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G.R. No. 63145 October 5, 1999

evidenced by the hereto attached statement marked as Annexes A and A-1 which account was obtained by him for the benefit of his family; 3. Said obligation is already due and demandable and the defendant thru Ms. Ventura who is ostensibly taking care of the properties/estate of deceased Carlos Ngo, refused, failed and neglected and still continues to refuse, fail and neglect to pay despite repeated demands; 4. As a consequence of the refusal to pay the plaintiff was compelled to retain the services of counsel with whom he contracted to pay P10,000.00 as attorney's fees. Upon institution of this complaint, he has further incurred initial litigation expenditures in the sum of P4,000.00.1wphi1.nt WHEREFORE, this Honorable Court is most respectfully prayed to render judgment for the plaintiff by 1. Ordering the defendant to pay the plaintiff the sum of P48,889.70 plus interest until the obligation is fully paid; 2. Ordering the defendant to pay the plaintiff the amount of P10,000.00 as attorney's fees plus P4,000.00 as reimbursement of the initial litigation expenditures. FURTHER plaintiff prays for such other relief or remedy in accordance with law, justice and equity. Cebu City, Philippines, March 29, 1982. xxx xxx xxx 3 Petitioner moved to dismiss the foregoing complaint on the ground that "the estate of Carlos Ngo has no legal personality," the same being "neither a natural nor legal person in contemplation of law" 4. In his Opposition to Motion to Dismiss, 5 petitioner insisted that since "the money claim subject of this case actually represents the costs of automotive spare parts/replacements contracted by deceased Carlos Ngo during his lifetime for the benefit/business of the family . . . the conjugal partnership . . . shall be accountable for the payment thereof." 6 Subsequently, private respondent's counsel manifested that he is poised to "amend the complaint in order to state the correct party defendant that he intends to sue in this case" 7. The public respondent gave private respondent fifteen (15) days to make the amendment. Petitioner filed a Motion for Reconsideration 8 of the order of public respondent permitting private respondent to amend his complaint. First, she argued that the action instituted by the private respondent to recover P48,889.70, representing the unpaid price of the automotive spare parts purchased by her deceased husband during his lifetime, is a money claim which, under Section 21, Rule 3 of the Revised Rules of Court, does not survive, the same having been filed after Carlos Ngo had already died. Second, she claimed that the public respondent never acquired jurisdiction over the subject matter of the case which, being an action to recover a sum of money from a deceased person, may only be heard by a probate court. Private respondent opposed the foregoing motion. 9 He insisted that petitioner, being the wife of the deceased Carlos Ngo, is liable to pay the obligation which benefited their family.

SULPICIA VENTURA, petitioner, vs. HON. FRANCIS J. MILITANTE, in His Capacity as Presiding Judge, Regional Trial Court, 7th Judicial District, Branch XII, Cebu City; and JOHN UY, respondent. PUNO, J.: This is a Petition for Certiorari assailing the Order 1 of public respondent directing her to file an Answer to the Complaint for a Sum of Money with Damages filed by private respondent after denying her Motion to Dismiss. 2 There is no dispute as to the following relevant facts: Private respondent filed a Complaint for a Sum of Money and Damages against petitioner which reads: REPUBLIC OF THE PHILIPPINES COURT OF FIRST INSTANCE OF CEBU 14th Judicial District BRANCH ___ MR. JOHN UY, Proprietor of Cebu Textar Auto Supply, Plaintiff, -versus- CIVIL CASE NO. R-21968 For: SUM OF MONEY AND DAMAGES ESTATE OF CARLOS NGO as represented by surviving spouse Ms. SULPICIA VENTURA, Defendant.

COMPLAINT PLAINTIFF, thru counsel, unto this Honorable Court, most respectfully states that: 1. He is of legal age, Filipino and proprietor of Cebu Textar Auto Supply whose postal address is at 177 Leon Kilat St., Cebu City, while the defendant is an estate of Carlos Ngo as represented by surviving spouse Ms. Sulpicia Ventura with residence and postal address at-Back [sic] of Chong Hua Hospital, Cebu City where summons and other processes of the Court could be effected; 2. During the lifetime of Carlos Ngo he was indebted with the plaintiff in the amount of P48,889.70 as

Public respondent issued an Order giving private respondent twenty four (24) hours to file his amended complaint "so that the Court can determine for itself whether there is really a cause of action against the defendant who would be substituted to the Estate of Carlos Ngo," considering that "it would seem from the arguments of counsel for plaintiff . . . that the debt incurred by the deceased Carlos [sic] Ngo was in behalf of the conjugal partnership so that the wife of Carlos Ngo might be liable to pay the obligation." 10 Private respondent then filed his Amended Complaint follows:

with the new allegations underscored therein as


COURT OF FIRST INSTANCE OF CEBU 14th Judicial District BRANCH XII MR. JOHN UY, Proprietor of Cebu Textar Auto Supply, Plaintiff, -versus- CIVIL CASE NO. R-21968 For: SUM OF MONEY AND MS. SULPICIA VENTURA, DAMAGES Defendant.

ORDER This case is called today to deal on the motion for reconsideration of the order of this Court dated November 16, 1982 denying the motion of the defendant to dismiss the complaint. In its order of November 16, 1982, the Court in the interest of justice advised the plaintiff to make the proper amendment so that the proper party defendant may be impleaded considering that the motion to dismiss then was anchored on the ground that the estate of Carlos Ngo was not a natural nor juridical person, hence it could not be sued. On December 23, 1982, the plaintiff amended its complaint and this time the defendant is already Sulpicia Ventura. The defendant now argues that even the amended complaint would show that this is really a collection of a debt of the conjugal partnership of deceased Carlong [sic] Ngo and his wife. Perusing the amended complaint, the Court finds that in Paragraph 2 the allegation states: "During the lifetime of Carlos Ngo, he and his wife, the defendant, are indebted with the plaintiff in the amount of P48,689.70, (sic) etc.," so that the indebtedness was incurred by Carlos Ngo and defendant Sulpicia Ventura and since Carlos Ngo is now dead that will not preclude the plaintiff from filing a case against the living defendant, Sulpicia Ventura. WHEREFORE, the motion for reconsideration is hereby DENIED and the defendant may file her answer within fifteen (15) days from today. IT IS SO ORDERED. 15

AMENDED COMPLAINT PLAINTIFF thru counsel, unto this Honorable Court most respectfully states that:

Petitioner scurried to this Court praying that the foregoing order of the public respondent be set aside and the amended complaint of private respondent, ordered dismissed. 16 We grant the petition.

1. . . . 2. During the lifetime of Carlos Ngo he and his wife, the defendant herein are indebted with the plaintiff in the amount of P48,889.70 as evidenced by the hereto attached statement marked as Annexes A and A-1 which account was obtained for the benefit of their family and is being confirmed by their son Roy Ngo per his signature marked as Annex "A-2"; 3. . . . 4. For several times, the defendant had concealed herself in her house when the plaintiff's representative went to her residence to collect payment of the said account; 5. . . . xxx xxx xxx 12 Petitioner filed a Comment to Plaintiff's Amended Complaint. 13 She reiterated that whether the unsecured debt was contracted by her husband alone or as a charge against the conjugal partnership of gains, it cannot be denied that her husband was now deceased, the said debt does not survive him, the conjugal partnership of gains is terminated upon the death of one of the spouses, and the debts and charges against the conjugal partnership of gains may only be paid after an inventory is made in the appropriate testate or intestate proceeding. Private respondent filed a Rejoinder to Defendant's Comment. 14 He countered that the defendant in his amended complaint was now petitioner and that she was not deceased, hence the inapplicability of the legal rules on the abatement of money claims in case the defendant dies pending their prosecution. Public respondent issued the herein assailed order which reads as follows: First. Sec. 1, Rule 3 of the Revised Rules of Court provided that "only natural or judicial persons, or entities authorized by law may be parties in a civil action". This was the rule in 1982 at the time that private respondent filed his complaint against petitioner. In 1997, the rules on civil procedure were revised, but Sec. 1, Rule 3 remained largely unaltered, except for the change of the word, "judicial" to "juridical". Parties may be either plaintiffs or defendants. The plaintiff in an action is the party complaining, and a proper party plaintiff is essential to confer jurisdiction on the court. 17 In order to maintain an action in a court of justice, the plaintiff must have an actual legal existence, that is, he, she or it must be a person in law and possessed of a legal entity as either a natural or an artificial person, and no suit can be lawfully prosecuted save in the name of such a person. 18 The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he institutes a judicial proceeding, to name the proper party defendant to his cause of action. 19 In a suit or proceeding in personam of an adversary character, the court can acquire no jurisdiction for the purpose of trial or judgment until a party defendant who actually or legally exists and is legally capable of being sued, is brought before it. 20 It has even been held that the question of the legal personality of a party defendant is a question of substance going to the jurisdiction of the court and not one of procedure. 21 The original complaint of petitioner named the "estate of Carlos Ngo as represented by surviving spouse Ms. Sulpicia Ventura" as the defendant. Petitioner moved to dismiss the same on the ground that the defendant as named in the complaint had no legal personality. We agree. Neither a dead person nor his estate may be a party plaintiff in a court action. A deceased person does not have such legal entity as is necessary to bring action so much so that a motion to substitute cannot lie and should be denied by the court. 22 An action begun by a decedent's estate cannot be said to have been begun by a legal person, since an estate is not a legal entity; such an action is a nullity and a motion to amend the party plaintiff will not likewise lie, there being nothing before the court to amend. 23 Considering that capacity to be sued is a correlative of the capacity to sue, to the same extent, a decedent does not have the capacity to be sued and may not be named a party defendant in a court action. 24

Second. It is clear that the original complaint of private respondent against the estate of Carlos Ngo was a suit against Carlos Ngo himself who was already dead at the time of the filing of said complaint. At that time, and this private respondent admitted, no special proceeding to settle his estate had been filed in court. As such, the trial court did not acquire jurisdiction over either the deceased Carlos Ngo or his estate. To cure this fatal defect, private respondent amended his original complaint. In his amended complaint, private respondent deleted the estate of Carlos Ngo and named petitioner as the defendant. When petitioner, in her comment to the amended complaint, reasoned that the conjugal partnership of gains between her and Carlos Ngo was terminated upon the latter's death and that the debt which he contracted, assuming it was a charge against the conjugal property, could only be paid after an inventory is made in the appropriate testate or intestate proceeding, private respondent simply reiterated his demand that petitioner pay her husband's debt which, he insisted, redounded to the benefit of everyone in her family. It is true that amendments to pleadings are liberally allowed in furtherance of justice, in order that every case may so far as possible be determined on its real facts, and in order to speed the trial of causes or prevent the circuitry of action and unnecessary expense. 25 But amendments cannot be allowed so as to confer jurisdiction upon a court that never acquired it in the first place. 26 When it is evident that the court has no jurisdiction over the person and the subject matter and that the pleading is so fatally defective as not to be susceptible of amendment, or that to permit such amendment would radically alter the theory and the nature of the action, then the court should refuse the amendment of the defective pleading and order the dismissal of the case. 27 Moreover, as correctly argued by petitioner, the conjugal partnership terminates upon the death of either spouse. 28 After the death of one of the spouses, in case it is necessary to sell any portion of the conjugal property in order to pay outstanding obligations of the partnership, such sale must be made in the manner and with the formalities established by the Rules of Court for the sale of the property of deceased persons. 29 Where a complaint is brought against the surviving spouse for the recovery of an indebtedness chargeable against said conjugal property, any judgment obtained thereby is void. 30 The proper action should be in the form of a claim to be filed in the testate or intestate proceedings of the deceased spouse. 31 In many cases as in the instant one, even after the death of one of the spouses, there is no liquidation of the conjugal partnership. This does not mean, however, that the conjugal partnership continues. 32 And private respondent cannot be said to have no remedy. Under Sec. 6, Rule 78 of the Revised Rules of Court, he may apply in court for letters of administration in his capacity as a principal creditor of the deceased Carlos Ngo if after thirty (30) days from his death, petitioner failed to apply for administration or request that administration be granted to some other person.1wphi1.nt WHEREFORE, the instant petition for certiorari is GRANTED. The Amended Complaint filed by private respondent is HEREBY DISMISSED. SO ORDERED.

G.R. No. L-58028 April 18, 1989 CHIANG KAI SHEK SCHOOL, petitioner, vs. COURT OF APPEALS and FAUSTINA FRANCO OH, respondents.

within 90 days from such recognition. It appears that it had not done so at the time the complaint was filed notwithstanding that it had been in existence even earlier than 1932. The petitioner cannot now invoke its own non-compliance with the law to immunize it from the private respondent's complaint. There should also be no question that having contracted with the private respondent every year for thirty two years and thus represented itself as possessed of juridical personality to do so, the petitioner is now estopped from denying such personality to defeat her claim against it. According to Article 1431 of the Civil Code, "through estoppel an admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying on it." As the school itself may be sued in its own name, there is no need to apply Rule 3, Section 15, under which the persons joined in an association without any juridical personality may be sued with such association. Besides, it has been shown that the individual members of the board of trustees are not liable, having been appointed only after the private respondent's dismissal. 6 It is clear now that a charitable institution is covered by the labor laws 7 although the question was still unsettled when this case arose in 1968. At any rate, there was no law even then exempting such institutions from the operation of the labor laws (although they were exempted by the Constitution from ad valorem taxes). Hence, even assuming that the petitioner was a charitable institution as it claims, the private respondent was nonetheless still entitled to the protection of the Termination Pay Law, which was then in force. While it may be that the petitioner was engaged in charitable works, it would not necessarily follow that those in its employ were as generously motivated. Obviously, most of them would not have the means for such charity. The private respondent herself was only a humble school teacher receiving a meager salary of Pl80. 00 per month. At that, it has not been established that the petitioner is a charitable institution, considering especially that it charges tuition fees and collects book rentals from its students. 8 While this alone may not indicate that it is profit-making, it does weaken its claim that it is a non-profit entity. The petitioner says the private respondent had not been illegally dismissed because her teaching contract was on a yearly basis and the school was not required to rehire her in 1968. The argument is that her services were terminable at the end of each year at the discretion of the school. Significantly, no explanation was given by the petitioner, and no advance notice either, of her relief after teaching year in and year out for all of thirty-two years, the private respondent was simply told she could not teach any more. The Court holds, after considering the particular circumstance of Oh's employment, that she had become a permanent employee of the school and entitled to security of tenure at the time of her dismissal. Since no cause was shown and established at an appropriate hearing, and the notice then required by law had not been given, such dismissal was invalid. The private respondent's position is no different from that of the rank-and-file employees involved in Gregorio Araneta University Foundation v. NLRC, 9 of whom the Court had the following to say: Undoubtedly, the private respondents' positions as deans and department heads of the petitioner university are necessary in its usual business. Moreover, all the private respondents have been serving the university from 18 to 28 years. All of them rose from the ranks starting as instructors until they became deans and department heads of the university. A person who has served the University for 28 years and who occupies a high administrative position in addition to teaching duties could not possibly be a temporary employee or a casual. The applicable law is the Termination Pay Law, which provided:

