RULE 1

FIRST DIVISION

G.R. No. 156759 June 5, 2013

ALLEN A. MACASAET, NICOLAS V. QUIJANO, JR., ISAIAS ALBANO, LILY REYES, JANET BAY, JESUS R. GALANG,
AND RANDY HAGOS, Petitioners,
vs.
FRANCISCO R. CO, JR., Respondent.

DECISION

BERSAMIN, J.:

To warrant the substituted service of the summons and copy of the complaint, the serving officer must
first attempt to effect the same upon the defendant in person. Only after the attempt at personal service
has become futile or impossible within a reasonable time may the officer resort to substituted service.

The Case

Petitioners – defendants in a suit for libel brought by respondent – appeal the decision promulgated on
March 8, 20021 and the resolution promulgated on January 13, 2003,2 whereby the Court of Appeals (CA)
respectively dismissed their petition for certiorari, prohibition and mandamus and denied their motion for
reconsideration. Thereby, the CA upheld the order the Regional Trial Court (RTC), Branch 51, in Manila had
issued on March 12, 2001 denying their motion to dismiss because the substituted service of the summons
and copies of the complaint on each of them had been valid and effective.3

Antecedents

On July 3, 2000, respondent, a retired police officer assigned at the Western Police District in Manila, sued
Abante Tonite, a daily tabloid of general circulation; its Publisher Allen A. Macasaet; its Managing Director
Nicolas V. Quijano; its Circulation Manager Isaias Albano; its Editors Janet Bay, Jesus R. Galang and Randy
Hagos; and its Columnist/Reporter Lily Reyes (petitioners), claiming damages because of an allegedly
libelous article petitioners published in the June 6, 2000 issue of Abante Tonite. The suit, docketed as Civil
Case No. 00-97907, was raffled to Branch 51 of the RTC, which in due course issued summons to be served
on each defendant, including Abante Tonite, at their business address at Monica Publishing Corporation,
301-305 3rd Floor, BF Condominium Building, Solana Street corner A. Soriano Street, Intramuros, Manila.4

In the morning of September 18, 2000, RTC Sheriff Raul Medina proceeded to the stated address to effect
the personal service of the summons on the defendants. But his efforts to personally serve each defendant
in the address were futile because the defendants were then out of the office and unavailable. He returned
in the afternoon of that day to make a second attempt at serving the summons, but he was informed that
petitioners were still out of the office. He decided to resort to substituted service of the summons, and
explained why in his sheriff’s return dated September 22, 2005,5 to wit:

SHERIFF’S RETURN

This is to certify that on September 18, 2000, I caused the service of summons together with copies of
complaint and its annexes attached thereto, upon the following:

1. Defendant Allen A. Macasaet, President/Publisher of defendant AbanteTonite, at Monica Publishing

Corporation, Rooms 301-305 3rd Floor, BF Condominium Building, Solana corner A. Soriano Streets,
Intramuros, Manila, thru his secretary Lu-Ann Quijano, a person of sufficient age and discretion working
therein, who signed to acknowledge receipt thereof. That effort (sic) to serve the said summons personally
upon said defendant were made, but the same were ineffectual and unavailing on the ground that per
information of Ms. Quijano said defendant is always out and not available, thus, substituted service was
applied;

2. Defendant Nicolas V. Quijano, at the same address, thru his wife Lu-Ann Quijano, who signed to
acknowledge receipt thereof. That effort (sic) to serve the said summons personally upon said defendant
were made, but the same were ineffectual and unavailing on the ground that per information of (sic) his
wife said defendant is always out and not available, thus, substituted service was applied;
3. Defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy Hagos and Lily Reyes, at the same address,
thru Rene Esleta, Editorial Assistant of defendant AbanteTonite, a person of sufficient age and discretion
working therein who signed to acknowledge receipt thereof. That effort (sic) to serve the said summons
personally upon said defendants were made, but the same were ineffectual and unavailing on the ground
that per information of (sic) Mr. Esleta said defendants is (sic) always roving outside and gathering news,
thus, substituted service was applied.

Original copy of summons is therefore, respectfully returned duly served.

Manila, September 22, 2000.

On October 3, 2000, petitioners moved for the dismissal of the complaint through counsel’s special
appearance in their behalf, alleging lack of jurisdiction over their persons because of the invalid and
ineffectual substituted service of summons. They contended that the sheriff had made no prior attempt
to serve the summons personally on each of them in accordance with Section 6 and Section 7, Rule 14 of
the Rules of Court. They further moved to drop Abante Tonite as a defendant by virtue of its being neither
a natural nor a juridical person that could be impleaded as a party in a civil action.

At the hearing of petitioners’ motion to dismiss, Medina testified that he had gone to the office address
of petitioners in the morning of September 18, 2000 to personally serve the summons on each defendant;
that petitioners were out of the office at the time; that he had returned in the afternoon of the same day
to again attempt to serve on each defendant personally but his attempt had still proved futile because all
of petitioners were still out of the office; that some competent persons working in petitioners’ office had
informed him that Macasaet and Quijano were always out and unavailable, and that Albano, Bay, Galang,
Hagos and Reyes were always out roving to gather news; and that he had then resorted to substituted
service upon realizing the impossibility of his finding petitioners in person within a reasonable time.

On March 12, 2001, the RTC denied the motion to dismiss, and directed petitioners to file their answers
to the complaint within the remaining period allowed by the Rules of Court,6 relevantly stating:

Records show that the summonses were served upon Allen A. Macasaet, President/Publisher of defendant
AbanteTonite, through LuAnn Quijano; upon defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy
Hagos and Lily Reyes, through Rene Esleta, Editorial Assistant of defendant Abante Tonite (p. 12, records).
It is apparent in the Sheriff’s Return that on several occasions, efforts to served (sic) the summons
personally upon all the defendants were ineffectual as they were always out and unavailable, so the Sheriff
served the summons by substituted service.

Considering that summonses cannot be served within a reasonable time to the persons of all the
defendants, hence substituted service of summonses was validly applied. Secretary of the President who
is duly authorized to receive such document, the wife of the defendant and the Editorial Assistant of the
defendant, were considered competent persons with sufficient discretion to realize the importance of the
legal papers served upon them and to relay the same to the defendants named therein (Sec. 7, Rule 14,
1997 Rules of Civil Procedure).

WHEREFORE, in view of the foregoing, the Motion to Dismiss is hereby DENIED for lack of merit..

Accordingly, defendants are directed to file their Answers to the complaint within the period still open to
them, pursuant to the rules.

SO ORDERED.

Petitioners filed a motion for reconsideration, asserting that the sheriff had immediately resorted to
substituted service of the summons upon being informed that they were not around to personally receive
the summons, and that Abante Tonite, being neither a natural nor a juridical person, could not be made a
party in the action.

On June 29, 2001, the RTC denied petitioners’ motion for reconsideration.7 It stated in respect of the
service of summons, as follows:

The allegations of the defendants that the Sheriff immediately resorted to substituted service of summons
upon them when he was informed that they were not around to personally receive the same is untenable.
During the hearing of the herein motion, Sheriff Raul Medina of this Branch of the Court testified that on
September 18, 2000 in the morning, he went to the office address of the defendants to personally serve
summons upon them but they were out. So he went back to serve said summons upon the defendants in
the afternoon of the same day, but then again he was informed that the defendants were out and
unavailable, and that they were always out because they were roving around to gather news. Because of
that information and because of the nature of the work of the defendants that they are always on field,
so the sheriff resorted to substituted service of summons. There was substantial compliance with the rules,
considering the difficulty to serve the summons personally to them because of the nature of their job
which compels them to be always out and unavailable. Additional matters regarding the service of
summons upon defendants were sufficiently discussed in the Order of this Court dated March 12, 2001.

Regarding the impleading of Abante Tonite as defendant, the RTC held, viz:

"Abante Tonite" is a daily tabloid of general circulation. People all over the country could buy a copy of
"Abante Tonite" and read it, hence, it is for public consumption. The persons who organized said
publication obviously derived profit from it. The information written on the said newspaper will affect the
person, natural as well as juridical, who was stated or implicated in the news. All of these facts imply that
"Abante Tonite" falls within the provision of Art. 44 (2 or 3), New Civil Code. Assuming arguendo that
"Abante Tonite" is not registered with the Securities and Exchange Commission, it is deemed a corporation
by estoppels considering that it possesses attributes of a juridical person, otherwise it cannot be held liable
for damages and injuries it may inflict to other persons.

Undaunted, petitioners brought a petition for certiorari, prohibition, mandamusin the CA to nullify the
orders of the RTC dated March 12, 2001 and June 29, 2001.

Ruling of the CA

On March 8, 2002, the CA promulgated its questioned decision,8 dismissing the petition for certiorari,
prohibition, mandamus, to wit:

We find petitioners’ argument without merit. The rule is that certiorari will prosper only if there is a
showing of grave abuse of discretion or an act without or in excess of jurisdiction committed by the
respondent Judge. A judicious reading of the questioned orders of respondent Judge would show that the
same were not issued in a capricious or whimsical exercise of judgment. There are factual bases and legal
justification for the assailed orders. From the Return, the sheriff certified that "effort to serve the summons
personally xxx were made, but the same were ineffectual and unavailing xxx.

and upholding the trial court’s finding that there was a substantial compliance with the rules that allowed
the substituted service.

Furthermore, the CA ruled:

Anent the issue raised by petitioners that "Abante Tonite is neither a natural or juridical person who may
be a party in a civil case," and therefore the case against it must be dismissed and/or dropped, is
untenable.

The respondent Judge, in denying petitioners’ motion for reconsideration, held that:

xxxx

Abante Tonite’s newspapers are circulated nationwide, showing ostensibly its being a corporate entity,
thus the doctrine of corporation by estoppel may appropriately apply.

An unincorporated association, which represents itself to be a corporation, will be estopped from denying
its corporate capacity in a suit against it by a third person who relies in good faith on such representation.

There being no grave abuse of discretion committed by the respondent Judge in the exercise of his
jurisdiction, the relief of prohibition is also unavailable.

WHEREFORE, the instant petition is DENIED. The assailed Orders of respondent Judge are AFFIRMED.

SO ORDERED.9

On January 13, 2003, the CA denied petitioners’ motion for reconsideration.10

Issues
Petitioners hereby submit that:

1. THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN HOLDING THAT THE TRIAL COURT
ACQUIRED JURISDICTION OVER HEREIN PETITIONERS.

2. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR BY SUSTAINING THE INCLUSION OF ABANTE
TONITE AS PARTY IN THE INSTANT CASE.11

Ruling

The petition for review lacks merit.

Jurisdiction over the person, or jurisdiction in personam –the power of the court to render a personal
judgment or to subject the parties in a particular action to the judgment and other rulings rendered in the
action – is an element of due process that is essential in all actions, civil as well as criminal, except in
actions in rem or quasi in rem. Jurisdiction over the defendantin an action in rem or quasi in rem is not
required, and the court acquires jurisdiction over an actionas long as it acquires jurisdiction over the
resthat is thesubject matter of the action. The purpose of summons in such action is not the acquisition
of jurisdiction over the defendant but mainly to satisfy the constitutional requirement of due process.12

The distinctions that need to be perceived between an action in personam, on the one hand, and an action
inrem or quasi in rem, on the other hand, are aptly delineated in Domagas v. Jensen,13 thusly:

The settled rule is that the aim and object of an action determine its character. Whether a proceeding is
in rem, or in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by
these only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought
against the person and is based on the jurisdiction of the person, although it may involve his right to, or
the exercise of ownership of, specific property, or seek to compel him to control or dispose of it in
accordance with the mandate of the court. The purpose of a proceeding in personam is to impose, through
the judgment of a court, some responsibility or liability directly upon the person of the defendant. Of this
character are suits to compel a defendant to specifically perform some act or actions to fasten a pecuniary
liability on him. An action in personam is said to be one which has for its object a judgment against the
person, as distinguished from a judgment against the property to determine its state. It has been held that
an action in personam is a proceeding to enforce personal rights or obligations; such action is brought
against the person. As far as suits for injunctive relief are concerned, it is well-settled that it is an injunctive
act in personam. In Combs v. Combs, the appellate court held that proceedings to enforce personal rights
and obligations and in which personal judgments are rendered adjusting the rights and obligations
between the affected parties is in personam. Actions for recovery of real property are in personam.

On the other hand, a proceeding quasi in rem is one brought against persons seeking to subject the
property of such persons to the discharge of the claims assailed. In an action quasi in rem, an individual is
named as defendant and the purpose of the proceeding is to subject his interests therein to the obligation
or loan burdening the property. Actions quasi in rem deal with the status, ownership or liability of a
particular property but which are intended to operate on these questions only as between the particular
parties to the proceedings and not to ascertain or cut off the rights or interests of all possible claimants.
The judgments therein are binding only upon the parties who joined in the action.

As a rule, Philippine courts cannot try any case against a defendant who does not reside and is not found
in the Philippines because of the impossibility of acquiring jurisdiction over his person unless he voluntarily
appears in court; but when the case is an action in rem or quasi in rem enumerated in Section 15, Rule 14
of the Rules of Court, Philippine courts have jurisdiction to hear and decide the case because they have
jurisdiction over the res, and jurisdiction over the person of the non-resident defendant is not essential.
In the latter instance, extraterritorial service of summons can be made upon the defendant, and such
extraterritorial service of summons is not for the purpose of vesting the court with jurisdiction, but for the
purpose of complying with the requirements of fair play or due process, so that the defendant will be
informed of the pendency of the action against him and the possibility that property in the Philippines
belonging to him or in which he has an interest may be subjected to a judgment in favor of the plaintiff,
and he can thereby take steps to protect his interest if he is so minded. On the other hand, when the
defendant in an action in personam does not reside and is not found in the Philippines, our courts cannot
try the case against him because of the impossibility of acquiring jurisdiction over his person unless he
voluntarily appears in court.14
As the initiating party, the plaintiff in a civil action voluntarily submits himself to the jurisdiction of the
court by the act of filing the initiatory pleading. As to the defendant, the court acquires jurisdiction over
his person either by the proper service of the summons, or by a voluntary appearance in the action.15

Upon the filing of the complaint and the payment of the requisite legal fees, the clerk of court forthwith
issues the corresponding summons to the defendant.16 The summons is directed to the defendant and
signed by the clerk of court under seal. It contains the name of the court and the names of the parties to
the action; a direction that the defendant answers within the time fixed by the Rules of Court; and a notice
that unless the defendant so answers, the plaintiff will take judgment by default and may be granted the
relief applied for.17 To be attached to the original copy of the summons and all copies thereof is a copy of
the complaint (and its attachments, if any) and the order, if any, for the appointment of a guardian ad
litem.18

The significance of the proper service of the summons on the defendant in an action in personam cannot
be overemphasized. The service of the summons fulfills two fundamental objectives, namely: (a) to vest
in the court jurisdiction over the person of the defendant; and (b) to afford to the defendant the
opportunity to be heard on the claim brought against him.19 As to the former, when jurisdiction in
personam is not acquired in a civil action through the proper service of the summons or upon a valid
waiver of such proper service, the ensuing trial and judgment are void.20 If the defendant knowingly does
an act inconsistent with the right to object to the lack of personal jurisdiction as to him, like voluntarily
appearing in the action, he is deemed to have submitted himself to the jurisdiction of the court.21 As to
the latter, the essence of due process lies in the reasonable opportunity to be heard and to submit any
evidence the defendant may have in support of his defense. With the proper service of the summons being
intended to afford to him the opportunity to be heard on the claim against him, he may also waive the
process.21 In other words, compliance with the rules regarding the service of the summons is as much an
issue of due process as it is of jurisdiction.23

Under the Rules of Court, the service of the summons should firstly be effected on the defendant himself
whenever practicable. Such personal service consists either in handing a copy of the summons to the
defendant in person, or, if the defendant refuses to receive and sign for it, in tendering it to him.24 The
rule on personal service is to be rigidly enforced in order to ensure the realization of the two fundamental
objectives earlier mentioned. If, for justifiable reasons, the defendant cannot be served in person within a
reasonable time, the service of the summons may then be effected either (a) by leaving a copy of the
summons at his residence with some person of suitable age and discretion then residing therein, or (b) by
leaving the copy at his office or regular place of business with some competent person in charge thereof.25
The latter mode of service is known as substituted service because the service of the summons on the
defendant is made through his substitute.

It is no longer debatable that the statutory requirements of substituted service must be followed strictly,
faithfully and fully, and any substituted service other than that authorized by statute is considered
ineffective.26 This is because substituted service, being in derogation of the usual method of service, is
extraordinary in character and may be used only as prescribed and in the circumstances authorized by
statute.27 Only when the defendant cannot be served personally within a reasonable time may
substituted service be resorted to. Hence, the impossibility of prompt personal service should be shown
by stating the efforts made to find the defendant himself and the fact that such efforts failed, which
statement should be found in the proof of service or sheriff’s return.28 Nonetheless, the requisite showing
of the impossibility of prompt personal service as basis for resorting to substituted service may be waived
by the defendant either expressly or impliedly.29

There is no question that Sheriff Medina twice attempted to serve the summons upon each of petitioners
in person at their office address, the first in the morning of September 18, 2000 and the second in the
afternoon of the same date. Each attempt failed because Macasaet and Quijano were "always out and not
available" and the other petitioners were "always roving outside and gathering news." After Medina
learned from those present in the office address on his second attempt that there was no likelihood of any
of petitioners going to the office during the business hours of that or any other day, he concluded that
further attempts to serve them in person within a reasonable time would be futile. The circumstances fully
warranted his conclusion. He was not expected or required as the serving officer to effect personal service
by all means and at all times, considering that he was expressly authorized to resort to substituted service
should he be unable to effect the personal service within a reasonable time. In that regard, what was a
reasonable time was dependent on the circumstances obtaining. While we are strict in insisting on
personal service on the defendant, we do not cling to such strictness should the circumstances already
justify substituted service instead. It is the spirit of the procedural rules, not their letter, that governs.30
In reality, petitioners’ insistence on personal service by the serving officer was demonstrably superfluous.
They had actually received the summonses served through their substitutes, as borne out by their filing of
several pleadings in the RTC, including an answer with compulsory counterclaim ad cautelam and a pre-
trial brief ad cautelam. They had also availed themselves of the modes of discovery available under the
Rules of Court. Such acts evinced their voluntary appearance in the action.

Nor can we sustain petitioners’ contention that Abante Tonite could not be sued as a defendant due to its
not being either a natural or a juridical person. In rejecting their contention, the CA categorized Abante
Tonite as a corporation by estoppel as the result of its having represented itself to the reading public as a
corporation despite its not being incorporated. Thereby, the CA concluded that the RTC did not gravely
abuse its discretion in holding that the non-incorporation of Abante Tonite with the Securities and
Exchange Commission was of no consequence, for, otherwise, whoever of the public who would suffer any
damage from the publication of articles in the pages of its tabloids would be left without recourse. We
cannot disagree with the CA, considering that the editorial box of the daily tabloid disclosed that basis,
nothing in the box indicated that Monica Publishing Corporation had owned Abante Tonite.

WHEREFORE, the Court AFFIRMS the decision promulgated on March 8, 2002; and ORDERS petitioners to
pay the costs of suit.

SO ORDERED.

RULE 2
G.R. No. 170750 April 7, 2009
HEIRS OF TOMAS DOLLETON, HERACLIO ORCULLO, REMEDIOS SAN PEDRO, HEIRS OF
BERNARDO MILLAMA, HEIRS OF AGAPITO VILLANUEVA, HEIRS OF HILARION GARCIA,
SERAFINA SP ARGANA, and HEIRS OF MARIANO VILLANUEVA, Petitioners,
vs.
FIL-ESTATE MANAGEMENT INC., ET AL. AND THE REGISTER OF DEEDS OF LAS PIÑAS
CITY, Respondents.

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing (1) the Decision1
dated 16 September 2005, rendered by the Court of Appeals in CA-G.R. CV No. 80927, which affirmed the
Resolutions2 dated 8 September 2000 and 30 June 2003, of the Regional Trial Court (RTC), Branch 253, of
Las Piñas City, dismissing the Complaints in Civil Cases No. LP-97-0228, No. LP-97-0229, No. LP-97-0230,
No. LP-97-0231, No. LP-97-0236, No. LP-97-0237, No. LP-97-0238, and No. LP-97-0239; and (2) the
Resolution dated 9 December 2005 of the same court denying petitioners’ Motion for Reconsideration.

In October 1997, petitioners Heirs of Tomas Dolleton,3 Heraclio Orcullo, Remedios San Pedro, et al.,4 Heirs
of Bernardo Millama, et al.,5 Heirs of Agapito Villanueva, et al.,6 Heirs of Hilarion Garcia, et al.,7 Serafina
SP Argana, et al.,8 and Heirs of Mariano Villanueva, et al.9 filed before the RTC separate Complaints for
Quieting of Title and/or Recovery of Ownership and Possession with Preliminary Injunction/Restraining
Order and Damages against respondents Fil-Estate Management Inc., Spouses Arturo E. Dy and Susan Dy,
Megatop Realty Development, Inc.,10 and the Register of Deeds of Las Piñas. The Complaints, which were
later consolidated, were docketed as follows:

1. Civil Case No. L-97-0228, which was filed by the Heirs of Tomas Dolleton covering a parcel of land with
an area of 17,681 square meters, located in Magasawang Mangga, Barrio Pugad Lawin, Las Piñas, Rizal
under Psu-235279 approved by the Director of the Bureau of Lands on 20 February 1959;

2. Civil Case No. L-97-0229, which was filed by Heraclio Orcullo covering two (2) parcels of land with the
total areas of 14,429 square meters and 2,105 square meters, respectively, located in Magasawang
Mangga, Barrio Pugad Lawin, Las Piñas, Rizal under Lots 1 and 2, Psu-169404 approved by the Director of
the Bureau of Lands on 4 December 1959;

3. Civil Case No. L-97-0230, which was filed by Remedios San Pedro, et al., covering a parcel of land with
an area of 17,159 square meters, located in Barrio Pugad Lawin, Las Piñas, Rizal under Psu-96901 approved
by the Director of the Bureau of Lands on 21 July 1933;

4. Civil Case No. L-97-0231, which was filed by the Heirs of Bernardo Millama, et al., covering a parcel of
land with an area of 23,359 square meters, located in Magasawang Mangga, Barrio Pugad Lawin, Las Piñas,
Rizal under Psu-96905 approved by the Director of the Bureau of Lands on 16 January 1933;
5. Civil Case No. L-97-0236, which was filed by the Heirs of Agapito Villanueva covering a parcel of land
with an area of 10,572 square meters, located in Magasawang Mangga, Barrio Pugad Lawin, Las Piñas,
Rizal;

6. Civil Case No. L-97-0237, which was filed by the Heirs of Hilarion Garcia, et al., covering a parcel of land
with an area of 15,372 square meters, located in Magasawang Mangga, Barrio Pugad Lawin, Las Piñas,
Rizal under Psu-96920 approved by the Director of the Bureau of Lands on 16 January 1933;

7. Civil Case No. L-97-0238, which was filed by Serafina SP Argana, et al., covering a parcel of land with an
area of 29,391 square meters, located in Magasawang Mangga, Barrio Pugad Lawin, Las Piñas, Rizal under
Psu-96909 approved by the Director of the Bureau of Lands on 18 January 1933; and

8. Civil Case No. L-97-0239, which was filed by the Heirs of Mariano Villanueva, et al., covering a parcel of
land with an area of 7,454 square meters, located in Magasawang Mangga, Barrio Pugad Lawin, Las Piñas,
Rizal under Psu-96910 approved by the Director of the Bureau of Lands on 16 January 1933.

The eight Complaints11 were similarly worded and contained substantially identical allegations.
Petitioners claimed in their Complaints that they had been in continuous, open, and exclusive possession
of the afore-described parcels of land (subject properties) for more than 90 years until they were forcibly
ousted by armed men hired by respondents in 1991. They had cultivated the subject properties and
religiously paid the real estate taxes for the same. Respondents cannot rely on Transfer Certificates of Title
(TCTs) No. 9176, No. 9177, No. 9178, No. 9179, No. 9180, No. 9181 and No. 9182,12 issued by the Registry
of Deeds of Las Piñas in their names, to support their claim over the subject properties since, petitioners
averred, the subject properties were not covered by said certificates. Petitioners also alleged that said
TCTs, purportedly derived from Original Certificate of Title (OCT) No. 6122, issued in favor of Jose
Velasquez, were spurious.

To support their narration of facts, petitioners cited Vda. de Cailles v. Mayuga13 and Orosa v. Migrino,14
which both involved the parcel of land referred to as Lot 9, Psu-11411, Amd-2. In these cases, the Court
adjudicated said piece of land to Dominador Mayuga, who later transferred it to Marciano Villanueva, who
sold it to Nicolas Orosa. Pending a controversy between the Heirs of Nicolas Orosa and Jose Velasquez,
Delta Motors Corporation somehow acquired the rights over their conflicting claims to the land and
managed to obtain certificates of title over the same. Delta Motors Corporation sold the land to
Goldenrod, Inc., which finally transferred it to a consortium composed of respondents, Peaksun
Enterprises and Export Corporation, and Elena Jao.

Petitioners stressed, however, that in Vda. de Cailles and Orosa, the land that was transferred was Lot 9,
Psu-11411, Amd-2, measuring 53 hectares, which was only a portion of the entire Lot 9, Psu-11411, with
a total area of 119.8 hectares. And respondents’ TCTs, derived from OCT No. 6122 in the name of Jose
Velasquez, covered only 26.44 hectares or roughly half of Lot 9, Psu-11411, Amd-2. Petitioners averred
that the subject properties were not included in the 53 hectares of Lot 9, Psu-11411, adjudicated to
Dominador Mayuga.

Petitioners thus sought from the RTC that an order be issued enjoining respondents from making any
developments on the subject properties, and that after hearing, judgment be rendered as follows:

A. [Herein respondents] be ordered to recognize the rights of [herein petitioners]; to vacate the subject
lot and peacefully surrender possession thereof to [petitioners]; and that Transfer Certificate of Title
Numbers 9176, 9177, 9178, 9179, 9180 and 9182 be cancelled by the Register of Deeds for Las Pinas,
Metro Manila, insofar as they are or may be utilized to deprive [petitioners] of the possession and
ownership of said lot.

B. Making the preliminary injunctions permanent.

C. An order be issued directing [respondents] to pay [petitioners] the sums of:

a. ₱500,000.00 as moral damages;

b. ₱150,000.00 as exemplary damages;

c. ₱100,000.00 as attorney’s fees; and,

d. Cost of suit.
[Petitioners] further pray for such other affirmative reliefs as are deemed just and equitable in the
premises.15

Respondents filed before the RTC a Motion to Dismiss and Opposition to Application for a Temporary
Restraining Order/Writ of Preliminary Injunction.16 They moved for the dismissal of the eight Complaints
on the grounds of (1) prescription; (2) laches; (3) lack of cause of action; and (4) res judicata.17

Respondents argued that the Complaints sought the annulment of the certificates of title that were issued
in their names. Section 32 of Presidential Decree No. 1529, otherwise known as the Property Registration
Decree,18 provides that the decree of registration and the certificate of title issued pursuant thereto can
only be nullified on the ground of fraud within one year after the entry of such decree of registration.
Respondents’ TCTs could be traced back to the decree/s of registration entered in 1966/1967, which
resulted in the issuance of OCT No. 6122 in the name of Jose Velasquez, respondents’ predecessor-in-
interest. Hence, the filing of the Complaints only in October 1997 was made beyond the prescription
period for assailing a decree of registration and/or the certificate of title issued pursuant thereto.
Additionally, petitioners’ Complaints were actions for reconveyance of the subject properties based on
implied trust, the filing of which prescribes after 10 years from the time said properties were first
registered under the Torrens system, in accordance with Articles 1144 and 1456 of the Civil Code.19 Since
the subject properties were first registered in 1966/1967, then the actions for their reconveyance,
instituted only in 1997 or 30 years later, should be dismissed on the ground of prescription.20

Respondents also contended that petitioners were guilty of laches. Despite their alleged possession of the
subject properties for 90 years, petitioners failed to take any steps to oppose the land registration cases
involving the same properties or to seek the nullification of the decrees of registration and certificates of
title which were entered and issued as early as 1966 and 1967.21

Moreover, respondents maintained that the Complaints should be dismissed for failure to state a cause of
action. Even assuming that petitioners were able to prove their allegations of longtime possession and
payment of realty taxes on the subject properties, and to submit a sketch plan of the same, these cannot
defeat a claim of ownership over the parcels of land, which were already registered under the Torrens
system in the name of respondents and the other consortium members.22

Lastly, respondents insisted that the Complaints should be dismissed on the ground of res judicata.23 By
virtue of the decided cases Vda. de Cailles and Orosa, which petitioners themselves cited in their
Complaints, any claims to all portions of Lot 9, Psu 11411, Amd-2 are barred by res judicata. In said cases,
respondents’ predecessors-in-interest were declared owners of Lot 9, Psu 11411, Amd-2. Respondents
also referred to a Decision24 dated 17 December 1991 rendered by the Metropolitan Trial Court (MTC) of
Las Piñas, Branch 79, in Civil Case No. 3271, entitled Heirs of Benito Navarro v. Fil-Estate Management
Inc.25 In its Decision, the MTC declared that therein plaintiffs were not in possession of the land, which it
found to belong to respondent Fil-Estate Management Inc.

On 11 June 1998, the Heirs of Jose Velasquez (intervenors) filed a Motion for Intervention with Leave of
Court and a Complaint-in-Intervention, alleging that the subject properties, covered by TCTs No. 9176, No.
9177, No. 9178, No. 9179, No. 9180, and No. 9181, were once owned by the Spouses Jose Velasquez and
Loreto Tiongkiao. Without settling the conjugal partnership after the death of his wife Loreto Tiongkiao,
and without obtaining the intervenors’ consent, Jose Velasquez, together with J.V. Development
Corporation, Delta Motors Corporation, and Nicolas Orosa, transferred all their rights to the subject
properties to Goldenrod, Inc., from which respondents acquired the same. The intervenors sought the
cancellation and nullification of respondents’ certificates of title insofar as their mother’s share in the
subject properties was concerned.26

On 8 September 2000, the RTC issued a Resolution27 in Civil Case No. LP-97-0228 granting respondents’
Motion to Dismiss. The trial court determined that the subject properties were already registered in the
names of respondents, and that petitioners were unable to prove by clear and convincing evidence their
title to the said properties. The dispositive part of the RTC Resolution reads:

On the basis of the foregoing reasons alone, the instant complaint should immediately be DISMISSED.
Accordingly, the prayer for a temporary restraining order and preliminary injunction is DENIED. This,
however, is without prejudice to the complaint-in-intervention filed by intervenors over the disputed
properties, their undivided interests being intertwined and attached to the disputed properties wherever
it goes and whoever is in possession of the same, their right to bring action to pursue the same being
imprescriptible.28
On 12 August 2002, respondents filed a Motion for Clarification29 asking the RTC whether the order of
dismissal of Civil Case No. LP-97-0228, included Civil Cases No. LP-97-0229, No. LP-97-0230, No. LP-97-
0231, No. LP-97-0236, No. LP-97-0237, No. LP-97-0238, and No. LP-97-0239. In a Resolution30 dated 30
June 2003, the RTC reiterated its Resolution dated 8 September 2000 dismissing the Complaint of
petitioners Heirs of Tomas Dolleton in Civil Case No. LP-97-0228; and declared that the other cases – Civil
Cases No. LP-97-0229, No. LP-97-0230, No. LP-97-0231, No. LP-97-0236, No. LP-97-0237, No. LP-97-0238,
and No. LP-97-0239 – were similarly dismissed since they involved the same causes of action as Civil Case
No. LP-97-0228.

On 9 July 2003, petitioners filed a consolidated Notice of Appeal questioning the 30 June 2003 Resolution
of the RTC.31 They accordingly filed an appeal of the said Resolution of the trial court with the Court of
Appeals, docketed as CA-G.R. CV No. 80927.

In its Decision dated 16 September 2005 in CA-G.R. CV No. 80927, the Court of Appeals denied petitioners’
appeal and affirmed the RTC Resolutions dated 8 September 2000 and 30 June 2003. The appellate court
found that respondents’ titles to the subject properties were indefeasible because they were registered
under the Torrens system. Thus, petitioners could not say that any claim on the subject properties casts a
cloud on their title when they failed to demonstrate a legal or an equitable title to the same. The Court of
Appeals also ruled that petitioners’ actions had already prescribed. Section 32 of Presidential Decree No.
1529 requires that an action assailing a certificate of title should be filed within one year after its issuance.
Moreover, actions assailing fraudulent titles should be filed within 10 years after the said titles were issued.
The appellate court further decreed that the cases for quieting of title should be dismissed based on the
allegation of petitioners themselves that the parcels of land covered by respondents’ certificates of title
were not the subject properties which petitioners claimed as their own.32

Petitioners filed a Motion for Reconsideration of the afore-mentioned Decision,33 which the Court of
Appeals denied in a Resolution dated 9 December 2005.34

Hence, the present Petition, where petitioners made the following assignment of errors:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT AFFIRMED THE RESOLUTION OF THE
COURT A QUO, DATED SEPTEMBER 8, 2000 AND THE RESOLUTION DATED JUNE 30, 2003, BASED PURELY
ON THE TECHNICALITY OF THE LAW RATHER THAN THE LAW THAT PROTECT[S] THE PROPERTY RIGHTS OF
THE PETITIONERS WHO WERE FORCIBLY EVICTED FROM THEIR RESPECTIVE LANDHOLDINGS BY THE USED
(sic) OF BRUTE FORCE OF ARMED MEN ON THE BASIS OF THE TITLES OF THE PRIVATE RESPONDENTS, IN
VIOLATION OF THEIR PROPERTY RIGHTS AND OF DUE PROCESS.

II

THAT THE COURT OF APPEALS GRAVELY ERRED WHEN IT AFFIRMED THE RESOLUTION OF THE COURT A
QUO, DESPITE THE FACT THAT A FULL BLOWN HEARING ON THE MERIT[S] IS NECESSARY TO DETERMINE
THE ACTUAL LOCATION ON THE ACTUAL GROUND [OF] THE LOTS COVERED BY THE PRIVATE RESPONDENT
(sic) TITLES, LOTS COVERED BY ITS TITLES ARE MORE THAN THREE HUNDRED (300 m) METERS AWAY TO
THE WEST-NORTHWEST FROM THE CONSOLIDATED LOTS OF THE HEREIN PETITIONERS AND THEREFORE
PRIVATE RESPONDENTS BRUTAL ACTION IN FORCIBLY EVICTING THE PETITIONERS FROM THEIR
RESPECTIVE LANDHOLDINGS BY THE USED (sic) OF BRUTE FORCE OF ARMED MEN, ARE PURELY CASES OF
LANDGRABBING.35

This Petition is meritorious.

The main issue in this case is whether the RTC properly granted respondents’ motion to dismiss. This Court
finds that the trial court erred in dismissing petitioners’ Complaints.

Complaints sufficiently stated a cause of action.

Respondents seek the dismissal of petitioners’ Complaints for failure to state a cause of action. Even
assuming as true that the subject properties have been in the possession of petitioners and their
predecessors-in-interest for 90 years; that petitioners have been paying the realty taxes thereon; and that
petitioners are able to submit a sketch plan of the subject properties, respondents maintain that their
ownership of the subject properties, evidenced by certificates of title registered in their names, cannot be
defeated. This contention is untenable.
Respondents mistakenly construe the allegations in petitioners’ Complaints. What petitioners alleged in
their Complaints was that while the subject properties were not covered by respondents’ certificates of
title, nevertheless, respondents forcibly evicted petitioners therefrom. Hence, it is not simply a question
of whether petitioners’ possession can defeat respondents’ title to registered land. Instead, an initial
determination has to be made on whether the subject properties were in fact covered by respondents’
certificates of title.

Section 2, Rule 2 of the Rules of Civil Procedure defines a cause of action as the act or omission by which
a party violates the right of another. Its essential elements are as follows: (1) a right in favor of the plaintiff
by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the
named defendant to respect or not to violate such right; and (3) an act or omission on the part of such
defendant in violation of the right of the plaintiff or constituting a breach of the obligation of the defendant
to the plaintiff, for which the latter may maintain an action for recovery of damages or other appropriate
relief. 36

The elementary test for failure to state a cause of action is whether the complaint alleges facts which if
true would justify the relief demanded. The inquiry is into the sufficiency, not the veracity, of the material
allegations. If the allegations in the complaint furnish sufficient basis on which it can be maintained, it
should not be dismissed regardless of the defense that may be presented by the defendant.37

This Court is convinced that each of the Complaints filed by petitioners sufficiently stated a cause of action.
The Complaints alleged that petitioners are the owners of the subject properties by acquisitive
prescription. As owners thereof, they have the right to remain in peaceful possession of the said properties
and, if deprived thereof, they may recover the same. Section 428 of the Civil Code provides that:

Article 428. The owner has the right to enjoy and dispose of a thing without other limitations than those
established by law.

The owner has also a right of action against the holder and possessor of the thing in order to recover it.

Petitioners averred that respondents had violated their rights as owner of the subject properties by
evicting the former therefrom by means of force and intimidation. Respondents allegedly retained
possession of the subject properties by invoking certificates of title covering other parcels of land.
Resultantly, petitioners filed the cases before the RTC in order to recover possession of the subject
properties, to prevent respondents from using their TCTs to defeat petitioners’ rights of ownership and
possession over said subject properties, and to claim damages and other reliefs that the court may deem
just and equitable.

The Court notes that petitioners’ prayer for the cancellation of respondents’ certificates of title are
inconsistent with their allegations. Petitioners prayed for in their Complaints that, among other reliefs,
judgment be rendered so that "Transfer Certificate of Title Numbers 9176, 9177, 9178, 9179, 9180, 9181,
and 9182 be cancelled by the Register of Deeds for Las Piñas, Metro Manila, insofar as they are or may be
utilized to deprive plaintiffs of possession and ownership of said lot." Yet, petitioners also made it plain
that the subject properties, of which respondents unlawfully deprived them, were not covered by
respondents’ certificates of title. It is apparent that the main concern of petitioners is to prevent
respondents from using or invoking their certificates of title to deprive petitioners of their ownership and
possession over the subject properties; and not to assert a superior right to the land covered by
respondents’ certificates of title. Admittedly, while petitioners can seek the recovery of the subject
properties, they cannot ask for the cancellation of respondents’ TCTs since petitioners failed to allege any
interest in the land covered thereby. Still, the other reliefs sought by petitioners, i.e., recovery of the
possession of the subject properties and compensation for the damages resulting from respondents’
forcible taking of their property, are still proper.

Petitioners’ Complaints should not have been dismissed despite the seeming error made by petitioners in
their prayer. To sustain a motion to dismiss for lack of cause of action, the complaint must show that the
claim for relief does not exist, rather than that a claim has been defectively stated, or is ambiguous,
indefinite or uncertain.38

Complaints are not barred by prescription and laches.

In their Motion to Dismiss, respondents argued that petitioners’ cases were barred by prescription, in
accordance with Section 32 of the Property Registration Decree and Articles 1144(2) and 1456 of the Civil
Code. Respondents relied on the premise that the actions instituted by petitioners before the RTC were
for the reopening and review of the decree of registration and reconveyance of the subject properties.
Section 32 of the Property Registration Decree provides that a decree of registration may be reopened
when a person is deprived of land or an interest therein by such adjudication or confirmation obtained by
actual fraud. On the other hand, an action for reconveyance respects the decree of registration as
incontrovertible but seeks the transfer of property, which has been wrongfully or erroneously registered
in other persons’ names, to its rightful and legal owners, or to those who claim to have a better right.39
In both instances, the land of which a person was deprived should be the same land which was
fraudulently or erroneously registered in another person’s name, which is not the case herein, if the Court
considers the allegations in petitioners’ Complaints.

As previously established, petitioners’ main contention is that the subject properties from which they were
forcibly evicted were not covered by respondents’ certificates of title. Stated differently, the subject
properties and the land registered in respondents’ names are not identical. Consequently, petitioners do
not have any interest in challenging the registration of the land in respondents’ names, even if the same
was procured by fraud.

While petitioners improperly prayed for the cancellation of respondents’ TCTs in their Complaints, there
is nothing else in the said Complaints that would support the conclusion that they are either petitions for
reopening and review of the decree of registration under Section 32 of the Property Registration Decree
or actions for reconveyance based on implied trust under Article 1456 of the Civil Code. Instead,
petitioners’ Complaints may be said to be in the nature of an accion reivindicatoria, an action for recovery
of ownership and possession of the subject properties, from which they were evicted sometime between
1991 and 1994 by respondents. An accion reivindicatoria may be availed of within 10 years from
dispossession.40 There is no showing that prescription had already set in when petitioners filed their
Complaints in 1997.

Furthermore, the affirmative defense of prescription does not automatically warrant the dismissal of a
complaint under Rule 16 of the Rules of Civil Procedure. An allegation of prescription can effectively be
used in a motion to dismiss only when the Complaint on its face shows that indeed the action has already
prescribed. 41 If the issue of prescription is one involving evidentiary matters requiring a full-blown trial
on the merits, it cannot be determined in a motion to dismiss.42 In the case at bar, respondents must first
be able to establish by evidence that the subject properties are indeed covered by their certificates of title
before they can argue that any remedy assailing the registration of said properties or the issuance of the
certificates of title over the same in the names of respondents or their predecessors-in-interest has
prescribed.

Neither can the Court sustain respondents’ assertion that petitioners’ Complaints were barred by laches.

Laches has been defined as the failure of or neglect, for an unreasonable and unexplained length of time,
to do that which by exercising due diligence, could or should have been done earlier; or to assert a right
within reasonable time, warranting a presumption that the party entitled thereto has either abandoned it
or declined to assert it. Thus, the doctrine of laches presumes that the party guilty of negligence had the
opportunity to do what should have been done, but failed to do so. Conversely, if the said party did not
have the occasion to assert the right, then, he cannot be adjudged guilty of laches. Laches is not concerned
with the mere lapse of time; rather, the party must have been afforded an opportunity to pursue his claim
in order that the delay may sufficiently constitute laches.43

Again, going back to petitioners’ chief claim that the subject properties are distinct from the land covered
by respondents’ certificates of title, then, petitioners would have no standing to oppose the registration
of the latter property in the names of respondents or their predecessors-in-interest, or to seek the
nullification of the certificates of title issued over the same.

It also appears from the records that the RTC did not conduct a hearing to receive evidence proving that
petitioners were guilty of laches. Well-settled is the rule that the elements of laches must be proven
positively. Laches is evidentiary in nature, a fact that cannot be established by mere allegations in the
pleadings and cannot be resolved in a motion to dismiss. At this stage, therefore, the dismissal of
petitioners’ Complaints on the ground of laches is premature. Those issues must be resolved at the trial
of the case on the merits, wherein both parties will be given ample opportunity to prove their respective
claims and defenses.44

Complaints are not barred by res judicata.

Lastly, respondents argued in their Motion to Dismiss that petitioners’ Complaints are barred by res
judicata, citing Vda. de Cailles and Orosa. Likewise, petitioners are barred from instituting any case for
recovery of possession by the MTC Decision in Civil Case No. 3271.

Res judicata refers to the rule that a final judgment or decree on the merits by a court of competent
jurisdiction is conclusive of the rights of the parties or their privies in all later suits on all points and matters
determined in the former suit. Res judicata has two concepts: (1) "bar by prior judgment" as enunciated
in Rule 39, Section 47 (b) of the Rules of Civil Procedure; and (2) "conclusiveness of judgment" in Rule 39,
Section 47 (c).

There is "bar by prior judgment" when, as between the first case where the judgment was rendered, and
the second case that is sought to be barred, there is identity of parties, subject matter, and causes of
action. But where there is identity of parties and subject matter in the first and second cases, but no
identity of causes of action, the first judgment is conclusive only as to those matters actually and directly
controverted and determined and not as to matters merely involved therein. There is "conclusiveness of
judgment." Under the doctrine of conclusiveness of judgment, facts and issues actually and directly
resolved in a former suit cannot again be raised in any future case between the same parties, even if the
latter suit may involve a different claim or cause of action. The identity of causes of action is not required
but merely identity of issues.45

Vda. de Cailles and Orosa cannot bar the filing of petitioners’ Complaints before the RTC under the doctrine
of conclusiveness of judgment, since they involve entirely different subject matters. In both cases, the
subject matter was a parcel of land referred to as Lot 9 Psu-11411 Amd-2, while subject matter of the
petitioners’ Complaints are lots which are not included in the said land.

It follows that the more stringent requirements of res judicata as "bar by prior judgment" will not apply to
petitioners’ Complaints. In Vda. de Cailles, the Court confirmed the ownership of Dominador Mayuga over
a 53-hectare parcel of land located in Las Piñas, Rizal, more particularly referred to as Lot 9, Psu-11411,
Amd-2. The Court also recognized that Nicolas Orosa was Dominador Mayuga’s successor-in-interest.
However, the judgment in said case was not executed because the records of the Land Registration
Authority revealed that the property had previously been decreed in favor of Jose T. Velasquez, to whom
OCT No. 6122 was issued. During the execution proceedings, Goldenrod Inc. filed a motion to intervene,
the granting of which by the trial court was challenged in Orosa. The Court held in Orosa that Goldenrod,
Inc., despite having acquired the opposing rights of Nicolas Orosa and Jose T. Velasquez to the property
sometime in 1987, no longer had any interest in the same as would enable it to intervene in the execution
proceedings, since it had already sold its interest in February 1989 to the consortium composed of
respondents, Peaksun Enterprises and Export Corporation, and Elena Jao.1avvphi1.zw+

The adjudication of the land to respondents’ predecessors-in-interest in Vda. de Cailles and Orosa is not
even relevant to petitioners’ Complaints. According to petitioners’ allegations in their Complaints,
although the subject properties were derived from the 119.8-hectare parcel of land referred to as Lot 9,
Psu-11411, they are not included in the 53-hectare portion thereof, specifically identified as Lot 9, Psu-
11411, Amd-2, subject of Vda. de Cailles and Orosa. This was the reason why petitioners had to cite Vda.
de Cailles and Orosa: to distinguish the subject properties from the land acquired by respondents and the
other members of the consortium. There clearly being no identity of subject matter and of parties, then,
the rulings of this Court in Vda. de Cailles and Orosa do not bar by prior judgment Civil Cases No. LP-97-
0228, No. LP-97-0229, No. LP-97-0230, No. LP-97-0231, No. LP-97-0236, No. LP-97-0237, No. LP-97-0238,
and No. LP-97-0239 instituted by petitioners in the RTC.

The Court is aware that petitioners erroneously averred in their Complaints that the subject properties
"originated from Psu-11411, Lot 9, Amd-2," instead of stating that the said properties originated from Psu-
11411, Lot 9. However, this mistake was clarified in later allegations in the same Complaints, where
petitioners stated that "Psu-114, Lot 9 consists of 1, 198,017 square meters," or 119.8 hectares when
converted, while Psu-11411, Lot 9, Amd-2 referred to a 53-hectare parcel. Petitioners pointed out that in
Vda. de Cailles and Orosa, the Court acknowledged "the ownership [of respondents’ predecessor-in-
interest] only over a fifty-three (53) hectare parcel, more particularly referred to as Lot 9 Psu-11411, Amd-
2." Thus, petitioners argued that the rights which respondents acquired from Mayuga and Orosa
"cover[ed] only 531, 449 square meters or 53 hectares of Psu-11411, Lot 9. They do not extend to the
latter’s other portion of 1,198, 017 square meters part of which [petitioners] had been occupying until
they were forcibly evicted by [respondents]." Accordingly, the single statement in the Complaints that the
subject properties originated from Lot 9, Psu-11411, Amd-2, is an evident mistake which cannot prevail
over the rest of the allegations in the same Complaints.
Similarly, the Decision dated 17 December 1991 of the MTC in Civil Case No. 3271 cannot bar the filing of
petitioners’ Complaints before the RTC because they have different subject matters. The subject matter in
Civil Case No. 3271 decided by the MTC was the parcel of land covered by TCTs No. 9176, No. 9177, No.
9178, No. 9179, No. 9180, and No. 9181, in the name of respondents and the other consortium members;
while, according to petitioners’ allegations in their Complaints, the subject matters in Civil Cases No. LP-
97-0228, No. LP-97-0229, No. LP-97-0230, No. LP-97-0231, No. LP-97-0236, No. LP-97-0237, No. LP-97-
0238, and No. LP-97-0239, before the RTC, are the subject properties which are not covered by
respondents’ certificates of title.

The MTC, in its 17 December 1991 Decision in Civil Case No. 3271 found that:

The subject parcels of land are covered by (TCT) Nos. 9176, 9177, 9178, 9179, [9180], [9181] and 9182
(Exhs. "1" to "7", Defendants) all issued in the name of defendant Fil-Estate Management, Inc. It appears
from the evidence presented that defendant Fil-Estate purchased the said property from Goldenrod, Inc.
It also appears from the evidence that the subject property at the time of the purchase was then occupied
by squatters/intruders. By reason thereof, the Municipality of Las Piñas conducted in 1989 a census of all
structures/shanties on subject property. Those listed in the census were relocated by defendant, which
relocation program started in 1990 up to the present. Interestingly, however, all of the plaintiffs herein
except the Almas, were not listed as among those in possession of defendant’s land as of November 1989.

xxxx

In fine, plaintiffs have not clearly established their right of possession over the property in question. They
claim ownership, but no evidence was ever presented to prove such fact. They claim possession from time
immemorial. But the Census prepared by Las Piñas negated this posture.46 (Emphasis provided.)

The determination by the MTC that petitioners were not occupants of the parcels of land covered by TCTs
No. 9176, No. 9177, No. 9178, No. 9179, No. 9180, and No. 9181 cannot bar their claims over another
parcel of land not covered by the said TCTs. It should also be noted that petitioners Heirs of Agapito
Villanueva do not appear to be plaintiffs in Civil Case No. 3271 and, therefore, cannot be bound by the
MTC Decision therein.

In all, this Court pronounces that respondents failed to raise a proper ground for the dismissal of
petitioners’ Complaints. Petitioners’ claims and respondents’ opposition and defenses thereto are best
ventilated in a trial on the merits of the cases.

IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The Decision dated 16 September 2005 and
Resolution dated 9 December 2005 of the Court of Appeals in CA-G.R. CV No. 80927 are REVERSED and
SET ASIDE. Let the records of the case be remanded for further proceedings to the Regional Trial Court,
Branch 253, of Las Piñas City, which is hereby ordered to try and decide the case with deliberate speed.

SO ORDERED.
As the initiating party, the plaintiff in a civil action voluntarily submits himself to the jurisdiction of the
court by the act of filing the initiatory pleading. As to the defendant, the court acquires jurisdiction over
his person either by the proper service of the summons, or by a voluntary appearance in the action.15

G.R. No. 146726 June 16, 2006

MULTI-REALTY DEVELOPMENT CORPORATION, Petitioner,

vs.
CONDOMINIUM CORPORATION, Respondent.

DECISION

CALLEJO, SR., J.:

Before this Court is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-
G.R. CV No. 44696 dismissing the appeal of Multi-Realty Development Corporation on the ground of
prescription.

Multi-Realty is a domestic corporation engaged in the real estate business, and the construction and
development of condominiums. It developed, among others, the Ritz Towers Condominium, and the
former Galeria de Magallanes, both built in the Municipality (now city) of Makati.
In the 1970s, Multi-Realty constructed a 26-storey condominium at the corner of Ayala Avenue and
Fonda Street in Makati City, known as the Makati Tuscany Condominium Building (Makati Tuscany,
for short). The building was one of the Philippines’ first condominium projects, making it necessary for
Multi-Realty and the government agencies concerned with the project, to improve and formulate rules
and regulations governing the project as construction progressed.

Makati Tuscany consisted of 160 condominium units, with 156 units from the 2nd to the 25th floors,
and 4 penthouse units in the 26th floor. Two hundred seventy (270) parking slots were built therein for
apportionment among its unit owners. One hundred sixty-four (164) of the parking slots were so
allotted, with each unit at the 2nd to the 25th floors being allotted one (1) parking slot each, and each
penthouse unit with two slots. Eight (8) other parking slots, found on the ground floor of the Makati
Tuscany were designated as guest parking slots, while the remaining 98 were to be retained by Multi-
Realty for sale to unit owners who would want to have additional slots.

According to Multi-Realty, the intention to allocate only 8 parking slots to the Makati Tuscany’s
common areas was reflected in its color-coded ground floor plan, upper basement plan and lower
basement plan prepared by its architect, C.D. Arguelles and Associates. These plans, which depict
common areas as yellow zones and areas reserved for unit owners as red zones, clearly show that,
of the 270 parkings slots, 262 were designated red zones, and only 8 first-floor parking slots were
designated yellow zones or common areas.

Pursuant to Republic Act No. 4726, otherwise known as the Condominium Act, the Makati Tuscany
Condominium Corporation (MATUSCO) was organized and established to manage the condominium
units.

In 1975, Multi-Realty executed a Master Deed and Declaration of Restrictions2 (Master Deed, for short)
of the Makati Tuscany. Sections 5 and 7 provide:

SEC. 5. Accessories to Units. – To be considered as part of each unit and reserved for the exclusive
use of its owner are the balconies adjacent thereto and the parking lot or lots which are to be assigned
to each unit.

xxxx

SEC. 7. The Common Areas. – The common elements or areas of the Makati Tuscany shall comprise
of all the parts of the project other than the units, including without limitation the following:

xxxx

(d) All driveways, playgrounds, garden areas and PARKING AREAS OTHER THAN THOSE
ASSIGNED TO EACH UNIT UNDER SEC. 5 ABOVE;3

The Master Deed was filed with the Register of Deeds in 1977. Multi-Realty executed a Deed of
Transfer in favor of MATUSCO over these common areas. However, the Master Deed and the Deed
of Transfer did not reflect or specify the ownership of the 98 parking slots. Nevertheless, Multi-Realty
sold 26 of them in 1977 to 1986 to condominium unit buyers who needed additional parking slots.
MATUSCO did not object, and certificates of title were later issued by the Register of Deeds in favor
of the buyers. MATUSCO issued Certificates of Management covering the condominium units and
parking slots which Multi-Realty had sold.

At a meeting of MATUSCO’s Board of Directors on March 13, 1979, a resolution was approved,
authorizing its President, Jovencio Cinco, to negotiate terms under which MATUSCO would buy 36 of
the unallocated parking slots from Multi-Realty. During another meeting of the Board of Directors on
June 14, 1979, Cinco informed the Board members of Multi-Realty’s proposal to sell all of the
unassigned parking lots at a discounted price of P15,000.00 per lot, or some 50% lower than the then
prevailing price of P33,000.00 each. The Board agreed to hold in abeyance any decision on the matter
to enable all its members to ponder upon the matter.

In the meantime, the fair market value of the unallocated parking slots reached P250,000.00 each, or
a total of P18,000,000.00 for the 72 slots.

In September 1989, Multi-Realty, through its President, Henry Sy, who was also a member of the
Board of Directors of MATUSCO, requested that two Multi-Realty executives be allowed to park their
cars in two of Makati Tuscany’s remaining 72 unallocated parking slots. In a letter, through its counsel,
MATUSCO denied the request, asserting, for the first time, that the remaining unallocated parking
slots were common areas owned by it. In another letter, MATUSCO offered, by way of goodwill
gesture, to allow Multi-Realty to use two unallocated parking slots, which offer was rejected by the
latter.
On April 26, 1990, Multi-Realty, as plaintiff, filed a complaint, docketed as Civil Case No. 90-1110,
against MATUSCO, as defendant, for Damages and/or Reformation of Instrument with prayer for
temporary restraining order and/or preliminary injunction. The case was raffled to Branch 59 of the
Makati RTC.

Multi-Realty alleged therein that it had retained ownership of the 98 unassigned parking slots.
Considering, however, that Makati Tuscany was one of its first condominium projects in the
Philippines, this was not specified in Section 7(d) of the Master Deed since the documentation and the
terms and conditions therein were all of first impression. It was further alleged that the mistake was
discovered for the first time when MATUSCO rejected its request to allow its (Multi-Realty’s)
executives to park their cars in two of the unassigned parking lots.

In its Answer with counterclaim, MATUSCO alleged that Multi-Realty had no cause of action against
it for reformation of their contract. By its own admission, Multi-Realty sold various parking slots to third
parties despite its knowledge that the parking areas, other than those mentioned in Sec. 5 of the
Master Deed, belonged to MATUSCO. MATUSCO prayed that judgment be rendered in its favor
dismissing the complaint; and, on its counterclaim, to order the plaintiff to render an accounting of the
proceeds of the sale of the parking slots other than those described in Sec. 5 of the Master Deed; to
pay actual damages equivalent to the present market value of the parking areas other than those
described in Sec. 5 of the Master Deed, amounting to no less than P250,000.00 per slot plus
reasonable rentals thereon at no less than P400.00 per slot per month from date of sale until payment
by plaintiff to defendant of the market value of these parking areas.

After trial, the RTC rendered a decision, the dispositive portion of which reads:

Premises considered, this case is dismissed. Defendant’s counterclaim is, likewise, dismissed, the
same not being compulsory and no filing fee having been paid. Plaintiff is, however, ordered to pay
defendant attorney’s fees in the amount of P50,000.00.

Cost against plaintiff.

SO ORDERED.4

The trial court ruled that Multi-Realty failed to prove any ground for the reformation of its agreement
with MATUSCO relative to the ownership of the common areas. There is no evidence on record to
prove that the defendant acted fraudulently or inequitably to the prejudice of the plaintiff, and the latter
was estopped, by deed, from claiming that it owned the common areas. It also held that the defendant
was not estopped from assailing plaintiff’s ownership over the disputed parking slots.

Multi-Realty appealed the decision to the CA via a petition under Rule 41 of the Rules of Court,
contending that:

THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT AND DISALLOWING THE
PLAINTIFF-APPELLANT FROM REFORMING THE MASTER DEED BECAUSE:

THERE IS VALID GROUND FOR REFORMATION OF THE MASTER DEED SINCE THE MASTER
DEED DID NOT REFLECT THE TRUE INTENTION OF THE PARTIES REGARDING THE
OWNERSHIP OF THE EXTRA NINETY-EIGHT PARKING [SLOTS] DUE TO MISTAKE.

II

THE REGISTRATION OF THE MASTER DEED WITH THE REGISTER OF DEEDS DID NOT MAKE
PLAINTIFF-APPELLANT GUILTY OF ESTOPPEL BY DEED.

III

THE TRIAL COURT ERRED IN FINDING THAT DEFENDANT-APPELLEE IS NOT ESTOPPED

FROM QUESTIONING THE OWNERSHIP OF PLAINTIFF-APPELLANT OVER THE DISPUTED
PARKING LOTS.5

In support of its appeal, Multi-Realty reiterated its contentions in the trial court, insisting that it had
adduced evidence to prove all the requisites for the reformation of Section 7(d) of the Master Deed
under Article 1359 of the New Civil Code. It was never its intention to designate the 98 unassigned
parking slots as common areas, and, as shown by the evidence on record, this was known to
MATUSCO. Under Article 1364 of the New Civil Code, an instrument may be reformed if, due to lack
of skill on the part of the drafter, the deed fails to express the true agreement or intention of the parties
therein. Since MATUSCO knew that it (Multi-Realty) owned the 98 parking slots when the Master Deed
was executed, its registration did not make Multi-Realty guilty of estoppel by deed. In fact, MATUSCO
failed to object to the sale of some of the parking slots to third parties. It was also pointed out that
Multi-Realty remained in possession thereof.

Multi-Realty further claimed that the trial court erred in not declaring that MATUSCO was estopped
from assailing the ownership over the parking slots, as it not only conformed to the sale of some of the
unassigned parking slots but likewise failed to assail the ownership thereon for a period of 11 years.
It insisted that the sale of the said parking slots was made in accord with law, morals and public order,
and that MATUSCO’s claim of ownership of the unassigned parking slots was merely an afterthought.

MATUSCO, for its part, appealed the trial court’s dismissal of its counterclaim.

On Multi-Realty’s appeal, MATUSCO countered that the 270 parking slots were to be apportioned as
follows:

1 parking lot for each ordinary unit - 156

parking lots for each of the 4 Penthouse Apartment
2
Units - 8
of the remaining 106 parking lots, 34 parking lots were
designated and allocated as part of "common areas"
which would be allocated purely for visitors, while the
remaining 72 units would become part of the
Condominium Corporation’s income-earning
"common areas" - 106
----
2706
====

It was further averred that Multi-Realty, through Henry Sy, executed the Master Deed in July 1975 and
the Deed of Transfer in 1977, in which the ownership of the common areas was unconditionally
transferred to MATUSCO; Multi-Realty sold 26 of the 34 parking slots in bad faith, which had been
allocated purposely for visitors of unit owners, amounting to millions of pesos; the action for
reformation has no legal basis because the transfer of the 106 unassigned parking slots which form
part of the common areas is contrary to Section 167 of the Condominium Act.

MATUSCO further pointed out that the unassigned parking slots could be transferred only by the
affirmative votes of all the members of Multi-Realty, and that the Master Deed and the Deed of Transfer
were prepared by the latter with the assistance of its renowned lawyers. If there was a mistake in the
drafting of the Master Deed in 1975, the deed should have been corrected in 1977 upon the execution
of the Deed of Transfer. With the social and economic status of Henry Sy, Multi-Realty’s President, it
is incredible that the Master Deed and the Deed of Transfer failed to reflect the true agreement of the
parties. MATUSCO went on to state that Multi-Realty failed to adduce a preponderance of evidence
to prove the essential requirements for reformation of the questioned documents. Even if there was a
mistake in drafting the deeds, reformation could not be given due course absent evidence that
defendant-appellee acted fraudulently or inequitably.

On its claim of ownership over the unassigned parking slots, MATUSCO averred that it is not estopped
to do so because the sales thereof were illegal, and it had no knowledge that Multi-Realty had been
selling the same. Having acted fraudulently and illegally, Multi-Realty cannot invoke estoppel against
it.

On the RTC decision dismissing its counterclaim, MATUSCO averred that said decision is erroneous,
as it had adduced evidence to prove its entitlement to said counterclaim.

In reply, Multi-Realty averred that MATUSCO’s counterclaim had already prescribed because it was
filed only in 1990, long after the period therefor had elapsed in 1981.

On August 21, 2000, the CA rendered its decision dismissing Multi-Realty’s appeal on the ground that
its action below had already prescribed. The dispositive portion of the decision reads:

WHEREFORE, foregoing premises considered, the appeal having no merit in fact and in law, is hereby
ORDERED DISMISSED, and the judgment of the trial court is MODIFIED by deleting the award of
attorney’s fees not having been justified but AFFIRMED as to its Order dismissing both the main
complaint of plaintiff-appellant and the counterclaim of defendant-appellant. With costs against both
parties.8
The appellate court ruled that it was justified in dismissing Multi-Realty’s appeal on the ground of
prescription as it was clothed with ample authority to review the lower court’s rulings even those not
assigned as errors on appeal, especially if the consideration of the matter is necessary to arrive at a
just decision of the case, and to avoid dispensing "piecemeal justice." The CA cited the rulings of this
Court in Servicewide Specialists, Inc. v. Court of Appeals,9 and Dinio v. Laguesma.10

Multi-Realty filed a motion for reconsideration of the decision, contending that:

THIS HONORABLE COURT VIOLATED SECTION 8 OF RULE 51 OF THE RULES OF COURT TO

MRDC’S SUBSTANTIAL AND UNFAIR PREJUDICE BY RESOLVING MRDC’S APPEAL ON THE
GROUND OF PRESCRIPTION, EVEN THOUGH NEITHER PARTY HAD ASSIGNED OR ARGUED
AS AN ERROR THE TRIAL COURT’S FAILURE TO DISMISS THE ACTION FILED BY MRDC
BELOW AS PRESCRIBED.

THIS HONORABLE COURT ERRED IN COUNTING THE RUNNING OF THE PRESCRIPTIVE

PERIOD FROM THE DATE OF EXECUTION OF THE MASTER DEED IN 1975, BECAUSE UNDER
ARTICLE 1150 OF THE CIVIL CODE, AND THE SUPREME COURT’S DECISIONS IN TORMON VS.
CUTANDA, AND VELUZ VS. VELUZ, MRDC’S PERIOD TO FILE A SUIT FOR REFORMATION
ONLY BEGAN RUNNING IN 1989, AFTER DEFENDANT-APPELLANT MAKATI TUSCANY
CONDOMINIUM CORPORATION’S REPUDIATION OF THE PARTIES’ TRUE AGREEMENT GAVE
RISE TO MRDC’S RIGHT OF ACTION.11

Multi-Realty further averred that the appellate court misapplied Rule 51, Section 8 of the 1997 Rules
of Court as well as the ruling of this Court in the Servicewide Specialists case. It pointed out that, when
it filed its Brief, as appellee, Rule 51, Section 7 of the 1964 Rules of Court was still in effect, under
which an error which does not affect the jurisdiction over the subject matter will not be considered
unless stated in the assignment of error and properly assigned in the Brief, as the court may pass
upon plain and clerical errors only. Multi-Realty insisted that the parties did not raise the issue of
whether its action had already prescribed when it filed its complaint in their pleadings below and in the
respondent’s Brief. It claimed that it was deprived of its right to due process when the appellate court
denied its appeal based on a ruling of this Court under the 1997 Rules of Civil Procedure. It insisted
that the ruling of this Court in Servicewide Specialist, Inc. was promulgated when the 1997 Rules of
Civil Procedure was in effect.

On January 18, 2001, the CA issued a Resolution denying Multi-Realty’s motion for reconsideration.
The appellate court cited the ruling of this Court in Rosello-Bentir v. Hon. Leanda,12 to support its ruling
that the action of petitioner had already prescribed when it was filed with the RTC. Multi-Realty
received its copy of said Order of denial on January 29, 2001.

Multi-Realty, now petitioner, filed the instant petition for review on certiorari, alleging that:

THE HONORABLE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE IN A MANNER

INCONSISTENT WITH LAW, AND DEPARTED WITH UNFAIRLY PREJUDICIAL EFFECT FROM
THE USUAL COURSE OF JUDICIAL PROCEEDINGS LAID DOWN IN SECTION 8 OF RULE 51 OF
THE RULES OF COURT WHEN IT DISMISSED MULTI-REALTY’S "APPEAL" ON THE BASIS OF
PRESCRIPTION, EVEN THOUGH NEITHER PARTY RAISED [NOR] DISCUSSED THE TRIAL
COURT’S FAILURE TO ENFORCE THE ALLEGEDLY APPLICABLE TIME BAR AS AN ERROR IN
THEIR BRIEFS.

THE HONORABLE COURT OF APPEALS DECIDED A MATTER OF SUBSTANCE IN A MANNER

PROBABLY NOT IN ACCORD WITH ARTICLE 1150 OF THE CIVIL CODE, WHEN IT
DISREGARDED THIS HONORABLE COURT’S RULINGS IN TORMON V. CUTANDA AND VELUZ
V. VELUZ, AND RULED THAT THE PRESCRIPTIVE PERIOD APPLICABLE TO AN ACTION FOR
REFORMATION BEGINS TO RUN FROM THE DATE THE INSTRUMENT TO BE REFORMED IS
EXECUTED, RATHER THAN FROM THE DATE ON WHICH THE TRUE AGREEMENT THE
REFORMATION IS MEANT TO EXPRESS IS VIOLATED.

THE HONORABLE COURT OF APPEALS OVERLOOKED RELEVANT FACTS SUSTAINING A

DECISION ALLOWING REFORMATION OF THE MASTER DEED WHEN IT FAILED TO REVERSE
THE TRIAL COURT’S DECISION AND FIND THAT MATUSCO’S CONSISTENT RECOGNITION OF,
AND PARTICIPATION IN, THE SALES OF UNALLOCATED PARKING SLOTS MADE BY MULTI-
REALTY, AND ITS EFFORTS TO BUY THE UNALLOCATED PARKING SLOTS FROM MULTI-
REALTY, ESTOP IT FROM ASSERTING TITLE TO THE UNALLOCATED PARKING SLOTS.13

The Court is to resolve two issues: (1) whether the CA erred in dismissing petitioner’s appeal on the
ground of prescription; and (2) whether petitioner’s action had already prescribed when it was filed in
1990.
On the issue of prescription, petitioner asserts that under Article 1150 in relation to Article 1144 of the
New Civil Code, its action for reformation of the Master Deed accrued only in 1989, when respondent,
by overt acts, made known its intention not to abide by their true agreement; since the complaint below
was filed in 1990, the action was filed within the prescriptive period therefor. Petitioner cites the rulings
of this Court in Tormon v. Cutanda,14 Veluz v. Veluz,15 and Español v. Chairman, Philippine Veterans
Administration16 to bolster its claim.

In its comment on the petition, respondent avers that, as held by this Court in Rosello-Bentir v. Hon.
Leanda,17 the prescriptive period for the petitioner to file its complaint commenced in 1975, upon the
execution of the Master Deed in its favor. Considering that the action was filed only in 1990, the same,
by then, had already prescribed.

On the first issue, we sustain petitioner’s contention that the CA erred in dismissing its appeal solely
on its finding that when petitioner filed its complaint below in 1990, the action had already prescribed.
It bears stressing that in respondent’s answer to petitioner’s complaint, prescription was not alleged
as an affirmative defense. Respondent did not raise the issue throughout the proceedings in the RTC.
Indeed, the trial court did not base its ruling on the prescription of petitioner’s action; neither was this
matter assigned by respondent as an error of the RTC in its brief as defendant-appellant in the CA.

Settled is the rule that no questions will be entertained on appeal unless they have been raised below.
Points of law, theories, issues and arguments not adequately brought to the attention of the lower
court need not be considered by the reviewing court as they cannot be raised for the first time on
appeal. Basic considerations of due process impel this rule.18

Truly, under Section 7, Rule 51 of the 1964 Rules of Court, no error which does not affect the
jurisdiction over the subject matter will be considered unless stated in the assignment of errors and
properly argued in the brief, save as the Court, at its option, may pass upon plain errors not specified,
and clerical errors. Even at that time, the appellate court was clothed with ample authority to review
matters even if not assigned as errors in their appeal if it finds that their consideration is necessary in
arriving at a just decision of the case.19 It had ample authority to review and resolve matters not
assigned and specified as errors by either of the parties on appeal if it found that the matter was
essential and indispensable in order to arrive at a just decision of the case. It has broad discretionary
power, in the resolution of a controversy, to take into consideration matters on record unless the parties
fail to submit to the court specific questions for determination. Where the issues already raised also
rest on other issues not specifically presented, as long as the latter issues bear relevance and close
relation to the former and as long as they arise from matters on record, the appellate court has authority
to include them in its discussion of the controversy as well as to pass upon them. In brief, in those
cases wherein questions not particularly raised by the parties surface as necessary for the complete
adjudication of the rights and obligations of the parties and such questions fall within the issues already
framed by the parties, the interests of justice dictate that the court consider and resolve them.20

When the appeals of the petitioner and that of the respondent were submitted to the CA for decision,
the 1997 Rules of Civil Procedure was already in effect. Section 8, Rule 51 of said Rules, reads:

SEC. 8. Questions that may be decided. – No error which does not affect the jurisdiction over the
subject matter or the validity of the judgment appealed from or the proceedings therein will be
considered unless stated in the assignment of errors, or closely related to or dependent on an assigned
error and properly argued in the brief, save as the court may pass upon plain errors and clerical errors.

This provision was taken from the former rule with the addition of errors affecting the validity of the
judgment or closely related to or dependent on an assigned error.21 The authority of the appellate court
to resolve issues not raised in the briefs of the parties is even broader.

Nevertheless, given the factual backdrop of the case, it was inappropriate for the CA, motu proprio, to
delve into and resolve the issue of whether petitioner’s action had already prescribed. The appellate
court should have proceeded to resolve petitioner’s appeal on its merits instead of dismissing the
same on a ground not raised by the parties in the RTC and even in their pleadings in the CA.

Even if we sustain the ruling of the CA that it acted in accordance with the Rules of Court in considering
prescription in denying petitioner’s appeal, we find and so rule that it erred in holding that petitioner’s
action had already prescribed when it was filed in the RTC on April 26, 1990.

Prescription is rightly regarded as a statute of repose whose object is to suppress fraudulent and stale
claims from springing up at great distances of time and surprising the parties or their representatives
when the facts have become obscure from the lapse of time or the defective memory or death or
removal of witnesses. The essence of the statute of limitations is to prevent fraudulent claims arising
from unwarranted length of time and not to defeat actions asserted on the honest belief that they were
sufficiently submitted for judicial determination.22 Our laws do not favor property rights hanging in the
air, uncertain, over a long span of time.23
Article 1144 of the New Civil Code provides that an action upon a written contract must be brought
within ten (10) years from the time the right of action accrues:

Art. 1144. The following actions must be brought within ten years from the time the right of action
accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

In relation thereto, Article 1150 of the New Civil Code provides that the time for prescription of all
actions, when there is no special provision which ordains otherwise, shall be counted from the day
they may be brought. It is the legal possibility of bringing the action that determines the starting point
for the computation of the period of prescription.24

The term "right of action" is the right to commence and maintain an action. In the law of pleadings,
right of action is distinguished from a cause of action in that the former is a remedial right belonging
to some persons while the latter is a formal statement of the operational facts that give rise to such
remedial right. The former is a matter of right and depends on the substantive law while the latter is a
matter of statute and is governed by the law of procedure. The right of action springs from the cause
of action, but does not accrue until all the facts which constitute the cause of action have occurred.25

A cause of action must always consist of two elements: (1) the plaintiff’s primary right and the
defendant’s corresponding primary duty, whatever may be the subject to which they relate – person,
character, property or contract; and (2) the delict or wrongful act or omission of the defendant, by
which the primary right and duty have been violated.26

To determine when all the facts which constitute a cause of action for reformation of an instrument
may be brought and when the right of the petitioner to file such action accrues, the second paragraph
of Section 1, Rule 63, must be considered because an action for the reformation of an instrument may
be brought under said Rule:

SECTION 1. Who may file petition. – Any person interested under a deed, will, contract or other written
instrument, whose rights are affected by a statute, executive order or regulation, ordinance, or any
other governmental regulation may, before breach or violation thereof, bring an action in the
appropriate Regional Trial Court to determine any question of construction or validity arising, and for
a declaration of his rights or duties, thereunder.

An action for the reformation of an instrument, to quiet title to real property or remove clouds therefrom,
or to consolidate ownership under Article 1607 of the Civil Code, may be brought under this Rule
(emphasis supplied).

Such a petition is a special civil action determinative of the rights of the parties to the case. It is
permitted on the theory that courts should be allowed to act, not only when harm is actually done and
rights jeopardized by physical wrongs or physical attack upon existing legal relations, but also when
challenge, refusal, dispute or denial thereof is made amounting to a live controversy. The uncertainty
and insecurity which may thereby be avoided may hamper or disturb the freedom of the parties to
transact business or to make improvements on their property rights. A situation is thus created when
a judicial declaration may serve to prevent a dispute from ripening into violence or destruction.27

The concept and meaning of the term cause of action in proceedings for declaratory relief, vis-à-vis
an ordinary civil action, is broadened. It is not, as in ordinary civil action, the wrong or delict by which
the plaintiff’s rights are violated, but it is extended to a mere denial, refusal or challenge raising at least
an uncertainty or insecurity which is injurious to plaintiff’s rights.28

For a petition for declaratory relief to prosper, the following conditions sine qua non must concur: (1)
there must be a justiciable controversy; (2) the controversy must be between persons whose interests
are adverse; (3) the party seeking declaratory relief must have a legal interest in the controversy; and
(4) the issue involved must be ripe for judicial determination.29

To controvert is to dispute; to deny, to oppose or contest; to take issue on.30 The controversy must be
definite and concrete, touching on the legal relations of the parties having adverse legal interests. It
must be a real and substantial controversy admitting of specific relief through a decree of a conclusive
character as distinguished from an opinion advising what the law would be upon a hypothetical state
of facts.31
The fact that the plaintiff’s desires are thwarted by its own doubts, or by the fears of others, does not
confer a cause of action. No defendant has wronged the plaintiff or has threatened to do so.32 However,
the doubt becomes a justiciable controversy when it is translated into a claim of right which is actually
contested.33 As explained by this Court, a dispute between the parties is justiciable when there is an
active antagonistic assertion of a legal right on one side and a denial thereof on the other, concerning
a real, not merely a theoretical question or issue.34

In sum, one has a right of action to file a complaint/petition for reformation of an instrument when his
legal right is denied, challenged or refused by another; or when there is an antagonistic assertion of
his legal right and the denial thereof by another concerning a real question or issue; when there is a
real, definitive and substantive controversy between the parties touching on their legal relations having
adverse legal interests. This may occur shortly after the execution of the instrument or much later.35

A party to an instrument is under no obligation to seek a reformation of an instrument while he is

unaware that any opposition will be made to carry out the actual agreement.36 The statute of limitations
does not begin to run against an equitable cause of action for the reformation of an instrument because
of mistake until the mistake has been discovered or ought to have been discovered.37 The mere
recording of a deed does not charge the grantor with constructive notice of a mistake therein, but is to
be considered with other facts and circumstances in determining whether the grantor be charged with
notice actual or constructive.38

In State ex rel. Pierce County v. King County,39 the appellate court ruled that:

In equitable actions for reformation on the ground of mistake the rule on the question of when the
period of limitation or laches commences to run is as stated by this Court in State v. Lorenz, 22 Wash.
289, 60 P. 644, 647:

* * * that the statute did not begin to run against the right of appellant to reform the deed [because of
a mistake therein] until the assertion on the part of respondents of their adverse claim.

In Chebalgoity v. Branum, 16 Wash.2d 251, 133 P.2d 288, 290, we said:

‘Nor is his right to maintain it [an action for reformation grounded on mistake] impaired by lapse of
time, for the bar of the statue of limitations does not begin to run until the assertion of an adverse claim
against the party seeking reformation.’

The rule is also stated in 53 C.J. 1003, reformation of instruments, as follows:

‘[§ 155] C. Time for Bringing Action. An action to reform an instrument may be brought as soon as the
cause of action accrues. * * * On the other hand, a party to an instrument is under no obligation to
seek its correction before his cause of action is finally vested or while he is unaware that any opposition
will be made in carrying out the actual agreement, where for a long time the rights and duties of the
parties are the same under the writing and under the terms which it is alleged were intended, and the
failure to take any action toward reformation until his right vests or opposition is manifest does not
prejudice his suit.’40

In this case, before petitioner became aware of respondent’s denial of its right under their true contract,
petitioner could not be expected to file an action for the reformation of the Master Deed. As Justice
Jose BL Reyes, ratiocinated in Tormon v. Cutanda:41

It follows that appellant’s cause of action arose only when the appellees made known their intention,
by overt acts, not to abide by the true agreement; and the allegations of the complaint establish that
this happened when the appellees executed the affidavit of consolidation of the title allegedly acquired
by appellees under the fictitious pacto de retro sale. It was then, and only then, that the appellant’s
cause of action arose to enforce the true contract and have the apparent one reformed or disregarded,
and the period of extinctive prescription began to run against her. Since the consolidation affidavit was
allegedly made only in September 1960, and the complaint was filed in Court the following November
1960, just two months afterward, the action of appellant had not prescribed.42

The Court’s ruling in the Tormon case was reiterated in Veluz v. Veluz.43

In the more recent case of Naga Telephone Co., Inc. v. Court of Appeals,44 the Court made the
following declaration:

Article 1144 of the New Civil Code provides, inter alia, that an action upon a written contract must be
brought within ten (10) years from the time the right of action accrues. Clearly, the ten (10) years
period is to be reckoned from the time the right of action accrues which is not necessarily the date of
execution of the contract. As correctly ruled by respondent court, private respondent’s right of action
arose "sometime during the latter part of 1982 or in 1983 when according to Atty. Luis General, Jr. x
x x, he was asked by (private respondent’s) Board of Directors to study said contract as it already
appeared disadvantageous to (private respondent) (p. 31, tsn, May 8, 1989). Private respondent’s
cause of action to ask for reformation of said contract should thus be considered to have arisen only
in 1982 or 1983, and from 1982 to January 2, 1989 when the complaint in this case was filed, ten (10)
years had not yet elapsed.45

This ruling was reiterated in Pilipinas Shell Petroleum Corporation v. John Bordman Ltd. of Iloilo,
Inc., 46 where the Court declared that the cause of action of respondent therein arose upon its
discovery of the short deliveries with certainty, since prior thereto, it had no indication that it was not
getting what it was paying for. The Court declared that before then, there was yet no issue to speak
of, and as such, respondent could not have brought an action against petitioner. It was stressed that
"it was only after the discovery of the short deliveries that respondent got into position to bring an
action for specific performance." Thus, the Court declared that the action was brought within the
prescriptive period.47

In the present case, petitioner executed the Master Deed in 1975. However, petitioner had no doubt
about its ownership of the unassigned parking lots, and even sold some of them. Respondent did not
even object to these sales, and even offered to buy some of the parking slots. Respondent assailed
petitioner’s ownership only in 1989 and claimed ownership of the unassigned parking slots, and it was
then that petitioner discovered the error in the Master Deed; the dispute over the ownership of the
parking slots thereafter ensued. It was only then that petitioner’s cause of action for a reformation of
the Master Deed accrued. Since petitioner filed its complaint in 1990, the prescriptive period had not
yet elapsed.

The CA erred in relying on the ruling of this Court in Rosello-Bentir v. Hon. Leanda.48 In that case, the
Leyte Gulf Traders, Inc. leased a parcel of land owned by Yolando Rosello-Bentir. The lease
agreement was entered into on May 5, 1968 and was for a period of 20 years. The parties therein
agreed, inter alia, that:

"4. IMPROVEMENT. The lessee shall have the right to erect on the leased premises any building or
structure that it may desire without the consent or approval of the Lessor x x x provided that any
improvements existing at the termination of the lease shall remain as the property of the Lessor without
right to reimbursement to the Lessee of the cost or value thereof."49

On May 5, 1989, the lessor Rosello-Bentir sold the property and the corporation questioned the sale,
alleging that they had a verbal agreement that the lessor has the right to equal the offers of prospective
buyers of the property. It insisted, however, that the said agreement was inadvertently omitted in the
contract. On May 15, 1992, the corporation filed a complaint for reformation of instrument, specific
performance, annulment of conditional sale and damages with a prayer for a writ of preliminary
injunction, alleging that the contract of lease failed to reflect the true agreement of the parties.

In his answer to the complaint, the lessor alleged that the corporation was guilty of laches for not
bringing the case for reformation of the lease contract within the prescriptive period of 10 years from
its execution. On December 15, 1995, the trial court issued an Order dismissing the complaint on the
ground that the action had already prescribed. Plaintiff filed a motion for the reconsideration of the
Order and, on May 10, 1996, the trial court granted the motion and set aside its Order, this time,
declaring that its Order dated December 15, 1995 dismissing the complaint was "premature and
precipitate" and denied the corporation its right to due process. The trial court declared that, aside
from plaintiff’s cause of action for reformation of lease contract, plaintiff had other causes of action
such as specific performance, annulment of conditional sale and damages, which must first be
resolved before the trial on the merits of its case.

On appeal to the CA, the lessor alleged that the RTC committed grave abuse of discretion amounting
to excess or lack of jurisdiction in setting aside the December 15, 1995 Order of the RTC. For its part,
the CA rendered judgment dismissing the petition for certiorari on its finding that the complaint had not
yet prescribed when it was filed in the court below. The CA declared that the prescriptive period for
the action for reformation of the lease contract should be reckoned not from the execution of the
contract of lease in 1968, but from the date of the four-year extension of the lease contract after it
expired in 1988. According to the CA, the extended period of the lease was an "implied new lease"
within the contemplation of Article 1670 of the New Civil Code under which provision, the other terms
of the original contract were deemed revived in the implied new lease.

However, we reversed this CA decision and declared that the action for reformation of the lease
contract was inappropriate because petitioner had already breached the deed.50 Even supposing that
the four-year extended lease could be considered as an implied new lease under Article 1670 of the
New Civil Code, the "other terms" contemplated therein were only those terms which are germane to
the lessee’s right of continued enjoyment of the leased property. We concluded that the prescriptive
period of 10 years, as provided for in Article 1144 of the Civil Code, applies by operation of law and
not by the will of the parties, and that, therefore, the right of action for reformation accrues from the
date of the execution of the contract of lease in 1968.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals
in CA-G.R. CV No. 44696 is SET ASIDE. The Court of Appeals is directed to resolve petitioner’s
appeal with reasonable dispatch. No costs.

ORDERED.

FIRST DIVISION

[ G.R. No. 202618. April 12, 2016 ]

CONSULAR AREA RESIDENTS ASSOCIATION, INC., REPRESENTED BY ITS PRESIDENT

BENJAMIN V. ZABAT, ROMEO JUGADO, JR., AND NANCY QUINO, PETITIONER, VS. ARNEL
PACIANO D. CASANOVA, ENGR. TOMAS Y. MACROHON, LOCAL HOUSING BOARD OF
TAGUIG CITY, AND THE CITY GOVERNMENT OF TAGUIG, RESPONDENTS.

DECISION

PERLAS-BERNABE, J.:

Before the Court is a petition1 denominated as one for "Prohibition with plea for the issuance of a
Temporary Restraining Order and Injunction" filed by petitioner Consular Area Residents Association,
Inc., an association composed of residents of the Diplomatic and Consular Area of Fort Bonifacio,
Taguig City, represented by its President Benjamin V. Zabat, Romeo Jugado, Jr., and Nancy Quino
(petitioner), against respondents Arnel Paciano D. Casanova (Casanova), President and Chief
Executive Officer of the Bases Conversion and Development Authority (BCDA), Engr. Tomas
Macrohon2 (Engr. Macrohon), as well as the Local Housing Board of Taguig City, and the City
Government of Taguig, seeking that the BCDA be enjoined from demolishing what it claims as the
remaining structures in the Joint US Military Army Group (JUSMAG) Area in Fort Bonifacio, Taguig
City.

The Facts

In 1992, Congress enacted Republic Act No. (RA) 7227,3 otherwise known as the Bases
Conversion and Development Act of 1992, which, inter alia, created the BCDA in order to "accelerate
the sound and balanced conversion into alternative productive uses of the Clark and Subic military
reservations and their extensions (i.e., John Hay Station, Wallace Air Station, O'Donnell Transmitter
Station, San Miguel Naval Communications Station, and Capas Relay Station)" and "to raise funds by
the sale of portions of Metro Manila military camps."4 For this purpose, the BCDA was authorized to
own, hold, and administer portions of the Metro Manila military camps that may be transferred to it by
the President.5 In this relation, Executive Order (EO) No. 40, Series of 19926 was issued, identifying
Fort Bonifacio as one of the military camps earmarked for development and disposition to raise funds
for BCDA projects.7

Located in Fort Bonifacio are the JUSMAG and Diplomatic and Consular Areas subject of this
case.8 The JUSMAG Area is a 34.5-hectare area located along Lawton Avenue where military officers,
both in the active and retired services, and their respective families, had occupied housing units and
facilities originally constructed by the Armed Forces of the Philippines (AFP).9 Presently, it is being
developed by Megaworld Corporation as the McKinley West.10 On the other hand, the Diplomatic and
Consular Area was declared as alienable and disposable land by virtue of Proclamation No.
1725,11 signed on February 10, 2009. Its administrative jurisdiction, supervision, and control were
transferred to the BCDA, which is likewise responsible for maintaining the usefulness of the area.12

On July 18, 2012, the Local Housing Board of Taguig City issued a Certificate of Compliance on
Demolition13 declaring that the BCDA had complied with the requirement of "Just and Humane
Demolition and Eviction," prescribed under Section 28 of RA 7279,14 otherwise known as the "Urban
Development and Housing Act of 1992," for the demolition of structures within the JUSMAG Area.
Consequently, respondent Casanova, as President and Chief Executive Officer of the BCDA, sent a
Letter15 dated July 20, 2012, informing petitioner and its members that they should, within a seven
(7)-day period ending on July 27, 2012, coordinate with BCDA officials should they choose to either
accept the relocation package being offered to them, or voluntarily dismantle their structures and
peacefully vacate the property.

Petitioner filed the present case to enjoin the demolition of their structures which they claimed are
within the Diplomatic and Consular Area, and not the JUSMAG Area. They averred that the BCDA
1aшphi1

itself declared in its own website that the Diplomatic and Consular Area is not its property,16 and that
its members are occupying the Diplomatic and Consular Area with the consent of the Republic of the
Philippines given at the time of their assignments in the military service,17 and hence, cannot be
demolished, especially in the absence of a court order.18 Furthermore, petitioner posited that
Casanova had no authority to act for and in behalf of the BCDA considering his "highly anomalous
and irregular" appointment as President thereof.19

In their Comment,20 respondents Casanova and Engr. Macrohon maintained that the clearing
operations undertaken by the BCDA covered only the JUSMAG area, on which the structures
possessed by petitioner's members are located.21 They also argued that under Section 28 (b) of RA
7279, eviction or demolition is allowed when government infrastructure projects with available funding
are about to be implemented, even in the absence of a court order.22 Moreover, they maintained that
respondent Casanova acted with authority as President and Chief Executive Officer of the BCDA,
having been duly appointed by the President of the Philippines,23 and in any event, the instant case
has already been rendered moot and academic because the act sought to be enjoined, i.e., the
demolition of the remaining structures in the JUSMAG Area, was already completed on September
21, 2012.24

Respondents Local Housing Board of Taguig City and the City Government of Taguig likewise
filed their own Comment,25 substantially adopting the contentions propounded by respondents
Casanova and Engr. Macrohon. Separately, however, they contended that the instant petition should
have been filed before the Regional Trial Court (RTC) exercising jurisdiction over the territorial area,
instead of the Supreme Court.26

The Issue Before the Court

The main issue in this case is whether or not the demolition should be enjoined.

The Court's Ruling

The petition lacks merit.

The Court first resolves the preliminary concerns raised.

