CIVIL PROCEDURE

1. 291 SCRA 396

11/12/12

PNB & NATIONAL SUGAR DEVELOPMENT CORPORATION vs. ANDRADA ELECTRIC & ENGINEERING COMPANY, G.R. No. 142936, April 17, 2002 Basic is the rule that a corporation has a legal personality distinct and separate from the persons and entities owning it. The corporate veil may be lifted only if it has been used to shield fraud, defend crime, justify a wrong, defeat public convenience, insulate bad faith or perpetuate injustice. Thus, the mere fact that the Philippine National Bank (PNB) acquired ownership or management of some assets of the Pampanga Sugar Mill (PASUMIL), which had earlier been foreclosed and purchased at the resulting public auction by the Development Bank of the Philippines (DBP), will not make PNB liable for the PASUMILs contractual debts to respondent. Statement of the Case Before us is a Petition for Review assailing the April 17, 2000 Decision1 of the Court of Appeals (CA) in CA-GR CV No. 57610. The decretal portion of the challenged Decision reads as follows: "WHEREFORE, the judgment appealed from is hereby AFFIRMED."2 The Facts The factual antecedents of the case are summarized by the Court of Appeals as follows: "In its complaint, the plaintiff [herein respondent] alleged that it is a partnership duly organized, existing, and operating under the laws of the Philippines, with office and principal place of business at Nos. 794-812 Del Monte [A]venue, Quezon City, while the defendant [herein petitioner] Philippine National Bank (herein referred to as PNB), is a semi-government corporation duly organized, existing and operating under the laws of the Philippines, with office and principal place of business at Escolta Street, Sta. Cruz, Manila; whereas, the other defendant, the National Sugar Development Corporation (NASUDECO in brief), is also a semi-government corporation and the sugar arm of the PNB, with office and principal place of business at the 2nd Floor, Sampaguita Building, Cubao, Quezon City; and the defendant Pampanga Sugar Mills (PASUMIL in short), is a corporation organized, existing and operating under the 1975 laws of the Philippines, and had its business office before 1975 at Del Carmen, Floridablanca, Pampanga; that the plaintiff is engaged in the business of general construction for the repairs and/or construction of different kinds of machineries and buildings; that on August 26, 1975, the defendant PNB acquired the assets of the defendant PASUMIL that were earlier foreclosed by the Development Bank of the Philippines (DBP) under LOI No. 311; that the defendant PNB organized the defendant NASUDECO in September, 1975, to take ownership and possession of the assets and ultimately to nationalize and consolidate its interest in other PNB controlled sugar mills; that prior to October 29, 1971, the defendant PASUMIL engaged the services of plaintiff for electrical rewinding and repair, most of which were partially paid by the defendant PASUMIL, leaving several unpaid accounts with the plaintiff; that finally, on October 29, 1971, the plaintiff and the defendant PASUMIL entered into a contract for the plaintiff to perform the following, to wit (a) Construction of one (1) power house building; (b) Construction of three (3) reinforced concrete foundation for three (3) units 350 KW diesel engine generating set[s]; (c) Construction of three (3) reinforced concrete foundation for the 5,000 KW and 1,250 KW turbo generator sets; (d) Complete overhauling and reconditioning tests sum for three (3) 350 KW diesel engine generating

set[s]; (e) Installation of turbine and diesel generating sets including transformer, switchboard, electrical wirings and pipe provided those stated units are completely supplied with their accessories; (f) Relocating of 2,400 V transmission line, demolition of all existing concrete foundation and drainage canals, excavation, and earth fillings all for the total amount of P543,500.00 as evidenced by a contract, [a] xerox copy of which is hereto attached as Annex A and made an integral part of this complaint; that aside from the work contract mentioned-above, the defendant PASUMIL required the plaintiff to perform extra work, and provide electrical equipment and spare parts, such as: (a) Supply of electrical devices; (b) Extra mechanical works; (c) Extra fabrication works; (d) Supply of materials and consumable items; (e) Electrical shop repair; (f) Supply of parts and related works for turbine generator; (g) Supply of electrical equipment for machinery; (h) Supply of diesel engine parts and other related works including fabrication of parts. that out of the total obligation of P777,263.80, the defendant PASUMIL had paid only P250,000.00, leaving an unpaid balance, as of June 27, 1973, amounting to P527,263.80, as shown in the Certification of the chief accountant of the PNB, a machine copy of which is appended as Annex C of the complaint; that out of said unpaid balance of P527,263.80, the defendant PASUMIL made a partial payment to the plaintiff of P14,000.00, in broken amounts, covering the period from January 5, 1974 up to May 23, 1974, leaving an unpaid balance of P513,263.80; that the defendant PASUMIL and the defendant PNB, and now the defendant NASUDECO, failed and refused to pay the plaintiff their just, valid and demandable obligation; that the President of the NASUDECO is also the Vice-President of the PNB, and this official holds office at the 10th Floor of the PNB, Escolta, Manila, and plaintiff besought this official to pay the outstanding obligation of the defendant PASUMIL, inasmuch as the defendant PNB and NASUDECO now owned and possessed the assets of the defendant PASUMIL, and these defendants all benefited from the works, and the electrical, as well as the engineering and repairs, performed by the plaintiff; that because of the failure and refusal of the defendants to pay their just, valid, and demandable obligations, plaintiff suffered actual damages in the total amount of P513,263.80; and that in order to recover these sums, the plaintiff was compelled to engage the professional services of counsel, to whom the plaintiff agreed to pay a sum equivalent to 25% of the amount of the obligation due by way of attorneys fees. Accordingly, the plaintiff prayed that judgment be rendered against the defendants PNB, NASUDECO, and PASUMIL, jointly and severally to wit: (1) Sentencing the defendants to pay the plaintiffs the sum of P513,263.80, with annual interest of 14% from the time the obligation falls due and demandable; (2) Condemning the defendants to pay attorneys fees amounting to 25% of the amount claim; (3) Ordering the defendants to pay the costs of the suit. "The defendants PNB and NASUDECO filed a joint motion to dismiss the complaint chiefly on the ground that the