CRUZ, J.: An unpleasant surprise awaited Fausta F. Oh when she reported for work at the Chiang Kai Shek School in Sorsogon on the first week of July, 1968. She was told she had no assignment for the next semester. Oh was shocked. She had been teaching in the school since 1932 for a continuous period of almost 33 years. And now, out of the blue, and for no apparent or given reason, this abrupt dismissal. Oh sued. She demanded separation pay, social security benefits, salary differentials, maternity benefits and moral and exemplary damages. 1 The original defendant was the Chiang Kai Shek School but when it filed a motion to dismiss on the ground that it could not be sued, the complaint was amended. 2 Certain officials of the school were also impleaded to make them solidarily liable with the school. The Court of First Instance of Sorsogon dismissed the complaint. 3 On appeal, its decision was set aside by the respondent court, which held the school suable and liable while absolving the other defendants. 4 The motion for reconsideration having been denied, 5 the school then came to this Court in this petition for review on certiorari. The issues raised in the petition are: 1. Whether or not a school that has not been incorporated may be sued by reason alone of its long continued existence and recognition by the government, 2. Whether or not a complaint filed against persons associated under a common name will justify a judgment against the association itself and not its individual members. 3. Whether or not the collection of tuition fees and book rentals will make a school profit-making and not charitable. 4. Whether or not the Termination Pay Law then in force was available to the private respondent who was employed on a year-to-year basis. 5. Whether or not the awards made by the respondent court were warranted. We hold against the petitioner on the first question. It is true that Rule 3, Section 1, of the Rules of Court clearly provides that "only natural or juridical persons may be parties in a civil action." It is also not denied that the school has not been incorporated. However, this omission should not prejudice the private respondent in the assertion of her claims against the school. As a school, the petitioner was governed by Act No. 2706 as amended by C.A. No. 180, which provided as follows: Unless exempted for special reasons by the Secretary of Public Instruction, any private school or college recognized by the government shall be incorporated under the provisions of Act No. 1459 known as the Corporation Law, within 90 days after the date of recognition, and shall file with the Secretary of Public Instruction a copy of its incorporation papers and by-laws. Having been recognized by the government, it was under obligation to incorporate under the Corporation Law

SECTION 1. In cases of employment, without a definite period, in a commercial, industrial, or agricultural establishment or enterprise, the employer or the employee may terminate at any time the employment with just cause; or without just cause in the case of an employee by serving written notice on the employer at least one month in advance, or in the case of an employer, by serving such notice to the employee at least one month in advance or one-half month for every year of service of the employee, whichever, is longer, a fraction of at least

six months being considered as one whole year. The employer, upon whom no such notice was served in case of termination of employment without just cause may hold the employee liable for damages. The employee, upon whom no such notice was served in case of termination of employment without just cause shall be entitled to compensation from the date of termination of his employment in an I amount equivalent to his salaries or wages correspond to the required period of notice. ... . The respondent court erred, however, in awarding her one month pay instead of only one-half month salary for every year of service. The law is quite clear on this matter. Accordingly, the separation pay should be computed at P90.00 times 32 months, for a total of P2,880.00. Parenthetically, R.A. No. 4670, otherwise known as the Magna Carta for Public School Teachers, confers security of tenure on the teacher upon appointment as long as he possesses the required qualification. 10 And under the present policy of the Department of Education, Culture and Sports, a teacher becomes permanent and automatically acquires security of tenure upon completion of three years in the service. 11 While admittedly not applicable to the case at bar, these I rules nevertheless reflect the attitude of the government on the protection of the worker's security of tenure, which is now guaranteed by no less than the Constitution itself. 12 We find that the private respondent was arbitrarily treated by the petitioner, which has shown no cause for her removal nor had it given her the notice required by the Termination Pay Law. As the respondent court said, the contention that she could not report one week before the start of classes is a flimsy justification for replacing her. 13 She had been in its employ for all of thirty-two years. Her record was apparently unblemished. There is no showing of any previous strained relations between her and the petitioner. Oh had every reason to assume, as she had done in previous years, that she would continue teaching as usual. It is easy to imagine the astonishment and hurt she felt when she was flatly and without warning told she was dismissed. There was not even the amenity of a formal notice of her replacement, with perhaps a graceful expression of thanks for her past services. She was simply informed she was no longer in the teaching staff. To put it bluntly, she was fired. For the wrongful act of the petitioner, the private respondent is entitled to moral damages. 14 As a proximate result of her illegal dismissal, she suffered mental anguish, serious anxiety, wounded feelings and even besmirched reputation as an experienced teacher for more than three decades. We also find that the respondent court did not err in awarding her exemplary damages because the petitioner acted in a wanton and oppressive manner when it dismissed her. 15 The Court takes this opportunity to pay a sincere tribute to the grade school teachers, who are always at the forefront in the battle against illiteracy and ignorance. If only because it is they who open the minds of their pupils to an unexplored world awash with the magic of letters and numbers, which is an extraordinary feat indeed, these humble mentors deserve all our respect and appreciation. WHEREFORE, the petition is DENIED. The appealed decision is AFFIRMED except for the award of separation pay, which is reduced to P2,880.00. All the other awards are approved. Costs against the petitioner. This decision is immediately executory. SO ORDERED.

G.R. No. 172595

April 10, 2008

BIENVENIDO EJERCITO and JOSE MARTINEZ, petitioners, vs. M.R. VARGAS CONSTRUCTION, BRION, MARCIAL R. VARGAS, Sole Owner, RENATO AGARAO**, respondents. DECISION TINGA, J.: This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, assailing the Court of Appeals' Decision1 and Resolution2 in CA-G.R. SP No. 89001. The appellate court's decision dismissed the petition for certiorari, which sought to set aside the Order 3 dated 08 November 2004 issued by Hon. Marie Christine Jacob, Presiding Judge of the Regional Trial Court (RTC) of Quezon City, Branch 100. The appellate court's resolution denied petitioners' motion for reconsideration of the decision. As culled from the records, the following factual antecedents appear: On 5 March 2004, the City Government of Quezon City, represented by Mayor Feliciano Belmonte, Jr., entered into a construction contract4 with M.R. Vargas Construction, represented by Marcial Vargas in his capacity as general manager of the said business enterprise, for the improvement and concreting of Panay Avenue.5 Pursuant to the contract, the business enterprise commenced its clearing operations by removing the structures and uprooting the trees along the thoroughfare. Its foreman, Renato Agarao, supervised the clearing operations.6 Claiming that the clearing operations lacked the necessary permit and prior consultation, petitioners Bienvenido Ejercito and Jose Martinez, as well as a certain Oscar Baria, brought the matter to the attention of the barangay authorities, Mayor Belmonte, Senator Ma. Ana Consuelo A.S. Madrigal, the Department of Environment and Natural Resources and the Philippine Coconut Authority. 7 The efforts of petitioners proved unsuccessful. Hence, on 10 September 2004, they filed a petition for injunction before the Quezon City RTC. The petition named "M.R. Vargas Construction Co., represented by herein Marcial R. Vargas and Renato Agarao," as respondent.8 The Petition,9 docketed as Civil Case No. Q-04-53687, indicated that "Respondent M.R. Vargas Construction, is an entity, with office address at the 4th Floor, President Tower, Timog Avenue corner Scout Ybardaloza [sic] St., Quezon City, represented herein by its President Marcial Vargas and its construction foreman Renato Agarao, where they may be served with summons and other court processes." 10 The petition was accompanied with an application for a temporary restraining order (TRO) and a writ of preliminary injunction.11 Thus, the Office of the Clerk of Court forthwith issued summons and notice of raffle on 10 September 2004.12 Upon service of the processes on the aforementioned address, they were returned unserved on the ground that respondent enterprise was unknown thereat.13 The petition was subsequently raffled to the sala of Judge Jacob, before which petitioners' application for a temporary restraining order was heard on 15 September 2004.14 On the same day, when Agarao was also present in court, Judge Jacob issued a TRO directing respondent enterprise to desist from cutting, damaging or transferring the trees found along Panay Avenue.15 On 23 September 2004, the Mangoba Tan Agus Law Offices filed a special appearance on behalf of respondent enterprise and moved for the dismissal of the petition as well as the quashal of the temporary restraining order on the ground of lack of jurisdiction over respondent enterprise. The motion also assailed the raffle of the case for having been conducted in violation of Section 4, Rule 58 of the Rules of Court; the issuance of the TRO without requiring the posting of a bond; the failure to implead the Government of Quezon City despite its being the real party-in-interest; and petitioners' application for the injunctive writ which was allegedly grossly defective in form and substance.16 The motion to dismiss the petition and to quash the TRO was heard on 24 September 2004. 17 Before the

hearing, a court interpreter showed to respondent enterprise's counsel a copy of the summons and of the notice of raffle in which appear a signature at the bottom of each copy, apparently indicating the receipt of the summons.18 On the mistaken belief that the summons was received by respondent enterprise, at the hearing of the motion, its counsel withdrew two of the grounds stated in the motion, to wit, lack of jurisdiction and irregularity in the raffle of the case.19 At the hearing of petitioners' application for a writ of preliminary injunction on 1 October 2004, the counsel for respondent enterprise manifested that he was adopting the arguments in the motion to quash the TRO. 20 On 6 October 2004, the RTC issued an Order granting petitioners' application for a writ of preliminary injunction.21 On 7 October 2004, counsel for respondent enterprise filed a manifestation with urgent omnibus motion to nullify the proceedings and to cite petitioners and the process server in contempt of court.22 He argued that respondent enterprise failed to receive the summons, alleging that it was herein petitioner Jose Martinez who signed as recipient thereof as well as of the notice of raffle that was served on 10 September 2004. 23 On 18 October 2004, the writ of preliminary injunction was issued. Subsequently, petitioners filed a motion for ocular inspection and another motion praying that respondent enterprise be ordered to restore the structures damaged by its clearing operations.24 On 8 November 2004, the RTC issued the assailed Order,25 nullifying the proceedings thus far conducted in the case.26 Petitioners sought reconsideration, but the motion was denied in an Order dated 20 December 2004. 27 Thus, petitioners filed a petition for certiorari before the Court of Appeals assailing the 8 November 2004 Order issued by Judge Jacob.28 This time, aside from Judge Jacob and the enterprise "M.R. Vargas Construction" itself, the petition also named Marcial R. Vargas and Renato Agarao, the enterprise's owner and foreman, respectively, as individual respondents. The separate addresses of said respondents were also indicated in the initial part of the petition. It was argued in the petition that Judge Jacob committed grave abuse of direction in nullifying the proceedings on the ground of lack of jurisdiction in view of Agarao's presence at the hearing on petitioners' application for TRO, in failing to act on petitioners' pending motions and in directing instead the issuance of new summons on respondent enterprise.29 On 10 October 2005, the Court of Appeals rendered the assailed Decision dismissing the petition for certiorari for lack of merit.30 In its Order dated 28 April 2006, the Court of Appeals denied petitioners' motion for reconsideration. Hence, the instant petition attributes the following errors to the Court of Appeals: I. THE COURT OF APPEALS ERRED IN RULING THAT THE REGIONAL TRIAL COURT DID NOT OBTAIN JURISDICTION OVER THE RESPONDENTS, DEPSITE THE RECEIPT OF COURT PROCESSES AND VOLUNTARY APPEARANCE BEFORE THE COURTS. II. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE WITHDRAWAL BY PRIVATE RESPONDENTS OF THE GROUND OF ABSENCE OF JURISDICTION OVER ITS PERSON CONSTITUTED A WAIVER OF SUCH OBJECTION31 The instant petitionwhich similarly impleads the enterprise, M.R. Vargas Construction, Marcial R. Vargas and Renato Agarao as respondentsraises two issues, namely: (1) whether the trial court acquired jurisdiction over respondent enterprise and (2) whether the defense of lack of jurisdiction had been waived. Jurisdiction over the defendant is acquired either upon a valid service of summons or the defendant's voluntary

appearance in court. When the defendant does not voluntarily submit to the court's jurisdiction or when there is no valid service of summons, any judgment of the court, which has no jurisdiction over the person of the defendant is null and void. In an action strictly in personam, personal service on the defendant is the preferred mode of service, that is, by handing a copy of the summons to the defendant in person.32 Citing the jurisdictional implications of the failure of service of summons, the Court of Appeals concluded that no grave abuse of discretion was committed by Judge Jacob in nullifying the proceedings thus far conducted in the case based on the finding that the summons had not been served on respondent enterprise and that Agarao, despite being present at the 15 September 2004 hearing, was not authorized to represent respondent enterprise in said hearing. Petitioners take exception. They argue that the trial court acquired jurisdiction over respondent enterprise, an entity without juridical personality, through the appearance of its foreman, Agarao, at the 15 September 2004 hearing on the TRO application. Petitioners theorize that the voluntary appearance of Agarao in said hearing was equivalent to service of summons binding upon respondent enterprise, following by analogy, Section 8, Rule 1433 which allows the service of summons on any of the defendants associated to an entity without juridical personality. Furthermore, they contend that the receipt by a certain Rona Adol of the court processes was binding upon respondent enterprise because the latter did not deny the authority of Adol to receive communications on its behalf. Petitioners' argument is untenable. At the outset, it is worthy to note that both the Court of Appeals and the trial court found that summons was not served on respondent enterprise. The Officer's Return stated essentially that the server failed to serve the summons on respondent enterprise because it could not be found at the address alleged in the petition. This factual finding, especially when affirmed by the appellate court, is conclusive upon this Court and should not be disturbed because this Court is not a trier of facts. A sole proprietorship does not possess a juridical personality separate and distinct from the personality of the owner of the enterprise. The law does not vest a separate legal personality on the sole proprietorship or empower it to file or defend an action in court.34 Only natural or juridical persons or entities authorized by law may be parties to a civil action and every action must be prosecuted and defended in the name of the real parties-in-interest.35 The records show that respondent enterprise, M.R. Vargas Construction Co., is a sole proprietorship and, therefore, an entity without juridical personality. Clearly, the real party-in-interest is Marcial R. Vargas who is the owner of the enterprise. Thus, the petition for injunction should have impleaded him as the party respondent either simply by mention of his name or by denominating him as doing business under the name and style of "M.R. Vargas Construction Co." It was erroneous to refer to him, as the petition did in both its caption and body, as representing the enterprise. Petitioners apparently realized this procedural lapse when in the petition for certiorari filed before the Court of Appeals and in the instant petition, M.R. Vargas Construction, Marcial R. Vargas and Renato Agaro were separately named as individual respondents. Since respondent enterprise is only a sole proprietorship, an entity without juridical personality, the suit for injunction may be instituted only against its owner, Marcial Vargas. Accordingly summons should have been served on Vargas himself, following Rule 14, Sections 636 and 737 of the Rules of Court on personal service and substituted service. In the instant case, no service of summons, whether personal or substituted, was effected on Vargas. It is well-established that summons upon a respondent or a defendant must be served by handing a copy thereof to him in person or, if he refuses to receive it, by tendering it to him. Personal service of summons most effectively ensures that the notice desired under the constitutional requirement of due process is accomplished. If however efforts to find him personally would make prompt service impossible, service may be completed by substituted service, i.e., by leaving copies of the summons at his dwelling house or residence with some person of suitable age and discretion then residing therein or by leaving the copies at his office or regular place of business with some competent person in charge thereof. 38 The modes of service of summons should be strictly followed in order that the court may acquire jurisdiction over the respondents, and failure to strictly comply with the requirements of the rules regarding the order of its publication is a fatal defect in the service of summons. It cannot be overemphasized that the statutory

requirements on service of summons, whether personally, by substituted service or by publication, must be followed strictly, faithfully and fully, and any mode of service other than that prescribed by the statute is considered ineffective.39 Agarao was not a party respondent in the injunction case before the trial court. Certainly, he is not a real partyin-interest against whom the injunction suit may be brought, absent any showing that he is also an owner or he acts as an agent of respondent enterprise. Agarao is only a foreman, bereft of any authority to defend the suit on behalf of respondent enterprise. As earlier mentioned, the suit against an entity without juridical personality like respondent enterprise may be instituted only by or against its owner. Impleading Agarao as a partyrespondent in the suit for injunction would have no legal consequence. In any event, the petition for injunction described Agarao only as a representative of M.R. Vargas Construction Co., which is a mere inconsequentiality considering that only Vargas, as its sole owner, is authorized by the Rules of Court to defend the suit on behalf of the enterprise. Despite Agarao's not being a party-respondent, petitioners nevertheless confuse his presence or attendance at the hearing on the application for TRO with the notion of voluntary appearance, which interpretation has a legal nuance as far as jurisdiction is concerned. While it is true that an appearance in whatever form, without explicitly objecting to the jurisdiction of the court over the person, is a submission to the jurisdiction of the court over the person, the appearance must constitute a positive act on the part of the litigant manifesting an intention to submit to the court's jurisdiction.40 Thus, in the instances where the Court upheld the jurisdiction of the trial court over the person of the defendant, the parties showed the intention to participate or be bound by the proceedings through the filing of a motion, a plea or an answer. 41 Neither is the service of the notice of hearing on the application for a TRO on a certain Rona Adol binding on respondent enterprise. The records show that Rona Adol received the notice of hearing on behalf of an entity named JCB. More importantly, for purposes of acquiring jurisdiction over the person of the defendant, the Rules require the service of summons and not of any other court processes. Petitioners also contend that respondent enterprise waived the defense of lack of jurisdiction when its counsel actively demanded positive action on the omnibus motion. The argument is implausible. It should be noted that when the defendant's appearance is made precisely to object to the jurisdiction of the court over his person, it cannot be considered as appearance in court. 42 Such was the purpose of the omnibus motion, as counsel for respondent enterprise precisely manifested therein that he erroneously believed that Vargas himself had received the summons when in fact it was petitioner Martinez who signed as recipient of the summons. Noteworthy is the fact that when the counsel first appeared in court his appearance was "special" in character and was only for the purpose of questioning the court's jurisdiction over Vargas, considering that the latter never received the summons. However, the counsel was shown a copy of the summons where a signature appears at the bottom which led him to believe that the summons was actually received by Vargas when in fact it was petitioner Martinez himself who affixed his signature as recipient thereof. When the counsel discovered his mistake, he lost no time pleading that the proceedings be nullified and that petitioners and the process server be cited for contempt of court. Both the trial and appellate courts concluded that the improvident withdrawal of the defense of lack of jurisdiction was an innocuous error, proceeding on the undeniable fact that the summons was not properly served on Vargas. Thus, the Court of Appeals did not commit a reversible error when it affirmed the trial court's nullification of the proceedings for lack of jurisdiction. WHEREFORE, the instant petition for certiorari is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 89001 are AFFIRMED in toto. Costs against petitioners. The temporary restraining order issued in this case is DISSOLVED. SO ORDERED.

