Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 189496               February 1, 2012

D.M. FERRER & ASSOCIATES CORPORATION, Petitioner,

vs.
UNIVERSITY OF SANTO TOMAS, Respondent.

DECISION

SERENO, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court. Petitioner assails
the Court of Appeals (CA) Resolution1 promulgated on 26 June 2009 dismissing the former’s Petition for
Certiorari, and the Resolution2 dated 3 September 2009 denying the subsequent Motion for Reconsideration.

The facts are undisputed:

On 25 November 2005, petitioner and University of Santo Tomas Hospital, Inc. (USTHI) entered into a Project
Management Contract for the renovation of the 4th and 5th floors of the Clinical Division Building, Nurse Call
Room and Medical Records, Medical Arts Tower, Diagnostic Treatment Building and Pay Division Building.

On various dates, petitioner demanded from USTHI the payment of the construction costs amounting to
₱17,558,479.39. However, on 16 April 2008, the University of Santo Tomas (UST), through its rector, Fr.
Rolando V. Dela Rosa, wrote a letter informing petitioner that its claim for payment had been denied, because
the Project Management Contract was without the required prior approval of the board of trustees. Thus, on 23
May 2008, petitioner filed a Complaint 3 for sum of money, breach of contract and damages against herein
respondent UST and USTHI when the latter failed to pay petitioner despite repeated demands.

In impleading respondent UST, petitioner alleged that the former took complete control over the business and
operation of USTHI, as well as the completion of the construction project.

It also pointed out that the Articles of Incorporation of USTHI provided that, upon dissolution, all of the latter’s
assets shall be transferred without any consideration and shall inure to the benefit of UST. It appears that
USTHI passed a Resolution on 10 January 2008 dissolving the corporation by shortening its corporate term of
existence from 16 March 2057 to 31 May 2008.

Finally, petitioner alleged that respondent, through its rector, Fr. Dela Rosa, O.P., verbally assured the former
of the payment of USTHI’s outstanding obligations.

Thus, petitioner posited in part that UST may be impleaded in the case under the doctrine of "piercing the
corporate veil," wherein respondent UST and USTHI would be considered to be acting as one corporate entity,
and UST may be held liable for the alleged obligations due to petitioner.

Subsequently, respondent filed its Motion to Dismiss dated 12 June 2008. 4 It alleged that the Complaint failed
to state a cause of action, and that the claim was unenforceable under the provisions of the Statute of Frauds.

On 4 August 2008, Judge Bernelito R. Fernandez of Branch 97 of the Regional Trial Court (RTC) of Quezon
City granted the motion and dismissed the Complaint insofar as respondent UST was concerned.5
1
First, basing its findings on the documents submitted in support of the Complaint, the RTC held that
respondent was not a real party-in-interest, and that it was not privy to the contract executed between USTHI
and petitioner. Second, the court pointed out that the alleged verbal assurances of Fr. Dela Rosa should have
been in writing to make these assurances binding and demandable.

Petitioner sought a reconsideration of the RTC Order and asserted that only allegations of the Complaint, and
not the attached documents, should have been the basis of the trial court’s ruling, consistent with the rule that
the cause of action can be determined only from the facts alleged in the Complaint. It also insisted that the
Statute of Frauds was inapplicable, since USTHI’s obligation had already been partially executed.6

On 5 October 2008, petitioner filed an Urgent Motion for Voluntary Inhibition 7 on the ground that Judge
Fernandez was an alumnus of respondent UST.

Thereafter, Judge Fernandez issued an Order 8 inhibiting himself from the case, which was consequently re-
raffled to Branch 76 presided by Judge Alexander S. Balut.

On 16 April 2009, Judge Balut dismissed the Motion for Reconsideration filed by petitioner, 9 upholding the
initial findings of Judge Fernandez declaring that respondent UST was not a real party-in-interest, and that Fr.
Dela Rosa’s alleged assurances of payment were unenforceable.

Subsequently, petitioner filed a Petition for Certiorari under Rule 65 with the CA. 10 Petitioner alleged that the
trial court committed grave abuse of discretion when it granted respondent’s Motion to Dismiss on the basis of
the documents submitted in support of the Complaint, and not solely on the allegations stated therein.
Petitioner pointed out that the allegations raised questions of fact and law, which should have been threshed
out during trial, when both parties would have been given the chance to present evidence supporting their
respective allegations.

However, on 26 June 2009, the CA issued the assailed Resolution and dismissed the Petition on the ground
that a petition under Rule 65 is the wrong remedy to question the RTC’s Order that completely disposes of the
case. Instead, petitioner should have availed itself of an appeal under Rule 41 of the Rules of Court.

Petitioner moved for a reconsideration of the Resolution. 11 It pointed out that the present case falls under the
enumerated exceptions of Rule 41, in particular, while the main case is still pending, no appeal may be made
from 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.

On 3 September 2009, the CA denied the Motion for Reconsideration through its second assailed Resolution,
holding that the motion raised no new issues or substantial grounds that would merit the reconsideration of the
court.

Hence this Petition.

Petitioner raises two grounds in the present Petition: first, whether the CA erred in dismissing the Petition for
Certiorari by failing to consider the exception in Sec. 1(g) of Rule 41 of the Rules of Court; second, whether the
trial court committed grave abuse of discretion when it held that the Complaint stated no cause of action.

We rule for petitioner.

Respondent insists that petitioner should have first filed a notice of appeal before the RTC, and the appeal
should have been subsequently denied before recourse to the CA was made. This contention holds no water.

2
In Jan-Dec Construction Corp. v. Court of Appeals, 12 we held that a petition for certiorari under Rule 65 is the
proper remedy to question the dismissal of an action against one of the parties while the main case is still
pending. This is the general rule in accordance with Rule 41, Sec. 1(g). In that case, ruled thus:

Evidently, the CA erred in dismissing petitioner's petition for certiorari from the Order of the RTC dismissing the
complaint against respondent. While 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, it also provides several
exceptions to the rule, to wit: (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; and (h) an order dismissing an action without prejudice. In the foregoing
instances, the aggrieved party may file an appropriate special civil action for certiorari under Rule 65.

In the present case, the Order of the RTC dismissing the complaint against respondent is a final order
because it terminates the proceedings against respondent but it falls within exception (g) of the Rule
since the case involves two defendants, Intermodal and herein respondent and the complaint against
Intermodal is still pending. Thus, the remedy of a special civil action for certiorari availed of by
petitioner before the CA was proper and the CA erred in dismissing the petition. (Emphasis supplied)

Clearly, in the case at bar, the CA also erred when it dismissed the Petition filed before it.

Anent the second issue, we also agree with petitioner that the Complaint states a cause of action against
respondent UST. In Abacan v. Northwestern University, Inc.,13 we said:

It is settled that the existence of a cause of action is determined by the allegations in the complaint.1âwphi1 In
resolving a motion to dismiss based on the failure to state a cause of action, only the facts alleged in the
complaint must be 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. Indeed, the elementary test for failure to state a cause of
action is whether the complaint alleges facts which if true would justify the relief demanded. Only ultimate
facts and not legal conclusions or evidentiary facts, which should not be alleged in the complaint in
the first place, are considered for purposes of applying the test. (Emphasis supplied)

While it is admitted that respondent UST was not a party to the contract, petitioner posits that the former is
nevertheless liable for the construction costs. In support of its position, petitioner alleged that (1) UST and
USTHI are one and the same corporation; (2) UST stands to benefit from the assets of USTHI by virtue of the
latter’s Articles of Incorporation; (3) respondent controls the business of USTHI; and (4) UST’s officials have
performed acts that may be construed as an acknowledgement of respondent’s liability to petitioner.

Obviously, these issues would have been best resolved during trial. The RTC therefore committed grave abuse
of discretion when it dismissed the case against respondent for lack of cause of action. The trial court relied on
the contract executed between petitioner and USTHI, when the court should have instead considered merely
the allegations stated in the Complaint.

