SECOND DIVISION

G.R. No. 163584             December 12, 2006

REMELITA M. ROBINSON, petitioner,
vs.
CELITA B. MIRALLES, respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is the instant petition for review on certiorari assailing the Resolutions dated
February 111 and May 11, 20042 of the Regional Trial Court (RTC), Branch 274, Parañaque
City, in Civil Case No. 00-0372.

On August 25, 2000, Celita Miralles, respondent, filed with the said court a complaint for
sum of money against Remelita Robinson, petitioner, docketed as Civil Case No. 00-0372.
Respondent alleged that petitioner borrowed from her US$20,054.00 as shown by a
Memorandum of Agreement they both executed on January 12, 2000.

Summons was served on petitioner at her given address. However, per return of service of
Sheriff Maximo Potente dated March 5, 2001, petitioner no longer resides at such address.

On July 20, 2001, the trial court issued an alias summons to be served at No. 19 Baguio St.,
Alabang Hills, Muntinlupa City, petitioner’s new address.

Again, the summons could not be served on petitioner. Sheriff Potente explained that:

The Security Guard assigned at the gate of Alabang Hills refused to let me go inside
the subdivision so that I could effect the service of the summons to the defendant in
this case. The security guard alleged that the defendant had given them instructions
not to let anybody proceed to her house if she is not around. I explained to the
Security Guard that I am a sheriff serving the summons to the defendant, and if the
defendant is not around, summons can be received by any person of suitable age and
discretion living in the same house. Despite of all the explanation, the security guard
by the name of A.H. Geroche still refused to let me go inside the subdivision and
served (sic) the summons to the defendant. The same thing happened when I
attempted to serve the summons previously.

Therefore, the summons was served by leaving a copy thereof together with the copy
of the complaint to the security guard by the name of A.H. Geroche, who refused to
affix his signature on the original copy thereof, so he will be the one to give the same
to the defendant.
Eventually, respondent filed a motion to declare petitioner in default for her failure to file an
answer seasonably despite service of summons.

On February 28, 2003, the trial court granted respondent’s motion declaring petitioner in
default and allowing respondent to present her evidence ex parte.

On June 20, 2003, the trial court issued an Order, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against

defendant ordering the defendant to pay the plaintiff as follows:

1. The sum of US$20,054.00 as the unpaid obligation, plus the stipulated interest of
3% a month from May 2000 (date of default) until fully paid;

2. Php100,000.00 for moral damages;

3. Php50,000.00 plus Php1,500.00 per appearance as attorney’s fees;

4. Costs of suit.

SO ORDERED.

A copy of the Order was sent to petitioner by registered mail at her new address.

Upon respondent’s motion, the trial court, on September 8, 2003, issued a writ of execution.

On September 26, 2003, petitioner filed with the trial court a petition for relief from the
judgment by default. She claimed that summons was improperly served upon her, thus, the
trial court never acquired jurisdiction over her and that all its proceedings are void.

On February 11, 2004, the trial court issued a Resolution denying the petition for relief.
Petitioner filed a motion for reconsideration, but it was denied by the trial court in a
Resolution dated May 11, 2004.

Hence, the instant recourse.

The sole issue for our resolution is whether the trial court correctly ruled that a substituted
service of summons upon petitioner has been validly effected.

Summons is a writ by which the defendant is notified of the action brought against him or
her.3 In a civil action, service of summons is the means by which the court acquires
jurisdiction over the person of the defendant.4 Any judgment without such service, in the
absence of a valid waiver, is null and void.5 Where the action is in personam and the
defendant is in the Philippines, the service of summons may be made through personal or
substituted service in the manner provided for in Sections 6 and 7, Rule 14 of the 1997 Rules
of Procedure, as amended,6 thus:

SEC. 6. Service in person on defendant. – Whenever practicable, the summons shall

be served by handing a copy thereof to the defendant in person, or if he refuses to
receive and sign for it, by tendering it to him.
 SEC. 7. Substituted service. – If, for justifiable causes, the defendant cannot be served
within a reasonable time as provided in the preceding section, service may be effected
(a) by leaving copies of the summons at the defendant’s residence with some person
of suitable age and discretion then residing therein; or (b) by leaving the copies at the
defendant’s office or regular place of business with some competent person in charge
thereof.

Under our procedural rules, personal service is generally preferred over substituted service,
the latter mode of service being a method extraordinary in character.7 For substituted service
to be justified, the following circumstances must be clearly established: (a) personal service
of summons within a reasonable time was impossible; (b) efforts were exerted to locate the
party; and (c) the summons was served upon a person of sufficient age and discretion residing
at the party’s residence or upon a competent person in charge of the party’s office or place of
business.8 Failure to do so would invalidate all subsequent proceedings on jurisdictional
grounds.9

Petitioner contends that the service of summons upon the subdivision security guard is not in
compliance with Section 7, Rule 14 since he is not related to her or staying at her residence.
Moreover, he is not duly authorized to receive summons for the residents of the village.
Hence, the substituted service of summons is not valid and that the trial court never acquired
jurisdiction over her person.

We have ruled that the statutory requirements of substituted service must be followed strictly,
faithfully, and fully and any substituted service other than that authorized by the Rules is
considered ineffective.10 However, we frown upon an overly strict application of the Rules. It
is the spirit, rather than the letter of the procedural rules, that governs.

In his Return, Sheriff Potente declared that he was refused entry by the security guard in
Alabang Hills twice. The latter informed him that petitioner prohibits him from allowing
anybody to proceed to her residence whenever she is out. Obviously, it was impossible for
the sheriff to effect personal or substituted service of summons upon petitioner. We note that
she failed to controvert the sheriff’s declaration. Nor did she deny having received the
summons through the security guard.

Considering her strict instruction to the security guard, she must bear its consequences. Thus,
we agree with the trial court that summons has been properly served upon petitioner and that
it has acquired jurisdiction over her.

WHEREFORE, we DENY the petition and we AFFIRM the assailed Orders of the RTC,

Branch 274, Parañaque City, in Civil Case No. 00-0372. Costs against petitioner.

SO ORDERED
G.R. No. 73531. April 6, 1993.

DOLORES DELOS SANTOS, NICOLAS DELOS SANTOS and RICARDO DELOS

SANTOS, petitioners,
vs.
HON. JUDGE CAMILO MONTESA, JR. and JUANA DELOS SANTOS, respondents.

Jose C. Patalinjug for petitioners.

Leonardo O. Mancao for private respondent.

SYLLABUS

1. REMEDIAL LAW CIVIL PROCEDURE; SUMMONS; DEFENDANT'S VOLUNTARY

APPEARANCE IN THE ACTION EQUIVALENT TO SERVICE OF SUMMONS; CASE
AT BAR. — At first blush, it would appear that the recourse pursued by petitioners could
elicit a favorable response from us in as much as the proof of service of the summons upon
petitioners does not indicate impossibility of personal service, a condition precedent for
resorting to substituted service. Even then, and assuming in gratia argumenti that the statutory
norms on service of summons have not been strictly complied with, still, any defect in form
and in the manner of effecting service thereof were nonetheless erased when petitioners'
counsel moved to re-examine the impugned decision and posed a subsequent bid on appeal to
impede immediate execution (Boticano vs. Chu. Jr., 145 SCRA 541 [1987]); 1 Regalado,
Remedial Law Compendium, 1988 Fifth Rev. Ed., p. 136). Indeed, such demeanor is
tantamount to voluntary submission to the competencia of the court within the purview of
Section 23, Rule 14 of the Revised Rules of Court since any mode of appearance in court by
a defendant or his lawyer is equivalent to service of summons, absent any indication that the
appearance of counsel for petitioner was precisely to protest the jurisdiction of the court over
the person of defendant (Carballo vs. Encarnacion, 49 O.G. 1383; 1 Regalado, supra, p. 144;
Flores vs. Zurbito, 37 Phil. 746 [1918]; 1 Martin, Rules of Court in the Philippines, 1989
Rev. Ed., p. 473 Sison, et al. vs. Gonzales, 50 O.G. 4756; 1 Moran, Comments on the Rules
of Court, 1970 Ed., p. 467). Neither can We treat the motion for reconsideration directed
against the unfavorable disposition as a special appearance founded on the sole challenge on
invalid service of summons since the application therefor raised another ground on failure to
state a cause of action when conciliation proceedings at the barangay level were allegedly
bypassed, nay, disregarded (Republic vs. Ker and Co., Ltd., 64 O.G. 3761; Regalado, supra,
p. 152).

2. ID APPEAL; ONLY QUESTIONS OF LAW MAY BE RAISED IN PETITION FOR

REVIEW ON CERTIORARI UNDER RULE 45; CASE AT BAR The fact that petitioners
are supposedly occupying a parcel of land other than the realty claimed by private respondent
deserves scant consideration since a clarification on a factual query of this nature is
proscribed by the second paragraph, Section 2 of Rule 45 of the Revised Rules of Court.
Verily, counsel for petitioners' assertion in the notice of appeal filed with respondent judge
that the grievance to be elevated to this Court will focus "fully on a question of law" (p. 32
Rollo) is a self-defeating posture and operates as a legal bar for us to dwell into the truth or
falsehood of such factual premise (Article 1431, New Civil Code; Section 4, Rule 129;
Section 2(a), Rule 131, Revised Rules on Evidence).
3. ID; JUDGMENT; EXECUTION PENDING APPEAL; PREVAILING PARTY MOVING
FOR EXECUTION PENDING APPEAL OBLIGED TO SERVE COPY OF MOTION ON
ADVERSE PARTY'S COUNSEL. — Petitioners argue next that execution pending appeal
was ordered without any prior notice to them (p. 3, Petition; p. 7, Rollo). This notion is also
devoid of substance since it erroneously suggests that the court is duty-bound to notify
petitioners of the immediate enforcement of the appealed decision. A contrario, it is the
prevailing party moving for execution pending appeal under Section 2, Rule 39 of the
Revised Rules of Court who is obliged to serve a copy of such motion on the adverse party's
counsel, which, on the face of the subject motion, was effected by personal delivery (p. 23,
Rollo; Lao vs. Mencias, 21 SCRA 1021 [1967]; 2 Martin, Rules of Court in the Philippines,
1973 Ed., p. 288).

DECISION

MELO, J p:

In the suit for desahucio initiated below by herein private respondent against petitioners, the
court of origin ordered petitioners to vacate the lot in question to pay P5,000.00 per year as
reasonable rental from 1985 until possession is surrendered, and to pay P1,000.00 as
attorney's fees and the costs of the suit (pp. 37-38, Rollo). Upon appeal, Branch XIX of the
Regional Trial Court of the Third Judicial Region stationed in Malolos and presided over by
herein respondent judge, granted private respondents motion for execution pending appeal on
account of petitioners' failure to post a supersedeas bond (p. 21, Rollo). To set aside the
proceedings below, the petition at hand was instituted anchored on the supposition that
petitioners were deprived of their day in court.

Petitioners' mental distress started when private respondent, who supposedly owns Lot 39 of
the Cadastral survey of Bustos with an area of 5,358 square meters covered by Original
Certificate of Title No. U-7924 a portion of which petitioners entered and occupied, lodged
the complaint geared towards petitioners' eviction. Summons was served through the mother
of petitioners when the process server was unable to locate Dolores, Nicolas, and Ricardo
delos Santos in Talampas, Bustos, Bulacan. For failure of petitioners to submit the
corresponding answer, judgment was rendered pursuant to the rules on summary procedure
(pp. 2-3, Decision; pp. 37-38, Rollo).

Upon learning of said decision, petitioners sought to reconsider on the principal thesis that
they were never served notice of the conciliation meeting at the barangay level, as well as the
summons. They insist that private respondent was referring to a different piece of realty
because petitioners actually occupied Lot No. 3568 owned by Nicolas delos Santos under
Original Certificate of Title No. F-10418. Moreover, petitioners advanced the proposition that
Dolores' husband should have been impleaded. All of these arguments were to no avail. As
indicated earlier, execution pending appeal was ordered due to petitioners' failure to post a
supersedeas bond.

To stave off the impending eviction of petitioners, this Court issued a restraining order on
April 28, 1986 directed against the reviewing authority and private respondent until further
orders (p. 52, Rollo).

At first blush, it would appear that the recourse pursued by petitioners could elicit a favorable
response from us in as much as the proof of service of the summons upon petitioners does not
indicate impossibility of personal service, a condition precedent for resorting to substituted
service. Even then, and assuming in gratia argumenti that the statutory norms on service of
summons have not been strictly complied with, still, any defect in form and in the manner of
effecting service thereof were nonetheless erased when petitioners' counsel moved to re-
examine the impugned decision and posed a subsequent bid on appeal to impede immediate
execution (Boticano vs. Chu. Jr., 145 SCRA 541 [1987]); 1 Regalado, Remedial Law
Compendium, 1988 Fifth Rev. Ed., p. 136). Indeed, such demeanor is tantamount to
voluntary submission to the competencia of the court within the purview of Section 23, Rule
14 of the Revised Rules of Court since any mode of appearance in court by a defendant or his
lawyer is equivalent to service of summons, absent any indication that the appearance of
counsel for petitioner was precisely to protest the jurisdiction of the court over the person of
defendant (Carballo vs. Encarnacion, 49 O.G. 1383; 1 Regalado, supra, p. 144; Flores vs.
Zurbito, 37 Phil. 746 [1918]; 1 Martin, Rules of Court in the Philippines, 1989 Rev. Ed., p.
473 Sison, et al. vs. Gonzales, 50 O.G. 4756; 1 Moran, Comments on the Rules of Court,
1970 Ed., p. 467).

Neither can We treat the motion for reconsideration directed against the unfavorable
disposition as a special appearance founded on the sole challenge on invalid service of
summons since the application therefor raised another ground on failure to state a cause of
action when conciliation proceedings at the barangay level were allegedly bypassed, nay,
disregarded (Republic vs. Ker and Co., Ltd., 64 O.G. 3761; Regalado, supra, p. 152).

The fact that petitioners are supposedly occupying a parcel of land other than the realty
claimed by private respondent deserves scant consideration since a clarification on a factual
query of this nature is proscribed by the second paragraph, Section 2 of Rule 45 of the
Revised Rules of Court. Verily, counsel for petitioners' assertion in the notice of appeal filed
with respondent judge that the grievance to be elevated to this Court will focus "fully on a
question of law" (p. 32 Rollo) is a self-defeating posture and operates as a legal bar for us to
dwell into the truth or falsehood of such factual premise (Article 1431, New Civil Code;
Section 4, Rule 129; Section 2(a), Rule 131, Revised Rules on Evidence).