G.R. No. 143723

June 28, 2001

LITONJUA GROUP OF COMPANIES, EDDIE LITONJUA and DANILO LITONJUA, petitioners, vs. TERESITA VIGAN, respondent. GONZAGA-REYES, J.: In this petition for review on certiorari, petitioners seek to annul and set aside the (1) decision1 of the respondent Court of Appeals dated March 20, 2000 which reversed and set aside the decision of the National Labor Relations Commission finding respondent guilty of abandonment and (2) resolution2 dated June 19, 2000 denying petitioners motion for reconsideration. The factual backdrop as found by the respondent Court of Appeals is as follows: 3

the office and explained she was not feeling well the day before. After that Vigan went AWOL and did not heed telegram notices from her employer made on August 26, 1996 and on September 9, 1996 (Annexes "1" & "2", pp. 108 to 109, rollo). She instead filed the instant suit for illegal dismissal." On June 10, 1997, Labor Arbiter Ernesto S. Dinopol rendered his decision 4 finding Vigan diseased and unfit for work under Article 284 of the Labor Code5 and awarded the corresponding separation pay as follows:6 "WHEREFORE, judgment is hereby rendered ordering respondents LITONJUA GROUP OF COMPANIES, EDDIE K. LITONJUA and DANILO LITONJUA to jointly and severally pay complainant TERESITA Y. VIGAN, the following amounts: Separation pay (P4,000 x 18) years.= Proportionate 13th" month pay (P8,000 x 8 months over 12) =



"As to the factual milieu, the contending parties have diametrically opposed versions. Vigan tells it this way; She was hired by the Litonjua Group of Companies on February 2, 1979 as telex operator. Later, she was assigned as accounting and payroll clerk under the supervision of Danilo Litonjua. She had been performing well until 1995, when Danilo Litonjua who was already naturally a (sic) very ill-tempered, ill-mouthed and violent employer, became more so due to business problems. In fact, a complaint letter (Annex "I", p. 85, rollo) was sent by the Litonjua Employees to the father and his junior regarding the boorishness of their kin Danilo Litonjua but apparently the management just glossed over this.1wphi1.nt Danilo Litonjua became particularly angry with Vigan and threw a stapler at her when she refused to give him money upon the instructions of Eddie Litonjua. From then on, Danilo Litonjua had been rabid towards her berated and bad-mouthed her, calling her a "mental case" "psycho", "sira ulo", etc. and even threatened to hit her for some petty matters. Danilo Litonjua even went so far as to lock her up in the comfort room and preventing others to help her out. Not contented, Danilo Litonjua would order the security guards to forcibly eject her or prevent her entry in the office premises whenever he was angry. This occurred twice in July of 1995, first on the 5th then on the 7th. The incidents prompted Vigan to write Danilo Litonjua letters asking why she was treated so and what was her fault (Annexes "F", "G" & "K", pp. 82, 83 & 87, rollo). She suspected that Danilo Litonjua wanted her out for he would not let her inside the office such that even while abroad he would order the guards by phone to bar her. She pleaded for forgiveness or at least for explanation but it fell on deaf ears. Later, Danilo Litonjua changed tack and charged that Vigan had been hysterical, emotional and created scenes at the office. He even required her to secure psychiatric assistance. (Annexes "L" to "N", pp. 88-90, rollo) But despite proof that she was not suffering from psychosis or organic brain syndrome as certified to by a Psychiatrist of Danilo Litonjuas choice (Annex "H", p. 84, rollo), still she was denied by the guards entry to her work upon instructions again of Danilo Litonjua. Left with no alternative, Vigan filed this case for illegal dismissal, alleging she was receiving a monthly salary of P8,000.00 at the time she was unlawfully terminated. The Litonjuas have a different version. They negate the existence of the Litonjua Group of Companies and the connection of Eduardo Litonjua thereto. They contend that Vigan was employed by ACT Theater, Inc., where Danilo Litonjua is a Director. They dispute the charge of illegal dismissal for it was Vigan who ceased to report for work despite notices and likewise contest the P8,000.00 monthly salary alleged by Vigan, claiming it was merely P6,850.00. They claim that Vigan was a habitual absentee specially on Tuesdays that fell within three days before and after the "15th" day and "30th" day of every month. Her performance had been satisfactory, but then starting March 15, 1996 she had become emotional, hysterical, uncontrollable and created disturbances at the office with her crying and shouting for no reason at all. The incident was repeated on April 3, 1996, May 24, 1996 and on June 4, 1996. Thus alarmed, on July 24, 1996 Vigan was required by management to undergo medical and psychological examination at the companys expense and naming three doctors to attend to her. Dr. Baltazar Reyes and Dr. Tony Perlas of the Philippine General Hospital and Dr. Lourdes Ignacio of the Medical Center Manila. But they claim that Vigan refused to comply. On August 2, 1996, Vigan again had another breakdown, hysterical, shouting and crying as usual for about an hour, and then she just left the premises without a word. The next day, August 3, 1996, Saturday, she came to


All other causes of action are DISMISSED for lack of merit." Vigan appealed the decision to the National Labor Relations Commission which modified7 the arbiters decision by ruling that Art. 284 of the Labor Code is inapplicable in the instant case but affirmed the legality of the termination of the complainant based on her having effectively abandoned her job; the rest of the decision was affirmed. Vigan moved for a partial reconsideration which was denied in a resolution dated August 7, 1998. Dissatisfied, Vigan filed a petition for certiorari with the respondent Court of Appeals which rendered its assailed decision dated March 20, 2000 reversing the NLRC Resolution. The dispositive portion of the decision reads:8 "WHEREFORE, premises considered, the assailed NLRC Decision and Resolution are hereby REVERSED and SET ASIDE. In its stead judgment is rendered ordering the respondents LITONJUA GROUP OF COMPANIES, EDDIE K. LITONJUA and DANILO LITONJUA jointly and severally to: (a) Reinstate complainant TERESITA Y. VIGAN if she so desires; or (b) pay her separation compensation in the sum of P8,000.00 multiplied by her years of service counted from February 2, 1979 up to the time this Decision becomes final; and in either case to pay Vigan; (c) full back wages from the time she was illegally dismissed up to the date of the finality of this Decision; (d) moral damages in the amount of P40,000.00; (e) exemplary damages in the amount of P15,000.00; and (f) attorneys fees of P10,000.00. SO ORDERED." Litonjuas filed their motion for reconsideration which was denied in a resolution dated June 19, 2000. Petitioners Litonjuas filed the instant petition for review on certiorari alleging the following grounds: I

WHETHER OR NOT "LITONJUA GROUP OF COMPANIES", WHICH HAS NO JURIDICAL PERSONALITY, BUT ONLY A GENERIC NAME TO DESCRIBE THE VARIOUS COMPANIES WHICH THE LITONJUA FAMILY HAS INTERESTS, CAN BE LEGALLY CONSTRUED AS RESPONDENTS EMPLOYER. II WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED AS A MATTER OF LAW IN HOLDING THAT RESPONDENT WAS ILLEGALLY DISMISSED FROM HER EMPLOYMENT, INSTEAD OF AFFIRMING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION THAT SHE HAD ABANDONED HER JOB OR THAT OF LABOR ARBITER ERNESTO DINOPOL HOLDING THAT SHE SHOULD BE SEPARATED ON THE GROUND OF DISEASE UNDER ARTICLE 284 OF THE LABOR CODE, CONSIDERING THAT SHE HAS EXHIBITED A PATTERN OF PSYCHOLOGICAL AND MENTAL DISTURBANCE WHICH ADMITTEDLY NO LONGER MADE HER PHYSICALLY FIT TO WORK. III WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED AS A MATTER OF LAW IN DIRECTING RESPONDENTS REINSTATEMENT AT HER OWN CHOICE OR PAYMENT OF SEPARATION PAY OF ONE MONTH SALARY FOR EVERY YEAR OF SERVICE AND BACKWAGES. IV THE COURT OF APPEALS SERIOUSLY ERRED AS A MATTER OF LAW IN HOLDING PETITIONERS LIABLE FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES. Anent the first assigned error, petitioners allege that the Litonjua group of companies cannot be a party to this suit for it is not a legal entity with juridical personality but is merely a generic name used to describe collectively the various companies in which the Litonjua family has business interest; that the real employer of respondent Vigan was the ACT theater Incorporated where Danilo Litonjua is a member of the Board of Directors while Eddie Litonjua was not connected in any capacity. Petitioners argument is meritorious. Only natural or juridical persons or entities authorized by law may be parties to a civil action and every action must be prosecuted and defended in the name of the real parties in interest.9 Petitioners claim that Litonjua Group of Companies is not a legal entity with juridical personality hence cannot be a party to this suit deserves consideration since respondent failed to prove otherwise. In fact, respondent Vigans own allegation in her Memorandum supported petitioners claim that Litonjua group of companies does not exist when she stated therein that instead of naming each and every corporation of the Litonjua family where she had rendered accounting and payroll works, she simply referred to these corporations as the Litonjua group of companies, thus, respondent merely used such generic name to describe collectively the various corporations in which the Litonjua family has business interest. Considering the nonexistence of the Litonjua group of companies as a juridical entity and petitioner Eddie Litonjuas denial of his connection in any capacity with the ACT Theater, the supposed company where Vigan was employed, petitioner Eddie Litonjuas should also be excluded as a party in this case since respondent Vigan failed to prove Eddie Litonjuas participation in the instant case. It is respondent Vigan, being the party asse rting a fact, who has the burden of proof as to such fact10 which however, she failed to discharge. Next, petitioners claim that the complaint for illegal dismissal was prematurely filed since Vigan was not dismissed, actual or constructive, from her employment as the records show that despite being absent without official leave since August 5, 1996 and her receipt of two telegram notices sent to her by petitioners on August 26, and September 9, 1996 for her to report for work, she failed to do so and yet petitioners had not done any act to dismiss her. Petitioners deny Vigans claim that she had been physically barred from entering the work premises. Petitioners thus contend that since respondent Vigan was not illegally dismissed from employment, the respondent courts order reinstating the latter, awarding her separation pay equivalent to one month salary per year of service as well as backwages, damages and attorneys fees have no factual and legal basis.

We are not persuaded. The above arguments relate mainly to the correctness of the factual findings of the Court of Appeals and the award of damages. This Court has consistently affirmed that the findings of fact of the Court of Appeals are as a rule binding upon it, subject to certain exceptions, one of which is when the factual findings of the Court of Appeals are contrary to those of the trial court (or administrative body, as the case may be). 11 However, it bears emphasizing that mere disagreement between the Court of Appeals and the trial court as to the facts of a case does not of itself warrant this Court's review of the same. It has been held that the doctrine that the findings of fact made by the Court of Appeals, being conclusive in nature, are binding on this Court, applies even if the Court of Appeals was in disagreement with the lower court as to the weight of evidence with a consequent reversal of its findings of fact, so long as the findings of the Court of Appeals are borne out by the record or based on substantial evidence.12 We have gone over the records of this case and found no cogent reason to disagree with the respondent courts findings that respondent Vigan did not abandon her job but was illegally dismissed. Petitioners claim that despite two (2) telegram notices dated August 26 and September 9, 1996 respectively sent to respondent Vigan to report for work, the latter did not heed the demands and absented herself since August 5, 1996 was belied by the respondents evidence, as it was upon instructions of petitioner Danilo Litonjua to th e guards on duty that she could not enter the premises of her workplace. In fact, in her letter dated August 30, 1996 addressed to petitioner Danilo Litonjua, respondent Vigan had complained of petitioner Danilos inhumane treatment in barring her from entering her workplace, to wit: "Sukdulan na po ang pang-aaping dinaranas ko sa inyo, sir. Since August 5 etc. I was always approached by your guard Batutay and harassed by your men to vacate my cubicle as per your strict order. Only this August 7 that you succeeded as you order the door locked for me only. As per our agreement Aug. 27 at Jollibee (sic) gave me assurance that I willingly undergo psychiatric test I could freely report for work without intimidating me, you wont anymore charge me of insubordination. You wont disturb my family anymore, so why do you advice to try to go back Aug. 30 but as always to be barred by guard Batutay? Sir, with my 18 years of loyal service, all I need is a little respect. Tao ako sir, hindi hayop. Malaki ang nawawala sa akin." Notwithstanding the fact the she was refused entrance to her workplace, respondent Vigan, to show her earnest desire to report for work, would sneak her way into the premises and punched her time card but she could not resume work as the guards in the company gate would prevent her per petitioner Danilo Litonjuas instructions. It appears also that respondent Vigan wrote petitioner Danilo a letter dated September 9, 1996 notifying him that per his instructions, she had made an appointment for a psychiatric test on September 11, 1996 and requested him to make a check payable to Dr. Lourdes Ladrido-Ignacio in the amount of P800.00 consultation fee as they agreed upon. She underwent a psychiatric examination as a result of which Dr. Ignacio issued a medical certificate as follows:13 "This is to certify that MISS TERESITA VIGAN has come for psychiatric evaluation on September 11 and 17, 1996. The psychiatric interview and mental status examination did not reveal any symptoms of psychosis or organic brain syndrome. She showed anxiety but this was deemed a realistic reaction to her present job difficulties." Respondents actuations militate against petitioners claim that she did not heed the notices to return to work and abandoned her job. She had been going to her workplace to report for work but was prevented from resuming her work upon the instructions of petitioner Danilo Litonjua. It would be the height of injustice to allow an employee to claim as a ground for abandonment a situation which he himself had brought about.14 We fully agree with the respondent courts ratiocination on the illegality of Vigans dismissal, to wit:15 "The basic issue is whether Vigans employment was terminated by illegal dismissal or by abandonment of work, and We hold that this was a case of illegal dismissal. Shopworn is the rule on abandonment that the immediate filing of a case for illegal dismissal negates the same. Mark that Vigan promptly filed this suit for illegal dismissal when her attempts to enter the premises of her workplace became futile and the efforts to bar and eject her became unmistakable. In the more recent case of Rizada vs. NLRC (G.R. No. 96982, September 21, 1999), the Supreme Court reiterated anew the hoary rule