For one, respondents Local Housing Board of Taguig City and the City Government of Taguig
seek the outright dismissal of the petition on the ground that it should have been filed before the RTC,
and not before the Supreme Court. As basis, they cite Section 4, Rule 65 of the Rules of Court, which
provision applies to, among others, petitions for prohibition, viz.:

RULE 65
Certiorari, Prohibition and Mandamus

Section 4. When and where to file the petition. — x x x x

If the petition relates to an act or an omission of a municipal trial court or of a corporation, a board, an
officer or a person, it shall be filed with the Regional Trial Court exercising jurisdiction over the territorial
area as defined by the Supreme Court. It may also be filed with the Court of Appeals or with the
Sandiganbayan whether or not the same is in aid of the court's appellate jurisdiction. If the petition
involves an act or an omission of a quasi-judicial agency, unless otherwise provided by law or these
rules, the petition shall be filed with and be cognizable only by the Court of Appeals.

xxxx

While the instant petition is denominated as one for prohibition, a careful perasal of the same
reveals that it is actually a petition for injunction as it ultimately seeks that a writ of injunction be issued
to pennanently stop "[r]espondents, or any other person acting under their orders or authority, from
carrying out, or causing to carry out, the demolition of [p]etitioner's properties."27 More significantly,
respondents (with the exception of Casanova as will be herein discussed) are not asked to be
prevented from exercising any judicial or ministerial function on account of any lack or excess of
jurisdiction, or grave abuse of discretion, which allegation is key in an action for prohibition. Case law
dictates that "[f]or a party to be entitled to a writ of prohibition, he must establish the following
requisites: (a) it must be directed against a tribunal, corporation, board or person exercising
functions, judicial[, quasi-judiciall or ministerial; (b) the tribunal, corporation, board or person
has acted without or in excess of its jurisdiction, or with grave abuse of discretion; and (c) there
is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law."28 In his
opinion in the case of Nuclear Free Philippine Coalition v. National Power Corporation,29 former Chief
Justice Ramon Aquino discussed the basic distinction between an action for prohibition and one for
injunction:

Prohibition is not the same as injunction. Lawyers often make the mistake of
confusing prohibition with injunction. Basically, prohibition is a remedy to stop a
tribunal from exercising a power beyond its jurisdiction, x x x.
 Prohibition is an extraordinary prerogative writ of a preventive nature, its proper
function being to prevent courts or other tribunals, officers, or persons from usurping
or exercising a jurisdiction with which they are not vested.

It is a fundamental rule of procedural law that it is not the caption of the pleading that determines
the nature of the complaint but rather its allegations.30 Hence, considering the above-discussed
allegations, the petition, albeit denominated as one for prohibition, is essentially an action for
injunction, which means that Section 4, Rule 65 of the Rules of Court would not apply. 1aш phi 1

Instead, it is Section 21 of RA 7227, which solely authorizes the Supreme Court to issue
injunctions to restrain or enjoin "[t]he implementation of the projects for the conversion into alternative
productive uses of the military reservations," that would govern:31

Section 21. Injunction and Restraining Order. - The implementation of the projects
for the conversion into alternative productive uses of the military reservations are
urgent and necessary and shall not be restrained or enjoined except by an order
issued by the Supreme Court of the Philippines. (Emphasis supplied)

Notably, while the petition asks in the final item of its "PRAYER" that a "writ of prohibition be issued
commanding respondents, especially Casanova, from usurping or exercising jurisdiction with which
he has not been vested by law",32 this relief, when read together with the pertinent allegations in the
body of the petition,33 is one which is directed against the title of respondent Casanova as President
and Chief Executive Officer of the BCDA. Particularly, it is claimed that respondent Casanova's
appointment was "highly anomalous and irregular" as it was made contrary to Section 934 of RA 7227,
which purportedly mandates that the Chairman of the BCDA shall also be its President.

The Court observes that the collateral attack on respondent Casanova's title as President and
Chief Executive Officer, which is a public office by nature,35 is improper to resolve in this petition. The
title to a public office may not be contested except directly, by quo warranto proceedings; and it cannot
be assailed collaterally.36 Also, it has already been settled that prohibition does not lie to inquire
into the validity of the appointment of a public officer.37 In fact, petitioner impliedly recognized
the impropriety of raising this issue herein by stating that "until the final resolution regarding the
purported authority of [respondent Casanova], he should be prohibited from acting for and on behalf
of BCDA and from issuing notices of demolition."38 Thus, at all events, the foregoing characterization
of this action as one for injunction, and the consequent conclusion that it was properly filed before the
Court remain. That being said, the Court now proceeds to the main issue in this case.

As earlier mentioned, petitioner ultimately seeks the issuance of a writ of injunction to enjoin the
demolition of the structures which they - as opposed to respondents' version - claim to be located in
the Diplomatic and Consular Area, and hence, outside of the JUSMAG Area.

Jurisprudence teaches that in order for a writ of injunction to issue, the petitioner should be able
to establish: (a) a right in esse or a clear and unmistakable right to be protected; (b) a violation of that
right; and (c) that there is an urgent and permanent act and urgent necessity for the writ to prevent
serious damage. In the absence of a clear legal right, the writ must not issue. A restraining order or
an injunction is a preservative remedy aimed at protecting substantial rights and interests, and it is not
designed to protect contingent or future rights. Verily, the possibility of irreparable damage without
proof of adequate existing rights is not a ground for injunction.39

In this case, the Court finds that petitioner has failed to prove that the structures for which they
seek protection against demolition fall within the Diplomatic and Consular Area. Its supposition is
anchored on two (2) documents, namely: (a) a printed copy of BCDA's declaration in its website that
the Diplomatic and Consular Area is a non-BCDA property;40 and (b) a map of the South Bonifacio
Properties showing the metes and bounds of the properties of the BCD A as well as the properties
contiguous to them.41 However, none of these documents substantiate petitioner's claim: the website
posting is a mere statement that the Diplomatic Consular Area is supposedly a non-BCDA property,
whereas the map only depicts the metes and bounds of the BCDA's properties.

Plainly, none of them show whether or not the structures to be demolished are indeed within the
Diplomatic and Consular Area as petitioner claims. On the other hand, records show that on the basis
of Relocation Survey Plan Rel-00-00129742 approved by the Department of Environment and Natural
Resources (DENR), the BCDA came up with a Structural Map of the JUSMAG Area,43 conducted
ground surveys, and tagged the location of informal settlers whose structures will be affected by the
demolition.44 In this relation, the Urban Poor Affairs Office of the City of Taguig assisted the BCDA in
the conduct of house tagging and validation of the affected families in the JUSMAG Area as well as a
joint inspection to verify the boundaries of the JUSMAG and Diplomatic and Consular
Areas.45 Relying on the prima facie credibility of these documents as opposed to petitioner's flimsy
argumentation, the Court finds that respondents have correctly identified petitioner's structures as
those belonging to the JUSMAG Area. Thus, since petitioner's purported right in esse is hinged on the
premise that the structures do not fall within the JUSMAG but within the Diplomatic and Consular Area,
the petition should already fail.

For another, petitioner argues against the legality of the intended demolition, insisting that there
should be a court order authorizing the demolition pursuant to Article 53646 of the Civil Code and
Section 28 of RA 7279, and not a mere Certificate of Compliance on Demolition.47 However, contrary
to petitioner's argument, the Court has already settled, in the case of Kalipunan ng Damay ang
Mahihirap, Inc. v. Robredo,48 that demolitions and evictions may be validly carried out even
without a judicial order when, among others, government infrastructure projects with available
funding are about to be implemented pursuant to Section 28 (b) of RA 7279, which reads:

Sec. 28. Eviction and Demolition. — Eviction or demolition as a practice shall be discouraged.
Eviction or demolition, however, may be allowed under the following situations:

(a) When persons or entities occupy danger areas such as esteros, railroad
tracks, garbage dumps, riverbanks, shorelines, waterways, and other public places
such as sidewalks, roads, parks, and playgrounds;

(b) When government infrastructure projects with available funding are

about to be implemented; or

(c) When there is a court order for eviction and demolition.

xxxx

Records show that the demolition of the properties is the precursory step to the conversion of the
JUSMAG area into a residential and mixed-use development49 as provided under the terms of a Joint
Venture Agreement dated April 13, 201050 between the BCDA and Megaworld Corporation. As such,
it falls within the ambit of Section 28 (b) of RA 7279, which authorizes eviction or demolition without
the need of a court order.

Likewise, there is no merit to petitioner's statement that there was non-compliance with the
parameters of just and humane eviction or demolition under the same provision, namely:

Sec. 28. Eviction and Demolition. — x x x

xxxx

In the execution of eviction or demolition orders involving underprivileged and homeless citizens,
the following shall be mandatory:

(1) Notice upon the effected persons or entities at least thirty (30) days prior to the date of
eviction or demolition;

(2) Adequate consultations on the matter of settlement with the duly designated
representatives of the families to be resettled and the affected communities in the
areas where they are to be relocated;

(3) Presence of local government officials or their representatives during eviction or

demolition;

(4) Proper identification of all persons taking part in the demolition;

(5) Execution of eviction or demolition only during regular office hours from Mondays to
Fridays and during good weather, unless the affected families consent otherwise;

(6) No use of heavy equipment for demolition except for structures that are permanent
and of concrete materials;

(7) Proper uniforms for members of the Philippine National Police who shall occupy the
first line of law enforcement and observe proper disturbance control procedures; and

(8) Adequate relocation, whether temporary or permanent: Provided, however, That in

cases of eviction and demolition pursuant to a court order involving underprivileged
and homeless citizens, relocation shall be undertaken by the local government unit
concerned and the National Housing Authority with the assistance of other
government agencies within forty-five (45) days from service of notice of final
judgment by the court, after which period the said order shall be executed: Provided,
 further, That should relocation not be possible within the said period, financial
assistance in the amount equivalent to the prevailing minimum daily wage multiplied
by sixty (60) days shall be extended to the affected families by the local government
unit concerned.

The Department of the Interior and Local Government and the Housing and Urban Development
Coordinating Council shall jointly promulgate the necessary rules and regulations to carry out the
above provision.

Particularly, petitioner decries that the demolition is premature as the notice given to them was not
issued thirty (30) days prior to the intended date of the same. However, records show that the
demolition fully - if not, substantially - complied with all the parameters laid down under Section 28 (b)
as above-quoted, including the thirty (30) day prior notice rule, considering the following unrefuted
circumstances: (a) a Local Inter-Agency Committee consisting of members of the BCDA, local
government of Taguig, the Housing and Urban Development Coordinating Council, the Presidential
Commission for the Urban Poor, the People's Organization, the Commission on Human Rights, and
various barangays of Fort Bonifacio was convened for the purpose of conducting meetings and
consultations with the affected settlers;51 (b) after said meetings and consultations, the said
Committee came up with a financial compensation and relocation package which it offered to those
affected by the demolition and eviction of the JUSMAG Area;52 and (c) affected settlers were given
numerous 30-day notices of the impending demolition and eviction activities, with the warning that
their failure to heed the same would constitute a waiver of their right to claim anything under the
aforesaid financial compensation and relocation package.53

In fact, it is in view of the above-enumerated accomplished acts that respondent Local Housing
Board of Taguig City issued a Certificate of Compliance on Demolition dated July 18, 2012 certifying
that the BCDA "has complied with the requirement of 'Just and Humane Demolition and Eviction'
prescribed under Section 28, pre-relocation phase of [RA] 7279 or the Urban Development and
Housing Act (UDHA) of 1992." Hence, bereft of any clear and convincing evidence to the contrary,
such certificate should be accorded the presumption of regularity in the performance of the official
duties of respondent Local Housing Board of Taguig City. Case law states that "[t]he presumption of
regularity of official acts may be rebutted by affirmative evidence of irregularity or failure to perform a
duty. The presumption, however, prevails until it is overcome by no less than clear and
convincing evidence to the contrary. Thus, unless the presumption in rebutted, it becomes
conclusive. Every reasonable intendment will be made in support of the presumption and in
case of doubt as to an officer's act being lawful or unlawful, construction should be in favor of
its lawfulness,"54 as in this case.

As a final note, attention should be drawn to the manifestation of respondents that the demolition
and eviction activities in the JUSMAG Area, on which petitioner's claimed structures belong, had
already been performed and completed on September 21, 2012.55 Thus, since prayers for injunctive
reliefs do not lie to restrain an act that is already fait accompli,56 there is no other proper course of
action but to dismiss the petition.

WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.

THIRD DIVISION

[G.R. NO. 143788. September 9, 2005]

DANFOSS, INC., Petitioners, v. CONTINENTAL CEMENT

CORPORATION, Respondent.

DECISION

CORONA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules on Civil
Procedure of the February 11, 2000 decision1 of the Court of Appeals in CA-G.R. No. SP-
55645, and its resolution dated June 7, 2000 denying petitioner's motion for
reconsideration.

The antecedents show that on November 5, 1998, respondent Continental Cement

Corporation (CCC) filed a complaint for damages against petitioner DANFOSS and
Mechatronics Instruments and Controls, Inc. (MINCI) before the Regional Trial Court of
Quezon City, Branch 80, alleging that:
 xxx

6. On 1 September 1997, Plaintiff CCC purchased from defendant MINCI two (2) unit 132
KW Danfoss Brand Frequency Converter/Inverter for use in the Finish Mill of its Cement
Plant located in Barrio Bigte, Norzagaray, Bulacan. The said purchase is covered by a
Purchase [Order] (PO) No. 36625'.

6.1 Under the terms and conditions of the purchase order, the delivery of the two (2)
unit Frequency Converter are to be delivered within eight (8) to ten (10) weeks from the
opening of the letter of credit;

7. Defendant MINCI, immediately relayed the purchase order of plaintiff CCC to the other
defendant DANFOSS, represented by Messrs. Klaus Stove and Hans Vigaard, who in turn
forwarded the same to their Asian Regional Office in Singapore and Head Office in
Denmark for the shipment of the orders to the Philippines.

7.1 Defendant DANFOSS' commitment to deliver the two (2) unit Danfoss Brand
Frequency Converter/Inverter to plaintiff CCC was relayed by defendant MINCI to CCC
upon the assurance of Messrs. Stove and Vigaard of DANFOSS.

8. On September 1997, plaintiff CCC received the pro-forma invoice of defendant MINCI
through fax transmission dated 2 September 1998, indicating the mode of payment
through irrevocable letter of credit in favor of Danfoss Industries Pte. Ltd.'

8.1 Plaintiff CCC executed and opened a letter of credit under LC No. 970884 in favor of
DANFOSS INDUSTRIES PTE. LTD., with address at 6 Jalan Pesawat, Singapore 619364,
which is the Asian Regional Office of defendant DANFOSS'

9. Defendant MINCI informed plaintiff CCC through fax transmission dated 17 September
1997, that the two (2) unit Frequency Converter/Inverter are ready for shipment, and at
the same time requested for the amendments of the letter of credit changing the port of
origin/loading from Singapore to Denmark'.

9.1 In compliance, plaintiff CCC amended the letter of credit changing the port of origin
from Singapore to Denmark'.

10. On 6 November 1997, defendant MINCI informed plaintiff CCC that Danfoss Industries
Pte. Ltd. was still checking the status of the shipment of the two (2) unit Frequency
Converter/Inverter with Danfoss Denmark.

10.1 In reply, plaintiff CCC through a letter dated 7 November 1997, reiterated its
demand that every delay in the shipment of the two (2) unit Frequency
Converter/Inverter will cause substantial losses in its operations and requested for the
early work out and the immediate shipment of the frequency converter to avoid further
loss to the company'.

11. However, on 9 November 1997, defendant DANFOSS, informed the other defendant
MINCI through fax transmission, copy furnished plaintiff CCC, that the reason why
DANFOSS has delivery problems was that some of the supplied components for the new
VLT 5000 series did not meet the agreed quality standard. That means that their factory
was canvassing for another supplier. And at that moment, there was no clear message
when normal production will resume'.

12. Due to this information received, plaintiff CCC surmised that defendants MINCI and
DANFOSS could not be able to deliver the two (2) unit Frequency Converter within the
maximum period of ten (10) weeks period from the opening of the Letter of Credit, as
one of the conditions in the Purchase Order dated 1 September 1997.

12.1 Thereafter, no definite commitment was received by plaintiff CCC from defendants
MINCI and DANFOSS for the delivery of the two (2) unit Frequency Converter.

13. By reason of the delay of the defendants MINCI and DANFOSS to deliver the two (2)
unit Frequency Converter/Inverter under PO No. 36625, plaintiff CCC, through its
Purchasing Manager, informed defendant MINCI in a letter dated 13 November 1997, of
the plaintiff's intention to cancel the said order'.
13.1 As a consequence thereof, plaintiff CCC has suffered an actual substantial production
losses in the amount of Eight Million Sixty-four Thousand Pesos (P8,064,000.00) due to
the time lost and delay in the delivery of the said two (2) unit Frequency
Converter/Inverter. Likewise, plaintiff CCC was compelled to look for another supplier.

xxx xxx xxx2

On February 17, 1999, petitioner DANFOSS filed a motion to dismiss the complaint on
the ground that it did not state a cause of action:

xxx xxx xxx

The above allegations of the complaint clearly establish the following key constitutive
facts:

1. Defendant's period of delivery is from 8 to 10 weeks from the opening of the letter of
credit on September 9, 1997 or until November 19, 1997.

2. Defendant Danfoss, although having problems with its supplier during the period prior
to defendant's cancellation, nevertheless, plaintiff never alleged that Danfoss Denmark
cannot perform its obligation to deliver by the 10th week or on November 20, 1997.
Admittedly, plaintiff only surmised that defendant Danfoss could not deliver.

3. Before the period for delivery has expired on November 19, 1997, the plaintiff cancelled
its order on November 13, 1997. The cancellation took place seven (7) days before the
expiry of the defendant's obligation to deliver on November 19, 1997.

4. Neither plaintiff nor defendant Danfoss changed the date of delivery, what plaintiff
changed in the letter of credit was only the port of origin/loading from Singapore to
Denmark. The period of delivery as stipulated in the pro forma invoice issued by
defendant MINCI remained intact, that is for a period of 6 to 10 weeks from the opening
of the letter of credit on September 9, 1997 or until November 19, 1997 was still in force
when the plaintiff cancelled its order on November 13, 1997. Defendant Danfoss has not
incurred in delay and has 7 days more within which to make delivery. Plaintiff, having
cancelled the order on November 13, 1997 before the expiry of defendant Danfoss'
delivery commitment, defendant Danfoss's principal could not have been in default.

5. Plaintiff never made an extrajudicial demand for the delivery of two (2) units Frequency
Converter on its due date. On the contrary, as above alleged, plaintiff cancelled its order
on November 13, 1997.

6. Plaintiff's claim for damages could not have accrued until after defendant incurred in
delay.

The above allegations neither prove any right of the plaintiffs arising from the
transactions nor a violation of such right. It is submitted that this Honorable Court based
on the complaint, cannot render a valid judgment against the defendant Danfoss. The
plaintiff's cause of action against Danfoss or plaintiff's right to demand delivery cannot
arise earlier than November 19, 1997, which is the last day for the defendant Danfoss's
principal (Danfoss Denmark) to deliver the two (2) units Frequency Converter. As
admitted by the plaintiff, it cancelled its order on November 13, 1997, or six (6) days
before the expiry of the defendant's obligation to deliver. Indeed, defendant Danfoss's
obligation to deliver is not yet demandable. The period of 8 to 10 weeks for the delivery
of plaintiff's purchase order of two (2) units Frequency Converter was established for the
benefit of both the plaintiff and the defendant Danfoss. As such, plaintiff cannot demand
delivery before the period stipulated'.

xxx

From the allegations of the complaint, there is also no clear and categorical demand for
the fulfillment of the plaintiff's obligation to deliver by the 10th week or on November 19,
1997.

WHEREFORE, it is respectfully prayed of this Honorable Court that the Complaint be

dismissed for failure to state a cause of action.3
The court a quo denied the motion to dismiss in its order4 dated May 28, 1999, holding
that:

xxx

In the Court's opinion, the issue of whether or not the defendants incur delay in the
delivery of the equipment in question within the period stipulated is a debatable question
which necessitates actual trial on the merits where the parties have to adduce evidence
in support of their respective stance.

While the defendants contend that the stipulated period of delivery had not lapsed yet
when the plaintiff cancelled its order of the two equipments in question as the cancellation
took place seven (7) days before the expiry date of the defendants' obligation to deliver,
the plaintiff's position is that the acts of the defendants had made compliance with their
obligation to deliver within the period stipulated, impossible, hence, there was no need
for a demand as the law provides that "when demand would be useless, as when the
obligor has rendered it beyond his power to perform." The plaintiff's contention if properly
and strongly supported by evidence during the hearing of the merits of the case may well
negates (sic) the defendant's contrary stand.

As to the argument of the defendant MINCI that it cannot be held liable jointly with the
defendant Danfoss due to the fact that it was merely an "agent" of Danfoss, the Court
finds the same a debatable issue considering the stand of plaintiff that the defendant
MINCI dealt with the former not as an agent but also as a principal. The issue at hand
necessitates the presentation of evidence which has to be done during the hearing on the
merits of the case where the issue of damages incurred by either of the parties may well
be taken up and judgment be rendered after presentation of evidence by the parties.

WHEREFORE, premises considered, the two motions to dismiss, interposed separately by

the defendants as earlier stated, are both denied.

SO ORDERED.5

Danfoss filed a motion for reconsideration of the order but it was denied. On appeal to
the Court of Appeals, the latter also denied Danfoss' petition for lack of merit. The CA
likewise denied petitioner's motion for reconsideration, hence, this appeal.

The only issue for our consideration is whether or not the CA erred in affirming the denial
by the court a quo of petitioner's motion to dismiss the complaint for damages on the
ground that it failed to state a cause of action.

Section 1 (g), Rule 16 of the 1997 Revised Rules on Civil Procedure provides that:

Section 1. Grounds - Within the time for but before filing the answer to the complaint or
pleading asserting a claim, a motion to dismiss may be made on any of the following
grounds:

xxx

(g) That the pleading asserting the claim states no cause of action;

A cause of action is defined under Section 2, Rule 2 of the same Rules as:

Sec. 2. Cause of action, defined. 'A cause of action is the act or omission by which a party
violates a right of another.

It is the delict or wrongful act or omission committed by the defendant in violation of the
primary right of the plaintiff.6

In order to sustain a dismissal on the ground of lack of cause of action, the insufficiency
must appear on the face of the complaint. And the test of the sufficiency of the facts
alleged in the complaint to constitute a cause of action is whether or not, admitting the
facts alleged, the court can render a valid judgment thereon in accordance with the prayer
of the complaint. For this purpose, the motion to dismiss must hypothetically admit the
truth of the facts alleged in the complaint.7
After a careful perusal of the allegations in respondent's complaint for damages against
petitioner, we rule that the same failed to state a cause of action. When respondent sued
petitioner for damages, petitioner had not violated any right of respondent from which a
cause of action had arisen. Respondent only surmised that petitioner would not be able
to deliver the two units frequency converter/inverter on the date agreed upon by them.
Based on this apprehension, it cancelled its order six days prior to the agreed date of
delivery. How could respondent hold petitioner liable for damages (1) when petitioner
had not yet breached its obligation to deliver the goods and (2) after respondent made
it impossible for petitioner to deliver them by cancelling its order even before the agreed
delivery date?cralawlibra ry

The trial court erred in ruling that the issue of whether or not the defendants incurred
delay in the delivery of the equipment within the period stipulated was a debatable
question. It said that trial on the merits was necessary and the parties had to adduce
evidence in support of their respective positions.8 But what was there to argue about
when, based on the allegations of the complaint, petitioner was not yet due to deliver the
two units frequency converter/inverter when respondent cancelled its order? It still had
six days within which to comply with its obligation. The court a quo should not have
denied petitioner's motion to dismiss the complaint (for its failure to state a cause of
action) when, on its face, it was clear that petitioner had not yet reneged on its obligation
to deliver the frequency converter/inverter on the date mutually agreed upon by the
parties. Moreover, the obligation itself was negated by no less than respondent's own act
of cancelling its order even before the prestation became due and demandable. Where
therefore was the breach? Where was the damage caused by petitioner? There was none.

Consequently, it was wrong for the CA to affirm the order of the trial court denying
petitioner's motion to dismiss the complaint for its failure to state a cause of action.

The principle of anticipatory breach enunciated in Blossom & Company, Inc. v. Manila
Gas Corporation 9 does not apply here. In that case, Blossom & Company, Inc. entered
into a contract with Manila Gas Corporation for the sale and delivery of water gas and
coal gas tar at stipulated prices for a period of four years. On the second year of the
contract, Manila Gas willfully and deliberately refused to deliver any coal and water gas
tar to Blossom and Company, Inc. because it was asking for a higher price than what had
been previously stipulated by them. The price of its tar products had gone up. We held
that:

'even if the contract is divisible in its performance and the future periodic deliveries are
not yet due, if the obligor has already manifested his refusal to comply with his future
periodic obligations, "the contract is entire and the breach total," hence, there can only
be one action for damages.10

Thus, the principle contemplates future periodic deliveries and a willful refusal to comply
therewith. Here, the obligation was single and indivisible - to deliver two units of
frequency converter/inverter by November 19, 1997. The records do not show that
petitioner refused to deliver the goods on the date agreed upon. On the contrary,
petitioner exerted efforts to make good its obligation by looking for other suppliers who
could provide it the parts needed to make timely delivery of the frequency
converter/inverter ordered by respondent.

Furthermore, respondent's complaint suffered from another fatal infirmity. It was

premature. The obligation of petitioner to respondent was not yet due and demandable
at the time the latter filed the complaint. The alleged violation of respondent's right being
no more than mere speculation, there was no need to call for judicial intervention.

The premature invocation of the court's intervention was fatal to respondent's cause of
action.11 Hence, the dismissal of respondent's complaint was in order.

In sum, since respondent's fear that petitioner might not be able to deliver the frequency
converter/inverter on time was not the cause of action referred to by the Rules and
jurisprudence, the motion to dismiss the respondent's complaint for damages for lack of
cause of action should have been granted by the trial court. In addition, the dismissal of
the complaint was warranted on the ground of prematurity.

WHEREFORE, we hereby GRANT the petition. The assailed decision of the CA dated
February 11, 2000 and its resolution dated June 7, 2000 are REVERSED and SET
ASIDE. Civil Case No. Q-98-35997 pending before the Regional Trial Court of Quezon
City, Branch 80, is hereby DISMISSED.

SO ORDERED.

[ G.R. No. 252467, June 21, 2021 ]

FRANK COLMENAR, IN HIS CAPACITY AS AN HEIR OF THE LATE FRANCISCO COLMENAR,*

PETITIONER, VS. APOLLO A. COLMENAR, JEANNIE COLMENAR MENDOZA, VICTORIA JET
COLMENAR, PHILIPPINE ESTATES CORPORATION, AMAIA LAND CORPORATION, CRISANTA
REALTY DEVELOPMENT CORPORATION, PROPERTY COMPANY OF FRIENDS, AND THE
REGISTER OF DEEDS OF THE PROVINCE OF CAVITE, RESPONDENTS.

DECISION

LAZARO-JAVIER, J.:

The Case

This petition for review on certiorari1 seeks to reverse and set aside the Order2 dated May 22, 2020
of the Regional Trial Court (RTC), Branch 23, Trece Martires City, Cavite in Civil Case No. TMCV-
062-18 dismissing the complaint of petitioner Frank Colmenar for declaration of nullity of deeds of
extrajudicial settlement of estate, deeds of sale, cancellation of titles, and damages against
respondents Philippine Estates Corporation (PEC), Amaia Land Corporation (Amaia), Crisanta Realty
Development Corporation (Crisanta Realty), and Property Company of Friends (ProFriends), on the
ground that the complaint failed to state a cause of action as against them. In dismissing the case, the
trial court applied the 2019 Amendments to the 1997 Revised Rules on Civil Procedure even though
it was allegedly not feasible and it caused injustice to petitioner.

Antecedents

In his complaint3 filed on September 11, 2018, petitioner essentially averred:

(a) He is the second child of Filipino-born Francisco Jesus Colmenar and American Dorothy
Marie Crimmin. Their family lived in Cleveland, Ohio, United States of America.4

(b) Following his parents' divorce, his father Francisco Jesus Colmenar returned to the
Philippines. Despite the distance between him and his father, he remained close to the latter.
In fact, when his own child was born, Francisco Jesus Colmenar visited them in Las Vegas,
Nevada, where he and his family lived. Francisco Jesus Colmenar confided in him that he
(Francisco Jesus Colmenar) had met a woman named Loida.5

(c) Years later, he learned that his father had died. The latter left real properties located at
General Trias, Cavite, all registered in his father's name, viz.: (i) an interest in a property
covered by Transfer Certificate of Title (TCT) No. 579 with an area of 130,743 sq. m.; (ii) an
interest in the property under TCT No. 588 with an area of 806 sq. m.; (iii) half an interest in
the property under TCT No. 572 measuring 27,175 sq. m.; and (iv) 1/6 interest in the property
under TCT No. 25848 with an area of 117,476 sq. m..6

(d) He also learned that respondents Apollo Colmenar (Apollo), Jeannie Colmenar Mendoza
(Jeannie), and Victoria Jet Colmenar (Victoria) executed an Extrajudicial Settlement of Estate
of Francisco Jesus Colmenar dated May 16, 2008 and another Extrajudicial Settlement of
Estate of Deceased Francisco Jesus Colmenar and Loida Colmenar dated July 8, 2011 where
they made it appear that they were the surviving heirs of Francisco Jesus Colmenar, and by
virtue thereof, allocated unto themselves the interests of his late father in the aforesaid
properties.7

(e) Apollo, Jeannie, and Victoria thereafter sold to ProFriends the property under TCT No.
25848 on January 3, 2012; to Crisanta Realty the property under TCT No. 572 through a Deed
of Absolute Sale dated September 21, 2012; and to PEC the property under TCT No. 579
through a Deed of Sale dated May 22, 2013. Much later, PEC sold this property to Amaia in
whose name TCT No. 057-2013024578 was issued.8

(f) These sales were made without his knowledge and consent. The individual respondents
effectively deprived him of his successional rights under Philippine laws as a legitimate son of
his late father. Thus, he secured the services of counsel and sent demand letters to individual
respondents to invoke his successional rights. Apollo's counsel, however, refused to meet with
him. His subsequent demand letters were also ignored.9
 (g) The Deeds of Sale in PEC's favor are void because the individual respondents, not being
heirs of Francisco Jesus Colmenar, had no rightful claim and interest over the property under
TCT No. 579. Consequently, PEC also did not confer any right on Amaia when the former sold
this property to the latter.10 For the same reason, the sale in favor of Crisanta Realty and
ProFriends are also void.11

The case was docketed as Civil Case No. TMCV-062-18 and raffled to RTC-Trece Martires City,
Cavite, Branch 23.

ProFriends,12 PEC,13 and Crisanta Realty14 filed their respective answers. ProFriends invoked as
affirmative defense lack of cause of action, while PEC and Crisanta Realty, averred that the complaint
failed to state a cause of action against them. They also invoked the following common defenses: (1)
they are innocent purchasers for value; and (2) petitioner's claim is barred by laches and/or
prescription.

Apollo15 and Amaia, on the other hand, filed their respective motions to dismiss. Amaia, like PEC and
Crisanta Realty, averred that the complaint stated no cause of action against it and that it was a buyer
in good faith.16

Crisanta Realty and PEC then filed a Motion for Leave of Court to Set the Case for Preliminary Hearing
on Affirmative Defenses (Motion for Leave of Court).17

On April 1, 2019, the trial court, through then Assisting Judge Bonifacio S. Pascua, issued an
Order18 granting the aforesaid motion and setting their affinnative defenses for hearing on May 27,
2019. In the same order, the trial court deferred the resolution of the motions to dismiss of Apollo and
Amaia.

Through Order19 dated December 26, 2019, however, Assisting Judge Jean Desuasido-Gill (Judge
Gill) set aside the April 1, 2019 Order and deemed PEC and Crisanta Realty's Motion for Leave of
Court, as well as Apollo and Amaia's respective motions to dismiss, submitted for resolution.

On February 12, 2020, Judge Gill issued an Omnibus Order20 denying these motions, viz.:

MOTIONS TO DISMISS

Anent the Motion to Dismiss filed by Defendants Apollo Colmenar (Apollo) and Amaia Land
Corporation (Amaia), the Court hereby DENIES said Motions. The issues raised by the Defendants
are complex and the matters raised are evidentiary, which can be best threshed out during trial.
Defendants Apollo and Amaia are directed to file their Answer within ten (10) days from receipt hereof.

MOTIONS TO HEAR AFFIRMATIVE DEFENSES

The Court exercises its discretion under Section 1, Rule 16 of the Rules of Court to DENY the Motion
to Hear Affirmative Defenses. The issues raised in this case by each party are complex. The affirmative
defenses raised by defendants Crisanta Realty Development Corporation (Crisanta) and Philippine
Estates Corporation (PEC) are matters better threshed out in trial.21

xxxx

PEC,22 Crisanta Realty,23 and Amaia24 filed their respective motions for reconsideration. At the
same time, Amaia filed its Answer25 pleading anew its affirmative defenses that the complaint failed
to state a cause of action against it, it was an innocent purchaser for value, and petitioner's claim had
prescribed.

Meantime, the 2019 amendment to the Rules of Court took effect on May 1, 2020.

Thereafter, the trial court, still through Judge Gill, issued the assailed Order dated May 22,
2020,26 dismissing the complaint as against PEC, Crisanta Realty, Amaia, and ProFriends on ground
that the complaint failed to state a cause of action against them.27 Judge Gill stated that she applied
Section 12, Rule 8 of the 2019 Amendments to the Revised Rules on Civil Procedure, thus:

For comment and resolution of the Court are the Affirmative Defenses filed by: Philippine Estates
Corporation (PEC), Amaia Land Corporation (Amaia), Crisanta Realty Development Corporation
(Crisanta), and Property Company of Friends, Inc. (Profriends).

They are being resolved in consonance with Rule 8 Section 12, particularly par. (a) and (c) of the 2020
Amendments to the 1997 Rules of Civil Procedure, which took effect on May 1, 2020. As per this new
provision, the Court shall motu proprio resolve the affirmative defense if claim [sic] allegedly states no
cause of action, among others. The Court marries the case status with the new provision.28

xxxx

The Court rules to DISMISS the Complaint vs. PEC and AMAIA.

Nowhere in the Complaint did Plaintiff allege that Defendant PEC is a purchaser in bad faith or that it
has notice of the defect in the title of Defendants Siblings Colmenar.

In a complaint for recovery of ownership of real property, the Supreme Court held that:

Where the complaint for recovery of ownership and possession of a parcel of land alleges that some
of the defendants bought said land from their co-defendants who had a defective title thereto but does
not allege that the purchasers were purchasers in bad faith or with notice of the defect in the title of
their vendors, there is a failure to state a cause of action.

A complaint states a cause of action if it avers the existence of the three essential elements of a cause
of action, namely:

i) the legal right of the plaintiff;

ii) the correlative obligation of the defendant;

iii) the act or omission of the defendant in violation of said legal right.

If the allegations in the complaint do not aver the concurrence of these elements, the complaint
becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action.

Amaia has similar arguments for dismissal as PEC. Defendant AMAIA purchased the subject property
from PEC. The Complaint's omission to allege that PEC and Amaia are not purchasers in good faith
or that they had notice of defect in the title of their predecessors in interest makes the Complaint fail
to state a cause of action.

An innocent purchaser for value is protected by the Torrens system of registration under Section 53
of PD 1529. Under this section, while a legal remedy is available for fraud perpetrators in obtaining
Title to property, the remedy is not available against an innocent purchaser for value.

Both PEC and Amaia, the latter a company in the business of realty or land sales, enumerated the
due diligence they observed in procuring or purchasing the subject property which are, among others:
keen inspection of titles; physical inspection of land; inspection of neighboring or adjacent lands;
inquiries in the Register of Deeds; circumspect inspection of any defect of Title.

As PEC and Amaia are innocent purchasers for value of the subject land, the Plaintiff loses the legal
remedy that could have been afforded by Section 53. There is no cause of action against PEC and
Amaia.

Premises considered: 1/ the Complaint against Philippine Estates Corporation is DISMISSED for lack
of cause of action, sans pronouncement as to Damages, [Attorney's] fees and Compulsory
Counterclaim; 2/ PEC's Motion for Reconsideration to Hear Affirmative Defenses is rendered MOOT.

Likewise, the Complaint as against Amaia Land Corporation is hereby Dismissed for lack of cause of
action, bereft of pronouncement as to the Counterclaim and Cross-claim.

Crisanta Realty Development Corporation

Crisanta's Affirmative Defenses strongly echo PEC's.

Crisanta's Affirmative Defenses of No Cause of Action against it AND innocent purchaser for value
displayed the same narrative in PEC's affirmative defense.

The Court reached the same conclusions: 1/ the Complaint against Crisanta Realty Development
Corporation is DISMISSED for lack of cause of action, sans pronouncement as to Damages,
[Attorney's] fees and Compulsory Counterclaim; 2/ Crisanta's Motion for Reconsideration to Hear
Affirmative Defenses is rendered MOOT.

Property Company of Friends, Inc.

Profriends Affirmative Defense relied on No cause of action.

Profriends alleged that although it is being impleaded in the Complaint as a purchaser of the parcel of
land previously covered by TCT No. 25848, it allegedly has no obligation insofar as plaintiff is
concerned. Plaintiff failed to provide in its Complaint factual and legal basis for the prayer of
cancellation of the Deed of Sale in Profriend's favor, as well as the new TCT issued under it, as a
result of the sale.

Again, the Court finds no cause of action against Profriends to support the Complaint.

Profriends is a purchaser in good faith, the property it bought is covered by the Torrens Title.

The Court reiterates the discussion in PEC's and Amaia's cases above, as conclusive ground for
dismissal of the Complaint against Profriends.

Wherefore, the Complaint against Property Company of Friends, Inc. is DISMISSED for lack of cause
of action, bereft of pronouncement as to the Compulsory Counterclaim.

FINAL ORDERS:

Preceding any progression of this case, in order to be consistent with the 2020 Amendments to the
Rules of Civil Procedure, particularly Rule 7 Section 6 (b) and (c) the Court orders the Plaintiff to file
within a non-extendible period of thirty (30) days from receipt hereof: 1/ a summary of its witnesses
and their intended testimonies; 2/ the judicial affidavits of the said witnesses; 3/ true copy of the
documentary evidence and object evidence of all the allegations to support the claim, if none filed, as
suppletory to its initial pleading.

Let this case be set for a possible marking of Exhibits and true copy of documents, including Judicial
Affidavits of Plaintiffs witnesses on Tuesday, June 30, 2020 @ 1:15 o'clock in the afternoon in the
Courtroom of RTC Branch 23, Trece Martires City. This case will be heard face to face.

The Court stands pat on the Default Order against Defendants Jeannie Colmenar Mendoza and
Victoria Jet Colmenar, and strongly NOTES the non-Answer of Defendant Apollo A. Colmenar, despite
Court Order of February 12, 2020. The period for Apollo A. Colmenar to file Answer has lapsed.

So Ordered.29

Noticeably, the inclusion of the name of ProFriends was erroneous since ProFriends actually pleaded
a different affirmative defense - lack of cause of action.

In light of the proscription against filing a motion for reconsideration under Section 12, Rule 1530 of
the 2019 Rules on Civil Procedure and in view of the singular question of law purportedly involved,
petitioner directly sought relief from the Court.

The Present Petition

Petitioner now seeks affirmative relief from the Court against the assailed Order dated May 22, 2020.
He faults Judge Gill for applying the 2019 Rules on Civil Procedure to the case, and based
thereon, motu proprio acted on the affirmative defenses of respondent companies despite the clear
injustice it caused to him.31 He asserts that although admittedly procedural rules may be applied to
actions already pending prior to their effectivity, the 2019 Amendments expressly proscribe their
application to pending actions when "in the opinion of the court, their application would not be feasible
or would work injustice, in which case the procedure under which the cases were filed shall
govern."32 Here, Judge Gill motu proprio acted on and granted the affirmative defenses of respondent
companies despite previously denying them through her Omnibus Order dated February 12, 2020.
This hasty turn-about caused him great prejudice as he was peremptorily deprived of the opportunity
to assert his claim against respondent companies. More so considering the trial court's earlier
pronouncement that the issues presented could be better threshed out through a full dressed trial.
Worse, he could not even seek a reconsideration from the assailed disposition because Section 12,
Rule 15 of the 2019 Amendments prohibits the filing of a motion for reconsideration of court actions
on affirmative defenses.33

Petitioner further posits that Judge Gill had earlier ruled on the affirmative defenses through her
Omnibus Order dated February 12, 2020. The pending matters at the time the 2019 Amendments took
effect were respondent companies' motions for reconsideration of the February 12, 2020 Omnibus
Order. If Judge Gill was truly insistent on applying the new rules in the case, she should have denied
the motions for reconsideration pursuant to Section 12(e), Rule 8 of the 2019 Amendments which
prohibits the filing of a motion for reconsideration where an affirmative defense is denied.34
Further, by motu proprio resolving the affirmative defenses, Judge Gill totally disregarded the
requirement set forth under Section 12(c), Rule 8 of the 2019 Amendments that the court "shall motu
proprio resolve the above affirmative defenses within thirty (30) calendar days from the filing of the
answer." ProFriends filed its answer with affirmative defense as early as December 2018; PEC and
Crisanta Realty, on January 3, 2019; and Amaia on February 27, 2020. Thus, when she resolved their
respective affirmative defenses on May 22, 2020, she did so way beyond the 30-day period provided
under the 2019 Amendments.35

Lastly, Judge Gill gravely erred when she decreed that the complaint failed to state a cause of action
as against respondent companies in view of the absence of a material allegation that they were
purchasers in bad faith or had notice of a defect in the sellers' titles. In truth, the complaint bears the
material allegations that petitioner is the heir of Francisco Jesus Colmenar, the registered owner of
the properties which were sold to respondent companies by Apollo, Jeannie, and Victoria, who were
not heirs of Francisco Jesus Colmenar. A purchaser may be impleaded in an action if said purchaser
acquired the property from a seller who had no right over the said property. The Roman Catholic
Bishop of Tuguegarao v. Prudencio,36 decreed that a transferee's claim of good faith does not
preclude a cause of action against it. Thus, the lack of specific allegation in the complaint that
respondent companies acquired the properties in bad faith does not equate to failure to state a cause
of action against them.37

In their Comment dated January 22, 2021,38 PEC and Crisanta Realty aver that the petition must be
dismissed since it actually raises a question of fact. For petitioner is asking the Court to evaluate the
allegations in the complaint and determine whether the same make out a case against respondent
companies, which is basically a question of fact, thus, outside the purview of Rule 45 of the Revised
Rules of Court.39 Contrary to petitioner's claim, Judge Gill did not err in applying the 2019 Rules on
Civil Procedure to the case for Rule 144 of the Rules itself clearly ordains that the same may be applied
to all pending proceedings. In fact, Judge Gill had consistently applied the 2019 Rules in all
proceedings before her court.40 In any event, Judge Gill was correct in holding that the complaint
failed to state a cause of action against them. Petitioner, indeed, did not allege in his complaint that
they are purchasers in bad faith or that they had notice of any defect in the titles of the properties they
bought from individual respondents who are also children of Francisco Jesus Colmenar, albeit, from a
different wife. In effect, the complaint failed to state the particular right, if any, which they supposedly
violated. They were innocent purchasers for value. They exercised the required diligence when they
investigated the property before buying it. Their diligent investigation did not yield anything suspicious
about the properties and their corresponding titles.41

For its part, Amaia reiterates the arguments in its Comment42 dated January 25, 2021 that the
complaint indeed failed to state a cause of action against it. The complaint did not bear any allegation
that respondent companies were purchasers in bad faith. As innocent purchasers for value, they are
protected by law.43 Also, the trial court was correct when it applied the 2019 Amendments and acted
on respondent companies' affirmative defenses. The 2019 Amendments clearly uses the word "shall"
to qualify its effectivity provision, hence, it applies as well to pending cases.44

On the other hand, ProFriends, in its Comment45 dated January 29, 2021, also faults petitioner for
improperly raising here a mixed question of fact and law, which is not allowed under Rule 45. Petitioner
should have gone first t() the Court of Appeals in consonance with the rule on the hierarchy of courts.46

Issues

1. Does the petition raise pure questions of law?

2. Did the trial court commit reversible error when it applied the 2019 Amendments to the 1997
Revised Rules on Civil Procedure (now known as the 2019 Rules of Procedure) to resolve the
affirmative defenses pleaded by respondent companies?

3. Did the trial court commit reversible error when it dismissed the complaint against
respondent companies on ground that it failed to state a cause of action against them?

Ruling

The petition raises pure questions of law.

The issues for resolution are:

First. Did the trial court commit reversible error when it applied the 2019 Amendments to resolve the
affirmative defenses pleaded by respondent companies, albeit the case was already pending when
the 2019 Amendments took effect?; and
Second. Assuming the allegations in the complaint to be true, does the complaint state a cause of
action against respondent companies?

A "question of law" exists when the doubt hinges on what the law is on a certain set of facts or
circumstances; on the other hand, there is a "question of fact" when the issue raised on appeal pertains
to the truth or falsity of the alleged facts. The test for determining whether the supposed error was one
of "law" or "fact" is not the appellation given by the parties raising the same; rather, it is whether the
reviewing court can resolve the issues raised without evaluating the evidence, in which case, it is a
question of law; otherwise, it is one of fact. In other words, where there is no dispute as to the facts,
the question of whether the conclusions drawn from these facts are correct is a question of law. If the
question posed, however, requires a re-evaluation of the credibility of witnesses, or the existence or
relevance of surrounding circumstances and their relationship to each other, the issue is factual.47

Here, the first question of whether the trial court committed reversible error when it applied the 2019
Amendments to resolve the affirmative defenses pleaded by the respondent companies, albeit the
same was already pending when these Amendments took effect is one of law. In Central Realty and
Development Corp. v. Solar Resources, Inc.,48 the Court held that the issue of whether the trial
court correctly applied a specific law or rules to a particular case is a question of law, viz.:

Was the denial of petitioner's motion for judgment on the pleadings correct? Is Solar's action for
specific performance barred by res judicata? Is summary judgment in the case proper? These are
precisely the questions being raised here. The resolution of these questions rests solely on what the
law or the rules provides on the given set of circumstances. In other words, the Court ought to look
only into whether the trial court correctly applied the law or rules in the case. These are pure
questions of law which do not require the examination of evidence. (Emphasis supplied)

As for the second issue, whether the allegations in the complaint, assuming them to be true, state a
cause of action against respondent companies is also one of law. The Court stressed in Bases
Conversion Development Authority v. Reyes,49 that where there is no dispute as to the facts, the
question of whether the conclusions drawn from these facts are correct is a question of law. Indeed,
in resolving whether the complaint here, based on its allegations, states a cause of action against
respondent companies, the Court need not re-evaluate the credibility of any witnesses or the veracity
of any evidence. The Court only needs to examine the complaint itself, the allegations of which are
assumed to be true, in order to determine whether the complaint states a cause of action against
respondent companies for declaration of nullity of deeds of extrajudicial settlement of estate, deeds of
sale, cancellation of titles, and damages against respondent companies. To repeat, this is a pure
question of law.

In fine, petitioner's direct resort to the Court is in accordance with Rule 45, which ordains:

Section 1. Filing of petition with Supreme Court - A party desiring to appeal by certiorari from a
judgment, final order or resolution of the Court of Appeals, the Sandiganbayan, the Court of Tax
Appeals, the Regional Trial Court or other courts, whenever authorized by law, may file with the
Supreme Court a verified petition for review on certiorari. The petition may include an application for
a writ of preliminary injunction or other provisional remedies and shall raise only questions of law,
which must be distinctly set forth. The petitioner may seek the same provisional remedies by verified
motion filed in the same action or proceeding at any time during its pendency.

As held in Daswani v. Banco de Oro,50 when only questions of law remain to be addressed, a direct
recourse to the Court under this remedy is the proper mode of appeal.

We now resolve the case on the merits.

The trial court gravely erred when it applied the 2019 Amendments to resolve the affirmative
defenses pleaded by respondent companies

The 2019 Amendments have been incorporated into the 1997 Revised Rules on Civil Procedure, now
known as the 2019 Rules on Civil Procedure. And as with all things new, precedence is generally
scarce, hence, its application must be done with utmost caution and in strict adherence to its
provisions.

Rule 144 of the 2019 Rules, provides:

The 2019 Proposed Amendments to the 1997 Rules of Civil Procedure shall govern all cases filed
after their effectivity on May 1, 2020, and also all pending proceedings, except to the extent that
in the opinion of the court, their application would not be feasible or would work injustice, in
which case the procedure under which the cases were filed shall govern. (Emphasis supplied)
As worded, the 2019 Amendments shall also govern all pending cases commenced before they took
effect on May 1, 2020, except to the extent that in the opinion of the court, their application would not
be feasible or would work injustice, in which case, the procedure under which the cases were filed
shall govern. Here, the case commenced with the filing of the complaint in September 2018 and
remained pending when the 2019 Amendments took effect.

As it was, Judge Gill applied Section 12, Rule 8 of the 2019 Amendments when she supposedly
resolved motu proprio the affirmative defense of respondent companies, that is, the complaint failed
to state a cause of action, thus:

Section 12. Affirmative defenses. - (a) A defendant shall raise his or her affirmative defenses in his or
her answer, which shall be limited to the reasons set forth under Section 5(b), Rule 6, and the following
grounds:

1. That the court has no jurisdiction over the person of the defending party;

2. That venue is improperly laid;

3. That the plaintiff has no legal capacity to sue;

4. That the pleading asserting the claim states no cause of action; and

5. That a condition precedent for filing the claim has not been complied with.

(b) Failure to raise the affirmative defenses at the earliest opportunity shall constitute a waiver
thereof.

(c) The court shall motu proprio resolve the above affirmative defenses within thirty (30)
calendar days from the filing of the answer. (Emphasis supplied)

The records though readily show that when Judge Gill motu proprio resolved the affirmative defenses
on May 22, 2020, the prescribed thirty (30) day period had long expired. ProFriends filed 1ts answer
with affirmative defense51 in December 2018; PEC52 and Crisanta Realty53 on January 3, 2019; and
Amaia54 on February 27, 2020. Judge Gill should have, therefore, desisted from applying the 2019
Amendments to the case below, specifically Section 12, Rule 8 thereof, because when she did, the
same was no longer feasible.

Another. It was inaccurate for Judge Gill to say that she was motu proprio acting on the affirmative
defenses. In truth, she had already resolved this common affirmative defense of failure to state a cause
of action, together with the other affirmative defenses in her Omnibus Order dated February 12, 2020.
There, she denied the motions to dismiss and motions to set the affirmative defenses for hearing
because in her words, "the issues x x x are complex x x x and are x x x better threshed out in
trial."55 Too, PEC, Crisanta Realty, and Amaia all had pending motions for reconsideration of the
Omnibus Order dated February 12, 2020 when Judge Gill "motu proprio" resolved their common
affirmative defense, and dismissed the case based on, and consequently considered the pending
motions for reconsiderations as moot. Thus, instead of applying the 2019 Amendments, Judge Gill
could have simply resolved the pending motions for reconsiderations of PEC, Crisanta Realty, and
Amaia.

But this is not all. The worst part is when Judge Gill ignored the injustice caused by the application of
the 2019 Amendments to the case. For as a consequence, petitioner lost his substantial right to be
heard on the common affirmative defense of PEC, Crisanta Realty, and Amaia, and his right to seek
a reconsideration of the order of dismissal which were both granted him under the 1997 Revised Rules
on Civil Procedure.

This brings us to the third and last issue: did the complaint fail to state a cause of action against
respondent companies?

The complaint stated a cause of action against respondent companies

To recall, there are two (2) sets of affirmative defenses raised below, viz.: (1) the complaint failed to
state a cause of action, raised by PEC, Amaia, and Crisanta Realty; and (2) lack of cause of action,
raised by ProFriends.

In the Omnibus Order dated February 12, 2020, Judge Gill did not resolve the affirmative defense of
lack of cause of action raised by ProFriends. She only resolved the common affirmative defense of
PEC, Amaia, and Crisanta Realty that the complaint failed to state a cause of action. And yet, in the
assailed Order dated May 22, 2020, the case against ProFriends was also dismissed on the ground
that the complaint failed to state a cause of action, the common affirmative defense raised only by
PEC, Amaia, and Crisanta Realty.56

It has been repeatedly held, however, that failure to state a cause of action and lack of cause of
action are distinct and separate grounds to dismiss a particular action. Zuniga-Santos v. Santos-
Gran57 explained that failure to state a cause of action refers to the insufficiency of the allegations in
the pleading, while lack of cause of action refers to the insufficiency of the factual basis for the action.
Dismissal for failure to state a cause of action may be raised at the earliest stages of the proceedings
through a motion to dismiss under Rule 16 of the 1997 Rules of Court or raised as an affirmative
defense in an answer, while dismissal for lack of cause of action may be raised any time after the
questions of fact have been resolved on the basis of stipulations, admissions or evidence presented
by the plaintiff. Asia Brewery, Inc. v. Equitable PCI Bank58 further explained:

Failure to state a cause of action is not the same as lack of cause of action; the terms are not
interchangeable. It may be observed that lack of cause of action is not among the grounds that may
be raised in a motion to dismiss under Rule 16 of the Rules of Court. The dismissal of a Complaint for
lack of cause of action is based on Section 1 of Rule 33, which provides:

Section 1. Demurrer to evidence. - After the plaintiff has completed the presentation of his evidence,
the defendant may move for dismissal on the ground that upon the facts and the law the plaintiff has
shown no right to relief. If his motion is denied he shall have the right to present evidence. If the motion
is granted but on appeal the order of dismissal is reversed he shall be deemed to have waived the
right to present evidence.

If the Complaint fails to state a cause of action, a motion to dismiss must be made before a
responsive pleading is filed; and the issue can be resolved only on the basis of the allegations
in the initiatory pleading. On the other hand, if the Complaint lacks a cause of action, the
motion to dismiss must be filed after the plaintiff has rested its case.

In the first situation, the veracity of the allegations is immaterial; however, in the second situation, the
judge must determine the veracity of the allegations based on the evidence presented.

xxxx

Hence, in order to resolve whether the Complaint lacked a cause of action, respondent must have
presented evidence to dispute the presumption that the signatories validly and intentionally delivered
the instrument.

xxxx

The test to determine whether a complaint states a cause of action against the defendants is this:
admitting hypothetically the truth of the allegations of fact made in the complaint, may a judge validly
grant the relief demanded in the complaint?59 (Emphasis supplied)

Consequently, the trial court erred in dismissing the complaint against ProFriends on ground that the
complaint failed to state a cause of action, an affirmative defense it did not raise, and which is
completely different from what it actually raised, i.e., lack of cause action. And strictly speaking, lack
of cause of action may only be raised after the questions of fact have been resolved on the basis of
stipulations or admissions or evidence presented by the plaintiff. Before then, it cannot be raised as a
ground for dismissal; much less can the court dismiss the case on that ground.

We now go to the dismissal of the complaint against PEC, Amaia, and Crisanta Realty on the ground
that the complaint failed to state a cause of action against them.

A cause of action is defined as an act or omission by which a party violates a right of another.60 A
complaint states a cause of action if it sufficiently avers the existence of the three (3) essential
elements of a cause of action, namely: (a) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (b) an obligation on the part of the named defendant to respect or
not to violate such right; and (c) an act or omission on the part of the named defendant violative of the
right of the plaintiff or constituting a breach of the obligation of defendant to the plaintiff for which the
latter may maintain an action for recovery of damages. If the allegations of the complaint do not state
the concurrence of these elements, the complaint becomes vulnerable to a motion to dismiss on the
ground of failure to state a cause of action.61

Here, the complaint for declaration of nullity of Deeds of Extrajudicial Settlement of Estate, Deeds of
Sale, Cancellation of Titles, and Damages alleges:

1. Plaintiff Frank Colmenar x x x is the legitimate son of the late Francisco Jesus Colmenar
(Deceased) and Dorothy Marie Crimmin (Dorothy).62
xxxx

28. Years later, Plaintiff learned of the unfortunate demise of his father.63 x x x

xxxx

29. Upon his death, Deceased left real properties registered under his name, to wit:

(1) An interest in a real property located in General Trias, Cavite, with an area of
130,743 square meters then covered by Transfer Certificate of Title No. 579;

(2) One-half (1/2) interest in a real property located in General Trias, Cavite, with total
area of 27,175 square meters then covered by Transfer Certificate of Title No. 572;

(3) One-sixth (1/6) interest in a real property located in General Trias, Cavite with a
total land area of 117,476 square meters then covered by Transfer Certificate of Title
No. 25848; and

(4) An interest in a real property located in General Trias, Cavite with a total land area
of 806 square meters then covered by Transfer Certificate of Title No. 588.

30. Several years later, Plaintiff learned that Defendants Apollo, Jeannie, and Victoria made it
appear that they were the heirs of the Deceased in the Extrajudicial Settlement of Estate dated
16 May 2008 involving a real property then covered by Transfer Certificate of Title No. T-
579 registered in the name of the Deceased, and a portion of a real property covered
by Transfer Certificate of Title No. T-572 registered in the name of the Deceased and Angel
Colmenar, both properties being located at General Trias, Province of Cavite.

31. Defendants Apollo, Jeannie, and Victoria committed the same misrepresentations when
they executed the Extrajudicial Settlement of the Estates of Deceased Francisco Colmenar
and Loida Colmenar dated 8 July 2011 involving a real property then covered by Transfer
Certificate of Title No. 579 issued in the name of the Deceased and another real property
covered by Transfer Certificate of Title No. 25848 in the name of the Deceased, among others,
both properties being located at General Trias, Province of Cavite.

32. Using the foregoing deeds of extrajudicial settlement of estate as authority, Defendants
Apollo and Jeannie executed a Deed of Absolute Sale dated 22 May 2013 in favor of
Defendant PEC covering a real property then covered by Transfer Certificate of Title No.
579 issued in the name of the Deceased. For her part, Defendant Victoria, executed a Deed
of Absolute Sale dated 22 May 2013 in favor of Defendant PEC covering a real property
with Transfer Certificate of Title No. 579 issued in the name of the Deceased.

32.1. Subsequently, Defendant PEC sold the property covered by Transfer Certificate of Title
No. 579 to Defendant Amaia, which by then was already covered by Transfer Certificate of
Title No. 057-2013024578 in the name of Defendant PEC.

33. In the same manner, Defendants Apollo. Jeannie, and Victoria executed a Deed of
Sale dated 12 September 2012 in favor of Defendant Crisanta, covering a real property then
covered by Transfer Certificate of Title No. 943212 issued in the name of the Deceased and
a Deed of Absolute Sale dated 3 January 2012 in favor of Defendant Profriends covering a
portion of a real property then covered [by] Transfer Certificate of Title No. 25848 in the name
of the Deceased, among others.

34. All the actions of Defendants Apollo, Jeannie and Victoria were made without the
knowledge and consent of Plaintiff. Worse, said Defendants did the same depriving Plaintiff
ℒ αwρhi৷

of his successional rights under Philippine laws as the legitimate son of the Deceased.64

xxxx

47. However, Defendant PEC did not earlier acquire any right or interest over the property
since the Deeds of Absolute Sale executed by Defendants Apollo, Jeannie and Victoria are
void.

47.1. The said deeds are void since Defendants Apollo, Jeannie, and Victoria had no interest
over the property covered by Transfer Certificate of Title No. 579. Hence, they had no right to
sell the same to Defendant PEC.
 48. Despite not having acquired any right or interest over the property covered by Transfer
Certificate of Title No. 579, Defendant PEC still subsequently sold the said property to
Defendant Amaia x x x65

xxxx

54. Subsequently, or on 21 September 2012, Defendants Apollo, Jeannie and Victoria

executed a deed of sale involving the property covered by Transfer Certificate of Title No.
943212 in favor of Defendant Crisanta.

55. It bears stressing, however, that Defendants Apollo, Jeannie, and Victoria are not [the]
heirs of the Deceased. Therefore, they had no right to dispose of the property covered
by Transfer Certificate of Title No. 943212 in favor of Defendant Crisanta.66

xxxx

60. Defendants Apollo, Jeannie and Victoria subsequently sold Francisco Colmenar's share
in Transfer Certificate of Title No. 25848 to Defendant Profriends.

61. It bears stressing, however, that Defendants Apollo, Jeannie, and Victoria are not [the]
heirs of the Deceased. Therefore, they had no right to dispose of the property covered
by Transfer Certificate of Title No. 25848 in favor of Defendant Profriends.67

xxxx

64. On account of the Deeds of Extrajudicial Settlement of Estate and void Deeds of Absolute
Sale executed by Defendants Apollo, Jeannie, and Victoria, Transfer Certificate of Title Nos.
579, 943212, 25848 were cancelled.

65. To reiterate, however, Defendants Apollo, Jeannie, and Victoria had no right to transfer
the properties to Defendant corporations.

66. Consequently, the titles issued by Defendant Registry of Deeds under the name of
Defendant Amaia, which originated from the title issued to Defendant PEC, should be
cancelled. In the same manner, the titles issued by the Defendant Registry of Deeds to
Defendants Crisanta and Profriends are earnestly requested to be cancelled.68

In essence, petitioner essentially avers that: (a) he is the legitimate son and lawful heir of Francisco
Jesus Colmenar; (b) his father left real properties in the Philippines, the rights and interests of which
would legally pass on to his heirs upon his death; (c) the individual respondents are not the lawful heirs
of Francisco Jesus Colmenar, thus, have no claim to the properties left by the latter; (d) the individual
respondents, nonetheless, despite being devoid of any right in or authority over the estate of his father,
were able to effect a void extrajudicial settlement of his father's estate, and thereafter, a void sale of
his father's properties in favor of respondent companies, which, as a consequence, also did not acquire
a valid title hereto.

In Asia Brewery, Inc. v. Equitable PCI Bank69 the Court ordained that the test to determine whether
a complaint states a cause of action against the defendants is - admitting hypothetically the truth of
the allegations of fact made in the complaint, may a judge validly grant the relief demanded in the
complaint?

Here, assuming the foregoing allegations to be true, petitioner as legitimate child and lawful heir of
Francisco Jesus Colmenar has the right to the relief prayed for. i.e., to declare as void the extrajudicial
settlement of estate effected by the individual respondents who, not being lawful heirs of his father,
had no legal right to settle the estate; and to declare as void the subsequent deeds of sale executed
by these individual respondents in favor of respondent companies which consequently also did not
derive any valid title from the individual respondents.

In Unciano v. Gorospe70 the Court underscored the fundamental principle that no one can give what
he does not have. In other words, a seller may sell only what he or she owns, or that which he or she
does not own but has authority to transfer, and a buyer can acquire only what the seller can legally
transfer. As the Court emphasized in Daclag v. Macahilig,71 in a contract of sale, it is essential that
the seller is the owner of the property he is selling. Under Article 1458 of the New Civil Code, the
principal obligation of a seller is to transfer the ownership of the property sold. Article 1459 of the same
provides that the thing must be licit and the vendor must have a right to trar.sfcr the ownership thereof
at the time it is delivered. Nool v. Court of Appeals,72 further enunciated Article 1505 of the New
Civil Code which provides that "where goods are sold by a person who is not the owner thereof, and
who does not sell them under authority or with consent of the owner, the buyer acquires no better title
to the goods than the seller had, unless the owner of the goods is by his conduct precluded from
denying the seller's authority to sell."

Hence, whether respondent companies were buyers in bad faith or had knowledge of the defect in the
title of the seller is not the issue nor the trigger that gave rise to the complaint. Petitioner's causes of
action hinged on his averment that the individual respondents are not the owners of the properties,
hence, they cannot validly sell the same to respondent companies, nor convey any title to the latter by
reason of the invalid sale. The spring cannot rise above its source. Needless to state, the trial court
cannot inject its own theory to take the place of the actual allegations in the complaint. Besides, where
petitioner in this case has no actual or personal knowledge of the good faith or bad faith of the buyers
in the purchase of the properties, how could he possibly allege it in the complaint? In any event, good
faith or lack of bad faith is a matter of defense for the buyers in this case. It can be pleaded in the
answer and proved during the trial.

As enunciated in Sindophil, Inc. v. Republic,73 the presumption that a holder of a Torrens title is an
innocent purchaser for value is disputable and may be overcome by contrary evidence, thus:

Sindophil insists that it bought the Trame property from Ty in good faith and that it was an innocent
purchaser for value. However, the presumption of good faith and that a holder of a title is an innocent
purchaser for value may be overcome by contrary evidence.

Here, the Republic presented evidence that TCT No. 10354, from which Sindophil's TCT No. 132440
was derived, was void. As found by the Regional Trial Court:

Record shows that Certificate of Title No. 6735, wherein the lot claimed by defendant, Marcelo R.
Teodoro, lot 3270-B, is derived therefrom, is under the name of the Republic of the Philippines, dated
October 17, 1913. Nothing in the subsequent annotations was under the name of any of the
defendants and neither the subject TCT No. 10354.

With the Republic having put forward evidence that the Tramo property claimed by Sindophil belongs
to the Republic, the burden of evidence shifted to Sindophil to prove that its title to it was valid.
Concomitantly, it had the burden of proving that it was indeed a buyer in good faith and for value. As
this Court said in Baltazar v. Court of Appeals, "the burden of proving the status of a purchaser in
good faith and for value lies upon him who asserts that status" and "[i]n discharging that burden,
it is not enough to invoke the ordinary presumption of good faith, i.e., that everyone is presumed to
act in good faith. The good faith that is [essential here] is integral with the very status which must be
proved." (Emphasis supplied)

In any event, the trial court's reliance on Spouses Castillo v. Heirs of Madrigal74 is utterly
misplaced. It is not on all fours with the present case. Spouses Castillo involved a conveyance of
property registered in the names of the Castillo Siblings. The conveyance appeared to have been
executed by all the registered co-owners, albeit the plaintiffs later disclaimed their participation in the
conveyance and sued for recovery of possession and ownership. Meantime the property had already
been conveyed from the original buyer to a company who invoked the right of an innocent buyer for
value. The Court ruled:

Where the complaint for recovery of ownership and possession of a parcel of land alleges that some
of the defendants bought said land from their co-defendants who had a defective title thereto but does
not allege that the purchasers were purchasers in bad faith or with notice of the defect in the title of
their vendors, there is a failure to state a cause of action. By reason of this failure, private respondent
Susana Realty, Inc. is presumed to be an innocent purchaser for value and in good faith, entitled to
protection under the law.75

Here, the allegations in the complaint do not speak of co-ownership between petitioner and the
individual respondents insofar as the subject properties are concerned. There is no allegation either
that the corresponding certificates of title which the respondent individuals transacted with respondent
companies bore all the names of the respondent individuals, as well as the name of petitioner himself
as their co-owner. Nor is there any allegation that the deeds of sale executed in favor of respondent
companies were signed not only by individual respondents but also by petitioner himself, all of them
being supposedly co-owners of the properties. On the contrary, the allegations in the complaint,
assuming them to be true, are all about the unlawful conveyances of the properties by the respondent
individuals who had no right to do so since the true and lawful owner of these properties is petitioner,
no other.

All told, the trial court gravely erred when it held that the complaint failed to state a cause of action
against respondent companies, and based thereon, dismissed the complaint against them.

WHEREFORE, the petition is GRANTED and the Order dated May 22, 2020 of the Regional Trial
Court, Branch 23, Trece Martires, Cavite in Civil Case No. TMCV-062-18 REVERSED and SET
 ASIDE. The Complaint is REINSTATED as against Philippine Estates Corporation, Crisanta Realty
Development Corporation, Amaia Land Corporation, and Property Company of Friends. The trial court
is DIRECTED to PROCEED with the resolution of the case with UTMOST DISPATCH.

SO ORDERED.

SECOND DIVISION

[ G.R. No. 209969. September 27, 2017 ]

JOSE SANICO AND VICENTE CASTRO, PETITIONERS, VS. WERHERLINA P. COLIPANO,

RESPONDENT.

DECISION

CAGUIOA, J:

Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court filed
by petitioners Jose Sanico (Sanico) and Vicente Castro (Castro), assailing the Decision2 dated
September 30, 2013 of the Court of Appeals (CA) in CA-G.R. CEB-CV No. 01889. The CA affirmed
with modification the Decision3 dated October 27, 2006 of the Regional Trial Court, Branch 25, Danao
City (RTC) which found Sanico and Castro liable for breach of' contract of carriage and awarded actual
and compensatory damages for loss of income in favor of respondent Werherlina P. Colipano
(Colipano). The CA reduced the compensatory damages that the RTC awarded.

Antecedents

Colipano filed a complaint on January 7, 1997 for breach of contract of carriage and damages
against Sanico and Castro.4 In her complaint, Colipano claimed that at 4:00 P.M. more or less of
December 25, 1993, Christmas Day, she and her daughter were; paying passengers in the jeepney
operated by Sanico, which was driven by Castro.5 Colipano claimed she was made to sit on an empty
beer case at the edge of the rear entrance/exit of the jeepney with her sleeping child on her lap.6 And,
at an uphill incline in the road to Natimao-an, Carmen, Cebu, the jeepney slid backwards because it
did not have the power to reach the top.7 Colipano pushed both her feet against the step board to
prevent herself and her child from being thrown out of the exit, but because the step board was wet,
her left foot slipped and got crushed between the step board and a coconut tree which the jeepney
bumped, causing the jeepney to stop its backward movement.8 Colipano's leg was badly injured and
was eventually amputated.9 Colipano prayed for actual damages, loss of income, moral damages,
exemplary damages, and attorney's fees.10

In their answer, Sanico and Castro admitted that Colipano's leg was crushed and amputated but
claimed that it! was Colipano's fault that her leg was crushed.11 They admitted that the jeepney slid
backwards because the jeepney lost power.12 The conductor then instructed everyone not to panic
but Colipano tried to disembark and her foot got caught in between the step board and the coconut
tree.13 Sanico claimed that he paid for all the hospital and medical expenses of Colipano,14 and that
Colipano eventually freely and voluntarily executed an Affidavit of Desistance and Release of Claim.15

After trial, the RTC found that Sanico and Castro breached the contract of carriage between them
and Colipano but only awarded actual and compensatory damages in favor of Colipano. The 1aшphi1

dispositive portion of the RTC Decision states:

WHEREFORE, premises considered, this Court finds the defendants LIABLE for breach of contract
of carriage and are solidarily liable to pay plaintiff:

1. Actual damages in the amount of P2,098.80; and

2. Compensatory damages for loss of income in the amount of P360,000.00.

No costs.

SO ORDERED.16

Only Sanico and Castro appealed to the CA, which affirmed with modification the RTC Decision.
The dispositive portion of the CA Decision states:

IN LIGHT OF ALL THE FOREGOING, the instant appeal is

PARTIALLY GRANTED. The Decision dated October 27, 2006 of the Regional Trial
Court, Branch 25, Danao City, in Civil Case No. DNA-418,
 is AFFIRMED with MODIFICATION in that the award for compensatory damages for
loss of income in paragraph 2 of the dispositive portion of the RTC's decision, is
reduced to P200,000.00.

SO ORDERED.17

Without moving for the reconsideration of the CA Decision, Sanico and Castro filed this petition
before the Court assailing the CA Decision.

Issues

a. Whether the CA erred in finding that Sanico and Castro breached the contract of carriage with Colipano;

b. Whether the Affidavit of Desistance and Release of Claim is binding on Colipano; and

c. Whether the CA erred in the amount of damages awarded.

The Court's Ruling

The Court partly grants the petition.

Only Sanico breached the contract of carriage.

Here, it is beyond dispute that Colipano was injured while she was a passenger in the jeepney
owned and operated by Sanico that was being driven by Castro. Both the CA and RTC found Sanico
and Castro jointly and severally liable. This, however, is erroneous because only Sanico was the party
to the contract of carriage with Colipano.

Since the cause of action is based on a breach of a contract of carriage, the liability of Sanico is
direct as the contract is between him and Colipano. Castro, being merely the driver of Sanico's
jeepney, cannot be made liable as he is not a party to the contract of carriage.

In Soberano v. Manila Railroad Co.,18 the Court ruled that a complaint for breach of a contract of
carriage is dismissible as against the employee who was driving the bus because the parties to the
contract of carriage are only the passenger, the bus owner, and the operator, viz.:

The complaint against Caccam was therefore properly dismissed. He was not a
party to the contract; he was a mere employee of the BAL. The parties to that contract
are Juana Soberano, the passenger, and the MRR and its subsidiary, the BAL, the
bus owner and operator, respectively; and consequent to the inability of the defendant
companies to carry Juana Soberano and her baggage arid personal effects securely
and safely to her destination as imposed by law (art. 1733, in relation to arts. 1736
and 1755, N.C.C.), their liability to her becomes direct and immediate.19

Since Castro was not a party to the contract of carriage, Colipano had no cause of action against
him and the complaint against him should be dismissed. Although he was driving the jeepney, he was
a mere employee of Sanico, who was the operator and owner of the jeepney. The obligation to carry
Colipano safely to her destination was with Sanico. In fact, the elements of a contract of carriage
existeid between Colipano and Sanico: consent, as shown when Castro, as employee of Sanico,
accepted Colipano as a passenger when he allowed Colipano to board the jeepney, and as to
Colipano, when she boarded the jeepney; cause or consideration, when Colipano, for her part, paid
her fare; and, object, the transportation of Colipano from the place of departure to the place of
destination.20

Having established that the contract of carriage was only between Sanico and Colipano and that
therefore Colipano had no cause of action against Castro, the Court next determines whether Sanico
breached his obligations to Colipano under the contract.

Sanico is liable as operator and owner of a common carrier.

Specific to a contract of carriage, the Civil Code requires common carriers to observe extraordinary
diligence in safely transporting their passengers. Article 1733 of the Civil Code states:

ART. 1733. Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all the
circumstances of each case.
 Such extraordinary diligence in the vigilance over the goods is further expressed
in Articles 1734, 1735 and 1745, Nos. 5, 6, and 7, while the extraordinary diligence
for the safety of the passengers is further set forth in Articles 1755 and 1756.

This extraordinary diligence, following Article 1755 of the Civil Code, means that common carriers
have the obligation to carry passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with due regard for all the circumstances.

In case of death of or injury to their passengers, Article 1756 of the Civil Code provides that
common carriers are presumed to have been at fault or negligent, and this presumption can be
overcome only by proof of the extraordinary diligence exercised to ensure the safety of the
passengers.21

Being an operator and owner of a common carrier, Sanico was required to observe extraordinary
diligence in safely transporting Colipano. When Colipano's leg was injured while she was a passenger
in Sanico's jeepney, the presumption of fault or negligence on Sanico's part arose and he had the
burden to prove that he exercised the extraordinary diligence required of him. He failed to do this.1aшphi1

In Calalas v. Court of Appeals,22 the Court found that allowing the respondent in that case to be
seated in an extension seat, which was a wooden stool at the rear of the jeepney, "placed [the
respondent] in a peril greater than that to which the other passengers were exposed."23 The Court
further ruled that the petitioner in Calalas was not only "unable to overcome the presumption of
negligence imposed on him for the injury sustained by [the respondent], but also, the evidence shows
he was actually negligent in transporting passengers."24

Calalas squarely applies here. Sanico failed to rebut the presumption of fault or negligence under
the Civil Code. More than this, the evidence indubitably established Sanico's negligence when Castro
made Colipano sit on an empty beer case at the edge of the rear entrance/exit of the jeepney with her
sleeping child on her lap, which put her and her child in greater peril than the other passengers. As
the CA correctly held:

For the driver, Vicente Castro, to allow a seat extension made of an empty case
of beer clearly indicates lack of prudence. Permitting Werherlina to occupy an
improvised seat in the rear portion of the jeepney, with a child on her lap to boot,
exposed her and her child in a peril greater than that to which the other passengers
were exposed. The use of an improvised seat extension is undeniable, in view of the
testimony of plaintiffs witness, which is consistent with Werherlina's testimonial
assertion. Werherlina and her witness's testimony were accorded belief by the RTC.
Factual findings of the trial court are entitled to great weight on appeal and should not
be disturbed except for strong and valid reasons, because the trial court is in a better
position to examine the demeanor of the witnesses while testifying.25

The CA also correctly held that the!defense of engine failure, instead of exonerating Sanico, only
aggravated his already precarious position.26 The engine failure "hinted lack of regular check and
maintenance to ensure that the engine is at its best, considering that the jeepney regularly passes
through a mountainous area."27 This failure to ensure that the jeepney can safely transport
passengers through its route which required navigation through a mountainous area is proof of fault
on Sanico's part. In the face of such evidence, there is no question as to Sanico's fault or negligence.

Further, common carriers may also be liable for damages when they contravene the tenor of their
obligations. Article 1170 of the Civil Code states:

ART. 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are
liable for damages.

In Magat v. Medialdea,28 the Court ruled: "The phrase 'in any manner contravene the tenor' of the
obligation includes any illicit act or omission which impairs the strict and faithful fulfillment of the
obligation and every kind of defective performance."29 There is no question here that making Colipano
sit on the empty beer case was a clear showing of how Sanico contravened the tenor of his obligation
to safely transport Colipano from the place of departure to the place of destination as far as human
care and foresight can provide, using the utmost diligence of very cautious persons, and with due
regard for all the circumstances.

Sanico's attempt to evade liability by arguing that he exercised extraordinary diligence when he
hired; Castro, who was allegedly an experienced and time-tested driver, whom he had even
accompanied on a test-drive and in whom he was personally convinced of the driving skills,30 are not
enough to exonerate him from liability - because the liability of common carriers does not cease upon
proof that they exercised all the diligence of a good father of a family in the selection and supervision
of their employees. This is the express mandate of Article 1759 of the Civil Code:

ART. 1759. Common carriers are liable for the death of or injuries to passengers
through the negligence or willful acts of the former's employees, although such
employees may have acted beyond the scope of their authority or in violation of the
orders of the common carriers.

This liability of the common carriers does not cease upon proof that they exercised
all the diligence of a good father of a family in the selection and supervision of their
employees.

The only defenses available to common carriers are (1) proof that they observed extraordinary
diligence as prescribed in Article 1756,31 and (2) following Article 1174 of the Civil Code, proof that
the injury or death was brought about by an event which "could not be foreseen, or which, though
foreseen, were inevitable," or a fortuitous event.

The Court finds that neither of these defenses obtain. Thus, Sanico is liable for damages to
Colipano because of the injury that Colipano suffered as a passenger of Sanico's jeepney.

The Affidavit of Desistance and Release of Claim is void.

Sanico cannot be exonerated from liability under the Affidavit of Desistance and Release of
Claim32and his payment of the hospital and medical bills of Colipano amounting to P44,900.00.33

The RTC ruled that "the Affidavit of Desistance and Release of Claim is not binding on plaintiff
[Colipano] in the absence of proof that the contents thereof were sufficiently translated and explained
to her."34 The CA affirmed the findings of the RTC and ruled that the document was not binding on
Colipano, as follows:

Finally, We sustain the RTC's finding that the affidavit of desistance and release
of claim, offered by defendants-appellants, are not binding on Werherlina, quoting with
approval its reflection on the matter, saying:

xxx this Court finds that the Affidavit of Desistance and Release of
Claim is not binding on plaintiff in the absence of proof that the
contents thereof were sufficiently explained to her. It is clear from the
plaintiffs circumstances that she is not able to understand English,
more so stipulations stated in the said Affidavit and Release. It is
understandable that in her pressing need, the plaintiff may have been
easily convinced to sign the document with the promise that she will
be compensated for her injuries.35

The Court finds no reason to depart from these findings of the CA and the RTC.

For there to be a valid waiver, the following requisites are essential:

(1) that the person making the waiver possesses the right, (2) that he has the
capacity and power to dispose of the right, (3) that the waiver must be clear and
unequivocal although it may be made expressly or impliedly, and (4) that the waiver
is not contrary to law, public policy, public order, morals, good customs or prejudicial
to a third person with a right recognized by law.36

While the first two requirements can be said to exist in this case, the third and fourth requirements
are, however, lacking.

For the waiver to be clear and unequivocal, the person waiving the right should understand what
she is waiving and the effect of such waiver. Both the CA and RTC made the factual determination
that Colipano was not able to understand English and that there was no proof that the documents and
their contents and effects were explained to her. These findings of the RTC, affirmed by the CA, are
entitled to great weight and respect.37 As this Court held in Philippine National Railways Corp. v.
Vizcara38:

It is a well-established rule that factual findings by the CA are conclusive on the

parties and are not reviewable by this Court. They are entitled to great weight and
respect, even finality, especially when, as in this case, the CA affirmed the factual
findings arrived at by the trial court.39

Although there are exceptions to this rule,40 the exceptions are absent here.
 Colipano could not have clearly and unequivocally waived her right to claim damages when she
had no understanding of the right she was waiving and the extent of that right. Worse, she was made
to sign a document written in a language she did not understand.

The fourth requirement for a valid waiver is also lacking as the waiver, based on the attendant
facts, can only be construed as contrary to public policy. The doctrine in Gatchalian v. Delim,41 which
the CA correctly cited,42 is applicable here:

Finally, because what is involved here is the liability of a common carrier for
injuries sustained by passengers in respect of whose safety a common carrier must
exercise extraordinary diligence, we must construe any such purported waiver most
strictly against the common carrier. For a waiver to be valid and effective, it must not
be contrary to law, morals, public policy or good customs. To uphold a supposed
waiver of any right to claim damages by an injured passenger, under circumstances
like those exhibited in this case, would be to dilute and weaken the standard of
extraordinary diligence exacted by the law from common carriers and hence to render
that standard unenforceable. We believe such a purported waiver is offensive to public
policy.43

"[P]ublic policy refers to the aims of the state to promote the social and general well-being of the
inhabitants."44 The Civil Code requires extraordinary diligence from common carriers because the
nature of their business requires the public to put their safety and lives in the hands of these common
carriers. The State imposes this extraordinary diligence to promote the well-being of the public who
avail themselves of the services of common carriers. Thus, in instances of injury or death, a waiver of
the right to claim damages is strictly construed against the common carrier so as not to dilute or
weaken the public policy behind the required standard of extraordinary diligence.

It was for this reason that in Gatchalian, the waiver was considered offensive to
public policy because it was shown that the passenger was still in the hospital and
was dizzy when she signed the document. It was also shown that when she saw the
other passengers signing the document, she signed it without reading it. .

Similar to Gatchalian, Colipano testified that she did not understand the document she
signed.45 She also did not understand the nature and extent of her waiver as the content of the
document was not explained to her.46 The waiver is therefore void because it is contrary to public
policy.47

The Court reiterates that waivers executed under similar circumstances are indeed contrary to
public policy and are void.48 To uphold waivers taken from injured passengers who have no
knowledge of their entitlement under the law and the extent of liability of common carriers would indeed
dilute the extraordinary diligence required from common carriers, and contravene a public policy
reflected in the Civil Code.

Amount of compensatory damages granted is incorrect.

On the amount of damages, the RTC awarded P2,098.80 as actual damages and P360,000.00 as
compensatory damages for loss of income, as follows:

[T]his Court can only award actual damages in the amount that is duly supported
by receipts, that is, P2,098.80 mid not P7,277.80 as prayed for by plaintiff as there is
no basis for the amount prayed for. However, considering that plaintiff has suffered
the loss of one leg which has caused her to be limited in her movement thus resulting
in loss of livelihood, she is entitled to compensatory damages for lost income at the
rate of P12,000.00/year for thirty years in the amount of P360,000.00.49

The CA, on the other hand, modified the award of the RTC by reducing the compensatory
damages from P360,000.00 to P200,000.00, thus:

By virtue of their negligence, defendants-appellants are liable to pay Werherlina

compensatory damages for loss of earning capacity. In arriving at the proper amount,
the Supreme Court has consistently used the following formula:

Net Earning = Life Expectancy x [Gross Annual Income - Living

Capacity Expenses (50% of gross annual income)]
where life = 2/3 (80 - the age of the deceased).
expectancy
 Based on the stated formula, the damages due to Werherlina for loss of earning
capacity is:

Net Earning Capacity = [2/3 x (80-30)] x (P12,000.00 x (50%)

= (2/3 x 50) x P6,000.00
= 33.33 x P6,000.00
= P200,000.00

The award of the sum of P200,000.00 as compensatory damages for loss of

earning capacity is in order, notwithstanding the objections of defendants-appellants
with respect to lack of evidence on Werherlina's age and annual income.50

Sanico argues that Colipano failed to present documentary evidence to support her age and her
income, so that her testimony is self-serving and that there was no basis for the award of compensatory
damages in her favor.51 Sanico is gravely mistaken.

The Court has held in Heirs of Pedro Clemeña y Zurbano v. Heirs of Irene B. Bien52 that
testimonial evidence cannot be objected to on the ground of being self-serving, thus:

"Self-serving evidence" is not to be taken literally to mean any evidence that

serves its proponent's interest. The term, if used with any legal sense, refers only to
acts or declarations made by a party in his own interest at some place and time out of
court, and it does not include testimony that he gives as a witness in court. Evidence
of this sort is excluded on the same ground as any hearsay evidence, that is, lack of
opportunity for cross-examination by the adverse party and on the consideration that
its admission would open the door to fraud and fabrication. In contrast, a party's
testimony in court is sworn and subject to cross-examination by the other party, and
therefore, not susceptible to an objection on the ground that it is self-serving.53

Colipano was subjected to cross-examination and both the RTC and CA believed her testimony
on her age and annual income. In fact, as these are questions of facts, these findings of the RTC and
CA are likewise binding on the Court.54

Further, although as a general rule, documentary evidence is required to prove loss of earning
capacity, Colipano's testimony on her annual earnings of P12,000.00 is an allowed exception. There
are two exceptions to the general rule and Colipano's testimonial evidence falls under the second
exception, viz.:

By way of exception, damages for loss of earning capacity may be awarded

despite the absence of documentary evidence when (1) the deceased is self-
employed earning less than the minimum wage under current labor laws, and judicial
notice may be taken of the fact that in the deceased's line of work no documentary
evidence is available; or (2) the deceased is employed as a daily wage worker earning
less than the minimum wage under current labor laws.55

The CA applied the correct formula for computing the loss of Colipano's earning capacity:

Net earning capacity = Life expectancy x [Gross Annual Income - Living Expenses
(50% of gross annual income)], where life expectancy = 2/3 (80-the age of the
deceased).56

However, the CA erred when it used Colipano's age at the time she testified as basis for computing
the loss of earning capacity.57 The loss of earning capacity commenced when Colipano's leg was
crushed on December 25, 1993. Given that Colipano was 30 years old when she testified on October
14, 1997, she was roughly 27 years old on December 25, 1993 when the injury was sustained.
Following the foregoing formula, the net earning capacity of Colipano is P212,000.00.58

Sanico is liable to pay interest.

Interest is a form of actual or compensatory damages as it belongs to Chapter 259 of Title XVIII
on Damages of the Civil Code. Under Article 2210 of the Civil Code, "[i]nterest may, in the discretion
of the court, be allowed upon damages awarded for breach of contract." Here, given the gravity of the
breach of the contract of carriage causing the serious injury to the leg of Colipano that resulted in its
amputation, the Court deems it just and equitable to award interest from the date of the RTC decision.
Since the award of damages was given by the RTC in its Decision dated October 27, 2006, the interest
on the amount awarded shall be deemed to run beginning October 27, 2006.
 As to the rate of interest, in Eastern Shipping Lines, Inc. v. Court of Appeals,60 the Court ruled
that "[w]hen an obligation, not constituting a loan or forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum."61 Further, upon finality of the judgment awarding a sum of money, the rate of interest shall
be 12% per annum from such finality until satisfaction because the interim period is considered a
forbearance of credit.62 Subsequently, in Nacar v. Gallery Frames,63 the rate of legal interest for
loans or forbearance of any money, goods or credits and the rate allowed in judgments was lowered
from 12% to 6%. Thus, the applicable rate of interest to the award of damages to Colipano is 6%.

WHEREFORE, premises considered, the petition for review is hereby PARTLY GRANTED. As to
petitioner Vicente Castro, the Decision of the Court of Appeals dated September 30, 2013
is REVERSED and SET ASIDE and the complaint against him is dismissed for lack of cause of action.
As to petitioner Jose Sanico, the Decision of the Court of Appeals is
hereby AFFIRMED with MODIFICATIONS, Petitioner Jose Sanico is liable and ordered to pay
respondent Werherlina Colipano the following amounts:

1. Actual damages in the amount of P2,098.80;

2. Compensatory damages for loss of income in the amount of P212,000.00;

3. Interest on the total amount of the damages awarded in 1 and 2 at the rate of 6% per
annum reckoned from October 27, 2006 until finality of this Decision.

The total amount of the foregoing shall, in turn, earn interest at the rate of 6% per annum from
finality of this Decision until full payment thereof.

SO ORDERED.

SECOND DIVISION

G.R. No. 129928 August 25, 2005

MISAMIS OCCIDENTAL II COOPERATIVE, INC., Petitioners,

vs.
VIRGILIO S. DAVID, Respondent.

DECISION

Tinga, J.:

In this Petition for Review1 under Rule 45 of the 1997 Rules of Civil Procedure, petitioner Misamis
Occidental II Electric Cooperative, Inc. (hereinafter, MOELCI II) seeks the reversal of the Decision2 of
the Court of Appeals, Former Ninth Division in C.A. G.R. SP No. 41626 and its Resolution3 denying
MOELCI II’s motion for reconsideration. The questioned Decision dismissed MOELCI II’s petition for
certiorari under Rule 65 and effectively affirmed the trial court’s orders dated 16 November 19954 and
13 March 19965 which respectively denied petitioner’s Motion (For Preliminary Hearing of Affirmative
Defenses and Deferment of Pre-Trial Conference)6 and Motion for Reconsideration.7

The antecedents are as follows:

Private respondent Virgilio S. David (hereinafter, David), a supplier of electrical hardware,8 filed a case
for specific performance and damages against MOELCI II, a rural electric cooperative in Misamis
Occidental, docketed as Civil Case No. 94-69402 entitled "Virgilio David v. Misamis Occidental II
Electric Cooperative, Inc. (MOELCI II)." The said case, which was essentially a collection suit, pending
before Judge Felixberto Olalia (hereinafter, Judge Olalia) of the Regional Trial Court of Manila, Branch
8 (the trial court), was predicated on a document attached as Annex "A" to the Amended
Complaint9 that according to David is the contract pursuant to which he sold to MOELCI II one (1) unit
of 10 MVA Transformer.10

MOELCI II filed its Answer to Amended Complaint11 which pleaded, among others, affirmative
defenses which also constitute grounds for dismissal of the complaint. These grounds were lack of
cause of action, there being allegedly no enforceable contract between David and MOELCI II under
the Statute of Frauds pursuant to Section 1 (g) and (i), Rule 16 of the Rules of Court, and improper
venue.12

In accordance with Section 5, Rule 16 of the Rules of Court,13 (now Section 6, Rule 16 of the 1997
Rules of Civil Procedure) MOELCI II filed with the trial court a Motion (For Preliminary Hearing of
Affirmative Defenses and Deferment of Pre-Trial Conference)14 (hereinafter referred to as Motion). In
said Motion, MOELCI II in essence argued that the document attached as Annex "A" to the Amended
Complaint was only a quotation letter and not a contract as alleged by David. Thus, it contends that
David’s Amended Complaint is dismissible for failure to state a cause of action.15

In his opposition to MOELCI II’s Motion, David contended in the main that because a motion to dismiss
on the ground of failure to state a cause of action is required to be based only on the allegations of the
complaint, the "quotation letter," being merely an attachment to the complaint and not part of its
allegations, cannot be inquired into.16

MOELCI II filed a rejoinder to the opposition in which it asserted, citing extensively the ruling of the
Court in World Wide Insurance & Surety Co., Inc. v. Macrohon,17 that a complaint cannot be separated
from its annexes; hence, the trial court in resolving a motion to dismiss on the ground of failure to state
a cause of action must consider the complaint’s annexes.18

After the parties filed their respective memoranda, Judge Olalia issued an order dated 16 November
1995 denying MOELCI II’s motion for preliminary hearing of affirmative defenses. MOELCI II’s motion
for reconsideration of the said order was likewise denied in another order issued by Judge Olalia on
13 March 1996.19

MOELCI II elevated this incident to the Court of Appeals by way of a special civil action for certiorari,
alleging grave abuse of discretion on the part of Judge Olalia in the issuance of the two aforesaid
orders.