WHEREFORE, in view of the foregoing, the Petition is GRANTED. Branch 76 of the Regional Trial Court of
Quezon City is hereby ordered to REINSTATE respondent University of Santo Tomas as a defendant in C.C.
No. 0862635.

SO ORDERED.

3
MARIA LOURDES P. A. SERENO
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ARTURO D. BRION DIOSDADO M. PERALTA*

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that
the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

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.

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.
4
 Antecedents

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 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.

5
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.

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

6
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 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.

7
 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 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.
8
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 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.
9
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 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

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
10
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 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
11
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.

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:
12
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 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.

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:

(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

13
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.

Corona, C.J., (Chairperson), Leonardo de Castro, Del Castillo, and Villarama, Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 71479 October 18, 1990
MELLON BANK, N.A., petitioner,
vs.
HON. CELSO L. MAGSINO, in his capacity as Presiding Judge of Branch CLIX of the Regional Trial
Court at Pasig; MELCHOR JAVIER, JR., VICTORIA JAVIER; HEIRS OF HONORIO POBLADOR, JR.,
namely: Elsa Alunan Poblador, Honorio Poblador III, Rafael Poblador, Manuel Poblador, Ma. Regina
Poblador, Ma. Concepcion Poblador & Ma. Dolores Poblador; F.C. HAGEDORN & CO., INC.; DOMINGO
JHOCSON, JR.; JOSE MARQUEZ; ROBERTO GARINO; ELNOR INVESTMENT CO., INC.; PARAMOUNT
FINANCE CORPORATION; RAFAEL CABALLERO; and TRI-ARC INVESTMENT and MANAGEMENT CO.,
INC. respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.
Jose Buendia for respondent Jose Marquez.
Raul L. Cornea & Associates for Jhocson and Garino.
Jesus L. Santos and Conrado Valera for Tri-Arc Investment, etc.
Bernardo D. Calderon for respondent ELNOR and Rafael Caballero.
Nazareno, Azada, Sabado & Dizon for Movants.
Balgos & Perez for Paramount Finance Corporation.
Meer, Meer & Meer for Hagedorn.
Alberto Villareza for F.C. Hagedorn & Co.

FERNAN, C.J.:

The issue in the instant special civil action of certiorari is whether or not, by virtue of the principle of election of
remedies, an action filed in California, U.S.A., to recover real property located therein and to constitute a
constructive trust on said property precludes the filing in our jurisdiction of an action to recover the purchase
price of said real property.

On May 27, 1977, Dolores Ventosa requested the transfer of $1,000 from the First National Bank of
Moundsville, West Virginia, U.S.A. to Victoria Javier in Manila through the Prudential Bank. Accordingly, the
First National Bank requested the petitioner, Mellon Bank, to effect the transfer. Unfortunately the wire sent by
Mellon Bank to Manufacturers Hanover Bank, a correspondent of Prudential Bank, indicated the amount

14
transferred as "US$1,000,000.00" instead of US$1,000.00. Hence Manufacturers Hanover Bank transferred
one million dollars less bank charges of $6.30 to the Prudential Bank for the account of Victoria Javier.

On June 3, 1977, Javier opened a new dollar account (No. 343) in the Prudential Bank and deposited
$999,943.70. Immediately their, Victoria Javier and her husband, Melchor Javier, Jr., made withdrawals from
the account, deposited them in several banks only to withdraw them later in an apparent plan to conceal,
"launder" and dissipate the erroneously sent amount.

On June 14, 1977, Javier withdrew $475,000 from account No. 343 and converted it into eight cashier's checks
made out to the following: (a) F.C. Hagedorn & Co., Inc., two cheeks for the total amount of P1,000,000; (b)
Elnor Investment Co., Inc., two checks for P1,000,000; (c) Paramount Finance Corporation, two checks for
P1,000,000; and (d) M. Javier, Jr., two checks for P496,000. The first six checks were delivered to Jose
Marquez and Honorio Poblador, Jr.

It appears that Melchor Javier, Jr. had requested Jose Marquez, a realtor, to look for properties for sale in the
United States. Marquez offered a 160-acre lot in the Mojave desert in California City which was owned by
Honorio Poblador, Jr. Javier, without having seen the property, agreed to buy it for P3,236,800 (US$437,405)
although it was actually appraised at around $38,500. Consequently, as Poblador's agent, Marquez executed
in Makati a deed of absolute sale in favor of the Javiers and had the document notarized in Manila before an
associate of Poblador. Marquez executed another deed of sale indicating receipt of the purchase price and
sent the deed to the Kern County Registrar in California for registration.

Inasmuch as Poblador had requested that the purchase price should not be paid directly to him, the payment
of P3,000,000 was coursed through Elnor Investment Co., Inc., allegedly Poblador's personal holding
company; Paramount Finance, allegedly headed by Poblador's brother, and F.C. Hagedorn, allegedly a stock
brokerage with extensive dealings with Poblador. The payment was made through the aforementioned six
cashier's checks while the balance of P236,000 was paid in cash by Javier who did not even ask for a receipt.

The two checks totalling P1,000,000 was delivered by Poblador to F.C. Hagedorn with specific instructions to
purchase Atlas, SMC and Philex shares. The four checks for P2,000,000 with Elnor Investment and Paramount
Finance as payees were delivered to the latter to purchase "bearer" notes.

Meanwhile, in July, 1977, Mellon Bank filed a complaint docketed as No. 148056 in the Superior Court of
California, County of Kern, against Melchor Javier, Jane Doe Javier, Honorio Poblador, Jrn, and Does I
through V. In its first amended complaint to impose constructive trust dated July 14, 1977, 1 Mellon Bank
alleged that it had mistakenly and inadvertently cause the transfer of the sum of $999,000.00 to Jane Doe
Javier; that it believes that the defendants had withdrawn said funds; that "the defendants and each of them
have used a portion of said funds to purchase real property located in Kern County, California"; and that
because of defendants' knowledge of Mellon Bank's mistake and inadvertence and their use of the funds to
purchase the property, they and "each of them are involuntary or constructive trustees of the real property and
of any profits therefrom, with a duty to convey the same to plaintiff forthwith." It prayed that the defendants and
each of them be declared as holders of the property in trust for the plaintiff; that defendants be compelled to
transfer legal title and possession of the property to the plaintiff; that defendants be made to pay the costs of
the suit, and that other reliefs be granted them.

On July 29, 1977, Mellon Bank also filed in the Court of First Instance of Rizal, Branch X, a complaint against
the Javier spouses, Honorio Poblador, Jr., Domingo L. Jhocson, Jr., Jose Marquez, Roberto Gariño, Elnor
Investment Co., Inc., F.C. Hagedorn & Co., Inc. and Paramount Finance Corporation. After its amendment,
Rafael Caballero and Tri-Arc Investment & Management Company, Inc. were also named defendants. 2

The amended and supplemental complaint alleged the facts set forth above and added that Roberto Gariño,
chief accountant of Prudential Bank, and who was the reference of Mrs. Ventosa's dollar remittances to
Victoria Javier, immediately informed the Javiers of the receipt of US$1,000,000.00; that knowing the financial

15
circumstances of Mrs. Ventosa and the fact that a mistake had been committed, the Javiers, with undue haste,
took unlawful advantage of the mistake, withdrew the whole amount and transferred the same to a "343 dollar
account"; that, aided and abetted by Poblador and Domingo L. Jhocson, the Javiers "compounded and
completed the conversion" of the funds by withdrawing from the account dollars or pesos equivalent to US
$975,000; that by force of law, the Javiers had been constituted trustees of an implied trust for the benefit of
Mellon Bank with a clear duty to return to said bank the moneys mistakenly paid to them; that, upon request of
Mellon Bank and Manufacturers Hanover Bank, Prudential Bank informed the Javiers of the erroneous
transmittal of one million dollars first orally and later by letter-demand; that conferences between the
representatives of the Javiers, led by Jhocson and Poblador, in the latter's capacity as legal and financial
counsel, and representatives of Mellon Bank, proved futile as the Javiers claimed that most of the moneys had
been irretrievably spent; that the Javiers could only return the amount if the Mellon Bank should agree to make
an absolute quitclaim and waiver of future rights against them, and that in a scheme to conceal and dissipate
the funds, through the active participation of Jose Marquez, the Javiers bought the California property of
Poblador.