Petitioners argue next that execution pending appeal was ordered without any prior notice to
them (p. 3, Petition; p. 7, Rollo). This notion is also devoid of substance since it erroneously
suggests that the court is duty-bound to notify petitioners of the immediate enforcement of
the appealed .appeal under Section 2, Rule 39 of the Revised Rules of Court who is obliged
to serve a copy of such motion on the adverse party's counsel, which, on the face of the
subject motion, was effected by personal delivery (p. 23, Rollo; Lao vs. Mencias, 21 SCRA
1021 [1967]; 2 Martin, Rules of Court in the Philippines, 1973 Ed., p. 288).

In fine, petitioners may not press the idea that they were deprived of their day in court amidst
the implicit forms of waiver performed by their lawyer in submitting every conceivable
defense for petitioners via the two motions for reconsideration below.

WHEREFORE, the petition is hereby DISMISSED for lack of merit and the restraining order
issued on April 28, 1986 LIFTED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 163287             April 27, 2007

ORION SECURITY CORPORATION, Petitioner,

vs.
KALFAM ENTERPRISES, INC., Respondent.

RESOLUTION

QUISUMBING, J.:

For review on certiorari are the Decision1 dated February 17, 2004 and Resolution2 dated
April 22, 2004 of the Court of Appeals in CA-G.R. CV No. 70565, which reversed the
Decision3 dated March 15, 2000 of the Regional Trial Court of Quezon City, Branch 215, in
Civil Case No. Q-97-32024.

The facts, borne by the records, are as follows:

Petitioner Orion Security Corporation is a domestic private corporation engaged in the

business of providing security services. One of its clients is respondent Kalfam Enterprises,
Inc.

Respondent was not able to pay petitioner for services rendered. Petitioner thus filed a
complaint4 against respondent for collection of sum of money. The sheriff tried to serve the
summons and a copy of the complaint on the secretary of respondent’s manager. However,
respondent’s representatives allegedly refused to acknowledge their receipt. The summons
and the copy of the complaint were left at respondent’s office.5

When respondent failed to file an Answer, petitioner filed a motion to declare respondent in
default.6 The trial court, however, denied the motion on the ground that there was no proper
service of summons on respondent.7

Petitioner then filed a motion for alias summons, which the trial court granted.8 The process
server again left the summons and a copy of the complaint at respondent’s office through
respondent’s security guard, who allegedly refused to acknowledge their receipt.9

Again, respondent failed to file an Answer. On motion10 of petitioner, respondent was

declared in default.11 Thereafter, petitioner was allowed to adduce evidence ex parte.

Respondent filed a motion for reconsideration12 of the resolution declaring it in default.

Respondent alleged the trial court did not acquire jurisdiction over its person due to invalid
service of summons. The trial court denied the motion for reconsideration.13

On March 15, 2000, the trial court rendered a default judgment, the decretal portion of which
reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff Orion Security Corporation
and against defendant Kalfam Enterprises, Inc., ordering said defendant to pay plaintiff the
amounts as follows:

a) FIVE HUNDRED THIRTEEN THOUSAND EIGHT HUNDRED THIRTY NINE

PESOS AND TWENTY SIX CENTAVOS (₱513,839.26), Philippine Currency, as
the total amount of the balance due to the plaintiff, plus interest thereon at the rate of
twelve percent (12%) per annum, computed from August 29, 1997, the date of the
filing of this case until said obligation is fully paid;

b) FIFTY ONE THOUSAND THREE HUNDRED EIGHTY THREE PESOS AND

NINETY TWO CENTAVOS (₱51,383.92), Philippine Currency, which is ten percent
(10%) of the outstanding obligation, as attorney’s fees;

c) FIVE THOUSAND PESOS (₱5,000.00), Philippine Currency, as litigation

expenses; and THREE THOUSAND FIVE HUNDRED SIXTY THREE PESOS
AND TWENTY FIVE CENTAVOS (₱3,563.25) for the costs of suit.

SO ORDERED.14

On appeal, the Court of Appeals held that summons was not validly served on respondent,
decreeing thus:

WHEREFORE, in view of the foregoing, the appealed decision is REVERSED and SET

ASIDE. The case is hereby REMANDED to the trial court for further proceedings upon
valid service of summons to the parties concerned.

SO ORDERED.15

Petitioner’s motion for reconsideration of the Court of Appeals’ decision was denied. Hence,
the instant petition raising the following as issues:

I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS’ DECISION DATED

FEBRUARY 17, 2004 AND ITS RESOLUTION DATED APRIL 22, 2004 ARE NULL
AND VOID FOR FAILURE TO COMPLY WITH SEC. 14, ART. VIII OF THE 1987
CONSTITUTION;

II. WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY

ERRED IN NOT RULING THAT THE TRIAL COURT HAS IN FACT ACQUIRED
JURISDICTION OVER THE PERSON OF THE RESPONDENT DUE TO THE LATTER’S
VOLUNTARY APPEARANCE IN THE PROCEEDINGS THEREIN;

III. WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY

ERRED IN NOT HOLDING THAT THE SUBSTITUTED SERVICE OF SUMMONS
EFFECTED UPON THE SECURITY GUARD OF THE RESPONDENT SHOULD BE
DEEMED SUBSTANTIAL COMPLIANCE WITH THE RULE ON SERVICE OF
SUMMONS, IN VIEW OF THE EXCEPTIONAL CIRCUMSTANCES ATTENDANT IN
THE PRESENT CASE.16
Simply put, the sole issue is whether the trial court acquired jurisdiction over respondent
either by (1) valid substituted service of summons on respondent; or (2) respondent’s
voluntary appearance in the trial court and submission to its authority.

Petitioner contends that the Court of Appeals completely brushed aside respondent’s
voluntary appearance in the proceedings of the trial court. According to petitioner, the trial
court acquired jurisdiction over respondent due to the latter’s voluntary appearance in the
proceedings before the said court. Petitioner insists substituted service of summons on
respondent’s security guard is substantial compliance with the rule on service of summons, in
view of the exceptional circumstances in the present case.

Respondent, however, counters that the special appearance of its counsel does not constitute
voluntary appearance. Respondent maintains that its filing of an opposition to petitioner’s
motion to declare respondent in default and other subsequent pleadings questioning the trial
court’s jurisdiction over it does not amount to voluntary appearance. Respondent stresses it
was not properly served with summons via substituted service since the security guard on
whom it was purportedly served was not the competent person contemplated by Section 7,
Rule 14 of the Rules of Court.

We find the petition without merit.

Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint. On the other
hand, jurisdiction over the defendants in a civil case is acquired either through the service of
summons upon them or through their voluntary appearance in court and their submission to
its authority.17

In case of domestic private juridical entities such as respondent in the instant case, Section 11
of Rule 14 states:

SEC. 11. Service upon domestic private juridical entity. – When the defendant is a
corporation, partnership or association organized under the laws of the Philippines with a
juridical personality, service may be made on the president, managing partner, general
manager, corporate secretary, treasurer, or in-house counsel.

As a rule, summons should be personally served on the defendant. It is only when summons
cannot be served personally within a reasonable period of time that substituted service may
be resorted to. In this connection, Section 7 of Rule 14 provides:

SEC. 7. Substituted service. – If, for justifiable causes, the defendant cannot be served within
a reasonable time as provided in the preceding section, service may be effected (a) by leaving
copies of the summons at the defendant’s residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copies at defendant’s office or regular
place of business with some competent person in charge thereof.

In this case, records show that respondent’s president, managing partner, general manager,
corporate secretary, treasurer, or in-house counsel never received the summons against
respondent, either in person or by substituted service.

Note that in case of substituted service, there should be a report indicating that the person
who received the summons in the defendant’s behalf was one with whom the defendant had a
relation of confidence ensuring that the latter would actually receive the summons.18 Here,
petitioner failed to show that the security guard who received the summons in respondent’s
behalf shared such relation of confidence that respondent would surely receive the summons.
Hence, we are unable to accept petitioner’s contention that service on the security guard
constituted substantial compliance with the requirements of substituted service.

Neither did the trial court acquire jurisdiction over respondent by the latter’s voluntary
appearance in court proceedings. Note that a party who makes a special appearance in court
challenging the jurisdiction of said court based on the ground of invalid service of summons
is not deemed to have submitted himself to the jurisdiction of the court.19 In this case, records
show that respondent, in its special appearance, precisely questioned the jurisdiction of the
trial court on the ground of invalid service of summons. Thus, it cannot be deemed to have
submitted to said court’s authority.

Since the trial court never acquired jurisdiction over respondent, either by valid substituted
service of summons or by respondent’s voluntary appearance in court and submission to its
authority, respondent cannot be bound by the trial court’s judgment ordering it to pay
petitioner a sum of money.

WHEREFORE, the petition is DENIED. The assailed Decision dated February 17, 2004
and Resolution dated April 22, 2004 of the Court of Appeals in CA-G.R. CV No. 70565
are AFFIRMED. Let the case be REMANDED to the trial court for further proceedings
upon valid service of summons to respondent.

No pronouncement as to costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-21905             March 31, 1966

EUFRONIO J. LLANTO, petitioner-appellant,
vs.
MOHAMAD ALI DIMAPORO, Provincial Governor of Lanao del Norte;
PROVINCIAL BOARD OF LANAO DEL NORTE; VALERIO V. ROVIRA, Vice-
Governor;
BIENVENIDO L. PADILLA, Member; FELIXBERTO ABELLANOSA, Member;
PROVINCE OF LANAO DEL NORTE; PROVINCIAL AUDITOR OF LANAO DEL
NORTE; PROVINCIAL TREASURER OF LANAO DEL NORTE, and PROVINCIAL
ASSESSOR OF LANAO DEL NORTE, respondents-appellees.

Virgilio Llanto for petitioner-appellant.

Moises F. Dalisay for respondents-appellees.

SANCHEZ, J.:

Resolution No. 7, Series of 1960, adopted by the Provincial Board of Lanao del Norte on
January 6, 1960, reverted the 1960-1961 salary appropriation for the position of Assistant
Provincial Assessor to the general fund. In effect, that position then held by petitioner was
abolished. Appeals to the Commissioner of Civil Service, the Secretary of Finance, the
Secretary of Justice, the Auditor General and the President of the Philippines were of no
avail. Petitioner came to court on mandamus. He sought, (a) the annulment of the resolution
aforesaid, (b) the restoration of the salary appropriation; (c) his reinstatement, and (d)
payment of back salaries and damages.

Respondents moved to dismiss. Ground therefor is lack of cause of action. The Court below
granted the motion, dismissed the petition. The motion to reconsider failed. Offshoot is this
appeal.

1. The threshold, questions are these: Was the dismissal order issued "without any hearing on
the motion to dismiss"? Is it void?

We go to the record. The motion to dismiss was filed on February 1, 1961 and set for hearing
on February, 10 following. On February 8, 1961 petitioner's counsel telegraphed the court,
"Request postponement motion dismissal till written opposition filed." He did not appear at
the scheduled hearing. But on March 4, 1961 he followed up his wire, with his written
opposition to the motion to dismiss. Adverting to the 5-page motion to dismiss and the 6-page
opposition thereto, we find that the arguments pro and con on the question of the board's
power to abolish petitioner's position minutely discussed the problem and profusely cited
authorities. The May 15, 1961, 8-page court order recited at length the said arguments and
concluded that petitioner made no case.
One good reason for the statutory requirement of hearing on a motion as to enable the suitors
to adduce evidence in support of their opposing claims.1 But here the motion to dismiss is
grounded on lack of cause of action. Existence of a cause of action or lack of it is determined
by a reference to the facts averred in the challenged pleading. The question raised in the
motion is purely one of law. This legal issue was fully discussed in said motion and the
opposition thereto. In this posture, oral arguments on the motion are reduced to an
unnecessary ceremony and should be overlooked.2 And, correctly so, because the other
intendment of the law in requiring hearing on a motion, i.e., "to avoid surprise upon the
opposite party and to give to the latter time to study and meet the arguments of the
motion",3 has been sufficiently met. And then, courts do not exalt form over substance.

Besides, there is respondents' vehement claim that the motion to dismiss (originally set for
February 10) has been actually reset for hearing for March 23, 1961, at 8:30 o'clock a.m.; that
then there was no appearance on petitioner's behalf, but that respondents' attorneys appeared.
Of course, petitioner now disputes this fact. But nothing extent in the record would support
his position. On the contrary, his telegram of February 8 induces rational belief that all he
wanted was to be given an opportunity to meet argument with argument by means of his
"written opposition". He filed that opposition. And more. Adversely affected by the court's
order, he sought reconsideration thereof. In that motion to reconsider he squarely brought to
the court's attention his present averment that "no hearing was conducted on the motion to
dismiss". The gravity of this charge notwithstanding, the same Judge shunted aside
petitioner's contention with the statement that his motion is "not (being) meritorious".
Implicit in this pronouncement is that there was such a second hearing and petitioner was
there given an opportunity to argue his case. It is in this backdrop that we hew to the line
drawn in the Ongsiako decision4 that "it is presumed that the proceeding was regular and that
all the steps required by law to be taken before the court could validly act thereon, had been
so taken". The quantum of proof required to overcome this presumption is reflected in a
passage in another case,5 thus: in the absence of a clear showing to the contrary, the
regularity of the court proceedings" is to be upheld. Petitioner offered no showing, let alone a
clear showing, of irregularity.

More to this. Even conceding for present purposes that there was no previous notice of
hearing of the motion to dismiss before the court ruled (May 15, 1961) on the same adversely
to petition, still this alleged defect was fully cured by his motion for reconsideration aforesaid
(filed June 24, 1961), which was overruled. By the standard in De Borja, et al. vs. Tan, etc.,
et al.,  93 Phil. 167, 171, "the interested parties were given their day in court, and the previous
objection of lack of notice or opportunity to be heard fully met". As the De Borja decision
points out, what the law prohibits "is not the absence of previous notice, but the absolute
absence thereof and lack of opportunity to be heard."6

2. The critical inquiry is whether or not the mandamus petition was correctly dismissed on the
ground of lack of cause of action. The job of assistant provincial assessor is a creation of the
provincial board. Petitioner concedes that, in the law of public administration, the power to
create normally implies the power to abolish.7 The thrust of his argument, however, is that the
power to abolish is not absolute; it is subject to the limitations that it be exercised (a) in good
faith, (b) personal or political reasons, and (c) not in violation of Civil Service Law. He cites
the Briones case.8 There, the reasons given for the abolition of the positions of petitioners
therein, namely, "economy and efficiency", were found to be transparent and unimpressive
and to constitute a mere subterfuge for the removal without cause of the said appellees, in
violation of the security of Civil Service tenures as provided by the Constitution." And this,
because in said case it was shown that the abolition of the 32 positions in the city mayor's
office and the office of the municipal board was preceded by the creation of 35 positions in
the city mayor's office, calling for an annual outlay of P68,100.00.