On 14 March 1997, the Court of Appeals dismissed MOELCI II’s petition holding that the allegations
in David’s complaint constitute a cause of action. With regard to MOELCI II’s contention that
David’s Amended Complaint is dismissible as the document, attached thereto as Annex "A," upon
which David’s claim is based is not a contract of sale but rather a quotation letter, the Court of Appeals
ruled that the interpretation of the document requires evidence aliunde which is not allowed in
determining whether or not the complaint states a cause of action. The appellate court further declared
that when the trial court is confronted with a motion to dismiss on the ground of lack of cause of action,
it is mandated to confine its examination for the resolution thereof to the allegations of the complaint
and is specifically enjoined from receiving evidence for that purpose.20

With the denial of its Motion for Reconsideration, petitioner is now before this Court seeking a review
of the appellate court’s pronouncements. MOELCI II asserts that the Court of Appeals committed
serious error in: (1) ruling that the resolution of its motion to dismiss on the ground of lack of cause of
action necessitated hearings by the trial court with the end in view of determining whether or not the
document attached as Annex "A" to the Amended Complaint is a contract as alleged in the body of
said pleading; and (2) not ordering the trial court to dismiss the Amended Complaint on the ground of
lack of cause of action.21 Anent the first ground, MOELCI II further claims that with the denial of
its Petition, the appellate court in effect exhorted the trial court to defer the resolution of its motion to
dismiss until after the hearing of the case on the merits contrary to Rule 1622 of the Rules of Court and
well-settled jurisprudence.23

In his comment,24 David counters that a sufficient cause of action exists. He also points out that he and
MOELCI II differ in the interpretation of the construction of the document attached as Annex "A" of
the Amended Complaint; hence, there is a need to conduct hearings thereon. He likewise contends
that the trial court did not defer the resolution of petitioner’s motion to dismiss. On the contrary, the
trial court denied squarely the motion "to abbreviate the proceedings and for the parties to proceed to
trial and avoid piece meal resolution of issues."25

In its Reply,26 MOELCI II reiterates its position that the document attached as Annex "A" of
the Amended Complaint clearly is a quotation letter and not a perfected contract of sale as alleged by
David. The absence of doubt or ambiguity of the contents and import of the document leaves no room
for its interpretation.

At issue is whether the Court of Appeals erred in dismissing the petition for certiorari and in holding
that the trial court did not commit grave abuse of discretion in denying petitioner’s Motion.

We find no error in the ruling of the Court of Appeals.

In Municipality of Biñan, Laguna v. Court of Appeals,27 decided under the old Rules of Court, we held
that a preliminary hearing permitted under Section 5, Rule 16, is not mandatory even when the same
is prayed for. It rests largely on the sound discretion of the court, thus:

SEC. 5. Pleading grounds as affirmative defenses.- Any of the grounds for dismissal provided for in
this rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing
may be had thereon as if a motion to dismiss had been filed.
The use of the word "may" in the aforequoted provision shows that such a hearing is not mandatory
but discretionary. It is an auxiliary verb indicating liberty, opportunity, permission and possibility.28

Such interpretation is now specifically expressed in the 1997 Rules of Civil Procedure. Section 6, Rule
16 provides that a grant of preliminary hearing rests on the sound discretion of the court, to wit-

SEC. 6. Pleading grounds as affirmative defenses.- If no motion to dismiss has been filed, any of the
grounds for dismissal provided for in this Rule may be pleaded as an affirmative defense in the answer
and, in the discretion of the court, a preliminary hearing may be had thereon as if a motion to dismiss
had been filed. …

Based on the foregoing, a preliminary hearing undeniably is subject to the discretion of the trial court.
Absent any showing that the trial court had acted without jurisdiction or in excess thereof or with such
grave abuse of discretion as would amount to lack of jurisdiction, as in the present case, the trial
court’s order granting or dispensing with the need for a preliminary hearing may not be corrected by
certiorari.29

Moreover, consistent with our ruling in The Heirs of Juliana Clavano v. Genato,30 as MOELCI
II’s Motion is anchored on the ground that the Complaint allegedly stated no cause of action, a
preliminary hearing thereon is more than unnecessary as it constitutes an erroneous and improvident
move. No error therefore could be ascribed to the trial court in the denial of such Motion. The Court
ruled in the cited case, thus:

. . . . respondent Judge committed an error in conducting a preliminary hearing on the private

respondent’s affirmative defenses. It is a well-settled rule that in a motion to dismiss based on the
ground that the complaint fails to state a cause of action, the question submitted to the court for
determination is the sufficiency of the allegations in the complaint itself. Whether those allegations are
true or not is beside the point, for their truth is hypothetically admitted by the motion. The issue rather
is: admitting them to be true, may the court render a valid judgment in accordance with the prayer of
the complaint? Stated otherwise, the sufficiency of the cause of action must appear on the face of the
complaint in order to sustain a dismissal on this ground. No extraneous matter may be considered nor
facts not alleged, which would require evidence and therefore must be raised as defenses and await
the trial. In other words, to determine the sufficiency of the cause of action, only the facts alleged in
the complaint, and no other should be considered.

The respondent Judge departed from this rule in conducting a hearing and in receiving evidence in
support of the private respondent’s affirmative defense, that is, lack of cause of action.31

To determine the existence of a cause of action, only the statements in the complaint may be properly
considered. It is error for the court to take cognizance of external facts or hold preliminary hearings to
determine their existence. If the allegations in a complaint furnish sufficient basis by which the
complaint can be maintained, the same should not be dismissed regardless of the defenses that may
be averred by the defendants.32

The test of sufficiency of facts alleged in the complaint as constituting a cause of action is whether or
not admitting the facts alleged, the court could render a valid verdict in accordance with the prayer of
said complaint.33

In the case at bar, the Amended Complaint states in paragraphs 3, 4, 5, and 6, thus:

FIRST CAUSE OF ACTION

3. On June 8 1992 the parties entered into a contract for the sale by the plaintiff to the defendant of
one (1) unit 10 MVA Power transformer with accessories for a total price of ₱5,200,000.00 plus 69 KV
Line Accessories for a total price of ₱2,169,500.00 under the following relevant terms and conditions:

1. Fifty percent (50%) downpayment upon signing of contract.

Fifty percent (50%) upon delivery

2. Delivery- Ninety (90) working days upon receipt of your Purchase Order and Downpayment

Copy of the contract is hereto attached as Annex "A."

4. Because of the standing relationship between the parties and the urgent need on the part of the
defendant for the power transformer to remedy the electric supply deficiency in its area of coverage
the plaintiff waived the 50% downpayment and delivered soon thereafter the 10 MVA transformer with
accessories evidence (sic) by a copy of the sales invoice hereto attached as Annex "B".
5. Despite demands however, verbal and written, since December 1992, the defendant has failed to
pay the price thereof of ₱5,200,000.00 plus the custom duties and incidental expenses of
₱272,722.27.

SECOND CAUSE OF ACTION

6. Apart from the above transaction, the plaintiff has been, on a regular basis, delivering various
electrical hardware to the defendant which, as of 31 January 1994, despite demands, has an
outstanding balance of ₱281,939.76.34

And David prayed as follows:

WHEREFORE, it is respectfully prayed that judgment render ordering the defendant to pay the plaintiff:

ON THE FIRST CAUSE OF ACTION

1. The total sum of ₱5,472,722.27 plus the stipulated interest at 24% per annum from December 1992
until fully paid.

ON THE SECOND CAUSE OF ACTION

2. The balance of ₱281,939.76 plus the stipulated interest at 24% per annum from due dates until fully
paid.

COMMON PROPER (sic)

3. Attorney’s fee at 25% of the foregoing amounts plus expenses of litigation and not less than
₱100,000.00 with costs.

4. Other reliefs as may be just and equitable in the premises.35

It has been hypothetically admitted that the parties had entered into a contract sale David bound
himself to supply MOELCI II (1) unit 10 MVA Power transformer with accessories for a total price of
₱5,200,000.00 plus 69 KV Line Accessories for a total price of ₱2,169,500.00; that despite written and
verbal demands, MOELCI II has failed to pay the price thereof plus the custom duties and incidental
expenses of ₱272,722.27; and that apart from the previously stated contract of sale, David regularly
delivered various electrical hardware to MOELCI II which, despite demands, has an outstanding
balance of ₱281,939.76.

We believe all the foregoing sufficiently lay out a cause of action. Even extending our scrutiny to Annex
"A," which is after all deemed a part of the Amended Complaint, will not result to a change in our
conclusion.

Contrary to MOELCI II’s assertion, Annex "A" is not an "undisguised quotation letter."36 While Annex
"A" is captioned as such, the presence of the signatures of both the General Manager and the
Chairman of the Committee of Management immediately below the word "CONFORME" appearing on
the document’s last page37 lends credulity to David’s contention that there was, or might have been, a
meeting of minds on the terms embodied therein. Thus, the appendage of Annex "A" does not entirely
serve to snuff out David’s claims.

In fact, the ambiguity of the import and nature of Annex "A" which necessitates a resort to its proper
interpretation, fortifies the propriety of the trial court’s

denial of MOELCI II’s Motion. The interpretation of a document requires introduction of evidence which
is precisely disallowed in determining whether or not a complaint states a cause of action. The Court
of Appeals therefore correctly dismissed MOELCI II’s petition and upheld the trial court’s ruling.

Now, whether in truth Annex "A" is, as entitled, a mere quotation letter is a matter that could best be
proven during a full-blown hearing rather than through a preliminary hearing as this may involve
extensive proof. Verily, where a preliminary hearing will not suffice, it is incumbent upon the trial court
to deny a motion for preliminary hearing and go on to trial. The veracity of the assertions of the parties
can be ascertained at the trial of the case on the merits.38

Finally, we do not agree with MOELCI II’s contention that the Court of Appeals sanctioned the trial
court’s deferment of the resolution of MOELCI II’s Motion. The trial court squarely denied
the Motion and not merely deferred its resolution.39 Thus, there is no deferment to speak of that should
be enjoined.
WHEREFORE, the instant petition is DENIED. The Decision of the Court of Appeals dated 14 March
1997 and its Resolution dated 14 July 1997 are AFFIRMED. Costs against petitioner.

SO ORDERED.

FIRST DIVISION

G.R. No. 201892 JULY 22, 2015

NORLINDA S. MARILAG, Petitioner,

vs.
MARCELINO B. MARTINEZ, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated November 4, 2011 and the
Resolution 3 dated May 14, 2012 of the Court of Appeals (CA) in CA-G.R. CV No. 81258 which recalled
and set aside the Orders dated November 3, 2003 4 and January 14, 2004 5 of the Regional Trial Court
(RTC) of Las Piñas City, Branch 202 (court a quo) in Civil Case No. 980156, and reinstated the
Decision 6 dated August 28, 2003 directing petitioner Norlinda S. Marilag (petitioner) to return to
respondent Marcelino B. Martinez (respondent) the latter's excess payment, plus interest, and to pay
attorney's fees and the costs of suit.

The Facts

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

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

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

Respondent filed his answer, 15 contending that petitioner has no cause of action against him. He
averred that he has fully settled Rafael's obligation and that he committed a mistake in paying more
than the amount due under the loan, i.e., the amount of ₱229,200.00 as adjudged by the RTC-Imus
in the judicial foreclosure case which, thus, warranted the return of the excess payment. He therefore
prayed for the dismissal of the complaint, and interposed a compulsory counterclaim for the release
of the mortgage, the return of the excess payment, and the payment of moral and exemplary damages,
attorney's fees and litigation expenses. 16

The Court A Quo's Ruling

In a Decision 17 dated August 28, 2003 (August 28, 2003 Decision), the court a quo denied recovery
on the subject PN. It found that the consideration for its execution was Rafael's indebtedness to
petitioner, the extinguishment of which necessarily results in the consequent extinguishment of the
cause therefore. Considering that the RTC-Imus had adjudged Rafael liable to petitioner only for the
amount of ₱229,200.00, for which a total of ₱400,000.00 had already been paid, the court a quo found
no valid or compelling reason to allow petitioner to recover further on the subject PN. There being an
excess payment of Pl 71,000.00, it declared that a quasi-contract (in the concept of solution indebiti)
exists between the parties and, accordingly, directed petitioner to return the said amount to
respondent, plus 6% interest p.a.18 reckoned from the date of judicial demand 19 on August 6, 1998
until fully paid, and to pay attorney's fees and the costs of suit. 20

In an Order 21 dated November 3, 2003 (November 3, 2003 Order), however, the court a quo granted
petitioner's motion for reconsideration, and recalled and set aside its August 28, 2003 Decision. It
declared that the causes of action in the collection and foreclosure cases are distinct, and respondent's
failure to comply with his obligation under the subject PN justifies petitioner to seek judicial relief. It
further opined that the stipulated 5% monthly interest is no longer usurious and is binding on
respondent considering the suspension of the Usury Law pursuant to Central Bank Circular 905, series
of 1982. Accordingly, it directed respondent to pay the amount of ₱289,000.00 due under the subject
PN, plus interest at the legal rate reckoned from the last extra judicial demand on May 15, 1998, until
fully paid, as well as attorney's fees and the costs of suit.22

Aggrieved, respondent filed a motion for reconsideration 23 which was denied in an Order 24 dated
January 14, 2004, prompting him to elevate the matter to the CA. 25

The CA Ruling

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

Petitioner's motion for reconsideration was denied in a Resolution 29 dated May 14, 2012; hence, this
petition.

The Issue before the Court

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

The Court's Ruling

The petition lacks merit.

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

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

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

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

In this relation, it must be noted that the question of whether a cause of action is single and entire or
separate is not always easy to determine and the same must often be resolved, not by the general
rules, but by reference to the facts and circumstances of the particular case. The true rule, therefore,
is whether the entire amount arises from one and the same act or contract which must, thus, be sued
for in one action, or the several parts arise from distinct and different acts or contracts, for which a
party may maintain separate suits.35

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

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

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

On the contrary, it is significant to point out that: (a) the consideration for the subject PN was the same
consideration that supported the original loan obligation of Rafael; (b) respondent merely assumed to
pay Rafael's remaining unpaid balance in the latter's behalf, i.e., as Rafael's agent or
representative; 42 and (c) the subject PN was executed after respondent had assumed to pay Rafael's
obligation and made several payments thereon. Case law states that the fact that the creditor accepts
payments from a third person, who has assumed the obligation, will result merely in the addition of
debtors, not novation, and the creditor may enforce the obligation against both debtors. 43 for ready
reference, the subject PN reads in full:

February 20, 1998

PROMISSORY NOTE

₱289, 000.00
===========

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

Executed at Pamplona I, Las Piñas City, Metro Manila, this 20th day of February, 1998.
Sgd.
MARCELINO B. MARTINEZ
Promissory 44

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

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

For non-payment of a note secured by mortgage, the creditor has a single cause of action against the
debtor. This single cause of action consists in the recovery of the credit with execution of the security.
In other words, the creditor in his action may make two demands, the payment of the debt and the
foreclosure · of his mortgage. But both demands arise from the same cause, the nonpayment of the
debt, and, for that reason, they constitute a single cause of action. Though the debt and the mortgage
constitute separate agreements, the latter is subsidiary to the former, and both refer to one and the
same obligation. Consequently, there exists only one cause of action for a single breach of that
obligation. Plaintiff. then, by applying the rule above stated, cannot split up his single cause of action
by filing a complaint (or payment of the debt, and thereafter another complaint (or foreclosure of the
mortgage. If he does so, the filing of the first complaint will bar the subsequent complaint. By allowing
the creditor to file two separate complaints simultaneously or successively, one to recover his credit
and another to foreclose his mortgage, we will, in effect, be authorizing him plural redress for a single
breach of contract at so much cost to the courts and with so much vexation and oppression to the
debtor. (Emphases and underscoring supplied)

Further on the point, the fact that no foreclosure sale appears to have been conducted is of no moment
because the remedy of foreclosure of mortgage is deemed chosen upon the filing of the complaint
there for.48 In Suico Rattan & Buri Interiors, Inc. v. CA, 49 it was explained:

x x x x In sustaining the rule that prohibits mortgage creditors from pursuing both the remedies of a
personal action for debt or a real action to foreclose the mortgage, the Court held in the case of
Bachrach Motor Co., Inc. v. Esteban Icarangal, et al. that a rule which would authorize the plaintiff to
bring a personal action against the debtor and simultaneously or successively another action against
the mortgaged property, would result not only in multiplicity of suits so offensive to justice and
obnoxious to law and equity, but also in subjecting the defendant to the vexation of being sued in the
place of his residence or of the residence of the plaintiff, and then again in the place where the property
lies. Hence, a remedy is deemed chosen upon the filing of the suit for collection or upon the filing of
the complaint in an action for foreclosure of mortgage, pursuant to the provisions of Rule 68 of the
Rules of Court. As to extrajudicial foreclosure, such remedy is deemed elected by the mortgage
creditor upon filing of the petition not with any court of justice but with the office of the sheriff of the
province where the sale is to be made, in accordance with the provisions of Act No. 3135, as amended
by Act No. 4118. (Emphases supplied)

As petitioner had already instituted judicial foreclosure proceedings over the mortgaged
property, she is now barred from availing herself of an ordinary action for collection, regardless
of whether or not the decision in the foreclosure case had attained finality. In fine, the dismissal of the
collection case is in order. Considering, however, that respondent's claim for return of excess payment
partakes of the nature of a compulsory counterclaim and, thus, survives the dismissal of petitioner's
collection suit, the same should be resolved based on its own merits and evidentiary support. 50

Records show that other than the matter of interest, the principal loan obligation and the payments
made were not disputed by the parties. Nonetheless, the Court finds the stipulated 5% monthly
1âwphi1

interest to be excessive and unconscionable. In a plethora of cases, the Court has affirmed that
stipulated interest rates of three percent (3°/o) per month and higher are excessive, iniquitous,
unconscionable, and exorbitant, 51 hence, illegal 52 and void for being contrary to morals.53 In Agner v.
BPI Family Savings Bank, Inc., 54 the Court had the occasion to rule:

Settled is the principle which this Court has affirmed in a number of cases that stipulated interest rates
of three percent (3%) per month and higher are excessive, iniquitous, unconscionable, and exorbitant.
While Central Bank Circular No. 905-82, which took effect on January 1, 1983, effectively removed
the ceiling on interest rates for both secured and unsecured loans, regardless of maturity, nothing in
the said circular could possibly be read as granting carte blanche authority to lenders to raise interest
rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets.
Since the stipulation on the interest rate is void for being contrary to morals, if not against the law, it is
as if there was no express contract on said interest rate; thus, the interest rate may be reduced as
reason and equity demand. (Emphases supplied)

As such, the stipulated 5% monthly interest should be equitably reduced to l % per month or 12% p.a.
reckoned from the execution of the real estate mortgage on July 30, 1992. In order to determine
whether there was any overpayment as claimed by respondent, we first compute the interest until
January 30, 1998 55 when he made a payment in the amount of ₱300,000.00 on Rafael's loan
obligation. Accordingly, the amount due on the loan as of the latter date is hereby computed as follows:

Principal ₱160, 000.00

Add: Interest from 07/30/1992 to 01/30/1998
(₱160, 000.00 x 12% x 5.5 yrs.) 105,600.00
Amount due on the loan ₱265, 600.00
Less: Payment made on 01/30/98 (300,000.00)
Overpayment as of 01/30/98 (P 34,400.00) 56

Thus, as of January 30, 1998, only the amount of ₱265,600.00 was due under the loan contract, and
the receipt of an amount more than that renders petitioner liable for the return of the excess.
Respondent, however, made further payment in the amount of Pl 00,000.0057 on the belief that the
subject loan obligation had not yet been satisfied. Such payments were, therefore, clearly made by
mistake, giving rise to the quasi-contractual obligation of solutio indebiti under Article 2154 58 in relation
to Article 2163 59 of the Civil Code. Not being a loan or forbearance of money, an interest of 6% p.a.
should be imposed on the amount to be refunded and on the damages and attorney's fees awarded,
if any, computed from the time of demand 60 until its satisfaction. 61 Consequently, petitioner must return
to respondent the excess payments in the total amount of ₱134,400.00, with legal interest at the rate
of 6% p.a. from the filing of the Answer on August 6, 1998 62 interposing a counterclaim for such
overpayment, until fully settled.

However, inasmuch as the court a quo failed to state in the body of its decision the factual or legal
basis for the award of attorney's fees to the respondent, as required under Article 2208 63 of the New
Civil Code, the Court resolves to delete the same. The rule is well-settled that the trial court must
clearly state the reasons for awarding attorney's fees in the body of its decision, not merely in its
dispositive portion, as the appellate courts are precluded from supplementing the bases for such
award. 64

Finally, in the absence of showing that the court a quo 's award of the costs of suit in favor of
respondent was patently capricious, 65 the Court finds no reason to disturb the same.

WHEREFORE, the petition is DENIED. The Decision dated November 4, 2011 and the Resolution
dated May 14, 2012 of the Court of Appeals in CA-G.R. CV No. 81258 reinstating the court a quo's
Decision dated August 28, 2003 in Civil Case No. 98-0156 are hereby AFFIRMED with the
MODIFICATIONS: (a) directing petitioner Norlinda S. Marilag to return to respondent Marcelino B.
Martinez the latter's excess payments in the total amount of ₱134,400.00, plus legal interest at the
rate of 6% p.a. from the filing of the Answer on August 6, 1998 until full satisfaction; and (b) deleting
the award of attorney's fees.

SO ORDERED.

FIRST DIVISION

G.R. No. 169889 September 29, 2009

SPOUSES SIMON YAP AND MILAGROS GUEVARRA, Petitioners,

vs.
FIRST e-BANK CORPORATION (previously known as PDCP DEVELOPMENT BANK,
INC.), Respondent.

DECISION

CORONA, J.:

On August 30, 1990, Sammy Yap obtained a ₱2 million loan from PDCP Development Bank,
Inc.1 (PDCP). As security, Sammy’s parents, petitioners Simon Yap and Milagros Guevarra, executed
a third-party mortgage on their land2 and warehouse standing on it. The mortgage agreement provided
that PDCP may extrajudicially foreclose the property in case Sammy failed to pay the loan.
On November 7, 1990, Sammy issued a promissory note and six postdated checks3 in favor of PDCP
as additional securities for the loan.

When Sammy defaulted on the payment of his loan, PDCP presented the six checks to the drawee
bank but the said checks were dishonored.4 This prompted PDCP to file a complaint against Sammy
for six counts of violation of BP 22 (Bouncing Checks Law) on February 8, 1993.

On May 3, 1993, PDCP filed an application for extrajudicial foreclosure of mortgage on the property
of petitioners which served as principal security for Sammy’s loan.

On December 16, 1993, on motion of Sammy and without objection from the public prosecutor and
PDCP, the BP 22 cases were provisionally dismissed.

On October 26, 1994, pursuant to the petition of PDCP for extrajudicial foreclosure, the extrajudicial
sale was set on December 28, 1994. Copies of the notice of extrajudicial sale were sent by registered
mail to Sammy, petitioners, the Registrar of Deeds of San Carlos City, Pangasinan, the Sangguniang
Panglungsod of San Carlos City and the office of the barangay secretary of Taloy District, San Carlos
City, Pangasinan.

The notice was also published in the Sunday Punch, a newspaper of general circulation in Pangasinan
on November 27, December 4 and 11, 1994.

On December 20, 1994, petitioners filed in the Regional Trial Court (RTC) of San Carlos City,
Pangasinan a complaint for injunction (with prayer for the issuance of a temporary restraining
order/preliminary injunction), damages and accounting of payments against PDCP. The complaint
sought to stop the foreclosure sale on the ground that PDCP waived its right to foreclose the mortgage
on their property when it filed the BP 22 cases against Sammy.

On April 2, 1997, the RTC5 ruled in favor of petitioners. It held that PDCP had three options when
Sammy defaulted in the payment of his loan: enforcement of the promissory note in a collection case,
enforcement of the checks under the Negotiable Instruments Law and/or BP 22, or foreclosure of
mortgage. The remedies were alternative and the choice of one excluded the others. Thus, PDCP was
deemed to have waived its right to foreclose on the property of petitioners when it elected to sue
Sammy for violation of BP 22.6

PDCP appealed to the Court of Appeals (CA). On February 8, 2005, the CA7 reversed the RTC. It
opined that PDCP was not barred from exercising its right to foreclose on the property of petitioners
despite suing Sammy for violation of BP 22. The purpose of BP 22 was to punish the act of issuing a
worthless check, not to force a debtor to pay his debt.8

Hence, this appeal9 where petitioners argue that, when Sammy was sued for six counts of violation of
BP 22, PDCP should have been deemed to have simultaneously filed for collection of the amount
represented by the checks. The civil aspect of the case was naturally an action for collection of
Sammy’s obligation to PDCP. PDCP clearly elected a remedy. PDCP should not be allowed to pursue
another, like foreclosure of mortgage.

The argument is not convincing.

First, petitioners anchor their position on Supreme Court Circular 57-97, which provides for the rules
and guidelines in the filing and prosecution of criminal cases under BP 22. Pertinent portions of
Circular 57-97 provide:

1. The criminal action for violation of [BP] 22 shall be deemed to necessarily include the
corresponding civil action, and no reservation to file such civil action separately shall
be allowed or recognized.

2. Upon the filing of the aforesaid joint criminal and civil actions, the offended party shall pay
in full the filing fees based upon the amount of the check involved, which shall be considered
as the actual damages claimed, in accordance with the filing fees in Section 7 (a) and Section
8 (a), Rule 141 of the Rules of Court, and last amended by Administrative Circular No. 11-94
effective August 1, 1994. Where the offended party seeks to enforce against the accused civil
liability by way of liquidated, moral, nominal, temperate or exemplary damages, he shall pay
the corresponding filing fees therefore based on the amounts thereof as alleged either in his
complaint or in the information. If not so alleged but any of these damages are awarded by the
court, the amount of such fees shall constitute a first lien on the judgment.

3. Where the civil action has heretofore been filed separately and trial thereof has not yet
commenced, it may be consolidated with the criminal action upon application with the court
trying the latter case. If the application is granted, the trial of both actions shall proceed in
 accordance with the pertinent procedure outlined in Section 2 (a) of Rule 111 governing the
proceedings in the actions as thus consolidated. (emphasis supplied)

Circular 57-97 has been institutionalized as Section 1(b), Rule 111 of the Rules of Court:10

Section 1. Institution of criminal and civil actions.—xxx

(b) The criminal action for violation of [BP] 22 shall be deemed to include the corresponding
civil action. No reservation to file such civil action separately shall be allowed.

Upon filing of the aforesaid joint criminal and civil actions, the offended party shall pay in full the filing
fees based on the amount of the check involved, which shall be considered as the actual damages
claimed. Where the complaint or information also seeks to recover liquidated, moral, nominal,
temperate or exemplary damages, the offended party shall pay additional filing fees based on the
amounts alleged therein. If the amounts are not so alleged but any of these damages are subsequently
awarded by the court, the filing fee based on the amount awarded shall constitute a first lien on the
judgment.

Where the civil action has been filed separately and trial thereof has not yet commenced, it may be
consolidated with the criminal action upon application with the court trying the latter case. If the
application is granted, the trial of both actions shall proceed in accordance with section 2 of this Rule
governing consolidation of the civil and criminal actions. (emphasis supplied)

Sad to say, Circular 57-97 (and, it goes without saying, Section 1(b), Rule 111 of the Rules of Court)
was not yet in force11 when PDCP sued Sammy for violation of BP 22 and when it filed a petition for
extrajudicial foreclosure on the mortgaged property of petitioners on February 8, 1993 and May 3,
1993, respectively. In Lo Bun Tiong v. Balboa,12 Circular 57-97 was not applied because the collection
suit and the criminal complaints for violation of BP 22 were filed prior to the adoption of Circular 57-
97. The same principle applies here.

Thus, prior to the effectivity of Circular 57-97, the alternative remedies of foreclosure of mortgage and
collection suit were not barred even if a suit for BP 22 had been filed earlier, unless a judgment of
conviction had already been rendered in the BP 22 case finding the accused debtor criminally liable
and ordering him to pay the amount of the check(s).13

In this case, no judgment of conviction (which could have declared the criminal and civil liability of
Sammy) was rendered because Sammy moved for the provisional dismissal of the case. Hence,
PDCP could have still foreclosed on the mortgage or filed a collection suit.

Nonetheless, records show that, during the pendency of the BP 22 case, Sammy had already paid
PDCP the total amount of ₱1,783,582.14 Thus, to prevent unjust enrichment on the part of the creditor,
any foreclosure by PDCP should only be for the unpaid balance.

Second, it is undisputed that the BP 22 cases were provisionally dismissed at Sammy’s instance. In
other words, PDCP was prevented from recovering the whole amount by Sammy himself. To bar
PDCP from foreclosing on petitioners’ property for the balance of the indebtedness would be to
penalize PDCP for the act of Sammy. That would not only be illogical and absurd but would also violate
elementary rules of justice and fair play. In sum, PDCP has not yet effectively availed of and fully
exhausted its remedy.

While it can be argued that PDCP may revive the BP 22 cases anytime as their dismissal was only
provisional, suffice it to state that the law gives the right of choice to PDCP, not to Sammy or to
petitioners.1avvph!1

Third, petitioners should be mindful that, by being third party mortgagors, they agreed that their
property would stand as collateral to the loan of Sammy until the last centavo is paid to PDCP. That is
a risk they willingly assumed. To release the mortgage just because they find it inconvenient would be
the height of injustice against PDCP.

All told, PDCP should not be left without recourse for the unsettled loan of Sammy. Otherwise, an
iniquitous situation will arise where Sammy and petitioners are unjustly enriched at the expense of
PDCP. That we cannot sanction.

So as not to create any misunderstanding, however, the point should be underscored that the creditor’s
obvious purpose when it forecloses on mortgaged property is to obtain payment for a loan which the
debtor is unable or unjustifiably refuses to pay. The rationale is the same if the creditor opts to sue the
debtor for collection. Thus, it is but logical that a creditor who obtains a personal judgment against the
debtor on a loan waives his right to foreclose on the mortgage securing the loan. Otherwise, the
creditor becomes guilty of splitting a single cause of action15 for the debtor’s inability (or unjustified
refusal) to pay his debt.16 Nemo debet bis vexare pro una et eadem causa. No man shall be twice
vexed for one and the same cause.

In the light of Circular 57-97 and Section 1(b), Rule 111 of the Rules of Court, the same rule applies
when the creditor sues the debtor for BP 22 and thereafter forecloses on the mortgaged property. It is
true that BP 22 is a criminal remedy while foreclosure of mortgage is a civil remedy. It is also true that
BP 22 was not enacted to force, much more penalize a person for his inability (or refusal to pay) his
debt.17 What BP 22 prohibits and penalizes is the issuance of bum checks because of its pernicious
effects on public interest. Congress, in the exercise of police power, enacted BP 22 in order to maintain
public confidence in commercial transactions.18

At the other end of the spectrum, however, is the fact that a creditor’s principal purpose in suing the
debtor for BP 22 is to be able to collect his debt. (Circular 57-97 and Section 1(b), Rule 111 of the
Rules of Court have been drawn up to address this reality.) It is not so much that the debtor should be
imprisoned for issuing a bad check; this is so specially because a conviction for BP 22 does not
necessarily result in imprisonment.19

Thus, we state the rule at present. If the debtor fails (or unjustly refuses) to pay his debt when it falls
due and the debt is secured by a mortgage and by a check, the creditor has three options against the
debtor and the exercise of one will bar the exercise of the others. He may pursue either of the three
but not all or a combination of them.

First, the creditor may file a collection suit against the debtor. This will open up all the properties of the
debtor to attachment and execution, even the mortgaged property itself. Second, the creditor may opt
to foreclose on the mortgaged property. In case the debt is not fully satisfied, he may sue the debtor
for deficiency judgment (not a collection case for the whole indebtedness), in which case, all the
properties of the debtor, other than the mortgaged property, are again opened up for the satisfaction
of the deficiency.20 Lastly, the creditor may opt to sue the debtor for violation of BP 22 if the checks
securing the obligation bounce. Circular 57-97 and Section 1(b), Rule 111 of the Rules of Court both
provide that the criminal action for violation of BP 22 shall be deemed to necessarily include the
corresponding civil action, i.e., a collection suit. No reservation to file such civil action separately shall
be allowed or recognized.

Petitioners would have been correct had it not been for the reasons stated earlier.

WHEREFORE, the petition is hereby DENIED.

Costs against petitioners.

SO ORDERED.

SECOND DIVISION

G.R. No. 167246 July 20, 2011

GEORGE LEONARD S. UMALE, Petitioner,

vs.
CANOGA PARK DEVELOPMENT CORPORATION, Respondent.

DECISION

BRION, J.:

Before us is a petition for review on certiorari1 filed by George Leonard S. Umale (petitioner),
challenging the August 20, 2004 Decision2 of the Court of Appeals (CA) in CA-G.R. SP. No. 78836
and its subsequent February 23, 2005 Resolution3 that denied his motion for reconsideration. The CA
reversed the Decision4 of the Regional Trial Court (RTC)-Branch 68, Pasig City, that dismissed
Canoga Park Development Corporation’s complaint for unlawful detainer on the ground of litis
pendentia.

ANTECEDENTS

On January 4, 2000, the parties entered into a Contract of Lease5 whereby the petitioner agreed to
lease, for a period of two (2) years starting from January 16, 2000, an eight hundred sixty (860)-square-
meter prime lot located in Ortigas Center, Pasig City owned by the respondent. The respondent
acquired the subject lot from Ortigas & Co. Ltd. Partnership through a Deed of Absolute Sale, subject
to the following conditions: (1) that no shopping arcades or retail stores, restaurants, etc. shall be
allowed to be established on the property, except with the prior written consent from Ortigas & Co. Ltd.
Partnership and (2) that the respondent and/or its successors-in-interest shall become member/s of
the Ortigas Center Association, Inc. (Association), and shall abide by its rules and regulations.6

On October 10, 2000, before the lease contract expired, the respondent filed an unlawful detainer
case against the petitioner before the Metropolitan Trial Court (MTC)-Branch 68, Pasig City, docketed
as Civil Case No. 8084.7 The respondent used as a ground for ejectment the petitioner’s violation of
stipulations in the lease contract regarding the use of the property. Under this contract, the petitioner
shall use the leased lot as a parking space for light vehicles and as a site for a small drivers’
canteen,8 and may not utilize the subject premises for other purposes without the respondent’s prior
written consent.9 The petitioner, however, constructed restaurant buildings and other commercial
establishments on the lot, without first securing the required written consent from the respondent, and
the necessary permits from the Association and the Ortigas & Co. Ltd. Partnership. The petitioner also
subleased the property to various merchants-tenants in violation of the lease contract.

The MTC-Branch 68 decided the ejectment case in favor of the respondent. On appeal, the RTC-
Branch 155, Pasig City affirmed in toto the MTC-Branch 68 decision.10 The case, however, was re-
raffled to the RTC-Branch 267, Pasig City because the Presiding Judge of the RTC-Branch 155, upon
motion, inhibited himself from resolving the petitioner’s motion for reconsideration.11 The RTC-Branch
267 granted the petitioner’s motion, thereby reversing and setting aside the MTC-Branch 68 decision.
Accordingly, Civil Case No. 8084 was dismissed for being prematurely filed.12 Thus, the respondent
filed a petition for review with the CA on April 10, 2002.13

During the pendency of the petition for review, the respondent filed on May 3, 2002 another case for
unlawful detainer against the petitioner before the MTC-Branch 71, Pasig City. The case was docketed
as Civil Case No. 9210.14 This time, the respondent used as a ground for ejectment the expiration of
the parties’ lease contract.

On December 4, 2002, the MTC-Branch 71 rendered a decision15 in favor of the respondent, the
dispositive portion of which read, as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff [referring to the respondent] and
against the defendant and all persons claiming rights under him, as follows:

1. Defendant and all persons claiming rights under him are ordered to peacefully vacate the
premises located at Lot 9, Block 5, San Miguel Avenue, Ortigas Center, Pasig City, covered
by Transfer Certificate of Title No. 488797 of the Registry of Deeds of Pasig City and to
surrender the possession thereof to the plaintiff;

2. Defendant is ordered to pay unto plaintiff the following:

a. Damages for the use of the property after the expiration of the lease contract therefor
in the amount of One Hundred Fifty Thousand Pesos (₱150,000.00) a month,
beginning 16 January 2002 until he and all those claiming rights under him have
vacated and peacefully turned over the subject premises to the plaintiff; and

b. One Hundred Thousand Pesos (₱100,000.00) as and for attorney’s fees together
with costs of suit.

3. With respect to the commercial units built by [the] defendant on the subject land, he is
hereby ordered to remove the same from the subject land and to restore the subject land in
the same condition as it was received unto the plaintiff, at his exclusive account, failing which
the same shall be removed by the plaintiff, with expenses therefor chargeable to the defendant.

On appeal, the RTC-Branch 68 reversed and set aside the decision of the MTC-Branch 71, and
dismissed Civil Case No. 9210 on the ground of litis pendentia.16 The petitioner, however, was still
ordered to pay rent in the amount of seventy-one thousand five hundred pesos (₱71,500.00) per month
beginning January 16, 2002, which amount is the monthly rent stipulated in the lease contract.

Aggrieved by the reversal, the respondent filed a Petition for Review under Rule 42 of the Rules of
Court with the CA. The respondent argued that there exists no litis pendentia between Civil Case Nos.
8084 and 9210 because the two cases involved different grounds for ejectment, i.e., the first case was
filed because of violations of the lease contract, while the second case was filed due to the expiration
of the lease contract. The respondent emphasized that the second case was filed based on an event
or a cause not yet in existence at the time of the filing of the first case.17 The lease contract expired on
January 15, 2002,18 while the first case was filed on October 10, 2000.

On August 20, 2004, the CA nullified and set aside the assailed decision of the RTC-Branch 68, and
ruled that there was no litis pendentia because the two civil cases have different causes of action. The
decision of the MTC- Branch 71 was ordered reinstated. Subsequently, the petitioner’s motion for
reconsideration was denied; hence, the filing of the present petition for review on certiorari.

In presenting his case before this Court, the petitioner insists that litis pendentia exists between the
two ejectment cases filed against him because of their identity with one another and that any judgment
on the first case will amount to res judicata on the other. The petitioner argues that the respondent
reiterated the ground of violations of the lease contract, with the additional ground of the expiration of
the lease contract in the second ejectment case. Also, the petitioner alleges that all of the elements
of litis pendentia are present in this case, thus, he prays for the reversal and setting aside of the
assailed CA decision and resolution, and for the dismissal of the complaint in Civil Case No. 9210 on
the ground of litis pendentia and/or forum shopping.

THE COURT’S RULING

We disagree with the petitioner and find that there is no litis pendentia.

As a ground for the dismissal of a civil action, litis pendentia refers to a situation where two actions
are pending between the same parties for the same cause of action, so that one of them becomes
unnecessary and vexatious.19

Litis pendentia exists when the following requisites are present: identity of the parties in the two
actions; substantial identity in the causes of action and in the reliefs sought by the parties; and the
identity between the two actions should be such that any judgment that may be rendered in one case,
regardless of which party is successful, would amount to res judicata in the other.20

In the present case, the parties’ bone of contention is whether Civil Case Nos. 8084 and 9210 involve
the same cause of action. The petitioner argues that the causes of action are similar, while the
respondent argues otherwise. If an identity, or substantial identity, of the causes of action in both cases
exist, then the second complaint for unlawful detainer may be dismissed on the ground of litis
pendentia.

We rule that Civil Case Nos. 8084 and 9210 involve different causes of action.

Generally, a suit may only be instituted for a single cause of action.21 If two or more suits are instituted
on the basis of the same cause of action, the filing of one or a judgment on the merits in any one is
ground for the dismissal of the others.22

Several tests exist to ascertain whether two suits relate to a single or common cause of action, such
as whether the same evidence would support and sustain both the first and second causes of
action23 (also known as the "same evidence" test),24 or whether the defenses in one case may be used
to substantiate the complaint in the other.25 Also fundamental is the test of determining whether the
cause of action in the second case existed at the time of the filing of the first complaint.26

Of the three tests cited, the third one is especially applicable to the present case, i.e., whether the
cause of action in the second case existed at the time of the filing of the first complaint – and to which
we answer in the negative. The facts clearly show that the filing of the first ejectment case was
grounded on the petitioner’s violation of stipulations in the lease contract, while the filing of the second
case was based on the expiration of the lease contract. At the time the respondent filed the first
ejectment complaint on October 10, 2000, the lease contract between the parties was still in effect.
The lease was fixed for a period of two (2) years, from January 16, 2000, and in the absence of a
renewal agreed upon by the parties, the lease remained effective until January 15, 2002. It was only
at the expiration of the lease contract that the cause of action in the second ejectment complaint
accrued and made available to the respondent as a ground for ejecting the petitioner. Thus, the cause
of action in the second case was not yet in existence at the time of filing of the first ejectment case.

In response to the petitioner’s contention that the similarity of Civil Case Nos. 8084 and 9210 rests on
the reiteration in the second case of the cause of action in the first case, we rule that the restatement
does not result in substantial identity between the two cases. Even if the respondent alleged violations
of the lease contract as a ground for ejectment in the second complaint, the main basis for ejecting
the petitioner in the second case was the expiration of the lease contract. If not for this subsequent
development, the respondent could no longer file a second complaint for unlawful detainer because
an ejectment complaint may only be filed within one year after the accrual of the cause of
action,27 which, in the second case, was the expiration of the lease contract. 1aw phi1

Also, contrary to petitioner’s assertion, there can be no conflict between the decisions rendered in Civil
Case Nos. 8084 and 9210 because the MTC-Branch 71 decided the latter case on the sole issue of
whether the lease contract between the parties had expired. Although alleged by the respondent in its
complaint, the MTC-Branch 71 did not rule on the alleged violations of the lease contract committed
by the petitioner. We note that the damages awarded by the MTC-Branch 71 in Civil Case No. 9210
were for those incurred after the expiration of the lease contract,28 not for those incurred prior thereto.

Similarly, we do not find the respondent guilty of forum shopping in filing Civil Case No. 9210, the
second civil case. To determine whether a party violated the rule against forum shopping, the test
applied is whether the elements of litis pendentia are present or whether a final judgment in one case
will amount to res judicata in another.29 Considering our pronouncement that not all the requisites
of litis pendentia are present in this case, the CA did not err in declaring that the respondent committed
no forum shopping. Also, a close reading of the Verification and Certification of Non-Forum
Shopping30 (attached to the second ejectment complaint) shows that the respondent did disclose that
it had filed a former complaint for unlawful detainer against the petitioner. Thus, the respondent cannot
be said to have committed a willful and deliberate forum shopping.

WHEREFORE, the instant petition is DENIED. The assailed Decision dated August 20, 2004 and
Resolution dated February 23, 2005 of the Court of Appeals in CA-G.R. SP. No. 78836 are
AFFIRMED.

SO ORDERED.

SECOND DIVISION

G.R. No. 147417 July 8, 2005

SPS. VICTOR & MILAGROS PEREZ and CRISTINA AGRAVIADOR AVISO, Petitioners,
vs.
ANTONIO HERMANO, Respondent.

DECISION

CHICO-NAZARIO, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Resolution1 of
the Court of Appeals dismissing petitioners’ original action for certiorari under Rule 65 for being filed
out of time. Assailed as well is the Resolution2 dismissing petitioners’ motion for reconsideration.

The pertinent facts of the case are as follows:

On 27 April 1998, petitioners Cristina Agraviador Aviso and spouses Victor and Milagros Perez filed a
civil case for Enforcement of Contract and Damages with Prayer for the Issuance of a Temporary
Restraining Order (TRO) and/or Preliminary Injunction against Zescon Land, Inc. and/or its President
Zenie Sales-Contreras, Atty. Perlita Vitan-Ele and against respondent herein Antonio Hermano before
the Regional Trial Court (RTC) of Quezon City, Branch 224.3 On 15 May 1998, respondent (then
defendant) Hermano filed his Answer with Compulsory Counterclaim. On 17 January 2000,
respondent Hermano filed a "Motion with Leave to Dismiss the Complaint or Ordered Severed for
Separate Trial" which was granted by the trial court in an Order dated 28 February 2000.

This Order was received by petitioners on 21 March 2000. On 23 March 2000, petitioners moved for
reconsideration which was denied by the trial court on 25 May 2000 and received by petitioners on 18
June 2000. On 17 August 2000, petitioners filed an original action for certiorari before the Court of
Appeals imputing grave abuse of discretion on the part of the trial court in dismissing the complaint
against respondent Hermano.

On 19 October 2000, the Court of Appeals rendered the first assailed Resolution dismissing the
petition for certiorari "for having been filed beyond the reglementary period pursuant to Section 4, Rule
65 of the 1997 Rules on Civil Procedure, as amended." On 02 March 2001, the second assailed
Resolution was promulgated dismissing petitioners’ motion for reconsideration, the Court of Appeals
holding that:

From the time petitioners received the assailed Order on March 21, 2000 and filed their motion for
reconsideration, four (4) days had elapsed. On June 18, 2000, petitioners received the denial of their
motion for reconsideration. When the instant petition was filed on August 17, 2000, a total of 63 days
had elapsed.

A.M. No. 00-2-03-50 further amending Section 4, Rule 65 of the New Rules on Civil Procedure states
that the petition shall be filed not later than sixty (60) days from notice of the judgment, Order or
Resolution and in case a motion for reconsideration or new trial is timely filed, whether such motion is
required or not, the 60-day period shall be counted from notice of the denial of said motion.
Viewed from its light, the assailed Orders had already attained finality, and are now beyond the power
of this Court to review.4

Aggrieved by the foregoing ruling, petitioners are now before us assigning the following –

MANIFEST AND/OR SERIOUS ERROR COMMITTED BY THE HONORABLE COURT OF APPEALS

IN THE COMPUTATION OF THE PERIOD WITHIN WHICH THE PETITIONERS FILED THEIR
PETITION FOR CERTIORARI BEFORE IT AND CONSEQUENTLY COMMITTED GRAVE ABUSE
OF DISCRETION IN THE APPRECIATION OF FACTS AND/OR MISAPPREHENSION OF FACTS,
WITH ITS FINDING OF FACT NOT BEING BORNE BY THE RECORD OR EVIDENCE, AND THUS
ITS CONCLUSION IS ENTIRELY BASELESS.5

According to petitioners, following the amendment introduced by A.M. No. 00-2-03-SC to Section 4,
Rule 65 of the 1997 Rules on Civil Procedure, their petition was filed on the 60th day, thus, within the
reglementary period. Respondent insists, on the other hand, that the petition was filed on the 61st day
while the Court of Appeals had declared that the petition was filed on the 63rd day.

We agree in the position taken by petitioners.

Admittedly, at the time petitioners filed their petition for certiorari on 17 August 2000, the rule then
prevailing was Section 4, Rule 65 of the 1997 Rules on Civil Procedure, as amended by Circular No.
39-98 effective 01 September 1998, which provides:

Sec. 4. Where petition filed. – The petition shall be filed not later than sixty (60) days from notice of
the judgment, order or resolution sought to be assailed in the Supreme Court, or if it relates to the acts
or omissions of a lower court or of a corporation, board, officer or person in the Regional Trial Court
exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in
the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in the
Sandiganbayan if it is in aid of its jurisdiction. If it involves the acts or omissions of a quasi-judicial
agency, and unless otherwise provided by law or these Rules, the petition shall be filed in and
cognizable only by the Court of Appeals.

If the petitioner had filed a motion for new trial or reconsideration in due time after notice of said
judgment, order, or resolution, the period herein fixed shall be interrupted. If the motion is denied,
the aggrieved party may file the petition within the remaining period, but which shall not be
less than five (5) days in any event, reckoned from notice of such denial. No extension of time
to file the petition shall be granted except for the most compelling reason and in no case to exceed
fifteen (15) days. (Emphasis supplied)

However, on 01 September 2000, during the pendency of the case before the Court of Appeals,
Section 4 was amended anew by A.M. No. 00-2-03-SC6 which now provides:

Sec. 4. When and where petition filed. – The petition shall be filed not later than sixty (60) days from
notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is
timely filed, whether such motion is required or not, the sixty (60) day period shall be counted
from notice of the denial of said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower court
or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the
territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether
or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its appellate
jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, unless otherwise provided
by law or these rules, the petition shall be filed in and cognizable only by the Court of Appeals.

No extension of time to file the petition shall be granted except for compelling reason and in no case
exceeding fifteen (15) days. (Emphasis supplied)

Under this amendment, the 60-day period within which to file the petition starts to run from receipt of
notice of the denial of the motion for reconsideration, if one is filed.7

In Narzoles v. National Labor Relations Commission,8 we described this latest amendment as curative
in nature as it remedied the confusion brought about by Circular No. 39-98 because, "historically, i.e.,
even before the 1997 revision to the Rules of Civil Procedure, a party had a fresh period from receipt
of the order denying the motion for reconsideration to file a petition for certiorari." Curative statutes,
which are enacted to cure defects in a prior law or to validate legal proceedings which would otherwise
be void for want of conformity with certain legal requirements, by their very essence, are
retroactive.9 And, being a procedural rule, we held in Sps. Ma. Carmen and Victor Javellana v. Hon.
Presiding Judge Benito Legarda10 that "procedural laws are construed to be applicable to actions
pending and undetermined at the time of their passage, and are deemed retroactive in that sense and
to that extent."

Consequently, petitioners had a fresh period of 60 days from the time they received the Order of the
trial court denying their motion for reconsideration on 18 June 2000. When they filed their petition with
the Court of Appeals on 17 August 2000, exactly 60 days had elapsed following the rule that in
computing a period, the first day shall be excluded and the last day included.11 Hence, there can be
no doubt that the petition was filed within the reglementary period for doing so and it was reversible
error on the part of the Court of Appeals in not giving said petition due course. However, instead of
remanding the case to the Court of Appeals which would only unduly prolong the disposition of the
substantive issue raised, we shall resolve the petition originally filed therein.

Petitioners brought to the Court of Appeals on petition for certiorari under Rule 65 the lone issue of:

WHETHER OR NOT THE PUBLIC RESPONDENT [Hon. Emilio L. Leachon, Jr., Presiding Judge,
RTC, Branch 224, Quezon City] HAD PLAINLY AND MANIFESTLY ACTED WITH GRAVE ABUSE
OF DISCRETION, IN EXCESS OF JURISDICTION, TANTAMOUNT TO LACK OF JURISDICTION,
IN DISMISSING THE COMPLAINT AS AGAINST RESPONDENT ANTONIO HERMANO IN CIVIL
CASE NO. Q-98-34211.12

Petitioners assert that respondent Hermano should not have been dismissed from the complaint
because: (1) He did not file a motion to dismiss under Rule 16 of the Rules of Court and, in fact, his
"Motion with Leave to Dismiss the Complaint or Ordered Severed for Separate Trial" was filed almost
two years after he filed his Answer to the complaint; (2) There was no misjoinder of causes of action
in this case; and (3) There was no misjoinder of parties.

The case filed by petitioners against respondent Hermano and the other defendants, namely Zescon
Land, Inc. and/or its President Zenie Sales-Contreras and Atty. Perlita Vitan-Ele, was one for
"Enforcement of Contract and Damages with Prayer for the Issuance of a Temporary Restraining
Order (TRO) and/or Preliminary Injunction" docketed as Civil Case No. Q-98-34211 and raffled to
Branch 224.

Petitioners presented three causes of action in their complaint, the first for enforcement of contract to
sell entered into between petitioners and Zescon Land, Inc., the second for annulment or rescission
of two contracts of mortgage entered into between petitioners and respondent Hermano and the third
for damages against all defendants.

For the first cause of action, petitioners allege that sometime in November 1997, they entered into a
Contract to Sell with Zescon Land, Inc., through Zenie Sales-Contreras, for the purchase of five (5)
parcels of land in the total amount of Nineteen Million One Hundred Four Thousand Pesos
(P19,104,000.00). As part of their agreement, a portion of the purchase price would be paid to them
as down payment, another portion to be given to them as cash advance upon the execution of the
contract and another portion to be used by the buyer, Zescon Land, Inc., to pay for loans earlier
contracted by petitioners which loans were secured by mortgages.

Re-pleading the foregoing in their second cause of action, petitioners contend that "in a tricky
machination and simultaneous with the execution of the aforesaid Contract to Sell," they were made
to sign other documents, two of which were Mortgage deeds over the same five properties in favor of
respondent Hermano, whom they had never met. It was allegedly explained to them by Sales-
Contreras that the mortgage contracts would merely serve to facilitate the payment of the price as
agreed upon in their Contract to Sell. Petitioners claim that it was never their intention to mortgage
their property to respondent Hermano and that they have never received a single centavo from
mortgaging their property to him. Petitioners acknowledge, however, that respondent Hermano was
responsible for discharging their obligations under the first mortgage and for having the titles over the
subject lands released, albeit not to them but to respondent Hermano. They seek a TRO against
respondent Hermano who had informed them that he would be foreclosing the subject properties.

In their third cause of action, petitioners pray for damages against all the defendants alleging that:

Due to the failure and refusal, without any valid justification and reason, by defendants Zescon and
Contreras to comply with their obligations under the Contract to Sell, including their failure and refusal
to pay the sums stipulated therein, and in misleading and misrepresenting the plaintiffs into mortgaging
their properties to defendant Antonio Hermano, who in turn had not paid the plaintiffs the proceeds
thereof, putting them in imminent danger of losing the same, plaintiffs had suffered, and continue to
suffer, sleepless nights ….

By reason of defendants Zescon and Contreras’s failure and refusal to pay the sums stipulated in the
Contract to Sell, and of defendant Antonio Hermano’s not having paid plaintiffs the proceeds of the
mortgage agreements, plaintiffs had been deprived of the beneficial use of the proceeds and stood to
lose, as they continue to lose, by way of unearned profits at least P1,000,000.00.13

In his Answer with (Compulsory) Counterclaim dated 15 May 1998, respondent Hermano denied
petitioners’ allegations.14 Then, on 19 February 1999, respondent Hermano filed a civil case entitled
"Judicial Foreclosure of Real Estate Mortgage" against petitioner Aviso docketed as Civil Case No. Q-
99-36914 and raffled to Branch 216 of the RTC of Quezon City. On 17 January 2000, respondent
Hermano filed a "Motion With Leave To Dismiss The Complaint Against Defendant Antonio Hermano,
Or Ordered Severed For Separate Trial" before Branch 224. In said motion, respondent Hermano
argued that there was a mis-joinder of causes of action under Rule 2, Section 6 of the Rules of Court.
To quote respondent Hermano:

3. In the instant case, the plaintiffs’ action for the Enforcement of Contract and Damages with Prayer
for The Issuance of a Temporary Restraining Order And/Or Preliminary Injunction against Zescon
Land, Inc., and/or its President Zenie Sales Contreras, may not, under Rule 2, Section 6 of the 1997
Rules of Civil Procedure, join defendant Hermano as party defendant to annul and/or rescind the Real
Estate Mortgages of subject properties. There is a misjoinder of parties defendants under a different
transaction or cause of action; that under the said Rule 2, Section 6, upon motion of defendant
Hermano in the instant case, the complaint against defendant Hermano can be severed and tried
separately; . . . .15

Over petitioners’ opposition to said motion, the same was granted by the trial court in its Order dated
28 February 2000 on the justification that:

. . . [D]efendant having filed a special civil action for judicial foreclosure of mortgage and now pending
before RTC Branch 216, he should be dropped as one of the defendants in this case and whatever
claims plaintiffs may have against defendant Hermano, they can set it up by way of an answer to said
judicial foreclosure.16

And, in an Order dated 25 May 2000, the trial court resolved petitioners’ motion for reconsideration by
dismissing the same, to wit:

After going over the arguments of the parties, the Court believes that defendant Hermano has nothing
to do with the transaction which the plaintiffs entered into with defendant Zescon Land, Inc. Besides,
the said motion raised matters and defenses previously considered and passed upon by the Court.17

It is these two Orders that were brought up by petitioners to the Court of Appeals on petition
for Certiorari under Rule 65. The pivotal issue to be resolved, therefore, is whether or not respondent
trial court committed grave abuse of discretion in dismissing the complaint against respondent
Hermano in Civil Case No. Q-98-34211.

As far as we can glean from the Orders of the trial court, respondent Hermano was dropped from the
complaint on the ground of misjoinder of causes of action. Petitioners, on the other hand, insist that
there was no misjoinder in this case.

To better understand the present controversy, it is vital to revisit the rules on joinder of causes of action
as exhaustively discussed in Republic v. Hernandez,18 thus:

By a joinder of actions, or more properly, a joinder of causes of action, is meant the uniting of two or
more demands or rights of action in one action; the statement of more than one cause of action in a
declaration. It is the union of two or more civil causes of action, each of which could be made the basis
of a separate suit, in the same complaint, declaration or petition. A plaintiff may under certain
circumstances join several distinct demands, controversies or rights of action in one declaration,
complaint or petition.

As can easily be inferred from the above definitions, a party is generally not required to join in one suit
several distinct causes of action. The joinder of separate causes of action, where allowable, is
permissive and not mandatory in the absence of a contrary statutory provision, even though the causes
of action arose from the same factual setting and might under applicable joinder rules be joined.
Modern statutes and rules governing joinders are intended to avoid a multiplicity of suits and to
promote the efficient administration of justice wherever this may be done without prejudice to the rights
of the litigants. To achieve these ends, they are liberally construed.

While joinder of causes of action is largely left to the option of a party litigant, Section 5, Rule 2 of our
present Rules allows causes of action to be joined in one complaint conditioned upon the following
requisites: (a) it will not violate the rules on jurisdiction, venue and joinder of parties; and (b) the causes
of action arise out of the same contract, transaction or relation between the parties, or are for demands
for money or are of the same nature and character.
The objectives of the rule or provision are to avoid a multiplicity of suits where the same parties and
subject matter are to be dealt with by effecting in one action a complete determination of all matters in
controversy and litigation between the parties involving one subject matter, and to expedite the
disposition of litigation at minimum cost. The provision should be construed so as to avoid such
multiplicity, where possible, without prejudice to the rights of the litigants. Being of a remedial nature,
the provision should be liberally construed, to the end that related controversies between the same
parties may be adjudicated at one time; and it should be made effectual as far as practicable, with the
end in view of promoting the efficient administration of justice.

The statutory intent behind the provisions on joinder of causes of action is to encourage joinder of
actions which could reasonably be said to involve kindred rights and wrongs, although the courts have
not succeeded in giving a standard definition of the terms used or in developing a rule of universal
application. The dominant idea is to permit joinder of causes of action, legal or equitable, where there
is some substantial unity between them. While the rule allows a plaintiff to join as many separate
claims as he may have, there should nevertheless be some unity in the problem presented and a
common question of law and fact involved, subject always to the restriction thereon regarding
jurisdiction, venue and joinder of parties. Unlimited joinder is not authorized.

Our rule on permissive joinder of causes of action, with the proviso subjecting it to the correlative rules
on jurisdiction, venue and joinder of parties and requiring a conceptual unity in the problems presented,
effectively disallows unlimited joinder.

Section 6, Rule 2 on misjoinder of causes of action provides:

Sec. 6. Misjoinder of causes of action. - Misjoinder of causes of action is not a ground for dismissal of
an action. A misjoined cause of action may, on motion of a party or on the initiative of the court, be
severed and proceeded with separately.

There is misjoinder of causes of action when the conditions for joinder under Section 5, Rule 2 are not
met. Section 5 provides:

Sec. 5. Joinder of causes of action. - A party may in one pleading assert, in the alternative or otherwise,
as many causes of action as he may have against an opposing party, subject to the following
conditions:

(a) The party joining the causes of action shall comply with the rules on joinder of parties;

(b) The joinder shall not include special civil actions or actions governed by special rules;

(c) Where the causes of action are between the same parties but pertain to different venues or
jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of
action falls within the jurisdiction of said court and the venue lies therein; and

(d) Where the claims in all the causes of action are principally for recovery of money, the aggregate
amount claimed shall be the test of jurisdiction.

As far as can be gathered from the assailed Orders, it is the first condition - on joinder of parties - that
the trial court deemed to be lacking. It is well to remember that the joinder of causes of action may
involve the same parties or different parties. If the joinder involves different parties, as in this case,
there must be a question of fact or of law common to both parties joined, arising out of the same
transaction or series of transaction.19

In herein case, petitioners have adequately alleged in their complaint that after they had already
agreed to enter into a contract to sell with Zescon Land, Inc., through Sales-Contreras, the latter also
gave them other documents to sign, to wit: A Deed of Absolute Sale over the same properties but for
a lower consideration, two mortgage deeds over the same properties in favor of respondent Hermano
with accompanying notes and acknowledgment receipts for Ten Million pesos (P10,000,000) each.
Petitioners claim that Zescon Land, Inc., through Sales-Contreras, misled them to mortgage their
properties which they had already agreed to sell to the latter.

From the above averments in the complaint, it becomes reasonably apparent that there are questions
of fact and law common to both Zescon Land, Inc., and respondent Hermano arising from a series of
transaction over the same properties. There is the question of fact, for example, of whether or not
Zescon Land, Inc., indeed misled petitioners to sign the mortgage deeds in favor of respondent
Hermano. There is also the question of which of the four contracts were validly entered into by the
parties. Note that under Article 2085 of the Civil Code, for a mortgage to be valid, it is imperative that
the mortgagor be the absolute owner of the thing mortgaged. Thus, respondent Hermano will definitely
be affected if it is subsequently declared that what was entered into by petitioners and Zescon Land,
Inc., was a Contract of Sale (as evidenced by the Deed of Absolute Sale signed by them) because
this would mean that the contracts of mortgage were void as petitioners were no longer the absolute
owners of the properties mortgaged. Finally, there is also the question of whether or not Zescon Land,
Inc., as represented by Sales-Contreras, and respondent Hermano committed fraud against
petitioners as to make them liable for damages.

Prescinding from the foregoing, and bearing in mind that the joinder of causes of action should be
liberally construed as to effect in one action a complete determination of all matters in controversy
involving one subject matter, we hold that the trial court committed grave abuse of discretion in
severing from the complaint petitioners’ cause of action against respondent Hermano.

WHEREFORE, premises considered, the Resolution of the Court of Appeals dated 19 October 2000
dismissing petitioners’ petition for certiorari and its Resolution dated 02 March 2001 denying
petitioners’ motion for reconsideration are REVERSED and SET ASIDE. The petition for certiorari is
hereby GRANTED. The Orders of the Regional Trial Court of Quezon City, Branch 224, dated 28
February 2000 and 25 May 2000 are ANNULLED and SET ASIDE. The RTC is further ordered to
reinstate respondent Antonio Hermano as one of the defendants in Civil Case No. Q-98-34211. No
costs.

SO ORDERED.

THIRD DIVISION

G.R. No. 140746 March 16, 2005

PANTRANCO NORTH EXPRESS, INC., and ALEXANDER BUNCAN, Petitioner,

vs.
STANDARD INSURANCE COMPANY, INC., and MARTINA GICALE, Respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari assailing the Decision1 dated July 23 1999 and
Resolution2 dated November 4, 1999 of the Court of Appeals in CA-G.R. CV No. 38453, entitled
"Standard Insurance Company, Inc., and Martina Gicale vs. PANTRANCO North Express, Inc., and
Alexander Buncan."

In the afternoon of October 28, 1984, Crispin Gicale was driving the passenger jeepney owned by his
mother Martina Gicale, respondent herein. It was then raining. While driving north bound along the
National Highway in Talavera, Nueva Ecija, a passenger bus, owned by Pantranco North Express,
Inc., petitioner, driven by Alexander Buncan, also a petitioner, was trailing behind. When the two
vehicles were negotiating a curve along the highway, the passenger bus overtook the jeepney. In so
doing, the passenger bus hit the left rear side of the jeepney and sped away.

Crispin reported the incident to the Talavera Police Station and respondent Standard Insurance Co.,
Inc. (Standard), insurer of the jeepney. The total cost of the repair was P21,415.00, but respondent
Standard paid only P8,000.00. Martina Gicale shouldered the balance of P13,415.00.

Thereafter, Standard and Martina, respondents, demanded reimbursement from petitioners Pantranco
and its driver Alexander Buncan, but they refused. This prompted respondents to file with the Regional
Trial Court (RTC), Branch 94, Manila, a complaint for sum of money.

In their answer, both petitioners specifically denied the allegations in the complaint and averred that it
is the Metropolitan Trial Court, not the RTC, which has jurisdiction over the case.

On June 5, 1992, the trial court rendered a Decision3 in favor of respondents Standard and Martina,
thus:

"WHEREFORE, and in view of the foregoing considerations, judgment is hereby rendered in

favor of the plaintiffs, Standard Insurance Company and Martina Gicale, and against
defendants Pantranco Bus Company and Alexander Buncan, ordering the latter to pay as
follows:

(1) to pay plaintiff Standard Insurance the amount of P8,000.00 with interest due thereon from
November 27, 1984 until fully paid;

(2) to pay plaintiff Martina Gicale the amount of P13,415.00 with interest due thereon from
October 22, 1984 until fully paid;
 (3) to pay the sum of P10,000.00 for attorney’s fees;

(4) to pay the expenses of litigation and the cost of suit.

SO ORDERED."

On appeal, the Court of Appeals, in a Decision4 dated July 23, 1999, affirmed the trial court’s ruling,
holding that:

"The appellants argue that appellee Gicale’s claim of P13,415.00 and appellee insurance
company’s claim of P8,000.00 individually fell under the exclusive original jurisdiction of the
municipal trial court. This is not correct because under the Totality Rule provided for under
Sec. 19, Batas Pambansa Bilang 129, it is the sum of the two claims that determines the
jurisdictional amount.

xxx

In the case at bench, the total of the two claims is definitely more than P20,000.00 which at
the time of the incident in question was the jurisdictional amount of the Regional Trial Court.

Appellants contend that there was a misjoinder of parties. Assuming that there was, under the
Rules of Court (Sec. 11, Rule 7) as well as under the Rules of Civil Procedure (ditto), the same
does not affect the jurisdiction of the court nor is it a ground to dismiss the complaint.

xxx

It does not need perspicacity in logic to see that appellees Gicale’s and insurance company’s
individual claims against appellees (sic) arose from the same vehicular accident on October
28, 1984 involving appellant Pantranco’s bus and appellee Gicale’s jeepney. That being the
case, there was a question of fact common to all the parties: Whose fault or negligence caused
the damage to the jeepney?

Appellants submit that they were denied their day in court because the case was deemed
submitted for decision "without even declaring defendants in default or to have waived the
presentation of evidence." This is incorrect. Of course, the court did not declare defendants in
default because that is done only when the defendant fails to tender an answer within the
reglementary period. When the lower court ordered that the case is deemed submitted for
decision that meant that the defendants were deemed to have waived their right to present
evidence. If they failed to adduce their evidence, they should blame nobody but themselves.
They failed to be present during the scheduled hearing for the reception of their evidence
despite notice and without any motion or explanation. They did not even file any motion for
reconsideration of the order considering the case submitted for decision.

Finally, contrary to the assertion of the defendant-appellants, the evidence preponderantly

established their liability for quasi-delict under Article 2176 of the Civil Code."

Petitioners filed a motion for reconsideration but was denied by the Appellate Court in a Resolution
dated November 4, 1999.

Hence, this petition for review on certiorari raising the following assignments of error:

"I

WHETHER OR NOT THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT OF
THE ACTION CONSIDERING THAT RESPONDENTS’ RESPECTIVE CAUSE OF ACTION
AGAINST PETITIONERS DID NOT ARISE OUT OF THE SAME TRANSACTION NOR ARE
THERE QUESTIONS OF LAW AND FACTS COMMON TO BOTH PETITIONERS AND
RESPONDENTS.

II

WHETHER OR NOT PETITIONERS ARE LIABLE TO RESPONDENTS CONSIDERING

THAT BASED ON THE EVIDENCE ADDUCED AND LAW APPLICABLE IN THE CASE AT
BAR, RESPONDENTS HAVE NOT SHOWN ANY RIGHT TO THE RELIEF PRAYED FOR.

III
 WHETHER OR NOT PETITIONERS WERE DEPRIVED OF THEIR RIGHT TO DUE
PROCESS."

For their part, respondents contend that their individual claims arose out of the same vehicular accident
and involve a common question of fact and law. Hence, the RTC has jurisdiction over the case.

Petitioners insist that the trial court has no jurisdiction over the case since the cause of action of each
respondent did not arise from the same transaction and that there are no common questions of law
and fact common to both parties. Section 6, Rule 3 of the Revised Rules of Court,5 provides:

"Sec. 6. Permissive joinder of parties. – All persons in whom or against whom any right to relief
in respect to or arising out of the same transaction or series of transactions is alleged to exist,
whether jointly, severally, or in the alternative, may, except as otherwise provided in these
Rules, join as plaintiffs or be joined as defendants in one complaint, where any question of law
or fact common to all such plaintiffs or to all such defendants may arise in the action; but the
court may make such orders as may be just to prevent any plaintiff or defendant from being
embarrassed or put to expense in connection with any proceedings in which he may have no
interest."

Permissive joinder of parties requires that: (a) the right to relief arises out of the same transaction or
series of transactions; (b) there is a question of law or fact common to all the plaintiffs or defendants;
and (c) such joinder is not otherwise proscribed by the provisions of the Rules on jurisdiction and
venue.6

In this case, there is a single transaction common to all, that is, Pantranco’s bus hitting the rear side
of the jeepney. There is also a common question of fact, that is, whether petitioners are negligent.
There being a single transaction common to both respondents, consequently, they have the same
cause of action against petitioners.

To determine identity of cause of action, it must be ascertained whether the same evidence which is
necessary to sustain the second cause of action would have been sufficient to authorize a recovery in
the first.7 Here, had respondents filed separate suits against petitioners, the same evidence would
have been presented to sustain the same cause of action. Thus, the filing by both respondents of the
complaint with the court below is in order. Such joinder of parties avoids multiplicity of suit and ensures
the convenient, speedy and orderly administration of justice.

Corollarily, Section 5(d), Rule 2 of the same Rules provides:

"Sec. 5. Joinder of causes of action. – A party may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may have against an opposing party, subject to the
following conditions:

xxx

(d) Where the claims in all the causes of action are principally for recovery of money the
aggregate amount claimed shall be the test of jurisdiction."

The above provision presupposes that the different causes of action which are joined accrue in favor
of the same plaintiff/s and against the same defendant/s and that no misjoinder of parties is
involved.8 The issue of whether respondents’ claims shall be lumped together is determined by
paragraph (d) of the above provision. This paragraph embodies the "totality rule" as exemplified by
Section 33 (1) of B.P. Blg. 1299 which states, among others, that "where there are several claims or
causes of action between the same or different parties, embodied in the same complaint, the amount
of the demand shall be the totality of the claims in all the causes of action, irrespective of whether the
causes of action arose out of the same or different transactions."

As previously stated, respondents’ cause of action against petitioners arose out of the same
transaction. Thus, the amount of the demand shall be the totality of the claims.

Respondent Standard’s claim is P8,000.00, while that of respondent Martina Gicale is P13,415.00, or
a total of P21,415.00. Section 19 of B.P. Blg. 129 provides that the RTC has "exclusive original
jurisdiction over all other cases, in which the demand, exclusive of interest and cost or the value of the
property in controversy, amounts to more than twenty thousand pesos (P20,000.00)." Clearly, it is the
RTC that has jurisdiction over the instant case. It bears emphasis that when the complaint was filed,
R.A. 7691 expanding the jurisdiction of the Metropolitan, Municipal and Municipal Circuit Trial Courts
had not yet taken effect. It became effective on April 15, 1994.
II

The finding of the trial court, affirmed by the Appellate Court, that petitioners are negligent and thus
liable to respondents, is a factual finding which is binding upon us, a rule well-established in our
jurisprudence. It has been repeatedly held that the trial court's factual findings, when affirmed by the
Appellate Court, are conclusive and binding upon this Court, if they are not tainted with arbitrariness
or oversight of some fact or circumstance of significance and influence. Petitioners have not presented
sufficient ground to warrant a deviation from this rule.10

III

There is no merit in petitioners’ contention that they were denied due process. Records show that
during the hearing, petitioner Pantranco’s counsel filed two motions for resetting of trial which were
granted by the trial court. Subsequently, said counsel filed a notice to withdraw. After respondents had
presented their evidence, the trial court, upon petitioners’ motion, reset the hearing to another date.
On this date, Pantranco failed to appear. Thus, the trial court warned Pantranco that should it fail to
appear during the next hearing, the case will be submitted for resolution on the basis of the evidence
presented. Subsequently, Pantranco’s new counsel manifested that his client is willing to settle the
case amicably and moved for another postponement. The trial court granted the motion. On the date
of the hearing, the new counsel manifested that Pantranco’s employees are on strike and moved for
another postponement. On the next hearing, said counsel still failed to appear. Hence, the trial court
considered the case submitted for decision.

We have consistently held that the essence of due process is simply an opportunity to be heard, or an
opportunity to explain one’s side or an opportunity to seek for a reconsideration of the action or ruling
complained of.11

Petitioner Pantranco filed an answer and participated during the trial and presentation of respondents’
evidence. It was apprised of the notices of hearing issued by the trial court. Indeed, it was afforded fair
and reasonable opportunity to explain its side of the controversy. Clearly, it was not denied of its right
to due process. What is frowned upon is the absolute lack of notice and hearing which is not present
here.

WHEREFORE, the petition is DENIED. The assailed Decision dated July 23 1999 and Resolution
dated November 4, 1999 of the Court of Appeals in CA-G.R. CV No. 38453 are hereby AFFIRMED.
Costs against petitioners.

SO ORDERED.

SECOND DIVISION

G.R. No. 155736. March 31, 2005

SPOUSES DANILO and CRISTINA DECENA, Petitioners,

vs.
SPOUSES PEDRO and VALERIA PIQUERO, Respondents.

RESOLUTION

CALLEJO, SR., J.:

The petitioners, Spouses Danilo and Cristina Decena were the owners of a parcel of land, with a house
constructed thereon, located in Parañaque, Metro Manila (now Parañaque City) covered by Transfer
Certificate of Title (TCT) No. 134391 issued on February 24, 1998.1

On September 7, 1997, the petitioners and the respondents, the Spouses Pedro and Valeria Piquero,
executed a Memorandum of Agreement (MOA)2 in which the former sold the property to the latter for
the price of ₱940,250.00 payable in six (6) installments via postdated checks. The vendees forthwith
took possession of the property.

It appears in the MOA that the petitioners obliged themselves to transfer the property to the
respondents upon the execution of the MOA with the condition that if two of the postdated checks
would be dishonored by the drawee bank, the latter would be obliged to reconvey the property to the
petitioners.

On May 17, 1999, the petitioners, then residents of Malolos, Bulacan, filed a Complaint3 against the
respondents with the Regional Trial Court (RTC) of Malolos, Bulacan, for the annulment of the
sale/MOA, recovery of possession and damages. The petitioners alleged therein that, they did not
transfer the property to and in the names of the respondents as vendees because the first two checks
drawn and issued by them in payment for the purchase price of the property were dishonored by the
drawee bank, and were not replaced with cash despite demands therefor.

The petitioners prayed that, after due proceedings, judgment be rendered in their favor, thus:

a. The sale/Memorandum of Agreement (Annex "A," supra) be declared null and void, rescinded and
with no further force and effect;

b. Defendants, and all persons claiming right under them, be ordered to immediately vacate the subject
property and turnover its possession to the plaintiffs;

c. Defendants, jointly and severally, be ordered to pay the plaintiffs:

i. ₱10,000.00 – monthly, starting 01 October 1997 until complete turnover of the subject property to
the plaintiffs, as reasonable compensation for its continued unlawful use and occupation by the
defendants;

ii. ₱200,000.00 – moral damages;

iii. ₱200,000.00 – exemplary damages;

iv. ₱250,000.00 – attorney’s fees and litigation – related expenses; and

v. the costs of suit.

Other reliefs just and equitable are, likewise, prayed for.4

The petitioners declared in their complaint that the property subject of the complaint was valued at
₱6,900,000.00. They appended copies of the MOA and TCT No. 134391 to their complaint. The case
was eventually raffled to Branch 13 of the RTC of Malolos, Bulacan.

The respondents filed a motion to dismiss the complaint on the ground, inter alia, of improper venue
and lack of jurisdiction over the property subject matter of the action.

On the first ground, the respondents averred that the principal action of the petitioners for the
rescission of the MOA, and the recovery of the possession of the property is a real action and not a
personal one; hence, it should have been brought in the RTC of Parañaque City, where the property
subject matter of the action was located, and not in the RTC of Malolos, Bulacan, where the petitioners
resided. The respondents posited that the said court had no jurisdiction over the property subject
matter of the action because it was located in Parañaque City.5

In opposition, the petitioners insisted that their action for damages and attorney’s fees is a personal
action and not a real action; hence, it may be filed in the RTC of Bulacan where they reside. They
averred that while their second cause of action for the recovery of the possession of the property is a
real action, the same may, nevertheless, be joined with the rest of their causes of action for damages,
conformably with Section 5(c), Rule 2 of the Rules of Court.6

By way of reply, the respondents averred that Section 5(c), Rule 2 of the Rules of Court applies only
when one or more of multiple causes of action falls within the exclusive jurisdiction of the first level
courts, and the other or others are within the exclusive jurisdiction of the RTC, and the venue lies
therein.

On February 9, 2000, the trial court issued an Order7 denying the motion for lack of merit. It found
merit in the petitioner’s contention that Section 5(c), Rule 2 was applicable.

Meanwhile, the case was re-raffled to Branch 10 of the RTC of Malolos, Bulacan. In a Motion8 dated
December 20, 2000, the respondents prayed for the reconsideration of the trial court’s February 9,
2000 Order. On October 16, 2001, the court issued an Order9 granting the motion and ordered the
dismissal of the complaint. It ruled that the principal action of the petitioners was a real action and
should have been filed in the RTC of Parañaque City where the property subject matter of the
complaint was located. However, since the case was filed in the RTC of Bulacan where the petitioners
reside, which court had no jurisdiction over the subject matter of the action, it must be dismissed.

Hence, the present recourse.

The petition has no merit.

The sole issue is whether or not venue was properly laid by the petitioners in the RTC of Malolos,
Bulacan. The resolution of this issue is, in turn, anchored on whether Section 5, Rule 2 of the Rules
of Court invoked by the petitioners is applicable in this case.

Under the said Rule, a party may, in one pleading, assert, in the alternative or otherwise, as many
causes of action as he may have against an opposing party subject to the conditions therein
enumerated, one of which is Section 5(c) which reads:

Sec. 5. Joinder of causes of action. -- …

(c) Where the causes of action are between the same parties but pertain to different venues or
jurisdiction, the joinder may be allowed in the Regional Trial Court provided one of the causes of action
falls within the jurisdiction of said court and the venue lies therein; …

Explaining the aforequoted condition, Justice Jose Y. Feria declared:

(c) Under the third condition, if one cause of action falls within the jurisdiction of the Regional Trial
Court and the other falls within the jurisdiction of a Municipal Trial Court, the action should be filed in
the Regional Trial Court. If the causes of action have different venues, they may be joined in any of
the courts of proper venue. Hence, a real action and a personal action may be joined either in the
Regional Trial Court of the place where the real property is located or where the parties reside.10

A cause of action is an act or omission of one party in violation of the legal right of the other which
causes the latter injury. The essential elements of a cause of action are the following: (1) the existence
of a legal right of the plaintiff; (2) a correlative legal duty of the defendant to respect one’s right; and
(3) an act or omission of the defendant in violation of the plaintiff’s right.11 A cause of action should not
be confused with the remedies or reliefs prayed for. A cause of action is to be found in the facts alleged
in the complaint and not in the prayer for relief. It is the substance and not the form that is
controlling.12 A party may have two or more causes of action against another party.

A joinder of causes of action is the uniting of two or more demands or right of action in a complaint.
The question of the joinder of causes of action involves in particular cases a preliminary inquiry as to
whether two or more causes of action are alleged.13 In declaring whether more than one cause of
action is alleged, the main thrust is whether more than one primary right or subject of controversy is
present. Other tests are whether recovery on one ground would bar recovery on the other, whether
the same evidence would support the other different counts and whether separate actions could be
maintained for separate relief;14 or whether more than one distinct primary right or subject of
controversy is alleged for enforcement or adjudication.15

A cause of action may be single although the plaintiff seeks a variety of remedies. The mere fact that
the plaintiff prays for multiple reliefs does not indicate that he has stated more than one cause of
action. The prayer may be an aid in interpreting the petition and in determining whether or not more
than one cause of action is pleaded.16 If the allegations of the complaint show one primary right and
one wrong, only one cause of action is alleged even though other matters are incidentally involved,
and although different acts, methods, elements of injury, items of claims or theories of recovery are
set forth.17 Where two or more primary rights and wrongs appear, there is a joinder of causes of action.

After due consideration of the foregoing, we find and so rule that Section 5(c), Rule 2 of the Rules of
Court does not apply. This is so because the petitioners, as plaintiffs in the court a quo, had only one
cause of action against the respondents, namely, the breach of the MOA upon the latter’s refusal to
pay the first two installments in payment of the property as agreed upon, and turn over to the petitioners
the possession of the real property, as well as the house constructed thereon occupied by the
respondents. The claim for damages for reasonable compensation for the respondents’ use and
occupation of the property, in the interim, as well as moral and exemplary damages suffered by the
petitioners on account of the aforestated breach of contract of the respondents are merely incidental
to the main cause of action, and are not independent or separate causes of action.18

The action of the petitioners for the rescission of the MOA on account of the respondents’ breach
thereof and the latter’s failure to return the premises subject of the complaint to the petitioners, and
the respondents’ eviction therefrom is a real action.19 As such, the action should have been filed in the
proper court where the property is located, namely, in Parañaque City, conformably with Section 1,
Rule 4 of the Rules of Court which reads:

SECTION 1. Venue of real actions. — Actions affecting title to or possession of real property, or
interest therein, shall be commenced and tried in the proper court which has jurisdiction over the area
wherein the real property involved, or a portion thereof, is situated.
Since the petitioners, who were residents of Malolos, Bulacan, filed their complaint in the said RTC,
venue was improperly laid; hence, the trial court acted conformably with Section 1(c), Rule 16 of the
Rules of Court when it ordered the dismissal of the complaint.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the
petitioners.

SO ORDERED.

SECOND DIVISION

[ G.R. No. 211563, September 29, 2021 ]

SANTOS VENTURA HOCORMA FOUNDATION, INC., PETITIONER, VS. MABALACAT

INSTITUTE, INC., RESPONDENT.

DECISION

HERNANDO, J.:

Challenged in this appeal is the August 30, 2013 Decision1 of the Court of Appeals (CA/appellate
court) in CA-G.R. CV No. 93376, and its February 26, 2014 Resolution2 finding petitioner Santos
Ventura Hocorma Foundation, Inc. (SVHFI) guilty of forum shopping when it filed two different actions,
one for collection of sum of money and the other an unlawful detainer suit in two different courts.

The Antecedents:

SVHFI claimed that it is the registered and absolute owner of a parcel of land with an area of 11,451
square meteres (sq.m.), situated in Mabalacat, Pampanga, more particularly described as Lot No. 530
and covered by Transfer Certificate of Title No. (TCT) T-195826-R, issued in its name (subject lot).
Mabalacat Institute, Inc. (MII), which is now known as Don Teodoro V. Santos Institute, occupies said
lot without paying rent and only through its tolerance since the year 1983 until March 14, 2002.3

Nevertheless, through SVHFI's March 14, 2002 letter,4 it informed MII that beginning April 1, 2002, it
will be charged a rental fee for its use and occupancy of the subject lot at the monthly rate of P50.00
per sq.m. which is payable on or before the 5th day of each month. However, in MII's June 7, 2002
reply letter5, it refused to comply with SVHFI's demand.

In view of MII's refusal, SVHFI wrote another letter6 on July 11, 2002, demanding the rental payment
for the months of April to July 2002 in the total amount of P2,519,220.00 within 15 days from receipt
thereof. Otherwise, it must vacate the subject lot. However, MII still failed to comply therewith.7

In view of the foregoing, SVHFI filed a Complaint8 for collection of a sum of money against MII. The
case was raffled to Branch 150, Regional Trial Court, Makati City (court a quo) and docketed as Civil
Case No. 02-1326 (Collection Case).9

Instead of filing an answer, MII filed a Motion to Dismiss10 the complaint on the ground that the court
a quo had not validly acquired jurisdiction because it was not properly served with summons.11

In its March 12, 2003 Order12, the court a quo denied MII's Motion to Dismiss. MII moved for
reconsideration13 of the said Order but the same was likewise denied in its September 25, 2003
Order.14

MII then sought to nullify the RTC's March 12, 2003 and September 25, 2003 Orders before the CA
through a Petition for Certiorari15 under Rule 65 of the Rules of Court, which was denied in the
appellate court's July 13, 2005 Decision16 in CA G.R. SP No. 80547. MII moved for reconsideration,
which was likewise denied in the appellate court's September 16, 2005 Resolution.17

Unfazed, MII filed with this Court a Petition for Review on Certiorari18docketed as GR. No. 167876.
However, it was dismissed through this Court's July 4, 2005 Resolution19 on the following grounds:
(i) the petition'was considered as unsigned pleading for failure to verify the same in accordance with
Section 4, Rule 7 in relation to Section 1, Rule 65 of the Rules of Court; and (ii) the petition lacks
sufficient showing that the assailed judgement was tainted with grave abuse of discretion.

On March 29, 2006, MII filed its Answer with Compulsory Counterclaim20 with the court a quo in the
Collection Case which was admitted in the Order dated June 27, 200721.
Thereafter, the court a quo set the Collection Case for pre-trial. However, prior to the scheduled pre-
trial, on September 28, 2007, MII filed a Motion to Dismiss22 the complaint on the ground of forum
shopping. It argued that the failure of SVHFI to report to the court a quo that it filed the Ejectment Case
despite the explicit requirement of Section. 5(c), Rule 7 of the Rules of Court was a willful and
deliberate act of forum shopping on account of which its complaint should be dismissed. MII likewise
charged SVHFI with violating the rule on splitting of a single cause of action as set forth in Sections 3
and 4, Rule 2 of the same Rules.23

While the court a quo's proceedings were underway, SVHFI filed a Complaint24 for Ejectment on June
20, 2006 against MII. It was raffled to the sixth Municipal Circuit Trial Court (MCTC) of Mabalacat and
Magalang, Pampanga and docketed as Civil Case No. 06-2568 (Ejectment Case).25

Ruling of the Regional Trial

Court:

In its March 31, 2008 Order26 the court a quo granted MII's motion to dismiss, thereby dismissing the
Collection Case, to wit:

WHEREFORE, the instant motion is Granted. Civil Case No. 02-1326 is hereby dismissed.

SO ORDERED.27

Aggrieved, SVHFI filed a Motion for Reconsideration28 which the RTC denied in its October 6, 2008
Order.29

Ruling of the Court of Appeals:

SVHFI filed an appeal30 with the appellate court, wherein the sole issue raised was whether or not
SVHFI was guilty of forum shopping when it filed two different actions, i.e., the Collection and
Ejectment Cases, in two different courts.31 In its August 30, 2013 Decision,32 the appellate court
ruled in the affirmative, to wit:

WHEREFORE, in view of the foregoing premises, the instant appeal is hereby DENIED and the March
31. 2008 Order of the Regional Trial Court, Branch 150 in the City of Makati in Civil Case No. 02-1326
is hereby AFFIRMED.

SO ORDERED.33

Both parties filed their respective Motions for Reconsideration34 which were both denied in the
appellate court's February 26, 2014 Resolution.35

Thus, both parties filed their respective Petitions for Review on Certiorari36 under Rule 45 of the Rules
of Court. In MII's Petition, docketed as G.R. No. 211531, it asserts that the appellate court failed to
resolve the issue it raised as to whether or not it should be allowed to present evidence to prove Its
compulsory counterclaim pursuant to Section 6, Rule 16 of the Rules of Court, as amended.37 It
claims that the dismissal of the complaint under the said provision was without prejudice to the
prosecution in the same or separate action of a counterclaim pleaded in the answer.38 Thus, it prays
that We order the court a quo to hear ex-parte the presentation of its evidence for its compulsory
counterclaim.39

On the other hand, in SVHFI's instant petition, docketed as G.R. No. 211563, it argues that the
appellate court erred in sustaining the trial court's finding that it is guilty of forum shopping.40 It asserts
that the identity of the rights asserted in a collection of rent is different from an ejectment proceeding.41

In Our April 21, 2014 Resolution42 We denied MII's petition in G.R. No. 211531, to wit:

In this appeal, MII cries foul over the silence of the Court of Appeals' decision and resolution regarding
the fate of its counterclaim. MII claimed that it had already apprised the Court, of Appeals about its
counterclaim in its Reply Brief and motion for reconsideration.

xxxx

We deny the petition.

It must be mentioned at the outset that MII is not actually challenging the merits of the decision arid
resolution of the Court of Appeals. MII is just concerned about the apparent disregard of its
counterclaim in both.
The fate of the counterclaim of MII, however, is not for the Court of Appeals to decide; it is for the RTC.
And the RTC was only unable to act upon MII's request because, according to the trial court, it already
transmitted the records of Civil Case No. 02-1326 to the Court of Appeals due to the pendency of CA-
G.R. CV No. 93376. This reasoning employed by the RTC was never challenged by MII; rather MII
merely took the same as a cue to inform the Court of Appeals about its request to present evidence
on its counterclaim before the RTC.

Hence, We find no error on the part of the Court of Appeals in making no disposition as to MII's
counterclaim in its decision and resolution in CA-G.R. CV No. 93376.

