
exception to this rule and serves as basis for recognizing the dissolution of the marriage
between the Filipino spouse and his or her alien spouse.

Additionally, an action based on the second paragraph of Article 26 of the Family Code
is not limited to the recognition of the foreign divorce decree. If the court finds that the
decree capacitated the alien spouse to remarry, the courts can declare that the Filipino
spouse is likewise capacitated to contract another marriage. No court in this jurisdiction,
however, can make a similar declaration for the alien spouse (other than that already
established by the decree), whose status and legal capacity are generally governed by
his national law.26

Given the rationale and intent behind the enactment, and the purpose of the second
paragraph of Article 26 of the Family Code, the RTC was correct in limiting the
applicability of the provision for the benefit of the Filipino spouse. In other words, only
the Filipino spouse can invoke the second paragraph of Article 26 of the Family Code;
the alien spouse can claim no right under this provision.

The foreign divorce decree is presumptive evidence of a right that clothes the party with
legal interest to petition for its recognition in this jurisdiction

We qualify our above conclusion – i.e., that the second paragraph of Article 26 of the
Family Code bestows no rights in favor of aliens – with the complementary statement
that this conclusion is not sufficient basis to dismiss Gerbert’s petition before the RTC.
In other words, the unavailability of the second paragraph of Article 26 of the Family
Code to aliens does not necessarily strip Gerbert of legal interest to petition the RTC for
the recognition of his foreign divorce decree. The foreign divorce decree itself, after its
authenticity and conformity with the alien’s national law have been duly proven
according to our rules of evidence, serves as a presumptive evidence of right in favor of
Gerbert, pursuant to Section 48, Rule 39 of the Rules of Court which provides for the
effect of foreign judgments. This Section states:

SEC. 48. Effect of foreign judgments or final orders.—The effect of a judgment or final
order of a tribunal of a foreign country, having jurisdiction to render the judgment or final
order is as follows:

(a) In case of a judgment or final order upon a specific thing, the judgment or final
order is conclusive upon the title of the thing; and

1213
 (b) In case of a judgment or final order against a person, the judgment or final
order is presumptive evidence of a right as between the parties and their
successors in interest by a subsequent title.

In either case, the judgment or final order may be repelled by evidence of a want of
jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.

To our mind, direct involvement or being the subject of the foreign judgment is sufficient
to clothe a party with the requisite interest to institute an action before our courts for the
recognition of the foreign judgment. In a divorce situation, we have declared, no less,
that the divorce obtained by an alien abroad may be recognized in the Philippines,
provided the divorce is valid according to his or her national law. 27

The starting point in any recognition of a foreign divorce judgment is the

acknowledgment that our courts do not take judicial notice of foreign judgments and
laws. Justice Herrera explained that, as a rule, "no sovereign is bound to give effect
within its dominion to a judgment rendered by a tribunal of another country." 28 This
means that the foreign judgment and its authenticity must be proven as facts under our
rules on evidence, together with the alien’s applicable national law to show the effect of
the judgment on the alien himself or herself. 29 The recognition may be made in an action
instituted specifically for the purpose or in another action where a party invokes the
foreign decree as an integral aspect of his claim or defense.

In Gerbert’s case, since both the foreign divorce decree and the national law of the
alien, recognizing his or her capacity to obtain a divorce, purport to be official acts of a
sovereign authority, Section 24, Rule 132 of the Rules of Court comes into play. This
Section requires proof, either by (1) official publications or (2) copies attested by the
officer having legal custody of the documents. If the copies of official records are not
kept in the Philippines, these must be (a) accompanied by a certificate issued by the
proper diplomatic or consular officer in the Philippine foreign service stationed in the
foreign country in which the record is kept and (b) authenticated by the seal of his office.

The records show that Gerbert attached to his petition a copy of the divorce decree, as
well as the required certificates proving its authenticity, 30 but failed to include a copy of
the Canadian law on divorce.31 Under this situation, we can, at this point, simply dismiss
the petition for insufficiency of supporting evidence, unless we deem it more appropriate
to remand the case to the RTC to determine whether the divorce decree is consistent
with the Canadian divorce law.

We deem it more appropriate to take this latter course of action, given the Article 26
interests that will be served and the Filipina wife’s (Daisylyn’s) obvious conformity with
the petition. A remand, at the same time, will allow other interested parties to oppose
the foreign judgment and overcome a petitioner’s presumptive evidence of a right by
proving want of jurisdiction, want of notice to a party, collusion, fraud, or clear mistake of
law or fact. Needless to state, every precaution must be taken to ensure conformity with
our laws before a recognition is made, as the foreign judgment, once recognized, shall

1214
have the effect of res judicata32 between the parties, as provided in Section 48, Rule 39
of the Rules of Court.33

In fact, more than the principle of comity that is served by the practice of reciprocal
recognition of foreign judgments between nations, the res judicata effect of the foreign
judgments of divorce serves as the deeper basis for extending judicial recognition and
for considering the alien spouse bound by its terms. This same effect, as discussed
above, will not obtain for the Filipino spouse were it not for the substantive rule that the
second paragraph of Article 26 of the Family Code provides.

Considerations beyond the recognition of the foreign divorce decree

As a matter of "housekeeping" concern, we note that the Pasig City Civil Registry Office
has already recorded the divorce decree on Gerbert and Daisylyn’s marriage certificate
based on the mere presentation of the decree. 34 We consider the recording to be legally
improper; hence, the need to draw attention of the bench and the bar to what had been
done.

Article 407 of the Civil Code states that "[a]cts, events and judicial decrees concerning
the civil status of persons shall be recorded in the civil register." The law requires the
entry in the civil registry of judicial decrees that produce legal consequences touching
upon a person’s legal capacity and status, i.e., those affecting "all his personal qualities
and relations, more or less permanent in nature, not ordinarily terminable at his own will,
such as his being legitimate or illegitimate, or his being married or not." 35

A judgment of divorce is a judicial decree, although a foreign one, affecting a person’s

legal capacity and status that must be recorded. In fact, Act No. 3753 or the Law on
Registry of Civil Status specifically requires the registration of divorce decrees in the
civil registry:

Sec. 1. Civil Register. – A civil register is established for recording the civil status of
persons, in which shall be entered:

(a) births;

(b) deaths;

(c) marriages;

(d) annulments of marriages;

(e) divorces;

(f) legitimations;

(g) adoptions;

1215
 (h) acknowledgment of natural children;

(i) naturalization; and

(j) changes of name.

xxxx

Sec. 4. Civil Register Books. — The local registrars shall keep and preserve in their
offices the following books, in which they shall, respectively make the proper entries
concerning the civil status of persons:

(1) Birth and death register;

(2) Marriage register, in which shall be entered not only the marriages
solemnized but also divorces and dissolved marriages.

(3) Legitimation, acknowledgment, adoption, change of name and naturalization

register.

But while the law requires the entry of the divorce decree in the civil registry, the law
and the submission of the decree by themselves do not ipso facto authorize the
decree’s registration. The law should be read in relation with the requirement of a
judicial recognition of the foreign judgment before it can be given res judicata effect. In
the context of the present case, no judicial order as yet exists recognizing the foreign
divorce decree. Thus, the Pasig City Civil Registry Office acted totally out of turn and
without authority of law when it annotated the Canadian divorce decree on Gerbert and
Daisylyn’s marriage certificate, on the strength alone of the foreign decree presented by
Gerbert.

Evidently, the Pasig City Civil Registry Office was aware of the requirement of a court
recognition, as it cited NSO Circular No. 4, series of 1982, 36 and Department of Justice
Opinion No. 181, series of 198237 – both of which required a final order from a
competent Philippine court before a foreign judgment, dissolving a marriage, can be
registered in the civil registry, but it, nonetheless, allowed the registration of the decree.
For being contrary to law, the registration of the foreign divorce decree without the
requisite judicial recognition is patently void and cannot produce any legal
effect.1avvphi1

Another point we wish to draw attention to is that the recognition that the RTC may
extend to the Canadian divorce decree does not, by itself, authorize the cancellation of
the entry in the civil registry. A petition for recognition of a foreign judgment is not the
proper proceeding, contemplated under the Rules of Court, for the cancellation of
entries in the civil registry.

1216
Article 412 of the Civil Code declares that "no entry in a civil register shall be changed
or corrected, without judicial order." The Rules of Court supplements Article 412 of the
Civil Code by specifically providing for a special remedial proceeding by which entries in
the civil registry may be judicially cancelled or corrected. Rule 108 of the Rules of Court
sets in detail the jurisdictional and procedural requirements that must be complied with
before a judgment, authorizing the cancellation or correction, may be annotated in the
civil registry. It also requires, among others, that the verified petition must be filed with
the RTC of the province where the corresponding civil registry is located; 38 that the civil
registrar and all persons who have or claim any interest must be made parties to the
proceedings;39 and that the time and place for hearing must be published in a
newspaper of general circulation.40 As these basic jurisdictional requirements have not
been met in the present case, we cannot consider the petition Gerbert filed with the
RTC as one filed under Rule 108 of the Rules of Court.

We hasten to point out, however, that this ruling should not be construed as requiring
two separate proceedings for the registration of a foreign divorce decree in the civil
registry – one for recognition of the foreign decree and another specifically for
cancellation of the entry under Rule 108 of the Rules of Court. The recognition of the
foreign divorce decree may be made in a Rule 108 proceeding itself, as the object of
special proceedings (such as that in Rule 108 of the Rules of Court) is precisely to
establish the status or right of a party or a particular fact. Moreover, Rule 108 of the
Rules of Court can serve as the appropriate adversarial proceeding 41 by which the
applicability of the foreign judgment can be measured and tested in terms of
jurisdictional infirmities, want of notice to the party, collusion, fraud, or clear mistake of
law or fact.

WHEREFORE, we GRANT the petition for review on certiorari, and REVERSE the
October 30, 2008 decision of the Regional Trial Court of Laoag City, Branch 11, as well
as its February 17, 2009 order. We order the REMAND of the case to the trial court for
further proceedings in accordance with our ruling above. Let a copy of this Decision be
furnished the Civil Registrar General. No costs.

SO ORDERED.

APPEAL

SECOND DIVISION

November 20, 2017

G.R. No. 216788

UNITED INTERIOR MANGGAHAN HOMEOWNERS ASSOCIATION, represented by

its President, DANIEL CALILUNG, Petitioner
vs.

1217
HON. AMBROSIO B. DE LUNA, Presiding Judge, REGIONAL TRIAL COURT OF
PALAWAN and PUERTO PRINCESA CITY - BRANCH 51, SPOUSES EDILBERTO
VILLON and HELEN PEVILLON, represented by their heirs namely: EMEE
PEVILLON, EMMANUEL PEVILLON, ELSIE VILLONCABRERA, ELMA
VILLONAUSTRIA, and ELLEN FERRERO, Respondents

DECISION

PERLAS-BERNABE, J.:

Before the Court is a petition for certiorari1 assailing the Orders dated September 19,
20142 and December 12, 20143 of the Regional Trial Court of Palawan and Puerto
Princesa City, Branch 51 (RTC) in Civil Case No. 3442, expunging from the records of
the case the Notice of Appeal filed by petitioner United Interior Manggahan
Homeowners Association (petitioner) for lack of authority from its Board of Directors to
initiate the filing of the same.

The Facts

Sometime in early 2000, petitioner, as represented by its President, Daniel Calilung

(Calilung), filed before the RTC a Complaint4 for Specific Performance with Prayer for
the Issuance of a Temporary Restraining Order and Preliminary Injunction with
Damages against respondents Spouses Edilberto Villon and Helen Pe-Villon (Sps.
Villon), now represented by their heirs Emee Pe-Villon, Emmanuel Pe-Villon, Elsie
Villon-Cabrera, Elma Villon-Austria, and Ellen Ferrero (respondents). After petitioner
rested its case, Sps. Villon filed a Manifestation and Motion to Dismiss on Demurrer to
Evidence5 which the RTC eventually granted in an Order 6 dated March 5, 2014,7 and
thereby dismissed petitioner's complaint.

Aggrieved, petitioner moved for reconsideration, 8 but was denied in an Order9 dated

May 6, 2014. Consequently, petitioner filed a Notice of Appeal. 10 For their part, Sps.
Villon filed an Omnibus Motion to Strike Out Notice of Appeal and Issue Certificate of
Finality,11 claiming that petitioner failed to attach a board resolution authorizing Calilung
to file the Notice of Appeal on its behalf, pursuant to Section 12 of Republic Act No.
(RA) 9904.12 They also claimed that petitioner no longer exists and that it failed to
comply with the reportorial requirements mandated by Section 46, Rule 8 13 and Section
63, Rule 1014 of Housing and Land Use Regulatory Board Resolution No. 877, Series of
2011,15 and furthermore, did not show proof of payment of the required appeal fees. 16

The RTC Ruling

On September 19, 2014, the RTC ordered 17 petitioner's Notice of Appeal expunged from
the records "for lack of authority from [its] Board of Directors to initiate the
appeal,"18 pursuant to Section 12 of RA 9904. It, however, found that "[petitioner] has
paid the appeal fee within the reglementary period."19

1218
Dissatisfied, petitioner sought reconsideration, 20 attaching therewith a copy of Board
Resolution No. 01, Series of 2013,21 confirming Calilung's authority to, among others,
represent petitioner in the case.22 For their part, Sps. Villon opposed,23 reiterating that
petitioner did not attach a board resolution authorizing Calilung to file the Notice of
Appeal on its behalf; and had failed to show proof of payment of the required appeal
fees. They added that petitioner's motion for reconsideration failed to comply with the
three (3)-day notice rule under Sections 4,24 5,25 and 6,26 Rule 15 of the Rules of Court.27

In an Order28 dated December 12, 2014, the RTC denied petitioner's motion on the
same ground,29 adding that petitioner failed to "present proof that the required docket
and other court fees were paid"30 and to comply with Section 4, Rule 15 of the same
Rules that requires at least three (3) days prior notice for the hearing of its motion for
reconsideration.31 Accordingly, the RTC declared the September 19, 2014 Order final
and executory.32

Undaunted, petitioner filed the present certiorari petition against the heirs of Sps.

Villon, i.e., herein respondents.

The Issue Before the Court

The essential issue for the Court's resolution is whether or not the RTC gravely abused
its discretion in expunging petitioner's Notice of Appeal from the records of the case.

The Court's Ruling

The petition is meritorious.

Preliminarily, respondents assail33 petitioner's present resort to a certiorari action

arguing that: being final, the September 19, 2014 and December 12, 2014 Orders are
not the proper subject of a petition for certiorari;34 and, in any case, direct filing of the
petition to the Court violates the doctrine of hierarchy of courts. 35

The Court finds petitioner's resort to a certiorari petition before the Court proper.

Under Section 1, Rule 65 of the Rules of Court, an aggrieved party may file a petition
for certiorari when "any tribunal, board, or officer exercising judicial or quasi-judicial
functions has acted without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal, nor any
plain, speedy, and adequate remedy in the ordinary course of law." 36 Section 1, Rule 41
of the same Rules provides that no appeal may be taken from, among others, an order
disallowing or dismissing an appeal; the aggrieved party may, however, file an
appropriate special civil action under Rule 65.

In this case, the assailed September 19, 2014 Order – expunging petitioner's Notice of
Appeal from the records of the case– is effectively an order disallowing or dismissing an

1219
appeal that precludes resort to an appeal. Hence, pursuant to Section 1 of Rule 41, its
only recourse is via the present certiorari action.

Moreover, certiorari is the proper remedy when the assailed orders were issued in
excess of or without jurisdiction or with grave abuse of discretion amounting to lack or
excess thereof. Grave abuse of discretion may arise when a lower court or tribunal
violates or contravenes the Constitution, existing law, or jurisprudence.1âwphi1 As will
be discussed in detail below, the RTC's order, expunging from the records petitioner's
Notice of Appeal was a grave legal error and contradicts established procedural rules.

In this relation, it should be observed that while strict adherence to the judicial hierarchy
of courts has been the long standing policy of the courts, it is not without exception as
the Court possesses full discretionary power to take cognizance and assume jurisdiction
over petitions filed directly with it. A direct resort to the Court is allowed when the
questions involved are dictated by public welfare and the advancement of public policy,
or demanded by the broader interest of justice,37 as in this case.38

Proceeding to the main issue, petitioner argues that pursuant to Section 9, Rule 41 of
the Rules of Court, once an appeal is perfected, the trial court is divested of jurisdiction
all over the judgment and the action in which it is rendered so far as the rights of the
parties under the judgment are concerned.39 Thus, it has no power to do anything which
affects the substantial rights of the parties therein. 40

The Court disagrees. Under Section 9, Rule 41 of the Rules of Court, "[i]n appeals by
notice of appeal, the court loses jurisdiction over the case upon the perfection of the
appeals filed in due time  and the expiration of the time to appeal of the other
parties."41 In fact, under Section 13 of the same Rules, the trial court, prior to the
transmittal of the original record or record on appeal, may, motu propio or on motion,
order the dismissal of the appeal on the grounds specified therein. In other words, the
mere filing of a notice of appeal does not automatically divest the trial court of its
jurisdiction, since the appeal is deemed perfected as to the appellant only; it is not
"deemed perfected," for purposes of divesting the court of its jurisdiction, "before the
expiration of the period to appeal of the other parties." Thus, contrary to petitioner's
position, the RTC has yet to lose its jurisdiction over the case when it filed its Notice of
Appeal as respondents' period to appeal had not yet expired by then.

This notwithstanding, the Court finds that the RTC committed grave abuse of discretion
when it expunged from the records petitioner's Notice of Appeal for "lack of authority
from its Board of Directors to initiate the appeal." 42 Under the Rules, an appeal from
cases decided by the RTC in the exercise of its original jurisdiction shall be made to the
Court of Appeals by "filing a notice of appeal [(or record of appeal in cases required by
law)] with the court which rendered the judgment or final order appealed from and
serving a copy thereof upon the adverse party." 43 The appeal shall be taken, with the full
amount of the appellate court docket and other lawful fees paid, within fifteen (15) days
from notice of the judgment or final order appealed from. 44

1220
It is clear from the foregoing provisions that a board resolution authorizing the
representative to initiate the appeal is not required for the purpose of filing a notice of
appeal. This is because a notice of appeal is not a pleading, initiatory or otherwise, that,
when required by the law or the rules, 45 must contain, among others, a verification and
certification against forum shopping to be signed by the party or his/her representative,
and, in the case of a representative, proof of his/her authority to file the
action, i.e., power of attorney or secretary's certificate with copy of the board resolution.
Besides, if only to put to rest any doubts anent respondents' objection against Calilung's
authority to represent petitioner in the case, 46 the latter in fact submitted, with its motion
for reconsideration, a copy of Board Resolution No. 01, Series of 2013 47 to this effect.
Thus, when the RTC in this case expunged petitioner's Notice of Appeal for lack of
authority from petitioner's Board of Directors to initiate the appeal, it not only effectively
expanded the procedural requirements for initiating an appeal; more than anything, it
effectively deprived petitioner of further recourse to the higher courts by asking for the
submission of documents which neither the law nor the Rules and jurisprudence
require.

Moreover, it should be pointed out that petitioner's failure to present proof of payment of
the appeal fees, as ruled by the RTC in the December 12, 2014 Order, is not fatal to
petitioner's appeal especially considering its earlier finding that petitioner "has paid the
appeal fee within the reglementary period." 48 Under the Rules, it is the non-payment of
the docket and other lawful fees within the reglementary period that would justify the
court in dismissing the appeal.49

Finally, it should be reiterated that procedural rules are meant to facilitate, not defeat,
the attainment of justice.50 Considering the grave legal error it had committed in
expunging petitioner's Notice of Appeal from the records on grounds which neither the
law nor the Rules and jurisprudence require, it behooved the RTC to set aside the
procedural infirmity in petitioner's motion for reconsideration of the September 19, 2014
Order, i.e., failure to comply with the three (3)-day notice rule, and instead give due
course to its appeal. The purpose, after all, of this notice requirement is to provide
respondents with the opportunity to be heard, and to meaningfully oppose petitioner's
motion or participate in the hearing thereof, 51 which respondents were sufficiently able
to do so through their Comment/Opposition 52 to petitioner's motion.

All told, in acting as it did, the RTC clearly committed grave legal error that far exceeds
the proper exercise of its jurisdiction.

WHEREFORE, the petition is GRANTED. The Orders dated September 19, 2014 and

December 12, 2014 of the Regional Trial Court of Palawan and Puerto Princesa City,
Branch 51 (RTC) in Civil Case No. 3442 are hereby SET ASIDE. The Regional Trial
Court is DIRECTED to give due course to petitioner's Notice of Appeal.

SO ORDERED.

SECOND DIVISION

1221
 [ G.R. No. 179257, November 23, 2015 ]
UNITED ALLOY PHILIPPINES CORPORATION, PETITIONER, VS. UNITED
COCONUT PLANTERS BANK [UCPB] AND/OR PHILIPPINE DEPOSIT INSURANCE
CORPORATION [PDIC], JAKOB VAN DER SLUIS AND ROBERT T.CHUA,
RESPONDENTS.

DECISION
DEL CASTILLO, J.:
"[T]he dismissal of the principal action x x x [carries] with it the denial, disallowance or
revocation of all reliefs ancillary to the main remedy sought in that action." [1]

Challenged in this Petition for Review on Certiorari[2] is the August 17, 2007
Decision[3] of the Court of Appeals, Cagayan de Oro City Station (CA CDO) in CA-G.R.
SP No. 67079 dismissing petitioner United Alloy Philippines Corporation's (UniAlloy)
Petition for Certiorari and Mandamus filed therewith. In said Petition, UniAlloy sought to
nullify the Orders dated September 13[4] and 14,[5] 2001 of the Regional Trial Court
(RTC), Branch 40, Cagayan de Oro City in Civil Case No. 2001-219 that dismissed its
Complaint for Annulment and/or Reformation of Contract and Damages with Prayer for
A Writ of Preliminary Injunction or Temporary Restraining Order (TRO) [6] and ordered it
to surrender the possession of the disputed premises to respondent United Coconut
Planters Bank (UCPB).

Factual Antecedents

UniAlloy is a domestic corporation engaged in the business of manufacturing and

trading on wholesale basis of alloy products, such as ferrochrome, ferrosilicon and
ferromanganese. It has its principal office and business address at Phividec Industrial
Area, Tagaloan, Misamis Oriental. Respondent UCPB, on the other hand, is a banking
corporation while respondent Robert T. Chua (Chua) is one of its Vice-Presidents.
Respondent Jakob Van Der Sluis is a Dutch citizen and was the Chairman of UniAlloy.
Respondent Philippine Deposit Insurance Corporation is the assignee-in-interest of
UCPB as regards the loan account of UniAlloy.

On September 10, 1999, UniAlloy and UCPB entered into a Lease Purchase
Agreement[7] (LPA) wherein UniAlloy leased from UCPB several parcels of land with a
total area of 156,372 square meters located in Barangay Gracia, Tagoloan, Misamis
Oriental,[8] The three-year lease commenced on August 1, 1999 to run until July 31,
2002 for a monthly rent: of P756/700.00. The parties stipulated that upon the expiration
of the lease, UniAlloy shall purchase the leased properties for P300 million to be paid on
staggered basis. UniAlloy also obtained loans from UCPB.

On August 27, 2001, however, UniAlloy filed the aforesaid Complaint [9] against
respondents. It claimed that, thru misrepresentation and manipulation, respondent

1222
Jakob Van Der Sluis took foil control of the management and operation of UniAlloy; that
respondents connived with one another to obtain fictitious loans purportedly for UniAlloy
as evidenced by Promissory Note Nos. 8111-00-00110-6, 8111-00-20031-1, and 8111-
01-20005-6 for P6 million, US$10,000.00, and US$320,000.00, respectively; that UCPB
demanded payment of said loans; and, that UCPB unilaterally rescinded the LPA.
UniAlloy prayed that judgment be issued: (i) ordering the annulment and/or reformation
of the three Promissory Notes; (ii) nullifying UCPB's unilateral rescission of the LPA; (iii)
enjoining UCPB from taking possession of the leased premises; and (iv) ordering
respondents to jointly and severally pay nominal and exemplary damages, as well as
attorney's fees of P500,000.00 each. As ancillary relief, UniAlloy prayed for the issuance
of a temporary restraining order and/or writ of preliminary injunction.

On the same day, the Executive Judge of the RTC, Cagayan de Oro City issued a 72-
hour TRO directing UCPB to cease and desist from taking possession of the disputed
premises.[10] The following day, respondent Jakob Van Der Sluis filed a Motion to
Dismiss and Opposition to the Application for Injunction or TRO [11] on the grounds of
improper venue, forum-shopping,[12] litis pendentia, and for being a harassment suit
under the Interim Rules of Procedure for Intra-Corporate Cases. He argued that the
LPA specifically provides that any legal action aiising therefrom should be brought
exclusively in the proper courts of Makati City. The Complaint did not disclose the
pendency of Civil Case No. 2001-156 entitled "Ernesto Paraiso and United Alloy
Philippines Corporation v. Jakob Van Der Sluis" before Branch 40, as well as CA-G.R.
SP No, 66240 entitled "Jakob Van Der Sluis v. Honorable Epifanio T. Nacaya, et al." He
further averred that what UniAlloy sought to enjoin is already fait accompli.

Respondents UCPB and Chua, on the other hand, filed a Motion to Dismiss & Motion to
Recall Temporary Restraining Order.[13] In addition to the ground of improper venue,
they raised the issue of lack of authority of the person who verified the Complaint as no
secretary's certificate or a board resolution was attached thereto.

During the hearing on the writ of preliminary injunction on August 30, 2001, the RTC
directed the parties to maintain the status quo by not disturbing the possession of the
present occupants of the properties in question pending resolution of respondents'
motions,

On September 13, 2001, the RTC, acting as Special Commercial Court, issued an
Order[14] granting the motions to dismiss and ordering the dismissal of the case on the
grounds of improper venue, forum-shopping and for being a harassment suit. The RTC
held that venue was improperly laid considering that the Promissory Notes sought to be
annulled were issued pursuant to a Credit Agreement which, in turn, stipulates that any
legal action relating thereto shall be initiated exclusively in the proper courts of Makati
City. It also opined that UniAlloy committed forum-shopping for failing to disclose in its
certificate of non-forum-shopping the pendency of Civil Case No, 2001-156 which

1223
involves the same parties, the same transactions and the same essential facts and
circumstances. The cases, as ruled by the RTC, have also identical causes of action,
subject matter and issues. The dispositive portion of the September 13, 2001 Order
reads:

ACCORDINGLY, finding meritorious that the venue is improperly laid and the
complain[an]t engaged in forum-shopping and harassment of defendant Jakob Van der
Sluis, this case is hereby DISMISSED rendering the prayer issuance of a writ of
preliminary injunction moot and academic, and ordering plaintiff to turn over possession
of the subject premises of the properties in question at Barangay Gracia, Tagoloan,
Misamis Oriental to defendant United Coconut Planters Bank.

SO ORDERED.[15]

Upon UCPB's motion, the RTC issued another Order [16] dated September 14, 2001
directing the issuance of a writ of execution to enforce its September 13, 2001 Order.
Accordingly, a Writ of Execution[17] was issued directing the Sheriff to put UCPB in
possession of the disputed premises. It was satisfied on September 17, 2001. [18] The
employees of UniAlloy were evicted from the leased premises and UCPB's
representatives were placed in possession thereof.

On September 25, 2001, UniAlloy received copies of the RTC Orders. [19] And on
October 9, 2001, it filed with the Court of Appeals, Manila Station (CA Manila) its
petition in CA-G.R. SP No. 67079 attributing grave abuse of discretion on the part of the
court a quo in (i) dismissing its petition on the grounds of improper venue, forum-
shopping and harassment, (ii) ordering the turnover of the property in question to UCPB
after the dismissal of the Complaint, and (iii) applying the Interim Rules of Procedure for
Intra-corporate Controversies.

On October 18,2001, the CA Manila issued a TRO. After hearing, the CA Manila issued
a Resolution[20] dated February 18, 2002 granting UniAlloy's ancillary prayer for the
issuance of a writ of preliminary injunction upon posting of a bond in the amount of
P300,000.00.

UniAlloy posted the requisite bond.

However, no writ of preliminary injunction was actually issued by the CA Manila

because of this Court's March 18, 2002 Resolution [21] in G.R. No. 152238 restraining it
from enforcing its February 18, 2002 Resolution. G.RNo. 152238 is a Petition
for Certiorari initiated by UCPB assailing said Resolution of CA Manila. And, in
deference to this Court, the CA Manila refrained from taking further action in CA-G.R.
SP No. 67079 until G.R. No. 152238 was resolved. [22]

1224
On January 28, 2005, this Court rendered its Decision [23] in G.R. No. 152238 finding no
grave abuse of discretion on the part of the CA in issuing its February 18, 2002
Resolution and, consequently, denying UCPB's petition.

Thereafter, and since this Court's Decision in G.R. No. 152238 attained finality,
UniAUoy filed with the CA Manila a Motion to Issue and Implement Writ of Preliminary
Mandatory Injunction.[24] In the meantime, the records of CA-G.R. SP No. 67079 were
forwarded to CA CDO pursuant to Republic Act No. 8246. [25]

On May 31, 2006, the CA CDO issued a Resolution [26] denying UniAlloy's motion. It
found that UniAUoy had lost its right to remain in possession of the disputed premises
because it defaulted in the payment of lease rentals and it was duly served with a notice
of extrajudicial termination of the LPA. Said court also found that UniAUoy vacated the
leased premises and UCPB was already in actual physical possession thereof as of
August 24, 2001, or three days before UniAUoy filed its complaint with the RTC. Hence,
it could no longer avail of the remedy of preliminary injunction to regain possession of
the disputed premises.

UniAUoy filed a Motion for Reconsideration,[27] which was denied in the CA CDO's

November 29,2006 Resolution.[28]

On August 17, 2007, the CA CDO issued the assailed Decision denying UniAlloy's
petition and affirming the RTC's questioned Orders. It opined inter alia that UniAUoy
erred in resorting to a Rule 65 petition because its proper recourse should have been to
appeal the questioned Orders of the RTC, viz.:

It is plain from the record, though, that Unialloy had lost its right to appeal. The time to
make use of that remedy is gone. It is glaringly obvious that Unialloy resorted to this
extraordinary remedy of certiorari and mandamus as a substitute vehicle for securing a
review and reversal of the questioned order of dismissal which it had, by its own fault,
allowed to lapse into finality. Unfortunately, none of the arguments and issues raised by
Unialloy in its petition can adequately brand the 13 September 2001 Order as void on its
face for being jurisdietionaily flawed, nor mask the fact that it became final and
executory by Unialloy's failure to file an appeal on time. And so, even if the assailed
order of dismissal might arguably not have been entirely free from some errors in
substance, or lapses in procedure or in findings of fact or of law, and which that account
could have been reversed or modified on appeal, the indelible fact, however is that it
was never appealed. It had become final and executory. It is now beyond the power of
this Court to modify it.[29]

Hence, this Petition raising the following issues for Our resolution:
1. Whether the Court of Appeals (Cagayan de Oro City) erred, or acted without, or
in excess of jurisdiction, or committed grave abuse of discretion arnounting to lack, or

1225
 excess of jurisdiction in DENYING United Alloy's Motion to Issue and Implement Writ
of Preliminary Mandatory Injunction in this case, DESPITE the earlier resolution
dated February 18, 2002 issued by the same Court of Appeals (Manila) of coordinate
and co-equal jurisdiction which granted United Alloy's Motion for Issuance of
Preliminary Injunction upon bond of P300,000.00, and DESPITE this Honorable
Court's decision dated January 28, 2005 in the certiorari case G.R. No. 152238 filed
by UCPB to assail the Court of Appeals's Resolution of February 18, 2002, which
decision sustained the said resolution of February 18, 2002, and DENIED UCPB's
petition in said G.R. No. 152238.

As sub-issue - Whether the Court of Appeals (Cagayan de Oro City) disregarded the
rule that every court must take cognizance of decisions the Supreme Court has
rendered, because they are proper subjects of mandatory judicial notice. The said
decisions more importantly, form part of the legal system, and failure of any court to
apply them shall constitute an abdication of its duty to resolve a dispute in
accordance with law and shall be a ground for administrative action against an
inferior court magistrate x x x

2. Whether x x x the Court of Appeals (Cagayan de Qro City) decided this case in
accord with law and the evidence, and so far departed from the accepted and usual
course of judicial proceedings as to call for an exercise of the supervisory power of
this Honorable Court, and to entitle this petition to allowance and the review sought in
this case.[30]

Issue

The basic issue to be resolved in this case is whether the CA CDO erred in dismissing
UniAlloy's Petition for Certiorari and Mandamus. For if the said court did not commit an
error then it would be pointless to determine whether UniAlloy is entitled to a writ of
preliminary injunction pursuant to CA Manila's February 18, 2002 Resolution which was
issued as a mere ancillary' remedy in said petition.

Our Ruling

The Petition is devoid of merit.

Before delving on the focal issue, the Court shall first pass upon some procedural
matters.

UniAlloy availed of the proper remedy

in assailing the RTC's September 13, 2001
Order dismissing its Complaint

1226
In its Comment,[31] UCPB defends the CA CDO in denying due course to UniAlloy's
Petition for Certiorari and Mandamus. It posits that UniAlloy should have filed with the
RTC a Notice of Appeal from the Order dated September 13, 2001 instead of a Rule 65
petition before the CA, Respondents Jakob Van der Sluis and Chua echo UCPB's
contention that UniAlloy resorted to a wrong mode of remedy and that the dismissal of
its complaint had become final and executory which, in turn, rendered UniAlloy's Rule
65 petition before the CA moot and academic.[32]

In its Consolidated Reply,[33] UniAlloy counter-argues that it filed a Rule 65 petition with

the CA because the remedy of appeal is inadequate as the RTC had already directed
the issuance of a writ of execution and that the RTC Orders are patently illegal.

UniAlloy availed of the correct remedy. Under Section 1 Rule 16 of the Rules of Court,
the following may be raised as grounds in a motion to dismiss:

SECTION 1. Grounds. — Within the time for but before filing the answer to the
complaint or pleading asserting a claim, a motion to dismiss may be made on any of the
following grounds:

(a) That the court has no jurisdiction over the person of the defending party;

(b) That the court has no jurisdiction over the subject matter of the claim;

(c) That venue is improperly laid;

(d) That the plaintiff has no legal capacity to sue;

(e) That there is another action pending between the same parties for the same cause;
(f) That the cause of action is barred by a prior judgment or by the statute of limitations;

(g) That the pleading asserting the claim states no cause of action;

(h) That the claim or demand set forth in the plaintiffs pleading has been paid, waived,
abandoned, or otherwise extinguished;

(i) That the claim on which the action is founded is unenforceable under the provisions
of the statute of frauds; and

(j) That a condition precedent for filing the claim has not been complied with.

Except for cases falling under paragraphs (f), (h), or (i), the dismissal of an action based
on the above-enumerated grounds is without prejudice and does not preclude the
refiling of the same action. And, under Section l(g) of Rule 41, [34] an order dismissing an

1227
action without prejudice is not appealable. The proper remedy therefrom is a special
civil action for certiorari under Rule 65,[35] But, if the reason for the dismissal is based on
paragraphs (f), (h), or (i) (i.e., res judicata, prescription, extinguishment of the claim or
demand, and unenforceability under the Statute of Frauds) the dismissal, under Section
5,[36] of Rule 16, is with prejudice and the remedy of the aggrieved party is to appeal the
order granting the motion to dismiss.

Here, the dismissal of UniAlloy's Complaint was without prejudice. The September 13,
2001 Order of the RTC dismissing UniAlloy's Complaint was based on the grounds of
improper venue, forum-shopping and for being a harassment suit, which do not fall
under paragraphs (f), (h), or (i) of Section 1, Rule 16. Stated differently, none of the
grounds for the dismissal of UniAlloy's Complaint is included in Section 5 of Rule 16 of
the Rules of Court. Hence, since the dismissal of its Complaint was without prejudice,
the remedy then available to UniAlloy was a Rule 65 petition.

CA CDO did not err in affirming the

dismissal of UniAlloy's Complaint on the
grounds of improper venue, forum-shopping
and for being a harassment suit

The RTC was correct in dismissing UniAlloy's Complaint on the ground of improper
venue. In general, personal actions must be commenced and tried (i) where the plaintiff
or any of the principal plaintiffs resides, (ii) where the defendant or any of the principal
defendants resides, or (III) in the case of a resident defendant where he may be found,
at the election of the plaintiff.[37] Nevertheless, the parties may agree in writing to limit
the venue of future actions between them to a specified place. [38]

In the case at bench, paragraph 18 of the LPA expressly provides that "[a]ny legal
action arising out of or in connection with this Agreement shall be brought exclusively in
the proper courts of Makati City, Metro Manila." [39] Hence, UniAlloy should have filed its
complaint before the RTC of Makati City, and not with the RTC of Cagayan de Oro City.

But to justify its choice of venue, UniAlloy insists that the subject matter of its Complaint
in Civil Case No. 2001-219 is not the LPA, but the fictitious loans that purportedly
matured on April 17, 2001.[40]

UniAlloy's insistence lacks merit. Its Complaint unequivocally sought to declare "as null
and void the unilateral rescission made by defendant UCPB of its subsisting Lease
Purchase Agreement with [UniAlloy]." [41] What UCPB unilaterally rescinded is the LPA
and without it there can be no unilateral rescission to speak of. Hence, the LPA is the
subject matter or at least one of the subject matters of the Complaint. Moreover, and to
paraphrase the aforecited paragraph 18 of the LPA, as long as the controversy arises
out of or is connected therewith, any legal action should be filed exclusively before the

1228
proper courts of Makati City. Thus, even assuming that the LPA is not the main subject
matter, considering that what is being sought to be annulled is an act connected and
inseparably related thereto, the Complaint should have been filed before the proper
courts in Makati City.

With regard forum-shopping, our review of the records of this case revealed that
UniAlloy did not disclose in the Verification/Certification of the Complaint the pendency
of Civil Case No. 2001-156 entitled "Ernesto Paraiso and United Alloy Philippines
Corporation v. Jakob Van Der Sluis." The trial court took judicial notice of its pendency
as said case is also assigned and pending before it. Thus, we adopt the following
unrebutted finding of the RTC:

These two civil cases have identical causes of action or issues against defendant Jakob
Van Der Sluis for having misrepresented to plaintiff and its stockholders that he can
extend financial assistance in running the operation of the corporation, such that on
April 6, 2001 plaintiff adopted a Stockholders Resolution making defendant Jakob
chairman of the corporation for having the financial capability to provide the financial
needs of plaintiff and willing to finance the operational needs thereof; that a
Memorandum of Agreement was subsequently entered between the parties whereby
defendant Jakob obligated to provide sufficient financial loan to plaintiff to make it
profitable; that Jakob maliciously and willfiilly reneged [on] his financial commitments to
plaintiff prompting the stockholders to call his attention and warned him of avoiding the
said agreement; that defendant who had then complete control of plaintiffs bank
account with defendant UCPB, through fraudulent machinations and manipulations, was
able to maliciously convince David C. Chua to pre-sign several checks; that defendant
Jakob facilitated several huge loans purportedly obtained by plaintiff which defendant
himself could not even account and did not even pay the debts of the corporation but
instead abused and maliciously manipulated plaintiffs account.

Forum-shopping indeed exists in this case, for both actions involve the same
transactions and same essential facts and circumstances as well as identical causes of
action, subject matter and issues, x x x[42]

The dismissal of UniAlloy's main

action carries with it the dissolution of
any ancillary relief previously granted
therein.

UniAlloy argues that the CA CDO erred in denying its petition considering that this Court
has already sustained with finality the CA Manila's February 18, 2002 Resolution
granting its prayer for the issuance of a writ of preliminary mandatory injunction.

The contention is non sequitur.

1229
"Provisional remedies [also known as ancillary or auxiliary remedies], are writs and
processes available during the pendency of the action which may be resorted to by a
litigant to preserve and protect certain rights and interests pending rendition, and for
purposes of the ultimate effects, of a final judgment in the case. They are provisional
because they constitute temporary measures availed of during the pendency of the
action, and they are ancillary because they are mere incidents in and are dependent
upon the result of the main action."[43] One of the provisional remedies provided in the
Rules of Court is preliminary injunction, which may be resorted to by a litigant at any
stage of an action or proceeding prior to the judgment or final order to compel a party or
a court, agency or a person to refrain from doing a particular act or acts. [44] In Bacolod
City Water District v. Hon. Labayen,[45] this Court elucidated that the auxiliary remedy of
preliminary injunction persists only until it is dissolved or until the tepnination of the
main action without the court issuing a final injunction, viz.:

x x x Injunction is a judicial writ, process or proceeding whereby a party is ordered to do

or refrain from doing a certain act, It may be the main action or merely a provisional
remedy for and as an incident in the main action.

The main action for injunction is distinct from the provisional or ancillary remedy of
preliminary injunction which cannot exist except only as part or an incident of an
independent action or proceeding. As a matter of course, in an action for injunction, the
auxiliary remedy of preliminary injunction, whether prohibitory or mandatory, may issue.
Under the law, the main action for injunction seeks a judgment embodying a final
injunction which is distinct from, and should not be confused with, the provisional
remedy of preliminary injunction, the sole object of which is to preserve the status quo
until the merits can be heard. A preliminary injunction is granted at any stage of an
action or proceeding prior to the judgment or final order. It persists until it is dissolved or
until the termination of the action without the court issuing a final injunction. [46]

Based on the foregoing, it is indubitably clear that the August 17, 2007 Decision of CA
CDO dismissing UniAlloy's Petition for Certiorari and Mandamus effectively superseded
the February 18, 2002 Resolution of the CA Manila granting UniAUoy's ancillary prayer
for the issuance of a writ of preliminary injunction. It wrote finis not only to the main case
but also to the ancillary relief of preliminary injunction issued in the main case.

For the same reason, there is no merit in UniAUoy's contention that the RTC grievously
erred in ordering it to turn over the possession of the subject premises to UCPB
considering that the latter never prayed for it. As borne out by the records of the case,
UCPB was already in actual possession of the litigated premises prior to the filing of the
Complaint on August 27, 2001. This conforms with the finding of the CA CDO which
pronounced that "an actual turnover of the premises x x x was really effected on August
24, 2001, prior to the institution of the complaint a quo."[47] UniAlloy was able to regain

1230
possession of the disputed premises only by virtue of the RTC's 72-hour TRO. With the
issuance of the RTC's September 13, 2001 Order dismissing the Complaint of UniAlloy,
however, the RTC's 72-hour TRO and August 30, 2001 order to maintain status quo,
which are mere incidents of the main action, lost their efficacy. As discussed above, one
of the inevitable consequences of the dismissal of the main action is the dissolution of
the ancillary relief granted therein. Besides, the RTC issued the status quo order with
the express caveat that the same shall remain in force until it has resolved respondents'
motions to dismiss, which it subsequently granted. Consequently, UniAlloy has no more
bases to remain in possession of the disputed premises. It must, therefore, restitute
whatever it may have possessed by virtue of the dissolved provisional remedy, even if
the opposing party did not pray for it.

The August 17, 2007 Decision neither

violated this Court's January 28, 2005
Decision in G.R. No. 152238 nor contradicted
the CA Manila's February 18, 2002 Resolution.

UniAlloy further argues that in denying its petition, CA CDO contradicted the earlier
Resolution of a coordinate court, the CA Manila, and the January 28, 2005 Decision of
this Court in G.R. No. 152238. It insists that no court can interfere with the judgment,
orders or decrees of another court of concurrent or coordinate jurisdiction.

We are not persuaded.

True, under the doctrine of judicial stability or non-interference, "no court can interfere
by injunction with the judgments or orders of another court of concurrent jurisdiction
having the power to grant the relief sought by injunction. The rationale for the rule is
founded on the concept of jurisdiction: a court that acquires jurisdiction over the case
and renders judgment therein has jurisdiction over its judgment, to the exclusion of all
other coordinate courts, for its execution and over all its incidents, and to control, in
furtherance of justice,, the conduct of ministerial officers acting in connection with this
judgment."[48] But said doctrine is not applicable to this case. Here, the proceeding in CA
CDO is a continuation of the proceeding conducted in CA Manila. There is only one
case as what was resolved by CA CDO is the same case, CA-G.R. SP No. 67079
earlier filed with and handled by CA Manila. It was referred to CA CDO pursuant to
Republic Act No. 8246 creating three divisions of the CA each in Cebu and Cagayan de
Qro. Section 5 thereof provides:

SECTION 5. Upon the effectivity of this Act, all pending cases, except those which have
been submitted for resolution, shall be referred to the proper division of the Court of
Appeals.

In fine, CA CDO did not intrude into an order issued by another co-equal court in a

1231
different case. Rather, it continued to hear the petition until its termination after the CA
Manila referred the same to it by virtue of a law.

The fact that said February 18, 2002 Resolution of CA Manila was affirmed by this Court
in its January 28, 2005 Decision in G.R. No. 152238 is likewise of no moment. Said
Resolution of CA Manila only granted UniAlloy's ancillary prayer for injunctive relief. It
did not touch on the issues of improper venue, forum-shopping, and harassment. Thus,
neither did this Court tackle said issues in its January 28, 2005 Decision. In fact, this
Court cautiously limited its discussions on the propriety of the CA's directive temporarily
restraining the RTC from placing UCPB in possession of the disputed premises and
deliberately reserved to the CA the determination of whether the RTC erred in
dismissing the main case. Thus:

The dismissal of Civil Case No. 2001-219 on the grounds of forum-shopping, improper
venue and harassment - although raised, too, by Unialloy in its Petition before the Court
of Appeals - was not passed upon in the assailed interlocutory CA Resolution. As a
consequence, it would be premature and improper for us to pass upon the RTC's
dismissal of the case. Hence, we shall limit our discussion to the assailed Resolutions
temporarily stopping the trial court's turnover of the litigated property to petitioner. [49]

WHEREFORE, the instant petition is hereby DENIED.

SO ORDERED.

FIRST DIVISION

G.R. No. 218901, February 15, 2017

PHILIPPINE BANK OF COMMUNICATIONS, Petitioner, v. HON. COURT OF

APPEALS, HON. HONORIO E. GUANLAO, JR., IN HIS CAPACITY AS PRESIDING
JUDGE OF THE REGIONAL TRIAL COURT, MAKATI CITY, BRANCH 56,
TRAYELLER KIDS INC., CELY L. GABALDON-CO AND JEANNIE L.
LUGMOC, Respondents.

DECISION

CAGUIOA, J.:

This Petition for Certiorari and Mandamus1 filed by petitioner Philippine Bank of

Communications (PBCOM) seeks to reverse and set aside the Decision dated July 31,
20142 and Resolution dated May 5, 20153 of the Court of Appeals (CA) in CA-G.R. SP
No. 120884, and prays that Judge Honorio E. Guanlao, Jr. of the Regional Trial Court
(RTC) of Makati City, Branch 56, be ordered to approve PBCOM's notice of appeal and
to transmit the case records to the CA. The CA dismissed PBCOM's Petition for
Certiorari and Mandamus and sustained the Order dated June 2, 2011 4 issued by the

1232
RTC, which denied due course to PBCOM's Notice of Appeal on the ground that said
appeal was not the proper remedy.

Facts

This case originated from a Complaint 5 for collection of a sum of money in the amount
of P8,971,118.06 filed by PBCOM against private respondents before the RTC of
Makati City, Branch 56 and docketed as Civil Case No. 10-185.

Private respondents moved for the dismissal of the Complaint alleging that their
obligation had already been paid in full and that the RTC had no jurisdiction over the
case because PBCOM failed to pay the correct docket fees. 6

On September 29, 2010, the RTC issued an Order 7 directing PBCOM to pay additional
docket fees in the amount of P24,765.70, within fifteen days from receipt of thereof.

On October 21, 2010, PBCOM paid the additional docket fees but filed its Compliance
with the RTC only on November 11, 2010.8

In the interim, however, the RTC issued an Order dated November 4, 2010, 9 dismissing
PBCOM's Complaint, which reads:chanRoblesvirtualLawlibrary
For failure of the plaintiff to comply with the Order dated September 29, 2010, this case
is hereby DISMISSED.

SO ORDERED.10
PBCOM filed a Motion for Reconsideration dated November 22, 2010, 11 stating that it
had paid the additional docket fees within the period prescribed by the court as
evidenced by the Official Receipt attached thereto.

In an Order dated May 3, 2011,12 the RTC denied PBCOM's motion for reconsideration,
pertinent portions of which read as follows:chanRoblesvirtualLawlibrary
As per registry return slip, the plaintiff received a copy of the said order on October 7,
2010. Hence, it had until October 22, 2010 within which to pay the additional docket fee.

There being no proof [of] payment of the additional fee submitted to the Court by the
plaintiff on or before October 23, 2010, the Court, in its Order dated November 4, 2010
dismissed the case, pursuant to Section 3, Rule 17 of the 1997 Rules of Civil
Procedure.

It is only on November 11, 2010 that plaintiff filed with the Court a Compliance with the
Order of the Court dated September 29, 2010 but without any plausible explanation
relative to its failure to submit such proof of compliance on or before October 23, 2010.

xxxx

1233
The Court finds to be impressed with merit the observation of the defendants in their
comment/opposition in this wise:chanRoblesvirtualLawlibrary
"The Compliance dated November 11, 2010 filed by the plaintiff is suspicious because it
was filed several weeks after it allegedly paid the additional docket fees on October 21,
2010.

Moreover, the subject Official Receipt was only signed by a certain Liza Maia Esteves
Sirios who allegedly prepared the same. Amazingly, there is no signature above the
name of Engracio M. Escasinas, Jr., Clerk of Court VII, who is supposed to receive said
payment. Hence, the subject Official Receipt is highly irregular."
WHEREFORE, for reasons afore-stated, the motion for reconsideration is hereby
DENIED.

SO ORDERED.13
Undaunted, PBCOM timely filed a Notice of Appeal dated May 26, 2011. 14

On June 2, 2011, the RTC issued an Order (Assailed Order), denying due course to
PBCOM's Notice of Appeal on the ground that said appeal is not the proper remedy. 15

Without filing a motion for reconsideration, PBCOM filed a Petition for Certiorari and
Mandamus with the CA.16

On July 31, 2014, the CA issued the assailed Decision 17 denying PBCOM's Petition for
Certiorari and Mandamus and affirming the order of the RTC. The CA reasoned that,
apart from availing itself of a wrong mode of appeal, PBCOM failed to comply with the
mandatory requirement of a motion for reconsideration. The CA emphasized that the
filing of a motion for reconsideration is a condition sine qua non for a petition
for certiorari to prosper.

On August 26, 2014, PBCOM filed a Motion for Reconsideration 18 of the aforesaid
Decision, but the same was denied by the CA for having been filed out of time. 19

Hence, the present petition for certiorari and mandamus20 anchored on the following

grounds:chanRoblesvirtualLawlibrary
A.

RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE OF 

DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
DENIED PBCOM'S MOTION FOR RECONSIDERATION ON THE GROUND THAT IT
WAS FILED ONE (1) DAY LATE.

B.

RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
DENIED PBCOM'S PETITION FOR CERTIORARI AND MANDAMUS ON THE

1234
GROUND THAT A PRIOR MOTION FOR RECONSIDERATION IS REQUIRED.

xxxx

C.

RESPONDENT JUDGE SHOULD BE COMPELLED BY MANDAMUS TO APPROVE

PBCOM'S NOTICE OF APPEAL AND TO TRANSMIT THE CASE RECORDS TO THE
COURT OF APPEALS.

D.

RESPONDENT COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION WHEN

IT RULED THAT THE PETITION FOR CERTIORARI AND MANDAMUS IS A WRONG
MODE OF APPEAL.21
The Court's Ruling

Prefatorily, the Court notes that PBCOM availed of the wrong mode of appeal in
bringing the case before the Court. A petition for certiorari under Rule 65 is not the
proper remedy to assail the July 31, 2014 Decision and May 5, 2015 Resolution of the
CA. In Mercado v. Valley Mountain Mines Exploration, Inc.,22 this Court held
that:chanRoblesvirtualLawlibrary
The proper remedy of a party aggrieved by a decision of the Court of Appeals is a
petition for review under Rule 45 which is not similar to a petition for certiorari under
Rule 65 of the Rules of Court. As provided in Rule 45 of the Rules of Court, decisions,
final orders or resolutions of the Court of Appeals in any case, i.e., regardless of the
nature of the action or proceedings involved, may be appealed to us by filing a petition
for review, which would be but a continuation of the appellate process over the original
case. On the other hand, a special civil action under Rule 65 is an independent action
based on the specific grounds therein provided and, as a general rule, cannot be
availed of as a substitute for the lost remedy of an ordinary appeal, including that under
Rule 45. Accordingly, when a party adopts an improper remedy, his petition may be
dismissed outright.23
However, under exceptional circumstances, as when stringent application of the rules
will result in manifest injustice, the Court may set aside technicalities and proceed with
the appea1.24 In Tanenglian v. Lorenzo,25 the Court recognized the broader interest of
justice and gave due course to the appeal even if it was a wrong mode of appeal and
was even filed beyond the reglementary period provided by the rules. The Court
reasoned that:chanRoblesvirtualLawlibrary
We have not been oblivious to or unmindful of the extraordinary situations that merit
liberal application of the Rules, allowing us, depending on the circumstances, to set
aside technical infirmities and give due course to the appeal. In cases where we
dispense with the technicalities, we do not mean to undermine the force and effectivity
of the periods set by law. In those rare cases where we did not stringently apply the
procedural rules, there always existed a clear need to prevent the commission of a
grave injustice. Our judicial system and the courts have always tried to maintain a

1235
healthy balance between the strict enforcement of procedural laws and the
guarantee that every litigant be given the full opportunity for the just and proper
disposition of his cause. x x x

xxxx

In Sebastian v. Morales, we ruled that rules of procedure must be faithfully followed

except only when, for persuasive reasons, they may be relaxed to relieve a litigant
of an injustice not commensurate with his failure to comply with the prescribed
procedure, thus:

xxxx

The Court has allowed some meritorious cases to proceed despite inherent procedural
defects and lapses. This is in keeping with the principle that rules of procedure are mere
tools designed to facilitate the attainment of justice and that strict and rigid application of
rules which would result in technicalities that tend to frustrate rather than promote
substantial justice must always be avoided. It is a far better and more prudent cause
of action for the court to excuse a technical lapse and afford the parties a review
of the case to attain the ends of justice, rather than dispose of the case on
technicality and cause grave injustice to the parties, giving a false impression of
speedy disposal of cases while actually resulting in more delay, if not a
miscarriage of justice.26 (Emphasis supplied; citations omitted)
Considering that what is at stake in the present case is PBCOM's statutory right to
appeal and the amplest opportunity for the proper and just determination of its cause,
the Court resolves to set aside PBCOM's procedural mistake and give due course to its
petition.

In the present petition, PBCOM is asking the Court to rule on the correctness of the
CA's dismissal of its Petition for Certiorari and Mandamus on the grounds that (1) a
petition for certiorari is a wrong mode of appeal and (2) in any event, PBCOM failed to
comply with the mandatory requirement of a motion for reconsideration.

PBCOM argues that the CA should have given due course to its Petition for Certiorari
and Mandamus because it is the proper remedy to question the Order dated June 2,
2011 of the RTC denying its Notice of Appeal and that a motion for reconsideration is
not required when the order assailed of is a patent nullity for having been issued without
jurisdiction.

The Court finds PBCOM's arguments impressed with merit.

In the assailed Decision, the CA appears to have confused the RTC Order dismissing
PBCOM's complaint with the RTC Order denying PBCOM's notice of appeal, and
mistakenly ruled that the petition for certiorari and mandamus filed by PBCOM was a
wrong mode of appeal, viz:chanRoblesvirtualLawlibrary

1236
Records will bear that the dismissal of the petitioner's complaint for sum of money was
grounded on private respondents' [petitioner] failure to timely comply with the order
dated 29 September 2010 of the public respondent which is pursuant to Section 3 Rule
17 of the Rules of Court.

Section 3 Rule 17 of the Rules of Court provides that:chanRoblesvirtualLawlibrary

"Sec. 3. Dismissal due to fault of plaintiff. - If, for no justifiable cause, the plaintiff fails to
appear on the date of the presentation of his evidence in chief on the complaint, or to
prosecute his action for an unreasonable length of time, or to comply with these Rules
or any order of the court, the complaint may be dismissed upon motion of the defendant
or upon the court's own motion, without prejudice to the right of the defendant to
prosecute his counterclaim in the same or in a separate action. This dismissal shall
have the effect of an adjudication upon the merits, unless otherwise declared by the
court."
Apparent from the aforesaid is the fact that the dismissal based thereon has the effect
of an adjudication upon the merits, unless otherwise declared by court. Here there is no
such declaration by the public respondent, thus, the dismissal of petitioner's complaint
for sum of money is an adjudication on the merits and should be challenged by appeal
within the reglementary period, thus, We cannot give due course to petitioner's petition
for certiorari and mandamus not only because it is a wrong mode of appeal but it also
failed to comply with the mandatory requirement of a motion for reconsideration. 27
Notably, in its petition before the CA, PBCOM assailed the RTC Order denying due
course to its notice of appeal. In Neplum, Inc. v. Orbeso,28 this Court ruled that a trial
court's order disallowing a notice of appeal, which is tantamount to a disallowance or
dismissal of the appeal itself, is not a decision or final order from which an appeal may
be taken. The suitable remedy for the aggrieved party is to elevate the matter through a
special civil action under Rule 65.29 Clearly, contrary to theCA's finding, PBCOM availed
itself of the correct remedy in questioning the disallowance of its notice of appeal.

Moreover, while it is a settled rule that a special civil action for certiorari under Rule 65
will not lie unless a motion for reconsideration is filed before the respondent
court;30 there are well-defined exceptions established by jurisprudence, such as
(a) where the order is a patent nullity, as where the court a quo has no
jurisdiction; (b) where the questions raised in the certiorari proceedings have been
duly raised and passed upon by the lower court, or are the same as those raised and
passed upon in the lower court; (c) where there is an urgent necessity for the resolution
of the question and any further delay would prejudice the interests of the Government or
of the petitioner or the subject matter of the action is perishable; (d) where, under the
circumstances, a motion for reconsideration would be useless; (e) where petitioner was
deprived of due process and there is extreme urgency for relief; (f) where, in a criminal
case, relief from an order of arrest is urgent and the granting of such relief by the trial
court is improbable; (g) where the proceedings in the lower court are a nullity for lack of
due process; (h) where the proceedings were ex parte or in which the petitioner had no
opportunity to object; and (i) where the issue raised is one purely of law or where public
interest is involved.31

1237
The first exception applies in this case.

Rule 41, Section 13 of the 1997 Rules on Civil Procedure

states:chanRoblesvirtualLawlibrary
SEC. 13. Dismissal of appeal. - Prior to the transmittal of the original record or the
record on appeal to the appellate court, the trial court may, motu proprio or on motion,
dismiss the appeal for having been taken out of time or for non-payment of the docket
and other lawful fees within the reglementary period. 32
In Salvan v. People,33 this Court held that the power of the RTC to dismiss an appeal is
limited to the instances specified in the afore-quoted provision. In other words, the RTC
has no jurisdiction to deny a notice of appeal on an entirely different ground - such as
"that an appeal is not a proper remedy."

The authority to dismiss an appeal for being an improper remedy is specifically vested
upon the CA and not the RTC. Rule 50, Section 1 of the same Rules
states:chanRoblesvirtualLawlibrary
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:

xxxx

(i) The fact that [the] order or judgment appealed from is not

appealable. (Emphasis supplied)
The Court's pronouncement Ortigas & Company Limited Partnership v. Velasco 34 is
apropos:chanRoblesvirtualLawlibrary
Yet another serious error was the disallowance by His Honor of Ortigas' appeal from the
judgment in the reconstitution case, declaring its notice of appeal to be nothing but "a
mere scrap of paper." His Honor opined that "Ortigas is x x x not vested with any
justiciable interest to be party in (the) case" because it had admittedly "already sold all
the subdivision lots which it claims to overlap the disputed two lots (of Molina)," and
Ortigas' pleadings "failed to disclose x x x any allegation about its ownership of road lots
that may overlap the land covered by the certificate of title of petitioner sought to be
reconstituted;" and that therefore Ortigas was not a real party in interest since it would
neither derive benefit nor suffer injury from the decision; hence, its opposition could not
be entertained and, "by force of law," it could not also appeal the decision.

His Honor was apparently incognizant of the principle that dismissals of appeals from
the judgment of a Regional Trial Court by the latter are authorized only in the instances
specifically set forth x x x in Section 13, Rule 41 of the Rules of Court. The succeeding
provision, Section 14 of said Rule 41, provides that "(a) motion to dismiss an appeal
may be filed in the (Regional Trial) Court x x x prior to the transmittal of the record to the
appellate court;" and the grounds are limited to those "mentioned in the preceding
section," i.e., Section 13 to wit: where "the notice of appeal, appeal bond, or record on
appeal is not filed within the period of time herein provided x x x."

These two (2) sections clearly establish "that unless the appeal is abandoned, the

1238
only ground for dismissing an appeal in the trial court is the failure of the
appellant to file on time the notice of appeal, appeal bond, or record on appeal x x
x. (A) trial court may not dismiss an appeal as frivolous, or on the ground that the case
has become moot and academic, such step devolving upon the appellate courts.
Otherwise, the way would be opened for (regional trial) courts x x x to forestall review or
reversal of their decisions by higher courts, no matter how erroneous or improper such
decisions should be."

xxxx

Dismissals of appeal may also be had upon the grounds specified by Rule 50 of
the Rules of Court; but it is the Court of Appeals, not the trial court, which is
explicitly authorized to dismiss appeals on said grounds. Generally, these
grounds do not include matters which go into the merits of the cause or to the
right of the plaintiff or defendant to recover. Case law has come to recognize other
grounds for dismissal, by way of exception, e.g., that the cause has become moot, or
the appeal is frivolous or manifestly dilatory. But, to repeat, authority to dismiss an
appeal on the ground that it is frivolous or taken manifestly for delay "is not certainly
with the court a quo whose decision is an issue, but with the appellate
court."35 (Emphasis supplied; citations omitted)
In fine, the assailed RTC Order, denying due course to PBCOM's notice of appeal on
the ground that it was a wrong remedy, is a patent nullity. The RTC acted without or in
excess of its jurisdiction.

WHEREFORE, the instant petition is GRANTED. The Order dated June 2, 2011 issued
by the Regional Trial Court, Branch 56 in Makati City and the assailed Decision dated
July 31, 2014 and Resolution dated May 5, 2015 of the Court of Appeals in CA-G.R. SP
No. 120884, are hereby REVERSED and SET ASIDE. The Regional Trial Court, Branch
56 in Makati City is DIRECTED to give due course to petitioner's Notice of Appeal dated
May 26, 2011 and to elevate the case records to the Court of Appeals for the review of
petitioner's appeal. No costs.

SO ORDERED.
THIRD DIVISION

[G.R. No. 167398 : August 09, 2011]

AUGUSTUS GONZALES AND SPOUSES NESTOR VICTOR AND MA. LOURDES

RODRIGUEZ, PETITIONERS, VS. QUIRICO PE, RESPONDENT.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari seeking to set aside the
Decision[1] dated June 23, 2004 and Resolution[2] dated February 23, 2005 of the Court

1239
of Appeals (CA),  Twentieth Division, in CA-G.R. SP No. 73171, entitled Quirico Pe v.
Honorable Judge Rene Hortillo, in his capacity as Presiding Judge  of  the  Regional
Trial  Court  of Iloilo  City, Branch 31, Augustus Gonzales and Spouses Engr. Nestor
Victor and Dr. Ma. Lourdes Rodriguez, which granted the petition of respondent Quirico
Pe.  The CA Decision reversed and set aside the Order [3] dated September 23, 2002 of
the Regional Trial Court (RTC) of Iloilo City, Branch 31, which dismissed respondent's
appeal for non-payment of docket and other lawful fees, and directing the issuance of
the writ of execution for the implementation of its Decision [4] dated June 28, 2002 in
favor of the petitioners and against the respondent.  The CA Decision also directed the
RTC to assess the appellate docket fees to be paid by the respondent, if it has not done
so, and allow him to pay such fees and give due course to his appeal.

The antecedents are as follows:

Respondent Quirico Pe was engaged in the business of construction materials, and had
been transacting business with petitioner Spouses Nestor Victor Rodriguez and Ma.
Lourdes Rodriguez.  The Department of Public Works and Highways (DPWH) awarded
two contracts in favor of petitioner Nestor Rodriguez for the following projects, namely,
construction of "Lanot-Banga Road (Kalibo Highway) km. 39 + 200 to km. 40 + 275
Section IV (Aklan side)" and concreting of "Laua-an Pandan Road (Tibial-Culasi
Section), Province of Antique."  In 1998, respondent agreed to supply cement for the
construction projects of petitioner Spouses Rodriguez.  Petitioner Nestor Rodriguez
availed of the DPWH's pre-payment program for cement requirement regarding the
Lanot-Banga Road, Kalibo Highway project (Kalibo project), wherein the DPWH would
give an advance payment even before project completion upon his presentment, among
others, of an official receipt for the amount advanced.  Petitioner Nestor Rodriguez gave
Land Bank of the Philippines (LBP) Check No. 6563066 to respondent, which was
signed by co-petitioners (his wife Ma. Lourdes Rodriguez and his business partner
Augustus Gonzales), but leaving the amount and date in blank.  The blank LBP check
was delivered to respondent to guarantee the payment of 15,698 bags of Portland
cement valued at P1,507,008.00, covered by Official Receipt No. 1175, [5] issued by
respondent (as owner of Antique Commercial), in favor of petitioner Nestor Rodriguez
(as owner of Greenland Builders).  However, a year later, respondent filled up blank
LBP Check No. 6563066, by placing P2,062,000.00 and June 30, 1999, corresponding
to the amount and date.

On December 9, 1999, petitioners filed an Amended Complaint [6] for Declaration of

Payment, Cancellation of Documents and Damages against respondent with the RTC,
Branch 31, Iloilo City, docketed as Civil Case No. 25945.  The amended complaint
alleged that they entrusted blank LBP Check No. 6563066 to respondent so as to
facilitate the approval of the pre-payment application of petitioner Nestor Rodriguez with
the DPWH.  They stated that the blank LBP check would "serve as collateral" to
guarantee the payment for 15,698 bags to be used for the Kalibo project, amounting to
P1,507,008.00, and that after payment of the said amount, respondent would return the
LBP check. According to them, after having paid respondent the amount of
P2,306,500.00, which is P139,160.00 more than the amount of P2,167,340.00

1240
(representing the value for 23,360 bags of cement taken for the Kalibo project), they
were cleared of any liability.

On January 6, 2000, respondent filed an Answer to Amended Complaint, [7] averring that

he had so far delivered 40,360 bags of cement to petitioners who remitted
P2,306,500.00, thereby leaving an outstanding amount of P2,062,000.00.  He
countered that when petitioners stopped the bank-to-bank online payments to him, he
filled up the amount of P2,062,000.00 and made the LBP check payable on June 30,
1999.  The LBP check was dishonored for being "drawn against insufficient funds
(DAIF)."  By way of compulsory counterclaim, he sought recovery of the balance of
P2,062,000.00, with interest at 24% from January 29, 1999 until fully paid as actual
damages.

In the Pre-trial Order[8] dated January 28, 2000, the trial court determined the following
to be the delimited issues, to wit:

(1)  whether plaintiffs' [herein petitioners] liability to defendant [herein respondent] for
15,698 bags priced at P1,507,008.00 subject of the earlier-mentioned pre-payment
program and covered by the "blank" LBP Check No. 6563066 has already been paid,
hence, plaintiffs are no longer liable to the defendant for this amount;

(2) whether this LBP Check No. 6563066 should not be returned by defendant to
plaintiffs, or failing in which, should now be declared as cancelled, null and void;

(3) whether plaintiffs have completely paid to the defendant the price of the cement
used for the Kalibo project which specifically is the amount of 23,360 bags of cement
valued in the total amount of P2,167,340.00;

(4) whether plaintiffs are entitled to damages and attorney's fees; and

(5) whether this case be dismissed and with the dismissal of the complaint to proceed
with the counterclaim.[9]

In a Decision dated June 28, 2002, the trial court, applying Section 14 [10] of the
Negotiable Instruments Law, found that respondent's subsequent filling up of LBP
Check No. 6563066 in the amount of P2,062,000.00 was not made strictly in
accordance with the authority given to him by petitioner Nestor Rodriguez, and that
since one year had already lapsed, the same was not done within a reasonable time. As
to the 23,360 bags of cement for the Kalibo project, valued at P2,167,340.00 which was
subject of previous transactions, the trial court ruled that the same had been fully paid
and considered a settled issue.  Consequently, the RTC rendered judgment in favor of
the petitioners and against the respondent, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendant, as follows:

1241
1.  Declaring plaintiffs' obligation to the defendant for the cement supplied for the Kalibo
(Lanot-Banga) Road Construction Project in the amount of P2,167,340.00 as already
and fully paid, hence, plaintiffs are no longer liable to the defendant;

2.  Declaring Land Bank Check No. 6563066 dated June 30, 1999 for P2,062,000.00 as
null and void and without any legal effect;

3. Ordering defendant to pay each plaintiff the sums of P100,000.00 as actual damages;
P500,000.00 as moral damages; P200,000.00 as attorney's fees and P2,000.00 per
hearing as appearance fee; P50,000.00 as miscellaneous actual and necessary
litigation expenses; and

4.  To pay the costs.

Defendant's counterclaim is hereby DISMISSED.

SO ORDERED.[11]

After receipt of a copy of the said RTC Decision on July 26, 2002, respondent filed a
Notice of Appeal on July 30, 2002.

In an Order[12] dated August 5, 2002, the trial court gave due course to respondent's
appeal, and directed the Branch Clerk of Court to transmit the entire records of the case
to the CA.

On August 26, 2002, petitioners filed a Motion for Reconsideration, to Dismiss Appeal,
and for Issuance of Writ of Execution,[13] stating that respondent's appeal should be
dismissed as the same was not perfected due to non-payment of docket and other
lawful fees as required under Section 4, Rule 41 of the Rules of Court. Claiming that
since the respondent's appeal was not perfected and, as a consequence, the RTC
Decision dated June 28, 2002 became final and executory, petitioners sought the
issuance of a writ of execution for the implementation of the said RTC Decision.  To
buttress their motion, petitioners also appended a Certification [14] dated August 19,
2002, issued by the Clerk of Court of the Office of the Clerk of Court (OCC) of the RTC,
Iloilo City, certifying that no appeal fees in the case had been paid and received by the
OCC.

In the Order dated September 23, 2002, the trial court dismissed respondent's appeal
and directed the issuance of a writ of execution to implement the RTC Decision dated
June 28, 2002.

On October 2, 2002, the Clerk of Court and Ex-officio Provincial Sheriff of Iloilo issued

the Writ of Execution[15] directing the execution of the RTC Decision dated June 28,
2002.

On October 7, 2002, respondent filed a Petition for Certiorari and Prohibition with

1242
Application for Writ of Preliminary Injunction and Prayer for Temporary Restraining
Order,[16] seeking to set aside the RTC Order dated September 23, 2002 (which
dismissed his appeal and directed the issuance of a writ of execution to implement the
RTC Decision dated June 28, 2002), and to enjoin the implementation of the Writ of
Execution dated October 2, 2002.

In a Resolution[17] dated October 9, 2002, the CA granted the respondents' prayer for

Temporary Restraining Order and, in the Resolution [18] dated August 20, 2003, approved
the respondent's injunction bond and directed the Division Clerk of Court to issue the
writ of preliminary injunction.

On August 20, 2003, the Division Clerk of Court issued the Writ of Preliminary
Injunction,[19] thereby enjoining the implementation of the Writ of Execution dated
October 2, 2002.

On June 23, 2004, the CA rendered a Decision in favor of the respondent, the
dispositive portion of which reads:

WHEREFORE, the petition is granted.  The assailed order and writ of execution of the
Regional Trial Court must be, as it is hereby, SET ASIDE.  The trial court is hereby
ordered to assess the appellate docket fees, if it has not done so, and allow the
petitioner to pay such fees and give due course to the petitioner's appeal. No costs.

SO ORDERED.[20]

Aggrieved, petitioners filed a Motion for Reconsideration [21] on August 24, 2004, which,
however, was denied by the CA in a Resolution [22] dated February 23, 2005.

Hence, petitioner filed this present petition raising the sole issue that:

THE COURT OF APPEALS PATENTLY ERRED IN REVERSING THE  DECISION OF

THE LOWER COURT AND ALLOWING RESPONDENT TO BELATEDLY PAY THE
REQUIRED APPELLATE DOCKET AND OTHER LEGAL FEES.

Petitioners allege that since respondent failed to pay the docket and other legal fees at
the time he filed the Notice of Appeal, his appeal was deemed not perfected in
contemplation of the law.  Thus, petitioners pray that the CA decision be set aside and a
new one be rendered dismissing the respondent's appeal and ordering the execution of
the RTC Decision dated June 28, 2002.

On the other hand, respondent, citing Section 9, Rule 41 of the Rules of Court,
maintains that his appeal has been perfected by the mere filing of the notice of appeal. 
Respondent theorizes that with the perfection of his appeal, the trial court is now
divested of jurisdiction to dismiss his appeal and, therefore, only the CA has jurisdiction
to determine and rule on the propriety of his appeal.  He raises the defense that his
failure to pay the required docket and other legal fees was because the RTC Branch

1243
Clerk of Court did not make an assessment of the appeal fees to be paid when he filed
the notice of appeal.

The petition is meritorious.

In cases of ordinary appeal, Section 2, Rule 41 of the Rules of Court provides that the
appeal to the CA in cases decided by the RTC in the exercise of its original jurisdiction
shall be taken by filing a notice of appeal with the RTC (the court which rendered the
judgment or final order appealed from) and serving a copy thereof upon the adverse
party.  Section 3 thereof states that the appeal shall be taken within fifteen (15) days
from notice of the judgment or final order appealed from.  Concomitant with the filing of
a notice of appeal is the payment of the required appeal fees within the 15-day
reglementary period set forth in Section 4 of the said Rule.  Thus,

SEC. 4.  Appellate court docket and other lawful fees. - Within the period for taking an
appeal, the appellant shall pay to the clerk of the 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.

In reversing the ruling of the trial court, the CA cited Yambao v. Court of Appeals[23] as
justification for giving due course to respondent's petition and ordering the belated
payment of docket and other legal fees.  In Yambao, the CA dismissed therein
petitioners' appeal from the RTC decision for failure to pay the full amount of the
required docket fee.  Upon elevation of the case, the Court, however, ordered the CA to
give due course to their appeal, and ruled that their subsequent payment of the P20.00
deficiency, even before the CA had passed upon their motion for reconsideration, was
indicative of their good faith and willingness to comply with the Rules.

The ruling in Yambao is not applicable to the present case as herein respondent never
made any payment of the docket and other lawful fees, not even an attempt to do so,
simultaneous with his filing of the Notice of Appeal.  Although respondent was able to
file a timely Notice of Appeal, however, he failed to pay the docket and other legal fees,
claiming that the Branch Clerk of Court did not issue any assessment.  This procedural
lapse on the part of the respondent rendered his appeal with the CA to be dismissible
and, therefore, the RTC Decision, dated June 28, 2002, to be final and executory.

In Far Corporation v. Magdaluyo,[24] as with other subsequent cases[25] 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

1244
period is not a mere technicality of law or procedure.  The payment of docket fees within
the 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.

Respondent's claim that his non-payment of docket and other lawful fees should be
treated as mistake and excusable negligence, attributable to the RTC Branch Clerk of
Court, is too superficial to warrant consideration.  This is clearly negligence of
respondent's counsel, which is not excusable. Negligence to be excusable must be one
which ordinary diligence and prudence could not have guarded against. [26] Respondent's
counsel filed a notice of appeal within the reglementary period for filing the same
without, however, paying the appellate docket fees.  He simply ignored the basic
procedure of taking an appeal by filing a notice of appeal, coupled with the payment of
the full amount of docket and other lawful fees. Respondent's counsel should keep
abreast of procedural laws and his ignorance of the procedural requirements shall bind
the respondent.  In National Power Corporation v. Laohoo,[27] we ruled that therein
counsel's failure to file the appeal in due time does not amount to excusable
negligence.  The non-perfection of the appeal on time is not a mere technicality.
Besides, to grant therein petitioner's plea for the relaxation of the rules on technicality
would disturb a well-entrenched ruling that could make uncertain when a judgment
attains finality, leaving the same to depend upon the resourcefulness of a party in
concocting implausible excuses to justify an unwarranted departure from the time-
honored policy of the law that the period for the perfection of an appeal is mandatory
and jurisdictional.

The CA took cognizance over the case, based on the wrong premise that when the RTC
issued the Order dated August 5, 2002 giving due course to respondent's Notice of
Appeal and directing the Branch Clerk of Court to transmit the entire records of the case
to the CA, it ipso facto lost jurisdiction over the case. Section 9,[28] Rule 41 of the Rules
explains that the court of origin loses jurisdiction over the case only upon the perfection
of the appeal filed in due time by the appellant and the expiration of the time to appeal
of the other parties.  Withal, prior to the transmittal of the original records of the case to
the CA, the RTC may issue orders for the protection and preservation of the rights of
the prevailing party, as in this case, the issuance of the writ of execution because the
respondent's appeal was not perfected.

Moreover, Section 13, Rule 41 of the Rules states that the CA may dismiss an appeal
taken from the RTC on the ground of non-payment of the docket and other lawful fees
within the 15-day reglementary period:

1245
SEC 13. Dismissal of appeal. -- Prior to the transmittal of the original record or the
record on appeal to the appellate court, the trial court may motu proprio or on motion
dismiss the appeal for having been taken out of time, or for non-payment of the docket
and other lawful fees within the reglementary period. (As amended by A.M. No. 00-2-
10-SC, May 1, 2000.)

Since respondent's appeal was not perfected within the 15-day reglementary period, it
was as if no appeal was actually taken. Therefore, the RTC retains jurisdiction to rule on
pending incidents lodged before it, such as the petitioner's Motion for Reconsideration,
to Dismiss Appeal, and for Issuance of Writ of Execution, filed on August 26, 2002,
which sought to set aside its Order dated August 5, 2002 that gave due course to
respondent's Notice of Appeal, and directed the issuance of a writ of execution.  Having
no jurisdiction over the case, the prudent thing that the CA should have done was to
dismiss the respondent's appeal for failure to pay the appeal fees, and declare that the
RTC Decision dated June 28, 2002 has now become final and executory.

As an incidental matter on the propriety of petitioners' petition for review

on certiorari under Rule 45 of the Rules, respondent raises the argument that since the
subject of the present petition is the writ of preliminary injunction granted by the CA (in
favor of the respondent enjoining the execution of the RTC Decision dated June 28,
2002), in CA-G.R. SP No. 73171, which is interlocutory in nature, petitioners' petition
should be denied for being the wrong remedy.  In other words, respondent advances
the theory that since the assailed CA Decision dated June 23, 2004 partakes of an
interlocutory order, i.e., enjoining the finality of the RTC Decision dated June 28, 2002,
petitioners should have availed of the remedy of a petition for certiorari under Rule 65,
not a petition for review on certiorari under Rule 45.

Respondent's argument is unfounded.  The proper remedy of a party aggrieved by a

decision of the CA is a petition for review on certiorari under Rule 45, which is not
identical to a petition for certiorari under Rule 65.  Rule 45 provides that decisions, final
orders or resolutions of the CA in any case, i.e., regardless of the nature of the action or
proceedings involved, may be appealed to Us by filing a petition for review on certiorari,
which would be but a continuation of the appellate process over the original case. [29] 
Therefore, petitioners' filing of the present petition for review on certiorari under Rule 45
is the proper and adequate remedy to challenge the Decision dated June 24, 2004 and
Resolution dated February 23, 2005 of the CA.

To recapitulate, one who seeks to avail of the right to appeal must strictly comply with
the requirements of the rules, and failure to do so leads to the loss of the right to appeal.
[30]
  The rules require that from the date of receipt of the assailed RTC order denying
one's motion for reconsideration, an appellant may take an appeal to the CA by filing a
notice of appeal with the RTC and paying the required docket and other lawful fees with
the RTC Branch Clerk of Court, within the 15-day reglementary period for the perfection
of an appeal.  Otherwise, the appellant's appeal is not perfected, and the CA may
dismiss the appeal on the ground of non-payment of docket and other lawful fees.  As a
consequence, the assailed RTC decision shall become final and executory and,

1246
therefore, the prevailing parties can move for the issuance of a writ of execution.

Since the CA erroneously took cognizance over the case, its Decision dated June 23,
2004 and Resolution dated February 23, 2005 should be overturned, and the Writ of
Preliminary Injunction issued on August 20, 2003 should likewise be lifted.  Thus, the
RTC Decision dated June 28, 2002 is reinstated and, as the said decision having
become final and executory, the case is remanded for its prompt execution.

While every litigant must be given the amplest opportunity for the proper and just
determination of his cause, free from the constraints of technicalities, the failure to
perfect an appeal within the reglementary period is not a mere technicality.  It raises
jurisdictional problem, as it deprives the appellate court of its jurisdiction over the
appeal.  After a decision is declared final and executory, vested rights are acquired by
the winning party.  Just as a losing party has the right to appeal within the prescribed
period, the winning party has the correlative right to enjoy the finality of the decision on
the case.[31]

WHEREFORE, the petition is GRANTED.  The Decision dated June 23, 2004 and
Resolution dated February 23, 2005 of the Court of Appeals, in CA-G.R. SP No. 73171,
are REVERSED and SET ASIDE.  The Writ of Preliminary Injunction, issued by the
Court of Appeals on August 20, 2003, is LIFTED.

The Decision dated June 28, 2002 of the Regional Trial Court, Branch 31, Iloilo City
is REINSTATED and, in view of its finality, the case is REMANDED for its prompt
execution.

SO ORDERED.
THIRD DIVISION

[G.R. No. 156375, May 30 : 2011]

DOLORES ADORA MACASLANG, PETITIONER, VS. RENATO AND MELBA

ZAMORA, RESPONDENTS.

DECISION

BERSAMIN, J.:

The Regional Trial Court (RTC) is not limited in its review of the decision of the
Municipal Trial Court (MTC) to the issues assigned by the appellant, but can decide on
the basis of the entire records of the proceedings of the trial court and such memoranda
or briefs as may be submitted by the parties or required by the RTC.

The petitioner appeals the decision promulgated on July 3, 2002, [1] whereby the Court of
Appeals (CA) reversed"for having no basis in fact and in law" the decision rendered on
May 18, 2000[2] by the Regional Trial Court, Branch 25, in Danao City (RTC) thathad

1247
dismissed the respondents' action for ejectment against the petitioner, andreinstated the
decision dated September 13, 1999 of the Municipal Trial Court in Cities (MTCC) of
DanaoCity (ordering the petitioner as defendant to vacate the premises and to pay
attorney's fees of P10,000.00 and monthly rental of P5,000.00 starting December 1997
until they vacated the premises).[3]

We grant the petition for review and rule that contrary to the CA's conclusion, the
RTCas an appellate court properly considered and resolved issues even if not raised in
the appeal from the decisionrendered in an ejectment case by the MTCC.

ANTECEDENTS

On March 10, 1999, the respondents filed a complaint for unlawful detainer in the
MTCC, alleging that "the [petitioner] sold to [respondents] a residential land located in
Sabang, DanaoCity" and that "the [petitioner] requested to be allowed to live in the
house" with a "promise to vacate as soon as she would be able to find a new
residence." They further alleged thatdespitetheir demand after a year, the petitioner
failed or refused to vacate the premises.

Despite the due service of the summons and copy of the complaint, the petitioner did
not file heranswer. The MTCC declared her in defaultupon the respondents' motion to
declare her in default, and proceeded to receivethe respondents'oral testimony and
documentary evidence. Thereafter, on September 13, 1999, the MTCC rendered
judgment against her, disposing:

WHEREFORE, considering the foregoing, Judgment is hereby rendered in favor [of]

plaintiffs (sic) spouses Renato Zamora and Melba Zamora and against defendant
Dolores AdoraMacaslang, ordering defendant to vacate the properties in question, to
pay to plaintiffs Attorney's Fees in the sum of P10,000.00 and monthly rental of
P5,000.00 starting December, 1997 until the time the defendant shall have vacated the
properties in question.

SO ORDERED.[4]

The petitioner appealed to the RTC, averring the following as reversible errors, namely:

1. Extrinsic Fraud was practiced upon defendant-appellant which ordinary

prudence could not have guarded against and by reason of which she has
been impaired of her rights.

2. Defendant-Appellant has a meritorious defense in that there was no actual

sale considering that the absolute deed of sale relied upon by the plaintiff-
appell[ees] is a patent-nullity as her signature therein was procured
through fraud and trickery.[5]

1248
and praying through her appeal memorandum as follows:

Wherefore, in view of the foregoing, it is most respectfully prayed for that judgment be
rendered in favor of defendant-appellant ordering that this case be remanded back to
the Court of Origin, Municipal Trial Court of Danao City, for further proceedings to allow
the defendant to present her evidence, and thereafter, to render a judgment anew. [6]

On May 18, 2000, the RTC resolved the appeal, to wit: [7]

WHEREFORE,judgment is hereby rendered dismissing the complaint for failure to state

a cause of action.

The same may, however, be refiled in the same Court, by alleging plaintiffs' cause of
action, if any.

Plaintiffs' Motion for Execution of Judgment of the lower court is rendered moot by this
judgment.

SO ORDERED.

The respondents appealed to the CA, assailing the RTC's decision for "disregarding the
allegations in the complaint" in determining the existence or non-existence of a cause of
action.

On July 3, 2002, the CA reversed and set aside the RTC's decision and reinstated the
MTCC's decision in favor of the respondents, disposing:

WHEREFORE,foregoing premises considered, the Petition is hereby GIVEN DUE

COURSE. Resultantly, the impugned decision of the Regional Trial Court is hereby
REVERSED and SET ASIDE for having no basis in fact and in law, and the Decision of
the Municipal Trial Court in Cities REINSTATED and AFFIRMED. No costs.

SO ORDERED.[8]

The petitioner'smotion for reconsideration was denied onNovember 19, 2002.

ISSUES

Hence, the petitioner appeals the CA's adverse decision, submitting legal issues, as
follows:

1. Whether or not the Regional Trial Court in the exercise of its Appellate
Jurisdiction is limited to the assigned errors in the Memorandum or brief
filed before it or whether it can decide the case based on the entire
records of the case, as provided for in Rule 40, Sec. 7. This is a novel

1249
 issue which, we respectfully submit, deserves a definitive ruling by this
Honorable Supreme Court since it involves the application of a new
provision, specifically underlined now under the 1997 Revised Rules on
Civil procedure.

2. Whether or not in an action for unlawful detainer, where there was no prior
demand to vacate and comply with the conditions of the lease made, a
valid cause of action exists?

3. Whether or not in reversing the Regional Trial Court Decision and

reinstating and affirming the decision of the Municipal Circuit Trial Court,
which was tried and decided by the MCTC in violation of the Rules on
Summary Procedure, the Court of Appeals sanctioned a gross departure
from the usual course of judicial proceedings? [9]

The issues that this Court has to resolve are stated thuswise:

1. Whether or not the CA correctly found that the RTC committed reversible error in
ruling on issues not raised by the petitioner in her appeal;

2. Whether or not the CA correctly found that the complaint stated a valid cause of
action;

3. Whether or not the CA erred in finding that there was a valid demand to vacate
made by the respondents on the petitioner; and

4. Whether or not the petitioner's defense of ownership was meritorious.

RULING

We grant the petition for review.

A.
As an appellate court, RTC may rule
upon an issue notraised on appeal

In its decision, the CA ruled that the RTC could not resolve issues that were not
assigned by the petitioner in her appeal memorandum, explaining:

Indeed(,) We are rather perplexed why the Regional Trial Court, in arriving at its
decision, discussed and ruled on issues or grounds which were never raised, assigned,
or argued on by the Defendant-appellee in her appeal to the former. A careful reading of
the Defendant-appellee's appeal memorandum clearly shows that it only raised two (2)
grounds, namely (a) alleged extrinsic fraud, (b) meritorious defenses based on nullity of
the Deed of Sale Instrument. And yet the Trial Court, in its decision, ruled on issues not

1250
raised such as lack of cause of action and no prior demand to vacate having been
made.

Only errors assigned and properly argued on the brief and those necessarily related
thereto, may be considered by the appellate court in resolving an appeal in a civil case.
Based on said clear jurisprudence, the court a quo committed grave abuse of discretion
amounting to lack of jurisdiction when it resolved Defendant-appellee's appeal based on
grounds or issues not raised before it, much less assigned by Defendant-appellee as an
error.

Not only that. It is settled that an issue which was not raised during the Trial in the court
below would not be raised for the first time on appeal as to do so would be offensive to
the basic rules of fair play, justice and due process (Victorias Milling Co., Inc. vs. CA,
333 SCRA 663). We can therefore appreciate Plaintiffs-appellants' dismay caused by
the Regional Trial Court's blatant disregard of a basic and fundamental right to due
process.[10]

The petitioner disagrees with the CA and contends that the RTC as an appellate
courtcould rule on the failure of the complaint to state a cause of action and the lack of
demand to vacate even if not assigned in the appeal.

We concur with the petitioner's contention.

The CA might have been correct had the appeal been a first appeal from the RTC to the
CA or another proper superior court, in which instance Section 8 of Rule 51, which
applies to appeals from the RTC to the CA,imposesthe express limitation of the review
to only those specified in the assignment of errorsor closely related to or dependent on
an assigned error and properly argued in the appellant's brief, viz:

Section 8. Questions that may be decided. - No error which does not affect the
jurisdiction over the subject matter or the validity of the judgment appealed from or the
proceeding therein will be considered unless stated in the assignment of errors, or
closely related to or dependent on an assigned error and properly argued in the
brief, save as the court may pass upon plain errors and clerical errors.

Butthe petitioner's appeal herein,being taken from the decision of the MTCC to the RTC,
was governed by a different rule, specifically Section 18 of Rule 70 of the Rules of
Court, to wit:

Section 18. xxx

xxx

The judgment or final order shall be appealable to the appropriate Regional Trial
Court which shall decide the same on the basis of the entire record of the

1251
proceedings had in the court of origin and such memoranda and/or briefs as may
be submitted by the parties or required by the Regional Trial Court. (7a)

As such,the RTC, in exercising appellate jurisdiction,was not limited to the errors

assigned in the petitioner's appeal memorandum, but coulddecide on the basis of the
entire record of the proceedingshad in the trial court and such memoranda and/or briefs
as may be submitted by the parties or required by the RTC.

The difference between the procedures for deciding on review is traceable to Section 22
of Batas PambansaBlg. 129,[11]which provides:

Section 22. Appellate Jurisdiction. - Regional Trial Courts shall exercise appellate

jurisdiction over all cases decided by Metropolitan Trial Courts, Municipal Trial Courts,
and Municipal Circuit Trial Courts in their respective territorial jurisdictions.Such cases
shall be decided on the basis of the entire record of the proceedings had in the
court of origin [and] such memoranda and/or briefs as may be submitted by the
parties or required by the Regional Trial Courts. The decision of the Regional Trial
Courts in such cases shall be appealable by petition for review to the Court of Appeals
which may give it due course only when the petition shows prima facie that the lower
court has committed an error of fact or law that will warrant a reversal or modification of
the decision or judgment sought to be reviewed. [12]

As its compliance with the requirement of Section 36 of Batas PambansaBlg. 129to

"adopt special rules or procedures applicable to such cases in order to achieve an
expeditious and inexpensive determination thereof without regard to technical rules," the
Court promulgated the 1991 Revised Rules on Summary Procedure, whereby it
institutionalized the summary procedure for all the first level courts. Section 21 of
the 1991 Revised Rules on Summary Procedurespecifically stated:

Section 21. Appeal. - Thejudgment or final order shall be appealable to the

appropriate Regional Trial Court which shall decide the same in accordance with
Section 22 of Batas PambansaBlg. 129. The decision of the Regional Trial Court in
civil cases governed by this Rule, including forcible entry and unlawful detainer shall be
immediately executory, without prejudice to a further appeal that may be taken
therefrom. Section 10 of Rule 70 shall be deemed repealed.

Later on, the Court promulgated the 1997 Rules of Civil Procedure, effective on July 1,
1997, and incorporated in Section 7 of Rule 40 thereof the directive to the RTC to
decide appealed cases"on the basis of the entire record of the proceedings had in the
court of origin and such memoranda as are filed,"viz:

Section 7. Procedure in the Regional Trial Court. -

(a) Upon receipt of the complete record or the record on appeal, the clerk of court of the
Regional Trial Court shall notify the parties of such fact.

1252
(b) Within fifteen (15) days from such notice, it shall be the duty of the appellant to
submit a memorandum which shall briefly discuss the errors imputed to the lower court,
a copy of which shall be furnished by him to the adverse party. Within fifteen (15) days
from receipt of the appellant's memorandum, the appellee may file his memorandum.
Failure of the appellant to file a memorandum shall be a ground for dismissal of the
appeal.

(c) Upon the filing of the memorandum of the appellee, or the expiration of the period to
do so, the case shall be considered submitted for decision. The Regional Trial Court
shall decide the case on the basis of the entire record of the proceedings had in
the court of origin and such memoranda as are filed. (n)

As a result, the RTC presently decides all appeals from the MTC based on the entire
record of the proceedings had in the court of origin and such memoranda or briefs as
are filed in the RTC.

Yet, even withoutthe differentiation in the procedures of deciding appeals, thelimitation

of the review to onlythe errors assigned and properly argued in the appeal brief or
memorandum and the errors necessarily related to such assigned errorsought not to
have obstructed the CA from resolving the unassigned issues by virtue of their coming
under one or several of the following recognized exceptions to the limitation, namely:

(a) When the question affectsjurisdiction over the subject matter;

(b) Matters that are evidently plain or clerical errors within contemplation of law;
(c) Matters whose consideration is necessary in arriving at a just decision and
complete resolution of the case or in serving the interests of justice or avoiding
dispensing piecemeal justice;
(d) Matters raised in the trial court and are of record having some bearing on the issue
submitted that the parties failed to raise or that the lower court ignored;
(e) Matters closely related to an error assigned; and
(f) Matters upon which the determination of a question properly assigned is
dependent.[13]

Consequently, the CA improperly disallowed the consideration and resolution of the two
errors despite their being: (a)necessary in arriving at a just decision and acomplete
resolution of the case; and (b) matters of record having some bearing on the issues
submitted that the lower court ignored.

B.
CA correctly delved into and determined
whether or not complaint stateda cause of action

The RTC opined that the complaint failed to state a cause of action because the
evidence showed that there was no demand to vacate made upon the petitioner.

The CA disagreed, observingin its appealed decision:

1253
But what is worse is that a careful reading of Plaintiffs-appellants' Complaint would
readily reveal that they have sufficiently established (sic) a cause of action against
Defendant-appellee. It is undisputed that as alleged in the complaint and testified to by
Plaintiffs-appellants, a demand to vacate was made before the action for unlawful
detainer was instituted.

A complaint for unlawful detainer is sufficient if it alleges that the withholding of

possession or the refusal is unlawful without necessarily employing the terminology of
the law (Jimenez vs. Patricia, Inc., 340 SCRA 525). In the case at bench, par. 4 of the
Complaint alleges, thus:

"4. After a period of one (1) year living in the aforementioned house, Plaintiff demanded
upon defendant to vacate but she failed and refused;"

From the foregoing allegation, it cannot be disputed that a demand to vacate has not
only been made but that the same was alleged in the complaint. How the Regional Trial
Court came to the questionable conclusion that Plaintiffs-appellants had no cause of
action is beyond Us.[14]

We concur with the CA.

A complaint sufficiently alleges a cause of action for unlawful detainer if it states the
following:

(a) Initially, the possession of the property by the defendant was by contract with or by
tolerance of the plaintiff;

(b) Eventually, such possession became illegal upon notice by the plaintiff to the
defendant about the termination of the latter's right of possession;

(c) Thereafter, the defendant remained in possession of the property and deprived the
plaintiff of its enjoyment; and

(d) Within one year from the making of the last demand to vacate the propertyon the
defendant, the plaintiff instituted the complaint for ejectment. [15]

In resolving whether the complaint states a cause of actionor not, only the facts alleged
in the complaint are considered. The test is whether the court can render a valid
judgment on the complaint based on the facts alleged and the prayer asked for. [16] Only
ultimate facts, not legal conclusions or evidentiary facts, are considered for purposes of
applying the test.[17]

To resolve the issue, therefore, a look at the respondents' complaint is helpful:

2. On September 10, 1997, defendant sold to plaintiffs a residential land located in

Sabang, Danao City, covered by Tax Dec.0312417 RB with an area of 400 square

1254
meters, including a residential house where defendant was then living covered by Tax
Dec. 0312417 RB, a copy of the deed of absolute [sale] of these properties is hereto
attached as Annex "A";

3. After the sale, defendant requested to be allowed to live in the

house which plaintiff granted on reliance of defendant's promise to vacate as soon
as she would be able to find a new residence;

4. After a period of one (1) year living in the aforementioned house, plaintiffs

demanded upon defendant to vacate but she failed or refused.

5. Plaintiffs sought the aid of the barangay Lupon of Sabang, Danao City for arbitration
but no settlement was reached as shown by a certification to file action hereto attached
as Annex "B";

6. Plaintiffs were compelled to file this action and hire counsel for P10,000 by way of
attorney's fee;

7. Defendant agreed to pay plaintiffs a monthly rental of P5,000 for the period of time
that the former continued to live in the said house in question.

WHEREFORE, it is respectfully prayed of this Honorable Court to render judgment

ordering the defendant to vacate the properties in question, ordering the defendant to
pay plaintiffs attorney's fees in the sum of P10,000, ordering the defendant to pay the
plaintiffs a monthly rental of P5,000 starting in October 1997, until the time that
defendant vacates the properties in question. Plaintiffs pray for such other refiefs
consistent with justice and equity.[18]

Based on its allegations, the complaintsufficiently stated a cause of action for unlawful
detainer. Firstly, it averred that the petitioner possessed the property by the mere
tolerance of the respondents. Secondly, the respondents demanded that the petitioner
vacate the property, thereby rendering her possession illegal. Thirdly,she remained in
possession of the property despite the demand to vacate. And, fourthly, the
respondents instituted the complaint on March 10, 1999,which was well within a year
after the demand to vacate was made around September of 1998 or later.

Yet, even as we rule that the respondents' complaint stated a cause of action, we must
find and hold that both the RTC and the CA erroneously appreciatedthe real issue to be
about the complaint's failure to state a cause of action. It certainly was not so, butthe
respondents' lack of cause of action. Their erroneous appreciationexpectedly prevented
the correct resolution of the action.

Failure to state a cause of action and lack of cause of action are really different from
each other.On the one hand, failure to state a cause of actionrefers to the insufficiency
of the pleading, and is a ground for dismissal under Rule 16 of the Rules of Court. On
the other hand, lack of cause action refers to a situation where the evidence does not

1255
prove the cause of action alleged in the pleading. Justice Regalado, a recognized
commentator on remedial law, has explained the distinction: [19]

xxx What is contemplated, therefore, is a failure to state a cause of action which is

provided in Sec. 1(g) of Rule 16. This is a matter of insufficiency of the pleading. Sec. 5
of Rule 10, which was also included as the last mode for raising the issue to the court,
refers to the situation where the evidence does not prove a cause of action. This is,
therefore, a matter of insufficiency of evidence. Failure to state a cause of action is
different from failure to prove a cause of action. The remedy in the first is to move for
dismissal of the pleading, while the remedy in the second is to demur to the evidence,
hence reference to Sec. 5 of Rule 10 has been eliminated in this section. The procedure
would consequently be to require the pleading to state a cause of action, by timely
objection to its deficiency; or, at the trial, to file a demurrer to evidence, if such motion is
warranted.

A complaint states a cause of action if it avers the existence of the three essential
elements of a cause of action, namely:

(a) The legal right of the plaintiff;

(b) The correlative obligation of the defendant; and

(c) The act or omission of the defendant in violation of said legal right.

If the allegations of the complaint do not aver the concurrence of these elements, the
complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a
cause of action.Evidently, it is not the lack or absence of a cause of action that is a
ground for the dismissal of the complaint but the fact that the complaint states no cause
of action.Failure to state a cause of action may be raised at the earliest stages of an
action through a motion to dismiss, but lack of cause of action may be raised at any
time after the questions of fact have been resolved on the basis of the stipulations,
admissions, or evidence presented.[20]

Having found that neither Exhibit C nor Exhibit E was a proper demand to vacate,
[21]
 considering that Exhibit C (the respondents' letter dated February 11,
1998)demanded the payment of P1,101,089.90, and Exhibit E (theirletter dated January
21, 1999) demandedthe payment of P1,600,000.00, the RTC concluded that the
demand alleged in the complaint did not constitute a demand to pay rent and to vacate
the premises necessary in an action for unlawful detainer. It was this conclusion that
caused the RTC to confuse the defect as failure of the complaint to state a cause of
action for unlawful detainer.

The RTCerred even in that regard.

To begin with, it was undeniable that Exhibit D (the respondents' letter dated April 28,
1998) constitutedthedemand to vacate that validly supported their action for unlawful

1256
detainer, because of its unmistakable tenor as a demand to vacate, which the following
portion indicates:[22]

This is to give notice that since the mortgage to your property has long expired and that
since the property is already in my name, I will be taking over the occupancy of said
property two (2) months from date of this letter.

Exhibit D, despite not explicitly using the wordvacate, relayed to the petitionerthe
respondents' desire to take over the possession of the property by givingher no
alternative exceptto vacate.The word vacate,according toGolden Gate Realty
Corporation v. Intermediate Appellate Court,[23]is not a talismanic word that must be
employed in all notices to vacate.The tenantsin Golden Gate Realty Corporationhad
defaulted in the payment of rents, leading theirlessorto notify them to pay with a warning
that a case of ejectment would be filed against themshould they not do so. The Court
held that the lessor had thereby given strong notice that "you either pay your unpaid
rentals or I will file a court case to have you thrown out of my property,"for therewas no
other interpretation of the import of the notice due to the alternatives being clear cut, in
that the tenants must pay rentals that had been fixed and had become payable in the
past, failing in which they must move out.[24]

Also, the demand not being to pay rent and to vacate did not render the cause of action
deficient. Based on the complaint, the petitioner's possession was allegedly based on
the respondents' tolerance, not on any contract between them. Hence, thedemand to
vacate sufficed.

C.
Ejectment was not proper due
to defense of ownership being established

The respondents' cause of action for unlawful detainer was based on their supposed
right to possession resulting from their having acquired it through sale.

The RTCdismissed the complaint based on its following findings, to wit:

In the case at bench, there is conflict between the allegation of the complaint and the
document attached thereto.

Simply stated, plaintiff alleged that she bought the house of the defendant for
P100,000.00 on September 10, 1997 as stated in an alleged Deed of Absolute Sale
marked as Exhibit "A" to the complaint. Insofar as plaintiff is concerned, the best
evidence is the said Deed of Absolute Sale.

The Court is surprised why in plaintiff's letter dated February 11, 1998, marked as
Exhibit "C" and attached to the same complaint, she demanded from the defendant the
whooping sum of P1,101,089.90. It must be remembered that this letter was written five
(5) months after the deed of absolute sale was executed.

1257
The same letter (Exhibit "C") is not a letter of demand as contemplated by law and
jurisprudence. The plaintiff simply said that she will appreciate payment per notarized
document. There is no explanation what this document is.

Plaintiff's letter dated April 28, 1998 (Exhibit "D") contradicts her allegation that she
purchased the house and lot mentioned in the complaint. Exhibit "D", which is part of
the pleading and a judicial admission clearly shows that the house and lot of the
defendant was not sold but mortgaged.

Again, for purposes of emphasis and clarity, a portion of the letter (Exhibit "D") reads:

`This is to give notice that since the mortgage to your property has long expired and that
since the property is already in my name, I will be taking over the occupancy of said
property two (2) months from date of this letter.'

xxxx

Exhibit "E", which is a letter dated January 21, 1999, shows the real transaction
between the parties in their case. To reiterate, the consideration in the deed of sale
(Exhibit "A") is P100,000.00 but in their letter (Exhibit "E") she is already demanding the
sum of P1,600,000.00 because somebody was going to buy it for P2,000,000.00.

There are indications that point out that the real transaction between the parties is one
of equitable mortgage and not sale.[25]

Despite holding herein that the respondents' demand to vacate sufficed, we uphold the
result of the RTC decision in favor of the petitioner. This we do,because
therespondents' Exhibit Cand Exhibit E, by demandingpayment from the petitioner,
respectively,of P1,101,089.90 and P1,600,000.00, revealedthe true nature of the
transaction involving the property in question as one of equitable mortgage, not a sale.

Our upholding of the result reached by the RTC rests on the following
circumstancesthat tended to show that the petitioner had not really sold the property to
the respondents, contrary to the latter's averments, namely:

(a)The petitioner, as the vendor, was paid the amount of only P100,000.00, [26] a price
too inadequate in comparison with the sum of P1,600,000.00 demanded in Exhibit E; [27]

(b) The petitioner retained possession of the property despite the supposed sale; and

(c) The deed of sale wasexecuted as a result or by reason of the loan the respondents

extended to the petitioner,because they still allowed the petitioner to "redeem" the
property by paying her obligation under the loan. [28]

Submissions of the petitioner further supported the findings of the RTCon the equitable

1258
mortgage. Firstly, there was the earlier dated instrument (deed of pactode
retro)involving the same property, albeit the consideration was only P480,000.00,
executed between the petitioner as vendor a retro and the respondent Renato Zamora
as vendee a retro.[29] Secondly, there were two receipts for the payments the petitioner
had made to the respondentstotaling P300,000.00. [30] And, thirdly, the former secretary
of respondent Melba Zamora executed an affidavit acknowledging that the petitioner
had already paid a total of P500,000.00 to the respondents. [31] All these confirmed the
petitioner's claim that she remained the owner of the property and was still entitled to its
possession.

Article 1602 of the Civil Codeenumerates the instances when a contract, regardless of

its nomenclature, may be presumed to be an equitable mortgage, namely:

(a) When the price of a sale with right to repurchase is unusually inadequate;
(b) When the vendor remains in possession as lessee or otherwise;
(c) When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;
(d) When the purchaser retains for himself a part of the purchase price;
(e) When the vendor binds himself to pay the taxes on the thing sold; and,
(f) In any other case where it may be fairly inferred that the real intention of the parties
is that the transaction shall secure the payment of a debt or the performance of any
other obligation.

The circumstances earlier mentioned were, indeed, badges of an equitable mortgage

within the context ofArticle 1602 of the Civil Code.

Nonetheless, the findingsfavorable to the petitioner's ownership are neitherfinally

determinative of the title in the property, nor conclusive in any other proceeding where
ownership of the property involved herein may be more fittingly adjudicated.Verily,
where the cause of action in an ejectment suit is based on ownership of the property,
the defense that the defendantretainedtitle or ownership is a proper subject for
determination by the MTC but only for the purpose of adjudicating the rightful possessor
of the property.[32]This is based on Rule 70 of the Rules of Court, viz:

Section 16. Resolving defense of ownership. -- When the defendant raises the defense
of ownership in his pleadings and the question of possession cannot be resolved
without deciding the issue of ownership, the issue of ownership shall be resolved only to
determine the issue of possession.(4a)

D.
MTC committed procedural lapses
that must be noted and corrected

The Court seizes theopportunity to note and to correctseveralnoticeable procedural

lapses on the part of the MTCC, to avoid the impression that the Court condones or
tolerates the lapses.

1259
The first lapse wasthe MTCC's granting of the respondents' motion to declare the
petitioner in default following her failure to file an answer. The proper procedurewas not
for the plaintiffs to move for the declaration in default of the defendant who failed to file
the answer. Such a motion to declare in default has been expressly prohibited under
Section 13, Rule 70 of theRules of Court.[33]Instead, the trial court, either motuproprio or
on motion of the plaintiff, should render judgment as the facts alleged in the complaint
might warrant.[34]In other words, the defendant's failure to file an answer under Rule 70
of the Rules of Courtmight result to a judgment by default, not to a declaration of
default.

The second lapse wasthe MTCC'sreception of the oral testimony of respondent Melba
Zamora. Rule 70 of the Rules of Courthas envisioned the submission only of affidavits
of the witnesses (not oral testimony) and other proofs on the factual issues defined in
the order issued within five days from the termination of the preliminary conference;
[35]
and has permittedthe trial court, should it find the need to clarify material facts, to
thereafterissue an order during the 30-day period from submission of the affidavits and
other proofs specifying the matters to be clarified, and requiring the parties to submit
affidavits or other evidence upon such matters within ten days from receipt of the order.
[36]

The procedural lapses committed in this case are beyond comprehension.The MTCC
judge could not have been unfamiliar with the prevailing procedure, considering that
therevised version of Rule 70, although taking effect only on July 1, 1997,was derived
from the 1991 Revised Rule on Summary Procedure, in effect since November 15,
1991. It was not likely, therefore, that the MTCC judge committed the lapses out of his
unfamiliarity with the relevant rule. We discern thatthe cause of the lapses was his lack
of enthusiasm in implementingcorrect procedures in this case. If that was the true
reason, the Court can only be alarmed and concerned, for a judge should not lack
enthusiasm in applying the rules of procedure lest the worthy objectives of their
promulgation be unwarrantedly sacrificed and brushed aside. The MTCC judge should
not forget that the rules of procedure were always meant to be implemented
deliberately, not casually, and their non-compliance should only be excused in the
higher interest of the administration of justice.

It is timely, therefore, to remind all MTC judges to display full and enthusiastic
compliance with all the rules of procedure, especially those intended for expediting
proceedings.

WHEREFORE,we grant the petition for review on certiorari; set aside the decision
promulgated on July 3, 2002 by the Court of Appeals; and dismiss the complaint for
unlawful detainer for lack of a cause of action.

The respondents shall pay the costs of suit.

SO ORDERED.

1260
 FIRST DIVISION
[ G.R. No. 218867, February 17, 2016 ]
SPOUSES EDMOND LEE AND HELEN HUANG, PETITIONERS, VS. LAND BANK
OF THE PHILIPPINES, RESPONDENT.

DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari[1] are the Decision[2] dated January 28,
2015 and the Resolution[3] dated June 5, 2015 of the Court of Appeals (CA) in CA-G.R.
SP No. 133533 finding grave abuse of discretion on the part of the Regional Trial Court
of Balanga City, Bataan, Branch 1 (RTC), sitting as a Special Agrarian Court (SAC) in
Civil Case No. 7171, for dismissing the appeal filed by respondent Land Bank of the
Philippines (respondent) for failure to prosecute.

The Facts

Petitioners-spouses Edmond Lee and Helen Huang (petitioners) are the registered
owners of parcels of land with an aggregate area of 5.4928 hectares (has.) situated in
Mambog, Hermosa, Bataan and covered by Transfer Certificate of Title (TCT) No. T-
26257 of the Register of Deeds of Bataan (subject property). The subject property was
compulsorily acquired by the Department of Agrarian Reform (DAR) in accordance with
Republic Act No. (RA) 6657,[4] as amended, otherwise known as the "Comprehensive
Agrarian Reform Law of 1988."[5]

DAR offered the sum of PI09,429.98 as just compensation for the 1.5073-ha. portion of
the subject property. Rejecting the valuation, petitioners instead filed the present
petition for determination of just compensation against Provincial Adjudicator Erasmo
SP. Cruz of the Department of Agrarian Reform Adjudication Board (DARAB) and
herein respondent before the RTC, docketed as Civil Case No. 7171. [6]

In defense, respondent claimed that its valuation was based on DAR Administrative
Order (AO) No. 11, series of 1994,[7] as amended by DAR AO No. 5, series of 1998.[8] It
also contended that petitioners' appraisal was biased. [9]

The RTC Ruling and Subsequent Proceedings

After due proceedings, the RTC, sitting as a SAC, rendered a Decision [10] dated January
17, 2002 rejecting the valuation given by respondent and setting the just compensation
for petitioners' 1.5073 has. at P250.00 per square meter, or a total amount of
P3,768,250.00. It took judicial notice of the fact that the lots within the vicinity of the
subject property are valued between F200.00 to P500.00 per square meter. [11]

Respondent's motion for reconsideration[12] was denied in an Order[13] dated June 14,

2002.

Several years later, or sometime in September 2006, [14] petitioners filed a motion for

1261
execution of the RTC's January 17, 2002 Decision, alleging that while they received a
copy of respondent's Notice of Appeal dated June 19, 2002, upon verification, no such
appeal was actually filed before the RTC. Respondent denied petitioners' claim and
asserted that it filed a Notice of Appeal in accordance with the rules and has, therefore,
perfected its appeal. As such, the RTC's January 17, 2002 Decision was not yet final
and executory.[15]

Finding that respondent had perfected its appeal and based on equitable considerations
and the highest interest of justice, the RTC, in an Order [16] dated June 7, 2007, gave due
course to respondent's appeal and directed that the entire records thereof be
transmitted to the CA.

Petitioners moved for reconsideration, [17] which the RTC denied in an Order[18] dated

August 27, 2008. The RTC clarified that respondent was able to file its Notice of Appeal
within the prescribed period and that a postal money order in the amount of P520.00
had been issued by respondent in favor of the Clerk of Court of the RTC of Balanga
City, Bataan, representing the payment of the appeal fee. [19]

Almost five (5) years later, or on April 26, 2013, petitioners filed a motion to
dismiss[20] the appeal of respondent for failure to prosecute, asseverating that from the
time the RTC gave due course to its appeal in 2008, respondent had not made any
further action on its appeal, particularly with regard to the payment of the prescribed
appeal fees. In its defense, respondent argued that the RTC no longer had jurisdiction
to entertain petitioners' motion after its Notice of Appeal had been given due course. It
maintained that petitioners' motion should have been filed not before the RTC, but
before the CA.[21]

In its assailed Order[22] dated July 5, 2013, the RTC, through Judge Angelito I.
Balderama (Judge Balderama), granted petitioners' motion and accordingly, dismissed
respondent's appeal for failure to prosecute. Upon a meticulous inspection of the
records, the RTC found that respondent failed to pay the prescribed appeal fees. While
it is true that Postal Money Order No. J8353389-390 had been issued by respondent as
purported payment therefor, records show that the amount pertaining thereto had not
been remitted or credited to the account of the Office of the Clerk of Court of the RTC.
According to the Officer-in-Charge (OIC) Clerk of Court of the RTC, Mr. Gelbert
Argonza (Mr. Argonza), respondent's failure to pay the appeal fees was the reason why
the records of the case were not transmitted to the CA, explaining that proof of payment
of the appeal fees is a required attachment that forms part of the records to be
transmitted to the CA.[23]

As payment of docket and other legal fees within the prescribed period is both
mandatory and jurisdictional, the RTC, therefore, held that respondent's appeal was not
duly perfected. As such, it did not lose jurisdiction over the case and, accordingly,
pursuant to Section 5,[24] Rule 141 on Legal Fees of the Rules of Court, dismissed
respondent's appeal for failure to prosecute.[25]

1262
Respondent's motion for reconsideration[26] was denied in an Order dated December 11,
2013; hence, the matter was elevated before the CA via a petition for certiorari, imputing
grave abuse of discretion on the part of the RTC in dismissing its appeal.

The CA Ruling

In a Decision[27] dated January 28, 2015, the CA found grave abuse of discretion on the
part of the RTC in dismissing respondent's appeal for failure to prosecute, holding that
the validity of the latter's appeal had already been passed upon in the RTC's earlier
Orders dated June 7, 2007 and August 27, 2008 that gave due course to the appeal
and directed the transmittal of the records to the CA. It also ruled that upon the
perfection of respondent's appeal, the RTC had already lost jurisdiction over the case.
Thus, any orders subsequently issued by the RTC after the filing of respondent's Notice
of Appeal on June 19, 2002 were of no force and effect. [28]

Aggrieved, petitioners filed a motion for reconsideration, [29] which the CA denied in a

Resolution[30] dated June 5, 2015; hence, this petition.

The Issue Before the Court

The issue for the Court's resolution is whether or not the CA erred in finding grave
abuse of discretion on the part of the RTC when it dismissed respondent's appeal for
failure to prosecute.

The Court's Ruling

The petition has merit.

Section 4, Rule 41 of the Rules of Court provides:

Section 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.

In Gipa v. Southern Luzon Institute,[31] citing Gonzales v. Pe,[32] the Court clarified the

requirement of full payment of docket and other lawful fees under the above-quoted rule
in this wise:

[T]he 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

1263
which rendered the judgment or final order appealed from. The requirement of paving
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
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. [33] (Emphasis and underscoring
supplied)

In relation thereto, Section 9, Rule 41 of the Rules of Court states:

Section 9. Perfection of appeal; effect thereof. - A party's appeal by notice of appeal is

deemed perfected as to him upon the filing of the notice of appeal in due time.

A party's appeal by record on appeal is deemed perfected as to him with respect to the
subject matter thereof upon the approval of the record on appeal filed in due time.

In appeals by notice of appeal, the court loses jurisdiction over the case upon the
perfection of appeals filed in due time and the expiration of the time to appeal of
the other parties.

In appeals by record on appeal, the court loses jurisdiction only over the subject matter
thereof upon the approval of the records on appeal filed in due time and the expiration
of the time to appeal of the other parties.

In either case, prior to the transmittal of the original record or the record on appeal, the
court may issue orders for the protection and preservation of the rights of the parties
which do not involve any matter litigated by the appeal, approve compromises, permit
appeals of indigent litigants, order execution pending appeal in accordance with section
2 of Rule 39, and allow withdrawal of the appeal. (Emphasis supplied)

After a punctilious review of the records of this case, the Court finds that respondent
failed to perfect its appeal before the RTC by not paying the full amount of the
prescribed appellate docket fees. Consequently, the RTC did not lose jurisdiction over
the case and, as a matter of discretion, properly dismissed the appeal for failure to
prosecute.

The Court gives credence to the statement given by the OIC Clerk of Court of the RTC,
Mr. Argonza, who, upon meticulous inspection of the records, found that while
respondent had indeed issued a postal money order in favor of the Office of the Clerk of
Court of the RTC, the amount pertaining thereto was never remitted or received by the
1264
court. There being no proof of payment of the required appellate fees, Mr. Argonza
explained that the case records cannot be transmitted to the CA and therefore,
remained with the RTC. This fact sheds light and lends credibility to petitioners'
allegation that they originally attempted to file their motion to dismiss appeal before the
CA, which was unsurprisingly rejected, there being no case docket and court records
pertaining to respondent's appeal. [34]

Further militating against respondent's cause is the fact that almost five (5) years had
already lapsed from the time its Notice of Appeal had been originally given due course
by the RTC up to the time the petitioners moved for its dismissal. And yet, respondent
failed to pursue its case. In fact, had petitioners not taken any action, the instant case
would have continued to languish in the RTC dockets. Besides, even if it were true that
respondent had paid the required appellate docket fees in this case, it still failed to
exercise diligence and prudence in ascertaining that the records of the case had been
transmitted to the CA and that its appeal had been given due course. As it is,
respondent miserably neglected its case and may, thus, be considered to have
abandoned its appeal.[35] Clearly, the RTC, through Judge Balderama, cannot be faulted
for dismissing the appeal for failure to prosecute.

That the RTC retained jurisdiction to dismiss the appeal is beyond cavil, as provided
under Section 9, Rule 41 above-quoted. As a result of respondent's failure to perfect an
appeal within the period fixed by law, no court could exercise appellate jurisdiction to
review the RTC decision.[36] To reiterate, perfection of an appeal within the period and in
the manner prescribed by law is jurisdictional and non-compliance with such
requirements is considered fatal and has the effect of rendering the judgment final and
executory.[37] It bears to stress that the right to appeal is a statutory right and the one
who seeks to avail that right must comply with the statute or rules. [38]

In the light of the foregoing, the CA erred when it found that the RTC committed grave
abuse of discretion when it dismissed respondent's appeal for failure to prosecute.
While it is true that the RTC previously gave due course to respondent's Notice of
Appeal and declared that the latter had issued a postal money order in payment of the
required appellate docket fees, the RTC, however, is not precluded from perusing the
records a second or a third time, if only to ensure that all the requirements for perfecting
an appeal have been complied with. The Court further notes that if it were true that
respondent actually paid the appellaite docket fees, it could have easily produced proof
of payment if only to dispel any doubts thereon and consequently, prove compliance
with the rules on the perfection of appeals. Unfortunately, no such evidence was
forthcoming. Indubitably, the dismissal of respondent's appeal was in order, and the
RTC's January 17, 2002 Decision, as a result, had attained finality.

WHEREFORE, the petition is GRANTED. The Decision dated January 28, 2015 and the
Resolution dated June 5, 2015 of the Court of Appeals in CA-G.R. SP No. 133533 are
hereby REVERSED and SET ASIDE. Accordingly, the Orders dated July 5, 2013 and
December 11, 20.13 of the Regional Trial Court of Balanga City, Bataan, Branch 1,
sitting as a Special Agrarian Court, are AFFIRMED.

1265
SO ORDERED.
THIRD DIVISION
[ G.R. No. 171172, November 09, 2015 ]
BANK OF THE PHILIPPINE ISLANDS, PETITIONER, VS. SPOUSES JOHNSON &
EVELYN CO & JUPITER REAL ESTATE VENTURES, INC., RESPONDENTS.

[G.R. No. 200061]

SPOUSES JOHNSON & EVELYN CO REPRESENTED BY THEIR HEIR JOBELLE

CO, PETITIONERS, VS. BANK OF THE PHILIPPINE ISLANDS (AS SUCCESSOR-IN-
INTEREST OF FAR EAST BANK AND TRUST COMPANY), RESPONDENT.

DECISION
JARDELEZA, J.:
Before this Court are two consolidated petitions for review on certiorari. In G.R. No.
171172, the Bank of the Philippine Islands ("BPI") assails the orders of the Regional
Trial Court (RTC) of Parañaque City, Branch 196 in LRC Case No. 03-0063 dated
December 15, 2005[1] and January 13, 2006;[2] whereas in G.R. No. 200061, the
Spouses Johnson and Evelyn Co ("Spouses Co") question the Decision [3] of the Court of
Appeals (CA) in CA-G.R. CV No. 86986 dated June 27, 2011, and its Resolution [4] dated
January 9, 2012.

The Antecedents

On November 13, 1997, Jupiter Real Estate Ventures, Inc. ("Jupiter") and Spouses Co
obtained a loan from Far East Bank and Trust Company ("FEBTC") in the amount of
P9,434,200.00.[5] As security for the loan, Jupiter and Spouses Co mortgaged in favor of
FEBTC eight parcels of land including their improvements covered by Transfer
Certificates of Title (TCT) Nos. 94204, 94205, 94206, 94207, 94208, 94209, (91437)
39728, and (91438) 39729.[6]

Meanwhile, BPI and FEBTC merged, with BPI as the surviving corporation. [7]

Jupiter and Spouses Co defaulted on the payment of the loan. BPI, as successor-in-
interest of FEBTC, foreclosed the real estate mortgage pursuant to Act No. 3135, as
amended.[8] An auction sale was held on July 12, 2000 where the mortgaged properties
were sold to BPI as the highest bidder for P3,567,000.00. The Certificate of Sale was
registered and annotated at the back of the certificates of title on August 22, 2000.
[9]
 After the expiration of the period of redemption, BPI consolidated its ownership over
the real properties, and new titles were issued in its name. [10]

On August 7, 2002, Spouses Co and Jupiter filed a complaint for the nullification of

1266
foreclosure proceedings and damages before the Regional Trial Court of Parañaque
City, Branch 257 ("RTC Br. 257"), docketed as Civil Case No. 02-0331. [11]

On April 29, 2003, BPI filed a petition for the issuance of a writ of possession before the
Regional Trial Court of Parañaque City, Branch 196 ("RTC Br. 196"), docketed as LRC
Case No. 03-0063.[12]

On June 12, 2003, Spouses Co and Jupiter moved for the consolidation of LRC Case
No. 03-0063 with Civil Case No. 02-0331.[13] In an Order[14] dated August 7, 2003, the
RTC Br. 196 denied the motion, to wit:
Given the distinctiveness of the causes of action available to the parties herein a
proceeding for issuance for a writ of possession can be maintained independently in
relation to an action for annulment of document, without prejudice to the outcome of the
latter. [Ong vs. Court of Appeals, 333 SCRA 189 (2000); Vaca vs. Court of Appeals, 234
SCRA 146 (1994); de Jacob vs. Court of Appeals, 184 SCRA 294 (1990)].

WHEREFORE, premises considered, the motion for consolidation dated June 9, 2002 is
hereby DENIED for lack of merit.

SO ORDERED.
The motion for reconsideration of Spouses Co and Jupiter was also denied. [15]

On September 22, 2003, Jupiter filed a petition for corporate rehabilitation [16] dated
September 9, 2003 with the RTC of Pasay City Br. 231 ("RTC Br. 231") docketed as
RTC SEC No. 03-0006-CFM. On October 6, 2003, Spouses Co and Jupiter moved for
the suspension of the proceedings before the RTC Br. 196. [17] They alleged that on
September 24, 2003, the RTC Br. 231 issued a Stay Order after Jupiter filed its petition
for rehabilitation and among the properties covered were those subject of the real estate
mortgage. Spouses Co and Jupiter alleged that because of the Stay Order, the writ of
possession may not be issued.[18] Spouses Co, however, admitted in their pleadings that
the Stay Order was later lifted.[19] In an Order dated March 30, 2004, the RTC Br. 196
denied the Motion to Suspend Proceedings.[20]

In an Order[21] dated September 30, 2005, the RTC Br. 196 issued a writ of possession
in favor of BPI. However, the order was mistakenly addressed to spouses Trinidad P.
Salazar and Ranulfo M. Salazar and not to Spouses Co. [22] Thus, BPI filed a motion to
amend the order,[23] which was granted.[24] In an Amended Order[25] dated December 8,
2005, the RTC Br. 196 held:
WHEREFORE, premises considered, the Petition dated March 10, 2003 is hereby
GRANTED, and, let a Writ of Possession be issued in favor of petitioner, Bank of the
Philippine Islands, which writ, be made effective upon respondent, respondent Spouses

1267
Johnson A. Co & Evelyn Sy-Co, their assigns, heirs and any person deriving any
interest from the latter, over the properties identified as Eot Nos. 1 to 8 of Block 3 of the
subd. plan (LRC) Psd-1643, being a portion of Lot 5-A (ERC) Psd-187700, LRC Record
No. 54982, situated in Barrio Ibayo, Municipality of Parañaque and covered by Transfer
Certificates of Title Nos. TCT Nos. 150405 to 150412 issued by the Register of Deeds
of Pasay City.

SO ORDERED. (Underscoring in the original)

On October 21, 2005, Spouses Co and Jupiter filed a notice of appeal of the Order
dated September 30, 2005.[26] In its comment, BPI argued that the order of the trial court
granting a writ of possession is merely interlocutory from which no appeal is taken.
[27]
 Spouses Co and Jupiter countered that based on the case of Samson v. Rivera,
[28]
 the remedy from an order granting a writ of possession is an ordinary appeal. [29]

In an Order dated December 15, 2005, the RTC Br. 196 granted the notice of appeal of
Spouses Co and Jupiter and ordered the elevation of the records of the case to the CA.
[30]

BPI filed a motion for reconsideration to set aside the Order dated December 15, 2005,
but the RTC Br. 196 denied the motion for lack of merit in an Order dated January 13,
2006.[31] The trial court held:
Considering an appeal is a substantive right of a party herein to undertake an appellate
proceeding, petitioner's insistence on the nature of a writ of possession granted in its
favor cannot override the substantive right of an oppositors-mortgagors to appeal.

WHEREFORE, premises considered, petitioner's Motion for Reconsideration dated

January 3, 2006 is denied for lack of merit.

Let the records of this case be elevated immediately to the appellate court.

SO ORDERED.
On March 10, 2006, BPI filed a petition for review on certiorari under Rule 45 with this;
Court to set aside the Orders of the RTC Br. 196 dated December 15, 2006 and
January 13, 2006.[32] BPI alleged that Spouses Co and Jupiter cannot appeal the order
granting the writ of possession because the same is not appealable, the proceedings
being merely ex parte from which no appeal may be taken. BPI also alleged that as
registered owner of the properties subject of the foreclosure, it has the right to the
immediate possession of the property and its right to immediate possession is impaired
by the grant of the appeal.

On the other hand, Spouses Co and Jupiter maintained that the proper remedy is an

1268
ordinary appeal, instead of a petition for certiorari, because there is no grave abuse of
discretion when the court issues a writ of possession. [33] They added that the possession
of a third party in a writ of possession is an exemption to the ministerial and non-judicial
proceedings in a petition for writ of possession. [34]

Meanwhile, the CA rendered a Decision[35] on June 27, 2011 denying the appeal of
Spouses Co and Jupiter filed on October 21, 2005, and affirming the Amended Order
dated December 8, 2005. The CA held that the RTC Br. 196 acted with sound discretion
when it denied appellants' motion for consolidation. [36] It further held that when the
ownership over the properties was consolidated and new certificates of title were issued
in BPI's name, the possession of the real properties became an absolute right of BPI as
confirmed owner. Thus, BPI was entitled to the writ of possession as a matter of right.
[37]
 Finally, the CA denied the appeal because the issue of consolidation had become
moot and academic with the RTC Br. 196's issuance of an order granting the writ of
possession in favor of BPI.[38]

In a Resolution dated January 9, 2012, the CA denied the motion for reconsideration of
Spouses Co and Jupiter.[39] Only Spouses Co filed a Petition for Review on Certiorari
with Motion to Consolidate this Petition (G.R. No. 200061) with G.R. No. 171172 dated
February 8, 2012.[40] Spouses Co alleged that the cases of Philippine Savings Bank v.
Mañalac, Jr.,[41] Bank of Commerce v. Perlas-Bernabe[42] Sulit v. Court of Appeals,
[43]
 and Barican v. Intermediate Appellate Court[44] should apply and the CA should have
considered the peculiar circumstances of the case. [45] They claimed that there was then
a petition for corporate rehabilitation pending with another court that issued a stay order.
[46]
 Thus, the foreclosure was null and void. [47] Spouses Co further alleged that Act No.
3135 violates the Constitution since the law gives unbridled license to the court and
purchaser to deprive the owner of the property without the opportunity to be heard. [48]

On February 29, 2012, we issued a Resolution [49] consolidating G.R. No. 200061 with
G.R. No. 171172 since they involve similar parties and raise interrelated issues that
arose from the same set of facts.

In its Comment/Opposition,[50] BPI alleged that the petition for rehabilitation is not a

ground to consolidate the writ of possession case and the annulment of mortgage case,
as to justify the suspension of the writ of possession's implementation. Further, the
petition for rehabilitation was filed later than the petition for writ of possession. BPI also
claimed that the rulings in Bank of Commerce and Sulit do not apply to this case.

On February 5, 2014, BPI manifested[51] that the properties are still in the possession of
Spouses Co and the writ of possession is necessary to deliver their possession to BPI.

The Issues

1269
The issues for resolution are:
1. Whether the writ of possession was validly issued;

2. Whether the RTC Br. 196 erred in giving due course to the Notice of Appeal of
Spouses Co and Jupiter from its Order dated September 30, 2005 and Amended
Order dated December 8, 2005 granting the writ of possession in favor of BPI;

3. Whether or not Act No. 3135, as amended, violates the Constitution; and

4. Whether the CA erred in denying the consolidation of LRC Case No. 03-0063
with Civil Case No. 02-0331.
Our Ruling

Validity of the Issuance of the Writ of Possession

Under Section 7[52] of Act No. 3135, as amended by Act No. 4118, the purchaser in a
foreclosure sale may apply for a writ of possession during the redemption period. Upon
the purchaser's filing of an ex parte petition and posting of the appropriate bond, the
RTC shall, as a matter of course, order the issuance of the writ of possession in the
purchaser's favor. But equally well settled is the rule that a writ of possession will issue
as a matter of course, even without the filing and approval of a bond, after consolidation
of ownership and the issuance of a new TCT in the name of the purchaser. [53]

Upon expiration of the redemption period, the right of the purchaser to the possession of
the foreclosed property becomes absolute. This right to possession is based on the
purchaser's ownership of the property.[54] In like manner, the mere filing of an ex
parte motion for the issuance of the writ of possession would suffice and the filing of a
bond is no longer necessary. This is because possession has become the absolute right
of the purchaser as the confirmed owner. [55]

Spouses Co and Jupiter do not deny that they failed to redeem the properties
mortgaged within the redemption period. Consequently, ownership over the properties
was consolidated in the name of BPI and new titles were issued in its name. Thus, as
the new registered owner, BPI is even more entitled to the possession of the properties
and has the unmistakable right to file an ex parte motion for the issuance of a writ of
possession.

Spouses Co insist that the petition for issuance of a writ of possession should have
been denied because of the pendency of the petition for nullification of the foreclosure
sale, and the petition for rehabilitation, and the stay order. We are not persuaded.

The mere pendency of a petition for corporate rehabilitation and the issuance of a stay

1270
order do not and cannot enjoin the courts from the enforcement of claims; neither does
it make the case unique and peculiar. In Equitable PCI Bank, Inc. v. DNG Realty and
Development Corporation,[56] we reiterated the rule in New Frontier Sugar Corporation v.
Regional Trial Court, Branch 39, Iloilo City[57] that a stay order or the suspension of the
enforcement of all claims against the corporation shall commence only from the time the
rehabilitation receiver is appointed and a stay order is issued.

In Town and Country Enterprises, Inc. v. Qinsumbing, Jr.,[58] which presents the same
set of facts with this case, we held:
Considering that Metrobank acquired ownership over the mortgaged properties upon
the expiration of the redemption period on 6 February 2002, TCEI is also out on a limb
in invoking the Stay Order issued by the Rehabilitation Court on 8 October 2002 and the
approval of its rehabilitation plan on 29 March 2004. An essential function of corporate
rehabilitation is, admittedly, the Stay Order which is a mechanism of suspension of all
actions and claims against the distressed corporation upon the disappointment of a
management committee or rehabilitation receiver. The Stay Order issued by the
Rehabilitation Court in SMC Case No. 023-02 cannot, however, apply to the mortgage
obligations owing to Metrobank which had already been enforced even before TCEI's
filing of its petition for corporate rehabilitation on 1 October 2002.

In Equitable PCI Bank, Inc. v. DNG Really and Development Corporation, the Court
upheld the validity of the writ of possession procured by the creditor despite the
subsequent issuance of a stay order in the rehabilitation proceedings instituted by the
debtor. In said case. Equitable PCI Bank (Equitable) foreclosed on 30 June 2003 the
mortgage executed in its favor by DNG Realty and Development Corporation (DNG)
and was declared the highest bidder at the 4 September 2003 public auction of the
property. On 21 October 2003, DNG also instituted a petition for corporate rehabilitation
which resulted in the issuance of a Stay Order on 27 October 2003. Having caused the
recording of the Certificate of Sale on 3 December 2003, on the other hand, Equitable
executed an affidavit of consolidation of its ownership which served as basis for the
issuance of a new title in its favor on 10 December 2003. Equitable subsequently filed
an action for the issuance of a writ of possession on 17 March 2004 which was
eventually granted on 6 September 2004. In affirming the validity of the certificate of
sale, certificate of title and writ of possession issued in favor of Equitable, the Court
ruled as follows:
In RCBC, we upheld the extrajudicial foreclosure sale of the mortgage properties of BF
Homes wherein RCBC emerged as the highest bidder as it was done before the
appointment of the management committee. Noteworthy to mention was the fact that
the issuance of the certificate of sale in RCBC's favor, the consolidation of title, and the
issuance of the new titles in RCBC's name had also been upheld notwithstanding that
the same were all done after the management committee had already been appointed
and there was already a suspension of claims. Thus, applying RCBC v. IAC in this case,

1271
since the foreclosure of respondent DNG's mortgage and the issuance of the certificate
of sale in petitioner EPCIB's favor were done prior to the appointment of a Rehabilitation
Receiver and the Stay Order, all the actions taken with respect to the foreclosed
mortgage property which were subsequent to the issuance of the Stay Order were not
affected by the Stay Order. Thus, after the redemption period expired without
respondent redeeming the foreclosed properly, petitioner becomes the absolute owner
of the property and it was within its right to ask for the consolidation of title and the
issuance of new title in its name as a consequence of ownership; thus, it is entitled to
the possession and enjoyment of the property.[59] (Citations omitted) (Emphasis in the
original)
In this case, the auction sale on July 12, 2000, the registration and annotation of the
certificate of sale on August 22, 2000 and the issuance of new titles in favor of BPI in
2001,[60] as well as the petition for issuance of the writ of possession were all completed
before the filing of the petition for rehabilitation and the issuance of the stay order in
September 2003. Thus, after the redemption period expired without respondent
redeeming the foreclosed property, BPI became the absolute owner of the property and
it was within its right to move for the consolidation of title and the issuance of new title in
its name as a consequence of ownership; thus, it is entitled to the possession and
enjoyment of the property.[61]

Remedy to assail an order granting a writ of possession

We find no merit in BPI's argument that the order of the RTC Br. 196 granting a writ of
possession is merely interlocutory from which no appeal may be taken.

In Mallari v. Banco Filipino Savings and Mortgage Bank,[62] we ruled that it is the
ministerial duty of the trial court to issue a writ of possession in favor of the purchaser
who has already consolidated its title. After the consolidation of title in the buyer's name
for failure of the mortgagor to redeem the property, the writ of possession becomes a
matter of right. Its issuance to a purchaser in an extrajudicial foreclosure sale is merely
a ministerial function. The trial court has no discretion on this matter. Hence, any
assertion of discretion in connection with such issuance is misplaced, and a petition
for certiorari is not a proper remedy.[63] The order for the issuance of a writ of possession
being final, it is a proper subject for appeal.

We clarify, however, that this remedy of appeal is different from the remedy provided in
Section 8 of Act No. 3135, as amended by Act No. 4118. [64] An error of judgment
committed by a court in the exercise of its legitimate jurisdiction is not the same as
grave abuse of discretion. Errors of judgment are correctible by appeal while those of
jurisdiction are reviewable by certiorari.[65] In 680 Home Appliances, Inc. v. Court of
Appeals,[66] we explained that Act No. 3135 finds no application after the lapse of the
redemption period, and the remedy of a debtor to contest the possession of the property

1272
is a separate action, and not the appeal provided for in Section 8 of the Act. We
explained:
In a number of cases, the Court declared that Section 8 of Act No. 3135 is the available
remedy to set aside a writ of possession, without considering whether the writ involved
in each of these cases was issued during or after the lapse of the redemption period.
Upon revaluation, we find it necessary to make a distinction and clarify when the
remedy under Section 8 of Act No. 3135 may be availed of.

xxx

Act No. 3135 governs only the manner of the sale and redemption of the mortgaged real
property in an extrajudicial foreclosure; proceedings beyond these, i.e., upon the lapse
of the redemption period and the consolidation of the purchaser's title, are no longer
within its scope. xxx

As pointed out, the remedy provided under Section 8 of Act No. 3135 to the debtor
becomes available only after the purchaser acquires actual possession of the property.
This is required because until then the debtor, as the owner of the property, does not
lose his right to possess.

However, upon the lapse of the redemption period without the debtor exercising
his right of redemption and the purchaser consolidates his title, it becomes
unnecessary to require the purchaser to assume actual possession thereof
before the debtor may contest it. Possession of the land becomes an absolute right of
the purchaser, as this is merely an incident of his ownership. In fact, the issuance of the
writ of possession at this point becomes ministerial for the court. The debtor contesting
the purchaser's possession may no longer avail of the remedy under Section 8 of Act
No. 3135, but should pursue a separate action e.g., action for recovery of ownership, for
annulment of mortgage and/or annulment of foreclosure. FSAMI's consolidation of
ownership therefore makes the remedy under Section 8 of Act No. 3135 unavailable for
680 Home. 680 Home cannot assail the writ of possession by filing a petition in LRC No.
M-5444.[67] (Citations omitted) (Emphasis in the original)
Constitutionality of Act No. 3135, as amended

Spouses Co alleged that the ex parte nature of the proceedings under Section 7 of Act
No. 3135 violates the due process clause of the Constitution. In Rayo v. Metropolitan
Bank and Trust Company, we already ruled that the issuance of the writ of possession
in extrajudicial foreclosure proceedings docs not violate the mortgagor's right to
constitutional due process, thus:
First, there was no violation of petitioner's right to constitutional due process. In a long
line of cases, we have consistently ruled that the issuance of a writ of possession in

1273
favor of the purchaser in a foreclosure sale of a mortgaged property under Section 7 of
Act No. 3135, as amended is a ministerial duty of the court. The purchaser of the
foreclosed property, upon ex parte application and the posting of the required bond, has
the right to acquire possession of the foreclosed property during the 12-month
redemption period and with more reason, after the expiration of the redemption period.

An ex parte petition for the issuance of a writ of possession under Section 7 of Act No.
3135 is not, strictly speaking, a "judicial process" as contemplated in Article 433 of the
Civil Code. It is a judicial proceeding for the enforcement of one's right of possession as
purchaser in a foreclosure sale. It is not an ordinary suit filed in court, by which one
party "sues another for the enforcement of a wrong or protection of a right, or the
prevention or redress of a wrong." It is a non-litigious proceeding authorized in an
extrajudicial foreclosure of mortgage pursuant to Act No. 3135, as amended, and is
brought for the benefit of one party only, and without notice to, or consent by any person
adversely interested. It is a proceeding where the relief is granted without requiring an
opportunity for the person against whom the relief is sought to be heard. No notice is
needed to be served upon persons interested in the subject property.

xxx

Now, petitioner is challenging the constitutionality of Section 7 of Act No. 3135, as

amended, lie avers that Section 7 violates the clue process clause because, by the
mere  filing of an ex parte motion in the proper cadastral court, the purchaser in a
foreclosure sale is allowed to obtain possession of the foreclosed property during the
redemption period.

The Court of Appeals ruled that petitioners attempt to challenge the constitutionality of
Section 7 of Act No. 3135, as amended, constitutes a collateral attack that is not
allowed. We fully agree with the appellate court's ruling, for reasons of public policy, the
constitutionality of a law cannot be attacked collaterally. [68] (Emphasis and citations
omitted)
On the propriety of consolidation

Spouses Co claim that based on our rulings in Philippine Savings Bank v. Mañalac, Jr.,
[69]
 Bank of Commerce v. Perlas-Bernabe,[70] Sulit v. Court of Appeals,[71] and Barican v.
Intermediate Appellate Court,[72] the proceedings for the issuance of a writ of possession
should have been consolidated with their action for annulment of the foreclosure
proceedings, and that the issuance of the writ of possession should be withheld.

They alleged the existence of "unique and peculiar set of facts" [73] that call for the
application of the cited cases. We disagree.

In Philippine Savings Bank, we upheld the consolidation of a petition for the issuance of
1274
a writ of possession with an ordinary civil action in order to achieve a more expeditious
resolution of the cases. However, in the more recent case of Espinoza v. United
Overseas Bank Phils.,[74] we held that the consolidation of a petition for the issuance of a
writ of possession with the proceedings for nullification of foreclosure would be highly
improper when title to the litigated property had already been consolidated in the name
of the mortgagee-purchaser, as in the case of BPI. "Otherwise, not only will the very
purpose of consolidation (which is to avoid unnecessary delay) be defeated but the
procedural matter of consolidation will also adversely affect the substantive right of
possession as an incident of ownership."[75]

In Bank of Commerce, we ordered the consolidation of a receivership case with the

petition for certiorari after a finding that the certiorari petition therein is only a pending
incident in the receivership case, and that the outcome of the certiorari proceeding will
have a bearing on the receivership case. In this case, the issuance of the writ of
possession is not a pending incident to the action for nullity of foreclosure.

In Barican, we held that the obligation of a court to issue a writ of possession ceases to
be ministerial if there is a third party holding the property adversely to the judgment
debtor.[76] In this case, there is no third party holding the property adversely to the
judgment debtor.

In Sulit, we withheld the issuance of a writ of possession in favor of the mortgagee or

purchaser in an extrajudicial foreclosure sale for failure of the mortgagee to pay a
substantial amount of the surplus proceeds of the sale to the mortgagor. In this case,
the issue of payment of the foreclosure proceeds was never raised. In fact, BPI already
consolidated title and ownership of the subject properties and new titles issued in its
name after the expiration of the redemption period.

In view of the foregoing, both petitions must fail.

WHEREFORE, the petitions are DENIED for lack of merit. The orders of the RTC Br.
196 dated December 15, 2005 and January 13, 2006 assailed in G.R. No. 171172, as
well as the Decision of the Court of Appeals (CA) dated June 27, 2011 and its
Resolution dated January 9, 2012 assailed in G.R. No. 200061 are hereby AFFIRMED.
The sheriff of the RTC Br. 196 is ordered to PROCEED with the implementation of the
writ of possession without prejudice to the outcome of Civil Case No. 02-0331.

SO ORDERED.

THIRD DIVISION

G.R. No. 165273               March 10, 2010

1275
LEAH PALMA, Petitioner,
vs.
HON. DANILO P. GALVEZ, in his capacity as PRESIDING JUDGE of the
REGIONAL TRIAL COURT OF ILOILO CITY, BRANCH 24; and PSYCHE ELENA
AGUDO, Respondents.

DECISION

PERALTA, J.:

Assailed in this petition for certiorari under Rule 65 of the Rules of Court are the Orders
dated May 7, 20041 and July 21, 20042 of the Regional Trial Court (RTC) of Iloilo City,
Branch 24, granting the motion to dismiss filed by private respondent Psyche Elena
Agudo and denying reconsideration thereof, respectively.

On July 28, 2003, petitioner Leah Palma filed with the RTC an action for damages
against the Philippine Heart Center (PHC), Dr. Danilo Giron and Dr. Bernadette O.
Cruz, alleging that the defendants committed professional fault, negligence and
omission for having removed her right ovary against her will, and losing the same and
the tissues extracted from her during the surgery; and that although the specimens were
subsequently found, petitioner was doubtful and uncertain that the same was hers as
the label therein pertained that of somebody else. Defendants filed their respective
Answers. Petitioner subsequently filed a Motion for Leave to Admit Amended
Complaint, praying for the inclusion of additional defendants who were all nurses at the
PHC, namely, Karla Reyes, Myra Mangaser and herein private respondent Agudo.
Thus, summons were subsequently issued to them.

On February 17, 2004, the RTC's process server submitted his return of summons
stating that the alias summons, together with a copy of the amended complaint and its
annexes, were served upon private respondent thru her husband Alfredo Agudo, who
received and signed the same as private respondent was out of the country. 3

On March 1, 2004, counsel of private respondent filed a Notice of Appearance and a

Motion for Extension of Time to File Answer4 stating that he was just engaged by private
respondent's husband as she was out of the country and the Answer was already due.

On March 15, 2004, private respondent's counsel filed a Motion for Another Extension
of Time to File Answer,5 and stating that while the draft answer was already finished, the
same would be sent to private respondent for her clarification/verification before the
Philippine Consulate in Ireland; thus, the counsel prayed for another 20 days to file the
Answer.

On March 30, 2004, private respondent filed a Motion to Dismiss 6 on the ground that the
RTC had not acquired jurisdiction over her as she was not properly served with
summons, since she was temporarily out of the country; that service of summons on her
should conform to Section 16, Rule 14 of the Rules of Court. Petitioner filed her

1276
Opposition7 to the motion to dismiss, arguing that a substituted service of summons on
private respondent's husband was valid and binding on her; that service of summons
under Section 16, Rule 14 was not exclusive and may be effected by other modes of
service, i.e., by personal or substituted service. Private respondent filed a Comment 8 on
petitioner's Opposition, and petitioner filed a Reply 9 thereto.

On May 7, 2004, the RTC issued its assailed Order granting private respondent's
motion to dismiss. It found that while the summons was served at private respondent's
house and received by respondent's husband, such service did not qualify as a valid
service of summons on her as she was out of the country at the time the summons was
served, thus, she was not personally served a summons; and even granting that she
knew that a complaint was filed against her, nevertheless, the court did not acquire
jurisdiction over her person as she was not validly served with summons; that
substituted service could not be resorted to since it was established that private
respondent was out of the country, thus, Section 16, Rule 14 provides for the service of
summons on her by publication.

Petitioner filed a motion for reconsideration, which the RTC denied in its Order dated
July 21, 2004.

Petitioner is now before us alleging that the public respondent committed a grave abuse
of discretion amounting to lack or excess of jurisdiction when he ruled that:

I. Substituted service of summons upon private respondent, a defendant residing

in the Philippines but temporarily outside the country is invalid;

II. Section 16, Rule 14, of the 1997 Rules of Civil Procedure limits the mode of
service of summons upon a defendant residing in the Philippines, but temporarily
outside the country, exclusively to extraterritorial service of summons under
section 15 of the same rule;

III. In not ruling that by filing two (2) motions for extension of time to file Answer,
private respondent had voluntarily submitted herself to the jurisdiction of
respondent court, pursuant to Section 20, Rule 14 of the 1997 Rules of Civil
Procedure, hence, equivalent to having been served with summons;

IV. The cases cited in his challenged Order of May 7, 2004 constitute stare
decisis despite his own admission that the factual landscape in those decided
cases are entirely different from those in this case.10

Petitioner claims that the RTC committed a grave abuse of discretion in ruling that
Section 16, Rule 14, limits the service of summons upon the defendant-resident who is
temporarily out of the country exclusively by means of extraterritorial service, i.e., by
personal service or by publication, pursuant to Section 15 of the same Rule. Petitioner
further argues that in filing two motions for extension of time to file answer, private
respondent voluntarily submitted to the jurisdiction of the court.

1277
In her Comment, private respondent claims that petitioner's certiorari under Rule 65 is
not the proper remedy but a petition for review under Rule 45, since the RTC ruling
cannot be considered as having been issued with grave abuse of discretion; that the
petition was not properly verified because while the verification was dated September
15, 2004, the petition was dated September 30, 2004. She insists that since she was
out of the country at the time the service of summons was made, such service should
be governed by Section 16, in relation to Section 15, Rule 14 of the Rules of Court; that
there was no voluntary appearance on her part when her counsel filed two motions for
extension of time to file answer, since she filed her motion to dismiss on the ground of
lack of jurisdiction within the period provided under Section 1, Rule 16 of the Rules of
Court.

In her Reply, petitioner claims that the draft of the petition and the verification and
certification against forum shopping were sent to her for her signature earlier than the
date of the finalized petition, since the petition could not be filed without her signed
verification. Petitioner avers that when private respondent filed her two motions for
extension of time to file answer, no special appearance was made to challenge the
validity of the service of summons on her.

The parties subsequently filed their respective memoranda as required.

We shall first resolve the procedural issues raised by private respondent.

Private respondent's claim that the petition for certiorari under Rule 65 is a wrong

remedy thus the petition should be dismissed, is not persuasive. A petition
for certiorari is proper when any tribunal, board or officer exercising judicial or quasi-
judicial functions has acted without or in excess of jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction and there is no appeal, or any
plain, speedy, and adequate remedy at law.11 There is "grave abuse of discretion" when
public respondent acts in a capricious or whimsical manner in the exercise of its
judgment as to be equivalent to lack of jurisdiction.

Section 1, Rule 41 of the 1997 Rules of Civil Procedure states that an appeal may be
taken only from a final order that completely disposes of the case; that no appeal may
be taken from (a) an order denying a motion for new trial or reconsideration; (b) an
order denying a petition for relief or any similar motion seeking relief from judgment; (c)
an interlocutory order; (d) an order disallowing or dismissing an appeal; (e) an order
denying a motion to set aside a judgment by consent, confession or compromise on the
ground of fraud, mistake or duress, or any other ground vitiating consent; (f) an order of
execution; (g) a judgment or final order for or against one or more of several parties or
in separate claims, counterclaims, cross-claims and third-party complaints, while the
main case is pending, unless the court allows an appeal therefrom; or (h) an order
dismissing an action without prejudice. In all the above instances where the judgment or
final order is not appealable, the aggrieved party may file an appropriate special civil
action for certiorari under Rule 65.

1278
In this case, the RTC Order granting the motion to dismiss filed by private respondent is
a final order because it terminates the proceedings against her, but it falls within
exception (g) of the Rule since the case involves several defendants, and the complaint
for damages against these defendants is still pending. 12 Since there is no appeal, or any
plain, speedy, and adequate remedy in law, the remedy of a special civil action for
certiorari is proper as there is a need to promptly relieve the aggrieved party from the
injurious effects of the acts of an inferior court or tribunal. 13

Anent private respondent's allegation that the petition was not properly verified, we find
the same to be devoid of merit. The purpose of requiring a verification is to secure an
assurance that the allegations of the petition have been made in good faith, or are true
and correct, not merely speculative. 14 In this instance, petitioner attached a verification
to her petition although dated earlier than the filing of her petition. Petitioner explains
that since a draft of the petition and the verification were earlier sent to her in New York
for her signature, the verification was earlier dated than the petition for certiorari filed
with us. We accept such explanation. While Section 1, Rule 65 requires that the petition
for certiorari be verified, this is not an absolute necessity where the material facts
alleged are a matter of record and the questions raised are mainly of law. 15 In this case,
the issue raised is purely of law.

Now on the merits, the issue for resolution is whether there was a valid service of
summons on private respondent.

In civil cases, the trial court acquires jurisdiction over the person of the defendant either
by the service of summons or by the latter’s voluntary appearance and submission to
the authority of the former.16 Private respondent was a Filipino resident who was
temporarily out of the Philippines at the time of the service of summons; thus, service of
summons on her is governed by Section 16, Rule 14 of the Rules of Court, which
provides:

Sec. 16. Residents temporarily out of the Philippines. – When an action is commenced

against a defendant who ordinarily resides within the Philippines, but who is temporarily
out of it, service may, by leave of court, be also effected out of the Philippines, as under
the preceding section. (Emphasis supplied)

The preceding section referred to in the above provision is Section 15, which speaks of
extraterritorial service, thus:

SEC. 15. Extraterritorial service. ─ When the defendant does not reside and is not
found in the Philippines, and the action affects the personal status of the plaintiff or
relates to, or the subject of which is, property within the Philippines, in which the
defendant has or claims a lien or interest, actual or contingent, or in which the relief
demanded consists, wholly or in part, in excluding the defendant from any interest
therein, or the property of the defendant has been attached within the Philippines,
service may, by leave of court, be effected out of the Philippines by personal service as
under section 6; or by publication in a newspaper of general circulation in such places

1279
and for such time as the court may order, in which case a copy of the summons and
order of the court shall be sent by registered mail to the last known address of the
defendant, or in any other manner the court may deem sufficient. Any order granting
such leave shall specify a reasonable time, which shall not be less than sixty (60) days
after notice, within which the defendant must answer.

The RTC found that since private respondent was abroad at the time of the service of
summons, she was a resident who was temporarily out of the country; thus, service of
summons may be made only by publication.

We do not agree.

In Montefalcon v. Vasquez,17 we said that because Section 16 of Rule 14 uses the

words "may" and "also," it is not mandatory. Other methods of service of summons
allowed under the Rules may also be availed of by the serving officer on a defendant-
resident who is temporarily out of the Philippines. Thus, if a resident defendant is
temporarily out of the country, any of the following modes of service may be resorted to:
(1) substituted service set forth in section 7 ( formerly Section 8), Rule 14; (2) personal
service outside the country, with leave of court; (3) service by publication, also with
leave of court; or (4) in any other manner the court may deem sufficient. 18

In Montalban v. Maximo,19 we held that substituted service of summons under the

present Section 7, Rule 14 of the Rules of Court in a suit in personam against residents
of the Philippines temporarily absent therefrom is the normal method of service of
summons that will confer jurisdiction on the court over such defendant. In the same
case, we expounded on the rationale in providing for substituted service as the normal
mode of service for residents temporarily out of the Philippines.

x x x A man temporarily absent from this country leaves a definite place of residence, a
dwelling where he lives, a local base, so to speak, to which any inquiry about him may
be directed and where he is bound to return. Where one temporarily absents himself, he
leaves his affairs in the hands of one who may be reasonably expected to act in his
place and stead; to do all that is necessary to protect his interests; and to communicate
with him from time to time any incident of importance that may affect him or his
business or his affairs. It is usual for such a man to leave at his home or with his
business associates information as to where he may be contacted in the event a
question that affects him crops up. If he does not do what is expected of him, and a
case comes up in court against him, he cannot just raise his voice and say that he is not
subject to the processes of our courts. He cannot stop a suit from being filed against
him upon a claim that he cannot be summoned at his dwelling house or residence or his
office or regular place of business.

Not that he cannot be reached within a reasonable time to enable him to contest a suit
against him. There are now advanced facilities of communication. Long distance
telephone calls and cablegrams make it easy for one he left behind to communicate
with him.20

1280
Considering that private respondent was temporarily out of the country, the summons
and complaint may be validly served on her through substituted service under Section
7, Rule 14 of the Rules of Court which reads:

SEC. 7. Substituted service. — If, for justifiable causes, the defendant cannot be served
within a reasonable time as provided in the preceding section, service may be effected
(a) by leaving copies of the summons at the defendant’s residence with some person of
suitable age and discretion then residing therein, or (b) by leaving the copies at
defendant’s office or regular place of business with some competent person in charge
thereof.

We have held that a dwelling, house or residence refers to the place where the person
named in the summons is living at the time when the service is made, even though he
may be temporarily out of the country at the time. 21 It is, thus, the service of the
summons intended for the defendant that must be left with the person of suitable age
and discretion residing in the house of the defendant. Compliance with the rules
regarding the service of summons is as important as the issue of due process as that of
jurisdiction.221avvphi1

Section 7 also designates the persons with whom copies of the process may be left.
The rule presupposes that such a relation of confidence exists between the person with
whom the copy is left and the defendant and, therefore, assumes that such person will
deliver the process to defendant or in some way give him notice thereof. 23

In this case, the Sheriff's Return stated that private respondent was out of the country;
thus, the service of summons was made at her residence with her husband, Alfredo P.
Agudo, acknowledging receipt thereof. Alfredo was presumably of suitable age and
discretion, who was residing in that place and, therefore, was competent to receive the
summons on private respondent's behalf.

Notably, private respondent makes no issue as to the fact that the place where the
summons was served was her residence, though she was temporarily out of the country
at that time, and that Alfredo is her husband. In fact, in the notice of appearance and
motion for extension of time to file answer submitted by private respondent's counsel,
he confirmed the Sheriff's Return by stating that private respondent was out of the
country and that his service was engaged by respondent's husband. In his motion for
another extension of time to file answer, private respondent's counsel stated that a draft
of the answer had already been prepared, which would be submitted to private
respondent, who was in Ireland for her clarification and/or verification before the
Philippine Consulate there. These statements establish the fact that private respondent
had knowledge of the case filed against her, and that her husband had told her about
the case as Alfredo even engaged the services of her counsel.

In addition, we agree with petitioner that the RTC had indeed acquired jurisdiction over
the person of private respondent when the latter's counsel entered his appearance on
private respondent's behalf, without qualification and without questioning the propriety of

1281
the service of summons, and even filed two Motions for Extension of Time to File
Answer. In effect, private respondent, through counsel, had already invoked the RTC’s
jurisdiction over her person by praying that the motions for extension of time to file
answer be granted. We have held that the filing of motions seeking affirmative relief,
such as, to admit answer, for additional time to file answer, for reconsideration of a
default judgment, and to lift order of default with motion for reconsideration, are
considered voluntary submission to the jurisdiction of the court. 24 When private
respondent earlier invoked the jurisdiction of the RTC to secure affirmative relief in her
motions for additional time to file answer, she voluntarily submitted to the jurisdiction of
the RTC and is thereby estopped from asserting otherwise. 25

Considering the foregoing, we find that the RTC committed a grave abuse of discretion
amounting to excess of jurisdiction in issuing its assailed Orders.

WHEREFORE, the petition is GRANTED. The Orders dated May 7, 2004 and July 21,
2004 of the Regional Trial Court of Iloilo City, Branch 24, are hereby SET ASIDE.
Private respondent is DIRECTED to file her Answer within the reglementary period from
receipt of this decision.

SO ORDERED.

EN BANC

February 7, 2017

G.R. No. 191416

MAYOR WILLIAM N. MAMBA, ATTY. FRANCISCO N. MAMBA, JR., ARIEL

MALANA, NARDING AGGANGAN, JOMARI SAGALON, JUN CINABRE,
FREDERICK BALIGOD, ROMMEL ENCOLLADO, JOSEPH TUMALIUAN, and
RANDY DAYAG, Petitioners
vs.
LEOMAR BUENO, Respondent

DECISION

REYES, J.:

This is a Petition for Review on Certiorari1 filed in relation to Section 19 of A.M. No. 07-
9-12-SC,2 seeking to annul and set aside the Decision 3 dated January 18, 2010 and
Resolution4 dated March 2, 2010 of the Court of Appeals (CA) in CA-G.R. SP. No.
00038, which granted the petition for the issuance of a writ of amparo filed by Leomar
Bueno (respondent) against Mayor William N. Mamba (Mayor Mamba), Atty. Francisco
N. Mamba, Jr. (Atty. Mamba), Ariel Malana (Malana), Narding Aggangan (Aggangan),
Jomari Sagalon (Sagalon), Jun Cinabre (Cinabre), Frederick Baligod (Baligod), Rommel

1282
Encollado (Encollado ), Joseph Tumaliuan (Tumaliuan), and Randy Dayag (Dayag)
(collectively, the petitioners).

The Facts

On June 13, 2009, the canteen owned by Emelita N. Mamba (Emelita) in Tuao,
Cagayan was robbed. Emelita is the mother of Mayor Mamba, then Mayor of the
Municipality of Tuao, Cagayan and Atty. Mamba, then a Malacafiang official. 5 The Task
Force Lingkod Bayan (Task Force), an agency created by the Sangguniang Bayan of
Tuao to help the local police force in maintaining peace and order in the municipality,
undertook an investigation on the robbery.6

On June 14, 2009, several members of the Task Force, Malana, Aggangan and
Sagalon, together with barangay officials Cinabre and Encollado, went to the. house of
the respondent, then still a minor, to invite him for questioning on his supposed
involvement in the robbery. The respondent and his mother, Maritess Bueno (Maritess ),
acceded to the invitation. Thereupon, the respondent was brought to the Tuao police
station.7

The parties gave different accounts of what happened after the respondent was brought
to the Tuao police station.

The petitioners claim that:

When they reached the Tuao police station, there were no police investigators or any
representative from the local Social Welfare and Development (SWD) office and, hence,
the investigation could not proceed. At that time, Raymund Rodriguez (Raymund),
allegedly an eyewitness to the robbery, was at the police station. Raymund pointed to
the respondent as among those who robbed the store; the respondent then told
Raymund that he would kill him for ratting him out. 8 The petitioners allege that prior to
the robbery of the canteen, the respondent approached Raymund and his brother Robin
and proposed to them that they rob the canteen. The latter, however, declined the offer.
Later that night, Raymund saw the respondent and Lorenzo Haber (Haber) robbing the
canteen. Thereafter, Robin reported the incident to the Task Force. 9

The petitioners further claim that at the time of the robbery, Mayor Mamba and Atty.
Mamba were not around since they previously left Tuao, Cagayan for Manila on June
10, 2009. Mayor Mamba was on official leave for 10 days, from June 10, 2009 until
June 20, 2009, while Atty. Mamba had to report for work in Malacañang. 10

The respondent's custody was then referred to the Task Force. Haber was later invited
to the police station for questioning regarding his involvement in the robbery. However,
his custody was likewise referred to the Task Force since there were still no police
investigators.11

1283
On June 17, 2009, Atty. Mamba arrived in Tuao, Cagayan. While going out of his
residence, Maritess approached Atty. Mamba and asked him about her son. Atty.
Mamba told her that he does not know her son and that if the respondent indeed
committed a crime, she should not tolerate what her son was doing. 12

On June 18, 2009, while the members of the Task Force were on their way to bring the
respondent and Haber to the police station, they were met by Police Superintendent
Joselito Buenaobra (P/Supt. Buenaobra) of the Philippine National Police (PNP)
Cagayan Regional Office. Thereafter, the respondent's custody was transferred to the
PNP Cagayan Regional Office.13

Maritess then went to the office of Mayor Mamba, but she was told to come back at later
date since Mayor Mamba was still on official leave. When Mayor Mamba arrived in Tuao
on June 20, 2009, a conference was immediately held. Maritess requested that the
members of the Task Force be brought to Mayor Mamba's office. Almost all of the
members of the Task Force arrived. However, Maritess was unable to pinpoint who
among them took custody of his son. Mayor Mamba then advised her to file a complaint
in court should she be able to identify the responsible persons. 14

On the other hand, the respondent alleges that:

At around 3:00 p.m. of June 14, 2009, Tumaliuan and Dayag, both members of the
Task Force, upon the order of Baligod, then Municipal Administrator of Tuao, fetched
the respondent from the police station and brought .him to Mayor Mamba's
house.15 Sometime in the evening of even date, the respondent was made to board a
white van driven by Aggangan. Inside the van, he was beaten with a gun by Malana,
who later threatened him that he would be killed. Thereafter, he was brought back to
Mayor Mamba's house.16

That same evening, Haber, likewise a minor, was invited by the barangay captain in his
place, accompanied by about 10 barangay tanods and two police officers, for
questioning as regards the robbery of the canteen. Haber was brought to the police
station where he spent the night.17

On June 15, 2009, Haber was brought to Mayor Mamba's house. The respondent and
Haber were then tortured to force them to admit to their involvement in the robbery.
They were made to roll on the grass while being kicked and beaten with a cue stick by
Malana; hot wax was poured over their bodies to force them to admit to the robbery, but
they denied any involvement therein. Thereafter, they were blindfolded and were
questioned by Atty. Mamba regarding the robbery of the canteen. When his blindfold
was taken off, the respondent saw Atty. Mamba sitting nearby. 18 On June 16, 2009,
Malana brought the respondent and Haber, together with Robin and Raymund, to the
office of the Task Force, where they all spent the night. 19

Meanwhile, Maritess went to the Tuao police station to look for her son; she was told
that the respondent was brought to Mayor Mamba's house. However, when Maritess

1284
went to Mayor Mamba's house, she was not permitted to see her son. Maritess was
able to talk to Mayor Mamba who told her that she should not condone the acts of her
son. Maritess then sought the assistance of P/Supt. Buenaobra regarding the
respondent's disappearance from the police station. The PNP Cagayan Regional Office
was then preparing a case for habeas corpus when the respondent was released on
June 18, 2009 to the local SWD office. 20

Maritess then sought the assistance of the Regional Office of the Commission on
Human Rights (CHR) in Cagayan as regards the case of the respondent. 21 On August
25, 2009, the respondent, assisted by the CHR, filed a Petition for the Issuance of a
Writ of Amparo with the CA.22

On September 14, 2009, the CA, gave due course to the petition and directed the
issuance of the writ of amparo. On September 23, 2009, the petitioners filed their
verified return.23

A summary hearing was thereafter conducted by the CA. The respondent presented in
evidence his own testimony and the testimonies of Dr. Odessa B. Tiangco (Dr. Tiangco)
of the Cagayan Valley Medical Center, provindal social welfare officer Elvira Layus
(Layus), and Maritess.24 The petitioners, on the other hand, presented the testimony of
Cinabre, Encollado, Baligod, and Robin. 25

The CA further issued subpoena duces tecum ad testificandum to and heard the

testimony of P/Supt. Buenaobra.26

On January 18, 2010, the CA rendered the herein assailed Decision, 27 the decretal
portion of which reads:

WHEREFORE, the Petition for a Writ of Amparo filed by [the respondent] is

hereby GRANTED. Accordingly:

1. [The petitioners] are hereby enjoined from doing any act of physical or psychological
violence that would harm or threaten [the respondent] and his family, including those
who assisted him in the preparation of this present petition, especially the [CHR],
Regional Office No. 02, Cagayan and his witnesses;

2. The Head of the PNP Regional Office of Cagayan, whoever is the incumbent, is
hereby ordered to continue the investigation on the violation done against [the
respondent], and using extraordinary diligence, to furnish this Court with a report
regarding the said investigation. The investigation must be commenced as soon as
possible but not more than 30 days from the receipt of this Decision.