that: "To constitute abandonment two elements must concur (1) the failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship, with the second element as the more determinative factor and being manifested by some ov ert acts. Abandoning ones job means the deliberate, unjustified refusal of the employee to resume his employment and the burden of proof is on the employer to show a clear and deliberate intent on the part of the employee to discontinue employment. Abandonment is a matter of intention and cannot be lightly inferred, much less legally presumed from certain equivocal acts. (Shin Industrial v. National Labor Relations Commission, 164 SCRA 8). An employee who forthwith took steps to protest his dismissal cannot be said to have abandoned his work." (Toogue v. National Labor Relations Commission, 238 SCRA 241), as where the employee immediately filed a complaint for illegal dismissal to seek reinstatement (Tolong Aqua Culture Corp., et al. V. National Labor Relations Commission, G.R. 122268, November 12, 1996) (emphasis supplied). Note that in the instant case Vigan was even pleading to be allowed to work but she was prevented by the guards thereat upon the orders of Danilo Litonjua. These are disclosed by her letters (Annexes "F", "G", "K", "Q", "R" and "U", pp. 82, 83, 87, 93, 94 & 97, rollo), the entries in her time cards (Annexes "P", "S", "W" and "X", pp. 92, 95, 99 & 100, rollo) and her compliance when required to see a psychiatrist (Annex "H", p. 84, rollo). On the other hand there is complete silence from the Litonjuas on these matters, including on the collective manifesto of several employees against Danilo Litonjua and his highhanded ways (Annex "I", p. 85). They chose to ignore material and telling points. They even alleged that Vigan refused to comply with their request for her to have medical examination (Comment, pp. 164-171, rollo and Memorandum for the Respondents, pp. 215-222, rollo), an unmitigated falsity in the face of clear proofs that she complied with their directive and was given a clean bill of mental health by a reputable psychiatrist of their choice. For emphasis, We shall quote with seeming triteness the dictum laid down in Mendoza vs. NLRC (supra) regarding the unflinching rule in illegal dismissal cases: "that the employer bears the burden of proof. To establish a case of abandonment, the employer must prove the employees deliberate and unjustified refusal to resume employment without any intention of returning. . . mere absence from work, especially where the employee has been verbally told not to report, cannot by itself constitute abandonment. To repeat, the employer has the burden of proving overt acts on the employees part which demonstrate a desire or intention to abandon her work" The NLRC had erred in shifting the onus probandi to Vigan in the charge of abandonment against her, while the Litonjuas failed to discharge their burden. Though they may not have verbally told Vigan not to report for work but the act of ordering the guard s not to let her in was just as clear a notice. Vigans plight was akin to that of the truck helper in the case of Masagana Concrete Products, et al. vs. NLRC (G.R. No. 106916, September 3, 1999) who was likewise prevented from coming to work. While there was no formal termination of his services, Marias, was constructively dismissed when he was accused of tampering the "vale sheet" and prevented from returning to work. Constructive dismissal does not always involve forthright dismissal or diminution in rank, compensation, benefit and privileges. For an act of clear discrimination insensibility or disdain by an employer may become so unbearable on the part of the employee that it could foreclose any choice by him except to forego his continued employment. In this case, Marias had to resign from his job because he was prevented from returning back to work unless he admitted his mistake in writing and he was not given any opportunity to contest the charge against him. It is a rule often repeated that unsubstantiated accusation without anything more are not synonymous with guilt and unless a clear, valid, just or authorized ground for dismissing an employee is established by the employer the dismissal shall be considered unfounded. Similarly, Vigan was accused of having mental, emotional and physical disorders (Annex "M", p. 89, rollo), but per medical examination it was proven that hers was pure anxiety as a realistic reaction to her present job difficulties. She was charged of habitual absenteeism on Tuesdays that fell within three days before and after

the "15th" day and "30th" day of every month (Litonjuas Position Paper, pp. 101 -107, rollo). This is preposterous for how many Tuesdays in a year would fall within three days before and after the "15th" day and "30th" day of every month? By no extrapolation can this be habitual absenteeism." Since respondent Vigan was illegally dismissed from her employment, she is entitled to: (1) either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and (2) backwages.16 As correctly disposed by the respondent Court:17 "Thus finding that Vigan was illegally dismissed, she is entitled to the following: 1) Either reinstatement, if viable, or separation pay if reinstatement is no longer viable; and 2) Backwages, Backwages and separation pay are distinct relief given to alleviate the economic damage by an illegally dismissed employee. Hence, an award of separation pay in lieu of reinstatement does not bar an award of backwages, computed from the time of illegal dismissal up to the date of the finality of the Decision... without qualification or deduction. Separation pay, equivalent to one months salary for every year of service, is awarded as an alternative to reinstatement when the latter is no longer an option. Separation pay is computed from the commencement of employment up to the time of termination, including the imputed service for which the employee is entitled to backwages, with the salary rate prevailing at the end of the period of putative service being the basis for computation (Masagana Concrete Products, et al. vs. NLRC, supra). In case of a fraction of at least six (6) months in the length of service, the same shall be considered as one year in computing the separation pay. With regard to backwages, it meant literal "full backwages" that is inclusive of allowances and other benefits or their monetary equivalent computed from the time her compensation was withheld from her up to the time of her actual reinstatement, if it is still viable or up to the time the Decision in her favor becomes final without deducting from back wages the earning derived elsewhere, if there is any, by Vigan during the period of her illegal dismissal. (Lopez vs. NLRC, 297 SCRA 508). In other words, Vigan is entitled to reinstatement, which perhaps is no longer viable due to the strained relations between the parties, or separation pay of P8,000.00 for every year of service and backwages of another P8,000 per month reckoned from the time she last received salary from the Litonjuas up to the date of the finality of this Decision. Mark again that We allowed the P8,000.00 claim of Vigan as her last salary received for again the Litonjuas failed to validly refute the same." We likewise affirm respondent courts award of moral and exemplary damages to the respondent. As a rule, moral damages are recoverable only where the dismissal of the employee was attended by bad faith or fraud or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy. We find that bad faith attended respondents dismissal from her employment. Bad faith involves a state of mind dominated by ill will or motive. It implies a conscious and intentional design to do a wrongful act for a dishonest purpose or some moral obliquity.18 Petitioner Danilo Litonjua showed ill will in treating respondent Vigan in a very unfair and cruel manner which made her suffer anxieties by reason of such job difficulties. The report to work notices sent by petitioners to respondent Vigan was just part of the ploy to make it appear that the latter abandoned her work but in reality, Vigan was barred from entering her work premises. We fully subscribe to respondents position that petitioners action was for the purpose of removing her from her employment. Respondent Vigan is also entitled to exemplary damages as her dismissal was effected in an oppressive and malevolent manner.19 We also find that there is a basis for the award of attorneys fees. It is settled that in act ions for recovery of wages or where an employee was forced to litigate and incur expenses to protect his rights and interest, he is entitled to an award of attorneys fees.20 WHEREFORE, premises considered, the decision of the respondent Court of Appeals dated March 20, 2000 is hereby AFFIRMED with the MODIFICATION that Litonjua Group of Companies and Eddie Litonjua are dropped as parties in the instant case.1wphi1.nt SO ORDERED. Melo, Vitug, Panganiban, Sandoval-Gutierrez, JJ., concur.

G.R. No. L-41322 September 29, 1988 MUNICIPALITY OF KAPALONG, thru its Mayor, PORFIRIO F. ROYO Vice Mayor, TOMAS D. MANZANO, Municipal Councilors VALERIANO CLARO, CARIDAD A. DORONIO FELICULO ESTRADA, GEORGE PEDRO JAIN, LIDO E. MONOY SALVADOR PASPE and AGUEDO ROTOL petitioners, vs. HON. FELIX L. MOYA, Presiding Judge of Court of First Instance of Davao, Branch IX, and the MUNICIPALITY OF STO. TOMAS, thru its Mayor, ANICETO SOLIS, Vice-Mayor LEOPOLDO RECTO, Municipal Councilors DOMINGO CAGADAS, WENCESLAO CASTRO, WILDA ESPIRITU, PASTOR FERNANDEZ, MACROSQUE PIMENTEL, DOMINADOR SOLIS, JOSE TAGHOY and ALFONSO VALDEZ, and Municipal Treasurer JOSE AVENIDO, respondents. Martin V. Delgra, Jr. for petitioners. Simeon N. Millan Jr. for respondent Santo Tomas.

3. WHETHER OR NOT PRESIDENTIAL DECREE NO. 242 SUPERSEDED REPUBLIC ACT NO. 6128; AND 4. WHETHER OR NOT THE ACTION HAS ALREADY PRESCRIBED. The instant petition is impressed with merit. The pivotal issue in this case is whether or not the Municipality of Santo Tomas legally exists. Petitioner contends that the ruling of this Court in Pelaez v. Auditor General. (15 SCRA 569) is clear that the President has no power to create municipalities. Thus, there is no Municipality of Santo Tomas to speak of It has no right to assert, no cause of action, no corporate existence at all, and it must perforce remain part and parcel of Kapalong. Based on this premise, it submits that respondent Judge should have dismissed the case. On the ground of jurisdiction, petitioner argues that the settlement of boundary disputes is administrative in nature and should originate in the political or administrative agencies of the government, and not in the courts whose power is limited to judicial review on appropriate occasions (Ibid., pp. 73-74).

PARAS, J.: This is a petition for certiorari and prohibition with preliminary injunction seeking: (a) the reversal (annulment) of the February 17, 1975 Order of the then Court of First Instance of Davao denying the motion to dismiss Civil Case No. 475; and the March 17, 1975 and July 10, 1975 Orders of the same Court denying petitioner's motions for reconsideration; and (b) the issuance of a writ of prohibition directing respondent Judge to desist from taking cognizance of Civil Case No. 475. From portions of the Municipality of Kapalong, President Carlos P. Garcia created respondent Municipality of Santo Tomas, and the latter now asserts jurisdiction over eight (8) barrios of petitioner. For many years and on several occasions, this conflict of boundaries between the two municipalities was brought, at the instance of private respondent, to the Provincial Board of Davao for it to consider and decide. However, it appears that no action was taken on the same. Private respondent then filed a complaint with the then Court of First Instance of Davao, presided over by herein public respondent Judge Felix L. Moya against the Municipality of Kapalong, for settlement of the municipal boundary dispute, recovery of collected taxes and damages, docketed therein as Civil Case No. 475. On March 7, 1974, petitioner filed its Answer (Rollo, pp. 1417). On November 22, 1974, petitioner filed a Motion to Dismiss on the ground of lack of jurisdiction of the lower court and lack of legal personality of the Municipality of Santo Tomas (Ibid., pp. 18-22), which was opposed by private respondent (Ibid., pp. 23-26). On December 12, 1974, petitioner filed its reply to the opposition (Ibid., pp. 27-30), after which respondent Judge, in an Order dated February 17, 1975, denied the motion to dismiss (Ibid., pp. 34-36). On March 3, 1975, petitioner filed a Motion for Reconsideration (Ibid., pp. 37-40), but in an Order dated March 17, 1975, the same was denied by respondent Judge and so was the Second Motion for Reconsideration (Ibid., pp. 42-43), in an Order dated July 10, 1975 (Ibid., p. 44). Hence, the instant petition (Ibid., pp. 1-10). The Second Division of this Court, in a Resolution dated September 10, 1975, resolved to require the respondents to answer and to issue a temporary restraining order (Ibid., p. 49). In compliance therewith, private respondent filed its Answer on October 28, 1975 (Ibid., pp. 53-57). In the Resolution dated November 3, 1975, the parties were required to file their respective memoranda (Ibid., p. 65). Petitioner filed its Memorandum on December 10, 1975 (Ibid., pp. 68-76), and private respondent on January 5, 1975 (Ibid., pp. 77-85). Petitioner raised four (4) issues, to wit: 1. WHETHER OR NOT PRIVATE RESPONDENT HAS LEGAL PERSONALITY TO SUE; 2. WHETHER OR NOT THE MATTER OF SETTLEMENT OF BOUNDARY DISPUTE IS A POLITICAL QUESTION; Rule 3, Section 1 of the Rules of Court expressly provides that only "entities authorized by law may be patties in a civil action." Now then, as ruled in the Pelaez case supra, the President has no power to create a municipality. Since private respondent has no legal personality, it can not be a party to any civil action, and as such, respondent Judge should have dismissed the case, since further proceedings would be pointless. PREMISES CONSIDERED, the petition is GRANTED; the Orders of February 17, 1975, March 17, 1975 and July 10, 1975 of respondent Judge are SET ASIDE; and Civil Case No. 475 is DISMISSED. The restraining order previously issued by this Court is made permanent. Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ., concur.

G.R. No. 152430

March 22, 2007

SAMAHANG MAGSASAKA NG 53 HEKTARYA, represented by ELVIRA M. BALADAD, Petitioner, vs. WILFREDO G. MOSQUERA, ROSARIO R. ROMAN, DANILO M. RELUCIO, and EDGARDO V. GUEVARRA, Respondents. DECISION VELASCO, JR., J.: This is an appeal to the Court under Rule 45 of the December 14, 2001 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 62583, affirming the Resolutions of the Office of the President (OP) in OP Case No. 96116582, and exempting respondents 53-hectare land from the Comprehensive Agrarian Reform Program (CARP) coverage. Also challenged is the CAs February 26, 2002 Resolution 2 rejecting petitioners plea for reconsideration of the CA Decision now under review. The Facts Petitioner Samahang Magsasaka ng 53 Hektarya (Samahan) is an association of farmer-beneficiaries duly recognized by the Department of Agrarian Reform (DAR). Petitioner alleged that its members had been cultivating the disputed land of the case for many years prior to the effectivity of Republic Act No. (R.A.) 6657, otherwise known as the "Comprehensive Agrarian Reform Law" (CARL).3 Respondents Wilfredo G. Mosquera, Rosario R. Roman, Danilo M. Relucio, and Edgardo V. Guevarra, on the other hand, are the registered owners of three parcels of land covered by Transfer Certificate of Title Nos. T-267409, T-267410, and T-267411, which have an aggregate area of 53.1164 hectares located in Macabud, Rodriguez (formerly Montalban), Rizal.4 The disputed land was previously owned by Philippine Suburban Development Corporation which planned to develop it as a residential subdivision. In 1979, it was sold to Vinebel Realties, Inc. through an extrajudicial foreclosure sale. Petitioner alleged that in 1994, the landholding was sold to respondents without any DAR clearance, in violation of Section 6-D of CARL.5 On July 7, 1994, the Municipal Agrarian Reform Officer (MARO) of Rodriguez, Rizal issued a Notice of Coverage to the disputed land. On February 21, 1995, respondents applied for exemption from the coverage of CARL based on its provision in Sec. 10, that is, the property is above 18% slope and unfit for cultivation.6 In support of the application, respondents presented the certification from Ruben A. Cabreira, Deputy Land Inspector, Community Environment and Natural Resources Office, Antipolo, Rizal, certifying that the land was partly developed, sporadically planted with mangoes, guava, and other seasonal crops, and with over 18% slope. On March 31 and August 7, 1995,7 the Regional Director of DAR-Region IV denied respondents application and Motion for Reconsideration, respectively. On August 24, 1995, respondents appealed the two Orders of the Regional Director to the DAR Secretary. On April 19 and July 9, 1996, Sec. Ernesto D. Garilao denied the appeal and respondents Motion for Reconsideration, respectively. 8 In his April 19, 1996 Order, Sec. Garilao stated: A review of all the ocular inspection / field investigation reports submitted by DAR personnel concerned (from the municipal to the central office) reveals that the subject properties have been consistently described as suitable to agriculture. Except for the investigation report (dated December 20, 1995) submitted by the Legal Officer of BALA tasked to inspect the subject properties, all the ocular inspection teams which inspected/investigated the area recommended for the coverage under CARP of the subject properties on the ground of the subject properties suitability for agriculture and present agricultural development. xxxx As for the apparently conflicting certifications issued by the Community Environment and Natural Resources office (CENRO) of Antipolo, Rizal, on different dates, it is the view of this Office that there is actually no conflict between the two certifications. This is so because the certification issued by Deputy Land Inspector Ruben A. Cabreira on October 21, 1994 refers only to one of the three lots subject of the instant petition (the lot which used to be covered by TCT No. N-49174 with an area of 16.2204 has.). x x x The certification issued by Geodetic Engineer III Romulo G. Unciano on January 25, 1995 on the other hand pertains to all the lots subject of the instant petition, which were described to be "partly rolling and agricultural in nature," and