Subsequently, in G.R. No. 211531, MII moved for reconsideration which this Court denied in its July
9, 2014 Resolution.43 Thus, the same became final and executory on September 9, 2014.44

Issue

The issue to be resolved in the instant case is whether SVHFI committed forum shopping when it filed
two different actions, i.e., the Collection and Ejectment Cases, in two different courts.

Our Ruling

We resolve to grant SVHFI's Petition.

We hold that SVHFI did not violate the rule on forum shopping when it filed the Ejectment Case while
the Collection Case has been pending for four years.

The determinative factor in

violations of the rule against
forum shopping is whether the
elements of litis pendentia are
present, or whether a final
judgment in one case will
amount to res judicata in
another.

In Intramuros Administration v. Offshore Construction Development Co.,45 (Intramuros) We explained

that "[f]orum shopping is the practice of resorting to multiple fora for the same relief, to increase the
chances of obtaining a favorable judgment."46

Section 5, Rule 7 of the Rules of Court prohibits forum shopping by requiring the plaintiff or principal
party to certify under oath that he or she has not commenced any- action involving the' same issues
in any court.47 In Orix Metro Leasing and Finance Corp. v. Cardline, Inc.,48 We pointed out that the
"rule against forum shopping seeks to address the great evil of two competent tribunals rendering two
separate and contradictory decisions. Forum shopping exists when a party initiates two or more
actions, other than appeal or certiorari, grounded on the same cause to obtain a more favorable
decision from any tribunal."49

The elements of forum shopping are: (i) identity of parties, or at least such parties representing the
same interest; (ii) identity of rights asserted and relief prayed for, the latter founded, on the same facts;
and (iii) any judgment rendered in one action will amount to res judicata in the other action.50

In Spouses Reyes v. Spouses Chung,51 We explained the test to determine whether a party violated
the rule against forum shopping, to wit:

It has been jurisprudentially established that forum shopping exists when a party avails himself of
several judicial remedies in different courts, simultaneously or successively, all substantially founded
on the same transactions and the same essential facts and circumstances, and all raising substantially
the same issues either pending in or already resolved adversely by some other courts.

The test to determine whether a party violated the rule against forum shopping is whether the
elements of litis pendentia are present, or whether a final judgment in. one case will amount
to res judicata in another. Simply put, when litis pendentia or res judicata does not exist, neither can
forum shopping exist.

The requisites of litis pendentia are: (a) the identity of parties, or at least such as representing the
same interests in both actions; (b) the identity of rights asserted and relief prayed for, the relief
being founded on the same facts; and (c) the identity of the two cases such that judgment in
one, regardless of which party is successful, would amount to res judicata in the other. On the
other hand, the elements of res judicata, also known as bar by prior judgment, are: (a) the former
judgment must be final; (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.52 (Emphasis supplied)

SVHFI was not guilty of forum

shopping.

In the instant case, We find that the second and third elements of forum shopping and litis
pendentia are lacking. Thus, We are of the firm view that there is no identity of rights asserted and
reliefs prayed for between a suit for collection of sura of money and an unlawful detainer case, and
that any judgment rendered in one of these actions would not amount to res judicata in the other
action.

Firstly, there is no identity of rights asserted and reliefs prayed for between both actions.

The only issue that must be settled in an ejectment proceeding is physical possession of the property
involved.53 Thus, in actions for unlawful detainer, a complaint sufficiently alleges said cause of action
if it states the following elements, to wit: (1) initially, the possession of the property by the defendant
was by contract with or by tolerance of the plaintiff; (2) eventually, such possession became illegal
upon notice by the plaintiff to the defendant of the termination of the latter's right of possession; (3)
thereafter, the defendant remained in possession of the property and deprived the plaintiff of its
enjoyment; and (4) within one year from the making of the last demand to vacate the property, the
plaintiff instituted the complaint for ejectment.54

On one hand, the purpose of the Collection Case was to compel MII to pay its rent in view of its
occupancy on the subject lot from the time of SVHI's initial demand to vacate the subject lot. Thus,
in Pro-Guard Security Services Corp. v. Tormil Realty and Development Corp.,55 this Court pointed
out that the party adjudged to be the lawful possessor in an ejectment suit is entitled to compensation,
reckoned from the time he demanded the adverse party to vacate the disputed property.

On the other hand, in the Ejectment Case, SVHFI's cause of action stemmed from the prejudice it
suffered due to the loss of possession of its property. Nonetheless, its claims in the Collection Case
do not have a direct relation to its loss of material possession of the subject lot.56 Thus, We
emphasized Our pronouncement in Araos v. Court of Appeals,57 which We likewise reiterated
in Lajave Agricultural Management and Development Enterprises, Inc. v. Spouses
Javellana58 (Lajave) to wit:

The rule is settled that in forcible entry or unlawful detainer cases, the only damage that can be
recovered is the fair rental value or the reasonable compensation for the use and occupation of the
leased property. The reason for this is that in such cases, the only issue raised in ejectment cases is
that of rightful possession; hence, the damages which could be recovered are those which the plaintiff
could have sustained as a mere possessor, or those caused by the loss of the use and occupation of
the property, and not the damages which he may have suffered but which have no direct relation to
his loss of material possession.

Secondly, any judgment rendered in ejectment cases of forcible entry or unlawful detainer will not
amount to res judicata in a civil case of collection of sum of money for unpaid rent of the same property
and vice versa.

Settled is the rule that the only issue raised in ejectment cases is that of physical possession of the
property.59 Thus, in forcible entry or unlawful detainer cases, the only damage that can be recovered
is the fair rental value or the reasonable compensation for the use and occupation of the leased
property.60 Hence, the damages which could be recovered are those which the plaintiff could have
sustained as a mere possessor, or those caused by the loss of the use and occupation of the property.
On the other hand, in a civil suit for collection of sum of money, what is sought to be recovered is the
payment of rentals only without regard to the unlawfulness of the occupancy.61

Our pronouncement in Lajave, is instructive, to wit:

[D]id Agustin commit violation of the rules on forum shopping, on splitting of a single cause
of action, and on litis pendentia when he filed the complaint for collection of sum of money
during the pendency of the unlawful detainer cases?

We answer in the negative.

xxxx

In the instant case, a perusal of the records shows that the second and third requirements [of litis
pendentia] are lacking. While the complaints appear to involve the same parties and properties, we
find, however, no identity of causes of action. In the unlawful detainer cases filed by Agustin, in view
of Lajave's failure to vacate the subject properties and nonpayment of rentals, his cause of action
stemmed from the prejudice he suffered due to the loss of possession of his properties and the
damages incurred after the dispossession.

Meanwhile, in the complaint for collection of sum of money, the same was founded upon
alleged violation of Lajave, as lessee, of certain stipulations with regard to payment of the
lease, i.e., whether Lajave correctly paid the rental fees for the subject period as stipulated in the lease
agreement.

It must be emphasized anew that in forcible entry or unlawful detainer cases, the only damage
that can be recovered is the fair rental value or the reasonable compensation for the use and
occupation of the leased property. The reason for this is that in such cases, the only issue raised
in ejectment cases is that of rightful possession; hence, the damages which could be recovered are
those which the plaintiff could have sustained as a mere possessor, or those caused by the loss of the
use and occupation of the property, and not the damages which he may have suffered but which have
no direct relation to his loss of material possession.62 (Emphasis supplied; underscoring on the
original).

We are not unaware of Our ruling in Intramuros. In said case, petitioner instituted an ejectment case
against the respondent in the Metropolitan Trial Court (MeTC) while respondent filed a case for specific
performance against petitioner in the Regional Trial Court (RTC). In the specific performance case,
respondent prayed that petitioner be compelled to offset respondent's unpaid rentals. In addition, an
interpleader case was filed against them in the RTC wherein the complainant prayed that the RTC
determine which between the parties was the rightful lessor of the subject property in view of the
respondent's threats to evict the tenants therein.

Thus, We held that "any recovery made by petitioner of unpaid rentals in either its ejectment case or
in the specific performance case must bar recovery in the other, pursuant to the principle of unjust
enrichment."63 Our foregoing pronouncement is in fact consistent with Our ruling in the instant case.
In the Ejectment Case, the sole issue was the restoration to the rightful possessor of the subject lot
who was deprived of the same. The rightful possessor would then be entitled to the fair rental value
for the use and occupation of the property.

On the other hand, in the Collection Case, what is sought to be recovered is the payment of rentals,
without regard to the legality of MII's occupancy or damages which SVHFI allegedly suffered but which
have no direct relation to its loss of material possession. Both issues may be decided by the courts
wherein they are pending. However, any amount that the victor may have recovered in the ejectment
suit due to the damage caused by the loss of the use and occupation of the property, may no longer
be recovered in the Collection Case on the ground of unjust enrichment.

We further note that in Intramuros, this Court resolved the issue of possession, without further
remanding the case to the MeTC which would cause undue delay. Thus, the issue of the rightful
possession was settled even if the issue of unpaid rentals was still pending before the RTC in the
complaint for specific performance.64 This further strengthens our view that an institution of an
ejectment suit does not constitute as forum shopping even if the issue of unpaid rentals between the
same parties and of the same property is pending before another court.

An action for collection, of sum of

money may not tie joined with an
ejectment suit, otherwise a
misjoinder of causes of actios
would ensue.

Section 5, Rule 2 of the Rules of Court prohibits the joinder of an ordinary action, such as an action
for collection of sum of money and a special civil action, such as an ejectment suit. Said provision
reads:

Section 5. Joinder of causes of action. — A party may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may have against an opposing party, subject to the
following conditions:

(a) The party joining the causes of action shall comply with the rules on joinder of parties;

(b) The joinder shall not include special civil actions or actions governed by special rules;

(c) Where the causes of action are between the same parties but pertain to different venues or
jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of
action falls within the jurisdiction, of said court and the venue lies therein; and
(d) Where the claims in all the causes of action are principally for recovery of money, the aggregate
amount claimed shall be the test of jurisdiction. (Emphasis supplied.)

Thus, in Lajave, We pointed out that "an action, for collection of sum of money may not be properly
joined with the action for ejectment. The former is an ordinary civil action requiring a full-blown trial,
while an action for unlawful detainer is a special civil action which requires a summary procedure."

Thus, We explained, to wit:

[I]nsofar as the complaint for collection of sum of money is concerned, it is not a simple case of
recovering the unpaid balance of rentals. It must be pointed out that there are several factors to
consider if and when the collection of sum of money will prosper, i.e., the determination if indeed
recovery of the alleged balance is proper, the correct amount of rental to be paid or recovered, the
intention and/or agreement of the parties as to the terms of payment of rental in order to arrive at a
correct amount, among others. Indeed, as correctly observed by the appellate court, the resolution of
whether Lajave paid the correct rental fees and if there is a deficiency in the payment of rentals
requires a full-blowsn trial through the submission of documentary and testimonial evidence
by the parties which cannot be passed upon in a summary proceeding.65 (Emphasis supplied).

In the instant case, the Collection Case requires a full-blown trial for the parties to show evidence on
the propriety of paying rent and its rightful amount. These may not be accomplished in an ejectment
proceeding which is summary in nature.

Therefore, this Court finds SVHFI not guilty of forum shopping when it filed the Ejectment Case
subsequent to the Collection Case, while the latter is still pending. In both cases, there is no identity
of rights asserted and reliefs prayed for, and that any judgement on any of these cases would not
amount to res judicata on the other.

In the Ejectment Case, the cause of action stemmed from the prejudice that SVHFI allegedly suffered
due to the loss of possession of the subject lot. On the other hand, the Collection Case was founded
on the appropriate amount of rental fees that are allegedly due and the damages that SVHFI allegedly
suffered but which have no direct relation to its loss of material, possession.

WHEREFORE, petitioner Santos Ventura Hocorma Foundation Inc.'s Petition for Review
on Certiorari is GRANTED. The Court of Appeals' August 30, 2013 Decision and February 26, 2014
Resolution in CA-G.R, CV No. 93376 are hereby REVERSED AND SET ASIDE. The instant case
is REMANDED to the Regional Trial Court of Makati City, Branch 150 which is DIRECTED to continue
its proceedings.

SO ORDERED.

RULE 3

SECOND DIVISION

November 8, 2017

G.R. No. 219408

DONALD FRANCIS GAFFNEY, Petitioner

vs.
GINA V. BUTLER, Respondent

DECISION

CAGUIOA, J.:

Before the Court is a Petition for Review1 on Certiorari (Petition) under Rule 45 of the Rules of Court
(Rules) filed by petitioner Donald Francis Gaffney (Donald) against respondent Gina V. Butler (Gina),
assailing the Decision2 dated February 6, 2015 (questioned Decision) and Resolution3 dated July 14,
2015, both of the Court of Appeals (CA) Special Twelfth (12th) Division, in CA-G.R. SP No. 133762.

The CA reversed and set aside the Orders (RTC Orders) dated August 15, 2013 4 and November 25,
20135 (denying the corresponding Motion for Reconsideration) of the Regional Trial Court (RTC) of
Pasig City, Branch 70, in Civil Case No. 73187. Said RTC Orders dismissed Gina's Motion to Dismiss
Ad-Cautelam (Motion to Dismiss) and Donald's Motion to Declare Defendant in Default (Motion to
Declare in Default) as well as the Motion for Reconsideration against the denial of the Motion to
Dismiss subsequently filed by Gina.

The Facts

The facts, as found by the CA, are as follows:

On September 21, 2011, Donald Francis Gaffney ("private respondent") filed a Complaint against Gina
V. Butler ("petitioner") for sum of money. Private respondent alleged that sometime between the years
2006 to 2007, petitioner and her husband Anthony Richard Butler approached and invited private
respondent to invest in ActiveFun Corporation ("ActiveFun"), an entity engaged in the construction,
operation and management of children's play and party facilities. Petitioner was the President of
ActiveFun while her husband was its Treasurer and Chief Executive Officer.

Private respondent advanced the approximate amount of PhP12,500,000.00 representing his initial
investment in ActiveFun. However, petitioner's husband passed away sometime in December 2009.
Consequently, the proposed investment agreement did not materialize. Private respondent then
demanded the return of his investments from petitioner, who personally undertook to repay the total
amount of his investments plus accrued interest. However, despite the lapse of a considerable period
of time, petitioner was only able to pay private respondent on October 15, 2010 an initial amount of
PhPl,000,000.00, receipt of which was duly acknowledged in writing by private respondent. Several
demands through phone calls and e-mails were made to petitioner for her to comply with her
undertaking to return the investments of private respondent but to no avail.

On July 13, 2011, a letter was sent to petitioner through registered mail demanding her to pay private
respondent and Richard McDonnell (another party who infused funds into ActiveFun) within ten (10)
days from receipt of the said letter the aggregate amount of PhP25,000,000.00 plus accrued interests.
The period allowed for petitioner within which to pay lapsed without her making any payment.
Petitioner in a letter dated August 2, 2011, denied having knowledge of the investments and having
offered to buy private respondent's share in ActiveFun. Private respondent was thus constrained to
institute a legal action for the enforcement of his claim against petitioner.

In her Answer filed on April 23, 2012, petitioner averred, among others, that she had no knowledge of
private respondent's investment in ActiveFun. She, however[,] admitted that she paid private
respondent the amount of PhPl,000,000.00 with the qualification that the same was an undue
payment, having been misled and intimidated by the latter into believing that she has an obligation to
return said investment, when no such obligation exists under the law or under a contract. Moreover,
petitioner denied the signature in the Acknowledgment Receipt as hers and claimed that it is a forgery.

After the issues have been joined and Pre-trial was scheduled, parties were directed to have all their
documentary evidence pre-marked. Among those pre-marked by petitioner is a handwritten note
signed by private respondent acknowledging receipt of Phpl,000[,]000.00 from petitioner. Unlike the
Acknowledgement Receipt attached to the Complaint stating that PhPl,000,000.00 was partial
payment for monies invested in ActiveFun, the handwritten note states that the partial payment was
for money owed by petitioner's husband.

Because no full relief can be had against the Estate/heirs of Anthony Richard Butler under the original
Complaint, private respondent filed a Motion for Leave to Admit Amended Complaint for the purpose
of impleading the estate or the heirs6 of the late Anthony Richard Butler [as additional party-
defendant],7 allegedly represented by petitioner as his surviving spouse. He alleged that petitioner
required him, as a pre-condition for the payment of the balance, to execute a separate handwritten
acknowledgment of the said payment. Petitioner opposed the motion primarily on the ground that "only
natural or juridical persons may be parties in an ordinary civil action."

In an Order dated February 13, 2013, public respondent granted private respondent's Motion and
admitted the Amended Complaint. Petitioner did not file a motion for reconsideration of the said order.
An Alias Summons was served upon petitioner purportedly as the representative of her late husband.

In the meantime, petitioner filed a Motion to Dismiss Ad-Cautelam, allegedly not as the defendant
originally named in the complaint but as the purported representative of her late husband, arguing that
the death of her husband did not ipso facto make her the representative of his estate. More
importantly, a claim against an estate of a deceased person is governed by Rule 86 of the Rules of
Court. Hence, it cannot be consolidated with an ordinary civil action in which only natural or juridical
persons may be parties pursuant to Section 1, Rule 3 of the Rules of Court. Consequently, the service
of summons intended for the estate of the late Anthony Richard Butler was improperly served.

Private respondent on the other hand, filed a Motion to Declare Defendant in Default for failure to file
an answer within the reglementary period. x x x8 (Emphasis supplied)
Ruling of the RTC

The RTC denied Gina's Motion to Dismiss and Donald's Motion to Declare in Default in the RTC
Order9 dated August 15, 2013, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, the movant's Motion to Dismiss Ad-Cautelam and plaintiff's
Motion to Declare Defendant in Default are hereby DENIED for lack of merit.

SO ORDERED.10

On the Motion to Dismiss, the RTC ruled that the inclusion of the estate of the late Anthony Richard
Butler (Anthony), represented by his surv1vmg spouse Gina, is necessary for a complete relief on the
determination or settlement of the controversy raised in the case.11 On the Motion to Declare in
Default, the RTC observed that Gina filed an Answer to the Amended Complaint on March 12, 2013;
hence, there is no reason to declare her in default.12

Gina filed a Motion for Reconsideration Ad Cautelam to the denial of her Motion to Dismiss, which the
RTC denied for lack of merit in its Order13 dated November 25, 2013. No motion for reconsideration
was filed as against the denial of the Motion to Declare in Default.

Proceedings in, and Ruling of, the CA

Gina thereafter sought relief with the CA through a Petition for Certiorari14 under Rule 65 (CA Petition),
seeking to nullify the RTC Orders, imputing grave abuse of discretion on the RTC for allowing the
estate of Anthony to be named a defendant in the present case and for considering Gina as legal
representative of said estate when, in fact, no settlement proceedings thereon had yet been brought.15

Gina prayed that the RTC Orders be reversed and set aside for having been issued with grave abuse
of discretion; and Civil Case No. 73187, insofar as it relates to the estate of Anthony, be dismissed.16

The CA, in the questioned Decision dated February 6, 2015, granted Gina's CA Petition, reversed and
set aside the RTC Orders and dismissed the entire complaint, in the following manner:

WHEREFORE, premises considered, the petition is GRANTED. The Orders dated August 15, 2012
and November 25, 2013 of the Regional Trial Court of Pasig City, Branch 70 in Civil Case No. 73187
are hereby SET ASIDE. Accordingly, the complaint for sum of money in Civil Case No. 73187 is hereby
ordered DISMISSED.

SO ORDERED.17

The CA ruled that dismissal of the case against Anthony's estate is warranted under Section 1, Rule
3 of the Rules of Court which states that "only natural or juridical persons, or entities authorized by law
may be parties in a civil action."18 The CA likewise ruled that the genuineness and authenticity of the
handwritten receipt stating that the advanced amount of ₱l,000,000.00 is part payment of money owed
by Anthony is undisputed.19 This suggests that Anthony is the one owing the money and is an
indispensable party to the case.20 Finally, the CA ruled that there is no legal basis to consider Gina as
representative of Anthony's estate since the estate has no legal personality.21

Donald filed a Motion for Reconsideration of the questioned Decision, which the CA dismissed for
failing to raise any new substantial arguments, in its Resolution22 dated July 14, 2015.

Hence, the present Petition filed by Donald, with the following prayer:

1. The questioned Decision and Resolution of the CA be set aside and the RTC Orders, denying
Gina's Motion to Dismiss be reinstated and affirmed in toto.

2. In the alternative, in the event that the estate of Anthony as represented by Gina, could not be
named as additional defendant in the present case, the questioned Decision be reconsidered partially
such that the case be dismissed only as against the estate of Anthony and that it be remanded to the
R TC for further proceedings against Gina as the sole principal defendant.23

Issues

Whether or not the CA committed reversible error when it:

1. set aside the RTC's ruling that the estate or heirs of Anthony, represented by his surviving spouse
Gina, could be named as additional defendant in the present case.
2. dismissed the entire complaint when dismissal of the same was not raised as an issue nor prayed
for in the petition before it.24

The Court's Ruling

The Petition is partly meritorious.

The deceased or his estate may not

be named a defendant in the present

case.

A deceased person does not have the capacity to be sued and may not be made a defendant in a
case.25 Section 1, Rule 3 of the Revised Rules of Court unequivocally states that "[o]nly natural or
juridical persons, or entities authorized by law may be parties in a civil action."

Applying this legal provision, the Court, in Ventura v. Militante,26 declared that neither a deceased
person nor his estate has capacity to be sued, explaining thus:

Parties may be either plaintiffs or defendants. The plaintiff in an action is the party complaining, and a
proper party plaintiff is essential to confer jurisdiction on the court. In order to maintain an action in a
court of justice, the plaintiff must have an actual legal existence, that is, he, she or it must be a person
in law and possessed of a legal entity as either a natural or an artificial person, and no suit can be
lawfully prosecuted save in the name of such a person.

The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he institutes
a judicial proceeding, to name the proper party defendant to his cause of action. 19 In a suit or
proceeding in personam of an adversary character, the court can acquire no jurisdiction for the
purpose of trial or judgment until a party defendant who actually or legally exists and is legally capable
of being sued, is brought before it. It has even been held that the question of the legal personality of
a party defendant is a question of substance going to the jurisdiction of the court and not one of
procedure.

xxxx

Neither a dead person nor his estate may be a party plaintiff in a court action. A deceased person
does not have such legal entity as is necessary to bring action so much so that a motion to substitute
cannot lie and should be denied by the court. An action begun by a decedent's estate cannot be said
to have been begun by a legal person, since an estate is not a legal entity; such an action is a nullity
and a motion to amend the party plaintiff will not likewise lie, there being nothing before the court to
amend. Considering that capacity to be sued is a correlative of the capacity to sue, to the same extent,
a decedent does not have the capacity to be sued and may not be named a party defendant in a court
action.27 (Emphasis supplied; citations omitted)

Hence, there can be no doubt that a deceased person or his estate may not be impleaded as defendant
in a civil action as they lack legal personality. Thus, when Anthony died, his legal personality ceased
and he could no longer be impleaded as respondent in the present ordinary civil suit for collection.28 As
such, the complaint against him should be dismissed on the ground that the pleading asserting the
claim states no cause of action or for failure to state a cause of action pursuant to Section 1 (g), Rule
16 of the Rules of Court, because a complaint cannot possibly state a cause of action against one
who cannot be a party to a civil action.29

Moreover, the RTC did not acquire jurisdiction over the person or estate of Anthony. Summons is a
writ by which the defendant is notified of the action brought against him and service thereof is the
means by which the court acquires jurisdiction over his person.30 In the present case, no valid service
of summons upon the deceased Anthony was or could have been made, precisely because he was
already dead even before the complaint against him and his wife was filed in court. In several
occasions, the Court has held that the trial court fails to acquire jurisdiction over a defendant who was
already dead at the time the complaint was filed against him.31

In Ventura, the factual milieu of which is similar to the present case, the original complaint named the
"estate of Carlos Ngo as represented by surviving spouse Ms. Sulpicia Ventura." The Court held that
as the deceased was dead at the time the complaint was filed and no special proceeding to settle his
estate had been filed in court, the trial court did not acquire jurisdiction over either the deceased or his
estate.32 In the case at bench, the Alias Summons served upon Gina purportedly as the representative
of her late husband33 was thus invalid.
In sum, impleading the deceased Anthony or his estate in the present petition was improper. The
action against him must be dismissed and the same may just be filed as a claim against his estate in
a proper proceeding.34 The CA thus did not err in reversing the trial court.

The CA cannot validly dismiss the

complaint against Gina in the instant
action.

Petitioner alleges that the dismissal of the entire case by the CA has no basis in fact or in law because
the same was not raised as an issue or prayed for in both the Motion to Dismiss in the trial court and
in the CA Petition.

The Court agrees.

The present action sprung when the original complaint was amended by Donald to implead the estate
of Anthony as additional defendant. Thereafter, the Motion to Dismiss was filed by Gina, with the sole
1âw phi 1

prayer that the Amended Complaint, "insofar as the claim against the Estate of the Late Anthony Butler
is concerned," be dismissed.35

When the aforementioned motion was denied, Gina's CA Petition, from which the questioned Decision
issued, raised only the following issues:

WHETHER OR NOT AN ESTATE OF A DECEASED PERSON IS A JURIDICAL ENTITY THAT

COULD BE NAMED DEFENDANT IN AN ORDINARY CIVIL ACTION;

WHETHER OR NOT A SURVIVING SPOUSE IS IPSO FACTO THE LEGAL REPRESENTATIVE OF

THE ESTATE OF THE DECEASED SPOUSE36

By way of relief, the petition prayed only that the RTC Orders be set aside and the case be dismissed
"insofar as it relates to the Estate of Anthony Richard Butler."37

It is settled that courts cannot grant a relief not prayed for in the pleadings or in excess of what is being
sought by the party.38 Due process considerations justify this requirement.39 It is improper to enter an
order which exceeds the scope of relief sought by the pleadings, absent notice which affords the
opposing party an opportunity to be heard with respect to the proposed relief.40

In the present case, clearly, no issue on, or prayer for, the dismissal of the entire case was made in
the Motion to Dismiss before the RTC and the corresponding CA Petition. The sole issue presented
was, and is, confined to the propriety of the complaint being maintained as against Anthony (or his
estate) who was impleaded as an additional defendant by virtue of the Amended Complaint.

The CA regarded the estate of Anthony as an indispensable party41 on the basis of the handwritten
receipt, executed by Donald, of the ₱l,000,000.00 amount from Gina "as part payment of the money
owed by the late Anthony Richard Butler to Don Gaffney."42 The CA ruled that the note's genuineness
and authenticity were undisputed;43 hence, Anthony's estate was ultimately answerable for Donald's
claims.44

These findings of the CA lack basis. It is clear from the pleadings that Donald actually disputes the
genuineness of the handwritten receipt insofar as the same shows the debt to be that of Anthony's.
Donald claims that he was merely forced to execute said handwritten receipt as it was made a pre-
condition for payment by Gina.45 In fact, Donald submitted in evidence46 another acknowledgment
receipt47 which allegedly reflects his due acknowledgment of the initial payment.48 To be sure, it would
be illogical for Donald to admit the genuineness of the handwritten receipt precisely because his main
contention is that Gina personally undertook to pay the entire debt,49 explaining why he named her as
the principal party-defendant herein.50 He only imp leaded the estate of Anthony to obtain a complete
relief should the same be necessary.51

Moreover, courts cannot grant a relief without first ascertaining the evidence presented in support
thereof. Due process considerations require that judgments must conform to and be supported by the
pleadings.52 The issue of the authenticity of the handwritten receipts, and ultimately, which party is
liable for the debt, was never brought up to the CA - as indeed, these are the very issues that the trial
court is meant to address and resolve. Determination of the same requires an examination of the
evidence of the parties in a full-blown trial on the merits. Dismissal of the entire complaint, including
the action against the main defendant Gina, is thus utterly premature and erroneous.

All told, the complaint against the estate of Anthony, which was impleaded as co-defendant, should
be dismissed. Any cause of action arising from the herein alleged debt against the estate of Anthony
may be brought as a claim against said estate in the proper settlement proceedings. However, the
complaint against the original defendant Gina should remain with the RTC for trial on the merits.
WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY
GRANTED. The Decision dated February 6, 2015 and the Resolution dated July 14, 2015 of the Court
of Appeals in CA-G.R. SP No. 133762 are AFFIRMED with MODIFICATION such that the Amended
Complaint is REINSTATED insofar as Gina V. Butler is concerned.

The RTC is hereby ordered to proceed, expeditiously and without delay, in resolving Civil Case No.
73187 against Gina V. Butler.

SO ORDERED.

SECOND DIVISION

G.R. No. 157447. April 29, 2005

NEMENCIO C. EVANGELISTA, PASCUAL G. QUINTO, LUIS B. BUENA, EUSEBIA V. TABLADA,

CANUTO G. TISBE, DAVID R. CARULLO, SOFONIAS E. COLEGADO, FELIX B. BUENA,
TORIBIO C. EVANGELISTA, LEBRADA A. NICOLAS, ALECIA J. RAMOS, MILA G. DE LOS
REYES, SALVADOR I. DE LA TORRE, MOISES CRUZ, RUFINO INFANTE, ALICIA
ASTROLOGO, TRINIDAD LUMIQUED, LUZMINIDA QUINIQUINI, & TEODORA C.
TEMERAS, Petitioners,
vs.
CARMELINO M. SANTIAGO, Respondents.

DECISION

CHICO-NAZARIO, J.:

In this Petition for Review under Rule 45 of the Rules of Court, petitioners pray for the reversal of the
Decision of the Court of Appeals in CA-G.R. CV No. 64957,1 affirming the Order of the Regional Trial
Court (RTC) of San Mateo, Rizal, Branch 77, in Civil Case No. 1220,2 dismissing petitioners’ Complaint
for declaration of nullity of Original Certificate of Title (OCT) No. 670 and all other titles emanating
therefrom.

In their Complaint, petitioners alleged that they occupied and possessed parcels of land, located in
Sitio Panayawan, Barangay San Rafael, Montalban (now Rodriquez), Province of Rizal (Subject
Property), by virtue of several Deeds of Assignment, dated 15 April 1994 and 02 June 1994, executed
by a certain Ismael Favila y Rodriguez.3

According to the Deeds of Assignment, the Subject Property was part of a vast tract of land called
"Hacienda Quibiga," which extended to Parañaque, Las Piñas, Muntinlupa, Cavite, Batangas, Pasay,
Taguig, Makati, Pasig, Mandaluyong, Quezon City, Caloocan, Bulacan, and Rizal; awarded to Don
Hermogenes Rodriguez by the Queen of Spain and evidenced by a Spanish title. Ismael Favila
claimed to be one of the heirs and successors-in-interest of Don Hermogenes Rodriguez. Acting as
Attorney-in-Fact pursuant to a Special Power of Attorney executed by his "mga kapatid" on 25
February 1965, Ismael Favila signed the aforementioned Deeds of Assignment, assigning portions of
the Subject Property to the petitioners, each portion measuring around 500 to 1,000 square meters,
in exchange for the labor and work done on the Subject Property by the petitioners and their
predecessors.4

Petitioners came by information that respondent was planning to evict them from the Subject Property.
Two of the petitioners had actually received notices to vacate. Their investigations revealed that the
Subject Property was included in Transfer Certificates of Titles (TCTs) No. 53028, No. 281660, No. N-
39258 and No. 205270, all originating from OCT No. 670, and now in the name of respondent.5

OCT No. 670 was issued in the name of respondent’s mother, Isabel Manahan y Francisco, and three
other individuals, pursuant to Decree No. 10248, dated 13 February 1913, in Case No. 8502 of the
Court of Land Registration of the Philippine Islands. The whole property covered by OCT No. 670 was
subsequently adjudicated in favor of Isabel Manahan Santiago (formerly Isabel Manahan y Francisco).
Consequently, OCT No. 670 was cancelled and TCT No. T-53028 was issued exclusively in the name
of Isabel Manahan Santiago. On 28 December 1968, Isabel Manahan Santiago executed a Deed of
Donation transferring the property to her son, respondent herein, who subsequently secured TCTs
No. 281660, No. N-39258 and No. 205270 in his own name.6

Petitioners filed with the trial court, on 29 April 1996, an action for declaration of nullity of respondent’s
certificates of title on the basis that OCT No. 670 was fake and spurious. Among the defects of OCT
No. 670 pointed out by petitioners were that: (1) OCT No. 670 was not signed by a duly authorized
officer; (2) Material data therein were merely handwritten and in different penmanships; (3) OCT No.
670 was not printed on the Official Form used in 1913, the year it was issued; (4) It failed to indicate
the Survey Plan which was the basis of the Technical Description of the property covered by the title;
(5) Decree No. 10248 referred to in OCT No. 670 was issued only on 11 April 1913, while OCT No.
670 was issued earlier, on 13 February 1913; and (6) Decree No. 10248 was issued over a property
other than the one described in OCT No. 670, although also located in the Province of Rizal.7

Respondent filed his Answer with Prayer for Preliminary Hearing on the Affirmative Defenses on 03
July 1996. According to respondent, "[t]he allegations in the Complaint would readily and patently
show that the same are flimsy, fabricated, malicious, without basis in law and in fact…"8

As an affirmative defense, respondent claimed that the petitioners had no legal capacity to file the
Complaint, and thus, the Complaint stated no cause of action. Since OCT No. 670 was genuine and
authentic on its face, then OCT No. 670 and all of respondent’s land titles derived therefrom, are
incontrovertible, indefeasible and conclusive against the petitioners and the whole world.9

Citing the consolidated cases of Director of Forestry, et al. v. Hon. Emmanuel M. Muñoz, et al. and
Pinagcamaligan Indo-Agro Development Corporation v. Hon. Macario Peralta, Jr., et al.,10 respondent
argued that the Spanish title, on which petitioners based their claim, was neither indefeasible nor
imprescriptible. Moreover, Presidential Decree (P.D.) No. 892, which took effect on 16 February 1976,
required all holders of Spanish titles or grants to apply for registration of their lands under Republic
Act No. 496, otherwise known as the Land Registration Act,11 within six months from effectivity of the
decree. After the given period, Spanish titles could no longer be used as evidence of land ownership
in any registration proceedings under the Torrens System. 12

Respondent also raised the affirmative defense of prescription. He pointed out that any action against
his certificates of title already prescribed, especially with regard to OCT No. 670, which was issued in
1913 or more than 83 years prior to the filing of the Complaint by the petitioners. At the very least,
respondent contended, "it must be presumed that the questioned land titles were issued by the public
officials concerned in the performance of their regular duties and functions pursuant to the law."13

Even assuming arguendo that the petitioners entered and occupied the Subject Property, they did so
as mere intruders, squatters and illegal occupants, bereft of any right or interest, since the Subject
Property was already covered by Torrens certificates of title in the name of respondent and his
predecessors-in-interest.14

Lastly, respondent denied knowing the petitioners, much less, threatening to evict them. In fact,
petitioners were not included as defendants in Civil Case No. 783 entitled, "Carmelino M. Santiago v.
Remigio San Pascual, et al.," which respondent instituted before the same trial court against squatters
occupying the Subject Property. In its decision, dated 01 July 1992, the trial court held that "there is
no doubt that the plaintiff (respondent herein) is the owner of the land involved in this case on which
the defendants have built their houses and shanties…" Although the decision in Civil Case No. 783
was appealed to the Court of Appeals, it had become final and executory for failure of the defendants-
appellants therein to file their appellants’ brief.15

In the instant case, the trial court held a preliminary hearing on the affirmative defenses as prayed for
by the respondent. During said hearing, petitioners presented their lone witness, Engineer Placido
Naval, a supposed expert on land registration laws. In response to questions from Honorable Judge
Francisco C. Rodriguez of the trial court, Engineer Naval answered that a parcel of land titled illegally
would revert to the State if the Torrens title was cancelled, and that it was the State, through the Office
of the Solicitor General, that should file for the annulment or cancellation of the title. Respondent, on
the other hand, did not present any evidence but relied on all the pleadings and documents he had so
far submitted to the trial court.16

After the preliminary hearing, the trial court issued the questioned Order, dated 05 February 1999,
dismissing petitioners’ Complaint. Pertinent portions of the Order of the trial court read:

After considering the testimonial and documentary evidence presented, this Court is inclined not to
grant plaintiffs (sic) prayer. Finding credence and giving weight to plaintiffs (sic) lone but "expert
witness", it is crystal clear that, to quote:

1. "a parcel of land titled illegally will revert to the State

2. it is the State who must file the corresponding case of annulment of title through the Office of the
Solicitor General, and

3. a land illegally titled in the name of private individual, the State through the Office of the Solicitor
General should file the corresponding case for cancellation of title." (TSN August 26, 1997).

The above quoted testimony is straight from horse (sic) mouth so to speak as this was the testimony
of the plaintiffs (sic) expert witness. And judging from the said testimony alone aforecited, plaintiffs
(sic) cause [of action] is bound to fail. "Plaintiffs (sic) own testimony" wrote "finis" to their case. From
the record, this case was initiated and filed by private individuals, Nemencio Evangelista, et. al.,
contradicting their witness (sic) testimony. To reiterate, this Court finds credence to the testimony of
the plaintiffs (sic) witness, i.e., is (sic) the State through the Office of the Solicitor General who must
initiate and file a case of this nature when title to a land is being claimed to be obtained through fraud
and allegedly spurious.

The opinion of this Court anent the testimony of the witness is not without basis. Explicit is the
pronouncement of the Supreme Court in the recent case of Heirs of Marciano Nagano v. Court of
Appeals, to wit:

An action for reversion has to be instituted by the Solicitor General pursuant to Section 101,
Commonwealth Act No. 141. (282 SCRA 43).

As to the documentary evidence, having gone through with the "Deed of Assignment/s" purportedly
executed by and between a certain Ismael Favila y Rodriguez and the plaintiffs, which is the principal
if not the only basis of plaintiffs claim ownership and possession of the subject parcel of land, the same
does not hold water in a manner of speaking, for being self-serving. "Assignor Ismael Favila y
Rodriguez" claimed in said Deed that he is the Attorney-in-Fact by virtue of an alleged Special Power
of Attorney executed in his favor by his "mga kapatid" on February 23, 1965, but said Special Power
of Attorney was not presented before this Court, thus there arises a doubt as to its existence and
execution not to mention doubt on the existence of his "mga kapatid" who as alleged executed said
Special Power Attorney (sic) in his favor.

Even if this Court granting arguendo would admit the authenticity of said "Deeds of Assignment/s",
that will not alter the outcome of the pending incident/s before this Court. Why? Because the said
"Deed of Assignment/s" which were based on Spanish title have lost their evidentiary value pursuant
to the Presidential Decree No. 892 i.e. "DISCONTINUANCE OF THE SPANISH MORTGAGE
SYSTEM OF REGISTRATION AND OF THE USE OF SPANISH TITLES AS EVIDENCE IN LAND
REGISTRATION PROCEEDINGS."

There is no need to elaborate on the above-cited provisions of PD 892 as they are self-explanatory.
Suffice it to say that there is no showing, that plaintiffs complied with the said law i.e. to "apply for
registration of their lands under Act No. 496, otherwise known as the Land Registration Act, within six
(6) months from the effectivity of this decree (February 16, 1976). Thereafter, Spanish titles cannot be
used as evidence of land ownership in any registration proceedings under the Torrens System."

This being the case and likewise being clear that plaintiffs were not the lawful owners of the land
subject of this case, for they did not comply with PD 892, the said plaintiffs do not have the legal
standing to bring before this Court the instant complaint…

Moreover, the principal issue in this case is for the declaration of nullity of defendant’s title, which has
nothing to do with plaintiffs (sic) claim of ownership and possession even if we set aside, albeit
momentarily, the truth that plaintiffs (sic) claim were based on barred Spanish Title/s, and thus plaintiffs
were never the owners of the parcel of land subject of this case.

Further, defendants (sic) title especially so with the mother title OCT 670 was entered and issued in
1913 or more than Eighty Three (83) years ago, the same not having been questioned by any party.
Only now that it is being questioned, but sad to say, plaintiffs who are on the offensive and relying on
their lone expert witness, instead of bolstering their case, unwittingly sealed their fate… 17

After the trial court denied petitioners’ Motion for Reconsideration in its Order, dated 20 July
1999,18 petitioners appealed both Orders of the trial court to the Court of Appeals.

The Court of Appeals, in its Decision, dated 29 July 2002,19 affirmed the Order of the trial court, dated
05 February 1999, dismissing petitioners’ Complaint. The Court of Appeals denied petitioners’ Motion
for Reconsideration in its Resolution, dated 14 February 2003.20

Thus, petitioners filed this Petition for Review 21 under Rule 45 of the Rules of Court, raising the
following issues and praying for the reversal of the aforementioned Decision of the Court of Appeals
affirming the Order of dismissal of the trial court:

I. Whether the lower court’s dismissal of the petitioners’ complaint should be proscribed by the rules
of evidence it being based inter alia on Engr. Naval’s testimony, which was indisputably not based on
facts but conclusion of law.

II. Whether the lower court’s dismissal of petitioners’ complaint should be proscribed by the rules of
evidence it being done sans ample evidence except bare allegations of respondent.
III. Whether the provision of P.D. 892, i.e., Spanish titles cannot be used as evidence of land ownership
in any registration proceedings under the Torrens system, holds of an exception.

IV. Whether an action for quieting of title, specifically where petitioners are in possession of subject
land, can be subject of prescription.

In his Comment,22 the respondent, for the most part, reiterated the findings of the trial court and the
Court of Appeals.

The Court believes that the trial court rightfully dismissed petitioners’ Complaint, but for reasons
different from those relied upon by the trial court and the Court of Appeals.

According to the respondent, petitioners had no legal capacity to file the Complaint, and thus, the
Complaint filed before the trial court stated no cause of action.

Before anything else, it should be clarified that "the plaintiff has no legal capacity to sue" 23 and "the
pleading asserting the claim states no cause of action"24 are two different grounds for a motion to
dismiss or are two different affirmative defenses. Failure to distinguish between "the lack of legal
capacity to sue" from "the lack of personality to sue" is a fairly common mistake. The difference
between the two is explained by this Court in Columbia Pictures, Inc. v. Court of Appeals:25

Among the grounds for a motion to dismiss under the Rules of Court are lack of legal capacity to sue
and that the complaint states no cause of action. Lack of legal capacity to sue means that the plaintiff
is not in the exercise of his civil rights, or does not have the necessary qualification to appear in the
case, or does not have the character or representation he claims. On the other hand, a case is
dismissible for lack of personality to sue upon proof that the plaintiff is not the real party-in-interest,
hence grounded on failure to state a cause of action. The term "lack of capacity to sue" should not be
confused with the term "lack of personality to sue." While the former refers to a plaintiff’s general
disability to sue, such as on account of minority, insanity, incompetence, lack of juridical personality
or any other general disqualifications of a party, the latter refers to the fact that the plaintiff is not the
real party- in-interest. Correspondingly, the first can be a ground for a motion to dismiss based on the
ground of lack of legal capacity to sue; whereas the second can be used as a ground for a motion to
dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of action.

In the present case, this Court may assume that the respondent is raising the affirmative defense that
the Complaint filed by the petitioners before the trial court stated no cause of action because the
petitioners lacked the personality to sue, not being the real party-in-interest. It is the respondent’s
contention that only the State can file an action for annulment of his certificates of title, since such an
action will result in the reversion of the ownership of the Subject Property to the State.

The affirmative defense that the Complaint stated no cause of action, similar to a motion to dismiss
based on the same ground, requires a hypothetical admission of the facts alleged in the Complaint.
In the case of Garcon v. Redemptorist Fathers,26 this Court laid down the rules as far as this ground for
dismissal of an action or affirmative defense is concerned:

It is already well-settled by now that, in a motion to dismiss a complaint based on lack of cause of
action, the question submitted to the court for determination is the sufficiency of the allegations of fact
made in the complaint to constitute a cause of action, and not on whether these allegations of fact are
true, for said motion must hypothetically admit the truth of the facts alleged in the complaint; that the
test of the sufficiency of the facts alleged in the complaint is whether or not, admitting the facts alleged,
the court could render a valid judgment upon the same in accordance with the prayer of said complaint.
Stated otherwise, the insufficiency of the cause of action must appear in the face of the complaint in
order to sustain a dismissal on this ground, for in the determination of whether or not a complaint
states a cause of action, only the facts alleged therein and no other matter may be considered, and
the court may not inquire into the truth of the allegations, and find them to be false before a hearing is
had on the merits of the case; and it is improper to inject in the allegations of the complaint facts not
alleged or proved, and use these as basis for said motion.

In resolving whether or not the Complaint in the present case stated a cause of action, the trial court
should have limited itself to examining the sufficiency of the allegations in the Complaint. It was
proscribed from inquiring into the truth of the allegations in the Complaint or the authenticity of any of
the documents referred or attached to the Complaint, since these are deemed hypothetically admitted
by the respondent. The trial court evidently erred in making findings as to the authenticity of the Deeds
of Assignment executed by Ismael Favila in favor of petitioners on 15 April 1994 and 02 June 1994;
and questioning the existence and execution of the Special Power of Attorney in favor of said Ismael
Favila by his siblings on 25 February 1965. These matters may only be resolved after a proper trial on
the merits.
Petitioners alleged in their Complaint, and respondent hypothetically admitted that: (1) Petitioners’
predecessors-in-interest, in the concept of owners, had been in actual, physical, open, continuous and
adverse possession of the Subject Property against the whole world since time immemorial; (2) The
Subject Property was part of the vast tract of land called "Hacienda Quibiga" awarded to Don
Hermogenes Rodriguez by the Queen of Spain by virtue of a Spanish title; (3) Ismael Favila, an heir
and successor-in-interest of Don Hermogenes Rodriguez, acting as Attorney-in-Fact pursuant to a
Special Power of Attorney executed by his "mga kapatid" on 25 February 1965, executed Deeds of
Assignment covering the Subject Property in favor of petitioners; (4) Petitioners still occupied and
possessed the Subject Property, on which their houses were erected, when they discovered that the
Subject Property was already covered by Torrens certificates of title in the name of respondent; and
(5) That petitioners filed the Complaint to prevent their eviction by the respondent. To determine
whether these allegations are sufficient to constitute a cause of action, it is important for this Court to
establish first the nature of petitioners’ action.

Indeed, petitioners’ Complaint filed before the trial court was captioned as an action for declaration of
nullity of respondent’s certificates of title. However, the caption of the pleading should not be the
governing factor, but rather the allegations therein should determine the nature of the action, because
even without the prayer for a specific remedy, the courts may nevertheless grant the proper relief as
may be warranted by the facts alleged in the Complaint and the evidence introduced.27

The trial court believed that petitioners’ action was ultimately one for reversion of the Subject Property
to the public domain. Based on the testimony of Engineer Naval and the case of Nagaño v. Court of
Appeals,28 it declared that the State, represented by the Office of the Solicitor General, is the party-in-
interest in an action for cancellation of a certificate of title illegally issued in the name of a private
individual, because the eventual effect of such cancellation is the reversion of the property to the State.

The Court disagrees in this pronouncement of the trial court, and calls for a far closer review of its
decision in Nagaño v. Court of Appeals,29 wherein the Court held that –

It is then clear from the allegations in the complaint that private respondents claim ownership of the
2,250 square meter portion for having possessed it in the concept of an owner, openly, peacefully,
publicly, continuously and adversely since 1920. This claim is an assertion that the lot is private land,
or that even assuming it was part of the public domain, private respondents had already acquired
imperfect title thereto under Section 48(b) of C.A. No. 141, otherwise known as the Public Land Act,
as amended by R.A. No. 1942…

Under Section 48, a subject lot is, for all legal intents and purposes, segregated from the public
domain, because the beneficiary is "conclusively presumed to have performed all the conditions
essential to a Government grant and shall be entitled to a certificate of title under the provisions of this
chapter."

Consequently, merely on the basis of the allegations in the complaint, the lot in question is apparently
beyond the jurisdiction of the Director of the Bureau of Lands and could not be the subject of a Free
Patent. Hence, dismissal of private respondents’ complaint was premature and trial on the merits
should have been conducted to thresh out evidentiary matters.

It would have been entirely different if the action were clearly for reversion, in which case, it would
have to be instituted by the Solicitor General pursuant to Section 101 of C.A. No. 141, which provides:

Sec. 101. All actions for the reversion to the Government of lands of the public domain or
improvements thereon shall be instituted by the Solicitor General or the officer acting in his stead, in
the proper courts, in the name of the [Republic] of the Philippines.

In the more recent case of Heirs of Ambrocio Kionisala v. Heirs of Honorio Dacut,30 the difference
between an action for declaration of nullity of land titles from an action for reversion was more
thoroughly discussed as follows:

An ordinary civil action for declaration of nullity of free patents and certificates of title is not the same
as an action for reversion. The difference between them lies in the allegations as to the character of
ownership of the realty whose title is sought to be nullified. In an action for reversion, the pertinent
allegations in the complaint would admit State ownership of the disputed land. Hence, in Gabila vs.
Barriga [41 SCRA 131], where the plaintiff in his complaint admits that he has no right to demand the
cancellation or amendment of the defendant’s title because even if the title were canceled or amended
the ownership of the land embraced therein or of the portion affected by the amendment would revert
to the public domain, we ruled that the action was for reversion and that the only person or entity
entitled to relief would be the Director of Lands.

On the other hand, a cause of action for declaration of nullity of free patent and certificate of title would
require allegations of the plaintiff’s ownership of the contested lot prior to the issuance of such free
patent and certificate of title as well as the defendant’s fraud or mistake, as the case may be, in
successfully obtaining these documents of title over the parcel of land claimed by plaintiff. In such a
case, the nullity arises strictly not from the fraud or deceit but from the fact that the land is beyond the
jurisdiction of the Bureau of Lands to bestow and whatever patent or certificate of title obtained
therefore is consequently void ab initio. The real party-in-interest is not the State but the plaintiff who
alleges a pre-existing right of ownership over the parcel of land in question even before the grant of
title to the defendant…

In their Complaint, petitioners never alleged that the Subject Property was part of the public domain.
On the contrary, petitioners asserted title over the Subject Property by virtue of their actual, physical,
open, continuous and adverse possession thereof, in the concept of owners, by themselves and
through their predecessors-in-interest, since time immemorial. The Deeds of Assignment executed in
their favor and attached to their Complaint referred to a Spanish title granted by the Queen of Spain
to their predecessor-in-interest, Don Hermogenes Rodriguez. Clearly, petitioners are asserting private
title over the Subject Property, and consequently, their action could not be one for reversion.

In their instant Petition, petitioners further averred that rather than an action for nullity of respondent’s
certificates of title, theirs was more appropriately an action to remove a cloud on or to quiet their title
over the Subject Property.

Article 476 of the Civil Code, on removal of a cloud on or quieting of title, provides that:

Art. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any
instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in
truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an
action may be brought to remove such cloud or to quiet the title.

An action may also be brought to prevent a cloud from being cast upon title to real property or any
interest therein.

Respondent’s certificates of title over the Subject Property appeared valid or effective; but according
to the petitioners, they were fake, spurious and/or fraudulent, and a cloud on their title to the same
property that needed to be removed. A cloud on title has been defined as follows:

Cloud on Title. – A cloud on title is an outstanding instrument, record, claim, encumbrance or

proceeding which is actually invalid or inoperative, but which may nevertheless impair or affect
injuriously the title to property. The matter complained of must have a prima facie appearance of
validity or legal efficacy. The cloud on title is a semblance of title which appears in some legal form
but which is in fact unfounded. The invalidity or inoperativeness of the instrument is not apparent on
the face of such instrument, and it has to be proved by extrinsic evidence…31

Even as this Court agrees with the petitioners that their action was one for removal of a cloud on or
quieting of title, it does arrive at the same conclusion as the trial court and the Court of Appeals that
petitioners had no personality to file the said action, not being the parties-in-interest, and their
Complaint should be dismissed for not stating a cause of action.

According to Article 477 of the Civil Code, the plaintiff, in an action to remove a cloud on or to quiet
title, must have legal or equitable title to, or interest in, the real property which is the subject matter of
the action.32 Petitioners failed to establish in their Complaint that they had any legal or equitable title
to, or legitimate interest in, the Subject Property so as to justify their right to file an action to remove a
cloud on or to quiet title.

Title to real property refers to that upon which ownership is based. It is the evidence of the right of the
owner or the extent of his interest, by which means he can maintain control and, as a rule, assert right
to exclusive possession and enjoyment of the property.33

In their Complaint, petitioners claimed title to the Subject Property by virtue of their actual and
continuous possession of the same since time immemorial, by themselves and through their
predecessors-in-interest. Yet, the Deeds of Assignment executed by Ismael Favila in their favor,
attached to and an integral part of their Complaint, revealed that petitioners’ predecessors-in-interest
based their right to the Subject Property on the Spanish title awarded to Don Hermogenes Rodriguez.

There existed a contradiction when petitioners based their claim of title to the Subject Property on their
possession thereof since time immemorial, and at the same time, on the Spanish title granted to Don
Hermogenes Rodriguez. Possession since time immemorial carried the presumption that the land
had never been part of the public domain or that it had been private property even before the
Spanish conquest.34 If the Subject Property was already private property before the Spanish
conquest, then it would have been beyond the power of the Queen of Spain to award or grant to
anyone.
The title to and possession of the Subject Property by petitioners’ predecessors-in-interest could be
traced only as far back as the Spanish title of Don Hermogenes Rodriguez. Petitioners, having
acquired portions of the Subject Property by assignment, could acquire no better title to the said
portions than their predecessors-in-interest, and hence, their title can only be based on the same
Spanish title.

Respondent maintained that P.D. No. 892 prevents petitioners from invoking the Spanish title as basis
of their ownership of the Subject Property. P.D. No. 892 strengthens the Torrens system by
discontinuing the system of registration under the Spanish Mortgage Law, and by categorically
declaring all lands recorded under the latter system, not yet covered by Torrens title, unregistered
lands. It further provides that within six months from its effectivity, all holders of Spanish titles or grants
should apply for registration of their land under what is now P.D. No. 1529, otherwise known as the
Land Registration Decree. Thereafter, Spanish titles can no longer be used as evidence of land
ownership in any registration proceedings under the Torrens system. 35 Indubitably, P.D. No. 892
divests the Spanish titles of any legal force and effect in establishing ownership over real property.

P.D. No. 892 became effective on 16 February 1976. The successors of Don Hermogenes Rodriguez
had only until 14 August 1976 to apply for a Torrens title in their name covering the Subject Property.
In the absence of an allegation in petitioners’ Complaint that petitioners’ predecessors-in-interest
complied with P.D. No. 892, then it could be assumed that they failed to do so. Since they failed to
comply with P.D. No. 892, then the successors of Don Hermogenes Rodriguez were already enjoined
from presenting the Spanish title as proof of their ownership of the Subject Property in registration
proceedings.

Registration proceedings under the Torrens system do not create or vest title, but only confirm and
record title already created and vested.36 By virtue of P.D. No. 892, the courts, in registration
proceedings under the Torrens system, are precluded from accepting, confirming and recording a
Spanish title. Reason therefore dictates that courts, likewise, are prevented from accepting and
indirectly confirming such Spanish title in some other form of action brought before them (i.e., removal
of cloud on or quieting of title), only short of ordering its recording or registration. To rule otherwise
would open the doors to the circumvention of P.D. No. 892, and give rise to the existence of land titles,
recognized and affirmed by the courts, but would never be recorded under the Torrens system of
registration. This would definitely undermine the Torrens system and cause confusion and instability
in property ownership that P.D. No. 892 intended to eliminate.

Petitioners argued that the Spanish title may still be presented as proof of ownership on the basis of
the exception provided in the fourth whereas clause of P.D. No. 892, which reads:

WHEREAS, Spanish titles to lands which have not yet been brought under the operation of the Torrens
system, being subject to prescription, are now ineffective to prove ownership unless accompanied by
proof of actual possession; . . .

Since Petitioners alleged that they were in actual possession of the Subject Property, then they could
still present the Spanish title as evidence of their ownership of the Subject Property. 37

This Court cannot sustain petitioners’ argument. Actual proof of possession only becomes necessary
because, as the same whereas clause points out, Spanish titles are subject to prescription. A holder
of a Spanish title may still lose his ownership of the real property to the occupant who actually
possesses the same for the required prescriptive period.38 Because of this inherent weakness of a
Spanish title, the applicant for registration of his Spanish title under the Torrens system must also
submit proof that he is in actual possession of the real property, so as to discount the possibility that
someone else has acquired a better title to the same property by virtue of prescription.

Moreover, legislative intent must be ascertained from a consideration of the statute as a whole, and
not just a particular provision alone. A word or phrase taken in the abstract may easily convey a
meaning quite different from the one actually intended and evident when the word or phrase is
considered with those with which it is associated. An apparently general provision may have a limited
application if read together with other provisions of the statute.39

The fourth whereas clause of P.D. No. 892 should be interpreted and harmonized with the other
provisions of the whole statute.40 Note that the tenor of the whole presidential decree is to discontinue
the use of Spanish titles and to strip them of any probative value as evidence of ownership. It had
clearly set a deadline for the filing of applications for registration of all Spanish titles under the Torrens
system (i.e., six months from its effectivity or on 14 August 1976), after which, the Spanish titles may
no longer be presented to prove ownership.

All holders of Spanish titles should have filed applications for registration of their title on or before 14
August 1976. In a land registration proceeding, the applicant should present to the court his Spanish
title plus proof of actual possession of the real property. However, if such land registration proceeding
was filed and initiated after 14 August 1976, the applicant could no longer present his Spanish title to
the court to evidence his ownership of the real property, regardless of whether the real property was
in his actual possession.

Therefore, the fact that petitioners were in actual possession of the Subject Property when they filed
the Complaint with the trial court on 29 April 1996 does not exclude them from the application of P.D.
No. 892, and their Spanish title remain inadmissible as evidence of their ownership of the Subject
Property, whether in a land registration proceeding or in an action to remove a cloud on or to quiet
title.

The preceding discussion does not bar holders of Spanish titles from claiming ownership of the real
property on some other basis, such as those provided in either the Land Registration Decree 41 or the
Public Land Act.42 Petitioners though failed to allege any other basis for their titles in their Complaint
aside from possession of the Subject Property from time immemorial, which this Court has already
controverted; and the Spanish title, which is already ineffective to prove ownership over the Subject
Property.

Therefore, without legal or equitable title to the Subject Property, the petitioners lacked the personality
to file an action for removal of a cloud on, or quieting of, title and their Complaint was properly
dismissed for failing to state a cause of action. In view of the dismissal of the case on this ground, it is
already unnecessary for this Court to address the issue of prescription of the action.

Wherefore, this Court DENIES the instant petition and AFFIRMS the Decision of the Court of Appeals,
dated 29 July 2002, and the Order of the Regional Trial Court of San Mateo, Rizal, Branch 77, dated
05 February 1999, dismissing petitioners’ Complaint for failure to state a cause of action.

SO ORDERED.

SECOND DIVISION

G.R. No. 186305 July 22, 2015

V-GENT, INC., Petitioner,

vs.
MORNING STAR TRAVEL and TOURS, INC., Respondent.

DECISION

BRION, J.:

We resolve the petition for review on certiorari filed to challenge the November 11, 2008 Decision
and February 5, 2009 Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 97032.1

ANTECEDENTS

Sometime in June and in September 1998, the petitioner V-Gent, Inc. (V-Gent) bought twenty-six
(26)2 two-way plane tickets (Manila-Europe-Manila) from the respondent Morning Star Travel and
Tours, Inc. (Morning Star).

On June 24, 1998 and September 28, 1998, V-Gent returned a total of fifteen (15) unused tickets
worth $8,747.50 to the defendant. Of the 15, Morning Star refunded only six (6) tickets worth
$3,445.62. Morning Star refused to refund the remaining nine (9) unused tickets despite repeated
demands.

On December 15, 2000, petitioner V-Gent filed a money claim against Morning Star for payment
of the unrefunded $5,301.88 plus attorney's fees. The complaint was raffled to Branch 2 of the
Metropolitan Trial Court (MeTC) of Manila and docketed as Civil Case No. 169296-CV.

Morning Star countered that V-Gent was not entitled to a refund because the tickets were bought
on the airline company's "buy one, take one" promo. It alleged that there were only fourteen (14)
unused tickets and only seven (7) of these were refundable; considering that it had already
refunded six (6) tickets (which is more or less 50o/o of 14), then there was nothing else to refund.

Morning Star also questioned V-Gent's personality to file the suit. It asserted that the passengers,
in whose names the tickets were issued, are the real parties-in-interest.
On January 27, 2006, after due proceedings, the MeTC dismissed the complaint for lack of a cause
of action. Citing Rule 3, Section 3 of the Rules of Court,3 the MeTC declared that, as agent of the
passengers who paid for the tickets, V-Gent stood as the real party-in-interest. Nevertheless, it
still dismissed the complaint because V-Gent failed to prove its claim by a preponderance of
evidence.

V-Gent appealed to the Regional Trial Court (RTC) and the case was docketed as Civil Case No.
06-115050.

On September 25, 2006, the RTC granted the appeal after finding that V-Gent had established its
claim by a preponderance of evidence. It set aside the MeTC's judgment and ordered Morning
Star to pay V-Gent the value of the nine (9) unrefunded tickets plus attorney's fees. Morning Star
filed a petition for review with the CA; the case was docketed as CA-G.R. SP No. 97032. Morning
Star questioned the RTC's appreciation of the evidence and factual conclusions. It also reiterated
its question about V-Gent's legal standing, submitting once again that V-Gent is not the real party-
in-interest.

On November 11, 2008, the CA granted the petition for review and dismissed V-Gent's complaint.
The CA held that V-Gent is not a real party-in-interest because it merely acted as an agent of the
passengers who bought the tickets from Morning Star with their own money.

V-Gent moved for reconsideration, which motion the CA denied on February 5, 2009, thus clearing
the way for the present petition for review on certiorari.

THE PETITION

V-Gent argues that the CA erred in ruling that it is not the real party-in-interest. It asserts: (1) that
the issue of its legal standing to file the complaint has already become final because Morning Star
did not appeal the MeTC's ruling on the issue; (2) that it is a real party-in-interest in filing the
complaint; and (3) that Morning Star is already estopped from questioning V-Gent's legal standing
to file the complaint.

In its Comment, Morning Star counters: (1) that it had no obligation to appeal the MeTC judgment
dismissing the complaint in its favor; (2) that the MeTC did not specifically state that V-Gent is the
real party-in-interest; (3) that the real parties-in-interest are the passengers named on the tickets;
and (4) that it made no admissions that would estop it from denying the refund.

OUR RULING

V-Gent maintains that the MeTC determined that it was the real party-in-interest. It argues that
since Morning Star did not appeal this specific finding with the RTC, then the MeTC's ruling on this
point had already become final and conclusive; therefore, Morning Star can no longer revive the
issue before the CA.

We disagree with V -Gent.

The MeTC dismissed V-Gent's complaint against Morning Star for failure to prove its claim. This
dismissal meant that the plaintiff did not prove a violation of its right for which the defendant should
be held liable. This ruling was plainly a judgment in Morning Star's favor and one that it had no
cause to question. Indeed, it would be legally illogical for Morning Star to file an appeal to question
a ruling of dismissal in its favor.

V-Gent also argues that it is a real party-in-interest with legal standing to institute the complaint
against Morning Star. In the present petition, it states:
1âw phi 1

36. The Court of Appeals chose to ignore the fact that while the plane tickets bore the names of
the individual passengers, the respondent admitted that it was the petitioner that transacted
business with it concerning the purchase of these plane tickets. Both the purchase order and
receipt of payments were under the name of the petitioner. Thus, since it was the petitioner who
purchased these plane tickets on behalf of the passengers, the respondent voluntarily refunded to
the former the value of six (6) unused return tickets in the total amount of US$3,445.62.

Though, for reasons it did not reveal to petitioner, it refused to refund the rest.4 (Emphasis
supplied.)

V-Gent admits that it purchased the plane tickets on behalf of the passengers as the latter's
agent.5 The tickets were issued in the name of the passengers and paid for with the passengers'
money. No dispute or conclusion in the lower courts' minds on this point; hence, both the
MeTC6 and the CA7 commonly found that V-Gent acted as an agent of the passengers when it
purchased the passengers' plane tickets.

However, while the MeTC held that V-Gent could sue as an agent acting in his own name on
behalf of an undisclosed principal, the CA held that it could not because the requirements for such
a suit by the agent had not been satisfied.

We agree with the Court of Appeals.

Every action must be prosecuted or defended in the name of the real party-in-interest - the party
who stands to be benefited or injured by the judgment in the suit.8 In suits where an agent
represents a party, the principal is the real party-in-interest; an agent cannot file a suit in his own
name on behalf of the principal.

Rule 3, Section 3 of the Rules of Court provides the exception when an agent may sue or be sued
without joining the principal.

Section 3. Representatives as parties. - Where the action is allowed to be prosecuted and

defended by a representative or someone acting in a fiduciary capacity, the beneficiary shall be
included in the title of the case and shall be deemed to be the real party-in-interest. A
representative may be a trustee of an express trust, a guardian, an executor or administrator, or a
party authorized by law or these Rules. An agent acting in his own name and for the benefit of an
undisclosed principal may sue or be sued without joining the principal except when the contract
involves things belonging to the principal. (Emphasis supplied.)

Thus an agent may sue or be sued solely in its own name and without joining the principal when
the following elements concur: (1) the agent acted in his own name during the transaction; (2) the
agent acted for the benefit of an undisclosed principal; and (3) the transaction did not involve the
property of the principal.

When these elements are present, the agent becomes bound as if the transaction were its own.
This rule is consistent with Article 1883 of the Civil Code which says:

Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons
with whom the agent has contracted; neither have such persons against the principal. In such
case, the agent is the one directly bound in favor of the person with whom he has contracted, as
if the transaction were his own, except when the contract involves things belonging to the principal.

The provisions of this article shall be understood to be without prejudice to the actions between
the principal and agent.

In the present case, only the · first element is present; the purchase order and the receipt were in
the name of V-Gent. However, the remaining elements are absent because: (1) V-Gent disclosed
the names of the passengers to Morning Star - in fact the tickets were in their names; and (2) the
transaction was paid using the passengers' money. Therefore, Rule 3, Section 3 of the Rules of
Court cannot apply.

To define the actual factual situation, V-Gent, the agent, is suing to recover the money of its
principals - the passengers - who are the real parties-in-interest because they stand to be injured
or benefited in case Morning Star refuses or agrees to grant the refund because the money
belongs to them. From this perspective, V-Gent evidently does not have a legal standing to file the
complaint.

Finally, V-Gent argues that by making a partial refund, Morning Star was already estopped from
refusing to make a full refund on the ground that V-Gent is not the real party-in-interest to demand
reimbursement.9

We find no merit in this argument.

The power to collect and receive payments on behalf of the principal is an ordinary act of
administration covered by the general powers of an agent.10 On the other hand, the filing of suits
is an act of strict dominion.

Under Article 1878 (15) of the Civil Code, a duly appointed agent has no power to exercise any
act of strict dominion on behalf of the principal unless authorized by a special power of attorney.
An agent's authority to file suit cannot be inferred from his authority to collect or receive payments;
the grant of special powers cannot be presumed from the grant of general powers. Moreover, the
authority to exercise special powers must be duly established by evidence, even though it need
not be in writing.11
 By granting the initial refund, Morning Star recognized V-Gent's authority to buy the tickets and
collect refunds on behalf of the passengers. However, Morning Star's recognition of V-Gent's
authority to collect a refund for the passengers is not equivalent to recognition of V-Gent's authority
to initiate a suit on behalf of the passengers. Morning Star therefore, is not estopped from
questioning V-Gent's legal standing to initiate the suit.

WHEREFORE, premises considered, we DENY the petition for lack of merit.

SO ORDERED.

EN BANC

G.R. No. 101083 July 30, 1993

JUAN ANTONIO, ANNA ROSARIO and JOSE ALFONSO, all surnamed OPOSA, minors, and
represented by their parents ANTONIO and RIZALINA OPOSA, ROBERTA NICOLE SADIUA, minor,
represented by her parents CALVIN and ROBERTA SADIUA, CARLO, AMANDA SALUD and
PATRISHA, all surnamed FLORES, minors and represented by their parents ENRICO and NIDA
FLORES, GIANINA DITA R. FORTUN, minor, represented by her parents SIGRID and DOLORES
FORTUN, GEORGE II and MA. CONCEPCION, all surnamed MISA, minors and represented by their
parents GEORGE and MYRA MISA, BENJAMIN ALAN V. PESIGAN, minor, represented by his
parents ANTONIO and ALICE PESIGAN, JOVIE MARIE ALFARO, minor, represented by her parents
JOSE and MARIA VIOLETA ALFARO, MARIA CONCEPCION T. CASTRO, minor, represented by her
parents FREDENIL and JANE CASTRO, JOHANNA DESAMPARADO,
minor, represented by her parents JOSE and ANGELA DESAMPRADO, CARLO JOAQUIN T.
NARVASA, minor, represented by his parents GREGORIO II and CRISTINE CHARITY NARVASA,
MA. MARGARITA, JESUS IGNACIO, MA. ANGELA and MARIE GABRIELLE, all surnamed SAENZ,
minors, represented by their parents ROBERTO and AURORA SAENZ, KRISTINE, MARY ELLEN,
MAY, GOLDA MARTHE and DAVID IAN, all surnamed KING, minors, represented by their parents
MARIO and HAYDEE KING, DAVID, FRANCISCO and THERESE VICTORIA, all surnamed
ENDRIGA, minors, represented by their parents BALTAZAR and TERESITA ENDRIGA, JOSE MA.
and REGINA MA., all surnamed ABAYA, minors, represented by their parents ANTONIO and MARICA
ABAYA, MARILIN, MARIO, JR. and MARIETTE, all surnamed CARDAMA, minors, represented by
their parents MARIO and LINA CARDAMA, CLARISSA, ANN MARIE, NAGEL, and IMEE LYN, all
surnamed OPOSA, minors and represented by their parents RICARDO and MARISSA OPOSA,
PHILIP JOSEPH, STEPHEN JOHN and ISAIAH JAMES, all surnamed QUIPIT, minors, represented
by their parents JOSE MAX and VILMI QUIPIT, BUGHAW CIELO, CRISANTO, ANNA, DANIEL and
FRANCISCO, all surnamed BIBAL, minors, represented by their parents FRANCISCO, JR. and
MILAGROS BIBAL, and THE PHILIPPINE ECOLOGICAL NETWORK, INC., petitioners,
vs.
THE HONORABLE FULGENCIO S. FACTORAN, JR., in his capacity as the Secretary of the
Department of Environment and Natural Resources, and THE HONORABLE ERIBERTO U.
ROSARIO, Presiding Judge of the RTC, Makati, Branch 66, respondents.

Oposa Law Office for petitioners.

The Solicitor General for respondents.

DAVIDE, JR., J.:

In a broader sense, this petition bears upon the right of Filipinos to a balanced and healthful ecology
which the petitioners dramatically associate with the twin concepts of "inter-generational responsibility"
and "inter-generational justice." Specifically, it touches on the issue of whether the said petitioners
have a cause of action to "prevent the misappropriation or impairment" of Philippine rainforests and
"arrest the unabated hemorrhage of the country's vital life support systems and continued rape of
Mother Earth."

The controversy has its genesis in Civil Case No. 90-77 which was filed before Branch 66 (Makati,
Metro Manila) of the Regional Trial Court (RTC), National Capital Judicial Region. The principal
plaintiffs therein, now the principal petitioners, are all minors duly represented and joined by their
respective parents. Impleaded as an additional plaintiff is the Philippine Ecological Network, Inc.
(PENI), a domestic, non-stock and non-profit corporation organized for the purpose of, inter alia,
engaging in concerted action geared for the protection of our environment and natural resources. The
original defendant was the Honorable Fulgencio S. Factoran, Jr., then Secretary of the Department of
Environment and Natural Resources (DENR). His substitution in this petition by the new Secretary,
the Honorable Angel C. Alcala, was subsequently ordered upon proper motion by the petitioners.1
The complaint2 was instituted as a taxpayers' class suit3 and alleges that the plaintiffs "are all citizens
of the Republic of the Philippines, taxpayers, and entitled to the full benefit, use and enjoyment of the
natural resource treasure that is the country's virgin tropical forests." The same was filed for
themselves and others who are equally concerned about the preservation of said resource but are "so
numerous that it is impracticable to bring them all before the Court." The minors further asseverate
that they "represent their generation as well as generations yet unborn."4 Consequently, it is prayed
for that judgment be rendered:

. . . ordering defendant, his agents, representatives and other persons acting in his behalf to —

(1) Cancel all existing timber license agreements in the country;

(2) Cease and desist from receiving, accepting, processing, renewing or approving new timber license
agreements.

and granting the plaintiffs ". . . such other reliefs just and equitable under the premises."5

The complaint starts off with the general averments that the Philippine archipelago of 7,100 islands
has a land area of thirty million (30,000,000) hectares and is endowed with rich, lush and verdant
rainforests in which varied, rare and unique species of flora and fauna may be found; these rainforests
contain a genetic, biological and chemical pool which is irreplaceable; they are also the habitat of
indigenous Philippine cultures which have existed, endured and flourished since time immemorial;
scientific evidence reveals that in order to maintain a balanced and healthful ecology, the country's
land area should be utilized on the basis of a ratio of fifty-four per cent (54%) for forest cover and forty-
six per cent (46%) for agricultural, residential, industrial, commercial and other uses; the distortion and
disturbance of this balance as a consequence of deforestation have resulted in a host of environmental
tragedies, such as (a) water shortages resulting from drying up of the water table, otherwise known as
the "aquifer," as well as of rivers, brooks and streams, (b) salinization of the water table as a result of
the intrusion therein of salt water, incontrovertible examples of which may be found in the island of
Cebu and the Municipality of Bacoor, Cavite, (c) massive erosion and the consequential loss of soil
fertility and agricultural productivity, with the volume of soil eroded estimated at one billion
(1,000,000,000) cubic meters per annum — approximately the size of the entire island of
Catanduanes, (d) the endangering and extinction of the country's unique, rare and varied flora and
fauna, (e) the disturbance and dislocation of cultural communities, including the disappearance of the
Filipino's indigenous cultures, (f) the siltation of rivers and seabeds and consequential destruction of
corals and other aquatic life leading to a critical reduction in marine resource productivity, (g) recurrent
spells of drought as is presently experienced by the entire country, (h) increasing velocity of typhoon
winds which result from the absence of windbreakers, (i) the floodings of lowlands and agricultural
plains arising from the absence of the absorbent mechanism of forests, (j) the siltation and shortening
of the lifespan of multi-billion peso dams constructed and operated for the purpose of supplying water
for domestic uses, irrigation and the generation of electric power, and (k) the reduction of the earth's
capacity to process carbon dioxide gases which has led to perplexing and catastrophic climatic
changes such as the phenomenon of global warming, otherwise known as the "greenhouse effect."

Plaintiffs further assert that the adverse and detrimental consequences of continued and deforestation
are so capable of unquestionable demonstration that the same may be submitted as a matter of judicial
notice. This notwithstanding, they expressed their intention to present expert witnesses as well as
documentary, photographic and film evidence in the course of the trial.

As their cause of action, they specifically allege that:

CAUSE OF ACTION

7. Plaintiffs replead by reference the foregoing allegations.

8. Twenty-five (25) years ago, the Philippines had some sixteen (16) million hectares of rainforests
constituting roughly 53% of the country's land mass.

9. Satellite images taken in 1987 reveal that there remained no more than 1.2 million hectares of said
rainforests or four per cent (4.0%) of the country's land area.

10. More recent surveys reveal that a mere 850,000 hectares of virgin old-growth rainforests are left,
barely 2.8% of the entire land mass of the Philippine archipelago and about 3.0 million hectares of
immature and uneconomical secondary growth forests.

11. Public records reveal that the defendant's, predecessors have granted timber license agreements
('TLA's') to various corporations to cut the aggregate area of 3.89 million hectares for commercial
logging purposes.

A copy of the TLA holders and the corresponding areas covered is hereto attached as Annex "A".

12. At the present rate of deforestation, i.e. about 200,000 hectares per annum or 25 hectares per
hour — nighttime, Saturdays, Sundays and holidays included — the Philippines will be bereft of forest
resources after the end of this ensuing decade, if not earlier.
13. The adverse effects, disastrous consequences, serious injury and irreparable damage of this
continued trend of deforestation to the plaintiff minor's generation and to generations yet unborn are
evident and incontrovertible. As a matter of fact, the environmental damages enumerated in paragraph
6 hereof are already being felt, experienced and suffered by the generation of plaintiff adults.

14. The continued allowance by defendant of TLA holders to cut and deforest the remaining forest
stands will work great damage and irreparable injury to plaintiffs — especially plaintiff minors and their
successors — who may never see, use, benefit from and enjoy this rare and unique natural resource
treasure.

This act of defendant constitutes a misappropriation and/or impairment of the natural resource property
he holds in trust for the benefit of plaintiff minors and succeeding generations.

15. Plaintiffs have a clear and constitutional right to a balanced and healthful ecology and are entitled
to protection by the State in its capacity as the parens patriae.

16. Plaintiff have exhausted all administrative remedies with the defendant's office. On March 2, 1990,
plaintiffs served upon defendant a final demand to cancel all logging permits in the country.

A copy of the plaintiffs' letter dated March 1, 1990 is hereto attached as Annex "B".

17. Defendant, however, fails and refuses to cancel the existing TLA's to the continuing serious
damage and extreme prejudice of plaintiffs.

18. The continued failure and refusal by defendant to cancel the TLA's is an act violative of the rights
of plaintiffs, especially plaintiff minors who may be left with a country that is desertified (sic), bare,
barren and devoid of the wonderful flora, fauna and indigenous cultures which the Philippines had
been abundantly blessed with.

19. Defendant's refusal to cancel the aforementioned TLA's is manifestly contrary to the public policy
enunciated in the Philippine Environmental Policy which, in pertinent part, states that it is the policy of
the State —

(a) to create, develop, maintain and improve conditions under which man and nature can thrive in
productive and enjoyable harmony with each other;

(b) to fulfill the social, economic and other requirements of present and future generations of Filipinos
and;

(c) to ensure the attainment of an environmental quality that is conductive to a life of dignity and well-
being. (P.D. 1151, 6 June 1977)

20. Furthermore, defendant's continued refusal to cancel the aforementioned TLA's is contradictory to
the Constitutional policy of the State to —

a. effect "a more equitable distribution of opportunities, income and wealth" and "make full and efficient
use of natural resources (sic)." (Section 1, Article XII of the Constitution);

b. "protect the nation's marine wealth." (Section 2, ibid);

c. "conserve and promote the nation's cultural heritage and resources (sic)" (Section 14, Article XIV,
id.);

d. "protect and advance the right of the people to a balanced and healthful ecology in accord with the
rhythm and harmony of nature." (Section 16, Article II, id.)

21. Finally, defendant's act is contrary to the highest law of humankind — the natural law — and
violative of plaintiffs' right to self-preservation and perpetuation.

22. There is no other plain, speedy and adequate remedy in law other than the instant action to arrest
the unabated hemorrhage of the country's vital life support systems and continued rape of Mother
Earth. 6

On 22 June 1990, the original defendant, Secretary Factoran, Jr., filed a Motion to Dismiss the
complaint based on two (2) grounds, namely: (1) the plaintiffs have no cause of action against him
and (2) the issue raised by the plaintiffs is a political question which properly pertains to the legislative
or executive branches of Government. In their 12 July 1990 Opposition to the Motion, the petitioners
maintain that (1) the complaint shows a clear and unmistakable cause of action, (2) the motion is
dilatory and (3) the action presents a justiciable question as it involves the defendant's abuse of
discretion.
On 18 July 1991, respondent Judge issued an order granting the aforementioned motion to dismiss.7
In the said order, not only was the defendant's claim — that the complaint states no cause of action
against him and that it raises a political question — sustained, the respondent Judge further ruled that
the granting of the relief prayed for would result in the impairment of contracts which is prohibited by
the fundamental law of the land.

Plaintiffs thus filed the instant special civil action for certiorari under Rule 65 of the Revised Rules of
Court and ask this Court to rescind and set aside the dismissal order on the ground that the respondent
Judge gravely abused his discretion in dismissing the action. Again, the parents of the plaintiffs-minors
not only represent their children, but have also joined the latter in this case.8

On 14 May 1992, We resolved to give due course to the petition and required the parties to submit
their respective Memoranda after the Office of the Solicitor General (OSG) filed a Comment in behalf
of the respondents and the petitioners filed a reply thereto.

Petitioners contend that the complaint clearly and unmistakably states a cause of action as it contains
sufficient allegations concerning their right to a sound environment based on Articles 19, 20 and 21 of
the Civil Code (Human Relations), Section 4 of Executive Order (E.O.) No. 192 creating the DENR,
Section 3 of Presidential Decree (P.D.) No. 1151 (Philippine Environmental Policy), Section 16, Article
II of the 1987 Constitution recognizing the right of the people to a balanced and healthful ecology, the
concept of generational genocide in Criminal Law and the concept of man's inalienable right to self-
preservation and self-perpetuation embodied in natural law. Petitioners likewise rely on the
respondent's correlative obligation per Section 4 of E.O. No. 192, to safeguard the people's right to a
healthful environment.

It is further claimed that the issue of the respondent Secretary's alleged grave abuse of discretion in
granting Timber License Agreements (TLAs) to cover more areas for logging than what is available
involves a judicial question.

Anent the invocation by the respondent Judge of the Constitution's non-impairment clause, petitioners
maintain that the same does not apply in this case because TLAs are not contracts. They likewise
submit that even if TLAs may be considered protected by the said clause, it is well settled that they
may still be revoked by the State when the public interest so requires.

On the other hand, the respondents aver that the petitioners failed to allege in their complaint a specific
legal right violated by the respondent Secretary for which any relief is provided by law. They see
nothing in the complaint but vague and nebulous allegations concerning an "environmental right" which
supposedly entitles the petitioners to the "protection by the state in its capacity as parens patriae."
Such allegations, according to them, do not reveal a valid cause of action. They then reiterate the
theory that the question of whether logging should be permitted in the country is a political question
which should be properly addressed to the executive or legislative branches of Government. They
therefore assert that the petitioners' resources is not to file an action to court, but to lobby before
Congress for the passage of a bill that would ban logging totally.

As to the matter of the cancellation of the TLAs, respondents submit that the same cannot be done by
the State without due process of law. Once issued, a TLA remains effective for a certain period of time
— usually for twenty-five (25) years. During its effectivity, the same can neither be revised nor
cancelled unless the holder has been found, after due notice and hearing, to have violated the terms
of the agreement or other forestry laws and regulations. Petitioners' proposition to have all the TLAs
indiscriminately cancelled without the requisite hearing would be violative of the requirements of due
process.

Before going any further, We must first focus on some procedural matters. Petitioners instituted Civil
Case No. 90-777 as a class suit. The original defendant and the present respondents did not take
issue with this matter. Nevertheless, We hereby rule that the said civil case is indeed a class suit. The
subject matter of the complaint is of common and general interest not just to several, but to all citizens
of the Philippines. Consequently, since the parties are so numerous, it, becomes impracticable, if not
totally impossible, to bring all of them before the court. We likewise declare that the plaintiffs therein
are numerous and representative enough to ensure the full protection of all concerned interests.
Hence, all the requisites for the filing of a valid class suit under Section 12, Rule 3 of the Revised
Rules of Court are present both in the said civil case and in the instant petition, the latter being but an
incident to the former.

This case, however, has a special and novel element. Petitioners minors assert that they represent
their generation as well as generations yet unborn. We find no difficulty in ruling that they can, for
themselves, for others of their generation and for the succeeding generations, file a class suit. Their
personality to sue in behalf of the succeeding generations can only be based on the concept of
intergenerational responsibility insofar as the right to a balanced and healthful ecology is concerned.
Such a right, as hereinafter expounded, considers
the "rhythm and harmony of nature." Nature means the created world in its entirety.9 Such rhythm and
harmony indispensably include, inter alia, the judicious disposition, utilization, management, renewal
and conservation of the country's forest, mineral, land, waters, fisheries, wildlife, off-shore areas and
other natural resources to the end that their exploration, development and utilization be equitably
accessible to the present as well as future generations. 10 Needless to say, every generation has a
responsibility to the next to preserve that rhythm and harmony for the full enjoyment of a balanced and
healthful ecology. Put a little differently, the minors' assertion of their right to a sound environment
constitutes, at the same time, the performance of their obligation to ensure the protection of that right
for the generations to come.

The locus standi of the petitioners having thus been addressed, We shall now proceed to the merits
of the petition.

After a careful perusal of the complaint in question and a meticulous consideration and evaluation of
the issues raised and arguments adduced by the parties, We do not hesitate to find for the petitioners
and rule against the respondent Judge's challenged order for having been issued with grave abuse of
discretion amounting to lack of jurisdiction. The pertinent portions of the said order reads as follows:

xxx xxx xxx

After a careful and circumspect evaluation of the Complaint, the Court cannot help but agree with the
defendant. For although we believe that plaintiffs have but the noblest of all intentions, it (sic) fell short
of alleging, with sufficient definiteness, a specific legal right they are seeking to enforce and protect,
or a specific legal wrong they are seeking to prevent and redress (Sec. 1, Rule 2, RRC). Furthermore,
the Court notes that the Complaint is replete with vague assumptions and vague conclusions based
on unverified data. In fine, plaintiffs fail to state a cause of action in its Complaint against the herein
defendant.

Furthermore, the Court firmly believes that the matter before it, being impressed with political color
and involving a matter of public policy, may not be taken cognizance of by this Court without doing
violence to the sacred principle of "Separation of Powers" of the three (3) co-equal branches of the
Government.

The Court is likewise of the impression that it cannot, no matter how we stretch our jurisdiction, grant
the reliefs prayed for by the plaintiffs, i.e., to cancel all existing timber license agreements in the country
and to cease and desist from receiving, accepting, processing, renewing or approving new timber
license agreements. For to do otherwise would amount to "impairment of contracts" abhored (sic) by
the fundamental law. 11

We do not agree with the trial court's conclusions that the plaintiffs failed to allege with sufficient
definiteness a specific legal right involved or a specific legal wrong committed, and that the complaint
is replete with vague assumptions and conclusions based on unverified data. A reading of the
complaint itself belies these conclusions.

The complaint focuses on one specific fundamental legal right — the right to a balanced and healthful
ecology which, for the first time in our nation's constitutional history, is solemnly incorporated in the
fundamental law. Section 16, Article II of the 1987 Constitution explicitly provides:

Sec. 16. The State shall protect and advance the right of the people to a balanced and healthful
ecology in accord with the rhythm and harmony of nature.

This right unites with the right to health which is provided for in the preceding section of the same
article:

Sec. 15. The State shall protect and promote the right to health of the people and instill health
consciousness among them.

While the right to a balanced and healthful ecology is to be found under the Declaration of Principles
and State Policies and not under the Bill of Rights, it does not follow that it is less important than any
of the civil and political rights enumerated in the latter. Such a right belongs to a different category of
rights altogether for it concerns nothing less than self-preservation and self-perpetuation — aptly and
fittingly stressed by the petitioners — the advancement of which may even be said to predate all
governments and constitutions. As a matter of fact, these basic rights need not even be written in the
Constitution for they are assumed to exist from the inception of humankind. If they are now explicitly
mentioned in the fundamental charter, it is because of the well-founded fear of its framers that unless
the rights to a balanced and healthful ecology and to health are mandated as state policies by the
Constitution itself, thereby highlighting their continuing importance and imposing upon the state a
solemn obligation to preserve the first and protect and advance the second, the day would not be too
far when all else would be lost not only for the present generation, but also for those to come —
generations which stand to inherit nothing but parched earth incapable of sustaining life.

The right to a balanced and healthful ecology carries with it the correlative duty to refrain from impairing
the environment. During the debates on this right in one of the plenary sessions of the 1986
Constitutional Commission, the following exchange transpired between Commissioner Wilfrido
Villacorta and Commissioner Adolfo Azcuna who sponsored the section in question:

MR. VILLACORTA:

Does this section mandate the State to provide sanctions against all forms of pollution — air, water
and noise pollution?

MR. AZCUNA:

Yes, Madam President. The right to healthful (sic) environment necessarily carries with it the
correlative duty of not impairing the same and, therefore, sanctions may be provided for impairment
of environmental balance. 12

The said right implies, among many other things, the judicious management and conservation of the
country's forests.

Without such forests, the ecological or environmental balance would be irreversiby disrupted.

Conformably with the enunciated right to a balanced and healthful ecology and the right to health, as
well as the other related provisions of the Constitution concerning the conservation, development and
utilization of the country's natural resources, 13 then President Corazon C. Aquino promulgated on 10
June 1987 E.O. No. 192, 14 Section 4 of which expressly mandates that the Department of
Environment and Natural Resources "shall be the primary government agency responsible for the
conservation, management, development and proper use of the country's environment and natural
resources, specifically forest and grazing lands, mineral, resources, including those in reservation and
watershed areas, and lands of the public domain, as well as the licensing and regulation of all natural
resources as may be provided for by law in order to ensure equitable sharing of the benefits derived
therefrom for the welfare of the present and future generations of Filipinos." Section 3 thereof makes
the following statement of policy:

Sec. 3. Declaration of Policy. — It is hereby declared the policy of the State to ensure the sustainable
use, development, management, renewal, and conservation of the country's forest, mineral, land, off-
shore areas and other natural resources, including the protection and enhancement of the quality of
the environment, and equitable access of the different segments of the population to the development
and the use of the country's natural resources, not only for the present generation but for future
generations as well. It is also the policy of the state to recognize and apply a true value system
including social and environmental cost implications relative to their utilization, development and
conservation of our natural resources.

This policy declaration is substantially re-stated it Title XIV, Book IV of the Administrative Code of
1987,15 specifically in Section 1 thereof which reads:

Sec. 1. Declaration of Policy. — (1) The State shall ensure, for the benefit of the Filipino people, the
full exploration and development as well as the judicious disposition, utilization, management, renewal
and conservation of the country's forest, mineral, land, waters, fisheries, wildlife, off-shore areas and
other natural resources, consistent with the necessity of maintaining a sound ecological balance and
protecting and enhancing the quality of the environment and the objective of making the exploration,
development and utilization of such natural resources equitably accessible to the different segments
of the present as well as future generations.

(2) The State shall likewise recognize and apply a true value system that takes into account social and
environmental cost implications relative to the utilization, development and conservation of our natural
resources.

The above provision stresses "the necessity of maintaining a sound ecological balance and protecting
and enhancing the quality of the environment." Section 2 of the same Title, on the other hand,
specifically speaks of the mandate of the DENR; however, it makes particular reference to the fact of
the agency's being subject to law and higher authority. Said section provides:

Sec. 2. Mandate. — (1) The Department of Environment and Natural Resources shall be primarily
responsible for the implementation of the foregoing policy.

