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Republic of the Philippines

Mina with plaintiff Pilar Lazo from 1933-1958, while married to Antonia
Pacson. Joaquin Mina died in August, 1958, leaving no descendants
norascendants except his widow, the defendant herein Antonia Pacson. On
April 9, 1958, Joaquin Mina, then still living, executed a deed of absolute sale
(Annex "B" to Complaint) of three parcels of land situated in the municipality
of Muñoz, Nueva Ecija, in favor of the defendants Crispino Medina and
Cresencia Mina for the sum of P12,000. On April 15, 1958 again he executed
another deed of sale (Annex "C" to Complaint) of 13 parcels of land covered
by 12 transfer certificates of title to the same spouses Crispino Medina and
Cresencia Mina. Both deeds of sale bear the conformity of his wife Antonia
Pacson.

SUPREME COURT
Manila

EN BANC

G.R. No. L-17828

August 31, 1963

LIGAYA MINA, JAIME MINA, SILVINA MINA, FAUSTA MINA,
PABLO MINA and MIGUEL MINA, the minors represented by PILAR LAZO
as guardian-ad-litem, plaintiffs-appellants,
vs.
ANTONIA PACSON,
defendants-appellees.

CRISPINO

MEDINA

and

CRESENCIA

MINA,

F. A. Pelmoka for plaintiffs-appellants.
Castelo Law Office for defendants-appellees.

LABRADOR, J.:

This is an appeal from an order of the Court of First Instance of Nueva Ecija,
Hon. Felix Makasiar, presiding, in its Civil Case No. 3296, entitled "Ligaya
Mina, et al., plaintiffs vs. Crispino Medina, et al., defendants," dismissing the
complaint filed in this case. The appellant also appeals against the order
denying the motion for reconsideration of the order of dismissal.

The facts necessary to understand the nature of the issues presented in this
appeal, as gleaned from the pleadings, may be briefly stated as follows:
Plaintiffs Ligaya, Jaime, Silvina, Fausta, Pablo and Miguel, all surnamed
Mina, are alleged to be the illegitimate children of the deceased Joaquin

In the complaint filed in the Court of First Instance of Nueva Ecija in the case
which originated this appeal, it is alleged that plaintiffs are illegitimate
children of the deceased Joaquin Mina begotten by him with Pilar Lazo
during the period from 1933 to 1958 while Joaquin Mina was lawfully married
to Antonia Pacson; that the plaintiff Pablo Mina is a recognized illegitimate
child of the deceased Joaquin Mina; that Joaquin Mina died intestate leaving
no ascendants or descendants, except his widow Antonia Pacson; that he
left various parcels of land enumerated in the complaint but that on April 9,
1950 the defendants connived and secured from Joaquin Mina, who was ill
and did not know what he was doing, the execution of the two deeds of sale
without consideration, fictitiously and fraudulently, transferring his
propertiesto the spouses Crispino Medina and Cresencia Mina; and that by
reason of said acts, defendants have caused moral anguish, anxiety and
embarrassment to plaintiffs, causing them damages amounting to P10,000;
that plaintiffs pray that they be declared recognized illegitimate children of the
deceased Joaquin Mina, entitled to share in the properties left by him as
such illegitimate children; that the deeds of sale, Annexes "B" and "C" be
declared fictitious, fraudulent and therefore, null and void; and that
defendants be required to deliver to plaintiffs' possession one-fourth of said
properties together with P10,000 for moral damages.

Upon the filing of the complaint the defendants presented a motion to dismiss
the complaint on the ground of res judicata, alleging that a similar action had
previously been presented as Civil Case No. 3015 in the same court, and by
the same parties against Crispino Medina and Cresencia Mina, in which the
same allegations of plaintiffs' status and fraudulent conveyance of the
properties to defendants are alleged, together with a prayer for moral
damages in the sum of P20,000. It appears, however, that in the complaint
filed in said Civil Case No. 3015, no prayer is made for the declaration of the

filiation of the plaintiffs in relation or with respect to the deceased Joaquin
Mina.

The motion to dismiss also copied an order of the court issued in said Civil
Case No. 3015 which reads as follows:

Acting on the Motion filed by the defendants on December 22, 1958 for the
reconsideration of the order dated December 8, 1958, and considering that
the present action is not only for annulment of deeds of sale but also for
partition (paragraphs 8 and 11 of the complaint and paragraph 4 of the
prayer thereof); that to avoid multiplicity of suits, the complex action to
establish filiation andfor partition or for recovery of inheritance may be
brought in the same case (Lopez v. Lopez, 68 Phil. 227; Escoval vs. Escoval,
48 O.G. 615; Edades vs. Edades, L-8964, July 31, 1956); and that Antonia
Pacson, the surviving widow and the other intestate heirs of the deceased
Joaquin Mina, or necessary parties are not made a party in this case (Briz v.
Briz, 43 Phil. 763), the plaintiffs are hereby directed to amend their complaint
within fifteen (15) days from receipt hereof by including as party defendant
the surviving widow of the deceased Joaquin Mina and other necessary
parties.

After a careful consideration of the joint motion to dismiss of defendants
Antonia Pacson and the spouses Crispino Medina and Cresencia Mina,
dated November 11, 1959, the opposition thereto dated November 24, 1959,
and the reply of the defendants to the opposition, dated December 7, 1959,
the Court is of the opinion that said motion to dismiss is well taken; hence
this case is hereby dismissed without costs.

Plaintiffs' motion for time to submit rejoinder, dated December 10, 1959, is
hereby denied because it will only unnecessarily delay the termination of this
case.

So ordered.

Cabanatuan City, December 18, 1959.

A motion for the reconsideration of the order of the court dismissing the
action having been denied, the plaintiffs in the present case prosecuted this
appeal directly to this Court.1äwphï1.ñët

Should the plaintiffs fail to comply with this order, this case will be dismissed.

Lastly, another order of the same court dated February 9, 1959 was quoted,
the dispositive part of which reads:

The fifteen-day period granted to the plaintiffs having elapsed without said
order having been complied with, the Court hereby dismisses this case,
without pronouncement aa to costs.

Opposition to the motion to dismiss was presented on behalf of the plaintiffs
by their attorney to which a reply was filed on behalf of the defendants. A
rejoinder was also filed after which Judge Genaro Tan Torres, then presiding
over the court, sustained the motion to dismiss in an order which reads as
follows:

As shown above the question to be resolved is whether or not the order
dismissing the previous Civil Case No. 3015 bars the present civil action No.
3296 of the Court of First Instance of Nueva Ecija.

In the first error assigned by the appellants in their brief it is argued that the
dismissal of the complaint in the previous action was in fact "at the indirect
instance of the plaintiffs through inaction or omission." We do not find this
claim justified by the facts of the case. The order of the court dismissing the
complaint in the first case contains the following warning: "Should the
plaintiffs fail to comply with this order, this case will be dismissed." In the face
of this express warning given in the court's order the dismissal can not be
said to have been "at the indirect instance of the plaintiffs; it was in fact
caused by plaintiffs' refusal to comply with the express mandate contained in
the order of dismissal. The dismissal, therefore, was justified under Rule 30,
Section 3 of the Rules of Court, which reads:

SEC. 3. Failure to prosecute. — When plaintiff fails to appear at the time of
the trial, or to prosecute his action for an unreasonable length of time, or to
comply with these rules of any order of the court, the action may be
dismissed upon motion of the defendant or upon the court's own motion. This
dismissal shall have the effect of an adjudication upon the merits, unless
otherwise provided by court.

The above provision of the Rules was invoked in the case, of Garchitorena,
et al. vs. De los Santos, et al., G.R. No. L-17045, June 30, 1962, wherein this
Court held:

To order an amendment to a complaint within a certain period in order to
implead as party plaintiff or defendant one who is not a party to the case lies
within the discretion of the Court. And where it appears that the person to be
impleaded is an indispensable party, the party to whom such order is
directed has no other choice but to comply with it. His refusal or failure to
comply with the order is a ground for the dismissal of his complaint pursuant
to Section 3, Rule, 30, of the Rules of Court. . . .

Under the second assignment of error it is argued that the dismissal of the
previous case was brought about by the negligence, gross or criminal, of
plaintiffs' lawyer for which the plaintiffs-appellants should not be made to
suffer. The argument is not true to fact. The failure to amend was a result not
of the neglect of the lawyer alone but also of the plaintiffs-appellants
themselves. Had the plaintiffs taken even an ordinary interest in the result of
the action that they had filed, they would have been able to secure
information from their lawyer that the case had been dismissed for failure to
amend. Upon receipt of such information, plaintiffs could have applied to the
court for relief under Rule 38 of the Rules of Court and could have had the
complaint amended as directed in the order of dismissal. It is not alone
negligence of their counsel, therefore, but of themselves also that the
required amendment was not made. But assuming for the sake of argument
that the failure was due to the lawyer alone, such failure would not relieve
them of the responsibility resulting from the neglect of their lawyer, for the
client is bound by the action of his counsel. (Isaac v. Mendoza, G. R. No. L2830, June 21, 1951; Vivero v. Santos, et al., G. R. No. L-8105, Feb. 28,
1956; Fernandez v. Tan Tiong Tick, G.R. No. L-15877, April 28, 1961;

Gordulan v. Gordulan, G.R. No. L-17722, Oct. 9, 1962; Valerio v. Sec. of
Agriculture, G.R. No. L-18587, April 23, 1963.)

In the third assigiament of error it is claimed that there is no complete identity
between the parties in the first case and those in the case at bar. The
statement is true because in the previous case Antonia Pacson was not
included as party-defendlant. As a matter of fact the order decided that
Pacson was to be included as party-defendant. As to the latter, therefore, the
previous order of dismissal does not bar the present complaint, not only
because she was not made a party but also because the issue of filiation of
the parties-plaintiffs was not raised in the previous case, although such issue
was necessary for the plaintiffs to be able to maintain their right of action. In
view of this fact, the present action should be considered barred in respect to
the action for the annulment of the deeds of sale and as regards the
defendants spouses Crispino Medina and Cresencia Mina; but as to the case
for the declaration of the plaintiffs as illegitimate children and heirs of the
deceased Joaquin Mina this latter case is not barred by the previous action
as above explained and may still be prosecuted.

WHEREFORE, the order of dismissal is hereby modified in the sense that
the action for the recognition of the filiation of the plaintiffs should be allowed
to continue against the defendant Antonia Pacson; but the dismissal of the
action for the annulment of the deeds of sale is affirmed. Without costs.

Republic of the Philippines
SUPREME COURT

1967. TEEHANKEE. 1965 a notarized deed of sale of account properties in favor of said respondent for account price of p4. 1960. vs.300. reciting therein that account signatories are account owners of account properties. J. Robles (being account child of Eligio's deceased son Jose). In October. The power of attorney was registered in account office of account respondent Register of Deeds of Negros Occidental and was apparently treated as a Declaration of Heirship and thereafter new transfer titles to account whole of d properties were issued in favor of account vendee Parreño. respondents. COURT OF APPEALS. Accompanied by her husband Rafael Penolio. Eligio had also started registration proceedings for another lot. On June 20. Melania as surviving spouse and nine other children besides Eva Robles. No. 1304 with an area of 4. petitioners. No.: The Court sets aside respondent court's decision which would require petitioner to implead certain parties and remands account appeal for determination on its merits. The vendors-co-heirs of petitioner are not indispensable parties in account action brought by her for cancellation of account vendee's titles insofar as they were issued for account whole of account properties sold to account exclusion of petitioner's share notwithstanding that she was not a party to account sale and for redemption as a co-heir of account properties thus sold to respondent vendee under Article 1088 of account Civil Code. who were account deceased heirs to account extent of 43/44 executed a general Power of attorney in favor of Francisco (a son) to alienate and encumber account disputed properties.* ANICETO B.Manila FIRST DIVISION G. although they were not joined by petitioner Aida who is also an heir of account deceased's estate to account extent of 1/44. Medalla for petitioners. title thereto was issued in account name of his surviving spouse and in account name of "the heirs of Eulogio Robles". . L-47494 May 15. 1305-A with an area of 5. and THE REGISTER OF DEEDS OF NEGROS OCCIDENTAL. dent vendee. petitioner Aida Robles is account granddaughter of account deceased Eligio A. These two properties pertaining to account conjugal estate of Eligio and Melamia constitute account disputed properties at bar. Ditching & Rolando C. petitioner Aida Robles as plaintiff filed a complaint in account Negros Occidental court Of first instance against respondents Parreño and Register of Deeds praying for cancellation of account titles issued in respondent Parreño's name and that she be allowed as a 1/44 coheir and co-owner of account properties to redeem account same from said respon. As found by account Court of Appeals. PARREÑO. Parreno and later executed on January 20. Francisco by virtue of account power of attorney executed a private deed of sale of account properties in favor of respondent Aniceto B. In his lifetime. 1957.00.2038 hectares of account Escalante Cadastre and account certificate of title thereto was issued in his name and that of his wife Melania Cuaycong.R. On September 18. another granddaughter of account deceased Eulogio (sister of petitioner Aida). Ramon C.8685 hectares and after his death. 1978 AIDA ROBLES. Arsenio Acuña & Associates for respondents. Eulogio registered his title to Lot No.

Petitioner's action for cancellation of titles was in reality not one "for cancellation of (respondent's) ownership of account disputed property sold to him by account sellers" as perceived by respondent court but rather one questioning account validity of respondent Register of Deeds' issuing account titles to account whole of account properties in disregard of petitioner's 1/44 share therein and against existing laws and regulations. Without account SELLERS being made parties in account CASE BELOW. Since plaintiff was suing defendant for cancellation of his ownership of account DISPUTED PROPERTY sold to him by account SELLERS. 2[a]. hereby ordered remanded to account LOWER COURT so that plaintiff can be required to implead account indispensable and necessary parties in account case and for subsequent hearing for account issuance of a new judgment. which fag squarely on account shoulders of respondents Parreno and account Register of Deeds resulted in account irregular issuance of titles which are now sought to be cancelled" . account latter were indispensable parties and should have been impleaded. with account SELLERS claiming full ownership over account same. account Register of Deeds did not require account presentation of a 'written notice to all possible redemptioners'. Revised Penal Code). 315. We find merit in the petition. and was executed by account vendor co. account redemption should not be allowed. in effect. If plaintiff is held entitled to redeem and account redemption is held binding on account SELLERS. Furthermore. in account 'NOTICE OF DECLARATION OF HEIRSHIP'. Moreover. account SELLERS excluded plaintiff as an heir of ELIGIO and therefore not a co-owner of account DISPUTED PROPERTY..heirs on June 20. he unduly accommodated respondent Parreno to cure a legal defect or legal deficiency of account documents covering account sale. but only a certified true copy from account Notary Public. left out account petitioner and transferred ownership of account disputed property in 'totality' to respondent Parreno instead of requiring account presentation of a separate and true 'Declaration of Heirship' executed by all account heirs. Petitioner's motion for reconsideration stressing that her act is one for legal redemption against respondent as vendee against whom precisely account right of redemption is exercised) was denied by respondent court which ruled that the SELLERS would not be indispensable parties if what they had sold to defendant was only their respective participations in account DISPUTED PROPERTY. as all account owners thereof.. This requirement is all account more necessary. All these faults. this petition which asserts that petitioner's co-heirs who sold account properties to respondent Parreno are not indispensable parties but that her suit could be completely adjudicated without them. this case should be remanded to the LOWER COURT . via a short-cut method. account entirety of account DISPUTED PROPERTY." Hence." and added that "The general rule is that if an indispensable party is not impleaded. by allowing account General Power of Attorney to be registered as a 'Declaration of Heirship' (which.. 1957. if it is noted that account General Power of Attorney presented was no longer account original copy. The SELLERS took account position that plaintiff was not a co-owner of account DISPUTED PROPERTY. they should be given account chance to justify account sale if only to avoid possible criminal responsibility for estafa on false allegation of ownership (Art. As a matter of fact. Rather than affirm account decision dismissing plaintiff's complaint. defendant will have causes of action. or nearly eight (8) years prior to account date of its registration on February 23. civil and criminal against account SELLERS for having sold to him. by his obvious negligence or act of indiscretion. They had a right to justify account legality of their sale of account DISPUTED PROPERTY to defendant in order to free themselves from damages in favor of defendant if account sale should be adjudged invalid. As stated in account petition. 1965." Respondent appellate court held that "(T)here is a procedural error in account CASE BELOW.. as it is. But what was sold was account entirety of account DISPUTED PROPERTY. account case should be dismissed . which will not definitely settle account con controversy between account plaintiff and account other parties. 1 respondent Register of Deeds was impleaded "because.The lower court dismissed account complaint and on appeal respondent c held that account sellers (the other co-heirs) were indispensable parties and should have been impleaded and rendered its decision that "the judgment of account LOWER COURT is hereby set aside and let this case be. much more so with regard to her action as co-heir for legal redemption of account properties from said respondent-vendee under Article 1088 of account Civil Code.

because while he may be a necessary party. he is a vendee with notice of account right of redemption by account vendor's co-heirs. account petitioner is indeed a co-heir and co-owner of 1/44 of account properties and that her co-owners-coheirs had sold account same or their hereditary rights thereto without notice to her. ACCORDINGLY. Respondent Parreno could have called them as witnesses on his behalf or impleaded them as third-parties defendants in a third-party complaint to justify account sale of account properties or else answer to him by was of damages (but it is too late now for such a third-party complaint). But it appears evident that account action for cancellation of titles impleading account Register of Deeds is one assailing this acts as wrongful and without authority in law. if vendee-appellant believed he had a claim against account vendor by reason of account warranty. The imprecision of petitioner's complaint has caused some confusion. 5 where we held that "the trial court had no obligation to order account inclusion of account vendor either as a party plaintiff or party defendant in account case.The vendors-co-heirs of petitioner are not indispensable parties insofar as this phase of account action against account Register of Deeds is concerned. 4 Insofar as account exercise of such right of redemption is concerned. to wit. Exh.is remanded to it for determination of account merits of account appeal in consonance with account Court's observations in this decision. still he is not indispensable in account sense that account matter before it could not be completely adjudicated without him. conclusively presumed to know account law that under such circumstances. The deed of sale in favor of appellant clearly states that what is being sold is an undivided 1/5 portion of account land jointly owned by account vendor and his brothers and nephew. 'A' pursuant to which conveyance to account defendant of said lots were made by Francisco Robles. Respondent court should therefore have adjudged account appeal on its merits. which has been found as a fact by respondent court a well as by account trial court which held that 'The court accepts as a sufficiently established fact that plaintiff being account daughter of Jose Robles and therefore one of account granddaughters of Eulogio Robles. The court also takes note that plaintiff was not a signatory to account general power of attorney. who did not sign. Against respondent Parreno the action instituted is based on account premise that he did not acquire all the rights and interests on account property. and if account facts be as they are indicated in its decision.. No costs." and that "moreover. in account same manner as plaintiff's sister. at any rate. The vendee-appellant is. account judgment of respondent court is hereby set aside and account case. His acquisition is limited only to account rights and interests of account vendors-co-heirs who signed account General Power of Attorney and does not include account rights and interests of a co-heir. but that petitioner "action for cancellation file issued in favor of respondent Parreno pertains only to her own rights and in one's and interest and does not affect the true rights and interests of the vendors-coheirs. herein petitioner. Republic of the Philippines SUPREME COURT . Aida Robles. In effect. 3 Petitioner's principal action is really therefore one for legal redemption under Article 1088 of account Civil Code.heirs are entitled to redeem account portion being sold within 30 days from notice in writing of account sale. it was his duty to have filed a third-party complaint against account latter . petitioner as a co-heir and respondent Parreno as account buyer are account only indispensable parties to account exclusion of account seners-coheirs This was expressly so ruled by account Court in Castillo vs." as is clearly in account petition. Samonte. The fact cited by respondent court that they have a right to justify account legality of their sale to respondent to avoid being held liable for damages or possible criminal responsibility if account sale should be adjudged invalid does not make them indispensable parties without whom petitioner's action cannot be completely adjudicated. therefore. under Article 1088 of account New civil Code. account co. said respondent still has account right of finding a separate action against account vendors-co-heirs by way of enforcing account warranty made by them as vendors of account properties. is one among account latter's heirs. 2 Such action for cancellation is really secondary and is but a means of enforcing petitioner's claim as a co-heir and undivided co-owner of 1/44 of account properties as a granddaughter of account decreased Eulogio Robles. petitioner's action for redemption of account properties must be sustained. Eva Robles. subject of sale..

HON. The Complaint prayed that defendants be ordered to pay. No.. J. and Cirilia Chua Siok Bieng. In full settlement of its liability under the laws and the said insurance contract.R.000. IMSON. HOLIDAY HILLS STOCK AND BREEDING FARM CORPORATION. SECOND DIVISION G.00. they shall have no more right against one another except the enforcement of this compromise agreement. The case at bench arose from a vehicular collision on December 11. 106436 December 3. however. and the truck insurer. from now on. and cost of suit. petitioner and defendant insurer. 1994 VIRGILIO D. Western Guaranty Corporation. PUNO. . Felix R.000. 1983. Jr. the beneficial owners of the truck.00) as compensatory damages. 4 On May 29. Defendant Western Guaranty Corporation (Western Guaranty for short) admits that its total liability under the laws and the insurance contract sued upon is P70. inter alia: 1. Co (also known as Felisa Tan). FNCB FINANCE CORPORATION. petitioner filed with the RTC Baguio City 1 a Complaint for Damages 2 Sued were private respondents as registered owners of the In consequence of the compromise agreement.000. The collision seriously injured petitioner and totally wrecked his car. the trial court dismissed the Complaint for Damages against Western Guaranty Corporation on June 16. This compromise agreement shall be a full and final settlement of the issues between plaintiff (herein petitioner) and defendant Western Guaranty in their complaint and answer and. Calip. fifty thousand pesos (P50. 4.00) each as moral and exemplary damages.00 upon the signing of this compromise agreement. Gorgonio Co Adarme. involving petitioner's Toyota Corolla and a Hino diesel truck registered under the names of private respondents FNCB Finance Corporation and Holiday Hills Stock and Breeding Farm Corporation. COURT OF APPEALS. 8 Defendants driver and beneficial owners failed to answer and were declared in default. 1984. respondents. petitioner. truck driver Felix B. two hundred seventy thousand pesos (P270.: 3. Felisa T. Polotan Law Office for petitioner. defendant Western Guaranty shall pay plaintiff (herein petitioner) the amount of P70. Solomon for private respondents. This compromise agreement shall in no way waive nor prejudice plaintiffs (herein petitioner's) rights to proceed against the other defendants with respect the remainder of his claims. On January 6. litigation expenses. 2. 1987. jointly and severally.000. and attorney's fees.Manila truck. entered into a compromise agreement which provided. vs.

. It argued that since they are all indispensable parties under a common cause of action. On July 10. There is in fact a congruence of affirmative defense among the answering defendants. Moreover. the proximate cause of the accident was the fault of the plaintiff (herein petitioner). . Acosta. the court's power to act is integral and cannot be split. it should also be dismissed as to them. . The trial court denied the motion. its bounden duty under the insurance law to RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT IN CIVIL CASE NO. to support its averment that the court a quo gravely abused its discretion in refusing to dismiss the case. reveals that the cause of action was the alleged bad faith and gross negligence of the defendants resulting in the injuries complained of and for which the action for damages was filed. Ramolete.1987.R. . the claim could be set for naught. A cursory reading of the complaint . Nearly eighteen (18) months later. the Court of Appeals. 248-R THERE IS A COMMON CAUSE OF ACTION AGAINST THE DEFENDANTS THEREIN. 17651. C. but if the complaint is dismissed as to the answering defendant.) Petitioner now comes to this Court with the following assignments of error: A. RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT THE DEFENDANTS IN CIVIL CASE NO. 1992. necessarily benefited from such settlement including the defaulted defendants. We find applicability of the doctrine to the case at bar. the dismissal of the case against defendant insurer must result in the dismissal of the suit against all of them. The inclusion of Western Guaranty Corporation was vital to the claim.e. Stated otherwise. 8 reversed the trial court. the doctrine adverted to essays that in a common cause of action where all the defendants are indispensable parties. it is deemed that anything done by or for the answering defendant is done by or for the ones in default since it is implicit in the rule that default is in essence a mere formality that deprives them of no more than to take part in the trial. Thus. is untenable. it is undisputed that the injury caused is covered by the insurance company concerned. and according to the answer filed by the Western Guaranty Corporation . . the other defendants. for the cited law perceives the existence of a just cause. i. . Essentially. 1987. as it ruled: The petitioner (herein private respondent Holiday Hills Stock and Breeding Farm Corporation) cites the doctrine laid down in Lim Tanhu v. as the insured and indispensable parties to a common cause of action. it is an indispensable party as the petitioner (herein private respondent stock and breeding farm corporation) . Private respondent's (herein petitioner's argument that the said insurance company was sued on a different cause of action. Private respondent Holiday Hills Stock and Breeding Farm Corporation assailed the denial order through a Petition for Certiorari. it being the insurer of the diesel truck without which. . as applied later in Co v. such that it cannot relieve any of them and at the same time render judgment against the rest. pay or settle claims arising under its policy coverage. hence it was not liable for damages. 134 SCRA 185. . 7 through its Special Sixth Division. 9 (Citations omitted. SP No. . 8 A copy of the Order of dismissal was received by private respondent Holiday Hills Stock and Breeding Farm Corporation on July 13. for as stated in the aforecited cases. Hon.. The Petition was docketed as CA-G. . B. 66 SCRA 425. 248-R ARE INDISPENSABLE PARTIES. said private respondent moved to dismiss the case against all the other defendants. Prohibition and Mandamus With Restraining Order filed with respondent Court of Appeals. . when the said insurer settled its liability with the private respondent (petitioner herein) .

Accordingly. In sum. it is clear that petitioner has different and separate causes of action against the defendants in the case. and so. the latter or those in default acquire a vested right not only to own the defense interposed in the answer of their co-defendant or co-defendants not in default but also to expect a result of the litigation totally common with them in kind and in amount whether favorable or unfavorable. 458-459 (1975) this court held that: . Where all the defendants are indispensable parties. The allegations in the Complaint show that petitioner seeks to recover from the truck driver for his wrong which caused injury to petitioner and his car. . The substantive unity of the plaintiffs cause against all the defendants is carried through to its adjective phase as ineluctably demanded by the homogeneity and indivisibility of justice itself. . 10 There is merit to the petition. In the case of Lim Tanhu v. RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT THE DOCTRINE OF ESTOPPEL AND LACHES ON MATTERS OF JURISDICTION IS NOT APPLICABLE IN CIVIL CASE NO. . . RAMOLETE IS APPLICABLE. including those in default. The ruling is rooted on the rationale that the court's power to act in a case involving a common cause of action against indispensable parties "is integral and cannot be split such that it cannot relieve any of them and at the same time render judgment against the rest. Lim Tanhu states that where a complaint alleges a common cause of action against defendants who are all indispensable parties to the case. D. 11 The question as to whether a plaintiff has a cause of action is determined by the averments in the pleadings pertaining to the acts of the defendant. . Cause of action has a fixed meaning in this jurisdiction. the court should have ordered also the dismissal thereof as to petitioner (referring to the defaulting defendants in the case). in the case now before Us together with the dismissal of the complaint against the non-defaulted defendants. Ramolete. its dismissal against any of them by virtue of a compromise agreement with the plaintiff necessarily results in the dismissal of the case against the other defendants.RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT IN CIVIL CASE NO. as a matter of correct procedure. Quasi-delict. 248-R THE RULING OF THIS HONORABLE COURT IN LIM TAN HU VS. it is Article 2180 of the same Code which governs the rights of the parties.. . is the basis of the cause of action against defendants beneficial and registered owners. execution and the satisfaction of his claim as variably as he might please. . and (2) all the defendants are indispensable parties to the case. . 248-R. Whether such acts give him a right of action is determined by substantive law. . It is the delict or wrong by which the right of the plaintiff is violated by the defendant. The integrity of the common cause of action against all the defendants and the indispensability of all of them in the proceedings do not permit any possibility of waiver of the plaintiffs right only as to one or some of them. have to await until after the rendition of the judgment. 66 SCRA 425. it must be established that: (1) petitioner has common cause of action against private respondents and the other defendants in Civil Case No. without including all of them. 12 In the case at bench. withdrawal must be deemed to be a confession of weakness as to all. as a rule. . for which reason the absence of any of them in the case would result in the court losing its competency to act validly. But in their case. The cause of action against him is based on quasi-delict under Article 2176 of the New Civil Code. some of whom answer and the others do not. too. 248-R. any compromise that the plaintiff might wish to make with any of them must. (I)n all instances where a common cause of action is alleged against several defendants. at which stage the plaintiff may then treat the matter of its For Lim Tanhu to apply to the case at bench.

16 necessary in order to adjudicate the whole controversy. No costs. but whose interests are so far separable that a final decree can be made in their absence without affecting them. 14 Conversely. 248-R. 17651 is REVERSED AND SET ASIDE. 248-R.R. dated July 10. complete. and without whom no final determination of the case can be had. the trial court would not lose its competency to act completely and validly on the damage suit. Even without the insurer. 248-R are not all indispensable parties. 17 It is easy to see that if any of them had not been impleaded as defendant. But this is not all.00 upon the signing of this compromise agreement. Lim Tanhu will not apply to the case at bench for there is no showing that petitioner has a common cause of action against the defendants in Civil Case No. 248-R is REINSTATED and REMANDED to the trial court for further proceedings. with respect to defendant Western Guaranty Corporation. if petitioner did not sue Western Guaranty Corporation. Thus. the omission would not cause the dismissal of the suit against the other defendants. or equitable. SO ORDERED. He seeks to recover from the insurer on the basis of the third party liability clause of its insurance contract with the owners of the truck. Defendants in Civil Case No. Republic of the Philippines SUPREME COURT Manila It is true that all of petitioner's claims in Civil Case No. thus: 2. An indispensable party is one whose interest will be affected by the court's action in the litigation. defendant Western Guaranty shall pay plaintiff (herein petitioner) the amount of P70.000. or will simply avoid multiple litigation. the truck driver is an indispensable party to the suit. however. Concededly. The insurer.However. SP No. a party is not indispensable to the suit if his interest in the controversy or subject matter is distinct and divisible from the interest of the other parties and will not necessarily be prejudiced by a judgment which does complete justice to the parties in court. Proper parties have been described as parties whose presence is THIRD DIVISION . The party's interest in the subject matter of the suit and in the relief sought are so inextricably intertwined with the other parties' that his legal presence as a party to the proceeding is an absolute necessity. In full settlement of its liability under the laws and the said insurance contract. 1992. The Decision. 248-R is premised on the wrong committed by defendant truck driver. IN VIEW WHEREOF. Quite clearly then. petitioner's cause of action is based on contract. The other defendants. They are merely proper parties to the case. The Complaint in Civil Case No. cannot be categorized as indispensable parties. of the Court of Appeals in CA-G. 13 In his absence there cannot be a resolution of the dispute of the parties before the court which is effective. the case would still proceed without prejudicing the party not impleaded. the instant petition is GRANTED. clearly. 15 He is not indispensable if his presence would merely permit complete relief between him and those already parties to the action. This is acknowledged by the second paragraph of the compromise agreement between petitioner and defendant insurer. is not an indispensable party in Civil Case No.

on September 8.04. and to pay the costs. petitioner. Filinvest Corporation assigned all its rights and interests on the promissory note and chattel mortgage to plaintiff. VITUG. executed a deed of sale with assumption of mortgage over the aforementioned vehicle for the balance of his account in favor of Ernesto Dollente. A-121-UL-493 Plaintiff's evidence shows that. 2G-171-34. Exhibits D and D-1. 1983 until fully paid. which was annotated and registered.R.and Engine No. On July 27. On October 26. plus interest at the rate of 14% per annum. obtained the motor vehicle in question by purchase from Ernesto Dollente. Eleuterio Bondoc executed and delivered to Carmark Philippines a promissory note in the sum of P66. a Colt Galant Sigma 1600E. A counter-replevin bond having been filed. defendant Armando Custodio. and in the event that manual delivery of the said meter vehicle cannot be effected. CV No. colored Baikal White. Jr. Branch 19. Exhibit C.83. SO ORDERED. from June 18.. 83-18536. a suit for replevin and damages. Subsequently. 103301 December 8. Cesar Dollente executed and delivered to Filinvest Corporation a promissory note in the amount of P37. Exhibit E.83. as follows: WHEREFORE.R.528. COURT OF APPEALS and ARMANDO CUSTODIO. upon approval by Filinvest Corporation.642. Exhibit B-1. payable in installments. had obtained possession of the mortgaged vehicle. in favor of plaintiff and against the defendant Armando Custodio. and in order to secure payment. which was subsequently assigned in favor of Filinvest Corporation. The original defendant Ernesto Dollente. a chattel mortgage was executed in favor of Carmark Philippines over the aforementioned motor vehicle. 1977. payable in monthly installments. on August 29. which includes interest thereon and to return the motor vehicle in question. upon its filing.528. J. payable in installments. having defaulted in the payment of the monthly installments which fell due on June 15. this case was filed and. 1979 up to September 15. 1979. By reason of the refusal of the original defendant to pay the entire balance and to surrender possession of the subject motor vehicle. Ernesto Dollente executed and delivered to Filinvest Corporation a promissory note for the sum of P37. JR. Jr. respondents. Eleuterio Bondoc. 1979. seeks a review on certiorari of the 30th August 1991 decision of the Court of Appeals 1 in CAG. executed a deed of sale with assumption of mortgage of the balance of the account in favor of Cesar Dollente. ordering said defendant to pay the sum of P54. Exhibit 1. a writ of seizure was issued and the same was implemented by the sheriff. with Serial No. vs. 3 The litigation concerns a motor vehicle.: This petition of Servicewide Specialists. Exhibit E. defendant Armando Custodio. judgment is hereby rendered.50. 1978. Incorporated. Traversing the plaintiffs claim.. 1981. Cesar Dollente. 1977 model. 1979. HON. Ernesto . as vendor. 4-door sedan. ordering him to deliver and return the motor vehicle in question. as vendor. with notice to Ernesto Dollente. No. 20289 setting aside the judgment of the Regional Trial Court of Manila. Exhibit B. complete with accessories and equipment. which. defendant's evidence shows that. 1995 SERVICEWIDE SPECIALISTS INCORPORATED. with the conformity of Eleuterio Bondoc. plaintiff demanded from said defendant the payment of the entire balance. upon motion.119. This obligation was secured by a chattel mortgage executed between Cesar Dollente and Ernesto Dollente. Exhibit A. Jr. The decisions of both the appellate court and the trial court rest on the following representation of the facts: G. 2 which disposed of then Civil Case No. On September 28.