complaint failed to state sufficient allegations to establish a cause of action against both defendants, inasmuch as there is lack or want of privity of contract between the plaintiff and the two defendants, the PNB and NASUDECO, said defendants citing Article 1311 of the New Civil Code, and the case law ruling in Salonga v. Warner Barnes & Co., 88 Phil. 125; and Manila Port Service, et al. v. Court of Appeals, et al., 20 SCRA 1214. "The motion to dismiss was by the court a quo denied in its Order of November 27, 1980; in the same order, that court directed the defendants to file their answer to the complaint within 15 days. "In their answer, the defendant NASUDECO reiterated the grounds of its motion to dismiss, to wit: That the complaint does not state a sufficient cause of action against the defendant NASUDECO because: (a) NASUDECO is not x x x privy to the various electrical construction jobs being sued upon by the plaintiff under the present complaint; (b) the taking over by NASUDECO of the assets of defendant PASUMIL was solely for the purpose of reconditioning the sugar central of defendant PASUMIL pursuant to martial law powers of the President under the Constitution; (c) nothing in the LOI No. 189-A (as well as in LOI No. 311) authorized or commanded the PNB or its subsidiary corporation, the NASUDECO, to assume the corporate obligations of PASUMIL as that being involved in the present case; and, (d) all that was mentioned by the said letter of instruction insofar as the PASUMIL liabilities [were] concerned [was] for the PNB, or its subsidiary corporation the NASUDECO, to make a study of, and submit [a] recommendation on the problems concerning the same. "By way of counterclaim, the NASUDECO averred that by reason of the filing by the plaintiff of the present suit, which it [labeled] as unfounded or baseless, the defendant NASUDECO was constrained to litigate and incur litigation expenses in the amount of P50,000.00, which plaintiff should be sentenced to pay. Accordingly, NASUDECO prayed that the complaint be dismissed and on its counterclaim, that the plaintiff be condemned to pay P50,000.00 in concept of attorneys fees as well as exemplary damages. "In its answer, the defendant PNB likewise reiterated the grounds of its motion to dismiss, namely: (1) the complaint states no cause of action against the defendant PNB; (2) that PNB is not a party to the contract alleged in par. 6 of the complaint and that the alleged services rendered by the plaintiff to the defendant PASUMIL upon which plaintiffs suit is erected, was rendered long before PNB took possession of the assets of the defendant PASUMIL under LOI No. 189-A; (3) that the PNB take-over of the assets of the defendant PASUMIL under LOI 189-A was solely for the purpose of reconditioning the sugar central so that PASUMIL may resume its operations in time for the 1974-75 milling season, and that nothing in the said LOI No. 189-A, as well as in LOI No. 311, authorized or directed PNB to assume the corporate obligation/s of PASUMIL, let alone that for which the present action is brought; (4) that PNBs management and operation under LOI No. 311 did not refer to any asset of PASUMIL which the PNB had to acquire and thereafter [manage], but only to those which were foreclosed by the DBP and were in turn redeemed by the PNB from the DBP; (5) that conformably to LOI No. 311, on August 15, 1975, the PNB and the Development Bank of the Philippines (DBP) entered into a Redemption Agreement whereby DBP sold, transferred and conveyed in favor of the PNB, by way of redemption, all its (DBP) rights and interest in and over the foreclosed real and/or personal properties of PASUMIL, as shown in Annex C which is made an integral part of the answer; (6) that again, conformably with LOI No. 311, PNB pursuant to a Deed of Assignment dated October 21, 1975, conveyed, transferred, and assigned for valuable consideration, in favor of NASUDECO, a distinct and independent corporation, all its (PNB) rights and interest in and under the above Redemption Agreement. This is shown in Annex D which is also made an integral part of the answer; [7] that as a consequence of the said Deed of Assignment, PNB on October 21, 1975 ceased to managed and operate the above-mentioned assets of PASUMIL, which function was now actually transferred to NASUDECO. In other words, so asserted PNB, the complaint as to PNB, had become moot and academic because of the execution of the said Deed of Assignment; [8] that moreover, LOI No. 311 did not authorize or direct PNB to

assume the corporate obligations of PASUMIL, including the alleged obligation upon which this present suit was brought; and [9] that, at most, what was granted to PNB in this respect was the authority to make a study of and submit recommendation on the problems concerning the claims of PASUMIL creditors, under sub-par. 5 LOI No. 311. "In its counterclaim, the PNB averred that it was unnecessarily constrained to litigate and to incur expenses in this case, hence it is entitled to claim attorneys fees in the amount of at least P50,000.00. Accordingly, PNB prayed that the complaint be dismissed; and that on its counterclaim, that the plaintiff be sentenced to pay defendant PNB the sum of P50,000.00 as attorneys fees, aside from exemplary damages in such amount that the court may seem just and equitable in the premises. "Summons by publication was made via the Philippines Daily Express, a newspaper with editorial office at 371 Bonifacio Drive, Port Area, Manila, against the defendant PASUMIL, which was thereafter declared in default as shown in the August 7, 1981 Order issued by the Trial Court. "After due proceedings, the Trial Court rendered judgment, the decretal portion of which reads: WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the defendant Corporation, Philippine National Bank (PNB) NATIONAL SUGAR DEVELOPMENT CORPORATION (NASUDECO) and PAMPANGA SUGAR MILLS (PASUMIL), ordering the latter to pay jointly and severally the former the following: 1. The sum of P513,623.80 plus interest thereon at the rate of 14% per annum as claimed from September 25, 1980 until fully paid; 2. The sum of P102,724.76 as attorneys fees; and, 3. Costs. SO ORDERED. Manila, Philippines, September 4, 1986. '(SGD) ERNESTO S. TENGCO Judge"3 Ruling of the Court of Appeals Affirming the trial court, the CA held that it was offensive to the basic tenets of justice and equity for a corporation to take over and operate the business of another corporation, while disavowing or repudiating any responsibility, obligation or liability arising therefrom.4 Hence, this Petition.5 Issues In their Memorandum, petitioners raise the following errors for the Courts consideration: "I. The Court of Appeals gravely erred in law in holding the herein petitioners liable for the unpaid corporate debts of PASUMIL, a corporation whose corporate existence has not been legally extinguished or terminated, simply because of petitioners[] take-over of the management and operation of PASUMIL pursuant to the mandates of LOI No. 189-A, as amended by LOI No. 311. "II. The Court of Appeals gravely erred in law in not applying [to] the case at bench the ruling enunciated in Edward J. Nell Co. v. Pacific Farms, 15 SCRA 415."6 Succinctly put, the aforesaid errors boil down to the principal issue of whether PNB is liable for the unpaid debts of PASUMIL to respondent.

This Courts Ruling The Petition is meritorious. Main Issue: Liability for Corporate Debts As a general rule, questions of fact may not be raised in a petition for review under Rule 45 of the Rules of Court.7To this rule, however, there are some exceptions enumerated in Fuentes v. Court of Appeals.8 After a careful scrutiny of the records and the pleadings submitted by the parties, we find that the lower courts misappreciated the evidence presented.9 Overlooked by the CA were certain relevant facts that would justify a conclusion different from that reached in the assailed Decision.10 Petitioners posit that they should not be held liable for the corporate debts of PASUMIL, because their takeover of the latters foreclosed assets did not make them assignees. On the other hand, respondent asserts that petitioners and PASUMIL should be treated as one entity and, as such, jointly and severally held liable for PASUMILs unpaid obligation.1wphi1.nt As a rule, a corporation that purchases the assets of another will not be liable for the debts of the selling corporation, provided the former acted in good faith and paid adequate consideration for such assets, except when any of the following circumstances is present: (1) where the purchaser expressly or impliedly agrees to assume the debts, (2) where the transaction amounts to a consolidation or merger of the corporations, (3) where the purchasing corporation is merely a continuation of the selling corporation, and (4) where the transaction is fraudulently entered into in order to escape liability for those debts.11 Piercing the Corporate Veil Not Warranted A corporation is an artificial being created by operation of law. It possesses the right of succession and such powers, attributes, and properties expressly authorized by law or incident to its existence.12 It has a personality separate and distinct from the persons composing it, as well as from any other legal entity to which it may be related.13 This is basic. Equally well-settled is the principle that the corporate mask may be removed or the corporate veil pierced when the corporation is just an alter ego of a person or of another corporation.14 For reasons of public policy and in the interest of justice, the corporate veil will justifiably be impaled15 only when it becomes a shield for fraud, illegality or inequity committed against third persons.16 Hence, any application of the doctrine of piercing the corporate veil should be done with caution.17 A court should be mindful of the milieu where it is to be applied.18 It must be certain that the corporate fiction was misused to such an extent that injustice, fraud, or crime was committed against another, in disregard of its rights.19 The wrongdoing must be clearly and convincingly established; it cannot be presumed.20 Otherwise, an injustice that was never unintended may result from an erroneous application.21 This Court has pierced the corporate veil to ward off a judgment credit,22 to avoid inclusion of corporate assets as part of the estate of the decedent,23 to escape liability arising from a debt,24 or to perpetuate fraud and/or confuse legitimate issues25 either to promote or to shield unfair objectives26 or to cover up an otherwise blatant violation of the prohibition against forum-shopping.27 Only in these and similar instances may the veil be pierced and disregarded.28 The question of whether a corporation is a mere alter ego is one of fact.29 Piercing the veil of corporate fiction may be allowed only if the following elements concur: (1) control -- not mere stock control, but complete domination -- not only of finances, but of policy and business practice in respect to the transaction attacked, must have been such that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; (2) such control must have been used by the defendant to commit a fraud or a wrong to perpetuate the violation of a statutory or other positive