(2) It shall, subject to law and higher authority, be in charge of carrying out the State's constitutional
mandate to control and supervise the exploration, development, utilization, and conservation of the
country's natural resources.

Both E.O. NO. 192 and the Administrative Code of 1987 have set the objectives which will serve as
the bases for policy formulation, and have defined the powers and functions of the DENR.
It may, however, be recalled that even before the ratification of the 1987 Constitution, specific statutes
already paid special attention to the "environmental right" of the present and future generations. On 6
June 1977, P.D. No. 1151 (Philippine Environmental Policy) and P.D. No. 1152 (Philippine
Environment Code) were issued. The former "declared a continuing policy of the State (a) to create,
develop, maintain and improve conditions under which man and nature can thrive in productive and
enjoyable harmony with each other, (b) to fulfill the social, economic and other requirements of present
and future generations of Filipinos, and (c) to insure the attainment of an environmental quality that is
conducive to a life of dignity and well-being." 16 As its goal, it speaks of the "responsibilities of each
generation as trustee and guardian of the environment for succeeding generations." 17 The latter
statute, on the other hand, gave flesh to the said policy.

Thus, the right of the petitioners (and all those they represent) to a balanced and healthful ecology is
as clear as the DENR's duty — under its mandate and by virtue of its powers and functions under E.O.
No. 192 and the Administrative Code of 1987 — to protect and advance the said right.

A denial or violation of that right by the other who has the corelative duty or obligation to respect or
protect the same gives rise to a cause of action. Petitioners maintain that the granting of the TLAs,
which they claim was done with grave abuse of discretion, violated their right to a balanced and
healthful ecology; hence, the full protection thereof requires that no further TLAs should be renewed
or granted.

A cause of action is defined as:

. . . an act or omission of one party in violation of the legal right or rights of the other; and its essential
elements are legal right of the plaintiff, correlative obligation of the defendant, and act or omission of
the defendant in violation of said legal right. 18

It is settled in this jurisdiction that in a motion to dismiss based on the ground that the complaint fails
to state a cause of action, 19 the question submitted to the court for resolution involves the sufficiency
of the facts alleged in the complaint itself. No other matter should be considered; furthermore, the truth
of falsity of the said allegations is beside the point for the truth thereof is deemed hypothetically
admitted. The only issue to be resolved in such a case is: admitting such alleged facts to be true, may
the court render a valid judgment in accordance with the prayer in the complaint? 20 In Militante vs.
Edrosolano, 21 this Court laid down the rule that the judiciary should "exercise the utmost care and
circumspection in passing upon a motion to dismiss on the ground of the absence thereof [cause of
action] lest, by its failure to manifest a correct appreciation of the facts alleged and deemed
hypothetically admitted, what the law grants or recognizes is effectively nullified. If that happens, there
is a blot on the legal order. The law itself stands in disrepute."

After careful examination of the petitioners' complaint, We find the statements under the introductory
affirmative allegations, as well as the specific averments under the sub-heading CAUSE OF ACTION,
to be adequate enough to show, prima facie, the claimed violation of their rights. On the basis thereof,
they may thus be granted, wholly or partly, the reliefs prayed for. It bears stressing, however, that
insofar as the cancellation of the TLAs is concerned, there is the need to implead, as party defendants,
the grantees thereof for they are indispensable parties.

The foregoing considered, Civil Case No. 90-777 be said to raise a political question. Policy
formulation or determination by the executive or legislative branches of Government is not squarely
put in issue. What is principally involved is the enforcement of a right vis-a-vis policies already
formulated and expressed in legislation. It must, nonetheless, be emphasized that the political question
doctrine is no longer, the insurmountable obstacle to the exercise of judicial power or the impenetrable
shield that protects executive and legislative actions from judicial inquiry or review. The second
paragraph of section 1, Article VIII of the Constitution states that:

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.

Commenting on this provision in his book, Philippine Political Law, 22 Mr. Justice Isagani A. Cruz, a
distinguished member of this Court, says:

The first part of the authority represents the traditional concept of judicial power, involving the
settlement of conflicting rights as conferred as law. The second part of the authority represents a
broadening of judicial power to enable the courts of justice to review what was before forbidden
territory, to wit, the discretion of the political departments of the government.

As worded, the new provision vests in the judiciary, and particularly the Supreme Court, the power to
rule upon even the wisdom of the decisions of the executive and the legislature and to declare their
acts invalid for lack or excess of jurisdiction because tainted with grave abuse of discretion. The catch,
of course, is the meaning of "grave abuse of discretion," which is a very elastic phrase that can expand
or contract according to the disposition of the judiciary.

In Daza vs. Singson, 23 Mr. Justice Cruz, now speaking for this Court, noted:

In the case now before us, the jurisdictional objection becomes even less tenable and decisive. The
reason is that, even if we were to assume that the issue presented before us was political in nature,
we would still not be precluded from revolving it under the expanded jurisdiction conferred upon us
that now covers, in proper cases, even the political question. Article VII, Section 1, of the Constitution
clearly provides: . . .

The last ground invoked by the trial court in dismissing the complaint is the non-impairment of contracts
clause found in the Constitution. The court a quo declared that:

The Court is likewise of the impression that it cannot, no matter how we stretch our jurisdiction, grant
the reliefs prayed for by the plaintiffs, i.e., to cancel all existing timber license agreements in the country
and to cease and desist from receiving, accepting, processing, renewing or approving new timber
license agreements. For to do otherwise would amount to "impairment of contracts" abhored (sic) by
the fundamental law. 24

We are not persuaded at all; on the contrary, We are amazed, if not shocked, by such a sweeping
pronouncement. In the first place, the respondent Secretary did not, for obvious reasons, even invoke
in his motion to dismiss the non-impairment clause. If he had done so, he would have acted with
utmost infidelity to the Government by providing undue and unwarranted benefits and advantages to
the timber license holders because he would have forever bound the Government to strictly respect
the said licenses according to their terms and conditions regardless of changes in policy and the
demands of public interest and welfare. He was aware that as correctly pointed out by the petitioners,
into every timber license must be read Section 20 of the Forestry Reform Code (P.D. No. 705) which
provides:

. . . Provided, That when the national interest so requires, the President may amend, modify, replace
or rescind any contract, concession, permit, licenses or any other form of privilege granted herein . . .

Needless to say, all licenses may thus be revoked or rescinded by executive action. It is not a contract,
property or a property right protested by the due process clause of the Constitution. In Tan vs. Director
of Forestry, 25 this Court held:

. . . A timber license is an instrument by which the State regulates the utilization and disposition of
forest resources to the end that public welfare is promoted. A timber license is not a contract within
the purview of the due process clause; it is only a license or privilege, which can be validly withdrawn
whenever dictated by public interest or public welfare as in this case.

A license is merely a permit or privilege to do what otherwise would be unlawful, and is not a contract
between the authority, federal, state, or municipal, granting it and the person to whom it is granted;
neither is it property or a property right, nor does it create a vested right; nor is it taxation (37 C.J. 168).
Thus, this Court held that the granting of license does not create irrevocable rights, neither is it property
or property rights (People vs. Ong Tin, 54 O.G. 7576).

We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy Executive Secretary:
26

. . . Timber licenses, permits and license agreements are the principal instruments by which the State
regulates the utilization and disposition of forest resources to the end that public welfare is promoted.
And it can hardly be gainsaid that they merely evidence a privilege granted by the State to qualified
entities, and do not vest in the latter a permanent or irrevocable right to the particular concession area
and the forest products therein. They may be validly amended, modified, replaced or rescinded by the
Chief Executive when national interests so require. Thus, they are not deemed contracts within the
purview of the due process of law clause [See Sections 3(ee) and 20 of Pres. Decree No. 705, as
amended. Also, Tan v. Director of Forestry, G.R. No. L-24548, October 27, 1983, 125 SCRA 302].

Since timber licenses are not contracts, the non-impairment clause, which reads:

Sec. 10. No law impairing, the obligation of contracts shall be passed. 27

cannot be invoked.

In the second place, even if it is to be assumed that the same are contracts, the instant case does not
involve a law or even an executive issuance declaring the cancellation or modification of existing
timber licenses. Hence, the non-impairment clause cannot as yet be invoked. Nevertheless, granting
further that a law has actually been passed mandating cancellations or modifications, the same cannot
still be stigmatized as a violation of the non-impairment clause. This is because by its very nature and
purpose, such as law could have only been passed in the exercise of the police power of the state for
the purpose of advancing the right of the people to a balanced and healthful ecology, promoting their
health and enhancing the general welfare. In Abe vs. Foster Wheeler
Corp. 28 this Court stated:

The freedom of contract, under our system of government, is not meant to be absolute. The same is
understood to be subject to reasonable legislative regulation aimed at the promotion of public health,
moral, safety and welfare. In other words, the constitutional guaranty of non-impairment of obligations
of contract is limited by the exercise of the police power of the State, in the interest of public health,
safety, moral and general welfare.

The reason for this is emphatically set forth in Nebia vs. New York, 29 quoted in Philippine American
Life Insurance Co. vs. Auditor General,30 to wit:

Under our form of government the use of property and the making of contracts are normally matters
of private and not of public concern. The general rule is that both shall be free of governmental
interference. But neither property rights nor contract rights are absolute; for government cannot exist
if the citizen may at will use his property to the detriment of his fellows, or exercise his freedom of
contract to work them harm. Equally fundamental with the private right is that of the public to regulate
it in the common interest.

In short, the non-impairment clause must yield to the police power of the state. 31

Finally, it is difficult to imagine, as the trial court did, how the non-impairment clause could apply with
respect to the prayer to enjoin the respondent Secretary from receiving, accepting, processing,
renewing or approving new timber licenses for, save in cases of renewal, no contract would have as
of yet existed in the other instances. Moreover, with respect to renewal, the holder is not entitled to it
as a matter of right.

WHEREFORE, being impressed with merit, the instant Petition is hereby GRANTED, and the
challenged Order of respondent Judge of 18 July 1991 dismissing Civil Case No. 90-777 is hereby set
aside. The petitioners may therefore amend their complaint to implead as defendants the holders or
grantees of the questioned timber license agreements.

No pronouncement as to costs.

SO ORDERED.

Cruz, Padilla, Bidin, Griño-Aquino, Regalado, Romero, Nocon, Bellosillo, Melo and Quiason, JJ.,
concur.

Narvasa, C.J., Puno and Vitug, JJ., took no part.

Separate Opinions

FELICIANO, J., concurring

I join in the result reached by my distinguished brother in the Court, Davide, Jr., J., in this case which,
to my mind, is one of the most important cases decided by this Court in the last few years. The seminal
principles laid down in this decision are likely to influence profoundly the direction and course of the
protection and management of the environment, which of course embraces the utilization of all the
natural resources in the territorial base of our polity. I have therefore sought to clarify, basically to
myself, what the Court appears to be saying.

The Court explicitly states that petitioners have the locus standi necessary to sustain the bringing and,
maintenance of this suit (Decision, pp. 11-12). Locus standi is not a function of petitioners' claim that
their suit is properly regarded as a class suit. I understand locus standi to refer to the legal interest
which a plaintiff must have in the subject matter of the suit. Because of the very broadness of the
concept of "class" here involved — membership in this "class" appears to embrace everyone living in
the country whether now or in the
future — it appears to me that everyone who may be expected to benefit from the course of action
petitioners seek to require public respondents to take, is vested with the necessary locus standi. The
Court may be seen therefore to be recognizing a beneficiaries' right of action in the field of
environmental protection, as against both the public administrative agency directly concerned and the
private persons or entities operating in the field or sector of activity involved. Whether such
beneficiaries' right of action may be found under any and all circumstances, or whether some failure
to act, in the first instance, on the part of the governmental agency concerned must be shown ("prior
exhaustion of administrative remedies"), is not discussed in the decision and presumably is left for
future determination in an appropriate case.

The Court has also declared that the complaint has alleged and focused upon "one specific
fundamental legal right — the right to a balanced and healthful ecology" (Decision, p. 14). There is no
question that "the right to a balanced and healthful ecology" is "fundamental" and that, accordingly, it
has been "constitutionalized." But although it is fundamental in character, I suggest, with very great
respect, that it cannot be characterized as "specific," without doing excessive violence to language. It
is in fact very difficult to fashion language more comprehensive in scope and generalized in character
than a right to "a balanced and healthful ecology." The list of particular claims which can be subsumed
under this rubic appears to be entirely open-ended: prevention and control of emission of toxic fumes
and smoke from factories and motor vehicles; of discharge of oil, chemical effluents, garbage and raw
sewage into rivers, inland and coastal waters by vessels, oil rigs, factories, mines and whole
communities; of dumping of organic and inorganic wastes on open land, streets and thoroughfares;
failure to rehabilitate land after strip-mining or open-pit mining; kaingin or slash-and-burn farming;
destruction of fisheries, coral reefs and other living sea resources through the use of dynamite or
cyanide and other chemicals; contamination of ground water resources; loss of certain species of
fauna and flora; and so on. The other statements pointed out by the Court: Section 3, Executive Order
No. 192 dated 10 June 1987; Section 1, Title XIV, Book IV of the 1987 Administrative Code; and P.D.
No. 1151, dated 6 June 1977 — all appear to be formulations of policy, as general and abstract as the
constitutional statements of basic policy in Article II, Section 16 ("the right — to a balanced and
healthful ecology") and 15 ("the right to health").

P.D. No. 1152, also dated 6 June 1977, entitled "The Philippine Environment Code," is, upon the other
hand, a compendious collection of more "specific environment management policies" and
"environment quality standards" (fourth "Whereas" clause, Preamble) relating to an extremely wide
range of topics:

(a) air quality management;

(b) water quality management;

(c) land use management;

(d) natural resources management and conservation embracing:

(i) fisheries and aquatic resources;

(ii) wild life;

(iii) forestry and soil conservation;

(iv) flood control and natural calamities;

(v) energy development;

(vi) conservation and utilization of surface and ground water

(vii) mineral resources

Two (2) points are worth making in this connection. Firstly, neither petitioners nor the Court has
identified the particular provision or provisions (if any) of the Philippine Environment Code which give
rise to a specific legal right which petitioners are seeking to enforce. Secondly, the Philippine
Environment Code identifies with notable care the particular government agency charged with the
formulation and implementation of guidelines and programs dealing with each of the headings and
sub-headings mentioned above. The Philippine Environment Code does not, in other words, appear
to contemplate action on the part of private persons who are beneficiaries of implementation of that
Code.

As a matter of logic, by finding petitioners' cause of action as anchored on a legal right comprised in
the constitutional statements above noted, the Court is in effect saying that Section 15 (and Section
16) of Article II of the Constitution are self-executing and judicially enforceable even in their present
form. The implications of this doctrine will have to be explored in future cases; those implications are
too large and far-reaching in nature even to be hinted at here.

My suggestion is simply that petitioners must, before the trial court, show a more specific legal right
— a right cast in language of a significantly lower order of generality than Article II (15) of the
Constitution — that is or may be violated by the actions, or failures to act, imputed to the public
respondent by petitioners so that the trial court can validly render judgment granting all or part of the
relief prayed for. To my mind, the Court should be understood as simply saying that such a more
specific legal right or rights may well exist in our corpus of law, considering the general policy principles
found in the Constitution and the existence of the Philippine Environment Code, and that the trial court
should have given petitioners an effective opportunity so to demonstrate, instead of aborting the
proceedings on a motion to dismiss.

It seems to me important that the legal right which is an essential component of a cause of action be
a specific, operable legal right, rather than a constitutional or statutory policy, for at least two (2)
reasons. One is that unless the legal right claimed to have been violated or disregarded is given
specification in operational terms, defendants may well be unable to defend themselves intelligently
and effectively; in other words, there are due process dimensions to this matter.

The second is a broader-gauge consideration — where a specific violation of law or applicable

regulation is not alleged or proved, petitioners can be expected to fall back on the expanded
conception of judicial power in the second paragraph of Section 1 of Article VIII of the Constitution
which reads:

Section 1. . . .

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. (Emphasis supplied)

When substantive standards as general as "the right to a balanced and healthy ecology" and "the right
to health" are combined with remedial standards as broad ranging as "a grave abuse of discretion
amounting to lack or excess of jurisdiction," the result will be, it is respectfully submitted, to propel
courts into the uncharted ocean of social and economic policy making. At least in respect of the vast
area of environmental protection and management, our courts have no claim to special technical
competence and experience and professional qualification. Where no specific, operable norms and
standards are shown to exist, then the policy making departments — the legislative and executive
departments — must be given a real and effective opportunity to fashion and promulgate those norms
and standards, and to implement them before the courts should intervene.

My learned brother Davide, Jr., J., rightly insists that the timber companies, whose concession
agreements or TLA's petitioners demand public respondents should cancel, must be impleaded in the
proceedings below. It might be asked that, if petitioners' entitlement to the relief demanded is not
dependent upon proof of breach by the timber companies of one or more of the specific terms and
conditions of their concession agreements (and this, petitioners implicitly assume), what will those
companies litigate about? The answer I suggest is that they may seek to dispute the existence of the
specific legal right petitioners should allege, as well as the reality of the claimed factual nexus between
petitioners' specific legal rights and the claimed wrongful acts or failures to act of public respondent
administrative agency. They may also controvert the appropriateness of the remedy or remedies
demanded by petitioners, under all the circumstances which exist.

I vote to grant the Petition for Certiorari because the protection of the environment, including the forest
cover of our territory, is of extreme importance for the country. The doctrines set out in the Court's
decision issued today should, however, be subjected to closer examination.

# Separate Opinions

FELICIANO, J., concurring

I join in the result reached by my distinguished brother in the Court, Davide, Jr., J., in this case which,
to my mind, is one of the most important cases decided by this Court in the last few years. The seminal
principles laid down in this decision are likely to influence profoundly the direction and course of the
protection and management of the environment, which of course embraces the utilization of all the
natural resources in the territorial base of our polity. I have therefore sought to clarify, basically to
myself, what the Court appears to be saying.

The Court explicitly states that petitioners have the locus standi necessary to sustain the bringing and,
maintenance of this suit (Decision, pp. 11-12). Locus standi is not a function of petitioners' claim that
their suit is properly regarded as a class suit. I understand locus standi to refer to the legal interest
which a plaintiff must have in the subject matter of the suit. Because of the very broadness of the
concept of "class" here involved — membership in this "class" appears to embrace everyone living in
the country whether now or in the
future — it appears to me that everyone who may be expected to benefit from the course of action
petitioners seek to require public respondents to take, is vested with the necessary locus standi. The
Court may be seen therefore to be recognizing a beneficiaries' right of action in the field of
environmental protection, as against both the public administrative agency directly concerned and the
private persons or entities operating in the field or sector of activity involved. Whether such
beneficiaries' right of action may be found under any and all circumstances, or whether some failure
to act, in the first instance, on the part of the governmental agency concerned must be shown ("prior
exhaustion of administrative remedies"), is not discussed in the decision and presumably is left for
future determination in an appropriate case.

The Court has also declared that the complaint has alleged and focused upon "one specific
fundamental legal right — the right to a balanced and healthful ecology" (Decision, p. 14). There is no
question that "the right to a balanced and healthful ecology" is "fundamental" and that, accordingly, it
has been "constitutionalized." But although it is fundamental in character, I suggest, with very great
respect, that it cannot be characterized as "specific," without doing excessive violence to language. It
is in fact very difficult to fashion language more comprehensive in scope and generalized in character
than a right to "a balanced and healthful ecology." The list of particular claims which can be subsumed
under this rubic appears to be entirely open-ended: prevention and control of emission of toxic fumes
and smoke from factories and motor vehicles; of discharge of oil, chemical effluents, garbage and raw
sewage into rivers, inland and coastal waters by vessels, oil rigs, factories, mines and whole
communities; of dumping of organic and inorganic wastes on open land, streets and thoroughfares;
failure to rehabilitate land after strip-mining or open-pit mining; kaingin or slash-and-burn farming;
destruction of fisheries, coral reefs and other living sea resources through the use of dynamite or
cyanide and other chemicals; contamination of ground water resources; loss of certain species of
fauna and flora; and so on. The other statements pointed out by the Court: Section 3, Executive Order
No. 192 dated 10 June 1987; Section 1, Title XIV, Book IV of the 1987 Administrative Code; and P.D.
No. 1151, dated 6 June 1977 — all appear to be formulations of policy, as general and abstract as the
constitutional statements of basic policy in Article II, Section 16 ("the right — to a balanced and
healthful ecology") and 15 ("the right to health").

P.D. No. 1152, also dated 6 June 1977, entitled "The Philippine Environment Code," is, upon the other
hand, a compendious collection of more "specific environment management policies" and
"environment quality standards" (fourth "Whereas" clause, Preamble) relating to an extremely wide
range of topics:

(a) air quality management;

(b) water quality management;

(c) land use management;

(d) natural resources management and conservation embracing:

(i) fisheries and aquatic resources;

(ii) wild life;

(iii) forestry and soil conservation;

(iv) flood control and natural calamities;

(v) energy development;

(vi) conservation and utilization of surface and ground water

(vii) mineral resources

Two (2) points are worth making in this connection. Firstly, neither petitioners nor the Court has
identified the particular provision or provisions (if any) of the Philippine Environment Code which give
rise to a specific legal right which petitioners are seeking to enforce. Secondly, the Philippine
Environment Code identifies with notable care the particular government agency charged with the
formulation and implementation of guidelines and programs dealing with each of the headings and
sub-headings mentioned above. The Philippine Environment Code does not, in other words, appear
to contemplate action on the part of private persons who are beneficiaries of implementation of that
Code.

As a matter of logic, by finding petitioners' cause of action as anchored on a legal right comprised in
the constitutional statements above noted, the Court is in effect saying that Section 15 (and Section
16) of Article II of the Constitution are self-executing and judicially enforceable even in their present
form. The implications of this doctrine will have to be explored in future cases; those implications are
too large and far-reaching in nature even to be hinted at here.

My suggestion is simply that petitioners must, before the trial court, show a more specific legal right
— a right cast in language of a significantly lower order of generality than Article II (15) of the
Constitution — that is or may be violated by the actions, or failures to act, imputed to the public
respondent by petitioners so that the trial court can validly render judgment granting all or part of the
relief prayed for. To my mind, the Court should be understood as simply saying that such a more
specific legal right or rights may well exist in our corpus of law, considering the general policy principles
found in the Constitution and the existence of the Philippine Environment Code, and that the trial court
should have given petitioners an effective opportunity so to demonstrate, instead of aborting the
proceedings on a motion to dismiss.

It seems to me important that the legal right which is an essential component of a cause of action be
a specific, operable legal right, rather than a constitutional or statutory policy, for at least two (2)
reasons. One is that unless the legal right claimed to have been violated or disregarded is given
specification in operational terms, defendants may well be unable to defend themselves intelligently
and effectively; in other words, there are due process dimensions to this matter.

The second is a broader-gauge consideration — where a specific violation of law or applicable

regulation is not alleged or proved, petitioners can be expected to fall back on the expanded
conception of judicial power in the second paragraph of Section 1 of Article VIII of the Constitution
which reads:

Section 1. . . .

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. (Emphasis supplied)

When substantive standards as general as "the right to a balanced and healthy ecology" and "the right
to health" are combined with remedial standards as broad ranging as "a grave abuse of discretion
amounting to lack or excess of jurisdiction," the result will be, it is respectfully submitted, to propel
courts into the uncharted ocean of social and economic policy making. At least in respect of the vast
area of environmental protection and management, our courts have no claim to special technical
competence and experience and professional qualification. Where no specific, operable norms and
standards are shown to exist, then the policy making departments — the legislative and executive
departments — must be given a real and effective opportunity to fashion and promulgate those norms
and standards, and to implement them before the courts should intervene.

My learned brother Davide, Jr., J., rightly insists that the timber companies, whose concession
agreements or TLA's petitioners demand public respondents should cancel, must be impleaded in the
proceedings below. It might be asked that, if petitioners' entitlement to the relief demanded is not
dependent upon proof of breach by the timber companies of one or more of the specific terms and
conditions of their concession agreements (and this, petitioners implicitly assume), what will those
companies litigate about? The answer I suggest is that they may seek to dispute the existence of the
specific legal right petitioners should allege, as well as the reality of the claimed factual nexus between
petitioners' specific legal rights and the claimed wrongful acts or failures to act of public respondent
administrative agency. They may also controvert the appropriateness of the remedy or remedies
demanded by petitioners, under all the circumstances which exist.

I vote to grant the Petition for Certiorari because the protection of the environment, including the forest
cover of our territory, is of extreme importance for the country. The doctrines set out in the Court's
decision issued today should, however, be subjected to closer examination.

EN BANC

G.R. No. 180771 April 21, 2015

RESIDENT MARINE MAMMALS OF THE PROTECTED SEASCAPE TAÑON STRAIT, e.g.,

TOOTHED WHALES, DOLPHINS, PORPOISES, AND OTHER CETACEAN SPECIES, Joined in and
Represented herein by Human Beings Gloria Estenzo Ramos and Rose-Liza Eisma-Osorio, In Their
Capacity as Legal Guardians of the Lesser Life-Forms and as Responsible Stewards of God's
Creations, Petitioners,
vs.
SECRETARY ANGELO REYES, in his capacity as Secretary of the Department of Energy (DOE),
SECRETARY JOSE L. ATIENZA, in his capacity as Secretary of the Department of Environment and
Natural Resources (DENR), LEONARDO R. SIBBALUCA, DENR Regional Director-Region VII and in
his capacity as Chairperson of the Tañon Strait Protected Seascape Management Board, Bureau of
Fisheries and Aquatic Resources (BFAR), DIRECTOR MALCOLM J. SARMIENTO, JR., BFAR
Regional Director for Region VII ANDRES M. BOJOS, JAPAN PETROLEUM EXPLORATION CO.,
LTD. (JAPEX), as represented by its Philippine Agent, SUPPLY OILFIELD SERVICES, INC.
Respondents.

x-----------------------x
G.R. No. 181527

CENTRAL VISAYAS FISHERFOLK DEVELOPMENT CENTER (FIDEC), CERILO D. ENGARCIAL,

RAMON YANONG, FRANCISCO LABID, in their personal capacity and as representatives of the
SUBSISTENCE FISHERFOLKS OF THE MUNICIPALITIES OF ALOGUINSAN AND
PINAMUNGAJAN, CEBU, AND THEIR FAMILIES, AND THE PRESENT AND FUTURE
GENERATIONS OF FILIPINOS WHOSE RIGHTS ARE SIMILARLY AFFECTED, Petitioners,
vs.
SECRETARY ANGELO REYES, in his capacity as Secretary of the Department of Energy (DOE),
JOSE L. ATIENZA, in his capacity as Secretary of the Department of Environment and Natural
Resources (DENR), LEONARDO R. SIBBALUCA, in his capacity as DENR Regional Director-Region
VII and as Chairperson of the Tañon Strait Protected Seascape Management Board, ALAN
ARRANGUEZ, in his capacity as Director - Environmental Management Bureau-Region VII, DOE
Regional Director for Region VIII1 ANTONIO LABIOS, JAPAN PETROLEUM EXPLORATION CO.,
LTD. (JAPEX), as represented by its Philippine Agent, SUPPLY OILFIELD SERVICES, INC.,
Respondents.

DECISION

LEONARDO-DE CASTRO, J.:

Before Us are two consolidated Petitions filed under Rule 65 of the 1997 Rules of Court, concerning
Service Contract No. 46 (SC-46), which allowed the exploration, development, and exploitation of
petroleum resources within Tañon Strait, a narrow passage of water situated between the islands of
Negros and Cebu.2

The Petition docketed as G.R. No. 180771 is an original Petition for Certiorari, Mandamus, and
Injunction, which seeks to enjoin respondents from implementing SC-46 and to have it nullified for
willful and gross violation of the 1987 Constitution and certain international and municipal laws.3

Likewise, the Petition docketed as G.R. No. 181527 is an original Petition for Certiorari, Prohibition,
and Mandamus, which seeks to nullify the Environmental Compliance Certificate (ECC) issued by the
Environmental Management Bureau (EMB) of the Department of Environment and Natural Resources
(DENR), Region VII in connection with SC-46; to prohibit respondents from implementing SC-46; and
to compel public respondents to provide petitioners access to the pertinent documents involving the
Tañon Strait Oil Exploration Project.4

ANTECEDENT FACTS AND PROCEEDINGS

Petitioners in G.R. No. 180771, collectively referred to as the "Resident Marine Mammals" in the
petition, are the toothed whales, dolphins, porpoises, and other cetacean species, which inhabit the
waters in and around the Tañon Strait. They are joined by Gloria Estenzo Ramos (Ramos) and Rose-
Liza Eisma-Osorio (Eisma-Osorio) as their legal guardians and as friends (to be collectively known as
"the Stewards") who allegedly empathize with, and seek the protection of, the aforementioned marine
species. Also impleaded as an unwilling co-petitioner is former President Gloria Macapagal-Arroyo,
for her express declaration and undertaking in the ASEAN Charter to protect the Tañon Strait, among
others.5

Petitioners in G.R. No. 181527 are the Central Visayas Fisherfolk Development Center (FIDEC), a
non-stock, non-profit, non-governmental organization, established for the welfare of the marginal
fisherfolk in Region VII; and Cerilo D. Engarcial (Engarcial), Ramon Yanong (Yanong) and Francisco
Labid (Labid), in their personal capacities and as representatives of the subsistence fisherfolk of the
municipalities of Aloguinsan and Pinamungajan, Cebu.

Named as respondents in both petitions are the late Angelo T. Reyes, as then Secretary of the
Department of Energy (DOE); Jose L. Atienza, as then Secretary of the DENR; Leonardo R. Sibbaluca,
as then DENRRegional Director for Region VII and Chairman of the Tañon Strait Protected Seascape
Management Board; Japan Petroleum Exploration Co., Ltd. (JAPEX), a company organized and
existing under the laws of Japan with a Philippine branch office; and Supply Oilfield Services, Inc.
(SOS), as the alleged Philippine agent of JAPEX.

In G.R. No. 181527, the following were impleaded as additional public respondents: Alan C. Arranguez
(Arranguez) and Antonio Labios (Labios), in their capacities as then Director of the EMB, Region VII
and then Regional Director of the DOE, Region VII, respectively.6

On June 13, 2002, the Government of the Philippines, acting through the DOE, entered into a
Geophysical Survey and Exploration Contract-I 02 (GSEC-102) with JAPEX. This contract involved
geological and geophysical studies of the Tañon Strait. The studies included surface geology, sample
analysis, and reprocessing of seismic and magnetic data. JAPEX, assisted by DOE, also conducted
geophysical and satellite surveys, as well as oil and gas sampling in Tañon Strait.7
On December 21, 2004, DOE and JAPEX formally converted GSEC-102 into SC-46 for the
exploration, development, and production of petroleum resources in a block covering approximately
2,850 square kilometers offshore the Tañon Strait.8

From May 9 to 18, 2005, JAPEX conducted seismic surveys in and around the Tañon Strait. A multi-
channel sub-bottom profiling covering approximately 751 kilometers was also done to determine the
area's underwater composition.9

JAPEX committed to drill one exploration well during the second sub-phase of the project. Since the
well was to be drilled in the marine waters of Aloguinsan and Pinamungajan, where the Tañon Strait
was declared a protected seascape in 1988,10 JAPEX agreed to comply with the Environmental
Impact Assessment requirements pursuant to Presidential Decree No. 1586, entitled "Establishing An
Environmental Impact Statement System, Including Other Environmental Management Related
Measures And For Other Purposes."11

On January 31, 2007, the Protected Area Management Board12 of the Tañon Strait (PAMB-Tañon
Strait) issued Resolution No. 2007-001,13 wherein it adopted the Initial Environmental Examination
(IEE) commissioned by JAPEX, and favorably recommended the approval of JAPEX's application for
an ECC.

On March 6, 2007, the EMB of DENR Region VII granted an ECC to the DOE and JAPEX for the
offshore oil and gas exploration project in Tañon Strait.14 Months later, on November 16, 2007, JAPEX
began to drill an exploratory well, with a depth of 3,150 meters, near Pinamungajan town in the western
Cebu Province.15 This drilling lasted until February 8, 2008.16

It was in view of the foregoing state of affairs that petitioners applied to this Court for redress, via two
separate original petitions both dated December 1 7, 2007, wherein they commonly seek that
respondents be enjoined from implementing SC-46 for, among others, violation of the 1987
Constitution.

On March 31, 2008, SOS filed a Motion to Strike17 its name as a respondent on the ground that it is
not the Philippine agent of JAPEX. In support of its motion, it submitted the branch office application
of JAPEX,18 wherein the latter's resident agent was clearly identified. SOS claimed that it had acted
as a mere logistics contractor for JAPEX in its oil and gas exploration activities in the Philippines.

Petitioners Resident Marine Mammals and Stewards opposed SOS' s motion on the ground that it was
premature, it was pro-forma, and it was patently dilatory. They claimed that SOS admitted that "it is in
law a (sic) privy to JAPEX" since it did the drilling and other exploration activities in Tañon Strait under
the instructions of its principal, JAPEX. They argued that it would be premature to drop SOS as a party
as JAPEX had not yet been joined in the case; and that it was "convenient" for SOS to ask the Court
to simply drop its name from the parties when what it should have done was to either notify or ask
JAPEX to join it in its motion to enable proper substitution. At this juncture, petitioners Resident Marine
Mammals and Stewards also asked the Court to" implead JAPEX Philippines as a corespondent or as
a substitute for its parent company, JAPEX.19

On April 8, 2008, the Court resolved to consolidate G.R. No. 180771 and G.R. No. 181527.

On May 26, 2008, the FIDEC manifested20 that they were adopting in toto the Opposition to Strike
with Motion to Implead filed by petitioners Resident Marine Mammals and Stewards in G.R. No.
180771.

On June 19, 2008, public respondents filed their Manifestation21 that they were not objecting to SOS's
Motion to Strike as it was not JAPEX's resident agent. JAPEX during all this time, did not file any
comment at all.

Thus, on February 7, 2012, this Court, in an effort to ensure that all the parties were given ample
chance and opportunity to answer the issues herein, issued a Resolution directing the Court's process
servicing unit to again serve the parties with a copy of the September 23, 2008 Resolution of the Court,
which gave due course to the petitions in G.R. Nos. 180771 and 181527, and which required the
parties to submit their respective memoranda. The February 7, 2012 Resolution22 reads as follows:

G.R. No. 180771 (Resident Marine Mammals of the Protected Seascape Tañon Strait, e.g., Toothed
Whales, Dolphins, Porpoises and Other Cetacean Species, et al. vs. Hon. Angelo Reyes, in his
capacity as Secretary of the Department of Energy, et al.) and G.R. No. 181527 (Central Visayas
Fisherfolk Development Center, et al. vs. Hon. Angelo Reyes, et al.). - The Court Resolved to direct
the Process Servicing Unit to RE-SEND the resolution dated September 23, 2008 to the following
parties and counsel, together with this resolution:

Atty. Aristeo O. Carino

Counsel for Respondent Supply
Oilfield Services, Inc. 20th Floor Pearlbank Centre
146 Valero Street
Salcedo Village, Makati City
JAPEX Philippines Ltd. 20th Floor Pearlbank Centre
146 Valero Street
Salcedo Village, Makati City
JAPEX Philippines Ltd.
c/o Atty. Maria Farah Z.G.
Nicolas-Suchianco 19th Floor Pearlbank Centre
146 Valero Street
Salcedo Village, Makati City
Atty. Maria Farah Z.G.
Nicolas-Suchianco
Resident Agent of JAPEX
Philippines Ltd. Suite 2404 Discovery Centre
25 ADB Avenue
Ortigas Center, Pasig City
This Resolution was personally served to the above parties, at the above addresses on February 23,
2012. On March 20, 2012, JAPEX Philippines, Ltd. (JAPEX PH), by way of special appearance, filed
a Motion to Admit23 its Motion for Clarification,24 wherein JAPEX PH requested to be clarified as to
whether or not it should deem the February 7, 2012 Resolution as this Court's Order of its inclusion in
the case, as it has not been impleaded. It also alleged that JAPEX PH had already stopped exploration
activities in the Taft. on Strait way back in 2008, rendering this case moot.

On March 22, 2012, JAPEX PH, also by special appearance, filed a Motion for Extension of Time25
to file its Memorandum. It stated that since it received the February 7, 2012 Resolution on February
23, 2012, it had until March 22, 2012 to file its Memorandum. JAPEX PH then asked for an additional
thirty days, supposedly to give this Court some time to consider its Motion for Clarification.

On April 24, 2012, this Court issued a Resolution26 granting JAPEX PH's Motion to Admit its Motion
for Clarification. This Court, addressing JAPEX PH's Motion for Clarification, held:

With regard to its Motion for Clarification (By Special Appearance) dated March 19, 2012, this Court
considers JAPEX Philippines, Ltd. as a real party-in-interest in these cases. Under Section 2, Rule 3
of the 1997 Rules of Court, a real party-in-interest is the party who stands to be benefited or injured
by the judgment in the suit, or the party entitled to the avails of the suit. Contrary to JAPEX Philippines,
Ltd. 's allegation that it is a completely distinct corporation, which should not be confused with JAPEX
Company, Ltd., JAPEX Philippines, Ltd. is a mere branch office, established by JAPEX Company, Ltd.
for the purpose of carrying out the latter's business transactions here in the Philippines. Thus, JAPEX
Philippines, Ltd., has no separate personality from its mother foreign corporation, the party impleaded
in this case.

Moreover, Section 128 of the Corporation Code provides for the responsibilities and duties of a
resident agent of a foreign corporation:

SECTION 128. Resident agent; service of process. - The Securities and Exchange Commission shall
require as a condition precedent to the issuance of the license to transact business in the Philippines
by any foreign corporation that such corporation file with the Securities and Exchange Commission a
written power of attorney designating some person who must be a resident of the Philippines, on whom
any summons and other legal processes may be served in all actions or other legal proceedings
against such corporation, and consenting that service upon such resident agent shall be admitted and
held as valid as if served upon the duly authorized officers of the foreign corporation at its home office.
Any such foreign corporation shall likewise execute and file with the Securities and Exchange
Commission an agreement or stipulation, executed by the proper authorities of said corporation, in
form and substance as follows:

"The (name of foreign corporation) does hereby stipulate and agree, in consideration of its being
granted by the Securities and Exchange Commission a license to transact business in the Philippines,
that if at any time said corporation shall cease to transact business in the Philippines, or shall be
without any resident agent in the Philippines on whom any summons or other legal processes may be
served, then in any action or proceeding arising out of any business or transaction which occurred in
the Philippines, service of any summons or other legal process may be made upon the Securities and
Exchange Commission and that such service shall have the same force and effect as if made upon
the duly-authorized officers of the corporation at its home office."

Whenever such service of summons or other process shall be made upon the Securities and
Exchange Commission, the Commission shall, within ten (10) days thereafter, transmit by mail a copy
of such summons or other legal process to the corporation at its home or principal office. The sending
of such copy by the Commission shall be a necessary part of and shall complete such service. All
expenses incurred by the Commission for such service shall be paid in advance by the party at whose
instance the service is made.
In case of a change of address of the resident agent, it shall be his or its duty to immediately notify in
writing the Securities and Exchange Commission of the new address.

It is clear from the foregoing provision that the function of a resident agent is to receive summons or
legal processes that may be served in all actions or other legal proceedings against the foreign
corporation. These cases have been prosecuted in the name of JAPEX Company, Ltd., and JAPEX
Philippines Ltd., as its branch office and resident agent, had been receiving the various resolutions
from this Court, as evidenced by Registry Return Cards signed by its representatives.

And in the interest of justice, this Court resolved to grant JAPEX PH's motion for extension of time to
file its memorandum, and was given until April 21, 2012, as prayed for, within which to comply with the
submission.27

Without filing its Memorandum, JAPEX PH, on May 14, 2012, filed a motion, asking this Court for an
additional thirty days to file its Memorandum, to be counted from May 8, 2012. It justified its request
by claiming that this Court's April 24, 2012 Resolution was issued past its requested deadline for filing,
which was on April 21, 2012.28

On June 19, 2012, this Court denied JAPEX PH's second request for additional time to file its
Memorandum and dispensed with such filing.

Since petitioners had already filed their respective memoranda,29 and public respondents had earlier
filed a Manifestation30 that they were adopting their Comment dated March 31, 2008 as their
memorandum, this Court submitted the case for decision.

Petitioners.' Allegations

Protesting the adverse ecological impact of JAPEX's oil exploration activities in the Tañon Strait,
petitioners Resident Marine Mammals and Stewards aver that a study made after the seismic survey
showed that the fish catch was reduced drastically by 50 to 70 percent. They claim that before the
seismic survey, the average harvest per day would be from 15 to 20 kilos; but after the activity, the
fisherfolk could only catch an average of 1 to 2 kilos a day. They attribute this "reduced fish catch" to
the destruction of the ''payao," also known as the "fish aggregating device" or "artificial reef."31
Petitioners Resident Marine Mammals and Stewards also impute the incidences of "fish kill"32
observed by some of the local fisherfolk to the seismic survey. And they further allege that the ECC
obtained by private respondent JAPEX is invalid because public consultations and discussions with
the affected stakeholders, a pre-requisite to the issuance of the ECC, were not held prior to the ECC's
issuance.

In its separate petition, petitioner FIDEC confirms petitioners Resident Marine Mammals and
Stewards' allegations of reduced fish catch and lack of public consultations or discussions with the
fisherfolk and other stakeholders prior to the issuance of the ECC. Moreover, it alleges that during the
seismic surveys and drilling, it was barred from entering and fishing within a 7-kilometer radius from
the point where the oilrig was located, an area greater than the 1.5-kilometer radius "exclusion zone"
stated in the IEE.33 It also agrees in the allegation that public respondents DENR and EMB abused
their discretion when they issued an ECC to public respondent DOE and private respondent JAPEX
without ensuring the strict compliance with the procedural and substantive requirements under the
Environmental Impact Assessment system, the Fisheries Code, and their implementing rules and
regulations.34 It further claims that despite several requests for copies of all the documents pertaining
to the project in Tañon Strait, only copies of the P AMB-Tañon Strait Resolution and the ECC were
given to the fisherfolk.35

Public Respondents' Counter-Allegations

Public respondents, through the Solicitor General, contend that petitioners Resident Marine Mammals
and Stewards have no legal standing to file the present petition; that SC-46 does not violate the 1987
Constitution and the various laws cited in the petitions; that the ECC was issued in accordance with
existing laws and regulations; that public respondents may not be compelled by mandamus to furnish
petitioners copies of all documents relating to SC-46; and that all the petitioners failed to show that
they are entitled to injunctive relief. They further contend that the issues raised in these petitions have
been rendered moot and academic by the fact that SC-46 had been mutually terminated by the parties
thereto effective June 21, 2008.36

ISSUES

The following are the issues posited by petitioners Resident Marine Mammals and Stewards in G.R.
No. 180771:

I. WHETHER OR NOT PETITIONERS HAVE LOCUS STAND! TO FILE THE INSTANT PETITION;
II. WHETHER OR NOT SERVICE CONTRACT NO. 46 IS VIOLA T[IVE] OF THE 1987 PHILIPPINE
CONSTITUTION AND STATUTES;

III. WHETHER OR NOT THE ON-GOING EXPLORATION AND PROPOSED EXPLOITATION FOR
OIL AND NATURAL GAS AT, AROUND, AND UNDERNEATH THE MARINE WATERS OF THE
TAÑON STRAIT PROTECTED SEASCAPE IS INCONSISTENT WITH THE PHILIPPINE
COMMITMENTS TO INTERNATIONAL ENVIRONMENTAL LAWS AND INSTRUMENTS; AND

IV. WHETHER OR NOT THE ISSUANCE OF THE ENVIRONMENTAL COMPLIANCE CERTIFICATE

(ECC) IN ENVIRONMENTALLY CRITICAL AREAS AND HABITATS OF MARINE WILDLIFE AND
ENDANGERED SPECIES IS LEGAL AND PROPER.37

Meanwhile, in G.R. No. 181527, petitioner FIDEC presented the following issues for our consideration:

I. WHETHER OR NOT SERVICE CONTRACT NO. 46 EXECUTED BETWEEN RESPONDENTS DOE

AND JAPEX SHOULD BE NULLIFIED AND SET ASIDE FOR BEING IN DIRECT VIOLATION OF
SPECIFIC PROVISIONS OF THE 1987 PHILIPPINE CONSTITUTION AND APPLICABLE LAWS;

II. WHETHER OR NOT THE OFF-SHORE OIL EXPLORAT[I]ON CONTEMPLATED UNDER

SERVICE CONTRACT NO. 46 ·IS LEGALLY PERMISSIBLE WITHOUT A LAW BEING DULY
PASSED EXPRESSLY FOR THE PURPOSE;

III. WHETHER OR NOT THE OIL EXPLORATION BEING CONDUCTED WITHIN THE TAÑON
STRAIT PROTECTED SEASCAPE VIOLATES THE RIGHTS AND LEGAL PROTECTION GRANTED
TO PETITIONERS UNDER THE CONSTITUTION AND APPLICABLE LAWS.

IV. WHETHER OR NOT THE ISSUANCE OF THE ENVIRONMENTAL COMPLIANCE CERTIFICATE

(ECC) FOR SUCH AN ENVIRONMENTALLY CRITICAL PROJECT INSIDE AN
ENVIRONMENTALLY CRITICAL AREA SUCH AS THE TAÑON STRAIT PROTECTED SEASCAPE
CONFORMED TO LAW AND EXISTING RULES AND REGULATIONS ON THE MATTER.

V. WHETHER OR NOT THE RESPONDENTS MAY BE COMPELLED BY MANDAMUS TO FURNISH

PETITIONERS WITH COPIES OF THE DOCUMENTS PERTAINING TO THE TAÑON STRAIT OIL
EXPLORATION PROJECT.38

In these consolidated petitions, this Court has determined that the various issues raised by the
petitioners may be condensed into two primary issues:

I. Procedural Issue: Locus Standi of the Resident Marine Mammals and Stewards, petitioners in G.R.
No. 180771; and

II. Main Issue: Legality of Service Contract No. 46.

DISCUSSION

At the outset, this Court makes clear that the "'moot and academic principle' is not a magical formula
that can automatically dissuade the courts in resolving a case." Courts have decided cases otherwise
moot and academic under the following exceptions:

1) There is a grave violation of the Constitution;

2) The exceptional character of the situation and the paramount public interest is involved;

3) The constitutional issue raised requires formulation of controlling principles to guide the bench, the
bar, and the public; and

4) The case is capable of repetition yet evading review.39

In this case, despite the termination of SC-46, this Court deems it necessary to resolve these
consolidated petitions as almost all of the foregoing exceptions are present in this case. Both
petitioners allege that SC-46 is violative of the Constitution, the environmental and livelihood issues
raised undoubtedly affect the public's interest, and the respondents' contested actions are capable of
repetition.

Procedural Issues

Locus Standi of Petitioners Resident Marine Mammals and Stewards

The Resident Marine Mammals, through the Stewards, "claim" that they have the legal standing to file
this action since they stand to be benefited or injured by the judgment in this suit.40 Citing Oposa v.
Factoran, Jr.,41 they also assert their right to sue for the faithful performance of international and
municipal environmental laws created in their favor and for their benefit. In this regard, they propound
that they have the right to demand that they be accorded the benefits granted to them in multilateral
international instruments that the Philippine Government had signed, under the concept of stipulation
pour autrui.42

For their part, the Stewards contend that there should be no question of their right to represent the
Resident Marine Mammals as they have stakes in the case as forerunners of a campaign to build
awareness among the affected residents of Tañon Strait and as stewards of the environment since
the primary steward, the Government, had failed in its duty to protect the environment pursuant to the
public trust doctrine.43

Petitioners Resident Marine Mammals and Stewards also aver that this Court may lower the
benchmark in locus standi as an exercise of epistolary jurisdiction.44

In opposition, public respondents argue that the Resident Marine Mammals have no standing because
Section 1, Rule 3 of the Rules of Court requires parties to an action to be either natural or juridical
persons, viz.:

Section 1. Who may be parties, plaintiff and defendant. - Only natural or juridical persons, or entities
authorized by law may be parties in a civil action. The term "plaintiff' may refer to the claiming party,
the counter-claimant, the cross-claimant, or the third (fourth, etc.)-party plaintiff. The term "defendant"
may refer to the original defending party, the defendant in a counterclaim, the cross-defendant, or the
third (fourth, etc.)-party defendant.

The public respondents also contest the applicability of Oposa, pointing out that the petitioners therein
were all natural persons, albeit some of them were still unborn.45

As regards the Stewards, the public respondents likewise challenge their claim of legal standing on
the ground that they are representing animals, which cannot be parties to an action. Moreover, the
public respondents argue that the Stewards are not the real parties-in-interest for their failure to show
how they stand to be benefited or injured by the decision in this case.46 Invoking the alter ego principle
in political law, the public respondents claim that absent any proof that former President Arroyo had
disapproved of their acts in entering into and implementing SC-46, such acts remain to be her own.47

The public respondents contend that since petitioners Resident Marine Mammals and Stewards'
petition was not brought in the name of a real party-in-interest, it should be dismissed for failure to
state a cause of action.48

The issue of whether or not animals or even inanimate objects should be given legal standing in actions
before courts of law is not new in the field o f animal rights and environmental law. Petitioners Resident
Marine Mammals and Stewards cited the 1972 United States case Sierra Club v. Rogers C.B.
Morton,49 wherein Justice William 0. Douglas, dissenting to the conventional thought on legal
standing, opined:

The critical question of "standing" would be simplified and also put neatly in focus if we fashioned a
federal rule that allowed environmental issues to be litigated before federal agencies or federal courts
in the name of the inanimate object about to be despoiled, defaced, or invaded by roads and bulldozers
and where injury is the subject of public outrage. x x x. Inanimate objects are sometimes parties in
litigation. A ship has a legal personality, a fiction found useful for maritime purposes. The corporation
sole - a creature of ecclesiastical law - is an acceptable adversary and large fortunes ride on its cases.
The ordinary corporation is a "person" for purposes of the adjudicatory processes, whether it
represents proprietary, spiritual, aesthetic, or charitable causes.

So it should be as respects valleys, alpine meadows, rivers, lakes, estuaries, beaches, ridges, groves
of trees, swampland, or even air that feels the destructive pressures of modem technology and modem
life. The river, for example, is the living symbol of all the life it sustains or nourishes-fish, aquatic
insects, water ouzels, otter, fisher, deer, elk, bear, and all other animals, including man, who are
dependent on it or who enjoy it for its sight, its sound, or its life. The river as plaintiff speaks for the
ecological unit of life that is part of it. Those people who have a meaningful relation to that body of
water-whether it be a fisherman, a canoeist, a zoologist, or a logger-must be able to speak for the
values which the river represents and which are threatened with destruction.50 (Citations omitted.)

The primary reason animal rights advocates and environmentalists seek to give animals and inanimate
objects standing is due to the need to comply with the strict requirements in bringing a suit to court.
Our own 1997 Rules of Court demand that parties to a suit be either natural or juridical persons, or
entities authorized by law. It further necessitates the action to be brought in the name of the real party-
in-interest, even if filed by a representative, viz.:

Rule 3
Parties to Civil Actions
Section 1. Who may be parties; plaintiff and defendant. - Only natural or juridical persons, or entities
authorized by law may be parties in a civil action. The term "plaintiff' may refer to the claiming party,
the counter-claimant, the cross-claimant, or the third (fourth, etc.)-party plaintiff. The term "defendant"
may refer to the original defending party, the defendant in a counterclaim, the cross-defendant, or the
third (fourth, etc.)-party defendant.

Sec. 2. Parties in interest. - A real party in interest is the party who stands to be benefited or injured
by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized
by law or these Rules, every action must be prosecuted or defended in the name of the real party in
interest.

Sec. 3. Representatives as parties. - Where the action is allowed to be prosecuted or defended by a

representative or someone acting in a fiduciary capacity, the beneficiary shall be included in the title
of the case and shall be deemed to be the real party in interest. A representative may be a trustee of
an express trust, a guardian, an executor or administrator, or a party authorized by law or these Rules.
An agent acting in his own name and for the benefit of an undisclosed principal may sue or be sued
without joining the principal except when the contract involves things belonging to the principal.

It had been suggested by animal rights advocates and environmentalists that not only natural and
juridical persons should be given legal standing because of the difficulty for persons, who cannot show
that they by themselves are real parties-in-interests, to bring actions in representation of these animals
or inanimate objects. For this reason, many environmental cases have been dismissed for failure of
the petitioner to show that he/she would be directly injured or affected by the outcome of the case.
However, in our jurisdiction, locus standi in environmental cases has been given a more liberalized
approach. While developments in Philippine legal theory and jurisprudence have not progressed as
far as Justice Douglas's paradigm of legal standing for inanimate objects, the current trend moves
towards simplification of procedures and facilitating court access in environmental cases.

Recently, the Court passed the landmark Rules of Procedure for Environmental Cases,51 which allow
for a "citizen suit," and permit any Filipino citizen to file an action before our courts for violations of our
environmental laws:

SEC. 5. Citizen suit. - Any Filipino citizen in representation of others, including minors or generations
yet unborn, may file an action to enforce rights or obligations under environmental laws. Upon the filing
of a citizen suit, the court shall issue an order which shall contain a brief description of the cause of
action and the reliefs prayed for, requiring all interested parties to manifest their interest to intervene
in the case within fifteen (15) days from notice thereof. The plaintiff may publish the order once in a
newspaper of a general circulation in the Philippines or furnish all affected barangays copies of said
order.

Citizen suits filed under R.A. No. 8749 and R.A. No. 9003 shall be governed by their respective
provisions.52 (Emphasis ours.)

Explaining the rationale for this rule, the Court, in the Annotations to the Rules of Procedure for
Environmental Cases, commented:

Citizen suit. To further encourage the protection of the environment, the Rules enable litigants
enforcing environmental rights to file their cases as citizen suits. This provision liberalizes standing for
all cases filed enforcing environmental laws and collapses the traditional rule on personal and direct
interest, on the principle that humans are stewards of nature. The terminology of the text reflects the
doctrine first enunciated in Oposa v. Factoran, insofar as it refers to minors and generations yet
unborn.53 (Emphasis supplied, citation omitted.) Although this petition was filed in 2007, years before
the effectivity of the Rules of Procedure for Environmental Cases, it has been consistently held that
rules of procedure "may be retroactively applied to actions pending and undetermined at the time of
their passage and will not violate any right of a person who may feel that he is adversely affected,
inasmuch as there is no vested rights in rules of procedure."54

Elucidating on this doctrine, the Court, in Systems Factors Corporation v. National Labor Relations
Commission55 held that:

Remedial statutes or statutes relating to remedies or modes of procedure, which do not create new or
take away vested rights, but only operate in furtherance of the remedy or confirmation of rights already
existing, do not come within the legal conception of a retroactive law, or the general rule against
retroactive operation of statutes. Statutes regulating the procedure of the courts will be construed as
applicable to actions pending and undetermined at the time of their passage. Procedural laws are
retroactive in that sense and to that extent. x x x.

Moreover, even before the Rules of Procedure for Environmental · Cases became effective, this Court
had already taken a permissive position on the issue of locus standi in environmental cases. In Oposa,
we allowed the suit to be brought in the name of generations yet unborn "based on the concept of
intergenerational responsibility insofar as the right to a balanced and healthful ecology is
concerned."56 Furthermore, we said that the right to a balanced and healthful ecology, a right that
does not even need to be stated in our Constitution as it is assumed to exist from the inception of
humankind, carries with it the correlative duty to refrain from impairing the environment.57

In light of the foregoing, the need to give the Resident Marine Mammals legal standing has been
eliminated by our Rules, which allow any Filipino citizen, as a steward of nature, to bring a suit to
enforce our environmental laws. It is worth noting here that the Stewards are joined as real parties in
the Petition and not just in representation of the named cetacean species. The Stewards, Ramos and
Eisma-Osorio, having shown in their petition that there may be possible violations of laws concerning
the habitat of the Resident Marine Mammals, are therefore declared to possess the legal standing to
file this petition.

Impleading Former President Gloria Macapagal-Arroyo

as an Unwilling Co-Petitioner

Petitioners Stewards in G.R. No. 180771 impleaded as an unwilling co-petitioner former President
Gloria Macapagal-Arroyo for the following reasons, which we quote:

Her Excellency Gloria Macapagal-Arroyo, also of legal age, Filipino and resident of Malacailang
Palace, Manila Philippines. Steward Gloria Macapagal-Arroyo happens to be the incumbent President
of the Philippine Islands. She is personally impleaded in this suit as an unwilling co-petitioner by reason
of her express declaration and undertaking under the recently signed ASEAN Charter to protect Your
Petitioners' habitat, among others. She is meantime dominated as an unwilling co-petitioner due to
lack of material time in seeking her signature and imprimatur hereof and due to possible legal
complications that may hereafter arise by reason of her official relations with public respondents under
the alter ego principle in political law.58 This is incorrect.

Section 10, Rule 3 of the Rules of Court provides:

Sec. 10. Unwilling co-plaintiff. - If the consent of any party who should be joined as plaintiff can not be
obtained, he may be made a defendant and the reason therefor shall be stated in the complaint.

Under the foregoing rule, when the consent of a party who should be joined as a plaintiff cannot be
obtained, he or she may be made a party defendant to the case. This will put the unwilling party under
the jurisdiction of the Court, which can properly implead him or her through its processes. The unwilling
party's name cannot be simply included in a petition, without his or her knowledge and consent, as
such would be a denial of due process.

Moreover, the reason cited by the petitioners Stewards for including former President Macapagal-
Arroyo in their petition, is not sufficient to implead her as an unwilling co-petitioner. Impleading the
former President as an unwilling co-petitioner, for an act she made in the performance of the functions
of her office, is contrary to the public policy against embroiling the President in suits, "to assure the
exercise of Presidential duties and functions free from any hindrance or distraction, considering that
being the Chief Executive of the Government is a job that, aside from requiring all of the office holder's
time, also demands undivided attention."59

Therefore, former President Macapagal-Arroyo cannot be impleaded as one of the petitioners in this
suit. Thus, her name is stricken off the title of this case.

Main Issue:

Legality of Service Contract No. 46

Service Contract No. 46 vis-a-vis
Section 2, Article XII of the
1987 Constitution

Petitioners maintain that SC-46 transgresses the Jura Regalia Provision or paragraph 1, Section 2,
Article XII of the 1987 Constitution because JAPEX is 100% Japanese-owned.60 Furthermore, the
FIDEC asserts that SC-46 cannot be considered as a technical and financial assistance agreement
validly executed under paragraph 4 of the same provision.61 The petitioners claim that La Bugal-
B'laan Tribal Association, Inc. v. Ramos62 laid down the guidelines for a valid service contract, one of
which is that there must exist a general law for oil exploration before a service contract may be entered
into by the Government. The petitioners posit that the service contract in La Bugal is presumed to have
complied with the requisites of (a) legislative enactment of a general law after the effectivity of the
1987 Constitution (such as Republic Act No. 7942, or the Philippine Mining Law of 1995, governing
mining contracts) and (b) presidential notification. The petitioners thus allege that the ruling in La
Bugal, which involved mining contracts under Republic Act No. 7942, does not apply in this case.63
The petitioners also argue that Presidential Decree No. 87 or the Oil Exploration and Development
Act of 1972 cannot legally justify SC-46 as it is deemed to have been repealed by the 1987 Constitution
and subsequent laws, which enunciate new policies concerning the environment.64 In addition,
petitioners in G.R. No. 180771 claim that paragraphs 2 and 3 of Section 2, Article XII of the 1987
Constitution mandate the exclusive use and enjoyment by the Filipinos of our natural resources,65
and paragraph 4 does not speak of service contracts but of FTAAs or Financial Technical Assistance
Agreements.66

The public respondents again controvert the petitioners' claims and asseverate that SC-46 does not
violate Section 2, Article XII of the 1987 Constitution. They hold that SC-46 does not fall under the
coverage of paragraph 1 but instead, under paragraph 4 of Section 2, Article XII of the 1987
Constitution on FTAAs. They also insist that paragraphs 2 and 3, which refer to the grant of exclusive
fishing right to Filipinos, are not applicable to SC-46 as the contract does not grant exclusive fishing
rights to JAPEX nor does it otherwise impinge on the FIDEC's right to preferential use of communal
marine and fishing resources.67

Ruling of the Court

On the legality of Service Contract No. 46

vis-a-vis Section 2, Article XII of the 1987 Constitution

The petitioners insist that SC-46 is null and void for having violated Section 2, Article XII of the 1987
Constitution, which reads as follows:

Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural resources
shall not be alienated. The exploration, development, and utilization of natural resources shall be under
the full control and supervision of the State. The State may directly undertake such activities, or it may
enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or
corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such
agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-
five years, and under such terms and conditions as may be provided by law. In cases of water rights
for irrigation, water supply, fisheries, or industrial uses other than the development of water power,
beneficial use may be the measure and limit of the grant.

The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and
exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens. The
Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as
cooperative fish farming, with priority to subsistence fishermen and fishworkers in rivers, lakes, bays,
and lagoons.

The President may enter into agreements with foreign-owned corporations involving either technical
or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum,
and other mineral oils according to the general terms and conditions provided by law, based on real
contributions to the economic growth and general welfare of the country. In such agreements, the
State shall promote the development and use of local scientific and technical resources.

The President shall notify the Congress of every contract entered into in accordance with this
provision, within thirty days from its execution. (Emphases ours.)

This Court has previously settled the issue of whether service contracts are still allowed under the
1987 Constitution. In La Bugal, we held that the deletion of the words "service contracts" in the 1987
Constitution did not amount to a ban on them per se. In fact, in that decision, we quoted in length,
portions of the deliberations of the members of the Constitutional Commission (ConCom) to show that
in deliberating on paragraph 4, Section 2, Article XII, they were actually referring to service contracts
as understood in the 1973 Constitution, albeit with safety measures to eliminate or minimize the
abuses prevalent during the martial law regime, to wit: Summation of the

ConCom Deliberations

At this point, we sum up the matters established, based on a careful reading of the Con Com
deliberations, as follows:

In their deliberations on what was to become paragraph 4, the framers used the term service contracts
in referring to agreements x x x involving either technical or financial assistance.

They spoke of service contracts as the concept was understood in the 1973 Constitution.

It was obvious from their discussions that they were not about to ban or eradicate service contracts.

Instead, they were plainly crafting provisions to put in place safeguards that would eliminate or
minimize the abuses prevalent during the marital law regime. In brief, they were going to permit service
contracts with foreign corporations as contractors, but with safety measures to prevent abuses, as an
exception to the general norm established in the first paragraph of Section 2 of Article XII. This
provision reserves or limits to Filipino citizens -- and corporations at least 60 percent of which is owned
by such citizens -- the exploration, development and utilization of natural resources.

This provision was prompted by the perceived insufficiency of Filipino capital and the felt need for
foreign investments in the EDU of minerals and petroleum resources.

The framers for the most part debated about the sort of safeguards that would be considered adequate
and reasonable. But some of them, having more "radical" leanings, wanted to ban service contracts
altogether; for them, the provision would permit aliens to exploit and benefit from the nation's natural
resources, which they felt should be reserved only for Filipinos.

In the explanation of their votes, the individual commissioners were heard by the entire body. They
sounded off their individual opinions, openly enunciated their philosophies, and supported or attacked
the provisions with fervor. Everyone's viewpoint was heard.

In the final voting, the Article on the National Economy and Patrimony -- including paragraph 4 allowing
service contracts with foreign corporations as an exception to the general norm in paragraph 1 of
Section 2 of the same article --was resoundingly approved by a vote of 32 to 7, with 2 abstentions.

Agreements Involving Technical

Or Financial Assistance Are
Service Contracts with Safeguards

From the foregoing, we are impelled to conclude that the phrase agreements involving either technical
or financial assistance, referred to in paragraph 4, are in fact service contracts. But unlike those of the
1973 variety, the new ones are between foreign corporations acting as contractors on the one hand;
and on the other, the government as principal or "owner" of the works. In the new service contracts,
the foreign contractors provide capital, technology and technical know-how, and managerial expertise
in the creation and operation of large-scale mining/extractive enterprises; and the government, through
its agencies (DENR, MGB), actively exercises control and supervision over the entire operation.68

In summarizing the matters discussed in the ConCom, we established that paragraph 4, with the
safeguards in place, is the exception to paragraph 1, Section 2 of Article XII. The following are the
safeguards this Court enumerated in La Bugal:

Such service contracts may be entered into only with respect to minerals, petroleum and other mineral
oils. The grant thereof is subject to several safeguards, among which are these requirements:

(1) The service contract shall be crafted in accordance with a general law that will set standard or
uniform terms, conditions and requirements, presumably to attain a certain uniformity in provisions
and avoid the possible insertion of terms disadvantageous to the country.

(2) The President shall be the signatory for the government because, supposedly before an agreement
is presented to the President for signature, it will have been vetted several times over at different levels
to ensure that it conforms to law and can withstand public scrutiny.

(3) Within thirty days of the executed agreement, the President shall report it to Congress to give that
branch of government an opportunity to look over the agreement and interpose timely objections, if
any.69

Adhering to the aforementioned guidelines, this Court finds that SC-46 is indeed null and void for
noncompliance with the requirements of the 1987 Constitution.

1. The General Law on Oil Exploration

The disposition, exploration, development, exploitation, and utilization of indigenous petroleum in the
Philippines are governed by Presidential Decree No. 87 or the Oil Exploration and Development Act
of 1972. This was enacted by then President Ferdinand Marcos to promote the discovery and
production of indigenous petroleum through the utilization of government and/or local or foreign private
resources to yield the maximum benefit to the Filipino people and the revenues to the Philippine
Government.70

Contrary to the petitioners' argument, Presidential Decree No. 87, although enacted in 1972, before
the adoption of the 1987 Constitution, remains to be a valid law unless otherwise repealed, to wit:

ARTICLE XVIII - TRANSITORY PROVISIONS

Section 3. All existing laws, decrees, executive orders, proclamations, letters of instructions, and other
executive issuances not inconsistent with this Constitution shall remain operative until amended,
repealed, or revoked.
If there were any intention to repeal Presidential Decree No. 87, it would have been done expressly
by Congress. For instance, Republic Act No. 7160, more popularly known as the Local Government
Code of 1991, expressly repealed a number of laws, including a specific provision in Presidential
Decree No. 87, viz.:

SECTION 534. Repealing Clause. - (a) Batas Pambansa Blg. 337, otherwise known as the "Local
Government Code," Executive Order No. 112 (1987), and Executive Order No. 319 (1988) are hereby
repealed.

(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders, instructions,
memoranda and issuances related to or concerning the barangay are hereby repealed.

(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund; Section
3, a (3) and b (2) of Republic Act No. 5447 regarding the Special Education Fund; Presidential Decree
No. 144 as amended by Presidential Decree Nos. 559 and 1741; Presidential Decree No. 231 as
amended; Presidential Decree No. 436 as amended by Presidential Decree No. 558; and Presidential
Decree Nos. 381, 436, 464, 477, 526, 632, 752, and 1136 are hereby repealed and rendered of no
force and effect.

(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded projects.

(e) The following provisions are hereby repealed or amended insofar as they are inconsistent with the
provisions of this Code: Sections 2, 16 and 29 of Presidential Decree No. 704; Section 12 of
Presidential Decree No. 87, as amended; Sections 52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of
Presidential Decree No. 463, as amended; and Section 16 of Presidential Decree No. 972, as
amended, and

(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and
administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of
this Code are hereby repealed or modified accordingly. (Emphasis supplied.)

This Court could not simply assume that while Presidential Decree No. 87 had not yet been expressly
repealed, it had been impliedly repealed. As we held in Villareña v. The Commission on Audit,71
"[i]mplied repeals are not lightly presumed." It is a settled rule that when laws are in conflict with one
another, every effort must be exerted to reconcile them. In Republic of the Philippines v. Marcopper
Mining Corporation,72 we said:

The two laws must be absolutely incompatible, and a clear finding thereof must surface, before the
inference of implied repeal may be drawn. The rule is expressed in the maxim, interpretare et
concordare leqibus est optimus interpretendi, i.e., every statute must be so interpreted and brought
into accord with other laws as to form a uniform system of jurisprudence. The fundament is that the
legislature should be presumed to have known the existing laws on the subject and not have enacted
conflicting statutes. Hence, all doubts must be resolved against any implied repeal, and all efforts
should be exerted in order to harmonize and give effect to all laws on the subject. (Citation omitted.)

Moreover, in cases where the statute seems to be in conflict with the Constitution, but a construction
that it is in harmony with the Constitution is also possible, that construction should be preferred.73
This Court, in Pangandaman v. Commission on Elections74 expounding on this point, pronounced:

It is a basic precept in statutory construction that a statute should be interpreted in harmony with the
Constitution and that the spirit, rather than the letter of the law determines its construction; for that
reason, a statute must be read according to its spirit and intent. x x x. (Citation omitted.)

Consequently, we find no merit in petitioners' contention that SC-46 is prohibited on the ground that
there is no general law prescribing the standard or uniform terms, conditions, and requirements for
service contracts involving oil exploration and extraction.

But note must be made at this point that while Presidential Decree No. 87 may serve as the general
law upon which a service contract for petroleum exploration and extraction may be authorized, as will
be discussed below, the exploitation and utilization of this energy resource in the present case may
be allowed only through a law passed by Congress, since the Tañon Strait is a NIPAS75 area.

2. President was not the signatory to SC-46 and the same was not submitted to Congress

While the Court finds that Presidential Decree No. 87 is sufficient to satisfy the requirement of a general
law, the absence of the two other conditions, that the President be a signatory to SC-46, and that
Congress be notified of such contract, renders it null and void.

As SC-46 was executed in 2004, its terms should have conformed not only to the provisions of
Presidential Decree No. 87, but also to those of the 1987 Constitution. The Civil Code provides:
ARTICLE 1306. The contracting parties may establish such stipulations, clauses, terms and conditions
as they may deem convenient, provided they are not contrary to law, morals, good customs, public
order, or public policy. (Italics ours.)

In Heirs of San Miguel v. Court of Appeals,76 this Court held that:

It is basic that the law is deemed written into every contract. Although a contract is the law between
the parties, the provisions of positive law which regulate contracts are deemed written therein and
shall limit and govern the relations between the parties. x x x. (Citations omitted.) Paragraph 4, Section
2, Article XII of the 1987 Constitution requires that the President himself enter into any service contract
for the exploration of petroleum. SC-46 appeared to have been entered into and signed only by the
DOE through its then Secretary, Vicente S. Perez, Jr., contrary to the said constitutional requirement.
Moreover, public respondents have neither shown nor alleged that Congress was subsequently
notified of the execution of such contract.

Public respondents' implied argument that based on the "alter ego principle," their acts are also that
of then President Macapagal-Arroyo's, cannot apply in this case. In Joson v. Torres,77 we explained
the concept of the alter ego principle or the doctrine of qualified political agency and its limit in this
wise:

Under this doctrine, which recognizes the establishment of a single executive, all executive and
administrative organizations are adjuncts of the Executive Department, the heads of the various
executive departments are assistants and agents of the Chief Executive, and, except in cases where
the Chief Executive is required by the Constitution or law to act in person or the exigencies of the
situation demand that he act personally, the multifarious executive and administrative functions of the
Chief Executive are performed by and through the executive departments, and the acts of the
Secretaries of such departments, performed and promulgated in the regular course of business, are,
unless disapproved or reprobated by the Chief Executive presumptively the acts of the Chief
Executive. (Emphasis ours, citation omitted.)

While the requirements in executing service contracts in paragraph 4, Section 2 of Article XII of the
1987 Constitution seem like mere formalities, they, in reality, take on a much bigger role. As we have
explained in La Bugal, they are the safeguards put in place by the framers of the Constitution to
"eliminate or minimize the abuses prevalent during the martial law regime."78 Thus, they are not just
mere formalities, which will only render a contract unenforceable but not void, if not complied with.
They are requirements placed, not just in an ordinary statute, but in the fundamental law, the non-
observance of which will nullify the contract. Elucidating on the concept of a "constitution," this Court,
in Manila Prince Hotel v. Government Service Insurance System,79 held:

A constitution is a system of fundamental laws for the governance and administration of a nation. It is
supreme, imperious, absolute and unalterable except by the authority from which it emanates. It has
been defined as the fundamental and paramount law of the nation. It prescribes the permanent
framework of a system of government, assigns to the different departments their respective powers
and duties, and establishes certain fixed principles on which government is founded. The fundamental
conception in other words is that it is a supreme law to which all other laws must conform and in
accordance with which all private rights must be determined and all public authority administered.
Under the doctrine of constitutional supremacy, if a law or contract violates any norm of the constitution
that law or contract whether promulgated by the legislative or by the executive branch or entered into
by private persons for private purposes is null and void and without any force and effect. Thus, since
the Constitution is the fundamental, paramount and supreme law of the nation, it is deemed written in
every statute and contract. (Emphasis ours.)

As this Court has held in La Bugal, our Constitution requires that the President himself be the signatory
of service agreements with foreign-owned corporations involving the exploration, development, and
utilization of our minerals, petroleum, and other mineral oils. This power cannot be taken lightly.

In this case, the public respondents have failed to show that the President had any participation in SC-
46. Their argument that their acts are actually the acts of then President Macapagal-Arroyo, absent
proof of her disapproval, must fail as the requirement that the President herself enter into these kinds
of contracts is embodied not just in any ordinary statute, but in the Constitution itself. These service
contracts involving the exploitation, development, and utilization of our natural resources are of
paramount interest to the present and future generations. Hence, safeguards were put in place to
insure that the guidelines set by law are meticulously observed and likewise to eradicate the corruption
that may easily penetrate departments and agencies by ensuring that the President has authorized or
approved of these service contracts herself.

Even under the provisions of Presidential Decree No. 87, it is required that the Petroleum Board, now
the DOE, obtain the President's approval for the execution of any contract under said statute, as shown
in the following provision:

SECTION 5. Execution of contract authorized in this Act. -Every contract herein authorized shall,
subject to the approval of the President, be executed by the Petroleum Board created in this Act, after
due public notice pre-qualification and public bidding or concluded through negotiations. In case bids
are requested or if requested no bid is submitted or the bids submitted are rejected by the Petroleum
Board for being disadvantageous to the Government, the contract may be concluded through
negotiation.

In opening contract areas and in selecting the best offer for petroleum operations, any of the following
alternative procedures may be resorted to by the Petroleum Board, subject to prior approval of the
President[.]

Even if we were inclined to relax the requirement in La Bugal to harmonize the 1987 Constitution with
the aforementioned provision of Presidential Decree No. 87, it must be shown that the government
agency or subordinate official has been authorized by the President to enter into such service contract
for the government. Otherwise, it should be at least shown that the President subsequently approved
of such contract explicitly. None of these circumstances is evident in the case at bar.

Service Contract No. 46 vis-a-vis Other Laws

Petitioners in G.R. No. 180771 claim that SC-46 violates Section 27 of Republic Act. No. 9147 or the
Wildlife Resources Conservation and Protection Act, which bans all marine exploration and
exploitation of oil and gas deposits. They also aver that Section 14 of Republic Act No. 7586 or the
National Integrated Protected Areas System Act of 1992 (NIPAS Act), which allows the exploration of
protected areas for the purpose of information-gathering, has been repealed by Section 27 of Republic
Act No. 914 7. The said petitioners further claim that SC-46 is anathema to Republic Act No. 8550 or
the Philippine Fisheries Code of 1998, which protects the rights of the fisherfolk in the preferential use
of municipal waters, with the exception being limited only to research and survey activities.80

The FIDEC, for its part, argues that to avail of the exceptions under Section 14 of the NIP AS Act, the
gathering of information must be in accordance with a DENR-approved program, and the exploitation
and utilization of energy resources must be pursuant to a general law passed by Congress expressly
for that purpose. Since there is neither a DENR approved program nor a general law passed by
Congress, the seismic surveys and oil drilling operations were all done illegally.81 The FIDEC likewise
contends that SC-46 infringes on its right to the preferential use of the communal fishing waters as it
is denied free access within the prohibited zone, in violation not only of the Fisheries Code but also of
the 1987 Constitutional provisions on subsistence fisherfolk and social justice.82 Furthermore, the
FIDEC believes that the provisions in Presidential Decree No. 87, which allow offshore drilling even in
municipal waters, should be deemed to have been rendered inoperative by the provisions of Republic
Act No. 8550 and Republic Act No. 7160, which reiterate the social justice provisions of the
Constitution.83

The public respondents invoke the rules on statutory construction and argue that Section 14 of the
NIP AS Act is a more particular provision and cannot be deemed to have been repealed by the more
general prohibition in Section 27 of Republic Act No. 9147. They aver that Section 14, under which
SC-46 falls, should instead be regarded as an exemption to Section 27.84 Addressing the claim of
petitioners in G.R. No. 180771 that there was a violation of Section 27 of Republic Act No. 9147, the
public respondents assert that what the section prohibits is the exploration of minerals, which as
defined in the Philippine Mining Act of 1995, exclude energy materials such as coal, petroleum, natural
gas, radioactive materials and geothennal energy. Thus, since SC-46 involves oil and gas exploration,
Section 27 does not apply.85

The public respondents defend the validity of SC-46 and insist that it does not grant exclusive fishing
rights to JAPEX; hence, it does not violate the rule on preferential use of municipal waters. Moreover,
they allege that JAPEX has not banned fishing in the project area, contrary to the FIDEC's claim. The
public respondents also contest the attribution of the declining fish catch to the seismic surveys and
aver that the allegation is unfounded. They claim that according to the Bureau of Fisheries and Aquatic
Resources' fish catch data, the reduced fish catch started in the 1970s due to destructive fishing
practices.86

Ruling of the Court

On the legality of Service Contract No. 46

vis-a-vis Other Laws

Although we have already established above that SC-46 is null and void for being violative of the 1987
Constitution, it is our duty to still rule on the legality of SC-46 vis-a-vis other pertinent laws, to serve
as a guide for the Government when executing service contracts involving not only the Tafion Strait,
but also other similar areas. While the petitioners allege that SC-46 is in violation of several laws,
including international ones, their arguments focus primarily on the protected status of the Tañon
Strait, thus this Court will concentrate on those laws that pertain particularly to the Tañon Strait as a
protected seascape.
The Tañon Strait is a narrow passage of water bounded by the islands of Cebu in the East and Negros
in the West. It harbors a rich biodiversity of marine life, including endangered species of dolphins and
whales. For this reason, former President Fidel V. Ramos declared the Tañon Strait as a protected
seascape in 1998 by virtue of Proclamation No. 1234 -Declaring the Tañon Strait situated in the
Provinces of Cebu, Negros Occidental and Negros Oriental as a Protected Area pursuant to the NIP
AS Act and shall be known as Tañon Strait Protected Seascape. During former President Joseph E.
Estrada's time, he also constituted the Tañon Strait Commission via Executive Order No. 76 to ensure
the optimum and sustained use of the resources in that area without threatening its marine life. He
followed this with Executive Order No. 177,87 wherein he included the mayor of Negros Occidental
Municipality/City as a member of the Tañon Strait Commission, to represent the LGUs concerned.
This Commission, however, was subsequently abolished in 2002 by then President Gloria Macapagal-
Arroyo, via Executive Order No. 72.88

True to the constitutional policy that the "State shall protect and advance the right of the people to a
balanced and healthful ecology in accord with the rhythm and harmony of nature,"89 Congress
enacted the NIP AS Act to secure the perpetual existence of all native plants and animals through the
establishment of a comprehensive system of integrated protected areas. These areas possess
common ecological values that were incorporated into a holistic plan representative of our natural
heritage. The system encompasses outstandingly remarkable areas and biologically important public
lands that are habitats of rare and endangered species of plants and animals, biogeographic zones
and related ecosystems, whether terrestrial, wetland, or marine.90 It classifies and administers all the
designated protected areas to maintain essential ecological processes and life-support systems, to
preserve genetic diversity, to ensure sustainable use of resources found therein, and to maintain their
natural conditions to the greatest extent possible.91 The following categories of protected areas were
established under the NIPAS Act:

a. Strict nature reserve;

b. Natural park;

c. Natural monument;

d. Wildlife sanctuary;

e. Protected landscapes and seascapes;

f. Resource reserve;

g. Natural biotic areas; and

h. Other categories established by law, conventions or international agreements which the Philippine
Government is a signatory.92

Under Section 4 of the NIP AS Act, a protected area refers to portions of land and water, set aside
due to their unique physical and biological significance, managed to enhance biological diversity and
protected against human exploitation.

The Tañon Strait, pursuant to Proclamation No. 1234, was set aside and declared a protected area
under the category of Protected Seascape. The NIP AS Act defines a Protected Seascape to be an
area of national significance characterized by the harmonious interaction of man and land while
providing opportunities for public enjoyment through recreation and tourism within the normal lifestyle
and economic activity of this areas;93 thus a management plan for each area must be designed to
protect and enhance the permanent preservation of its natural conditions.94 Consistent with this
endeavor is the requirement that an Environmental Impact Assessment (EIA) be made prior to
undertaking any activity outside the scope of the management plan. Unless an ECC under the EIA
system is obtained, no activity inconsistent with the goals of the NIP AS Act shall be implemented.95

The Environmental Impact Statement System (EISS) was established in 1978 under Presidential
Decree No. 1586. It prohibits any person, partnership or corporation from undertaking or operating
any declared environmentally critical project or areas without first securing an ECC issued by the
President or his duly authorized representative.96 Pursuant to the EISS, which called for the proper
management of environmentally critical areas,97 Proclamation No. 214698 was enacted, identifying
the areas and types of projects to be considered as environmentally critical and within the scope of
the EISS, while DENR Administrative Order No. 2003-30 provided for its Implementing Rules and
Regulations (IRR).

DENR Administrative Order No. 2003-30 defines an environmentally critical area as "an area
delineated as environmentally sensitive such that significant environmental impacts are expected if
certain types of proposed projects or programs are located, developed, or implemented in it";99 thus,
before a project, which is "any activity, regardless of scale or magnitude, which may have significant
impact on the environment,"100 is undertaken in it, such project must undergo an EIA to evaluate and
predict the likely impacts of all its stages on the environment.101 An EIA is described in detail as
follows:

h. Environmental Impact Assessment (EIA) - process that involves evaluating and predicting the likely
impacts of a project (including cumulative impacts) on the environment during construction,
commissioning, operation and abandonment. It also includes designing appropriate preventive,
mitigating and enhancement measures addressing these consequences to protect the environment
and the community's welfare. The process is undertaken by, among others, the project proponent
and/or EIA Consultant, EMB, a Review Committee, affected communities and other stakeholders.102

Under Proclamation No. 2146, the Tañon Strait is an environmentally critical area, having been
declared as a protected area in 1998; therefore, any activity outside the scope of its management plan
may only be implemented pursuant to an ECC secured after undergoing an EIA to determine the
effects of such activity on its ecological system.

The public respondents argue that they had complied with the procedures in obtaining an ECC103
and that SC-46 falls under the exceptions in Section 14 of the NIP AS Act, due to the following reasons:

1) The Tañon Strait is not a strict nature reserve or natural park;

2) Exploration is only for the purpose of gathering information on possible energy resources; and 3)
Measures are undertaken to ensure that the exploration is being done with the least damage to
surrounding areas.104

We do not agree with the arguments raised by the public respondents.

Sections 12 and 14 of the NIPAS Act read:

SECTION 12. Environmental Impact Assessment. - Proposals for activities which are outside the
scope of the management plan for protected areas shall be subject to an environmental impact
assessment as required by law before they are adopted, and the results thereof shall be taken into
consideration in the decision-making process.

No actual implementation of such activities shall be allowed without the required Environmental
Compliance Certificate (ECC) under the Philippine Environmental Impact Assessment (EIA) system.
In instances where such activities are allowed to be undertaken, the proponent shall plan and carry
them out in such manner as will minimize any adverse effects and the preventive and remedial action
when appropriate. The proponent shall be liable for any damage due to lack of caution or indiscretion.

SECTION 14. Survey for Energy Resources. - Consistent with the policies declared in Section 2
hereof, protected areas, except strict nature reserves and natural parks, may be subjected to
exploration only for the purpose of gathering information on energy resources and only if such activity
is carried out with the least damage to surrounding areas. Surveys shall be conducted only in
accordance with a program approved by the DENR, and the result of such surveys shall be made
available to the public and submitted to the President for recommendation to Congress. Any
exploitation and utilization of energy resources found within NIP AS areas shall be allowed only
through a law passed by Congress.

It is true that the restrictions found under the NIP AS Act are not without exceptions. However, while
an exploration done for the purpose of surveying for energy resources is allowed under Section 14 of
the NIP AS Act, this does not mean that it is exempt from the requirement to undergo an EIA under
Section 12. In Sotto v. Sotto,105 this Court explained why a statute should be construed as a whole:

A statute is passed as a whole and not in parts or sections and is animated by one general purpose
and intent. Consequently each part or section should be construed in connection with every other part
or section and so as to produce a harmonious whole. It is not proper to confine the attention to the
one section to be construed. It is always an unsafe way of construing a statute or contract to divide it
by a process of etymological dissection, into separate words, and then apply to each, thus separated
from its context, some particular definition given by lexicographers, and then reconstruct the
instrument upon the basis of these definitions. An instrument must always be construed as a whole,
and the particular meaning to be attached to any word or phrase is usually to be ascertained from the
context, the nature of the subject treated of and the purpose or intention of the parties who executed
the contract, or of the body which enacted or framed the statute or constitution. x x x.

Surveying for energy resources under Section 14 is not an exemption from complying with the EIA
requirement in Section 12; instead, Section 14 provides for additional requisites before any exploration
for energy resources may be done in protected areas.

The rationale for such additional requirements are incorporated m Section 2 of the NIP AS Act, to wit:
SECTION 2. Declaration of Policy - Cognizant of the profound impact of man's activities on all
components of the natural environment particularly the effect of increasing population, resource
exploitation and industrial advancement and recognizing the critical importance of protecting and
maintaining the natural biological and physical diversities of the environment notably on areas with
biologically unique features to sustain human life and development, as well as plant and animal life, it
is hereby declared the policy of the State to secure for the Filipino people of present and future
generations the perpetual existence of all native plants and animals through the establishment of a
comprehensive system of integrated protected areas within the classification of national park as
provided for in the Constitution.

It is hereby recognized that these areas, although distinct in features, possess common ecological
values that may be incorporated into a holistic plan representative of our natural heritage; that effective
administration of this area is possible only through cooperation among national government, local
government and concerned private organizations; that the use and enjoyment of these protected areas
must be consistent with the principles of biological diversity and sustainable development.

To this end, there is hereby established a National Integrated Protected Areas System (NIPAS), which
shall encompass outstandingly remarkable areas and biologically important public lands that are
habitats of rare and endangered species of plants and animals, biogeographic zones and related
ecosystems, whether terrestrial, wetland or marine, all of which shall be designated as "protected
areas."

The public respondents themselves admitted that JAPEX only started to secure an ECC prior to the
second sub-phase of SC-46, which required the drilling of an oil exploration well. This means that
when the seismic surveys were done in the Tañon Strait, no such environmental impact evaluation
was done. Unless seismic surveys are part of the management plan of the Tañon Strait, such surveys
were done in violation of Section 12 of the NIPAS Act and Section 4 of Presidential Decree No. 1586,
which provides:

Section 4. Presidential Proclamation of Environmentally Critical Areas and Projects. - The President
of the Philippines may, on his own initiative or upon recommendation of the National Environmental
Protection Council, by proclamation declare certain projects, undertakings or areas in the country as
environmentally critical. No person, partnership or corporation shall undertake or operate any such
declared environmentally critical project or area without first securing an Environmental Compliance
Certificate issued by the President or his duly authorized representative. For the proper management
of said critical project or area, the President may by his proclamation reorganize such government
offices, agencies, institutions, corporations or instrumentalities including the re-alignment of
government personnel, and their specific functions and responsibilities.

For the same purpose as above, the Ministry of Human Settlements shall: (a) prepare the proper land
or water use pattern for said critical project(s) or area(s); (b) establish ambient environmental quality
standards; (c) develop a program of environmental enhancement or protective measures against
calamitous factors such as earthquakes, floods, water erosion and others, and (d) perform such other
functions as may be directed by the President from time to time.

The respondents' subsequent compliance with the EISS for the second sub-phase of SC-46 cannot
and will not cure this violation. The following penalties are provided for under Presidential Decree No.
1586 and the NIPAS Act.

Section 9 of Presidential Decree No. 1586 provides for the penalty involving violations of the ECC
requirement:

Section 9. Penalty for Violation. - Any person, corporation or partnership found violating Section 4 of
this Decree, or the terms and conditions in the issuance of the Environmental Compliance Certificate,
or of the standards, rules and regulations issued by the National Environmental Protection Council
pursuant to this Decree shall be punished by the suspension or cancellation of his/its certificates and/or
a fine in an amount not to exceed Fifty Thousand Pesos (₱50,000.00) for every violation thereof, at
the discretion of the National Environmental Protection Council. (Emphasis supplied.)

Violations of the NIP AS Act entails the following fines and/or imprisonment under Section 21:

SECTION 21. Penalties. - Whoever violates this Act or any rules and regulations issued by the
Department pursuant to this Act or whoever is found guilty by a competent court of justice of any of
the offenses in the preceding section shall be fined in the amount of not less than Five thousand pesos
(₱5,000) nor more than Five hundred thousand pesos (₱500,000), exclusive of the value of the thing
damaged or imprisonment for not less than one (1) year but not more than six (6) years, or both, as
determined by the court: Provided, that, if the area requires rehabilitation or restoration as determined
by the court, the offender shall be required to restore or compensate for the restoration to the damages:
Provided, further, that court shall order the eviction of the offender from the land and the forfeiture in
favor of the Government of all minerals, timber or any species collected or removed including all
equipment, devices and firearms used in connection therewith, and any construction or improvement
made thereon by the offender. If the offender is an association or corporation, the president or
manager shall be directly responsible for the act of his employees and laborers: Provided, finally, that
the DENR may impose administrative fines and penalties consistent with this Act. (Emphases
supplied.) Moreover, SC-46 was not executed for the mere purpose of gathering information on the
possible energy resources in the Tañon Strait as it also provides for the parties' rights and obligations
relating to extraction and petroleum production should oil in commercial quantities be found to exist in
the area. While Presidential Decree No. 87 may serve as the general law upon which a service contract
for petroleum exploration and extraction may be authorized, the exploitation and utilization of this
energy resource in the present case may be allowed only through a law passed by Congress, since
the Tañon Strait is a NIPAS area.106 Since there is no such law specifically allowing oil exploration
and/or extraction in the Tañon Strait, no energy resource exploitation and utilization may be done in
said protected seascape.

