Rule 6 – Kinds of Pleadings

CASES
TABLE OF CONTENTS

Talastas v. Abella, G.R. No. L-26398, [October 25, 1968].....................................................................................2

Seconds To Go v. Fabriano Societa Per Azioni, Inc., G.R. No. 213698, November 12, 2014..............................6
PBCOM v. Go, G.R. No. 175514 (2011)................................................................................................................8
Warner Barnes v. Reyes, 103 Phil. 662 (1958)...................................................................................................17
Serrano Mahilum v. Spouses Ilano, G.R. No. 197923, June 22, 2015................................................................19
Vargas v. Estate of Ogsos, G.R. No. 221062, [October 5, 2016], 796 PHIL 840-856)........................................25
Dio v. Subic Bay Marine Exploratorium, Inc., G.R. No. 189532, [June 11, 2014]...............................................30
Alba Jr. v. Malapajo, G.R. No. 198752, January 13, 2016..................................................................................34
Ganofa v Nee Bon Sing, G.R No. L-22018, Jan 17, 1968..................................................................................38
Londres v. CA, G.R. No. 136427 (2002).............................................................................................................40
Camara vs. Aguilar, 94 Phil. 527.........................................................................................................................48
Tiu po vs. Bautista, 103 SCRA 388.....................................................................................................................50
China Banking Corp. vs. Padilla, 514 SCRA 35..................................................................................................51
Spouses Uy v. Ariza, G.R. No. 158370, [August 17, 2006], 530 PHIL 637-646..................................................54
Commercial Bank vs. Republic Armored Car Service, 8 SCRA 425...................................................................57

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Talastas v. Abella, G.R. No. L-26398, [October 25, 1968]

[G.R. No. L-26398. October 25, 1968.]

ELPIDIO TALASTAS, Plaintiff-Appellee, v. CLEMENCO ABELLA, defendant- Appellant.

Antonio Barredo for Plaintiff-Appellee.

M. V. Quintana, for Defendant-Appellant.

SYLLABUS4

1. REMEDIAL LAW; PROCEDURE; ANSWER; SPECIFIC DENIAL; MATERIAL AVERMENT IS DEEMED ADMITTED WHEN NOT
SPECIFICALLY DENIED. — "Material averment in the complaint, other than those as to the amount of damage, shall be deemed
admitted when not specifically denied . . ." (Rule 9, Section 1, Rules Court). Moreover, to be specific, within the purview of the Rules of
Court, a denial must not only "specify each material allegation of fact the truth of which" is not admitted. It must, also, "whenever
practicable, . . . set forth the substance of the matters which he will rely upon to support his denial." (Rule 8, Section 10, Rules of Court)

2. ID.; ID.; ID.; ID.; ANSWER CONTAINS MERELY A GENERAL DENIAL IN INSTANT CASE. — Defendant’s answer limited itself to
saying that he "denies the allegations contained in paragraphs 2, 3, 4, 5, 6, 7, . . . 8, . . . 12, 13, . . . 14, . . . 16 and 17 of the plaintiff’s
complaint." Surely, defendant could have said something else about the specific topics of these paragraphs, if he had any concrete
matter on which to rely in controverting the allegations made therein, instead of making a mere denial thereof. No matter how we may
view the situation, the conclusion is inevitable that defendant has indulged and is indulging in no more than a general denial of the
material allegations in plaintiff’s complaint.

3. ID.; ID.; JUDGMENTS; SUMMARY JUDGMENT; WHERE THERE IS NO GENUINE ISSUE SUMMARY JUDGMENT IS JUSTIFIED;
REASON. — Where the facts alleged in the pleading give no genuine issue, the lower court would be justified in rendering a summary
judgment thereon, the reason for said judgment being "to expedite or promptly dispose of cases where the facts appear undisputed and
certain from the pleadings, depositions, admissions and affidavits." (Singleton v. Philippine Trust Co., 99 Phil. 91, 97)

4. ID.; ID.; APPEAL; INTERLOCUTORY ORDER; ORDER TO RENDER AN ACCOUNTING IS NOT APPEALABLE. — An accounting
order in a summary judgment partakes of an interlocutory nature and is not appealable, pursuant to the doctrine laid down in
Fuentebella v. Carrascoso, G.R. No. 48102, May 27, 1942 and reiterated in Zaldarriaga v. Zaldarriaga, L-13252, April 29, 1961.

DECISION

CONCEPCION, J.:

From a summary judgment of the Court of First Instance of Manila, the defendant appealed to the Court of Appeals which,
subsequently, certified the case to Us, pursuant to Sections 17 and 31 of Republic Act No. 296, as amended 1 only questions of law
being raised in the appeal.

In his complaint, herein plaintiff, Elpidio Talastas, seeks the liquidation of a partnership he claims to have with defendant Clemenco
Abella, as well as to recover several sums of money. In said pleading, plaintiff alleges that, sometime in September 1955, defendant
and he entered into an oral contract of partnership for the operation of a dance-hall or cabaret, known as the Sambat Recreation Center
— hereinafter known as the Center — in Samal, Bataan; that, pursuant to said contract, plaintiff contributed one-third (or P1,546.54)
and defendant two-thirds (or P3,093.08) of the partnership capital, aggregating P4,639.62, with the understanding that the profits would
be divided among them in the same proportion; that, as managing partner, defendant was bound to render an accounting and deliver
plaintiff’s share in the profits, at the end of each month; that, after rendering accounts for four (4) months, or beginning from February
1956, defendant failed and refused to make said accounting or give plaintiff’s share in the profits; that a corner space in the building
housing the Center was leased to a refreshment concessionaire, at P6.00 a night, from September to December 1955; that defendant
caused said concessionaire to be ejected from said nook and then operated therein his own refreshment business, since January,
1956; that, in September 1955, the partnership hired taxi-dancers and lent them, by way of advances, the total sum of P327.00, one-
third of which had been contributed by the plaintiff; that the taxi dancers had already refunded said sum of P327.00 to the defendant;
and that the latter had failed and refused to deliver plaintiff’s share therein, in the aforementioned earnings for the lease of part of the
Center and in the proceeds of its operation, as well as to render an accounting thereof.

Plaintiff prayed, therefore, that said partnership be dissolved and liquidated; that the defendant be ordered to render accounts and to
deliver to the plaintiff his share in the proceeds of the operation of the Center, in the monthly rentals received or due for the lease of the
corner space above referred to and in the abovementioned advances made to taxi-dancers, as well as to pay moral damages,
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attorney’s fees and the costs.

Upon being summoned, the defendant filed an answer denying "the allegations contained" in plaintiff’s complaint, alleging that there
had been no oral contract of partnership between them and setting up a counterclaim for attorney’s fees and moral damages.

Soon thereafter, plaintiff filed a "motion for summary judgment," upon the ground that "no genuine issue of fact" had been raised in
defendant’s answer, for: (1) the same is in the nature of a general denial, and, thus, amounts to an admission of the material averments
contained in the complaint; (2) defendant’s allegation to the effect that there had been no oral contract of partnership between the
parties is manifestly false, as shown in the affidavits of the plaintiff, and Angel Bugay, Luningning Bugay, Marciano Medina, Vicente
Tinao and Juan Castillo, annexed to the motion; and (3) plaintiff is in possession of indubitable documents establishing the existence of
said partnership, which documents are too voluminous to be attached to the motion, but would be presented at the hearing thereof.

In their respective sworn statements, affiants said, substantially the following:chanrob1es virtual 1aw library

1. Plaintiff Elpidio Talastas. — Sometime in 1955, defendant and he entered into a partnership agreement whereby he constructed, at
his expense, the first floor — including the eaves and an "extension" of said floor — of a building of the defendant, in Samal, Bataan,
which had, theretofore, been used as dance-hall or cabaret. As the materials and labor in said construction — which was supervised by
the plaintiff, who, at first, was assisted by Luningning Bugay in his task — had cost him the aggregate sum of P1,546.54, and defendant
claimed to have spent P3,093.08 for the second floor of the building, it was agreed that their shares in the partnership would be one-
third (1/3) for the plaintiff and two-thirds (2/3) for the defendant. After rendering accounts for four (4) months, defendant failed and
refused to do so or to deliver plaintiff’s share in the profits, since February 1956. Besides, in July 1958, plaintiff learned that his interest
in the business had been sold by the defendant, for P1,600.00, to Juan Castillo. Confronted, soon thereafter, by the plaintiff, with this
information, in the presence of Castillo, defendant offered to buy plaintiff’s share and pay therefor P67.00 a month, but plaintiff rejected
the offer. Again, upon its establishment, the partnership had lent to the taxi-dancers hired for its business, the aggregate sum of
P327.00, which was subsequently paid to the defendant. Yet, the latter failed to deliver to the plaintiff his share of said loan, or the sum
of P109.00. Lastly, since January 1956, defendant had occupied as lessee a nook of the Center — which used to be let to a
concessionaire, at a rental of P6.00 a night — in which he operated a refreshment store, but, despite repeated demands, defendant
had failed and refused to give plaintiff’s share in the corresponding rental.

2. Angel Bugay. — He was the master carpenter, engaged by plaintiff herein in the aforementioned construction, which plaintiff
supervised, apart from paying for his services and for the lumber used, all of which were ordered in his name or on his account. Said
construction was plaintiff’s capital as partner in the operation of the Center.

3. Luningning Bugay. — Upon plaintiff’s request, she supervised for a while, and advanced some funds for, the aforementioned
construction. The lumber used therein was secured in plaintiff’s name. According to the defendant, said construction was plaintiff’s
contribution to their partnership for the operation of the Center. Upon the completion of the construction, plaintiff engaged her services
as ticket seller and his representative in the Center. Said tickets bore the names of the plaintiff and the defendant, as owners of the
business. Upon closing every night, defendant and she made an accounting, the records of which were signed by either the defendant
or one Rodolfo Buan. She showed these records to the plaintiff, whenever he came.

4. Marciano Medina. — He has a lumber yard from which plaintiff got, for the construction above referred to, lumber worth P1,000, of
which P180 is still unpaid. Defendant told him that said construction is plaintiff’s share in their business. Sometime in June or July 1958,
he learned from the defendant that he had sold plaintiff’s share to Juan Castillo.

5. Vicente Tinao. — From 1955 to 1957, he had worked in the Center as ticket seller and as helper of Rodolfo Buan. The tickets sold
there bore the names of the plaintiff and the defendant, as owners of the Center, and, whenever plaintiff came, on Saturdays and
Sundays, he inspected its books of accounts or records.

6. Juan Castillo. — In June 1958, defendant offered to sell him plaintiff’s share in the Center for P1,600.00, which he delivered to the
defendant to reimburse plaintiff’s investment therein. Thereupon, he acted as cashier of the Center, but, presently, he found out that
defendant had not turned over said sum of P1,600.00 to the plaintiff. So, the three (3) of them had a meeting in the house of Arturo
Bugay, in Samal, Bataan, at which defendant admitted his failure to deliver the aforementioned sum to the plaintiff and offered to pay it
to him at the rate of P67.00 a month. Plaintiff did not agree thereto, whereas he (Castillo) filed a criminal complaint for estafa against
the defendant.

The latter opposed said motion, upon the ground that the allegations in plaintiff’s complaint had been denied in his (defendant’s)
answer and that he affirmed therein that there is no partnership between them. This, notwithstanding, the lower court, after due hearing,
granted plaintiff’s motion and rendered a summary judgment, the dispositive part of which reads:jgc:chanrobles.com.ph

"FOR THE FOREGOING CONSIDERATIONS the Court hereby renders a summary judgment against the defendant and in favor of the
plaintiff as follows:jgc:chanrobles.com.ph

"1. P1,600.00 on the first cause of action, with 6% interest thereon from the filing of the complaint until full payment;

"2. P240.00 on the second cause of action with the same rate of interest from the filing of the complaint;

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"3. P109.00 on the third cause of action, with the same rate of interest from the date of the complaint;

"4. Ordering the defendant to render an accounting of the proceeds of the business beginning February, 1956 up to and including
September, 1959, and every month thereafter until this issue of the case shall be fully terminated; and

"5. Directing an accounting on the rentals of the space for refreshment from January, 1956 up to September, 1959, and every month
thereafter until this issue shall be wholly resolved and that these two accountings shall be submitted to this Court within thirty (30) days
from receipt of this decision, otherwise the defendant may be cited for contempt of court; and

"6. Adjudging the defendant to pay plaintiff attorney’s fees in the sum of P300.00, plus costs."cralaw virtua1aw library

A reconsideration of this judgment having been denied, defendant interposed the present appeal. Defendant maintains that the lower
court erred: (1) in finding that his answer is "a general denial" ; (2) "in finding the existence of a partnership" between the parties "on the
strength of mere affidavits" ; and (3). "in awarding money judgments . . . even before the accounting" ordered in the decision appealed
from had been rendered.

Under his first assignment of error, defendant argues that his answer was not in the nature of a general denial, because he had averred
"that the alleged verbal partnership did not exist between him and the plaintiff." It should be noted, however, that "material averment in
the complaint, other than those as to the amount of damage, shall be deemed admitted when not specifically denied . . ." 2 Moreover, to
be specific, within the purview of the Rules of Court, a denial must not only "specify each material allegation of fact the truth of which" is
not admitted. He must, also, "whenever practicable, set forth the substance of the matters which he will rely upon to support his denial.
3 This, the defendant herein has not done. Besides, we perceive no reason why, and he does not claim, it would not be practicable for
him to "set forth the substance of the matters" on which he would rely to support his denial, if the allegations in the complaint were not
true.

Indeed, apart from alleging, in paragraph 2 of the complaint, the existence of said oral contract of partnership, plaintiff averred, in
paragraphs 3, 4, 5, 6, 7, 8, 12, 13, 14, 16, and 17 of said pleading, the specific sum contributed by him to the common fund, his
particular share therein and in the assets and proceeds of the business, the stipulation concerning accounting, the months during which
the defendant rendered account, the month and year from which he allegedly failed and refused to comply with his obligations, the
specific amount of rental paid by the concessionaire of the space where the defendant now runs a refreshment store, the date from
which the latter was operated by the defendant, the precise sum advanced to taxi-dancers and the exact amount of plaintiff’s share
therein.

Yet, defendant’s answer limited itself to saying that he "denies the allegations contained in paragraphs 2, 3, 4, 5, 6, 7, . . . 8, . . . 12,
13, . . . 14, . . . 16 and 17 of the plaintiff’s complaint." Surely, defendant could have said something else about the specific topics of
these paragraphs, if he had any concrete matter on which to rely in controverting the allegations made therein, instead of making a
mere denial thereof.

No matter how we may view the situation, the conclusion is inevitable that defendant has indulged and is indulging in no more than a
general denial of the material allegations in plaintiff’s complaint. 4

Contrary to defendant’s contention under his second assignment of error, the lower court was fully justified in finding that the existence
of a partnership between the parties had been duly established. Indeed, his aforementioned general denial of the material allegations in
the complaint resulted in the admission of the truth of said allegations, including the allegation about the oral contract of partnership
between the parties. This admission by the defendant was bolstered up by the six (6) affidavits attached to plaintiff’s motion for a
summary judgment, which affidavits corroborate each other and leave no room for doubt on the construction of the first floor of the
building on which the Center was operated, as plaintiff’s contribution to the business of said partnership. Furthermore, the impact of
said affidavits has been made overwhelming by defendant’s failure to submit counter-affidavits — not even his own — even, if only, to
give a semblance of earnestness to the denials and allegations made in his answer and in his opposition to plaintiff’s aforesaid motion.

It is well-settled that a party against whom a motion for summary judgment is made must show that he has a "plausible ground of
defense, something fairly arguable and of a substantial character," 5 a bona fide defense that he may be able to establish. 6 He can not
take cover under an umbrella of general and specific denials, 7 or denials of knowledge or information sufficient to form a belief, 8 much
less repeat denials contained in his answer, or shelter behind pleadings already filed in court. 9

In connection with the third and last assignment of error made by the defendant, it should be noted that, because of the admissions
resulting from defendant’s general denial and his failure to submit counter-affidavits to offset those attached to plaintiff’s motion for a
summary judgment, there is, on record, no genuine issue on the fact:chanrob1es virtual 1aw library

1. That a partnership exists between the parties under the terms and conditions set forth in the complaint;

2. That defendant received from Juan Castillo the sum of P1,600, for delivery to the plaintiff, as the price of his share or interest in the
partnership;

3. That defendant has been running a refreshment store on a space in the Center operated by the partnership which used to rent P6.00
a night or P180 a month, so that plaintiff’s share therein is P60 monthly, or P240 for the four (4) months during which it was leased to a

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concessionaire; and

4. That one-third of the P327.00 lent to the first taxi-dancers hired by the partnership and already collected by the same, belongs to the
plaintiff and should, therefore, be refunded to him.

And there being no genuine issue on the foregoing facts, the lower court had authority to render the proper summary judgment that said
facts justified, 10 the reason for said judgment being "to expedite or promptly dispose of cases where the facts appear undisputed and
certain from the pleadings, depositions, admissions and affidavits." 11

As regards the sum of P1,600 received by the defendant from Juan Castillo, in payment for plaintiff’s share in the partnership, it was
proper for the decision appealed from to sentence the defendant to pay to the plaintiff the aforementioned sum, with interest thereon, as
directed in the first subdivision of the dispositive part of said decision, since the understanding with Castillo was that the defendant
would turn it over to the plaintiff, to whom it rightfully belongs, without any qualification whatsoever.

Concerning, however, the sums of P240 and P109 mentioned in the second and third subdivisions of said dispositive part, the authority
of the lower court was limited to making a declaration of plaintiff’s right to have these sums credited in his favor in the accounting
ordered in the fourth and fifth subdivisions of the aforementioned dispositive part. The actual amount recoverable by the plaintiff —
except as to the price of his share — will depend upon the result of such accounting.

Similarly, the amount of attorney’s fees to be awarded to the plaintiff should, likewise, be fixed after said accounting, for, until the same
shall have been completed, it is not possible to determine, with reasonable certainty, the nature and extent of the services rendered by
his counsel.

In fact, because of the accounting ordered in the decision appealed from, the same partakes of an interlocutory nature and is not
appealable, pursuant to the doctrine laid down in Fuentebella v. Carrascoso 12 and reiterated in Zaldarriaga v. Zaldarriaga. 13 We
should not overlook, however, that this action was instituted on January 27, 1959, and that, although the defendant has set up, in effect,
no defense whatsoever, he has managed to delay the final determination of the case for almost ten (10) years now. Besides,
considering that none of the parties has questioned the propriety of the appeal taken by the defendant, and that the issues therein are
purely legal in character, it is our considered opinion that public interest and that of the parties herein would be served better by settling
those issues in this appeal, instead of remanding the case to the lower court for the required accounting and letting the parties to,
thereafter, bring said issues back to this Court, in another appeal.

WHEREFORE, the decision appealed from is hereby affirmed, except only with respect to: (1) the attorney’s fees, the amount of which
shall be determined upon completion of said accounting, and (2) the aforementioned sums of P240 and P109, with interest on both,
which shall be credited to the plaintiff in the accounts to be submitted by the defendant, as ordained in said decision. The defendant
shall, also, pay the costs. It is so ordered.

Reyes, J.B.L., Dizon, Makalintal, Sanchez, Castro, Angeles, Fernando and Capistrano, JJ., concur.

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Seconds To Go v. Fabriano Societa Per Azioni, Inc., G.R. No. 213698, November 12, 2014

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PBCOM v. Go, G.R. No. 175514 (2011)

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 175514 February 14, 2011

PHILIPPINE BANK OF COMMUNICATIONS, Petitioner,

vs.
SPOUSES JOSE C. GO and ELVY T. GO, Respondents.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 filed by petitioner Philippine Bank of Communications (PBCom) seeking to set
aside the July 28, 2006 Decision,1 and the November 27, 2006 Resolution2 of the Court of Appeals (CA) in CA G.R. CV No. 77714. The
CA decision reversed and set aside the January 25, 2002 Decision of the Regional Trial Court, Branch 42, Manila (RTC), which granted
the motion for summary judgment and rendered judgment on the basis of the pleadings and attached documents.

THE FACTS

On September 30, 1999, respondent Jose C. Go (Go) obtained two loans from PBCom, evidenced by two promissory notes,
embodying his commitment to pay ₱17,982,222.22 for the first loan, and ₱80 million for the second loan, within a ten-year period from
September 30, 1999 to September 30, 2009.3

To secure the two loans, Go executed two (2) pledge agreements, both dated September 29, 1999, covering shares of stock in Ever
Gotesco Resources and Holdings, Inc. The first pledge, valued at ₱27,827,122.22, was to secure payment of the first loan, while the
second pledge, valued at ₱70,155,100.00, was to secure the second loan. 4

Two years later, however, the market value of the said shares of stock plunged to less than ₱0.04 per share. Thus, PBCom, as
pledgee, notified Go in writing on June 15, 2001, that it was renouncing the pledge agreements. 5

Later, PBCom filed before the RTC a complaint6 for sum of money with prayer for a writ of preliminary attachment against Go and his
wife, Elvy T. Go (Spouses Go), docketed as Civil Case No. 01-101190. PBCom alleged that Spouses Go defaulted on the two (2)
promissory notes, having paid only three (3) installments on interest payments—covering the months of September, November and
December 1999. Consequently, the entire balance of the obligations of Go became immediately due and demandable. PBCom made
repeated demands upon Spouses Go for the payment of said obligations, but the couple imposed conditions on the payment, such as
the lifting of garnishment effected by the Bangko Sentral ng Pilipinas (BSP) on Go’s accounts. 7

Spouses Go filed their Answer with Counterclaim8 denying the material allegations in the complaint and stating, among other matters,
that:

8. The promissory note referred to in the complaint expressly state that the loan obligation is payable within the period of ten (10) years.
Thus, from the execution date of September 30, 1999, its due date falls on September 30, 2009 (and not 2001 as erroneously stated in
the complaint). Thus, prior to September 30, 2009, the loan obligations cannot be deemed due and demandable.

In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon
the happening of the event which constitutes the condition. (Article 1181, New Civil Code)

9. Contrary to the plaintiff’s proferrence, defendant Jose C. Go had made substantial payments in terms of his monthly payments.
There is, therefore, a need to do some accounting works (sic) to reconcile the records of both parties.

10. While demand is a necessary requirement to consider the defendant to be in delay/default, such has not been complied with by the
plaintiff since the former is not aware of any demand made to him by the latter for the settlement of the whole obligation.

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11. Undeniably, at the time the pledge of the shares of stock were executed, their total value is more than the amount of the loan or at
the very least, equal to it. Thus, plaintiff was fully secured insofar as its exposure is concerned.

12. And even assuming without conceding, that the present value of said shares x x x went down, it cannot be considered as something
permanent since the prices of stocks in the market either increases (sic) or decreases (sic) depending on the market forces. Thus, it is
highly speculative for the plaintiff to consider said shares to have suffered tremendous decrease in its value. More so, it is unfair for the
plaintiff to renounce or abandon the pledge agreements.

On September 28, 2001, PBCom filed a verified motion for summary judgment 9 anchored on the following grounds:

I. MATERIAL AVERMENTS OF THE COMPLAINT ADMITTED BY DEFENDANT-SPOUSES IN THEIR ANSWER TO

OBVIATE THE NECESSITY OF TRIAL

II. NO REAL DEFENSES AND NO GENUINE ISSUES AS TO ANY MATERIAL FACT WERE TENDERED BY THE
DEFENDANT-SPOUSES IN THEIR ANSWER

III. PLANTIFF’S CAUSES OF ACTIONS ARE SUPPORTED BY VOLUNTARY ADMISSIONS AND AUTHENTIC
DOCUMENTS WHICH MAY NOT BE CONTRADICTED.10

PBCom contended that the Answer interposed no specific denials on the material averments in paragraphs 8 to 11 of the complaint
such as the fact of default, the entire amount being already due and demandable by reason of default, and the fact that the bank had
made repeated demands for the payment of the obligations.11

Spouses Go opposed the motion for summary judgment arguing that they had tendered genuine factual issues calling for the
presentation of evidence.12

The RTC granted PBCom’s motion in its Judgment13 dated January 25, 2002, the dispositive portion of which states:

WHEREFORE, in view of all the foregoing, judgment is rendered for the plaintiff and against the defendants ordering them to pay
plaintiff jointly and severally the following:

1. The total amount of ₱117,567,779.75, plus interests and penalties as stipulated in the two promissory notes;

2. A sum equivalent to 10% of the amount involved in this case, by way of attorney’s fees; and

3. The costs of suit.

SO ORDERED.14

Spouses Go moved for a reconsideration but the motion was denied in an order 15 dated March 20, 2002.

RULING OF THE COURT OF APPEALS

In its Decision dated July 28, 2006, the CA reversed and set aside the assailed judgment of the RTC, denied PBCom’s motion for
summary judgment, and ordered the remand of the records to the court of origin for trial on the merits. The dispositive portion of the
decision states:

WHEREFORE, premises considered, the assailed judgment of the Regional Trial Court, Branch 42 of Manila in Civil Case No. 01-
101190 is hereby REVERSED and SET ASIDE, and a new one entered denying plaintiff-appellee’s motion for summary judgment.
Accordingly, the records of the case are hereby remanded to the court of origin for trial on the merits.

SO ORDERED.16

The CA could not agree with the conclusion of the RTC that Spouses Go admitted paragraphs 3, 4 and 7 of the complaint. It found the
supposed admission to be insufficient to justify a rendition of summary judgment in the case for sum of money, since there were other
allegations and defenses put up by Spouses Go in their Answer which raised genuine issues on the material facts in the action. 17

The CA agreed with Spouses Go that paragraphs 3 and 4 of the complaint merely dwelt on the fact that a contract of loan was entered
into by the parties, while paragraph 7 simply emphasized the terms of the promissory notes executed by Go in favor of PBCom. The

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fact of default, the amount of the outstanding obligation, and the existence of a prior demand, which were all material to PBCom’s claim,
were "hardly admitted"18 by Spouses Go in their Answer and were, in fact, effectively questioned in the other allegations in the
Answer.19

PBCom’s motion for reconsideration was denied in a resolution20 dated November 27, 2006.

Thus, this petition for review.

THE ISSUES

WHETHER THE COURT OF APPEALS ERRED OR ACTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK, OR
EXCESS OF JURISDICTION IN RULING THAT THERE EXISTS A GENUINE ISSUE AS TO MATERIAL FACTS IN THE ACTION IN
SPITE OF THE UNEQUIVOCAL ADMISSIONS MADE IN THE PLEADINGS BY RESPONDENTS; AND

II

WHETHER THE COURT OF APPEALS ERRED OR ACTED IN GRAVE ABUSE OF JURISDICTION [DISCRETION] IN HOLDING
THAT ISSUES WERE RAISED ABOUT THE FACT OF DEFAULT, THE AMOUNT OF THE OBLIGATION, AND THE EXISTENCE OF
PRIOR DEMAND, EVEN WHEN THE PLEADING CLEARLY POINTS TO THE CONTRARY.