It further alleged that trust fund moneys totalling P3,000,000.00 were made payable to Hagedorn Paramount
and Elnor; that Hagedorn on instructions of Poblador, purchased shares of stock at a stock exchange for
P1,000,000.00 but later, it hastily sold said shares at a loss of approximately P150,000.00 to the prejudice of
the plaintiff; that proceeds of the sale were deposited by Hagedorn in the name of Poblador and/or the law
office of Poblador, Nazareno, Azada, Tomacruz and Paredes; that dividends declared on the shares were
delivered by Hagedorn to Caballero after the complaint had been filed and thereafter, Caballero deposited the
dividends in his personal account; that after receiving the P1,000,000.00 trust money, Paramount issued
promissory notes upon maturity of which Paramount released the amount to unknown persons; that Elnor also
invested P1,000,000.00 in Paramount for which the latter also issued promissory notes; that after the filing of
the complaint, counsel for plaintiff requested Paramount not to release the amount after maturity; that in
evident bad faith, Elnor transferred the non-negotiable Paramount promissory notes to Tri-Arc. that when the
notes matured, Paramount delivered the proceeds of P1,000,000.00 to Tri-Arc; that Poblador knew or should
have known that the attorney's fees he received from the Javiers came from the trust funds; and that despite
formal demands even after the filing of the complaint, the defendants refused to return the trust funds which
they continued concealing and dissipating.

It prayed that: (a) the Javiers, Poblador, Elnor, Jhocson and Gariño be ordered to account for and pay jointly
and severally unto the plaintiff US$999,000.00 plus increments, additions, fruits and interests earned by the
funds from receipt thereof until fully paid; (b) the other defendants be ordered to account for and pay unto the
plaintiff jointly and severally with the Javiers to the extent of the amounts which each of them may have
received directly or indirectly from the US$999,000.00 plus increments, additions, fruits and interests; (c)
Marquez be held jointly and severally liable with Poblador for the amount received by the latter for the sale of
the 160-acre lot in California City; and (d) defendants be likewise held liable jointly and severally for attomey's
fees and litigation expenses plus exemplary damages.

In due course, the defendants filed their answers and hearing of the case ensued. In his testimony, Jose
Marquez stated that Prudential Bank and Trust Company checks Nos. 2530 and 2531 in the respective
amounts of P100,000 and P900,000 payable to F. C. Hagedorn were delivered to him by Melchor Javier, Jr. as
partial consideration for the sale of Poblador's property in California. After receiving the checks, Hagedorn
purchased shares of Atlas Mining, Philex, Marcopper and San Miguel Corporation for Account No. 3000,
which, according to Fred Hagedorn belonged to the law office of Poblador. 3

F.C. Hagedorn & Co., Inc. then sold the shares for P874,490.75 as evidenced by HSBC check No. 339736 for
P400,000 and HSBC check No. 339737 for P474,490.75 payable to "cash". Mellon Bank traced these checks
to Account 2825-1 of the Philippine Veterans Bank in the name of Cipriano Azada, Poblador's law partner and
counsel to the Javiers. 4

An employee of the Philippine Veterans Bank thereafter introduced the specimen signature cards for Account
No. 2825-1 thereby confirming Azada's ownership of the account. Defendants objected to this testimony on the
16
grounds of Azada's absence, the confidentiality of the bank account, and the best evidence rule. The court
overruled the objection. Another employee of the Philippine Veterans Bank then presented the ledger card for
Account No. 2825-1, a check deposit slip and a daily report of returned items. The defendants objected but
they were again overruled by the court.

Mellon Bank then subpoenaed Erlinda Baylosis of the Philippine Veterans Bank to show that Azada deposited
HSBC checks No. 339736 and 339737 amounting to P874,490.75 in his personal current account with said
bank. It also subpoenaed Pilologo Red, Jr. of Hongkong & Shanghai Banking Corporation to prove that said
amount was returned by Azada to Hagedorn.

The testimonies of these witnesses were objected to by the defense on the grounds of res inter alios acta,
immateriality, irrelevancy and confidentiality. To resolve the matter, the court ordered the parties to submit
memoranda. The defendants' objections were also discussed at the hearing on July 13, 1982. For the first
time, Poblador's counsel raised the matter of "election of remedies." 5

At the July 20, 1982 hearing, the lower court, then presided by Judge Eficio Acosta, conditionally allowed the
testimonies of Baylosis and Red. Baylosis afffirmed that Azada deposited checks Nos. 339736 and 339737 in
the total amount of P874,490.75 in his personal account with the Philippine Veterans Bank but almost
simultaneously, Azada issued his PVB check for the same amount in favor of Hagedorn Consequently,
Azada's check initially bounced. For his part, Red testified that Azada's check for P874,490.75 was received by
the Hongkong & Shanghai Banking Corporation and credited to the account of Hagedorn .

The defendants then moved to strike off the testimonies of Baylosis and Red from the record. Defendant
Paramount Finance Corporation, which is not a party to the California case, thereafter filed its memorandum
raising the matter of "election of remedies". It averred that inasmuch as the Mellon Bank had filed in California
an action to impose constructive trust on the California property and to recover the same, Mellon Bank can no
longer try to regain the purchase price of the same property through Civil Case No. 26899. The other
defendants adopted Paramount's stand.

After Mellon Bank filed its reply to the memorandum of Paramount, on September 10, 1982, Judge Acosta
issued a resolution ordering that the testimonies of Baylosis and Red and the documents they testified on,
which were conditionally allowed, be stricken from the records. 6 Judge Acosta explained:

After a judicious evaluation of the arguments of the parties the Court is of the view that in cases
where money held in trust was diverted by the trustee, under the "rule of trust pursuit" the
beneficiary "may elect whether to accept the trust estate in its new form or hold the trustee
responsible for it in its original condition" (Lathrop vs. Hampton, 31 Cal. 17; Zodos vs. Marefalos
48 Idaho 291; Bahle vs. Hasselbrach 64 NW Eq. 334, 51 Sections 508-76 Am Jur. 2d p. 475),
and that "an election to pursue one remedy waives and bars pursuit of any inconsistent
remedy"(76 Am Jur. 2d S253). The instant complaint among others is for the recovery of the
purchase price of the Kern property as held in trust for the plaintiff while in the California case
the plaintiff maintains that the Kern property is held in trust for the plaintiff, which positions are
inconsistent with each other. Neither can the plaintiff now abandon his complaint for the
recovery of the Kern property and pursue his complaint for the recovery of the purchase price of
said property for "if he has first sought to follow the res, the plaintiff cannot thereafter hold the
trustee personally responsible" and "when once there has been an election to do one of two
things, you cannot retract it and do the other thing. The election once made is finally made."
(Fowler vs. Bowvery Savings Bank 113 N.Y. 450, 21 N.E. 172, 4 LRA 145, 10 Am. S.R. 479. 2
Silv. 280, 23, Abb. N. Cos. 133065 C. J. p. 980 Note 32).

The fact that the California case has been stayed pending determination of the instant case only
means that should this case be dismissed, the California case can proceed to its final
determination.

17
 Furthermore, when the plaintiff filed the California case for the transfer of legal title and
possession of the Kern property to the plaintiff it in effect ratified the transaction for "by taking
the proceeds or product of a wrongful transfer of trust property or funds, the beneficiary ratifies
the transaction" (Board of Commissioner vs. Strawn [CA6 Ohio] 157 F. 49, 76 Am Jur. 2d
Section 253). Consequently the purchase price of the California property received by defendant
Poblador from Javier is no longer the proper subject matter of litigation and the movement and
disposition of the purchase price is therefore within the scope of the absolutely confidential
nature of bank deposits as provided by Sec. 2, R.A. 1405 as amended by PD No. 1792.