In view of the foregoing premises and conclusions, it is no longer necessary to discuss the other issues
raised in these consolidated petitions.

WHEREFORE, the Petitions in G.R. Nos. 180771 and 181527 are GRANTED, Service Contract No.
46 is hereby declared NULL AND VOID for violating the 1987 Constitution, Republic Act No. 7586,
and Presidential Decree No. 1586.

SO ORDERED.

SPECIAL THIRD DIVISION

G.R. No. 182645 December 15, 2010

In the Matter of the Heirship (Intestate Estates) of the Late Hermogenes Rodriguez, Antonio
Rodriguez, Macario J. Rodriguez, Delfin Rodriguez, and Consuelo M. Rodriguez and Settlement
of their Estates,

RENE B. PASCUAL, Petitioner,

vs.
JAIME M. ROBLES, Respondent.

RESOLUTION

PERALTA, J.:

Before the Court is the Very Urgent Motion for Reconsideration of Jaime M. Robles (Robles) seeking
to set aside this Court's Decision dated December 4, 2009 which nullified the April 16, 2002 Decision
of the Court of Appeals (CA) in CA-G.R. SP No. 57417 and the February 27, 2007 Order of the
Regional Trial Court (RTC) of Iriga City, Branch 34 in SP No. IR-1110 and reinstated the August 13,
1999 Amended Decision of the same RTC in the same case.

Robles' Motion is based on the following arguments:

A.) THE HEREIN MOVANT – JAIME M. ROBLES, BEING A REAL PARTY-IN-INTEREST –

WAS NEVER IMPLEADED AS RESPONDENT IN THE PETITION FOR CERTIORARI (WITH
PRAYER TO CLARIFY JUDGMENT) DATED MAY 10, 2008 WHICH WAS FILED BEFORE
THIS HONORABLE SUPREME COURT ON MAY 13, 2008 - - - BY PETITIONER-RENE B.
PASCUAL;

B.) THE DECISION DATED DECEMBER 04, 2009 ISSUED BY THIS HONORABLE
SUPREME COURT IN G.R. NO. 182645 WAS RENDERED BASED ON A PETITION FOR
CERTIORARI AND MEMORANDUM DATED APRIL 7, 2009, WHOSE COPIES THEREOF
WERE NEVER SERVED UPON THE HEREIN MOVANT;

C.) THE NAME OF HEREIN MOVANT-JAIME M. ROBLES APPEARS AS RESPONDENT IN

THE TITLE OF THIS CASE AS CAPTIONED IN THE HONORABLE SUPREME COURT'S
ASSAILED DECISION DATED DECEMBER 04, 2009. HOWEVER, HE WAS NOT
REQUIRED TO FILE COMMENT NOR ANSWER TO THE PETITION, A CLEAR VIOLATION
TO (sic) THE RULES OF COURT AND TO (sic) THE CONSTITUTION.

D.) THE PUBLIC RESPONDENT COURT OF APPEALS PRESENTED THE SALIENT

CIRCUMSTANCES THAT WOULD JUSTIFY THE RELAXATION OF THE RULES ON THE
PERFECTION OF AN APPEAL AND THE RULE THAT CERTIORARI IS NOT A SUBSTITUTE
FOR A LOST APPEAL. THE DECISION ISSUED BY THE PUBLIC RESPONDENT
HONORABLE COURT OF APPEALS DATED APRIL 16, 2002 HAS ALREADY ATTAINED
FINALITY BY WAY OF AN ENTRY OF JUDGMENT ISSUED BY THIS HONORABLE COURT
 ON NOVEMBER 10, 2005, IN G.R. NO. 168648 ENTITLED JAIME M. ROBLES PETITIONER,
VS. HENRY F. RODRIGUEZ, ET. AL., AS RESPONDENTS.1

Robles prays for the reversal of the presently assailed Decision and the entry of a new judgment
requiring him to file his comment and memorandum to the petition. Robles also seeks the
reinstatement of the December 15, 1994 Order of the RTC declaring him as the only forced heir and
next of kin of Hermogenes Rodriguez.

For a clearer discussion and resolution of the instant Motion, it bears to restate the relevant antecedent
facts as stated in the assailed Decision of this Court, to wit:

On 14 September 1989, a petition for Declaration of Heirship and Appointment of Administrator and
Settlement of the Estates of the Late Hermogenes Rodriguez (Hermogenes) and Antonio Rodriguez
(Antonio) was filed before the RTC [of Iriga City]. The petition, docketed as Special Proceeding No.
IR-1110, was filed by Henry F. Rodriguez (Henry), Certeza F. Rodriguez (Certeza), and Rosalina R.
Pellosis (Rosalina). Henry, Certeza and Rosalina sought that they be declared the sole and surviving
heirs of the late Antonio Rodriguez and Hermogenes Rodriguez. They alleged they are the great
grandchildren of Antonio based on the following genealogy: that Henry and Certeza are the surviving
children of Delfin M. Rodriguez (Delfin) who died on 8 February 1981, while Rosalina is the surviving
heir of Consuelo M. Rodriguez (Consuelo); that Delfin and Consuelo were the heirs of Macario J.
Rodriguez (Macario) who died in 1976; that Macario and Flora Rodriguez were the heirs of Antonio;
that Flora died without an issue in 1960 leaving Macario as her sole heir.

Henry, Certeza and Rosalina's claim to the intestate estate of the late Hermogenes Rodriguez, a
former gobernadorcillo, is based on the following lineage: that Antonio and Hermogenes were brothers
and the latter died in 1910 without issue, leaving Antonio as his sole heir.

At the initial hearing of the petition on 14 November 1989, nobody opposed the petition. Having no
oppositors to the petition, the RTC entered a general default against the whole world, except the
Republic of the Philippines. After presentation of proof of compliance with jurisdictional requirements,
the RTC allowed Henry, Certeza and Rosalina to submit evidence before a commissioner in support
of the petition. After evaluating the evidence presented, the commissioner found that Henry, Certeza
and Rosalina are the grandchildren in the direct line of Antonio and required them to present additional
evidence to establish the alleged fraternal relationship between Antonio and Hermogenes.

Taking its cue from the report of the commissioner, the RTC rendered a Partial Judgment dated 31
May 1990 declaring Henry, Certeza and Rosalina as heirs in the direct descending line of the late
Antonio, Macario and Delfin and appointing Henry as regular administrator of the estate of the
decedents Delfin, Macario and Antonio, and as special administrator to the estate of Hermogenes.

Henry filed the bond and took his oath of office as administrator of the subject estates.

Subsequently, six groups of oppositors entered their appearances either as a group or individually,
namely:

(1) The group of Judith Rodriguez;

(2) The group of Carola Favila-Santos;

(3) Jaime Robles;

(4) Florencia Rodriguez;

(5) Victoria Rodriguez; and

(6) Bienvenido Rodriguez

Only the group of Judith Rodriguez had an opposing claim to the estate of Antonio, while the rest filed
opposing claims to the estate of Hermogenes.

In his opposition, Jamie Robles likewise prayed that he be appointed regular administrator to the
estates of Antonio and Hermogenes and be allowed to sell a certain portion of land included in the
estate of Hermogenes covered by OCT No. 12022 located at Barrio Manggahan, Pasig, Rizal.

After hearing on Jamie Robles' application for appointment as regular administrator, the RTC issued
an Order dated 15 December 1994 declaring him to be an heir and next of kin of decedent
Hermogenes and thus qualified to be the administrator. Accordingly, the said order appointed Jaime
Robles as regular administrator of the entire estate of Hermogenes and allowed him to sell the property
covered by OCT No. 12022 located at Barrio Manggahan, Pasig Rizal.

On 27 April 1999, the RTC rendered a decision declaring Carola Favila-Santos and her co-heirs as
heirs in the direct descending line of Hermogenes and reiterated its ruling in the partial judgment
declaring Henry, Certeza and Rosalina as heirs of Antonio. The decision dismissed the oppositions of
Jamie Robles, Victoria Rodriguez, Bienvenido Rodriguez, and Florencia Rodriguez, for their failure to
substantiate their respective claims of heirship to the late Hermogenes.

On 13 August 1999, the RTC issued an Amended Decision reversing its earlier finding as to Carola
Favila-Santos. This time, the RTC found Carola Favila-Santos and company not related to the
decedent Hermogenes. The RTC further decreed that Henry, Certeza and Rosalina are the heirs of
Hermogenes. The RTC also re-affirmed its earlier verdict dismissing the oppositions of Jaime Robles,
Victoria Rodriguez, Bienvenido Rodriguez, and Florencia Rodriguez.2

Robles then appealed the August 13, 1999 Decision of the RTC by filing a Notice of Appeal, but the
same was denied by the trial court in its Order dated November 22, 1999 for Robles' failure to file a
record on appeal.

Robles questioned the denial of his appeal by filing a petition for review on certiorari with this Court.

In a Resolution dated February 14, 2000, this Court referred the petition to the CA for consideration
and adjudication on the merits on the ground that the said court has jurisdiction concurrent with this
Court and that no special and important reason was cited for this Court to take cognizance of the said
case in the first instance.

On April 16, 2002, the CA rendered judgment annulling the August 13, 1999 Amended Decision of the
RTC.

Henry Rodriguez (Rodriguez) and his group moved for the reconsideration of the CA decision, but the
same was denied in a Resolution dated January 21, 2004. Rodriguez and his co-respondents did not
appeal the Decision and Resolution of the CA.

On the other hand, Robles filed an appeal with this Court assailing a portion of the CA Decision. On
August 1, 2005, this Court issued a Resolution denying the petition of Robles and, on November 10,
2005, the said Resolution became final and executory.

On May 13, 2008, the instant petition was filed.

On December 4, 2009, this Court rendered the presently assailed Decision which held as follows:

In special proceedings, such as the instant proceeding for settlement of estate, the period of appeal
from any decision or final order rendered therein is 30 days, a notice of appeal and a record on appeal
being required. x x x

xxxx

The appeal period may only be interrupted by the filing of a motion for new trial or reconsideration.
Once the appeal period expires without an appeal being perfected, the decision or order becomes
final, x x x

xxxx

In the case under consideration, it was on 13 August 1999 that the RTC issued an Amended Decision.
On 12 October 1999, Jaime Robles erroneously filed a notice of appeal instead of filing a record on
appeal. The RTC, in an order dated 22 November 1999, denied this for his failure to file a record on
appeal as required by the Rules of Court. Petitioner failed to comply with the requirements of the rule;
hence, the 13 August 1999 Amended Decision of the RTC lapsed into finality. It was, therefore, an
error for the Court of Appeals to entertain the case knowing that Jaime Robles' appeal was not
perfected and had lapsed into finality.

This Court has invariably ruled that perfection of an appeal in the manner and within the period laid
down by law is not only mandatory but also jurisdictional. The failure to perfect an appeal as required
by the rules has the effect of defeating the right to appeal of a party and precluding the appellate court
from acquiring jurisdiction over the case. The right to appeal is not a natural right nor a part of due
process; it is merely a statutory privilege, and may be exercised only in the manner and in accordance
with the provisions of law. x x x Failure to meet the requirements of an appeal deprives the appellate
court of jurisdiction to entertain any appeal. There are exceptions to this rule, unfortunately
respondents did not present any circumstances that would justify the relaxation of said rule.3
The basic contention of Robles in the instant Motion is that he is a party-in-interest who stands to be
adversely affected or injured or benefited by the judgment in the instant case. He also argues that the
failure of service upon him of a copy of the instant petition as well as petitioner's memorandum, and
the fact that he was not required or given the opportunity to file his comment or answer to the said
petition nor served with any order, resolution or any other process issued by this Court in the instant
petition, is a clear denial of his right to due process.

In his Comment and Opposition, petitioner contends that Robles has no legal standing to participate
in the instant petition. Petitioner argues that in an original action for certiorari, the parties are the
aggrieved party against the lower court and the prevailing party. Petitioner claims, however, that
Robles was never impleaded, because he was not the prevailing party in the assailed Decision of the
CA as well as the questioned Order of the RTC. Petitioner further avers that the inclusion of Robles'
name as respondent in the caption of the instant petition was a result of a clerical error which was
probably brought about by numerous cases filed with this Court involving Robles and the subject
estate.

The Court finds partial merit in the instant motion.

Petitioner admitted in his Comment and Opposition to Robles' Motion that in the instant petition he
filed, only the CA and the RTC were impleaded as respondents.

Section 5, Rule 65 of the Rules of Court provides:

Section 5. Respondents and costs in certain cases. – When the petition filed relates to the acts or
omissions of a judge, court, quasi-judicial agency, tribunal, corporation, board, officer or person, the
petitioner shall join as private respondent or respondents with such public respondent or
respondents, the person or persons interested in sustaining the proceedings in the court; and
it shall be the duty of such private respondents to appear and defend, both in his or their own
behalf and in behalf of the public respondent or respondents affected by the proceedings, and
the costs awarded in such proceedings in favor of the petitioner shall be against the private
respondents only, and not against the judge, court, quasi-judicial agency, tribunal, corporation, board,
officer or person impleaded as public respondent or respondents.

Unless otherwise specifically directed by the court where the petition is pending, the public
respondents shall not appear in or file an answer or comment to the petition or any pleading therein.
If the case is elevated to a higher court by either party, the public respondents shall be included therein
as nominal parties. However, unless otherwise specifically directed by the court, they shall not appear
or participate in the proceedings therein.4

In Lotte Phil. Co., Inc. v. Dela Cruz,5 this Court ruled as follows:

An indispensable party is a party-in-interest without whom no final determination can be had of an

action, and who shall be joined either as plaintiffs or defendants. The joinder of indispensable parties
is mandatory. The presence of indispensable parties is necessary to vest the court with jurisdiction,
which is "the authority to hear and determine a cause, the right to act in a case." Thus, without the
presence of indispensable parties to a suit or proceeding, judgment of a court cannot attain real finality.
The absence of an indispensable party renders all subsequent actions of the court null and void for
want of authority to act, not only as to the absent parties but even as to those present.6

In the case at bar, Robles is an indispensable party. He stands to be injured or benefited by the
outcome of the petition. He has an interest in the controversy that a final decree would necessarily
affect his rights, such that the courts cannot proceed without his presence.7 Moreover, as provided for
under the aforequoted Section 5, Rule 65 of the Rules of Court, Robles is interested in sustaining the
assailed CA Decision, considering that he would benefit from such judgment. As such, his non-
inclusion would render the petition for certiorari defective.8

Petitioner, thus, committed a mistake in failing to implead Robles as respondent.

The rule is settled that the non-joinder of indispensable parties is not a ground for the dismissal of an
action.9 The remedy is to implead the non-party claimed to be indispensable.10 Parties may be added
by order of the court on motion of the party or on its own initiative at any stage of the action and/or at
such times as are just.11 If petitioner refuses to implead an indispensable party despite the order of the
court, the latter may dismiss the complaint/petition for the plaintiff’s/petitioner's failure to comply
therewith.12

Based on the foregoing, and in the interest of fair play, the Court finds it proper to set aside its decision
and allow Robles to file his comment on the petition. 1avv phi 1
WHEREFORE, the Motion for Reconsideration is PARTLY GRANTED. The Decision dated December
4, 2009 is SET ASIDE. Petitioner is ORDERED to furnish Robles a copy of his petition for certiorari
within a period of five (5) days from receipt of this Resolution. Thereafter, Robles is DIRECTED to file
his comment on the petition within a period of ten (10) days from notice.

SO ORDERED.

FIRST DIVISION

G.R. No. 141538 March 23, 2004

HERMANA R. CEREZO, petitioner,

vs.
DAVID TUAZON, respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari1 to annul the Resolution2 dated 21 October 1999 of the Court
of Appeals in CA-G.R. SP No. 53572, as well as its Resolution dated 20 January 2000 denying the
motion for reconsideration. The Court of Appeals denied the petition for annulment of the
Decision3 dated 30 May 1995 rendered by the Regional Trial Court of Angeles City, Branch 56 ("trial
court"), in Civil Case No. 7415. The trial court ordered petitioner Hermana R. Cerezo ("Mrs. Cerezo")
to pay respondent David Tuazon ("Tuazon") actual damages, loss of earnings, moral damages, and
costs of suit.

Antecedent Facts

Around noontime of 26 June 1993, a Country Bus Lines passenger bus with plate number NYA 241
collided with a tricycle bearing plate number TC RV 126 along Captain M. Palo Street, Sta. Ines,
Mabalacat, Pampanga. On 1 October 1993, tricycle driver Tuazon filed a complaint for damages
against Mrs. Cerezo, as owner of the bus line, her husband Attorney Juan Cerezo ("Atty. Cerezo"),
and bus driver Danilo A. Foronda ("Foronda"). The complaint alleged that:

7. At the time of the incident, plaintiff [Tuazon] was in his proper lane when the second-named
defendant [Foronda], being then the driver and person in charge of the Country Bus with plate
number NYA 241, did then and there willfully, unlawfully, and feloniously operate the said
motor vehicle in a negligent, careless, and imprudent manner without due regard to traffic rules
and regulations, there being a "Slow Down" sign near the scene of the incident, and without
taking the necessary precaution to prevent loss of lives or injuries, his negligence,
carelessness and imprudence resulted to severe damage to the tricycle and serious physical
injuries to plaintiff thus making him unable to walk and becoming disabled, with his thumb and
middle finger on the left hand being cut[.]4

On 1 October 1993, Tuazon filed a motion to litigate as a pauper. Subsequently, the trial court issued
summons against Atty. Cerezo and Mrs. Cerezo ("the Cerezo spouses") at the Makati address stated
in the complaint. However, the summons was returned unserved on 10 November 1993 as the Cerezo
spouses no longer held office nor resided in Makati. On 18 April 1994, the trial court issued alias
summons against the Cerezo spouses at their address in Barangay Sta. Maria, Camiling, Tarlac. The
alias summons and a copy of the complaint were finally served on 20 April 1994 at the office of Atty.
Cerezo, who was then working as Tarlac Provincial Prosecutor. Atty. Cerezo reacted angrily on
learning of the service of summons upon his person. Atty. Cerezo allegedly told Sheriff William Canlas:
"Punyeta, ano ang gusto mong mangyari? Gusto mong hindi ka makalabas ng buhay dito? Teritoryo
ko ito. Wala ka sa teritoryo mo."5

The records show that the Cerezo spouses participated in the proceedings before the trial court. The
Cerezo spouses filed a comment with motion for bill of particulars dated 29 April 1994 and a reply to
opposition to comment with motion dated 13 June 1994.6 On 1 August 1994, the trial court issued an
order directing the Cerezo spouses to file a comment to the opposition to the bill of particulars. Atty.
Elpidio B. Valera ("Atty. Valera") of Valera and Valera Law Offices appeared on behalf of the Cerezo
spouses. On 29 August 1994, Atty. Valera filed an urgent ex-parte motion praying for the resolution of
Tuazon’s motion to litigate as a pauper and for the issuance of new summons on the Cerezo spouses
to satisfy proper service in accordance with the Rules of Court.7

On 30 August 1994, the trial court issued an order resolving Tuazon’s motion to litigate as a pauper
and the Cerezo spouses’ urgent ex-parte motion. The order reads:

At the hearing on August 30, 1994, the plaintiff [Tuazon] testified that he is presently jobless;
that at the time of the filing of this case, his son who is working in Malaysia helps him and
sends him once in a while P300.00 a month, and that he does not have any real property.
Attached to the Motion to Litigate as Pauper are his Affidavit that he is unemployed; a
Certification by the Barangay Captain of his poblacion that his income is not enough for his
family’s subsistence; and a Certification by the Office of the Municipal Assessor that he has
no landholding in the Municipality of Mabalacat, Province of Pampanga.

The Court is satisfied from the unrebutted testimony of the plaintiff that he is entitled to
prosecute his complaint in this case as a pauper under existing rules.

On the other hand, the Court denies the prayer in the Appearance and Urgent Ex-Parte Motion
requiring new summons to be served to the defendants. The Court is of the opinion that any
infirmity in the service of the summons to the defendant before plaintiff was allowed to
prosecute his complaint in this case as a pauper has been cured by this Order.

If within 15 days from receipt of this Order, the defendants do not question on appeal this
Order of this Court, the Court shall proceed to resolve the Motion for Bill of Particulars.8

On 27 September 1994, the Cerezo spouses filed an urgent ex-parte motion for reconsideration. The
trial court denied the motion for reconsideration.

On 14 November 1994, the trial court issued an order directing the Cerezo spouses to file their answer
within fifteen days from receipt of the order. The Cerezo spouses did not file an answer. On 27 January
1995, Tuazon filed a motion to declare the Cerezo spouses in default. On 6 February 1995, the trial
court issued an order declaring the Cerezo spouses in default and authorizing Tuazon to present his
evidence. 9

On 30 May 1995, after considering Tuazon’s testimonial and documentary evidence, the trial court
ruled in Tuazon’s favor. The trial court made no pronouncement on Foronda’s liability because there
was no service of summons on him. The trial court did not hold Atty. Cerezo liable as Tuazon failed to
show that Mrs. Cerezo’s business benefited the family, pursuant to Article 121(3) of the Family Code.
The trial court held Mrs. Cerezo solely liable for the damages sustained by Tuazon arising from the
negligence of Mrs. Cerezo’s employee, pursuant to Article 2180 of the Civil Code. The dispositive
portion of the trial court’s decision reads:

WHEREFORE, judgment is hereby rendered ordering the defendant Hermana Cerezo to pay
the plaintiff:

a) For Actual Damages - P69,485.35

1) Expenses for operation and medical Treatment
2) Cost of repair of the tricycle
b) For loss of earnings - 39,921.00
c) For moral damages - 43,300.00
d) And to pay the cost of the suit. - 20,000.00

The docket fees and other expenses in the filing of this suit shall be lien on whatever judgment
may be rendered in favor of the plaintiff.

SO ORDERED.10

Mrs. Cerezo received a copy of the decision on 25 June 1995. On 10 July 1995, Mrs. Cerezo filed
before the trial court a petition for relief from judgment on the grounds of "fraud, mistake or excusable
negligence." Testifying before the trial court, both Mrs. Cerezo and Atty. Valera denied receipt of
notices of hearings and of orders of the court. Atty. Valera added that he received no notice before or
during the 8 May 1995 elections, "when he was a senatorial candidate for the KBL Party, and very
busy, using his office and residence as Party National Headquarters." Atty. Valera claimed that he was
able to read the decision of the trial court only after Mrs. Cerezo sent him a copy.11
Tuazon did not testify but presented documentary evidence to prove the participation of the Cerezo
spouses in the case. Tuazon presented the following exhibits:

Exhibit 1 - Sheriff’s return and summons;

Exhibit 1-A - Alias summons dated April 20, 1994;
Exhibit 2 - Comment with Motion;
Exhibit 3 - Minutes of the hearing held on August 1, 1994;
Exhibit 3-A - Signature of defendant’s counsel;
Exhibit 4 - Minutes of the hearing held on August 30, 1994;
Exhibit 4-A - Signature of the defendant’s counsel;
Exhibit 5 - Appearance and Urgent Ex-Parte Motion;
Exhibit 6 - Order dated November 14, 1994;
Exhibit 6-A - Postal certification dated January 13, 1995;
Exhibit 7 - Order dated February [illegible];
Exhibit 7-A - Court’s return slip addressed to Atty. Elpidio Valera;
Exhibit 7-B - Court’s return slip addressed to Spouses Juan and Hermana Cerezo;
Exhibit 8 - Decision dated May [30], 1995
Exhibit 8-A - Court’s return slip addressed to defendant Hermana Cerezo;
Exhibit 8-B - Court’s return slip addressed to defendant’s counsel, Atty. Elpidio Valera;
Exhibit 9 - Order dated September 21, 1995;
Exhibit 9-A - Second Page of Exhibit 9;
Exhibit 9-B - Third page of Exhibit 9;
Exhibit 9-C - Fourth page of Exhibit 9;
Exhibit 9-D - Court’s return slip addressed to Atty. Elpidio Valera;
and
Exhibit 9-E - Court’s return slip addressed to plaintiff’s counsel, Atty. Norman Dick de
Guzman.12

On 4 March 1998, the trial court issued an order13 denying the petition for relief from judgment. The
trial court stated that having received the decision on 25 June 1995, the Cerezo spouses should have
filed a notice of appeal instead of resorting to a petition for relief from judgment. The trial court refused
to grant relief from judgment because the Cerezo spouses could have availed of the remedy of appeal.
Moreover, the Cerezo spouses not only failed to prove fraud, accident, mistake or excusable
negligence by conclusive evidence, they also failed to prove that they had a good and substantial
defense. The trial court noted that the Cerezo spouses failed to appeal because they relied on an
expected settlement of the case.

The Cerezo spouses subsequently filed before the Court of Appeals a petition for certiorari under
Section 1 of Rule 65. The petition was docketed as CA-G.R. SP No. 48132.14 The petition questioned
whether the trial court acquired jurisdiction over the case considering there was no service of summons
on Foronda, whom the Cerezo spouses claimed was an indispensable party. In a resolution15 dated 21
January 1999, the Court of Appeals denied the petition for certiorari and affirmed the trial court’s order
denying the petition for relief from judgment. The Court of Appeals declared that the Cerezo spouses’
failure to file an answer was due to their own negligence, considering that they continued to participate
in the proceedings without filing an answer. There was also nothing in the records to show that the
Cerezo spouses actually offered a reasonable settlement to Tuazon. The Court of Appeals also denied
Cerezo spouses’ motion for reconsideration for lack of merit.

The Cerezo spouses filed before this Court a petition for review on certiorari under Rule 45. Atty.
Cerezo himself signed the petition, docketed as G.R. No. 137593. On 13 April 1999, this Court
rendered a resolution denying the petition for review on certiorari for failure to attach an affidavit of
service of copies of the petition to the Court of Appeals and to the adverse parties. Even if the petition
complied with this requirement, the Court would still have denied the petition as the Cerezo spouses
failed to show that the Court of Appeals committed a reversible error. The Court’s resolution was
entered in the Book of Entries and Judgments when it became final and executory on 28 June 1999.16

Undaunted, the Cerezo spouses filed before the Court of Appeals on 6 July 1999 a petition for
annulment of judgment under Rule 47 with prayer for restraining order. Atty. Valera and Atty. Dionisio
S. Daga ("Atty. Daga") represented Mrs. Cerezo in the petition, docketed as CA-G.R. SP No.
53572.17 The petition prayed for the annulment of the 30 May 1995 decision of the trial court and for
the issuance of a writ of preliminary injunction enjoining execution of the trial court’s decision pending
resolution of the petition.

The Court of Appeals denied the petition for annulment of judgment in a resolution dated 21 October
1999. The resolution reads in part:
 In this case, records show that the petitioner previously filed with the lower court a Petition for
Relief from Judgment on the ground that they were wrongfully declared in default while waiting
for an amicable settlement of the complaint for damages. The court a quo correctly ruled that
such petition is without merit. The defendant spouses admit that during the initial hearing they
appeared before the court and even mentioned the need for an amicable settlement. Thus,
the lower court acquired jurisdiction over the defendant spouses.

Therefore, petitioner having availed of a petition for relief, the remedy of an annulment of
judgment is no longer available. The proper action for the petitioner is to appeal the order of
the lower court denying the petition for relief.

Wherefore, the instant petition could not be given due course and should accordingly be
dismissed.

SO ORDERED.18

On 20 January 2000, the Court of Appeals denied the Cerezo spouses’ motion for
reconsideration.19 The Court of Appeals stated:

A distinction should be made between a court’s jurisdiction over a person and its jurisdiction
over the subject matter of a case. The former is acquired by the proper service of summons
or by the parties’ voluntary appearance; while the latter is conferred by law.

Resolving the matter of jurisdiction over the subject matter, Section 19(1) of B[atas]
P[ambansa] 129 provides that Regional Trial Courts shall exercise exclusive original
jurisdiction in all civil actions in which the subject of the litigation is incapable of pecuniary
estimation. Thus it was proper for the lower court to decide the instant case for damages.

Unlike jurisdiction over the subject matter of a case which is absolute and conferred by law;
any defects [sic] in the acquisition of jurisdiction over a person (i.e., improper filing of civil
complaint or improper service of summons) may be waived by the voluntary appearance of
parties.

The lower court admits the fact that no summons was served on defendant Foronda. Thus,
jurisdiction over the person of defendant Foronda was not acquired, for which reason he was
not held liable in this case. However, it has been proven that jurisdiction over the other
defendants was validly acquired by the court a quo.

The defendant spouses admit to having appeared in the initial hearings and in the hearing for
plaintiff’s motion to litigate as a pauper. They even mentioned conferences where attempts
were made to reach an amicable settlement with plaintiff. However, the possibility of amicable
settlement is not a good and substantial defense which will warrant the granting of said petition.

xxx

Assuming arguendo that private respondent failed to reserve his right to institute a separate
action for damages in the criminal action, the petitioner cannot now raise such issue and
question the lower court’s jurisdiction because petitioner and her husband have waived such
right by voluntarily appearing in the civil case for damages. Therefore, the findings and the
decision of the lower court may bind them.

Records show that the petitioner previously filed with the lower court a Petition for Relief from
Judgment on the ground that they were wrongfully declared in default while waiting for an
amicable settlement of the complaint for damages. The court a quo correctly ruled that such
petition is without merit, jurisdiction having been acquired by the voluntary appearance of
defendant spouses.

Once again, it bears stressing that having availed of a petition for relief, the remedy of
annulment of judgment is no longer available.

Based on the foregoing, the motion for reconsideration could not be given due course and is
hereby DENIED.

SO ORDERED.20

The Issues
On 7 February 2000, Mrs. Cerezo, this time with Atty. Daga alone representing her, filed the present
petition for review on certiorari before this Court. Mrs. Cerezo claims that:

1. In dismissing the Petition for Annulment of Judgment, the Court of Appeals assumes that
the issues raised in the petition for annulment is based on extrinsic fraud related to the denied
petition for relief notwithstanding that the grounds relied upon involves questions of lack of
jurisdiction.

2. In dismissing the Petition for Annulment, the Court of Appeals disregarded the allegation
that the lower court[’s] findings of negligence against defendant-driver Danilo Foronda [whom]
the lower court did not summon is null and void for want of due process and consequently,
such findings of negligence which is [sic] null and void cannot become the basis of the lower
court to adjudge petitioner-employer liable for civil damages.

3. In dismissing the Petition for Annulment, the Court of Appeals ignored the allegation that
defendant-driver Danilo A. Foronda whose negligence is the main issue is an indispensable
party whose presence is compulsory but [whom] the lower court did not summon.

4. In dismissing the Petition for Annulment, the Court of Appeals ruled that assuming arguendo
that private respondent failed to reserve his right to institute a separate action for damages in
the criminal action, the petitioner cannot now raise such issue and question the lower court’s
jurisdiction because petitioner [has] waived such right by voluntarily appearing in the civil case
for damages notwithstanding that lack of jurisdiction cannot be waived.21

The Court’s Ruling

The petition has no merit. As the issues are interrelated, we shall discuss them jointly.

Remedies Available to a Party Declared in Default

An examination of the records of the entire proceedings shows that three lawyers filed and signed
pleadings on behalf of Mrs. Cerezo, namely, Atty. Daga, Atty. Valera, and Atty. Cerezo. Despite their
number, Mrs. Cerezo’s counsels failed to avail of the proper remedies. It is either by sheer ignorance
or by malicious manipulation of legal technicalities that they have managed to delay the disposition of
the present case, to the detriment of pauper litigant Tuazon.

Mrs. Cerezo claims she did not receive any copy of the order declaring the Cerezo spouses in default.
Mrs. Cerezo asserts that she only came to know of the default order on 25 June 1995, when she
received a copy of the decision. On 10 July 1995, Mrs. Cerezo filed before the trial court a petition for
relief from judgment under Rule 38, alleging "fraud, mistake, or excusable negligence" as grounds. On
4 March 1998, the trial court denied Mrs. Cerezo’s petition for relief from judgment. The trial court
stated that Mrs. Cerezo could have availed of appeal as a remedy and that she failed to prove that the
judgment was entered through fraud, accident, mistake, or excusable negligence. Mrs. Cerezo then
filed before the Court of Appeals a petition for certiorari under Section 1 of Rule 65 assailing the denial
of the petition for relief from judgment. On 21 January 1999, the Court of Appeals dismissed Mrs.
Cerezo’s petition. On 24 February 1999, the appellate court denied Mrs. Cerezo’s motion for
reconsideration. On 11 March 1999, Mrs. Cerezo filed before this Court a petition for review
on certiorari under Rule 45, questioning the denial of the petition for relief from judgment. We denied
the petition and our resolution became final and executory on 28 June 1999.

On 6 July 1999, a mere eight days after our resolution became final and executory, Mrs. Cerezo filed
before the Court of Appeals a petition for annulment of the judgment of the trial court under Rule 47.
Meanwhile, on 25 August 1999, the trial court issued over the objection of Mrs. Cerezo an order of
execution of the judgment in Civil Case No. 7415. On 21 October 1999, the Court of Appeals dismissed
the petition for annulment of judgment. On 20 January 2000, the Court of Appeals denied Mrs.
Cerezo’s motion for reconsideration. On 7 February 2000, Mrs. Cerezo filed the present petition for
review on certiorari under Rule 45 challenging the dismissal of her petition for annulment of judgment.

Lina v. Court of Appeals22 enumerates the remedies available to a party declared in default:

a) The defendant in default may, at any time after discovery thereof and before judgment, file
a motion under oath to set aside the order of default on the ground that his failure to
answer was due to fraud, accident, mistake or excusable negligence, and that he has a
meritorious defense (Sec. 3, Rule 18 [now Sec. 3(b), Rule 9]);

b) If the judgment has already been rendered when the defendant discovered the default, but
before the same has become final and executory, he may file a motion for new trial under
Section 1 (a) of Rule 37;
 c) If the defendant discovered the default after the judgment has become final and executory,
he may file a petition for relief under Section 2 [now Section 1] of Rule 38; and

d) He may also appeal from the judgment rendered against him as contrary to the evidence
or to the law, even if no petition to set aside the order of default has been presented by him
(Sec. 2, Rule 41). (Emphasis added)

Moreover, a petition for certiorari to declare the nullity of a judgment by default is also available if the
trial court improperly declared a party in default, or even if the trial court properly declared a party in
default, if grave abuse of discretion attended such declaration.23

Mrs. Cerezo admitted that she received a copy of the trial court’s decision on 25 June 1995. Based on
this admission, Mrs. Cerezo had at least three remedies at her disposal: an appeal, a motion for new
trial, or a petition for certiorari.

Mrs. Cerezo could have appealed under Rule 4124 from the default judgment within 15 days from notice
of the judgment. She could have availed of the power of the Court of Appeals to try cases and conduct
hearings, receive evidence, and perform all acts necessary to resolve factual issues raised in cases
falling within its appellate jurisdiction.25

Mrs. Cerezo also had the option to file under Rule 3726 a motion for new trial within the period for taking
an appeal. If the trial court grants a new trial, the original judgment is vacated, and the action will stand
for trial de novo. The recorded evidence taken in the former trial, as far as the same is material and
competent to establish the issues, shall be used at the new trial without retaking the same.27

Mrs. Cerezo also had the alternative of filing under Rule 6528 a petition for certiorari assailing the order
of default within 60 days from notice of the judgment. An order of default is interlocutory, and an
aggrieved party may file an appropriate special civil action under Rule 65.29 In a petition for certiorari,
the appellate court may declare void both the order of default and the judgment of default.

Clearly, Mrs. Cerezo had every opportunity to avail of these remedies within the reglementary periods
provided under the Rules of Court. However, Mrs. Cerezo opted to file a petition for relief from
judgment, which is available only in exceptional cases. A petition for relief from judgment should be
filed within the reglementary period of 60 days from knowledge of judgment and six months from entry
of judgment, pursuant to

Rule 38 of the Rules of Civil Procedure.30 Tuason v. Court of Appeals31 explained the nature of a
petition for relief from judgment:

When a party has another remedy available to him, which may either be a motion for new trial
or appeal from an adverse decision of the trial court, and he was not prevented by fraud,
accident, mistake or excusable negligence from filing such motion or taking such appeal, he
cannot avail himself of this petition. Indeed, relief will not be granted to a party who seeks
avoidance from the effects of the judgment when the loss of the remedy at law was due to his
own negligence; otherwise the petition for relief can be used to revive the right to appeal which
has been lost thru inexcusable negligence.

Evidently, there was no fraud, accident, mistake, or excusable negligence that prevented Mrs. Cerezo
from filing an appeal, a motion for new trial or a petition for certiorari. It was error for her to avail of a
petition for relief from judgment.

After our resolution denying Mrs. Cerezo’s petition for relief became final and executory, Mrs. Cerezo,
in her last ditch attempt to evade liability, filed before the Court of Appeals a petition for annulment of
the judgment of the trial court. Annulment is available only on the grounds of extrinsic fraud and lack
of jurisdiction. If based on extrinsic fraud, a party must file the petition within four years from its
discovery, and if based on lack of jurisdiction, before laches or estoppel bars the petition. Extrinsic
fraud is not a valid ground if such fraud was used as a ground, or could have been used as a ground,
in a motion for new trial or petition for relief from judgment.32

Mrs. Cerezo insists that lack of jurisdiction, not extrinsic fraud, was her ground for filing the petition for
annulment of judgment. However, a party may avail of the remedy of annulment of judgment under
Rule 47 only if the ordinary remedies of new trial, appeal, petition for relief from judgment, or other
appropriate remedies are no longer available through no fault of the party.33 Mrs. Cerezo could have
availed of a new trial or appeal but through her own fault she erroneously availed of the remedy of a
petition for relief, which was denied with finality. Thus, Mrs. Cerezo may no longer avail of the remedy
of annulment.

In any event, the trial court clearly acquired jurisdiction over Mrs. Cerezo’s person. Mrs. Cerezo
actively participated in the proceedings before the trial court, submitting herself to the jurisdiction of
the trial court. The defense of lack of jurisdiction fails in light of her active participation in the trial court
proceedings. Estoppel or laches may also bar lack of jurisdiction as a ground for nullity especially if
raised for the first time on appeal by a party who participated in the proceedings before the trial court,
as what happened in this case.34

For these reasons, the present petition should be dismissed for utter lack of merit. The extraordinary
action to annul a final judgment is restricted to the grounds specified in the rules. The reason for the
restriction is to prevent this extraordinary action from being used by a losing party to make a complete
farce of a duly promulgated decision that has long become final and executory. There would be no
end to litigation if parties who have unsuccessfully availed of any of the appropriate remedies or lost
them through their fault could still bring an action for annulment of judgment.35 Nevertheless, we shall
discuss the issues raised in the present petition to clear any doubt about the correctness of the
decision of the trial court.

Mrs. Cerezo’s Liability and the Trial Court’s Acquisition of Jurisdiction

Mrs. Cerezo contends that the basis of the present petition for annulment is lack of jurisdiction. Mrs.
Cerezo asserts that the trial court could not validly render judgment since it failed to acquire jurisdiction
over Foronda. Mrs. Cerezo points out that there was no service of summons on Foronda. Moreover,
Tuazon failed to reserve his right to institute a separate civil action for damages in the criminal action.
Such contention betrays a faulty foundation. Mrs. Cerezo’s contention proceeds from the point of view
of criminal law and not of civil law, while the basis of the present action of Tuazon is quasi-delict under
the Civil Code, not delict under the Revised Penal Code.

The same negligent act may produce civil liability arising from a delict under Article 103 of the Revised
Penal Code, or may give rise to an action for a quasi-delict under Article 2180 of the Civil Code. An
aggrieved party may choose between the two remedies. An action based on a quasi-delict may
proceed independently from the criminal action.36 There is, however, a distinction between civil liability
arising from a delict and civil liability arising from a quasi-delict. The choice of remedy, whether to sue
for a delict or a quasi-delict, affects the procedural and jurisdictional issues of the action.37

Tuazon chose to file an action for damages based on a quasi-delict. In his complaint, Tuazon alleged
that Mrs. Cerezo, "without exercising due care and diligence in the supervision and management of
her employees and buses," hired Foronda as her driver. Tuazon became disabled because of
Foronda’s "recklessness, gross negligence and imprudence," aggravated by Mrs. Cerezo’s "lack of
due care and diligence in the selection and supervision of her employees, particularly Foronda."38

The trial court thus found Mrs. Cerezo liable under Article 2180 of the Civil Code. Article 2180 states
in part:

Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry.

Contrary to Mrs. Cerezo’s assertion, Foronda is not an indispensable party to the case. An
indispensable party is one whose interest is affected by the court’s action in the litigation, and without
whom no final resolution of the case is possible.39 However, Mrs. Cerezo’s liability as an employer in
an action for a quasi-delict is not only solidary, it is also primary and direct. Foronda is not an
indispensable party to the final resolution of Tuazon’s action for damages against Mrs. Cerezo.

The responsibility of two or more persons who are liable for a quasi-delict is solidary.40 Where there is
a solidary obligation on the part of debtors, as in this case, each debtor is liable for the entire obligation.
Hence, each debtor is liable to pay for the entire obligation in full. There is no merger or renunciation
of rights, but only mutual representation.41 Where the obligation of the parties is solidary, either of the
parties is indispensable, and the other is not even a necessary party because complete relief is
available from either.42 Therefore, jurisdiction over Foronda is not even necessary as Tuazon may
collect damages from Mrs. Cerezo alone.

Moreover, an employer’s liability based on a quasi-delict is primary and direct, while the employer’s
liability based on a delict is merely subsidiary.43 The words "primary and direct," as contrasted with
"subsidiary," refer to the remedy provided by law for enforcing the obligation rather than to the
character and limits of the obligation.44 Although liability under Article 2180 originates from the negligent
act of the employee, the aggrieved party may sue the employer directly. When an employee causes
damage, the law presumes that the employer has himself committed an act of negligence in not
preventing or avoiding the damage. This is the fault that the law condemns. While the employer is
civilly liable in a subsidiary capacity for the employee’s criminal negligence, the employer is also civilly
liable directly and separately for his own civil negligence in failing to exercise due diligence in selecting
and supervising his employee. The idea that the employer’s liability is solely subsidiary is wrong.45
 The action can be brought directly against the person responsible (for another), without
including the author of the act. The action against the principal is accessory in the sense that
it implies the existence of a prejudicial act committed by the employee, but it is not subsidiary
in the sense that it can not be instituted till after the judgment against the author of the act or
at least, that it is subsidiary to the principal action; the action for responsibility (of the employer)
is in itself a principal action.46

Thus, there is no need in this case for the trial court to acquire jurisdiction over Foronda. The trial
court’s acquisition of jurisdiction over Mrs. Cerezo is sufficient to dispose of the present case on the
merits.

In contrast, an action based on a delict seeks to enforce the subsidiary liability of the employer for the
criminal negligence of the employee as provided in Article 103 of the Revised Penal Code. To hold
the employer liable in a subsidiary capacity under a delict, the aggrieved party must initiate a criminal
action where the employee’s delict and corresponding primary liability are established.47 If the present
action proceeds from a delict, then the trial court’s jurisdiction over Foronda is necessary. However,
the present action is clearly for the quasi-delict of Mrs. Cerezo and not for the delict of Foronda.

The Cerezo spouses’ contention that summons be served anew on them is untenable in light of their
participation in the trial court proceedings. To uphold the Cerezo spouses’ contention would make a
fetish of a technicality.48 Moreover, any irregularity in the service of summons that might have vitiated
the trial court’s jurisdiction over the persons of the Cerezo spouses was deemed waived when the
Cerezo spouses filed a petition for relief from judgment.49

We hold that the trial court had jurisdiction and was competent to decide the case in favor of Tuazon
and against Mrs. Cerezo even in the absence of Foronda. Contrary to Mrs. Cerezo’s contention,
Foronda is not an indispensable party to the present case. It is not even necessary for Tuazon to
reserve the filing of a separate civil action because he opted to file a civil action for damages against
Mrs. Cerezo who is primarily and directly liable for her own civil negligence. The words of Justice Jorge
Bocobo in Barredo v. Garcia still hold true today as much as it did in 1942:

x x x [T]o hold that there is only one way to make defendant’s liability effective, and that is, to
sue the driver and exhaust his (the latter’s) property first, would be tantamount to compelling
the plaintiff to follow a devious and cumbersome method of obtaining relief. True, there is such
a remedy under our laws, but there is also a more expeditious way, which is based on the
primary and direct responsibility of the defendant under article [2180] of the Civil Code. Our
view of the law is more likely to facilitate remedy for civil wrongs, because the procedure
indicated by the defendant is wasteful and productive of delay, it being a matter of common
knowledge that professional drivers of taxis and other similar public conveyances do not have
sufficient means with which to pay damages. Why, then, should the plaintiff be required in all
cases to go through this roundabout, unnecessary, and probably useless procedure? In
construing the laws, courts have endeavored to shorten and facilitate the pathways of right
and justice.50

Interest at the rate of 6% per annum is due on the amount of damages adjudged by the trial court.51 The
6% per annum interest shall commence from 30 May 1995, the date of the decision of the trial court.
Upon finality of this decision, interest at 12% per annum, in lieu of 6% per annum, is due on the amount
of damages adjudged by the trial court until full payment.

WHEREFORE, we DENY the instant petition for review. The Resolution dated 21 October 1999 of the
Court of Appeals in CA-G.R. SP No. 53572, as well as its Resolution dated 20 January 2000 denying
the motion for reconsideration, is AFFIRMED with the MODIFICATION that the amount due shall earn
legal interest at 6% per annum computed from 30 May 1995, the date of the trial court’s decision.
Upon finality of this decision, the amount due shall earn interest at 12% per annum, in lieu of 6% per
annum, until full payment.

SO ORDERED.

FIRST DIVISION

G.R. No. 130228 July 27, 2004

BERNABE FOSTER-GALLEGO, petitioner,

vs.
SPOUSES ROMEO and VIVIEN GALANG, VIVE REALTY CORPORATION, MUNICIPALITY OF
PARAÑAQUE, TREASURER OF PARAÑAQUE, REGISTER OF DEEDS OF
PARAÑAQUE, respondents.
DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review1 assailing the Decision2 of 22 July 1997 of the Court of Appeals
in CA-G.R. CV No. 43439. The Court of Appeals affirmed with modification the Decision3 of 8 July
1993 of the Regional Trial Court of Makati, Metro Manila, Branch 148, in Civil Case No. 89-3898. The
trial court rendered judgment against Lito Gallego ("Gallego") and declared Romeo and Vivien Galang
("Spouses Galang"), the owners of the parcel of land subject of this case.

Antecedent Facts

Vive Realty Corporation ("VRC") acquired several properties at a public auction held by the Municipal
Treasurer of Parañaque ("Treasurer") on 29 October 1982. Among these properties was a parcel of
land ("Property") with an area of 330 square meters located in Barrio Kaybiga, Parañaque, Metro
Manila, and covered by TCT No. 435402. The Treasurer executed a Final Bill of Sale4 over the
Property in favor of VRC on 25 November 1983. VRC then filed a petition, docketed as Civil Case No.
5801, to cancel the titles of the properties VRC had purchased during the public auction. In a
Decision5 dated 19 December 1983, the Regional Trial Court of Makati, Branch 138 ("RTC-Branch
138"), ordered the Register of Deeds to cancel 11 transfer certificates of title, including TCT No.
435402, and to issue new titles in the name of VRC.

On 22 June 1984, the Spouses Galang purchased the Property from VRC through a Deed of Absolute
Sale.6 The Register of Deeds later issued TCT No. (86872) 22786 over the Property in the name of the
Spouses Galang. The Spouses Galang took possession of the Property and had it declared in their
name for taxation purposes. They diligently paid the corresponding real property taxes.

In April 1989, Romeo Galang came home from Saudi Arabia and discovered a hollow block fence
along the perimeter of the Property. Gallego built the fence in March 1989. Although the Spouses
Galang brought the matter to the Barangay Lupon for possible settlement, Gallego failed to appear at
the barangay hall and instead sent his lawyer. On 16 May 1989, the Spouses Galang filed a complaint
for Quieting of Title with Damages7 against Gallego. The case was raffled to the Regional Trial Court
of Makati, Branch 1468 ("RTC-Branch 146").

In his Answer with Counterclaim, Gallego alleged that his brother, Bernabe Foster-Gallego, owned the
Property. Gallego denied that his brother was delinquent in the payment of real property
taxes. Gallego asserted that his brother had never received a notice of delinquency or a notice of the
public auction of the Property, much less a copy of RTC-Branch 138's decision cancelling TCT No.
435402. Gallego pointed out that TCT No. 435402 and Tax Declaration No. A-022-00019 clearly
indicated his brother's address as No. 15 Tiller Green S.W. Washington D.C., USA. Since his brother
is the true and lawful owner of the Property, Gallego argued that the Spouses Galang should not
disturb his possession as caretaker of the Property.

As Gallego subsequently failed to appear at the pre-trial conference and to submit his pre-trial brief,
RTC-Branch 146 issued an Order9 on 16 February 1990 declaring Gallego in default and allowing the
Spouses Galang to present their evidence ex parte. On 10 March 1990, Gallego filed a motion to lift
the order of default and to admit his pre-trial brief. On the same day, Bernabe Foster-Gallego
("petitioner") filed a motion for intervention with an attached answer-in-intervention. RTC-Branch 146
denied Gallego's motion but granted petitioner's motion and admitted the answer-in-intervention.

RTC-Branch 146 set a pre-trial conference between the Spouses Galang and petitioner. However,
the pre-trial did not push through because petitioner filed on 2 August 1990 a motion to admit third-
party complaint, which RTC-Branch 146 granted. Summonses were issued on third-party defendant
VRC, as well on the Municipality (now City), Treasurer, and Register of Deeds of Parañaque. VRC
failed to file an answer to the third-party complaint.

The case was subsequently re-raffled to the Regional Trial Court of Makati, Branch 6510 ("RTC-Branch
65"). On 4 March 1991, the Spouses Galang started presenting their evidence ex parte against
Gallego. Petitioner filed a motion to strike out these proceedings and to hold in abeyance the hearing
scheduled on 8 April 1991 on the ground that not all the third-party defendants had filed their answers
and pre-trial briefs. RTC-Branch 65 denied the motion in an Order dated 6 May 1991.11
Gallego and petitioner jointly filed a petition for certiorari with the Court of Appeals praying to annul
the order. The appellate court dismissed the petition for lack of merit. Gallego and petitioner then
elevated the matter to this Court, which denied their petition and subsequent motion for
reconsideration for lack of reversible error.

The Spouses Galang continued to present their evidence ex parte against Gallego on 17 August
1992. On 24 August 1992, they submitted their written offer of evidence and RTC-Branch 65 deemed
the case involving the Gallego and the Spouses Galang submitted for decision. RTC-Branch 65 also
ordered the Spouses Galang and petitioner to submit their position papers on the procedure to receive
further evidence in the case. Both parties complied in September 1992.

In October 1992, petitioner filed a motion to inhibit Judge Abad Santos who granted the motion and
inhibited himself. The case was re-raffled to the Regional Trial Court of Makati, Branch 148 ("trial
court"). The trial court eventually decided the original case in favor of the Spouses Galang, and denied
petitioner's intervention and third-party complaint.

The Ruling of the Trial Court

The dispositive portion of the Decision of 8 July 1993 of the trial court reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and
against defendant Lito Gallego removing any cloud or quieting of title and ownership over the
parcel of land covered by TCT No. (86872) 22786 of the Register of Deeds of Pasay City with
an area of 330 square meters more or less situated in Barrio Kaybiga, Parañaque, Metro
Manila, declaring them at this point in time as exclusive owner of said land and that said
defendant Lito Gallego is hereby ordered to pay plaintiffs moral damages in the amount
of P10,000.00; attorney's fees in the amount of P25,000.00 including the appearance fees
and P3,000.00 as litigation expenses.

With costs against the defendant Lito Gallego.

SO ORDERED.12

Dissatisfied with the trial court's decision, Gallego and the Spouses Galang appealed to the Court of
Appeals.

The trial court also set for hearing the issue of whether trial on the merits should proceed on petitioner's
intervention and third-party complaint. After hearing the arguments of the parties concerned and
receiving their respective memoranda, the trial court issued on 12 October 1993 the following Order:

WHEREFORE, premises considered,

(1) the order admitting the Answer in Intervention by Bernabe Gallego is hereby reconsidered,
and the Motion to Admit the same is hereby DENIED, and the Answer in Intervention is hereby
stricken off the record.

(2) the third party complaint filed by Bernabe Gallego is hereby denied admission, and if it was
already admitted, the admission is hereby reconsidered and said third party complaint is
hereby stricken off the records.

SO ORDERED.13

Petitioner received the trial court's order on 21 October 1993. Petitioner filed a motion for
reconsideration on 5 November 1993, which the trial court denied. Petitioner received a copy of the
trial court's denial on 23 January 1995. Petitioner then filed on 26 January 1995 a notice that he was
appealing the Order to the Court of Appeals. Instead of filing his own brief, however, petitioner joined
in Gallego's appeal.

The Ruling of the Court of Appeals

The Court of Appeals held that petitioner had no legal personality to join Gallego's appeal, thus:

In fact, with the denial of his motion for intervention, intervenor-appellant never became a party
to the case. Thus, he had no legal personality to join defendant-appellant in this appeal to
impugn the decision of 8 July 1993, much less to use this appeal as a mode to question the
orders denying his intervention. Under Section 2, Rule 12 of the Rules of Court, the Rule then
prevailing at the time the intervention of intervenor-appellant was denied, any person desiring
to intervene shall file a motion for leave of court and that allowance or disallowance of the
 motion is addressed to the sound discretion of the court. xxx once the court exercises its
discretion, the same cannot be reviewed save in instances where such discretion has been so
exercised in an arbitrary or capricious manner in which case a petition for certiorari may be
pursued. In other words, if intervenor-appellant believes that the lower court gravely abused
its discretion in denying his motion for intervention, his proper forum is elsewhere and not in
this appeal.

xxx

But even assuming that the questioned orders are final such that they can be the proper
subject of appeal, an examination of the records will show that intervenor-appellant's appeal
was interposed out of time. The order of 12 October 1993 denying the motion for intervention
of intervenor-appellant was received by him on 21 October 1993; hence, pursuant to Section
39 of Batas Pambansa Bilang 129, he only had a period of fifteen (15) days, or until 5
November 1993, within which to perfect an appeal. Intervenor-appellant instead filed a motion
for reconsideration on 5 November 1993 but this was denied by the lower court on 26
December 1994, a copy of the order of which was served on him on 23 January 1995. This
means that intervenor-appellant had until the next day, 24 January 1995, within which to
perfect his appeal considering that he filed his motion for reconsideration on the very last day
to appeal. It will be noted, however, that intervenor-appellant failed to beat his deadline as he
filed his notice of appeal only on 26 January 1995. This Court therefore has no jurisdiction to
review the assailed orders as they already lapsed into finality. xxx

xxx

One last note. Intervenor-appellant is not without any remedy with the denial of his motion for
intervention. Whatever right or interest he may have over the subject property will not in any
way be affected by the judgment rendered against defendant-appellant. If indeed there were
some irregularities in the sale at public auction of the property and in the cancellation of his
title, intervenor-appellant may still avail of the proper remedies under the rules.14

The Court of Appeals also affirmed the decision of the trial court but deleted the award of damages to
the Spouses Galang for lack of basis, as follows:

WHEREFORE, premises considered, the 8 July 1993 decision appealed from is hereby
AFFIRMED, with MODIFICATION that the award in favor of plaintiffs-appellants for moral
damages, attorney's fees and litigation expenses is DELETED.

SO ORDERED.15

Gallego and the Spouses Galang did not appeal the appellate court's Decision of 22 July
1997. However, petitioner filed before this Court a petition for review on certiorari assailing the
Decision.

The Issues

Petitioner contends that:

1. THE COURT OF APPEALS SERIOUSLY ERRED IN NOT SETTING ASIDE THE ORDER
DATED OCTOBER 12, 1993 AND THE ORDER DATED DECEMBER 26, 1994 AS WELL AS
THE DECISION DATED JULY 8, 1993 AND IN NOT RENDERING A DECISION RULING
THAT:

a) THE TRIAL COURT ERRED IN RECONSIDERING THE ORDER DATED APRIL

16, 1990 xxx;

b) THE TRIAL COURT GRAVELY ERRED IN REASONING THAT THE DEFAULT

ORDER AGAINST GALLEGO PRECLUDED THE ADMISSION OF THE VERIFIED
ANSWER-IN-INTERVENTION AND THE VERIFIED THIRD-PARTY COMPLAINT OF
PETITIONER WHICH HAVE IPSO FACTO AND EFFECTIVELY ADMITTED OR
INSTALLED PETITIONER AS DEFENDANT OR BECAME THE MAIN DEFENDANT
AND INDISPENSABLE PARTY OF THE CASE;

c) THE TRIAL COURT GRAVELY ERRED IN RULING THAT THE

INTERVENTION OF PETITIONER IS MERELY ANCILLARY TO THE MAIN ACTION
xxx;

d) THE TRIAL COURT GRAVELY ERRED IN NOT CONCLUDING THAT THE

NOTICE OF AUCTION SALE AND ITS PUBLICATION, THE CERTIFICATE OF SALE,
 AND THE FINAL BILL OF SALE INVOLVED ARE ALL VOID AB INITIO AND DID
NOT AFFECT THE EFFECTIVE AND STANDING VALIDITIY AND EXISTENCE OF
TCT NO. 435402 xxx;

e) THE TRIAL COURT GRAVELY ERRED IN NOT DECIDING THAT xxx CIVIL
CASE NO. 5801 OF THE RTC, BRANCH 138, MAKATI, AND THE PROCEEDINGS
AND DECISION DATED DECEMBER 19, 199316 THEREUNDER ARE VOID;

f) THE TRIAL COURT COMMITTED A SERIOUS ERROR IN NOT DECIDING

THAT EVEN ASSUMING THAT THE AUCTION PROCEEDINGS WERE VALID,
PETITIONER IN EFFECT HAD REDEEMED HIS PROPERTY WHICH WAS
ALLEGEDLY AUCTIONED, WITHIN THE REDEMPTION PERIOD OF ONE (1) YEAR
BASED ON UNDISPUTED FACTS ON RECORD;

g) THE TRIAL COURT COMMITTED A SERIOUS MISTAKE IN NOT DECIDING

THAT THE DOCTRINE OF AN INNOCENT PURCHASER FOR VALUE IS NOT
APPLICABLE IN THIS CASE, BECAUSE THE SPOUSES GALANG PURCHASED
NOTHING FROM VIVE REALTY CORPORATION WHOSE TITLE IS VOID AB
INITIO AND THEREFORE HAD NOTHING TO SELL;

h) THE TRIAL COURT SERIOUSLY ERRED IN NOT RULING THAT TCT NO.
86872 (22786) IN THE NAME OF THE SPOUSES GALANG IS VOID AB INITIO AND
PETITIONER'S TCT NO. 435402 WHICH REMAINS UNCANCELLED IN THE NAME
OF PETITIONER AND IN HIS POSSESSION, IS STILL LEGALLY EXISTING AND
VALID;

i) THE TRIAL COURT GRAVELY ERRED IN NOT RULING THAT THE ANSWER-
IN-INTERVENTION IS A DIRECT ATTACK, NOT COLLATERAL, ON THE TITLE OF
SPOUSES GALANG;

2. THE COURT OF APPEALS SERIOUSLY ERRED IN CONCLUDING THAT IT CANNOT

REVIEW THE ORDER DATED OCTOBER 12, 1993 AND THE ORDER DATED DECEMBER
26, 1994;

3. THE COURT OF APPEALS SERIOUSLY ERRED IN RULING THAT PETITIONER

FILED HIS NOTICE OF APPEAL LATE; BUT EVEN ASSUMING IT TO BE SO, THE ONE-
DAY17 TARDINESS IS EXCUSABLE AND STRICTLY TECHNICAL TO DEFEAT
PETITIONER'S PROPERTY RIGHT OF WHICH HE IS BEING DEPRIVED WITHOUT DUE
PROCESS OF LAW; and

4. THE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN THAT, ASSUMING

PETITIONER HAD NO PERSONALITY TO JOIN THE APPEAL OF GALLEGO AND THAT
THE ORDERS DATED OCTOBER 12, 1993 AND DATED DECEMBER 26, 1993
RESPECTIVELY ARE INTERLOCUTORY, PETITIONER HAS STILL A REMEDY TO FILE
HIS OWN ACTION TO ANNUL TCT NO. (86872) 22786 IN THE NAMES OF THE SPOUSES
GALANG.18

The original parties to this case chose not to appeal the Court of Appeals' Decision of 22 July
1997. The ruling of this Court thus pertains to petitioner only. We will not delve into the issues
between the Spouses Galang and Gallego.

In sum, the issues of this case are: (1) whether the Court of Appeals erred in dismissing petitioner's
appeal from the trial court's orders disallowing petitioner's intervention; (2) whether RTC-Branch 138's
Decision of 19 December 1983 can be declared void in an action for quieting of title; and (3) whether
petitioner is an indispensable party to the action for quieting of title.

The Ruling of the Court

The Court of Appeals Did Not Err in

Dismissing Petitioner's Appeal

True, this Court has on occasion held that an order denying a motion for intervention is
appealable.19 Where the lower court's denial of a motion for intervention amounts to a final order, an
appeal is the proper remedy,20 as when the denial leaves the intervenor without further remedy or resort
to judicial relief.

However, the issue of whether petitioner correctly appealed the assailed orders of the trial court to the
Court of Appeals is beside the point since petitioner did not interpose his own appeal. Petitioner
merely joined Gallego's appeal from the trial court's decision.
A prospective intervenor's right to appeal applies only to the denial of his intervention.21 Not being a
party to the case, a person whose intervention the court denied has no standing to question the
decision of the court.22 Petitioner thus had no legal personality to join Gallego in assailing the decision
of the trial court. Petitioner could question only the trial court's orders denying his intervention and
striking off from the records his answer-in-intervention, not the decision itself.

Moreover, petitioner filed his notice of appeal out of time. The Court of Appeals ruled that:

xxx The order of 12 October 1993 denying the motion for intervention of intervenor-appellant
was received by him on 21 October 1993; hence, pursuant to Section 39 of Batas Pambansa
Bilang 129, he only had a period of fifteen (15) days, or until 5 November 1993, within which
to perfect an appeal. Intervenor-appellant instead filed a motion for reconsideration on 5
November 1993 but this was denied by the lower court on 26 December 1994, a copy of the
order of which was served on him on 23 January 1995. This means that intervenor-appellant
had until the next day, 24 January 1995, within which to perfect his appeal considering that he
filed his motion for reconsideration on the very last day to appeal. It will be noted, however,
that intervenor-appellant failed to beat his deadline as he filed his notice of appeal only on 26
January 1995.23

Petitioner disputes the appellate court's findings. Petitioner claims that he filed his motion for
reconsideration on 3 November 1993, and not on 5 November. The deadline for his appeal was on
25 January 1995 and not on 24 January 1995. Petitioner concedes that he filed his appeal a day late
on 26 January 1993, but argues that this brief delay is strictly technical.

The records show that petitioner filed with the trial court his motion for reconsideration by registered
mail on 3 November 1993,24 and not on 5 November. However, as petitioner himself admits, he still
filed his appeal a day beyond the 25 January 1993 deadline.

An appeal from a court's judgment or final order is a statutory right, subject to the law and the rules of
procedure. The perfection of an appeal within the statutory or reglementary period is not only
mandatory but also jurisdictional.25 Failure to interpose a timely appeal renders the assailed decision
final and executory, and deprives the appellate court of jurisdiction to alter the final judgment or to
entertain the appeal.26

Petitioner lost his right to appeal when he exceeded the fifteen-day period27 granted by law. Petitioner
filed his motion for reconsideration on the thirteenth day of his fifteen-day period to appeal. The filing
of a motion for reconsideration merely suspends the running of the period to appeal.28 Once the court
denies the motion, the aggrieved party has only the remaining period from receipt of the order of denial
to file his appeal.29 Petitioner thus had only two days from his receipt on 23 January 1995 of the trial
court's order denying the reconsideration, or up to 25 January 1995, to perfect his appeal to the Court
of Appeals. Petitioner's failure to interpose his appeal on time rendered the assailed orders of the trial
court final.

Petitioner argues that his tardiness of one day is excusable, and cannot defeat his property
rights. Petitioner does not, however, offer any valid justification for the late filing of his
appeal. Petitioner merely cites the lame excuse that his counsel's assistant attorney must have
mistaken the handwritten received date of "1/23/95" on counsel's copy of the trial court's order denying
petitioner's motion for reconsideration as "1/25/95".30 Although the Court, under exceptional
circumstances, has allowed late appeals in the interest of justice and equity, this only applies to highly
meritorious cases to prevent a grave injustice.31 That is not the case here.

The allowance or disallowance of a motion to intervene is addressed to the sound discretion of the
court hearing the case.32 This discretion, once exercised, is not reviewable
by certiorari or mandamus save in instances where such discretion is exercised in an arbitrary or
capricious manner.33 Petitioner has not shown that the trial court acted capriciously or arbitrarily. That
the trial court initially allowed petitioner to intervene but subsequently reconsidered and withdrew its
permission does not prove, by itself, that the trial court acted in a manner warranting review. This is
certainly not the first time a trial court initially allowed a motion for intervention and later reconsidered
and denied it.34

The trial court had a valid reason to deny petitioner's intervention. An intervention is ordinarily not
permitted if the prospective intervenor's rights can be fully protected in a separate proceeding.35 In this
case, even if the trial court allowed it, petitioner's intervention in the action for quieting of title would
have been futile.

Reliefs Sought by Petitioner are Not Available

in an Action to Quiet Title
It is evident from most of the issues raised and the reliefs prayed for that petitioner's principal aim is
to overturn the 19 December 1983 Decision of RTC-Branch 138 ("RTC-Branch 138 Decision")
cancelling his title. Petitioner seeks to set aside the RTC-Branch 138 Decision, to uphold the validity
of his title, and to annul the title held by the Spouses Galang. To this end, petitioner impleaded VRC,
and the Municipality (now City), Treasurer and Register of Deeds of Parañaque in a third-party
complaint, alleging that these parties committed fraud and deprived petitioner of due process.

However, these issues – whether fraud tainted the proceedings before RTC-Branch 138, whether the
Treasurer of Parañaque notified petitioner of the public auction of the Property, and whether there was
denial of petitioner's right to due process – cannot be resolved in a proceeding for quieting of title. The
only issue in an action to quiet title is whether there is a cloud on a title to real property because of
any instrument, record, claim, encumbrance or proceeding that has a prima facie appearance of
validity.36

The issues petitioner raised would also necessarily require the trial court to review the decision of
another regional trial court. This is plainly beyond the powers of the trial court. Under the doctrine of
non-interference, a trial court has no authority to interfere with the proceedings of a court of equal
jurisdiction,37 much less to annul the final judgment of a co-equal court.38 The Court held
in Metropolitan Bank & Trust Co. v. Alejo39 that an action for quieting of title is not the appropriate
remedy where the action would require the court hearing it to modify or interfere with the judgment or
order of another co-equal court.

Even if it wanted to, the trial court could not declare the RTC-Branch 138 Decision void, since that
would be tantamount to annulling the decision of a co-equal court. The jurisdiction to annul the
judgment of a regional trial court lies with the Court of Appeals,40 and not with another regional trial
court. The trial court also did not err when it recognized the auction sale of the Property, which RTC-
Branch 138 had already upheld.

The instant petition must also fail because it anchors petitioner's claim on a cancelled certificate of
title. Petitioner's cancelled title cannot cast a cloud on the current title the Spouses Galang now
hold. On 19 December 1983, RTC-Branch 138 cancelled TCT No. 435402 in its decision in Civil Case
No. 5801. With the lapse of more than two decades, RTC-Branch 138's Decision has long gained
finality by operation of law. A judgment becomes final upon the lapse of the reglementary period to
appeal if no appeal is perfected.41 Being final, the RTC-Branch 138 Decision is no longer subject to
review by appeal.

What petitioner is barred from directly appealing, however, he seeks to overturn through an appeal
from another case heard by a different trial court. Obviously, petitioner cannot do this. When a
judgment of a lower court becomes final and executory, it is no longer reviewable, directly or indirectly,
by a higher court, not even by the Supreme Court.42

Moreover, as correctly pointed out by the Court of Appeals, a certificate of title is not subject to
collateral attack. An attack is collateral when, in an action to obtain a different relief, an attack on the
judgment is nevertheless made as an incident in the action.43 Under the Property Registration Decree,
titles issued under the Torrens system can only be altered, modified or cancelled in direct proceedings
in accordance with the law.44

In this case, petitioner raised the alleged nullity of TCT No. (86872) 22786 in his answer-in-intervention
to the suit the Spouses Galang filed to quiet title. The petitioners in Villanueva v. Court of
Appeals45 also raised the supposed invalidity of respondents' titles in their answer to respondents'
complaint for recovery of ownership. The Court disallowed the defense on the ground that it was a
collateral attack on respondents' title, that is, an indirect challenge to the final judgment and decree of
registration that resulted in the issuance of the assailed title. In Villanueva, the Court declared that
Section 48 of the Property Registration Decree required no less than a direct action for reconveyance
filed within the period provided by law.46

Petitioner argues that these rules do not apply to him. Citing Ferrer v. Bautista,47 petitioner alleges
that the Spouses Galang's title is void ab initio because it originated from the allegedly void title issued
to VRC. The Court held in Ferrer that a void title is susceptible to direct and collateral attack.48

Ferrer does not apply to the case at bar. The void title referred to in Ferrer was based on a free patent
issued by the Director of Lands over alluvial property. The patent nullity of the assailed title
in Ferrer arose, not from fraud or deceit, but from the fact that the Bureau of Lands had no
jurisdiction over land that had passed to private ownership.49

In this case, the trial court ordered the cancellation of petitioner's title and the issuance of a new title
to VRC. The trial court's decision has long attained finality. Regional trial courts exercise exclusive
original jurisdiction over all civil actions involving title to real property.50 The law authorizes regional trial
courts, acting as land registration courts, to order the cancellation and issuance of certificates of title.51
Unlike in Ferrer, there is also insufficient evidence in the records to verify at this time petitioner's
allegations that RTC-Branch 138, the City Treasurer and Register of Deeds of Parañaque failed to
observe the legal requirements of notice and due process on tax sales of real property. Worse,
petitioner anchors many of his arguments assailing the public auction of the Property on the outmoded
Assessment Law of 1939.52 Presidential Decree No. 464 had long superseded the Assessment Law,
which was no longer the applicable law when the tax sale of the Property took place in 1982.53

Petitioner's allegations are better ventilated in a full-blown trial, and not in an action for quieting of title,
which operates under the rules on declaratory relief. Petitioner's charge that the proceedings and
decision of RTC-Branch 138 were void because of alleged due process violations cannot be resolved
in a suit to quiet title. The issue of whether a title was procured by falsification or fraud should be
raised in an action expressly instituted for the purpose.54

Petitioner is Not an Indispensable Party

to the Action for Quieting of Title

An indispensable party is a party who has such an interest in the controversy or subject matter that a
final adjudication cannot be made, in his absence, without injuring or affecting that interest.55 A person
is not an indispensable party if his interest in the controversy or subject matter is separable from the
interest of the other parties, so that he will not necessarily be injuriously affected by a decree that does
complete justice between the other parties.56 He is also not indispensable if his presence would merely
permit complete relief between him and those already parties to the action or will simply avoid multiple
litigations.57

Petitioner, whose title RTC-Branch 138 cancelled, is not an indispensable party to the action for
quieting of title. The assailed decision quieting title in favor of the Spouses Galang has no appreciable
effect on petitioner's title. Petitioner's title could still be cancelled with or without the trial court's
declaration that the Spouses Galang are the owners of the Property "at this time."58

Further, the assailed decision does not bind petitioner. The rules on quieting of title59 expressly
provide that any declaration in a suit to quiet title shall not prejudice persons who are not parties to the
action. Given that the trial court denied petitioner's intervention and struck it off from the records,
petitioner is not a party to the instant case. Suits to quiet title are actions quasi in rem, and the
judgment in such proceedings is conclusive only between the parties to the action.60

There is also no legal basis for petitioner's argument that the order declaring Gallego in default
rendered petitioner the ipso facto defendant of this case. Petitioner could have but did not move to
substitute Gallego during the proceedings before the court a quo.

On a final note, the Court fully agrees with the Court of Appeals that petitioner is not without other
remedy. Assuming petitioner can prove his allegations, petitioner is at the least entitled to recover
damages from the parties that defrauded or deprived him of due process.

WHEREFORE, we DENY the instant petition and AFFIRM the Decision of 22 July 1997 of the Court
of Appeals in CA-G.R. CV No. 43439.

SO ORDERED.

SECOND DIVISION

[ G.R. No. 170631. February 10, 2016 ]

CARAVAN TRAVEL AND TOURS INTERNATIONAL, INC., PETITIONER, VS. ERMILINDA R.

ABEJAR, RESPONDENT.

DECISION

LEONEN, J.:

The plaintiff may first prove the employer's ownership of the vehicle involved in a mishap by
presenting the vehicle's registration in evidence. Thereafter, a disputable presumption that the
requirements for an employer's liability under Article 21801 of the Civil Code have been satisfied will
arise. The burden of evidence then shifts to the defendant to show that no liability under Article 2180
has ensued. This case, thus, harmonizes the requirements of Article 2180, in relation to Article
21762 of the Civil Code, and the so-called registered-owner rule as established in this court's rulings
in Aguilar, Sr. v. Commercial Savings Bank,3 Del Carmen, Jr. v. Bacoy,4 Filcar Transport Services v.
Espinas,5 and Mendoza v. Spouses Gomez.6
 Through this Petition for Review on Certiorari,7 Caravel Travel and Tours International, Inc.
(Caravan) prays that the Decision8 dated October 3, 2005 and the Resolution9 dated November 29,
2005 of the Court of Appeals Twelfth Division be reversed and set aside.10

On July 13, 2000, Jesmariane R. Reyes (Reyes) was walking along the west-bound lane of
Sampaguita Street, United Parañaque Subdivision IV, Parañaque City.11 A Mitsubishi L-300 van with
plate number PKM 19512 was travelling along the east-bound lane, opposite Reyes.13 To avoid an
incoming vehicle, the van swerved to its left and hit Reyes.14 Alex Espinosa (Espinosa), a witness to
the accident, went to her aid and loaded her in the back of the van.15 Espinosa told the driver of the
van, Jimmy Bautista (Bautista), to bring Reyes to the hospital.16 Instead of doing so, Bautista
appeared to have left the van parked inside a nearby subdivision with Reyes still in the
van.17 Fortunately for Reyes, an unidentified civilian came to help and drove Reyes to the hospital.18

Upon investigation, it was found that the registered owner of the van was Caravan.19 Caravan is
a corporation engaged in the business of organizing travels and tours.20 Bautista was Caravan's
employee assigned to drive the van as its service driver.21

Caravan shouldered the hospitalization expenses of Reyes.22 Despite medical attendance,

Reyes died two (2) days after the accident.23

Respondent Ermilinda R. Abejar (Abejar), Reyes' paternal aunt and the person who raised her
since she was nine (9) years old,24 filed before the Regional Trial Court of Parañaque a
Complaint25 for damages against Bautista and Caravan. In her Complaint, Abejar alleged that
Bautista was an employee of Caravan and that Caravan is the registered owner of the van that hit
Reyes.26

Summons could not be served on Bautista.27 Thus, Abejar moved to drop Bautista as a
defendant.28 The Regional Trial Court granted her Motion.29

After trial, the Regional Trial Court found that Bautista was grossly negligent in driving the
vehicle.30 It awarded damages in favor of Abejar, as follows:

WHEREFORE, considering that the [respondent] was able to provide by preponderance of evidence
her cause of action against the defendants, judgment is hereby rendered ordering defendants
JIMMY BAUTISTA and CARAVAN TRAVEL and TOURS[,] INC., to jointly and solidarity pay the
plaintiff, the following, to wit:

1. The amount of P35,000.00 representing actual damages;

2. The amount of P300,000.00 as moral damages;

3. The amount of P30,000.00 as exemplary damages;

4. The amount of P50,000.00 as and by way of attorney's fees; and

5. The cost of suit.

SO ORDERED.31

Caravan's Motion for Reconsideration32 was denied through the October 20, 2003 Order33 of the
Regional Trial Court.

The Court of Appeals affirmed with modification the Regional Trial Court's July 31, 2003 Decision
and October 20, 2003 Order, as follows:

WHEREFORE, premises considered, the instant appeal is DENIED for lack of merit. The assailed
Decision dated 31 July 2003 and Order dated 20 October 2003 of the Regional Trial Court, City of
Para[ñ]aque, Branch 258, in Civil Case No. 00-0447 are AFFIRMED with the
following MODIFICATIONS:

1. Moral Damages is REDUCED to Php 200,000.00;

2. Death Indemnity of Php 50,000.00 is awarded;

3. The Php 35,000.00 actual damages, Php 200,000.00 moral damages, Php 30,000.00 exemplary
damages and Php 50,000.00 attorney's fees shall earn interest at the rate of 6% per annum computed
from 31 July 2003, the date of the [Regional Trial Court's] decision; and upon finality of this Decision,
 all the amounts due shall earn interest at the rate of 12% per annum, in lieu of 6% per annum, until
full payment; and

4. The Php 50,000.00 death indemnity shall earn interest at the rate of 6% per annum computed from the
date of promulgation of this Decision; and upon finality of this Decision, the amount due shall earn
interest at the rate of 12% per annum, in lieu of 6% per annum, until full payment.

Costs against [Caravan].

SO ORDERED.34

Caravan filed a Motion for Reconsideration, but it was denied in the Court of Appeals' assailed
November 29, 2005 Resolution.35

Hence, this Petition was filed.

Caravan argues that Abejar has no personality to bring this suit because she is not a real party in
interest. According to Caravan, Abejar does not exercise legal or substitute parental authority. She is
also not the judicially appointed guardian or the only living relative of the deceased.36 She is also not
"the executor or administrator of the estate of the deceased."37 According to Caravan, only the victim
herself or her heirs can enforce an action based on culpa aquiliana such as Abejar's action for
damages.38

Caravan adds that Abejar offered no documentary or testimonial evidence to prove that Bautista,
the driver, acted "within the scope of his assigned tasks"39 when the accident occurred.40 According
to Caravan, Bautista's tasks only pertained to the transport of company personnel or products, and
when the accident occurred, he had not been transporting personnel or delivering products of and for
the company.41

Caravan also argues that "it exercised the diligence of a good father of a family in the selection
and supervision of its employees."42

Caravan further claims that Abejar should not have been awarded moral damages, actual
damages, death indemnity, exemplary damages, and attorney's fees.43 It questions the Certificate
provided by Abejar as proof of expenses since its signatory, a certain Julian Peñaloza (Peñaloza),
was not presented in court, and Caravan was denied the right to cross-examine him.44 Caravan
argues that the statements in the Certification constitute hearsay.45 It also contends that based on
Article 2206(3)46 of the Civil Code, Abejar is not entitled to moral damages.47 It insists that moral and
exemplary damages should not have been awarded to Abejar because Caravan acted in good
faith.48 Considering that moral and exemplary damages are unwarranted, Caravan claims that the
award of attorney's fees should have also been removed.49

Lastly, Caravan argues that it should not be held solidarily liable with Bautista since Bautista was
already dropped as a party.50

Abejar counters that Caravan failed to provide proof that it exercised the requisite diligence in the
selection and supervision of Bautista.51 She adds that the Court of Appeals' ruling that Caravan is
solidarily liable with Bautista for moral damages, exemplary damages, civil indemnity ex delicto, and
attorney's fees should be upheld.52 Abejar argues that since Caravan is the registered owner of the
van, it is directly, primarily, and solidarity liable for the tortious acts of its driver.53

For resolution are the following issues:

First, whether respondent Ermilinda R. Abejar is a real party in interest who may bring an action
for damages against petitioner Caravan Travel and Tours International, Inc. on account of Jesmariane
R. Reyes' death; and

Second, whether petitioner should be held liable as an employer, pursuant to Article 2180 of the
Civil Code.

We deny the Petition.

Having exercised substitute parental authority, respondent suffered actual loss and is, thus, a real
party in interest in this case.
 In her Complaint, respondent made allegations that would sustain her action for damages: that
she exercised substitute parental authority over Reyes; that Reyes' death was caused by the
negligence of petitioner and its driver; and that Reyes' death caused her damage.54 Respondent
properly filed an action based on quasi-delict. She is a real party in interest.

Rule 3, Section 2 of the 1997 Rules of Civil Procedure defines a real party in interest:

RULE 3. Parties to Civil Actions

....

Section 2. Parties in Interest. — A real party in interest is the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise
authorized by law or these Rules, every action must be prosecuted or defended in the name of the
real party in interest.

"To qualify a person to be a real party in interest in whose name an action must be prosecuted,
he [or she] must appear to be the present real owner of the right sought to be
enforced."55 Respondent's capacity to file a complaint against petitioner stems from her having
exercised substitute parental authority over Reyes.

Article 216 of the Family Code identifies the persons who exercise substitute parental authority:

Art. 216. In default of parents or a judicially appointed guardian, the following persons shall exercise
substitute parental authority over the child in the order indicated:

(1) The surviving grandparent, as provided in Art. 214;56

(2) The oldest brother or sister, over twenty-one years of age, unless unfit or disqualified; and

(3) The child's actual custodian, over twenty-one years of age, unless unfit or disqualified.

Whenever the appointment or a judicial guardian over the property of the child becomes
necessary, the same order of preference shall be observed. (Emphasis supplied)

Article 233 of the Family Code provides for the extent of authority of persons exercising substitute
parental authority, that is, the same as those of actual parents:

Art. 233. The person exercising substitute parental authority shall have
the same authority over the person of the child as the parents. (Emphasis supplied)

Both of Reyes' parents are already deceased.57 Reyes' paternal grandparents are also both
deceased.58 The whereabouts of Reyes' maternal grandparents are unknown.59 There is also no
record that Reyes has brothers or sisters. It was under these circumstances that respondent took
custody of Reyes when she was a child, assumed the role of Reyes' parents, and thus, exercised
substitute parental authority over her.60 As Reyes' custodian, respondent exercised the full extent of
the statutorily recognized rights and duties of a parent. Consistent with Article 22061 of the Family
Code, respondent supported Reyes' education62 and provided for her personal needs.63 To echo
respondent's words in her Complaint, she treated Reyes as if she were her own daughter.64

Respondent's right to proceed against petitioner, therefore, is based on two grounds.

First, respondent suffered actual personal loss. With her affinity for Reyes, it stands to reason that
when Reyes died, respondent suffered the same anguish that a natural parent would have felt upon
the loss of one's child. It is for this injury—as authentic and personal as that of a natural parent—that
respondent seeks to be indemnified.

Second, respondent is capacitated to do what Reyes' actual parents would have been capacitated
to do.

In Metro Manila Transit Corporation v. Court of Appeals,65 Tapdasan, Jr. v.

People,66 and Aguilar, Sr. v. Commercial Savings Bank,67 this court allowed natural parents of
victims to recover damages for the death of their children. Inasmuch as persons exercising substitute
parental authority have the full range of competencies of a child's actual parents, nothing prevents
persons exercising substitute parental authority from similarly possessing the right to be indemnified
for their ward's death.
 We note that Reyes was already 18 years old when she died. Having reached the age of majority,
she was already emancipated upon her death. While parental authority is terminated upon
emancipation,68 respondent continued to support and care for Reyes even after she turned
18.69 Except for the legal technicality of Reyes' emancipation, her relationship with respondent
remained the same. The anguish and damage caused to respondent by Reyes' death was no different
because of Reyes' emancipation.

In any case, the termination of respondent's parental authority is not an insurmountable legal bar
that precludes the filing of her Complaint. In interpreting Article 190270 of the old Civil Code, which is
substantially similar to the first sentence of Article 217671 of the Civil Code, this court in The Receiver
For North Negros Sugar Company, Inc. v. Ybañez, et al.72 ruled that brothers and sisters may recover
damages, except moral damages, for the death of their sibling.73 This court declared that Article 1902
of the old Civil Code (now Article 2176) is broad enough to accommodate even plaintiffs who are not
relatives of the deceased, thus:74

This Court said: "Article 1902 of the Civil Code declares that any person who by
an act or omission, characterized by fault or negligence, causes damage to another
shall be liable for the damage done ... a person is liable for damage done to another
by any culpable act; and by any culpable act is meant any act which is blameworthy
when judged by accepted legal standards. The idea thus expressed is undoubtedly
broad enough to include any rational conception of liability for the tortious acts likely
to be developed in any society." The word "damage" in said article, comprehending
as it does all that are embraced in its meaning, includes any and all damages that a
human being may suffer in any and all the manifestations of his life: physical or
material, moral or psychological, mental or spiritual, financial, economic, social,
political, and religious.

It is particularly noticeable that Article 1902 stresses the passive subject of the
obligation to pay damages caused by his fault or negligence. The article does not limit
or specify the active subjects, much less the relation that must exist between the victim
of the culpa aquiliana and the person who may recover damages, thus warranting the
inference that, in principle, anybody who suffers any damage from culpa
aquiliana, whether a relative or not of the victim, may recover damages from the
person responsible therefor[.]75 (Emphasis supplied, citations omitted)

II

Respondent's Complaint is anchored on an employer's liability for quasi-delict provided in Article

2180, in relation to Article 2176 of the Civil Code. Articles 2176 and 2180 read:

ARTICLE 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and is governed by the provisions of
this Chapter.

.....

ARTICLE 2180. The obligation imposed by article 2176 is demandable not only for one's own acts
or omissions, but also for those of persons for whom one is responsible.

The father and, in case of his death or incapacity, the mother, are responsible for the damages
caused by the minor children who live in their company.

Guardians are liable for damages caused by the minors or incapacitated persons who are under
their authority and live in their company.

The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on the
occasion of their functions.

Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry.

The State is responsible in like manner when it acts through a special agent; but not when the
damage has been caused by the official to whom the task done properly pertains, in which case what
is provided in article 2176 shall be applicable.
 Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused
by their pupils and students or apprentices, so long as they remain in their custody.

The responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage. (Emphasis supplied)

Contrary to petitioner's position, it was not fatal to respondent's cause that she herself did not
adduce proof that Bautista acted within the scope of his authority. It was sufficient that Abejar proved
that petitioner was the registered owner of the van that hit Reyes.

The resolution of this case must consider two (2) rules. First, Article 2180's specification that
"[e]mployers shall be liable for the damages caused by their employees . . . acting within the scope of
their assigned tasks[.]" Second, the operation of the registered-owner rule that registered owners are
liable for death or injuries caused by the operation of their vehicles.76

These rules appear to be in conflict when it comes to cases in which the employer is also the
registered owner of a vehicle. Article 2180 requires proof of two things: first, an employment
relationship between the driver and the owner; and second, that the driver acted within the scope of
his or her assigned tasks. On the other hand, applying the registered-owner rule only requires the
plaintiff to prove that the defendant-employer is the registered owner of the vehicle.

The registered-owner rule was articulated as early as 1957 in Erezo, et al. v. Jepte,77 where this
court explained that the registration of motor vehicles, as required by Section 5(a)78 of Republic Act
No. 4136, the Land Transportation and Traffic Code, was necessary "not to make said registration the
operative act by which ownership in vehicles is transferred, . . . but to permit the use and operation of
the vehicle upon any public highway[.]"79 Its "main aim . . . is to identify the owner so that if any
accident happens, or that any damage or injury is caused by the vehicle on the public highways,
responsibility therefor can be fixed on a definite individual, the registered owner."80

Erezo notwithstanding, Castilex Industrial Corporation v. Vasquez, Jr.81 relied on Article 2180 of
the Civil Code even though the employer was also the registered owner of the vehicle.82 The
registered-owner rule was not mentioned.

In Castilex, Benjamin Abad (Abad) was a manager of Castilex Industrial Corporation (Castilex).
Castilex was also the registered owner of a Toyota Hi-Lux pick-up truck. While Abad was driving the
pick-up truck, it collided with a motorcycle driven by Romeo Vasquez (Vasquez). Vasquez died a few
days after. Vasquez's parents filed a case for damages against Abad and Castilex.83 Castilex denied
liability, arguing that Abad was acting in his private capacity at the time of the accident.84

This court absolved Castilex of liability, reasoning that it was incumbent upon the plaintiff to prove
that the negligent employee was acting within the scope of his assigned tasks.85 Vasquez's parents
failed to prove this.86 This court outlined the process necessary for an employer to be held liable for
the acts of its employees and applied the process to the case:

Under the fifth paragraph of Article 2180, whether or not engaged in any business
or industry, an employer is liable for the torts committed by employees within the
scope of his assigned tasks. But it is necessary to establish the employer-employee
relationship; once this is done, the plaintiff must show, to hold the employer liable, that
the employee was acting within the scope of his assigned task when the tort
complained of was committed. It is only then that the employer may find it necessary
to interpose the defense of due diligence in the selection and supervision of the
employee.

....

Since there is paucity of evidence that ABAD was acting within the scope of the
functions entrusted to him, petitioner CASTILEX had no duty to show that it exercised
the diligence of a good father of a family in providing ABAD with a service vehicle.
Thus, justice and equity require that petitioner be relieved of vicarious liability for the
consequences of the negligence of ABAD in driving its vehicle. (Emphasis supplied,
citations omitted)87

Aguilar, Sr. v. Commercial Savings Bank recognized the seeming conflict between Article 2180
and the registered-owner rule and applied the latter.88

In Aguilar, Sr., a Mitsubishi Lancer, registered in the name of Commercial Savings Bank and
driven by the bank's assistant vice-president Ferdinand Borja, hit Conrado Aguilar, Jr. The impact
killed Conrado Aguilar, Jr. His father, Conrado Aguilar, Sr. filed a case for damages against Ferdinand
Borja and Commercial Savings Bank. The Regional Trial Court found Commercial Savings Bank
solidarity liable with Ferdinand Borja.89

However, the Court of Appeals disagreed with the trial court's Decision and dismissed the
complaint against the bank. The Court of Appeals reasoned that Article 2180 requires the plaintiff to
prove that at the time of the accident, the employee was acting within the scope of his or her assigned
tasks. The Court of Appeals found no evidence that Ferdinand Borja was acting as the bank's assistant
vice-president at the time of the accident.90

The Court of Appeals' ruling was reversed by this court.91 Aguilar, Sr. reiterated the following
pronouncements made in Erezo in ruling that the bank, as the registered owner of the vehicle, was
primarily liable to the plaintiff:92

The main aim of motor vehicle registration is to identify the owner so that if any accident happens,
or that any damage or injury is caused by the vehicle on the public highways, responsibility therefor
can be fixed on a definite individual, the registered owner....

....