Petitioner PBCom’s Position: Summary judgment was proper, as there were no genuine issues raised as to any material fact.

PBCom argues that the material averments in the complaint categorically admitted by Spouses Go obviated the necessity of trial. In
their Answer, Spouses Go admitted the allegations in paragraphs 3 and 4 of the Complaint pertaining to the security for the loans and
the due execution of the promissory notes,21 and those in paragraph 7 which set forth the acceleration clauses in the promissory note.
Their denial of paragraph 5 of the Complaint pertaining to the Schedules of Payment for the liquidation of the two promissory notes did
not constitute a specific denial required by the Rules.22

Even in the Comment23 of Spouses Go, the clear, categorical and unequivocal admission of paragraphs 3, 4, and 7 of the Complaint
had been conceded.24

PBCom faults the CA for having formulated non-existent issues pertaining to the fact of default, the amount of outstanding obligation
and the existence of prior demand, none of which is borne by the pleadings or the records.25

The Spouses Go, PBCom argues, cannot negate or override the legal effect of the acceleration clauses embodied in each of the two
promissory notes executed by Go. Moreover, the non-payment of arrearages constituting default was admitted by Go in his letters to
PBCom dated March 3 and April 7, 2000, respectively.26 Therefore, by such default, they have lost the benefit of the period in their
favor, pursuant to Article 119827 of the Civil Code.

Further, PBCom claims that its causes of action are supported by authentic documents and voluntary admissions which cannot be
contradicted. It cites the March 3 and April 7, 2000 letters of Go requesting deferment of interest payments on his past due loan
obligations to PBCom, as his assets had been placed under attachment in a case filed by the BSP. 28 PBCom emphasizes that the said
letters, in addition to its letters of demand duly acknowledged and received by Go, negated their claim that they were not aware of any
demand having been made.29

Respondent spouses’ position: Summary judgment was not proper.

The core contention of Spouses Go is that summary judgment was not proper under the attendant circumstances, as there exist
genuine issues with respect to the fact of default, the amount of the outstanding obligation, and the existence of prior demand, which
were duly questioned in the special and affirmative defenses set forth in the Answer. Spouses Go agree with the CA that the
admissions in the pleadings pertained to the highlight of the terms of the contract. Such admissions merely recognized the existence of
the contract of loan and emphasized its terms and conditions. 30 Moreover, although they admitted paragraphs 3, 4, and 7, the special
and affirmative defenses contained in the Answer tendered genuine issues which could only be resolved in a full-blown trial. 31

On the matter of specific denial, Spouses Go posit that the Court decisions cited by PBCom 32 do not apply on all fours in this case.
Moreover, the substance of the repayment schedule was not set forth in the complaint. It, therefore, follows that the act of attaching
copies to the complaint is insufficient to secure an implied admission. Assuming arguendo that it was impliedly admitted, the existence
of said schedule and the promissory notes would not immediately make private respondents liable for the amount claimed by

10
PBCom.33 Before respondents may be held liable, it must be established, first, that they indeed defaulted; and second, that the
obligations has remained outstanding.34

Spouses Go also state that although they admitted paragraphs 3, 4 and 7 of the Complaint, the fact of default, the amount of
outstanding obligation and the existence of prior demand were fully questioned in the special and affirmative defenses. 35

RULING OF THE COURT

The Court agrees with the CA that "[t]he supposed admission of defendants-appellants on the x x x allegations in the complaint is
clearly not sufficient to justify the rendition of summary judgment in the case for sum of money, considering that there are other
allegations embodied and defenses raised by the defendants-appellants in their answer which raise a genuine issue as to the material
facts in the action."36

The CA correctly ruled that there exist genuine issues as to three material facts, which have to be addressed during trial: first, the fact
of default; second, the amount of the outstanding obligation, and third, the existence of prior demand.

Under the Rules, following the filing of pleadings, if, on motion of a party and after hearing, the pleadings, supporting affidavits,
depositions and admissions on file show that, "except as to the amount of damages, there is no genuine issue as to any material fact,
and that the moving party is entitled to a judgment as a matter of law," 37 summary judgment may be rendered. This rule was expounded
in Asian Construction and Development Corporation v. Philippine Commercial International Bank,38 where it was written:

Under Rule 35 of the 1997 Rules of Procedure, as amended, except as to the amount of damages, when there is no genuine issue as
to any material fact and the moving party is entitled to a judgment as a matter of law, summary judgment may be allowed. 39 Summary
or accelerated judgment is a procedural technique aimed at weeding out sham claims or defenses at an early stage of litigation thereby
avoiding the expense and loss of time involved in a trial.40

Under the Rules, summary judgment is appropriate when there are no genuine issues of fact which call for the presentation of evidence
in a full-blown trial. Even if on their face the pleadings appear to raise issues, when the affidavits, depositions and admissions show that
such issues are not genuine, then summary judgment as prescribed by the Rules must ensue as a matter of law. The determinative
factor, therefore, in a motion for summary judgment, is the presence or absence of a genuine issue as to any material fact.

A "genuine issue" is an issue of fact which requires the presentation of evidence as distinguished from a sham, fictitious, contrived or
false claim. When the facts as pleaded appear uncontested or undisputed, then there is no real or genuine issue or question as to the
facts, and summary judgment is called for. The party who moves for summary judgment has the burden of demonstrating clearly the
absence of any genuine issue of fact, or that the issue posed in the complaint is patently unsubstantial so as not to constitute a genuine
issue for trial. Trial courts have limited authority to render summary judgments and may do so only when there is clearly no genuine
issue as to any material fact. When the facts as pleaded by the parties are disputed or contested, proceedings for summary judgment
cannot take the place of trial.41 (Underscoring supplied.)

Juxtaposing the Complaint and the Answer discloses that the material facts here are not undisputed so as to call for the rendition of a
summary judgment. While the denials of Spouses Go could have been phrased more strongly or more emphatically, and the Answer
more coherently and logically structured in order to overthrow any shadow of doubt that such denials were indeed made, the pleadings
show that they did in fact raise material issues that have to be addressed and threshed out in a full-blown trial.

PBCom anchors its arguments on the alleged implied admission by Spouses Go resulting from their failure to specifically deny the
material allegations in the Complaint, citing as precedent Philippine Bank of Communications v. Court of Appeals,42 and Morales v.
Court of Appeals. Spouses Go, on the other hand, argue that although admissions were made in the Answer, the special and
affirmative defenses contained therein tendered genuine issues.

Under the Rules, every pleading must contain, in a methodical and logical form, a plain, concise and direct statement of the ultimate
facts on which the party pleading relies for his claim or defense, as the case may be, omitting the statement of mere evidentiary facts. 43

To specifically deny a material allegation, a defendant must specify each material allegation of fact the truth of which he does not admit,
and whenever practicable, shall set forth the substance of the matters upon which he relies to support his denial. Where a defendant
desires to deny only a part of an averment, he shall specify so much of it as is true and material and shall deny only the remainder.
Where a defendant is without knowledge or information sufficient to form a belief as to the truth of a material averment made in the
complaint, he shall so state, and this shall have the effect of a denial. 44

Rule 8, Section 10 of the Rules of Civil Procedure contemplates three (3) modes of specific denial, namely: 1) by specifying each
material allegation of the fact in the complaint, the truth of which the defendant does not admit, and whenever practicable, setting forth
the substance of the matters which he will rely upon to support his denial; (2) by specifying so much of an averment in the complaint as

11
is true and material and denying only the remainder; (3) by stating that the defendant is without knowledge or information sufficient to
form a belief as to the truth of a material averment in the complaint, which has the effect of a denial. 45

The purpose of requiring the defendant to make a specific denial is to make him disclose the matters alleged in the complaint which he
succinctly intends to disprove at the trial, together with the matter which he relied upon to support the denial. The parties are compelled
to lay their cards on the table.46

Again, in drafting pleadings, members of the bar are enjoined to be clear and concise in their language, and to be organized and logical
in their composition and structure in order to set forth their statements of fact and arguments of law in the most readily comprehensible
manner possible. Failing such standard, allegations made in pleadings are not to be taken as stand-alone catchphrases in the interest
of accuracy. They must be contextualized and interpreted in relation to the rest of the statements in the pleading.

In Spouses Gaza v. Lim, the Court ruled that the CA erred in declaring that the petitioners therein impliedly admitted respondents'
allegation that they had prior and continuous possession of the property, as petitioners did in fact enumerate their special and
affirmative defenses in their Answer. They also specified therein each allegation in the complaint being denied by them. The Court
therein stated:

The Court of Appeals held that spouses Gaza, petitioners, failed to deny specifically, in their answer, paragraphs 2, 3 and 5 of the
complaint for forcible entry quoted as follows:

xxx xxx xxx

2. That plaintiffs are the actual and joint occupants and in prior continuous physical possession since 1975 up to Nov. 28, 1993 of a
certain commercial compound described as follows:

A certain parcel of land situated in Bo. Sta. Maria, Calauag, Quezon. Bounded on the N., & E., by Julian de Claro; on the W., by Luis
Urrutia. Containing an area of 5,270 square meters, more or less. Declared under Ramon J. Lim's Tax Dec. No. 4576 with an Ass.
Value of P26,100.00

3. That plaintiffs have been using the premises mentioned for combined lumber and copra business. Copies of plaintiffs' Lumber
Certificate of Registration No. 2490 and PCA Copra Business Registration No. 6265/76 are hereto attached as Annexes "A" and "B"
respectively; the Mayor's unnumbered copra dealer's permit dated Dec. 31, 1976 hereto attached as Annex "C";

xxx xxx xxx

5. That defendants' invasion of plaintiffs' premises was accomplished illegally by detaining plaintiffs' caretaker Emilio Herrera and his
daughter inside the compound, then proceeded to saw the chain that held plaintiffs' padlock on the main gate of the compound and
then busted or destroyed the padlock that closes the backyard gate or exit. Later, they forcibly opened the lock in the upstairs room of
plaintiff Agnes J. Lim's quarters and defendants immediately filled it with other occupants now. Copy of the caretaker's (Emilio Herrera)
statement describing in detail is hereto attached as Annex "D";

xxx xxx x x x7

The Court of Appeals then concluded that since petitioners did not deny specifically in their answer the above-quoted allegations in the
complaint, they judicially admitted that Ramon and Agnes Lim, respondents, "were in prior physical possession of the subject property,
and the action for forcible entry which they filed against private respondents (spouses Gaza) must be decided in their favor. The
defense of private respondents that they are the registered owners of the subject property is unavailing."

We observe that the Court of Appeals failed to consider paragraph 2 of petitioners' answer quoted as follows:

2. That defendants specifically deny the allegations in paragraph 2 and 3 of the complaint for want of knowledge or information
sufficient to form a belief as to the truth thereof, the truth of the matter being those alleged in the special and affirmative defenses of the
defendants;"8

Clearly, petitioners specifically denied the allegations contained in paragraphs 2 and 3 of the complaint that respondents have prior and
continuous possession of the disputed property which they used for their lumber and copra business. Petitioners did not merely allege
they have no knowledge or information sufficient to form a belief as to truth of those allegations in the complaint, but added the
following:

SPECIAL AND AFFIRMATIVE DEFENSES

12
That defendants hereby reiterate, incorporate and restate the foregoing and further allege:

5. That the complaint states no cause of action;

"From the allegations of plaintiffs, it appears that their possession of the subject property was not supported by any concrete title or
right, nowhere in the complaint that they alleged either as an owner or lessee, hence, the alleged possession of plaintiffs is
questionable from all aspects. Defendants Sps. Napoleon Gaza and Evelyn Gaza being the registered owner of the subject property
has all the right to enjoy the same, to use it, as an owner and in support thereof, a copy of the transfer certificate of title No. T-47263 is
hereto attached and marked as Annex "A-Gaza" and a copy of the Declaration of Real Property is likewise attached and marked as
Annex "B-Gaza" to form an integral part hereof;

6. That considering that the above-entitled case is an ejectment case, and considering further that the complaint did not state or there is
no showing that the matter was referred to a Lupon for conciliation under the provisions of P.D. No. 1508, the Revised Rule on
Summary Procedure of 1991, particularly Section 18 thereof provides that such a failure is jurisdictional, hence subject to dismissal;

7. That the Honorable Court has no jurisdiction over the subject of the action or suit;

The complaint is for forcible entry and the plaintiffs were praying for indemnification in the sum of ₱350,000.00 for those copra, lumber,
tools, and machinery listed in par. 4 of the complaint and ₱100,000.00 for unrealized income in the use of the establishment,
considering the foregoing amounts not to be rentals, Section 1 A (1) and (2) of the Revised Rule on Summary Procedure prohibits
recovery of the same, hence, the Honorable Court can not acquire jurisdiction over the same. Besides, the defendants Napoleon Gaza
and Evelyn Gaza being the owners of those properties cited in par. 4 of the complaint except for those copra and two (2) live carabaos
outside of the subject premises, plaintiffs have no rights whatsoever in claiming damages that it may suffer, as and by way of proof of
ownership of said properties cited in paragraph 4 of the complaint attached herewith are bunche[s] of documents to form an integral
part hereof;

8. That plaintiffs' allegation that Emilio Herrera was illegally detained together with his daughter was not true and in support thereof,
attached herewith is a copy of said Herrera's statement and marked as Annex "C-Gaza."

xxx xxx x x x9

The above-quoted paragraph 2 and Special and Affirmative Defenses contained in petitioners' answer glaringly show that petitioners
did not admit impliedly that respondents have been in prior and actual physical possession of the property. Actually, petitioners are
repudiating vehemently respondents' possession, stressing that they (petitioners) are the registered owners and lawful occupants
thereof.

Respondents' reliance on Warner Barnes and Co., Ltd. v. Reyes10 in maintaining that petitioners made an implied admission in their
answer is misplaced. In the cited case, the defendants' answer merely alleged that they were "without knowledge or information
sufficient to form a belief as to the truth of the material averments of the remainder of the complaint" and "that they hereby reserve the
right to present an amended answer with special defenses and counterclaim." 11 In the instant case, petitioners enumerated their special
and affirmative defenses in their answer. They also specified therein each allegation in the complaint being denied by them. They
particularly alleged they are the registered owners and lawful possessors of the land and denied having wrested possession of the
premises from the respondents through force, intimidation, threat, strategy and stealth. They asserted that respondents' purported
possession is "questionable from all aspects." They also averred that they own all the personal properties enumerated in respondents'
complaint, except the two carabaos. Indeed, nowhere in the answer can we discern an implied admission of the allegations of the
complaint, specifically the allegation that petitioners have priority of possession.

Thus, the Court of Appeals erred in declaring that herein petitioners impliedly admitted respondents' allegation that they have prior and
continuous possession of the property.47 (Underscoring supplied.)

In this case, as in Gaza, the admissions made by Spouses Go are to be read and taken together with the rest of the allegations made in
the Answer, including the special and affirmative defenses.

For instance, on the fact of default, PBCom alleges in paragraph 8 of the Complaint that Go defaulted in the payment for both
promissory notes, having paid only three interest installments covering the months of September, November, and December 1999.

In paragraph 6 of the Answer, Spouses Go denied the said allegation, and further alleged in paragraphs 8 to 13 that Go made
substantial payments on his monthly loan amortizations.

The portions of the pleadings referred to are juxtaposed below:

13
 Complaint
8. The defendant defaulted in the payment of the
obligations on the two (2) promissory notes (Annexes "A"
and "B" hereof) as he has paid only three (3) installments
on interests (sic) payments covering the months of
September, November and December, 1999, on both
promissory notes, respectively. As a consequence of the
default, the entire balance due on the obligations of the
defendant to plaintiff on both promissory notes immediately
became due and demandable pursuant to the terms and
conditions embodied in the two (2) promissory notes;48
Moreover, in paragraph 10 of the Answer, Spouses Go also denied the existence of prior demand alleged by PBCom in paragraph 10
of the Complaint. They stated therein that they were not aware of any demand made by PBCom for the settlement of the whole
obligation. Both sections are quoted below:
Complaint
10. Plaintiff made repeated demands from (sic) defendant
for the payment of the obligations which the latter
acknowledged to have incurred however, defendant
imposed conditions such as [that] his [effecting] payments
shall depend upon the lifting of garnishment effected by the
Bangko Sentral on his accounts. Photocopies of
Answer
6. Defendants deny the allegations in paragraphs 8, 9, 10
and 11 of the Complaint;
xxx
8. The promissory notes referred to in the complaint
expressly state that the loan obligation is payable within the
period of ten (10) years. Thus, from the execution date of
September 30, 1999, its due date falls on September 3o,
2009 (and not 2001 as erroneously stated in the complaint).
Thus, prior to September 30, 2009, the loan obligations
cannot be deemed due and demandable.
In conditional obligations, the acquisition of rights, as well
as the extinguishment or loss of those already acquired,
shall depend upon the happening of the event which
constitutes the condition. (Article 1181, New Civil Code)
9. Contrary to the plaintiff’s preference, defendant Jose C.
Go has made substantial payments in terms of his monthly
payments. There is therefore, a need to do some
accounting works (sic) just to reconcile the records of both
parties.
10. While demand is a necessary requirement to consider
the defendant to be in delay/default, such has not been
complied with by the plaintiff since the former is not aware
of any demand made to him by the latter for the settlement
of the whole obligation.
11. Undeniably, at the time the pledge of the shares of
stocks were executed, their total value is more than the
amount of the loan, or at the very least, equal to it. Thus,
plaintiff was fully secured insofar as its exposure is
concerned.49
12. And even assuming without conceding, that the present
value of said shares has went (sic) down, it cannot be
considered as something permanent since, the prices of
stocks in the market either increases (sic) or (sic)
decreases depending on the market forces. Thus, it is
highly speculative for the plaintiff to consider said shares to
have suffered tremendous decrease in its value. Moreso
(sic), it is unfair for the plaintiff to renounce or abandon the
pledge agreements.
13. As aptly stated, it is not aware of any termination of the
pledge agreement initiated by the plaintiff.
Answer
10. While demand is a necessary requirement to consider
the defendant to be in delay/default, such has not been
complied with by the plaintiff since the former is not aware
of any demand made to him by the latter for the settlement
of the whole obligation.
14
 defendant’s communication dated March 3, 2000 and April
7, 2000, with plaintiff are hereto attached as Annexes
"F" and "G" hereof, as well as its demand to pay dated
April 18, 2000. Demand by plaintiff is hereto attached
as Annex "H" hereof.50 [Emphases supplied]

Finally, as to the amount of the outstanding obligation, PBCom alleged in paragraph 9 of the Complaint that the outstanding balance on
the couples’ obligations as of May 31, 2001 was ₱21,576,668.64 for the first loan and ₱95,991,111.11, for the second loan or a total of
₱117,567,779.75.

In paragraph 9 of the Answer, however, Spouses Go, without stating any specific amount, averred that substantial monthly payments
had been made, and there was a need to reconcile the accounting records of the parties.

Complaint
9. Defendants’ outstanding obligations under the two (2)
promissory notes as of May 31, 2001 are: P21,576,668.64
(Annex "A") and P95,991,111.11 (Annex "B"), or a total of
P117,567,779.75. Copy of the Statement of Account is
hereto attached as Annex "E" hereof.51
Answer
9. Contrary to the plaintiff’s preference, defendant Jose C.
Go has made substantial payments in terms of his monthly
payments. There is therefore, a need to do some
accounting works just to reconcile the records of both
parties.52

Clearly then, when taken within the context of the entirety of the pleading, it becomes apparent that there was no implied admission and
that there were indeed genuine issues to be addressed.

As to the attached March 3, 2000 letter, the Court is in accord with the CA when it wrote:

The letter dated March 3, 2000 is insufficient to support the material averments in PBCom’s complaint for being equivocal and capable
of different interpretations. The contents of the letter do not address all the issues material to the bank’s claim and thus do not
conclusively establish the cause of action of PBCom against the spouses Go. As regards the letter dated April 7, 2000, the trial court
itself ruled that such letter addressed to PBCom could not be considered against the defendants-appellants simply because it was not
signed by defendant-appellant Jose Go.

Notably, the trial court even agreed with the defendant-appellants on the following points:

The alleged default and outstanding obligations are based on the Statement of Account. This Court agrees with the defendants that
since the substance of the document was not set forth in the complaint although a copy thereof was attached thereto, or the said
document was not set forth verbatim in the pleading, the rule on implied admission does not apply. 53

It must also be pointed out that the cases cited by PBCom do not apply to this case.1avvphi1 Those two cases involve denial of lack of
knowledge of facts "so plainly and necessarily within [the knowledge of the party making such denial] that such averment of ignorance
must be palpably untrue."54 Also, in both cases, the documents denied were the same documents or deeds sued upon or made the
basis of, and attached to, the complaint.

In Philippine Bank of Communications v. Court of Appeals,55 the Court ruled that the defendant’s contention that it had no truth or
information sufficient to form a belief as to the truth of the deed of exchange was an invalid or ineffectual denial pursuant to the Rules of
Court,56 as it could have easily asserted whether or not it had executed the deed of exchange attached to the petition. Citing Capitol
Motors Corporations v. Yabut,57 the Court stated that:

x x x The rule authorizing an answer to the effect that the defendant has no knowledge or information sufficient to form a belief as to the
truth of an averment and giving such answer the effect of a denial, does not apply where the fact as to which want of knowledge is
asserted, is so plainly and necessarily within the defendant’s knowledge that his averment of ignorance must be palpably untrue. 58

The Warner Barnes case cited above sprung from a suit for foreclosure of mortgage, where the document that defendant denied was
the deed of mortgage sued upon and attached to the complaint. The Court then ruled that it would have been easy for the defendants
to specifically allege in their answer whether or not they had executed the alleged mortgage.

Similarly, in Capitol Motors, the document denied was the promissory note sued upon and attached to the complaint. In said case, the
Court ruled that although a statement of lack of knowledge or information sufficient to form a belief as to the truth of a material averment
in the complaint was one of the modes of specific denial contemplated under the Rules, paragraph 2 of the Answer in the said case was
insufficient to constitute a specific denial.59 Following the ruling in the Warner Barnes case, the Court held that it would have been easy
for defendant to specifically allege in the Answer whether or not it had executed the promissory note attached to the Complaint. 60

15
In Morales v. Court of Appeals,61 the matter denied was intervenor’s knowledge of the plaintiff’s having claimed ownership of the
vehicle in contention. The Court therein stated:

Yet, despite the specific allegation as against him, petitioner, in his Answer in Intervention with Counterclaim and Crossclaim, answered
the aforesaid paragraph 11, and other paragraphs, merely by saying that "he has no knowledge or information sufficient to form a belief
as to its truth." While it may be true that under the Rules one could avail of this statement as a means of a specific denial, nevertheless,
if an allegation directly and specifically charges a party to have done, performed or committed a particular act, but the latter had not in
fact done, performed or committed it, a categorical and express denial must be made. In such a case, the occurrence or non-
occurrence of the facts alleged may be said to be within the party’s knowledge. In short, the petitioner herein could have simply
expressly and in no uncertain terms denied the allegation if it were untrue. It has been held that when the matters of which a defendant
alleges of having no knowledge or information sufficient to form a belief, are plainly and necessarily within his knowledge, his alleged
ignorance or lack of information will not be considered as specific denial. His denial lacks the element of sincerity and good faith, hence,
insufficient.62

Borrowing the phraseology of the Court in the Capitol Motors case, clearly, the fact of the parties’ having executed the very documents
sued upon, that is, the deed of exchange, deed or mortgage or promissory note, is so plainly and necessarily within the knowledge of
the denying parties that any averment of ignorance as to such fact must be palpably untrue.

In this case, however, Spouses Go are not disclaiming knowledge of the transaction or the execution of the promissory notes or the
pledge agreements sued upon. The matters in contention are, as the CA stated, whether or not respondents were in default, whether
there was prior demand, and the amount of the outstanding loan. These are the matters that the parties disagree on and by which
reason they set forth vastly different allegations in their pleadings which each will have to prove by presenting relevant and admissible
evidence during trial.

Furthermore, in stark contrast to the cited cases where one of the parties disclaimed knowledge of something so patently within his
knowledge, in this case, respondents Spouses Go categorically stated in the Answer that there was no prior demand, that they were not
in default, and that the amount of the outstanding loan would have to be ascertained based on official records.

WHEREFORE, the petition is DENIED.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

Warner Barnes v. Reyes, 103 Phil. 662 (1958)

[G.R. No. L-9531. May 14, 1958.]

16
 WARNER BARNES & CO., LTD., Plaintiff-Appellee, v. GUILLERMO C. REYES, ET AL., Defendants-Appellants.

Ozaeta, Lichauco & Picazo for Appellee.

Mariano M. de Joya for appellants.

SYLLABUS

1. PLEADING AND PRACTICE; ANSWER; WANT OF KNOWLEDGE OR INFORMATION SUFFICIENT TO FORM A BELIEF AS TO
THE TRUTH OF AN AVERMENT, WHEN CONSIDERED A MERE GENERAL DENIAL. — The rule specifically authorizing an answer
that defendant has no knowledge or information sufficient to form a belief as to the truth of an averment and giving such answer the
effect of a denial, does not apply where the fact as to which want of knowledge is asserted is to the knowledge of the court so plainly
and necessarily within the defendant’s knowledge that his averment of ignorance must be palpably untrue.

DECISION

PARAS, C.J. :

The plaintiff-appellee filed against the defendants-appellants an action for foreclosure of mortgage on August 20, 1954. The deed of
mortgage sued upon was attached to the complaint as Annex "A." After having been granted an extension, the appellants filed an
answer on September 30, 1954, alleging:jgc:chanrobles.com.ph

"1. That they admit paragraph 1 of the complaint;

"2. That the defendants are without knowledge or information sufficient to form a belief as to the truth of the material averments of the
remainder of the complaint; and

"3. That they hereby reserve the right to present an amended answer with special defenses and counterclaim."cralaw virtua1aw library

As the appellants did not file any amended answer, the appellee moved on November 15, 1954 for judgment on the pleadings on the
ground that the answer failed to tender an issue. The lower court granted appellee’s motion in the order dated December 28, 1954 and
thereafter (on December 29, 1954) rendered judgment in favor of the appellee. In granting the motion for judgment on the pleadings,
the lower court held "that the denial by the defendants of the material allegations of the complaint under the guise of lack of knowledge
is a general denial so as to entitle the plaintiff to judgment on the pleadings."cralaw virtua1aw library

In the present appeal taken by the defendants, the question raised is whether the allegation of want of knowledge or information as to
the truth of the material averments of the complaint amounts to a mere general denial warranting judgment on the pleadings or is
sufficient to tender a triable issue.