Mellon Bank moved for reconsideration, alleging that said order prevented the presentation of evidence on the
purchase price of the California property; that the California case cannot be considered a waiver of the pursuit
of the purchase price as even if said case was filed fifteen days prior to the filing of the original complaint in this
case, except for the Javiers, no other defendants raised in their answers the affirmative defense of the filing of
the California case; that after the amendment of the complaint, none of the defendants raised the matter of
"election of remedies" in their answers; that realizing this procedural error, Paramount sought the amendment
of its answer to reflect the "defence" of "election of remedies"; that, disregarding its previous orders allowing
evidence and testimonies on Account No. 2825-1, the court made a turnabout and ruled that the testimonies
on said account were irrelevant and confidential under Republic Act No. 1405; that Philippine law and
jurisprudence does not require the election of remedies for they favor availment of all remedies; that even
United States jurisprudence frowns upon election of remedies if it will lead to an inequitable result; that, as held
by this Court in Radiowealth vs. Javier, 7 there can be no binding election of remedies before the decision on
the merits is had; that until Mellon Bank gets full recovery of the trust moneys, any contention of election of
remedy is premature, and that, the purchase price being the subject of litigation, inquiring into its movement,
including its deposit in banks, is allowed under Republic Act No. 1405.

Defendants filed their respective comments and oppositions to the motion for reconsideration. In its reply, the
Mellon Bank presented proof to the effect that in the California case, defendants filed motions to stake out the
cross-complaint of Mellon Bank, for summary judgment and to stay or dismiss the action on the ground of
inconvenient forum but the first two motions and the motion to dismiss were denied "without prejudice to renew
upon determination of the Philippine action." The motion to stay proceedings was "granted until determination
of the Philippine action." 8

On October 28, 1983, the lower court, through Judge Acosta, denied the motion for reconsideration and
ordered the continuation of the hearing (Rollo, p. 182). The plaintiff filed a motion for the reconsideration of
both the September 10, 1982 and October 28, 1983 orders. After the parties had filed comments, opposition
and reply, the court, through Judge Celso L. Magsino, denied Mellon Bank's second motion for reconsideration
on the ground that it was "prescribed by the 1983 Interim Rules of Court" in an order dated July 9, 1985. 9

The court ruled that the determination of the relevancy of the testimonies of Baylosis and Red was "premised
directly and principally" on whether or not Mellon Bank could still recover the purchase price of the California
property notwithstanding the filing of the case in California to recover title and possession of the said property.
After quoting the resolution of September 10, 1982, the Court ruled that it was a "final order or a definitive
judgment with respect to the claim of plaintiff for the recovery" of the purchase price of the California property.
It stated:

The adjudication in the Order of September 10, 1982 and the Order of October 28, 1983, which
has the effect of declaring that plaintiff has no cause of action against the defendants for the
recovery of the proceeds of the sale of Kern property in the amount of Three Million Three
Hundred Fifty Thousand Pesos (P3,500,000.00 [sic]) for having filed a complaint for the
recovery of the Kern property in the Superior Court of California, County of Kern is a final and
definitive disposition of the claim of the plaintiff to recover in the instant action the proceeds of
sale of said property against the defendants. The issue of "election of remedy" by the plaintiff
was lengthily and thoroughly discussed and argued by the parties before the rendition of the
resolution of September 10, 1982, and in the motion for reconsideration and oppositions thereto
18
 before its resolution in the Order of October 28, 1983. Such issue is a substantive one as it
refers to the existence of plaintiffs cause of action to recover the proceeds of the sale of the
Kern property in this action, and that issue was presented to the Court as if a motion to dismiss
or a preliminary hearing of an affirmative defense on the ground that plaintiff has no cause of
action, and was resolved against plaintiff in the Order of September 10, 1982, after a full
hearing of all the parties. Said Order of September 10, 1982 has the effect of putting an end to
the controversy between the parties as to the right of plaintiff to claim or recover the proceeds of
the sale of the Kern property from the defendants. It is therefore an adjudication upon the
merits. 10

Hence, Mellon Bank filed the instant petition for certiorari claiming that the resolution of September 10, 1982
and the orders of October 28, 1983 and July 9, 1985 are void for being unlawful and oppressive exercises of
legal authority, subversive of the fair administration of justice, and in excess of jurisdiction. The petition is
founded on its allegations that: (a) the resolution of September 10, 1982 is interlocutory as it does not dispose
of Civil Case No. 26899 completely: (b) the evidence stricken from the records is relevant on the basis of the
allegations of the amended and supplemental complaint, and (c) the doctrine of election of remedies, which
has long been declared obsolete in the United States, is not applicable in this case.

With the exception of the Javiers, all the respondents filed their respective comments on the petition. Having
failed to file said comment, the Javiers' counsel of record, Azada, Tomacruz & Cacanindin, 11 was required to
show cause why disciplinary action should not be taken against it. And, having also failed to show cause, it
was fined P300.

In his motion for reconsideration of the resolution imposing said fine, Cipriano Azada alleged that in Civil Case
No. 26899, the Javiers were indeed represented by the law firm of Poblador, Azada, Tomacruz & Cacanindin
but he was never the lawyer of the Javiers' in his personal capacity; that after the death of Honorio Poblador,
Jr., he had withdrawn from the partnership; that he is the counsel of the Administratrix of the Estate of Honorio
Poblador, Jr. for which he had filed a comment, and that should the Court still require him to file comment for
the Javiers despite the lack of client-lawyer relationship, he would adopt the comment he had filed for the said
Administratrix. 12

In its effort to locate the Javiers so that their side could be heard, we required the petitioner to furnish us with
the Javiers' address as well as the name and address of their counsel. 13 In compliance therewith, counsel for
petitioner manifested that the Javiers had two known addresses in San Juan, Metro Manila and in Sampaloc,
Manila; that since their conviction in Crim. Case No. CCC-VII 2369-P.C. of the Pasig Regional Trial Court, the
Javiers had gone into hiding and warrants for their arrest still remain unserved; 14 that the Javiers' counsel of
record in Civil Case No. 26899 is Atty. Cipriano Azada; that the same counsel appeared for the Javiers in
Criminal Case No. 39851 of the Pasig Regional Trial Court which is a tax evasion case filed by the Republic of
the Philippines, and that during the hearings of the civil and tax evasion cases against the Javiers, Atty.
Cipriano Azada, Jr. represented them. 15

Inasmuch as copies of the resolution requiring comment on the petition and the petition itself addressed to
Melchor Javier were returned with the notations "moved" and "deceased", the Court required that said copies
be sent to Mrs. Javier herself and that petitioner should inform the Court of the veracity of Javier's death. 16 A
copy of the resolution addressed to Mrs. Javier was returned also with the notation "deceased." 17

Counsel for petitioner accordingly informed the Court that he learned that the Javiers had fled the country and
that he had no way of verifying whether Melchor Javier had indeed died. 18

In view of these circumstances, the Javiers' comment on the petition shall be dispensed with as the Court
deems the pleadings filed by the parties sufficient bases for resolving this case. The Javiers shall be served
copies of this decision in accordance with Section 6, Rule 13 of the Rules of Court by delivering said copies to
the clerk of court of the lower court, with proof of failure of both personal service and service by mail.

19
We hold that the lower court gravely abused its discretion in ruling that the resolution of September 10, 1982 is
a "final and definitive disposition" of petitioner's claim for the purchase price of the Kern property. The
resolution is interlocutory and means no more than what it states in its dispositive portion-the testimonies of
Baylosis and Red and the documents they testified on, should be stricken from the record.

That the resolution discusses the common-law principle of election of remedies, a subject matter which shall
be dealt with later, is beside the point. It is interlocutory because the issue resolved therein is merely the
admissibility of the plaintiff's evidence. 19 As such, it does not dispose of the case completely but leaves
something more to be done upon its merits. 20 There are things left undone in Civil Case No. 26899 after the
issuance of the September 10, 1982 resolution not only because of its explicit dispositive portion but also due
to the fact that even until now, the case is still pending and being heard. 21

Furthermore, the lower court's holding in its July 9, 1985 order that petitioner's second motion for
reconsideration is proscribed by the 1983 Interim Rules of Court which disallows such motion on a final order
or judgment, should be rectified. As explained above, the resolution of September 10, 1982 is not a final one. It
also contains conclusions on procedural matters which, if left unchecked, would prejudice petitioner's
substantive rights.