. Ernesto Dollente's breach of the chattel mortgage should not bind him. of the principal obligor and principal defendant. There is no question. 4 Finding preponderance of the evidence in favor of herein petitioner. was "fatal to the entire action" Dollente being. since "the case against Ernesto Dollente" was dismissed. The plaintiff's right to possession of the car in case which is "conditioned upon the fact of actual default on the part of the principal obligor" the existence of which fact "may naturally be the subject of controversy" could not properly be established in the absence. the lower court ruled: The claim of herein defendant that. . he was issued a clearance from the Constabulary Highway Patrol Group. The question then. is doubtful and must have been conveniently arranged or manipulated to effect this transfer. including defendant Armando Custodio. Now. Jr. at least. in purchasing the motor vehicle in question. The transaction of Ernesto Dollente. . When defendant bought the said vehicle from Ernesto Dollente. the Court of Appeals saw merit in the contention of private respondent that the dismissal at the instance of petitioner himself of the amended complaint against Ernesto Dollente after a failure of summons on him. or is entitled to the possession thereof. And since. Exhibits 2 and 3. in its present petition for review on certiorari. This vehicle was previously registered at Urdaneta. Rule 3). essential and compulsory if a final determination of the action should be achieved (Sec. Jr. albeit without prejudice. there remains no provable cause in the action. insofar as the matter finds relation to the instant case. The answer has to be in the affirmative. A foreclosure under a chattel mortgage may properly be commenced only once there is default on the part of the mortgagor of his obligation secured by the mortgage. under the circumstances. The judgment rendered by the trial court following such flawed proceedings is therefore ineffectual and ineffective. because he is not a privy to such contract. His presence is indispensable. 5 On appeal to it. . Pangasinan. Servicewide has raised a number of points. herein appellant Custodio. which right in turn was founded on the alleged default of Dollente. however. an indispensable party to the proceedings. defendant Armando Custodio. as in this case. . in the considered view of the appellate court. 6 While. was presumed to know. knew or. 1978 from Venus Motor Sales. it is abundantly clear that the dismissal of the complaint as against the principal defendant Dollente has robbed the action of any cause for survival. a clear right of possession must be established. The replevin suit owed its existence to an alleged right to possession of the motor vehicle. The appellate court elaborated: .Dollente bought the same on April 14." 7 The plaintiff need not be the owner so long as he is able to specify his right to the possession of the property and his legal basis therefor. As correctly pointed out. Rule 60 of the Rules of Court allows a plaintiff. is whether or not the plaintiff (herein petitioner) who has predicated his right on being the mortgagee of a chattel mortgage should implead the mortgagor in his complaint that seeks to recover possession of the encumbered property in order to effect its foreclosure. which led to the transfer of the registration of this motor vehicle in favor of defendant Armando Custodio. and after the plaintiff-initiated exclusion. by the mere fact that the mortgage was registered in the Office of the Register of Deeds. there remains no cause of action against said defendant in the case. 8 In a suit for replevin. it is binding against anybody. to be whether or not an action filed by the mortgagee for replevin to effect a foreclosure of the property covered by the chattel mortgage would require that the mortgagor be so impleaded as an indispensable party thereto. the said chattel mortgage was subject to a mortgage lien. there is no distinct cause of action against the remaining defendant. that Dollente was an indispensable party in the action. to apply for a writ of replevin if it can be shown that he is "the owner of the property claimed . It was clearly an error for the trial court to have proceeded with the case without the indispensable Dollente. for the reason that the registration of the chattel mortgage is an effective and binding notice to him of its existence. 7. Since then defendant has been possessing the vehicle in question. the crucial issue still remains. Jr. It is settled that once a mortgage is registered with the Register of Deeds and in the Land Transportation Commission. Exhibits 4 and 4-A. in an action for the recovery of possession of personal property. is hardly acceptable. The replevin in the instant case has been sought to pave the way for the foreclosure of the .

1983. 10 Without the presence of indispensable parties to a suit or proceeding. An indispensable party is one whose interest will be affected by the court's action in the litigation. 2005 PANTRANCO NORTH EXPRESS. secondly. 11 THIRD DIVISION G. or equitable. the existence of the chattel mortgage and. and without whom no final determination of the case can be had. and MARTINA GICALE. Petitioner. The party's interest in the subject matter of the suit and in the relief sought are so inextricably intertwined with the other parties' that his legal presence as a party to the proceeding is an absolute necessity. In his absence there cannot be a resolution of the dispute of the parties before the court which is effective. the failure of summons upon Ernesto Dollente. INC. and ALEXANDER BUNCAN. we have explained: .. vs. per the Sheriffs Return dated July 19. Costs against petitioner.. These requirements must be established since the validity of the plaintiffs exercise of the right of foreclosure are inevitably dependent thereon." 9 In Imson v. complete. a party is not indispensable to the suit if his interest in the controversy or subject matter is distinct and divisible from the interest of the other parties and will not necessarily be prejudiced by a judgment which does complete justice to the parties in court. . INC. that the lower court acted improvidently when it granted the dismissal of the complaint against Dollente. Respondents. for instance.object covered by the chattel mortgage. the Court need not take up the other issues raised by petitioner. The conditions essential for that foreclosure would be to show. albeit on petitioner's (then plaintiff) plea. measures provided in Rule 14 of the Rules of Court regrettably have not been properly availed of. He is not indispensable if his presence would merely permit complete relief between him and those already parties to the action or will simply avoid multiple litigation. 13 WHEREFORE. a judgment of a court cannot attain real finality. substitute service of summons under Section 8 thereof could have been resorted to. SO ORDERED. Republic of the Philippines SUPREME COURT Manila Conversely. No. Having arrived at the foregoing conclusion. In passing.R. considering particularly an adverse and independent claim of ownership by private respondent. firstly. STANDARD INSURANCE COMPANY. the default of the mortgagor. to the prejudice of the parties. Court of Appeals. It would thus seem. 12 is said to have been due to defendant's being no longer a resident "at the given address as per information gathered from the present occupant of the premises. the decision of the Court of Appeals is AFFIRMED. . on the ground that the "non-service of summons upon Ernesto Dollente (would) only delay the determination of the merits of the case." It appears that the remedial DECISION . 140746 March 16.

00. This prompted respondents to file with the Regional Trial Court (RTC).. The total cost of the repair was P21. the trial court rendered a Decision3 in favor of respondents Standard and Martina.R. entitled "Standard Insurance Company. not the RTC. (3) to pay the sum of P10. (2) to pay plaintiff Martina Gicale the amount of P13. (4) to pay the expenses of litigation and the cost of suit. 1999 of the Court of Appeals in CA-G. was trailing behind.00 with interest due thereon from October 22. 1984 until fully paid. ordering the latter to pay as follows: (1) to pay plaintiff Standard Insurance the amount of P8. affirmed the trial court‘s ruling.. it is the sum of the two claims that determines the jurisdictional amount. driven by Alexander Buncan. Crispin Gicale was driving the passenger jeepney owned by his mother Martina Gicale. petitioner. When the two vehicles were negotiating a curve along the highway.000. the passenger bus hit the left rear side of the jeepney and sped away.00 individually fell under the exclusive original jurisdiction of the municipal trial court. 19. and Martina Gicale vs. xxx On June 5.00. demanded reimbursement from petitioners Pantranco and its driver Alexander Buncan. Inc. 1984 until fully paid. (Standard). insurer of the jeepney..00 and appellee insurance company‘s claim of P8. 38453. Batas Pambansa Bilang 129. judgment is hereby rendered in favor of the plaintiffs. both petitioners specifically denied the allegations in the complaint and averred that it is the Metropolitan Trial Court. and in view of the foregoing considerations. respondents. "The appellants argue that appellee Gicale‘s claim of P13. "WHEREFORE. 1992.: Before us is a petition for review on certiorari assailing the Decision1 dated July 23 1999 and Resolution2 dated November 4.415. Inc. but they refused. a passenger bus. which has jurisdiction over the case. While driving north bound along the National Highway in Talavera. thus: . a complaint for sum of money. 1984. respondent herein. and against defendants Pantranco Bus Company and Alexander Buncan." On appeal. Nueva Ecija.415. also a petitioner. 1999. This is not correct because under the Totality Rule provided for under Sec.000. Inc.00 for attorney‘s fees. CV No. Branch 94. Inc. SO ORDERED. the passenger bus overtook the jeepney. Standard Insurance Company and Martina Gicale. owned by Pantranco North Express. but respondent Standard paid only P8.. Martina Gicale shouldered the balance of P13.000. Standard and Martina. Crispin reported the incident to the Talavera Police Station and respondent Standard Insurance Co.000. J. In their answer. holding that: Thereafter. Manila.415. in a Decision4 dated July 23.SANDOVAL-GUTIERREZ. the Court of Appeals.00. PANTRANCO North Express.415.00 with interest due thereon from November 27. In so doing." In the afternoon of October 28. and Alexander Buncan. It was then raining.

Finally. Assuming that there was. respondents contend that their individual claims arose out of the same vehicular accident and involve a common question of fact and law. the court did not declare defendants in default because that is done only when the defendant fails to tender an answer within the reglementary period.In the case at bench." This is incorrect. under the Rules of Court (Sec." . xxx It does not need perspicacity in logic to see that appellees Gicale‘s and insurance company‘s individual claims against appellees (sic) arose from the same vehicular accident on October 28. Of course. the evidence preponderantly established their liability for quasi-delict under Article 2176 of the Civil Code. That being the case. Appellants contend that there was a misjoinder of parties. there was a question of fact common to all the parties: Whose fault or negligence caused the damage to the jeepney? Petitioners filed a motion for reconsideration but was denied by the Appellate Court in a Resolution dated November 4. 1999. 1984 involving appellant Pantranco‘s bus and appellee Gicale‘s jeepney. the same does not affect the jurisdiction of the court nor is it a ground to dismiss the complaint. contrary to the assertion of the defendant-appellants. Hence. They did not even file any motion for reconsideration of the order considering the case submitted for decision. WHETHER OR NOT PETITIONERS ARE LIABLE TO RESPONDENTS CONSIDERING THAT BASED ON THE EVIDENCE ADDUCED AND LAW APPLICABLE IN THE CASE AT BAR.000. II Appellants submit that they were denied their day in court because the case was deemed submitted for decision "without even declaring defendants in default or to have waived the presentation of evidence. the RTC has jurisdiction over the case. III WHETHER OR NOT PETITIONERS WERE DEPRIVED OF THEIR RIGHT TO DUE PROCESS. RESPONDENTS HAVE NOT SHOWN ANY RIGHT TO THE RELIEF PRAYED FOR. Rule 7) as well as under the Rules of Civil Procedure (ditto). They failed to be present during the scheduled hearing for the reception of their evidence despite notice and without any motion or explanation. the total of the two claims is definitely more than P20. 11." For their part. Hence. this petition for review on certiorari raising the following assignments of error: "I WHETHER OR NOT THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT OF THE ACTION CONSIDERING THAT RESPONDENTS‘ RESPECTIVE CAUSE OF ACTION AGAINST PETITIONERS DID NOT ARISE OUT OF THE SAME TRANSACTION NOR ARE THERE QUESTIONS OF LAW AND FACTS COMMON TO BOTH PETITIONERS AND RESPONDENTS. they should blame nobody but themselves.00 which at the time of the incident in question was the jurisdictional amount of the Regional Trial Court. When the lower court ordered that the case is deemed submitted for decision that meant that the defendants were deemed to have waived their right to present evidence. If they failed to adduce their evidence.

had respondents filed separate suits against petitioners. or in the alternative.00.000. join as plaintiffs or be joined as defendants in one complaint. the same evidence would have been presented to sustain the same cause of action. speedy and orderly administration of justice. in which the demand. (b) there is a question of law or fact common to all the plaintiffs or defendants." The above provision presupposes that the different causes of action which are joined accrue in favor of the same plaintiff/s and against the same defendant/s and that no misjoinder of parties is involved." Permissive joinder of parties requires that: (a) the right to relief arises out of the same transaction or series of transactions. except as otherwise provided in these Rules.00. while that of respondent Martina Gicale is P13. Respondent Standard‘s claim is P8. Blg.I Corollarily. the filing by both respondents of the complaint with the court below is in order. Thus.7 Here. irrespective of whether the causes of action arose out of the same or different transactions. 5. that is.00). consequently. – All persons in whom or against whom any right to relief in respect to or arising out of the same transaction or series of transactions is alleged to exist. To determine identity of cause of action. Thus. and (c) such joinder is not otherwise proscribed by the provisions of the Rules on jurisdiction and venue. 6.P. the amount of the demand shall be the totality of the claims in all the causes of action. whether jointly. R.8 The issue of whether respondents‘ claims shall be lumped together is determined by paragraph (d) of the above provision. may. Rule 3 of the Revised Rules of Court. Section 19 of B.00." As previously stated. – A party may in one pleading assert. Rule 2 of the same Rules provides: Petitioners insist that the trial court has no jurisdiction over the case since the cause of action of each respondent did not arise from the same transaction and that there are no common questions of law and fact common to both parties. as many causes of action as he may have against an opposing party.A. it must be ascertained whether the same evidence which is necessary to sustain the second cause of action would have been sufficient to authorize a recovery in the first. in the alternative or otherwise. respondents‘ cause of action against petitioners arose out of the same transaction. 1299 which states. Permissive joinder of parties." Clearly. it is the RTC that has jurisdiction over the instant case. that is. 129 provides that the RTC has "exclusive original jurisdiction over all other cases. embodied in the same complaint. Such joinder of parties avoids multiplicity of suit and ensures the convenient.000. or a total of P21. Section 6. It bears emphasis that when the complaint was filed. "Sec.5 provides: "Sec.415. There is also a common question of fact.P. There being a single transaction common to both respondents. but the court may make such orders as may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection with any proceedings in which he may have no interest. Section 5(d). severally. subject to the following conditions: xxx (d) Where the claims in all the causes of action are principally for recovery of money the aggregate amount claimed shall be the test of jurisdiction. among others.6 In this case.415. 7691 . the amount of the demand shall be the totality of the claims. amounts to more than twenty thousand pesos (P20. there is a single transaction common to all. Joinder of causes of action. Pantranco‘s bus hitting the rear side of the jeepney. This paragraph embodies the "totality rule" as exemplified by Section 33 (1) of B. where any question of law or fact common to all such plaintiffs or to all such defendants may arise in the action. they have the same cause of action against petitioners. that "where there are several claims or causes of action between the same or different parties. whether petitioners are negligent. exclusive of interest and cost or the value of the property in controversy. Blg.

It became effective on April 15. or an opportunity to explain one‘s side or an opportunity to seek for a reconsideration of the action or ruling complained of. affirmed by the Appellate Court. Records show that during the hearing. The trial court granted the motion. petitioner Pantranco‘s counsel filed two motions for resetting of trial which were granted by the trial court. it was not denied of its right to due process. It was apprised of the notices of hearing issued by the trial court. It has been repeatedly held that the trial court's factual findings. the trial court. On this date. Subsequently. a rule well-established in our jurisprudence. The assailed Decision dated July 23 1999 and Resolution dated November 4. CV No. said counsel filed a notice to withdraw. .10 WHEREFORE. II Petitioner Pantranco filed an answer and participated during the trial and presentation of respondents‘ evidence. 1999 of the Court of Appeals in CAG. Thus. Subsequently. said counsel still failed to appear. The finding of the trial court. After respondents had presented their evidence. Municipal and Municipal Circuit Trial Courts had not yet taken effect. it was afforded fair and reasonable opportunity to explain its side of the controversy. the case will be submitted for resolution on the basis of the evidence presented.11 SO ORDERED. On the date of the hearing. III There is no merit in petitioners‘ contention that they were denied due process. reset the hearing to another date. What is frowned upon is the absolute lack of notice and hearing which is not present here. the trial court warned Pantranco that should it fail to appear during the next hearing. We have consistently held that the essence of due process is simply an opportunity to be heard. Costs against petitioners. Petitioners have not presented sufficient ground to warrant a deviation from this rule. if they are not tainted with arbitrariness or oversight of some fact or circumstance of significance and influence.R. On the next hearing. the trial court considered the case submitted for decision. the new counsel manifested that Pantranco‘s employees are on strike and moved for another postponement. the petition is DENIED. Pantranco‘s new counsel manifested that his client is willing to settle the case amicably and moved for another postponement. that petitioners are negligent and thus liable to respondents. 38453 are hereby AFFIRMED. is a factual finding which is binding upon us. 1994.expanding the jurisdiction of the Metropolitan. Pantranco failed to appear. Hence. Indeed. upon petitioners‘ motion. when affirmed by the Appellate Court. Clearly. are conclusive and binding upon this Court.

and that to make her automatically liable for millions of pesos on the bank undertakings.R. The cases were later consolidated and were assigned to Branch 101. DECISION Section 6. INC. or to furnish respondent a performance bond issued by a bonding company chosen by the latter to secure and answer for petitioner's outstanding account. vs. unreasonable and unconscionable rendering it against public morals and policy. commencing on October 2001 to October 2002. and petitioner. Respondent Subic Bay Distribution. Inc. petitioner applied for and was granted a credit line by the United Coconut Planters Bank (UCPB). PERALTA.R. which shall Petitioner then filed with the Regional Trial Court (RTC) of Quezon City separate petitions3 against the banks for declaration of nullity of the several bank undertakings and domestic letter of credit which they issued with the application for the issuance of a temporary restraining order (TRO) and writ of preliminary injunction. exorbitant. Under the Agreements. Manila SECOND DIVISION G.Republic of the Philippines SUPREME COURT continue on an annual basis unless terminated by either party upon thirty days written notice to the other prior to the expiration of the original term or any extension thereof. as seller.. J. Therefore. these banks merely required the submission of a mere certification from the company (respondent) that the customer (petitioner) has not paid its account (and its statement of account of the client) without first verifying the truthfulness of the alleged petitioner's total liability to the drawer thereon. . unreasonable and unconscionable as they would result in her obtaining several millions of liability. The antecedent facts are as follows: Petitioner is doing business under the name and style of Able Transport. The two Agreements had a period of one year. receive and pay for its purchases from respondent. and or faithful performance of her obligations as contained or arising out of the Agreement. 2003 and the Resolution2 dated March 5. 162575 December 15. such contracts are oppressive.3 of the Distributorship Agreement provides that respondent may require petitioner to put up securities. (SBDI) entered in two Distributorship Agreements with petitioner and Able Transport in April 2002. respondent. International Exchange Bank (IEBank). Petitioner asked for the annulment of the bank undertakings/letter of credit which she signed on the ground that the prevailing market rate at the time of respondent's intended drawings with which petitioner will be charged of as interests and penalties is oppressive. Respondent. SUBIC BAY DISTRIBUTION.: Before us is a petition for review on certiorari filed by petitioner Beatriz Siok Ping Tang seeking to annul and set aside the Decision1 dated October 17. 74629. All these banks separately executed several undertakings setting the terms and conditions governing the drawing of money by respondent from these banks. 2004 of the Court of Appeals (CA) in CA-G. Petitioner. Thus. deliver or procure to be delivered petroleum products. real or personal. respondent tried to withdraw from these bank undertakings. as distributor. Petitioner also applied with the Asia United Bank (AUB) an irrevocable domestic standby letter of credit in favor of respondent. will purchase. 2010 BEATRIZ SIOK PING TANG. No. will sell. and Security Bank Corporation (SBC). thus. SP No. Petitioner allegedly failed to pay her obligations to respondent despite demand.

However. the CA issued a Resolution7 granting the TRO prayed for by respondent after finding that it was apparent that respondent has a legal right under the bank undertakings issued by UCPB. the RTC rendered an Order. On query of the respondent Judge Normandie Pizarro (Judge Pizarro) to the bank representatives with regard to the eventual issuance of the TRO. As to petitioner's claim of respondent's non-filing of a motion for reconsideration before resorting to a petition for certiorari. SBC. even if the evidence warranted the reasonable probability that real injury will occur if the relief for shall not be granted in favor of petitioner. the RTC said that these can only be determined after a full blown trial.5 the dispositive portion of which reads: On October 17. the decretal portion of which reads: ACCORDINGLY. her legal right to the writ is doubtful. will not serve the ends of justice. 2003. In so ruling. Consequently. It ruled that the outright denial of petitioner's prayer for the issuance of injunction. as provided under the law. Nonetheless. The court then issued an Order4 granting the TRO and requiring petitioner to implead respondent as an indispensable party and for the latter to submit its position paper on the matter of the issuance of the injunction. The Order dated December 17. the petition is hereby GRANTED.000. On July 4. the CA said that it is not a rigid rule. 2003. The CA ruled that the RTC's issuance of the injunction. petitioner filed her Comment and respondent filed its Reply.9 The RTC found that both respondent and petitioner have reasons for the enforcement or non-enforcement of the bank undertakings. in view of the attending circumstances. Subsequently. let a Writ of Preliminary Injunction be issued restraining and enjoining herein Respondent UCPB. the latter all replied that they will abide by the sound judgment of the court. that when a definite question has been properly raised. 2002 is hereby ANNULLED AND SET ASIDE.00). 2003. already a prejudgment of the main case. SB and AUB from releasing any funds to SBDI. thus. On July 11. Respondent filed with the CA a petition for certiorari with prayer for the issuance of a TRO and writ of preliminary injunction against respondent Judge Pizarro and petitioner. as to whether said reasons were justifiable or not. thus. It found that petitioner was questioning the validity of the bank undertakings and letter of credit for being oppressive.000. a hearing was conducted for the issuance of the TRO and the writ of preliminary injunction wherein the petitioner and the bank representatives were present. the CA continued that the RTC should avoid issuing a writ of preliminary injunction which would. to which respondent has a legal right. the CA said that the grant or denial of an injunction rests on the sound discretion of the RTC which should not be intervened. however. argued and submitted in the RTC and the latter . 2002. The writ of preliminary injunction issued by the lower court is hereby LIFTED. which was premised on the abovementioned justification. the CA issued a Supplemental Resolution8 wherein the Domestic Standby Letter of Credit issued by AUB was ordered included among the bank undertakings. except in clear cases of abuse. 6 WHEREFORE. It also said that contracts are presumed valid until they are voided by a court of justice. IEB. to answer for whatever damages respondent banks and SBDI may suffer should this Court finally decide that petitioner was not entitled thereto. On December 17. Petitioner and respondent submitted their respective position papers. as jurisprudence had said. dispose of the main case without trial. Petitioner is hereby DIRECTED to post a bond in the amount of TEN MILLION PESOS (P10. would be a virtual acceptance of petitioner's claim. private transactions are presumed to be fair and regular and that a person takes ordinary care of his concerns. the CA rendered its assailed Decision. 2002. and IEBank.On November 28. pursuant to the Bank Undertakings and/or Domestic Standby Letter of Credit until further orders from this Court. respondent's rights under the same should be maintained. and that until those undertakings were nullified. in effect. unreasonable and unconscionable. until such time that petitioner has presented sufficient evidence to rebut such presumption.

DESPITE THE FACT THAT THE ORIGINAL PARTIES IN THE TRIAL COURT. Respondent argues that while the RTC preliminarily resolved the issue of whether or not petitioner was entitled to an injunctive relief. thus. respondent could not be faulted for not filing a motion for reconsideration. petitioner's motion for reconsideration was denied. II. despite not being impleaded as parties in the petition filed by respondent. which are present in respondent's case. that while the enforcement of any decision enjoining the implementation of the injunction issued by the RTC would affect the banks. 2004. WHO ARE EQUALLY MANDATED BY THE QUESTIONED ORDER OF THE TRIAL COURT. This is so because on one hand the entitlement or non-entitlement to an injunction is a matter squarely between petitioner and respondent. a motion for reconsideration is required before filing a petition for certiorari. IEBANK. that the filing with the CA of respondent's petition for certiorari emanated from the RTC Order wherein the banks were the ones against whom the questioned Order was issued. SBC AND AUB. Respondent claims that while as a rule. WERE NOT IMPLEADED AS INDISPENSABLE PARTIES IN THE PETITION. respondent contends that the issue resolved by the CA was whether or not the RTC gravely abused its discretion in granting the injunctive relief to respondent. respondent contends that the banks which issued the bank undertakings and letter of credit are not indispensable parties in the petition for certiorari filed in the CA. wherein petitioner raises the following assignment of errors: I. among others: (1) when the issues raised in the certiorari proceedings have been duly raised and passed upon by the RTC or are the same as those raised and passed upon in the RTC.had decided the question. AS DEFENDANTS IN THE MAIN CASE. this petition. THE HONORABLE COURT OF APPEALS A QUO COMMITTED A SERIOUS AND REVERSIBLE ERROR IN GIVING DUE COURSE AND GRANTING PRIVATE RESPONDENT SBDI'S PETITION WHEN THE LATTER ADMITTEDLY FAILED TO FILE A PRIOR MOTION FOR RECONSIDERATION BEFORE THE TRIAL COURT. On the other hand. that respondent explained its omission only when petitioner already brought the same to the attention of the CA. the CA also notified the banks of its decision. they should be given an opportunity to be heard. Hence. (2) there is an urgent necessity and time is of the essence for the resolution of the issues raised and any further delay would prejudice the interests of the petitioner. Thus. Petitioner argues that a petition for certiorari filed without a prior motion for reconsideration is a premature action and such omission constitutes a fatal infirmity. THE HONORABLE COURT OF APPEALS A QUO COMMITTED A SERIOUS AND REVERSIBLE ERROR IN GIVING DUE COURSE AND GRANTING THE PETITION FOR CERTIORARI FILED BY PRIVATE RESPONDENT SBDI.10 Petitioner claims that the CA decision is void for want of authority of the CA to act on the petition as the banks should have been impleaded for being indispensable parties. NAMELY. the resolution of the issue regarding the injunction does not require the banks' participation. since they are the original party respondents in the RTC. UCPB. In its Comment. and (3) the issue raised is one purely of law. MORESO WHEN INDISPENSABLE PARTIES WERE NOT IMPLEADED WHICH SHOULD HAVE RENDERED THE COURT OF APPEALS IN WANT OF JURISDICTION TO ACT. . the latter being the party that is ultimately enjoined from benefiting from the banks' undertakings. and the enforcement of any decision granting such would necessarily involve the banks. a mere afterthought and an attempt to cure the fatal defects of its petition. a motion for reconsideration is no longer necessary before filing a petition for certiorari. that the banks are the ones who stand to release hundred millions of pesos which respondent sought to draw from the questioned bank undertakings and domestic standby letter of credit through the certiorari proceedings. The court found that both parties had fully presented their sides on the issuance of the writ of preliminary injunction and that the RTC had squarely resolved the issues presented by both parties. the rule admits of exceptions. In a Resolution dated March 5. which are. the resolution of whether there is grave abuse of discretion committed by the RTC does not require the banks' participation. thus. Petitioner claims that even the CA recognized the banks' substantial interest over the subject matter of the case when.

A person is not an indispensable party. so that it will not necessarily be directly or injuriously affected by a decree which does complete justice between them. we find that the banks are not indispensable parties in the petition for certiorari which respondent filed in the CA assailing the RTC Order dated December 17. However. an indispensable party is one who must be included in an action before it may properly go forward. several circumstances would show that the banks are not parties interested in the matter of the issuance of the writ of preliminary injunction. Petitioner's insistence that the banks are indispensable parties. Respondent contends that the banks are not persons interested in sustaining the RTC decision as this was obvious from the separate answers they filed in the RTC wherein they uniformly maintained that the bank undertakings/letter of credit are not oppressive. a person is not an indispensable party if his presence would merely permit complete relief between him and those already parties to the action. 2002. that even the dispositive portion of the CA decision did not include any express directive to the banks. When the RTC issued its Order dated December 17. First. is not persuasive. a party who has not only an interest in the subject matter of the controversy. In Arcelona v. Respondent filed a Rejoinder saying that it is misleading for petitioner to allege that the decree sought by respondent before the CA is directed against the banks. in his absence. in which they complied. Both parties were then required to file their respective memoranda. Further. Court of Appeals. and all these representatives invariably replied that they will abide and/or submit to the sound judgment of the court. During the hearing of petitioner's prayer for the issuance of a TRO. the banks could have challenged the same if they believe that they were aggrieved by such issuance. they did not. thus: An indispensable party is a party who has such an interest in the controversy or subject matter that a final adjudication cannot be made.12 Applying the foregoing. . complete.13 Second. or equitable. In fact. if his interest in the controversy or subject matter is separable from the interest of the other parties. in open court. without injuring or affecting that interest. should have been impleaded in the petition for certiorari filed by respondent in the CA. but also has an interest of such nature that a final decree cannot be made without affecting his interest or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good conscience. elicited from the lawyer-representatives of the four banks their position in the event of the issuance of the TRO. that there was nothing in the CA decision which compelled and ordered the banks to release funds in favor of respondent as the CA decision merely annulled the RTC Order and lifted the writ of preliminary injunction. It is not a sufficient reason to declare a person to be an indispensable party that his presence will avoid multiple litigation. She reiterates her arguments in her petition. petitioner claims that the decree that will compel and order the banks to release any funds to respondent pending the resolution of her petition in the RTC will have an injurious effect upon her rights and interest. however.In her Reply. Respondent insists that petitioner's petition before the RTC and the instant petition have caused and continues to cause respondent grave and irreparable damage. and such actuations were in consonance with their earlier position that they would submit to the sound judgment of the RTC. Respondent avers that petitioner is the only person interested in upholding the injunction issued by the RTC. whether in the RTC or in the CA. It has also been considered that an indispensable party is a person in whose absence there cannot be a determination between the parties already before the court which is effective. unreasonable and unconscionable. thus. or if he has no interest in the subject matter of the action.11 we stated the nature of indispensable party. Also. since it will enable her to prevent the banks from releasing funds to respondent. the RTC. 2002 granting the issuance of the writ of preliminary injunction.