"planted to fruit-bearing trees." These two certifications, instead of coming into conflict with one another, actually complement each other, the first one being a part of the other. Even assuming arguendo that they are in conflict, it is submitted that between the two certifications, the second one should prevail since it is not only the latest, [but] it is also more complete as it refers to all the lots subject of the instant petition.9 On appeal to the OP, Executive Secretary Ruben D. Torres set aside the DAR Secretarys Orders and exempted the property from the CARL coverage through his June 25, 1997 Resolution.10 Petitioner and the DAR subsequently filed a Motion for Reconsideration. In the meantime, the Department of Agriculture (DA), through the Bureau of Soil and Water Management, sent two missions to conduct fieldwork and validate the actual development in the disputed land. The findings of these missions were allegedly contained in a report transmitted by Secretary Salvador Escudero III (Escudero Report) to Pres. Fidel V. Ramos. In sum, the Escudero Report recommended that the disputed land be exempted from conversion since the general area of the land, including areas with 18% slope, was physically occupied and actively used for intensive and diversified farming. On August 14, 1998, the OP denied petitioners Motion for Reconsideration. 11 On September 23, 1998, petitioner, through Elvira M. Baladad, and the DAR jointly filed a second Motion for Reconsideration which was denied by the OP in its December 22, 2000 Resolution.12 Petitioner appealed the Resolutions of the OP to the CA through Rule 43 of the 1997 Rules of Civil Procedure. Petitioner identified the OPs errors, as follows: 1) rejecting the findings of the DAR that the subject landholding was already agriculturally developed at the time of effectivity of the CARL and suitable for agricultural purposes; 2) ignoring the findings of the DA contained in the Escudero Report on the ground that this report was not signed by Sec. Salvador Escudero III himself; 3) holding that the disputed land has more than 18% slope on the basis of a certification issued by a personnel from the Department of Environment and Natural Resources, who was neither authorized nor competent to make such determination; 4) disregarding the certification of the MARO of Rodriguez, Rizal that the landholding was highly agricultural and suitable for cultivation for permanent and seasonal crops; and 5) relying on the certifications of the Municipal Development Coordinator, Housing and Land Use Regulatory Board, Provincial Irrigation Office, and the Municipal Assessor as bases for granting the exemption applied for, which are irrelevant for purposes of determining agricultural development and suitability under Sec. 10 of R.A. 6657.13 The Ruling of the Court of Appeals The CA ruled that the petitioner was not a real party-in-interest and had no legal standing to sue. The appellate court held, thus: Applying the foregoing standards in the case at bar, there is no question petitioner lacks the legal standing to raise the instant appeal. This conclusion finds support in the later case of Fortich vs. Corona, 289 SCRA 624 [1998] x x x xxxx Having resolved that the petitioner, not being actual grantee of the land but mere qualified beneficiary, has no legal standing to sue and is not the real party in interest. Neither will it be directly affected by the assailed resolutions rendered by the Office of the President. Consequently, petitioner has no personality to file the instant appeal. Besides, petitioner is not a juridical person and apropos not equipped with legal personality to sue or be sued. As a consequence, the authority of Elvira M. Baladad in filing this case for the petitioner will likewise be baseless.14

The CA further held that respondents never waived their right to question petitioners legal standing, because, in fact, they raised the issue in the CA; and that they could not be expected to raise the issue in the OP since they obtained a favorable judgment. On the exemption of the land from CARL, the CA found that the OPs Resolution was supported by substantial evidence; hence, the CA did not substitute the OPs findings of fact.15 Petitioners January 17, 2002 Motion for Reconsideration was then denied by the CA in its February 26, 2002 Resolution. The Issues The parties submit the following issues for our resolution: WHETHER OR NOT PETITIONERS ARE REAL PARTIES-IN-INTEREST IN THIS CASE WHETHER OR NOT THE SUBJECT LANDHOLDING MAY BE EXEMPTED FROM THE COVERAGE OF THE COMPREHENSIVE AGRARIAN REFORM WHETHER OR NOT THE PETITION RAISES ONLY QUESTIONS OF FACT Petitioner argues that the CA committed serious error in holding that it lacked the legal standing to file an appeal from the OP. It contends that its members, the Macabud farmers, are entitled to the distribution of the land based on Sec. 22 of the CARL, to wit: Sec. 22. Qualified Beneficiaries.The lands covered by the CARP shall be distributed as much as possible to landless residents of the same barangay, or in the absence thereof, landless residents of the same municipality in the following order of priority: (a) agricultural lessees and share tenants; (b) regular farm workers; (c) seasonal farm workers; (d) other farm workers; (e) actual tillers or occupants of public lands; (f) collective or cooperatives of the above beneficiaries; and (g) others directly working on the land. Petitioner further argues that Fortich v. Corona, cited by the appellate court, did not rule that qualified beneficiaries are not real parties-in-interest. Petitioner pointed out that the Courts pronouncement regarding legal standing was allegedly mere dictum since the crux of the controversy was whether the OP can still modify its own decision which had already attained finality; and that the Court found in Fortich that the farmers were merely recommendee farmer-beneficiaries in contrast to the Macabud farmers in the present case who are qualified and approved farmer-beneficiaries of the disputed landthe fact of which is supported by the certification issued by the MARO. Petitioner believes that being identified as CARP beneficiaries entitles the farmers to usufructuary rights over the land under DAR rules, to wit: 2. Upon verification and validation based on the Application for Purchase and Farmers Undertakings (FUs), [the MARO shall] inform the qualified ARBs or the Farmers Cooperative/Association, as the case may be, that they have been identified to receive the land to give them usufructuary right over the property (CARP Form No. 19)16 Petitioner argues that the foregoing rule, when read in conjunction with Article 562 of the Civil Code, gives them a right over the land which can be injured by a judgment of exemption from CARP. It claims that Certificates of Land Ownership Award (CLOAs) were already generated in the Macabud farmers names by the Provincial Agrarian Reform Officer of Rizal, but were not issued to them in view of the instant case. Also, petitioner contends that respondents are now estopped from raising the issue of legal standing in view of their failure to question the same issue at the earliest opportunity, that is, before the OP. 17 Lastly, since petitioner relies on the findings of the DA regarding the suitability of the land for agriculture for the purpose of the CARP, it then imputes error on the CA for holding that the DA had no authority to make such a determination. The Courts Ruling

The petition should be dismissed. The peculiar circumstances of this case should be noted. This petition originated from an application for exemption from CARP which was filed by the respondents before the Regional Director of the DAR. Petitioner entered the picture when the DARs Orders were reversed by the OP. Petitioners lack of capacity to intervene in the case may not have been an issue before the OP since in administrative cases, technical rules of procedure are not strictly applied. In fact, Sec. 50 of R.A. 6657 expressly allows farmer leaders to "represent themselves, their fellow farmers, or their organization in any proceedings before the DAR." This right of representation generally continues in appeals in congruence with the provisions of Rule 3 of the Revised Rules of Court, specifically: SECTION 1. Who may be parties; plaintiff and defendant. Only natural or juridical persons, or entities authorized by law may be parties in a civil action. x x x SEC. 2. Parties in interest.A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest. SEC. 3. Representatives as parties.Where the action is allowed to be prosecuted or defended by a representative or someone acting in a fiduciary capacity, the beneficiary shall be included in the title of the case and shall be deemed to be the real party in interest. A representative may be a trustee of an express trust, a guardian, an executor or administrator, or a party authorized by law or these Rules. x x x R.A. 6657 allows farmer leaders like Elvira Baladad to represent the Macabud farmers or their Samahan in the proceedings before the DAR. The law, however, should be harmonized with the provisions of the Rules of Court. Assuming that the Macabud farmers are real parties-in-interest as defined by Sec. 2 of Rule 3, the appeal may be brought by their representative since such is allowed by R.A. 6657. The action may then be brought by 1) the organization represented by its authorized representative (Sec. 1) OR 2) the representative with the beneficiaries identified in the title of the case (Sec. 3). In the first option, the organization should be duly registered in order to be clothed with juridical personality (Sec. 1). Admittedly, petitioner Samahan is not registered with the Securities and Exchange Commission. Thus, it is not a juridical person which can be a party in a case. The Rules of Court, however, does not prevent the Macabud farmers from filing an appeal since an action may be instituted in the name of their representative with each farmer-beneficiary identified in the title of the case in accordance with Sec. 3 of Rule 3. Unfortunately, petitioner also failed to comply with this simple requirement. The petition was brought by the unregistered Samahan represented by Elvira Baladad without mentioning the members of it. On this score, the petition can already be dismissed. More importantly, petitioner is not a real party-in-interest in this case. According to Sec. 2 of Rule 3 of the Rules of Court, a real party-in-interest is the party who stands to be benefited or injured by the judgment in the suit or the party entitled to the avails of the suit. We stand by the ruling in Fortich v. Corona 18 that farmerbeneficiaries, who are not approved awardees of CARP, are not real parties-in-interest. In Fortich, the farmers who intervened in the case were mere recommendees. We stated in said case that: The rule in this jurisdiction is that a real party in interest is a party who would be benefited or injured by the judgment or is the party entitled to the avails of the suit. Real interest means a present substantial interest, as distinguished from a mere expectancy or a future, contingent, subordinate or consequential interest. Undoubtedly, movants interest over the land in question is a mere expectancy. Ergo, they are not real parties in interest.19 In the case at bar, members of petitioner Samahan are mere qualified beneficiaries of CARP. The certification that CLOAs were already generated in their names, but were not issued because of the present dispute, does not vest any right to the farmers since the fact remains that they have not yet been approved as awardees, actually awarded lands, or granted CLOAs. Respondents cannot be considered estopped from questioning petitioners legal standing since petitioner appeared before the OP after the latter decided in respondents favor. When the petitioner appealed the case to the CA, respondents duly questioned the petitioners capacity to sue. It is only unfortunate that petitioner failed to comply with basic procedural requirements. We must again

emphasize that these procedural requisites were promulgated to ensure fairness and orderly administration of justice. While the Court sometimes disregards the rules of procedure in the interest of justice, we find that the present case does not merit such leniency. The requirement that a party must have real interest in the case is essential in the administration of justice. Thus, having resolved that the respondents have no legal standing to sue and are not the real parties-in-interest, we find no more necessity to take up the other issues. WHEREFORE, we AFFIRM IN TOTO the December 14, 2001 Decision and the February 26, 2002 Resolution of the CA, with no costs. SO ORDERED.

G.R. No. 194024

April 25, 2012

PHILIP L. GO, PACIFICO Q. LIM and ANDREW Q. LIM Petitioners, vs. DISTINCTION PROPERTIES DEVELOPMENT AND CONSTRUCTION, INC. Respondent. DECISION MENDOZA, J.: Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure assailing the March 17, 2010 Decision1 and October 7, 2010 Resolution2 of the Court of Appeals (CA) in CAG.R. SP No. 110013 entitled "Distinction Properties Development & Construction, Inc. v. Housing Land Use Regulatory Board (NCR), Philip L. Go, Pacifico Q. Lim and Andrew Q. Lim." Factual and Procedural Antecedents: Philip L. Go, Pacifico Q. Lim and Andrew Q. Lim (petitioners) are registered individual owners of condominium units in Phoenix Heights Condominium located at H. Javier/Canley Road, Bo. Bagong Ilog, Pasig City, Metro Manila. Respondent Distinction Properties Development and Construction, Inc. (DPDCI) is a corporation existing under the laws of the Philippines with principal office at No. 1020 Soler Street, Binondo, Manila. It was incorporated as a real estate developer, engaged in the development of condominium projects, among which was the Phoenix Heights Condominium. In February 1996, petitioner Pacifico Lim, one of the incorporators and the then president of DPDCI, executed a Master Deed and Declaration of Restrictions (MDDR)3 of Phoenix Heights Condominium, which was filed with the Registry of Deeds. As the developer, DPDCI undertook, among others, the marketing aspect of the project, the sale of the units and the release of flyers and brochures. Thereafter, Phoenix Heights Condominium Corporation (PHCC) was formally organized and incorporated. Sometime in 2000, DPDCI turned over to PHCC the ownership and possession of the condominium units, except for the two saleable commercial units/spaces:

1. G/F Level BAS covered by Condominium Certificate of Title (CCT) No. 21030 utilized as the PHCCs administration office, and 2. G/F Level 4-A covered by CCT No. PT-27396/C-136-II used as living quarters by the building administrator. Although used by PHCC, DPDCI was assessed association dues for these two units.

4. Ordering the Respondent to refund to the PHCC the amount of Php1,277,500.00, representing the cost of the deep well, with interests and surcharges with a corresponding credit to complainants individual shares as members of PHCC entitled to such refund or reimbursements. 5. Ordering the Respondent to pay the complainants moral and exemplary damages in the amount of P 10,000.00 and attorneys fees in the amount of P 10,000.00. All other claims and counterclaims are hereby dismissed accordingly.

Meanwhile, in March 1999, petitioner Pacifico Lim, as president of DPDCI, filed an Application for Alteration of Plan4 pertaining to the construction of 22 storage units in the spaces adjunct to the parking area of the building. The application, however, was disapproved as the proposed alteration would obstruct light and ventilation. In August 2004, through its Board,5 PHCC approved a settlement offer from DPDCI for the set-off of the latters association dues arrears with the assignment of title over CCT Nos. 21030 and PT-27396/C-136-II and their conversion into common areas. Thus, CCT Nos. PT-43400 and PT-43399 were issued by the Registrar of Deeds of Pasig City in favor of PHCC in lieu of the old titles. The said settlement between the two corporations likewise included the reversion of the 22 storage spaces into common areas. With the conformity of PHCC, DPDCIs application for alteration (conversion of unconstructed 22 stor age units and units GF4-A and BAS from saleable to common areas) was granted by the Housing and Land Use Regulatory Board (HLURB).6 In August 2008, petitioners, as condominium unit-owners, filed a complaint7 before the HLURB against DPDCI for unsound business practices and violation of the MDDR. The case was docketed as REM- 08050813906. They alleged that DPDCI committed misrepresentation in their circulated flyers and brochures as to the facilities or amenities that would be available in the condominium and failed to perform its obligation to comply with the MDDR. In defense, DPDCI denied that it had breached its promises and representations to the public concerning the facilities in the condominium. It alleged that the brochure attached to the complaint was "a mere preparatory draft" and not the official one actually distributed to the public, and that the said brochure contained a disclaimer as to the binding effect of the supposed offers therein. Also, DPD CI questioned the petitioners personality to sue as the action was a derivative suit. After due hearing, the HLURB rendered its decision 8 in favor of petitioners. It held as invalid the agreement entered into between DPDCI and PHCC, as to the alteration or conversion of the subject units into common areas, which it previously approved, for the reason that it was not approved by the majority of the members of PHCC as required under Section 13 of the MDDR. It stated that DPDCIs defense, that the brochure wa s a mere draft, was against human experience and a convenient excuse to avoid its obligation to provide the facility of the project. The HLURB further stated that the case was not a derivative suit but one which involved contracts of sale of the respective units between the complainants and DPDCI, hence, within its jurisdiction pursuant to Section 1, Presidential Decree (P.D.) No. 957 (The Subdivision and Condominium Buyers Protective Decree), as amended. The decretal portion of the HLURB decision reads: WHEREFORE, in view of the foregoing, judgment is hereby rendered: 1. Ordering respondent to restore/provide proper gym facilities, to restore the hallway at the mezzanine floor. 2. Declaring the conversion/alteration of 22 storage units and Units GF4-A and BAS as illegal, and consequently, and ordering respondent to continue paying the condominium dues for these units, with interest and surcharge. 3. Ordering the Respondent to pay the sum of Php998,190.70, plus interests and surcharges, as condominium dues in arrears and turnover the administration office to PHCC without any charges pursuant to the representation of the respondent in the brochures it circulated to the public with a corresponding credit to complainants individual shares as members of PHCC entitled to such refund or reimbursements.