A victim of recklessness on the public highways is usually without means to discover or identify
the person actually causing the injury or damage. He has no means other than by a recourse to the
registration in the Motor Vehicles Office to determine who is the owner. The protection that the law
aims to extend to him would become illusory were the registered owner given the opportunity to escape
liability by disproving his ownership.93

Thus, Aguilar, Sr. concluded:

In our view, respondent bank, as the registered owner of the vehicle, is primarily
liable for Aguilar, Jr.'s death. The Court of Appeals erred when it concluded that the
bank was not liable simply because (a) petitioner did not prove that Borja was acting
as the bank's vice president at the time of the accident; and (b) Borja had, according
to respondent bank, already bought the car at the time of the mishap. For as long as
the respondent bank remained the registered owner of the car involved in the
vehicular accident, it could not escape primary liability for the death of petitioner's
son.94 (Emphasis supplied)

Preference for the registered-owner rule became more pronounced in Del Carmen, Jr. v. Bacoy:95

Without disputing the factual finding of the [Court of Appeals] that Allan was still his employee at
the time of the accident, a finding which we see no reason to disturb, Oscar Jr. contends that Allan
drove the jeep in his private capacity and thus, an employer's vicarious liability for the employee's fault
under Article 2180 of the Civil Code cannot apply to him.

The contention is no longer novel. In Aguilar Sr. v. Commercial Savings Bank, the car of therein
respondent bank caused the death of Conrado Aguilar, Jr. while being driven by its assistant vice
president. Despite Article 2180, we still held the bank liable for damages for the accident as said
provision should defer to the settled doctrine concerning accidents involving registered motor
vehicles, i.e., that the registered owner of any vehicle, even if not used for public service, would
primarily be responsible to the public or to third persons for injuries caused the latter while the vehicle
was being driven on the highways or streets. We have already ratiocinated that:

The main aim of motor vehicle registration is to identify the owner so that if any
accident happens, or that any damage or injury is caused by the vehicle on the public
highways, responsibility therefor can be fixed on a definite individual, the registered
owner. Instances are numerous where vehicles running on public highways caused
accidents or injuries to pedestrians or other vehicles without positive identification of
the owner or drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public highways.96 (Emphasis
supplied, citations omitted)

Filcar Transport Services v. Espinas97 stated that the registered owner of a vehicle can no longer
use the defenses found in Article 2180:98

Neither can Filcar use the defenses available under Article 2180 of the Civil Code
- that the employee acts beyond the scope of his assigned task or that it exercised
the due diligence of a good father of a family to prevent damage - because the motor
vehicle registration law, to a certain extent, modified Article 2180 of the Civil Code by
 making these defenses unavailable to the registered owner of the motor vehicle. Thus,
for as long as Filcar is the registered owner of the car involved in the vehicular
accident, it could not escape primary liability for the damages caused to Espinas.99

Mendoza v. Spouses Gomez100 reiterated this doctrine.

However, Aguilar, Sr., Del Carmen, Filcar, and Mendoza should not be taken to mean that Article
2180 of the Civil Code should be completely discarded in cases where the registered-owner rule finds
application.

As acknowledged in Filcar, there is no categorical statutory pronouncement in the Land

Transportation and Traffic Code stipulating the liability of a registered owner.101 The source of a
registered owner's liability is not a distinct statutory provision, but remains to be Articles 2176 and
2180 of the Civil Code:

While Republic Act No. 4136 or the Land Transportation and Traffic Code does
not contain any provision on the liability of registered owners in case of motor vehicle
mishaps, Article 2176, in relation with Article 2180, of the Civil Code imposes an
obligation upon Filcar, as registered owner, to answer for the damages caused to
Espinas' car.102

Thus, it is imperative to apply the registered-owner rule in a manner that harmonizes it with Articles
2176 and 2180 of the Civil Code. Rules must be construed in a manner that will harmonize them with
other rules so as to form a uniform and consistent system of jurisprudence.103 In light of this, the
words used in Del Carmen are particularly notable. There, this court stated that Article 2180 "should
defer to"104 the registered-owner rule. It never stated that Article 2180 should be totally abandoned.

Therefore, the appropriate approach is that in cases where both the registered-owner rule and
Article 2180 apply, the plaintiff must first establish that the employer is the registered owner of the
vehicle in question. Once the plaintiff successfully proves ownership, there arises a disputable
presumption that the requirements of Article 2180 have been proven. As a consequence, the burden
of proof shifts to the defendant to show that no liability under Article 2180 has arisen.

This disputable presumption, insofar as the registered owner of the vehicle in relation to the actual
driver is concerned, recognizes that between the owner and the victim, it is the former that should
carry the costs of moving forward with the evidence. The victim is, in many cases, a hapless pedestrian
or motorist with hardly any means to uncover the employment relationship of the owner and the driver,
or any act that the owner may have done in relation to that employment.

The registration of the vehicle, on the other hand, is accessible to the public.

Here, respondent presented a copy of the Certificate of Registration105 of the van that hit
Reyes.106 The Certificate attests to petitioner's ownership of the van. Petitioner itself did not dispute
its ownership of the van. Consistent with the rule we have just stated, a presumption that the
requirements of Article 2180 have been satisfied arises. It is now up to petitioner to establish that it
incurred no liability under Article 2180. This it can do by presenting proof of any of the following: first,
that it had no employment relationship with Bautista; second, that Bautista acted outside the scope of
his assigned tasks; or third, that it exercised the diligence of a good father of a family in the selection
and supervision of Bautista.107

On the first, petitioner admitted that Bautista was its employee at the time of the accident.108

On the second, petitioner was unable to prove that Bautista was not acting within the scope of his
assigned tasks at the time of the accident. When asked by the court why Bautista was at the place of
the accident when it occurred, Sally Bellido, petitioner's accountant and supervisor,109 testified that
she did not "have the personal capacity to answer [the question]"110 and that she had no knowledge
to answer it:

COURT : Madam Witness, do you know the reason why your driver, Jimmy Bautista, at around
10:00 o' clock in the morning of July 13, 2000 was in the vicinity of Barangay Marcelo Green, United
Parañaque Subdivision 4?

WITNESS : I don't have the personal capacity to answer that, Sir.

Q : So you don't have any knowledge why he was there?

A : Yes, Sir.111 (Emphasis supplied)

 Sally Bellido's testimony does not affect the presumption that Article 2180's requirements have
been satisfied. Mere disavowals are not proof that suffice to overturn a presumption. To this end,
evidence must be adduced. However, petitioner presented no positive evidence to show that Bautista
was acting in his private capacity at the time of the incident.

On the third, petitioner likewise failed to prove that it exercised the requisite diligence in the
selection and supervision of Bautista.

In its selection of Bautista as a service driver, petitioner contented itself with Bautista's submission
of a non-professional driver's license.112 Hence, in Sally Balledo's cross-examination:

Q : . . . when he was promoted as service driver, of course, there were certain requirements and among
other else, you made mention about a driver's license.

A : Yes, Sir.

Q : Would you be able to show to this Honorable Court whether indeed this person did submit a driver's
license to your company?

A : Yes, Sir.

....

Q : Do you recall what kind of driver's license is this?

A : The Land Transportation Office.

Q : Is it a professional driver's license or non-proffesional [sic] driver's license?

A : Non-professional.

Q : You are not sure?

COURT : Non professional, professional?

A : It's a non-professional.113 (Emphasis supplied)

Employing a person holding a non-professional driver's license to operate another's motor vehicle
violates Section 24 of the Land Transportation and Traffic Code, which provides:

SEC. 24. Use of driver's license and badge. — ...

....

No owner of a motor vehicle shall engage, employ, or hire any person to operate
such motor vehicle, unless the person sought to be employed is a duly licensed
professional driver.

Evidently, petitioner did not only fail to exercise due diligence when it selected Bautista as service
driver; it also committed an actual violation of law.

To prove that it exercised the required diligence in supervising Bautista, petitioner presented
copies of several memoranda and company rules.114 These, however, are insufficient because
petitioner failed to prove actual compliance. Metro Manila Transit Corporation v. Court of
Appeals115 emphasized that to establish diligence in the supervision of employees, the issuance of
company policies must be coupled with proof of compliance:

Due diligence in the supervision of employees, on the other hand, includes the formulation of
suitable rules and regulations for the guidance of employees and the issuance of proper instructions
intended for the protection of the public and persons with whom the employer has relations through
his or its employees and the imposition of necessary disciplinary measures upon employees in case
of breach or as may be warranted to ensure the performance of acts indispensable to the business of
and beneficial to their employer. To this, we add that actual implementation and monitoring
of consistent compliance with said rules should be the constant concern of the employer, acting
through dependable supervisors who should regularly report on their supervisory functions.

In order that the defense of due diligence in the selection and supervision of employees may be
deemed sufficient and plausible, it is not enough to emptily invoke the existence of said company
guidelines and policies on hiring and supervision. As the negligence of the employee gives rise
to the presumption of negligence on the part of the employer, the latter has the burden of proving that
it has been diligent not only in the selection of employees but also in the actual supervision of their
work. The mere allegation of the existence of hiring procedures and supervisory policies, without
anything more, is decidedly not sufficient to overcome presumption.

We emphatically reiterate our holding, as a warning to all employers, that "(t)he mere formulation
of various company policies on safety without showing that they were being complied with is not
sufficient to exempt petitioner from liability arising from negligence of its employees. It is incumbent
upon petitioner to show that in recruiting and employing the erring driver the recruitment procedures
and company policies on efficiency and safety were followed." Paying lip-service to these injunctions
or merely going through the motions of compliance therewith will warrant stern sanctions from the
Court.116 (Emphasis supplied, citations omitted)

For failing to overturn the presumption that the requirements of Article 2180 have been satisfied,
petitioner must be held liable.

III

Petitioner's argument that it should be excused from liability because Bautista was already
dropped as a party is equally unmeritorious. The liability imposed on the registered owner is direct and
primary.117 It does not depend on the inclusion of the negligent driver in the action. Agreeing to
petitioner's assertion would render impotent the rationale of the motor registration law in fixing liability
on a definite person.

Bautista, the driver, was not an indispensable party under Rule 3, Section 7118 of the 1997 Rules
of Civil Procedure. Rather, he was a necessary party under Rule 3, Section 8.119 Instead of insisting
that Bautista—who was nothing more than a necessary party—should not have been dropped as a
defendant, or that petitioner, along with Bautista, should have been dropped, petitioner (as a co-
defendant insisting that the action must proceed with Bautista as party) could have opted to file a
cross-claim against Bautista as its remedy.

The 1997 Rules of Civil Procedure spell out the rules on joinder of indispensable and necessary
parties. These are intended to afford "a complete determination of all possible issues, not only between
the parties themselves but also as regards to other persons who may be affected by the judgment."120

However, while an exhaustive resolution of disputes is desired in every case, the distinction
between indispensable parties and necessary parties delineates a court's capacity to render effective
judgment. As defined by Rule 3, Section 7, indispensable parties are "[p]arties in interest without whom
no final determination can be had of an action[.]" Thus, their non-inclusion is debilitating: "the presence
of indispensable parties is a condition for the exercise of juridical power and when an indispensable
party is not before the court, the action should be dismissed."121

In contrast, a necessary party's presence is not imperative, and his or her absence is not
debilitating. Nevertheless, it is preferred that they be included in order that relief may be complete.

The concept of indispensable parties, as against parties whose inclusion only allows complete
relief, was explained in Arcelona v. Court of Appeals:122

An indispensable party is a party who has such an interest in the controversy or

subject matter that a final adjudication cannot be made, in his absence, without
injuring or affecting that interest, a party who has not only an interest in the subject
matter of the controversy, but also has an interest of such nature that a final decree
cannot be made without affecting his interest or leaving the controversy in such a
condition that its final determination may be wholly inconsistent with equity and good
conscience. It has also been considered that an indispensable party is a person in
whose absence there cannot be a determination between the parties already before
the court which is effective, complete, or equitable. Further, an indispensable party is
one who must be included in an action before it may properly go forward.

A person is not an indispensable party, however, if his interest in the controversy

or subject matter is separable from the interest of the other parties, so that it will not
necessarily be directly or injuriously affected by a decree which does complete justice
between them. Also, a person is not an indispensable party if his presence would
merely permit complete relief between him and those already parties to the action, or
if he has no interest in the subject matter of the action. It is not a sufficient reason to
declare a person to be an indispensable party that his presence will avoid multiple
litigation.123
 Petitioner's interest and liability is distinct from that of its driver. Regardless of petitioner's
employer-employee relationship with Bautista, liability attaches to petitioner on account of its being
the registered owner of a vehicle that figures in a mishap. This alone suffices. A determination of its
liability as owner can proceed independently of a consideration of how Bautista conducted himself as
a driver. While certainly it is desirable that a determination of Bautista's liability be made alongside
that of the owner of the van he was driving, his non-inclusion in these proceedings does not absolutely
hamper a judicious resolution of respondent's plea for relief.

IV

The Court of Appeals committed no reversible error when it awarded actual damages to
respondent. Respondent's claim for actual damages was based on the Certificate124 issued and
signed by a certain Peñaloza showing that respondent paid Peñaloza P35,000.00 for funeral
expenses.

Contrary to petitioner's claim, this Certificate is not hearsay. Evidence is hearsay when its
probative value is based on the personal knowledge of a person other than the person actually
testifying.125 Here, the Certificate sought to establish that respondent herself paid Peñaloza
P35,000.00 as funeral expenses for Reyes' death:126

3. Na ang aking kontrata ay nagkakahalaga ng P35,000-00 [sic] sa lahat ng nagamit na

materiales at labor nito kasama ang lote na ibinayad sa akin ni Gng. ERMILINDA
REYES ABEJAR na siyang aking kakontrata sa pagsasagawa ng naturang
paglilibingan.127 (Emphasis supplied)

It was respondent herself who identified the Certificate. She testified that she incurred funeral
expenses amounting to P35,000.00, that she paid this amount to Peñaloza, and that she was present
when Peñaloza signed the Certificate:

[ATTY. LIM] : Did you incur any expenses?

A : Meron po.

Q : How much did you spend for the death of Jesmarian [sic] Reyes?

A : 'Yun pong P35,000.00 na pagpapalibing at saka...

Q : You said that you spent P35,000.00. Do you have any evidence or proof that you spent that amount?

A : Meron po.

Q : Showing to you this sort of certification. What relation has this...

A : 'Yan po' yung contractor nagumawa.

Q : Contractor of what?

A : 'Yan po' yung mismong binilhan ko ng lupa at nitso.

....

ATTY. LIM : There is a signature at the top of the printed name Julian Penalosa [sic]. Whose
signature is this?

A : 'Yan po' yung mismong contractor.

....

Q : Did you see him sign this?

A : Opo.128 (Emphasis supplied)

Respondent had personal knowledge of the facts sought to be proved by the Certificate, i.e. that
she spent P35,000.00 for the funeral expenses of Reyes. Thus, the Certificate that she identified and
testified to is not hearsay. It was not an error to admit this Certificate as evidence and basis for
awarding P35,000.00 as actual damages to respondent.
 The Court of Appeals likewise did not err in awarding civil indemnity and exemplary damages.

Article 2206 of the Civil Code provides:

ARTICLE 2206. The amount of damages for death caused by a crime or quasi-
delict shall be at least three thousand pesos, even though there may have been
mitigating circumstances[.]

Further, Article 2231 of the Civil Code provides:

ARTICLE 2231. In quasi-delicts, exemplary damages may be granted if the defendant

acted with gross negligence.

Both the Court of Appeals and the Regional Trial Court found Bautista grossly negligent in driving
the van and concluded that Bautista's gross negligence was the proximate cause of Reyes' death.
Negligence and causation are factual issues.129 Findings of fact, when established by the trial court
and affirmed by the Court of Appeals, are binding on this court unless they are patently unsupported
by evidence or unless the judgment is grounded on a misapprehension of facts.130 Considering that
petitioner has not presented any evidence disputing the findings of the lower courts regarding
Bautista's negligence, these findings cannot be disturbed in this appeal. The evidentiary bases for the
award of civil indemnity and exemplary damages stand. As such, petitioner must pay the exemplary
damages arising from the negligence of its driver.131 For the same reasons, the award of P50,000.00
by way of civil indemnity is justified.132

The award of moral damages is likewise proper.

Article 2206(3) of the Civil Code provides:

ARTICLE 2206. The amount of damages for death caused by a crime or quasi-delict shall be at
least three thousand pesos, even though there may have been mitigating circumstances. In addition:

....

(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand
moral damages for mental anguish by reason of the death of the deceased. (Emphasis supplied)

For deaths caused by quasi-delict, the recovery of moral damages is limited to the spouse,
legitimate and illegitimate descendants, and ascendants of the deceased.133

Persons exercising substitute parental authority are to be considered ascendants for the purpose
of awarding moral damages. Persons exercising substitute parental authority are intended to stand in
place of a child's parents in order to ensure the well-being and welfare of a child.134 Like natural
parents, persons exercising substitute parental authority are required to, among others, keep their
wards in their company,135 provide for their upbringing,136 show them love and affection,137 give
them advice and counsel,138 and provide them with companionship and understanding.139 For their
part, wards shall always observe respect and obedience towards the person exercising parental
authority.140 The law forges a relationship between the ward and the person exercising substitute
parental authority such that the death or injury of one results in the damage or prejudice of the other.

Moral damages are awarded to compensate the claimant for his or her actual injury, and not to
penalize the wrongdoer.141 Moral damages enable the injured party to alleviate the moral suffering
resulting from the defendant's actions.142 It aims to restore—to the extent possible—"the
spiritual status quo ante[.]"143

Given the policy underlying Articles 216 and 220 of the Family Code as well as the purposes for
awarding moral damages, a person exercising substitute parental authority is rightly considered an
ascendant of the deceased, within the meaning of Article 2206(3) of the Civil Code. Hence, respondent
is entitled to moral damages.

As exemplary damages have been awarded and as respondent was compelled to litigate in order
to protect her interests, she is rightly entitled to attorney's fees.144

However, the award of interest should be modified. This modification must be consistent
with Nacar v. Gallery Frames,145 in which we ruled:

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or
 until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any case,
be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.146 (Emphasis supplied)

WHEREFORE, the Decision of the Court of Appeals dated October 3, 2005 is AFFIRMED with the
following MODIFICATIONS: (a) actual damages in the amount of P35,000.00 shall earn interest at the
rate of 6% per annum from the time it was judicially or extrajudicially demanded from petitioner
Caravan Travel and Tours International, Inc. until full satisfaction; (b) moral damages, exemplary
damages, and attorney's fees shall earn interest at the rate of 6% per annum from the date of the
Regional Trial Court Decision until full satisfaction; and (c) civil indemnity shall earn interest at the rate
of 6% per annum from the date of the Court of Appeals Decision until full satisfaction.

SO ORDERED.

THIRD DIVISION

G.R. No. 150135 October 30, 2006

SPOUSES ANTONIO F. ALGURA and LORENCITA S.J. ALGURA, petitioners,

vs.
THE LOCAL GOVERNMENT UNIT OF THE CITY OF NAGA, ATTY. MANUEL TEOXON, ENGR.
LEON PALMIANO, NATHAN SERGIO and BENJAMIN NAVARRO, SR., respondents.

DECISION

VELASCO, JR., J.:

Anyone who has ever struggled with poverty

knows how extremely expensive it is to be poor.
–– James Baldwin

The Constitution affords litigants—moneyed or poor—equal access to the courts; moreover, it

specifically provides that poverty shall not bar any person from having access to the
courts.1 Accordingly, laws and rules must be formulated, interpreted, and implemented pursuant to
the intent and spirit of this constitutional provision. As such, filing fees, though one of the essential
elements in court procedures, should not be an obstacle to poor litigants' opportunity to seek redress
for their grievances before the courts.

The Case

This Petition for Review on Certiorari seeks the annulment of the September 11, 2001 Order of the
Regional Trial Court (RTC) of Naga City, Branch 27, in Civil Case No. 99-4403 entitled Spouses
Antonio F. Algura and Lorencita S.J. Algura v. The Local Government Unit of the City of Naga, et al.,
dismissing the case for failure of petitioners Algura spouses to pay the required filing fees.2 Since the
instant petition involves only a question of law based on facts established from the pleadings and
documents submitted by the parties,3 the Court gives due course to the instant petition sanctioned
under Section 2(c) of Rule 41 on Appeal from the RTCs, and governed by Rule 45 of the 1997 Rules
of Civil Procedure.

The Facts

On September 1, 1999, spouses Antonio F. Algura and Lorencita S.J. Algura filed a Verified
Complaint dated August 30, 19994 for damages against the Naga City Government and its officers,
arising from the alleged illegal demolition of their residence and boarding house and for payment of
lost income derived from fees paid by their boarders amounting to PhP 7,000.00 monthly.

Simultaneously, petitioners filed an Ex-Parte Motion to Litigate as Indigent Litigants,5 to which

petitioner Antonio Algura's Pay Slip No. 2457360 (Annex "A" of motion) was appended, showing a
gross monthly income of Ten Thousand Four Hundred Seventy Four Pesos (PhP 10,474.00) and a
net pay of Three Thousand Six Hundred Sixteen Pesos and Ninety Nine Centavos (PhP 3,616.99)
for [the month of] July 1999.6 Also attached as Annex "B" to the motion was a July 14, 1999
Certification7 issued by the Office of the City Assessor of Naga City, which stated that petitioners had
no property declared in their name for taxation purposes.

Finding that petitioners' motion to litigate as indigent litigants was meritorious, Executive Judge Jose
T. Atienza of the Naga City RTC, in the September 1, 1999 Order,8 granted petitioners' plea for
exemption from filing fees.

Meanwhile, as a result of respondent Naga City Government's demolition of a portion of petitioners'

house, the Alguras allegedly lost a monthly income of PhP 7,000.00 from their boarders' rentals.
With the loss of the rentals, the meager income from Lorencita Algura's sari-sari store and Antonio
Algura's small take home pay became insufficient for the expenses of the Algura spouses and their
six (6) children for their basic needs including food, bills, clothes, and schooling, among others.

On October 13, 1999, respondents filed an Answer with Counterclaim dated October 10,
1999,9 arguing that the defenses of the petitioners in the complaint had no cause of action, the
spouses' boarding house blocked the road right of way, and said structure was a nuisance per se.

Praying that the counterclaim of defendants (respondents) be dismissed, petitioners then filed their
Reply with Ex-Parte Request for a Pre-Trial Setting10 before the Naga City RTC on October 19,
1999. On February 3, 2000, a pre-trial was held wherein respondents asked for five (5) days within
which to file a Motion to Disqualify Petitioners as Indigent Litigants.

On March 13, 2000, respondents filed a Motion to Disqualify the Plaintiffs for Non-Payment of Filing
Fees dated March 10, 2000.11 They asserted that in addition to the more than PhP 3,000.00 net
income of petitioner Antonio Algura, who is a member of the Philippine National Police, spouse
Lorencita Algura also had a mini-store and a computer shop on the ground floor of their residence
along Bayawas St., Sta. Cruz, Naga City. Also, respondents claimed that petitioners' second floor
was used as their residence and as a boarding house, from which they earned more than PhP
3,000.00 a month. In addition, it was claimed that petitioners derived additional income from their
computer shop patronized by students and from several boarders who paid rentals to them. Hence,
respondents concluded that petitioners were not indigent litigants.

On March 28, 2000, petitioners subsequently interposed their Opposition to the Motion12 to
respondents' motion to disqualify them for non-payment of filing fees.

On April 14, 2000, the Naga City RTC issued an Order disqualifying petitioners as indigent litigants
on the ground that they failed to substantiate their claim for exemption from payment of legal fees
and to comply with the third paragraph of Rule 141, Section 18 of the Revised Rules of Court—
directing them to pay the requisite filing fees.13

On April 28, 2000, petitioners filed a Motion for Reconsideration of the April 14, 2000 Order. On May
8, 2000, respondents then filed their Comment/Objections to petitioner's Motion for Reconsideration.

On May 5, 2000, the trial court issued an Order14 giving petitioners the opportunity to comply with the
requisites laid down in Section 18, Rule 141, for them to qualify as indigent litigants.

On May 13, 2000, petitioners submitted their Compliance15 attaching the affidavits of petitioner
Lorencita Algura16 and Erlinda Bangate,17 to comply with the requirements of then Rule 141, Section
18 of the Rules of Court and in support of their claim to be declared as indigent litigants.

In her May 13, 2000 Affidavit, petitioner Lorencita Algura claimed that the demolition of their small
dwelling deprived her of a monthly income amounting to PhP 7,000.00. She, her husband, and their
six (6) minor children had to rely mainly on her husband's salary as a policeman which provided
them a monthly amount of PhP 3,500.00, more or less. Also, they did not own any real property as
certified by the assessor's office of Naga City. More so, according to her, the meager net income
from her small sari-sari store and the rentals of some boarders, plus the salary of her husband, were
not enough to pay the family's basic necessities.

To buttress their position as qualified indigent litigants, petitioners also submitted the affidavit of
Erlinda Bangate, who attested under oath, that she personally knew spouses Antonio Algura and
Lorencita Algura, who were her neighbors; that they derived substantial income from their boarders;
that they lost said income from their boarders' rentals when the Local Government Unit of the City of
Naga, through its officers, demolished part of their house because from that time, only a few
boarders could be accommodated; that the income from the small store, the boarders, and the
meager salary of Antonio Algura were insufficient for their basic necessities like food and clothing,
considering that the Algura spouses had six (6) children; and that she knew that petitioners did not
own any real property.
Thereafter, Naga City RTC Acting Presiding Judge Andres B. Barsaga, Jr. issued his July 17,
200018 Order denying the petitioners' Motion for Reconsideration.

Judge Barsaga ratiocinated that the pay slip of Antonio F. Algura showed that the "GROSS INCOME
or TOTAL EARNINGS of plaintiff Algura [was] ₧10,474.00 which amount [was] over and above the
amount mentioned in the first paragraph of Rule 141, Section 18 for pauper litigants residing outside
Metro Manila."19 Said rule provides that the gross income of the litigant should not exceed PhP
3,000.00 a month and shall not own real estate with an assessed value of PhP 50,000.00. The trial
court found that, in Lorencita S.J. Algura's May 13, 2000 Affidavit, nowhere was it stated that she
and her immediate family did not earn a gross income of PhP 3,000.00.

The Issue

Unconvinced of the said ruling, the Alguras instituted the instant petition raising a solitary issue for
the consideration of the Court: whether petitioners should be considered as indigent litigants who
qualify for exemption from paying filing fees.

The Ruling of the Court

The petition is meritorious.

A review of the history of the Rules of Court on suits in forma pauperis (pauper litigant) is necessary
before the Court rules on the issue of the Algura spouses' claim to exemption from paying filing fees.

When the Rules of Court took effect on January 1, 1964, the rule on pauper litigants was found in
Rule 3, Section 22 which provided that:

Section 22. Pauper litigant.—Any court may authorize a litigant to prosecute his action or
defense as a pauper upon a proper showing that he has no means to that effect by affidavits,
certificate of the corresponding provincial, city or municipal treasurer, or otherwise. Such
authority[,] once given[,] shall include an exemption from payment of legal fees and from
filing appeal bond, printed record and printed brief. The legal fees shall be a lien to any
judgment rendered in the case [favorable] to the pauper, unless the court otherwise provides.

From the same Rules of Court, Rule 141 on Legal Fees, on the other hand, did not contain any
provision on pauper litigants.

On July 19, 1984, the Court, in Administrative Matter No. 83-6-389-0 (formerly G.R. No. 64274),
approved the recommendation of the Committee on the Revision of Rates and Charges of Court
Fees, through its Chairman, then Justice Felix V. Makasiar, to revise the fees in Rule 141 of the
Rules of Court to generate funds to effectively cover administrative costs for services rendered by
the courts.20 A provision on pauper litigants was inserted which reads:

Section 16. Pauper-litigants exempt from payment of court fees.—Pauper-litigants include

wage earners whose gross income do not exceed P2,000.00 a month or P24,000.00 a year
for those residing in Metro Manila, and P1,500.00 a month or P18,000.00 a year for those
residing outside Metro Manila, or those who do not own real property with an assessed value
of not more than P24,000.00, or not more than P18,000.00 as the case may be.

Such exemption shall include exemption from payment of fees for filing appeal bond, printed
record and printed brief.

The legal fees shall be a lien on the monetary or property judgment rendered in favor of the
pauper-litigant.

To be entitled to the exemption herein provided, the pauper-litigant shall execute an affidavit
that he does not earn the gross income abovementioned, nor own any real property with the
assessed value afore-mentioned [sic], supported by a certification to that effect by the
provincial, city or town assessor or treasurer.

When the Rules of Court on Civil Procedure were amended by the 1997 Rules of Civil Procedure
(inclusive of Rules 1 to 71) in Supreme Court Resolution in Bar Matter No. 803 dated April 8, 1997,
which became effective on July 1, 1997, Rule 3, Section 22 of the Revised Rules of Court was
superseded by Rule 3, Section 21 of said 1997 Rules of Civil Procedure, as follows:

Section 21. Indigent party.—A party may be authorized to litigate his action, claim or
defense as an indigent if the court, upon an ex parte application and hearing, is satisfied that
the party is one who has no money or property sufficient and available for food, shelter and
basic necessities for himself and his family.
 Such authority shall include an exemption from payment of docket and other lawful fees, and
of transcripts of stenographic notes which the court may order to be furnished him. The
amount of the docket and other lawful fees which the indigent was exempted from paying
shall be a lien on any judgment rendered in the case favorable to the indigent, unless the
court otherwise provides.

Any adverse party may contest the grant of such authority at any time before judgment is
rendered by the trial court. If the court should determine after hearing that the party declared
as an indigent is in fact a person with sufficient income or property, the proper docket and
other lawful fees shall be assessed and collected by the clerk of court. If payment is not
made within the time fixed by the court, execution shall issue for the payment thereof,
without prejudice to such other sanctions as the court may impose.

At the time the Rules on Civil Procedure were amended by the Court in Bar Matter No. 803,
however, there was no amendment made on Rule 141, Section 16 on pauper litigants.

On March 1, 2000, Rule 141 on Legal Fees was amended by the Court in A.M. No. 00-2-01-SC,
whereby certain fees were increased or adjusted. In this Resolution, the Court amended Section 16
of Rule 141, making it Section 18, which now reads:

Section 18. Pauper-litigants exempt from payment of legal fees.—Pauper litigants (a) whose
gross income and that of their immediate family do not exceed four thousand (P4,000.00)
pesos a month if residing in Metro Manila, and three thousand (P3,000.00) pesos a month if
residing outside Metro Manila, and (b) who do not own real property with an assessed value
of more than fifty thousand (P50,000.00) pesos shall be exempt from the payment of legal
fees.

The legal fees shall be a lien on any judgment rendered in the case favorably to the pauper
litigant, unless the court otherwise provides.

To be entitled to the exemption herein provided, the litigant shall execute an affidavit that he
and his immediate family do not earn the gross income abovementioned, nor do they own
any real property with the assessed value aforementioned, supported by an affidavit of a
disinterested person attesting to the truth of the litigant's affidavit.

Any falsity in the affidavit of a litigant or disinterested person shall be sufficient cause to
strike out the pleading of that party, without prejudice to whatever criminal liability may have
been incurred.

It can be readily seen that the rule on pauper litigants was inserted in Rule 141 without revoking or
amending Section 21 of Rule 3, which provides for the exemption of pauper litigants from payment
of filing fees. Thus, on March 1, 2000, there were two existing rules on pauper litigants;
namely, Rule 3, Section 21 and Rule 141, Section 18.

On August 16, 2004, Section 18 of Rule 141 was further amended in Administrative Matter No. 04-2-
04-SC, which became effective on the same date. It then became Section 19 of Rule 141, to wit:

Sec. 19. Indigent litigants exempt from payment of legal fees.– INDIGENT LITIGANTS
(A) WHOSE GROSS INCOME AND THAT OF THEIR IMMEDIATE FAMILY DO NOT
EXCEED AN AMOUNT DOUBLE THE MONTHLY MINIMUM WAGE OF AN
EMPLOYEE AND (B) WHO DO NOT OWN REAL PROPERTY WITH A FAIR MARKET
VALUE AS STATED IN THE CURRENT TAX DECLARATION OF MORE THAN THREE
HUNDRED THOUSAND (P300,000.00) PESOS SHALL BE EXEMPT FROM PAYMENT OF
LEGAL FEES.

The legal fees shall be a lien on any judgment rendered in the case favorable to the indigent
litigant unless the court otherwise provides.

To be entitled to the exemption herein provided, the litigant shall execute an affidavit
that he and his immediate family do not earn a gross income abovementioned, and
they do not own any real property with the fair value aforementioned, supported by an
affidavit of a disinterested person attesting to the truth of the litigant's affidavit. The
current tax declaration, if any, shall be attached to the litigant's affidavit.

Any falsity in the affidavit of litigant or disinterested person shall be sufficient cause to
dismiss the complaint or action or to strike out the pleading of that party, without prejudice to
whatever criminal liability may have been incurred. (Emphasis supplied.)
Amendments to Rule 141 (including the amendment to Rule 141, Section 18) were made to
implement RA 9227 which brought about new increases in filing fees. Specifically, in the August 16,
2004 amendment, the ceiling for the gross income of litigants applying for exemption and that of their
immediate family was increased from PhP 4,000.00 a month in Metro Manila and PhP 3,000.00 a
month outside Metro Manila, to double the monthly minimum wage of an employee; and the
maximum value of the property owned by the applicant was increased from an assessed value of
PhP 50,000.00 to a maximum market value of PhP 300,000.00, to be able to accommodate more
indigent litigants and promote easier access to justice by the poor and the marginalized in the wake
of these new increases in filing fees.

Even if there was an amendment to Rule 141 on August 16, 2004, there was still no amendment or
recall of Rule 3, Section 21 on indigent litigants.

With this historical backdrop, let us now move on to the sole issue—whether petitioners are exempt
from the payment of filing fees.

It is undisputed that the Complaint (Civil Case No. 99-4403) was filed on September 1, 1999.
However, the Naga City RTC, in its April 14, 2000 and July 17, 2000 Orders, incorrectly applied
Rule 141, Section 18 on Legal Fees when the applicable rules at that time were Rule 3, Section
21 on Indigent Party which took effect on July 1, 1997 and Rule 141, Section 16 on Pauper
Litigants which became effective on July 19, 1984 up to February 28, 2000.

The old Section 16, Rule 141 requires applicants to file an ex-parte motion to litigate as a pauper
litigant by submitting an affidavit that they do not have a gross income of PhP 2,000.00 a month or
PhP 24,000.00 a year for those residing in Metro Manila and PhP 1,500.00 a month or PhP
18,000.00 a year for those residing outside Metro Manila or those who do not own real property with
an assessed value of not more than PhP 24,000.00 or not more than PhP 18,000.00 as the case
may be. Thus, there are two requirements: a) income requirement—the applicants should not have a
gross monthly income of more than PhP 1,500.00, and b) property requirement––they should not
own property with an assessed value of not more than PhP 18,000.00.

In the case at bar, petitioners Alguras submitted the Affidavits of petitioner Lorencita Algura and
neighbor Erlinda Bangate, the pay slip of petitioner Antonio F. Algura showing a gross monthly
income of PhP 10,474.00,21 and a Certification of the Naga City assessor stating that petitioners do
not have property declared in their names for taxation.22 Undoubtedly, petitioners do not own real
property as shown by the Certification of the Naga City assessor and so the property requirement is
met. However with respect to the income requirement, it is clear that the gross monthly income of
PhP 10,474.00 of petitioner Antonio F. Algura and the PhP 3,000.00 income of Lorencita Algura
when combined, were above the PhP 1,500.00 monthly income threshold prescribed by then Rule
141, Section 16 and therefore, the income requirement was not satisfied. The trial court was
therefore correct in disqualifying petitioners Alguras as indigent litigants although the court should
have applied Rule 141, Section 16 which was in effect at the time of the filing of the application on
September 1, 1999. Even if Rule 141, Section 18 (which superseded Rule 141, Section 16 on March
1, 2000) were applied, still the application could not have been granted as the combined PhP
13,474.00 income of petitioners was beyond the PhP 3,000.00 monthly income threshold.

Unrelenting, petitioners however argue in their Motion for Reconsideration of the April 14, 2000
Order disqualifying them as indigent litigants23 that the rules have been relaxed by relying on Rule 3,
Section 21 of the 1997 Rules of Civil procedure which authorizes parties to litigate their action as
indigents if the court is satisfied that the party is "one who has no money or property sufficient and
available for food, shelter and basic necessities for himself and his family." The trial court did not
give credence to this view of petitioners and simply applied Rule 141 but ignored Rule 3, Section 21
on Indigent Party.

The position of petitioners on the need to use Rule 3, Section 21 on their application to litigate as
indigent litigants brings to the fore the issue on whether a trial court has to apply both Rule 141,
Section 16 and Rule 3, Section 21 on such applications or should the court apply only Rule 141,
Section 16 and discard Rule 3, Section 21 as having been superseded by Rule 141, Section 16 on
Legal Fees.

The Court rules that Rule 3, Section 21 and Rule 141, Section 16 (later amended as Rule 141,
Section 18 on March 1, 2000 and subsequently amended by Rule 141, Section 19 on August 16,
2003, which is now the present rule) are still valid and enforceable rules on indigent litigants.

For one, the history of the two seemingly conflicting rules readily reveals that it was not the intent of
the Court to consider the old Section 22 of Rule 3, which took effect on January 1, 1994 to have
been amended and superseded by Rule 141, Section 16, which took effect on July 19, 1984 through
A.M. No. 83-6-389-0. If that is the case, then the Supreme Court, upon the recommendation of the
Committee on the Revision on Rules, could have already deleted Section 22 from Rule 3 when it
amended Rules 1 to 71 and approved the 1997 Rules of Civil Procedure, which took effect on July 1,
1997. The fact that Section 22 which became Rule 3, Section 21 on indigent litigant was retained in
the rules of procedure, even elaborating on the meaning of an indigent party, and was also
strengthened by the addition of a third paragraph on the right to contest the grant of authority to
litigate only goes to show that there was no intent at all to consider said rule as expunged from the
1997 Rules of Civil Procedure.

Furthermore, Rule 141 on indigent litigants was amended twice: first on March 1, 2000 and the
second on August 16, 2004; and yet, despite these two amendments, there was no attempt to delete
Section 21 from said Rule 3. This clearly evinces the desire of the Court to maintain the two (2) rules
on indigent litigants to cover applications to litigate as an indigent litigant.

It may be argued that Rule 3, Section 21 has been impliedly repealed by the recent 2000 and 2004
amendments to Rule 141 on legal fees. This position is bereft of merit. Implied repeals are frowned
upon unless the intent of the framers of the rules is unequivocal. It has been consistently ruled that:

(r)epeals by implication are not favored, and will not be decreed, unless it is manifest that the
legislature so intended. As laws are presumed to be passed with deliberation and with full
knowledge of all existing ones on the subject, it is but reasonable to conclude that in passing
a statute[,] it was not intended to interfere with or abrogate any former law relating to same
matter, unless the repugnancy between the two is not only irreconcilable, but also clear and
convincing, and flowing necessarily from the language used, unless the later act fully
embraces the subject matter of the earlier, or unless the reason for the earlier act is beyond
peradventure removed. Hence, every effort must be used to make all acts stand and if,
by any reasonable construction they can be reconciled, the later act will not operate as a
repeal of the earlier.24 (Emphasis supplied).

Instead of declaring that Rule 3, Section 21 has been superseded and impliedly amended by Section
18 and later Section 19 of Rule 141, the Court finds that the two rules can and should be
harmonized.

The Court opts to reconcile Rule 3, Section 21 and Rule 141, Section 19 because it is a settled
principle that when conflicts are seen between two provisions, all efforts must be made to harmonize
them. Hence, "every statute [or rule] must be so construed and harmonized with other statutes [or
rules] as to form a uniform system of jurisprudence."25

In Manila Jockey Club, Inc. v. Court of Appeals, this Court enunciated that in the interpretation of
seemingly conflicting laws, efforts must be made to first harmonize them. This Court thus ruled:

Consequently, every statute should be construed in such a way that will harmonize it with
existing laws. This principle is expressed in the legal maxim 'interpretare et concordare leges
legibus est optimus interpretandi,' that is, to interpret and to do it in such a way as to
harmonize laws with laws is the best method of interpretation.26

In the light of the foregoing considerations, therefore, the two (2) rules can stand together and are
compatible with each other. When an application to litigate as an indigent litigant is filed, the court
shall scrutinize the affidavits and supporting documents submitted by the applicant to determine if
the applicant complies with the income and property standards prescribed in the present Section 19
of Rule 141—that is, the applicant's gross income and that of the applicant's immediate family do not
exceed an amount double the monthly minimum wage of an employee; and the applicant does not
own real property with a fair market value of more than Three Hundred Thousand Pesos (PhP
300,000.00). If the trial court finds that the applicant meets the income and property requirements,
the authority to litigate as indigent litigant is automatically granted and the grant is a matter of right.

However, if the trial court finds that one or both requirements have not been met, then it would set a
hearing to enable the applicant to prove that the applicant has "no money or property sufficient and
available for food, shelter and basic necessities for himself and his family." In that hearing, the
adverse party may adduce countervailing evidence to disprove the evidence presented by the
applicant; after which the trial court will rule on the application depending on the evidence adduced.
In addition, Section 21 of Rule 3 also provides that the adverse party may later still contest the grant
of such authority at any time before judgment is rendered by the trial court, possibly based on newly
discovered evidence not obtained at the time the application was heard. If the court determines after
hearing, that the party declared as an indigent is in fact a person with sufficient income or property,
the proper docket and other lawful fees shall be assessed and collected by the clerk of court. If
payment is not made within the time fixed by the court, execution shall issue or the payment of
prescribed fees shall be made, without prejudice to such other sanctions as the court may impose.

The Court concedes that Rule 141, Section 19 provides specific standards while Rule 3, Section 21
does not clearly draw the limits of the entitlement to the exemption. Knowing that the litigants may
abuse the grant of authority, the trial court must use sound discretion and scrutinize evidence strictly
in granting exemptions, aware that the applicant has not hurdled the precise standards under Rule
141. The trial court must also guard against abuse and misuse of the privilege to litigate as an
indigent litigant to prevent the filing of exorbitant claims which would otherwise be regulated by a
legal fee requirement.

Thus, the trial court should have applied Rule 3, Section 21 to the application of the Alguras after
their affidavits and supporting documents showed that petitioners did not satisfy the twin
requirements on gross monthly income and ownership of real property under Rule 141. Instead of
disqualifying the Alguras as indigent litigants, the trial court should have called a hearing as required
by Rule 3, Section 21 to enable the petitioners to adduce evidence to show that they didn't have
property and money sufficient and available for food, shelter, and basic necessities for them and
their family.27 In that hearing, the respondents would have had the right to also present evidence to
refute the allegations and evidence in support of the application of the petitioners to litigate as
indigent litigants. Since this Court is not a trier of facts, it will have to remand the case to the trial
court to determine whether petitioners can be considered as indigent litigants using the standards
set in Rule 3, Section 21.

Recapitulating the rules on indigent litigants, therefore, if the applicant for exemption meets the
salary and property requirements under Section 19 of Rule 141, then the grant of the application is
mandatory. On the other hand, when the application does not satisfy one or both requirements, then
the application should not be denied outright; instead, the court should apply the "indigency test"
under Section 21 of Rule 3 and use its sound discretion in determining the merits of the prayer for
exemption.

Access to justice by the impoverished is held sacrosanct under Article III, Section 11 of the 1987
Constitution. The Action Program for Judicial Reforms (APJR) itself, initiated by former Chief Justice
Hilario G. Davide, Jr., placed prime importance on 'easy access to justice by the poor' as one of its
six major components. Likewise, the judicial philosophy of Liberty and Prosperity of Chief Justice
Artemio V. Panganiban makes it imperative that the courts shall not only safeguard but also enhance
the rights of individuals—which are considered sacred under the 1987 Constitution. Without doubt,
one of the most precious rights which must be shielded and secured is the unhampered access to
the justice system by the poor, the underprivileged, and the marginalized.

WHEREFORE, the petition is GRANTED and the April 14, 2000 Order granting the disqualification
of petitioners, the July 17, 2000 Order denying petitioners' Motion for Reconsideration, and the
September 11, 2001 Order dismissing the case in Civil Case No. RTC-99-4403 before the Naga City
RTC, Branch 27 are ANNULLED and SET ASIDE. Furthermore, the Naga City RTC is ordered to
set the "Ex-Parte Motion to Litigate as Indigent Litigants" for hearing and apply Rule 3, Section 21 of
the 1997 Rules of Civil Procedure to determine whether petitioners can qualify as indigent litigants.

No costs.

SO ORDERED.

THIRD DIVISION

[ G.R. Nos. 232724-27, February 15, 2021 ]

REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE ANTI-MONEY LAUNDERING

COUNCIL, PETITIONER, VS. THE SANDIGANBAYAN AND OFFICE OF THE OMBUDSMAN,
REPRESENTED BY THE OFFICE OF THE SPECIAL PROSECUTOR, RESPONDENTS.

DECISION

LEONEN, J.:

The Anti-Money Laundering Council is not merely a repository of reports and information on covered
and suspicious transactions. It was created precisely to investigate and institute charges against those
suspected to commit money laundering activities.

The criminal prosecution of such offenses would be unduly hampered if it were to be prohibited from
disclosing such information. For the Anti-Money Laundering Council to refuse disclosing the
information required of it would be to go against its own functions under the law.

This Court resolves a Petition for Certiorari1 assailing the Resolution2 and Order3 of the
Sandiganbayan, which denied the Anti-Money Laundering Council's Motion to Quash the
Subpoena Duces Tecum and Ad Testificandum and its subsequent Motion for Reconsideration.4
This Petition is an offshoot of a criminal case, People v. P/Dir. General Jesus Versoza. In Versoza,
the Office of the Special Prosecutor charged former First Gentleman Jose Miguel T. Arroyo (Arroyo)
with, among others, plunder for his involvement in the Philippine National Police's anomalous
purchase of two secondhand helicopters.5

The seller, Lionair, Inc. (Lionair), sold the helicopters as brand new, as required by law, even if they
were already used.6 Lionair's president Archibald L. Po (Po), however, testified that Arroyo was the
helicopters' real owner. He alleged that Lionair imported the helicopters from the United States and
sold it to Arroyo, who, in turn, deposited partial payment to Lionair's account with the Union Bank.7

Lionair's savings account passbook reflected the following deposits:

Teller Date Transaction Amount (USD)

S733 02/27/04 Credit Memo 408,067.06
S733 02/27/04 Credit Memo 509,065.41
T731 03/01/04 Cash 148,217.538

To verify the source of the deposits, the Office of the Special Prosecutor presented Katrina Cruz-Dizon
(Cruz-Dizon), the manager of the Union Bank branch where the account was maintained. Cruz-Dizon
testified that the account was closed on March 6, 2006, and as five years had lapsed since, the bank
has already disposed the account records. She suggested that the Bangko Sentral ng Pilipinas or the
Anti-Money Laundering Council (Council) may have reports on the transactions, as banks are required
to report covered transactions.9

Thus, the Sandiganbayan, upon the Office of the Special Prosecutor's request, issued a
Subpoena Duces Tecum and Ad Testificandum directing Executive Director Julia C. Bacay-Abad,
then Secretariat of the Council, to testify and to produce Lionair's bank records.10

The Council moved to quash the Subpoena, arguing that whatever information it has on Lionair's bank
account is confidential under Republic Act No. 9160, or the Anti-Money Laundering Act.11 However,
on March 28, 2017, the Sandiganbayan issued a Resolution12 denying the Motion to Quash,
disposing thus:

WHEREFORE, in view of the foregoing, the AMLC's Motion to Quash (Subpoena Duces
Tecum and Ad Testificandum dated 10 October 2016) is DENIED for lack of merit.

SO ORDERED.13

The Sandiganbayan ruled that the Council's misgivings on the disclosure of the bank records were
outweighed by the importance of these documents.14

The Council moved for reconsideration, but it was likewise denied.15 The Sandiganbayan noted that
the Council was not present during the hearing of the Motion for Reconsideration, and that the accused
and their counsels were not furnished copies of the pleading.16

Thus, the Council, representing the Republic of the Philippines, filed this Petition for Certiorari.17 It
mainly argues that it is prohibited by law to disclose the relevant bank records of Lionair.

Petitioner argues that it cannot disclose Lionair's bank records because they are confidential.18 It
avers that the disclosure of reports on covered and suspicious transactions is prohibited under Section
9(c) of the Anti-Money Laundering Act.19 It explains that Section 9(c) adheres to international
standards, which recommend that financial institutions and their officers be prohibited from disclosing
covered and suspicious transaction reports, or "tipping-off" that a case is being filed.20

Further, petitioner explains that the transactions are made confidential to encourage those persons
covered to report transactions "without fear of reprisal from their customers, or fear of losing the
confidence of their clientele[.]"21 It adds that the confidentiality requirement keeps "suspected money
launderers oblivious of the fact that their financial transactions are being monitored and reported by
the covered person to [petitioner]."22 If confidential reports were divulged, it says, money laundering
investigations and prevention would be impeded.23

Then, petitioner avers that Section 9(c) covers it, and not only financial institutions. To prohibit financial
institutions from disclosing reports but allow petitioner to divulge the same reports would be absurd, it
says, pointing out that such act would be indirectly doing what cannot be done directly.24
Aside from the law, petitioner cites its Revised Implementing Rules and Regulations, which states that
petitioner and its secretariat are prohibited from revealing any information related to the
transactions.25

Petitioner likewise argues that respondent failed to reasonably describe the documents subpoenaed,
saying that the description falls short of the requirement under the Rules of Court because the
electronic database contains millions of reports from millions of entities. Without a specific description,
petitioner says it would be difficult to trace the records demanded.26

Petitioner points out that it is not required to furnish the accused or their counsels a copy of its Motion
for Reconsideration, because it is only a nominal party. Thus, it argues that the Sandiganbayan
committed grave abuse of discretion in denying its Motion on this ground.27

Lastly, petitioner prays for the issuance of a temporary restraining order and/or writ of preliminary
injunction, claiming that it is bound to suffer great and irreparable injury should respondent implement
the Subpoena.28

In its Comment,29 respondent Office of the Ombudsman argues that the Sandiganbayan did not
abuse its discretion when it denied petitioner's Motions.30 It says the prohibition on disclosure under
Section 9(c) of the Anti-Money Laundering Act only applies to covered persons-such as financial
institutions, dealers, and company service providers-which do not at all include petitioner.31

Respondent avers that while the Anti-Money Laundering Act does intend to preserve the confidentiality
of bank transactions, its fundamental objective remains to prohibit money laundering through the
reporting of covered and suspicious transactions.32

Besides, respondent says that Lionair has waived its rights to confidentiality through a written
permission, and granted the prosecution access to its bank account under the Foreign Currency
Deposit Act.33 In any case, respondent asserts that petitioner's contentions are outweighed by the
need to materialize the objectives of the Anti-Money Laundering Act and to enforce the principles of
public accountability.34

Respondent further argues that the Subpoena complies with the requirements laid down by the Rules
of Court,35 as it readily identifies the documents requested from petitioner, namely: (1) the reports;
(2) identification documents; (3) statement of accounts; and (4) other transaction documents which
pertain to the three specific transactions of Lionair's Union Bank Account No. 13133-000119-3.36

Contrary to petitioner's claim, respondent contends that it would be easy to retrieve the specific records
from their pool of transactions, as these are electronically processed and may be searched within
seconds or minutes.37

Moreover, respondent belies petitioner's claim that it was not required to furnish copies of the Motion
for Reconsideration for being a nominal party. Citing the Rules of Court,38 respondent argues that
proof of service of the Motion is required, in line with the requirements of due process.39

Respondent points out that even the Office of the Solicitor General agrees that the bank documents
may be subpoenaed, and that Lionair has waived confidentiality through a Secretary's Certificate.40

Lastly, respondent asserts that the temporary restraining order and/or writ of preliminary injunction
should not be issued considering that petitioner failed to prove having a clear and existing right
enforceable by law,41 and any material or substantial invasion of that right.42

On June 19, 2018, absent a temporary restraining order or writ of preliminary injunction, petitioner,
through Jerry L. Leal, acting director of the Financial Analysis Group, testified.43 Nevertheless,
petitioner still addressed respondent's contention in this case.44

In its Reply,45 petitioner reiterates that although Section 9(c) of the law does not explicitly say so, the
prohibition on disclosure extends to petitioner, it having been mandated to keep such reports
confidential. Otherwise, it says, the confidentiality requirement would be for naught.46

Petitioner adds that the reports are pieces of financial intelligence information that should not be used
as evidence because they are merely leads in the investigation of money laundering activities.47 To
use these reports as evidence, Section 11 of the Anti-Money Laundering Act authorizes petitioner to
inquire into the transaction but only upon the Court of Appeals' order.48 Thus, petitioner says the
disclosure of reports directed by the Subpoena will only bypass the bank inquiry process laid down by
law.49

Moreover, petitioner argues that Lionair's written permission cannot allow the disclosure of the
transactions because the subpoena will necessarily include the counterpart transactions from which
the funds originated. In this case, petitioner notes, the originating account is owned by another person
who has not executed a similar waiver.50

The main issue for this Court's resolution is whether or not the Sandiganbayan gravely abused its
discretion in denying the Motion to Quash and Motion for Reconsideration of petitioner Anti-Money
Laundering Council. To answer this, the following issues must first be resolved:

First, whether or not petitioner Anti-Money Laundering Council is required to furnish the respondent a
copy of the Motion for Reconsideration;

Second, whether or not Section 9(c) of the Anti-Money Laundering Act prohibits petitioner Anti-Money
Laundering Council from disclosing confidential and suspicious transaction reports;

Third, whether or not the written permission of Lionair, Inc. is sufficient to disclose the transaction
reports; and

Finally, whether or not the Subpoena failed to reasonably describe the documents sought to be
produced.

Rule 15 of the Rules of Court lays down the basic rules on the filing and hearing of a motion:

SECTION 4. Hearing of motion. - Except for motions which the court may act upon without prejudicing
the rights of the adverse party, every written motion shall be set for hearing by the applicant.

Every written motion required to be heard and the notice of the hearing thereof shall be served in such
a manner as to ensure its receipt by the other party at least three (3) days before the date of hearing,
unless the court for good cause sets the hearing on shorter notice.

SECTION 5. Notice of hearing. - The notice of hearing shall be addressed to all parties concerned,
and shall specify the time and date of the hearing which must not be later than ten (10) days after the
filing of the motion.

SECTION 6. Proof of service necessary. - No written motion set for hearing shall be acted upon by
the court without proof of service thereof.

Under Rule 15, Section 4, every written motion must be set for hearing by the applicant, except when
the court deems it prejudicial to the other party. The motion shall then be served together with its notice
of hearing in a manner that would ensure receipt by the other party at least three days before the date
of hearing, unless the court, for good cause, sets the hearing on shorter notice.

Sections 5 and 6 state that the notice of hearing shall be addressed to the parties concerned and shall
specify the time and date of the hearing. No motion shall be acted upon by the court without proof of
service of its notice, except when the court is satisfied that the adverse party's rights are not affected.

In Valderrama v. People,51 this Court emphasized that these requirements are mandatory. While
there may be motions which the court may resolve without prejudice to the opposing party, the general
rule holds that all motions must set a hearing, including motions for reconsideration. These rules are
in place to satisfy the requirements of due process:

The intention behind the notice requirements is to avoid surprises and to provide the adverse party a
chance to study the motion and to argue meaningfully against it before the court's resolution.

This Court has allowed exceptions to this rule when to do so would not cause prejudice to the other
party nor violate his or her due process rights.52 (Citations omitted)

Hence, the notice of hearing on the motion must be furnished to the adverse party, and the latter must
be informed of the time and date of the hearing. Failure to comply means the motion is defective,
reducing it to a mere scrap of paper.53

Jurisprudence amply supports this rule. In De la Peña v. De la Peña,54 this Court cited a series of
cases where a motion for reconsideration was rendered defective due to a lack of notice of hearing:

In New Japan Motors, Inc. v. Perucho defendant filed a motion for reconsideration which did not
contain any notice of hearing. In a petition for certiorari, we affirmed the lower court in ruling that a
motion for reconsideration that did not contain a notice of hearing was a useless scrap of paper. We
held further -
Under Sections 4 and 5 of Rule 15 of the Rules of Court, ... a motion is required to accompanied by a
notice of hearing which must be served by the applicant on all parties concerned at least three (3)
days before the hearing thereof. Section 6 of the same rule commands that '(n)o motion shall acted
upon by the Court, without proof of service of the notice thereof....' It is therefore patent that the motion
for reconsideration in question is fatally defective for it did not contain any notice of hearing, We have
already consistently held in a number of cases that the requirements of Sections 4, 5 and 6 of Rule 15
of the Rules of Court are mandatory and that failure to comply with the same is fatal to movant's cause.

In Sembrano v. Ramirez we declared that -

(a) motion without notice of hearing is a mere scrap of paper. It does not toll the running of the
period of appeal. This requirement of notice of hearing equally applies to a motion for
consideration. Without such notice, the motion is pro forma. And a pro forma motion for
reconsideration does not suspend the running of the period to appeal.

In In re Almacen defendant lost his case in the lower court. His counsel then filed a motion for
reconsideration but did not notify the adverse counsel of the time and place of hearing of said motion.
The Court of Appeals dismissed the motion for reason that "the motion for reconsideration date July
5, 1966 does not contain a notice of time and place of hearing thereof and is, therefore a useless piece
of paper which did not interrupt the running of the period to appeal, and, consequently, the appeal was
perfected out of time." When the case was brought to us, we reminded counsel for the defendant that
-

As a law practitioner who was admitted to the bar as far back as 1941, Atty. Almacen knew - or ought
to have known that a motion for reconsideration to stay the running of the period of (sic) appeal, the
movant must not only serve a copy of the motion upon the adverse party ... but also notify the adverse
party of the time and place of hearing...

Also, in Manila Surety and Fidelity Co., Inc. v. Bath Construction and Company we ruled -

The written notice referred to evidently is that prescribed for motions in general by Rule 15, Sections
4 and 5 (formerly Rule 26), which provide that such notice shall state the time and place of hearing
and shall be served upon all the parties concerned at least three days in advance. And according to
Section 6 of the same Rule no motion shall be acted upon by the court without proof of such notice.
Indeed it has been held that in such a case the motion if nothing but a useless piece of paper. The
reason is obvious; unless the movant sets the time and place of hearing the court would have no way
to determine whether that party agrees to or objects to the motion, and if he objects, to hear him on
his objection, since the Rules themselves do not fix any period within which he may file his reply or
opposition.

In fine, the abovecited cases confirm that the requirements laid down in Sec. 5 Rule 15 of the Rules
of Court that the notice shall be directed to the parties concerned, and shall state the time and place
for the hearing of the motion, are mandatory. If not religiously complied with, they render the motion pro
forma. As such the motion is a useless piece of paper that will not toll the running of the prescriptive
period.55 (Citations omitted)

In this case, petitioner does not deny that it failed to furnish the accused or their counsels their copies
of the Motion for Reconsideration. However, it contends that it is not required to follow this rule because
it is merely a nominal party.

We do not agree.

First, petitioner cannot claim that it is merely a nominal party.

A nominal or pro forma party is a person "who is joined as a plaintiff or defendant, not because such
party has any real interest in the subject matter or because any relief is demanded, but merely because
the technical rules of pleadings require the presence of such party on the record."56 On the other
hand, an indispensable party is "a party in interest without whom no final determination can be had of
an action without that party being impleaded."57 They are parties with "such an interest in the
controversy that a final decree would necessarily affect their rights, so that the court cannot proceed
without their presence."58

Petitioner is not a nominal party as it claims to be. It has an interest in this case, and the relief
respondent prays for is exactly directed at it. This makes petitioner an indispensable party. As
petitioner alleged in its pleadings, it is the agency directed to act, and it claims that it will suffer injury
if the Subpoena will be implemented. Without petitioner, there can be no relief accorded. It was also
petitioner that filed the Motion to Quash and the Motion for Reconsideration.
Even if petitioner were just a nominal party, it is still required to comply with the requirements under
the Rules of Court. Courts only dispense with the requirement of notice when it will not prejudice the
adverse party or violate their right to due process.

Here, the lack of notice of the Motion for Reconsideration will clearly violate respondent's due process
rights. The character and tenor of the Motions filed by petitioner precisely demand respondent's
participation. If respondent was not informed of their contents and did not appear during the hearing,
it will be robbed of the opportunity to oppose them.

II

The Anti-Money Laundering Act was passed "to protect and preserve the integrity and confidentiality
of bank accounts and to ensure that the Philippines shall not be used as a money laundering site for
the proceeds of any unlawful activity."59

Section 7 of the law creates the Anti-Money Laundering Council, which is mandated "to require and
receive covered transaction reports from covered institutions[,]" as well as "to issue orders ... to
determine the true identity of the owner of any monetary instrument or property subject of a covered
transaction report ... on the basis of substantial evidence, ... involving, or related to, directly or
indirectly, in any manner or by any means, the proceeds of an unlawful activity[.]"60

A covered transaction refers to "a single, series, or combination of transactions involving a total amount
in excess of [P4,000,000.00 or an equivalent amount in foreign currency" which has no credible
purpose, origin, or underlying trade obligation or contract.61

Covered transactions also include: (1) transactions in cash or other equivalent monetary instrument
exceeding P500,000.00; (2) transaction with or involving jewelry or precious stone dealers in cash or
other equivalent monetary instrument exceeding P1,000,000.00; and (3) casino cash transaction
exceeding P5,000,000.00 or its equivalent are also deemed covered transactions.62

On the other hand, suspicious transactions are transactions with covered institutions, regardless of
the amounts involved, where any of the following circumstances exists:

1. there is no underlying legal or trade obligation, purpose or economic justification;

2. the client is not properly identified;

3. the amount involved is not commensurate with the business or financial capacity of the
client;

4. taking into account all known circumstances, it may be perceived that the client's transaction
is structured in order to avoid being the subject of reporting requirements under the Act;

5. any circumstance relating to the transaction which is observed to deviate from the profile of
the client and/or the client's past transactions with the covered institution;

6. the transaction is in any way related to an unlawful activity or offense under this Act that is
about to be, is being or has been committed; or

7. any transaction that is similar or analogous to any of the foregoing.63

Section 9(c) of the Anti-Money Laundering Act further details how the covered and suspicious
transactions will be reported. Under this provision, covered institutions and their officers and
employees are prohibited from communicating that a covered or suspicious transaction report was
made, its contents, or any information related to the reports. Section 9(c) states:

SECTION 9. Prevention of Money Laundering; Customer Identification Requirements and Record

Keeping. -

....

(c) Reporting of Covered and Suspicious Transactions. Covered institutions shall report to the AMLC
all covered transactions and suspicious transactions within five (5) working days from occurrence
thereof, unless the Supervising Authority prescribes a longer period not exceeding ten (10) working
days.

Should a transaction be determined to be both a covered transaction and a suspicious transaction,

the covered institution shall be required to report the same as a suspicious transaction.
When reporting covered or suspicious transactions to the AMLC, covered institutions and their officers
and employees shall not be deemed to have violated Republic Act No. 1405, as amended, Republic
Act No. 6426, as amended, Republic Act No. 8791 and other similar laws, but are prohibited from
communicating, directly or indirectly, in any manner or by any means, to any person, the fact that a
covered or suspicious transaction report was made, the contents thereof, or any other information in
relation thereto. In case of violation thereof, the concerned officer and employee of the covered
institution shall be criminally liable. However, no administrative, criminal or civil proceedings, shall lie
against any person for having made a covered or suspicious transaction report in the regular
performance of his duties in good faith, whether or not such reporting results in any criminal
prosecution under this Act or any other law.

When reporting covered or suspicious transactions to the AMLC, covered institutions and their officers
and employees are prohibited from communicating directly or indirectly, in any manner or by any
means, to any person or entity, the media, the fact that a covered or suspicious transaction report was
made, the contents thereof or any other information in relation thereto. Neither may such reporting be
published or aired in any manner or form by the mass media, electronic mail, or other similar devices.
In case of violation thereof, the concerned officer and employee of the covered institution and media
shall be held criminally liable.64 (Emphasis supplied)

Section 3 enumerates the covered institutions required to report to the Anti-Money Laundering Council:

SECTION 3. Definitions. - For purposes of this Act, the following terms are hereby defined as follows:

(a) "Covered institution" refers to:

(1) banks, non-banks, quasi-banks, trust entities, and all other institutions and their
subsidiaries and affiliates supervised or regulated by the Bangko Sentral ng Pilipinas (BSP);

(2) insurance companies and all other institutions supervised or regulated by the Insurance
Commission; and

(3) (i) securities dealers, brokers, salesmen, investment houses and other similar entities
managing securities or rendering services as investment agent, advisor, or consultant, (ii)
mutual funds, closed-end investment companies, common trust funds, pre-need companies
and other similar entities, (iii) foreign exchange corporations, money changers, money
payment, remittance, and transfer companies and other similar entities, and (iv) other entities
administering or otherwise dealing in currency, commodities or financial derivatives based
thereon, valuable objects, cash substitutes and other similar monetary instruments or property
supervised or regulated by Securities and Exchange Commission.

The prohibition applies to institutions and persons that, under the law and by reason of their business,
possess information on covered and suspicious transactions. It supports the functions of the Anti-
Money Laundering Council and other prosecuting agencies. If these institutions were allowed to
disclose information to anyone, especially to persons subject of the report, their investigatory functions
will be rendered ineffective.

Meanwhile, the Anti-Money Laundering Council is the financial intelligence unit tasked to analyze the
covered transaction reports and suspicious transaction reports submitted to it. It "shall require and
receive [covered transaction reports] and [suspicious transaction reports] from covered persons";
"formulate guidelines and develop protocols necessary to require covered persons to submit relevant
information"; and "access all relevant financial, administrative and law enforcement information for a
holistic financial intelligence analysis of [covered transaction reports] and [suspicious transaction
reports]."65

Aside from collecting and analyzing reports of covered and suspicious transactions, the Anti-Money
Laundering Council is also tasked to be the investigator and complainant in money laundering or
money terrorism finance cases. Section 7 of the Anti-Money Laundering Act states in part:

(3) to institute civil forfeiture proceedings and all other remedial proceedings through the Office
of the Solicitor General;

(4) to cause the filing of complaints with the Department of Justice or the Ombudsman for the
prosecution of money laundering offenses;

(5) to initiate investigations of covered transactions, money laundering activities and other
violations of this Act;

(6) to freeze any monetary instrument or property alleged to be proceeds of any unlawful
activity[.]66
To perform these functions, the Anti-Money Laundering Council is authorized to "issue orders
addressed to the appropriate [supervising authority] or the covered person to determine the true
identity of the owner of any monetary instrument or property: (a) subject of [covered transaction report]
or [suspicious transaction report]; (b) subject of request for assistance from a foreign State or
jurisdiction; or (c) believed by the Council, on the basis of substantial evidence, to be, in whole or in
part, wherever located, representing, involving, or related to, directly or indirectly, in any manner or by
any means, the proceeds of any unlawful activity."67

Here, petitioner Anti-Money Laundering Council argues that the prohibition extends to it. It claims that
as a covered institution, it cannot be forced to disclose such prohibited information.

This argument is untenable.

First, as the text of the Anti-Money Laundering Act reveals, petitioner is not one of the covered
institutions prohibited from disclosing information on covered and suspicious transactions. Section
3(a) enumerates those that are prohibited from disclosing such information, and petitioner is not one
of them.

Second, contrary to petitioner's claim, the rationale behind the prohibition does not extend and apply
to it To reiterate, covered institutions are precluded from disclosing the reports or the fact they are
reported to petitioner, because it will impede the possible investigation on the covered and suspicious
transactions. Unlike covered institutions, petitioner is mandated to investigate and use the information
it has to institute cases against violators.

The international standards that petitioner cites, which advocate confidentiality of the transaction
reports and prohibits their disclosure, only apply to covered institutions. As the wording of the
standards shows, the prohibition avoids "tipping-off" or situations where covered transactions will warn
depositors and possible violators that they are being reported to petitioner.

Third, the prohibition and confidentiality provisions cannot apply to petitioner; otherwise, it would
contravene its direct mandate under Section 7 of the Anti-Money Laundering Act.

Petitioner is not merely a repository of reports and information on covered and suspicious transactions.
It is created precisely to investigate and institute charges against the offenders. Section 7 clearly states
that it is tasked to institute civil forfeiture proceedings and other remedial proceedings, and to file
complaints with the Department of Justice or the Office of the Ombudsman for anti-money laundering
offenses.

In addition, the criminal prosecution of anti-money laundering offenses would be unduly hampered if
petitioner were prohibited from disclosing information regarding covered and suspicious transactions.
It would be antithetical to its own functions if petitioner were to refuse to participate in prosecuting anti-
money laundering offenses by taking shelter in the confidentiality provisions of the Anti-Money
Laundering Act.

This is not the first time that petitioner was called to participate in the investigation and prosecution of
cases involving banking transactions.

For instance, in Revilla v. Sandiganbayan,68 the Anti-Money Laundering Council was presented as a
witness during the Sandiganbayan trials in the plunder cases involving the pork barrel scam. In one of
the cases, the Council reported that several investment and bank accounts of accused Ramon Revilla,
Jr. were terminated immediately before and after the PDAF scandal leaked to the public.69

The Anti-Money Laundering Council testified to bank transaction records showing that the accounts
of the involved nongovernment organizations with the Land Bank of the Philippines and Metropolitan
Bank and Trust Company were only temporary repositories of money, and that the withdrawals were
done only after the approval of accused Janet Napoles (Napoles). The Council also testified that the
ℒ αwρhi৷

bank accounts were opened using the identification cards of Napoles's corporations, consistent with
the other accused's testimonies.70

The Sandiganbayan used the Council's report as basis to issue a writ of preliminary attachment. This
Court affirmed the writ's validity, citing the Council's report as strong evidence against the accused.71

Thus, in this case, petitioner's reliance on the confidentiality provision is misplaced. It was specifically
created as the country's financial intelligence unit to ensure that our financial institutions are not used
as conduits to perpetuate unlawful activities.

III
Republic Act No. 6426, or the Foreign Currency Deposit Act, provides the rule on secrecy of foreign
currency deposits. Section 8 states:

SECTION 8. Secrecy of foreign currency deposits. - All foreign currency deposits authorized under
this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized under PD No.
1034, are hereby declared as and considered of an absolutely confidential nature and, except upon
the written permission of the depositor, in no instance shall foreign currency deposits be examined,
inquired or looked into by any person, government official, bureau or office whether judicial or
administrative or legislative, or any other entity whether public or private; Provided, however, that said
foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process
of any court, legislative body, government agency or any administrative body whatsoever.72

As a rule, foreign currency deposits are absolutely confidential, and thus, are not susceptible to
examination and inquiry by any person. The law further mandates that foreign currency deposits are
exempt from attachment, garnishment, or any other order or process of any court or government
agency.

Nevertheless, this rule admits an exception. Section 8 itself states that a foreign currency deposit may
be inquired into and examined if there is a written permission from the depositor.73

In China Banking Corporation v. Court of Appeals,74 complainant Jose Gotianuy accused his
daughter Margaret Dee and his son-in-law of stealing huge sums of money from his US dollar deposit
account with Citibank. Allegedly, his daughter received the money from Citibank through checks she
deposited with the China Banking Corporation (Chinabank).

To prove his theory, the complainant presented the US dollar checks withdrawn by his daughter from
his US dollar placement with Citibank. The trial court then subpoenaed employees of Chinabank to
testify on the case. The Court of Appeals affirmed the trial court's order.75

Ultimately, this Court agreed with the lower courts. It ruled that the complainant, as the owner of the
funds, had the right to inquire into the deposits.76 This is the exception to the secrecy of foreign
currency deposits under Section 8 of Republic Act No. 6426. Thus:

[T]he law provides that all foreign currency deposits authorized under Republic Act No. 6426, as
amended by Sec. 8, Presidential Decree No. 1246, Presidential Decree No. 1035, as well as foreign
currency deposits authorized under Presidential Decree No. 1034 are considered absolutely
confidential in nature and may not be inquired into. There is only one exception to the secrecy of
foreign currency deposits, that is, disclosure is allowed upon the written permission of the depositor.

....

... As a corollary issue, sought to be resolved is whether Jose Gotianuy may be considered a depositor
who is entitled to seek an inquiry over the said deposits. The Court of Appeals, in allowing the inquiry,
considered Jose Gotianuy, a co-depositor of Mary Margaret Dee. It reasoned that since Jose Gotianuy
is the named co-payee of the latter in the subject checks, which checks were deposited in China Bank,
then, Jose Gotianuy is likewise a depositor thereof. On that basis, no written consent from Mary
Margaret Dee is necessitated.

We agree in the conclusion arrived at by the Court of Appeals.

The following facts are established: (1) Jose Gotianuy and Mary Margaret Dee are co-payees of
various Citibank checks; (2) Mary Margaret Dee withdrew these checks from Citibank; (3) Mary
Margaret Dee admitted in her Answer to the Request for Admissions by the Adverse Party sent to her
by Jose Gotianuy that she withdrew the funds from Citibank upon the instruction of her father Jose
Gotianuy and that the funds belonged exclusively to the latter; (4) these checks were endorsed by
Mary Margaret Dee at the dorsal portion; and (5) Jose Gotianuy discovered that these checks were
deposited with China Bank as shown by the stamp of China Bank at the dorsal side of the checks.

Thus, with this, there is no issue as to the source of the funds. Mary Margaret Dee declared the source
to be Jose Gotianuy. There is likewise no dispute that these funds in the form of Citibank US dollar
Checks are now deposited with China Bank.

As the owner of the funds unlawfully taken and which are undisputably now deposited with China
Bank, Jose Gotianuy has the right to inquire into the said deposits.

A depositor, in cases of bank deposits, is one who pays money into the bank in the usual course of
business, to be placed to his credit and subject to his check or the beneficiary of the funds held by the
bank as trustee.77 (Citations omitted)
Here, there is no question that the owner of the bank account submitted its written permission to allow
the inquiry and examination of its accounts. Lionair, the owner of the dollar account subject of the
Subpoena, waived its rights under the Foreign Currency Deposit Act and granted the prosecution
access to its account. It issued a Board Resolution reflecting this waiver:

RESOLVED, as it is hereby resolved, to approve the waiver by the Company of its rights under the
Bank Secrecy Law and grant the Special Prosecutors, access to LIONAIR INCORPORATED's bank
account No. 13133-000199-3 with Union Bank Philippines, Richville Tower Branch, Madrigal Business
Park, Alabang, Muntinlupa City;

RESOLVED FURTHER, as it is hereby resolved, to authorize and direct the Union Bank of the
Philippines and its duly authorized representatives to allow access to the Special Prosecutors to
examine, look into and obtain copies of the records of the Company's bank account No. 13133-
000119-3[.]78

Thus, petitioner's arguments invoking confidentiality should not be an issue, because the owner and
depositor of the bank account itself has already waived its rights. Lionair, as the owner of the account
and its funds, has the right to inquire into the deposits and its records. Its written permission is sufficient
basis for petitioner to disclose the records.

Yet, petitioner cites Section 11 of the Anti-Money Laundering Act, arguing that before the bank records
are disclosed, the Court of Appeals must have first issued an order upon finding probable cause.
Section 11 states:

SECTION 11. Authority to Inquire into Bank Deposits. Notwithstanding the provisions of Republic Act
No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws,
the AMLC may inquire into or examine any particular deposit or investment with any banking institution
or non-bank financial institution upon order of any competent court in cases of violation of this Act,
when it has been established that there is probable cause that the deposits or investments are related
to an unlawful activity as defined in Section 3(i) hereof or a money laundering offense under Section
4 hereof; except that no court order shall be required in cases involving unlawful activities defined in
Sections 3(i)(1), (2) and (12).

To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may inquire into or examine
any deposit or investment with any banking institution or non-bank financial institution when the
examination is made in the course of a periodic or special examination, in accordance with the rules
of examination of the BSP.79

Petitioner's reliance on Section 11 is misplaced. It is not this provision of the Anti-Money Laundering
Act that applies here, but Republic Act No. 6426.

As the provision reads, Section 11 of the Anti-Money Laundering Act is only an exception to Republic
Act No. 6426, as well as Republic Act Nos. 1405 and 8791. Section 11 applies to situations where
there is no written permission from the depositor and owner of the bank account. Thus, in Section 11,
there is a need for a finding of probable cause and a court order.

Here, the order to produce Lionair's records is not anchored on Section 11 of the Anti-Money
Laundering Act, but on the written permission of Lionair, satisfying the requirement under Republic
Act No. 6426. Hence, there is no need to require an inquiry order from the Court of Appeals. As shown
in China Banking Corporation and Government Service Insurance System, a subpoena on the
disclosure of bank transactions and accounts under Republic Act No. 6426 only requires the
depositor's written permission.

IV

Petitioner argues that the description provided in the Subpoena falls short of the requirement under
the Rules of Court.

Rule 21 states the requirements of a subpoena. For a subpoena duces tecum, Section 3 demands a
reasonable description of the books, documents, or things demanded, and these must appear to be
relevant. Per Section 4, a party may move to quash the subpoena if it is unreasonable and oppressive,
or if the books, documents, or things are not relevant:

SECTION 3. Form and Contents. - A subpoena shall state the name of the court and the title of the
action or investigation, shall be directed to the person whose attendance is required, and in the case
of a subpoena duces tecum, it shall also contain a reasonable description of the books, documents or
things demanded which must appear to the court prima facie relevant.
SECTION 4. Quashing a Subpoena. The court may quash a subpoena duces tecum upon motion
promptly made and, in any event, at or before the time specified therein if it is unreasonable and
oppressive, or the relevancy of the books, documents or things does not appear, or if the person in
whose behalf the subpoena is issued fails to advance the reasonable cost of the production thereof.

The court may quash a subpoena ad testificandum on the ground that the witness is not bound
thereby. In either case, the subpoena may be quashed on the ground that the witness fees and
kilometrage allowed by these Rules were not tendered when the subpoena was served.80

A subpoena duces tecum may be issued if the tests of relevancy and definiteness are satisfied. The
court must ensure that "(1) the books, documents or other things requested must appear prima
facie relevant to the issue subject of the controversy (test of relevancy); and (2) such books must be
reasonably described by the parties to be readily identified (test of definiteness)."81

In Presidential Commission on Good Government v. Sandiganbayan,82 a petition was filed assailing

sequestration order involving the shares of stock of Lucio C. Tan, among others. Upon motion, the
Sandiganbayan then issued a subpoena ad testificandum and duces tecum, requiring the Presidential
Commission on Good Government's records officer to produce the following documents:

1. The documents, records and other evidence considered by the PCGG and on the basis of
which the PCGG issued the Sequestration Order dated June 19, 1986 (Annex "A," hereof) and
the Writ of Sequestration dated June 19, 1986 (Annex "B," hereof); and

2. The minutes of the meeting(s) of the PCGG at which the Sequestration Order dated June
19, 1986 (Annex "A" hereof) and Writ of Sequestration dated June 19, 1986 (Annex "B" hereof)
was authorized to be issued and which chronicles the discussion (if any) and the decision (of
the PCGG Chairman and Commissioners) to issue the Sequestration Order dated June 19,
1986 (Annex "A," hereof) and the Writ of Sequestration dated June 19, 1986 (Annex
"hereof).83

The Presidential Commission on Good Government moved to quash the subpoena, but when this was
denied, it petitioned the case to this Court, arguing that the subpoena was unreasonable and
oppressive.84

In dismissing the petition, this Court ruled that the subpoena passed the test of definiteness. It gave
credence to respondents' argument that "the documents sought are material and relevant to the issues
and are properly described and identified[.]"85 Thus, the Sandiganbayan did not commit grave abuse
of discretion in issuing the subpoena.86

In this case, petitioner assails the validity of the Subpoena Duces Tecum for failing to reasonably
describe the documents sought to be produced. We disagree.

The Subpoena Duces Tecum issued by the Sandiganbayan satisfies the test of definiteness. Its simple
reading clearly shows which specific reports and transactions are being requested. The contested
paragraph of the Subpoena reads:

"Documents to be produced:

The original or certified copies of any and all reports, identification documents, statement of accounts
and other transaction documents obtained by the said office from any and all banking institutions, non-
bank financial institutions and other covered institutions, in connection with the above-specified
transactions reflected in the savings passbook of Lionair under Union Bank Savings Account No.
13133-000119-3. Copy of said passbook is hereby attached for easy reference."87

The documents requested are readily and reasonably identifiable: (1) the reports; (2) identification
documents; (3) statement of accounts; and (4) other transaction documents particularly pertaining to
the specific account number and three specific bank transactions.

Finally, petitioner cannot excuse itself from complying with the Subpoena by raising the difficulty of
retrieving the records. As petitioner itself admitted, the transactions are done electronically, and this
Court is well aware that the advancement in technology with our banking system allows for easier
retrieval of these records. In any case, petitioner failed to show how it would be impossible for it to
retrieve the reports from its system.

In sum, there was no showing that the Sandiganbayan gravely abused its discretion in issuing the
Subpoena Duces Tecum and Ad Testificandum and denying petitioner's Motion to Quash and Motion
for Reconsideration. Instead of avoiding compliance with the Subpoena, petitioner must firmly perform
its mandate as an investigatory body and independent financial intelligence unit.
WHEREFORE, the Petition for Certiorari is DISMISSED. The March 28, 2017 Resolution and May 12,
2017 Order of the Sandiganbayan in Criminal Case Nos. SB-12-CRM-0164 to 0167 are AFFIRMED.

SO ORDERED.

FIRST DIVISION

March 11, 2015

G.R. No. 196750

MA. ELENA R. DIVINAGRACIA, as Administratrix of the ESTATE OF THE LATE SANTIAGO C.

DIVINAGRACIA, Petitioner,
vs.
CORONACION PARILLA, CELESTIAL NOBLEZA, CECILIA LELINA, CELEDONIO NOBLEZA,
MAUDE NOBLEZA, Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated March 26, 2009 and the
Resolution3 dated April 6, 2011 of the Court of Appeals (CA) in CA-G.R. CV. No. 80167, which set
aside the Decision4 dated November 29, 2002 and the Order5 dated April 4, 2003 of the Regional Trial
Court of Iloilo City, Branch 31 (RTC) in Civil Case No. 19003 and, consequently, dismissed Santiago
C. Divinagracia's (Santiago) complaint for judicial partition.

The Facts

Conrado Nobleza, Sr. (Conrado, Sr.) owned a 313-square meter parcel of land located at Cor.
Fuentes-Delgado Streets, Iloilo City denominated as Lot 133-B-1-A and covered by Transfer
Certificate of Title (TCT) No. T- 12255 (subject land).6 During his lifetime, he contracted two marriages:
(a) the first was with Lolita Palermo with whom he had two (2) children, namely, Cresencio and
Conrado, Jr.; and (b) the second was with Eusela Niangar with whom he had seven (7) children,
namely, Mateo, Sr., Coronacion, Cecilia, Celestial, Celedonio, Ceruleo,7 and Cebeleo, Sr. Conrado,
Sr. also begot three (3) illegitimate children, namely, Eduardo, Rogelio, and Ricardo.8 Mateo, Sr. pre-
deceased Conrado, Sr. and was survived by his children Felcon, Landelin, Eusela, Giovanni, Mateo,
Jr., Tito, and Gaylord. Cebeleo, Sr. also pre-deceased his father and was survived by his wife, Maude,
and children Cebeleo, Jr. and Neobel.9

According to Santiago, upon Conrado, Sr.’s death, Cresencio, Conrado, Jr., Felcon (in representation
of his father, Mateo, Sr., and his siblings), Coronacion, Celestial, Cecilia, Rogelio, Eduardo, and
Ricardo sold their respective interests over the subject land to Santiago for a consideration of
447,695.66, as embodied in a Deed of Extrajudicial Settlement or Adjudication with Deed of
Sale10 dated November 22, 1989 (subject document),11 which was, however, not signed by the other
heirs who did not sell their respective shares, namely, Ceruleo, Celedonio, and Maude (in
representation of his husband, Cebeleo, Sr., and their children).12 On December 22, 1989, the same
parties executed a Supplemental Contract13 whereby the vendors-heirs and Santiago agreed that out
of the aforesaid consideration, only 109,807.93 will be paid up front, and that Santiago will only pay
the remaining balance of 337,887.73 upon the partition of the subject land.14 However, Santiago was
not able to have TCT No. T-12255 cancelled and the subject document registered because of Ceruleo,
Celedonio, and Maude’s refusal to surrender the said title. This fact, coupled with Ceruleo, Celedonio,
and Maude’s failure to partition the subject land, prompted Santiago to file a Complaint15 dated January
3, 1990 for judicial partition and for receivership.16

For their part, Ceruleo, Celedonio, and Maude maintained that Santiago had no legal right to file an
action for judicial partition nor compel them to surrender TCT No. T-12255 because, inter alia: (a)
Santiago did not pay the full purchase price of the shares sold to him; and (b) the subject land is a
conjugal asset of Conrado Sr. and Eusela Niangar and, thus, only their legitimate issues may validly
inherit the same.17

The RTC Ruling

In a Decision18 dated November 29, 2002, the RTC ordered, among others, the partition of the subject
land between Santiago on the one hand, and Ceruleo, Celedonio, Maude, and the heirs of Mateo, Sr.
(i.e., Felcon, et al.) on the other hand and, consequently, the cancellation of TCT No. T- 12255 and
the issuance of a new owner’s duplicate certificate in favor of Santiago and the group of Ceruleo,
Celedonio, Maude, and the heirs of Mateo, Sr.19 The RTC found that through the subject document,
Santiago became a co-owner of the subject land and, as such, has the right to demand the partition
of the same. However, the RTC held that Santiago did not validly acquire Mateo, Sr.’s share over the
subject land, considering that Felcon admitted the lack of authority to bind his siblings with regard to
Mateo, Sr.’s share thereon.20

On reconsideration21 of Ceruleo and herein respondents Celedonio, Maude, Celestial, Coronacion,

and Cecilia (respondents), the RTC issued an Order22 dated April 4, 2003 further ordering Santiago to
comply with the provisions of the Supplemental Contract dated December 22, 1989 by paying the
amount of 337,887.73 upon the partition of the subject land.

Dissatisfied, respondents appealed23 to the CA. Records are bereft of any showing that the other heirs
made similar appeals thereto.

The CA Ruling

In a Decision24 dated March 26, 2009, the CA set aside the RTC Rulings and, consequently, dismissed
Santiago’s complaint for judicial partition.25 It held that Felcon’s siblings, as well as Maude’s children,
are indispensable parties to the judicial partition of the subject land and, thus, their non-inclusion as
defendants in Santiago’s complaint would necessarily result in its dismissal.26

Aggrieved, the heirs of Santiago27 moved for reconsideration28 which was, however, denied in a
Resolution29 dated April 6, 2011, hence, this petition instituted by herein petitioner, Ma. Elena R.
Divinagracia, as administratrix of Santiago’s estate.

The Issues Before the Court

The issues for the Court’s resolution are whether or not the CA correctly: (a) ruled that Felcon’s siblings
and Cebeleo, Sr. and Maude’s children are indispensable parties to Santiago’s complaint for judicial
partition; and (b) dismissed Santiago’s complaint for his failure to implead said omitted heirs.

The Court’s Ruling

The petition is partly meritorious.

An indispensable party is one whose interest will be affected by the court’s action in the litigation, and
without whom no final determination of the case can be had. The party’s interest in the subject matter
of the suit and in the relief sought are so inextricably intertwined with the other parties’ that his legal
presence as a party to the proceeding is an absolute necessity. In his absence, there cannot be a
resolution of the dispute of the parties before the court which is effective, complete, or
equitable.30 Thus, the absence of an indispensable party renders all subsequent actions of the court
null and void, for want of authority to act, not only as to the absent parties but even as to those
present.31

With regard to actions for partition, Section 1, Rule 69 of the Rules of Court requires that all persons
interested in the property shall be joined as defendants, viz.:

SEC. 1. Complaint in action for partition of real estate. – A person having the right to compel the
partition of real estate may do so as provided in this Rule, setting forth in his complaint the nature and
extent of his title and an adequate description of the real estate of which partition is demanded and
joining as defendants all other persons interested in the property. (Emphasis and underscoring
supplied)

Thus, all the co-heirs and persons having an interest in the property are indispensable parties; as
such, an action for partition will not lie without the joinder of the said parties.32

In the instant case, records reveal that Conrado, Sr. has the following heirs, legitimate and illegitimate,
who are entitled to a pro-indiviso share in the subject land, namely: Conrado, Jr., Cresencio, Mateo,
Sr., Coronacion, Cecilia, Celestial, Celedonio, Ceruleo, Cebeleo, Sr., Eduardo, Rogelio, and Ricardo.
However, both Mateo, Sr. and Cebeleo, Sr. pre-deceased Conrado, Sr. and, thus, pursuant to the
rules on representation under the Civil Code,33 their respective interests shall be represented by their
children, namely: (a) for Mateo, Sr.: Felcon, Landelin, Eusela, Giovanni, Mateo, Jr., Tito, and Gaylord;
and (b) for Cebeleo, Sr.: Cebeleo, Jr. and Neobel.34

The aforementioned heirs – whether in their own capacity or in representation of their direct ascendant
– have vested rights over the subject land and, as such, should be impleaded as indispensable parties
in an action for partition thereof. However, a reading of Santiago’s complaint shows that as regards
Mateo, Sr.’s interest, only Felcon was impleaded, excluding therefrom his siblings and co-
representatives. Similarly, with regard to Cebeleo, Sr.’s interest over the subject land, the complaint
impleaded his wife, Maude, when pursuant to Article 97235 of the Civil Code, the proper representatives
to his interest should have been his children, Cebeleo, Jr. and Neobel. Verily, Santiago’s omission of
the aforesaid heirs renders his complaint for partition defective.

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

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

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

However, the CA erred in ordering the dismissal of the complaint on account of Santiago’s failure to
implead all the indispensable parties in his complaint. In Heirs of Mesina v. Heirs of Fian, Sr.,39 the
1âw phi 1

Court definitively explained that in instances of non-joinder of indispensable parties, the proper remedy
is to implead them and not to dismiss the case, to wit:

The non-joinder of indispensable parties is not a ground for the dismissal of an action. At any stage of
a judicial proceeding and/or at such times as are just, parties may be added on the motion of a party
or on the initiative of the tribunal concerned. If the plaintiff refuses to implead an indispensable party
despite the order of the court, that court may dismiss the complaint for the plaintiff’s failure to comply
with the order.