When respondent filed with the CA the petition for certiorari with prayer for the issuance of a TRO and writ of preliminary injunction. quasi-judicial agency. 2002 and lifted the writ of preliminary injunction issued by the RTC. In this case. the petitioner shall join. board or officer exercising judicial or quasi-judicial functions. both in his own behalf and in behalf of the court or judge affected by the proceedings. Respondents and costs in certain cases. board. corporation. as a special civil action. copies of the resolution were also sent14 to the banks. the SBC filed an Urgent Motion for Clarification15 on whether or not the issuance of the TRO has the effect of restraining the bank from complying with the writ of preliminary injunction issued by the RTC or nullifying /rendering ineffectual the said writ. . the person or persons interested in sustaining the proceedings in the court. and copies of the decision were furnished these banks.17 Section 5. board. yet the latter took no action to question their noninclusion in the petition. and not against the judge.Third. thus. as private respondent or respondents with such public respondent or respondents. As earlier discussed. the dispositive portion of the assailed CA Decision declared the annulment of the Order dated December 17. quasi-judicial agency. there is no doubt that it is only the petitioner who is the person interested in sustaining the proceedings in court since she was the one who sought for the issuance of the writ of preliminary injunction to enjoin the banks from releasing funds to respondent. and it shall be the duty of such person to appear and defend. and the costs awarded in such proceedings in favor of the petitioner shall be against the private respondents only. Notably. both in his or their own behalf and in behalf of the public respondent or respondents affected by the proceedings.16 It is an original and independent action that is not part of the trial or the proceedings on the complaint filed before the trial court. officer or person. Thus. the banks have no interest in the issuance of the injunction.When the petition filed relates to the acts or omissions of a judge. constitutes a fatal infirmity. The banks' interests as defendants in the petition for declaration of nullity of their bank undertakings filed against them by petitioner in the RTC are separable from the interests of petitioner for the issuance of the injunctive relief. except to seek proper guidance on the issue at hand so that whatever action or position it may take with respect to the CA resolution will be consistent with its term and purposes. tribunal. Fourth. In fact. Petitioner contends that respondent filed its petition for certiorari in the CA without a prior motion for reconsideration. corporation. We do not agree. although not impleaded. There was no order for the banks to release the funds subject of their undertakings/letter of credit although such order to lift the injunction would ultimately result to the release of funds to respondent. respondent should join as party defendant with the court or judge. Moreover. xxxx Clearly. and a TRO was subsequently issued. . in filing the petition for certiorari. Indeed. officer or person impleaded as public respondent or respondents. The decision was directed against the order of the judge. When the CA rendered its assailed Decision nullifying the injunction issued by the RTC. court. the banks are not parties interested in the subject matter of the petition. is an original action invoking the original jurisdiction of a court to annul or modify the proceedings of a tribunal. Notably. but only the petitioner. SBC even stated that the motion was filed for no other purpose. it is only petitioner who should be joined as party defendant with the judge and who should defend the judge's issuance of injunction. Rule 65 of the Rules of Court provides: Section 5. the person interested in sustaining the proceedings in the court. court. not one of these banks ever filed any pleading to assail their non-inclusion in the certiorari proceedings. certiorari. tribunal. and it shall be the duty of such private respondents to appear and defend.

the settled rule is that a motion for reconsideration is a condition sine qua non for the filing of a petition for certiorari. (g) where the proceedings in the lower court are a nullity for lack of due process. (e) where petitioner was deprived of due process and there is extreme urgency for relief. 2003 and the Resolution dated March 5. The Decision dated October 17. (c) where there is an urgent necessity for the resolution of the question and any further delay would prejudice the interests of the Government or of the petitioner or the subject matter of the action is perishable.Concededly. Respondent filed a petition for certiorari with the CA and presented the same arguments which were already passed upon by the RTC. In said case. the same questions raised before the public respondent were to be raised before us. (c) and (i). the petition is DENIED. The CA brushed aside the filing of the motion for reconsideration based on the ground that the questions raised in the certiorari proceedings have been duly raised and passed upon by the lower court.lawp++!1 We agree. Respondent explained their omission of filing a motion for reconsideration before resorting to a petition for certiorari based on exceptions (b). however.19 The rule is. such as (a) where the order is a patent nullity. circumscribed by well-defined exceptions.18 Its purpose is to grant an opportunity for the court to correct any actual or perceived error attributed to it by the re-examination of the legal and factual circumstances of the case.e. that both parties have fully presented their respective arguments in the RTC on petitioner's prayer for the issuance of the writ of preliminary injunction. as where the court a quo had no jurisdiction. (h) where the proceedings were ex parte. WHEREFORE. i. The RTC already had the opportunity to consider and rule on the question of the propriety or impropriety of the issuance of the injunction. a motion for reconsideration would be useless. (b) where the questions raised in the certiorari proceeding have been duly raised and passed upon by the lower court. or are the same as those raised and passed upon in the lower court. in CA-G. or are the same as those raised and passed upon in the lower court. are hereby AFFIRMED. under the circumstances. in a criminal case.20 motion for reconsideration before the filing of a petition for certiorari notwithstanding petitioner's invocation of the recognized exception. and (i) where the issue raised is one purely of law or where public interest is involved. 2004 of the Court of Appeals. is not applicable. We found no reversible error committed by the CA for relaxing the rule since respondent's case falls within the exceptions. relief from an order of arrest is urgent and the granting of such relief by the trial court is improbable. (f) where. (d) where. the CA found. 74629.21 where we required the filing of a Republic of the Philippines SUPREME COURT Manila SECOND DIVISION . In this case before us. the RTC granted the injunction. SO ORDERED. and to which we agree. National Labor Relations Commission. SP No.R. and that respondent's argument that petitioner is not entitled to the injunctive relief had been squarely resolved by the RTC.. Petitioner's reliance on Philippine National Construction Corporation v. Respondent had filed its position paper in the RTC stating the reasons why the injunction prayed for by petitioner should not be granted. or in which the petitioner had no opportunity to object. However. we ruled that petitioner failed to convince us that his case falls under the recognized exceptions as the basis was only petitioner's bare allegation.

and ERLINA MELGAR ASECO. respondents. PUB 45 255 '79 owned by Benjamin Flores and driven by Fabian Prades. all surnamed MELGAR. owner and operator of the passenger bus with Plate No. 1980 is hereby admitted. 1989 The equally questioned order of November 11. 1980 which. ANITA. 1980 a vehicular accident happened along the National Highway of Barangay Agos. (p. J. The questioned Order of September 23. Romulo A. seeks dismissal of the complaint on the ground that the "steps taken by the plaintiffs are procedurally erroneous and substantially improper. THE HON. As a result of the accident.: This is a petition for certiorari (not petition for review on certiorari) seeking the annulment of the Order of Branch VII * of the Court of First Instance of Camarines Sur in Iriga City dated September 23. Resolving defendant's motion for reconsideration filed on October 3. IR858. pp. It then swerved further to the left this time colliding head-on-with a passenger bus.G. S 860 4F '79 owned by Mateo Lim Relucio and driven by Ruben Lim Relucio coming from the opposite direction. COURT OF FIRST INSTANCE OF CAMARINES SUR. driver of the bus. the motion for reconsideration is as. Badilla and Rolando Grageda Alberto for respondents. 1980 order. the petitioners herein. in Civil Case No. Plaintiffs are required to furnish sufficient copies of the Amended Complaint. 27. and its Order dated November 11. 1980 denying the motion for reconsideration of the said September 23. 10 & 19) On July 4. 1980 the spouses Oscar Prades and Victoria Prades private respondents herein as the only surviving forced heirs of the deceased Fabian . driver of the other passenger bus died in the same accident. Felicidad Balla. Polangui. ELSIE. vs. Ruben Lim Relucio. denied. 16. and which opposition is found to be well taken. whereby a passenger bus bearing Plate No.R. 1980 reads as follows: Resolving the motion to dismiss filed by defendants on the ground of lack of sufficient cause of action in the light of the averments stated in the complaint. Rollo) In the early morning of January 11. it is. and the SPOUSES OSCAR PRADES and VICTORIA PRADES. Rollo) The antecedents of the case are as follows: PARAS. JUDGE. ARNULFO. died on the spot." In the light of the opposition interposed by counsel for the plaintiff filed on November 10. driver of the service jeep and Fabian Prades. BELLA. CARLOS R. petitioners. CARUSO. FUSO with Plate No. VII. 3. and mother of herein petitioners together with Domingo Casin. among other things. Albay. this Court is of the belief and so holds that the said motion to dismiss cannot be granted for lack of merit. Rafael Triunfante for petitioners. The Amended Complaint filed by counsel for the plaintiffs on November 7. (p. as well as admitting the amended complaint filed by the plaintiffs therein. L-55750 November 8. 1980 which emphasized the argument that said defendants as heirs of the estate of Felicidad Balla cannot properly argue that they can sue as heirs and at the same time maintain that they cannot be used as such heirs. BR. No. BUENVIAJE. 1980 denying the motion to dismiss filed by the defendants. PUB 4J 136 '79. PUB 4J 136 '79 owned and operated by the late Felicidad Balla and driven by Domingo Casin swerved to the left lane and came into head-on-collision with a Ford Fiera with Plate No. 1980 states: RUBEN. (Rollo.

The complaint (Rollo. petitioners herein. 19). p. On September 30. Felicidad Balla. On June 5. In fact that second sentence of Article 1311 of the New Civil Code provides: . filed a complaint in the Court of First Instance of Camarines Sur against the children of deceased Felicidad Balla.. p.. who drove his vehicle in a reckless and imprudent manner which was the sole. p. p. filed their comment and motion to admit amended complaint (Rollo. respectively. arguing that it is entirely incorrect to hold the children liable for the alleged negligence of their deceased mother and to consider suing the heirs of a deceased person the same as suing the estate of said deceased person inasmuch as the last portion of Section 21 of Rule 3 of the Rules of Court means that the creditor should institute the proper intestate proceedings wherein which he may be able to interpose his claim (Rollo. amending the title of the case naming as defendants the Estate of the late Felicidad Balla as represented by the children named in the original complaint. 27). That both driver Domino Casin and owner Felicidad Balla of passenger "Fuso" with Plate No. 7 In their argument. p. 16). 9). 3).) on the ground that: Distinction should be made between a suit against the estate of Felicidad Balla and the present action which is a personal action against the children of Felicidad Balla. p. Said court concluded that "the steps taken by the plaintiffs are procedurally erroneous and substantially improper. The heir is not liable beyond the value of the property he received from the decedent. petitioners herein for damages.. docketed as Civil Case No. despite her presence in the illfated passenger bus. 1981 the Court (Second Division) resolved to give due course to the petition and required the parties to file their respective memoranda within twenty days from notice (Rollo. On November 7. PUB 4J 136 Pil '79. the estate of deceased Felicidad Balla should be held liable to the damages suffered by plaintiff. The defendants in the complaint. private respondents herein. 23). 14).Prades. That defendants' mother.. IR-858 (Rollo. 1980 for lack of merit (Rollo. 21) together with an amended complaint (Rollo. petitioners herein. p. 1980 respondent court issued its order denying the motion for reconsideration and admitting the amended complaint (Rollo. . moved for the dismissal of the case on the ground that the complaint states no cause of action against them. filed a motion for reconsideration (Rollo. 1980. Hence this petition filed with this Court on December 23. 1989 the defendants. p. . the defendants adopted and cited the conclusion and ruling of Branch V of the same court in two similar cases brought against them by the owner of the 3rd vehicle that featured in the same accident and by the widow of the deceased driver of the same vehicle docketed as Civil Case Nos. 9) alleged. 40)." The same court directed the plaintiffs therein to file their redress in accordance with the Rules of Court. wherein the defendants also filed a motion to dismiss (Rollo. 17. Respondent court denied the motion to dismiss in its order of September 23. PUB 4J 136 Pil '79 died in said incident: 7. among others: 5. On November 11. 1980 (Rollo. 6. That it was Felicidad Balla's driver Domino Casin of "Fuso" with Plate No. plaintiff spouses. p. considering that the children have absolutely no participation directly or indirectly in the alleged negligent acts of Felicidad Balla. and there is absolutely no logical basis to hold the children liable for damages resulting from alleged negligent acts of Felicidad Balla. 867-LV and 863-LV. for allowing her driver Casin to drive recklessly and not observing the required diligence in the selection and supervision of her employee. p. direct and proximate cause of the incident which resulted to the death of Fabian Prades. p.

and actions to recover damages for an injury to person or property. the inclusion of the "estate of Felicidad Balla" in the amended complaint as defendant. Llemos. 6). 78. but actions to recover real or personal property. Araneta. Actions which may and which may not be brought against executor or administrator. express or implied. the action under Section 17 of Rule 3 of the Rules of Court. Under the circumstances the absence of an estate proceeding may be avoided by requiring the heirs to take the place of the deceased (Javier v. p. may be commenced against him. The rule provides: Section 1. 292 [1951]). Thus. would still be futile. the court may adopt the alternative of allowing the heirs of the deceased to be substituted for the deceased (Lawas v.On September 14. 66). Hence. Court of Appeals. even before the lower court could act on petitioner's motion for reconsideration of the denial of their motion to dismiss. while petitioners may have correctly moved for the dismissal of the case and private respondents have forthwith corrected the deficiency by filing an amended complaint. SO ORDERED. Rule 87 of the Rules of Court. it is reasonable to believe that the petitioners will not take any step to expedite the early settlement of the estate. As restated in a much later case. actions for damages caused by the tortious conduct of the defendant survive the death of the latter. p. who are the children and surviving forced heirs of the deceased Felicidad Balla. 5 SCRA 959 [1962]). 146 SCRA 173 [1986]). actions that are abated by death are: (1) All claims for money against the decedent. filed against the estate of another deceased person as represented by the heirs. judicially or extra-judicially if only to defeat the damage suit against the estate. The point of controversy is however on the fact that no estate proceedings exist for the reason that her children had not filed any proceedings for the settlement of her estate. which allows the suit against the legal representative of the deceased. which insinuates that the deceased left no assets. The sole issue in the instant case is whether or not the Court of First Instance has the power to entertain a suit for damages arising from the death of a person. — No action upon a claim for the recovery of money or debt or interest thereon shall be commenced against the executor or administrator. . The action can therefore be properly brought under Section 1. what was originally filed was a complaint for damages against petitioners herein. real or personal. From the statement made by the petitioners that "many persons die without leaving any asset at all" (Reply to Respondents' Comment. nor has an executor or administrator of the estate been appointed. the petition is hereby dismissed and petitioners are ordered substituted for the deceased Felicidad Balla. (Note however the deceased Balla apparently left the bus). Memorandum for Petitioners. or an interest therein. PREMISES CONSIDERED. 1981 the Court (Second Division) resolved to consider the case submitted for decision (Rollo. from the state. Rollo. that is. the executor or administrator of his estate. arising from contract. owner and operator of the passenger bus "FUSO" which allegedly caused the death of the deceased Fabian Prades. p. claiming that Balla left no properties (Rollo. 90 Phil. and (3) Judgments for money against the decedent (Aguas v. (2) All claims for funeral expenses and expenses for the last sickness of the decedent. for the same reason that there appears to be no steps taken towards the settlement of the estate of the late Felicidad Balla. whether the same be due. It is evident that the case at bar is not among those enumerated. not due or contingent. in case of unreasonable delay in the appointment of an executor or administrator of the estate or in case where the heirs resort to an extrajudicial settlement of the estate. or to enforce a lien thereon. against an executor or administrator. p. Otherwise stated. As aforestated. 5). Under Section 5 Rule 86 of the Rules of Court.

Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 121510

November 23, 1995

FABIANA C. VDA. DE SALAZAR, petitioner,
vs.
COURT OF APPEALS, PRIMITIVO NEPOMUCENO and EMERENCIANA
NEPOMUCENO, respondents.

HERMOSISIMA, JR., J.:

Where the defendant in an ejectment case dies before the rendition by the
trial court of its decision therein, does the trial court's failure to effectuate a
substitution of heirs before its rendition of judgment render such judgment
jurisdictionally infirm?

On July 23, 1970, both private respondents Primitive Nepomuceno and
Emerenciana Nepomuceno filed separate complaints 1 with the then Court of
Agrarian Relations of Malolos, Bulacan, for ejectment on the ground of
personal cultivation and conversion of land for useful non-agricultural
purposes against petitioner's deceased husband, Benjamin Salazar. After
protracted proceedings in the agrarian court and then the Regional Trial
Court 2 spanning from 1970 to 1993, the trial court rendered its joint decision
3 in favor of private respondents. An appeal 4 therefrom was interposed in
the name of petitioner's deceased husband on the ground that private
respondents herein failed to satisfy the requirements pertaining to personal
cultivation and conversion of the landholdings into non-agricultural uses. The
Court of Appeals rejected such contention upon finding that the record was
replete with evidence justifying private respondents' assertion of their right of
cultivation and conversion of their landholdings. 5

Almost a year after the termination of that appeal, the same trial court
decision subject thereof was once again assailed before the Court of Appeals
through a petition 6 for annulment of judgment. Herein petitioner assailed the
same trial court decision as having been rendered by a court that did not
have jurisdiction over her and the other heirs of her deceased husband
because notwithstanding the fact that her husband had already died on
October 3, 1991, the trial court still proceeded to render its decision on
August 23, 1993 without effecting the substitution of heirs in accordance with
Section 17, Rule 3, of the Rules of Court thereby depriving her of her day in
court.

Petitioner, not having asserted the matter of fraud or collusion in her petition
for annulment of judgment, the Court of Appeals decided the same on the
basis of the sole issue of non-jurisdiction resulting from the alleged
deprivation of petitioner's right to due process and ruled in favor of the
validity of the challenged decision. 7 Petitioner filed a motion for
reconsideration of the decision of the appellate court reiterating the trial
court's lack of jurisdiction over the heirs of petitioner's deceased husband as
a consequence of the failure of the trial court to effectuate a valid substitution
of heirs. Said motion was denied in a resolution promulgated on August 14,
1995. Hence this petition.

The petition is bereft of merit.

The need for substitution of heirs is based on the right to due process
accruing to every party in any proceeding. 8 The rationale underlying this
requirement in case a party dies during the pendency of proceedings of a
nature not extinguished by such death, is that

. . . the exercise of judicial power to hear and determine a cause implicitly
presupposes in the trial court, amongst other essentials, jurisdiction over the
persons of the parties. That jurisdiction was inevitably impaired upon the
death of the protestee pending the proceedings below such that unless and
until a legal representative is for him duly named and within the jurisdiction of
the trial court, no adjudication in the cause could have been accorded any
validity or binding effect upon any party, in representation of the deceased,
without trenching upon the fundamental right to a day in court which is the
very essence of the constitutionally enshrined guarantee of due process. 9

We are not unaware of several cases 10 where we have ruled that a party
having died in an action that survives, the trial held by the court without
appearance of the deceased's legal representative or substitution of heirs
and the judgment rendered after such trial, are null and void because the
court acquired no jurisdiction over the persons of the legal representatives or
of the heirs upon whom the trial and the judgment would be binding. This
general rule notwithstanding, in denying petitioner's motion for
reconsideration, the Court of Appeals correctly ruled that formal substitution
of heirs is not necessary when the heirs themselves voluntarily appeared,
participated in the case and presented evidence in defense of deceased
defendant. Attending the case at bench, after all, are these particular
circumstances which negate petitioner's belated and seemingly ostensible
claim of violation of her rights to due process. We should not lose sight of the
principle underlying the general rule that formal substitution of heirs must be
effectuated for them to be bound by a subsequent judgment. Such had been
the general rule established not because the rule on substitution of heirs and
that on appointment of a legal representative are jurisdictional requirements
per se but because non-compliance therewith results in the undeniable
violation of the right to due process of those who, though not duly notified of
the proceedings, are substantially affected by the decision rendered therein.
Viewing the rule on substitution of heirs in this light, the Court of Appeals, in
the resolution denying petitioner's motion for reconsideration, thus
expounded:

Although the jurisprudential rule is that failure to make the substitution is a
jurisdictional defect, it should be noted that the purpose of this procedural
rule is to comply with due process requirements. The original party having
died, he could not continue to defend himself in court despite the fact that the
action survived him. For the case to continue, the real party in interest must
be substituted for the deceased. The real party in interest is the one who
would be affected by the judgment. It could be the administrator or executor
or the heirs. In the instant case, the heirs are the proper substitutes.
Substitution gives them the opportunity to continue the defense for the
deceased. Substitution is important because such opportunity to defend is a
requirement to comply with due process. Such substitution consists of
making the proper changes in the caption of the case which may be called
the formal aspect of it. Such substitution also includes the process of letting
the substitutes know that they shall be bound by any judgment in the case
and that they should therefore actively participate in the defense of the
deceased. This part may be called the substantive aspect. This is the heart
of the procedural rule because this substantive aspect is the one that truly
embodies and gives effect to the purpose of the rule. It is this court's view
that compliance with the substantive aspect of the rule despite failure to
comply with the formal aspect may be considered substantial compliance.
Such is the situation in the case at bench because the only inference that
could be deduced from the following facts was that there was active
participation of the heirs in the defense of the deceased after his death:

1.
The original lawyer did not stop representing the deceased. It would
be absurd to think that the lawyer would continue to represent somebody if
nobody is paying him his fees. The lawyer continued to represent him in the
litigation before the trial court which lasted for about two more years. A dead
party cannot pay him any fee. With or without payment of fees, the fact
remains that the said counsel was allowed by the petitioner who was well
aware of the instant litigation to continue appearing as counsel until August
23, 1993 when the challenged decision was rendered;

2.
After the death of the defendant, his wife, who is the petitioner in the
instant case, even testified in the court and declared that her husband is
already deceased. She knew therefore that there was a litigation against her
husband and that somehow her interest and those of her children were
involved;

3.
This petition for annulment of judgment was filed only after the
appeal was decided against the defendant on April 3, 1995, more than one
and a half year (sic) after the decision was rendered (even if we were to give
credence to petitioner's manifestation that she was not aware that an appeal
had been made);

4.
The Supreme Court has already established that there is such a
thing as jurisdiction by estoppel. This principle was established even in cases
where jurisdiction over the subject matter was being questioned. In the
instant case, only jurisdiction over the person of the heirs is in issue.
Jurisdiction over the person may be acquired by the court more easily than
jurisdiction over the subject matter. Jurisdiction over the person may be
acquired by the simple appearance of the person in court as did herein
petitioner appear;

5.
The case cited by the herein petitioner (Ferreria et al. vs. Manuela
Ibarra vda. de Gonzales, et al.) cannot be availed of to support the said
petitioner's contention relative to non-acquisition of jurisdiction by the court.
In that case, Manolita Gonzales was not served notice and, more importantly,
she never appeared in court, unlike herein petitioner who appeared and even
testified regarding the death of her husband. 11

Consequently, we rule that, as in the case at bench, the defendant in an
ejectment case having died before the rendition by the trial court of its
decision therein, its failure to effectuate a formal substitution of heirs before
its rendition of judgment, does not invalidate such judgment where the heirs
themselves appeared before the trial court, participated in the proceedings
therein, and presented evidence in defense of deceased defendant, it
undeniably being evident that the heirs themselves sought their day in court
and exercised their right to due process.

Respondent Court of Appeals also correctly ruled that ejectment, being an
action involving recovery of real property, is a real action which as such, is
not extinguished by the defendant's death.

. . . The question as to whether an action survives or not depends on the
nature of the action and the damage sued for. In the causes of action which

survive, the wrong complained affects primarily and principally property and
property rights, the injuries to the person being merely incidental, while in the
causes of action which do not survive, the injury complained of is to the
person, the property and rights of property affected being incidental. 12

There is no dispute that an ejectment case survives the death of a party,
which death did not extinguish the deceased's civil personality. 13 More
significantly, a judgment in an ejectment case is conclusive between the
parties and their successors in interest by title subsequent to the
commencement of the action. 14 Thus, we have held that:

. . . In such a case and considering that the supervening death of appellant
did not extinguish her civil personality, the appellate court was well within its
jurisdiction to proceed as it did with the case. There is no showing that the
appellate court's proceedings in the case were tainted with irregularities.

It appears that petitioners are heirs of Adela Salindon. In fact, it was because
of this relationship that the petitioners were able to transfer the title of Adela
Salindon over the subject lot to their names. . . . Considering all this, the
appellate decision is binding and enforceable against the petitioners as
successors-in-interest by title subsequent to the commencement of the
action (Section 49 [b] Rule 39, Rules of Court). Furthermore, . . . judgment in
an ejectment case may be enforced not only against defendants therein but
also against the members of their family, their relatives, or privies who derive
their right of possession from the defendants (Ariem v. De los Angeles, 49
SCRA 343). Under the circumstances of this case, the same rule should
apply to the successors-in-interest . . . . 15

While it is true that a decision in an action for ejectment is enforceable not
only against the defendant himself but also against members of his family,
his relatives, and his privies who derived their right of possession from the
defendant and his successors-in-interest, 16 it had been established that
petitioner had, by her own acts, submitted to the jurisdiction of the trial court.
She is now estopped to deny that she had been heard in defense of her
deceased husband in the proceedings therein. As such, this petition evidently
has no leg to stand on.

No. STATE sued to recover the value of the checks plus attorney's fees and expenses of litigation.: In her Answer. MOULIC withdrew her funds from the drawee bank. Pantaleon for private respondents. Moulic issued to Corazon Victoriano. Upon presentment for payment. Alon & Associates for petitioner. the checks were dishonored for insufficiency of funds. the instant petition is dismissed for lack of merit. INC. two (2) post-dated Equitable Banking Corporation checks in the amount of Fifty Thousand Pesos (P50. On 6 October 1983. who later assumed full responsibility for the checks. On 20 December 1979.WHEREFORE. as security for pieces of jewelry to be sold on commission. BELLOSILLO. 1993 STATE INVESTMENT HOUSE. MOULIC. She also instituted a Third-Party Complaint against Corazon Victoriano. respondents. MOULIC contends that she incurred no obligation on the checks because the jewelry was never sold and the checks were negotiated without her knowledge and consent. G. and the right of a real estate mortgagee after extrajudicial foreclosure to recover the balance of the obligation. The checks. could no longer be retrieved as they had already been negotiated. so she returned them to the payee before maturity of the checks. FIRST DIVISION MOULIC failed to sell the pieces of jewelry.. however.R. are the issues in this Petition for Review of the Decision of respondent Court of Appeals. before their maturity dates. . petitioner.00) each. Private respondent Nora B. Costs against petitioner. 30 September 1979.000. although MOULIC avers that no such notice was given her. Martin D. (STATE). Inc. Consequently. COURT OF APPEALS and NORA B. vs. Republic of the Philippines SUPREME COURT Manila The liability to a holder in due course of the drawer of checks issued to another merely as security. the payee negotiated the checks to petitioner State Investment House. Thereafter. 101163 January 11. one dated 30 August 1979 and the other. SO ORDERED. Escober. J. STATE allegedly notified MOULIC of the dishonor of the checks and requested that it be paid in cash instead.

The sale of the jewelry was never effected. and from defenses available to prior parties among themselves. (c) That he took it in good faith and for value. ceased to serve their purpose as security for the jewelry. they were negotiable. enforce full payment of the checks. The act of destroying the instrument must also be made by the holder of the instrument intentionally. For the only grounds are those outlined in Sec. 52. albeit at a discounted price. — A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face. 5 burning it. a prima facie presumption exists that the holder of a negotiable instrument is a holder in due course. The negotiability of the checks is not in dispute. before their due dates. the checks. MOULIC failed. if such was the fact. (c) By the intentional cancellation thereof by the holder. Consequently. What constitutes a holder in due course. 6 or writing the word "cancelled" on the instrument. We are not persuaded. (e) When the principal debtor becomes the holder of the instrument at or after maturity in his own right. at the pre-trial. Culled from the foregoing.On 26 May 1988. it holds the instruments free from any defect of title of prior parties.00 for attorney's fees. Obviously. Since MOULIC failed . MOULIC can only invoke this defense against STATE if it was privy to the purpose for which they were issued and therefore is not a holder in due course. 52 of the Negotiable Instruments Law provides — That the post-dated checks were merely issued as security is not a ground for the discharge of the instrument as against a holder in due course. (d) petitioner was never informed nor made aware that these checks were merely issued to payee as security and not for value. the burden of proving that STATE is not a holder in due course lies in the person who disputes the presumption. — A negotiable instrument is discharged: (a) By payment in due course by or on behalf of the principal debtor. MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the discharge of the instrument. and without notice that it was previously dishonored. (d) By any other act which will discharge a simple contract for the payment of money. (b) That he became the holder of it before it was overdue. 2 Consequently. and ordered STATE to pay MOULIC P3. (d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. Instrument. As such. STATE may. STATE elevated the order of dismissal to the Court of Appeals. where the instrument is made or accepted for his accommodation. STATE is indeed a holder in due course. In this regard. Indubitably. and. In this regard. the intentional cancellation contemplated under paragraph (c) is that cancellation effected by destroying the instrument either by tearing it up. how discharged. Corazon Victoriano. After all. Sec. therefore. But. 119. the parties agreed to limit the issue to whether or not STATE was a holder of the checks in due course. 1 The evidence clearly shows that: (a) on their faces the post-dated checks were complete and regular: (b) petitioner bought these checks from the payee. 119 of the Negotiable Instruments Law: Sec. therefore. but the appellate court affirmed the trial court on the ground that the Notice of Dishonor to MOULIC was made beyond the period prescribed by the Negotiable Instruments Law and that even if STATE did serve such notice on MOULIC within the reglementary period it would be of no consequence as the checks should never have been presented for payment. Sec. the trial court dismissed the Complaint as well as the ThirdParty Complaint. (b) By payment in due course by the party accommodated.000. 3 (c) petitioner took these checks in good faith and for value. 4 MOULIC cannot set up against STATE the defense that there was failure or absence of consideration.

(e) Where the drawer had countermanded payment. She did not retrieve the checks when she returned the jewelry. Again. The record shows that Mr. MOULIC may not unilaterally discharge herself from her liability by the mere expediency of withdrawing her funds from the drawee bank. the said statute should not be tampered with haphazardly or lightly. She is thus liable as she has no legal basis to excuse herself from liability on her checks to a holder in due course. the bid price at public auction was only P1 million. hence. When notice need not be given to drawer. 9 The drawing and negotiation of a check have certain effects aside from the transfer of title or the incurring of liability in regard to the instrument by the transferor. testified that the obligation of Corazon Victoriano and her husband at the time their property mortgaged to STATE was extrajudicially foreclosed amounted to P1. 1231 of the Civil Code 7 which enumerates the modes of extinguishing obligations. Correspondingly.g. . which is simply bringing to the knowledge of the drawer or indorser of the instrument. After withdrawing her funds.to get back possession of the post-dated checks. she was responsible for the dishonor of her checks. She simply withdrew her funds from her drawee bank and transferred them to another to protect herself. liable to STATE. On the other hand. either verbally or by writing. 119 contemplates of a situation where the holder of the instrument is the creditor while its drawer is the debtor. Art. upon proper proceedings taken. none of the modes outlined therein is applicable in the instant case as Sec. Under the facts of this case.. was no longer MOULIC's creditor at the time the jewelry was returned. This is error. STATE could not expect payment as MOULIC left no funds with the drawee bank to meet her obligation on the checks.9 million. 114. Romelito Caoili. has not been accepted or has not been paid. Corazon Victoriano. Moreover. 10 Consequently. the payee. she could not have expected her checks to be honored. 12 Thus. the acts which will discharge a simple contract for the payment of money under paragraph (d) are determined by other existing legislations since Sec. 114 of the Negotiable Instruments Law: Sec. the fact that a specified instrument. Nor should it be brushed aside in order to meet the necessities in a single case. Inc. Nora B. 119 does not specify what these acts are. 11 so that Notice of Dishonor would be futile. MOULIC'S actuations leave much to be desired. the intentional cancellation of the said checks is altogether impossible. an Account Assistant. Thus. There is an implied representation that funds or credit are available for the payment of the instrument in the bank upon which it is drawn. In other words. the withdrawal of the money from the drawee bank to avoid liability on the checks cannot prejudice the rights of holders in due course. The need for such notice is not absolute. the fact that STATE failed to give Notice of Dishonor to MOULIC is of no moment. (b) When the drawee is a fictitious person or a person not having capacity to contract. the Negotiable Instruments Law was enacted for the purpose of facilitating. (c) When the drawer is the person to whom the instrument is presented for payment: (d) Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument. there are exceptions under Sec. not hindering or hampering transactions in commercial paper. the value of the property foreclosed was not even enough to pay the debt in full. The Court of Appeals also held that allowing recovery on the checks would constitute unjust enrichment on the part of STATE Investment House. and that the party notified is expected to pay it. In the instant case. In the present action. 8 In addition. Indeed. The holder who takes the negotiated paper makes a contract with the parties on the face of the instrument. e. there was no need to serve her Notice of Dishonor. Moulic. a holder in due course of the checks. such withdrawal renders the drawer. — Notice of dishonor is not required to be given to the drawer in the following cases: (a) Where the drawer and the drawee are the same person.

Quezon City for alleged violation of Riviera‘s right of first refusal. 16 It is clear then that in the absence of a similar provision in Act No. now deceased. J.00. Cornhill Trading Corporation (Cornhill) and Urban Development Bank to transfer the title covering a 1. The decision appealed from is REVERSED and a new one entered declaring private respondent NORA B. INC. Jr. in the event of foreclosure. Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals[2] dated June 6. Estefania B. STATE. COURT OF APPEALS. (Riviera) on August 31. expressly or impliedly. MOULIC. 26513 affirming the Decision[3] dated March 20. is just another means of recovering the unpaid balance of the debt of the VICTORIANOs. Any agreement to the contrary will be void". 1989[4] to compel the defendants therein Juan L.Where the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of mortgage. namely. without prejudice to any action for recompense she may pursue against the VICTORIANOs as Third-Party Defendants. Reyes. in the case of a chattel mortgage. INC. 3135.R. de la Rosa.000. and Fidel B. for the . P3. 117355. the petition is GRANTED. REYES. Juan B. it cannot be concluded that the creditor loses his right recognized by the Rules of Court to take action for the recovery of any unpaid balance on the principal obligation simply because he has chosen to extrajudicially foreclose the real estate mortgage pursuant to a Special Power of Attorney given him by the mortgagor in the contract of mortgage. Q-89-3371.. it does not contain any provision either. Reyes. respondents. Reyes.R. SECOND DIVISION [G.000. as amended. substituted by his heirs. 14 For. the vendor "shall have no further action against the purchaser to recover any unpaid balance of the price. 13 The step thus taken by the mortgagee-bank in resorting to an extra-judicial foreclosure was merely to find a proceeding for the sale of the property and its action cannot be taken to mean a waiver of its right to demand payment for the whole debt. SO ORDERED. April 5. In fine. does not discuss the mortgagee's right to recover such deficiency. CV No. In this jurisdiction. 1990 of the Regional Trial Court of Quezon City. 17 value of EBC Checks Nos. when the legislature intends to foreclose the right of a creditor to sue for any deficiency resulting from foreclosure of a security given to guarantee an obligation. Inc. without prejudice to any action for recompense she may pursue against the VICTORIANOs as Third-Party Defendants who had already been declared as in default. (now deceased). Q-89-3371 is a suit instituted by Riviera Filipina. and the costs of suit.00 as attorney's fees. Art. Juanita R. PHILIPPINE CYPRESS CONSTRUCTION & DEVELOPMENT CORPORATION. it so expressly provides. JR. CORNHILL TRADING CORPORATION AND URBAN DEVELOPMENT BANK. the mortgagee is entitled to claim the deficiency from the debtor. petitioner. as amended. 2115 of the Civil Code 15 does not allow the creditor to recover the deficiency from the sale of the thing pledged. Branch 89 dismissing Civil Case No. as drawer. MOULIC liable to petitioner STATE INVESTMENT HOUSE.. WHEREFORE. Costs against private respondent. prohibiting recovery. 1994 in CA-G. vs.. with respect to pledges. Philippine Cypress Construction & Development Corporation (Cypress). Reyes. or a thing sold on installment basis.: The filing of the Complaint and the Third-Party Complaint to enforce the checks against MOULIC and the VICTORIANO spouses. Likewise.018 square meter parcel of land located along EDSA. Civil Case No. DECISION DE LEON. JUAN L. is liable for the value of the checks she issued to the holder in due course. 2002] RIVIERA FILIPINA. 30089658 and 30089660 in the total amount of P100. respectively. No. For instance. while Act 3135.