Section 7 of Rule 9 of the Rules of court, in allowing the defendant to controvert material averments not within his knowledge or
information, provides that "where the defendant is without knowledge or information sufficient to form a belief as to the truth of material
averment, he shall so state and this shall have the effect of a denial. This form of denial was explained in one case as
follows:jgc:chanrobles.com.ph

"Just as the explicit denials of an answer should be either general or specific, so all denials of knowledge or information sufficient to
form a belief should refer either generally to all the averments of the complaint thus intended to be denied, or specifically to such as are
to be met by that particular form of plea. The answer should be so definite and certain in its allegation that the pleaders’ adversary
should not be left in doubt as to what is admitted, what is denied, and what is covered by denials of knowledge or information sufficient
to form a belief. Under this form of denial employed by the defendant, it would be difficult, if not impossible to convict him of perjury if it
should transpire that some of his denials of knowledge, etc., were false, for he could meet the charge by saying that his denials referred
only to matters of which he had in fact no knowledge or information." (Kirachbaum v. Eschmann, 98 NE 328, 329-330.)

This is a foreclosure suit. It is alleged that the appellants are jointly and severally indebted in the sum of P9,906.88, secured by a
mortgage. A copy of the mortgage deed was attached to and made a part of the complaint. There are also allegations of partial
payments, defaults in the payment of outstanding balance, and a covenant to pay interest and attorney’s fees. It is hard to believe that
the appellants could not have had knowledge or information as to the truth or falsity of any of said allegations. As a copy of the deed of
mortgage formed part of the complaint, it was easy for and within the power of the appellants, for instance, to determine and so
specifically allege in their answer whether or not they had executed the alleged mortgage. The appellants could be aided in the matter
by an inquiry or verification as to its registration in the Registry of Deeds. "An unexplained denial of information and belief of a matter of
records, the means of information concerning which are within the control of the pleader, or are readily accessible to him, is evasive

17
and is insufficient to constitute an effective denial." (41 Am. Juris., 399, citing Dahlstrom v. Gemunder, 92, NE 106.)

It is noteworthy that the answer was filed after an extension granted by the lower court, and that while a reservation was made to file an
amended answer, no such pleading was presented. If these show anything, it is that the appellants obviously did not have any defense
or wanted to delay the proceedings.

The form of denial adopted by the appellants, although allowed by the Rules of Court, must be availed of with sincerity and in good
faith, — certainly neither for the purpose of confusing the adverse party as to what allegations of the complaint are really put in issue
nor for the purpose of delay.

". . . no court will permit its process to be trifled with and its intelligence affronted by the offer of pleadings which any reasoning person
knows can not possibly be true. . . .’The general rule that the Court is not bound to accept statements in pleadings which are, to the
common knowledge of all intelligent persons, untrue, applies just as well to the provisions of Rule 8(b), 28 U.S.C.A. following Section
723c, as to pleadings under the State Statute.’" (Nieman v. Long, 51 F. Supp. 30, 31.)

"This rule, specifically authorizing an answer that defendant has no knowledge or information sufficient to form a belief as to the truth of
an averment and giving such answer the effect of a denial, does not apply where the fact as to which want of knowledge is asserted is
to the knowledge of the court as plainly and necessarily within the defendant’s knowledge that his averment of ignorance must be
palpably untrue." (Icle Plant Equipment Co. v. Martocello, D. C. Pa. 1941, 43 F. Supp. 281.)

Wherefore, the decision appealed from is hereby affirmed with costs against the appellants. So ordered.

Serrano Mahilum v. Spouses Ilano, G.R. No. 197923, June 22, 2015

G.R. No. 197923, June 22, 2015

18
 RUBY RUTH S. SERRANO MAHILUM, Petitioner, v. SPOUSES EDILBERTO ILANO AND LOURDES ILANO, Respondent.

DECISION

DEL CASTILLO, J.:

Assailed in this Petition for Review on Certiorari1 are the following dispositions of the Court of Appeals: 1) February 2, 2011 Decision 2 in
CA-G.R. SP No. 113782 which granted herein respondents' Petition for Certiorari and Prohibition and thus nullified and set aside the
January 5, 20103 and February 24, 20104 Orders of the Regional Trial Court of Las Pinas City, Branch 255 in Civil Case No. LP-07-
0109; and 2) July 28, 2011 Resolution5 denying the herein petitioner's motion for reconsideration.

Factual Antecedents

Petitioner Ruby Ruth S. Serrano Mahilum is the registered owner of a parcel of land covered by Transfer Certificate of Title No.
855336 (TCT 85533) of the Registry of Deeds of Las Pinas City.

In September 2003, she entrusted the original owner's duplicate copy of TCT 85533 to Teresa Perez (Perez) - a purported real estate
broker - who claimed that she can assist petitioner in obtaining a loan, with TCT 85533 serving as collateral. After several months,
petitioner demanded the return of the title, but Perez failed to produce the same; after much prodding, Perez admitted that the title was
lost. Thus, in June 2004, petitioner executed an Affidavit of Loss and caused the same to be annotated upon the original registry copy
of TCT 85533 as Entry No. 1668-247 on October 7, 2004.

In June 2006, petitioner received a letter from the Registry of Deeds of Las Pinas City informing her that the owner's duplicate copy of
TCT 85533 was not lost, but that it was presented to the registry by respondents, spouses Edilberto and Lourdes Ilano, who claimed
that the property covered by the title was sold to them. In this connection, respondents - instead of registering the supposed sale in their
favor - executed an Affidavit of Non-Loss, which was entered on TCT 85533 on June 28, 2006 as Entry No. 1875-27. 8

Petitioner confronted respondents, who showed her a notarized Agreement 9 with right of repurchase dated December 4, 2003 and an
unnotarized and undated Deed of Absolute Sale,10 on which documents petitioner's purported signatures were affixed. These
documents indicate that petitioner sold the property covered by TCT 85533 to respondents for P250,000.00 with right to repurchase the
same within a period of 90 days. Petitioner told respondents that she did not execute these documents, and that her purported
signatures therein were in fact falsified and forged. She demanded the return of TCT 85533, but respondents refused to surrender the
title to her. They claimed that the property was sold to them by Perez and "a companion."

All this time, title to the property remained in petitioner's name, as respondents have not registered the unnotarized and undated Deed
of Absolute Sale.

Civil Case No. LP-07-0109

On June 20, 2007, petitioner and her husband Richard instituted against respondents and Perez Civil Case No. LP-07-0109 with the
Regional Trial Court of Las Pinas City. Her Complaint11 for "annulment of agreement and deed of absolute sale, specific performance,
with damages," which contained the foregoing statement of facts, likewise contained the following allegations and
prayer:chanroblesvirtuallawlibrary
18. That by reason of the actuations of the defendants in facilitating the execution of the aforesaid falsified documents, and adamant
refusal to return to plaintiffs the duplicate original owner's copy of their title, which were all done with evident bad faith, the plaintiffs
suffered and continue to suffer sleepless nights, wounded feelings, besmirched reputation, serious anxiety and other similar feelings,
which, when quantified, can reasonably be compensated with the sum of Fifty Thousand (P50,000.00) Pesos, as moral damages;

xxxx

PRAYER

WHEREFORE, it is most respectfully prayed of this Honorable Court, that after due notice and hearing, judgment be rendered in favor
of the plaintiffs and against the defendants, as follows:

1. Ordering the annulment of the documents denominated as Agreement (Deed of Sale with Right to Repurchase), dated December 4,
2003, and Deed of Absolute Sale and declaring the same as null and void;

2. Ordering defendants Ilano to surrender and return to plaintiffs the duplicate original owner's copy of TCT No. 85533;

3. Ordering the defendants, jointly and severally, to pay the plaintiffs the sum of Fifty Thousand Pesos (P50,000.00) as moral damages;

[4.] Ordering the defendants, jointly and severally, to pay the plaintiffs the sum of Twenty Thousand Pesos (P20,000.00) as attorney's
fees, and the additional amount of Two Thousand Pesos (P2,000.00) for every court hearing; and

19
[5.] Ordering the defendants to pay the costs of this suit.

Other reliefs deemed just and equitable are also prayed for. 12cralawlawlibrary
Respondents' Amended Answer with Compulsory Counterclaim13 alleged and admitted, among others, that petitioner was the owner of
the lot covered by TCT 85533; that said title was entrusted to Perez; that petitioner executed an affidavit of loss which was annotated
on TCT 85533; that they caused the annotation of an affidavit of non-loss on TCT 85533, as Entry No. 1875-27; that petitioner
confronted them; that they showed petitioner the Agreement and unnotarized Deed of Absolute Sale; that they are in possession of the
owner's copy of TCT 85533; that sometime in October 2003, Perez - accompanied by one Corazon Tingson (Tingson) "and a female
person who introduced herself as Ruby Ruth Serrano" - offered to sell to them the property covered by TCT 85533; that "in support of
the identity of the said Ruby Ruth Serrano, the original owner's copies of the title (TCT No. T-85533), Declaration of Real Property, Tax
Clearance, Barangay Clearance, Community Tax Certificate with picture of Ruby Ruth Serrano attached therein" were presented to
respondent Edilberto Ilano (Edilberto); that upon being satisfied as to the "identity of the person who introduced herself as Ruby Ruth
Serrano," Edilberto instructed his secretary to verify the authenticity of the title with the Register of Deeds of Las Pi�as City and
conduct an ocular inspection of the property; that "the person who introduced herself as Ruby Ruth Serrano" obtained a cash advance
of P50,000.00; that after verification confirmed that the property is indeed owned by and registered in the name of Ruby Ruth Serrano,
Edilberto - "believing in good faith that the person [with] whom he is dealing x x x is indeed the real Ruby Ruth Serrano" - entered into
the sale transaction; that on the same day, or October 30, 2004, petitioner received the full consideration of P250,000.00 and signed
the Agreement and Deed of Absolute Sale; that petitioner's affidavit of loss filed with the Registry of Deeds is false as TCT 85533 was
never lost but was entrusted to Perez who, together with Tingson "and another person herein named as 'Jane Doe' whose identity is yet
to be established who introduced herself as Ruby Ruth Serrano," came to respondents' office to obtain a loan because petitioner was in
dire need of money as she admitted in her complaint; that TCT 85533 was negotiated and/or sold by petitioner "or by her duly
authorized person, otherwise no one can present/deliver the original owner's duplicate copy of the said title x x x and the original copies
of the documents x x x;" that "for failure of the registered owner, Ruby Ruth Serrano, to exercise her right of repurchase within the
agreed period, ownership of the subject property now lawfully belongs to" respondents; that the complaint failed to allege that
respondents were purchasers in bad faith or at least with notice of the defect in the title, which leads to the conclusion that the
complaint states no cause of action; and that respondents filed a perjury case against petitioner with the Office of the City Prosecutor of
Para�aque.

Respondents thus prayed for the dismissal of the complaint, and by way of counterclaim, sought indemnity for moral damages in the
amount of P300,000.00; P100,000.00 as nominal damages; P200,000.00 as exemplary damages; P100,000.00 for attorney's fees; and
costs of suit.

Pre-trial and presentation of petitioner's evidence ensued. Thereafter, petitioner rested her case.

Respondents filed a Demurrer to Evidence,14 arguing that the complaint failed to state a cause of action in that petitioner failed to allege
that respondents were purchasers in bad faith or with notice of a defect in the title; that in the absence of such an allegation, the
presumption that respondents are purchasers in good faith prevails. Petitioner filed a Comment/ Opposition, 15 contending essentially
that her complaint contained an allegation that respondents were purchasers in bad faith, which is found in paragraphs 13 to 15 of the
complaint; and that the issues raised in the demurrer may only be resolved after trial on the merits.

Ruling of the Regional Trial Court

In a January 5, 2010 Order,16 the trial court denied respondents' demurrer. It held that the question of whether respondents are
purchasers in bad faith can only be resolved after the parties present their respective evidence. Thus, it
stated:chanroblesvirtuallawlibrary
The Court, after taking into account all the foregoing, does not find merit in the above demurrer. For one, the Court already held in its
Order dated 11 April 2008 that "during the pre-trial held last 11 February 2008 one of the issues submitted for resolution by the Court is
whether or not [sic] defendants Sps. Ilano are buyers in good faith and for value of the property subject hereof. This being so, the same
can only be resolved upon presentation of evidence by the parties herein regarding their respective positions." Thus, the instant case
cannot just be dismissed simply because the defendants said so based on their own evaluation of the evidence presented by the
plaintiff.

If only to stress, as far as the Court is concerned the assertions of the defendants are merely conclusions they arrived at on their own
that [run] counter to the position of the plaintiffs. As such, the defendants will have to present their own evidence to substantiate their
claims.

More importantly, the Court cannot just disregard the evidence and testimonies of the witnesses presented by the plaintiffs. Further, in
order to ferret out the truth and determine the veracity of the assertions being made by the parties herein, it is best that the "other side"
be heard. It is only in allowing the defendants to present their evidence that this can be achieved so that the herein case against them
can be resolved judiciously.

In the end, it is for the Court to evaluate the evidence to be presented by the parties herein. The conclusions being forwarded by the
parties will have to be reckoned with what have been presented and not on their respective self-serving assertions.

Indeed, a demurrer to evidence is anchored on the claim that upon the facts and the law the plaintiff has shown no right to relief (Sec.
1, Rule 33, Rules of Court). With respect to the herein case, there is no clear showing that plaintiffs Sps. Mahilum have no right to the
20
reliefs being sought by them. On the contrary, and if not opposed by contravening evidence by the defendants, their causes of action
may end up being supported by evidence that may merit rulings in their favor.

WHEREFORE, premises considered, the "Demurrer to Evidence" dated 11 November 2009 filed by defendants Sps. Edilberto and
Lourdes Ilano is DENIED for lack of merit.

SO ORDERED.17cralawlawlibrary
Respondents filed a Motion for Reconsideration,18 but the trial court denied the same in a February 24, 2010 Order. 19

Ruling of the Court of Appeals

Respondents went up to the Court of Appeals (CA) via an original Petition for Certiorari.20 Docketed as CA-G.R. SP No. 113782, the
petition essentially insisted that since petitioner's complaint failed to include an allegation that respondents were purchasers in bad
faith, then her complaint for annulment of sale failed to state a cause of action, which entitles them to a dismissal on demurrer; and that
in denying their demurrer, the trial court disregarded existing jurisprudence to the effect that where a complaint does not contain all the
facts constituting the plaintiffs cause of action, it is subject to a motion to dismiss. In addition to seeking the reversal of the trial court's
January 5, 2010 and February 24, 2010 Orders, respondents prayed for injunctive relief as well.

On July 15, 2010, the CA issued a Resolution21 denying respondents' application for a temporary restraining order.

Petitioner filed her Comment to the Petition.

On February 2, 2011, the CA issued the assailed Decision, which contained the following decretal portion:chanroblesvirtuallawlibrary
WHEREFORE, the above premises considered, the instant petition is GRANTED. The Orders of public respondent Regional Trial Court
of Las Pi�as City, Branch 255 dated 5 January 2010 and 24 February 2010, respectively, are NULLIFIED and SET ASIDE. Private
respondents' complaint for Annulment of Agreement and Deed of Absolute Sale, Specific Performance with Damages
is DISMISSED for lack of cause of action.

SO ORDERED.22cralawlawlibrary
The CA held that -
A careful reading of private respondents'23 complaint before public respondent would show that private respondents indeed failed to
allege that petitioners24 were in bad faith or at least aware of the misrepresentation of the vendor of the subject property at the time they
purchased the same, x x x

xxxx

xxx. Thus, absent an allegation in the subject complaint that petitioners were in bad faith or with notice of the vendor's
misrepresentation at the time of sale or prior thereto, they are presumed to be innocent purchasers for value of the subject property.

Under the law, a title procured through fraud and misrepresentation can still be the source of a completely legal and valid title if the
same is in the hands of an innocent purchaser for value and in good faith. Again, how can public respondent render a valid judgment
when, based on the allegations in the complaint, petitioners are presumed to have bought the subject lot in good faith? Stated
differently, private respondents have no cause of action against petitioners.

In their comment or opposition to petitioners' demurrer to evidence, private respondents argued that it is not accurate that they failed to
allege bad faith because paragraphs 13, 14, and 15 of their complaint indicated the evident bad faith of petitioners. However, a review
of said averments would only prove that petitioners became aware of the alleged fraud or misrepresentation after the execution of the
assailed agreement and deed of sale when private respondents confronted the former, and not before or during the execution of the
same. The Supreme Court held:chanroblesvirtuallawlibrary
"A person is considered in law as an innocent purchaser for value when he buys the property of another, without notice that some other
person has a right or an interest in such property, and pays a full price for the same at the time of such purchase, or before he has
notice of the claims or interest of some other person in the property. A person dealing with registered land may safely rely on the
correctness of the certificate of title of the vendor/transferor, and the law will in no way oblige him to go behind the certificate to
determine the condition of the property."25cralawlawlibrary
When the complaint alleges that private respondents did not sell the subject property to petitioners but does not allege that the latter
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. 26 By
reason of this failure, petitioners are presumed to be innocent purchasers for value and in good faith, entitled to protection under the
law.
"In Spouses Chu, Sr. v. Benelda Estate Development Corporation, this Court pronounced that it is crucial that a complaint for
annulment of title must allege that the purchaser was aware of the defect in the title, so that the cause of action against him or her will
be sufficient. Failure to do so, as in the case at bar, is fatal for the reason that the court cannot render a valid judgment against
the purchaser who is presumed to be in good faith in acquiring said property."27cralawlawlibrary
It was further held that a title issued to an innocent purchaser and for value cannot be revoked on the basis that the deed of sale was
falsified, if he or she had no knowledge of the fraud committed. 28 Here, there is clearly no imputation that petitioners had knowledge of

21
the fraud committed during the execution of the assailed agreement and deed of sale. Furthermore, in the formal offer of the testimony
of private respondent Ruby Ruth, proving bad faith was not even among the purposes for which her testimony was offered. Accordingly,
the testimony itself did not show bad faith on the part of petitioners.

It is significant to note that in the subject complaint, formal offer of evidence, and oral testimony, only two things were established: (1)
private respondents did not sell the subject property to petitioners and (2) Teresa Perez breached the trust given to her by private
respondents. These facts cannot constitute a cause of action or relief against petitioners because, absent an allegation of bad faith in
the complaint, they are presumed to be innocent purchasers for value during the execution of the agreement and deed of sale.

There is the established rule that if the defendant permits evidence to be introduced, without objection, which supplies the necessary
allegations of a defective complaint, this evidence has the effect of curing the defects of such complaint, and a demurrer thereafter is
inadmissible on the ground that the complaint does not state facts sufficient to constitute a cause of action. This rule, however, cannot
be applied in the instant case. Granting that petitioners did not object to the presentation of evidence of private respondents, the latter
still failed to cure the defect in their complaint since no evidence of bad faith on the part of petitioners was presented before the court.
Proofs of bad faith were all directed against Teresa Perez and her companion who introduced herself as Ruby Ruth Serrano.

Although this Court relied on the transcript of stenographic notes quoted by petitioners, as complete records of the case are still with
public respondent, private respondents did not question in their Comment on the petition, the tmthfulness of the statements quoted
therein. Hence, private respondents are deemed to have admitted the veracity of said transcript. Without an imputation [or] a showing
that petitioners were in bad faith or aware of the fraud perpetrated by Teresa Perez and her companion, no action can be maintained
against them.

In view of the foregoing, public respondent RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction when it
denied the Demurrer to Evidence notwithstanding the complete absence of a cause of action against petitioners. Public respondent
RTC contravened and disregarded the settled and prevailing jurisprudence on the matter. 29cralawlawlibrary
Petitioner filed her Motion for Reconsideration,30 which the CA denied in its assailed July 28, 2011 Resolution. Hence, the present
Petition.chanRoblesvirtualLawlibrary

Issues

Petitioner raises the following issues:chanroblesvirtuallawlibrary

I

ON QUESTION OF LAW, WHETHER x x x FAILURE TO ALLEGE BAD FAITH IN THE COMPLAINT IS A FATAL DEFECT
CONSIDERING THAT THE SUBJECT DOCUMENTS (AGREEMENT/DEED OF ABSOLUTE SALE WITH RIGHT TO REPURCHASE,
AND UNNOTARIZED DEED OF SALE) WERE MERELY SIMULATED, FICTITIOUS AND FORGERY [sic], AND HENCE, NULL AND
VOID FROM THE BEGINNING.

II

ON QUESTION OF LAW, WHETHER x x x THE PETITIONER WAS DEPRIVED OF HER PROPERTY WHEN THE COURT OF
APPEALS GRANTED THE DEMURRER TO EVIDENCE ON THE GROUND THAT THERE WAS NO CAUSE OF ACTION WHEN ONE
OF THE ISSUED [sic] AGREED UPON BY THE PARTIES DURING THE PRE-TRIAL BEFORE THE RTC WAS WHETHER x x x
PRIVATE RESPONDENTS WERE PURCHASERS IN GOOD FAITH.

III

WHETHER xxx PETITIONER'S WERE PREVENTED FROM CONFRONTING THE PRIVATE RESPONDENTS AND THEIR
WITNESSES TO DETERMINE WHETHER xxx THEY REALLY DEALT WITH PETITIONER AND TO DETERMINE WHO WAS THE
IMPOSTOR WHO SIGNED THE SUBJECT AGREEMENT AND DEED OF ABSOLUTE SALE AND HENCE, ALLOW THE RTC
COURT TO DETERMINE WHETHER THE SUBJECT AGREEMENT AND DEED OF ABSOLUTE SALE WERE SIMULATED,
FICTITIOUS AND NULL AND VOID AND IF PRIVATE RESPONDENTS WERE REALLY PURCHASERS FOR VALUE IN GOOD
FAITH THAT WILL AFFECT THE OUTCOME OF THE INSTANT CASE. 31cralawlawlibrary
Petitioner's Arguments

In praying that the assailed CA dispositions be set aside and that in effect the January 5, 2010 and February 24, 2010 Orders of the
trial court denying respondents' demurrer to evidence be reinstated, petitioner insists in her Petition and Reply 32 that during the pre-trial
conference, one of the issues agreed upon by the parties to be resolved was whether respondents were buyers in good faith, which
was reflected in the trial court's January 5, 2010 Order;33 that since the issue of good or bad faith has been agreed upon by the parties
as one of the matters to be tackled during trial, then the failure to allege bad faith in the complaint is deemed cured, and the defense is
deemed waived by the respondents with their assent given during pre-trial; and that the agreement and deed of absolute sale, being
forgeries, are null and void and without force and effect.

Petitioner adds that although a complaint which does not contain all the facts constituting the plaintiffs cause of action is subject to a
motion to dismiss, the defect is cured if the defendant permits the introduction of evidence which supplies or remedies such
22
defect;34 thus, respondents' assent to the framing of the issues during pre-trial and their failure to object to the presentation of evidence
on the issue of good or bad faith cured her defective complaint.

Finally, petitioner contends that the grant of respondents' demurrer amounts to a deprivation of property without due process of law, as
she was prevented from defending her ownership over the same by duly confronting the respondents and their witnesses and proving
that the agreement and deed of absolute sale were mere forgeries.

Respondents' Arguments

Respondents, on the other hand, argue in their Comment35 that the CA was correct in declaring that petitioner's complaint in Civil Case
No. LP-07-0109 failed to state a cause of action owing to her failure to allege that the property in question was purchased in bad faith.
They add that petitioner failed to present evidence during trial to the effect that they bought the subject property in bad faith; that the
scope of her evidence covered only her claim that she did not execute the subject agreement and deed of absolute sale, and that these
documents are fictitious and forged - she did not present evidence to show that they were buyers in bad faith. Thus, they maintain that
for failing to allege and prove bad faith on their part, the CA was correct in ordering the dismissal of Civil Case No. LP-07-
0109.chanRoblesvirtualLawlibrary

Our Ruling

The Court grants the Petition.

In granting demurrer, the CA failed to consider that title to the property remained in petitioner's name; TCT 85533 was never cancelled
and no new title was issued in respondents' name. As a matter of fact, what they did when petitioner annotated her affidavit of loss
upon TCT 85533 was to cause the annotation of an "affidavit of non-loss" afterward.

Since a new title was never issued in respondents' favor and, instead, title remained in petitioner's name, the former never came within
the coverage and protection of the Torrens system, where the issue of good or bad faith becomes relevant. Since respondents never
acquired a new certificate of title in their name, the issue of their good or bad faith which is central in an annulment of title case is of
no consequence; petitioner's case is for annulment of the Agreement and Deed of Absolute Sale, and not one to annul title since
the certificate of title is still in her name. The jurisprudential bases for the CA's pronouncement that there is a failure to state a cause of
action if there is no allegation in the complaint that respondents were purchasers in bad faith - Castillo v. Heirs of Vicente
Madrigal36 and Heirs of Julian Tiro v. Philippine Estates Corporation37 - involved complaints for annulment of new titles issued to the
buyers; they cannot apply to petitioner's case where title remains in her name.

Petitioner's case is to annul the agreement and deed of sale based on the allegation that they are forgeries, and that respondents were
parties to the fraud; since no new title was issued in respondents' favor, there is no new title to annul. Indeed, if the agreement and
deed of sale are forgeries, then they are a nullity and convey no title. 38 The underlying principle is that no one can give what one does
not have. Nemo dat quod non habet.
In Sps. Solivel v. Judge Francisco, we held that:chanroblesvirtuallawlibrary
x x x in order that the holder of a certificate for value issued by virtue of the registration of a voluntary instrument may be
considered a holder in good faith for value, the instrument registered should not be forged. When the instrument presented is
forged, even if accompanied by the owner's duplicate certificate of title, the registered owner does not thereby lose his title,
and neither does the assignee in the forged deed acquire any right or title to the property.

xxx The innocent purchaser for value protected by law is one who purchases a titled land by virtue of a deed executed by the
registered owner himself, not by a forged deed, as the law expressly states. xxx
In Instrade, Inc. v. Court of Appeals, we reiterated the said ruling maintaining that "[A]s early as Joaquin v. Madrid, x x x, we said that in
order that the holder of a certificate for value issued by virtue of the registration of a voluntary instrument may be considered a holder in
good faith and for value, the instrument registered should not be forged." Indubitably, therefore, the questioned Deed of Absolute Sale
did not convey any title to herein petitioners. Consequently, they cannot take refuge in the protection accorded by the Torrens system
on titled lands.

Thus, we hold that with the presentation of the forged deed, even if accompanied by the owner's duplicate certificate of title, the
registered owner did not thereby lose his title, and neither does the assignee in the forged deed acquire any right or title to the said
property, x x x39 (Emphasis supplied)
In this case, it is petitioner who must be protected under the Torrens system - as the registered owner of the subject property. "A
certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name
appears therein. The real puipose of the Torrens system of land registration is to quiet title to land and put a stop forever to any
question as to the legality of the title."40ChanRoblesVirtualawlibrary
In Tenio-Obsequio v. Court of Appeals, we explained the purpose of the Torrens system and its legal implications to third persons
dealing with registered land, as follows:chanroblesvirtuallawlibrary
The main purpose of the Torrens system is to avoid possible conflicts of title to real estate and to facilitate transactions relative thereto
by giving the public the right to rely upon the face of a Torrens certificate of title and to dispense with the need of inquiring further,
except when the party concerned has actual knowledge of facts and circumstances that should impel a reasonably cautious man to
make such further inquiry. Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights

23
over the property, the court cannot disregard such rights and order the total cancellation of the certificate. The effect of such
an outright cancellation would be to impair public confidence in the certificate of title, for everyone dealing with property
registered under the Torrens system would have to inquire in every instance as to whether the title has been regularly or
irregularly issued by the court. Every person dealing with registered land may safely rely on the correctness of the certificate of title
issued therefor and the law will in no way oblige him to go beyond the certificate to determine the condition of the property.