In effect, therefore, the July 9, 1985 order is a shortcut disposition of Civil Case No. 26899 in total disregard of
petitioner's right to a thorough ventilation of its claims. By putting a premium on procedural technicalities over
the resolution of the merits of the case, the lower court rode roughshod over the basic judicial tenet that
litigations should, as much as possible, be decided on their merits and not on technicalities. 22 The trial court's
patent grave abuse of discretion therefore forces us to exercise supervisory authority to correct its errors
notwithstanding the fact that ordinarily, this Court would not entertain a petition for certiorari questioning the
legality and validity of an interlocutory order. 23

Respondents' principal objection to the testimonies of Baylosis and Red is their alleged irrelevance to the
issues raised in Civil Case No. 26899. The fallacy of this objection comes to fore upon a scrutiny of the
complaint. Petitioner's theory therein is that after the Javiers had maliciously appropriated unto themselves
$999,000, the other private respondents conspired and participated in the concealment and dissipation of said
amount. The testimonies of Baylosis and Red are therefore needed to establish the scheme to hide the
erroneously sent amount.

Private respondents' protestations that to allow the questioned testimonies to remain on record would be in
violation of the provisions of Republic Act No. 1405 on the secrecy of bank deposits, is unfounded. Section 2 of
said law allows the disclosure of bank deposits in cases where the money deposited is the subject matter of
the litigation. 24 Inasmuch as Civil Case No. 26899 is aimed at recovering the amount converted by the Javiers
for their own benefit, necessarily, an inquiry into the whereabouts of the illegally acquired amount extends to
whatever is concealed by being held or recorded in the name of persons other than the one responsible for the
illegal acquisition. 25

We view respondents' reliance on the procedural principle of election of remedies as part of their ploy to
terminate Civil Case No. 26899 prematurely. With the exception of the Javiers, respondents failed to raise it as
a defense in their answers and therefore, by virtue of Section 2, Rule 9 of the Rules of Court, such defense is
deemed waived. 26 Notwithstanding its lengthy and thorough discussion during the hearing and in pleadings
subsequent to the answers, the issue of election of remedies has not, contrary to the lower court's assertion,
been elevated to a "substantive one." Having been waived as a defense, it cannot be treated as if it has been
raised in a motion to dismiss based on the nonexistence of a cause of action.

Moreover, granting that the defense was properly raised, it is inapplicable in this case. In its broad sense,
election of remedies refers to the choice by a party to an action of one of two or more coexisting remedial
rights, where several such rights arise out of the same facts, but the term has been generally limited to a
choice by a party between inconsistent remedial rights, the assertion of one being necessarily repugnant to, or

20
a repudiation of, the other. In its technical and more restricted sense, election of remedies is the adoption of
one of two or more coexisting remedies, with the effect of precluding a resort to the others. 27

As a technical rule of procedure, the purpose of the doctrine of election of remedies is not to prevent recourse
to any remedy, but to prevent double redress for a single wrong. 28 It is regarded as an application of the law of
estoppel, upon the theory that a party cannot, in the assertion of his right occupy inconsistent positions which
form the basis of his respective remedies. However, when a certain state of facts under the law entitles a party
to alternative remedies, both founded upon the Identical state of facts, these remedies are not considered
inconsistent remedies. In such case, the invocation of one remedy is not an election which will bar the other,
unless the suit upon the remedy first invoked shall reach the stage of final adjudication or unless by the
invocation of the remedy first sought to be enforced, the plaintiff shall have gained an advantage thereby or
caused detriment or change of situation to the other. 29 It must be pointed out that ordinarily, election of
remedies is not made until the judicial proceedings has gone to judgment on the merits. 30

Consonant with these rulings, this Court, through Justice J.B.L. Reyes, opined that while some American
authorities hold that the mere initiation of proceedings constitutes a binding choice of remedies that precludes
pursuit of alternative courses, the better rule is that no binding election occurs before a decision on the merits
is had or a detriment to the other party supervenes. 31 This is because the principle of election of remedies is
discordant with the modern procedural concepts embodied in the Code of Civil Procedure which Permits a
party to seek inconsistent remedies in his claim for relief without being required to elect between them at the
pleading stage of the litigation. 32

It should be noted that the remedies pursued in the California case and in Civil Case No. 26899 are not exactly
repugnant or inconsistent with each other. If ever, they are merely alternative in view of the inclusion of parties
in the latter case who are not named defendants in the former. The causes of action, although they all stem
from the erroneous transmittal of dollars, are distinct as shown by the complaints lengthily set out above. The
bar of an election of remedies does not apply to the assertion of distinct causes of action against different
persons arising out of independent transactions. 33

As correctly pointed out by the petitioner, the doctrine of election of remedies is not favored in the United
States for being harsh. 34 Its application with regard to two cases filed in two different jurisdictions is also
circumscribed by jurisprudence on abatement of suits. Thus, in Brooks Erection Co. v. William R. Montgomery
& Associates, Inc., 35 it is held:

The pendency of an action in the courts of one state or country is not a bar to the institution of
another action between the same parties and for the same cause of action in a court of another
state or country, nor is it the duty of the court in which the latter action is brought to stay the
same pending a determination of the earlier action, even though the court in which the earlier
action is brought has jurisdiction sufficient to dispose of the entire controversy. Nevertheless,
sometimes stated as a matter of comity not of right, it is usual for the court in which the later
action is brought to stay proceedings under such circumstances until the earlier action is
determined.

However, in view of the fact that the California court wherein the case for recovery of the Kern property was
first filed against the Javiers had stayed proceedings therein until after the termination of Civil Case No. 26899,
the court below can do no less than expedite the disposition of said case.

We cannot dispose of this case without condemning in the strongest terms possible the acts of chicanery so
apparent from the records. The respective liabilities of the respondents are still being determined by the court
below. We must warn, however, against the use of technicalities and obstructive tactics to delay a just
settlement of this case. The taking advantage of the petitioner's mistake to gain sudden and undeserved
wealth is marked by circumstances so brazen and shocking that any further delay will reflect poorly on the kind
of justice our courts dispense. The possible involvement of lawyers in this sorry scheme stamps a black mark
on the legal profession. The Integrated Bar of the Philippines (IBP) must be made aware of the ostensible
21
participation, if not instigation, in the spiriting away of the missing funds. The IBP must take the proper action at
the appropriate time against all lawyers involved in any misdeeds arising from this case.

WHEREFORE, the resolution of September 10, 1982 and the orders of October 28, 1982 and July 9, 1985 are
hereby annulled. The lower court is ordered to proceed with dispatch in the disposition of Civil case No. 26899,
considering that thirteen (13) years have gone by since the original erroneous remittance.

Service of this decision on the Javier spouses shall be in accordance with Section 6, Rule 13 of the Rules of
Court. A copy of this decision shall be served on the Integrated Bar of the Philippines.

The decision is immediately executory. Costs against private respondents.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin and Cortes,JJ., concur.

EN BANC
[G.R. No. L-7076. April 28, 1955.]
ERIBERTO P. ROSARIO and PAZ UNTALAN DE ROSARIO, Plaintiffs-Appellants, v. FILOMENO
CARANDANG, ET AL., Defendants-Appellees.
Primicias, Abad, Mencias & Castillo for plaintiffs and appellants.
Brigido G. Estrada for Appellees.
SYLLABUS

1. PLEADING AND PRACTICE; FORCIBLE ENTRY AND DETAINER; ALLEGATIONS IN THE COMPLAINT;
EFFECT THEREOF. — A simple allegation in the complaint for forcible entry and detainer that the defendant
have filed an opposition in the case where plaintiffs have applied for the registration of the parcel of land
subject of the complaint, does not amount to an allegation that the defendants are claiming ownership thereof,
since an opposition in a registration case may be based on claims or interest other than ownership in the land
sought to be registered.