IT IS SO ORDERED.9 Aggrieved, DPDCI filed with the CA its Petition for Certiorari and Prohibition 10 dated August 11, 2009, on the ground that the HLURB decision was a patent nullity constituting an act without or beyond its jurisdiction and that it had no other plain, speedy and adequate remedy in the course of law. On March 17, 2010, the CA rendered the assailed decision which disposed of the case in favor of DPDCI as follows: WHEREFORE, in view of the foregoing, the petition is GRANTED. Accordingly, the assailed Decision of the HLURB in Case No. REM-0800508-13906 is ANNULLED and SET ASIDE and a new one is entered DISMISSING the Complaint a quo. IT IS SO ORDERED.11 The CA ruled that the HLURB had no jurisdiction over the complaint filed by petitioners as the controversy did not fall within the scope of the administrative agencys authority under P.D. No. 957. The HLURB not only relied heavily on the brochures which, according to the CA, did not set out an enforceable obligation on the part of DPDCI, but also erroneously cited Section 13 of the MDDR to support its finding of contractual violation. The CA held that jurisdiction over PHCC, an indispensable party, was neither acquired nor waived by estoppel. Citing Carandang v. Heirs of De Guzman,12 it held that, in any event, the action should be dismissed because the absence of PHCC, an indispensable party, rendered all subsequent actuations of the court void, for want of authority to act, not only as to the absent parties but even as to those present. Finally, the CA held that the rule on exhaustion of administrative remedies could be relaxed. Appeal was not a speedy and adequate remedy as jurisdictional questions were continuously raised but ignored by the HLURB. In the present case, however, "[t]he bottom line is that the challenged decision is one that had been rendered in excess of jurisdiction, if not with grave abuse of discretion amounting to lack or excess of jurisdiction." 13 Petitioners filed a motion for reconsideration14 of the said decision. The motion, however, was denied by the CA in its Resolution dated October 7, 2010. Hence, petitioners interpose the present petition before this Court anchored on the following GROUNDS (1) THE COURT OF APPEALS ERRED IN HOLDING THAT THE HLURB HAS NO JURISDICTION OVER THE INSTANT CASE; (2) THE COURT OF APPEALS ALSO ERRED IN FINDING THAT PHCC IS AN INDISPENSABLE PARTY WHICH WARRANTED THE DISMISSAL OF THE CASE BY REASON OF IT NOT HAVING BEEN

IMPLEADED IN THE CASE; (3) THE COURT OF APPEALS HAS LIKEWISE ERRED IN RELAXING THE RULE ON NONEXHAUSTION OF ADMINISTRATIVE REMEDIES BY DECLARING THAT THE APPEAL MAY NOT BE A SPEEDY AND ADEQUATE REMEDY WHEN JURISDICTIONAL QUESTIONS WERE CONTINUOUSLY RAISED BUT IGNORED BY THE HLURB; and (4) THAT FINALLY, THE COURT A QUO ALSO ERRED IN NOT GIVING DUE RESPECT OR EVEN FINALITY TO THE FINDINGS OF THE HLURB.15 Petitioners contend that the HLURB has jurisdiction over the subject matter of this case. Their complaint with the HLURB clearly alleged and demanded specific performance upon DPDCI of the latters contractual obligation under their individual contracts to provide a back-up water system as part of the amenities provided for in the brochure, together with an administration office, proper gym facilities, restoration of a hallway, among others. They point out that the violation by DPDCI of its obligations enumerated in the said complaint squarely put their case within the ambit of Section 1, P.D. No. 957, as amended, enumerating the cases that are within the exclusive jurisdiction of the HLURB. Likewise, petitioners argue that the case was not a derivative suit as they were not suing for and in behalf of PHCC. They were suing, in their individual capacities as condominium unit buyers, their developer for breach of contract. In support of their view that PHCC was not an indispensable party, petitioners even quoted the dispositive portion of the HLURB decision to show that complete relief between or among the existing parties may be obtained without the presence of PHCC as a party to this case. Petitioners further argue that DPDCIs petition before the CA should have been dismissed outright for failure to comply with Section 1, Rule XVI of the 2004 Rules of Procedure of the HLURB providing for an appeal to the Board of Commissioners by a party aggrieved by a decision of a regional officer. DPDCI, in its Comment,16 strongly objects to the arguments of petitioners and insists that the CA did not err in granting its petition. It posits that the HLURB has no jurisdiction over the complaint filed by petitioners because the controversies raised therein are in the nature of "intra-corporate disputes." Thus, the case does not fall within the jurisdiction of the HLURB under Section 1, P.D. No. 957 and P.D. No. 1344. According to DPDCI, petitioners sought to address the invalidation of the corporate acts duly entered and executed by PHCC as a corporation of which petitioners are admittedly members of, and not the acts pertaining to their ownership of the units. Such being the case, PHCC should have been impleaded as a party to the complaint. Its non-inclusion as an indispensable party warrants the dismissal of the case. DPDCI further avers that the doctrine of exhaustion is inapplicable inasmuch as the issues raised in the petition with the CA are purely legal; that the challenged administrative act is patently illegal; and that the procedure of the HLURB does not provide a plain, speedy and adequate remedy and its application may cause great and irreparable damage. Finally, it claims that the decision of the HLURB Arbiter has not attained finality, the same having been issued without jurisdiction. Essentially, the issues to be resolved are: (1) whether the HLURB has jurisdiction over the complaint filed by the petitioners; (2) whether PHCC is an indispensable party; and (3) whether the rule on exhaustion of administrative remedies applies in this case. The petition fails.

property involved and the parties.18 Generally, the extent to which an administrative agency may exercise its powers depends largely, if not wholly, on the provisions of the statute creating or empowering such agency. 19 With respect to the HLURB, to determine if said agency has jurisdiction over petitioners cause of action, an examination of the laws defining the HLURBs jurisdiction and authority becomes imperative. P.D. No. 957, 20 specifically Section 3, granted the National Housing Authority (NHA) the "exclusive jurisdiction to regulate the real estate trade and business." Then came P.D. No. 134421 expanding the jurisdiction of the NHA (now HLURB), as follows: SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and decide cases of the following nature: (a) Unsound real estate business practices; (b) Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and (c) Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman. This provision must be read in light of the laws preamble, which explains the reasons for enactment of the law or the contextual basis for its interpretation.22 A statute derives its vitality from the purpose for which it is enacted, and to construe it in a manner that disregards or defeats such purpose is to nullify or destroy the law.23 P.D. No. 957, as amended, aims to protect innocent subdivision lot and condominium unit buyers against fraudulent real estate practices.24 The HLURB is given a wide latitude in characterizing or categorizing acts which may constitute unsound business practice or breach of contractual obligations in the real estate trade. This grant of expansive jurisdiction to the HLURB does not mean, however, that all cases involving subdivision lots or condominium units automatically fall under its jurisdiction. The CA aptly quoted the case of Christian General Assembly, Inc. v. Ignacio,25 wherein the Court held that: The mere relationship between the parties, i.e., that of being subdivision owner/developer and subdivision lot buyer, does not automatically vest jurisdiction in the HLURB. For an action to fall within the exclusive jurisdiction of the HLURB, the decisive element is the nature of the action as enumerated in Section 1 of P.D. 1344. On this matter, we have consistently held that the concerned administrative agency, the National Housing Authority (NHA) before and now the HLURB, has jurisdiction over complaints aimed at compelling the subdivision developer to comply with its contractual and statutory obligations. 26 [Emphases supplied] In this case, the complaint filed by petitioners alleged causes of action that apparently are not cognizable by the HLURB considering the nature of the action and the reliefs sought. A perusal of the complaint discloses that petitioners are actually seeking to nullify and invalidate the duly constituted acts of PHCC - the April 29, 2005 Agreement27 entered into by PHCC with DPDCI and its Board Resolution 28 which authorized the acceptance of the proposed offsetting/settlement of DPDCIs indebtedness and approval of the conversion of certain units from saleable to common areas. All these were approved by the HLURB. Specifically, the reliefs sought or prayers are the following: 1. Ordering the respondent to restore the gym to its original location;

Basic as a hornbook principle is that jurisdiction over the subject matter of a case is conferred by law and determined by the allegations in the complaint which comprise a concise statement of the ultimate facts constituting the plaintiff's cause of action. The nature of an action, as well as which court or body has jurisdiction over it, is determined based on the allegations contained in the complaint of the plaintiff, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein. The averments in the complaint and the character of the relief sought are the ones to be consulted. Once vested by the allegations in the complaint, jurisdiction also remains vested irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein. 17 Thus, it was ruled that the jurisdiction of the HLURB to hear and decide cases is determined by the nature of the cause of action, the subject matter or

2. Ordering the respondent to restore the hallway at the second floor; 3. Declaring the conversion/alteration of 22 storage units and Units GF4-A and BAS as illegal, and consequently, ordering respondent to continue paying the condominium dues for these units, with interest and surcharge; 4. Ordering the respondent to pay the sum of PHP998,190.70, plus interest and surcharges, as condominium

dues in arrears and turnover the administration office to PHCC without any charges pursuant to the representation of the respondent in the brochures it circulated to the public; 5. Ordering the respondent to refund to the PHCC the amount of PHP1,277,500.00, representing the cost of the deep well, with interests and surcharges; 6. Ordering the respondent to pay the complainants moral/exemplary damages in the amount of PHP100,000.00; and 7. Ordering the respondent to pay the complainant attorneys fees in the amount of PHP100,000.00, and PHP3,000.00 for every hearing scheduled by the Honorable Office. 29 As it is clear that the acts being assailed are those of PHHC, this case cannot prosper for failure to implead the proper party, PHCC. An indispensable party is defined as one who has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence, without injuring or affecting that interest. 30 In the recent case of Nagkakaisang Lakas ng Manggagawa sa Keihin (NLMK-OLALIA-KMU) v. Keihin Philippines Corporation,31 the Court had the occasion to state that: Under Section 7, Rule 3 of the Rules of Court, "parties in interest without whom no final determination can be had of an action shall be joined as plaintiffs or defendants." If there is a failure to implead an indispensable party, any judgment rendered would have no effectiveness. It is "precisely when an indispensable party is not before the court (that) an action should be dismissed. The absence of an indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even to those present." The purpose of the rules on joinder of indispensable parties is a complete determination of all issues not only between the parties themselves, but also as regards other persons who may be affected by the judgment. A decision valid on its face cannot attain real finality where there is want of indispensable parties.32 (Underscoring supplied) Similarly, in the case of Plasabas v. Court of Appeals, 33 the Court held that a final decree would necessarily affect the rights of indispensable parties so that the Court could not proceed without their presence. In support thereof, the Court in Plasabas cited the following authorities, thus: "The general rule with reference to the making of parties in a civil action requires the joinder of all indispensable parties under any and all conditions, their presence being a sine qua non of the exercise of judicial power. (Borlasa v. Polistico, 47 Phil. 345, 348) For this reason, our Supreme Court has held that when it appears of record that there are other persons interested in the subject matter of the litigation, who are not made parties to the action, it is the duty of the court to suspend the trial until such parties are made either plaintiffs or defendants. (Pobre, et al. v. Blanco, 17 Phil. 156). x x x Where the petition failed to join as party defendant the person interested in sustaining the proceeding in the court, the same should be dismissed. x x x When an indispensable party is not before the court, the action should be dismissed. (People, et al. v. Rodriguez, et al., G.R. Nos. L-14059-62, September 30, 1959) (sic) "Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants. (Sec. 7, Rule 3, Rules of Court). The burden of procuring the presence of all indispensable parties is on the plaintiff. (39 Amjur [sic] 885). The evident purpose of the rule is to prevent the multiplicity of suits by requiring the person arresting a right against the defendant to include with him, either as co-plaintiffs or as co-defendants, all persons standing in the same position, so that the whole matter in dispute may be determined once and for all in one litigation. (Palarca v. Baginsi, 38 Phil. 177, 178). From all indications, PHCC is an indispensable party and should have been impleaded, either as a plaintiff or as a defendant,34 in the complaint filed before the HLURB as it would be directly and adversely affected by any determination therein. To belabor the point, the causes of action, or the acts complained of, were the acts of PHCC as a corporate body. Note that in the judgment rendered by the HLURB, the dispositive portion in particular, DPDCI was ordered (1) to pay P 998,190.70, plus interests and surcharges, as condominium dues in arrears and turnover the administration office to PHCC; and (2) to refund to PHCC P 1,277,500.00, representing the cost of the deep well, with interests and surcharges. Also, the HLURB declared as illegal the

agreement regarding the conversion of the 22 storage units and Units GF4-A and BAS, to which agreement PHCC was a party. Evidently, the cause of action rightfully pertains to PHCC. Petitioners cannot exercise the same except through a derivative suit. In the complaint, however, there was no allegation that the action was a derivative suit. In fact, in the petition, petitioners claim that their complaint is not a derivative suit. 35 In the cited case of Chua v. Court of Appeals,36 the Court ruled: For a derivative suit to prosper, it is required that the minority stockholder suing for and on behalf of the corporation must allege in his complaint that he is suing on a derivative cause of action on behalf of the corporation and all other stockholders similarly situated who may wish to join him in the suit. It is a condition sine qua non that the corporation be impleaded as a party because not only is the corporation an indispensable party, but it is also the present rule that it must be served with process. The judgment must be made binding upon the corporation in order that the corporation may get the benefit of the suit and may not bring subsequent suit against the same defendants for the same cause of action. In other words, the corporation must be joined as party because it is its cause of action that is being litigated and because judgment must be a res adjudicata against it. (Underscoring supplied) Without PHCC as a party, there can be no final adjudication of the HLURBs judgment. The CA was, thus, correct in ordering the dismissal of the case for failure to implead an indispensable party. To justify its finding of contractual violation, the HLURB cited a provision in the MDDR, to wit: Section 13. Amendment. After the corporation shall have been created, organized and operating, this MDDR may be amended, in whole or in part, by the affirmative vote of Unit owners constituting at least fifty one (51%) percent of the Unit shares in the Project at a meeting duly called pursuant to the Corporation By Laws and subject to the provisions of the Condominium Act. This citation, however, is misplaced as the above-quoted provision pertains to the amendment of the MDDR. It should be stressed that petitioners are not asking for any change or modification in the terms of the MDDR. What they are really praying for is a declaration that the agreement regarding the alteration/conversion is illegal. Thus, the Court sustains the CAs finding that: There was nothing in the records to suggest that DPDCI sought the amendment of a part or the whole of such MDDR. The cited section is somewhat consistent only with the principle that an amendment of a corporations Articles of Incorporation must be assented to by the stockholders holding more than 50% of the shares. The MDDR does not contemplate, by such provision, that all corporate acts ought to be with the concurrence of a majority of the unit owners.37 Moreover, considering that petitioners, who are members of PHCC, are ultimately challenging the agreement entered into by PHCC with DPDCI, they are assailing, in effect, PHCCs acts as a body corporate. This action, therefore, partakes the nature of an "intra-corporate controversy," the jurisdiction over which used to belong to the Securities and Exchange Commission (SEC), but transferred to the courts of general jurisdiction or the appropriate Regional Trial Court (RTC), pursuant to Section 5b of P.D. No. 902-A,38 as amended by Section 5.2 of Republic Act (R.A.) No. 8799.39 An intra-corporate controversy is one which "pertains to any of the following relationships: (1) between the corporation, partnership or association and the public; (2) between the corporation, partnership or association and the State in so far as its franchise, permit or license to operate is concerned; (3) between the corporation, partnership or association and its stockholders, partners, members or officers; and (4) among the stockholders, partners or associates themselves."40 Based on the foregoing definition, there is no doubt that the controversy in this case is essentially intracorporate in character, for being between a condominium corporation and its members-unit owners. In the recent case of Chateau De Baie Condominium Corporation v. Sps. Moreno,41 an action involving the legality of assessment dues against the condominium owner/developer, the Court held that, the matter being an intracorporate dispute, the RTC had jurisdiction to hear the same pursuant to R.A. No. 8799.