The Torrens system was adopted in this country because it was believed to be the most effective measure to guarantee the integrity of
land titles and to protect their indefeasibility once the claim of ownership is established and recognized. If a person purchases apiece of
land on the assurance that the seller's title thereto is valid, he should not run the risk of being told later that his acquisition was
ineffectual after all. This would not only be unfair to him. What is worse is that if this were permitted, public confidence in the system
would be eroded and land transactions would have to be attended by complicated and not necessarily conclusive investigations and
proof of ownership. The further consequence would be that land conflicts could be even more numerous and complex than they are
now and possibly also more abrasive, if not even violent. The Government, recognizing the worthy purposes of the Torrens system,
should be the first to accept the validity of titles issued thereunder once the conditions laid down by the law are satisfied.
The Torrens system was intended to guarantee the integrity and collusiveness of the certificate of registration, but the system cannot be
used for the perpetration of fraud against the real owner of the registered land. The system merely confirms ownership and does not
create it. It cannot be used to divest lawful owners of their title for the purpose of transferring it to another one who has not
acquired it by any of the modes allowed or recognized by law. Thus, the Torrens system cannot be used to protect a usurper from
the true owner or to shield the commission of fraud or to enrich oneself at the expense of another. 41 (Emphasis and underscoring
supplied)
A cursory examination of the record will show that petitioner's action does not appear to be groundless. There are circumstances which
lead one to believe that respondents are not exactly innocent of the charge. Their failure to register the unnotarized and undated deed
of absolute sale is at the very least unusual; it is contrary to experience. It is uncharacteristic of a conscientious buyer of real estate not
to cause the immediate registration of his deed of sale as well as the issuance of a new certificate of title in his name. Having
supposedly paid a considerable amount (P250,000.00) for the property, respondents certainly would have protected themselves by
immediately registering the sale and obtaining a new title in their name; but they did not. Even after petitioner caused the annotation of
her affidavit of loss, respondents did not register their supposed sale, but merely annotated an "affidavit of non-loss." This, together with
the fact that the deed of absolute sale is undated and unnotarized, places their claim that they are purchasers in good faith seriously in
doubt. The ruling in Rufloe v. Burgos42 comes to mind:chanroblesvirtuallawlibrary
We cannot ascribe good faith to those who have not shown any diligence in protecting their rights. Respondents had
knowledge of facts that should have led them to inquire and investigate in order to acquaint themselves with possible defects in the title
of the seller of the property. However, they failed to do so. Thus, Leonarda, as well as the Burgos siblings, cannot take cover under the
protection the law accords to purchasers in good faith and for value. They cannot claim valid title to the property.

Moreover, the defense of indefeasibility of a Torrens title does not extend to a transferee who takes it with notice of a flaw in the title of
his transferor. To be effective, the inscription in the registry must have been made in good faith. A holder in bad faith of a certificate of
title is not entitled to the protection of the law, for the law cannot be used as a shield for fraud.

We quote with approval the following findings of the trial court showing that the sale between the Burgos siblings and
Leonarda is simulated:
1. The sale was not registered, a circumstance which is inconceivable in a legitimate transfer. A true vendee would not brook
any delay in registering the sale in his favor. Not only because registration is the operative act that effects property covered
by the Torrens System, but also because registration and issuance of new title to the transferee, enable this transferee to
assume domiciliary and possessory rights over the property. These benefits of ownership shall be denied him if the titles of
the properly shall remain in the name of vendor. Therefore, it is inconceivable as contrary to behavioral pattern of a true buyer
and the empirical knowledge of man to assume that a buyer who invested on the property he bought would be uninvolved and
not endeavor to register the property he bought. The nonchalance of Leonarda amply demonstrates the pretended sale to her, and
the evident scheme of her brother Amado who invested on the property he bought. 43 (Emphasis supplied)
Most telling is respondents' Amended Answer with Compulsory Counterclaim, which tends to admit and indicate that when the
December 4, 2003 Agreement with right of repurchase and unnotarized and undated Deed of Absolute Sale were executed, an
individual - who falsely represented herself to be petitioner - appeared and signed these documents. Thus, respondents alleged in their
amended answer that sometime in October 2003, Perez - accompanied by one Corazon Tingson (Tingson) "and a female person who
introduced herself as Ruby Ruth Serrano" - offered to sell to them the properly covered by TCT 85533; that "in support of the
identity of the said Ruby Ruth Serrano, the original owner's copies of the title (TCT No. T-85533), Declaration of Real Property, Tax
Clearance, Barangay Clearance, Community Tax Certificate with picture of Ruby Ruth Serrano attached therein" were presented to
respondent Edilberto Ilano (Edilberto); that upon being satisfied as to the "identity of the person who introduced herself as Ruby
Ruth Serrano," Edilberto instructed his secretary to verify the authenticity of the title from the Register of Deeds of Las Pinas City and
conduct an ocular inspection of the property; that "the person who introduced herself as Ruby Ruth Serrano" obtained a cash
advance of P50,000.00; that after verification confirmed that the property is indeed owned by and registered in the name of Ruby Ruth
Serrano, Edilberto - "believing in good faith that the person [with] whom he is dealing x x x is indeed the real Ruby Ruth
Serrano" - entered into the sale transaction; that petitioner's affidavit of loss filed with the Registry of Deeds is false as TCT 85533 was
never lost but was entrusted to Perez who, together with Tingson "and another person herein named as 'Jane Doe' whose identity
is yet to be established who introduced herself as Ruby Ruth Serrano," came to respondents' office to obtain a loan because
petitioner was in dire need of money as she admitted in her complaint.

24
Even at the level of the CA, respondents admitted, in their petition for certiorari, that they bought the property not from petitioner, but
from their "co-defendants who had a defective title" - presumably Perez and the impostor. The pertinent portion of their petition
reads:chanroblesvirtuallawlibrary
Bad faith cannot be presumed. It must be established by clear evidence. And it appearing that the subject complaint is for recovery and
possession of a parcel of land, and that defendants bought it from their co-defendants who had a defective title, but does not
allege in the complaint that the purchasers were buyers in bad faith or with notice of the defect in the title of their vendors x x
x44 (Emphasis supplied)
The above allegations in respondents' pleadings are certainly revealing. They already knew petitioner's identity and how she looked,
having met her even before the filing of the complaint - when petitioner confronted them and they showed her the agreement and deed
of sale. Thus, they should not have referred to the supposed seller as "another person herein named as 'Jane Doe' whose identity is
yet to be established who introduced herself as Ruby Ruth Serrano" or "the person who introduced herself as Ruby Ruth Serrano" if
indeed it was petitioner herself who appeared and signed the agreement and deed of sale in question. They should have categorically
alleged that they bought the property from petitioner herself if indeed this was so. Their ambiguous allegations constitute a negative
pregnant, which is in effect an admission.
Evidently, this particular denial had the earmark of what is called in the law on pleadings as a negative pregnant, that is, a denial
pregnant with the admission of the substantial facts in the pleading responded to which are not squarely denied. It was in effect an
admission of the averments it was directed at. Stated otherwise, a negative pregnant is a form of negative expression which carries with
it an affirmation or at least an implication of some kind favorable to the adverse party. It is a denial pregnant with an admission of the
substantial facts alleged in the pleading. Where a fact is alleged with qualifying or modifying language and the words of the allegation
as so qualified or modified are literally denied, it has been held that the qualifying circumstances alone are denied while the fact itself is
admitted.45ChanRoblesVirtualawlibrary

"If an allegation is not specifically denied or the denial is a negative pregnant, the allegation is deemed admitted." "Where a fact is
alleged with some qualifying or modifying language, and the denial is conjunctive, a 'negative pregnant' exists, and only the qualification
or modification is denied, while the fact itself is admitted." "A denial in the form of a negative pregnant is an ambiguous pleading, since
it cannot be ascertained whether it is the fact or only the qualification that is intended to be denied." "Profession of ignorance about a
fact which is patently and necessarily within the pleader's knowledge, or means of knowing as ineffectual, is no denial at
all."46 (Emphasis supplied)
Finally, petitioner's complaint in Civil Case No. LP-07-0109 clearly states that in the execution of the agreement and deed of absolute
sale, respondents and Perez acted in bad faith and connived in the forgery. Specifically, paragraph 18 of her complaint states, as
follows:chanroblesvirtuallawlibrary
18. That by reason of the actuations of the defendants in facilitating the execution of the aforesaid falsified documents, and adamant
refusal to return to plaintiffs the duplicate original owner's copy of their title, which were all done with evident bad faith, the plaintiffs
suffered and continue to suffer sleepless nights, wounded feelings, besmirched reputation, serious anxiety and other similar feelings,
which, when quantified, can reasonably be compensated with the sum of Fifty Thousand (P50,000.00) Pesos, as moral
damages;47cralawlawlibrary
Thus, the CA's pronouncement - that nowhere in the complaint is it alleged that respondents were purchasers in bad faith - is patently
erroneous. The primary ground for reversing the trial court's denial of respondents' demurrer is therefore completely unfounded.
Besides, the action itself, which is grounded on forgery, necessarily presupposes the existence of bad faith.

With the foregoing pronouncement, the Court finds no need to tackle the other issues raised by petitioner. They are rendered moot and
irrelevant by the view taken and manner in which the case was resolved.cralawred

WHEREFORE, the Petition is GRANTED. The assailed February 2, 2011 Decision and. July 28, 2011 Resolution of the Court of
Appeals in CA-G.R. SP No. 113782 are REVERSED and SET ASIDE. The case is remanded to the Regional Trial Court of Las Pinas
City, Branch 255 in Civil Case No. LP-07-0109 for proper disposition.

SO ORDERED.c

Vargas v. Estate of Ogsos, G.R. No. 221062, [October 5, 2016], 796 PHIL 840-856)

G.R. No. 221062, October 05, 2016

ELIZABETH SY-VARGAS, Petitioner, v. THE ESTATE OF ROLANDO OGSOS, SR. AND ROLANDO OGSOS, JR., Respondent.

DECISION

PERLAS-BERNABE, J.:

25
Assailed in this petition for review on certiorari1 are the Decision2 dated February 28, 2014 and the Resolution3 dated October 1, 2015
of the Court of Appeals (CA) in CA G.R. CV No. 03710, which affirmed with modification the Decision 4 dated July 2, 2007 of the
Regional Trial Court of Dumaguete City, Branch 36 (RTC) in Civil Case No. 12708, thereby: (a) ordering petitioner Elizabeth Sy-Vargas
(petitioner) and her sister, Kathryn T. Sy (Kathryn), to pay respondents the Estate of Rolando Ogsos, Sr. (Ogsos, Sr.) and Rolando
Ogsos, Jr., (Ogsos, Jr.; collectively, respondents) the amount of P10,391,981.76, representing the value of the sugar and molasses that
could have been produced from 1999 to 2004, if only respondents were not deprived by petitioner and Kathryn of possession and
enjoyment of the leased agricultural farm; and (b) deleting the awards for moral and exemplary damages, as well as the attorney's fees
and costs of suit against respondents.

The Facts

On February 10, 1994, Ogsos, Sr. and the Heirs of Fermina Pepico (Fermina), represented by their Attorney-in-Fact, Catalino V. Noel,
entered into a Contract of Lease5 (lease contract) covering five (5) parcels of agricultural land owned by the latter, with an aggregate
area of 23 hectares, more or less, situated in Maaslum Manjuyod, Negros Oriental (leased premises). Based on the contract, Ogsos,
Sr. agreed to pay the Heirs of Fermina 230 piculs or 290.95 liquid-kilogram (lkg.) of centrifugal sugar every crop year, starting from crop
year 1994-1995 to crop year 2000-2001, as lease rental.6chanrobleslaw

On June 5, 1996, the term of the lease contract was extended for three (3) years, or until the end of crop year 2004, due to Ogsos, Sr.'s
introduction of improvements on the leased premises.7 Thereafter, or on December 30, 1996, the said contract was amended,
modifying the lease rental from 230 piculs or 290.95 lkg. of centrifugal sugar every crop year to P150,000.00 cash, beginning the crop
year 1996-1997.8chanrobleslaw

Petitioner and Kathryn, who are among the heirs of Fermina, claimed that the lease rentals from crop year 1994-1995 to crop year
1998-1999 were not paid. Thus, on April 27, 2000,9 they filed a Complaint10 for Specific Performance and Damages against
respondents, before the RTC, docketed as Civil Case No. 12708, to recover the unpaid lease rentals. Pertinently, they did not include in
their claim the lease rental for crop year 1999-2000 because respondents had already abandoned the leased premises since the said
crop year.11chanrobleslaw

Summons was served in May 2000, but respondent Ogsos, Jr. only filed a motion to admit answer 12 and answer13 to the complaint after
more than two (2) years, or on December 17, 2002.14 Thus, petitioner and Kathryn filed on January 28, 2003, an opposition thereto, and
moved to declare respondents in default, which the RTC granted in an Order dated March 7, 2003. 15chanrobleslaw

Their motion for reconsideration having been denied by the RTC, respondents, then, elevated the matter via a petition for certiorari to
the CA, docketed as CA-G.R. SP No. 79463, wherein the CA granted respondents petition and remanded the case to the RTC. The CA
ordered the RTC to admit respondents' answer so as to give them the opportunity to be heard and to present their side on the merits of
the case.16chanrobleslaw

In their answer,17 respondents alleged that they had faithfully complied with their obligations as embodied in the lease contract and its
subsequent amendments.18 They denied abandoning the leased premises and claimed that sometime in December 1998, petitioner and
Kathryn unlawfully took possession of the leased premises and appropriated for themselves the sugarcane ready for harvest under the
pretext that they would apply the proceeds thereof to the unpaid rent. 19 They likewise alleged that in the same year, Ogsos, Sr. and his
wife fell ill, which incidents forced respondents to obtain loans from several businessmen, namely: Emiliano "Nonette" Bacang, Zaldy
Roleda, and Pastor Domocol.20 The arrangement regarding the foregoing loans was that the said creditors would be allowed to harvest
the sugarcane from the leased premises and apply the proceeds thereof to the loans. 21 However, when the creditors were about to
harvest the sugarcane, they were prevented by petitioner and Kathryn; resulting in respondents' default in the payment of their
debts.22 On March 22, 2000, Ogsos, Sr. died.23chanrobleslaw

Respondents also averred that since crop years 1994 to 1997-1998, the average production of sugarcane is 1,308.68 lkg. of sugar and
30.409 tons of molasses per year, as computed on the basis of the Planter's Production Reports. Thus, when petitioner and Kathryn
took possession of the leased premises, respondents lost their profits equivalent to the aforesaid production starting from crop year
1999-2000 until the termination of the lease contract on crop year 2003-2004. 24 Accordingly, respondents filed a counterclaim for these
lost profits plus damages.25cralawredchanrobleslaw

On June 6, 2005, respondents moved for the dismissal of the complaint in view of the absence of the required Certificate of Non-Forum
Shopping. In a Resolution dated November 9, 2005, the RTC dismissed the case without prejudice. 26chanrobleslaw

On December 15, 2005, respondents moved for the hearing of their counterclaim, to which the RTC required petitioner and Kathryn to
submit a comment, but none was filed. Hence, in an Order dated February 9, 2006, the RTC set the case for reception of evidence on
respondents' counterclaim.27chanrobleslaw

On February 28, 2006, respondents filed an Ex-Parte Motion to Set Case for Pre-Trial, which was granted by the RTC on March 1,
2006, setting the pre-trial on March 30, 2006. Petitioner, Kathryn, and their counsel failed to appear at the pre-trial and to file their pre-
trial brief. Thus, respondents filed a manifestation with motion to present evidence ex-parte on June 7, 2006, praying that petitioner and
Kathryn be declared in default, and that respondents be allowed to present evidence on their counterclaim ex-parte, which the RTC
granted in an Order dated June 28,2006.28chanrobleslaw

26
Thereafter, or on August 16, 2006, petitioner and Kathryn moved to quash the June 28, 2006 Order, which was, however, denied on
September 1, 2006 on the ground that the period to ask for reconsideration or for the lifting of the order had already
lapsed.29chanrobleslaw

On October 17, 2006, petitioner and Kathryn filed a motion to dismiss respondents' counterclaim arguing that the same were
permissive and that respondents had not paid the appropriate docket fees. 30 However, the RTC, in its November 16, 2006
Order,31 denied the said motion, declaring respondents' counterclaim as compulsory; thus, holding that the payment of the required
docket fees was no longer necessary.32chanrobleslaw

The RTC Ruling

In a Decision33 dated July 2, 2007, the RTC granted respondents' counterclaim, and consequently, ordered petitioner and Kathryn to
pay respondents the following amounts: (a) P10,391,981.76 worth of sugar and molasses produced representing the value of 1,308.68
lkg. of sugar and 30.409 tons of molasses for each crop year that defendant and Ogsos, Sr. were deprived of possession and
enjoyment of the leased premises; (b) P500,000.00 as moral damages; (c) P100,000.00 as exemplary damages; (d) P100,000.00 as
attorney's fees and P1,000.00 for each personal appearance of respondents' counsel before the RTC; and (e) P50,000.00 as costs of
suit.34 In so ruling, it found that Ogsos, Sr. faithfully paid the lease rentals during the crop years 1994 to 1997 35 but eventually stopped
their payments when petitioner and Kathryn took possession and harvested the sugarcane in the leased premises sometime in
December 1998, despite respondents' objection.36 Accordingly, petitioner and Kathryn reneged on their obligation to maintain
respondents' peaceful and adequate enjoyment of the leased premises when the former forcibly and unlawfully deprived the latter of
possession thereof in December 1998, despite payment of the lease rentals. Due to this, petitioner and Kathryn were held liable for
breach of the lease contract.37chanrobleslaw

Dissatisfied, petitioner and Kathryn appealed to the CA.38chanrobleslaw

The CA Ruling

In a Decision39 dated February 28, 2014 (CA Decision), the CA affirmed the ruling of the RTC but deleted the awards for moral and
exemplary damages, as well as the attorney's fees and costs of suit due to the absence of proof that petitioner and Kathryn acted
fraudulently or in bad faith.40chanrobleslaw

The CA ruled that the RTC was correct in ruling that respondents' counterclaim is not permissive but compulsory; hence, payment of
docket fees was not necessary.41 Further, the CA ruled that even though the counterclaim was compulsory, the same would not be
automatically dismissed upon the dismissal of the action if the dismissal was caused by the fault of the plaintiff, as in this
case.42chanrobleslaw

The counsel of petitioner and Kathryn received the CA Decision on March 14, 2014. 43 On March 31, 2014, petitioner and Kathryn filed
their motion for reconsideration,44 which was denied in the Resolution45 dated October 1, 2015 for being filed out of time; hence, the
instant petition solely filed by petitioner.46chanrobleslaw

The Issues Before the Court

The essential issues for resolution in this case are whether or not the CA correctly ruled that: (a) petitioner's motion for reconsideration
was filed out of time; (b) respondents' counterclaim for damages is compulsory and not permissive in nature, and thus, no payment of
docket fees is required; and (c) respondents are entitled to such counterclaim.

The Court's Ruling

I.

Records bear out that in the assailed October 1, 2015 Resolution, the CA denied petitioner's motion for reconsideration for being
purportedly filed out of time. The CA explained that since the registry return receipt showed that petitioner and Kathryn's counsel
received the assailed March 14, 2014 Decision, it only had until March 29, 2014 to file a motion for reconsideration. However, they only
filed such motion on March 31, 2014, thus, rendering the assailed CA Decision final and executory.

Notably, however, the CA failed to take into consideration that March 29, 2014 fell on a Saturday. In these situations, Section 1, Rule 22
of the Rules of Court provides that:ChanRoblesVirtualawlibrary
Section. 1. How to compute time. - In computing any period of time prescribed or allowed by these Rules, or by order of the court, or by
any applicable statute, the day of the act or event from which the designated period of time begins to run is to be excluded and the date
of performance included. If the last day of the period, as thus computed, falls on a Saturday, a Sunday, or a legal holiday in the place
where the court sits, the time shall not run until the next working day.
Since March 29, 2014 fell on a Saturday, petitioner and Kathryn were completely justified in filing their motion for reconsideration on the
next working day: Monday, March 31, 2014. Accordingly, the CA should not have considered it filed out of time, and instead, resolved
such motion on the merits. In such an instance, court procedure dictates that the instant case be remanded to the CA for resolution on
the merits. However, when there is already enough basis on which a proper evaluation of the merits may be had - as in this case - the

27
Court may dispense with the time-consuming procedure of remand in order to prevent further delays in the disposition of the case and
to better serve the ends of justice.47 In view of the foregoing � as well as the fact that petitioner prayed for the resolution of the
substantive issues on the merits48 - the Court finds it appropriate to resolve the substantive issues of this case.

II.

Essentially, the nature of a counterclaim is determinative of whether or not the counterclaimant is required to pay docket fees. The rule
in permissive counterclaims is that for the trial court to acquire jurisdiction, the counterclaimant is bound to pay the prescribed docket
fees.49 On the other hand, the prevailing rule with respect to compulsory counterclaims is that no filing fees are required for the trial
court to acquire jurisdiction over the subject matter.50chanrobleslaw

In general, a counterclaim is any claim which a defending party may have against an opposing party. A compulsory counterclaim is one
which, being cognizable by the regular courts of justice, arises out of or is connected with the transaction or occurrence constituting the
subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court
cannot acquire jurisdiction. A compulsory counterclaim is barred if not set up in the same action. 51chanrobleslaw

On the other hand, a counterclaim is permissive if it does not arise out of or is not necessarily connected with the subject matter of the
opposing party's claim. It is essentially an independent claim that may be filed separately in another case. 52chanrobleslaw

In Spouses Mendiola v. CA,53 the Court had devised tests m determining whether or not a counterclaim is compulsory or
permissive:ChanRoblesVirtualawlibrary
The four tests to determine whether a counterclaim is compulsory or not are the following, to wit: (a) Are the issues of fact or law
raised by the claim and the counterclaim largely the same? (b) Would res judicata bar a subsequent suit on defendant's
claims, absent the compulsory counterclaim rule? (c) Will substantially the same evidence support or refute plaintiff's claim
as well as the defendant's counterclaim? and (d) Is there any logical relation between the claim and the counterclaim, such
that the conduct of separate trials of the respective claims of the parties would entail a substantial duplication of effort and
time by the parties and the court? Of the four, the one compelling test of compulsoriness is the logical relation between the claim
alleged in the complaint and that in the counterclaim. Such relationship exists when conducting separate trials of the respective claims
of the parties would entail substantial duplication of time and effort by the parties and the court; when the multiple claims involve the
same factual and legal issues; or when the claims are offshoots of the same basic controversy between the parties. If these tests
result in affirmative answers, the counterclaim is compulsory. 54 (Emphases and underscoring supplied)
Based on the abovementioned standards, the Court finds that the counterclaim of respondents is permissive in nature. This is because:
(a) the issue in the main case, i.e., whether or not respondents are liable to pay lease rentals, is entirely different from the issue in the
counterclaim, i.e., whether or not petitioner and Kathryn are liable for damages for taking over the possession of the leased premises
and harvesting and appropriating respondents' crops planted therein; (b) since petitioner and respondents' respective causes of action
arose from completely different occurrences, the latter would not be barred by res judicata had they opted to litigate its counterclaim in
a separate proceeding; (c) the evidence required to prove petitioner's claim that respondents failed to pay lease rentals is likewise
different from the evidence required to prove respondents' counterclaim that petitioner and Kathryn are liable for damages for
performing acts in bad faith; and (d) the recovery of petitioner's claim is not contingent or dependent upon proof of respondents'
counterclaim, such that conducting separate trials will not result in the substantial duplication of the time and effort of the court and the
parties.

In view of the finding that the counterclaim is permissive, and not compulsory as held by the courts a quo, respondents are required to
pay docket fees. However, it must be clarified that respondents' failure to pay the required docket fees, per se, should not necessarily
lead to the dismissal of their counterclaim. It has long been settled that while the court acquires jurisdiction over any case only upon the
payment of the prescribed docket fees, its non-payment at the time of filing of the initiatory pleading does not automatically cause its
dismissal provided that: (a) the fees are paid within a reasonable period; and (b) there was no intention on the part of the claimant to
defraud the government.55chanrobleslaw

Here, respondents cannot be faulted for non-payment of docket fees in connection with their counterclaim, primarily because as early
as November 16, 2006, the RTC had already found such counterclaim to be compulsory in nature. 56 Such finding was then upheld in
the July 2, 2007 RTC Decision and affirmed on appeal by the CA in its assailed Decision. As such, the lower courts did not require
respondents to pay docket fees and even proceeded to rule on their entitlement thereto. Verily, respondents' reliance on the findings of
the courts a quo, albeit erroneous, exhibits their good faith in not paying the docket fees, much more their intention not to defraud the
government. Thus, the counterclaim should not be dismissed for non�payment of docket fees. Instead, the docket fees required shall
constitute a judgment lien on the monetary awards in respondents'� favor. In Intercontinental Broadcasting Corporation v.
Legasto,57 citing, Section 2, Rule 14158 of the Rules of Court, the Court held that in instances where a litigant's non-payment of docket
fees was made in good faith and without any intention of defrauding the government, the clerk of court of the court a quo should be
ordered to assess the amount of deficient docket fees due from such litigant, which will constitute a judgment lien on the amount
awarded to him, and enforce such lien,59 as in this case.

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

III.

In this case, the RTC found that under the lease contract, petitioner and Kathryn were bound to keep respondents in peaceful and
28
adequate enjoyment of the leased premises for the entire duration of the lease and that respondents faithfully paid their lease rentals
for a period of four (4) years, or until crop year 1998. Despite the foregoing, petitioner and Kathryn unlawfully took possession
(sometime in December 1998) and harvested respondents' crops over their objections. The RTC further found that due to such unlawful
dispossession of the leased premises, respondents were deprived of profits for six (6) crop years (i.e., from crop year 1999 to
crop year 2004, which was the last crop year of the lease) in the amount of P1,731,996.96 per year, or a grand total of
P10,391,987.76.60 Such factual findings were then affirmed by the CA in its assailed ruling. It has long been settled that factual findings
of the trial court, affirmed by the CA, are final and conclusive and may not be reviewed on appeal, 61 save for certain exceptions,62 which
petitioner failed to show in this case. As such, the grant of said counterclaim is upheld.