Here, the case has not gone beyond the pleadings stage; there is no trial on the merits. And,
taking the averments of the petition herein as bases, the Briones decision is not properly to he
read as controlling. For, the wholesale creation and abolition of offices in almost the same
breath there, are not here obtaining. Differences in factual background generate differences in
legal consideration.1äwphï1.ñët

Let us now take the petition on its face value. Paragraph VIII thereof avers that "with intent
of circumventing the constitutional prohibition that 'no officer or employee in the civil
service shall be removed or suspended except for cause as provided by law"', respondents
"maliciously and illegally for the purpose of political persecution and political vengeance,
reverted the fund of the salary item ... and furthermore eliminated or abolished the said
position effective July 1, 1960". This statement by itself submits no justiciable controversy
for the court's determination; it is not an allegation of ultimate facts; it is a mere conclusion of
law unsupported by factual premise. Some such averments as that "defendant usurped the
office of Senator of the Philippines";9 or that defendant had incurred damages as a
consequence of the "malicious and unjustified" institution of the action, 10 have heretofore
been stricken down by this Court as nothing more than mere conclusions of law. 11

Finally as against the allegation of malicious and illegal abolition of petitioner's position, we
have the presumption of good faith. 12 Not that this presumption stands alone. There is the
other presumption that official duty had been regularly performed by the members of the
provincial board. 13 And the facts set forth in resolution No. 7, lend stout support to these two
precepts, viz: There was a huge deficit of P60,330.60; the position of assistant provincial
assessor which is not required to be created by the Administrative Code l4 — could be
dispensed with and performed by others. 15

It results that petitioner's case is not within the coverage of the exceptions to the general rule
that the provincial board's power to create normally carries with it the power to eliminate.
And, petitioner has no cause for complaint.

3. Petitioner also advances the theory that the provincial board resolution abolishing his
position is not effective, because it did not bear the stamp of approval of the Secretary of
Finance, citing Republic Act No. 1062. The necessity for such approval, however, was done
away with by the passage of Republic Act No. 2264, otherwise known as the Local
Autonomy Act. Section 3(a) of the Local Autonomy Act gives the provincial board the power
to appropriate money having in view the general welfare of the province and its inhabitants.
Concomitant to this express power is the implied power to withdraw unexpended money
already appropriated.

We observe that the sole authority given by the Autonomy Act to the Secretary of Finance is
to review provincial and city budgets and city and municipal tax ordinances. 16 Nothing
therein contained requires his approval for the abolition of positions in the provincial or city
or municipal governments. We do not even discern in the law a purpose to require such
approval. For the language is restrictive. 17 We are not prepared to take imperishable liberties
with and recast said law. Such is not within the scope of the powers entrusted to courts of
justice.
On top of all of these is the fact that section 12 of the Local Autonomy Act leaves us with but
one guidepost in the interpretation of powers allocated to local governments, thus:

Sec. 12. Rules for the interpretation of the Local Autonomy Act. —

1. Implied power of a province, a city or municipality shall be liberally construed in

its favor. Any fair and reasonable doubt as to the existence of the power should be
interpreted in favor of the local government and it shall be presumed to exist.

Autonomy is the underlying rationale of the Local Autonomy Act. By the statute itself no
interpretation thereof should be indulged in which would cripple the board's powers. This
legal yardstick stops us, too, from writing into the statute the Finance Secretary's approval as
a condition precedent to effectivity of the resolution herein questioned.

4. By section 3, Rule 65 of the Rules of Court, mandamus will issue if the performance of an
act is one "which the law specifically enjoins as a duty resulting from an office, trust or
station". Mandamus compels performance of a ministerial duty. That duty must be clear and
specific. But mandamus is not meant to control or review the normal exercise of judgment or
discretion. 18 which is the case here. The respondent board, therefore, cannot be compelled to
restore petitioner's item in the budget.

The order appealed from is not legally infirm. We accordingly vote to affirm the same. Costs
against appellant. So ordered.
 SECOND DIVISION

[G.R. No. L-58036. March 16, 1987.]

ELISEO BOTICANO, Petitioner, v. MANUEL CHU, JR., Respondent.

Arturo S. Santos for Petitioner.

Juan C. Limin for Respondent.

DECISION

PARAS, J.:

This is a petition for review on certiorari seeking to reverse and set aside the following: (a)
the decision of the Court of Appeals ** promulgated on March 31, 1981 in CA-G.R. No.
65287-R entitled: "Eliseo Boticano, plaintiff-appellee v. Jaime Sigua, defendant and Manuel
Chu, Jr., Defendant-Appellant" which holds that the defendant-appellant was not properly
served with summons and (b) the resolution denying petitioner’s motion for reconsideration
of said decision.chanrobles virtuallawlibrary

The findings of fact of the trial court are as follows:chanrob1es virtual 1aw library

Petitioner Eliseo Boticano is the registered owner of a Bedford truck with plate No. QC-870,
T-Pilipinas ‘77 which he was using in hauling logs for a certain fee. At 11:00 o’clock in the
evening of September 3, 1971, while loaded with logs, it was properly parked by its driver
Maximo Dalangin at the shoulder of the national highway in Barrio Labi, Bongabon, Nueva
Ecija when it was hit and bumped at the rear portion by a Bedford truck bearing plate No.
QK-516, T-Pilipinas, ‘77 owned by private respondent Manuel Chu, Jr. and driven by Jaime
Sigua, the former’s co-defendant in this case. Manuel Chu, Jr. acknowledged ownership
thereof and agreed with petitioner to shoulder the expenses of the repair of the damaged truck
of the latter. (Decision, Civil Case No. 6754, Rollo, pp. 36-37).

When Manuel Chu, Jr. failed to comply with aforesaid agreement as well as to pay damages
representing lost income despite petitioner’s demands, the latter (plaintiff in the lower court),
filed a complaint on November 24, 1977 at the Court of First Instance of Nueva Ecija, Branch
VII at Cabanatuan City, against private respondent Manuel Chu, Jr. (truck owner) and Jaime
Sigua (his driver) both as defendants in Civil Case No. 6754 "Eliseo Boticano v. Manuel
Chu, Jr. and Jaime Sigua" for damages. (Record on Appeal, Rollo, pp. 45-47).
Summons was issued on December 12, 1977 but was returned unserved for defendant Jaime
Sigua because he was no longer connected with San Pedro Saw Mill, Guagua, Pampanga,
while another copy of the summons for Manuel Chu, Jr. was returned duly served on him thru
his wife Veronica Chu at his dwelling house.chanrobles virtual lawlibrary

On February 15, 1978 petitioner moved to dismiss the case against Jaime Sigua and to
declare Manuel Chu, Jr. in default for failure to file responsive pleadings within the
reglementary period. The motion was granted by the lower court in an Order dated September
4, 1978, allowing petitioner to adduce his evidence ex parte on October 17, 1978. (Petition,
Rollo, pp. 8-9).

From the evidence adduced by the plaintiff (petitioner herein) the trial court found that
private respondent Manuel Chu, Jr. is responsible for the fault and negligence of his driver
Sigua under Article 2180 of the Civil Code, whose negligence and lack of due care was the
immediate and proximate cause of the damage to petitioner’s truck and ruled in favor of
plaintiff-petitioner.

The dispositive portion of the judgment reads:jgc:chanrobles.com.ph

"WHEREFORE, judgment is hereby rendered in favor of the plaintiff, Eliseo Boticano, and
against herein defendant, Manuel Chu, Jr. ordering the latter as follows:chanrob1es virtual
1aw library

(a) To pay the plaintiff the sum of P6,970.00 representing actual damages;

(b) To pay the plaintiff the sum of P73,700.00 representing unrealized income for the non-use
of the plaintiff’s damaged truck for the period of eleven (11) months;

(c) To pay the plaintiff the sum of P2.000.00 for and as attorney’s fees; and

(d) To pay the costs of this suit.

SO ORDERED.

Cabanatuan City, November 28, 1978." (Ibid., pp. 13-14).

On March 19, 1979 private respondent Manuel Chu, Jr. filed with the trial court a "Notice of
Appeal" and an Urgent Motion for Extension of Time to File Record on Appeal which was
granted by the trial court on the same date.

On March 26, 1979, Atty. Hermenegildo D. Ocampo, counsel of record of private

respondent, filed a "Motion to Withdraw as Counsel" while the new counsel Atty. Wilfredo
G. Laxamana entered his appearance on April 18, 1979 and filed his record on appeal on the
same date.chanroblesvirtuallawlibrary

On May 4, 1979 petitioner filed with the trial court a Motion to Dismiss Appeal and for
execution which was set for hearing on May 14, 1979 wherein private respondent’s counsel
personally appeared and opposed petitioner’s motion while on the latter date petitioner filed
his reply to opposition, after which on May 16, 1979 the trial court issued an order denying
aforesaid motion, while on May 22, 1979, the trial court issued another order approving
private respondent’s Record on Appeal. (Rollo, pp. 9-10).

After the case was brought to the Court of Appeals and the parties had filed their respective
briefs, said Appellate Court issued its decision on March 31, 1981, the dispositive portion of
which reads:jgc:chanrobles.com.ph

"IN VIEW OF THE FOREGOING CONSIDERATIONS the appealed judgment is hereby set
aside, for being null and void. This case is directed to be remanded to the court of origin; that
appellant be properly served with summons and a copy of the complaint; and that the
necessary and appropriate proceedings or action be taken thereafter, as the circumstances and
the case will warrant.

With costs against appellee.

SO ORDERED.

Judgment is set aside." (Rollo, p. 33).

On April 20, 1981, petitioner filed with the respondent Court of Appeals a Motion for
Reconsideration and on June 3, 1981 a Supplemental Motion for Reconsideration. On August
28, 1981 respondent Court of Appeals issued an order denying petitioner’s Motion for
Reconsideration. (Rollo, pp. 9-11).

Hence, this petition, with the following assigned errors:chanrob1es virtual 1aw library

1. THE RESPONDENT COURT OF APPEALS COMMITTED A MISTAKE IN HOLDING

THAT PRIVATE RESPONDENT MANUEL CHU, JR. WAS NOT PROPERLY SERVED
WITH SUMMONS DESPITE THE FACT THAT THE SUMMONS WAS SERVED TO
HIM THROUGH HIS WIFE;

2. THE RESPONDENT COURT OF APPEALS COMMITTED A MISTAKE IN HOLDING

THAT PRIVATE RESPONDENT DID NOT VOLUNTARILY SUBMIT HIMSELF TO
THE JURISDICTION OF THE TRIAL COURT DESPITE HIS VOLUNTARY
APPEARANCE, THRU COUNSEL ON A FIXED DATE OF HEARING AND BY FILING
WITH THE LOWER COURT A NOTICE OF APPEAL, APPEAL BOND, MOTION FOR
EXTENSION OF TIME TO FILE RECORD ON APPEAL, MOTION FOR
WITHDRAWAL OF APPEARANCE, NOTICE OF APPEARANCE, AND OPPOSITION
TO MOTION TO DISMISS APPEAL AND FOR ISSUANCE OF WRIT OF EXECUTION;

3. THE RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT

PRIVATE RESPONDENT HAS WAIVED ANY QUESTION ON THE TRIAL COURT’S
JURISDICTION OVER HIS PERSON BY HIS DELIBERATE FAILURE AND REFUSAL
TO SEEK RELIEF FROM THE TRIAL COURT.

4. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN SETTING ASIDE

THE JUDGMENT IN CIVIL CASE NO. 6754, COURT OF FIRST INSTANCE OF
CABANATUAN CITY, BRANCH VII AND IN DIRECTING THAT THE CASE BE
REMANDED TO THE COURT OF ORIGIN SO THAT APPELLANT CAN BE
PROPERLY SERVED WITH SUMMONS. (Petition, Rollo, pp. 12-23).

In compliance with the resolution of the Second Division of this Court of October 12, 1981
(Rollo, p. 79-A) private respondent filed his comment on November 13, 1981 (Rollo, pp. 84-
87). Petitioner then filed a reply thereto in compliance with the resolution of December 7,
1981 (Rollo, p. 39) after which the petition was given due course in the resolution of
February 8, 1982 and the parties were required to file their respective memoranda (Rollo, p.
43). Petitioner filed his memorandum on March 19, 1982 (Rollo, pp. 45-59) while private
respondent filed his memorandum on April 15, 1982 (Rollo, pp. 60-64). Thereafter, in the
resolution of April 30, 1982, the case was submitted for decision. (Rollo, p. 65).

There is no dispute as to the facts of this case, as shown by the admission of private
respondent to the extent of making an agreement with petitioner to shoulder the expenses of
the repair of the damaged truck of the latter and the findings of the Court of Appeals that
petitioner’s evidence fully supports the findings of facts of the trial court as well as its
judgment under appeal.

Neither does private respondent deny receipt of the summons in question. The bone of
contention appears to be in the manner of service of said summons on the wife of private
respondent at their dwelling instead of on private respondent himself personally.

Petitioner contends in favor of validity of such service while private respondent maintains the
opposite view which was sustained by respondent Court of Appeals to the effect that the
Sheriff resorted to substituted service under Section 8, Rule 14 of the Rules of Court, without
first complying with the mode of personal service required under Section 7 of the same Rule.

Thus, the principal issue which arises in this case which involves an inquiry into procedural
due process, is whether or not the question of jurisdiction over the person of the defendant
can be raised for the first time on appeal.

The question has been answered in the negative by the Supreme Court in a long line of
decisions. In fact, one of the circumstances considered by the Court as indicative of waiver
by the defendant-appellant of any alleged defect of jurisdiction over his person arising from
defective or even want of process, is his failure to raise the question of jurisdiction in the
Court of First Instance and at the first opportunity. It has been held that upon general
principles, defects in jurisdiction arising from irregularities in the commencement of the
proceedings, defective process or even absence of process may be waived by a failure to
make seasonable objections. (Castro v. Cebu Portland Cement Co., 71 Phil. 481 [1941] citing
Machan v. De la Trinidad, 3 Phil. 684; Vergara v. Laciapag, 28 Phil. 439; U.S. v. Inductivo,
40 Phil. 84; Soriano v. Ramirez, 44 Phil. 519). More recently, in reiteration of the same
principle, the Court ruled in Dalman v. City Court of Dipolog City, Branch II, that as to the
dismissal of the criminal case, the question of jurisdiction which was never raised in said case
before the trial court cannot be done at this stage and level (134 SCRA 244
[1985]).chanrobles.com:cralaw:red

Coming to the case at bar, it has been pointed out that during the stages of the proceedings in
the court below, Defendant-Appellant could have questioned the jurisdiction of the lower
court but he did not.