legal duty, or a dishonest and an unjust act in contravention of plaintiffs legal right; and (3) the said control and breach of duty must have proximately caused the injury or unjust loss complained of.30 We believe that the absence of the foregoing elements in the present case precludes the piercing of the corporate veil. First, other than the fact that petitioners acquired the assets of PASUMIL, there is no showing that their control over it warrants the disregard of corporate personalities.31 Second, there is no evidence that their juridical personality was used to commit a fraud or to do a wrong; or that the separate corporate entity was farcically used as a mere alter ego, business conduit or instrumentality of another entity or person.32 Third, respondent was not defrauded or injured when petitioners acquired the assets of PASUMIL.33 Being the party that asked for the piercing of the corporate veil, respondent had the burden of presenting clear and convincing evidence to justify the setting aside of the separate corporate personality rule.34 However, it utterly failed to discharge this burden;35 it failed to establish by competent evidence that petitioners separate corporate veil had been used to conceal fraud, illegality or inequity.36 While we agree with respondents claim that the assets of the National Sugar Development Corporation (NASUDECO) can be easily traced to PASUMIL,37 we are not convinced that the transfer of the latters assets to petitioners was fraudulently entered into in order to escape liability for its debt to respondent.38 A careful review of the records reveals that DBP foreclosed the mortgage executed by PASUMIL and acquired the assets as the highest bidder at the public auction conducted.39 The bank was justified in foreclosing the mortgage, because the PASUMIL account had incurred arrearages of more than 20 percent of the total outstanding obligation.40 Thus, DBP had not only a right, but also a duty under the law to foreclose the subject properties.41 Pursuant to LOI No. 189-A42 as amended by LOI No. 311,43 PNB acquired PASUMILs assets that DBP had foreclosed and purchased in the normal course. Petitioner bank was likewise tasked to manage temporarily the operation of such assets either by itself or through a subsidiary corporation.44 PNB, as the second mortgagee, redeemed from DBP the foreclosed PASUMIL assets pursuant to Section 6 of Act No. 3135.45 These assets were later conveyed to PNB for a consideration, the terms of which were embodied in the Redemption Agreement.46 PNB, as successor-in-interest, stepped into the shoes of DBP as PASUMILs creditor.47 By way of a Deed of Assignment,48 PNB then transferred to NASUDECO all its rights under the Redemption Agreement. In Development Bank of the Philippines v. Court of Appeals,49 we had the occasion to resolve a similar issue. We ruled that PNB, DBP and their transferees were not liable for Marinduque Minings unpaid obligations to Remington Industrial Sales Corporation (Remington) after the two banks had foreclosed the assets of Marinduque Mining. We likewise held that Remington failed to discharge its burden of proving bad faith on the part of Marinduque Mining to justify the piercing of the corporate veil. In the instant case, the CA erred in affirming the trial courts lifting of the corporate mask.50 The CA did not point to any fact evidencing bad faith on the part of PNB and its transferee.51 The corporate fiction was not used to defeat public convenience, justify a wrong, protect fraud or defend crime.52 None of the foregoing exceptions was shown to exist in the present case.53 On the contrary, the lifting of the corporate veil would result in manifest injustice. This we cannot allow. No Merger or Consolidation Respondent further claims that petitioners should be held liable for the unpaid obligations of PASUMIL by virtue of LOI Nos. 189-A and 311, which expressly authorized PASUMIL and PNB to merge or consolidate. On the other hand, petitioners contend that their takeover of the operations of PASUMIL did not involve any corporate merger or consolidation, because the latter had never lost its separate identity as a corporation.

A consolidation is the union of two or more existing entities to form a new entity called the consolidated corporation. A merger, on the other hand, is a union whereby one or more existing corporations are absorbed by another corporation that survives and continues the combined business.54 The merger, however, does not become effective upon the mere agreement of the constituent corporations.55Since a merger or consolidation involves fundamental changes in the corporation, as well as in the rights of stockholders and creditors, there must be an express provision of law authorizing them.56 For a valid merger or consolidation, the approval by the Securities and Exchange Commission (SEC) of the articles of merger or consolidation is required.57 These articles must likewise be duly approved by a majority of the respective stockholders of the constituent corporations.58 In the case at bar, we hold that there is no merger or consolidation with respect to PASUMIL and PNB. The procedure prescribed under Title IX of the Corporation Code59 was not followed. In fact, PASUMILs corporate existence, as correctly found by the CA, had not been legally extinguished or terminated.60 Further, prior to PNBs acquisition of the foreclosed assets, PASUMIL had previously made partial payments to respondent for the formers obligation in the amount of P777,263.80. As of June 27, 1973, PASUMIL had paid P250,000 to respondent and, from January 5, 1974 to May 23, 1974, another P14,000. Neither did petitioner expressly or impliedly agree to assume the debt of PASUMIL to respondent.61 LOI No. 11 explicitly provides that PNB shall study and submit recommendations on the claims of PASUMILs creditors.62Clearly, the corporate separateness between PASUMIL and PNB remains, despite respondents insistence to the contrary.63 WHEREFORE, the Petition is hereby GRANTED and the assailed Decision SET ASIDE. No pronouncement as to costs. SO ORDERED.

2. Lavarro v. Labitoria 54 PHIL 788

SOFIA LAVARRO, ET AL. vs. REGINA LABITORIA, ET AL., G.R. No. L-32030, July 2, 1930 Anastacio Labitoria, who died over thirty years ago, was the original owner of a tract of land divided into three parcels and situated in the barrio of Mangilag, municipality of Candelaria, Province of Tayabas. He left four children, Francisco, Liberata, Tirso, and Eustacio Labitoria. Francisco acquired the shares of Tirso and Eustacio together with the greater part of that of Liberata, and thus became the owner of nearly all of the land. After his death, his children, Macario and Regina Labitoria, became the owners of his interest in the land. Sofia Lavarro is the daughter of Liberata Labitoria, and in or about the year 1897, her first husband, Crispulo Alcantara, borrowed P330 from Francisco Labitoria on the condition that Alcantara should plant 3,300 coconut palms on the land to be divided in equal shares between the parties, the loan to be paid back by turning over to the creditor 330 coconut palms out of the share of Alcantara and Sofia. Under this agreement, about 1,700 palms were planted by Alcantara, but later on, further plantings were made by his wife, Sofia Lavarro. In July, 1916, the land was registered in the names of Macario Labitoria, Regina Labitoria, Bernardo Labitoria, Vidal Labitoria, Ariston Lavarro, Sofia Lavarro, and Isidro Lavaris. Nothing seems to have been said about the improvements on the land and no special mention of them appears in the certificate of title. Neither were the respective shares of the persons to whom the land was adjudicated definitely determined. On October 31, 1916, Macario, Regina, and Bernardo Labitoria and Ariston Lavarro brought an action against Sofia Lavarro and her then husband, Emeterio Pureza, for the partition of the land with its improvements. The action is civil case No. 351 of the Court of First Instance of Tayabas. In her answer in that case, Sofia Lavarro set up a cross-complaint alleging, among other things, that she was a coowner of the land and was entitled to a large proportion of the coconut palms thereon. The prayer of the cross-complaint reads as follows:

Wherefore, by this cross-complaint Sofia Lavarro and Emeterio Pureza, through their undersigned attorney, pray the court to decree the partition of the three parcels of land described above, with all the improvements thereon, allotting to Sofia Lavarro and Emeterio Pureza their rightful portion, and ordering Macario Labitoria to render the proper accounts, and to deliver to his coheirs their proportionate part of the fruits and products of said lands, with costs against the cross-complaint defendants. (Emphasis supplied.) Upon trial partition was ordered, and Sofia Lavarro was awarded 520 coconut trees and 43,391 square meters of land. She thereupon appealed to the Supreme Court, and a decision was rendered by that court on March 24, 1927,1 in which it was held that Sofia Lavarro was entitled to 1/28 of the land. In all the respects, the decision of the Court of First Instances was affirmed. The partition seems to have been carried out in conformity with the decision of the Supreme Court, and Sofia was awarded 6 hectares, 88 ares, and 77 centiares of land, together with 850 coconut palms instead of 520. The present action was initiated by Sofia Lavarro and her daughters, Apolonia and Isabel Alcantara, on August 15, 1927, against Regina Labitoria and Marciano Labitoria, the latter as administrator of the estate of the deceased Macario Labitoria. In their amended complaint, the plaintiffs allege that on or about the year 1897, Sofia Lavarro and her husband, Crispulo Alcantara, planted 2,850 coconut palms on the land above-mentioned, of which 1,970 trees were actually alive and bearing fruit; that after the death of Crispulo Alcantara in the year 1910, Sofia Lavarro, being then a widow, planted 2,200 coconut palms on the same tract of land, 2,000 palms being still in existence and the greater part of them bearing fruit; that from the year 1897, the plaintiffs had been in possession of the above-mentioned plantings and had collected the fruits, but that the defendants were now endeavoring to take possession of said coconut palms; and that each coconut palm was worth P12. The plaintiffs therefore prayed that unless the defendants paid to the plaintiffs the sum of P47,640, the value of the 3,970 palms planted, it be ordered that said plaintiffs be allowed to continue in possession of said coconut palms in accordance with the law. In their answer to the complaint, the defendants set up as special defenses res judicata and prescription. Upon trial, the court below, basing its decision on the case of Bautista vs. Jimenez (24 Phil., 111), and article 361 of the Civil Code, ordered the defendants to pay the plaintiffs the sum of P4,820 for 1,205 coconut palms or to require the plaintiffs to purchase the land, the plaintiffs to retain the coconut palms until the aforesaid sum was paid. From this judgment both the plaintiffs and defendants appealed. It is very obvious that the court below erred in rendering judgment in favor of the plaintiffs. This is an action for compensation for improvements alleged to have been made by the plaintiffs on the land awarded to the defendants and is brought notwithstanding the fact that the question of improvements was put in issue in case No. 351 and that the portion of land due Sofia Lavarro, and the improvements as well, were determined and adjudicated by the court in that case. Her rights in regard to the improvements are consequently res judicata. But it is intimated that, while in the earlier case the issues related to the ownership of the improvements, the issue here is only a question of money payment and that therefore the causes of action are different. Assuming, without conceding, that such is the case, the result would be the same. The issues in both cases arose from the same source or transactions and should have been determined in the same case (sec. 97, Code of Civil Procedure). A judgment upon the merits bars a subsequent suit upon the same cause, though brought in a different form of action. (White vs. Martin, 1 Port. [Ala.], 215.) "The principle is firmly established that a party will not be permitted to split up a single cause of action and make it the basis for several suits. If several suits be brought for different parts of such a claim, the pendency of the first may be pleaded in abatement of the others, and a recovery of any part of the cause of action will be a bar to an action brought upon the other part. Not only is it a bar to suit, but the plaintiff in the former action cannot subsequently avail himself of the residue by way of offset in an action against him by the opposite party." (15 R. C. L., 965) In passing, it may be noted that a close examination of the facts in the case of Bautista vs. Jimenez (24 Phil., 111), will show that it

differs materially from the present case; the case of Berses vs. Villanueva (25 Phil., 473), is more in point. As to the other plaintiffs, Apolonia and Isabel Alcantara, it is sufficient to say that if they had any claim to the property or improvements, such claims should have been presented in the registration proceedings in 1916; trees and plants annexed to the land are parts thereof and unless rights or interests in such trees or plants are claimed in the registration proceedings by others, they become the property of the persons to whom the land is adjudicated. By timely proceedings in equity, matters of that character, if fraudulent, may sometimes be corrected, but in the present case, the plaintiffs Apolonia and Isabel Alcantara did not prosecute their alleged rights until eleven years after the registration of the property, and it is obvious that whatever rights they may have had are now lost by prescription. The judgment of the court below is therefore reversed, and the case is dismissed with the costs in both instances against the plaintiffs, jointly and severally. So ordered.

3. Flores v. Mallare- Phillips 144 SCRA 377

REMEDIO V. FLORES vs. HON. JUDGE HEILIA S. MALLARE-PHILLIPPS, IGNACIO BINONGCAL & FERNANDO CALION, G.R. No. L-66620, September 24, 1986 The Court rules that the application of the totality rule under Section 33(l) of Batas Pambansa Blg. 129 and Section 11 of the Interim Rules is subject to the requirements for the permissive joinder of parties under Section 6 of Rule 3 which provides as follows: Permissive joinder of parties.-All persons in whom or against whom any right to relief in respect to or arising out of the same transaction or series of transactions is alleged to exist, whether jointly, severally, or in the alternative, may, except as otherwise provided in these rules, join as plaintiffs or be joined as defendants in one complaint, where any question of law or fact common to all such plaintiffs or to all such defendants may arise in the action; but the court may make such orders as may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection with any proceedings in which he may have no interest. Petitioner has appealed by certiorari from the order of Judge Heilia S. Mallare-Phillipps of the Regional Trial Court of Baguio City and Benguet Province which dismissed his complaint for lack of jurisdiction. Petitioner did not attach to his petition a copy of his complaint in the erroneous belief that the entire original record of the case shall be transmitted to this Court pursuant to the second paragraph of Section 39 of BP129. This provision applies only to ordinary appeals from the regional trial court to the Court of Appeals (Section 20 of the Interim Rules). Appeals to this Court by petition for review on certiorari are governed by Rule 45 of the Rules of Court (Section 25 of the Interim Rules). However, the order appealed from states that the first cause of action alleged in the complaint was against respondent Ignacio Binongcal for refusing to pay the amount of P11,643.00 representing cost of truck tires which he purchased on credit from petitioner on various occasions from August to October, 1981; and the second cause of action was against respondent Fernando Calion for allegedly refusing to pay the amount of P10,212.00 representing cost of truck tires which he purchased on credit from petitioner on several occasions from March, 1981 to January, 1982. On December 15, 1983, counsel for respondent Binongcal filed a Motion to Dismiss on the ground of lack of jurisdiction since the amount of the demand against said respondent was only P11,643.00, and under Section 19(8) of BP129 the regional trial court shall exercise exclusive original jurisdiction if the amount of the demand is more than twenty thousand pesos (P20,000.00). It was further averred in said motion that although another person, Fernando Calion, was allegedly indebted to petitioner in the amount of P10,212.00, his obligation was separate and distinct from that of the other respondent. At the hearing of said Motion to Dismiss, counsel for respondent Calion joined in moving for the dismissal of the complaint on the ground of lack of jurisdiction. Counsel for petitioner opposed the Motion to Dismiss. As above