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

WHEREFORE, the petition is DENIED. The Decision dated February 28, 2014 and the Resolution dated October 1, 2015 of the Court
of Appeals in CA G.R. CV No. 03710 are hereby AFFIRMED with MODIFICATION deducting from the counterclaim award of
P10,391,987.76 in favor of the Estate of Rolando Ogsos, Sr. and Rolando Ogsos, Jr. (respondents) the amount of P900,000.00, which
represents the unpaid lease rentals for the crop years 1999 to 2004 as above-discussed. Moreover, a judgment lien shall be imposed
on the monetary award given to respondents corresponding to the unpaid docket fees on the permissive counterclaim. Accordingly, the
Clerk of Court of the Regional Trial Court of Dumaguete City, Branch 36, or his duly authorized deputy, is hereby ordered to enforce the
judgment lien and to assess and collect the appropriate docket fees from respondents.

SO ORDERED.

Dio v. Subic Bay Marine Exploratorium, Inc., G.R. No. 189532, [June 11, 2014]

Republic of the Philippines

SUPREME COURT
Manila

29
 SECOND DIVISION

G.R. No. 189532 June 11, 2014

VIRGINIA S. DIO and H.S. EQUITIES, LTD., Petitioners,

vs.
SUBIC BAY MARINE EXPLORATORIUM, INC., represented by its Chairman and Chief Executive Officer, TIMOTHY
DESMOND, Respondents.

DECISION

PEREZ, J.:

This is a Petition for Review on Certiorari1 pursuant to Rule 45 of the Revised Rules of Court, assailing the 3 April 2009 Order 2 of the
Regional Trial Court (RTC) of Balanga City, Bataan, on pure question of law. In its assailed Order, the RTC denied the motion filed by
petitioners to set their counterclaims for hearing on the ground that the main case was already dismissed with finality by the Court of
Appeals in CA-G.R. CV No. 87117.

In an Order3 dated 26 August 2009, the RTC refused to reconsider its earlier disposition.

The Facts

Petitioner H.S. Equities, Ltd., (HSE) is a foreign corporation duly organized and existing under the laws of the British Virgin Islands, with
registered address at Akara Building, 24 De Castro Street, Wickhams Cay I, Road Town, Tortola, British Virgin Islands. It entered into
an isolated transaction subject of the instant case. It is represented in this action by petitioner Virginia S. Dio (Dio).

Respondent Subic Bay Marine Exploratorium, Inc. (SBME) is a domestic corporation, duly organized and existing under the Philippine
laws and is represented in this action by its Chief Executive Officer, respondent Timothy Desmond (Desmond).

In 2002, SBME decided to expand its business by operating a beach resort inside the property administered by the Subic Bay
Metropolitan Authority (SBMA). For the business venture to take off, SBME needed to solicit investors who are willing to infuse funds for
the construction and operation of the beach resort project. HSE (formerly known as Westdale Assets Limited) thru its authorized
director, Dio, agreed to invest the amount of US$2,500,000.00 with SBME by purchasing 750,000 common shares with a par value of
₱100 per share from the increase in its authorized capital stock. The agreement was reduced into writing wherein HSE, in order to
protect its interest in the company, was afforded minority protection rights such as the right to appoint a member of the board of
directors and the right to veto certain board resolutions. After HSE initially paid US$200,000.00 for its subscription, it refused to further
lay out money for the expansion project of the SBME due to the alleged mismanagement in the handling of corporate funds.

Consequently, SBME initiated an intra-corporate dispute before the RTC of Balanga City, Bataan against petitioners HSE and
Dio.4 Before petitioners could file their answer to the complaint, respondents impleaded its Corporate Secretary, Atty. Winston Ginez, as
additional defendant. In their Amended Complaint5 docketed as Civil Case No. 7572, SBME essentially alleged that HSE unjustly
refused to pay the balance of its unpaid subscription effectively jeopardizing the company’s expansion project. Apart from their refusal
to honor their obligation under the subscription contract, it was further alleged by SBME that Dio tried to dissuade local investors and
financial institutions from putting in capital to SBME by imputing defamatory acts against Desmond. To protect the interest of the
corporation and its stockholders, SBME sought that petitioners be enjoined from committing acts inimical to the interest of the company.

To refute the claims of respondents, petitioners maintained in their Answer with Compulsory Counterclaim 6 that it would be highly
preposterous for them to dissuade investors and banks from putting in money to SBME considering that HSE and Dio are stakeholders
of the company with substantial investments therein. In turn, petitioners countered that their reputation and good name in the business
community were tarnished as a result of the filing of the instant complaint, and thus prayed that they be indemnified in the amount of
US$2,000,000.00 as moral damages. Constrained to litigate to protect their rights, petitioners asked that they be indemnified in the
amount of₱1,000,000.00 in litigation expenses. Petitioners likewise sought to recover their investment of US$1,500,000.00 since they
were purportedly inveigled by Desmond into putting in money to SBME under the pretext that they will be accorded with minority
protection rights. It was alleged that after the filing of the instant complaint, Desmond, in collusion with other Board of Directors of
SBME, managed to unjustly deny HSE and Dio their rights under the Subscription Agreement. To curb similar socially abhorrent
actions, petitioners prayed that SBME and its Board of Directors, namely, Desmond, John Corcoran, Gaile Laule and Gregorio
Magdaraog, be jointly and severally held liable to pay exemplary damages in the amount of US$2,000,000.00.

After petitioners filed their Answer with Compulsory Counterclaim, the RTC, instead of setting the case for pre-trial, issued an
Order7 dated 15 August 2005 motu proprio dismissing Civil Case No. 7572. The dismissal was grounded on the defective certificate of
non-forum shopping which was signed by Desmond without specific authority from the Board of Directors of SBME.

30
Armed with a board resolution specifically authorizing Desmond to sign the certificate of non-forum shopping on behalf of SBME,
respondents moved that Civil Case No. 7572 be reinstated and further proceedings thereon be conducted. A copy of such authority
was attached by respondents to their Motion for Reconsideration.

For lack of merit, RTC denied respondents’ motion and affirmed the dismissal in an Order 8 dated 22 September 2005. In refusing to
reinstate respondents’ complaint, the court a quo ruled that the belated submission of a board resolution evidencing Desmond’s
authority to bind the corporation did not cure the initial defect in the complaint and declared that strict compliance with procedural rules
is enjoined for the orderly administration of justice.

Aggrieved by the lower court’s refusal to reinstate their complaint, respondents elevated the matter before the Court of Appeals
assailing the propriety of the 15 August 2005 and 22 September 2005 RTC Orders via Petition for Review which was docketed as CA-
G.R. CV No. 87117.

For failure of the respondents to file their appellants’ brief, the appellate court proceeded to dismiss CA-G.R.CV No. 87117 and
considered the case closed and terminated in its Resolution9 dated 2 January 2007.

After respondents failed to seasonably move for the reconsideration of the aforementioned Resolution, the dismissal of CA-G.R. CV No.
87117 became final and executory, as shown in the Entry of Judgment 10 dated 3 May 2007.

The procedural incidents before the appellate court having been resolved with finality, petitioners went back to the RTC to file a motion
to set their counterclaims for hearing11 which was opposed by the respondents on the ground that the filing of the compulsory
counterclaims was not accompanied by payment of the required docket fees precluding the court from acquiring jurisdiction over the
case.12

Acting on the motions filed by the opposing parties, the RTC, in an Order 13 dated 3 April 2009 granted the motion of the respondents,
thereby directing the dismissal of petitioners’ counterclaims but not on the ground of non-payment of docket fees. In disallowing
petitioners’ counterclaims to proceed independently of respondents’ complaint, the lower court pointed out that in view of the dismissal
of the main case, which has already been affirmed with finality by the appellate court, it has already lost its jurisdiction to act on
petitioners’ counterclaim, the compulsory counterclaim being merely ancillary to the principal controversy.

In an Order14 dated 26 August 2009, the RTC refused to reconsider its earlier disposition. Petitioners filed this instant Petition for
Review on Certiorari15 on pure question of law seeking the reversal of the 3 April 2009 and 26 August 2009 RTC Orders on the ground
that:

THE TRIAL COURT COMMITTED AN ERROR OF LAW WHEN IT REFUSED TO SET [PETITIONERS’] COUNTERCLAIMS FOR
HEARING ON THE GROUND THATTHE CASE WAS DEEMED "CLOSED AND TERMINATED" BYTHE COURT OF APPEALS
AFTER THE LATTER DISMISSED RESPONDENTS’ APPEAL BECAUSE OF THEIR FAILURE TOFILE THEIR APPELLANTS’
BRIEF.16

The Court’s Ruling

Petitioners argue that despite the dismissal of the main case, the counterclaim may still remain for independent adjudication under
Section 6, Rule 16 of the Revised Rules of Court.17 Petitioners pointed out that while the dismissal of respondents’ complaint is a
confirmation of Desmonds’ lack of legal personality to file the case, this does not, however, mean that they also do not have the
qualification to pursue their counterclaim. To fault petitioners for the fatal infirmity in the respondents’ complaint would not only work
injustice to the former but would result to an absurd situation where the fate of their counterclaims is placed entirely in the hands of the
respondents.

For their part, respondents posit that, in directly assailing the adverse RTC Orders before the Court, petitioners erroneously availed
themselves of an erroneous remedy arguing that this petition should have been initially filed with the appellate court. By seeking relief
directly from the Court, petitioners ignored the judicial hierarchy warranting the peremptory dismissal of their petition. Unless special
and important reasons were clearly and specifically set out in the petition, and in this case it was not, a direct invocation of this Court’s
original jurisdiction may not be allowed.

The established policy of strict observance of the judicial hierarchy of courts, as a rule, requires that recourse must first be made to the
lower ranked court exercising concurrent jurisdiction with a higher court. A regard for judicial hierarchy clearly indicates that petitions for
the issuance of extraordinary writs against first level courts should be filed in the RTC and those against the latter should be filed in the
Court of Appeals. The rule is not iron-clad, however, as it admits of certain exceptions. 18

Thus, a strict application of the rule is unnecessary when cases brought before the appellate courts do not involve factual but purely
legal questions.19 In fact, Rule 41, Section 2(c)20 of the Revised Rules of Court provides that a decision or order of the RTC may as it

31
was done in the instant case, be appealed to the Supreme Court by petition for review on certiorari under Rule 45, provided that such
petition raises only questions of law.

A question of law exists when the doubt or controversy concerns the correct application of law or jurisprudence to a certain set of facts;
or when the issue does not call for the examination of the probative value of the evidence presented, the truth or falsehood of facts
being admitted. A question of fact exists when the doubt or difference arises as to the truth or falsehood of facts or when the query
invites calibration of the whole evidence considering mainly the credibility of the witnesses, the existence and relevancy of specific
surrounding circumstances, as well as their relation to each other and to the whole, and the probability of the whole situation. 21 Thus,
the test of whether a question is one of law or of fact is not the appellation given to such question by the party raising the same; rather,
it is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case, it is a
question of law; otherwise it is a question of fact.22

Petitioners here raise the solitary issue of the propriety of the dismissal of their counterclaim on the basis of the reasoning of the lower
court that the counterclaim derives its jurisdictional support from the complaint which has already been dismissed. Petitioners maintain
that the court a quo erred in arriving at the legal conclusion that the counterclaim can no longer stand for independent adjudication after
the main case was already dismissed with finality. In order to resolve this issue, the Court need only to look into the pleadings,
depositions, admissions, and affidavits submitted by the respective parties without going into the truth or falsity of such documents.
Consequently, the petitioners’ remedy for assailing the correctness of the dismissal of their counterclaims, involving as it does a pure
question of law, indeed lies with this Court. Now to the issue of the propriety of the dismissal of the counterclaim.

The dismissal of the complaint resulted from respondents’ failure to append to the complaint a copy of the board resolution authorizing
Desmond to sign the certificate of non-forum shopping on behalf of SBME. The subsequent dismissal of the counterclaim, in turn,
erroneously proceeded from the ratio that since the main action has already been dismissed with finality by the appellate court, the
lower court has lost its jurisdiction to grant any relief under the counterclaim.

In the significant case of Pinga v. Heirs of German Santiago, 23 this Court speaking through Justice Dante Tinga, resolved the nagging
question as to whether or not the dismissal of the complaint carries with it the dismissal of the counterclaim. Putting to rest the
remaining confusion occasioned by Metals Engineering Resources Corp. v. Court of Appeals 24 and BA Finance Corporation v. Co,25 the
Court articulated that, in light of the effectivity of the 1997 Rules of Civil Procedure, the correct and prevailing doctrine is as follows:

To be certain, when the Court promulgated the 1997 Rules of Civil Procedure, including the amended Rule17, those previous jural
doctrines that were inconsistent with the new rules incorporated in the 1997 Rules of Civil Procedure were implicitly abandoned insofar
as incidents arising after the effectivity of the new procedural rules on 1 July 1997. BA Finance, or even the doctrine that a counterclaim
may be necessarily dismissed along with the complaint, clearly conflicts with the 1997 Rules of Civil Procedure. The abandonment of
BA Finance as doctrine extends as far back as 1997, when the Court adopted the new Rules of Civil Procedure. If, since then, such
abandonment has not been affirmed in jurisprudence, it is only because no proper case has arisen that would warrant express
confirmation of the new rule. That opportunity is here and now, and we thus rule that the dismissal of a complaint due to fault of the
plaintiff is without prejudice to the right of the defendant to prosecute any pending counterclaims of whatever nature in the same or
separate action. We confirm that BA Finance and all previous rulings of the Court that are inconsistent with this present holding are now
abandoned.

xxxx

Thus, the present rule embodied in Sections 2 and 3 of Rule 17 ordains a more equitable disposition of the counterclaims by ensuring
that any judgment thereon is based on the merit of the counterclaim itself and not on the survival of the main complaint. Certainly, if the
counterclaim is palpably without merit or suffers jurisdictional flaws which stand independent of the complaint, the trial court is not
precluded from dismissing it under the amended rules, provided that the judgment or order dismissing the counterclaim is premised on
those defects. At the same time, if the counterclaim is justified, the amended rules now unequivocally protect such counterclaim from
peremptory dismissal by reason of the dismissal of the complaint.26 Reviewing the vacated position, in Metals Engineering Resources
Corp., severance of causes of action was not be permitted in order to prevent circuity of suits and to avert the possibility of inconsistent
rulings based on the same set of facts, viz:

For all intents and purposes, such proposition runs counter to the nature of a compulsory counterclaim in that it cannot remain pending
for independent adjudication by the court. This is because a compulsory counterclaim is auxiliary to the proceeding in the original suit
and derives its jurisdictional support therefrom, inasmuch as it arises out of or is necessarily connected with the transaction or
occurrence that is the subject matter of the complaint. It follows that if the court does not have jurisdiction to entertain the main action of
the case and dismisses the same, then the compulsory counterclaim, being ancillary to the principal controversy, must likewise be
dismissed since no jurisdiction remained for any grant of relief under the counterclaim.

The aforementioned doctrine is in consonance with the primary objective of a counterclaim which is to avoid and prevent circuity of
action by allowing the entire controversy between the parties to be litigated and finally determined in one action, wherever this can be
done with entire justice to all parties before the court. The philosophy of the rule is to discourage multiplicity of suits.1âwphi1 It will be

32
observed that the order of the trial court allowing herein private respondent to proceed with the presentation of his evidence in support
of the latter's counterclaim is repugnant to the very purpose and intent of the rule on counterclaims. 27

In BA Finance Corporation, we likewise refused to entertain the compulsory counterclaim after the trial court lost its jurisdiction in the
main case, thus:

The rule is that a compulsory counterclaim cannot "remain pending for independent adjudication by the court." This is because a
compulsory counterclaim is auxiliary to the proceeding in the original suit and merely derives its jurisdictional support therefrom.

Thus, it necessarily follows that if the trial court no longer possesses jurisdiction to entertain the main action of the case, as when it
dismisses the same, then the compulsory counterclaim being ancillary to the principal controversy, must likewise be similarly dismissed
since no jurisdiction remains for the grant of any relief under the counterclaim. 28

As the rule now stands, the nature of the counterclaim notwithstanding, the dismissal of the complaint does not ipso jure result in the
dismissal of the counterclaim, and the latter may remain for independent adjudication of the court, provided that such counterclaim,
states a sufficient cause of action and does not labor under any infirmity that may warrant its outright dismissal. Stated differently, the
jurisdiction of the court over the counterclaim that appears to be valid on its face, including the grant of any relief thereunder, is not
abated by the dismissal of the main action. The court’s authority to proceed with the disposition of the counterclaim independent of the
main action is premised on the fact that the counterclaim, on its own, raises a novel question which may be aptly adjudicated by the
court based on its own merits and evidentiary support.

In Perkin Elmer Singapore Pte Ltd. v. Dakila Trading Corporartion, 29 a case on all fours with the present one, we expounded our ruling
in Pinga and pointed out that the dismissal of the counterclaim due to the fault of the plaintiff is without prejudice to the right of the
defendant to prosecute any pending counterclaims of whatever nature in the same or separate action, thus: Based on the aforequoted
ruling of the Court, if the dismissal of the complaint somehow eliminates the cause of the counterclaim, then the counterclaim cannot
survive. Conversely, if the counterclaim itself states sufficient cause of action then it should stand independently of and survive the
dismissal of the complaint. Now, having been directly confronted with the problem of whether the compulsory counterclaim by reason of
the unfounded suit may prosper even if the main complaint had been dismissed, we rule in the affirmative.

It bears to emphasize that petitioner's counterclaim against respondent is for damages and attorney's fees arising from the unfounded
suit. While respondent's Complaint against petitioner is already dismissed, petitioner may have very well already incurred damages and
litigation expenses such as attorney's fees since it was forced to engage legal representation in the Philippines to protect its rights and
to assert lack of jurisdiction of the courts over its person by virtue of the improper service of summons upon it. Hence, the cause of
action of petitioner's counterclaim is not eliminated by the mere dismissal of respondent's complaint. 30 (Emphasis theirs).

Once more, we allow the counterclaim of the petitioners to proceed independently of the complaint of the respondents.

WHEREFORE, premises considered, the petition is GRANTED. The assailed R TC Orders dated 3 April 2009 and 26 August 2009 are
hereby REVERSED and SET ASIDE. The case is REMANDED to the Regional Trial Court of Balanga City, Bataan for further
proceedings, on the matter of petitioners Virginia S. Dio and H.S. Equities, Ltd. 's counterclaims. No pronouncement as to costs.

SO ORDERED.

Alba Jr. v. Malapajo, G.R. No. 198752, January 13, 2016

January 13, 2016

G.R. No. 198752

33
ARTURO C. ALBA, JR., duly represented by his attorneys-in-fact, ARNULFO B. ALBA and ALEXANDER C. ALBA, Petitioner,
vs.
RAYMUND D. MALAPAJO, RAMIL D. MALAPAJO and the Register of Deeds for the City of Roxas, Respondents.

DECISION

PERALTA, J.:

Assailed in this petition for review on certiorari are the Resolution1 dated February 28, 2011 and the Resolution2 dated August 31, 2011
issued by the Court of Appeals (CA) Cebu City, in CA-G.R. SP No. 05594.

The antecedents are as follows:

On October 19, 2009, petitioner Arturo C. Alba, Jr., duly represented by his attorneys-in-fact, Arnulfo B. Alba and Alexander C. Alba,
filed with the Regional Trial Court (RTC) of Roxas City, Branch 15, a Complaint 3 against respondents Raymund D. Malapajo, Ramil D.
Malapajo and the Register of Deeds of Roxas City for recovery of ownership and/or declaration of nullity or cancellation of title and
damages alleging, among others, that he was the previous registered owner of a parcel of land consisting of 98,146 square meters
situated in Bolo, Roxas City, covered by TCT No. T-22345; that his title was subsequently canceled by virtue of a deed of sale he
allegedly executed in favor of respondents Malapajo for a consideration of Five Hundred Thousand Pesos (P500,000.00); that new TCT
No. T-56840 was issued in the name of respondents Malapajo; that the deed of sale was a forged document which respondents
Malapajo were the co-authors of.

Respondents Malapajo filed their Answer with Counterclaim4 contending that they were innocent purchasers for value and that the deed
was a unilateral document which was presented to them already prepared and notarized; that before the sale, petitioner had, on
separate occasions, obtained loans from them and their mother which were secured by separate real estate mortgages covering the
subject property; that the two real estate mortgages had never been discharged. Respondents counterclaimed for damages and for
reimbursement of petitioner's loan from them plus the agreed monthly interest in the event that the deed of sale is declared null and
void on the ground of forgery.

Petitioner filed a Reply to Answer and Answer to (Permissive) Counterclaim 5 stating, among others, that the court had not acquired
jurisdiction over the nature of respondents' permissive counterclaim; and, that assuming without admitting that the two real estate
mortgages are valid, the rate of five percent (5%) per month uniformly stated therein is unconscionable and must be reduced.
Respondents filed their Rejoinder6 thereto.

Petitioner filed a Motion to Set the Case for Preliminary Hearing as if a Motion to Dismiss had been Filed 7 alleging that respondents’
counterclaims are in the nature of a permissive counterclaim, thus, there must be payment of docket fees and filing of a certification
against forum shopping; and, that the supposed loan extended by respondents’ mother to petitioner, must also be dismissed as
respondents are not the real parties-in-interest. Respondents filed their Opposition 8 thereto.

On June 4, 2010, the RTC issued an Order9 denying petitioner's motion finding that respondents’ counterclaims are compulsory.
Petitioner’s motion for reconsideration was denied in an Order 10 dated September 30, 2010.

Petitioner filed a petition for certiorari with the CA which sought the annulment of the RTC Orders dated June 4, 2010 and September
30, 2010.

In a Resolution dated February 28, 2011, the CA dismissed the petition for certiorari saying that there was no proper proof of service of
the petition to the respondents, and that only the last page of the attached copy of the RTC Order was signed and certified as a true
copy of the original while the rest of the pages were mere machine copies.

Petitioner filed a motion for reconsideration which the CA denied in a Resolution dated August 31, 2011 based on the following findings:

Nevertheless, while petitioner filed with the Petition his Affidavit of Service and incorporated the registry receipts, petitioner still failed to
comply with the requirement on proper proof of service. Post office receipt is not the required proof of service by registered mail.
Section 10, Rule 13 of the 1997 Rules of Civil Procedure specifically stated that service by registered mail is complete upon actual
receipt by the addressee, or after five (5) days from the date he received the first notice of the postmaster, whichever is earlier. Verily,
registry receipts cannot be considered sufficient proof of service; they are merely evidence of the mail matter with the post office of the
sender, not the delivery of said mail matter by the post office to the addressee. Moreover, Section 13, Rule 13 of the 1997 Rules of Civil
Procedure specifically stated that the proof of personal service in the form of an affidavit of the party serving shall contain a full
statement of the date, place and manner of service, which was not true in the instant petition. 11

Petitioner filed the instant petition for review raising the following assignment of errors:

34
I. CONTRARY TO THE ERRONEOUS RULING OF THE COURT A QUO, THE COUNTERCLAIMS INTERPOSED BY
RESPONDENTS MALAPAJO IN THEIR ANSWER WITH COUNTERCLAIM ARE, BASED ON APPLICABLE LAW AND
JURISPRUDENCE, PERMISSIVE IN NATURE, NOT COMPULSORY, AND THEREFORE, SUCH ANSWER WITH RESPECT TO
SUCH COUNTERCLAIMS IS IN REALITY AN INITIATORY PLEADING WHICH SHOULD HAVE BEEN ACCOMPANIED BY A
CERTIFICATION AGAINST FORUM SHOPPING AND CORRESPONDING DOCKET FEES, THEREFORE, SHOULD HAVE BEEN
PAID, FAILING IN WHICH THE COUNTERCLAIMS SHOULD HAVE BEEN ORDERED DISMISSED. MOREOVER, AS REGARDS
THE LOAN ALLEGEDLY EXTENDED BY THEIR MOTHER TO PETITIONER, WHICH UP TO NOW IS SUPPOSEDLY STILL UNPAID,
RESPONDENTS MALAPAJO ARE NOT THE REAL PARTIES-IN-INTEREST AND IS, THEREFORE, DISMISSIBLE ON THIS
ADDITIONAL GROUND; and

II. THE HONORABLE COURT OF APPEALS COMMITTED A VERY SERIOUS ERROR WHEN IT DISMISSED THE PETITION FOR
CERTIORARI BASED ON PURE TECHNICALITY, THEREBY GIVING MORE PREMIUM AND MORE WEIGHT ON TECHNICALITIES
RATHER THAN SUBSTANCE AND DISREGARDING THE MERITS OF THE PETITION. 12

We find that the CA erred in denying petitioner's petition for certiorari after the latter had clearly shown compliance with the proof of
service of the petition as required under Section 13 of Rule 13 of the 1997 Rules of Civil Procedure, which provides:

Sec.13. Proof of service.

Proof of personal service shall consist of a written admission of the party served, or the official return of the server, or the affidavit of the
party serving, containing a full statement of the date, place and manner of service. If the service is by ordinary mail, proof thereof shall
consist of an affidavit of the person mailing of facts showing compliance with section 7 of this Rule. If service is made by registered
mail, proof shall be made by such affidavit and the registry receipt issued by the mailing office. The registry return card shall be filed
immediately upon its receipt by the sender, or in lieu thereof the unclaimed letter together with the certified or sworn copy of the notice
given by the postmaster to the addressee.

Clearly, service made through registered mail is proved by the registry receipt issued by the mailing office and an affidavit of the person
mailing of facts showing compliance with the rule. In this case, Nerissa Apuyo, the secretary of petitioner’s counsel, had executed an
affidavit13 of personal service and service by registered mail which she attached to the petition marked as original filed with the CA. She
stated under oath that she personally served a copy of the petition to the RTC of Roxas City on December 6, 2010, as evidenced by a
stamp mark of the RTC on the corresponding page of the petition; that she also served copies of the petition by registered mail to
respondents' counsels on December 6, 2010 as evidenced by registry receipts numbers "PST 188" and "PST 189", both issued by the
Roxas City Post Office. The registry receipts issued by the

post office were attached to the petition filed with the CA. Petitioner had indeed complied with the rule on proof of service.

Since the case was dismissed outright on technicality, the arguments raised in the petition for certiorari were not at all considered.
However, we will now resolve the issue on the merits so as not to delay further the disposition of the case instead of remanding it to the
CA.

The issue for resolution is whether respondents’ counterclaim, i.e., reimbursement of the loan obtained from them in case the deed of
absolute sale is declared null and void on the ground of forgery, is permissive in nature which requires the payment of docket fees and
a certification against forum shopping for the trial court to acquire jurisdiction over the same.

A counterclaim is any claim which a defending party may have against an opposing party. 14 A compulsory counterclaim is one which,
being cognizable by the regular courts of justice, arises out of or is connected with the transaction or occurrence constituting the subject
matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot
acquire jurisdiction. Such a counterclaim must be within the jurisdiction of the court both as to the amount and the nature thereof,
except that in an original action before the Regional Trial Court, necessarily connected with the subject matter of the opposing party's
claim or even where there is such a connection, the Court has no jurisdiction to entertain the claim or it requires for adjudication the
presence of third persons over whom the court acquire jurisdiction. 15 A compulsory counterclaim is barred if not set up in the same
action.