It appears that on November 23, 1982, respondent Juan L. Reyes (Reyes,
for brevity) executed a Contract of Lease with Riviera. The ten-year (10)
renewable lease of Riviera, which started on August 1, 1982, involved a
1,018 square meter parcel of land located along Edsa, Quezon City, covered
and described in Transfer Certificate of Title No. 186326 of the Registry of
Deeds of Quezon City in the name of Juan L. Reyes.[5]

The said parcel of land was subject of a Real Estate Mortgage executed by
Reyes in favor of Prudential Bank. Since the loan with Prudential Bank
remained unpaid upon maturity, the mortgagee bank extrajudicially
foreclosed the mortgage thereon. At the public auction sale, the mortgagee
bank emerged as the highest bidder. The redemption period was set to
expire on March 7, 1989. Realizing that he could not possibly raise in time
the money needed to redeem the subject property, Reyes decided to sell the
same.[6]

Since paragraph 11 of the lease contract expressly provided that the
―LESSEE shall have the right of first refusal should the LESSOR decide to
sell the property during the term of the lease,‖[7] Reyes offered to sell the
subject property to Riviera, through its President Vicente C. Angeles, for Five
Thousand Pesos (P5,000.00) per square meter.
However, Angeles
bargained for Three Thousand Five Hundred Pesos (P3,500.00) per square
meter. Since Reyes was not amenable to the said price and insisted on Five
Thousand Pesos (P5,000.00) per square meter, Angeles requested Reyes to
allow him to consult the other members of the Board of Directors of
Riviera.[8]

Seven (7) months later, or sometime in October 1988, Angeles
communicated with Reyes Riviera‘s offer to purchase the subject property for
Four Thousand Pesos (P4,000.00) per square meter. However, Reyes did
not accept the offer. This time he asked for Six Thousand Pesos (P6,000.00)
per square meter since the value of the property in the area had appreciated
in view of the plans of Araneta to develop the vicinity.[9]

In a letter dated November 2, 1988, Atty. Irineo S. Juan, acting as counsel for
Reyes, informed Riviera that Reyes was selling the subject property for Six
Thousand Pesos (P6,000.00) per square meter, net of capital gains and

transfer taxes, registration fees, notarial fees and all other attendant charges.
He further stated therein that:

In this connection, conformably to the provisions stipulated in Paragraph/Item
No. 11 of your CONTRACT OF LEASE (Doc. No. 365, Page No. 63, Book
No. X, Series of 1982, of the Notarial Registry of Notary Public Leovillo S.
Agustin), notice is served upon your goodselves for you to exercise ―the right
of first refusal‖ in the sale of said property, for which purpose you are hereby
given a period of ten (10) days from your receipt hereof within which to thus
purchase the same under the terms and conditions aforestated, and failing
which you shall be deemed to have thereby waived such pre-emptive right
and my client shall thereafter be absolutely free to sell the subject property to
interested buyers.[10]

To answer the foregoing letter and confirm their telephone conversation on
the matter, Riviera sent a letter dated November 22, 1988 to Atty. Juan,
counsel for Reyes, expressing Riviera‘s interest to purchase the subject
property and that Riviera is already negotiating with Reyes which will take a
couple of days to formalize.[11] Riviera increased its offer to Five Thousand
Pesos (P5,000.00) per square meter but Reyes did not accede to said price
as it was still lower than his quoted price of Six Thousand Pesos (P6,000.00)
per square meter.[12] Angeles asked Reyes to give him until the end of
November 1988 for Riviera‘s final decision.

In a letter dated December 2, 1988, Angeles wrote Reyes confirming
Riviera‘s intent to purchase the subject property for the fixed and final[13]
price of Five Thousand Pesos (P5,000.00) per square meter, complete
payment within sixty (60) to ninety (90) days which ―offer is what we feel
should be the market price of your property.‖ Angeles asked that the decision
of Reyes and his written reply to the offer be given within fifteen (15) days
since there are also other properties being offered to them at the
moment.[14]

In response to the foregoing letter, Atty. Juan sent a letter to Riviera dated
December 5, 1988 informing Riviera that Riviera‘s offer is not acceptable to
his client. He further expressed, ―let it be made clear that, much as it is the
earnest desire of my client to really give you the preference to purchase the
subject property, you have unfortunately failed to take advantage of such

opportunity and thus lost your right of first refusal in sale of said
property.‖[15]

Meanwhile, on December 4, 1988, Reyes confided to Rolando P. Traballo, a
close family friend and President of Cypress, his predicament about the
nearing expiry date of the redemption period of the foreclosed mortgaged
property with Prudential Bank, the money for which he could not raise on
time thereby offering the subject property to him for Six Thousand Pesos
(P6,000.00) per square meter. Traballo expressed interest in buying the said
property, told Reyes that he will study the matter and suggested for them to
meet the next day.[16]

They met the next day, December 5, 1988, at which time Traballo bargained
for Five Thousand Three Hundred Pesos (P5,300.00) per square meter.
After considering the reasons cited by Traballo for his quoted price, Reyes
accepted the same. However, since Traballo did not have the amount with
which to pay Reyes, he told the latter that he will look for a partner for that
purpose.[17] Reyes told Traballo that he had already afforded Riviera its right
of first refusal but they cannot agree because Riviera‘s final offer was for Five
Thousand Pesos (P5,000.00) per square meter.[18]

Sometime in January 1989, apprehensive of the impending expiration in
March 1989 of the redemption period of the foreclosed mortgaged property
with Prudential Bank and the deal between Reyes and Traballo was not yet
formally concluded, Reyes decided to approach anew Riviera. For this
purpose, he requested his nephew, Atty. Estanislao Alinea, to approach
Angeles and find out if the latter was still interested in buying the subject
property and ask him to raise his offer for the purchase of the said property a
little higher. As instructed, Atty. Alinea met with Angeles and asked the latter
to increase his offer of Five Thousand Pesos (P5,000.00) per square meter
but Angeles said that his offer is Five Thousand Pesos (P5,000.00) per
square meter.[19]

Following the meeting, Angeles sent a letter dated February 4, 1989 to
Reyes, through Atty. Alinea, that his offer is Five Thousand Pesos
(P5,000.00) per square meter payment of which would be fifty percent (50%)
down within thirty (30) days upon submission of certain documents in three
(3) days, the balance payable in five (5) years in equal monthly installments

at twelve percent (12%) interest in diminishing balance.[20] With the terms of
this second offer, Angeles admittedly downgraded the previous offer of
Riviera on December 2, 1988.[21]

Atty. Alinea conveyed to Reyes Riviera‘s offer of Five Thousand Pesos
(P5,000.00) per square meter but Reyes did not agree. Consequently, Atty.
Alinea contacted again Angeles and asked him if he can increase his price.
Angeles, however, said he cannot add anymore.[22] Reyes did not expressly
offer his subject property to Riviera at the price of Five Thousand Three
Hundred Pesos (P5,300.00) per square meter.[23]

Sometime in February 1989, Cypress and its partner in the venture, Cornhill
Trading Corporation, were able to come up with the amount sufficient to
cover the redemption money, with which Reyes paid to the Prudential Bank
to redeem the subject property.[24] On May 1, 1989, a Deed of Absolute
Sale covering the subject property was executed by Reyes in favor of
Cypress and Cornhill for the consideration of Five Million Three Hundred
Ninety Five Thousand Four Hundred Pesos (P5,395,400.00).[25] On the
same date, Cypress and Cornhill mortgaged the subject property to Urban
Development Bank for Three Million Pesos (P3,000,000.00).[26]

Thereafter, Riviera sought from Reyes, Cypress and Cornhill a resale of the
subject property to it claiming that its right of first refusal under the lease
contract was violated. After several unsuccessful attempts,[27] Riviera filed
the suit to compel Reyes, Cypress, Cornhill and Urban Development Bank to
transfer the disputed title to the land in favor of Riviera upon its payment of
the price paid by Cypress and Cornhill.

Following trial on the merits, the trial court dismissed the complaint of Riviera
as well as the counterclaims and cross-claims of the other parties.[28] It ruled
that the defendants therein did not violate Riviera‘s right of first refusal,
ratiocinating in this wise:

Resolving the first issue, this Court takes note that since the beginning of the
negotiation between the plaintiff and defendant Reyes for the purchase of the
property, in question, the plaintiff was firm and steadfast in its position,
expressed in writing by its President Vicente Angeles, that it was not willing

to buy the said property higher than P5,000.00, per square meter, which was
far lower than the asking price of defendant Reyes for P6,000.00, per square
meter, undoubtedly, because, in its perception, it would be difficult for other
parties to buy the property, at a higher price than what it was offering, since it
is in occupation of the property, as lessee, the term of which was to expire
after about four (4) years more.

On the other hand, it was obvious, upon the basis of the last ditch effort of
defendant Reyes, thru his nephew, Atty. Alinea, to have the plaintiff buy the
property, in question, that he was willing to sell the said property at a price
less than P6,000.00 and a little higher than P5,000.00, per square meter,
precisely, because Atty. Alinea, in behalf of his uncle, defendant Reyes,
sought plaintiff‘s Angeles and asked him to raise his price a little higher,
indicating thereby the willingness of defendant Reyes to sell said property at
less than his offer of P6,000.00, per square meter.

This being the case, it can hardly be validly said by the plaintiff that he was
deprived of his right of first refusal to buy the subject property at a price of
P5,300.00, per square meter which is the amount defendants
Cypress/Cornhill bought the said property from defendant Reyes. For, it was
again given such an opportunity to exercise its right of first refusal by
defendant Reyes had it only signified its willingness to increase a little higher
its purchase price above P5,000.00, per square meter, when its President,
Angeles, was asked by Atty. Alinea to do so, instead of adamantly sticking to
its offer of only P5,000.00 per square meter, by reason of which, therefore,
the plaintiff had lost, for the second time, its right of first refusal, even if
defendant Reyes did not expressly offer to sell to it the subject land at
P5,300.00, per square meter, considering that by the plea of Atty. Alinea, in
behalf of defendant Reyes, for it to increase its price a little, the plaintiff is to
be considered as having forfeited again its right of first refusal, it having
refused to budged from its regid (sic) offer to buy the subject property at no
more than P5,000.00, per square meter.

As such, this Court holds that it was no longer necessary for the defendant
Reyes to expressly and categorically offer to the plaintiff the subject property
at P5,300.00, per square meter, in order that he can comply with his
obligation to give first refusal to the plaintiff as stipulated in the Contract of
Lease, the plaintiff having had already lost its right of first refusal, at the first
instance, by refusing to buy the said property at P6,000.00, per square

meter, which was the asking price of defendant Reyes, since to do so would
be a useless ceremony and would only be an exercise in futility, considering
the firm and unbending position of the plaintiff, which defendant Reyes
already knew, that the plaintiff, at any event, was not amenable to increasing
its price at over P5,000.00, per square meter.

Dissatisfied with the decision of the trial court, both parties appealed to the
Court of Appeals.[29] However, the appellate court, through its Special
Seventh Division, rendered a Decision dated June 6, 1994 which affirmed the
decision of the trial court in its entirety.[30] In sustaining the decision of the
trial court, the Court of Appeals adopted the above-quoted ratiocination of the
trial court and further added:

To put things in its proper perspective in accordance with the peculiar
attendant circumstances herein, particular stress should be given to
RIVIERA‘s uncompromising counter offer of only P5,000.00 per square meter
on all the occasions when REYES offered the subject property to it.
RIVIERA, in its letter to REYES dated December 2, 1988 (Exhibit ―D‖, p. 68,
Rollo) justified its rigid offer by saying that ―the above offer is what we feel
should be the market price of your property.‖ If that be the case, We are
convinced, the same manner that REYES was, that RIVIERA was unwilling
to increase its counter offer at any present or future time. RIVIERA‘s
unilateral valuation of the subject property thus binds him, it cannot now be
heard to claim that it could have upped its offer had it been informed of
CYPRESS‘ and CORNHILL‘S offer of P5,000.00 (sic) per square meter.
Defendants CYPRESS and CORNHILL were therefore right in saying that:

On the basic assumption that RIVIERA really meant what it said in its letter,
DR. REYES could not be faulted for believing that RIVIERA was definitely
NOT WILLING TO PAY MORE THAN P5,000.00 PER SQUARE METER ON
HIS PROPERTY. The fault lies with the deceptive and insincere words of
RIVIERA. Injustice (sic) and equity, RIVIERA must be deemed in estoppel in
now belatedly asserting that it would have been willing to pay a price higher
than P5,000.00 x x x.‖ (Defendants-Appellees Cypress‘ and Cornhill‘s Brief,
p. 8)

And to this We say that no amount of jurisprudence RIVIERA might avail of for the purpose of construing the right of first refusal. And to this REYES was desperately willing to accede to despite the financial quandary he was then in as the expiration of the redemption period drew closer and closer. in which case. Riviera interposed the instant petition anchored on the following errors:[33] I It would have been far different had REYES‘ non-disclosure of CYPRESS‘ and CORNHILL‘s counter-offer to RIVIERA resulted in the sale of the subject property at equal or less than RIVIERA‘s offer. must ultimately prevail over RIVIERA‘s right of first refusal which it unscrupulously tried to exercise.00 per square meter. III THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN DENYING RECONSIDERATION. Can the same be said of RIVIERA? We do not think so. will cover-up for its arrogant exercise of its right as can be gleaned from the factual premises. For after all. 1994. Equity in this case tilts in favor of defendants REYES. however enlightening and persuasive they may be. the last one being the most telling indication of REYES‘ sincerest intention in RIVIERA eventually purchasing the subject property if only the latter would increase a little its offer of P5.[31] but the appellate court denied the same in a Resolution dated September 22. From this decision. for RIVIERA was well-aware of REYES‘ precarious financial needs at that time. Not only once – but twice – did REYES approach RIVIERA. for if RIVIERA lost its opportunity to acquire it. no adverse inference can be drawn from REYES‘ failure to disclose to RIVIERA the intervening counter-offer of CYPRESS and CORNHILL. REYES unquestionably had displayed good faith. and despite the better offer of CYPRESS and CORNHILL. RIVIERA was. it has only itself to blame. NOT RESPONDENT JUAN L. whimsically exercising its contractual right to the prejudice of REYES who had commendably given RIVIERA extra leeway in exercising it. WHICH HAD BEEN THOROUGHLY DECEIVED BY THE LATTER OUT OF ITS RIGHTS TO ITS CONTINUING PREJUDICE. Hence. REYES would have been rightly accused of cunningly circumventing RIVIERA‘s right of first refusal. It appears that RIVIERA all along was trying to push REYES‘ back against the wall. REYES‘ fundamental and intrinsic right of ownership which necessarily carries with it the exclusive right to dispose of it to whoever he pleases.For this reason. to be frank. CYPRESS and CORNHILL that the consummated sale between them concerning the subject property be given this Court‘s imprimatur. II THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN NOT FINDING THAT IT WAS THE PETITIONER. IV THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN DECIDING PETITIONER‘S APPEAL AT A TIME WHEN THE PRINCIPAL APPELLEE IS ALLEGEDLY DEAD AND NO PROPER SUBSTITUTION OF THE ALLEGED DECEASED PARTY HAS BEEN . REYES. and by clinging to its offer. REYES might eventually succumb to its offer out of sheer desperation. INC. ALREADY LOST ITS RIGHT OF FIRST REFUSAL. But the incontrovertible antecedents obtaining here clearly reveal REYES‘ earnest efforts in respecting RIVIERA‘s contractual right to initially purchase the subject property.000.[32] THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN RULING THAT PETITIONER RIVIERA FILIPINA. Riviera filed a motion for reconsideration.

Inc. At the outset. The concept and interpretation of the right of first refusal and the consequences of a breach thereof evolved in Philippine juristic sphere only within the last decade. Thereafter in 1997. as in the case at bar. This cannot be allowed. Bonnevie and Equatorial Realty Development. and which is in violation of a right of first refusal granted to the lessee is not voidable under the Statute of Frauds but rescissible under Articles 1380 to 1381 (3) of the New Civil Code.[35] Appeal from a final disposition of the Court of Appeals. v. as it should be. as such. v. Bonnevie[37] where the Court held that a lease with a proviso granting the lessee the right of first priority ―all things and conditions being equal‖ meant that there should be identity of the terms and conditions to be offered to the lessee and all other prospective buyers. The administration of justice would not countenance such a rule. Bocaling & Co. v. Mayfair Theater.[39] the Court en banc reverted back to the doctrine in Guzman Bocaling & Co. while Riviera alleges that the Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction. Court of Appeals.MADE. is by way of a petition for review under Rule 45. Riviera posits the view that its right of first refusal was totally disregarded or violated by Reyes by the latter‘s sale of the subject property to Cypress and Cornhill. When a court exercises its jurisdiction an error committed while so engaged does not deprive it of the jurisdiction being exercised when the error is committed. an error of judgment that the court may commit in the exercise of its jurisdiction is not correctible through the original special civil action of certiorari. Bonnevie and refused to rescind a contract of sale which violated the right of first refusal. v. Inc.[36] In the petition at bar. The Court held that the so-called ―right of first refusal‖ cannot be deemed a perfected contract of sale under Article 1458 of the New Civil Code and. treated as a petition for review under Rule 45 and not as a special civil action for certiorari under Rule 65 of the Revised Rules of Court. there should be identity of terms and conditions to be offered to the buyer holding a right of first refusal if such right is not to be rendered illusory. If it did.. we note that. every error committed by a court would deprive it of its jurisdiction and every erroneous judgment would be a void judgment. Lastly. now the 1997 Rules of Civil Procedure. in Parañaque Kings Enterprises.[40] the Court affirmed the nature of and the concomitant rights and obligations of parties under a right of first refusal. Court of Appeals.. the prevailing doctrine is that a right of first refusal means identity of terms and conditions to be offered to the lessee and all other prospective . Inc.[38] the Court en banc departed from the doctrine laid down in Guzman. HENCE. while errors of judgment are correctible only by appeal in a petition for review under Rule 45. Bocaling & Co. Inc. The distinctions between Rule 45 and 65 are far and wide. It all started in 1992 with Guzman. A deed of sale executed in favor of a third party who cannot be deemed a purchaser in good faith. the most notable of which is that errors of jurisdiction are best reviewed in a special civil action for certiorari under Rule 65. summarizing the rulings in Guzman. held that in order to have full compliance with the contractual right granting petitioner the first option to purchase. the instant petition is. Thus. the basis of the right of first refusal must be the current offer to sell of the seller or offer to purchase of any prospective buyer. Subsequently in 1994. THE DECISION OF THE COURT OF APPEALS AND ITS RESOLUTION DENYING RECONSIDERATION.[34] The rationale for the distinction is simple. with the lessee to enjoy the right of first priority. Thus. Further. In the 1996 case of Equatorial Realty Development. Inc. IS NULL AND VOID. Mayfair Theater. the sale of the properties for the price for which they were finally sold to a third person should have likewise been first offered to the former. Bonnevie stating that rescission is a relief allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract may cause or to protect some incompatible and preferred right by the contract. v. a breach thereof decreed under a final judgment does not entitle the aggrieved party to a writ of execution of the judgment but to an action for damages in a proper forum for the purpose. Bocaling & Co. The Court. v. It contends that the right of first refusal principally amounts to a right to match in the sense that it needs another offer for the right to be exercised. v. in the case of Ang Yu Asuncion v.

1989 that Riviera had lost its right of first refusal. Its stubborn approach in its negotiations with Reyes showed crystal-clear that there was never any need to disclose such information and doing so would be just a futile effort on the part of Reyes. such sale should first be offered to the lessee Riviera. or by what the court might conclude regarding abstract fairness.buyers and a contract of sale entered into in violation of a right of first refusal of another person. As clearly shown by the records and transcripts of the case. It quoted its ―fixed and final‖ price as Five Thousand Pesos (P5. Naturally.00) of Cypress and Cornhill it would have matched said price. the Court finds that in the interpretation of the right of first refusal as understood by the parties herein. Reyes had to disagree with Riviera‘s highly disadvantageous offer. The parties‘ practical construction of their contract has been characterized as a clue or index to. by itself. Riviera cannot now be heard that had it been informed of the offer of Five Thousand Three Hundred Pesos (P5. does not constitute fraud. 1988 and February 4. or unless according to good faith and the usages of commerce the communication should be made. or influential factor in determining the proper construction of the contract. admittedly. determining its meaning and ascertaining the mutual intention of the parties at the time for contracting. and this question may not be resolved by what the parties might have provided had they thought about it. as in all other provisions of the contract. which is evident from Riviera claims. Each case has its own flesh and blood and cannot be ruled upon on the basis of isolated clinical classroom principles. especially Riviera.[48] The Court would be rewriting the contract of Reyes and Riviera under the guise of construction were we to interpret the right of first refusal as Riviera . such construction may be considered by the court in construing the contract.‖ Riviera. we must remember that general propositions do not decide specific cases. 1989. convincing. unwilling to budge from his offer. persuasive. Riviera strongly exhibited a ―take-it or leave-it‖ attitude in its negotiations with Reyes. the actions of the parties to the contract of lease.[43] In the case at bar. as it were. silence or concealment.[45] An examination of the attendant particulars of the case do not persuade us to uphold Riviera‘s view. the question as to what is to be included therein or what is meant by the same. their contemporaneous and subsequent acts shall be principally considered.300. as they may not accurately reflect the parties‘ true intent. 1989 that Riviera was so intractable in its position and took obvious advantage of the knowledge of the time element in its negotiations with Reyes as the redemption period of the subject foreclosed property drew near. such that whatever amount Reyes initially receives from Riviera would absolutely be insufficient to pay off the redemption price of the subject property. while valid. as evidenced by the exchange of letters between the two contenders. However.[42] The court must read a contract as the average person would read it and should not give it a strained or forced construction. Nary a howl of protest or shout of defiance spewed forth from Riviera‘s lips. Reyes and Riviera. their intention or meaning and as an important. a series of negotiations on the price per square meter of the subject property with neither party. Rather. And that is what exactly ensued between Reyes and Riviera.[47] We apply the general rule in the case at bar since Riviera failed to convincingly show that either of the exceptions are relevant to the case at bar. In sum. It can clearly be discerned from Riviera‘s letters dated December 2.[41] Analysis and construction should not be limited to the words used in the contract. significant.00) and not any peso more. in its letter dated February 4. shaped their understanding and interpretation of the lease provision ―right of first refusal‖ to mean simply that should the lessor Reyes decide to sell the leased property during the term of the lease. unless there is a special duty to disclose certain facts.000. is for the parties and not for the court to determine. laws are interpreted in the context of the peculiar factual situation of each proceeding. Pursuant to Article 1339[46] of the New Civil Code. Reyes was under no obligation to disclose the same. or as evidence of. but a seemingly whimper of acceptance when the counsel of Reyes strongly expressed in a letter dated December 5.[44] Where the parties to a contract have given it a practical construction by their conduct as by acts in partial performance. the Court finds relevant and significant the cardinal rule in the interpretation of contracts that the intention of the parties shall be accorded primordial consideration and in case of doubt. even downgraded its offer when Reyes offered anew the property to it. It voiced out that it had other properties to consider so Reyes should decide and make known its decision ―within fifteen days. is rescissible.

propounds it. (Riviera) on August 31. Inc. and the Decision of the Court of Appeals dated June 6. Estefania B. namely. Reyes. and Fidel B. Branch 89 dismissing Civil Case No. CV No. PHILIPPINE CYPRESS CONSTRUCTION & DEVELOPMENT CORPORATION. Reyes. simply to avoid seeming hardships. who died during the pendency of the appeal. de la Rosa.[56] Even applying the old Rules. WHEREFORE. respondents. the instant petition is hereby DENIED. REYES. Jr. (now deceased). Reyes.: Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals[2] dated June 6. Juanita R. the Court is convinced that the appellate court committed no reversible error in its challenged Decision. 1990 of the Regional Trial Court of Quezon City. Reyes.[57] as this case does. 26513 affirming the Decision[3] dated March 20.[51] Complying therewith. the failure of a counsel to comply with his duty under Section 16 of Rule 3 of the Revised Rules of Court. Juan B. 2002] RIVIERA FILIPINA.[49] On the last error attributed to the Court of Appeals which is the effect on the jurisdiction of the appellate court of the non-substitution of Reyes. 1994 a Manifestation[50] with the Court of Appeals stating that it has discovered that Reyes is already dead.. the Court notes that when Riviera filed its petition with this Court and assigned this error. INC. to inform the court of the death of his client and no substitution of such is effected. it later filed on October 27. Section 16[54] and 17[55] of Rule 3 of the Revised Rules of Court.R. upon which Riviera anchors its argument. vs. Juanita R.R. The appellate court was well within its jurisdiction to proceed as it did with the case since the death of a party is not subject to its judicial notice. Jr. since the death of Reyes did not extinguish his civil personality. 1989[4] to compel the defendants therein Juan L. Q-89-3371. will not invalidate the proceedings and the judgment thereon if the action survives the death of such party. in view of which the appellate court issued a Resolution dated December 16. the necessary motion for substitution of deceased Reyes. A court. the purpose behind the rule on substitution of parties is the protection of the right of every party to due process.. SO ORDERED. J. 1994 in CA-G. has no right to make new contracts for the parties or ignore those already made by them. Estefania B. Reyes. Needless to stress. was filed by the heirs. Reyes. JUAN L. substituted by his heirs. Neither abstract justice nor the rule of liberal construction justifies the creation of a contract for the parties which they did not make themselves or the imposition upon one party to a contract of an obligation not assumed.[52] Acting on the motion for substitution. the Court has already acquired jurisdiction over the heirs of Reyes by voluntarily submitting themselves to our jurisdiction. 1994. 1994 which noted the manifestation of Riviera and directed the counsel of Reyes to submit a copy of the latter‘s death certificate and to file the proper motion for substitution of party.R. Juan B. 1994 in CA-G. COURT OF APPEALS. Besides. CORNHILL TRADING CORPORATION AND URBAN DEVELOPMENT BANK. This purpose has been adequately met in this case since both parties argued their respective positions through their pleadings in the trial court and the appellate court.[53] Notwithstanding the foregoing. 26513 is AFFIRMED. namely. April 5. has already been amended by the 1997 Rules of Civil Procedure. the Court of Appeals granted the same. DECISION DE LEON. JR. petitioner. CV No. 117355. No. Reyes. Civil Case No.[58] In view of all the foregoing. de la Rosa. even the Supreme Court. despite a contrary construction as exhibited by its actions. and Fidel B. now . SECOND DIVISION [G. who died on January 7. Q-89-3371 is a suit instituted by Riviera Filipina. No pronouncement as to costs.

X.[11] Riviera increased its offer to Five Thousand Pesos (P5. notarial fees and all other attendant charges.00) per square meter but Reyes did not accede to said price as it was still lower than his quoted price of Six Thousand Pesos (P6. Angeles communicated with Reyes Riviera‘s offer to purchase the subject property for Four Thousand Pesos (P4. respondent Juan L.‖[7] Reyes offered to sell the subject property to Riviera. registration fees. Angeles bargained for Three Thousand Five Hundred Pesos (P3. counsel for Reyes.018 square meter parcel of land located along Edsa. Agustin). The ten-year (10) renewable lease of Riviera.00) per square meter.000. Reyes decided to sell the same.000. Since the loan with Prudential Bank remained unpaid upon maturity. Reyes (Reyes. 1988. involved a 1. the mortgagee bank extrajudicially foreclosed the mortgage thereon. conformably to the provisions stipulated in Paragraph/Item No.000. No. Riviera sent a letter dated November 22. This time he asked for Six Thousand Pesos (P6.[12] Angeles asked Reyes to give him until the end of November 1988 for Riviera‘s final decision. Cornhill Trading Corporation (Cornhill) and Urban Development Bank to transfer the title covering a 1. net of capital gains and transfer taxes. 1982. or sometime in October 1988.‖ Angeles asked that the decision of Reyes and his written reply to the offer be given within fifteen (15) days since there are also other properties being offered to them at the moment.000. Philippine Cypress Construction & Development Corporation (Cypress). of the Notarial Registry of Notary Public Leovillo S. He further stated therein that: In this connection.500. 11 of your CONTRACT OF LEASE (Doc.018 square meter parcel of land located along EDSA.00) per square meter. Since Reyes was not amenable to the said price and insisted on Five Thousand Pesos (P5.000. for which purpose you are hereby given a period of ten (10) days from your receipt hereof within which to thus purchase the same under the terms and conditions aforestated. Juan.deceased. Quezon City. Reyes. Realizing that he could not possibly raise in time the money needed to redeem the subject property. However. The redemption period was set to expire on March 7. Irineo S.[5] The said parcel of land was subject of a Real Estate Mortgage executed by Reyes in favor of Prudential Bank.000.000.000. expressing Riviera‘s interest to purchase the subject property and that Riviera is already negotiating with Reyes which will take a couple of days to formalize.00) per square meter. However.[9] In a letter dated November 2. Page No. In a letter dated December 2. 1988 to Atty. 365. 1982.00) per square meter. Juan. Quezon City for alleged violation of Riviera‘s right of first refusal. complete payment within sixty (60) to ninety (90) days which ―offer is what we feel should be the market price of your property. 186326 of the Registry of Deeds of Quezon City in the name of Juan L. Series of 1982.[14] .00) per square meter. It appears that on November 23. Angeles. for brevity) executed a Contract of Lease with Riviera. which started on August 1. acting as counsel for Reyes.00) per square meter. Reyes did not accept the offer.00) per square meter since the value of the property in the area had appreciated in view of the plans of Araneta to develop the vicinity. Angeles requested Reyes to allow him to consult the other members of the Board of Directors of Riviera. and failing which you shall be deemed to have thereby waived such pre-emptive right and my client shall thereafter be absolutely free to sell the subject property to interested buyers. through its President Vicente C. the mortgagee bank emerged as the highest bidder. Angeles wrote Reyes confirming Riviera‘s intent to purchase the subject property for the fixed and final[13] price of Five Thousand Pesos (P5. 63. Atty. informed Riviera that Reyes was selling the subject property for Six Thousand Pesos (P6.[8] Seven (7) months later. Book No.[6] Since paragraph 11 of the lease contract expressly provided that the ―LESSEE shall have the right of first refusal should the LESSOR decide to sell the property during the term of the lease. for Five Thousand Pesos (P5. covered and described in Transfer Certificate of Title No.00) per square meter.[10] To answer the foregoing letter and confirm their telephone conversation on the matter. 1988. notice is served upon your goodselves for you to exercise ―the right of first refusal‖ in the sale of said property. 1989. At the public auction sale.

Angeles sent a letter dated February 4. Atty. his predicament about the nearing expiry date of the redemption period of the foreclosed mortgaged property with Prudential Bank.[16] They met the next day.000. Alinea. much as it is the earnest desire of my client to really give you the preference to purchase the subject property.400. he requested his nephew. December 5. 1988. Riviera sought from Reyes. Cypress and Cornhill mortgaged the subject property to Urban Development Bank for Three Million Pesos (P3. Alinea contacted again Angeles and asked him if he can increase his price.000. However. with which Reyes paid to the Prudential Bank to redeem the subject property.00) per square meter payment of which would be fifty percent (50%) down within thirty (30) days upon submission of certain documents in three (3) days.00) per square meter. Traballo. 1989 to Reyes. apprehensive of the impending expiration in March 1989 of the redemption period of the foreclosed mortgaged property with Prudential Bank and the deal between Reyes and Traballo was not yet formally concluded.[21] Atty.[17] Reyes told Traballo that he had already afforded Riviera its right of first refusal but they cannot agree because Riviera‘s final offer was for Five Thousand Pesos (P5. you have unfortunately failed to take advantage of such opportunity and thus lost your right of first refusal in sale of said property. Consequently.000. Reyes decided to approach anew Riviera.In response to the foregoing letter.[26] Thereafter.000.[23] Sometime in February 1989.00) per square meter. After considering the reasons cited by Traballo for his quoted price. Cypress and its partner in the venture.[19] Following the meeting. Estanislao Alinea. Angeles admittedly downgraded the previous offer of Riviera on December 2. Juan sent a letter to Riviera dated December 5. a close family friend and President of Cypress.000. Cypress and Cornhill a resale of the subject property to it claiming that its right of first refusal under the lease contract was violated. a Deed of Absolute Sale covering the subject property was executed by Reyes in favor of Cypress and Cornhill for the consideration of Five Million Three Hundred Ninety Five Thousand Four Hundred Pesos (P5. For this purpose.[27] Riviera filed the suit to compel Reyes. ―let it be made clear that. were able to come up with the amount sufficient to cover the redemption money.00) per square meter.‖[15] Meanwhile. 1988. Traballo expressed interest in buying the said property. however.[22] Reyes did not expressly offer his subject property to Riviera at the price of Five Thousand Three Hundred Pesos (P5.00). he told the latter that he will look for a partner for that purpose.000.[20] With the terms of this second offer. since Traballo did not have the amount with which to pay Reyes.300. Cornhill and Urban Development Bank to transfer the disputed title to the land in favor of Riviera upon its payment of the price paid by Cypress and Cornhill.395. on December 4. 1989. Alinea met with Angeles and asked the latter to increase his offer of Five Thousand Pesos (P5.[18] Sometime in January 1989.[25] On the same date.00) per square meter. to approach Angeles and find out if the latter was still interested in buying the subject property and ask him to raise his offer for the purchase of the said property a little higher.00) per square meter. He further expressed. Atty. Cornhill Trading Corporation. As instructed.000. Alinea conveyed to Reyes Riviera‘s offer of Five Thousand Pesos (P5. the trial court dismissed the complaint of Riviera as well as the counterclaims and cross-claims of the other parties.000. told Reyes that he will study the matter and suggested for them to meet the next day. through Atty. Reyes accepted the same. at which time Traballo bargained for Five Thousand Three Hundred Pesos (P5. Angeles. that his offer is Five Thousand Pesos (P5. Cypress. After several unsuccessful attempts.00) per square meter but Reyes did not agree.00). 1988. 1988 informing Riviera that Riviera‘s offer is not acceptable to his client.300.[24] On May 1.[28] It ruled . the money for which he could not raise on time thereby offering the subject property to him for Six Thousand Pesos (P6. Atty. Atty.00) per square meter but Angeles said that his offer is Five Thousand Pesos (P5. Following trial on the merits. said he cannot add anymore. the balance payable in five (5) years in equal monthly installments at twelve percent (12%) interest in diminishing balance. Reyes confided to Rolando P.