stated, the trial court dismissed the complaint for lack of jurisdiction. Petitioner maintains that the lower court has jurisdiction over the case following the "novel" totality rule introduced in Section 33(l) of BP129 and Section 11 of the Interim Rules. The pertinent portion of Section 33(l) of BP129 reads as follows: ... Provided,That where there are several claims or causes of action between the same or different parties, embodied in the same complaint, the amount of the demand shall be the totality of the claims in all the causes of action, irrespective of whether the causes of action arose out of the same or different transactions. ... Section 11 of the Interim Rules provides thus: Application of the totality rule.-In actions where the jurisdiction of the court is dependent on the amount involved, the test of jurisdiction shall be the aggregate sum of all the money demands, exclusive only of interest and costs, irrespective of whether or not the separate claims are owned by or due to different parties. If any demand is for damages in a civil action, the amount thereof must be specifically alleged. Petitioner compares the above-quoted provisions with the pertinent portion of the former rule under Section 88 of the Judiciary Act of 1948 as amended which reads as follows: ... Where there are several claims or causes of action between the same parties embodied in the same complaint, the amount of the demand shall be the totality of the demand in all the causes of action, irrespective of whether the causes of action arose out of the same or different transactions; but where the claims or causes of action joined in a single complaint are separately owned by or due to different parties, each separate claim shall furnish the jurisdictional test. ... and argues that with the deletion of the proviso in the former rule, the totality rule was reduced to clarity and brevity and the jurisdictional test is the totality of the claims in all, not in each, of the causes of action, irrespective of whether the causes of action arose out of the same or different transactions. This argument is partly correct. There is no difference between the former and present rules in cases where a plaintiff sues a defendant on two or more separate causes of action. In such cases, the amount of the demand shall be the totality of the claims in all the causes of action irrespective of whether the causes of action arose out of the same or different transactions. If the total demand exceeds twenty thousand pesos, then the regional trial court has jurisdiction. Needless to state, if the causes of action are separate and independent, their joinder in one complaint is permissive and not mandatory, and any cause of action where the amount of the demand is twenty thousand pesos or less may be the subject of a separate complaint filed with a metropolitan or municipal trial court. On the other hand, there is a difference between the former and present rules in cases where two or more plaintiffs having separate causes of action against a defendant join in a single complaint. Under the former rule, "where the claims or causes of action joined in a single complaint are separately owned by or due to different parties, each separate claim shall furnish the jurisdictional test" (Section 88 of the Judiciary Act of 1948 as amended, supra). This was based on the ruling in the case of Vda. de Rosario vs. Justice of the Peace, 99 Phil. 693. As worded, the former rule applied only to cases of permissive joinder of parties plaintiff. However, it was also applicable to cases of permissive joinder of parties defendant, as may be deduced from the ruling in the case ofBrillo vs. Buklatan, thus: Furthermore, the first cause of action is composed of separate claims against several defendants of different amounts each of which is not more than P2,000 and falls under the jurisdiction of the justice of the peace court under section 88 of Republic Act No, 296. The several claims do not seem to arise from the same transaction or series of transactions and there seem to be no questions of law or of fact

10

common to all the defendants as may warrant their joinder under Rule 3, section 6. Therefore, if new complaints are to be filed in the name of the real party in interest they should be filed in the justice of the peace court. (87 Phil. 519, 520, reiterated in Gacula vs. Martinez, 88 Phil. 142, 146) Under the present law, the totality rule is applied also to cases where two or more plaintiffs having separate causes of action against a defendant join in a single complaint, as well as to cases where a plaintiff has separate causes of action against two or more defendants joined in a single complaint. However, the causes of action in favor of the two or more plaintiffs or against the two or more defendants should arise out of the same transaction or series of transactions and there should be a common question of law or fact, as provided in Section 6 of Rule 3. The difference between the former and present rules in cases of permissive joinder of parties may be illustrated by the two cases which were cited in the case of Vda. de Rosario vs. Justice of the Peace (supra) as exceptions to the totality rule. In the case of Soriano y Cia vs. Jose (86 Phil. 523), where twenty-nine dismissed employees joined in a complaint against the defendant to collect their respective claims, each of which was within the jurisdiction of the municipal court although the total exceeded the jurisdictional amount, this Court held that under the law then the municipal court had jurisdiction. In said case, although the plaintiffs' demands were separate, distinct and independent of one another, their joint suit was authorized under Section 6 of Rule 3 and each separate claim furnished the jurisdictional test. In the case of International Colleges, Inc. vs. Argonza (90 Phil. 470), where twenty-five dismissed teachers jointly sued the defendant for unpaid salaries, this Court also held that the municipal court had jurisdiction because the amount of each claim was within, although the total exceeded, its jurisdiction and it was a case of permissive joinder of parties plaintiff under Section 6 of Rule 3. Under the present law, the two cases above cited (assuming they do not fall under the Labor Code) would be under the jurisdiction of the regional trial court. Similarly, in the abovecited cases of Brillo vs. Buklatan and Gacula vs. Martinez (supra), if the separate claims against the several defendants arose out of the same transaction or series of transactions and there is a common question of law or fact, they would now be under the jurisdiction of the regional trial court. In other words, in cases of permissive joinder of parties, whether as plaintiffs or as defendants, under Section 6 of Rule 3, the total of all the claims shall now furnish the jurisdictional test. Needless to state also, if instead of joining or being joined in one complaint separate actions are filed by or against the parties, the amount demanded in each complaint shall furnish the jurisdictional test. In the case at bar, the lower court correctly held that the jurisdictional test is subject to the rules on joinder of parties pursuant to Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules of Court and that, after a careful scrutiny of the complaint, it appears that there is a misjoinder of parties for the reason that the claims against respondents Binongcal and Calion are separate and distinct and neither of which falls within its jurisdiction. WHEREFORE, the order appealed from is affirmed, without pronouncement as to costs.

4. Cause of Action
An act or omission by which a party violates a right of another.[1] An act or omission of one party in violation of the legal right or rights of the other; and its essential elements are legal right of the plaintiff, correlative obligations of the defendant, and act or omission of the defendant in violation of said legal right.

Rules of Court, Rule 2, Sec. 1 5. Tijam v. Sibonghanay

11

TIJAM vs. SIBONGHANOY (23 SCRA 29) FACTS: Tijam filed for recovery of P1,908 + legal interest from Sibongahanoy. Defendants filed a counter bond with Manila Surety and Fidelity Co (Surety). Judgement was in favour of the plaintiffs, a writ of execution was issued against the defendant. Defendants moved for writ of execution against surety which was granted. Surety moved to quash the writ but was denied, appealed to CA without raising the issue on lack of jurisdiction. CA affirmed the appealed decision. Surety then filed Motion to Dismiss on the ground of lack of jurisdiction against CFI Cebu in view of the effectivity of Judiciary Act of 1948 a month before the filing of the petition for recovery. Act placed original exclusive jurisdiction of inferior courts all civil actions for demands not exceeding 2,000 exclusive of interest. CA set aside its earlier decision and referred the case to SC since it has exclusive jurisdiction over "all cases in which the jurisdiction of any inferior court is in issue. ISSUE: WON Surety bond is estopped from questioning the jurisdiction of the CFI Cebu for the first time upon appeal.YES RATIO: SC believes that that the Surety is now barred by laches from invoking this plea after almost fifteen years before the Surety filed its motion to dismiss raising the question of lack of jurisdiction for the first time - A party may be estopped or barred from raising a question in different ways and for different reasons. Thus we speak of estoppel in pais, or estoppel by deed or by record, and of estoppel by laches. Laches, in a general sense is failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier - Furthermore, it has also been held that after voluntarily submitting a cause and encountering an adverse decision on the merits, it is too late for the loser to question the jurisdiction or power of the court -"undesirable practice" of a party submitting his case for decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction, when adverse. Other merits on the appeal: The surety insists that the lower court should have granted its motion to quash the writ of execution because the same was issued without the summary hearing - Summary hearing is "not intended to be carried on in the formal manner in which ordinary actions are prosecuted" (83 C.J.S. 792). It is, rather, a procedure by which a question is resolved "with dispatch, with the least possible delay, and in preference to ordinary legal and regular judicial proceedings" (Ibid, p. 790). What is essential is that "the defendant is notified or summoned to appear and is given an opportunity to hear what is urged upon him, and to interpose a defense, after which follows an adjudication of the rights of the parties - In the case at bar, the surety had been notified of the plaintiffs' motion for execution and of the date when the same would be submitted for consideration. In fact, the surety's counsel was present in court when the motion was called, and it was upon his request that the court a quo gave him a period of four days within which to file an answer. Yet he allowed that period to lapse without filing an answer or objection. The surety cannot now, therefore, complain that it was deprived of its day in court. The orders appealed from are affirmed.