As to the alleged failure to comply with the rule on exhaustion of administrative remedies, the Court again agrees with the position of the CA that the circumstances prevailing in this case warranted a relaxation of the rule. The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial system.1wphi1 The thrust of the rule is that courts must allow administrative agencies to carry out their functions and discharge their responsibilities within the specialized areas of their respective competence. 42 It has been held, however, that the doctrine of exhaustion of administrative remedies and the doctrine of primary jurisdiction are not ironclad rules. In the case of Republic of the Philippines v. Lacap,43 the Court enumerated the numerous exceptions to these rules, namely: (a) where there is estoppel on the part of the party invoking the doctrine; (b) where the challenged administrative act is patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable delay or official inaction that will irretrievably prejudice the complainant; (d) where the amount involved is relatively so small as to make the rule impractical and oppressive; (e) where the question involved is purely legal and will ultimately have to be decided by the courts of justice; (f) where judicial intervention is urgent; (g) where the application of the doctrine may cause great and irreparable damage; (h) where the controverted acts violate due process; (i) where the issue of non-exhaustion of administrative remedies has been rendered moot; (j) where there is no other plain, speedy and adequate remedy; (k) where strong public interest is involved; and (l) in quo warranto proceedings.44 [Underscoring supplied] The situations (b) and (e) in the foregoing enumeration obtain in this case. The challenged decision of the HLURB is patently illegal having been rendered in excess of jurisdiction, if not with grave abuse of discretion amounting to lack or excess of jurisdiction. Also, the issue on jurisdiction is purely legal which will have to be decided ultimately by a regular court of law. As the Court wrote in Vigilar v. Aquino:45 It does not involve an examination of the probative value of the evidence presented by the parties. There is a question of law when the doubt or difference arises as to what the law is on a certain state of facts, and not as to the truth or the falsehood of alleged facts. Said question at best could be resolved only tentatively by the administrative authorities. The final decision on the matter rests not with them but with the courts of justice. Exhaustion of administrative remedies does not apply, because nothing of an administrative nature is to be or can be done. The issue does not require technical knowledge and experience but one that would involve the interpretation and application of law. Finally, petitioners faulted the CA in not giving respect and even finality to the findings of fact of the HLURB. Their reliance on the case of Dangan v. NLRC,46 reiterating the well-settled principles involving decisions of administrative agencies, deserves scant consideration as the decision of the HLURB in this case is manifestly not supported by law and jurisprudence. Petitioners, therefore, cannot validly invoke DPDCIs failure to fulfill its obligation on the basis of a plain draft leaflet which petitioners were able to obtain, specifically Pacifico Lim, having been a president of DPDCI. To accord petitioners the right to demand compliance with the commitment under the said brochure is to allow them to profit by their own act. This, the Court cannot tolerate. In sum, inasmuch as the HLURB has no jurisdiction over petitioners complaint, the Court sustains the subject decision of the CA that the HLURB decision is null and void ab initio. This disposition, however, is without prejudice to any action that the parties may rightfully file in the proper forum. CARPIO MORALES, J.: WHEREFORE, the petition is DENIED. SO ORDERED. The case at bar involves a parcel of land identified as Lot No. 3781 (the lot) located in Inayawan, Cebu, covered by Original Certificate of Title No. RO-2649 (0-9092)1 in the name of the following 13 co-owners, their respective shares of which are indicated opposite their names: Fortunata Padigos (Fortunata) Felix Padigos (Felix) 1/8 1/8 G.R. No. 173192 April 14, 2008


Wenceslao Padigos (Wenceslao) Maximiano Padigos (Maximiano) Geronimo Padigos (Geronimo) Macaria Padigos Simplicio Padigos (Simplicio) Ignacio Padigos (Ignacio) Matilde Padigos Marcelo Padigos Rustica Padigos Raymunda Padigos Antonino Padigos

1/8 1/8 1/8 1/8 1/8 1/48 1/48 1/48 1/48 1/48 1/48

Padigos, Perfecto Padigos, Frisca15 Salarda, Flora Quinto (sometimes rendered as "Guinto"), Benita Templa, Sotero Padigos, Andres Padigos, and Emilio Padigos.16 In their Answer to the Second Amended Complaint, 17 petitioners contended that the Second Amended Complaint should be dismissed in view of the failure to implead other heirs of the other registered owners of the lot who are indispensable parties.18 A Third Amended Complaint19 was thereafter filed with leave of court20 impleading as additional plaintiffs the heirs of Wenceslao, namely, herein respondents Demetrio Padigos, Jr., Wenceslao Padigos, and Nelly Padigos, and the heirs of Felix, namely, herein respondents Expedito Padigos (Expedito), Henry Padigos, and Enrique P. Malazarte.21 After trial, Branch 16 of the Cebu City RTC decided22 in favor in the therein plaintiffs-herein respondents, disposing as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants. 1. Declaring the plaintiffs to be entitled to the ownership and possession of the lot in litigation; 2. Declaring as null and void the Deeds of Absolute Sale in question; 3. Ordering the defendants to pay plaintiffs the sum of P50,000.00 as actual and compensatory damages[,] the sum of P20,000.00 as attorney's fees, and P10,000.00 as litigation expenses. 4. Ordering the defendants to pay the costs of suit. SO ORDERED.23 (Emphasis in the original; underscoring supplied) The defendants-herein petitioners Bacalsos appealed.24 Meanwhile, the trial court, on respondents' Motion for Execution Pending Appeal,25 issued a writ of execution which was implemented by, among other things, demolishing the houses constructed on the lot.26 By Decision27 of September 6, 2005, the Court of Appeals affirmed the trial court's decision. Their Motion for Reconsideration28 having been denied,29 petitioners filed the present Petition for Review on Certiorari, 30 faulting the Court of Appeals: . . . when it ruled that the Second Amended Complaint is valid and legal, even if not all indispensable parties are impleaded or joined . . . . . . when [it] wittingly overlooked the most potent, unescapable and indubitable fact or circumstance which proved the continuous possession of Lot No. 3781 by the defendants and their predecessors in interest, Alipio Bacalso [Sr.] and/or when it sanctioned impliedly the glaring arbitrary RTC order of the demolition of the over 40 years old houses, situated on Lot No. 3781 Cebu Cad., belonging to the old lessees, long allowed to lease or stay thereat for many years, by Alipio Bacalso [Sr.], father and [predecessor] in interest of the defendants, now the herein Petitioners. The said lessees were not even joined as parties in this case, much less were they given a chance to air their side before their houses were demolished, in gross violation of the due process clause provided for in Sec. 1[,] Art. III of the Constitution . . . . . . in upholding as gospel truth the report and conclusion of Nimrod Vao, the supposed handwriting expert[,] that signatures and thumb marks appearing on all documents of sale presented by the defendants are forgeries, and not mindful that Nimrod Vao was not cross-examined thoroughly by the defense counsel as he was prevented from doing so by the trial judge, in violation of the law more particularly Sec. 6, Rule 132, Rules of Court and/or the accepted and usual course of judicial proceedings and is therefore not admissible in evidence. . . . [when it] . . . wittingly or unwittingly, again overlooked the vital facts, the circumstances, the laws and rulings of the Supreme Court, which are of much weight, substance and influence which, if considered

Maximo Padigos (Maximo), Flaviano Mabuyo (Flaviano), Gaudencio Padigos (Gaudencio), Domingo Padigos (Domingo), and Victoria P. Abarquez (Victoria), who are among the herein respondents, filed on April 17, 1995, before the Regional Trial Court (RTC) of Cebu City, a Complaint,2 docketed as Civil Case No. CEB17326, against Rosendo Bacalso (Rosendo) and Rodrigo Bacalso (Rodrigo) who are among the herein petitioners, for quieting of title, declaration of nullity of documents, recovery of possession, and damages. The therein plaintiffs-herein respondents Maximo and Flaviano claimed that they are children of the deceased co-owner Simplicio; that respondents Gaudencio and Domingo are children of the deceased co-owner Ignacio; and that respondent Victoria and respondent Lilia P. Gabison (Lilia) are grandchildren of the late co-owner Fortunata.3 Respondents also alleged that the therein defendants-petitioners Rosendo and Rodrigo are heirs of Alipio Bacalso, Sr. (Alipio, Sr.) who, during his lifetime, secured Tax Declaration Nos. L-078-02223 and L-07802224 covering the lot without any legal basis; that Rosendo and Rodrigo have been leasing portions of the lot to persons who built houses thereon, and Rosendo has been living in a house built on a portion of the lot; 4 and that demands to vacate and efforts at conciliation proved futile,5 prompting them to file the complaint at the RTC. In their Answer6 to the complaint, petitioners Rosendo and Rodrigo claimed that their father Alipio, Sr. purchased via deeds of sale the shares in the lot of Fortunata, Simplicio, Wenceslao, Geronimo, and Felix from their respective heirs, and that Alipio, Sr. acquired the shares of the other co-owners of the lot by extraordinary acquisitive prescription through continuous, open, peaceful, and adverse possession thereof in the concept of an owner since 1949.7 By way of Reply and Answer to the Defendants' Counterclaim, 8 herein respondents Gaudencio, Maximo, Flaviano, Domingo, and Victoria alleged that the deeds of sale on which Rosendo and Rodrigo base their claim of ownership of portions of the lot are spurious, but assuming that they are not, laches had set in against Alipio, Sr.; and that the shares of the other co-owners of the lot cannot be acquired through laches or prescription. Gaudencio, Maximo, Flaviano, Domingo, and Victoria, with leave of court,9 filed an Amended Complaint10 impleading as additional defendants Alipio, Sr.'s other heirs, namely, petitioners Marceliana 11 Doblas, Terolio Bacalso, Alipio Bacalso, Jr., Mario Bacalso, William Bacalso, Alipio Bacalso III, and Christine B. Baes.12 Still later, Gaudencio et al. filed a Second Amended Complaint 13 with leave of court,14 impleading as additional plaintiffs the other heirs of registered co-owner Maximiano, namely, herein respondents Timoteo

carefully, undoubtedly uphold that the defendants and their predecessors in interests, have long been in continuous, open, peaceful and adverse, and notorious possession against the whole world of Lot No. 3781, Cebu Cad., in concept of absolute owners for 46 years, a period more than sufficient to sustain or uphold the defense of prescription, provided for in Art. 1137 of the Civil Code even without good faith.31 (Emphasis and underscoring in the original; italics supplied) Respondents admit that Teodulfo Padigos (Teodulfo), an heir of Simplicio, was not impleaded. 32 They contend, however, that the omission did not deprive the trial court of jurisdiction because Article 487 of the Civil Code states that "[a]ny of the co-owners may bring an action in ejectment."33 Respondents' contention does not lie. The action is for quieting of title, declaration of nullity of documents, recovery of possession and ownership, and damages. Arcelona v. Court of Appeals34 defines indispensable parties under Section 7 of Rule 3, Rules of Court as follows: [P]arties-in-interest without whom there can be no final determination of an action. As such, they must be joined either as plaintiffs or as defendants. The general rule with reference to the making of parties in a civil action requires, of course, the joinder of all necessary parties where possible, and the joinder of all indispensable parties under any and all conditions, their presence being a sine qua non for the exercise of judicial power. It is precisely "when an indispensable party is not before the court (that) the action should be dismissed." The absence of an indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present. Petitioners are co-owners of a fishpond . . . The fishpond is undivided; it is impossible to pinpoint which specific portion of the property is owned by Olanday, et. al. and which portion belongs to petitioners. x x x Indeed, petitioners should have been properly impleaded as indispensable parties. x x x x x x x35 (Underscoring supplied) The absence then of an indispensable party renders all subsequent actions of a court null and void for want of authority to act, not only as to the absent party but even as to those present.36 Failure to implead indispensable parties aside, the resolution of the case hinges on a determination of the authenticity of the documents on which petitioners in part anchor their claim to ownership of the lot. The questioned documents are: 1. Exhibit "3" a notarized Deed of Sale executed by Gaudencio, Domingo, a certain Hermenegilda Padigos, and the heirs of Fortunata, in favor of Alipio, Sr. on June 8, 1959; 2. Exhibit "4" a notarized Deed of Sale executed on September 9, 1957 by Gavino Padigos (Gavino), alleged son of Felix, in favor of Alipio Gadiano; 3. Exhibit "5" a private deed of sale executed in June 1957 by Macaria Bongalan, Marciano Padigos, and Dominga Padigos, supposed heirs of Wenceslao, in favor of Alipio, Sr.; 4. Exhibit "6" a notarized deed of sale executed on September 9, 1957 by Gavino and Rodulfo Padigos, heirs of Geronimo, in favor of Alipio Gadiano; 5. Exhibit "7" a notarized deed of sale executed on March 19, 1949 by Irenea Mabuyo, Teodulfo and Maximo, heirs of Simplicio; 6. Exhibit "8" a private deed of sale executed on May 3, 1950 by Candido Padigos, one of Simplicio's children, in favor of Alipio, Sr.; and 7. Exhibit "9" a notarized deed of sale executed on May 17, 1957 by Alipio Gadiano in favor of Alipio, Sr. Exhibits "3," "4," "6," "7," and "8," which are notarized documents, have in their favor the presumption of regularity.37