A counterclaim is permissive if it does not arise out of or is not necessarily connected with the subject matter of the opposing party's
claim.16 It is essentially an independent claim that may be filed separately in another case.

To determine whether a counterclaim is compulsory or permissive, we have devised the following tests: (a) Are the issues of fact and
law raised by the claim and by the counterclaim largely the same? (b) Would res judicata bar a subsequent suit on defendants’ claims,
absent the compulsory counterclaim rule? (c) Will substantially the same evidence support or refute plaintiffs’ claim as well as the
defendants’ counterclaim? and (d) Is there any logical relation between the claim and the counterclaim? 17 A positive answer to all four
questions would indicate that the counterclaim is compulsory.18

35
Based on the above-mentioned tests, we shall determine the nature of respondents’ counterclaim. Respondents anchored their
assailed counterclaim on the following allegations in their affirmative defenses in their Answer with Counterclaim, thus:

xxxx

10. The plaintiff's cause of action is based on his allegation that his signature on the Deed of Absolute Sale was forged.

The Deed of Absolute Sale is a unilateral instrument, i.e., it was signed only by the vendor, who is the plaintiff in this case and his
instrumental witnesses, who are his parents in this case. It was presented to defendants already completely prepared, accomplished
and notarized. Defendants had no hand in its preparation, accomplishment and notarization.

While the plaintiff claims that his signature on the instrument is forged, he never questioned the genuineness of the signatures of his
instrumental witnesses, his parents Arturo P. Alba, Sr. and Norma C. Alba, who signed the said instrument below the words "SIGNED
IN THE PRESENCE OF" and above the words "Father" and "Mother," respectively.

Furthermore, plaintiff acknowledged in par. 7 of his Complaint that the stated consideration in the Deed of Absolute Sale is
P500,000.00 and he never categorically denied having received the same.

11. Before the plaintiff sold the property to the defendants, he secured a loan from them in the sum of Six Hundred Thousand Pesos
(P600,000.00) payable on or before November 10, 2008. The loan is evidenced by a Promissory Note and secured by a Real Estate
Mortgage dated September 11, 2008, both executed by him, covering the parcel of land subject of this case, Lot 2332-D, Psd 06-
000738. Like the Deed of Absolute Sale, the Real Estate Mortgage is a unilateral instrument, was signed solely by the plaintiff, and
furthermore, his parents affixed their signatures thereon under the heading "WITH MY PARENTAL CONSENT", and above the words,
"Father" and "Mother," respectively.

Prior to this, or as early as July 25, 2008, the plaintiff also obtained a loan payable on or before September 6, 2008 from defendants'
mother, Alma D. David, and already mortgaged to her Lot 2332-D, Psd 06-000738. The loan is evidenced by a Promissory Note and a
Real Estate Mortgage, both of which were executed by plaintiff. Again, the Real Estate Mortgage is an unilateral instrument, was signed
solely by the plaintiff and furthermore, his parents also affixed their signatures thereon under the heading, "WITH MY PARENTAL
CONSENT " and above the words, "Father" and "Mother," respectively.

In both instances, the plaintiff was always represented by his parents, who always manifested their authority to transact in behalf of
their son the plaintiff.1âwphi1

As in the case with the Deed of Absolute Sale, the defendants or their mother did not have any hand in the preparation,
accomplishment or notarization of the two Promissory Notes with accompanying Real Estate Mortgages, x x x.

Neither of the two Real Estate Mortgages have been discharged or extinguished.

12. Considering the foregoing, the plaintiff's allegation that his signature on the Deed of Absolute Sale was forged, and that the
defendants are the "co-authors" of the said forgery, are absolutely false and baseless.

13. If the Deed of Absolute Sale is declared null and void on the ground of forgery, then the plaintiff should reimburse the defendants
the loan he obtained from them, which he did not deny having obtained, plus the agreed monthly interest. 19

Petitioner seeks to recover the subject property by assailing the validity of the deed of sale on the subject property which he allegedly
executed in favor of respondents Malapajo on the ground of forgery. Respondents counterclaimed that, in case the deed of sale is
declared null and void, they be paid the loan petitioner obtained from them plus the agreed monthly interest which was covered by a
real estate mortgage on the subject property executed by petitioner in favor of respondents. There is a logical relationship between the
claim and the counterclaim, as the counterclaim is connected with the transaction or occurrence constituting the subject matter of the
opposing party's claim. Notably, the same evidence to sustain respondents' counterclaim would disprove petitioner's case. In the event
that respondents could convincingly establish that petitioner actually executed the promissory note and the real estate mortgage over
the subject property in their favor then petitioner's complaint might fail. Petitioner's claim is so related logically to respondents'
counterclaim, such that conducting separate trials for the claim and the counterclaim would result in the substantial duplication of the
time and effort of the court and the parties.20

Since respondents' counterclaim is compulsory, it must be set up in the same action; otherwise, it would be barred forever. 21 If it is filed
concurrently with the main action but in a different proceeding, it would be abated on the ground of litis pendentia; if filed subsequently,
it would meet the same fate on the ground of res judicata.22 There is, therefore, no need for respondents to pay docket fees and to file a
certification against forum shopping for the court to acquire jurisdiction over the said counterclaim.

36
We agree with the RTC’s disquisition in finding that respondents’ counterclaim is compulsory, to wit:

The arguments of the plaintiffs that this transaction is a permissive counterclaim do not convince.

By the manner in which the answer pertaining to this transaction was phrased, the real estate mortgage was the origin of the Deed of
Absolute Sale after the loan of P600,000.00 using the same property as security for the payment thereof was not settled. In short, it is
one of defendants' defenses and controverting evidence against plaintiffs' allegations of falsification of the Deed of Absolute Sale, the
property subject of the Deed of Sale being one and the same property subject of the mortgage. 23

xxxx

Can the Court adjudicate upon the issues [of whether or not the plaintiff could recover ownership and or whether or not the title to the
property in question may be canceled or declared null and void, and damages] without the presence of the mother of defendants in
whose favor the Real Estate Mortgage of the property subject of this action was executed?

Definitely, this Court can. That there was an allegation pertaining to the mortgage of the property in question to defendants’ mother is
only some sort of a backgrounder on why a deed of sale was executed by plaintiff in defendants’ favor, the truth or falsity of which will
have to be evidentiary on the part of the parties hereto. In short, the Court does not need the presence of defendants’ mother before it
can adjudicate on whether or not the deed of absolute sale was genuine or falsified and whether or not the title to the property may be
cancelled.24

WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED. The Resolutions dated February 28, 2011 and
August 31, 2011 issued by the Court of Appeals in CA-G.R. SP No. 05594 dismissing the petition for certiorari and denying
reconsideration thereof, respectively, for failure to show proper proof of service of the petition to respondents, are SET ASIDE. Acting
on the petition for certiorari, we resolve to DENY the same and AFFIRM the Order dated June 4, 2010 of the Regional Trial Court of
Roxas City, Branch 15, denying petitioner's motion to set the case for hearing as if a motion to dismiss had been filed, and the Order
dated September 30, 2010 denying reconsideration thereof.

SO ORDERED.

Ganofa v Nee Bon Sing, G.R No. L-22018, Jan 17, 1968

Republic of the Philippines

SUPREME COURT
Manila
37
 EN BANC

G.R. No. L-22018 January 17, 1968

APOLONIO GALOFA, plaintiff-appellee,

vs.
NEE BON SING, defendant-appellant.

Madrid Law Office for plaintiff-appellee.

Salvador Nee-Estuye for defendant-appellant.

REYES, J.B.L., J.:

Direct appeal from a judgment on the pleadings in Civil Case No. 145
(No. 1737-Sorsogon) of the Court of First Instance of Sorsogon on the issue of whether or not the defendant's answer to the complaint
tendered a genuine issue.

The plaintiff-appellee Apolonio Galofa filed a complaint against the defendant-appellant Nee Bon Sing 1 for the recovery of possession
of and to quiet title over a certain parcel of land in Sta. Lourdes, Barcelona, Sorsogon, alleging therein the prior ownership and
possession of the land by his late father, Francisco Galofa, and its adjudication in favor of the plaintiff in an oral partition among his co-
heirs. The complaint alleges further:

4. That plaintiff however, despite the foregoing, was unable to take actual possession of the above-described property due to
an unwarranted adverse claim of rights of ownership and possession by the defendant and/or his tenant or encargado, Abion
Pantilone, alleging sale by a certain Fe Nicolas of said property to defendant, which if true, had no right whatsoever to legally
dispose the above-described property not being the owner thereof, aside from the fact that the defendant is not allowed under
the law to own and possess real properties being an alien, pursuant to the Constitution and/or the Krivenko case;

xxx xxx xxx

xxx xxx xxx

9. That as a result thereof, plaintiff was compelled to ventilate this case to court and in so doing has to retain the services of
counsel for the contracted amount of no less than P1,500.00 and/or spent or will spend the sum of P500.00 because of this
case which could have been avoided had the defendants been more fair and just in his dealings with your plaintiff.

xxx xxx xxx

In his answer corresponding to the above-quoted allegations in the complaint, the defendant-appellant Nee Bon Sing manifested as
follows:

3. That the defendant denies the material averments contained in paragraph 4 of the Complaint, the truth being, that the
defendant never asserted title of ownership to the property described in the Complaint to anybody, much less to the herein
plaintiff in virtue of any deed of conveyance executed in favor of the defendant by one Fe Nicolas, nor claimed any right over
the said property, either by himself or through another:

xxx xxx xxx

5. That if in fact the plaintiff had contracted, as alleged in paragraph 8 of the Complaint, the services of counsel and will spend
the amounts therein specified occasioned by the institution of the action, the same is his own personal responsibility, for
defendant denies any part and assumes no liability therefor in any manner whatsoever;

xxx xxx xxx

Upon motion by the plaintiff that the defendant's answer failed to tender an issue, the lower court rendered judgment on the pleadings,
declaring the plaintiff the owner of the property "free from any cloud arising from any assertion of adverse claim or interest whatsoever
on the part of the defendant", ordering the defendant to deliver possession of the property to the plaintiff, and to pay attorney's fees and
costs.

We find that the lower court committed no reversible error in ordering the appealed judgment.
38
It is to be noted that, to the plaintiff's allegation of his inability to take actual possession of the parcel of land due to "an unwarranted
adverse claim of rights of ownership and possession by the defendant . . .", followed by an allegation of how such claim was exercised,
the defendant's denial is as to "the materials averments contained in paragraph 4 of the Complaint, . . ." conjoined with his disclaimer or
dominical or possessory rights in the manner alleged in the complaint. The defendant's denial is, therefore, a negative pregnant, which
is equivalent to an admission.

A denial in the form of a negative pregnant is an ambiguous pleading, since it cannot be ascertained whether it is the fact or
only the qualification that is intended to be denied. (41 Am. Jur. 429)

Where a fact is alleged with some qualifying or modifying language, and the denial is conjunctive, a "negative pregnant" exists,
and only the qualification or modification is denied, while the fact itself is admitted. Ison v. Ison, 115 SW 2d. 330, 272 Ky. 836.
(28 Words & Phrases 314)

As to the plaintiff's allegations of his having contracted a lawyer for a fee, the defendant does not deny the alleged fact; what he denies
in his liability therefor, which is an issue of law. Since the defendant neither denies nor admits the material allegation about the services
of plaintiff's counsel, judgment on the pleadings is proper. (Alemany vs. Sweeney, 3 Phil. 114)

The defendant, however, had specifically denied the plaintiff's allegations in paragraphs 5, 6 and 7 of the complaint. He traversed these
allegations in his answer by stating that he "does not possess any knowledge or information sufficient to form a belief as to the truth of
the allegations contained in paragraphs 5, 6 and 7 of the (original) Complaint and therefore, denies the same." But paragraphs 6 and 7
of the Complaint referred to damages, while paragraph 5 of the complaint merely alleged a conclusion (that by defendant's acts a cloud
over plaintiff's title had been raised) so that the defendant's specific denials served no purpose at all. As to the amount of damages,
alleged in paragraph 6 of the complaint (P2,000.00 per agricultural year) and specifically denied by the defendant, as aforesaid, a
specific denial is not required by the Rules. (Sec. 1, Rule 9, Rules of Court) At any rate, the appealed judgment did not condemn the
defendant-appellant to pay damages.

The defendant should have no complaint about the Court's finding, described in his second assignment of error, that —

the lower court erred in concluding that the allegations in defendant-appellant's answer to paragraphs 5, 6 and 7 of the
complaint are mere general denials and not specific denials under the Rules of Court

because, aside from what has been previously stated, the plaintiff is barred from recovery of his alleged damages for having prayed for
a judgment on the pleadings, as thereby he is deemed to have admitted the truth of the defendant's denial on the alleged damages and
to have rested his motion for judgment on those allegations taken together with such of his own as are admitted in the pleadings.
(Bauermann v. Casas, 10 Phil. 386; Evangelista v. De la Rosa, et al., 76 Phil. 115)

The defendant's motion for reconsideration and/or new trial furnished no justification to the lower court to set aside or reconsider its
judgment. Said motion prayed that the defendant be allowed to amend his answer, but annexed to it is the defendant's own affidavit
(Annex A, Rec. on Appeal, p. 57) reiterating that he had "no real right or interest whatsoever not having been involved in any way with
any transaction affecting the title or possession of the same. Definitely, therefore, there was no issue to be tried and the court's denial
of the motion was proper. And why should the defendant resist the judgment when he simultaneously asserts that he has no right to the
land?

FOR THE FOREGOING REASONS, the appealed judgment is hereby affirmed, with costs against the appellant. So ordered.

Concepcion, C.J., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.

Londres v. CA, G.R. No. 136427 (2002)

G.R. No. 136427 December 17, 2002

SONIA F. LONDRES, ARMANDO V. FUENTES, CHI-CHITA FUENTES QUINTIA, ROBERTO V. FUENTES, LEOPOLDO V.
FUENTES, OSCAR V. FUENTES and MARILOU FUENTES ESPLANA Petitioners,
vs.
39
THE COURT OF APPEALS, THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, THE DEPARTMENT OF
TRANSPORTATION AND COMMUNICATIONS, ELENA ALOVERA SANTOS and CONSOLACION ALIVIO
ALOVERA, Respondents.

DECISION

CARPIO, J.:

Before us is a petition for review on certiorari1 of the March 17, 1997 Decision2 and the November 16, 1998 Resolution3 of the Court of
Appeals in CA-G.R. CV No. 35540 entitled "Londres vs. Alovera". The assailed decision affirmed the validity of the Absolute Sale dated
April 24, 1959 vesting ownership of two parcels of land, Lots 1320 and 1333, to private respondents. The same decision also ordered
public respondents to pay just compensation to private respondents. The questioned resolution denied the motion for reconsideration of
petitioners.

The Antecedent Facts

The present case stemmed from a battle of ownership over Lots 1320 and 1333 both located in Barrio Baybay, Roxas City, Capiz.
Paulina Arcenas ("Paulina" for brevity) originally owned these two parcels of land. After Paulina’s death, ownership of the lots passed to
her daughter, Filomena VidaI ("Filomena" for brevity). The surviving children of Filomena, namely, Sonia Fuentes Londres ("Sonia" for
brevity), Armando V. Fuentes, Chi-Chita Fuentes Quintia, Roberto V. Fuentes, Leopoldo V. Fuentes and Marilou Fuentes Esplana
("petitioners" for brevity) now claim ownership over Lots 1320 and 1333.

On the other hand, private respondents Consolacion Alivio Alovera ("Consolacion" for brevity) and Elena Alovera Santos ("Elena" for
brevity) anchor their right of ownership over Lots 1320 and 1333 on the Absolute Sale executed by Filomena on April 24, 1959
("Absolute Sale" for brevity). Filomena sold the two lots in favor of Consolacion and her husband, Julian Alovera ("Julian" for brevity).
Elena is the daughter of Consolacion and Julian (deceased).

On March 30, 1989, petitioners filed a complaint for the declaration of nullity of contract, damages and just compensation. Petitioners
sought to nullify the Absolute Sale conveying Lots 1320 and 1333 and to recover just compensation from public respondents
Department of Public Works and Highways ("DPWH" for brevity) and Department of Transportation and Communication ("DOTC" for
brevity). The case was raffled to the Regional Trial Court, Branch 18, Roxas City, Capiz and docketed as Civil Case No. V-5668.

In their Complaint, petitioners claimed that as the surviving children of Filomena, they are the owners of Lots 1320 and 1333.
Petitioners claimed that these two lots were never sold to Julian. Petitioners doubt the validity of the Absolute Sale because it was
tampered. The cadastral lot number of the second lot mentioned in the Absolute Sale was altered to read Lot 1333 when it was
originally written as Lot 2034. Petitioners pointed out that Lot 2034, situated in Barrio Culasi, Roxas City, Capiz, was also owned by
their grandmother, Paulina.

Petitioners alleged that it was only recently that they learned of the claim of private respondents when Consolacion filed a petition for
the judicial reconstitution of the original certificates of title of Lots 1320 and 1333 with the Capiz Cadastre. 4 Upon further inquiry,
petitioners discovered that there exists a notarized Absolute Sale executed on April 24, 1959 registered only on September 22, 1982 in
the Office of the Register of Deeds of Roxas City. The private respondents’ copy of the Absolute Sale was tampered so that the second
parcel of lot sold, Lot 2034 would read as Lot 1333. However, the Records Management and Archives Office kept an unaltered copy of
the Absolute Sale. This other copy shows that the objects of the sale were Lots 1320 and 2034.

In their Answer, private respondents maintained that they are the legal owners of Lots 1333 and 1320. Julian purchased the lots from
Filomena in good faith and for a valid consideration. Private respondents explained that Julian was deaf and dumb and as such, was
placed in a disadvantageous position compared to Filomena. Julian had to rely on the representation of other persons in his business
transactions. After the sale, Julian and Consolacion took possession of the lots. Up to now, the spouses’ successors-in-interest are in
possession of the lots in the concept owners. Private respondents claimed that the alteration in the Absolute Sale was made by
Filomena to make it conform to the description of the lot in the Absolute Sale. Private respondents filed a counterclaim with damages.

The cross-claim of petitioners against public respondents was for the recovery of just compensation. Petitioners claimed that during the
lifetime of Paulina, public respondents took a 3,200-square meter portion of Lot 1320. The land was used as part of the Arnaldo
Boulevard in Roxas City without any payment of just compensation. In 1988, public respondents also appropriated a 1,786-square
meter portion of Lot 1333 as a vehicular parking area for the Roxas City Airport. Sonia, one of the petitioners, executed a deed of
absolute sale in favor of the Republic of the Philippines over this portion of Lot 1333. According to petitioners, the vendee agreed to pay
petitioners P214,320.00. Despite demands, the vendee failed to pay the stipulated amount.

Public respondents in their Answer raised the following defenses: (1) they have no capacity to sue and be sued since they have no
corporate personality separate and distinct from the Government; (2) they cannot comply with their undertaking since ownership over

40
the portions of land is disputed by private respondents and until the issue of ownership is settled, petitioners have no cause of action
against public respondents; and (3) they are not proper parties since they were not parties to the Absolute Sale sought to be nullified.

On May 28, 1991, the trial court issued its decision upholding the validity of the Absolute Sale. The dispositive portion of the decision
reads:

"IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered:

1. Declaring the Absolute Sale executed by Filomina Vidal in favor of spouses Julian Alovera and Consolacion Alivio on April
24, 1959 over subject Lots 1320 and 1333 (Exh. 4) valid and effective;

2. Declaring private defendants Consolacion Alivio Alovera and Elena Alovera Santos legal owners of subject Lots 1320 and
1333;

3. Ordering public defendants Department of Public Works and Highways and Department of Transportation and
Communications to pay jointly and severally private defendants Consolacion Alivio Alovera and Elena Alovera Santos just
compensation of the 3,200-square meter portion taken by the government from subject Lot 1320 used as part of the Arnaldo
Boulevard in Roxas City, and the 1,786-square meter portion also taken by the government from subject Lot 1333 to be used
as vehicle parking area of the Roxas City Airport; and

4. Ordering the dismissal of the complaint for lack of merit.

The cross-claim of private defendants against public defendants and private defendants’ counterclaim for damages against the plaintiffs
are likewise ordered dismissed. Costs against plaintiffs.

SO ORDERED."5

Petitioners and private respondents appealed. On March 17, 1997, the Court of Appeals promulgated its decision affirming the decision
of the trial court, thus:

"PREMISES CONSIDERED, the decision appealed from is hereby AFFIRMED.

SO ORDERED."6

On November 16, 1998, the Court of Appeals denied the respective motions for reconsideration of petitioners and private respondents.
The dispositive portion of the resolution reads:

"WHEREFORE, for lack of merit, the two motions for reconsideration are hereby DENIED.

SO ORDERED."7

The Ruling of the Trial Court

The trial court ruled that the Absolute Sale is valid based on the following facts:

"First, the description of subject Lot 1333, as appearing in the Absolute Sale dated April 24, 1959 executed by Filomena Vidal in favor
of spouses Julian Alovera and Consolacion Alivio (Exhs. 24 and 24-A), reads:

"2) A parcel of land (Lot No. 1333 of the Cadastral Survey of Capiz), with the improvements thereon, situated in the Barrio of Baybay,
Municipality of Capiz (now Roxas City). Bounded on the N. by the property of Nemesio Fuentes; on the S. by the property of Rufo
Arcenas; on the E. by the property of Mateo Arcenas; and on the W. by the property of Valeriano Arcenas; containing an area of
Eighteen Thousand Five Hundred Fifty Seven (18,557) square meters, more or less. This parcel of land is all rice land and the
boundaries thereon are visible consisting of stone monuments erected thereon by the Bureau of Lands. It is declared under Tax Dec.
No. 336 in the name of Filomena Vidal and assessed at P930.00."

In the Absolute Sale executed by the same parties on the same date, the above-quoted description is the same except the lot number,
i.e., instead of the figure "1333" what is written therein is the figure "1320";

41
Second, subject Lot 1333 is situated in Barangay Baybay, Roxas City, whereas Lot 2034 which is the second lot subject of the
questioned absolute sale is situated in Barangay Culasi, Roxas City as evidenced by a certified true/xerox copy of a sketch plan (Exh.
29) thereby indicating that said Lot 2034 in said Barangay Culasi (Exh. 29-A).

Third, Lot 2034 was previously owned by Jose Altavas (Exhs, 38 and 38-A) and later is owned in common by Libertad Altavas Conlu, et
al. (Exhs. 37 and 37-A) and there is no convincing evidence showing that this lot was ever owned, at one time or another, by Paulina
Arcenas or by Filomena Vidal or by plaintiffs, or their predecessors-in-interest;

Fourth, the two lots have been the subject of the transactions made by their former owner, Filomena Vidal, with some persons,
including spouses Julian Alovera and defendant Consolacion Alivio;

Fifth, the subject two lots have been continuously worked on since the early 1950’s up to the present by Alejandro Berlandino, and later
by his son, Zosimo Berlandino, who were instituted therein as tenants by Julian Alovera and the private defendants;

Sixth, these two lots have never been in the possession of the plaintiffs." 8

The trial court further noted that while petitioners and private respondents claimed that Lots 1320 and 1333 are titled, both failed to
account for the certificates of title. The trial court then concluded that there is merely a disputable presumption that Lots 1320 and 1333
are titled and covered by certificates of title. The trial court further declared that ownership over the two lots can still be acquired by
ordinary prescription as in this case.

Private respondents and their predecessors-in-interest have been in continuous possession of Lots 1320 and 1333 for nearly 30 years
in good faith and with just title. The tax declarations issued in the name of Consolacion and the real estate taxes paid by private
respondents are strong evidence of ownership over Lots 1320 and 1333. Petitioners’ late filing of the complaint, 30 years after the
execution of the Absolute Sale or seven years after the registration of the same, was considered by the trial court as laches.

The trial court gave more credence to the explanation of private respondents as to why the Absolute Sale was altered. Consolacion
noticed that the lot number of the second parcel of and sold to them by Filomena under the Absolute Sale appeared to be "Lot 2034"
and not "Lot 1333". Together with her husband, Julian, Consolacion went to Filomena. It was Filomena who erased "Lot 2034" in the
deed of sale and changed it to "Lot 1333". However, the copies of the document in the custody of the Notary Public were not
correspondingly corrected. Consequently, the copies kept by the Records Management and Archives Office still referred to the second
parcel of land sold as "Lot 2034".

Based on its factual findings, the trial court held that private respondents are the legal owners of Lots 1320 and 1333. Private
respondents are therefore entitled to just compensation for the portions of land taken by public respondents from the two lots. However,
the trial court ruled that private respondents could not recover attorney’s fees since there was no indication that the complaint was
maliciously filed and intended to prejudice private respondents. The trial court held that petitioners filed the action in good faith,
believing that they were the real owners of the two lots.

The Ruling of the Court of Appeals

The Court of Appeals sustained the factual findings of the trial court, specifically the six points enumerated by the trial court establishing
Lots 1320 and 1333 as the objects of the Absolute Sale. Applying Article 1370 of the Civil Code, 9 the Court of Appeals agreed with the
trial court that there could be no room for interpretation as to the intention of the parties on the objects of their contract.

The Court of Appeals upheld the ruling of the trial court that private respondents are not entitled to attorney’s fees and damages. The
Court of Appeals opined that while there might have been incipient greed when the DPWH and DOTC notified petitioners of the just
compensation from the government, there was, however, no evidence that petitioners filed the complaint in bad faith. There was
nothing in the records to indicate that petitioners had actual or constructive knowledge of the sale of the two lots to Julian. The
document on file with the Records Management archives Office alluded to a parcel of land denominated as Lot 2034 which is different
from the property in question, Lot 1333. It was only during the hearing of the case that it was made clear through the presentation of
evidence that the lot referred to in the Absolute Sale was Lot 1333, not Lot 2034, in addition to Lot 1320.

The Issues

Petitioners thus interposed this appeal, raising the following errors allegedly committed by the Court of Appeals:

"I.

THE COURT OF APPEALS ACTED WITH PATENT GRAVE ABUSE OF DISCRETION IN NOT REVERSING THE DECISION OF THE
TRIAL COURT, INSOFAR AS IT DECLARED VALID AND EFFECTIVE AN ABSOLUTE SALE", PURPORTEDLY EXECUTED BY

42
FILOMENA VIDAL, PREDECESSOR-IN-INTEREST OF PETITIONERS, IN FAVOR OF PRIVATE RESPONDENT CONSOLACION
ALIVIO AND HER SPOUSE, JULIAN ALOVERA, ON 24 APRIL 1959, OVER SUBJECT LOTS 1320 AND 1333.

II.

THE COURT OF APPEALS ACTED WITH PATENT GRAVE ABUSE OF DISCRETION IN NOT REVERSING THE DECISION OF THE
TRIAL COURT, INSOFAR AS IT DECLARED PRIVATE RESPONDENTS "LEGAL OWNERS OF SUBJECT LOTS 1320 AND 1333".

III.