3. [Mayor Mamba] is hereby ordered to provide assistance to the above PNP

investigation including but not limited to the act of furnishing and/or providing the latter a
list of the members of the Task Force who had direct involvement in the violation of [the
respondent's] rights to life, liberty and security, including their identities and

1285
whereabouts, and to allow the investigation to run its course unhindered or influenced.
He is further ordered to update and furnish this Court of the actions he has done or will
be doing regarding this directive.

4. The Head of the PNP Regional Office of Cagayan and [Mayor Mamba] are ordered to
update this Court regarding their reportorial duty under this Decision within ten (10)
days from the commencement of the investigation, and thereafter, to make a quarterly
report regarding the said investigation. The investigation should be completed within
one year from the receipt of this Decision;

5. All findings resulting from the said investigation should be made available to [the
respondent] and his counsel should they consider the same necessary to aid them in
the filing of appropriate actions, criminal or otherwise, against those who are
responsible for the violation of the former's rights.

Failure to comply with the above will render the Head of the PNP Regional Office of
Cagayan and [Mayor Mamba] liable for contempt of this Court.

The Clerk of Court is hereby ordered to also furnish the Head of the PNP Regional
Office of Cagayan a copy of this Decision.

SO ORDERED.28

The CA opined that the respondent's rights to liberty and security were undeniably
undermined when he was invited by the members of the Task Force for investigation
and was brought to Mayor Mamba's house from the Tuao police station. 29 It further
pointed out that notwithstanding that Mayor Mamba was not in Tuao when the incident
happened, he is still accountable since he· failed to show sufficient action to protect the
respondent's rights; that Mayor Mamba failed to acknowledge the irregularity of the acts
of the members of the Task Force or to identify those who were responsible for the
violation of the respondent's rights. The CA further ruled that it was incumbent upon
Atty. Mamba, being a public servant, to ensure that the respondent's constitutional
rights are not violated.30

The CA pointed out that the "invitation" extended to the respondent by the members of
the Task Force was in the nature of an arrest as the real purpose of the same was to
make him answer to the heist committed the night before. The CA ruled that the same
amounted to an invalid warrantless arrest since the circumstances of the case do not
fall within the purview of Section 5 of Rule 113 of the Rules of Court. 31

Further, the CA ruled that although the respondent was subsequently released and that
he failed to establish that there is an impending danger of physical harm to him or his
family, the refusal of the respondent officials of the local government of Tuao, especially
Mayor Mamba, to admit and address the irregularities committed by the members of the
Task Force is tantamount to a continuing violation of the respondent's right to security. 32

1286
The petitioners sought a reconsideration 33 of the Decision dated January 18, 2010, but it
was denied by the CA in its Resolution34 dated March 2, 2010.

Hence, this petition.

The petitioners claim that the CA erred in issuing the writ of amparo in favor of the
respondent. They insist that the respondent, who was then the suspect in the robbery of
the canteen, was not illegally detained or tortured; that the members of the Task Force
merely invited him for questioning as to his involvement in the robbery. 35 They allege
that the petition for the issuance of a writ of amparo is not the proper remedy available
to the respondent since the present laws provide ample recourse to him for the alleged
threats to his life, liberty and security. They also maintain that the respondent's rights to
life, liberty and security are not under threat since he and his mother stated that they are
not afraid of the petitioners.36

The petitioners further aver that it was improper for the CA to direct the PNP Cagayan
Regional Office to conduct further investigation on the incident since P/Supt. Buenaobra
had already testified for the respondent during the summary hearing conducted by the
CA.37 They also maintain that Mayor Mamba and Atty. Mamba had nothing to do with
the alleged violation of the rights of the respondent since they were not in Tuao at the
time of the incident. That when Mayor Mamba returned to Tuao, he immediately met
Maritess to discuss the incident, but the latter failed to identify the persons involved in
the incident.38

On the other hand, the respondent claims that this petition was filed beyond the
reglementary period. He claims that under Section 19 of A.M. No. 07-9-12-SC, an
appeal from the final judgment or order must be filed with this Court within five working
days from notice of the adverse judgment. The respondent avers that the petitioners,
instead of immediately filing a petition for review on certiorari with this Court, opted to
file a motion for reconsideration with the CA, which is a prohibited pleading since it is
dilatory.39

The respondent further maintains that the CA did not err when it directed the issuance
of a writ of amparo in his favor. He claims that the writ of amparo is an appropriate
remedy in his case since it covers enforced disappearances; that his illegal warrantless
arrest is covered by the term "enforced disappearances." 40

Issues

Essentially, the issues for the Court's consideration are the following: first, whether the
petition for review on certiorari before the Court was filed within the reglementary
period; and second, whether the CA erred in granting the petition for the issuance of a
writ of amparo.

Ruling of the Court

1287
The petition is devoid of merit.

First Issue: Timeliness of the petition

The petition for review on certiorari before the Court, which assails the CA's grant of the
writ of amparo, contrary to the respondent's assertion, was filed on time. Section 19 of
A.M. No. 07-9-12-SC provides that:

Sec. 19. Appeal. - Any party may appeal from the final judgment or order to the
Supreme Court under Rule 45. The appeal may raise question of fact or law or both.

The period of appeal shall be five (5) working days from the date of notice of the
adverse judgment.1âwphi1

The appeal shall be given the same priority as in habeas corpus cases.

There is nothing in A.M. No. 07-9-12-SC which proscribes the filing of a motion for
reconsideration of the final judgment or order that grants or denies a writ
of amparo. Section 11 of A.M. No. 07-9-12-SC only prohibits the following pleadings
and motions:

Sec. 11. Prohibited Pleadings and Motions. - The following pleadings and motions are
prohibited:

a. Motion to dismiss;

b. Motion for extension of time to file return, opposition, affidavit, position paper and
other pleadings;

c. Dilatory motion for postponement;

d. Motion for a bill of particulars;

e. Counterclaim or cross-claim;

f. Third-party complaint;

g. Reply;

h. Motion to declare respondent in default;

i. Intervention;

j. Memorandum;

k. Motion for reconsideration of interlocutory orders or interim relief orders; and

1288
l. Petition for certiorari, mandamus, or prohibition against any interlocutory order.

What is prohibited under Section 11 of A.M. No. 07-9-12-SC are motions for
reconsideration directed against interlocutory orders or interim relief orders, not those
assailing the final judgment or order. The pleadings and motions enumerated in Section
11 of A.M. No. 07-9-12-SC would unnecessarily cause delays in the proceedings; they
are, thus, proscribed since they would run counter to the summary nature of the rule on
the writ of amparo. A motion seeking a reconsideration of a final judgment or order in
such case, obviously, no longer affects the proceedings.

Moreover, the Rules of Court applies suppletorily to A.M. No. 07-9-12- SC insofar as it
is not inconsistent with the latter.41 Accordingly, there being no express prohibition to the
contrary, the rules on motions for reconsideration under the Rules of Court apply
suppletorily to the Rule on the Writ of Amparo.

Nevertheless, considering that under Section 19 of A.M. No. 07-9-12-SC a party is only
given five working days from the date of notice of the adverse judgment within which to
appeal to this Court through a petition· for review on certiorari, a motion for
reconsideration of a final judgment or order must likewise be filed within the same
period. Thereafter, from the order denying or granting the motion for reconsideration,
the party concerned may file an appeal to the Court via a Rule 45 petition within five
working days from notice of the order pursuant to the fresh period rule. 42

The petitioners received a copy of the CA's Decision dated January 18, 2010 on
January 20, 2010.43 They, thus, have until January 27, 2010 to either file a motion for
reconsideration with the CA or an appeal to this Court through a Rule 45 petition. 44 On
January 25, 2010, the petitioners filed a motion for reconsideration with the CA. 45 The
CA denied the petitioners' motion for reconsideration in its Resolution dated March 2,
2010, a copy of which was received by the petitioners' counsel on March 8,
2010.46 Thus, the petitioners had until March 15, 2010 within which to appeal to this
Court.47 The petitioners filed this petition for review on certiorari on March 12,
2010.48 Thus, contrary to the respondent's claim, this petition was filed within the
reglementary period.

Second Issue: Propriety of the grant

of the writ of amparo

The writ of amparo is a protective remedy aimed at providing judicial relief consisting of
the appropriate remedial measures and directives that may be crafted by the court, in
order to address specific violations or threats of violation of the constitutional rights to
life, liberty or security.49 Section 1 of A.M. No. 07-9-12-SC specifically delimits the
coverage of the writ of amparo to extralegal killings and enforced disappearances, viz.:

Sec. 1. Petition. - The petition for a writ of amparo is a remedy available to any person
whose rights to life, liberty and security is violated or threatened with violation by an

1289
unlawful act or omission of a public official or employee, or of a private individual or
entity.

The writ shall cover extralegal killings and enforced disappearances or threats thereof.

Extralegal killings are killings committed without due process of law, i.e., without legal
safeguards or judicial proceedings.50 On the other hand, enforced disappearance has
been defined by the Court as the arrest, detention, abduction or any other form of
deprivation of liberty by agents of the State or by persons or groups of persons acting
with the authorization, support or acquiescence of the State, followed by a refusal to
acknowledge the deprivation of liberty or by concealment of the fate or whereabouts of
the disappeared person, which place such a person outside the protection of the law. 51

In an amparo action, the parties must establish their respective claims by substantial

evidence.52 Substantial evidence is that amount of evidence which a reasonable mind
might accept as adequate to support a conclusion. It is more than a mere imputation of
wrongdoing or violation that would warrant a finding of liability against the person
charged.53

After a thorough review of the records of this case, the Court affirms the factual findings
of the CA, which is largely based on the respondent's evidence. Verily, the totality of the
evidence presented by the respondent meets the requisite evidentiary threshold. To
corroborate his allegations, the respondent presented the testimony of Haber who,
during the hearing conducted by the CA on October 6, 2009, averred that on June 15,
2009, he was brought to Mayor Mamba's house where he and the respondent were
tortured. Haber testified that hot wax was dripped onto their bodies while they were
handcuffed; that they were kicked and beaten with a cue stick and an alcohol container.
Thereafter, Haber testified that he and the respondent were brought to the guardhouse
where they were suffocated by placing plastic bags on their heads. He also testified that
a wire was inserted inside their penises. 54

The respondent's claim was further corroborated by Dr. Tiangco who testified that on
June 18, 2009, she examined the respondent and found that he suffered several injuries
and multiple second degree bums. Layus also attested that she saw the scars incurred
by the respondent on his head, arms, and back when she interviewed him on July 26,
2009.55

In contrast, the respective testimonies of the witnesses for the petitioners merely
consisted in denial and the allegation that the respondent was indeed the one who
robbed the canteen.56 Clearly, against the positive testimony of the respondent, which
was corroborated by his witnesses, the petitioners' allegations must fail.

It is settled that denial is inherently a weak defense. To be believed, it must be

buttressed by a strong evidence of non-culpability; otherwise, such denial is purely self-
serving and without evidentiary value. 57 Further, even if the respondent was indeed

1290
guilty of a crime, assuming it to be true, it does not justify his immediate apprehension,
in the guise of an invitation, and the subsequent acts of torture inflicted on him.

What is clear is that the respondent was able to prove by substantial evidence that he
was apprehended by the members of the Task Force, illegally detained, and tortured. It
was further established that Maritess would not have seen his son if not for the timely
intercession of P/Supt. Buenaobra of the PNP Cagayan Regional Office. The members
of the Task Force apprehended and detained the respondent to make him admit to his
complicity in the heist the night before sans the benefit of legal and judicial processes.

Nevertheless, it is undisputed that the respondent, after four days of detention, had
been released by the members of the Task Force on June 18, 2009. This fact alone,
however, does not negate the propriety of the grant of a writ of amparo.

In the seminal case of Secretary of National Defense, et al. v. Manalo, et al., 58 the Court
emphasized that the writ of amparo serves both preventive and curative roles in
addressing the problem of extralegal killings and enforced disappearances. It is
preventive in that it breaks the expectation of impunity in the commission of these
offenses; it is curative in that it facilitates the subsequent punishment of perpetrators as
it will inevitably yield leads to subsequent investigation and action. 59

Accordingly, a writ of amparo may still issue in the respondent's favor notwithstanding

that he has already been released from detention. In such case, the writ of amparo is
issued to facilitate the punishment of those behind the illegal detention through
subsequent investigation and action.

More importantly, the writ of amparo likewise covers violations of the right to

security.1âwphi1 At the core of the guarantee of the right to security, as embodied in
Section 2, Article III of the Constitution,60 is the immunity of one's person, including the
extensions of his/her person, i.e., houses, papers and effects, against unwarranted
government intrusion. Section 2, Article III of the Constitution not only limits the State's
power over a person's home and possession, but more importantly, protects the privacy
and sanctity of the person himself.61

The right to security is separate and distinct from the right to life. The right to life
guarantees essentially the right to be alive - upon which the enjoyment of all other rights
is preconditioned. On the other hand, the right to security is a guarantee of the secure
quality of life, i.e., the life, to which each person has a right, is not a life lived in fear that
his person and property may be unreasonably violated by a powerful ruler. 62

In Manalo, the Court further opined that the right to security of person yields various
permutations of the exercise of the right, such as freedom from fear or, in
the arnparo context, freedom from threat; a guarantee of bodily and psychological
integrity or security; and a guarantee of protection of one's rights by the
government.63 As regards the right to security, in the sense of the guarantee of
protection of one's rights by the government, the Court explained:

1291
In the context of the writ of amparo, this right is built into the guarantees of the rights
to life and liberty under Article III, Section 1 of the 1987 Constitution and the right to
security of person (as freedom from threat and guarantee of bodily and psychological
integrity) under Article III, Section 2. The right to security of person in this third sense is
a corollary of the policy that the State "guarantees full respect for human rights" under
Article II, Section 11 of the 1987 Constitution. As the government is the chief guarantor
of order and security, the Constitutional guarantee of the rights to life, liberty and
security of person is rendered ineffective if government does not afford protection to
these rights especially when they are under threat. Protection includes conducting
effective investigations, organization of the government apparatus to extend protection
to victims of extralegal killings or enforced disappearances (or threats thereof) and/or
their families, and bringing offenders to the bar of justice. x x x. 64 (Citation omitted and
emphasis in the original)

In this case, it is incumbent upon the petitioners, who all hold positions in the local
government of Tuao, to conduct, at the very least, an investigation on the alleged illegal
arrest, illegal detention and torture of the respondent. The petitioners, nevertheless,
claim that the Office of the Mayor and the police station of Tuao, unknown to the
respondent, are conducting an investigation on the incident. However, other than their
bare assertion, they failed to present any evidence that would prove the supposed
investigation. Mere allegation is not a fact. Absent any evidence that would corroborate
the said claim, it is a mere allegation that does not have any probative value.

Verily, the petitioners failed to point to any specific measures undertaken by them to
effectively investigate the irregularities alleged by the respondent and to prosecute
those who are responsible therefor. Worse, the illegal detention and torture suffered by
the respondent were perpetrated by the members of the Task Force themselves.

Instead of effectively addressing the irregularities committed against the respondent, the
petitioners seemingly justify the illegal arrest and detention and infliction of bodily harm
upon the respondent by stating that the latter is a habitual delinquent and was the one
responsible for the robbery of the canteen. As stated earlier, even if the respondent
committed a crime, the petitioners, as local government officials, are not at liberty to
disregard the respondent's constitutionally guaranteed rights to life, liberty and security.
It is quite unfortunate that the petitioners, all local government officials, are the very
ones who are infringing on the respondent's fundamental rights to life, liberty and
security.

Clearly, there is substantial evidence in this case that would warrant the conclusion that
the respondent's right to security, as a guarantee of protection by the government, was
violated. Accordingly, the CA correctly issued the writ of amparo in favor of the
respondent.

The petitioners' claim that it was improper for the CA to direct the PNP Cagayan
Regional Office to conduct further investigation on the respondent's allegations
deserves scant consideration. There is simply no basis to the petitioners' claim that the

1292
PNP Cagayan Regional Office would not be expected to be objective in their
investigation since representatives therefrom testified during the summary hearing. It
bears stressing that P/Supt. Buenaobra was not a witness for the respondent; he
testified pursuant to the subpoena duces tecum ad testificandum issued by the CA.
Further, as aptly pointed out by the CA, it would be more reasonable for the PNP
Cagayan Regional Office to conduct the said investigation since it has already
commenced an initial investigation on the incident.

Nevertheless, there is a need to modify the reliefs granted by the CA in favor of the
respondent. The CA's Decision was promulgated in 2010.1âwphi1 Since then, Mayor
Mamba's term of office as Mayor of Tuao had ended and, presumably, a new individual
is now occupying the position of Mayor of Tuao. Accordingly, the incumbent Mayor of
Tuao should be directed to likewise provide assistance to the investigation to be
conducted by the PNP Cagayan Regional Office. Further, it has not been manifested in
this case that the PNP Cagayan Regional Office had commenced the investigation on
the incident that was ordered by the CA.

WHEREFORE, in consideration of the foregoing disquisitions, the petition

is DENIED. The Decision dated January 18, 2010 and Resolution dated March 2, 2010
issued by the Court of Appeals in CA-G.R. SP. No. 00038 are
hereby AFFIRMED subject to the following terms:

1. Petitioners Mayor William N. Mamba, Atty. Francisco N. Mamba, Jr., Ariel

Malana, Narding Aggangan, Jomari Sagalon, Jun Cinabre, Frederick Baligod,
Rommel Encollado, Joseph Tumaliuan, and Randy Dayag and the incumbent
local government officials of Tuao, Cagayan are hereby enjoined from doing any
act of physical or psychological violence on respondent Leomar Bueno and his
family including those who assisted him in the filing of the petition for the
issuance of a writ of amparo with the Court of Appeals;

2. The Regional Director of the Philippine National Police – Cagayan Regional

Office, whoever is the incumbent, is hereby directed to conduct an investigation,
using extraordinary diligence, on the violation of the rights to life, liberty and
security of the respondent when he was supposedly arrested on June 14, 2009
by the members of the Task Force Lingkod Bayan until he was released on June
18, 2009;

3. The petitioners and the incumbent officials of the local government of Tuao are
hereby ordered to provide genuine and effective assistance to the investigation to
be conducted by the Philippine National Police - Cagayan Regional Office,
including but not limited to furnishing and/or providing the latter a list of the
members of the Task Force Lingkod Bayan and all those who had a direct
involvement in the violation of the respondent's rights to life, liberty and security,
including their whereabouts, and to allow the investigation to run its course
unhindered;

1293
 4. The investigation shall be completed not later than six (6) months from receipt
of this Decision; and within thirty (30) days after completion of the investigation,
the Regional Director of the Philippine National Police - Cagayan Regional Office
shall submit a full report on the results of the investigation to the Court of
Appeals;

5. The Court of Appeals, within thirty (30) days from the submission by the
Regional Director of the Philippine National Police - Cagayan Regional Office of
his full report, is directed to submit to this Court its own report and
recommendations on the investigation and furnish a copy thereof to the
incumbent Regional Director of the Philippine National Police - Cagayan
Regional Office, the petitioners, and the respondent; and

6. This case is referred back to the Court of Appeals for appropriate proceedings
directed at the monitoring of (a) the investigation to be conducted by the
Philippine National Police - Cagayan Regional Office, (b) the actions to be
undertaken in pursuance of the said investigation, and (c) the validation of the
results.

SO ORDERED.

RULE 42

FIRST DIVISION

G.R. No. 162217, July 22, 2015

HEIRS OF ARTURO GARCIA I, (IN SUBSTITUTION OF HEIRS OF MELECIO

BUENO), Petitioners, v. MUNICIPALITY OF IBA, ZAMBALES, Respondent.

DECISION

BERSAMIN, J.:

For review are the resolutions promulgated on October 28, 2003 1 and February 10,
2004,2 whereby the Court of Appeals (CA) respectively “dismissed” the petitioners’
petition for review under Rule 42 of the Rules of Court, and denied their motion for
reconsideration.

At issue is the correct remedy of a party aggrieved by the decision rendered by the
Regional Trial Court (RTC) in the special civil action for certiorari brought by the
defendant in an ejectment suit to assail the refusal of the Municipal Trial Court (MTC) to
give due course to the latter’s notice of appeal vis-à-vis the judgment in favor of the
plaintiff.

Antecedents

1294
The late Melecio R. Bueno was the tenant-farmer beneficiary of an agricultural land
located in Poblacion, Iba, Zambales. On October 18, 1999, he brought an ejectment suit
in the MTC of Iba against the Municipality of Iba, Province of Zambales, 3claiming that in
1983, the Municipality of Iba had constructed the public market on a substantial portion
of his land without his consent; and that his repeated demands for the Municipality of
Iba to vacate the property had remained unheeded.

After due proceedings, the MTC ruled in favor of Bueno. 4 Thence, the Municipality of Iba
filed its notice of appeal, but the MTC denied due course to the notice of appeal. Thus,
the Municipality of Iba filed its petition for certiorari in the RTC in Iba, Zambales to assail
the denial of due course by the MTC. The case was assigned to Branch 69 which
ultimately granted the petition for certiorari.5redarclaw

The petitioners, who meanwhile substituted Bueno upon his death, moved for the
reconsideration of the judgment granting the petition for certiorari, but the RTC denied
their motion for reconsideration.6redarclaw

Aggrieved, the petitioners appealed to the CA by petition for review under Rule 42 of the
Rules of Court.

As earlier mentioned, the CA “dismissed” the petitioners’ petition for review on October
28, 2003 for not being the proper mode of appeal, observing that the assailed orders
had been issued by the RTC in the exercise of its original jurisdiction. 7redarclaw

The motion for reconsideration of the petitioners was ultimately denied by the
CA.8redarclaw

Issue

Although admitting that their petition for review under Rule 42 was inappropriate, the
petitioners maintain that they substantially complied with the requirements of an
ordinary appeal under Rule 41, and pray that the Court exercise its equity jurisdiction
because a stringent application of the Rules of Court would not serve the demands of
substantial justice.

Ruling of the Court

We affirm.

An appeal brings up for review any error of judgment committed by a court with
jurisdiction over the subject of the suit and over the persons of the parties, or any error
committed by the court in the exercise of its jurisdiction amounting to nothing more than
an error of judgment.9 It was, therefore, very crucial for the petitioners and their counsel
to have been cognizant of the different modes to appeal the adverse decision of the
RTC in the special civil action for certiorari brought by the Municipality of Iba. Such

1295
modes of appeal were well delineated in the Rules of Court, and have been expressly
stated in Section 2, Rule 41 of the Rules of Court since July 1, 1997,10 to
wit:LawlibraryofCRAlaw

ChanRoblesVirtualawlibrary
Section 2. Modes of appeal.—

(a) Ordinary appeal.— The appeal to the Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its original jurisdiction shall be taken by filing
a notice of appeal with the court which rendered the judgment or final order appealed
from and serving a copy thereof upon the adverse party. No record on appeal shall be
required except in special proceedings and other cases of multiple or separate appeals
where the law or these Rules so require. In such cases, the record on appeal shall be
filed and served in like manner.

(b) Petition for review.— The appeal to the Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its appellate jurisdiction shall be by petition
for review in accordance with Rule 42.

(c) Appeal by certiorari.—In all cases where only questions of law are raised or
involved, the appeal shall be to the Supreme Court by petition for review on certiorari in
accordance with Rule 45. (n)

Pursuant to this rule, in conjunction with Section 3 11 and Section 412 of Rule 41, the
petitioners should have filed a notice of appeal in the RTC within the period of 15 days
from their notice of the judgment of the RTC, and within the same period should have
paid to the clerk of the RTC the full amount of the appellate court docket and other
lawful fees. The filing of the notice of appeal within the period allowed by Section 3 sets
in motion the remedy of ordinary appeal because the appeal is deemed perfected as to
the appealing party upon his timely filing of the notice of appeal. It is upon the perfection
of the appeal filed in due time, and the expiration of the time to appeal of the other
parties that the RTC shall lose jurisdiction over the case. 13 On the other hand, the non-
payment of the appellate court docket fee within the reglementary period as required by
Section 4, is both mandatory and jurisdictional, the non-compliance with which is fatal to
the appeal, and is a ground to dismiss the appeal under Section 1, 14 (c), Rule 50 of
the Rules of Court. The compliance with these requirements was the only way by which
they could have perfected their appeal from the adverse judgment of the RTC.

In contrast, an appeal filed under Rule 42 is deemed perfected as to the petitioner upon
the timely filing of the petition for review before the CA, while the RTC shall lose
jurisdiction upon perfection thereof and the expiration of the time to appeal of the other
parties.15redarclaw

The distinctions between the various modes of appeal cannot be taken for granted, or
easily dismissed, or lightly treated. The appeal by notice of appeal under Rule 41 is a
matter or right, but the appeal by petition for review under Rule 42 is a matter of

1296
discretion. An appeal as a matter of right, which refers to the right to seek the review by
a superior court of the judgment rendered by the trial court, exists after the trial in the
first instance. In contrast, the discretionary appeal, which is taken from the decision or
final order rendered by a court in the exercise of its primary appellate jurisdiction, may
be disallowed by the superior court in its discretion. 16 Verily, the CA has the discretion
whether to due course to the petition for review or not. 17redarclaw

The procedure taken after the perfection of an appeal under Rule 41 also significantly
differs from that taken under Rule 42. Under Section 10 of Rule 41, the clerk of court of
the RTC is burdened to immediately undertake the transmittal of the records by verifying
the correctness and completeness of the records of the case; the transmittal to the CA
must be made within 30 days from the perfection of the appeal. 18 This requirement of
transmittal of the records does not arise under Rule 42, except upon order of the CA
when deemed necessary.19redarclaw

As borne out in the foregoing, the petitioners’ resort to the petition for review under Rule
42 was wrong. Hence, the CA did not err in denying due course to the petition for
review.

Yet, the petitioners plead for liberality, insisting that their petition for review, albeit the
wrong mode, was a substantial compliance with the proper mode of appeal.

The plea for liberality is unworthy of any sympathy from the Court. We have always
looked at appeal as not a matter of right but a mere statutory privilege. As the parties
invoking the privilege, the petitioners should have faithfully complied with the
requirements of the Rules of Court. Their failure to do so forfeited their privilege to
appeal. Indeed, any liberality in the application of the rules of procedure may be
properly invoked only in cases of some excusable formal deficiency or error in a
pleading, but definitely not in cases like now where a liberal application would directly
subvert the essence of the proceedings or results in the utter disregard of the Rules of
Court.20redarclaw

Moreover, the petitioners did not give any good reason or cause that could warrant the
relaxation of the rules in their favor. Their bare plea for substantial justice was not
enough ground to suspend the rules. Acceding to their plea would conceal their
shortcomings in procedure, and thereby belittle the lofty objectives of instituting rules of
procedure. We cannot allow that to happen, for doing so would sacrifice the smooth
administration of justice guaranteed to every litigant. We have allowed exceptions only
for the most persuasive of reasons, like relieving the litigant of an injustice not
commensurate with the degree of his thoughtlessness in not complying with the
procedure prescribed.21redarclaw

WHEREFORE, the Court AFFIRMS the resolutions of the Court of Appeals

promulgated on October 28, 2003 and February 10, 2004 in C.A. G.R. SP No. 78706;
and ORDERS the petitioners to pay the costs of suit.

1297
SO ORDERED.cralawlawlibrary

THIRD DIVISION

G.R. No. 190660               April 11, 2011

LAND BANK OF THE PHILIPPINES, Petitioner,

vs.
COURT OF APPEALS and ELIZABETH DIAZ, represented by FRANCISCA P. DE
GUZMAN as Attorney-in-Fact, Respondents.

DECISION

CARPIO MORALES, J.:

Private respondent Elizabeth P. Diaz (Elizabeth) was the registered owner of a parcel of
agricultural land measuring approximately 15 hectares, situated in San Ricardo,
Talavera, Nueva Ecija and covered by Transfer Certificate of Title (TCT) No. 197132.
Ten hectares of the land were expropriated by the Department of Agrarian Reform
(DAR) under Presidential Decree No. 27 and Executive Order No. 228.

The DAR valued the expropriated land (the land) at ₱54,880.59 plus increment of
₱143,041.59 or a total of ₱197,922.18. Not satisfied with the valuation, Elizabeth,
through her attorney-in-fact Francisca P. De Guzman (Francisca), filed a complaint 1 on
November 28, 2001 against the Land Bank of the Philippines (Land Bank) and the DAR
before the Regional Trial Court of Guimba, Nueva Ecija, Branch 33, acting as a Special
Agrarian Court (SAC). The complaint, docketed as Special Agrarian Case No. 1194-G,
prayed that just compensation be fixed at ₱350,000 per hectare or a total of
₱5,250.000.

Upon Elizabeth’s motion, three Commissioners were appointed to determine the just
compensation for the land.

By Decision of June 21, 2006,2 the SAC, adopted the DAR’s valuation on the basis of
average gross production and fixed the just compensation plus increment at
₱19,107.235 per hectare or a total of ₱197,922.29. It held that given the formula used in
Gabatin v. LBP,3 the Commissioner’s Report and the fair market or assessed value of
the land can not be considered in the valuation.

Elizabeth’s motion for reconsideration was denied by Order dated August 31,
2006,4 hence, she elevated the case to the Court of Appeals. 5

Land Bank and the DAR failed to file their appellees’ brief. During the pendency of the
appeal, Land Bank filed a Motion for Leave to Admit Defendant-Appellee[’s] Motion to
Dismiss Appeal,6 maintaining that the appeal should be dismissed because an ordinary

1298
appeal is the wrong remedy, the proper mode being by way of a petition for review,
citing Section 60 of Republic Act No. 6657 or the Comprehensive Agrarian Reform Law.
Hence, Land Bank concluded that the appellate court had no jurisdiction over the case,
the SAC decision having attained finality following Land Bank of the Philippines v. De
Leon7 which held that failure of a party to file the proper remedy within fifteen (15) days
from receipt of notice of the assailed decision renders it final.

By Resolution8 of June 2, 2009, the appellate court denied Land Bank’s motion to
dismiss. It faulted Land Bank for not filing an appellee’s brief as directed, and for filing
the motion to dismiss the appeal after the lapse of 157 days from the last day for filing
the brief.

Hence, the present petition for review on certiorari, 9 Land Bank maintaining that the
SAC Decision had become final and executory and, therefore, the appellate court never
acquired jurisdiction over the appeal filed by Elizabeth, a wrong mode of appeal.

Additionally, Land Bank ascribes bad faith on the part of Elizabeth for, instead of
sending a copy of her motion for reconsideration before the SAC and her subsequent
Notice of Appeal to Land Bank’s counsel of record Atty. Graciela L. Gutierrez at her
address at the Land Bank Field Office in Cabanatuan City, Elizabeth sent them to the
Land Bank’s main office in Malate, Manila where, it points out, the lawyers neither have
control nor possession of the records of the case.

In view of the filing of the present petition, action on Elizabeth’s appeal was held in
abeyance by the appellate court per Resolution dated June 7, 2010. 10

The petition is meritorious.

Indeed, following Land Bank of the Philippines v. De Leon, 11 the proper mode of appeal
from decisions of Regional Trial Courts sitting as SACs is by petition for review under
Rule 42 of the Rules of Court and not through an ordinary appeal under Rule 41. The
Court, in the immediately cited case of Land Bank, observing that "before the instant
case reached us, Land Bank of the Philippines had no authoritative guideline on how to
appeal decisions of SACs considering the seemingly conflicting provisions of Sections
60 and 61 of RA 6657," held that "Sec. 60 of RA 6657 12 clearly and categorically states
that the said mode of appeal (petition for review) should be adopted."

First, there is no conflict between Section[s] 60 and 61 of RA 6657 inasmuch as the

Rules of Court do not at all prescribe the procedure for ordinary appeals as the proper
mode of appeal for decisions of Special Agrarian Courts. Section 61 in fact makes no
more than a general reference to the Rules of Court and does not even mention the
procedure for ordinary appeals in Section 2, Rule 41 of the 1997 Revised Rules of Civil
Procedure as the appropriate method of elevating to the Court of Appeals decisions of
Special method of elevating to the Court of Appeals decisions of Special Agrarian
Courts in eminent domain cases.

1299
Second, the failure to mention Special Agrarian Courts in Section 1 of Rule 43 of the
Revised Rules of Civil Procedure cannot be construed to mean that a petition for review
is not permissible for decisions of the said special courts. In fact, the said Rule is not
relevant to determine whether a petition for review is the proper mode of appeal from
decisions of Regional Trial Courts in agrarian cases, that is, why they act as Special
Agrarian Courts. Section 1 of Rule 43 of the 1997 Revised Rules of Civil Procedure
merely mentions the Court of Tax Appeals and the other different quasi-judicial
agencies without exclusivity in its phraseology. Such omission cannot be construed to
justify the contention that a petition for review is prohibited for decisions on special
agrarian cases inasmuch as the category is for quasi-judicial agencies and tax courts to
which the Regional Trial Courts do not properly belong. Although Supreme Court of
Circular No. 1-91 (precursor to Rule 43 of the Revised Rules of Civil Procedure)
included the decisions of Special Agrarian Courts in the enumeration requiring petition
for review, its non-inclusion later on in Rule 43 merely signifies that it was
inappropriately classified as a quasi-judicial agencies.

What is indisputable is that Section 60 expressly regards a petition for review as the
proper way of appealing decisions of agrarian courts. So far, there is no rule prescribed
by this Court expressly disallowing the said procedure.

Third, far from being in conflict, Section 61 of RA 6657 can easily be harmonized with
Section 60. The reference to the Rules of Court means that the specific rules for
petitions for review in the Rules of Court and other relevant procedures in appeals filed
before the Court of Appeals shall be followed in appealed decisions of Special Agrarian
Courts. Considering that RA 6657 cannot and does not provide the details on how the
petition for review shall be conducted, a suppletory application of the pertinent
provisions of the Rules of Court is necessary. In fact, Section 61 uses the word "review"
to designate the mode by which the appeal is to be effected. The reference therefore by
Section 61 to the Rules of Court only means that the procedure under Rule 42 for
petitions for review is to be followed for appeals in agrarian cases. 13 (italics in the
original; emphasis and underscoring supplied)

The adoption of a petition for review as the mode of appeal is justified in order to
"hasten" the resolution of cases involving issues on just compensation of expropriated
lands under RA 6657. Thus the Court, still in the immediately cited Land Bank case,
pronounced:

The reason why it is permissible to adopt a petition for review when appealing cases
decided by the Special Agrarian Courts in eminent domain case is the need for absolute
dispatch in the determination of just compensation. Just compensation means not only
paying the correct amount but also paying for the land within a reasonable time from its
acquisition. Without prompt payment, compensation cannot be considered "just" for the
property owner is made to suffer the consequences of being immediately deprived of his
land while being made to wait for a decade or more before actually receiving the
amount necessary to cope with his loss. Such objective is more in keeping with the
nature of a petition for review.1avvphi1

1300
Unlike an ordinary appeal, a petition for review dispenses with the filing of a notice of
appeal or completion of records as requisites before any pleading is submitted. A
petition for review hastens the award of fair recompense to deprived landowners for the
government-acquired property, an end not foreseeable in an ordinary appeal. . . .
14
 (Italics in the original; emphasis and underscoring supplied)

Following then the same Land Bank case, resort by Elizabeth to a wrong mode of
appeal was fatal to her cause as it resulted in rendering the decision appealed from final
and executory. Her notice of appeal did not, it bears emphasis, stop the running of the
reglementary period to file a petition for review.

Although appeal is an essential part of our judicial process, it has been held, time and
again, that the right thereto is not a natural right or a part of due process but is merely a
statutory privilege. Thus, the perfection of an appeal in the manner and within the period
prescribed by law is not only mandatory but also jurisdictional and failure of a party to
conform to the rules regarding appeal will render the judgment final and executory.
Once a decision attains finality, it becomes the law of the case irrespective of whether
the decision is erroneous or not and no court - not even the Supreme Court - has the
power to revise, review, change or alter the same. The basic rule of finality of judgment
is grounded on the fundamental principle of public policy and sound practice that, at the
risk of occasional error, the judgment of courts and the award of quasi-judicial agencies
must become final at some definite date fixed by law. 15 (emphasis and underscoring
supplied)

WHEREFORE, the petition is GRANTED. The Resolution of the Court of Appeals dated
June 2, 2009 is SET ASIDE.

The Decision dated June 21, 2006 of the Regional Trial Court of Guimba, Nueva Ecija,
Branch 33 sitting as a Special Agrarian Court in Agr. Case No. 1194-G is deemed final
and executory.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 159792, December 23, 2009 ]
BARANGAY SANGALANG, REPRESENTED BY ITS CHAIRMAN DANTE C.
MARCELLANA, PETITIONER, VS. BARANGAY MAGUIHAN, REPRESENTED BY
ITS CHAIRMAN ARNULFO VILLAREZ, RESPONDENT.

DECISION
PERALTA, J.:
Before this Court is a Petition for Review[1] on certiorari, under Rule 45 of the Rules of
Court, seeking to set aside the October 17, 2002 Decision [2] and August 25, 2003
Resolution[3] of the Court of Appeals (CA) in CA-G.R. CV No. 70021.

1301
The facts of the case:

The controversy has its roots in a barangay jurisdiction dispute between petitioner

Barangay Sangalang and respondent Barangay Maguihan, both situated in Lemery,
Batangas. Specifically, the properties involved in the controversy are those covered by
Tax Declaration Nos. 038-00315, 038-00316, and 038-00317. Petitioner claims the lots
to be within their territorial jurisdiction, whereas respondent maintains that they are
within their territorial boundary.

The case was lodged before the Sangguniang Bayan, which referred it to a hearing
committee. In turn, the committee formed rendered a report [4] to the effect that the
properties in dispute belonged to petitioner. The recommendation was subsequently
affirmed in Resolution No. 75-96[5] passed on November 14, 1996 by the Sangguniang
Bayan of Lemery, Batangas, the pertinent portion of which reads:

Resolved, as it hereby resolves to recognize as it hereby recognizes the old boundaries

of Barangay Maguihan and Sangalang, specifically the areas which are the subject of a
barangay dispute covered by TD Nos. 038-00315, 038-00316 and 038-00317 are within
the territorial jurisdiction of Barangay Sangalang. [6]

Respondent appealed the decision to the Regional Trial Court (RTC) pursuant to
Section 119[7] of the Local Government Code, and the same was docketed as Barangay
Jurisdiction Dispute No. 1.

On April 27, 2000, the RTC rendered a Decision [8] ruling in favor of respondent, the
dispositive portion of which states:

WHEREFORE, Resolution No. 75-96, Series of 1996 of the Sangguniang Bayan of

Lemery, Batangas is hereby reversed and set aside and that Lot Nos. 4469 and 6650,
covered by and embraced in Tax Declaration Nos. 038-00315, 038-00316, and 038-
00317 of the Municipal Assessor of Lemery, Batangas, are hereby adjudged and
declared as within the territorial jurisdiction of appellant Barangay Maguihan and,
consequently, the Municipal Assessor of Lemery, Batangas and the Provincial Assessor
of the Province of Batangas are hereby ordered to make the necessary corrections in its
records implemental of this decision.

SO ORDERED.[9]

Petitioner filed a Motion for Reconsideration, [10] which was, however, denied by the RTC
in an Order[11] dated December 20, 2000.

Aggrieved, petitioner then filed a Notice of Appeal. [12] Later, petitioner filed an Amended
Notice of Appeal.

On October 17, 2002, the CA rendered a Decision [13] dismissing the appeal, the
dispositive portion of which reads:

1302
IN VIEW OF ALL THE FOREGOING, the present appeal is ordered DISMISSED. No
cost.

SO ORDERED.[14]

In dismissing the appeal, the CA ruled that petitioner had availed itself of the wrong
remedy in filing a notice of appeal instead of filing a petition for review under Rule 42 of
the Rules of Court. The pertinent portions of said decision is hereunder reproduced, to
wit:

Given the procedural mandates, the Decision of the Regional Trial Court of Lemery,
Batangas, dated April 27, 2000, was rendered by the Regional Trial Court in the
exercise of its appellate jurisdiction. Appropriately, under Section 22 of Batas
Pambansa Blg. 129, decisions of the Regional Trial Court in the exercise of its appellate
jurisdiction, shall be appealable to the Court of Appeals by way of petitions for review
under Rule 42 of the 1997 Rules of Civil Procedure. [15]

The CA also ruled that if said appeal were to be considered as an ordinary appeal under
Rule 41, it still should be dismissed, because the submitted appellant's brief failed to
contain a subject index and page references to the records requirement in its Statement
of Facts and Case and Argument, as provided for in Section 13 of Rule 44 of the 1997
Rules of Procedure.[16]

Petitioner filed a Motion for Reconsideration, which was, however, denied by the CA in
a Resolution dated August 25, 2003.

Hence, herein petition, with petitioner raising the following assignment of errors, to wit:

A.

THE COURT A QUO COMMITTED GRAVE ABUSE OF DISCRETION IN DISMISSING

THE APPEAL OF PETITIONER SOLELY BASED ON THE RIGID AND STRICT
APPLICATION OF TECHNICALITIES OVERRIDING SUBSTANTIAL JUSTICE, THAT
IS, THE MERIT OF THE PETITIONER'S APPEAL, IN UTTER VIOLATION OF
EXISTING AND WELL SETTLED NUMEROUS DECISIONS OF THIS HONORABLE
SUPREME COURT.

B.

THE DECISION, ANNEX "I", AND THE ORDER, ANNEX "K", RENDERED BY THE
REGIONAL TRIAL COURT OF BATANGAS, BRANCH V, LEMERY, BATANGAS, IN
CIVIL CASE BOUNDARY JURISDICTIONAL DISPUTE NO. 01, REVERSING AND
SETTING ASIDE THE APPEALED RESOLUTION NO. 75-96, SERIES OF 1996, OF
THE SANGGUNIANG BAYAN OF LEMERY, BATANGAS, ARE NULL AND VOID
BECAUSE RESPONDENT MAGUIHAN HAS NOT PERFECTED ITS APPEAL AND
BY REASON THEREOF, THE TRIAL COURT HAS NOT ACQUIRED APPELLATE
JURISDICTION.

1303
 C.

THE TRIAL COURT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING

TO LACK OF OR IN EXCESS OF JURISDICTION IN SUBSTITUTING ITS OWN
JUDGMENT OVER AND ABOVE THE JUDGMENT OF THE SANGGUNIANG BAYAN
OF LEMERY, BATANGAS, WHICH IS SUPPORTED BY SUBSTANTIAL EVIDENCE
LIKEWISE IN DISREGARD OF THE EXISTING AND WELL SETTLED DECISIONS
OF THIS HONORABLE SUPREME COURT.[17]

At the outset, this Court shall first address the procedural issues raised by petitioner.

This Court is bewildered by petitioner's posture to tailor-fit the rules of court to its own
convenience. The first and second assigned errors involve a question of the propriety of
a strict application of the rules. It seems, however, that petitioner has taken a divergent
stand on the said matter depending, on whether the same would be favorable to his
cause. As to his first assigned error, petitioner faults the CA for having strictly applied
the rules of court notwithstanding his choice of the wrong remedy; yet, on the other
hand, as to his second assigned error, petitioner faults the RTC for not having strictly
applied the rules of court to respondent's alleged failure to pay the corresponding
docket fees.

Anent the issue of docket fees, this Court, in Yambao v. Court of Appeals,[18] declared:

x x x Considering the importance and purpose of the remedy of appeal, an essential

part of our judicial system, courts are well-advised to proceed with caution so as not to
deprive a party of the right to appeal, but rather, ensure that every party-litigant has the
"amplest opportunity for the proper and just disposition of his cause, freed from
constraints of technicalities." In line with this policy, we have held that, in appealed
cases, the failure to pay the appellate docket fee does not automatically result in the
dismissal of the appeal x x x

A reading of the records of the case shows that it was only in his Supplemental Motion
for Reconsideration[19] to the RTC Decision that petitioner first raised the issue of non-
payment of docket fees. Respondent, for his part, filed with the RTC an Opposition and
Comment[20] explaining his failure to file the corresponding docket fees, thus:

1. That as regards the claim of appellee that the docket fee has not been paid by the
appellant the same is correct. But the appellant who appealed the case by himself and
being a layman was not aware that a docket fee should be paid in case perfection of an
appeal and no one from the court's personnel reminds (sic) him of this requirement. But
in order not to sacrifice the ends of justice, the appellant is willing to pay the docket fee
and other lawful charges necessary for the perfection of an appeal. [21]

The Order denying petitioner's motion for reconsideration was silent as to the issue of
the non-payment of docket fees; however, this Court deems that the RTC must have
accepted the explanation given by respondent, otherwise, said court would have
dismissed the appeal and reconsidered its decision. The failure to pay docket fees does

1304
not automatically result in the dismissal of an appeal, it being discretionary on the part
of the appellate court to give it due course or not. [22] This Court will then not interfere
with matters addressed to the sound discretion of the RTC in the absence of proof that
the exercise of such discretion was tainted with bias or prejudice, or made without due
circumspection of the attendant circumstances of the case. [23]

In any case, the more pressing issue is whether or not this Court should even entertain
petitioner's appeal.

By filing a Notice of Appeal assailing the RTC Decision, petitioner has availed itself of
the remedy provided for under Rule 41 of the Rules of Court, which provides for the
ordinary mode of appeal. The CA, however, considered petitioner's choice to be the
wrong remedy and, forthwith, dismissed the petition.

After an examination of relevant laws pertinent to herein petition, this Court finds that
the CA was correct in holding that petitioner had availed itself of the wrong remedy.

As correctly observed by the CA, under Section 118 of the Local Government Code, the
jurisdictional responsibility for settlement of boundary disputes between and among
local government units is to be lodged before the proper Sangguniang
Panlungsod or Sangguniang Bayan concerned, if it involves two or more barangays in
the same city or municipality. Under Section 118(e) of the same Code, if there is a
failure of amicable settlement, the dispute shall be formally tried by
the sanggunian concerned and shall decide the same within (60) days from the date of
the certification referred to.[24]

Section 119 of the Local Government Code also provides that the decision of
the sanggunian concerned may be appealed to the RTC having jurisdiction over the
area in dispute, within the time and manner prescribed by the Rules of Court.

In the case at bar, it is clear that when the case was appealed to the RTC, the latter
took cognizance of the case in the exercise of its appellate jurisdiction, not its original
jurisdiction. Hence, any further appeal from the RTC Decision must conform to the
provisions of the Rules of Court dealing with said matter. On this score, Section 2, Rule
41 of the Rules of Court provides:

Sec. 2. Modes of appeal.

(a) Ordinary appeal. - The appeal to the Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its original jurisdiction shall be taken by filing a
notice of appeal with the court which rendered the judgment or final order appealed
from and serving a copy thereof upon the adverse party. No record on appeal shall be
required except in special proceedings and other cases of multiple or separate appeals
where the law or these Rules so require. In such cases, the record on appeal shall be
filed and served in like manner.

(b) Petition for review. - The appeal to the Court of Appeals in cases decided by
1305
the Regional Trial Court in the exercise of its appellate jurisdiction shall be
by petition for review in accordance with Rule 42.[25]

Based on the foregoing, it is apparent that petitioner has availed itself of the wrong
remedy. Since the RTC tried the case in the exercise of its appellate jurisdiction,
petitioner should have filed a petition for review under Rule 42 of the Rules of Court,
instead of an ordinary appeal under Rule 41. The law is clear in this respect.

In any case, as in the past, this Court has recognized the emerging trend towards a
liberal construction of the Rules of Court. In Ong Lim Sing, Jr. v. FEB Leasing and
Finance Corporation,[26] this Court stated:

Courts have the prerogative to relax procedural rules of even the most mandatory
character, mindful of the duty to reconcile both the need to speedily put an end to
litigation and the parties' right to due process. In numerous cases, this Court has
allowed liberal construction of the rules when to do so would serve the demands of
substantial justice and equity. In Aguam v. Court of Appeals, the Court explained:

The court has the discretion to dismiss or not to dismiss an appellant's appeal. It is a
power conferred on the court, not a duty. The "discretion must be a sound one, to be
exercised in accordance with the tenets of justice and fair play, having in mind the
circumstances obtaining in each case." Technicalities, however, must be avoided. The
law abhors technicalities that impede the cause of justice. The court's primary duty is to
render or dispense justice. "A litigation is not a game of technicalities." "Lawsuits, unlike
duels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper
office as an aid to justice and becomes its great hindrance and chief enemy, deserves
scant consideration from courts." Litigations must be decided on their merits and not on
technicality. Every party-litigant must be afforded the amplest opportunity for the proper
and just determination of his cause, free from the unacceptable plea of technicalities.
Thus, dismissal of appeals purely on technical grounds is frowned upon where the
policy of the court is to encourage hearings of appeals on their merits and the rules of
procedure ought not to be applied in a very rigid, technical sense; rules of procedure are
used only to help secure, not override substantial justice. It is a far better and more
prudent course of action for the court to excuse a technical lapse and afford the parties
a review of the case on appeal to attain the ends of justice rather than dispose of the
case on technicality and cause a grave injustice to the parties, giving a false impression
of speedy disposal of cases while actually resulting in more delay, if not a miscarriage of
justice.[27]
Thus, notwithstanding petitioner's wrong mode of appeal, the CA should not have so
easily dismissed the petition, considering that the parties involved are local government
units and that what is involved is the determination of their respective territorial
jurisdictions. In the same vein, the CA's strict reliance on the requirements under
Section 13 of Rule 44 of the 1997 Rules of Procedure relating to subject index and page
references in an appellant's brief is, to stress, putting a premium on technicalities. While
the purpose of Section 13, Rule 44, is to present to the appellate court in the most
helpful light, the factual and legal antecedents of a case on appeal, [28] said rule should
not be strictly applied considering that petitioner's brief before the CA contained only 9

1306
pages, the records of the case consisted only of a few documents and pleadings, and
there was no testimonial evidence.

Moving on to the substantive merits of the case, what it basically involves is adjudication
as to which barangay the lots in dispute belong. Ideally, herein petition should be
remanded to the CA, as the same inherently involves a question of fact. However, since
this case has been pending for almost 13 years now, this Court deems it best to once
and for all settle the controversy.

Petitioner presents the following documents to prove its claim:

1. Copy of a certification from the Office of the Provincial Assessor stating that the
area covered by Tax Declaration Nos. 038-00315, 038-00316 and 038-00317 are all
within the territorial jurisdiction of Barangay Sangalang, Lemery, Batangas; [29]

2. Copies of Tax Declaration Nos. 038-00315, 038-00316 and 038-00317; [30] and

3. Old Map of Barangay Sangalang.[31]

Respondent, for its part, presents the following documents:

1. Certified copy of the cadastral map of the Lemery Cadastre, which was approved
on March 17, 1983 by the Director of Lands, Department of Environment and Natural
Resources;[32] and

2. Certification of the Community Environment and Natural Resources Office,

Department of Environment and Natural Resources dated September 9, 1997. [33]

Article 17, Rule III of the Rules and Regulations Implementing the Local Government
Code of 1991, outlines the procedures governing boundary disputes, including the
documents that should be attached to the petition, to wit:

Art. 17. Procedures for Settling Boundary Disputes. - The following procedures shall
govern the settlement of boundary disputes:

x x xx

(c) Documents attached to petition - The petition shall be accompanied by:

1. Duly authenticated copy of the law or statute creating the LGU or any other document
showing proof of creation of the LGU;

2. Provincial, city, municipal, or barangay map, as the case may be, duly certified by the
LMB.

1307
3. Technical description of the boundaries of the LGUs concerned;

4. Written certification of the provincial, city, or municipal assessor, as the case may be,
as to territorial jurisdiction over the disputed area according to records in custody;

5. Written declarations or sworn statements of the people residing in the disputed area;
and

6. Such other documents or information as may be required by the sanggunian hearing

the dispute.

The RTC observed that neither of the parties satisfied the requirement that all the
enumerated documents must be attached to the petition. Hence, like the RTC, this
Court is left with no other option but to select which between the documents presented
by the parties carries greater weight in proving its claim. The documents presented by
petitioner were sourced from the tax assessor's office, whereas the documents
presented by respondent were sourced from the land management bureau. The answer
is very apparent and needs little discussion.

To this Court's mind, the presence of the cadastral map, which was approved by the
Director of Lands, should be given more weight than the documents sourced by
petitioner from the assessor's office. Said map was approved on March 17, 1986, which
was approximately 10 years before the controversy in hand developed. Hence, the
same should be controlling in the absence of proof that such document is invalid or
inaccurate. As a matter of fact, notwithstanding the hearing committee's
recommendation to rule in favor of petitioner, the committee itself stated in its report that
the cadastral map submitted by respondent was authentic. [34]

Moreover, in ruling against petitioner, the RTC also gave greater weight to the
documents submitted by respondent, thus:

x x x This Court is mindful of the fact and takes judicial notice that the Land
Management Bureau is manned by geodetic engineers with sufficient expertise and is
the cognizant agency of government charged with the responsibility of matters
respecting surveys of land. This Court likewise takes into consideration that the duty of
the provincial and municipal assessors are primarily assessments of taxes. [35]

This Court shares the view of the RTC. It is undisputed that the Land Management
Bureau is the principal government agency tasked with the survey of lands, and thus,
more weight should be given to the documents relating to its official tasks which are
presumed to be done in the ordinary course of business. Between a geodetic engineer
and a tax assessor, the conclusion is inevitable that it is the former's certification as to
the location of properties in dispute that is controlling, absent any finding of abuse of
discretion. As correctly observed by respondent and the RTC, the duty of provincial and

1308
municipal assessors is primarily the assessment of taxes and not the survey of lands.

Lastly, petitioner alludes to a petition/resolution allegedly of persons residing in the

properties in dispute to the effect they are under the jurisdiction of petitioner. On this
note, this Court agrees with the observation of the RTC that the determination as to
whether the properties in dispute are within a certain jurisdiction is not a decision to be
made by the populace, to wit:

x x x In simple language, the population follows the territory and not vice versa. It is the
determination of the ambit and sphere of the land area as culled in the approved
barangay map that determines the jurisdiction of the barangay and not the decision of
the populace. To allow the latter will open endless litigation concerning disputes of
jurisdiction.[36]

In sum, this Court does not belittle the documents presented by petitioner or the duties
of the provincial and municipal assessors; however, since the documents presented by
respondent are sourced from the very agency primarily tasked with the survey of lands,
more credence must be given to the same in the absence of proof that would cast doubt
on the contents thereof.

WHEREFORE, premises considered, the petition is PARTLY GRANTED. The October

17, 2002 Decision and August 25, 2003 Resolution of the Court of Appeals in CA-G.R.
CV No. 70021 are hereby REVERSED and SET ASIDE. The April 27, 2000 Decision
and December 20, 2000 Order of the Regional Trial Court, Lemery, Batangas, in
Barangay Jurisdiction Dispute No. 1, are hereby AFFIRMED.

SO ORDERED.

RULE 43. APPEAL FROM QUASI-JUDICIAL AGENCIES

FIRST DIVISION
[ G.R. No. 202877, December 09, 2015 ]
NARRA NICKEL MINING AND DEVELOPMENT CORPORATION, TESORO MINING
AND DEVELOPMENT, INC., AND MCARTHUR MINING, INC., PETITIONERS, VS.
REDMONT CONSOLIDATED MINES CORPORATION, RESPONDENT.

DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari[1] are the Decision[2] dated February 23,
2012 and the Resolution[3] dated July 27, 2012 of the Court of Appeals (CA) in CA-G.R.
SP No. 120409, which affirmed the Decision[4] dated April 6, 2011 and the
Resolution[5] dated July 6, 2011 of the Office of the President (OP) in O.P. Case No. 10-
E-229 and, among others, ordered the cancellation and/or revocation of the Financial or
Technical Assistance Agreement[6] (FTAA) executed between the Republic of the

1309
Philippines (Republic) and herein petitioners Narra Nickel Mining and Development
Corporation, Tesoro Mining and Development, Inc., and Me Arthur Mining, Inc.

The Facts

On November 8, 2006, respondent Redmont Consolidated Mines Corporation

(Redmont) filed an Application for an Exploration Permit [7] (EP) over mining areas
located in the Municipalities of Rizal, Bataraza, and Narra, Palawan. After an inquiry
with the Department of Environment and Natural Resources (DENR), Redmont learned
that said areas were already covered by existing Mineral Production Sharing
Agreements (MPSA) and an EP, which were initially applied for by petitioners'
respective predecessors-in-interest with the Mines and Geosciences Bureau (MGB),
Region IV-B, Office of the DENR.[8]

In particular, petitioner Narra Nickel Mining and Development Corporation (Narra Nickel)
acquired the application of MPSA-IV-I-12, covering an area of 3,277 hectares (ha.) in
Barangays Calategas and San Isidro, Narra, Palawan, from Alpha Resources and
Development Corporation and Patricia Louise Mining and Development Corporation. On
March 30, 2006, or prior to Redmont's EP application, Narra Nickel had converted its
MPSA into an FTAA application, denominated as AFTA-IVB-07. [9]

For its part, petitioner Tesoro Mining and Development, Inc. (Tesoro) acquired the
application of MPSA-AMA-IVB-154 (formerly EPA-IVB-47), covering an area of 3,402
has. in Barangays Malinao and Princesa Urduja, Narra, Palawan, from Sara Marie
Mining, Inc. (SMMI). Similar to Narra Nickel, Tesoro sought the conversion of its MPSA
into an FTAA, but its application therefor, denominated as AFTA-IVB-08, was filed
subsequent to Redmont's EP application, or sometime in May 2007. [10]

In the same vein, petitioner McArthur Mining, Inc. (McArthur) acquired the application of
MPSA-AMA-IVB-153, as well as EPA-IVB-44, covering the areas of 1,782 has. and
3,720 has. in Barangays Sumbiling and Malatagao, Bataraza, Palawan, respectively,
from Madridejos Mining Corporation, an SMMI assignee. McArthur also filed an
application for FTAA conversion in May 2007, denominated as AFTA-IVB-09. [11]

Upon the recommendation of then DENR Secretary Jose L. Atienza, Jr., through a
memorandum[12] dated November 9, 2009, petitioners' FTAA applications were all
approved on April 5, 2010. Consequently, on April 12, 2010, the Republic - represented
by then Executive Secretary Leandro R. Mendoza, acting by authority of then President
Gloria Macapagal-Arroyo - and petitioners executed an FTAA [13] covering the subject
areas, denominated as FTAA No. 05-2010-IVB (MIMAROPA). [14]

Prior to the grant of petitioners' applications for FTAA conversion, and the execution of
the above-stated FTAA, Redmont filed on January 2, 2007 three (3) separate

1310
petitions[15] for the denial of petitioners' respective MPSA and/or EP applications before
the Panel of Arbitrators (POA) of the DENR-MGB, docketed as DENR Case Nos. 2007-
01,[16] 2007-02,[17] and 2007-03.[18] Redmont's primary argument was that petitioners
were all controlled by their common majority stockholder, MBMI Resources, Inc. (MBMI)
- a 100% Canadian-owned corporation[19] - and, thus, disqualified from being grantees of
MPSAs and/or EPs. The matter essentially concerning the propriety of denying
petitioners' MPSAs and/or EPs in view of their nationality had made it all the way to this
Court, and was docketed as G.R. No. 195580.[20] In the Court's April 21, 2014 Decision,
[21]
 petitioners were declared to be foreign corporations under the application of the
"Grandfather Rule." Petitioners moved for the reconsideration of the said Decision,
which was, however, denied in the Court's Resolution dated January 28, 2015.

Meanwhile, Redmont separately sought the cancellation and/or revocation of the

executed FTAA through a Petition[22] dated May 7, 2010 (May 7, 2010 Petition) filed
before the Office of the President (OP), docketed as O.P. Case No. 10-E-229. Redmont
asserted, among others, that the FTAA was highly anomalous and irregular, considering
that petitioners and their mother company, MBMI, have a long history of violating and
circumventing the Constitution and other laws, due to their questionable activities in the
Philippines and abroad.[23]

Petitioners opposed Redmont's petition through a motion to dismiss, contending that:

(a) there is no rule or law which grants an appeal from a memorandum of a department
secretary; (b) the appeal was filed beyond the reglementary period; (c) the appeal was
not perfected because copies of the appeal were not properly served on them; and (d)
Redmont is not a real party-in-interest. [24]

The OP Ruling

In a Decision[25] dated April 6, 2011, the OP granted Redmont's petition. It declared that

the OP has the authority to cancel the FTAA because the grant of exclusive power to
the President of the Philippines to enter into agreements, including FTAAs under
Republic Act No. (RA) 7942,[26] or the "Philippine Mining Act of 1995," carries with it the
authority to cancel the same.[27] Thus, finding, inter alia, that petitioners misrepresented
that they were Filipino corporations qualified to engage in mining activities, [28] the OP
cancelled and/or revoked the said FTAA, and, in turn, gave due course to Redmont's
EP application.[29]

Dissatisfied, petitioners appealed to the CA.[30]

The CA Ruling

In a Decision[31] dated February 23, 2012, the CA affirmed the OP Ruling. It found no

procedural error in the OP's action on the FTAA, holding that it was done in accordance

1311
with the President's power of control over the executive departments. [32] As to its merits,
the CA ruled that the Republic, as represented by the OP, had the right to cancel the
FTAA, even without judicial permission, because paragraph a (iii), Section
17.2[33] thereof provides that such agreement may be cancelled by either party on the
ground of "any intentional and materially false statement or omission of facts by a
[p]arty."[34] Accordingly, it sustained the OP's finding that petitioners committed
misrepresentations which warranted the cancellation and/or revocation of the FTAA. [35]

Unperturbed, petitioners filed on March 14, 2012 a motion for reconsideration, [36] which
was denied in a Resolution[37] dated July 27, 2012; hence, this petition.

The Issue Before the Court

The main issue for the Court's resolution is whether or not the CA correctly affirmed on
appeal the OP's cancellation and/or revocation of the FTAA.

The Court's Ruling

The petition is meritorious.

I. ON JURISDICTION.

It is a fundamental rule that the question of jurisdiction may be tackled motu proprio on

appeal even if none of the parties raised the same. [38] The reason for the rule is that a
court without jurisdiction cannot render a valid judgment. [39]

Cast against this light, the Court finds that the CA improperly took cognizance of the
case on appeal under Rule 43 of the Rules of Court for the reason that the OP's
cancellation and/or revocation of the FTAA was not one which could be classified as an
exercise of its quasi-judicial authority, thus negating the CA's jurisdiction over the case.
The jurisdictional parameter that the appeal be taken against a judgment, final order,
resolution or award of a "quasi-judicial agency in the exercise of its quasi-judicial
functions" is explicitly stated in Section 1 of the said Rule:
Rule 43

Appeals from the Court of Tax Appeals and Quasi-Judicial Agencies to the Court of
Appeals

Section 1. Scope. — This Rule shall apply to appeals from judgments or final orders of
the Court of Tax Appeals and from awards, judgments, final orders or resolutions of or
authorized by any quasi-judicial agency in the exercise of its quasi-judicial
functions. Among these agencies are the Civil Service Commission, Central Board of
Assessment Appeals, Securities and Exchange Commission, Office of the President,
1312
Land Registration Authority, Social Security Commission, Civil Aeronautics Board,
Bureau of Patents, Trademarks and Technology Transfer, National Electrification
Administration, Energy Regulatory Board, National Telecommunications Commission,
Department of Agrarian Reform under Republic Act No. 6657, Government Service
Insurance System, Employees Compensation Commission, Agricultural Inventions
Board, Insurance Commission, Philippine Atomic Energy Commission, Board of
Investments, Construction Industry Arbitration Commission, and voluntary arbitrators
authorized by law. (Emphases and underscoring supplied)
Quasi-judicial or administrative adjudicatory power is the power of the administrative
agency to adjudicate the rights of persons before it. The administrative body
exercises its quasi-judicial power when it performs in a judicial manner an act which is
essentially executive or administrative in nature, where the power to act in such manner
is incidental to or reasonably necessary for the performance of the executive or
administrative duty entrusted to it.[40]

"'Adjudicate' as commonly or popularly understood, means to adjudge, arbitrate, judge,

decide, determine, resolve, rule on, or settle. The dictionary defines the term as 'to
settle finally (the rights and duties of parties to a court case) on the merits of issues
raised: x x x to pass judgment on: settle judicially: x x x act as judge.'" [41] "In the legal
sense, 'adjudicate' means: '[t]o settle in the exercise of judicial authority. To determine
finally. Synonymous with adjudge in its strictest sense;' and 'adjudge' means: '[t]o pass
on judicially, to decide, settle, or decree, or to sentence or condemn, x x x. Implies a
judicial determination of a fact, and the entry of a judgment.'" [42]

The OP's cancellation and/or revocation of the FTAA is obviously not an

"adjudication" in the sense above-described. It cannot be likened to the judicial
function of a court of justice, or even a quasi-judicial agency or office. The OP - at the
instance of Redmont at that - was exercising an administrative function pursuant to the
President's authority[43] to invoke the Republic's right under paragraph a (iii), Section
17.2 of the FTAA which reads:
17.2 Termination
a. Grounds. This Agreement may be terminated, after due process, for any of the
following causes:
xxxx

iii. any intentional and materially false statement or omission of facts by a Party; [44]
To contextualize the exercise, a brief discussion on the nature and legal parameters of
an FTAA is apropos.

The basis for the State, through the President, to enter into an FTAA with another
contracting party is found in the fourth paragraph of Section 2, Article XII of the 1987
Constitution:

1313
Section 2. x x x.

xxxx

The President may enter into agreements with foreign-owned corporations involving

either technical or financial assistance for large-scale exploration, development,
and utilization of minerals, petroleum, and other mineral oils according to the
general terms and conditions provided by law, based on real contributions to the
economic growth and general welfare of the country. In such agreements, the State
shall promote the development and use of local scientific and technical resources.
(Emphases supplied)
An FTAA is explicitly characterized as a contract in Section 3 (r) of RA 7942:
Section 3. Definition of Terms. - As used in and for purposes of this Act, the following
terms, whether in singular or plural, shall mean: :

xxxx
 
(r) "Financial or technical assistance agreement" means a contract involving financial
or technical assistance for large-scale exploration, development, and utilization of
mineral resources. (Emphasis and underscoring supplied)
Since an FTAA is entered into by the President on the State's behalf, and it involves a
matter of public concern in that it covers the large-scale exploration, development, and
utilization of mineral resources, it is properly classified as a government or public
contract, which is, according to jurisprudence, "generally subject to the same laws and
regulations which govern the validity and sufficiency of contracts between private
individuals."[45] In Sargasso Construction & Development Corporation v. Philippine Ports
Authority:[46]
A government or public contract has been defined as a contract entered into by state
officers acting on behalf of the state, and in which the entire people of the state are
directly interested. It relates wholly to matter of public concern, and affects private rights
only so far as the statute confers such rights when its provisions are carried out by the
officer to whom it is confided to perform.

A government contract is essentially similar to a private contract contemplated under

the Civil Code. The legal requisites of consent of the contracting parties, an object
certain which is the subject matter, and cause or consideration of the obligation must
likewise concur. Otherwise, there is no government contract to speak of.

xxxx

1314
x x x. Contracts to which the government is a party are generally subject to the
same laws and regulations which govern the validity and sufficiency of contracts
between private individuals. A government contract, however, is perfected only upon
approval by a competent authority, where such approval is required. [47] (Emphasis and
underscoring supplied)
Similar to private contracts, an FTAA involves terms, conditions, and warranties to be
followed by the contracting parties, which are expressly stated in Section 35 [48] of RA
7942. Likewise, Section 36 of RA 7942 provides that an FTAA goes through negotiation:
Section 36. Negotiations. - A financial or technical assistance agreement shall be
negotiated by the Department and executed and approved by the President. The
President shall notify Congress of all financial or technical assistance agreements within
thirty (30) days from execution and approval thereof.
In La Bugal-Oposa Tribal Association, Inc. v. Ramos[49] (La Bugal-Oposa), the Court
differentiated an FTAA from a license. It pronounced that an FTAA involves contract or
property rights, which merit protection by the due process clause of the Constitution;
as such, it may not be revoked or cancelled in a blink of an eye, in contrast, say for
instance, to a timber license, else the contractor be unduly deprived of its investments,
which are ultimately intended to contribute to the general welfare of the people:
3. Citing Oposa v. Factoran[,] Jr. [G.R. No. 101083, July 30, 1993, 224 SCRA 792],
Justice Morales claims that a service contract is not a contract or property right which
merits protection by the due process clause of the Constitution, but merely a license or
privilege which may be validly revoked, rescinded or withdrawn by executive action
whenever dictated by public interest or public welfare.

Oposa cites Tan v. Director of Forestry and Ysmael v. Deputy Executive Secretary [210

Phil. 244 (1983)] as authority. The latter cases dealt specifically with timber licenses
only. Oposa allegedly reiterated that a license is merely a permit or privilege to do what
otherwise would be unlawful, and is not a contract between the authority, federal, state
or municipal, granting it and the person to whom it is granted; neither is it property or a
property right, nor does it create a vested right; nor is it taxation. Thus this Court held
that the granting of license does not create irrevocable rights, neither is it property or
property rights.

Should Oposa be deemed applicable to the case at bar, on the argument that natural
resources are also involved in this situation? We do not think so. A grantee of a timber
license, permit or license agreement gets to cut the timber already growing on the
surface; it need not dig up tons of earth to get at the logs. In a logging concession, the
investment of the licensee is not as substantial as the investment of a large-scale
mining contractor. If a timber license were revoked, the licensee packs up its gear and
moves to a new area applied for, and starts over; what it leaves behind are mainly the
trails leading to the logging site.

1315
In contrast, the mining contractor will have sunk a great deal of money (tens of millions
of dollars) into the ground, so to speak, for exploration activities, for development of the
mine site and infrastructure, and for the actual excavation and extraction of minerals,
including the extensive tunneling work to reach the ore body. The cancellation of the
mining contract will utterly deprive the contractor of its investments ( i.e., prevent
recovery of investments), most of which cannot be pulled out.

To say that an FTAA is just like a mere timber license or permit and does not
involve contract or property rights which merit protection by the due process
clause of the Constitution, and may therefore be revoked or cancelled in the blink
of an eye, is to adopt a well-nigh confiscatory stance; at the very least, it is
downright dismissive of the property rights of businesspersons and corporate
entities that have investments in the mining industry-! whose investments,
operations and expenditures do contribute to the general welfare of the people,
the coffers of government, and the strength of the economy. Such a
pronouncement will surely discourage investments (local and foreign) which are
critically needed to fuel the engine of economic growth and move this country out of the
rut of poverty. In sum, Oposa is not applicable.[50] (Emphases and underscoring
supplied)
In La Bugal-B'laan, the financial interest of the contractor party to an FTAA was
recognized by the Court as follows; hence, the need for its fair protection:
[T]he foreign contractor is in the game precisely to make money. In order to come
anywhere near profitability, the contractor must first extract and sell the mineral ore. In
order to do that, it must also develop and construct the mining facilities, set up its
machineries and equipment and dig the tunnels to get to the deposit. The contractor is
thus compelled to expend funds in order to make profits. If it decides to cut back on
investments and expenditures, it will necessarily sacrifice the pace of development and
utilization; it will necessarily sacrifice the amount of profits it can make from the mining
operations. In fact, at certain less-than-optimal levels of operation, the stream of
revenues generated may not even be enough to cover variable expenses, let alone
overhead expenses; this is a dismal situation anyone would want to avoid. In order to
make money, one has to spend money. This truism applies to the mining industry as
well.[51] (Underscoring supplied)
Meanwhile, in Celestial Nickel Mining Exploration Corporation v. Macroasia
Corporation[52] (Celestial), the Court answered the question on who between the DENR
Secretary, as one of the functionaries of the President under the Executive Department,
and the POA had the authority to cancel mineral agreements. In Celestial, it was
pronounced that the DENR Secretary, and not the POA, has the jurisdiction to cancel
existing mineral lease contracts or mineral agreements. "The power of the DENR
Secretary to cancel mineral agreements emanates from his administrative authority,

1316
supervision, management, and control over mineral resources under [Section 2,]
Chapter I, Title XIV of Book IV of the Revised Administrative Code of 1987[:]" [53]
Section 2. Mandate. - (1) The Department of Environment and Natural Resources shall
be primarily responsible for the implementation of the foregoing policy.

(2) It shall, subject to law and higher authority, be in charge of carrying out the
State's constitutional mandate to control and supervise the exploration,
development, utilization, and conservation of the country's natural
resources. (Emphasis supplied)
"[And] [d]erived from the broad and explicit powers of the DENR and its Secretary under
the Administrative Code of 1987 is the power to approve mineral agreements and
necessarily to cancel or cause to cancel said agreements." [54]

In fact, Sections 8 and 29 of RA 7942 confer to the DENR Secretary specific authority
over mineral agreements:
Section 8. Authority of the Department. - The Department shall be the primary
government agency responsible for the conservation, management, development, and
proper use of the State's mineral resources including those in reservations, watershed
areas, and lands of the public domain. The Secretary shall have the authority to
enter into mineral agreements on behalf of the Government upon the
recommendation of the Director, promulgate such rules and regulations as may be
necessary to implement the intent and provisions of this Act.

Section 29. Filing and approval of Mineral Agreements. - x x x.

The filing of a proposal for a mineral agreement shall give the proponent the prior right
to areas covered by the same. The proposed mineral agreement will be approved
by the Secretary and copies thereof shall be submitted to the President. Thereafter,
the President shall provide a list to Congress of every approved mineral agreement
within thirty (30) days from its approval by the Secretary. (Emphases supplied)
In this relation, the Court, in Celestial, elaborated that a petition for the cancellation of
an existing mineral agreement covering an area applied for by an applicant based on
the alleged violation of any of the terms thereof, is not a 'dispute' involving a mineral
agreement under [Section] 77 (b) of RA 7942, [55] which lists down the cases which fall
within the jurisdiction of the POA:
Section. 77. Panel of Arbitrators. - x x x. Within thirty (30) working days, after the
submission of the case by the parties for decision, the panel shall have exclusive and
original jurisdiction to hear and decide on the following:
(a) Disputes involving rights to mining areas;

1317
(b) Disputes involving mineral agreements or permits;
(c) Disputes involving surface owners, occupants and claimholders/concessionaires;
and
(d) Disputes pending before the Bureau and the Department at the date of the
effectivity of this Act.
This is because such matter "does not pertain to a violation by a party of the right of
another. The applicant [who seeks cancellation] is not a real party-in-interest as he does
not have a material or substantial interest in the mineral agreement but only a
prospective or expectant right or interest in the mining area. He has no legal right to
such mining claim and hence no dispute can arise between the applicant and the
parties to the mineral agreement."[56] "[R]A 7942 x x x confers exclusive and primary
jurisdiction on the DENR Secretary to approve mineral agreements, which is purely an
administrative function within the scope of his powers and authority."[57]

With the legal treatment and parameters of an FTAA in mind, it becomes apparent that
the OP's cancellation and/or revocation of the FTAA is an exercise of a contractual
right that is purely administrative in nature, and thus, cannot be treated as an
adjudication, again, in the sense above-discussed. As one of the contracting parties to
the FTAA, the OP could not have adjudicated on the matter in which it is an interested
party, as in a court case where rights and duties of parties are settled before an
impartial tribunal. In a very loose sense, the OP's cancellation/revocation may be taken
as a "decision" but only to the extent of considering it as its final administrative action
internal to its channels. It is not one for which we should employ the conventional import
of the phrase "final and executory," as accorded to proper judicial/quasi-judicial
decisions, and its concomitant effect of barring further recourse of a party. To reiterate,
being a government or public contract, the FTAA is subject to fundamental contract
principles, one of which is the principle of mutuality of contracts which would definitely
be violated if one were to accept the view that the OP, a contracting party, can
adjudicate on the contract's own validity. The principle of mutuality of contracts is
expressed in Article 1308 of the Civil Code, which provides:
Article 1308. The contracts must bind both contracting parties; its validity or compliance
cannot be left to the will of one of them.
At this juncture, the Court finds it fitting to clarify that Redmont's participation in these
proceedings does not, by and of itself, make the OP's cancellation/revocation quasi-
judicial. Strangely enough, Redmont's May 7, 2010 Petition was, in fact, taken
cognizance by the OP albeit having been filed outside the existing state of procedure on
FTAA conversion and cancellation. A brief run-through of these procedures would prove
instructive.

A. Conversion.

1318
Under Section 45 of DENR Administrative Order No. 2010-21, otherwise known as the
"Revised Implementing Rules and Regulations of RA 7942, or the Philippine Mining Act
of 1995" (RIRR), mining contractor may opt to convert totally or partially his existing
mineral agreement, e.g., an MPSA to an FTAA, by filing a Letter of Intent with the MGB,
copy furnished the Regional Office where the area covered by said mineral agreement
is located. Within sixty (60) days from the filing of the Letter of Intent, the contractor
must comply with the requirements for the grant of an FTAA laid down in Sections 49 to
69, Chapter VII of the RIRR, as well as pay the conversion fee. The application for
conversion shall be evaluated and eventually, approved upon compliance. Note that the
term of the FTAA arising from such conversion shall be equivalent to the remaining
period of its predecessor-mineral agreement.

Section 55 of the same DENR issuance requires a publication/posting/radio

announcement of an FTAA application. Any adverse claim, protest, or opposition to the
said FTAA should be filed directly to the Regional Office, Community Environment and
Natural Resources Office, or Provincial Environment and Natural Resources Office
concerned, within ten (10) days from the date of publication or from the last date of
posting/radio announcement. The said adverse claim, protest, or opposition shall then
be resolved by the POA of the DENR, whose ruling may then be appealed to the proper
tribunals.[58] To this, it bears pointing out that Section 55 explicitly exempts "previously
published valid and existing mining claims or FTAA applications originating from
Exploration Permits that have undergone the [publication requirement]" from the
aforesaid publication requirement.

From the foregoing, it may be inferred that the only time that third parties, i.e., an entity
other than the contractor/applicant, may pose an objection to an FTAA application is
during the ten (10)-day window period given by Section 55 of the RIRR. However, this
window period is only available in instances of "fresh" FTAA applications (meaning, that
the same covers an area previously uncovered by any existing mineral agreements
and/or FTAAs). Differently, in instances of conversion, i.e., of an existing MPSA to an
FTAA, publication is not required as such would have already been undertaken during
the application of the original mineral agreement, pursuant to the exemption expressly
contained in Section 55 of the RIRR. Absent any form of protest procedure at least
under the prevailing rules, it appears that the process merely involves the concerned
executive agency directly evaluating, i.e., screening and checking, whether the
contractor had complied with the pertinent requisites necessary for it to enter into a'valid
FTAA with the Republic. If the requisites have been met, the agency would then
endorse the conversion application to the topmost executive levels, i.e., the DENR
Secretary, all culminating in the President's, through his/her duly appointed
agents/representatives, i.e., the Executive Secretary, execution of the FTAA for and in
behalf of the Republic, with the contractor as counterparty. Following these premises,
Redmont's opposition to petitioner's application for FTAA conversion was actually made
beyond the prescribed course of procedure.

1319
B. Cancellation.

Section 68 of the RIRR provides that the cancellation/revocation/termination of an FTAA

may only be done after due process. In relation, Section 77 of RA 7942, to reiterate,
provides that the POA has the exclusive and original jurisdiction to hear and decide
mining disputes:
Section. 77. Panel of Arbitrators. - x x x. Within thirty (30) working days, after the
submission of the case by the parties for decision, the panel shall have exclusive and
original jurisdiction to hear and decide on the following:
(a) Disputes involving rights to mining areas;
(b) Disputes involving mineral agreements or permits;
(c) Disputes involving surface owners, occupants and claimholders/concessionaires;
and
(d) Disputes pending before the Bureau and the Department at the date of the
effectivity of this Act.
In Gonzales v. Climax Mining Ltd. (Gonzales),[59] it was clarified that "a mining dispute is
a dispute involving (a) rights to mining areas, (b) mineral agreements, FTAAs, or
permits, and (c) surface owners, occupants and claimholders/concessionaires." [60] Note
that "the [POA's] jurisdiction is limited only to those mining disputes which raise
questions of fact or matters requiring the application of technological knowledge and
experience."[61] Thus, the Court, in Gonzales, ruled that the POA is bereft of any
jurisdiction over a complaint for declaration of nullity and/or termination of the
subject contracts on the ground of fraud, oppression and violation of the
Constitution, viz.:
We now come to the meat of the case which revolves mainly around the question of
jurisdiction by the Panel of Arbitrators: Does the Panel of Arbitrators have jurisdiction
over the complaint for declaration of nullity and/or termination of the subject contracts
on the ground of fraud, oppression and violation of the Constitution? This issue may be
distilled into the more basic question of whether the Complaint raises a mining dispute
or a judicial question.

A judicial question is a question that is proper for determination by the courts, as

opposed to a moot question or one properly decided by the executive or legislative
branch. A judicial question is raised when the determination of the question involves the
exercise of a judicial function; that is, the question involves the determination of what
the law is and what the legal rights of the parties are with respect to the matter in
controversy.

xxxx
1320
x x x. Whether the case involves void or voidable contracts is still a judicial question. It
may, in some instances, involve questions of fact especially with regard to the
determination of the circumstances of the execution of the contracts. But the resolution
of the validity or voidness of the contracts remains a legal or judicial question as it
requires the exercise of judicial function. It requires the ascertainment of what laws are
applicable to the dispute, the interpretation and application of those laws, and the
rendering of a judgment based thereon. Clearly, the dispute is not a mining conflict. It is
essentially judicial. The complaint was not merely for the determination of rights under
the mining contracts since the very validity of those contracts is put in issue. [62]
The Court added that although mining rights may be raised as corollary issues, the
POA still has no jurisdiction to resolve cases which mainly involve a
determination of a contract's validity. Neither too would the mere involvement of an
FTAA turn a case into a mining dispute that would fall under the POA's jurisdiction:
The Complaint is not about a dispute involving rights to mining areas, nor is it a dispute
involving claimholders or concessionaires. The main question raised was the validity of
the Addendum Contract, the FTAA and the subsequent contracts. The question as to
the rights of petitioner or respondents to the mining area pursuant to these contracts, as
well as the question of whether or not petitioner had ceded his mining claims in favor of
respondents by way of execution of the questioned contracts, is merely corollary to the
main issue, and may not be resolved without first determining the main issue.

The Complaint is also not what is contemplated by [RA] 7942 when it says the dispute
should involve FTAAs. The Complaint is not exclusively within the jurisdiction of the
Panel of Arbitrators just because, or for as -long as, the dispute involves an FTAA.
The Complaint raised the issue of the constitutionality of the FTAA, which is definitely a
judicial question. The question of constitutionality is exclusively within the jurisdiction of
the courts to resolve as this would clearly involve the exercise of judicial power. The
Panel of Arbitrators does not have jurisdiction over such an issue since it does not
involve the application of technical knowledge and expertise relating to mining. x x x. [63]
In this case, the OP cancelled/revoked the subject FTAA based on its finding that
petitioners misrepresented, inter alia, that they were Filipino corporations qualified to
engage in mining activities. Again, this is obviously an administrative exercise of a
contractual right under paragraph a (iii), Section 17.2 of the FTAA, which finds legal
basis in Section 99 of RA 7942 that states: "[a]ll statements made in the exploration
permit, mining agreement and financial or technical assistance shall be considered as
conditions and essential parts thereof x x x." A material misrepresentation, if so found
by ordinary courts of law as enunciated in Gonzales upon a case duly instituted
therefor, would then constitute a breach of a contractual condition that would entitle the
aggrieved party to cancel/revoke the agreement. [64]

1321
The scenario at hand does not involve a complaint for cancellation/revocation
commenced before the ordinary courts of law. Hence, Redmont's recourse to the OP -
that, on the assumption that it even had the legal standing to oppose an already
executed FTAA which it was not a party to - was, by and of itself, done outside the
correct course procedure. Observe that RA 7942 and its RIRR do not state that the OP
has the power to take cognizance of a quasi-judicial proceeding involving a petition for
cancellation of an existing FTAA. In fact, there is even no mention of a petition for
cancellation or revocation to be taken by a third party before the OP. While it may be
said that the OP has administrative control or supervision over its subordinate agencies,
such as the POA,[65] again the jurisdiction of that body pertains only to mining disputes,
and not .those which involve judicial questions cognizable by the ordinary courts of law.

Thus, at least with respect to cases affecting an FTAA's validity, the Court holds that the
OP has no quasi-judicial power to adjudicate the propriety of its cancellation/revocation.
At the risk of belaboring the point, the FTAA is a contract to which the OP itself
represents a party, i.e., the Republic. It merely exercised a contractual right by
cancelling/revoking said agreement, a purely administrative action which should not be
considered quasi-judicial in nature. Thus, absent the OP's proper exercise of a quasi-
judicial function, the CA had no appellate jurisdiction over the case, and its Decision is,
perforce, null and void. With this, it is unnecessary to delve into the other ancillary
issues raised in the course of these proceedings.

WHEREFORE, the petition is GRANTED. The Decision dated February 23, 2012 and
the Resolution dated July 27, 2012 of the Court of Appeals in CA-G.R. SP No. 120409
are hereby declared NULL and VOID due to lack of jurisdiction. This pronouncement is
without prejudice to any other appropriate remedy the parties may take against each
other.

SO ORDERED.
THIRD DIVISION
[ G.R. No. 191705, March 07, 2016 ]
BASIANA MINING EXPLORATION CORPORATION, BASIANA MINERALS
DEVELOPMENT CORPORATION AND RODNEY O. BASIANA, IN HIS OWN
PERSONAL CAPACITY AS PRESIDENT AND DULY AUTHORIZED
REPRESENTATIVE OF BASIANA MINING EXPLORATION CORPORATION AND
BASIANA MINING DEVELOPMENT CORPORATION, PETITIONERS, VS.
HONORABLE SECRETARY OF THE DEPARTMENT OF ENVIRONMENT AND
NATURAL RESOURCES, AND SR METALS INC. (SRMI), RESPONDENTS.

DECISION
REYES, J.:

1322
In this petition for review on certiorari[1] under Rule 45 of the Rules of Basiana Mining
Exploration Corporation (BMEC), Basiana Mining Development Corporation (BMDC),
and Rodney O. Basiana (Basiana) (petitioners) assail the Amended Decision [2] dated
June 18, 2009 of the Court of Appeals (CA) in CA-G.R. SP No. 103033, which granted
the motions for reconsideration dated January 21, 2009 [3] and December 23, 2008[4] of
the Honorable Secretary of the Department of Environment and Natural Resources
(DENR) and SR Metals, Inc. (SRMI), respectively, reversed and set aside the CA's
Decision[5] dated December 10, 2008 and dismissed the petition for review filed by the
petitioners, among others.

The Facts

Petitioner BMEC, headed by its President Basiana, applied on July 31, 1997 for a
Mineral Production Sharing Agreement (MPSA) with the DENR for the extraction of
nickel and other minerals covering an area of 6,642 hectares in Tubay and Jabonga,
Agusan del Norte, docketed as MPSA (XIII)-00014.[6]

Pending approval of its application, BMEC, on April 29, 2000, assigned to Manila Mining
Corporation (Manila Mining) all its rights and interest in MPSA (XIII)-00014, with the
latter acknowledging BMEC as the real and true owner of said application. [7] Manila
Mining, in turn, assigned on October 17, 2005, its rights and interest to SRMI. [8] A day
after, or on October 18, 2005, Basiana and SRMI executed a Memorandum of
Agreement where SRMI agreed, among others, to undertake technical and geological
tests, exploration and small-scale mining operations of the site subject of MPSA (XIII)-
00014.[9] Necessary permits and certificates were then issued by the DENR and the
Provincial Government of Agusan del Norte to SRMI, San R Construction Corporation
(San R) and Galeo Equipment Corporation (Galeo). Consequently, SRMI, using
BMEC's application, applied for an MPSA for the extraction of nickel, iron and cobalt on
a 591-ha area in Tubay, Agusan del Norte. The application was docketed as APSA-
000014-XIII.[10]

On November 24, 2006, the DENR Secretary issued a cease and desist order against
the mining operations due to excess in annual production, maximum capitalization and
labor cost to equipment utilization. The Minerals Development Council, on December 7,
2006, also advised SRMI, San R and Galeo to immediately stop all mining activities in
Tubay, which were conducted under the pretext of small-scale mining. [11]

Basiana then filed a complaint before the Regional Trial Court of Butuan City on May
15, 2007 for rescission of contract, abuse of rights and damages against SRMI,
docketed as Civil Case No. 5728.[12] For its part, BMEC, then already known as BMDC,
also filed a complaint for breach of trust, accounting and conveyance of proceeds,
judicial confirmation of declaration of partial nullity of contract and termination of trust,
and abuse of rights with damages against SRMI, San R, Galeo, et al. on July 13, 2007,
docketed as Civil Case No. 5746.[13]

Subsequently, the Director of the Mines and Geosciences Bureau (MGB), on January
10, 2008, recommended the approval of APSA-000014-XIII filed by SRMI. [14] Thus,
1323
BMEC and Basiana filed with the MGB Panel of Arbitrators (MGB-POA) a petition to
deny and/or disapprove and/or declare the nullity of the application for MPSA and/or
cancellation, revocation and termination of MPSA. [15] Pending resolution of the protest
before the MGB-POA, the Republic of the Philippines, represented by the DENR
Secretary entered into MPSA No. 261-2008-XIII with SRMI for the development and
commercial utilization of nickel, cobalt, iron and other associated mineral deposits in the
572.64-ha area in Tubay, Agusan del Norte.[16]

Hence, the herein petitioners filed a petition for review with the CA assailing the
issuance of MPSA No. 261-2008-XIII on the grounds that (1) "there was clear violation
of due process and the entire proceedings was railroaded and suited for the benefit of
[SRMI]," and that (2) the approval of the application is a patent nullity and/or absolutely
without any factual and legal basis. [17]

CA Decision dated December 10, 2008

The CA initially granted the petition and declared MPSA No. 261-2008-XIII null and
void.[18] According to the CA, MPSA No. 261-2008-XIII should be stricken down for the
reasons that the DENR Secretary has no authority and jurisdiction to approve SRMI's
application pending resolution by the MGB-POA of the petitioners' protest. The CA ruled
that the grounds raised by the petitioners in their protest, to wit: (a) "the application of
[SRMI] to extract mineral and dispose nickel, iron and cobalt for commercial purposes is
a falsified document;" and (b) "[SRMI] is not qualified to undertake the exploration,
development and utilization of minerals in Tubay, Agusan del Norte," involve a dispute
on rights to mining areas and fall within the jurisdiction of the MGB-POA. [19]

The CA also found that the petitioners adopted the wrong mode of appeal when it filed a
petition for review before it; nevertheless, it resolved to treat the petition as one
for certiorari since it alleged grave abuse of discretion on the part of the DENR
Secretary in approving the application despite the pendency of the petitioners' protest. [20]

SRMI filed a motion for reconsideration of the CA decision, which was granted by the
CA.[21]

CA Amended Decision dated June 18, 2009

According to the CA, the petition for review filed by the petitioners cannot be treated as
a special civil action for certiorari for lack of jurisdictional grounds.[22] The CA ruled that
the approval by the DENR Secretary of SRMFs application does not involve a quasi-
judicial function since both the petitioners and SRMI are still applicants and there was
yet an adjudication of rights between them.[23] The CA also ruled that the petition for
review was premature due to the absence of any decision or resolution rendered by a
competent body exercising a quasi-judicial function and the petitioners should have
exhausted all administrative remedies available before it filed the petition for review.
[24]
 The CA also stated that even if it were to treat the petition as a special civil action
for certiorari, it failed to show any grave abuse of discretion committed by the DENR
Secretary when it entered into MPSA No. 261-2008-XIII. [25] Citing Celestial Nickel

1324
Mining Exploration Corporation v. Macroasia Corporation,[26] the CA ruled that it is the
DENR Secretary that has jurisdiction to cancel existing mining agreements. [27] Finally,
the CA found the petitioners to have committed forum shopping as the petition for
review was filed despite the pendency of the protest with the MGB-POA. [28]

Petition before the Court

Hence, the present petition anchored on the ground that —

THE HONORABLE [CA], WITH DUE RESPECT, GRIEVOUSLY ERRED IN
REVERSING ITS OWN RESOLUTION, XXX, DECLARING THAT THE MPSA ISSUED
BY THE [DENR] AS NULL AND VOID, BY GIVING THE FOLLOWING SPECIOUS AND
BASELESS LEGAL GROUNDS, WHICH ARE NOT IN ACCORD WITH EXISTING
LAWS AND JURISPRUDENCE: X X X.[29]
The petitioners insist that they made the proper recourse when they filed a petition for
review with the CA because the determination by the DENR Secretary as to the
propriety of the MGB Director's recommendation of approval and SRMFs qualification to
undertake development and its compliance with the law requires an exercise of its
quasi-judicial function, and that the issue of whether the petitioners failed to exhaust its
administrative remedies when it did not await the MGB-POA's resolution of its protest
involves questions of law.[30]

The petitioners also take exception to the CA's use of the Celestial Nickel
Mining[31] case, citing alleged differences. According to the petitioners, in Celestial
Nickel Mining, the Court did not make an issue on the remedy resorted to by Blue Ridge
Mineral Corporation (Blue Ridge) and instead, delved on the merits of the case thereby
implying that the filing of a petition for certiorari resorted to by Blue Ridge was proper.
Also, Celestial Nickel Mining did not rule into the action of the DENR Secretary in
entering into the mining agreement because its issuance was not raised before the
MGB Director and the DENR Secretary and neither was it presented before the CA.
This case, on the other hand, presents sufficient grounds why the DENR Secretary's
approval was illegal and tainted with grave abuse of discretion, that is, despite that the
DENR Secretary and the MGB Director knew of the existence of the protest before the
MGB-POA, the agreement was still entered into. [32]

SRMI, meanwhile, argues that the DENR Secretary's signing of MPSA No. 261-2008-
XIII was within his authority and that the grounds raised by the petitioners are mere
rehash of the arguments raised in the CA. [33]

On the other hand, the Office of the Solicitor General, who appeared for the DENR
Secretary, maintains that the CA properly dismissed the petition on ground of forum
shopping.[34]

Ruling of the Court

Without stamping approval on the validity of MPSA No. 261-2008-XIII, the Court
dismisses the petition for the simple reason that the petitioners' recourse to the CA was
erroneous.

1325
First, the act of the DENR Secretary in approving SRMI's application and entering into
MPSA No. 261-2008-XIII is not an exercise of its quasi-judicial power; hence, it cannot
be reviewed by the CA, whether by a petition for review under Rule 43 or a special civil
action for certiorari under Rule 65 of the Rules of Court.

Depending on its enabling statute,[35] administrative agencies possess distinct powers

and functions - administrative, quasi-legislative, and quasi-judicial. "Administrative
power is concerned with the work of applying policies and enforcing orders as
determined by proper governmental organs." [36] Quasi-judicial or administrative
adjudicator/ power, on the other hand, "is the power to hear and determine questions of
fact to which the legislative policy is to apply and to decide in accordance with the
standards laid down by the law itself in enforcing and administering the same law." [37] "A
government agency performs adjudicator/ functions when it renders decisions or awards
that determine the rights of adversarial parties, which decisions or awards have the
same effect as a judgment of the court." [38]

In the case of the DENR Secretary, its power to approve and enter into a MPSA is
unmistakably administrative in nature as it springs from the mandate of the DENR under
the Revised Administrative Code of 1987, which provides that "[t]he [DENR] shall x x x
be in charge of carrying out the State's constitutional mandate to control and supervise
the exploration, development, utilization, and conservation of the country's natural
resources."[39] Contrary to the petitioners' position, the determination by the DENR
Secretary as to (1) the propriety of the MGB Director's recommendation of approval,
and (2) the qualification of SRMI to undertake development and its compliance with the
law, does not involve the exercise of quasi-judicial power. Note that under Section 41 of
DENR Administrative Order (A.O.) No. 96-40, initial evaluation of an application for an
MPSA is made by the MGB Regional Office in the area covered by the application.
Thereafter, the application will be reviewed by the MGB Director for further evaluation.
[40]
 It is only after the MGB Director has evaluated the application that the same will be
forwarded to the DENR Secretary for final evaluation and approval. In approving an
MPSA, the DENR Secretary does not determine the legal rights and obligations of
adversarial parties, which are necessary in adjudication. In fact, it is only after an
application is approved that the right to undertake the project accrues on the applicant's
part, and until then, no rights or obligations can be enforced by or against any party.
[41]
 Neither does the DENR Secretary resolve conflicting claims; rather, what is involved
here is the determination whether a certain applicant complied with the conditions
required by the law, and is financially and technically capable to undertake the contract,
among others. Thus, in Republic of the Philippines v. Express Telecommunication Co.,
Inc.,[42] the Court stated that the powers granted to the Secretary of Agriculture and
Commerce (natural resources) by law such as granting of licenses, permits, leases and
contracts, or approving, rejecting, reinstating, or canceling applications, are
all executive and administrative in nature. It even further ruled that purely
administrative and discretionary functions may not be interfered with by the courts. [43]

Jurisprudence also emphasized the administrative nature of the grant by the DENR

1326
Secretary of license, permits, lease and contracts, reiterating the distinction made
in Pearson v. Intermediate Appellate Court[44] between the different mining
claims/disputes, to wit:
Decisions of the Supreme Court on mining disputes have recognized a distinction
between (1) the primary powers granted by pertinent provisions of law to the then
Secretary of Agriculture and Natural Resources (and the bureau directors) of an
executive or administrative nature, such as "granting of license, permits, lease
and contracts, or approving, rejecting, reinstating or cancelling applications, or
deciding conflicting applications," and (2) controversies or disagreements of civil or
contractual nature between litigants which are questions of a judicial nature that may be
adjudicated only by the courts of justice.[45] (Emphasis ours)
This distinction has been carried over under Republic Act No. 7942 (R.A. No. 7942) or
the Philippine Mining Act of 1995. [46]

Moreover, even assuming, for the sake of argument, that recourse to the courts may be
had by the petitioners, the circumstances of this case do not warrant its intervention at
this point for the following reasons:

For one, in their petition for review filed with the CA, the petitioners prayed that MPSA
No. 261-2008-XIII be set aside and its implementation enjoined. [47] In effect, the
petitioners seek a cancellation of MPSA No. 261-2008-XIII. As earlier discussed,
however, the power to approve and enter into agreements or contracts rests primarily
with the DENR Secretary. Perforce, the power to cancel an MPSA likewise lies with the
DENR Secretary. Such implied power of the DENR Secretary was upheld by the Court
in Celestial Nickel Mining.

Celestial Nickel Mining involved the cancellation of several mining lease contracts in

favor of Macroasia Corporation. The pivotal issue in said case was defined by the Court
as: "who has authority and jurisdiction to cancel existing mineral agreements under
[R.A. No. 7942] in relation to [Presidential Decree No.] 463 and pertinent rules and
regulations."[48] In acknowledging the DENR Secretary's power to cancel mining
agreements, the Court provided the reasons, as follows: (1) the DENR Secretary's
power to cancel mineral agreements emanates from his administrative authority,
supervision, management, and control over mineral resources under Chapter I, Title XIV
of Book IV of the Revised Administrative Code of 1987; [49] (2) R.A. No. 7942 confers to
the DENR Secretary specific authority over mineral resources, which includes the
authority to enter into mineral agreements on behalf of the Government upon the
recommendation of the Director and corollarily, the implied power to terminate mining or
mineral contracts;[50] (3) the power of control and supervision of the DENR Secretary
over the MGB to cancel or recommend cancellation of mineral rights under R.A. No.
7942 demonstrates the authority of the DENR Secretary to cancel or approve the
cancellation of mineral agreements;[51] and (4) the DENR Secretary's power to cancel
mining rights or agreements can be inferred from Section 230, Chapter XXIV of DENR
A.O. No. 96-40 on cancellation, revocation, and termination of a permit/mineral
agreement/Financial and Technical Assistance Agreement. [52]

1327
Given that it is the DENR Secretary that has the primary jurisdiction to approve and
cancel mining agreements and contract, it is with the DENR Secretary that the
petitioners should have sought the cancellation of MPSA No. 261-2008-XIII, and not
with the courts. The doctrine of primary jurisdiction instructs that if a case is such that its
determination requires the expertise, specialized training and knowledge of an
administrative body, relief must first be obtained in an administrative proceeding before
resort to the courts is had.[53]

For another, the doctrine of exhaustion of administrative remedies bars recourse to the
courts at the very first instance.
The doctrine of non-exhaustion of administrative remedies requires that resort be first
made with the administrative authorities in the resolution of a controversy falling under
their jurisdiction before the controversy may be elevated to a court of justice for review.
A premature invocation of a court's intervention renders the complaint without cause of
action and dismissible.[54] (Citations omitted)
The DENR Secretary, no doubt, is under the control of the President; thus, his decision
is subject to review of the latter.[55] Consequently, the petitioners should have appealed
its case to the Office of the President under A.O. No. 18, series of 1987, [56] instead of
directly seeking review by the court.[57]

WHEREFORE, the petition is DENIED. The Amended Decision dated June 18, 2009 of
the Court of Appeals in CA-G.R. SP No. 103033 is AFFIRMED.

SO ORDERED.

SECOND DIVISION

January 25, 2017

G.R. No. 206038

MARY E. LIM, represented by her Attorney-in-fact, REYNALDO V. LIM, Petitioner,

vs.
MOLDEX LAND, INC., 1322 ROXAS BOULEVARD CONDOMINIUM CORPORATION,
and JEFFREY JAMINOLA, EDGARDO MACALINTAL, JOJI MILANES, and
CLOTHILDA ANNE ROMAN, in their capacity as purported MENDOZA, and
LEONEN,JJ. members of the Board of Directors of 1322 Golden Empire
Corporation,, Respondents.

DECISION

MENDOZA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the March 4, 2013 Decision 1 of the Regional Trial Court of Manila, Branch
24, (RTC) in Civil Case No. 12-128478, which dismissed the complaint against the

1328
respondents for 1] annulment of the July 21, 2012 general membership meeting of 1322
Roxas Boulevard Condominium Corporation (Condocor); 2] annulment of election of
Jeffrey Jaminola (Jaminola), Edgardo Macalintal (Macalintal), Joji
Milanes (Milanes), and Clothilda Anne Roman (Roman) (collectively referred to as
"individual respondents") as members of the Board of Directors; and 3] accounting.

The primordial issue presented before the R TC, acting as a special commercial court,
was the validity, legality and effectivity of the July 21, 2012 Annual General Membership
Meeting and Organizational Meeting of Condocor's Board of Directors. 2

Initially, the Court, in its Resolution3 dated April 1, 2013, denied the petition for having
availed of the wrong mode of appeal because Lim raised mixed questions of fact and
law, which should have been filed before the Court of Appeals (CA).4Upon motion for
reconsideration, however, the Court granted it. Thereafter, the respondents filed their
Comment5 and Lim filed a Reply6 thereto.

The Antecedents

Lim is a registered unit owner of 1322 Golden Empire Tower (Golden Empire Tower), a
condominium project of Moldex Land, Inc. (Moldex), a real estate company engaged in
the construction and development of high-end condominium projects and in the
marketing and sale of the units thereof to the general public. Condocor, a non-stock,
non-profit corporation, is the registered condominium corporation for the Golden Empire
Tower. Lim, as a unit owner of Golden Empire Tower, is a member of Condocor.

Lim claimed that the individual respondents are non-unit buyers, but all are members of
the Board of Directors of Condocor, having been elected during its organizational
meeting in 2008. They were again elected during the July 21, 2012 general membership
meeting.7

Moldex became a member of Condocor on the basis of its ownership of the 220 unsold
units in the Golden Empire Tower. The individual respondents acted: as its
representatives.

On July 21, 2012, Condocor held its annual general membership meeting. Its corporate
secretary certified, and Jaminola, as Chairman, declared the existence of a quorum
even though only 29 of the 1088 unit buyers were present. The declaration of quorum
was based on the presence of the majority of the voting rights, including those
pertaining to the 220 unsold units held by Moldex through its representatives. Lim,
through her attorney-in-fact, objected to the validity of the meeting. The objection was
denied. Thus, Lim and all the other unit owners present, except for one, walked out and
left the meeting.

Despite the walkout, the individual respondents and the other unit owner proceeded
with the annual general membership meeting and elected the new members of the
Board of Directors for 2012-2013. All four (4) individual respondents were voted as

1329
members of the board, together with three (3) others whose election was conditioned on
their subsequent confirmation.9 Thereafter, the newly elected members of the board
conducted an organizational meeting and proceeded with the election of its officers. The
individual respondents were elected as follows:

1. Atty. Jeffrey Jaminola - Chairman of the Board and President

2. Ms. Joji Milanes - Vice-President

3. Ms. Clothilda Ann Roman - Treasurer

4. Mr. Edgardo Macalintal - Corporate Secretary

5. Atty. Ma. Rosario Bernardo - Asst. Corporate Secretary

6. Atty. Mary Rose Pascual - Asst. Corporate Secretary

7. Atty. Jasmin Cuizon - Asst. Corporate Secretary10

Consequently, Lim filed an election protest before the RTC. Said court, however,
dismissed the complaint holding that there was a quorum during the July 21, 2012
annual membership meeting; that Moldex is a member of Condocor, being the
registered owner of the unsold/unused condominium units, parking lots and storage
areas; and that the individual respondents, as Moldex's representatives, were entitled to
exercise all membership rights, including the right to vote and to be voted. 11 In so
ruling, the trial court explained that the presence or absence of a quorum in the subject
meeting was determined on the basis of the voting rights of all the units owned by the
members in good standing. 12 The total voting rights of unit owners in good standing
was 73,376 and, as certified by the corporate secretary, 83.33% of the voting rights in
good standing were present in the said meeting, inclusive of the 5 8,504 voting rights of
Moldex. 13

Not in conformity, Lim filed the subject petition raising the following

ISSUES

A. THE LOWER COURT GRAVELY ERRED IN RULING THAT IN DETERMINING

THE PRESENCE OR ABSENCE OF QUORUM AT GENERAL OR ANNUAL
MEMBERSHIP MEETINGS OF RESPONDENT CONDOCOR, EVEN NONUNIT
BUYERS SHOULD BE INCLUDED DESPITE THE EXPRESS PROVISION OF ITS BY-
LAWS, THE LAW AND SETTLED JURISPRUDENCE;

B. THE LOWER COURT ERRED IN RULING THAT RESPONDENT MOLDEX IS A

MEMBER OF RESPONDENT CONDOCOR AND THAT IT MAY APPOINT
INDIVIDUAL RESPONDENTS TO REPRESENT IT THEREIN;

1330
C. EVEN ASSUMING THAT RESPONDENT MOLDEX MAY BE A MEMBER OF
RESPONDENT CONDOCOR, THERE IS STILL NO BASIS FOR IT TO BE ELECTED
TO THE BOARD OF DIRECTORS OF RESPONDENT CONDOCOR BECAUSE IT IS
A JURIDICAL PERSON;

D. ASSUMING FURTHER THAT DESPITE BEING A JURIDICAL PERSON, IT MAY

BE ELECTED TO THE BOARD OF DIRECTORS OF RESPONDENT CONDOCOR,
THERE IS NO LEGAL BASIS FOR THE LOWER COURT TO HOLD THAT
RESPONDENT MOLDEX HAS AUTOMATICALLY RESERVED FOUR SEATS
THEREIN; AND,

E. THE LOWER COURT GRAVELY ERRED IN RULING TO RECOGNIZE

RESPONDENT MOLDEX AS OWNERDEVELOPER HAVING FOUR RESERVED
SEATS IN RESPONDENT CONDOCOR BOARD, AS SUCH RULING EFFECTIVELY
ALLOWED THE VERY EVIL THAT PD 957 SOUGHT TO PREVENT FROM
DOMINATING THE CONTROL AND MANAGEMENT OF RESPONDENT
CONDOCOR TO THE GRAVE AND IRREPARABLE DAMAGE AND INJURY OF
PETITIONER AND THE OTHER UNIT BUYERS, WHO ARE THE BONA FIDE
MEMBERS OF RESPONDENT CONDOCOR.

In sum, the primordial issues to be resolved are: 1) whether the July 21, 2012
membership meeting was valid; 2) whether Moldex can be deemed a member of
Condocor; and 3) whether a non-unit owner can be elected as a member of the Board
of Directors of Condocor.

Procedural Issues

The issues raised being purely legal, the Court may properly entertain the subject
petition.

The subject case was initially denied because it appeared that Lim raised mixed
questions of fact and law which should have been filed before the CA. After judicious
perusal of Lim's arguments, however, the Court ascertained that a reconsideration of its
April 1, 2013 Resolution14 was in order.

It has been consistently held that only pure questions of law can be entertained in a
petition for review under Rule 45 of the Rules of Court. In Century Iron Works, Inc. v.
Banas,15the Court held:

A petition for review on certiorari under Rule 45 is an appeal from a ruling of a lower

tribunal on pure questions of law. It is only in exceptional circumstances that we admit
and review questions of fact.

A question of law arises when there is doubt as to what the law is on a certain state of
facts, while there is a question of fact when the doubt arises as to the truth or falsity of
the alleged facts. For a question to be one of law, the question must not involve an

1331
examination of the probative value of the evidence presented by the litigants or any of
them. The resolution of the issue must rest solely on what the law provides on the given
set of circumstances. Once it is clear that the issue invites a review of the evidence
presented, the question posed is one of fact.

Thus, the test of whether a question is one of law or of fact is not the appellation
given to such question by the party raising the same; rather, it is whether the
appellate court can determine the issue raised without reviewing or evaluating
the evidence, in which case, it is a question of law; otherwise it is a question of
fact. 16 [Emphasis supplied]

Respondents argued that the initial denial of the petition was correct because Lim
availed of the wrong mode of appeal. As the assailed judgment involved an intra-
corporate dispute cognizable by the RTC, the appeal should have been filed before the
CA, and not before this Court.

Doubtless, this case involves intra-corporate controversies and, thus, jurisdiction lies
with the R TC, acting as a special commercial court. Section 5.2 of Republic Act No.
8799 (R.A. No. 8799)17effectively transferred to the appropriate RTCs jurisdiction over
all cases enumerated under Section 5 of Presidential Decree No. 902-A (P.D. No. 902-
A), to wit:

a) Devices or schemes employed by or any acts, of the board of directors, business

associates, its officers or partnership, amounting to fraud and misrepresentation which
may be detrimental to the interest of the public and/ or of the stockholder, partners,
members of associations or organizations registered with the Commission;

b) Controversies arising out of intra-corporate or partnership relations, between

and among stockholders, members, or associates; between any or all of them and
the corporation, partnership or association of which they
are stockholders, members or associates, respectively; and between such corporation,
partnership or association and the state insofar as it concerns their individual franchise
or right to exist as such entity; and

c) Controversies in the election or appointments of directors, trustees, officers or

managers of such corporations, partnerships or associations. [Emphases
supplied]

Pursuant to A.M. No. 04-9-07-SC, all decisions and final orders in cases falling under
the Interim Rules of Corporate Rehabilitation and the Interim Rules of Procedure
Governing Intra-Corporate Controversies shall be appealable to the CA through a
petition for review under Rule 43 of the Rules of Court. Such petition shall be taken
within fifteen (15) days from notice of the decision or final order of the RTC. 18

In turn, Rule 43 governs the procedure for appeals from judgments or final orders of
quasi-judicial agencies to the CA, whether it involves questions of fact, of law, or mixed

1332
questions of fact and law. Nevertheless, a party may directly file a petition for review
on certiorari before the Court to question the judgment of a lower court, especially when
the issue raised is purely of law and is one of novelty.

Substantive Issues

Lim is still a member of Condocor

Respondents argued that Lim had no cause of action to file the subject action because
she was no longer the owner of a condominium unit by virtue of a Deed of
Assignment19 she executed in favor of Reynaldo Valera Lim and Dianna Mendoza Lim,
her nephew and niece.

Section 90 of the Corporation Code states that membership in a non-stock corporation

and all rights arising therefrom are personal and non-transferable, unless the articles of
incorporation or the by-laws otherwise provide. A perusal of Condocor's By-Laws as
regards membership and transfer of rights or ownership over the unit reveal that:

Membership in the CORPORATION is a mere appurtenance of the ownership of any

unit in the CONDOMINIUM and may not therefore be sold, transferred or otherwise
encumbered separately from the said unit. Any member who sells or transfer
his/her/its unit/s in the CONDOMINIUM shall automatically cease to be a member
of the CORPORATION, the membership being automatically assumed by the
buyer or transferee upon registration of the sale or transfer and ownership of the
latter over the unit with the Register of Deeds for the City of Manila.20 [Emphasis
supplied.]

Likewise, the Master Deed of Condocor provides:

Section 11 : MORTGAGES, LIENS, LEASES, TRANSFERS OF RIGHTS AND SALE

OF UNITS: All transactions involving the transfer of the ownership or occupancy of any
UNIT, such as sale, transfer of rights or leases, as well as encumbrances involving said
UNIT, such as mortgages, liens and the like, shall be reported to the CORPORATION
within five (5) days after the effectivity of said transactions. 21

Nothing in the records showed that the alleged transfer made by Lim was registered
with the Register of Deeds of the City of Manila or was reported to the corporation.
Logically, until and unless the registration is effected, Lim remains to be the registered
owner of the condominium unit and thus, continues to be a member of Condocor.

Moreover, even assuming that there was a transfer by virtue of the Deed of Assignment,
the Confirmatory Special Power of Attorney22 executed later by Lim, wherein she
reiterated her membership in Condocor and constituted Reynaldo V. Lim as her true
and lawful Attorney-in-Fact, strengthened the fact that she still owns the condominium
unit and that there has been no transfer of ownership over the said property to her
nephew, but only a mere assignment of rights to the latter. As held by the Court

1333
in Casabuena v. CA,23 at most, an assignee can only acquire rights duplicating those
which his assignor is entitled by law to exercise. 24 Had it been otherwise, Reynaldo V.
Lim himself would have questioned and objected to the granting of the special power of
attorney, and would have insisted that he was really the owner of the condominium unit.

In non-stock corporations, quorum

is determined by the majority
of its actual members

In corporate parlance, the term "meeting" applies to every duly convened assembly
either of stockholders, members, directors, trustees, or managers for any legal purpose,
or the transaction of business of a common interest. 25 Under Philippine corporate laws,
meetings may either be regular or special. A stockholders' or members' meeting must
comply with the following requisites to be valid:

1. The meeting must be held on the date fixed in the By-Laws or in accordance with
law;26

2. Prior written notice of such meeting must be sent to all stockholders/members of

record;27

3. It must be called by the proper party; 28

4. It must be held at the proper place;29 and

5. Quorum and voting requirements must be met. 30

Of these five (5) requirements, the existence of a quorum is crucial. Any act or
transaction made during a meeting without quorum is rendered of no force and effect,
thus, not binding on the corporation or parties concerned.

In relation thereto, Section 52 of the Corporation Code of the Philippines (Corporation

Code) provides:

Section 52. Quorum in meetings. - Unless otherwise provided for in this Code or in the
by-laws, a quorum shall consist of the stockholders representing a majority of the
outstanding capital stock or a majority of the members in the case of non-stock
corporations.

Thus, for stock corporations, the quorum is based on the number of outstanding voting
stocks while for non-stock corporations, only those who are actual, living members with
voting rights shall be counted in determining the existence of a quorum. 31

To be clear, the basis in determining the presence of quorum in non-stock corporations

is the numerical equivalent of all members who are entitled to vote, unless some other
basis is provided by the By-Laws of the corporation. The qualification "with voting rights"

1334
simply recognizes the power of a non-stock corporation to limit or deny the right to vote
of any of its members.32 To include these members without voting rights in the total
number of members for purposes of quorum would be superfluous for although they
may attend a particular meeting, they cannot cast their vote on any matter discussed
therein.

Similarly, Section 6 of Condocor's By-Laws reads: "The attendance of a simple majority

of the members who are in good standing shall constitute a quorum ... x x x." The
phrase, "members in good standing," is a mere qualification as to which members will
be counted for purposes of quorum. As can be gleaned from Condocor's By-Laws, there
are two (2) kinds of members: 1) members in good standing; and 2) delinquent
members. Section 6 merely stresses that delinquent members are not to be taken into
consideration in determining quorum. In relation thereto, Section 7 33 of the By-Laws,
referring to voting rights, also qualified that only those members in good standing are
entitled to vote. Delinquent members are stripped off their right to vote. Clearly, contrary
to the ruling of the RTC, Sections 6 and 7 of Condocor's By-Laws do not provide that
majority of the total voting rights, without qualification, will constitute a quorum.

It must be emphasized that insofar as Condocor is concerned, quorum is different from

voting rights. Applying the law and Condocor's By-Laws, if there are 100 members in a
non-stock corporation, 60 of which are members in good standing, then the presence of
50% plus 1 of those members in good standing will constitute a quorum. Thus, 31
members in good standing will suffice in order to consider a meeting valid as regards
the presence of quorum. The 31 members will naturally have to exercise their voting
rights. It is in this instance when the number of voting rights each member is entitled to
becomes significant. If 29 out of the 31 members are entitled to 1 vote each, another
member (known as A) is entitled to 20 votes and the remaining member (known as B) is
entitled to 15 votes, then the total number of voting rights of all 31 members is 64. Thus,
majority of the 64 total voting rights, which is 33 (50% plus 1), is necessary to pass a
valid act. Assuming that only A and B concurred in approving a specific undertaking,
then their 35 combined votes are more than sufficient to authorize such act.

The By-Laws of Condocor has no rule different from that provided in the Corporation
Code with respect the determination of the existence of a quorum. The quorum during
the July 21, 2012 meeting should have been majority of Condocor's members in good
standing. Accordingly, there was no quorum during the July 21, 2012 meeting
considering that only 29 of the 108 unit buyers were present.

As there was no quorum, any resolution passed during the July 21, 2012 annual
membership meeting was null and void and, therefore, not binding upon the corporation
or its members. The meeting being null and void, the resolution and disposition of other
legal issues emanating from the null and void July 21, 2012 membership meeting has
been rendered unnecessary.

To serve as a guide for the bench and the bar, however, the Court opts to discuss and
resolve the same.

1335
Moldex is a member
Of Condocor

Matters involving a condominium are governed by Republic Act No.

4726 (Condominium Act). Said law sanctions the creation of a condominium corporation
which is especially formed for the purpose of holding title to the common areas,
including the land, or the appurtenant interests in such areas, in which the holders of
separate interest shall automatically be members or shareholders, to the exclusion of
others, in proportion to the appurtenant interest of their respective units in the common
areas. 34 In relation thereto, Section 10 of the same law clearly provides that the
condominium corporation shall constitute the management body of the project.

Membership in a condominium corporation is limited only to the unit owners of the

condominium project. This is provided in Section 10 of the Condominium Act which
reads:

Membership in a condominium corporation, regardless of whether it is a stock or non-

stock corporation, shall not be transferable separately from the condominium unit of
which it is an appurtenance. When a member or stockholder ceases to own a unit in
the project in which the condominium corporation owns or holds the common areas, he
shall automatically cease to be a member or stockholder of the condominium
corporation.35 [Emphases supplied]

Although the Condominium Act provides for the minimum requirement for membership
in a condominium corporation, a corporation's articles of incorporation or by-laws may
provide for other terms of membership, so long as they are not inconsistent with the
provisions of the law, the enabling or master deed, or the declaration of restrictions of
the condominium project.

In this case, Lim argued that Moldex cannot be a member of Condocor. She insisted
that a condominium corporation is an association of homeowners for the purpose of
managing the condominium project, among others. Thus, it must be composed of actual
unit buyers or residents of the condominium project. 36 Lim further averred that the
ownership contemplated by law must result from a sale transaction between the owner-
developer and the purchaser. She advanced the view that the ownership of Moldex was
only in the nature of an owner-developer and only for the sole purpose of selling the
units.37 In justifying her arguments, Lim cited Section 30 of Presidential Decreee No.
957, known as The Subdivision and Condominium Buyers' Protective Decree (P.D. No.
957), to wit:

Section 30. Organization of Homeowners Association. The owner or developer of a

subdivision project or condominium project shall initiate the organization of a
homeowners association among the buyers and residents of the projects for the
purpose of promoting and protecting their mutual interest and assist in their community
development. [Emphasis in the original.]

1336
Furthermore, in distinguishing between a unit buyer and an owner-developer of a
project, Lim cited Section 25 of P.D. No. 957, which provides:

Section 25. Issuance of Title. The owner or developer shall deliver the title of the lot or
unit to the buyer upon full payment of the lot or unit. xxx

Likewise, Lim relied on Sunset View Condominium Corp. v. Hon. Campos, Jr.,  38 where
the Court wrote:

The share of stock appurtenant to the unit will be transferred accordingly to the
purchaser of the unit only upon full payment of the purchase price at which time
he will also become the owner of the unit. Consequently, even under the contract, it
is only the owner of a unit who is a shareholder of the Condominium Corporation.

Inasmuch as owners is conveyed only upon full payment of the purchase price, it
necessarily follows that a purchaser of a unit who has not paid the full purchase
price thereof is not the owner of the unit and consequently is not a shareholder of
the Condominium Corporation. [Emphasis in the original]

On these grounds, Lim asserted that only unit buyers are entitled to become members
of Condocor. 39

The Court finds itself unable to agree.

Lim's reliance of P.D. No. 957 is misplaced. There is no provision in P.D. No. 957 which
states that an owner-developer of a condominium project cannot be a member of a
condominium corporation. Section 30 of P.D. No. 957 determines the purposes of a
homeowners association - to promote and protect the mutual interest of the buyers and
residents, and to assist in their community development. A condominium corporation,
however, is not just a management body of the condominium project. It also holds title
to the common areas, including the land, or the appurtenant interests in such areas.
Hence, it is especially governed by the Condominium Act. Clearly, a homeowners
association is different from a condominium corporation. P.D. No. 957 does not regulate
condominium corporations and, thus, cannot be applied in this case.

Sunset View merely delineated the difference between a "purchaser" and an "owner,"

whereby the former could be considered an owner only upon full payment of the
purchase price. The case merely clarified that not every purchaser of a condominium
unit could be a shareholder of the condominium corporation.

Respondents, for their part, countered that a registered owner of a unit in a

condominium project or the holders of duly issued condominium certificate of
title (CCT),40automatically becomes a member of the condominium corporation, 41 relying
on Sections 2 and 10 of the Condominium Act, the Master Deed and Declaration of
Restrictions, as well as the By-Laws of Condocor. For said reason, respondents averred
that as Moldex is the owner of 220 unsold units and the parking slots and storage areas

1337
attached thereto, it automatically became a member of Condocor upon the latter's
creation.42

On this point, respondents are correct.

Section 2 of the Condominium Act states:

Sec. 2. A condominium is an interest in real property consisting of separate interest in a

unit in a residential, industrial or commercial building and an undivided interest in
common, directly or indirectly, in the land on which it is located and in other common
areas of the building. A condominium may include, in addition, a separate interest in
other portions of such real property. Title to the common areas, including the land,
or the appurtenant interests in such areas, may be held by a corporation specially
formed for the purpose (hereinafter known as the "condominium corporation") in
which the holders of separate interest shall automatically be members or
shareholders, to the exclusion of others, in proportion to the appurtenant interest
of their respective units in the common areas. [Emphasis supplied]

In Sunset View,43the Court elucidated on what constitutes "separate interest," in relation

to membership, as mentioned in the Condominium Act, to wit:

By necessary implication, the "separate interest" in a condominium, which

entitles the holder to become automatically a shareholder in the condominium
corporation, as provided in Section 2 of the Condominium Act, can be no other
than ownership of a unit. This is so because nobody can be a shareholder unless he
is the owner of a unit and when he ceases to be the owner, he also ceases
automatically to be a shareholder.44 [Emphasis supplied.]

Thus, law and jurisprudence dictate that ownership of a unit entitles one to become a

member of a condominium corporation.1âwphi1 The Condominium Act does not provide
a specific mode of acquiring ownership. Thus, whether one becomes an owner of a
condominium unit by virtue of sale or donation is of no moment.

It is erroneous to argue that the ownership must result from a sale transaction between
the owner-developer and the purchaser. Such interpretation would mean that persons
who inherited a unit, or have been donated one, and properly transferred title in their
names cannot become members of a condominium corporation.

The next issue is - may Moldex appoint duly authorized representatives who will
exercise its membership rights, specifically the right to be voted as corporate
directors/officers?

Moldex may appoint a

duly authorized representative

1338
A corporation can act only through natural persons duly authorized for the purpose or by
a specific act of its board of directors.45 Thus, in order for Moldex to exercise its
membership rights and privileges, it necessarily has to appoint its representatives.

Section 58 of the Corporation Code mandates:

Section 58. Proxies. - Stockholders and members may vote in person or by proxy in

all meetings of stockholders or members. Proxies shall in writing, signed by the
stockholder or member and filed before the scheduled meeting with the corporate
secretary. Unless otherwise provided in the proxy, it shall be valid only for the meeting
for which it is intended. No proxy shall be valid and effective for a period longer than five
(5) years at any one time. [Emphasis supplied]

Relative to the above provision is Section 1, Article II of Condocor's By-Laws, 46 which

grants registered owners the right to designate any person or entity to represent them in
Condocor, subject to the submission of a written notification to the Secretary of such
designation. Further, the owner's representative is entitled to enjoy and avail himself of
all the rights and privileges, and perform all the duties and responsibilities of a member
of the corporation. The law and Condocor's By-Laws evidently allow proxies in
members' meeting.

Prescinding therefrom, Moldex had the right to send duly authorized representatives to
represent it during the questioned general membership meeting. Records showed that,
pursuant to a Board Resolution, as certified 47 by Sandy T. Uy, corporate secretary of
Moldex, the individual respondents were instituted as Moldex's representatives. This
was attested to by Mary Rose V. Pascual, Assistant Corporate Secretary of Condocor,
in a sworn statement48 she executed on August 31, 2012.

Next question is - can the individual respondents be elected as directors of Condocor?

Individual respondents who

are non-members cannot be
elected as directors and officers
of the condominium corporation

The governance and management of corporate affairs in a corporation lies with its
board of directors in case of stock corporations, or board of trustees in case of non-
stock corporations. As the board exercises all corporate powers and authority expressly
vested upon it by law and by the corporations' by-laws, there are minimum requirements
set in order to be a director or trustee, one of which is ownership of a share in one's
name or membership in a non-stock corporation. Section 23 of the Corporation Code
provides:

Section 23. The Board of Directors or Trustees. - Unless otherwise provided in this

Code, the corporate powers of all corporations formed under this Code shall be
exercised, all business conducted and all property of such corporations controlled and

1339
held by the board of directors or trustees to be elected from among the holders of
stocks, or where there is no stock, from among the members of the
corporation, who shall hold office for one (1) year until their successors are elected
and qualified.

Every director must own at least one (1) share of the capital stock of the corporation of
which he is a director, which share shall stand in his name on the books of the
corporation. Any director who ceases to be the owner of at least one (1) share of the
capital stock of the corporation of which he is a director shall thereby cease to be a
director. Trustees of non-stock corporations must be members thereof. A majority
of the directors or trustees of all corporations organized under this Code must be
residents of the Philippines. [Emphases supplied]

This rule was reiterated in Section 92 of the Corporation Code, which states:

Section 92. Election and term of trustees. – x x x No person shall be elected as trustee

unless he is a member of the corporation. x x x

While Moldex may rightfully designate proxies or representatives, the latter, however,
cannot be elected as directors or trustees of Condocor. First, the Corporation Code
clearly provides that a director or trustee must be a member of record of the
corporation. Further, the power of the proxy is merely to vote. If said proxy is not a
member in his own right, he cannot be elected as a director or proxy.

Respondents cannot rely on the Securities and Exchange Commission (SEC) Opinions

they cited to justify the individual respondents' election as directors. In Heirs of Gamboa
v. Teves,49 the Court En Banc held that opinions issued by SEC legal officers do not
have the force and effect of SEC rules and regulations because only the SEC en
banc can adopt rules and regulations.

Following Section 25 of the Corporation Code, the election of individual respondents, as

corporate officers, was likewise invalid.

Section 25 of the Corporation Code mandates that the President shall be a director. As
previously discussed, Jaminola could not be elected as a director. Consequently,
Jaminola's election as President was null and void.

The same provision allows the election of such other officers as may be provided for in
the by-laws. Condocor's By-Laws, however, require that the Vice-President shall
be elected by the Board from among its member-directors in good standing, and the
Secretary may be appointed by the Board under the same circumstance. Like Jaminola,
Milanes and Macalintal were not directors and, thus, could not be elected and appointed
as Vice-President and Secretary, respectively.

Insofar as Roman's election as Treasurer is concerned, the same would have been
valid, as a corporate treasurer may or may not be a director of the corporation's board.

1340
The general membership meeting of Condocor, however, was null and void. As a
consequence, Roman's election had no legal force and effect.

In fine, the July 21, 2012 annual general membership meeting of Condocor being null
and void, all acts and resolutions emanating therefrom are likewise null and void.

WHEREFORE, the petition is GRANTED. The March 4, 2013 Decision of the Regional

Trial Court, Branch 24, Manila, in Civil Case No. 12-128478 is
hereby REVERSED and SET ASIDE. The Court declares that:

a) The July 21, 2012 Annual General Membership Meeting of Condocor is null and void;

b) The election of members of the Board of Directors in the annual general membership
meeting is likewise null and void; and

c) The succeeding Organizational Meeting of Condocor's Board of Directors as well as

the election of its corporate officers are of no force and effect.

Costs against respondents.

SO ORDERED.

RULE 44. ORDINARY APPEALED CASES

SECOND DIVISION
[ G.R. No. 184466, December 05, 2016 ]
LUZ ANATOLIA E. CRISPINO, CARIDAD O. ECHAVES REESE AND ZENAIDA
ECHAVES REPRESENTED BY THEIR ATTORNEY-IN- FACT, REUBEN CAPILI
ECHAVES, PETITIONERS, VS. ANATOLIA TANSAY AS SUBSTITUTED BY LILIAN
YAP, RESPONDENT.

DECISION
LEONEN, J.:
The Court of Appeals' power to receive evidence to resolve factual issues in cases
falling within its original and appellate jurisdiction is qualified by its internal rules. In an
ordinary appeal, the Court of Appeals may receive evidence when a motion for new trial
is granted based on newly discovered evidence.

This resolves the Petition for Review on Certiorari [1] assailing the Court of Appeals'
Decision[2] dated January 24, 2007 and Resolution[3] dated August 28, 2008 in CA-G.R.
CV No. 54832.

This case originated from Civil Case No. CEB-14547 filed by respondent Anatolia
Tansay against petitioners Luz Anatolia E. Crispino, Caridad O. Echaves, and Zenaida
Echaves before the Regional Trial Court ofCebu City, for Revocation of Trust,

1341
Declaration ofNullity of Transfer and Cancellation of Titles. [4]

Respondent Anatolia Tansay, now deceased, was twice widowed. [5] In 1947, Anatolia
established her residence in Oroquieta, Misamis Occidental. [6] There, she met 20-year
old Zenaida Capili who was then single.[7] Anatolia took in Zenaida and treated her as
her own child.[8]

Subsequently, Anatolia and Zenaida moved to Cebu City, [9] where Anatolia acquired a
3,107 sq. m. parcel of land (Lot No. 1048)[10] known as the Tansay Compound.
[11]
 Anatolia subdivided the compound into three lots: (1) Lot No. 1048-A-1 with an area
of 617 sq. m., (2) Lot No. 1048-A-2 with an area of 555 sq. m., and (3) Lot No. 1048-A-3
with an area of 1,845 sq. m.[12] In 1957, Anatolia constructed her abode over a portion of
Lot No. 1048-A-3.[13]

Zenaida eventually got married to Ben Ricaredo Echaves and had several children,
among whom are petitioners Luz Anatolia E. Crispino and Caridad C. Echaves.
[14]
 Zenaida and her family lived in Anatolia's house. [15] Anatolia had a close relationship
with the Echaves family.[16] She was affectionately called "honey" by Zenaida and
"nanay" by Zenaida's children.[17] Through Anatolia's efforts and connections, Zenaida's
husband was able to find employment.[18] She also paid or the education of Zenaida's
children.[19]

By virtue of two deeds of sale, Anatolia allegedly sold Lot No. 1048- A-1 in favor of
Zenaida on July 6, 1981 and tot No. 1048-A-3 in favor of Luz Anatolia and Caridad on
July 11, 1989.[20]

In 1991, Zenaida returned from abroad and discovered that the titles of the lots were
missing from her room where she had left them. [21] Hence, she filed a petition before the
Regional Trial Court of Cebu City for reconstitution of the certificates of title, which was
granted.[22]

Meanwhile, Anatolia filed Civil Case No. CEB-14547 entitled Revocation of Trust,
Declaration of Nullity of Transfer, and Cancellation of Title before the Regional Trial
Court of Cebu City.[23]

Zenaida alleged that Anatolia sold Lot No. 1048-A-1 in her favor for P6,170.00. [24] One
of Zenaida's daughters, Lourdes Behaves de Leon, testified that since 1975, her sisters,
Luz Anatolia and Caridad, deposited sums of money in Anatolia's bank account for the
purchase of Lot No. 1048- A-3.[25] However, Anatolia merely turned over the sums she
received to Zenaida since she was not in need of money. [26]

Based on the evidence on record, the trial court found that Zenaida, Luz Anatolia, and
Caridad did not pay any monetary or other valuable consideration for the transfer of the

1342
properties in their names.[27] Hence, the deeds of sale could not have been valid. In
addition, the trial court found that Anatolia never intended to sell the lots despite
executing the deeds of sale. Rather, she merely constituted Zenaida, Luz Anatolia, and
Caridad as trustees of the properties.[28] The trial court also questioned the validity of
Zenaida's Petition for Reconstitution of Titles considering that Anatolia presented the
Original Certificates of Title of the properties in court. [29]

On February 16, 1996, the Regional Trial Court rendered its Decision. The dispositive
portion reads:

WHEREFORE, in light of the foregoing, judgment is hereby rendered:

(1) Declaring plaintiff Anatolia Tansay as the lawful and rightful owner of Lot No. 1048-
A-1 covered by TCT No. 81406, and Lot No. 1048-A-3 covered by TCT No.
101693; and,
(2) Ordering the Register of Deeds of Ceb[u] City to cancel said TCT No. 1048-A-1
issued to defendant Zenaida Echave[s], and TCT No. 10963, issued to the
defendants Luz Anatolia Crispino and Caridad Echave[s], and to reinstate plaintiff
Anatolia Tansay's title to said lots.

Cost against the defendants.[30]

Zenaida, Luz Anatolia, and Caridad appealed the Decision before the Court of Appeals.
[31]

During the pendency of the appeal, Anatolia died on August 11, 2001 and was
substituted by her only known legal heir, Lilian Tan Yap. [32]

On August 16, 2001, Zenaida, Luz Anatolia, and Caridad filed an Urgent Motion to
Remand Records of the Case for the Re-Opening of Trial. [33] They anchored their motion
on an Affidavit allegedly executed by Anatolia after the Regional Trial Court had
rendered its Decision,[34] which reads:

CONFIRMATION OF PREVIOUS SALES

That I, ANATOLIA TANSAY, Filipino, of legal age, widow and a resident of Cebu City,
hereby declare and manifest, as follows:

1. That on July 6, 1981, I executed a deed of sale over Lot No. 1048-A-1 covered
by TCT No. 17556 of the Register of Deeds of Cebu City in favor of Zenaida
Echave[s];
1343
2. That on July 11, 1989, I executed a deed of sale over Lot No. 1048-A-3 covered
by TCT No. 81605 of [the] Register of Deeds of Cebu City in favor of Luz Anatolia E.
Crispino and Caridad C. Echave[s];

3. That by virtue of said sales, I paid the capital gains tax and other taxes due on
the said sales so that the titles could be transferred to the vendees in said sales;

4. That later on I filed in the Regional Trial Court of Cebu an action for revocation of
trust, declaration of nullity of transfer and for cancellation of titles against Zenaida
Echave[s], Luz Anatolia Crispino: and Caridad C. Echave[s];

5. That after proper reflection, I now realize that the filing of said case was a
mistake and that I hereby confirm and affirm the validity of said sales.

IN WITNESS WHEREOF, I have hereunto set my signature this 15 th day of January,

1998 in Cebu City, Philippines.

ANATOLIA TANSAY[35]

In their Urgent Motion to Remand Records of the Case for the Re Opening of Trial,
Zenaida, Luz Anatolia, and Caridad alleged:

1. That during the pendency of the appeal, the plaintiff-appellee, Anatolia Tansay
died on August 11, 2001;

2. That it was discovered that on January 15, 1998, she executed a document
denominated as confirmation of previous sales...

3. That in view of the discovery of this document confirming the previous sales of
Lot Nos. 1048-A-1 and 1048-A-3 to defendants-appellants Zenaida C. Echave[s], Luz
Anatolia E. Crispino and Caridad C. Echave[s], it is necessary in e interest of
substantial justice to remand the records of the case to the trial court and re-open the
trial of this case in order to enable the herein defendants to present said document in
evidence in order to avoid a grave miscarriage of justice.

WHEREFORE, in view of all the foregoing, it is most respectfully prayed that the
records of this case be remanded to the lower court and that the trial of this case be
ordered re-opened.[36]

The Court of Appeals, in a Resolution[37] dated July 25, 2006 denied the Urgent Motion
to Remand Records of the Case for the Re-Opening of Trial. The appellate court
considered the same as a motion for new trial based on newly discovered evidence
under Rule 53 of the Rules of Court[38] and ruled that the Confirmation of Previous Sales

1344
was "not the kind of newly discovered evidence contemplated by the Rules that would
warrant a [n]ew [t]rial."[39] The appellate court also noted that the petitioners-appellants
failed to attach an affidavit of merit as required by the rules and that the Confirmation of
Previous Sales attached to the motion was merely a photocopy. [40]

On January 24, 2007, the Court of Appeals rendered a Decision, which affirmed the
Regional Trial Court's Decision in toto.[41] Zenaida, Luz Anatolia, and Caridad moved for
reconsideration.[42] They assailed, among others, the propriety of the Court of Appeals'
Resolution in treating their motion to remand as a motion for new trial. Their Motion for
Reconsideration was denied in a Resolution [43] dated August 28, 2008.

Petitioners Zenaida, Luz Anatolia, and Caridad come to this Court through a Petition for
Review on Certiorari seeking a ruling on the power of the Court of Appeals to receive
evidence under Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act
No. 7902.[44]

Respondent Anatolia, as substituted by Lilian Yap, filed her Comment [45] on December
2, 2008. Petitioners filed their Reply[46] on March 19, 2009. On June 3, 2009, this Court
gave due course to the Petition and required the parties to submit their Memoranda. [47]

Petitioners argue that the Court of Appeals should have considered their Urgent Motion
to Remand Records of the Case for Re-Opening of Trial as a motion to receive further
evidence under Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act
No. 7902.[48] According to the petitioners, the Court of Appeals has the authority and
power to "receive all kinds of evidence to resolve factual issues within its original and
appellate jurisdiction."[49] However, the appellate court inadvertently treated their motion
to remand as a motion for new trial under Rule 53 of the Rules of Court. [50] Assuming
that the Court of Appeals was correct, petitioners contend that the Court of Appeals'
power to conduct new trials is not limited to new trials based on newly discovered
evidence.[51]

Petitioners pray that the Court of Appeals,' Decision dated January 24, 2007 be vacated
and that the Court of Appeals be ordered to receive in evidence the affidavit
denominated as Confirmation of Previous Sales and render a new decision. [52]

Respondent alleges that it was unlikely for Anatolia to execute the affidavit because she
requested the early resolution of the appeal through two letters addressed to the
appellate court.[53] The first letter was dated March 27, 2001, while the second letter was
dated July 20, 2001, a month before Anatolia died. [54] Respondent suspects the timing of
petitioner's motion to remand since it was filed just a few days after Anatolia's death. [55]

Respondent argues that the Petition for Review is not the proper remedy considering
that petitioners are not disputing the factual findings or the ratio decidendi of the Court

1345
of Appeals' Decision dated January 24, 2007. [56] According to respondent, petitioners'
arguments are directed against the Court of Appeals' Resolution dated July 25, 2006,
which denied the motion to remand, which was an interlocutory order. [57] Respondent
adds that since the Resolution was not challenged through an appeal or a motion for
reconsideration, the same had already become final and could no longer be assailed on
appeal.[58]

This case presents the following substantive issues: (1) whether the Court of Appeals
erred in treating petitioners' motion to remand as a motion for new trial under Rule 53 of
the Rules of Court; and (2) whether the Court of Appeals' power to grant new trials is
limited to motions based on newly discovered evidence. [59]

On the other hand, respondent raises the procedural issue of whether an interlocutory
order may be assailed in an appeal of the appellate court's Decision. [60]

In determining the correct procedural remedy, aggrieved parties must first ascertain the
nature of the decision, order, or resolution they intend to challenge. [61]

A final judgment or order, from which an appeal may be taken, is one that finally
disposes of the case and leaves nothing more to be done by the court (e.g. an
adjudication on the merits of the case on the basis of the evidence). [62] In contrast, an
interlocutory order is one that merely resolves incidental matters [63] and does not finally
dispose of the case.[64] When an interlocutory order is issued, the court is still tasked
with adjudicating on the merits of the case.[65]

The remedy against an interlocutory order is not appeal but a special civil action for
certiorari under Rule 65 of the Rules of Court. [66] The reason for the prohibition is to
prevent multiple appeals in a single action that would unnecessarily cause delay during
trial.[67] In Rudecon v. Singson:[68]

The rule is founded on considerations of orderly procedure, to forestall useless appeals

and avoid undue inconvenience to the appealing party by having to assail orders as
they are promulgated by the court, when all such orders may be contested in a single
appeal.[69]

Faced with an interlocutory order, parties may instantly avail of the special civil action of
certiorari. This would entail compliance with the strict requirements under Rule 65 of the
Rules of Court. Aggrieved parties would have to prove that the order was issued without
or in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess

1346
of jurisdiction and that there is neither appeal nor any plain, speedy, and adequate
remedy in the ordinary course of law.[70]

This notwithstanding, a special civil action for certiorari is not the only remedy that
aggrieved parties may take against an interlocutory order, since an interlocutory order
may be appealed in an appeal of the judgment itself. [71] In Investments, Inc. v. Court of
Appeals[72] it was held:

Unlike a "final" judgment or order, which is appealable, as above pointed out, an

"interlocutory" order may not be questioned on appeal except only as part of an
appeal that may eventually' be taken from the final judgment rendered in the case.
[73]
 (Emphasis supplied)

The Court of Appeals' Resolution dated July 25, 2006, which denied petitioners' motion
to remand, was an interlocutory order. It did not finally dispose of the case because the
appellate court still had to determine whether the deeds of sale executed by Anatolia
were valid. Rather than availing of the extraordinary remedy of certiorari under Rule 65,
petitioners opted to wait for the Court of Appeals to render its decision before
challenging the July 25, 2006 Resolution.

Petitioners did not commit any procedural infirmity in assailing the interlocutory order in
an appeal of the Court of Appeals' decision. Though petitioners could have filed a
petition for certiorari, they would have been burdened to prove that the Court of
Appeals: committed grave abuse of discretion in denying their motion to remand.
Moreover, petitioners still had the option to assail the July 25, 2006 Resolution in an
appeal of the Court of Appeals' final decision.

II

As regards the first substantive issue raised, this Court finds that the Court of Appeals
correctly treated petitioners' motion to remand as a motion for new trial under Rule 53 of
the Rules of Court.

Essentially, petitioners sought the introduction of evidence pursuant to the Court of

Appeals' expanded power under Section 9 of Batas Pambansa Blg. 129, as amended.

Originally, Section 9, of Batas Pambansa Blg. 129, otherwise known as Judiciary

Reorganization Act, provides:

SECTION 9. Jurisdiction. — The Intermediate Appellate Court shall exercise:

(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas

1347
 corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of
its appellate jurisdiction;
   
(2) Exclusive original jurisdiction ,over actions for annulment of judgments of Regional
Trial Courts; and
   
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions,
orders, or awards of Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards, or commissions, except those falling within the appellate
jurisdiction of the Supreme Court in accordance with the Constitution, the
provisions of ,this Act, and of subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.

The Intermediate Appellate Court shall have the power to try cases and conduct
hearings, receive evidence and perform any and all acts necessary to resolve
factual issues raised in cases falling within its original and appellate jurisdiction,
including 'the power to grant and conduct new trials or further proceedings.

These provisions shall not apply to decisions and interlocutory orders issued under the
Labor Code of the Philippines and by the Central Board of Assessment Appeals.
(Emphasis supplied)

Subsequently, Republic Act No. 7902[74] amended Section 9 of Batas Pambansa Blg.

129:

Sec. 9. Jurisdiction. — The Court of Appeals shall exercise:

(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas

corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of
its appellate jurisdiction;

(2) Exclusive original jurisdiction over actions for annulment of judgment of Regional
Trial Courts; and

1348
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions,
orders or awards of Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards or commissions, including the Securities and Exchange
Commission, the Social Security Commission, the Employees Compensation
Commission and the Civil Service Commission, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, the
Labor Code of the Philippines under Presidential Decree No. 442, as amended, the
provisions of this Act, and of subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.

The Court of Appeals shall have the power to try cases and conduct hearings,
receive evidence and perform any and all acts necessary to resolve factual
issues raised in cases falling within its original and appellate jurisdiction,
including the power to grant and conduct new trials or further proceedings. Trials
or hearings in the Court of Appeals must be continuous and must be completed within
three (3) months, unless extended by the Chief Justice. (Emphasis supplied)

Clearly, the Court of Appeals, pursuant to its expanded jurisdiction under Section 9 or
Batas Pambansa Blg. 129, as amended, is empowered to receive evidence to resolve
factual issues raised in cases falling within its original and appellate jurisdiction.
However, Section 9 of Batas Pambansa Blg. 129, as amended, should be read and
construed together with the Court of Appeals' internal rules. [75]

Thus, in Republic v. Mupas,[76] the Court held that the power of the Court of Appeals to
receive evidence is qualified by its internal rules:

Under Section 3, Rule 6 of the Internal ,Rules of the CA, the CA may receive evidence
in the following cases:

(a) In actions falling within its original jurisdiction, such as (1) certiorari, prohibition

and mandamus, (2) annulment of judgment or final order, (3) quo warranto,
(4) habeas corpus, (5) amparo, (6) habeas data, (7) anti money laundering, and (8)
application for judicial authorization under the Human Security Act of 2007;
(b) In appeals in civil cases where the Court grants a new trial on the ground of
newly discovered evidence, pursuant to Sec. 12, Rule 53 of the Rules of
Court;
(c) In appeals in criminal cases where the Court grants a new trial on the ground of

1349
 newly discovered evidence, pursuant to Sec. 12, Rule 124 of the rules of Court; and
(d) In appeals involving claims for damages arising from provisional remedies.
(Emphasis supplied)

This provision qualifies the CA's power to receive evidence in the exercise of its original
and appellate jurisdiction under Section 9 of BP 129, as amended:

Sec. 9. Jurisdiction. — The Court of Appeals shall exercise:

....

The Court of Appeals shall have the power to try cases and conduct hearings, receive
evidence, and perform any and all acts necessary to resolve factual issues raised in
cases falling within its original and appellate jurisdiction, including the power to grant
and conduct new trials or further proceedings. Trials or hearings in the Court of Appeals
must be continuous and must be completed within three (3) months, unless extended by
the Chief Justice.

Since Takenaka and Asahikosan filed an ordinary appeal pursuant to Rule 41 in relation
to Rule 44 of the Rules of Court, the CA could only have admitted newly discovered
evidence. Contrary to Takenaka and Asahikosan's claim, the attachments to the
motions are not newly discovered evidence. Newly discovered evidence is evidence
that could not, with reasonable diligence, have been discovered and produced at the
trial, and which, if presented, would probably alter the result. [77] (Emphasis in the
original, citations omitted).

The Internal Rules of the Court of Appeals enumerates instances when the Court of
Appeals may receive evidence depending on the nature of the case filed.

In a special civil action for certiorari, which is an action falling within the Court of
Appeals' original jurisdiction, the Court of Appeals has "ample authority to make its own
factual determination"[78] and may receive evidence for this purpose. In Maralit v.
Philippine National Bank:  [79]

In a special civil action for certiorari, the Court of Appeals has ample authority to receive
new evidence and perform any act necessary to resolve factual issues. Section 9 of
Batas Pambansa Blg. 129, as amended, states that, "The Court of Appeals shall have
the power to try cases and conduct hearings, receive evidence and perform any and all
acts necessary to resolve factual issues raised in cases falling within its original and

1350
appellate jurisdiction, including the power to grant and conduct new trials or further
proceedings."[80] (Emphasis omitted)

Thus, the 2009 Internal Rules of the Court of Appeals [81] provide:

SECTION 3. Power of the Court to Receive Evidence. – The Court may receive
evidence in the following cases:

(a) In actions falling within its original jurisdiction, such as: (1) certiorari,
prohibition and mandamus under Rules 46 and 65 of the Rules of Court; (2)
annulment of judgment or final order; (3) quo warranto; (4) habeas
corpus; (5) amparo; (6) habeas data; (7) anti-money laundering and (8) application
for judicial authorization under the Human Security Act of 2007. (Emphasis
supplied)

As may be gleaned from above, in actions falling within the original jurisdiction of the
Court of Appeals, such as a special civil action for certiorari, the Court of Appeals'
power to receive evidence is unqualified. This does not hold true with respect to appeals
in civil cases, criminal cases, as well as appeals involving claims for damages.

In this case, petitioners filed an ordinary appeal from the Regional Trial Court's Decision
dated February 16, 1996. At the time the Court of Appeals ruled on petitioners' motion
to remand,[82] the 2002 Internal Rules of the Court of Appeals [83] was in effect:

SECTION 3. Power of the Court to Receive Evidence. - The Court may receive
evidence in the following cases:

(a) In actions falling within its original jurisdiction, such as: (1) certiorari,
prohibition and mandamus under Rules 46 and 65 of the Rules of Court; (2) action
for annulment of judgment or final order under Rule 46 of the Rules of Court; (3)
quo warranto under Rule 66 of the Rules of Court; (4) habeas corpus under
Sections 2 and 12, Rule 102 of the Rules of Court;
   
(b) In appeals in civil cases where the court grants a new trial on the ground of
newly discovered evidence pursuant to Sec. 3, Rule 53 of the Rules of Court;
   
(c) In appeals in criminal cases where the court grants a new trial on the ground of
newly discovered evidence pursuant to Section 12, Rule 124 of the Rules of Court;
and
   

1351
(d) In appeals involving claims for: damages arising from provisional remedies.
(Emphasis supplied)

Although the Court of Appeals has the power to receive evidence pursuant to its
expanded powers under Section 9 of Batas Pambansa Blg. 129, this power is not
without limit. The Court of Appeals cannot simply accept additional evidence from the
parties. If the interpretation were otherwise, then there would be no end to litigation.

Hence, in appeals in civil cases, the Court of Appeals may only receive evidence when
it grants a new trial based on newly discovered evidence.

This notwithstanding, the Court of Appeals cannot accept any kind of evidence in a
motion for new trial. A motion for new trial under Rule 53 is limited to newly discovered
evidence:

SECTION 1. Period for filing; ground. – At any time after the appeal from the lower
court has been perfected and before the Court of Appeals loses jurisdiction over the
case, a party may file a motion for new trial on the ground of newly discovered
evidence which could not have been discovered prior to the trial in the court
below by the exercise of due diligence and which is of such character as would
probably change the result. The motion shall be accompanied by affidavits showing
the facts constituting the grounds therefor and the newly discovered evidence.
(Emphasis supplied)

The document petitioners seek to present before the appellate court does not fall under
the concept of newly discovered evidence.

Newly discovered evidence has a specific meaning under the law. Under Rule 53 of the
Rules of Court, the following criteria must be satisfied for evidence to be considered
newly discovered: (a) the evidence could not have been discovered prior to the trial in
the court below by exercise of due diligence; and (2) it is of such character as would
probably change the result.

The document denominated as Confirmation of Previous Sales was allegedly executed

on January 15, 1998, three years after the Regional Trial Court rendered its decision.
[84]
 Hence, it could not have been discovered by petitioners prior to trial by the exercise
of due diligence.

However, the document is not of such character that would probably change the lower

1352
court's judgment. The nature of the deeds of sale executed would not have been
affected even if the Confirmation of Previous Sales was admitted in evidence since the
validity of a contract is determined by law and not by the stipulation of the parties.
Furthermore, the Court of Appeals can determine whether the deeds of sale were valid
independent of said document. Thus, the Court of Appeals correctly denied petitioners'
motion to have the Confirmation of Previous Sales admitted in evidence.

WHEREFORE, the petition is DENIED. This Court hereby AFFIRMS the January 24,

2007 Decision and August 28, 2008 Resolution of the Court of Appeals in CA-G.R. CV
No. 54832.

RULE 45. APPEAL BY CERTIORARI TO SC

FIRST DIVISION

July 27, 2016

G.R. No. 215723

DOREEN GRACE PARILLA MEDINA, a.k.a. "DOREEN GRACE MEDINA

KOIKE," Petitioner
vs.
MICHIYUKI KOIKE, THE LOCAL CIVIL REGISTRAR OF QUEZON CITY, METRO
MANILA, and THE ADMINISTRATOR AND CIVIL REGISTRAR GENERAL OF THE
NATIONAL STATISTICS OFFICE, Respondents

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1are the Decision2 dated July 31, 2014
and the Resolution3 dated November 28, 2014, of the Regional Trial Court of Quezon
City, Branch 106 (RTC), in Sp. Proc. No. Q-13-72692, denying petitioner's petition for
judicial recognition of foreign divorce and declaration of capacity to remarry pursuant to
Article 26 of the Family Code.

The Facts

Petitioner Doreen Grace Parilla (Doreen), a Filipino citizen, and respondent Michiyuki
Koike (Michiyuki), a Japanese national, were married on June 14, 2005 in Quezon City,
Philippines.4 Their union bore two children, Masato Koike, who was born on January 23,
2006, and Fuka Koike who was born on April 4, 2007. 5

On June 14, 2012, Doreen and Michiyuki, pursuant to the laws of Japan, filed for
divorce6 before the Mayor of Ichinomiya City, Aichi Prefecture, Japan. They were

1353
divorced on even date as appearing in the Divorce Certificate 7 and the same was duly
recorded in the Official Family Register ofMichiyuki Koike. 8

Seeking to have the said Divorce Certificate annotated on her Certificate of

Marriage9 on file with the Local Civil Registrar of Quezon City, Doreen filed on February
7, 2013 a petition10 for judicial recognition of ioreign divorce and declaration of capacity
to remarry pursuant to the second paragraph of Article 26 of the Family Code 11 before
the RTC, docketed as Sp. Proc. No. Q-13-72692.

At the hearing, no one appeared to oppose the petition. 12 On the other hand, Doreen
presented several foreign documents, namely, "Certificate of Receiving/ Certificate of
Acceptance of Divorce"13 and "Family Register of Michiyuki Koike"14 both issued by the
Mayor of Ichinomiya City and duly authenticated by the Consul of the Republic of the
Philippines for Osaka, Japan. She also presented a certified machine copy of a
document entitled "Divorce Certificate" issued by the Consul for the Ambassador of
Japan in Manila that was authenticated by the Department of the Foreign Affairs, as well
as a Certification15 issued by the City Civil Registry Office in Manila that the original of
said divorce certificate was filed and recorded in the said Office. In addition,
photocopies of the Civil Code of Japan and their corresponding English translation, as
well as two (2) books entitled "The Civil Code of Japan 2000" 16 and "The Civil Code of
Japan 2009"17 were likewise submitted as proof of the existence of Japan's law on
divorce.18

The RTC Ruling

In a Decision19 dated July 31, 2014, the RTC denied Doreen's petition, ruling that in an
action for recognition of foreign divorce decree pursuant to Article 26 of the Family
Code, the foreign divorce decree and the national law of the alien recognizing his or her
capacity to obtain a divorce must be proven in accordance with Sections 24 20 and
2521 of Rule 132 of the Revised Rules on Evidence. The RTC ruled that while the
divorce documents presented by Doreen were successfully proven to be public or
official records of Japan, she nonetheless fell short of proving the national law of her
husband, particularly the existence of the law on divorce. The RTC observed that the
"The Civil Code of Japan 2000" and "The Civil Code of Japan 2009," presented were
not duly authenticated by the Philippine Consul in Japan as required by Sections 24 and
25 of the said Rules, adding too that the testimony of Doreen relative to the applicable
provisions found therein and its effect on the matrimonial relations was insufficient since
she was not presented as a qualified expert witness nor was shown to have, at the very
least, a working knowledge of the laws of Japan, particularly those on family relations
and divorce. It likewise did not consider the said books as learned treatises pursuant to
Section 46,22 Rule 130 of the Revised Rules on Evidence, since no expert witness on
the subject matter was presented and considering further that Philippine courts cannot
take judicial notice of foreignjudgments and law. 23

Doreen's motion for reconsideration24 was denied in a Resolution25 dated November 28,

2014; hence, this petition.

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 The Issue Before the Court

The core issue for the Court's resolution is whether or not the RTC erred in denying the
petition for judicial recognition of foreign divorce.1âwphi1

The Court's Ruling

At the outset, it bears stressing that Philippine law does not provide for absolute
divorce; hence, our courts cannot grant it. However, Article 26 of the Family Code -
which addresses foreign marriages or mixed marriages involving a Filipino and a
foreigner - allows a Filipino spouse to contract a subsequent marriage in case the
divorce is validly obtained abroad by an alien spouse capacitating him or her to remarry.
The provision reads:

Art. 26. All marriages solemnized outside the Philippines in accordance with the laws in
force in the country where they were solemnized, and valid there as such, shall also be
valid in this country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37
and 38.

Where a marriage between a Filipino citizen and a foreigner is validly celebrated

and a divorce is thereafter validly obtained abroad by the alien
spouse capacitating him or her to remarry, the Filipino spouse shall likewise
have capacity to remarry under Philippine law. (Emphasis supplied)

Under the above-highlighted paragraph, the law confers jurisdiction on Philippine courts
to extend the effect of a foreign divorce decree to a Filipino spouse without undergoing
trial to determine the validity of the dissolution of the marriage. 26

In Corpuz v. Sta. Tomas,27the Court had the occasion to rule that:

The starting point in any recognition of a foreign divorce judgment is the

acknowledgment that our courts do not take judicial notice of foreign judgments and
laws.1âwphi1 Justice Herrera explained that, as a rule, "no sovereign is bound to give
effect within its dominion to a judgment rendered by a tribunal of another country." This
means that the foreign judgment and its authenticity must be proven as facts
under our rules on evidence, together with the alien's applicable national law to
show the effect of the judgment on the alien himself or herself. The recognition
may be made in an action instituted specifically for the purpose or in another action
where a party invokes the foreign decree as an integral aspect of his claim or
defense.28 (Emphasis and underscoring supplied; citation omitted)

Thus, in Garcia v. Recio,29 it was pointed out that in order for a divorce obtained abroad
by the alien spouse to be recognized in our jurisdiction, it must be shown that the
divorce decree is valid according to the national law of the foreigner. Both the divorce
decree and the governing personal law of the alien spouse who obtained the divorce
must be proven.30 Since our courts do not take judicial notice of foreign laws and

1355
judgment, our law on evidence requires that both the divorce decree and the national
law of the alien must be alleged and proven like any other fact.31

Considering that the validity of the divorce decree between Doreen and Michiyuki, as
well as the existence of pertinent laws of Japan on the matter are essentially factual that
calls for a re-evaluation of the evidence presented before the RTC, the issue raised in
the instant appeal is obviously a question of fact that is beyond the ambit of a Rule 45
petition for review.

Well entrenched is the rule that this Court is not a trier of facts. The resolution of factual
issues is the function of the lower courts, whose findings on these matters are received
with respect and are in fact binding subject to certain exceptions. 32 In this regard, it is
settled that appeals taken from judgments or final orders rendered by RTC in the
exercise of its original jurisdiction raising questions of fact or mixed questions of fact
and law should be brought to the Court of Appeals (CA) in accordance with Rule 41 of
the Rules of Court.33

Nonetheless, despite the procedural restrictions on Rule 45 appeals as above-adverted,

the Court may refer the case to the CA under paragraph 2, Section 6 of Rule 56 of the
Rules of Court, which provides:

SEC. 6. Disposition of improper appeal. -x x x

An appeal by certiorari taken to the Supreme Court from the Regional Trial Court
submitting issues of fact may be referred to the Court of Appeals for decision or
appropriate action. The determination of the Supreme Court on whether or not issues of
fact are involved shall be final.

This, notwithstanding the express provision under Section 5 (f) thereof that an appeal
likewise "may" be dismissed when there is error irr the choice or mode of appeal. 34

Since the said Rules denote discretion on the part of the Court to either dismiss the
appeal or refer the case to the CA, the question of fact involved in the instant appeal
and substantial ends of justice warrant that the case be referred to the CA for further
appropriate proceedings. It bears to stress that procedural rules were intended to
ensure proper administration of law and justice. The rules of procedure ought not to be
applied in a very rigid, technical sense, for they are adopted to help secure, not
override, substantial justice. A deviation from its rigid enforcement may thus be allowed
to attain its prime objective, for after all, the dispensation of justice is the core reason for
the existence of the courts.35

WHEREFORE, in the interest of orderly procedure and substantial justice, the case is
hereby REFERRED to the Court of Appeals for appropriate action including the
reception of evidence to DETERMINE and RESOLVE the pertinent factual issues in
accordance with this Decision.

1356
SO ORDERED.

RULE 47. ANNULMENT OF JUDGMENTS

FIRST DIVISION
[ G.R. No. 163602, September 07, 2011 ]
SPOUSES EULOGIA MANILA AND RAMON MANILA, PETITIONERS, VS.
SPOUSES EDERLINDA GALLARDO-MANZO AND DANIEL MANZO,
RESPONDENTS.

DECISION
VILLARAMA, JR., J.:
This resolves the petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, assailing the Decision[1] dated February 27, 2004 and
Resolution[2] dated May 14, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 49998
which granted the petition for annulment of judgment filed by the respondents.

The controversy stemmed from an action for ejectment [3] filed by the respondents,
spouses Ederlinda Gallardo-Manzo and Daniel Manzo, against the petitioners, spouses
Ramon and Eulogia Manila, before the Metropolitan Trial Court (MeTC) of Las Piñas
City, Branch 79 (Civil Case No. 3537). The facts as summarized by the said court are
as follows:

On June 30, 1982, Ederlinda Gallardo leased two (2) parcels of land situated along Real
St., Manuyo, Las Piñas, Metro Manila, to Eulogia Manila for a period of ten (10) years at
a monthly rental(s) of P2,000.00 for the first two years, and thereafter an increase of ten
(10) percent every after two years.  They also agreed that the lessee shall have the
option to buy the property within two (2) years from the date of execution of the contract
of lease at a fair market value of One Hundred and Fifty Thousand Pesos
(P150,000.00)

The contract of lease expired on July 1, 1992 but the lessee continued in possession of
the property despite a formal demand letter dated August 8, 1992, to vacate the same
and pay the rental arrearages.  In a letter reply dated August 12, 1992, herein defendant
claimed that no rental fee is due because she allegedly became the owner of the
property at the time she communicated to the plaintiff her desire to exercise the option
to buy the said property.

Their disagreement was later brought to the Barangay for conciliation but the parties
failed to reach a compromise, hence the present action. [4]

On July 14, 1993, the MeTC rendered its decision, [5] the dispositive portion of which
reads:

WHEREFORE, a judgment is rendered in favor of the plaintiffs ordering the defendants:

1357
 1) To vacate the subject parcels of land and surrender possession thereof upon
the payment by the plaintiff of one-half of the value of the building constructed
by the lessee.  Should the lessor refuse to reimburse the aforesaid amount, the
lessee shall have the option to exercise her right under Article 1678 of the New
Civil Code;

2) To pay rental arrearages up to July 1, 1992 in the amount of Two Hundred

Twenty Eight Thousand and Forty Four 80/100 Pesos (P228,044.80);

3) To pay, as reasonable compensation for their continued withholding of

possession of the subject lots, the sum of Three Thousand Two Hundred and
Twenty One Pesos (P3,221.00) every month, commencing July 2, 1992 up to
such time that they finally yield possession thereof to the plaintiffs, subject to
an increase of ten percent (10%) after every two (2) years from said date; and

4) To pay plaintiffs attorney's fees in the sum of Five Thousand Pesos

(P5,000.00)

No pronouncement as to costs.

SO ORDERED.[6]

Petitioners appealed to the Regional Trial Court (RTC) of Makati City, Branch 63 (Civil
Case No. 93-3733) which reversed the MeTC.  The RTC found that petitioners have in
fact exercised their option to buy the leased property but the respondents refused to
honor the same.  It noted that respondents even informed the petitioners about
foreclosure proceedings on their property, whereupon the petitioners tried to intervene 
by tendering rental payments but the respondents advised them to withhold such
payments until the appeal of respondents in the case they filed against the Rural Bank
of Bombon (Camarines Sur), Inc. (Civil Case No. 6062) is resolved. It further noted that
respondents' intention to sell the lot to petitioners is confirmed by the fact that the former
allowed the latter to construct a building of strong materials on the premises. The RTC
thus decreed:

IN THE LIGHT OF THE FOREGOING, judgment is hereby rendered reversing the

decision of the lower court dated July 14, 1993 and ordering as follows:

1) That plaintiffs execute a deed of absolute sale over that parcel of land subject
of the Contract of Lease dated June 30, 1982 after full payment of defendants
of the purchase price of P150,000.00;

2) That plaintiffs pay the costs of suit.

1358
SO ORDERED.[7]

Respondents filed a motion for reconsideration on December 23, 1994. In its Order
dated March 24, 1995, the RTC denied the motion for having been filed beyond the
fifteen (15)-day period considering that respondents received a copy of the decision on
December 7, 1994.[8] Consequently, the November 18, 1994 decision of the RTC
became final and executory.[9]

On December 22, 1998, respondents filed a petition for annulment of the RTC decision
in the CA. Respondents assailed the RTC for ordering them to sell their property to
petitioners arguing that said court's appellate jurisdiction in ejectment cases is limited to
the determination of who is entitled to the physical possession of real property and the
only judgment it can render in favor of the defendant is to recover his costs, which
judgment is conclusive only on the issue of possession and does not affect the
ownership of the land.  They contended that the sale of real property by one party to
another may be ordered by the RTC only in a case for specific performance falling
under its original exclusive jurisdiction, not in the exercise of its appellate jurisdiction in
an ejectment case.  Respondents also alleged that the petition for annulment is the only
remedy available to them because the ordinary remedies of new trial, appeal, petition
for relief or other appropriate remedies are no longer available through no fault on their
part.

By Decision dated February 27, 2004, the CA granted the petition, annulled the
November 18, 1994 RTC decision and reinstated the July 14, 1993 MeTC decision.  On
the issue of lack of jurisdiction raised by the respondents, the CA ruled as follows:

It must be stressed that the main action before the Metropolitan Trial Court is one for
ejectment grounded on the expiration of the parties' contract of lease. And said court,
finding that petitioners have a valid right to ask for the ejectment of private respondents,
ordered the latter to vacate the premises and to pay their rentals in arrears.  To Our
mind, what the respondent court should have done in the exercise of its appellate
jurisdiction, was to confine itself to the issue of whether or not petitioners have a valid
cause of action for ejectment against the private respondents.