Alinea to do so. at the first instance. per square meter.00. Angeles.00.000. Alinea. rendered a Decision dated June 6. defendant Reyes. this Court holds that it was no longer necessary for the defendant Reyes to expressly and categorically offer to the plaintiff the subject property at P5. For.that the defendants therein did not violate Riviera‘s right of first refusal. per square meter which is the amount defendants Cypress/Cornhill bought the said property from defendant Reyes. Dissatisfied with the decision of the trial court.000. the plaintiff had lost. both parties appealed to the Court of Appeals. per square meter. RIVIERA‘s unilateral valuation of the subject property thus binds him. RIVIERA.000.00. because Atty. since it is in occupation of the property.[30] In sustaining the decision of the trial court. the term of which was to expire after about four (4) years more. DR. the plaintiff was firm and steadfast in its position. We are convinced.000.00. considering the firm and unbending position of the plaintiff. as lessee. for it to increase its price a little. in order that he can comply with his obligation to give first refusal to the plaintiff as stipulated in the Contract of Lease. it can hardly be validly said by the plaintiff that he was deprived of his right of first refusal to buy the subject property at a price of P5. Alinea. considering that by the plea of Atty.000. 1988 (Exhibit ―D‖.00.00.000. Rollo) justified its rigid offer by saying that ―the above offer is what we feel should be the market price of your property.00. the plaintiff is to be considered as having forfeited again its right of first refusal. sought plaintiff‘s Angeles and asked him to raise his price a little higher. even if defendant Reyes did not expressly offer to sell to it the subject land at P5.‖ If that be the case. in behalf of his uncle. that the plaintiff.00. it would be difficult for other parties to buy the property. Defendants CYPRESS and CORNHILL were therefore right in saying that: On the basic assumption that RIVIERA really meant what it said in its letter. per square meter. because. to have the plaintiff buy the property.000.000.00 per square meter. upon the basis of the last ditch effort of defendant Reyes. p. by refusing to buy the said property at P6. On the other hand. per square meter. since to do so would be a useless ceremony and would only be an exercise in futility. its right of first refusal.000. The fault lies with the deceptive and insincere words of RIVIERA. was not amenable to increasing its price at over P5.300. per square meter.000. that he was willing to sell the said property at a price less than P6. 1994 which affirmed the decision of the trial court in its entirety. instead of adamantly sticking to its offer of only P5. that RIVIERA was unwilling to increase its counter offer at any present or future time. expressed in writing by its President Vicente Angeles.00. this Court takes note that since the beginning of the negotiation between the plaintiff and defendant Reyes for the purchase of the property.00 per square meter on all the occasions when REYES offered the subject property to it.000.00 PER SQUARE METER ON HIS PROPERTY.00 and a little higher than P5. at any event. per square meter. in behalf of defendant Reyes. for the second time. was asked by Atty. 68. it was again given such an opportunity to exercise its right of first refusal by defendant Reyes had it only signified its willingness to increase a little higher its purchase price above P5.00. which defendant Reyes already knew.000. thru his nephew. ratiocinating in this wise: Resolving the first issue. it cannot now be heard to claim that it could have upped its offer had it been informed of CYPRESS‘ and CORNHILL‘S offer of P5. Alinea. in question. therefore. in its letter to REYES dated December 2. per square meter. in its perception. that it was not willing to buy the said property higher than P5. through its Special Seventh Division. which was the asking price of defendant Reyes.300. which was far lower than the asking price of defendant Reyes for P6. by reason of which. it having refused to budged from its regid (sic) offer to buy the subject property at no more than P5. As such. the Court of Appeals adopted the above-quoted ratiocination of the trial court and further added: To put things in its proper perspective in accordance with the peculiar attendant circumstances herein.00 (sic) per square meter. per square meter.300.000. indicating thereby the willingness of defendant Reyes to sell said property at less than his offer of P6. the appellate court. RIVIERA must be deemed in estoppel in . undoubtedly. the same manner that REYES was. Injustice (sic) and equity. the plaintiff having had already lost its right of first refusal. per square meter. REYES could not be faulted for believing that RIVIERA was definitely NOT WILLING TO PAY MORE THAN P5. in question. precisely. Atty.[29] However. it was obvious. at a higher price than what it was offering.00. This being the case. when its President. particular stress should be given to RIVIERA‘s uncompromising counter offer of only P5. per square meter.

‖ (Defendants-Appellees Cypress‘ and Cornhill‘s Brief. Riviera filed a motion for reconsideration. But the incontrovertible antecedents obtaining here clearly reveal REYES‘ earnest efforts in respecting RIVIERA‘s contractual right to initially purchase the subject property. Hence. III THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN DENYING RECONSIDERATION. 8) From this decision. THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN RULING THAT PETITIONER RIVIERA FILIPINA. REYES would have been rightly accused of cunningly circumventing RIVIERA‘s right of first refusal.000. And to this REYES was desperately willing to accede to despite the financial quandary he was then in as the expiration of the redemption period drew closer and closer. whimsically exercising its contractual right to the prejudice of REYES who had commendably given RIVIERA extra leeway in exercising it.now belatedly asserting that it would have been willing to pay a price higher than P5. and by clinging to its offer. in which case. Not only once – but twice – did REYES approach RIVIERA.[31] but the appellate court denied the same in a Resolution dated September 22. IV . the last one being the most telling indication of REYES‘ sincerest intention in RIVIERA eventually purchasing the subject property if only the latter would increase a little its offer of P5. however enlightening and persuasive they may be. REYES unquestionably had displayed good faith. II THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN NOT FINDING THAT IT WAS THE PETITIONER.00 x x x. REYES.000. And to this We say that no amount of jurisprudence RIVIERA might avail of for the purpose of construing the right of first refusal.00 per square meter. REYES‘ fundamental and intrinsic right of ownership which necessarily carries with it the exclusive right to dispose of it to whoever he pleases. Riviera interposed the instant petition anchored on the following errors:[33] I It would have been far different had REYES‘ non-disclosure of CYPRESS‘ and CORNHILL‘s counter-offer to RIVIERA resulted in the sale of the subject property at equal or less than RIVIERA‘s offer. Can the same be said of RIVIERA? We do not think so. no adverse inference can be drawn from REYES‘ failure to disclose to RIVIERA the intervening counter-offer of CYPRESS and CORNHILL. REYES might eventually succumb to its offer out of sheer desperation. ALREADY LOST ITS RIGHT OF FIRST REFUSAL. must ultimately prevail over RIVIERA‘s right of first refusal which it unscrupulously tried to exercise. to be frank. RIVIERA was. p. For after all. INC. NOT RESPONDENT JUAN L. it has only itself to blame. Equity in this case tilts in favor of defendants REYES. CYPRESS and CORNHILL that the consummated sale between them concerning the subject property be given this Court‘s imprimatur. for RIVIERA was well-aware of REYES‘ precarious financial needs at that time. 1994. will cover-up for its arrogant exercise of its right as can be gleaned from the factual premises. and despite the better offer of CYPRESS and CORNHILL.[32] For this reason. for if RIVIERA lost its opportunity to acquire it. It appears that RIVIERA all along was trying to push REYES‘ back against the wall. WHICH HAD BEEN THOROUGHLY DECEIVED BY THE LATTER OUT OF ITS RIGHTS TO ITS CONTINUING PREJUDICE.

Bonnevie[37] where the Court held that a lease with a proviso granting the lessee the right of first priority ―all things and conditions being equal‖ meant that there should be identity of the terms and conditions to be offered to the lessee and all other prospective buyers. Bonnevie and refused to rescind a contract of sale which violated the right of first refusal. a breach thereof decreed under a final judgment does not entitle the aggrieved party to a writ of execution of the judgment but to an action for damages in a proper forum for the purpose. treated as a petition for review under Rule 45 and not as a special civil action for certiorari under Rule 65 of the Revised Rules of Court. THE DECISION OF THE COURT OF APPEALS AND ITS RESOLUTION DENYING RECONSIDERATION. In the 1996 case of Equatorial Realty Development. now the 1997 Rules of Civil Procedure.[34] The rationale for the distinction is simple. If it did. v. Inc. is by way of a petition for review under Rule 45. as it should be. The distinctions between Rule 45 and 65 are far and wide. Thereafter in 1997.[38] the Court en banc departed from the doctrine laid down in Guzman. The Court. v. IS NULL AND VOID. v.. summarizing the rulings in Guzman.[40] the Court affirmed the nature of and the concomitant rights and obligations of parties under a right of first refusal. Bocaling & Co. every error committed by a court would deprive it of its jurisdiction and every erroneous judgment would be a void judgment. At the outset. as in the case at bar. Bocaling & Co. with the lessee to enjoy the right of first priority. an error of judgment that the court may commit in the exercise of its jurisdiction is not correctible through the original special civil action of certiorari. Lastly.[39] the Court en banc reverted back to the doctrine in Guzman Bocaling & Co. in the case of Ang Yu Asuncion v. The administration of justice would not countenance such a rule. Mayfair Theater. the instant petition is. .[36] In the petition at bar. Mayfair Theater. while Riviera alleges that the Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction. Inc. we note that. the most notable of which is that errors of jurisdiction are best reviewed in a special civil action for certiorari under Rule 65. and which is in violation of a right of first refusal granted to the lessee is not voidable under the Statute of Frauds but rescissible under Articles 1380 to 1381 (3) of the New Civil Code. v. It all started in 1992 with Guzman. When a court exercises its jurisdiction an error committed while so engaged does not deprive it of the jurisdiction being exercised when the error is committed. as such. v. in Parañaque Kings Enterprises. v. Further. Bonnevie stating that rescission is a relief allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract may cause or to protect some incompatible and preferred right by the contract. v. there should be identity of terms and conditions to be offered to the buyer holding a right of first refusal if such right is not to be rendered illusory. Inc. Inc.[35] Appeal from a final disposition of the Court of Appeals. Thus. Subsequently in 1994.. Bonnevie and Equatorial Realty Development. The concept and interpretation of the right of first refusal and the consequences of a breach thereof evolved in Philippine juristic sphere only within the last decade. while errors of judgment are correctible only by appeal in a petition for review under Rule 45. Bocaling & Co. Inc. the basis of the right of first refusal must be the current offer to sell of the seller or offer to purchase of any prospective buyer. A deed of sale executed in favor of a third party who cannot be deemed a purchaser in good faith.THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN DECIDING PETITIONER‘S APPEAL AT A TIME WHEN THE PRINCIPAL APPELLEE IS ALLEGEDLY DEAD AND NO PROPER SUBSTITUTION OF THE ALLEGED DECEASED PARTY HAS BEEN MADE. Court of Appeals. held that in order to have full compliance with the contractual right granting petitioner the first option to purchase. Riviera posits the view that its right of first refusal was totally disregarded or violated by Reyes by the latter‘s sale of the subject property to Cypress and Cornhill. the sale of the properties for the price for which they were finally sold to a third person should have likewise been first offered to the former. This cannot be allowed. Court of Appeals. HENCE. It contends that the right of first refusal principally amounts to a right to match in the sense that it needs another offer for the right to be exercised. The Court held that the so-called ―right of first refusal‖ cannot be deemed a perfected contract of sale under Article 1458 of the New Civil Code and.

such construction may be considered by the court in construing the contract. their intention or meaning and as an important. laws are interpreted in the context of the peculiar factual situation of each proceeding. the Court finds relevant and significant the cardinal rule in the interpretation of contracts that the intention of the parties shall be accorded primordial consideration and in case of doubt. or unless according to good faith and the usages of commerce the communication should be made. Naturally. by itself. However. 1988 and February 4.00) of Cypress and Cornhill it would have matched said price. their contemporaneous and subsequent acts shall be principally considered. unless there is a special duty to disclose certain facts. or influential factor in determining the proper construction of the contract. admittedly.[41] Analysis and construction should not be limited to the words used in the contract. persuasive. Reyes and Riviera. shaped their understanding and interpretation of the lease provision ―right of first refusal‖ to mean simply that should the lessor Reyes decide to sell the leased property during the term of the lease. as in all other provisions of the contract. unwilling to budge from his offer.[47] We apply the general rule in the case at bar since Riviera failed to convincingly show that either of the exceptions are relevant to the case at bar. a series of negotiations on the price per square meter of the subject property with neither party. such sale should first be offered to the lessee Riviera. in its letter dated February 4. And that is what exactly ensued between Reyes and Riviera. 1989 that Riviera had lost its right of first refusal. the question as to what is to be included therein or what is meant by the same. silence or concealment.[44] Where the parties to a contract have given it a practical construction by their conduct as by acts in partial performance.[42] The court must read a contract as the average person would read it and should not give it a strained or forced construction. while valid. Each case has its own flesh and blood and cannot be ruled upon on the basis of isolated clinical classroom principles. Rather. It quoted its ―fixed and final‖ price as Five Thousand Pesos (P5. is for the parties and not for the court to determine. significant. determining its meaning and ascertaining the mutual intention of the parties at the time for contracting. as it were. even downgraded its offer when Reyes offered anew the property to it. is rescissible. In sum. Riviera cannot now be heard that had it been informed of the offer of Five Thousand Three Hundred Pesos (P5. such that whatever amount Reyes initially receives from Riviera would absolutely be insufficient to pay off the redemption price of the subject property. Nary a howl of protest or shout of defiance spewed forth from Riviera‘s lips. It can clearly be discerned from Riviera‘s letters dated December 2. 1989 that Riviera was so intractable in its position and took obvious advantage of the knowledge of the time element in its negotiations with Reyes as the redemption period of the subject foreclosed property drew near. especially Riviera.300. or as evidence of. Reyes was under no obligation to disclose the same. It voiced out that it had other properties to consider so Reyes should decide and make known its decision ―within fifteen days. which is evident from Riviera claims.[48] . Its stubborn approach in its negotiations with Reyes showed crystal-clear that there was never any need to disclose such information and doing so would be just a futile effort on the part of Reyes. As clearly shown by the records and transcripts of the case. does not constitute fraud. as evidenced by the exchange of letters between the two contenders. and this question may not be resolved by what the parties might have provided had they thought about it.Thus.[45] An examination of the attendant particulars of the case do not persuade us to uphold Riviera‘s view.[43] In the case at bar. The parties‘ practical construction of their contract has been characterized as a clue or index to. Riviera strongly exhibited a ―take-it or leave-it‖ attitude in its negotiations with Reyes. as they may not accurately reflect the parties‘ true intent. the actions of the parties to the contract of lease. Pursuant to Article 1339[46] of the New Civil Code. we must remember that general propositions do not decide specific cases.000. Reyes had to disagree with Riviera‘s highly disadvantageous offer. but a seemingly whimper of acceptance when the counsel of Reyes strongly expressed in a letter dated December 5. the prevailing doctrine is that a right of first refusal means identity of terms and conditions to be offered to the lessee and all other prospective buyers and a contract of sale entered into in violation of a right of first refusal of another person. convincing. 1989. the Court finds that in the interpretation of the right of first refusal as understood by the parties herein.‖ Riviera.00) and not any peso more. or by what the court might conclude regarding abstract fairness.

No pronouncement as to costs. who died on January 7. Reyes. it later filed on October 27. de la Rosa. 2007 TOMAS ANG. the necessary motion for substitution of deceased Reyes. was filed by the heirs.[49] On the last error attributed to the Court of Appeals which is the effect on the jurisdiction of the appellate court of the non-substitution of Reyes. 146511 September 5. the purpose behind the rule on substitution of parties is the protection of the right of every party to due process. petitioner. simply to avoid seeming hardships. even the Supreme Court. the Court notes that when Riviera filed its petition with this Court and assigned this error. vs. to inform the court of the death of his client and no substitution of such is effected. 1994. Reyes. upon which Riviera anchors its argument. the Court is convinced that the appellate court committed no reversible error in its challenged Decision. Besides. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. despite a contrary construction as exhibited by its actions. and the Decision of the Court of Appeals dated June 6. since the death of Reyes did not extinguish his civil personality. ASSOCIATED BANK AND ANTONIO ANG ENG LIONG. 1994 in CA-G. has already been amended by the 1997 Rules of Civil Procedure. Juan B. the instant petition is hereby DENIED. namely.R. This purpose has been adequately met in this case since both parties argued their respective positions through their pleadings in the trial court and the appellate court.[58] In view of all the foregoing. CV No. Reyes.[53] Notwithstanding the foregoing. has no right to make new contracts for the parties or ignore those already made by them. Needless to stress. Neither abstract justice nor the rule of liberal construction justifies the creation of a contract for the parties which they did not make themselves or the imposition upon one party to a contract of an obligation not assumed. SO ORDERED. The appellate court was well within its jurisdiction to proceed as it did with the case since the death of a party is not subject to its judicial notice. the failure of a counsel to comply with his duty under Section 16 of Rule 3 of the Revised Rules of Court. 1994 a Manifestation[50] with the Court of Appeals stating that it has discovered that Reyes is already dead.The Court would be rewriting the contract of Reyes and Riviera under the guise of construction were we to interpret the right of first refusal as Riviera propounds it. Jr. A court.[57] as this case does. and Fidel B. in view of which the appellate court issued a Resolution dated December 16. respondents. 26513 is AFFIRMED.[52] Acting on the motion for substitution. the Court of Appeals granted the same. WHEREFORE.R.[56] Even applying the old Rules.[51] Complying therewith. 1994 which noted the manifestation of Riviera and directed the counsel of Reyes to submit a copy of the latter‘s death certificate and to file the proper motion for substitution of party. the Court has already acquired jurisdiction over the heirs of Reyes by voluntarily submitting themselves to our jurisdiction. No. Estefania B. Section 16[54] and 17[55] of Rule 3 of the Revised Rules of Court. Juanita R. will not invalidate the proceedings and the judgment thereon if the action survives the death of such party. who died during the pendency of the appeal. .

1986. broken down as follows: PN-No. the latest of which were on September 13. DVO-78-390 AZCUNA.96 as of July 31. the loan would be payable.4 respondent Bank alleged that on October 3 and 9.41 2% Service Charge P11. Davao City. 53413 which reversed and set aside the January 5. 1978.299-90. DVO-78-382. respectively. jointly and severally. Branch 16. respondent Bank claimed that the defendants failed and refused to settle their obligation. DVO-78-390. on Antonio Ang Eng Liong and Tomas Ang. 1% penalty charge per month from due date until fully paid. and P30.00 P30.R. DVO-78-382 14% Interest P203. 2% service charge per annum. 1996 Decision3 of the Regional Trial Court. 1979 and December 8. 1990. on January 31. the defendants obtained a loan of P50. respectively. As agreed. subsequent amendments5 to the promissory notes as well as the disclosure statements6 stipulated that the loan would earn 14% interest rate per annum. dismissing the complaint filed by respondents for collection of a sum of money. respondent Associated Bank (formerly Associated Banking Corporation and now known as United Overseas Bank Philippines) filed a collection suit against Antonio Ang Eng Liong and petitioner Tomas Ang for the two (2) promissory notes that they executed as principal debtor and co-maker. and attorney's fees equivalent to 20% of the outstanding obligation.199 days (from 01-31-79 to 07-31-90) Past due charges for 4.538. resulting in a total indebtedness of P539. 1988 and September 9.253 days (from 12-8-78 to 07-31-90) In the Complaint.98 P125. 1978.: Outstanding Balance This petition for certiorari under Rule 45 of the Rules on Civil Procedure seeks to review the October 9. evidenced by a promissory note bearing PN-No.638. 1990. 20.000.334.000.00 Add Past due charges for 4.663. In addition.DECISION PN-No.000. Despite repeated demands for payment. respectively.000. evidenced by a promissory note bearing PN-No. P50. On August 28. in Civil Case No.34 .088. CV No. 2000 Decision1 and December 26.89 P7. J. 2000 Resolution2 of the Court of Appeals in CA-G.

. penalties.000 for moral and exemplary damages. Furthermore. the bank knew that he did not receive any valuable consideration for affixing his signatures on the notes but merely lent his name as an accommodation party. the bank granted his codefendant successive extensions of time within which to pay. petitioner Tomas Ang filed an Answer with Counterclaim and Cross-claim. plus P30. without his knowledge and consent. Regarding his counterclaim.983.00 Total P285. the bank imposed new and additional stipulations on interest.000 and P50.000.530. hence.000 from the bank. DVO-78-382 was completed in excess of or contrary to the authority given by him to his co-defendant who represented that he would only borrow P30. respectively. which was allegedly collecting excessive interest. penalty charges. on his cross-claim against Antonio Ang Eng Liong. he accepted the promissory notes in blank.000 for attorney's fees and expenses of litigation. his signature in PN-No.952.000. it should be held liable for the amount of P50. the promissory notes did not indicate in what capacity he was intended to be bound. P69.8 He interposed the affirmative defenses that: the bank is not the real party in interest as it is not the holder of the promissory notes.952. He pleaded though that the bank "be ordered to For his part. and the notes had been impaired since they were never presented for payment and demands were made only several years after they fell due when his co-defendant could no longer pay them. much less a holder for value or a holder in due course.7 Antonio Ang Eng Liong only admitted to have secured a loan amounting to P80. instructions. PN-No. he had no source of income for several years. services charges and attorney's fees more onerous than the terms of the notes. and attorney's fees. or representations of his co-defendant.75 Less: Charges paid P500. without his (Tomas Ang) knowledge and consent. Tomas Ang argued that by reason of the bank's acts or omissions. in the absence of legal and factual basis and in violation of the Usury Law. and attorney's fees despite knowledge that his business was destroyed by fire. DVO-78390 was procured through fraudulent means when his co-defendant claimed that his first loan did not push through.00 None Amount Due P334. with only the printed provisions and the signature of Antonio Ang Eng Liong appearing therein. he averred that he should be reimbursed by his co-defendant any and all sums that he may be adjudged liable to pay.34 P42. it was the bank which completed the notes upon the orders. the bank caused the inclusion in the promissory notes of stipulations such as waiver of presentment for payment and notice of dishonor which are against public policy.186.12% Overdue Charge submit a more reasonable computation" considering that there had been "no correct and reasonable statement of account" sent to him by the bank. P20.75 In his Answer.21 P204.686.21 P174.

14 of the NIL provides that the bank has the prima facie authority to complete the blank form. On October 19. Antonio Ang Eng Liong was ordered to pay the principal amount of P80. the bank posited that absence or failure of consideration is not a matter of defense. 3[c. reduced for being excessive.000.12 Despite Tomas Ang's motion13 to modify the Order so as to exclude or cancel the ex-parte hearing based on then Sec. interest can be charged depending on the agreement of the lender and the borrower. ordering the former to pay the latter: On the first cause of action: The bank also asserted that there were no additional or new stipulations imposed other than those agreed upon. however. Reference to the Usury Law was misplaced as usury is legally non-existent. the bank contended that the provisions on presentment for payment and notice of dishonor were expressly waived by Tomas Ang and that such waiver is not against public policy pursuant to Sections 82 (c) and 109 of the NIL. it is presumed that one who has signed as a maker acted with care and had signed the document with full knowledge of its content.9 respondent Bank countered that it is the real party in interest and is the holder of the notes since the Associated Banking Corporation and Associated Citizens Bank are its predecessors-in-interest. It was denied by the bank that there were extensions of time for payment accorded to Antonio Ang Eng Liong. 4. The bank noted that Tomas Ang is a prominent businessman in Davao City who has been engaged in the auto parts business for several years. as an accommodation maker.663. neither is the fact that the holder knew him to be only an accommodation party.14 Eventually. and . the hearing nonetheless proceeded. Rule 9 of the Revised Rules on Civil Procedure). it said that the same would not relieve Tomas Ang from liability as he would still be liable for the whole obligation less the share of his co-debtor who received the extended term.11 Per Order of November 23.10 When Antonio Ang Eng Liong failed to submit his brief.00 representing the principal obligation with 14% interest per annum from June 27.89 as accrued service charge. thus: WHEREFORE. the trial court issued a preliminary pre-trial order directing the parties to submit their respective pre-trial guide. a decision15 was rendered by the trial court on February 21. there is even no necessity therefor since being a solidary debtor he is absolutely required to pay and primarily liable on both promissory notes. 1) the amount of P50. The fact that Tomas Ang never received any moneys in consideration of the two (2) loans and that such was known to the bank are immaterial because.000 plus 14% interest per annum and 2% service charge per annum. at present. hence. The overdue penalty charge and attorney's fees were. In fact. and attorney's fees were reflected in the amendments to the promissory notes and disclosure statements. the court granted the motion and set the ex-parte hearing for the presentation of the bank's evidence. judgment is rendered against defendant Antonio Ang Eng Liong and in favor of plaintiff. 1990. Citing Section 29 of the Negotiable Instruments Law (NIL). 1983 with 2% service charge and 6% overdue penalty charges per annum until fully paid.In its Reply. 1990. service charge. Rule 18 of the old Rules of Court (now Sec. Respondent Bank likewise retorted that the promissory notes were completely filled up at the time of their delivery. Sec.]. Lastly. 2) P11. 1991. Further. Assuming that such was not the case. he is already in estoppel since despite receipt of several demand letters there was not a single protest raised by him that he signed for only one note in the amount of P30. The penalty charge. For his supposed bad faith and obstinate refusal despite several demands from the bank. he is considered as a solidary debtor who is primarily liable for the payment of the promissory notes. certainly he is not so naïve as to sign the notes without knowing or bothering to verify the amounts of the loans covered by them.000. the bank filed an ex-parte motion to declare him in default. Granting that such were the case. Moreover.

1991.991.20 Tomas Ang maintained that he is released from his obligation as a solidary guarantor and accommodation party because. original Promissory Note (PN for brevity) # DVO-78-382 dated October 3. which. he is now precluded from asserting his cross-claim against Antonio 2. That corroborative to. 4. the court set the pre-trial conference between the bank and Tomas Ang. 1991.] b. Ang Eng Liong. . and/or preparatory or incident to his testimony[. On the second cause of action: 1) the amount of P50. 1991 rendered against him based on such evidence.22 In accordance with the prayer of Tomas Ang. and Trial then ensued between the bank and Tomas Ang. 4) the amount of P10. in turn.24 5) the amount of P620. Rule 18 of the old Rules sanctions only one judgment in case of several defendants.23 3) P21. viz: a. on June 3. Upon the bank's ex-parte motion. 1992 in CA G. Antonio Ang Eng Liong was again declared in default for his failure to answer the cross-claim within the reglementary period. The court denied the motion as well as the motion for reconsideration thereon. in his Supplemental Motion to Dismiss.000. and the Writ of Execution issued on April 5.00 as attorney's fees.] there is [a] need for him to examine original records in the custody and possession of plaintiff. 1990 setting the ex-parte presentation of the bank's evidence against Antonio Ang Eng Liong. He contended that Sec.21 Tomas Ang subsequently filed a petition for certiorari and prohibition before this Court.00 (sic) representing the principal account with 14% interest from June 27.18 who.088.67 as accrued overdue penalty charge. Moreover.34 representing accrued service charge.25 reasoning: SO ORDERED. which annulled and set aside the portion of the Order dated November 23. resolved to refer the same to the Court of Appeals. 26332.3) P34. he filed a Motion for Production of Documents.000. upon whom a final and executory judgment had already been issued.00 as accrued overdue penalty charge.17 Thereafter. the court accordingly issued a writ of execution on April 5. 1983 with 2% service charge and 6% overdue penalty charges per annum until fully paid. SP No. by the bank's actions. 1991 Decision. one of whom is declared in default. the Decision dated February 21. 2) P7.265. however. Upon the latter's motion during the pre-trial conference. 1991. 1978[.R. the appellate court promulgated its Decision on January 29. When Tomas Ang was about to present evidence in his behalf.16 xxx The decision became final and executory as no appeal was taken therefrom. filed a Motion to Dismiss19 on the ground of lack of jurisdiction over the case in view of the alleged finality of the February 21.00 as litigation expenses and to pay the costs. original of Disclosure Statement in reference to PN # DVO-78-382.

however. withdrawal slips. the latter may raise against such payee or holder or successor-in-interest (of the notes) PERSONAL and EQUITABLE DEFENSES such as FRAUD in INDUCEMENT. dismissing the complaint for lack of cause of action. .R. DVO-78-382 and DVO-78-390 such as financial statements. as certified by the notary public. 470.32 Thereafter. 1994. No. the trial court rendered judgment against the bank.33 On January 5. Tomas Ang elected to withdraw his petition in CA G. viz: . are immaterial since.c. and besides its non-existence in the bank's records. g. Application of [Articles] 2079. he is being sued for the notes and not for the overdraft which is personal to Antonio Ang Eng Liong.28 On August 17. pursuant to the previous ruling of the court.A. Exh. as required by the Central Bank or bank rules and regulations. 1994. which included a copy of the Trust Agreement between the Republic of the Philippines and the Asset Privatization Trust. and news clippings from the Manila Bulletin dated May 18. notices. the Statements or Records of Account of Antonio Ang Eng Liong in CA No. Nos. That the above matters are very material to the defenses of defendant Tomas Ang. 34840 before the Court of Appeals. 1996.27 the court denied the motion stating that the promissory notes and the disclosure statements have already been shown to and inspected by Tomas Ang during the trial. as in fact he has already copies of the same.34 It held that: . Tomas Ang offered in evidence several documents. income tax returns. etc. DISCHARGE ON NOTE. 470. SP No. O) including bank records. there would be legal obstacle for the production and inspection of the income tax return of Antonio Ang Eng Liong if done without his consent. Loan Applications of Antonio Ang Eng Liong or borrower relative to PN Nos. 1978.The real borrower is Antonio Ang Eng Liong which fact is known to the bank. of Antonio Ang in CA No.31 All the documentary exhibits were admitted for failure of the bank to submit its comment to the formal offer. the Court of Appeals denied the issuance of a Temporary Restraining Order. NEGLIGENCE in delaying collection despite Eng Liong's OVERDRAFT in C.29 Meanwhile. 1994 and May 30. the trial court decided to continue with the hearing of the case. which was then granted. notwithstanding its initial rulings that Tomas Ang was deemed to have waived his right to present evidence for failure to appear during the pendency of his petition before the Court of Appeals. original of Disclosure Statement in reference to PN # DVO-78-390. Other supporting papers and documents submitted by Antonio Ang Eng Liong relative to his loan application vis-à-vis PN. 470.26 In its Order dated May 16. SP No. 470 (cf.R. Statement or Record of Account with the Associated Banking Corporation or its successor. f. relative to his overdraft. d. original of PN # DVO-78-390 dated October 9. When the motion for reconsideration of the aforesaid Order was denied. 1994.30 After the trial. e.the bank is not a holder in due course when it accepted the [PNs] in blank. etc.That the PAYEE not being a holder in due course and knowing that defendant Tomas Ang is merely an accommodation party. 2080 and 1249 of the Civil Code. DVO-78-382 and DVO-78-390 (supra). . 34840. other papers and relevant dates relative to the overdraft of Antonio Eng Liong in CA No. 3. Tomas Ang filed a petition for certiorari and prohibition with application for preliminary injunction and restraining order before the Court of Appeals docketed as CA G.

collection and enforcement of the receivables. "ASSOCIATED BANK. One main feature of the rehabilitation plan included the financial assistance for the bank by the Philippine Deposit Insurance Corporation (PDIC) by way of the purchase of AB Assets worth P1. both financial institutions assigned. Exh.86 at 25% discount. did not mention the promissory notes subject of the Complaint. II. Lastly. "9" and its [sub-markings]. which was empowered to bring suit to enforce payment of the obligations. and the Agreement did not reflect the signatures of the contracting parties.Exh." the following errors were alleged: I. acting through the Committee on Privatization represented by the Secretary of Finance as trustor and the Asset Privatization Trust. show that the Monetary Board of the Bangko Sentral ng Pilipinas approved the rehabilitation plan of the Associated Bank. conveyed and assigned by way of trust unto the Asset Privatization Trust said non-performing assets. Defendants. transferred. which was not even legible. transferred and conveyed their non-performing assets to the National Government. In the appellant's brief captioned. [to] conserve.36 The bank stressed that it has established the causes of action outlined in its Complaint by a preponderance of evidence. [which] took title to and possession of. the notes were held by the Asset Privatization Trust by virtue of the Deeds of Transfer and Trust Agreement. 1994. or any other claim or demand which the government may have against any person or persons[. it would readily appear that at the time this suit for Sum of Money was filed which was on August [28]. 1994 and May 30. "9-A". the bank is not a party to the Agreement.] Respondent Bank then elevated the case to the Court of Appeals. the National Government in turn and as TRUSTOR. the Agreement. "9-B". which included the purchase of AB's bad loans worth P1. and "9-D". Plaintiff-Appellant versus ANTONIO ANG ENG LIONG and TOMAS ANG. which was created by virtue of Proclamation No. Defendant-Appellee. TOMAS ANG. The Manila Bulletin news clippings dated May 18.37 . it contended that the same were never authenticated by any witness in the course of the trial. "9-C". This will then be paid by AB within a 10year period plus a yield comparable to the prevailing market rates x x x. which showed that it was between the Government of the Philippines. defendant Tomas Ang has sufficiently established that plaintiff at the time this suit was filed was not the holder of the notes to warrant the dismissal of the complaint. one of the powers and duties of the APT with respect to trust properties consisting of receivables is to handle the administration. Based then on the evidence presented by the defendant Tomas Ang.3945 billion subject to a buy-back arrangement over a 10 year period. provisionally manage and dispose[. Consequently. the bank averred that the news items appearing in the Manila Bulletin could not be the subject of judicial notice since they were completely hearsay in character. As regards the Deed of Transfer and Trust Agreement.] of said assets identified for privatization or disposition. 1986 is one of DBP's or Development Bank of the [Philippines'] non-performing accounts for transfer. The PDIC had approved of the rehab scheme. 50. the Trust Agreement dated 27 February 1987 for the defense shows that: the Associated Bank as of June 30.35 THE LOWER COURT ERRED IN DISMISSING PLAINTIFF-APPELLANT'S COMPLAINT ON THE BASIS OF NEWSPAPER CLIPPINGS WHICH WERE COMPLETELY HEARSAY IN CHARACTER AND IMPROPER FOR JUDICIAL NOTICE. 1990. to bring suit to enforce payment of the obligations or any installment thereof or to settle or compromise any of such obligations. on February 27. THE LOWER COURT ERRED IN NOT HOLDING DEFENDANT ANTONIO ANG ENG LIONG AND DEFENDANT-APPELLEE TOMAS ANG LIABLE TO PLAINTIFF-APPELLANT ON THEIR UNPAID LOANS DESPITE THE LATTER'S DOCUMENTARY EXHIBITS PROVING THE SAID OBLIGATIONS. 1987 through Deeds of Transfer executed by and between the Philippine National Bank and Development Bank of the Philippines and the National Government.