It can of course be argued that the failure to question the lower court’s jurisdiction cannot be
accounted against Chu for his having been declared in default gave him no chance to
participate in the court deliberations and therefore no chance to raise the jurisdictional issue,
but then, he could have done so, in the subsequent pleadings he filed. Besides, even assuming
that such failure cannot be taken against him, the fact is he had VOLUNTARILY submitted
himself to the court’s jurisdiction.

On the contrary, private respondent voluntarily appeared thru counsel in the trial court. He
filed a Notice of Appeal, Appeal Bond, Motion for Extension of Time to File Record on
Appeal, Record on Appeal, Motion for Withdrawal of Appearance, Notice of Appearance and
Opposition to Plaintiff’s Motion to Dismiss Appeal and for Issuance of a Writ of Execution.
Not only did he submit pleadings and motions, but he likewise appeared in person, thru
counsel in the hearing held on May 14, 1979 at 8:30 a.m. and orally argued in open court on
the pending incident. (Rollo, pp. 53-54).

Under Section 23, Rule 14 of the Rules of Court, the defendant’s voluntary appearance in the
action shall be equivalent to service. Thus, under this principle, it has been consistently held
by the Supreme Court that the defect of summons is cured by the voluntary appearance of the
defendant. (Infante v. Toledo and Lanting, 44 Phil. 834 [1918]; Aguilos v. Sepulvede, 53
SCRA 274 [1973]; J.M. Tuazon & Co. v. Estabillo, 62 SCRA 1; Castro v. Cebu Portland
Cement Co., supra).cralawnad

The Court of Appeals is however of the view that from all the actions and steps taken by the
appellant no presumption can arise that he voluntarily submitted himself to the jurisdiction of
the Court. In fact according to said Court, all of these actions taken by the appellant are
geared and mustered towards contesting the court’s jurisdiction over his person, or of
attacking the validity of the judgment on jurisdictional grounds. (Decision, CA, G.R. No.
65287-R; Rollo, p. 31).

It will be noted however, that the Notice of Appeal (Rollo, p. 38) unmistakably indicates the
reason for the appeal, which reads:jgc:chanrobles.com.ph

"2. That, the herein defendant is not contented with the aforesaid Decision for it is contrary to
the evidence and the law and the award of damages is so excessively unsupported by any
evidence to warrant the same; hence, he is appealing said Decision to the Hon. Court of
Appeals, Manila, both on questions of facts and law."cralaw virtua1aw library
As clearly shown in the foregoing, the above stated conclusion of the Court of Appeals has
evidently no basis.

Of equal importance is the question: if the defendant in the Regional Trial Court (RTC) has
been declared in default, may he appeal the default judgment that may subsequently be
rendered even if he has not asked the RTC to set aside the declaration of default? The answer
is in the affirmative. However a distinction must be made as to the effects of such appeal.

(a) If an appeal is made without first asking the RTC to set aside the declaration of default,
and the appellate court sets aside on said declaration, all he can get is a review of the RTC’s
default judgment without the opportunity of having the higher court consider defense
evidence (for the simple reason that no evidence was even adduced by him in the RTC) (See
Rule 41, sec. 2, par. 3, Rules of Court).

(b) If upon the other hand, the defendant first asks the RTC to set aside the declaration of
default (See Rule 18, secs. 2 and 3, Rules of Court), and he is able to prevail, the declaration
will be set aside, and he will now have the opportunity to present his evidence in the RTC.
Thus, even if he finally loses in the RTC’s subsequent decision, his defense can be
considered, when appeal is made to the appellate tribunal. Of course, even if the default
declaration is not set aside despite his motion for the setting aside, he will be entitled to all
notices in the court proceedings, and can file any pleading he may wish to file, including the
notice of appeal. (See Rule 13, sec. 9, Rules of Court).

Incidentally, the afore-mentioned rules apply to default declarations in the Metropolitan Trial
Courts, the Municipal Trial Courts, and the Municipal Circuit Trial Courts, for under Batas
Pambansa Bilang 129, the said inferior courts will follow the rules in the RTC. Note however
that in summary proceedings, there can be no default declarations.chanroblesvirtual|awlibrary

In the case at bar, there is no question that summons was timely issued and received by
private Respondent. In fact, he never denied actual receipt of such summons but confined
himself to the argument that the Sheriff should prove that personal service was first made
before resorting to substituted service.

This brings to the fore the question of procedural due process. In Montalban v. Maximo (22
SCRA 1077 [1968]) the Court ruled that "The constitutional requirement of due process
exacts that the service be such as may be reasonably expected to give the notice desired.
Once the service provided by the rules reasonably accomplishes that end, the requirement of
justice is answered; the traditional notions of fair play are satisfied; due process is
served."cralaw virtua1aw library

Indeed, such construction is but fair, and in accord with substantial justice. The burden on a
plaintiff is not to be enlarged with a restrictive construction desired by the defendant. (Ibid.,
p. 1078).

Finally in a last ditch effort, private respondent insists that there was no valid service of
summons because private respondent is a partner and general manager in San Pedro Sawmill.
Consequently the wife of private respondent to whom summons and complaint were
allegedly served not being partnership, cannot receive the same under Section 13 of Rule 14
of the Rules of Court.

It has however been settled that actions must be brought by the real parties in interest and
against the persons who are bound by the judgment obtained therein. (Salmon and Pacific
Commercial Company v. Tan Cueco, 36 Phil. 557-558
[1917]).chanroblesvirtuallawlibrary:red

The title of the case both in the trial court, in the Court of Appeals and in this Court shows
that the partnership is not a party. On the contrary, as previously stated private respondent
himself assumed the responsibility of the accident and is now estopped to disclaim the
liabilities pertaining thereto.

From what has been discussed the following conclusions are hereby made: jurisdiction was
properly acquired by the trial court over the person of respondent thru both service of
summons and voluntary appearance in court; he was therefore properly declared in default for
not having filed any answer; despite respondent’s failure to file a motion to set aside the
declaration of default, he has the right to appeal the default judgment but in the appeal only
the evidence of the petitioner may be considered, respondent not having adduced any defense
evidence; We agree with the findings of fact by the trial court, the same being unrebutted.

WHEREFORE, the assailed decision and resolution of the Court of Appeals are REVERSED
and SET ASIDE, and the decision of the then Court of First Instance (now Regional Trial
Court) of Nueva Ecija, Cabanatuan City in Civil Case No. 6754 "Eliseo Boticano v. Manuel
Chu, Jr. and Jaime Sigua" is hereby REINSTATED. No costs.cralawnad

SO ORDERED
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 150134             October 31, 2007

ERNESTO C. DEL ROSARIO and DAVAO TIMBER CORPORATION, petitioners,

vs.
FAR EAST BANK & TRUST COMPANY1 and PRIVATE DEVELOPMENT
CORPORATION OF THE PHILIPPINES, respondents.

DECISION

CARPIO MORALES, J.:

The Regional Trial Court (RTC) of Makati City, Branch "65" (sic)2 having, by Decision3 of
July 10, 2001, dismissed petitioners' complaint in Civil Case No. 00-540 on the ground of res
judicata and splitting of a cause of action, and by Order of September 24, 20014 denied their
motion for reconsideration thereof, petitioners filed the present petition for review on
certiorari.

From the rather lengthy history of the present controversy, a recital of the following material
facts culled from the records is in order.

On May 21, 1974, petitioner Davao Timber Corporation (DATICOR) and respondent Private
Development Corporation of the Philippines (PDCP) entered into a loan agreement under
which PDCP extended to DATICOR a foreign currency loan of US $265,000 and a peso loan
of P2.5 million or a total amount of approximately P4.4 million, computed at the then
prevailing rate of exchange of the dollar with the peso.

The loan agreement provided, among other things, that DATICOR shall pay: (1) a service fee
of one percent (1%) per annum (later increased to six percent [6%] per annum) on the
outstanding balance of the peso loan; (2) 12 percent (12%) per annum interest on the peso
loan; and (3) penalty charges of two percent (2%) per month in case of default.

The loans were secured by real estate mortgages over six parcels of land – one situated in
Manila (the Otis property) which was registered in the name of petitioner Ernesto C. Del
Rosario, and five in Mati, Davao Oriental – and chattel mortgages over pieces of machinery
and equipment.

Petitioners paid a total of P3 million to PDCP, which the latter applied to interest, service fees
and penalty charges. This left petitioners, by PDCP's computation, with an outstanding
balance on the principal of more than P10 million as of May 15, 1983.

By March 31, 1982, petitioners had filed a complaint against PDCP before the then Court of
First Instance (CFI) of Manila for violation of the Usury Law, annulment of contract and
damages. The case, docketed as Civil Case No. 82-8088, was dismissed by the CFI.
On appeal, the then Intermediate Appellate Court (IAC) set aside the CFI's dismissal of the
complaint and declared void and of no effect the stipulation of interest in the loan agreement
between DATICOR and PDCP.

PDCP appealed the IAC's decision to this Court where it was docketed as G.R. No. 73198.

In the interim, PDCP assigned a portion of its receivables from petitioners (the receivables) to
its co-respondent Far East Bank and Trust Company (FEBTC) under a Deed of Assignment
dated April 10, 19875 for a consideration of P5,435,000. The Deed of Assignment was later
amended by two Supplements.6

FEBTC, as assignee of the receivables, and petitioners later executed a Memorandum of

Agreement (MOA) dated December 8, 1988 whereby petitioners agreed to, as they did pay
FEBTC7 the amount of P6.4 million as full settlement of the receivables.

On September 2, 1992, this Court promulgated its Decision in G.R. No. 731988 affirming in
toto the decision of the IAC. It determined that after deducting the P3 million earlier paid by
petitioners to PDCP, their remaining balance on the principal loan was only P1.4 million.

Petitioners thus filed on April 25, 1994 a Complaint9 for sum of money against PDCP and
FEBTC before the RTC of Makati, mainly to recover the excess payment which they
computed to be P5.3 million10 – P4.335 million from PDCP, and P965,000 from FEBTC. The
case, Civil Case No. 94-1610, was raffled to Branch 132 of the Makati RTC.

On May 31, 1995, Branch 132 of the Makati RTC rendered a decision11 in Civil Case No. 94-
1610 ordering PDCP to pay petitioners the sum of P4.035 million,12 to bear interest at 12%
per annum from April 25, 1994 until fully paid; to execute a release or cancellation of the
mortgages on the five parcels of land in Mati, Davao Oriental and on the pieces of machinery
and equipment and to return the corresponding titles to petitioners; and to pay the costs of the
suit.

As for the complaint of petitioners against respondent FEBTC, the trial court dismissed it for
lack of cause of action, ratiocinating that the MOA between petitioners and FEBTC was not
subject to this Court's Decision in G.R. No. 73198, FEBTC not being a party thereto.

From the trial court's decision, petitioners and respondent PDCP appealed to the Court of
Appeals (CA). The appeal was docketed as CA-G.R. CV No. 50591.

On May 22, 1998, the CA rendered a decision13 in CA-G.R. CV No. 50591, holding that
petitioners' outstanding obligation, which this Court had determined in G.R. No. 73198 to
be P1.4 million, could not be increased or decreased by any act of the creditor PDCP.

The CA held that when PDCP assigned its receivables, the amount payable to it by
DATICOR was the same amount payable to assignee FEBTC, irrespective of any stipulation
that PDCP and FEBTC might have provided in the Deed of Assignment, DATICOR not
having been a party thereto, hence, not bound by its terms.

Citing Articles 215414 and 216315 of the Civil Code which embody the principle of solutio
indebiti, the CA held that the party bound to refund the excess payment of P5 million16 was
FEBTC as it received the overpayment; and that FEBTC could recover from PDCP the
amount of P4.035 million representing its overpayment for the assigned receivables based on
the terms of the Deed of Assignment or on the general principle of equity.

Noting, however, that DATICOR claimed in its complaint only the amount of P965,000 from
FEBTC, the CA held that it could not grant a relief different from or in excess of that prayed
for.

Finally, the CA held that the claim of PDCP against DATICOR for the payment of P1.4
million had no basis, DATICOR's obligation having already been paid in full, overpaid in
fact, when it paid assignee FEBTC the amount of P6.4 million.

Accordingly, the CA ordered PDCP to execute a release or cancellation of the mortgages it

was holding over the Mati real properties and the machinery and equipment, and to return the
corresponding certificates of title to petitioners. And it ordered FEBTC to pay petitioners the
amount of P965,000 with legal interest from the date of the promulgation of its judgment.

FEBTC's motion for reconsideration of the CA Decision was denied, and so was its
subsequent appeal to this Court.

On April 25, 2000, petitioners filed before the RTC of Makati a

Complaint17 against FEBTC to recover the balance of the excess payment of P4.335
million.18 The case was docketed as Civil Case No. 00-540, the precursor of the present case
and raffled to Branch 143 of the RTC.

In its Answer,19 FEBTC denied responsibility, it submitting that nowhere in the dispositive

portion of the CA Decision in CA-G.R. CV No. 50591 was it held liable to return the whole
amount of P5.435 million representing the consideration for the assignment to it of the
receivables, and since petitioners failed to claim the said whole amount in their original
complaint in Civil Case No. 94-1610 as they were merely claiming the amount of P965,000
from it, they were barred from claiming it.

FEBTC later filed a Third Party Complaint20 against PDCP praying that the latter be made to
pay the P965,000 and the interests adjudged by the CA in favor of petitioners, as well as
the P4.335 million and interests that petitioners were claiming from it. It posited that PDCP
should be held liable because it received a consideration of P5.435 million when it assigned
the receivables.

Answering21 the Third Party Complaint, PDCP contended that since petitioners were not
seeking the recovery of the amount of P965,000, the same cannot be recovered via the third
party complaint.

PDCP went on to contend that since the final and executory decision in CA-G.R. CV No.
50591 had held that DATICOR has no cause of action against it for the refund of any part of
the excess payment, FEBTC can no longer re-litigate the same issue.