Unfortunately, in the decision herein sought to be annulled, the respondent court went
further than what is required of it as an appellate court when it ordered the petitioners to
sell their properties to the private respondents. In a very real sense, the respondent
court materially changed the nature of petitioners' cause of action by deciding the
question of ownership even as the appealed case involves only the issue of
prior physical possession which, in every ejectment suit, is the only question to
be resolved.  As it were, the respondent court converted the issue to one for specific
performance which falls under its original, not appellate jurisdiction.  Sad to say, this
cannot be done by the respondent court in an appealed ejectment case because the
essential criterion of appellate jurisdiction is that it revises and corrects the proceedings
in a cause already instituted and does not create that cause (Marbury v. Madison, 1
1359
Cranch (U.S.), 137, 172, 2 L. edition 60, cited in 15 Corpus Juris 727).

It follows that the respondent Regional Trial Court clearly acted without jurisdiction when
it ordered the petitioners to sell their properties to the private respondents.  The order to
sell can be made only by the respondent court in an action for specific performance
under its exclusive original jurisdiction, and not in the exercise of
its appellate jurisdiction in an appealed ejectment suit, as in this case. Worse, the relief
granted by the same court was not even prayed for by the private respondents in their
Answer and position paper before the MTC, whereat they only asked for the dismissal
of the complaint filed against them.[10] (Emphasis supplied.)

With the denial of their motion for reconsideration, petitioners filed the present petition
raising the following issues:

WHETHER THE COURT OF APPEALS COMMITTED A GRAVE ERROR IN

ANNULLING THE JUDGMENT BY THE REGIONAL TRIAL COURT OF MAKATI CITY
NOTWITHSTANDING THE FINDING THAT THE ORDINARY REMEDIES OF NEW
TRIAL, APPEAL, PETITION FOR RELIEF OR OTHER APPROPRIATE REMEDIES
WERE LOST THROUGH THE FAULT OF THE RESPONDENTS

WHETHER THE COURT OF APPEALS COMMITTED A GRAVE ERROR IN

ANNULLING THE JUDGMENT BY THE REGIONAL TRIAL COURT OF MAKATI CITY
ON THE GROUND OF "LACK OF JURISDICTION" WHEN IT HAS NOT BEEN
SHOWN THAT THE REGIONAL TRIAL COURT OF MAKATI CITY HAD NO
JURISDICTION OVER THE PERSON OF THE RESPONDENTS OR THE SUBJECT
MATTER OF THE CLAIM[11]

The petition is meritorious.

A petition for annulment of judgments or final orders of a Regional Trial Court in civil
actions can only be availed of where "the ordinary remedies of new trial, appeal, petition
for relief or other appropriate remedies are no longer available through no fault of the
petitioner."[12]  It is a remedy granted only under exceptional circumstances and such
action is never resorted to as a substitute for a party's own neglect in not promptly
availing of the ordinary or other appropriate remedies. [13]  The only grounds provided in
Sec. 2, Rule 47 are extrinsic fraud and lack of jurisdiction.

In this case, respondents alleged that the loss of remedies against the RTC decision
was attributable to their former counsel's late filing of their motion for reconsideration
and failure to file any proper petition to set aside the said decision. They claimed that
they had been constantly following up the status of the case with their counsel, Atty.
Jose Atienza, who repeatedly assured them he was on top of the situation and would
even get angry if repeatedly asked about the case. Out of their long and close

1360
relationship with Atty. Atienza and due regard for his poor health due to his numerous
and chronic illnesses which required frequent prolonged confinement at the hospital,
respondents likewise desisted from hiring the services of another lawyer to assist Atty.
Atienza, until the latter's death on September 10, 1998.  Thus, it was only on November
1998 that respondents engaged the services of their new counsel who filed the petition
for annulment of judgment in the CA.

We are not persuaded by respondents' asseveration.  They could have directly followed
up the status of their case with the RTC especially during the period of Atty. Atienza's
hospital confinement.  As party litigants, they should have constantly monitored the
progress of their case. Having completely entrusted their case to their former counsel
and believing his word that everything is alright, they have no one to blame but
themselves when it turned out that their opportunity to appeal and other remedies from
the adverse ruling of the RTC could no longer be availed of due to their counsel's
neglect.  That respondents continued to rely on the services of their counsel
notwithstanding his chronic ailments that had him confined for long periods at the
hospital is unthinkable.  Such negligence of counsel is binding on the client, especially
when the latter offered no plausible explanation for his own inaction.  The Court has
held that when a party retains the services of a lawyer, he is bound by his counsel's
actions and decisions regarding the conduct of the case.  This is true especially where
he does not complain against the manner his counsel handles the suit. [14]  The oft-
repeated principle is that an action for annulment of judgment cannot and is not a
substitute for the lost remedy of appeal. [15]

In any event, the petition for annulment was based not on fraudulent assurances or
negligent acts of their counsel, but on lack of jurisdiction.

Petitioners assail the CA in holding that the RTC decision is void because it granted a
relief inconsistent with the nature of an ejectment suit and not even prayed for by the
respondents in their answer.  They contend that whatever maybe questionable in the
decision is a ground for assignment of errors on appeal - or in certain cases, as ground
for a special civil action for certiorari under Rule 65 - and not as ground for its
annulment. On the other hand, respondents assert that the CA, being a higher court,
has the power to adopt, reverse or modify the findings of the RTC in this case.  They
point out that the CA in the exercise of its sound discretion found the RTC's findings
unsupported by the evidence on record which also indicated that the loss of ordinary
remedies of appeal, new trial and petition for review was not due to the fault of the
respondents.

We agree with the petitioners.

Lack of jurisdiction as a ground for annulment of judgment refers to either lack of

jurisdiction over the person of the defending party or over the subject matter of the
claim.[16]  In a petition for annulment of judgment based on lack of jurisdiction, petitioner
must show not merely an abuse of jurisdictional discretion but an absolute lack of
jurisdiction.  Lack of jurisdiction means absence of or no jurisdiction, that is, the court

1361
should not have taken cognizance of the petition because the law does not vest it with
jurisdiction over the subject matter. Jurisdiction over the nature of the action or subject
matter is conferred by law.[17]

There is no dispute that the RTC is vested with appellate jurisdiction over ejectment
cases decided by the MeTC, MTC or MCTC. We note that petitioners' attack on the
validity of the RTC decision pertains to a relief erroneously granted on appeal, and
beyond the scope of judgment provided in Section 6 (now Section 17) of Rule 70. [18] 
While the court in an ejectment case may delve on the issue of ownership or
possession de jure solely for the purpose of resolving the issue of possession de
facto, it has no jurisdiction to settle with finality the issue of ownership [19] and any
pronouncement made by it on the question of ownership is provisional in nature. [20]  A
judgment in a forcible entry or detainer case disposes of no other issue than possession
and establishes only who has the right of possession, but by no means constitutes a bar
to an action for determination of who has the right or title of ownership. [21]  We have held
that although it was proper for the RTC, on appeal in the ejectment suit, to delve on the
issue of ownership and receive evidence on possession de jure, it cannot adjudicate
with semblance of finality the ownership of the property to either party by ordering the
cancellation of the TCT.[22]

In this case, the RTC acted in excess of its jurisdiction in deciding the appeal of
respondents when, instead of simply dismissing the complaint and awarding any
counterclaim for costs due to the defendants (petitioners), it ordered the respondents-
lessors to execute a deed of absolute sale in favor of the petitioners-lessees, on the
basis of its own interpretation of the Contract of Lease which granted petitioners the
option to buy the leased premises within a certain period (two years from date of
execution) and for a fixed price (P150,000.00). [23]  This cannot be done in an ejectment
case where the only issue for resolution is who between the parties is entitled to the
physical possession of the property.

Such erroneous grant of relief to the defendants on appeal, however, is but an exercise
of jurisdiction by the RTC. Jurisdiction is not the same as the exercise of jurisdiction. As
distinguished from the exercise of jurisdiction, jurisdiction is the authority to decide a
cause, and not the decision rendered therein. [24] The ground for annulment of the
decision is absence of, or no, jurisdiction; that is, the court should not have taken
cognizance of the petition because the law does not vest it with jurisdiction over the
subject matter.[25]

Thus, while respondents assailed the content of the RTC decision, they failed to show
that the RTC did not have the authority to decide the case on appeal. As we held
in Ybañez v. Court of Appeals:[26]

On the first issue, we feel that respondent court acted inadvertently when it set aside
the RTC ruling relative to the validity of the substituted service of summons over the
persons of the petitioners in the MTC level.  We must not lose sight of the fact that what
was filed before respondent court is an action to annul the RTC judgment and not a
petition for review.  Annulment of judgment may either be based on the ground that a
1362
judgment is void for want of jurisdiction or that the judgment was obtained by extrinsic
fraud.  There is nothing in the records that could cogently show that the RTC lacked
jurisdiction. Chiefly, Section 22 of B.P. Blg. 129, otherwise known as the Judiciary
Reorganization Act of 1980, vests upon the RTC the exercise of an "appellate
jurisdiction over all cases decided by the Metropolitan Trial Courts, Municipal Trial
Courts, and Municipal Circuit Trial Courts in their respective territorial jurisdictions."
Clearly then, when the RTC took cognizance of petitioners' appeal from the
adverse decision of the MTC in the ejectment suit, it (RTC) was unquestionably
exercising its appellate jurisdiction as mandated by law. Perforce, its decision
may not be annulled on the basis of lack of jurisdiction as it has, beyond cavil,
jurisdiction to decide the appeal.[27] (Emphasis supplied.)

The CA therefore erred in annulling the November 18, 1994 RTC decision on the
ground of lack of jurisdiction as said court had jurisdiction to take cognizance of
petitioners' appeal.

On the timeliness of the petition for annulment of judgment filed with the CA, Section 3,
Rule 47 of the Rules of Court provides that a petition for annulment of judgment based
on extrinsic fraud must be filed within four years from its discovery; and if based on lack
of jurisdiction, before it is barred by laches or estoppel. The principle of laches or "stale
demands" ordains that 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--negligence or omission to assert a right within a reasonable time, warrants
a presumption that the party entitled to assert it has abandoned it or declined to assert
it.[28]  There is no absolute rule as to what constitutes laches or staleness of demand;
each case is to be determined according to its particular circumstances. [29]

Here, respondents' failure to assail the RTC ruling in a petition for review or certiorari
before the CA, rendered the same final and executory.  Having lost these remedies due
to their lethargy for three and a half years, they cannot now be permitted to assail anew
the said ruling rendered by the RTC in the exercise of its appellate jurisdiction. Their
inaction and neglect to pursue available remedies to set aside the RTC decision for
such length of time, without any acceptable explanation other than the word of a former
counsel who already passed away, constitutes unreasonable delay warranting the
presumption that they have declined to assert their right over the leased premises which
continued to be in the possession of the petitioners. Clearly, respondents' petition to
annul the final RTC decision is barred under the equitable doctrine of laches.

WHEREFORE, the petition for review on certiorari is GRANTED.  The Decision dated

February 27, 2004 and Resolution dated May 14, 2004 of the Court of Appeals in CA-
G.R. SP No. 49998 are SET ASIDE.  The petition for annulment of judgment filed by
herein respondents is DISMISSED.

No costs.

SO ORDERED.

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 THIRD DIVISION

G.R. No. 200072, June 20, 2016

PHILIP YU, Petitioner, v. VIVECA LIM YU, Respondent.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking to reverse and set aside the Decision 1 dated September 30, 2011 and
Resolution2 dated January 5, 2012 of the Court of Appeals (CA) in CA-G.R. SP No.
111414 which granted the petition for the annulment of the Decision 3 dated August 20,
2008 of the Regional Trial Court (RTC), Fourth Judicial Region, Branch 10, Balayan,
Batangas.

The factual antecedents are as follows.

Petitioner Philip Yu and respondent Viveca Lim Yu were married on November 18,
1984. They had four children and maintained their conjugal home at Room 1603
Horizon Condominium, Meralco Avenue, Pasig, Metro Manila. In 1993, however, Viveca
left the conjugal home with their four children and filed a Petition for Legal Separation
against Philip before the RTC of Pasig City, Branch 261, for repeated physical violence,
grossly abusive conduct against her and the children, sexual infidelity, and attempt on
her life. She prayed for permanent custody over the children, support, and the
dissolution and distribution of their conjugal partnership valued at approximately
P5,000,000.00.4chanrobleslaw

Philip denied the accusations against him claiming that it was Viveca who actually
attacked him a few times. He narrated that his marriage to Viveca was arranged
according to the Chinese tradition and that it was much later when he discovered
Viveca's excessively jealous, cynical, and insecure behaviour. He countered that since
she abandoned the family home, taking their four children away, she was not entitled to
support. She was, likewise, unqualified to become the administrator of their conjugal
funds, which had outstanding obligations. Thus, Philip prayed in his Counterclaim for
the declaration of nullity of their marriage due to Viveca's psychological incapacity,
rendering her incapable of complying with her marital obligations. 5chanrobleslaw

On April 24, 2007, however, Philip filed a Motion to Withdraw Counterclaim for
Declaration of Nullity of Marriage revealing that he no longer had the desire to have his
marriage declared void. Despite Viveca's fervent opposition, the Pasig RTC granted the
motion.6chanrobleslaw

On July 1, 2009, the RTC of Pasig City rendered a Decision 7 dismissing the Petition for
Legal Separation in the following wise:ChanRoblesVirtualawlibrary

1364
From the facts obtaining in this case, the Court finds that the parties are in pari
delicto warranting a denial of this petition. Respondent's illicit relationship with Linda
Daet and his repeated verbal and physical abuses towards petitioner come within the
purview of pars. 8 and 1 of Art. 55 of the Family Code of the Philippines whereas
petitioner's unjustifiable abandonment bringing with her their children without the
knowledge and consent of respondent and her assaulting respondent with a 10-inch
knife are those contemplated in pars. 10 and 9 of the same code.

Notwithstanding the foregoing Court's findings, the same becomes moot with the
declaration of nullity of the marriage of the parties, on the ground of the
psychological incapacity of petitioner, Viveca Yu, pursuant to the Decision of
Branch 10, RTC of Balayan, Batangas, which attained its finality on October 13,
2008. Since the marriage of the parties was declared a nullity there is, therefore, no
legal basis to issue a decree of legal separation to the spouses whose marriage has
already been declared of no force and effect.

WHEREFORE, premises considered, this petition should be, as it is hereby

DISMISSED, for lack of merit.

SO ORDERED.8chanroblesvirtuallawlibrary
Claiming to be completely unaware of the proceedings before the RTC of Balayan,
Batangas, nullifying her marriage with Philip on the ground of her psychological
incapacity, Viveca filed a Petition for Annulment of Judgment 9 before the CA seeking to
annul the Decision dated August 20, 2008 of said court. According to Viveca, jurisdiction
over her person did not properly vest since she was not duly served with Summons.
She alleged that she was deprived of her right to due process when Philip fraudulently
declared that her address upon which she may be duly summoned was still at their
conjugal home, when he clearly knew that she had long left said address for the United
States of America. Viveca likewise maintained that had Philip complied with the legal
requirements for an effective service of summons by publication, she would have been
able to rightly participate in the proceedings before the Batangas court.

On September 30, 2011, the CA granted Viveca's petition ruling as

follows:ChanRoblesVirtualawlibrary
The Petition for Declaration of Nullity of Marriage affecting the personal status of private
respondent is in the nature of an action in rem. This is so because the term "personal
status" includes family relations, particularly the relations between husband and wife.

With this premise in mind, it is beyond cavil that the court a quo was justified in resorting
to Summons by publication. Petitioner is a nonresident defendant who left the
Philippines with her children way back in 1997 and has now been living in the United
States of America. The court a quo validly acquired jurisdiction to hear and decide the
case given that as adumbrated, in a proceeding 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.

1365
Still and all, there is more to this case than meets the eye. Private respondent
knew that petitioner left the conjugal home on account of their marital
difficulties. She temporarily resided at her parent's house in Greenhills, Mandaluyong,
Metro Manila. But during the pendency of the Legal Separation case, she lived in
Quezon City. This much was revealed by private respondent himself in
the Amended Answer with Counterclaim filed in the Legal Separation suit-
"10. After abandoning the conjugal abode on 24 August 1993, petitioner resided at
her parent's house in Richbelt Condominium, Annapolis Street, Greenhills,
Mandaluyong, Metro Manila, until she moved to her present address in October
1993. x x x x
This knowledge notwithstanding, private respondent declared before the court a
quo that the "last known address" of petitioner was still her conjugal abode at
Unit 1603 Horizon Condominium, Mcralco Avenue, Ortigas, Pasig City. While
private respondent knew that it was well-nigh impossible for petitioner to
receive Summons and other court notices at their former conjugal home, still, he
supplied the aforesaid address.

We cannot turn a blind eye to the fact that private respondent moved for the
dismissal of his counterclaim for nullity of marriage in the Legal Separation case
in 2007 as he had by then had the sinister motive of filing the Petition for
Declaration of Nullity of Marriage before the court a quo. Private respondent knew
that if he breathed a word on the filing and pendency of the latter Petition,
petitioner would vigorously resist it as revealed by her tenacious opposition in
the proceedings before the RTC-Pasig.

The deceitful scheme employed by private respondent deprived petitioner of her

constitutional right to due process which ensued in her failure to participate in
the proceedings before the court a quo. To Our mind, this compelling justification
warrants the annulment of judgement.10chanroblesvirtuallawlibrary
In its Resolution dated January 5, 2012, the CA denied Philip's Motion for
Reconsideration finding no cogent and persuasive reason to revise or reverse its
Decision. Hence, this petition invoking the following
grounds:ChanRoblesVirtualawlibrary
I.

THE COURT OF APPEALS ERRED WHEN IT SET ASIDE THE FINAL AND
EXECUTORY DECISION OF THE COURT A QUO DESPITE ITS ACCURATE
FINDINGS THAT THE COURT A QUO PROPERLY ACQUIRED JURISDICTION OVER
THE ACTION IN REM THROUGH SUMMONS BY PUBLICATION.

II.

THE PUBLICATION OF THE ORDER OF THE COURT A QUO, SUMMONS, THE

COMPLAINT AS WELL AS THE DECISION RENDERED THEREIN IS NOTICE TO
THE WHOLE WORLD INCLUDING RESPONDENT. RESPONDENT WAS

1366
THEREFORE CONSTRUCTIVELY NOTIFIED OF THE PROCEEDINGS AND WAS
NOT DENIED DUE PROCESS HAVING BEEN DULY NOTIFIED BY PUBLICATION.

III.

RESPONDENT HAS BEEN DOMICILED IN THE UNITED STATES OF AMERICA FOR

MORE THAN TEN (10) YEARS AND WHOSE ADDRESS IS UNKNOWN TO
PETITIONER. AS FAR AS PETITIONER IS CONCERNED, UNIT 1603 HORIZON
CONDOMINIUM, MERALCO AVENUE, PASIG CITY IS THE LAST KNOWN ADDRESS
OF RESPONDENT, BEING THE CONJUGAL HOME.

IV.

PETITIONER IS CURRENTLY NOT A RESIDENT OF THE CONJUGAL HOME.

V.

THE OFFICE OF THE SOLICITOR GENERAL AND/OR THE OFFICE OF THE CITY
PROSECUTOR OF BALAYAN, BATANGAS, APPEARED AS COUNSEL FOR THE
STATE AND FULLY PROTECTED THE INTEREST OF THE STATE INCLUDING THE
INTEREST OF RESPONDENT.

VI.

PETITIONER CANNOT BE FAULTED FOR MOVING FOR THE WITHDRAWAL OF

HIS COUNTER-CLAIM FOR DECLARATION OF NULLITY OF MARRIAGE, WHICH IS
ALLOWED BY SECTION 2, RULE 17 OF THE NEW RULES OF COURT AS
AMENDED, AND SAID WITHDRAWAL WAS EVEN APPROVED BY THE RTC OF
PASIG.

VII.

THE PETITION FOR ANNULMENT OF DECISION FILED BEFORE THE COURT OF

APPEALS WAS DEFECTIVE AND NOT IN ACCORDANCE WITH RULE 47 OF THE
NEW RULES OF COURT, AS AMENDED, FOR HAVING FAILED TO STATE AND
ALLEGE THE DEFENSES THAT RESPONDENT HAS AGAINST PETITIONER.

VIII.

EVEN ASSUMING ARGUENDO THAT THE DEFENSES THAT ARE AVAILABLE TO

RESPONDENT ARE THOSE THAT WERE PRESENTED IN THE LEGAL
SEPARATION CASE THAT WAS DISMISSED BY THE RTC OF PASIG CITY, SAID
GROUNDS ONLY BOLSTER THE FACT THAT THE DECISION DATED AUGUST 20,
2008 OF THE RTC OF BALAYAN, BATANGAS, CORRECTLY NULLIFIED THE
MARRIAGE DUE TO RESPONDENT'S PSYCHOLOGICAL INCAPACITY.

IX.

1367
THE COURT OF APPEALS DID NOT OBSERVE AND FOLLOW SECTIONS 6 AND 7
OF RULE 47 OF THE REVISED RULES OF COURT, AS AMENDED.
In essence, Philip questions the appellate court's judgment of setting aside the decision
of the Batangas RTC despite its own finding that said court validly acquired jurisdiction
when Summons was duly served on Viveca by publication. He maintains that since
service of summons was properly accomplished by publication thereof in a newspaper
of general circulation as well as its personal service on Viveca at her last known
address, it logically follows that any and all resolutions rendered by the trial court are
valid and binding on the parties. Thus, the decision of the Batangas court which
acquired jurisdiction over the res should be immutable as it is already final and
executory.11chanrobleslaw

Philip also questions the appellate court's choice of supporting jurisprudence alleging
them to be inapplicable to the instant case. He asserts that the teachings in Spouses
Belen v. Judge Chavez,12Biaco v. Philippine Countryside Rural Bank,13 and Ancheta v.
Judge Ancheta14 fail to be instructive simply because they involve substituted service of
summons whereas the mode of service in this case is by publication. Philip further
asserts that said jurisprudential doctrines even teach us that in proceedings in
rem or quasi in rem, such as the case at hand, jurisdiction over the defendant is not a
prerequisite to confer jurisdiction on the court for as long as the court acquires
jurisdiction over the res. Thus, 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, which in this case was duly complied with when Viveca, who is a non-
resident, not found in the Philippines, was served with summons by
publication.15chanrobleslaw

Hence, Philip faults the CA in finding that due to his bad faith in maliciously supplying
the Batangas court with an erroneous address wherein Viveca may supposedly be
summoned, she was deprived of her constitutional right to due process, warranting the
annulment of the subject judgment. According to him, as far as he was concerned,
Viveca's last known address was their conjugal home. This is because the addresses
supplied in the proceedings of the Legal Separation case before the RTC of Pasig City
were merely temporary in nature.16 Philip recalled that when Viveca left their conjugal
abode on August 24, 1993, she temporarily stayed at her parents' house in Greenhills,
Mandaluyong, for less than two months then, thereafter, stayed at her temporary
residence at Domingo Street, Cubao, Quezon City, in October 1993. Considering that
said addresses were merely temporary, Philip claims that he should not be faulted for
using their conjugal abode as Viveca's "last known address." According to him, what is
mandated by the rules as the defendant's "last known address" is his or her last
known permanent address, and certainly not one of temporary nature. 17chanrobleslaw

The petition is bereft of merit.

Annulment of judgment is a recourse equitable in character, allowed only in exceptional

cases as where there is no available or other adequate remedy. Section 2, Rule 47 of

1368
the 1997 Rules of Civil Procedure provides that judgments may be annulled only on
grounds of extrinsic fraud and lack of jurisdiction or denial of due process. 18 The
objective of the remedy of annulment of judgment or final order is to undo or set aside
the judgment or final order, and thereby grant to the petitioner an opportunity to
prosecute his cause or to ventilate his defense. If the ground relied upon is lack of
jurisdiction, the entire proceedings are set aside without prejudice to the original action
being refiled in the proper court. If the judgment or final order or resolution is set aside
on the ground of extrinsic fraud, the CA may on motion order the trial court to try the
case as if a timely motion for new trial had been granted therein. 19chanrobleslaw

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.20 Fraud is extrinsic where the unsuccessful party had been prevented
from exhibiting fully his case, by means of fraud or deception, as by keeping him away
from court, or by 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; these and similar cases which show that there has never been a real contest
in the trial or hearing of the case are reasons for which a new suit may be sustained to
set aside and annul the former judgment and open the case for a new and fair hearing.
Ultimately, the overriding consideration is that the fraudulent scheme of the prevailing
litigant prevented a party from having his day in court. 21chanrobleslaw

In the present case, We find that Viveca was completely prevented from participating in
the Declaration of Nullity case because of the fraudulent scheme employed by Philip
insofar as the service of summons is concerned.

Summons is a writ by which the defendant is notified of the action brought against him.
Through its service, the court acquires jurisdiction over his person. 22 As a rule,
Philippine courts cannot try any case against a defendant who does not reside and is
not found in the Philippines because of the impossibility of acquiring jurisdiction over his
person unless he voluntarily appears in court. Section 15, Rule 14 of the Rules of Court,
however, enumerates the actions in rem or quasi in rem when Philippine courts have
jurisdiction to hear and decide the case because they have jurisdiction over the res, and
jurisdiction over the person of the non-resident defendant is not essential. 23 Said section
provides:ChanRoblesVirtualawlibrary
Section 15. Extraterritorial service. — When the defendant does not reside and is
not found in the Philippines, and the action affects the personal status of the
plaintiff or relates to, or the subject of which is, property within the Philippines, in which
the defendant has or claims a lien or interest, actual or contingent, or in which the relief
demanded consists, wholly or in part, in excluding the defendant from any interest
therein, or the property of the defendant has been attached within the Philippines,
service may, by leave of court, be effected out of the Philippines by personal service as
under section 6; or by publication in a newspaper of general circulation in such
places and for such time as the court may order, in which case a copy of the

1369
summons and order of the court shall be sent by registered mail to the last
known address of the defendant, or in any other manner the court may deem
sufficient. Any order granting such leave shall specify a reasonable time, which shall
not be less than sixty (60) days after notice, within which the defendant must answer.
(17a)
Thus, under Section 15 of Rule 14, a defendant who is a non-resident and is not found
in the country may be served with summons by extraterritorial service in four instances:
(1) when the action affects the personal status of the plaintiff; (2) when the action
relates to, or the subject of which is property within the Philippines, in which the
defendant has or claims a lien or interest, actual or contingent; (3) when the relief
demanded consists, wholly or in part, in excluding the defendant from any interest in
property located in the Philippines; or (4) when the property of the defendant has been
attached within the Philippines.24chanrobleslaw

In these instances, extraterritorial service of summons may be effected under any of

three modes: (1) by personal service out of the country, with leave of court; (2) by
publication and sending a copy of the summons and order of the court by registered
mail to the defendant's last known address, also with leave of court; or (3) by any other
means the judge may consider sufficient. 25cralawredchanrobleslaw

In the present case, it is undisputed that when Philip filed the Petition for Declaration of
Nullity of Marriage, an action which affects his personal status, Viveca was already
residing in the United States of America. Thus, extraterritorial service of summons
under Section 15, Rule 14 of the Rules of Court is the proper mode by which summons
may be served on Viveca, a non-resident defendant who is not found in the Philippines.
In compliance therewith, Philip claims that Viveca was duly served summons because:
(1) copies of the summons, complaint, and order of the Batangas court were published
in Tempo, a newspaper of general circulation on March 27, 2008 and April 3,
2008;26 and (2) the sheriff served copies of the summons, complaint, and order of the
Batangas court on Viveca at their conjugal home in Pasig City, her last known
address.27 Thus, he contends that the second mode of extraterritorial service of
summons mentioned above - by publication and sending a copy of the summons and
order of the court by registered mail to the defendant's last known address - was
sufficiently complied with. The Court finds, however, that such service of summons on
their conjugal home address cannot be deemed compliant with the requirements of the
rules and is even tantamount to deception warranting the annulment of the Batangas
court's judgment.

Philip fervently asserts the propriety of their conjugal home address as Viveca's "last
known address," well within the true meaning and intent of the rules. But as borne by
the records of the instant case, not only is he mistaken, factual considerations herein
belie his claims of good faith. First and foremost, it is undisputed that the parties herein
are also parties in a Legal Separation case, previously filed by Viveca way back in
1994. There was, in said case, a disclosure of their basic personal information, which
customarily includes their respective local addresses, wherein they may be served with
court papers. In fact, as pointed out by the appellate court, Philip knew that Viveca had

1370
already left their conjugal home and moved to a different local address for purposes of
the pendency of the Legal Separation case, as shown by his stipulation in his Amended
Answer with Counterclaim that "after abandoning the conjugal abode on 24 August
1993, petitioner resided at her parent's house in Richbelt Condominium, Annapolis
Street, Greenhills, Mandaluyong, Metro Manila, until she moved to her present address
in October 1993." Thus, Philip cannot be allowed to feign ignorance to the fact that
Viveca had already intentionally abandoned their conjugal abode and that of all the
addresses that Viveca resided at, their conjugal home in Horizon Condominium is her
least recent address. In fact, it may very well be considered as the address she is least
likely to be found considering the circumstances in which she left the same. Note that
from the very beginning of the Legal Separation case in 1994, all the way up until the
promulgation by the Pasig RTC of its decision thereon in 2009, there is no showing that
Viveca had ever received any document in relation to said case, nor is there any proof
that Philip had ever sent any pertinent file to Viveca, at the conjugal address. There is,
therefore, no reason for Philip to assume, in good faith, that said address is in truth and
in fact Viveca's "last known address" at which she may receive summons. His
contention that the rules require the defendant's "last known address" to be of a
permanent, and not of a temporary nature, has no basis in law or jurisprudence.

In addition, the Court is curious as to why Philip filed the instant Petition for Declaration
of Nullity of Marriage28 before the RTC of Batangas City on February 15, 2008 when
less than a year before filing the same, he had motioned the RTC of Pasig City on April
24, 2007 to withdraw his counterclaim for the same declaration of nullity of
marriage.29 In his petition before the Court, Philip explained that he withdrew his
counterclaim in the Legal Separation case in his "desire to explore the possibility of
having a so-called 'universal settlement' of all the pending cases with respondent and
her relatives for the sake of his love for his four (4) children." 30 Yet, in an apparent,
direct contravention of this so-called "desire," he filed an identical action which sought
the same nullity of his marriage with Viveca. Thus, while there may be no outright
admission on Philip's part as to a sinister motive, his inconsistent actions effectively
negate his claims of good faith.

It is interesting to note, moreover, that as pointed out by Viveca, Philip does not even
reside in Batangas, the city of the court wherein he filed his Petition for Declaration of
Nullity of Marriage. In a Certification31 issued by Ricardo V. Bautista, Barangay
Chairman of Poblacion 1, Calatagan, Batangas, it was categorically stated that "the
name Philip Yu is not a resident of Barangay Poblacion 1, Calatagan, Batangas."
Section 4 of A.M. No. 02-11-10-SC, otherwise known as the Rule on Declaration of
Absolute Nullity of Void Marriages and Annulment of Voidable Marriages, which took
effect on March 15, 2003, provides:ChanRoblesVirtualawlibrary
Section 4. Venue. - The Petition shall be filed in the Family Court of the province or
city where the petitioner or the respondent has been residing for at least six
months prior to the date of filing. Or in the case of non-resident respondent, where
he may be found in the Philippines, at the election of the
petitioner.32chanroblesvirtuallawlibrary

1371
It is, therefore, evident that not only did Philip contradict his previous Motion to
Withdraw his Counterclaim for the Declaration of Nullity of marriage, he even violated a
basic mandate of law so as to be able to file the same action before a different court in a
city he was not even a resident of.

Thus, while individually and in isolation, the aforementioned doubtful circumstances

may not instantly amount to extrinsic fraud, these circumstances, when viewed in
conjunction with each other, paint a deceitful picture which resulted in a violation of
Viveca's constitutional right to due process. True, the service of summons in this case is
not for the purpose of vesting the court with jurisdiction, but for the purpose of
complying with the requirements of fair play or due process. But because of Philip's
employment of deceptive means in the service of summons on Viveca, said purpose of
satisfying the due process requirements was never accomplished. To this Court, when
Philip declared before the Batangas court that Viveca's last known address was still
their conjugal home with full and undisputed knowledge that she had already
intentionally abandoned the same and had even established a more recent, local
residence herein evinces a clear lack of good faith. As a result, Viveca never had
knowledge of the filing of the Declaration of Nullity of Marriage suit, only finding out
about the same when the Pasig City RTC had promulgated its decision on the Legal
Separation case. It is clear, therefore, that because of the service of summons at the
erroneous address, Viveca was effectively prevented from participating in the
proceedings thereon.

In Acance v. Court of Appeals,33 where the extraterritorial service of summons on the

non-resident, US citizen, defendants therein were held to be defective due to the
absence of proof that the summons, complaint, and order of the court were duly served
at their last known correct address, the Court ruled that the failure to strictly comply
correctly with the requirements of the rules regarding the mailing of copies of the
summons and the order for its publication is a fatal defect in the service of
summons.34 Citing Dulap, et al. v. Court of Appeals, et al.,35 it elucidated as
follows:ChanRoblesVirtualawlibrary
It is the duty of the court to require the fullest compliance with all the requirements of the
statute permitting service by publication. Where service is obtained by publication, the
entire proceeding should be closely scrutinized by the courts and a strict compliance
with every condition of law should be exacted. Otherwise great abuses may occur, and
the rights of persons and property may be made to depend upon the elastic conscience
of interested parties rather than the enlightened judgment of the court or
judge.36chanroblesvirtuallawlibrary
Indeed, due process requires that those with interest to the thing in litigation be notified
and given an opportunity to defend those interests. 37 When defendants are deprived of
such opportunity to duly participate in, and even be informed of, the proceedings, due to
a deceitful scheme employed by the prevailing litigant, as in this case, there exists a
violation of their due process rights. Any judgment issued in violation thereof necessarily
suffers a fatal infirmity for courts, as guardians of constitutional rights cannot be
expected to deny persons their due process rights while at the same time be considered
as acting within their jurisdiction.38 This Court, therefore, deems as proper the

1372
annulment of the Batangas court's judgment issued without proper service of summons.

WHEREFORE, premises considered, the instant petition is DENIED. The assailed

Decision dated September 30, 2011 and Resolution dated January 5, 2012 of the Court
of Appeals in CA-G.R. SP No. 111414 are AFFIRMED.

SO ORDERED.chanRoblesvirtualLawlibrary

THIRD DIVISION

G.R. No. 193397, January 25, 2017

ESTRELLA MEJIA-ESPINOZA AND NORMA MEJIA DELLOSA, Petitioners, v. NENA

A. CARIÑO, Respondent.

DECISION

JARDELEZA, J.:

Rule 47 of the Rules of Court allows an aggrieved party to file an action for annulment
of judgment or final orders under extraordinary circumstances. The question before us
in this petition for review on certiorari, which seeks to set aside the Decision1 dated
November 26, 2009 and Resolution2 dated August 3, 2010 of the Court of Appeals in
CA-G.R. CV No. 89905, is whether the same remedy may be used to annul court
processes pursuant to a final and executory judgment whose validity is not being
questioned. We hold that it cannot.

Petitioner Estrella Mejia-Espinoza (Espinoza) was the plaintiff in an action for ejectment
against respondent Nena A. Cariño (Nena) before the Municipal Trial Court of
Mangaldan, Pangasinan (MTC). The case was docketed as Civil Case No. 1420. The
case was consolidated with another ejectment case, docketed as Civil Case No. 1419,
involving Espinoza and one Alberto Cariño (Alberto) covering a different property. 3 On
August 25, 1998, the MTC rendered a joint decision in favor of Espinoza. It ordered
Nena and Alberto to vacate the respective properties and to pay rents from time of
default, litigation expenses, and attorney's' fees. 4 Nena and Alberto separately appealed
the joint decision to the Regional Trial Cout of Dagupan City, Branch 43 (RTC Branch
43), which reversed the decision only with respect to Civil Case No. 1420 and dismissed
the case against Nena for lack of cause of action.5 On Espinoza's petition for review, the
Court of Appeals Special Seventeenth Division 6 (CA 17th Division) reversed the decision
of the RTC Branch 43 and affirmed the MTC decision. 7 Nena sought to elevate the case
to us on certiorari, but we denied it as a result of Nena's failure to file her petition for
review within the extended period. An entry of judgment was issued on December 3,
2003.8

Espinoza filed a motion for issuance of a writ of execution before the MTC, which Nena
1373
opposed.9 The MTC granted the motion on October 14, 2004 10 and subsequently issued
a writ of execution on March 10, 2005.11 Sheriff Vinez A. Hortaleza (Sheriff Hortaleza)
served the writ upon Nena on March 16, 2005. 12 When Sheriff Hortaleza proceeded to
the property subject of the ejectment suit, he found out that Nena had voluntarily
vacated the place and turned over the padlock to one Gertrudes Taberna, Nena's
caretaker. Thus, Sheriff Hortaleza was able to peacefully turn over the propetiy to co-
petitioner Norma Mejia Dellosa (Dellosa), Espinoza's attorney-in-fact. 13 Sheriff Hortaleza
then levied a separate commercial lot owned by Nena to cover the monetary awards for
rent, litigation expenses, and attorney's fees, and correspondingly issued a Notice of
Sale on Execution of Real Property14 scheduled on September 26, 2005.

On September 19, 2005, Nena filed a complaint captioned as "Annulment of Court's

Processes with prayer for the issuance of a Temporary Restraining Order, Preliminary
Injunction and/or Prohibition, and Damages" before the RTC of Dagupan City, which
was raffled to Branch 41 (RTC Branch 41).15 Nena argued that she was deprived of the
opportunity to ask for reconsideration of the order granting Espinoza's motion for
issuance of writ of execution because she was not furnished a copy of the order. She
claimed that Espinoza, through Dellosa, illegally caused the demolition, without a
special court order, of a one-story building which Nena allegedly constructed on the
land subject of the ejectment suit. Furthermore, she questioned the levy on her
commercial lot for being premature, as well as the computation of the judgment debt. 16

In her Answer,17 Espinoza emphasized that the writ of execution was properly served
and received by Nena on March 16, 2005, and that Nena had already removed all her
personal belongings from the premises weeks before the service of the writ. With
respect to the demolition of the one-story building, Espinoza claimed that it was the
previous owners of the land, the Penullars, who built the structure. On the levy of the
commercial lot, Espinoza asserted that it was proper due to Nena's continued defiance
of a final and executory judgment.18

In its Decision,19 the RTC Branch 41 dismissed the complaint for lack of cause of action.
It opined that the issue on the alleged irregularity of the issuance of the writ of execution
was rendered moot by its implementation. It noted that Nena had already voluntarily
relinquished her possession of the property-including the building-before the demolition.
The RTC Branch 41 also found that the levy on Nena's commercial lot was proper
because Sheriff Hortaleza found no personal properties belonging to Nena. With regard
to the computation of the amount, the RTC ruled that the sheriff was guided by the
decision in the ejectment suit. Finally, the RTC Branch 41 held that Nena availed of the
wrong remedy; instead of a petition for annulment under Rule 47, Nena should have
filed a petition for relief from judgment under Rule 38.

On appeal, the Court of Appeals Fourth Division (CA 4 th Division) reversed the RTC.20 It
held that Nena correctly filed the petition for annulment with the RTC of Dagupan City in
accordance with Section 10 of Rule 47. It brushed aside the RTC Branch 41's ruling that
Nena availed of the wrong remedy because according to the CA 4 th Division, regardless
of the caption of the pleading, Nena had a cause of action accruing from the violations

1374
of her rights. The CA 4th Division opined that because Nena did not receive a copy of
the order granting Espinoza's motion for issuance of writ of execution, it "did not
become final and executory insofar as [Nena] is concerned." 21 The CA 4th Division
concluded that the writ of execution was "premature and without legal basis" 22 and,
therefore, void.23 Next, the CA 4th Division ruled that the levy on Nena's commercial
property was void because the dispositive portion of the CA 17 th Division Decision in the
ejectment suit did not mention any monetary award. Lastly, the CA 4 th Division held that
Nena was entitled to damages because the one-story building was demolished without
the benefit of a writ of demolition as required by Section 10(d) 24 of Rule 39.25 The CA
4th Division then remanded the case to the RTC for the determination of the amount of
damages that Nena is entitled to.26

After the CA 4th Division denied Espinoza's motion for reconsideration, Espinoza filed
this petition tor review on certiorari.27 She asserts that the issuance of a writ of
execution based on a final and executory decision is a ministerial duty of the MTC, and
that Nena was nonetheless given her day in court when she filed her opposition to the
motion for execution. She also faults the CA 4 th Division for failing to properly appreciate
the dispositive portion of the CA 17th Division Decision in the ejectment suit. In that
case, the CA 17th Division affirmed the MTC Decision, which in turn ordered Nena to
vacate the premises and to pay rentals, litigation costs, and attorney's fees. 28 Espinoza
likewise disputes the necessity for a writ of demolition because Section 10(d) of Rule 39
only applies to "improvements constructed or planted by the judgment obligor or his
agent." Espinoza maintains that since it was the Penullars who constructed the building,
the provision is inapplicable. In any case, Espinoza contends that Nena's claim that she
built the building was unsubstantiated. 29 Finally, Espinoza argues that Nena is estopped
from questioning the validity of the writ of execution because she already voluntarily
surrendered possession of the property. 30 In her Comment,31 Nena reiterates the
reasoning of the CA 4th Division that the court processes were void.

II

A petition for annulment of judgment or final order under Rule 47 is an extraordinary

remedy that may be availed of only under certain exceptional circumstances. Under the
Rules, there are three requirements that must be satisfied before a Rule 47 petition can
prosper. First, the remedy is available only when the petitioner can no longer resort to
the ordinary remedies of new trial, appeal, petition for relief or other appropriate
remedies through no fault of the petitioner.32 This means that a Rule 47 petition is a
remedy of last resort-it is not an alternative to the ordinary remedies under Rules 37, 38,
40, 41, 42, 43, and 45. Second, an action for annulment of judgment may be based only
on two grounds: extrinsic fraud and lack of jurisdiction. 33Third, the action must be filed
within the temporal window allowed by the Rules. If based on extrinsic fraud, it must be
filed within four years from the discovery of the extrinsic fraud; if based on lack of
jurisdiction, must be brought before it is barred by laches or estoppel. 34 There is also a
formal requisite that the petition be verified, and must allege with particularity the facts
and the law relied upon for annulment, as well as those supporting the petitioner's good
and substantial cause of action or defense, as the case may be. 35

1375
The averments of Nena's complaint a quo, however, do not make out an action for
annulment of judgment or final order. It was therefore inaccurate for both the CA
4th Division and the RTC Branch 41 to characterize it as a Rule 47 petition. While the
non-compliance with the requisites laid down in Rule 47 is glaring-there is neither any
averment in the complaint showing prima facie compliance with the aforementioned
requisites nor even a reference to Rule 47-the first thing the lower courts should have
considered is the subject of the complaint. Nena is challenging the MTC's order granting
the issuance of the writ of execution, the writ of execution itself, as well as the sheriffs
notice of levy and notice of sale on her real property. Clearly, these are not the
judgments or final orders contemplated by Rule 47. A final order or resolution is one
which is issued by a court which disposes of the subject matter in its entirety or
terminates a particular proceeding or action, leaving nothing else to be done but to
enforce by execution what has been detem1ined by the court. 36 Rule 47 does not apply
to an action to annul the levy and sale at public auction. Neither does it apply to an
action to annul a writ of execution because a writ of execution is not a final order or
resolution, but is issued to carry out the mandate of the court in the enforcement of a
final order or of a judgment. It is a judicial process to enforce a final order or judgment
against the losing party.37

The proper remedy for Nena was to file a motion to nullify the writ of execution and
notices of levy and sale before the MTC, instead of instituting a new complaint before
the RTC.38 This is because the execution of a decision is merely incidental to the
jurisdiction already acquired by a trial court. As we explained in Deltaventures
Resources, Inc. v. Cabato:39
Jurisdiction once acquired is not lost upon the instance of the parties but continues until
the case is terminated. Whatever irregularities attended the issuance and execution
of the alias writ of execution should be referred to the same administrative
tribunal which rendered the decision. This is because any court which issued a writ
of execution has the inherent power, for the advancement of justice, to correct errors of
its ministerial officers and to control its own processes. 40 (Emphasis supplied; citations
omitted.)
Ostensibly, Nena's complaint before the RTC may be viewed as one for prohibition and
damages insofar as it also prayed for the issuance of a permanent injunction and award
of damages. While a petition for prohibition may be an available remedy to assail the
actions of a sheriff who performs purely ministerial functions, in excess or without
jurisdiction,41 the filing of the aforementioned motion with the MTC is still a precondition
to such action. This is because the motion is the "plain, speedy, and adequate remedy
in the ordinary course of law."42

Therefore, while the RTC Branch 41 is partially correct in dismissing the complaint for
being the wrong remedy, it incorrectly identified a petition for relief under Rule 38 as the
proper recourse. The correct remedy is a motion to nullify court processes filed with the
MTC.

III

1376
Even assuming that Nena availed of the appropriate remedy, her complaint is still
without merit.

Nena sought to annul the writ of execution because she did not receive a copy of the
MTC order granting the issuance of the writ of execution. Yet, she received a copy of
the writ without any protest and voluntarily vacated the premises and turned over
possession to Espinoza's representative. These actions evince Nena's recognition of
and acquiescence to, the writ of execution; she is therefore estopped from questioning
its validity. After all, she is fully aware of the finality of the decision in the ejectment case
and that execution of the decision is its logical consequence. "[W]hen a judgment has
been satisfied, it passes beyond review, satisfaction being the last act and the end of
the proceedings, and payment or satisfaction of the obligation thereby established
produces permanent and irrevocable discharge; hence, a judgment debtor who
acquiesces to and voluntarily complies with the judgment is estopped from taking an
appeal therefrom."43 Furthermore, as a result of Nena's voluntary compliance with the
writ, any issue arising from the issuance or enforcement of such writ is rendered moot.
Injunction is no longer available to question the transfer of possession to Espinoza, as
the act sought to be enjoined is already fait accompli.44

Nena's contention that her failure to receive a copy of the order deprived her of the
opportunity to file a motion for reconsideration is without legal basis, because she is not
entitled to file a motion for reconsideration in the first place. We have repeatedly held
that once a judgment becomes final, the prevailing party is entitled as a matter of right
to a writ of execution and its issuance is the trial court's ministerial duty. 45 When a
prevailing party tiles a motion for execution of a final and executory judgment, it is not
mandatory for such party to serve a copy of the motion to the adverse party and to set it
for hearing. The absence of such advance notice to the judgment debtor does not
constitute an infringement of due process. 46 Ergo, it follows that the opportunity to move
for reconsideration of an order granting execution is likewise not indispensable to due
process. This renders of little significance Nena's lack of opportunity to file a motion for
reconsideration. In fact, such motion for reconsideration may be considered as a mere
dilatory pleading, as it would serve no other purpose than to frustrate the execution of a
final judgment. In any case, the MTC actually gave Nena more than enough opportunity
to contest Espinoza's application for execution when it allowed her to file her opposition
to the motion for execution and heard the parties' arguments on the matter.

We are convinced that Nena's complaint for annulment of court processes, filed six
months after she voluntarily complied with the writ of execution, was a mere
afterthought designed to evade the execution of a decision that has long attained
finality. Public policy dictates that once a judgment becomes final, executory, and
unappealable, the prevailing party should not be denied the fruits of his victory by some
subterfuge devised by the losing party. Unjustified delay in the enforcement of a
judgment sets at naught the role of courts in disposing justiciable controversies with
finality.47
1377
 B

The CA 4th Division ordered the remand of the case to determine the amount of
damages Nena is entitled to as a result of the demolition of the one-story building
without a special writ of demolition. It relied on Section 10(d) of Rule 39 which prohibits
a sheriff from destroying, demolishing or removing any improvements constructed or
planted by the judgment obligor without a special order of the court. We agree with the
view of the CA 4th Division that the special writ for the purpose of demolition is required
even if there is already a writ of execution, and that a demolition performed without a
special writ may serve as basis for an independent civil action for damages. 48 However,
the CA 4th Division overlooked one crucial fact in this case: Nena admitted that she has
previously filed a complaint for damages in relation to the alleged illegal demolition. In
her Memorandum filed before the RTC Branch 41, she categorically stated that "the
illegal demolition of her building was already the subject of an earlier complaint for
damages that she asked her counsel to prepare." 49 Thus, her complaint, insofar as it
sought the award of damages based on the demolition, is dismissible on the ground
of litis pendentia.

Moreover, as correctly pointed out by Espinoza, the CA 4th Division merely assumed

that Nena was the builder of the one-story building. Apart from the bare allegations in
her pleadings and her own testimony, the records are bereft of any evidentiary basis to
support her claim. There are two elementary rules in litigation that the CA 4 th Division
failed to apply. First, the party who alleges must prove his case.50 Since Nena is seeking
reimbursement for the building she allegedly constructed, it was incumbent upon her to
prove by preponderance of evidence that the building was constructed at her own
expense, more so since Espinoza disputes Nena's ownership of the improvement.
However, Nena failed to present any tax declaration, receipt for construction materials,
or testimonies of the workers who physically built the structure which would tend to
substantiate her claim that the building was constructed at her expense. Second,
questions of fact must be resolved according to the evidence presented. 51 The general
rule is that courts must base their factual findings on such relevant evidence formally
offered during trial. Recognized exceptions to this are matters which courts can take
judicial notice of,52 judicial admissions,53 and presumptions created by law or by the
Rules.54 Here, we find nothing under Philippine law that creates a presumption that
improvements on a land were made by the lessee (in this case, Nena). On the contrary,
Article 446 of the Civil Code provides that "all works x x x are presumed made by the
owner and at his expense, unless the contrary is proved." Therefore, in the absence of
such contrary evidence, the CA 4th Division cannot expediently assume that the building
was constructed by Nena.

Finally, one of the grounds relied upon by the CA 4 th Division in annulling the writ of
execution was because it purportedly failed to conform to the judgment which is to be
executed. It pointed to the absence of any mention of monetary award in the dispositive
portion of the CA 17th Division's Decision in the ejectment suit that became final and
executory. We cannot sustain this unreasonably narrow reading of the fallo.
1378
To recall, the MTC rendered a joint decision against Nena and Alberto in the
consolidated ejectment cases. The MTC ordered both to vacate the respective premises
and to pay the corresponding rentals, litigation costs, and attorney's fees.
The fallo reads:ChanRoblesVirtualawlibrary
WHEREFORE, judgment is hereby rendered in:chanRoblesvirtualLawlibrary

1. Civil Case No. 1419 ordering defendant ALBERTO CARIÑO to vacate the premises
in question; to pay plaintiff ESTRELLA ESPINOZA Four Hundred Fifty (P450.00) Pesos
a month, as reasonable rental of said premises from the time of default until defendant
vacates the same; One Thousand (P1,000.00) Pesos as litigation expenses; Five
Thousand (P5,000.00) Pesos as attorney's fees in addition to costs of suit; and

2. Civil Case No. 1420 ordering defendant NENA CARIÑO to vacate the premises in
question; to pay plaintiff ESTRELLA ESPINOZA Four Hundred Fifty (P450.00) Pesos a
month, as reasonable rental of said premises from the time of default until defendant
vacates the same; One Thousand (P1,000.00) Pesos as litigation expenses; Five
Thousand (P5,000.00) Pesos as attorney's fees in addition to costs of
suit.55chanroblesvirtuallawlibrary
Nena and Albetio filed separate appeals with the RTC, which also consolidated the
cases. In its Joint Decision, the RTC Branch 43 reversed the MTC ruling in Civil Case
No. 1420 and decreed that "the case against Nena Cari[ñ]o is hereby dismissed for lack
of cause of action." However, it upheld the ruling against Alberto, and ordered that he
be ejected from the premises and increased the amount payable as rentals, litigation
expenses, and attorney's fees.56

Espinoza then elevated the case to the CA 17 th Division only with respect to the
dismissal of the case against Nena Albetio did not appeal the decision against him.
Eventually, the CA 17th Division reversed the RTC Branch 43 and affirmed the MTC
Decision. The fallo of the CA 17th Division Decision states:ChanRoblesVirtualawlibrary
WHEREFORE, the petition for review is hereby GRANTED and the Joint Decision dated
January 2, 2001 of the court a quo is hereby REVERSED and SET ASIDE, only insofar
as it decreed the dismissal of the ejectment case against respondent Nena Cari[ñ]o.
Accordingly, the Joint Decision dated 25 August 1998 of the Municipal Trial Court of
Mangaldan, Pangasinan is hereby AFFIRMED insofar as it decreed the ejectment of
Nena Cari[ñ]o.57chanroblesvirtuallawlibrary
After attaining finality, the CA 17th Division Decision became the basis of the writ of
execution issued by the MTC. In turn, the writ was the basis of Sheriff Hortaleza's notice
of levy and notice of sale. In her complaint a quo, Nena never questioned her liability for
rentals, attorney's fees, and litigation expenses in accordance with the MTC Decision.
She only questioned the allegedly erroneous computation of the judgment debt. The CA
4th Division, however, held that "[n]owhere in the dispositive portion of the Court of
Appeals' Decision was it mentioned that an award is granted nor the amount
specified."58 This is blatant error on the part of the CA 4th Division. The CA 17th Division
Decision, in no uncertain terms, affirmed the decision of the MTC. Hence, the awards
for rentals, litigation expenses, and attorney's fees stand. When an appellate court

1379
affirms a trial court's decision without any modification, the execution must necessarily
conform to the terms and conditions of the trial court's fallo.59

It appears that the CA 4th Division interpreted the statement that "[the MTC decision] is
hereby AFFIRMED insofar as it decreed the ejectment of Nena Cari[ñ]o" to mean
that only the order to vacate is affirmed. This, however, is clearly not the intent of the
phrase. It must be noted that both the MTC and RTC Branch 43 Decisions were joint
decisions. Thus, to clarify that its decision will not have any effect on the judgment
against Alberto who did not appeal-the CA 17th Division deemed it appropriate to tailor
the dispositive portion as specifically applicable to Nena only. If the CA 17 th Division
intended to do away with the monetary awards, then it would have explicitly stated
its modifications in the dispositive portion. Furthermore, there is nothing in the body of
the CA 17th Division's Decision that would tend to support the deletion of the awards for
rentals, litigation expenses, and attorney's fees.

WHEREFORE, the petition is GRANTED. The Decision dated November 26, 2009 and
Resolution dated August 3, 2010 of the Court of Appeals in CA-G.R. CV No. 89905
are REVERSED and SET ASlDE. The Decision dated April 10, 2007 of Branch 41 of
the Regional. Trial Court of Dagupan City in Civil Case No. 2005-0317-D is AFFIRMED.

SO ORDERED.chanroblesvirtuallawlibrary

THIRD DIVISION

G.R. No. 178842, January 30, 2017

RENE H. IMPERIAL AND NIDSLAND RESOURCES AND DEVELOPMENT

CORPORATION, Petitioners, v. HON. EDGAR L. ARMES, PRESIDING JUDGE OF
BRANCH 4, REGIONAL TRIAL COURT, 5TH JUDICIAL REGION, LEGAZPI CITY AND
ALFONSO B. CRUZ, JR., Respondents.

G.R. No. 195509

ALFONSO B. CRUZ, Petitioner, v. RENE IMPERIAL AND NIDSLAND RESOURCES

AND DEVELOPMENT CORPORATION, Respondent.

DECISION

JARDELEZA, J.:

An action for the annulment of a void judgment, like the remedy of appeal, is a statutory
right. No party may invoke it unless a law expressly grants the right and identifies the
tribunal which has jurisdiction over this action. While a void judgment is no judgment at
all in legal contemplation, any action to challenge it must be done through the correct
remedy and filed before the appropriate tribunal. Procedural remedies and rules of

1380
jurisdiction are in place in order to ensure that litigants are able to employ the proper
legal tools to obtain complete relief from the tribunal fully equipped to grant it.

The Case

Before us are two (2) consolidated petitions for review on certiorari under Rule 45 of the
Rules of Court. The first petition, docketed as G.R. No. 178842, is filed by Rene H.
Imperial (Imperial) and NIDSLAND Resources and Development Corporation
(NIDSLAND) against Alfonso B. Cruz, Jr. (Cruz). It seeks the reversal of the resolutions
of the Court of Appeals (CA) dated March 6, 2007 and July 3, 2007, respectively. The
second petition, G.R. No. 195509, filed by Cruz against Imperial and NIDSLAND, seeks
the reversal of the Decision of the CA dated September 13, 2010.

The Facts

On September 24, 1993, Julian C. Napal (Napal) and Imperial entered into a
Memorandum of Agreement1 to organize a domestic corporation to be named
NIDSLAND. Under the Memorandum of Agreement, Napal and Imperial agreed to
engage in the real estate business. For his capital contribution to the corporation, Napal
undertook to convey to NIDSLAND a tract of land consisting of four lots (the Property)
covered by Transfer Certificate of Title (TCT) Nos. 37737, 37738, 37739 and 21026,
and to Imperial a two hectare portion of the Property situated in Taysan, Legazpi
City.2 Napal and Imperial intended to develop this land into a subdivision. Imperial, on
the other hand, as his contribution to NIDSLAND, committed to perform the following
obligations: to settle Napal's obligation to the Rural Bank of Ligao, Inc., which was about
to foreclose its mortgage on the Property; pay Napal's tax liabilities to the Bureau of
Internal Revenue (BIR) which encumbered with a tax lien the largest portion of the
Property; fund NIDSLAND's initial operating capital; and provide for Napal's personal
drawings in an amount not exceeding P1,200,000. 3

While Imperial faithfully complied with his obligations under the Memorandum of
Agreement, Napal failed to convey to NIDSLAND a certain portion of the Property, in
particular Lot 15-C covered by TCT No. 21026 (the Subject Property). 4 On July 24,
1996, Napal sold the Subject Property to Cruz as evidenced by a Deed of Absolute
Sale.5 While the Deed of Absolute Sale between Napal and Cruz bore the date July 24,
1996, the sale was registered in the Registry of Deeds of Legazpi City only on August
27, 1996.6

As Napal continued to refuse to convey the Subject Property to NIDSLAND under the
Memorandum of Agreement, Imperial filed on July 30, 1996, for himself and in
representation of NIDSLAND, a derivative suit (SEC Petition) before the Securities and
Exchange Commission (SEC).7 This was filed after the sale to Cruz but before its
registration. The case was docketed as SEC LEO Case No. 96-0004 (SEC Case). 8 On
the same day, Imperial also filed a notice of lis pendens for the SEC Case with the
Registry of Deeds of Legazpi City. This was annotated on TCT No. 21026 9 as Entry No.
99956/99957.10

1381
Since the annotation of the lis pendens occurred after the sale of the Subject Property
to Cruz but before its registration with the Registry of Deeds, the notice of lis
pendens was carried over to the new TCT No. 4393611 issued in Cruz's
name.12 Meanwhile, the SEC Case proceeded without the participation of Cruz who had
possession of the new TCT covering the Subject Property during the continuation of the
hearings.

On August 8, 1997 and during the pendency of the SEC Case, Imperial and NIDSLAND
filed an action for annulment of sale against Cruz (Annulment of Sale Action) before the
Regional Trial Court, Legazpi City (RTC Legazpi City). This was docketed as Civil Case
No. 9419.13 On August 14, 1997, the RTC Legazpi City dismissed the action and held
that it should have been filed in the original case where the decree of registration was
entered.14 Imperial and NIDSLAND elevated the case to the CA through an
appeal.15 The CA affirmed the RTC Legazpi City's ruling.16

On November 10, 1998, SEC Hearing Officer Santer G. Gonzales (SEC Hearing Officer
Gonzales) rendered a Decision17 in favor of Imperial and NIDSLAND (SEC Decision).
The Decision declared the Deed of Absolute Sale between Napal and Cruz void ab
initio as the SEC found that the sale was simulated and was intentionally made to
appear to have been perfected prior to the filing of the notice of lis pendens. Thus, the
SEC ordered the cancellation of the TCT in the name of Cruz. Further, the SEC directed
Napal to execute the proper deed of conveyance of the Subject Property in favor of
NIDSLAND. The SEC also mandated Napal to deliver the possession of the Subject
Property to NIDSLAND.18

Since Napal did not appeal the SEC Decision, it became final and executory and was
enforced on January 13, 1999. As ordered in the SEC Decision, a Deed of
Conveyance19 was issued on the same date, transferring the Subject Property to
NIDSLAND. TCT No. 43936 in the name of Cruz was cancelled and a new TCT No.
49730 was issued in the name of NIDSLAND on January 19, 1999. 20

On February 18, 1999, Napal filed with the CA a Petition for Annulment of Judgment
under Rule 47 of the Rules of Court (Annulment of Judgment Action). This was
docketed as CA-G.R. SP No. 51258.21 Napal sought the nullification of the SEC
Decision as well as the orders and writs issued pursuant to it. Napal argued that the
SEC has no jurisdiction over the SEC Case as it did not involve any intra-corporate
controversy. On April 15, 1999, Cruz filed in the Annulment of Judgment Action a
Motion to Join as Party-Petitioner.22 In his motion, Cruz claimed that he is a
transferee pendente lite of the Subject Property.23

The CA promulgated a Decision24 on August 31, 1999 dismissing the Petition for
Annulment of Judgment. The CA explained that Rule 47 of the Rules of Court is not
available to annul the judgment of the SEC. According to the CA, the proper remedy in
this case is a special civil action for certiorari and prohibition. None of the parties
appealed the CA Decision. Thus, entry of judgment was made on November 16,
2000.25cralawred

1382
On January 22, 2001,26 Cruz filed a pleading denominated as a "Petition" before RTC
Legazpi City (RTC Petition),27 which sought to nullify the SEC Decision. This was
docketed as Civil Case No. SR-09 and raffled to Branch 4 of RTC Legazpi City. 28 In the
RTC Petition, Cruz prayed for the following reliefs:ChanRoblesVirtualawlibrary
WHEREFORE, it is respectfully prayed that after hearing, judgment be rendered as
follows:chanRoblesvirtualLawlibrary

a) Declaring the Decision dated 10 November 1998 of respondent Gonzales to be

null and void insofar as it affects the property rights of petitioner to the Subject
Property
b) Declaring the Deed of Conveyance dated January 13, 1999 as null and void for
having been issued pursuant to an invalid and void judgment
c) Declaring the cancellation of the TCT No. 43936 of petitioner, as well as the
issuance of TCT No. 49730 (and its derivatives TCT Nos. 50398, 50399, 50400
and 50401) of respondent Nidsland, by respondent Register of Deeds of Legazpi
City, to be invalid and illegal.
d) Directing the respondent Register of Deeds of Legazpi City to duly cancel the TCT
Nos. 50398, 50399, 50400 and 50401, and restore the status of TCT No. 43936 of
plaintiff prior to its cancellation, or otherwise reconvey and/or issue a new title to
the Subject Property in the name of plaintiff,
e) Ordering respondents to solidarily pay to petitioner the amount of P500,000.00, as
and for moral damages.
f) Ordering respondents to solidarily pay attorney's fees in the amount of
P100,000.00, appearance fees and costs of suit. 29
Presiding Judge Gregorio A. Consulta, without issuing summons, dismissed the
Petition motu proprio.30 He justified his dismissal on the ground that regional trial courts
have no jurisdiction over the SEC and as such, an action assailing the decision of the
SEC should be brought before the CA. As his motion for reconsideration of the decision
was denied,31 Cruz elevated the case to the CA by way of a special civil action
for certiorari. This was docketed as CA G.R. SP No. 65720.32 In a Decision33 dated
October 28, 2002, the CA held that RTC Legazpi City acted with grave abuse of
discretion in dismissing the Petition, and therefore ordered that the case be remanded
to RTC Legazpi City to be given due course.34

In accordance with the Decision of the CA, the RTC Petition was redocketed as Civil
Case No. 10325 and was reraftled to Branch 3 of the RTC Legazpi City. 35 However,
even before summons could be issued, Presiding Judge Henry B. Basilia issued an
Order36 dated April 15, 2004 dismissing the Petition. The Order stated that the RTC
Petition failed to comply with the reglementary period and other procedural
requirements under Rule 65 for the proper filing of a special civil action for certiorari.

However, upon Cruz's motion for reconsideration, Judge Basilia reversed his ruling in

1383
an Order37 dated May 7, 2004. Thus, RTC Legazpi City summoned Imperial and
NIDSLAND on July 1, 2004.38 On July 30, 2004, Imperial and NIDSLAND filed a motion
to dismiss39 which was denied by Judge Basilla.40

Imperial and NIDSLAND then failed to file their answer and were declared in
default.41 Thus, Cruz was allowed to present evidence ex-parte. Judge Basilia
eventually set aside the order of default upon motion of Imperial and
NIDSLAND.42 Judge Basilia subsequently voluntarily inhibited himself, and the RTC
Petition was reraffled to Branch 4 presided by Respondent Judge Edgar L. Armes
(Respondent Judge Armes).43

After trial, the parties to the RTC Petition submitted their respective memoranda. In
Imperial and NIDSLAND's memorandum and supplemental memorandum, they again
sought the dismissal of the RTC Petition on the ground of lack of jurisdiction. Judge
Armes refused the dismissal.44

On August 22, 2006, Imperial and NIDSLAND filed an Omnibus Motion. This was
followed by a Supplemental Motion filed on September 7, 2006. 45 In the two motions,
Imperial and NIDSLAND once again prayed for the dismissal of the RTC Petition and
raised, for the first time, the following grounds:ChanRoblesVirtualawlibrary

1. The failure of herein private respondent CRUZ, as petitioner in Civil Case

No. 10325, to state the required material dates in his initiatory Petition
necessary in order to determine compliance with the 60-days
reglementary period;chanrobleslaw

2. The failure of herein private respondent CRUZ, as petitioner in Civil Case

No. 10325, to show by any allegation in his initiatory Petition that there is
no appeal or any other plain, speedy and adequate remedy under the
ordinary course of law against the assailed decision in SEC LEO Case No.
96-0004 to warrant recourse to the extra-ordinary writ
of certiorari;chanrobleslaw

3. The indisputable fact that the Petition in Civil Case No. 10325 was filed by
herein private respondent CRUZ far beyond the 60-days reglementary
period allowed under Section 4 of Rule 65 of the Rules of Court in view of
the admission by said respondent CRUZ in the Motion to Join as Party-
Petitioner that he filed in CA-G.R. SP No. 51258 wherein he expressly
admitted having received a copy of the assailed decision in SEC LEO
Case No. 96-0004 in February, 1999; and

4. The decision in SEC LEO Case No. 96-0006, which has become final and
had been fully executed, is binding against herein private respondent
CRUZ, he being a successor-in-interest pendente lite to the title over the
Subject Property, of therein respondent Napal, pursuant to Section 19 of
Rule 3 of the Rules of Court.46

1384
Respondent Judge Armes denied the Omnibus Motion and Supplemental Motion in an
Order dated September 21, 2006.47 According to the Order, the issues raised by
Imperial and NIDSLAND have already been settled by the CA in the certiorari case filed
by Cruz. The Order held that the CA ruled that the RTC Legazpi City has jurisdiction
over the case and even directed the latter to give due course to the RTC Petition.

Imperial and NIDSLAND filed a motion for reconsideration of this RTC Order on October
6, 2006.48 In this motion, Imperial and NIDSLAND argued that the ruling of the CA
pertained to an entirely different jurisdictional issue from that raised in their Omnibus
Motion and Supplemental Omnibus Motion.49 Respondent Judge Armes denied the
motion for reconsideration in an Order50 dated November 23, 2006. This Order
reiterated that the CA's directive that the RTC Legazpi City give due course to the RTC
Petition was unqualified and unconditional. Further, the Order explained that Imperial
and NIDSLAND's arguments had no merit for the following
reasons:ChanRoblesVirtualawlibrary

1. This action is geared to declare the nullity of a void judgment. In the case
of Paluwagan ng Bayan Savings Bank vs. King, 172 SCRA 60, it was held
that an action to declare the nullity of a void judgment does not prescribe,
citing also Ang Lam vs. Rosillosa and Santiago, 86 Phil. 447-452. This
imprescriptibility of the action places it beyond the ambit of the 60-day
reglementary period under Sec. 4, Rule 65 of the Revised Rules of Court.

2. The petitioner in this case, not being a party in SEC LEO Case No. 96-
0004, was never officially notified of the assailed Decision, dated
November 10, 1998 by the deciding authority simply because there was
no basis therefor. The notice of the judgment, order or resolution, from
which the 60-day period shall be computed under Sec. 4, Rule 65 of the
Rules of Court, contemplates of an official notice from the deciding
authority and not mere informal information from other sources like what
happened in the case at bar[.] Since the official notice from the deciding
authority in SEC LEO Case No. 96-0004 was not and is not forthcoming
because there was no basis thereof, it follows that the 60-day period
aforesaid is not applicable to the case at bar.51

FIRST CONSOLIDATED CASE-G.R. No. 178842

Imperial and NIDSLAND then filed a Petition for Certiorari and Prohibition52 under Rule

65 of the Rules of Court before the CA. This petition assailed the validity of Respondent
Judge Armes' Orders dated September 21,2006 and November 23, 2006. This was
docketed as CA-G.R. SP No. 97823. The CA rendered a Resolution dated March 6,
200753 (First Assailed Resolution) dismissing Imperial and NIDSLAND's Petition
for Certiorari and Prohibition for lack of merit. Imperial and NIDSLAND filed a motion for
reconsideration which was denied by the CA in a Resolution dated July 3,
200754 (Second Assailed Resolution).

Hence, on August 2, 2007, Imperial and NIDSLAND filed this Petition for Review
1385
on Certiorari55 under Rule 45 of the Rules of Court seeking a reversal of the two
assailed resolutions (First Petition). In their petition, Imperial and NIDSLAND argue that
the CA erred in affirming the RTC Decision on the RTC Petition. They argue that the CA
should have reversed the error of the RTC Legazpi City in allowing the filing of the RTC
Petition way beyond the 60-day period for the filing of a special civil action for certiorari.
They stress that the RTC Petition was filed three and a half years after the finality of the
SEC Decision and two years and three months from the time Cruz received notice of its
promulgation. They argue that neither the CA nor Cruz was able to present any
compelling reason for the relaxation of the reglementary period.

SECOND CONSOLIDATED CASE-G.R. No. 195509

While the First Petition was pending, RTC Legazpi City rendered a Decision 56 dated
March 24, 2009 (RTC Main Decision). The RTC Legazpi City ruled that SEC Hearing
Officer Gonzales acted with grave abuse of discretion when he annulled the Deed of
Sale of the Subject Property between Napal and Cruz, ordered the cancellation of
Cruz's TCT, and directed Napal to execute a deed of conveyance in favor of
NIDSLAND. According to the RTC Main Decision, the CA has already definitively settled
the issue of RTC Legazpi City's jurisdiction over the case. It held that there is no merit in
Imperial and NIDSLAND's contention that the RTC Petition should have been dismissed
for non-compliance with the 60-day period for the filing of a special civil action
for certiorari and for failure of the RTC Petition to state the material dates. On the other
hand, the RTC Main Decision found that the SEC had no jurisdiction over Cruz and as
such, in issuing orders affecting his ownership over the Subject Property, it violated
Cruz's right not to be deprived of property without due process of law. Further, the RTC
Main Decision stated that RTC Legazpi City cannot settle the issue as to the rightful
ownership of the Subject Property in a special civil action for certiorari. The RTC Main
Decision however affirmed the award of damages in favor of Imperial and NIDSLAND in
the SEC Case. The dispositive portion held-
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
petitioner, as follows:

1. The Decision in SEC-LEO Case No. 96-0004, dated November 10, 1998,
signed by respondent Santer G. Gonzales, is hereby DECLARED NULL
AND VOID ONLY WITH RESPECT TO PARAGRAPHS 1 AND 2 OF THE
DISPOSITIVE PORTION THEREOF regarding the annulment of the Deed
of Sale of the subject property by Napal to petitioner Cruz, the cancellation
of the title issued pursuant to the said sale in the name of petitioner Cruz
and the directive to Napal to execute the deed of conveyance in favor of
respondent herein Nidsland as well as the delivery of possession of the
subject property to Nidsland and the designation of then Clerk of Court
Atty. Antonio C. Bagagnan to execute the proper deed of conveyance in
the event of refusal on the part of Napal.

2. The following documents are hereby DECLARED NULL AND

VOID:chanRoblesvirtualLawlibrary

1386
 a) Deed of Conveyance, dated [January] 13, 1999 issued by Atty. Antonio
C. Bagagnan, Clerk of Court MTCC, Legazpi City (Exh. "E" and Exh. "11")

b) TCT No. 49730 in the name of respondent Nidsland (Exh. "F" and Exh.
"12")

c) TCT No. 50398 in the name of respondent Nidsland (Exh. "F-1" and
Exh. "13")

d) TCT No. 50399 (Exh. "F-2" and Exh. "14")

e) TCT No. 50400 (Exh. "F-3" and Exh. "15")

f) TCT No. 50401 (Exh. "F-4" and Exh. "16")

3. Respondent Register of Deeds of Legazpi City Atty. Danilo B. Lorena is

hereby ordered to cancel the foregoing titles, to wit: TCT Nos. 49730;
50398; 50399; 50400; and 50401;chanrobleslaw

4. Respondent Lorena is hereby further ordered to recall or lift the

cancellation of TCT No. 43936 in the name of petitioner Alfonso Cruz, Jr.,
covering the subject property.

The parties' claims and counterclaims on their respective damages are

hereby ordered DISMISSED.

SO ORDERED.57chanroblesvirtuallawlibrary
Aggrieved by the RTC Main Decision, Imperial and NIDSLAND filed before the CA an
appeal under Rule 41 of the Rules of Court. In a Decision 58 dated September 13, 2010
(Second Assailed Decision), the CA reversed the RTC Decision. The dispositive portion
of the Assailed Decision states-
WHEREFORE, the assailed decision dated March 24, 2009, issued by the Regional
Trial Court, Branch -4, Legazpi City is hereby REVERSED and SET ASIDE;
accordingly, Civil Case No. 10325 is hereby DISMISSED.

No costs.

SO ORDERED.59chanroblesvirtuallawlibrary
On March 24, 2011, Cruz filed a Petition for Review on Certiorari60 (Second Petition)
challenging the Second Assailed Decision. Cruz raised the following arguments: first,
Cruz claimed that he is the registered owner of the Subject Property. He was thus an
indispensable party to the SEC Case and as such, should have been impleaded. Since
the SEC Case was a personal action and he was never impleaded, Cruz argues that the
SEC never acquired jurisdiction over him. Thus, any decision cannot prejudice his
property rights over the Subject Property. Further, as an indispensable party, any
judgment obtained by Imperial and NIDSLAND in the SEC Case has no binding effect

1387
on Cruz. Second, Cruz also claims that since the property was already registered in his
name, any deed of conveyance which Napal executed pursuant to the SEC Decision
transfers no rights since Napal no longer had rights over the Subject Property at the
time. Third, Cruz states that the CA erred when it held that he is already estopped from
challenging the cancellation of his TCT. He explains that he could not have participated
in the SEC Case to protect his rights. The SEC Case pertained to an intra corporate
dispute. As he was obviously not a stockholder of NIDSLAND, he had no basis to
intervene. He also emphasizes that Imperial and NIDSLAND never prayed for the
cancellation of his TCT in the SEC Case and thus, had no real reason to interfere until
SEC Hearing Officer Gonzales ruled that his TCT should be cancelled. Cruz also raises
the argument that he could not have filed a separate action to protect his rights over the
property since Imperial and NIDSLAND had already filed the Annulment of Sale action
against him for the annulment of the sale and cancellation of his TCT before RTC
Legazpi City. Cruz claims that he actively participated in this case which attained finality
only in 2003. According to Cruz, filing another case while this case was pending would
have amounted to multiplicity of suits.

We resolve the issues raised in these two consolidated cases.

The Issues

The core issue is whether RTC Legazpi City has jurisdiction to declare the nullity of the
Decision of the SEC. To resolve this issue, we once again clarify the apparent clash of
jurisdiction between the SEC and the ordinary courts in cases involving Presidential
Decree No. 902-A61 (PD 902-A).

The Ruling of the Court

We rule that that the RTC Petition should have been dismissed for lack of jurisdiction.
We likewise rule that the SEC Decision was issued with grave abuse of discretion
amounting to an excess of jurisdiction.

Nature of a void judgment

A void judgment is no judgment at all in legal contemplation. In Cañero v. University of

the Philippines62 we held that-
x x x A void judgment is not entitled to the respect accorded to a valid judgment, but
may be entirely disregarded or declared inoperative by any tribunal in which effect is
sought to be given to it. It has no legal or binding effect or efficacy for any purpose or at
any place. It cannot affect, impair or create rights. It is not entitled to enforcement and
is, ordinarily, no protection to those who seek to enforce. In other words, a void
judgment is regarded as a nullity, and the situation is the same as it would be if there
was no judgment. x x x63chanroblesvirtuallawlibrary
A judgment rendered without jurisdiction is a void judgment. This want of jurisdiction
may pertain to lack of jurisdiction over the subject matter or over the person of one of
the parties.

1388
A void judgment may also arise from the tribunal's act constituting grave abuse of
discretion amounting to lack or excess of jurisdiction. In Yu v. Judge Reyes-Carpio,64 we
explained-
The term "grave abuse of discretion" has a specific meaning. An act of a court or
tribunal can only be considered as with grave abuse of discretion when such act is done
in a "capricious or whimsical exercise of judgment as is equivalent to lack of
jurisdiction." x x x [T]he use of a petition for certiorari is restricted only to "truly
extraordinary cases wherein the act of the lower court or quasi-judicial body is wholly
void" x x x.65chanroblesvirtuallawlibrary
In Guevarra v. Sandiganbayan, Fourth Division,66 we further explained-
x x x However, if the Sandiganbayan acts in excess or lack of jurisdiction, or with grave
abuse of discretion amounting to excess or lack of jurisdiction in dismissing a criminal
case, the dismissal is null and void. A tribunal acts without jurisdiction if it does not have
the legal power to determine the case; there is excess of jurisdiction where a tribunal,
being clothed with the power to determine the case, oversteps its authority as
determined by law. A void judgment or order has no legal and binding effect, force or
efficacy for any purpose. In contemplation of law, it is nonexistent. Such judgment or
order may be resisted in any action or proceeding whenever it is involved. x x
x67chanroblesvirtuallawlibrary
To give flesh to these doctrines, the Rules of Court, particularly the 1997 Revised Rules
on Civil Procedure, provides for a remedy that may be used to assail a void judgment
on the ground of lack of jurisdiction. Rule 47 of the Rules of Court states that an action
for the annulment of judgment may be filed before the CA to annul a void judgment of
regional trial courts even after it has become final and executory. If the ground invoked
is lack of jurisdiction, which we have explained as pertaining to both lack of jurisdiction
over the subject matter and over the person, the action for the annulment of the
judgment may be filed at any time for as long as estoppel has not yet set in. In cases
where a tribunal's action is tainted with grave abuse of discretion, Rule 65 of the Rules
of Court provides the remedy of a special civil action for certiorari to nullify the act.

Void judgments may also be collaterally attacked. A collateral attack is done through an
action which asks for a relief other than the declaration of the nullity of the judgment but
requires such a detennination if the issues raised are to be definitively settled.

Nature of the RTC Petition

The RTC Petition filed by Cruz has been treated by the CA and the parties as a special
civil action for certiorari. The RTC Petition, however, prays for the nullification of the
SEC Decision and thus purports to be an action for the annulment of a void judgment.
Ascertaining the true nature of the RTC Petition is crucial as it determines whether Cruz
properly invoked the correct remedy in assailing the SEC Decision.

The nature of an action is determined by the material allegations in the complaint and
the type of relief prayed for.68 We have examined the RTC Petition, and we rule that
contrary to the findings of the lower courts, it is an action for the annulment of judgment

1389
on the ground of lack of jurisdiction. The meat of the RTC Petition's allegation is that the
SEC declared as void ab initio the sale between Napal and Cruz without impleading
Cruz in the proceedings. The SEC also had no power to order the transfer of title over
the Subject Property from Cruz to NIDSLAND because Cruz was never heard in these
proceedings. Cruz asserts that the SEC never acquired jurisdiction over his person.
Cruz thus prayed in the RTC Petition that the SEC Decision be declared null and void.

The RTC Petition clearly captures the material allegations in a petition for annulment of
judgment on the ground of lack of jurisdiction over the person of one of the parties
under Rule 47 of the Rules of Court. In sharp contrast, the RTC Petition makes no
allegations that the SEC Decision was rendered with grave abuse of discretion. It
cannot be treated as a special civil action for certiorari under Rule 65.

The necessary question before us now is whether Cruz invoked the proper remedy.
There have been several attempts to use an action for annulment of judgment under
Rule 47 of the Rules of Court to set aside a void judgment of a quasi-judicial body. We
retrace our jurisprudence on the matter in order to ascertain if this remedy may be
properly invoked. A review of the relevant cases reveals two interrelated issues. First,
whether this remedy is available to set aside a void judgment of a quasi-judicial body;
and second, which tribunal has jurisdiction over it.

Jurisdiction over annulment of judgment of quasi-judicial bodies

Prior to Batas Pambansa Bilang 129 (BP 129),69 we had the chance to rule on the
question of jurisdiction over the annulment of judgment of quasi judicial bodies in BF
Northwest Homeowners Association, Inc. v. Intermediate Appellate Court.70 In that case,
we held that regional trial courts can annul the judgment of quasi-judicial bodies which
are of the same rank as courts of first instance. This ruling established two things: first,
an action for the annulment of judgment is a remedy available against a void judgment
of a quasi-judicial body. Second, regional trial courts had jurisdiction whenever the
quasi-judicial body involved is of inferior rank.

With the passage of BP 129, this doctrine appears to have been altered. Section 9(a) of
BP 129 expressly vested the CA with jurisdiction over annulment of judgments of
regional trial courts. Notably, it does not mention jurisdiction over annulment of
judgment of quasi-judicial bodies. In fact, quasi-judicial bodies are mentioned only in
Section 9(3)71 which provides for the CA's appellate jurisdiction over their judgments,
orders, resolutions and awards.

In 1997, the new rules of civil procedure took effect. These rules provided, for the first
time, a remedy called annulment of judgment on the ground of extrinsic fraud and lack
of jurisdiction. Rule 47, however, limits its application to regional trial courts and
municipal trial courts.

We had the opportunity to apply these relevant provisions in the 2000 case of Cole v.
Court of Appeals.72 In this case, we explained that the CA has no jurisdiction over a

1390
petition for annulment of judgment under Rule 47 against a decision of the Housing and
Land Use Regulatory Board, a quasijudicial body. Rule 47 allows a resort to theCA only
in instances where the judgment challenged was rendered by regional trial courts. This
was also the import of our ruling in Elcee Farms, Inc. v. Semillano73 when we held that
the CA has no jurisdiction over the annulment of judgment of the National Labor
Relations Commission.

This was reiterated in the 2005 case Galang v. Court of Appeals74 which dealt with
decisions rendered by the SEC. In that case, we categorically ruled that the CA has no
jurisdiction over annulment of a void judgment rendered by the SEC since Rule 47 of
the Rules of Court clearly states that this jurisdiction only pertains to judgments
rendered by regional trial courts.

Springfield Development Corporation, Inc. v. Presiding Judge, RTC, Misamis Oriental,

Br. 40, Cagayan de Oro City75 summarized our foregoing rulings in determining whether
the CA has jurisdiction to annul a void judgment of the Department of Agrarian Reform
Adjudication Board (DARAB). This case was a significant development in the then
growing jurisprudence which all merely said that an action to annul a judgment of a
quasi-judicial body cannot be brought before the CA, and which did not categorically
state whether the action may be filed before any other court.

In Springfield, we explained that regional trial courts have no jurisdiction to annul

judgments of quasi-judicial bodies of equal rank. It then proceeded to state that the CA
also has no jurisdiction over such an action. Springfield emphasized that Section 9 ofBP
129 and Rule 47 of the Rules of Court both state that the CA has jurisdiction over
annulment of judgments of regional trial courts only. We ruled in this case that the
"silence of B.P. Blg. 129 on the jurisdiction of the CA to annul judgments or final orders
and resolutions of quasi-judicial bodies like the DARAB indicates its lack of such
authority."76 While this case explained that neither the regional trial courts nor the CA
possess jurisdiction over an action to annul the judgment of quasi-judicial bodies, it did
not categorically state that the remedy itself does not exist in the first place. Notably, we
disposed of this case by remanding the action filed before us-a special civil action for
prohibitionto the CA because the matter required a determination of facts which this
Court cannot do. We then held that the CA may rule upon the validity of the judgment by
noting that a void judgment may be collaterally attacked in a proceeding such as an
action for prohibition.77

The seeming confusion in the string of cases pertaining to the jurisdiction over petitions
for annulment of judgment of quasi-judicial bodies is clarified when these cases are
read in conjunction with Macalalag v. Ombudsman.78 While we repeated our consistent
ruling that Rule 47 of the Rules of Court only applies to judgments of regional trial
courts, Macalalag also explains that an action for the annulment of judgment is similar in
nature to an appeal-both are merely statutory. No right exists unless expressly granted
by law.79 In Macalalag, we implied that the key to determining whether this remedy may
be had and where such action may be filed is to ascertain whether there is a law
expressly allowing a resort to this action before a particular tribunal. This then requires

1391
an examination of the laws and rules relevant to a specified quasi-judicial body. While it
is correct that both the regional trial courts and the CA cannot take cognizance of a
petition for annulment of judgment of a quasi-judicial body under Rule 47 of the Rules of
Court, they may nevertheless do so, if a law categorically provides for such a remedy
and clearly provides them with jurisdiction.

Applying this to the present case, we rule that there is no law at the time pertinent to this
case, which allows the filing of a petition for annulment of judgment before the regional
trial courts and the CA to set aside a void judgment of the SEC on the basis of lack of
jurisdiction. We hasten to emphasize, however, that this pertains only to cases filed
prior to Republic Act No. 879980 (RA 8799) which transferred the jurisdiction over intra-
corporate disputes to regional trial courts designated as commercial courts. As to the
latter, Rule 47 clearly applies.

This leads to the conclusion that the RTC Petition is .not the proper remedy to assail the
SEC Decision. Since it is an action for the annulment of judgment, the RTC Petition
cannot prosper as we have already ruled that this remedy is not available in this
particular case.

However, the error in Cruz's RTC Petition does not automatically warrant a dismissal of
these proceedings. We rule that the SEC, in nullifying the sale between Napa! and Cruz
and in ordering the cancellation of Cruz's TCTs in favor of NIDSLAND, overstepped its
jurisdiction. The SEC Decision was rendered with grave abuse of discretion.

Grave Abuse of Discretion and the SEC's Jurisdiction

In 1976, PD 902-A vested the SEC with the quasi-judicial power over intra-corporate
disputes. While this jurisdiction was eventually transferred to regional trial courts
designated as special commercial courts by The Securities Regulation Code in 2000,
the SEC had the authority over intra corporate disputes at the time relevant to this case.

Through the years that the SEC had quasi-judicial power over intracorporate
controversies, this Court explained the delineation of jurisdiction between the trial courts
and the SEC. Our finding in this case that the SEC acted with grave abuse of discretion
is rooted on the proper understanding of the limits of the jurisdiction of the SEC. We
now review this Court's pertinent rulings on the jurisdiction of the SEC.

Under Section 5 of PD 902-A, the applicable law at the time the SEC Case was filed,
the SEC has original and exclusive jurisdiction to hear and decide cases involving the
following:ChanRoblesVirtualawlibrary
(a) Devices or schemes employed by or any acts, of the board of directors, business
associates, its officers or partnership, amounting to fraud and misrepresentation
which may be detrimental to the interest of the public and/or of the stockholder,
partners, members of associations or organizations registered with the
Commission;

1392
(b) Controversies ansmg out of intra-corporate or partnership relations, between and
among stockholders, members, or associates; between any or all of them and the
corporation, partnership or association of which they are stockholders, members
or associates, respectively; and between such corporation, partnership or
association and the state insofar as it concems their individual franchise or right
to exist as such entity; and
(c) Controversies in the election or appointments of directors, trustees, officers or
managers of such corporations, partnerships or associations.
In Union Glass & Container Corporation v. Securities and Exchange Commission 81 we
said that "the law [PD 902-A] explicitly specified and delimited its jurisdiction to matters
intrinsically connected with the regulation of corporations, partnerships and associations
and those dealing with the internal affairs of such corporations, partnerships or
associations."82 We added that in order for the SEC to take cognizance of a case, the
controversy must pertain to any of the following relationships: (1) between the
corporation, partnership or association and the public; (2) between the corporation,
partnership or association and the state in so far as its franchise, permit or license to
operate is concerned; (3) between the corporation, partnership or association and its
stockholders, partners, members or officers; and (4) among the stockholders, partners
or associates themselves.83

This is the relationship test, under which the existence of any of these relationships
vested the SEC with jurisdiction. In Abejo v. De la Cruz,84 we even declared that "an
intra-corporate controversy is one which arises between a stockholder and the
corporation. There is no distinction, qualification, nor any exemption whatsoever. The
provision is broad and covers all kinds of controversies between stockholders and
corporations."85

Later decisions of this Court, however, have moved away from this rather simplistic
determination of what constitutes an intra-corporate controversy. In the 1990 case
of Viray v. Court of Appeals,86 we held, thus:ChanRoblesVirtualawlibrary
The establishment of any of the relationships mentioned in Union will not necessarily
always confer jurisdiction over the dispute on the SEC to the exclusion of the regular
courts. The statement made in one case that the rule admits of no exceptions or
distinctions is not that absolute. The better policy in determining which body has
jurisdiction over a case would be to consider not only the status or relationship of the
parties but also the nature of the question that is the subject of their
controversy.87chanroblesvirtuallawlibrary
This is the controversy test. In Lozano v. De los Santos,88 we explained that the
controversy test requires that the dispute among the parties be intrinsically connected
with the regulation of the corporation, partnership or association. 89 In Speed Distribution
Corp. v. Court of Appeals,90 we added that "[i]f the nature of the controversy involves
matters that are purely civil in character, necessarily, the case does not involve an intra-
corporate controversy."91

Taking all these holdings together, the issue of whether the SEC has the power to hear

1393
and decide a case depends on two determinants: (1) the status or relationship of the
parties; and (2) the nature of the question that is the subject of their controversy. 92

The application of these two tests has allowed for the proper delineation of the seeming
overlap in the jurisdiction of the SEC and the courts.

By way of illustration, in Union Glass we ruled that the action filed by the dissenting
stockholders against their corporation Pioneer Glass Manufacturing (Pioneer)
questioning its dacion en pago of Pioneer's plant in favor of Union Glass is an intra-
corporate dispute as it clearly pertained to the internal affairs of the corporation.
However, we held that the recovery of the possession of the plant should have been
filed with the trial court because the SEC possesses no jurisdiction over Union Glass
(the third-party purchaser) because it has no intra-corporate relationship with any of the
parties.

In Embassy Farms, Inc. v. Court of Appeals,93 the respondent, under a memorandum of

agreement, undertook to deliver certain parcels of land and shares of stock of Embassy
Farms, Inc. to the other party in exchange for the latter's payment of a certain amount.
When the other party failed to comply with his obligation to pay the amount, we held that
the conflict arising between them pertains to their contractual obligations under the
memorandum of agreement. It does not refer to the enforcement of rights and
obligations under the Corporation Code or the internal or intra-corporate affairs of the
corporation.

In Saura v. Saura, Jr.,94 certain stockholders sold a parcel of land to a corporation

without the consent of the other stockholders. When the latter filed an action for the
annulment of the sale against the purchasing corporation and the selling stockholders
before the trial court, the question of whether the case is an intra-corporate dispute
arose. Applying the two tests, we found that the case is not intra-corporate. The action
was ultimately directed against a third party even if the selling stockholders of the
corporation were also impleaded.

Further, in Intestate Estate of Alexander T. Ty v. Court of Appeals,95 where a

stockholder filed an action against the estate of another stockholder for the annulment
of a sale of shares which the former claims was simulated for lack of consideration, we
ruled that the jurisdiction properly belongs to the regional trial court. We explained that
"[t]he determination whether a contract is simulated or not is an issue that could be
resolved by applying pertinent provisions of the Civil Code, particularly those relative to
obligations and contracts. Disputes concerning the application of the Civil Code are
properly cognizable by courts of general jurisdiction." 96

The development of both the concept and application of the relationship

test and controversy test reveals a growing emphasis on the delineated jurisdiction
between the SEC and ordinary courts. The delineation is based on the very purpose for
which the SEC was granted quasi-judicial powers in the first place. Under PD 902-A, the
SEC exercised jurisdiction over intra-corporate controversies precisely because it is a

1394
highly-specialized administrative body in specialized corporate matters. It follows
therefore, that where the controversy does not call for the use of any technical
expertise, but the application of general laws, the case is cognizable by the ordinary
courts. In Macapalan v. Katalbas-Moscardon,97 we said-
It is true that the trend is towards vesting administrative bodies like the SEC with the
power to adjudicate matters coming under their particular specialization, to insure a
more knowledgeable solution of the problems submitted to them. This would also
relieve the regular courts of a substantial number of cases that would otherwise swell
their already clogged dockets. But as expedient as this policy may be, it should not
deprive the courts of justice of their power to decide ordinary cases in accordance with
the general laws that do not require any particular expertise or training to interpret and
apply. Otherwise, the creeping take-over by the administrative agencies of the judicial
power vested in the courts would render the judiciary virtually impotent in the discharge
of the duties assigned to it by the Constitution.98chanroblesvirtuallawlibrary
Applying these principles to this case, we rule that the SEC does not have jurisdiction to
order the cancellation of the sale between Napal and Cruz. It also has no jurisdiction to
cancel Cruz's TCT and order its transfer to NIDSLAND.

To assail the validity of the sale, Imperial and NIDSLAND sought to prove that the sale
to Cruz was simulated. This involves the application of the law on sales. As we have
already held in Intestate Estate of Alexander T. Ty, the issue of whether a sale is
simulated falls within the jurisdiction of ordinary civil courts. It does not concern an
adjudication of the rights of Imperial, NIDSLAND and Napal under the Corporation Code
and the internal rules of the corporation. The resolution of these questions requires the
application of an entire gamut of laws that goes well beyond the expertise of the SEC.

Meanwhile, the question of whether Cruz's TCT should be cancelled goes into the
proper application of Presidential Decree No. 1529 99 and related doctrines. Specifically,
there is a need to take into consideration whether the SEC Petition is a collateral attack
on the certificate of title which goes against the well-established rule of indefeasibility.
The resolution of this question demands the application of our laws on land title and
deeds, a matter outside the ambit of the SEC's special competence.

Indeed, our jurisprudence has leaned in favor of recognizing the jurisdiction of quasi-
judicial bodies. However, this jurisdiction must always be viewed within the context of its
grant. The law vests quasi-judicial powers to administrative bodies over matters that
require their particular competence and specialized expertise. This grant of jurisdiction
is not and should not be justification to deprive courts of law of their jurisdiction as
determined by law and the Constitution. Courts of law are the instruments for the
adjudication of legal disputes. In a system of government where courts of law exist
alongside quasi-judicial bodies, the need to harmonize apparent conflicts in jurisdiction
require a determination of whether the matter to be resolved pertains to a general
question of law which belongs to ordinary courts or whether it refers to a highly
specialized question that can be better resolved by a quasi-judicial body in accordance
with its power vested by law.

1395
In overstepping its jurisdiction, the SEC committed grave abuse of discretion.

Grave abuse of discretion is the capricious and whimsical exercise of judgment. It is the
exercise of a power in an arbitrary manner. It must be so patent or gross as to amount
to the evasion of a positive duty or to a virtual refusal to perform a duty enjoined or to
act at all in contemplation of law. In Air Transportation Office v. Court of Appeals,100 we
explained that grave abuse of discretion exists when the act is: (1) done contrary to the
Constitution, the law or jurisprudence; or (2) executed whimsically, capriciously or
arbitrarily out of malice, ill will or personal bias.101

In Thenamaris Philippines Inc. v. Court of Appeals,102 we ruled that grave abuse of

discretion exists where the assailed decision of the CA displayed patent errors. In Air
Transportation Office, the patent violation of the Rules of Court merited a finding that
there was grave abuse of discretion.

In this case, the SEC, in rendering the decision, disregarded established law and
jurisprudence on the jurisdiction of the SEC. Further, it adjudicated on the rights of Cruz,
cancelled the deed of sale, and took away his property without giving him the
opportunity to be heard. It is a breach of the basic requirements of due process.

Further, the incorrectness and impracticality of presenting these issues before the SEC
are highlighted by the reliefs granted by SEC Hearing Officer Gonzales in the SEC
Case. The SEC annulled the deed of sale between Napal and Cruz. This was based on
evidence presented during the SEC Hearing which consisted of Imperial's testimony
that the price that Cruz paid for the Subject Property was grossly below its value. While
we will not delve into the propriety of the SEC's factual findings, we note that there
appears nothing in the record, other than Imperial's statements, to support the
contention that the consideration was indeed grossly below the actual value of the
Subject Property. Furthermore, the SEC also found that the Deed of Sale was
antedated to make it appear that it took place prior to the annotation of the notice of lis
pendens. Again, this was based solely on Imperial's testimony during the SEC Hearing.
We note that there was nothing in the records, other than Imperial's bare statement, to
establish this.

The SEC Decision even went further and ordered the cancellation of Cruz's TCT. This
did not take into consideration the indefeasibility of a Torrens title. While this is not a
question that we seek to resolve in these consolidated cases, we emphasize that a
proper adjudication of this matter requires, at the very least, an analysis of the effect of
the notice of lis pendens, the rights of a transferee pendente lite, and the .propriety of a
collateral attack on a certificate of title. Clearly, the SEC is not the appropriate forum to
delve into these civil law concepts.

The SEC also does not possess the expertise to go into the reception of evidence and
the conduct of hearings geared for the purpose of resolving issues proper for a civil
action. The resolution of a civil action requires preponderance of evidence as a burden
of proof. On the other hand, cases before quasi-judicial bodies require only substantial

1396
evidence. Hence, the propriety of annulling a sale and cancelling a Torrens title-which
are in the nature of a civil action-on the basis merely of substantial evidence determined
by an administrative body raises due process concerns.

Effects of a void judgment

When grave abuse of discretion taints a judgment, it becomes wholly void. It may be
challenged by direct action which has for its object the declaration of the nullity of the
judgment. It may also be set aside through a collateral attack.

Thus, in Guevarra, we allowed the filing of a motion for reconsideration even if it was
made beyond the reglementary 15-day period.

We based our ruling on the ground that the order challenged by the motion for
reconsideration was issued with grave abuse of discretion and is null and void. We
explained-
Such judgment or order may be resisted in any action or proceeding whenever it is
involved. It is not even necessary to take any steps to vacate or avoid a void judgment
or final order; it may simply be ignored.103chanroblesvirtuallawlibrary
Our ruling in Gonzales v. Solid Cement Corporation104 is more unequivocal. In this case,
we found that the CA committed grave abuse of discretion amounting to lack or excess
of jurisdiction, therefore acting outside the contemplation of law. Hence, even when the
period to assail the CA decision had already lapsed, we ruled that it did not become
final and immutable. A void judgment never becomes final. We ruled thus-
The CA's actions outside its jurisdiction camiot produce legal effects and cannot
likewise be perpetuated by a simple reference to the principle of immutability of final
judgment; a void decision can never become final. "The only exceptions to the rule on
the immutability of final judgments are (1) the correction of clerical errors, (2) the so-
called nunc pro tunc entries which cause no prejudice to any party, and (3) void
judgments." x x x105chanroblesvirtuallawlibrary
More, our ruling in Banco Español-Filipino v. Palanca106 on the effects of a void
judgment has reappeared consistently in jurisprudence touching upon the matter. In this
case, we said that a void judgment is "a lawless thing, which can be treated as an
outlaw and slain at sight, or ignored wherever and whenever it exhibits its head." 107 In
concrete terms, this means that a void judgment creates no rights and imposes no
duties. Any act performed pursuant to it and any claim emanating from it have no legal
effect.108 Thus, in Heirs of Mayor Nemencio Galvez v. Court of Appeals,109 we nullified
an auction sale of a land as well as the resulting deed of sale and transfer certificate of
title as they were the offshoot of a writ of execution carried pursuant to a void judgment.

Hence, because the SEC Decision was issued with grave abuse of discretion and is
therefore void, all acts emanating from it have no force and effect. Thus, the Deed of
Conveyance issued pursuant to it has no legal effect.

Nevertheless, while the certificates of title issued in the name of NIDSLAND arose from
a void judgment, this Court cannot nullify them in these proceedings. The indefeasibility

1397
of a Torrens title prevents us from doing so. Further, we are bound by rules on
jurisdiction and the nature of the proceedings before us.

Our Torrens system serves a very important purpose: As a general rule, a Torrens
certificate of title is conclusive proof of ownership. Thus, provided that the requirements
of law are met, a certificate of title under the Torrens system of registration is
indefeasible. The value of this rule finds real meaning when viewed in practical terms. A
registration under the Torrens system confirms that the person whose name appears as
owner of the land is indeed the true owner. Except for specific circumstances allowed by
law, a person who registers his or her ownership over a piece of land makes his or her
title indefeasible because the law does not allow any other person to attack or challenge
it. Because the title is indefeasible, third persons interested in the registered land can
simply look at the certificate of title and rely on the information stated in it. This creates
stability in our system of registration. This rule is so zealously protected that our laws
even prohibit a collateral attack of a void certificate of title.

This is the spirit that infused our ruling in Heirs of Spouses Benito Gavino and Juana
Euste v. Court of Appeals.110 In this case, we explained that the general rule that the
direct result of a void contract caimot be valid is inapplicable when the integrity of the
Torrens system is involved. Thus, a void certificate of title cannot be cancelled in a
proceeding not instituted for the purpose. We further said-
x x x The effect of such outright cancellation will be to impair public confidence in the
certificate of title. The sanctity of the Torrens system must be preserved; otherwise,
everyone dealing with the property registered under the system will have to inquire in
every instance as to whether the title had been regularly or irregularly issued, contrary
to the evident purpose of the law. Every person dealing with the registered land may
safely rely on the correctness of the certificate of title issued therefor and the law will in
no way oblige him to go behind the certificate to determine the condition of the
property.111chanroblesvirtuallawlibrary
We cited this ruling in subsequent cases such as Rabaja Ranch Development
Corporation v. AFP Retirement and Separation Benefits System,112Spouses Chua v.
Soriano,113 and Republic v. Orfinada, Sr.114 The stability and reliability of the Torrens
system is so important that we cannot, in this case, undermine it for the sake of
expediency.

Hence, we cannot order the direct cancellation of the certificates of title issued to
NIDSLAND even if they are the direct result of a void decision. The nullity of the
certificates of title should be threshed out in a petition for cancellation of title brought
before the proper court.115

Moreover, there are procedural barriers that prevent us from determining the validity of
the certificates of title questioned in this case. First, we do not have jurisdiction over the
cancellation of certificates of title. Second, the nature of the action before us bars us
from going into the certificates of title themselves. We emphasize that this case is a
petition for review on certiorari of an action for annulment of judgment on the ground of
lack of jurisdiction. Our ruling is anchored on the lack of jurisdiction of the SEC to annul

1398
the sale to Cruz and order the cancellation of the certificates of title. In this Decision, we
emphasized that the proper jurisdiction to annul the sale and to cancel the certificates of
title belongs to the regular courts, in particular, the regional trial courts. We must thus
also respect the rule on jurisdiction and exercise restraint in this case. The proper action
to cancel the void certificates of title must be brought before the tribunal designated by
law to possess jurisdiction over the matter. The proper party may, however, use this
Decision as it definitively settles that the certificates of title issued to NIDSLAND arose
out of a void judgment and as such, should have no force and effect. This Decision is
res judicata as to this question.

Further, we also cannot rule on the validity of the sale of the Subject Property to Cruz as
well as Napal's obligation to Imperial and NIDSLAND under the Memorandum of
Agreement. These matters require the presentation of facts before the proper forum and
through appropriate procedural remedies. While we endeavor to fully settle legal
disputes brought before us, we must also place premium on the importance of rules of
procedure. Rules of procedure serve to protect the interests of litigants who seek
redress before the courts. They ensure that litigants plead before the proper forum that
has the necessary expertise and legal tools to fully resolve a legal problem. They also
ensure that litigants employ the proper remedies that will allow them to successfully
obtain the appropriate relief. With this in mind, litigants must be more circumspect in
invoking the jurisdiction of the various tribunals and the multiple remedies available to
them.

WHEREFORE, the Court of Appeals' Resolution dated March 6, 2007 in the First
Consolidated Case is REVERSED and SET ASIDE. Further, we rule that Branch 4,
Regional Trial Court, Legazpi City has no jurisdiction over Cruz's Petition. Thus, the
Regional Trial Court's Decision dated March 24, 2009 is NULLIFIED.

The Court of Appeals' Decision dated September 13, 2010 in the Second Consolidated
Case is also REVERSED and SET ASIDE. We rule that the Securities and Exchange
Commission's Decision dated November 10, 1998 is VOID. Thus, the Deed of
Conveyance dated January 13, 1999 executed in compliance with this Decision
is NULLIFIED. The proper parties can file the appropriate petition for cancellation of title
in the trial court which has jurisdiction to nullify the certificates of title issued to
NIDSLAND by virtue of the void SEC Decision.

SO ORDERED.chanroblesvirtuallawlibrary
RULE 57. PRELIMINARY ATTACHMENT

FIRST DIVISION

APRIL 4, 2018

G.R. No. 193572

1399
TSUNEISHI HEAVY INDUSTRIES (CEBU), INC., Petitioner
vs
MIS MARITIME CORPORATION, Respondent

DECISION

JARDELEZA, J.:

This is a petition for review on certiorari1 under Rule 45 of the Rules of Court filed by
petitioner Tsuneishi Heavy Industries (Cebu), Inc. (Tsuneishi) challenging the
Decision2 of the Court of Appeals (CA) in CAG.R. CEB-SP No. 03956 dated October 7,
2009 and its Resolution3 dated August 26, 2010. The CA Decision reversed three
Orders of Branch 7 of the Regional Trial Court (RTC), Cebu City dated April 15, 2008,
July 7, 2008, and December 11, 2008, respectively. 4 The Resolution denied Tsuneishi's
motion for reconsideration.

Respondent MIS Maritime Corporation (MIS) contracted Tsuneishi to dry dock and
repair its vessel M/T MIS-1 through an Agreement dated March 22, 2006. 5 On March
23, 2006, the vessel dry docked in Tsuneishi's shipyard. Tsuneishi rendered the
required services. However, about a month later and while the vessel was still dry
docked, Tsuneishi conducted an engine test on M/T MIS-1. The vessel's engine emitted
smoke. The parties eventually discovered that this was caused by a burnt crank journal.
The crankpin also showed hairline cracks due to defective lubrication or deterioration,
Tsuneishi insists that the damage was not its fault while MIS insists on the contrary.
Nevertheless, as an act of good will, Tsuneishi paid for the vessel's new engine
crankshaft, crankpin, and main bearings. 6

Tsuneishi billed MIS the amount of US$318,571.50 for payment of its repair and dry
docking services. MIS refused to pay this amount. Instead, it demanded that Tsuneishi
pay US$471,462.60 as payment for the income that the vessel lost in the six months
that it was not operational and dry docked at Tsuneishi's shipyard. It also asked that its
claim be set off against the amount billed by Tsuneishi. MIS further insisted that after
the set off, Tsuneishi still had the obligation to pay it the amount of
US$152,891.10.7 Tsuneishi rejected MIS' demands. It delivered the vessel to MIS in
September 2006.8 On November 6, 2006, MIS signed an Agreement for Final
Price.9 However, despite repeated demands, MIS refused to pay Tsuneishi the amount
billed under their contract.

Tsuneishi claims that MIS also caused M/T White Cattleya, a vessel owned by Cattleya
Shipping Panama S.A. (Cattleya Shipping), to stop its payment for the services
Tsuneishi rendered for the repair and dry docking of the vessel. 10

MIS argued that it lost revenues because of the engine damage in its vessel. This
damage occurred while the vessel was dry docked and being serviced at Tsuneishi's
yard. MIS insisted that since this arose out of Tsuneishi's negligence, it should pay for

1400
MIS' lost income. Tsuneishi offered to pay 50% of the amount demanded but MIS
refused any partial payment.11

On April 10, 2008, Tsuneishi filed a complaint 12 against MIS before the RTC. This
complaint stated that it is invoking the admiralty jurisdiction of the RTC to enforce a
maritime lien under Section 21 of the Ship Mortgage Decree of 1978 13 (Ship Mortgage
Decree). It also alleged as a cause of action MIS' unjustified refusal to pay the amount it
owes Tsuneishi under their contract. The complaint included a prayer for the issuance
of arrest order/writ of preliminary attachment. To support this prayer, the complaint
alleged that Section 21 of the Ship Mortgage Decree as well as Rule 57 of the Rules of
Court on attachment authorize the issuance of an order of arrest of vessel and/or writ of
preliminary attachment.14

In particular, Tsuneishi argued that Section 21 of the Ship Mortgage Decree provides for
a maritime lien in favor of any person who furnishes repair or provides use of a dry dock
for a vessel. Section 21 states that this may be enforced through an action in rem.
Further, Tsuneishi and MIS' contract granted Tsuneishi the right to take possession,
control and custody of the vessel in case of default of payment. Paragraph 9 of this
contract further states that Tsuneishi may dispose of the vessel and apply the proceeds
to the unpaid repair bill.15

Finally, Tsuneishi's complaint alleges that there are sufficient grounds for the issuance
of a writ of preliminary attachment. In particular, it claims that MIS is guilty of fraud in the
performance of its obligation. The complaint states:

40. X X X Under the factual milieu, it is wrongful for defendant MIS Maritime to take
undue advantage of an unfortunate occurrence by withholding payment of what is justly
due to plaintiff under law and contract. Defendant MIS Maritime knew or ought to have
known that its claim for lost revenues was unliquidated and could not be set-off or
legally compensated against the dry-docking and repair bill which was liquidated and
already fixed and acknowledged by the parties.

41. Defendant CATTLEYA SHIPPING's actions and actuations in performing its

obligation were clearly fraudulent because, firstly, it had no business getting involved as
far as the M/T MIS-1 incident was concerned; secondly, no incident of any sort occurred
when its vessel M/T WHITE CATTLEYA was dry docked and repaired. It had no claim
against the plaintiff. Yet, it (defendant Cattleya Shipping) allowed itself to be used by
defendant MIS Maritime when it willfully and unlawfully stopped paying plaintiff, and
conspired to make good defendant MIS Maritime's threat to "withhold payment of any
and all billings that you (plaintiff) may have against our fleet of vessels which include
those registered under Cattleya Shipping Panama S.A. (MT White Cattleya) x x x. 16

Tsuneishi also filed the Affidavit17 of its employee Lionel T. Bitera (Bitera Affidavit), in
accordance with the requirement for the issuance of a writ of preliminary attachment
under Rule 57 of the Rules of Court. The Bitera Affidavit stated that Tsuneishi
performed dry docking and repair services for M/T MIS-1 and M/T White Cattleya. It

1401
also alleged that after Tsuneishi performed all the services required, MIS and Cattleya
refused to pay their obligation. According to the Bitera Affidavit, this refusal to pay
constitutes fraud because:

d. The breach of the obligation was willful. In the case of M/T MIS-1 no single
installment payment was made despite the fact that the vessel was accepted fully dry
docked and with a brand new engine crankshaft installed by the yard free of charge to
the Owner. MIS Maritime Corporation was blaming the yard for the damage sustained
by the engine crank shaft on 25 April 2006 when the engine was started in preparation
for sea trial. When the incident happened the dry docking had already been completed
and the vessel was already in anchorage position for sea trial under the management
and supervisory control of the Master and engineers of the vessel. Besides, the incident
was not due to the fault of the yard. It was eventually traced to dirty lube oil or defective
main engine lubricating oil which was the lookout and responsibility of the vessel's
engineers.

xxxx

e. The action taken by MIS Maritime Corporation in setting off its drydocking obligation
against their claim for alleged lost revenues was unilaterally done, and without legal and
factual basis for while, on one hand, the drydocking bill was for a fixed and agreed
amount, the claim of MIS Maritime for lost revenues, on the other hand, was not
liquidated as it was for a gross amount. X X X

f. Cattleya Shipping for its part had nothing to do with the dry docking of M/T MIS-1.
There was no incident whatsoever during the dry docking of its vessel M/T WHITE
CATTLEYA. In fact, after this vessel was satisfactorily dry docked and delivered to its
Owner (Cattleya Shipping) the latter started paying the monthly installments without any
complaint whatsoever. X X X18

The RTC issued a writ of preliminary attachment in an Order 19 dated April 15, 2008
(First Order) without hearing. Consequently, MIS' condominium units located in the
financial district of Makati, cash deposits with various banks, charter hire receivables
from Shell amounting to ₱26.6 Million and MT MIS-1 were attached. 20

MIS filed a motion to discharge the attachment. 21 The RTC denied this motion in an
Order22 dated July 7, 2008 (Second Order). MIS filed a motion for reconsideration which
the RTC also denied in an Order23 dated December 11, 2008 (Third Order).

MIS then filed a special civil action for certiorari24 before the CA assailing the three
Orders. MIS argued that the RTC acted with grave abuse of discretion when it ordered
the issuance of a preliminary writ of attachment and denied MIS’ motion to discharge
and motion for reconsideration.

The CA ruled in favor of MIS. It reversed the three assailed Orders after finding that the
RTC acted with grave abuse of discretion in issuing the writ of preliminary attachment. 25

1402
According to the CA, the Bitera Affidavit lacked the required allegation that MIS has no
sufficient security for Tsuneishi's claim. In fact, the CA held that the evidence on record
shows that MIS has sufficient properties to cover the claim. It also relied on
jurisprudence stating that when an affidavit does not contain the allegations required
under the rules for the issuance of a writ of attachment and the court nevertheless
issues the writ, the RTC is deemed to have acted with grave abuse of discretion.
Consequently, the writ of preliminary attachment is fatally defective. 26 The CA further
highlighted that a writ of preliminary attachment is a harsh and rigorous remedy. Thus,
the rules must be strictly construed. Courts have the duty to ensure that all the
requisites are complied with.27

The CA also found that the RTC ordered the issuance of the writ of preliminary
attachment despite Tsuneishi's failure to prove the presence of fraud. It held that the
bare and unsubstantiated allegation in the Bitera Affidavit that MIS willfully refused to
pay its obligation is not sufficient to establish prima facie fraud. The CA emphasized that
a debtor's mere inability to pay is not fraud. Moreover, Tsuneishi's allegations of fraud
were general. Thus, they failed to comply with the requirement in the Rules of Court that
in averments of fraud, the circumstances constituting it must be alleged with
particularity. The CA added that while notice and hearing are not required for the
issuance of a writ of preliminary attachment, it may become necessary in instances
where the applicant makes grave accusations based on grounds alleged in general
terms. The CA also found that Tsuneishi failed to comply with the requirement that the
affidavit must state that MIS has no other sufficient security to cover the amount of its
obligation.28

The CA disposed of the case, thus:

WHEREFORE, the petition is GRANTED. The three (3) Orders dated April 15, 2008,
July 7, 2008 and December 11, 2008, respectively, of the Regional Trial Court, Branch
7, Cebu City, in Civil Case No. CEB-34250, are ANNULLED and SET
ASIDE.29 (Emphasis in the original, citations omitted.)

Tsuneishi filed this petition for review on certiorari under Rule 45 of the Rules of Court
challenging the CA's ruling. Tsuneishi pleads that this case involves a novel question of
law. It argues that while Section 21 of the Ship Mortgage Decree grants it a maritime
lien, the law itself, unfortunately, does not provide for the procedure for its enforcement.
It posits that to give meaning to this maritime lien, this Court must rule that the
procedure for its enforcement is Rule 57 of the Rules of Court on the issuance of the
writ of preliminary attachment. Thus, it proposes that aside from the identified grounds
for the issuance of a writ of preliminary attachment in the Rules of Court, the maritime
character of this action should be considered as another basis to issue the writ. 30

To support its application for the issuance of a writ of preliminary attachment, Tsuneishi
also invokes a provision in its contract with MIS which states that:

1403
In case of default, either in payment or in violation of the warranties stated in Section
11. by the Owner, the Owner hereby appoints the Contractor as its duly authorized
attorney in fact with full power and authority to take possession, control, and custody of
the said Subject Vessel and / or any of the Subject Vessel's accessories and
equipment, or other assets of the Owner, without resorting to court action, and that the
Owner hereby empowers the Contractor to take custody of the same until the obligation
of the Owner to the Contractor is fully paid and settled to the satisfaction of the
Contractor. x x x31 (Underscoring omitted.)

It insists that the writ of preliminary attachment must be issued so as to give effect to
this provision in the contract.

Tsuneishi also disputes the CA's finding that it failed to show fraud in MIS' performance
of its obligation. It opines that MIS' failure to comply with its obligation does not arise
from a mere inability to pay. If that were the case, then the CA would be correct in
saying that MIS committed no fraud. However, MIS' breach of its obligation in this case
amounts to a gross unwillingness to pay amounting to fraud. 32

Tsuneishi adds that the CA erred in holding that the RTC acted with grave abuse of
discretion when it failed to conduct a hearing prior to the issuance of the writ of
preliminary attachment. It insisted that the Rules of Court, as well as jurisprudence,
does not require a hearing prior to issuance. 33

Finally, Tsuneishi disagrees with the ruling of the CA that it did not comply with the
requirements under the rules because the Bitera Affidavit did not state that MIS has no
other sufficient security. This was already stated in Tsuneishi's complaint filed before
the RTC. Thus, the rules should be applied liberally in favor of rendering justice. 34

In its comment,35 MIS challenges Tsuneishi's argument that its petition raises a novel
question of law. According to MIS, the issue in this case is simple. A reading of
Tsuneishi's complaint shows that it prayed for the issuance of a writ of preliminary
attachment under Rule 57 of the Rules of Court or arrest of vessel to enforce its
maritime lien under the Ship Mortgage Decree. 36 Thus, Tsuneishi knew from the start
that a remedy exists for the enforcement of its maritime lien-through an arrest of vessel
under the Ship Mortgage Decree. However, the RTC itself characterized the complaint
as a collection of sum of money with prayer for the issuance of a writ of preliminary
attachment. Thus, what it issued was a writ of preliminary attachment. Unfortunately for
Tsuneishi, the CA reversed the RTC because it found that the element of fraud was not
duly established. Thus, there was no ground for the issuance of a writ of preliminary
attachment. 37

MIS insists that Tsuneishi is raising this alleged novel question of law for the first time
before this Court in an attempt to skirt the issue that it failed to sufficiently establish that
MIS acted with fraud in the performance of its obligation. MIS contends that fraud
cannot be inferred from a debtor's mere inability to pay. There is no distinction between
inability and a refusal to pay where the refusal is based on its claim that Tsuneishi

1404
damaged its vessel. According to MIS, its vessel arrived at Tsuneishi's shipyard on its
own power. Its engine incurred damage while it was under Tsuneishi's custody. Thus,
Tsuneishi is presumed negligent.38

MIS further highlights that Tsuneishi completed the dry docking in April 2006. It was
during this time that the damage in the vessel's engine was discovered. The vessel was
turned over to MIS only in September 2006. Thus, it had lost a significant amount of
revenue during the period that it was off-hire. Because of this, it demanded payment
from Tsuneishi which the latter rejected. 39

Hence, MIS argues that this is not a situation where, after Tsuneishi rendered services,
MIS simply absconded.1âwphi1 MIS has the right to demand for the indemnification of
its lost revenue due to Tsuneishi's negligence. 40

MIS further adds that the CA correctly held that there was no statement in the Bitera
Affidavit that MIS had no adequate security to cover the amount being demanded by
Tsuneishi. Tsuneishi cannot validly argue that this allegation is found in its complaint
and that this should be deemed compliance with the requirement under Rule 57. 41

Further, in its motion to discharge the preliminary attachment, MIS presented proof that
it has the financial capacity to pay any liability arising from Tsuneishi's claims. In fact,
there was an excessive levy of MIS' properties. This is proof in itself that MIS has
adequate security to cover Tsuneishi's claims. Finally, MIS agrees with the CA that the
RTC should have conducted a hearing. While it is true that a hearing is not required by
the Rules of Court, jurisprudence provides that a hearing is necessary where the
allegations in the complaint and the affidavit are mere general averments. Further,
where a motion to discharge directly contests the allegation in the complaint and
affidavit, the applicant has the burden of proving its claims of fraud. 42

There are two central questions presented for the Court to resolve, namely: (1) whether
a maritime lien under Section 21 of the Ship Mortgage Decree may be enforced through
a writ of preliminary attachment under Rule 57 of the Rules of Court; and (2) whether
the CA correctly ruled that Tsuneishi failed to comply with the requirements for the
issuance of a writ of preliminary injunction.

We deny the petition.

We begin by classifying the legal concepts of lien, maritime lien and the provisional
remedy of preliminary attachment.

Alien is a "legal claim or charge on property, either real or personal, as a collateral or

security for the payment of some debt or obligation. 43 It attaches to a property by
operation of law and once attached, it follows the property until it is discharged. What it
does is to give the party in whose favor the lien exists the right to have a debt satisfied

1405
out of a particular thing. It is a legal claim or charge on the property which functions as a
collateral or security for the payment of the obligation. 44

Section 21 of the Ship Mortgage Decree establishes a lien. It states:

Sec. 21. Maritime Lien for Necessaries; Persons entitled to such Lien. - Any person
furnishing repairs, supplies, towage, use of dry dock or marine railway, or other
necessaries to any vessel, whether foreign or domestic, upon the order of the owner of
such vessel, or of a person authorized by the owner, shall have a maritime lien on the
vessel, which may be enforced by suit in rem, and it shall be necessary to allege or
prove that credit was given to the vessel.

In practical terms, this means that the holder of the lien has the right to bring an action
to seek the sale of the vessel and the application of the proceeds of this sale to the
outstanding obligation. Through this lien, a person who furnishes repair, supplies,
towage, use of dry dock or marine railway, or other necessaries to any vessel, in
accordance with the requirements under Section 21, is able to obtain security for the
payment of the obligation to him.

A party who has a lien in his or her favor has a remedy in law to hold the property liable
for the payment of the obligation. A lienholder has the remedy of filing an action in court
for the enforcement of the lien. In such action, a lienholder must establish that the
obligation and the corresponding lien exist before he or she can demand that the
property subject to the lien be sold for the payment of the obligation. Thus, a lien
functions as a form of security for an obligation.

Liens, as in the case of a maritime lien, arise in accordance with the provision of
particular laws providing for their creation, such as the Ship Mortgage Decree which
clearly states that certain persons who provide services or materials can possess a lien
over a vessel. The Rules of Court also provide for a provisional remedy which
effectively operates as a lien. This is found in Rule 57 which governs the procedure for
the issuance of a writ of preliminary attachment.

A writ of preliminary attachment is a provisional remedy issued by a court where an

action is pending. In simple terms, a writ of preliminary attachment allows the levy of a
property which shall then be held by the sheriff. This property will stand as security for
the satisfaction of the judgment that the court may render in favor of the attaching party.
In Republic v. Mega Pacific eSolutions (Republic), 45 we explained that the purpose of a
writ of preliminary attachment is twofold:

First, it seizes upon property of an alleged debtor in advance of final judgment and
holds it subject to appropriation, thereby preventing the loss or dissipation of the
property through fraud or other means. Second, it subjects the property of the debtor to
the payment of a creditor's claim, in those cases in which personal service upon the
debtor cannot be obtained. This remedy is meant to secure a contingent lien on the
defendant's property until the plaintiff can, by appropriate proceedings, obtain a

1406
judgment and have the property applied to its satisfaction, or to make some
provision for unsecured debts in cases in which the means of satisfaction thereof
are liable to be removed beyond the jurisdiction, or improperly disposed of or
concealed, or otherwise placed beyond the reach of creditors.46 (Citations omitted,
emphasis supplied. Italics in the original.)

As we said, a writ of preliminary attachment effectively functions as a lien. This is crucial

to resolving Tsuneishi's alleged novel question of law in this case. Tsuneishi is correct
that the Ship Mortgage Decree does not provide for the specific procedure through
which a maritime lien can be enforced. Its error is in insisting that a maritime lien can
only be operationalized by granting a writ of preliminary attachment under Rule 57 of
the Rules of Court. Tsuneishi argues that the existence of a maritime lien should be
considered as another ground for the issuance of a writ of preliminary attachment under
the Rules of Court.

Tsuneishi's argument is rooted on a faulty understanding of a lien and a writ of

preliminary attachment. As we said, a maritime lien exists in accordance with the
provision of the Ship Mortgage Decree. It is enforced by filing a proceeding in court.
When a maritime lien exists, this means that the party in whose favor the lien was
established may ask the court to enforce it by ordering the sale of the subject property
and using the proceeds to settle the obligation.

On the other hand, a writ of preliminary attachment is issued precisely to create a lien.
When a party moves for its issuance, the party is effectively asking the court to attach a
property and hold it liable for any judgment that the court may render in his or her favor.
This is similar to what a lien does. It functions as a security for the payment of an
obligation. In Quasha Asperilla Ancheta Valmonte Peña & Marcos v. Juan, 47 we held:

An attachment proceeding is for the purpose of creating a lien on the property to serve
as security for the payment of the creditors' claim. Hence, where a lien already exists,
as in this case a maritime lien, the same is already equivalent to an attachment. X X X 48

To be clear, we repeat that when a lien already exists, this is already equivalent to an
attachment. This is where Tsuneishi's argument fails.

Clearly, because it claims a maritime lien in accordance with the Ship Mortgage Decree,
all Tsuneishi had to do is to file a proper action in court for its enforcement. The
issuance of a writ of preliminary attachment on the pretext that it is the only means to
enforce a maritime lien is superfluous. The reason that the Ship Mortgage Decree does
not provide for a detailed procedure for the enforcement of a maritime lien is because it
is not necessary. Section 21 already provides for the simple procedure-file an action in
rem before the court.

To our mind, this alleged novel question of law is a mere device to remedy the error
committed by Tsuneishi in the proceedings before the trial court regarding the issuance
of a writ of preliminary attachment. We note that the attachment before the trial court

1407
extended to other properties other than the lien itself, such as bank accounts and real
property. Clearly, what was prayed for in the proceedings below was not an attachment
for the enforcement of a maritime lien but an attachment, plain and simple.

II

Tsuneishi's underlying difficulty is whether it succeeded in proving that it complied with

the requirements for the issuance of a writ of preliminary attachment. This is the only
true question before us. In particular, we must determine whether the Bitera Affidavit
stated that MIS lacked sufficient properties to cover the obligation and whether MIS
acted with fraud in refusing to pay.

At the onset, we note that these questions dwell on whether there was sufficient
evidence to prove that Tsuneishi complied with the requirements for the issuance of a
writ of preliminary attachment. Sufficiency of evidence is a question of fact which this
Court cannot review in a Rule 45 petition. We are not a trier of fact.

Nevertheless, we have examined the record before us and we agree with the factual
findings of the CA.

The record clearly shows that the Bitera Affidavit does not state that MIS has no other
sufficient security for the claim sought to be enforced. This is a requirement under
Section 3, Rule 57 of the Rules of Court. We cannot agree with Tsuneishi's insistence
that this allegation need not be stated in the affidavit since it was already found in the
complaint. The rules are clear and unequivocal. There is no basis for Tsuneishi's
position. Nor is it entitled to the liberal application of the rules. Not only has Tsuneishi
failed to justify its omission to include this allegation, the facts also do not warrant the
setting aside of technical rules. Further, rules governing the issuance of a writ of
preliminary attachment are strictly construed.

We also agree with the CA's factual finding that MIS did not act with fraud in refusing to
pay the obligation.1âwphi1 We emphasize that when fraud is invoked as a ground for
the issuance of a writ of preliminary attachment under Rule 57 of the Rules of Court,
there must be evidence clearly showing the factual circumstances of the alleged
fraud.49 Fraud cannot be presumed from a party's mere failure to comply with his or her
obligation. Moreover, the Rules of Court require that in all averments of fraud, the
circumstances constituting it must be stated with particularity. 50

In Republic, we defined fraud as:

[A]s the voluntary execution of a wrongful act or a wilful omission, while knowing and
intending the effects that naturally and necessarily arise from that act or omission. In its
general sense, fraud is deemed to comprise anything calculated to deceive -- including
all acts and omission and concealment involving a breach of legal or equitable duty,
trust, or confidence justly reposed ---- resulting in damage to or in undue advantage
over another. Fraud is also described as embracing all multifarious means that human

1408
ingenuity can device, and is resorted to for the purpose of securing an advantage over
another by false suggestions or by suppression of truth; and it includes all surprise,
trick, cunning, dissembling, and any other unfair way by which another is
cheated.51 (Citations omitted.)

By way of example, in Metro, Inc. v. Lara's Gifts and Decors, Inc.,52 we ruled that the
factual circumstances surrounding the parties' transaction clearly showed fraud. In this
case, the petitioners entered into an agreement with respondents where the
respondents agreed that they will endorse their purchase orders from their foreign
buyers to the petitioners in order to help the latter's export business. The petitioners
initially promised that they will transact only with the respondents and never directly
contact respondents' foreign buyers. To convince respondents that they should trust the
petitioners, petitioners even initially remitted shares to the respondents in accordance
with their agreement. However, as soon as there was a noticeable increase in the
volume of purchase orders from respondents' foreign buyers, petitioners abandoned
their contractual obligation to respondents and directly transacted with respondents'
foreign buyers. We found in this case that the respondents' allegation (that the
petitioners undertook to sell exclusively through respondents but then transacted
directly with respondents' foreign buyer) is sufficient allegation of fraud to support the
issuance of a writ of preliminary attachment. 53

In contrast, in PCL Industries Manufacturing Corporation v. Court of Appeals,54 we

found no fraud that would warrant the issuance of a writ of preliminary attachment. In
that case, petitioner purchased printing ink materials from the private respondent.
However, petitioner found that the materials delivered were defective and thus refused
to pay its obligation under the sales contract. Private respondent insisted that
petitioner's refusal to pay after the materials were delivered to it amounted to fraud. We
disagreed. We emphasized our repeated and consistent ruling that the mere fact of
failure to pay after the obligation to do so has become due and despite several
demands is not enough to warrant the issuance of a writ of preliminary attachment. 55

An examination of the Bitera Affidavit reveals that it failed to allege the existence of
fraud with sufficient specificity. The affidavit merely states that MIS refused to pay its
obligation because it demanded a set off between its obligation to Tsuneishi and
Tsuneishi's liability for MIS' losses caused by the delay in the turn-over of the vessel.
The affidavit insists that this demand for set off was not legally possible. Clearly, there is
nothing in the affidavit that even approximates any act of fraud which MIS committed in
the performance of its obligation. MIS' position was clear: Tsuneishi caused the damage
in the vessel's engine which delayed its trip and should thus be liable for its losses.
There is no showing that MIS performed any act to deceive or defraud Tsuneishi.

In Watercraft Venture Corporation v. Wolfe,56 we ruled that an affidavit which does not
contain concrete and specific grounds showing fraud is inadequate to sustain the
issuance of the writ of preliminary attachment. 57

Moreover, the record tells a different story.

1409
The record shows that Tsuneishi released the vessel in September 2006. MIS signed
the Agreement of the Final Price only in November 2006. Thus, Tsuneishi's claim that
MIS'act of signing the document and making it believe that MIS will pay the amount
stated is the fraudulent act which induced it to release the vessel cannot stand.
Tsuneishi agreed to release the vessel even before MIS signed the document. It was
thus not the act which induced Tsuneishi to turn over the vessel.

Further, Tsuneishi is well aware of MIS' claims. It appears from the record, and as
admitted by MIS in its pleadings, that the reason for its refusal to pay is its claim that its
obligation should be set off against Tsuneishi's liability for the losses that MIS incurred
for the unwarranted delay in the turn-over of the vessel. MIS insists that Tsuneishi is
liable for the damage on the vessel. This is not an act of fraud. It is not an intentional act
or a willful omission calculated to deceive and injure Tsuneishi. MIS is asserting a claim
which it believes it has the right to do so under the law. Whether MIS' position is legally
tenable is a different matter. It is an issue fit for the court to decide. Notably, MIS filed
this as a counterclaim in the case pending before the RTC. 58 Whether MIS is legally
correct should be threshed out there.

Even assuming that MIS is wrong in refusing to pay Tsuneishi, this is nevertheless not
the fraud contemplated in Section 1(d), Rule 57 of the Rules of Court. Civil law grants
Tsuneishi various remedies in the event that the trial court rules in its favor such as the
payment of the obligation, damages and legal interest. The issuance of a writ of
preliminary attachment is not one of those remedies.

There is a reason why a writ of preliminary attachment is available only in specific cases
enumerated under Section 1 of Rule 57. As it entails interfering with property prior to a
determination of actual liability, it is issued with great caution and only when warranted
by the circumstances. As we said in Ng Wee v. Tankiansee, 59 the rules on the issuance
of the writ of preliminary attachment as a provisional remedy are strictly construed
against the applicant because it exposes the debtor to humiliation and annoyance. 60

Moreover, we highlight that this petition for review on certiorari arose out of a Decision
of the CA in a Rule 65 petition. In cases like this, this Court's duty is only to ascertain
whether the CA was correct in ruling that the RTC acted with grave abuse of discretion
amounting to lack or excess of jurisdiction.

Jurisprudence has consistently held that a court that issues a writ of preliminary
attachment when the requisites are not present acts in excess of its
jurisdiction.61 In Philippine Bank of Communications v. Court of Appeals, 62 we
highlighted:

Time and again, we have held that the rules on the issuance of a writ of attachment
must be construed strictly against the applicants. This stringency is required because
the remedy of attachment is harsh, extraordinary and summary in nature. If all the
requisites for the granting of the writ are not present, then the court which issues it acts
in excess of its jurisdiction.63 (Citation omitted.)

1410
In accordance with consistent jurisprudence, we must thus affirm the ruling of the CA
that the RTC, in issuing a writ of preliminary attachment when the requisites under the
Rules of Court were clearly not present, acted with grave abuse of discretion.

WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision of the
Court of Appeals dated October 7, 2009 and its Resolution dated August 26, 2010
are AFFIRMED.

SO ORDERED.

FIRST DIVISION

G.R. No. 169694, December 09, 2015

MEGAWORLD PROPERTIES AND HOLDINGS, INC., EMPIRE EAST LAND

HOLDINGS, INC., AND ANDREW L. TAN, Petitioners, v. MAJESTIC FINANCE AND
INVESTMENT CO., INC., RHODORA LOPEZ-LIM, AND PAULINA
CRUZ, Respondents.

DECISION

BERSAMIN, J.:

This case arises from a dispute on whether either party of a joint venture agreement to
develop property into a residential subdivision has already performed its obligation as to
entitle it to demand the performance of the other's reciprocal
obligation.chanRoblesvirtualLawlibrary

The Case

Under review is the decision promulgated on April 27, 2005, 1 whereby the Court of
Appeals (CA) upheld the order issued on November 5, 2002 by the Regional Trial
Court, Branch 67, in Pasig City (RTC) in Civil Case No. 67813 directing the defendants
(petitioners herein) to perform their obligation to provide round-the-clock security for the
property under development.2 Also appealed is the resolution promulgated on
September 12, 2005 denying the petitioners' motion for
reconsideration.3chanRoblesvirtualLawlibrary

Antecedents

On September 23, 1994, Megaworld Properties and Holdings, Inc. (developer) entered
into a Joint Venture Agreement (JVA)4 with Majestic Finance and Investment Co., Inc.
(owner) for the development of the residential subdivision located in Brgy. Alingaro,
General Trias, Cavite. According to the JVA, the development of the 215 hectares of
land belonging to the owner (joint venture property) would be for the sole account of the
developer;5 and that upon completion of the development of the subdivision, the owner
would compensate the developer in the form of saleable residential subdivision
1411
lots.6 The JVA further provided that the developer would advance all the costs for the
relocation and resettlement of the occupants of the joint venture property, subject to
reimbursement by the owner;7 and that the developer would deposit the initial amount of
P10,000,000.00 to defray the expenses for the relocation and settlement, and the costs
for obtaining from the Government the exemptions and conversion permits, and the
required clearances.8chanroblesvirtuallawlibrary

On September 24, 1994, the developer and owner agreed, through the addendum to
the JVA,9 to increase the initial deposit for the settlement of claims and the relocation of
the tenants from P10,000,000.00 to P60,000,000.00.

On October 27, 1994, the developer, by deed of assignment, 10 transferred, conveyed

and assigned to Empire East Land Holdings, Inc. (developer/assignee) all its rights and
obligations under the JVA including the addendum.

On February 29, 2000, the owner filed in the RTC a complaint for specific performance
with damages against the developer, the developer/assignee, and respondent Andrew
Tan, who are now the petitioners herein. The complaint, docketed as Civil Case No.
67813, was mainly based on the failure of the petitioners to comply with their obligations
under the JVA,11 including the obligation to maintain a strong security force to safeguard
the entire joint venture property of 215 hectares from illegal entrants and occupants.

Following the joinder of issues by the petitioners' answer with counterclaim, and by the
respondents' reply with answer to the counterclaim, the RTC set the pre-trial of the
case. At the conclusion of the pre-trial conference, the presentation of the owner's
evidence was suspended because of the parties' manifestation that they would settle
the case amicably. It appears that the parties negotiated with each other on how to
implement the JVA and the addendum.

On September 16, 2002, the owner filed in the RTC a manifestation and
motion,12 praying therein that the petitioners be directed to provide round-the-clock
security for the joint venture property in order to defend and protect it from the invasion
of unauthorized persons. The petitioners opposed the manifestation and
motion,13 pointing out that: (1) the move to have them provide security in the properties
was premature; and (2) under the principle of reciprocal obligations, the owner could not
compel them to perform their obligations under the JVA if the owner itself refused to
honor its obligations under the JVA and the addendum.

On November 5, 2002, the RTC issued its first assailed order, 14 directing the developer
to provide sufficient round-the-clock security for the protection of the joint venture
property, as follows:

For consideration is a "Manifestation and Motion" filed by plaintiff, through counsel,

defendants having filed their Opposition thereto, the incident is now ripe for resolution.

After a careful examination of the records of this case, the Court believes that the
defendants should provide security for the 215 hectares land subject of the joint venture
1412
agreement to protect it from unlawful elements as well as to avoid undue damage which
may be caused by the settling of squatters. As specified in Article III par. (j) of the joint
venture agreement which was entered into by plaintiffs and defendants, the latter shall
at its exclusive account and sole expense secure the land in question from the influx of
squatters and/or unauthorized settlers, occupants, tillers, cultivators and the likes from
date of execution of this agreement.

WHEREFORE, and as prayed for, the Court hereby directs the defendants to provide
sufficient round the clock security for the protection of the 215 hectares land subject of
the joint venture agreement during the pendency of this case.

SO ORDERED.

The petitioners sought the reconsideration of the November 5, 2002 order, 15 but the
RTC denied the motion on May 19, 2003,16 observing that there was no reason to
reverse the order in question considering that the allegations in the motion for
reconsideration, being a mere rehash of those made earlier, had already been passed
upon.

On August 4, 2003, the petitioners instituted a special civil action for certiorari in the
CA,17 claiming therein that the RTC thereby gravely abused its discretion amounting to
lack or excess of jurisdiction in issuing the order of November 5, 2002, specifying the
following grounds, namely:

THE PUBLIC RESPONDENT GRAVELY ABUSED HIS DISCRETION AMOUNTING TO

LACK OR EXCESS OF JURISDICTION IN DIRECTING PETITIONERS TO PROVIDE
ROUND THE CLOCK SECURITY GUARDS ON THE SUBJECT PROPERTIES.

I. THE PUBLIC RESPONDENT ARBITRARILY AND PREMATURELY DISPOSED OF

ONE OF THE RELIEF[S] PRAYED FOR BY PRIVATE RESPONDENTS IN THEIR
COMPLAINT WHEN TRIAL HAS NOT EVEN STARTED.

II. PUBLIC RESPONDENT ARBITRARILY DISREGARDED THE FACT THAT THE

PARTIES ARE DISCUSSING HOW TO PURSUE THE JVA.

III. PUBLIC RESPONDENT ARBITRARILY DISREGARDED THE PRINCIPLE OF

"RECIPROCAL OBLIGATIONS" UNDER THE CIVIL CODE.

On April 27, 2005, the CA promulgated its assailed decision dismissing the petitioner's
petition for certiorari,18 ruling thusly:

On the merits of the petition, our examination of the records shows nothing whimsical or
arbitrary in the respondent judge's order directing the petitioners to provide security over
the joint venture property. Like the respondent judge, we believe that the obligation of
the petitioners under the JVA to provide security in the area, as spelled out under Article
II, par. (c) and Article III, paragraphs (h) and (j), is well established, thus:

1413
xxxx

These clear and categorical provisions in the JVA -which petitioners themselves do not
question -obviously belie their contention that the respondent judge's order to provide
security for the property is premature at this stage. The petitioner's obligation to secure
the property under the JVA arose upon the execution of the Agreement, or as soon as
the petitioners acquired possession of the joint venture property in 1994, and is
therefore already demandable. The settled rule is that "contracts are the laws between
the contracting parties, and if their terms are clear and leave no room for doubt as to
their intentions, the contracts are obligatory no matter what their forms may be,
whenever the essential requisites for their validity are present." Thus, unless the
existence of this particular obligation - i.e., to secure the joint venture property - is
challenged, petitioners are bound to respect the terms of the Agreement and of his
obligation as the law between them and MAJESTIC.

We stress along this line that the complaint MAJESTIC filed below is for specific
performance and is not for rescission of contract. The complaint presupposes existing
obligations on the part of the petitioners that MAJESTIC seeks to be carried out in
accordance with the terms of the Agreement. Significantly, MAJESTIC did not pray in
the complaint that petitioners be ordered to secure the area from the influx of illegal
settlers and squatters because petitioner's obligation in this regard commenced upon
the execution of the JVA and hence, is already an existing obligation. What it did ask is
for the petitioners to maintain a strong security force at all times over the area, in
keeping with their commitment to secure the area from the influx of illegal settlers and
occupant. To be sure, to "maintain" means "to continue", "to carry on", to "hold or keep
in any particular state or condition" and presupposes an obligation that already began.
Thus, contrary to petitioner's submissions, the question of whether or not they have the
obligation to provide security in the area is not at all an issue in the case below. The
issue MAJESTIC presented below is whether or not petitioner should be ordered to
maintain a strong security force within the joint venture property. Hence, in issuing the
assailed orders, the public respondent prejudged no issue that is yet to be resolved
after the parties shall have presented their evidence.

Our conclusion (that the petitioner's obligation to secure and protect the joint venture
property is a non-issue in the case below) necessarily explains why the first assailed
order -although not in the form of a preliminary mandatory injunction -is nonetheless
legally justified. As an established and undisputed interim measure pending the
resolution of the case on the merits, we do not see its enforcement as hindrance to
whatever negotiations the parties may undertake to settle their dispute.

Nor do we find the principle of reciprocal obligations a justification for petitioner's refusal
to perform their commitment of safeguarding the joint venture property. For, while it is
true that the JVA gives rise to reciprocal obligations from both parties, these obligations
are not necessarily demandable at the same time. MAJESTIC's initial obligation under
the JVA is to deliver or surrender to the petitioners the possession of the joint venture

1414
property -an obligation it fulfilled upon the execution of the Agreement. MAJESTIC's
obligation under the JVA to deliver to the petitioners the titles to the joint venture
property and to reimburse them for tenant-related expenses are demandable at later
stages of the contract or upon completion of the development, and therefore may not be
used by the petitioners as an excuse for not complying with their own currently
demandable obligation.

All told, we believe that securing and protecting the area from unlawful elements
benefits both the developer and the landowner who are equally keen in safeguarding
their interests in the project. Otherwise stated, incursion by unlawful settlers into an
unsecured and unprotected joint venture property can only cause great loss and
damage to both parties. Reasons of practicality within legal parameters, rather than
grave abuse of discretion, therefore underlie the respondent judge's challenged orders.

WHEREFORE, premises considered, we hereby DISMISS the petition for lack of merit.

SO ORDERED.19 (Emphasis omitted)

On May 26, 2005, the petitioners filed a motion for reconsideration, 20 but the CA denied
the motion on September 12, 2005. 21chanroblesvirtuallawlibrary

Hence, this appeal by petition for review on certiorari.chanRoblesvirtualLawlibrary

Issues

The petitioner submits the following issues:

a. Whether or not the petitioners are obligated to perform their obligations

under the JVA, including that of providing round-the-clock security for the
subject properties, despite respondents' failure or refusal to acknowledge,
or perform their reciprocal obligations there;

b. Whether or not the RTC gravely abused its discretion in directing the
petitioners to perform their obligations under the JVA, including that of
providing round-the-clock security for the subject properties, although the
JVA had been suspended due to the parties' disagreement as to how to
implement the same;

c. Whether or not the RTC gravely abused its discretion in issuing the first
and second assailed orders and prematurely resolving and disposing of
one of the causes of action of the respondents, which was to provide
round-the-clock security for the subject properties, an issue proposed by
the respondents, even before the termination of the pre-trial;

1415
 d. Whether or not the RTC gravely abused its discretion in issuing the first
and second assailed orders in clear disregard of the mandatory
requirements of Rule 58 of the Rules of Court.22chanroblesvirtuallawlibrary

Ruling of the Court

The appeal is meritorious. The CA erred in upholding the November 5, 2002 order of
the RTC.

The obligations of the parties under the JVA were unquestionably reciprocal. Reciprocal
obligations are those that arise from the same cause, and in which each party is a
debtor and a creditor of the other at the same time, such that the obligations of one are
dependent upon the obligations of the other. They are to be performed simultaneously,
so that the performance by one is conditioned upon the simultaneous fulfillment by the
other.23 As the Court has expounded in Consolidated Industrial Gases, Inc. v. Alabang
Medical Center:24chanroblesvirtuallawlibrary

Reciprocal obligations are those which arise from the same cause, and in which each
party is a debtor and a creditor of the other, such that the obligation of one is dependent
upon the obligation of the other. They are to be performed simultaneously, so that the
performance of one is conditioned upon the simultaneous fulfillment of the other. In
reciprocal obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. From the moment
one of the parties fulfills his obligation, delay by the other begins.

xxxx

In reciprocal obligations, before a party can demand the performance of the obligation
of the other, the former must also perform its own obligation. For its failure to turn over a
complete project in accordance with the terms and conditions of the installation
contracts, CIGI cannot demand for the payment of the contract price balance from AMC,
which, in turn, cannot legally be ordered to pay. 25chanrobleslaw

The determination of default on the part of either of the parties depends on the terms of
the JVA that clearly categorized the parties' several obligations into two types.

The first type related to the continuous obligations that would be continuously performed

from the moment of the execution of the JVA until the parties shall have achieved the
purpose of their joint venture. The continuous obligations under the JVA were as
follows: (1) the developer would secure the joint venture property from unauthorized
occupants;26 (2) the owner would allow the developer to take possession of the joint
venture property;27 (3) the owner would deliver any and all documents necessary for the
accomplishment of each activity;28 and (4) both the developer and the owner would pay
the real estate taxes.29chanroblesvirtuallawlibrary

1416
The second type referred to the activity obligations. The following table shows the
activity obligations of the parties under the JVA, to wit:
SEQUENCE OF ACTIVITIES (Article XIV of the JVA)
ACTIVITY
Signing of JVA.
DEVELOPER to negotiate
immediately with all
tenants, settlers,
occupants, tillers,
cultivators of the land in
question.
DEVELOPER to pay and
settle all monetary claims
of all tenants, settlers,
occupants, tillers,
cultivators of the land.
OWNER DEVELOPER
OBLIGATION OBLIGATION
Sign JVA Sign JVA
Art. II(b) Art. V par. 2
Deliver any and all Pay real estate taxes
documents required for the Art. IIIa par. 2
successful development of Deposit P10M
the Project
Art. V par. 2
Pay real estate taxes
Art. II(g)
Warrant absolute
ownership
Art. II(b) Art. V par. 2
Deliver any and all Pay real estate taxes
documents required for the Art. II(c)
successful development of Take possession of the
the Project parcels of land
Art. V par. 2 Art. III (j)
Pay real estate taxes Secure property from
Art. II(c) invasion of squatters and
Allow DEVELOPER to take other elements
possession of subject Art. III (c)
property To negotiate with occupants
Art. II(b) Art. V par. 2
Deliver any and all Pay real estate taxes
documents required for the Art. II(c)
successful development of Take possession of the
the Project parcels of land
Art. V par. 2 Art. III (j)
Pay real estate taxes Secure property from
Art. VI invasion of squatters and
Must consent on the other elements
reasonableness of the Art. III(a) par. 1
expenses. Advance expense for
settlement and relocation
Art. III(a) par. 2
Deposit P10M in a joint
account of parties.
1417
DEVELOPER to relocate
and transfer all the tenants,
settlers, occupants, tillers,
cultivators of the land to
their relocation site, and
shall endeavor to fulfill the
same and the two
immediately preceding
paragraphs (b & c) up to
the extent of 75%
accomplishment thereof
within a period of one (1)
year from date of execution
of this Agreement. The
remaining 25% of the same
requirements shall be fully
accomplished within
another 6 months from date
of expiration of the original
one-year period.
DEVELOPER to apply for
and secure exemption or
conversion permit and such
other related requirements
needed for the approval of
exemption or conversion
application of the land in
question within a period of
one and a half (1 1/2) years
from date of execution of
this Agreement subject to a
six (6) month extension.
DEVELOPER to lay out a
complete Development
Plan
Art. II(b)
Deliver any and all
documents required for the
successful development of
the Project
Art. V par. 2
Pay real estate taxes
Art. II(d)
Agree to allocate and
aggregate a resettlement
site within the property
subject to mutually
accepted conditions.
Art. VI
Must consent on the
reasonableness of the
expenses.
Art. II(b)
Deliver any and all
documents required for the
successful development of
the Project
Art. V par. 2
Pay real estate taxes
Art. II(f)
Assist DEVELOPER
secure exemption from
CARL and
conversion/reclassification
of subject property
Art. III(b)
Give DEVELOPER
authority to apply for
exemption, conversion and
re-classification.
Art. VI
Must consent on the
reasonableness of the
expenses.
Art.III(i)
Give written conformity to
the development plan
Art. V par. 2
Pay real estate taxes
Art. III(c)
Take possession of the
parcels of land
Art. III(j)
Secure property from
invasion of squatters and
other elements
Art. III(a) par. 1
Advance expense for
settlement and relocation
Art. III(a)par. 2
Deposit P10M in a joint
account of OWNER and
DEVELOPER
Art. III(c)
Relocate the occupants
Art. V par. 2
Pay real estate taxes
Art. II(c) 
Take possession of the
parcels of land
Art. III (j)
Secure property from
invasion of squatters and
other elements
Art. III(a)
Advance expenses for
exemption, conversion, re-
classification expenses.
Art.III(b) secure exemption
and conversion permit
Art. III(d)
Complete comprehensive
development plan (within 6
1418

DEVELOPER to apply for
and secure all necessary
development permit,
performance bonds,
environmental compliance
certificate, license to sell
and all other related
requirement from the
pertinent Municipal
Government, DENR,
HLURB and other
governmental agencies
concerned within a period
of 2 years from date of
execution of this
Agreement.
DEVELOPER
construction stage/ground
breaking to commence
after release of DAR
exemption permit or
conversion clearance and
approval of other required
permits by pertinent
agencies of the
government.
DEVELOPER to secure
approval of subdivision
plan and technical
description from the Bureau
of Lands based on the
approved scheme and
thereafter to petition,
follow-up and secure the
release of individual titles
for all lots in the project in
months to one year from the
execution of the JVA)
Art. II(b) Art. V par. 2
Deliver any and all Pay real estate taxes
documents required for the Art. II(c)
successful development of Take possession of the
the Project parcels of land
Art. V par. 2 Art. III (j)
Pay real estate taxes Secure property from
invasion of squatters and
other elements
Art. III(f)
Secure development permit,
ECC, License to Sell, etc.
Art. II(b) Art. V par. 2
Deliver any and all Pay real estate taxes
documents required for the Art. II(c)
successful development of Take possession of the
the Project parcels of land
Art. V par. 2 Art. III (j)
Pay real estate taxes Secure property from
invasion of squatters and
other elements
Art. III(e)
Mobilize development work
and solely pay its expenses
Art. III(f)
Develop the property and
solely pay its expenses on
necessary permits
Art. II(b) Art. V par. 2
Deliver any and all Pay real estate taxes
documents required for the Art. II(c)
successful development of Take possession of the
the Project parcels of land
Art. V par. 2 Art. III (j)
Pay real estate taxes Secure property from
Art. II(a) invasion of squatters and
Deliver titles to other elements
DEVELOPER Art. III(k)
1419
the respective names of the Art. II(a) Process titling of lots
parties form the register of Execute Deed of
deeds. Assignment
Art. III(a)
Pay all expenses for
settlement of claims,
relocation, application for
exemption, conversion, re-
classification.
Market and Sell the Fix selling date Fix selling date
property
Owner to reimburse and
pay the DEVELOPER

The activities under the JVA fell into seven major categories, specifically: (l)the
relocation of the occupants; (2) the completion of the development plan; (3) the securing
of exemption and conversion permits; (4) the obtention of the development permits from
government agencies; (5) the development of the subject land; (6) the issuance of titles
for the subdivided lots; and (7) the selling of the subdivided lots and the reimbursement
of the advances.

For the first activity (i.e., the relocation of the occupants), the developer was obliged to
negotiate with the occupants, to advance payment for disturbance compensation, and to
relocate the occupants to an area within the subject land, while the owner was obliged
to agree to and to allocate the resettlement site within the property, and to approve the
expenses to be incurred for the process. Should the owner fail to allocate the site for the
resettlement, the obligation of the developer to relocate would not be demandable.
Conversely, should the developer fail to negotiate with the occupants, the owner's
obligation to allocate the resettlement site would not become due.

As to the second activity (i.e., the completion of the development plan), the developer
had the obligation to lay out the plan, but the owner needed to conform to the plan
before the same was finalized. Accordingly, the final development plan would not be
generated should the owner fail to approve the lay-out plan; nor would the owner be
able to approve if no such plan had been initially laid out by the developer.

In each activity, the obligation of each party was dependent upon the obligation of the
other. Although their obligations were to be performed simultaneously, the performance
of an activity obligation was still conditioned upon the fulfillment of the continuous
obligation, and vice versa. Should either party cease to perform a continuous obligation,
the other's subsequent activity obligation would not accrue. Conversely, if an activity
obligation was not performed by either party, the continuous obligation of the other
would cease to take effect. The performance of the continuous obligation was subject to
the resolutory condition that the precedent obligation of the other party, whether

1420
continuous or activity, was fulfilled as it became due. Otherwise, the continuous
obligation would be extinguished.

According to Article 1184 of the Civil Code, the condition that some event happen at a
determinate time shall extinguish the obligation as soon as the time expires, or if it has
become indubitable that the event will not take place. Here, the common cause of the
parties in entering into the joint venture was the development of the joint venture
property into the residential subdivision as to eventually profit therefrom. Consequently,
all of the obligations under the JVA were subject to the happening of the complete
development of the joint venture property, or if it would become indubitable that the
completion would not take place, like when an obligation, whether continuous or activity,
was not performed. Should any of the obligations, whether continuous or activity, be not
performed, all the other remaining obligations would not ripen into demandable
obligations while those already performed would cease to take effect. This is because
every single obligation of each party under the JVA rested on the common cause of
profiting from the developed subdivision.

It appears that upon the execution of the JVA, the parties were performing their
respective obligations until disagreement arose between them that affected the
subsequent performance of their accrued obligations. Being reciprocal in nature, their
respective obligations as the owner and the developer were dependent upon the
performance by the other of its obligations; hence, any claim of delay or non-
performance against the other could prosper only if the complaining party had faithfully
complied with its own correlative obligation. 30chanroblesvirtuallawlibrary

A respected commentator has cogently observed in this

connection:31chanroblesvirtuallawlibrary

§ 135. Same; consequences of simultaneous performance. As a consequence of

the rule of simultaneous performance, if the party who has not performed his obligation
demands performance from the other, the latter may interpose the defense of unfulfilled
contract (exceptio non adimpleli contraclus) by virtue of which he cannot be obliged to
perform while the other's obligation remains unfulfilled. Hence, the Spanish Supreme
Court has ruled that the non-performance of one party is justified if based on the non-
performance of the other; that the party who has failed to perform cannot demand
performance from the other; and that judicial approval is not necessary to release a
party from his obligation, the non-performance of the other being a sufficient defense
against any demand for performance by the guilty party.

Another consequence of simultaneous performance is the rule of compensatio

morae, that is to say that neither party incurs in delay if the other does not or is not
ready to comply in a proper manner with what is incumbent upon him. From the moment
one of the parties fulfills his obligations, delay by the other begins.

Yet, the record is bereft of the proof to support the lower courts' unanimous conclusion
that the owner had already performed its correlative obligation under the JVA as to

1421
place itself in the position to demand that the developer should already perform its
obligation of providing the round-the-clock security on the property. In issuing its order
of November 5, 2002, therefore, the RTC acted whimsically because it did not first
ascertain whether or not the precedent reciprocal obligation of the owner upon which
the demanded obligation of the developer was dependent had already been performed.
Without such showing that the developer had ceased to perform a continuous obligation
to provide security over the joint venture property despite complete fulfillment by the
owner of all its accrued obligations, the owner had no right to demand from the
developer the round-the-clock security over the 215 hectares of land.

The CA further gravely erred in characterizing the order for the petitioners to implement
the round-the-clock security provision of the JVA and the addendum as an established
and undisputed interim measure that could be issued pending the resolution of the case
on the merits.

Apart from the provisional remedies expressly recognized and made available under
Rule 56 to Rule 61 of the Rules of Court, the Court has sanctioned only the issuance of
the status quo ante order but only to maintain the last, actual, peaceable and
uncontested state of things that preceded the controversy. 32 The eminent Justice
Florenz D. Regalado,33 an authority on remedial law, has delineated the nature of
the status quo ante order, and distinguished it from the provisional remedy of temporary
restraining order, as follows:

There have been instances when the Supreme Court has issued a status quo order
which, as the very term connotes, is merely intended to maintain the last, actual,
peaceable and uncontested state of things which preceded the controversy. This was
resorted to when the projected proceedings in the case made the conservation of
the status quo desirable or essential, but the affected party neither sought such relief or
the allegations in his pleading did not sufficiently make out a case for a temporary
restraining order. The status quo order was thus issued motu proprio on equitable
considerations. Also, unlike a temporary restraining order or a preliminary injunction,
a status quo order is more in the nature of a cease and desist order, since it neither
directs the doing or undoing of acts as in the case of prohibitory or mandatory injunctive
relief. The further distinction is provided by the present amendment in the sense that,
unlike the amended rule on restraining orders, a status quo order does not require the
posting of a bond.

The order of November 5, 2002, by directing the developer to provide sufficient round-
the-clock security for the protection of the joint venture property during the pendency of
the case, was not of the nature of the status quo ante order because the developer, as
averred in the complaint, had not yet provided a single security watchman to secure the
entire 215 hectares of land for several years.34 Also, the owner stated in the comment to
the petition that the developer had dismissed all the security guards posted in the
property since 1997.35 At the time of the filing of the complaint for specific performance
on February 29, 2000, therefore, the last actual, peaceable and uncontested state of
things preceding the controversy was the absence of such security, not the installation

1422
of the security personnel/measures. In fact, the failure of the developer to provide the
round-the-clock security itself became the controversy that impelled the owner to bring
the action against the petitioners.

By preliminarily directing the developer to provide sufficient round-the-clock security for

the protection of the joint venture property during the pendency of the case, the
November 5, 2002 order of the RTC did not come under the category of the status quo
ante order that would issue upon equitable consideration, or even of an injunctive relief
that would issue under Rule 58 of the Rules of Court. Hence, the issuance of the order
constituted a blatant jurisdictional error that needed to be excised. Verily, a jurisdictional
error is one by which the act complained of was issued by the court without or in excess
of jurisdiction.36Without jurisdiction means that the court acted with absolute want of
jurisdiction. Excess of jurisdiction means that the court has jurisdiction but has
transcended the same or acted without any statutory
authority.37chanroblesvirtuallawlibrary

Although the RTC undoubtedly had jurisdiction to hear and decide the principal action
for specific performance as well as to act on the motions submitted to it in the course of
the proceedings, the distinction between jurisdiction over the case and jurisdiction to
issue an interlocutory order as an ancillary remedy incident to the principal action
should be discerned. We have frequently declared that a court may have jurisdiction
over the principal action but may nevertheless act irregularly or in excess of its
jurisdiction in the course of its proceedings by the granting of an auxiliary
remedy.38 In Leung Ben v. O'Brien,39 for instance, this Court has thus clarified:

It may be observed in this connection that the word "jurisdiction" as used in attachment
cases, has reference not only to the authority of the court to entertain the principal
action but also to its authority to issue the attachment, as dependent upon the existence
of the statutory ground. (6 C. J., 89.) This distinction between jurisdiction to issue the
attachment as an ancillary remedy incident to the principal litigation is of importance; as
a court's jurisdiction over the main action may be complete, and yet it may lack authority
to grant an attachment as ancillary to such action. This distinction between jurisdiction
over the ancillary has been recognized by this court in connection with actions involving
the appointment of a receiver. Thus in Rocha & Co. vs. Crossfield and Figueras (6 Phil.
Rep., 355), a receiver had been appointed without legal justification. It was held that the
order making the appointment was beyond the jurisdiction of the court; and though the
court admittedly had jurisdiction of the main cause, the order was vacated by this court
upon application a writ of certiorari. (See Blanco vs. Ambler, 3 Phil. Rep., 358, Blanco
vs. Ambler and McMicking 3 Phil. Rep., 735, Yangco vs. Rohde, 1 Phil. Rep., 404.)

By parity of reasoning it must follow that when a court issues a writ of attachment for
which there is no statutory authority, it is acting irregularly and in excess of its
jurisdiction, in the sense necessary to justify the Supreme Court in granting relief by the
writ of certiorari.

WHEREFORE, the Court GRANTS the petition for review

1423
on certiorari; REVERSES and SETS ASIDE the decision promulgated on April 27, 2005
and the resolution promulgated on September 12, 2005; NULLIFIES the orders issued
on November 5, 2002 and May 19, 2003 in Civil Case No. 67813 by the Regional Trial
Court, Branch 67, in Pasig City; DIRECTS the Regional Trial Court, Branch 67, in Pasig
City to resume the proceedings in Civil Case No. 67813 with dispatch;
and ORDERS the respondents to pay the costs of suit.

SO ORDERED.cralawlawlibrary

SECOND DIVISION

G.R. No. 185734               July 3, 2013

ALFREDO C. LIM, JR., PETITIONER,

vs.
SPOUSES TITO S. LAZARO AND CARMEN T. LAZARO, RESPONDENTS.

RESOLUTION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari 1 are the July 10, 2008 Decision2 and
December 18, 2008 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
100270, affirming the March 29, 2007 Order4 of the Regional Trial Court of Quezon City,
Branch 223 (RTC), which lifted the writ of preliminary attachment issued in favor of
petitioner Alfredo C. Lim, Jr. (Lim, Jr.).

The Facts

On August 22, 2005, Lim, Jr. filed a complaint5 for sum of money with prayer for the
issuance of a writ of preliminary attachment before the RTC, seeking to recover from
respondents-spouses Tito S. Lazaro and Carmen T. Lazaro (Sps. Lazaro) the sum of
₱2,160,000.00, which represented the amounts stated in several dishonored checks
issued by the latter to the former, as well as interests, attorney’s fees, and costs. The
RTC granted the writ of preliminary attachment application 6 and upon the posting of the
required ₱2,160,000.00 bond,7 issued the corresponding writ on October 14, 2005. 8 In
this accord, three (3) parcels of land situated in Bulacan, covered by Transfer
Certificates of Title (TCT) Nos. T-64940, T-64939, and T-86369 (subject TCTs),
registered in the names of Sps. Lazaro, were levied upon. 9

In their Answer with Counterclaim,10 Sps. Lazaro averred, among others, that Lim, Jr.
had no cause of action against them since: (a) Colim Merchandise (Colim), and not Lim,
Jr., was the payee of the fifteen (15) Metrobank checks; and (b) the PNB and Real Bank
checks were not drawn by them, but by Virgilio Arcinas and Elizabeth Ramos,
respectively. While they admit their indebtedness to Colim, Sps. Lazaro alleged that the
same had already been substantially reduced on account of previous payments which

1424
were apparently misapplied. In this regard, they sought for an accounting and
reconciliation of records to determine the actual amount due. They likewise argued that
no fraud should be imputed against them as the aforesaid checks issued to Colim were
merely intended as a form of collateral.11 Hinged on the same grounds, Sps. Lazaro
equally opposed the issuance of a writ of preliminary attachment. 12

Nonetheless, on September 22, 2006, the parties entered into a Compromise

Agreement13 whereby Sps. Lazaro agreed to pay Lim, Jr. the amount of ₱2,351,064.80
on an installment basis, following a schedule of payments covering the period from
September 2006 until October 2013, under the following terms, among others: (a) that
should the financial condition of Sps. Lazaro improve, the monthly installments shall be
increased in order to hasten the full payment of the entire obligation; 14 and (b) that Sps.
Lazaro’s failure to pay any installment due or the dishonor of any of the postdated
checks delivered in payment thereof shall make the whole obligation immediately due
and demandable.

The aforesaid compromise agreement was approved by the RTC in its October 31,
2006 Decision15 and January 5, 2007 Amended Decision.16

Subsequently, Sps. Lazaro filed an Omnibus Motion, 17 seeking to lift the writ of
preliminary attachment annotated on the subject TCTs, which the RTC granted on
March 29, 2007.18 It ruled that a writ of preliminary attachment is a mere provisional or
ancillary remedy, resorted to by a litigant to protect and preserve certain rights and
interests pending final judgment. Considering that the case had already been
considered closed and terminated by the rendition of the January 5, 2007 Amended
Decision on the basis of the September 22, 2006 compromise agreement, the writ of
preliminary attachment should be lifted and quashed. Consequently, it ordered the
Registry of Deeds of Bulacan to cancel the writ’s annotation on the subject TCTs.

Lim, Jr. filed a motion for reconsideration19 which was, however, denied on July 26,
2007,20 prompting him to file a petition for certiorari 21 before the CA.

The CA Ruling

On July 10, 2008, the CA rendered the assailed decision, 22 finding no grave abuse of
discretion on the RTC’s part. It observed that a writ of preliminary attachment may only
be issued at the commencement of the action or at any time before entry of judgment.
Thus, since the principal cause of action had already been declared closed and
terminated by the RTC, the provisional or ancillary remedy of preliminary attachment
would have no leg to stand on, necessitating its discharge. 23

Aggrieved, Lim, Jr. moved for reconsideration 24 which was likewise denied by the CA in
its December 18, 2008 Resolution.25

Hence, the instant petition.

1425
 The Issue Before the Court

The sole issue in this case is whether or not the writ of preliminary attachment was
properly lifted.

The Court’s Ruling

The petition is meritorious.