And neither does the fact that plaintiffs pray in their complaint that they be declared owners of the parcel in
question convert their action from one of forcible entry into one for declaration of ownership or quieting of title;
for the prayer is not a material part of the complaint (Vda. de Lacson v. Diaz, 47 Off. Gaz., [Supp. ] 237), and it
is the allegations of the complaint, and not the prayer, that not only determined the jurisdiction of the court, but
confer that jurisdiction (Fernandez contra Gala-Sison, 50 Off. Gaz., No. 12, 5760; Infante v. Dulay, 67 Phil.,
159).

2. ID.; AMENDMENTS TO PLEADINGS; WHEN THEY CAN NOT BE ALLOWED. — Although amendments to
pleadings are favored and liberally allowed in the furtherance of justice, it is obvious that when it appears from
the very face of the complaint that the Court has no jurisdiction over the subject matter of the case, an
amendment of the complaint can not be allowed so as to confer jurisdiction upon the Court.

3. ID.; ID.; AMENDMENT AS OF RIGHT. — Before an answer or a motion to dismiss has been filed, the
original complaint is amendable, and the amendment can supersede the original pleading, as of right, without
leave of court being required, and without the court taking cognizance at all of the original complaint.

4. FORCIBLE ENTRY AND DETAINER; EXCLUSIVE JURISDICTION OF JUSTICE OF PEACE COURTS

REGARDLESS OF CLAIM FOR DAMAGES; EXPENSES OF FILING SUIT. — The justice of the peace courts
have exclusive jurisdiction over forcible entry and detainer case, regardless of the amount claimed therein as
damages (Lao Seng Hian, Et. Al. v. Hon. Natividad Almeda Lopez, Et Al., 83 Phil., 617). The expenses for the
filing of the suit, viz costs and attorneys’ fees, are excluded from the jurisdictional amount that confer
jurisdiction upon courts.
22
 DECISION

REYES, J.B.L., J.:

This is an appeal from two orders of the Court of First Instance of Pangasinan in Civil Case No. 12316, the first
dismissing plaintiffs’ complaint, and the second denying plaintiffs’ motion for reconsideration and for the
admission of an amended complaint.

On October 16, 1952, plaintiffs Eriberto P. Rosario and Paz Untalan de Rosario filed a complaint against
defendants Filomeno Carangdang, Et Al., specifically alleging therein that plaintiffs-appellants are the owners
and possessors of a parcel of land (lot No. 2, plan Psu-123111) in Labrador, Pangasinan; that they have
applied for the registration thereof in Registration Case No. 658, G.L.R.O. No. 2610, wherein defendants filed
an opposition; that on or about October 3, 1952, defendants illegally entered into the premises, destroyed the
nipa plants thereon, and made dikes to convert the place into a fishpond; that in spite of warnings and notices
from plaintiffs-appellants, defendants continued to possess and occupy the premises; and that as a result of
defendants’ entry into and possession of the land in question, plaintiffs have suffered damages in the amount
of P2,000.

On November 3, 1952, defendants moved for the dismissal of the complaint, claiming (1) that the Court had no
jurisdiction of the case because it is one of forcible entry and detainer exclusively cognizable by the Justice of
the Peace Court, and furthermore, because the demand for damages does not exceed P2,000; and (2) that
there is another action pending between the same parties and for the same cause (Land Registration Case No.
658, G.L.R.O. No. 2610, wherein plaintiffs are the applicants and defendants are the oppositors, and Land
Registration Case No. 602, G.L.R.O. No. 2313, wherein defendants are the applicants and plaintiffs are the
oppositors) in which the title and ownership of the parcel in question is involved and contested. Plaintiffs
opposed the motion to dismiss, alleging that the Court of First Instance acting as a registration court, can not
award damages resulting from defendants’ alleged illegal entry into and possession of the land in question.

The lower Court found the motion to dismiss meritorious, and on November 7, 1952 ordered the dismissal of
the complaint. Plaintiffs moved for the reconsideration of the order of dismissal, and prayed as well for the
admission of an amended complaint, wherein they make specific allegation for the first time that the
defendants are claiming ownership of the land in question in the two registration cases previously mentioned.
Defendants opposed the motion for reconsideration and the admission of an amended complaint, upon the
ground that the amended complaint would convert plaintiffs’ action from one of forcible entry and detainer to
one of recovery of ownership and possession. Again, defendants’ position was sustained by the Court below;
and later, it denied a motion for the reconsideration of the order of dismissal. Hence, this appeal by the
plaintiffs to this Court.

We see no error in the lower Court’s dismissal of appellants’ original complaints. It was filed on October 16,
1952, barely two weeks from and after the alleged entry into and illegal taking of possession of the land in
question by the defendants. The case pleaded was a clear action for forcible entry and detainer, where
plaintiffs allege prior possession of the premises in question and to have been deprived thereof within the
period of one year, by other person or persons, who excluded them therefrom and withheld possession without
right — a case falling within the exclusive and original jurisdiction of the justice of the peace courts (Rule 72,
Sec. 1, Rules of Court: Sec. 88, Rep. Act 296).

Appellants insist that their action is not for forcible entry and detainer but for declaration of ownership or
23
quieting of title, with claim for damages in the sum of P2,500 This argument is untenable. There is no averment
in the complaint that the defendants claim or dispute the ownership of the parcel in question. The simple
allegation therein that defendants have filed an opposition in the case where plaintiffs have applied for the
registration of said parcel, does not amount to an allegation that the defendants are claiming ownership
thereof, since an opposition in a registration case may be based on claims or interest other than ownership in
the land sought to be registered. And neither does the fact that appellants pray in their complaint that they be
declared owners of the parcel in question convert their action from one of forcible entry into one for declaration
of ownership or quieting of title; for the prayer is not a material part of the complaint (Vda. de Lacson v. Diaz,
87 Phil., 150, 47 Off. Gaz., [Supp. ] 337), and it is the allegations of the complaint, and not the prayer, that not
only determine the jurisdiction of the court, but confer that jurisdiction (Fernandez contra Gala-Sison, supra, p,
282; Infante v. Dulay, 67 Phil., 259).

Plaintiffs also insist that their action falls within the jurisdiction of the Court of First Instance, because their
claim for damages amounts to P2,500. This argument is untenable. In the first place, settled is the rule that
justice of the peace courts have exclusive jurisdiction over forcible entry and detainer cases, regardless of the
amount claimed therein as damages (Lao Seng Hian, Et. Al. v. Honorable Natividad Almeda Lopez, Et Al., 83
Phil., 617; 46 Off. Gaz., [11] 70). In the second place, it appears from the allegations of the complaint that only
the amount of P2,000 is claimed to have been suffered by appellants as damages as a result of defendants’
illegal possession and destruction of the land in question (par. 8 of the complaint, Rec. on App., p. 4), the
additional claim of P500 being allegedly for "additional expenses, besides the damages stated above",
meaning expenses incurred due to the filing of this case. Considering that the expenses for the filing of the suit,
viz, costs and attorneys’ fees, are excluded from the jurisdictional amount that confer jurisdiction upon courts,
the additional amount of P500 claimed by appellants in their complaint would not take their case out of the
jurisdiction of the justice of the peace court, even if such jurisdiction were to be determined by no other factor
than the amount sought to be recovered in the complaint.