Moreover, PDCP contended that it was not privy to the MOA which explicitly excluded the
receivables from the effect of the Supreme Court decision, and that the amount of P6.4
million paid by petitioners to FEBTC was clearly intended as consideration for the release
and cancellation of the lien on the Otis property.
Replying,22 FEBTC pointed out that PDCP cannot deny that it benefited from the assignment
of its rights over the receivables from petitioners. It added that the third party claim being
founded on a valid and justified cause, PDCP's counterclaims lacked factual and legal basis.

Petitioners thereafter filed a Motion for Summary Judgment23 to which FEBTC filed its
opposition.24

By Order of March 5, 2001, the trial court denied the motion for summary judgment for lack
of merit.25

On July 10, 2001, the trial court issued the assailed Decision dismissing petitioners'
complaint on the ground of res judicata and splitting of cause of action. It recalled that
petitioners had filed Civil Case No. 94-1610 to recover the alleged overpayment both from
PDCP and FEBTC and to secure the cancellation and release of their mortgages on real
properties, machinery and equipment; that when said case was appealed, the CA, in its
Decision, ordered PDCP to release and cancel the mortgages and FEBTC to pay P965,000
with interest, which Decision became final and executory on November 23, 1999; and that a
Notice of Satisfaction of Judgment between petitioners and FEBTC was in fact submitted on
August 8, 2000, hence, the issue between them was finally settled under the doctrine of res
judicata.

The trial court moreover noted that the MOA between petitioners and FEBTC clearly stated
that the "pending litigation before the Supreme Court of the Philippines with respect to the
Loan exclusive of the Receivables assigned to FEBTC shall prevail up to the extent not
covered by this Agreement." That statement in the MOA, the trial court ruled, categorically
made only the loan subject to this Court's Decision in G.R. No. 73198, hence, it was with the
parties' full knowledge and consent that petitioners agreed to pay P6.4 million to FEBTC as
consideration for the settlement. The parties cannot thus be allowed to welsh on their
contractual obligations, the trial court concluded.

Respecting the third party claim of FEBTC, the trial court held that FEBTC's payment of the
amount of P1,224,906.67 (P965,000 plus interest) to petitioners was in compliance with the
final judgment of the CA, hence, it could not entertain such claim because the Complaint
filed by petitioners merely sought to recover from FEBTC the alleged overpayment of P4.335
million and attorney's fees of P200,000.

Petitioners' motion for reconsideration26 of the July 10, 2001 decision of the trial court was
denied by Order of September 24, 2001.

Hence, the present petition.

In their Memorandum,27 petitioners proffer that, aside from the issue of whether their
complaint is dismissible on the ground of res judicata and splitting of cause of action, the
issues of 1) whether FEBTC can be held liable for the balance of the overpayment of P4.335
million plus interest which petitioners previously claimed against PDCP in Civil Case No.
94-1610, and 2) whether PDCP can interpose as defense the provision in the Deed of
Assignment and the MOA that the assignment of the receivables shall not be affected by this
Court's Decision in G.R. No. 73198, be considered.
Stripped of the verbiage, the only issue for this Court's consideration is the propriety of the
dismissal of Civil Case No. 00-540 upon the grounds stated by the trial court. This should be
so because a Rule 45 petition, like the one at bar, can raise only questions of law (and that
justifies petitioners' elevation of the case from the trial court directly to this Court) which
must be distinctly set forth.28

The petition is bereft of merit.

Section 47 of Rule 39 of the Rules of Court, on the doctrine of res judicata, reads:

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

xxxx

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

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

The above-quoted provision lays down two main rules. Section 49(b) enunciates the first rule
of res judicata known as "bar by prior judgment" or "estoppel by judgment," which states
that the judgment or decree of a court of competent jurisdiction on the merits concludes the
parties and their privies to the litigation and constitutes a bar to a new action or suit involving
the same cause of action either before the same or any other tribunal.29

Stated otherwise, "bar by former judgment" makes the judgment rendered in the first case an
absolute bar to the subsequent action since that judgment is conclusive not only as to the
matters offered and received to sustain it but also as to any other matter which might have
been offered for that purpose and which could have been adjudged therein. 30 It is in this
concept that the term res judicata is more commonly and generally used as a ground for a
motion to dismiss in civil cases.31

The second rule of res judicata embodied in Section 47(c), Rule 39 is "conclusiveness of

judgment." This rule provides that any right, fact, or matter in issue directly adjudicated or
necessarily involved in the determination of an action before a competent court in which a
judgment or decree is rendered on the merits is conclusively settled by the judgment therein
and cannot again be litigated between the parties and their privies whether or not the claim or
demand, purpose, or subject matter of the two suits is the same.32 It refers to a situation where
the judgment in the prior action operates as an estoppel only as to the matters actually
determined or which were necessarily included therein.33

The case at bar satisfies the four essential requisites of "bar by prior judgment," viz:
 (a) finality of the former judgment;

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

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

(d) there must be, between the first and second actions, identity of parties, subject
matter and causes of action.34

There is no doubt that the judgment on appeal relative to Civil Case No. 94-1610 (that
rendered in CA-G.R. CV No. 50591) was a final judgment. Not only did it dispose of the case
on the merits; it also became executory as a consequence of the denial of FEBTC's motion for
reconsideration and appeal.35

Neither is there room to doubt that the judgment in Civil Case No. 94-1610 was on the merits
for it determined the rights and liabilities of the parties.36 To recall, it was ruled that: (1)
DATICOR overpaid by P5.3 million; (2) FEBTC was bound to refund the excess payment
but because DATICOR's claim against FEBTC was only P965,000, the court could only grant
so much as the relief prayed for; and (3) PDCP has no further claim against DATICOR
because its obligation had already been paid in full.

Right or wrong, that judgment bars another case based upon the same cause of action.37

As to the requisite of identity of parties, subject matter and causes of action, it cannot be
gainsaid that the first case, Civil Case No. 94-1610, was brought by petitioners to recover an
alleged overpayment of P5.3 million –P965,000 from FEBTC and P4.335 million from
PDCP.

On the other hand, Civil Case No. 00-540, filed by the same petitioners, was for the recovery
of P4.335 million which is admittedly part of the P5.3 million earlier sought to be recovered
in Civil Case No. 94-1610. This time, the action was brought solely against FEBTC which in
turn impleaded PDCP as a third party defendant.

In determining whether causes of action are identical to warrant the application of the rule
of res judicata, the test is to ascertain whether the same evidence which is necessary to
sustain the second action would suffice to authorize a recovery in the first even in cases in
which the forms or nature of the two actions are different.38 Simply stated, if the same facts or
evidence would sustain both, the two actions are considered the same within the rule that the
judgment in the former is a bar to the subsequent action.

It bears remembering that a cause of action is the delict or the wrongful act or omission
committed by the defendant in violation of the primary rights of the plaintiff.39

In the two cases, petitioners imputed to FEBTC the same alleged wrongful act of mistakenly
receiving and refusing to return an amount in excess of what was due it in violation of their
right to a refund. The same facts and evidence presented in the first case, Civil Case No. 94-
1610, were the very same facts and evidence that petitioners presented in Civil Case No. 00-
540.
Thus, the same Deed of Assignment between PDCP and FEBTC, the first and second
supplements to the Deed, the MOA between petitioners and FEBTC, and this Court's
Decision in G.R. No. 73198 were submitted in Civil Case No. 00-540.

Notably, the same facts were also pleaded by the parties in support of their allegations for,
and defenses against, the recovery of the P4.335 million. Petitioners, of course, plead the CA
Decision as basis for their subsequent claim for the remainder of their overpayment. It is well
established, however, that a party cannot, by varying the form of action or adopting a
different method of presenting his case, or by pleading justifiable circumstances as herein
petitioners are doing, escape the operation of the principle that one and the same cause of
action shall not be twice litigated.40

In fact, authorities tend to widen rather than restrict the doctrine of res judicata on the ground
that public as well as private interest demands the ending of suits by requiring the parties to
sue once and for all in the same case all the special proceedings and remedies to which they
are entitled.41

This Court finds well-taken then the pronouncement of the court a quo that to allow the re-
litigation of an issue that was finally settled as between petitioners and FEBTC in the prior
case is to allow the splitting of a cause of action, a ground for dismissal under Section 4 of
Rule 2 of the Rules of Court reading:

SEC. 4. Splitting of a single cause of action; effect of. – If two or more suits are
instituted on the basis of the same cause of action, the filing of one or a judgment
upon the merits in any one is available as a ground for the dismissal of the
others. (Emphasis and underscoring supplied)

This rule proscribes a party from dividing a single or indivisible cause of action into several
parts or claims and instituting two or more actions based on it.42 Because the plaintiff cannot
divide the grounds for recovery, he is mandated to set forth in his first action every ground
for relief which he claims to exist and upon which he relies; he cannot be permitted to rely
upon them by piecemeal in successive actions to recover for the same wrong or injury.43

Clearly then, the judgment in Civil Case No. 94-1610 operated as a bar to Civil Case No. 00-
540, following the above-quoted Section 4, Rule 2 of the Rules of Court.

A final word. Petitioners are sternly reminded that both the rules on res judicata and splitting
of causes of action are based on the salutary public policy against unnecessary multiplicity of
suits – interest reipublicae ut sit finis litium.44 Re-litigation of matters already settled by a
court's final judgment merely burdens the courts and the taxpayers, creates uneasiness and
confusion, and wastes valuable time and energy that could be devoted to worthier cases.45

WHEREFORE, the Petition is DENIED. The assailed Decision of the RTC, Branch 143,
Makati dismissing petitioners' complaint in Civil Case No. 00-540 is AFFIRMED.

Costs against petitioners.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. L-51058 January 27, 1992

ASIA PRODUCTION CO., INC., WANG TA PENG and WINSTON

WANG, petitioners,
vs.
HON. ERNANI CRUZ PAñO, as Judge of the Court of First Instance of Rizal (Quezon
City, Branch XVIII), LOLITA LEE LE HUA and ALBERTO DY, respondents.

Ismael J. Andres for petitioner Asia Production Co., Inc.

Burgos, Sarte, Rebueno & Sarte for petitioners.

Roman Careaga for Alberto Dy.

DAVIDE, JR.  J.:

The simple issue in this case is whether or not an action for the refund of partial payments of
the purchase price of a building covered by an oral agreement to sell it with an oral promise
to assign the contract of lease on the lot where the building is constructed is barred by the
Statute of Frauds.

Sometime in March 1976, private respondents, who claimed to be the owners of a building
constructed on a lot leased from Lucio San Andres and located in Valenzuela, Bulacan,
offered to sell the building to the petitioners for P170,000.00. Petitioners agreed because of
private respondents' assurance that they will also assign to the petitioners the contract of lease
over the land. The above agreement and promise were not reduced to writing. Private
respondents undertook to deliver to the petitioners the deed of conveyance over the building
and the deed of assignment of the contract of lease within sixty (60) days from the date of
payment of the downpayment of P20,000.00. The balance was to be paid in monthly
installments. On 20 March 1976, petitioners paid the downpayment and issued eight (8)
postdated checks drawn against the Equitable Banking Corporation for the payment of the
eight (8) monthly installments, as follows:

Check No. Amount Due Date

10112253 P10,000.00 June 30, 1976

10112254 20,000.00 July 30, 1976
10112255 20,000.00 August 30, 1976
10112256 20,000.00 September 30, 1976
10112257 20,000.00 October 30, 1976
 10112258 20,000.00 November 30, 1976
10112259 20,000.00 December 30, 1976
10112260 20,000.00 January 31, 1977

Relying on the good faith of private respondents, petitioners constructed in May 1976 a
weaving factory on the leased lot. Unfortunately, private respondents, despite extensions
granted, failed to comply with their undertaking to execute the deed to sale and to assign the
contract despite the fact that they were able to encash the checks dated 30 June and 30 July
1976 in the total amount of P30,000.00. Worse, the lot owner made it plain to petitioners that
he was unwilling to give consent to the assignment of the lease unless petitioners agreed to
certain onerous terms, such as an increase in rental, or the purchase of the land at a very
unconscionable price.

Petitioners were thus compelled to request for a stop payment order of the six (6) remaining
checks. Succeeding negotiations to save the transaction proved futile by reason of the
continued failure of private respondents to execute the deed of sale of the building and the
deed of assignment of the contract of lease.

So, on or about 29 December 1976, upon prior agreement with private respondents,
petitioners removed all their property, machinery and equipment from the building, vacated
the same and returned its possession to private respondents. Petitioners demanded from the
latter the return of their partial payment for the purchase price of the building in the total sum
of P50,000.00. Private respondents refused to return it. Hence, petitioners, filed against
private respondents a complaint 1 for its recovery and for actual, moral and exemplary
damages and attorney's fees with the then Court of First Instance (now Regional Trial Court)
of Quezon City, which was docketed as Civil Case No. Q-23593. The case was raffled to
Branch XVIII of the court which was then presided over by herein respondent Judge.

Private respondent Lolita Lee Le Hua did not file an Answer; hence, she was declared in
default.

Upon the other hand, private respondent Alberto Dy filed a motion

to dismiss the complaint on the ground that the claim on which the action is based — an
alleged purchase of a building which is not evidenced by any writing — cannot be proved by
parol evidence since Article 1356 in relation to Article 1358 of the Civil Code requires that it
should be in writing. 2 In their
opposition 3 to said motion, petitioners argue that their complaint is essentially for collection
of a sum of money; it does not seek to enforce the sale, but aims to compel private
respondents to refund a sum of money which was paid to them as purchase price in a sale
which did not materialize by reason of their bad faith. Furthermore, the execution of the
document was an undertaking of the private respondents, which they refused to comply with.
Hence, they cannot now be heard to complain against something which they themselves
brought about.

In his Order 4 of 18 April 1979, respondent Judge granted the motion to dismiss on the
ground that the complaint is barred by the Statute of Frauds. He says:

It cannot be disputed that the contract in this case is condemned by the

Statutes of Fraud (sic) it involves not merely the sale of real property (the
 building), it also includes an alleged lease agreement that must certainly be for
more than one year (See Art. 1403, No. 2, subparagraph e, New Civil Code).

Plaintiffs cannot avoid the Statutes of Fraud (sic) by saying that this is merely
an action for the collection of a sum of money. To be entitled to the sum of
P50,000.00, it is necessary to show that such contract was executed and the
same was violated but — plaintiffs are prevented from proving this alleged
agreement by parol evidence.

Neither may plaintiffs claim that by the payment of the sum of P50,000.00 the
contract was removed from the Statutes of Fraud (sic). This is so because
plaintiffs have not fully complied with their obligation to pay P170,000.00. If
there had been full payment of P170,000.00, the situation would have been
different.