By its nature, preliminary attachment, under Rule 57 of the Rules of Court (Rule 57), is
an ancillary remedy applied for not for its own sake but to enable the attaching party to
realize upon the relief sought and expected to be granted in the main or principal action;
it is a measure auxiliary or incidental to the main action. As such, it is available during
its pendency which may be resorted to by a litigant to preserve and protect certain rights
and interests during the interim, awaiting the ultimate effects of a final judgment in the
case.26 In addition, attachment is also availed of in order to acquire jurisdiction over the
action by actual or constructive seizure of the property in those instances where
personal or substituted service of summons on the defendant cannot be effected. 27

In this relation, while the provisions of Rule 57 are silent on the length of time within
which an attachment lien shall continue to subsist after the rendition of a final judgment,
jurisprudence dictates that the said lien continues until the debt is paid, or the sale is
had under execution issued on the judgment or until the judgment is satisfied, or the
attachment discharged or vacated in the same manner provided by law. 28

Applying these principles, the Court finds that the discharge of the writ of preliminary
attachment against the properties of Sps. Lazaro was improper.

Records indicate that while the parties have entered into a compromise agreement
which had already been approved by the RTC in its January 5, 2007 Amended
Decision, the obligations thereunder have yet to be fully complied with – particularly, the
payment of the total compromise amount of ₱2,351,064.80. Hence, given that the
foregoing debt remains unpaid, the attachment of Sps. Lazaro’s properties should have
continued to subsist.

In Chemphil Export & Import Corporation v. CA,29 the Court pronounced that a writ of
attachment is not extinguished by the execution of a compromise agreement between
the parties, viz:

Did the compromise agreement between Antonio Garcia and the consortium discharge
the latter’s attachment lien over the disputed shares?

CEIC argues that a writ of attachment is a mere auxiliary remedy which, upon the
dismissal of the case, dies a natural death. Thus, when the consortium entered into a
compromise agreement, which resulted in the termination of their case, the disputed
shares were released from garnishment.

1426
We disagree. To subscribe to CEIC’s contentions would be to totally disregard the
concept and purpose of a preliminary attachment.

xxxx

The case at bench admits of peculiar character in the sense that it involves a
compromise agreement. Nonetheless, x x x. The parties to the compromise agreement
should not be deprived of the protection provided by an attachment lien especially in an
instance where one reneges on his obligations under the agreement, as in the case at
bench, where Antonio Garcia failed to hold up his own end of the deal, so to speak.

xxxx

If we were to rule otherwise, we would in effect create a back door by which a debtor
can easily escape his creditors. Consequently, we would be faced with an anomalous
situation where a debtor, in order to buy time to dispose of his properties, would enter
into a compromise agreement he has no intention of honoring in the first place. The
purpose of the provisional remedy of attachment would thus be lost. It would become, in
analogy, a declawed and toothless tiger. (Emphasis and underscoring supplied;
citations omitted)

In fine, the Court holds that the writ of preliminary attachment subject of this case
should be restored and its annotation revived in the subject TCTs, re-vesting unto Lim,
Jr. his preferential lien over the properties covered by the same as it were before the
cancellation of the said writ. Lest it be misunderstood, the lien or security obtained by an
attachment even before judgment, is in the nature of a vested interest which affords
specific security for the satisfaction of the debt put in suit. 30 Verily, the lifting of the
attachment lien would be tantamount to an abdication of Lim, Jr.’s rights over Sps.
Lazaro’s properties which the Court, absent any justifiable ground therefor, cannot
allow.

WHEREFORE, the petition is GRANTED. The July 10, 2008 Decision and the
December 18, 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 100270 are
REVERSED and SET ASIDE, and the March 29, 2007 Order of the Regional Trial Court
of Quezon City, Branch 223 is NULLIFIED. Accordingly, the trial court is directed to
RESTORE the attachment lien over Transfer Certificates of Title Nos. T-64940, T-
64939, and T-86369, in favor of petitioner Alfredo C. Lim, Jr.

SO ORDERED.

THIRD DIVISION

G.R. No. 203530, April 13, 2015

LUZON DEVELOPMENT BANK, TOMAS CLEMENTE, JR., AND OSCAR

RAMIREZ, Petitioners, v. ERLINDA KRISHNAN, Respondent.

1427
 DECISION

PERALTA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure praying for the annulment of the Decision 1 dated March 27, 2012 and
Resolution2 dated September 11, 2012 of the Court of Appeals (CA) in CA-G.R. SP No.
120664, which affirmed the Orders dated September 24, 2010 and May 26, 2011,
respectively, of Branch 30, Regional Trial Court (RTC) - Manila.

The factual antecedents, as found by the CA, are as follows:chanroblesvirtuallawlibrary

Petitioners Luzon Development Bank, Tomas Clemente, and Oscar Ramirez (hereafter
petitioners) are the respondents in the complaint for Collection of Sum of Money and
Damages filed by respondent Erlinda Khrishnan (hereafter respondent Erlinda) on
February 7, 2001. Respondent Erlinda claimed that she is a client of respondent bank
wherein she maintained several accounts including time deposits. On several
occasions, when respondent Erlinda presented her Time Deposits Certificates
amounting to P28,597,472.70 for payment because they have become due, petitioners
refused to honor them for the reason that they were fraudulent. Respondent Erlinda
likewise applied for a Preliminary Writ of Attachment which the RTC granted on
February 27, 2001.

By virtue of the writ, petitioner bank's accounts in BPI Family Bank, Calamba, Laguna in
the amount of P28,597,472.70 and its account amounting to P49,000,000.00 in the
Central Bank were garnished.

On March 9, 2001, petitioners filed an urgent ex-parte Motion to Recall Quash and/or
Lift Attachment or Garnishment (in excess of amounts in the writ). Respondent Erlinda
opposed the motion.

On August 15, 2001, petitioners filed an Omnibus Motion seeking the substitution of
their garnished account with government securities and the immediate resolution of their
motion to discharge attachment and setting the motion for hearing, which respondent
Erlinda opposed.

On May 22, 2002, the RTC resolved the pending incidents and required the petitioners
to justify their motion to discharge the attachment. During pre-trial on May 23, 2002,
respondents requested additional time to file a supplemental motion to justify their
earlier motions which was granted and gave petitioners ten (10) days from receipt within
which to comment or opposed (sic) it.

On September 8, 2003, the RTC issued an order lifting the attachment to which
respondent Erlinda filed a motion for reconsideration. Respondent Erlinda also filed a
Motion for Inhibition. On December 18, 2003, the RTC denied the motion for
reconsideration but granted the motion for inhibition. The said Order was questioned by

1428
respondent Erlinda by way of Petition for Certiorari before the 7th Division which
rendered a decision on November 15, 2006, the dispositive portion of which reads as
follows:chanroblesvirtuallawlibrary
"WHEREFORE, the PETITION FOR CERTIORARI is GRANTED.

THE ORDERS dated September 8, 2003, and December 18, 2003 are NULLIFIED and
SET ASIDE.

The private respondents, as defendants in Civil Case No. 01-100046 entitled Erlinda C.

Krishnan v. Luzon Development Bank, et al., are ORDERED to file a counterbond in
accordance with Sec. 12, Rule 57, 1997 Rules of Civil Procedure, within 10 days from
the finality of this decision; otherwise, the REGIONAL TRIAL COURT, BRANCH 36, in
Manila shall immediately reinstate the writ of attachment issued and implemented in
Civil Case No. 01-100046.

Costs of suit to be paid by the respondents. SO ORDERED.

Petitioners' subsequent motion for reconsideration was denied. Thereafter, their petition
and motion for reconsideration before the Supreme Court were likewise denied.

On May 09, 2008, respondent judge issued an Order directing respondent Erlinda to file
a new attachment bond in the amount of P35,000,000.00 and petitioners to file a
counterbond within ten days from notice of the filing and approval of the bond of
respondent Erlinda. Petitioners moved for the reconsideration of the said Order which
respondent judge denied and granted a period of fifteen days for respondent Erlinda to
file an attachment bond.

Respondent Erlinda filed her attachment bond on June 25, 2009 in the amount of
P35,000,000.00 through Visayan Surety and Insurance Corporation which was
approved by respondent on July 7, 2009.

Meanwhile, on July 3, 2009, petitioners filed an Omnibus Motion praying that a hearing
be held to determine the sufficiency of the attachment bond and they be allowed to
deposit Certificates of Title of real property, and the issuance of the writ of attachment
be held in abeyance.

On July 20, 2009, petitioners filed a motion for extension of time to comply and/or file
the appropriate pleading and to hold in abeyance the reinstatement of the writ of
attachment.

On January 28, 2010, petitioners filed a motion to admit bank property in lieu of
counterbond which was opposed by respondent Erlinda.

On September 24, 2010, respondent judge denied petitioners' motion in the assailed
Order. Their subsequent motion for reconsideration was denied on May 26, 2011.

On June 27, 2011, respondent judge issued an Order reinstating the Writ of Attachment

1429
dated March 1, 2001 for failure of petitioners to file the required counterbond.
Respondent judge also issued an amended Reinstated Writ of Attachment directing
respondent Sheriff Oscar L. Rojas (hereafter respondent Sheriff) to attach the real
estate or personal properties of petitioners in the amount of P28,597,472.70. On June
30, 2011, the sheriff served the Notice of Garnishment and the Amended Reinstated
Writ of Attachment.

On July 4, 2011, petitioners filed an urgent motion to recall, suspend or hold in

abeyance and re-examination of the amended reinstated writ of preliminary attachment
of June 27, 2011 which was opposed by respondent Erlinda.

On July 19, 2011, respondent Sheriff issued a Sheriffs Partial Report. Thereafter,
petitioners filed this petition for certiorari x x x.
In a Decision dated March 27, 2012, the CA dismissed petitioners' certiorari petition and
affirmed the Orders of the RTC reinstating the Writ of Attachment for failure of
petitioners to file the required counter-bond. The CA ruled that the RTC judge
committed no grave abuse of discretion in denying petitioners' motion to admit bank
property in lieu of counter-bond, thus, it held:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, the petition is DISMISSED and accordingly,
DENIED DUE COURSE. The Orders dated September 24, 2010 and May 26, 2011 are
hereby AFFIRMED.

SO ORDERED.3cralawlawlibrary
Petitioners filed a motion for reconsideration against said decision, but the same was
denied in a Resolution dated September 11, 2012.

Hence, petitioners filed this present petition raising the following

grounds:chanroblesvirtuallawlibrary
IN THE FIRST ASSAILED ORDER THE HONORABLE COURT OF APPEALS ACTED
WITH GRAVE ABUSE OF DISCRETION WHEN IT MISCONSTRUED AND FAILED TO
RULE ON THE CORRECT LEGAL ISSUE PRESENTED IN THE PETITION FOR
CERTIORARI.4

IN THE SECOND ASSAILED ORDER THE FIONORABLE COURT OF APPEALS

AGAIN ACTED WITH GRAVE ABUSE OF DISCRETION WHEN IT FAILED TO
PRESENT ANY LEGAL BASIS FOR STATING THAT RULE 39 OF THE REVISED
RULES OF COURT DOES NOT APPLY.5cralawlawlibrary

Simply stated, the issue for our resolution is whether the CA erred in affirming the RTC's
decision which denied petitioners' motion praying that bank property be deposited in lieu
of cash or a counter-bond.

In their petition, petitioners contend that it has the option to deposit real property, in lieu
of cash or a counter-bond, to secure any contingent lien on its property in the event
respondent wins the case. They argue that Section 2 of Rule 57 only mentions the term
"deposit," thus, it cannot only be confined or construed to refer to cash.

1430
We rule in the negative.

Section 2, Rule 57 of the Rules of Court explicitly states that "[a]n order of attachment
may be issued either ex parte or upon motion with notice and hearing by the court in
which the action is pending, or by the Court of Appeals or the Supreme Court, and must
require the sheriff of the court to attach so much of the property in the Philippines of the
party against whom it is issued, not exempt from execution, as may be sufficient to
satisfy the applicant's demand, unless such party makes deposit or gives a bond as
hereinafter provided in an amount equal to that fixed in the order, which may be
the amount sufficient to satisfy the applicant's demand or the value of the property to be
attached as stated by the applicant, exclusive of costs."

Section 5 of the same Rule likewise states that "[t]he sheriff enforcing the writ shall
without delay and with all reasonable diligence attach, to await judgment and execution
in the action, only so much of the property in the Philippines of the party against whom
the writ is issued, not exempt from execution, as may be sufficient to satisfy the
applicant's demand, unless the former makes a deposit with the court from which
the writ is issued, or gives a counter-bond executed to the applicant, in an
amount equal to the bond fixed by the court in the order of attachment or to the
value of the property to be attached, exclusive of costs."

From the foregoing, it is evidently clear that once the writ of attachment has been
issued, the only remedy of the petitioners in lifting the same is through a cash deposit or
the filing of the counter-bond. Thus, the Court holds that petitioner's argument that it has
the option to deposit real property instead of depositing cash or filing a counter-bond to
discharge the attachment or stay the implementation thereof is unmeritorious.

In fact, in Security Pacific Assurance Corporation v. Tria-Infante,6 we held that one of

the ways to secure the discharge of an attachment is for the party whose property has
been attached or a person appearing on his behalf, to post a counterbond or make the
requisite cash deposit in an amount equal to that fixed by the court in the order of
attachment.7

Apropos, the trial court aptly ruled that while it is true that the word deposit cannot only
be confined or construed to refer to cash, a broader interpretation thereof is not justified
in the present case for the reason that a party seeking a stay of the attachment under
Section 5 is required to make a deposit in an amount equal to the bond fixed by the
court in the order of attachment or to the value of the property to be attached. The
proximate relation of the word "deposit" and "amount" is unmistakable in Section 5 of
Rule 57. Plainly, in construing said words, it can be safely concluded that Section 5
requires the deposit of money as the word "amount" commonly refers to or is regularly
associated with a sum of money.

In Alcazar v. Arante,8 we held that in construing words and phrases used in a statute,
the general rule is that, in the absence of legislative intent to the contrary, they should

1431
be given their plain, ordinary and common usage meaning. The words should be read
and considered in their natural, ordinary, commonly-accepted and most obvious
signification, according to good and approved usage and without resorting to forced or
subtle construction. Words are presumed to have been employed by the lawmaker in
their ordinary and common use and acceptation. 9 Thus, petitioners should not give a
special or technical interpretation to a word which is otherwise construed in its ordinary
sense by the law and broaden the signification of the term "deposit" to include that of
real properties.cralawred

WHEREFORE, premises considered, the instant petition is DENIED. The Decision

dated March 27, 2012 and Resolution dated September 11, 2012 of the Court of
Appeals are hereby AFFIRMED.

SO ORDERED.chanroblesvirtuallawlibrary

SECOND DIVISION
[ G.R. No. 111685, August 20, 2001 ]
DAVAO LIGHT & POWER CO., INC., PETITIONER, VS. THE HON. COURT OF
APPEALS, HON. RODOLFO M. BELLAFLOR, PRESIDING JUDGE OF BRANCH 11,
RTC-CEBU AND FRANCISCO TESORERO, RESPONDENTS.

DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari assailing the Decision dated August 31,
1993 rendered by the Sixteenth Division [1] of the Court of Appeals in CA-G.R. SP No.
29996, the dispositive portion of which states:

WHEREFORE, the petition for review filed by Davao Light & Power Co., Inc. is hereby
DENIED DUE COURSE and the same is DISMISSED.

IT IS SO ORDERED.

The antecedent facts are:

On April 10, 1992, petitioner Davao Light & Power Co., Inc. filed a complaint for
damages[2] against private respondent Francisco Tesorero before the Regional Trial
Court of Cebu City, Branch 11.  Docketed as CEB-11578, the complaint prayed for
damages in the amount of P11,000,000.00.

In lieu of an answer, private respondent filed a motion to dismiss [3] claiming that: (a) the
complaint did not state a cause of action; (b) the plaintiff's claim has been extinguished
or otherwise rendered moot and academic; (c) there was non-joinder of indispensable
parties; and (d) venue was improperly laid.  Of these four (4) grounds, the last
mentioned is most material in this case at bar.

1432
On August 3, 1992, the trial court issued a Resolution [4] dismissing petitioner's complaint
on the ground of improper venue.  The trial court stated that:

The plaintiff being a private corporation undoubtedly Banilad, Cebu City is the plaintiff's
principal place of business as alleged in the complaint and which for purposes of venue
is considered as its residence. xxx.

However, in defendant's motion to dismiss, it is alleged and submitted that the principal
office of plaintiff is at "163-165 P. Reyes Street, Davao City as borne out by the Contract
of Lease (Annex 2 of the motion) and another Contract of Lease of Generating
Equipment (Annex 3 of the motion) executed by the plaintiff with the NAPOCOR.

The representation made by the plaintiff in the 2 aforementioned Lease Contracts

stating that its principal office is at "163-165 P. Reyes Street, Davao City" bars the
plaintiff from denying the same.

The choice of venue should not be left to plaintiff's whim or caprises [sic].  He may be
impelled by some ulterior motivation in choosing to file a case in a court even if not
allowed by the rules of venue.

Another factor considered by the Courts in deciding controversies regarding venue are
considerations of judicial economy and administration, as well as the convenience of the
parties for which the rules of procedure and venue were formulated xxx.

Considering the foregoing, the Court is of the opinion that the principal office of plaintiff
is at Davao City which for purposes of venue is the residence of plaintiff.

Hence, the case should be filed in Davao City.

The motion on the ground of improper venue is granted and the complaint DISMISSED
on that ground.

SO ORDERED.

Petitioner's motion for reconsideration[5] was denied in an Order[6] dated October 1,

1992.

From the aforesaid resolution and order, petitioner originally filed before this Court on
November 20, 1992 a petition for review on certiorari docketed as G.R. No. 107381.
[7]
 We declined to take immediate cognizance of the case, and in a Resolution dated
January 11, 1993,[8] referred the same to the Court of Appeals for resolution.  The
petition was docketed in the appellate court as CA-G.R. SP No. 29996.

On August 31, 1993, the Court of Appeals rendered the assailed judgment [9] denying
due course and dismissing the petition.  Counsel for petitioner received a copy of the
decision on September 6, 1993.[10] Without filing a motion for reconsideration, petitioner

1433
filed the instant petition, assailing the judgment of the Court of Appeals on the following
grounds:

5.01. Respondent Court of Appeals denied petitioner procedural due process by failing
to resolve the third of the above-stated issues.

5.02. Petitioner's right to file its action for damages against private respondent in Cebu
City where its principal office is located, and for which it paid P55,398.50 in docket fees,
may not be negated by a supposed estoppel absent the essential elements of the false
statement having been made to private respondent and his reliance on good faith on the
truth thereof, and private respondent's action or inaction based thereon of such
character as to change his position or status to his injury, detriment or prejudice.

The principal issue in the case at bar involves a question of venue.  It is to be

distinguished from jurisdiction, as follows:

Venue and jurisdiction are entirely distinct matters.  Jurisdiction may not be conferred by
consent or waiver upon a court which otherwise would have no jurisdiction over the
subject-matter of an action; but the venue of an action as fixed by statute may be
changed by the consent of the parties and an objection that the plaintiff brought his suit
in the wrong county may be waived by the failure of the defendant to make a timely
objection.  In either case, the court may render a valid judgment. Rules as to jurisdiction
can never be left to the consent or agreement of the parties, whether or not a prohibition
exists against their alteration.[11]

It is private respondent's contention that the proper venue is Davao City, and not Cebu
City where petitioner filed Civil Case No. CEB-11578. Private respondent argues that
petitioner is estopped from claiming that its residence is in Cebu City, in view of
contradictory statements made by petitioner prior to the filing of the action for damages. 
First, private respondent adverts to several contracts [12] entered into by petitioner with
the National Power Corporation (NAPOCOR) where in the description of personal
circumstances, the former states that its principal office is at "163-165 P. Reyes St.,
Davao City." According to private respondent the petitioner's address in Davao City, as
given in the contracts, is an admission which should bind petitioner.

In addition, private respondent points out that petitioner made several judicial
admissions as to its principal office in Davao City consisting principally of allegations in
pleadings filed by petitioner in a number of civil cases pending before the Regional Trial
Court of Davao in which it was either a plaintiff or a defendant. [13]

Practically the same issue was addressed in Young Auto Supply Co. v. Court of
Appeals.[14] In the aforesaid case, the defendant therein sought the dismissal of an
action filed by the plaintiff, a corporation, before the Regional Trial Court of Cebu City,
on the ground of improper venue.  The trial court denied the motion to dismiss; on
certiorari before the Court of Appeals, the denial was reversed and the case was
dismissed.  According to the appellate tribunal, venue was improperly laid since the
address of the plaintiff was supposedly in Pasay City, as evidenced by a contract of

1434
sale, letters and several commercial documents sent by the plaintiff to the defendant,
even though the plaintiff's articles of incorporation stated that its principal office was in
Cebu City.  On appeal, we reversed the Court of Appeals.  We reasoned out thus:

In the Regional Trial Courts, all personal actions are commenced and tried in the
province or city where the defendant or any of the defendants resides or may be found,
or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff xxx.

There are two plaintiffs in the case at bench:  a natural person and a domestic
corporation.  Both plaintiffs aver in their complaint that they are residents of Cebu City,
thus:

xxx                                                   xxx                                          xxx

The Article of Incorporation of YASCO (SEC Reg. No. 22083) states:

"THIRD. That the place where the principal office of the corporation is to be established
or located is at Cebu City, Philippines (as amended on December 20, 1980 and further
amended on December 20, 1984)" xxx.

A corporation has no residence in the same sense in which this term is applied to a
natural person.  But for practical purposes, a corporation is in a metaphysical sense a
resident of the place where its principal office is located as stated in the articles of
incorporation (Cohen v. Benguet Commercial Co., Ltd., 34 Phil. 526 [1916] Clavecilla
Radio System v. Antillo, 19 SCRA 379 [1967]).  The Corporation Code precisely
requires each corporation to specify in its articles of incorporation the "place where the
principal office of the corporation is to be located which must be within the Philippines"
(Sec. 14[3].  The purpose of this requirement is to fix the residence of a corporation in a
definite place, instead of allowing it to be ambulatory.

In Clavecilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court explained why
actions cannot be filed against a corporation in any place where the corporation
maintains its branch offices.  The Court ruled that to allow an action to be instituted in
any place where the corporation has branch offices, would create confusion and work
untold inconvenience to said entity.  By the same token, a corporation cannot be
allowed to file personal actions in a place other than its principal place of business
unless such a place is also the residence of a co-plaintiff or a defendant.

If it was Roxas who sued YASCO in Pasay City and the latter questioned the venue on
the ground that its principal place of business was in Cebu City, Roxas could argue that
YASCO was in estoppel because it misled Roxas to believe that Pasay City was its
principal place of business.  But this is not the case before us.

With the finding that the residence of YASCO for purposes of venue is in Cebu City,
where its principal place of business is located, it becomes unnecessary to decide
whether Garcia is also a resident of Cebu City and whether Roxas was in estoppel from
questioning the choice of Cebu City as the venue.  [italics supplied]
1435
The same considerations apply to the instant case.  It cannot be disputed that
petitioner's principal office is in Cebu City, per its amended articles of
incorporation[15] and by-laws.[16] An action for damages being a personal action, [17] venue
is determined pursuant to Rule 4, section 2 of the Rules of Court, to wit:

Venue of personal actions.--All other actions may be commenced and tried 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. [18]

Private respondent is not a party to any of the contracts presented before us.  He is a
complete stranger to the covenants executed between petitioner and NAPOCOR,
despite his protestations that he is privy thereto, on the rather flimsy ground that he is a
member of the public for whose benefit the electric generating equipment subject of the
contracts were leased or acquired.  We are likewise not persuaded by his argument that
the allegation or representation made by petitioner in either the complaints or answers it
filed in several civil cases that its residence is in Davao City should estop it from filing
the damage suit before the Cebu courts.  Besides there is no showing that private
respondent is a party in those civil cases or that he relied on such representation by
petitioner.

WHEREFORE, the instant petition is hereby GRANTED.  The appealed decision is

hereby REVERSED and SET ASIDE.  The Regional Trial Court of Cebu City, Branch 11
is hereby directed to proceed with Civil Case No. CEB-11578 with all deliberate
dispatch. No pronouncement as to costs.

SO ORDERED.

EN BANC

G.R. No. 93262 December 29, 1991

DAVAO LIGHT & POWER CO., INC., petitioner,

vs.
THE COURT OF APPEALS, QUEENSLAND HOTEL or MOTEL or QUEENSLAND
TOURIST INN, and TEODORICO ADARNA, respondents.

Breva & Breva Law Offices for petitioner.

Goc-Ong & Associates for private respondents.

1436
NARVASA, J.:

Subject of the appellate proceedings at bar is the decision of the Court of Appeals in
CA-G.R. Sp. No. 1967 entitled "Queensland Hotel, Inc., etc. and Adarna v. Davao Light
& Power Co., Inc.," promulgated on May 4, 1990. 1 That decision nullified and set aside
the writ of preliminary attachment issued by the Regional Trial Court of Davao City 2 in
Civil Case No. 19513-89 on application of the plaintiff (Davao Light & Power Co.),
before the service of summons on the defendants (herein respondents Queensland Co.,
Inc. and Adarna).

Following is the chronology of the undisputed material facts culled from the Appellate
Tribunal's judgment of May 4, 1990.

1. On May 2, 1989 Davao Light & Power Co., Inc. (hereafter, simply Davao Light) filed a
verified complaint for recovery of a sum of money and damages against Queensland
Hotel, etc. and Teodorico Adarna (docketed as Civil Case No. 19513-89). The complaint
contained an ex parte application for a writ of preliminary attachment.

2. On May 3, 1989 Judge Nartatez, to whose branch the case was assigned by raffle,
issued an Order granting the ex parte application and fixing the attachment bond at
P4,600,513.37.

3. On May 11, 1989 the attachment bond having been submitted by Davao Light, the
writ of attachment issued.

4. On May 12, 1989, the summons and a copy of the complaint, as well as the writ of
attachment and a copy of the attachment bond, were served on defendants Queensland
and Adarna; and pursuant to the writ, the sheriff seized properties belonging to the
latter.

5. On September 6, 1989, defendants Queensland and Adarna filed a motion to

discharge the attachment for lack of jurisdiction to issue the same because at the time
the order of attachment was promulgated (May 3, 1989) and the attachment writ issued
(May 11, 1989), the Trial Court had not yet acquired jurisdiction over the cause and over
the persons of the defendants.

6. On September 14, 1989, Davao Light filed an opposition to the motion to discharge
attachment.

7. On September 19, 1989, the Trial Court issued an Order denying the motion to
discharge.

1437
This Order of September 19, 1989 was successfully challenged by Queensland and
Adarna in a special civil action of certiorari instituted by them in the Court of Appeals.
The Order was, as aforestated, annulled by the Court of Appeals in its Decision of May
4, 1990. The Appellate Court's decision closed with the following disposition:

. . . the Orders dated May 3, 1989 granting the issuance of a writ of preliminary
attachment, dated September 19, 1989 denying the motion to discharge
attachment; dated November 7, 1989 denying petitioner's motion for
reconsideration; as well as all other orders emanating therefrom, specially the
Writ of Attachment dated May 11, 1989 and Notice of Levy on Preliminary
Attachment dated May 11, 1989, are hereby declared null and void and the
attachment hereby ordered DISCHARGED.

The Appellate Tribunal declared that —

. . . While it is true that a prayer for the issuance of a writ of preliminary

attachment may be included m the complaint, as is usually done, it is likewise
true that the Court does not acquire jurisdiction over the person of the defendant
until he is duly summoned or voluntarily appears, and adding the phrase that it
be issued "ex parte" does not confer said jurisdiction before actual summons had
been made, nor retroact jurisdiction upon summons being made. . . .

It went on to say, citing Sievert v. Court of Appeals, 3 that "in a proceedings in

attachment," the "critical time which must be identified is . . . when the trial court
acquires authority under law to act coercively against the defendant or his property . . .;"
and that "the critical time is the of the vesting of jurisdiction in the court over the person
of the defendant in the main case."

Reversal of this Decision of the Court of Appeals of May 4, 1990 is what Davao Light
seeks in the present appellate proceedings.

The question is whether or not a writ of preliminary attachment may issue ex

parte against a defendant before acquisition of jurisdiction of the latter's person by
service of summons or his voluntary submission to the Court's authority.

The Court rules that the question must be answered in the affirmative and that
consequently, the petition for review will have to be granted.

It is incorrect to theorize that after an action or proceeding has been commenced and
jurisdiction over the person of the plaintiff has been vested in the court, but before the
acquisition of jurisdiction over the person of the defendant (either by service of
summons or his voluntary submission to the court's authority), nothing can be validly
done by the plaintiff or the court. It is wrong to assume that the validity of acts done
during this period should be defendant on, or held in suspension until, the actual
obtention of jurisdiction over the defendant's person. The obtention by the court of
jurisdiction over the person of the defendant is one thing; quite another is the acquisition

1438
of jurisdiction over the person of the plaintiff or over the subject-matter or nature of the
action, or the res or object hereof.

An action or proceeding is commenced by the filing of the complaint or other initiatory

pleading. 4 By that act, the jurisdiction of the court over the subject matter or nature of the action or proceeding is invoked or called into
activity; 5
 and it is thus that the court acquires jurisdiction over said subject matter or nature
of the action. 6 And it is by that self-same act of the plaintiff (or petitioner) of filing the
complaint (or other appropriate pleading) — by which he signifies his submission to the
court's power and authority — that jurisdiction is acquired by the court over his
person. 7 On the other hand, jurisdiction over the person of the defendant is obtained,
as above stated, by the service of summons or other coercive process upon him or by
his voluntary submission to the authority of the court. 8
The events that follow the filing of the complaint as a matter of routine are well known. After the complaint is filed, summons issues to the defendant, the
summons is then transmitted to the sheriff, and finally, service of the summons is effected on the defendant in any of the ways authorized by the Rules
of Court. There is thus ordinarily some appreciable interval of time between the day of the filing of the complaint and the day of service of summons of
the defendant. During this period, different acts may be done by the plaintiff or by the Court, which are unquestionable validity and propriety. Among
these, for example, are the appointment of a guardian ad litem, 9
 the grant of authority to the plaintiff to prosecute
10
the suit as a pauper litigant,   the amendment of the complaint by the plaintiff as a
matter of right without leave of court, 11 authorization by the Court of service of
summons by publication, 12 the dismissal of the action by the plaintiff on mere notice. 13
This, too, is true with regard to the provisional remedies of preliminary attachment, preliminary injunction, receivership or replevin. 14
 They may
be validly and properly applied for and granted even before the defendant is summoned
or is heard from.

A preliminary attachment may be defined, paraphrasing the Rules of Court, as the

provisional remedy in virtue of which a plaintiff or other party may, at the
commencement of the action or at any time thereafter, have the property of the adverse
party taken into the custody of the court as security for the satisfaction of any judgment
that may be recovered. 15 It is a remedy which is purely statutory in respect of which the
law requires a strict construction of the provisions granting it. 16 Withal no principle,
statutory or jurisprudential, prohibits its issuance by any court before acquisition of
jurisdiction over the person of the defendant.

Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or
at any time thereafter." 17 The phase, "at the commencement of the action," obviously
refers to the date of the filing of the complaint — which, as above pointed out, is the
date that marks "the commencement of the action;" 18 and the reference plainly is to a
time before summons is served on the defendant, or even before summons issues.
What the rule is saying quite clearly is that after an action is properly commenced — by
the filing of the complaint and the payment of all requisite docket and other fees — the
plaintiff may apply for and obtain a writ of preliminary attachment upon fulfillment of the
pertinent requisites laid down by law, and that he may do so at any time, either before
or after service of summons on the defendant. And this indeed, has been the
immemorial practice sanctioned by the courts: for the plaintiff or other proper party to

1439
incorporate the application for attachment in the complaint or other appropriate pleading
(counter-claim, cross-claim, third-party claim) and for the Trial Court to issue the writ ex-
parte at the commencement of the action if it finds the application otherwise sufficient in
form and substance.

In Toledo v. Burgos, 19 this Court ruled that a hearing on a motion or application for

preliminary attachment is not generally necessary unless otherwise directed by the Trial
Court in its discretion. 20 And in Filinvest Credit Corporation v. Relova, 21 the Court
declared that "(n)othing in the Rules of Court makes notice and hearing indispensable
and mandatory requisites for the issuance of a writ of attachment." The only pre-
requisite is that the Court be satisfied, upon consideration of "the affidavit of the
applicant or of some other person who personally knows the facts, that a sufficient
cause of action exists, that the case is one of those mentioned in Section 1 . . . (Rule
57), that there is no other sufficient security for the claim sought to be enforced by the
action, and that the amount due to the applicant, or the value of the property the
possession of which he is entitled to recover, is as much as the sum for which the order
(of attachment) is granted above all legal counterclaims." 22 If the court be so satisfied,
the "order of attachment shall be granted," 23 and the writ shall issue upon the
applicant's posting of "a bond executed to the adverse party in an amount to be fixed by
the judge, not exceeding the plaintiffs claim, conditioned that the latter will pay all the
costs which may be adjudged to the adverse party and all damages which he may
sustain by reason of the attachment, if the court shall finally adjudge that the applicant
was not entitled thereto." 24
In Mindanao Savings & Loan Association, Inc. v. Court of Appeals, decided on April 18, 1989, 25
 this Court had occasion to
emphasize the postulate that no hearing is required on an application for preliminary
attachment, with notice to the defendant, for the reason that this "would defeat the
objective of the remedy . . . (since the) time which such a hearing would take, could be
enough to enable the defendant to abscond or dispose of his property before a writ of
attachment issues." As observed by a former member of this Court, 26 such a procedure
would warn absconding debtors-defendants of the commencement of the suit against
them and the probable seizure of their properties, and thus give them the advantage of
time to hide their assets, leaving the creditor-plaintiff holding the proverbial empty bag; it
would place the creditor-applicant in danger of losing any security for a favorable
judgment and thus give him only an illusory victory.

Withal, ample modes of recourse against a preliminary attachment are secured by law
to the defendant. The relative ease with which a preliminary attachment may be
obtained is matched and paralleled by the relative facility with which the attachment
may legitimately be prevented or frustrated. These modes of recourse against
preliminary attachments granted by Rule 57 were discussed at some length by the
separate opinion in Mindanao Savings & Loans Asso. Inc. v. CA., supra.

That separate opinion stressed that there are two (2) ways of discharging an
attachment: first, by the posting of a counterbond; and second, by a showing of its
improper or irregular issuance.

1440
1.0. The submission of a counterbond is an efficacious mode of lifting an attachment
already enforced against property, or even of preventing its enforcement altogether.

1.1. When property has already been seized under attachment, the attachment may be
discharged upon counterbond in accordance with Section 12 of Rule 57.

Sec. 12. Discharge of attachment upon giving counterbond. — At any time after

an order of attachment has been granted, the party whose property has been
attached or the person appearing in his behalf, may, upon reasonable notice to
the applicant, apply to the judge who granted the order, or to the judge of the
court in which the action is pending, for an order discharging the attachment
wholly or in part on the security given . . . in an amount equal to the value of the
property attached as determined by the judge to secure the payment of any
judgment that the attaching creditor may recover in the action. . . .

1.2. But even before actual levy on property, seizure under attachment may be
prevented also upon counterbond. The defendant need not wait until his property is
seized before seeking the discharge of the attachment by a counterbond. This is made
possible by Section 5 of Rule 57.

Sec. 5. Manner of attaching property. — The officer executing the order shall
without delay attach, to await judgment and execution in the action, all the
properties of the party against whom the order is issued in the province, not
exempt from execution, or so much thereof as may be sufficient to satisfy the
applicant's demand, unless the former makes a deposit with the clerk or judge of
the court from which the order issued, or gives a counter-bond executed to the
applicant, in an amount sufficient to satisfy such demand besides costs, or in an
amount equal to the value of the property which is about to be attached, to
secure payment to the applicant of any judgment which he may recover in the
action. . . . (Emphasis supplied)

2.0. Aside from the filing of a counterbond, a preliminary attachment may also be lifted
or discharged on the ground that it has been irregularly or improperly issued, in
accordance with Section 13 of Rule 57. Like the first, this second mode of lifting an
attachment may be resorted to even before any property has been levied on. Indeed, it
may be availed of after property has been released from a levy on attachment, as is
made clear by said Section 13, viz.:

Sec. 13. Discharge of attachment for improper or irregular issuance. — The party
whose property has been attached may also, at any time either BEFORE or
AFTER the release of the attached property, or before any attachment shall have
been actually levied, upon reasonable notice to the attaching creditor, apply to
the judge who granted the order, or to the judge of the court in which the action is
pending, for an order to discharge the attachment on the ground that the same
was improperly or irregularly issued. If the motion be made on affidavits on the
part of the party whose property has been attached, but not otherwise, the

1441
 attaching creditor may oppose the same by counter-affidavits or other evidence
in addition to that on which the attachment was made. . . . (Emphasis supplied)

This is so because "(a)s pointed out in Calderon v. I.A.C., 155 SCRA 531 (1987), The
attachment debtor cannot be deemed to have waived any defect in the issuance of the
attachment writ by simply availing himself of one way of discharging the attachment writ,
instead of the other. Moreover, the filing of a counterbond is a speedier way of
discharging the attachment writ maliciously sought out by the attaching creditor instead
of the other way, which, in most instances . . . would require presentation of evidence in
a fullblown trial on the merits, and cannot easily be settled in a pending incident of the
case." 27
It may not be amiss to here reiterate other related principles dealt with in Mindanao Savings & Loans Asso. Inc. v. C.A., supra., 28
 to wit:

(a) When an attachment may not be dissolved by a showing of its irregular or

improper issuance:

. . . (W)hen the preliminary attachment is issued upon a ground which is at the

same time the applicant's cause of action; e.g., "an action for money or property
embezzled or fraudulently misapplied or converted to his own use by a public
officer, or an officer of a corporation, or an attorney, factor, broker, agent, or
clerk, in the course of his employment as such, or by any other person in a
fiduciary capacity, or for a willful violation of duty." (Sec. 1 [b], Rule 57), or "an
action against a party who has been guilty of fraud m contracting the debt or
incurring the obligation upon which the action is brought" (Sec. 1 [d], Rule 57),
the defendant is not allowed to file a motion to dissolve the attachment under
Section 13 of Rule 57 by offering to show the falsity of the factual averments in
the plaintiff's application and affidavits on which the writ was based — and
consequently that the writ based thereon had been improperly or irregularly
issued (SEE Benitez v. I.A.C., 154 SCRA 41) — the reason being that the
hearing on such a motion for dissolution of the writ would be tantamount to a trial
of the merits of the action. In other words, the merits of the action would be
ventilated at a mere hearing of a motion, instead of at the regular trial. Therefore,
when the writ of attachment is of this nature, the only way it can be dissolved is
by a counterbond (G.B. Inc. v. Sanchez, 98 Phil. 886).

(b) Effect of the dissolution of a preliminary attachment on the plaintiffs attachment

bond:

. . . The dissolution of the preliminary attachment upon security given, or a

showing of its irregular or improper issuance, does not of course operate to
discharge the sureties on plaintiff's own attachment bond. The reason is simple.
That bond is "executed to the adverse party, . . . conditioned that the . . .
(applicant) will pay all the costs which may be adjudged to the adverse party and
all damages which he may sustain by reason of the attachment, if the court shall
finally adjudge that the applicant was not entitled thereto" (SEC. 4, Rule 57).

1442
 Hence, until that determination is made, as to the applicant's entitlement to the
attachment, his bond must stand and cannot be with-drawn.

With respect to the other provisional remedies, i.e., preliminary injunction (Rule 58),
receivership (Rule 59), replevin or delivery of personal property (Rule 60), the rule is the
same: they may also issue ex parte. 29
It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the person of defendant, as above
indicated — issuance of summons, order of attachment and writ of attachment (and/or appointments of guardian ad litem, or grant of authority to the
plaintiff to prosecute the suit as a pauper litigant, or amendment of the complaint by the plaintiff as a matter of right without leave of court 30
 — and
however valid and proper they might otherwise be, these do not and cannot bind and
affect the defendant until and unless jurisdiction over his person is eventually obtained
by the court, either by service on him of summons or other coercive process or his
voluntary submission to the court's authority. Hence, when the sheriff or other proper
officer commences implementation of the writ of attachment, it is essential that he serve
on the defendant not only a copy of the applicant's affidavit and attachment bond, and of
the order of attachment, as explicity required by Section 5 of Rule 57, but also the
summons addressed to said defendant as well as a copy of the complaint and order for
appointment of guardian ad litem, if any, as also explicity directed by Section 3, Rule 14
of the Rules of Court. Service of all such documents is indispensable not only for the
acquisition of jurisdiction over the person of the defendant, but also upon considerations
of fairness, to apprise the defendant of the complaint against him, of the issuance of a
writ of preliminary attachment and the grounds therefor and thus accord him the
opportunity to prevent attachment of his property by the posting of a counterbond in an
amount equal to the plaintiff's claim in the complaint pursuant to Section 5 (or Section
12), Rule 57, or dissolving it by causing dismissal of the complaint itself on any of the
grounds set forth in Rule 16, or demonstrating the insufficiency of the applicant's
affidavit or bond in accordance with Section 13, Rule 57.

It was on account of the failure to comply with this fundamental requirement of service
of summons and the other documents above indicated that writs of attachment issued
by the Trial Court ex parte were struck down by this Court's Third Division in two (2)
cases, namely: Sievert v. Court of Appeals, 31 and BAC Manufacturing and Sales
Corporation v. Court of Appeals, et al. 32 In contrast to the case at bar — where the
summons and a copy of the complaint, as well as the order and writ of attachment and
the attachment bond were served on the defendant — in Sievert, levy on attachment
was attempted notwithstanding that only the petition for issuance of the writ of
preliminary attachment was served on the defendant, without any prior or
accompanying summons and copy of the complaint; and in BAC Manufacturing and
Sales Corporation, neither the summons nor the order granting the preliminary
attachment or the writ of attachment itself was served on the defendant "before or at the
time the levy was made."

For the guidance of all concerned, the Court reiterates and reaffirms the proposition that
writs of attachment may properly issue ex parte provided that the Court is satisfied that
the relevant requisites therefor have been fulfilled by the applicant, although it may, in

1443
its discretion, require prior hearing on the application with notice to the defendant; but
that levy on property pursuant to the writ thus issued may not be validly effected unless
preceded, or contemporaneously accompanied, by service on the defendant of
summons, a copy of the complaint (and of the appointment of guardian ad litem, if any),
the application for attachment (if not incorporated in but submitted separately from the
complaint), the order of attachment, and the plaintiff's attachment bond.

WHEREFORE, the petition is GRANTED; the challenged decision of the Court of

Appeals is hereby REVERSED, and the order and writ of attachment issued by Hon.
Milagros C. Nartatez, Presiding Judge of Branch 8, Regional Trial Court of Davao City
in Civil Case No. 19513-89 against Queensland Hotel or Motel or Queensland Tourist
Inn and Teodorico Adarna are hereby REINSTATED. Costs against private
respondents.

SO ORDERED.

THIRD DIVISION

September 9, 2015

G.R. No. 181721

WATERCRAFT VENTURE CORPORATION, represented by its Vice-President,

ROSARIO E. RANOA, Petitioners,
vs.
ALFRED RAYMOND WOLFE, Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to
reverse and set aside the Court of Appeals (CA) Resolution 1 dated January 24, 2008
denying the motion for reconsideration of its Decision 2 dated September 27, 2007 in
CA-G.R. SP No. 97804.

The facts are as follows:

Petitioner Watercraft Venture Corporation (Watercraft) is engaged in the business of

building, repairing, storing and maintaining yachts, boats and other pleasure crafts at
the Subic Bay Freeport Zone, Subic, Zambales. In connection with its operations and
maintenance of boat storage facilities, it charges a boat storage fee of Two Hundred
Seventy-Two US Dollars (US$272.00) per month with interest of 4% per month for
unpaid charges.

1444
Sometime in June 1997, Watercraft hired respondent Alfred Raymond Wolfe (Wolfe), a
British national and resident of Subic Bay Freeport Zone, Zambales, as its Shipyard
Manager.

During his empolyment, Wolfe stored the sailboat, Knotty Gull, within Watercraft's boat
storage facilities, but never paid for the storage fees.

On March 7, 2002, Watercraft terminated the employment of Wolfe.

Sometime in June 2002, Wolfe pulled out his sailboat from Watercraft's storage facilities
after signing a Boat Pull-Out Clearance dated June 29, 2002 where he allegedly
acknowledged the outstanding obligation of Sixteen Thousand Three Hundred and
Twenty-Four and 82/100 US Dollars (US$16,324.82) representing unpaid boat storage
fees for the period of June 1997 to June 2002. Despite repeated demands, he failed to
pay the said amount.

Thus, on July 7, 2005, Watercraft filed against Wolfe a Complaint for Collection of Sum
of Money with Damages with an Application for the Issuance of a Writ of Preliminary
Attachment. The case was docketed as Civil Case No. 4534-MN, and raffled to Branch
1703 of the Regional Trial Court (RTC) of Malabon City.

In his Answer, Wolfe claimed he was hired as Service and Repair Manager, instead of
Shipyard Manager. He denied owing Watercraft the amount of US$16,324.82
representing storage fees for the sailboat. He explained that the sailboat was purchased
in February 1998 as part of an agreement between him and Watercraft's then General
Manager, Barry Bailey, and its President, Ricky Sandoval, for it to be repaired and used
as training or fill-in project for the staff, and to be sold later on. He added that pursuant
to a central Listing Agreement for the sale of the sailboat, he was appointed as agent,
placed in possession thereof and entitled to a ten percent (10%) sales commission. He
insisted that nowhere in the agreement was there a stipulation that berthing and storage
fees will be charged during the entire time that the sailboat was in Watercraft's
dockyard. Thus, he claimed to have been surprised when he received five (5) invoices
billing him for the said fees two (2) months after his services were terminated. He
pointed out that the complaint was an offshoot of an illegal dismissal case he filed
against Watercraft which had been decided in his favor by the Labor Arbiter.

Meanwhile, finding Watercraft's ex-parte application for writ of preliminary attachment

sufficient in form and in substance pursuant to Section 1 of Rule 57 of the Rules of
Court, the RTC granted the same in the Order dated July 15, 2005, thus:

WHEREFORE, let a Writ of Preliminary Attachment be issued accordingly in favor of the

plaintiff, Watercraft Ventures Corporation conditioned upon the filing of attachment bond
in the amount of Three Million Two Hundred Thirty-One Thousand Five Hundred and
Eighty-Nine and 25/100 Pesos (Php3,231,589.25) and the said writ be served
simultaneously with the summons, copies of the complaint, application for attachment,
applicant's affidavit and bond, and this Order upon the defendant.

1445
SO ORDERED.4

Pursuant to the Order dated July 15, 2005, the Writ of Attachment dated August 3, 2005
and the Notice of Attachment dated August 5, 2005 were issued, and Wolfe's two
vehicles, a gray Mercedes Benz with plate number XGJ 819 and a maroon Toyota
Corolla with plate number TFW 110, were levied upon.

On August 12, 2005, Wolfe's accounts at the Bank of the Philippine Islands were also
garnished.

By virtue of the Notice of Attachment and Levy dated September 5, 2005, a white
Dodge pick-up truck with plate number XXL 111 was also levied upon. However, a
certain Jeremy Simpson filed a Motion for Leave of Court to Intervene, claiming that he
is the owner of the truck as shown by a duly-notarized Deed of Sale executed on
August 4, 2005, the Certificate of Registration No. 3628665-1 and the Official Receipt
No. 271839105.

On November 8, 2005, Wolfe filed a Motion to Discharge the Writ of Attachment,

arguing that Watercraft failed to show the existence of fraud and that the mere failure to
pay or perform an obligation does not amount to fraud. He also claimed that he is not a
flight risk for the following reasons: (1) contrary to the claim that his Special Working
Visa expired in April 2005, his Special Subic Working Visa and Alien Certificate of
Registration are valid until April 25, 2007 and May 11, 2006, respectively; (2) he and his
family have been residing in the Philippines since 1997; (3) he is an existing stockholder
and officer of Wolfe Marine Corporation which is registered with the Securities and
Exchange Commission, and a consultant of "Sudeco/Ayala" projects in Subic, a
member of the Multipartite Committee for the new port development in Subic, and the
Subic Chamber of Commerce; and (4) he intends to finish prosecuting his pending labor
case against Watercraft. On even date, Watercraft also filed a Motion for Preliminary
Hearing of its affirmative defenses of forum shopping, litis pendentia, and laches.

In an Order dated March 20, 2006, the RTC denied Wolfe's Motion to Discharge Writ of
Attachment and Motion for Preliminary Hearing for lack of merit.

Wolfe filed a motion for reconsideration, but the RTC also denied it for lack of merit in
an Order dated November 10, 2006. Aggrieved, Wolfe filed a petition for certiorari
before the CA.

The CA granted Wolfe's petition in a Decision dated September 27, 2007, the
dispositive portion of which reads:

WHEREFORE, the Order dated March 20, 2006 and the Order dated November 10,
2006 of respondent Judge are hereby ANNULLED and SET ASIDE. Accordingly, the
Writ of Attachment issued on August 3, 2005, the Notice of Attachment dated August 5,
2005 and the Notice of Attachment and Levy dated September 5, 2005 are hereby also

1446
declared NULL and VOID, and private respondent is DIRECTED to return to their
owners the vehicles that were attached pursuant to the Writ.

SO ORDERED.5

The CA ruled that the act of issuing the writ of preliminary attachment ex-parte
constitutes grave abuse of discretion on the part of the RTC, thus:

x x x In Cosiquien [v. Court of Appeals], the Supreme Court held that:

"Where a judge issues a fatally defective writ of preliminary attachment based on an

affidavit which failed to allege the requisites prescribed for the issuance of the writ of
preliminary attachment, renders the writ of preliminary attachment issued against the
property of the defendant fatally defective. The judge issuing it is deemed to have acted
in excess of jurisdiction. In fact, the defect cannot even be cured by amendment. Since
the attachment is a harsh and rigorous remedy which exposed the debtor to humiliation
and annoyance, the rule authorizing its issuance must be strictly construed in favor of
defendant. It is the duty of the court before issuing the writ to ensure that all the
requisites of the law have been complied with. Otherwise, a judge acquires no
jurisdiction to issue the writ." (emphasis supplied)

In the instant case, the Affidavit of Merit executed by Rosario E. Rañoa, Watercraft's
Vice-President, failed to show fraudulent intent on the part of Wolfe to defraud the
company. It merely enumerated the circumstances tending to show the alleged
possibility of Wolfe's flight from the country. And upon Wolfe's filing of the Motion to
Discharge the Writ, what the respondent Judge should have done was to determine,
through a hearing, whether the allegations of fraud were true. As further held in
Cosiquien:

"When a judge issues a writ of preliminary attachment ex-parte, it is incumbent on him,

upon proper challenge of his order to determine whether or not the same was
improvidently issued. If the party against whom the writ is prayed for squarely
controverts the allegation of fraud, it is incumbent on the applicant to prove his
allegation. The burden of proving that there indeed was fraud lies with the party making
such allegation. This finds support in Section 1, Rule 131 Rules of Court. In this
jurisdiction, fraud is never presumed." (Emphasis supplied) As correctly noted by Wolfe,
although Sec. 1 of Rule 57 allows a party to invoke fraud as a ground for the issuance
of a writ of attachment, the Rules require that in all averments of fraud, the
circumstances constituting fraud must be stated with particularity, pursuant to Rule 8,
Section 5. The Complaint merely stated, in paragraph 23 thereof that "For failing to pay
the use [of] facilities and services – in the form of boat storage fees, the Defendant is
clearly guilty of fraud which entitles the Plaintiff to a Writ of Preliminary Attachment upon
the property of the Defendant as security for the satisfaction of any judgment herein."
This allegation does not constitute fraud as contemplated by law, fraud being the
"generic term embracing all multifarious means which human ingenuity can devise, and
which are resorted to by one individual to secure an advantage over another by false

1447
suggestions or by suppression of truth and includes all surprise, trick, cunning,
dissembling and any unfair way by which another is cheated." In this instance, Wolfe's
mere failure to pay the boat storage fees does not necessarily amount to fraud, absent
any showing that such failure was due to [insidious] machinations and intent on his part
to defraud Watercraft of the amount due it.

As to the allegation that Wolfe is a flight risk, thereby warranting the issuance of the writ,
the same lacks merit. The mere fact that Wolfe is a British national does not
automatically mean that he would leave the country at will. As Wolfe avers, he and his
family had been staying in the Philippines since 1997, with his daughters studying at a
local school. He also claims to be an existing stockholder and officer of Wolfe Marine
Corporation, a SEC-registered corporation, as well as a consultant of projects in the
Subic Area, a member of the Multipartite Committee for the new port development in
Subic, and a member of the Subic Chamber of Commerce. More importantly, Wolfe has
a pending labor case against Watercraft – a fact which the company glaringly failed to
mention in its complaint – which Wolfe claims to want to prosecute until its very end.
The said circumstances, as well as the existence of said labor case where Wolfe stands
not only to be vindicated for his alleged illegal dismissal, but also to receive
recompense, should have convinced the trial court that Wolfe would not want to leave
the country at will just because a suit for the collection of the alleged unpaid boat
storage fees has been filed against him by Watercraft.

Neither should the fact that Wolfe's Special Working Visa expired in April 2005 lead
automatically to the conclusion that he would leave the country. It is worth noting that all
visas issued by the government to foreigners staying in the Philippines have expiration
periods. These visas, however, may be renewed, subject to the requirements of the law.
In Wolfe's case, he indeed renewed his visa, as shown by Special Working Visa No. 05-
WV-0124P issued by the Subic Bay Metropolitan Authority Visa Processing Office on
April 25, 2005, and with validity of two (2) years therefrom. Moreover, his Alien
Certificate of Registration was valid up to May 11, 2006.

Based on the foregoing, it is therefore clear that the writ was improvidently issued. It is
well to emphasize that "[T]he rules on the issuance of a writ of attachment must be
construed strictly against the applicants. This stringency is required because the
remedy of attachment is harsh, extraordinary and summary in nature. If all the requisites
for the granting of the writ are not present, then the court which issues it acts in excess
of its jurisdiction. Thus, in this case, Watercraft failed to meet all the requisites for the
issuance of the writ. Thus, in granting the same, respondent Judge acted with grave
abuse of discretion.6

In a Resolution dated January 24, 2008, the CA denied Watercraft's motion for
reconsideration of its Decision, there being no new or significant issues raised in the
motion.

Dissatisfied with the CA Decision and Resolution, Watercraft filed this petition for review
on certiorari, raising these two issues:

1448
 I.

WHETHER THE EX-PARTE ISSUANCE OF THE PRELIMINARY ATTACHMENT BY

THE TRIAL COURT IN FAVOR OF THE PETITIONER IS VALID.

II.

WHETHER THE ALLEGATIONS IN THE AFFIDAVIT OF MERIT CONCERNING

FRAUD ARE SUFFICIENT TO WARRANT THE ISSUANCE OF A PRELIMINARY
WRIT OF ATTACHMENT BY THE

TRIAL COURT IN FAVOR OF THE PETITIONER.7

Watercraft argues that the CA erred in holding that the RTC committed grave abuse of
discretion in issuing the writ of preliminary attachment, and in finding that the affidavit of
merit only enumerated circumstances tending to show the possibility of Wolfe's flight
from the country, but failed to show fraudulent intent on his part mpany.

Stressing that its application for such writ was anchored on two (2) grounds under
Section 1,8 Rule 57, Watercraft insists that, contrary to the CA ruling, its affidavit of merit
sufficiently averred with particularity the circumstances constituting fraud as a common
element of said grounds.

Watercraft points out that its affidavit of merit shows that from 1997, soon after Wolfe's
employment as Shipyard Manager, up to 2002, when his employment was terminated,
or for a period of five (5) years, not once did he pay the cost for the use of the
company's boat storage facilities, despite knowledge of obligation and obvious ability to
pay by reason of his position.

Watercraft adds that its affidavit clearly stated that Wolfe, in an attempt to avoid settling
of his outstanding obligations to the company, signed a Boat Pull-Out Clearance where
he merely acknowledged but did not pay Sixteen Thousand Three Hundred and
Twenty-Four and 82/100 US Dollars (US$16,324.82) representing unpaid boat storage
fees for the period commencing June 1997 to June 2002. It avers that the execution of
such clearance enabled Wolfe to pull out his boat from the company storage facilities
without payment of storage fees.

Watercraft also faults the CA in finding no merit in its allegation that Wolfe is a flight risk.
It avers that he was supposed to stay and work in the country for a limited period, and
will eventually leave; that despite the fact that his wife and children reside in the country,
he can still leave with them anytime; and that his work in the country will not prevent him
from leaving, thereby defeating the purpose of the action, especially since he had
denied responsibility for his outstanding obligations. It submits that the CA overlooked
paragraph 28 of its Complaint which alleged that "[i]n support of the foregoing
allegations and the prayer for the issuance of a Writ of Preliminary Attachment in the

1449
instant case, the Plaintiff has attached hereto the Affidavit of the Vice-President of the
Plaintiff, MS. ROSARIO E. RAÑOA x x x."9

Watercraft asserts that it has sufficiently complied with the only requisites for the
issuance of the writ of preliminary attachment under Section 3, Rule 57 of the Rules of
Court, i.e., affidavit of merit and bond of the applicant. It posits that contrary to the CA
ruling, there is no requirement that evidence must first be offered before a court can
grant such writ on the basis of Section 1 (d) of Rule 57, and that the rules only require
an affidavit showing that the case is one of those mentioned in Section 1, Rule 57. It
notes that although a party is entitled to oppose an application for the issuance of the
writ or to move for the discharge thereof by controverting the allegations of fraud, such
rule does not apply when the same allegations constituting fraud are the very facts
disputed in the main action, as in this case.

Watercraft also points out the inconsistent stance of Wolfe with regard to the ownership
and possession of the sailboat. Contrary to Wolfe's Answer that the purchase of the
sailboat was made pursuant to a three (3)-way partnership agreement between him and
its General Manager and Executive Vice-President, Barry Bailey, and its President,
Ricky Sandoval, Watercraft claims that he made a complete turnaround and exhibited
acts of soleownership by signing the Boat Pull-Out Clearance in order to retrieve the
sailboat. It argues that common sense and logic would dictate that he should have
invoked the existence of the partnership to answer the demand for payment of the
storage fees.

Watercraft contends that in order to pre-empt whatever action it may decide to take with
respect to the sailboat in relation to his liabilities, Wolfe accomplished in no time the
clearance that paved the way for its removal from the company's premises without
paying his outstanding obligations. It claims that such act reveals a fraudulent intent to
use the company storage facilities without payment of storage fees, and constitutes
unjust enrichment.

The petition lacks merit.

A writ of preliminary attachment is defined as a provisional remedy issued upon order of

the court where an action is pending to be levied upon the property or properties of the
defendant therein, the same to be held thereafter by the sheriff as security for the
satisfaction of whatever judgment that might be secured in the said action by the
attaching creditor against the defendant. 10 However, it should be resorted to only when
necessary and as a last remedy because it exposes the debtor to humiliation and
annoyance.11 It must be granted only on concrete and specific grounds and not merely
on general averments quoting the words of the rules. 12 Since attachment is harsh,
extraordinary, and summary in nature,13 the rules on the application of a writ of
attachment must be strictly construed in favor of the defendant. the court 14 in which the
action is pending. Such bond executed to the adverse party in the amount fixed by the
court is subject to the conditions that the applicant will pay: (1) all costs which may be
adjudged to the adverse party; and (2) all damages which such party may sustain by

1450
reason of the attachment, if the court shall finally adjudge that the applicant was not
entitled thereto.15 As to the requisite affidavit of merit, Section 3, 16 Rule 57of the Rules of
Court states that an order of attachment shall be granted only when it appears in the
affidavit of the applicant, or of some other person who personally knows the facts:

1. that a sufficient cause of action exists;

2. that the case is one of those mentioned in Section 1 17 hereof;

3. that there is no other sufficient security for the claim sought to be enforced by
the action; and

4. that the amount due to the applicant, or the value of the property the
possession of which he is entitled to recover, is as much as the sum for which
the order is granted above all legal counterclaims.

The mere filing of an affidavit reciting the facts required by Section 3, Rule 57,
however, is not enough to compel the judge to grant the writ of preliminary
attachment. Whether or not the affidavit sufficiently established facts therein
stated is a question to be determined by the court in the exercise of its
discretion.18 "The sufficiency or insufficiency of an affidavit depends upon the
amount of credit given it by the judge, and its acceptance or rejection, upon his
sound discretion."19 Thus, in reviewing the conflicting findings of the CA and the
RTC on the pivotal issue of whether or not Watercraft's affidavit of merit
sufficiently established facts which constitute as grounds upon which attachment
may be issued under Section 1 (a)20 and (d),21 Rule 57, the Court will examine
the Affidavit of Preliminary Attachment22 of Rosario E. Rañoa, its Vice-President,
which reiterated the following allegations in its complaint to substantiate the
application for a writ of preliminary attachment:

xxxx

4. Sometime in June 1997, the Defendant was hired as Watercraft's Shipyard

Manager.

5. Soon thereafter, the Defendant placed his sailboat, the Knotty Gull, within the
boat storage facilities of Watercraft for purposes of storage and safekeeping.

6. Despite having been employed by Watercraft, the Defendant was not

exempted from paying Watercraft boat storage fees for the use of the said
storage facilities.

7. By virtue of his then position and employment with Watercraft, the Defendant
was very much knowledgeable of the foregoing fact.

1451
8. All throughout his employment with Watercraft, the Defendant used the boat
storage facilities of Watercraft for his Knotty Gull.

9. However, all throughout the said period of his employment, the Defendant
never paid the boat storage fees in favor of the Plaintiff.

10. The Defendant's contract of employment with Watercraft was terminated on

07 March 2002.

11. [Sometime] thereafter, that is, in or about June 2002, the Defendant pulled
out the Knotty Gull from the boat storage facilities of Watercraft.

12. Instead of settling in full his outstanding obligations concerning unpaid

storage fees before pulling our the Knotty Gull, the Defendant signed a Boat Pull-
Out Clearance dated 29 June 2002 wherein he merely acknowledged the then
outstanding balance of Sixteen Thousand Three Hundred and Twenty-four and
82/100 US Dollars (US$16,324.82), representing unpaid boat storage fees for the
period commencing June 1997 to June 2002, that he owed Watercraft.

13. By reason of Defendant's mere accomplishment of the said Boat Pull-Out

Clearance with acknowledgment of his outstanding obligation to Watercraft in
unpaid boat storage fees, Mr. Franz Urbanek, then the Shipyard Manager who
replaced the Defendant, contrary to company policy, rules and regulations,
permitted the latter to physically pull out his boat from the storage facilities of the
Plaintiff without paying any portion of his outstanding obligation in storage fees.

14. Several demands were then made upon the Defendant for him to settle his
outstanding obligations to the Plaintiff in unpaid storage fees but the same went
unheeded.

15. As of 02 April 2005, the outstanding obligation of the Defendant to the

Plaintiff in unpaid boat storage fees stands at Three Million Two Hundred Thirty-
One Thousand Five Hundred and Eighty-Nine and 25/100 Pesos (Php
3,231,589.25) inclusive of interest charges.

16. For failing to pay for the use [of] facilities and services—in the form of boat
storage facilities—duly enjoyed by him and for failing and refusing to fulfill his
promise to pay for the said boat storage fees, the Defendant is clearly guilty of
fraud which entitles the Plaintiff to a Writ of Preliminary Attachment upon the
property of the Defendant as security for the satisfaction of any judgment in its
favor in accordance with the provisions of Paragraph (d), Section 1, Rule 57 of
the Rules of Court.

17. The instant case clearly falls under the said provision of law.

1452
 18. Furthermore, lawful factual and legal grounds exist which show that the
Defendant may have departed or is about to depart the country to defraud his
creditors thus rendering it imperative that a Writ of Preliminary Attachment be
issued in favor of the Plaintiff in the instant case.

19. The possibility of flight on the part of the Defendant is heightened by the
existence of the following circumstances:

a. The Special Working Visa issued in favor of the Defendant expired in

April 2005;

b. The Defendant is a British national who may easily leave the country at
will;

c. The Defendant has no real properties and visible, permanent business

or employment in the Philippines; and

e. The house last known to have been occupied by the Defendant is

merely being rented by him.

20. All told, the Defendant is a very serious flight risk which fact will certainly
render for naught the capacity of the Plaintiff to recover in the instant case. 23

After a careful perusal of the foregoing allegations, the Court agrees with the CA that
Watercraft failed to state with particularity the circumstances constituting fraud, as
required by Section 5,24 Rule 8 of the Rules of Court, and that Wolfe's mere failure to
pay the boat storage fees does not necessarily amount to fraud, absent any showing
that such failure was due to insidious machinations and intent on his part to defraud
Watercraft of the amount due it.

In Liberty Insurance Corporation v. Court of Appeals, 25 the Court explained that to

constitute a ground for attachment in Section 1(d), Rule 57 of the Rules of Court, it must
be shown that the debtor in contracting the debt or incurring the obligation intended to
defraud the creditor. A debt is fraudulently contracted if at the time of contracting it, the
debtor has a preconceived plan or intention not to pay. "The fraud must relate to the
execution of the agreement and must have been the reason which induced the other
party into giving consent which he would not have otherwise given." 26

Fraudulent intent is not a physical entity, but a condition of the mind beyond the reach of
the senses, usually kept secret, very unlikely to be confessed, and therefore, can only
be proved by unguarded expressions, conduct and circumstances. 27 Thus, the applicant
for a writ of preliminary attachment must sufficiently show the factual circumstances of
the alleged fraud because fraudulent intent cannot be inferred from the debtor's mere
non-payment of the debt or failure to comply with his obligation. 28 The particulars of
such circumstances necessarily include the time, persons, places and specific acts of
fraud committed.29 An affidavit which does not contain concrete and specific grounds is

1453
inadequate to sustain the issuance of such writ. In fact, mere general averments render
the writ defective and the court that ordered its issuance acted with grave abuse of
discretion amounting to excess of jurisdiction.30

In this case, Watercraft's Affidavit of Preliminary Attachment does not contain specific
allegations of other factual circumstances to show that Wolfe, at the time of contracting
the obligation, had a preconceived plan or intention not to pay. Neither can it be inferred
from such affidavit the particulars of why he was guilty of fraud in the performance of
such obligation. To be specific, Watercraft's following allegation is unsupported by any
particular averment of circumstances that will show why or how such inference or
conclusion was arrived at, to wit: "16. For failing to pay for the use [of] facilities and
services - in the form of boat storage facilities – duly enjoyed by him and for failing and
refusing to fulfill his promise to pay for the said boat storage fees, the Defendant is
clearly guilty of fraud x x x."31 It is not an allegation of essential facts constituting
Watercraft's causes of action, but a mere conclusion of law.

With respect to Section 1 (a),32 Rule 57, the other ground invoked by Watercraft for the
issuance of the writ of preliminary attachment, the Court finds no compelling reason to
depart from the CA's exhaustive ruling to the effect that such writ is unnecessary
because Wolfe is not a flight risk, thus:

As to the allegation that Wolfe is a flight risk, thereby warranting the issuance of the writ,
the same lacks merit. The mere fact that Wolfe is a British national does not
automatically mean that he would leave the country at will. As Wolfe avers, he and his
family had been staying in the Philippines since 1997, with his daughters studying at a
local school. He also claims to be an existing stockholder and officer of Wolfe Marine
Corporation, a SEC-registered corporation, as well as a consultant of projects in the
Subic Area, a member of the Multipartite Committee for the new port development in
Subic, and a member of the Subic Chamber of Commerce. More importantly, Wolfe has
a pending labor case against Watercraft – a fact which the company glaringly failed to
mention in its complaint – which Wolfe claims to want to prosecute until its very end.
The said circumstances, as well as the existence of said labor case where Wolfe stands
not only to be vindicated for his alleged illegal dismissal, but also to receive
recompense, should have convinced the trial court that Wolfe would not want to leave
the country at will just because a suit for the collection of the alleged unpaid boat
storage fees has been filed against him by Watercraft.

Neither should the fact that Wolfe's Special Working Visa expired in April 2005 lead
automatically to the conclusion that he would leave the country.1âwphi1 It is worth
noting that all visas issued by the government to

foreigner staying in the Philippines have expiration periods. These visas, however, may
be renewed, subject to the requirements of the law. In Wolfe's case, he indeed renewed
his visa, as shown by Special Working Visa No. 05-WV-0124P issued by the Subic Bay
Metropolitan Authority Visa Processing Office on April 25, 2005, and with validity of two

1454
(2) years therefrom. Moreover, his Alien Certificate of Registration was valid up to May
11, 2006.33

Meanwhile, Watercraft's reliance on Chuidian v. Sandiganbayan 34 is misplaced. It is well

settled that:

x x x when the preliminary attachment is issued upon a ground which is at the same
time the applicant's cause of action; e.g., "an action for money or property embezzled or
fraudulently misapplied or converted to his own use by a public officer, or an officer of a
corporation, or an attorney, factor, broker, agent, or clerk, in the course of his
employment as such, or by any other person in a fiduciary capacity, or for a willful
violation of duty," or "an action against a party who has been guilty of fraud in
contracting the debt or incurring the obligation upon which the action is brought," the
defendant is not allowed to file a motion to dissolve the attachment under Section 13 of
Rule 57 by offering to show the falsity of the factual averments in the plaintiff's
application and affidavits on which the writ was based – and consequently that the writ
based thereon had been improperly or irregularly issued – the reason being that the
hearing on such a motion for dissolution of the writ would be tantamount to a trial of the
merits of the action. In other words, the merits of the action would be ventilated at a
mere hearing of a motion, instead of at the regular trial. 35

Be that as it may, the foregoing rule is not applicable in this case because when Wolfe
filed a motion to dissolve the writ of preliminary attachment, he did not offer to show the
falsity of the factual averments in Watercraft's application and affidavit on which the writ
was based. Instead, he sought the discharge of the writ on the ground that Watercraft
failed to particularly allege any circumstance amounting to fraud. No trial on the merits
of the action at a mere hearing of such motion will be had since only the sufficiency of
the factual averments in the application and affidavit of merit will be examined in order
to find out whether or not Wolfe was guilty of fraud in contracting the debt or incurring
the obligation upon which the action is brought, or in the performance thereof.

Furthermore, the other ground upon which the writ of preliminary attachment was issued
by the RTC is not at the same time the applicant's cause of action. Assuming arguendo
that the RTC was correct in issuing such writ on the ground that Watercraft's complaint
involves an action for the recovery of a specified amount of money or damages against
a party, like Wolfe, who is about to depart from the Philippines with intent to defraud his
creditors, the Court stresses that the circumstances36 cited in support thereof are merely
allegations in support of its application for such writ. 37 Such circumstances, however,
are neither the core of Watercraft's complaint for collection of sum of money and
damages, nor one of its three (3) causes of action therein. 38

All told, the CA correctly ruled that Watercraft failed to meet one of the requisites for the
issuance of a writ of preliminary attachment, i.e., that the case is one of those
mentioned in Section 1 of Rule 57, and that the RTC gravely abused its discretion in
improvidently issuing such writ. Watercraft failed to particularly state in its affidavit of
merit the circumstances constituting intent to defraud creditors on the part of Wolfe in

1455
contracting or in the performance of his purported obligation to pay boat storage fees,
as well as to establish that he is a flight risk. Indeed, if all the requisites for granting
such writ are not present, then the court which issues it acts in excess of its
jurisdiction.39

WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals

Decision dated September 27, 2007 and its Resolution dated January 24, 2008 in CA-
G.R. SP No. 97804, are AFFIRMED.

SO ORDERED.

RULE 58. PRELIMINARY INJUNCTION

EN BANC

G.R. Nos. 217126-27, November 10, 2015

CONCHITA CARPIO MORALES, IN HER CAPACITY AS THE

OMBUDSMAN, Petitioner, v. COURT OF APPEALS (SIXTH DIVISION) AND
JEJOMAR ERWIN S. BINAY, JR., Respondents.

DECISION

PERLAS-BERNABE, J.:

"All government is a trust, every branch of government is a trust, and immemorially

acknowledged so to be[.]"1ChanRoblesVirtualawlibrary

The Case

Before the Court is a petition for certiorari and prohibition2 filed on March 25, 2015 by

petitioner Conchita Carpio Morales, in her capacity as the Ombudsman (Ombudsman),
through the Office of the Solicitor General (OSG), assailing: (a) the Resolution 3 dated
March 16, 2015 of public respondent the Court of Appeals (CA) in CA-G.R. SP No.
139453, which granted private respondent Jejomar Erwin S. Binay, Jr.'s (Binay, Jr.)
prayer for the issuance of a temporary restraining order (TRO) against the
implementation of the Joint Order4 dated March 10, 20,15 of the Ombudsman in OMB-
C-A-15-0058 to 0063 (preventive suspension order) preventively suspending him and
several other public officers and employees of the City Government of Makati, for six (6)
months without pay; and (b) the Resolution 5 dated March 20, 2015 of the CA, ordering
the Ombudsman to comment on Binay, Jr.'s petition for contempt 6 in CA-G.R. SP No.
139504.

Pursuant to the Resolution7 dated April 6, 2015, the CA issued a writ of preliminary

injunction8 (WPI) in CA-G.R. SP No. 139453 which further enjoined the implementation

1456
of the preventive suspension order, prompting the Ombudsman to file a supplemental
petition9 on April 13, 2015.

The Facts

On July 22, 2014, a complaint/affidavit10 was filed by Atty. Renato L. Bondal and Nicolas
"Ching" Enciso VI before the Office of the Ombudsman against Binay, Jr. and other
public officers and employees of the City Government of Makati (Binay, Jr., et al),
accusing them of Plunder11 and violation of Republic Act No. (RA) 3019,12 otherwise
known as "The Anti-Graft and Corrupt Practices Act," in connection with the five (5)
phases of the procurement and construction of the Makati City Hall Parking Building
(Makati Parking Building).13

On September 9, 2014, the Ombudsman constituted a Special Panel of

Investigators14 to conduct a fact-finding investigation, submit an investigation report, and
file the necessary complaint, if warranted (1st Special Panel). 15 Pursuant to the
Ombudsman's directive, on March 5, 2015, the 1st Special Panel filed a
complaint16 (OMB Complaint) against Binay, Jr., et al, charging them with six (6)
administrative cases17 for Grave Misconduct, Serious Dishonesty, and Conduct
Prejudicial to the Best Interest of the Service, and six (6) criminal cases 18 for violation of
Section 3 (e) of RA 3019, Malversation of Public Funds, and Falsification of Public
Documents (OMB Cases).19

As to Binay, Jr., the OMB Complaint alleged that he was involved in anomalous
activities attending the following procurement and construction phases of the Makati
Parking Building project, committed during his previous and present terms as City
Mayor of Makati:

Binay, Jr.'s First Term (2010 to 2013)20

(a) On September 21, 2010, Binay, Jr. issued the Notice of Award21 for Phase III of the
Makati Parking Building project to Hilmarc's Construction Corporation (Hilmarc's), and
consequently, executed the corresponding contract 22 on September 28, 2010,23 without
the required publication and the lack of architectural design, 24 and approved the release
of funds therefor in the following amounts as follows: (1) P130,518,394.80
on December 15, 2010;25 (2) P134,470,659.64 on January 19, 2011;26 (3)
P92,775,202.27 on February 25, 2011;27 (4) P57,148,625.51 on March 28, 2011;28 (5)
P40,908,750.61 on May 3, 2011;29 and (6) P106,672,761.90 on July 7, 2011;30

(b) On August 11, 2011, Binay, Jr. issued the Notice of Award31 for Phase IV of the
Makati Parking Building project to Hilmarc's, and consequently, executed the
corresponding contract32 on August 18, 2011,33 without the required publication and the
lack of architectural design,34 and approved the release of funds therefor in the following
amounts as follows: (1) P182,325,538.97 on October 4, 2O11; 35 (2) P173,132,606.91 on
October 28,2011;36 (3) P80,408,735.20 on December 12, 2011;37 (4) P62,878,291.81 on
February 10, 2012;38 and (5) P59,639,167.90 on October 1, 2012; 39

(c) On September 6, 2012, Binay, Jr. issued the Notice of Award 40 for Phase V of the

1457
Makati Parking Building project to Hilmarc's, and consequently, executed the
corresponding contract41 on September 13, 2012,42 without the required publication and
the lack of architectural design,43 and approved the release of the funds therefor in the
amounts of P32,398,220.0544 and P30,582,629.3045 on December 20, 2012;  and

Binay, Jr.'s Second Term (2013 to 2016)46

(d) On July 3, 2013 and July 4, 2013, Binay, Jr. approved the release of funds for the
remaining balance of the September 13, 2012 contract with Hilmarc's for Phase V of the
Makati Parking Building project in the amount of P27,443,629.97; 47 and

(e) On July 24, 2013, Binay, Jr. approved the release of funds for the remaining
balance of the contract48 with MANA Architecture & Interior Design Co. (MANA) for the
design and architectural services covering the Makati Parking Building project in the
amount of P429,011.48.49

On March 6, 2015, the Ombudsman created another Special Panel of Investigators to

conduct a preliminary investigation and administrative adjudication on the OMB Cases
(2nd Special Panel).50 Thereafter, on March 9, 2015, the 2nd Special Panel issued
separate orders51 for each of the OMB Cases, requiring Binay, Jr., et al. to file their
respective counter-affidavits.52

Before Binay, Jr., et al.'s filing of their counter-affidavits, the Ombudsman, upon the
recommendation of the 2nd Special Panel, issued on March 10, 2015, the subject
preventive suspension order, placing Binay, Jr., et al. under preventive suspension for
not more than six (6) months without pay, during the pendency of the OMB
Cases.53 The Ombudsman ruled that the requisites for the preventive suspension of a
public officer are present,54 finding that: (a) the evidence of Binay, Jr., et al.'s guilt was
strong given that (1) the losing bidders and members of the Bids and Awards
Committee of Makati City had attested to the irregularities attending the Makati Parking
Building project; (2) the documents on record negated the publication of bids; and (3)
the disbursement vouchers, checks, and official receipts showed the release of funds;
and (b) (1) Binay, Jr., et al. were administratively charged with Grave Misconduct,
Serious Dishonesty, and Conduct Prejudicial to the Best Interest of the Service; (2) said
charges, if proven to be true, warrant removal from public service under the Revised
Rules on Administrative Cases in the Civil Service (RRACCS), and (3) Binay, Jr., et al.'s
respective positions give them access to public records and allow them to influence
possible witnesses; hence, their continued stay in office may prejudice the investigation
relative to the OMB Cases filed against them.55 Consequently, the Ombudsman directed
the Department of Interior and Local Government (DILG), through Secretary Manuel A.
Roxas II (Secretary Roxas), to immediately implement the preventive suspension order
against Binay, Jr., et al., upon receipt of the same.56

On March 11, 2015, a copy of the preventive suspension order was sent to the Office of
the City Mayor, and received by Maricon Ausan, a member of Binay, Jr.'s staff. 57

1458
 The Proceedings Before the CA

On even date,58 Binay, Jr. filed a petition for certiorari59 before the CA, docketed as CA-
G.R. SP No. 139453, seeking the nullification of the preventive suspension order, and
praying for the issuance of a TRO and/or WPI to enjoin its implementation. 60Primarily,
Binay, Jr. argued that he could not be held administratively liable for any
anomalous activity attending any of the five (5) phases of the Makati Parking Building
project since: (a) Phases I and II were undertaken before he was elected Mayor of
Makati in 2010; and (b) Phases III to V transpired during his first term and that his re-
election as City Mayor of Makati for a second term effectively condoned his
administrative liability therefor, if any, thus rendering the administrative cases against
him moot and academic.61In any event, Binay, Jr. claimed that the Ombudsman's
preventive suspension order failed to show that the evidence of guilt presented
against him is strong, maintaining that he did not participate in any of the purported
irregularities.62 In support of his prayer for injunctive relief, Binay, Jr. argued that he has
a clear and unmistakable right to hold public office, having won by landslide vote in the
2010 and 2013 elections, and that, in view of the condonation doctrine, as well as the
lack of evidence to sustain the charges against him, his suspension from office would
undeservedly deprive the electorate of the services of the person they have
conscientiously chosen and voted into office.63

On March 16, 2015, at around 8:24 a.m., Secretary Roxas caused the implementation
of the preventive suspension order through the DILG National Capital Region - Regional
Director, Renato L. Brion, CESO III (Director Brion), who posted a copy thereof on the
wall of the Makati City Hall after failing to personally serve the same on Binay, Jr. as the
points of entry to the Makati City Hall were closed. At around 9:47 a.m., Assistant City
Prosecutor of Makati Billy C. Evangelista administered the oath of office on Makati City
Vice Mayor Romulo V. Peña, Jr. (Peña, Jr.) who thereupon assumed office as Acting
Mayor.64

At noon of the same day, the CA issued a Resolution 65 (dated March 16, 2015), granting
Binay, Jr.'s prayer for a TRO,66 notwithstanding Pena, Jr.'s assumption of duties as
Acting Mayor earlier that day.67 Citing the case of Governor Garcia, Jr. v. CA,68 the CA
found that it was more prudent on its part to issue a TRO in view of the extreme urgency
of the matter and seriousness of the issues raised, considering that if it were
established that the acts subject of the administrative cases against Binay, Jr. were all
committed during his prior term, then, applying the condonation doctrine, Binay, Jr.'s re-
election meant that he can no longer be administratively charged. 69 The CA then
directed the Ombudsman to comment on Binay, Jr.'s petition for certiorari .70

On March 17, 2015, the Ombudsman manifested 71 that the TRO did not state what act
was being restrained and that since the preventive suspension order had already been
served and implemented, there was no longer any act to restrain. 72

On the same day, Binay, Jr. filed a petition for contempt, 73  docketed as CA-G.R. SP
No. 139504, accusing Secretary Roxas, Director Brion, the officials of the Philippine

1459
National Police, and Pena, Jr. of deliberately refusing to obey the CA, thereby allegedly
impeding, obstructing, or degrading the administration of justice. 74 The Ombudsman and
Department of Justice Secretary Leila M. De Lima were subsequently impleaded as
additional respondents upon Binay, Jr.'s filing of the amended and supplemental petition
for contempt75 (petition for contempt) on March 19, 2015.76 Among others, Binay, Jr.
accused the Ombudsman and other respondents therein for willfully and maliciously
ignoring the TRO issued by the CA against the preventive suspension order. 77

In a Resolution78dated March 20, 2015, the CA ordered the consolidation of CA-G.R.

SP No. 139453 and CA-G.R. SP No. 139504, and, without necessarily giving due
course to Binay, Jr.'s petition for contempt, directed the Ombudsman to file her
comment thereto.79 The cases were set for hearing of oral arguments on March 30 and
31, 2015.80

The Proceedings Before the Court

Prior to the hearing of the oral arguments before the CA, or on March 25, 2015, the
Ombudsman filed the present petition before this Court, assailing the CA's March 16,
2015 Resolution, which granted Binay, Jr.'s prayer for TRO in CA-G.R. SP No. 139453,
and the March 20, 2015 Resolution directing her to file a comment on Binay, Jr.'s
petition for contempt in CA-G.R. SP No. 139504. 81 The Ombudsman claims that: (a) the
CA had no jurisdiction to grant Binay, Jr.'s prayer for a TRO, citing Section 14 of RA
6770,82 or "The Ombudsman Act of 1989," which states that no injunctive writ could be
issued to delay the Ombudsman's investigation unless there is prima facie evidence that
the subject matter thereof is outside the latter's jurisdiction; 83 and (b) the CA's directive
for the Ombudsman to comment on Binay, Jr.'s petition for contempt is illegal and
improper, considering that the Ombudsman is an impeachable officer, and therefore,
cannot be subjected to contempt proceedings. 84

In his comment85 filed on April 6, 2015, Binay, Jr. argues that Section 1, Article VIII of
the 1987 Constitution specifically grants the CA judicial power to review acts of any
branch or instrumentality of government, including the Office of the Ombudsman, in
case of grave abuse of discretion amounting to lack or excess of jurisdiction, which he
asserts was committed in this case when said office issued the preventive suspension
order against him.86 Binay, Jr. posits that it was incumbent upon the Ombudsman to1
have been apprised of the condonation doctrine as this would have weighed heavily in
determining whether there was strong evidence to warrant the issuance of the
preventive suspension order.87 In this relation, Binay, Jr. maintains that the CA correctly
enjoined the implementation of the preventive suspension order given his clear and
unmistakable right to public office, and that it is clear that he could not be held
administratively liable for any of the charges against him since his subsequent re-
election in 2013 operated as a condonation of any administrative offenses he may have
committed during his previous term.88 As regards the CA's order for the Ombudsman to
comment on his petition for contempt, Binay, Jr. submits that while the Ombudsman is
indeed an impeachable officer and, hence, cannot be removed from office except by
way of impeachment, an action for contempt imposes the penalty of fine and
imprisonment, without necessarily resulting in removal from office. Thus, the fact that
1460
the Ombudsman is an impeachable officer should not deprive the CA of its inherent
power to punish contempt.89

Meanwhile, the CA issued a Resolution90 dated April 6, 2015, after the oral arguments
before it were held,91 granting Binay, Jr.'s prayer for a WPI, which further enjoined the
implementation of the preventive suspension order. In so ruling, the CA found that
Binay, Jr. has an ostensible right to the final relief prayed for, namely, the nullification of
the preventive suspension order, in view of the condonation doctrine, citing Aguinaldo
v. Santos.92 Particularly, it found that the Ombudsman can hardly impose preventive
suspension against Binay, Jr. given that his re-election in 2013 as City Mayor of Makati
condoned any administrative liability arising from anomalous activities relative to the
Makati Parking Building project from 2007 to 2013. 93 In this regard, the CA added that,
although there were acts which were apparently committed by Binay, Jr. beyond his first
term — namely, the alleged payments on July 3, July 4, and July 24,
2013,94 corresponding to the services of Hillmarc's and MANA - still, Binay, Jr. cannot
be held administratively liable therefor based on the cases of Salalima v. Guingona,
Jr.,95 and Mayor Garcia v. Mojica96 wherein the condonation doctrine was still applied
by the Court although the payments were made after the official's re-election, reasoning
that the payments were merely effected pursuant to contracts executed before said re-
election.97 To this, the CA added that there was no concrete evidence of Binay, Jr.'s
participation for the alleged payments made on July 3, 4, and 24, 2013. 98

In view of the CA's supervening issuance of a WPI pursuant to its April 6, 2015
Resolution, the Ombudsman filed a supplemental petition 99 before this Court, arguing
that the condonation doctrine is irrelevant to the determination of whether the evidence
of guilt is strong for purposes of issuing preventive suspension orders. The Ombudsman
also maintained that a reliance on the condonation doctrine is a matter of defense,
which should have been raised by Binay, Jr. before it during the administrative
proceedings, and that, at any rate, there is no condonation because Binay, Jr.
committed acts subject of the OMB Complaint after his re-election in 2013. 100

On April 14 and 21, 2015,101 the Court conducted hearings for the oral arguments of the
parties. Thereafter, they were required to file their respective memoranda. 102 In
compliance thereto, the Ombudsman filed her Memorandum 103 on May 20, 2015, while
Binay, Jr. submitted his Memorandum the following day. 104

Pursuant to a Resolution105 dated June 16, 2015, the Court directed the parties to
comment on each other's memoranda, and the OSG to comment on the Ombudsman's
Memorandum, all within ten (10) days from receipt of the notice.

On July 15, 2015, both parties filed their respective comments to each other's
memoranda.106 Meanwhile, on July 16, 2015, the OSG filed its Manifestation In Lieu of
Comment,107 simply stating that it was mutually agreed upon that the Office of the
Ombudsman would file its Memorandum, consistent with its desire to state its
"institutional position."108 In her Memorandum and Comment to Binay, Jr.'s
Memorandum, the Ombudsman pleaded, among others, that this Court abandon the

1461
condonation doctrine.109 In view of the foregoing, the case was deemed submitted for
resolution.chanrobleslaw

The Issues Before the Court

Based on the parties' respective pleadings, and as raised during the oral arguments
conducted before this Court, the main issues to be resolved in seriatim are as follows:

I. Whether or not the present petition, and not motions for reconsideration of
the assailed CA issuances in CA-G.R. SP No. 139453 and CA-G.R. SP
No. 139504, is the Ombudsman's plain, speedy, and adequate
remedy;cralawlawlibrary

II. Whether or not the CA has subject matter jurisdiction over the main
petition for certiorari in CA-G.R. SP No. 139453;cralawlawlibrary
III. Whether or not the CA has subject matter jurisdiction to issue a TRO
and/or WPI enjoining the implementation of a preventive suspension order
issued by the Ombudsman;cralawlawlibrary
IV. Whether or not the CA gravely abused its discretion in issuing the TRO
and eventually, the WPI in CA-G.R. SP No. 139453 enjoining the
implementation of the preventive suspension order against Binay, Jr.
based on the condonation doctrine; and
V. Whether or not the CA's directive for the Ombudsman to ' comment on
Binay, Jr.'s petition for contempt in CA- G.R. SP No. 139504 is improper
and illegal.

The Ruling of the Court

The petition is partly meritorious.chanrobleslaw

I.

A common requirement to both a petition for certiorari and a petition for prohibition

taken under Rule 65 of the 1997 Rules of Civil Procedure is that the petitioner has no
other plain, speedy, and adequate remedy in the ordinary course of law. Sections 1 and
2 thereof provide:

Section 1. Petition for certiorari. - When any tribunal, board or officer exercising judicial
or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no
appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law,
a person aggrieved thereby may file a verified petition in the proper court, alleging the
facts with certainty and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting such incidental reliefs as law
and justice may require.

1462
xxxx

Section 2. Petition for prohibition. - When the proceedings of any tribunal, corporation,
board, officer or person, whether exercising judicial, quasi-judicial or ministerial
functions, are without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any
other plain, speedy, and adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the proper court, alleging the facts r with
certainty and praying that judgment be rendered commanding the respondent to desist
from further proceedings in the action or matter specified therein, or otherwise granting
such incidental reliefs as law and justice may require.

x x x x (Emphases supplied)

Hence, as a general rule, a motion for reconsideration must first be filed with the lower
court prior to resorting to the extraordinary remedy of certiorari or prohibition since a
motion for reconsideration may still be considered as a plain, speedy, and adequate
remedy in the ordinary course of law. The rationale for the pre-requisite is to grant an
opportunity for the lower court or agency to correct any actual or perceived error
attributed to it by the re-examination of the legal and factual circumstances of the
case.110

Jurisprudence states that "[i]t is [the] inadequacy, [and] not the mere absence of all
other legal remedies and the danger of failure of justice without the writ, that must
usually determine the propriety of certiorari [or prohibition]. A remedy is plain, speedy[,]
and adequate if it will promptly relieve the petitioner from the injurious effects of the
judgment, order, or resolution of the lower court or agency, x x x." 111

In this light, certain exceptions were crafted to the general rule requiring a prior motion
for reconsideration before the filing of a petition for certiorari, which exceptions also
apply to a petition for prohibition.112 These are: (a) where the order is a patent nullity, as
where the court a quo has no jurisdiction; (b) where the questions raised in
the certiorari proceedings have been duly raised and passed upon by the lower court, or
are the same as those raised and passed upon in the lower court; (c) where there is an
urgent necessity for the resolution of the question and any further delay would prejudice
the interests of the Government or of the petitioner or the subject matter of the action is
perishable; (d) where, under the circumstances, a motion for reconsideration would be
useless; (e) where petitioner was deprived of due process and there is extreme urgency
for relief; (f) where, in a criminal case, relief from an order of arrest is urgent and the
granting of such relief by the trial court is improbable; (g) where the proceedings in the
lower court are a nullity for lack of due process; (h) where the proceedings were ex
parte or in which the petitioner had no opportunity to object; and (i) where the issue
raised is one purely of law or where public interest is involved.113

In this case, it is ineluctably clear that the above-highlighted exceptions attend since, for
the first time, the question on the authority of the CA - and of this Court, for that matter -

1463
to enjoin the implementation of a preventive suspension order issued by the Office of
the Ombudsman is put to the fore. This case tests the constitutional and statutory limits
of the fundamental powers of key government institutions - namely, the Office of the
Ombudsman, the Legislature, and the Judiciary - and hence, involves an issue of
transcendental public importance that demands no less than a careful but expeditious
resolution. Also raised is the equally important issue on the propriety of the continuous
application of the condonation doctrine as invoked by a public officer who desires
exculpation from administrative liability. As such, the Ombudsman's direct resort
to certiorari and prohibition before this Court, notwithstanding her failure to move for the
prior reconsideration of the assailed issuances in CA-G.R. SP No. 139453 and CA-G.R.
SP No. 139504 before the CA, is justified.chanrobleslaw

II.

Albeit raised for the first time by the Ombudsman in her Memorandum, 114 it is
nonetheless proper to resolve the issue on the CA's lack of subject matter jurisdiction
over the main petition for certiorari in CA-G.R. SP No. 139453, in view of the well-
established rule that a court's jurisdiction over the subject matter may be raised at any
stage of the proceedings. The rationale is that subject matter jurisdiction is conferred by
law, and the lack of it affects the very authority of the court to take cognizance of and to
render judgment on the action.115 Hence, it should be preliminarily determined if the CA
indeed had subject matter jurisdiction over the main CA-G.R. SP No. 139453 petition,
as the same determines the validity of all subsequent proceedings relative thereto. It is
noteworthy to point out that Binay, Jr. was given the opportunity by this Court to be
heard on this issue,116 as he, in fact, duly submitted his opposition through his comment
to the Ombudsman's Memorandum.117 That being said, the Court perceives no
reasonable objection against ruling on this issue.

The Ombudsman's argument against the CA's lack of subject matter jurisdiction over
the main petition, and her corollary prayer for its dismissal, is based on her
interpretation of Section 14, RA 6770, or the Ombudsman Act, 118 which reads in full:

Section 14. Restrictions. - No writ of injunction shall be issued by any court to delay an
investigation being conducted by the Ombudsman under this Act, unless there is
a prima facie evidence that the subject matter of the investigation is outside the
jurisdiction of the Office of the Ombudsman.

No court shall hear any appeal or application for remedy against the decision or findings
of the Ombudsman, except the Supreme Court, on pure question of law.

The subject provision may be dissected into two (2) parts.

The first paragraph of Section 14, RA 6770 is a prohibition against any court (except
the Supreme Court119) from issuing a writ of injunction to delay an investigation being
conducted by the Office of the Ombudsman. Generally speaking, "[injunction is a judicial
writ, process or proceeding whereby a party is ordered to do or refrain from doing a

1464
certain act. It may be the main action or merely a provisional remedy for and as an
incident in the main action."120 Considering the textual qualifier "to delay," which
connotes a suspension of an action while the main case remains pending, the "writ of
injunction" mentioned in this paragraph could only refer to injunctions of the provisional
kind, consistent with the nature of a provisional injunctive relief.

The exception to the no injunction policy is when there is prima facie evidence that the
subject matter of the investigation is outside the office's jurisdiction. The Office of the
Ombudsman has disciplinary authority over all elective and appointive officials of the
government and its subdivisions, instrumentalities, and agencies, with the exception
only of impeachable officers, Members of Congress, and the Judiciary. 121 Nonetheless,
the Ombudsman retains the power to investigate any serious misconduct in office
allegedly committed by officials removable by impeachment, for the purpose of filing a
verified complaint for impeachment, if warranted. 122 Note that the Ombudsman has
concurrent jurisdiction over certain administrative cases which are within the jurisdiction
of the regular courts or administrative agencies, but has primary jurisdiction to
investigate any act or omission of a public officer or employee who is under the
jurisdiction of the Sandiganbayan. 123

On the other hand, the second paragraph of Section 14, RA 6770 provides that no

appeal or application for remedy may be heard against the decision or findings of the
Ombudsman, with the exception of the Supreme Court on pure questions of law. This
paragraph, which the Ombudsman particularly relies on in arguing that the CA had no
jurisdiction over the main CA-G.R. SP No. 139453 petition, as it is supposedly this Court
which has the sole jurisdiction to conduct a judicial review of its decisions or findings, is
vague for two (2) reasons: (1) it is unclear what the phrase "application for remedy" or
the word "findings" refers to; and (2) it does not specify what procedural remedy is
solely allowable to this Court, save that the same be taken only against a pure question
of law. The task then, is to apply the relevant principles of statutory construction to
resolve the ambiguity.

"The underlying principle of all construction is that the intent of the legislature should be
sought in the words employed to express it, and that when found[,] it should be made to
govern, x x x. If the words of the law seem to be of doubtful import, it may then perhaps
become necessary to look beyond them in order to ascertain what was in the legislative
mind at the time the law was enacted; what the circumstances were, under which the
action was taken; what evil, if any, was meant to be redressed; x x x [a]nd where the
law has contemporaneously been put into operation, and in doing so a construction has
necessarily been put upon it, this construction, especially if followed for some
considerable period, is entitled to great respect, as being very probably a true
expression of the legislative purpose, and is not lightly to be overruled, although it is not
conclusive."124

As an aid to construction, courts may avail themselves of the actual proceedings of the
legislative body in interpreting a statute of doubtful meaning. In case of doubt as to what
a provision of a statute means, the meaning put to the provision during the legislative

1465
deliberations may be adopted,125 albeit not controlling in the interpretation of the law. 126

A. The Senate deliberations cited by the

Ombudsman do not pertain to the second
paragraph of Section 14, RA 6770.

The Ombudsman submits that the legislative intent behind Section 14, RA 6770,
particularly on the matter of judicial review of her office's decisions or findings, is
supposedly clear from the following Senate deliberations: 127

Senator [Edgardo J.] Angara, x x x. On page 15, Mr. President, line 14, after the
phrase "petition for" delete the word "review" and in lieu thereof, insert the
word CERTIORARI. So that, review or appeal from the decision of the Ombudsman
would only be taken not on a petition for review, but on certiorari.

The President [Jovito R. Salonga]. What is the practical effect of that? Will it be

more difficult to reverse the decision under review?

Senator Angara. It has two practical effect ways, Mr. President. First is that the
findings of facts of the Ombudsman would be almost conclusive if supported by
substantial evidence. Second, we would not unnecessarily clog the docket of the
Supreme Court. So, it in effect will be a very strict appeal procedure.

xxxx

Senator [Teofisto T.] Guingona, [Jr.]. Does this mean that, for example, if there are
exhaustive remedies available to a respondent, the respondent himself has the right to
exhaust the administrative remedies available to him?

Senator Angara. Yes, Mr. President, that is correct.

Senator Guingona. And he himself may cut the proceeding short by appealing to the
Supreme Court only on  certiorari  ?

Senator Angara. On question of law, yes.

Senator Guingona. And no other remedy is available to him?

Senator Angara. Going to the Supreme Court, Mr. President?

Senator Guingona. Yes. What I mean to say is, at what stage, for example, if he is a
presidential appointee who is the respondent, if there is f no certiorari available, is the
respondent given the right to exhaust his administrative remedies first before the
Ombudsman can take the appropriate action?

Senator Angara. Yes, Mr. President, because we do not intend to change the
administrative law principle that before one can go to court, he must exhaust all
1466
administrative remedies xxx available to him before he goes and seeks judicial review.

xxxx

Senator [Neptali A.] Gonzales. What is the purpose of the Committee in changing

the method of appeal from one of a petition for review to a petition for certiorari ?

Senator Angara. To make it consistent, Mr. President, with the provision here in
the bill to the effect that the finding of facts of the Ombudsman is conclusive if
supported by substantial evidence.

Senator Gonzales. A statement has been made by the Honorable Presiding Officer to
which I concur, that in an appeal by certiorari , the appeal is more difficult.
Because in certiorari it is a matter of discretion on the part of the court, whether
to give due course to the petition or dismiss it outright. Is that not correct, Mr.
President?

Senator Angara. That is absolutely correct, Mr. President

Senator Gonzales. And in a petition for certiorari , the issue is limited to whether

or not the Ombudsman here has acted without jurisdiction and has committed a
grave abuse of discretion amounting to lack of jurisdiction. Is that not the
consequence, Mr. President.

Senator Angara. That is correct, Mr. President.

Senator Gonzales. And it is, therefore, in this sense that the intention of the
Committee is to make it harder to have a judicial review, but should be limited only
to cases that I have enumerated.

Senator Angara. Yes, Mr. President.

Senator Gonzales. I think, Mr. President, our Supreme Court has made a distinction
between a petition for review and a petition for certiorari ; because before, under the
1935 Constitution appeal from any order, ruling or decision of the COMELEC shall be
by means of review. But under the Constitution it is now by certiorari and the Supreme
Court said that by this change, the court exercising judicial review will not inquire into
the facts, into the evidence, because we will not go deeply by way of review into the
evidence on record but its authority will be limited to a determination of whether the
administrative agency acted without, or in excess of, jurisdiction, or committed a grave
abuse of discretion. So, I assume that that is the purpose of this amendment, Mr.
President.

Senator Angara. The distinguished Gentleman has stated it so well.

Senator Gonzales. I just want to put that in the Record. Senator Angara. It is very well

1467
stated, Mr. President.

xxxx

The President. It is evident that there must be some final authority to render
decisions. Should it be the Ombudsman or should it be the Supreme Court?

Senator Angara. As I understand it, under our scheme of government, Mr. President, it
is and has to be the Supreme Court to make the final determination.

The President. Then if that is so, we have to modify Section 17.

Senator Angara. That is why, Mr. President, some of our Colleagues have made a
reservation to introduce an appropriate change during the period of Individual
Amendments.

xxxx

The President. All right. Is there any objection to the amendment inserting the
word CERTIORARI instead of "review"? [Silence] Hearing none, the same is
approved.128

Upon an assiduous scrutiny of these deliberations, the Court is, however, unconvinced
that the provision debated on was Section 14, RA 6770, as the Ombudsman invokes.
Note that the exchange begins with the suggestion of Senator Angara to delete the
word "review" that comes after the phrase "petition for review" and, in its stead, insert
the word "certiorari" so that the "review or appeal from the decision of the Ombudsman
would not only be taken on a petition for review, but on certiorari" The ensuing
exchange between Senators Gonzales and Angara then dwells on the purpose of
changing the method of review from one of a petition for review to a petition
for certiorari - that is, to make "the appeal x x x more difficult." Ultimately, the
amendment to the change in wording, from "petition for review" to "petition for certiorari"
was approved.

Noticeably, these references to a "petition for review" and the proposed "petition
for certiorari" are nowhere to be found in the text of Section 14, RA 6770. In fact, it was
earlier mentioned that this provision, particularly its second paragraph, does not indicate
what specific procedural remedy one should take in assailing a decision or finding of the
Ombudsman; it only reveals that the remedy be taken to this Court based on pure
questions of law. More so, it was even commented upon during the oral arguments of
this case129 that there was no debate or clarification made on the current formulation of
the second paragraph of Section 14, RA 6770 per the available excerpts of the Senate
deliberations. In any case, at least for the above-cited deliberations, the Court finds no
adequate support to sustain the Ombudsman's entreaty that the CA had no subject
matter jurisdiction over the main CA-G.R. SP No. 139453 petition.

1468
On the contrary, it actually makes greater sense to posit that these deliberations refer to
another Ombudsman Act provision, namely Section 27, RA 6770. This is because the
latter textually reflects the approval of Senator Angara's suggested amendment, i.e.,
that the Ombudsman's decision or finding may be assailed in a petition for certiorari to
this Court (fourth paragraph), and further, his comment on the conclusive nature of the
factual findings of the Ombudsman, if supported by substantial evidence (third
paragraph):

Section 27. Effectivity and Finality of Decisions.— (1) All provisionary orders of the

Office of the Ombudsman are immediately effective and executory.

A motion for reconsideration of any order, directive or decision of the Office of the
Ombudsman must be filed within five (5) days after receipt of written notice and shall be
entertained only on any of the following grounds:chanRoblesvirtualLawlibrary
(1) New evidence has been discovered which materially affects the order, directive or
decision;cralawlawlibrary

(2) Errors of law or irregularities have been committed prejudicial to the interest of the
movant. The motion for reconsideration shall be resolved within three (3) days from
filing: Provided, That only one motion for reconsideration shall be
entertained.ChanRoblesVirtualawlibrary
Findings of fact by the Office of the Ombudsman when supported by substantial
evidence are conclusive. Any order, directive or decision imposing the penalty of public
censure or reprimand, suspension of not more than one (1) month's salary shall be final
and unappealable.

In all administrative disciplinary cases, orders, directives, or decisions of the

Office of the Ombudsman may be appealed to the Supreme Court by filing
a petition for certiorari within ten (10) days from receipt of the written notice of
the order, directive or decision or denial of the motion for reconsideration in
accordance with Rule 45 of the Rules of Court.

The above rules may be amended or modified by the Office of the ' Ombudsman as the
interest of justice may require. (Emphasis and underscoring supplied)

At first blush, it appears that Section 27, RA 6770 is equally ambiguous in stating that a
"petition for certiorari" should be taken in accordance with Rule 45 of the Rules of Court,
as it is well-known that under the present 1997 Rules of Civil Procedure, petitions
for certiorari are governed by Rule 65 of the said Rules. However, it should be
discerned that the Ombudsman Act was passed way back in 1989 130 and, hence, before
the advent of the 1997 Rules of Civil Procedure. 131 At that time, the governing 1964
Rules of Court,132 consistent with Section 27, RA 6770, referred to the appeal taken
thereunder as a petition for certiorari , thus possibly explaining the remedy's textual
denomination, at least in the provision's final approved version:

1469
 RULE 45
Appeal from Court of Appeals to Supreme Court

SECTION 1. Filing of Petition with Supreme Court. - A party may appeal by certiorari ,
from a judgment of the Court of Appeals, by filing with the Supreme Court a petition
for certiorari , within fifteen (15) days from notice of judgment or of the denial of his
motion for reconsideration filed in due time, and paying at the same time, to the clerk of
said court the corresponding docketing fee. The petition shall not be acted upon without
proof of service of a copy thereof to the Court of Appeals. (Emphasis supplied)

B. Construing the second paragraph of

Section 14, RA 6770.

The Senate deliberations' lack of discussion on the second paragraph of Section 14, RA
6770 notwithstanding, the other principles of statutory construction can apply to
ascertain the meaning of the provision.

To recount, the second paragraph of Section 14, RA 6770 states that "[n]o court shall
hear any appeal or application for remedy against the decision or findings of the
Ombudsman, except the Supreme Court, on pure question of law."   
;cralawlawlibrary

As a general rule, the second paragraph of Section 14, RA 6770 bans the whole
range of remedies against issuances of the Ombudsman, by prohibiting: (a) an
appeal against any decision or finding of the Ombudsman, and (b) "any application of
remedy" (subject to the exception below) against the same. To clarify, the phrase
"application for remedy," being a generally worded provision, and being separated from
the term "appeal" by the disjunctive "or",133 refers to any remedy (whether taken mainly
or provisionally), except an appeal, following the maxim generalia verba sunt generaliter
intelligenda: general words are to be understood in a general sense. 134 By the same
principle, the word "findings," which is also separated from the word "decision" by the
disjunctive "or", would therefore refer to any finding made by the Ombudsman (whether
final or provisional), except a decision.

The subject provision, however, crafts an exception to the foregoing general rule. While
the specific procedural vehicle is not explicit from its text, it is fairly deducible that the
second paragraph of Section 14, RA 6770 excepts, as the only allowable remedy
against "the decision or findings of the Ombudsman," a Rule 45 appeal, for the reason
that it is the only remedy taken to the Supreme Court on "pure questions of law,"
whether under the 1964 Rules of Court or the 1997 Rules of Civil Procedure:

Rule 45, 1964 Rules of Court

RULE 45
Appeal from Court of Appeals to Supreme Court

1470
xxxx

Section 2. Contents of Petition. — The petition shall contain a concise statement of the
matters involved, the assignment of errors made in the court below, and the reasons
relied on for the allowance of the petition, and it should be accompanied with a true
copy of the judgment sought to be reviewed, together with twelve (12) copies of the
record on appeal, if any, and of the petitioner's brief as filed in the Court of Appeals. A
verified statement of the date when notice of judgment and denial of the motion for
reconsideration, if any, were received shall accompany the petition.

Only questions of law may be raised in the petition and must be distinctly set forth.
If no record on appeal has been filed in the Court of Appeals, the clerk of the Supreme
Court, upon admission of the petition, shall demand from the Court of Appeals the
elevation of the whole record of the case. (Emphasis and underscoring supplied)

Rule 45, 1997 Rules of Civil Procedure

RULE 45
Appeal by Certiorari to the Supreme Court

Section 1. Filing of petition with Supreme Court. - A party desiring to appeal

by certiorari from a judgment, final order or resolution of the Court of Appeals, the
Sandiganbayan, the Court of Tax Appeals, the Regional Trial Court or other courts,
whenever authorized by law, may file with the Supreme Court a verified petition for
review on certiorari. The petition may include an application for a writ of preliminary
injunction or other provisional remedies and shall raise only questions of law, which
must be distinctly set forth. The petitioner may seek the same provisional remedies
by verified motion filed in the same action or proceeding at any time during its
pendency. (Emphasis and underscoring supplied)

That the remedy excepted in the second paragraph of Section 14, RA 6770 could be a
petition for certiorari under Rule 65 of the 1964 Rules of Court or the 1997 Rules of
Procedure is a suggestion that defies traditional norms of procedure. It is basic
procedural law that a Rule 65 petition is based on errors of jurisdiction, and not errors of
judgment to which the classifications of (a) questions of fact, (b) questions of law, or (c)
questions of mixed fact and law, relate to. In fact, there is no procedural rule, whether in
the old or new Rules, which grounds a Rule 65 petition on pure questions of law.
Indeed, it is also a statutory construction principle that the lawmaking body cannot be
said to have intended the establishment of conflicting and hostile systems on the same
subject. Such a result would render legislation a useless and idle ceremony, and subject
the laws to uncertainty and unintelligibility. 135 There should then be no confusion that the
second paragraph of Section 14, RA 6770 refers to a Rule 45 appeal to this Court, and
no other. In sum, the appropriate construction of this Ombudsman Act provision is that
all remedies against issuances of the Office of the Ombudsman are prohibited, except

1471
the above-stated Rule 45 remedy to the Court on pure questions of law.

C. Validity of the second paragraph of

Section 14, RA 6770.

Of course, the second paragraph of Section 14, RA 6770's extremely limited restriction
on remedies is inappropriate since a Rule 45 appeal -which is within the sphere of the
rules of procedure promulgated by this Court - can only be taken against final decisions
or orders of lower courts,136 and not against "findings" of quasi-judicial agencies. As will
be later elaborated upon, Congress cannot interfere with matters of procedure; hence, it
cannot alter the scope of a Rule 45 appeal so as to apply to interlocutory "findings"
issued by the Ombudsman. More significantly, by confining the remedy to a Rule 45
appeal, the provision takes away the remedy of certiorari, grounded on errors of
jurisdiction, in denigration of the judicial power constitutionally vested in courts. In this
light, the second paragraph of Section 14, RA 6770 also increased this Court's appellate
jurisdiction, without a showing, however, that it gave its consent to the same. The
provision is, in fact, very similar to the fourth paragraph of Section 27, RA 6770 (as
above-cited), which was invalidated in the case of Fabian v. Desiertoni137 (Fabian).138

In Fabian, the Court struck down the fourth paragraph of Section 27, RA 6770 as
unconstitutional since it had the effect of increasing the appellate jurisdiction of the
Court without its advice and concurrence in violation of Section 30, Article VI of the
1987 Constitution.139 Moreover, this provision was found to be inconsistent with Section
1, Rule 45 of the present 1997 Rules of Procedure which, as above-intimated, applies
only to a review of "judgments or final orders of the Court of Appeals, the
Sandiganbayan, the Court of Tax Appeals, the Regional Trial Court, or other courts
authorized by law;" and not of quasi-judicial agencies, such as the Office of the
Ombudsman, the remedy now being a Rule 43 appeal to the Court of Appeals.
In Ruivivar v. Office of the Ombudsman,140 the Court's ratiocinations and ruling
in Fabian were recounted:

The case of Fabian v. Desierto arose from the doubt created in the application of
Section 27 of R.A. No. 6770 (The Ombudsman's Act) and Section 7, Rule III of A.O. No.
7 (Rules of Procedure of the Office of the Ombudsman) on the availability of appeal
before the Supreme Court to assail a decision or order of the Ombudsman in
administrative cases. In Fabian, we invalidated Section 27 of R.A. No. 6770 (and
Section 7, Rule III of A.O. No. 7 and the other rules implementing the Act) insofar
as it provided for appeal by certiorari under Rule 45 from the decisions or orders
of the Ombudsman in administrative cases. We held that Section 27 of R.A. No.
6770 had the effect, not only of increasing the appellate jurisdiction of this Court
without its advice and concurrence in violation of Section 30, Article VI of the
Constitution; it was also inconsistent with Section 1, Rule 45 of the Rules of
Court which provides that a petition for review on certiorari shall apply only to a
review of "judgments or final orders of the Court of Appeals, the Sandiganbayan,
the Court of Tax Appeals, the Regional Trial Court, or other courts authorized by
law." We pointedly said:chanRoblesvirtualLawlibrary

1472
As a consequence of our ratiocination that Section 27 of Republic Act No. 6770 should
be struck down as unconstitutional, and in line with the regulatory philosophy adopted in
appeals from quasi-judicial agencies in the 1997 Revised Rules of Civil Procedure,
appeals from decisions of the Office of the Ombudsman in administrative disciplinary
cases should be taken to the CA under the provisions of Rule 43. 141 (Emphasis
supplied)

Since the second paragraph of Section 14, RA 6770 limits the remedy against "decision
or findings" of the Ombudsman to a Rule 45 appeal and thus - similar to the fourth
paragraph of Section 27, RA 6770142 - attempts to effectively increase the Supreme
Court's appellate jurisdiction without its advice and concurrence, 143 it is therefore
concluded that the former provision is also unconstitutional and perforce, invalid.
Contrary to the Ombudsman's posturing,144Fabian should squarely apply since the
above-stated Ombudsman Act provisions are in part materia in that they "cover the
same specific or particular subject matter,"145 that is, the manner of judicial review over
issuances of the Ombudsman.

Note that since the second paragraph of Section 14, RA 6770 is clearly determinative of
the existence of the CA's subject matter jurisdiction over the main CA-G.R. SP No.
139453 petition, including all subsequent proceedings relative thereto, as the
Ombudsman herself has developed, the Court deems it proper to resolve this issue ex
mero motu (on its own motion146). This procedure, as was similarly adopted
in Fabian, finds its bearings in settled case law:

The conventional rule, however, is that a challenge on constitutional grounds must be

raised by a party to the case, neither of whom did so in this case, but that is not an
inflexible rule, as we shall explain.

Since the constitution is intended for the observance of the judiciary and other
departments of the government and the judges are sworn to support its provisions, the
courts are not at liberty to overlook or disregard its commands or countenance evasions
thereof. When it is clear , that a statute transgresses the authority vested in a legislative
body, it is the duty of the courts to declare that the constitution, and not the statute,
governs in a case before them for judgment.

Thus, while courts will not ordinarily pass upon constitutional questions which are not
raised in the pleadings, the rule has been recognized to admit of certain exceptions. It
does not preclude a court from inquiring into its own jurisdiction or compel it to enter a
judgment that it lacks jurisdiction to enter. If a statute on which a court's jurisdiction in a
proceeding depends is unconstitutional, the court has no jurisdiction in the proceeding,
and since it may determine whether or not it has jurisdiction, it necessarily follows that it
may inquire into the constitutionality of the statute.

Constitutional questions, not raised in the regular and orderly procedure in the
trial are ordinarily rejected unless the jurisdiction of the court below or that of the
appellate court is involved in which case it may be raised at any time or on the

1473
court's own motion. The Court ex mero motu may take cognizance of lack of
jurisdiction at any point in the case where that fact is developed. The court has a clearly
recognized right to determine its own jurisdiction in any proceeding. 147 (Emphasis
supplied)

D. Consequence of invalidity.

In this case, the Rule 65 petition for certiorari in CA-G.R. SP No. 139453 was filed by
Binay, Jr. before the CA in order to nullify the preventive suspension order issued by the
Ombudsman, an interlocutory order,148 hence, unappealable.149

In several cases decided after Fabian, the Court has ruled that Rule 65 petitions
for certiorari against unappelable issuances150 of the Ombudsman should be filed before
the CA, and not directly before this Court:

In Office of the Ombudsman v. Capulong151 (March 12, 2014), wherein a preventive

suspension order issued by the Office of the Ombudsman was - similar to this case -
assailed through a Rule 65 petition for certiorari filed by the public officer before the CA,
the Court held that "[t]here being a finding of grave abuse of discretion on the part of the
Ombudsman, it was certainly imperative for the CA to grant incidental reliefs, as
sanctioned by Section 1 of Rule 65."152

In Dagan v. Office of the Ombudsman153 (November 19, 2013), involving a Rule 65

petition for certiorari assailing a final and unappealable order of the Office of the
Ombudsman in an administrative case, the Court remarked that "petitioner employed
the correct mode of review in this case, i.e., a special civil action for certiorari before the
Court of Appeals."154 In this relation, it stated that while "a special civil action
for Certiorari is within the concurrent original jurisdiction of the Supreme Court and the
Court of Appeals, such petition should be initially filed with the Court of Appeals in
observance of the doctrine of hierarchy of courts." Further, the Court upheld Barata v.
Abalos, Jr.155 (June 6, 2001), wherein it was ruled that the remedy against final and
unappealable orders of the Office of the Ombudsman in an administrative case was a
Rule 65 petition to the CA. The same verdict was reached in Ruivivar156 (September 16,
2008).

Thus, with the unconstitutionality of the second paragraph of Section 14, RA 6770, the
Court, consistent with existing jurisprudence, concludes that the CA has subject matter
jurisdiction over the main CA-G.R. SP No. 139453 petition. That being said, the Court
now examines the objections of the Ombudsman, this time against the CA's authority to
issue the assailed TRO and WPI against the implementation of the preventive
suspension order, incidental to that main case.

III.

From the inception of these proceedings, the Ombudsman has been adamant that the
CA has no jurisdiction to issue any provisional injunctive writ against her office to enjoin

1474
its preventive suspension orders. As basis, she invokes the first paragraph of Section
14, RA 6770 in conjunction with her office's independence under the 1987 Constitution.
She advances the idea that "[i]n order to further ensure [her office's] independence, [RA
6770] likewise insulated it from judicial intervention," 157 particularly, "from injunctive
reliefs traditionally obtainable from the courts," 158 claiming that said writs may work "just
as effectively as direct harassment or political pressure would." 159

A. The concept of Ombudsman independence.

Section 5, Article XI of the 1987 Constitution guarantees the independence of the Office
of the Ombudsman:

Section 5. There is hereby created the independent Office of the Ombudsman,

composed of the Ombudsman to be known as Tanodbayan, one overall Deputy and at
least one Deputy each for Luzon, Visayas[,] and Mindanao. A separate Deputy for the
military establishment may likewise be appointed. (Emphasis supplied)

In Gonzales III v. Office of the President160 (Gonzales III), the Court traced the historical
underpinnings of the Office of the Ombudsman:

Prior to the 1973 Constitution, past presidents established several Ombudsman-like

agencies to serve as the people's medium for airing grievances and for direct redress
against abuses and misconduct in the government. Ultimately, however, these agencies
failed to fully realize their objective for lack of the political independence necessary for
the effective performance of their function as government critic.

It was under the 1973 Constitution that the Office of the Ombudsman became a
constitutionally-mandated office to give it political independence and adequate powers
to enforce its mandate. Pursuant to the ( 1973 Constitution, President Ferdinand
Marcos enacted Presidential Decree (PD) No. 1487, as amended by PD No. 1607 and
PD No. 1630, creating the Office of the Ombudsman to be known as Tanodbayan. It
was tasked principally to investigate, on complaint or motu proprio, any administrative
act of any administrative agency, including any government-owned or controlled
corporation. When the Office of the Tanodbayan was reorganized in 1979, the powers
previously vested in the Special Prosecutor were transferred to the Tanodbayan
himself. He was given the exclusive authority to conduct preliminary investigation of all
cases cognizable by the Sandiganbayan, file the corresponding information, and control
the prosecution of these cases.

With the advent of the 1987 Constitution, a new Office of the Ombudsman was created
by constitutional fiat. Unlike in the 1973 Constitution, its independence was
expressly and constitutionally guaranteed. Its objectives are to enforce the state
policy in Section 27, Article II and the standard of accountability in public service under
Section 1, Article XI of the 1987 Constitution. These provisions
read:chanRoblesvirtualLawlibrary

1475
Section 27. The State shall maintain honesty and integrity in the public service and take
positive and effective measures against graft and corruption.

Section 1. Public office is a public trust. Public officers and employees must, at all times,
be accountable to the people, serve them with utmost responsibility, integrity, loyalty,
and efficiency; act with patriotism and justice, and lead modest lives. 161 (Emphasis
supplied)

More significantly, Gonzales III explained the broad scope of the office's mandate, and
in correlation, the impetus behind its independence:

Under Section 12, Article XI of the 1987 Constitution, the Office of the Ombudsman is
envisioned to be the "protector of the people" against the inept, abusive, and corrupt in
the Government, to function essentially as a complaints and action bureau. This
constitutional vision of a Philippine Ombudsman practically intends to make the
Ombudsman an authority to directly check and guard against the ills, abuses and
excesses , of the bureaucracy. Pursuant to Section 13 (8), Article XI of the 1987
Constitution, Congress enacted RA No. 6770 to enable it to further realize the vision of
the Constitution. Section 21 of RA No. 6770 provides:chanRoblesvirtualLawlibrary
Section 21. Official Subject to Disciplinary Authority; Exceptions. - The Office of the
Ombudsman shall have disciplinary authority over all elective and appointive officials of
the Government and its subdivisions, instrumentalities, and agencies, including
Members of the Cabinet, local government, government-owned or controlled
corporations and their subsidiaries, except over officials who may be removed only by
impeachment or over Members of Congress, and the
Judiciary.ChanRoblesVirtualawlibrary
As the Ombudsman is expected to be an "activist watchman," the < Court has upheld its
actions, although not squarely falling under the broad powers granted [to] it by the
Constitution and by RA No. 6770, if these actions are reasonably in line with its official
function and consistent with the law and the Constitution.

The Ombudsman's broad investigative and disciplinary powers include all acts of
malfeasance, misfeasance, and nonfeasance of all public officials, including Members
of the Cabinet and key Executive officers, during their tenure. To support these broad
powers, the Constitution saw it fit to insulate the Office of the Ombudsman from
the pressures and influence of officialdom and partisan politics and from fear of
external reprisal by making it an "independent" office, x x x.

xxxx

Given the scope of its disciplinary authority, the Office of the Ombudsman is a very
powerful government constitutional agency that is considered "a notch above other
grievance-handling investigative bodies." It has powers, both constitutional and
statutory, that are commensurate , with its daunting task of enforcing accountability of
public officers.162 (Emphasis and underscoring supplied)

1476
Gonzales III is the first case which grappled with the meaning of the Ombudsman's
independence vis-a-vis the independence of the other constitutional bodies. Pertinently,
the Court observed:

(1) "[T]he independence enjoyed by the Office of the Ombudsman and by the

Constitutional Commissions shares certain characteristics - they do not owe their
existence to any act of Congress, but are created by the Constitution itself;
additionally, they all enjoy fiscal autonomy. In general terms, the framers of the
Constitution intended that these 'independent' bodies be insulated from political
pressure to the extent that the absence of 'independence' would result in the
impairment of their core functions"163;cralawlawlibrary

(2) "[T]he Judiciary, the Constitutional Commissions, and the Ombudsman must have
the independence and flexibility needed in the discharge of their constitutional duties.
The imposition of restrictions and constraints on the manner the independent
constitutional offices allocate and utilize the funds appropriated for their
operations is anathema to fiscal autonomy and violative not only [of] the express
mandate of the Constitution, but especially as regards the Supreme Court, of the
independence and separation of powers upon which the entire fabric of our
constitutional system is based";164 and

(3) "[T]he constitutional deliberations explain the Constitutional Commissions' need for

independence. In the deliberations of the 1973 Constitution, the delegates amended the
1935 Constitution by providing for a constitutionally-created Civil Service Commission,
instead of one created by law, on the premise that the effectivity of this body is
dependent on its freedom from the tentacles of politics. In a similar manner, the
deliberations of the 1987 Constitution on the Commission on Audit highlighted the
developments in the past Constitutions geared towards insulating the Commission on
Audit from political pressure."165

At bottom, the decisive ruling in Gonzales III, however, was that the independence of
the Office of the Ombudsman, as well as that of the foregoing independent
bodies, meant freedom from control or supervision of the Executive Department:

[T]he independent constitutional commissions have been consistently intended by the

framers to be independent from executive control or supervision or any form of
political influence. At least insofar as these bodies are concerned, jurisprudence is not
scarce on how the "independence" granted to these bodies prevents presidential
interference.

In Brillantes, Jr. v. Yorac (G.R. No. 93867, December 18, 1990, 192 SCRA 358), we
emphasized that the Constitutional Commissions, which have been characterized under
the Constitution as "independent," are not under the control of the President, even if
they discharge functions that are executive in nature. The Court declared as
unconstitutional the President's act of temporarily appointing the respondent in that case
as Acting Chairman of the [Commission on Elections] "however well-meaning" it might
1477
have been.

In Bautista v. Senator Salonga (254 Phil. 156, 179 [1989]), the Court categorically
stated that the tenure of the commissioners of the independent Commission on Human
Rights could not be placed under the discretionary power of the President.

xxxx

The kind of independence enjoyed by the Office of the Ombudsman certainly cannot be
inferior - but is similar in degree and kind - to the independence similarly guaranteed by
the Constitution to the Constitutional Commissions since all these offices fill the political
interstices of a republican democracy that are crucial to its existence and proper
functioning.166 (Emphases and underscoring supplied)

Thus, in Gonzales III, the Court declared Section 8 (2), RA 6770, which provides that
"[a] Deputy or the Special Prosecutor, may be removed from office by the President for
any of the grounds provided for the removal of the Ombudsman, and after due process,"
partially unconstitutional insofar as it subjected the Deputy Ombudsman to the
disciplinary authority of the President for violating the principle of independence.
Meanwhile, the validity of Section 8 (2), RA 6770 was maintained insofar as the Office
of the Special Prosecutor was concerned since said office was not considered to be
constitutionally within the Office of the Ombudsman and is, hence, not entitled to the
independence the latter enjoys under the Constitution. 167

As may be deduced from the various discourses in Gonzales III, the concept of
Ombudsman's independence covers three (3) things:

First: creation by the Constitution, which means that the office cannot be abolished,
nor its constitutionally specified functions and privileges, be removed, altered, or
modified by law, unless the Constitution itself allows, or an amendment thereto is
made;cralawlawlibrary

Second: fiscal autonomy, which means that the office "may not be obstructed from
[its] freedom to use or dispose of [its] funds for purposes germane to [its]
functions;168hence, its budget cannot be strategically decreased by officials of the
political branches of government so as to impair said functions; and

Third: insulation from executive supervision and control, which means that those
within the ranks of the office can only be disciplined by an internal authority.

Evidently, all three aspects of independence intend to protect the Office of the
Ombudsman from political harassment and pressure, so as to free it from the
"insidious tentacles of politics."169

That being the case, the concept of Ombudsman independence cannot be invoked as
basis to insulate the Ombudsman from judicial power constitutionally vested unto the

1478
courts. Courts are apolitical bodies, which are ordained to act as impartial tribunals and
apply even justice to all. Hence, the Ombudsman's notion that it can be exempt from an
incident of judicial power - that is, a provisional writ of injunction against a preventive
suspension order - clearly strays from the concept's rationale of insulating the office
from political harassment or pressure.

B. The first paragraph of Section 14, RA

6770 in light of the powers of Congress and the
Court under the 1987 Constitution.

The Ombudsman's erroneous abstraction of her office's independence notwithstanding,

it remains that the first paragraph of Section 14, RA 6770 textually prohibits courts from
extending provisional injunctive relief to delay any investigation conducted by her office.
Despite the usage of the general phrase "[n]o writ of injunction shall be issued by any
court," the Ombudsman herself concedes that the prohibition does not cover the
Supreme Court.170 As support, she cites the following Senate deliberations:

Senator [Ernesto M.] Maceda. Mr. President, I do not know if an amendment is

necessary. I would just like to inquire for the record whether below the Supreme
Court, it is understood that there is no injunction policy against the Ombudsman
by lower courts. Or, is it necessary to have a special paragraph for that?

Senator Angara. Well, there is no provision here, Mr. President, that will prevent an
injunction against the Ombudsman being issued.

Senator Maceda. In which case, I think that the intention, this being one of the
highest constitutional bodies, is to subject this only to   certiorari  to the Supreme
Court. I think an injunction from the Supreme Court is, of course, in order but no
lower courts should be allowed to interfere. We had a very bad experience with
even, let us say, the Forestry Code where no injunction is supposed to be issued
against the Department of Natural Resources. Injunctions are issued right and left
by RTC judges all over the country.

The President. Why do we not make an express provision to that effect?

Senator Angara. We would welcome that, Mr. President.

The President. No [writs of injunction] from the trial courts other than the
Supreme Court.

Senator Maceda. I so move, Mr. President, for that amendment.

The President. Is there any objection? [Silence] Hearing none, the same is

approved.171

Further, she acknowledges that by virtue of Sections 1 and 5 (1), Article VIII of the 1987

1479
Constitution, acts of the Ombudsman, including interlocutory orders, are subject to the
Supreme Court's power of judicial review As a corollary, the Supreme Court may issue
ancillary mjunctive writs or provisional remedies in the exercise of its power of judicial
review over matters pertaining to ongoing investigations by the Office of the
Ombudsman. Respecting the CA, however, the Ombudsman begs to differ. 172

With these submissions, it is therefore apt to examine the validity of the first paragraph
of Section 14, RA 6770 insofar as it prohibits all courts, except this Court, from issuing
provisional writs of injunction to enjoin an Ombudsman investigation. That the
constitutionality of this provision is the lis mota of this case has not been seriously
disputed. In fact, the issue anent its constitutionality was properly raised and presented
during the course of these proceedings. 173 More importantly, its resolution is clearly
necessary to the complete disposition of this case.174

In the enduring words of Justice Laurel in Angara v. The Electoral

Commission (Angara),175 the "Constitution has blocked out with deft strokes and in bold
lines, allotment of power to the executive, the legislative[,] and the judicial departments
of the government."176 The constitutional demarcation of the three fundamental powers
of government is more commonly known as the principle of separation of powers. In the
landmark case of Belgica v. Ochoa, Jr. (Belgica),177 the Court held that "there is a
violation of the separation of powers principle when one branch of government unduly
encroaches on the domain of another." 178 In particular, "there is a violation of the
principle when there is impermissible (a) interference with and/or (b) assumption of
another department's functions."179

Under Section 1, Article VIII of the 1987 Constitution, judicial power is allocated to

the Supreme Court and all such lower courts:

Section 1. The judicial power shall be vested in one Supreme Court and in such lower
courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the Government.

This Court is the only court established by the Constitution, while all other lower
courts may be established by laws passed by Congress.  Thus, through the
passage of Batas Pambansa Bilang (BP) 129,180 known as "The Judiciary
Reorganization Act of 1980," the Court of Appeals, 181 the Regional Trial Courts,182 and
the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial
Courts183 were established. Later, through the passage of RA 1125, 184 and Presidential
Decree No. (PD) 1486,185 the Court of Tax Appeals, and the Sandiganbayan were
respectively established.

In addition to the authority to establish lower courts, Section 2, Article VIII of the

1480
1987 Constitution empowers Congress to define, prescribe, and apportion the
jurisdiction of all courts, except that it may not deprive the Supreme Court of its
jurisdiction over cases enumerated in Section 5 186 of the same Article:

Section 2. The Congress shall have the power to define, prescribe, ' and apportion the
jurisdiction of the various courts but may not deprive the Supreme Court of its
jurisdiction over cases enumerated in Section 5 hereof.

x x x xChanRoblesVirtualawlibrary

Jurisdiction, as hereinabove used, more accurately pertains to jurisdiction over the

subject matter of an action. In The Diocese ofBacolod v. Commission on
Elections,187 subject matter jurisdiction was defined as "the authority 'to hear and
determine cases of the general class to which the proceedings in question belong
and is conferred by the sovereign authority which organizes the court and
defines its powers.'"

Among others, Congress defined, prescribed, and apportioned the subject matter
jurisdiction of this Court (subject to the aforementioned constitutional limitations), the
Court of Appeals, and the trial courts, through the passage of BP 129, as amended.

In this case, the basis for the CA's subject matter jurisdiction over Binay, Jr.'s main
petition for certiorari in CA-G.R. SP No. 139453 is Section 9(1), Chapter I of BP 129,
as amended:

Section 9. Jurisdiction. - The Court of Appeals shall exercise:

1. Original jurisdiction to issue writs of mandamus, prohibition, certiorari,

habeas corpus, and quo warranto, and auxiliary writs or processes,
whether or not in aid of its appellate jurisdiction[.]

Note that the CA's certiorari jurisdiction, as above-stated, is not only original but

also concurrent with the Regional Trial Courts (under Section 21 (1), Chapter II of BP
129), and the Supreme Court (under Section 5, Article VIII of the 1987 Philippine
Constitution). In view of the concurrence of these courts' jurisdiction over petitions
for certiorari, the doctrine of hierarchy of courts should be followed. In People v.
Cuaresma,188 the doctrine was explained as follows:

[T]his concurrence of jurisdiction is not x x x to be taken as according to parties

seeking any of the writs an absolute, unrestrained freedom of choice of the court to
which application therefor will be directed. There is after all a hierarchy of courts. That
hierarchy is determinative of the venue of appeals, and should also serve as a general
determinant of the appropriate forum for petitions for the extraordinary writs. A
becoming regard for that judicial hierarchy most certainly indicates that petitions for the

1481
issuance of extraordinary writs against first level ("inferior") courts should be filed with
the Regional Trial Court, and those against the latter, with the Court of Appeals. 189

When a court has subject matter jurisdiction over a particular case, as conferred unto

it by law, said court may then exercise its jurisdiction acquired over that case, which
is called judicial power.

Judicial power, as vested in the Supreme Court and all other courts established by
law, has been defined as the "totality of powers a court exercises when it assumes
jurisdiction and hears and decides a case."190 Under Section 1, Article VIII of the
1987 Constitution, it includes "the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government."

In Oposa v. Factoran, Jr.191 the Court explained the expanded scope of judicial power
under the 1987 Constitution:

The first part of the authority represents the traditional concept of judicial power,
involving the settlement of conflicting rights as conferred by law. The second part of the
authority represents a broadening of f judicial power to enable the courts of justice to
review what was before forbidden territory, to wit, the discretion of the political
departments of the government.

As worded, the new provision vests in the judiciary, and particularly the Supreme Court,
the power to rule upon even the wisdom of the decisions of the executive and the
legislature and to declare their acts invalid for lack or excess of jurisdiction because
they are tainted with grave abuse of discretion. The catch, of course, is the meaning of
"grave abuse of discretion," which is a very elastic phrase that can expand or contract
according to the disposition of the judiciary.192

Judicial power is never exercised in a vacuum. A court's exercise of the

jurisdiction it has acquired over a particular case conforms to the limits and
parameters of the rules of procedure duly promulgated by this Court. In other
words, procedure is the framework within which judicial power is exercised. In Manila
Railroad Co. v. Attorney-General,193 the Court elucidated that "[t]he power or authority of
the court over the subject matter existed and was fixed before procedure in a given
cause began. Procedure does not alter or change that power or authority; it simply
directs the manner in which it shall be fully and justly exercised.  To be sure, in
certain cases, if that power is not exercised in conformity with the provisions of the
procedural law, purely, the court attempting to exercise it loses the power to exercise it
legally. This does not mean that it loses jurisdiction of the subject matter." 194

While the power to define, prescribe, and apportion the jurisdiction of the various courts
is, by constitutional design, vested unto Congress, the power to promulgate rules

1482
concerning the protection and enforcement of constitutional rights, pleading,
practice, and procedure in all courts belongs exclusively to this Court. Section 5
(5), Article VIII of the 1987 Constitution reads:

Section 5. The Supreme Court shall have the following powers:

xxxx

(5) Promulgate rules concerning the protection and enforcement of constitutional

rights, pleading, practice, and procedure in all courts, the admission to the practice
of law, the Integrated Bar, and legal assistance to the underprivileged. Such rules shall
provide a simplified and inexpensive procedure for the speedy disposition of cases,
shall be uniform for all courts of the same grade, and shall not diminish, increase, or
modify substantive rights. Rules of procedure of special courts and quasi-judicial bodies
shall remain effective unless disapproved by the Supreme Court. (Emphases and
underscoring supplied)

In Echegaray v. Secretary of Justice195 (Echegaray), the Court traced the evolution of its

rule-making authority, which, under the 1935 196 and 1973 Constitutions,197 had been
priorly subjected to a power-sharing scheme with Congress. 198 As it now stands, the
1987 Constitution textually altered the old provisions by deleting the concurrent
power of Congress to amend the rules, thus solidifying in one body the Court's
rule-making powers, in line with the Framers' vision of institutionalizing a "[s]tronger
and more independent judiciary."199

The records of the deliberations of the Constitutional Commission would show 200 that
the Framers debated on whether or not the Court's rule-making powers should be
shared with Congress. There was an initial suggestion to insert the sentence "The
National Assembly may repeal, alter, or supplement the said rules with the advice and
concurrence of the Supreme Court", right after the phrase "Promulgate rules concerning
the protection and enforcement of constitutional rights, pleading, practice, and
procedure in all courts, the admission to the practice of law, the integrated bar, and
legal assistance to the underprivileged^" in the enumeration of powers of the Supreme
Court. Later, Commissioner Felicitas S. Aquino proposed to delete the former sentence
and, instead, after the word "[underprivileged," place a comma (,) to be followed by "the
phrase with the concurrence of the National Assembly." Eventually, a compromise
formulation was reached wherein (a) the Committee members agreed to Commissioner
Aquino's proposal to delete the phrase "the National Assembly may repeal, alter, or
supplement the said rules with the advice and concurrence of the Supreme Court" and
(b) in turn, Commissioner Aquino agreed to withdraw his proposal to add "the phrase
with the concurrence of the National Assembly." The changes were approved,
thereby leading to the present lack of textual reference to any form of
Congressional participation in Section 5 (5), Article VIII, supra. The prevailing
consideration was that "both bodies, the Supreme Court and the Legislature,
have their inherent powers."201

1483
Thus, as it now stands, Congress has no authority to repeal, alter, or supplement rules
concerning pleading, practice, and procedure. As pronounced in Echegaray:

The rule making power of this Court was expanded. This Court for the first time was
given the power to promulgate rules concerning the protection and enforcement of
constitutional rights. The Court was also r granted for the first time the power to
disapprove rules of procedure of special courts and quasi-judicial bodies. But most
importantly, the 1987 Constitution took away the power of Congress to repeal,
alter, or supplement rules concerning pleading, practice and procedure. In fine,
the power to promulgate rules of pleading, practice and procedure is no longer
shared by this Court with Congress, more so with the Executive.202 (Emphasis and
underscoring supplied)

Under its rule-making authority, the Court has periodically passed various rules of
procedure, among others, the current 1997 Rules of Civil Procedure. Identifying the
appropriate procedural remedies needed for the reasonable exercise of every
court's judicial power, the provisional remedies of temporary restraining orders
and writs of preliminary injunction were thus provided.

A temporary restraining order and a writ of preliminary injunction both constitute

temporary measures availed of during the pendency of the action. They are, by nature,
ancillary because they are mere incidents in and are dependent upon the result of the
main action. It is well-settled that the sole object of a temporary restraining order or
a writ of preliminary injunction, whether prohibitory or mandatory, is to preserve
the status quo203 until the merits of the case can be heard. They are usually granted
when it is made to appear that there is a substantial controversy between the parties
and one of them is committing an act or threatening the immediate commission of an
act that will cause irreparable injury or destroy the status quo of the controversy before
a full hearing can be had on the merits of the case. In other words, they are preservative
remedies for the protection of substantive rights or interests, and, hence, not a cause of
action in itself, but merely adjunct to a main suit. 204 In a sense, they are regulatory
processes meant to prevent a case from being mooted by the interim acts of the parties.

Rule 58 of the 1997 Rules of Civil Procedure generally governs the provisional
remedies of a TRO and a WPI. A preliminary injunction is defined under Section
1,205 Rule 58, while Section 3206 of the same Rule enumerates the grounds for its
issuance. Meanwhile, under Section 5207 thereof, a TRO may be issued as a precursor
to the issuance of a writ of preliminary injunction under certain procedural parameters.

The power of a court to issue these provisional injunctive reliefs coincides with
its inherent power to issue all auxiliary writs, processes, and other means
necessary to carry its acquired jurisdiction into effect under Section 6, Rule 135
of the Rules of Court which reads:

Section 6. Means to carry jurisdiction into effect. - When by law jurisdiction is conferred
on a court or judicial officer, all auxiliary writs, f processes and other means necessary

1484
to carry it into effect may be employed by such court or officer; and if the procedure to
be followed in the exercise of such jurisdiction is not specifically pointed out by law 208 or
by these rules, any suitable process or mode of proceeding may be adopted which
appears comfortable to the spirit of the said law or rules.ChanRoblesVirtualawlibrary

In City of Manila v. Grecia-Cuerdo,209 which is a case involving "[t]he supervisory power

or jurisdiction of the [Court of Tax Appeals] to issue a writ of certiorari in aid of its
appellate jurisdiction"210 over "decisions, orders or resolutions of the RTCs in local tax
cases originally decided or resolved by them in the exercise of their original or appellate
jurisdiction,"211 the Court ruled that said power "should coexist with, and be a
complement to, its appellate jurisdiction to review, by appeal, the final orders and
decisions of the RTC, in order to have complete supervision over the acts of the
latter:"212

A grant of appellate jurisdiction implies that there is included in it the power necessary

to exercise it effectively, to make all orders that ; will preserve the subject of the
action, and to give effect to the final determination of the appeal. It carries with it the
power to protect that jurisdiction and to make the decisions of the court thereunder
effective. The court, in aid of its appellate jurisdiction, has authority to control all
auxiliary and incidental matters necessary to the efficient and proper exercise of that
jurisdiction. For this purpose, it may, when necessary, prohibit or restrain the
performance of any act which might interfere with the proper exercise of its rightful
jurisdiction in cases pending before it. 213 (Emphasis supplied)

In this light, the Court expounded on the inherent powers of a court endowed with
subject matter jurisdiction:

[A] court which is endowed with a particular jurisdiction should have powers which are
necessary to enable it to act effectively within such jurisdiction. These should be
regarded as powers which are inherent in its jurisdiction and the court must
possess them in order to enforce its rules of practice and to suppress any abuses
of its process and to t defeat any attempted thwarting of such process.

x x x x cralawlawlibrary

Indeed, courts possess certain inherent powers which may be said to be implied from

a general grant of jurisdiction, in addition to those expressly conferred on them. These
inherent powers are such powers as are necessary for the ordinary and efficient
exercise of jurisdiction; or are essential to the existence, dignity and functions of
the courts, as well as to the due administration of justice; or are directly
appropriate, convenient and suitable to the execution of their granted powers;
and include the power to maintain the court's jurisdiction and render it effective
in behalf of the litigants.214 (Emphases and underscoring supplied)

Broadly speaking, the inherent powers of the courts resonates the long-entrenched
constitutional principle, articulated way back in the 1936 case of Angara, that "where a

1485
general power is conferred or duty enjoined, every particular power necessary for the
exercise of the one or the performance of the other is also conferred." 215

In the United States, the "inherent powers doctrine refers to the principle, by which
the courts deal with diverse matters over which they are thought to have intrinsic
authority like procedural [rule-making] and general judicial housekeeping. To justify the
invocation or exercise of inherent powers, a court must show that the powers are
reasonably necessary to achieve the specific purpose for which the exercise is
sought. Inherent powers enable the judiciary to accomplish its constitutionally
mandated functions."216

In Smothers v. Lewis217 (Smothers), a case involving the constitutionality of a statute

which prohibited courts from enjoining the enforcement of a revocation order of an
alcohol beverage license pending appeal, 218 the Supreme Court of Kentucky held:

[T]he Court is x x x vested with certain "inherent" powers to do that which is

reasonably necessary for the administration of justice within the scope of their
jurisdiction. x x x [W]e said while considering the rule making power and the judicial
power to be one and the same that ". . . the grant of judicial power [rule making
power] to the courts by the constitution carries with it, as a necessary incident,
the right to make that power effective in the administration of justice." (Emphases
supplied)

Significantly, Smothers characterized a court's issuance of provisional injunctive relief

as an exercise of the court's inherent power, and to this end, stated that any attempt on
the part of Congress to interfere with the same was constitutionally impermissible:

It is a result of this foregoing line of thinking that we now adopt the language framework
of 28 Am.Jur.2d, Injunctions, Section 15, and once and for all make clear that a court,
once having obtained jurisdiction of a cause of action, has, as an incidental to its
constitutional grant of power, inherent power to do all things reasonably necessary to
the administration of justice in the case before it. In the exercise of this power, a
court, when necessary in order to protect or preserve the subject matter of the
litigation, to protect its jurisdiction and to make its judgment effective, may grant
or issue a temporary injunction in aid of or ancillary to the principal action.

The control over this inherent judicial power, in this particular instance the
injunction, is exclusively within the constitutional realm of the courts. As such, it
is not within the purview of the legislature to grant or deny the power nor is it
within the purview of the legislature to shape or fashion circumstances under
which this inherently judicial power may be or may not be granted or denied.

This Court has historically recognized constitutional limitations upon the power of the
legislature to interfere with or to inhibit the performance of constitutionally granted and
inherently provided judicial functions, x x x

1486
xxxx

We reiterate our previously adopted language, ". . . a court, once having obtained
jurisdiction of a cause of action, has, as incidental to its general jurisdiction, inherent
power to do all things reasonably necessary f to the administration of justice in the case
before it. . ." This includes the inherent power to issue injunctions. (Emphases
supplied)

Smothers also pointed out that the legislature's authority to provide a right to appeal in
the statute does not necessarily mean that it could control the appellate judicial
proceeding:

However, the fact that the legislature statutorily provided for this appeal does not give it
the right to encroach upon the constitutionally granted powers of the judiciary. Once the
administrative action has ended and the right to appeal arises the legislature is
void of any right to control a subsequent appellate judicial proceeding. The
judicial rules have come into play and have preempted the field. 219 (Emphasis
supplied)

With these considerations in mind, the Court rules that when Congress passed the first
paragraph of Section 14, RA 6770 and, in so doing, took away from the courts their
power to issue a TRO and/or WPI to enjoin an investigation conducted by the
Ombudsman, it encroached upon this Court's constitutional rule-making authority.
Clearly, these issuances, which are, by nature, provisional reliefs and auxiliary writs
created under the provisions of the Rules of Court, are matters of procedure which
belong exclusively within the province of this Court. Rule 58 of the Rules of Court did
not create, define, and regulate a right but merely prescribed the means of
implementing an existing right220 since it only provided for temporary reliefs to preserve
the applicant's right in esse which is threatened to be violated during the course of a
pending litigation. In the case of Fabian,211 it was stated that:

If the rule takes away a vested right, it is not procedural. If the rule creates a right such
as the right to appeal, it may be classified as a substantive matter; but if it operates as a
means of implementing an existing right then the rule deals merely with
procedure.ChanRoblesVirtualawlibrary

Notably, there have been similar attempts on the part of Congress, in the exercise of its
legislative power, to amend the Rules of Court, as in the cases of: (a) In Re: Exemption
of The National Power Corporation from Payment of Filing/ Docket Fees;222 (b) Re:
Petition for Recognition of the Exemption of the Government Service Insurance System
(GSIS) from Payment of Legal Fees;223 and (c) Baguio Market Vendors Multi-Purpose
Cooperative (BAMARVEMPCO) v. Cabato-Cortes224 While these cases involved
legislative enactments exempting government owned and controlled corporations and
cooperatives from paying filing fees, thus, effectively modifying Rule 141 of the Rules of
Court (Rule on Legal Fees), it was, nonetheless, ruled that the prerogative to amend,
repeal or even establish new rules of procedure 225 solely belongs to the Court, to

1487
the exclusion of the legislative and executive branches of government. On this
score, the Court described its authority to promulgate rules on pleading, practice, and
procedure as exclusive and "[o]ne of the safeguards of [its] institutional
independence."226

That Congress has been vested with the authority to define, prescribe, and apportion
the jurisdiction of the various courts under Section 2, Article VIII supra, as well as to
create statutory courts under Section 1, Article VIII supra, does not result in an
abnegation of the Court's own power to promulgate rules of pleading, practice, and
procedure under Section 5 (5), Article VIII supra. Albeit operatively interrelated, these
powers are nonetheless institutionally separate and distinct, each to be preserved under
its own sphere of authority. When Congress creates a court and delimits its
jurisdiction, the procedure for which its jurisdiction is exercised is fixed by the
Court through the rules it promulgates. The first paragraph of Section 14, RA 6770
is not a jurisdiction-vesting provision, as the Ombudsman misconceives, 227 because it
does not define, prescribe, and apportion the subject matter jurisdiction of courts to act
on certiorari cases; the certiorari jurisdiction of courts, particularly the CA, stands under
the relevant sections of BP 129 which were not shown to have been repealed. Instead,
through this provision, Congress interfered with a provisional remedy that was
created by this Court under its duly promulgated rules of procedure, which utility
is both integral and inherent to every court's exercise of judicial power. Without
the Court's consent to the proscription, as may be manifested by an adoption of
the same as part of the rules of procedure through an administrative circular
issued therefor, there thus, stands to be a violation of the separation of powers
principle.

In addition, it should be pointed out that the breach of Congress in prohibiting

provisional injunctions, such as in the first paragraph of Section 14, RA 6770, does not
only undermine the constitutional allocation of powers; it also practically dilutes a
court's ability to carry out its functions. This is so since a particular case can
easily be mooted by supervening events if no provisional injunctive relief is
extended while the court is hearing the same. Accordingly, the court's acquired
jurisdiction, through which it exercises its judicial power, is rendered nugatory. Indeed,
the force of judicial power, especially under the present Constitution, cannot be
enervated due to a court's inability to regulate what occurs during a proceeding's
course. As earlier intimated, when jurisdiction over the subject matter is accorded by
law and has been acquired by a court, its exercise thereof should be undipped. To give
true meaning to the judicial power contemplated by the Framers of our Constitution, the
Court's duly promulgated rules of procedure should therefore remain unabridged, this,
even by statute. Truth be told, the policy against provisional injunctive writs in whatever
variant should only subsist under rules of procedure duly promulgated by the Court
given its sole prerogative over the same.

The following exchange between Associate Justice Marvic Mario Victor F. Leonen
(Justice Leonen) and the Acting Solicitor General Florin T. Hilbay (Acting Solicitor
General Hilbay) mirrors the foregoing observations:

1488
JUSTICE LEONEN:
Okay. Now, would you know what rule covers injunction in the Rules of Court?

ACTING SOLICITOR GENERAL HILBAY:

Rule 58, Your Honor.

JUSTICE LEONEN:
58, that is under the general rubric if Justice Bersamin will correct me if I will be
mistaken under the rubric of what is called provisional remedies, our resident expert
because Justice Peralta is not here so Justice Bersamin for a while. So provisional
remedy you have injunction, x x x.

xxxx

JUSTICE LEONEN:
Okay, Now, we go to the Constitution. Section 5, subparagraph 5 of Article VIII of the
Constitution, if you have a copy of the Constitution, can you please read that provision?
Section 5, Article VIII the Judiciary subparagraph 5, would you kindly read that
provision?

ACTING SOLICTOR GENERAL HILBAY.

"Promulgate rules concerning the protection and enforcement of constitutional rights,
pleading, practice and procedure in all courts..."

JUSTICE LEONEN:
Okay, we can stop with that, promulgate rules concerning pleading, practice and
procedure in all courts. This is the power, the competence, the jurisdiction of what
constitutional organ?

ACTING SOLICITOR GENERAL HILBAY:

The Supreme Court, Your Honor.

JUSTICE LEONEN:
The Supreme Court. This is different from Article VIII Sections 1 and 2 which we've
already been discussed with you by my other colleagues, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

JUSTICE LEONEN:
Okay, so in Section 2, [apportion] jurisdiction that is the power of Congress, is that not
correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

1489
JUSTICE LEONEN:
On the other hand, the power to promulgate rules is with the Court, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

JUSTICE LEONEN:
A TRO and a writ of preliminary injunction, would it be a separate case or is it part of
litigation in an ordinary case?

ACTING SOLICITOR GENERAL HILBAY:

It is an ancillary remedy, Your Honor.

JUSTICE LEONEN:
In fact, it originated as an equitable remedy, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

JUSTICE LEONEN:
In order to preserve the power of a court so that at the end of litigation, it will not
be rendered moot and academic, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

JUSTICE LEONEN:
In that view, isn't Section 14, first paragraph, unconstitutional?

ACTING SOLICITOR GENERAL HILBAY:

No, Your Honor.

xxxx

JUSTICE LEONEN.
Can Congress say that a Court cannot prescribe Motions to Dismiss under Rule 16?

ACTING SOLICITOR GENERAL HILBAY:

Your Honor, Congress cannot impair the power of the Court to create remedies, x x x.

JUSTICE LEONEN.
What about bill [of] particulars, can Congress say, no Court shall have the power to
issue the supplemental pleading called the bill of t particular [s]? It cannot, because
that's part of procedure...

ACTING SOLICITOR GENERAL HILBAY:

1490
That is true.

JUSTICE LEONEN
...or for that matter, no Court shall act on a Motion to Quash, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct.

JUSTICE LEONEN:
So what's different with the writ of injunction?

ACTING SOLICITOR GENERAL HILBAY:

Writ of injunction, Your Honor, requires the existence of jurisdiction on the part of a
court that was created by Congress. In the absence of jurisdiction... (interrupted)

JUSTICE LEONEN:
No, writ of injunction does not attach to a court. In other words, when they create a
special agrarian court it has all procedures with it but it does not attach particularly to
that particular court, is that not correct?

ACTING SOLICTOR GENERAL HILBAY:

When Congress, Your Honor, creates a special court...

JUSTICE LEONEN:
Again, Counsel, what statute provides for a TRO, created the concept of a TRO? It was
a Rule. A rule of procedure and the Rules of Court, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Yes, Your Honor.

JUSTICE LEONEN:
And a TRO and a writ of preliminary injunction does not exist unless it is [an] ancillary to
a particular injunction in a court, is that not correct?

ACTING SOLICITOR GENERAL HILBAY:

Correct, Your Honor.

xxxx228 (Emphasis supplied)

In Biraogo v. The Philippine Truth Commission of 2010, 229 the Court instructed that "[i]t
is through the Constitution that the fundamental powers of government are established,
limited and defined, and by which these powers are distributed among the several
departments. The Constitution is the basic and paramount law to which all other laws
must conform and to which all persons, including the highest officials of the land, must
defer." It would then follow that laws that do not conform to the Constitution shall be
stricken down for being unconstitutional.230

1491
However, despite the ostensible breach of the separation of powers principle, the Court
is not oblivious to the policy considerations behind the first paragraph of Section 14, RA
6770, as well as other statutory provisions of similar import. Thus, pending deliberation
on whether or not to adopt the same, the Court, under its sole prerogative and authority
over all matters of procedure, deems it proper to declare as ineffective the prohibition
against courts other than the Supreme Court from issuing provisional injunctive writs to
enjoin investigations conducted by the Office of the Ombudsman, until it is adopted as
part of the rules of procedure through an administrative circular duly issued therefor.

Hence, with Congress interfering with matters of procedure (through passing the first
paragraph of Section 14, RA 6770) without the Court's consent thereto, it remains that
the CA had the authority to issue the questioned injunctive writs enjoining the
implementation of the preventive suspension order against Binay, Jr. At the risk of
belaboring the point, these issuances were merely ancillary to the exercise of the
CA's certiorari jurisdiction conferred to it under Section 9 (1), Chapter I of BP 129, as
amended, and which it had already acquired over the main CA-G.R. SP No. 139453
case.

IV.

The foregoing notwithstanding, the issue of whether or not the CA gravely abused its
jurisdiction in issuing the TRO and WPI in CA-G.R. SP No. 139453 against the
preventive suspension order is a persisting objection to the validity of said injunctive
writs. For its proper analysis, the Court first provides the context of the assailed
injunctive writs.

A. Subject matter of the CA's iniunctive writs is the preventive suspension order.

By nature, a preventive suspension order is not a penalty but only a preventive

measure. In Quimbo v. Acting Ombudsman Gervacio,231 the Court explained the
distinction, stating that its purpose is to prevent the official to be suspended from
using his position and the powers and prerogatives of his office to influence
potential witnesses or tamper with records which may be vital in the prosecution
of the case against him:

Jurisprudential law establishes a clear-cut distinction between suspension as preventive

measure and suspension as penalty. The distinction, by considering the purpose aspect
of the suspensions, is readily cognizable as they have different ends sought to be
achieved.

Preventive suspension is merely a preventive measure, a preliminary step in an

administrative investigation. The purpose of the suspension order is to prevent
the accused from using his position and the powers and prerogatives of his office
to influence potential witnesses or tamper with records which may be vital in the
prosecution of the case against him. If after such investigation, the charge is
established and the person investigated is found guilty of acts warranting his

1492
suspension or removal, then he is suspended, removed or dismissed. This is the
penalty.

That preventive suspension is not a penalty is in fact explicitly provided by Section 24 of

Rule XIV of the Omnibus Rules Implementing Book V of the Administrative Code of
1987 (Executive Order No. 292) and other Pertinent Civil Service Laws.
Section. 24. Preventive suspension is not a punishment or penalty for misconduct in
office but is considered to be a preventive measure. (Emphasis
supplied)ChanRoblesVirtualawlibrary
Not being a penalty, the period within which one is under preventive suspension is not
considered part of the actual penalty of suspension. So Section 25 of the same Rule
XIV provides:chanRoblesvirtualLawlibrary
Section 25. The period within which a public officer or employee charged is placed
under preventive suspension shall not be considered part of the actual penalty of
suspension imposed upon the employee found guilty.232 (Emphases
supplied)ChanRoblesVirtualawlibrary

The requisites for issuing a preventive suspension order are explicitly stated in Section
24, RA 6770:

Section 24. Preventive Suspension. - The Ombudsman or his Deputy may preventively
suspend any officer or employee under his authority pending an investigation, if in his
judgment the evidence of guilt is strong, and (a) the charge against such officer
or employee involves dishonesty, oppression or grave misconduct or neglect in
the performance of duty; (b) the charges would warrant removal from the
service; or (c) the respondent's continued stay in office may prejudice the case
filed against him.

The preventive suspension shall continue until the case is terminated by the Office of
the Ombudsman but not more than six (6) months, without pay, except when the delay
in the disposition of the case by the Office of the Ombudsman is due to the fault,
negligence or petition of the respondent, in which case the period of such delay shall
not be counted in computing the period of suspension herein provided. (Emphasis and
underscoring supplied)

In other words, the law sets forth two (2) conditions that must be satisfied to justify the
issuance of an order of preventive suspension pending an investigation, namely:

(1) The evidence of guilt is strong; and

(2) Either of the following circumstances co-exist with the first

requirement:chanRoblesvirtualLawlibrary
(a) The charge involves dishonesty, oppression or grave misconduct or neglect in the
performance of duty;cralawlawlibrary

(b) The charge would warrant removal from the service; or

1493
(c) The respondent's continued stay in office may prejudice the case filed against
him.233ChanRoblesVirtualawlibrary

B. The basis of the CA's injunctive writs is the condonation doctrine.

Examining the CA's Resolutions in CA-G.R. SP No. 139453 would, however, show that
the Ombudsman's non-compliance with the requisites provided in Section 24, RA 6770
was not the basis for the issuance of the assailed injunctive writs.

The CA's March 16, 2015 Resolution which directed the issuance of the assailed TRO
was based on the case of Governor Garcia, Jr. v. CA234 (Governor Garcia, Jr.),
wherein the Court emphasized that "if it were established in the CA that the acts subject
of the administrative complaint were indeed committed during petitioner [Garcia's] prior
term, then, following settled jurisprudence, he can no longer be administratively
charged."235 Thus, the Court, contemplating the application of the condonation doctrine,
among others, cautioned, in the said case, that "it would have been more prudent for
[the appellate court] to have, at the very least, on account of the extreme urgency of the
matter and the seriousness of the issues raised in the certiorari petition, issued a
TRO x x x"236 during the pendency of the proceedings.

Similarly, the CA's April 6, 2015 Resolution which directed the issuance of the assailed
WPI was based on the condonation doctrine, citing the case of Aguinaldo v.
Santos237 The CA held that Binay, Jr. has an ostensible right to the final relief prayed
for, i.e., the nullification of the preventive suspension order, finding that the Ombudsman
can hardly impose preventive suspension against Binay, Jr. given that his re-election in
2013 as City Mayor of Makati condoned any administrative liability arising from
anomalous activities relative to the Makati Parking Building project from 2007 to
2013.238 Moreover, the CA observed that although there were acts which were
apparently committed by Binay, Jr. beyond his first term , i.e., the alleged payments on
July 3, 4, and 24, 2013,239 corresponding to the services of Hillmarc's and MANA - still,
Binay, Jr. cannot be held administratively liable therefor based on the cases
of Salalima v. Guingona, Jr.,240 and Mayor Garcia v. Mojica,241 wherein the
condonation dobtrine was applied by the Court although the payments were made after
the official's election, reasoning that the payments were merely effected pursuant to
contracts executed before said re-election.242

The Ombudsman contends that it was inappropriate for the CA to have considered the
condonation doctrine since it was a matter of defense which should have been raised
and passed upon by her office during the administrative disciplinary
proceedings.243 However, the Court agrees with the CA that it was not precluded from
considering the same given that it was material to the propriety of according provisional
injunctive relief in conformity with the ruling in Governor Garcia, Jr., which was the
subsisting jurisprudence at that time. Thus, since condonation was duly raised by Binay,
Jr. in his petition in CA-G.R. SP No. 139453,244 the CA did not err in passing upon the
same. Note that although Binay, Jr. secondarily argued that the evidence of guilt against

1494
him was not strong in his petition in CA-G.R. SP No. 139453, 245 it appears that the CA
found that the application of the condonation doctrine was already sufficient to enjoin
the implementation of the preventive suspension order. Again, there is nothing aberrant
with this since, as remarked in the same case of Governor Garcia, Jr., if it was
established that the acts subject of the administrative complaint were indeed committed
during Binay, Jr.'s prior term, then, following the condonation doctrine, he can no longer
be administratively charged. In other words, with condonation having been invoked by
Binay, Jr. as an exculpatory affirmative defense at the onset, the CA deemed it
unnecessary to determine if the evidence of guilt against him was strong, at least for the
purpose of issuing the subject injunctive writs.

With the preliminary objection resolved and the basis of the assailed writs herein laid
down, the Court now proceeds to determine if the CA gravely abused its discretion in
applying the condonation doctrine.

C. The origin of the condonation doctrine.

Generally speaking, condonation has been defined as "[a] victim's express or implied
forgiveness of an offense, [especially] by treating the offender as if there had been
no offense."246

The condonation doctrine - which connotes this same sense of complete

extinguishment of liability as will be herein elaborated upon - is not based on statutory
law. It is a jurisprudential creation that originated from the 1959 case of Pascual v.
Hon. Provincial Board ofNueva Ecija,247 (Pascual),  which was therefore decided
under the 1935 Constitution.

In Pascual, therein petitioner, Arturo Pascual, was elected Mayor of San Jose, Nueva
Ecija, sometime in November 1951, and was later re-elected to the same position in
1955. During his second term, or on October 6, 1956, the Acting Provincial Governor
filed administrative charges before the Provincial Board of Nueva Ecija against him for
grave abuse of authority and usurpation of judicial functions for acting on a criminal
complaint in Criminal Case No. 3556 on December 18 and 20, 1954. In defense, Arturo
Pascual argued that he cannot be made liable for the acts charged against him since
they were committed during his previous term of office, and therefore, invalid grounds
for disciplining him during his second term. The Provincial Board, as well as the Court of
First Instance of Nueva Ecija, later decided against Arturo Pascual, and when the case
reached this Court on appeal, it recognized that the controversy posed a novel issue -
that is, whether or not an elective official may be disciplined for a wrongful act
committed by him during his immediately preceding term of office.

As there was no legal precedent on the issue at that time, the Court,
in Pascual, resorted to American authorities and "found that cases on the matter are
conflicting due in part, probably, to differences in statutes and constitutional provisions,
and also, in part, to a divergence of views with respect to the question of whether the

1495
subsequent election or appointment condones the prior misconduct." 248Without going
into the variables of these conflicting views and cases, it proceeded to state that:

The weight of authorities x x x seems to incline toward the rule denying the right
to remove one from office because of misconduct during a prior term, to which we
fully subscribe.249 (Emphasis and underscoring supplied)

The conclusion is at once problematic since this Court has now uncovered that there is
really no established weight of authority in the United States (US) favoring the doctrine
of condonation, which, in the words of Pascual, theorizes that an official's re-election
denies the right to remove him from office due to a misconduct during a prior term. In
fact, as pointed out during the oral arguments of this case, at least seventeen (17)
states in the US have abandoned the condonation doctrine. 250 The Ombudsman aptly
cites several rulings of various US State courts, as well as literature published on the
matter, to demonstrate the fact that the doctrine is not uniformly applied across all state
jurisdictions. Indeed, the treatment is nuanced:

(1) For one, it has been widely recognized that the propriety of removing a public officer
from his current term or office for misconduct which he allegedly committed in a prior
term of office is governed by the language of the statute or constitutional provision
applicable to the facts of a particular case (see In Re Removal of Member of Council
Coppola).251 As an example, a Texas statute, on the one hand, expressly allows
removal only for an act committed during a present term: "no officer shall be prosecuted
or removed from office for any act he may have committed prior to his election to office"
(see State ex rel. Rowlings v. Loomis).252 On the other hand, the Supreme Court of
Oklahoma allows removal from office for "acts of commission, omission, or neglect
committed, done or omitted during a previous or preceding term of office" (see State v.
Bailey)253 Meanwhile, in some states where the removal statute is silent or unclear, the
case's resolution was contingent upon the interpretation of the phrase "in office." On
one end, the Supreme Court of Ohio strictly construed a removal statute containing the
phrase "misfeasance of malfeasance in office" and thereby declared that, in the
absence of clear legislative language making, the word "office" must be limited to the
single term during which the offense charged against the public officer occurred
(see State ex rel. Stokes v. Probate Court of Cuyahoga County)254 Similarly, the
Common Pleas Court of Allegheny County, Pennsylvania decided that the phrase "in
office" in its state constitution was a time limitation with regard to the grounds of
removal, so that an officer could not be removed for misbehaviour which occurred; prior
to the taking of the office (see Commonwealth v. Rudman)255 The opposite was
construed in the Supreme Court of Louisiana which took the view that an officer's
inability to hold an office resulted from the commission of certain offenses, and at once
rendered him unfit to continue in office, adding the fact that the officer had been re-
elected did not condone or purge the offense (see State ex rel. Billon v.
Bourgeois).256 Also, in the Supreme Court of New York, Apellate Division, Fourth
Department, the court construed the words "in office" to refer not to a particular term of
office but to an entire tenure; it stated that the whole purpose of the legislature in
enacting the statute in question could easily be lost sight of, and the intent of the law-

1496
making body be thwarted, if an unworthy official could not be removed during one term
for misconduct for a previous one (Newman v. Strobel).257

(2) For another, condonation depended on whether or not the public officer was a
successor in the same office for which he has been administratively charged. The "own-
successor theory," which is recognized in numerous States as an exception to
condonation doctrine, is premised on the idea that each term of a re-elected incumbent
is not taken as separate and distinct, but rather, regarded as one continuous term of
office. Thus, infractions committed in a previous term are grounds for removal because
a re-elected incumbent has no prior term to speak of 258 (see Attorney-General v.
Tufts;259State v. Welsh;260Hawkins v. Common Council of Grand Rapids;261Territory v.
Sanches;262 and Tibbs v. City of Atlanta).263

(3) Furthermore, some State courts took into consideration the continuing nature of an
offense in cases where the condonation doctrine was invoked. In State ex rel. Douglas
v. Megaarden,264 the public officer charged with malversation of public funds was denied
the defense of condonation by the Supreme Court of Minnesota, observing that "the
large sums of money illegally collected during the previous years are still retained by
him." In State ex rel. Beck v. Harvey265 the Supreme Court of Kansas ruled that "there is
no necessity" of applying the condonation doctrine since "the misconduct continued in
the present term of office[;] [thus] there was a duty upon defendant to restore this
money on demand of the county commissioners." Moreover, in State ex rel. Londerholm
v. Schroeder,266 the Supreme Court of Kansas held that "insofar as nondelivery and
excessive prices are concerned, x x x there remains a continuing duty on the part of the
defendant to make restitution to the country x x x, this duty extends into the present
term, and neglect to discharge it constitutes misconduct."