Forgery, as any other mechanism of fraud, must be proved clearly and convincingly, and the burden of proof lies on the party alleging forgery.38 The trial court and the Court of Appeals relied on the findings of Nimrod Bernabe Vao (Vao), expert witness for respondents, that Gaudencio's signature on Exhibit "3" (Deed of Absolute Sale covering Fortunata's share in the lot) and Maximo's thumbprint on Exhibit "7" (Deed of Sale covering Simplicio's share in the lot) are spurious.39 Vao's findings were presented by respondents to rebut those of Wilfredo Espina (Espina), expert witness for petitioners, that Gaudencio's signature and Maximo's thumbprint are genuine. 40 Expert opinions are not ordinarily conclusive. They are generally regarded as purely advisory in character. 41 The courts may place whatever weight they choose upon and may reject them, if they find them inconsistent with the facts in the case or otherwise unreasonable.42 When faced with conflicting expert opinions, courts give more weight and credence to that which is more complete, thorough, and scientific. 43 The Court observes that in examining the questioned signatures of respondent Gaudencio, petitioners' expert witness Espina used as standards 15 specimen signatures which have been established to be Gaudencio's,44 and that after identifying similarities between the questioned signatures and the standard signatures, he concluded that the questioned signatures are genuine. On the other hand, respondents' expert witness Vao used, as standards, the questioned signatures themselves.45 He identified characteristics of the signatures indicating that they may have been forged. Vao's statement of the purpose of the examination is revealing: x x x [t]o x x x discover, classify and determine the authenticity of every document that for any reason requires examination be [sic] scrutinized in every particular that may possibly throw any light upon its origin, its age or upon quality element or condition that may have a bearing upons [sic] its genuineness or spuriousness.46 (Emphasis supplied) The Court also notes that Vao also analyzed the signatures of the witnesses to the questioned documents, the absence of standard specimens with which those signatures could be compared notwithstanding.47 On the other hand, Espina refrained from making conclusions on signatures which could not be compared with established genuine specimens.48 Specifically with respect to Vao's finding that Maximo's thumbprint on Exhibit "7" is spurious, the Court is not persuaded, no comparison having been made of such thumbprint with a genuine thumbprint established to be Maximo's.49 Vao's testimony should be received with caution, the trial court having abruptly cut short his crossexamination conducted by petitioners' counsel,50 thus: COURT: You are just delaying the proceedings in this case if you are going to ask him about the documents one by one. Just leave it to the Court to determine whether or not he is a qualified expert witness. The Court will just go over the Report of the witness. You do not have to ask the witness one by one on the document, 51 thereby depriving this Court of the opportunity to determine his credibility. Espina, on the other hand, withstood thorough cross-examination, re-direct and re-cross examination.52 The value of the opinion of a handwriting expert depends not upon his mere statements of whether a writing is genuine or false, but upon the assistance he may afford in pointing out distinguishing marks, characteristics and discrepancies in and between genuine and false specimens of writing which would ordinarily escape notice or detection from an unpracticed observer.53 While differences exist between Gaudencio's signatures appearing on Exhibits "3"-"3-D" and his signatures appearing on the affidavits accompanying the pleadings in this case, 54 the gap of more than 30 years from the time he affixed his signatures on the questioned document to the time he affixed his signatures on the pleadings in the case could explain the difference. Thus Espina observed: xxxx

4. Both questioned and standard signatures exhibited the same style and form of the movement impulses in its execution; 5. Personal habits of the writer were established in both questioned and standard signatures such as misalignment of the whole structure of the signature, heavy penpressure [sic] of strokes from initial to the terminal, formation of the loops and ovals, poor line quality and spacing between letters are all repeated; 6. Both questioned and standard signatures [show] no radical change in the strokes and letter formation in spite o[f] their wide difference in dates of execution considering the early writing maturity of the writer; 7. Variations in both writings questioned and standards were considered and properly evaluated. xxxx Fundamental similarities are observed in the following characteristics to wit:

for a person who knows how to write is not precluded from signing by thumbmark. In affirming the nullification by the trial court of Exhibits "3," "4," "5," "6," "7," and "8," the Court of Appeals held: xxxx First of all, facts about pedigree of the registered owners and their lawful heirs were convincingly testified to by plaintiff-appellant Gaudencio Padigos and his testimony remained uncontroverted. xxxx Giving due weight to his testimony, we find that x x x the vendors in the aforesaid Deeds of Sale x x x were not the legal heirs of the registered owners of the disputed land. x x x xxxx

xxxx SIGNATURES 1. Ovals of "a" either rounded or angular at the base; 2. Ovals of "d" either narrow, rounded, or angular at the base; 3. Loop stems of "d" consistently tall and retraced in both specimens questioned and standards; xxxx 4. Base alignment of "e" and "i" are repeated with sameness; 5. Top of "c" either with a retrace, angular formation or an eyelet; 6. Terminal ending of "o" heavy with a short tapering formation; 7. Loop stem of "P" with wide space and angular; 8. Oval of "P" either rounded or multi-angular; 9. Base loop of "g" consistently short either a retrace, a blind loop or narrow space disproportionate to the top oval; 10. Angular top of "s" are repeated with sameness; 11. Terminal ending of "s" short and heavy with blind loop or retrace at the base. 55 And Espina concluded xxxx [t]hat the four (4) questioned signatures over and above the typewritten name and word GAUDENCIO PADIGOS Vendor on four copies of a DEED OF ABSOLUTE SALE (original and carbon) dated June 8, 1959 were written, signed, and prepared by the hand who wrote the standard specimens Exh. "G" and other specimen materials collected from the records of this case that were submitted or comparison; a product of one Mind and Brain hence GENUINE and AUTHENTIC.56 (Emphasis in the original; underscoring supplied) Respondents brand Maximo's thumbmark on Exhibit "7" as spurious because, so they claim, Maximo did not affix his signature thru a thumbmark, he knowing how to write. 57 Such conclusion is a non sequitur, however, As for Exhibit "8," the vendor Candido Padigos is not a legal heir of Simplicio Padigos. Therefore, the former could not vest title of the land to Alipio Bacalso. As for Exhibit "3," the vendors Gaudencio Padigos, Hermenegilda Padigos and Domingo Padigos are not the legal heirs of registered owner Fortunata Padigos. Hermenegilda Padigos is not a known heir of any of the other registered owners of the property. On the other hand, plaintiffs-appellants Gaudencio and Domingo Padigos are only some of the collateral grandchildren of Fortunata Padigos. They could not by themselves dispose of the share of Fortunata Padigos. xxxx As for Exhibit "5," the vendors in Exhibit "5" are not the legal heirs of Wenceslao Padigos. The children of registered owner Wenceslao Padigos are: Wenceslao Padigos, Demetrio Padigos and Nelly Padigos. Therefore, Exhibit "5" is null and void and could not convey the shares of the registered owner Wenceslao Padigos in favor of Alipio Bacalso. As for Exhibit "9," the Deed of Sale executed by Alipio [Gadiano] in favor of Alipio Bacalso is also void because the shares of the registered owners Felix and Geronimo Padigos were not validly conveyed to Alipio [Gadiano] because Exhibit "4" and "6" were void contracts. Thus, Exhibit "9" is also null and void.58 (Italics in the original; underscoring supplied) The evidence regarding the "facts of pedigree of the registered owners and their heirs" does not, however, satisfy this Court. Not only is Gaudencio's self-serving testimony uncorroborated; it contradicts itself on material points. For instance, on direct examination, he testified that Ignacio is his father and Fortunata is his grandmother.59 On cross-examination, however, he declared that his father Ignacio is the brother of Fortunata.60 On direct examination, he testified that his co-plaintiffs Victoria and Lilia are already dead. 61 On cross-examination, however, he denied knowledge whether the two are already dead. 62 Also on direct examination, he identified Expedito, Henry, and Enrique as the children of Felix. 63 Expedito himself testified, As for Exhibit "6," the vendors Gavino and Rodulfo Padigos are not the legal heirs of the registered owner Geronimo Padigos. Therefore, these fictitious heirs could not validly convey ownership in favor of Alipio [Gadiano]. As for Exhibit "4," the vendor Gavino Padigos is not a legal heir of the registered owner Felix Padigos. The latter's heirs are plaintiff-appellants Expedito Padigos, Henry Padigos and Enrique P. Malazarte. Accordingly, Exhibit "4" is a patent nullity and did not vest title of Felix Padigos' share of Lot 3781 to Alipio [Gadiano].

however, that he is the son of a certain Mamerto Padigos, the son of a certain Apolonio Padigos who is in turn the son of Felix.64 At all events, respondents are guilty of laches the negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it has either abandoned it or declined to assert it.65 While, by express provision of law, no title to registered land in derogation of that of the registered owner shall be acquired by prescription or adverse possession, it is an enshrined rule that even a registered owner may be barred from recovering possession of property by virtue of laches.66 Respondents insist, however, that they only learned of the deeds of sale in 1994, the year that Alipio, Sr. allegedly commenced possession of the property.67 The record shows, however, that although petitioners started renting out the land in 1994, they have been tilling it since the 1950s, 68 and Rosendo's house was constructed in about 1985.69 These acts of possession could not have escaped respondents' notice given the following unassailed considerations, inter alia: Gaudencio testified that he lived on the lot from childhood until 1985, after which he moved to a place three kilometers away, and after he moved, a certain Vicente Debelos lived on the lot with his permission.70 Petitioners' witness Marina Alcoseba, their employee,71 testified that Gaudencio and Domingo used to cut kumpay planted by petitioners' tenant on the lot.72 The tax declarations in Alipio, Sr.'s name for the years 1967-1980 covering a portion of the lot indicate Fortunata's share to be the north and east boundaries of Alipio, Sr.'s;73 hence, respondents could not have been unaware of the acts of possession that petitioners exercised over the lot. Upon the other hand, petitioners have been vigilant in protecting their rights over the lot, which their predecessor-in-interest Alipio, Sr. had declared in his name for tax purposes as early as 1960, and for which he had been paying taxes until his death in 1994, by continuing to pay the taxes thereon. 74 Respondents having failed to establish their claim by preponderance of evidence, their action for quieting of title, declaration of nullity of documents, recovery of possession, and damages must fail. A final word. While petitioners' attribution of error to the appellate court's "implied sanction" of the trial court's order for the demolition pending appeal of the houses of their lessees is well taken, the Court may not consider any grant of relief to them, they not being parties to the case. WHEREFORE, the petition is GRANTED. The September 6, 2005 decision of the Court of Appeals is REVERSED and SET ASIDE. Civil Case No. CEB-17326 of Branch 16 of the Regional Trial Court of Cebu City is DISMISSED. SO ORDERED. CORONA, J.: In this petition for review on certiorari under Rule 45, petitioner submits that the Court of Appeals (CA) erred in annulling and setting aside the Regional Trial Court (RTC) decision on the ground of extrinsic fraud. The facts follow.1 Respondent allegedly took out a loan of P409,000 from petitioner. To secure the loan, respondent issued petitioner an Asian Bank Corporation (ABC) check (Check No. AYA 020195) in the amount of P325,500 dated February 8, 1994. The date was later changed to June 8, 1994 with the consent and concurrence of petitioner. The check was, however, dishonored due to a material alteration when petitioner deposited the check on due date. On August 24, 1994, respondent, through her representative Emily P. Abojada, remitted P235,000 to petitioner as partial payment of the loan. The balance of P174, 000 was due on or before December 8, 1994. On August 24, 1994, however, petitioner filed an action for a sum of money and damages (Civil Case No. Q94-21495) against ABC for the full amount of the dishonored check. And in a decision dated May 23, 1997, the RTC of Quezon City, Branch 101 ruled in his favor.2 When respondent went to ABC Salcedo Village Branch on June 30, 1997 to withdraw money from her account, she was unable to do so because the trial court had ordered ABC to pay petitioner the value of respondents ABC check. On August 25, 1997, ABC remitted to the sheriff a managers check amounting to P325,500 drawn on respondents account. The check was duly received by petitioner on the same date. Respondent then filed a petition in the CA seeking to annul and set aside the trial courts decision ordering ABC to pay petitioner the value of the ABC check.3 The CA ruled: WHEREFORE, premises considered, the petition is GRANTED and the Decision dated May 23, 1997 of the G.R. No. 148211 July 25, 2006

SINCERE Z. VILLANUEVA, petitioner, vs. MARLYN P. NITE,* respondent. DECISION

public respondent is hereby ANNULLED and SET ASIDE for extrinsic fraud. [Petitioner] Villanueva is hereby ordered to pay [Nite] 1) the sum of [P146,500] as actual damages plus interest at 12% per annum from August 25, 1997 until full payment; 2) the sum of [P75,000] as moral damages; 3) the sum of [P50,000] as exemplary damages; and 4) the sum of [P50,000] as attorneys fees and cost of suit. SO ORDERED.4 Thus, this petition. We find for respondent. Annulment of judgment is a remedy in law independent of the case where the judgment sought to be annulled is promulgated. It can be filed by one who was not a party to the case in which the assailed judgment was rendered. Section 1 of Rule 47 provides: Section 1. Coverage. This Rule shall govern the annulment by the Court of Appeals of judgments or final orders and resolutions in civil actions of Regional Trial Courts for which the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer available through no fault of the petitioner. Respondent may avail of the remedy of annulment of judgment under Rule 47. The ordinary remedies of new trial, appeal and petition for relief were not available to her for the simple reason that she was not made a party to the suit against ABC. Thus, she was neither able to participate in the original proceedings nor resort to the other remedies because the case was filed when she was abroad. Annulment of judgment may be based only on extrinsic fraud and lack of jurisdiction.5 Extrinsic or collateral fraud pertains to such fraud which prevents the aggrieved party from having a trial or presenting his case to the court, or is used to procure the judgment without fair submission of the controversy.6 This refers to acts intended to keep the unsuccessful party away from the courts as when there is a false promise of compromise or when one is kept in ignorance of the suit.7 We uphold the appellate courts finding of extrinsic fraud: Barely 6 days after receipt of the partial payment of P235,000.00 and agreeing that the balance of P174,000.00 shall be paid on or before December 8, 1994, [Sincere] filed his complaint against [ABC] for the full amount of the dishonored check in the sum of P320,500.00 without impleading petitioner. The apparent haste by which [Sincere] filed his complaint and his failure to implead [Marlyn] clearly shows his intent to prevent [Marlyn] from opposing his action. [A]t the time news about [Marlyn] having left the country was widespread, appearing even in print media as early as May 1994, [Marlyn] paid [Sincere] the amount of P235,000.00 as partial payment on [August 18, 1994], through a representative. Notwithstanding the foregoing, SIX (6) days later or on [August 24, 1994, Sincere] instituted an action for collection with damages for the whole amount of the issued check. [Sincere] does not deny knowledge of such payment neither of the fact that he concurred in settling the balance of P174,000.00 on December 8, 1994. [His] actuation and pronouncement shows not only bad faith on his part but also of his fraudulent intention to

completely exclude [Marlyn] from the proceedings in the court a quo. By doing what he did he prevented the [trial court] from fully appreciating the particulars of the case.8 In any event, the RTC decision may be annulled for lack of jurisdiction over the person of respondent. The pertinent provisions of the Negotiable Instruments Law are enlightening: SEC. 185. Check, defined. A check is a bill of exchange drawn on a bank payable on demand. Except as herein otherwise provided, the provisions of this Act applicable to a bill of exchange payable on demand apply to a check.9 (emphasis ours) SEC. 189. When check operates as an assignment. A check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts or certifies the check. (emphasis ours) If a bank refuses to pay a check (notwithstanding the sufficiency of funds), the payee-holder cannot, in view of the cited sections, sue the bank. The payee should instead sue the drawer who might in turn sue the bank. Section 189 is sound law based on logic and established legal principles: no privity of contract exists between the drawee-bank and the payee. Indeed, in this case, there was no such privity of contract between ABC and petitioner. Petitioner should not have sued ABC. Contracts take effect only between the parties, their assigns and heirs, except in cases where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law.10 None of the foregoing exceptions to the relativity of contracts applies in this case. The contract of loan was between petitioner and respondent. No collection suit could prosper without respondent who was an indispensable party. Rule 3, Sec. 7 of the Rules of Court states: Sec. 7. Compulsory joinder of indispensable parties. Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants. (emphasis ours) An indispensable party is one whose interest in the controversy is such that a final decree will necessarily affect his rights. The court cannot proceed without his presence. 11 If an indispensable party is not impleaded, any judgment is ineffective.12 On this, Aracelona v. Court of Appeals13 declared: Rule 3, Section 7 of the Rules of Court defines indispensable parties as parties-in-interest without whom there can be no final determination of an action. As such, they must be joined either as plaintiffs or as defendants. The general rule with reference to the making of parties in a civil action requires, of course, the joinder of all necessary parties where possible, and the joinder of all indispensable parties under any and all conditions, their presence being sine qua non for the exercise of judicial power. It is precisely "when an indispensable party is not before the court (that) the action should be dismissed." The absence of an indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present. WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 44971 is AFFIRMED in toto. Costs against petitioner. SO ORDERED.