Plaintiffs knew or should have known that their contract (as described by them
in their complaint) was unenforceable; they had thereby voluntarily assumed
the risks attendant to such contract. Moreover, the primordial aim of the
Statutes of Fraud (sic) is to prevent fraud and perjury in the enforcement of
obligations depending upon the unassisted memory of witnesses (Shoemaker
vs. La Tondeña, 68 Phil. 24). The Court would find it difficult to determine
whether the sum of P50,000.00 was paid because of the unenforceable
contract or for some other transactions.

Their motion for reconsideration 5 having been denied by respondent Judge in his Order 6 of
21 June 1979 for the reason that the oral contract in this case was not removed from the
operation of the Statute of Frauds because there was no full or complete performance by the
petitioners of the contract as required in Paterno vs. Jao Yan 7 and Babao
vs.  Perez, 8 petitioners filed this petition 9 on 16 July 1979, alleging therein as ground
therefor grave abuse of discretion on the part of respondent Judge in issuing the orders of 18
April 1979 and 21 June 1979.

After private respondent Alberto Dy filed his Comment 10 to the petition in compliance with
the resolution 11 of 23 July 1979 and petitioners filed their Reply 12 to said comment on 2
April 1980, this Court gave due course 13 to the petition. Private respondent Lolita Lee Le
Hua was considered to have waived her right to file her comment to the petition.14

Petitioners were subsequently required to file their Brief, which they complied with on 13
October 1981; 15 they make the following assignment of errors:

The lower court erred in holding that for a contract of purchase and sale to be
removed from the operation of the Statute of Frauds, there must be full and
complete payment of the purchase price.

II

The lower court erred in failing to appreciate the nature of petitioners' cause of
action.
 III

The lower court erred in not finding that this case is not covered by the Statute
of Frauds.

IV

The lower court erred in not following the procedure prescribed by this
Honorable Court in cases when partial performance is alleged.

The lower court erred in dismissing the case.

Private respondents did not file their Brief.

We find merit in the petition. Respondent Judge committed grave abuse of discretion in
dismissing the complaint on the ground that the claim is barred by the Statute of Frauds.

Article 1403 of the Civil Code declares the following contracts, among others,
as unenforceable, unless they are ratified:

xxx xxx xxx

(2) Those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received without the writing,
or a secondary evidence of its contents:

(a) An agreement that by its terms is not to be performed within

a year from the making thereof;

(b) A special promise to answer for the debt, default, or

miscarriage of another;

(c) An agreement made in consideration of marriage, other than

a mutual promise to marry;

(d) An agreement for the sale of goods, chattels or things in

action, at a price not less than five hundred pesos, unless the
buyer accept and receive part of such goods and chattels, or the
evidences, or some of them, of such things in action, or pay at
the time some part of the purchase money; but when a sale is
made by auction and entry is made by the auctioneer in his
sales book, at the time of the sale, of the amount and kind of
property sold, terms of sale, price, names of the purchasers and
person on whose account the sale is made, it is a sufficient
memorandum;
 (e) An agreement for the leasing for a longer period than one
year, or for the sale of real property or of an interest therein;

(f) A representation to the credit of a third person.

x x x           x x x          x x x

The purpose of the statute is to prevent fraud and perjury in the enforcement of obligations
depending for their evidence on the unassisted memory of witnesses by requiring certain
enumerated contracts and transactions to be evidenced by a writing signed by the party to be
charged. 16 It was not designed to further or perpetuate fraud. Accordingly, its application is
limited. It makes only ineffective actions for specific performance of the contracts covered by
it; it does not declare them absolutely void and of no effect. As explicitly provided for in the
above-quoted paragraph (2), Article 1403 of the Civil Code, the contracts concerned are
simply "unenforceable" and the requirement that they — or some note or memorandum
thereof — be in writing refers only to the manner they are to be proved. It goes without
saying then, as held in the early case of Almirol, et al. vs. Monserrat, 17 that the statute will
apply only to executory rather than executed contracts. Partial execution is even enough to
bar the application of the statute. In Carbonnel vs. Poncio, et al., 18 this Court held:

. . . It is well-settled in this jurisdiction that the Statute of Frauds is applicable

only to executory contracts (Facturan vs. Sabanal, 81 Phil. 512), not to
contracts that are totally or partially performed (Almirol, et al. vs. Monserrat,
48 Phil. 67, 70; Robles vs. Lizarraga Hermanos, 50 Phil. 387; Diana vs.
Macalibo, 74 Phil. 70).

Subject to a rule to the contrary followed in a few jurisdictions,

it is the accepted view that part performance of a parol contract
for the sale of real estate has the effect, subject to certain
conditions concerning the nature and extent of the acts
constituting performance and the right to equitable relief
generally, of taking such contract from the operation of the
statute of frauds, so that chancery may decree its specific
performance or grant other equitable relief. It is well settled in
Great Britain and in this country, with the exception of a few
states, that a sufficient part performance by the purchaser under
a parol contract for the sale of real estate removes the contract
form the operation of the statute of frauds (49 Am. Jur. 722-
723).

In the words of former Chief Justice Moran: "The reason is simple. In

executory contracts there is a wide field for fraud because unless they be in
writing there is no palpable evidence of the intention of the contracting parties.
The statute has precisely been enacted to prevent fraud." (Comments on the
Rules of Court, by Moran, Vol. III [1957 ed.] p. 178). However, if a contract
has been totally or partially performed, the exclusion of parol evidence would
promote fraud or bad faith, for it would enable the defendant to keep the
benefits already derived by him form the transaction in litigation, and, at the
same time, evade the obligations, responsibilities or liabilities assumed or
contracted by him thereby.
 It follows then that the statute applies only to executory contracts and in actions for
their specific performance. It does not apply to actions which are neither for violation
of a contract nor for the performance thereof. 19

There can be no dispute that the instant case is not for specific performance of the agreement
to sell the building and to assign the leasehold right. Petitioners merely seek to recover their
partial payment for the agreed purchase price of the building, which was to be paid on
installments, with the private respondents promising to execute the corresponding deed of
conveyance, together with the assignment of the leasehold rights, within two (2) months from
the payment of the agreed downpayment of P20,000.00. By their motion to dismiss, private
respondents theoretically or hypothetically admitted the truth of the allegations of fact in the
complaint. 20 Among the allegations therein are:
(1) that the P50,000.00 sought to be recovered represents the downpayment of P20,000.00
and two (2) monthly installments of the purchase price, and (2) that petitioners decided, in
effect, to withdraw from the agreement by ordering the stop payment of the remaining six (6)
checks and to return the possession of the building to private respondents because of the
latter's failure to comply with their agreement. The action is definitely not one for specific
performance, hence the Statute of Frauds does not apply. And even if it were for specific
performance, partial execution thereof by petitioners effectively bars the private respondents
from invoking it. Since it is for refund of what petitioners had paid under the agreement,
originally unenforceable under the statute, because petitioners had withdrawn therefrom due
to the "bad faith" of the private respondents, the latter cannot be allowed to take shelter under
the statute and keep the P50,000.00 for themselves. If this were the case, the statute would
only become a shield for fraud, allowing private respondents not only to escape performance
of their obligations, but also to keep what they had received from petitioners, thereby unjustly
enriching themselves.

Besides, even if the action were for specific performance, it was premature for the respondent
Judge to dismiss the complaint by reason of the Statute of Frauds despite the explicit
allegations of partial payment. As this Court stated in Carbonnel vs. Poncio, et al.: 21

For obvious reasons, it is not enough for a party to allege partial performance

in order to hold that there has been such performance and
to render a decision declaring that the Statute of Frauds is inapplicable. But
neither is such party required to establish such partial performance
by documentary proof before he could have the opportunity to introduce oral
testimony on the transaction. Indeed, such oral testimony would usually be
unnecessary if there were documents proving partial performance. Thus, the
rejection of any and all testimonial evidence on partial performance, would
nullify the rule that the Statute of Frauds is inapplicable to contracts which
have been partly executed, and lead to the very evils that the statute seeks to
prevent.

xxx xxx xxx

When the party concerned has pleaded partial performance, such party is
entitled to a reasonable chance to establish by parol evidence the truth of this
allegation, as well as the contract itself. "The recognition of the exceptional
effect of part performance in taking an oral contract out of the statute of frauds
 involves the principle that oral evidence is admissible in such cases to prove
both the contract and the part performance of the contract" (49 Am. Jur. 927).

We thus rule that an action by a withdrawing party to recover his partial payment of the
consideration of a contract, which is otherwise unenforceable under the Statute of Frauds, by
reason of the failure of the other contracting party to comply with his obligation, is not
covered by the Statute of Frauds.

WHEREFORE, the petition is hereby GRANTED. The challenged Orders of 18 April 1979
and 21 June 1979 in Civil Case No. Q-23593 of the court below are hereby ANNULLED and
SET ASIDE, and the complaint in said case is hereby ordered REINSTATED. The default
order against private respondent Lolita Lee Le Hua shall stand and private respondent
Alberto Dy is ordered to file his Answer to the complaint with the court below within ten (10)
days from receipt of this decision. This decision shall be immediately executory.

Costs against private respondents.

IT IS SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 112702 September 26, 1997

NATIONAL POWER CORPORATION, petitioner,

vs.
COURT OF APPEALS and CAGAYAN ELECTRIC POWER AND LIGHT CO., INC.
(CEPALCO), respondents.

G.R. No. 113613 September 26, 1997

PHIVIDEC INDUSTRIAL AUTHORITY, petitioner,

vs.
COURT OF APPEALS and CAGAYAN ELECTRIC POWER AND LIGHT CO., INC.
(CEPALCO), respondents.

ROMERO, J.:

Offered for resolution in these consolidated petitions for review on certiorari is the issue of
whether or not the National Power Corporation (NPC) has jurisdiction to determine whether
it may supply electric power directly to the facilities of an industrial corporation in areas
where there is an existing and operating electric power franchisee.

On June 17, 1961, the Cagayan Electric and power Light Company (CEPALCO) was
enfranchised by Republic Act No. 3247 "to construct, maintain and operate an electric light,
heat and power system for the purpose of generating and/or distributing electric light, heat
and/or power for sale within the City of Cagayan de Oro and its suburbs" for fifty (50) years.
Republic Act No. 3570, approved on June 21, 1963, expanded the area of coverage of the
franchise to include the municipalities of Tagoloan and Opol, both in the Province of
Misamis Oriental. On August 4, 1969, Republic Act No. 6020 further amended the same
franchise to include in the areas of CEPALCO's authority of "generating and distributing
electric light and power for sale," the municipalities of Villanueva and Jasaan, also of the said
province.

Presidential Decree No. 243, issued on July 12, 1973, created a "body corporate and politic"
to be known as the Philippine Veterans Investment Development Corporation (PHIVIDEC)
vested with authority to engage in "commercial, industrial, mining, agricultural and other
enterprises" among other powers1 and "to allow the full and continued employment of the
productive capabilities of and investment of the veterans and retirees of the Armed Forces of
the Philippines." On August 13, 1974, Presidential Decree No. 538 was promulgated to create
the PHIVIDEC Industrial Authority (PIA), a subsidiary of PHIVIDEC, to carry out the
government policy "to encourage, promote and sustain the economic and social growth of the
country and that the establishment of professionalized management of well-planned industrial
areas shall further this objective."2 Under Sec. 3 of P.D. No. 538, the first area for
development shall be located in the municipalities of Tagoloan and Villanueva.3 This area
forms part of the PHIVIDEC Industrial Estate Misamis Oriental (PIE-MO).

As manager of PIE-MO, PIA granted the Ferrochrome Philippines, Inc. (FPI) and Metal
Alloys Corporation (MAC) authority to operate in its area of development. On July 6, 1979,
PIA granted CEPALCO a temporary authority to retail electric power to the industries
operating within the PIE-MO.4 The Agreement executed by PIA and CEPALCO authorized
CEPALCO "to operate, administer, construct and distribute electric power within the
PHIVIDEC Industrial Estate, Misamis Oriental, such authority to be co-extensive with the
territorial jurisdiction of PHIVIDEC Industrial Estate, as defined in Sec. 3 of P.D. No. 538
and shall be for a period of five (5) years, renewable for another five (5) years at the option of
CEPALCO." The parties provided further that:

9. At the end of the fifth year, or at the end of the 10th year, should this Agreement be
thus renewed, PIA has the option to take over the operation of the electric service and
acquire by purchase CEPALCO's assets within PIE-MO. This option shall be
communicated to CEPALCO in writing at least 24 months before the date of
acquisition of assets and takeover of operation by PIA. Should PIA exercise its option
to purchase the assets of CEPALCO in PIE-MO, PIA shall respect the right of
ownership of and maintenance by CEPALCO of those assets inside PIE-MO not
covered by such purchase. . . .

According to PIA,5 CEPALCO proved no match to the power demands of the industries in

PIE-MO that most of these companies operating therein closed shop.6 Impelled by a "desire
to provide cheap power costs to power-intensive industries operating within the Estate," PIA
applied with the National Power Corporation (NPC) for direct power connection which the
latter in due course approved.7 One of the companies which entered into an agreement with
the NPC for a direct sale and supply of power was the Ferrochrome Phils., Inc. (FPI).

Contending that the said agreement violated its right as the authorized operator of an electric
light and power system in the area and the national electrification policy, CEPALCO filed
Civil Case No. Q-35945, a petition for prohibition, mandamus and injunction before the
Regional Trial Court of Quezon City against the NPC. Notwithstanding NPC's claim that it
was authorized by its Charter to sell electric power "in bulk" to industrial enterprises, the
lower court rendered a decision on May 2, 1984, restraining the NPC from supplying power
directly to FPI upon the ground that such direct sale, supply and delivery of electric power by
the NPC to FPI was violative of the rights of CEPALCO under its legislative franchise.
Hence, the lower court ordered the NPC to "permanently desist" from effecting direct supply
of power to the FPI and "from entering into and/or implementing any agreement or
arrangement for such direct power connection, unless coursed through the power line" of
CEPALCO.

Eventually, the case reached this Court through G.R. No. 72085.8 On December 28, 1989, the
Court denied the appeal interposed by NPC on the ground that the statutory authority given to
the NPC as regards direct supply of power to BOI-registered enterprises "should always be
subordinate to the 'total-electrification-of-the-entire-country-on-an-area-coverage basis
policy' enunciated in P. D. No. 40,"9 We held further that:
 Nor should we lose sight of the factual findings of the court a quo that petitioner-
appellee CEPALCO had not only been authorized by the Phividec Industrial
Authority to provide electrical power to the Phividec Industrial Estate within which
the FPI plant is located, but that petitioner-appellee CEPALCO had in fact, supplied
the latter's power requirements for the construction of its plant, upon FPI's application
therefor as early as October 17, 1980.