Overall, the foregoing data clearly contravenes the preliminary conclusion

in Pascual that there is a "weight of authority" in the US on the condonation doctrine. In
fact, without any cogent exegesis to show that Pascual had accounted for the numerous
factors relevant to the debate on condonation, an outright adoption of the doctrine in this
jurisdiction would not have been proper.

At any rate, these US cases are only of persuasive value in the process of this Court's
decision-making. "[They] are not relied upon as precedents, but as guides of
interpretation."267 Therefore, the ultimate analysis is on whether or not the condonation
doctrine, as espoused in Pascual, and carried over in numerous cases after, can be
held up against prevailing legal norms. Note that the doctrine of stare decisis does not
preclude this Court from revisiting existing doctrine. As adjudged in the case of Belgica,
the stare decisis rule should not operate when there are powerful countervailing
considerations against its application.268 In other words, stare decisis becomes an
intractable rule only when circumstances exist to preclude reversal of standing
precedent.269 As the Ombudsman correctly points out, jurisprudence, after all, is not a
rigid, atemporal abstraction; it is an organic creature that develops and devolves along
with the society within which it thrives. 270 In the words of a recent US Supreme Court
Decision, "[w]hat we can decide, we can undecide." 271

1497
In this case, the Court agrees with the Ombudsman that since the time Pascual was
decided, the legal landscape has radically shifted. Again, Pascual was a 1959 case
decided under the 1935 Constitution, which dated provisions do not reflect the
experience of the Filipino People under the 1973 and 1987 Constitutions. Therefore, the
plain difference in setting, including, of course, the sheer impact of the condonation
doctrine on public accountability, calls for Pascual's judicious re-examination.

D. Testing the Condonation Doctrine.

Pascual's ratio decidendi may be dissected into three (3) parts:

First, the penalty of removal may not be extended beyond the term in which the public
officer was elected for each term is separate and distinct:

Offenses committed, or acts done, during previous term are generally held not to
furnish cause for removal and this is especially true where the constitution provides
that the penalty in proceedings for removal shall not extend beyond the removal from
office, and disqualification from holding office for the term for which the officer
was elected or appointed. (67 C.J.S. p. 248, citing Rice vs. State, 161 S.W. 2d. 401;
Montgomery vs. Nowell, 40 S.W. 2d. 418; People ex rel. Bagshaw vs. Thompson, 130
P. 2d. 237; Board of Com'rs of Kingfisher County vs. Shutter, 281 P. 222; State vs.
Blake, 280 P. 388; In re Fudula, 147 A. 67; State vs. Ward, 43 S.W. 2d. 217).
The underlying theory is that each term is separate from other terms x x x.272

Second, an elective official's re-election serves as a condonation of previous

misconduct, thereby cutting the right to remove him therefor; and

[T]hat the reelection to office operates as a condonation of the officer's previous

misconduct to the extent of cutting off the right to remove him therefor. (43 Am. Jur. p.
45, citing Atty. Gen. vs. Hasty, 184 Ala. 121, 63 So. 559, 50 L.R.A. (NS)
553.273 (emphasis supplied)

Third, courts may not deprive the electorate, who are assumed to have known the life
and character of candidates, of their right to elect officers:

As held in Conant vs. Grogan (1887) 6 N.Y.S.R. 322, cited in 17 A.I.R. 281, 63 So. 559,
50 LRA (NS) 553 —
The Court should never remove a public officer for acts done prior to his present term of
office. To do otherwise would be to deprive the people of their right to elect their
officers. When the people have elected a man to office, it must be assumed that
they did this with knowledge of his life and character, and that they disregarded
or forgave his faults or misconduct, if he had been guilty of any. It is not for the
court, by reason of such faults or misconduct to practically overrule the will of the
people.274 (Emphases supplied)

1498
The notable cases on condonation following Pascual are as follows:

(1) Lizares v. Hechanova275 (May 17, 1966) - wherein the Court first applied the
condonation doctrine, thereby quoting the above-stated passages from Pascual in
verbatim.

(2) Insco v. Sanchez, et al.276 (December 18, 1967) - wherein the Court clarified that
the condonation doctrine does not apply to a criminal case. It was explained that a
criminal case is different from an administrative case in that the former involves the
People of the Philippines as a community, and is a public wrong to the State at large;
whereas, in the latter, only the populace of the constituency he serves is affected. In
addition, the Court noted that it is only the President who may pardon a criminal
offense.

(3) Aguinaldo v. Santos277 (Aguinaldo; August 21, 1992) - a case decided under the

1987 Constitution wherein the condonation doctrine was applied in favor of then
Cagayan Governor Rodolfo E. Aguinaldo although his re-election merely supervened
the pendency of, the proceedings.

(4) Salalima v. Guinsona, Jr.278 (Salalima; May 22, 1996) -wherein the

Court reinforced the condonation doctrine by stating that the same is justified by
"sound public policy." According to the Court, condonation prevented the elective
official from being "hounded" by administrative cases filed by his "political enemies"
during a new term, for which he has to defend himself "to the detriment of public
service." Also, the Court mentioned that the administrative liability condoned by re-
election covered the execution of the contract and the incidents related therewith. 279

(5) Mayor Garcia v. Mojica280 (Mayor Garcia; September 10, 1999) - wherein the

benefit of the doctrine was extended to then Cebu City Mayor Alvin B. Garcia who was
administratively charged for his involvement in an anomalous contract for the supply of
asphalt for Cebu City, executed only four (4) days before the upcoming elections. The
Court ruled that notwithstanding the timing of the contract's execution, the electorate is
presumed to have known the petitioner's background and character, including his past
misconduct; hence, his subsequent re-election was deemed a condonation of his prior
transgressions. More importantly, the Court held that the determinative time element in
applying the condonation doctrine should be the time when the contract was
perfected; this meant that as long as the contract was entered into during a prior
term, acts which were done to implement the same, even if done during a
succeeding term, do not negate the application of the condonation doctrine in
favor of the elective official.

(6) Salumbides, Jr. v. Office of the Ombudsman 281 (Salumbides, Jr.; April 23, 2010) -
wherein the Court explained the doctrinal innovations in the Salalima and Mayor
Garcia rulings, to wit:

1499
Salalima v. Guingona, Jr. and Mayor Garcia v. Hon. Mojica reinforced the doctrine. The
condonation rule was applied even if the administrative complaint was not filed
before the reelection of the public official, and even if the alleged misconduct
occurred four days before the elections, respectively. Salalima did not distinguish
as to the date of filing of the administrative complaint, as long as the alleged misconduct
was committed during the prior term, the precise timing or period of which Garcia did
not further distinguish, as long as the wrongdoing that gave rise to the public official's
culpability was committed prior to the date of reelection. 282 (Emphasis
supplied)ChanRoblesVirtualawlibrary

The Court, citing Civil Service Commission v. Sojor,283 also clarified that the

condonation doctrine would not apply to appointive officials since, as to them,
there is no sovereign will to disenfranchise.

(7) And finally, the above discussed case of Governor Garcia, Jr. -wherein the Court
remarked that it would have been prudent for the appellate court therein to have issued
a temporary restraining order against the implementation of a preventive suspension
order issued by the Ombudsman in view of the condonation doctrine.

A thorough review of the cases post-1987, among others, Aguinaldo, Salalima, Mayor

Garcia, and Governor Garcia, Jr. - all cited by the CA to justify its March 16, 2015 and
April 6, 2015 Resolutions directing the issuance of the assailed injunctive writs - would
show that the basis for condonation under the prevailing constitutional and statutory
framework was never accounted for. What remains apparent from the text of these
cases is that the basis for condonation, as jurisprudential doctrine, was - and still
remains - the above-cited postulates of Pascual, which was lifted from rulings of US
courts where condonation was amply supported by their own state laws. With respect to
its applicability to administrative cases, the core premise of condonation - that is, an
elective official's re-election cuts qff the right to remove him for an administrative offense
committed during a prior term - was adopted hook, line, and sinker in our jurisprudence
largely because the legality of that doctrine was never tested against existing legal
norms. As in the US, the propriety of condonation is - as it should be -dependent on the
legal foundation of the adjudicating jurisdiction. Hence, the Court undertakes an
examination of our current laws in order to determine if there is legal basis for the
continued application of the doctrine of condonation.

The foundation of our entire legal system is the Constitution. It is the supreme law of the
land;284 thus, the unbending rule is that every statute should be read in light of the
Constitution.285 Likewise, the Constitution is a framework of a workable government;
hence, its interpretation must take into account the complexities, realities, and politics
attendant to the operation of the political branches of government. 286

As earlier intimated, Pascual was a decision promulgated in 1959. Therefore, it was

decided within the context of the 1935 Constitution which was silent with respect to
public accountability, or of the nature of public office being a public trust. The provision
in the 1935 Constitution that comes closest in dealing with public office is Section 2,

1500
Article II which states that "[t]he defense of the State is a prime duty of government, and
in the fulfillment of this duty all citizens may be required by law to render personal
military or civil service."287 Perhaps owing to the 1935 Constitution's silence on public
accountability, and considering the dearth of jurisprudential rulings on the matter, as
well as the variance in the policy considerations, there was no glaring objection
confronting the Pascual Court in adopting the condonation doctrine that originated from
select US cases existing at that time.

With the advent of the 1973 Constitution, the approach in dealing with public officers
underwent a significant change. The new charter introduced an entire article on
accountability of public officers, found in Article XIII. Section 1 thereof positively
recognized, acknowledged, and declared that "[p]ublic office is a public trust."
Accordingly, "[p]ublic officers and employees shall serve with the highest degree
of responsibility, integrity, loyalty and efficiency, and shall remain accountable to
the people."

After the turbulent decades of Martial Law rule, the Filipino People have framed and
adopted the 1987 Constitution, which sets forth in the Declaration of Principles and
State Policies in Article II that "[t]he State shall maintain honesty and integrity in the
public service and take positive and effective measures against graft and
corruption."288 Learning how unbridled power could corrupt public servants under the
regime of a dictator, the Framers put primacy on the integrity of the public service by
declaring it as a constitutional principle and a State policy. More significantly, the 1987
Constitution strengthened and solidified what has been first proclaimed in the 1973
Constitution by commanding public officers to be accountable to the people at all times:

Section 1. Public office is a public trust. Public officers and employees must at all
times be accountable to the people, serve them with utmost responsibility,
integrity, loyalty, and efficiency and act with patriotism and justice, and lead
modest lives.ChanRoblesVirtualawlibrary

In Belgica, it was explained that:

[t]he aphorism forged under Section 1, Article XI of the 1987 Constitution, which states
that "public office is a public trust," is an overarching reminder that every instrumentality
of government should exercise their official functions only in accordance with the
principles of the Constitution which embodies the parameters of the people's trust. The
notion of a public trust connotes accountability x x x.289 (Emphasis
supplied)ChanRoblesVirtualawlibrary

The same mandate is found in the Revised Administrative Code under the section of the
Civil Service Commission,290 and also, in the Code of Conduct and Ethical Standards for
Public Officials and Employees.291

For local elective officials like Binay, Jr., the grounds to discipline, suspend or
remove an elective local official from office are stated in Section 60 of Republic

1501
Act No. 7160,292 otherwise known as the "Local Government Code of 1991" (LGC),
which was approved on October 10 1991, and took effect on January 1, 1992:

Section 60. Grounds for Disciplinary Action. - An elective local official may be

disciplined, suspended, or removed from office on any of the r following
grounds:chanRoblesvirtualLawlibrary
(a) Disloyalty to the Republic of the Philippines;cralawlawlibrary
(b) Culpable violation of the Constitution;cralawlawlibrary
(c) Dishonesty, oppression, misconduct in office, gross negligence, or dereliction of
duty;cralawlawlibrary
(d) Commission of any offense involving moral turpitude or an offense punishable by at
least prision mayor;cralawlawlibrary
(e) Abuse of authority;cralawlawlibrary
(f) Unauthorized absence for fifteen (15) consecutive working days, except in the case
of members of the sangguniang panlalawigan, sangguniang panlunsod, sanggunian
bayan, and sangguniang barangay;cralawlawlibrary
(g) Application for, or acquisition of, foreign citizenship or residence or the status of an
immigrant of another country; and
(h) Such other grounds as may be provided in this Code and other laws.
An elective local official may be removed from office on the grounds enumerated above
by order of the proper court.

Related to this provision is Section 40 (b) of the LGC which states that those

removed from office as a result of an administrative case shall be disqualified
from running for any elective local position:

Section 40. Disqualifications. - The following persons are disqualified from running for
any elective local position:

xxxx

(b) Those removed from office as a result of an administrative case;

x x x x (Emphasis supplied)ChanRoblesVirtualawlibrary

In the same sense, Section 52 (a) of the RRACCS provides that the penalty of
dismissal from service carries the accessory penalty of perpetual disqualification
from holding public office:

Section 52. - Administrative Disabilities Inherent in Certain Penalties. -

a. The penalty of dismissal shall carry with it cancellation of eligibility,

forfeiture of retirement benefits, perpetual disqualification from holding
public office, and bar from taking the civil service examinations.

1502
In contrast, Section 66 (b) of the LGC states that the penalty of suspension shall not
exceed the unexpired term of the elective local official nor constitute a bar to his
candidacy for as long as he meets the qualifications required for the office. Note,
however, that the provision only pertains to the duration of the penalty and its effect on
the official's candidacy. Nothing therein states that the administrative liability
therefor is extinguished by the fact of re-election:

Section 66. Form and Notice of Decision. - x x x.

xxxx

(b) The penalty of suspension shall not exceed the unexpired term of the respondent or
a period of six (6) months for every administrative offense, nor shall said penalty be a
bar to the candidacy of the respondent so suspended as long as he meets the
qualifications required for the office.

Reading the 1987 Constitution together with the above-cited legal provisions now leads
this Court to the conclusion that the doctrine of condonation is actually bereft of legal
bases.

To begin with, the concept of public office is a public trust and the corollary
requirement of accountability to the people at all times, as mandated under the
1987 Constitution, is plainly inconsistent with the idea that an elective local official's
administrative liability for a misconduct committed during a prior term can be wiped off
by the fact that he was elected to a second term of office, or even another elective
post. Election is not a mode of condoning an administrative offense, and there is
simply no constitutional or statutory basis in our jurisdiction to support the notion that an
official elected for a different term is fully absolved of any administrative liability arising
from an offense done during a prior term. In this jurisdiction, liability arising from
administrative offenses may be condoned bv the President in light of Section 19,
Article VII of the 1987 Constitution which was interpreted in Llamas v. Orbos293 to apply
to administrative offenses:

The Constitution does not distinguish between which cases executive clemency may be
exercised by the President, with the sole exclusion of impeachment cases. By the same
token, if executive clemency may be exercised only in criminal cases, it would indeed
be unnecessary to provide for the exclusion of impeachment cases from the coverage
of Article VII, Section 19 of the Constitution. Following petitioner's proposed
interpretation, cases of impeachment are automatically excluded inasmuch as the same
do not necessarily involve criminal offenses.

In the same vein, We do not clearly see any valid and convincing , reason why the
President cannot grant executive clemency in administrative cases. It is Our considered
view that if the President can grant reprieves, commutations and pardons, and remit

1503
fines and forfeitures in criminal cases, with much more reason can she grant executive
clemency in administrative cases, which are clearly less serious than criminal offenses.

Also, it cannot be inferred from Section 60 of the LGC that the grounds for discipline
enumerated therein cannot anymore be invoked against an elective local official to hold
him administratively liable once he is re-elected to office. In fact, Section 40 (b) of the
LGC precludes condonation since in the first place, an elective local official who is
meted with the penalty of removal could not be re-elected to an elective local position
due to a direct disqualification from running for such post. In similar regard, Section 52
(a) of the RRACCS imposes a penalty of perpetual disqualification from holding public
office as an accessory to the penalty of dismissal from service.

To compare, some of the cases adopted in Pascual were decided by US State

jurisdictions wherein the doctrine of condonation of administrative liability was supported
by either a constitutional or statutory provision stating, in effect, that an officer cannot
be removed by a misconduct committed during a previous term,294 or that
the disqualification to hold the office does not extend beyond the term in which
the official's delinquency occurred.295 In one case,296 the absence of a provision
against the re-election of an officer removed - unlike Section 40 (b) of the LGC-was the
justification behind condonation. In another case, 297 it was deemed that condonation
through re-election was a policy under their constitution - which adoption in this
jurisdiction runs counter to our present Constitution's requirements on public
accountability. There was even one case where the doctrine of condonation was not
adjudicated upon but only invoked by a party as a ground; 298 while in another case,
which was not reported in full in the official series, the crux of the disposition was that
the evidence of a prior irregularity in no way pertained to the charge at issue and
therefore, was deemed to be incompetent. 299 Hence, owing to either their variance or
inapplicability, none of these cases can be used as basis for the continued adoption of
the condonation doctrine under our existing laws.

At best, Section 66 (b) of the LGC prohibits the enforcement of the penalty of

suspension beyond the unexpired portion of the elective local official's prior term, and
likewise allows said official to still run for re-election This treatment is similar to People
ex rel Bagshaw v. Thompson300 and Montgomery v. Novell301 both cited
in Pascual, wherein it was ruled that an officer cannot be suspended for a misconduct
committed during a prior term. However, as previously stated, nothing in Section 66 (b)
states that the elective local official's administrative liability is extinguished by the fact of
re-election. Thus, at all events, no legal provision actually supports the theory that the
liability is condoned.

Relatedly it should be clarified that there is no truth in Pascual's postulation that the

courts would be depriving the electorate of their right to elect their officers if condonation
were not to be sanctioned. In political law, election pertains to the process by which a
particular constituency chooses an individual to hold a public office. In this jurisdiction,
there is, again, no legal basis to conclude that election automatically implies
condonation. Neither is there any legal basis to say that every democratic and

1504
republican state has an inherent regime of condonation. If condonation of an elective
official's administrative liability would perhaps, be allowed in this jurisdiction, then the
same should have been provided by law under our governing legal mechanisms. May it
be at the time of Pascual or at present, by no means has it been shown that such a law,
whether in a constitutional or statutory provision, exists. Therefore, inferring from this
manifest absence, it cannot be said that the electorate's will has been abdicated.

Equally infirm is Pascual's proposition that the electorate, when re-electing a local

official, are assumed to have done so with knowledge of his life and character, and that
they disregarded or forgave his faults or misconduct, if he had been guilty of any.
Suffice it to state that no such presumption exists in any statute or procedural
rule.302 Besides, it is contrary to human experience that the electorate would have full
knowledge of a public official's misdeeds. The Ombudsman correctly points out the
reality that most corrupt acts by public officers are shrouded in secrecy, and concealed
from the public. Misconduct committed by an elective official is easily covered up,
and is almost always unknown to the electorate when they cast their votes.303 At a
conceptual level, condonation presupposes that the condoner has actual knowledge of
what is to be condoned. Thus, there could be no condonation of an act that is
unknown. As observed in Walsh v. City Council of Trenton304 decided by the New
Jersey Supreme Court:

Many of the cases holding that re-election of a public official prevents his removal for
acts done in a preceding term of office are reasoned out on the theory of condonation.
We cannot subscribe to that theory because condonation, implying as it does
forgiveness, connotes knowledge and in the absence of knowledge there can be no
condonation. One cannot forgive something of which one has no knowledge.

That being said, this Court simply finds no legal authority to sustain the condonation
doctrine in this jurisdiction. As can be seen from this discourse, it was a doctrine
adopted from one class of US rulings way back in 1959 and thus, out of touch from -
and now rendered obsolete by - the current legal regime. In consequence, it is high time
for this Court to abandon the condonation doctrine that originated from Pascual, and
affirmed in the cases following the same, such as Aguinaldo, Salalima, Mayor
Garcia, and Governor Garcia, Jr. which were all relied upon by the CA.

It should, however, be clarified that this Court's abandonment of the condonation

doctrine should be prospective in application for the reason that judicial decisions
applying or interpreting the laws or the Constitution, until reversed, shall form part of the
legal system of the Philippines.305 Unto this Court devolves the sole authority to interpret
what the Constitution means, and all persons are bound to follow its interpretation. As
explained in De Castro v. Judicial Bar Council.306

Judicial decisions assume the same authority as a statute itself and, until authoritatively
abandoned, necessarily become, to the extent that they are applicable, the criteria that
must control the actuations, not only of those called upon to abide by them, but also of
those duty-bound to enforce obedience to them.307

1505
Hence, while the future may ultimately uncover a doctrine's error, it should be, as a
general rule, recognized as "good law" prior to its abandonment. Consequently, the
people's reliance thereupon should be respected. The landmark case on this matter
is People v. Jabinal,308 wherein it was ruled:

[W]hen a doctrine of this Court is overruled and a different view is adopted, the new
doctrine should be applied prospectively, and should not apply to parties who had relied
on the old doctrine and acted on the faith thereof.

Later, in Spouses Benzonan v. CA,309 it was further elaborated:

[Pursuant to Article 8 of the Civil Code "judicial decisions applying or interpreting the
laws or the Constitution shall form a part of the legal system of the Philippines." But
while our decisions form part of the law of the land, they are also subject to Article 4 of
the Civil Code which provides that "laws shall have no retroactive effect unless the
contrary is provided." This is expressed in the familiar legal maxim lex prospicit, non
respicit, the law looks forward not backward. The rationale against retroactivity is easy
to perceive. The retroactive application of a law usually divests rights that have already
become vested or impairs the obligations of contract and hence, is
unconstitutional.310ChanRoblesVirtualawlibrary

Indeed, the lessons of history teach us that institutions can greatly benefit from
hindsight and rectify its ensuing course. Thus, while it is truly perplexing to think that a
doctrine which is barren of legal anchorage was able to endure in our jurisprudence for
a considerable length of time, this Court, under a new membership, takes up the
cudgels and now abandons the condonation doctrine.

E. Consequence of ruling.

As for this section of the Decision, the issue to be resolved is whether or not
the CA committed grave abuse of discretion amounting to lack or excess of
jurisdiction in issuing the assailed injunctive writs.

It is well-settled that an act of a court or tribunal can only be considered as with grave
abuse of discretion when such act is done in a capricious or whimsical exercise of
judgment as is equivalent to lack of jurisdiction. The abuse of discretion must be so
patent and gross as to amount to an evasion of a positive duty or to a virtual refusal to
perform a duty enjoined by law, or to act at all in contemplation of law, as where the
power is exercised in an arbitrary and despotic manner by reason of passion and
hostility.311 It has also been held that "grave abuse of discretion arises when a lower
court or tribunal patently violates the Constitution, the law or existing
jurisprudence."312

As earlier established, records disclose that the CA's resolutions directing the issuance
of the assailed injunctive writs were all hinged on cases enunciating the condonation

1506
doctrine. To recount, the March 16, 2015 Resolution directing the issuance of the
subject TRO was based on the case of Governor Garcia, Jr., while the April 6, 2015
Resolution directing the issuance of the subject WPI was based on the cases
of Aguinaldo, Salalima, Mayor Garcia, and again, Governor Garcia, Jr. Thus, by merely
following settled precedents on the condonation doctrine, which at that time, unwittingly
remained "good law," it cannot be concluded that the CA committed a grave abuse of
discretion based on its legal attribution above. Accordingly, the WPI against the
Ombudsman's preventive suspension order was correctly issued.

With this, the ensuing course of action should have been for the CA to resolve the main
petition for certiorari in CA-G.R. SP No. 139453 on the merits. However, considering
that the Ombudsman, on October 9, 2015, had already found Binay, Jr. administratively
liable and imposed upon him the penalty of dismissal, which carries the accessory
penalty of perpetual disqualification from holding public office, for the present
administrative charges against him, the said CA petition appears to have been
mooted.313 As initially intimated, the preventive suspension order is only an ancillary
issuance that, at its core, serves the purpose of assisting the Office of the Ombudsman
in its investigation. It therefore has no more purpose - and perforce, dissolves - upon the
termination of the office's process of investigation in the instant administrative case.

F. Exceptions to the mootness principle.

This notwithstanding, this Court deems it apt to clarify that the mootness of the issue
regarding the validity of the preventive suspension order subject of this case does not
preclude any of its foregoing determinations, particularly, its abandonment of the
condonation doctrine. As explained in Belgica, '"the moot and academic principle' is not
a magical formula that can automatically dissuade the Court in resolving a case. The
Court will decide cases, otherwise moot, if: first, there is a grave violation of the
Constitution; second, the exceptional character of the situation and the paramount
public interest is involved; third, when the constitutional issue raised requires
formulation of controlling principles to guide the bench, the bar, and the public;
and fourth, the case is capable of repetition yet evading review." 314 All of these
scenarios obtain in this case:

First, it would be a violation of the Court's own duty to uphold and defend the
Constitution if it were not to abandon the condonation doctrine now that its infirmities
have become apparent. As extensively discussed, the continued application of the
condonation doctrine is simply impermissible under the auspices of the present
Constitution which explicitly mandates that public office is a public trust and that public
officials shall be accountable to the people at all times.

Second, the condonation doctrine is a peculiar jurisprudential creation that has

persisted as a defense of elective officials to escape administrative liability. It is the first
time that the legal intricacies of this doctrine have been brought to light; thus, this is a
situation of exceptional character which this Court must ultimately resolve. Further,
since the doctrine has served as a perennial obstacle against exacting public

1507
accountability from the multitude of elective local officials throughout the years, it is
indubitable that paramount public interest is involved.

Third, the issue on the validity of the condonation doctrine clearly requires the
formulation of controlling principles to guide the bench, the bar, and the public. The
issue does not only involve an in-depth exegesis of administrative law principles, but
also puts to the forefront of legal discourse the potency of the accountability provisions
of the 1987 Constitution. The Court owes it to the bench, the bar, and the public to
explain how this controversial doctrine came about, and now, its reasons for
abandoning the same in view of its relevance on the parameters of public office.

And fourth, the defense of condonation has been consistently invoked by elective local
officials against the administrative charges filed against them. To provide a sample size,
the Ombudsman has informed the Court that "for the period of July 2013 to December
2014 alone, 85 cases from the Luzon Office and 24 cases from the Central Office were
dismissed on the ground of condonation. Thus, in just one and a half years, over a
hundred cases of alleged misconduct - involving infractions such as dishonesty,
oppression, gross neglect of duty and grave misconduct - were placed beyond the
reach of the Ombudsman's investigatory and prosecutorial powers." 315 Evidently, this
fortifies the finding that the case is capable of repetition and must therefore, not evade
review.

In any event, the abandonment of a doctrine is wholly within the prerogative of the
Court. As mentioned, it is its own jurisprudential creation and may therefore, pursuant to
its mandate to uphold and defend the Constitution, revoke it notwithstanding
supervening events that render the subject of discussion moot.chanrobleslaw

V.

With all matters pertaining to CA-G.R. SP No. 139453 passed upon, the Court now
rules on the final issue on whether or not the CA's Resolution 316 dated March 20, 2015
directing the Ombudsman to comment on Binay, Jr.'s petition for contempt in CA-G.R.
SP No. 139504 is improper and illegal.

The sole premise of the Ombudsman's contention is that, as an impeachable officer,

she cannot be the subject of a charge for indirect contempt 317 because this action is
criminal in nature and the penalty therefor would result in her effective removal from
office.318 However, a reading of the aforesaid March 20, 2015 Resolution does not show
that she has already been subjected to contempt proceedings. This issuance, in? fact,
makes it clear that notwithstanding the directive for the Ombudsman to comment, the
CA has not necessarily given due course to Binay, Jr.'s contempt petition:

Without necessarily giving due course to the Petition for Contempt respondents

[Hon. Conchita Carpio Morales, in her capacity as the Ombudsman, and the
Department of Interior and Local Government] are hereby DIRECTED to file Comment
on the Petition/Amended and Supplemental Petition for Contempt (CA-G.R. SP No.

1508
139504) within an inextendible period of three (3) days from receipt hereof. (Emphasis
and underscoring supplied)ChanRoblesVirtualawlibrary

Thus, even if the Ombudsman accedes to the CA's directive by filing a comment,
wherein she may properly raise her objections to the contempt proceedings by virtue of
her being an impeachable officer, the CA, in the exercise of its sound judicial discretion,
may still opt not to give due course to Binay, Jr.'s contempt petition and accordingly,
dismiss the same. Sjmply put, absent any indication that the contempt petition has been
given due course by the CA, it would then be premature for this Court to rule on the
issue. The submission of the Ombudsman on this score is perforce denied.

WHEREFORE, the petition is PARTLY GRANTED. Under the premises of this

Decision, the Court resolves as follows:

(a) the second paragraph of Section 14 of Republic Act No. 6770 is

declared UNCONSTITUTIONAL, while the policy against the issuance of provisional
injunctive writs by courts other than the Supreme Court to enjoin an investigation
conducted by the Office of the Ombudsman under the first paragraph of the said
provision is DECLARED ineffective until the Court adopts the same as part of the rules
of procedure through an administrative circular duly issued therefor;cralawlawlibrary

(b) The condonation doctrine is ABANDONED, but the abandonment

is PROSPECTIVE in effect;cralawlawlibrary

(c) The Court of Appeals (CA) is DIRECTED to act on respondent Jejomar Erwin S.
Binay, Jr.'s (Binay, Jr.) petition for certiorari in CA-G.R. SP No. 139453 in light of the
Office of the Ombudsman's supervening issuance of its Joint Decision dated October 9,
2015 finding Binay, Jr. administratively liable in the six (6) administrative complamts,
docketed as OMB-C-A-15-0058, OMB-C-A-15-0059, OMB-C-A-15-0060, OMB-C-A-15-
0061, OMB-C-A-15-0062, and OMB-C-A-15-0063; and

(d) After the filing of petitioner Ombudsman Conchita Carpio Morales's comment, the
CA is DIRECTED to resolve Binay, Jr.'s petition for contempt in CA-G.R. SP No.
139504 with utmost dispatch.

SO ORDERED.chanroblesvirtuallawlibrary
SECOND DIVISION
[ G.R. No. 182944, November 09, 2016 ]
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH), REPRESENTED BY
SEC. HERMOGENES E. EBDANE, JR, AND METROPOLITAN MANILA
DEVELOPMENT AUTHORITY, REPRESENTED BY CHAIRMAN BAYANI F.
FERNANDO, PETITIONERS, VS. CITY ADVERTISING VENTURES CORPORATION,
REPRESENTED BY DEXTER Y. LIM, RESPONDENT.

DECISION

1509
LEONEN, J.:
For a writ of preliminary injunction to be issued, the applicant must show, by prima facie
evidence, an existing right before trial, a material and substantial invasion of this right,
and that a writ of preliminary injunction is necessary to prevent irreparable injury.

This resolves a Petition for Review on Certiorari [1] praying that the assailed December 3,
2007[2] and May 14, 2008[3] Resolutions of the Court of Appeals in CA G.R. SP No.
101420 be set aside; and that Branch 66 of the Regional Trial Court of Makati City be
prohibited from conducting further proceedings in Civil Case No. 06-899. [4] The Petition
also prays that the Regional Trial Court be ordered to dismiss Civil Case No. 06-899. [5]

The Court of Appeals' December 3, 2007 Resolution denied petitioners Department of

Public Works and Highways and the Metropolitan Manila Development Authority's
Petition for Certiorari and Prohibition,[6] which sought to annul the Regional Trial Court's
November 21, 2006[7] and April 11, 2007[8] Orders in Civil Case No. 06-899. The Court of
Appeals' May 14, 2008 Resolution denied the Motion for Reconsideration of the
Department of Public Works and Highways and the Metropolitan Manila Development
Authority.[9]

The Regional Trial Court's November 21, 2006 Order granted City Advertising Ventures
Corporation's prayer for the issuance of a writ of preliminary injunction in its Complaint
for "Violation of [Administrative Order No.] 160, Tort, [and] Injunction," [10] which was
docketed as Civil Case No. 06-899. The April 11, 2007 Order of the Regional Trial Court
denied the Department of Public Works and Highways and the Metropolitan Manila
Development Authority's Omnibus Motion, [11] which sought reconsideration of its
November 21, 2006 Order.

Respondent City Advertising Ventures Corporation is a company engaged in the

advertising business, such as putting up banners and signages within Metro Manila. [12]

On December 28, 2005, City Advertising Ventures Corporation entered into a lease
agreement with the MERALCO Financing Services Corporation [13] for the use of 5,000 of
Manila Electric Company's (MERALCO) lampposts to display advertising banners.
[14]
 Under this contract, City Advertising Ventures Corporation obtained sign permits from
Quezon City's Department of Engineering, Office of the Building Official, Signboard
Permit Section.[15] It obtained similar permits for the cities of Pasay and Makati. [16] City
Advertising Ventures Corporation likewise obtained permits for setting up pedestrian
overpass banners in Quezon City.[17]

When Typhoon Milenyo hit in September 2006, several billboards in Metro Manila were
blown by strong winds and fell. In its wake, Former President Gloria Macapagal-Arroyo,
through Executive Secretary Eduardo R. Ermita, issued Administrative Order No.
160[18] dated October 4, 2006 "[d]irecting the Department of Public Works and Highways
to conduct field investigations, evaluations and assessments of all billboards and
determine those that are hazardous and pose imminent danger to life, health, safety
and property of the general public and to abate and dismantle the same." [19] Six (6) days

1510
later, on October 10, 2006, Administrative Order No. 160-A [20] was issued,
supplementing Administrative Order No. 160 and "[s]pecifying the legal grounds and
procedures for the prohibition and abatement of billboards and signboards constituting
public nuisance or other violations of law." [21]

Section 1 of Administrative Order No. 160 laid out instructions to the Department of
Public Works and Highways, as follows:

SECTION 1. Tasks of the DPWH. The DPWH is hereby tasked to:

1.1. Conduct field inspection and determine (a) billboards posing imminent danger or
threat to the life, health, safety and property of the public; (b) billboards violating
applicable laws, rules and regulations; (c) billboards constructed within the easement of
road right-of-way; and (d) billboards constructed without the necessary permit. Priority
shall be given to billboards located along major roads in Metro Manila and other cities
and other national highways and major thoroughfares, as determined by DPWH;

1.2. Upon evaluation and assessment, issue a certification as to those billboards found
to be hazardous and violative of existing standards prescribed by the National Building
Code, Structural Code of the Philippines and other related legal issuances furnishing
copy [sic] of the certification to the LGUs concerned which have jurisdiction over the
location of the billboards;

1.3. Abate and dismantle those billboards, commercial or non-commercial, constructed

on private or public properties found to be falling under any and all grounds enumerated
in paragraph 1.1. above;

1.4. Submit a detailed written report to the Department of Justice (DOJ) to serve as
basis for the possible filing of appropriate civil or criminal cases;

1.5. Call upon the Philippine National Police (PNP) to provide assistance in the
dismantling of billboards and other off-site signs declared as covered under paragraph
1.1. above.[22]

Section 2 of Administrative Order No. 160 provided that the Department of Public Works
and Highways shall be assisted by the Metro Manila Development Authority and by
local government units:

SECTION 2. Assistance by MMDA and LGUs. The Metropolitan Manila Development

Authority (MMDA) and/or the concerned LGUs are hereby directed to give full support
and assistance to the DPWH for the immediate inspection, assessment and abatement
of billboards found to be hazardous and violative of the National Building Code,
Structural Code of the Philippines and other related issuances. [23]

Proceeding from Articles 694,[24] 695,[25] and 699[26] of the Civil Code, Administrative

1511
Order No. 160-A identified the remedies available to the Department of Public Works
and Highways:

SECTION 4. Remedies Against Public Nuisance. Pursuant to Article 699 of the Civil
Code, in relation to AO No. 160, dated October 4, 2006, the Department of Public
Works and Highways (DPWH), through its Secretary, with the help of the Metropolitan
Manila Development Authority (MMDA), and the various local government units (LGUs),
through the local Building Officials, shall take care that one or all of the following
remedies against public nuisances are availed of:

(a) A prosecution under the Revised Penal Code or any local ordinance; or
(b) A civil action; or
(c) Abatement, without judicial proceedings, if the local Building Official determines that
this is the best remedy under the circumstances. [27]

On October 6, 2006, the Department of Public Works and Highways announced that
they would start dismantling billboards. [28] During its operations, it was able to remove
250 of City Advertising Ventures Corporation's lamppost banners and frames, 12
pedestrian overpass banners, 17 pedestrian overpass frames, and 36 halogen lamps. [29]

City Advertising Ventures Corporation then filed before the Regional Trial Court of
Makati City its Complaint for "Violation of [Administrative Order No.] 160, Tort, [and]
Injunction with Prayer for [Temporary Restraining Order], Preliminary Injunction, and
Preliminary Mandatory Injunction"[30] dated October 18, 2006.

Asserting that Administrative Order No. 160 pertained specifically to "billboards" (i.e.,
"large panel[s] that carr[y] outdoor advertising") and not to small advertising fixtures
such as its signages and banners, City Advertising Ventures Corporation claimed that
the Department of Public Works and Highways exceeded its authority when it
dismantled its banners and other fixtures.[31] It also claimed that the Department of
Public Works and Highways "seriously impeded the pursuit of [its] legitimate business
and ... unlawfully deprived [it] of property, income and income opportunities ... without
due process of law,"[32] violated Articles 19,[33] 20,[34] 21[35] and 32(2), (6), and (8)[36] of the
Civil Code, and impaired contractual obligations. [37]

After conducting summary hearings on October 25 and 30, 2006, Branch 66 of the
Regional Trial Court of Makati City issued the Order [38] dated October 31, 2006 granting
City Advertising Ventures Corporation's prayer for a temporary restraining order. This
Order stated:

Such being the case, the Court is left with no recourse but to GRANT the Temporary
Restraining Order from [sic] a period of twenty (20) days from today.

ACCORDINGLY, the defendants are hereby restrained from further removing,

dismantling, and confiscating any of plaintiff's lamppost and pedestrian overpass
1512
banners.

In the meantime, let the hearing on the plaintiff's application for Writ of Preliminary
Injunction [be set] on November 8, 2006 at 2:00 p.m.

Let a copy of this order be served upon the defendants at the expense of the plaintiff
through the Process Server of this Court.

SO ORDERED.[39]

In the Order[40] dated November 21, 2006, the Regional Trial Court granted City
Advertising Ventures Corporation's prayer for the issuance of a writ of preliminary
injunction:

Wherefore, plaintiff's prayer for the issuance of a writ or preliminary injunction is

granted. Accordingly, let a writ of injunction issue upon the filing by the plaintiff of a
bond in the amount of PESOS ONE HUNDRED THOUSAND (P100,000.00) executed
to the defendants to the effect that the plaintiff will pay all damages defendants may
suffer by reason of this injunction should the Court finally decide that the plaintiff is not
entitled thereto. The defendants, their agents and representatives are hereby ordered to
cease and desist from further removing, dismantling and confiscating any of plaintiff's
lamppost and pedestrian overpass banners.

Let the hearing on the main case be set on January 23, 2006 [sic] at 8:30 in the
morning.

SO ORDERED.[41]

In response, the Department of Public Works and Highways and the Metropolitan
Manila Development Authority filed an Omnibus Motion for Reconsideration and
Clarification of the November 21, 2006 Order and for the Dissolution of the Writ of
Preliminary Injunction.[42] They asserted that City Advertising Ventures Corporation
failed to show a clear legal right worthy of protection and that it did not stand to suffer
grave and irreparable injury.[43] They likewise asserted that the Regional Trial Court
exceeded its authority in issuing a writ of preliminary injunction. [44]

In the Order[45] dated April 11, 2007, the Regional Trial Court denied the Omnibus
Motion.

Thereafter, the Department of Public Works and Highways and the Metropolitan Manila
Department Authority filed before the Court of Appeals a Petition for Certiorari and
Prohibition.[46] In its assailed December 3, 2007 Resolution,[47] the Court of Appeals
denied the Petition. In its assailed May 14, 2008 Resolution, [48] the Court of Appeals
denied the Motion for Reconsideration.

1513
Hence, this Petition[49] was filed.

On November 3, 2008, respondent City Advertising Ventures Corporation filed its

Comment.[50] On April 14, 2009, petitioners filed their Reply. [51]

In the Resolution[52] dated July 7, 2010, this Court issued a temporary restraining order
enjoining the implementation of the Regional Trial Court's November 21, 2006 and April
11, 2007 Orders, as well as of a subsequent May 21, 2010 Order, which reiterated the
trial court's November 21, 2006 and April 11, 2007 Orders.

For resolution is the sole issue of whether the Regional Trial Court gravely abused its
discretion in issuing its November 21, 2006 and April 11, 2007 Orders.

After seeking relief from the Court of Appeals through the remedy of a petition for
certiorari and prohibition under Rule 65 of the 1997 Rules of Civil Procedure, petitioners
come to this Court through a petition for review on certiorari under Rule 45. The
distinctions between Rule 65 and Rule 45 petitions have long been settled. A Rule 65
petition is an original action, independent of the action from which the assailed ruling
arose. A Rule 45 petition, on the other hand, is a mode of appeal. As such, it is a
continuation of the case subject of the appeal. In Sy v. Commission on Settlement of
Land Problems:[53]

[T]he remedy of certiorari under Rule 65 is not a component of the appeal process. It is
an original and independent action that is not a part of the trial which resulted in the
rendition of the judgment complained of. In contrast, the exercise of our appellate
jurisdiction refers to a process which is but a continuation of the original suit. [54]

As it is a mere continuation, a Rule 45 petition (apart from being limited to questions of

law) cannot go beyond the issues that were subject of the original action giving rise to it.
This is consistent with the basic precept that:

As a rule, no question will be entertained on appeal unless it has been raised in the
court below. Points of law, theories, issues and arguments not brought to the attention
of the lower court need not be, and ordinarily will not be, considered by a reviewing
court, as they cannot be raised for the first time at that late stage. Basic considerations
of due process impel this rule.[55]

Rule 45 petitions engendered by prior Rule 65 petitions for certiorari and/or prohibition
are, therefore, bound by the same basic issue at the crux of the prior Rule 65 petition,
that is, "issues of jurisdiction or grave abuse of discretion." [56] When Rule 45 petitions
are brought before this Court, they remain tethered to the "sole office" [57] of the original
action to which they owe their existence: "the correction of errors of jurisdiction including
the commission of grave abuse of discretion amounting to lack or excess of

1514
jurisdiction."[58]

When petitioners sought relief from the Court of Appeals, what they sought to remedy
was the Regional Trial Court's issuance of its November 21, 2006 and April 11, 2007
Orders. These were interlocutory orders pertaining to a temporary relief extended to
respondent, that is, a writ of preliminary injunction. These orders were not judgments
that completely disposed of Civil Case No. 06-899. They were not the Regional Trial
Court's final ruling on Civil Case No. 06-899. By the time petitioners sought redress from
the Court of Appeals (and even at the time of the filing of their appeal before this Court),
the Regional Trial Court had not yet even ruled on the merits of Civil Case No. 06-899.

The question before the Court of Appeals was, therefore, limited to the matter of
whether the Regional Trial Court's issuance of a writ of preliminary injunction was
tainted with grave abuse of discretion. On appeal from the original action brought before
the Court of Appeals, it is this same, singular issue that confronts us.

This Court cannot, at this juncture, entertain petitioners' prayer that the Regional Trial
Court be ordered to dismiss Civil Case No. 06-899. Ruling on the complete cessation of
a civil action on grounds other than those permitted by Rule 16 [59] of the 1997 Rules of
Civil Procedure (on motions to dismiss filed before the filing of an answer and before the
conduct of trial; on grounds such as supervening events that render a pending action
moot, unlitigable; or on grounds that render relief impracticable or impossible) compels
an examination of the merits of a case. The case must then be litigated—through trial,
reception of evidence, and examination of witnesses. This entire process will be
frustrated were this Court to rule on Civil Case No. 06-899's dismissal on the basis only
of allegations made in reference to provisional relief extended before trial even started.

In ruling on the propriety of the Regional Trial Court's issuance of a writ of preliminary
injunction, both the Court of Appeals and this Court are to be guided by the established
standard on what constitutes grave abuse of discretion:

By grave abuse of discretion is meant capricious and whimsical exercise of judgment as

is equivalent to lack of jurisdiction. Mere abuse of discretion is not enough. It must be
grave abuse of discretion as when the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, and must be so patent and so gross
as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of law. [60]

The sole question, then, is whether the Regional Trial Court, in issuing a writ of
preliminary injunction in favor of respondent, acted in a manner that was practically
bereft of or violative of legally acceptable standards.

We turn to the basic principles governing the Issuance of writs of preliminary injunction.

II

1515
A writ of preliminary injunction is issued in order to:

[P]revent threatened or continuous irremediable injury to some of the parties before

their claims can be thoroughly studied and adjudicated. Its sole aim is to preserve the
status quo until the merits of the case can be heard fully[.] Thus, it will be issued only
upon a showing of a clear and unmistakable right that is violated. Moreover, an urgent
necessity for its issuance must be shown by the applicant. [61] (Emphasis supplied)

Rule 58, Section 3 of the 1997 Rules of Civil Procedure identifies the instances when a
writ of preliminary injunction may be issued:

Section 3. Grounds for issuance of preliminary injunction. — A preliminary injunction

may be granted when it is established:

(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 act or acts
complained of, or in requiring 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, agency or a person is doing, threatening, or is 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.

As Marquez v. Sanchez[62] summarized, "the requisites of preliminary injunction whether

mandatory or prohibitory are the following":

(1) the applicant must have a clear and unmistakable right, that is a right in esse;
   
(2) there is a material and substantial invasion of such right;
   
(3) there is an urgent need for the writ to prevent irreparable injury to the applicant; and
   
(4) no other ordinary, speedy, and adequate remedy exists to prevent the infliction of
irreparable injury.[63] (Emphasis in the original)

1516
In satisfying these requisites, parties applying for a writ of preliminary injunction need
not set out their claims by complete and conclusive evidence. Prima facie evidence
suffices:

It is crystal clear that at the hearing for the issuance of a writ of preliminary
injunction, mere prima facie evidence is needed to establish the applicant's rights or
interests in the subject matter of the main action. It is not required that the applicant
should conclusively show that there was a violation of his rights as this issue will still be
fully litigated in the main case. Thus, an applicant for a writ is required only to show that
he has an ostensible right to the final relief prayed for in his complaint.[64]  (Emphasis
supplied)

Spouses Nisce v. Equitable PCI Bank[65] discussed the requisites, vis-a-vis the proof
required, for issuing a writ of preliminary injunction:

The plaintiff praying for a writ of preliminary injunction must further establish that he or
she has a present and unmistakable right to be protected; that the facts against which
injunction is directed violate such right; and there is a special and paramount necessity
for the writ to prevent serious damages. In the absence of proof of a legal right and the
injury sustained by the plaintiff, an order for the issuance of a writ of preliminary
injunction will be nullified. Thus, where the plaintiff's right is doubtful or disputed, a
preliminary injunction is not proper. The possibility of irreparable damage without proof
of an actual existing right is not a ground for a preliminary injunction.

However, to establish the essential requisites for a preliminary injunction, the evidence
to be submitted by the plaintiff need not be conclusive and complete. The plaintiffs are
only required to show that they have an ostensible right to the final relief prayed for in
their complaint. A writ of preliminary injunction is generally based solely on initial or
incomplete evidence. Such evidence need only be a sampling intended merely to give
the court an evidence of justification for a preliminary injunction pending the decision on
the merits of the case, and is not conclusive of the principal action which has yet to be
decided.[66]

Clearly, a writ of preliminary injunction is an ancillary and interlocutory order issued as a

result of an impartial determination of the context of both parties. It entails a procedure
for the judge to assess whether the reliefs prayed for by the complainant will be
rendered moot simply as a result of the parties' having to go through the full
requirements of a case being fully heard on its merits. Although a trial court judge is
given a latitude of discretion, he or she cannot grant a writ of injunction if there is no
clear legal right materially and substantially breached from a prima facie evaluation of
the evidence of the complainant. Even if this is present, the trial court must satisfy itself
that the injury to be suffered is irreparable.

1517
 III

Respondent satisfied the standards for the issuance of a writ of preliminary injunction.
The Regional Trial Court acted in keeping with these standards and did not gravely
abuse its discretion in extending temporary relief to respondent.

III.A

Petitioners have conceded that respondent entered into a lease agreement enabling the
latter to use MERALCO's lampposts to display advertising banners. [67] Respondent
obtained permits from the local government units of Makati, Pasay, and Quezon City so
that it could put up banners and signages on lampposts and pedestrian overpasses. [68]

There was no allegation nor contrary proof "[t]hat the ordinary course of business has
been followed."[69] Respondent must have obtained the customary permits and
clearances (e.g., Mayor's and business permits as well as registration with the
Securities and Exchange Commission and with the Bureau of Internal Revenue)
necessary to make itself a going concern.

Respondent's lease agreement with MERALCO Financing Services  Corporation and its
having secured permits from local government units, for the specific purpose of putting
up advertising banners and signages, gave it the right to put up such banners and
signages. Respondent had in its favor a property right, of which it cannot be deprived
without due process. This is respondent's right in esse, that is, an actual right. It is not
merely a right in posse, or a potential right.

III.B

Petitioners counter that respondent had no right to put up banners and signages. They
point out that on September 2, 2004, the Metro Manila Council passed MMDA
Regulation No. 04-004, "[p]rescribing guidelines on the installation and display of
billboards and advertising signs along major and secondary thoroughfares, avenues,
streets, roads, parks and open spaces within Metro Manila and providing penalties for
violation thereof."[70]

Section 13 of this Regulation identified the officers responsible for issuing clearances for
the installation of "billboards/signages and advertising signs," as follows:

Section 13. The MMDA, thru the Chairman or his duly authorized representative, shall
be the approving authority in the issuance of clearance in the installation of
billboards/signboards and advertising signs along major thoroughfares of Metro Manila.
Upon securing clearance from the MMDA, a permit from the Local Government Unit
must be secured. (The list of major thoroughfares is hereto attached as Appendix A of
this Regulation).

1518
The City/Municipal Mayor or his duly authorized representative shall be the approving
authority in the issuance of permit for the installation/posting billboards/signboards and
advertising signs along local roads and private properties of Metro Manila.

Petitioners claim that the dismantling of respondent's banners and signages was "[f]or
want of the required MMDA clearance(s) ... and for other violation[s] of MMDA
Regulation No. 04-004."[71] Petitioners also counter that "sidewalk and streetlight posts
are outside the commerce of men"[72] and, therefore, cannot be spaces for respondent's
commercial activities. They also claim that respondent's contract with MERALCO
Financing Services Corporation has since expired. [73] Petitioners likewise underscore
that the right to non-impairment of contracts "is limited by the exercise of the police
power of the State, in the interest of public health, safety, morals and general
welfare."[74]

Petitioners may subsequently and after trial prove that they are correct. A more
thorough examination of prevailing laws, ordinances, and pertinent regulations may later
on establish that the use of lampposts and pedestrian overpasses as platforms for
visual advertisements advancing private commercial interests contradict the public
character of certain spaces. Likewise, petitioners did subsequently adduce evidence
that, by December 29, 2006, respondent's contract with MERALCO Financing Services
Corporation had expired.[75] After trial, it may later on be found that respondent's
proprietary interest may be trumped by the general welfare.

However, at the point when the Regional Trial Court was confronted with respondents
prayer for temporary relief, all that respondent needed was a right ostensibly in
existence. Precisely, a writ of preliminary injunction is issued "before [parties'] claims
can be thoroughly studied and adjudicated." [76]

MMDA Regulation No. 04-004's clearance requirements appear to stand in contrast with
the permits obtained by respondent from the local government units of Makati, Pasay,
and Quezon City. Whether the permits suffice by themselves, or whether respondent's
alleged non-compliance with MMDA Regulation No. 04-004 is fatal to its cause, are
matters better resolved by a process more painstaking than the summary hearings
conducted purely for the purpose of extending provisional remedy.

The phrase "outside the commerce of men" [77] is not an incantation that can be invoked
to instantly establish the accuracy of petitioners' claims. 'Public spaces' are not a
monolithic, homogenous mass that is impervious to private activity. Determining
whether the specific locations where respondent conducts its business is absolutely
excluded from commercial activity requires more rigorous fact-finding and analysis.

Although "public health, safety, morals and general welfare" [78] may justify intrusion into
private commercial interests, the exercise of police power entails considerations of due
process, fitness, and propriety. Even when these considerations are invoked, they do

1519
not peremptorily and invariably set aside private property rights. When acting in view of
these considerations, state organs must still do so with restraint and act only to the
extent reasonably necessary. Whether state organs actually did so is something that
can only be adjudged when the competing claims of the State and of private entities are
conscientiously and deliberately appraised.

Even by petitioners' own allegation, the expiration of respondent's lease agreement with
MERALCO Financing Services Corporation did not happen until after November 21,
2006, when the Regional Trial Court issued the contentious writ of preliminary
injunction.[79] It was a subsequent fact, which could have only been proven later during
trial, and which was still inefficacious when respondent pleaded for provisional relief.

Petitioners' own arguments demonstrate the need for litigation—a thorough study and
adjudication—of the parties' competing claims. When the Regional Trial Court extended
provisional relief on November 21, 2006, it did not yet have the benefit of exhaustive
litigation. That it acted without such benefit is not something for which it can be faulted.
It did not gravely abuse its discretion then, because it did not yet need to engage in full
litigation.

III.C

Turning to the other requisites for the issuance of a writ of preliminary injunction, we find
that respondent adequately averred and showed a material and substantial invasion of
its ostensible right, for which the writ or preliminary injunction was necessary lest that
invasion persist and it be made to suffer irreparable injury.

As respondent pointed out, the filing of its Complaint was precipitated by the removal of
no less than 250 of its lamppost banners and frames, as well as 12 of its pedestrian
overpass banners, 17 pedestrian overpass frames, and 36 halogen lamps. [80] All these
were done in the span of less than two (2) weeks. [81] Petitioners do not dispute this.
Moreover, nowhere does it appear that petitioners intended to restrict themselves to
these 250 lamppost banners and frames, 12 pedestrian overpass banners, 17
pedestrian overpass frames, and 36 halogen lamps. On the contrary, their incessant
attempts at having the Regional Trial Court's writ of preliminary injunction lifted—first, on
reconsideration at the Regional Trial Court itself; next, on certiorari and prohibition, and
later, on reconsideration at the Court of Appeals; then, on appeal before this Court; and
still later, on their June 15, 2010 Motion before this Court—are indicative of their sheer
resolve to dismantle more. Respondent was left with no justifiable recourse but to seek
relief from our courts.

Petitioners' admitted and pronounced course of action directly obstructed respondent's

ability to avail itself of its rights under its lease agreement and the permits it secured
from local government units. What petitioners sought to restrict was the very essence of
respondent's activity as a business engaged in advertising via banners and signages.
As the Regional Trial Court explained in its April 11, 2007 Order:

1520
It bears stressing that the lifeblood of a business rests on effective advertising
strategies. One of which is the posting of billboards and signages at strategic places.
The manner of posting may be regulated by the government but must comply with
certain requirements, and should not result in taking of property without due process or
in wanton disregard of existing laws. It stands to reason that [petitioners] are not vested
with blanket authority to confiscate billboards without warning and in violation of existing
laws.[82]

IV

Administrative Order No. 160's mere existence, absent a showing of compliance with its
instructions, gives no solace to petitioners. Administrative Order No. 160 expressed the
Chief Executive's general directive for the abatement of billboards that pose a hazard to
the general welfare. In doing so, it did not give petitioner Department of Public Works
and Highways unbridled authority to dismantle all billboards and signages.
Administrative Order No. 160 prescribed a well-defined process for the carrying out of
petitioner Department of Public Works and Highways' functions. Before any such
abatement and dismantling—as permitted by paragraph 1.3—paragraphs 1.1 and 1.2 of
Administrative Order No. 160 require the Department of Public Works and Highways to:
first, conduct field inspections; second, make evaluations and assessments; third, issue
certifications as to those billboards found to be hazardous and violative of existing
standards; and fourth, furnish copies of these certifications to concerned local
government units.

Six (6) days after it was issued, Administrative Order No. 160 was supplemented by
Administrative Order No. 160-A.[83] This subsequent issuance recognized that
hazardous billboards are public nuisances. [84] Thus, in its Section 4, it prescribed
remedies consistent with Article 699 of the Civil Code:

(a) A prosecution under the Revised Penal Code or any local ordinance; or
(b) A civil action; or
(c) Abatement, without judicial proceedings, if the local Building Official determines that
this is the best remedy under the circumstances.[85]

In its October 31, 2006 Order, which issued an initial 20-day temporary restraining order
in favor of respondent, the Regional Trial Court emphasized that despite the opportunity
extended to petitioners (in the October 25 and 30, 2006 summary hearings) to present
evidence of their compliance with paragraphs 1.1 and 1.2 of Administrative Order No.
160, with Section 4 of Administrative Order No. 160-A, or with Article 699 of the Civil
Code, petitioners failed to show any such evidence. [86] From all indications, petitioners
proceeded to dismantle respondent's banners and signages without having first
completed formal or systematic field inspections, as well as evaluations and
assessments, and without having first issued written certifications and furnished local
government units with copies of these certifications. In the 12-day span between
petitioner Department of Public Works and Highways' October 6, 2006 announcement

1521
that it would start dismantling billboards, and respondent's October 18, 2006 Complaint,
petitioners managed to dismantle a considerable number of respondent's banners and
signages while apparently ignoring the same regulations from which they drew their
authority:

So far, no evidence has been presented by the [petitioners] to the satisfaction of this
Court that they had strictly observed the procedure laid down by Administrative Order
No. 160 and prescribed by law for the abatement of billboards and signboards found to
have been a public nuisance before carrying their tasks of dismantling the banners and
other temporary signages belonging to [respondent]. [87]

In its November 21, 2006 Order, the Regional Trial Court reiterated that petitioners had
yet to adduce proof of their prior compliance with paragraphs 1.1 and 1.2 of
Administrative Order No. 160, with Section 4 of Administrative Order No. 160-A, or with
Article 699 of the Civil Code. This, even after the conduct of another hearing on
November 8, 2006:[88]

The Court finds that the continuous removal and destruction of [respondent's] billboards
without due notice and without following the procedure provided under the law. No price
can be placed on the deprivation of a person's right to his property without due process
of law.

The New Civil Code provides for remedies against a public nuisance which
[respondent's] billboards are classified by [petitioners].

Article 699 of the New Civil Code provides that a public nuisance [may be] prosecuted
under the penal code or any local ordinance, by civil action or by abatement. The district
health officer if required to determine whether or not abatement, without judicial
proceedings, is the best remedy against a public nuisance. Any private person may
abate a public nuisance which is specially injurious to him by removing or if necessary,
by destroying the thing which constitutes the same, without committing a breach of the
peace, or doing unnecessary injury. But it is necessary: (1) That demand be first made
upon the owner or possessor of the property to abate the nuisance; (2) That such
demand has been rejected; (3) That the abatement be approved by the district health
officer and executed with the assistance of the local police[; and] (4) That the value of
the destruction does not exceed three thousand pesos.

However, as found by the Court in the Order granting the temporary restraining order,
no evidence was presented by [petitioners] to prove that they had strictly observed the
procedure laid down by Administrative Order No. 160 or the provisions of the New Civil
Code on abatement of public nuisance.[89]

In its April 11, 2007 Order, the Regional Trial Court again emphasized the utter lack of
such proof from petitioners:[90]

1522
The Court maintains [that] there is no justifiable reason to dissolve the issued
preliminary injunction. The fact remains that [petitioners] disregarded the minimum
requirements of due process under Administrative Order [No.] 160 when they
dismantled [respondent's] banners duly licensed by the local government concerned
and covered by a legitimate agreement with MERALCO. No proof was shown by
[petitioners] that they had complied with the requirements of [Administrative Order No.]
160 particularly as to the evaluation and certification process prior to the dismantling, or
to the creation of a task force, or at least a finding that said banners or [respondent] are
nuisances or hazardous. Worse, they jumped right into abatement, skipping initial
investigatory stages and the all-important feature that id due process. [91]

The Court of Appeals' assailed December 3, 2007 Resolution drew attention to

petitioners' failure to show proof of such compliance. [92] Even now, in their Petition for
Review on Certiorari before us, petitioners make no reference whatsoever to satisfying
Administrative Order No. 160's, 160-A's, and the Civil Code's procedural requisites.

Even if it were to be assumed that Administrative Order No. 160's and 160-A's
procedural requirements completely and impeccably satisfy the standards of due
process, it remains that petitioners have not shown that they complied with these
administrative mechanisms. Their complete and protracted silence on this compliance is
glaring. It would have been easy for them to simply state that they have complied with
the same instrument from which they are drawing their authority. Petitioners' utter
inability to even make any such allegation, let alone to offer proof of compliance with
Administrative Order No. 160's and 160-A's due process safeguards is detrimental to
their cause.

Petitioners' final bid at securing this Court's favor is through a reference to Republic Act
No. 8975.[93] Section 3 of Republic Act No. 8975 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 national government project;

(b) Bidding or awarding of contract/project of the national government as defined under

Section 2 hereof;
1523
(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.

Petitioners claim that Republic Act No. 8975's prohibition applies to their efforts to
protect the public's welfare by dismantling billboards. [94]

Republic Act No. 8975 was enacted to "ensure the expeditious and efficient
implementation and completion of government infrastructure projects,"[95] specifically for
the purposes of "avoid[ing] unnecessary increase in construction, maintenance and/or
repair costs and to immediately enjoy the social and economic benefits therefrom." [96] Its
scope and aims are clear.

Removing or dismantling billboards, banners, and signages cannot qualify as acts

relating to the implementation and completion of "government infrastructure projects," or
of "national government projects"[97] within the contemplation of Republic Act No. 8975.
They do not involve the construction, operation, maintenance, repair, or rehabilitation of
structures for public use. Neither do they involve the acquisition, supply, or installation

1524
of equipment and materials relating to such structures; nor the reduction of costs or the
facilitation of public utility. What they entail are preventive and even confiscatory
mechanisms. Moreover, while it is also true that public taking may be a prelude to the
completion of facilities for public use (e.g., expropriation for infrastructure projects),
petitioners' removal and confiscation here do not serve that specific end. Rather, they
serve the overarching interest of public safety.

Petitioners prevented and threatened to prevent respondent from engaging in its

cardinal business activity. Their admitted actions and apparent inactions show that the
well-defined due process mechanisms outlined by Administrative Order No. 160 and
160-A were not followed. Confronted with acts seemingly tantamount to deprivation of
property without due process of law, the Regional Trial Court acted well within its
competence when it required petitioners to temporarily desist, pending a more complete
and circumspect estimation of the parties' rights.

WHEREFORE, the Petition is DENIED. The assailed December 3, 2007 and May 14,

2008 Resolutions of the Court of Appeals in CA-G.R. SP No. 101420
are AFFIRMED without prejudice to the ultimate disposition of Civil Case No. 06-899.

The temporary restraining order dated July 7, 2010 is LIFTED.

SO ORDERED.

EN BANC

G.R. No. 202836, June 19, 2018

FIRST SARMIENTO PROPERTY HOLDINGS, INC., Petitioner, v. PHILIPPINE BANK

OF COMMUNICATIONS, Respondent.

DECISION

LEONEN, J.:

To determine the nature of an action, whether or not its subject matter is capable or
incapable of pecuniary estimation, the nature of the principal action or relief sought must
be ascertained. If the principal relief is for the recovery of a sum of money or real
property, then the action is capable of pecuniary estimation. However, if the principal
relief sought is not for the recovery of sum of money or real property, even if a claim
over a sum of money or real property results as a consequence of the principal relief,
the action is incapable of pecuniary estimation.

This resolves the Petition for Review1 filed by First Sarmiento Property Holdings, Inc.
(First Sarmiento) assailing the April 3, 2012 Decision 2 and July 25, 2012 Order3 of
Branch 11, Regional Trial Court, Malolos City, Bulacan in Civil Case No. 04-M-2012.

1525
The facts as established by the parties are as follows:

On June 19, 2002,4 First Sarmiento obtained from Philippine Bank of Communications

(PBCOM) a P40,000,000.00 loan, which was secured by a real estate mortgage 5 over
1,076 parcels of land.6

On March 15, 2003,7 the loan agreement was amended8 with the increase of the loan
amount to P51,200,000.00. On September 15, 2003, the loan agreement was further
amended9 when the loan amount was increased to P100,000,000.00.

On January 2, 2006,10 PBCOM filed a Petition for Extrajudicial Foreclosure of Real

Estate Mortgage.11 It claimed in its Petition that it sent First Sarmiento several demand
letters, yet First Sarmiento still failed to pay the principal amount and accrued interest
on the loan. This prompted PBCOM to resort to extrajudicial foreclosure of the
mortgaged properties, a recourse granted to it under the loan agreement. 12

On December 27, 2011, First Sarmiento attempted to file a Complaint for annulment of
real estate mortgage with the Regional Trial Court. However, the Clerk of Court refused
to accept the Complaint in the absence of the mortgaged properties' tax declarations,
which would be used to assess the docket fees.13

On December 29, 2011, Executive Judge Renato C. Francisco (Judge Francisco), First
Vice-Executive Judge Ma. Theresa A. Mendoza Arcega, Second Vice-Executive Judge
Ma. Belen R. Liban, and Third Vice-Executive Judge Basilio R. Gabo, Jr. of the
Regional Trial Court of City of Malolos, Bulacan, granted First Sarmiento's Urgent
Motion to Consider the Value of Subject Matter of the Complaint as Not Capable of
Pecuniary Estimation, and ruled that First Sarmiento's action for annulment of real
estate mortgage was incapable of pecuniary estimation. 14

Also on December 29, 2011, the mortgaged properties were auctioned and sold to
PBCOM as the highest bidder.15

On January 2, 2012, First Sarmiento filed a Complaint for annulment of real estate
mortgage and its amendments, with prayer for the issuance of temporary restraining
order and preliminary injunction.16 It paid a filing fee of P5,545.00.17

First Sarmiento claimed in its Complaint that it never received the loan proceeds of
P100,000,000.00 from PBCOM, yet the latter still sought the extrajudicial foreclosure of
real estate mortgage. It prayed for the issuance of a temporary restraining order and
preliminary injunction to enjoin the Ex-Officio Sheriff from proceeding with the
foreclosure of the real estate mortgage or registering the certificate of sale in PBCOM's
favor with the Registry of Deeds of Bulacan.18

That same day, Judge Francisco issued an ex-parte temporary restraining order for 72
hours, enjoining the registration of the certificate of sale with the Registry of Deeds of
Bulacan.19

1526
On January 4, 2012, the Regional Trial Court directed the parties to observe the status
quo ante.20

On January 24, 2012, the Clerk of Court and Ex-Officio Sheriff of Malolos City, Bulacan
issued a certificate of sale to PBCOM.21

In its Opposition (Re: Application for Issuance of Temporary Restraining

Order),22 PBCOM asserted that the Regional Trial Court failed to acquire jurisdiction
over First Sarmiento's Complaint because the action for annulment of mortgage was a
real action; thus, the filing fees filed should have been based on the fair market value of
the mortgaged properties.23

PBCOM also pointed out that the Regional Trial Court's directive to maintain the status
quo order beyond 72 hours constituted an indefinite extension of the temporary
restraining order, a clear contravention of the rules. 24

On April 3, 2012, Branch 11, Regional Trial Court, 25 Malolos City, Bulacan dismissed
the Complaint for lack of jurisdiction:

Following the High Court's ruling in the case of Home Guaranty Corporation v. R. II
Builders, Inc. and National Housing Authority, G.R. No. 192549, March 9, 2011, cited by
the bank in its Rejoinder, which appears to be the latest jurisprudence on the matter to
the effect that an action for annulment or rescission of contract does not operate to
efface the true objective and nature of the action which is to recover real property, this
Court hereby RESOLVES TO DISMISS the instant case for lack of jurisdiction, plaintiff
having failed to pay the appropriate filing fees.

Accordingly, the instant case is hereby DISMISSED.

SO ORDERED.26
On July 25, 2012, the Regional Trial Court 27 denied First Sarmiento's motion for
reconsideration.28

On August 17, 2012, First Sarmiento sought direct recourse to this Court with its
Petition for Review29 under Rule 45. It insists that its Complaint for the annulment of real
estate mortgage was incapable of pecuniary estimation. 30 It points out that the
Executive Judge and Vice-Executive Judges of the Regional Trial Court likewise
acknowledged that its action was incapable of pecuniary estimation. 31

Petitioner highlights that the Supreme Court En Banc in Lu v. Lu Ym held "that an action
for declaration of nullity of issuance of shares or an action questioning the legality of a
conveyance is one not capable of pecuniary estimation." 32 Furthermore, petitioner
maintains that the Supreme Court En Banc in Bunayog v. Tunas also established that a
complaint questioning the validity of a mortgage is an action incapable of pecuniary
estimation.33

1527
It emphasizes that Home Guaranty Corporation v. R-II Builders, which the Regional
Trial Court relied on to dismiss its complaint for lack of jurisdiction, was rendered by a
division of the Supreme Court; hence, it cannot modify or reverse a doctrine or principle
of law laid down by the Supreme Court En Banc.34

On September 19, 2012,35 this Court directed respondent PBCOM to comment on the

petition.

In its Comment,36 respondent contends that petitioner's action to annul the real estate
mortgage and enjoin the foreclosure proceedings did not hide the true objective of the
action, which is to restore petitioner's ownership of the foreclosed properties. 37

Respondent maintains that this Court has already settled that "a complaint for
cancellation of sale which prayed for both permanent and preliminary injunction aimed
at the restoration of possession of the land in litigation is a real action." 38

It likewise stresses that since petitioner's primary objective in filing its Complaint was to
prevent the scheduled foreclosure proceedings over the mortgaged properties and the
conveyance of their ownership to the highest bidder, the case was a real action. 39

Finally, it denies that Home Guaranty Corporation modified and reversed Lu v. Lu

Ym because the factual and legal milieus of these two (2) cases were different. 40

On November 26, 2012,41 this Court required petitioner to file a reply to the comment.

On February 1, 2013, petitioner filed its Reply 42 where it denies that its Complaint was
for the annulment of the foreclosure sale, because when it filed its Complaint, the
foreclosure sale had not yet happened.43

It proclaims that its Complaint sought the removal of the lien on the mortgaged
properties and was not intended to recover ownership or possession since it was still
the registered owner with possession of the mortgaged properties when it filed its
Complaint.44

On February 27, 2013,45 this Court noted petitioner's reply and directed the parties to
submit their respective memoranda.

On May 30, 2013, the parties filed their respective memoranda. 46

In its Memorandum,47 petitioner continues to insist that it did not receive the loan
proceeds from PBCOM which is why it filed its Complaint for annulment of real estate
mortgage in response to the latter's Petition for Extrajudicial Foreclosure of Real Estate
Mortgage.48

Petitioner reiterates that its Complaint for annulment of real estate mortgage was an

1528
action incapable of pecuniary estimation because it merely sought to remove the lien on
its properties, not the recovery or reconveyance of the mortgaged properties. 49

It states that it never expressly or impliedly sought the conveyance of the mortgaged
properties because it was still the registered owner of the mortgaged properties when its
Complaint was first presented for filing with the Clerk of Court. 50

On the other hand, respondent in its Memorandum 51 restates its stand that petitioner's
Complaint involved a real action; hence, the estimated value of the mortgaged
properties should have been alleged and used as the basis for the computation of the
docket fees.52

Respondent claims that the allegations in petitioner's Complaint reveal the latter's real
intention to assert its title and recover the real properties sold at the public auction. 53

The only issue for this Court's resolution is whether or not the Regional Trial Court
obtained jurisdiction over First Sarmiento Corporation, Inc.'s Complaint for annulment of
real estate mortgage.

Rule 45 of the Rules of Court allows for a direct recourse to this Court by appeal from a
judgment, final order, or resolution of the Regional Trial Court. Rule 45, Section 1
provides:
Section 1. Filing of petition with Supreme Court. — A party desiring to appeal by
certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law,
may file with the Supreme Court a verified petition for review on certiorari. The petition
shall raise only questions of law which must be distinctly set forth.
Rule 41, Section 2(c) likewise provides:
Section 2. Modes of appeal. —

....

(c) Appeal by certiorari. — In all cases where only questions of law are raised or
involved, the appeal shall be to the Supreme Court by petition for review on certiorari in
accordance with Rule 45.
Thus, there is no question that a petitioner may file a verified petition for review directly
with this Court if only questions of law are at issue; however, if both questions of law
and of facts are present, the correct remedy is to file a petition for review with the Court
of Appeals.54

Doña Adela Export International v. Trade and Investment Development

Corp.55 differentiated between a question of law and a question of fact as follows:
We stress that a direct recourse to this Court from the decisions, final resolutions and
orders of the RTC may be taken where only questions of law are raised or involved.

1529
There is a question of law when the doubt or difference arises as to what the law is on a
certain state of facts, which does not call for an examination of the probative value of
the evidence presented by the parties-litigants. On the other hand, there is a question of
fact when the doubt or controversy arises as to the truth or falsity of the alleged facts.
Simply put, when there is no dispute as to fact, the question of whether the conclusion
drawn therefrom is correct or not, is a question of law. 56 (Citation omitted)
In the case at bar, the underlying question for this Court's resolution pertains to
jurisdiction, or to be more precise, whether the Regional Trial Court attained jurisdiction
over petitioner's Complaint with the amount of docket fees paid.

Considering that the issue of jurisdiction is a pure question of law, 57 petitioner did not err
in filing its appeal directly with this Court pursuant to law and prevailing jurisprudence.

II

Petitioner contends that its Complaint for annulment of real estate mortgage has a
subject incapable of pecuniary estimation because it was not intended to recover
ownership or possession of the mortgaged properties sold to respondent during the
auction sale.58 It insists that it had ownership and possession of the mortgaged
properties when it filed its Complaint; hence, it never expressly or impliedly sought
recovery of their ownership or possession.59

The petition is meritorious.

Jurisdiction is "the power and authority of a court to hear, try and decide a
case"60 brought before it for resolution.

Courts exercise the powers conferred on them with binding effect if they acquire
jurisdiction over: "(a) the cause of action or the subject matter of the case; (b) the thing
or the res; (c) the parties; and (d) the remedy." 61

Jurisdiction over the thing or the res is a court's authority over the object subject of
litigation.62 The court obtains jurisdiction or actual custody over the object through the
seizure of the object under legal process or the institution of legal proceedings which
recognize the power and authority of the court.63

Jurisdiction over the parties is the court's power to render judgment that are binding on
the parties. The courts acquire jurisdiction over the plaintiffs when they file their initiatory
pleading, while the defendants come under the court's jurisdiction upon the valid service
of summons or their voluntary appearance in court. 64

Jurisdiction over the cause of action or subject matter of the case is the court's authority
to hear and determine cases within a general class where the proceedings in question
belong. This power is conferred by law and cannot be acquired through stipulation,
agreement between the parties,65 or implied waiver due to the silence of a party. 66

1530
Jurisdiction is conferred by the Constitution, with Congress given the plenary power, for
cases not enumerated in Article VIII, Section 5 67 of the Constitution, to define, prescribe,
and apportion the jurisdiction of various courts. 68

Batas Pambansa Blg. 129, or the Judiciary Reorganization Act of 1980 as amended by
Republic Act No. 7691, provided for the jurisdictional division between the first and
second level courts by considering the complexity of the cases and the experience
needed of the judges assigned to hear the cases.

In criminal cases, first level courts are granted exclusive original jurisdiction to hear
complaints on violations of city or municipal ordinances 69 and offenses punishable with
imprisonment not exceeding six (6) years. 70 In contrast, second level courts, with more
experienced judges sitting at the helm, are granted exclusive original jurisdiction to
preside over all other criminal cases not within the exclusive jurisdiction of any other
court, tribunal, or body.71

The same holds true for civil actions and probate proceedings, where first level courts
have the power to hear cases where the value of personal property, estate, or amount
of the demand does not exceed P100,000.00 or P200,000.00 if in Metro Manila. 72 First
level courts also possess the authority to hear civil actions involving title to, possession
of, or any interest in real property where the value does not exceed P20,000.00 or
P50,000.00 if the real property is situated in Metro Manila. 73 Second level courts then
assume jurisdiction when the values involved exceed the threshold amounts reserved
for first level courts74 or when the subject of litigation is incapable of pecuniary
estimation.75

First level courts were also conferred with the power to hear the relatively
uncomplicated cases of forcible entry and unlawful detainer, 76 while second level courts
are authorized to hear all actions in admiralty and maritime jurisdiction 77 with claims
above a certain threshold amount. Second level courts are likewise authorized to hear
all cases involving the contract of marriage and marital relations, 78 in recognition of the
expertise and probity required in deciding issues which traverse the marital sphere.

Section 19(1) of Batas Pambansa Blg. 129, as amended, provides Regional Trial Courts
with exclusive, original jurisdiction over "all civil actions in which the subject of the
litigation is incapable of pecuniary estimation."

Lapitan v. Scandia79 instructed that to determine whether the subject matter of an action

is incapable of pecuniary estimation, the nature of the principal action or remedy sought
must first be established. This finds support in this Court's repeated pronouncement that
jurisdiction over the subject matter is determined by examining the material allegations
of the complaint and the relief sought. 80Heirs of Dela Cruz v. Heirs of Cruz81 stated,
thus:
It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or
government agency, over the nature and subject matter of a petition or complaint is
determined by the material allegations therein and the character of the relief prayed for,

1531
irrespective of whether the petitioner or complainant is entitled to any or all such
reliefs.82
However, Lapitan stressed that where the money claim is only a consequence of the
remedy sought, the action is said to be one incapable of pecuniary estimation:
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. If it is primarily for the recovery of a sum of money, the claim is
considered capable of pecuniary estimation, and whether jurisdiction is in the municipal
courts or in the courts of first instance would depend on the amount of the claim.
However, where the basic issue is something other than the right to recover a sum of
money, or where the money claim is purely incidental to, or a consequence of, the
principal relief sought like in suits to have the defendant perform his part of the contract
(specific performance) and in actions for support, or for annulment of a judgment or to
foreclose a mortgage, this Court has considered such actions as cases where the
subject of the litigation may not be estimated in terms of money, and are cognizable
exclusively by courts of first instance. The rationale of the rule is plainly that the second
class cases, besides the determination of damages, demand an inquiry into other
factors which the law has deemed to be more within the competence of courts of first
instance, which were the lowest courts of record at the time that the first organic laws of
the Judiciary were enacted allocating jurisdiction (Act 136 of the Philippine Commission
of June 11, 1901).83 (Citation omitted)
Heirs of Sebe v. Heirs of Sevilla84 likewise stressed that if the primary cause of action is
based on a claim of ownership or a claim of legal right to control, possess, dispose, or
enjoy such property, the action is a real action involving title to real property. 85

A careful reading of petitioner's Complaint convinces this Court that petitioner never
prayed for the reconveyance of the properties foreclosed during the auction sale, or that
it ever asserted its ownership or possession over them. Rather, it assailed the validity of
the loan contract with real estate mortgage that it entered into with respondent because
it supposedly never received the proceeds of the P100,000,000.00 loan
agreement.86 This is evident in its Complaint, which read:
GROUNDS FOR THE APPLICATION OF PRELIMINARY INJUNCTION AND
TEMPORARY RESTRAINING ORDER

7. Defendant PBCOM knows fully well that plaintiff did not receive from it the loan it
(PBCOM) alleged to have granted in its favor.

8. Despite this, defendant PBCOM has filed with the Ex-Officio Sheriff of Bulacan, a
petition for extra judicial foreclosure of real estate mortgage, bent on foreclosing the real
estate properties of plaintiff, photocopy of the petition is hereto attached as Annex "F".

9. The auction sale of the properties is set on December 29, 2011.

10. Defendant PBCOM, well knowing the facts narrated above and willfully disregarding
the property rights of plaintiff, wrongfully filed an extra judicial foreclosure of real estate

1532
mortgage and pursuant to said petition, the Ex-Officio Sheriff now does offer for sale,
the real estate properties of the plaintiff as set forth in its (PBCOM) said petition.

11. Unless defendants PBCOM and Ex-Officio Sheriff are restrained by this Honorable
Court, they will infringe the property rights of the plaintiff in the manner herein before
related.87
Far East Bank and Trust Company v. Shemberg Marketing Corporation 88 stated that an
action for cancellation of mortgage has a subject that is incapable of pecuniary
estimation:
Here, the primary reliefs prayed for by respondents in Civil Case No. MAN-4045 is the
cancellation of the real estate and chattel mortgages for want of consideration.
In Bumayog v. Tumas, this Court ruled that where the issue involves the validity of a
mortgage, the action is one incapable of pecuniary estimation. In the more recent case
of Russell v. Vestil, this Court, citing Bumayog, held that an action questioning the
validity of a mortgage is one incapable of pecuniary estimation. Petitioner has not
shown adequate reasons for this Court to revisit Bumayog and Russell. Hence,
petitioner's contention [cannot] be sustained. Since respondents paid the docket fees,
as computed by the clerk of court, consequently, the trial court acquired jurisdiction over
Civil Case No. MAN-4045.89
It is not disputed that even if the Complaint were filed a few days after the mortgaged
properties were foreclosed and sold at auction to respondent as the highest bidder, the
certificate of sale was only issued to respondent after the Complaint was filed.

Section 6 of Act No. 3135,90 as amended, provides that a property sold through an
extrajudicial sale may be redeemed "at any time within the term of one year from and
after the date of the sale":
Section 6. In all cases in which an extrajudicial sale is made under the special power
hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or
judgment creditor of said debtor, or any person having a lien on the property
subsequent to the mortgage or deed of trust under which the property is sold, may
redeem the same at any time within the term of one year from and after the date of the
sale; and such redemption shall be governed by the provisions of sections four hundred
and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in
so far as these are not inconsistent with the provisions of this Act.
Mahinay v. Dura Tire & Rubber Industries Inc.91 clarified that "[t]he date of the sale'
referred to in Section 6 is the date the certificate of sale is registered with the Register
of Deeds. This is because the sale of registered land does not 'take effect as a
conveyance, or bind the land' until it is registered." 92

The registration of the certificate of sale issued by the sheriff after an extrajudicial sale
is a mandatory requirement; thus, if the certificate of sale is not registered with the
Registry of Deeds, the property sold at auction is not conveyed to the new owner and
the period of redemption does not begin to run. 93

In the case at bar, the Ex-Officio Sheriff of the City of Malolos, Bulacan was restrained

1533
from registering the certificate of sale with the Registry of Deeds of Bulacan and the
certificate of sale was only issued to respondent after the Complaint for annulment of
real estate mortgage was filed. Therefore, even if the properties had already been
foreclosed when the Complaint was filed, their ownership and possession remained with
petitioner since the certificate of sale was not registered with the Registry of Deeds.
This supports petitioner's claim that it never asked for the reconveyance of or asserted
its ownership over the mortgaged properties when it filed its Complaint since it still
enjoyed ownership and possession over them.

Considering that petitioner paid the docket fees as computed by the clerk of court, upon
the direction of the Executive Judge, this Court is convinced that the Regional Trial
Court acquired jurisdiction over the Complaint for annulment of real estate mortgage.

Furthermore, even if it is assumed that the instant case were a real action and the
correct docket fees were not paid by petitioner, the case should not have been
dismissed; instead, the payment of additional docket fees should have been made a lien
on the judgment award. The records attest that in filing its complaint, petitioner readily
paid the docket fees assessed by the clerk of court; hence, there was no evidence of
bad faith or intention to defraud the government that would have rightfully merited the
dismissal of the Complaint.94

III

Although not raised in the Petition, this Court nonetheless deems it proper to pass upon
the legality of the Regional Trial Court January 4, 2012 Order, which directed the parties
to observe the status quo ante,95 effectively extending indefinitely its 72-hour ex-parte
temporary restraining order issued on January 2, 2012. 96

Rule 58, Section 5 of the Rules of Court provides the instances when a temporary
restraining order may be issued:
Section 5. Preliminary injunction not granted without notice; exception. — No
preliminary injunction shall be granted without hearing and prior notice to the party or
person sought to be enjoined. If it shall appear from facts shown by affidavits or by the
verified application that great or irreparable injury would result to the applicant before
the matter can be heard on notice, the court to which the application for preliminary
injunction was made, may issue a temporary restraining order to be effective only for a
period of twenty (20) days from service on the party or person sought to be enjoined,
except as herein provided. Within the said twenty-day period, the court must order said
party or person to show cause, at a specified time and place, why the injunction should
not be granted, determine within the same period whether or not the preliminary
injunction shall be granted, and accordingly issue the corresponding order.

However, and subject to the provisions of the preceding sections, if the matter is of
extreme urgency and the applicant will suffer grave injustice and irreparable injury, the
executive judge of a multiple-sala court or the presiding judge of a single-sala court may
issue ex-parte a temporary restraining order effective for only seventy-two (72) hours
from issuance but he shall immediately comply with the provisions of the next preceding
1534
section as to service of summons and the documents to be served therewith.
Thereafter, within the aforesaid seventy-two (72) hours, the judge before whom the
case is pending shall conduct a summary hearing to determine whether the temporary
restraining order shall be extended until the application for preliminary injunction can be
heard. In no case shall the total period of effectivity of the temporary restraining order
exceed twenty (20) days, including the original seventy-two hours provided herein.

In the event that the application for preliminary injunction is denied or not resolved
within the said period, the temporary restraining order is deemed automatically vacated.
The effectivity of a temporary restraining order is not extendible without need of any
judicial declaration to that effect and no court shall have authority to extend or renew the
same on the same ground for which it was issued.

However, if issued by the Court of Appeals or a member thereof, the temporary

restraining order shall be effective for sixty (60) days from service on the party or person
sought to be enjoined. A restraining order issued by the Supreme Court or a member
thereof shall be effective until further orders.
It is clear that a temporary restraining order may be issued by a trial court in only two (2)
instances: first, when great or irreparable injury would result to the applicant even
before the application for writ of preliminary injunction can be heard; and second, if the
matter is of extreme urgency and the applicant will suffer grave injustice and irreparable
injury. The executive judge of a multi-sala court or the presiding judge of a single-sala
court may issue a 72-hour temporary restraining order.

In both instances, the temporary restraining order may be issued ex parte. However, in
the first instance, the temporary restraining order has an effectivity of only 20 days to be
counted from service to the party sought to be enjoined. Likewise, within those 20 days,
the court shall order the enjoined party to show why the injunction should not be granted
and shall then determine whether or not the injunction should be granted.

In the second instance, when there is extreme urgency and the applicant will suffer
grave injustice and irreparable injury, the court shall issue a temporary restraining order
effective for only 72 hours upon issuance. Within those 72 hours, the court shall conduct
a summary hearing to determine if the temporary restraining order shall be extended
until the application for writ of preliminary injunction can be heard. However, in no case
shall the extension exceed 20 days.

If the application for preliminary injunction is denied or not resolved within the given
periods, the temporary restraining order is automatically vacated and the court has no
authority to extend or renew it on the same ground of its original issuance.

Despite the clear wording of the rules, the Regional Trial Court issued a status quo ante
order dated January 4, 2012, indefinitely extending the temporary restraining order on
the registration of the certificate of sale with the Registry of Deeds.

Petitioner applied for a writ of preliminary injunction, yet the Regional Trial Court did not

1535
conduct any hearing for that purpose and merely directed the parties to observe the
status quo ante.

Miriam College Foundation, Inc v. Court of Appeals 97 explained the difference between
preliminary injunction and a restraining order as follows:
Preliminary injunction is an order granted at any stage of an action or proceeding prior
to the judgment or final order, requiring a party or a court, agency or a person to
perform to refrain from performing a particular act or acts. As an extraordinary remedy,
injunction is calculated to preserve or maintain the status quo of things and is generally
availed of to prevent actual or threatened acts, until the merits of the case can be heard.
A preliminary injunction persists until it is dissolved or until the termination of the action
without the court issuing a final injunction.

The basic purpose of restraining order, on the other hand, is to preserve the status quo
until the hearing of the application for preliminary injunction. Under the former A§5, Rule
58 of the Rules of Court, as amended by A§5, Batas Pambansa Blg. 224, a judge (or
justice) may issue a temporary restraining order with a limited life of twenty days from
date of issue. If before the expiration of the 20-day period the application for preliminary
injunction is denied, the temporary order would thereby be deemed automatically
vacated. If no action is taken by the judge on the application for preliminary injunction
within the said 20 days, the temporary restraining order would automatically expire on
the 20th day by the sheer force of law, no judicial declaration to that effect being
necessary. In the instant case, no such preliminary injunction was issued; hence, the
TRO earlier issued automatically expired under the aforesaid provision of the Rules of
Court.98 (Citations omitted)
A temporary restraining order cannot be extended indefinitely to take the place of a writ
of preliminary injunction, since a temporary restraining order is intended only to have a
limited lifespan and is deemed automatically vacated upon the expiration of 72 hours or
20 days, as the case may be. As such, the temporary restraining order has long expired
and, in the absence of a preliminary injunction, there was nothing to stop the sheriff
from registering the certificate of sale with the Registry of Deeds.

This Court has repeatedly expounded on the nature of a temporary restraining

order99 and a preliminary injunction.100 Yet lower courts consistently interchange these
ancillary remedies and disregard the sunset clause 101 inherent in a temporary restraining
order by erroneously extending it indefinitely. Such ignorance or defiance of basic
remedial measures is a gross disservice to the public, who look towards the court for
legal guidance and legal remedy. More importantly, this cavalier attitude towards these
injunctive reliefs might even be construed as a deliberate effort to look the other way to
favor a party, which will then sully the image of the entire judiciary. Henceforth, this
Court will demand stricter compliance with the rules from the members of the bench as
regards their issuances of these injunctive reliefs.

IV

Finally, there is a need to reassess the place of Home Guaranty v. R-II Builders102 in our

1536
jurisprudence.

In Home Guaranty, R-II Builders, Inc. (R-II Builders) filed a Complaint for the rescission
of the Deed of Assignment and Conveyance it entered into with Home Guaranty
Corporation and National Housing Authority. The Complaint was initially determined to
have a subject that is incapable of pecuniary estimation and the docket fees were
assessed and paid accordingly.103

R-II Builders later filed a motion to admit its Amended and Supplemental Complaint,
which deleted its earlier prayer for the resolution of its Deed of Assignment and
Conveyance, and prayed for the conveyance of title to and/or possession of the entire
Asset Pool. The Regional Trial Court ruled that the Amended and Supplemental
Complaint involved a real action and directed R-II Builders to pay the correct docket
fees.104

Instead of paying the additional docket fees, R-II Builders withdrew its Amended and
Supplemental Complaint and instead filed a motion to admit its Second Amended
Complaint, which revived the prayer in its original Complaint to resolve the Deed of
Assignment and Conveyance and deleted the causes of action for conveyance of title to
and/or possession of the entire Asset Pool in its Amended and Supplemental
Complaint.105 The Regional Trial Court granted the motion to admit the Second
Amended Complaint, ratiocinating that the docket fees to the original Complaint had
been paid; that the Second Amended Complaint was not intended to delay the
proceedings; and that the Second Amended Complaint was consistent with R-II
Builders' previous pleadings.106

The Court of Appeals upheld the ruling of the Regional Trial Court and reiterated that
the case involved a subject that was incapable of pecuniary
estimation.107 However, Home Guaranty reversed the Court of Appeals Decision, ruling
that the Complaint and the Amended and Supplemental Complaint both involved
prayers for the conveyance and/or transfer of possession of the Asset Pool, causes of
action which were undoubtedly real actions. Thus, the correct docket fees had not yet
been paid:108
Although an action for resolution and/or the nullification of a contract, like an action for
specific performance, fall squarely into the category of actions where the subject matter
is considered incapable of pecuniary estimation, we find that the causes of action for
resolution and/or nullification of the [Deed of Assignment and Conveyance] was
erroneously isolated by the [Court of Appeals] from the other causes of action alleged in
R-II Builders' original complaint and Amended and Supplemental Complaint which
prayed for the conveyance and/or transfer of possession of the Asset Pool. In Gochan
v. Gochan, this Court held that an action for specific performance would still be
considered a real action where it seeks the conveyance or transfer of real property, or
ultimately, the execution of deeds of conveyance of real property.

....

1537
Granted that R-II Builders is not claiming ownership of the Asset Pool because its
continuing stake is, in the first place, limited only to the residual value thereof, the
conveyance and/or transfer of possession of the same properties sought in the original
complaint and Amended and Supplemental Complaint both presuppose a real action for
which appropriate docket fees computed on the basis of the assessed or estimated
value of said properties should have been assessed and paid. . . . 109 (Citations omitted)
Home Guaranty stated that to determine whether an action is capable or incapable of
pecuniary estimation, the nature of the principal action or remedy prayed for must first
be determined.110 Nonetheless, in citing Ruby Shelter Builders v. Formaran, Home
Guaranty looked beyond R-II Builder's principal action for annulment or rescission of
contract to purportedly unmask its true objective and nature of its action, which was to
recover real property.111

In a dissenting opinion in the Home Guaranty112 June 22, 2011 Resolution that

dismissed R-II Builders' motion for reconsideration, Associate Justice Presbitero
Velasco, Jr. stressed that one must first look at the principal action of the case to
determine if it is capable or incapable of pecuniary estimation:
Whether or not the case is a real action, and whether or not the proper docket fees were
paid, one must look to the main cause of action of the case. In all instances, in the
original Complaint, the Amended and Supplemental Complaint and the Amended
Complaint, it was all for the resolution or rescission of the [Deed of Assignment and
Conveyance], with the prayer for the provisional remedy of injunction and the
appointment of a trustee and subsequently a receiver. In the Second Amended
Complaint, the return of the remaining assets of the asset pool, if any, to respondent R-
II Builders would only be the result of the resolution or rescission of the [Deed of
Assignment and Conveyance].

Even if real property in the Asset Pool may change hands as a result of the case in the
trial court, the fact alone that real property is involved does not make that property the
basis of computing the docket fees. De Leon v. Court of Appeals has already settled the
matter. That case, citing Bautista v, Lim, held that a case for rescission or annulment of
contract is not susceptible of pecuniary estimation. On the other hand, in the Decision
We rendered on July 25, 2005 in Serrano v. Delica, We ruled that the action for
cancellation of contracts of sale and the titles is a real action. Similarly, on February 10,
2009, We ruled in Ruby Shelter Builders and Realty Development Corporation v.
Formaran III (Ruby Shelter) that an action for nullification of a Memorandum of
Agreement which required the lot owner to issue deeds of sale and cancellation of the.
Deeds of Sale is a real action.113 (Citations omitted)
Whatever confusion there might have been regarding the nature of actions for nullity of
contracts or legality of conveyances, which would also involve recovery of sum of
money or real property, was directly addressed by Lu v. Lu Ym.114Lu underscored that
"where the basic issue is something other than the right to recover a sum of money, the
money claim being only incidental to or merely a consequence of, the principal relief
sought, the action is incapable of pecuniary estimation." 115

This finds support in numerous decisions where this Court proclaimed that the test to

1538
determine whether an action is capable or incapable of pecuniary estimation is to
ascertain the nature of the principal action or relief sought. Thus, if the principal relief
sought is the recovery of a sum of money or real property, then the action is capable of
pecuniary estimation. However, if the principal relief sought is not for the recovery of
money or real property and the money claim is only a consequence of the principal
relief, then the action is incapable of pecuniary estimation. 116

Considering that the principal remedy sought by R-II Builders was the resolution of the
Deed of Assignment and Conveyance, the action was incapable of pecuniary estimation
and Home Guaranty erred in treating it as a real action simply because the principal
action was accompanied by a prayer for conveyance of real property.

It is clear that subject matter jurisdiction cannot be dependent on the supposed ultimate
motive or true objective of the complaint because this will require the judge to speculate
on the defenses of the plaintiff beyond the material allegations contained in the
complaint. Likewise, in attempting to pinpoint the true objective of the complaint at the
initial stages of trial, the judge might end up dictating the result outside of the evidence
still to be presented during the trial, opening up the judge to charges of partiality and
even impropriety. Furthermore, the judge is not aware of the evidence to be presented
by either party when the complaint is filed; thus, there is no reliable basis that can be
used to infer the true objective of the complaint. It is imperative then that the competing
claims as basis of subject matter jurisdiction be textually based, finding its basis in the
body of the complaint and the relief sought without reference to extraneous facts not
alleged or evidence still to be presented.

Nonetheless, if subject matter jurisdiction is assailed during the course of the trial and
evidence is presented to prove the defense's allegation of lack of jurisdiction, this will
lead to an anomaly where the defense's evidence, instead of the complaint, will
effectively determine the remedy and cause of action.

In the case at bar, petitioner contends that its complaint prayed for the annulment of the
real estate mortgage it entered into with respondent and not for the recovery or
reconveyance of the mortgaged properties because it was still the registered owner
when it filed its complaint. The evidence on record supports petitioner's claim; hence,
there was no reason for the dismissal of its Complaint for lack of jurisdiction.

Home Guaranty likewise erred in dismissing the action because of non-payment of the

correct filing fees. Fedman Development Corporation v. Agcaoili 117 reiterated that where
the assessed docket fees have been paid and the assessment turns out to be
insufficient, the court still acquires jurisdiction over the case, subject to payment of the
deficiency assessment.118 The only exception is when the deficiency in docket fees is
accompanied with bad faith and an intention to defraud the government. 119 It is not
disputed that R-II Builders paid the assessed docket fees when it filed its Complaint,
negating bad faith or intent on its part to defraud the government.

In light of the foregoing, this Court reaffirms that the nature of an action is determined by

1539
the principal relief sought in the complaint, irrespective of the other causes of actions
that may also crop up as a consequence of the principal relief prayed for. The contrary
rule espoused in Home Guaranty is thereby set aside.

WHEREFORE, this Court resolves to GRANT the Petition. The assailed April 3, 2012
Decision and July 25, 2012 Order of Branch 11, Regional Trial Court, City of Malolos,
Bulacan in Civil Case No. 04-M-2012 are REVERSED and SET ASIDE.

The case is ordered REMANDED to Branch 11, Regional Trial Court, City of Malolos,
Bulacan for continued trial on First Sarmiento Property Holdings, Inc.'s Complaint for
annulment of real estate mortgage and its amendments.

SO ORDERED.
FIRST DIVISION
[ G.R. No. 177486, December 21, 2009 ]
PURISIMO BUYCO, PETITIONER, VS. NELSON BARAQUIA, RESPONDENT.

DECISION
CARPIO MORALES, J.:
Nelson Baraquia (respondent) filed before the Regional Trial Court (RTC) of Iloilo City a
complaint[1] against Dominico Buyco and Clemente Buyco (Buycos), for the
establishment of a permanent right of way, injunction and damages with preliminary
injunction and temporary restraining order, to enjoin the Buycos from closing off a
private road within their property which he has been using to go to and from the public
highway to access his poultry farm.

The Buycos died during the pendency of the case, and were substituted by Purisimo
Buyco (petitioner) and his brother Gonzalo.

Branch 39 of the Iloilo RTC granted respondent's application for preliminary injunction.

By Decision[2] of February 14, 2007, the trial court dismissed respondent's complaint for
failure to establish the concurrence of the essential requisites for the establishment of
an easement of right of way under Articles 649 and 650 of the Civil Code. [3] It
accordingly lifted the writ of preliminary injunction.

Respondent filed a notice of appeal of the trial court's decision. Petitioner filed too a
notice of partial appeal bearing on to the non-award of prayer for damages.

Respondent later filed with the trial court a motion to cite petitioner and his brother
Gonzalo in contempt, alleging that they had closed off the subject road, thus violating
the writ of preliminary injunction. The trial court, by Resolution of March 13, 2007,
[4]
 noting that respondent received on March 5, 2007 his copy of its decision while
petitioner received his on February 21, 2007, held that the February 14, 2007 decision
had not yet become final and executory, hence, the writ of preliminary injunction

1540
remained to be valid, efficacious and obligatory, rendering petitioner's act of closing the
road on March 1, 2007 an indirect contempt of court. It thus declared petitioner and his
brother in contempt of court.

Petitioner moved for reconsideration of the trial court's March 13, 2007 Resolution,
contending that a preliminary injunction, once quashed, ceases to exist, and that he and
his brother cannot be held guilty of indirect contempt by mere motion.

By Resolution[5] of April 18, 2007, the trial court set aside the March 13, 2007 Resolution
and granted petitioner's motion for reconsideration, ruling that petitioner and his brother
cannot be held in contempt of court by mere motion and not by verified petition.

On the lifetime of the writ of preliminary injunction, the trial court held that it is its
"illumined opinion that the matter of whether a writ of preliminary injunction remains
valid until the decision annulling the same attains finality is not firmly entrenched in
jurisprudence, contrary to the position of the defendants." It thereupon quoted a
portion of the ruling in the 2006 case of Lee v. Court of Appeals,[6] to wit:

Furthermore, notwithstanding the stand of both parties, the fact remains that the
Decision of the Court of Appeals annulling the grant of preliminary injunction in favor of
petitioners has not yet become final on 14 December 2000. In fact, such Decision has
not yet become final and executory even on the very date of this Decision, in view of
petitioners' appeal with us under Rule 45 of the 1997 Rules of Civil Procedure. The
preliminary injunction, therefore, issued by the trial court remains valid until the Decision
of the Court of Appeals annulling the same attains finality, and violation thereof
constitutes indirect contempt which, however, requires either a formal charge or a
verified petition.[7] (underscoring in the original decision)

Hence, this petition for review, raising a question of law - whether the lifting of a writ of
preliminary injunction due to the dismissal of the complaint is immediately executory,
even if the dismissal of the complaint is pending appeal.

The petition is meritorious.

A writ of preliminary injunction is an order granted at any stage of an action or

proceeding prior to the judgment or final order, requiring a party or a court, agency or a
person to refrain from a particular act or acts. [8] It is merely a provisional remedy,
adjunct to the main case subject to the latter's outcome. [9] It is not a cause of action in
itself.[10] Being an ancillary or auxiliary remedy, it is available during the pendency of the
action which may be resorted to by a litigant to preserve and protect certain rights and
interests therein pending rendition, and for purposes of the ultimate effects, of a final
judgment in the case.

The writ is provisional because it constitutes a temporary measure availed of during the
pendency of the action and it is ancillary because it is a mere incident in and is
dependent upon the result of the main action. [11]

1541
It is well-settled that the sole object of a preliminary injunction, whether prohibitory or
mandatory, is to preserve the status quo until the merits of the case can be heard.
It is usually granted when it is made to appear that there is a substantial controversy
between the parties and one of them is committing an act or threatening the immediate
commission of an act that will cause irreparable injury or destroy the status quo of the
controversy before a full hearing can be had on the merits of the case.[12]

Indubitably, in the case at bar, the writ of preliminary injunction was granted by the
lower court upon respondent's showing that he and his poultry business would be
injured by the closure of the subject road. After trial, however, the lower court found that
respondent was not entitled to the easement of right of way prayed for, having failed to
prove the essential requisites for such entitlement, hence, the writ was lifted.

The present case having been heard and found dismissible as it was in fact dismissed,
the writ of preliminary injunction is deemed lifted, its purpose as a provisional remedy
having been served, the appeal therefrom notwithstanding.

Unionbank v. Court of Appeals[13] enlightens:

"x x x a dismissal, discontinuance or non-suit of an action in which a restraining

order or temporary injunction has been granted operates as a dissolution of the
restraining order or temporary injunction," regardless of whether the period for
filing a motion for reconsideration of the order dismissing the case or appeal
therefrom has expired. The rationale therefor is that even in cases where an appeal
is taken from a judgment dismissing an action on the merits, the appeal does not
suspend the judgment, hence the general rule applies that a temporary injunction
terminates automatically on the dismissal  of the action." (italics, emphasis and
underscoring supplied)

The lower court's citation of Lee v. Court of Appeals[14] is misplaced. In Lee, unlike in the
present case, the original complaint for specific performance and cancellation of real
estate mortgage was not yet decided on the merits by the lower court. Thus, the
preliminary injunction therein issued subsisted pending appeal of an incident.

There being no indication that the appellate court issued an injunction in respondent's
favor, the writ of preliminary injunction issued on December 1, 1999 by the trial court
was automatically dissolved upon the dismissal of Civil Case No. 26015.

WHEREFORE, the petition is GRANTED. The Resolution dated April 18, 2007 of the
trial court is REVERSED. The writ of preliminary injunction which Branch 39 of the Iloilo
Regional Trial Court issued on December 1, 1999 was automatically dissolved upon its
dismissal by Decision of February 14, 2007 of Civil Case No. 26015.

SO ORDERED.

EN BANC

1542
 [ G.R. No. 225973, August 08, 2017 ]
SATURNINO C. OCAMPO, TRINIDAD H. REPUNO, BIENVENIDO LUMBERA,
BONIFACIO P. ILAGAN, NERI JAVIER COLMENARES, MARIA CAROLINA P.
ARAULLO, M.D., SAMAHAN NG EX-DETAINEES LABAN SA DETENSYON AT
ARESTO (SELDA), REPRESENTED BY DIONITO CABILLAS, CARMENCITA M.
FLORENTINO, RODOLFO DEL ROSARIO, FELIX C. DALISAY, AND DANILO M.
DELA FUENTE,* PETITIONERS, VS. REAR ADMIRAL ERNESTO C. ENRIQUEZ (IN
HIS CAPACITY AS THE DEPUTY CHIEF OF STAFF FOR RESERVIST AND
RETIREE AFFAIRS, ARMED FORCES OF THE PHILIPPINES), THE GRAVE
SERVICES UNIT (PHILIPPINE ARMY), AND GENERAL RICARDO R. VISAYA (IN
HIS CAPACITY AS THE CHIEF OF STAFF, ARMED FORCES OF THE
PHILIPPINES), DEFENSE SECRETARY DELFIN LORENZANA, AND HEIRS OF
FERDINAND E. MARCOS, REPRESENTED BY HIS SURVIVING SPOUSE IMELDA
ROMUALDEZ MARCOS, RESPONDENTS.

RENE A.V. SAGUISAG, SR., RENE A.Q. SAGUISAG, JR., RENE A.C. SAGUISAG III,
INTERVENORS.

[G.R. No. 225984]

REP. EDCEL C. LAGMAN, IN HIS PERSONAL AND OFFICIAL CAPACITIES AND

AS A MEMBER OF CONGRESS AND AS THE HONORARY CHAIRPERSON OF THE
FAMILIES OF VICTIMS OF INVOLUNTARY DISAPPEARANCE (FIND),
REPRESENTED BY ITS CO-CHAIRPERSON, NILDA L. SEVILLA; REP. TEDDY
BRAWNER BAGUILAT, JR.; REP. TOMASITO S. VILLARIN; REP. EDGAR R.
ERICE; AND REP. EMMANUEL A. BILLONES, PETITIONERS, VS. EXECUTIVE
SECRETARY SALVADOR C. MEDIALDEA; DEFENSE SECRETARY DELFIN N.
LORENZANA; AFP CHIEF OF STAFF LT. GEN. RICARDO R. VISAYA; AFP
DEPUTY CHIEF OF STAFF REAR ADMIRAL ERNESTO C. ENRIQUEZ; AND
PHILIPPINE VETERANS AFFAIRS OFFICE (PVAO) ADMINISTRATOR LT. GEN.
ERNESTO G. CAROLINA (RET.), RESPONDENTS.

[G.R. No. 226097]

LORETTA ANN PARGAS-ROSALES, HILDA B. NARCISO, AIDA F. SANTOS-

MARANAN, JO-ANN Q. MAGLIPON, ZENAIDA S. MIQUE, FE B. MANGAHAS, MA.
CRISTINA P. BAWAGAN, MILA D. AGUILAR, MINERVA G. GONZALES, MA.
CRISTINA V. RODRIGUEZ, LOUIE G. CRISMO, FRANCISCO E. RODRIGO, JR.,
LIWAYWAY D. ARCE, AND ABDULMARI DE LEON IMAO, JR., PETITIONERS, VS.
EXECUTIVE SECRETARY SALVADOR C. MEDIALDEA, DEFENSE SECRETARY
DELFIN LORENZANA, AFP DEPUTY CHIEF OF STAFF REAR ADMIRAL ERNESTO
C. ENRIQUEZ, AFP CHIEF OF STAFF LT. GEN. RICARDO R. VISAYA, AND HEIRS
OF FERDINAND E. MARCOS, REPRESENTED BY HIS SURVIVING SPOUSE
IMELDA ROMUALDEZ MARCOS, RESPONDENTS.

[G.R. No. 226116]

1543
 HEHERSON T. ALVAREZ, JOEL C. LAMANGAN, FRANCIS X. MANGLAPUS,
EDILBERTO C. DE JESUS, BELINDA O. CUNANAN, CECILIA GUIDOTE ALVAREZ,
REX DEGRACIA LORES, SR., ARNOLD MARIE NOEL, CARLOS MANUEL,
EDMUND S. TAYAO, DANILO P. OLIVARES, NOEL F. TRINIDAD, JESUS DELA
FUENTE, REBECCA M. QUIJANO, FR. BENIGNO BELTRAN, SVD, ROBERTO S.
VERZOLA, AUGUSTO A. LEGASTO, JR., AND JULIA KRISTINA P. LEGASTO,
PETITIONERS, VS. EXECUTIVE SECRETARY SALVADOR C. MEDIALDEA,
DEFENSE SECRETARY DELFIN LORENZANA, AFP CHIEF OF STAFF LT. GEN.
RICARDO R. VISAYA, AFP DEPUTY CHIEF OF STAFF REAR ADMIRAL ERNESTO
C. ENRIQUEZ, AND PHILIPPINE VETERANS AFFAIRS OFFICE (PVAO) OF THE
DND, RESPONDENTS.

[G.R. No. 226117]

ZAIRA PATRICIA B. BANIAGA, JOHN ARVIN BUENAAGUA, JOANNE ROSE SACE

LIM, JUAN ANTONIO RAROGAL MAGALANG, PETITIONERS, VS. SECRETARY OF
NATIONAL DEFENSE DELFIN N. LORENZANA, AFP CHIEF OF STAFF RICARDO
R. VISAYA, ADMINISTRATOR OF THE PHILIPPINE VETERANS AFFAIRS OFFICE
ERNESTO G. CAROLINA, RESPONDENTS.

[G.R. No. 226120]

ALGAMAR A. LATIPH, PETITIONER, VS. SECRETARY DELFIN N. LORENZANA,

SUED IN HIS CAPACITY AS SECRETARY OF NATIONAL DEFENSE, LT. GEN.
RICARDO R. VISAYA, IN HIS CAPACITY AS CHIEF OF STAFF OF THE ARMED
FORCES OF THE PHILIPPINES AND LT. GEN. ERNESTO G. CAROLINA (RET.), IN
HIS CAPACITY AS ADMINISTRATOR, PHILIPPINE VETERANS AFFAIRS OFFICE
(PVAO), RESPONDENTS.

[G.R. No. 226294]

LEILA M. DE LIMA, IN HER CAPACITY AS SENATOR OF THE REPUBLIC AND AS

TAXPAYER, PETITIONER, VS. HON. SALVADOR C. MEDIALDEA, DEFENSE
SECRETARY DELFIN LORENZANA, AFP CHIEF OF STAFF LT. GEN. RICARDO R.
VISAYA, UNDERSECRETARY ERNESTO G. CAROLINA, IN HIS CAPACITY AS
PHILIPPINE VETERANS AFFAIRS OFFICE (PVAO) ADMINISTRATOR AND B/GEN.
RESTITUTO L. AGUILAR, IN HIS CAPACITY AS SHRINE CURATOR AND CHIEF,
VETERANS MEMORIAL AND HISTORICAL DIVISION AND HEIRS OF FERDINAND
EDRALIN MARCOS, RESPONDENTS.

[G.R. No. 228186]

SATURNINO C. OCAMPO, TRINIDAD H. REPUNO, BONIFACIO P. ILAGAN, MARIA

CAROLINA P. ARAULLO, M.D., SAMAHAN NG EX-DETAINEES LABAB SA
DETENSYON AT ARESTO (SELDA) REPRESENTED BY ANGELINA BISUNA,

1544
 CARMENCITA M. FLORENTINO, RODOLFO DEL ROSARIO, FELIX C. DALISAY,
DANILO M. DELA FUENTE, PETITIONERS, VS. REAR ADMIRAL ERNESTO C.
ENRIQUEZ (IN HIS CAPACITY AS THE DEPUTY CHIEF OF STAFF FOR
RESERVIST AND RETIREE AFFAIRS, ARMED FORCES OF THE PHILIPPINES),
THE GRAVE SERVICES UNIT (PHILIPPINE ARMY) AND GENERAL RICARDO R.
VISAYA (IN HIS CAPACITY AS THE CHIEF OF STAFF, ARMED FORCES OF THE
PHILIPPINES), DEFENSE SECRETARY DELFIN LORENZANA, AND HEIRS OF
FERDINAND E. MARCOS, SR., REPRESENTED BY HIS SURVIVING SPOUSE
IMELDA ROMUALDEZ MARCOS AND LEGITIMATE CHILDREN IMEE, IRENE AND
FERDINAND, JR., RESPONDENTS.

[G.R. No. 228245]

LORETTA ANN PARGAS-ROSALES, HILDA B. NARCISO, AIDA F. SANTOS-

MARANAN, JO-ANN Q. MAGLIPON, ZENAIDA S. MIQUE, FE B. MANGAHAS, MA.
CRISTINA P. BAWAGAN, MILA D. AGUILAR, MINERVA G. GONZALES, MA.
CRISTINA V. RODRIGUEZ, LOUIE G. CRISMO, FRANCISCO E. RODRIGO, JR.,
LIWAYWAY D. ARCE, AND ABDULMARI DE LEON IMAO, JR., PETITIONERS, VS.
EXECUTIVE SECRETARY SALVADOR MEDIALDEA, DEFENSE SECRETARY
DELFIN LORENZANA, REAR ADMIRAL ERNESTO C. ENRIQUEZ (IN HIS
CAPACITY AS THE DEPUTY CHIEF OF STAFF FOR RESERVIST AND RETIREE
AFFAIRS, ARMED FORCES OF THE PHILIPPINES), GENERAL RICARDO R.
VISAYA (IN HIS CAPACITY AS CHIEF OF STAFF, ARMED FORCES OF THE
PHILIPPINES), AND HEIRS OF FERDINAND E. MARCOS, REPRESENTED BY
IMELDA ROMUALDEZ MARCOS, RESPONDENTS.

RESOLUTION
PERALTA, J.:
On November 8, 2016, the Court dismissed the petitions challenging the intended burial
of the mortal remains of Ferdinand E. Marcos (Marcos), former President of the
Republic of the Philippines, at the Libingan ng mga Bayani (LNMB). As the Filipino
public witnessed through the broadcast media and as the Office of the Solicitor
General (OSG) manifested[1] based on the letter sent by the Philippine Veterans Affairs
Office (PVAO) of the Department of National Defense (DND), Marcos was finally laid to
rest at the LNMB around noontime of November 18, 2016, which was ten (10) days
after the promulgation of the judgment and prior to the filing of petitioners' separate
motions for reconsideration.

Now before Us are the following matters for resolution:

1. Motions for reconsideration (MRs) filed by Ocampo et al.,[2] Lagman et al.,

[3]
 Rosales et al.,[4] Latiph,[5] and De Lima;[6]

2. Urgent motion or petition for the exhumation of Marcos' remains at the LNMB
filed by Lagman et al.;[7] and

1545
3. Petitions to cite respondents in contempt of court filed by Ocampo et al.[8] and
Rosales et al.,[9] which were consolidated[10] with the case and docketed as G.R. No.
228186 and G.R. No. 228245, respectively.

Respondents were ordered to file their Comment to the above-mentioned pleadings, as

to which they complied in due time.

We shall first tackle the procedural issues raised.

Political question doctrine

Petitioners argue that the main issue of the petitions does not deal on the wisdom of the
actions of President Rodrigo R. Duterte (Duterte) and the public respondents but their
violation of the 1987 Constitution (Constitution), laws, and jurisprudence. They posit
that, under its expanded jurisdiction, the Court has the duty to exercise judicial power to
review even those decisions or exercises of discretion that were formerly considered
political questions in order to determine whether there is grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of a public officer.

From the records of the proceedings of the 1986 Constitutional Commission, it is clear
that judicial power is not only a power but also a duty which cannot be abdicated by the
mere invocation of the political question doctrine. [11] Nonetheless, Chief Justice Roberto
Concepcion clarified that Section 1, Article VIII of the Constitution was not intended to
do away with "truly political questions," which are beyond judicial review due to the
doctrine of separation of powers.[12] In Francisco, Jr. v. The House of Representatives,
[13]
 this Court conceded that Section 1 Article VIII does not define what are "truly political
questions" and "those which are not truly political," and that identification of these two
species may be problematic since there has been no clear standard. In the end,
however, We resolved that, "[i]n our jurisdiction, the determination of whether an issue
involves a truly political and non-justiciable question lies in the answer to the question of
whether there are constitutionally imposed limits on powers or functions conferred upon
political bodies. If there are, then our courts are duty-bound to examine whether the
branch or instrumentality of the government properly acted within such limits." [14]

The Court sees no cogent reason to depart from the standard set in Francisco,
Jr. Applying that in this case, We hold that petitioners failed to demonstrate that the
constitutional provisions they invoked delimit the executive power conferred upon
President Duterte. Significantly, AFP Regulations G 161-375 was issued by order of the
DND Secretary, who, as the alter ego of the President, has supervision and control over
the Armed Forces of the Philippines (AFP) and the PVAO. The Veterans Memorial
Historical Division of the PVAO is tasked to administer, develop and maintain military
shrines such as the LNMB, As held in Our Decision, AFP Regulations G 161-375 is

1546
presumptively valid and has the force and effect of a law and that, until set aside by the
Court, is binding upon executive and administrative agencies like public respondents,
including the President as the chief executor of the laws.

While the Bill of Rights stands primarily as a limitation not only against legislative
encroachments on individual liberties but also against presidential intrusions,
[15]
 petitioners failed to show as well that President Duterte violated the due process and
equal protection clauses in issuing a verbal order to public respondents that authorized
Marcos' burial at the LNMB. To note, if the grant of presidential pardon to one who is
totally undeserving cannot be set aside under the political question doctrine, [16] the same
holds true with respect to the President's power to faithfully execute a valid and existing
AFP regulation governing the LNMB as a national military cemetery and military shrine.

More so, even if subject to review by the Court, President Duterte did not gravely abuse
his discretion when he allowed Marcos' burial at the LNMB because it was already
shown that the latter is qualified as a Medal of Valor Awardee, a war veteran, and a
retired military personnel, and not disqualified due to dishonorable
separation/revertion/discharge from service or conviction by final judgment of an offense
involving moral turpitude. If grave abuse is not established, the Court will not substitute
its judgment for that of the official concerned and decide a matter which by its nature or
by law is for the latter alone to decide.[17]

Locus standi

Petitioners claim to have a legal standing to file the petitions because they have already
sustained direct injury as a result of the act being questioned in this case. With respect
to petitioners who are human rights violation victims (HRVVs) during the martial law
period, they contend that their right to dispute Marcos' burial at the LNMB rests on their
right to full and effective remedy and entitlement to reparation as guaranteed by the
State under the Constitution as well as the domestic and international laws. In
particular, they cite Republic Act (R.A.) No. 10368, arguing that Marcos' burial at the
LNMB distorts the historical bases upon which their rights to other non-monetary
compensation were granted, and is an affront to their honor and dignity that was
restored to them by law. Essentially, petitioners decry that Marcos' burial at the LNMB
results in illegal use of public funds, re-traumatization, historical revisionism, disregard
of their state recognition as heroes and their rights to effective reparation and to
satisfaction.

Petitioners' contentions still fail to persuade.

Locus standi or legal standing has been defined as a personal and substantial interest
in the case such that the party has sustained or will sustain direct injury as a result of
the governmental act that is being challenged. [18] Generally, a party will be allowed to

1547
litigate only when he or she can demonstrate that (1) he or she has personally suffered
some actual or threatened injury because of the allegedly illegal conduct of the
government; (2) the injury is fairly traceable to the challenged action; and (3) the injury
is likely to be redressed by the remedy being sought. [19] Petitioners have not clearly
shown the direct injury they suffered or would suffer on account of the assailed
memorandum and directive allowing Marcos' burial at the LNMB.

Petitioners' view that they sustained or will sustain direct injury is founded on the wrong
premise that Marcos' burial at the LNMB contravenes the provisions of the Constitution:
P.D. No. 105; R.A. Nos. 289, 10066, 10086, 10368; and international laws. However, as
the Court fully explained in the assailed Decision, the historical and legal bases
governing the LNMB unequivocally reveal its nature and purpose as an active military
cemetery/grave site over which President Duterte has certain discretionary authority,
pursuant to his control and commander-in-chief powers, which is beyond the Court's
judicial power to review.

Petitioners cannot also maintain that Marcos' burial at the LNMB serves no legitimate
public purpose and that no valid emulative recognition should be given him in view of
his sins as recognized by law and jurisprudence. They have not proven that Marcos was
actually not qualified and in fact disqualified under the provisions of AFP Regulations G
161-375. Moreover, the beneficial pro visions of R.A. No. 10368 cannot be extended to
construe Marcos' burial at the LNMB as a form of reparation for the HRVVs. As We
pointed out, such unwarranted interpretation is tantamount to judicial legislation, hence,
unconstitutional. It is not Marcos' burial at the LNMB that would result in the "re-
traumatization" of HRVVs but the act of requiring them to recount their harrowing
experiences in the course of legal proceedings instituted by them or their families to
seek justice and reparation for the gross human rights violations.

While the Court has adopted a liberal attitude and recognized the legal standing of
concerned citizens who have invoked a public right allegedly breached by a
governmental act, there must be showing that the issues raised are of transcendental
importance which must be settled early.[20] Since the term has no exact definition, the
Court has provided the following instructive guides to determine whether a matter is of
transcendental importance: (1) the character of the funds or other assets involved in the
case; (2) the presence of a clear case of disregard of constitutional or statutory
prohibition by the public respondent agency or instrumentality of the government; and
(3) the lack of any other party with a more direct and specific interest in the questions
being raised.[21] As held in the assailed Decision and further elucidated below,
petitioners are unable to satisfy all three determinants.

At this point, suffice it to state that given the public character of the LNMB and the
general appropriations for its maintenance and upkeep, petitioners failed to prove illegal
disbursement of public funds by showing that Marcos is disqualified to be interred at the

1548
LNMB under the provisions of existing Constitution, laws, and regulations. Also, they did
not establish that a special disbursement was ordered for the Marcos burial apart from
the funds appropriated for the interment of those who are similarly situated, which are
sourced from the Maintenance and Other Operating Expenses of the AFP and are
regularly included in the General Appropriations Act. As aptly noted by the OSG, the
Marcos family would shoulder all the expenses for the burial and that the AFP is even
authorized to claim reimbursement for the costs incurred therefor.

In stressing the alleged transcendental importance of the case, petitioners made much
out of the Court's issuance of Status Quo Ante Order (SQAO), the conduct of oral
arguments, and the mass protest across various sectors of the Philippine society. They
erred. The SQAO was issued so as not to render moot and academic the petitions filed
while the oral arguments were held in order to enlighten Us on difficult and complicated
issues involved in this case. The concerted actions that transpired were but
manifestations of the people's exercise of freedom of speech and expression or the right
to peaceably assemble and petition the government for redress of grievances. The legal
requisites for judicial inquiry before a question involving the constitutionality or validity of
a law or governmental act may be heard and decided by the Court were not at all
dispense with.

Exhaustion of
Administrative Remedies
and Hierarchy of Courts

Petitioners claim that the filing of an MR before public respondents and the Office of the
President (OP) would have been an exercise in futility, and that direct resort to this
Court is justified by the following special and compelling reasons; (1) the very alter
egos of President Duterte, if not the President himself, would rule on the MR; (2) a mere
verbal instruction of the President already put in motion the task of organizing Marcos'
burial at the LNMB; (3) the denial of an appeal to the OP is a forgone conclusion in view
of the President's repeated pronouncements during his election campaign, after the
filing of the petitions, and subsequent to the promulgation of the Court's Decision, that
he would allow Marcos' burial at the LNMB; (4) the case involves a matter of extreme
urgency which is evident from the Court's issuance of SQAO; (5) whether the President
committed grave abuse of discretion and violated the Constitution and the laws is purely
a question of law; (6) as proven by the clandestine burial of Marcos in coordination with
public respondents, there is up other plain, speedy and adequate remedy to assail the
acts which are patently illegal and made with grave abuse of discretion; (7) the strong
public interest involved as shown by the nationwide protests; and (8) the case is
impressed with public interest and transcendental issues.

We do not subscribe.

1549
The purpose behind the settled rule that a motion for reconsideration is a condition sine
qua non for the filing of a petition for certiorari is to grant the court or administrative
body which issued the assailed decision, resolution or order the opportunity to correct
any actual or perceived error attributed to it by the re-examination of the legal and
factual circumstances of the case.[22] Even if the challenged issuance of public
respondents were rendered upon the verbal order of President Duterte, it cannot be
denied that the concerned AFP officials still have the power to enforce compliance with
the requirements of AFP Regulations G 161-375, as amended. [23] The logical and
reasonable remedy to question the burial procedures and the allocation of plots should
be with public respondents who issued the directives.

If the court or administrative body is given an opportunity to correct itself on an MR,

there is no reason then not to extend such basic courtesy to public respondents since
they are subordinates who merely follow the orders of their Commander-in-Chief. Like
the President who is tasked to faithfully execute the laws of the land, they are also
enjoined to obey the laws and are entitled to the disputable presumption of regularity in
the performance of their official duties. Having been charged to exercise over-all
supervision in the implementation of AFP Regulations G 161-375, public respondents
could correct the interment directive issued should there be any meritorious ground
therefor. The fact that the administrative regulation does not provide a remedy to
question an interment directive does not automatically entitle petitioners to directly
implore this Court considering that it does not prevent them to appeal or ask for
reconsideration based on their claim of right to due process or an opportunity to be
heard on an issue over which they insist to have a standing to intervene.

Likewise, the Court cannot anchor its judgment on news accounts of President Duterte's
statements with regard to the issue of Marcos' burial at the LNMB. Newspaper articles
amount to "hearsay evidence, twice removed" and are therefore not only inadmissible
but without any probative value at all whether objected to or not, unless offered for a
purpose other than proving the truth of the matter asserted. [24] As it is, the news article is
admissible only as evidence that such publication exists with the tenor of the news
therein stated.[25] The same rules apply to news article published via the broadcast
media or the internet communication. While it may be asserted that President Duterte's
position on the issue is consistent, We must base Our decision on a formal concrete
act, preferably a written order denying the MR or appeal, so as to avoid being entangled
in possibly moot and academic discourses should he make a volte-face on the issue.
Needless to state, he should be given an opportunity to correct himself, as it is
disputably presumed that he would maintain his solemn oath to faithfully and
conscientiously fulfill his duties as President of the Philippines, preserve and defend its
Constitution, execute its laws, do justice to eveiy man, and consecrate himself to the
service of the Nation.[26]

The fact that the Court was prompted to issue the SQAO does not make this case

1550
extremely urgent to resolve. Instead of issuing a temporary restraining order (TRO) and
a writ of preliminary injunction (WPI), We issued (and extended) the effectivity of the
SQAO in order not to render moot and academic the issues raised in the petitions. With
respect to the alleged strong public interest on the case as shown by the nationwide
protests, the Court views that such mass actions indicate the controversial nature of the
issue involved. Again, the requisites of judicial review must be satisfied.

There is also no merit in petitioners' contention that the issue of whether President
Duterte and public respondents violated the Constitution and the laws and/or committed
grave abuse of discretion is purely a question of law that the Court ultimately has to
resolve. To reiterate, the issue of allowing Marcos' burial at the LNMB involves a truly
political question which is within the full discretionary authority and wisdom of President
Duterte to decide. There is no constitutionally imposed limits on the powers or functions
conferred upon him, much less grave abuse of discretion in the exercise thereof.
Similarly, public respondents cannot be faulted for issuing the interment directive in their
official capacities pursuant to the President's verbal order and to a valid and binding
administrative regulation.

Petitioners' direct resort to the Court cannot also be justified by the ruling in Drilon v.
Lim[27] that –

x x x [I]n the exercise of this jurisdiction [to consider the constitutionality of a law], lower
courts are advised to act with the utmost circumspection, bearing in mind the
consequences of a declaration of unconstitutionality upon the stability of laws, no less
than on the doctrine of separation of powers. As the questioned act is usually the
handiwork of the legislative or the executive departments, or both, it will be prudent for
such courts, if only out of a becoming modesty, to defer to the higher judgment of this
Court in the consideration of its validity, which is better determined after a thorough
deliberation by a collegiate body and with concurrence of the majority of those who
participated in its discussion.[28]

Such opinion bears no relation to the doctrines on exhaustion of administrative

remedies and hierarchy of courts. Instead, it refers to the duty of a purposeful hesitation
which every court, including Us, is charged before declaring a law unconstitutional, on
the theory that the measure was first carefully studied by the executive and the
legislative departments and determined by them to be in accordance with the
fundamental law before it was finally approved. [29]

It bears emphasis that the Constitution is clear that judicial power, which includes the
duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any

1551
branch or instrumentality of the Government, is vested not just in the Supreme Court but
also upon such lower courts established by law.[30] The organic act vests in Us appellate
jurisdiction over final judgments and orders of lower courts in all cases in which the
constitutionality or validity of any treaty, international or executive agreement, law,
presidential decree, proclamation, order, instruction, ordinance or regulation is in
question.[31] This means that the resolution of such cases may be made in the first
instance by said lower courts.[32] Under the law, the proper Regional Trial Court
exercises concurrent jurisdiction over extraordinary remedies such as petitions
for certiorari, prohibition and/or mandamus and equally wields the power to grant
provisional relief/s.

In a case where the constitutionality of an executive order was challenged, the Court
stressed that, while lower courts should observe a becoming modesty in examining
constitutional questions, they are nonetheless not prevented from resolving the same
whenever warranted, subject only to review by the highest tribunal. [33] Besides, even if
the case is one of first impression, the New Civil Code provides that no judge or court
shall decline to render judgment by reason of the silence, obscurity or insufficiency of
the laws.[34] What is missing in the rules may be found in the general principles of logic,
justice and equity.[35] A judge may apply a rule he sees fit to resolve the issue, as long
as the rule chosen is in harmony with general interest, order, morals and public policy. [36]

Despite the patent procedural defects of the petitions, the Court nevertheless fully
discussed the substantive merits of the case and finally ruled in favor of President
Duterte's decision to allow Marcos' burial at the LNMB.

The substantive issues raised in the MR shall now be discussed in seriatim.

Mootness of the Case

The OSG argues that Marcos' burial at the LNMB on November 18, 2016 is a
supervening event that rendered moot and academic the MRs of petitioners-movants.
Consequently, this Court must refrain from resolving the issues raised in the MRs for to
do so would result in an absurd situation wherein Marcos' remains would have to be
exhumed if the assailed Decision is overturned. The OSG asserts that petitioners-
movants cannot plead for the exhumation without first complying with Articles 306 to
309 of the New Civil Code.[37]

We disagree.

An issue becomes moot and academic when any declaration thereon would be of no
practical use or value such that there is no actual substantial relief to which petitioners
would be entitled and which would be negated by the dismissal of the claim. [38] On this
basis, the Court holds that the MRs filed by petitioners-movants have not been mooted

1552
by Marcos' burial at the LNMB. There is still a live controversy between the parties. The
MRs were not rendered illusory considering that the execution pending their resolution
may still be voided in the event that We find merit in the contentions of petitioners-
movants. In that sense, a declaration sustaining their motions and granting their prayer
for relief would still be of practical value.

SQAO, Petitions for

Contempt and Motion
for Exhumation

Lagmao et al. contend that the right of a party to file a MR is impaired and that due
process is derailed if a decision that is not yet final and executory is implemented. In
this case, the Decision must become final and executory before the dissolution of the
SQAO can take effect. Pending its finality, the absence of a court order enjoining
Marcos' burial at the LNMB is of no moment because the lifting of the SQAO is
contingent upon the finality of the Decision. Consistent with Tung Ho Steel Enterprises
Corporation v. Ting Guan Trading Corporation, [39] which applied Sections 1 and 4 of
Rule 52 of the Rules of Court (Rules), while the reglementary period for filing a MR has
not expired, the Decision and the SQAO as an accessory order must not be enforced.
Accordingly, a premature and void execution of the Decision can be recalled even motu
proprio by this Court.

The assertions lack merit.

While the Court concedes that execution takes place only when decisions become final
and executory,[40] there are cases that may be executed pending appeal [41] or are
immediately executory[42] pursuant to the provisions of the Rules and the statutes as
well as by court order. Yet, the fact that a decision is immediately executory does not
prevent a party from questioning the decision before a court of law. [43]

As regards the SQAO, Tung Ho is inapplicable for having factual and procedural
antecedents that are different from the instant case. Instead, We should find guidance
in Buyco v. Baraquia,[44] which ruled that the lifting of a WPI due to the dismissal of the
complaint is immediately executory even if the dismissal of the complaint is pending
appeal. It was held:

A writ of preliminary injunction is an order granted at any stage of an action or

proceeding prior to the judgment or final order, requiring a party or a court, agency or a
person to refrain from a particular act or acts. It is merely a provisional remedy, adjunct
to the main case subject to the latter's outcome. It is not a cause of action in itself. Being
an ancillary or auxiliary remedy, it is available during the pendency of the action which
may be resorted to by a litigant to preserve and protect certain rights and interests
therein pending rendition, and for purposes of the ultimate effects, of a final judgment in

1553
the case.

The writ is provisional because it constitutes a temporary measure availed of during the
pendency of the action and it is ancillary because it is a mere incident in and is
dependent upon the result of the main action.

It is well-settled that the sole object of a preliminary injunction, whether prohibitory or

mandatory, is to preserve the status quo until the merits of the case can be
heard. It is usually granted when it is made to appear that there is a substantial
controversy between the parties and one of them is committing an act or threatening the
immediate commission of an act that will cause irreparable injury or destroy the status
quo of the controversy before a full hearing can be had on the merits of the case.

xxxx

The present case having been heard and found dismissible as it was in fact dismissed,
the writ of preliminary injunction is deemed lifted, its purpose as a provisional remedy
having been served, the appeal therefrom notwithstanding.

Unionbank v. Court of Appeals enlightens:

". . . a dismissal, discontinuance or non-suit of an action in which a restraining order

or temporary injunction has been granted operates as a dissolution of the
restraining order or temporary injunction," regardless of whether the period for
filing a motion for reconsideration of the order dismissing the case or appeal
therefrom has expired. The rationale therefor is that even in cases where an appeal
is taken from a judgment dismissing an action on the merits, the appeal does not
suspend the judgment, hence the general rule applies that a temporary injunction
terminates automatically on the dismissal  of the action."[45]

By nature, a SQAO is similar to the provisional remedies of TRO and WPI. [46] Thus,
when the Court dismissed the petitions in Our Decision, the SQAO, in effect,
became functus officio; it could not stand independent of the main proceeding. [47] Such
dismissal necessarily carried with it the lifting of the SQAO issued during the pendency
of the action. Being interlocutory and ancillary in character, the order automatically
dissolved upon dismissal of the main case.[48] The SQAO is effective immediately upon
its issuance and upon its lifting despite the existence of the right to file and the actual
filing of a MR or appeal.[49]

Petitioners-movants know for a fact that a SQAO has a definite life span; that it
automatically ceases to have effect upon the expiration of the period. [50] In this case, the
SQAO was initially effective until September 12, 2016. [51] It was extended twice, up to

1554
October 18, 2016,[52] and then until November 8, 2016[53] when the Decision was
eventually promulgated. If a SQAO has no specific time frame, petitioners need not
have pleaded for an extension and this Court need not have reissued separate
resolutions therefor. With the dismissal of the petitions, a court order for the
reinstatement of the SQAO is again necessary. There must be a new exercise of judicial
power.[54] Petitioners-movants were cognizant of this rule. On November 11, 2016,
Lagman et al. filed a "Manifestation"[55] praying "that the Honorable Supreme Court may
consider reissuing the Status [Quo] Ante Order and/or advising the Respondents not to
proceed with the said burial pending resolution of the motion/s for reconsideration to be
interposed seasonably. " On the same day, Ocampo et al. also filed an "Extremely
Urgent Motion"[56] praying, among others, to "[direct] respondents to hold in abeyance or
refrain from executing any plans on the interment of the remains of Marcos Sr. at the
Libingan pending the formal service of the Decision to petitioners, the resolution of the
Motion for Reconsideration to be filed by petitioners, and the finality of the Honorable
Court's Decision[.] " However, We did not act on these pleadings.

Finally, based on the title, allegations, and relief being sought, this consolidated case is
one for prohibition; hence, essentially in the nature of petitions for injunction. Under
Section 4, Rule 39 of the Rules,[57] judgments in actions for injunction are immediately
executory; it shall be enforceable after their rendition stud shall not be stayed by
an appeal taken therefrom, unless otherwise ordered by the court.

With the dismissal of the petitions and the lifting of the SQAO, nothing stood to hinder
respondents from acting on and proceeding with Marcos' burial at the LNMB prior to the
expiration of the period to file a MR and before its resolution. Considering that there is
no fault or punishable acts to speak of, respondents cannot be held guilty of indirect
contempt under Section 3 (c) and (d), Rule 71 of the Rules.[58] On the same ground,
neither is there any legal justification to order the exhumation of the mortal remains of
Marcos and subject the same to forensic examination to ascertain its authenticity.

Non-publication of AFP Regulations

Lagman et al. raise a new issue. They propound that AFP Regulations 161-375 cannot
be used as basis to justify Marcos' burial at the LNMB because, per certification issued
by Director Flordeliza C. Vargas-Trinidad,[59] AFP Regulations G 161-371 to 161-375
were not filed with the Office of the National Administrative Register (ONAR) of the
University of the Philippines Law Complex. This failure is in violation of the mandatory
requirement of Sections 3 (1) and 4, Chapter 2, Book VII of the Administrative Code of
1987. Being legally invalid, defective and unenforceable, no rights, privileges and
obligations have accrued therefrom or been vested thereby.

They are mistaken.

1555
Chapter 2, Book VII of the Administrative Code of 1987 provides:

SECTION 3. Filing. – (1) Every agency[60] shall file with the University of the Philippines
Law Center three (3) certified copies of every rule [61] adopted by it. Rules in force on the
date of effectivity of this Code which are not filed within three (3) months from that date
shall not thereafter be the basis of any sanction against any party or persons.
(2) The records officer of the agency, or his equivalent functionary, shall carry out the
requirements of this section under pain of disciplinary action.
(3) A permanent register of all rules shall be kept by the issuing agency and shall be
open to public inspection.

SECTION 4. Effectivity. – In addition to other rule-making requirements provided by law

not inconsistent with this Book, each rule shall become effective fifteen (15) days from
the date of filing as above provided unless a different date is fixed by law, or specified in
the rule in cases of imminent danger to public health, safety and welfare, the existence
of which must be expressed in a statement accompanying the rule. The agency shall
take appropriate measures to make emergency rules known to persons who may be
affected by them.

The publication requirement in the ONAR is confined to issuances of administrative

agencies under the Executive Branch of the government. [62] Exempted from this
prerequisite are the military establishments in all matters relating exclusively to Armed
Forces personnel.[63] A plain reading of AFP Regulations G 161-371 to 161-375 reveals
that they are internal in nature as that they were issued merely for the guidance of the
concerned AFP units which are tasked to administer the LNMB. Moreover, in view of the
nature of the LNMB as an active military cemetery, it cannot be said that AFP
Regulations G 161-375 is a regulation which "adversely affect, or impose a heavy and
substantial burden on, the citizenry in a matter that implicates the very nature of
government we have adopted" such that registration with the ONAR is not only "a
matter of administrative convenience but x x x a dictate of due process." [64]

In the exercise of executive power, the President has inherent power to adopt rules and
regulations – a power which is different from a delegated legislative power that can be
exercised only within the prescribed standards set by law – and to delegate this power
to subordinate executive officials.[65] On July 12, 1957, then President Carlos P. Garcia,
in the exercise of his powers of control and to reserve public land, issued Proclamation
No. 423. Pursuant thereto, the AFP Chief of Staff issued AFP Regulations G 161-371
on February 2, 1960, which was eventually succeeded by AFP Regulations G 161-375.
By granting the AFP Chief of Staff the power to administer a military reservation site
then known as Fort Wm Mckinley (now Fort Andres Bonifacio), part of which is now the
LNMB, former President Garcia and the presidents subsequent to him effectively

1556
delegated their rule-making power. As expressed in said regulations, they were
issued "By Order of the Secretary of National Defense/Defense Minister, " who, in turn,
is under the Office of the President.

Assuming that AFP Regulations G 161-375 is invalid for non-compliance with the
publication requirement in the ONAR, its invalidity would still not result in the denial of
Marcos' burial at the LNMB. Since the Administrative Code of 1987 is prospective in its
application, President Duterte may apply AFP Regulations G 161-373 issued on April 9,
1986[66] as legal basis to justify the exercise of his presidential prerogative. Under this
earlier regulation, Marcos may be buried at the LNMB because he is a Medal of Valor
Awardee, President and AFP Commander-in-Chief, Minister of National Defense,
Veteran, and Statesman, Moreover, unlike the succeeding regulations, AFP Regulations
G 161-373 contains no provisions on disqualification for interment.

Compliance with the 1987

Constitution, statutes, and
jurisprudence

Petitioners-movants reiterate that AFP Regulations G 161-375 does not have the force
and effect of Law and cannot be a valid source of any right, obligation or power for
violating the Constitution, international and municipal laws, and foreign and local
jurisprudence, which, cannot be disregarded as they are deemed incorporated in
administrative regulations.

Again, the Court is not persuaded.

On the 1987 Constitution

Ocampo et al. maintain that Marcos' burial at the LNMB brazenly violates the
Constitution, the basic principles of which are respect for human rights and dignity and
public accountability. Rosales et al. hold that the spectacle of burying Marcos at the
LNMB undermines the recognition of his crimes and takes away the very historical
premises on which so much of our present constitutional design and order is anchored.
And, Latiph expresses that Marcos was an epitome of anti-democracy, representing
oppression and tyranny which the Constitution rejects.

It is asserted that We ignored the intent expressed by the Filipinos when they ratified
the Constitution, which, among others, orders the AFP to be the protector of the people
(Sec. 3, Art. II); adopts an independent foreign policy (Sec. 7, Art. II); directs the State to
take positive and effective measures against graft and corruption (Sec. 27, Art. II);
restricts the powers of the President to suspend the privilege of the writ of habeas
corpus and proclamation of martial law (Sec. 18, Art. VII); expands the power and duty
of the Supreme Court (Sec. 1, Art. VIII); directs that education shall inculcate patriotism

1557
and nationalism, foster love of humanity, respect for human rights, appreciation of the
role of national heroes in the historical development of the country (Sec. 3 [2], Art. XIV);
requires the State to strengthen the patriotic spirit and nationalist consciousness of the
military, and respect for people's rights in the performance of their duty (Sec. 5 [2], Art.
XVI); creates the Commission on Human Rights (Sec. 17, Art. XIII); and causes the
establishment of the Presidential Commission on Good Government (PCGG) and the
Comprehensive Agrarian Reform Program (CARP) as well as the enactment of R.A.
Nos. 9745, 9851, 10353, and 10368.

Moreover, for Rosales et al., the cases of Manila Prince Hotel v. GSIS,[67] Agabon v.

NLRC,[68] Serrano v. Gallant Maritime Services, Inc., et al., [69] Gutierrez v. House of
Representatives Committee on Justice,[70] and Gamboa v. Finance Secretary Teves. et
al.[71] prove that the Constitution has self-executing provisions. Ocampo et al. add that
this Court struck down in Manila Prince Hotel the argument that some provisions of the
Constitution are not self-executing and requires implementing legislation, and that
provisions claimed to be non self-executing can still be violated if the questioned act is
directly opposite the provisions that require the government to undertake.

Finally, it is contended that our constitutional tradition has consistently followed the
doctrine that the silence of the Constitution does not mean the absence of constitutional
principles and commands. Rosales et al. cite Angara v. Electoral Commission,
[72]
 wherein the Court, following the doctrine of necessary implication, appeared to have
recognized the principle of separation of powers and Our power of judicial review. Also,
Ocampo et al. refer to Egerton v. Earl of Brownlow,[73] wherein an act based on public
policy considerations was allegedly struck down despite the fact that there was no law
or jurisprudence prohibiting it.

The Court need not belabor once more in discussing the points raised above as most, if
not all, of the above submissions were considered and passed upon in the Decision.

As the OSG correctly counters, reliance on Manila Prince Hotel is misplaced because
the issue there was whether Sec. 10, Art. XII of the Constitution, a provision which was
not invoked in this case, is self-executing. Petitioners-movants repeatedly failed to
demonstrate precisely how Sections 3, 7, 11, 13, 23, 26, 27 and 28 of Art. II; Sec. 18,
Art. VII; Sec. 1, Art. VIII; Sec. 1, Art. XI; Sec. 3[2], Art. XIV; Sec. 5 [2], Art. XVI; and Sec.
17, Art. XIII of the Constitution prohibit Marcos' burial at the LNMB. In fact, even the
Statement[74] dated November 24, 2016, which was issued by some members of the
Constitutional Commission, offers no consolation as nowhere therefrom could We find
any specific constitutional provision/s violated by the interment of Marcos.

The provisions of the Constitution being invoked in this case are simple and clear. They
are not equivocal as to necessitate resort to extraneous aids of construction and
interpretation, such as the proceedings of the Constitutional Commission or Convention,

1558
in order to shed light on and ascertain the true intent or purpose thereof. [75] Verba
legis should prevail since the presumption is that the words in which the constitutional
provisions are couched express the objective sought to be attained. [76] The authors of
our Constitution were not only the members of the Constitutional Commission but also
all those who participated in its ratification. Since the ideas and opinions exchanged by
a few of its commissioners should not be presumed to be the opinions of ail of them, it is
the specific text – and only that text – which was the result of the deliberations of the
Commission that must be read and construed.[77] As this Court, through Justice Leonen,
held in David v. Senate Electoral Tribunal:[78]

In the hierarchy of the means for constitutional interpretation, inferring meaning from the
supposed intent of the framers or fathoming the original understanding of the individuals
who adopted the basic document is the weakest approach.

These methods leave the greatest room for subjective interpretation. Moreover, they
allow for the greatest errors. The alleged intent of the framers is not necessarily
encompassed or exhaustively articulated in the records of deliberations. Those that
have been otherwise silent and have not actively engaged in interpellation and debate
may have voted for or against a proposition for reasons entirely their own and not
necessarily in complete agreement with those articulated by the more vocal. It is even
possible that the beliefs that motivated them were based on entirely erroneous
premises. Fathoming original understanding can also misrepresent history as it compels
a comprehension of actions made within specific historical episodes through detached,
and not necessarily better-guided, modem lenses.

Moreover, the original intent of the framers of the Constitution is not always uniform with
the original understanding of the People who ratified it. In Civil Liberties Union:

While it is permissible in this jurisdiction to consult the debates and proceedings of the
constitutional convention in order to arrive at the reason and purpose of the resulting
Constitution, resort thereto may be had only when other guides fail as said proceedings
are powerless to vary the terms of the Constitution when the meaning is clear. Debates
in the constitutional convention "are of value as showing the views of the individual
members, and as indicating the reasons for their votes, but they give us no light as to
the views of the large majority who did not talk, much less of the mass of our fellow
citizens whose votes at the polls gave that instrument the force of fundamental law. We
think it safer to construe the constitution from what appears upon its face." The proper
interpretation therefore depends more on how it was understood by the people adopting
it than in the framer's understanding thereof.

Considering that the Court may not ascribe to the Constitution meanings and
restrictions that would unduly burden the powers of the President, [79] its plain and

1559
unambiguous language with respect to his power of control as Chief Executive and
Commander-in-Chief should be construed in a sense that will allow its foil exercise. It
cannot be conveniently claimed that various provisions of the Constitution, taken
together, necessarily imply the prohibition of Marcos' burial at the LNMB. The silence of
the Constitution cannot be unreasonably stretched to justify such alleged proscription.

On R.A. No. 289

Petitioners Ocampo et al. and Lagman et al. insist that R.A. No. 289 is applicable in
determining the standards on who are entitled to be buried at the LNMB. As a special
law, its provisions prevail over the power to allocate lands of the public domain granted
to the President by the Administrative Code of 1987. Its salutary objective encompasses
all subsequent shrines or memorials as interment grounds for former Presidents,
heroes, and patriots, regardless of the time it was constituted and its location.

While We agree that R.A. No. 289 is an existing and valid law for not having been
amended or repealed by subsequent ones, it is maintained that said law and the LNMB
are unrelated to each other, Up to now, the Congress has deemed it wise not to
appropriate any funds for the construction of the National Pantheon or the creation of
the Board on National Pantheon. Significantly, the parcel of land subject matter of
Proclamation No. 431, which was later on revoked by Proclamation No. 42, is different
from that covered by Proclamation No. 208. Even Justice Caguioa's dissent, as to which
Justice Jardeleza concurred, concluded that it is non sequitur to argue the applicability
of R.A. No. 289, or the standards indicated therein, to the LNMB because the land on
which the National Pantheon was to be built refers to a discrete parcel of land that is
totally distinct from the site of the LNMB. Except for Justice Leonen, the other justices
who dissented to the majority opinion were silent on the matter.

On R.A. No. 10368

The applicability of R.A. No. 10368 was reiterated by petitioners-movants. Ocampo et

al. posit that Marcos' burial at the LNMB is diametrically opposed and evidently
repugnant to the legislative intent and spirit of R.A. No. 10368, which statutorily
declared the policy of the State to recognize the heroism and sacrifices of all human
rights violations victims (HRVVs) during the Marcos regime. The HRVVs cannot be
recognized and their dignity cannot be restored if the perpetrator is extolled and given
honors befitting that of a hero, tantamount to exonerating him. from the abuses of
Martial Law. To recall Justice Leonen raised the same arguments in his dissent, stating
that Marcos' burial at the LNMB is violative of R.A. No. 10368 because it may be
considered as an effort "to conceal abuses during the Marcos regime" or to "conceal x x
x the effects of Martial Law"; that it undermines the recognition of his complicity.

On their part, Lagman et al. and Rosales et al. assert that aside from the repealing

1560
clause expressly provided for under Sec, 31 of R.A. No. 10368, the incompatibility
between AFP Regulations G 161-375 and said law satisfies the standard of effecting a
repeal by implication. Under the doctrine of necessary implication, every statutory grant
of power, right or privilege is deemed to include all incidental power, right or privilege.

We differ.

The provisions of R.A. No. 10368 are straightforward. The rights of HRVVs to
recognition and reparation have been set and defined under the law, which grants
specific remedies. Glaringly, not one of its provisions could be construed to justify
denying former Pres. Marcos or his family of any rights which have been vested by law
or regulation. R.A. No. 10368 repudiated no commendation or revoked any distinction
attained by Marcos during his lifetime, particularly those which he accomplished outside
the period of September 21, 1972 to February 25, 1986. Neither did it nullify any right or
benefit accruing to him because of such achievements. The Court cannot do more than
what the law clearly provides. To stretch its scope is not only unreasonable but also
tantamount to judicial legislation.

Based on the history of the passage of R.A. No. 10368 and the events that led to or
precipitated its enactment,[80] what the legislature actually had in mind is accurately
reflected in the language of the law. As a matter of fact, in the sponsorship speech of
Senator Francis G. Escudero, he expressed that the "bill seeks to provide reparation
and recognition of the survivors and relatives of the victims of human rights during the
regime of former Pres. Ferdinand Marcos" and that "[i]n order to qualify for
compensation under this Act, the human rights violation must have occurred during the
period from September 21, 1972 to February 25, 1986."[81] In the Senate, Senators
Franklin M. Drilon and Panfilo M. Lacson withdrew their reservation to interpellate on
the measure.[82] Likewise, in the House of Representatives (House), no member
signified an intention to ask any question during the period of sponsorship and debate,
and no committee or individual amendments were made during the period of
amendments.[83] Thus, this Court is of the view that the statutory omission – the non-
inclusion of the prohibition of Marcos' burial at the LNMB – was both deliberate and
significant. Congress itself did not consider it as part and parcel of reparation to HRVVs.

Even on the assumption that there is in fact a legislative gap caused by such an
omission, neither could the Court presume otherwise and supply the details thereof,
because a legislative lacuna cannot be filled by judicial fiat. Indeed, courts may not, in
the guise of interpretation, enlarge the scope of a statute and include therein situations
not provided nor intended by the lawmakers. An omission at the time of the enactment,
whether careless or calculated, cannot be judicially supplied however after later wisdom
may recommend the inclusion. Courts are not authorized to insert into the law what they
think should be in it or to supply what they think the legislature would have supplied if its
attention has been called to the omission. [84]

1561
Indeed, the Court cannot supply legislative omission. We cannot engraft upon a law
something that has been omitted but is believed as ought to have been embraced.
[85]
 This Court cannot, under its power of interpretation, supply the omission even though
the omission may have resulted from inadvertence or because the case in question was
not foreseen or contemplated."[86] If the law is too narrow in scope or has shortcoming, it
is for the Legislature alone to correct it by appropriate enactment, amendment or even
repeal.[87]

With regard to the non-monetary reparation to HRVVs under Sec. 5 of R,A. No. 10368,
Rosales et al. argue that the Court's narrow interpretation is inconsistent with the
prevailing jurisprudence and international law for failure to recognize the all-
encompassing concept of the right to an effective remedy. To them, non-monetary
reparation is not limited to a hollow commitment to provide services from government
agencies including public respondents.

We are not amendable.

It is well established that courts may avail themselves of extrinsic aids such as the
records of the deliberations or the actual proceedings of the legislative body in order to
assist in determining the construction of a statute of doubtful meaning. Where there is
doubt as to what a provision of a statute means, the meaning put to the provision during
the legislative deliberation or discussion on the bill may be adopted. [88]

Notably, R.A. No. 10368 is the consolidation of Senate Bill (S.B.) No. 3334[89] and

House Bill (H.B.) No. 5990[90] of the 15th Congress. S.B. No. 3334 substituted S.B. Nos.
2615[91] and 3330,[92] which were both referred to and considered by the Senate
Committees on Justice and Human Rights and Finance. While S.B. No. 3334 did not
provide for non-monetary compensation,[93] H.B. No. 5990[94] afforded such benefit. The
Conference Committee on the Disagreeing Provisions of H.B. No. 5990 and S.B. No.
3334 resolved to adopt the provision of the House of Representatives on non-monetary
compensation (appearing as Section 5 of now R.A. No. 10368) but did not include its
definition under H.B. No. 5990.[95] As defined by the House, it "refers to a non-pecuniary
compensation given to a victim of human rights violation or members of the family to
restore the family's honor and dignity and shall include, but not limited to,
psychotherapy, counseling, medical care, social amelioration and honorific
recognition."[96] Hence, interpretation of the term should be viewed in light of this
definition such that any non-monetary compensation to be granted must be similar in
nature with the enumerated services.

If a statute is plain and free from ambiguity, it must be given its literal meaning or
applied according to its express terms, without any attempted interpretation, and leaving

1562
the court no room for any extended ratiocination or rationalization. [97] When the letter of
the law is clear, to seek its spirit elsewhere is simply to venture vainly, to no practical
purpose, upon the boundless domains of speculations. [98] A strictly literal interpretation
of a statute may be disregarded and the court may consider the spirit and reason of the
statute where a literal meaning would be impossible, render the provision/s
meaningless, or lead to inconvenience, absurdity, contradiction, injustice or mischievous
results, or would defeat the clear purpose of the lawmakers. [99] Liberality has a place
only when, between two positions that the law can both accommodate, the more
expansive or more generous option is chosen.[100] It has no place where no choice is
available at all because the terms of the law do riot at all leave room for discretion. [101]

The function of the courts is jus dicere and not jus dare; to interpret law, and not to
make law or give law.[102] Our duty is not to amend the law by enlarging or abridging the
same.[103] This Court should not make or supervise legislation, or under the guise of
interpretation, modify, revise, amend, distort, remodel, or rewrite the law, or give the law
a construction which is repugnant to its terms.[104] We cannot interpose our own views as
to alter them.[105] Simply put, the Court, must not read into the law what is not there.
[106]
 The letter of the law cannot be disregarded on the pretext of pursuing its spirit. [107] To
do so would be engaging in judicial legislation, which is abjured by the trias
politica, principle and in violation of one of the most basic principles of a republican and,
democratic government – the separation of powers. [108]

Judicial power covers only the recognition, review or reversal of the policy crafted by the
political departments if and when a case is brought before it on the ground of illegality,
unconstitutionality or grave abuse of discretion (i.e,, blatant abuse of power or
capricious exercise thereof).[109] The determination of the wisdom, fairness, soundness,
justice, equitableness or expediency of a statute or what "ought to be" as a matter of
policy is within the realm of and should be addressed to the legislature. [110] If existing
laws are inadequate, the policy-determining branches of the government, specifically
the duly elected representatives who carry the mandate of the popular will, may be
exhorted peacefully by the citizenry to effect positive changes. [111] True to its
constitutional mandate, the Court cannot craft and tailor statutory provisions in order to
accommodate all of situations no matter how ideal or reasonable the proposal may
sound.[112] No matter how well-meaning, We can only air Our views in the hope that
Congress would take notice.[113]

x x x [The] Court should give Congress a chance to perform its primordial duty of
lawmaking. The Court should not pre-empt Congress and usurp its inherent powers of
making and enacting laws. While it may be the most expeditious approach, a short cut
by judicial fiat is a dangerous proposition, lest the Court dare trespass on prohibited
judicial legislation.[114]

1563
Judicial activism should never be allowed to become judicial exuberance. [115] In this
case, no amount, of logic or convenience can convince Us to perform an insertion of a
matter that was clearly not included in R.A. No. 10368 as enacted. Just like his return to
the country, Marcos' burial at the LNMB is a delicate and complex subject with far
reaching implications. No one can deny this as even the Post-EDSA presidents,
including the two Aquino governments, as well as the past Congresses did not dare,
wittingly or unwittingly, to finally put the issue to rest. In view of its political (and even
economic) repercussions, We must leave the task of enlarging the scope of benefits to
the HRVVs to the legislative authority where it properly belongs and which must be
assumed to be just as capable of compassionate consideration as courts are thought to
be.[116]

Observance of the IHR Laws

Rosales et al. propound that mere existence of human rights laws, administrative rules,
and judicial issuance in the Philippines is not equivalent to full compliance with
international law standards. It is contended that if the State is to ensure its commitment
to the principles of international human rights law, HRVVs must be given full satisfaction
and guarantees of non-repetition as defined by Principles 22 and 23 of the Basic
Principles and Guidelines on the Right to a Remedy and Reparation for Victims of
Gross Violations of International Human Rights Law and Serious Violations of
International Humanitarian Law ("Basic Principles and Guidelines"). Similarly,
Ocampo et al. hold that the HRVVs are entitled to restitution, compensation,
rehabilitation, and satisfaction as contemplated in Sections 19 to 22 of the Basic
Principles and Guidelines. Essentially, as the Chief Justice expressed in her dissent,
there must holistic reparation – financial and symbolic.

The Basic Principles and Guidelines and the Updated Set of Principles for the

Protection and. Promotion of Human Rights Through Action to Combat Impunity ("UN
Principles on Impunity") are neither a treaty nor have attained the status of generally
accepted principles of international law and/or international customs. Justice Arturo D.
Brion fittingly observed in his Separate Concurring Opinion that they do not create
legally binding obligations because they are not international agreements but are
considered as "'soft law" that cannot be interpreted as constraints on the exercise of
presidential prerogative. Consistent with Pharmaceutical and Health Care Assoc. of the
Phils, v. Health Sec. Duque III, [117] the Basic Principles and Guidelines and the
UN Principles on Impunity are merely expressions of non-binding norms, principles, and
practices that influence state behavior; therefore, they cannot be validly considered as
sources of international law that is binding upon the Philippines under Art. 38 (1),
Chapter II[118] of the Statute of the International Court of Justice.

It is evident from the plain text of the Basic Principles and Guidelines and the

1564
UN Principles on Impunity that they are recommendatory in character. The Resolution
of the General Assembly adopting the Basic Principles and Guidelines states:

2. Recommends that States take the Basic Principles and Guidelines into account,
promote respect thereof and bring them to the attention of members of the executive
bodies of government, in particular law enforcement officials and military and security
forces, legislative bodies, the judiciary, victims and their representatives, human rights
defenders and lawyers, the media and the public in general; (Underscoring ours)

As to the UN Principles on Impunity, the concluding portion of its Preamble reads:

Pursuant to the Vienna Declaration and Programme of Action, the following principles

are intended as guidelines to assist States in developing effective measures for
combating impunity. (Underscoring ours)

Had the Congress intended to incorporate the provisions of the Basic Principles and
Guidelines and the UN Principles on Impunity, which was already adopted by tine
United Nations as early as 2005, it could have done so by expressly mentioning them in
the Declaration of Policy under Sec. 2 of R.A. No. 10368. During the consideration of
S.B. No. 3334 and H.B. No. 5990, petitioners-movants should have petitioned the
Commission on Human Rights to make the necessary recommendations to the
Congress or otherwise directly lobbied to the lawmakers to include the Basic Principles
and Guidelines and the UN Principles on Impunity in the proposed law. They did not.
Nonetheless, they can do so for the enactment of amendatory laws.

While the States have a duty to repair violations of human rights and international
humanitarian law, the modalities of the reparation vary according to the right violated,
the gravity of the violation, the harm done, or the persons affected. The Basic Principles
and Guidelines recognizes that the different forms of reparation may be awarded
depending on the facts of each case arid whenever applicable.

Even if the Basic Principles and Guidelines and the UN Principles on Impunity are

treated as binding, international laws, they do not prohibit Marcos' burial at the LNMB.
We already noted in the Decision that they do not derogate against the right to due
process of the alleged human rights violator. Aside from Art. 14, Part III of the ICCPR,
[119]
 XIII (27) of the Basic Principles and Guidelines[120] and Principle 9 of the
UN Principles on Impunity[121] are clear and unequivocal. Certainly, observance of due
process must not be sacrificed in pursuing the HRVVs' right to full and effective remedy
under the international human rights law. The recognition and protection of a person's
human rights and dignity must not trample upon that of another who we do not like or
those who are perceived to be against us. Justice and equity demands that there be a

1565
balancing of interests in the enforcement of both. For the Constitution is a law for all
classes of men at all times and there is only one Bill of Rights with the same
interpretation for both unloved and despised persons on one hand and the rest who are
not so stigmatized on the other.[122]

Disqualification under the AFP Regulations

Dishonorable Discharge

Rosales et al. assert that "active service," as defined in Sec. 3 of P.D. No. 1638,
contemplates both civilian and military service. Thus, the term "dishonorable discharge"
applies equally to civilians who are guilty of conduct so reprehensible and tainted with
manifest disrespect to the rule of law. In Marcos' case, he was ousted from the
Presidency by the Filipinos and was forced into dishonorable exile abroad. Lagman et
al. posit that Marcos' burial at the LNMB would completely nullify all that the EDSA
People Power Revolution stands for. It would desecrate the spirit of EDSA as it would
sweep under the rug of impunity the cardinal sins of Marcos against the Filipinos.

The Court subscribes to the OSG's contention that the two instances of disqualification
under AFP Regulations G 161-375 apply only to military personnel in "active service."
For the purpose of P.D. No. 1638, the definition of "active service" under Sec. 3 covers
the military and civilian service rendered prior to the date of separation or retirement
from the AFP. Once separated or retired, the military person is no longer considered as
in "active service." In addition, the term dishonorable discharge in AFP Regulations G
161-375 refers to an administrative military process. Petitioners-movants have not
shown that Marcos was dishonorably discharged from military service under the law or
rules prevailing at the time his active service was terminated or as set forth by any of
the grounds and pursuant to the procedures described in AFP Circular 17, Series of
1987[123] issued on October 2, 1987.

Moral Turpitude

Ocampo et al., Lagman et al., Rosales et al., and Latiph argue that the November 8,

2016 Decision distinctly stands out as an aberration that contradicts and undoes the
previous court rulings against Marcos. They contend that the majority opinion chose to
ignore Republic v. Sandiganbayan (First Division),[124] Republic v. Sandiganbayan,
[125]
 Marcos, Jr. v. Rep. of the Phils.,[126] Marcos v. Sec. Manglapus,[127] Dizon v. Brig.
Gen. Eduardo,[128] Mijares v. Hon. Rañada,[129] PCGG v. Judge Peña,[130] Bisig ng
Manggagawa sa Concrete Aggregates, Inc. v. NLRC, [131] Galman v. Sandiganbayan,
[132]
 In Re Estate of Marcos Human Rights Litigation [133] and Hilao v. Estate of Marcos,
[134]
 which characterized the Martial Law as a regime filled with human rights violations
and memorialized Marcos as a dictator who plundered the country. Rosales et al. opine
that it is immaterial that the decisions of this Court and the foreign, tribunals were mere

1566
civil in character because all those litigation involved exhaustive presentation of
evidence wherein Marcos and his heirs were fully heard and have enjoyed due process
before courts of competent jurisdiction.

We disagree.

The cited cases cannot be relied upon to bar Marcos' burial at the LNMB. Galman v.
Sandiganbayan, Marcos v. Sec. Manglapus, Republic v. Sandiganbayan, Marcos, Jr. v.
Rep. of the Phils., PCGG v. Judge Peña, and Mijares v. Hon. Rañada did not involve
the power and authority of the President to order an interment at the LNMB,
while Republic v. Sandiganbayan (First Division), Republic v.
Sandiganbayan, and Marcos, Jr. v. Rep. of the Phils. pertained to forfeiture cases under
R.A. No. 1379,[135] which this Court declared as civil in nature. More importantly, these
cases did not convict Marcos of a crime. The complaints, denunciations, and charges
against him no matter how numerous and compelling do not amount to conviction by
final judgment of an offense involving moral turpitude. Neither mere presence of an
offense involving moral turpitude nor conviction by final judgment of a crime not
involving moral turpitude would suffice. The twin elements of "conviction by final
judgment" and "offense involving moral turpitude" must concur in order to defeat one's
entitlement for burial at the LNMB. The conviction by final judgment referred to is a
criminal conviction rendered by a civil court, not one that is handed down by a general
court martial. The highest quantum of evidence – proof beyond reasonable doubt, not
preponderance of evidence or substantial evidence – must be satisfied. Rosales et
al., therefore, erred in supposing that Marcos could never be disqualified under AFP
Regulations G 161-375 because it would be absurd that he would appoint a Judge
Advocate General to prosecute him and convene a General Court Martial to convict
him.