Under their second assignment of error, appellants contend that the lower Court erred in denying their motion
for reconsideration and in refusing to admit their amended complaint. Again we find this assignment of error to
be without merit. While it is true that under the liberal provisions of our Rules of Court, amendments to
pleadings are favored and liberally allowed in the furtherance of justice, it is obvious that when it appears from
the very face of the complaint that the Court has no jurisdiction over the subject-matter of the case, an
amendment of the complaint can not be allowed so as to confer jurisdiction upon the Court. In Alvarez, Et. Al.
v. Commonwealth of the Phil., Et Al., 65 Phil., 302, this Court held:chanrob1es virtual 1aw library

Under this section (Sec. 101 of the Code of Civ. Pro. the amendment of a pleading, after a demurrer is
sustained, is not an absolute right of the pleader; the amendment rests rather in the sound discretion of the
court. Generally when a demurrer is sustained, the party who presented the defective pleading is afforded an
opportunity to amend it under conditions which the court may fix; and this should be done when it appears
clearly that the defect is remediable by amendment (Molina v. La Electricista, 6 Phil., 519; Serrano v. Serrano,
9 Phil., 142; Segovia v. Provincial Board of Albay, 13 Phil., 331; Balderrama v. Compañia General de Tabacos,
13 Phil., 609; Macapinlac v. Gutierrez Repide, 43 Phil., 770). But when it is evident that the court has no
jurisdiction over the person and the subject matter that the pleading is so fatally defective as not to be
susceptible of amendment, or that to permit such amendment would radically alter the theory and the nature of
the action, then the court may refuse the amendment of the defective pleading and order the dismissal of the
case (49 C. J., sec. 563, p. 457; San Joaquin etc., Ganal, etc., Co. v. Stanislaus County, 155 Cal., 21; Bell. v.
California Bank, 153 Cal., 234; Ridgway v. Pogan, 2 Cal. Unrep. Cas., 718; Schlecht v. Schlecht, 277 F.
1065; :Beal v. United Properties Co., 46 Cal. A., 287; Bemartini v. Marini, 45 Cal. A., 418; Lentz v. Clough, 39
Cal. A., 430; Burki v. Pleasanton School District., 18 Cal. A., 493; Patterson v. Steele, 98 Neb., 209; Cox v.
Gerogia R., etc. Co., 139 Ga., 532; Peo. v. McHatton, 7 Ill., 731; Higgins v. Degney, 25 Misc., 248; 55 N. Y. S.,
59; Wood v. Anderson, 25 Pa., 407). Section 101 authorizing the amendment of a defective pleading should be

24
liberally construed and the courts, whenever possible, should incline in favor of the amendment; but when it
appears patent that the pleading is not susceptible of amendment upon the grounds above set out, the
appellate courts should not hold that the former have abused their discretion in not permitting the amendment
and in dismissing the case."
Appellants’ original complaint, as we have already determined, is one for forcible entry and detainer, over
which the Court below has no jurisdiction. Not having acquired jurisdiction over the case by the filing of the
original complaint, the lower court has neither the power nor the jurisdiction to act on the motion for the
admission of the amended complaint, much less to allow such amendment, since it is elementary that the court
must first acquire jurisdiction over the case in order to act validly therein. Wherefore, the Court below did not
err in refusing to admit plaintiffs-appellants’ amended complaint.

The case might be different had the amendment been made before an answer or a motion to dismiss had been
filed, since the original complaint was then amendable, and the amendment could supersede the original
pleading, as of right, without leave of court being required, and without the Court taking cognizance at all of the
original complaint.

In view of the foregoing, the orders appealed from are affirmed, without prejudice to appellants’ filing another
case for reivindicacion. Costs against appellants.

Pablo, Acting C. J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, and
Concepcion, JJ., concur.

SECOND DIVISION
[G.R. No. 107824. July 5, 1996.]
SUPERCLEAN SERVICES CORPORATION, Petitioner, v. COURT OF APPEALS and HOME
DEVELOPMENT MUTUAL FUND, Respondents.

DECISION

MENDOZA, J.:

The question in this case is the propriety of filing a Supplemental Complaint in order to seek a different relief in
view of developments rendering the original relief impossible of attainment.

The facts are as follows:

On November 8, 1989, petitioner Superclean Services filed with the Regional Trial Court of Manila a complaint
for Mandamus/Certiorari With Preliminary Injunction And/Or Restraining Order against private respondent
Home Development and Mutual Fund. Petitioner alleged that at the public bidding for janitorial services for the
year 1990 it was the "lowest or best bidder," but private respondent refused without just cause to award the
contract to it and instead caused the publication on October 23, 1989 of a Notice of Rebidding to be held on
November 9, 1989.

In its answer private respondent defended its action on the ground that not a single bid submitted complied
with the terms and conditions agreed upon in the pre-bidding conference held on September 6, 1989.

The trial court thereafter set petitioner’s application for preliminary injunction for hearing and in the meantime
ordered private respondent to desist from conducting a rebidding. At the same time, the court granted leave to
25
private respondent on January 4, 1990 to hire janitorial services on a month-to-month basis to insure the
maintenance of its offices.

On July 24, 1991, petitioner moved for the admission of a "Supplemental Complaint." 1 Petitioner alleged that
because the contract of services was for the furnishing of janitorial service for the previous year 1990, the
delay in the decision of the case had rendered the case moot and academic "without [petitioner] obtaining
complete relief to redress the wrong committed against it by [private respondent], which relief consists in
unrealized profits, exemplary damages and attorney’s fees." Accordingly, instead of pursuing its prayer for a
writ of mandamus, petitioner sought the payment of damages to it.

On August 23, 1991, the trial court denied petitioner’s motion, finding "no merit in and no basis supporting it"
and set the continuation of the trial on September 19, 1991.

Petitioner filled a motion for reconsideration, but its motion was likewise denied. In its order dated November
25, 1991, the trial court said that admission of the "Supplemental Complaint" would "not only radically but
substantially [change] the issues" by "materially var[ying] the grounds of relief, and would operate unjustly to
the prejudice of the rights of [private respondent]."

Petitioner filed a petition for certiorari in the Court of Appeals which, on August 5, 1992, rendered a decision,
finding no grave abuse of discretion to have been committed by the trial court in not admitting petitioner’s
"Supplemental Complaint" and denying the motion for reconsideration of its order. Its ruling was based on the
fact that the relief sought in the "Supplemental Complaint" was different from that contained in the original
complaint which sought to compel private respondent to recognize petitioner as the lowest qualifying bidder. In
addition, the appellate court held that the original complaint had been rendered moot and academic by
supervening events and that a supplemental complaint was inappropriate since "supplemental pleadings are
meant to supply the deficiency in aid of the original pleading, not to entirely substitute the latter." library

Petitioner moved for a reconsideration, but its motion was denied in a resolution of the Court of Appeals dated
October 30, 1992. Hence, this petition for review on certiorari.

First. The "Supplemental Complaint" appears to have been filed under Rule 10 of the Rules of Court which
provides:

§6, Matters subject of Supplemental Pleadings. — Upon motion of a party the court may, upon reasonable
notice and upon much terms as are just, permit him to serve a supplemental pleading setting forth
transactions, occurrence of events which have happened since the date of the pleading sought to be
supplemented. If the court deems it advisable that the adverse party should plead thereto, it shall so order,
specifying time therefor.

The transaction, occurrence or event happening since the filing of the pleading, which is sought to be
supplemented, must be pleaded in aid of a party’s right of defense as the case may be. 2 But in the case at
bar, the supervening event is not invoked for that purpose but to justify the new relief sought.

To begin with, what was alleged as a supervening event causing damage to petitioner was the fact that the
year for which the contract should have been made had passed without the resolution of the case. Only
incidentally was it claimed that because of the award of a contract for janitorial services, on a month-to-month
basis to a third party, petitioner failed to realize profits. In its "Supplemental Complaint" petitioner alleged:
library

1. Supervening events not attributable to anybody which consist in the delay in the early disposition of the cage
within the one (1) year period life span of the contract for janitorial services, have rendered the case moot and
academic, without plaintiff obtaining complete relief to redress the wrong committed against it by defendant,
which is the unjustified and/or unlawful refusal of defendant to recognize plaintiff as the lowest qualifying bidder
for janitorial services for the year 1990;

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2. By reason of the unjustified refusal of defendant to recognize the result of the public bidding held in
September 1989 and to award to plaintiff the contract for janitorial services as the lowest qualifying bidder
favorable and advantageous to the defendant for the year 1990, and by hiring another entity to perform
janitorial services during the pendency of the suit, plaintiff suffered unrealized profits in the sum of P158,
117.28.