6. Lions Club International v. Amores

LIONS CLUBS INTERNATIONAL and JAMES L. SO vs. HON. AUGUSTO M. AMORES, Presiding Judge of the Court of First Instance of Manila, Branch XXIV, COURT OF APPEALS and VICENTE JOSEFA, G.R. No. L-61259, April 26, 1983 Where the Constitution of petitioner association, the Lions Clubs International, specifically provides that all Lions Clubs so organized shall be under the exclusive jurisdiction of the International Board of Directors (Sec. 5, Art. III) and that all District Governor election results shall be adopted by the International Board of Directors and thereby become effective,

12

except in the case of an election protest filed or legal action resulting therefrom, in which event the appointment or election of such District Governor shall be subject to action by the International Board of Directors [Sec. 8(a), (1) 2nd par., Art. VII] and in accordance therewith, the election protest between petitioner So and respondent Josefa for the position of District Governor of District 301-Al Philippines for the fiscal year 1982-1983 was filed and elevated to the International Board of Directors through its Constitution and By-Laws Committee following the prescribed Constitutional Complaints Procedure and said Committee conducted a hearing therein attended by the parties, each claiming to be duly elected to the disputed position, the decision of the International Board of Directors adopting the Committee's Report and approving the election of petitioner James L. So to server as District Governor of District 301-Al for the fiscal year 19821983 is final, binding, and conclusive, it being a question of policy, discipline, and internal government in the relation of the mother organization with local clubs organized, chartered and supervised exclusively thereunder, absent any clear showing of mistake, fraud, conclusion or arbitrariness and, therefore, the basic matter in dispute in the instant petition as to who has the right to the contested office presents no justiciable controversy that necessitates judicial interference or intervention. The case at bar is a special civil action for certiorari, mandamus and prohibition with prayer to lift the restraining order issued by the Court of Appeals, (now the Intermediate Appellate Court) in CA-G.R. No. 14599- SP entitled "Vicente Josefa. Petitioner, versus Hon. Judge Augusto M. Amores, Lions Clubs International, and James L. So. Respondents." The principal adversaries in this controversy are respondent Vicente Josefa of the Manila Traders Lions Club and petitioner James L. So of the Manila Centrum Lions Club, which Lions clubs are duly organized, chartered, and affiliated with Lions Clubs International having its International offices at 300 22nd Street, Oakbrook, Illinois 60570, U.S.A. The Manila Traders Lions Club and the Manila Centrum Lions Club, together with other Lions clubs, are embraced and constituted into the newly organized District 301-Al. The Lions districts in the country form the so-called Multiple District 301,Philippines. All clubs so organized and chartered under the Constitution of Lions Clubs International are under the exclusive supervision of the International Board of Directors. The records show that on July 1, 1982, Vicente Josefa filed a complaint for Quo Warranto, Injunction, Damages with writ of preliminary injunction and prayer for temporary restraining order docketed as Civil Case No. 82-10588 in the Court of First Instance of Manila against Lions Clubs International and James L. So, defendants. alleginginter alia the following material and pertinent allegations: that Josefa and So filed their certificates of candidacy for the position of District Governor of District 301-Al for the fiscal year 1982-83; that before the elections, or on April 22, 1982, an agreement was executed between Josefa and So for the purpose of avoiding an expensive, full-blown election contest, whereby the latter withdrew his certificate of candidacy in favor of Josefa; that said withdrawal of So was duly accepted by District 301-A through Governor Huang who affixed his signature to the aforesaid agreement; that however, news items were published conveying the Idea that So had not withdrawn from the gubernatorial race; that Gov. Huang informed Josefa that So had not filed a new certificate of candidacy and that the District did not recognize So as a candidate to any position; that a telex was sent to Lions Clubs International requesting information whether So was still a candidate after his withdrawal and Lions International admonished incumbent Governor Huang to enforce the Constitution and By-Laws of Multiple District 301 if the withdrawal was in fact made and accepted by the District. It was further alleged that on the day of the election, June 6, 1982, the Chairman of the Nominations Committee reported at the Plenary Session of the 33rd Multiple District Convention held at the Little Theater of the Olongapo High School, Olongapo City, that because of So's failure to file another certificate of candidacy, the District recognized only one candidate, Vicente Josefa, for Governor; that, however, some members of the Council of Past District Governors arbitrarily set aside said report and proclaimed So as a qualified candidate, which action was vigorously objected to by some Lions present in the Plenary Session on the ground that the session was not the proper quorum to deliberate and decide on the matter as some of those present were Lions and Lionesses who were not qualified to vote; that the Past District Governors dismissed the members of the Nomination Committee, Election Committee, and other committees

13

incharge of the accreditation of votes and unlawfully appointed new members thereof. The complaint likewise alleged that during all this time, armed men by force and intimidation prevented known leaders and followers of Josefa from entering the Plenary Session; that forced by the deteriorated peace and order in the convention hall and by virtue of the powers vested in him by the State Council of Governors, as well as the Rules of Procedure, Gov. Huang through his Cabinet Secretary announced in the Plenary Session that he has changed the venue of the election from the Little Theater of the Olongapo High School to its new site at the ground floor of Admiral Hotel, also at Olongapo City; that to this transfer, Vice Chairman of the State Council of Governors, Gov. Ramon Beleno and the Secretary General of the hosting clubs Estanislao Cesa, Jr. made no objections, provided the cost of facilities of new venue is not shouldered by them. Plaintiff Josefa also alleged that So and some members of the Council of Past District Governors continued to hold and supervise an illegal election at the old site where voting and non-voting delegates and alternates were allowed to cast their votes without ballots, without ballot boxes and without the issuance of valid accreditation papers of the registered voting delegates; that in the meantime, at the election held at the Admiral Hotel Supervised by Gov. Huang, Josefa obtained 115 votes, a majority of the qualified voting delegates duly accredited, and was duly proclaimed as the Governor-elect of District 301-Al by the State Council of Governors; that, however, defendant Lions Clubs International unlawfully recognized So as the winner. And finally alleging that So would assume the powers and prerogatives of Governor of District 301-Al at the closing program of the International Convention on July 3, 1982, Josefa prayed for the issuance of a writ of preliminary injunction or at least a temporary restraining order. He likewise asked for moral damages and for attorney's fees. Finding the foregoing allegations of the complaint to be sufficient in form and substance, the Court of First Instance on the same date, July 1, 1982, issued a temporary restraining order enjoining So from assuming the powers and prerogatives of the office of Governor of District 301-Al, and Lions Clubs International, represented by Antonio Ramos, from recognizing and proclaiming So as the Governor of District 301-Al for the fiscal year 1982- 1983. On July 8, 1982, defendants So and Lions Club International filed a Motion to Dismiss and to Lift Restraining Order on the grounds that: (1) the Court of First Instance had no jurisdiction over the person of the defendants or over the subject of the action or suit; (2) venue is improperly laid; and (3) there is another action pending between the same parties for the same cause. Plaintiff Josefa filed his Opposition, to which defendants filed a Reply. On July 26, 1982, the Court of First Instance issued an Order denying defendants' motion to dismiss. Finding the Motion to lift restraining order to be meritorious, the Court set aside said restraining order. Before the hearing on the application for a writ of preliminary injunction, Josefa filed in the Court of Appeals on July 29, 1982 a petition docketed as CA-G.R. No. 14599-SP for certiorari with preliminary and mandatory injunction and a prayer for a temporary restraining order, assailing that portion of the Order of the Court of First Instance dated July 26, 1982 lifting the restraining order. Josefa contended that by lifting said restraining order without awaiting the evidence on his petition for a writ of injunction, So would immediately assume the contested position, the very act sought to be enjoined, thereby making the action moot and academic and whatever favorable judgment may be rendered in the main action would be rendered useless and nugatory. The appellate court in a Resolution dated July 29, 1982 issued a temporary restraining order "restraining and prohibiting the respondents (Hon. Judge Augusto M. Amores, Lions Clubs International and James L. So) from implementing the questioned Order of July 26, 1982 issued in Civil Case No. 82-10588 particularly the portion thereof lifting the temporary restraining order issued by the respondent Judge on July 1, 1982 until further orders ... " Herein petitioners Lions Clubs International and James L. So now come to this Court attributing grave abuse of discretion to the Court of First Instance of Manila for the denial of their Motion to Dismiss dated July 6, 1982, and contending that