Rosales et al., Latiph, and De Lima further hold that Sec. 14 (2) Art. III of the
Constitution anent the right of the accused to be presumed innocent arises only in
criminal prosecution. Correspondingly, Marcos cannot avail such right because he was
not charged criminally; he was not under trial; and would not be sentenced to a penalty
where he stood to lose his life or liberty. Moreover, a claim for violation of due process
by a criminal offender presupposes that the People of the Philippines was afforded a fair
opportunity to arrest and prosecute the accused in a court of competent jurisdiction. In
Marcos' case, the People were unable to criminally prosecute him because he was
ousted from the presidency and died in a foreign land. Under the principle of territoriality
in criminal law, the long arm of the law could not reach him for lack of jurisdiction over
his person.

The arguments are untenable;

Aside from criminal prosecution, the presumption of innocence applies in the cases of

1567
attorney[136] under suspension or disbarment proceedings, judge [137] and court
personnel[138] with pending administrative complaint, detained person [139] before a military
tribunal, and employee[140] in labor cases.

The right to be presumed innocent until proven guilty is subsumed in the constitutional
right of every person not to be held to answer for a criminal offense without due process
of law.[141] This constitutional mandate refers to any person, not only to one who has
been arrested, detained or otherwise deprived of liberty, or against whom a complaint or
information was formally filed, or who is undergoing trial, or who is awaiting judgment by
the trial court, or whose judgment of conviction is pending appeal. In Herras Teehankee
v. Rovira,[142] the Court observed that bail is constitutionally available to ail persons,
even those against whom no formal charges are filed. By parity of reasoning, there is no
legal or just ground for Us to deny the constitutional right to be presumed innocent to
one who is not even criminally prosecuted. Similarly, to place such person in a less
favored position than an accused in a criminal case would be, to say the least,
anomalous and absurd. It is illogical, if not inane. If there is a presumption of innocence
in favor of one already formally charged with criminal offense, a fortiori, this
presumption should be indulged in favor of one who is yet to be charged.

Likewise, it is entirely inaccurate to proclaim that there was no opportunity to arrest, try,
and convict Marcos for his alleged criminal acts. Petitioners-movants must recall
that Marcos v. Sec. Manglapus arose precisely because the former president intended
to return to the Philippines, but then President Corazon C. Aquino refused on the
grounds of national security and public safety. We sustained the exercise of her
executive power. On hindsight, Marcos could have been prosecuted for his alleged
offenses had he been allowed to come back. As what happened, the Court is unaware
of any criminal case that was commenced against Marcos until his death.

Rosales et al. are also grossly mistaken to contend that a deceased person cannot
claim any demandable right to due process for it is exclusively reserved to a person with
civil personality. As the assailed Decision indicated, no less than the Constitution
intends that "full respect for human rights [covers] every stage of a person's
development 'from the time he becomes a person to the time he leaves this
earth.'"[143] In fact, in our system of laws, all criminal liability is totally extinguished by
death.[144] This applies to every Filipino, not. just Marcos.

Lagman et al. advance that Marcos must be assessed in his totality as a person, since
he did not err as an ordinary human being. He was a disgraced President who was
deposed by the sovereign people because he was a dictator, plunderer, and human
rights violator; he sinned against the multitude of Filipinos as the magnitude of his
transgressions permeated and ruined the very core of the Philippines' democratic
society and developing economy; and he was not a noble soldier for faking his wartime
exploits and credentials. Of the same view, Ocampo et al. assert that the record of

1568
Marcos as a soldier cannot be dichotomized and separated from his record as a
President because he is no ordinary soldier and president. As Marcos v. Sec.
Manglapus held, he is "in a class by itself."

The contentions lack merit.

We already pointed out in Our Decision that the NHCP study is limited to the conclusion
that Marcos did not receive the Distinguished Service Cross, the Silver Medal, and the
Order of the Purple Heart, and that the U.S. Government never recognized the Ang
Mga Maharlika and his alleged leadership of said guerilla unit. It is incomplete as to his
entire career. It did not cover and had no adverse findings with respect to his other
accomplishments as a legislator, a Secretary of National Defense, a military personnel,
a veteran, and a Medal of Valor awardee. When the Decision declared that Marcos
is "just a human who erred like us, " it was never the intention of the ponente to
trivialize or, as petitioners-movants perceive it to be, forgive and forget what Martial Law
has done to the HRVVs and our nation in general. There was no attempt to erase his
accountability for the alleged human rights violations and the plunder he committed
during the period. What the comparison only meant was to convey the truth that no
human is perfect; that it is in our nature to commit sins and make mistakes. The
Decision did not pass upon the issue of whether Marcos' "errors" were deliberately or
innocently done, extensive or insignificant in scale, or heinous or meritorious in
character.

Moreover, the case of Cudia v. The Superintendent of the Philippine Military

Academy (PMA),[145] which was invoked by Rosales et al., is inapplicable. The
factual antecedents are different and the applicable laws are unrelated: Cudia involves
the right to due process of a military cadet who was dismissed from the Philippine
Military Academy (PMA) while this case involves the right to be buried of a military
personnel at the LNMB; Cudia involves the PMA cadet's Honor Code and Honor
System Handbook while this case involves the AFP Regulations G 161-375;
and Cudia involves the exercise of academic freedom by the military academy while
this case involves the exercise of executive power by the President.

Even if Cudia applies, there is actually no conflict. In that case, the Court affirmed the
decision of the PMA, noting that it complied with the due process requirement of the
law. We did not substitute the judgment of the military; did not impose standards other
than what is traditionally and legally been practiced; and did not enforce a penalty
different from what was imposed by the PMA, On the other hand, this case also involves
a military regulation that We upheld for not being contrary to the prevailing Constitution,
laws, and jurisprudence. This Court affirms the standards as to who may be buried at
the LNMB, which are based on our unique military traditions and legal milieu, as
codified in various AFP Regulations that took into account existing laws such as C.A.
No. 408, P.D. No. 1638, and their amendments.

1569
Finally, the Court resolves the challenge of Rosales et al. with respect to Our citation of
U.S. rules and regulations on Arlington National Cemetery (Arlington). First, it must be
stressed that We did not heavily rely on the list provided by the Code of Federal
Regulations (C.F.R.) as to who are entitled to be buried at the LNMB. The rules and
regulations on Arlington, as found in the C.F.R., were mentioned because of their
apparent similarity with AFP Regulations G 161-375. They were not the main basis of
Our Decision, which can stand on its own even without such reference. Second, We
also did not forget to cite the very statute that explicitly enumerates those who are
prohibited from interment in Arlington. This is reflected in footnotes 161 and 162 of the
Decision, Third, We cannot consider the cases of Timothy Mcveigh and Russel Wayne
Wagner, allegedly U.S. military men who were denied the right to be buried at the
military cemetery. Newspaper or electronic reports cannot be appreciated by the Court,
"not because of any issue as to their truth, accuracy, or impartiality, but for the simple
reason that facts must be established in accordance with the rules of
evidence."[146] And Fourth, the majority members of the Court did not "insist" the need of
a prior proceeding in accordance with § 553.21 of the C.F.R. before any disqualification
under 38 U.S.C. § 2411 can be applied. We merely echoed the U.S. rules with respect
to a person found to have committed a Federal or State capital crime but who has not
been convicted by reason of not being available for trial due to death or flight to avoid
prosecution. We do not imply that exactly the same U.S. rules should be applied in
Marcos' case but only emphasized the need to guarantee the rights of the accused who
enjoys the presumption of innocence. In this jurisdiction, there has been no identical or
similar rules to apply; hence, this Court cannot direct any compliance. Instead, Our lone
guide is to determine whether, under AFP Regulations G 161-375, Marcos was
dishonorably separated/reverted/discharged from service or whether he was convicted
by final judgment of an offense involving moral turpitude, Nothing more, nothing less.

MOA between Ramos

and the Marcoses

According to Lagman et al., the 1992 Memorandum of Agreement (MOA), which was

executed between the Government of the Republic of the Philippines, represented by
then Department of Interior and Local Government (DILG) Secretary Rafael M. Alunan
III, and the Marcos family, represented by Mrs. Imelda R. Marcos, is a valid and
enforceable government contract, it being not contrary to law or public policy, that has
never been impugned. As such, it cannot be amended, revoked or rescinded by the
subsequent President in order to honor a personal campaign promise. If the sanctity of
a private, eontrgct is protected by the non-impairment clause, with more reason is a
State contract inviolable. Also, under the MOA, the Marcos family has irrevocably
waived any entitlement of the late president to be buried at the LNMB. They are in
estoppel and are guilty of laches because they have not instituted any formal demand or
action for 24 years since it was signed.

1570
The Court cannot agree.

The decision of former President Fidel V. Ramos in disallowing Marcos' burial at the
LNMB is not etched in stone; it may be modified by succeeding administrations. If one
Congress cannot limit or reduce the plenary legislative power of succeeding
Congresses,[147] so, too, the exercise of executive power by the past president cannot
emasculate that of the incumbent president. The discretionary act of the former is not
binding upon and cannot tie the hands of the latter, who may alter the same.

In this case, the MOA expressly provides that "any transfer of burial grounds shall be
with prior clearance with the Philippine Government taking into account socio-political
climate. " When President Duterte issued his verbal directive, he effectively gave the
required prior government clearance bearing in mind the current socio-political climate
that is different from the one prevailing at the time of former President Ramos. His
factual foundation, which is based on his presumed wisdom and possession of vital
information as Chief Executive and Commander-in-Chief, cannot be easily defeated by
petitioners-movants' naked assertions. Certainly, the determination of whether Marcos'
burial at the LNMB will best serve the public interest lies within the prerogative of the
President.

The powers of the Philippine President is not limited only to the specific powers
enumerated in the Constitution, i.e., executive power is more than the sum of specific
powers so enumerated.[148] Thus, he or she should not be prevented from accomplishing
his or her constitutionally and statutorily assigned functions and discretionary
responsibilities in a broad variety of areas. Presidential prerogative ought not be fettered
or embarrassed as the powers, express or implied, may be impermissibly undermined.
If the act is within the exercise of the President's discretion, it is conclusive; if it is
without authority and against law, it is void.[149] In the absence of arbitrariness and grave
abuse, courts have no power or control over acts involving the exercise of judgment of
the Executive Department. The ultimate power over alienable and disposable public
lands is reposed in the President of the Philippines. [150] More so, a judicial review should
not interfere with or intrude into a great extent on his needed prerogatives in conducting
military affairs, We have held that the commander-in-chief power of the President is a
wholly different and independent specie of presidential authority such that, by tradition
and jurisprudence, it is not encumbered by the same degree of restriction as that which
may attach to the exercise of executive control. [151]

With the foregoing, it is unnecessary for Us to discuss whether the Marcos family are
in estoppel or guilty of laches.

National reconciliation and forgiveness

1571
As long as it is proven that Marcos' burial at the LNMB is not contrary to the prevailing
Constitution, laws, and jurisprudence, public respondents need not show exactly how
such act would promote the declared policy of national healing and reconciliation.
Regardless of petitioners-movants' disagreement with it, the rationale for the assailed
directives pertains to the wisdom of an executive action which is not within the ambit of
Our judicial review. As well, the disputed act, just like a law that is being challenged, is
tested not by its supposed or actual result but by its conformity to existing Constitution,
laws, and jurisprudence. Hence, whether or not Marcos' burial at the LNMB would in
fact cause the healing of the nation and reconciliation of the parties is another matter
that is immaterial for purposes of resolving this case and irrelevant to the application of
AFP Regulations G 161-375. It is presumptuous for petitioners-movants to claim that
Marcos' burial at the LNMB will not bring about genuine national healing and closure.
While the HRYVs may find it hard to accept, it is not improbable that the rest of the
Filipinos may think and feel differently. In either case, the Court cannot engage in
conjectures and surmises. Instead, Our policy is to presume that the acts of the political
departments are valid in the absence of a clear and wimistakable showing to the
contrary. To doubt is to sustain.[152]

Equally, We cannot pass upon the propositions that Marcos' burial at the LNMB would
cleanse the late President Marcos of his sins or consecrate his misdeeds (Lagman et
al.); or would clear the image of the Marcos family as they once again attempt to rise
into power (Rosales, et al); or would politically rehabilitate their already tarnished
reputation and give a shot in the arm to their moribund fanatical followers (Ocampo et
al.); or would vindicate him or exonerate each and every plunderer, thief, murderer,
human rights violator, and torturer in government or justify every immoral and unlawful
act of crooks, trapos, cheaters, and other villains in public office, giving honor to
impunity in public office and to a public life without moral principles (De Lima). All these
allegations are pure and simple speculations that are devoid of any factual moorings.

Historical revisionism

We concur with Ocampo et al. that this Court was also a victim of Marcos' authoritarian
rule and that it cannot isolate itself from history because it was and is a part of it.
However, as Justice Brion put it, while the Court is not blind to history, it is not a judge
thereof. Accordingly, We should leave Marcos' legacy to the judgment of history. The
assailed Decision aptly ruled:

Contrary to petitioners' postulation, our nation's history will not be instantly revised by a
single resolve of President Duterte, acting through the public respondents, to bury
Marcos at the LNMB. Whether petitioners admit it or not, the lessons of Martial Law are
already engraved, albeit in varying degrees, in the hearts and minds of the present
generation of Filipinos. As to the unborn, [We] must [say] that the preservation and
popularization of our history is not the sole responsibility of the Chief Executive; it is a

1572
joint and collective endeavor of every freedom-loving citizen of this country.

Notably, complementing the statutory powers and functions of the Human Rights
Victims' Claims Board and the HRVV Memorial Commission in the memorialization of
HRVVs, the National Historical Commission of the Philippines (NHCP), formerly known
as the National Historical Institute (NHI), is mandated to act as the primary government
agency responsible for history and is authorized to determine all factual matters relating
to official Philippine history. Among others, it is tasked to: (a) conduct and support all
kinds of research relating to Philippine national and local history; (b) develop
educational materials in various media, implement historical educational activities for
the popularization of Philippine history, and disseminate, information regarding
Philippine historical events, dates, places and personages; and (c) actively engage in
the settlement or resolution of controversies or issues relative to historical personages,
places, dates and events. Under R.A. Nos. 10066 (National Cultural Heritage Act of
2009) and 10086 (Strengthening Peoples' Nationalism Through Philippine History
Act), the declared State policy is to conserve, develop, promote, and popularize the
nation's historical and cultural heritage and resources. Towards this end, means shall
be provided to strengthen people's nationalism, love of country, respect for its heroes
and pride for the people's accomplishments by reinforcing the importance of Philippine
national and local history in daily life with the end in view of raising social
consciousness. Utmost priority shall be given not only with the research on history but
also its popularization.[153]

The President of the Philippines has no authority to unilaterally declare anyone a hero.
Also, while it is mandatory for the courts to take judicial notice of Philippine history, the
NHCP has the primary jurisdiction with respect thereto. [154] It is the principal government
agency responsible for history and has the authority to determine all factual matters
relating to official Philippine history. In its task to actively engage in the settlement or
resolution of controversies or issues relative to historical personages, places, dates and
events, the NHCP Board is empowered to discuss and resolve, with finality, issues or
conflicts on Philippine history.[155] The Court only steps in if an action is brought before it
to determine whether there is grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the NHCP.

Equitable consideration

Rosales et al. contend that the Court should apply equity and extend equitable
protection to the HRVVs because Marcos' burial at the LNMB causes them irreparable
injury as it re-inflicts their trauma and grief while the Marcos' heirs have not shown any
injury that they would sustain by its denial.

The argument is untenable.

1573
Justice is done according to law. As a rule, equity follows the law. There may be a moral
obligation, often regarded as an equitable consideration (meaning compassion), but if
there is no enforceable legal duty, the action must fail although the disadvantaged party
deserves commiseration or sympathy.

The choice between what is legally just and what is morally just, when these two options
do not coincide, is explained by Justice Moreland in Vales vs. Villa, 35 Phil. 769. 788
where he said:

Courts operate not because one person has been defeated or overcome by another, but
because he has been defeated or overcome illegally. Men may do foolish things, make
ridiculous contracts, use miserable judgment, and lose money by them – indeed, all
they have in the world;  but not for that alone can the law intervene and restore. There
must be, in addition, a violation of law, the commission of what the law knows as
an actionable wrong before the courts are authorized to lay hold of the situation and
remedy it.[156]

Equity is "justice outside legality,"[157] It is applied only in the absence of and never
against statutory law or, as in this case, appropriate AFP regulations. Courts exercising
equity jurisdiction are bound and circumscribed by law or rules and have no arbitrary
discretion to disregard them.[158] Here, while there is no provision of the Constitution,
law, or jurisprudence expressly allowing or disallowing Marcos' burial at the LNMB,
there is a rule, particularly AFP Regulations G 161-375, that is valid and existing. It has
the force and effect of law because it was duly issued pursuant to the rule-making
power of the President that was delegated to his subordinate official. Hence, it is the
sole authority in determining who may or may not be buried at the LNMB.

To conclude, let it be emphasized that Supreme Court decisions do not have to be

popular as long as the Constitution and the law are followed. In pursuit of the ideal "cold
neutrality of an impartial judge," every member of this august body must be guided by
what Justice Isagani A. Cruz fittingly stated in his Dissenting Opinion in Marcos v. Sec.
Manglapus, thus:

I have no illusion that the stand I am taking will be met with paeans of praise,
considering that Marcos is perhaps the most detested man in the entire history of our
country. But we are not concerned here with popularity and personalities. As a judge, I
am not swayed by what Justice Cardozo called the "hooting throng" that may make us
see things through the prisms of prejudice. I bear in mind that when I sit in judgment as
a member of this Court, I must cast all personal feelings aside.

The issue before us must be resolved with total objectivity, on the basis only of the

1574
established, facts and the applicable law and not of wounds that still fester and scars
that have not healed. And not even of fear, for fear is a phantom. That phantom did not
rise when the people stood fast at EDSA – against the threat of total massacre in
defense at last of their freedom.[159]

Never has a burial stirred so much emotion, rancor and animosity as this case, drawing
the Court in its vortex. We could only do so much, however, deciding the issues in a
manner within our competence and otherwise holding back on getting embroiled in
politically and emotionally charged controversies, matters better left for other
government officials and agencies, the people, and history, eventually, to judge.

Ever mindful that the Court cannot and should not be the ultimate judge of all questions
that confront the country, We must ever remain cognizant of the boundaries of our role
as final arbiters on questions of law in a carefully wrought structure of government. If we
are to do our job well, we must know the limits of our powers and the appropriate
yardsticks for our decision-making authority. Overextending ourselves is more likely to
be counterproductive, eventually compromising our ability to discharge our
responsibilities effectively.

Just like the subject matter of this case, the issues must come to an end and be
interred. A man's place in history is for others to decide, not the Court's.

WHEREFORE, the motions for reconsideration, as well as the motion/petition to

exhume Marcos' remains at the Libingan ng mga Bayani, are DENIED WITH
FINALITY. The petitions for indirect contempt in GR. No. 228186 and GR. No. 228245
are DISMISSED for lack of merit.

SO ORDERED.

THIRD DIVISION

G.R. No. 195374               March 10, 2014

PEDRO LUKANG, Petitioner,
vs.
PAGBILAO DEVELOPMENT CORPORATION and EDUARDO T.
RODRIGUEZ, Respondents.

DECISION

MENDOZA, J.:

1575
This petition for review under Rule 45 of the Rules of Court assails the October 21,
2010 Decision1 and the January 19, 2011 Resolution2 of the Court of Appeals (CA) in
CA-G.R. SP No. 108809, which nullified and set aside the May 13, 2008 Order 3 of the
Regional Trial Court (RTCJ. Branch 53, Lucena City, granting the petitioner's application
for a writ of preliminary injunction.

The Facts:

The patriarch of the family, Arsenio Lukang (Arsenio), and Mercedes Dee (Mercedes)
lived as husband and wife in Calamba, Laguna, from 1922 to 1934 and begot three (3)
children, namely, Domingo, Rosalina and Olympia.

In 1935, he started cohabiting with Leoncia Martinez (Leoncia), with whom he had ten
(10) children, namely, Elpidio, Socorro, Manuel, Pedro, Teresita, Simeon, Eugenio,
Hilaria, Concepcion, and Carlos. During their cohabitation in Lucena, Quezon, they
acquired several real properties located in Pagbilao, Quezon, to wit:

(a) Transfer Certificate of Title (TCT) Nos. T-44547 4 with an area of 257,967
square meters;

(b) TCT No. T-445485 with an area of 40,000 square meters;

(c) TCT No. T-445496 with an area of 5.0078 hectares; and

(d) TCT No. T-445507 consisting of 5.0803 hectares.

The said properties were then registered in the name of "ARSENIO LUKANG, married
to Mercedes Dee, 1/2 share and Leoncia Martinez, single, 1/2 share."

Arsenio and Leoncia later acquired four (4) more parcels of land covered by TCT No. T-
103094, TCT No. T- 101425, TCT No. T-125349, and TCT No. T-125348. It was
allegedly agreed that the said properties should be registered in the name of Simeon,
one of their children, in trust for the other heirs and should be owned in common by their
family.

When Arsenio died in 1976, his 13 children and Mercedes, executed the Extrajudicial
Settlement of Estate,8 in which they agreed to adjudicate and transfer among
themselves the rights, interest and ownership of the four (4) parcels of land covered by
TCT Nos. T-44547, T-44548, T-44549, and T-44550. There was, however, no
agreement to partition the properties as they remained common to all the heirs.

Years later, after the execution of the Extrajudicial Settlement of Estate, Mercedes,
together with her three (3) children, Rosalina, Domingo, and Olympia, executed another
document, denominated as Pagbabahaging Labas sa Hukuman Na May Pagtalikod sa
Karapatan,9 dated December 19, 1987, wherein the parties declared that they were the
only heirs of Arsenio and partitioned the half portion of the four (4) parcels of land

1576
covered by TCT Nos. T-44547, T-44548, T-44549, and T-44550 among themselves,
with Mercedes waiving her supposed share in favor of her three (3) children.

In 1988, Simeon, alleging that the certificates of title of the properties covered by TCT
Nos. T-103094, T-101425, T-125349, and T-125348 were lost, filed a petition for the
issuance of the owner’s duplicate copy before the RTC, Branch 57, Lucena City. As a
result, new owner’s duplicate copies of the allegedly lost titles were issued in his favor.
Thereafter, Simeon, in a deed of donation, transferred the said properties in favor of his
children, Benedict, Heile and Madeleine. Consequently, TCT Nos. T-103094, T-125348
and T-125349 were cancelled, and TCT No. T-241034 was issued in the name of
Benedict; TCT No. 241035 in the name of Heile; and TCT No. 241036 in the name of
Madeleine.10 Furthermore, Simeon purportedly executed the Bilihang Lampasan and
Pagbibilihang Lubusan, where he sold the land covered by TCT No. 101425 in favor of
Mercedes, Rosalina, Leoncia, and Elpidio.

In the meantime, on February 15, 1989, Mercedes, through Rosalinda, filed the Petition
for the Issuance of the Owner’s Duplicate of TCT Nos. T-44547, T-44548, T-44549 and
T-4455011 before the RTC, Branch 58, Lucena City. The RTC, in its Order, 12 dated
March 27, 1989, granted the petition and new titles were issued in favor of Mercedes.
Unknown to Leoncia, Rosalina caused the segregation of the one-half portion of the
said properties in her (Leoncia’s) favor and the division of the remaining half among her
and her siblings, Domingo and Olympia. Hence, TCT Nos. T-44547, T-44548, T-44549,
and T-44550 were cancelled and new titles were issued: TCT Nos. T-247219, 13 T-
247221,14 T-247223,15 and T-24722516 in the names of Rosalina, Domingo and Olympia,
while TCT Nos. T-247220,17 T-247222,18 T-247224,19 and T-24722620 were registered in
the name of Leoncia.

On September 26, 1990, Leoncia and her children, claiming that the titles of TCT Nos.
T-44547, T-44548, T-44549, and T-44550 were not lost but in her (Leoncia’s)
possession, filed a complaint21 for annulment of extrajudicial partition, affidavit of
segregation and annulment of the new certificates of title, which was docketed as Civil
Case No. 90-124. The said case was consolidated with Civil Case No. 89-79, a case for
recovery of four (4) owner’s duplicate copy of TCTs filed by Simeon against his brother
Pedro. The cases were raffled to RTC, Branch 53, Lucena City.

Subsequently, Leoncia, through Pedro, registered her adverse claim on February 3,

1989 on TCT Nos. T-241034, T-242429, TCT No. T-241036, T-241035, and T-242427
as Entry No. 530545. He further caused the annotation of a notice of lis pendens on
TCT No. T-247221 as Entry No. 556192 on October 1, 1990, and on TCT Nos. T-
241034, T-242429, TCT No. T-241036, T-241035, and T-242427 as Entry No. 538916
on November 6, 1989.

In 1993, while Civil Case No. 89-79 and Civil Case No. 90-124 were still pending,
respondent Pagbilao Development Corporation (PDC) purchased from Simeon,
Mercedes and Rosalina the six (6) properties which were the subject of the two cases.
Thus, TCT Nos. T-241034, T-242429, T-241036, T-241035, T-247221, and T-242427

1577
were cancelled and new titles, TCT Nos. T-282100, 22 T-282101,23 T-282102,24 T-
282103,25 T-282104,26 and T-28210527 were issued in favor of PDC. Accordingly, the
annotations were carried over to PDC’s titles.

When Pedro and the other heirs learned of the sale of the subject properties to PDC,
they filed a motion to require Simeon and Rosalina to explain why they sold the
properties without permission from the RTC.28 On April 23, 2008, they also filed an
application for a writ of preliminary injunction with ex-parte prayer for temporary
restraining order (TRO).29 They alleged that they were in actual and physical possession
of the subject properties; and that PDC entered into the said premises, destroyed some
structures therein and started to construct improvements on the properties without their
consent.

In its Order, dated April 23, 2008, the RTC 30 granted the issuance of the TRO effective
for a period of twenty (20) days.

On May 13, 2008, after due hearing, the RTC issued the Order 31 granting the
application for writ of preliminary injunction by which it restrained PDC from wresting
possession of the subject properties and ordering the movant, Pedro, to file a bond.

PDC filed a motion for reconsideration but it was denied in the RTC Order, 32 dated
March 18, 2009.

On May 29, 2009, Pedro posted a bond in the amount of One Million Pesos
(₱1,000,000.000).33

PDC filed a petition for certiorari before the CA assailing the issuance of the writ of
preliminary injunction. The CA, in its Decision, dated October 21, 2010, granted the
petition and set aside the May 13, 2008 and March 18, 2009 Orders of the RTC. The
CA explained that Pedro’s right over the said properties was not clear as it was
contingent on the outcome or result of the cases pending before the RTC; that it was
not a present right but a contingent or future right which was not covered by injunction;
and that there was no paramount necessity because there would be no great and
irreparable injury. Moreover, PDC, as the registered owner of the said properties, had
the right to enjoy the same as provided under Articles 428 and 429 of the Civil Code.

Pedro filed a motion for reconsideration but it was denied in the CA Resolution, dated
January 19, 2011. Hence, this petition, anchored on the following

ISSUES

THE COURT OF APPEALS ERRED IN CONSISTENTLY TURNING AWAY

FROM THE ISSUE OF RESPONDENT PAGBILAO’S STATUS AS A

1578
 TRANSFEREE PENDENTE LITE WHEN THAT IS THE MAIN ISSUE IN THE
FIRST PLACE

II

THE COURT OF APPEALS ERRED IN RULING THAT PAGBILAO AS

REGISTERED OWNER OF THE SUBJECT PROPERTIES HAVE THE RIGHT
TO ENJOY AND EXCLUDE OTHER PERSONS FROM THE ENJOYMENT
THEREOF

III

THE COURT OF APPEALS ERRED IN RULING THAT THE TRIAL COURT

PRE-JUDGED THE MAIN CASE AND SHIFTED THE BURDEN OF PROOF ON
THE HEIRS OF SIMEON LUKANG

IV

THE COURT OF APPEALS ERRED IN RULING THAT NON-ISSUANCE OF

THE INJUNCTIVE RELIEF IS NOT OF PARAMOUNT NECESSITY NOR WILL
IT CAUSE GREAT AND IRREPARABLE INJURY TO PEDRO LUKANG

THE COURT OF APPEALS ERRED IN HOLDING THAT THE TRIAL COURT

COMMITTED GRAVE ABUSE OF DISCRETION IN NOT FIXING THE BOND.

Synthesized, the issues boil down to the question of whether or not the RTC committed
grave abuse of discretion when it issued the May 13, 2008 Order granting the writ of
preliminary injunction.

A writ of preliminary injunction is a provisional remedy which is adjunct to a main suit, as

well as a preservative remedy issued to maintain the status quo of the things subject of
the action or the relations between the parties during the pendency of the suit. 34 The
purpose of injunction is to prevent threatened or continuous irremediable injury to the
parties before their claims can be thoroughly studied and educated. Its sole aim is to
preserve the status quo until the merits of the case are fully heard. 35 Under Section 3,
Rule 58 of the Rules of Court, an application for a writ of preliminary injunction may be
granted if the following grounds are established:

(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 act or
acts complained of, or in requiring the performance of an act or acts, either for a
limited period or perpetually;

1579
 (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, agency or a person is doing, threatening, or is 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.

Thus, a writ of preliminary injunction may be issued upon the concurrence of the
following essential requisites, to wit: (a) the invasion of right sought to be protected is
material and substantial; (b) the right of the complainant is clear and unmistakable; and
(c) there is an urgent and paramount necessity for the writ to prevent serious
damage.36 While a clear showing of the right is necessary, its existence need not be
conclusively established. Hence, to be entitled to the writ, it is sufficient that the
complainant shows that he has an ostensible right to the final relief prayed for in his
complaint.37

The well-entrenched rule is that the grant or denial of the writ of preliminary injunction
rests upon the sound discretion of the court. The trial court is given a wide latitude in
this regard. Thus, in the absence of a manifest abuse, such discretion must not be
interfered with.38 "Grave abuse of discretion in the issuance of writs of preliminary
injunction implies a capricious and whimsical exercise of judgment that is equivalent to
lack of jurisdiction, or where the power is exercised in an arbitrary or despotic manner
by reason of passion, prejudice or personal aversion amounting to an evasion of
positive duty or to a virtual refusal to perform the duty enjoined, or to act at all in
contemplation of law."39

In the present case, the Court finds the RTC grant of injunction to be in
order.1âwphi1 The pertinent parts of its order read:

It is to be emphasized that the deeds of sale between the vendors of the six parcels of
land and the Pagbilao Development Corporation were executed on June 1, 1993. The
Affidavit of Adverse Claim of Leoncia Martinez Vda. De Lukang and the Notice of Lis
Pendens of Pedro Lukang over the six properties were all inscribed on February 3,
1989.

There is no question, therefore, that when the Pagbilao Development Corporation

bought the properties from the vendors, it had full knowledge that there were questions
involving ownership of the parcels of land it bought.

Likewise there is no question that Pagbilao Development Corporation did not take any
step to have the annotation or encumbrance in each title cancelled. [Emphases
supplied]

1580
The annotation of an adverse claim and notice of lis pendens over the subject
properties is a notice to third persons that there is a controversy over the ownership of
the land and serves to preserve and protect the right of the adverse claimants during
the pendency of the controversy.40 The principle of filing a notice of lis pendens is based
on public policy and necessity, the purpose of which is to keep the properties in litigation
within the power of the court until the litigation is terminated in order to prevent the
defeat of the judgment by subsequent alienation; and in order to bind a purchaser, bona
fide or otherwise, to the judgment that the court would subsequently promulgate. It
serves as an announcement to the whole world that a particular real property is in
litigation and as a warning that those who acquire an interest in the property do so at
their own risk -- they gamble on the result of the litigation over it. 41

Here, it must be noted that the annotations of adverse claim and lis pendens have been
inscribed in the certificates of titles on the following dates February 3, 1989, November
6, 1989 and October 1, 1990, more than three (3) years before PDC bought the subject
properties in 1993. It would have been different if the adverse claims and lis pendens
were not annotated in the titles. With PDC having been officially aware of them, there
can be no grave abuse of discretion that can be attributed to the RTC for issuing the writ
of preliminary injunction. There is no question that when PDC purchased the property,
the petitioner and other intervenors were in actual possession of the property and their
claims adverse to its predecessors-in-interest were annotated in the very titles of the
properties. In fact, these annotations were carried over to PDC’s title. PDC cannot
invoke its being the registered owner to dispossess the present possessors for,
precisely, when it brought the properties, it was charged with the knowledge that the
ownership and sale of the subject properties by its predecessors-in-interest have been
questioned by their co-heirs. Inevitably, PDC is deemed to have obtained the properties
subject to the outcome of the litigation among the heirs of Arsenio.

During the hearing, Pedro and the other heirs were able to convince the RTC that they
had a right over the properties which should be protected while being litigated.
Convinced, the RTC made a preliminary determination that their right should be
protected by a writ of preliminary injunction. Their claimed ownership and actual
possession were then being violated by PDC which had started entering the premises
and preparing the property for the construction of a power plant for liquefied natural gas.
Unless legally stopped, such act would indeed cause irreparable damage to the
petitioner and other claimants. As claimed co-owners, the petitioner and the other heirs
have the right to remain in possession of the subject properties pendente lite. The legal
or practical remedy of PDC, who gambled its lot in purchasing the properties despite the
annotations, is to await the final outcome of the cases or to amicably settle its problems
with all the co-owners, co-heirs or claimants.

With regard to the issue of the injunctive bond, the Court has time and again ruled that
the posting of the bond is a condition sine qua non before a writ of preliminary injunction
may issue.42 Its purpose is to secure the person enjoined against any damage that he
may sustain in case the court should finally decide that the applicant was not entitled
thereto.43 The rule, does not mean, however, that the injunction maybe disregarded

1581
since it becomes effective only after the bond is actually filed in court. 44 In fact, in the
case of Consolidated Workers Union v. Court of Industrial Relations, 45 the Court
declared that it was erroneous for the labor court not to require the party to file a bond.
Yet, the Court did not annul the writ of injunction but instead ordered the said court to
determine the appropriate amount of bond to be posted by the party.

In fine, it is erroneous for the CA to rule that the RTC committed grave abuse of
discretion simply because it failed to fix the amount of the bond. This error caused "no
substantial prejudice" that would warrant the quashal of the writ of injunction. 46 As a
matter of fact, Pedro posted a bond in the amount of One Million Pesos
(₱1,000,000.00), the sufficiency or insufficiency of which was never questioned by PDC
before the RTC.

Hence, the Court will not discuss the sufficiency of the bond not only because the issue
was not raised before the RTC but also it involves a question of fact.

WHEREFORE, the petition is GRANTED. The assailed October 21, 2010 Decision and
the January 19, 2011 Resolution of the Court of Appeals in CA-G.R. SP No. 108809 are
hereby REVERSED and SET ASIDE. The May 13, 2008 Order of the Regional Trial
Court, Branch 53, Lucena City, in Civil Case No. 89-79 and Civil Case No. 90-124
ordering the issuance of a Writ of Preliminary Injunction, is hereby ordered
REINSTATED.

SO ORDERED.

RULE 59. RECEIVERSHIP

FIRST DIVISION

G.R. No. 167238               March 25, 2009

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner,

vs.
SPOUSES JESUS and ANACORITA DOYON, Respondents.

DECISION

CORONA, J.:

This petition1 seeks to the set aside the November 23, 2004 decision 2 and February 18,
2005 resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 74660.

In the early 1990s, respondent spouses Jesus and Anacorita Doyon obtained several
loans amounting to ₱10 million4 from petitioner Development Bank of the Philippines
(DBP). As security for the loans, respondents mortgaged their real estate properties as
well as the motor vehicles of JD Bus Lines.

1582
Due to their inability to fully pay their obligations upon maturity, 5 respondents requested
petitioner to restructure their past due loans. 6 Petitioner agreed. Hence, respondents
signed three promissory notes on June 29, 1994. 7

Nonetheless, respondents still failed to pay the quarterly installments on the promissory
notes. Thus, petitioner demanded the payment of the total value of their loans from
respondents.8 Respondents, however, ignored petitioner and adamantly refused to pay
their loans.

Consequently, petitioner filed an application for extrajudicial foreclosure of real estate

mortgages in the Regional Trial Court (RTC) of Ormoc City in 1995. To forestall the
foreclosure proceedings, respondents immediately filed an action for their nullification in
the RTC of Ormoc City, Branch 35 claiming that they had already paid the principal
amount of their loans (or ₱10 million) to petitioner. This was docketed as Civil Case No.
3314-O.

For three years, Civil Case No. 3314-O was not acted upon by the RTC.

In 1998, petitioner withdrew the application for extrajudicial foreclosure and thereafter
moved for the dismissal of Civil Case No. 3314-O. The RTC granted the motion in an
order dated March 2, 1998.9 It held:

In today’s hearing, which is for the reception of evidence for [petitioner], [it] informed the
Court about its withdrawal of the [application] for extrajudicial foreclosure of real estate
made subject of the present case. In view of the withdrawal, [petitioner] moved for the
dismissal of the case considering that the action would be rendered moot and
academic.

When [respondents were] made to comment, they interposed no objection to the motion
to dismiss.

By agreement therefore between the parties, this case is considered DISMISSED with
prejudice.

Weeks later, petitioner demanded from respondents the payment of their outstanding
obligations which had by then ballooned to more than ₱20 million. Again, respondents
ignored petitioner.

Petitioner filed an application for extrajudicial foreclosure of respondents’ real and

chattel mortgages with the DBP special sheriff in Makati 10 and subsequently took
constructive possession of the foreclosed properties.11 It posted guards at the perimeter
of respondents’ property in Barangay Cabulihan, Ormoc City (Cabulihan property)
where the foreclosed motor vehicles of JD Bus Lines were parked. 12 Subsequently, the
DBP special sheriff issued notices of sale at public auction of the foreclosed
properties.13

1583
Meanwhile, respondents filed a complaint for damages 14 against petitioner and the DBP
special sheriff in the RTC of Ormoc City, Branch 35. According to respondents, by
withdrawing the application for extrajudicial foreclosure and moving for the dismissal of
Civil Case No. 3314-O, petitioner led them to believe that it would no longer seek the
satisfaction of its claims. Petitioner therefore acted contrary to Article 19 of the Civil
Code15 when it foreclosed on the real and chattel mortgages anew.

Furthermore, respondents claimed that the provision in the mortgage

contracts16 allowing petitioner as mortgagee to take constructive possession of the
mortgaged properties upon respondents’ default was void. The provision allegedly
constituted a pactum commissorium17 since it permitted petitioner to appropriate the
mortgaged properties.

Lastly, respondents assailed the validity of the public auctions conducted by the DBP
special sheriff. The September 9, 1998 notices of sale stated that the foreclosed real
properties would be sold at public auction on "September 16, 1998 at 10:00 a.m. or
soon thereafter"18 while the foreclosed motor vehicles would be sold on "September 16,
1998 at 2:00 p.m. or soon thereafter."19 Section 4 of Act 3135,20 however, requires that
public auctions must take place from 9 a.m. until 4 p.m. or, allegedly, for seven
continuous hours.

Petitioner, in its answer, pointed out that despite the restructuring, respondents refused
to pay the amortizations on the June 29, 2004 promissory notes. Moreover, the filing of
Civil Case No. 3314-O and the delay in its resolution prevented petitioner from
collecting on the said notes from respondents. It withdrew the application in the RTC
and moved for the dismissal of Civil Case No. 3314-O only for the purpose of availing of
a more efficient legal remedy, that is, foreclosure through a special sheriff, as
authorized by its charter.21

In a decision dated January 25, 2002,22 the RTC found that, by withdrawing its
application for extrajudicial foreclosure and moving for the dismissal of Civil Case No.
3314-O, petitioner led respondents to believe that their loans had been extinguished.
Thus, petitioner acted in bad faith when it foreclosed on the real and chattel mortgages
anew. The dispositive portion of the decision read:

Wherefore, after due consideration of all the foregoing, judgment is hereby rendered in
favor of [respondents] and against [petitioner], ordering as follows:

1. [petitioner] to immediately stop the presence of its security guards in the

compound or premises of the plaintiffs at Barangay Cabulihan, Ormoc City, and
to vacate them from said premises;

2. [petitioner] to pay actual damages to [respondents] in the total amount of

₱16,000 per day for the four buses, or a total of ₱480,000 per month for these
buses starting from April 27, 1998 until the time the buses shall have been
allowed to leave the compound of [respondents] or until [petitioner] shall vacate

1584
 the said premises, and ₱200,000 as compensatory damages for the injury to
[respondents'] business standing;

3. [petitioner] to pay ₱1,000,000 as exemplary damages;

4. [petitioner and the DBP special sheriff] jointly and severally to pay the plaintiffs
the sum of ₱2,000,000 as moral damages, the sum of ₱50,000 as attorney's
fees, the sum of ₱10,000 as litigation expenses and costs of the suit.

Aggrieved, petitioner appealed to the CA. 23

In a decision dated November 23, 2004, the CA affirmed the RTC decision with
modification of the liability for damages. Because the DBP special sheriff merely
performed his ministerial duty (when he foreclosed on the real and chattel mortgages
and issued notices of sale in public auction of the foreclosed properties), petitioner
alone was liable.

Petitioner moved for reconsideration but it was denied. Hence, this petition.

Petitioner basically asserts that it did not act in bad faith when it foreclosed on
respondents’ real and chattel mortgages anew. Because respondents’ loans were past
due, it had the right to satisfy its credit by foreclosing on the mortgages.

We grant the petition.

This Court is not a trier of facts and, as a rule, it only entertains questions of law in a
petition for review on certiorari. This rule, however, admits of exceptions such as when
the assailed decision is based on a misapprehension of facts. 24

In this instance, the RTC and the CA both found that petitioner acted with bad faith
when it foreclosed on the real and chattel mortgages. We disagree.

What is due to a person is determined by the circumstances of each particular

case.25 Article 19 of the Civil Code provides:

Article 19. 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.

For an action for damages under this provision to prosper, the complainant must prove
that:

(a) defendant has a legal right or duty;

(b) he exercised his right or performed his duty with bad faith and

1585
 (c) complainant was prejudiced or injured as a result of the said exercise or
performance by defendant.

On the first requisite, we find that petitioner had the legal right to foreclose on the real
and chattel mortgages.

Since respondents neither assailed the due execution of the June 29, 1994 promissory
notes nor presented proof of payment thereof, their obligation remained outstanding.
Upon default, by prior mutual agreement, petitioner had the right to foreclose on the real
and chattel mortgages securing their loans.

The June 29, 1994 promissory notes uniformly stated that failure to pay an installment
(or interest) on the due date was an event of default. 26 Respondents were therefore in
default when they failed to pay the quarterly amortizations on the designated due
dates.1avvphi1.zw+

When the principal obligation becomes due and the debtor fails to perform his
obligation, the creditor may foreclose on the mortgage 27 for the purpose of alienating the
(mortgaged) property to satisfy his credit. 28

Regarding the second requisite, bad faith imports a dishonest purpose or some moral
obliquity or conscious doing of a wrong that partakes of the nature of fraud. 29

We note that the RTC of Ormoc City (Judge Fortunito L. Madrona) "sat" on Civil Case
No. 3314-O for three long years. This inordinate delay prejudiced petitioner. Inasmuch
as petitioner was in the business of lending out money it borrowed from the public,
sound banking practice called for the exercise of a more efficient legal remedy against a
defaulting debtor like respondent.30 Thus, petitioner could not be faulted for resorting to
foreclosure through a special sheriff. Such procedure was, after all, the more efficient
method of enforcing petitioner’s rights as mortgagee under its charter. 31

Moreover, the March 2, 1998 order of the RTC (quoted above) merely stated that the
withdrawal of the application for extrajudicial foreclosure in the RTC rendered Civil Case
No. 3314-O moot and academic. Nothing in the said order stated, or even hinted, that
respondents’ obligation to petitioner had in fact been extinguished. Thus, there was
nothing on the part of petitioner even remotely showing that it led respondents to
believe that it had waived its claims.

Lastly, inasmuch as petitioner demanded payment from them right after the dismissal of
Civil Case No. 3314-O, respondents could not have reasonably presumed that the bank
had waived its claims against them. Furthermore, the fact that a demand for payment
was made negated bad faith on the part of petitioner. Despite giving respondents the
opportunity to pay their long overdue obligations and avoid foreclosure, respondents still
refused to pay. Since respondents did not have a cause of action against petitioner, the
RTC and CA erred in granting damages to them.

1586
A stipulation allowing the mortgagee to take actual or constructive possession of a
mortgaged property upon foreclosure is valid. In Agricultural and Industrial Bank v.
Tambunting,32 we explained:

A stipulation … authorizing the mortgagee, for the purpose stated therein specified, to
take possession of the mortgaged premises upon the foreclosure of a mortgage is not
repugnant [to either Article 2088 or Article 2137]. On the contrary, such a stipulation is
in consonance or analogous to the provisions of Article [2132], et seq. of the Civil Code
regarding antichresis and the provision of the Rules of Court regarding the appointment
of a receiver as a convenient and feasible means of preserving and administering the
property in litigation.33

The real estate and chattel mortgage contracts 34 uniformly provided that petitioner could
take possession of the foreclosed properties upon the failure of respondents to pay
even one amortization. Thus, respondents’ refusal to pay their obligations gave rise to
petitioner’s right to take constructive possession of the foreclosed motor vehicles.

In Philippine National Bank v. Cabatingan,35 we held that a sale at public auction held at
any time between 9:00 a.m. and 4:00 p.m. of a particular day, regardless of duration,
was valid. Since the sale at public auction of the foreclosed real properties and chattels
was conducted between 10:00 a.m. and 11:00 a.m. and between 2:00 p.m. and 3:30
p.m., respectively, the auctions were valid.

WHEREFORE, the petition is hereby GRANTED. The November 23, 2004 decision and
February 18, 2005 resolution of the Court of Appeals in CA-G.R. CV 74660 affirming the
January 25, 2002 decision of the Regional Trial Court of Ormoc City, Branch 35 in Civil
Case No. 3592-0 are SET ASIDE. New judgment is hereby entered dismissing Civil
Case No. 3592-0 for lack of cause of action.

No pronouncement as to costs.

SO ORDERED.

RULE 60. REPLEVIN

THIRD DIVISION

G.R. No. 182963               June 3, 2013

SPOUSES DEO AGNER and MARICON AGNER, Petitioners,

vs.
BPI FAMILY SAVINGS BANK, INC., Respondent.

DECISION

PERALTA, J.:

1587
This is a petition for review on certiorari assailing the April 30, 2007 Decision 1 and May
19, 2008 Resolution2of the Court of Appeals in CAG.R. CV No. 86021, which affirmed
the August 11, 2005 Decision3 of the Regional Trial Court, Branch 33, Manila City.

On February 15, 2001, petitioners spouses Deo Agner and Maricon Agner executed a
Promissory Note with Chattel Mortgage in favor of Citimotors, Inc. The contract
provides, among others, that: for receiving the amount of Php834, 768.00, petitioners
shall pay Php 17,391.00 every 15th day of each succeeding month until fully paid; the
loan is secured by a 2001 Mitsubishi Adventure Super Sport; and an interest of 6% per
month shall be imposed for failure to pay each installment on or before the stated due
date.4

On the same day, Citimotors, Inc. assigned all its rights, title and interests in the
Promissory Note with Chattel Mortgage to ABN AMRO Savings Bank, Inc. (ABN
AMRO), which, on May 31, 2002, likewise assigned the same to respondent BPI Family
Savings Bank, Inc.5

For failure to pay four successive installments from May 15, 2002 to August 15, 2002,
respondent, through counsel, sent to petitioners a demand letter dated August 29, 2002,
declaring the entire obligation as due and demandable and requiring to pay
Php576,664.04, or surrender the mortgaged vehicle immediately upon receiving the
letter.6 As the demand was left unheeded, respondent filed on October 4, 2002 an
action for Replevin and Damages before the Manila Regional Trial Court (RTC).

A writ of replevin was issued.7 Despite this, the subject vehicle was not seized.8 Trial on
the merits ensued. On August 11, 2005, the Manila RTC Br. 33 ruled for the respondent
and ordered petitioners to jointly and severally pay the amount of Php576,664.04 plus
interest at the rate of 72% per annum from August 20, 2002 until fully paid, and the
costs of suit.

Petitioners appealed the decision to the Court of Appeals (CA), but the CA affirmed the
lower court’s decision and, subsequently, denied the motion for reconsideration; hence,
this petition.

Before this Court, petitioners argue that: (1) respondent has no cause of action,
because the Deed of Assignment executed in its favor did not specifically mention ABN
AMRO’s account receivable from petitioners; (2) petitioners cannot be considered to
have defaulted in payment for lack of competent proof that they received the demand
letter; and (3) respondent’s remedy of resorting to both actions of replevin and collection
of sum of money is contrary to the provision of Article 1484 9 of the Civil Code and the
Elisco Tool Manufacturing Corporation v. Court of Appeals 10 ruling.

The contentions are untenable.

With respect to the first issue, it would be sufficient to state that the matter surrounding
the Deed of Assignment had already been considered by the trial court and the CA.

1588
Likewise, it is an issue of fact that is not a proper subject of a petition for review under
Rule 45. An issue is factual when the doubt or difference arises as to the truth or
falsehood of alleged facts, or when the query invites calibration of the whole evidence,
considering mainly the credibility of witnesses, existence and relevancy of specific
surrounding circumstances, their relation to each other and to the whole, and the
probabilities of the situation.11 Time and again, We stress that this Court is not a trier of
facts and generally does not weigh anew evidence which lower courts have passed
upon.

As to the second issue, records bear that both verbal and written demands were in fact
made by respondent prior to the institution of the case against petitioners. 12 Even
assuming, for argument’s sake, that no demand letter was sent by respondent, there is
really no need for it because petitioners legally waived the necessity of notice or
demand in the Promissory Note with Chattel Mortgage, which they voluntarily and
knowingly signed in favor of respondent’s predecessor-in-interest. Said contract
expressly stipulates:

In case of my/our failure to pay when due and payable, any sum which I/We are obliged
to pay under this note and/or any other obligation which I/We or any of us may now or in
the future owe to the holder of this note or to any other party whether as principal or
guarantor x x x then the entire sum outstanding under this note shall, without prior
notice or demand, immediately become due and payable. (Emphasis and underscoring
supplied)

A provision on waiver of notice or demand has been recognized as legal and valid in
Bank of the Philippine Islands v. Court of Appeals, 13 wherein We held:

The Civil Code in Article 1169 provides that one incurs in delay or is in default from the
time the obligor demands the fulfillment of the obligation from the obligee. However, the
law expressly provides that demand is not necessary under certain circumstances, and
one of these circumstances is when the parties expressly waive demand. Hence, since
the co-signors expressly waived demand in the promissory notes, demand was
unnecessary for them to be in default.14

Further, the Court even ruled in Navarro v. Escobido 15 that prior demand is not a
condition precedent to an action for a writ of replevin, since there is nothing in Section 2,
Rule 60 of the Rules of Court that requires the applicant to make a demand on the
possessor of the property before an action for a writ of replevin could be filed.

Also, petitioners’ representation that they have not received a demand letter is
completely inconsequential as the mere act of sending it would suffice. Again, We look
into the Promissory Note with Chattel Mortgage, which provides:

All correspondence relative to this mortgage, including demand letters, summonses,

subpoenas, or notifications of any judicial or extrajudicial action shall be sent to the
MORTGAGOR at the address indicated on this promissory note with chattel mortgage

1589
or at the address that may hereafter be given in writing by the MORTGAGOR to the
MORTGAGEE or his/its assignee. The mere act of sending any correspondence by mail
or by personal delivery to the said address shall be valid and effective notice to the
mortgagor for all legal purposes and the fact that any communication is not actually
received by the MORTGAGOR or that it has been returned unclaimed to the
MORTGAGEE or that no person was found at the address given, or that the address is
fictitious or cannot be located shall not excuse or relieve the MORTGAGOR from the
effects of such notice.16 (Emphasis and underscoring supplied)

The Court cannot yield to petitioners’ denial in receiving respondent’s demand letter. To
note, their postal address evidently remained unchanged from the time they executed
the Promissory Note with Chattel Mortgage up to time the case was filed against them.
Thus, the presumption that "a letter duly directed and mailed was received in the regular
course of the mail"17 stands in the absence of satisfactory proof to the contrary.

Petitioners cannot find succour from Ting v. Court of Appeals 18 simply because it
pertained to violation of Batas Pambansa Blg. 22 or the Bouncing Checks Law. As a
higher quantum of proof – that is, proof beyond reasonable doubt – is required in view
of the criminal nature of the case, We found insufficient the mere presentation of a copy
of the demand letter allegedly sent through registered mail and its corresponding
registry receipt as proof of receiving the notice of dishonor.

Perusing over the records, what is clear is that petitioners did not take advantage of all
the opportunities to present their evidence in the proceedings before the courts below.
They miserably failed to produce the original cash deposit slips proving payment of the
monthly amortizations in question. Not even a photocopy of the alleged proof of
payment was appended to their Answer or shown during the trial. Neither have they
demonstrated any written requests to respondent to furnish them with official receipts or
a statement of account. Worse, petitioners were not able to make a formal offer of
evidence considering that they have not marked any documentary evidence during the
presentation of Deo Agner’s testimony.19

Jurisprudence abounds that, in civil cases, one who pleads payment has the burden of
proving it; the burden rests on the defendant to prove payment, rather than on the
plaintiff to prove non-payment.20 When the creditor is in possession of the document of
credit, proof of non-payment is not needed for it is presumed. 21 Respondent's
possession of the Promissory Note with Chattel Mortgage strongly buttresses its claim
that the obligation has not been extinguished. As held in Bank of the Philippine Islands
v. Spouses Royeca:22

x x x The creditor's possession of the evidence of debt is proof that the debt has not
been discharged by payment. A promissory note in the hands of the creditor is a proof
of indebtedness rather than proof of payment. In an action for replevin by a mortgagee,
it is prima facie evidence that the promissory note has not been paid. Likewise, an
uncanceled mortgage in the possession of the mortgagee gives rise to the presumption
that the mortgage debt is unpaid.23

1590
Indeed, when the existence of a debt is fully established by the evidence contained in
the record, the burden of proving that it has been extinguished by payment devolves
upon the debtor who offers such defense to the claim of the creditor. 24 The debtor has
the burden of showing with legal certainty that the obligation has been discharged by
payment.25

Lastly, there is no violation of Article 1484 of the Civil Code and the Court’s decision in
Elisco Tool Manufacturing Corporation v. Court of Appeals. 26

In Elisco, petitioner's complaint contained the following prayer:

WHEREFORE, plaintiffs pray that judgment be rendered as follows:

ON THE FIRST CAUSE OF ACTION

Ordering defendant Rolando Lantan to pay the plaintiff the sum of ₱39,054.86 plus legal
interest from the date of demand until the whole obligation is fully paid;

ON THE SECOND CAUSE OF ACTION

To forthwith issue a Writ of Replevin ordering the seizure of the motor vehicle more
particularly described in paragraph 3 of the Complaint, from defendant Rolando Lantan
and/or defendants Rina Lantan, John Doe, Susan Doe and other person or persons in
whose possession the said motor vehicle may be found, complete with accessories and
equipment, and direct deliver thereof to plaintiff in accordance with law, and after due
hearing to confirm said seizure and plaintiff's possession over the same;

PRAYER COMMON TO ALL CAUSES OF ACTION

1. Ordering the defendant Rolando Lantan to pay the plaintiff an amount

equivalent to twenty-five percent (25%) of his outstanding obligation, for and as
attorney's fees;

2. Ordering defendants to pay the cost or expenses of collection, repossession,

bonding fees and other incidental expenses to be proved during the trial; and

3. Ordering defendants to pay the costs of suit.

Plaintiff also prays for such further reliefs as this Honorable Court may deem just and
equitable under the premises.27

The Court therein ruled:

The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of
one bars the exercise of the others. This limitation applies to contracts purporting to be
leases of personal property with option to buy by virtue of Art. 1485. The condition that

1591
the lessor has deprived the lessee of possession or enjoyment of the thing for the
purpose of applying Art. 1485 was fulfilled in this case by the filing by petitioner of the
complaint for replevin to recover possession of movable property. By virtue of the writ of
seizure issued by the trial court, the deputy sheriff seized the vehicle on August 6, 1986
and thereby deprived private respondents of its use. The car was not returned to private
respondent until April 16, 1989, after two (2) years and eight (8) months, upon issuance
by the Court of Appeals of a writ of execution.

Petitioner prayed that private respondents be made to pay the sum of ₱39,054.86, the
amount that they were supposed to pay as of May 1986, plus interest at the legal rate.
At the same time, it prayed for the issuance of a writ of replevin or the delivery to it of
the motor vehicle "complete

with accessories and equipment." In the event the car could not be delivered to
petitioner, it was prayed that private respondent Rolando Lantan be made to pay
petitioner the amount of ₱60,000.00, the "estimated actual value" of the car, "plus
accrued monthly rentals thereof with interests at the rate of fourteen percent (14%) per
annum until fully paid." This prayer of course cannot be granted, even assuming that
private respondents have defaulted in the payment of their obligation. This led the trial
court to say that petitioner wanted to eat its cake and have it too. 28

In contrast, respondent in this case prayed:

(a) Before trial, and upon filing and approval of the bond, to forthwith issue a Writ
of Replevin ordering the seizure of the motor vehicle above-described, complete
with all its accessories and equipments, together with the Registration Certificate
thereof, and direct the delivery thereof to plaintiff in accordance with law and after
due hearing, to confirm the said seizure;

(b) Or, in the event that manual delivery of the said motor vehicle cannot be
effected to render judgment in favor of plaintiff and against defendant(s) ordering
them to pay to plaintiff, jointly and severally, the sum of ₱576,664.04 plus interest
and/or late payment charges thereon at the rate of 72% per annum from August
20, 2002 until fully paid;

(c) In either case, to order defendant(s) to pay jointly and severally:

(1) the sum of ₱297,857.54 as attorney’s fees, liquidated damages,

bonding fees and other expenses incurred in the seizure of the said motor
vehicle; and

(2) the costs of suit.

Plaintiff further prays for such other relief as this Honorable Court may deem just and
equitable in the premises.29

1592
Compared with Elisco, the vehicle subject matter of this case was never recovered and
delivered to respondent despite the issuance of a writ of replevin. As there was no
seizure that transpired, it cannot be said that petitioners were deprived of the use and
enjoyment of the mortgaged vehicle or that respondent pursued, commenced or
concluded its actual foreclosure. The trial court, therefore, rightfully granted the
alternative prayer for sum of money, which is equivalent to the remedy of "exacting
fulfillment of the obligation." Certainly, there is no double recovery or unjust
enrichment30 to speak of.1âwphi1

All the foregoing notwithstanding, We are of the opinion that the interest of 6% per
month should be equitably reduced to one percent (1%) per month or twelve percent
(12%) per annum, to be reckoned from May 16, 2002 until full payment and with the
remaining outstanding balance of their car loan as of May 15, 2002 as the base amount.

Settled is the principle which this Court has affirmed in a number of cases that
stipulated interest rates of three percent (3%) per month and higher are excessive,
iniquitous, unconscionable, and exorbitant. 31 While Central Bank Circular No. 905-82,
which took effect on January 1, 1983, effectively removed the ceiling on interest rates
for both secured and unsecured loans, regardless of maturity, nothing in the said
circular could possibly be read as granting carte blanche authority to lenders to raise
interest rates to levels which would either enslave their borrowers or lead to a
hemorrhaging of their assets.32 Since the stipulation on the interest rate is void for being
contrary to morals, if not against the law, it is as if there was no express contract on said
interest rate; thus, the interest rate may be reduced as reason and equity demand. 33

WHEREFORE, the petition is DENIED and the Court AFFIRMS WITH MODIFICATION
the April 30, 2007 Decision and May 19, 2008 Resolution of the Court of Appeals in CA-
G.R. CV No. 86021. Petitioners spouses Deo Agner and Maricon Agner are ORDERED
to pay, jointly and severally, respondent BPI Family Savings Bank, Inc. ( 1) the
remaining outstanding balance of their auto loan obligation as of May 15, 2002 with
interest at one percent ( 1 o/o) per month from May 16, 2002 until fully paid; and (2)
costs of suit.

SO ORDERED.

SECOND DIVISION

[G.R. No. 183018 : August 03, 2011]

ADVENT CAPITAL AND FINANCE CORPORATION, PETITIONER, VS. ROLAND

YOUNG, RESPONDENT.

DECISION

CARPIO, J.:

1593
 The Case

This petition for review[1] assails the 28 December 2007 Decision[2] and 15 May 2008
Resolution[3] of the Court of Appeals in CA-G.R. SP No. 96266. The Court of Appeals
set aside the 24 March 2006 and 5 July 2006 Orders [4] of the Regional Trial Court of
Makati City, Branch 147, and directed petitioner Advent Capital and Finance
Corporation to return the seized vehicle to respondent Roland Young. The Court of
Appeals denied the motion for reconsideration.

The Antecedents

The present controversy stemmed from a replevin suit instituted by petitioner Advent
Capital and Finance Corporation (Advent) against respondent Roland Young (Young) to
recover the possession of a 1996 Mercedes Benz E230 with plate number UMN-168,
which is registered in Advent's name. [5]

Prior to the replevin case, or on 16 July 2001, Advent filed for corporate rehabilitation
with the Regional Trial Court of Makati City, Branch 142 (rehabilitation court). [6]

On 27 August 2001, the rehabilitation court issued an Order (stay order) which states
that "the enforcement of all claims whether for money or otherwise, and whether such
enforcement is by court action or otherwise, against the petitioner (Advent), its
guarantors and sureties not solidarily liable with it, is stayed." [7]

On 5 November 2001, Young filed his Comment to the Petition for Rehabilitation,
claiming, among others, several employee benefits allegedly due him as Advent's
former president and chief executive officer.

On 6 November 2002, the rehabilitation court approved the rehabilitation plan submitted
by Advent. Included in the inventory of Advent's assets was the subject car which
remained in Young's possession at the time.

Young's obstinate refusal to return the subject car, after repeated demands, prompted
Advent to file the replevin case on 8 July 2003. The complaint, docketed as Civil Case
No. 03-776, was raffled to the Regional Trial Court of Makati City, Branch 147 (trial
court).

After Advent's posting of P3,000,000 replevin bond, which was double the value of the
subject car at the time, through Stronghold Insurance Company, Incorporated
(Stronghold), the trial court issued a Writ of Seizure [8] directing the Sheriff to seize the
subject car from Young. Upon receipt of the Writ of Seizure, Young turned over the car
to Advent,[9] which delivered the same to the rehabilitation receiver. [10]

Thereafter, Young filed an Answer alleging that as a former employee of Advent, he had
the option to purchase the subject car at book value pursuant to the company car plan
and to offset the value of the car with the proceeds of his retirement pay and stock
option plan. Young sought the (1) execution of a deed of sale over the subject car; and
1594
(2) determination and payment of the net amount due him as retirement benefits under
the stock option plan.

Advent filed a Reply with a motion to dismiss Young's counterclaim, alleging that the
counterclaim did not arise from or has no logical relationship with the issue of ownership
of the subject car.

After issues have been joined, the parties entered into pre-trial on 2 April 2004, which
resulted in the issuance of a pre-trial order of even date reciting the facts and the issues
to be resolved during the trial.

On 28 April 2005, the trial court issued an Order dismissing the replevin case without
prejudice for Advent's failure to prosecute. In the same order, the trial court dismissed
Young's counterclaim against Advent for lack of jurisdiction. The order pertinently reads:

It appears that as of July 28, 2003, subject motor vehicle has been turned over to the
plaintiff, thru its authorized representative, and adknowledged by the parties' respective
counsels in separate Manifestations filed. To date, no action had been taken by the
plaintiff in the further prosecution of this case. Accordingly, this case is ordered
dismissed without prejudice on the ground of failure to prosecute.

Anent plaintiff's Motion to Dismiss defendant Young's counterclaim for benefits under
the retirement and stock purchase plan, the Court rules as follows: The only issue in this
case is who is entitled to the possession of the subject motor vehicle. This issue may
have a connection, but not a necessary connection with defendant's rights under the
retirement plan and stock purchase plan as to be considered a compulsory
counterclaim.

xxx

Notably, defendant's claim is basically one for benefits under and by virtue of his
employment with the plaintiff, and the subject vehicle is merely an incident in that claim.
Said claim is properly ventilated, as it is resolvable by, the Rehabilitation Court which
has jurisdiction and has acquired jurisdiction, to the exclusion of this Court. Accordingly,
plaintiff's Motion To Dismiss defendant Young's counterclaim is granted. [11]

On 10 June 2005, Young filed a motion for partial reconsideration of the dismissal order
with respect to his counterclaim.

On 8 July 2005, Young filed an omnibus motion, praying that Advent return the subject
car and pay him P1.2 million in damages "(f)or the improper and irregular seizure" of the
subject car, to be charged against the replevin bond posted by Advent through
Stronghold.

On 24 March 2006, the trial court issued an Order denying Young's motion for partial
reconsideration, viz:

1595
In the instant case, defendant, in his counterclaim anchored her [sic] right of possession
to the subject vehicle on his alleged right to purchase the same under the company car
plan. However, considering that the Court has already declared that it no longer has
jurisdiction to try defendant's counterclaim as it is now part of the rehabilitation
proceedings before the corporate court concerned, the assertions in the Motion for
Reconsiderations (sic) will no longer stand.

On the other hand, the plaintiff did not file a Motion for Reconsideration of the same
Order, dismissing the complaint for failure to prosecute, within the reglementary period.
Hence, the same has attained finality.

Defendant alleged that the dismissal of the case resulted in the dissolution of the writ.
Nonetheless, the Court deems it proper to suspend the resolution of the return of the
subject vehicle. In this case, the subject vehicle was turned over to plaintiff by virtue of a
writ of replevin validly issued, the latter having sufficiently shown that it is the
absolute/registered owner thereof. This was not denied by the defendant. Plaintiff's
ownership includes its right of possession. The case has been dismissed without a
decision on the merits having been rendered. Thus, to order the return of the vehicle to
one who is yet to prove his right of possession would not be proper.

Accordingly, the Motion for Partial Reconsideration is denied. [12]

On 8 June 2006, Young filed a motion to resolve his omnibus motion.

In an Order dated 5 July 2006, the trial court denied the motion to resolve, to wit:

In the instant case, the Court suspended the resolution of the return of the vehicle to
defendant Roland Young. It should be noted that the writ of replevin was validly issued
in favor of the plaintiff and that it has sufficiently established ownership over the subject
vehicle which includes its right to possess. On the other hand, the case (Olympia
International vs. Court of Appeals) cited by defendant finds no application to this case,
inasmuch as in the former the Court has not rendered judgment affirming plaintiff's
(Olympia) right of possession on the property seized. Moreover, the Court, in the Order
dated April 28, 2005, has already denied defendant's counterclaim upon which he
based his right of possession on the ground of lack of jurisdiction. Accordingly, the
Court reiterates its previous ruling that to order the return of the subject vehicle to
defendant Young, who is yet to prove his right of possession before the Rehabilitation
Court would not be proper.

WHEREFORE, there being no new and substantial arguments raised, the Motion to
Resolve is denied.[13]

Young filed a petition for certiorari and mandamus with the Court of Appeals seeking to
annul the trial court's Orders of 24 March 2006 and 5 July 2006.

The Court of Appeals' Ruling

1596
In his petition before the Court of Appeals, Young argued mainly that the trial court
committed grave abuse of discretion amounting to lack or excess of jurisdiction in (1)
not directing the return of the subject vehicle to him; (2) refusing to hold a hearing to
determine the damages to be recovered against the replevin bond; and (3) dismissing
his counterclaim.

The Court of Appeals ruled in favor of Young and annulled the assailed rulings of the
trial court. The Court of Appeals held:

It is noteworthy that the case was dismissed by the court a quo for failure of Advent to
prosecute the same. Upon dismissal of the case, the writ of seizure issued as an
incident of the main action (for replevin) became functus officio and should have been
recalled or lifted. Since there was no adjudication on the merits of the case, the issue of
who between Advent and petitioner has the better right to possess the subject car was
not determined. As such, the parties should be restored to their status immediately
before the institution of the case.

The Supreme Court's ruling in Olympia International, Inc. vs. Court of Appeals (supra)
squarely applies to the present controversy, to wit:

"Indeed, logic and equity demand that the writ of replevin be cancelled. Being
provisional and ancillary in character, its existence and efficacy depended on the
outcome of the case. The case having been dismissed, so must the writ's existence and
efficacy be dissolved. To let the writ stand even after the dismissal of the case would be
adjudging Olympia as the prevailing party, when precisely, no decision on the merits
had been rendered. The case having been dismissed, it is as if no case was filed at all
and the parties must revert to their status before the litigation."

Indeed, as an eminent commentator on Remedial Law expounds:

"The plaintiff who obtains possession of the personal property by a writ of replevin does
not acquire absolute title thereto, nor does the defendant acquire such title by rebonding
the property, as they only hold the property subject to the final judgment in the action." (I
Regalado, Remedial Law Compendium, Eighth Revised Edition, p. 686)

Reversion of the parties to the status quo ante is the consequence ex proprio vigore of

the dismissal of the case. Thus, in Laureano vs. Court of Appeals (324 SCRA 414), it
was held:

"(A)lthough the commencement of a civil action stops the running of the statute of
prescription or limitations, its dismissal or voluntary abandonment by plaintiff leaves the
parties in exactly the same position as though no action had been commenced at all."

By the same token, return of the subject car to petitioner pending rehabilitation of
Advent does not constitute enforcement of claims against it, much more adjudication on

1597
the merits of petitioner's counterclaim. In other words, an order for such return is not a
violation of the stay order, which was issued by the rehabilitation court on August 27,
2001. x x x

Corollarily, petitioner's claim against the replevin bond has no connection at all with the
rehabilitation proceedings. The claim is not against the insolvent debtor (Advent) but
against bondsman, Stronghold. Such claim is expressly authorized by Sec. 10, Rule 60,
in relation to Sec. 20, Rule 57, id., x x x[14]

The dispositive portion of the Court of Appeals' decision reads:

WHEREFORE, premises considered, the instant petition is PARTLY GRANTED. The

orders of the Regional Trial Court dated March 24, 2006 and July 5, 2006 are
ANNULLED and SET ASIDE in so far as they suspended resolution of petitioner's
motion for, and/or disallowed, the return of the subject car to petitioner. Accordingly,
respondent Advent Capital and Finance Corporation is directed to return the subject car
to petitioner.

The Regional Trial Court of Makati City (Branch 147) is directed to conduct a hearing
on, and determine, petitioner's claim for damages against the replevin bond posted by
Stronghold Insurance Co.

SO ORDERED.[15]

Advent filed a motion for reconsideration, which was denied by the Court of Appeals in a
Resolution dated 15 May 2008.

The Issue

The main issue in this case is whether the Court of Appeals committed reversible error
in (1) directing the return of the seized car to Young; and (2) ordering the trial court to
set a hearing for the determination of damages against the replevin bond.

The Court's Ruling

The petition is partially meritorious.

On returning the seized vehicle to Young   

We agree with the Court of Appeals in directing the trial court to return the seized car to
Young since this is the necessary consequence of the dismissal of the replevin case for
failure to prosecute without prejudice. Upon the dismissal of the replevin case for failure
to prosecute, the writ of seizure, which is merely ancillary in nature,
became functus officio and should have been lifted. There was no adjudication on the
merits, which means that there was no determination of the issue who has the better
right to possess the subject car. Advent cannot therefore retain possession of the

1598
subject car considering that it was not adjudged as the prevailing party entitled to the
remedy of replevin.

Contrary to Advent's view, Olympia International Inc. v. Court of Appeals[16] applies to

this case. The dismissal of the replevin case for failure to prosecute results in the
restoration of the parties' status prior to litigation, as if no complaint was filed at all. To
let the writ of seizure stand after the dismissal of the complaint would be adjudging
Advent as the prevailing party, when precisely no decision on the merits had been
rendered. Accordingly, the parties must be reverted to their status quo ante. Since
Young possessed the subject car before the filing of the replevin case, the same must
be returned to him, as if no complaint was filed at all.

Advent's contention that returning the subject car to Young would constitute a violation
of the stay order issued by the rehabilitation court is untenable. As the Court of Appeals
correctly concluded, returning the seized vehicle to Young is not an enforcement of a
claim against Advent which must be suspended by virtue of the stay order issued by the
rehabilitation court pursuant to Section 6 of the Interim Rules on Corporate
Rehabilitation (Interim Rules).[17] The issue in the replevin case is who has better right to
possession of the car, and it was Advent that claimed a better right in filing the replevin
case against Young. In defense, Young claimed a better right to possession of the car
arising from Advent's car plan to its executives, which he asserts entitles him to offset
the value of the car against the proceeds of his retirement pay and stock option plan.

Young cannot collect a money "claim" against Advent within the contemplation of the
Interim Rules. The term "claim" has been construed to refer to debts or demands of a
pecuniary nature, or the assertion to have money paid by the company under
rehabilitation to its creditors.[18] In the replevin case, Young cannot demand that Advent
pay him money because such payment, even if valid, has been "stayed" by order of the
rehabilitation court. However, in the replevin case, Young can raise Advent's car plan,
coupled with his retirement pay and stock option plan, as giving him a better right to
possession of the car. To repeat, Young is entitled to recover the subject car as a
necessary consequence of the dismissal of the replevin case for failure to prosecute
without prejudice.

On the damages against the replevin bond   

Section 10, Rule 60 of the Rules of Court [19] governs claims for damages on account of
improper or irregular seizure in replevin cases. It provides that in replevin cases, as in
receivership and injunction cases, the damages to be awarded upon the bond "shall be
claimed, ascertained, and granted" in accordance with Section 20 of Rule 57 which
reads:

Sec. 20. Claim for damages on account of improper, irregular or excessive

attachment. - An application for damages on account of improper, irregular or excessive
attachment must be filed before the trial or before appeal is perfected or before the
judgment becomes executory, with due notice to the attaching obligee or his surety or
sureties, setting forth the facts showing his right to damages and the amount thereof.

1599
Such damages may be awarded only after proper hearing and shall be included in the
judgment on the main case.

If the judgment of the appellate court be favorable to the party against whom the
attachment was issued, he must claim damages sustained during the pendency of the
appeal by filing an application in the appellate court with notice to the party in whose
favor the attachment was issued or his surety or sureties, before the judgment of the
appellate court becomes executory. The appellate court may allow the application to be
heard and decided by the trial court.

Nothing herein contained shall prevent the party against whom the attachment was
issued from recovering in the same action the damages awarded to him from any
property of the attaching obligee not exempt from execution should the bond or deposit
given by the latter be insufficient or fail to fully satisfy the award.

The above provision essentially allows the application to be filed at any time before the
judgment becomes executory.[20] It should be filed in the same case that is the main
action,[21] and with the court having jurisdiction over the case at the time of the
application.[22]

In this case, there was no application for damages against Stronghold resulting from the
issuance of the writ of seizure before the finality of the dismissal of the complaint for
failure to prosecute. It appears that Young filed his omnibus motion claiming damages
against Stronghold after the dismissal order issued by the trial court on 28 April 2005
had attained finality. While Young filed a motion for partial reconsideration on 10 June
2005, it only concerned the dismissal of his counterclaim, without any claim for
damages against the replevin bond. It was only on 8 July 2005 that Young filed an
omnibus motion seeking damages against the replevin bond, after the dismissal order
had already become final for Advent's non-appeal of such order. In fact, in his omnibus
motion, Young stressed the finality of the dismissal order. [23] Thus, Young is barred from
claiming damages against the replevin bond.

In Jao v. Royal Financing Corporation,[24] the Court held that defendant therein was
precluded from claiming damages against the surety bond since defendant failed to file
the application for damages before the termination of the case, thus:

The dismissal of the case filed by the plaintiffs-appellees on July 11, 1959, had become
final and executory before the defendant-appellee corporation filed its motion for
judgment on the bond on September 7, 1959. In the order of the trial court, dismissing
the complaint, there appears no pronouncement whatsoever against the surety bond.
The appellee-corporation failed to file its proper application for damages prior to the
termination of the case against it. It is barred to do so now. The prevailing party, if such
would be the proper term for the appellee-corporation, having failed to file its application
for damages against the bond prior to the entry of final judgment, the bondsman-
appellant is relieved of further liability thereunder.

1600
Since Young is time-barred from claiming damages against the replevin bond, the
dismissal order having attained finality after the application for damages, the Court of
Appeals erred in ordering the trial court to set a hearing for the determination of
damages against the replevin bond.

WHEREFORE, the Court GRANTS the petition IN PART. The Court SETS ASIDE the

portion in the assailed decision of the Court of Appeals in CA-G.R. SP No. 96266
ordering the trial court to set a hearing for the determination of damages against the
replevin bond.

SO ORDERED.

THIRD DIVISION

[G.R. No. 137705. August 22, 2000]

SERGS PRODUCTS, INC., and SERGIO T. GOQUIOLAY, Petitioners, vs. PCI

LEASING AND FINANCE, INC., Respondent.

DECISION

PANGANIBAN, J.: chanrobles virtual law library

After agreeing to a contract stipulating that a real or immovable property be

considered as personal or movable, a party is estopped from subsequently
claiming otherwise. Hence, such property is a proper subject of a writ of replevin
obtained by the other contracting party.

The Case chanrobles virtual law library

Before us is a Petition for Review on Certiorari assailing the January 6, 1999

Decision1 of the Court of Appeals (CA)[2 in CA-GR SP No. 47332 and its February
26, 1999 Resolution[3 denying reconsideration. The decretal portion of the CA
Decision reads as follows: chanrobles virtual law library

WHEREFORE, premises considered, the assailed Order dated February 18, 1998
and Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are
hereby AFFIRMED. The writ of preliminary injunction issued on June 15, 1998 is
hereby LIFTED.4 chanrobles virtual law library

In its February 18, 1998 Order,5 the Regional Trial Court (RTC) of Quezon City
(Branch 218)[6 issued a Writ of Seizure.[7 The March 18, 1998 Resolution[8 denied
petitioners Motion for Special Protective Order, praying that the deputy sheriff be
enjoined from seizing immobilized or other real properties in (petitioners) factory

1601
in Cainta, Rizal and to return to their original place whatever immobilized
machineries or equipments he may have removed.[9

The Facts chanrobles virtual law library

The undisputed facts are summarized by the Court of Appeals as

follows:10 chanrobles virtual law library

On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI Leasing for
short) filed with the RTC-QC a complaint for [a] sum of money (Annex E), with an
application for a writ of replevin docketed as Civil Case No. Q-98-
33500. chanrobles virtual law library

On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge

issued a writ of replevin (Annex B) directing its sheriff to seize and deliver the
machineries and equipment to PCI Leasing after 5 days and upon the payment of
the necessary expenses. chanrobles virtual law library

On March 24, 1998, in implementation of said writ, the sheriff proceeded to

petitioners factory, seized one machinery with [the] word that he [would] return
for the other machineries. chanrobles virtual law library

On March 25, 1998, petitioners filed a motion for special protective order (Annex
C), invoking the power of the court to control the conduct of its officers and
amend and control its processes, praying for a directive for the sheriff to defer
enforcement of the writ of replevin. chanrobles virtual law library

This motion was opposed by PCI Leasing (Annex F), on the ground that the
properties [were] still personal and therefore still subject to seizure and a writ of
replevin. chanrobles virtual law library

In their Reply, petitioners asserted that the properties sought to be seized [were]
immovable as defined in Article 415 of the Civil Code, the parties agreement to
the contrary notwithstanding. They argued that to give effect to the agreement
would be prejudicial to innocent third parties. They further stated that PCI
Leasing [was] estopped from treating these machineries as personal because the
contracts in which the alleged agreement [were] embodied [were] totally sham
and farcical. chanrobles virtual law library

On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take
possession of the remaining properties. He was able to take two more, but was
prevented by the workers from taking the rest. chanrobles virtual law library

On April 7, 1998, they went to [the CA] via an original action for certiorari.

Ruling of the Court of Appeals chanrobles virtual law library

1602
Citing the Agreement of the parties, the appellate court held that the subject
machines were personal property, and that they had only been leased, not owned,
by petitioners. It also ruled that the words of the contract are clear and leave no
doubt upon the true intention of the contracting parties. Observing that Petitioner
Goquiolay was an experienced businessman who was not unfamiliar with the
ways of the trade, it ruled that he should have realized the import of the document
he signed. The CA further held: chanrobles virtual law library

Furthermore, to accord merit to this petition would be to preempt the trial court in
ruling upon the case below, since the merits of the whole matter are laid down
before us via a petition whose sole purpose is to inquire upon the existence of a
grave abuse of discretion on the part of the [RTC] in issuing the assailed Order
and Resolution. The issues raised herein are proper subjects of a full-blown trial,
necessitating presentation of evidence by both parties. The contract is being
enforced by one, and [its] validity is attacked by the other a matter x x x which
respondent court is in the best position to determine. chanrobles virtual law
library

Hence, this Petition.11

The Issues chanrobles virtual law library

In their Memorandum, petitioners submit the following issues for our

consideration: chanrobles virtual law library

A. Whether or not the machineries purchased and imported by SERGS became

real property by virtue of immobilization. chanrobles virtual law library

B. Whether or not the contract between the parties is a loan or a

lease.12 chanrobles virtual law library

In the main, the Court will resolve whether the said machines are personal, not
immovable, property which may be a proper subject of a writ of replevin. As a
preliminary matter, the Court will also address briefly the procedural points
raised by respondent.

The Courts Ruling chanrobles virtual law library

The Petition is not meritorious.

Preliminary Matter:Procedural Questionschanrobles virtual law library

Respondent contends that the Petition failed to indicate expressly whether it was
being filed under Rule 45 or Rule 65 of the Rules of Court. It further alleges that
the Petition erroneously impleaded Judge Hilario Laqui as
respondent. chanrobles virtual law library

1603
There is no question that the present recourse is under Rule 45. This conclusion
finds support in the very title of the Petition, which is Petition for Review on
Certiorari.13 chanrobles virtual law library

While Judge Laqui should not have been impleaded as a

respondent,14 substantial justice requires that such lapse by itself should not
warrant the dismissal of the present Petition. In this light, the Court deems it
proper to remove, motu proprio, the name of Judge Laqui from the caption of the
present case.

Main Issue: Nature of the Subject Machinerychanrobles virtual law library

Petitioners contend that the subject machines used in their factory were not
proper subjects of the Writ issued by the RTC, because they were in fact real
property. Serious policy considerations, they argue, militate against a contrary
characterization. chanrobles virtual law library

Rule 60 of the Rules of Court provides that writs of replevin are issued for the
recovery of personal property only. 15 Section 3 thereof reads: chanrobles virtual
law library

SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the
court shall issue an order and the corresponding writ of replevin describing the
personal property alleged to be wrongfully detained and requiring the sheriff
forthwith to take such property into his custody. chanrobles virtual law library

On the other hand, Article 415 of the Civil Code enumerates immovable or real
property as follows: chanrobles virtual law library

ART. 415. The following are immovable property:

x x x....................................x x x....................................x x x chanrobles virtual law

library

(5) Machinery, receptacles, instruments or implements intended by the owner of

the tenement for an industry or works which may be carried on in a building or on
a piece of land, and which tend directly to meet the needs of the said industry or
works;

x x x....................................x x x....................................x x x chanrobles virtual law

library

In the present case, the machines that were the subjects of the Writ of Seizure
were placed by petitioners in the factory built on their own land. Indisputably,
they were essential and principal elements of their chocolate-making industry.
Hence, although each of them was movable or personal property on its own, all of

1604
them have become immobilized by destination because they are essential and
principal elements in the industry.16 In that sense, petitioners are correct in
arguing that the said machines are real, not personal, property pursuant to Article
415 (5) of the Civil Code.[17 chanrobles virtual law library

Be that as it may, we disagree with the submission of the petitioners that the said
machines are not proper subjects of the Writ of Seizure. chanrobles virtual law
library

The Court has held that contracting parties may validly stipulate that a real
property be considered as personal.18 After agreeing to such stipulation, they are
consequently estopped from claiming otherwise. Under the principle of estoppel,
a party to a contract is ordinarily precluded from denying the truth of any material
fact found therein. chanrobles virtual law library

Hence, in Tumalad v. Vicencio,19 the Court upheld the intention of the parties to

treat a house as a personal property because it had been made the subject of a
chattel mortgage. The Court ruled: chanrobles virtual law library

x x x. Although there is no specific statement referring to the subject house as

personal property, yet by ceding, selling or transferring a property by way of
chattel mortgage defendants-appellants could only have meant to convey the
house as chattel, or at least, intended to treat the same as such, so that they
should not now be allowed to make an inconsistent stand by claiming
otherwise. chanrobles virtual law library

Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever

Textile Mills[20] also held that the machinery used in a factory and essential to
the industry, as in the present case, was a proper subject of a writ of replevin
because it was treated as personal property in a contract. Pertinent portions of
the Courts ruling are reproduced hereunder: chanrobles virtual law library

x x x. If a house of strong materials, like what was involved in the above Tumalad
case, may be considered as personal property for purposes of executing a chattel
mortgage thereon as long as the parties to the contract so agree and no innocent
third party will be prejudiced thereby, there is absolutely no reason why a
machinery, which is movable in its nature and becomes immobilized only by
destination or purpose, may not be likewise treated as such. This is really
because one who has so agreed is estopped from denying the existence of the
chattel mortgage. chanrobles virtual law library

In the present case, the Lease Agreement clearly provides that the machines in
question are to be considered as personal property. Specifically, Section 12.1 of
the Agreement reads as follows:21 chanrobles virtual law library

1605
12.1 The PROPERTY is, and shall at all times be and remain, personal property
notwithstanding that the PROPERTY or any part thereof may now be, or hereafter
become, in any manner affixed or attached to or embedded in, or permanently
resting upon, real property or any building thereon, or attached in any manner to
what is permanent. chanrobles virtual law library

Clearly then, petitioners are estopped from denying the characterization of the
subject machines as personal property. Under the circumstances, they are proper
subjects of the Writ of Seizure. chanrobles virtual law library

It should be stressed, however, that our holding -- that the machines should be
deemed personal property pursuant to the Lease Agreement is good only insofar
as the contracting parties are concerned. 22 Hence, while the parties are bound by
the Agreement, third persons acting in good faith are not affected by its
stipulation characterizing the subject machinery as personal.[23 In any event,
there is no showing that any specific third party would be adversely affected.

Validity of the Lease Agreement chanrobles virtual law library

In their Memorandum, petitioners contend that the Agreement is a loan and not a
lease.24 Submitting documents supposedly showing that they own the subject
machines, petitioners also argue in their Petition that the Agreement suffers from
intrinsic ambiguity which places in serious doubt the intention of the parties and
the validity of the lease agreement itself.[25 In their Reply to respondents
Comment, they further allege that the Agreement is invalid.[26 chanrobles virtual
law library

These arguments are unconvincing. The validity and the nature of the contract
are the lis mota of the civil action pending before the RTC. A resolution of these
questions, therefore, is effectively a resolution of the merits of the case. Hence,
they should be threshed out in the trial, not in the proceedings involving the
issuance of the Writ of Seizure. chanrobles virtual law library

Indeed, in La Tondea Distillers v. CA,27 the Court explained that the policy under
Rule 60 was that questions involving title to the subject property questions which
petitioners are now raising -- should be determined in the trial. In that case, the
Court noted that the remedy of defendants under Rule 60 was either to post a
counter-bond or to question the sufficiency of the plaintiffs bond. They were not
allowed, however, to invoke the title to the subject property. The Court
ruled: chanrobles virtual law library

In other words, the law does not allow the defendant to file a motion to dissolve
or discharge the writ of seizure (or delivery) on ground of insufficiency of the
complaint or of the grounds relied upon therefor, as in proceedings on
preliminary attachment or injunction, and thereby put at issue the matter of the
title or right of possession over the specific chattel being replevied, the policy

1606
apparently being that said matter should be ventilated and determined only at the
trial on the merits.28 chanrobles virtual law library

Besides, these questions require a determination of facts and a presentation of

evidence, both of which have no place in a petition for certiorari in the CA under
Rule 65 or in a petition for review in this Court under Rule 45. 29

Reliance on the Lease Agreement chanrobles virtual law library

It should be pointed out that the Court in this case may rely on the Lease
Agreement, for nothing on record shows that it has been nullified or annulled. In
fact, petitioners assailed it first only in the RTC proceedings, which had ironically
been instituted by respondent. Accordingly, it must be presumed valid and
binding as the law between the parties. chanrobles virtual law library

Makati Leasing and Finance Corporation 30 is also instructive on this point. In that
case, the Deed of Chattel Mortgage, which characterized the subject machinery
as personal property, was also assailed because respondent had allegedly been
required to sign a printed form of chattel mortgage which was in a blank form at
the time of signing. The Court rejected the argument and relied on the Deed,
ruling as follows: chanrobles virtual law library

x x x. Moreover, even granting that the charge is true, such fact alone does not
render a contract void ab initio, but can only be a ground for rendering said
contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by
a proper action in court. There is nothing on record to show that the mortgage
has been annulled. Neither is it disclosed that steps were taken to nullify the
same. x x x

Alleged Injustice Committed on the Part of Petitioners chanrobles virtual law

library

Petitioners contend that if the Court allows these machineries to be seized, then
its workers would be out of work and thrown into the streets. 31 They also allege
that the seizure would nullify all efforts to rehabilitate the corporation. chanrobles
virtual law library

Petitioners arguments do not preclude the implementation of the Writ. As earlier

discussed, law and jurisprudence support its propriety. Verily, the above-
mentioned consequences, if they come true, should not be blamed on this Court,
but on the petitioners for failing to avail themselves of the remedy under Section
5 of Rule 60, which allows the filing of a counter-bond. The provision
states: chanrobles virtual law library

SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the
applicants bond, or of the surety or sureties thereon, he cannot immediately

1607
require the return of the property, but if he does not so object, he may, at any
time before the delivery of the property to the applicant, require the return
thereof, by filing with the court where the action is pending a bond executed to
the applicant, in double the value of the property as stated in the applicants
affidavit for the delivery thereof to the applicant, if such delivery be adjudged, and
for the payment of such sum to him as may be recovered against the adverse
party, and by serving a copy bond on the applicant. chanrobles virtual law library

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of

Appeals AFFIRMED. Costs against petitioners. chanrobles virtual law library

SO ORDERED. chanrobles virtual law library

SECOND DIVISION

February 1, 2017

G.R. No. 195450

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner

vs.
HON. EMMANUEL C. CARPIO, in his capacity as Presiding Judge, Regional Trial
Court, Branch 16, Davao City, COUNTRY BANKERS INSURANCE CORPORATION,
DABAY ABAD, HATAB ABAD, OMAR ABAS, HANAPI ABDULLAH, ROJEA AB
ABDULLAH, ABDULLAH ABEDIN, ALEX ABEDIN, et al., represented by their
Attorney-in-Fact, MR. MANUEL L. TE, Respondents

DECISION

MENDOZA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the July 9,
2008 Decision1 and the January 21, 2011 Resolution2 of the Court of Appeals (CA) in
CA-G.R. SP No. 85719, which dismissed the petition
for certiorari and mandamus praying for the annulment of the May 17, 2004 and July 9,
2004 Orders3 of the Regional Trial Court, Branch 16, Davao City (RTC), in Civil Case
No. 28,721-01.

The Antecedents

On August 21, 2001, Dabay Abad, Hatab Abad, Omar Abas, Hanapi Abdullah, Rojea Ab
Abdullah, Abdullah Abedin, Alex Abedin, et al.(Abad, et al.), represented by their
attorney-in-fact, Manuel L. Te, filed a complaint for delivery of certificates of title,
damages, and attorney's fees against petitioner Development Bank of the
Philippines (DBP) and Guarantee Fund for Small and Medium
Enterprise (GFSME) before the RTC.4

1608
In their, Complaint,5 Abad, et al. prayed, among others, for the issuance of a writ of
seizure, pending hearing of the case, for delivery of their certificates of title they claimed
to be unlawfully detained by DBP and GFSME. They alleged that their certificates of title
were submitted to DBP for safekeeping pursuant to the loan agreement they entered
into with DBP. The same certificates of title were turned over by DBP to GFSME
because of its call on GFSME's guarantee on their loan, which became due and
demandable, and pursuant to the guarantee agreement between DBP and GFSME.

As prayed for, the RTC issued the Writ of Seizure 6 on August 24, 2001. The writ was
accompanied by Plaintiffs Bond for Manual Delivery of Personal Property 7 issued by
Country Bankers Insurance Corporation (CBIC).

On September 5, 2001, DBP filed its Omnibus Motion to Dismiss Complaint and to
Quash Writ of Seizure8 on the ground of improper venue, among others. Abad, et
al. filed their Opposition9 and later, their Supplemental Opposition,10 to which they
attached the Delivery Receipt11 showing that the court sheriff took possession of 228
certificates of title from GFSME.

In its Order,12 dated September 25, 2001, the RTC granted DBP's omnibus motion and
dismissed the case for improper venue.

On December 20, 2001, DBP and GFSME filed their Joint Motion to Order Plaintiffs to
Return Titles to Defendants DBP and GFSME. 13 After Abad, et al. filed their opposition,
the RTC issued the Order,14 dated January 27, 2003, directing Abad, et al. to return the
228 certificates of title.

Abad, et al. filed a petition for certiorari and prohibition with the Court praying, among
others, for the nullification and reversal of the January 27, 2003 Order of the RTC. The
Court, however, in its June 9, 2003 Resolution, 15 dismissed the petition.

On September 18, 2003, DBP filed its Motion for Writ of Execution 16 of the January 27,
2003 Order before the RTC. On December 16, 2003, the RTC issued the corresponding
Writ of Execution.17 The Sheriffs Return of Service,18 however, indicated that Abad, et
al. failed to deliver the certificates of title.

The Subject Motion against the Bond

Due to the non-delivery of the certificates of title by Abad, et al., DBP filed

its Motion/Application to Call on Plaintiff's Surety Bond, 19 dated February 3, 2004,
praying for the release of the bond issued by CBIC to answer for the damages it
sustained as a result of the failure to return the 228 certificates of title.

The RTC Ruling

In its Order, dated May 17, 2004, the RTC denied the subject motion explaining that the
resolution of the motion was no longer part of its residual power. It pointed out that

1609
although there was indeed an order to return the 228 certificates of title to DBP, it was
not made as a result of a trial of the case, but as a consequence of the order of
dismissal based on improper venue.

DBP moved for reconsideration. Nevertheless, in its July 9, 2004 Order, the RTC denied
the motion.

Aggrieved, DBP filed a petition for certiorari and mandamus before the CA.

The CA Ruling

In its July 9, 2008 Decision, the CA dismissed the petition

for certiorari and mandamus. It noted that DBP did not move for reconsideration of the
September 25, 2001 Order of dismissal. It considered the RTC decision as final and
executory. It added that Section 20, Rule 57 of the Rules of Court provided that the
claim for damages against the bond must be filed before trial or before appeal was
perfected or before the judgment became executory. 20

DBP moved for reconsideration, but its motion was denied by the CA in its January 21,
2011 Resolution.

Hence, this petition.

ISSUE

THE COURT OF APPEALS ERRED IN ITS BLIND ADHERENCE TO AND STRICT

APPLICATION OF SECTION 20, RULE 57 OF THE 1997 RULES OF CIVIL
PROCEDURE.21

Petitioner DBP argues that it could not have anticipated that Abad, et al.
(respondents) would not abide by the writ of execution; hence, prior to such failure of
execution, it would be premature to claim for damages against the bond because DBP
had not yet suffered any consequential damages with the implementation of the writ of
seizure; and that Section 20, Rule 57 of the Rules of Court was not applicable as the
damages resulting from the improper issuance of the writ of seizure occurred only after
the unjustified refusal of respondents to return the titles despite the order from the RTC.

In its Comment,22 dated August 11, 2011, respondent CBIC averred that Section 20,
Rule 57 of the Rules of Court specified that an application for damages on account of
improper, irregular or excessive attachment must be filed before the trial or before
appeal is perfected or before the judgment becomes executory; that the motion to call
on plaintiff's surety bond was filed more than two (2) years after the September 25,
2001 Order of the RTC, dismissing the case, became final and executory; that, under
Section 10, Rule 60 of the Rules of Court, the surety's liability under the replevin bond
should be included in the final judgment; that, there being no judgment as to who,
between the plaintiffs and the defendants, was entitled to the possession of the

1610
certificates of title, the R TC properly denied the motion to call on plaintiff's surety bond;
that, any claim for damages against the bond was only proper with respect to any loss
that DBP might have suffered by being compelled to surrender the possession of the
certificates of title pending trial of the action; that, in this case, the motion to call on
plaintiffs surety bond was filed after the trial was already terminated with the issuance of
the order of dismissal; and that, instead of moving to claim for damages, DBP sought to
quash the writ of seizure, even though it might already have some basis to claim for
damages at that time as could be gleaned from the wordings of their motion to dismiss
the complaint, based on, among others, improper venue and inapplicability of replevin
as proper remedy.

Respondents, on the other hand, failed to file their comment despite several
opportunities granted to them. Thus, their right to file a comment on the petition for
review was deemed waived.

In its Consolidated Reply,23 dated August 15, 2016, DPB asserted that Section 20, Rule
57 of the Rules of Court did not cover a situation where there was an instantaneous
dismissal of the case due to improper venue; that the damages resulting from the
improper issuance of the writ of seizure occurred only after the unjustified refusal of
respondents to return the titles despite order from the RTC; and, that DBP could not
resort to the surety prior to recovering the titles from respondents at any time during the
trial or before the judgment became final and executory.

The Court's Ruling

The petition lacks merit.

The trial court did not reach

the residual jurisdiction stage

Residual jurisdiction refers to the authority of the trial court to issue orders for the
protection and preservation of the rights of the parties which do not involve any matter
litigated by the appeal; to approve compromises; to permit appeals by indigent litigants;
to order execution pending appeal in accordance with Section 2, Rule 39; and to allow
the withdrawal of the appeal, provided these are done prior to the transmittal of the
original record or the record on appeal, even if the appeal has already been perfected or
despite the approval of the record on appeal 24 or in case of a petition for review under
Rule 42, before the CA gives due course to the petition. 25

The "residual jurisdiction" of the trial court is available at a stage in which the court is
normally deemed to have lost jurisdiction over the case or the subject matter involved in
the appeal. This stage is reached upon the perfection of the appeals by the parties or
upon the approval of the records on appeal, but prior to the transmittal of the original
records or the records on appeal. In either instance, the trial court still retains its so-
called residual jurisdiction to issue protective orders, approve compromises, permit

1611
appeals of indigent litigants, order execution pending appeal, and allow the withdrawal
of the appeal.26

From the foregoing, it is clear that before the trial court can be said to have residual
jurisdiction over a case, a trial on the merits must have been conducted; the court
rendered judgment; and the aggrieved party appealed therefrom.

In this case, there was no trial on the merits as the case was dismissed due to improper
venue and respondents could not have appealed the order of dismissal as the same
was a dismissal, without prejudice. Section 1 (h), Rule 41 of the Rules of Civil
Procedure states that no appeal may be taken from an order dismissing an action
without prejudice. Indeed, there is no residual jurisdiction to speak of where no appeal
has even been filed.27

In Strongworld Construction Corporation, et al. v. Hon. Perello, et al., 28 the Court

elucidated on the difference between a dismissal with prejudice and one without
prejudice:

We distinguish a dismissal with prejudice from a dismissal without prejudice. The

former disallows and bars the refiling of the complaint; whereas, the same cannot be
said of a dismissal without prejudice. Likewise, where the law permits, a dismissal with
prejudice is subject to the right of appeal.1âwphi1

xxx

Section 1, Rule 16 of the 1997 Revised Rules of Civil Procedure enumerates the
grounds for which a motion to dismiss may be filed, viz.:

Section 1. Grounds. Within the time for but before filing the answer to the complaint or
pleading asserting a claim, a motion to dismiss may be made on any of the following
grounds:

(a) That the court has no jurisdiction over the person of the defending party;

(b) That the court has no jurisdiction over the subject matter of the claim;

(c) That venue is improperly laid;

(d) That the plaintiff has no legal capacity to sue;

(e) That there is another action pending between the same parties for the same cause;

(f) That the cause of action is barred by a prior judgment or by the statute of limitations;

(g) That the pleading asserting the claim states no cause of action;

1612
(h) That the claim or demand set forth in the plaintiffs pleading has been paid, waived,
abandoned, or otherwise extinguished;

(i) That the claim on which the action is founded is unenforceable under the provisions
of the statute of frauds; and

(j) That a condition precedent for filing the claim has not been complied with.

Section 5 of the same Rule, recites the effect of a dismissal under Sections 1(f), (h), and
(i), thereof, thus:

SEC. 5. Effect of dismissal. Subject to the right of appeal, an order granting a motion to

dismiss based on paragraphs (f), (h), and (i) of section 1 hereof shall bar the refiling of
the same action or claim.

Briefly stated, dismissals that are based on the following grounds, to wit: (1) that the
cause of action is barred by a prior judgment or by the statute of limitations; (2) that the
claim or demand set forth in the plaintiffs pleading has been paid, waived, abandoned or
otherwise extinguished; and (3) that the claim on which the action is founded is
unenforceable under the provisions of the statute of frauds, bar the refiling of the same
action or claim. Logically, the nature of the dismissal founded on any of the preceding
grounds is with prejudice because the dismissal prevents the refiling of the same action
or claim. Ergo, dismissals based on the rest of the grounds enumerated are without
prejudice because they do not preclude the refiling of the same action.

xxx

As has been earlier quoted, Section 1(h), Rule 41 of the 1997 Revised Rules of Civil
Procedure mandates that no appeal may be taken from an order dismissing an action
without prejudice. The same section provides that in such an instant where the final
order is not appealable, the aggrieved party may file an appropriate special civil action
under Rule 65.29

Here, the RTC dismissed the replevin case on the ground of improper venue. Such
dismissal is one without prejudice and does not bar the refiling of the same action;
hence, it is not appealable. Clearly, the RTC did not reach, and could not have reached,
the residual jurisdiction stage as the case was dismissed due to improper venue, and
such order of dismissal could not be the subject of an appeal. Without the perfection of
an appeal, let alone the unavailability of the remedy of appeal, the RTC did not acquire
residual jurisdiction. Hence, it is erroneous to conclude that the RTC may rule on DBP's
application for damages pursuant to its residual powers.

Equity cannot supersede the

Rules of Court

1613
DBP admits that it filed the application for damages after the order of dismissal had
become final and executory. In seeking relief from this Court, however, it invokes equity
and argues that a strict application of Section 20, Rule 57 of the Rules of Court would
prejudice its right to recover damages arising from the improper attachment of the
certificates of title.

DBP, however, must be reminded that equity, "which has been aptly described as a
'justice outside legality,' is applied only in the absence of, and never against, statutory
law or, as in this case, judicial rules of procedure.30 The pertinent positive rules being
present here, they should preempt and prevail over all abstract arguments based only
on equity."31 As the Court has stated in Lim Tupas v. CA,32 "[ e]motional appeals for
justice, while they may wring the heart of the Court, cannot justify disregard of the
mandate of the law as long as it remains in force. The applicable maxim, which goes
back to the ancient days of the Roman jurists - and is now still reverently observed -
is 'aequetas nunquam contravenit legis.'"33

Accordingly, the CA did not commit any reversible error when it applied the rules of
procedure in resolving the issue at hand.

The application for damages

was belatedly filed

Section 10, Rule 60 of the Rules of Court provides that in replevin cases, as in
receivership and injunction cases, the damages to be awarded to either party upon any
bond filed by the other shall be claimed, ascertained, and granted in accordance with
Section 20 of Rule 57 which reads:

SEC. 20. Claimfor damages on account of illegal attachment. - If the judgment on the

action be in favor of the party against whom attachment was issued, he may recover,
upon the bond given or deposit made by the attaching creditor, any damages resulting
from the attachment. Such damages may be awarded only upon application and
after proper hearing, and shall be included in the final judgment. The application
must be filed before the trial or before appeal is perfected or before the judgment
becomes executory, with due notice to the attaching creditor and his surety or sureties,
setting forth the facts showing his right to damages and the amount thereof.

If the judgment of the appellate court be favorable to the party against whom the
attachment was issued, he must claim damages sustained during the pendency of
the appeal by filing an application with notice to the party in whose favor the attachment
was issued or his surety or sureties, before the judgment of the appellate court
becomes executory. The appellate court may allow the application to be heard and
decided by the trial court. [Emphases supplied]

In other words, to recover damages on a replevin bond (or on a bond for preliminary
attachment, injunction or receivership), it is necessary (1) that the defendant-claimant
has secured a favorable judgment in the main action, meaning that the plaintiff has no

1614
cause of action and was not, therefore, entitled to the provisional remedy of replevin; (2)
that the application for damages, showing claimant's right thereto and the amount
thereof, be filed in the same action before trial or before appeal is perfected or before
the judgment becomes executory; (3) that due notice be given to the other party and his
surety or sureties, notice to the principal not being sufficient; and (4) that there should
be a proper hearing and the award for damages should be included in the final
judgment.34

Likewise, to avoid multiplicity of suits, all incidents arising from the same controversy
must be settled in the same court having jurisdiction of the main action. Thus, the
application for damages must be filed in the court which took cognizance of the case,
with due notice to the other parties.35

In this case, DBP filed the application for damages long after the order of dismissal had
become final and executory. It explained that this belated filing was due to its recourse
to other remedies, such as the enforcement of the writ of execution. The Court,
however, finds this reason to be wanting in persuasiveness. To begin with, the filing of
an application for damages does not preclude resort to other remedies. Nowhere in the
Rules of Court is it stated that an application for damages bars the filing of a motion for
a writ of seizure, a writ of execution or any other applicable remedy. DBP, from the
beginning, had already perceived the attachment to be improper; hence, it could have
easily filed an application before the judgment became executory.

In Jao v. Royal Financing Corporation, 36 the Court precluded the defendant therein from
claiming damages against the surety bond because it failed to file the application for
damages before the termination of the case, thus:

xxx The dismissal of the case filed by the plaintiffs-appellees on July 11, 1959, had
become final and executory before the defendant-appellee corporation filed its motion
for judgment on the bond on September 7, 1959. In the order of the trial court,
dismissing the complaint, there appears no pronouncement whatsoever against the
surety bond. The appellee-corporation failed to file its proper application for
damages prior to the termination of the case against it. It is barred to do so now.
The prevailing party, if such would be the proper term for the appellee-corporation,
having failed to file its application for damages against the bond prior to the entry of final
judgment, the bondsman-appellant is relieved of further liability thereunder. [Emphases
supplied]37

Thus, the RTC has indeed no residual jurisdiction on DBP's claim for damages.

Remedies

The Court is not unmindful of the plight of DBP. Its chosen remedy, however, cannot be
countenanced as it disregards the Rules of Court and the settled jurisprudence on the
matter. Nevertheless, this is not to say that DBP has no other available remedies in
order to recover respondents' indebtedness.

1615
First, DBP could enforce its guarantee agreement with GFSME. A contract of guaranty
gives rise to a subsidiary obligation on the part of the guarantor. 38 A guarantor agrees
that the creditor, after proceeding against the principal, may proceed against the
guarantor if the principal is unable to pay. Moreover, he contracts to pay if, by the use of
due diligence, the debt cannot be made out of the principal debtor. 39

Further, it may file an action for damages based on Article 19 of the New Civil Code
against respondents for unlawfully taking the certificates of title, which served as
security for their loan. In Globe Mackay Cable and Radio Corporation v. Court of
Appeals,40 the Court held:

This article, known to contain what is commonly referred to as the principle of abuse

of rights, sets certain standards which must be observed not only in the exercise of
one's rights, but also in the performance of one's duties. These standards are the
following: to act with justice; to give everyone his due; and to observe honesty and good
faith. The law, therefore, recognizes a primordial limitation on all rights; that in their
exercise, the norms of human conduct set forth in Article 19 must be observed. A right,
though by itself legal because recognized or granted by law as such, may nevertheless
become the source of some illegality. When a right is exercised in a manner which does
not conform with the norms enshrined in Article 19 and results in damage to another, a
legal wrong is thereby committed for which the wrongdoer must be held responsible.
But while Article 19 lays down a rule of conduct for the government of human relations
and for the maintenance of social order, it does not provide a remedy for its violation.
Generally, an action for damages under either Article 20 or Article 21 would be
proper.41 [Emphasis supplied]

Finally, nothing precludes DBP from instituting an action for collection of sum of money
against respondents.1âwphi1 Besides, if the parcels of land covered by the certificates
of title, which DBP sought to recover from respondents, were mortgaged to the former,
then DBP, as mortgage-creditor, has the option of either filing a personal action for
collection of sum of money or instituting a real action to foreclose on the mortgage
security. The two remedies are alternative and each remedy is complete by itself. If the
mortgagee opts to foreclose the real estate mortgage, he waives the action for the
collection of the debt, and vice versa.42

WHEREFORE, the petition is DENIED. The July 9, 2008 Decision and the January 21,
2011 Resolution of the Court of Appeals, in CA-G.R. SP No. 85719,
are AFFIRMED in toto.

SO ORDERED.

RULE 62. INTERPLEADER

THIRD DIVISION

March 12, 2014

1616
G.R. No. 193494

LUI ENTERPRISES, INC., Petitioners,

vs.
ZUELLIG PHARMA CORPORATION and the PHILIPPINE BANK OF
COMMUNICATIONS, Respondents.

DECISION

LEONEN, J.:

There should be no inexplicable delay in the filing of a motion to set aside order of
default. Even when a motion is filed within the required period, excusable negligence
must be properly alleged and proven.

This is a petition for review on certiorari of the Court of Appeals' decision 1 dated May 24,
2010 and resoluticm2 dated August 13, 2010 in CA- G.R. CV No. 88023. The Court of
Appeals affirmed in toto the Regional

Trial Court of Makati’s decision3 dated July 4, 2006.

The facts as established from the pleadings of the parties are as follows:

On March 9, 1995, Lui Enterprises, Inc. and Zuellig Pharma Corporation entered into a
10-year contract of lease4 over a parcel of land located in Barrio Tigatto, Buhangin,
Davao City. The parcel of land was covered by Transfer Certificate of Title No. T-
166476 and was registered under Eli L. Lui.5

On January 10, 2003, Zuellig Pharma received a letter 6 from the Philippine Bank of
Communications. Claiming to be the new owner of the leased property, the bank asked
Zuellig Pharma to pay rent directly to it. Attached to the letter was a copy of Transfer
Certificate of Title No. 336962 under the name of the Philippine Bank of
Communications.7 Transfer Certificate ofTitle No. 336962 was derived fromTransfer
Certificate ofTitle No.T-166476.8

Zuellig Pharma promptly informed Lui Enterprises of the Philippine Bank of

Communications’ claim. On January 28, 2003, Lui Enterprises wrote to Zuellig Pharma
and insisted on its right to collect the leased property’srent. 9

Due to the conflicting claims of Lui Enterprises and the Philippine Bank of
Communications over the rental payments, Zuellig Pharma filed a complaint 10 for
interpleader with the Regional Trial Court of Makati. In its complaint, Zuellig Pharma
alleged that it already consigned in court P604,024.35 as rental payments. Zuellig
Pharma prayed that it be allowed to consign in court its succeeding monthly rental
payments and that Lui Enterprises and the Philippine Bank of Communications be
ordered to litigate their conflicting claims.11

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The Philippine Bank of Communications filed its answer 12 to the complaint. On the other
hand, Lui Enterprises filed a motion to dismiss 13 on the ground that Zuellig Pharma’s
alleged representative did not have authority to file the complaint for interpleader on
behalf of the corporation. Under the secretary’s certificate 14 dated May 6, 2003 attached
to the complaint, Atty. Ana L.A. Peralta was only authorized to "initiate and represent
[Zuellig Pharma] in the civil proceedings for consignation of rental payments to be filed
against Lui Enterprises, Inc. and/or [the Philippine Bank of Communications]." 15

According to Lui Enterprises, an earlier filed nullification of deed of dation in payment

case pending with the Regional Trial Court of Davao barred the filing of the interpleader
case.16 Lui Enterprises filed this nullification case against the Philippine Bank of
Communications with respect to several properties it dationed to the bank in payment of
its obligations. The property leased by Zuellig Pharma was among those allegedly
dationed to the Philippine Bank of Communications. 17

In the nullification of deed of dation in payment case, Lui Enterprises raised the issue of
which corporation had the better right over the rental payments. 18 Lui Enterprises
argued that the same issue was involved in the interpleader case. To avoid possible
conflicting decisions of the Davao trial court and the Makati trial court on the same
issue, Lui Enterprises argued that the subsequently filed interpleader case be
dismissed.

To support its argument, Lui Enterprises cited a writ of preliminary injunction 19 dated
July 2, 2003 issued by the Regional Trial Court of Davao, ordering Lui Enterprises and
the Philippine Bank of Communications "[to maintain] status quo" 20 with respect to the
rent. By virtue of the writ of preliminary injunction, Lui Enterprises argued that it should
continue collecting the rental payments from its lessees until the nullification of deed of
dation in payment case was resolved. The writ of preliminary injunction dated July 2,
2003 reads:

WHEREAS, on June 30, 2003, the Court issued an Order, a portion of which is quoted:

WHEREFORE, PREMISES CONSIDERED, let a Writ of Preliminary Injunction issue,

restraining and enjoining [the Philippine Bank of Communications], its agents or
[representative], the Office of the Clerk of Court- Sheriff and all persons acting on their
behalf, from conducting auction sale on the properties of [Lui Enterprises] in EJF-REM
Case No. 6272-03 scheduled on July 3, 2003 at 10:00 a.m. at the Hall of Justice,
Ecoland, Davao City, until the final termination of the case, upon plaintiff [sic] filing of a
bond in the amount of P1,000,000.00 to answer for damages that the enjoined parties
may sustain by reason of the injunction if the Court should finally decide that applicant is
not entitled thereto.

WHEREAS, that plaintiff posted a bond of P1,000,000.00 duly approved by this Court.

IT IS HEREBY ORDERED by the undersigned Judge that, until further orders, [the
Philippine Bank of Communications] and all [its] attorneys, representatives, agents and

1618
any other persons assisting [the bank], are directed to restrain from conducting auction
sale on the Properties of [Lui Enterprises] in EJF-REM Case No. 6272-03 scheduled on
July 3, 2003 at 10:00 a.m. at the Hall of Justice, Ecoland, Davao City, until the final
termination of the case.21

Zuellig Pharma filed its opposition22 to the motion to dismiss. It argued that the motion to
dismiss should be denied for having been filed late. Under Rule 16, Section 1 of the
1997 Rules of Civil Procedure, a motion to dismiss should be filed within the required
time given to file an answer to the complaint, which is 15 days from service of summons
on the defendant.23 Summons was served on Lui Enterprises on July 4, 2003. It had
until July 19, 2003 to file a motion to dismiss, but Lui Enterprises filed the motion only
on July23, 2003.24

As to Lui Enterprises’ claim that the interpleader case was filed without authority, Zuellig
Pharma argued that an action interpleader "is a necessary consequence of the action
for consignation."25 Zuellig Pharma consigned its rental payments because of "the
clearly conflicting claims of [Lui Enterprises] and [the Philippine Bank of
Communications]."26 Since Atty. Ana L.A. Peralta was authorized to file a consignation
case, this authority necessarily included an authority to file the interpleader case.

Nevertheless, Zuellig Pharma filed in court the secretary’s certificate dated August 28,
2003,27 which expressly stated that Atty. Ana L.A. Peralta was authorized to file a
consignation and interpleader case on behalf of Zuellig Pharma. 28

With respect to the nullification of deed of dation in payment case, Zuellig Pharma
argued that its pendency did not bar the filing of the interpleader case. It was not a party
to the nullification case.29

As to the writ of preliminary injunction issued by the Regional Trial Court of Davao,
Zuellig Pharma argued that the writ only pertained to properties owned by Lui
Enterprises. Under the writ of preliminary injunction, the Regional Trial Court of Davao
enjoined the July 3, 2003 auction sale of Lui Enterprises’ properties, the proceeds of
which were supposed to satisfy its obligations to the Philippine Bank of
Communications. As early as April 21, 2001, however, the Philippine Bank of
Communications already owned the leased property as evidenced by Transfer
Certificate of Title No. 336962. Thus, the writ of preliminary injunction did not apply to
the leased property.30

Considering that Lui Enterprises filed its motion to dismiss beyond the 15-day period to
file an answer, Zuellig Pharma moved that Lui Enterprises be declared in default. 31

In its compliance32 dated September 15, 2003, the Philippine Bank of Communications

"[joined Zuellig Pharma] in moving to declare [Lui Enterprises] in default, and in [moving
for] the denial of [Lui Enterprises’] motion to dismiss." 33

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The Regional Trial Court of Makati found that Lui Enterprises failed to file its motion to
dismiss within the reglementary period. Thus, in its order 34 dated October 6, 2003, the
trial court denied Lui Enterprises’motion to dismiss and declared it in default. 35

Lui Enterprises did not move for the reconsideration of the order dated October 6, 2003.
Thus, the Makati trial court heard the interpleader case without Lui
Enterprises’participation.

Despite having been declared in default, Lui Enterprises filed the manifestation with
prayer36 dated April 15, 2004. It manifested that the Regional Trial Court of Davao
allegedly issued the order37 dated April 1, 2004, ordering all of Lui Enterprises’ lessees
to "observe status quo with regard to the rental payments" 38 and continue remitting their
rental payments to Lui Enterprises while the nullification of deed of dation in payment
case was being resolved. The order dated April 1, 2004 of the Regional Trial Court of
Davao reads:

ORDER

Posed for Resolution is the Motion for Amendment of Order filed by [Lui Enterprises] on
September 23, 2003 seeking for the preservation of status quo on the
payment/remittance of rentals to [it] and the disposal/construction of the properties
subject matter of this case.

xxxx

As elsewhere stated, [the Philippine Bank of Communications] did not oppose the
instant motion up to the present. In fact, during the hearing held on March 15, 2004, [the
bank’s] counsel manifested in open court that except for the rentals due from [Zuellig
Pharma] which are the subject of a consignation suit before a Makati Court, the other
rental payments are continuously received by [Lui Enterprises].

There being no objection from [the Philippine Bank of Communications], and in order to
protect the right of [Lui Enterprises] respecting the subject of the action during the
pendency of this case, this Court, in the exercise of its discretion hereby grants the
motion.

Accordingly, consistent with the order of this Court dated June 30, 2003, the parties are
hereby directed to further observe status quo with regard to the rental payments owing
or due from the lessees of the properties subject of the first set of deeds of dacion and
that the defendants are enjoined from disposing of the properties located at Green
Heights Village, Davao City until the case is finally resolved.

With the order dated April 1, 2004 issued by the Regional Trial Court of Davao as basis,
Lui Enterprises argued that Zuellig Pharma must remit its rental payments to it and
prayed that the interpleader case be dismissed.

1620
The Regional Trial Court of Makati only noted the manifestation with prayer dated April
15, 2004.39

It was only on October 21, 2004, or one year after the issuance of the order of default,
that Lui Enterprises filed a motion to set aside order of default 40 in the Makati trial court
on the ground of excusable negligence. Lui Enterprises argued that its failure to file a
motion to dismiss on time "was caused by the negligence of [Lui Enterprises’] former
counsel."41 This negligence was allegedly excusable because "[Lui Enterprises] was
prejudiced and prevented from fairly presenting [its] case." 42

For its allegedly meritorious defense, Lui Enterprises argued that the earlier filed
nullification of deed of dation in payment case barred the filing of the interpleader case.
The two actions allegedly involved the same parties and the same issue of which
corporation had the better right over the rental payments. To prevent "the possibility of
two courts x x x rendering conflicting rulings [on the same issue]," 43 Lui Enterprises
argued that the subsequently filed interpleader case be dismissed.

Zuellig Pharma filed its opposition44 to the motion to set aside order of default. It argued
that a counsel’s failure to file a timely answer was inexcusable negligence which bound
his client.

Further, Zuellig Pharma argued that the pending case for nullification of deed of dation
in payment "[did] not preclude [Zuellig Pharma] from seeking the relief prayed for in the
[interpleader case]."45

While the motion to set aside order of default was still pending for resolution, Lui
Enterprises filed the manifestation and motion to dismiss 46 dated April 21, 2005 in the
Makati trial court. It manifested that the Davao trial court issued another order 47 dated
April 18, 2005 in the nullification of deed of dation in payment case. In this order, the
Davao trial court directed the Philippine Bank of Communications to inform Zuellig
Pharma to pay rent to Lui Enterprises while the Davao trial court’s order dated April 1,
2004 was subsisting. The order datedApril 18, 2005 of the Davao trial court reads:

ORDER

Plaintiffs move for execution or implementation of the Order dated September 14, 2004.
In substance, [Lui Enterprises] seek[s] to compel the remittance in their favor of the
rentals from [Zuellig Pharma], one of the lessees alluded to in the September 14, 2004
Order whose rental payments "must be remitted to and collected by [Lui Enterprises]."
[The Philippine Bank of Communications] did not submit any opposition.

It appears from the records that sometime in February 2003, after being threatened with
a lawsuit coming from [the Philippine Bank of Communications], [Zuellig Pharma]
stopped remitting its rentals to [Lui Enterprises] and instead, has reportedly deposited
the monthly rentals before a Makati court for consignation.

1621
As aptly raised by the plaintiffs, a possible impasse may insist should the Makati Court’s
ruling be contrary to or in conflict with the status quo order issued by this Court. To
preclude this spectacle, Zuellig Pharma should accordingly be advised with the import
of the Order dated September 14, 2004, the salient portion of which is quoted:

x x x prior to the institution of the instant case and by agreement of the parties, plaintiffs
were given as they did exercise the right to collect, receive and enjoy rental payments x
x x.

Since the April 1, 2004 status quo order was a necessary implement of the writ of
preliminary injunction issued on June 30, 2003, it follows that plaintiff's right to collect
and receive rental payments which he enjoyed prior to the filing of this case, must be
respected and protected and maintained until the case is resolved. As such, all rentals
due from the above-enumerated lessees must be remitted to and collectedby the
Plaintiffs.

Status quo simply means the last actual peaceable uncontested status that preceded
the actual controversy. (Searth Commodities Corp. v. Court ofAppeals, 207 SCRA 622).

As such, the [Philippine Bank of Communications] [is] hereby directed to forthwith

inform [Zuellig Pharma] of the April 1, 2004 status quo order and the succeeding
September 14, 2004 Order, and consequently, for the said lessee to remit all rentals
due from February 23, 2003 and onwards to [Lui Enterprises] in the meanwhile that the
status quo order is subsisting.

In its manifestation and motion to dismiss, Lui Enterprises reiterated its prayer for the
dismissal of the interpleader case to prevent "the possibility of [the Regional Trial Court,
Branch 143, Makati City] and [the Regional Trial Court, Branch 16, Davao City]
rendering conflicting rulings [on the same issue of which corporation has the better right
to the rental payments]."48

Without resolving the motion to set aside order of default, the Makati trial court denied
the manifestation with motion to dismiss dated April 21, 2005 on the ground that Lui
Enterprises already lost its standing in court. 49

Lui Enterprises did not file any motion for reconsideration of the denial of the
manifestation and motion to dismiss dated April 21, 2005.

In its decision50 dated July 4, 2006, the Regional Trial Court of Makati ruled that Lui
Enterprises "[was] barred from any claim in respect of the [rental payments]" 51 since it
was declared in default. Thus, according to the trial court, there was no issue as to
which corporation had the better right over the rental payments. 52 The trial court
awarded the total consigned amount of P6,681,327.30 to the Philippine Bank of
Communications and ordered Lui Enterprises to pay Zuellig Pharma P50,000.00 in
attorney’s fees.53

1622
Lui Enterprises appealed to the Court of Appeals. 54

The Court of Appeals found Lui Enterprises’ appellant’s brief insufficient. Under Rule 44,
Section 13 of the 1997 Rules of Civil Procedure, an appellant’s brief must contain a
subject index, page references to the record, table of cases, textbooks and statutes
cited, and the statement of issues, among others. However, Lui Enterprises’ appellant’s
brief did not contain these requirements. 55

As to the denial of Lui Enterprises’ motion to dismiss, the Court of Appeals sustained
the trial court. The Court of Appeals found that Lui Enterprises filed its motion to dismiss
four days late.56

With respect to Lui Enterprises’ motion to set aside order of default, the Court ofAppeals
found that Lui Enterprises failed to show the excusable negligence that prevented it
from filing its motion to dismiss on time. On its allegedly meritorious defense, the Court
of Appeals ruled that the nullification of deed of dation in payment case did not bar the
filing of the interpleader case, with Zuellig Pharma not being a party to the nullification
case.57

On the award of attorney’s fees, the Court of Appeals sustained the trial court since
"Zuellig Pharma x x x was constrained to file the action for interpleader with
consignation inorder to protect its interests x x x." 58

Thus, in its decision59 promulgated on May 24, 2010, the Court of Appeals dismissed
Lui Enterprises’appeal and affirmed in toto the Regional Trial Court of Makati’s decision.

Lui Enterprises filed a motion for reconsideration. 60

The Court of Appeals denied Lui Enterprises’ motion for reconsideration in its resolution
promulgated on August 13, 2010.61 Hence, this petition.

In this petition for review on certiorari, 62 Lui Enterprises argued that the Court of Appeals
applied "the rules of procedure strictly" 63 and dismissed its appeal on technicalities.
According to Lui Enterprises, the Court of Appeals should have taken a liberal stance
and allowed its appeal despite the lack of subject index, page references to the record,
table of cases, textbooks and statutes cited, and the statement of issues in its
appellant’s brief.64

Lui Enterprises also claimed that the trial court should have set aside the order of
default since its failure to file a motion to dismiss on time was due to excusable
negligence.65

For its allegedly meritorious defense, Lui Enterprises argued that the pending
nullification of deed of dation in payment case barred the filing of the interpleader
case.The nullification of deed of dation in payment case and the interpleader case
allegedly involved the same issue of which corporation had the better right to the rent.

1623
To avoid conflicting rulings on the same issue, Lui Enterprises argued that the
subsequently filed interpleader case be dismissed. 66

No attorney’s fees should have been awarded to Zuellig Pharma as argued by Lui
Enterprises. Zuellig Pharma filed the interpleader case despite its knowledge of the
nullification of deed of dation in payment case filed in the Davao trial court where the
same issue of which corporation had the better right over the rental payments was
being litigated. Thus, Zuellig Pharma filed the interpleader case in bad faith for which it
was not entitled to attorney’s fees.67

The Philippine Bank of Communications filed its comment 68 on the petition for review on
certiorari. It argued that Lui Enterprises failed to raise any error of law and prayed that
we affirm in toto the Court of Appeals’ decision.

For Zuellig Pharma, it manifested that it was adopting the Philippine Bank of
Communications’arguments in its comment.69

The issues for our resolution are:

I. Whether the Court of Appeals erred in dismissing Lui Enterprises’ appeal for
lack of subject index, page references to the record, table of cases, textbooks
and statutes cited, and the statement of issues in Lui Enterprises’appellant’s
brief;

II. Whether the Regional Trial Court of Makati erred in denying Lui
Enterprises’motion to set aside order of default;

III. Whether the annulment of deed of dation in payment pending in the Regional
Trial Court of Davao barred the subsequent filing of the interpleader case in the
Regional Trial Court of Makati; and

IV. Whether Zuellig Pharma was entitled to attorney’s fees.

Lui Enterprises’ petition for review on certiorari is without merit. However, we delete the
award of attorney’s fees.

Lui Enterprises did not comply with the rules on the contents of the appellant’s
brief

Under Rule 50, Section 1, paragraph (f) of the 1997 Rules of Civil Procedure, the Court
of Appeals may, on its own motion or that of the appellee, dismiss an appeal should the
appellant’s brief lack specific requirements under Rule 44, Section 13, paragraphs (a),
(c), (d), and (f):

1624
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:

xxxx

(f) Absence of specific assignment of errors in the appellant’s brief, or of page

references to the record as required in Section 13, paragraphs (a), (c), (d), and (f) of
Rule 44.

These requirements are the subject index of the matter in brief, page references to the
record, and a table of cases alphabetically arranged and with textbooks and statutes
cited:

Section 13. Contents of the appellant’s brief. – The appellant’s brief shall contain, in the
order herein indicated, the following:

(a) A subject index of the matter in brief with a digest of the arguments and page
references, and a table of cases alphabetically arranged, textbooks and statutes cited
with references to the pages where they are cited;

xxxx

(c) Under the heading "Statement of the Case," a clear and concise statement of the
nature of the action, a summary of the proceedings, the appealed rulings and orders of
the court, the nature of the controversy, with page references to the record;

(d) Under the heading "Statement of Facts," a clear and concise statement in a
narrative form of the facts admitted by both parties and of those in controversy, together
with the substance of the proof relating thereto in sufficient detail to make it clearly
intelligible, with page references to the record;

xxxx

(f) Under the heading "Argument," the appellant’s arguments on each assignment of
error with page references to the record. The authorities relied upon shall be cited by
the page of the report at which the case begins and the page of the report on which the
citation isfound;

xxxx

Lui Enterprises’ appellant’s brief lacked a subject index, page references to the record,
and table of cases, textbooks and statutes cited. Under Rule 50, Section 1 of the 1997
Rules of Civil Procedure, the Court of Appeals correctly dismissed Lui Enterprises’
appeal.

1625
Except for cases provided in the Constitution,70 appeal is a "purely statutory right."71 The
right to appeal "must be exercised in the manner prescribed by law" 72 and requires strict
compliance with the Rules of Court on appeals. 73 Otherwise, the appeal shall be
dismissed, and its dismissal shall not be a deprivation of due process of law.

In Mendoza v. United Coconut Planters Bank, Inc., 74 this court sustained the Court of
Appeals’ dismissal of Mendoza’s appeal. Mendoza’s appellant’s brief lacked a subject
index, assignment of errors, and page references to the record. In De Liano v. Court of
Appeals,75 this court also sustained the dismissal of De Liano’s appeal. De Liano’s
appellant’s brief lacked a subject index, a table of cases and authorities, and page
references to the record.

There are exceptions to this rule. In Philippine Coconut Authority v. Corona

International, Inc.,76 the Philippine Coconut Authority’s appellant’s brief lacked a clear
and concise statement of the nature of the action, a summary of the proceedings, the
nature of the judgment, and page references to the record. However, this court found
that the Philippine Coconut Authority substantially complied with the Rules. Its
appellant’s brief "apprise[d] [the Court of Appeals] of the essential facts and nature of
the case as well as the issues raised and the laws necessary [to dispose of the
case]."77 This court "[deviated] from a rigid enforcement of the rules" 78 and ordered the
Court of Appeals to resolve the Philippine Coconut Authority’s appeal.

In Go v. Chaves,79 Go’s 17-page appellant’s brief lacked a subject index. However, Go

subsequently filed a subject index. This court excused Go’s procedural lapse since the
appellant’s brief "[consisted] only of 17 pages which [the Court of Appeals] may easily
peruse to apprise it of [the case] and of the relief sought." 80 This court ordered the Court
of Appeals to resolve Go’s appeal "in the interest of justice." 81

In Philippine Coconut Authority and Go, the appellants substantially complied with the
rules on the contents of the appellant’s brief. Thus, this court excused the
appellants’procedural lapses.

In this case, Lui Enterprises did not substantially comply with the rules on the contents
of the appellant’s brief. It admitted that its appellant’s brief lacked the required subject
index, page references to the record, and table of cases, textbooks, and statutes cited.
However, it did not even correct its admitted "technical omissions" 82 by filing an
amended appellant’s brief with the required contents. 83 Thus, this case does not allow a
relaxation of the rules. The Court of Appeals did not err in dismissing Lui Enterprises’
appeal.

Rules on appeal "are designed for the proper and prompt disposition of cases before
the Court ofAppeals."84 With respect to the appellant’s brief, its required contents are
designed "to minimize the [Court ofAppeals’] labor in [examining]the record uponwhich
the appeal is heard and determined." 85

1626
The subject index serves as the brief’s table of contents. 86 Instead of "[thumbing]
through the [appellant’s brief]"87 every time the Court of Appeals Justice encounters an
argument or citation, the Justice deciding the case only has to refer to the subject index
for the argument or citation he or she needs.88 This saves the Court ofAppeals time in
reviewing the appealed case. Efficiency allows the justices of the appellate court to
substantially attend to this case as well as other cases.

Page references to the record guarantee that the facts stated in the appellant’s brief are
supported by the record.89 Astatement of fact without a page reference to the record
creates the presumption that it is unsupported by the record and, thus, "may be stricken
or disregarded altogether."90

As for the table of cases, textbooks, and statutes cited, this is required so that the Court
of Appeals can easily verify the authorities cited "for accuracy and aptness." 91

Lui Enterprises’ appellant’s brief lacked a subject index, page references to the record,
and a table of cases, textbooks, and statutes cited. These requirements "were designed
to assist the appellate court in the accomplishment of its tasks, and, overall, to enhance
the orderly administration of justice."92 This court will not disregard rules on appeal "in
the guise of liberal construction."93 For this court to liberally construe the Rules, the
party must substantially comply with the Rules and correct its procedural lapses. 94 Lui
Enterprises failed to remedy these errors.

All told, the Court of Appeals did not err in dismissing Lui Enterprises’ appeal. It failed to
comply with Rule 44, Section 13, paragraphs (a), (c), (d), and (f) of the 1997 Rules of
Civil Procedure on the required contents of the appellant’s brief.

II

Lui Enterprises failed to show that its failure to answer the complaint within the
required period was due to excusable negligence

When a defendant is served with summons and a copy of the complaint, he or she is
required to answer within 15 days from the day he or she was served with
summons.95 The defendant may also move to dismiss the complaint "[w]ithin the time for
but before filing the answer."96

Fifteen days is sufficient time for a defendant to answer with good defenses against the
plaintiff’s allegations in the complaint. Thus, a defendant who fails to answer within 15
days from service of summons either presents no defenses against the plaintiff’s
allegations in the complaint or was prevented from filing his or her answer within the
required period due to fraud, accident, mistake or excusable negligence. 97

In either case, the court may declare the defendant in default on plaintiff’s motion and
notice to defendant.98 The court shall then try the case until judgment without

1627
defendant’s participation99 and grant the plaintiff such relief as his or her complaint may
warrant.100

A defendant declared in default loses his or her standing in court. 101 He or she is
"deprived of the right to take part in the trial and forfeits his [or her] rights as a party
litigant,"102 has no right "to present evidence [supporting his or her] allegations," 103 and
has no right to "control the proceedings [or] cross-examine witnesses." 104 Moreover, he
or she "has no right to expect that [the court] would [act] upon [his or her
pleadings]"105 or that he or she "may [oppose]motions filed against him [or her]." 106

However, the defendant declared in default "does not [waive] all of [his or her]
rights."107 He or she still has the right to "receive notice of subsequent
proceedings."108 Also, the plaintiff must still present evidence supporting his or her
allegations "despite the default of [the defendant]." 109

Default, therefore, is not meant to punish the defendant but to enforce the prompt filing
of the answer to the complaint. For a defendant without good defenses, default saves
him or her "the embarrassment of openly appearing to defend the indefensible." 110 As
this court explained in Gochangco v. The Court of First Instance of Negros Occidental,
Branch

IV:111

It does make sense for a defendant without defenses, and who accepts the correctness
of the specific relief prayed for in the complaint, to forego the filing of the answer or any
sort of intervention in the action at all. For even if he did intervene, the result would be
the same: since he would be unable to establish any good defense, having none in fact,
judgment would inevitably go against him. And this would be an acceptable result, if not
being in his power to alter or prevent it, provided that the judgment did not go beyond or
differ from the specific relief stated in the complaint. x x x. 112 (Emphasis in the original)

On the other hand, for a defendant with good defenses, "it would be unnatural for him
[or her] not to set x x x up [his or her defenses] properly and timely." 113 Thus, "it must be
presumed that some insuperable cause prevented him [or her] from [answering the
complaint]."114 In which case, his or her proper remedy depends on when he or she
discovered the default and whether the default judgment was already rendered by the
trial court.

After notice of the declaration of default but before the court renders the default
judgment, the defendant may file, under oath, a motion to set aside order of default. The
defendant must properly show that his or her failure to answer was due to fraud,
accident,115 mistake116 or excusable negligence.117 The defendant must also have a
meritorious defense. Rule 9, Section 3, paragraph (b) of the1997 Rules of Civil
Procedure provides:

Section 3. Default; declaration of. – x x x x

1628
(b) Relief from order of default. – A party declared in default may at any time after notice
thereof and before judgment file a motion under oath to set aside the order of default
upon proper showing that his failure to answer was due to fraud, accident, mistake or
excusable negligence and that he has a meritorious defense. In such case, the order of
default may be set aside on such terms and conditions as the judge may impose in the
interest of justice.

If the defendant discovers his or her default after judgment but prior to the judgment
becoming final and executory, he or she may file a motion for new trial under Rule 37,
Section 1, paragraph (a) of the 1997 Rules of Civil Procedure. 118 If he or she discovers
his or her default after the judgment has become final and executory, a petition for relief
from judgment under Rule 38, Section 1 of the 1997 Rules of Civil Procedure may be
filed.119

Appeal is also available to the defendant declared in default. He or she may appeal the
judgment for being contrary to the evidence or to the law under Rule 41, Section 2 of
the 1997 Rules of Civil Procedure.120 He or she may do so even if he or she did not file a
petition to set aside order of default.121

A petition for certiorari may also be filed if the trial court declared the defendant in
default with grave abuse of discretion.122

The remedies of the motion to set aside order of default, motion for new trial, and
petition for relief from judgment are mutually exclusive, not alternative or cumulative.
This is to compel defendants to remedy their default at the earliest possible opportunity.
Depending on when the default was discovered and whether a default judgment was
already rendered, a defendant declared in default may avail of onlyone of the three
remedies.

Thus, if a defendant discovers his or her default before the trial court renders judgment,
he or she shall file a motion to set aside order of default. If this motion to set aside order
of default is denied, the defendant declared in default cannot await the rendition of
judgment, and he or she cannot file a motion for new trial before the judgment becomes
final and executory, or a petition for relief from judgment after the judgment becomes
final and executory.

Also, the remedies against default become narrower and narrower as the trial nears
judgment. The defendant enjoys the most liberality from this court with a motion to set
aside order of default, as he or she has no default judgment to contend with, and he or
she has the whole period before judgment to remedy his or her default.

With a motion for new trial, the defendant must file the motion within the period for
taking an appeal123 or within 15 days from notice of the default judgment. Although a
default judgment has already been rendered, the filing of the motion for new trial tolls
the reglementary period of appeal, and the default judgment cannot be executed
against the defendant.

1629
A petition for relief from judgment is filed after the default judgment has become final
and executory. Thus, the filing of the petition for relief from judgment does not stay the
execution of the default judgment unless a writ of preliminary injunction is issued
pending the petition’s resolution. 124

Upon the grant of a motion to set aside order of default, motion for new trial, or a
petition for relief from judgment, the defendant is given the chance to present his or her
evidence against that of plaintiff’s. With an appeal, however, the defendant has no right
to present evidence on his or her behalf and can only appeal the judgment for being
contrary to plaintiff’s evidence or the law.

Similar to an appeal, a petition for certiorari does not allow the defendant to present
evidence on his or her behalf. The defendant can only argue that the trial court
committed grave abuse of discretion in declaring him or her in default.

Thus, should a defendant prefer to present evidence on his or her behalf, he or she
must file either a motion to set aside order of default, motion for new trial, or a petition
for relief from judgment.

In this case, Lui Enterprises had discovered its default before the Regional Trial Court of
Makati rendered judgment. Thus, it timely filed a motion to set aside order of default,
raising the ground of excusable negligence.

Excusable negligence is "one which ordinary diligence and prudence could not have
guarded against."125 The circumstances should be properly alleged and proved. In this
case, we find that Lui Enterprises’ failure to answer within the required period is
inexcusable.

Lui Enterprises’ counsel filed its motion to dismiss four days late. It did not immediately
take steps to remedy its default and took one year from discovery of default to file a
motion to set aside order of default. In its motion to set aside order of default, Lui
Enterprises only "conveniently blamed its x x x counsel [for the late filing of the
answer]"126 without offering any excuse for the late filing. This is not excusable
negligence under Rule 9, Section 3, paragraph (b) 127 of the 1997 Rules of Civil
Procedure. Thus, the Regional Trial Court of Makati did not err in refusing to set aside
the order of default.

Lui Enterprises argued that the Regional Trial Court of Makati should have been liberal
in setting aside its order of default. After it had been declared in default, Lui Enterprises
filed several manifestations informing the Makati trial court of the earlier filed nullification
of deed of dation in payment case which barred the filing of the interpleader case. Lui
Enterprises’ president, Eli L. Lui, and counsel even flew in from Davao to Makati to
"formally [manifest that] a [similar] action between [Lui Enterprises] and [the Philippine
Bank of Communications]"128 was already pending in the Regional Trial Court of Davao.
However, the trial court did not recognize Lui Enterprises’standing incourt.

1630
The general rule is that courts should proceed with deciding cases on the merits and set
aside orders of default as default judgments are "frowned upon." 129 As much as
possible, cases should be decided with both parties "given every chance to fight their
case fairly and in the open, without resort to technicality." 130

However, the basic requirements of Rule 9, Section 3, paragraph (b) of the 1997 Rules
of Civil Procedure must first be complied with.131 The defendant’s motion to set aside
order of default must satisfy three conditions. First is the time element. The defendant
must challenge the default order before judgment. Second, the defendant must have
been prevented from filing his answer due to fraud, accident, mistake or excusable
negligence. Third, he must have a meritorious defense. As this court held in SSS v.
Hon. Chaves:132

Procedural rules are not to be disregarded or dismissed simply because their non-
observance may have resulted in prejudice to a party’s substantive rights. Like all
rules[,] they are to be followed, except only when for the most persuasive of reasons
they may be relaxed to relieve a litigant of an injustice not commensurate with the
degree of his thoughtlessness in not complying with the procedure prescribed. x x x. 133

As discussed, Lui Enterprises never explained why its counsel failed to file the motion to
dismiss on time. It just argued that courts should be liberal in setting aside orders of
default. Even assuming that it had a meritorious defense and that its representative and
counsel had to fly in from Davao to Makati to personally appear and manifest in court its
meritorious defense, Lui Enterprises must first show that its failure to answer was due to
fraud, accident, mistake or excusable negligence. This Lui Enterprises did not do.

Lui Enterprises argued that Zuellig Pharma filed the interpleader case to compel Lui
Enterprises and the Philippine Bank of Communications to litigate their claims. Thus,
"[d]eclaring the other claimant in default would ironically defeat the very purpose of the
suit."134 The RegionalTrial Court of Makati should not have declared Lui Enterprises in
default.

Under Rule 62, Section 1 of the 1997 Rules of Civil Procedure, a person may file a
special civil action for interpleader if conflicting claims are made against him or her over
a subject matter in which he or she has no interest. The action is brought against the
claimants to compel them to litigate their conflicting claims among themselves. Rule 62,
Section 1 of the 1997 Rules of Civil Procedure provides:

Section 1. When interpleader proper. – Whenever conflicting claims upon the same
subject matter are or may be made against a person who claims no interest whatever in
the subject matter, or an interest which in whole or in part is not disputed bythe
claimants, he may bring an action against the conflicting claimants to compel them to
interplead and litigate their several claims among themselves.

An interpleader complaint may be filed by a lessee against those who have conflicting
claims over the rent due for the property leased. 135 This remedy is for the lessee to

1631
protect him or her from "double vexation in respect of one liability." 136 He or she may file
the interpleader case to extinguish his or her obligation to pay rent, remove him or her
from the adverse claimants’dispute, and compel the parties with conflicting claims to
litigate among themselves.

In this case, Zuellig Pharma filed the interpleader case to extinguish its obligation to pay
rent. Its purpose in filing the interpleader case "was not defeated" 137 when the Makati
trial court declared Lui Enterprises in default.

At any rate, an adverse claimant in an interpleader case may be declared in default.

Under Rule 62, Section 5 of the 1997 Rules of Civil Procedure, a claimant who fails to
answer within the required period may, on motion, be declared in default. The
consequence of the default is that the court may "render judgment barring [the defaulted
claimant] from any claim in respect to the subject matter." 138 The Rules would not have
allowed claimants in interpleader cases to be declared in default if it would "ironically
defeat the very purpose of the suit."139

The Regional Trial Court of Makati declared Lui Enterprises in default when it failed to
answer the complaint within the required period. Lui Enterprises filed a motion to set
aside order of default without an acceptable excuse why its counsel failed to answer the
complaint. It failed to prove the excusable negligence. Thus, the Makati trial court did
not err in refusing to set aside the order of default.

III

The nullification of deed in dation in payment case did not bar the filing of the
interpleader case. Litis pendentia is not present in this case.

Lui Enterprises allegedly filed for nullification of deed of dation in payment with the
Regional Trial Court of Davao. It sought to nullify the deed of dation in payment through
which the Philippine Bank of Communications acquired title over the leased property.
Lui Enterprises argued that this pending nullification case barred the Regional Trial
Court of Makati from hearing the interpleader case. Since the interpleader case was
filed subsequently to the nullification case, the interpleader case should be dismissed.

Under Rule 16, Section 1, paragraph (e) of the 1997 Rules of Civil Procedure, a motion
to dismiss may be filed on the ground of litis pendentia:

Section 1. Grounds. – Within the time for but before filing the answer to the complaint or
pleading asserting a claim, a motion to dismiss may be made on any of the following
grounds:

xxxx

(e)That there is another action pending between the same parties for the same cause;

1632
 xxxx

Litis pendentia is Latin for "a pending suit." 140 It exists when "another action is pending
between the same parties for the same cause of actionx x x." 141 The subsequent action
is "unnecessary and vexatious"142 and is instituted to "harass the respondent [in the
subsequent action]."143

The requisites of litis pendentia are:

(1)Identity of parties or at least such as represent the same interest in both

actions;

(2)Identity of rights asserted and reliefs prayed for, the reliefs being founded on
the same facts; and

(3)The identity in the two cases should be such that the judgment that may be
rendered in one would, regardless of which party is successful, amount to res
judicata in the other.144

All of the requisites must be present.145 Absent one requisite, there is no litis

pendentia.146

In this case, there is no litis pendentia since there is no identity of parties in the

nullification of deed of dation in payment case and the interpleader case. Zuellig
Pharma is not a party to the nullification case filed in the Davao trial court.

There is also no identity of rights asserted and reliefs prayed for. Lui Enterprises filed
the first case to nullify the deed of dation in payment it executed in favor of the
Philippine Bank of Communications. Zuellig Pharma subsequently filed the interpleader
case to consign in court the rental payments and extinguish its obligation as lessee. The
interpleader case was necessary and was not instituted to harass either Lui Enterprises
or the Philippine Bank of Communications.

Thus, the pending nullification case did not bar the filing of the interpleader case.

Lui Enterprises cited Progressive Development Corporation, Inc. v. Court of

Appeals147 as authority to set aside the subsequently filed interpleader case. In this cited
case, petitioner Progressive Development Corporation, Inc. entered into a lease
contract with Westin Seafood Market, Inc. The latter failed to pay rent. Thus,
Progressive Development Corporation, Inc. repossessed the leased premises,
inventoried the movable properties inside the leased premises, and scheduled the
public sale of the inventoried properties as they agreed upon in their lease contract.

Westin Seafood Market, Inc. filed for forcible entry with damages against Progressive
Development Corporation, Inc. It subsequently filed an action for damages against

1633
Progressive Development Corporation for its "forcible takeover of the leased
premises."148

This court ordered the subsequently filed action for damages dismissed as the pending
forcible entry with damages case barred the subsequently filed damages case.

Progressive Development Corporation, Inc. does not apply in this case. The action for
forcible entry with damages and the subsequent action for damages were filed by the
same plaintiff against the same defendant. There is identity of parties in both cases.

In this case, the nullification of deed of dation in payment case was filed by Lui
Enterprises against the Philippine Bank of Communications. The interpleader case was
filed by Zuellig Pharma against Lui Enterprises and the Philippine Bank of
Communications. A different plaintiff filed the interpleader case against Lui Enterprises
and the Philippine Bank of Communications. Thus, there is no identity of parties, and
the first requisite of litis pendentia is absent.

As discussed, Lui Enterprises filed the nullification of deed of dation in payment to

recover ownership of the leased premises. Zuellig Pharma filed the interpleader case to
extinguish its obligation to pay rent.There is no identity of reliefs prayed for, and the
second requisite of litis pendentia is absent.

Since two requisites of litis pendentia are absent, the nullification of deed of dation in
payment case did not bar the filing of the interpleader case.

Lui Enterprises alleged that the Regional Trial Court of Davao issued a writ of
preliminary injunction against the Regional Trial Court of Makati. The Regional Trial
Court of Davao allegedly enjoined the Regional Trial Court of Makati from taking
cognizance of the interpleader case. Lui Enterprises argued that the Regional Trial
Court of Makati "should have respected the orders issued by the Regional Trial Court of
Davao."149 Lui Enterprises cited Compania General de Tabacos de Filipinas v. Court of
Appeals150 where this court allegedly held:

x x x [T]he issuance of the said writ by the RTC ofAgoo, La Union not only seeks to
enjoin Branch 9 of the RTC of Manila from proceeding with the foreclosure case but
also has the effect of pre-empting the latter’s orders. x x x. 151

Compania General de Tabacos de Filipinas is not an authority for the claim that a court
can issue a writ of preliminary injunction against a co- equal court.1âwphi1 The cited
sentence was taken out of context. In Compania General de Tabacos de Filipinas, this
court held that the Regional Trial Court ofAgoo had no power to issue a writ of
preliminary injunction against the Regional Trial Court of Manila. 152 Acourt cannot enjoin
the proceedings of a co-equal court.

Thus, when this court said that the Regional Trial Court of Agoo’s writ of preliminary
injunction "not only seeks to enjoin x x x [the Regional Trial Court of Manila] from

1634
proceeding with the foreclosure case but also has the effect of pre-empting the latter’s
orders,"153 this court followed with "[t]his we cannot countenance." 154

At any rate, the Regional Trial Court of Davao’s order datedApril 18, 2005 was not a writ
of preliminary injunction. It was a mere order directing the Philippine Bank of
Communications to inform Zuellig Pharma to pay rent to Lui Enterprises while the status
quo order between Lui Enterprises and the Philippine Bank of Communications was
subsisting. The Regional Trial Court of Davao did not enjoin the proceedings before the
Regional Trial Court of Makati.The order datedApril 18, 2005 provides:

As such, [the Philippine Bank of Communications] [is] hereby directed to forthwith

inform Zuellig Pharma Corp., of the April 1, 2004 status quo order and the succeeding
September 14, 2004 Order, and consequently, for the said lessee to remit all rentals
due from February 23, 2003 and onwards to plaintiff Lui Enterprises, Inc., in the
meanwhile that the status quo order is subsisting. 155

Thus, the Regional Trial Court of Davao did not enjoin the Regional Trial Court of
Makati fromhearing the interpleader case.

All told, the trial court did not err in proceeding with the interpleader case. The
nullification of deed of dation in payment case pending with the Regional Trial Court of
Davao did not bar the filing of the interpleader case with the RegionalTrial Court of
Makati.

IV

The Court of Appeals erred in awarding attorney’s fees

In its ordinary sense, attorney’s fees "represent the reasonable compensation [a client
pays his or her lawyer] [for legal service rendered]." 156 In its extraordinary sense,
attorney’s fees "[are] awarded x x x as indemnity for damages [the losing party pays the
prevailingparty]."157

The award of attorney’s fees is the exception rather than the rule. 158 It is not awarded to
the prevailing party "as a matter of course." 159 Under Article 2208 of the Civil Code,
attorney’s fees cannot be recovered in the absence of stipulation, except under specific
circumstances:

(1)When exemplary damages are awarded;

(2)When the defendant’s act or omission has compelled the plaintiff to litigate
with third persons or to incur expenses to protect his interest;

(3)In criminal cases of malicious prosecution against the plaintiff;

(4)In case of a clearly unfounded civil action or proceeding against the plaintiff;

1635
 (5)Where the defendant acted in gross and evident bad faith in refusing to satisfy
the plaintiff’s plainly valid, just and demandable claim;

(6)In actions for legal support;

(7)In actions for the recovery of wages of household helpers, laborers and skilled
workers;

(8)In actions for indemnity under workmen’s compensation and employer’s

liability laws;

(9)In a separate civil action to recover civil liability arising froma crime;

(10)When at least double judicial costs are awarded;

(11)In any other case where the court deems it just and equitable that attorney's
fees and expenses of litigation should be recovered. 160

Even if a party is "compelled to litigate with third persons or to incur expenses to protect
his [or her] rights,"161 attorney's fees will not be awarded if no bad faith "could be
reflected in a party's persistence in a case." 162

To award attorney's fees, the court must have "factual, legal, [and] equitable
justification."163 The court must state the award's basis in its decision. 164These rules are
based on the policy that "no premium should be placed.on the right to litigate." 165

In this case, the Court of Appeals awarded attorney's fees as "[Zuellig Pharma] was
compelled to litigate with third persons or to incur expenses to protect [its]
interest[s]."166 This is not a compelling reason to award attorney's fees. That Zuellig
Pharma had to file an interpleader case to consign its rental payments did not mean that
Lui Enterprises was in bad faith in insisting that rental payments be paid to it. Thus, the
Court. of Appeals erred in awarding attorney's fees to Zuellig Pharma.

All told, the Court of Appeals' award of P50,000.00 as attorney's fees must be deleted.

WHEREFORE, in view of the foregoing, the petition for review on certiorari is DENIED.
The Court of Appeals' decision and resolution in CA- G.R. CV No. 88023 are
AFFIRMED with MODIFICATION. The award of PS0,000.00 attorney's fees to Zuellig
Pharma Corporation is DELETED.

SO ORDERED.

SECOND DIVISION

G.R. Nos. 154470-71 : September 24, 2012

1636
 BANK OF COMMERCE, Petitioner, v. PLANTERS DEVELOPMENT BANK and
BANGKO SENTRAL NG PILIPINAS, Respondent.

G.R. Nos. 154589-90

BANGKO SENTRAL NG PILIPINAS, Petitioner, v. PLANTERS DEVELOPMENT

BANK, Respondent.

DECISION

BRION, J.:

Before the Court are two consolidated petitions for review on certiorari under Rule
45,1Ï‚rνll on pure questions of law, filed by the petitioners Bank of Commerce (BOC)
and the Bangko Sentral ng Pilipinas (BSP). They assail the January 10, 2002 and July
23, 2002 Orders (assailed orders) of the Regional Trial Court (RTC) of Makati City,
Branch 143, in Civil Case Nos. 94-3233 and 94-3254. These orders dismissed (i) the
petition filed by the Planters Development Bank (PDB), (ii) the "counterclaim" filed by
the BOC, and (iii) the counter-complaint/cross-claim for interpleader filed bythe BSP;
and denied the BOCs and the BSPs motions for reconsideration.

THE ANTECEDENTS

The Central Bank bills

I. First set of CB bills

The Rizal Commercial Banking Corporation (RCBC) was the registered owner of seven
Central Bank (CB) bills with a total face value of P 70 million, issued on January 2, 1994
and would mature on January 2, 1995. 2Ï‚rνll As evidenced by a "Detached
Assignment" dated April 8, 1994,3Ï‚rνll the RCBC sold these CB bills to the
BOC.4Ï‚rνll As evidenced by another "Detached Assignment" 5Ï‚rνll of even date, the
BOC, in turn, sold these CB bills to the PDB.6Ï‚rνll The BOC delivered the Detached
Assignments to the PDB.7ςrνll

On April 15, 1994 (April 15 transaction), the PDB, in turn, sold to the BOC Treasury Bills
worth P 70 million, with maturity date of June 29, 1994, as evidenced by a Trading
Order8Ï‚rνll and a Confirmation of Sale.9Ï‚rνll However, instead of delivering the
Treasury Bills, the PDB delivered the seven CB bills to the BOC, as evidenced by a
PDB Security Delivery Receipt, bearing a "note: ** substitution in lieu of 06-29-94"
referring to the Treasury Bills.10Ï‚rνll Nevertheless, the PDB retained possession of the
Detached Assignments. It is basically the nature of this April 15 transaction that the
PDB and the BOC cannot agree on.

The transfer of the first set of seven CB bills

1637
i. CB bill nos. 45351-53

On April 20, 1994, according to the BOC, it "sold back" 11Ï‚rνll to the PDB three of the
seven CB bills. In turn, the PDB transferred these three CB bills to Bancapital
Development Corporation (Bancap). On April 25, 1994, the BOC bought the three CB
bills from Bancap so, ultimately, the BOC reacquired these three CB
bills,12Ï‚rνll particularly described as follows:

Serial No.: 2BB XM 045351

2BB XM 045352
2BB XM 045353

Quantity: Three (3)

Denomination: Php 10 million

Total Face Value: Php 30 million

ii. CB bill nos. 45347-50

On April 20, 1994, the BOC sold the remaining four (4) CB bills to Capital One Equities
Corporation13Ï‚rνll which transferred them to All-Asia Capital and Trust Corporation (All
Asia). On September 30, 1994, All Asia further transferred the four CB bills back to the
RCBC.14ςrνll

On November 16, 1994, the RCBC sold back to All Asia one of these 4 CB bills. When
the BSP refused to release the amount of this CB bill on maturity, the BOC purchased
from All Asia this lone CB bill,15Ï‚rνll particularly described as follows:16Ï‚rνll

Serial No.: 2BB XM 045348

Quantity: One (1)

Denomination: Php 10 million

Total Face Value: Php 10 million

As the registered owner of the remaining three CB bills, the RCBC sold them to IVI
Capital and Insular Savings Bank. Again, when the BSP refused to release the amount
of this CB bill on maturity, the RCBC paid back its transferees, reacquired these three
CB bills and sold them to the BOC ultimately, the BOC acquired these three CB bills.

All in all, the BOC acquired the first set of seven CB bills.

1638
II. Second set of CB bills

On April 19, 1994, the RCBC, as registered owner, (i) sold two CB bills with a total face
value of P 20 million to the PDB and (ii) delivered to the PDB the corresponding
Detached Assignment.17Ï‚rνll The two CB bills were particularly described as follows:

Serial No.: BB XM 045373

BB XM 045374

Issue date: January 3, 1994

Maturity date: January 2, 1995

Denomination: Php 10 million

Total Face value: Php 20 million

On even date, the PDB delivered to Bancap the two CB bills 18Ï‚rνll (April 19
transaction). In turn, Bancap sold the CB bills to Al-Amanah Islamic Investment Bank of
the Philippines, which in turn sold it to the BOC.19ςrνll

PDBs move against the transfer of

the first and second sets of CB bills

On June 30, 1994, upon learning of the transfers involving the CB bills, the PDB
informed20Ï‚rνll the Officer-in-Charge of the BSPs Government Securities
Department,21Ï‚rνll Lagrimas Nuqui, of the PDBs claim over these CB bills, based on
the Detached Assignments in its possession. The PDB requested the BSP 22Ï‚rνll to
record its claim in the BSPs books, explaining that its non-possession of the CB bills is
"on account of imperfect negotiations thereof and/or subsequent setoff or
transfer."23ςrνll

Nuqui denied the request, invoking Section 8 of CB Circular No. 28 (Regulations

Governing Open Market Operations, Stabilization of the Securities Market, Issue,
Servicing and Redemption of the Public Debt) 24Ï‚rνll which requires the presentation of
the bond before a registered bond may be transferred on the books of the BSP. 25ςrνll

In a July 25, 1994 letter, the PDB clarified to Nuqui that it was not "asking for the
transfer of the CB Bills. rather it intends to put the BSP on formal notice that whoever is
in possession of said bills is not a holder in due course," and, therefore the BSP should
not make payment upon the presentation of the CB bills on maturity. 26Ï‚rνll Nuqui
responded that the BSP was "not in a position at that point in time to determine who is
and who is not the holder in due course since it is not privy to all acts and time involving
the transfers or negotiation" of the CB bills. Nuqui added that the BSPs action shall be
governed by CB Circular No. 28, as amended.27ςrνll

1639
On November 17, 1994, the PDB also asked BSP Deputy Governor Edgardo Zialcita
that (i) a notation in the BSPs books be made against the transfer, exchange, or
payment of the bonds and the payment of interest thereon; and (ii) the presenter of the
bonds upon maturity be required to submit proof as a holder in due course (of the first
set of CB bills). The PDB relied on Section 10 (d) 4 of CB Circular No. 28. 28Ï‚rνll This
provision reads:chanroblesvirtuallawlibrary

(4) Assignments effected by fraud Where the assignment of a registered bond is

secured by fraudulent representations, the Central Bank can grant no relief if the
assignment has been honored without notice of fraud. Otherwise, the Central Bank,
upon receipt of notice that the assignment is claimed to have been secured by
fraudulent representations, or payment of the bond the payment of interest thereon, and
when the bond is presented, will call upon the owner and the person presenting the
bond to substantiate their respective claims.If it then appears that the person presenting
the bond stands in the position of bonafide holder for value, the Central Bank, after
giving the owner an opportunity to assert his claim, will pass the bond for transfer,
exchange or payments, as the case may be, without further question.

In a December 29, 1994 letter, Nuqui again denied the request, reiterating the BSPs
previous stand.

In light of these BSP responses and the impending maturity of the CB bills, the PDB
filed29Ï‚rνll with the RTC two separate petitions for Mandamus, Prohibition and
Injunction with prayer for Preliminary Injunction and Temporary Restraining Order,
docketed as Civil Case No. 94-3233 (covering the first set of CB bills) and Civil Case
94-3254 (covering the second set of CB bills) against Nuqui, the BSP and the
RCBC.30ςrνll

The PDB essentially claims that in both the April 15 transaction (involving the first set of
CB bills) and the April 19 transaction (involving the second set of CB bills), there was no
intent on its part to transfer title of the CB bills, as shown by its non-issuance of a
detached assignment in favor of the BOC and Bancap, respectively. The PDB
particularly alleges that it merely "warehoused" 31Ï‚rνll the first set of CB bills with the
BOC, as security collateral.

On December 28, 1994, the RTC temporarily enjoined Nuqui and the BSP from paying
the face value of the CB bills on maturity. 32Ï‚rνll On January 10, 1995, the PDB filed an
Amended Petition, additionally impleading the BOC and All Asia. 33Ï‚rνll In a January
13, 1995 Order, the cases were consolidated.34Ï‚rνll On January 17, 1995, the RTC
granted the PDBs application for a writ of preliminary prohibitory injunction. 35Ï‚rνll In
both petitions, the PDB identically prayed:chanroblesvirtuallawlibrary

WHEREFORE, it is respectfully prayed x x x that, after due notice and hearing, the
Writs of Mandamus, Prohibition and Injunction, be issued; (i) commanding the BSP and
Nuqui, or whoever may take her place -

1640
(a) to record forthwith in the books of BSP the claim of x x x PDB on the [two sets of] CB
Bills in accordance with Section 10 (d) (4) of revised C.B. Circular No. 28; and

(b) also pursuant thereto, when the bills are presented on maturity date for payment, to
call (i) x x x PDB, (ii) x x x RCBC x x x, (iii) x x x BOC x x x, and (iv) x x x ALL-ASIA x x
x; or whoever will present the [first and second sets of] CB Bills for payment, to submit
proof as to who stands as the holder in due course of said bills, and, thereafter, act
accordingly;

and (ii) ordering the BSP and Nuqui to pay jointly and severally to x x x PDB the
following:

(a) the sum of P 100,000.00, as and for exemplary damages;

(b) the sum of at least P 500,000.00, or such amount as shall be proved at the trial, as
and for attorneys fees;

(c) the legal rate of interest from the filing of this Petition until full payment of the sums
mentioned in this Petition; and

(d) the costs of suit.36ςrνll

After the petitions were filed, the BOC acquired/reacquired all the nine CB bills the first
and second sets of CB bills (collectively, subject CB bills).

Defenses of the BSP and of the BOC37ςrνll

The BOC filed its Answer, praying for the dismissal of the petition. It argued that the
PDB has no cause of action against it since the PDB is no longer the owner of the CB
bills. Contrary to the PDBs "warehousing theory," 38Ï‚rνll the BOC asserted that the (i)
April 15 transaction and the (ii) April 19 transaction covering both sets of CB bills - were
valid contracts of sale, followed by a transfer of title (i) to the BOC (in the April 15
transaction) upon the PDBs delivery of the 1st set of CB bills in substitution of the
Treasury Bills the PDB originally intended to sell, and (ii) to Bancap (in the April 19
transaction) upon the PDBs delivery of the 2nd set of CB bills to Bancap, likewise by
way of substitution.

The BOC adds that Section 10 (d) 4 of CB Circular No. 28 cannot apply to the PDBs
case because (i) the PDB is not in possession of the CB bills and (ii) the BOC acquired
these bills from the PDB, as to the 1st set of CB bills, and from Bancap, as to the 2nd
set of CB bills, in good faith and for value. The BOC also asserted a compulsory
counterclaim for damages and attorneys fees.

On the other hand, the BSP countered that the PDB cannot invoke Section 10 (d) 4 of
CB Circular No. 28 because this section applies only to an "owner" and a "person
presenting the bond," of which the PDB is neither. The PDB has not presented to the

1641
BSP any assignment of the subject CB bills, duly recorded in the BSPs books, in its
favor to clothe it with the status of an "owner." 39Ï‚rνll According to the BSP

Section 10 d. (4) applies only to a registered bond which is assigned. And the issuance
of CB Bills x x x are required to be recorded/registered in BSPs books. In this regard,
Section 4 a. (1) of CB Circular 28 provides that registered bonds "may be transferred
only by an assignment thereon duly executed by the registered owner or his duly
authorized representative x x x and duly recorded on the books of the Central Bank."

xxxx

The alleged assignment of subject CB Bills in PDBs favor is not recorded/registered in

BSPs books.40Ï‚rνll (underscoring supplied)

Consequently, when Nuqui and the BSP refused the PDBs request (to record its claim),
they were merely performing their duties in accordance with CB Circular No. 28.