The supervening event was therefore cited not to reinforce or aid the original demand, which was for the
execution of a contract in petitioner’s favor, but to say that, precisely because of it, petitioner’s demand could
no longer be enforced, thus justifying petitioner in changing the relief sought to one for recovery of damages.
This being the case, petitioner’s remedy was not to supplement, but rather to amend its complaint.

Indeed the new relief sought (payment of damages in lieu of an award of the contract for janitorial services) is
actually an alternative remedy to which petitioner was entitled even before at the time of the filing of its original
complaint. If petitioner was entitled to the award of the contract, as it claimed it was, it could have asked either
for an award of the contract for janitorial services or for damages. The fact that it opted for the first does not
preclude it from subsequently claiming damages because through no fault of its own, the year passed without
an award in its favor, with the result that it could no longer demand the execution of a contract in its favor after
that year.

Be that as it may, the so-called Supplemental Complaint filed by petitioner should simply be treated as
embodying amendments to the original complaint or petitioner may be required to file an amended complaint.

Second. But it is contended, such an amendment of the complaint would change the theory of the case. Three
reasons were cited by the Court of Appeals why it through the trial court correctly refused to admit the so-
called Supplemental Complaint of petitioner: (1) change in the reliefs prayed for; (2) change in the issues of the
case; and (3) prejudice to the rights of private Respondent.

The contention has no merit. An amendment to change the relief sought does not change the theory of a case.
What is prohibited is a change in the cause of action. Thus in Arches v. Villarruz, 3 it was held:chanrob1es
virtual 1aw library

The lower court denied the admission of the amended complaint on the ground that the plaintiff therein has
changed the action alleged in the original complaint, but upon comparing the two complaints, we find that,
essentially, there was no change of action for, in both the original and the amended complaints, the action was
for the collection of the value of the same promissory notes and the only difference between the original and
the amended complaints is with regard to the consideration of said promissory notes, for while in the original
complaint it was alleged that these were executed by defendant Villarruz for money obtained from plaintiff
Arches and which the former paid for labor materials for the construction and completion of the Ivisan Bridge,
in the amended complaint it was alleged that said promissory notes were executed for materials supplied to
William Villarruz and actually used in the construction of the Ivisan Bridge. While the rule allowing amendments
to a pleading is subject to the general limitation that the cause of action should not be substantially changed or
that the theory of the case should not be altered, in the furtherance of justice, amendments to a pleading
should be favored and the rules thereon should be liberally construed. In the present case, we find justification
for allowing the admission of the amended complaint in order that the real question between the parties be
properly and justly threshed out, in a single proceeding, and thus avoid multiplicity of actions.

In Vda. de Villaruel v. Manila Motor Co., Inc., 4 plaintiffs, as lessors of a property, filed an action for the
rescission of the contract of lease for alleged refusal of defendants to pay rentals. While the case was pending,
the buildings leased were destroyed by fire. Plaintiffs filed a supplemental complaint for the recovery of the
value of the burned buildings. In holding the supplemental complaint proper, this Court held:

This action was inceptionally instituted for the rescission of the contract of lease and for the recovery of unpaid
rentals before and after liberation. When the leased buildings were destroyed, the plaintiffs-lessors demanded

27
from the defendants-lessees, instead, the value of the burned premises, basing their right to do so on
defendants’ alleged default in the payment of post-liberation rentals (which was also their basis in formerly
seeking for rescission). This cannot be considered as already altering the theory of the case which is merely a
change in the relief prayed for, brought about by circumstances occurring during the pendency of the action,
and is not improper. (Southern Pacific Co. v. Conway, 115 F. 2d 746; Suburban Improvement Company v.
Scott Lumber Co., 87 A.L.R. 555, 59 F. 2d 711). The filing of the supplemental complaint can well be justified
also under Section 2, Rule 17 of the Rules of Court (on amendments) "to the end that the real matter in dispute
and all matters in the action in dispute between the parties may, as far as possible be completely determined in
a single proceeding." It is to be noted furthermore, that the admission or rejection of this kind of pleadings is
within the sound discretion of the court that will not be disturbed on appeal in the absence of abuse thereof
(see Sec. 5, Rule 17, Rules of Court), especially so, as in this case, where no substantial procedural prejudice
is caused to be adverse party. 5

In this case, the original complaint for Mandamus/Certiorari With Preliminary Injunction And/Or Restraining
Order alleged, as cause of action, private respondent’s unjustifiable refusal to award the contract to petitioner
despite the fact that the latter was the "lowest and best qualifying bidder." On the basis of this allegation, it was
prayed that: library

1. Upon filing [of] this Complaint, a restraining order be issued to enjoin [private respondent] from implementing
[or] proceeding with its Notice of Rebidding which is scheduled on November 9, 1989 at 10:00 A.M;

2. After trial on the merits, judgment be rendered —

a. ordering [private respondent] to recognize [petitioner] as the lowest qualifying responsive bidder at the public
bidding held on September 22, 1989 and therefore its right to the award of the contract for janitorial services;

b. declaring that [private respondent] in publishing its "Notice of Rebidding" acted with grave abuse of
discretion amounting to excess and/or lack of jurisdiction;

c. declaring the restraining order or temporary writ of injunction to be permanent; and

d. for cost of suit.

These same allegations constitute petitioner’s cause of action for damages, to wit:

1. the sum of P158,117.28 as unrealized profits;

2. the sum of P50,000.00 as exemplary damages;

3. the sum equivalent to twenty-five (25%) percent of the total amount due and demandable, plus P1,000.00
for every appearance of counsel in court;

4. the cost of suit.

As already stated, the change in the relief sought was necessitated by a supervening event which rendered the
first relief sought impossible of attainment.

Because the cause of action on which the complaint for mandamus and injunction and the so-called
Supplemental Complaint are based is one and the same, the issue raised is the same, namely, whether private
respondent was justified in refusing to award the contract for janitorial services to petitioner.

Nor would admission of the amended complaint prejudice the rights of private respondent as defendant in the
action below, as the Court of Appeals held. Indeed neither the trial court nor the appellate court showed in
what way the rights of private respondent would be prejudiced by the allowance of the amendment in question.

28
There will be no unfairness or surprise to private respondent, because after all private respondent will have a
right to file an amended answer and present evidence in a support thereof. 6

Third. The court of Appeals also held that the action for mandamus and/or injunction had become moot and
academic and consequently there was no longer any complaint to be supplemented. It is true that a
supplemental or an amended pleading presupposes the existence of a pleading. What was rendered moot and
academic, however, was not petitioner’s cause of action but only its prayer for the writ of mandamus. There
was still an alternative remedy left to petitioner of seeking damages in lieu of an award of the contract. The
situation is similar to an action for illegal dismissal in labor law. If reinstatement is no longer possible, because
the position has been abolished and there is no way the dismissed employee can be reinstated to a
comparable position, the employee’s action is not thereby rendered moot and academic. He can instead ask
for separation pay.

Indeed, what is important is that, as already stated, the basic allegations of fact in the original and in the
amended complaints are the same, namely, that private respondent, without justification, refused to award the
contract of services to petitioner. Through no fault of petitioner, the year for which janitorial services to be
rendered expired without the resolution of petitioner’s case. It would be to exalt technicality over substance to
require that petitioner file a new complaint. It would best serve the interests of justice if the so-called
Supplemental Complaint is simply considered as embodying amendments to the original complaint. In fact it
appears that the court ordered, a continuation of the trial on September 19, 1991, despite petitioner’s
statement in its Supplemental Complaint that the original case had become and academic.

WHEREFORE, the decision of the Court of Appeals is REVISED and the case is REMANDED to the trial court
with instructions to admit the "Supplemental Complaint" and to treat it as an amendment to the original
complaint to or require petitioner to file an amended complaint, merging the relevant allegations of its original
complaint and "Supplemental Complaint," and thereafter to allow private respondent to file an answer.

SO ORDERED.
Regalado, Romero and Puno, JJ., concur.
Torres, Jr., J., took no part.

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