14

the Court of Appeals acted in excess of its jurisdiction in issuing its temporary restraining order of July 29, 1982. As prayed for by said petitioners, We issued on August 4, 1982 a temporary restraining order enjoining the enforcement of the assailed temporary restraining order of the Court of Appeals. The basic issue posed for Our determination is the justiciability of the election dispute between herein petitioner James L. So and private respondent Vicente Josefa for the position of District Governor of District 301-Al Philippines. It is petitioners' submission that the subject matter of the instant case is purely an internal affair of the Lions organization and, therefore, is beyond judicial review. On the other hand, private respondent maintains that court intervention is warranted when, as he alleges in this case, there is fraud, oppression. bad faith, when the proceedings in question are violative of the laws of the association, or where the proceedings are illegal. We find for the petitioners and in finding so, We adopt the general rule that "... the courts will not interfere with the internal affairs of an unincorporated association so as to settle disputes between the members, or questions of policy, discipline, or internal government, so long as the government of the society is fairly and honestly administered in conformity with its laws and the law of the land, and no property or civil rights are invaded. Under such circumstances, the decision of the governing body or established private tribunal of the association is binding and conclusive and not subject to review or collateral attack in the courts. " (7 C.J.S. pp. 38- 39). The general rule of non-interference in the internal affairs of associations is, however, subject to exceptions, but the power of review is extremely limited. Accordingly, the courts have and will exercise power to interfere in the internal affairs of an association where law and justice so require, and the proceedings of the association are subject to judicial review where there is fraud, oppression, or bad faith, or where the action complained of is capricious, arbitrary, or unjustly discriminatory. Also, the courts will usually entertain jurisdiction to grant relief in case property or civil rights are invaded, although it has also been held that the involvement of property rights does not necessarily authorize judicial intervention, in the absence of arbitrariness, fraud or collusion. Moreover, the courts will intervene where the proceedings in question are violative of the laws of the society, or the law of the land, as by depriving a person of due process of law. Similarly, judicial intervention is warranted where there is a lack of jurisdiction on the part of the tribunal conducting the proceedings, where the organization exceeds its powers, or where the proceedings are otherwise illegal. (7 C.J.S., pp. 39-41). In accordance with the general rules as to judicial interference cited above, the decision of an unincorporated association on the question of an election to office is a matter peculiarly and exclusively to be determined by the association, and, in the absence of fraud, is final and binding on the courts. (7 C.J.S., p. 44). The instant controversy between petitioner So and respondent Josefa falls squarely within the ambit of the rule of judicial non-intervention or non- interference. The elections in dispute, the manner by which it was conducted and the results thereof, is strictly the internal affair that concerns only the Lions association and/or its members, and We find from the records that the same was resolved within the organization of Lions Clubs International in accordance with the Constitution and By-Laws which are not immoral, unreasonable, contrary to public policy, or in contravention of the laws of the land. It is of judicial notice that a Lions club is a voluntary association of civic-minded men whose general purpose and aim is to serve the people and the community. It appears from the records that duly organized and chartered Lions clubs all over the world are under the supervision of the mother club known as The International Association of Lions Clubs for Lions Clubs International) which holds international offices in Illinois, U.S.A., and is governed by its constitution and bylaws. The objects of this worldwide organization are: (a) To create and foster a spirit of understanding among the peoples of the world. (b) To promote the principles of good government and good citizenship.

15

(c) To take an active interest in the civil, cultural, social and moral welfare of the community. (d) To unite the clubs in the bonds of friendship, good fellowship and mutual understanding. (e) To provide a forum for the open discussion of all matters of public interest provided, however, that partisan politics and secretarian religon shall not be debated by club members. (f) To encourage service-minded men to serve their community without personal financial reward, and to encourage efficiency and -promote high ethical standards in commerce, industry, professions, public works and private endeavors. (Constitution of the International Association of Lions Clubs, Article II, Section 2.) Member clubs are chartered in accordance with the provisions of its constitution which provide that: Section 4. ... A Lions club shall be considered chartered when its charter has been officially issued. The acceptance of a charter by a Lions Club shall be a ratification of, and agreement on its part to be bound by, the Constitution and By-Laws of this Association and a submission by said Lions Club to have its relationship with this Association interpreted and governed by this Constitution and By-Laws according to the laws in effect, from time to time, in the State of Incorporation of The International Association of Lions Clubs. Section 5. Except as otherwise provided herein, the International Board of Directors shall have full power and authority to sanction the organization and chartering of all clubs, under such rules and regulations as it may prescribe. Subject to the provisions of this Constitution and By-Laws, all club so organized shall be under the exclusive jurisdiction of said Board of Directors." Aside from the obligation to carry on activities for the advancement of the civic, cultural, social or moral welfare of the community and for the promotion of international understanding, a chartered Lions club shall "(j) abide by the policies and requirements as determined, from time to time, by the International Board of Directors." (Constitution, Art. XI, Sec. 1). The International Board of Directors is composed of the President, Immediate Past President, First and Second and Third Vice Presidents and 28 Directors. (Art. V, Sec. 1, Constitution). In the matter of the election for the office of District Governor, the Constitution of Lions International provides: Section 8 (a) Subject to the provisions of Sec. 2 of this Article VII: (1) ... An election for the office of District Governor shall be conducted in accordance with the provisions of the respective District (Single, Sub or Multiple) Constitution and By-Laws. The results of each District Governor election shall be reported to the International Office by the respective current District Governor and/or the Association's Extension Representative. The results so reported shall be presented to the International Board of Directors. All District Governor election results shall be adopted by the International Board of Directors and thereby become effective, except in the case of an election protest filed or legal action resulting therefrom in which event the appointment or election of such District Governor shall be subject to action by the International Board of Directors, (Emphasis supplied) The records disclose that the election dispute between petitioner James L. So and respondent Vicente Josefa was brought before and elevated to the International Board of Directors through the Constitution and By-Laws Committee of Lions Clubs International, 300 22nd Street, Oakbrook, Illinois 60570, U.S.A. (See Letter Protest of petitioner So marked Annex "20", pp. 187-190, Records and Answer of Gov. Huang marked Annex "21 ", pp. 191-196, Records).