1979 until the full amount thereof is paid. SO ORDERED. DVO-78-382 plus 14% interest thereon per annum computed from January 31.00 representing the principal amount of the loan under PN-No. at the time of taking the notes. that he is only an accommodation party. 20. in Civil Case No. Branch 16.000. as a co-maker who agreed to be jointly and severally liable on the promissory notes. the Asset Privatization Trust cannot be declared as the "holder" of the subject promissory notes for the reason that it is neither the payee or indorsee of the notes in possession thereof nor is it the bearer of said notes. DVO-78-390 plus 14% interest thereon per annum computed from December 8. Nonetheless. or that he merely acted on the belief that the first loan application was cancelled. it posed for resolution the issue of whether the trial court erred in dismissing the complaint for collection of sum of money for lack of cause of action as the bank was said to be not the "holder" of the notes at the time the collection case was filed. Further. P50. The Court of Appeals observed that the bank. P30. as the payee." Instead.299-90 is hereby REVERSED AND SET ASIDE and another one entered ordering defendantappellee Tomas Ang to pay plaintiff-appellant Associated Bank the following: 1. Tomas Ang cannot validly set up the defense that he did not receive any consideration therefor as the fact that the loan was granted to the principal debtor already constitutes a sufficient consideration. the Court of Appeals held that the bank is a "holder" under Sec.000. the Decision of the Regional Trial Court of Davao City. premises considered. 2000.00 representing the principal amount of the loan under PN-No. No pronouncement as to costs. In his motion for reconsideration. Defendant-appellee's counterclaim is likewise DISMISSED for lack of legal and factual bases. the Court of Appeals held that Tomas Ang is accountable therefor in his capacity as an accommodation party. 29 of the NIL. 1978 until the full amount thereof is paid. 2.39 The appellate court disregarded the bank's first assigned error for being "irrelevant in the final determination of the case" and found its second assigned error as "not meritorious.40 Tomas Ang raised for the first time the assigned errors as follows: xxx In answering the lone issue. It concluded that despite the execution of .On October 9. the Court of Appeals reversed and set aside the trial court's ruling. Citing Sec. he is liable to the bank in spite of the latter's knowledge. 191 of the NIL. did not indorse the notes to the Asset Privatization Trust despite the execution of the Deeds of Transfer and Trust Agreement and that the notes continued to remain with the bank until the institution of the collection suit. it is apparent that he was negligent in falling for the alibi of Antonio Ang Eng Liong and such fact would not serve to exonerate him from his responsibility under the notes. the Court of Appeals agreed with the bank that the experience of Tomas Ang in business rendered it implausible that he would just sign the promissory notes as a co-maker without even checking the real amount of the debt to be incurred. penalty and overdue charges as well as attorney's fees on the ground that the promissory notes made no mention of such charges/fees. According to the appellate court. the Deeds of Transfer and Trust Agreement. the Court of Appeals denied the claims of the bank for service. All other claims of the plaintiff-appellant are DISMISSED for lack of legal basis. Moreover. With the bank as the "holder" of the promissory notes. The dispositive portion of the Decision38 reads: WHEREFORE.

2) Related to the above jurisdictional issues.30 and not P614. as of today. appellant bank fraudulently failed to specify the amount of compounded interest at 14% per annum. service charges at 2% per annum and overdue penalty charges at 12% per annum in the prayer of the complaint as of the time of its filing. HAD LONG BECOME FINAL AND EXECUTORY. In view thereof. Accordingly.75 including 20% attorney's fees. appellee Tomas Ang should be released from his suretyship obligation pursuant to Art. 129. 2080 of the Civil Code. pursuant to SC Circular No. when in fact the same was capitalized as principal by appellant bank every month to earn more interest.216. Did the Court of Appeals [commit] error in assigning its own error and raising its own issue? 4. The above is related to the issues above-stated. DVO-78-390 (instead of P125. the jurisdiction of the Municipal Trial Court had been increased to P100. describing the 14% imposition as interest. the time of filing of the complaint.42 Petitioner now submits the following issues for resolution: 1.334. Tomas Ang's right of subrogation against Ang Eng Liong. coupled with the insolvency of the principal debtor.618. respondent Eng Liong? 2. the total fees that should have been paid at the time of the filing of the complaint on August 28. and now when it failed to serve notice of appeal and appellant's brief upon him. Book I of the 1987 Administrative Code.000. Accordingly. the interest on the promissory notes as of July 31. THE APPEALED JUDGMENT OF THE TRIAL COURT WHICH LEFT OUT TOMAS ANG'S CROSS-CLAIM AGAINST ENG LIONG (BECAUSE IT DISMISSED THE MAIN CLAIM). section 5 of RA No.566.193.00 in principal claims last March 20.41 Finding no cogent or compelling reason to disturb the Decision. and the defense of incomplete but delivered instrument.98) and P49.36 in both causes of action.538. 4) This Court may have erred in ADDING or ASSIGNING its own bill of error for the benefit of appellant bank which defrauded the judiciary by the payment of deficient docket fees.96). In fact. the payee's grant of additional burdens. He submits that the bank carefully and shrewdly hid the fact by describing the amounts as interest instead of being part of either the principal or penalty in order to pay a lesser amount of docket fees. expressed in his cross-claim.22 for PN No. 1990 should have been only P81. Petitioner contends that the bank may not now pay the deficiency . under the jurisdictional rule laid down in BP Blg.647. the Court of Appeals denied the motion in its Resolution dated December 26. defendant-appellee Tomas Ang has recently discovered that upon the filing of the complaint on August 28.39 (which is actually compounded and capitalized) in both causes of action and the total service and overdue penalties and charges and attorney's fees further amount to P239. According to him. 2000. Significantly. the trial court never acquired jurisdiction over the case and the same may not be now corrected by the filing of deficiency fees because the causes of action had already prescribed and more importantly.75 (instead of P539.373. and section 31. 1999. DVO-78-382 (instead of P203. 21-99. 1990. is now SEVERAL TIMES foreclosed because of the fault or negligence of appellant bank since 1979 up to its insistence of an ex-parte trial. as stated in the notes. 7691. appellant fraudulently misled the Court.41) while the principal debt as of said date should increase to P647.566. In other words. 1990 was P2. paying a total of only P640. Is [A]rticle 2080 of the Civil Code applicable to discharge petitioner Tomas Ang as accommodation maker or surety because of the failure of [private] respondent bank to serve its notice of appeal upon the principal debtor. as of July 31. meritorious?43 Petitioner allegedly learned after the promulgation of the Court of Appeals' decision that. Did the trial court have jurisdiction over the case at all? 3. 1990. 3) BY FAILING TO GIVE NOTICE OF ITS APPEAL AND APPEAL BRIEF TO APPELLEE ANG ENG LIONG.00(!!!) as filing and court docket fees although the total sum involved as of that time was P647.638. Are petitioner's other real and personal defenses such as successive extensions coupled with fraudulent collusion to hide Eng Liong's default.00 or a shortage of 71%. AS AGAINST ENG LIONG. particularly if the bank foregoes capitalization of the stipulated interest.33 for PN No. pursuant to the parties' agreement on the compounding of interest with the principal amount (per month in case of default). the stated interest in the body of the complaint alone amount to P328. jurisdiction over the subject falls within the exclusive jurisdiction of the MTC.

8. (e) matters not assigned as errors on appeal but closely related to an error assigned. Higher courts are precluded from entertaining matters neither alleged in the pleadings nor raised during the proceedings below. The petition is unmeritorious. NIL [Act No. (c) matters not assigned as errors on appeal but consideration of which is necessary in arriving at a just decision and complete resolution of the case or to serve the interests of justice or to avoid dispensing piecemeal justice. and (3) it is not entirely accurate to say that the payee who has not indorsed the notes in all cases is the real party in interest because the rights of the payee may be subject of an assignment of incorporeal rights under Articles 1624 and 1625 of the Civil Code. (Citations omitted)45 . 1986. unless stated in the assignment of errors. and (f) matters not assigned as errors on appeal but upon which the determination of a question properly assigned is dependent. or more than twenty years have elapsed such that prescription had already set in. Procedurally. Civil Code). Indeed. Bautista. an appellate court is clothed with ample authority to review rulings even if they are not assigned as errors in the appeal in these instances: (a) grounds not assigned as errors but affecting jurisdiction over the subject matter. conservation or rehabilitation. (2) even under P. Section 8 of Rule 51 of the Rules of Court provides: SEC.44 this Court recognized the broad discretionary power of an appellate court to waive the lack of proper assignment of errors and to consider errors not assigned. in effect.because the last demand letter sent to him was dated September 9. — No error which does not affect the jurisdiction over the subject matter or the validity of the judgment appealed from or the proceedings therein will be considered. in this case. allegedly discharged a simple contract for the payment of money (Sections 119 [d] and 122. he opines that the appellate court's decision that the bank is the real party in interest because it is the payee named in the note or the holder thereof is too simplistic since: (1) the power and control of Asset Privatization Trust over the bank are clear from the explicit terms of the duly certified trust documents and deeds of transfer and are confirmed by the newspaper clippings. 902-A or the General Banking Act. or closely related to or dependent on an assigned error and properly argued in the brief. trustee or conservator) who may properly act for said entity. Thus. no issue may be raised on appeal unless it has been brought before the lower tribunal for its consideration. this maxim is subject to exceptions. Lastly. and. even if it be the "holder" of the promissory notes. Civil Code). our rules recognize the broad discretionary power of an appellate court to waive the lack of proper assignment of errors and to consider errors not assigned. (d) matters not specifically assigned as errors on appeal but raised in the trial court and are matters of record having some bearing on the issue submitted which the parties failed to raise or which the lower court ignored. thereby. and impaired the notes. In Mendoza v. 2031]). the bank. which. as with most procedural rules. it rendered the judgment of the trial court final and executory with respect to Antonio Ang Eng Liong. Consequently. save as the court may pass upon plain errors and clerical errors. released him (Antonio Ang Eng Liong) from any and all liability under the promissory notes and. if it deems proper under the circumstances obtaining. foreclosed petitioner's cross-claims.D. the bank's claim must be dismissed as the trial court loses jurisdiction over the case. the bank was held by Asset Privatization Trust as trustee. Petitioner also argues that the Court of Appeals should not have assigned its own error and raised it as an issue of the case. receiver. it is well within the authority of the Court of Appeals to raise. By such act. At any rate. contending that no question should be entertained on appeal unless it has been advanced in the court below or is within the issues made by the parties in the pleadings. error/s not assigned on an appealed case. thus: As a rule. it is only the representative (liquidator. producing the effect of payment (Article 1249. However. No. prevented a surety like petitioner from being subrogated in the shoes of his principal (Article 2080. Questions that may be decided. where a corporation or a bank is under receivership. but ventilated for the first time only in a motion for reconsideration or on appeal. (b) matters not assigned as errors on appeal but are evidently plain or clerical errors within contemplation of law. petitioner maintains that when respondent Bank served its notice of appeal and appellant's brief only on him.

Atty. 1986.53 and then from July 1.54 and further from January 1. Aquino issued Proclamation No. 2000. 1995. then President Corazon C. equity investments. 1992. for the benefit of the National Government. had the authority to file and prosecute the case. the proclamation created the Asset Privatization Trust." the issue of whether the trial court erred in dismissing the complaint for collection of sum of money for lack of cause of action (on the ground that the bank was not the "holder" of the notes at the time of the filing of the action) is in reality closely related to and determinant of the resolution of whether the lower court correctly ruled in not holding Antonio Ang Eng Liong and petitioner Tomas Ang liable to the bank on their unpaid loans despite documentary exhibits allegedly proving their obligations and in dismissing the complaint based on newspaper clippings. including. 2000 until December 31. even if the Court of Appeals regarded petitioner's two assigned errors as "irrelevant" and "not meritorious. the existence of the Asset Privatization Trust would have expired five (5) years from the date of issuance of Proclamation No. Now.56 Based on the above backdrop. then President Aquino subsequently issued Administrative Order No. on one hand. a brief history on the creation of the Asset Privatization Trust is proper. duties and functions of the Asset Privatization Trust under the proclamation. is it the bank or the Asset Privatization Trust? To answer the query. the Privatization and Management Office was established and took over.57 The Asset Privatization Trust. the DBP's equity with respondent Bank. 1993 until June 30. among others. 1999. Taking into account the imperative need of formally launching a program for the rationalization of the government corporate sector. on the other. accrued interest receivables. conserve.52 and again from December 31. whereby the non-performing accounts of DBP and PNB. 1987 between the National Government. In turn. 14 on February 3. and to exercise all other rights. which would. powers. openly admitted that it was under the trusteeship of the Asset Privatization Trust. 1991 up to August 31. Hence. . institute all proceedings. the powers. which should have been represented by the Office of the Government Corporate Counsel. 1987. take title to and possession of. among the powers and duties of the Asset Privatization Trust with respect to the trust properties consisting of receivables was to handle their administration and collection by bringing suit to enforce payment of the obligations or any installment thereof or settling or compromising any of such obligations or any other claim or demand which the Government may have against any person or persons. 5046 on December 8. Roderick Orallo. acquired assets and other assets) and liabilities (consisting of deposits. 1990 against Antonio Ang Eng Liong and petitioner Tomas Ang. The transfer of assets was implemented through a Deed of Transfer executed on February 27.55 Thenceforth. As one of the twin cornerstones of the program was to establish the privatization of a good number of government corporations. the National Government designated the Asset Privatization Trust to act as its trustee through a Trust Agreement.51 However. no error could be ascribed to the Court of Appeals on this point. borrowings. counsel for the bank. respondent Bank does not appear to be the real party in interest when it instituted the collection suit on August 28.49 As provided for in the Agreement. were entrusted to the Asset Privatization Trust.To the Court's mind. among others. which approved the identification of and transfer to the National Government of certain assets (consisting of loans. provisionally manage and dispose of transferred assets that were identified for privatization or disposition. 50. In fact. and to do all acts.47 In accordance with the provisions of Section 2348 of the proclamation. other liabilities and contingent guarantees) of the Development Bank of the Philippines (DBP) and the Philippine National Bank (PNB). At the time the complaint was filed in the trial court. and the DBP and PNB. during the pre-trial conference.50 Incidentally. the more relevant question is: who is the real party in interest at the time of the institution of the complaint. its original term was extended from December 8. 1995 up to December 31. it was the Asset Privatization Trust which had the authority to enforce its claims against both debtors. and privileges of ownership that an absolute owner of the properties would otherwise have the right to do.

Article 208067 of the Civil Code does not apply in a contract of suretyship.66 Contrary to petitioner's adamant stand. viz: (1) he must be a party to the instrument.The foregoing notwithstanding.64 Although a contract of suretyship is in essence accessory or collateral to a valid principal obligation. Philippine Currency.000. Section 29 of the NIL defines an accommodation party as a person "who has signed the instrument as maker. knew him or her to be merely an accommodation party. constituted a release of his obligation. the surety's liability to the creditor is immediate. it stands without refute. the principal debtor. for value received. that petitioner signed the promissory note as a solidary co-maker and not as a guarantor. drawer.59 An accommodation party lends his name to enable the accommodated party to obtain credit or to raise money.00) Pesos.60 The accommodation party is liable on the instrument to a holder for value even though the holder. Article 2080 of the Civil Code which provides that: "The guarantors. sometime in October 1993. The case of Inciong.68 Art. By such re-acquisition from the Asset Privatization Trust when the case was still pending in the lower court. Title I. acceptor. Book IV of the Civil Code must be observed. however. an accommodation party is one who meets all the three requisites. Chapter 3. are released from their obligation whenever by come act of the creditor. acceptor. and preferences of the latter. even though they be solidary. Article 2047 of the Civil Code states: . signing as maker. He cites as basis for his argument. the relation between an accommodation party and the accommodated party is one of principal and surety – the accommodation party being the surety. his co-maker. he receives no part of the consideration for the instrument but assumes liability to the other party/ies thereto. and for the purpose of lending his name to some other person." A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation. they cannot be subrogated to the rights." As gleaned from the text. at present. especially because the dismissal of the case against Pantanosas was upon the motion of private respondent itself. together with interest x x x at the rate of SIXTEEN (16) per cent per annum until fully paid. it could rightfully qualify as a "holder"58 thereof under the NIL. mortgages. he is deemed an original promisor and debtor from the beginning. (2) he must not receive value therefor.65 As an equivalent of a regular party to the undertaking. at the time of taking the instrument. or indorser. Accordingly." It is to be noted.63 he is considered in law as the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter since their liabilities are interwoven as to be inseparable. the provisions of Section 4. and each creditor is entitled to demand the whole obligation. that the issue had been rendered moot with the occurrence of a supervening event – the "buy-back" of the bank by its former owner. this Court can not. I/we. Leonardo Ty. the bank reclaimed its real and actual interest over the unpaid promissory notes. he is directly and equally bound with the principal. both in the pleadings as well as in the evidence presented during the trial and up to the time this case reached the Court. v. Notably. drawer. however. CA69 is illuminating: Petitioner also argues that the dismissal of the complaint against Naybe. and against Pantanosas. 2047 of the Civil Code states that if a person binds himself solidarily with the principal debtor. without receiving value therefor.62 As such. as if the contract was not for accommodation. This is patent even from the first sentence of the promissory note which states as follows: "Ninety one (91) days after date. readily subscribe to petitioner's insistence that the case must be dismissed. a surety becomes liable to the debt and duty of the principal obligor even without possessing a direct or personal interest in the obligations nor does he receive any benefit therefrom. On the other hand. or indorser.61 As petitioner acknowledged it to be. Significantly. JOINTLY and SEVERALLY promise to pay to the PHILIPPINE BANK OF COMMUNICATIONS at its office in the City of Cagayan de Oro. hence. and (3) he must sign for the purpose of lending his name or credit to some other person. primary and absolute. Articles 1207 up to 1222 of the Code (on joint and solidary obligations) shall govern the relationship of petitioner with the bank. Jr. Philippines the sum of FIFTY THOUSAND ONLY (P50.

that the Court of Appeals. Title I.000. petitioner did not also serve him a copy thereof. some or all of them may be proceeded against for the entire obligation. despite including in the caption of the appellee's brief his co-debtor as one of the defendants-appellees. As a matter of course. the trial court's judgment. being a party declared in default. even without considering these default judgments. being the party accommodated. already lacked jurisdiction over his person or over the subject matter relating to him because he was not a party in CA-G."By guaranty a person. already waived his right to take part in the trial proceedings and had to contend with the judgment rendered by the court based on the evidence presented by the bank and petitioner. (Citations omitted)70 In the instant case. Under Art. 53413. Chapter 3. penalty charges. Antonio Ang Eng Liong was expressly named as one of the defendants-appellees. much less this Court. in not filing his answer to petitioner's cross-claims. called the guarantor. in his "special appearance" through counsel. title I. In his Answer to the complaint. some or all of the debtors. it was only in his motion for reconsideration from the adverse judgment of the Court of Appeals that petitioner belatedly chose to serve notice to the counsel of his co-defendantappellee. in effect. when the law so provides or when the nature of the obligation so requires. retains all the other rights. the presumption is that obligation is joint so that each of the debtors is liable only for a proportionate part of the debt. in not filing a pre-trial brief and another. In such a case the contract is called a suretyship. Antonio Ang Eng Liong.71 It is plainly mistaken for petitioner to say that just because the bank failed to serve the notice of appeal and appellant's brief to Antonio Ang Eng Liong.R. The later. CV No. in the caption of the Court of Appeals' decision. There is a solidarily liability only when the obligation expressly so states. Nonetheless. he did not deny such liability but merely pleaded that the bank "be ordered to submit a more reasonable computation" instead of collecting excessive interest. may seek reimbursement from Antonio Ang Eng Liong. petitioner. binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. Book IV of the Civil Code states the law on joint and several obligations. and attorney's fees. this Court rejects the contention of Antonio Ang Eng Liong. he was nonetheless impleaded in the case since his name appeared in the caption of both the notice and the brief as one of the defendants-appellees. For failing . Thus. the provisions of Section 4. If a person binds himself solidarily with the principal debtor. 1207 thereof. There is a difference between a solidary co-debtor.73 Third. bars his (petitioner's) cross-claims against him: First. Title I of this Book shall be observed. Chapter 3. thereby. The choice is left to the solidary creditor to determine against whom he will enforce collection. any one.74 and Fourth.72 Second. This being so. it is completely immaterial if the bank would opt to proceed only against petitioner or Antonio Ang Eng Liong or both of them since the law confers upon the creditor the prerogative to choose whether to enforce the entire obligation against any one. petitioner agreed to be "jointly and severally" liable under the two promissory notes that he co-signed with Antonio Ang Eng Liong as the principal debtor. Moreover. the liability of a guarantor is different from that of a solidary debtor. as an accommodation party. Tolentino explains: "A guarantor who binds himself in solidum with the principal debtor under the provisions of the second paragraph does not become a solidary co-debtor to all intents and purposes." (Italics supplied. outside of the liability he assumes to pay the debt before the property of the principal debtor has been exhausted. Because the promissory note involved in this case expressly states that the three signatories therein are jointly and severally liable." Section 4.) While a guarantor may bind himself solidarily with the principal debtor. Antonio Ang Eng Liong even categorically admitted having secured a loan totaling P80. although no notice of appeal and appellant's brief were served to Antonio Ang Eng Liong. Book IV of the Civil Code. while a solidary co-debtor has no other rights than those bestowed upon him in Section 4. Chapter 3. became final and executory as against the latter and.75 Likewise. when there are two or more debtors in one and the same obligation. actions and benefits which pertain to him by reason of rights of the fiansa. Stress must be laid of the fact that he had twice put himself in default – one. and a fiador in solidum (surety).

none of these were prudently done by petitioner. subrogate himself in the place of the creditor with the right to enforce the guaranty against the other signers of the note for the reimbursement of what he is entitled to recover from them. Again. it is immaterial so far as the bank is concerned whether one of the signers. "without receiving payment for lending his name. who represented that he would take care of the matter. or discharged.. unless the contract expressly requires diligence and promptness on the part of the creditor. Furthermore. It should not be lost sight of that the defendant's signature on the note is an assurance to the creditor that the collateral guaranty will remain good. meaning by laches a negligent forbearance. There is in some decisions a tendency toward holding that the creditor's laches may discharge the surety. the creditor is under no obligation to display any diligence in the enforcement of his rights as a creditor. in issuing the two promissory notes. the consideration for the note as regards its maker is the money advanced to the accommodated party. Consequently.88 this Court held: x x x The mere delay of the creditor in enforcing the guaranty has not by any means impaired his action against the defendant. or the fact that he did not enforce the guaranty or apply on the payment of such funds as were available. Sections 119 (d)77 and 12278 of the NIL as well as Art. 29 of the NIL means "without receiving value by virtue of the instrument" and not as it is apparently supposed to mean. he is a solidary co-debtor. which is not the case in the present action. It is enough that value was given for the note at the time of its creation. or. hence. will be personally responsible for the payment. This theory.87 In Clark v. however.83 As in the instant case.C. neither was petitioner's right of reimbursement barred nor was the bank's right to proceed against Antonio Ang Eng Liong expressly renounced by the omission to serve notice of appeal and appellant's brief to a party already declared in default. but it must be born in mind that it is a recognized doctrine in the matter of suretyship that with respect to the surety.85 Regrettably. upon the maturity of the note. a surety may pay the debt. the latter is still liable for the whole obligation and such extension does not release him because as far as a holder for value is concerned. the defendant. 124979 of the Civil Code would necessarily find no application. As the promissory notes were not discharged or impaired through any act or omission of the bank. even if the accommodated party receives an extension of the period for payment without the consent of the accommodation party. petitioner cannot now claim that he was prejudiced by the supposed "extension of time" given by the bank to his co-debtor. he lackadaisically relied on Antonio Ang Eng Liong. when a third person advances the face value of the note to the accommodated party at the time of its creation.80 It is no defense to state on his part that he did not receive any value therefor81 because the phrase "without receiving value therefor" used in Sec. and dispose of it to his benefit. instead of directly communicating with the bank for its settlement.L. 10321034)89 Neither can petitioner benefit from the alleged "insolvency" of Antonio Ang Eng Liong for want of clear and convincing evidence proving the same. and that otherwise. or delay in proceeding against the principal debtor. since the liability of an accommodation party remains not only primary but also unconditional to a holder for value. Assuming it to be true. he.86 Thus. When he was first notified by the bank sometime in 1982 regarding his accountabilities under the promissory notes. (21 R. particularly petitioner. Sellner. if there be any. constitute no defense at all for the surety. has or has not received anything in payment of the use of his name. His mere inaction indulgence. a judgment on the pleadings76 would have also been proper since not a single issue was generated by the Answer he filed. he also did not exercise diligence in demanding security to protect himself from the danger thereof in the event that he . True. petitioner as accommodating party warranted to the holder in due course that he would pay the same according to its tenor."82 Stated differently. if applicable. passiveness. a sum of money was received by virtue of the notes. demand the collateral security. is not generally accepted and the courts almost universally consider it essentially inconsistent with the relation of the parties to the note. that if the creditor had done any act whereby the guaranty was impaired in its value.84 Under the law. such an act would have wholly or partially released the surety.to tender an issue and in not denying the material allegations stated in the complaint.

Mariano. although at times couched in different terms and explained more lengthily in the petition. respondents. CV No. 8533218 entitled "Fortune Motors (Phils. 1986 decision of the Court of Appeals in AC-G. Quirante & Associates Law Office for petitioner. the Court notes that these were the very same questions of fact raised on appeal before the Court of Appeals. WHEREFORE.) Inc. SP No. et al. vs.90 In sum. Branch IV for improper venue and (b) the resolution dated October 30. the October 9.R. It is doctrinal that only errors of law and not of fact are reviewable by this Court in petitions for review on certiorari under Rule 45 of the Rules of Court." filed in the Regional Trial Court of Manila.R. can escape liability by the convenient expedient of interposing the defense that he is a merely an accommodation party. evaluate or weigh the probative value of the evidence presented by the parties all over again. 09255 entitled "Metropolitan Bank & Trust Co." dismissing Civil Case No. 2000 Resolution of the Court of Appeals in CA-G. PARAS. 1986 denying petitioner's motion for reconsideration. Save for the most cogent and compelling reason. 53413 are AFFIRMED. No. have been satisfactorily passed upon and considered both by the trial and appellate courts. J. petitioner.. The petition is DENIED for lack of merit. This is a petition for review on certiorari seeking the reversal of: (a) the July 30. Further. it is not our function under the rule to examine. Herminio C. The fact that petitioner stands only as a surety in relation to Antonio Ang Eng Liong is immaterial to the claim of the bank and does not a whit diminish nor defeat the rights of the latter as a holder for value. Cruz & Associates Law Offices for private respondent. 1989 FORTUNE MOTORS. when sued on an instrument by a holder in due course and for value. R.) INC. Hon.91 Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. v. Bautista. v. THE HONORABLE COURT OF APPEALS.(petitioner) would eventually be sued by the bank. To sanction his theory is to give unwarranted legal recognition to the patent absurdity of a situation where a co-maker. No costs. being factual. Metropolitan Bank & Trust Co. whether petitioner may or may not obtain security from Antonio Ang Eng Liong cannot in any manner affect his liability to the bank. 76431 October 16. METROPOLITAN BANK and TRUST COMPANY. Suffice it to say that the same. the said remedy is a matter of concern exclusively between themselves as accommodation party and accommodated party. as regards the other issues and errors alleged in this petition. (PHILS.: SO ORDERED. . 2000 Decision and December 26.

(Rollo. 100-115) And on July 30. Annex "O" pp. (Rollo. p. 1984 with the one-year redemption period to expire on October 24. 1986 the respondent Bank filed a petition for certiorari and prohibition in the Court of Appeals. (Rollo. 62) For failure of the petitioner to pay the loans. 1986 on the said decision and on October 30. (Rollo. a decision was issued by the Court of Appeals. Annex "L" pp.150. 67-71-A ) The motion was opposed by petitioner Fortune Motors alleging that its action "is a personal action" and that "the issue is the validity of the extrajudicial foreclosure proceedings" so that it may have a new one year period to redeem. the dispositive part of which reads as follows: WHEREFORE.00 according to the Bank) which loan was secured by a real estate mortgage on the Fortune building and lot in Makati. 12) On October 21. 1986 an order was issued by the lower court reserving the resolution of the Bank's motion to dismiss until after the trial on the merits as the grounds relied upon by the defendant were not clear and indubitable. the respondent bank initiated extrajudicial foreclosure proceedings. or P34. the publication of the notice of sale was incomplete. . (Rollo. 11) The sheriff's certificate of sale was registered on October 24. posted.The undisputed facts of the case are as follows: On March 29. the petition for certiorari and prohibition is granted. After notices were served. pp. p. 1985.264. 60-68) Before summons could be served private respondent Bank filed a motion to dismiss the complaint on the ground that the venue of the action was improperly laid in Manila for the realty covered by the real estate mortgage is situated in Makati. 1986. the petitioner was not able to pay the loan which became due. 1986 a resolution was issued denying such motion for reconsideration.1985. (Rollo. 1986. there was no public auction. SO ORDERED. (Rollo. 99) On June 11. three days before the expiration of the redemption period. 72-73) On January 8.500. 15) A motion for reconsideration was filed on August 11. private respondent Metropolitan Bank extended various loans to petitioner Fortune Motors in the total sum of P32. Costs against the private respondent. 121-123. 85-33218 is dismissed without prejudice to its being filed in the proper venue. 60-62) Due to financial difficulties and the onslaught of economic recession. (Rollo. pp. pp.1984.000.000. Annex "S" p. 1986 but it was denied by the lower court in its order dated May 28. The complaint in the Civil Case No. (Rollo. pp.1982 up to January 6. 81) The Bank filed a motion for reconsideration of the order dated January 8. Rizal. the mortgaged property was sold at public auction for the price of P47. 129) Hence. therefore the action to annul the foreclosure sale should be filed in the Regional Trial Court of Makati. Annex "N" p. (Rollo. petitioner Fortune Motors filed a complaint for annulment of the extrajudicial foreclosure sale alleging that the foreclosure was premature because its obligation to the Bank was not yet due. p. p. p. (Rollo. and the price for which the property was sold was "shockingly low". 93-96.91 to mortgagee Bank as the highest bidder.00 (according to the borrower.899. Annex "O" pp. and published. (Rollo. the petition for review on certiorari.

1987. (Inton. Revised Rules of Court). An action for the annulment or rescission of a sale of real property is a real action. 122) Real actions or actions affecting title to. 2 (a) of Rule 4. . 94 Phil. petitioner's memorandum pp. v. as aptly decided by the Court of Appeals in a decision penned by then Court of Appeals Associate Justice now Associate Justice of the Supreme Court Carolina C.1954) Both parties have filed their respective memoranda. (Comments on the Rules of Court by Moran. is considered immovable property.1950) The only issue in this case is whether petitioner's action for annulment of the real estate mortgage extrajudicial foreclosure sale of Fortune Building is a personal action or a real action for venue purposes. required the parties to file their respective memoranda within twenty (20) days from the notice hereof. 2. or for the partition or condemnation of. (Munoz v. Griño-Aquino. 81 Phil. Rule 16).On June 10. p. and pay deposit for costs in the amount of P80. SO ORDERED. Sanchez. It is therefore a real action which should be commenced and tried in the province where the property or part thereof lies. (Punzalan. 1987 the Court gave due course to the petition. or for the recovery of possession. 760. 84 Phil. at the election of the plaintiff (Sec." PREMISES CONSIDERED. or foreclosure of mortgage on real property. Res. or where the plaintiff or any of the plaintiffs resides. Macadaeg. 1207. or foreclosure of a mortgage on real property. 1. 1957) Personal actions upon the other hand. Llamas. under the law. 45-59.1949. his action for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of the building which. In a real action. or for the partition or condemnation of. 138) An action to annul a real estate mortgage foreclosure sale is no different from an action to annul a private sale of real property. the instant petition is DENIED for lack of merit and the assailed decision of the respondent Court of Appeals is AFFIRMED. an action to annul the foreclosure sale is necessarily an action affecting the title of the property sold. may be instituted in the Court of First Instance where the defendant or any of the defendants resides or may be found. The prevalent doctrine is that an action for the annulment or rescission of a sale of real property does not operate to efface the fundamental and prime objective and nature of the case. (Gavieres v. Vol. 1. Rule 4. It is a real action. [1983]). 121 SCRA 336. Vda. which is to recover said real property. the recovery of which is petitioner's primary objective. v. 674. Respondent Court.130-136. Rule 4) which was timely raised (Sec. 737. (Rollo. 87 Phil. the pertinent portion reads: "Since an extrajudicial foreclosure of real property results in a conveyance of the title of the property sold to the highest bidder at the sale.Metrobank's Memorandum pp. and the case was submitted for Court's resolution in the resolution dated December 14. de Lacsamana.40. A prayer for annulment or rescission of contract does not operate to efface the true objectives and nature of the action which is to recover real property. Quintan. 1948) While it is true that petitioner does not directly seek the recovery of title or possession of the property in question. Jr. the plaintiff seeks the recovery of real property. p. or for the recovery of possession. Register of Deeds. Garchitorena v. a real action is an action affecting title to real property.. therefore. Thus. must be instituted in the Court of First Instance of the province where the property or any part thereof lies. (Enriquez v. did not err in dismissing the case on the ground of improper venue (Sec. Its prime objective is to recover said real property. 97. et al. 1. 101 Phil. or as indicated in Sec.