Alternatively, the BSP asked that an interpleader suit be allowed between and among
the claimants to the subject CB bills on the position that while it is able and willing to pay
the subject CB bills face value, it is duty bound to ensure that payment is made to the
rightful owner. The BSP prayed that judgment be rendered:

a. Ordering the dismissal of the PDBs petition for lack of merit;

b. Determining which between/among [PDB] and the other claimants is/are lawfully
entitled to the ownership of the subject CB bills and the proceeds thereof;

c. x x x;

d. Ordering PDB to pay BSP and Nuqui such actual/compensatory and exemplary
damages as the RTC may deem warranted; and

e. Ordering PDB to pay Nuqui moral damages and to pay the costs of the suit. 41ςrνll

Subsequent events

The PDB agreed with the BSPs alternative response for an interpleader

4. PDB agrees that the various claimants should now interplead and substantiate their
respective claims on the subject CB bills. However, the total face value of the subject
CB bills should be deposited in escrow with a private bank to be disposed of only upon
order of the RTC.42ςrνll

Accordingly, on June 9, 199543Ï‚rνll and August 4, 1995,44Ï‚rνll the BOC and the PDB

entered into two separate Escrow Agreements.45Ï‚rνll The first agreement covered the
first set of CB bills, while the second agreement covered the second set of CB bills. The

1642
parties agreed to jointly collect from the BSP the maturity proceeds of these CB bills
and to deposit said amount in escrow, "pending final determination by Court judgment,
or amicable settlement as to who shall be eventually entitled thereto." 46Ï‚rνll The BOC
and the PDB filed a Joint Motion,47Ï‚rνll submitting these Escrow Agreements for court
approval. The RTC gave its approval to the parties Joint Motion. 48Ï‚rνll Accordingly, the
BSP released the maturity proceeds of the CB bills by crediting the Demand Deposit
Account of the PDB and of the BOC with 50% each of the maturity proceeds of the
amount in escrow.49ςrνll

In view of the BOCs acquisition of all the CB bills, All Asia 50Ï‚rνll moved to be dropped
as a respondent (with the PDBs conformity51Ï‚rνll ), which the RTC granted.52Ï‚rνll The
RCBC subsequently followed suit.53ςrνll

In light of the developments, on May 4, 1998, the RTC required the parties to manifest
their intention regarding the case and to inform the court of any amicable settlement;
"otherwise, th[e] case shall be dismissed for lack of interest." 54Ï‚rνll Complying with the
RTCs order, the BOC moved (i) that the case be set for pre-trial and (ii) for further
proceeding to resolve the remaining issues between the BOC and the PDB, particularly
on "who has a better right over the subject CB bills." 55Ï‚rνll The PDB joined the BOC in
its motion.56ςrνll

On September 28, 2000, the RTC granted the BSPs motion to interplead and,
accordingly, required the BOC to amend its Answer and for the conflicting claimants to
comment thereon.57Ï‚rνll In October 2000, the BOC filed its Amended Consolidated
Answer with Compulsory Counterclaim, reiterating its earlier arguments asserting
ownership over the subject CB bills.58ςrνll

In the alternative, the BOC added that even assuming that there was no effective
transfer of the nine CB bills ultimately to the BOC, the PDB remains obligated to deliver
to the BOC, as buyer in the April 15 transaction and ultimate successor-in-interest of the
buyer (Bancap) in the April 19 transaction, either the original subjects of the sales or the
value thereof, plus whatever income that may have been earned during the pendency of
the case.59ςrνll

That BOC prayed:

1. To declare BOC as the rightful owner of the nine (9) CB bills and as the party entitled
to the proceeds thereof as well as all income earned pursuant to the two (2) Escrow
Agreements entered into by BOC and PDB.

2. In the alternative, ordering PDB to deliver the original subject of the sales
transactions or the value thereof and whatever income earned by way of interest at
prevailing rate.

1643
Without any opposition or objection from the PDB, on February 23, 2001, the RTC
admitted60Ï‚rνll the BOCs Amended Consolidated Answer with Compulsory
Counterclaims.

In May 2001, the PDB filed an Omnibus Motion, 61Ï‚rνll questioning the RTCs
jurisdiction over the BOCs "additional counterclaims." The PDB argues that its petitions
pray for the BSP (not the RTC) to determine who among the conflicting claimants to the
CB bills stands in the position of the bona fide holder for value. The RTC cannot
entertain the BOCs counterclaim, regardless of its nature, because it is the BSP which
has jurisdiction to determine who is entitled to receive the proceeds of the CB bills.

The BOC opposed62Ï‚rνll the PDBs Omnibus Motion. The PDB filed its Reply.63Ï‚rνll

In a January 10, 2002 Order, the RTC dismissed the PDBs petition, the BOCs
counterclaim and the BSPs counter-complaint/cross-claim for interpleader, holding that
under CB Circular No. 28, it has no jurisdiction (i) over the BOCs "counterclaims" and
(ii) to resolve the issue of ownership of the CB bills. 64Ï‚rνll With the denial of their
separate motions for Reconsideration,65Ï‚rνll the BOC and the BSP separately filed the
present petitions for review on certiorari.66ςrνll

THE BOCS and THE BSPS PETITIONS

The BOC argues that the present cases do not fall within the limited provision of Section
10 (d) 4 of CB Circular No. 28, which contemplates only of three situations: first, where
the fraudulent assignment is not coupled with a notice to the BSP, it can grant no relief;
second, where the fraudulent assignment is coupled with a notice of fraud to the BSP, it
will make a notation against the assignment and require the owner and the holder to
substantiate their claims; and third, where the case does not fall on either of the first two
situations, the BSP will have to await action on the assignment pending settlement of
the case, whether by agreement or by court order.

The PDBs case cannot fall under the first two situations. With particular regard to the
second situation, CB Circular No. 28 requires that the conflict must be between an
"owner" and a "holder," for the BSP to exercise its limited jurisdiction to resolve
conflicting claims; and the word "owner" here refers to the registered owner giving
notice of the fraud to the BSP. The PDB, however, is not the registered owner nor is it in
possession (holder) of the CB bills.67Ï‚rνll Consequently, the PDBs case can only falls
under the third situation which leaves the RTC, as a court of general jurisdiction, with
the authority to resolve the issue of ownership of a registered bond (the CB bills) not
falling in either of the first two situations.

The BOC asserts that the policy consideration supportive of its interpretation of CB
Circular No. 28 is to have a reliable system to protect the registered owner; should he
file a notice with the BSP about a fraudulent assignment of certain CB bills, the BSP
simply has to look at its books to determine who is the owner of the CB bills fraudulently
assigned. Since it is only the registered owner who complied with the BSPs requirement

1644
of recording an assignment in the BSPs books, then "the protective mantle of
administrative proceedings" should necessarily benefit him only, without extending the
same benefit to those who chose to ignore the Circulars requirement, like the
PDB.68ςrνll

Assuming arguendo that the PDBs case falls under the second situation i.e., the BSP
has jurisdiction to resolve the issue of ownership of the CB bills the more recent CB
Circular No. 769-80 (Rules and Regulations Governing Central Bank Certificates of
Indebtedness) already superseded CB Circular No. 28, and, in particular, effectively
amended Section 10 (d) 4 of CB Circular No. 28. The pertinent provisions of CB Circular
No. 769-80 read:chanroblesvirtuallawlibrary

Assignment Affected by Fraud. Any assignment for transfer of ownership of registered

certificate obtained through fraudulent representation if honored by the Central Bank or
any of its authorized service agencies shall not make the Central Bank or agency liable
therefore unless it has previous formal notice of the fraud. The Central Bank, upon
notice under oath that the assignment was secured through fraudulent means, shall
immediately issue and circularize a "stop order" against the transfer, exchange,
redemption of the Certificate including the payment of interest coupons. The Central
Bank or service agency concerned shall continue to withhold action on the certificate
until such time that the conflicting claims have been finally settled either by amicable
settlement between the parties or by order of the Court.

Unlike CB Circular No. 28, CB Circular No. 769-80 limited the BSPs authority to the
mere issuance and circularization of a "stop order" against the transfer, exchange and
redemption upon sworn notice of a fraudulent assignment. Under this Circular, the BSP
shall only continue to withhold action until the dispute is ended by an amicable
settlement or by judicial determination. Given the more passive stance of the BSP the
very agency tasked to enforce the circulars involved - under CB Circular No. 769-80, the
RTCs dismissal of the BOCs counterclaims is palpably erroneous.

Lastly, since Nuquis office (Government Securities Department) had already been
abolished,69Ï‚rνll it can no longer adjudicate the dispute under the second situation
covered by CB Circular No. 28. The abolition of Nuquis office is not only consistent with
the BSPs Charter but, more importantly, with CB Circular No. 769-80, which removed
the BSPs adjudicative authority over fraudulent assignments.

THE PDBS COMMENT

The PDB claims that jurisdiction is determined by the allegations in the

complaint/petition and not by the defenses set up in the answer. 70Ï‚rνll In filing the
petition with the RTC, the PDB merely seeks to compel the BSP to determine, pursuant
to CB Circular No. 28, the party legally entitled to the proceeds of the subject CB bills,
which, as the PDB alleged, have been transferred through fraudulent representations an
allegation which properly recognized the BSPs jurisdiction to resolve conflicting claims
of ownership over the CB bills.

1645
The PDB adds that under the doctrine of primary jurisdiction, courts should refrain from
determining a controversy involving a question whose resolution demands the exercise
of sound administrative discretion. In the present case, the BSPs special knowledge
and experience in resolving disputes on securities, whose assignment and trading are
governed by the BSPs rules, should be upheld.

The PDB counters that the BOCs tri-fold interpretation of Section 10 (d) 4 of CB Circular
No. 28 sanctions split jurisdiction which is not favored;but even this tri-fold interpretation
which, in the second situation, limits the meaning of the "owner" to the registered owner
is flawed. Section 10 (d) 4 aims to protect not just the registered owner but anyone who
has been deprived of his bond by fraudulent representation in order to deter fraud in the
secondary trading of government securities.

The PDB asserts that the existence of CB Circular No. 769-80 or the abolition of Nuquis
office does not result in depriving the BSP of its jurisdiction: first, CB Circular No. 769-
80 expressly provides that CB Circular No. 28 shall have suppletory application to CB
Circular No. 769-80; and second, the BSP can always designate an office to resolve the
PDBs claim over the CB bills.

Lastly, the PDB argues that even assuming that the RTC has jurisdiction to resolve the
issue of ownership of the CB bills, the RTC has not acquired jurisdiction over the BOCs
so-called "compulsory" counterclaims (which in truth is merely "permissive") because of
the BOCs failure to pay the appropriate docket fees. These counterclaims should,
therefore, be dismissed and expunged from the record.

THE COURTS RULING

We grant the petitions.

At the outset, we note that the parties have not raised the validity of either CB Circular
No. 28 or CB Circular No. 769-80 as an issue. What the parties largely contest is the
applicable circular in case of an allegedly fraudulently assigned CB bill. The applicable
circular, in turn, is determinative of the proper remedy available to the PDB and/or the
BOC as claimants to the proceeds of the subject CB bills.

Indisputably, at the time the PDB supposedly invoked the jurisdiction of the BSP in 1994
(by requesting for the annotation of its claim over the subject CB bills in the BSPs
books), CB Circular No. 769-80 has long been in effect. Therefore, the parties
respective interpretations of the provision of Section 10 (d) 4 of CB Circular No. 28 do
not have any significance unless it is first established that that Circular governs the
resolution of their conflicting claims of ownership. This conclusion is important, given the
supposed repeal or modification of Section 10 (d) 4 of CB Circular No. 28 by the
following provisions of CB Circular No. 769-80:

ARTICLE XI
SUPPLEMENTAL RULES

1646
Section 1. Central Bank Circular No. 28 The provisions of Central Bank Circular No. 28
shall have suppletory application to matters not specially covered by these Rules.

ARTICLE XII
EFFECTIVITY

Effectivity The rules and regulations herein prescribed shall take effect upon approval
by the Monetary Board, Central Bank of the Philippines, and all circulars, memoranda,
or office orders inconsistent herewith are revoked or modified accordingly. (Emphases
added)

We agree with the PDB that in view of CB Circular No. 28s suppletory application, an
attempt to harmonize the apparently conflicting provisions is a prerequisite before one
may possibly conclude that an amendment or a repeal exists. 71Ï‚rνll Interestingly,
however, even the PDB itself failed to submit an interpretation based on its own position
of harmonization.

The repealing clause of CB Circular No. 769-80 obviously did not expressly repeal CB
Circular No. 28; in fact, it even provided for the suppletory application of CB Circular No.
28 on "matters not specially covered by" CB Circular No. 769-80. While no express
repeal exists, the intent of CB Circular No. 769-80 to operate as an implied
repeal,72Ï‚rνll or at least to amend earlier CB circulars, is supported by its text
"revoking" or "modif[ying" "all circulars" which are inconsistent with its terms.

At the outset, we stress that none of the parties disputes that the subject CB bills fall
within the category of a certificate or evidence of indebtedness and that these were
issued by the Central Bank, now the BSP. Thus, even without resorting to statutory
construction aids, matters involving the subject CB bills should necessarily be governed
by CB Circular No. 769-80. Even granting, however, that reliance on CB Circular No.
769-80 alone is not enough, we find that CB Circular No. 769-80 impliedly repeals CB
Circular No. 28.

An implied repeal transpires when a substantial conflict exists between the new and the
prior laws. In the absence of an express repeal, a subsequent law cannot be construed
as repealing a prior law unless an irreconcilable inconsistency and repugnancy exist in
the terms of the new and the old laws. 73Ï‚rνll Repeal by implication is not favored,
unless manifestly intended by the legislature, or unless it is convincingly and
unambiguously demonstrated, that the laws or orders are clearly repugnant and patently
inconsistent with one another so that they cannot co-exist; the legislature is presumed
to know the existing law and would express a repeal if one is intended. 74ςrνll

There are two instances of implied repeal. One takes place when the provisions in the
two acts on the same subject matter are irreconcilably contradictory, in which case, the
later act, to the extent of the conflict, constitutes an implied repeal of the earlier one.
The other occurs when the later act covers the whole subject of the earlier one and is
clearly intended as a substitute; thus, it will operate to repeal the earlier law. 75ςrνll

1647
A general reading of the two circulars shows that the second instance of implied repeal
is present in this case. CB Circular No. 28, entitled "Regulations Governing Open
Market Operations, Stabilization of Securities Market, Issue, Servicing and Redemption
of Public Debt," is a regulation governing the servicing and redemption of public debt,
including the issue, inscription, registration, transfer, payment and replacement of bonds
and securities representing the public debt. 76Ï‚rνll On the other hand, CB Circular No.
769-80, entitled "Rules and Regulations Governing Central Bank Certificate of
Indebtedness," is the governing regulation on matters 77Ï‚rνll (i) involving certificate of
indebtedness78Ï‚rνll issued by the Central Bank itself and (ii) which are similarly
covered by CB Circular No. 28.

The CB Monetary Board issued CB Circular No. 28 to regulate the servicing and
redemption of public debt, pursuant to Section 124 (now Section 119 of Republic Act
R.A. No. 7653) of the old Central Bank law 79Ï‚rνll which provides that "the servicing and
redemption of the public debt shall also be effected through the Bangko Sentral."
However, even as R.A. No. 7653 continued to recognize this role by the BSP, the law
required a phase-out of all fiscal agency functions by the BSP, including Section 119 of
R.A. No. 7653.

In other words, even if CB Circular No. 28 applies broadly to both government-issued

bonds and securities and Central Bank-issued evidence of indebtedness, given the
present state of law, CB Circular No. 28 and CB Circular No. 769-80 now operate on the
same subject Central Bank-issued evidence of indebtedness. Under Section 1, Article
XI of CB Circular No. 769-80, the continued relevance and application of CB Circular
No. 28 would depend on the need to supplement any deficiency or silence in CB
Circular No. 769-80 on a particular matter.

In the present case, both CB Circular No. 28 and CB Circular No. 769-80 provide the
BSP with a course of action in case of an allegedly fraudulently assigned certificate of
indebtedness. Under CB Circular No. 28, in case of fraudulent assignments, the BSP
would have to "call upon the owner and the person presenting the bond to substantiate
their respective claims" and, from there, determine who has a better right over the
registered bond. On the other hand, under CB Circular No. 769-80, the BSP shall
merely "issue and circularize a stop order against the transfer, exchange, redemption of
the [registered] certificate" without any adjudicative function (which is the precise root of
the present controversy). As the two circulars stand, the patent irreconcilability of these
two provisions does not require elaboration. Section 5, Article V of CB Circular No. 769-
80 inescapably repealed Section 10 (d) 4 of CB Circular No. 28.

The issue of BSPs jurisdiction, lay hidden

On that note, the Court could have written finis to the present controversy by simply
sustaining the BSPs hands-off approach to the PDBs problem under CB Circular No.
769-80. However, the jurisdictional provision of CB Circular No. 769-80 itself, in relation
to CB Circular No. 28, on the matter of fraudulent assignment, has given rise to a

1648
question of jurisdiction - the core question of law involved in these petitions - which the
Court cannot just treat sub-silencio.

Broadly speaking, jurisdiction is the legal power or authority to hear and determine a
cause.80Ï‚rνll In the exercise of judicial or quasi-judicial power, it refers to the authority
of a court to hear and decide a case.81Ï‚rνll In the context of these petitions, we hark
back to the basic principles governing the question of jurisdiction over the subject
matter.

First, jurisdiction over the subject matter is determined only by the Constitution and by
law.82Ï‚rνll As a matter of substantive law, procedural rules alone can confer no
jurisdiction to courts or administrative agencies. 83Ï‚rνll In fact, an administrative agency,
acting in its quasi-judicial capacity, is a tribunal of limited jurisdiction and, as such, could
wield only such powers that are specifically granted to it by the enabling statutes. In
contrast, an RTC is a court of general jurisdiction, i.e., it has jurisdiction over cases
whose subject matter does not fall within the exclusive original jurisdiction of any court,
tribunal or body exercising judicial or quasi-judicial functions. 84ςrνll

Second, jurisdiction over the subject matter is determined not by the pleas set up by the
defendant in his answer85Ï‚rνll but by the allegations in the
complaint,86Ï‚rνll irrespective of whether the plaintiff is entitled to favorable judgment on
the basis of his assertions.87Ï‚rνll The reason is that the complaint is supposed to
contain a concise statement of the ultimate facts constituting the plaintiff's causes of
action.88ςrνll

Third, jurisdiction is determined by the law in force at the time of the filing of the
complaint.89ςrνll

Parenthetically, the Court observes that none of the parties ever raised the issue of
whether the BSP can simply disown its jurisdiction, assuming it has, by the simple
expedient of promulgating a new circular (specially applicable to a certificate of
indebtedness issued by the BSP itself), inconsistent with an old circular, assertive of its
limited jurisdiction over ownership issues arising from fraudulent assignments of a
certificate of indebtedness. The PDB, in particular, relied solely and heavily on CB
Circular No. 28.

In light of the above principles pointing to jurisdiction as a matter of substantive law, the
provisions of the law itself that gave CB Circular 769-80 its life and jurisdiction must be
examined.

The Philippine Central Bank

On January 3, 1949, Congress created the Central Bank of the Philippines (Central
Bank) as a corporate body with the primary objective of (i) maintaining the internal and
external monetary stability in the Philippines; and (ii) preserving the international value
and the convertibility of the peso.90Ï‚rνll In line with these broad objectives, the Central

1649
Bank was empowered to issue rules and regulations "necessary for the effective
discharge of the responsibilities and exercise of the powers assigned to the Monetary
Board and to the Central Bank."91Ï‚rνll Specifically, the Central Bank is authorized to
organize (other) departments for the efficient conduct of its business and whose powers
and duties "shall be determined by the Monetary Board, within the authority granted to
the Board and the Central Bank"92Ï‚rνll under its original charter.

With the 1973 Constitution, the then Central Bank was constitutionally made as the
countrys central monetary authority until such time that Congress 93Ï‚rνll shall have
established a central bank. The 1987 Constitution continued to recognize this function
of the then Central Bank until Congress, pursuant to the Constitution, created a new
central monetary authority which later came to be known as the Bangko Sentral ng
Pilipinas.

Under the New Central Bank Act (R.A. No. 7653),94Ï‚rνll the BSP is given the
responsibility of providing policy directions in the areas of money, banking and credit; it
is given, too, the primary objective of maintaining price stability, conducive to a
balanced and sustainable growth of the economy, and of promoting and maintaining
monetary stability and convertibility of the peso.95ςrνll

The Constitution expressly grants the BSP, as the countrys central monetary authority,
the power of supervision over the operation of banks, while leaving with Congress the
authority to define the BSPs regulatory powers over the operations of finance
companies and other institutions performing similar functions. Under R.A. No. 7653, the
BSPs powers and functions include (i) supervision over the operation of banks; (ii)
regulation of operations of finance companies and non-bank financial institutions
performing quasi banking functions; (iii) sole power and authority to issue currency
within the Philippine territory; (iv) engaging in foreign exchange transactions; (v) making
rediscounts, discounts, loans and advances to banking and other financial institutions to
influence the volume of credit consistent with the objective of achieving price stability;
(vi) engaging in open market operations; and (vii) acting as banker and financial advisor
of the government.

On the BSPs power of supervision over the operation of banks, Section 4 of R.A. No.
8791 (The General Banking Law of 2000) elaborates as follows:

CHAPTER II
AUTHORITY OF THE BANGKO SENTRAL

SECTION 4. Supervisory Powers. The operations and activities of banks shall be

subject to supervision of the Bangko Sentral. "Supervision" shall include the following:

4.1. The issuance of rules of conduct or the establishment of standards of operation for
uniform application to all institutions or functions covered, taking into consideration the
distinctive character of the operations of institutions and the substantive similarities of
specific functions to which such rules, modes or standards are to be applied;

1650
4.2. The conduct of examination to determine compliance with laws and regulations if
the circumstances so warrant as determined by the Monetary Board;

4.3. Overseeing to ascertain that laws and regulations are complied with;

4.4. Regular investigation which shall not be oftener than once a year from the last date
of examination to determine whether an institution is conducting its business on a safe
or sound basis: Provided, That the deficiencies/irregularities found by or discovered by
an audit shall be immediately addressed;

4.5. Inquiring into the solvency and liquidity of the institution (2-D); or

4.6. Enforcing prompt corrective action. (n)

The Bangko Sentral shall also have supervision over the operations of and exercise
regulatory powers over quasi-banks, trust entities and other financial institutions which
under special laws are subject to Bangko Sentral supervision. (2-Ca)

For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the
borrowing of funds through the issuance, endorsement or assignment with recourse or
acceptance of deposit substitutes as defined in Section 95 of Republic Act No. 7653
(hereafter the "New Central Bank Act") for purposes of relending or purchasing of
receivables and other obligations. [emphasis ours]

While this provision empowers the BSP to oversee the operations and activities of
banks to "ascertain that laws and regulations are complied with," the existence of the
BSPs jurisdiction in the present dispute cannot rely on this provision. The fact remains
that the BSP already made known to the PDB its unfavorable position on the latters
claim of fraudulent assignment due to the latters own failure to comply 96Ï‚rνll with
existing regulations:chanroblesvirtuallawlibrary

In this connection, Section 10 (b) 2 also requires that a "Detached assignment will be
recognized or accepted only upon previous notice to the Central Bank x x x." In fact, in a
memo dated September 23, 1991 xxx then CB Governor Jose L. Cuisia advised all
banks (including PDB) xxx as follows:chanroblesvirtuallawlibrary

In view recurring incidents ostensibly disregarding certain provisions of CB circular No.

28 (as amended) covering assignments of registered bonds, all banks and all
concerned are enjoined to observe strictly the pertinent provisions of said CB Circular
as hereunder quoted:chanroblesvirtuallawlibrary

xxxx

Under Section 10.b. (2)

1651
x x x Detached assignment will be recognized or accepted only upon previous notice to
the Central Bank and its use is authorized only under the following circumstances:

(a) x x x

(b) x x x

(c) assignments of treasury notes and certificates of indebtedness in registered form

which are not provided at the back thereof with assignment form.

(d) Assignment of securities which have changed ownership several times.

(e) x x x

Non-compliance herewith will constitute a basis for non-action or withholding of action

on redemption/payment of interest coupons/transfer transactions or denominational
exchange that may be directly affected thereby. [Boldfacing supplied]

Again, the books of the BSP do not show that the supposed assignment of subject CB
Bills was ever recorded in the BSPs books. [Boldfacing supplied]

However, the PDB faults the BSP for not recording the assignment of the CB bills in the
PDBs favor despite the fact that the PDB already requested the BSP to record its
assignment in the BSPs books as early as June 30, 1994. 97ςrνll

The PDBs claim is not accurate. What the PDB requested the BSP on that date was not
the recording of the assignment of the CB bills in its favor but the annotation of its claim
over the CB bills at the time when (i) it was no longer in possession of the CB bills,
having been transferred from one entity to another and (ii) all it has are the detached
assignments, which the PDB has not shown to be compliant with Section 10 (b) 2
above-quoted. Obviously, the PDB cannot insist that the BSP take cognizance of its
plaint when the basis of the BSPs refusal under existing regulation, which the PDB is
bound to observe, is the PDBs own failure to comply therewith.

True, the BSP exercises supervisory powers (and regulatory powers) over banks (and
quasi banks). The issue presented before the Court, however, does not concern the
BSPs supervisory power over banks as this power is understood under the General
Banking Law. In fact, there is nothing in the PDBs petition (even including the letters it
sent to the BSP) that would support the BSPs jurisdiction outside of CB Circular No. 28,
under its power of supervision, over conflicting claims to the proceeds of the CB bills.

BSP has quasi-judicial powers over a

class of cases which does not include
the adjudication of ownership of the
CB bills in question

1652
In United Coconut Planters Bank v. E. Ganzon, Inc., 98Ï‚rνll the Court considered the
BSP as an administrative agency,99Ï‚rνll exercising quasi-judicial functions through its
Monetary Board. It held:chanroblesvirtuallawlibrary

A quasi-judicial agency or body is an organ of government other than a court and other
than a legislature, which affects the rights of private parties through either adjudication
or rule-making. The very definition of an administrative agency includes its being vested
with quasi-judicial powers. The ever increasing variety of powers and functions given to
administrative agencies recognizes the need for the active intervention of administrative
agencies in matters calling for technical knowledge and speed in countless
controversies which cannot possibly be handled by regular courts. A "quasi-judicial
function" is a term which applies to the action, discretion, etc., of public administrative
officers or bodies, who are required to investigate facts, or ascertain the existence of
facts, hold hearings, and draw conclusions from them, as a basis for their official action
and to exercise discretion of a judicial nature.

Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-

judicial powers or functions. As aptly observed by the Court of Appeals, the BSP
Monetary Board is an independent central monetary authority and a body corporate with
fiscal and administrative autonomy, mandated to provide policy directions in the areas
of money, banking and credit. It has power to issue subpoena, to sue for contempt
those refusing to obey the subpoena without justifiable reason, to administer oaths and
compel presentation of books, records and others, needed in its examination, to impose
fines and other sanctions and to issue cease and desist order. Section 37 of Republic
Act No. 7653, in particular, explicitly provides that the BSP Monetary Board shall
exercise its discretion in determining whether administrative sanctions should be
imposed on banks and quasi-banks, which necessarily implies that the BSP Monetary
Board must conduct some form of investigation or hearing regarding the same.
[citations omitted]

The BSP is not simply a corporate entity but qualifies as an administrative agency
created, pursuant to constitutional mandate,100Ï‚rνll to carry out a particular
governmental function.101Ï‚rνll To be able to perform its role as central monetary
authority, the Constitution granted it fiscal and administrative autonomy. In general,
administrative agencies exercise powers and/or functions which may be characterized
as administrative, investigatory, regulatory, quasi-legislative, or quasi-judicial, or a mix
of these five, as may be conferred by the Constitution or by statute. 102ςrνll

While the very nature of an administrative agency and the raison d're for its
creation103Ï‚rνll and proliferation dictate a grant of quasi-judicial power to it, the matters
over which it may exercise this power must find sufficient anchorage on its enabling law,
either by express provision or by necessary implication. Once found, the quasi-judicial
power partakes of the nature of a limited and special jurisdiction, that is, to hear and
determine a class of cases within its peculiar competence and expertise. In other words,
the provisions of the enabling statute are the yardsticks by which the Court would

1653
measure the quantum of quasi-judicial powers an administrative agency may exercise,
as defined in the enabling act of such agency. 104ςrνll

Scattered provisions in R.A. No. 7653 and R.A. No. 8791, inter alia, exist, conferring
jurisdiction on the BSP on certain matters. 105Ï‚rνll For instance, under the situations
contemplated under Section 36, par. 2106Ï‚rνll (where a bank or quasi bank persists in
carrying on its business in an unlawful or unsafe manner) and Section 37 107Ï‚rνll (where
the bank or its officers willfully violate the banks charter or by-laws, or the rules and
regulations issued by the Monetary Board) of R.A. No. 7653, the BSP may place an
entity under receivership and/or liquidation or impose administrative sanctions upon the
entity or its officers or directors.

Among its several functions under R.A. No. 7653, the BSP is authorized to engage in
open market operations and thereby "issue, place, buy and sell freely negotiable
evidences of indebtedness of the Bangko Sentral" in the following manner.

SEC. 90. Principles of Open Market Operations. The open market purchases and sales
of securities by the Bangko Sentral shall be made exclusively in accordance with its
primary objective of achieving price stability.

xxxx

SEC. 92. Issue and Negotiation of Bangko Sentral Obligations. In order to provide the
Bangko Sentral with effective instruments for open market operations, the Bangko
Sentral may, subject to such rules and regulations as the Monetary Board may
prescribe and in accordance with the principles stated in Section 90 of this Act, issue,
place, buy and sell freely negotiable evidences of indebtedness of the Bangko Sentral:
Provided, That issuance of such certificates of indebtedness shall be made only in
cases of extraordinary movement in price levels. Said evidences of indebtedness may
be issued directly against the international reserve of the Bangko Sentral or against the
securities which it has acquired under the provisions of Section 91 of this Act, or may be
issued without relation to specific types of assets of the Bangko Sentral.

The Monetary Board shall determine the interest rates, maturities and other
characteristics of said obligations of the Bangko Sentral, and may, if it deems it
advisable, denominate the obligations in gold or foreign currencies.

Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness
of the Bangko Sentral to which this section refers may be acquired by the Bangko
Sentral before their maturity, either through purchases in the open market or through
redemptions at par and by lot if the Bangko Sentral has reserved the right to make such
redemptions. The evidences of indebtedness acquired or redeemed by the Bangko
Sentral shall not be included among its assets, and shall be immediately retired and
cancelled.108Ï‚rνll (italics supplied; emphases ours)

1654
The primary objective of the BSP is to maintain price stability. 109Ï‚rνll The BSP has a
number of monetary policy instruments at its disposal to promote price stability. To
increase or reduce liquidity in the financial system, the BSP uses open market
operations, among others.110Ï‚rνll Open market operation is a monetary tool where the
BSP publicly buys or sells government securities111Ï‚rνll from (or to) banks and financial
institutions in order to expand or contract the supply of money. By controlling the money
supply, the BSP is able to exert some influence on the prices of goods and services and
achieve its inflation objectives.112ςrνll

Once the issue and/or sale of a security is made, the BSP would necessarily make a
determination, in accordance with its own rules, of the entity entitled to receive the
proceeds of the security upon its maturity. This determination by the BSP is an exercise
of its administrative powers113Ï‚rνll under the law as an incident to its power to
prescribe rules and regulations governing open market operations to achieve the
"primary objective of achieving price stability." 114Ï‚rνll As a matter of necessity, too, the
same rules and regulations facilitate transaction with the BSP by providing for an orderly
manner of, among others, issuing, transferring, exchanging and paying securities
representing public debt.

Significantly, when competing claims of ownership over the proceeds of the securities it
has issued are brought before it, the law has not given the BSP the quasi-judicial power
to resolve these competing claims as part of its power to engage in open market
operations. Nothing in the BSPs charter confers on the BSP the jurisdiction or authority
to determine this kind of claims, arising out of a subsequent transfer or assignment of
evidence of indebtedness a matter that appropriately falls within the competence of
courts of general jurisdiction. That the statute withholds this power from the BSP is only
consistent with the fundamental reasons for the creation of a Philippine central bank,
that is, to lay down stable monetary policy and exercise bank supervisory functions.
Thus, the BSPs assumption of jurisdiction over competing claims cannot find even a
stretched-out justification under its corporate powers "to do and perform any and all
things that may be necessary or proper to carry out the purposes" of R.A. No.
7653. 115Ï‚rνll

To reiterate, open market operation is a monetary policy instrument that the BSP
employs, among others, to regulate the supply of money in the economy to influence
the timing, cost and availability of money and credit, as well as other financial factors,
for the purpose of stabilizing the price level. 116Ï‚rνll What the law grants the BSP is a
continuing role to shape and carry out the countrys monetary policy not the authority to
adjudicate competing claims of ownership over the securities it has issued since this
authority would not fall under the BSPs purposes under its charter.

While R.A. No. 7653117Ï‚rνll empowers the BSP to conduct administrative hearings and
render judgment for or against an entity under its supervisory and regulatory powers
and even authorizes the BSP Governor to "render decisions, or rulings x x x on matters
regarding application or enforcement of laws pertaining to institutions supervised by the
BSP and laws pertaining to quasi-banks, as well as regulations, policies or instructions

1655
issued by the Monetary Board," it is precisely the text of the BSPs own regulation
(whose validity is not here raised as an issue) that points to the BSPs limited role in
case of an allegedly fraudulent assignment to simply (i) issuing and circularizing a "stop
order" against the transfer, exchange, redemption of the certificate of indebtedness,
including the payment of interest coupons, and (ii) withholding action on the certificate.

A similar conclusion can be drawn from the BSPs administrative adjudicatory power in
cases of "willful failure or refusal to comply with, or violation of, any banking law or any
order, instruction or regulation issued by the Monetary Board, or any order, instruction
or ruling by the Governor."118Ï‚rνll The non-compliance with the pertinent requirements
under CB Circular No. 28, as amended, deprives a party from any right to demand
payment from the BSP.

In other words, the grant of quasi-judicial authority to the BSP cannot possibly extend to
situations which do not call for the exercise by the BSP of its supervisory or regulatory
functions over entities within its jurisdiction.119ςrνll

The fact alone that the parties involved are banking institutions does not necessarily call
for the exercise by the BSP of its quasi-judicial powers under the law. 120ςrνll

The doctrine of primary jurisdiction/>argues against BSPs purported/>authority to

adjudicate ownership/>issues over the disputed CB bills

Given the preceding discussions, even the PDBs invocation of the doctrine of primary
jurisdiction is misplaced.

In the exercise of its plenary legislative power, Congress may create administrative
agencies endowed with quasi-legislative and quasi-judicial powers. Necessarily,
Congress likewise defines the limits of an agencys jurisdiction in the same manner as it
defines the jurisdiction of courts.121Ï‚rνll As a result, it may happen that either a court or
an administrative agency has exclusive jurisdiction over a specific matter or both have
concurrent jurisdiction on the same. It may happen, too, that courts and agencies may
willingly relinquish adjudicatory power that is rightfully theirs in favor of the other. One of
the instances when a court may properly defer to the adjudicatory authority of an
agency is the applicability of the doctrine of primary jurisdiction. 122ςrνll

As early as 1954, the Court applied the doctrine of primary jurisdiction under the
following terms:chanroblesvirtuallawlibrary

6. In the fifties, the Court taking cognizance of the move to vest jurisdiction in
administrative commissions and boards the power to resolve specialized disputes xxx
ruled that Congress in requiring the Industrial Court's intervention in the resolution of
labor-management controversies xxx meant such jurisdiction to be exclusive, although it
did not so expressly state in the law. The Court held that under the "sense-making and
expeditious doctrine of primary jurisdiction ... the courts cannot or will not determine a
controversy involving a question which is within the jurisdiction of an administrative

1656
tribunal, where the question demands the exercise of sound administrative discretion
requiring the special knowledge, experience, and services of the administrative tribunal
to determine technical and intricate matters of fact, and a uniformity of ruling is essential
to comply with the purposes of the regulatory statute administered." 123Ï‚rνll (emphasis
ours)

In Industrial Enterprises, Inc. v. Court of Appeals,124Ï‚rνll the Court ruled that while an

action for rescission of a contract between coal developers appears to be an action
cognizable by regular courts, the trial court remains to be without jurisdiction to entertain
the suit since the contract sought to be rescinded is "inextricably tied up with the right to
develop coal-bearing lands and the determination of whether or not the reversion of the
coal operating contract over the subject coal blocks to [the plaintiff] would be in line with
the countrys national program and objective on coal-development and over-all coal-
supply-demand balance." It then applied the doctrine of primary jurisdiction

In recent years, it has been the jurisprudential trend to apply the doctrine of primary
jurisdiction in many cases involving matters that demand the special competence of
administrative agencies. It may occur that the Court has jurisdiction to take cognizance
of a particular case, which means that the matter involved is also judicial in character.
However, if the case is such that its determination requires the expertise, specialized
skills and knowledge of the proper administrative bodies because technical matters or
intricate questions of facts are involved, then relief must first be obtained in an
administrative proceeding before a remedy will be supplied by the courts even though
the matter is within the proper jurisdiction of a court. This is the doctrine of primary
jurisdiction. It applies "where a claim is originally cognizable in the courts, and comes
into play whenever enforcement of the claim requires the resolution of issues which,
under a regulatory scheme, have been placed within the special competence of an
administrative body."

Clearly, the doctrine of primary jurisdiction finds application in this case since the
question of what coal areas should be exploited and developed and which entity should
be granted coal operating contracts over said areas involves a technical determination
by the Bureau of Energy Development as the administrative agency in possession of
the specialized expertise to act on the matter. The Trial Court does not have the
competence to decide matters concerning activities relative to the exploration,
exploitation, development and extraction of mineral resources like coal. These issues
preclude an initial judicial determination. [emphases ours]

The absence of any express or implied statutory power to adjudicate conflicting claims
of ownership or entitlement to the proceeds of its certificates of indebtedness finds
complement in the similar absence of any technical matter that would call for the BSPs
special expertise or competence.125Ï‚rνll In fact, what the PDBs petitions bear out is
essentially the nature of the transaction it had with the subsequent transferees of the
subject CB bills (BOC and Bancap) and not any matter more appropriate for special
determination by the BSP or any administrative agency.

1657
In a similar vein, it is well-settled that the interpretation given to a rule or regulation by
those charged with its execution is entitled to the greatest weight by the courts
construing such rule or regulation.126Ï‚rνll While there are exceptions127Ï‚rνll to this
rule, the PDB has not convinced us that a departure is warranted in this case. Given the
non-applicability of the doctrine of primary jurisdiction, the BSPs own position, in light of
Circular No. 769-80, deserves respect from the Court.

Ordinarily, cases involving the application of doctrine of primary jurisdiction are initiated
by an action invoking the jurisdiction of a court or administrative agency to resolve the
substantive legal conflict between the parties. In this sense, the present case is quite
unique since the courts jurisdiction was, originally, invoked to compel an administrative
agency (the BSP) to resolve the legal conflict of ownership over the CB bills - instead of
obtaining a judicial determination of the same dispute.

The remedy of interpleader

Based on the unique factual premise of the present case, the RTC acted correctly in
initially assuming jurisdiction over the PDBs petition for mandamus, prohibition and
injunction.128Ï‚rνll While the RTC agreed (albeit erroneously) with the PDBs view (that
the BSP has jurisdiction), it, however, dismissed not only the BOCs/the BSPs
counterclaims but the PDBs petition itself as well, on the ground that it lacks jurisdiction.

This is plain error.

Not only the parties themselves, but more so the courts, are bound by the rule on non-
waiver of jurisdiction.129Ï‚rνll believes that jurisdiction over the BOCs counterclaims and
the BSPs counterclaim/crossclaim for interpleader calls for the application of the
doctrine of primary jurisdiction, the allowance of the PDBs petition even becomes
imperative because courts may raise the issue of primary jurisdiction sua
sponte.130ςrνll

Of the three possible options available to the RTC, the adoption of either of these two
would lead the trial court into serious legal error: first, if it granted the PDBs petition, its
decision would have to be set aside on appeal because the BSP has no jurisdiction as
previously discussed; and second when it dismissed the PDBs petitions and the BOCs
counterclaims on the ground that it lacks jurisdiction, the trial court seriously erred
because precisely, the resolution of the conflicting claims over the CB bills falls within its
general jurisdiction.

Without emasculating its jurisdiction, the RTC could have properly dismissed the PDBs
petition but on the ground that mandamus does not lie against the BSP; but even this
correct alternative is no longer plausible since the BSP, as a respondent below, already
properly brought before the RTC the remaining conflicting claims over the subject CB
bills by way of a counterclaim/crossclaim for interpleader. Section 1, Rule 62 of the
Rules of Court provides when an interpleader is proper:chanroblesvirtuallawlibrary

1658
SECTION 1. When interpleader proper. Whenever conflicting claims upon the same
subject matter are or may be made against a person who claims no interest whatever in
the subject matter, or an interest which in whole or in part is not disputed by the
claimants, he may bring an action against the conflicting claimants to compel them to
interplead and litigate their several claims among themselves.

The remedy of an action of interpleader131Ï‚rνll is designed to protect a person against

double vexation in respect of a single liability. 7Ï‚rνll It requires, as an indispensable
requisite, that conflicting claims upon the same subject matter are or may be made
against the stakeholder (the possessor of the subject matter) who claims no interest
whatever in the subject matter or an interest which in whole or in part is not disputed by
the claimants.132ςrνll

Through this remedy, the stakeholder can join all competing claimants in a single
proceeding to determine conflicting claims without exposing the stakeholder to the
possibility of having to pay more than once on a single liability. 133ςrνll

When the court orders that the claimants litigate among themselves, in reality a new
action arises,134Ï‚rνll where the claims of the interpleaders themselves are brought to
the fore, the stakeholder as plaintiff is relegated merely to the role of initiating the suit. In
short, the remedy of interpleader, when proper, merely provides an avenue for the
conflicting claims on the same subject matter to be threshed out in an action. Section 2
of Rule 62 provides:chanroblesvirtuallawlibrary

SEC. 2. Order. Upon the filing of the complaint, the court shall issue an order requiring
the conflicting claimants to interplead with one another. If the interests of justice so
require, the court may direct in such order that the subject matter be paid or delivered to
the court.

This is precisely what the RTC did by granting the BSPs motion to interplead. The PDB
itself "agreed that the various claimants should now interplead." Thus, the PDB and the
BOC subsequently entered into two separate escrow agreements, covering the CB bills,
and submitted them to the RTC for approval.

In granting the BSPs motion, the RTC acted on the correct premise that it has
jurisdiction to resolve the parties conflicting claims over the CB bills - consistent with the
rules and the parties conduct - and accordingly required the BOC to amend its answer
and for the PDB to comment thereon. Suddenly, however, the PDB made an about-face
and questioned the jurisdiction of the RTC. Swayed by the PDBs argument, the RTC
dismissed even the PDBs petition - which means that it did not actually compel the BSP
to resolve the BOCs and the PDBs claims.

Without the motion to interplead and the order granting it, the RTC could only dismiss
the PDBs petition since it is the RTC which has jurisdiction to resolve the parties
conflicting claims not the BSP. Given that the motion to interplead has been actually
filed, the RTC could not have really granted the relief originally sought in the PDBs

1659
petition since the RTCs order granting the BSPs motion to interplead - to which the PDB
in fact acquiesced into - effectively resulted in the dismissal of the PDBs petition. This is
not altered by the fact that the PDB additionally prayed in its petition for damages,
attorneys fees and costs of suit "against the public respondents" because the grant of
the order to interplead effectively sustained the propriety of the BSPs resort to this
procedural device.

Interpleader

1. as a special civil action

What is quite unique in this case is that the BSP did not initiate the interpleader suit
through an original complaint but through its Answer. This circumstance becomes
understandable if it is considered that insofar as the BSP is concerned, the PDB does
not possess any right to have its claim recorded in the BSPs books; consequently, the
PDB cannot properly be considered even as a potential claimant to the proceeds of the
CB bills upon maturity. Thus, the interpleader was only an alternative position, made
only in the BSPs Answer.135ςrνll

The remedy of interpleader, as a special civil action, is primarily governed by the

specific provisions in Rule 62 of the Rules of Court and secondarily by the provisions
applicable to ordinary civil actions.136Ï‚rνll Indeed, Rule 62 does not expressly authorize
the filing of a complaint-in-interpleader as part of, although separate and independent
from, the answer. Similarly, Section 5, Rule 6, in relation to Section 1, Rule 9 of the
Rules of Court137Ï‚rνll does not include a complaint-in-interpleader as a claim, 138Ï‚rνll a
form of defense,139Ï‚rνll or as an objection that a defendant may be allowed to put up in
his answer or in a motion to dismiss. This does not mean, however, that the BSPs
"counter-complaint/cross-claim for interpleader" runs counter to general procedures.

Apart from a pleading,140Ï‚rνll the rules141Ï‚rνll allow a party to seek an affirmative relief

from the court through the procedural device of a motion. While captioned "Answer with
counter complaint/cross-claim for interpleader," the RTC understood this as in the
nature of a motion,142Ï‚rνll seeking relief which essentially consists in an order for the
conflicting claimants to litigate with each other so that "payment is made to the rightful
or legitimate owner"143Ï‚rνll of the subject CB bills.

The rules define a "civil action" as "one by which a party sues another for the
enforcement or protection of a right, or the prevention or redress of a wrong."
Interpleader may be considered as a stakeholders remedy to prevent a wrong, that is,
from making payment to one not entitled to it, thereby rendering itself vulnerable to
lawsuit/s from those legally entitled to payment.

Interpleader is a civil action made special by the existence of particular rules to govern
the uniqueness of its application and operation. Under Section 2, Rule 6 of the Rules of
Court, governing ordinary civil actions, a partys claim is asserted "in a complaint,
counterclaim, cross-claim, third (fourth, etc.)-party complaint, or complaint-in-

1660
intervention." In an interpleader suit, however, a claim is not required to be contained in
any of these pleadings but in the answer-(of the conflicting claimants)-in-interpleader.
This claim is different from the counter-claim (or cross-claim, third party-complaint)
which is separately allowed under Section 5, par. 2 of Rule 62.

2. the payment of docket fees covering BOCs counterclaim

The PDB argues that, even assuming that the RTC has jurisdiction over the issue of
ownership of the CB bills, the BOCs failure to pay the appropriate docket fees prevents
the RTC from acquiring jurisdiction over the BOCs "counterclaims."

We disagree with the PDB.

To reiterate and recall, the order granting the "PDBs motion to interplead," already
resulted in the dismissal of the PDBs petition. The same order required the BOC to
amend its answer and for the conflicting claimants to comment, presumably to conform
to the nature of an answer-in interpleader. Perhaps, by reason of the BOCs
denomination of its claim as a "compulsory counterclaim" and the PDBs failure to fully
appreciate the RTCs order granting the "BSPs motion for interpleader" (with the PDBs
conformity), the PDB mistakenly treated the BOCs claim as a "permissive counterclaim"
which necessitates the payment of docket fees.

As the preceding discussions would show, however, the BOCs "claim" - i.e., its
assertion of ownership over the CB bills is in reality just that, a "claim" against the
stakeholder and not as a "counterclaim," 144Ï‚rνll whether compulsory145Ï‚rνll or
permissive. It is only the BOCs alternative prayer (for the PDB to deliver to the BOC, as
the buyer in the April 15 transaction and the ultimate successor-in-interest of the buyer
in the April 19 transaction, either the original subjects of the sales or the value thereof
plus whatever income that may have been earned pendente lite) and its prayer for
damages that are obviously compulsory counterclaims against the PDB and, therefore,
does not require payment of docket fees.146ςrνll

The PDB takes a contrary position through its insistence that a compulsory counterclaim
should be one where the presence of third parties, of whom the court cannot acquire
jurisdiction, is not required. It reasons out that since the RCBC and All Asia (the
intervening holders of the CB bills) have already been dropped from the case, then the
BOCs counterclaim must only be permissive in nature and the BOC should have paid
the correct docket fees.

We see no reason to belabor this claim. Even if we gloss over the PDBs own conformity
to the dropping of these entities as parties, the BOC correctly argues that a remedy is
provided under the Rules. Section 12, Rule 6 of the Rules of Court
reads:chanroblesvirtuallawlibrary

SEC. 12. Bringing new parties. When the presence of parties other than those to the
original action is required for the granting of complete relief in the determination of a

1661
counterclaim or cross-claim, the court shall order them to be brought in as defendants, if
jurisdiction over them can be obtained.

Even then, the strict characterization of the BOCs counterclaim is no longer material in
disposing of the PDBs argument based on non-payment of docket fees.

When an action is filed in court, the complaint must be accompanied by the payment of
the requisite docket and filing fees by the party seeking affirmative relief from the court.
It is the filing of the complaint or appropriate initiatory pleading, accompanied by the
payment of the prescribed docket fee, that vests a trial court with jurisdiction over the
claim or the nature of the action.147Ï‚rνll However, the non-payment of the docket fee at
the time of filing does not automatically cause the dismissal of the case, so long as the
fee is paid within the applicable prescriptive or reglementary period, especially when the
claimant demonstrates a willingness to abide by the rules prescribing such
payment.148ςrνll

In the present case, considering the lack of a clear guideline on the payment of docket
fee by the claimants in an interpleader suit, compounded by the unusual manner in
which the interpleader suit was initiated and the circumstances surrounding it, we surely
cannot deduce from the BOCs mere failure to specify in its prayer the total amount of
the CB bills it lays claim to (or the value of the subjects of the sales in the April 15 and
April 19 transactions, in its alternative prayer) an intention to defraud the government
that would warrant the dismissal of its claim.149ςrνll

At any rate, regardless of the nature of the BOCs "counterclaims," for purposes of
payment of filing fees, both the BOC and the PDB, properly as defendants-in-
interpleader, must be assessed the payment of the correct docket fee arising from their
respective claims. The seminal case of Sun Insurance Office, Ltd. v. Judge
Asuncion150Ï‚rνll provides us guidance in the payment of docket fees, to wit:

1. x x x 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.
[underscoring ours]

This must be the rule considering that Section 7, Rule 62 of which

reads:chanroblesvirtuallawlibrary

SEC. 7. Docket and other lawful fees, costs and litigation expenses as liens. The docket
and other lawful fees paid by the party who filed a complaint under this Rule, as well as

1662
the costs and litigation expenses, shall constitute a lien or charge upon the subject
matter of the action, unless the court shall order otherwise.

only pertain to the docket and lawful fees to be paid by the one who initiated the
interpleader suit, and who, under the Rules, actually "claims no interest whatever in the
subject matter." By constituting a lien on the subject matter of the action, Section 7 in
effect only aims to actually compensate the complainant-in-interpleader, who happens
to be the stakeholder unfortunate enough to get caught in a legal crossfire between two
or more conflicting claimants, for the faultless trouble it found itself into. Since the
defendants-in-interpleader are actually the ones who make a claim - only that it was
extraordinarily done through the procedural device of interpleader - then to them
devolves the duty to pay the docket fees prescribed under Rule 141 of the Rules of
Court, as amended.151ςrνll

The importance of paying the correct amount of docket fee cannot be

overemphasized:chanroblesvirtuallawlibrary

The matter of payment of docket fees is not a mere triviality. These fees are necessary
to defray court expenses in the handling of cases. Consequently, in order to avoid
tremendous losses to the judiciary, and to the government as well, the payment of
docket fees cannot be made dependent on the outcome of the case, except when the
claimant is a pauper-litigant.152ςrνll

WHEREFORE, premises considered the consolidated PETITIONS are GRANTED. The

Planters Development Bank is hereby REQUIRED to file with the Regional Trial Court
its comment or answer-in-interpleader to Bank of Commerces Amended Consolidated
Answer with Compulsory Counterclaim, as previously ordered by the Regional Trial
Court. The Regional Trial Court of Makati City, Branch 143, is hereby ORDERED to
assess the docket fees due from Planters Development Bank and Bank of Commerce
and order their payment, and to resolve with DELIBERATE DISPATCH the parties
conflicting claims of ownership over the proceeds of the Central Bank bills.

The Clerk of Court of the Regional Trial Court of Makati City, Branch 143, or his duly
authorized representative is hereby ORDERED to assess and collect the appropriate
amount of docket fees separately due the Bank of Commerce and Planters
Development Bank as conflicting claimants in Bangko Sentral ng Pilipinas interpleader
suit, in accordance with this decision.ςrαlαωlιbrαr

SO ORDERED.

RULE 63. DECLARATORY RELIEF AND SIMILAR REMEDIES

THIRD DIVISION

G.R. No. 211356, September 29, 2014

1663
 CRISOSTOMO B. AQUINO, Petitioner, v. MUNICIPALITY OF MALAY, AKLAN,
REPRESENTED BY HON. MAYOR JOHN P. YAP, SANGGUNIANG BAYAN OF
MALAY, AKLAN, REPRESENTED BY HON. EZEL FLORES, DANTE PASUGUIRON,
ROWEN AGUIRRE, WILBEC GELITO, JUPITER GALLENERO, OFFICE OF THE
MUNICIPAL ENGINEER, OFFICE OF THE MUNICIPAL TREASURER, BORACAY
PNP CHIEF, BORACAY FOUNDATION, INC., REPRESENTED BY NENETTE GRAF,
MUNICIPAL AUXILIARY POLICE, AND JOHN AND JANE DOES, Respondents.

DECISION

VELASCO JR., J.:

Nature of the Case

Before the Court is a Petition for Review on Certiorari challenging the Decision 1 and the
Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 120042 dated August 13,
2013 and February 3, 2014, respectively. The assailed rulings denied Crisostomo
Aquino’s Petition for Certiorari for not being the proper remedy to question the issuance
and implementation of Executive Order No. 10, Series of 2011 (EO 10), ordering the
demolition of his hotel establishment.

The Facts

Petitioner is the president and chief executive officer of Boracay Island West Cove
Management Philippines, Inc. (Boracay West Cove). On January 7, 2010, the company
applied for a zoning compliance with the municipal government of Malay, Aklan. 2 While
the company was already operating a resort in the area, the application sought the
issuance of a building permit covering the construction of a three-storey hotel over a
parcel of land measuring 998 sqm. located in Sitio Diniwid, Barangay Balagab, Boracay
Island, Malay, Aklan, which is covered by a Forest Land Use Agreement for Tourism
Purposes (FLAgT) issued by the Department of Environment and Natural Resources
(DENR) in favor of Boracay West Cove.

Through a Decision on Zoning dated January 20, 2010, the Municipal Zoning
Administrator denied petitioner’s application on the ground that the proposed
construction site was within the “no build zone” demarcated in Municipal Ordinance
2000-131 (Ordinance).3 As provided in the Ordinance:chanRoblesvirtualLawlibrary

SECTION 2. – Definition of Terms. As used in this Ordinance, the following words,

terms and phrases shall mean as follows:chanRoblesvirtualLawlibrary

xxxx

(b) No Build Zone – the space twenty-five (25) meters from the edge of the mean high
water mark measured inland;

xxxx

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SECTION 3. – No building or structure of any kind whether temporary or permanent
shall be allowed to be set up, erected or constructed on the beaches around the Island
of Boracay and in its offshore waters. During the conduct of special activities or special
events, the Sangguniang Bayan may, through a Resolution, authorize the Office of the
Mayor to issue Special Permits for construction of temporary structures on the beach for
the duration of the special activity as embodied in the Resolution.

In due time, petitioner appealed the denial action to the Office of the Mayor on February
1, 2010.

On May 13, 2010, petitioner followed up his appeal through a letter but no action was
ever taken by the respondent mayor. On April 5, 2011, however, a Notice of
Assessment was sent to petitioner asking for the settlement of Boracay West Cove’s
unpaid taxes and other liabilities under pain of a recommendation for closure in view of
its continuous commercial operation since 2009 sans the necessary zoning clearance,
building permit, and business and mayor’s permit. In reply, petitioner expressed
willingness to settle the company’s obligations, but the municipal treasurer refused to
accept the tendered payment. Meanwhile, petitioner continued with the construction,
expansion, and operation of the resort hotel.

Subsequently, on March 28, 2011, a Cease and Desist Order was issued by the
municipal government, enjoining the expansion of the resort, and on June 7, 2011, the
Office of the Mayor of Malay, Aklan issued the assailed EO 10, ordering the closure and
demolition of Boracay West Cove’s hotel.

EO 10 was partially implemented on June 10, 2011. Thereafter, two more instances
followed wherein respondents demolished the improvements introduced by Boracay
West Cove, the most recent of which was made in February 2014.

Alleging that the order was issued and executed with grave abuse of discretion,
petitioner filed a Petition for Certiorari with prayer for injunctive relief with the CA. He
argued that judicial proceedings should first be conducted before the respondent mayor
could order the demolition of the company’s establishment; that Boracay West Cove
was granted a FLAgT by the DENR, which bestowed the company the right to construct
permanent improvements on the area in question; that since the area is a forestland, it
is the DENR—and not the municipality of Malay, or any other local government unit for
that matter—that has primary jurisdiction over the area, and that the Regional Executive
Director of DENR-Region 6 had officially issued an opinion regarding the legal issues
involved in the present case; that the Ordinance admits of exceptions; and lastly, that it
is the mayor who should be blamed for not issuing the necessary clearances in the
company’s favor.

In rebuttal, respondents contended that the FLAgT does not excuse the company from
complying with the Ordinance and Presidential Decree No. 1096 (PD 1096), otherwise
known as the National Building Code of the Philippines. Respondents also argued that

1665
the demolition needed no court order because the municipal mayor has the express
power under the Local Government Code (LGC) to order the removal of illegally
constructed buildings.

Ruling of the Court of Appeals

In its assailed Decision dated August 13, 2013, the CA dismissed the petition solely on
procedural ground, i.e., the special writ of certiorari can only be directed against a
tribunal, board, or officer exercising judicial or quasi-judicial functions and since the
issuance of EO 10 was done in the exercise of executive functions, and not of judicial or
quasi-judicial functions, certiorari will not lie. Instead, the proper remedy for the
petitioner, according to the CA, is to file a petition for declaratory relief with the Regional
Trial Court.

Petitioner sought reconsideration but this was denied by the CA on February 3, 2014
through the challenged Resolution. Hence, the instant petition raising arguments on
both procedure and substance.

The Issues

Stripped to the essentials, the pivotal issues in the extant case are as
follows:chanRoblesvirtualLawlibrary

The propriety under the premises of the filing of a petition for certiorari instead of

a petition for declaratory relief;

a. Whether or not declaratory relief is still available to petitioner;

b. Whether or not the CA correctly ruled that the respondent mayor was performing
neither a judicial nor quasi-judicial function when he ordered the closure and
demolition of Boracay West Cove’s hotel;

Whether or not respondent mayor committed grave abuse of discretion when he

issued EO 10;

a. Whether or not petitioner’s right to due process was violated when the
respondent mayor ordered the closure  and demolition of Boracay West Cove’s
hotel without first conducting judicial proceedings;

b. Whether or not the LGU’s refusal to issue petitioner the necessary building
permit and clearances was justified;

c. Whether or not petitioner’s rights under the FLAgT prevail over the municipal
ordinance providing for a no-build zone; andChanRoblesVirtualawlibrary

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 d. Whether or not the DENR has primary jurisdiction over the controversy, not the
LGU.

The Court’s Ruling

We deny the petition.

Certiorari, not declaratory relief, is the proper remedy

a. Declaratory relief no longer viable

Resolving first the procedural aspect of the case, We find merit in petitioner’s contention
that the special writ of certiorari , and not declaratory relief, is the proper remedy for
assailing EO 10. As provided under Sec. 1, Rule 63 of the Rules of
Court:chanRoblesvirtualLawlibrary

SECTION 1. Who may file petition. – Any person interested under a deed, will, contract
or other written instrument, whose rights are affected by a statute, executive order or
regulation, ordinance or any other governmental regulation may, before breach or
violation thereof, bring an action in the appropriate Regional Trial Court to determine
any question of construction or validity arising, and for a declaration of his rights or
duties, thereunder. x x x (emphasis added)

An action for declaratory relief presupposes that there has been no actual breach of the
instruments involved or of the rights arising thereunder.  Since the purpose of an action
for declaratory relief is to secure an authoritative statement of the rights and obligations
of the parties under a statute, deed, or contract for their guidance in the enforcement
thereof, or compliance therewith, and not to settle issues arising from an alleged breach
thereof, it may be entertained before the breach or violation of the statute, deed or
contract to which it refers.  A petition for declaratory relief gives a practical remedy for
ending controversies that have not reached the state where another relief is
immediately available; and supplies the need for a form of action that will set
controversies at rest before they lead to a repudiation of obligations, an invasion of
rights, and a commission of wrongs.4cralawlawlibrary

In the case at bar, the petition for declaratory relief became unavailable by EO 10’s
enforcement and implementation. The closure and demolition of the hotel rendered
futile any possible guidelines that may be issued by the trial court for carrying out the
directives in the challenged EO 10. Indubitably, the CA erred when it ruled that
declaratory relief is the proper remedy given such a situation.

b. Petitioner correctly resorted to certiorari

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On the propriety of filing a petition for certiorari , Sec. 1, Rule 65 of the Rules of Court
provides:chanRoblesvirtualLawlibrary

Section 1. Petition for certiorari . — When any tribunal, board or officer exercising

judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction,
or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is
no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court, alleging the
facts with certainty and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting such incidental reliefs as law
and justice may require. x x x

For certiorari to prosper, the petitioner must establish the concurrence of the following
requisites, namely:chanRoblesvirtualLawlibrary

1. The writ is directed against a tribunal, board, or officer exercising judicial or

quasi-judicial functions;

2. Such tribunal, board, or officer has acted without or in excess of jurisdiction, or

with grave abuse of discretion amounting to lack or excess of jurisdiction;
andChanRoblesVirtualawlibrary

3. There is no appeal or any plain speedy, and adequate remedy in the ordinary
course of law.5

Guilty of reiteration, the CA immediately dismissed the Petition for Certiorari upon
determining that the first element is wanting—that respondent mayor was allegedly not
exercising judicial or quasi-judicial functions when he issued EO 10.

We are not persuaded.

The CA fell into a trap when it ruled that a mayor, an officer from the executive
department, exercises an executive function whenever he issues an Executive Order.
This is tad too presumptive for it is the nature of the act to be performed, rather than of
the office, board, or body which performs it, that determines whether or not a particular
act is a discharge of judicial or quasi-judicial functions. The first requirement
for certiorari is satisfied if the officers act judicially in making their decision, whatever
may be their public character.6cralawlawlibrary

It is not essential that the challenged proceedings should be strictly and technically
judicial, in the sense in which that word is used when applied to courts of justice, but it is
sufficient if they are quasi-judicial.7   To contrast, a party is said to be exercising
a judicial function where he has the power to determine what the law is and what legal
rights of the parties are, and then undertakes to determine these questions and
adjudicate upon the rights of the parties, whereas quasi-judicial function is “a term

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which applies to the actions, discretion, etc., of public administrative officers or bodies x
x x required to investigate facts or ascertain the existence of facts, hold hearings, and
draw conclusions from them as a basis for their official action and to exercise discretion
of a judicial nature.”8cralawlawlibrary

In the case at bench, the assailed EO 10 was issued upon the respondent mayor’s
finding that Boracay West Cove’s construction, expansion, and operation of its hotel in
Malay, Aklan is illegal. Such a finding of illegality required the respondent mayor’s
exercise of quasi-judicial functions, against which the special writ of certiorari may lie.
Apropos hereto is Our ruling in City Engineer of Baguio v. Baniqued:9cralawlawlibrary

There is no gainsaying that a city mayor is an executive official nor is the matter of
issuing demolition notices or orders not a ministerial one. In determining whether or not
a structure is illegal or it should be demolished, property rights are involved thereby
needing notices and opportunity to be heard as provided for in the constitutionally
guaranteed right of due process.  In pursuit of these functions, the city mayor has to
exercise quasi-judicial powers.

With the foregoing discussion, the CA erred in ruling that the respondent mayor was
merely exercising his executive functions, for clearly, the first requisite for the special
writ has been satisfied.

Aside from the first requisite, We likewise hold that the third element, i.e., the
unavailability of a plain, speedy, or adequate remedy, is also present herein. While it
may be argued that, under the LGC, Executive Orders issued by mayors are subject to
review by provincial governors,10 this cannot be considered as an adequate remedy
given the exigencies of petitioner’s predicament.

In a litany of cases, We have held that it is inadequacy, not the mere absence of all
other legal remedies and the danger of failure of justice without the writ, that must
usually determine the propriety of certiorari . A remedy is plain, speedy and adequate if
it will promptly relieve the petitioner from the injurious effects of the judgment, order, or
resolution of the lower court or agency. It is understood, then, that a litigant need not
mark time by resorting to the less speedy remedy of appeal in order to have an order
annulled and set aside for being patently void for failure of the trial court to comply with
the Rules of Court.11cralawlawlibrary

Before applying this doctrine, it must first be borne in mind that respondents in this case
have already taken measures towards implementing EO 10. In fact, substantial
segments of the hotel have already been demolished pursuant to the mayor’s directive. 
It is then understandable why petitioner prayed for the issuance of an injunctive writ––a
provisional remedy that would otherwise have been unavailable had he sought a
reversal from the office of the provincial governor of Aklan. Evidently, petitioner correctly
saw the urgent need for judicial intervention via certiorari .

In light of the foregoing, the CA should have proceeded to grab the bull by its horns and

1669
determine the existence of the second element of certiorari ––whether or not there was
grave abuse of discretion on the part of respondents.

Upon Our finding that a petition for certiorari under Rule 65 is the appropriate remedy,
We will proceed to resolve the core issues in view of the urgency of the reliefs prayed
for in the petition.

Respondents did not commit grave abuse of discretion

a. The hotel’s classification as a nuisance

Article 694 of the Civil Code defines “nuisance” as any act, omission, establishment,
business, condition or property, or anything else that (1) injures or endangers the health
or safety of others; (2) annoys or offends the senses; (3) shocks, defies or disregards
decency or morality; (4) obstructs or interferes with the free passage of any public
highway or street, or any body of water; or (5) hinders or impairs the use of
property.12cralawlawlibrary

In establishing a no build zone through local legislation, the LGU effectively made a
determination that constructions therein, without first securing exemptions from the local
council, qualify as nuisances for they pose a threat to public safety. No build zones are
intended for the protection of the public because the stability of the ground’s foundation
is adversely affected by the nearby body of water. The ever present threat of high rising
storm surges also justifies the ban on permanent constructions near the shoreline.
Indeed, the area’s exposure to potential geo-hazards cannot be ignored and ample
protection to the residents of Malay, Aklan should be afforded.

Challenging the validity of the public respondents’ actuations, petitioner posits that the
hotel cannot summarily be abated because it is not a nuisance per se, given the
hundred million peso-worth of capital infused in the venture. Citing Asilo, Jr. v.
People,13 petitioner also argues that respondents should have first secured a court order
before proceeding with the demolition.

Preliminarily, We agree with petitioner’s posture that the property involved cannot be
classified as a nuisance per se, but not for the reason he so offers. Property valuation,
after all, is not the litmus test for such a determination. More controlling is the property’s
nature and conditions, which should be evaluated to see if it qualifies as a nuisance as
defined under the law.

As jurisprudence elucidates, nuisances are of two kinds: nuisance per se and

nuisance per accidens. The first is recognized as a nuisance under any and all
circumstances, because it constitutes a direct menace to public health or safety, and,
for that reason, may be abated summarily under the undefined law of necessity. The
second is that which depends upon certain conditions and circumstances, and its
existence being a question of fact, it cannot be abated without due hearing thereon in a
tribunal authorized to decide whether such a thing does in law constitute a

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nuisance.14cralawlawlibrary

In the case at bar, the hotel, in itself, cannot be considered as a nuisance per se since
this type of nuisance is generally defined as an act, occupation, or structure, which is a
nuisance at all times and under any circumstances, regardless of location or
surrounding.15 Here, it is merely the hotel’s particular incident––its location––and not its
inherent qualities that rendered it a nuisance. Otherwise stated, had it not been
constructed in the no build zone, Boracay West Cove could have secured the necessary
permits without issue. As such, petitioner is correct that the hotel is not a nuisance per
se, but to Our mind, it is still a nuisance per accidens.

b.    Respondent mayor has the power to order the demolition of illegal
constructions 

Generally, LGUs have no power to declare a particular thing as a nuisance unless such
a thing is a nuisance per se.16 So it was held in AC Enterprises v. Frabelle Properties
Corp:17cralawlawlibrary

We agree with petitioner’s contention that, under Section 447(a)(3)(i) of R.A. No. 7160,
otherwise known as the Local Government Code, the Sangguniang Panglungsod is
empowered to enact ordinances declaring, preventing or abating noise and other forms
of nuisance. It bears stressing, however, that the Sangguniang Bayan cannot declare a
particular thing as a nuisance per se and order its condemnation. It does not have the
power to find, as a fact, that a particular thing is a nuisance when such thing is
not a nuisance per se; nor can it authorize the extrajudicial condemnation and
destruction of that as a nuisance which in its nature, situation or use is not such.
Those things must be determined and resolved in the ordinary courts of law. If a
thing, be in fact, a nuisance due to the manner of its operation, that question cannot be
determined by a mere resolution of the Sangguniang Bayan. (emphasis supplied)

Despite the hotel’s classification as a nuisance per accidens, however, We still find in

this case that the LGU may nevertheless properly order the hotel’s demolition. This is
because, in the exercise of police power and the general welfare clause, 18 property
rights of individuals may be subjected to restraints and burdens in order to fulfill the
objectives of the government. Otherwise stated, the government may enact legislation
that may interfere with personal liberty, property, lawful businesses and occupations to
promote the general welfare.19cralawlawlibrary

One such piece of legislation is the LGC, which authorizes city and municipal
governments, acting through their local chief executives, to issue demolition orders.
Under existing laws, the office of the mayor is given powers not only relative to its
function as the executive official of the town; it has also been endowed with authority to
hear issues involving property rights of individuals and to come out with an effective
order or resolution thereon.20 Pertinent herein is Sec. 444 (b)(3)(vi) of the LGC, which
empowered the mayor to order the closure and removal of illegally constructed

1671
establishments for failing to secure the necessary permits, to
wit:chanRoblesvirtualLawlibrary

Section 444. The Chief Executive: Powers, Duties, Functions and Compensation. –

xxxx

(b) For efficient, effective and economical governance the purpose of which is the
general welfare of the municipality and its inhabitants pursuant to Section 16 of this
Code, the municipal mayor shall:chanroblesvirtuallawlibrary
xxxx

(3) Initiate and maximize the generation of resources and revenues, and apply the same
to the implementation of development plans, program objectives and priorities as
provided for under Section 18 of this Code, particularly those resources and revenues
programmed for agro-industrial development and country-wide growth and progress,
and relative thereto, shall:chanroblesvirtuallawlibrary
xxxx

(vi) Require owners of illegally constructed houses, buildings or other structures

to obtain the necessary permit, subject to such fines and penalties as may be
imposed by law or ordinance, or to make necessary changes in the construction
of the same when said construction violates any law or ordinance, or to order the
demolition or removal of said house, building or structure within the period
prescribed by law or ordinance. (emphasis supplied)

c.  Requirements for the exercise of the power are present

i.   Illegality of structures

In the case at bar, petitioner admittedly failed to secure the necessary permits,
clearances, and exemptions before the construction, expansion, and operation of
Boracay Wet Cove’s hotel in Malay, Aklan. To recall, petitioner declared that the
application for zoning compliance was still pending with the office of the mayor even
though construction and operation were already ongoing at the same time. As such, it
could no longer be denied that petitioner openly violated Municipal Ordinance 2000-131,
which provides:chanRoblesvirtualLawlibrary

SECTION 9. – Permits and Clearances.

(a) No building or structure shall be allowed to start construction unless a

Building Permit therefore has been duly issued by the Office of the Municipal
Engineer. Once issued, the building owner or any person in charge of the
construction shall display on the lot or on the building undergoing construction a
placard containing the Building Permit Number and the date of its issue. The office
of the Municipal Engineer shall not issue any building permit unless:
1. The proposed construction has been duly issued a Zoning Clearance

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 by the Office of the Municipal Zoning Officer;
2. The proposed construction has been duly endorsed by the Sangguniang
Bayan through a Letter of Endorsement.

(b) Only buildings/structures which has complied with all the requirements for its
construction as verified to by the Building Inspector and the Sangguniang Bayan
shall be issued a Certificate of Occupancy by the Office of the Municipal Engineer.
(c) No Business or Mayor’s Permit shall be issued to businesses being
undertaken on buildings or structures which were not issued a certificate of
Occupancy beginning January 2001 and thereafter.

xxxx

SECTION 10. – Penalties.

xxxx

(e) Any building, structure, or contraption erected in any public place within the
Municipality of Malay such as but not limited to streets, thoroughfares, sidewalks,
plazas, beaches or in any other public place are hereby declared as nuisance and
illegal structure. Such building structure or contraption shall be demolished by the
owner thereof or any of his authorized representative within ten (10) days from
receipt of the notice to demolish. Failure or refusal on the part of the owner or
any of his authorized representative to demolish the illegal structure within the
period herein above specified shall automatically authorize the government of the
Municipality of Malay to demolish the same, gather and keep the construction
materials of the demolished structure. (emphasis supplied)

Petitioner cannot justify his position by passing the blame onto the respondent mayor
and the latter’s failure to act on his appeal for this does not, in any way, imply that
petitioner can proceed with his infrastructure projects. On the contrary, this only means
that the decision of the zoning administrator denying the application still stands
and that petitioner acquired no right to construct on the no build zone. The
illegality of the construction cannot be cured by merely tendering payment for the
necessary fees and permits since the LGU’s refusal rests on valid grounds.

Instead of taking the law into his own hands, petitioner could have filed, as an
alternative, a petition for mandamus to compel the respondent mayor to exercise
discretion and resolve the controversy pending before his office. There is indeed an
exception to the rule that matters involving judgment and discretion are beyond the
reach of a writ of mandamus, for such writ may be issued to compel action in those
matters, when refused. Whether or not the decision would be for or against petitioner
would be for the respondent mayor to decide, for while mandamus may be invoked to
compel the exercise of discretion, it cannot compel such discretion to be exercised in a
particular way.21 What would have been important was for the respondent mayor to
immediately resolve the case for petitioner to be able to go through the motions that the

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zoning clearance application process entailed.

Alas, petitioner opted to defy the zoning administrator’s ruling. He consciously chose to
violate not only the Ordinance but also Sec. 301 of PD 1096, laying down the
requirement of building permits, which provides:chanRoblesvirtualLawlibrary

Section 301. Building Permits. No person, firm or corporation, including any agency or
instrumentality of the government shall erect, construct, alter, repair, move, convert or
demolish any building or structure or cause the same to be done without first obtaining a
building permit therefor from the Building Official assigned in the place where the
subject building is located or the building work is to be done.

This twin violation of law and ordinance warranted the LGU’s invocation of Sec. 444 (b)
(3)(vi) of the LGC, which power is separate and distinct from the power to summarily
abate nuisances per se. Under the law, insofar as illegal constructions are concerned,
the mayor can, after satisfying the requirement of due notice and hearing, order their
closure and demolition.
ii. Observance of procedural due process rights
In the case at bench, the due process requirement is deemed to have been sufficiently
complied with. First, basic is the rule that public officers enjoy the presumption of
regularity in the performance of their duties.22 The burden is on the petitioner herein to
prove that Boracay West Cove was deprived of the opportunity to be heard before EO
10 was issued. Regrettably, copies of the Cease and Desist Order issued by the LGU
and of the assailed EO 10 itself were never attached to the petition before this Court,
which documents could have readily shed light on whether or not petitioner has been
accorded the 10-day grace period provided in Section 10 of the Ordinance. In view of
this fact, the presumption of regularity must be sustained. Second, as quoted by
petitioner in his petition before the CA, the assailed EO 10 states that petitioner
received notices from the municipality government on March 7 and 28, 2011, requiring
Boracay West Cove to comply with the zoning ordinance and yet it failed to do so. 23   If
such was the case, the grace period can be deemed observed and the establishment
was already ripe for closure and demolition by the time EO 10 was issued in
June. Third, the observance of the 10-day allowance for the owner to demolish the hotel
was never questioned by petitioner so there is no need to discuss the same. Verily, the
only grounds invoked by petitioner in crying due process violation are (1) the absence of
a court order prior to demolition and (2) the municipal government’s exercise of
jurisdiction over the controversy instead of the DENR. Therefore, it can no longer be
belatedly argued that the 10-day grace period was not observed because to entertain
the same would result in the violation of the respondents’ own due process rights.

Given the presence of the requirements under Sec. 444 (b)(3)(vi) of the LGC, whether
the building constituted a nuisance per se or a nuisance per accidens becomes
immaterial. The hotel was demolished not exactly because it is a nuisance but because
it failed to comply with the legal requirements prior to construction. It just so happened
that, in the case at bar, the hotel’s incident that qualified it as a nuisance per accidens––
its being constructed within the no build zone––further resulted in the non-issuance of

1674
the necessary permits and clearances, which is a ground for demolition under the LGC.
Under the premises, a court order that is required under normal circumstances is
hereby dispensed with.

d.    The FLAgT cannot prevail over the municipal ordinance and PD 1096

Petitioner next directs our attention to the following FLAgT

provision:chanRoblesvirtualLawlibrary

VII. The SECOND PARTY may construct permanent and/or temporary improvements or
infrastructure in the FLAgT Area necessary and appropriate for its development for
tourism purposes pursuant to the approved SMP. “Permanent Improvements” refer to
access roads, and buildings or structures which adhere to the ground in a fixed and
permanent manner. On the other hand, “Temporary Improvements” include those which
are detachable from the foundation or the ground introduced by the SECOND PARTY in
the FLAgT Area and which the SECOND PARTY may remove or dismantle upon
expiration or cancellation of this AGREEMENT x x x.24chanrobleslaw

Taken in conjunction with the exceptions laid down in Sections 6 and 8 of the
Ordinance, petitioner argues that Boracay West Cove is exempted from securing
permits from the LGU. Said exceptions read:chanRoblesvirtualLawlibrary

SECTION 6. – No building or structure shall be allowed to be constructed on a slope

Twenty Five Percent (25%) or higher unless provided with soil erosion protective
structures and authorized by the Department of Environment and Natural Resources.

xxxx

SECTION 8. – No building or structure shall be allowed to be constructed on a swamp

or other water-clogged areas unless authorized by the Department of Environment and
Natural Resources.

According to petitioner, the fact that it was issued a FLAgT constitutes sufficient
authorization from the DENR to proceed with the construction of the three-storey hotel.

The argument does not persuade.

The rights granted to petitioner under the FLAgT are not unbridled. Forestlands,
although under the management of the DENR, are not exempt from the territorial
application of municipal laws, for local government units legitimately exercise their
powers of government over their defined territorial jurisdiction.

Furthermore, the conditions set forth in the FLAgT and the limitations circumscribed in
the ordinance are not mutually exclusive and are, in fact, cumulative. As sourced from
Sec. 447 (a)(5)(i) of the LGC:chanRoblesvirtualLawlibrary

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Section 447. Powers, Duties, Functions and Compensation. –

(a) The sangguniang bayan, as the legislative body of the municipality, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare of the
municipality and its inhabitants pursuant to Section 16 of this Code and in the proper
exercise of the corporate powers of the municipality as provided for under Section 22 of
this Code, and shall:chanroblesvirtuallawlibrary
xxxx

(5) Approve ordinances which shall ensure the efficient and effective delivery of the
basic services and facilities as provided for under Section 17 of this Code, and in
addition to said services and facilities, shall:chanroblesvirtuallawlibrary
(i) Provide for the establishment, maintenance, protection, and conservation of
communal forests and watersheds, tree parks, greenbelts, mangroves, and other
similar forest development projects x x x. (emphasis added)

Thus, aside from complying with the provisions in the FLAgT granted by the DENR, it
was incumbent on petitioner to likewise comply with the no build zone restriction under
Municipal Ordinance 2000-131, which was already in force even before the FLAgT was
entered into. On this point, it is well to stress that Sections 6 and 8 of the Ordinance do
not exempt petitioner from complying with the restrictions since these provisions
adverted to grant exemptions from the ban on constructions on slopes and swamps, not
on the no build zone.

Additionally, the FLAgT does not excuse petitioner from complying with PD 1096. As
correctly pointed out by respondents, the agreement cannot and will not amend or
change the law because a legislative act cannot be altered by mere contractual
agreement. Hence, petitioner has no valid reason for its failure to secure a building
permit pursuant to Sec. 301 of the National Building Code.

e.  The DENR does not have primary jurisdiction over the controversy

Lastly, in ascribing grave abuse of discretion on the part of the respondent mayor,
petitioner argued that the hotel site is a forestland under the primary jurisdiction of the
DENR. As such, the merits of the case should have been passed upon by the agency
and not by the LGU. In the alternative, petitioner explains that even if jurisdiction over
the matter has been devolved in favor of the LGU, the DENR still has the power of
review and supervision over the former’s rulings. As cited by the petitioner, the LGC
reads:chanRoblesvirtualLawlibrary

Section 17. Basic Services and Facilities. –

xxxx

(b) Such basic services and facilities include, but are not limited to, the
following:chanroblesvirtuallawlibrary

1676
xxxx

(2) For a Municipality:chanroblesvirtuallawlibrary

xxxx

(ii) Pursuant to national policies and subject to supervision, control and review of the
DENR, implementation of community-based forestry projects which include integrated
social forestry programs and similar projects; management and control of communal
forests with an area not exceeding fifty (50) square kilometers; establishment of tree
parks, greenbelts, and similar forest development projects. (emphasis added)

Petitioner has made much of the fact that in line with this provision, the DENR Region 6
had issued an opinion favourable to petitioner. 25 To petitioner, the adverted opinion
effectively reversed the findings of the respondent mayor that the structure introduced
was illegally constructed.

We disagree.

In alleging that the case concerns the development and the proper use of the country’s
environment and natural resources, petitioner is skirting the principal issue, which is
Boracay West Cove’s non-compliance with the permit, clearance, and zoning
requirements for building constructions under national and municipal laws. He
downplays Boracay West Cove’s omission in a bid to justify ousting the LGU of
jurisdiction over the case and transferring the same to the DENR. He attempts to blow
the issue out of proportion when it all boils down to whether or not the construction of
the three-storey hotel was supported by the necessary documentary requirements.

Based on law and jurisprudence, the office of the mayor has quasi-judicial powers to
order the closing and demolition of establishments. This power granted by the LGC, as
earlier explained, We believe, is not the same power devolved in favor of the LGU under
Sec. 17 (b)(2)(ii), as above-quoted, which is subject to review by the DENR. The fact
that the building to be demolished is located within a forestland under the administration
of the DENR is of no moment, for what is involved herein, strictly speaking, is not an
issue on environmental protection, conservation of natural resources, and the
maintenance of ecological balance, but the legality or illegality of the structure. Rather
than treating this as an environmental issue then, focus should not be diverted from the
root cause of this debacle––compliance.

Ultimately, the purported power of review by a regional office of the DENR over
respondents’ actions exercised through an instrumentality of an ex-parte opinion, in this
case, finds no sufficient basis. At best, the legal opinion rendered, though perhaps
informative, is not conclusive on the courts and should be taken with a grain of salt.

WHEREFORE, in view of the foregoing, the petition is hereby DENIED for lack of merit.

The Decision and the Resolution of the Court of Appeals in CA-G.R. SP No. 120042
dated August 13, 2013 and February 3, 2014, respectively, are hereby AFFIRMED.

1677
SO ORDERED.cralawred
RULE 65. CERTIORARI, PROHIBITION, AND MANDAMUS
SECOND DIVISION
[ G.R. No. 205128, August 09, 2017 ]
HEIRS OF ELIZA Q. ZOLETA, NAMELY: SERGIO RENATO Q. ZOLETA, A.K.A.,
CARLOS ZOLETA, VENANCIO Q. ZOLETA, AND MILAGROS Q. ZOLETA-GARCIA,
PETITIONERS, VS. LAND BANK OF THE PHILIPPINES AND DEPARTMENT OF
AGRARIAN REFORM ADJUDICATION BOARD, RESPONDENTS.

DECISION
LEONEN, J.:
A perceived abuse cannot be cured by an abuse. Administrative agencies, such as the
Department of Agrarian Reform Adjudication Board (DARAB), are not courts of law
exercising judicial power. The power to issue writs of certiorari is an incident of judicial
review. Thus, administrative agencies may not issue writs of certiorari to annul acts of
officers or state organs even when they exercise supervisory authority over these
officers or organs.

This resolves a Petition for Review on Certiorari[1] under Rule 45 of the 1997 Rules of
Civil Procedure praying that the assailed July 23, 2012 Decision [2] and January 9, 2013
Resolution[3] of the Court of Appeals be reversed and set aside. It is prayed that in lieu
of them, judgment be rendered directing respondent DARAB to dismiss the Petition for
Certiorari filed before it by respondent Land Bank of the Philippines (Landbank).

The assailed July 23, 2012 Decision denied the Petition for Certiorari and Prohibition
filed by Sergio Renato Q. Zoleta, Venancio Q. Zoleta, and Milagros Q. Zoleta-Garcia
(petitioners). This Decision found no grave abuse of discretion on the part of DARAB in
issuing a resolution granting Landbank's Petition for Certiorari against an order and
alias writ of execution issued by Regional Agrarian Reform Adjudicator (RARAD)
Conchita C. Miñas (Regional Adjudicator Miñas).[4] The assailed January 9, 2013
Resolution denied petitioners' Motion for Reconsideration. [5]

On September 29, 1996, Eliza Zoleta (Eliza), through Venancio Q. Zoleta, voluntarily
offered for sale to the government, under the Comprehensive Agrarian Reform
Program, a parcel of land covered by Transfer Certificate of Title No. T-87673. This lot
was located in Barangay Casay, San Francisco, Quezon and had an area of
approximately 136 hectares.[6]

Pursuant to Executive Order No. 405,[7] Landbank made a valuation of the land and
determined that only 125.4704 hectares of the property's 136 hectares were covered by
the Comprehensive Agrarian Reform Program. [8] It valued the covered portion at
P3,986,639.57.[9] Landbank then deposited this amount in the name of Eliza. [10]

Eliza rejected Landbank's valuation. Thus, the matter was endorsed to the Office of the

1678
Provincial Agrarian Reform Adjudicator (PARAD) of Quezon II. [11] However, upon Eliza's
manifestation that the amount involved was beyond the jurisdiction of PARAD, the case
was transferred to the Office of RARAD.[12] The Office of RARAD then conducted
summary administrative proceedings pursuant to Section 16(d) [13] of Republic Act No.
6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988. [14]

On October 3, 2000, Regional Adjudicator Miñas rendered a Decision [15] fixing just

compensation at P8,938,757.72.[16]

Not satisfied with the amount, Landbank filed a Petition for Just Compensation before
the Regional Trial Court, Branch 56, Lucena City, acting as Special Agrarian Court, on
November 7, 2000.[17]

On November 9, 2000, Eliza filed a Motion for Execution of Judgment before the Office
of Regional Adjudicator Miñas. This was unsuccessfully opposed by Landbank. [18]

On January 16, 2001, Regional Adjudicator Miñas granted Eliza's motion for execution
and issued an order directing the issuance of a writ of execution. The writ of execution,
however, was returned unsatisfied. Thus, Regional Adjudicator Miñas issued an alias
writ of execution on February 15, 2001. The following day, the DARAB Sheriff issued a
Notice of Garnishment and a Notice of Levy on Personal Property. [19]

Landbank sought from the Special Agrarian Court the quashal of the alias writ of
execution and, in the interim, the issuance of a temporary restraining order against its
implementation. In the Resolution dated March 27, 2001, the Special Agrarian Court
denied Landbank's plea as DARAB had never been impleaded by Landbank as
respondent, thereby failing to vest the Special Agrarian Court with jurisdiction over
DARAB.[20]

Unable to obtain relief from the Special Agrarian Court, Landbank, on April 2, 2001, filed
before DARAB a "petition for certiorari pursuant to  paragraph 2, Section 3, Rule VIII of
the [1994] DARAB New Rules of Procedure." [21] It ascribed "grave abuse of discretion
amounting to lack or in excess of jurisdiction" [22] on the part of Regional Adjudicator
Miñas in issuing the January 16, 2001 Order and the February 15, 2001 Alias Writ of
Execution.[23]

In the Resolution[24] dated May 12, 2006, DARAB granted Land Bank's petition for
certiorari and "annulled" the January 16, 2001 Order and the February 15, 2001 Alias
Writ of Execution:

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The Order
dated 16 January 2001 and an Alias Writ of Execution dated 15 February 2001 pursuant
to the Decision in DARAB Case No. V-0412-0339-98 dated 03 October 2000 is hereby
ANNULLED and herein public respondent is hereby ordered to withdraw the same.

SO ORDERED.[25]

1679
DARAB faulted Regional Adjudicator Miñas for relying on Rule XIV, Section 1 of the
1994 DARAB New Rules of Procedure (1994 Rules),[26] which allows for 15 days for
petitions for certiorari from DARAB rulings involving agrarian disputes to be brought to
the Court of Appeals, in concluding that her October 3, 2000 Decision had attained
finality. It noted that she should have instead relied on Rule XIII, Section 11 [27] regarding
the specific course of relief from adjudicators' decisions on just compensation or
valuation cases.[28]

Petitioners[29] then filed a Petition for Certiorari and Prohibition under Rule 65 of the
1997 Rules of Civil Procedure before the Court of Appeals alleging that DARAB
exceeded its authority when it granted Landbank's Petition for Certiorari under Rule VIII,
Section 3 of the 1994 Rules.[30]

In its assailed July 23, 2012 Decision, [31] the Court of Appeals held that DARAB's
actions were sustained by its general "supervisory authority" and appellate jurisdiction
over rulings of RARADs and PARADs.[32]

In its assailed January 9, 2013 Resolution, the Court of Appeals denied petitioners'
Motion for Reconsideration.[33]

Hence, the present Petition was filed.

For resolution is the issue of whether it was proper for respondent DARAB to issue its
May 12, 2006 Resolution, which granted respondent Landbank's "petition for certiorari
pursuant to paragraph 2, Section 3, Rule VIII of the [1994] DARAB New Rules of
Procedure."[34]

It was not.

Jurisprudence has settled that DARAB possesses no power to issue writs of certiorari.

This Court's 2005 Decision in Department of Agrarian Reform Adjudication Board v.

Lubrica[35] concerned a controversy over the amount of just compensation due to a
landowner, which was initially brought before RARAD. RARAD decided in favor of the
landowner and ordered Landbank to pay an amount that was greater than its initial
valuation.[36] Landbank then filed a petition for just compensation before the Regional
Trial Court, acting as a Special Agrarian Court, [37] This petition was dismissed as
Landbank failed to timely pay docket fees.[38] RARAD then considered its ruling on the
amount of just compensation final and executory, and issued a writ of execution.
[39]
 Landbank filed a Petition for Certiorari before DARAB, under Rule VIII, Section 3 of
its 1994 Rules.[40] DARAB ruled for Landbank and prevented the Regional Adjudicator
from implementing her ruling.[41] This prompted the landowner to file a Petition for
1680
Prohibition before the Court of Appeals, asking that DARAB be enjoined from
proceeding with the case, as it did not have jurisdiction over special civil actions
for certiorari.[42] The Court of Appeals ruled that DARAB had no jurisdiction over
petitions for certiorari.[43]

This Court sustained the ruling of the Court of Appeals. In doing so, this Court
emphasized that jurisdiction over the subject matter must be provided by law. It noted
that there was no law that vested DARAB with jurisdiction over petitions
for certiorari. Rather than finding constitutional or statutory basis, DARAB's
supposed certiorari power was provided only by its own rules of procedure:

Jurisdiction, or the legal power to hear and determine a cause or causes of action, must
exist as a matter of law. It is settled that the authority to issue writs of certiorari,
prohibition, and mandamus involves the exercise of original jurisdiction which must be
expressly conferred by the Constitution or by law. It is never derived by implication.
Indeed, while the power to issue the writ of certiorari is in some instance conferred on
all courts by constitutional or statutory provisions, ordinarily, the particular courts which
have such power are expressly designated.

....

In general, the quantum of judicial or quasi-judicial powers which an administrative

agency may exercise is defined in the enabling act of such agency. In other words, the
extent to which an administrative entity may exercise such powers depends largely, if
not wholly, on the provisions of the statute creating or empowering such agency. The
grant of original jurisdiction on a quasi-judicial agency is not implied. There is no
question that the legislative grant of adjudicatory powers upon the DAR, as in all other
quasi-judicial agencies, bodies and tribunals, is in the nature of a limited and special
jurisdiction, that is, the authority to hear and determine a class of cases within the
DAR's competence and field of expertise. In conferring adjudicatory powers and
functions on the DAR, the legislature could not have intended to create a regular court
of justice out of the DARAB, equipped with all the vast powers inherent in the exercise
of its jurisdiction. The DARAB is only a quasi-judicial body, whose limited jurisdiction
does not include authority over petitions for certiorari, in the absence of an express
grant in R.A. No. 6657, E.O. No. 229 and E.O. No. 129-A. [44] (Citations omitted)

This Court calibrates the pronouncements made in Department of Agrarian Reform

Adjudication Board v. Lubrica. It is true that the lack of an express constitutional or
statutory grant of jurisdiction disables DARAB  from exercising certiorari powers. Apart
from this, however, is a more fundamental reason for DARAB's disability.

As an administrative agency exercising quasi-judicial but not consummate judicial

power, DARAB is inherently incapable of issuing writs of certiorari. This is not merely a
matter of statutorily stipulated competence but a question that hearkens to the
separation of government's tripartite powers: executive, legislative, and judicial. [45]

1681
 II

Conceived in England, transplanted into our jurisdiction during American occupation,

and presently existing under the 1987 Constitution, the remedy of the writ of certiorari
was and remains a means for superior judicial bodies to undo the excesses of inferior
tribunals.

The writ of certiorari was a prerogative writ "issued by the King by virtue of his position
as fountain of justice and supreme head of the whole judicial administration." [46]

The King of England was considered the "supreme head of the nation with power over
life, limb, and property."[47] However, this status did not initially give him the absolute
power to pronounce judgment.[48] By the tradition carried over in the transition of Anglo-
Saxon chieftains "from the ducal to the royal dignity," [49] the power to pronounce
judgment was reserved to the members of the community themselves, "in accordance
with the Teutonic institution of popular courts." [50] The power that the King held was the
appointment of persons, called sheriffs, "who[,] as royal representatives[,] called the
popular courts together; to see that justice was rendered in case of its denial; personally
to judge those powerful litigants who could not be controlled by the popular courts; and
to execute or have executed the sentences of the courts." [51]

Despite these limitations on his right to pronounce judgment, the King reserved the
power to decide on certain cases: first, those which affected the crown, such as criminal
cases for violation of the King's peace; and second, cases involving the revenue. The
King and his advisers, known as the Curia Regis or the King's Council, decided these
cases. Its members were later on referred to as "justices" with a select member being
referred to as the "justitiar" or chief justice. [52]

Over time, the ways of popular courts—grounded as they were in custom, rather than
on standardized mechanisms—and evidence of sheriffs' partiality required the
intervention of the King's Council, in order that cases may be "decided by such new
methods as the wisdom of the King and his counsellors might invent." [53] Thus, the
King's council began to issue writs, to serve as "expedients by which the jus
honorarium of the King as fountain of justice was enabled to remedy the defects of the
jus civile or commune as applied in the local popular courts." [54]

In 1178, King Henry II realized that "there were too many justices in the Curia Regis to
do the work effectively."[55] Hence, he selected five (5) of his immediate personnel
"before whom he ordered the complaints of the people to be brought." [56] This group of
five (5) people became known as the King's Bench. This was called as such because its
members were to sit "in banco. "[57] In addition to these five (5) members, "the King was
supposed always to sit in the King's Bench," [58] With the King sitting in it, the King's
Bench "was regarded as the highest court in the land." [59] Even then, the King "reserved
the most difficult cases for his own hearing." [60]

1682
With the subsequent adoption of the Magna Carta, it was settled that "free persons and
free property were to be judged according to the law of the land." [61] To effect this
precept, royal courts were established, such as the Court of Common Pleas, where civil
suits were litigated.[62]

With the King still "reserv[ing] to himself the decision of the most difficult cases," [63] his
complete formal judicial supremacy emerged. "From his office proceeded all the writs
which were formulated by the King and his advisers, and by which actions were
commenced."[64] Over time, and owing to sheer multiplicity, many writs ceased to be
"writs of grace, granted by the King in his good pleasure" [65] but came to be issued to
litigants "de cursu"'or as a matter of course.[66]

While most writs were issued de cursu and upon proper demand, there remained writs
reserved only for the King's Bench: certiorari, mandamus, prohibition, and quo
warranto. Consistent with the status of the King's Bench as "the highest court in the
land,"[67] it "controlled the action of the other courts" through these writs. [68] Nevertheless,
the King's Bench issued these writs "only in extraordinary cases . . . and only when
some gross injustice was being done by other authorities." [69] They were used only
sparingly and in the most urgent of circumstances: "It remained the function of the King,
through his court of King's Bench, to [be the] judge of the necessity for their issue, and
they accordingly came to be known as prerogative writs." [70]

Spouses Delos Santos v. Metropolitan Bank and Trust Company [71] recounted the
purposes of and circumstances under which writs of certiorari were issued by the King's
Bench:

In the common law, from which the remedy of certiorari evolved, the writ
of certiorari was issued out of Chancery, or the King's Bench, commanding agents or
officers of the inferior courts to return the record of a cause pending before them, so as
to give the party more sure and speedy justice, for the writ would enable the superior
court to determine from an inspection of the record whether the inferior court's judgment
was rendered without authority. The errors were of such a nature that, if allowed to
stand, they would result in a substantial injury to the petitioner to whom no other remedy
was available. If the inferior court acted without authority, the record was then revised
and corrected in matters of law. The writ of certiorari was limited to cases in which the
inferior court was said to be exceeding its jurisdiction or was not proceeding according
to essential requirements of law and would lie only to review judicial or quasi-judicial
acts.[72] (Citations omitted)

The United States of America carried this English tradition. There, historically, only the
courts which "have inherited the jurisdiction of the English court of King's Bench" could
issue a writ of certiorari.[73]

The writ of certiorari, as a means of judicially rectifying a jurisdictional error, was

adopted by the Philippines from the California Code of Civil Procedure. [74] Our 1901
Code of Civil Procedure provided:
1683
Section 220. Final Proceedings in Certiorari. — When the proceedings complained of
have been fully certified, the court shall hear the parties and determine whether the
inferior tribunal, Board, or officer has regularly pursued its authority; and if it finds that
such inferior tribunal, Board, or officer has not regularly pursued its authority, it shall
thereupon give final judgment, either affirming, or annulling, or modifying the
proceedings below, as the law requires.

As Spouses Delos Santos v. Metropolitan Bank and Trust Company [75] further explained:

The concept of the remedy of certiorari in our judicial system remains much the same
as it has been in the common law. In this jurisdiction, however, the exercise of the
power to issue the writ of certiorari is largely regulated by laying down the instances or
situations in the Rules of Court in which a superior court may issue the writ of certiorari
to an inferior court or officer.[76]

Article VIII, Section 1 of the 1987 Constitution exclusively vests judicial power in this
Court "and in such lower courts as may be established by law." It identifies two (2)
dimensions of judicial power. First is "the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable." Second
is these courts'  same duty "to determine whether or not there has been a grave abuse
of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government."[77]

To effect the second dimension and pursuant to this Court's power to "[promulgate rules
concerning . . . pleading, practice, and procedure in all courts," [78] Rule 65 of the 1997
Rules of Civil Procedure defines the parameters for availing the writ of certiorari:

SECTION 1. Petition for certiorari. — When any tribunal, board or officer exercising
judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction,
or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is
no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court, alleging the
facts with certainty and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting such incidental reliefs as law
and justice may require.

The petition shall be accompanied by a certified true copy of the judgment, order or
resolution subject thereof, copies of all pleadings and documents relevant and pertinent
thereto, and a sworn certification of non-forum shopping as provided in the third
paragraph of Section 3, Rule 46.

The requisites for the issuance of a writ of certiorari are settled:

(a) the petition must be directed against a tribunal, Board, or officer exercising judicial

1684
 or quasi-judicial functions;

(b) the tribunal, Board, or officer must have acted without or in excess of jurisdiction or
with grave abuse of discretion amounting to lack or excess of jurisdiction; and

(c) there is no appeal, nor any plain, speedy and adequate remedy in the ordinary
course of law.[79] (Citation omitted)

The second and third requisites remain consistent with the original, Common Law
conception of certiorari as availing when "the inferior court's judgment was rendered
without authority," such that it "exceed[ed] its jurisdiction," and only when "no other
remedy [is] available."[80]

A lower court or tribunal is deemed to have acted "without jurisdiction" when it decides a
case even if no law gives it the jurisdiction over its subject matter. [81] The decision of a
lower court or tribunal can also be overturned by certiorari when it acts "in excess of
jurisdiction" or when it was given jurisdiction over the subject matter under the law but it
"has transcended the same or acted without any statutory authority." [82]

"Grave abuse of discretion" has been defined as:

By grave abuse of discretion is meant such capricious and whimsical exercise of

judgment as is equivalent to lack of jurisdiction. The abuse of discretion must be grave
as where the power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility and must be so patent and gross as to amount to an
evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act at
all in contemplation of law.

Grave abuse of discretion refers not merely to palpable errors of jurisdiction; or to

violations of the Constitution, the law and jurisprudence. It refers also to cases in which,
for various reasons, there has been a gross misapprehension of facts. [83] (Citations
omitted)

A petition for review on certiorari under Rule 45 should not be confused with a petition
for certiorari under Rule 65. The first is a mode of appeal; the latter is an extraordinary
remedy used to correct errors of jurisdiction. It is through the latter that a writ
of certiorari is issued. Precisely, for the writ to issue, there must be "no appeal, or any
plain, speedy and adequate remedy" available. [84]

III

The second dimension of judicial power under Article VIII, Section 1 of the 1987
Constitution settles the certiorari power as an incident of judicial review. Thus, judicial
1685
power includes the power of the courts to declare the acts of the executive and
legislative branches of the government void, when they act beyond the powers
conferred to them by law.[85] This second dimension does not operate independently of,
but within the parameters delimited by, the first dimension.

The first dimension of judicial power under Article VIII, Section 1 of the 1987
Constitution delimits the subject of judicial inquiry, that is, to "actual controversies
involving rights which are legally demandable and enforceable." The exercise of this
power, then, is proper only when a judicial question is raised, as opposed to a matter
that is better left to the competence of the other branches of the government.

Gonzales v. Climax Mining Ltd.[86] explained the concept of a judicial question, provided

an illustration of a controversy that involved a judicial question, and distinguished that
example from another controversy that did not involve a judicial question:

A judicial question is a question that is proper for determination by the courts, as

opposed to a moot question or one properly decided by the executive or legislative
branch. A judicial question is raised when the determination of the question involves the
exercise of a judicial function; that is, the question involves the determination of what
the law is and what the legal rights of the parties are with respect to the matter in
controversy.

....

[W]hether the case involves void or voidable contracts is still a judicial question. It may,
in some instances, involve questions of fact especially with regard to the determination
of the circumstances of the execution of the contracts. But the resolution of the validity
or voidness of the contracts remains a legal or judicial question as it requires the
exercise of judicial function. It requires the ascertainment of what laws are applicable to
the dispute, the interpretation and application of those laws, and the rendering of a
judgment based thereon. Clearly, the dispute is not a mining conflict. It is essentially
judicial. The complaint was not merely for the determination of rights under the mining
contracts since the very validity of those contracts is put in issue. [87] (Emphasis supplied,
citations omitted)

The non-judicial "mining conflict" which Gonzales referenced was explained to be a

factual or technical dispute that was more properly considered an "administrative
matter," rather than a judicial question:

On the other hand, a mining dispute is a dispute involving (a) rights to mining areas, (b)
mineral agreements, FTAAs, or permits, and (c) surface owners, occupants and
claimholders/concessionaires. Under Republic Act No. 7942 (otherwise known as the
Philippine Mining Act of 1995), the Panel of Arbitrators has exclusive and original
jurisdiction to hear and decide these mining disputes. The Court of Appeals, in its
questioned decision, correctly stated that the Panel's jurisdiction is limited only to those
mining disputes which raise questions of fact or matters requiring the application of

1686
technological knowledge and experience.

In Pearson v. Intermediate Appellate Court, this Court observed that the trend has been
to make the adjudication of mining cases a purely administrative matter. Decisions of
the Supreme Court on mining disputes have recognized a distinction between (1) the
primary powers granted by pertinent provisions of law to the then Secretary of
Agriculture and Natural Resources (and the bureau directors) of an executive or
administrative nature, such as granting of license, permits, lease and contracts, or
approving, rejecting, reinstating or canceling applications, or deciding conflicting
applications, and (2) controversies or disagreements of civil or contractual nature
between litigants which are questions of a judicial nature that may be adjudicated only
by the courts of justice.[88] (Citations omitted)

Administrative agencies are created to aid the government in the regulation of the
country's "ramified activities."[89] The creation of these agencies has become necessary
because of "the growing complexity of the modern society." [90] These agencies are
considered specialists, which "can deal with the problems [in their respective fields] with
more expertise and dispatch than can be expected from the legislature or the courts of
justice."[91]

Administrative agencies are part of the executive branch of the government. [92] However,
due to their highly specialized nature, they are not only vested executive powers but
also with quasi-legislative and quasi-judicial powers. [93]

Quasi-judicial power is "the power to hear and determine questions of fact to which the
legislative policy is to apply and to decide in accordance with the standards laid down
by the law itself in enforcing and administering the same law." [94] It is limited to the
adjudication of the rights of the parties that are incidental to the agency's functions
under the law. Its exercise does not amount to the executive's overreach into or
appropriation of actual judicial competence:

Quasi-judicial or administrative adjudicatory power is the power of the administrative

agency to adjudicate the rights of persons before it. The administrative body exercises
its quasi-judicial power when it performs in a judicial manner an act which is
essentially executive or administrative in nature, where the power to act in such manner
is incidental to or reasonably necessary for the performance of the executive or
administrative duty entrusted to it.[95] (Emphasis supplied)

Quasi-judicial power is vested in administrative agencies because complex issues call

for "technical knowledge and speed in countless controversies which cannot possibly be
handled by regular courts."[96] Congress may, by law, grant administrative agencies the
exclusive original jurisdiction over cases within their competence. [97] Consistent with
their specialized but narrowly limited competencies, the scope of the quasi-judicial
power vested in administrative agencies is delineated in an agency's enabling statute:

1687
In general, the quantum of judicial or quasi-judicial powers which an administrative
agency may exercise is defined in the enabling act of such agency. In other words, the
extent to which an administrative entity may exercise such powers depends largely, if
not wholly, on the provisions of the statute creating or empowering such agency. [98]

The basic nature of the certiorari power as an incident of judicial review—an exercise

which must be limited to judicial questions that are beyond the competence of
administrative agencies—necessarily means that administrative agencies have
no certiorari powers.

The three (3) branches of our government—the Executive, Legislative, and Judicial
branches—are superior in their respective spheres. Subject to our system of checks
and balances, one (1) branch cannot encroach on the duties and prerogatives of
another. The Legislative branch is tasked with enacting laws; [99] the Executive is
responsible for the implementation of laws; and the Judiciary interprets the Constitution
and laws.[100]

Determining whether an act of an officer or state organ exercising judicial or quasi-

judicial powers was made without or in excess of jurisdiction demands an examination
of the law delimiting that officer's or organ's jurisdiction. It is an exercise in legal
interpretation. It is an exercise that only courts, and not administrative agencies, are
competent to engage in.

IV

Presidential Proclamation No. 131 instituted then President Corazon C. Aquino's

Comprehensive Agrarian Reform Program. Executive Order Nos. 229 and 129-A [101] put
in place mechanisms for implementing this Program.

Executive Order No. 229 vested the Department of Agrarian Reform with quasi-judicial
powers to resolve agrarian reform cases and incidental powers to punish for contempt
and to issue subpoenas and enforcement writs. It also specified an appeal mechanism
for decisions rendered by this Department:

Section 17. Quasi-Judicial Powers of the DAR.— The DAR is hereby vested with quasi-
judicial powers to determine and adjudicate agrarian reform matters, and shall have
exclusive original jurisdiction over all matters involving implementation of agrarian
reform, except those falling under the exclusive original jurisdiction of the DENR and the
Department of Agriculture (DA).

The DAR shall have powers to punish for contempt arid to issue subpoena, subpoena
duces tecum and writs to enforce its orders or decisions.

The decisions of the DAR may, in proper cases, be appealed to the Regional Trial
Courts but shall be immediately executory notwithstanding such appeal.

1688
Executive Order No. 129-A created DARAB, which was tasked to "assume the powers
and functions with respect to the adjudication of agrarian reform cases." [102] Section 13
specifies that the Board's powers may be delegated to the regional offices of the
Department, subject to its rules and regulations:

Section 13. Agrarian Reform Adjudication Board. — There is hereby created an

Agrarian Reform Adjudication Board under the Office of the Secretary. The Board shall
be composed of the Secretary as Chairman, two (2) Undersecretaries as may be
designated by the Secretary, the Assistant Secretary for Legal Affairs, and three (3)
others to be appointed by the President upon the recommendation of the Secretary as
members. A Secretariat shall be constituted to support the Board. The Board shall
assume the powers and functions with respect to the adjudication of agrarian reform
cases under Executive Order No. 229 and this Executive Order. These powers and
functions may be delegated to the regional offices of the Department in accordance with
rules and regulations to be promulgated by the Board.

Republic Act No. 6657 or the Comprehensive Agrarian Reform Law of 1988 maintained
the quasi-judicial jurisdiction of the Department of Agrarian Reform:

Section 50. Quasi-Judicial Powers of the DAR. — The DAR is hereby vested with
primary jurisdiction to determine and adjudicate agrarian reform matters and shall have
exclusive original jurisdiction over all matters involving the implementation of agrarian
reform except those falling under the exclusive jurisdiction of the Department of
Agriculture (DA) and the Department of Environment and Natural Resources (DENR).

It shall not be bound by technical rules of procedure and evidence but shall proceed to
hear and decide all cases, disputes or controversies in a most expeditious manner,
employing all reasonable means to ascertain the facts of every case in accordance with
justice and equity and the merits of the case. Toward this end, it shall adopt a uniform
rule of procedure to achieve a just, expeditious and inexpensive determination of every
action or proceeding before it.

It shall have the power to summon witnesses, administer oaths, take testimony, require
submission of reports, compel the production of books and documents and answers to
interrogatories and issue subpoena, and subpoena duces tecum, and enforce its writs
through sheriffs or other duly deputized officers. It shall likewise have the power to
punish direct and indirect contempts [sic] in the same manner and subject to the same
penalties as provided in the Rules of Court.

Responsible farmer leaders shall be allowed to represent themselves, their fellow

farmers, or their organizations in any proceedings before the DAR: Provided, however,
That when there are two or more representatives for any individual or group, the
representatives should choose only one among themselves to represent such party or
group before any DAR proceedings.

1689
Notwithstanding an appeal to the Court of Appeals, the decision of the DAR shall be
immediately executory.

Pursuant to its power to "adopt a uniform, rule of procedure" under Republic Act No.
6657, the Department of Agrarian Reform, through DARAB, adopted the Revised Rules
of Procedure in 1989 (the 1989 Rules). The 1989 Rules were in lieu of "the previous
Rules of Procedure adopted on January 29, 1988, pursuant to Executive Order No. 129-
A."[103]

The 1989 Rules delegated DARAB's adjudicatory powers to RARADs and

PARADs[104] subject to its "functional supervision."[105]

The 1989 Rules further provided that the decisions of PARADs and RARADs may be
reviewed by the Board upon a verified petition for review on certiorari. Rule VIII, Section
3 of these Rules stated:

Section 3. Totality of Case Assigned. — When a case is assigned to a RARAD or

PARAD, any or all incidents thereto shall be considered assigned to him, and the same
shall be disposed of in the same proceedings to avoid multiplicity of suits or
proceedings.

The order or resolution of the Adjudicators on any issue, question, matter or incident
raised before them shall be valid and effective until the hearing shall have been
terminated and the case is decided on the merits, unless modified and reversed by the
Board upon a verified petition for review on certiorari. Such interlocutory orders shall not
be the subject of an appeal.

In 1994, the Department of Agrarian reform adopted new rules of procedure. As with the
1989 Rules, the 1994 Rules maintained that decisions of RARADs and PARADs were
reviewable by the Board upon a verified petition for certiorari, which must have been
preceded by the filing of a motion for reconsideration. Rule VIII, Section 3 of these
Rules stated:

SECTION 3. Totality of Case Assigned. — When a case is assigned to an Adjudicator,

any or all incidents thereto shall be considered assigned to him, and the same shall be
disposed of in the same proceedings to avoid multiplicity of suits or proceedings.

The order or resolution of the Adjudicator on any issue, question, matter or incident
raised before them shall be valid and effective until the hearing shall have been
terminated and the case is decided on the merits, unless modified and reversed by the
Board upon a verified petition for certiorari which cannot be entertained without filing a
motion for reconsideration with the Adjudicator a quo within five (5) days from receipt of
the order, subject of the petition. Such interlocutory order shall not be the subject of an
appeal.

1690
In 2003 the Department of Agrarian Reform adopted new rules of procedure (the 2003
Rules) and again in 2009 (the 2009 Rules). Unlike the 1989 and 1994 Rules, the 2003
and 2009 Rules no longer made reference to certiorari as the Board's vehicle for
reviewing decisions of RARADs and PARADs. Instead, they merely stated that, in
pursuit of its appellate jurisdiction, the Board has the power to "review, reverse, modify,
alter, or affirm resolutions, orders and decisions of the Adjudicators." [106]

The DARAB May 12, 2006 Resolution subject of the present appeal, which gave rise to
the assailed Court of Appeals July 23, 2012 Decision, was issued in response to a
pleading specifically denominated as a "petition for certiorari" by respondent Landbank:

This is a petition for certiorari pursuant to paragraph 2, Section 3, Rule VIII of the
DARAB New Rules of Procedure seeking to annul and set aside the Order dated
January 16, 2001 (sic) as well as the Alias Writ of Execution dated February 15, 2000
issued by respondent RARAD Miñas.[107]

In conformity with the relief sought by Landbank's petition for certiorari, the DARAB May
12, 2006 Resolution "annulled" the January 16, 2001 Order and the February 15, 2001
Alias Writ of Execution issued by Regional Adjudicator Miñas:

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The Order
dated 16 January 2001 and an Alias Writ of Execution dated 15 February 2001 pursuant
to the Decision in DARAB Case No. V-0412-0339-98 dated 03 October 2000 is hereby
ANNULLED and herein public respondent is hereby ordered to withdraw the same.

SO ORDERED.[108]

In its assailed July 23, 2012 Decision, the Court of Appeals justified DARAB's favorable
action on Landbank's petition for certiorari by referencing DARAB's appellate
jurisdiction over and supervision of RARADs:

In Department of Agrarian Reform Adjudication Board vs. Court of Appeals, the

Supreme Court observed, based on the provisions aforecited, that:

... the DAR's exclusive original jurisdiction (as set forth in Section 50 of the CARL) is
exercised through hierarchically arranged agencies, namely, the DARAB, RARAD and
PARAD. The latter two exercise "delegated authority," while the first exercises appellate
jurisdiction over resolutions, orders, decisions and other dispositions of the RARAD and
the PARAD.

1691
In other words, respondent DARAB which has appellate jurisdiction over the resolutions
and orders of RARAD and PARAD acted within the ambit of law when it annulled the
highly irregular orders of the regional adjudicator allowing the issuance of a writ of
execution for the purpose of enforcing the latter's October 3, 2000 Decision
notwithstanding the glaring fact that the same has not yet become final and executory in
view of [Landbank]'s appeal to the Special Agrarian Court in Lucena concerning the
issue on the determination of the correct value of the just compensation of the subject
property. The Supreme Court recognizes the supervisory authority of the DARAB over
its delegates, namely, the RARADs and PARADs.[109]

The Court of Appeals may have been correct in noting that DARAB has supervisory
authority over RARADs, but it was mistaken in using it as basis for sanctioning
DARAB's exercise of certiorari powers.

In Department of Agrarian Reform Adjudication Board v. Lubrica, [110] DARAB similarly

pleaded its authority over and supervision of RARADs as crafting an exception to the
need for an express constitutional or statutory grant of jurisdiction. This Court rebuffed
DARAB's reasoning:

DARAB takes exception to the general rule that jurisdiction over special civil actions
must be expressly conferred by law before a court or tribunal can take cognizance
thereof. It believes that this principle is applicable only in cases where the
officials/entities contemplated to be subject thereof are not within the administrative
power/competence, or in any manner under the control or supervision, of the issuing
authority.

This Court is not persuaded. The function of a writ of certiorari is to keep an inferior
court within the bounds of its jurisdiction or to prevent it from committing such a grave
abuse of discretion amounting to excess of jurisdiction. In the instant case, the RARAD
issued the order of finality and the writ of execution upon the belief that its decision had
become final and executory, as authorized under Section 1, Rule XII of the DARAB
Rules of Procedure. It is worth noting that in its petition, DARAB maintains that in
preventing the RARAD from implementing its decision, it merely "exercised its residual
power of supervision, to insure that the RARAD acted within the bounds of delegated
authority and/or prevent/avoid her from committing grave and serious disservice to the
Program." DARAB's action, therefore, is a rectification of what it perceived as an abuse
of the RARAD's jurisdiction. By its own admission, DARAB took upon itself the power to
correct errors of jurisdiction which is ordinarily lodged with the regular courts by virtue of
express constitutional grant or legislative enactments.

This Court recognizes the supervisory authority of the DARAB over its delegates,
namely, the RARADs and PARADs, but the same should be exercised within the
context of administrative supervision and/or control. In the event that the RARADs or
PARADs act beyond its adjudicatory functions, nothing prevents the aggrieved party
1692
from availing of the extraordinary remedy of certiorari, which is ordinarily within the
jurisdiction of the regular courts.

That the statutes allowed the DARAB to adopt its own rules of procedure does not
permit it with unbridled discretion to grant itself jurisdiction ordinarily conferred only by
the Constitution or by law. Procedure, as distinguished from jurisdiction, is the means by
which the power or authority of a court to hear and decide a class of cases is put into
action. Rules of procedure are remedial in nature and not substantive. They cover only
rules on pleadings and practice.[111] (Citations omitted)

DARAB's reasoning failed to impress then; the same reasoning fails to impress now.

Not only are mere procedural rules incapable of supplanting a constitutional or statutory
grant of jurisdiction, no amount of textual wrangling negates the basic truth that DARAB
is an administrative agency belonging to the Executive, and not to the Judicial branch,
of our government.

Determining whether an action was made without or in excess of jurisdiction or with

grave abuse of discretion is a judicial question. In a petition for certiorari where these
issues are raised, the public officers or state organs exercising judicial or quasi-judicial
powers are impleaded as respondents. They themselves become party-litigants and it is
their own legal rights that are the subject of adjudication. A consideration of law is
impelled to delineate their proper rights and prerogatives. The controversy that ensues
is inexorably beyond the competence of administrative agencies. When presented with
such a controversy, an administrative agency must recuse and yield to courts of law.

Well-meaning intentions at rectifying a perceived breach of authority cannot be cured by

an actual breach of authority. As It was in DARAB v. Lubrica, so it is true here that
DARAB's avowed good intentions cannot justify its exercise of powers that were never
meant for it to exercise.

DARAB's exercise of the innately judicial certiorari power is an executive encroachment

into the judiciary. It violates the separation of powers; it is unconstitutional.

With or without a law enabling it, DARAB has no power to rule on jurisdictional
controversies via petitions for certiorari. DARAB's self-serving grant to itself of the
power to issue writs of certiorari in the 1994 DARAB New Rules of Procedure is itself a
grave abuse of discretion amounting to lack or excess of jurisdiction. It must be annulled
for running afoul of the Constitution.

VI

It should suffice, to settle the present controversy, for us to state, as this Court did, that
under no circumstance may an administrative agency arrogate unto itself the power of
judicial review and to take cognizance of petitions for certiorari. However, it does not
1693
also escape our attention that the predicament that respondent Landbank finds itself in
is no less the result of its own unrefined legal maneuver.

Landbank rendered ineffectual its own immediate recourse to the Special Agrarian
Court. Before the Special Agrarian Court, it sought to restrain the looming actions of
DARAB, acting through its RARAD, to enforce a judgment. Despite this, it still failed to
implead DARAB as a respondent. Landbank's own oversight left the Special Agrarian
Court with no reasonable recourse but the denial of Landbank's plea.

Failing at obtaining relief from the Special Agrarian Court, Landbank sought relief from
an entirely different forum. Strikingly, this new forum is the same entity that it should
have first impleaded as an adverse party before the Special Agrarian Court. Before this
forum, it would then seek the issuance of what this Court long ago declared
in Lubrica to be an unfounded—and what this Court is affirming now to be an
unconstitutional—relief.

In keeping with our most basic constitutional principles and as a consequence of

Landbank's own failings, this Court must sustain the petitioners' position.

WHEREFORE, the Petition for Review on Certiorari is GRANTED. The assailed July

23, 2012 Decision and January 9, 2013 Resolution of the Court of Appeals in CA-G.R.
SP No. 113235 are REVERSED and SET ASIDE. Respondent Department of Agrarian
Reform Adjudication Board is ordered to dismiss the Petition for Certiorari, docketed as
DSCA 0219, filed before it by respondent Land Bank of the Philippines.

SO ORDERED.

SPECIAL THIRD DIVISION

G.R. No. 182645               June 22, 2011

In the Matter of the Heirship (Intestate Estates) of the Late Hermogenes

Rodriguez, Antonio Rodriguez, Macario J. Rodriguez, Delfin Rodriguez, and
Consuelo M. Rodriguez and Settlement of their Estates, RENE B.
PASCUAL, Petitioner,
vs.
JAIME M. ROBLES, Respondent.

DECISION

PERALTA, J.:

On December 15, 2010, this Court promulgated a Resolution 1 which set aside its
Decision2 earlier issued on December 4, 2009 on the ground that herein petitioner,
Rene B. Pascual failed to implead herein respondent Jaime M. Robles, who is an
indispensable party to the present case.

1694
After receiving respondent's Comment and Opposition, 3 as well as petitioner's
Reply4 thereto, the Court will now proceed to determine the merits of the instant petition
for certiorari.

Again, the Court finds it apropros to restate the pertinent antecedent facts and
proceedings as set forth in the December 4, 2009 Decision as well as in the December
15, 2010 Resolution, to wit:

On 14 September 1989, a petition for Declaration of Heirship and Appointment of

Administrator and Settlement of the Estates of the Late Hermogenes Rodriguez
(Hermogenes) and Antonio Rodriguez (Antonio) was filed before the [Regional Trial
Court] RTC [of Iriga City]. The petition, docketed as Special Proceeding No. IR-1110,
was filed by Henry F. Rodriguez (Henry), Certeza F. Rodriguez (Certeza), and Rosalina
R. Pellosis (Rosalina). Henry, Certeza and Rosalina sought that they be declared the
sole and surviving heirs of the late Antonio Rodriguez and Hermogenes Rodriguez.
They alleged they are the great grandchildren of Antonio based on the following
genealogy: that Henry and Certeza are the surviving children of Delfin M. Rodriguez
(Delfin) who died on 8 February 1981, while Rosalina is the surviving heir of Consuelo
M. Rodriguez (Consuelo); that Delfin and Consuelo were the heirs of Macario J.
Rodriguez (Macario) who died in 1976; that Macario and Flora Rodriguez were the heirs
of Antonio; that Flora died without an issue in 1960 leaving Macario as her sole heir.

Henry, Certeza and Rosalina's claim to the intestate estate of the late Hermogenes
Rodriguez, a former gobernadorcillo, is based on the following lineage: that Antonio and
Hermogenes were brothers and the latter died in 1910 without issue, leaving Antonio as
his sole heir.

At the initial hearing of the petition on 14 November 1989, nobody opposed the petition.
Having no oppositors to the petition, the RTC entered a general default against the
whole world, except the Republic of the Philippines. After presentation of proof of
compliance with jurisdictional requirements, the RTC allowed Henry, Certeza and
Rosalina to submit evidence before a commissioner in support of the petition. After
evaluating the evidence presented, the commissioner found that Henry, Certeza and
Rosalina are the grandchildren in the direct line of Antonio and required them to present
additional evidence to establish the alleged fraternal relationship between Antonio and
Hermogenes.

Taking its cue from the report of the commissioner, the RTC rendered a Partial
Judgment dated 31 May 1990 declaring Henry, Certeza and Rosalina as heirs in the
direct descending line of the late Antonio, Macario and Delfin and appointing Henry as
regular administrator of the estate of the decedents Delfin, Macario and Antonio, and as
special administrator to the estate of Hermogenes.

Henry filed the bond and took his oath of office as administrator of the subject estates.

1695
Subsequently, six groups of oppositors entered their appearances either as a group or
individually, namely:

(1) The group of Judith Rodriguez;

(2) The group of Carola Favila-Santos;

(3) Jaime Robles;

(4) Florencia Rodriguez;

(5) Victoria Rodriguez; and

(6) Bienvenido Rodriguez

Only the group of Judith Rodriguez had an opposing claim to the estate of Antonio,
while the rest filed opposing claims to the estate of Hermogenes.

In his opposition, Jaime Robles likewise prayed that he be appointed regular

administrator to the estates of Antonio and Hermogenes and be allowed to sell a certain
portion of land included in the estate of Hermogenes covered by OCT No. 12022
located at Barrio Manggahan, Pasig, Rizal.

After hearing on Jamie Robles' application for appointment as regular administrator, the
RTC issued an Order dated 15 December 1994 declaring him to be an heir and next of
kin of decedent Hermogenes and thus qualified to be the administrator. Accordingly, the
said order appointed Jaime Robles as regular administrator of the entire estate of
Hermogenes and allowed him to sell the property covered by OCT No. 12022 located at
Barrio Manggahan, Pasig Rizal.

On 27 April 1999, the RTC rendered a decision declaring Carola Favila-Santos and her
co-heirs as heirs in the direct descending line of Hermogenes and reiterated its ruling in
the partial judgment declaring Henry, Certeza and Rosalina as heirs of Antonio. The
decision dismissed the oppositions of Jamie Robles, Victoria Rodriguez, Bienvenido
Rodriguez, and Florencia Rodriguez, for their failure to substantiate their respective
claims of heirship to the late Hermogenes.

On 13 August 1999, the RTC issued an Amended Decision reversing its earlier finding
as to Carola Favila-Santos. This time, the RTC found Carola Favila-Santos and
company not related to the decedent Hermogenes. The RTC further decreed that
Henry, Certeza and Rosalina are the heirs of Hermogenes. The RTC also re-affirmed its
earlier verdict dismissing the oppositions of Jaime Robles, Victoria Rodriguez,
Bienvenido Rodriguez, and Florencia Rodriguez. 5

1696
Robles then appealed the August 13, 1999 Decision of the RTC by filing a notice of
appeal, but the same was denied by the trial court in its Order dated November 22,
1999 for Robles' failure to file a record on appeal.

Robles questioned the denial of his appeal by filing a petition for review
on certiorari with this Court.

In a Resolution dated February 14, 2000, this Court referred the petition to the [Court of
Appeals (CA)] for consideration and adjudication on the merits on the ground that the
said court has jurisdiction concurrent with this Court and that no special and important
reason was cited for this Court to take cognizance of the said case in the first instance.

On April 16, 2002, the CA rendered judgment annulling the August 13, 1999 Amended
Decision of the RTC.

Henry Rodriguez (Rodriguez) and his group moved for the reconsideration of the CA
decision, but the same was denied in a Resolution dated January 21, 2004. Rodriguez
and his co-respondents did not appeal the Decision and Resolution of the CA.

On the other hand, Robles filed an appeal with this Court assailing a portion of the CA
Decision. On August 1, 2005, this Court issued a Resolution denying the petition of
Robles and, on November 10, 2005, the said Resolution became final and executory.

On May 13, 2008, the instant petition was filed. 6

Petitioner posits the following reasons relied upon for the allowance of his petition:

THE HONORABLE COURT OF APPEALS' DECISION DATED APRIL 16, 2002 WAS
ISSUED IN GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS
OF JURISDICTION, HENCE, A PATENT NULLITY.

II

THE ORDER DATED FEBRUARY 21, 2007 ISSUED BY THE HONORABLE

REGIONAL TRIAL COURT, BRANCH 34, IRIGA CITY, BASED ON THE COURT OF
APPEALS' APRIL 16, 2002 DECISION WAS ISSUED IN GRAVE ABUSE OF
DISCRETION TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION, HENCE, A
PATENT NULLITY.

III

THE AFOREMENTIONED COURT OF APPEALS' APRIL 16, 2002 DECISION AND

FEBRUARY 21, 2007 ORDER OF THE REGIONAL TRIAL COURT, BRANCH 34,
IRIGA CITY, WERE NULL AND VOID AB INITIO AS THEY CONTRAVENED,

1697
INCONSISTENT WITH AND CONTRADICTORY TO THE FINAL AND EXECUTORY
DECISIONS AND RESOLUTIONS OF THE SUPREME COURT, WHICH IS IN GROSS
VIOLATION OF THE RULE THAT ALL COURTS SHOULD TAKE THEIR BEARINGS
FROM THE SUPREME COURT.7

The Court finds that there are compelling reasons to dismiss the present petition, as
discussed below.

First, petitioner has no personality to file the instant petition. The requirement of
personality is sanctioned by Section 1, Rule 65 of the Rules of Court, which essentially
provides that a person aggrieved by any act of a tribunal, board or officer exercising
judicial or quasi-judicial functions rendered without or in excess of jurisdiction or with
grave abuse of discretion amounting to lack or excess of jurisdiction may file a petition
for certiorari.8

This Court has held that:

An aggrieved party under Section 1, Rule 65 [of the Rules of Court] is one who was a
party to the original proceedings that gave rise to the original action
for certiorari under Rule 65. x x x.

Although Section 1 of Rule 65 provides that the special civil action of certiorari may be
availed of by a "person aggrieved" by the orders or decisions of a tribunal, the term
"person aggrieved" is not to be construed to mean that any person who feels
injured by the lower court’s order or decision can question the said court’s
disposition via certiorari. To sanction a contrary interpretation would open the
floodgates to numerous and endless litigations which would undeniably lead to the
clogging of court dockets and, more importantly, the harassment of the party who
prevailed in the lower court.

In a situation wherein the order or decision being questioned underwent adversarial

proceedings before a trial court, the "person aggrieved" referred to under Section 1 of
Rule 65 who can avail of the special civil action of certiorari pertains to one who was a
party in the proceedings before the lower court. The correctness of this interpretation
can be gleaned from the fact that a special civil action for certiorari may be dismissed
motu proprio if the party elevating the case failed to file a motion for reconsideration of
the questioned order or decision before the lower court. Obviously, only one who was a
party in the case before the lower court can file a motion for reconsideration since a
stranger to the litigation would not have the legal standing to interfere in the orders or
decisions of the said court. In relation to this, if a non-party in the proceedings before
the lower court has no standing to file a motion for reconsideration, logic would
lead us to the conclusion that he would likewise have no standing to question the
said order or decision before the appellate court via certiorari. 9

Thus, a person not a party to the proceedings in the trial court or in the CA cannot
maintain an action for certiorari in the Supreme Court to have the judgment

1698
reviewed.10 Stated differently, if a petition for certiorari or prohibition is filed by one who
was not a party in the lower court, he has no standing to question the assailed order. 11

In the present case, petitioner was never a party to the proceedings in the RTC and the
CA. In fact, he admits that he is a third party insofar as the instant case is concerned.
There is no dispute that it was only in January 2005 that he acquired interest in a
portion of the properties subject of the estate proceedings when he bought a real
property located in San Fernando, Pampanga, which belonged to the Rodriguez estate.
Petitioner claims that he filed the instant petition for certiorari only after learning of the
assailed Decision of the CA and the Order of the RTC on March 13, 2008, implying that
he could not have intervened earlier. This, however, is not an excuse or justification to
allow petitioner to file the instant petition. To do so would put into the hands of the
litigants in a case the power to resurrect or to introduce anew, with the assistance of
intervenors, issues to a litigation which have already been long settled on appeal.

Indeed, petitioner may not be allowed to intervene at this late a stage. Section 2, Rule
19 of the Rules of Court clearly provides that a motion to intervene may be filed at any
time before rendition of judgment by the trial court.1avvphi1

In The Learning Child, Inc. v. Ayala Alabang Village Association,12 this Court's

disquisition on the significance of the abovementioned Section is instructive, to wit:

This section is derived from the former Section 2, Rule 12, which then provided that the
motion to intervene may be filed "before or during a trial." Said former phraseology gave
rise to ambiguous doctrines on the interpretation of the word "trial," with one decision
holding that said Motion may be filed up to the day the case is submitted for decision,
while another stating that it may be filed at any time before the rendition of the final
judgment. This ambiguity was eliminated by the present Section 2, Rule 19 by clearly
stating that the same may be filed "at any time before rendition of the judgment by the
trial court," in line with the second doctrine above-stated. The clear import of the
amended provision is that intervention cannot be allowed when the trial court has
already rendered its Decision, and much less, as in the case at bar, when even the
Court of Appeals had rendered its own Decision on appeal. 13

In his book on remedial law, former Supreme Court Associate Justice Florenz D.
Regalado explained the rationale behind the amendments introduced in Section 2, Rule
19 of the Rules of Court as follows:

The justification advanced for this is that before judgment is rendered, the court for good
cause shown, may still allow the introduction of additional evidence and that is still
within a liberal interpretation of the period for trial. Also, since no judgment has yet been
rendered, the matter subject of the intervention may still be readily resolved and
integrated in the judgment disposing of all claims in the case, and would not require an
overall reassessment of said claims as would be the case if the judgment had already
been rendered.14

1699
It is also worthy to note that the disputed Decision was promulgated way back on April
16, 2002. The respondents in the said case, namely, Henry Rodriguez, Certeza
Rodriguez and Rosalina Pellosis, did not appeal. Herein respondent, on the other hand,
who was the petitioner in the case, filed a petition for review on certiorari with this Court
assailing a portion of the CA Decision. However, the petition was denied via a
Resolution issued by the Court dated August 1, 2005, and that the same had become
final and executory on November 10, 2005. Hence, by the time herein petitioner filed the
instant petition on the sole basis that he acquired an interest in a portion of the disputed
estate, the assailed CA Decision had long become final and executory.

In Mocorro, Jr. v. Ramirez,15 this Court reiterated the long-standing rule governing

finality of judgments, to wit:

A decision that has acquired finality becomes immutable and unalterable. This quality of
immutability precludes the modification of a final judgment, even if the modification is
meant to correct erroneous conclusions of fact and law. And this postulate holds true
whether the modification is made by the court that rendered it or by the highest court in
the land. The orderly administration of justice requires that, at the risk of occasional
errors, the judgments/resolutions of a court must reach a point of finality set by the law.
The noble purpose is to write finis to dispute once and for all. This is a fundamental
principle in our justice system, without which there would be no end to litigations. x x x

The only exceptions to the rule on the immutability of final judgments are (1) the
correction of clerical errors, (2) the so-called nunc pro tunc entries which cause no
prejudice to any party, and (3) void judgments. x x x 16

Unlike the August 13, 1999 Amended Decision of the RTC, Iriga City, Branch 34, which
was found by the CA to be a complete nullity, there is no showing that the instant case
falls under any of the exceptions enumerated above.

Considering the foregoing, the Court no longer finds it necessary to address the issues
raised by petitioner.

WHEREFORE, the instant petition for certiorari is DISMISSED for lack of merit.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 196894, March 03, 2014 ]
JESUS G. CRISOLOGO AND NANETTE B. CRISOLOGO, PETITIONERS, VS. JEWM
AGRO-INDUSTRIAL CORPORATION, RESPONDENT.

DECISION
MENDOZA, J.:

1700
This is a petition for certiorari under Rule 45 of the Rules of Court challenging the May
6, 2011 Decision[1] of the Court of Appeals (CA), in CA-G.R. SP No. 03896-MIN, which
affirmed the September 27, 2010,[2] October 7, 2010[3] and November 9, 2010[4] Orders
of the Regional Trial Court, Davao City, Branch 14 (RTC-Br. 14), in Civil Case No.
33,551-2010, an action for Cancellation of Lien.  It is entitled “JEWM Agro-Industrial
Corporation v. The Registry of Deeds for the City of Davao, Sheriff Robert Medialdea,
John & Jane Does, and all persons acting under their directions.

This controversy stemmed from various cases of collection for sum of money filed
against So Keng Kok, the owner of various properties including two (2) parcels of land
covered by TCT Nos. 292597 and 292600 (subject properties), which were attached by
various creditors including the petitioners in this case. As a result, the levies were
annotated on the back of the said titles.

Petitioners Jesus G. Crisologo and Nannette B. Crisologo (Spouses Crisologo) were the
plaintiffs in two (2) collection cases before RTC, Branch 15, Davao City (RTC-Br. 15),
docketed as Civil Case Nos. 26,810-98 and 26,811-98, against Robert Limso, So Keng
Koc, et al.  Respondent JEWM Agro-Industrial Corporation (JEWM) was the successor-
in-interest of one Sy Sen Ben, the plaintiff in another collection case before RTC,
Branch 8,  Davao City (RTC-Br. 8), docketed as Civil Case No. 26,513-98, against the
same defendants.

On October 19, 1998, RTC-Br.  8 rendered its decision based on a compromise

agreement, dated October 15, 1998, between the parties wherein the defendants in said
case were directed to transfer the subject properties in favor of Sy Sen Ben.  The latter
subsequently sold the subject properties to one Nilda Lam who, in turn, sold the same
to JEWM on June 1, 2000. Thereafter, TCT Nos. 325675 and 325676 were eventually
issued in the name of JEWM,  both of which still bearing the same annotations as well
as the notice of lis pendens in connection with the other pending cases filed against So
Keng Kok.

A year thereafter, Spouses Crisologo prevailed in the separate collection case filed
before RTC-Br. 15 against Robert Lim So and So Keng Koc (defendants). Thus, on July
1, 1999, the said defendants were ordered to solidarily pay the Spouses Crisologo.
When this decision attained finality, they moved for execution. On June 15, 2010, a writ
was eventually issued. Acting on the same, the Branch Sheriff issued a notice of sale
scheduling an auction on August 26, 2010. The notice of sale included, among others,
the subject properties covered by TCT Nos. 325675 and 325676, now, in the name of
JEWM.

In the same proceedings, JEWM immediately filed its Affidavit of Third Party Claim and
the Urgent Motion Ad Cautelam. It prayed for the exclusion of the subject properties
from the notice of sale. In an order, dated August 26, 2010, however, the motion was

1701
denied. In turn, the Spouses Crisologo posted a bond in order to proceed with the
execution.

To protect its interest, JEWM filed a separate action for cancellation of lien with prayer
for the issuance of a preliminary injunction before RTC-Br. 14, docketed as Civil Case
No. 33,551-2010.  It prayed for the issuance of a writ of preliminary injunction to prevent
the public sale of the subject properties covered in the writ of execution issued pursuant
to the ruling of RTC-Br. 15; the cancellation of all the annotations on the back of the
pertinent TCTs; and the issuance of a permanent injunction order after trial on the
merits. “The Register of Deeds of Davao City, Sheriff Robert Medialdea, John and Jane
Does and all persons acting under their direction” were impleaded as defendants.

At the scheduled hearing before RTC-Br. 14 on September 22, 2010, Spouses

Crisologo’s counsel appeared and filed in open court their Very Urgent Manifestation
questioning the authority of the said court to restrain the execution proceedings in RTC-
Br. 15. JEWM opposed it on the ground that Spouses Crisologo were not parties in the
case.

On September 24, 2010, Spouses Crisologo filed an Omnibus Motion praying for the
denial of the application for  writ or preliminary injuction filed by JEWM and asking for
their recognition as parties. No motion to intervene was, however, filed as the Spouses
Crisologo believed that it was unnecessary since they were already the John and Jane
Does named in the complaint.

In the Order, dated September 27, 2010, RTC-Br. 14 denied Spouses Crisologo’s 
Omnibus Motion and  granted JEWM’s application for a writ of preliminary injunction.

On October 1, 2010, Spouses Crisologo filed a Very Urgent Omnibus Motion before
RTC-Br. 14 praying for reconsideration and the setting aside of its September 27, 2010
Order. This was denied in the RTC Br.-14’s  October 7, 2010 Order for lack of legal
standing in court considering that their counsel failed to make the written formal notice
of appearance. The copy of this order was received by Spouses Crisologo on October
22, 2010.  It must be noted, however, that on October 27, 2010, they received another
order, likewise dated October 7, 2010, giving JEWM time to comment on their Very
Urgent Omnibus Motion filed on October 1, 2010. In its Order, dated November 9, 2010,
however, RTC-Br. 14 again denied the Very Urgent Motion previously filed by Spouses
Crisologo.

On November 12, 2010, JEWM moved to declare the “defendants” in default which was
granted in an order given in open court on November 19, 2010.

Spouses Crisologo then filed their Very Urgent Manifestation, dated November 30,
2010, arguing that they could not be deemed as defaulting parties because they were

1702
not referred to in the pertinent motion and order of default.

On November 19, 2010, Spouses Crisologo filed with the CA a petition

for certiorari[5] under Rule 65 of the Rules of Court  assailing the RTC-Br. 14 orders,
dated September 27, 2010, October 7, 2010 and November 9, 2010, all of which denied
their motion to be recognized as parties. They also prayed for the issuance of a
Temporary Restraining Order (TRO) and/or a Writ of Preliminary Injunction.

In its Resolution, dated January 6, 2011, the CA denied the application for a TRO, but
directed Spouses Crisologo to amend their petition.  On January 19, 2011, the Spouses
Crisologo filed their Amended Petition[6] with prayers for the issuance of a TRO and/or
writ of preliminary injunction, the annulment of the aforementioned orders of RTC Br.
14, and the issuance of an order dissolving the writ of preliminary injunction issued in
favor of JEWM.

Pending disposition of the Amended Petition by the CA, JEWM filed a motion on
December 6, 2010 before RTC-Br. 14 asking for the resolution of the case on the
merits.

On January 10, 2011, RTC-Br. 14 ruled in favor of JEWM, with the dispositive portion of
its Decision[7] stating as follows:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the
plaintiff as follows:
1. the preliminary writ of injunction issued on October 5, 2010 is hereby made
permanent;

2. directing herein defendant Registry of Deeds of Davao City where the subject
lands are located, to cancel all existing liens and encumbrances on TCT No. T-
325675 and T-325676 registered in the name of the plaintiff, and pay the

3. cost of suit.
SO ORDERED.[8]
Spouses Crisologo then filed their Omnibus Motion Ex Abudanti ad Cautelam, asking
RTC- Br. 14 to reconsider the above decision. Because no motion for intervention was
filed prior to the rendition of the judgment, a certificate, dated March 17, 2011, was
issued declaring the January 10, 2011 decision final and executory.

On May 6, 2011, the CA eventually denied the Amended Petition filed by Spouses
Crisologo for lack of merit. It ruled that the writ of preliminary injunction subject of the
petition was already fait accompli and, as such, the issue of grave abuse of discretion
attributed to RTC-Br. 14 in granting the relief had become moot and academic. It further
held that the failure of Spouses Crisologo to file their motion to intervene under Rule 19

1703
 rendered Rule 65 inapplicable as a vehicle to ventilate their supposed right in the case.
[9]

Hence, this petition.

ISSUES
I. The Court of Appeals erred in holding that the action for Cancellation of
Annotations may proceed even without notice to and impleading the party/ies
who caused the annotations, in clear contravention of the rule on joinder of
parties and basic due process.

II. The Court of Appeals erred in applying a very constrictive interpretation of

the rules in holding that a motion to intervene is the only way an otherwise real
party in interest could participate.

III. The Court of Appeals erred in denying our application for the issuance of a
temporary restraining order and/or a writ of preliminary injunction.

IV. The Court of Appeals erred in holding that the issues raised by petitioners
before it [had] been mooted by the January 10, 2011 decision of RTC Branch
14.[10]
Spouses Crisologo submit as error the CA affirmation of the RTC- Br. 14 ruling that the
action for cancellation may proceed without them being impleaded. They allege
deprivation of their right to due process when they were not impleaded in the case
before RTC-Br. 14 despite the claim that they stand, as indispensable parties, to be
benefited or injured by the judgment in the action for the cancellation of annotations
covering the subject properties. They cite Gonzales v. Judge Bersamin,[11] among
others, as authority. In that case, the Court ruled that pursuant to Section 108 of
Presidential Decree (P.D.) No. 1529, notice must be given to all parties in interest
before the court may hear and determine the petition for the cancellation of annotations
on the certificates of title.

The Spouses Crisologo also question the statement of the CA that their failure to file the
motion to intervene under Rule 19 before RTC-Br. 14 barred their participation in the
cancellation proceedings. They put emphasis on the court’s duty to, at the very least,
suspend the proceedings before it and have such indispensable parties impleaded.

As to the ruling on the denial of their application for the issuance of a TRO or writ of
preliminary injunction, Spouses Crisologo claim that their adverse interest, evinced by
the annotations at the back of the certificates of title, warranted the issuance of a TRO
or writ of preliminary injunction against JEWM’s attempt to cancel the said annotations
in violation of their fundamental right to due process.

Lastly, Spouses Crisologo cast doubt on the CA ruling that the issues presented in their

1704
petition were mooted by the RTC-Br. 14 Decision, dated January 10, 2011. Having been
rendered without impleading indispensable parties, the said decision was void and
could not have mooted their petition.

In their Comment,[12] JEWM asserts  that Spouses Crisologo’s failure to file a motion to

intervene, pleadings-in-intervention, appeal or annulment of judgment, which were plain,
speedy and adequate remedies then available to them, rendered recourse to Rule 65 as
improper; that Spouses Crisologo lacked the legal standing to file a Rule 65 petition
since they were not impleaded in the proceedings before RTC-Br. 14; and that Spouses
Crisologo were not indispensable parties since their rights over the properties had been
rendered ineffective by the final and executory October 19, 1998 Decision of RTC-Br. 8
which disposed unconditionally and absolutely the subject properties in favor of its
predecessor-in-interest. JEWM further argues that, on the assumption that Section 108
of P.D. No. 1529 applies,  no notice to Spouses Crisologo was required because they
were not real parties-in-interest in the case before RTC-Br. 14, or even if they were,
their non-participation in the proceedings was because of their failure to properly
intervene pursuant to Rule 19; and, lastly, that the case before RTC-Br. 14 became final
and executory because Spouses Crisologos did not perfect an appeal therefrom, thus,
rendering the issues in the CA petition moot and academic.

In their Reply,[13] Spouses Crisologo restate the applicability of Section 108 of P.D. No.
1529 to the effect that any cancellation of annotation of certificates of title must be
carried out by giving notice to all parties-in- interest. This they forward despite their
recognition of the mootness of their assertion over the subject properties, to wit:
Again, we respect JAIC’s position that “the claims of subsequent attaching creditors
(including petitioners’) have been rendered moot and academic, and hence the entries
in favor of said creditors have no more legal basis and therefore must be cancelled.” But
we likewise at least ask a modicum of respect by at least being notified and heard. [14]
The Ruling of the Court

The crux of this controversy is whether the CA correctly ruled that RTC-Br. 14 acted
without grave abuse of discretion in failing to recognize Spouses Crisologo as
indispensable parties in the case for cancellation of lien.

In this respect, the Court agrees with Spouses Crisologo.

In an action for the cancellation of memorandum annotated at the back of a certificate of

title, the persons considered as indispensable include those whose liens appear as
annotations pursuant to Section 108 of P.D. No. 1529, [15] to wit:
Section 108. Amendment and alteration of certificates. -No erasure, alteration or
amendment shall be made upon the registration book after the entry of a certificate of

1705
title or of a memorandum thereon and the attestation of the same by the Register of
Deeds, except by order of the proper Court of First Instance. A registered owner or
other person having an interest in registered property, or, in proper cases, the Register
of Deeds with the approval of the Commissioner of Land Registration, may apply by
petition to the court upon the ground that the registered interests of any description,
whether vested, contingent, expectant inchoate appearing on the certificate, have
terminated and ceased; or that new interest not appearing upon the certificates have
arisen or been created; or that an omission or error was made in entering a certificate or
memorandum thereon, or on any duplicate certificate; x x x or upon any other
reasonable ground; and the court may hear and determine the petition after notice to all
parties in interest, and may order the entry or cancellation of a new certificate, the entry
or cancellation of a memorandum upon a certificate, or grant any other relief upon such
terms and conditions, requiring security or bond if necessary, as it may consider proper.
In Southwestern University v. Laurente,[16] the Court held that the cancellation of the
annotation of an encumbrance cannot be ordered without giving notice to the parties
annotated in the certificate of title itself. It would, thus, be an error for a judge to contend
that no notice is required to be given to all the persons whose liens were annotated at
the back of a certificate of title.

Here, undisputed is the fact that Spouses Crisologo’s liens were indeed annotated at
the back of TCT Nos. 325675 and 325676. Thus, as persons with their liens annotated,
they stand to be benefited or injured by any order relative to the cancellation of
annotations in the pertinent TCTs. In other words, they are as indispensable as JEWM
itself in the final disposition of the case for cancellation, being one of the many lien
holders.

As indispensable parties, Spouses Crisologo should have been joined as defendants in

the case pursuant to Section 7, Rule 3 of the Rules of Court, to wit:
SEC. 7. Compulsory joinder of indispensable parties. – Parties in interest without whom
no final determination can be had of an action shall be joined either as plaintiffs or
defendants. [17]
The reason behind this compulsory joinder of indispensable parties is the complete
determination of all possible issues, not only between the parties themselves but also
as regards other persons who may be affected by the judgment. [18]

In this case, RTC-Br. 14, despite repeated pleas by Spouses Crisologo to be

recognized as indispensable parties, failed to implement the mandatory import of the
aforecited rule.

In fact, in Sps. Crisologo v. Judge George E. Omelio,[19] a related administrative case,

1706
the Court found the trial judge guilty of gross ignorance of the law when it disregarded
the claims of Spouses Crisologo to participate. In part, the Court stated:
This is not the first time Judge Omelio has rendered a decision affecting third parties’
interests, without even notifying the indispensable parties. In the first disputed case,
JEWM Agro-Industrial Corporation v. Register of Deeds, Sheriff Medialdea, John &
Jane Does and all persons acting under their directions, Judge Omelio failed to cause
the service of proper summons upon the John and Jane Does impleaded in the
complaint. Even when Sps. Crisologo voluntarily appeared in court to be recognized as
the John and Jane Does, Judge Omelio refused to acknowledge their appearance and
ordered the striking out of Sps. Crisologos' pleadings. For this reason, the Investigating
Justice recommended admonishing Judge Omelio for failing to recognize the
Sps.Crisologo as indispensable parties in that case.

x x x                x x x                x x x

Clearly, the cancellation of the annotation of the sale without notifying the buyers, Sps.
Crisologo, is a violation of the latter’s right to due process. Since this is the second time
that Judge Omelio has issued an order which fails to notify or summon the
indispensable parties, we find Judge Omelio guilty of gross ignorance of the law, with a
warning that repetition of the same or similar act will merit a stiffer penalty in the future.

xxx

WHEREFORE, … We find Judge George E. Omelio GUILTY of four counts of the

serious charge of gross ignorance of the law for the following acts: (a) refusing to
recognize Spouses Jesus G. Crisologo and Nannette B. Crisologo as indispensable
parties; … in violation of the latter's right to due process. Accordingly, we impose upon
Judge George E. Omelio the penalty of fine of Forty Thousand Pesos (?40,000.00), with
a warning that repetition of the same or similar acts will be dealt with more severely.

SO ORDERED.[20]
The trial court should have exercised prudence in denying Spouses Crisologo’s pleas to
be recognized as indispensable parties. In the words of the Court, “Judge Omelio
should be penalized for failing to recognize Sps. Crisologo as indispensable parties and
for requiring them to file a motion to intervene, considering that a simple perusal of the
certificates of title would show Sps. Crisologo’s adverse rights because their liens are
annotated at the back of the titles.” [21]

This manifest disregard of the basic rules and procedures constitutes a grave abuse of
discretion.

In State Prosecutors II Comilang and Lagman v. Judge Medel Belen,[22] the Court held

1707
as inexcusable abuse of authority the trial judge’s “obstinate disregard of basic and
established rule of law or procedure.” Such level of ignorance is not a mere error of
judgment. It amounts to “evasion of a positive duty or to a virtual refusal to perform a
duty enjoined by law, or to act at all in contemplation of law,” [23] or in essence, grave
abuse of discretion amounting to lack of jurisdiction.

Needless to say, judges are expected to exhibit more than just a cursory acquaintance
with statutes and procedural laws. They must know the laws and apply them properly in
good faith as judicial competence requires no less. [24]

Despite the clear existence of grave abuse of discretion on the part of RTC-Br. 14,
JEWM asserts technical grounds on why the CA did not err in dismissing the petition via
Rule 65. It states that:
a) The Crisologos could have used other available remedies such as intervention
under Rule 19, an appeal of the judgment, or even an annulment of judgment,
which are, by all means, plain, speedy and adequate remedies in the ordinary
course of law;

b) The Crisologos lack legal standing to file the Rule 65 petition since they were not
impleaded in the Branch 14 case.
The rule is that a petition for certiorari under Rule 65 is proper only if there is no appeal,
or any plain speedy, and adequate remedy in the ordinary course of law.

In this case, no adequate recourse, at that time, was available to Spouses Crisologo,
except resorting to Rule 65.

Although Intervention under Rule 19 could have been availed of, failing to use this
remedy should not prejudice Spouses Crisologo.  It is the duty of RTC-Br. 14, following
the rule on joinder of indispensable parties, to simply recognize them, with or without
any motion to intervene. Through a cursory reading of the titles, the Court would have
noticed the adverse rights of Spouses Crisologo over the cancellation of any
annotations in the subject TCTs.

Neither will appeal prove adequate as a remedy since only the original parties to an
action can appeal.[25]  Here, Spouses Crisologo were never impleaded. Hence, they
could not have utilized appeal as they never possessed the required legal standing in
the first place.

And even if the Court assumes the existence of the legal standing to appeal, it must be
remembered that the questioned orders were interlocutory in character and, as such,
Spouses Crisologo would have to wait, for the review by appeal, until the rendition of

1708
the judgment on the merits, which at that time may not be coming as speedy as
practicable. While waiting, Spouses Crisologo would have to endure the denial of their
right, as indispensable parties, to participate in a proceeding in which their
indispensability was obvious. Indeed, appeal cannot constitute an adequate, speedy
and plain remedy.

The same is also true if recourse to Annulment of Judgment under Rule 47 is made
since this remedy presupposes a final judgment already rendered by a trial court.

At any rate, the remedy against an interlocutory order, not subject of an appeal, is an
appropriate special civil action under Rule 65, provided that the interlocutory order is
rendered without or in excess of jurisdiction or with grave abuse of discretion. Only then
is certiorari under Rule 65 allowed to be resorted to. [26]

This takes particular relevance in this case where, as previously discussed, RTC-Br. 14
acted with grave abuse of discretion in not recognizing  Spouses Crisologo as
indispensable parties to the pertinent action.

Based on the above, recourse to the CA via Rule 65 would have already been proper,
except for one last issue, that is, Spouses Crisologo’s legal standing to file the
same. JEWM cites DBP v. COA[27] where the Court held:
The petition for certiorari under Rule 65, however, is not available to any person who
feels injured by the decision of a tribunal, board or officer exercising judicial or quasi
judicial functions. The ‘person aggrieved’ under Section 1 of Rule 65 who can avail of
the special civil action of certiorari pertains only to one who was a party in the
proceedings before the court a quo, or in this case before the COA. To hold otherwise
would open the courts to numerous and endless litigations.
Under normal circumstances, JEWM would be correct in their averment that the lack of
legal standing on the part of Spouses Crisologo in the case before RTC-Br. 14 prevents
the latter’s recourse via Rule 65.

This case, however, is an exception. In many instances, the Court has ruled that
technical rules of procedures should be used to promote, not frustrate the cause of
justice. Rules of procedure are tools designed not to thwart but to facilitate the
attainment of justice; thus, their strict and rigid application may, for good and deserving
reasons, have to give way to, and be subordinated by, the need to aptly dispense
substantial justice in the normal cause. [28]

Be it noted that the effect of their non-participation as indispensable parties is to

preclude the judgment, orders and the proceedings from attaining finality. Time and
again, the Court has ruled that 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

1709
the absent parties but even to those present. Consequently, the proceedings before
RTC-Br. 14 were null and void including the assailed orders, which may be “ignored
wherever and whenever it exhibits its head.”[29]

To turn a blind eye to the said nullity and, in turn, rule as improper the recourse to Rule
65 by the lack of legal standing is to prolong the denial of due process to the persons
whose interests are indispensible to the final disposition of the case. It will only result in
a protracted litigation as Spouses Crisologo will be forced to rely on a petition for the
annulment of judgment before the CA (as the last remaining remedy), which may again
reach this Court. To prevent multiplicity of suits and to expedite the swift administration
of justice, the CA should have applied liberality by striking down the assailed orders
despite the lack of legal standing on the part of  Spouses Crisologo to file the Rule 65
petition before it. Besides, this lacking requirement, of which Spouses Crisologo were
not even at fault, is precisely the reason why this controversy arose.

All told,  the CA erred in dismissing the amended petition filed before it and in not
finding grave abuse of discretion on the part of RTC-Br. 14.

WHEREFORE, the petition is GRANTED. The May 6, 2011 Decision of the Court of
Appeals is NULLIFIED and SET ASIDE. The September 27, 2010, October 7, 2010 and
November 9, 2010 Orders of the Regional Trial Court, Branch 14, Davao City, are
likewise NULLIFIED and SET ASIDE. Civil Case No. 33,551-2010 is
hereby REMANDED to the trial court for further proceedings. The respondent is ordered
to implead all parties whose annotations appear at the back of Transfer Certificate of
Title Nos. 325675 and 325676.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 181186, February 03, 2016 ]
SIGUION REYNA MONTECILLO AND ONGSIAKO LAW OFFICES, PETITIONER,
VS. HON. NORMA CHIONLO-SIA, IN HER CAPACITY AS PRESIDING JUDGE OF
BRANCH 56 OF THE REGIONAL TRIAL COURT OF LUCENA CITY, AND THE
TESTATE ESTATE OF DECEASED SUSANO RODRIGUEZ, REPRESENTED BY
THE SPECIAL ADMINISTRATRIX, RESPONDENTS.

DECISION
JARDELEZA, J.:
We resolve the core issue of whether a law firm acting as counsel for one of the parties
in the intestate proceedings a quo can file a petition for certiorari before the Court of
Appeals to protect its own interests.

1710
Petitioner Siguion Reyna Montecillo & Ongsiako Law Offices (SRMO) acted as counsel
for Remedios N. Rodriguez (Remedios) when she commenced an action for the
intestate settlement of the estate of her deceased husband Susano J. Rodriguez before
the Regional Trial Court (RTC) of Lucena City. Her action was docketed as Sp. Proc.
No. 4440.[1] During the pendency of the intestate proceedings, Remedios asked for the
payment of widow's allowance. This, however, was denied by the RTC in an Order
dated August 8, 1983.[2] On review, the Court of Appeals (CA) promulgated a decision
reversing the RTC's Order and granted Remedios a monthly widow's allowance of
P3,000.00 effective August 1982.[3]

On February 29, 1988, while the case was pending before the CA, Remedios executed
a Deed of Sale of Inheritance (Deed of Sale) wherein she agreed to sell all her rights,
interests and participation in the estate of Susano J. Rodriguez to a certain Remigio M.
Gerardo (Gerardo) in consideration of P200,000.00.[4]

As a condition subsequent to the sale, Remedios, on March 1, 1988, executed a special

power of attorney[5] (SPA) authorizing Gerardo to, among others, "receive from any
person, entity, government agency or instrumentality, or from any court, any property,
real or personal, cash, checks or other commercial documents which may be due to me
or payable to me by virtue of any contract, inheritance or any other legal means," and to
"receive said property... in his own name and for his own account and to deposit the
same at his sole discretion for his own account, and dispose of [the] same without any
limitation."[6] Gerardo later on executed a document titled as "Substitution of Attorney-in-
Fact,"[7] where he designated SRMO as substitute attorney pursuant to the power of
substitution granted to him in the earlier SPA. Gerardo subsequently executed his own
SPA authorizing SRMO "[t]o appear... and represent [Gerardo] in any and all
proceedings and incidents in the aforementioned case." [8]

After the CA's decision regarding the widow's allowance became final and executory,
SRMO, on April 24, 1991, accordingly filed a motion with the RTC for the payment of
the allowance then amounting to a total of P315,000.00. [9] A few months after, the
Estate of Deceased Susano J. Rodriguez (Estate) remitted to SRMO three (3) checks
totaling this amount.[10]

A Partial Project of Partition of the Estate dated January 10, 1997 [11] was approved by
the RTC on January 20, 1997.[12] Sometime in 2002, Remedios filed an "Urgent
Omnibus Motion and Notice of Termination of the Services of Petitioner's Counsel of
Record."[13] Therein, Remedios questioned the RTC's Order approving the partition and
denied the execution of the Deed of Sale in favor of Gerardo. She also demanded that
SRMO return the amount it received from the partition. [14] Before the motion could be
resolved, however, Remedios filed a Notice of Withdrawal of the same motion. [15]

The withdrawal of the motion notwithstanding, the RTC, in an Order dated August 21,
2003, motu proprio directed SRMO to reimburse the Estate the amount of P315,000.00
representing the widow's allowance it received in 1991. [16]

1711
In its Explanation with Motion to Excuse Reimbursement, [17] SRMO moved to be
excused from reimbursing the Estate. According to SRMO, when it sought the payment
of the widow's allowance, it was merely seeking the enforcement of a judgment credit in
favor of its client, Remedios, who had, in turn, sold her interests to Gerardo, also
represented by SRMO.[18]

In its Order dated December 22, 2003, the RTC denied SRMO's motion. [19] It disagreed
with SRMO's position because (1) "the sale of inheritance was never made known" to
the RTC and that (2) the sale cannot comprehend a widow's allowance because such
allowance is "personal in nature."[20]

Aggrieved by the RTC's orders, SRMO elevated the case to the CA through a petition
for certiorari.[21] SRMO argued that it merely acted as representative of Gerardo,
Remedios' successor-in-interest, when it received the sum corresponding to the widow's
allowance.[22] Without going into the merits of the case, however, the CA denied
SRMO's petition on the ground that the latter was not a party in the case before the
lower court and therefore had no standing to question the assailed order. [23] The CA
later denied SRMO's motion for reconsideration.[24]

SRMO is now before this Court contending that while it was not a party in the intestate
proceedings, it is nevertheless an "aggrieved party" which can file a petition
for certiorari. It claims that the RTC's order of reimbursement violated SRMO's right to
due process. SRMO further argues that the RTC erred in ordering it to reimburse the
widow's allowance since SRMO received said allowance only in favor of Gerardo as
buyer of Remedios' interests pursuant to the Deed of Sale.

In its Comment, the Estate maintains that SRMO has no standing to file the petition
for certiorari as it is not "the real party in interest who stands to lose or gain from the
verdict [that] the Court may hand in the case at bar." [25] Having only acted in the
proceedings below as counsel for Remedios and, upon transfer of interest, for Gerardo,
SRMO had no personality independent of its client. [26] Recognizing that SRMO received
the amount not for its own benefit but only in representation of its client, the Estate
claims that SRMO is only being made to return the amount it received for and in behalf
of its client; it is not being made to pay out of its own pocket. [27] The Estate also asserts
that since Remedios already sold her share in the estate to Gerardo on February 29,
1988, she was no longer entitled to any widow's allowance from that time on. [28]

II

Section 1, Rule 65 of the Rules of Court provides in full:

Section 1. Petition for certiorari. — When any tribunal, board or officer exercising judicial
or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no
appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court, alleging
the facts with certainty and praying that judgment be rendered annulling or modifying
1712
the proceedings of such tribunal, board or officer, and granting such incidental reliefs as
law and justice may require.

The petition shall be accompanied by a certified true copy of the judgment, order or
resolution subject thereof, copies of all pleadings and documents relevant and pertinent
thereto, and a sworn certification of non-forum shopping as provided in the third
paragraph of section 3, Rule 46.

(Emphasis supplied.)
The "aggrieved party" referred to in the above-quoted provision is one who was a party
to the original proceedings that gave rise to the original action for certiorari under Rule
65. In Tang v. Court of Appeals,[29] we explained:
Although Section 1 of Rule 65 provides that the special civil action of certiorari may be
availed of by a "person aggrieved" by the orders or decisions of a tribunal, the term
"person aggrieved" is not to be eonstrued to mean that any person who feels
injured by the lower court's order or decision can question the said court's
disposition via certiorari. To sanction a contrary interpretation would open the
floodgates to numerous and endless litigations which would undeniably lead to the
clogging of court dockets and, more importantly, the harassment of the party who
prevailed in the lower court.

In a situation wherein the order or decision being questioned underwent

adversarial proceedings before a trial court, the "person aggrieved" referred to
under Section 1 of Rule 65 who can avail of the special civil action
of certiorari pertains to one who was a party in the proceedings before the lower
court. The correctness of this interpretation can be gleaned from the fact that a special
civil action for certiorari may be dismissed motu proprio if the party elevating the case
failed to file a motion for reconsideration of the questioned order or decision before the
lower court. Obviously, only one who was a party in the case before the lower court can
file a motion for reconsideration since a stranger to the litigation would not have the
legal standing to interfere in the orders or decisions of the said court. In relation to
this, if a non-party in the proceedings before the lower court has no standing to file a
motion for reconsideration, logic would lead us to the conclusion that he would likewise
have no standing to question the said order or decision before the appellate court
via certiorari.[30]

(Emphasis supplied.)
The general rule, therefore, is that a person not a party to the proceedings in the trial
court cannot maintain an action for certiorari in the CA or the Supreme Court to have
the order or decision of the trial court reviewed. Under normal circumstances, the CA
would have been correct in dismissing a petition for certiorari filed by a non-party. The
peculiar facts of this case, however, call for a less stringent application of the rule.

The facts show that SRMO became involved in its own capacity only when the RTC
ordered it to return the money that it received on behalf of its client. The order of
reimbursement was directed to SRMO in its personal capacity—not in its capacity as
counsel for either Remedios or Gerardo. We find this directive unusual because the

1713
order for reimbursement would typically have been addressed to the parties of the case;
the counsel's role and duty would be to ensure that his client complies with the court's
order. The underlying premise of the RTC's order of reimbursement is that, logically,
SRMO kept or appropriated the money. But the premise itself is untenable because
SRMO never claimed the amount for its own account. In fact, it is uncontroverted that
SRMO only facilitated the transfer of the amount to Gerardo. [31]

Under the law of agency, an agent is not personally liable for the obligations of the
principal unless he performs acts outside the scope of his authority or he expressly
binds himself to be personally liable.[32] Otherwise, the principal is solely liable. Here,
there was no showing that SRMO bound itself personally for Gerardo's obligations.
SRMO also acted within the bounds of the authority issued by Gerardo, as the
transferee pendente lite of the widow's interest, to receive the payment.[33]

It appears that the RTC's primary justification for ordering SRMO to return the money
from its own pocket is due to the latter's failure to formally report the transfer of interest
from Remedios to Gerardo.[34] While it certainly would have been prudent for SRMO to
notify the RTC, the Rules of Court do not require counsels of parties to report any
transfer of interest. The Rules do not even mandate the substitution of parties in case of
a transfer of interest. Rule 3, Section 19 of the Rules of Court provides:
Section. 19. Transfer of interest. — In case of any transfer of interest, the action may be
continued by or against the original party, unless the court upon motion directs the
person to whom the interest is transferred to be substituted in the action or joined with
the original party.
Otherwise stated, unless the court upon motion directs the transferee pendente lite to
be substituted, the action is simply continued in the name of the original party. For all
intents and purposes, the Rules already consider Gerardo joined or substituted in the
proceeding a quo, commencing at the exact moment when the transfer of interest was
perfected between original party-transferor, Remedios, and the transferee pendente lite,
Gerardo.[35]

Given the foregoing, we find that the RTC was unjustified in ordering SRMO, in its own
capacity, to return the money to the Estate despite the fact, as certified to by Gerardo's
heirs, that SRMO had already accounted for all monies or funds it had received on its
client's behalf to Gerardo.[36] If the RTC was convinced that the Estate had a right to
reimbursement, it should have ordered the party who ultimately benefited from any
unwarranted payment—not his lawyer—to return the money.