16

In his formal protest dated June 11, 1982, petitioner So assailed the validity of the "alleged election and proclamation" of Lion Vicente Josefa as District Governor of District 301-Al for the Lions fiscal year 1982-1983 and called attention to the "blatant display of oppressive conduct of Gov. James T. Huang of District 301-Al before, during, and after the just concluded convention in the hope that the mistakes and miscarriage of justice be rectified." Narrating the sequence of events, petitioner claimed that Gov. Huang failed to constitute and present within the prescribed periods, the District Nominations and Elections Committee in violation of the Multiple District 301 Constitution and By-Laws; that duly registered delegates were deliberately disenfranchised; that Gov. Huang arbitrarily transferred the venue of election from the Little Theater, Olongapo City National High School, to the Admiral Hotel which was the headquarters of his opponent, Vicente Josefa, without the sanction and authority of the State Council of Governors and the Convention. Petitioner So pointed out that he was duly nominated by the District Nominations Committee as well as respondent Vicente Josefa and in the elections duly conducted by the Election Committee at the official venue at the Little Theater, he received 147 votes as against 3 votes in favor of Josefa and that the 147 votes he received is a clear majority of the total number of registered delegates of District 301-Al which was 251, or a clear majority of 59%. The election results were duly certified by the Convention Chairman and by the official representative of the State Council of Governors, District Gov. Ramon Beleno of District 301-E. Petitioner, therefore, prayed that he be recognized as the duly elected District Governor of District 301-Al for the Lion fiscal year 1982-1983. Answering the letter-protest of petitioner So and as directed by Lions Clubs International, Gov. Huang in his letter dated June 17, 1982 denied the assertions of the protestant, petitioner So, and maintained that he had faithfully performed all the duties and responsibilities of his office in accordance With the Constitution and By-Laws, of the Multiple District, citing incidents wherein followers of petitioner So allegedly created trouble by booing, shouting and uttering invectives and armed men intimidated followers of Josefa from entering the Little Theater. In changing the venue of elections, Huang said he wanted "a democratic and peaceful election which could not be achieved in the old site because of the unruly and deteriorated atmosphere caused by the agitations from the camp of James L. So." Gov. Huang, moreover, contended that the election in the Little Theater was never legally convened as there were no ballots, no accreditation papers, no ballot boxes and other important papers relative to an honest election. And since the election of Josefa was proclaimed by the State Council of Governors, Gov. Huang prayed that the election of Governor-elect Vicente Josefa be sustained and affirmed. Filed and attached to the Answer of Gov. Huang is the Report of the Governor to Lions Clubs International including reports of the Election Committee, the Board of Canvassers, Minutes of the Election Proceedings, Certification of the Proclamation of Governor-elect Josefa and Resolution of the State Council of Governors confirming the proclamation. (See Annex "22", pp.197-203). Thereafter, the Constitution and by-Laws Committee, through Joseph D. Stone, General Counsel of the International Association of Lions Clubs, submitted to the International Board of Directors the following Report: The International Board of Directors has received a complaint filed by Lion James L. So. This complaint has been filed in accordance with the Constitutional Complaints Procedure of the International Board of Directors. All parties have been given the opportunity to respond and have filed their official response with the International Association. Your Committee has examined the evidence submitted by the parties and has conducted a hearing attended by Lion So, District Governor of District 301-A Lion James Huang Lion Vicente Josefa and Multiple District 301 Council Chairman Lion Antonio Ramos. Your Committee hereby makes the following finding of facts and recommendations respecting the election for the office of District Governor in District 301-Al for the fiscal year 1982-83: 1. That there were two properly nominated candidates for the office of District Governor, District 301-Al, for the fiscal year 1982-83: Lion James L. So and Lion Vicente Josefa.

17

2. That one hour after the designated convening time, District Governor Huang transferred the election meeting from the designated site to the Admiral Royal Hotel. 3. That after the announcement of District Governor Huang transferring the election meeting, a majority of the delegates of the newly authorized District 301-Al remained at the designated site and convened an election for District Governor between the two candidates, Lion So and Lion Josefa. 4. That there were two elections held on June 6, 1982 for the office of District Governor of District 301-Al. 5. That one election was held as a part of the official District Convention at the designated election meeting site, the Little Theater Olongapo National High School, at which Lion So received 147 votes and Lion Josefa received 3 votes. 6. That the other election was held at the Admiral Royale Hotel at which Lion Josefa received 115 votes. 7. That the action of District Governor Huang in transferring the election meeting away from the convention site was without approval of a majority of the delegates and was without any clear authority and justification. 8. That the said election meeting held at the Little Theatre Olongapo National High School was properly conducted and resulted in the election of Lion So. 9. That said election of Lion So was duly certified by the official Election Committee Chairman Lion Ernesto Castaeda, appointed by District Governor Huang and District Governor Beleno of District 301-E, the official Multiple District Council representative. Based upon the above finding of facts your Committee is of the opinion that Lion James L. So was duly elected as District Governor, District 301- Al for the fiscal year 1982-83 and that said election should be recognized by the International Board of Directors. Your Committee is also of the opinion that the election conducted by District Governor Huang, 301-A, at the Admiral Royale Hotel was unauthorized and improper and is thereby null and void. Your Committee recommends that the Board concur in said finding of facts and recommendations by the adoption of RESOLUTION III-A hereinafter." (Annexes "O" and "O1", Reply, pp. 237-238, Records). At the meeting of the International Board of Directors held on June 27, 1982, the election of petitioner James L. So to serve as District Governor of District 301-Al for the fiscal year 1982-83 was approved and said petitioner was duly informed thereof by Richard G. Rice, Manager, District Operations Department, Lions Clubs International in his letter dated July 8, 1982 and marked Annex "K" to the petition, p. 79, Records. Petitioner attended and completed the District Governors' Executive Seminar as District Governor of 301-Al (see Annex "L", P. 80, Records). On June 29, 1982, petitioner So was proclaimed, sworn to and installed to office as District Governor of District 301-Al by the President of Lions International at the close of the 65th Lions Clubs International Convention held in Atlanta, Georgia, U.S.A. The Report of the Constitution and By-laws Committee duly approved and adopted by the International Board of Directors clearly belies the claim of injustice alleged by respondent Josefa in his complaint in Civil Case No. 82-10588 that petitioner So was illegally and arbitrarily nominated; that the latter's election was illegal and that he (Josefa) was legally elected in a valid election held at the new venue and was duly proclaimed by the State Council of Governors and that Lions International unlawfully recognized So as the winner on the basis of his illegal election. These findings upon the evidence submitted and examined at the hearing of the election protest before the Committee personally attended by both petitioner So and respondent Josefa may not be disturbed by the courts. The decision of the Association's tribunal,

18

the International Board of Directors, is controlling since respondent Josefa alleges no invasion of this property or civil rights and neither is it claimed that the government of the Association is not fairly and honestly administered in conformity with its laws and the law of the land. It is clear that under the Constitution of Lions International, Art. IV, Section, 8, the District Governor serves without compensation. Lionism prides itself in that its motto is: "We serve", and "Liberty, Intelligence, Our Nation's Safety" its slogan or credo. (Secs. 2 and 3, Art. 1, Constitution). There is, therefore, no proprietary or pecuniary interest involved in the membership of the Lions and in the offices they seek and hold in the club and district levels. Being merely a member or officer of the Lions Clubs or District is only a privilege and an opportunity for service to the community that is not enforceable at law. And since the disputed election to the position of District Governor is within the peculiar province and function of Lions International through its established tribunal to decide and determine in accordance with its governing laws, its resolution may not be questioned elsewhere, much less in the courts. Thus, in Our jurisprudence in U.S. vs. Caete 38 Phil. 253, the Supreme Court held that in matters purely ecclesiastical, the decision of the proper church tribunals are conclusive upon the civil tribunals and that a church member who is expelled from membership by the church authorities or a priest or minister who is by then deprived of his sacred office, is without remedy in the civil court, which will not inquire into the correctness of the decision of the ecclesiastical tribunals. So also in Felipe vs. Leuterio, et al, 91 Phil. 482, We held that the judiciary has no power to reverse the award of the Board of Judges of an oratorical contest and for that matter, it would not interfere in literary contests, beauty contests, and similar competitions. In essence, the courts, considering the nature of the action or suit at bar, are without jurisdiction and authority to review and reverse the decision of the International Board of Directors, Lions Clubs International, approving and recognizing the petitioner as duly elected District Governor of District 301-A1 for the fiscal year 1982-1983. WHEREFORE, IN VIEW OF THE FOREGOING, Civil Case No. 82- 10588 entitled "Vicente Josefa vs. Lions Clubs International, Antonio Ramos and Lion James L. So", Court of First Instance of Manila, Branch XXIV (now Regional Trial Court, National Capital Region) and the petition entitled "Vicente Josefa vs. Hon. Judge Augusto M. Amores, Lions Clubs International and James L. So", CA-G.R. No. 14599-SP (now Intermediate Appellate Court) are hereby DISMISSED. No costs. SO ORDERED.

19