The remedy is to implead the non-party claimed to be indispensable. x x x40 (Underscoring supplied;
emphases in the original)

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

WHEREFORE, the petition is PARTLY GRANTED. Accordingly, the Decision dated March 26, 2009
and the Resolution dated April 6, 2011 of the Court of Appeals in CA-G.R. CV. No. 80167, setting
aside the Decision dated November 29, 2002 and the Order dated April 4, 2003 of the Regional Trial
Court of Iloilo City, Branch 31 in Civil Case No. 19003, are hereby AFFIRMED with MODIFICATION
REMANDING the instant case to the court a quo, which is hereby DIRECTED to implead all
indispensable parties and, thereafter, PROCEED with the resolution of the case on the merits WITH
DISPATCH.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 162788. July 28, 2005 ]
SPOUSES JULITA DE LA CRUZ AND FELIPE DE LA CRUZ, PETITIONERS, VS.
PEDRO JOAQUIN, RESPONDENT.

DECISION
PANGANIBAN, J.:
The Rules require the legal representatives of a dead litigant to be substituted as parties to a litigation. This
requirement is necessitated by due process. Thus, when the rights of the legal representatives of a decedent
are actually recognized and protected, noncompliance or belated formal compliance with the Rules cannot affect
the validity of the promulgated decision. After all, due process had thereby been satisfied.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the August 26, 2003
Decision[2] and the March 9, 2004 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 34702. The
challenged Decision disposed as follows:
"WHEREFORE, the foregoing considered, the appeal is DISMISSED and the assailed decision accordingly
AFFIRMED in toto. No costs."[4]
 On the other hand, the trial court's affirmed Decision disposed as follows:
"WHEREFORE, judgment is hereby rendered:

"a) declaring the Deed of Absolute Sale (Exh. "D") and "Kasunduan" (Exhibit B), to be a sale
with right of repurchase;
"b) ordering the plaintiff to pay the defendants the sum of P9,000.00 by way of repurchasing the
land in question;
"c) ordering the defendants to execute a deed of reconveyance of said land in favor of the
plaintiff after the latter has paid them the amount of P9,000.00 to repurchase the land in
question;
"d) ordering the defendants to yield possession of the subject land to the plaintiff after the latter
has paid them the amount of P9,000.00 to repurchase the property from them; and
"e) ordering the defendants to pay the plaintiff the amount of P10,000.00 as actual and
compensatory damages; the amount of P5,000[.00] as exemplary damages; the amount of
P5,000.00 as expenses of litigation and the amount of P5,000.00 by way of attorney's
fees."[5]
The Facts

The case originated from a Complaint for the recovery of possession and ownership, the cancellation of title, and
damages, filed by Pedro Joaquin against petitioners in the Regional Trial Court of Baloc, Sto. Domingo, Nueva
Ecija.[6] Respondent alleged that he had obtained a loan from them in the amount of P9,000 on June 29, 1974,
payable after five (5) years; that is, on June 29, 1979. To secure the payment of the obligation, he supposedly
executed a Deed of Sale in favor of petitioners. The Deed was for a parcel of land in Pinagpanaan, Talavera,
Nueva Ecija, covered by TCT No. T-111802. The parties also executed another document entitled
"Kasunduan." [7]

Respondent claimed that the Kasunduan showed the Deed of Sale to be actually an equitable
mortgage.[8] Spouses De la Cruz contended that this document was merely an accommodation to allow the
repurchase of the property until June 29, 1979, a right that he failed to exercise. [9]

On April 23, 1990, the RTC issued a Decision in his favor. The trial court declared that the parties had entered
into a sale with a right of repurchase.[10] It further held that respondent had made a valid tender of payment on
two separate occasions to exercise his right of repurchase. [11] Accordingly, petitioners were required to reconvey
the property upon his payment.[12]

Ruling of the Court of Appeals

Sustaining the trial court, the CA noted that petitioners had given respondent the right to repurchase the property
within five (5) years from the date of the sale or until June 29, 1979. Accordingly, the parties executed
the Kasunduan to express the terms and conditions of their actual agreement. [13] The appellate court also found
no reason to overturn the finding that respondent had validly exercised his right to repurchase the land. [14]

In the March 9, 2004 Resolution, the CA denied reconsideration and ordered a substitution by legal
representatives, in view of respondent's death on December 24, 1988. [15]

Hence, this Petition.[16]

The Issues

Petitioners assign the following errors for our consideration:

"I. Public Respondent Twelfth Division of the Honorable Court of Appeals seriously erred in dismissing the
appeal and affirming in toto the Decision of the trial court in Civil Case No. SD-838;

"II. Public Respondent Twelfth Division of the Honorable Court of Appeals likewise erred in denying [petitioners"]
Motion for Reconsideration given the facts and the law therein presented." [17]
Succinctly, the issues are whether the trial court lost jurisdiction over the case upon the death of Pedro Joaquin,
and whether respondent was guilty of forum shopping.[18]

The Court's Ruling

The Petition has no merit.

First Issue:
Jurisdiction

Petitioners assert that the RTC's Decision was invalid for lack of jurisdiction.[19] They claim that respondent died
during the pendency of the case. There being no substitution by the heirs, the trial court allegedly lacked
jurisdiction over the litigation.[20]

Rule on Substitution

When a party to a pending action dies and the claim is not extinguished, [21] the Rules of Court require a
substitution of the deceased. The procedure is specifically governed by Section 16 of Rule 3, which reads thus:
"Section 16. Death of a party; duty of counsel. -Whenever a party to a pending action dies, and the claim is not
thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after such death
of the fact thereof, and to give the name and address of his legal representative or representatives. Failure of
counsel to comply with this duty shall be a ground for disciplinary action.
"The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the appointment
of an executor or administrator and the court may appoint a guardian ad litem for the minor heirs.

"The court shall forthwith order said legal representative or representatives to appear and be substituted within a
period of thirty (30) days from notice.

"If no legal representative is named by the counsel for the deceased party, or if the one so named shall fail to
appear within the specified period, the court may order the opposing party, within a specified time, to procure the
appointment of an executor or administrator for the estate of the deceased, and the latter shall immediately
appear for and on behalf of the deceased. The court charges in procuring such appointment, if defrayed by the
opposing party, may be recovered as costs."
The rule on the substitution of parties was crafted to protect every party's right to due process. [22] The estate of
the deceased party will continue to be properly represented in the suit through the duly appointed legal
representative.[23] Moreover, no adjudication can be made against the successor of the deceased if the
fundamental right to a day in court is denied.[24]

The Court has nullified not only trial proceedings conducted without the appearance of the legal representatives
of the deceased, but also the resulting judgments.[25] In those instances, the courts acquired no jurisdiction over
the persons of the legal representatives or the heirs upon whom no judgment was binding. [26]

This general rule notwithstanding, a formal substitution by heirs is not necessary when they themselves
voluntarily appear, participate in the case, and present evidence in defense of the deceased. [27] These actions
negate any claim that the right to due process was violated.

The Court is not unaware of Chittick v. Court of Appeals,[28] in which the failure of the heirs to substitute for the
original plaintiff upon her death led to the nullification of the trial court's Decision. The latter had sought to
recover support in arrears and her share in the conjugal partnership. The children who allegedly substituted for
her refused to continue the case against their father and vehemently objected to their inclusion as
parties.[29] Moreover, because he died during the pendency of the case, they were bound to substitute for the
defendant also. The substitution effectively merged the persons of the plaintiff and the defendant and thus
extinguished the obligation being sued upon.[30]

Clearly, the present case is not similar, much less identical, to the factual milieu of Chittick.

Strictly speaking, the rule on the substitution by heirs is not a matter of jurisdiction, but a requirement of due
process. Thus, when due process is not violated, as when the right of the representative or heir is recognized
and protected, noncompliance or belated formal compliance with the Rules cannot affect the validity of a
promulgated decision.[31] Mere failure to substitute for a deceased plaintiff is not a sufficient ground to nullify a
trial court's decision. The alleging party must prove that there was an undeniable violation of due process.

Substitution in
the Instant Case

The records of the present case contain a "Motion for Substitution of Party Plaintiff" dated February 15, 2002,
filed before the CA. The prayer states as follows:
"WHEREFORE, it is respectfully prayed that the Heirs of the deceased plaintiff-appellee as represented by his
daughter Lourdes dela Cruz be substituted as party-plaintiff for the said Pedro Joaquin.

"It is further prayed that henceforth the undersigned counsel[32] for the heirs of Pedro Joaquin be furnished with
copies of notices, orders, resolutions and other pleadings at its address below."
Evidently, the heirs of Pedro Joaquin voluntary appeared and participated in the case. We stress that the
appellate court had ordered[33] his legal representatives to appear and substitute for him. The substitution even
on appeal had been ordered correctly. In all proceedings, the legal representatives must appear to protect the
interests of the deceased.[34] After the rendition of judgment, further proceedings may be held, such as a motion
for reconsideration or a new trial, an appeal, or an execution. [35]

Considering the foregoing circumstances, the Motion for Substitution may be deemed to have been granted; and
the heirs, to have substituted for the deceased, Pedro Joaquin. There being no violation of due process, the
issue of substitution cannot be upheld as a ground to nullify the trial court's Decision.

Second Issue:
Forum Shopping

Petitioners also claim that respondents were guilty of forum shopping, a fact that should have compelled the trial
court to dismiss the Complaint.[36] They claim that prior to the commencement of the present suit on July 7, 1981,
respondent had filed a civil case against petitioners on June 25, 1979. Docketed as Civil Case No. SD-742 for
the recovery of possession and for damages, it was allegedly dismissed by the Court of First Instance of Nueva
Ecija for lack of interest to prosecute.

Forum Shopping Defined

Forum shopping is the institution of two or more actions or proceedings involving the same parties for the same
cause of action, either simultaneously or successively, on the supposition that one or the other court would make
a favorable disposition.[37] Forum shopping may be resorted to by a party against whom an adverse judgment or
order has been issued in one forum, in an attempt to seek a favorable opinion in another, other than by an
appeal or a special civil action for certiorari.[38]

Forum shopping trifles with the courts, abuses their processes, degrades the administration of justice, and
congests court dockets.[39] Willful and deliberate violation of the rule against it is a ground for the summary
dismissal of the case; it may also constitute direct contempt of court. [40]

The test for determining the existence of forum shopping is whether the elements of litis pendentia are present,
or whether a final judgment in one case amounts to res judicata in another.[41] We note, however, petitioners'
claim that the subject matter of the present case has already been litigated and decided. Therefore, the
applicable doctrine is res judicata.[42]

Applicability of Res Judicata

Under res judicata, a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of
the rights of the parties or their privies, in all later suits and on all points and matters determined in the previous
suit.[43] The term literally means a "matter adjudged, judicially acted upon, or settled by judgment." [44] The
principle bars a subsequent suit involving the same parties, subject matter, and cause of action. Public policy
requires that controversies must be settled with finality at a given point in time.

The elements of res judicata are as follows: (1) the former judgment or order must be final; (2) it must have been
rendered on the merits of the controversy; (3) the court that rendered it must have had jurisdiction over the
subject matter and the parties; and (4) there must have been -- between the first and the second actions -- an
identity of parties, subject matter and cause of action. [45]

Failure to Support Allegation

The onus of proving allegations rests upon the party raising them. [46] As to the matter of forum shopping and res
judicata, petitioners have failed to provide this Court with relevant and clear specifications that would show the
presence of an identity of parties, subject matter, and cause of action between the present and the earlier
suits. They have also failed to show whether the other case was decided on the merits. Instead, they have
made only bare assertions involving its existence without reference to its facts. In other words, they have alleged
conclusions of law without stating any factual or legal basis. Mere mention of other civil cases without showing
the identity of rights asserted and reliefs sought is not enough basis to claim that respondent is guilty of forum
shopping, or that res judicata exists.[47]

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution are AFFIRMED. Costs against
petitioners.

SO ORDERED.

FIRST DIVISION

G.R. No. 167321 July 31, 2006

EPIFANIO SAN JUAN, JR., petitioner,

vs.
JUDGE RAMON A. CRUZ, REGIONAL TRIAL COURT, BRANCH 224, QUEZON CITY and
ATTY. TEODORICO A. AQUINO, respondents.

DECISION

CALLEJO, SR., J.:

Before the Court is a Petition for Review on Certiorari of the Resolution1 of the Court of Appeals
(CA) in CA-G.R. SP No. 87458 dismissing the Petition for Certiorari with Prayer for Issuance of a
Temporary Restraining Order and/or Writ of Preliminary Injunction of petitioner Epifanio San Juan,
Jr., as well as its Resolution2 denying the motion for reconsideration thereof.

The Antecedents

Loreto Samia San Juan executed a Last Will and Testament naming Oscar Casa as one of the
devisees therein. Upon Loreto's death on October 25, 1988, Atty. Teodorico A. Aquino filed a
petition for the probate of the will in the Regional Trial Court (RTC) of Quezon City. The case was
raffled to Branch 224 of the court and was docketed as Special Proceedings No. 98-36118.

While the petition was pending, Oscar Casa died intestate on May 24, 1999. The firm of Aquino,
Galang, Lucas, Espinoza, Miranda & Associates entered their appearance as counsel of Federico
Casa, Jr., who claimed to be one of the heirs of Oscar Casa and their representative.

On August 14, 2002, the probate court issued an Order denying the entry of appearance of said
law firm, considering that Federico Casa, Jr. was not the executor or administrator of the estate of
the devisee, hence, cannot be substituted for the deceased as his representative as required by
Section 16, Rule 3 of the Rules of Court. On November 22, 2002, the court issued an order
directing Aquino to secure the appointment of an administrator or executor of the estate of Oscar
Casa in order that the appointee be substituted in lieu of the said deceased.

On February 26, 2003, Aquino filed a pleading entitled "Appointment of Administrator" signed by
Candelaria, Jesus, Arlyn, Nestor, Edna, Benhur, Federico, Rafael and Ma. Eden, all surnamed
Casa, on February 24, 2003, praying that one of them, Federico Casa, Jr., be designated as
administrator of the estate of the deceased and that he be substituted for the deceased.
NOW THEREFORE, in compliance with the ORDER of the Probate Court, cited above, we, the
legal heirs of the deceased OSCAR CASA, unanimously designate and appoint FEDERICO
CASA, JR., as the ADMINISTRATOR of the property to be inherited by the deceased OSCAR
CASA, in the WILL of the late LORETO SAMIA SAN JUAN, considering that FEDERICO CASA,
JR., is the nearest accessible heir to attend the hearing of the probate of the will and is most
competent to assume the responsibilities and the duties of the ADMINISTRATOR. We authorize
him to represent us the heirs of the deceased OSCAR CASA, on the hearing of the probate of the
will of the testatrix and to perform such duties as might be required by the Probate Court; to take
possession of the properties designated in the WILL upon distribution by the appointed
ADMINISTRATOR of the Estate of LORETO SAMIA SAN JUAN. (emphasis supplied)3

In compliance with the order of the court, Epifanio San Juan filed a "Motion to Declare Appointment
of Administrator As Inadequate or Insufficient."4 He maintained that the heirs should present an
administrator of the estate of Oscar Casa as the representative of the estate in the case.

In his reply, Aquino stated that, under Section 16, Rule 3 of the Rules of Court, the heirs of Oscar
Casa may be substituted for the deceased without need for appointment of an administrator or
executor of the estate. He also claimed that the court is enjoined to require the representative to
appear before the court and be substituted within the prescribed period.

On December 2, 2003, the RTC issued an Order denying the motion of San Juan. Contrary to its
Order dated November 22, 2002, the court held that there was, after all, no need for the
appointment of an administrator or executor as substitute for the deceased devisee. It is enough,
the court declared, that a representative be appointed as provided in Section 16, Rule 3 of the
Rules of Court.5

San Juan received a copy of the December 2, 2003 Order on December 15, 2003 and filed, on
December 30, 2003, a motion for reconsideration thereof. Citing the ruling of this Court in Lawas
v. Court of Appeals,6 he averred that, under Section 16, Rule 3 of the Rules of Court, while the
court may allow the heirs of the deceased to be substituted in cases of unreasonable delay in the
appointment of an executor or administrator, or where the heirs resort to an extrajudicial settlement
of the estate, priority is still given to the legal representative of the deceased, that is, the executor
or administrator of the estate. Moreover, in case the heirs of the deceased will be substituted, there
must be a prior determination by the probate court of who the rightful heirs are. He opined that this
doctrine is in line with Article 1058 of the New Civil Code, and the provisions of Section 6, Rule 78
and Section 2, Rule 79 of the Rules of Court. In this case, however, the alleged heirs of Oscar
Casa did not file any petition for the appointment of an administrator of his estate; hence, Federico
Casa, Jr. is not qualified to be appointed as substitute for the deceased devisee. San Juan pointed
out that the December 2, 2003 Order of the probate court contravened its August 14, 2002 and
November 22, 2002 Orders.7

The motion for reconsideration was denied on February 27, 2004 where the probate court declared
that it had carefully evaluated the arguments raised by the parties and found no compelling ground
or cogent reason to set aside its December 2, 2003 Order.8 Petitioner received a copy of the Order
on March 18, 2004.

On May 7, 2004, San Juan filed a Motion to Admit his second motion for reconsideration dated
May 6, 2004, appending thereto the December 2, 2003 Order of the RTC.9 He cited Torres, Jr. v.
Court of Appeals,10 where it was held that the purpose behind the rule on substitution of parties is
the protection of the right of every party to due process, to ensure that the deceased party would
continue to be properly represented in the suit through the duly appointed legal representative of
his estate. The need for substitution of heirs is based on the right to due process accruing to every
party in any proceeding, and the exercise of judicial power to hear and determine a cause
presupposes that the trial court acquires jurisdiction over the persons of the parties.

San Juan emphasized that it is only in the absence of an executor or administrator that the heirs
may be allowed by the court to substitute the deceased party. He averred that the purported heirs
simply agreed among themselves to appoint a representative to be substituted for the deceased,
which is contrary to the requirement of a prior hearing for the court to ascertain who the rightful
heirs are. The Orders of the Court dated December 2, 2003 and February 27, 2004 may be used
by purported heirs in order to "inherit" properties from estates of deceased parties, which will then
allow the rules of procedure to be used as an instrument for fraud and undermining due
process.11 San Juan reiterated the rulings of this Court in Dela Cruz v. Court of
Appeals12 and Lawas v. Court of Appeals,13 that court proceedings conducted or continued without
a valid substitution of a deceased party cannot be accorded validity and binding effect. He prayed
that the February 27, 2004 Order be reconsidered and a new order be issued as follows:

(a) declaring the "Appointment of Administrator" dated February 14, 2003 insufficient or
inadequate compliance with the rules of procedure on substitution of a deceased party;
(b) directing petitioner to secure from the appropriate court the appointment of an administrator of
the estate of the deceased Oscar Casa; and

(c) directing that further proceedings in the case be deferred until after the substitution of the
deceased Oscar Casa by the court-appointed administrator or executor of his estate.

Oppositor prays for other and further reliefs which may be just and equitable.14

On June 11, 2004, the probate court issued an order denying the second motion for
reconsideration of San Juan. It noted that the motion merely reiterated the same arguments in his
first motion for reconsideration which had already been passed upon. Citing the rulings
in Montañano v. Suesa15 and Riera v. Palmanori,16 it concluded that there was no need for the
appointment of an administrator of the estate of the deceased Oscar Casa at that stage of the
proceedings since a legatee is not considered either as an indispensable or necessary party in the
probate of a will.17

When San Juan received a copy of the June 11, 2004 Order of the trial court, he filed, on July 23,
2004, a motion for reconsideration thereof. He took exception to the probate court's reliance in
the Montañano and Riera cases, as claiming that said rulings were not relevant to the issue of the
validity of the appointment of Federico Casa Jr., by the alleged heirs of Oscar Casa, as
administrator and substitute for the deceased devisee. He insisted that the cases dealt only with
the question of whether or not the probate court can rule on the validity of the provisions of the
will; they do not involve the same issue presented by the oppositor, namely, whether or not a
substitution of a legatee under the will who died during the probate proceedings may be done by
simply submitting an "Appointment of Administrator," or whether or not there is a need for a
deceased legatee to be substituted by his/her duly appointed legal representative or administrator
of his estate.

San Juan further posited that the estate court, sitting as a probate court, does not only decide on
the questions of identity and testamentary capacity of the testator and the due execution of the
will; it is likewise charged with the settlement of the estate of the testator after the will has been
approved. Thus, the probate court must not only determine the validity of the will, but also the
rightful heirs, legatees and devisees for the purpose of settling the estate of the testator.18

Aquino opposed the motion, contending that it was, in fact, a third motion for reconsideration, a
prohibited pleading under Section 3, Rule 37 of the 1997 Rules of Civil Procedure.19

On September 8, 2004, the probate court issued an Order sustaining Aquino's argument and
denied the motion for reconsideration of San Juan.20

San Juan, now petitioner, filed a petition for certiorari with the CA on November 22, 2004 for the
nullification of the orders issued by the probate court on the following grounds:

A. THE RESPONDENT REGIONAL TRIAL COURT OF QUEZON CITY GRAVELY ABUSED ITS
DISCRETION WHICH AMOUNTS TO LACK, OR IN EXCESS, OF JURISDICTION IN RULING
THAT THE "APPOINTMENT OF ADMINISTRATOR" DATED FEBRUARY 14, 2003 MADE BY
PRIVATE RESPONDENT IS IN ACCORDANCE WITH THE RULES ON CIVIL PROCEDURE ON
PROPER SUBSTITUTION OF PARTIES.

B. THE RESPONDENT REGIONAL TRIAL COURT OF QUEZON CITY GRAVELY ABUSED ITS
DISCRETION WHICH AMOUNTS TO LACK, OR IN EXCESS, OF JURISDICTION IN DENYING
DUE COURSE TO PETITIONER'S MOTION FOR RECONSIDERATION ON THE GROUND
THAT SAID MOTION IS A THIRD MOTION FOR RECONSIDERATION WHICH IS A
PROHIBITED PLEADING UNDER SEC. 5, RULE 37 OF THE RULES OF COURT.21

On December 1, 2004, the CA dismissed the petition on the ground that it was filed beyond the
60-day period counted from notice to petitioner of the trial court's February 27, 2004 Order. The
appellate court declared that the May 6, 2004 motion for reconsideration of petitioner was a pro
forma motion because it was a second motion for reconsideration which sought the same relief as
the first motion, hence, did not toll the running of the 60-day period.22 The appellate court cited the
ruling of this Court in University of Immaculate Concepcion v. Secretary of Labor and
Employment.23

Petitioner filed a motion for reconsideration of the resolution of the CA, contending that the orders
sought to be reconsidered by him were interlocutory, hence, cannot be considered pro forma or
forbidden by the Rules of Court. He cited the rulings of this Court in Dizon v. Court of
Appeals,24 Philgreen Trading Construction Corporation v. Court of Appeals,25 and the cases cited
in the latter decision.26 However, on February 24, 2005, the CA resolved to deny the motion of
petitioner.27
Petitioner now seeks relief from this Court, via a petition for review on certiorari, for the reversal of
the resolutions of the appellate court. He raises the following issues:

(A)

WHETHER OR NOT THE SIXTY-DAY PERIOD FOR FILING A PETITION FOR CERTIORARI
UNDER RULE 65 OF THE RULES OF COURT IS RECKONED FROM NOTICE OF DENIAL OF
THE FIRST MOTION FOR RECONSIDERATION OF AN INTERLOCUTORY ORDER EVEN
THOUGH A SECOND AND THIRD MOTION FOR RECONSIDERATION (WHICH ARE NOT
PROHIBITED MOTIONS) OF THE SAME INTERLOCUTORY ORDER HAD BEEN FILED AND
WERE LATER DENIED.

(B)

WHETHER OR NOT A PERSON NOMINATED AS "ADMINISTRATOR" BY PURPORTED HEIRS

OF A DEVISEE OR LEGATEE IN A WILL UNDER PROBATE MAY VALIDLY SUBSTITUTE FOR
THAT DEVISEE OR LEGATEE IN THE PROBATE PROCEEDINGS DESPITE THE FACT THAT
SUCH "ADMINISTRATOR" IS NOT THE COURT-APPOINTED ADMINISTRATOR OF THE
ESTATE OF THE DECEASED DEVISEE OR LEGATEE.28

On the first issue, petitioner avers that the reckoning of the 60-day period for filing a petition
for certiorari under Rule 65 of the Rules of Court from the notice of denial of the first motion for
reconsideration is applicable only if the subject of the petition is a judgment, final resolution, or
order. It does not apply if the subject of the petition is merely an interlocutory order. He points out
that the reason for this is that only one motion for reconsideration of a judgment or final order is
allowed under Section 5, Rule 37 of the Rules of Court. A second motion for reconsideration of a
judgment or final order is a prohibited pleading; hence, the period for filing a petition
for certiorari may not be reckoned from notice of denial of such second and prohibited motion for
reconsideration. Petitioner asserts that a second (or even a third) motion for reconsideration of an
interlocutory order is not prohibited; hence, the 60-day period for filing a petition for certiorari may
be reckoned from notice of denial of subsequent motions for reconsideration.

Petitioner further claims that the Orders dated December 2, 2003, February 27, 2004, June 11,
2004 and September 8, 2004 issued by the RTC are only interlocutory orders. They deal solely
with the issue concerning the proper substitution of the deceased Oscar Casa who is one of the
devisees and legatees named in the purported will of the testatrix, Loreto San Juan, which is the
subject matter of the probate proceedings pending with the respondent court. Said orders did not
terminate or finally dispose of the case but left something to be done by the respondent court
before the case is finally decided on the merits. The assailed orders do not go into the merits of
the probate case, particularly on the due execution and validity of the will. It pertains only to the
proper substitution of the parties. Thus, the orders are not final orders from which no second or
third motion for reconsideration may be filed.29 It cannot also be said that the second motion for
reconsideration did not toll the running of the reglementary period for filing a petition for certiorari,
considering that there is no prohibition in the filing of a second motion for reconsideration of an
interlocutory order. Furthermore, there is no intention on the part of petitioner to delay proceedings
before the lower court when he filed the third motion for reconsideration, as he only sought to
correct the probate court's patently erroneous application of the law. Petitioner emphasizes that
he filed the petition for certiorari with the CA in view of the grave abuse of discretion which
amounted to lack of or excess of jurisdiction committed by respondent trial court when it wrongfully
assumed in its Order denying the third motion for reconsideration that the order sought to be
reconsidered is a final order on the merits of the case and that the motion for reconsideration is a
third motion for reconsideration of a final order.30

The petition is denied for lack of merit.

We agree with the ruling of the CA that the petition for certiorari filed by petitioner in the appellate
court was time-barred. However, the raison d'etre for its ruling is incorrect.

Contrary to the ruling of the CA, the proscription against a pro forma motion applies only to a final
resolution or order and not to an interlocutory one. The ruling of this Court in University of
Immaculate Concepcion v. Secretary of Labor and Employment31 involved a final order of the
NLRC and not an interlocutory order.

In this case, the December 2, 2003 Order of the trial court denying the motion of petitioner to
consider insufficient or inadequate respondent's compliance with its November 22, 2002 Order is
interlocutory. The order does not finally dispose of the case, and does not end the task of the court
of adjudicating the parties' contentions and determining their rights and liabilities as regards each
other but obviously indicates that other things remain to be done. Such order may not be
questioned except only as part of an appeal that may eventually be taken from the final judgment
rendered in the case.32 It bears stressing however that while the motion for reconsideration filed
by petitioner assailing the December 2, 2003 Order of the trial court based on the same grounds
as those alleged in his first motion is not pro forma, such second motion for reconsideration can
nevertheless be denied on the ground that it is merely a rehash or a mere reiteration of grounds
and arguments already passed upon and resolved by the court. Such a motion cannot be rejected
on the ground that a second motion for reconsideration of an interlocutory order is forbidden by
law or by the Rules of Court.33

Section 4, Rule 65 of the Rules of Civil Procedure as amended by the resolution of the Court in
Bar Matter No. 00-2-03-SC which took effect on September 1, 2000, reads:

Sec. 4. Where and when petition filed. – The petition shall be filed not later than sixty (60) days
from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial
is timely filed, whether such motion is required or not, the sixty (60) day period shall be counted
from notice of the denial of the said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower
court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction
over the territorial area as defined by the Supreme Court. It may also be filed in the Court of
Appeals whether or not the same is in the aid of its appellate jurisdiction, or in the Sandiganbayan
if it is in aid of its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency,
unless otherwise provided by law or these rules, the petition shall be filed in and cognizable only
by the Court of Appeals.

No extension of time to file the petition shall be granted except for compelling reason and in no
case exceeding fifteen (15) days.

Thus, there are three essential dates that must be stated in a petition for certiorari brought under
Rule 65 of the Rules of Court for the nullification of a judgment, resolution or order: (1) the date
when notice of the judgment, resolution or order was received; (2) when a motion for a new trial
or reconsideration of the judgment, order or resolution was submitted; and (3) when notice of the
denial thereof was received by petitioner.

The requirement of setting forth the three (3) dates in a petition for certiorari under Rule 65 of the
Rules of Court is for the purpose of determining its timeliness, considering that a petition is required
to be filed not later than 60 days from notice of the judgment, order or resolution sought to be
nullified.34

We agree with the ruling of the CA that the petition for certiorari filed by petitioner with the CA on
November 22, 2004 was filed beyond the 60-day period therefor. Petitioner received, on March
18, 2004, the February 27, 2004 Order of the court denying his motion for reconsideration of the
December 2, 2003 Order. Petitioner had 60 days from March 18, 2004 or until May 17, 2004 within
which to file his petition for certiorari. However, petitioner filed his petition for certiorari with the CA
only on November 22, 2004.

The 60-day period should not be reckoned from petitioner's receipt on June 11, 2004 of the denial
of his May 7, 2004 second motion for reconsideration. The 60-day period shall be reckoned from
the trial court's denial of his first motion for reconsideration, otherwise indefinite delays will ensue.35

We note that the parties articulated their stance in their respective pleadings not only on the
timeliness of the petition for certiorari in the CA but also on the validity of the assailed December
2, 2003 Order of the trial court. Ordinarily, in view of the dismissal of the petition because it was
time-barred, the Court will no longer delve into and resolve the other issues raised in the petition.
However, in this case, we find it appropriate and necessary to resolve once and for all the issue
of whether there is a need for the appointment of an administrator of the estate of Oscar Casa, or
whether it is enough that he be substituted by his heirs.

Section 16, Rule 3 of the 1997 Rules of Civil Procedure reads:

Sec. 16. Death of party; duty of counsel. – Whenever a party to a pending action dies, and the
claim is not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty
(30) days after such death of the fact thereof, and to give the name and address of his legal
representative or representatives. Failure of counsel to comply with this duty shall be a ground for
disciplinary action.

The heirs of the deceased may be allowed to be substituted for the deceased, without requiring
the appointment of an executor or administrator and the court may appoint a guardian ad litem for
the minor heirs.
The court shall forthwith order said legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice.

If no legal representative is named by the counsel for the deceased party, or if the one so named
shall fail to appear within the specified period, the court may order the opposing party, within a
specified time, to procure the appointment of an executor or administrator for the estate of the
deceased and the latter shall immediately appear for and on behalf of the deceased. The court
charges in procuring such appointment, if defrayed by the opposing party, may be recovered as
costs.

The rule is a revision of Section 17, Rule 3 of the Rules of Court which reads:

Death of party. – After a party dies and the claim is not thereby extinguished, the court shall order,
upon proper notice, the legal representative of the deceased to appear and to be substituted for
the deceased, within a period of thirty (30) days, or within such time as may be granted. If the legal
representative fails to appear within said time, the court may order the opposing party to procure
the appointment of a legal representative of the deceased within a time to be specified by the
court, and the representative shall immediately appear for and on behalf of the interest of the
deceased. The court charges involved in procuring such appointment, if defrayed by the opposing
party, may be recovered as costs. The heirs of the deceased may be allowed to be substituted for
the deceased, without requiring the appointment of an executor or administrator and the court may
appoint guardian ad litem for the minor heirs.36

The second paragraph of the rule is plain and explicit: the heirs may be allowed to be substituted
for the deceased without requiring the appointment of an administrator or executor. However, if
within the specified period a legal representative fails to appear, the court may order the opposing
counsel, within a specified period, to process the appointment of an administrator or executor who
shall immediately appear for the estate of the deceased.37 The pronouncement of this Court
in Lawas v. Court of Appeals38 (relied upon by petitioner), that priority is given to the legal
representative of the deceased (the executor or administrator) and that it is only in case of
unreasonable delay in the appointment of an executor or administrator, or in cases where the heirs
resort to an extrajudicial settlement of the estate that the court may adopt the alternative of allowing
the heirs of the deceased to be substituted for the deceased, is no longer true.39 In Gochan v.
Young,40 a case of fairly recent vintage, the Court ruled as follows:

The above-quoted rules, while permitting an executor or administrator to represent or to bring suits
on behalf of the deceased, do not prohibit the heirs from representing the deceased. These rules
are easily applicable to cases in which an administrator has already been appointed. But no rule
categorically addresses the situation in which special proceedings for the settlement of an estate
have already been instituted, yet no administrator has been appointed. In such instances, the heirs
cannot be expected to wait for the appointment of an administrator; then wait further to see if the
administrator appointed would care enough to file a suit to protect the rights and the interests of
the deceased; and in the meantime do nothing while the rights and the properties of the decedent
are violated or dissipated.

The Rules are to be interpreted liberally in order to promote their objective of securing a just,
speedy and inexpensive disposition of every action and proceeding. They cannot be interpreted
in such a way as to unnecessarily put undue hardships on litigants. For the protection of the
interests of the decedent, this Court has in previous instances recognized the heirs as proper
representatives of the decedent, even when there is already an administrator appointed by the
court. When no administrator has been appointed, as in this case, there is all the more reason to
recognize the heirs as the proper representatives of the deceased. Since the Rules do not
specifically prohibit them from representing the deceased, and since no administrator had as yet
been appointed at the time of the institution of the Complaint with the SEC, we see nothing wrong
with the fact that it was the heirs of John D. Young, Sr. who represented his estate in the case filed
before the SEC. (Emphasis supplied)41

The heirs of the estate of Oscar Casa do not need to first secure the appointment of an
administrator of his estate, because from the very moment of his death, they stepped into his
shoes and acquired his rights as devisee/legatee of the deceased Loreto San Juan. Thus, a prior
appointment of an administrator or executor of the estate of Oscar Casa is not necessary for his
heirs to acquire legal capacity to be substituted as representatives of the estate.42 Said heirs may
designate one or some of them as their representative before the trial court.

Hence, even on the threshold issue raised in the RTC and in the petition for certiorari in the CA,
the assailed order of the RTC is correct.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. Costs against petitioner.
SO ORDERED.

SECOND DIVISION

November 8, 2017

G.R. No. 219408

DONALD FRANCIS GAFFNEY, Petitioner

vs.
GINA V. BUTLER, Respondent

DECISION

CAGUIOA, J.:

Before the Court is a Petition for Review1 on Certiorari (Petition) under Rule 45 of the Rules of
Court (Rules) filed by petitioner Donald Francis Gaffney (Donald) against respondent Gina V.
Butler (Gina), assailing the Decision2 dated February 6, 2015 (questioned Decision) and
Resolution3 dated July 14, 2015, both of the Court of Appeals (CA) Special Twelfth (12th) Division,
in CA-G.R. SP No. 133762.

The CA reversed and set aside the Orders (RTC Orders) dated August 15, 2013 4 and November
25, 20135 (denying the corresponding Motion for Reconsideration) of the Regional Trial Court
(RTC) of Pasig City, Branch 70, in Civil Case No. 73187. Said RTC Orders dismissed
Gina's Motion to Dismiss Ad-Cautelam (Motion to Dismiss) and Donald's Motion to Declare
Defendant in Default (Motion to Declare in Default) as well as the Motion for
Reconsideration against the denial of the Motion to Dismiss subsequently filed by Gina.

The Facts

The facts, as found by the CA, are as follows:

On September 21, 2011, Donald Francis Gaffney ("private respondent") filed a Complaint against
Gina V. Butler ("petitioner") for sum of money. Private respondent alleged that sometime between
the years 2006 to 2007, petitioner and her husband Anthony Richard Butler approached and
invited private respondent to invest in ActiveFun Corporation ("ActiveFun"), an entity engaged in
the construction, operation and management of children's play and party facilities. Petitioner was
the President of ActiveFun while her husband was its Treasurer and Chief Executive Officer.

Private respondent advanced the approximate amount of PhP12,500,000.00 representing his

initial investment in ActiveFun. However, petitioner's husband passed away sometime in
December 2009. Consequently, the proposed investment agreement did not materialize. Private
respondent then demanded the return of his investments from petitioner, who personally
undertook to repay the total amount of his investments plus accrued interest. However, despite
the lapse of a considerable period of time, petitioner was only able to pay private respondent on
October 15, 2010 an initial amount of PhPl,000,000.00, receipt of which was duly acknowledged
in writing by private respondent. Several demands through phone calls and e-mails were made to
petitioner for her to comply with her undertaking to return the investments of private respondent
but to no avail.

On July 13, 2011, a letter was sent to petitioner through registered mail demanding her to pay
private respondent and Richard McDonnell (another party who infused funds into ActiveFun) within
ten (10) days from receipt of the said letter the aggregate amount of PhP25,000,000.00 plus
accrued interests. The period allowed for petitioner within which to pay lapsed without her making
any payment. Petitioner in a letter dated August 2, 2011, denied having knowledge of the
investments and having offered to buy private respondent's share in ActiveFun. Private respondent
was thus constrained to institute a legal action for the enforcement of his claim against petitioner.

In her Answer filed on April 23, 2012, petitioner averred, among others, that she had no knowledge
of private respondent's investment in ActiveFun. She, however[,] admitted that she paid private
respondent the amount of PhPl,000,000.00 with the qualification that the same was an undue
payment, having been misled and intimidated by the latter into believing that she has an obligation
to return said investment, when no such obligation exists under the law or under a contract.
Moreover, petitioner denied the signature in the Acknowledgment Receipt as hers and claimed
that it is a forgery.

After the issues have been joined and Pre-trial was scheduled, parties were directed to have all
their documentary evidence pre-marked. Among those pre-marked by petitioner is a handwritten
note signed by private respondent acknowledging receipt of Phpl,000[,]000.00 from petitioner.
Unlike the Acknowledgement Receipt attached to the Complaint stating that PhPl,000,000.00 was
partial payment for monies invested in ActiveFun, the handwritten note states that the partial
payment was for money owed by petitioner's husband.

Because no full relief can be had against the Estate/heirs of Anthony Richard Butler under the
original Complaint, private respondent filed a Motion for Leave to Admit Amended Complaint for
the purpose of impleading the estate or the heirs6 of the late Anthony Richard Butler [as additional
party-defendant],7 allegedly represented by petitioner as his surviving spouse. He alleged that
petitioner required him, as a pre-condition for the payment of the balance, to execute a separate
handwritten acknowledgment of the said payment. Petitioner opposed the motion primarily on the
ground that "only natural or juridical persons may be parties in an ordinary civil action."

In an Order dated February 13, 2013, public respondent granted private respondent's Motion and
admitted the Amended Complaint. Petitioner did not file a motion for reconsideration of the said
order. An Alias Summons was served upon petitioner purportedly as the representative of her late
husband.

In the meantime, petitioner filed a Motion to Dismiss Ad-Cautelam, allegedly not as the defendant
originally named in the complaint but as the purported representative of her late husband, arguing
that the death of her husband did not ipso facto make her the representative of his estate. More
importantly, a claim against an estate of a deceased person is governed by Rule 86 of the Rules
of Court. Hence, it cannot be consolidated with an ordinary civil action in which only natural or
juridical persons may be parties pursuant to Section 1, Rule 3 of the Rules of Court. Consequently,
the service of summons intended for the estate of the late Anthony Richard Butler was improperly
served.

Private respondent on the other hand, filed a Motion to Declare Defendant in Default for failure to
file an answer within the reglementary period. x x x8 (Emphasis supplied)

Ruling of the RTC

The RTC denied Gina's Motion to Dismiss and Donald's Motion to Declare in Default in the RTC
Order9 dated August 15, 2013, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, the movant's Motion to Dismiss Ad-Cautelam and
plaintiff's Motion to Declare Defendant in Default are hereby DENIED for lack of merit.

SO ORDERED.10

On the Motion to Dismiss, the RTC ruled that the inclusion of the estate of the late Anthony Richard
Butler (Anthony), represented by his surv1vmg spouse Gina, is necessary for a complete relief on
the determination or settlement of the controversy raised in the case.11 On the Motion to Declare
in Default, the RTC observed that Gina filed an Answer to the Amended Complaint on March 12,
2013; hence, there is no reason to declare her in default.12

Gina filed a Motion for Reconsideration Ad Cautelam to the denial of her Motion to Dismiss, which
the RTC denied for lack of merit in its Order13 dated November 25, 2013. No motion for
reconsideration was filed as against the denial of the Motion to Declare in Default.

Proceedings in, and Ruling of, the CA

Gina thereafter sought relief with the CA through a Petition for Certiorari14 under Rule 65 (CA
Petition), seeking to nullify the RTC Orders, imputing grave abuse of discretion on the RTC for
allowing the estate of Anthony to be named a defendant in the present case and for considering
Gina as legal representative of said estate when, in fact, no settlement proceedings thereon had
yet been brought.15

Gina prayed that the RTC Orders be reversed and set aside for having been issued with grave
abuse of discretion; and Civil Case No. 73187, insofar as it relates to the estate of Anthony, be
dismissed.16

The CA, in the questioned Decision dated February 6, 2015, granted Gina's CA Petition, reversed
and set aside the RTC Orders and dismissed the entire complaint, in the following manner:

WHEREFORE, premises considered, the petition is GRANTED. The Orders dated August 15,
2012 and November 25, 2013 of the Regional Trial Court of Pasig City, Branch 70 in Civil Case
No. 73187 are hereby SET ASIDE. Accordingly, the complaint for sum of money in Civil Case No.
73187 is hereby ordered DISMISSED.
SO ORDERED.17

The CA ruled that dismissal of the case against Anthony's estate is warranted under Section 1,
Rule 3 of the Rules of Court which states that "only natural or juridical persons, or entities
authorized by law may be parties in a civil action."18 The CA likewise ruled that the genuineness
and authenticity of the handwritten receipt stating that the advanced amount of ₱l,000,000.00 is
part payment of money owed by Anthony is undisputed.19 This suggests that Anthony is the one
owing the money and is an indispensable party to the case.20 Finally, the CA ruled that there is no
legal basis to consider Gina as representative of Anthony's estate since the estate has no legal
personality.21

Donald filed a Motion for Reconsideration of the questioned Decision, which the CA dismissed for
failing to raise any new substantial arguments, in its Resolution22 dated July 14, 2015.

Hence, the present Petition filed by Donald, with the following prayer:

1. The questioned Decision and Resolution of the CA be set aside and the RTC Orders, denying
Gina's Motion to Dismiss be reinstated and affirmed in toto.

2. In the alternative, in the event that the estate of Anthony as represented by Gina, could not be
named as additional defendant in the present case, the questioned Decision be reconsidered
partially such that the case be dismissed only as against the estate of Anthony and that it be
remanded to the R TC for further proceedings against Gina as the sole principal defendant.23

Issues

Whether or not the CA committed reversible error when it:

1. set aside the RTC's ruling that the estate or heirs of Anthony, represented by his surviving
spouse Gina, could be named as additional defendant in the present case.

2. dismissed the entire complaint when dismissal of the same was not raised as an issue nor
prayed for in the petition before it.24

The Court's Ruling

The Petition is partly meritorious.

The deceased or his estate may not

be named a defendant in the present

case.

A deceased person does not have the capacity to be sued and may not be made a defendant in a
case.25 Section 1, Rule 3 of the Revised Rules of Court unequivocally states that "[o]nly natural or
juridical persons, or entities authorized by law may be parties in a civil action."

Applying this legal provision, the Court, in Ventura v. Militante,26 declared that neither a deceased
person nor his estate has capacity to be sued, explaining thus:

Parties may be either plaintiffs or defendants. The plaintiff in an action is the party complaining,
and a proper party plaintiff is essential to confer jurisdiction on the court. In order to maintain an
action in a court of justice, the plaintiff must have an actual legal existence, that is, he, she or it
must be a person in law and possessed of a legal entity as either a natural or an artificial person,
and no suit can be lawfully prosecuted save in the name of such a person.

The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he
institutes a judicial proceeding, to name the proper party defendant to his cause of action. 19 In a
suit or proceeding in personam of an adversary character, the court can acquire no jurisdiction for
the purpose of trial or judgment until a party defendant who actually or legally exists and is legally
capable of being sued, is brought before it. It has even been held that the question of the legal
personality of a party defendant is a question of substance going to the jurisdiction of the court
and not one of procedure.

xxxx
Neither a dead person nor his estate may be a party plaintiff in a court action. A deceased person
does not have such legal entity as is necessary to bring action so much so that a motion to
substitute cannot lie and should be denied by the court. An action begun by a decedent's estate
cannot be said to have been begun by a legal person, since an estate is not a legal entity; such
an action is a nullity and a motion to amend the party plaintiff will not likewise lie, there being
nothing before the court to amend. Considering that capacity to be sued is a correlative of the
capacity to sue, to the same extent, a decedent does not have the capacity to be sued and may
not be named a party defendant in a court action.27 (Emphasis supplied; citations omitted)

Hence, there can be no doubt that a deceased person or his estate may not be impleaded as
defendant in a civil action as they lack legal personality. Thus, when Anthony died, his legal
personality ceased and he could no longer be impleaded as respondent in the present ordinary
civil suit for collection.28 As such, the complaint against him should be dismissed on the ground
that the pleading asserting the claim states no cause of action or for failure to state a cause of
action pursuant to Section 1 (g), Rule 16 of the Rules of Court, because a complaint cannot
possibly state a cause of action against one who cannot be a party to a civil action.29

Moreover, the RTC did not acquire jurisdiction over the person or estate of Anthony. Summons is
a writ by which the defendant is notified of the action brought against him and service thereof is
the means by which the court acquires jurisdiction over his person.30 In the present case, no valid
service of summons upon the deceased Anthony was or could have been made, precisely because
he was already dead even before the complaint against him and his wife was filed in court. In
several occasions, the Court has held that the trial court fails to acquire jurisdiction over a
defendant who was already dead at the time the complaint was filed against him.31

In Ventura, the factual milieu of which is similar to the present case, the original complaint named
the "estate of Carlos Ngo as represented by surviving spouse Ms. Sulpicia Ventura." The Court
held that as the deceased was dead at the time the complaint was filed and no special proceeding
to settle his estate had been filed in court, the trial court did not acquire jurisdiction over either the
deceased or his estate.32 In the case at bench, the Alias Summons served upon Gina purportedly
as the representative of her late husband33 was thus invalid.

In sum, impleading the deceased Anthony or his estate in the present petition was improper. The
action against him must be dismissed and the same may just be filed as a claim against his estate
in a proper proceeding.34 The CA thus did not err in reversing the trial court.

The CA cannot validly dismiss the

complaint against Gina in the instant
action.

Petitioner alleges that the dismissal of the entire case by the CA has no basis in fact or in law
because the same was not raised as an issue or prayed for in both the Motion to Dismiss in the
trial court and in the CA Petition.

The Court agrees.

The present action sprung when the original complaint was amended by Donald to implead the
estate of Anthony as additional defendant. Thereafter, the Motion to Dismiss was filed by Gina,
1âwphi1

with the sole prayer that the Amended Complaint, "insofar as the claim against the Estate of the
Late Anthony Butler is concerned," be dismissed.35

When the aforementioned motion was denied, Gina's CA Petition, from which the questioned
Decision issued, raised only the following issues:

WHETHER OR NOT AN ESTATE OF A DECEASED PERSON IS A JURIDICAL ENTITY THAT

COULD BE NAMED DEFENDANT IN AN ORDINARY CIVIL ACTION;

WHETHER OR NOT A SURVIVING SPOUSE IS IPSO FACTO THE LEGAL REPRESENTATIVE

OF THE ESTATE OF THE DECEASED SPOUSE36

By way of relief, the petition prayed only that the RTC Orders be set aside and the case be
dismissed "insofar as it relates to the Estate of Anthony Richard Butler."37

It is settled that courts cannot grant a relief not prayed for in the pleadings or in excess of what is
being sought by the party.38 Due process considerations justify this requirement.39 It is improper to
enter an order which exceeds the scope of relief sought by the pleadings, absent notice which
affords the opposing party an opportunity to be heard with respect to the proposed relief.40
In the present case, clearly, no issue on, or prayer for, the dismissal of the entire case was made
in the Motion to Dismiss before the RTC and the corresponding CA Petition. The sole issue
presented was, and is, confined to the propriety of the complaint being maintained as against
Anthony (or his estate) who was impleaded as an additional defendant by virtue of the Amended
Complaint.

The CA regarded the estate of Anthony as an indispensable party41 on the basis of the handwritten
receipt, executed by Donald, of the ₱l,000,000.00 amount from Gina "as part payment of the
money owed by the late Anthony Richard Butler to Don Gaffney."42 The CA ruled that the note's
genuineness and authenticity were undisputed;43 hence, Anthony's estate was ultimately
answerable for Donald's claims.44

These findings of the CA lack basis. It is clear from the pleadings that Donald actually disputes the
genuineness of the handwritten receipt insofar as the same shows the debt to be that of Anthony's.
Donald claims that he was merely forced to execute said handwritten receipt as it was made a
pre-condition for payment by Gina.45 In fact, Donald submitted in evidence46 another
acknowledgment receipt47 which allegedly reflects his due acknowledgment of the initial
payment.48 To be sure, it would be illogical for Donald to admit the genuineness of the handwritten
receipt precisely because his main contention is that Gina personally undertook to pay the entire
debt,49 explaining why he named her as the principal party-defendant herein.50 He only imp leaded
the estate of Anthony to obtain a complete relief should the same be necessary.51

Moreover, courts cannot grant a relief without first ascertaining the evidence presented in support
thereof. Due process considerations require that judgments must conform to and be supported by
the pleadings.52 The issue of the authenticity of the handwritten receipts, and ultimately, which
party is liable for the debt, was never brought up to the CA - as indeed, these are the very issues
that the trial court is meant to address and resolve. Determination of the same requires an
examination of the evidence of the parties in a full-blown trial on the merits. Dismissal of the entire
complaint, including the action against the main defendant Gina, is thus utterly premature and
erroneous.

All told, the complaint against the estate of Anthony, which was impleaded as co-defendant, should
be dismissed. Any cause of action arising from the herein alleged debt against the estate of
Anthony may be brought as a claim against said estate in the proper settlement proceedings.
However, the complaint against the original defendant Gina should remain with the RTC for trial
on the merits.

WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY
GRANTED. The Decision dated February 6, 2015 and the Resolution dated July 14, 2015 of the
Court of Appeals in CA-G.R. SP No. 133762 are AFFIRMED with MODIFICATION such that
the Amended Complaint is REINSTATED insofar as Gina V. Butler is concerned.

The RTC is hereby ordered to proceed, expeditiously and without delay, in resolving Civil Case
No. 73187 against Gina V. Butler.

SO ORDERED.

FIRST DIVISION

July 24, 2017

G.R. No. 223610

CONCHITA S. UY, CHRISTINE UY DY, SYLVIA UY SY, JANE UY TAN, JAMES LYNDON S.
UY, IRENE S. UY,* ERICSON S. UY, JOHANNA S. UY, and JEDNATHAN S. UY, Petitioners
vs.
CRISPULO DEL CASTILLO, substituted by his heirs PAULITA MANATAD-DEL CASTILLO,
CESAR DEL CASTILLO, A VITO DEL CASTILLO, NILA C. DUENAS, NIDA C. LATOSA,
LORNA C. BERNARDO, GIL DEL CASTILLO, LIZA C. GUNGOB, ALMA DEL CASTILLO, and
GEMMA DEL CASTILLO, Respondents

DECISION

PERLAS-BERNABE, J.:

Before the Court is a petition for review on certiorari1 filed by petitioner Conchita S. Uy (Conchita)
and her children, petitioners Christine Uy Dy, Sylvia Uy Sy, Jane Uy Tan, James Lyndon S. Uy,
Irene S. Uy, Ericson S. Uy (Ericson), Johanna S. Uy, and Jednathan S. Uy (Uy siblings;
collectively, petitioners), assailing the Decision2 dated May 26, 2015 and the Resolution3 dated
February 22, 2016 of the Court of Appeals (CA) in CA G.R. SP No. 07120, which affirmed the twin
Orders4 dated December 9, 2011 and the Order5 dated May 1 7, 2012 of the Regional Trial Court
of Mandaue City, Branch 55 (RTC) in Civil Case No. MAN-2797, denying petitioners' Omnibus
Motion,6 motion to quash the writ of execution,7 and their subsequent motion for reconsideration.8

The Facts

The present case is an offshoot of an action9 for quieting of title, reconveyance, damages, and
attorney's fees involving a parcel of land, known as Lot 791 and covered by Transfer Certificate of
Title (TCT) No. 29129,10 filed by Crispulo Del Castillo (Crispulo) against Jaime Uy (Jaime) and his
wife, Conchita, on November 12, 1996, docketed as Civil Case No. MAN-2797 (Quieting of Title
Case ).11 However, since Jaime had died six (6) years earlier in 1990,12 Crispulo amended his
complaint13 and imp leaded Jaime's children, i.e., the Uy siblings, as defendants.14 Meanwhile,
Crispulo died15 during the pendency of the action and hence, was substituted by his heirs,
respondents Paulita Manalad-Del Castillo, Cesar Del Castillo, Avito Del Castillo, Nila C. Duenas,
Nida C. Latosa, Loma C. Bernardo, Gil Del Castillo, Liza C. Gungob, Alma Del Castillo, and
Gemma Del Castillo (respondents).16

After due proceedings, the RTC rendered a Decision17 dated April 4, 2003 (RTC Decision) in
respondents' favor, and accordingly: (a) declared them as the true and lawful owners of Lot 791;
(b) nullified Original Certificate of Title No. 576,18 as well as TCT No. 29129; and (c) ordered
petitioners to pay respondents moral damages and litigation costs in the amount of P20,000.00
each, as well as attorney's fees equivalent to twenty-five percent (25%) of the zonal value of Lot
791.19 Aggrieved, petitioners appealed before the CA,20 and subsequently, to the Court, but the
same were denied for lack of merit.21 The ruling became final and executory on April 8, 2010, thus,
prompting the Court to issue an Entry of Judgment22 dated May 4, 2010.

On August 17, 2010, respondents filed a Motion for Issuance of Writ of Execution,23 manifesting
therein that since the zonal value of Lot 791 at that time was ₱3,500.00 per square meter (sqm.)
and that Lot 791 covers an area of 15,758 sqm., the total zonal value of Lot 791 was
₱55,153,000.00.24 Hence, the attorney's fees, computed at twenty-five percent (25%) thereof,
should be pegged at ₱13,788,250.00.25

Acting on the said motion, the RTC ordered26 petitioners to file their comment or opposition thereto,
which they failed to comply.27 Accordingly, in an Order28 dated November 22, 2010, the RTC
granted the motion and ordered the issuance of a writ of execution. On December 13, 2010, a Writ
of Execution29 was issued, to which the sheriff issued a Notice of Garnishment30 seeking to levy
petitioners' properties in an amount sufficient to cover for the ₱13,788,250.00 as attorney's fees
and ₱20,000.00 each as moral damages and litigation costs.

Threatened by the Notice of Garnishment, petitioners filed an Omnibus Motion31 praying that the
writ of execution be quashed and set aside, and that a hearing be conducted to re-compute the
attorney's fees.32 Petitioners maintained that the Writ of Execution is invalid because it altered the
terms of the RTC Decision which did not state that the zonal value mentioned therein referred to
the zonal value of the property at the time of execution.33 Before the RTC could act upon petitioners'
Omnibus Motion, they filed a Motion to Quash Writ of Execution on Jurisdictional Ground(s)
(motion to quash),34 claiming that the RTC had no jurisdiction over the Uy siblings in the Quieting
of Title Case as they were never served with summons in relation thereto.35

The RTC Proceedings

On December 9, 2011, the RTC issued two (2) orders: (a) one granting petitioners' Omnibus
Motion, nullifying the Notice of Garnishment, and setting a hearing to determine the proper
computation of the award for attorney's fees;36 and (b) another denying their motion to quash, since
they never raised such jurisdictional issue in the proceedings a quo.37

On January 20, 2012, a hearing was conducted for the determination of attorney's
fees.38 Thereafter, the parties were ordered to submit their respective position papers,39 to which
respondents complied with,40 presenting the following alternative options upon which to base the
computation of attorney's fees: (a) ₱3,387,970.00, equivalent to twenty-five percent (25%) of the
zonal value of Lot 791 in 1996, the year when the Quieting of Title Case was
filed; (b) ₱ll,424,550.00, equivalent to twenty-five percent (25%) of the zonal value of Lot 791 in
2003, the year when the RTC rendered its Decision in the same case; or (c) ₱15,758,000.00,
equivalent to twenty-five percent (25%) of the zonal value of Lot 791 in 2010, the year when the
RTC Decision became final and executory.41

On the other hand, instead of filing the required position paper, petitioners filed a Consolidated
Motion for Reconsideration42 of the RTC's December 9, 2011 twin Orders. In said motion,
petitioners contended that the RTC failed to definitely rule on the validity of the writ of execution,
and that it erred in holding that the RTC Decision was already final and executory despite the
absence of summons on the Uy siblings.43

In an Order44 dated May 17, 2012, the RTC: (a) pegged the attorney's fees at
₱3,387,970.00,45 using the zonal value of Lot 791 in 1996, the year when the Quieting of Title Case
was instituted, it being the computation least onerous to petitioners; and (b) denied petitioners'
Consolidated Motion for Reconsideration for lack of merit.

Dissatisfied, petitioners filed a petition for certiorari46 with the CA, assailing the RTC's twin Orders
dated December 9, 2011 and the Order dated May 17, 2012. Petitioners argued that instead of
just declaring the Notice of Garnishment void, the RTC should have also declared the writ of
execution void because the Uy siblings were never served with summons; and like the Notice of
Garnishment, the Writ of Execution also altered the terms of the RTC Decision. Petitioners further
added that the writ of execution was void because it made them liable beyond their inheritance
from Jaime. They maintain that the estate of Jaime should instead be held liable for the adjudged
amount and that respondents should have brought their claim against the estate, in accordance
with Section 20, Rule 3 of the Rules of Court.47

The CA Ruling

In a Decision48 dated May 26, 2015, the CA affirmed the assailed Orders of the RTC. The CA found
no merit in the claim that the Uy siblings were never served with summons, pointing out that in a
Manifestation/Motion49 dated November 26, 1997, their counsel in the trial proceedings, Atty. Alan
C. Trinidad (Atty. Trinidad), stated that petitioners received the summons with a copy of the
amended complaint.50 It likewise refused to give credence to petitioners' denial of Atty. Trinidad's
representation, observing that one of the Uy siblings, Ericson, even testified in court with the
former's assistance, and that none of them showed any concern or apprehension before the court,
which they would have if indeed Atty. Trinidad was not authorized to represent them.51

Anent petitioners' argument that they cannot be held personally liable with their separate property
for Jaime's liability and that respondents should have filed a claim against Jaime's estate in
accordance with Section 20, Rule 3 of the Rules of Court, the CA held that such provision only
applies to contractual money claims and not when the subject matter is some other relief and the
collection of any amount is merely incidental thereto, such as by way of damages, as in this
case.52 Besides, petitioners had all the opportunity to raise such perceived error when they
elevated the case to the CA and to this Court, but they did not.53 Following the principle of finality
of judgment, the CA can no longer entertain such assignment of errors.54

With respect to the validity of the writ of execution, the CA ruled that since the Writ of Execution
made express reference to the RTC Decision without adding anything else, the same was valid,
unlike the Notice of Garnishment which expressly sought to levy ₱13,788,250.00 in attorney's fees
and, in the process, exceeded the purview of the said Decision.55

Undaunted, petitioners moved for reconsideration,56 which was, however, denied by the CA in its
Resolution57 dated February 22, 2016; hence, the present petition.

The Issue Before the Court

The issue for the Court's resolution is whether or not the CA correctly upheld the twin Orders dated
December 9, 2011 and the Order dated May 17, 2012 of the RTC.

The Court's Ruling

The petition is partly meritorious.

At the outset, it is well to reiterate that petitioners are resisting compliance with the ruling in the
Quieting of Title Case, on the grounds that: (a) they were never served with summons in relation
thereto; and (b) they were merely impleaded as substitutes to Jaime therein, and as such,
respondents should have proceeded against his estate instead, pursuant to Section 20, Rule 3 of
the Rules of Court. However, a judicious review of the records would reveal that such contentions
are untenable, as will be discussed hereunder.

Anent petitioners' claim that they were never served with summons, the CA correctly pointed out
that in the November 26, 1997 Manifestation/Motion,58 petitioners, through their counsel, Atty.
Trinidad, explicitly stated, among others, that they "received the Summons with a copy of the
Second Amended Complaint" and that "the Answer earlier filed serves as the Answer to the
Second Amended Complaint."59 Having admitted the foregoing, petitioners cannot now assert
otherwise. "It is settled that judicial admissions made by the parties in the pleadings or in the
course of the trial or other proceedings in the same case are conclusive and do not require further
evidence to prove them. They are legally binding on the party making it, except when it is shown
that they have been made through palpable mistake or that no such admission was actually made,
neither of which was shown to exist in this case."60

Assuming arguendo that petitioners did not receive summons for the amended complaint, they
were nonetheless deemed to have voluntarily submitted to the RTC's jurisdiction by filing an
Answer61 to the amended complaint and actively participating in the case.62 In fact, one of the
petitioners and Uy siblings, Ericson, was presented as a witness for the defense.63 Moreover,
petitioners appealed the adverse RTC ruling in the Quieting of Title Case all the way to the Court.
It is settled that the active participation of the party against whom the action was brought, is
tantamount to an invocation of the court's jurisdiction and a willingness to abide by the resolution
of the case, and such will bar said party from later on impugning the court's jurisdiction.64 After all,
jurisdiction over the person of the defendant in civil cases is obtained either by a valid service of
summons upon him or by his voluntary submission to the court's authority.65

In this regard, petitioners cannot also deny Atty. Trinidad's authority to represent them. As
mentioned earlier, one of the petitioners, Ericson, even testified with the assistance of Atty.
Trinidad.66 Indeed, if Atty. Trinidad was not authorized to represent them, the natural reaction for
petitioners was to exhibit concern. Based on the records, however, there is no indication that any
of the petitioners or Ericson made even the slightest objections to Atty. Trinidad's representation.
This only confirms the CA's finding that such denial was a mere afterthought and a desperate
attempt to undo a final and executory judgment against them.67

As to petitioners' contention that respondents should have proceeded against Jaime's estate
pursuant to Section 20, Rule 3 of the Rules of Court, it is well to point out that based on the records,
the Uy siblings were not merely substituted in Jaime's place as defendant; rather, they were imp
leaded in their personal capacities. Under Section 16, Rule 3 of the Rules of Court, substitution of
parties takes place when the party to the action dies pending the resolution of the case and the
claim is not extinguished, viz.:

Section 16. Death of party; duty of counsel. - Whenever a party to a pending action dies, and the
claim is not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty
(30) days after such death of the fact thereof, and to give the name and address of his legal
representative or representatives. Failure of counsel to comply with his duty shall be a ground for
disciplinary action.

The heirs of the deceased may be allowed to be substituted for the deceased, without requiring
the appointment of an executor or administrator and the court may appoint a guardian ad litem for
the minor heirs.

The court shall forthwith order said legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice.

If no legal representative is named by the counsel for the deceased party, or if the one so named
shall fail to appear within the specified period, the court may order the opposing party, within a
specified time to procure the appointment of an executor or administrator for the estate of the
deceased and the latter shall immediately appear for and on behalf of the deceased. The court
charges in procuring such appointment, if defrayed by the opposing party, may be recovered as
costs. (Emphases supplied)

Here, Jaime died on March 4, 1990,68 or six (6) years be(ore private respondents filed the Quieting
of Title Case. Thus, after Conchita filed an Answer69 informing the RTC of Jaime's death in 1990,
1âwphi1

the complaint was amended70 to implead the Uy siblings. Accordingly, the Rules of Court provisions
on substitution upon the death of a party do not apply and the Uy siblings were not merely
substituted in place of Jaime in the Quieting of Title Case. Instead, they were impleaded in their
personal capacities.71 In this regard, petitioners' argument that they cannot be held solidarily liable
for the satisfaction of any monetary judgment or award must necessarily fail.72

In this light, petitioners can no longer invoke Section 20, Rule 3 of the Rules of Court, which reads:

Section 20. Action and contractual money claims. - When the action is for recovery of money
arising from contract, express or implied, and the defendant dies before entry of final judgment in
the court in which the action was pending at the time of such death, it shall not be dismissed but
shall instead be allowed to continue until entry of final judgment. A favorable judgment obtained
by the plaintiff therein shall be enforced in the manner especially provided in these Rules for
prosecuting claims against the estate of a deceased person. (Emphasis supplied)
 A cursory reading of the foregoing provision readily shows that like Section 16, Rule 3 of the Rules
of Court, it applies in cases where the defendant dies while the case is pending and not before the
case was even filed in court, as in this case.

At this point, the Court notes that if petitioners truly believed that Jaime's estate is the proper party
to the Quieting of Title Case, they could and should have raised the lack of cause of action against
them at the earliest opportunity. Obviously, they did not do so; instead, they actively participated
in the case, adopted the answer earlier filed by Conchita, and even litigated the case all the way
to the Court. Petitioners cannot now question the final and executory judgment in the Quieting of
Title Case because it happened to be adverse to them.

Time and again, the Court has repeatedly held that "a decision that has acquired finality becomes
immutable and unalterable, and may no longer be modified in any respect, even if the modification
is meant to correct erroneous conclusions of fact and law, and whether it be made by the court
that rendered it or by the Highest Court of the land. This principle, known as the doctrine of
immutability of judgment, has a two-fold purpose, namely: (a) to avoid delay in the administration
of justice and thus, procedurally, to make orderly the discharge of judicial business; and (b) to put
an end to judicial controversies, at the risk of occasional errors, which is precisely why courts exist.
Verily, it fosters the judicious perception that the rights and obligations of every litigant must not
hang in suspense for an indefinite period of time. As such, it is not regarded as a mere technicality
to be easily brushed aside, but rather, a matter of public policy which must be faithfully
complied."73 However, this doctrine "is not a hard and fast rule as the Court has the power and
prerogative to relax the same in order to serve the demands of substantial justice
considering: (a) matters of life, liberty, honor, or property; (b) the existence of special or compelling
circumstances; (c) the merits of the case; (d) a cause not entirely attributable to the fault or
negligence of the party favored by the suspension of the rules; (e) the lack of any showing that the
review sought is merely frivolous and dilatory; and (j) that the other party will not be unjustly
prejudiced thereby."74

In this case, a punctilious examination of the records, especially the Amended Complaint75 in the
Quieting of Title Case reveals that the disputed Lot 791 was covered by TCT No. 29129 in the
names of Jaime and Conchita. Thus, while the Uy siblings were indeed impleaded in their personal
capacities, the fact remains that they are merely succeeding to Jaime's interest in the said lot and
title. As successors-heirs, they cannot be personally bound to respond to the decedent's
obligations beyond their distributive shares.76 Verily, this is a special or a compelling circumstance
which would necessitate the relaxation of the doctrine of immutability of judgment, so as to
somehow limit the liability of the Uy siblings in the payment of the monetary awards in favor of
respondents in the Quieting of Title Case - i.e., moral damages and litigation costs in the amount
of ₱20,000.00 each, as well as attorney's fees, equivalent to twenty-five percent (25%) of the zonal
value of Lot 79177 - within the value of their inherited shares, notwithstanding the finality of the
ruling therein.

In sum, while the courts a quo correctly ruled that the Uy siblings may be held answerable to the
monetary awards in the Quieting of Title Case, such liability cannot exceed whatever value they
inherited from their late father, Jaime. For this purpose, the RTC is tasked to ensure that the
satisfaction of the monetary aspect of the judgment in the Quieting of Title Case will not result in
the payment by the Uy siblings of an amount exceeding their inheritance from Jaime. After all, the
other party, i.e., respondents, shall not be unjustly prejudiced by the same since Jaime's spouse,
Conchita, is still alive and the rest of the monetary awards may be applied against her, if need be.

WHEREFORE, the petition is PARTLY GRANTED. Accordingly, the Decision dated May 26, 2015
and the Resolution dated February 22, 2016 of the Court of Appeals in CA-G.R. SP No. 07120 are
hereby AFFIRMED with MODIFICATION limiting the adjudged monetary liability of petitioners
Christine Uy Dy, Sylvia Uy Sy, Jane Uy Tan, James Lyndon S. Uy, Irene S. Uy, Ericson S. Uy,
Johanna S. Uy, and Jednathan S. Uy to the total value of their inheritance from Jaime Uy.

SO ORDERED.

RULE 4

SECOND DIVISION

G.R. No. 145022 September 23, 2005

ARMAND NOCUM and THE PHILIPPINE DAILY INQUIRER, INC., Petitioners,

vs.

vs.
LUCIO TAN, Respondent.
 DECISION

CHICO-NAZARIO, J.:

Assailed in a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure are the decision1 of the Court of Appeals dated 19 April 2000 that affirmed the order
of the Regional Trial Court (RTC) of Makati City, Branch 56, in Civil Case No. 98-2288, dated 19
April 1999, admitting respondent Lucio Tan’s Amended Complaint for Damages for the alleged
malicious and defamatory imputations against him in two (2) articles of the Philippine Daily
Inquirer, and its Resolution2 dated 15 September 2000 denying petitioners Armand Nocum and
The Philippine Daily Inquirer, Inc.’s motion for reconsideration.

The antecedents are summarized by the Court of Appeals.

On September 27, 1998, Lucio Tan filed a complaint against reporter Armand Nocum, Capt.
Florendo Umali, ALPAP and Inquirer with the Regional Trial Court of Makati, docketed as Civil
Case No. 98-2288, seeking moral and exemplary damages for the alleged malicious and
defamatory imputations contained in a news article.

INQUIRER and NOCUM filed their joint answer, dated October 27, 1998, wherein they alleged
that: (1) the complaint failed to state a cause of action; (2) the defamatory statements alleged
in the complaint were general conclusions without factual premises; (3) the questioned news
report constituted fair and true report on the matters of public interest concerning a public
figure and therefore, was privileged in nature; and (4) malice on their part was negated by the
publication in the same article of plaintiff’s or PAL’s side of the dispute with the pilot’s union.

ALPAP and UMALI likewise filed their joint answer, dated October 31, 1998, and alleged therein
that: (1) the complaint stated no cause of action; (2) venue was improperly laid; and (3) plaintiff
Lucio Tan was not a real party in interest. It appeared that the complaint failed to state the
residence of the complainant at the time of the alleged commission of the offense and the place
where the libelous article was printed and first published.

Thus, the Regional Trial Court of Makati issued an Order dated February 10, 1999, dismissing
the complaint without prejudice on the ground of improper venue.

Aggrieved by the dismissal of the complaint, respondent Lucio Tan filed an Omnibus Motion
dated February 24, 1999, seeking reconsideration of the dismissal and admission of the
amended complaint. In par. 2.01.1 of the amended complaint, it is alleged that "This article was
printed and first published in the City of Makati" (p. 53, Rollo, CA-G.R. SP No. 55192), and in
par. 2.04.1, that "This caricature was printed and first published in the City of Makati" (p. 55,
id.).

The lower court, after having the case dismissed for improper venue, admitted the amended
complaint and deemed set aside the previous order of dismissal, supra, stating, inter alia, that:

"The mistake or deficiency in the original complaint appears now to have been cured in the
Amended Complaint which can still be properly admitted, pursuant to Rule 10 of the 1997 Rules
of Civil Procedure, inasmuch as the Order of dismissal is not yet final. Besides, there is no
substantial amendment in the Amended Complaint which would affect the defendants’
defenses and their Answers. The Amendment is merely formal, contrary to the contention of
the defendants that it is substantial."

Dissatisfied, petitioners, together with defendants Capt. Florendo Umali and the Airline Pilots
Association of the Philippines, Inc. (ALPAP), appealed the RTC decision to the Court of
Appeals. Two petitions for certiorari were filed, one filed by petitioners which was docketed as
CA-G.R. SP No. 55192, and the other by defendants Umali and ALPAP which was docketed as
CA-G.R. SP No. 54894. The two petitions were consolidated.

On 19 April 2000, the Court of Appeals rendered its decision the dispositive portion of which
reads:

WHEREFORE, premises considered, the petition is hereby DENIED DUE COURSE and
DISMISSED for lack of merit. The Order of the court a quo is hereby AFFIRMED.

The motions for reconsideration filed by petitioners and by defendants Umali and ALPAP were
likewise denied in a resolution dated 15 September 2000.

Both petitioners and defendants Umali and ALPAP appealed to this Court. Under consideration
is the petition for review filed by petitioners.
On 11 December 2000, the Court required respondent Tan to comment on the petition filed by
petitioners.3

Respondent filed his comment on 22 January 20014 to which petitioners filed a reply on 26 April
2001.5

In a Manifestation filed on 19 February 2001, respondent stated that the petition 6 filed by
defendants Umali and ALPAP has already been denied by the Court in a resolution dated 17
January 2001.7

On 20 August 2003, the Court resolved to give due course to the petition and required the
parties to submit their respective memoranda within thirty (30) days from notice.8 Both
petitioners and respondent complied.9

Petitioners assigned the following as errors:

A. THE COURT OF APPEALS ERRED IN RULING (1) THAT THE LOWER COURT HAD
JURISDICTION OVER THE CASE (ON THE BASIS OF THE ORIGINAL COMPLAINT)
NOTWITHSTANDING THE FACT THAT THE LOWER COURT HAD EARLIER DISMISSED THE
ORIGINAL COMPLAINT FOR ITS FAILURE TO CONFER JURISDICTION UPON THJE COURT;
AND (2) THAT THE AMENDED COMPLAINT WAS PROPERLY ALLOWED OR ADMITTED
BECAUSE THE LOWER COURT WAS "NEVER DIVESTED" OF JURISDICTION OVER THE
CASE;

B. THE COURT OF APPEALS ERRED IN NOT RULING THAT THE ORIGINAL COMPLAINT OF
RESPONDENT WAS AMENDED PURPOSELY TO CONFER UPON THE LOWER COURT
JURISDICTION OVER THE CASE.10

Petitioners state that Article 360 of the Revised Penal Code vests jurisdiction over all civil and
criminal complaints for libel on the RTC of the place: (1) where the libelous article was printed
and first published; or (2) where the complainant, if a private person, resides; or (3) where the
complainant, if a public official, holds office. They argue that since the original complaint only
contained the office address of respondent and not the latter’s actual residence or the place
where the allegedly offending news reports were printed and first published, the original
complaint, by reason of the deficiencies in its allegations, failed to confer jurisdiction on the
lower court.

The question to be resolved is: Did the lower court acquire jurisdiction over the civil case upon
the filing of the original complaint for damages?

We rule in the affirmative.

It is settled that jurisdiction is conferred by law based on the facts alleged in the
complaint since the latter comprises a concise statement of the ultimate facts constituting the
plaintiff's causes of action.11 In the case at bar, after examining the original complaint, we find
that the RTC acquired jurisdiction over the case when the case was filed before it. From the
allegations thereof, respondent’s cause of action is for damages arising from libel, the
jurisdiction of which is vested with the RTC. Article 360 of the Revised Penal Code provides
that it is a Court of First Instance12 that is specifically designated to try a libel case.13

Petitioners are confusing jurisdiction with venue. A former colleague, the Hon. Florenz D.
Regalado,14 differentiated jurisdiction and venue as follows: (a) Jurisdiction is the authority to
hear and determine a case; venue is the place where the case is to be heard or tried; (b)
Jurisdiction is a matter of substantive law; venue, of procedural law; (c) Jurisdiction
establishes a relation between the court and the subject matter; venue, a relation between
plaintiff and defendant, or petitioner and respondent; and, (d) Jurisdiction is fixed by law and
cannot be conferred by the parties; venue may be conferred by the act or agreement of the
parties.

In the case at bar, the additional allegations in the Amended Complaint that the article and the
caricature were printed and first published in the City of Makati referred only to the question
of venue and not jurisdiction. These additional allegations would neither confer jurisdiction on
the RTC nor would respondent’s failure to include the same in the original complaint divest the
lower court of its jurisdiction over the case. Respondent’s failure to allege these allegations
gave the lower court the power, upon motion by a party, to dismiss the complaint on the ground
that venue was not properly laid.

In Laquian v. Baltazar,15 this Court construed the term "jurisdiction" in Article 360 of the
Revised Penal Code as referring to the place where actions for libel shall be filed or "venue."
In Escribano v. Avila,16 pursuant to Republic Act No. 4363,17 we laid down the following rules
on the venue of the criminal and civil actions in written defamations.

1. General rule: The action may be filed in the Court of First Instance of the province or city
where the libelous article is printed and first published or where any of the offended parties
actually resides at the time of the commission of the offense.

2. If the offended party is a public officer with office in Manila at the time the offense was
committed, the venue is Manila or the city or province where the libelous article is printed and
first published.

3. Where an offended party is a public official with office outside of Manila, the venue is the
province or the city where he held office at the time of the commission of the offense or where
the libelous article is printed and first published.

4. If an offended party is a private person, the venue is his place of residence at the time of the
commission of the offense or where the libelous article is printed and first published.

The common feature of the foregoing rules is that whether the offended party is a public officer
or a private person, he has always the option to file the action in the Court of First Instance of
the province or city where the libelous article is printed or first published.

We further restated18 the rules on venue in Article 360 as follows:

1. Whether the offended party is a public official or a private person, the criminal action may
be filed in the Court of First Instance of the province or city where the libelous article is printed
and first published.

2. If the offended party is a private individual, the criminal action may also be filed in the Court
of First Instance of the province where he actually resided at the time of the commission of the
offense.

3. If the offended party is a public officer whose office is in Manila at the time of the commission
of the offense, the action may be filed in the Court of First Instance of Manila.

4. If the offended party is a public officer holding office outside of Manila, the action may be
filed in the Court of First Instance of the province or city where he held office at the time of the
commission of the offense.

We fully agree with the Court of Appeals when it ruled:

We note that the amended complaint or amendment to the complaint was not intended to vest
jurisdiction to the lower court, where originally it had none. The amendment was merely to
establish the proper venue for the action. It is a well-established rule that venue has nothing
to do with jurisdiction, except in criminal actions. Assuming that venue were properly laid in
the court where the action was instituted, that would be procedural, not a jurisdictional
impediment. In fact, in civil cases, venue may be waived.

Consequently, by dismissing the case on the ground of improper venue, the lower court had
jurisdiction over the case. Apparently, the herein petitioners recognized this jurisdiction by
filing their answers to the complaint, albeit, questioning the propriety of venue, instead of a
motion to dismiss.

...

We so hold that dismissal of the complaint by the lower court was proper considering that the
complaint, indeed, on its face, failed to allege neither the residence of the complainant nor the
place where the libelous article was printed and first published. Nevertheless, before the
finality of the dismissal, the same may still be amended as in fact the amended complaint was
admitted, in view of the court a quo’s jurisdiction, of which it was never divested. In so doing,
the court acted properly and without any grave abuse of discretion.19

It is elementary that objections to venue in CIVIL ACTIONS arising from libel may be waived
since they do not involve a question of jurisdiction. The laying of venue is procedural rather
than substantive, relating as it does to jurisdiction of the court over the person rather than the
subject matter. Venue relates to trial and not to jurisdiction.20 It is a procedural, not a
jurisdictional, matter. It relates to the place of trial or geographical location in which an action
or proceeding should be brought and not to the jurisdiction of the court.21 It is meant to provide
convenience to the parties, rather than restrict their access to the courts as it relates to the
place of trial.22 In contrast, in criminal actions, it is fundamental that venue is jurisdictional it
being an essential element of jurisdiction.23

Petitioners’ argument that the lower court has no jurisdiction over the case because
respondent failed to allege the place where the libelous articles were printed and first published
would have been tenable if the case filed were a criminal case. The failure of the original
complaint to contain such information would be fatal because this fact involves the issue of
venue which goes into the territorial jurisdiction of the court. This is not to be because the case
before us is a civil action where venue is not jurisdictional.

The cases24 cited by petitioners are not applicable here. These cases involve amendments on
complaints that confer jurisdiction on courts over which they originally had none. This is not
true in the case at bar. As discussed above, the RTC acquired jurisdiction over the subject
matter upon the filing of the original complaint. It did not lose jurisdiction over the same when
it dismissed it on the ground of improper venue. The amendment merely laid down the proper
venue of the case.

WHEREFORE, the foregoing considered, the decision of the Court of Appeals dated 19 April
2000 is AFFIRMED in toto. No costs.

SO ORDERED.

SECOND DIVISION

[ G.R. No. 227147. July 30, 2018 ]

RADIOWEALTH FINANCE COMPANY, INC., PETITIONER, VS. ALFONSO O. PINEDA, JR., AND
JOSEPHINE C. PINEDA, RESPONDENTS.

DECISION

PERLAS-BERNABE, J.:

This is a direct recourse to the Court from the Regional Trial Court of San Mateo, Rizal, Branch
75 (RTC), through a petition for review on certiorari assailing the Amended Order1 dated July 21, 2016
and the Order2 dated September 1, 2016 of the RTC in Civil Case No. 2814-15 SM which dismissed
petitioner Radiowealth Finance Company, Inc.'s (petitioner) complaint for sum of money against
respondents Alfonso O. Pineda, Jr. and Josephine C. Pineda (respondents) on the ground of lack of
jurisdiction.

The Facts

In its Complaint3 dated October 12, 2015, petitioner alleged that on October 23, 2014, it extended
a loan to respondents, as evidenced by a Promissory Note,4 in the amount of P557,808.00 payable
in 24 equal monthly installments of P23,242.00, which was secured by a Chattel
Mortgage5 constituted on a vehicle owned by respondents. Notably, the Promissory Note states that
"[a]ny action to enforce payment of any sums due under this Note shall exclusively be brought in the
proper court within [the] National Capital Judicial Region or in any place where Radiowealth Finance
Company, Inc. has a branch/office, a[t] its sole option."6 Due to respondents' default, petitioner
demanded payment of the whole remaining balance of the loan, which stood at P510,132.00 as of
June 8, 2015, excluding penalty charges. As the demand went unheeded, petitioner filed the instant
suit for sum of money and damages with application for a Writ of Replevin before the RTC, further
alleging that it has a branch in San Mateo, Rizal.7

The RTC Proceedings

In an Order8 dated March 28, 2016, the RTC issued a Writ of Replevin, due to respondents'
continued failure to pay their monetary obligations to petitioner and/or surrender their vehicle subject
of the Chattel Mortgage.

However, in an Amended Order9 dated July 21, 2016, the RTC recalled the Writ of Replevin and
ordered the dismissal of petitioner's complaint on the ground of lack of jurisdiction. It pointed out that
since: (a) petitioner's principal place of business is in Mandaluyong City, Metro Manila;
and (b) respondents' residence is in Porac, Pampanga, it has no jurisdiction over any of the party-
litigants, warranting the dismissal of the complaint.10

Aggrieved, petitioner moved for reconsideration,11 which was, however, denied in an

Order12 dated September 1, 2016; hence, this petition.
 The Issue Before the Court

The issue for the Court's resolution is whether or not the RTC correctly dismissed petitioner's
complaint on the ground of lack of jurisdiction.

The Court's Ruling

The petition is meritorious.

"Jurisdiction is defined as the authority to hear and determine a cause or the right to act in a case.
In addition to being conferred by the· Constitution and the law, the rule is settled that a court's
jurisdiction over the subject matter is determined by the relevant allegations in the complaint, the law
in effect when the action is filed, and the character of the relief sought irrespective of whether the
plaintiff is entitled to all or some of the claims asserted."13 This is markedly different from the concept
of venue, which only pertains to the place or geographical location where a case is filed. In Pilipinas
Shell Petroleum Corporation v. Royal Ferry Services, Inc.,14 the Court exhaustively differentiated
these concepts, to wit:

Petitioner confuses the concepts of jurisdiction and venue. In City of Lapu-Lapu

v. Phil. Economic Zone Authority:

On the one hand, jurisdiction is "the power to hear and determine

cases of the general class to which the proceedings in question
belong." Jurisdiction is a matter of substantive law. Thus, an action
may be filed only with the court or tribunal where the Constitution or
a statute says it can be brought. Objections to jurisdiction cannot be
waived and may be brought at any stage of the proceedings, even on
appeal. When a case is filed with a court which has no jurisdiction
over the action, the court shall motu proprio dismiss the case.

On the other hand, venue is "the place of trial or geographical

location in which an action or proceeding should be brought." In civil
cases, venue is a matter of procedural law. A party's objections to
venue must be brought at the earliest opportunity either in a motion
to dismiss or in the answer; otherwise the objection shall be deemed
waived. When the venue of a civil action is improperly laid, the court
ℒ αwρhi৷

cannot motu proprio dismiss the case. 1âшphi 1

Wrong venue is merely a procedural infirmity, not a jurisdictional impediment.

Jurisdiction is a matter of substantive law, while venue is a matter ofprocedurallaw.15

In this case, petitioner filed a complaint for, inter alia, sum of money involving the amount of
P510,132.00. Pursuant to Section 19 (8) of Batas Pambansa Blg. (BP) 129,16 as amended by Section
5 of Republic Act No. (RA) 7691,17 the RTC irrefragably has jurisdiction over petitioner's complaint.
Thus, it erred in dismissing petitioner's complaint on the ground of its purported lack of jurisdiction.

Clearly, the RTC confused the concepts of jurisdiction and venue which, as already discussed,
are not synonymous with each other. Even assuming arguendo that the RTC correctly pertained to
venue, it still committed grave error in dismissing petitioner's complaint, as will be explained
hereunder.

Rule 4 of the Rules of Court governs the rules on venue of civil actions, to wit:

Rule 4
VENUE OF ACTIONS

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

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

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

Section 2. Venue of personal actions. – All other actions may be commenced and
tried where the plaintiff or any of the principal plaintiffs resides, or where the defendant
or any of the principal defendants resides, or in the case of a non-resident defendant
where he may be found, at the election of the plaintiff.
 Section 3. Venue of actions against nonresidents. – If any of the defendants does
not reside and is not found in the Philippines, and the action affects the personal status
of the plaintiff, or any property of said defendant located in the Philippines, the action
may be commenced and tried in the court of the place where the plaintiff resides, or
where the property or any portion thereof is situated or found.

Section 4. When Rule not applicable. – This Rule shall not apply –

(a) In those cases where a specific rule or law provides otherwise;

or

(b) Where the parties have validly agreed in writing before the
filing of the action on the exclusive venue thereof.

In Briones v. Court of Appeals,18 the Court succinctly discussed the rule on venue, including the
import of restrictive stipulations on venue:

Based therefrom, the general rule is that the venue of real actions is the court
which has jurisdiction over the area wherein the real property involved, or a portion
thereof, is situated; while the venue of personal actions is the court which has
jurisdiction where the plaintiff or the defendant resides, at the election of the plaintiff.
As an exception, jurisprudence in Legaspi v. Rep. of the Phils. [(581 Phil. 381, 386
[2008])] instructs that the parties, thru a written instrument, may either introduce
another venue where actions arising from such instrument may be filed, or restrict the
filing of said actions in a certain exclusive venue, viz.:

The parties, however, are not precluded from agreeing in writing

on an exclusive venue, as qualified by Section 4 of the same
rule. Written stipulations as to venue may be restrictive in the
sense that the suit may be filed only in the place agreed upon,
or merely permissive in that the parties may file their suit not
only in the place agreed upon but also in the places fixed by
law. As in any other agreement, what is essential is the
ascertainment of the intention of the parties respecting the matter.

As regards restrictive stipulations on venue, jurisprudence

instructs that it must be shown that such stipulation is
exclusive. In the absence of qualifying or restrictive words, such
as "exclusively," "waiving for this purpose any other venue," "shall
only" preceding the designation of venue, "to the exclusion of the
other courts," or words of similar import, the stipulation should be
deemed as merely an agreement on an additional forum, not as
limiting venue to the specified place.19 (Emphases and
underscoring in the original)

In this case, the venue stipulation found in the subject Promissory Note – which reads "[a]ny action
to enforce payment of any sums due under this Note shall exclusively be brought in the proper court
within [the] National Capital Judicial Region or in any place where Radiowealth Finance Company,
Inc. has a branch/office, a[t] its sole option"20 – is indeed restrictive in nature, considering that it
effectively limits the venue of the actions arising therefrom to the courts of: (a) the National Capital
Judicial Region; or (b) any place where petitioner has a branch/office. In light of petitioner's standing
allegation that it has a branch in San Mateo, Rizal, it appears that venue has been properly laid, unless
such allegation has been disputed and successfully rebutted later on.

Finally, even if it appears that venue has been improperly laid, it is well-settled that the courts may
not motu proprio dismiss the case on the ground of improper venue. Without any objection at the
earliest opportunity, as in a motion to dismiss or in the answer, it is deemed waived.21 The Court's
ruling in Radiowealth Finance Company, Inc. v. Nolasco22 is instructive on this matter, to wit:

Dismissing the complaint on the ground of improper venue is certainly not the
appropriate course of action at this stage of the proceeding, particularly as venue, in
inferior courts as well as in the Courts of First Instance (now RTC), may be waived
expressly or impliedly. Where defendant fails to challenge timely the venue in a
motion to dismiss as provided by Section 4 of Rule 4 of the Rules of Court, and
allows the trial to be held and a decision to be rendered, be cannot on appeal
or in a special action be permitted to challenge belatedly the wrong venue,
which is deemed waived.
 Thus, unless and until the defendant objects to the venue in a motion to
dismiss, the venue cannot be truly said to have been improperlv laid, as for all
practical intents and purposes, the venue, though technically wrong, may be
acceptable to the parties for whose convenience the rules on venue had been
devised. The trial court cannot pre-empt the defendant's prerogative to object to the
improper laying of the venue by motu proprio dismissing the case.23 (Emphases and
underscoring supplied)

In sum, the RTC erred in motu proprio dismissing petitioner's complaint before it. As such, the
complaint must be reinstated, and thereafter, remanded to the RTC for further proceedings.

WHEREFORE, the petition is GRANTED. The Amended Order dated July 21,
2016 and the Order dated September 1, 2016 of the Regional Trial Court of San
Mateo, Rizal, Branch 75 in Civil Case No. 2814-15 SM are
hereby REVERSED and SET ASIDE. Accordingly, Civil Case No. 2814-15 SM
is REINSTATED and REMANDED to the RTC for further proceedings.

SO ORDERED.