THE COURT OF APPEALS ACTED WITH PATENT GRAVE ABUSE OF DISCRETION IN NOT REVERSING THE DECISION OF THE
TRIAL COURT, INSOFAR AS IT RULED THAT THE COMPENSATION FOR PORTIONS OF THE SUBJECT LOTS TAKEN BY THE
PUBLIC RESPONDENTS BE PAID TO THE PRIVATE RESPONDENTS AND NOT TO THE PETITIONERS.

IV.

THE COURT OF APPEALS ACTED WITH PATENT GRAVE ABUSE OF DISCRETION IN NOT REVERSING THE DECISION OF THE
TRIAL COURT, INSOFAR AS IT DISMISSED THE COMPLAINT IN CIVIL CASE NO. V-5668, RTC-ROXAS CITY, BRANCH 18." 10

The Court’s Ruling

At the outset, it must be pointed out that this petition was seasonably filed, contrary to private respondents’ contention that it was filed
one day late. Petitioners had until January 17, 1999 to file this petition, which was a Sunday. Since the last day for filing this petition fell
on a Sunday, the time to file the petition would not have run until the next working day. 11 Petitioners filed the petition the next working
day, January 18, 1999. Plainly then, the petition was filed on time.

The petition, however, must fail on substantive grounds.

Petitioners implore the Court to declare the Absolute Sale void for failing to identify with certainty the two parcels of land sold by
Filomena, their mother, to private respondents. However, there is no valid ground for annulling the Absolute Sale. The Absolute Sale is
clear as to the first parcel of lot sold, which is Lot 1320. What raises some doubt is the identity of the second parcel of lot sold, Is it Lot
2034 as indicated in the registered copy of the Absolute Sale? Or is it Lot 1333 as made to appear in the copy of the Absolute Sale of
private respondents?

In civil cases, the party with the burden of proof must establish his case by a preponderance of evidence. 12 By "preponderance of
evidence" is meant that the evidence as a whole adduced by one side is superior to that of the other. 13 Petitioners have the burden of
proving that Lot 2034 was the real object of the Absolute Sale and the alteration of the same instrument was unauthorized, warranting
the absolute nullification of the sale. The trial court and the Court of Appeals found the evidence of private respondents far more
convincing in explaining the alteration in their copy of the Absolute Sale. Both courts ruled that the correction was made by the parties
to reflect the true object of the sale, which was Lot 1333, not Lot 2034. In arriving at this conclusion, the two courts considered
contemporaneous and subsequent acts that indicate that what Filomena actually sold to private respondents were Lots 1320 and 1333.
These factual findings are binding upon the Court.14

As a rule, the appellate jurisdiction of the Court is limited only to question of law. 15 There is a question of law in a given case when the
doubt or difference arises as to what the law is given a certain set of facts, and there is a question of fact when the doubt arises as to
the truth or the falsity of the alleged facts.16 No exceptional circumstances are present in this case that would justify a re-evaluation of
the factual findings of the trial court and the Court of Appeals, findings that are duly supported by evidence of record.

Petitioners insist that there is serious doubt as to the identity of the objects of the Absolute Sale because the descriptions of Lots 1320
and 1333 in the Absolute Sale do not correspond to the technical descriptions of the two lots as found by the Bureau of Lands.
Petitioners direct the Court’s attention to these discrepancies:

TECHNICAL DESCRIPTION17 DESCRIPTION PER ABSOLUTE SALE

Lot 1320, Cad-I 33,
C-01 Capiz Cadastre, Ap-06-004023
A PARCEL OF LAND (Lot 1320, Cad-133, C-01,
1) A parcel of land (Lot No. 1320 of the Cadastral
Survey of Capiz), with the improvements thereon,
situated in the Barrio of Baybay, Municipality of
Capiz(now Roxas City).
Bounded on the N. by the property of Matea Arcenas;

43
Capiz Cadastre, Ap-06-004023, situated in the barrio on the S. by the property of Roque Severino; on the
of Baybay, municipality of Capiz (Now Roxas City), E. by the property of Matea Arcenas; the W. by the
province of Capiz, island of Panay. property of Damaso Arches;

Bounded on the NE., along line 1-2 by Lot 1327; |

along line 2-3 by Lot 1328; along line 3-4 by Lot 1329;
on the E., along line 4-5 by Lot 1326; on and the S., |
along line 5-6 by Lot 1325; along lines 6-7-8 by Lot
1321; on the W., along line 8-9 by Lot 1295; on the
NW., along lines 9-10-11 by Lot 1319; along line 11- |
12 by Lot 1318; along line 12-13 by Lot 1328; on the
NE., along line 13-1 by Lot 1327, all of Cad-133, |
Capiz Cadastre.
|
Beginning at point marked "1" on plan being N. 88-28
W., 651.78 meters from BBM No. 12, Cad-133, Capiz |
Cadastre, thence

|
N. 85-01 E., 23.00 m. to point 2;

|
N. 83-40E., 19.03m. to point 4;

|
S. 84-22W., 61.31 m. to point 6;

|
S. 83-00 W., 145.33 m. to point 8;

|
N. 87-42 E., 26.49 m. to point 10;

|
N. 83-07 E., 31.86 m. to point 12;

|
N. 83-09 E., 76.04 m. to point 13;

containing an area of THIRTY THOUSAND NINE

S. 07-04E., 41. 88 m. to point 1.
Point of beginning;
Containing an area of TWENTY FIVE THOUSAND
SEVEN HUNDRED SEVENTY FIVE (25,775)
SQUARE METERS, more or less.
HUNDRED FORTY FOUR (30,944) SQUARE
METERS, more or less. This parcel of land is all rice
land and the boundaries thereon are visible
consisting of stone monuments erected thereon by
the Bureau of Lands. It is declared under Tax Dec.
No. 4338 in the name of Filomena Vidal and
assessed at P1,550.00.

TECHNICAL DESCRIPTION18 DESCRIPTION PER ABSOLUTE SALE

Lot 1333, Cad-I 33, C-01
Capiz Cadastre, Ap-06-004022
A PARCEL OF LAND (Lot 1333, Cad-133, C-01,
Capiz Cadastre, Ap-06-004022, situated in the barrio
of Baybay, municipality of Capiz (now Roxas City),
province of Capiz, island of Panay.
Bounded on the SE., along line 1-2 by Lot 1330; on
the W., & NW., along lines2-3-4-5 by Lot 1329; on the
NW., along line 5-6 by Lot 1334; along line 6-7 by Lot
1335; on the NE., & SE., along lines 7-8-1 by Lot
1332; all of Cad-133, Capiz Cadastre.
2) A parcel of land (Lot No. 1333 of the Cadastral
Survey of Capiz), with the Improvements thereon,
situated in the Barrio of Baybay, Municipality of Capiz
(now Roxas City).
Bounded on the N. by the property of Nemesio
Fuentes; on the S. by the property of Rufo Arcenas;
on the E. by the property of Matea Arcenas; and on
the W. by the property of Valeriano Arcenas;
|
|

44
 Beginning at a point marked "1" on plan being N. 78- |
44., 326.64 meters from BBM No. 12, Cad-133, Capiz
Cadastre, thence |

S. 81-42 W., 59.67 meters to point 2; |

N. 07-36 W., 46.62 meters to point 3; |

N. 82-34 E., 84.29 meters to point 4; |

N. 09-13 W., 40-05 meters to point 5; |

N. 82-57 E., 59.24 meters to point 6; |

N. 81-48 E., 18.71 meters to point 7; |

S. 03-30 E., 95.46 meters to point 8; |

S. 82-57 W., 94.35 meters to point 1; containing an area of EIGHTEEN THOUSAND FIVE
HUNDRED FIFTY (10,860) SQUARE METERS,
Point of beginning. more or SEVEN (18,557) SQUARE METERS, more
or less. This parcel of land is all rice land and the
Containing an area of TEN THOUSAND EIGHT boundaries thereon are visible consisting of stone
HUNDRED SIXTY less. monuments erected thereon by the Bureau of Lands.
It is declared under Tax Dec. No. 4336 in the name of
Filomena Vidal and assessed at P930.00.

We are not persuaded. Petitioners rely on the technical descriptions of Lots 1320 and 1333 that were issued by the Bureau of Lands on
November 8, 1988. It must be pointed out that when private respondents and Filomena executed the sale in 1959, they based the
description of the two lots on the tax declarations of Filomena. Early tax declarations are, more often than not, based on approximation
or estimation rather than on computation.19 This is understandably so because of the absence then of technical knowledge in the
accurate measurement of lands.20 What really defines a piece of land is not the area mentioned in its description, but the boundaries
therein laid down, as enclosing the land and indicating its limits. 21 In this case, the boundaries of the two lots are sufficiently designated
in the Absolute Sale, leaving no room to doubt the identity of the objects of the sale.

Petitioners anchor their right of ownership over Lots 1320 and 1333 as the sole heirs of their mother, Filomena, who previously owned
the lots. However, Filomena had already ceded her right of ownership over Lots 1320 and 1333 to private respondents when she
executed the Absolute Sale. A sale of real property is a contract transferring dominion and other real rights in the thing sold. 22 Proof of
the conveyance of ownership is the fact that from the time of the sale, or after more than 30 years, private respondents have been in
possession of Lots 1320 and 1333. Petitioners on the other hand have never been in possession of the two lots.

Filomena died sometime in 198523 and petitioners instituted the complaint four years after Filomena’s death. It is unthinkable for
Filomena to have allowed private respondents to enjoy ownership of Lots 1320 and 1333 if she never really intended to sell the two lots
to private respondents or if she had Lot 2034 in mind when she signed the Absolute Sale. In the first place, Lot 2034 could not have
been contemplated by the parties since this parcel of land was never owned by Filomena, or by her mother, Paulina. Secondly, Lot
2034 does not fit the description of the second parcel of lot mentioned in the Absolute Sale. The Absolute Sale describes the second lot
as located in Barangay Baybay, Roxas City. Lot 2034 is situated in Barangay Culasi, Roxas City.

In resolving the similar case of Atilano vs. Atilano,24 where there was also a mistake in the designation of the lot number sold, the
Court took into account facts and circumstances to uncover the true intentions of the parties. The Court held that when one sells or
buys real property, one sells or buys the property as he sees it, in its actual setting and by its physical metes and bounds, and not by
the mere lot number assigned to it in the certificate of title. As long as the true intentions of the parties are evident, the mistake will not
vitiate the consent of the parties, or affect the validity and binding effect of the contract between them. In this case, the evidence shows
that the designation of the second parcel of land sold as Lot 2034 was merely an oversight or a typographical error. The intention of the
parties to the Absolute Sale became unmistakably clear when private respondents, as vendees, took possession of Lots 1320 and
1333 in the concept of owners without the objection of Filomena, the vendor.

Petitioners harp on the fact that the notarized and registered copy of the Absolute Sale should have, been correspondingly corrected.
Petitioners believe that the notarized and archived copy should prevail. We disagree. A contract of sale is perfected at the moment
45
there is a meeting of the minds upon the thing which is the object of the contract and upon the price. 25 Being consensual, a contract of
sale has the force of law between the contracting parties and they are expected to abide in good faith with their respective contractual
commitments.26 Article 1358 of the Civil Code, which requires certain contracts to be embodied in a public instrument, is only for
convenience, and registration of the instrument is needed only to adversely affect third parties. 27 Formal requirements are, therefore, for
the purpose of binding or informing third parties.28 Non-compliance with formal requirements does not adversely affect the validity of the
contract or the contractual rights and obligations of the parties. 29

Petitioners fault the trial court for declaring that Lots 1333 and 1320 can be acquired by prescription even though these lots are already
covered by certificates of title. The real issue in this case is the true intentions of the parties to the Absolute Sale, not adverse
possession. The decisions of the trial court and the Court of Appeals are clear on this point. In fact, the Court of Appeals no longer dealt
with the issue of acquisitive prescription since it was already convinced that private respondents’ right over Lots 1333 and 1320
emanates from the Absolute Sale.

In a desperate bid to compel the Court to disregard the evidence of private respondents, petitioners question the admissibility of the
testimony of Consolacion on the ground that it violates the Dead Man’s Statute. Petitioners contend that Consolacion’s testimony as to
how the alteration of the Absolute Sale took place should have been disregarded since at the time that Consolacion testified, death had
already sealed the lips of Filomena, precluding petitioners from refuting Consolacion’s version.

The contention is without basis. The Dead Man’s Statute then embodied in Section 20 (a) of Rule 130 of the 1988 Rules of Court
provides:

"SEC. 20. Disqualification by reason of interest or relationship. - The following persons cannot testify as to matters in which they are
interested, directly or indirectly, as herein enumerated:

(a) Parties or assignors of parties to a case, or persons in whose behalf a case is prosecuted, against an executor or administrator or
other representative of a deceased person, or against a person of unsound mind, upon a claim or demand against the estate of such
deceased person or against such person of unsound mind, cannot testify as to any matter of fact occurring before the death of such
deceased person or before such person became of unsound mind;

xxx"

The foregoing prohibition applies to a case against the administrator or representative of an estate upon a claim against the estate of
the deceased person.30 The present case was not filed against the administrator of the estate, nor was it filed upon claims against the
estate since it was the heirs of Filomena who filed the complaint against private respondents. Even assuming that Consolacion’s
testimony was within the purview of the Dead Man’s Statute, the fact that the counsel of petitioners failed to timely object to the
admissibility of Consolacion’s testimony is a waiver of the prohibition.31 The waiver was made more evident when the counsel of
petitioners cross-examined Consolacion.32 Petitioners cannot now invoke the rule they knowingly waived.

From the time of the execution of the Absolute Sale on April 24, 1959, private respondents became the owners of Lots 1320 and 1333.
The expropriation of any portion of the two lots from the time of the execution of the Absolute Sale would necessarily entitle private
respondents to the payment of just compensation. We cannot, however, agree with the trial court and the Court of Appeals that public
respondents could be ordered to pay private respondents just compensation in the same suit. Public respondents were impleaded in
this case when petitioners filed a cross-claim against them for just compensation. The cross-claim should have been dismissed, as it
does not comply with Section 7 of Rule 6 of the 1988 Rules of Court.1âwphi1 The rule provides:

"SEC. 7. Cross-claim. A cross-claim is any claim by one party against a co-party arising out of the transaction or occurrence that is the
subject matter either of the original action or of a counterclaim therein. Such cross-claim may include a claim that the party against
whom it is asserted is or may be liable to the cross-claimant for all or part of a claim asserted in the action against the cross-claimant."

Based on the foregoing rule, the cross-claim is proper only when:

"1. It arises out of the subject matter of the complaint.1âwphi1

2. It is filed against a co-party.

3. The cross-claimant stands to be prejudiced by the filing of the action against him." 33

The three requisites are absent in this case. The cross-claim for just compensation is a new matter raising a new cause of action that
must be litigated in a separate action, not in the same action for the nullification of contract. The purpose of a cross-claim is to avoid
multiplicity of suits.34 Multiplicity of suits should be avoided if the filing of a separate and independent action to recover a claim would
entail proving exactly the same claim in an existing action.35 However, when the causes of action are distinct and separate from each

46
other, as in this case, the independent interest should be pursued in another proceeding. 36 Also, petitioners and public respondents are
not co-parties as they are not co-plaintiffs. Lastly, petitioners, as cross-claimants, would not be prejudiced by the filing of the action
since they are the plaintiffs in this case.

At any rate, private respondents are not left without any recourse. They can file their claim for compensation with the proper
government agency. Public respondent DPWH in its Comment points out that it is now public respondent DOTC that has jurisdiction
over the claim for compensation since the portions of the properties subject of this case were taken to form part of the parking area of
the Roxas Airport.37 In the same Comment, public respondent DPWH concedes that they have never denied their obligation from the
very beginning of this case.38 Public respondents were only constrained to withhold payment of just compensation as the reel owners of
the lots In question were yet to be declared by the Court. Since the issue of ownership has been settled, private respondents can now
rightfully claim just compensation for the portions of Lots 1320 and 1333 taken by the government after the execution of the Absolute
Sale.

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 35540 is hereby AFFIRMED with the MODIFICATION that the
cross-claim against public respondents is DISMISSED. Costs against petitioners.

SO ORDERED.

47
Camara vs. Aguilar, 94 Phil. 527

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-6337 March 12, 1954

RUPERTA CAMARA, NATALIA CAMARA, ZOSIMA CAMARA, ABIGNIGO CAMARA, SADRAC CAMARA and REBECCA
CAMARA, plaintiffs-appellants,
vs.
CELESTINO AGUILAR, ROBERTA AGUILAR, ALICIA AGUILAR and RODELO AGUILAR, the last three being represented by
their guardian ad litem PURIFICACION VILLAMIEL, defendants-appellees.

H.B. Arandia for appellants.

Alfredo Bonus for appellees.

PADILLA, J.:

This is an action to recover the sum of P300 for clearing a parcel of land described in the complaint, and of P750 for its cultivation,
caring and preservation of the coconut trees and other fruit-bearing trees planted therein. The plaintiffs further pray that the defendants
jointly and severally be ordered to pay them the sum of P10, 100 representing the value of the coconut trees and other fruit-bearing
trees planted in the parcel of land or that they be declared entitled to pay the defendants the reasonable value of the parcel of land.

The plaintiffs allege that they are all of age except Rebecca Camara for whom her sister Ruperta was appointed guardian ad litem ; that
they are the children of the late Severino Camara who since 1915 had been in continuous and uninterrupted possession of a parcel of
land situated in the barrio of Balubad, municipality of Atimonan, province of Quezon, formerly Tayabas, containing an area of 5
hectares, more or less, and bounded on the North by the land of Catalino Velasco, on the East by the land of Jose Camara 1.º, on the
South by the lands of Santiago Villamorel and Antonio Saniel, and on the West by the land of Antonio Marquez; that the parcel of land
was inherited by Severino Camara from his parents Paulino Camara and Modesta Villamorel; that the late Severino Camara, and his
wife Vicenta Nera represented to their children, the plaintiffs herein, that said parcel of land belonged exclusively to him; that the
plaintiffs and their husbands helped cultivate and improve the parcel of land during the time Severino Camara was in possession
thereof and spent the amount sought by them for planting 1,500 coconut and other fruit bearing trees; that after the death of Severino
Camara the plaintiffs became the true, exclusive and absolute owner of the parcel of land and improvements thereon; that Fausto
Aguilar brought an action for ejectment (reivindicacion) against Vicenta Nera involving the parcel of land described above (civil case No.
4835) and on 26 January 1949 the Court of First Instance rendered judgment in said case, the dispositive part of which reads as
follows:

IN VIEW OF THE FOREGOING CONSIDERATIONS the Court hereby declares the herein plaintiff to be the absolute owner of
the land in question (the above described parcel of land) which is more particularly described in the complaint and Exhibits "A"
and "B", and orders the herein defendant and intervenors to immediately restore possession of said land to the plaintiff, to pay
said plaintiff the sum of P1,200 which is the value of the harvest of the products on said land obtained by them from 1941 up to
the filing of this complaint, and to pay the cost of the proceeding. For lack of merits, the counterclaim and the third party claim
are hereby dismissed;

that on 21 October 1950 the Court of Appeals rendered judgment in said case, the dispositive part of which is as follows:

Upon the question of damages we agree with the trial court that the preponderance of the evidence shows that the property in
question may yield, at most, P200 per year, but appellee's right to collect damages on that account should start only from the
date of the filing of the complaint on December 24, 1947, or from the year 1948.

Upon all the foregoing, we are of the opinion, and so hold that the trial court did not commit the errors assigned in appellant's
brief.

Wherefore, modified as above indicated, the appealed judgment is hereby affirmed, with costs; that they, together with their deceased
father Severino Camara were possessors in good faith of the parcel of land; that for that reason they are entitled to be reimbursed and
paid by the defendants for the trees they planted in the parcel of land; that the defendant Celestino Aguilar is the son of the late Fausto
Aguilar, plaintiff in civil case No. 4835 referred to, and the other defendant, Purificacion Villamiel,, is the widow of the late Isidro Aguilar
and the three minor defendants are children of the deceased Isidro Aguilar and his wife Purificacion Villamiel who represents them as
their guardian ad litem.
48
A motion to dismiss the complaint was filed on the ground that the judgment rendered in civil case No. 4835, which was affirmed by the
Court of Appeals with a modification only as above stated, bars the bringing of the present action, for the plaintiffs herein were
intervenors in the former case (No. 4835).

The Court dismissed the complaint on the ground that the action brought in this case had been adjudged in civil case No. 4835 and that
the complaint states no cause of action. Hence the appeal.

The appellants contend that the question of damages was not passed upon in the former case. The court below, however, held that this
action is barred by the prior judgment because there is identity of parties, the same subject matter and the same cause of action, as
provided for in section 45, Rule 39, the herein plaintiffs having intervened and joined the defendants in the former case, the subject
matter involved in both cases being the same parcel of land and the cause of action being ejectment (reivindicacion).

The fact that damages were awarded to the then plaintiff against the then defendants and intervenors negatives the latter's right to
claim damages in the present case, for such award is inconsistent with the claim that they were in possession of the parcel of land in
good faith and are entitled to recover what they spent for clearing, cultivating and planting the parcel of land and the fruits which they
failed to reap or harvest therein or their value.

The contention that a counterclaim for expenses incurred in clearing and cultivating the parcel of land and planting coconut and other
fruit-bearing trees therein could not have been set up in the former case because that would have been inconsistent with or would have
weakened the claim that they were entitled to the parcel of land, is without merit, because "A party may set forth two or more
statements of a claim or defense alternately or hypothetically, either in one cause of action or defense or in separate causes of action or
defenses."1 Hence, the plaintiffs herein and the intervenors in the former case could have set up the claim that they were entitled to the
parcel of land and alternatively that assuming (hypothetically) that they were not entitled to the parcel of land, at least they were entitled
as possessors in good faith to the coconut and other fruit-bearing trees planted by them in the parcel of land and their fruits or their
value.

The order appealed from is affirmed, with costs against the appellants.

Paras, C.J., Pablo, Bengzon, Montemayor, Reyes, Jugo, Bautista Angelo, Labrador, Concepcion and Diokno, JJ., concur.

49
Tiu po vs. Bautista, 103 SCRA 388

G.R. No. L-55514 March 17, 1981

TIU PO, GERARDO LEDONIO III and EUSEBIO S. MILLAR, Petitioners, vs. HON. PEDRO JL. BAUTISTA, in his capacity as
District Judge Presiding Branch III, CFI of Rizal, Pasay City and JUAN PAMBUAN, JR., Respondents.

MELENCIO-HERRERA, J.:

Poised for resolution in this Petition for certiorari with Preliminary Injunction is the sole issue of whether or not petitioners' claim for
moral, actual, compensatory and exemplary damages, together with attorney's fees and costs, constitutes a compulsory counterclaim.
law library

Private respondent, Juan Pambuan, Jr., filed a Complainant for Reconveyance and Damages of approximately P400,000.00 against
petitioners before the Court of First Instance of Rizal, Pasay City (Civil Case No. 5023-P) for an alleged wrongful sale at public auction
of a certain real property. Petitioners presented their Answer with a counter-claim, on account of the 11 malicious and unfounded
action," for moral damages in the amount of P600,000.00; actual and compensatory damages of P100,000.00; exemplary damages of
P50,000.00; attorney's fees of P30,000.00, plus P200.00 per appearance of counsel as representation and travelling expenses.

On the same day that they filed their Answer, petitioners filed an ex- parte Motion for exemption from payment of legal fees on their
counterclaim alleging that it was compulsory in nature and that under section 5(a), Rule 141, only a permissive counterclaim is subject
to payment of legal fees.

Since the Branch Clerk of Court required petitioners to deposit the amount of P1,410.00 pending resolution by the Court, petitioners
complied subject to refund. That was on March 15, 1976. Petitioners' Motion remained unresolved notwithstanding reiterations made on
May 5, 1978, January 12, 1979 and on August 20, 1979. Eventually, on December 28, 1979, respondent Judge denied petitioners'
Motion for refund on the ground that petitioners' counterclaim is permissive and not compulsory. The reconsideration prayed for by
petitioners was denied by respondent Judge on August 26, 1980. It is these two Orders that are assailed in this Petition, to which we
gave due course on February 2, 1981.

Under section 4, Rule 9, a counterclaim is compulsory in nature 1) if it arises out of, or is necessarily connected with the transaction or
occurrence that is the subject matter of the opposing party's claim; 2) if it does not require for its adjudication the presence of third
parties over whom the Court cannot acquire jurisdiction; and 3) if the Court has jurisdiction to entertain the claim A compulsory
counterclaim is barred if not set up. Conversely, a counterclaim is permissive where it has no necessary connection with the transaction
or occurrence that is the subject matter of the opposing party's claim, or even where there is such connection, the Court has no
jurisdiction to entertain the claim, or if it requires for its adjudication the presence of third persons over whom the Court acquire
jurisdiction

Petitioners' counterclaim for damages fulfills the necessary requisites of a compulsory counterclaim. They are damages claimed to
have been suffered by petitioners as a consequence of the action filed against them. They have to be pleaded in the same action,
otherwise, petitioners would be precluded by the judgment from invoking the same in an independent action. The pronouncement
in Papa vs. Banaag, 1is in point:

Compensatory, moral and exemplary damages, allegedly suffered by the creditor in consequence of the debtor's action, are also
compulsory counterclaim barred by the dismissal of the debtor's action. They cannot be claimed in a subsequent action by the creditor
against the debtor.

Aside from the fact that petitioners' counterclaim for damages cannot be the subject of an independent action, it is the same evidence
that sustains petitioners' counterclaim that win refute private respondent's own claim for damages. This is an additional factor that
characterizes petitioners' counterclaim as compulsory.

Defendants' counterclaim is compulsory not only because the same evidence to sustain it will also refute the cause or causes of action
alleged in plaintiff's complaint, but also because from its very nature, it is obvious that the same cannot remain pending for independent
adjudication by the court. (Section 2, Rule 17; Lim Tanhu vs. Ramolete, No. L-40098, August 29,1975,66 SCRA 426).

In respect of attorney's fees, it should be held that where a claim therefore arises out of the filing of the complaint they, too, should be
considered as in the nature of a compulsory counterclaim. They should be pleaded or prayed for in the answer to the complaint in order
to be recoverable, otherwise, they would be barred.

50
WHEREFORE, the challenged Orders of December 28, 1979 and August 26, 1980 are hereby set aside; the countered contained in
petitioners' Answer is hereby declared a compulsory countered and respondent Judge is hereby directed to order the refund to
petitioners of the amount of P1,410.00, which they were compelled to pay on their compulsory counterclaim. No costs. SO ORDERED.

China Banking Corp. vs. Padilla, 514 SCRA 35

[G.R. NO. SP 143490 : February 2, 2007]

CHINA BANKING CORPORATION, Petitioner, v. DOLORES PADILLA, Respondent.