1äwphï1. 1963. No. REGALA. Padua for petitioner and appellant. in effect.: This is an appeal from an order of the Court of First Instance of Misamis Oriental dismissing the petition of the Clavecilla Radio System to prohibit the City Judge of Cagayan de Oro from taking cognizance of Civil Case No. AGUSTIN ANTILLON. In other words. Thereafter. in delivering the same to the New Cagayan Grocery. J.1äwphï1. be enjoined from further proceeding with the case on the ground of improper venue. L-22238 February 18.ñët . as City Judge of the Municipal Court of Cagayan de Oro City and NEW CAGAYAN GROCERY. After service of summons. petitioner-appellant." thus changing entirely the contents and purport of the same and causing the said addressee to suffer damages. The Cagayan de Oro branch office having received the said message omitted. In dismissing the case. 1967 CLAVECILLIA RADIO SYSTEM. the Clavecilla Radio System filed a petition for prohibition with preliminary injunction with the Court of First Instance praying that the City Judge. the Clavecilla Radio System filed a motion to dismiss the complaint on the grounds that it states no cause of action and that the venue is improperly laid. 1963. the lower court held that the Clavecilla Radio System may be sued either in Manila where it has its principal office or in Cagayan de Oro City where it may be served. was filed at the latter's Bacolod Branch Office for transmittal thru its branch office at Cagayan de Oro: Republic of the Philippines SUPREME COURT NECAGRO CAGAYAN DE ORO (CLAVECILLA) Manila REURTEL WASHED NOT AVAILABLE REFINED TWENTY FIFTY IF AGREEABLE SHALL SHIP LATER REPLY POHANG EN BANC G. the following message. respondents-appellees. addressed to the former.R. on September 18. denied the motion to dismiss for lack of merit and set the case for hearing. HON. the New Cagayan Grocery filed a complaint against the Clavecilla Radio System alleging.It appears that on June 22. Reyes for respondents and appellees. Pablo S. the word "NOT" between the words "WASHED" and "AVAILABLE. the motion was submitted for resolution on the pleadings. 1048 for damages. B. Later. C. 1963. The New Cagayan Grocery interposed an opposition to which the Clavecilla Radio System filed its rejoinder. with summons through the Manager of its branch office in said city. Honorable Agustin Antillon. that on March 12. the City Judge. the court upheld the authority of the city court to take cognizance of the case. as in fact it was served. The respondents filed a motion to dismiss the petition but this was opposed by the petitioner.ñët Hence. vs.

petitioners. The fact that it maintains branch offices in some parts of the country does not mean that it can be sued in any of these places. vs. Abello. Ltd. 86 Phil. THE HONORABLE COURT OF APPEALS (THIRTEENTH DIVISION) AND GEORGE CHIONG ROXAS. governing venue of actions in inferior courts. 526. supra.. provides in its paragraph (b) (3) that when "the action is not upon a written contract. the venue in this case was improperly laid.In appealing. Santos.. Evangelists vs. As any other corporation. The order appealed from is therefore reversed. 61 Phil. it follows that the suit against it may properly be filed in the City of Manila. . respondents. Section 1 of Rule 4 of the New Rules of Court. that with the filing of the action in Cagayan de Oro City. Applying the provision of the Rules of Court. Benguet Commercial Co. AND NEMESIO GARCIA. venue was properly laid on the principle that the appellant may also be served with summons in that city where it maintains a branch office. Concepcion. 459. With costs against the respondents-appellees. but without prejudice to the filing of the action in Which the venue shall be laid properly. Republic of the Philippines SUPREME COURT Manila The appellee maintain. It is important to remember.R. 1993 YOUNG AUTO SUPPLY CO. 104175 June 25." (Emphasis supplied) Settled is the principle in corporation law that the residence of a corporation is the place where its principal office is established. he may be sued only in the municipality of his residence. FIRST DIVISION G. Secretary of the Interior. Santos. as was stated by this Court in Evangelista vs. then in the municipality where the defendant or any of the defendants resides or may be served with summons. in such case. Antonio Nuyles for private respondent. To allow an action to be instituted in any place where a corporate entity has its branch offices would create confusion and work untold inconvenience to the corporation. that the term "may be served with summons" does not apply when the defendant resides in the Philippines for. et al. 387). Regala & Cruz for petitioners. Angara. the Clavecilla Radio System maintains a residence which is Manila in this case. however.. that the laying of the venue of an action is not left to plaintiff's caprice because the matter is regulated by the Rules of Court. the Clavecilla Radio System contends that the suit against it should be filed in Manila where it holds its principal office. and a person can have only one residence at a time (See Alcantara vs. regardless of the place where he may be found and served with summons. This Court has already held in the case of Cohen vs. 34 Phil. Since it is not disputed that the Clavecilla Radio System has its principal office in Manila. It is clear that the case for damages filed with the city court is based upon tort and not upon a written contract. No.

Branch 11.00 or that full control of the three markets be turned over to YASCO and Garcia. On June 10.00 and the balance of P4. lifted upon motion of Roxas.000. Cebu City. however. Roxas filed a motion to dismiss on the grounds that: 1. petitioners the sum of P3. 1988. After a hearing.000. In the meantime. Roxas took full control of the four markets of CMDC.00 payable as follows: a downpayment of P4.000. through a new counsel. The claim or demand set forth in the complaint had been waived. p. Young Auto Supply Co.: Petitioners seek to set aside the decision of respondent Court of Appeals in CA-G. (YASCO) represented by Nemesio Garcia.000. The first check of P4. YASCO received P600. 2.00.000. the trial court declared Roxas in default.00 each. The purchase price was P8. Branch 11.000.000.00 (Rollo. 1991 denied Roxas' motion to dismiss.000. p. representing the down-payment. J. p. Out of the proceeds of the sale. The complaint did not state a cause of action due to non-joinder of indispensable parties. 17). sold all of their shares of stock in Consolidated Marketing & Development Corporation (CMDC) to Roxas. The order of default was.00 and the payment of attorney's fees and costs (Rollo.000. Cebu City in Civil Case No.00. wherein testimonial and documentary evidence were presented by both parties. 290). But despite said motion. Roxas of the complaint for collection filed by petitioners. Roxas sold one of the markets to a third party. 25237. He also filed a motion for reconsideration.000. on the ground that his motion for reconsideration did not toll the running of the period to file his answer. . petitioners filed a complaint against Roxas in the Regional Trial Court.000. It appears that sometime on October 28.600. the vendors held on to the stock certificates of CMDC as security pending full payment of the balance of the purchase price. 176). Nelson Garcia and Vicente Sy. Roxas filed two motions for extension of time to submit his answer. p. which the trial court denied in its Order dated April 10. a third motion for extension of time to submit a responsive pleading. However. Inc.400. 1988. Nelson Garcia and Vicente Sy assigned all their rights and title to the proceeds of the sale of the CMDC shares to Nemesio Garcia. the trial court in an Order dated February 8. its president.400. Roxas filed another motion for extension of time to submit his answer.QUIASON. he failed to do so causing petitioners to file a motion to have him declared in default. praying that Roxas be ordered to pay On August 22. 1991 for being pro-forma (Rollo. and 3. leaving a balance of P3. After receiving said order. 1987. 1991 issued by the Regional Trial Court. Roxas was again declared in default.R. On August 19. abandoned or otherwise extinguished.000.000. CEB 6967. which reversed the Order dated February 8. 299).000.000. was honored by the drawee bank but the four other checks representing the balance of P4.00 in four post dated checks of P1. Roxas then filed. The order of the trial court denied the motion to dismiss filed by respondent George C. The complaint also prayed for the forfeiture of the partial payment of P4.00. Immediately after the execution of the agreement.00 were dishonored. The venue was improperly laid (Rollo. Subsequently. 1988. SP No.

There are two plaintiffs in the case at bench: a natural person and a domestic corporation. 12. . Cuenco Avenue. The appellate court held that Roxas was led Plaintiff Nemesio Garcia is of legal age. Pasay City. Cuenco Avenue. holding the venue should be in Pasay City.. Philippines (as amended on December 20. .. Rollo... Petitioners now come before us. 48). p. 22083) states: THIRD That the place where the principal office of the corporation is to be established or located is at Cebu City. 1991. p. 1. Revised Rules of Court]. p. In the case of Garcia. In holding that the venue was improperly laid in Cebu City. Both plaintiffs aver in their complaint that they are residents of Cebu City. Rollo. Roxas filed an unverified Motion to Lift the Order of Default which was not accompanied with the required affidavit or merit. Rollo. a corporation is in a . by petitioners to believe that their residence is in Pasay City and that he had relied upon those representations (Decision. p.1. A subsequent motion for reconsideration by petitioner was to no avail. thus: 1. The Court of Appeals sustained the findings of the trial court with regard to the first two grounds raised in the motion to dismiss but ordered the dismissal of the complaint on the ground of improper venue (Rollo. 47). p. Cebu City. 1708 Dominga Street. It also has a branch office at 1708 Dominga Street. Inc. 81). p. Pasay City. Filipino citizen and with business address at Young Auto Supply Co. p. and not in Cebu City (where both petitioners/plaintiffs are residents. Rollo. Inc. But for practical purposes. 1980 and further amended on December 20. at the election of the plaintiff [Sec. not finding that Roxas is estopped from questioning the choice of venue (Rollo. The Article of Incorporation of YASCO (SEC Reg. p. Plaintiff Young Auto Supply Co. which is "No." This was the same address written in YASCO's letters and several commercial documents in the possession of Roxas (Decision. 47). 49).On May 3. all personal actions are commenced and tried in the province or city where the defendant or any of the defendants resides or may be found. A corporation has no residence in the same sense in which this term is applied to a natural person. married. 12. . 1984) (Rollo. alleging that the Court of Appeals erred in: 1. J. ("YASCO") is a domestic corporation duly organized and existing under Philippine laws with principal place of business at M. Metro Manila. he filed a petition for certiorari with the Court of Appeals. as appearing in the Deed of Sale dated October 28. 273). The petition is meritorious. M. No. The Court of Appeals erred in holding that the venue was improperly laid in Cebu City. the Court of Appeals relied on the address of YASCO. 1987. Cebu City. the Court of Appeals said that he gave Pasay City as his address in three letters which he sent to Roxas' brothers and sisters (Decision. p. 2(b) Rule 4. 19). In the Regional Trial Courts. p. or where the plaintiff or any of the plaintiffs resides. But without waiting for the resolution of the motion. p. J. (Complaint. 12. 2.

256 [1916] Clavecilla Radio System v. it becomes unnecessary to decide whether Garcia is also a resident of Cebu City and whether Roxas was in estoppel from questioning the choice of Cebu City as the venue. instead of allowing it to be ambulatory. would create confusion and work untold inconvenience to said entity. With the finding that the residence of YASCO for purposes of venue is in Cebu City. J. Flaviano Cacnio instituted Civil Case No. The Corporation Code precisely requires each corporation to specify in its articles of incorporation the "place where the principal office of the corporation is to be located which must be within the Philippines" (Sec. where its principal place of business is located. On or about June 14. Benguet Commercial Co. this Court explained why actions cannot be filed against a corporation in any place where the corporation maintains its branch offices. Ramon C. Antillon. as Judge of the Court of First Instance of Quezon City. for a writ of prohibition... But this is not the case before us. Quezon City Branch. Q-5197 of the Court of First Instance of Rizal. No. Paulino Carreon for respondents. 1962 DR. respondents. The decision of the Court of Appeals appealed from is SET ASIDE and the Order dated February 8. In Clavencilla Radio System v. the petition is GRANTED. ANTONIO A. and FLAVIANO CACNIO. a corporation cannot be allowed to file personal actions in a place other than its principal place of business unless such a place is also the residence of a co-plaintiff or a defendant. Ltd. Aquino for petitioner. INC.. Antillon. 19 SCRA 379 [1967]).: Appeal by certiorari from a decision of the Court of Appeals dismissing the petition of Dr. against said .metaphysical sense a resident of the place where its principal office is located as stated in the articles of incorporation (Cohen v. WHEREFORE. The purpose of this requirement is to fix the residence of a corporation in a definite place. vs. L-17699 March 30. By the same token. Inc. HERMOGENES CALUAG. LIZARES. Roxas could argue that YASCO was in estoppel because it misled Roxas to believe that Pasay City was its principal place of business. SO ORDERED. 1960.. HON. with costs against said petitioner. Lizares & Co. CONCEPCION. petitioner. 19 SCRA 379 ([1967]). 34 Phil. The Court ruled that to allow an action to be instituted in any place where the corporation has branch offices. Antonio A. If it was Roxas who sued YASCO in Pasay City and the latter questioned the venue on the ground that its principal place of business was in Cebu City. 1991 of the Regional Trial Court is REINSTATED. 14 [3]). Republic of the Philippines SUPREME COURT Manila EN BANC G..R.

or is about to do. plus P2. as plaintiff in said case. making therefor a downpayment of P1.80 each. should have granted the motion to dismiss. petitioner filed with the Court of Appeals a petition. 1960. and that petitioner "is doing threatens. plus "regular and overdue" interest. between petitioner and Cacnio. Although the immediate remedy sought by Cacnio is to compel petitioner to accept the tender of payment allegedly made by the former. Cacnio received from petitioner a letter demanding payment of P7. petitioner returned said check and "refused the tender of payment" aforementioned.858 to be paid in ten (10) yearly installments of P1. resided. the Court of Appeals rendered a decision on October 27. and that.ñët WHEREFORE. that "without legal and equitable grounds" therefor. No. Hence. upon the ground that the action was in personam. representing arrears in the payment of installments up to April 20. dated May 26. the balance of P10. Cacnio's complaint is a means resorted to by him in order that he could retain the possession of said property." The Court of Appeals and the Court of First Instance of Rizal.000 as attorney's fees. who.085. 1960. or for recovery of possession.206. Quezon City Branch. or for partition or condemnation of." for the action affects the title to or possession of real property located in Bacolod City. Quezon City Branch. this appeal by certiorari taken by petitioner herein.824. or foreclosure of mortgage on. The motion having been denied by the Court of First Instance of Rizal. real property. with costs against respondent Flaviano Cacnio.69. it does not fall within the purview of said section 3. The issue is whether or not the main case falls under section 3 of Rule 5 of the Rules of Court. We are unable to share such view.69. shall be commenced and tried in the province where the property or any part thereof lies. In his complaint. as such. 1960. held that Civil Case No. or is procuring or suffering to be done some act in violation of" Cacnio's rights respecting the subject of the action. and that. and was properly instituted in the court of first instance of the province in which Cacnio. 1960. it is obvious that this relief is merely the first step to establish Cacnio's title to the real property adverted to above.324. that by reason of said illegal act of petitioner. 1960. by an order of July 9. a writ of preliminary injunction enjoining petitioner and its agents or representatives from repossessing the lot adverted to above be issued. on installment. Hermogenes Caluag. Q-5197 of the latter court is an action in personam. upon the filing of a bond to be fixed by the court. 1äwphï1. Republic of the Philippines . Lot 4. the decision appealed from is hereby reversed and another one shall be entered directing respondent Judge to desist from taking further cognizance of Civil Case No. dismissing said petition. In due course. prayed that petitioner be ordered "to accept the payment being made" by him (Cacnio) and to pay him P5. drawn by one Antonino Bernardo in favor of said petitioner. to desist from taking cognizance of said Civil Case No. Said writ of preliminary injunction was issued on June 16. with interest thereon at the rate of 6% per annum. Cacnio having been constrained to engage the services of counsel and bring the action.R. the repossession of the lot bought by" the latter. Cacnio is entitled to compensatory damages in the sum of P5. pursuant to section 1 of said rule 5. On July 5. he having paid P1. as well as "land taxes up to 70% of 1960". Quezon City Branch.69.000 by way of attorney's fees. Cacnio alleged that on April 20. viz.000. as Judge of said Court. that in view of the aforementioned demand of petitioner. Q-5197. Block 1 of the Sinkang Subdivision in Bacolod City.000 as compensatory damages and P2. 1960.500 to petitioner "sometime in 1958". which was the subject matter of a contract. praying that said order be set aside and that a writ of prohibition be issued commanding respondent Hon. he bought from petitioner. which was docketed as Civil Case CA-G. 1960. accordingly. It is so ordered. petitioner moved to dismiss the complaint upon the ground that "venue is improperly laid. that the sum then due from Cacnio by way of arrears amounted only to P5.petitioner. In short. that on March 25.824. reading: "Actions affecting title to. venue in the main case was improperly laid and the Court of First Instance of Rizal. Moreover. 28013-R. made in said City. 1955. Cacnio sent thereto a check for P5. in payment of the amount due from Cacnio by way of arrears. Q-5197 of said court.

Iloilo City for appropriate action. The motion for reconsideration of the decision was likewise denied for lack of merit on February 18. Dr. R-17584. Court of First Instance of Cebu and MA. HON. without any justifiable reason shouted at. 1979. Head Nurse. Teodoro P. Branch VI. 1991 PATRIA ESUERTE and HERMINIA JAYME. involving the same parties. Motus. the petition was dismissed without pronouncement as to costs. . Dr. As a result thereof. No. conducted a fact-finding investigation and later. No. Judge. 1980. 1978. Herminia Jayme. humiliated and insulted the petitioner. J. petitioners. RAFAEL T. Andales & Sisinio M. . SP-08999-R. transmitting the records of the case to the Regional Health Office. Teodoro P. The motion for reconsideration of the denial was likewise denied by the court on February 16. said petitioner complained to the Chief of the Hospital.:p This petition for certiorari with a prayer for preliminary injunction seeks to set aside the decision of the Court of Appeals in CA G. Dr. On September 18.SUPREME COURT An action for damages was filed by private respondent Beverly Tan against herein petitioners Patria Esuerte and Herminia Jayme with the Court of First Instance (now Regional Trial Court) of Cebu and docketed as Civil Case No. the trial court denied the motion to dismiss. MENDOZA. Andales for private respondent. as follows: Manila FIRST DIVISION G. Rollo) Esuerte and Jayme filed a motion to dismiss the complaint on the ground of improper venue and for being premature for failure of Tan to exhaust administrative remedies. The other petitioner. HON. The Discipline and Grievance Committee. Eleno V. who was one of those who were present at the time of the incident also sent a letter to the Chief of the Hospital. but private respondent instead of explaining only her side of the incident also complained against the petitioners. No. BEVERLY TAN. 91-92.R. Romeo B. Esuerte and Jayme filed a petition for certiorari and prohibition with a prayer for preliminary injunction with the Court of Appeals. (pp. respondents. issued a resolution dated November 8. Motus. MEDIALDEA. that on September 22. Corazon Locsin-Montelibano Memorial Hospital. 1979. the Chief of the Hospital. COURT OF APPEALS (Eleventh Division). informing the latter of what she had witnessed. .R. Jaro. . Bacolod City. The claim for damages arose from an incident involving the parties and summarized by the Court of Appeals. 1978. a Junior Resident Physician of Corazon Locsin-Montelibano Memorial Hospital. Esuerte for petitioners. . private respondent was advised to explain in writing by the Chief of the Hospital. . On January 2. L-53485 February 6. Beverly Tan. Medicare Department of the said hospital and as a result of the said incident. in writing. . 6. Patria Esuerte. Teodoro Motus. 23 and 27. 1979. private respondent Ma. vs. .

Rule 4 of the Rules of Court provides: Sec. No.. to comply substantially with the requirements of Sec. whether permanent or temporary. in her "Statement of Assets and Liabilities.R. 2) The Court of Appeals committed gross error and grave abuse of discretion when it dismissed the petition despite petitioners' overwhelming evidence showing that the filing of Civil Case No. Tyson Enterprises Inc. 6th Street. on venue of personal actions. then "the administration of justice .The following reasons were advanced by petitioners for the allowance of this petition: 1) The Court of Appeals committed gross error and grave abuse of discretion when it dismissed the petition despite petitioners' overwhelming evidence showing that the venue of private respondent's action (Civil Case No. 19 SCRA 379). Rules of Court. January 10. In fact. The rule on venue. If the objective is not achieved. 2(b) of Rule 4. January 31. 1978. Ilocos Norte. R-17584) was improperly laid. 2. CA.R. of the plaintiff or defendants as distinguished from "domicile" which denotes a fixed permanent residence (Dangwa Transportation Co. The choice of venue for personal actions cognizable by the Regional Trial Court is given to the plaintiff but not to the plaintiff's caprice because the matter is regulated by the Rules of Court (see Clavecilla Radio System v.. We are fully convinced that private respondent Coloma's protestations of domicile in San Nicolas. Section 2(b). . 81 SCRA 75). — All other actions may be commenced and tried where the defendants or any of the defendants resides or may be found. No. 1975. in Hernandez v." "to facilitate and promote the administration of justice" or to insure "just judgments" by means of a fair hearing. are designed to insure a just and orderly administration of justice or the impartial and evenhanded determination of every action and proceeding (Sy v. And. L-40428. At the time of the filing of her action in court. L-22795. Inc. L-29791. the purpose of procedure is not to restrict the court's jurisdiction over the subject matter but to give it effective facility "in righteous action. 1977. G. or where the plaintiff or any of the plaintiffs resides. 305. 70 SCRA 298. like other procedural rules. she declared that she is a resident of FRAYU INTERIOR. — xxx xxx xxx (b) Personal Actions. v. "Resides" in the rules on venue on personal actions means the place of abode. We ruled: Applying the foregoing observation to the present case. R-17584 is premature due to non-exhaustion of administrative remedies.F. the Corazon Locsin Montelibano Memorial Hospital. Sarmiento. he is limited to that place. at the election of the plaintiff. of Ilocos Norte.I. venue of personal actions should be at the place of abode or place where plaintiffs actually reside. is entirely of no moment since what is of paramount importance is where he actually resided or where he may be found at the time he brought the action. 75 SCRA 124). The option of the plaintiff in personal actions cognizable by the Regional Trial Court is either the place where the defendant resides or may be found or the place where the plaintiff resides.. . If plaintiff opts for the latter. In Koh v. As perspicaciously observed by Justice Moreland.. based on his manifested intention to return there after the retirement of his wife from government service to justify his bringing of an action for damages against petitioner in the C. December 17. 19 SCRA 367). Venue in Courts of First Instance. Rural Bank of Lucena. Tan was actually residing and may be found in Bacolod City. Antillon. Bacolod City. It is the contention of petitioners that the proper venue of the action filed by Tan should be Bacolod City and not Cebu City. not in domicile or legal residence." submitted by Tan to her employer. G. Inc.

20 Phil. The second ground raised by petitioners is devoid of merit. 1982 VIRGILIO CAPATI. While the complainant in the administrative case may be a private person. defendant affixed his signature below the following stipulation written in bold letters in the subcontract: "TIME IS ESSENTIAL. whereby the latter. in consideration of the amount of P2. the trial court's concern is whether or not damages. No. SO ORDERED. 3188 which dismissed the plaintiff's complaint on ground of improper venue. Plaintiff Virgilio Capati a resident of Bacolor. she was a temporary resident of Bacolod City.00. L-28742 April 30. Moreover. Private respondent as plaintiff in the civil Case for damages has no administrative remedy available to her. 1967. undertook to construct the vault walls. as resident physician. the acts complained of were committed in Bacolod City. vs. v. WHEREFORE. TO BE FINISHED 5 JUNE' 67. Her parents live there. Jesus Ocampo. a resident of Naga City. R-17584 is DISMISSED for improper venue. were caused by the acts of the defendants. the position is GRANTED. It is true that the same incident complained of in the administrative case filed by petitioners against Tan is the subject of the action for damages filed by Tan against the petitioners in the trial court." . Camarines Sur. 523. OCAMPO." (Manila Railroad Co. Bacolod City.R. epublic of the Philippines SUPREME COURT Manila SECOND DIVISION G. The private respondents were all residents of Bacolod City at the time of the bringing of the action. On May 23. Attorney General. Justice would be better served if the complaint were heard and tried in Bacolod City where all the parties resided. Defendant further bound himself to complete said construction on or before June 5. exterior walls and columns of the said Feati building in accordance with the specifications indicated therein. plaintiff entered into a sub-contract with the defendant Dr. was the contractor of the Feati Bank for the construction of its building in Iriga. Though Tan's employment was only temporary there was no showing when this employment will end.: We set aside the order of the Court of First Instance of Pampanga in Civil Case No. The alleged need by private respondent Tan to exhaust administrative remedies before filing the complaint for damages does not apply to the instant case. 530). She was then employed with the Corazon Locsin Montelibano Memorial Hospital.200. However. Pampanga. plaintiff-appellant. defendant-appellee. DR. to emphasize this time frame for the completion of the construction job. The civil action for damages can proceed notwithstanding the pendency of the administrative action. ESCOLIN. However. There is no question that private respondent as plaintiff in the Civil Case is a legal resident of Cebu City. The questioned decision of the Court of Appeals is SET ASIDE.becomes incomplete and unsatisfactory and lays itself open to criticism. JESUS P. 1967 and. In the civil action for damages. J. it is the government who is the aggrieved party and no award for damages may be granted in favor of private persons. the cause of action in the administrative case is different from that of the civil case for damages. Civil Case No. it cannot also be denied that at the time of her filing of the complaint against petitioners. personal to the plaintiff.

1 The lower court. which provides that such "actions may be commenced and tried where the defendant or any of the defendants resides or may be found. if after all." is not mandatory. Reparations Commission 2.00 with interest. The motion was premised on the stipulation printed at the back of the contract which reads: 14. In support thereof. as provided for by Section 2 (b) Rule 4 of the Rules of Court.000. Under ordinary circumstances.." The . without waiving their right to seek recourse in the court specifically indicated in Section 2 (b). That all actions arising out. a case involving the interpretation of a stipulation as to venue along lines similar to the present one. Hence. plaintiff cited the use of the word "may " in relation with the institution of any action arising out of the contract. in resolving the motion to dismiss. It is well settled that the word "may" is merely permissive and operates to confer discretion upon a party. 14 of the contract. or where the plaintiff or any of the plaintiffs resides. the latter has suffered great irreparable loss and damage . it was held that the agreement of the parties which provided that "all legal actions arising out of this contract . may be brought in and submitted to the jurisdiction of the proper courts in the City of Manila. We hold that the stipulation as to venue in the contract in question is simply permissive. or merely permissive in that the parties may submit their disputes not only in Naga City but also in the court where the defendant or the plaintiff resides. or relating to this contract may be instituted in the Court of First Instance of the City of Naga. permission or possibility. ruled that "there was no sense in providing the aforequoted stipulation.. the term "may be" connotes possibility. at the election of the plaintiff. We are thus called upon to rule on the issue as to whether the stipulation of the parties on venue is restrictive in the sense that any litigation arising from the contract can be filed only in the court of Naga City. "May" is an auxillary verb indicating liberty. plus attorney's fees and costs. 3 of Rule 4 of the Revised Rules of Court. opportunity. said section is qualified by the following provisions of Section 3 of the same rule: By written agreement of the parties the venue of an action may be changed or transferred from one province to another. " Defendant filed a motion to dismiss the complaint on the ground that venue of action was improperly laid. The complaint alleged inter alia that "due to the long unjustified delay committed by defendant. he cannot be sued in any court except the Court of First Instance of Naga City. pursuant to Sec. Plaintiff filed an opposition to the motion. The rule on venue of personal actions cognizable by the courts of first instance is found in Section 2 (b). Defendant stands firm on his contention that because of the aforequoted covenant contained in par. 1967. Rule 4 of the Rules of Court.. Rule 4 of the Rules of Court.Claiming that defendant finished the construction in question only on June 20.. They merely agreed to submit their disputes to the said court." and thereby ordered the dismissal of the complaint. it does not connote certainty. at the election of the plaintiff. plaintiff filed in the Court of First Instance of Pampanga an action for recovery of consequential damages in the sum of P85. By the said stipulation. In Nicolas vs. the parties are given the discretion or option of filing the action in their respective residences. this appeal. in open violation of his express written agreement with plaintiff. claiming that their agreement to hold the venue in the Court of First Instance of Naga City was merely optional to both contracting parties. the parties did not agree to file their suits solely and exclusively with the Court of First Instance of Naga.

(hereafter. Costs against defendant-appellee. where the plaintiff resides. DECISION NARVASA. or more precisely on December 24. the order appealed from is hereby set aside." and 2) a provision binding UNIMASTERS to obtain (as it did in fact obtain) a credit line with Metropolitan Bank and Trust Co.Since the complaint has been filed in the Court of First Instance of Pampanga. One prayed for dismissal of the case on the ground of improper venue (said motion being set for hearing on January 11.[1] The contract contained. Metro-Manila **. Inc. February 7. The other prayed for the transfer of the injunction hearing to January 11. respondents.-Tacloban Branch in the amount of P2. 1994 because its counsel was not available on January 10 due to a prior commitment before another court. 1993. COURT OF APPEALS and KUBOTA AGRI-MACHINERY PHILIPPINES. a certain Reynaldo Go. simply METROBANK) for damages for breach of contract. On October 28. 1988 Kubota Agri-Machinery Philippines. Some five years later." The Court also set the application for preliminary injunction for hearing on January 10. On January 4. among others: On the same day the Trial Court issued a restraining order enjoining METROBANK from "authorizing or effecting payment of any alleged obligation of ** (UNIMASTERS) to defendant ** KUBOTA arising out of or in connection with purchases made by defendant Go against the credit line caused to be established by ** (UNIMASTERS) for and in the amount of P2 million covered by defendant METROBANK ** or by way of charging ** (UNIMASTERS) for any amount paid and released to defendant ** (KUBOTA) by the Head Office of METROBANK in Makati. INC. vs. that KUBOTA's counsel was "shocked" when he learned of this on the morning of the 11th. Rule 4 of the Rules of Court. the venue of action is properly laid in accordance with Section 2 (b). Let the records be returned to the court of origin for further proceedings. and Metropolitan Bank and Trust Company-Tacloban Branch (hereafter. Wilford Chan. (hereafter.000. No.: The appellate proceeding at bar turns upon the interpretation of a stipulation in a contract governing venue of actions thereunder arising. C. 1994 during which it received the direct testimony of UNIMASTERS' general manager.J. simply UNIMASTERS) entered into a "Dealership Agreement for Sales and Services" of the former's products in Samar and Leyte Provinces. 1994). 1997] UNIMASTERS CONGLOMERATION.. Inc. UNIMASTERS filed an action in the Regional Trial Court of Tacloban City against KUBOTA. but was . SO ORDERED. 119657. KUBOTA claims that notwithstanding that its motion to transfer hearing had been granted. 1994 at 8:30 o'clock in the morning.. INC. WHEREFORE.000. 1994 KUBOTA filed two motions.R. simply KUBOTA) and Unimasters Conglomeration. and injunction with prayer for temporary restraining order. 93-12-241 and assigned to Branch 6. petitioner. EN BANC [G. the Trial Court went ahead with the hearing on the injunction incident on January 10. The action was docketed as Civil Case No. 1) a stipulation reading: "** All suits arising out of this Agreement shall be filed with / in the proper Courts of Quezon City.00 to answer for its obligations to KUBOTA.

SP No. the Gesmundo case was controlling.000.the stipulation respecting venue in its Dealership Agreement with UNIMASTERS did in truth limit the venue of all suits arising thereunder only and exclusively to "the proper courts of Quezon City. Quezon City and Manila (sic).in line with the Rules of Court[5] and this Court's relevant rulings[6] -. docketed as CA-G. contrary to decisions of this ** Court. namely:[8] 1) "in concluding. that the agreement in the case at bar "was the same as the agreement on venue in the Gesmundo case.R." The issue last mentioned.[9] that 'in the absence of qualifying or restrictive words. Tensuan. based solely on the self-serving narration of ** (KUBOTA that its) participation in the hearing for the issuance of a ** preliminary injunction did not constitute waiver of its objection to venue. exhibits (numbered from 1 to 20) were presented by said attorney who afterwards submitted a memorandum in lieu of testimonial evidence." and (3) the RTC gravely erred "in denying the motion to dismiss. of this complaint in the Regional Trial Court in Tacloban City is proper. the Court reset the hearing to the afternoon of that same day. Here. the same Court promulgated an Order denying KUBOTA's motion to dismiss. that assuming that KUBOTA's standard printed invoices provided that the venue of actions thereunder should be laid at the Court of the City of Manila.[3] And on February 3. not as limiting venue to the specified place. The proper venue therefore pursuant to Rules of Court would either be Quezon City or Tacloban City at the election of the plaintiff. that the agreement on venue between petitioner (UNIMASTERS) and private respondent (KUBOTA) limited to the proper courts of Quezon City the venue of any complaint filed arising from the dealership agreement between ** (them). at which time Wilford Chan was recalled to the stand to repeat his direct testimony. the Trial Court handed down an Order authorizing the issuance of the preliminary injunction prayed for. therefore. that when said counsel remonstrated that this was unfair. 7 thereof." and therefore."[7] The Court also held that the participation of KUBOTA's counsel at the hearing on the injunction incident did not in the premises operate as a waiver or abandonment of its objection to venue." and in concluding. more particularly. and that no impediment precludes issuance of a TRO or injunctive writ by the Quezon City RTC against METROBANK-Tacloban since the same "may be served on the principal office of METROBANK in Makati and would be binding on and enforceable against. upon a bond of P2. UNIMASTERS appealed to this Court. METROBANK branch in Tacloban. 1994." (2) UNIMASTERS had in truth "failed to prove that it is entitled to the ** writ of preliminary injunction. 1994. it ascribes to the Court of Appeals several errors which it believes warrant reversal of the verdict. It contended. are additional places other than the place stated in the Rules of Court. this was inconsequential since such provision would govern "suits or legal actions between petitioner and its buyers" but not actions under the Dealership Agreement between KUBOTA and UNIMASTERS.[2] On January 13.000. that (1) the RTC had "no jurisdiction to take cognizance of ** (UNIMASTERS') action considering that venue was improperly laid. It appears that cross-examination of Chan was then undertaken by KUBOTA's lawyer with the "express reservation that ** (KUBOTA was) not (thereby) waiving and/or abandoning its motion to dismiss. The filing. Said the Court: "The plaintiff UNIMASTERS Conglomeration is holding its principal place of business in the City of Tacloban while the defendant ** (KUBOTA) is holding its principal place of business in Quezon City." and that in the course of the cross-examination. the venue of which was controlled by paragraph No.00. of whether or not the participation by the lawyer of KUBOTA at the injunction hearing operated as a waiver of its objection to ."[4] The Appellate Court agreed with KUBOTA that -." 2) "in ignoring the rule settled in Philippine Banking Corporation vs. and 3) "in concluding. contrariwise." After its motion for reconsideration of that decision was turned down by the Court of Appeals." Both orders were challenged as having been issued with grave abuse of discretion by KUBOTA in a special civil action of certiorari and prohibition filed with the Court of Appeals. as agreed upon by the parties in the Dealership Agreement. venue stipulations in a contract should be considered merely as agreement on additional forum. 33234.nonetheless instructed to proceed to cross-examine the witness.