It bears emphasis then that "it is only after a hearing (or an opportunity for such a
hearing) where it is established that the affected private franchise holder is incapable
or unwilling to match the reliability and rates of NPC that direct connection with NPC
may be granted." Here, petitioner-appellee's reliability as a power supplier and ability
to match the NPC rates were never put in issue.

It is immaterial that petitioner-appellee's franchise was not exclusive. A privilege to

sell within specified territory, even if not exclusive, is a valuable property right
entitled to protection against unauthorized competition.10

Notwithstanding said decision, in September 1990, FPI filed a new application for the direct
supply of electric power from NPC. The Hearing Committee of the NPC had started hearing
the application but CEPALCO filed with the Regional Trial Court of Quezon City a petition
for contempt against NPC officials led by Ernesto Aboitiz. On August 10, 1992, the trial
court found the respondents in direct contempt of court and accordingly imposed upon them a
fine of P500.00 each.

The respondent NPC officials challenged before this Court the judgment holding them in
contempt of court through G.R. No. 107809, (Aboitiz v. Regino).11 In the Decision of July 5,
1993, the Court upheld the contempt ruling and, after quoting the lower court's decision of
May 2, 1984 which the Court upheld in G.R. No. 72085, said:

These directives show that the lower court (and this Court) intended the arrangement
between FPI and CEPALCO to be permanent and free from NAPOCOR's influence or
intervention. Any attempt on the part of NAPOCOR or its officers and/or employees
to strike a deal with FPI would be a clear and direct disobedience to a lawful order
and therefore contemptuous.

The petitioners call the attention of the Court to the statement of CEPALCO that
"NAPOCOR has already implemented in full" the May 2, 1984 decision of the lower
court as affirmed by this Court. They suggest that in view of this, the decision no
longer has any binding effect upon the parties, or to put it another way, has
become functus officio. Consequently, when they entertained the re-application of FPI
for direct power connection to NAPOCOR, they were not disobeying the May 2, 1984
order of the trial court and so should not be held in contempt.

This argument must be rejected in view of our finding of the permanence and
comprehensiveness of the challenged order of the trial court. "Permanent" is not a
difficult word to understand. It means "lasting or intended to last indefinitely without
change." As for the scope of the order, NAPOCOR was directed to "desist from
effecting, causing, and continuing the direct supply, sale and delivery of electricity
from its power line to the plant of Ferrochrome Philippines, Inc., and from entering
into and/or implementing any agreement or arrangement for such direct power
 connection, unless coursed through the power line of petitioner." (Emphasis
supplied.)

Meanwhile, the NPC Hearing Committee12 proceeded with its hearings. CEPALCO was duly
notified thereof but it opted to question the committee's jurisdiction. It did not submit any
evidence. Consequently, in its Report and Recommendation dated September 27, 1991, the
committee gave weight to the evidence presented by FPI that CEPALCO charged higher rates
than what the NPC would if allowed to supply power directly to FPI. Although the committee
considered as unfounded FPI's claim of CEPALCO's unreliability as a power supplier,13 it
nonetheless held that:

Form (sic) the foregoing and on the basis of the decision of the Supreme Court in the
case of National Power Corporation and Fine Chemicals (Phils.) Inc. v. The Court of
Appeals and the Manila Electric Company, G.R. No. 84695, May 8, 1990, FPI is
entitled to a direct connection to NPC as applied for considering that CEPALCO is
unwilling to match the rates of NPC for directly serving FPI and that FPI is a duly
registered BOI registered enterprises (sic). The Supreme Court in the aforestated case
has ruled as follows:

As consistently ruled by the Court pursuant to P.D. No. 380 as

amended by P.D. No. 395, NPC is statutorily empowered to directly
service all the requirements of a BOI registered enterprise provided
that, first, any affected private franchise holder is afforded an
opportunity to be heard on the application therefor and second, from
such a hearing, it is established that said private franchise holder is
incapable or unwilling to match the reliability and rates of NPC for
directly serving the latter (National Power Corporation v. Jacinto, 134
SCRA 435 [1985]. National Power Corporation v. Court of Appeals,
161 SCRA 103 [1988]).14

However, considering the "better and priority right" of PIA, the committee recommended that
instead of a direct power connection by the NPC to FPI, the connection should be made to
PIA "as a utility user for its industrial Estate at Tagoloan, Misamis Oriental."15

For its part, on November 3, 1989, CEPALCO filed with the Energy Regulatory Board
(ERB) a petition praying that the ERB "order the discontinuance of all existing direct supply
of power by the NPC within petitioner's franchise area" (ERB Case No. 89-430). On July 17,
1992, the ERB ruled that CEPALCO "is relatively efficient and reliable as manifested by its
very low system losses (far from the 14% standard) and very high power factors" and
therefore CEPALCO is technically capable "to distribute power to its consumers within its
franchise area, particularly the industrial customers." It disposed of the petition as follows:

WHEREFORE, in view of the foregoing premises, when the petitioner has been
proven to be capable of distributing power to its industrial consumers and having
passed the secondary considerations with a passing mark of 85%, judgment is hereby
rendered granting the relief prayed for. Accordingly, it is hereby declared that all
direct connection of industries to NPC within the franchise area of CEPALCO is no
longer necessary. Therefore, all existing NPC direct supply of power to industrial
consumers within the franchise area of CEPALCO is hereby ordered discontinued. . . .
.16
However, during the pendency of the Aboitiz case in this Court or on August 3, 1992, PIA
contracted the NPC for the construction of a 138 kilovolt (KV) transmission line from
Namutulan substation to the receiving and/or substation of PIA.17

As expected, on February 17, 1993, CEPALCO filed in the Regional Trial Court of Pasig
(Branch 68), a petition for certiorari, prohibition, mandamus and injunction against the NPC
and some officials of both the NPC and PIA.18 Docketed as SCA No. 290, the petition
specifically sought the issuance of a temporary restraining order. However, after hearing, the
prayer for the temporary restraining order was denied by the court in its order of March 12,
1993.19 CEPALCO filed a motion for the reconsideration of said order while NPC and PIA
moved for the dismissal of the petition.20

On June 23, 1993, noting the cases filed by CEPALCO all seeking exclusivity in the
distribution of electric power to areas covered by its franchise, the court21 ruled that "the right
of petitioner to supply electric power in the aforesaid area to the exclusion of other entities
had been settled once and for all by the Regional Trial Court of Quezon City wherein
petitioner obtained a favorable judgment." Hence, the petition was dismissed on the ground
of res judicata.22

Forthwith, CEPALCO elevated the case to this Court through a petition for certiorari,
prohibition and injunction with prayer for the issuance of a preliminary injunction or a
temporary restraining order. The petition was docketed as G.R. No. 110686 but on August
18, 1993, the Court referred it to the Court of Appeals pursuant to Sec. 9, paragraph 1 of B.P.
Blg. 129 conferring upon the appellate court original jurisdiction to issue writs of prohibition
and certiorari and auxiliary writs.23 In the Court of Appeals, the petition was docketed as CA-
G.R. No. 31935-SP.

On September 10, 1993, the Fifteenth Division of the Court of Appeals issued a
resolution24 denying the prayer for the issuance of a temporary restraining order on the
strength of Sec. 1 of P.D. No. 1818. It ruled that since the NPC is a public utility, it "enjoys
the protective mantle" of said decree prohibiting courts from issuing restraining orders or
preliminary injunctions in cases involving infrastructure and natural resource development
projects of, and operated by, the government.25

However, on September 17, 1993, upon a motion for reconsideration filed by CEPALCO and
a re-evaluation of the provisions of P.D. No. 1818, the Court of Appeals set aside its
resolution of September 10, 1993 and held that:

. . . the project intended by respondent NPC, which is the construction, completion

and operation of the 138-kv line, is not in consonance with the intendment of said
Decree which is to protect public utilities and their projects and activities intended for
public convenience and necessity. The project of respondent NPC is intended to serve
exclusively the needs of private entities, Metal Alloys Corporation and Ferrochrome
Philippine in Tagoloan, Misamis Oriental.

Accordingly, the Court of Appeals issued a temporary restraining order directing the private
respondents therein "to immediately cease and desist from proceeding with the construction,
completion and operation of the 138-kv line subject of the petition." The NPC, PIA and the
officers of both were directed to explain why the preliminary injunction prayed for should not
issue.26
In due course, the Court of Appeals rendered the decision27 of November 15, 1993 assailed
herein. After ruling that the lower court gravely abused its discretion in dismissing the
petition below on the grounds of res judicata and litis pendentia, the Court of Appeals
confronted squarely the issue of whether or not "the NPC itself has the power to determine
the propriety of direct power connection from its lines to any entity located within the
franchise area of another public utility."28

Elucidating that the ruling of this Court in both G.R. No. 78609 (NPC v. Court of
Appeals) 29 and G.R. No. 87697 (Del Monte [Philippines], Inc. v. Hon. Felix M. de Guzman,
etc., etc., et al.)30 categorically held that before a direct connection to the NPC maybe granted,
a proper administrative body must conduct a hearing "to determine which entity, the
franchise holder or the NPC, has the right to supply electric power to the entity applying for
direct connection," the Court of Appeals declared:

We have no doubt that the ERB, and not the NPC, is the administrative body referred
to by the Supreme Court where the hearing is to be conducted to determine the
propriety of direct connection. The charter of the ERB (PD 1206 in relation to EO
172) is clear on this:

The Board shall, after due notice and hearing, exercise the following
powers and functions, among others:

x x x           x x x          x x x

e. Issue Certificate of Public Convenience for the operation of electric

power utilities and services, . . . including the establishment and
regulation of areas of operation of particular operators of public power
utilities and services, the fixing of standards and specifications in all
cases related to the issued Certificate of Public Convenience . . .

Moreover, NPC is not an administrative body as jurisprudentially defined, and that the
NPC cannot usurp a power it has never been conferred by its charter or by other law
— the power to determine the validity of direct connection agreement it enters into in
violation of a power distributor's franchise.

Thus, considering that PIA professes to be and intends to engage in the business of a
public power utility, it must first apply for a public convenience and necessity
(conferment of operating authority) with the ERB. This may have been the opportune
time for ERB to determine whether to allow PIA to directly connect with NPC, with
notice and opportunity for CEPALCO considering that, as the latter alleges, this new
line which NPC is installing duplicates that existing Cepalco 138 kv line which NPC
itself turned over to Cepalco and for which it was paid in full.

Consequently, the Court of Appeals affirmed the dismissal of the petition, annulled and set
aside the decision of the Hearing Committee of the NPC on direct connection with PIA, and
ordered the NPC "to desist from continuing the construction of that NPC-Natumulan-
Phividec 138 kv transmission line."31

Without filing a motion for the reconsideration of said Decision, NPC filed in this Court on
December 9, 1993, a motion for an extension of time within which to file "the proper
petition." The motion which was docketed as G.R. No. 112702, was granted on December 20,
1993 with warning that no further extension would be granted. Thereafter, NPC filed a
motion praying that it be excused from filing the petition on account of the filing by PIA in
the Court of Appeals of a motion for the reconsideration of the Decision of November 15,
1993. In the Resolution of February 2, 1994, the Court noted and granted petitioner' s motion
and considered the case "closed and terminated."32 This resolution was withdrawn in the
Resolution of February 8, 199533 in view of the "inadvertent clerical error" terminating the
case, after the NPC had mailed its petition for review on certiorari on February 21, 1994.34

In the meantime, PIA filed a motion for reconsideration of the appellate court's Decision of
November 15, 1993 arguing in the main that, not being a party to previous cases between
CEPALCO and NPC, it was not bound by decisions of this Court. The Court of Appeals
denied the motion on January 28, 1994 on the basis of stare decisis where once the court has
laid down a principle of law as applicable to a certain state of facts, it will adhere to and
apply the principle to all future cases where the facts are substantially the
same.35 Hence, PIA filed a petition for review on certiorari which was docketed as G.R. No.
113613.

G.R. Nos. 112702 and 113613 were consolidated on June 15, 1994.36

In G.R. No. 112702, petitioner NPC contends that private respondent CEPALCO is not
entitled to relief because it has been forum-shopping. Private respondent had filed Civil Case
No. Q-93-14597 in the Regional Trial Court of Quezon City which had been forwarded to it
by the Regional Trial Court of Pasig. Said case and the instant case (SCA No. 290) deal with
the same issue of restoring CEPALCO' s right to supply power to FPI and MAC. Petitioner
thus contends that because the principle of litis pendentia applies, although other parties are
involved in the case before the Quezon City court, there is no basis for granting relief to
private respondent CEPALCO "(s)ince the dismissal for lack of jurisdiction was affirmed by
the respondent court."37 Corollarily, petitioner asserts that because the main case herein was
dismissed "without trial," the respondent appellate court should not have accorded private
respondent affirmative relief.38

Petitioner NPC's contention is based on the fact that on October 6, 1992, private respondent
CEPALCO filed against the NPC in the Regional Trial Court of Pasig, Civil Case No. 62490,
an action for specific performance and damages with prayer for preliminary mandatory
injunction directing the NPC to immediately restore to CEPALCO the distribution of power
pertaining to MAC's consumption.39 However, no summons was served and the ex-parte writ
prayed for was not issued. Nevertheless, the case was forwarded to the Regional Trial Court
of Quezon City where it was docketed as Civil Case No. 93-14597. That case was pending
when SCA No. 290 was filed before the Regional Trial Court of Pasig.

The Court of Appeals affirmed the lower court's dismissal of the case neither on the grounds
of res judicata nor ligis pendentia but on the "only one unresolved issue, which is whether
the NPC itself has the power to determine the propriety of direct power connection from its
lines to any entity located within the franchise area of another public utility."40 The Court of
Appeals opined that the effects of litis pendentia could not have resulted in the dismissal of
SCA No. 290 because Civil Case No. Q-35945 which became G.R. No. 72085 was based on
facts totally different from that of SCA No. 290.
In invoking litis pendentia, however, petitioner NPC refers to this case, SCA No. 290, and
Civil Case No. 93-14597. SCA No. 290 and Civil Case No. 93-14597 may both have the
same objective, the restoration of CEPALCO's right to distribute power to PIE-MO areas
under its franchise aside from the fact that the cases involve practically the same parties.
However, litis pendentia may not be successfully invoked to cause the dismissal of SCA No.
290.