DECISION

GARCIA, J.:

Via this Petition for Review under Rule 45 of the Rules of Court, petitioner China Banking Corporation (CBC) seeks the annulment and
setting aside of the Resolution1 dated January 26, 2000 of the Court of Appeals (CA), as reiterated in its Resolution of June 2,
2000,2 denying due course to and dismissing CBC's Petition for Certiorari (with Prayer for Issuance of Restraining Order/Preliminary
Injunction) in CA-G.R. SP No. 55795, entitled China Banking Corporation v. Hon. Jose R. Bautista, in his capacity as Presiding Judge
of the Regional Trial Court, Makati City, Branch 136, and Dolores Padilla, for petitioner's failure to comply with the requirement of
Section 3, Rule 46, of the 1997 Rules of Civil Procedure, as amended.

The facts:

On December 22, 1997, in the Regional Trial Court (RTC) of Makati City, private respondent Dolores Padilla, who had a checking
account with the petitioner's branch at Tuguegarao, Cagayan filed a complaint 3 for sum of money with damages against the petitioner.
In her complaint, docketed as Civil Case No. 97-3020 and raffled to now Branch 136 of the court, Padilla, as plaintiff, alleges the
following causes of action against the petitioner:

1. Erroneous deductions from her Current Account No. 164-001371-5 of the following:

A. The amount of P23,425.00 on March 4, 1997;

b. The amount of P10,000.00, P35,000.00 and P100,000.00 or a total of P168,425.00 on April 1, 1997;

c. The total amount of P4,540,000.00 without debit memos on different dates;

2. Erroneous payment of China Bank Check No. 47050 with the amount in words stated therein as Eighteen Thousand Pesos only but
the figures were written as P80,000.00, resulting in an alleged loss of P62,000.00;

3. Erroneous debiting from her account of PVB -Tuguegarao Branch Check No. 6969 in the amount of P20,000.00.

Prior to the filing of the complaint, petitioner bank audited the transactions involving the respondent's checking account with its
Tuguegarao branch and came to the conclusion that if the foregoing allegations were true, the same were imputable to its branch
manager Emelina T. Quitan, who, in violation of the petitioner's Code of Ethics and Operations Procedure and Policy Manual, exceeded
her authority in the performance of her duties as branch manager. Petitioner also found out that Quitan had committed the following
acts, prompting it to terminate the latter's services on November 13, 1998: 4

1. Allowing the unauthorized overdraft of the respondent in the total amount of P1,475,731.43.

2. Accommodating the overdrawn checks of respondent, i.e., CBC Check Nos. 120935 and 120938 for P100,000.00 each, depositing
and posting them as available despite knowledge that they were drawn from insufficient funds in order to fund another depositor's CBC
Check No. 116461.

3. Making good CBC Check No. 111459 drawn by respondent for P250,000.00 despite the fact that said check was not sufficiently
funded.

4. Granting bills purchased facility without approval of the petitioner.

51
5. Allowing fund transfers from client's accounts to other accounts in violation of the petitioner's policy prohibiting fund transfers
between accounts not owned by the same party.

6. Defying the lawful order of her superior.ςηαñrοblεš �νιr†υαl �lαω �lιbrαrÿ

7. And other numerous acts and omissions.

Believing that there was sufficient cause to hold its branch manager liable to it by way of indemnity, subrogation and contribution in
respect to Padilla's complaint, petitioner filed with the trial court a motion for leave of court to file a third-party complaint 5 against Quitan.

In its Order6 of August 17, 1999, the trial court denied the motion on the ground that petitioner, as a corporation, could act only through
its employees and was responsible for the acts committed by them in the discharge of their function, adding that Quitan's inclusion in
the case was not proper and whatever claims the petitioner may have had against her should be ventilated in another forum. Petitioner
moved for a reconsideration but to no avail.

From the adverse action of the trial court, petitioner went to the CA on a petition for certiorari, docketed as CA-G.R. SP No. 55795.

In the herein challenged Resolution7 dated January 26, 2000, the CA denied due course to and dismissed the petition for petitioner's
failure to comply with Section 3, Rule 46, infra, of the 1997 Rules of Civil Procedure, as amended, which mandates that certified true
copies of the documents or pleadings mentioned in the petition must be attached thereto. Partly says the CA in its assailed Resolution:

Except for the orders of the court a quo denying the motion for leave of court to file third-party complaint dated July 26, 1999 and
August 17, 1999 and the order dated September 20, 1999 clarifying the above two (2) orders and denying the motion for
reconsideration, other relevant documents attached to the petition are plain photo copies and not certified copies pursuant to the Rules
(Annexes "D", p. 29; "E", p. 103; and "F", p. 133, Rollo).

There are also pertinent documents which were referred to but not appended to the petition, such as petitioner's motion for
reconsideration filed on August 20, 1999, the pre-trial order dated February 25, 1998, motion for consolidation, order dated March 11,
1999 granting the motion for consolidation, order of inhibition dated April 21, 1998, motion for consolidation filed on May 25, 1998, and
comment on the motion for leave of court including the counter-comment/reply.

In time, petitioner filed a motion for reconsideration, thereunder explaining that its failure to adhere to the rule was due to honest
mistake and excusable negligence and was not meant, in any slightest degree, to defy the mandate of the procedural rules. In the
same motion, petitioner also maintained that it had now fully complied with Section 3 of Rule 46 because certified true copies of the
documents/pleadings mentioned in its petition were already attached to its motion.

In its subsequent Resolution8 of June 2, 2000, the CA denied the petitioner's motion for reconsideration, explaining that the latter's
subsequent compliance, without any compelling reason for its failure to do so in the first instance, did not warrant the reconsideration
sought.

Hence, this recourse by the petitioner raising the following issues: 9

WHETHER THE COURT A QUO ERRED IN ADAMANTLY REFUSING TO RECONSIDER ITS RESOLUTION OF JANUARY 26, 2000
AND TO REINSTATE THE PETITION DESPITE COMPLIANCE BY PETITIONER WITH THE REQUIREMENT IN SECTION 3, RULE
46 OF THE 1997 RULES OF CIVIL PROCEDURE.

II

WHETHER THE TRIAL COURT ACTED WITH GRAVE ABUSE OF DISCRETION IN DENYING PETITIONER'S MOTION FOR LEAVE
TO FILE THIRD PARTY COMPLAINT.

We DENY.

Section 3, Rule 46, of the 1997 Rules of Civil Procedure, as amended, provides:

SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. - xxx

xxx
52
It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the respondent with the original copy
intended for the court indicated as such by the petitioner, and shall be accompanied by a clearly legible duplicate original or certified
true copy of the judgment, order, resolution, or ruling subject thereof, such material portions of the record as are referred to therein, and
other documents relevant or pertinent thereto. xxx

xxx

The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the dismissal of the petition.
(Italics ours)

The above rule is clear. Failure to comply with the requirement that the petition shall be accompanied by a certified true copy of the
resolutions, orders or any rulings subject thereof is a sufficient ground for the dismissal of the petition.

Petitioner contends that its failure to attach the required documents to its petition is due to honest mistake and excusable negligence
and that it was not meant to defy the mandate of the procedural rule. In Sea Power Shipping Enterprises, Inc. v. Court of Appeals, et
al.,10 the Court had already held that "oversight" and "excusable negligence" have become an all too familiar and ready excuse on the
part of lawyers remiss in their bounden duty to comply with established rules. Rules of procedure are tools designed to promote
efficiency and orderliness, as well as to facilitate attainment of justice, such that strict adherence thereto is required. The application of
the Rules may be relaxed only when rigidity would result in a defeat of equity and substantial justice, 11 which is not true in this case.

Even assuming that the petition filed in CA-G.R. SP No. 55795 is sufficient in form, still the same is dismissible there being no grave
abuse of discretion committed by the trial court in issuing its order of August 17, 1999 which denied the petitioner's motion for leave of
court to file third-party complaint against its branch manager. Explicitly, Section 11, Rule 6, of the 1997 Rules of Civil Procedure, as
amended, provides:

SEC. 11. Third (fourth, etc.)-party complaint. - A third (fourth, etc.)-party complaint is a claim that a defending party may, with leave of
court, file against a person not a party to the action, called the third (fourth, etc.)-party defendant, for contribution, indemnity,
subrogation or any other relief, in respect of his opponent's claim.

A third-party complaint is actually a complaint independent of, and separate and distinct from, the plaintiff's complaint. Were it not for
the above rule, such third-party complaint would have to be filed independently and separately from the original complaint. The purpose
is to avoid circuitry of action and unnecessary proliferation of lawsuits and of disposing expeditiously in one litigation all the matters
arising from one particular set of facts.12

Be that as it may, trial courts are not especially enjoined by law to admit a third-party complaint. They are vested with discretion to allow
or disallow a party to an action to implead an additional party. Thus, a defendant has no vested right to file a third-party complaint. 13

In any event, whatever claim the petitioner may have against its branch manager may, as correctly ruled by the trial court in its Order of
August 17, 1999, still be enforced in a separate action. In short, the denial of petitioner's motion for leave of court to file a third-party
complaint against Quitan for whatever claim for contribution, indemnity, subrogation or any other relief it may have against the latter vis
a vis the basic complaint of the private respondent in Civil Case No. 97-3020 is not lost.

WHEREFORE, the petition is DENIED and the challenged resolutions of the Court of Appeals in CA-G.R. SP No. 55795 are
AFFIRMED.

Costs against the petitioner.

SO ORDERED.

53
Spouses Uy v. Ariza, G.R. No. 158370, [August 17, 2006], 530 PHIL 637-646

G.R. No. 158370 August 17, 2006

SPOUSES MICHAEL UY & BONITA UY, Petitioners,

vs.
EDUARDO ARIZA, ERLINDA A. ABDON, BENJAMIN ARIZA, TERESITA A. SIMPORIOS, HEIRS OF MARIANO ARIZA, JR.,
namely: JUANITA L. ARIZA, DENNIS L. ARIZA, ROLDAN L. ARIZA, & JOVANNI L. ARIZA; and the Heirs of FAUSTO ARIZA,
namely: JESUSA ARIZA, THELMA SOLLANO, ARTURO ARIZA, ELDINA CONOS, VILMA SABERON, & REBECCA
PADULLO, Respondents.

DECISION

PUNO, J.:

The facts:

On October 8, 1996, spouses Michael and Bonita Uy, petitioners, purchased 200 square meters of the parcel of land designated as Lot
No. 3229-C-2-F, covered by Transfer Certificate of Title (TCT) No. T-20007, from respondents. The contract stipulated that petitioners
had the right of choice to designate which portion of Lot No. 3229-C-2-F would be the subject of the sale. 1

Petitioners exercised their right to choose within two to three months from the sale, informing respondents that they have selected and
in fact occupied around 200 square meters of a portion of land. 2

On August 4, 1997, petitioners purchased another 200 square meters of the same Lot No. 3229-C-2-F, with the same option to choose
which portion. They selected and occupied an adjoining portion to the lot in their first sale. 3

It appears that the parcels of land petitioners had chosen and occupied were already titled in the names of the Delgados, namely,
Carlos, Allan and Antonio, Jr. Although originally part of Lot No. 3229-C-2-F, the two parcels of land were part of some 3,500 square
meters that were purportedly sold by the respondents to the Delgados on July 31, 1985. This deed of sale to the Delgados was
annotated on TCT No. T-20007 (covering Lot No. 3229-C-2-F) on June 10, 1993, and a new title for the covered area was issued on
April 21, 1994, which was likewise annotated on TCT No. T-20007 on the same date. 4 Thus, at the time of the first sale by the
respondents to petitioners, the two parcels of land had been cancelled from Lot No. 3229-C-2-F (covered by TCT No. T-20007), and
were already part of Lot No. 3229-C-2-F-1 (covered by TCT No. T-39106). 5

Petitioners were sued for unlawful detainer by the Delgados. In September 1998, petitioners entered into a compromise agreement with
the Delgados and surrendered possession of the subject parcels of land. Petitioners compromised the case without giving notice to
respondents. 6

Thereafter, petitioners demanded from respondents that they be allowed to choose again from Lot No. 3229-C-2-F. When respondents
refused, petitioners filed, on March 12, 1999, a case for specific performance with delivery of possession of real property and
damages. 7 Petitioners anchored their claim for specific performance on the averment that they "could not exercise [their] right to
choose the portion bought from the parcel of land afore-described because the portion pointed out by the [petitioners] were already sold
and claimed by third persons…" 8

Respondents filed their answer and by way of special and affirmative defenses alleged that they had already complied with their
obligation to deliver, as petitioners had already chosen and been in possession of the parcels of land they chose. 9 Respondents also
faulted petitioners for losing possession of the parcels of land by entering into a compromise agreement with the Delgados on two
grounds: first, because respondents have allegedly initiated the necessary legal steps to defend their possessory rights to the disputed
land by filing a case for the declaration of nullity of the title of the Delgados, and second, because petitioners failed to interpose a third-
party complaint to implead respondents in the unlawful detainer case. 10

The trial court denied respondents’ motion to dismiss based on their Special and Affirmative Defenses as well as their motion for
reconsideration. 11 They went to the Court of Appeals on an action for certiorari and prohibition contending that the trial court committed
grave abuse of discretion in holding that:

1. petitioners had a cause of action for specific performance against respondents;

54
2. petitioners erroneously selected the parcels of land by some unfortunate turn of events so that the portions selected were not owned
by respondents but the Delgados; and

3. the parcels of land were owned by the Delgados, a conclusion that was premature considering that the case for the declaration of
nullity of the Delgados’ title covering the parcels was pending before the trial court.

The Court of Appeals reversed and set aside the orders of the trial court. It held that petitioners had no cause of action to file a case of
specific performance against respondents. 12 It ruled that the proper remedy of the petitioners is an action for enforcement of warranty
against eviction.

Petitioners now come before this Court on a petition for review on the following issues:

(1) whether the complaint filed in the RTC by petitioners fails to state a cause of action for specific performance with delivery of
possession of real property and damages against respondents; and

(2) whether the RTC’s denial of the motion to dismiss on lack of cause of action was the proper subject of certiorari before the Court of
Appeals.

We deny the petition.

We quote with approval the following ruling of the appellate court, viz:

At the outset, it could already be seen that indeed, [petitioners] have no cause of action against [respondents]. The case for specific
performance which was filed by [petitioners] against [respondents] is not the proper remedy in this case. Rather, said action was purely
an afterthought on the part of [petitioners] when they were eventually evicted from the lots they bought from [respondents].

The facts of the case are very clear. [Petitioners] bought from [respondents] a 200 square meter lot which was part of a bigger parcel of
land covered by TCT No. 20007 registered in the names of [respondents], and which [petitioners] immediately took possession of. After
a year, [petitioners] again bought from [respondents] and took possession of the adjacent lot also measuring 200 square meters. Since
the sale, [petitioners] had been in peaceful possession of the lots until they were evicted from the same by third persons claiming to be
the owners of the said lots. Thus, if [petitioners] have a cause of action against [respondents], it would be one for the enforcement of
warranty against eviction and not one for specific performance.

The core of [petitioners’] argument to support their action for specific performance was that [respondents] failed to deliver to them the
lots subject matter of the sale, since what was delivered were not owned by [respondents] but by third persons. They likewise maintain
that they were not able to exercise their choice on which lot to occupy as agreed upon by them. We do not find these arguments
tenable. The truth of the matter is that [respondents] were able to deliver the said parcels of land to [petitioners]. It could not be said that
[petitioners were] deprived of their choice on which parcel of land they were to buy and occupy. The fact that they even decided to buy
the lot adjacent to the first lot they bought would clearly indicate that the said lots were their choice. Moreover, [petitioners] had been
enjoying possession of the same until an unlawful detainer case was filed against them by third persons. After having enjoyed the
property for sometime, [petitioners] cannot now come before the court claiming that [respondents] failed to deliver the property subject
of the sale.

There is no denying also that these lots were originally part of a bigger parcel of land owned by [respondents] and covered by TCT No.
20007. That third persons armed with a certificate of title in their favor suddenly surfaced claiming to be the owners of the subject lots
does not automatically render the delivery made by [respondents] to [petitioners] ineffectual. Stated otherwise, although third persons
later on claimed ownership over the property, it does not mean that [respondents] failed to deliver the lots subject matter of the sale. It
is also worth mentioning that the claim of these third persons to the subject lots is being disputed by [respondents] as in fact, they filed
an action for the declaration of nullity of the title of Allan, Carlos and Antonio Delgado over the subject lots and which up to now is still
pending before the Court of Appeals. This action on the part of [respondents] would show that they do not recognize the right of these
third persons to the subject lots and that [respondents] still maintain that they are the lawful owners of the same.

What is before Us is a clear case of eviction. Thus, the action for specific performance filed by [petitioners] against [respondents] must
necessarily fail. If at all, [petitioners] may file an action for the enforcement of warranty in case of eviction which every vendor of a
parcel of land is enjoined by law to guarantee as provided under Article 1548 of the New Civil Code:

Art. 1548. Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor,
the vendee is deprived of the whole or part of the thing purchased.

The vendor shall answer for the eviction even though nothing has been said in the contract on the subject.

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The contracting parties, however, may increase, diminish or suppress this legal obligation of the vendor.

But even if [petitioners] would file an action for the enforcement of warranty in case of eviction against [respondents], We are afraid that
the same will not prosper. The records of the case reveal that the unlawful detainer case filed by third persons against [petitioners],
which led to the ouster of the latter from the subject lots, was decided by compromise agreement without impleading [respondents] as
third-party defendants. It should be stressed that in order for the case to prosper, it is a precondition that the seller must have been
summoned in the suit for the eviction of the buyer. This rule is provided under the provisions of Articles 1558 and 1559 of the New Civil
Code, to wit:

Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the suit for eviction at the
instance of the vendee.

Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for answering the complaint, that the vendor be
made a co-defendant.

Applying the above-quoted provisions of law, the Supreme Court enumerated the requisites in the enforcement of a vendor’s liability for
eviction, in the case of Maria Luisa De Leon Escaler and Ernesto Escaler v. Court of Appeals, et al., [G.R. No. L-42636. August 1,
1985.], to wit:

In order that a vendor’s liability for eviction may be enforced, the following requisites must concur – a) there must be a final judgment; b)
the purchaser has been deprived of the whole or part of the thing sold; c) said deprivation was by virtue of a right prior to the sale made
by the vendor; and d) the vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee. In
the case at bar, the fourth requisite – that of being summoned in the suit for eviction (Case No. 4252) at the instance of the vendee – is
not present.

We need only add that petitioners could have filed a third-party complaint against the respondents when they were sued for eviction by
the
Delgados under Rule 6, Section 11. 13 In Firestone Tire and Rubber Co. of the Philippines v. Tempongko, 14 we explained the function
of a third-party complaint, viz:

The third-party complaint, is x x x a procedural device whereby a ‘third party’ who is neither a party nor privy to the act or deed
complained of by the plaintiff, may be brought into the case with leave of court, by the defendant, who acts as third-party plaintiff to
enforce against such third-party defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiff’s
claim. The third-party complaint is actually independent of and separate and distinct from the plaintiff’s complaint. Were it not for this
provision of the Rules of Court, it would have to be filed independently and separately from the original complaint by the defendant
against the third-party. But the Rules permit defendant to bring in a third-party defendant or so to speak, to litigate his separate cause of
action in respect of plaintiff’s claim against a third party in the original and principal case with the object of avoiding circuitry of action
and unnecessary proliferation of lawsuits and of disposing expeditiously in one litigation the entire subject matter arising from one
particular set of facts. Prior leave of Court is necessary, so that where the allowance of a third-party complaint would delay the
resolution of the original case, such as when the third-party defendant cannot be located or where matters extraneous to the issue of
possession would unnecessarily clutter a case of forcible entry, or the effect would be to introduce a new and separate controversy into
the action, the salutary object of the rule would not be defeated, and the court should in such cases require the defendant to institute a
separate action. x x x.

If petitioners filed the third-party complaint against the respondents, they could have sought from the respondents "x x x contribution,
indemnity, subrogation or any other relief" in respect of the claim of the Delgados. The phrase "any other relief" includes a claim of a
vendee for warranty against the vendor. 15

IN VIEW WHEREOF, the petition is denied.

No cost.

SO ORDERED.

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Commercial Bank vs. Republic Armored Car Service, 8 SCRA 425

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. Nos. L-18223-24 June 29, 1963

COMMERCIAL BANK & TRUST COMPANY OF THE PHILIPPINES, plaintiff-appellee,

vs.
REPUBLIC ARMORED CAR SERVICE CORPORATION and DAMASO PEREZ, ET AL., defendants-appellants.

Pompeyo Diaz for plaintiff-appellee.

Halili, Bolinao, Bolinao & Associates and Crispin D. Baizas for defendants-appellants.

LABRADOR, J.:

The above-entitled cases are appeals from judgments rendered by the Court of First Instance of through Judges Gustavo Victoriano
and Conrado M. Vasquez, respectively, of said Court.

In G.R. No. L-8223 plaintiff-appellee filed it complaint alleging that the defendants-appellants were granted by it credit accommodations
in the form of an overdraft line for an amount not exceeding P80,000, with interest (paragraph 2, Complaint); that defendants or either
of them drew regularly upon the above credit line and as of February 10, 1960, the total of their drawings and interest due amounted to
P79,940.80 (par. 3, id.); that repeated demands were made upon defendants to pay for the drawings but said demands were ignored
(par. 4, id.). In their answer to the complaint the defendants admit having drawn upon the credit line extended to them as alleged in the
complaint; claim they have not ignored the demands for the payment of the sums demanded and have instituted actions against the
former officers of defendant corporation who held defrauded the latter; etc. (par. 4, Answer). By way of special affirmative defenses,
they allege that the former officers and directors of the defendant corporation had deliberately defrauded and mismanaged the
corporations, as a part of their scheme to wrest control of various corporations owned by Damaso Perez, from the latter, and as a result
of said frauds or mismanagements the defendants have instituted actions for damages for breach of trust; and that the amounts drawn
on the credit line subject of the complaint were received and used by the former directors and officers of the defendant corporations
and constitute part of the funds misapplied by them. Upon motion, Judge Victoriano entered for the plaintiff a judgment on the
pleadings, holding that the "special affirmative defenses (of the answer) filled to show that any allegation respecting the extent of
defendants' drawing although they have admitted having drawn against the credit line, subject of the action, so that said denial, not
being specific denial in the true sense, does not controvert the allegation at which it is aimed," etc. The court also further held that the
alleged mismanagement and fraud of the former directors and officials of defendant corporation and the action now pending in court
regarding the same are merely internal affairs of the corporation which cannot affect or diminish the liability of the defendant corporation
to the plaintiff. The defendants appealed from the decision to the Court of Appeals, but this Court certified the case to Us.

In G.R. No. L-18224 the complaint also alleges that the defendants were given credit accommodation in the form of an overdraft line in
an amount not exceeding P150,000 and drew regularly upon said credit line amounts which with their interest reach the sum of
P133,453.17; that demands were made for the payment of the drawings but defendants have failed to pay the amounts demanded.
Defendants in their answer admit the opening of the credit line in their favor and that demands for the indebtedness were made upon
them, but allege as special defenses that the directors and officers of the defendant corporation deliberately defrauded and
mismanaged the said corporation breach of trust in order to deprive Damaso Perez of his control and majority interest in the defendant
corporation, as a result of which fraud, mismanagement and breach of trust the defendants suffered tremendous losses; that the
amounts drawn by defendant corporation upon the credit line were received and used by the former directors and officers and same
constitute part of the funds of the defendant corporation misapplied and mismanaged by said former officers and directors of said
corporation. Upon the presentation of the answer the plaintiff presented motion sustained, for judgment on the pleadings which the
court sustained, holding:

The defendants having admitted the indebtedness in question, its liability to pay the plaintiff the amount of the said
indebtedness is beyond question. The alleged fact that the money borrowed from the plaintiff was misappropriated or
misapplied by some officers of the defendant corporation is no defense against the liability of the defendants to the plaintiff. It
is an internal matter of the defendant corporation in which the plaintiff has no concern or participation whatsoever. This is
specially so with respect to the defendant Damaso Perez who appears to have executed the agreement, Annex A, in his own
personal capacity and not as an officer of the defendant Republic Credit Corporation. The allegation that the defendants have

57
 a right to claim indemnity or contribution from the erring directors and officers of the defendant corporation is a matter which
may be the subject of a separate action, and in which the plaintiff is not concerned. (p. 37, Record on Appeal)

Against the above judgment the defendants also have prosecuted this appeal. The Court of Appeals certified the same to Us in
accordance with law.

In G.R. No. L-18223, the defendants-appellants argue that the admission made by the defendants in their answer that the amount
demanded was due, is qualified "in the sense that whatever amounts were drawn from the overdraft line in question were part of those
corporate funds of Philippine Armored Car, Inc., misused and misapplied by Ramon Racelis, et al., former directors and executive
officers of said corporation." (p. 13, Appellee's Brief) In answer to this argument we call attention to the fact that in the agreement
attached to the complaint Exhibit "A", the obligation of the defendants-appellants to pay for the amount due under the overdraft line is
not in any way qualified; there is no statement that the responsibility of the defendants-appellants for the amount taken on overdraft
would cease or be defeated or reduced upon misappropriations on mismanagement of the funds of the corporation by the directors and
employees thereof. The special defense is, therefore, a sham defense.

Furthermore, under general rules and principles of law the mismanagement of the business of a party by his agents does not relieve
said party from the responsibility that he had contracted to third persons, especially in the case at bar where the written agreement
contains no limitation to defendants-appellants' liability.1äwphï1.ñët

The so-called special defense contained in the answer is, therefore, no special defense to the liability of the defendants-appellants, nor
to the action, and the court's action or judgment on the pleadings was properly taken. The argument contained in the brief of the
defendants-appellants that the defendants contemplated a third-party complaint is of no weight, because a third-party complaint was
not available to the defendants under the facts of the case. A third-party complaint is, under the Rules, available only if the defendant
has a right to demand contribution, indemnity, subrogation or any other relief from the supposed third-party defendants in respect to the
plaintiff's claim. (Sec. 1, Rule 12, Rules of Court). The supposed parties defendants or alleged officers of the defendant corporation had
nothing to do with the overdraft account of defendant corporation with the plaintiff-appellee. Consequently, they cannot be made parties
defendants in a third party complaint. Anyway the filing of a third party complaint is no hindrance to the issuance of the order of the
court declaring that the defendants' answer presented no issue or defense and that, therefore, plaintiff-appellee was entitled to
judgment.

In G. R. No. L-18224, our ruling in the first case is also applicable. In this second case, it is also alleged that at the time of the
agreement for credit in current account the defendant corporation was under the management of Ramon Racelis and others who
defrauded and mismanaged the corporation, in breach of trust, etc., etc. Again we declare that the written agreement for credit in
current account, Annex "A", contains no limitation about the liability of the defendants-appellants, nor an express agreement that the
responsibility of the defendants-appellants should be conditioned upon the lawful management of the business of the defendant
corporation. The same rulings in the first case are applicable in this second case.

WHEREFORE, the judgments appealed from are hereby affirmed, with costs against the defendants-appellants.

Padilla, Bautista Angelo, Concepcion., Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.
Bengzon, C.J., took no part.

58