While the general rule laid down in Tang (which limits the availability of the remedy
of certiorari under Rule 65 only to parties in the proceedings before the lower court)
must be strictly adhered to, it is not without exception. In Republic v. Eugenio, Jr.,[37] we
allowed the wife of a respondent in two cases filed by the Anti-Money Laundering
Council (AMLC) to challenge via certiorari the inquiry orders issued by the respective
regional trial courts. There, we found that the wife had adequately demonstrated her
joint ownership of the accounts subject of the inquiry orders. Thus, notwithstanding the
fact that she was not named as a respondent in the cases filed by the AMLC or

1714
identified as a subject of the inquiry orders, we ruled that her joint ownership of the
accounts clothed her with standing to assail, via certiorari, the inquiry orders authorizing
the examination of said accounts in violation of her statutory right to maintain said
accounts' secrecy.[38]

Considering that the RTC's order of reimbursement is specifically addressed to SRMO

and the established fact that SRMO only received the subject money in its capacity as
counsel/agent of Gerardo, there is then more reason to apply the exception here.
Unlike Tang, which involved neighboring lot owners as petitioners, SRMO's interest can
hardly be considered as merely incidental. That SRMO is being required to
reimburse from its own coffers money already transmitted to its client is sufficient to give
SRMO direct interest to challenge the RTC's order. Neither can SRMO be considered a
total stranger to the proceedings. We have stated in one case that "a counsel becomes
the eyes and ears in the prosecution or defense of his or her client's case." [39] This
highly fiduciary relationship between counsel and client makes the party/non-party
delineation prescribed by Tang inadequate in resolving the present controversy.

As a corollary, we have, in a number of instances, ruled that technical rules of

procedures should be used to promote, not frustrate, the cause of justice. Rules of
procedure are tools designed not to thwart but to facilitate the attainment of justice;
thus, their strict and rigid application may, for good and deserving reasons, have to give
way to, and be subordinated by, the need to aptly dispense substantial justice in the
normal cause.[40] In this case, ordering SRMO to reimburse the widow's allowance from
its own pocket would result in the unjust enrichment of Gerardo, since the latter would
retain the money at the expense of his own counsel. To avoid such injustice, a petition
for certiorari is an adequate remedy available to SRMO to meet the situation presented.

Another important consideration for allowing SRMO to file a petition lor certiorari is the
rule on real party in interest, which is applicable to private litigation. [41] A real party in
interest is one "who stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit."[42] In Ortigas & Co., Ltd. v. Court of Appeals,[43] we
stated:
... "Interest" within the meaning of the rule means material interest, an interest in issue
and to be affected by the decree, as distinguished from mere interest in the question
involved, or a mere incidental interest. By real interest is meant a present substantial
interest, as distinguished from a mere expectancy or a future, contingent, subordinate,
or consequential interest.[44]
Simply put, a real party in interest is the person who will suffer (or has suffered) the
wrong. In this case, it is SRMO who stands to be injured by the RTC's order of
reimbursement considering that it is being made to return money received on behalf of,
and already accounted to, its client.

III

Section 3, Rule 83 of the Rules of Court[45] provides for the allowance granted to the
widow and family of the deceased person during the settlement of the estate. This
allowance is rooted on the right and duty to support under the Civil Code. The right to
1715
support is a purely personal right essential to the life of the recipient, so that it cannot be
subject to attachment or execution.[46] Neither can it be renounced or transmitted to a
third person.[47] Being intransmissible, support cannot be the object of contracts.
[48]
 Nonetheless, it has also been held that support in arrears is a different thing
altogether. It may be compensated, renounced and transmitted by onerous or gratuitous
title.[49]

The Estate contends that since Remedios already sold her Estate to Gerardo on
February 29, 1988, she was no longer entitled to any widow's allowance from that point
on.[50] SRMO, on the other hand, maintains that the right of Remedios to receive widow's
allowance remains from 1988 up to 1991 because she remained a nominal party in the
case, and that this formed part of the interests sold to Gerardo. [51]

However, neither of the parties to the Deed of Sale is impleaded in the present petition;
hence, this particular issue cannot be fully resolved. Following the principle of relativity
of contracts,[52] the Deed of Sale is binding only between Remedios and Gerardo, and
they alone acquired rights and assumed obligations thereunder. Any ruling that affects
the enforceability of the Deed of Sale will therefore have an effect on their rights as
seller and buyer, respectively. Both are, therefore, indispensable parties insofar as the
issue of enforceability of the Deed of Sale is concerned. [53] The failure to implead them
is fatal to the Estate's challenge on this front.

WHEREFORE, the petition is GRANTED. The September 24, 2007 Decision and
December 28, 2007 Resolution of the Court of Appeals in CA-G.R. SP No. 83082
are SET ASIDE. The Orders dated August 21, 2003 and December 22, 2003 issued by
Branch 56 of the Regional Trial Court of Lucena City in Sp. Proc. No. 4440 are
likewise SET ASIDE.

SO ORDERED.

EN BANC

G.R. No. 175723               February 4, 2014

THE CITY OF MANILA, represented by MAYOR JOSE L. ATIENZA, JR., and MS.
LIBERTY M. TOLEDO, in her capacity as the City Treasurer of Manila, Petitioners,
vs.
HON. CARIDAD H. GRECIA-CUERDO, in her capacity as Presiding Judge of the
Regional Trial Court, Branch 112, Pasay City; SM MART, INC.; SM PRIME
HOLDINGS, INC.; STAR APPLIANCES CENTER; SUPERVALUE, INC.; ACE
HARDWARE PHILIPPINES, INC.; WATSON PERSONAL CARE STORES, PHILS.,
INC.; JOLLIMART PHILS., CORP.; SURPLUS MARKETING CORPORATION and
SIGNATURE LINES, Respondents.

DECISION

1716
PERALTA, J.:

Before the Court is a special civil action for certiorari under Rule 65 of the Rules of
Court seeking to reverse and set aside the Resolutions 1 dated April 6, 2006 and
November 29, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 87948.

The antecedents of the case, as summarized by the CA, are as follows:

The record shows that petitioner City of Manila, through its treasurer, petitioner Liberty
Toledo, assessed taxes for the taxable period from January to December 2002 against
private respondents SM Mart, Inc., SM Prime Holdings, Inc., Star Appliances Center,
Supervalue, Inc., Ace Hardware Philippines, Inc., Watsons Personal Care Stores Phils.,
Inc., Jollimart Philippines Corp., Surplus Marketing Corp. and Signature Lines. In
addition to the taxes purportedly due from private respondents pursuant to Section 14,
15, 16, 17 of the Revised Revenue Code of Manila (RRCM), said assessment covered
the local business taxes petitioners were authorized to collect under Section 21 of the
same Code. Because payment of the taxes assessed was a precondition for the
issuance of their business permits, private respondents were constrained to pay the
₱19,316,458.77 assessment under protest.

On January 24, 2004, private respondents filed [with the Regional Trial Court of Pasay
City] the complaint denominated as one for "Refund or Recovery of Illegally and/or
Erroneously-Collected Local Business Tax, Prohibition with Prayer to Issue TRO and
Writ of Preliminary Injunction"

which was docketed as Civil Case No. 04-0019-CFM before public respondent's sala [at
Branch 112]. In the amended complaint they filed on February 16, 2004, private
respondents alleged that, in relation to Section 21 thereof, Sections 14, 15, 16, 17, 18,
19 and 20 of the RRCM were violative of the limitations and guidelines under Section
143 (h) of Republic Act. No. 7160 [Local Government Code] on double taxation. They
further averred that petitioner city's Ordinance No. 8011 which amended pertinent
portions of the RRCM had already been declared to be illegal and unconstitutional by
the Department of Justice.2

In its Order3 dated July 9, 2004, the RTC granted private respondents' application for a
writ of preliminary injunction.

Petitioners filed a Motion for Reconsideration 4 but the RTC denied it in its Order5 dated
October 15, 2004.

Petitioners then filed a special civil action for certiorari with the CA assailing the July 9,
2004 and October 15, 2004 Orders of the RTC. 6

In its Resolution promulgated on April 6, 2006, the CA dismissed petitioners' petition for
certiorari holding that it has no jurisdiction over the said petition. The CA ruled that since
appellate jurisdiction over private respondents' complaint for tax refund, which was filed

1717
with the RTC, is vested in the Court of Tax Appeals (CTA), pursuant to its expanded
jurisdiction under Republic Act No. 9282 (RA 9282), it follows that a petition for certiorari
seeking nullification of an interlocutory order issued in the said case should, likewise, be
filed with the CTA.

Petitioners filed a Motion for Reconsideration, 7 but the CA denied it in its Resolution
dated November 29, 2006.

Hence, the present petition raising the following issues:

I- Whether or not the Honorable Court of Appeals gravely erred in dismissing the
case for lack of jurisdiction.

II- Whether or not the Honorable Regional Trial Court gravely abuse[d] its
discretion amounting to lack or excess of jurisdiction in enjoining by issuing a
Writ of Injunction the petitioners, their agents and/or authorized representatives
from implementing Section 21 of the Revised Revenue Code of Manila, as
amended, against private respondents.

III- Whether or not the Honorable Regional Trial Court gravely abuse[d] its
discretion amounting to lack or excess of jurisdiction in issuing the Writ of
Injunction despite failure of private respondents to make a written claim for tax
credit or refund with the City Treasurer of Manila.

IV- Whether or not the Honorable Regional Trial Court gravely abuse[d] its
discretion amounting to lack or excess of jurisdiction considering that under
Section 21 of the Manila Revenue Code, as amended, they are mere collecting
agents of the City Government.

V- Whether or not the Honorable Regional Trial Court gravely abuse[d] its
discretion amounting to lack or excess of jurisdiction in issuing the Writ of
Injunction because petitioner City of Manila and its constituents would result to
greater damage and prejudice thereof. (sic)8

Without first resolving the above issues, this Court finds that the instant petition should
be denied for being moot and academic.

Upon perusal of the original records of the instant case, this Court discovered that a
Decision9 in the main case had already been rendered by the RTC on August 13, 2007,
the dispositive portion of which reads as follows:

WHEREFORE, in view of the foregoing, this Court hereby renders JUDGMENT in favor
of the plaintiff and against the defendant to grant a tax refund or credit for taxes paid
pursuant to Section 21 of the Revenue Code of the City of Manila as amended for the
year 2002 in the following amounts:

1718
 To plaintiff SM Mart, Inc. - P 11,462,525.02

To plaintiff SM Prime Holdings, Inc. - 3,118,104.63

To plaintiff Star Appliances Center - 2,152,316.54

To plaintiff Supervalue, Inc. - 1,362,750.34

To plaintiff Ace Hardware Phils., Inc. - 419,689.04

To plaintiff Watsons Personal Care Health - 231,453.62

Stores Phils., Inc.

To plaintiff Jollimart Phils., Corp. - 140,908.54

To plaintiff Surplus Marketing Corp. - 220,204.70

To plaintiff Signature Mktg. Corp. - 94,906.34

TOTAL: - P 19,316,458.77

Defendants are further enjoined from collecting taxes under Section 21, Revenue Code
of Manila from herein plaintiff.

SO ORDERED.10

The parties did not inform the Court but based on the records, the above Decision had
already become final and executory per the Certificate of Finality 11 issued by the same
trial court on October 20, 2008. In fact, a Writ of Execution 12 was issued by the RTC on
November 25, 2009. In view of the foregoing, it clearly appears that the issues raised in
the present petition, which merely involve the incident on the preliminary injunction
issued by the RTC, have already become moot and academic considering that the trial
court, in its decision on the merits in the main case, has already ruled in favor of
respondents and that the same decision is now final and executory. Well entrenched is
the rule that where the issues have become moot and academic, there is no justiciable
controversy, thereby rendering the resolution of the same of no practical use or value. 13

In any case, the Court finds it necessary to resolve the issue on jurisdiction raised by
petitioners owing to its significance and for future guidance of both bench and bar. It is a
settled principle that courts will decide a question otherwise moot and academic if it is
capable of repetition, yet evading review.14

1719
However, before proceeding, to resolve the question on jurisdiction, the Court deems it
proper to likewise address a procedural error which petitioners committed.

Petitioners availed of the wrong remedy when they filed the instant special civil action
for certiorari under Rule 65 of the Rules of Court in assailing the Resolutions of the CA
which dismissed their petition filed with the said court and their motion for
reconsideration of such dismissal. There is no dispute that the assailed Resolutions of
the CA are in the nature of a final order as they disposed of the petition completely. It is
settled that in cases where an assailed judgment or order is considered final, the
remedy of the aggrieved party is appeal. Hence, in the instant case, petitioner should
have filed a petition for review on certiorari under Rule 45, which is a continuation of the
appellate process over the original case. 15

Petitioners should be reminded of the equally-settled rule that a special civil action for
certiorari under Rule 65 is an original or independent action based on grave abuse of
discretion amounting to lack or excess of jurisdiction and it will lie only if there is no
appeal or any other plain, speedy, and adequate remedy in the ordinary course of
law.16 As such, it cannot be a substitute for a lost appeal. 17

Nonetheless, in accordance with the liberal spirit pervading the Rules of Court and in
the interest of substantial justice, this Court has, before, treated a petition for certiorari
as a petition for review on certiorari, particularly (1) if the petition for certiorari was filed
within the reglementary period within which to file a petition for review on certiorari; (2)
when errors of judgment are averred; and (3) when there is sufficient reason to justify
the relaxation of the rules.18 Considering that the present petition was filed within the 15-
day reglementary period for filing a petition for review on certiorari under Rule 45, that
an error of judgment is averred, and because of the significance of the issue on
jurisdiction, the Court deems it proper and justified to relax the rules and, thus, treat the
instant petition for certiorari as a petition for review on certiorari.

Having disposed of the procedural aspect, we now turn to the central issue in this case.
The basic question posed before this Court is whether or not the CTA has jurisdiction
over a special civil action for certiorari assailing an interlocutory order issued by the
RTC in a local tax case.

This Court rules in the affirmative.

On June 16, 1954, Congress enacted Republic Act No. 1125 (RA 1125) creating the
CTA and giving to the said court jurisdiction over the following:

(1) Decisions of the Collector of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto, or other matters arising under the National Internal
Revenue Code or other law or part of law administered by the Bureau of Internal
Revenue;

1720
 (2) Decisions of the Commissioner of Customs in cases involving liability for
customs duties, fees or other money charges; seizure, detention or release of
property affected fines, forfeitures or other penalties imposed in relation thereto;
or other matters arising under the Customs Law or other law or part of law
administered by the Bureau of Customs; and

(3) Decisions of provincial or City Boards of Assessment Appeals in cases

involving the assessment and taxation of real property or other matters arising
under the Assessment Law, including rules and regulations relative thereto.

On March 30, 2004, the Legislature passed into law Republic Act No. 9282 (RA 9282)
amending RA 1125 by expanding the jurisdiction of the CTA, enlarging its membership
and elevating its rank to the level of a collegiate court with special jurisdiction. Pertinent
portions of the amendatory act provides thus:

Sec. 7. Jurisdiction. - The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving

disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties in relation thereto, or other matters arising under the National Internal
Revenue or other laws administered by the Bureau of Internal Revenue;

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties
in relations thereto, or other matters arising under the National Internal Revenue
Code or other laws administered by the Bureau of Internal Revenue, where the
National Internal Revenue Code provides a specific period of action, in which
case the inaction shall be deemed a denial;

3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases
originally decided or resolved by them in the exercise of their original or appellate
jurisdiction;

4. Decisions of the Commissioner of Customs in cases involving liability for

customs duties, fees or other money charges, seizure, detention or release of
property affected, fines, forfeitures or other penalties in relation thereto, or other
matters arising under the Customs Law or other laws administered by the Bureau
of Customs;

5. Decisions of the Central Board of Assessment Appeals in the exercise of its

appellate jurisdiction over cases involving the assessment and taxation of real
property originally decided by the provincial or city board of assessment appeals;

1721
 6. Decisions of the Secretary of Finance on customs cases elevated to him
automatically for review from decisions of the Commissioner of Customs which
are adverse to the Government under Section 2315 of the Tariff and Customs
Code;

7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural

product, commodity or article, and the Secretary of Agriculture in the case of
agricultural product, commodity or article, involving dumping and countervailing
duties under Section 301 and 302, respectively, of the Tariff and Customs Code,
and safeguard measures under Republic Act No. 8800, where either party may
appeal the decision to impose or not to impose said duties.

b. Jurisdiction over cases involving criminal offenses as herein provided:

1. Exclusive original jurisdiction over all criminal offenses arising from violations
of the National Internal Revenue Code or Tariff and Customs Code and other
laws administered by the Bureau of Internal Revenue or the Bureau of Customs:
Provided, however, That offenses or felonies mentioned in this paragraph where
the principal amount of taxes and fees, exclusive of charges and penalties,
claimed is less than One million pesos (₱1,000,000.00) or where there is no
specified amount claimed shall be tried by the regular Courts and the jurisdiction
of the CTA shall be appellate. Any provision of law or the Rules of Court to the
contrary notwithstanding, the criminal action and the corresponding civil action
for the recovery of civil liability for taxes and penalties shall at all times be
simultaneously instituted with, and jointly determined in the same proceeding by
the CTA, the filing of the criminal action being deemed to necessarily carry with it
the filing of the civil action, and no right to reserve the filing of such civil action
separately from the criminal action will be recognized.

2. Exclusive appellate jurisdiction in criminal offenses:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts
in tax cases originally decided by them, in their respected territorial jurisdiction.

b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial
Courts in the exercise of their appellate jurisdiction over tax cases originally decided by
the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in
their respective jurisdiction.

c. Jurisdiction over tax collection cases as herein provided:

1. Exclusive original jurisdiction in tax collection cases involving final and

executory assessments for taxes, fees, charges and penalties: Provides,
however, that collection cases where the principal amount of taxes and fees,
exclusive of charges and penalties, claimed is less than One million pesos

1722
 (₱1,000,000.00) shall be tried by the proper Municipal Trial Court, Metropolitan
Trial Court and Regional Trial Court.

2. Exclusive appellate jurisdiction in tax collection cases:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts
in tax collection cases originally decided by them, in their respective territorial
jurisdiction.

b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial
Courts in the Exercise of their appellate jurisdiction over tax collection cases originally
decided by the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit
Trial Courts, in their respective jurisdiction.19

A perusal of the above provisions would show that, while it is clearly stated that the CTA
has exclusive appellate jurisdiction over decisions, orders or resolutions of the RTCs in
local tax cases originally decided or resolved by them in the exercise of their original or
appellate jurisdiction, there is no categorical statement under RA 1125 as well as the
amendatory RA 9282, which provides that th e CTA has jurisdiction over petitions for
certiorari assailing interlocutory orders issued by the RTC in local tax cases filed before
it.

The prevailing doctrine is that the authority to issue writs of certiorari involves the
exercise of original jurisdiction which must be expressly conferred by the Constitution or
by law and cannot be implied from the mere existence of appellate jurisdiction. 20 Thus,
in the cases of Pimentel v. COMELEC,21 Garcia v. De Jesus,22 Veloria v.
COMELEC,23 Department of Agrarian Reform Adjudication Board v. Lubrica, 24 and
Garcia v. Sandiganbayan,25 this Court has ruled against the jurisdiction of courts or
tribunals over petitions for certiorari on the ground that there is no law which expressly
gives these tribunals such power.26 It must be observed, however, that with the
exception of Garcia v. Sandiganbayan, 27 these rulings pertain not to regular courts but
to tribunals exercising quasi-judicial powers. With respect to the Sandiganbayan,
Republic Act No. 824928 now provides that the special criminal court has exclusive
original jurisdiction over petitions for the issuance of the writs of mandamus, prohibition,
certiorari, habeas corpus, injunctions, and other ancillary writs and processes in aid of
its appellate jurisdiction.

In the same manner, Section 5 (1), Article VIII of the 1987 Constitution grants power to
the Supreme Court, in the exercise of its original jurisdiction, to issue writs of certiorari,
prohibition and mandamus. With respect to the Court of Appeals, Section 9 (1) of Batas
Pambansa Blg. 129 (BP 129) gives the appellate court, also in the exercise of its
original jurisdiction, the power to issue, among others, a writ of certiorari,whether or not
in aid of its appellate jurisdiction. As to Regional Trial Courts, the power to issue a writ
of certiorari, in the exercise of their original jurisdiction, is provided under Section 21 of
BP 129.

1723
The foregoing notwithstanding, while there is no express grant of such power, with
respect to the CTA, Section 1, Article VIII of the 1987 Constitution provides,
nonetheless, that judicial power shall be vested in one Supreme Court and in such
lower courts as may be established by law and that judicial power includes the duty of
the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch
or instrumentality of the Government.

On the strength of the above constitutional provisions, it can be fairly interpreted that the
power of the CTA includes that of determining whether or not there has been grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of the RTC in
issuing an interlocutory order in cases falling within the exclusive appellate jurisdiction
of the tax court. It, thus, follows that the CTA, by constitutional mandate, is vested with
jurisdiction to issue writs of certiorari in these cases.

Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it
must have the authority to issue, among others, a writ of certiorari. In transferring
exclusive jurisdiction over appealed tax cases to the CTA, it can reasonably be
assumed that the law intended to transfer also such power as is deemed necessary, if
not indispensable, in aid of such appellate jurisdiction. There is no perceivable reason
why the transfer should only be considered as partial, not total.

Consistent with the above pronouncement, this Court has held as early as the case of
J.M. Tuason & Co., Inc. v. Jaramillo, et al.29 that "if a case may be appealed to a
particular court or judicial tribunal or body, then said court or judicial tribunal or body has
jurisdiction to issue the extraordinary writ of certiorari, in aid of its appellate
jurisdiction."30 This principle was affirmed in De Jesus v. Court of Appeals, 31 where the
Court stated that "a court may issue a writ of certiorari in aid of its appellate jurisdiction if
said court has jurisdiction to review, by appeal or writ of error, the final orders or
decisions of the lower court."32 The rulings in J.M. Tuason and De Jesus were reiterated
in the more recent cases of Galang, Jr. v. Geronimo 33 and Bulilis v. Nuez.34

Furthermore, Section 6, Rule 135 of the present Rules of Court provides that when by
law, jurisdiction is conferred on a court or judicial officer, all auxiliary writs, processes
and other means necessary to carry it into effect may be employed by such court or
officer.

If this Court were to sustain petitioners' contention that jurisdiction over their certiorari
petition lies with the CA, this Court would be confirming the exercise by two judicial
bodies, the CA and the CTA, of jurisdiction over basically the same subject matter –
precisely the split-jurisdiction situation which is anathema to the orderly administration
of justice.35 The Court cannot accept that such was the legislative motive, especially
considering that the law expressly confers on the CTA, the tribunal with the specialized
competence over tax and tariff matters, the role of judicial review over local tax cases
without mention of any other court that may exercise such power. Thus, the Court

1724
agrees with the ruling of the CA that since appellate jurisdiction over private
respondents' complaint for tax refund is vested in the CTA, it follows that a petition for
certiorari seeking nullification of an interlocutory order issued in the said case should,
likewise, be filed with the same court. To rule otherwise would lead to an absurd
situation where one court decides an appeal in the main case while another court rules
on an incident in the very same case.

Stated differently, it would be somewhat incongruent with the pronounced judicial

abhorrence to split jurisdiction to conclude that the intention of the law is to divide the
authority over a local tax case filed with the RTC by giving to the CA or this Court
jurisdiction to issue a writ of certiorari against interlocutory orders of the RTC but giving
to the CTA the jurisdiction over the appeal from the decision of the trial court in the
same case. It is more in consonance with logic and legal soundness to conclude that
the grant of appellate jurisdiction to the CTA over tax cases filed in and decided by the
RTC carries with it the power to issue a writ of certiorari when necessary in aid of such
appellate jurisdiction. The supervisory power or jurisdiction of the CTA to issue a writ of
certiorari in aid of its appellate jurisdiction should co-exist with, and be a complement to,
its appellate jurisdiction to review, by appeal, the final orders and decisions of the RTC,
in order to have complete supervision over the acts of the latter. 36

A grant of appellate jurisdiction implies that there is included in it the power necessary
to exercise it effectively, to make all orders that will preserve the subject of the action,
and to give effect to the final determination of the appeal. It carries with it the power to
protect that jurisdiction and to make the decisions of the court thereunder effective. The
court, in aid of its appellate jurisdiction, has authority to control all auxiliary and
incidental matters necessary to the efficient and proper exercise of that
jurisdiction.1âwphi1 For this purpose, it may, when necessary, prohibit or restrain the
performance of any act which might interfere with the proper exercise of its rightful
jurisdiction in cases pending before it. 37

Lastly, it would not be amiss to point out that a court which is endowed with a particular
jurisdiction should have powers which are necessary to enable it to act effectively within
such jurisdiction. These should be regarded as powers which are inherent in its
jurisdiction and the court must possess them in order to enforce its rules of practice and
to suppress any abuses of its process and to defeat any attempted thwarting of such
process.

In this regard, Section 1 of RA 9282 states that the CTA shall be of the same level as
the CA and shall possess all the inherent powers of a court of justice.

Indeed, courts possess certain inherent powers which may be said to be implied from a
general grant of jurisdiction, in addition to those expressly conferred on them. These
inherent powers are such powers as are necessary for the ordinary and efficient
exercise of jurisdiction; or are essential to the existence, dignity and functions of the
courts, as well as to the due administration of justice; or are directly appropriate,

1725
convenient and suitable to the execution of their granted powers; and include the power
to maintain the court's jurisdiction and render it effective in behalf of the litigants. 38

Thus, this Court has held that "while a court may be expressly granted the incidental
powers necessary to effectuate its jurisdiction, a grant of jurisdiction, in the absence of
prohibitive legislation, implies the necessary and usual incidental powers essential to
effectuate it, and, subject to existing laws and constitutional provisions, every regularly
constituted court has power to do all things that are reasonably necessary for the
administration of justice within the scope of its jurisdiction and for the enforcement of its
judgments and mandates."39 Hence, demands, matters or questions ancillary or
incidental to, or growing out of, the main action, and coming within the above principles,
may be taken cognizance of by the court and determined, since such jurisdiction is in
aid of its authority over the principal matter, even though the court may thus be called
on to consider and decide matters which, as original causes of action, would not be
within its cognizance.40

Based on the foregoing disquisitions, it can be reasonably concluded that the authority
of the CTA to take cognizance of petitions for certiorari questioning interlocutory orders
issued by the RTC in a local tax case is included in the powers granted by the
Constitution as well as inherent in the exercise of its appellate jurisdiction.

Finally, it would bear to point out that this Court is not abandoning the rule that, insofar
as quasi-judicial tribunals are concerned, the authority to issue writs of certiorari must
still be expressly conferred by the Constitution or by law and cannot be implied from the
mere existence of their appellate jurisdiction. This doctrine remains as it applies only to
quasi-judicial bodies.

WHEREFORE, the petition is DENIED.

SO ORDERED.

EN BANC

G.R. No. 188056               January 8, 2013

SPOUSES AUGUSTO G. DACUDAO AND OFELIA R. DACUDAO, Petitioners,

vs.
SECRETARY OF JUSTICE RAUL M. GONZALES OF THE DEPARTMENT OF
JUSTICE, Respondent.

DECISION

BERSAMIN, J.:

Petitioners - residents of Bacaca Road, Davao City - were among the investors whom
Celso G. Delos Angeles, Jr. and his associates in the Legacy Group of Companies

1726
(Legacy Group) allegedly defrauded through the Legacy Group's "buy back agreement"
that earned them check payments that were dishonored. After their written demands for
the return of their investments went unheeded, they initiated a number of charges for
syndicated estafa against Delos Angeles, Jr., et al. in the Office of the City Prosecutor
of Davao City on February 6, 2009. Three of the cases were docketed as NPS Docket
No. XI-02-INV.-09-A-00356, Docket No. XI-02-INV.-09-C-00752, and Docket No. XI-02-
INV.-09-C-00753.1

On March 18, 2009, the Secretary of Justice issued Department of Justice (DOJ) Order
No. 182 (DO No. 182), directing all Regional State Prosecutors, Provincial Prosecutors,
and City Prosecutors to forward all cases already filed against Delos Angeles, Jr., et al.
to the Secretariat of the DOJ Special Panel in Manila for appropriate action.

DO No. 182 reads:2

All cases against Celso G. delos Angeles, Jr., et al. under Legacy Group of Companies,
may be filed with the docket section of the National Prosecution Service, Department of
Justice, Padre Faura, Manila and shall be forwarded to the Secretariat of the Special
Panel for assignment and distribution to panel members, per Department Order No. 84
dated February 13, 2009.

However, cases already filed against Celso G. delos Angeles, Jr. et al. of Legacy group
of Companies in your respective offices with the exemption of the cases filed in
Cagayan de Oro City which is covered by Memorandum dated March 2, 2009, should
be forwarded to the Secretariat of the Special Panel at Room 149, Department of
Justice, Padre Faura, Manila, for proper disposition.

For information and guidance.

Pursuant to DO No. 182, the complaints of petitioners were forwarded by the Office of
the City Prosecutor of Davao City to the Secretariat of the Special Panel of the DOJ. 3

Aggrieved by such turn of events, petitioners have directly come to the Court via petition
for certiorari, prohibition and mandamus, ascribing to respondent Secretary of Justice
grave abuse of discretion in issuing DO No. 182. They claim that DO No. 182 violated
their right to due process, their right to the equal protection of the laws, and their right to
the speedy disposition of cases. They insist that DO No. 182 was an obstruction of
justice and a violation of the rule against enactment of laws with retroactive effect.

Petitioners also challenge as unconstitutional the issuance of DOJ Memorandum dated

March 2, 2009 exempting from the coverage of DO No. No. 182 all the cases for
syndicated estafa already filed and pending in the Office of the City Prosecutor of
Cagayan de Oro City. They aver that DOJ Memorandum dated March 2, 2009 violated
their right to equal protection under the Constitution.

1727
The Office of the Solicitor General (OSG), representing respondent Secretary of Justice,
maintains the validity of DO No. 182 and DOJ Memorandum dated March 2, 2009, and
prays that the petition be dismissed for its utter lack of merit.

Issues

The following issues are now to be resolved, to wit:

1. Did petitioners properly bring their petition for certiorari, prohibition and
mandamus directly to the Court?

2. Did respondent Secretary of Justice commit grave abuse of discretion in

issuing DO No. 182?

3. Did DO No. 182 and DOJ Memorandum dated March 2, 2009 violate
petitioners’ constitutionally guaranteed rights?

Ruling

The petition for certiorari, prohibition and mandamus, being bereft of substance and
merit, is dismissed.

Firstly, petitioners have unduly disregarded the hierarchy of courts by coming directly to
the Court with their petition for certiorari, prohibition and mandamus without tendering
therein any special, important or compelling reason to justify the direct filing of the
petition.

We emphasize that the concurrence of jurisdiction among the Supreme Court, Court of
Appeals and the Regional Trial Courts to issue the writs of certiorari, prohibition,
mandamus, quo warranto, habeas corpus and injunction did not give petitioners the
unrestricted freedom of choice of court forum. 4 An undue disregard of this policy against
direct resort to the Court will cause the dismissal of the recourse. In Bañez, Jr. v.
Concepcion,5 we explained why, to wit:

The Court must enjoin the observance of the policy on the hierarchy of courts, and now
affirms that the policy is not to be ignored without serious consequences. The strictness
of the policy is designed to shield the Court from having to deal with causes that are
also well within the competence of the lower courts, and thus leave time to the Court to
deal with the more fundamental and more essential tasks that the Constitution has
assigned to it. The Court may act on petitions for the extraordinary writs of certiorari,
prohibition and mandamus only when absolutely necessary or when serious and
important reasons exist to justify an exception to the policy. This was why the Court
stressed in Vergara, Sr. v. Suelto:

x x x. The Supreme Court is a court of last resort, and must so remain if it is to

satisfactorily perform the functions assigned to it by the fundamental charter and

1728
immemorial tradition. It cannot and should not be burdened with the task of dealing with
causes in the first instance. Its original jurisdiction to issue the so-called extraordinary
writs should be exercised only where absolutely necessary or where serious and
important reasons exist therefor. Hence, that jurisdiction should generally be exercised
relative to actions or proceedings before the Court of Appeals, or before constitutional
or other tribunals, bodies or agencies whose acts for some reason or another are not
controllable by the Court of Appeals. Where the issuance of an extraordinary writ is also
within the competence of the Court of Appeals or a Regional Trial Court, it is in either of
these courts that the specific action for the writ’s procurement must be presented. This
is and should continue to be the policy in this regard, a policy that courts and lawyers
must strictly observe. (Emphasis supplied)

In People v. Cuaresma, the Court has also amplified the need for strict adherence to the
policy of hierarchy of courts. There, noting "a growing tendency on the part of litigants
and lawyers to have their applications for the so-called extraordinary writs, and
sometimes even their appeals, passed upon and adjudicated directly and immediately
by the highest tribunal of the land," the Court has cautioned lawyers and litigants
against taking a direct resort to the highest tribunal, viz:

x x x. This Court’s original jurisdiction to issue writs of certiorari (as well as prohibition,
mandamus, quo warranto, habeas corpus and injunction) is not exclusive. It is shared
by this Court with Regional Trial Courts x x x, which may issue the writ, enforceable in
any part of their respective regions. It is also shared by this Court, and by the Regional
Trial Court, with the Court of Appeals x x x, although prior to the effectivity of Batas
Pambansa Bilang 129 on August 14, 1981, the latter's competence to issue the
extraordinary writs was restricted to those "in aid of its appellate jurisdiction." This
concurrence of jurisdiction is not, however, to be taken as according to parties seeking
any of the writs an absolute, unrestrained freedom of choice of the court to which
application therefor will be directed. There is after all a hierarchy of courts. That
hierarchy is determinative of the venue of appeals, and should also serve as a general
determinant of the appropriate forum for petitions for the extraordinary writs. A
becoming regard for that judicial hierarchy most certainly indicates that petitions for the
issuance of extraordinary writs against first level ("inferior") courts should be filed with
the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct
invocation of the Supreme Court's original jurisdiction to issue these writs should be
allowed only when there are special and important reasons therefor, clearly and
specifically set out in the petition. This is established policy. It is a policy that is
necessary to prevent inordinate demands upon the Court’s time and attention which are
better devoted to those matters within its exclusive jurisdiction, and to prevent further
over-crowding of the Court's docket. Indeed, the removal of the restriction on the
jurisdiction of the Court of Appeals in this regard, supra— resulting from the deletion of
the qualifying phrase, "in aid of its appellate jurisdiction" — was evidently intended
precisely to relieve this Court pro tanto of the burden of dealing with applications for the
extraordinary writs which, but for the expansion of the Appellate Court corresponding
jurisdiction, would have had to be filed with it.1âwphi1

1729
 xxxx

The Court therefore closes this decision with the declaration for the information and
evidence of all concerned, that it will not only continue to enforce the policy, but will
require a more strict observance thereof. (Emphasis supplied)

Accordingly, every litigant must remember that the Court is not the only judicial forum
from which to seek and obtain effective redress of their grievances. As a rule, the Court
is a court of last resort, not a court of the first instance. Hence, every litigant who brings
the petitions for the extraordinary writs of certiorari, prohibition and mandamus should
ever be mindful of the policy on the hierarchy of courts, the observance of which is
explicitly defined and enjoined in Section 4 of Rule 65, Rules of Court, viz:

Section 4. When and where petition filed. - The petition shall be filed not later than sixty
(60) days from notice of the judgment, order or resolution. In case a motion for
reconsideration or new trial is timely filed, whether such motion is required or not, the
sixty (60) day period shall be counted from notice of the denial of the said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions
of a lower court or of a corporation, board, officer or person, in the Regional Trial Court
exercising jurisdiction over the territorial area as defined by the Supreme Court. It may
also be filed in the Court of Appeals whether or not the same is in the aid of its appellate
jurisdiction, or in the Sandiganbayan if it is in aid of its appellate jurisdiction. If it involves
the acts or omissions of a quasi-judicial agency, unless otherwise provided by law or
these rules, the petition shall be filed in and cognizable only by the Court of Appeals.

In election cases involving an act or an omission of a municipal or a regional trial court,

the petition shall be filed exclusively with the Commission on Elections, in aid of its
appellate jurisdiction.6

Secondly, even assuming arguendo that petitioners’ direct resort to the Court was
permissible, the petition must still be dismissed.

The writ of certiorari is available only when any tribunal, board or officer exercising
judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction,
or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is
no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of
law.7 "The sole office of the writ of certiorari," according to Delos Santos v. Metropolitan
Bank and Trust Company:8

x x x is the correction of errors of jurisdiction, which includes the commission of grave

abuse of discretion amounting to lack of jurisdiction. In this regard, mere abuse of
discretion is not enough to warrant the issuance of the writ. The abuse of discretion
must be grave, which means either that the judicial or quasi-judicial power was
exercised in an arbitrary or despotic manner by reason of passion or personal hostility,
or that the respondent judge, tribunal or board evaded a positive duty, or virtually

1730
refused to perform the duty enjoined or to act in contemplation of law, such as when
such judge, tribunal or board exercising judicial or quasi-judicial powers acted in a
capricious or whimsical manner as to be equivalent to lack of jurisdiction.

For a special civil action for certiorari to prosper, therefore, the following requisites must
concur, namely: (a) it must be directed against a tribunal, board or officer exercising
judicial or quasi-judicial functions; (b) the tribunal, board, or officer must have acted
without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or
excess of jurisdiction; and (c) there is no appeal nor any plain, speedy, and adequate
remedy in the ordinary course of law.9 The burden of proof lies on petitioners to
demonstrate that the assailed order was issued without or in excess of jurisdiction or
with grave abuse of discretion amounting to lack or excess of jurisdiction.

Yet, petitioners have not shown a compliance with the requisites. To start with, they
merely alleged that the Secretary of Justice had acted without or in excess of his
jurisdiction. Also, the petition did not show that the Secretary of Justice was an officer
exercising judicial or quasi-judicial functions. Instead, the Secretary of Justice would
appear to be not exercising any judicial or quasi-judicial functions because his
questioned issuances were ostensibly intended to ensure his subordinates’ efficiency
and economy in the conduct of the preliminary investigation of all the cases involving
the Legacy Group. The function involved was purely executive or administrative.

The fact that the DOJ is the primary prosecution arm of the Government does not make
it a quasi-judicial office or agency. Its preliminary investigation of cases is not a quasi-
judicial proceeding. Nor does the DOJ exercise a quasi-judicial function when it reviews
the findings of a public prosecutor on the finding of probable cause in any case. Indeed,
in Bautista v. Court of Appeals,10 the Supreme Court has held that a preliminary
investigation is not a quasi-judicial proceeding, stating:

x x x the prosecutor in a preliminary investigation does not determine the guilt or

innocence of the accused. He does not exercise adjudication nor rule-making functions.
Preliminary investigation is merely inquisitorial, and is often the only means of
discovering the persons who may be reasonably charged with a crime and to enable the
fiscal to prepare his complaint or information. It is not a trial of the case on the merits
and has no purpose except that of determining whether a crime has been committed
and whether there is probable cause to believe that the accused is guilty thereof. While
the fiscal makes that determination, he cannot be said to be acting as a quasi-court, for
it is the courts, ultimately, that pass judgment on the accused, not the fiscal. 11

There may be some decisions of the Court that have characterized the public
prosecutor’s power to conduct a preliminary investigation as quasi-judicial in nature.
Still, this characterization is true only to the extent that the public prosecutor, like a
quasi-judicial body, is an officer of the executive department exercising powers akin to
those of a court of law.

1731
But the limited similarity between the public prosecutor and a quasi-judicial body quickly
endsthere. For sure, a quasi-judicial body is an organ of government other than a court
of law or a legislative office that affects the rights of private parties through either
adjudication or rule-making; it performs adjudicatory functions, and its awards and
adjudications determine the rights of the parties coming before it; its decisions have the
same effect as the judgments of a court of law. In contrast, that is not the effect
whenever a public prosecutor conducts a preliminary investigation to determine
probable cause in order to file a criminal information against a person properly charged
with the offense, or whenever the Secretary of Justice reviews the public prosecutor’s
orders or resolutions.

Petitioners have self-styled their petition to be also for prohibition. However, we do not
see how that can be. They have not shown in their petition in what manner and at what
point the Secretary of Justice, in handing out the assailed issuances, acted without or in
excess of his jurisdiction, or with grave abuse of discretion amounting to lack or excess
of jurisdiction. On the other hand, we already indicated why the issuances were not
infirmed by any defect of jurisdiction. Hence, the blatant omissions of the petition
transgressed Section 2, Rule 65 of the Rules of Court, to wit:

Section 2. Petition for prohibition. — When the proceedings of any tribunal, corporation,
board, officer or person, whether exercising judicial, quasi-judicial or ministerial
functions, are without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal or any
other plain, speedy, and adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered commanding the respondent to desist
from further proceedings in the action or matter specified therein, or otherwise granting
such incidental reliefs as law and justice may require.

The petition shall likewise be accompanied by a certified true copy of the judgment,
order or resolution subject thereof, copies of all pleadings and documents relevant and
pertinent thereto, and a sworn certification of non-forum shopping as provided in the
third paragraph of section 3, Rule 46. (2a) Similarly, the petition could not be one for
mandamus, which is a remedy available only when "any tribunal, corporation, board,
officer or person unlawfully neglects the performance of an act which the law specifically
enjoins as a duty resulting from an office, trust, or station, or unlawfully excludes
another from the use and enjoyment of a right or office to which such other is entitled,
and there is no other plain, speedy and adequate remedy in the ordinary course of law,
the person aggrieved thereby may file a verified petition in the proper court." 12 The main
objective of mandamus is to compel the performance of a ministerial duty on the part of
the respondent. Plainly enough, the writ of mandamus does not issue to control or
review the exercise of discretion or to compel a course of conduct, 13 which, it quickly
seems to us, was what petitioners would have the Secretary of Justice do in their favor.
Consequently, their petition has not indicated how and where the Secretary of Justice’s
assailed issuances excluded them from the use and enjoyment of a right or office to
which they were unquestionably entitled.

1732
Thirdly, there is no question that DO No. 182 enjoyed a strong presumption of its
validity. In ABAKADA Guro Party List v. Purisima, 14 the Court has extended the
presumption of validity to legislative issuances as well as to rules and regulations issued
by administrative agencies, saying:

Administrative regulations enacted by administrative agencies to implement and

interpret the law which they are entrusted to enforce have the force of law and are
entitled to respect. Such rules and regulations partake of the nature of a statute and are
just as binding as if they have been written in the statute itself. As such, they have the
force and effect of law and enjoy the presumption of constitutionality and legality until
they are set aside with finality in an appropriate case by a competent court. 15

DO No. 182 was issued pursuant to Department Order No. 84 that the Secretary of
Justice had promulgated to govern the performance of the mandate of the DOJ to
"administer the criminal justice system in accordance with the accepted processes
thereof"16 as expressed in Republic Act No. 10071 (Prosecution Service Act of 2010)
and Section 3, Chapter I, Title III and Section 1, Chapter I, Title III of Book IV of
Executive Order 292 (Administrative Code of 1987).

To overcome this strong presumption of validity of the questioned issuances, it became

incumbent upon petitioners to prove their unconstitutionality and invalidity, either by
showing that the Administrative Code of 1987 did not authorize the Secretary of Justice
to issue DO No. 182, or by demonstrating that DO No. 182 exceeded the bounds of the
Administrative Code of 1987 and other pertinent laws. They did not do so. They must
further show that the performance of the DOJ’s functions under the Administrative Code
of 1987 and other pertinent laws did not call for the impositions laid down by the
assailed issuances. That was not true here, for DO No 182 did not deprive petitioners in
any degree of their right to seek redress for the alleged wrong done against them by the
Legacy Group. Instead, the issuances were designed to assist petitioners and others
like them expedite the prosecution, if warranted under the law, of all those responsible
for the wrong through the creation of the special panel of state prosecutors and
prosecution attorneys in order to conduct a nationwide and comprehensive preliminary
investigation and prosecution of the cases. Thereby, the Secretary of Justice did not act
arbitrarily or oppressively against petitioners.

Fourthly, petitioners attack the exemption from the consolidation decreed in DO No. 182
of the cases filed or pending in the Office of the City Prosecutor of Cagayan de Oro
City, claiming that the exemption traversed the constitutional guaranty in their favor of
the equal protection of law.17

The exemption is covered by the assailed DOJ Memorandum dated March 2, 2009, to
wit:

It has come to the attention of the undersigned that cases for syndicated estafa were
filed with your office against officers of the Legacy Group of Companies. Considering
the distance of the place of complainants therein to Manila, your Office is hereby

1733
exempted from the directive previously issued by the undersigned requiring prosecution
offices to forward the records of all cases involving Legacy Group of Companies to the
Task Force.

Anent the foregoing, you are hereby directed to conduct preliminary investigation of all
cases involving the Legacy Group of Companies filed in your office with dispatch and to
file the corresponding informations if evidence warrants and to prosecute the same in
court.

Petitioners’ attack deserves no consideration. The equal protection clause of the

Constitution does not require the universal application of the laws to all persons or
things without distinction; what it requires is simply equality among equals as
determined according to a valid classification.18 Hence, the Court has affirmed that if a
law neither burdens a fundamental right nor targets a suspect class, the classification
stands as long as it bears a rational relationship to some legitimate government end. 19

That is the situation here. In issuing the assailed DOJ Memorandum dated March 2,
2009, the Secretary of Justice took into account the relative distance between Cagayan
de Oro, where many complainants against the Legacy Group resided, and Manila,
where the preliminary investigations would be conducted by the special panel. He also
took into account that the cases had already been filed in the City Prosecutor’s Office of
Cagayan de Oro at the time he issued DO No. 182. Given the considerable number of
complainants residing in Cagayan de Oro City, the Secretary of Justice was fully
justified in excluding the cases commenced in Cagayan de Oro from the ambit of DO
No. 182. The classification taken into consideration by the Secretary of Justice was
really valid. Resultantly, petitioners could not inquire into the wisdom behind the
exemption upon the ground that the non-application of the exemption to them would
cause them some inconvenience.

Fifthly, petitioners contend that DO No. 182 violated their right to the speedy disposition
of cases guaranteed by the Constitution. They posit that there would be considerable
delay in the resolution of their cases that would definitely be "a flagrant transgression of
petitioners’ constitutional rights to speedy disposition of their cases." 20

We cannot favor their contention.

In The Ombudsman v. Jurado,21 the Court has clarified that although the Constitution
guarantees the right to the speedy disposition of cases, such speedy disposition is a
flexible concept. To properly define that concept, the facts and circumstances
surrounding each case must be evaluated and taken into account. There occurs a
violation of the right to a speedy disposition of a case only when the proceedings are
attended by vexatious, capricious, and oppressive delays, or when unjustified
postponements of the trial are sought and secured, or when, without cause or justifiable
motive, a long period of time is allowed to elapse without the party having his case
tried.22 It is cogent to mention that a mere mathematical reckoning of the time involved
is not determinant of the concept.23

1734
The consolidation of the cases against Delos Angeles, Jr., et al. was ordered obviously
to obtain expeditious justice for the parties with the least cost and vexation to them.
Inasmuch as the cases filed involved similar or related questions to be dealt with during
the preliminary investigation, the Secretary of Justice rightly found the consolidation of
the cases to be the most feasible means of promoting the efficient use of public
resources and of having a comprehensive investigation of the cases.

On the other hand, we do not ignore the possibility that there would be more cases
reaching the DOJ in addition to those already brought by petitioners and other parties.
Yet, any delays in petitioners’ cases occasioned by such other and subsequent cases
should not warrant the invalidation of DO No. 182. The Constitution prohibits only the
delays that are unreasonable, arbitrary and oppressive, and tend to render rights
nugatory.24 In fine, we see neither undue delays, nor any violation of the right of
petitioners to the speedy disposition of their cases.

Sixthly, petitioners assert that the assailed issuances should cover only future cases
against Delos Angeles, Jr., et al., not those already being investigated. They maintain
that DO No. 182 was issued in violation of the prohibition against passing laws with
retroactive effect.

Petitioners’ assertion is baseless.

As a general rule, laws shall have no retroactive effect. However, exceptions exist, and
one such exception concerns a law that is procedural in nature. The reason is that a
remedial statute or a statute relating to remedies or modes of procedure does not create
new rights or take away vested rights but only operates in furtherance of the remedy or
the confirmation of already existing rights. 25 A statute or rule regulating the procedure of
the courts will be construed as applicable to actions pending and undetermined at the
time of its passage. All procedural laws are retroactive in that sense and to that extent.
The retroactive application is not violative of any right of a person who may feel
adversely affected, for, verily, no vested right generally attaches to or arises from
procedural laws.

Finally, petitioners have averred but failed to establish that DO No. 182 constituted
obstruction of justice. This ground of the petition, being unsubstantiated, was
unfounded.

Nonetheless, it is not amiss to reiterate that the authority of the Secretary of Justice to
assume jurisdiction over matters involving the investigation of crimes and the
prosecution of offenders is fully sanctioned by law. Towards that end, the Secretary of
Justice exercises control and supervision over all the regional, provincial, and city
prosecutors of the country; has broad discretion in the discharge of the DOJ’s functions;
and administers the DOJ and its adjunct offices and agencies by promulgating rules and
regulations to carry out their objectives, policies and functions.

1735
Consequently, unless and until the Secretary of Justice acts beyond the bounds of his
authority, or arbitrarily, or whimsically, or oppressively, any person or entity who may
feel to be thereby aggrieved or adversely affected should have no right to call for the
invalidation or nullification of the rules and regulations issued by, as well as other
actions taken by the Secretary of Justice.

WHEREFORE, the Court DISMISSES the omnibus petition for certiorari, prohibition,
and mandamus for lack of merit.

Petitioners shall pay the costs of suit.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 200670, July 06, 2015 ]
CLARK INVESTORS AND LOCATORS ASSOCIATION, INC., PETITIONER, VS.
SECRETARY OF FINANCE AND COMMISSIONER OF INTERNAL REVENUE,
RESPONDENTS.

DECISION
VILLARAMA, JR., J.:
This is a petition for certiorari with a prayer for the issuance of a temporary restraining
order and/or writ of preliminary injunction to annul and set aside Revenue Regulations
No. 2-2012 (RR 2-2012) issued by the Department of Finance (DOF) on February 17,
2012 upon recommendation of the Bureau of Internal Revenue (BIR). Petitioner Clark
Investors and Locators Association, Inc. claims that RR 2-2012, which imposes Value
Added Tax (VAT) and excise tax on the importation of petroleum and petroleum
products from abroad into the Freeport or Economic Zones, is void and contrary to
Republic Act (RA) No. 7227, otherwise known as the Bases Conversion and
Development Act of 1992, as amended by RA No. 9400.

The salient facts follow.

On March 13, 1992, Congress enacted RA No. 7227 which mandated the accelerated
conversion of the Clark and Subic military reservations into special economic zones.
Section 12 thereof provides for the creation of the Subic Special Economic Zone:

SEC. 12. Subic Special  Economic Zone.  —  Subject to the concurrence by resolution

of the sangguniang panlungsod of the City of Olongapo and the sangguniang bayan of
the Municipalities of Subic, Morong and Hermosa, there is hereby created a Special
Economic and Free-port Zone consisting of the City of Olongapo and the Municipality of
Subic, Province of Zambales, the lands occupied by the Subic Naval Base and its
contiguous extensions as embraced, covered, and defined by the 1947 Military Bases
Agreement between the Philippines and the United States of America as amended, and
within the territorial jurisdiction of the Municipalities of Morong and Hermosa, Province

1736
of Bataan, hereinafter referred to as the Subic Special Economic Zone whose metes
and bounds shall be delineated in a proclamation to be issued by the President of the
Philippines. Within thirty (30) days after the approval of this Act, each local government
unit shall submit its resolution of concurrence to join the Subic Special Economic Zone
to the Office of the President. Thereafter, the President of the Philippines shall issue a
proclamation defining the metes and bounds of the zone as provided herein.

The abovementioned zone shall be subject to the following policies:

(a) Within  the  framework  and  subject  to  the  mandate  and limitations of the
Constitution and the pertinent provisions of the Local Government Code, the Subic
Special Economic Zone shall be developed into a self-sustaining, industrial,
commercial, financial and investment center to generate employment opportunities in
and around the zone and to attract and promote productive foreign investments;

(b) The Subic Special Economic Zone shall be operated and managed  as a
separate customs territory ensuring  free  flow or movement of goods and capital
within, into and exported out of the Subic Special Economic Zone, as well as
provide incentives such as tax and duty-free importations of raw materials,
capital and equipment.  However,  exportation or removal of goods from the
territory of the Subic Special Economic Zone to the other parts of the Philippine
territory shall be subject to customs duties and taxes under the Customs and
Tariff Code and other relevant tax laws of the Philippines;

(c) The provision of existing laws, rules and regulations to the contrary
notwithstanding, no taxes, local and national, shall be imposed within the Subic
Special Economic Zone.  In lieu of paying taxes, three percent (3%) of the gross
income earned by all businesses and enterprises within the Subic Special
Economic Zone shall be remitted to the National Government, one percent (1%)
each to the local government units affected by the declaration of the zone in
proportion to their population area, and other factors.  In addition, there is hereby
established a development fund of one percent (1%) of the gross income earned
by all businesses and enterprises within the Subic Special Economic Zone to be
utilized for the development of municipalities outside the City of Olongapo and
the Municipality of Subic, and other municipalities contiguous to the base areas.

In case of conflict between national and local laws with respect to tax exemption
privileges in the Subic Special Economic Zone, the same shall be resolved in
favor of the latter;

(d) No exchange control policy shall be applied and free markets for foreign exchange,
gold, securities and futures shall be allowed and maintained in the Subic Special
Economic Zone;

(e) The Central Bank, through the Monetary Board, shall supervise and regulate the
operation of banks and other financial institutions within the Subic Special Economic

1737
Zone;

(f) Banking and finance shall be liberalized with the establishment of foreign currency
depository units of local commercial banks and offshore banking units of foreign banks
with minimum Central Bank regulation;

(g) Any investor within the Subic Special Economic Zone whose continuing investment
shall not be less than Two hundred fifty thousand dollars ($250,000), his/her spouse
and dependent children under twenty-one (21) years of age, shall be granted
permanent resident status within the Subic Special Economic Zone. They shall have
freedom of ingress and egress to and from the Subic Special Economic Zone without
any need of special authorization from the Bureau of Immigration and Deportation.  The
Subic Bay Metropolitan Authority referred to in Section 13 of this Act may also issue
working visas renewable every two (2) years to foreign executives and other aliens
possessing highly-technical skills which no Filipino within the Subic Special Economic
Zone possesses, as certified by the Department of Labor and Employment. The names
of aliens granted permanent residence status and working visas by the Subic Bay
Metropolitan Authority shall be reported to the Bureau of Immigration and Deportation
within thirty (30) days after issuance thereof;

(h) The defense of the zone and the security of its perimeters shall be the responsibility
of the National Government in coordination with the Subic Bay Metropolitan Authority.
The Subic Bay Metropolitan Authority shall provide and establish its own internal
security and firefighting forces; and

(i) Except as herein provided, the local government units comprising the Subic Special
Economic Zone shall retain their basic autonomy and identity. The cities shall be
governed by their respective charters and the municipalities shall operate and function
in accordance with Republic Act No. 7160, otherwise known as the Local Government
Code of 1991. (Emphasis supplied)

Based on Section 12 (c) above, in lieu of national and local taxes, all businesses and
enterprises operating within the Subic Special Economic Zone shall pay a preferential
gross income tax rate of five percent (5%). In addition, Section 12 (b) also provides that
such businesses and enterprises shall be exempt from the payment of all taxes and
duties on the importation of raw materials, capital, and equipment into the Subic Special
Economic Zone.

Meanwhile, on March 20, 2007, Congress enacted RA No. 9400 which extended the
aforementioned tax and fiscal incentives under RA No. 7227 to the Clark Freeport Zone.
By way of amendment, Section 2 thereof provides:

SEC. 2. Section 15 of Republic Act No. 7227, as amended, is hereby amended to read
as follows:

1738
"SEC. 15. Clark Special Economic Zone (CSEZ) and Clark Freeport Zone (CFZ). -
Subject to the concurrence by resolution of the local government units directly affected,
the President is hereby authorized to create by executive proclamation a Special
Economic Zone covering the lands occupied by the Clark military reservations and its
contiguous extensions as embraced, covered and defined by the 1947 Military Bases
Agreement between the Philippines and the United States of America, as amended,
located within the territorial jurisdiction of Angeles City, municipalities of Mabalacat and
Porac, Province of Pampanga, and the municipalities of Capas and Bamban, Province
of Tarlac, in accordance with the provision as herein provided insofar as applied to the
Clark military reservations. The Clark Air Base proper with an area of not more than four
thousand four hundred hectares (4,400 has.), with the exception of the twenty-two-
hectare commercial area situated near the main gate and the Bayanihan Park
consisting of seven and a half hectares (7.5 has.) located outside the main gate of the
Clark Special Economic Zone, is hereby declared a freeport zone.

"The CFZ shall be operated and managed as a separate customs territory

ensuring free flow or movement of goods and capital equipment within, into and
exported out of the CFZ, as well as provide incentives such as tax and duty-free
importation of raw materials and capital equipment. However, exportation or
removal of goods from the territory of the CFZ to the other parts of the Philippine
territory shall be subject to customs duties and taxes under the Tariff and
Customs Code of the Philippines, as amended, the National Internal Revenue
Code of 1997, as amended, and other relevant tax laws of the Philippines.

"The provisions of existing laws, rules and regulations to the contrary notwithstanding,
no national and local taxes shall be imposed on registered business enterprises within
the CFZ. In lieu of said taxes, a five percent (5%) tax on gross income earned shall be
paid by all registered business enterprises within the CFZ and shall be directly remitted
as follows: three percent (3%) to the National Government, and two percent (2%) to the
treasurer's office of the municipality or city where they are located.

"The governing body of the Clark Special Economic Zone shall likewise be established
by executive proclamation with such powers and functions exercised by the Export
Processing Zone Authority pursuant to Presidential Decree No. 66, as
amended: Provided, That it shall have no regulatory authority over public utilities, which
authority pertains to the regulatory agencies created by law for the purpose, such as the
Energy Regulatory Commission created under Republic Act No. 9136 and the National
Telecommunications Commission created under Republic Act No. 7925.

"xxx

"Subject to the concurrence by resolution of the local government units directly affected
and upon recommendation of the Philippine Economic Zone Authority (PEZA), the
President is hereby authorized to create by executive proclamation Special Economic
Zones covering the City of Balanga and the municipalities of Limay, Mariveles, Morong,
Hermosa, and Dinalupihan, Province of Bataan.

1739
"Subject to the concurrence by resolution of the local government units directly affected
and upon recommendation of the PEZA, the President is hereby authorized to create by
executive proclamation Special Economic Zones covering the municipalities of
Castillejos, San Marcelino, and San Antonio, Province of Zambales.

"Duly registered business enterprises that will operate in the Special Economic Zones to
be created shall be entitled to the same tax and duty incentives as provided for under
Republic Act No. 7916, as amended: Provided, That for the purpose of administering
these incentives, the PEZA shall register, regulate, and supervise all registered
enterprises within the Special Economic Zones."

Thus, the businesses and enterprises within the Clark Freeport Zone are similarly
exempt from the payment of all taxes and duties on the importation of raw materials,
capital and equipment.

On February 17, 2012, the DOF, upon recommendation of the BIR, issued RR 2-2012
which imposed VAT and excise tax on the importation of petroleum and petroleum
products from abroad and into the Freeport or Economic Zones. Section 3 thereof partly
provides:

SECTION 3. TAX TREATMENT OF ALL PETROLEUM AND PETROLEUM

PRODUCTS IMPORTED AND ITS SUBSEQUENT EXPORTATION OR SALES TO
FREEPORT AND ECONOMIC    ZONE LOCATORS OR OTHER
PERSONS/ENTITIES; REFUND OF TAXES PAID; AUTHORITY TO RELEASE
IMPORTED GOODS (ATRIG) AND OTHER ADMINISTRATIVE REQUIREMENTS. —
The Value-Added and Excise taxes which are due on all petroleum and petroleum
products that are imported and/or brought directly from abroad to the Philippines,
including Freeport and Economic zones, shall be paid by the importer thereof to the
Bureau of Customs (BOC).

The subsequent exportation or sale/delivery of these petroleum or petroleum products

to registered enterprises enjoying tax privileges within the Freeport and Economic
zones, as well as the sale of said goods to persons engaged in international shipping or
international air transport operations, shall be subject to 0% VAT. With respect to the
VAT paid on petroleum or petroleum products by the importer on account of aforesaid
0% VAT transactions/entities and the Excise taxes paid on account of sales to
international carriers of Philippine or Foreign Registry for use or consumption outside
the Philippines or exempt entities or agencies covered by tax treaties, conventions and
international agreements for their use or consumption (covered by Certification in such
entity's favor), as well as entities which are by law exempt from indirect taxes, the
importer may file a claim for credit or refund with the BOC, which shall process the claim
for refund, subject to the favorable endorsement of the BIR, in accordance with existing
rules and procedures: Provided, that no claim for refund shall be granted unless it is
properly shown to the satisfaction of the BIR that said petroleum or petroleum products
have been sold to a duly registered locator and have been utilized in the registered
1740
activity/operation of the locator, or that such have been sold and have been used for
international shipping or air transport operations, or that the entities to which the said
goods were sold are statutorily zero-rated for VAT, and/or exempt from Excise taxes.

xxxx

On March 8, 2012, petitioner, which represents the businesses and enterprises within
the Clark Freeport Zone, filed the instant petition alleging that respondents acted with
grave abuse of discretion in issuing RR 2-2012. It argues that by imposing the VAT and
excise tax on the importation of petroleum and petroleum products from abroad and into
the Freeport or Economic Zones, RR 2-2012 unilaterally revoked the tax exemption
granted by RA No. 7227 and RA No. 9400 to the businesses and enterprises operating
within the Subic Special Economic Zone and Clark Freeport Zone.

Respondents, through the Office of the Solicitor General (OSG), contend that the
petition must be denied outright because the special civil action for certiorari cannot be
used to assail RR 2-2012 which was issued by the respondents in the exercise of their
quasi-legislative or rule-making powers. According to the OSG, certiorari can only be
used against a public officer exercising judicial or quasi-judicial powers. In addition, the
OSG invokes the doctrine of hierarchy of courts and claims that a petition for certiorari
cannot be filed directly to this Court absent highly exceptional reasons which the
petitioner failed to adduce. Finally, the OSG opposes the argument of petitioner that RR
2-2012 unilaterally revoked the tax exemption granted by RA No. 7227 and RA No.
9400 to the businesses and enterprises operating within the Subic Special Economic
Zone and Clark Freeport Zone by referring to the tax refund under Section 3 of RR 2-
2012. It points out that Section 3 allows the businesses and enterprises operating within
the Subic Special Economic Zone and Clark Freeport Zone to claim for a tax refund
upon submission of competent proof that they used the imported fuel exclusively within
the Subic Special Economic Zone and Clark Freeport Zone. Thus, the OSG claimed
that RR 2-2012 is consistent with RA No. 7227 and RA No. 9400.

We deny the petition for being an improper remedy.

Firstly, respondents did not act in any judicial or quasi-judicial capacity. A petition for
certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended, is a special
civil action that may be invoked only against a tribunal, board, or officer exercising
judicial or quasi-judicial functions.

Section 1, Rule 65 of the 1997 Rules of Civil Procedure, as amended, provides:

SECTION 1. Petition for certiorari. — When any tribunal, board or officer exercising
judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction,
or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is
no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court, alleging the
facts with certainty and praying that judgment be rendered annulling or modifying the
1741
proceedings of such tribunal, board or officer, and granting such incidental reliefs as law
and justice may require.

xxxx

For a special civil action for certiorari to prosper, the following requisites must concur:
(1) it must be directed against a tribunal, board, or officer exercising judicial or quasi-
judicial functions; (2) the tribunal, board, or officer must have acted without or in excess
of jurisdiction or with grave abuse of discretion amounting to lack or excess of
jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy in the
ordinary course of law.[1]

A respondent is said to be exercising judicial function where he has the power to

determine what the law is and what the legal rights of the parties are, and then
undertakes to determine these questions and adjudicate upon the rights of the parties.
[2]
 Quasi-judicial function, on the other hand, is "a term which applies to the action,
discretion, etc., of public administrative officers or bodies x x x required to investigate
facts, or ascertain the existence of facts, hold hearings, and draw conclusions from
them, as a basis for their official action and to exercise discretion of a judicial
nature."[3] Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts,
it is necessary that there be a law that gives rise to some specific rights of persons or
property under which adverse claims to such rights are made, and the controversy
ensuing therefrom is brought before a tribunal, board, or officer clothed with power and
authority to determine the law and adjudicate the respective rights of the contending
parties.[4]

Respondents do not fall within the ambit of a tribunal, board, or officer exercising judicial
or quasi-judicial functions. They issued RR 2-2012 in the exercise of their quasi-
legislative or rule-making powers, and not judicial or quasi-judicial functions. Verily,
respondents did not adjudicate or determine the rights of the parties.

In order to determine whether a Revenue Regulation is quasi-legislative in nature, we

must examine the legal basis of the Secretary of Finance in the issuance thereof. In BPI
Leasing Corporation v. Court of Appeals,[5] we ruled that Revenue Regulation 19-86 was
quasi-legislative in nature because it was issued by the Secretary of Finance in the
exercise of his rule-making powers under Section 244 of the National Internal Revenue
Code (NIRC):

The Court finds the questioned revenue regulation to be legislative in nature. Section 1
of Revenue Regulation 19-86 plainly states that it was promulgated pursuant to Section
277 of the NIRC. Section 277 (now Section 244) is an express grant of authority to the
Secretary of Finance to promulgate all needful rules and regulations for the effective
enforcement of the provisions of the NIRC. In Paper Industries Corporation of the
Philippines v. Court of Appeals, the Court recognized that the application of Section 277
calls for none other than the exercise of quasi-legislative or rule-making authority.
Verily, it cannot be disputed that Revenue Regulation 19-86 was issued pursuant to the
1742
rule-making power of the Secretary of Finance, thus making it legislative, and not
interpretative as alleged by BLC.[6]

Similarly, in the case at bar, RR 2-2012 was also issued by the Secretary of Finance
based on Section 244 of the NIRC. Section 1 of RR 2-2012 provides:

SECTION 1. SCOPE — Pursuant to Section 244, in relation to Section 245, of the

National Internal Revenue Code (NIRC) of 1997, as amended, these Regulations are
hereby promulgated in order to prescribe: 1) the tax administration treatment of all
petroleum and petroleum products imported into the Philippines, including those coming
in through Freeport zones or Economic Zones; and 2) the refund of Value-Added Tax
(VAT) and Excise taxes paid for transactions statutorily zero-rated or exempt therefrom;
and to provide administrative guidelines on the operation and maintenance of storage
tanks, facilities, depots or terminals where commodities for commercial use can be
stored.

Relevantly, Section 244 of the NIRC provides:

SEC. 244. Authority of Secretary of Finance to Promulgate Rules and Regulations. —

The Secretary of Finance, upon recommendation of the Commissioner, shall
promulgate all needful rules and regulations for the effective enforcement of the
provisions of this Code.

Conformably with our ruling in BPI Leasing Corporation that the application of Section
244 of the NIRC is an exercise of quasi-legislative or rule-making powers of the
Secretary of Finance, and since RR 2-2012 was issued by the Secretary of Finance
based on Section 244 of the NIRC, such administrative issuance is therefore quasi-
legislative in nature which is outside the scope of a petition for certiorari.

Secondly, while this case is styled as a petition for certiorari, there is, however, no
denying the fact that, in essence, it seeks the declaration by this Court of the
unconstitutionality and illegality of the questioned rule, thus partaking the nature, in
reality, of one for declaratory relief over which this Court has only appellate, not original,
jurisdiction.[7] Section 5, Article VIII of the 1987 Philippine Constitution provides:

Sec. 5. The Supreme Court shall have the following powers:

(1) Exercise  original jurisdiction over cases affecting ambassadors, other public
ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo
warranto, and habeas corpus.

(2) Review,  revise,  reverse,  modify,  or affirm on appeal or certiorari as the law or the
Rules of Court may provide, final judgments and orders of lower courts in:

1743
(a) All cases in which the constitutionality or validity of any treaty, international or
executive agreement, law, presidential decree, proclamation, order, instruction,
ordinance, or regulation is in question.

xxxx

Accordingly, this petition must fail because this Court does not have original jurisdiction
over a petition for declaratory relief even if only questions of law are involved. [8] The
special civil action of declaratory relief falls under the exclusive jurisdiction of the
Regional Trial Courts.9 The Rules of Court is explicit that such action shall be brought
before the appropriate Regional Trial Court. Section 1, Rule 63 of the Rules of Court
provides:

SECTION 1. Who may file petition. — Any person interested under a deed, will, contract
or other written instrument, whose rights are affected by a statute, executive order or
regulation, ordinance, or any other governmental regulation may, before breach or
violation thereof, bring an action in the appropriate Regional Trial Court to determine
any question of construction or validity arising, and for a declaration of his rights or
duties, thereunder.

Lastly, although this Court, the Court of Appeals and the Regional Trial Courts have
concurrent jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto,
habeas corpus and injunction, such concurrence does not give the petitioner
unrestricted freedom of choice of court forum. [10] In Heirs ofBertuldo Hinog v. Hon.
Melicor,[11] citing People v. Cuaresrna,[12] we held:

This Court's original jurisdiction to issue writs of certiorari is not exclusive. It is shared by
this Court with Regional Trial Courts and with the Court of Appeals. This concurrence of
jurisdiction is not, however, to be taken as according to parties seeking any of the writs
an absolute, unrestrained freedom of choice of the court to which application therefor
will be directed. There is after all a hierarchy of courts. That hierarchy is determinative
of the venue of appeals, and also serves as a general determinant of the appropriate
forum for petitions for the extraordinary writs. A becoming regard for that judicial
hierarchy most certainly indicates that petitions for the issuance of extraordinary writs
against first level ("inferior") courts should be filed with the Regional Trial Court, and
those against the latter, with the Court of Appeals. A direct invocation of the Supreme
Court's original jurisdiction to issue these writs should be allowed only when there are
special and important reasons therefor, clearly and specifically set out in the petition.
This is [an] established policy. It is a policy necessary to prevent inordinate demands
upon the Court's time and attention which are better devoted to those matters within its
exclusive jurisdiction, and to prevent further over-crowding of the Court's docket.

The rationale for this rule is two-fold: (1) it would be an imposition upon the precious
time of this Court; and (2) it would cause an inevitable and resultant delay, intended or

1744
otherwise, in the adjudication of cases, which in some instances had to be remanded or
referred to the lower court as the proper forum under the rules of procedure, or as better
equipped to resolve the issues because this Court is not a trier of facts.

We thus affirm the judicial policy that we shall not entertain a direct resort to this Court
unless the remedy cannot be obtained in the appropriate courts, and exceptional and
compelling circumstances, such as cases of national interest and of serious
implications, justify the availment of the extraordinary remedy of writ of certiorari.

In Chamber of Real Estate and Builders Association, Inc. (CREBA) v. Secretary of

Agrarian Reform,[15] we provided examples of such exceptional and compelling
circumstances, to wit:

Exceptional and compelling circumstances were held present in the following cases:
(a) Chavez v. Romulo, on citizens' right to bear anus; (b) Government of [the] United
States of America v. Hon. Purganan, on bail in extradition proceedings; (c) Commission
on Elections v. Judge Quijano-Padilla, on government contract involving modernization
and computerization of voters' registration list; (d) Buklod ng Kawaning EIIB v. Hon.
Sec. Zamora, on status and existence of a public office; and (e) Hon. Fortich v. Hon.
Corona, on the so-called "Win-Win Resolution" of the Office of the President which
modified the approval of the conversion to agro-industrial area. [16]

In the case at bar, petitioner failed to allege such exceptional and compelling
circumstances which justify a direct resort to this Court.

In view of the serious procedural and technical defects of the petition, we see no need
for this Court to resolve the other issues raised by the petitioner.

WHEREFORE, premises considered, the petition is DISMISSED. With costs against the

petitioner.

SO ORDERED.

EN BANC

April 5, 2016

G.R. No. 201852

ROBERTO G. ROSALES, NICANOR M. BRIONES, PONCIANO D. PAYUYO, JOSE

R. PING-AY, ISIDRO Q. LICO, AND JOSE TAN RAMIREZ, in their capacity as
members of the Board of Directors of NATIONAL ALLIANCE FOR CONSUMER
EMPOWERMENT OF ELECTRIC COOPERATIVES and on behalf of the nine million
(9,000,000) member consumers of NEA-Electric Cooperatives nationwide who
have contributed the Members' Contributions for Capital Expenditures (MCC) or
Reinvestment Fund for Sustainable Capital Expenditures (RFSC), Petitioners,
1745
vs.
ENERGY REGULATORY COMMISSION (ERC), ASELCO, AKELCO, ALECO,
ANTECO, AURELCO, BATELEC I, BATELEC II, BENECO, BILECO, BOHECO I,
BOHECO II, FIBECO, BUSECO, CAGELCO I, CAGELCO II, CASURECO I,
CASURECO II, CASURECO III, CASURECO IV, CAMELCO, CAPELCO, CEBECO I,
CEBECO II, CEBECO III, CENECO, CENPELCO, DORECO, DASURECO,
ESAMELCO, FLECO, GUIMELCO, IFELCO, INEC, ISECO, ILECO I, ILECO II, ILECO
III, ISELCO I, KAELCO, LUELCO, SORECO I, LANECO, LEYECO I/DORELCO,
LEYECO II, LEYECO III, LEYECO IV, LEYECO V, PENELCO, MOELCO I, MOELCO
II, MORESCO I, MORESCO II, MOPRECO, NORECO I, NORSAMELCO, NEECO I,
NEECO II - Area I, NEECO II - Area II, PELCO I, PELCO II, CANORECO, PRESCO,
QUEZELCO I, QUEZELCO II, SAMELCO I, SAMELCO II, SIARELCO, SOCOTECO I,
SOCOTECO II, SOLECO, SUKELCO, SURNECO, SURSECO I, SURSECO II,
TARELCO I, TARELCO II, VRESCO, ZAMECO I, ZAMECO II, ZAMCELCO, ZANECO,
ZAMSURECO I, ZAMSURECO II, BAT ANELCO, LUBELCO, OMECO, ORMECO,
MARELCO, TIELCO, ROMELCO, BISELCO, FICELCO, MACELCO, TISELCO,
BANELCO, PROSIELCO, CELCO, COTELCO, TAWELCO, SIASELCO, SULECO,
BASELCO, CASELCO, LASURECO, MAGELCO, DIELCO, and COTELCO-
PALMA, Respondents.

DECISION

PERALTA, J.:

This petition for certiorari under Rule 65 of the Rules of

Court (Rules) Members ' Contribution for Capital Expenditures (MCC), later renamed
as Reinvestment Fund for Sustainable Capital Expenditures (RFSC), which is being
imposed by on-grid Electric Cooperatives (ECs ), pursuant to the following Rules and
Resolution of the Energy Regulatory Commission

(ERC):

1. Rules for Setting the Electric Cooperatives’ Wheeling Rates (RSEC-WR),

which was adopted in Resolution No. 20, Series of 2009, issued on September
23, 2009;1 and

2. Resolution No. 14, Series of 2011, issued on July 6, 2011. 2

In particular, Article 5 of RSEC-WR states:

ARTICLE 5
MEMBERS’ CONTRIBUTION FOR CAPITAL EXPENDITURES

5.1 Function of Members’ Contribution for Capital Expenditures

1746
The Members’ Contribution for Capital Expenditures is envisioned to fund the
amortization or debt service of its indebtedness associated with the expansion,
rehabilitation or upgrading of the existing electric power system of the ECs in
accordance with their ERC-approved Capital Expenditure Plan.

5.2 Utilization of Members’ Contribution for Capital Expenditures

The utilization of the Member’s Contribution fund shall be subject to the following
conditions:

a. It shall be used solely for capital expenditure or any other projects approved by
the Commission and not for any other purpose, even on a temporary basis;

b. The amounts collected for Members’ Contribution fund shall be recognized as

contribution from member-consumers;

c. The amounts collected for Members’ Contribution, including interest income,

shall be placed in a separate account; and

d. If the member-consumer terminates its contract with the EC, the said
contribution shall not be withdrawn, instead the same shall be treated as
Contribution in Aid of Construction (CIAC).

In the case of ECs registered under the CDA, the said member-contribution shall be
converted into member’s share capital.

5.3 Members’ Contribution for Capital Expenditure Rate Cap Per Group

The EC’s current tariff includes a reinvestment fund provision calculated at five percent
(5%) of its unbundled retail rate (inclusive of generation, transmission, and distribution
charges) as part of its Rate Unbundling Decision. This translates to an average of 22%
of the 98 ECs’ distribution charges (inclusive of distribution, supply and metering
charges). The Members’ Contribution for Capital Expenditure Rate Cap was determined
by applying the 22% to the respective group’s 2008 median operating costs per kWh
which was the basis for the ECs’ operating revenue requirements.

The result of the afore-mentioned calculation is presented in Table 7 hereunder:

TABLE 7. Members’ Contribution for Capital Expenditure Rate Cap per Group

2008 level Member’s contribution

GROUP3
(median) for CAPEX @ 22%

A 2.420000 0.5324

1747
 B 1.820000 0.4004

C 1.680000 0.3696

D 1.140000 0.2508

E 1.320000 0.2904

F 0.990000 0.2178

G 0.690000 0.1518

5.4 Additional Members’ Contribution for Capital Expenditure

The actual capital expenditure may vary among ECs. In the event that the members’
contribution for capital expenditures rate caps herein authorized are insufficient for its
purpose, the EC may collect such additional Members’ Contribution for Capital
Expenditures by securing the consent of its member-consumers for such collection
through existing legal procedures, provided the expenditure was approved by the
Commission as part of such EC’s Capital Expenditure Plan. Provided further that the
additional member contribution is obtained prior to the incurrence of the indebtedness[;]
provided finally that the collection of said additional contribution shall be subject to the
principles of fairness and equity, in accordance with the objective of the EPIRA for the
elimination of cross-subsidy.

Collections made pursuant to this (sic) provisions may be subject to the audit of the

Commission at its discretion.4

On the other hand, Resolution No. 14 provides:

NOW, THEREFORE, be it RESOLVED, as the ERC hereby RESOLVES to AMEND the

nomenclature of "Members’ Contribution for Capital Expenditures (MCC)" and the
"MCC-Real Property Tax (RPT)" to "Reinvestment Fund for Sustainable Capital
Expenditures (RFSC)" and "Provision for RPT", respectively, but the nature and
purpose of the same remain, to wit:

The MCC is envisioned to fund the amortization or debt service of the ECs’
indebtedness associated with the expansion, rehabilitation or upgrading of their existing
electric power system in accordance with their ERC-approved CAPEX Plan. The
utilization of the MCC fund shall be subject to the following conditions:

1. It shall be used solely for CAPEX or any other projects approved by the ERC
and not for any other purpose, even on a temporary basis;

1748
 2. The amounts collected for MCC fund shall be recognized as contribution from
member-consumers;

3. The amounts collected for MCC, including interest income, shall be put in a
separate account; and

4. If the member-consumer terminates his contract with the EC, the said
contribution shall not be withdrawn instead the same shall be treated as CIAC.

In the case of ECs registered under the CDA, the said member-contribution shall be
converted into member’s share capital.

In the event that the MCC rate caps are insufficient for its purpose, the EC may collect
such additional MCC by securing the consent of its member-consumers for such
collection through existing legal procedures; Provided that, the expenditure was
approved by the ERC as part of the EC’s CAPEX Plan; Provided further that, the
additional MCC is obtained prior to the incurrence of the indebtedness; Provided finally
that, the collection of said additional MCC shall be subject to the principles of fairness
and equity in accordance with the objective of the EPIRA for the elimination of cross-
subsidy.5 The alleged grounds for the petition are as follows:

(A)

THE IMPOSITION OF MCC OR RFSC BY THE ENERGY REGULATORY

COMMISSION AS A FORM OF INVESTMENT SOLICITATION TO FUND THE
EXPANSION AND OTHER CAPITAL [EXPENDITURES] OF ELECTRIC
COOPERATIVES IS HIGHLY IRREGULAR[,] OPPRESSIVE[,] AND
UNCONSTITUTIONAL AS IT DIRECTLY VIOLATES THE DUE PROCESS AND
EQUAL PROTECTION CLAUSES ON PROPERTY UNDER SECTION 1
ARTICLE III OF THE 1987 CONSTITUTION.

(B)

THE MANDATORY COLLECTION OF THE MCC OR RFSC BY THE ELECTRIC

COOPERATIVES FROM ITS MEMBER-CONSUMERS WITHOUT THE
PROPER EXPLICIT ACCOUNTING ENTRIES AND ACKNOWLEDGMENT OF
BEING A PATRONAGE CAPITAL AND WITHOUT THE BENEFIT OF A FAIR
RETURN OF THEIR INVESTMENTS OR PATRONAGE CAPITAL INPUT OR
CONTRIBUTIONS IS TANTAMOUNT TO TAKING A PROPERTY WITHOUT
JUST COMPENSATION AND IS VIOLATIVE OF THE PROVISION OF
SECTION 9, ARTICLE III OF THE 1987 CONSTITUTION.

(C)

THE RULING OF ERC ALLOWING THE MANDATORY COLLECTION OF MCC

OR RFSC BY THE ELECTRIC [COOPERATIVES] [ECs] IS UNDOUBTEDLY

1749
 UNCONSTITUTIONAL AS IT DIRECTLY VIOLATES SECTION 10, ARTICLE II
AND SECTION 1 & 15, ARTICLE XII OF THE 1987 CONSTITUTION.

(D)

THE UNJUST COLLECTION OF THE MCC OR RFSC BY THE ELECTRIC

COOPERATIVES AS AUTHORIZED AND RULED BY ERC IS CONTRARY TO
LAW AS NOWHERE IN THE PROVISIONS OF P.D. 269 DOES IT SAY THAT
MEMBERS ON A VOLUNTARY AND COOPERATIVE MANNER WILL
PROVIDE CAPITAL TO FUND THE CAPITAL EXPENDITURES BY THE
COOPERATIVES. IT LIKEWISE VIOLATES SECTION 37 OF P.D. 269. 6

In a nutshell, the issue for petitioners is not about the nomenclature of MCC/RFSC or
how such funds are utilized but in the ERC's treatment of MCC/RFSC as a
subsidy/funds for capital expenditures (CAPEX) or contribution in aid of construction
(CIAC) instead of patronage capital, which is an equity or investment that must be
accounted for and could be withdrawn by the member-consumers upon termination of
their contract with respondent ECs.7

The petition is dismissed.

Legal standing of petitioners

Petitioners claim that as Board members/officers of the National Alliance for Consumer
Empowerment of Electric Cooperatives (NACEELCO) they have the required legal
standing to assail the validity of MCC/RFSC imposed by the ECs under the RSEC-WR
and Resolution No. 14 issued by the ERC. They also stand to be benefited or injured by
the judgment in this suit because they are member-consumers of the ECs who were
required to and did pay the MCC/RFSC, as shown by the electric bills appended to the
petition. Further, over and above their personal capacity as member-consumers,
petitioners, like party-list representatives Briones of AGAP, Payuyo of Association of
Philippine Electric Cooperatives (APEC), and Ping-ay of Cooperative-National
Confederation of Cooperatives (Coop-NATCO), represent their constituents who are
paying EC member-consumers in good standing.

Even assuming that no direct injury is or will continue to be suffered, petitioners contend
that the liberal policy consistently adopted by the Court on locus standi must apply.
They view that the issues raised in this petition are of paramount public importance as it
does not merely involve the constitutionality of MCC/RFSC but also the plight of the
member-consumers of ECs nationwide. For them, the transcendental importance of this
case cannot simply be ignored as it also involves the economic wellbeing of more than
half of the Philippine population. Two contesting parties are said to be laying claim on
the ownership of the ECs, to wit: (1) the persons running the ECs being directly
controlled by the NEA, which has not contributed any funds to fund debt-servicing
except loan accommodations with high interest rates, and (2) the member-consumers of

1750
ECs who have continuously contributed their hard-earned money to fund the operations,
cost, and debt-servicing of the ECs.

Only petitioners Ping-ay and Ramirez satisfy the requirement of locus standi.

Petitioners have no legal standing to file this petition in their capacity as NACEELCO
Board members. It was not shown that respondent ECs are members of NACEELCO.
Further, while petitioners claim that they represent nine million member-consumers of
the ECs, they have not attached to the petition any documentary proof as regards their
purported authority to file the case on their behalf.

Also, petitioners Payuyo and Rosales have no legal standing to file the case as
member-consumers of the Palawan Electric Cooperative, Inc. (PALECO) and Agusan
Del Norte Electric Cooperative, Inc. (ANECO), respectively. 8 Even if ANECO is within
the coverage of RSEC-WR, it is not impleaded as respondent in the petition. As for
PALECO, it is neither a part of any group enumerated in RSEC-WR nor is it impleaded
as respondent herein.

While the Court held that legislators have the standing to maintain inviolate the
prerogatives, powers and privileges vested by the Constitution in their office and are
allowed to sue to question the validity of any official action which they claim infringes
their prerogatives as legislators,9 there was no specific allegation of usurpation of
legislative function in this case. Moreover, We do not view that the procedural rules on
standing should be waived on the ground that the issues raised in this petition are of
transcendental importance. To consider a matter as one of transcendental importance,
all of the following must concur: (1) the public character of the funds or other assets
involved in the case; (2) the presence of a clear case of disregard of a constitutional or
statutory prohibition by the public respondent agency or instrumentality of the
government; and (3) the lack of any other party with a more direct and specific interest
in the questions being raised.10 As will be shown in the discussion below, elements (2)
and (3) are obviously lacking in this case.

The above notwithstanding, petitioners Ping-ay and Ramirez have the legal standing to
sue. Ping-ay is a member-consumer of respondent Ilocos Sur Electric Cooperative, Inc.
(ISECO).11 On the other hand, Ramirez is undisputedly the spouse of Mary
Ramirez,12 who is the registered member-consumer of respondent Eastern Samar
Electric Cooperative, Inc. (ESAMELCO). Mary, who is not one of the petitioners, only
needs to be impleaded as a pro-forma party to the suit based on Section 4, Rule 4 of
the

Rules.13 The determination of whether Mary is a party who is indispensable or

necessary or neither indispensable nor necessary would no longer matter since, as We
said, Ping-ay possesses the required locus standi for the Court to already take
cognizance of the case.

1751
It is a general rule that every action must be prosecuted or defended in the name of the
real party-in-interest, who stands to be benefited or injured by the judgment in the suit,
or the party entitled to the avails of the suit.

Jurisprudence defines interest as "material interest, an interest in issue and to be

affected by the decree, as distinguished from mere interest in the question involved, or
a mere incidental interest. By real interest is meant a present substantial interest, as
distinguished from a mere expectancy or a future, contingent, subordinate, or
consequential interest." "To qualify a person to be a real party-ininterest in whose name
an action must be prosecuted, he must appear to be the present real owner of the right
sought to be enforced."

"Legal standing" or locus standi calls for more than just a generalized grievance. The
concept has been defined as a personal and substantial interest in the case such that
the party has sustained or will sustain direct injury as a result of the governmental act
that is being challenged. The gist of the question of standing is whether a party alleges
such personal stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon which the court depends
for illumination of difficult constitutional questions.

A party challenging the constitutionality of a law, act, or statute must show "not only that
the law is invalid, but also that he has sustained or is in immediate, or imminent danger
of sustaining some direct injury as a result of its enforcement, and not merely that he
suffers thereby in some indefinite way." It must shown that he has been, or is about to
be, denied some right or privilege to which he is lawfully entitled, or that he is about to
be subjected to some burdens or penalties by reason of the statute complained of. 14

Tested by the foregoing standards, petitioners Ping-ay and Ramirez clearly have legal
standing to file the petition. They are real parties-ininterest to assail the constitutionality
and legality of RSEC-WR and Resolution No. 14. Their cause of action to declare
invalid the subject Rule and Resolution is related to their right to seek a refund of the
payments made and to stop future imposition of the MCC/RFSC.

Rule 65 as a Remedy

Despite the legal standing of petitioners Ping-ay and Ramirez, their choice of remedy to
question the validity of RSEC-WR and Resolution No. 14 is inexcusably inapposite.

Section 1, Rule 65 of the Rules mandates:

SECTION 1. Petition for certiorari. - When any tribunal, board or officer exercising
judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction,
or with grave abuse of discretion amounting to lack or excess of its or his jurisdiction,
and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file a verified petition in the proper court,
alleging the facts with certainty and praying that judgment be rendered annulling or

1752
modifying the proceedings of such tribunal, board or officer, and granting such
incidental reliefs as law and justice may require.

xxx

The Court agrees with respondents that RSEC-WR and Resolution No. 14 were issued
by the ERC in its quasi-legislative power.

A respondent is said to be exercising judicial function where he has the power to

determine what the law is and what the legal rights of the parties are, and then
undertakes to determine these questions and adjudicate upon the rights of the parties.

Quasi-judicial function, on the other hand, is "a term which applies to the actions,
discretion, etc., of public administrative officers or bodies … required to investigate facts
or ascertain the existence of facts, hold hearings, and draw conclusions from them as a
basis for their official action and to exercise discretion of a judicial nature."

Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is

necessary that there be a law that gives rise to some specific rights of persons or
property under which adverse claims to such rights are made, and the controversy
ensuing therefrom is brought before a tribunal, board, or officer clothed with power and
authority to determine the law and adjudicate the respective rights of the contending
parties.15

As defined above, the ERC exercised neither judicial nor quasi-judicial function. In
issuing and implementing the RSEC-WR and Resolution No. 14, it was not called upon
to adjudicate the rights of contending parties to exercise, in any manner, discretion of a
judicial or quasi-judicial nature. Instead, RSEC-WR and Resolution No. 14 were done in
the exercise of the ERC's quasi-legislative and administrative functions. It was in the
nature of subordinate legislation, promulgated in the exercise of its delegated power.
Quasi-legislative power is exercised by administrative agencies through the
promulgation of rules and regulations within the confines of the granting statute and the
doctrine of non-delegation of powers flowing from the separation of the branches of the
government.16 Particularly, the ERC applied its rule-making power as expressly granted
by Republic Act (R.A.) No. 9136 ("Electric Power Industry Reform Act of 2001" or
EPIRA), to wit:

SEC. 43. Functions of the ERC. - The ERC shall xxx be responsible for the following
key functions in the restructured industry:

xxxx

f. In the public interest, establish and enforce a methodology for

setting transmission and distribution wheeling rates and retail rates for the captive
market of a distribution utility, taking into account all relevant considerations,
including the efficiency or inefficiency of the regulated entities. The rates must be such

1753
as to allow the recovery of just and reasonable costs and a reasonable return on rate
base (RORB) to enable the entity to operate viably. The ERC may adopt alternative
forms of internationally-accepted rate-setting methodology as it may deem appropriate.
The rate-setting methodology so adopted and applied must ensure a reasonable price
of electricity. The rates prescribed shall be nondiscriminatory. To achieve this objective
and to ensure the complete removal of cross subsidies, the cap on the recoverable rate
of system losses prescribed in Section 10 of Republic Act No. 7832, is hereby amended
and shall be replaced by caps which shall be determined by the ERC based on load
density, sales mix, cost of service, delivery voltage and other technical considerations it
may promulgate. The ERC shall determine such form of rate-setting methodology,
which shall promote efficiency. In case the rate setting methodology used is RORB, it
shall be subject to the following guidelines:

(i) For purposes of determining the rate base, the TRANSCO or any distribution
utility may be allowed to revalue its eligible assets not more than once every
three (3) years by an independent appraisal company: Provided, however, That
ERC may give an exemption in case of unusual devaluation: Provided,
further, That the ERC shall exert efforts to minimize price shocks in order to
protect the consumers;

(ii) Interest expenses are not allowable deductions from permissible return on
rate base;

(iii) In determining eligible cost of services that will be passed on to the end-
users, the ERC shall establish minimum efficiency performance standards for the
TRANSCO and distribution utilities including systems losses, interruption
frequency rates, and collection efficiency;

(iv.) Further, in determining rate base, the TRANSCO or any distribution utility
shall not be allowed to include management inefficiencies like cost of project
delays not excused by force majeure, penalties and related interest during
construction applicable to these unexcused delays; and

(v.) Any significant operating costs or project investments of the TRANSCO

and distribution utilities which shall become part of the rate base shall be
subject to verification by the ERC to ensure that the contracting and procurement
of the equipment, assets and services have been subjected to transparent and
accepted industry procurement and purchasing practices to protect the public
interest. (Emphasis supplied)17

Granting arguendo, that the MCC/RFSC imposition is in the exercise of the ERC’s

quasi-judicial function, still, the petition should have been filed before the Court of
Appeals, which may entertain a petition for certiorari whether or not the same is in aid of
its appellate jurisdiction.18 Indeed, petitioners violated the principle of hierarchy of
courts. As We said in one case:

1754
x x x The petitioners appear to have forgotten that the Supreme Court is a court of last
resort, not a court of first instance. The hierarchy of courts should serve as a general
determinant of the appropriate forum for Rule 65 petitions. The concurrence of
jurisdiction among the Supreme Court, Court of Appeals and the Regional Trial Courts
to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and
injunction does not give the petitioners the unrestricted freedom of choice of forum. By
directly filing Rule 65 petitions before us, the petitioners have unduly taxed the Court’s
time and attention which are better devoted to matters within our exclusive jurisdiction.
Worse, the petitioners only contributed to the overcrowding of the Court's docket. We
also wish to emphasize that the trial court is better equipped to resolve cases of this
nature since this Court is not a trier of facts and does not normally undertake an
examination of the contending parties’ evidence. 19

Since the Court of Appeals and the Supreme Court have original concurrent jurisdiction
over petitions for certiorari, the rule on hierarchy of courts determines the venue of
recourses to these courts. In original petitions for certiorari, this Court will not directly
entertain special civil action unless the redress desired cannot be obtained elsewhere
based on exceptional and compelling circumstances to justify immediate resort to this
Court,20 which We found none in the present case that likewise involves factual
questions. Time and again, it has been held that this Court is not a trier of fact. 21

Glaringly, petitioners did not comply with the rule that "there is no appeal, or any plain,
speedy, and adequate remedy in the ordinary course of law." Since petitioners assail
the validity of the ERC issuances and seeks to declare them as unconstitutional, a
petition for declaratory relief under Rule 63 of the Rules is the appropriate remedy.
Under the Rules, any person whose rights are affected by any other governmental
regulation may, before breach or violation thereof, bring an action in the appropriate
Regional Trial Court to determine any question of construction or validity arising, and for
a declaration of his rights or duties, thereunder. 22

Noticeably, administrative remedies should have been exhausted by filing the case in
the ERC, which, has technical expertise, at the very least, to dwell on the issue.
Considering that petitioners are challenging the MCC/RFSC, which is a rate component
under the RSEC-WR, the original and exclusive jurisdiction is vested with the ERC,
pursuant to Section 43 of R.A. No. 9136, which states:

SEC. 43. Functions of the ERC. - The ERC shall xxx be responsible for the following
key functions in the restructured industry:

xxxx

u. The ERC shall have the original and exclusive jurisdiction over all cases
contesting rates, fees, fines and penalties imposed by the ERC in the exercise of
the abovementioned powers, functions and responsibilities and over all cases
involving disputes between and among participants or players in the energy sector.
(Emphasis

1755
supplied)23

All actions taken by the ERC, pursuant to R.A. No. 9136, are subject to judicial review.
As an independent quasi-judicial agency in the exercise of its quasi-judicial functions, its
judgment, final order or resolution is appealable to the Court of Appeals via Rule 43 of
the Rules, and, if still unfavorable, to this Court via Rule 65.

The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial

system.24 As opined in a case:

The doctrine of exhaustion of administrative remedies allows administrative agencies to

carry out their functions and discharge their responsibilities within the specialized areas
of their respective competence. The doctrine entails lesser expenses and provides for
the speedier resolution of controversies. Therefore, direct recourse to the trial court,
when administrative remedies are available, is a ground for dismissal of the action.

The doctrine, however, is not without exceptions. Among the exceptions are: (1) where
there is estoppel on the part of the party invoking the doctrine; (2) where the challenged
administrative act is patently illegal, amounting to lack of jurisdiction; (3) where there is
unreasonable delay or official inaction that will irretrievably prejudice the complainant;
(4) where the amount involved is relatively so small as to make the rule impractical and
oppressive; (5) where the question involved is purely legal and will ultimately have to be
decided by the courts of justice; (6) where judicial intervention is urgent; (7) where the
application of the doctrine may cause great and irreparable damage; (8) where the
controverted acts violate due process; (9) where the issue of nonexhaustion of
administrative remedies had been rendered moot; (10) where there is no other plain,
speedy and adequate remedy; (11) where strong public interest is involved; and (12)
in quo warranto proceedings.25

Assuming, for argument's sake, that this case falls under any of the recognized
exceptions, just the same, the petition must be dismissed for being filed out of time.
Under the Rules, a petition for certiorari should be filed not later than sixty (60) days
from notice of the judgment, order or resolution sought to be assailed. In this case,
Resolution No. 20, which adopted the RSEC-WR, and Resolution No. 14 were issued
by the ERC on September 23, 2009 and July 6, 2011, respectively. The petition was
filed only on May 31, 2012, which is manifestly way beyond the reglementary period. 26

It is significant to note that, in drafting RSEC-WR, the ERC conducted a series of

expository hearings and public consultations for all ECs in Luzon, Visayas, and
Mindanao, and that it was only after taking into account the various manifestations,
comments, and oppositions during the public consultations that a new methodology for
setting the ECs’ wheeling rates was developed. The Whereas clauses of Resolution No.
20 narrated this long and tedious process:

1756
WHEREAS, the current rates of ECs are no longer responsive since the costs of
providing electric service to the consumers increased significantly from the time their
rates were determined by the Commission based on 2000 test year;

WHEREAS, the ECs are cognizant of the inherent regulatory lag in the current cash
flow rate-setting methodology adopted through a quasi-judicial process which is further
exacerbated by the fact that if all the one hundred twenty (120) ECs file their respective
rate applications with each application to the resolved in one (1) month, it will take the
Commission one hundred twenty (120) months or ten (10) years, to resolved all the
applications;

WHEREAS, the Commission has conducted studies to establish a new rate-setting

methodology for ECs that will address their present problems and resolve the regulatory
lag in the resolution of rate applications, particularly, the "Benchmarking Methodology";

WHEREAS, the results of said "Benchmarking Methodology" studies were subjected to

several expository and public consultations which were held on various dates and
venues. The ECs attended and actively participated in the said expository and public
consultations and submitted data to the Commission reflecting their respective costs of
service as part of the "Benchmarking Methodology' studies;

WHEREAS, the rates as determined in the said "Benchmarking Methodology"

encourage the ECs to be financially self-sufficient, efficient and member-customer
responsive;

WHEREAS, on May 3 and 4, 2007, the Commission conducted a series of expository

hearings for all ECs in Luzon, Visayas and Mindanao on the proposed "Benchmarking
Methodology" for ECs;

WHEREAS, on May 17, 2007, the Commission conducted a public consultation on the
"Classification of ECs for Regulatory Purposes and the Proposed Efficiency
Benchmarking Methodology";

WHEREAS, on various dates, the Commission conducted a series of Expository Public

Consultations for all ECs in Luzon, Visayas and Mindanao on the classification of on-
grid ECs and the determination of the functionalized benchmark Operation and
Maintenance (O&M) rate, Capital Expenditure (CAPEX) rate, proposed customer
segmentation, proposed benchmark rate design, new lifeline charges, performance
indices, transition period and rate comparison;

WHEREAS, after considering all the comments and manifestations during the various
public consultations, the Commission developed a new methodology for setting the ECs'
wheeling rates embodied in a document denominated as "Rules for Setting the Electric
Cooperatives' Wheeling Rates" (RSEC-WR);

1757
WHEREAS, on April 4, 2009, the General Managers of all the on-grid Electric
Cooperatives (ECs) in the Philippines adopted Resolution No. 1, Series of
2009, entitled "A Resolution Imploring Upon the Energy Regulatory Commission to
Implement a New Rate-Setting Methodology for Setting the Electric Cooperatives'
Wheeling Rates (RSEC-WR)";

WHEREAS, on April 21, 2009, the Commission issued a Notice of Proposed Rule-
Making (Notice), wherein it treated the Resolution adopted by the General Managers of
all the on-grid ECs as a petition to initiate rule-making by the ECs that are signatories
thereto, docketed as ERC Case No. 2009-007 RM, entitled "In the Matter of the Petition
by the On-Grid Electric Cooperatives for the Adoption of the Rules for Setting the
Electric Coopratives' Wheeling Rates". The Draft RSEC-WR adopted the Rule-Making
proceedings under Rule 21 of the Commission's Rules of Practice and Procedure. All
interested parties were directed to submit their respective comments on the Draft
RSEC-WR until May 15, 2009 and said petition was set for public hearings on various
dates and venues;

WHEREAS, on various dates, several ECs and interested parties submitted their
respective comments on the Draft RSEC-WR;

WHEREAS, from May 17 to July 20, 2009, the Commission conducted public hearings
on the instant petition at the respective localities of the ninety-six (96) on-grid ECs;

WHEREAS, on August 19, 2009, the Commission posted at its website and published in
newspapers of general circulation in the Philippines the revised Draft RSEC-WR for
solicitation of comments from interested parties;

WHEREAS, on various dates, several ECs and interested parties submitted their
respective comments on the revised Draft RSEC-WR;

WHEREAS, in accordance with the aforesaid mandate and after a careful consideration
of the various views and comments submitted by the interested parties, the Commission
adopts and promulgates the RSECWR[.]27

As ordered by the ERC, copies of Resolution No. 20 were furnished to the University of
the Philippines Law Center – Office of the National Administrative Register (UPLC-
ONAR), Philippine Rural Electric Cooperatives' Association, Inc. (PHILRECA), 28 and all
on-grid ECs. In addition, PHILRECA was directed to publish the RSEC-WR in a
newspaper of general circulation in the Philippines. 29

Petitioners could have filed their comment/opposition to the draft of RSEC-WR or

appealed its final version. Alternatively, they could have filed a comment/opposition,
motion for reconsideration, petition for relief from judgment or appeal with regard to the
rate adjustment applications of their respective ECs. The records of this case,
voluminous as they are, are bereft of evidence that they did.

1758
Finally, it bears to stress that a petition for certiorari under Rule 65 is the proper remedy
when the respondent has committed grave abuse of discretion amounting to lack or
excess of jurisdiction.

The term "grave abuse of discretion" has a specific meaning. An act of a court or
tribunal can only be considered as with grave abuse of discretion when such act is done
in a "capricious or whimsical exercise of judgment as is equivalent to lack of
jurisdiction." The abuse of discretion must be so patent and gross as to amount to an
"evasion of a positive duty or to a virtual refusal to perform a duty enjoined by law, or to
act at all in contemplation of law, as where the power is exercised in an arbitrary and
despotic manner by reason of passion and hostility." Furthermore, the use of a petition
for certiorari is restricted only to "truly extraordinary cases wherein the act of the lower
court or quasi-judicial body is wholly void. x x x" 30

The stringent criterion imposed by the above-quoted precludes Us from giving due
course to this petition. The ERC rests on solid legal grounds as it is indubitably
empowered to establish and enforce a methodology for setting the distribution wheeling
rates of respondent ECs. The delegation of legislative powers by the Congress to the
ERC is explicit in Section 43 (f) and (u) of R.A. No. 9136, which is elaborated in Section
5 (a), Rule 15 and Section 4 (n), Rule 3, respectively, of the IRR; hence, the
presumption of regularity of MCC/RFSC must be upheld.

As a new regulatory framework for the on-grid31 ECs, RSEC-WR is designed to

achieve the following:

1. Develop a tariff setting methodology that would be more responsive to the

needs of the ECs given the objectives of the EPIRA;

2. Encourage reforms in the structure and operations of the ECs for greater
efficiency and lower costs;

3. Introduce incentives in the framework that will allow efficiency gains to be

shared between the EC and the end-users; and

4. Develop a regulatory framework that will ease regulatory burden and cut down
regulatory lag for implementation.32

Prior to the RSEC-WR, the ECs operated under a cash flow regulatory regime, which
allows the ECs to generate revenues sufficient to cover payroll, operations and
maintenance outlays, debt service, including interest and allowance strictly for
reinvestment purposes.33 The ECs’ tariff structure was equivalent to the Distribution,
Supply, and Metering (DSM) Charges, which consisted of Operations and Maintenance
Expenses (OPEX), Payroll and Other Revenue Item (ORI), Capital Expenditures
(CAPEX) or Reinvestment Fund and Debt Service.34 With the enactment of R.A. No.
9136, the operating and the capital costs are unbundled. 35 The DSM Charges represent
only operating costs, while a separate charge, Members’ Contribution for Capital

1759
Expenditures (MCC) represent the ECs debt service and capital expenditure
requirements.36 In the new tariff structure under the RSEC-WR, the OPEX, Payroll and
ORI are translated into DSM Charges, while the Reinvestment Fund and Debt Service
are translated into MCC.37

As admitted by respondents, the MCC is not a new imposition on the member-

consumers of the ECs. Before the formulation of said MCC Charge, the rates of all the
ECs already include a Reinvestment Fund provision calculated at five percent (5%) of
their unbundled retail rates, inclusive of Generation, Transmission and Distribution
Charges.38 The intent of the RSEC-WR in translating Reinvestment Fund into MCC is to
recognize the fact that said MCC Charge indeed represents contributions from the
member-consumers for the expansion, rehabilitation and upgrading of the ECs’
distribution system which should be reflected in their bills for greater
transparency.39 When MCC was eventually designated as RFSC, only the appellation
changed; its nature and purpose remain the same.

Under Presidential Decree (P.D.) No. 269, 40 respondent ECs are vested with all powers
necessary or convenient for the accomplishment of its corporate purpose that is
supportive of the declared State policy of promoting sustainable development in the
rural areas through rural electrification.41 Such powers include, but are not limited to the
power:

xxxx

(g) To construct, purchase, lease as lessee, or otherwise acquire, and to equip,

maintain, and operate, and to sell, assign, convey, lease as lessor, mortgage,
pledge, or otherwise dispose of or encumber, electric transmission and
distribution lines or systems, electric generating plants, lands, buildings,
structures, dams, plants, and equipment, and any other real or personal property,
tangible or intangible, which shall be deemed necessary, convenient or
appropriate to accomplish the purpose for which the cooperative is organized;

(h) To purchase, lease as lessee, or otherwise acquire, and to use, and exercise
and to sell, assign, convey, mortgage, pledge or otherwise dispose of or
encumber franchises, rights, privileges, licenses and easements;

xxxx

(j) To construct, acquire, own, operate and maintain electric subtransmission and
distribution lines along, upon, under and across publicly owned lands and public
thoroughfares, including, without limitation, all roads, highways, streets, alleys,
bridges and causeways. In the event of the need of such lands and
thoroughfares for the primary purpose of the government, the electric cooperative
shall be properly compensated;

1760
 (j-1) To construct, acquire, own, operate and maintain generating facilities within
its franchise area. x x x

xxxx

(p) To do and perform any other acts and things, and to have and exercise any
other powers which may be necessary, convenient or appropriate to accomplish
the purpose for which the cooperative is organized. 42

Further, Section 35 of P.D. 269, which remains untouched despite amendments to the
law, provides:

SEC. 35. Non-profit, Non-discriminatory, Area Coverage Operation and Service. - A

cooperative shall be operated on a non-profit basis for the mutual benefit of its members
and patrons; shall, as to rates and services make or grant no unreasonable preference
or advantage to any member or patron nor subject any member or patron to any
unreasonable prejudice or disadvantage; shall not establish or maintain any
unreasonable difference as to rates or services either as between localities or as
between classes of service; shall not give, pay or receive any rebate or bonus, directly
or indirectly, or mislead its members in any manner as to rates charged for its services;
and shall furnish service on an area coverage basis; Provided, That for any extension
of service which if treated on the basis of standard terms and conditions is so
costly as to jeopardize the financial feasibility of the cooperative's entire
operation, the cooperative may require such contribution in aid of construction,
such facilities extension deposit, such guarantee of minimum usage for a minimum term
or such other reasonable commitment on the part of the person to be served as may be
necessary and appropriate to remove such jeopardy, but no difference in standard rates
for use of service shall be imposed for such purpose.

x x x43 (Emphasis supplied)

The MCC/RFSC is, therefore, an instrument to realize the foregoing statutory powers
and prerogatives of ECs. It is a charge that is vital to ensure the quality, reliability,
security, and affordability of electric power supply. To prevent any prejudice to the
public interest, the ERC is authorized to establish and enforce a methodology for setting
transmission and distribution wheeling rates and retail rates that takes into account all
relevant considerations, such as the expansion or improvement of the transmission
facilities pursuant to the ERC-approved plan.44

In closing, the Court observes that the ECs, whether under the control and supervision
of the National Electrification Administration (NEA) or registered with the Cooperative
Development Authority (CDA), use the RSEC-WR or collect MCC/RFSC contributions
from their member-consumers.45 Petitioners, however, excluded as parties to this case
the CDA-registered ECs, such as QUIRELCO (in Group A), ABRECO (in Group B),
ISELCO II (in Group C), SORECO II (in Group C), PANELCO I (in Group D), NUVELCO
(in Group D), NORECO II (in Group E), and DANECO (in Group F), SAJELCO (in

1761
Group F), and PELCO III (in Group G).46 Instead, what they impleaded were the
nineteen (19) off-grid47 ECs, namely: BATANELCO, LUBELCO, OMECO, ORMECO,
MARELCO, TIELCO, ROMELCO, BISELCO, FICELCO, MASELCO, TISELCO,
BANELCO, PROSIELCO, CELCO, TAWELCO, SIASELCO, SULECO, BASELCO, and
DIELCO.48 It is contended that although these ECs are not covered by RSEC-WR, the
ERC authorizes them to collect a Reinvestment Fund as component of their over-all
rate.49

If petitioners admit that the ECs, whether they belong to the off-grid or on-grid category
and whether they are CDA or NEA registered, are proper parties to the petition as they
will either suffer or benefit from the decision of the Court, 50 then they should have
equally impleaded as parties to the case the CDA-registered ECs and the off-grid ECs.
As indispensable parties, CDA-registered ECs should have been joined as petitioners or
respondents pursuant to Section 7, Rule 3 of the Rules.51 The reason behind this
compulsory joinder of indispensable parties is the complete determination of all possible
issues, not only between the parties themselves but also as regards other persons who
may be affected by the judgment. 52 While relief may be afforded to petitioners without
the presence of the CDA-registered ECs, it is uncertain whether the case can be finally
decided on its merits without taking into account, if not prejudicing, the rights and
interests of the latter.1âwphi1

There being no meritorious reason for Us to suspend the rules of procedure, any
discussion on substantive issues raised for resolution are unnecessary.

WHEREFORE, the petition is DISMISSED for inexcusable procedural and technical

defects. Costs against petitioner.

SO ORDERED.

EN BANC

G.R. No. 207132, December 06, 2016

ASSOCIATION OF MEDICAL CLINICS FOR OVERSEAS WORKERS, INC.,

(AMCOW), REPRESENTED HEREIN BY ITS PRESIDENT, DR. ROLANDO
VILLOTE, Petitioner, v. GCC APPROVED MEDICAL CENTERS ASSOCIATION, INC.
AND CHRISTIAN CANGCO, Respondents.

G.R. No. 207205

HON. ENRIQUE T. ONA, IN HIS CAPACITY AS SECRETARY OF THE

DEPARTMENT OF HEALTH, Petitioner, v. GCC APPROVED MEDICAL CENTERS
ASSOCIATION, INC. AND CHRISTIAN E. CANGCO, Respondents.

DECISION

1762
 BRION, J.:

In these consolidated petitions for review on certiorari1 filed under Rule 45 of the

Rules of Court, by the Association of Medical Clinics for Overseas Workers, Inc.
(AMCOW) in GR No. 207132, and by Secretary Enrique T. Ona (Secretary Ona) of the
Department of Health (DOH) in GR No. 207205, we resolve the challenge to
the August 10, 2012 decision2 and the April 12, 2013 order3 of the Regional Trial Court
(RTC) of Pasay City, Branch 108, in Sp. Civil Action No. R-PSY-10-04391-CV. 4

The August 10, 2012 decision and April 12, 2013 order declared null and void ab
initio the August 23, 2010 and November 2, 2010 orders issued by the DOH directing
respondent GCC Approved Medical Centers Association, Inc. (GAMCA) to cease and
desist from implementing the referral decking system (these orders shall be alternately
referred to as DOH CDO letters).

I. The Antecedents

On March 8, 2001, the DOH issued Administrative Order No. 5, Series of 20015(AO

5-01) which directed the decking or equal distribution of migrant workers among
the several clinics who are members of GAMCA.

AO 5-01 was issued to comply with the Gulf Cooperative Countries (GCC) States'
requirement that only GCC-accredited medical clinics/hospitals' examination results will
be honored by the GCC States' respective embassies. It required an OFW applicant to
first go to a GAMCA Center which, in turn, will refer the applicant to a GAMCA clinic or
hospital.

Subsequently, the DOH issued AO No. 106, Series of 20026holding in abeyance the
implementation of the referral decking system. The DOH reiterated its directive
suspending the referral decking system in AO No. 159, Series of 2004.7

In 2004, the DOH issued AO No. 167, Series of 20048repealing AO 5-01, reasoning
that the referral decking system did not guarantee the migrant workers' right to safe and
quality health service. AO 167-04 pertinently reads:
WHEREAS, after a meticulous and deliberate study, examination, and consultation
about the GAMCA referral decking system, the DOH believes that its mandate is to
protect and promote the health of the Filipino people by ensuring the rights to safe and
quality health service and reliable medical examination results through the stricter
regulation of medical clinics and other health facilities, which the referral decking system
neither assures nor guarantees.

NOW, THEREFORE, for and in consideration of the foregoing, the DOH hereby
withdraws, repeals and/or revokes Administrative Order No. 5, series of 2001,
concerning the referral decking system. Hence, all other administrative issuances,
bureau circulars and memoranda related to A.O. No. 5, series of 2001, are hereby
withdrawn, repealed and/revoked accordingly.

1763
In Department Memorandum No. 2008-0210,9 dated September 26, 2008, then DOH
Secretary Francisco T. Duque III expressed his concern about the continued
implementation of the referral decking system despite the DOH's prior suspension
directives. The DOH directed the "OFW clinics, duly accredited/licensed by the DOH
and/or by the Philippine Health Insurance Corporation (PHILHEALTH) belonging to and
identified with GAMCA x x x to forthwith stop, terminate, withdraw or otherwise end
the x x x 'referral decking system.'"10

GAMCA questioned the DOH's Memorandum No. 2008-0210 before the Office of the
President (OP). In a decision11 dated January 14, 2010, the OP nullified
Memorandum No. 2008-0210.

On March 8, 2010, Republic Act (RA) No. 1002212lapsed into law without the

President's signature. Section 16 of RA No. 10022 amended Section 23 of RA No.
8042, adding two new paragraphs - paragraphs (c) and (d). The pertinent portions of the
amendatory provisions read:
Section 16. Under Section 23 of Republic Act No. 8042, as amended, add new
paragraphs (c) and (d) with their corresponding subparagraphs to read as follows:

(c) Department of Health. - The Department of Health (DOH) shall regulate the
activities and operations of all clinics which conduct medical, physical, optical,
dental, psychological and other similar examinations, hereinafter referred to as
health examinations, on Filipino migrant workers as requirement for their
overseas employment. Pursuant to this, the DOH shall ensure that:

(c.1) The fees for the health examinations are regulated, regularly monitored and duly
published to ensure that the said fees are reasonable and not exorbitant;

(c.2) The Filipino migrant worker shall only be required to undergo health examinations
when there is reasonable certainty that he or she will be hired and deployed to the
jobsite and only those health examinations which are absolutely necessary for the type
of job applied for or those specifically required by the foreign employer shall be
conducted;

(c.3) No group or groups of medical clinics shall have a monopoly of exclusively

conducting health examinations on migrant workers for certain receiving
countries;

(c.4) Every Filipino migrant worker shall have the freedom to choose any of the
DOH-accredited or DOH-operated clinics that will conduct his/her health
examinations and that his or her rights as a patient are respected. The decking
practice, which requires an overseas Filipino worker to go first to an office for
registration and then farmed out to a medical clinic located elsewhere, shall not
be allowed;

(c.5) Within a period of three (3) years from the effectivity of this Act, all DOH regional

1764
and/or provincial hospitals shall establish and operate clinics that can serve the health
examination requirements of Filipino migrant workers to provide them easy access to
such clinics all over the country and lessen their transportation and lodging expenses;
and

(c.6) All DOH-accredited medical clinics, including the DOH operated clinics, conducting
health examinations for Filipino migrant workers shall observe the same standard
operating procedures and shall comply with internationally accepted standards in their
operations to conform with the requirements of receiving countries or of foreign
employers/principals.

Any Foreign employer who does not honor the results of valid health examinations
conducted by a DOH-accredited or DOH-operated clinic shall be temporarily disqualified
from participating in the overseas employment program, pursuant to POEA rules and
regulations.

In case an overseas Filipino worker is found to be not medically fit upon his/her
immediate arrival in the country of destination, the medical clinic that conducted the
health examinations of such overseas Filipino worker shall pay for his or her repatriation
back to the Philippines and the cost of deployment of such worker.

Any government official or employee who violates any provision of this subsection shall
be removed or dismissed from service with disqualification to hold any appointive public
office for five (5) years. Such penalty is without prejudice to any other liability which he
or she may have incurred under existing laws, rules or regulations. [emphases and
underscoring supplied]
On August 13, 2010, the Implementing Rules and Regulations13 (IRR) of RA No. 8042,
as amended by RA No. 10022, took effect.

Pursuant to Section 16 of RA No. 10022, the DOH, through its August 23, 2010

letter-order,14 directed GAMCA to cease and desist from implementing the referral
decking system and to wrap up their operations within three (3) days from receipt
thereof. GAMCA received its copy of the August 23, 2010 letter-order on August 25,
2010.

On August 26, 2010, GAMCA filed with the RTC of Pasig City a petition
for certiorari and prohibition with prayer for a writ of preliminary injunction and/or
temporary restraining order (GAMCA's petition).15 It assailed: (1) the DOH's August 23,
2010 letter-order on the ground of grave abuse of discretion; and (2) paragraphs c.3
and c.4, Section 16 of RA No. 10022, as well as Section 1 (c) and (d), Rule XI of the
IRR, as unconstitutional.

Meanwhile, the DOH reiterated - through its November 2, 2010 order - its directive that
GAMCA cease and desist from implementing the referral decking system. 16

On November 23, 2010, AMCOW filed an urgent motion for leave to intervene and to

1765
file an opposition-in-intervention, attaching its opposition-in-intervention to its
motion.17 In the hearing conducted the following day, November 24, 2010, the RTC
granted AMCOW's intervention; DOH and GAMCA did not oppose AMCOW's
motion.18 AMCOW subsequently paid the docket fees and submitted its memorandum. 19

In an order20 dated August 1, 2011, the RTC issued a writ of preliminary

injunction21 directing the DOH to cease and desist from implementing its August 23,
2010 and November 2, 2010 orders. The RTC likewise issued an order denying the
motion for inhibition/disqualification filed by AMCOW.

On August 18, 2011, the DOH sought reconsideration of the RTC's August 1, 2011
order.

The assailed RTC rulings

In its August 10, 2012 decision,22 the RTC granted GAMCA's certiorari petition and

declared null and void ab initio the DOH CDO letters. It also issued a writ of prohibition
directing "the DOH Secretary and all persons acting on his behalf to cease and desist
from implementing the assailed Orders against the [GAMCA]."

The RTC upheld the constitutionality of Section 16 of RA No. 10022, amending

Section 23 of RA No. 8042, but ruled that Section 16 of RA No. 10022 does not
apply to GAMCA.

The RTC reasoned out that the prohibition against the referral decking system under
Section 16 of RA No. 10022 must be interpreted as applying only to clinics that conduct
health examination on migrant workers bound for countries that do not require the
referral decking system for the issuance of visas to job applicants.

It noted that the referral decking system is part of the application procedure in obtaining
visas to enter the GCC States, a procedure made in the exercise of the sovereign
power of the GCC States to protect their nationals from health hazards, and of their
diplomatic power to regulate and screen entrants to their territories. Under the principle
of sovereign equality and independence of States, the Philippines cannot interfere with
this system and, in fact, must respect the visa-granting procedures of foreign states in
the same way that they respect our immigration procedures.

Moreover, to restrain GAMCA which is a mere adjunct of HMC, the agent of GCC
States, is to restrain the GCC States themselves. To the RTC, the Congress was aware
of this limitation, pursuant to the generally accepted principles of international law under
Article II, Section 2 of the 1987 Constitution, when it enacted Section 16 of RA No.
10022.

The DOH and AMCOW separately sought reconsideration of the RTC's August 10,
2012 decision, which motions the RTC denied. 23 The DOH and AMCOW separately filed
the present Rule 45 petitions.

1766
On August 24, 2013, AMCOW filed a motion for consolidation 24 of the two petitions; the
Court granted this motion and ordered the consolidation of the two petitions in a
resolution dated September 17, 2013. 25cralawred

In the resolution26 of April 14, 2015, the Court denied: (1) GAMCA's most urgent motion
for issuance of temporary restraining order/writ of preliminary injunction/status quo ante
order (with request for immediate inclusion in the Honorable Court's agenda of March 3,
2015, its motion dated March 2, 2015);27 and (2) the most urgent reiterating motion for
issuance of temporary restraining order/writ of preliminary injunction/status quo ante
order dated March 11, 2015.28

The Court also suspended the implementation of the permanent injunction issued by the
RTC of Pasay City, Branch 108 in its August 10, 2012 decision.

II. The Issues

The consolidated cases before us present the following issues:

First, whether the Regional Trial Court legally erred in giving due course to the petition
for certiorari and prohibition against the DOH CDO letters;

Second, whether the DOH CDO letters prohibiting GAMCA from implementing the
referral decking system embodied under Section 16 of Republic Act No. 10022 violates
Section 3, Article II of the 1987 Constitution for being an undue taking of property;

Third, whether the application of Section 16 of Republic Act No.10022 to the GAMCA
violates the international customary principles of sovereign independence and equality.

III. Our Ruling

A. The RTC legally erred when it gave due course to GAMCA's petition
for certiorari and prohibition.

The present case reached us through an appeal by certiorari (pursuant to Rule 45) of an

RTC ruling, assailing the decision based solely on questions of law. The RTC decision,
on the other hand, involves the grant of the petitions for certiorari and prohibition
(pursuant to Rule 65) assailing the DOH CDO letters for grave abuse of discretion.

The question before us asks whether the RTC made a reversible error of law
when it issued writs of certiorari and prohibition against the DOH CDO letters.

AMCOW questions the means by which GAMCA raised the issue of the legality of RA
No. 10022 before the RTC. AMCOW posits that GAMCA availed of an improper
remedy, as certiorari and prohibition lie only against quasi-judicial acts, and quasi-
judicial and ministerial acts, respectively. Since the disputed cease and desist order is
neither, the RTC should have dismissed the petition outright for being an improper

1767
remedy.

We agree with the petitioners' assertion that the RTC erred when it gave due course
to GAMCA's petition for certiorari and prohibition, but we do so for different reasons.

1. Certiorari under Rules of Court and under the courts' expanded jurisdiction
under Art VIII, Section 1 of the Constitution, as recognized by jurisprudence.

A.1.a. The Current Certiorari Situation

The use of petitions for certiorari and prohibition under Rule 65 is a remedy that

judiciaries have used long before our Rules of Court existed. 29 As footnoted below,
these writs - now recognized and regulated as remedies under Rule 65 of our Rules of
Court - have been characterized a "supervisory writs" used by superior courts to keep
lower courts within the confines of their granted jurisdictions, thereby ensuring
orderliness in lower courts' rulings.

We confirmed this characterization in Madrigal Transport v. Lapanday Holdings

Corporation,30 when we held that a writ is founded on the supervisory jurisdiction of
appellate courts over inferior courts, and is issued to keep the latter within the bounds of
their jurisdiction. Thus, the writ corrects only errors of jurisdiction of judicial and quasi-
judicial bodies, and cannot be used to correct errors of law or fact. For these mistakes
of judgment, the appropriate remedy is an appeal. 31

This situation changed after 1987 when the new Constitution "expanded" the scope of
judicial power by providing that -
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government. (italics supplied)32
In Francisco v. The House of Representatives,33 we recognized that this expanded
jurisdiction was meant "to ensure the potency of the power of judicial review to curb
grave abuse of discretion by 'any branch or instrumentalities of government.'" Thus, the
second paragraph of Article VIII, Section 1 engraves, for the first time in its history, into
black letter law the "expanded certiorari jurisdiction" of this Court, whose nature and
purpose had been provided in the sponsorship speech of its proponent, former Chief
Justice Constitutional Commissioner Roberto Concepcion:
xxxx

The first section starts with a sentence copied from former

Constitutions. It says:

The judicial power shall be vested in one Supreme Court and in such lower courts as
may be established by law.

1768
I suppose nobody can question it.

The next provision is new in our constitutional law. I will read it first and explain.

Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the government.

Fellow Members of this Commission, this is actually a product of our experience during
martial law. As a matter of fact, it has some antecedents in the past, but the role of the
judiciary during the deposed regime was marred considerably by the circumstance that
in a number of cases against the government, which then had no legal defense at all,
the solicitor general set up the defense of political question and got away with it. As a
consequence, certain principles concerning particularly the writ of habeas corpus, that
is, the authority of courts to order the release of political detainees, and other matters
related to the operation and effect of martial law failed because the government set up
the defense of political question. And the Supreme Court said: "Well, since it is political,
we have no authority to pass upon it." The Committee on the Judiciary feels that this
was not a proper solution of the questions involved. It did not merely request an
encroachment upon the rights of the people, but it, in effect, encouraged further
violations thereof during the martial law regime. x x x

xxxx

Briefly stated, courts of justice determine the limits of power of the agencies and offices
of the government as well as those of its officers. In other words, the judiciary is the final
arbiter on the question whether or not a branch of government or any of its officials has
acted without jurisdiction or in excess of jurisdiction, or so capriciously as to constitute
an abuse of discretion amounting to excess of jurisdiction or lack of jurisdiction. This is
not only a judicial power but a duty to pass judgment on matters of this nature.

This is the background of paragraph 2 of Section 1, which means that the courts cannot
hereafter evade the duty to settle matters of this nature, by claiming that such matters
constitute a political question.34 (italics in the original; emphasis and underscoring
supplied)
Meanwhile that no specific procedural rule has been promulgated to enforce this
"expanded" constitutional definition of judicial power and because of the commonality of
"grave abuse of discretion" as a ground for review under Rule 65 and the courts
expanded jurisdiction, the Supreme Court based on its power to relax its rules35 allowed
Rule 65 to be used as the medium for petitions invoking the courts' expanded
jurisdiction based on its power to relax its Rules. 36 This is however an ad hoc approach
that does not fully consider the accompanying implications, among them, that Rule 65 is
an essentially distinct remedy that cannot simply be bodily lifted for application under
the judicial power's expanded mode. The terms of Rule 65, too, are not fully aligned with

1769
what the Court's expanded jurisdiction signifies and requires. 37

On the basis of almost thirty years' experience with the courts' expanded jurisdiction,
the Court should now fully recognize the attendant distinctions and should be aware that
the continued use of Rule 65 on an ad hoc basis as the operational remedy in
implementing its expanded jurisdiction may, in the longer term, result in problems of
uneven, misguided, or even incorrect application of the courts' expanded mandate.

The present case is a prime example of the misguided reading that may take place in
constitutional litigation: the procedural issues raised apparently spring from the lack of
proper understanding of what a petition for certiorari assails under the traditional and
expanded modes, and the impact of these distinctions in complying with the procedural
requirements for a valid petition.

2. The Basic Distinctions

A.2.a. Actual Case or Controversy

Basic in the exercise of judicial power whether under the traditional or in the expanded
setting - is the presence of an actual case or controversy. For a dispute to be justiciable,
a legally demandable and enforceable right must exist as basis, and must be shown to
have been violated.38

Whether a case actually exists depends on the pleaded allegations, as affected by the
elements of standing (translated in civil actions as the status of being a "real-
party-in-interest," in criminal actions as "offended party" and in special
proceedings as "interested party"),39ripeness,40prematurity, and the moot and
academic principle that likewise interact with one another. These elements and their
interactions are discussed m greater detail below.

The Court's expanded jurisdiction - itself an exercise of judicial power - does not do
away with the actual case or controversy requirement in presenting a constitutional
issue, but effectively simplifies this requirement by merely requiring a prima
facie showing of grave abuse of discretion in the assailed governmental act.

A.2.b. Actions Correctable by Certiorari

A basic feature of the expanded jurisdiction under the constitutional definition of judicial
power, is the authority and command for the courts to act on petitions involving the
commission by any branch or instrumentality of government of grave abuse of
discretion amounting to lack or excess of jurisdiction.

This command distinctly contrasts with the terms of Rule 65 which confines
court certiorari action solely to the review of judicial and quasi-judicial acts.41 These
differing features create very basic distinctions that must necessarily result in
differences in the application of remedies.

1770
While actions by lower courts do not pose a significant problem because they are
necessarily acting judicially when they adjudicate, a critical question comes up for the
court acting on certiorari petitions when governmental agencies are involved - under
what capacity does the agency act?

This is a critical question as the circumstances of the present case show. When the
government entity acts quasi-judicially, the petition for certiorari challenging the action
falls under Rule 65; in other instances, the petition must be filed based on the courts'
expanded jurisdiction.

A.2.c. Grave Abuse of Discretion

Another distinction, a seeming one as explained below, relates to the cited ground of
a certiorari petition under Rule 65 which speaks of lack or excess of jurisdiction or grave
abuse of discretion amounting to lack or excess of jurisdiction, as against the remedy
under the courts' expanded jurisdiction which expressly only mentions grave abuse of
discretion amounting to lack or excess of jurisdiction.

This distinction is apparently not legally significant when it is considered that action
outside of or in excess of the granted authority necessarily involves action with grave
abuse of discretion: no discretion is allowed in areas outside of an agency's granted
authority so that any such action would be a gravely abusive exercise of power. The
constitutional grant of power, too, pointedly addresses grave abuse of discretion when it
amounts to lack or excess of jurisdiction,42 thus establishing that the presence of
jurisdiction is the critical element; failure to comply with this requirement necessarily
leads to the certiorari petition's immediate dismissal.43

As an added observation on a point that our jurisprudence has not fully explored, the
result of the action by a governmental entity (e.g., a law or an executive order) can be
distinguished from the perspective of its legality as tested against the terms of the
Constitution or of another law (where subordinate action like an executive order is
involved), vis-a-vis the legality of the resulting action where grave abuse of discretion
attended the governmental action or the exercise of the governmental function.

In the former, the conclusion may be plain illegality or legal error that characterized the
law or exec order (as tested, for example, under the established rules of interpretation);
no consideration is made of how the governmental entity exercised its function. In the
latter case, on the other hand, it is the governmental entity's exercise of its function that
is examined and adjudged independently of the result, with impact on the legality of the
result of the gravely abusive action.

Where the dispute in a case relates to plain legal error, ordinary court action and
traditional mode are called for and this must be filed in the lower courts based on rules
of jurisdiction while observing the hierarchy of courts.

1771
Where grave abuse of discretion is alleged to be involved, the expanded jurisdiction is
brought into play based on the express wording of the Constitution and constitutional
implications may be involved (such as grave abuse of discretion because of plain
oppression or discrimination), but this must likewise be filed with the lowest court of
concurrent jurisdiction, unless the court highest in the hierarchy grants exemption. Note
that in the absence of express rules, it is only the highest court, the Supreme Court, that
can only grant exemptions.

From these perspectives, the use of grave abuse of discretion can spell the difference in
deciding whether a case filed directly with the Supreme Court has been properly filed.

A.2.d. Exhaustion of Available Remedies

A basic requirement under Rule 65 is that there be "no other plain, speedy and
adequate remedy found in law,"44 which requirement the expanded jurisdiction provision
does not expressly carry. Nevertheless, this requirement is not a significant distinction in
using the remedy of certiorari under the traditional and the expanded modes. The
doctrine of exhaustion of administrative remedies applies to a petition for certiorari,
regardless of the act of the administrative agency concerned, i.e., whether the act
concerns a quasi-judicial, or quasi-legislative function, or is purely regulatory. 45

Consider in this regard that once an administrative agency has been empowered by
Congress to undertake a sovereign function, the agency should be allowed to perform
its function to the full extent that the law grants. This full extent covers the authority of
superior officers in the administrative agencies to correct the actions of subordinates, or
for collegial bodies to reconsider their own decisions on a motion for reconsideration.
Premature judicial intervention would interfere with this administrative mandate, leaving
administrative action incomplete; if allowed, such premature judicial action through a
writ of certiorari, would be a usurpation that violates the separation of powers principle
that underlies our Constitution.46

In every case, remedies within the agency's administrative process must be exhausted
before external remedies can be applied. Thus, even if a governmental entity may have
committed a grave abuse of discretion, litigants should, as a rule, first ask
reconsideration from the body itself, or a review thereof before the agency concerned.
This step ensures that by the time the grave abuse of discretion issue reaches the
court, the administrative agency concerned would have fully exercised its jurisdiction
and the court can focus its attention on the questions of law presented before it.

Additionally, the failure to exhaust administrative remedies affects the ripeness to

adjudicate the constitutionality of a governmental act, which in turn affects the
existence of the need for an actual case or controversy for the courts to exercise
their power of judicial review.47 The need for ripeness - an aspect of the timing of a
case or controversy does not change regardless of whether the issue of constitutionality
reaches the Court through the traditional means, or through the Court's expanded
jurisdiction. In fact, separately from ripeness, one other concept pertaining to judicial

1772
review is intrinsically connected to it; the concept of a case being moot and academic. 48

Both these concepts relate to the timing of the presentation of a controversy before the
Court ripeness relates to its prematurity, while mootness relates to a belated or
unnecessary judgment on the issues. The Court cannot preempt the actions of the
parties, and neither should it (as a rule) render judgment after the issue has already
been resolved by or through external developments.

The importance of timing in the exercise of judicial review highlights and reinforces the
need for an actual case or controversy an act that may violate a party's right. Without
any completed action or a concrete threat of injury to the petitioning party, the act is not
yet ripe for adjudication. It is merely a hypothetical problem. The challenged act must
have been accomplished or performed by either branch or instrumentality of
government before a court may come into the picture, and the petitioner must allege the
existence of an immediate or threatened injury to itself as a result of the challenged
action.

In these lights, a constitutional challenge, whether presented through the traditional

route or through the Court's expanded jurisdiction, requires compliance with the
ripeness requirement. In the case of administrative acts, ripeness manifests itself
through compliance with the doctrine of exhaustion of administrative remedies.

In like manner, an issue that was once ripe for resolution but whose resolution, since
then, has been rendered unnecessary, needs no resolution from the Court, as it
presents no actual case or controversy and likewise merely presents a hypothetical
problem. In simpler terms, a case is moot and academic when an event supervenes to
render a judgment over the issues unnecessary and superfluous.

Without the element of ripeness or a showing that the presented issue is moot and
academic, petitions challenging the constitutionality of a law or governmental act are
vulnerable to dismissal.

Not to be forgotten is that jurisprudence also prohibits litigants from immediately seeking
judicial relief without first exhausting the available administrative remedies for practical
reasons.49

From the perspective of practicality, immediate resort to the courts on issues that are
within the competence of administrative agencies to resolve, would unnecessarily clog
the courts' dockets. These issues, too, usually involve technical considerations that are
within the agency's specific competence and which, for the courts, would require
additional time and resources to study and consider. 50 Of course, the Supreme Court
cannot really avoid the issues that a petition for certiorari, filed with the lower courts may
present; the case may be bound ultimately to reach the Court, albeit as an appeal from
the rulings of the lower courts.

3. Situations Where a Petition for Certiorari May Be Used

1773
There are two distinct situations where a writ of certiorari or prohibition may be sought.
Each situation carries requirements, peculiar to the nature of each situation, that lead to
distinctions that should be recognized in the use of certiorari under Rule 65 and under
the courts' expanded jurisdiction.

The two situations differ in the type of questions raised. The first is the constitutional
situation where the constitutionality of acts are questioned. The second is the non-
constitutional situation where acts amounting to grave abuse of discretion are
challenged without raising constitutional questions or violations.

The process of questioning the constitutionality of a governmental action provides a

notable area of comparison between the use of certiorari in the traditional and the
expanded modes.

Under the traditional mode, plaintiffs question the constitutionality of a governmental

action through the cases they file before the lower courts; the defendants may likewise
do so when they interpose the defense of unconstitutionality of the law under which they
are being sued. A petition for declaratory relief may also be used to question the
constitutionality or application of a legislative (or quasi-legislative) act before the court. 51

For quasi-judicial actions, on the other hand, certiorari is an available remedy, as acts or

exercise of functions that violate the Constitution are necessarily committed with grave
abuse of discretion for being acts undertaken outside the contemplation of the
Constitution. Under both remedies, the petitioners should comply with the traditional
requirements of judicial review, discussed below.52 In both cases, the decisions of these
courts reach the Court through an appeal by certiorari under Rule 45.

In contrast, existing Court rulings in the exercise of its expanded jurisdiction have

allowed the direct filing of petitions for certiorari and prohibition with the Court to
question, for grave abuse of discretion, actions or the exercise of a function that violate
the Constitution.53 The governmental action may be questioned regardless of whether it
is quasi-judicial, quasi-legislative, or administrative in nature. The Court's expanded
jurisdiction does not do away with the actual case or controversy requirement for
presenting a constitutional issue, but effectively simplifies this requirement by merely
requiring a prima facie showing of grave abuse of discretion in the exercise of the
governmental act.54

To return to judicial review heretofore mentioned, in constitutional cases where the

question of constitutionality of a governmental action is raised, the judicial power the
courts exercise is likewise identified as the power of judicial review - the power to
review the constitutionality of the actions of other branches of government. 55 As a rule,
as required by the hierarchy of courts principle, these cases are filed with the lowest
court with jurisdiction over the matter. The judicial review that the courts undertake
requires:
1) there be an actual case or controversy calling for the exercise of judicial power;

1774
(2) the person challenging the act must have "Standing" to challenge; he must have
a personal and substantial interest in the case such that he has sustained, or will
sustain, direct injury as a result of its enforcement;
(3) the question of constitutionality must be raised at the earliest possible
opportunity; and
(4) the issue of constitutionality must be the very lis mota of the case.56
The lower court's decision under the constitutional situation reaches the Supreme Court
through the appeal process, interestingly, through a petition for review
on certiorari under Rule 45 of the Rules of Court.

In the non-constitutional situation, the same requirements essentially apply, less the

requirements specific to the constitutional issues. In particular, there must be an actual
case or controversy and the compliance with requirements of standing, as affected by
the hierarchy of courts, exhaustion of remedies, ripeness, prematurity, and the moot
and academic principles.

A.3.a. The "Standing" Requirement

Under both situations, the party bringing suit must have the necessary "standing." This
means that this party has, in its favor, the demandable and enforceable right or interest
giving rise to a justiciable controversy after the right is violated by the offending party.

The necessity of a person's standing to sue derives from the very definition of judicial
power. Judicial power includes the duty of the courts to settle actual controversies
involving rights which are legally demandable and enforceable. Necessarily, the person
availing of a judicial remedy must show that he possesses a legal interest or right to it,
otherwise, the issue presented would be purely hypothetical and academic. This
concept has been translated into the requirement to have "standing" in judicial
review,57 or to be considered as a "real-party-in-interest" in civil actions, 58 as the
"offended party" in criminal actions59 and the "interested party" in special proceedings. 60

While the Court follows these terms closely in both non-constitutional cases and
constitutional cases under the traditional mode, it has relaxed the rule in constitutional
cases harrdled under the expanded jurisdiction mode. in the latter case, a prima
facie showing that the questioned governmental act violated the Constitution, effectively
disputably shows an injury to the sovereign Filipino nation who approved the
Constitution and endowed it with authority, such that the challenged act may be
questioned by any Philippine citizen before the Supreme Court. 61 In this manner, the
"standing" requirement is relaxed compared with the standard of personal stake or
injury that the traditional petition requires.

The relaxation of the standing requirement has likewise been achieved through the
application of the "transcendental importance doctrine" under the traditional mode for
constitutional cases.62 (Under the traditional mode, "transcendental importance" not only
relaxes the standing requirement, but also allows immediate access to this Court, thus

1775
exempting the petitioner from complying with the hierarchy of courts requirement.) 63

More importantly perhaps, the prima facie showing of grave abuse of discretion in

constitutional cases also implies that the injury alleged is actual or imminent, and not
merely hypothetical.

Through this approach, the Court's attention is directed towards the existence of an
actual case or controversy - that is, whether the government indeed violated the
Constitution to the detriment of the Filipino people without the distractions of
determining the existence of transcendental importance indicators unrelated to the
dispute and which do not at all determine whether the Court properly exercises its
power of judicial review.

Parenthetically, in the traditional mode, the determination of the transcendental

importance of the issue presented,64 aside from simply relaxing the standing
requirement, may result in the dilution of the actual case or controversy element
because of the inextricable link between standing and the existence of an actual case or
controversy.

Consider, in this regard, that an actual case or controversy that calls for the exercise of
judicial power necessarily requires that the party presenting it possesses the standing to
mount a challenge to a governmental act. A case or controversy exists when there is an
actual dispute between parties over their legal rights, which remains in conflict at the
time the dispute is presented before the court. 65 Standing, on the other hand, involves a
personal and substantial interest in the case because the petitioner has sustained, or
will sustain, direct injury as a result of the violation of its right. 66

With the element of "standing" (or the petitioner's personal or substantial stake or
interest in the case) relaxed, the practical effect is to dilute the need to show that an
immediate actual dispute over legal rights did indeed take place and is now the subject
of the action before the court.67

In both the traditional and the expanded modes, this relaxation carries a ripple effect
under established jurisprudential rulings, 68 affecting not only the actual case or
controversy requirement, but compliance with the doctrine of hierarchy of courts,
discussed in greater detail below.

A.3.b. The Hierarchy of Courts Principle

Another requirement that a certiorari petition carries, springs from the principle of

"hierarchy of courts" which recognizes the various levels of courts in the country as they
are established under the Constitution and by law, their ranking and effect of their
rulings in relation with one another, and how these different levels of court interact with
one another.69 Since courts are established and given their defined jurisdictions by law,
the hierarchy of the different levels of courts should leave very little opening for flexibility
(and potential legal questions), but for the fact that the law creates courts at different

1776
and defined levels but with concurrent jurisdictions.

The Constitution itself has partially determined the judicial hierarchy in the Philippine
legal system by designating the Supreme Court as the highest court with irreducible
powers; its rulings serve as precedents that other courts must follow 70 because they
form part of the law of the land.71 As a rule, the Supreme Court is not a trial court and
rules only on questions of law, in contrast with the Court of Appeals and other
intermediate courts72 which rule on both questions of law and of fact. At the lowest level
of courts are the municipal and the regional trial courts which handle questions of fact
and law at the first instance according to the jurisdiction granted to them by law.

Petitions for certiorari and prohibition fall under the concurrent jurisdiction of the regional
trial courts and the higher courts, all the way up to the Supreme Court. As a general
rule, under the hierarchy of courts principle, the petition must be brought to the lowest
court with jurisdiction;73 the petition brought to the higher courts may be dismissed
based on the hierarchy principle. Cases, of course, may ultimately reach the Supreme
Court through the medium of an appeal.

The recognition of exceptions to the general rule is provided by the Supreme Court
through jurisprudence, i.e., through the cases that recognized the propriety of filing
cases directly with the Supreme Court. This is possible as the Supreme Court has the
authority to relax the application of its own rules. 74

As observed above, this relaxation waters down other principles affecting the remedy
of certiorari. While the relaxation may result in greater and closer supervision by the
Court over the lower courts and quasi-judicial bodies under Rule 65, the effect may not
always be salutary in the long term when it is considered that this may affect the
constitutional standards for the exercise of judicial power, particularly the existence of
an actual case or controversy.

The "transcendental importance" standard, in particular, is vague, open-ended and

value-laden, and should be limited in its use to exemptions from the application of the
hierarchy of courts principle. It should not carry any ripple effect on the constitutional
requirement for the presence of an actual case or controversy.

4. The petition for certiorari and prohibition against the DOH Letter was filed
before the wrong court.

In the present case, the act alleged to be unconstitutional refers to the cease and desist
order that the DOH issued against GAMCA's referral decking system. Its
constitutionality was questioned through a petition for certiorari and prohibition before
the RTC. The case reached this Court through a Rule 45 appeal by certiorari under the
traditional route.

In using a petition for certiorari and prohibition to assail the DOHCDO letters, GAMCA

committed several procedural lapses that rendered its petition readily dismissible by

1777
the RTC. Not only did the petitioner present a premature challenge against an
administrative act; it also committed the grave jurisdictional error of filing the
petition before the wrong court.

A.4.a. The DOH CDO letters were issued in the exercise of the DOH's quasi-
judicial functions, and could be assailed through Rule 65 on certiorari and
prohibition.

A cease and desist order is quasi-judicial in nature, as it applies a legislative policy to an

individual or group within the coverage of the law containing the policy.

The Court, in Municipal Council of Lemery, Batangas v. Provincial Board of

Batangas,75 recognized the difficulty of d fining the precise demarcation line between
what are judicial and what are administrative or ministerial functions, as the exercise of
judicial functions may involve the performance of legislative or administrative duties,
and the performance of administrative or ministerial duties may, to some extent, involve
the exercise of functions judicial in character. Thus, the Court held that the nature of
the act to be performed, rather than of the office, board, or body which performs
it, should determine whether or not an action is in the discharge of a judicial or a quasi-
judicial function.76

Generally, the exercise of judicial functions involves the determination of what the law
is, and what the legal rights of parties are under this law with respect to a matter in
controversy. Whenever an officer is clothed with this authority and undertakes to
determine those questions, he acts judicially.77

In the administrative realm, a government officer or body exercises a quasi-judicial

function when it hears and determines questions of fact to which the legislative policy is
to apply, and decide, based on the law's standards, matters relating to the enforcement
and administration of the law.78

The DOH CDO letter directed GAMCA to cease and desist from engaging in the referral
decking system practice within three days from receipt of the letter. By issuing this CDO
letter implementing Section 16 of RA No. 10022, the DOH (1) made the finding of fact
that GAMCA implements the referral decking system, and (2) applied Section 16 of RA
No. 10022, to conclude that GAMCA's practice is prohibited by law and should be
stopped.

From this perspective, the DOH acted in a quasi-judicial capacity: its CDO letter
determined a question of fact, and applied the legislative policy prohibiting the referral
decking system practice.

Notably, cease and desist orders have been described and treated as quasi-judicial acts
in past cases, and had even been described as similar to the remedy of injunction
granted by the courts.79

1778
A.4.b. The petitions for certiorari and prohibition against the DOH CDO letters fall
within the jurisdiction of the Court of Appeals.

Since the CDO Letter was a quasi-judicial act, the manner by which GAMCA assailed it
before the courts of law had been erroneous; the RTC should not have entertained
GAMCA's petition.

First, acts or omissions by quasi-judicial agencies, regardless of whether the remedy

involves a Rule 43 appeal or a Rule 65 petition for certiorari, is cognizable by the Court
of Appeals. In particular, Section 4, Rule 65 of the Rules of Court provides:
Section 4. When and where petition filed. The petition shall be filed not later than sixty
(60) days from notice of the judgment, order or resolution. In case a motion for
reconsideration or new trial is timely filed, whether such motion is required or not, the
sixty (60) day period shall be counted from notice of the denial of said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions
of a lower court or of a corporation, board, officer or person, in the Regional Trial Court
exercising jurisdiction over the territorial area as defined by the Supreme Court. It may
also be filed in the Court of Appeals whether or not the same is in aid of its appellate
jurisdiction, or in the Sandiganbayan if it is in aid of its appellate jurisdiction. If it
involves the acts or omissions of a quasi-judicial agency, unless otherwise
provided by law or these Rules, the petition shall be filed in and cognizable only
by the Court of Appeals. (emphasis, italics, and underscoring supplied)
Since the DOH is part of the Executive Department and has acted in its quasi-judicial
capacity, the petition challenging its CDO letter should have been filed before the Court
of Appeals. The RTC thus did not have jurisdiction over the subject matter of the
petitions and erred in giving due course to the petition for certiorari and prohibition
against the DOH CDO letters. In procedural terms, petitions for certiorari and prohibition
against a government agency are remedies avaiJable to assail its quasi-judicial acts,
and should thus have been filed before the CA.

The provision in Section 4, Rule 65 requiring that certiorari petitions challenging quasi-

judicial acts to be filed with the CA is in full accord with Section 9 of Batas Pambansa
Blg. 12980 on the same point. Section 9 provides:
Section 9. Jurisdiction.- The Court of Appeals shall exercise:

1. Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas

corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of
its appellate jurisdiction;

xxxx

3. Exclusive appellate jurisdiction over all final judgments, resolutions, orders or

awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities,
boards or commission, including the Securities and Exchange Commission, the Social
Security Commission, the Employees Compensation Commission and the Civil Service

1779
Commission, except those falling within the appellate jurisdiction of the Supreme Court
in accordance with the Constitution, the Labor Code of the Philippines under
Presidential Decree No. 442, as amended, the provisions of this Act, and of
subparagraph (1) of the third paragraph and subparagraph 4 of the fourth paragraph of
Section 17 of the Judiciary Act of 1948.

xxxx

(emphases, italics, and underscoring supplied)

Thus, by law and by Supreme Court Rules, the CA is the court with the exclusive
original jurisdiction to entertain petitions for certiorari and prohibition against quasi-
judicial agencies. In short, GAMCA filed its remedy with the wrong court.

A.4.c The petitions for certiorari and prohibition against the DOH CDO letters
were premature challenges - they failed to comply with the requirement that there
be "no other plain, speedy and adequate remedy" and with the doctrine of
exhaustion of administrative remedies.

Second, the Regional Trial Court of Pasay City unduly disregarded the requirements
that there be "no other plain, speedy and adequate remedy at law" and the doctrine of
exhaustion of administrative remedies, when it gave due course to the certiorari and
prohibition petition against the DOH's CDO.

Under Chapter 8, Book IV of Executive Order (EO) No. 292,81 series of 1987, the DOH
Secretary "shall have supervision and control over the bureaus, offices, and agencies
under him"82 and "shall have authority over and responsibility for x x x operation" of the
Department.

Section 1, Chapter 1, Title I, Book III of EO No. 292 in relation with Article VII, Sections
1 and 17 of the Constitution,83 on the other hand, provides that the "President shall have
control of all the executive departments, bureaus, and offices."

These provisions both signify that remedies internal to the Executive Branch exist
before resorting to judicial remedies: GAMCA could ask the DOH Secretary to
reconsider or clarify its letter-order, after which it could appeal, should the ruling be
unfavorable, to the Office of the President.

Significantly, this was what GAMCA did in the past when the DOH issued Memorandum
Order No. 2008-0210 that prohibited the referral decking system. GAMCA then asked
for the DOH Secretary's reconsideration, and subsequently appealed the DOH's
unfavorable decision with the Office of the President. The OP then reversed
Memorandum Order No. 2008-0210 and allowed the referral decking system to
continue.

That GAMCA had earlier taken this course indicates that it was not unaware of the
administrative remedies available to it; it simply opted to disregard the doctrine of

1780
exhaustion of administrative remedies and the requirement that there be no other plain,
speedy, and adequate remedy in law when it immediately filed its petition
for certiorari with the RTC.

This blatant disregard of the Rule 65 requirements clearly places GAMCA's petition
outside the exceptions that we recognized in the past in relaxing strict compliance with
the exhaustion of administrative remedies requirement.

Jurisprudence84 shows that this Court never hesitated in the past in relaxing the
application of the rules of procedure to accommodate exceptional circumstances when
their strict application would result in injustice. These instances, founded as they are on
equitable considerations, do not include the undue disreiard of administrative remedies,
particularly when they are readily available.85

A.4.d. The petitions for certiorari and prohibition against the DOH CDO letters
should have been dismissed outright, as Rule 65 Petitions for Certiorari and
Prohibition are extraordinary remedies given due course only upon compliance
with the formal and substantive requirements.

Note, at this point, that Rule 65 petitions for certiorari and prohibition are discretionary
writs, and that the handling court possesses the authority to dismiss them outright for
failure to comply with the form and substance requirements. Section 6, Rule 65 of the
Rules of Court in this regard provides:
Section 6. Order to comment. - If the petition is sufficient in form and substance to
justify suclr process, the court shall issue an order requiring the respondent or
respondents to comment on the petition within ten (10) days from receipt of a copy
thereof. Such order shall be served on the respondents in such manner as the court
may direct together with a copy of the petition and any annexes thereto. (emphasis,
italics, and underscoring supplied)
Thus, even before requiring the DOH to comment, the RTC could have assessed the
petition for certiorari and prohibition for its compliance with the Rule 65 requirements. At
that point, the petition for certiorari and prohibition should have been dismissed outright,
for failing to comply with Section 1 and Section 4 of Rule 65. When the court instead
took cognizance of the petition, it acted on a matter outside its jurisdiction.

Consequently, the RTC's resulting judgment is void and carries no legal effect. The
decision exempting GAMCA from the application of the referral decking system should
equally have no legal effect.

Noncompliance with the Section 1, Rule 65 requirement that there be no other plain,
speedy, and adequate remedy in law, on the other hand, is more than just a pro-forma
requirement in the present case. Since the petitions for certiorari and prohibition
challenge a governmental act - i.e. action under the DOH CDO letters, as well as the
validity of the instruments under which these letters were issued - compliance with
Section 1, Rule 65 and the doctrine of exhaustion of administrative remedies that
judicial review requires is also mandatory. To recall a previous discussion, the

1781
exhaustion of administrative remedies is also an aspect of ripeness in deciding a
constitutional issue.

Thus, GAMCA's disregard of the Rules of Court not only renders the petition dismissible
for failure to first exhaust administrative remedies; the constitutional issues GAMCA
posed before the RTC were not also ripe for adjudication.

5. The Regional Trial Court erred in finding grave abuse of discretion on the part
of the DOH's issuance of the DOH CDO letters.

On the merits, we find that the RTC of Pasay reversibly erred in law when it held that
the DOH acted with grave abuse of discretion m prohibiting GAMCA from implementing
the referral decking system.

In exempting GAMCA from the referral decking system that RA No. 10022 prohibits, the
RTC of Pasay City noted that the regulation per se was not unconstitutional, but its
application to GAMCA would violate the principle of sovereign equality and
independence.

While we agree with the RTC's ultimate conclusion upholding the constitutionality of the
prohibition against the referral decking system under RA No. 10022, our agreement
proceeds from another reason; we disagree that the prohibition does not apply to
GAMCA and with the consequent ruling nullifying the DOH's CDO Letter.

A.5.a. The prohibition against the referral decking system under Section 16, RA
No. 10022, is a valid exercise of police power.

In its comment, GAMCA asserts that implementing the prohibition against the referral
decking system would amount to an undue taking of property that violates Article II,
Section 2 of the 1987 Constitution.

It submits that the Securities and Exchange Commission had in fact approved its
Articles of Incorporation and Bylaws that embody the referral decking system; thus, the
DOH cannot validly prohibit the implementation of this system.

GAMCA further claims that its members made substantial investments to upgrade their
facilities and equipment. From this perspective, the August 23, 2010 order constitutes
taking of property without due process of law as its implementation would deprive
GAMCA members of their property.

AMCOW responded to these claims with the argument that the DOH CDO letters
implementing RA No. 10022 are consistent with the State's exercise of the police power
to prescribe regulations to promote the health, safety, and general welfare of the
people. Public interest justifies the State's interference in health matters, since the
welfare of migrant workers is a legitimate public concern. The DOH thus merely
performed its duty of upholding the migrant workers' freedom to consult their chosen

1782
clinics for the conduct of health examinations.

We agree with AMCOW.

The State's police power86 is vast and plenary87 and the operation of a

business,88 especially one that is imbued with public interest (such as healthcare
services),89 falls within the scope of governmental exercise of police power through
regulation.

As defined, police power includes (1) the imposition of restraint on liberty or property,
(2) in order to foster the common good. 90 The exercise of police power involves the
"state authority to enact legislation that may interfere with personal liberty or property in
order to promote the general welfare." 91

By its very nature, the exercise of the State's police power limits individual rights and
liberties, and subjects them to the "far more overriding demands and requirements of
the greater number."92 Though vast and plenary, this State power also carries
limitations, specifically, it may not be exercised arbitrarily or unreasonably. Otherwise, it
defeats the purpose for which it is exercised, that is, the advancement of the public
good.93

To be considered reasonable, the government's exercise of police power must satisfy

the "valid object and valid means" method of analysis: first, the interest of the public
generally, as distinguished from those of a particular class, requires interference;
and second, the means employed are reasonably necessary to attain the objective
sought and not unduly oppressive upon individuals. 94

These two elements of reasonableness are undeniably present in Section 16 of RA No.

10022. The prohibition against the referral decking system is consistent with the State's
exercise of the police power to prescribe regulations to promote the health, safety, and
general welfare of the people. Public interest demands State interference on health
matters, since the welfare of migrant workers is a legitimate public concern.

We note that RA No. 10022 expressly reflects the declared State policies to "uphold the
dignity of its citizens whether in the country or overseas, in general, and Filipino migrant
workers," and to "afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities
for all. Towards this end, the State shall provide adequate and timely social, economic
and legal services to Filipino migrant workers." The prohibition against the referral
decking system in Section 16 of RA No. 10022 is an expression and implementation of
these state policies.

The guarantee under Section 16 for OFWs to be given the option to choose a quality
healthcare service provider as expressed in Section 16 (c) 95 of RA No. 10022 is
guaranteed by the prohibition against the decking practice and against monopoly
practices in OFW health examinations.96

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Section 16 likewise requires employers to accept health examinations from any DOH-
accredited health facility; a refusal could lead to their temporary disqualification under
pertinent rules to be formulated by the Philippine Overseas Employment Authority
(POEA).97

These rules are part of the larger legal framework to ensure the Overseas Filipino
Workers' (OFW) access to quality healthcare services, and to curb existing practices
that limit their choices to specific clinics and facilities.

Separately from the Section 16 prohibition against the referral decking system, RA No.
10022 also prohibits and penalizes the imposition of a compulsory exclusive
arrangement requiring OFWs to undergo health examinations only from specifically
designated medical clinics, institutions, entities or persons. Section 5, in relation to
Section 6 of RA No. 10022, penalizes compulsory, exclusive arrangements 98 by
imprisonment and fine and by the automatic revocation of the participating medical
clinic's license.

The DOH's role under this framework is to regulate the activities and operations of all
clinics conducting health examinations on Filipino migrant workers as a requirement for
their overseas employment. The DOH is tasked to ensure that:
(c.3) No group or groups of medical clinics shall have a monopoly of exclusively
conducting health examinations on migrant workers for certain receiving countries;

(c.4) Every Filipino migrant worker shall have the freedom to choose any of the DOH-
accredited or DOH-operated clinics that will conduct his/her health examinations and
that his or her rights as a patient are respected. The decking practice, which requires an
overseas Filipino worker to go first to an office for registration and then farmed out to a
medical clinic located elsewhere, shall not be allowed; 99
While Section 16 of RA No. 10022 does not specifically define the consequences of
violating the prohibition against the referral decking system, Republic Act No. 4226
(Hospital Licensure Act), which governs the licensure and regulation of hospitals and
health facilities, authorizes the DOH to suspend, revoke, or refuse to renew the license
of hospitals and clinics violating the law. 100

These consequences cannot but apply to the violation of the prohibition against the
referral decking system under RA No. 10022. If, under the law, the DOH can suspend,
revoke, or refuse to renew the license of these hospitals upon the finding that they
violated any provision of law (whether those found in RA No. 4226 or in RA No. 10022),
it follows- as a necessarily included lesser power - that the DOH can likewise order
these clinics and their association to cease and desist from practices that the law
deems to be undesirable.

A.5.b. The DOH did not gravely abuse its discretion in issuing the assailed DOH
CDO letters.

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As discussed above, the letter-order implementing the prohibition against the referral
decking system is quasi-judicial in nature. This characteristic requires that procedural
due process be observed - that is, that the clinics concerned be given the opportunity to
be heard before the standard found in the law can be applied to them.

Thus, prior to the issuance of the disputed CDO letter, the DOH should have given
GAMCA the opportunity to be heard on whether the prohibition applies to it. Lest this
opportunity to be heard be misunderstood, this DOH obligation raises an issue different
from the question of whether Congress can, under the exercise of police power, prohibit
the referral decking system; this latter issue lies outside the scope of the DOH to pass
upon. The required hearing before the DOH relates solely to whether it properly
implemented, based on the given standards under the law, the prohibition that
Congress decreed under RA No. 10022.

Under normal circumstances, the issuance of a CDO without a prior hearing would
violate GAMCA's procedural due process rights, and would amount to more than a legal
error, i.e., an error equivalent to action without jurisdiction. Rendering a decision quasi-
judicial in nature without providing the opportunity to be heard amounts to a grave
abuse of discretion that divests a quasi-judicial agency of its jurisdiction.

Factual circumstances unique to the present case, however, lead us to conclude that
while it was an error of law for the DOH to issue a CDO without complying with the
requirements of procedural due process, its action did not amount to a grave abuse of
discretion.

Grave abuse of discretion amounts to more than an error of law; it refers to an act that
is so capricious, arbitrary, and whimsical that it amounts to a clear evasion of a positive
duty or a virtual refusal to perform a duty enjoined by law, as where the power is
exercised in an arbitrary and despotic manner because of passion or hostility. 101

Prior to the issuance of its CDO Letter, the DOH had more than sufficient basis to
determine that GAMCA practices the prohibited referral decking system under RA No.
10022. Notably, the DOH had earlier allowed and recognized the referral decking
system that GAMCA practiced through AO 5-01. This recognition was made with
GAMCA's practice in mind. The subsequent administrative orders and department
memorandum suspending and terminating the referral decking system, respectively, all
pertain to the practice that the DOH had authorized under AO 5-01. Even the subject
matter of these issuances do not just pertain to any other referral decking system, but to
the "GAMCA referral decking system."

GAMCA likewise had more than several opportunities to contest the suspension and
eventual revocation of the referral decking system initially pe1mitted under AO 5-01. Its
appeal even reached the Office of the President, which overturned the DOH
Memorandum Order terminating the referral decking system.

That the referral decking system had been subsequently prohibited by law shows the

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intent of Congress to prevent and prohibit the practice that GAMCA initiated and which
the President had allowed. The President's duty under our political system is to
implement the law; hence, when Congress subsequently prohibited the practice that
GAMCA initiated, the Executive - including the President -has no choice but to
implement it.

Based on these circumstances, while the DOH erred when it issued its CDO letters
without first giving GAMCA the opportunity to prove whether the practice conducted by
GAMCA is the same practice prohibited under RA No. 10022, the DOH conclusion to so
act, in our view, did not constitute grave abuse of discretion that would have divested it
of jurisdiction.

We note that the DOH had sufficient basis when it determined that the referral decking
system prohibited under RA No. 10022 was the same decking system practiced by
GAMCA. To reiterate, the referral decking system was not something new; it was an old
system that GAMCA practiced and was known to all in its scope and operating details.
That GAMCA had previously questioned the DOH prohibition and had been given ample
opportunity to be heard when it filed an appeal before the OP, negate the conclusion
that GAMCA had been aggrieved by precipitate and unfair DOH action.

To be sure, these factual circumstances do not make the CDO letter compliant with
procedural due process. They mitigate, however, the error committed and render it less
than the capricious, arbitrary, and patent refusal to comply with a positive legal duty that
characterizes an act committed with grave abuse of discretion.

The Court furthermore, in several instances, 102 has recognized that an administrative

agency may issue an ex parte cease and desist order, where vital public interests
outweigh the need for procedural due process." In these instances, the Court noted that
the affected establishment may contest the ex parte order, upon which the
administrative agency concerned must conduct a hearing and allow the establishment
to be heard. While jurisprudence has so far used the "vital public interests" standard to
pollution cases, it had not been a grave abuse of discretion on the part of the DOH to
consider that GAMCA's referral decking practice falls within this category. The DOH has
long made the factual finding that the referral decking system hinders our Filipino
seafarers' access to quality and affordable healthcare in its A.O. No. 106, series of
2002.

These circumstances further mitigate whatever legal error the DOH has committed and
render the conclusion that grave abuse of discretion had taken place misplaced.

Since the writs of certiorari and prohibition do not issue against legal errors, but to acts
of grave abuse of discretion, the RTC erred in issuing these writs against the DOH CDO
letters.

6. The prohibition against the referral decking system against GAMCA does not
violate the principle of sovereign equality and independence.

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The RTC based its decision to grant the writs of certiorari and prohibition against the
DOH letter-order on the principle of sovereign equality and independence; applying the
referral decking system prohibition against GAMCA violates this principle.

The RTC reasoned out that the prohibition against the referral decking system under
Section 16 of RA No. 10022 must be interpreted to apply only to clinics conducting
health examinations on migrant workers bound for countries that do not require the
referral decking system for the issuance of visas to job applicants.

The RTC observed, too, that the refer al decking system is part of the application
procedure in obtaining visas to enter the GCC States, a procedure made in the exercise
of the sovereign power of the GCC States to protect their nationals from health hazards,
and of their diplomatic power to regulate and screen entrants to their territories.

It also reasoned out that under the principle of sovereign equality and independence of
States, the Philippines cannot interfere with this system and in fact must respect the
visa-granting procedures of foreign states in the same way that they respect our
immigration procedures. Moreover, to restrain GAMCA which is a mere adjunct of HMC
(an agent of GCC States) is to restrain the GCC States themselves.

AMCOW contests the RTC's conclusion, arguing that the principles of sovereign
equality and independence of States do not apply to the present case. According to
AMCOW, the subject matter of this case pertains to a domestic concern as the law and
the regulations that GAMCA assails relate to the operation of medical clinics in the
Philippines.

It points out that the Philippines gave GAMCA and its members the privilege of
conducting their businesses domestically; hence, their operations are governed by
Philippine laws, specifically by RA No. 10022 which serves as one of the limitations on
the privilege granted to them. GAMCA's right to engage in business should yield to the
State's exercise of police power. In legal contemplation, therefore, the DOH CDO letters
did not prejudice GAMCA's right to engage in business; nor did they hamper the
GAMCA members' business operations.

AMCOW further insists that the August 23, 2010 and November 2, 2010 orders are
consistent with the State's exercise of the police power to prescribe regulations to
promote the health, safety, and general welfare of the people. Public interest demands
State interference on health matters, since the welfare of migrant workers is a legitimate
public concern. The DOH thus merely performed its duty of upholding the migrant
workers' freedom to choose any of its accredited or operated clinics that will conduct
health examinations.

The DOH, for its part, adds that the implementation of RA No. 10022 cannot be
defeated by agreements entered into by GAMCA with the GCC States. The GCC
States, the DOH points out, are not empowered to determine the Philippines' courses of

1787
action with respect to the operation, within Philippine territory, of medical clinics; the
conduct of health examinati