In order to constitute a ground for the abatement or dismissal of an action, litis

pendentia must exhibit the concurrence of the following requisites: (a) identity of parties, or
at least such as representing the same interest in both actions; (b) identity of rights asserted
and relief prayed for, the relief being founded on the same facts, and (c) identity in the two
(2) cases should be such that the judgment that may be rendered in the pending case would,
regardless of which party is successful, amount to res judicata in the other.41 As a rule, the
second case filed should be abated under the maxim qui prior est tempore, potior est jure.
However, this rule is not a hard and fast one. The "priority-in-time rule" may give way to the
criterion of "more appropriate action." More recently, the criterion used was the "interest of
justice rule."42

We hold that the last criterion should be the basis for resolving this case, although it was filed
later than Civil Case No. 62490 which, upon its transfer, became Civil Case No. 93-14795. In
so doing, we shall avoid multiplicity of suits which is the matrix upon which litis pendentia is
anchored and eventually bring about the final settlement of the recurring issue of whether or
not the NPC may supply power directly to the industries within PIE-MO, notwithstanding the
operation of franchisee CEPALCO in the same area.

It should be noted that there is yet pending another case, namely, Civil Case No. 91-383,
instituted by PIA against CEPALCO in the Regional Trial Court of Misamis Oriental which
apparently deals with a related issue — PIA' s franchise or authority to provide power to
enterprises within the PIE-MO.43 Hence, the principle of litis pendentia which ordinarily
demands the dismissal of an action filed later than another, should be considered under the
primordial concept of "interest of justice," in order that a recurrent issue common to all cases
may be definitively resolved.

The principal and common question raised in these consolidated cases is: whether or not the
NPC may supply power directly to PIA in the PIE-MO area where CEPALCO has a directly
franchise. Petitioner PIA in G.R. No. 113613 asserts that it may receive power directly from
the NPC because it is a public utility. It avers that P.D. No. 538, as amended, empowers PIA
"as and to be a public utility to operate and serve the power needs within PIE-MO, i.e., a
specific area constituting a small portion of petitioner's franchise coverage," without,
however, specifying the particular provision which so empower PIA.44

A "public utility" is a business or service engaged in regularly supplying the public with
some commodity or service of public consequence such as electricity, gas, water,
transportation, telephone or telegraph service.45 The term implies public use and service.46

Petitioner PIA is a subsidiary of the PHIVIDEC with "governmental and proprietary

functions."47 Sec. 4 of P.D. No. 538 specifically confers upon it the following powers:

a. To operate, administer and manage the PHIVIDEC Industrial Areas and other areas
which shall hereafter be proclaimed, designated and specified in subsequent
 Presidential Proclamation; to construct acquire, own, lease, operate and
maintain infrastructure facilities, factory buildings, warehouses, dams, reservoirs,
water distribution, electric light and power systems, telecommunications and
transportation networks, or such other facilities and services necessary or useful in
the conduct of industry and commerce or in the attainment of the purposes and
objectives of this Decree; (Emphasis supplied.)

Clearly then, the PIA is authorized to render indirect service to the public by its
administration of the PHIVIDEC industrial areas like the PIE-MO and may, therefore, be
considered a public utility. As it is expressly authorized by law to perform the functions of a
public utility, a certificate of public convenience, as suggested by the Court of Appeals, is not
necessary for it to avail of a direct power connection from the NPC. However, such authority
to be a public utility may not be exercised in such a manner as to prejudice the rights of
existing franchisees. In fact, by its actions, PIA recognized the rights of the franchisees in the
area.

Accordingly, in pursuit of its powers "to grant such franchise for and to operate and maintain
within the Areas electric light, heat or power systems," etc. under Sec. 4 (i) of P.D. No. 538
and its rule-making power under Sec. 4 (1) of the same law, on July 20, 1979, the PIA Board
of Directors promulgated the "Rules and Regulations To Implement the Intent and Provisions
of Presidential Decree No. 538."48 Rule XI thereof on "Utilities and Services" provides as
follows:

Sec. 1. Utilities — It is the responsibility of the Authority to provide all required

utilities and services inside the Estate:

x x x           x x x          x x x

a) Contracts for the purchase of public utilities and/or

services shall be subject to the prior approval of the
Authority; Provided, however, that similar contract(s)
existing prior to the effectivity of this Rules and
Regulations shall continue to be in full force and effect.

xxx xxx xxx

(Emphasis supplied.)

It should be noted that the Rules and Regulations took effect thirty (30) days after its
publication in the Official Gazette on September 24, 1979 or more than three (3) months after
the July 6, 1979 contract between PIA and CEPALCO was entered into. As such, the Rules
and Regulations itself allowed the continuance of the supply of electric power to PIE-MO by
CEPALCO.

That the contract of July 6, 1979 was not renewed by the parties after the expiration of the
five-year period stipulated therein did not change the fact that within that five-year period, in
violation of both the contract and its Rules and Regulations, PIA applied with the NPC for
direct power connection. The
matter was aggravated by NPC's favorable action on the application, totally unmindful of the
extent of its powers under the law which, in National Power Corporation v. Court of
Appeals,49 the Court delimits as follows:

. . . . It is immaterial whether the direct connection is merely an improvement or an

increase in existing voltage, as alleged by petitioner, or a totally new and separate
electric service as claimed by private respondent. The law on the matter is clear. PD
40 promulgated on 7 November 1972 expressly provides that the generation of
electric power shall be undertaken solely by the NPC. However Section 3 of the same
decree also provides that the distribution of electric power shall be undertaken by
cooperatives, private utilities (such as the CEPALCO), local governments and other
entities duly authorized, subject to state regulation. ( Emphasis supplied.)

The same case ruled that "(i)t is only after a hearing (or an opportunity for such a hearing)
where it is established that the affected private franchise holder is incapable or unwilling to
match the reliability and rates of NPC that a direct connection with NPC may be
granted."50 As earlier stated, the Court arrived at the same ruling in the later cases of G.R.
Nos. 72085, 84695 and 87697.

Petitioner NPC attempted to abide by these rulings when it conducted a hearing to determine
whether it may supply power directly to PIA. While it notified CEPALCO of the hearing, the
NPC is not the proper authority referred to by this Court in the aforementioned earlier
decisions, not only because the subject of the hearing is a matter involving the NPC itself, but
also because the law has created the proper administrative body vested with authority to
conduct a hearing.

CEPALCO shares the view of the Court of Appeals that the Energy Regulatory Board (ERB)
is the proper administrative body for such hearings. However, a recent legislative
development has overtaken said view.

The ERB, which used to be the Board of Energy, is tasked with the following powers and
functions by Executive Order No. 172 which took effect immediately after its issuance on
May 8, 1987:

Sec. 3. Jurisdiction, Powers and Functions of the Board. — When warranted and only
when public necessity requires, the Board may regulate the business of importing,
exporting, re-exporting, shipping, transporting, processing, refining, marketing and
importing, distributing energy resources. . . .

The Board shall, upon prior notice and hearing, exercise the following, among other
powers and functions:

(a) Fix and regulate the prices of petroleum products;

(b) Fix and regulate the rate schedule or prices of piped gas to be
charged by duly franchised gas companies which distribute gas by
means of underground pipe system;

(c) Fix and regulate the rates of pipeline concessionaires under the
provisions of Republic Act No. 387, as amended, otherwise known as
 the "Petroleum Act of 1949," as amended by Presidential Decree No.
1700;

(d) Regulate the capacities of new refineries or additional capacities of

existing refineries and license refineries that may be organized after the
issuance of this Executive Order, under such terms and conditions as
are consistent with the national interest;

(e) Whenever the Board has determined that there is a shortage or any
petroleum product, or when public interest so requires, it may take
such steps as it may consider necessary, including the temporary
adjustment of the levels of prices of petroleum products and the
payment to the Oil Price Stabilization Fund created under Presidential
Decree No. 1956 by persons or entities engaged in the petroleum
industry of such amounts as may be determined by the Board, which
will enable the importer to recover its cost of importation.

As may be gleaned from said provisions, the ERB is basically a price or rate-fixing agency.
Apparently recognizing this basic function, Republic Act No. 7638 (An Act Creating the
Department of Energy, Rationalizing the Organization and Functions of Government
Agencies Related to Energy, and for Other Purposes),51 which was approved on December 9,
1992 and which took effect fifteen days after its complete publication in at least two (2)
national newspapers of general circulation, specifically provides as follows:

Sec. 18. Rationalization or Transfer of Functions of Attached or Related Agencies. —

The non-price regulatory jurisdiction, powers, and functions of the Energy Regulatory
Board as provided for in Section 3 of Executive Order No. 172 are hereby transferred
to the Department.

The foregoing transfer of powers and functions shall include all applicable funds and
appropriations, records, equipment, property, and such personnel as may be
necessary. Provided, That only such amount of funds and appropriations of the Board
as well as only the personnel thereof which are completely or primarily involved in
the exercise by said Board of its non-price regulatory powers and functions shall be
affected by such transfer.

The power of the NPC to determine, fix, and prescribe the rates being charged to its
customers under Section 4 of Republic Act No. 6395, as amended, as well as the
power of electric cooperatives to fix rates under Section 16 (o), Chapter II of
Presidential Decree No. 269, as amended, are hereby transferred to the Energy
Regulatory Board. The Board shall exercise its new powers only after due notice and
hearing and under the same procedure provided for in Executive Order No. 172.

Upon the effectivity of Republic Act No. 7638, then Acting Chairman of the Energy
Coordinating Council Delfin Lazaro transmitted to the Department of Justice the query of
whether or not the "non-power rate powers and functions" of the ERB are included in the
"jurisdiction, powers and functions transferred to the Department of Energy." Answering the
query in the affirmative, the Department of Justice rendered Opinion No. 22 dated February
12, 1993 the pertinent portion of which states:
 . . . we believe that since the provision of Section 18 on the transfer of certain powers
and functions from ERB to DOE is clear and unequivocal, and devoid of any
ambiguity, in the sense that it categorically refers to "non-price jurisdiction, powers
and functions" of ERB under Section 3 of E.O. No. 172, there is no room for
interpretation, but only for application, of the law. This is a cardinal rule of statutory
construction.

Clearly, the parameters of the transfer of functions from ERB to DOE pursuant to
Section 18, are circumscribed by the provision of Section 3 of E.O. No. 172 alone so
that, if there are other "related" functions of ERB under other provisions of E.O. No.
172 or other energy laws, these "related" functions, which may conceivably refer to
what you call "non-power rate powers and functions" of ERB, are clearly not
contemplated by Section 18 and are, therefore, not to be deemed included in the
transfer of functions from ERB to DOE under the said provision.

It may be argued that Section 26 of R.A. No. 7638 contains a repealing clause which
provides that:

All laws, presidential decrees, executive orders, rules and regulations

or parts thereof, inconsistent with the provisions of this Act, are hereby
repealed or modified accordingly. . . .

and, therefore, all provisions of E.O. No. 172 and related laws which are inconsistent
with the policy, purpose and intent of R.A. No. 7638 are deemed repealed. It has been
said, however, that a general repealing clause of such nature does not operate as an
express repeal because it fails to identify or designate the act or acts that are intended
to be repealed. Rather, it is a clause which predicates the intended repeal upon the
condition that a substantial conflict must be found on existing and prior acts of the
same subject matter. Such being the case, the presumption against implied repeals and
the rule on strict construction regarding implied repeals shall apply ex propio vigore.
For the legislature is presumed to know the existing laws so that, if repeal of
particular or specific laws is intended, the proper step is to so express it. The failure to
add a specific repealing clause particularly mentioning the statute to be repealed
indicates that the intent was not to repeal any existing law on the matter, unless an
irreconcilable inconsistency and repugnancy exists in the terms of the new and the old
laws (Iloilo Palay and Corn Planters Association, Inc. vs. Feliciano, 13 SCRA 377;
City of Naga vs. Agna, 71 SCRA 176, cited in Agpalo, Statutory Construction, 1990
Edition, pp. 191-192).

In view of the foregoing, it is our opinion that only the non-price regulatory functions
of ERB under Section 3 of E.O. 172 are transferred to the DOE. All other powers of
ERB which are not within the purview of its "non-price regulatory jurisdiction,
powers and functions" as defined in Section 3 are not so transferred to DOE and
accordingly remain vested in ERB.

The determination of which of two public utilities has the right to supply electric power to an
area which is within the coverage of both is certainly not a rate-fixing function which should
remain with the ERB. It deals with the regulation of the distribution of energy resources
which, under Executive Order No. 172, was expressly a function of ERB. However, with the
enactment of Republic Act No. 7638, the Department of Energy took over such function.
Hence, it is this Department which shall then determine whether CEPALCO or PIA should
supply power to PIE-MO.

Clearly, petitioner NPC's assertion that its "authority to entertain and hear direct connection
applications is a necessary incident of its express authority to sell electric power in bulk" is
now baseless.52 Even without the new legislation affecting its power to conduct hearings, it is
certainly irregular, if not downright anomalous for the NPC itself to determine whether it
should supply power directly to the PIA or the industries within the PIE-MO. It simply
cannot arrogate unto itself the authority to exercise non-rate fixing powers which now
devolves upon the Department of Energy and to hear and eventually grant itself the right to
supply power in bulk.53

On the other hand, ventilating the issue in a public hearing would not unduly prejudice
CEPALCO although it was enfranchised by law earlier than the PIA. Exclusivity of any
public franchise has not been favored by this Court such that in most, if not all, grants by the
government to private corporations, the interpretation of rights, privileges or franchises is
taken against the grantee. Thus in Alger Electric, Inc. v. Court of Appeals,54 the Court said.

. . . Exclusivity is given by law with the understanding that the company enjoying it is
self-sufficient and capable of supplying the needed service or product at moderate or
reasonable prices. It would be against public interest where the firm granted a
monopoly is merely an unnecessary conduit of electric power, jacking up prices as a
superfluous middleman or an inefficient producer which cannot supply cheap
electricity to power intensive industries. It is in the public interest when industries
dependent on heavy use of electricity are given reliable and direct power at the lower
costs thus enabling the sale of nationally marketed products at prices within the reach
of the masses. . . .

WHEREFORE, both petitions in G.R. No. 112702 and 113613 are hereby DENIED. The
Department of Energy is directed to conduct a hearing with utmost dispatch to determine
whether it is the Cagayan Electric Power and Light Co., Inc. or the National Power
Corporation, through the PHIVIDEC Industrial Authority, which should supply electric
power to the industries in the PHIVIDEC Industrial Estate-Misamis Oriental.

This Decision is immediately executory.

SO ORDERED.