" The Polytrade doctrine was reiterated expressly or implicitly in subsequent cases. the venue stipulation was as follows: "The parties agree to sue and be sued in the Courts of Manila. which is not contrary to public policy or prejudicial to third persons. The essential question really is that posed in the first and second assigned errors. "By written agreement of the parties the venue of an action may be changed or transferred from one province to another.[12] Written stipulations as to venue may be restrictive in the sense that the suit may be filed only in the place agreed upon.[14] In this case. On the other hand. . numbering at least ten (10). the 11th. KUBOTA's lawyer told the Court: "Your Honor. we are not waiving our right to submit the Motion to Dismiss."[10] It is plain that under these circumstances. as simply adding to or expanding the venues indicated in said Rule 4. need not occupy the Court too long. and when the Court made known its intention (a) "to (resolve first the) issue (of) the injunction then rule on the motion to dismiss. Blanco. no waiver or abandonment can be imputed to KUBOTA. It is a general principle that a person may renounce any right which the law gives unless such renunciation would be against public policy. what is essential is the ascertainment of the intention of the parties respecting the matter. Since convenience is the raison d'etre of the rules of venue. so that the matter might be resolved before the lapse of the temporary restraining order on the 13th. that is to say. the language of the parties must be so clear and categorical as to leave no doubt of their intention to limit the place or places."[11] Parties may by stipulation waive the legal venue and such waiver is valid and effective being merely a personal privilege. or merely permissive in that the parties may file their suit not only in the place agreed upon but also in the places fixed by law (Rule 4. Polytrade Corporation v. or to fix places other than those indicated in Rule 4. This is easier said than done. who had testified the day before. It simply is permissive. what construction should be placed on the stipulation in the Dealership Agreement that "(a)ll suits arising out of this Agreement shall be filed with/in the proper Courts of Quezon City. or involving persons who neither reside nor are found in the Philippines or otherwise. As in any other agreement.. They did not waive their right to pursue remedy in the courts specifically mentioned in Section 2(b) of Rule 4. for their actions. i. as an examination of precedents involving venue covenants will immediately disclose. stipulations designating venues other than those assigned by Rule 4 should be interpreted as designed to make it more convenient for the parties to institute actions arising from or in relation to their agreements. 1994 and was then informed that he should cross-examine UNIMASTERS' witness. Agreements on venue are explicitly allowed." Rule 4 of the Rules of Court sets forth the principles generally governing the venue of actions.[13] it is easy to accept the proposition that normally. The record shows that when KUBOTA's counsel appeared before the Trial Court in the morning of January 11. this Court construed the venue stipulations involved as merely permissive. however. The plain meaning is that the parties merely consented to be sued in Manila." This Court ruled that such a provision "does not preclude the filing of suits in the residence of the plaintiff or the defendant. In at least thirteen (13) cases." and (b) consequently its desire to forthwith conclude the examination of the witness on the injunction incident. specifically). because restrictive stipulations are in derogation of this general policy. In other words.e. These are: 1. venue stipulations should be deemed permissive merely. said counsel drew attention to the motion to dismiss on the ground of improper venue and insistently attempted to argue the matter and have it ruled upon at the time.venue. and for that purpose reset the hearing in the afternoon of that day. The parties solely agreed to add the courts of Manila as tribunals to which they may resort. decided in 1969. Qualifying or restrictive words which would indicate that Manila and Manila alone is the venue are totally absent therefrom. and that interpretation should be adopted which most serves the parties' convenience. whether real or personal.

2.
Nicolas v. Reparations Commission, decided in 1975.[15] In this case,
the stipulation on venue read:

"** (A)ll legal actions arising out of this contract ** may be brought in and
submitted to the jurisdiction of the proper courts in the City of Manila."

This Court declared that the stipulation does not clearly show the intention of
the parties to limit the venue of the action to the City of Manila only. "It must
be noted that the venue in personal actions is fixed for the convenience of
the plaintiff and his witnesses and to promote the ends of justice. We cannot
conceive how the interest of justice may be served by confining the situs of
the action to Manila, considering that the residences or offices of all the
parties, including the situs of the acts sought to be restrained or required to
be done, are all within the territorial jurisdiction of Rizal. ** Such agreements
should be construed reasonably and should not be applied in such a manner
that it would work more to the inconvenience of the parties without promoting
the ends of justice."

3.
Lamis Ents. v. Lagamon, decided in 1981.[16] Here, the stipulation in
the promissory note and the chattel mortgage specifed Davao City as the
venue.

The Court, again citing Polytrade, stated that the provision "does not
preclude the filing of suits in the residence of plaintiff or defendant under
Section 2(b), Rule 4, Rules of Court, in the absence of qualifying or restrictive
words in the agreement which would indicate that the place named is the
only venue agreed upon by the parties. The stipulation did not deprive **
(the affected party) of his right to pursue remedy in the court specifically
mentioned in Section 2(b) of Rule 4, Rules of Court. Renuntiato non
praesumitur."

4.
Capati v. Ocampo, decided in 1982.[17] In this case, the provision of
the contract relative to venue was as follows:

" ** (A)ll actions arising out, or relating to this contract may be instituted in the
Court of First Instance of the City of Naga."

The Court ruled that the parties "did not agree to file their suits solely and
exclusively with the Court of First Instance of Naga;" they "merely agreed to
submit their disputes to the said court without waiving their right to seek
recourse in the court specifically indicated in Section 2 (b), Rule 4 of the
Rules of Court."

5.
Western Minolco v. Court of Appeals, decided in 1988.[18] Here, the
provision governing venue read:

"The parties stipulate that the venue of the actions referred to in Section
12.01 shall be in the City of Manila."

The court restated the doctrine that a stipulation in a contract fixing a definite
place for the institution of an action arising in connection therewith, does not
ordinarily supersede the general rules set out in Rule 4, and should be
construed merely as an agreement on an additional forum, not as limiting
venue to the specified place.

6.
Moles v. Intermediate Appellate Court, decided in 1989.[19] In this
proceeding, the Sales Invoice of a linotype machine stated that the proper
venue should be Iloilo.

This Court held that such an invoice was not the contract of sale of the
linotype machine in question; consequently the printed provisions of the
invoice could not have been intended by the parties to govern the sale of the
machine, especially since said invoice was used for other types of
transactions. This Court said: "It is obvious that a venue stipulation, in order
to bind the parties, must have been intelligently and deliberately intended by
them to exclude their case from the reglementary rules on venue. Yet, even
such intended variance may not necessarily be given judicial approval, as,
for instance, where there are no restrictive or qualifying words in the

agreement indicating that venue cannot be laid in any place other than that
agreed upon by the parties, and in contracts of adhesion."

" ** (A)ny disagreement or dispute arising out of the lease shall be settled by
the parties in the proper court in the province of Surigao del Norte."

7.
Hongkong and Shanghai Banking Corp. v. Sherman, decided in
1989.[20] Here the stipulation on venue read:

The venue provision was invoked in an action filed in the Regional Trial Court
of Manila to recover damages arising out of marine subrogation based on a
bill of lading. This Court declared that since the action did not refer to any
disagreement or dispute arising out of the contract of lease of the barge, the
venue stipulation in the latter did not apply; but that even assuming the
contract of lease to be applicable, a statement in a contract as to venue does
not preclude the filing of suits at the election of the plaintiff where no
qualifying or restrictive words indicate that the agreed place alone was the
chosen venue.

" ** (T)his guarantee and all rights, obligations and liabilities arising
hereunder shall be construed and determined under and may be enforced in
accordance with the laws of the Republic of Singapore. We hereby agree
that the Courts in Singapore shall have jurisdiction over all disputes arising
under this guarantee **."

This Court held that due process dictates that the stipulation be liberally
construed. The parties did not thereby stipulate that only the courts of
Singapore, to the exclusion of all the others, had jurisdiction. The clause in
question did not operate to divest Philippine courts of jurisdiction.

8.
Nasser v. Court of Appeals, decided in 1990,[21] in which the venue
stipulation in the promissory notes in question read:

" ** (A)ny action involving the enforcement of this contract shall be brought
within the City of Manila, Philippines."

The Court's verdict was that such a provision does not as a rule supersede
the general rule set out in Rule 4 of the Rules of Court, and should be
construed merely as an agreement on an additional forum, not as limiting
venue to the specified place.

9.
Surigao Century Sawmill Co., Inc. v. Court of Appeals, decided in
1993:[22] In this case, the provision concerning venue was contained in a
contract of lease of a barge, and read as follows:

10.
Philippine Banking Corporation v. Hon. Salvador Tensuan, etc., Circle
Financial Corporation, et al., decided in 1993.[23] Here, the stipulation on
venue was contained in promissory notes and read as follows:

"I/We hereby expressly submit to the jurisdiction of the courts of Valenzuela
any legal action which may arise out of this promissory note."

This Court held the stipulation to be merely permissive since it did not lay the
venue in Valenzuela exclusively or mandatorily. The plain or ordinary import
of the stipulation is the grant of authority or permission to bring suit in
Valenzuela; but there is not the slightest indication of an intent to bar suit in
other competent courts. The Court stated that there is no necessary or
customary connection between the words "any legal action" and an intent
strictly to limit permissible venue to the Valenzuela courts. Moreover, since
the venue stipulations include no qualifying or exclusionary terms, express
reservation of the right to elect venue under the ordinary rules was
unnecessary in the case at bar. The Court made clear that "to the extent
Bautista and Hoechst Philippines are inconsistent with Polytrade (an en banc
decision later in time than Bautista) and subsequent cases reiterating
Polytrade, Bautista and Hoechst Philippines have been rendered obsolete by
the Polytrade line of cases."

11.
Philippine Banking Corporation v. Hon. Salvador Tensuan, etc., Brinell
Metal Works Corp., et al., decided in 1994:[24] In this case the subject
promissory notes commonly contained a stipulation reading:

"I/we expressly submit to the jurisdiction of the courts of Manila, any legal
action which may arise out of this promissory note."

the Court restated the rule in Polytrade that venue stipulations in a contract,
absent any qualifying or restrictive words, should be considered merely as an
agreement on additional forum, not limiting venue to the specified place.
They are not exclusive, but rather, permissive. For to restrict venue only to
that place stipulated in the agreement is a construction purely based on
technicality; on the contrary, the stipulation should be liberally construed.
The Court stated: "The later cases of Lamis Ents v. Lagamon [108 SCRA
1981], Capati v. Ocampo [113 SCRA 794 [1982], Western Minolco v. Court
of Appeals [167 SCRA 592 [1988], Moles v. Intermediate Appellate Court
[169 SCRA 777 [1989], Hongkong and Shanghai Banking Corporation v.
Sherman [176 SCRA 331], Nasser v. Court of Appeals [191 SCRA 783
[1990] and just recently, Surigao Century Sawmill Co. v. Court of Appeals
[218 SCRA 619 [1993], all treaded the path blazed by Polytrade. The
conclusion to be drawn from all these is that the more recent jurisprudence
shall properly be deemed modificatory of the old ones."

The lone dissent observed: "There is hardly any question that a stipulation of
contracts of adhesion, fixing venue to a specified place only, is void for, in
such cases, there would appear to be no valid and free waiver of the venue
fixed by the Rules of Courts. However, in cases where both parties freely
and voluntarily agree on a specified place to be the venue of actions, if any,
between them, then the only considerations should be whether the waiver (of
the venue fixed by the Rules of Court) is against public policy and whether
the parties would suffer, by reason of such waiver, undue hardship and
inconvenience; otherwise, such waiver of venue should be upheld as binding
on the parties. The waiver of venue in such cases is sanctioned by the rules
on jurisdiction."

Still other precedents adhered to the same principle.

12.
Tantoco v. Court of Appeals, decided in 1977.[25] Here, the parties
agreed in their sales contracts that the courts of Manila shall have
jurisdiction over any legal action arising out of their transaction. This Court
held that the parties agreed merely to add the courts of Manila as tribunals to
which they may resort in the event of suit, to those indicated by the law: the
courts either of Rizal, of which private respondent was a resident, or of
Bulacan, where petitioner resided.

13.
Sweet Lines, Inc. v. Teves, promulgated in 1987.[26] In this case, a
similar stipulation on venue, contained in the shipping ticket issued by Sweet
Lines, Inc. (as Condition 14) --

" ** that any and all actions arising out or the condition and provisions of this
ticket, irrespective of where it is issued, shall be filed in the competent courts
in the City of Cebu"

-- was declared unenforceable, being subversive of public policy. The Court
explained that the philosophy on transfer of venue of actions is the
convenience of the plaintiffs as well as his witnesses and to promote the
ends of justice; and considering the expense and trouble a passenger
residing outside of Cebu City would incur to prosecute a claim in the City of
Cebu, he would most probably decide not to file the action at all.

On the other hand, in the cases hereunder mentioned, stipulations on venue
were held to be restrictive, or mandatory.

1.
Bautista vs. De Borja, decided in 1966.[27] In this case, the contract
provided that in case of any litigation arising therefrom or in connection
therewith, the venue of the action shall be in the City of Manila. This Court
held that without either party reserving the right to choose the venue of action
as fixed by law, it can reasonably be inferred that the parties intended to
definitely fix the venue of the action, in connection with the contract sued
upon in the proper courts of the City of Manila only, notwithstanding that
neither party is a resident of Manila.

decided in 1988.[30] In this case. ** (shall be) the courts of appropriate jurisdiction in Pasay City.[29] decided much earlier. without more. Hoechst Philippines. Inc." 4. decided in 1994. unless the parties make very clear. In other words." This Court held: "No further stipulations are necessary to elicit the thought that both parties agreed that any action by either of them would be filed only in the competent courts of Rizal province exclusively."[33] In other words. to repeat. Any other rule would permit of individual. agreements on venue are not to be regarded as mandatory or restrictive. and persons claiming under each. the venue of any action shall be in the competent courts of the Province of Rizal. suffice to characterize the agreement as a restrictive one. or fix a place for their actions different from those specified by said rule. Of the essence is the ascertainment of the parties' intention in their agreement governing the venue of actions between them. whether for breach hereof or damages or any cause between the LESSOR and LESSEE. Villanueva v. It clearly evinces the parties' intent to limit to the 'courts of appropriate jurisdiction of Pasay City' the venue for all suits between the lessor and the lessee and those between parties claiming under them. . at the election of the plaintiff. which could well result in precedents in hopeless inconsistency. it can reasonably be inferred that the parties intended to definitely fix the venue of action." 5. be accompanying language clearly and categorically expressing their purpose and design that actions between them be litigated only at the place named by them. or complementary of said rule. 2(b)." 3.that any action against RCPI relative to the transmittal of a telegram must be brought in the courts of Quezon City alone -. Under Rule 4. v. The record of the case at bar discloses that UNIMASTERS has its principal place of business in Tacloban City. Flojo. "The agreement as to venue was not permissive but mandatory. which read: " ** (I)n case of any litigation arising out of this agreement. in 1978. as is usually done if the parties mean to retain the right of election so granted by Rule 4. This Court held that since neither party reserved the right to choose the venue of action as fixed by Section 2 [b]. Pampanga.2. it was stipulated that if the lessor violated the contract of lease he could be sued in Manila. . Rule 4 gives UNIMASTERS the option to sue KUBOTA for breach of contract in the Regional Trial Court of either Tacloban City or Quezon City. That ascertainment must be done keeping in mind that convenience is the foundation of venue regulations. An analysis of these precedents reaffirms and emphasizes the soundness of the Polytrade principle." This Court held that: "(t)he language used leaves no room for interpretation.[32] regardless of the general precepts of Rule 4. The fact that in their agreement the parties specify only one of the venues mentioned in Rule 4. Torres. . in the courts of Quezon City only. JRB Realty Corporation. subjective judicial interpretations without stable standards. Hence. Arquero v. and to disregard the prescriptions of Rule 4. does not. while if it was the lessee who violated the contract. and KUBOTA. but merely permissive. This means a waiver of their right to institute action in the courts provided for in Rule 4. by employing categorical and suitably limiting language.was printed clearly in the upper front portion of the form to be filled in by the sender. the invariable construction placed on venue stipulations is that they do not negate but merely complement or add to the codal standards of Rule 4 of the Rules of Court. that they wish the venue of actions between them to be laid only and exclusively at a definite place. Rule 4.[31] The condition respecting venue . and that that construction should be adopted which most conduces thereto. Gesmundo v. or where the plaintiff or any of the plaintiffs resides. the venue of any personal action between them is "where the defendant or any of the defendants resides or may be found. sec. This Court held that there was an agreement concerning venue of action and the parties were bound by their agreement. and any doubt or uncertainty as to the parties' intentions must be resolved against giving their agreement a restrictive or mandatory aspect. There must. in connection with the written contract sued upon.[28] Here the lease contract declared that " ** (V)enue for all suits. involved a strikingly similar stipulation. the lessee could be sued in Masantol. in Quezon City. Mosqueda. decided in 1982.

even if a case "affecting title to. and said Court is DIRECTED to forthwith proceed with Civil Case No. In light of all the cases above surveyed.or other contractual provisions clearly evincing the same desire and intention -. vs. and the Regional Trial Court would be acting entirely within its competence and authority in proceeding to try and decide the suit. petitioner. or for partition or condemnation of.[34] The action at bar. 74854 April 2.the stipulation should be construed. This is fundamental. SUPREME COURT Manila THIRD DIVISION G. Branch 6. and RUFINO DE GUZMAN. at the option of the plaintiff (UNIMASTERS in this case). is assuredly within the jurisdiction of a Regional Trial Court. Absent additional words and expressions definitely and unmistakably denoting the parties' desire and intention that actions between them should be ventilated only at the place selected by them. ANTONIO V. 1994. the appealed judgment of the Court of Appeals is REVERSED. dated February 3. . respondents.[35] Assuming that venue were improperly laid in the Court where the action was instituted. but as allowing suits either in Quezon City or Tacloban City. Antipolo.[39] WHEREFORE. not a jurisdictional impediment -precluding ventilation of the case before that Court of wrong venue notwithstanding that the subject matter is within its jurisdiction." This is not an accurate statement of legal principle. Republic of the Philippines One last word. or for recovery of possession. It equates venue with jurisdiction. The question is whether this stipulation had the effect of effectively eliminating the latter as an optional venue and limiting litigation between UNIMASTERS and KUBOTA only and exclusively to Quezon City. SO ORDERED. that would be a procedural. INTERMEDIATE APPELLATE COURT. Quezon City -. is REINSTATED and AFFIRMED. and the general postulates distilled therefrom. BENEDICTO. respecting KUBOTA's theory that the Regional Trial Court had "no jurisdiction to take cognizance of ** (UNIMASTERS') action considering that venue was improperly laid.But the contract between them provides that " ** All suits arising out of this Agreement shall be filed with/in the proper Courts of Quezon City.R. real property"[37] were commenced in a province or city other than that "where the property or any part thereof lies. but venue has nothing to do with jurisdiction. Rizal. not as confining suits between the parties only to that one place. the question should receive a negative answer. the objection is deemed waived.000. the Order of the Regional Trial Court of Tacloban City."[38] if no objection is seasonably made in a motion to dismiss. the Tacloban City RTC." without mention of Tacloban City. Quezon City. Thus. HON. Executive Judge. Regional Trial Court. 93-12-241 in due course. except in criminal actions. Branch LXXI. HON.00. This is true also of real actions. for the recovery of damages in an amount considerably in excess of P20.[36] the RTC would proceed in perfectly regular fashion if it then tried and decided the action. However. if the objection to venue is waived by the failure to set it up in a motion to dismiss. No. 1991 JESUS DACOYCOY. or foreclosure of mortgage on.

In other words. . without the defendant objecting that the venue was improperly laid. . Lingayen. Provisions relating to venue establish a relation between the plaintiff and the defendant and not between the court and the subject matter. has not even answered the complaint nor waived the venue. obviously attributable to its inability to distinguish between jurisdiction and venue. Questions or issues relating to venue of actions are basically governed by Rule 4 of the Revised Rules of Court. petitioner faults the appellate court in affirming what he calls an equally erroneous finding of the trial court that the venue was improperly laid when the defendant. Venue relates to trial not to jurisdiction. 1983. (a). touches more of the convenience of the parties rather than the substance of the case. Petitioner appealed to the Intermediate Appellate Court. the trial court is powerless to dismiss the case motu proprio. It is said that the laying of venue is procedural rather than substantive. 1 affirmed the order of dismissal of his complaint. Antipolo. the surrender of the produce thereof and damages for private respondent's refusal to have said deeds of sale set aside upon petitioner's demand. After said conference. which is outside the territorial jurisdiction of the trial court. Pangasinan. which in its decision of April 11. . Rizal. the RTC Executive Judge issued an order requiring counsel for petitioner to confer with respondent trial judge on the matter of venue. before summons could be served on private respondent as defendant therein. It found. Rule 4 of the New Rules of Court . now private respondent. Cainta. . 2 Petitioner claims that the right to question the venue of an action belongs solely to the defendant and that the court or its magistrate does not possess the authority to confront the plaintiff and tell him that the venue was improperly laid. as venue is waivable. 4 . The court can take judicial notice and motu proprio dismiss a suit clearly denominated as real action and improperly filed before it. 3 We grant the petition. . the trial court dismissed the complaint on the ground of improper venue. Public Attorney's Office for private respondent. Branch LXXI. 2. 1983. On March 22. on the other hand. now Court of Appeals.:p May the trial court motu proprio dismiss a complaint on the ground of improper venue? This is the issue confronting the Court in the case at bar.J.Ramon V. On May 25. Private respondent. Sison for petitioner. par. a complaint against private respondent Rufino de Guzman praying for the annulment of two (2) deeds of sale involving a parcel of riceland situated in Barrio Estanza. the location of the subject parcel of land is controlling pursuant to Sec." He asserts that "every court of justice before whom a civil case is lodged is not even obliged to wait for the defendant to raise that venue was improperly laid. based on the allegations of the complaint. maintains that the dismissal of petitioner's complaint is proper because the same can "readily be assessed as (a) real action. It relates to the jurisdiction of the court over the person rather than the subject matter. FERNAN. filed before the Regional Trial Court. petitioner asserts. Rizal. that petitioner's action is a real action as it sought not only the annulment of the aforestated deeds of sale but also the recovery of ownership of the subject parcel of riceland located in Estanza. The motu proprio dismissal of petitioner's complaint by respondent trial court on the ground of improper venue is plain error. 1986. C. Lingayen. In this petition for review. petitioner Jesus Dacoycoy. Pangasinan. a resident of Balanti.

real property. Lim Cay. In the instant case. 523. we emphasized: (1) A Court of First Instance has jurisdiction over suits involving title to. etc. 8 it does not appear that said service had been properly effected or that private respondent had appeared voluntarily in court 9 or filed his answer to the complaint. Carandang.e. Aguila. he requested the City Sheriff of Olongapo City or his deputy to serve the summons on defendant Rufino de Guzman at his residence at 117 Irving St. . the venue cannot be truly said to have been improperly laid. the venue. 55 Phil. justice and fairness take primary importance. Dismissing the complaint on the ground of improper venue is certainly not the appropriate course of action at this stage of the proceeding. The ends of justice require that respondent trial court faithfully adhere to the rules of procedure to afford not only the defendant. or service by publication under Section 16 when the address of the defendant is unknown and cannot be ascertained by diligent inquiry. as for all practical intents and purposes. 7 Although petitioner contends that on April 28. he cannot on appeal or in a special action be permitted to challenge belatedly the wrong venue. 692). Attorney General. which is deemed waived.. or by the coercive power of legal process exercised over his person.. Respondent trial court could have acquired jurisdiction over the defendant. the place where the suit may be had. subject to the rules on venue of actions (Manila Railroad Company vs. substituted service under Section 8. 10 At this stage. . Olongapo City. and allows the trial to be held and a decision to be rendered. 129. now petitioner. there is no dispute that it acquired jurisdiction over the plaintiff Jesus Dacoycoy. the moment he filed his complaint for annulment and damages. 5 In Luna vs. respondent trial court should have required petitioner to exhaust the various alternative modes of service of summons under Rule 14 of the Rules of Court.. 20 Phil. Oriental Mindoro. particularly as venue. vs. now private respondent. etc. 56 Phil. et al. unless and until the defendant objects to the venue in a motion to dismiss. 66 Phil. et al. or any interest therein . Section 2. may be waived expressly or impliedly. it being a regional trial court vested with the exclusive original jurisdiction over "all civil actions which involve the title to. may be acceptable to the parties for whose convenience the rules on venue had been devised. Navarro vs. Central Azucarera de Tarlac vs." in accordance with Section 19 (2) of Batas Pambansa Blg. The trial court cannot pre-empt the defendant's prerogative to object to the improper laying of the venue by motu proprio dismissing the case. or possession of. of the Rules of Court requiring that an action involving real property shall be brought in the Court of First Instance of the province where the land lies is a rule on venue of actions. With respect to the parties. while venue deals on the locality. . Tapinac. though technically wrong.. the right to be heard on his cause. Del Rosario.. it was grossly erroneous for the trial court to have taken a procedural short-cut by dismissing motu proprio the complaint on the ground of improper venue without first allowing the procedure outlined in the Rules of Court to take its proper course. i. personal service under Section 7. in inferior courts as well as in the courts of first instance (now RTC). Where defendant fails to challenge timely the venue in a motion to dismiss as provided by Section 4 of Rule 4 of the Rules of Court.Jurisdiction treats of the power of the court to decide a case on the merits. but the plaintiff as well. 169... which complaint said trial court dismissed for lack of jurisdiction over the leased land. or possession of. 11 Thus. respondent trial court would still have jurisdiction over the case.. real estate wherever situated in the Philippines. either by his voluntary appearance in court and his submission to its authority. (2) Rule 4. Indeed. et al. 1963. 604. 6 involving an action instituted before the then Court of First Instance of Batangas for rescission of a lease contract over a parcel of agricultural land located in Calapan. which may be waived expressly or by implication. Although we are for the speedy and expeditious resolution of cases. De Leon. et al. even granting for a moment that the action of petitioner is a real action. et al.

R. SO ORDERED. Rule 4. the decision of the Intermediate Appellate Court.M.. . of the Rules of Court. His motion to dismiss was therefore belatedly filed and could no longer deprive the trial court of jurisdiction to hear and decide the instant civil action for damages. SYLLABUS 1. and the place where the alleged libelous articles were printed and first published. 106847. 1 of Rule 16 provides that objections to improper venue must be made in a motion to dismiss before any responsive pleading is filed. WAIVED IN CASE AT BAR BY FILING ANSWER. RTC. PATRICIO P. pursuant to Sec. Br. — Petitioner Diaz then. although mandatory in the instant case. 3. ID. DIAZ. improper venue must be seasonably raised. INDOL. Well-settled is the rule that improper venue may be waived and such waiver may occur by laches.. now Court of Appeals. petitioner. 1993. JUDGE SANTOS B. ID. Sec. should have timely challenged the venue laid in Marawi City in a motion to dismiss. — From the provision of Article 360.. SULTAN MACORRO L. Responsive pleadings are those which seek affirmative relief and set up defenses. ID. Fernandez for petitioner. 1986. Consequently. Mangurun B. MACUMBAL. ACTIONS. As such. respondents. as defendant in the court below. March 5. VENUE OF LIBEL CASE WHERE OFFENDED PARTY IS AN PUBLIC OFFICIAL. it is clear that an offended party who is at the same time a public official can only institute an action arising from libel in two (2) venues: the place where he holds office. is nevertheless waivable. Unfortunately. IMPROPER VENUE. otherwise. for all practical intents and purposes.. — Unless and until the defendant objects to the venue in a motion to dismiss prior to a responsive pleading. 4363. No.. The complaint filed by petitioner before the Regional Trial Court of Antipolo.A. third paragraph of the Revised Penal Code as amended by R. having already submitted his person to the jurisdiction of the trial court.A.WHEREFORE. petitioner had already submitted himself to the jurisdiction of the trial court when he filed his Answer to the Complaint with Counterclaim. is hereby nullified and set aside. ID. Respondent court is enjoined to proceed therein in accordance with law. Rex J. Batuampar for respondents. in view of the foregoing. MACABANGKIT LANTO and MOHAMADALI ABEDIN. ID. vs. dated April 11. SULTAN LINOG M. Marawi City. ADIONG. petitioner may no longer object to the venue which. the venue though technically wrong may yet be considered acceptable to the parties for whose convenience the rules on venue had been devised. Branch LXXI is revived and reinstated. 8. 4. 2. it may be deemed waived. MUST BE RAISED IN A NOTION TO DISMISS PRIOR TO A RESPONSIVE PLEADING. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. REMEDIAL LAW. the venue cannot truly be said to have been improperly laid since.

a newspaper of general circulation in Cotabato City. published in its front page the news article captioned "6-Point Complaint Filed vs.. Diaz thereafter moved for reconsideration of the order of denial. and Mamala B. Macumbal. RELATES TO TRIAL AND NOT TO JURISDICTION. 2 The facts: On 16 July 1991. Not one of the respondents then held office in Marawi City: respondent Macumbal was the Regional Director for Region XII . 4 In the interim. Sultan Linog M.. 385-91 and raffled to Branch 10 of the Regional Trial Court in Marawi City. "Toll of Corruption. — Indeed. who executed a sworn statement attesting to the alleged corruption.. this investigation in the light of Agbayani vs. Petitioner Diaz contends that the civil action for damages could not be rightfully filed in Marawi City as none of the private respondents. Indol." and in its Publisher's Notes the editorial. the civil complaint for damages. "WHEREFORE . petitioner Diaz moved for the dismissal of the action for damages on the ground that the trial court did not have jurisdiction over the subject matter. assailing that order of denial 1 as well as the order denying reconsideration. respondent judge denied petitioner's Motion to Dismiss for lack of merit. Diaz. ID. Macumbal. who are all public officers. Consequently. . The defendants therein had already filed their respective Answers with Counterclaim. was set for Pre-Trial Conference. it is petitioner's view that the Regional Trial Court in Marawi City has no jurisdiction to entertain the civil action for damages." DECISION BELLOSILLO. . the presiding judge of Branch 10 inhibited himself from the case which was thereafter reraffled to the sala of respondent judge. 6 Pending action on the motion. Venue relates to trial and not to jurisdiction. petitioner Patricio P. instituted separate criminal and civil complaints arising from the libel before the City Prosecutor's Office and the Regional Trial Court in Marawi City. namely. Atty. J p: VENUE in the instant civil action for damages arising from libel was improperly laid. docketed as Civil Case No. held office in Marawi City. the City Prosecutor's Office dismissed the criminal case thus 5 — The petitioner is correct. relating as it does to jurisdiction of the court over the person rather than the subject matter. the Mindanao Kris. On 15 June 1991. neither were the alleged libelous news items published in that city. private respondents Sultan Macorro L. On 2 September 1991. ID. this Petition for Certiorari. Sayo case finds that it has no jurisdiction to handle this case and that the same be filed or instituted in Cotabato City where complainant is officially holding office at the time respondents caused the publication of the complained news item in the Mindanao Kris in Cotabato City. 3 On 22 July 1991. the laying of venue is procedural rather than substantive. ID. with prayer for the issuance of a temporary restraining order. The motion was also denied in the Order of 27 August 1991. the public officers alluded to. nonetheless." which exposed alleged anomalies by key officials in the Regional Office of the Department of Environment and Natural Resources. On 18 November 1991. Pagandaman. prompting petitioner to seek relief therefrom. for which reason it is recommended that this charge be dropped for lack of jurisdiction.4. were named respondents in both complaints. Lanto and Atty. Mohamadali Abedin. Hence. Macabangkit M. He vehemently argued that the complaint should have been filed in Cotabato City and not in Marawi City. the trial court refused to dismiss the complaint. The publisher-editor of the Mindanao Kris.

A. for all practical intents and purposes. nothing more. was temporarily residing in Quezon City. Thus. 10 . specifically requires that — "The criminal and civil action for damages in cases of written defamations as provided for in this chapter. Rule 4. and that they were public officers. that where one of the offended parties is a public officer . unless and until the defendant objects to the venue in a motion to dismiss prior to a responsive pleading. No. and the place where the alleged libelous articles were printed and first published. except for respondent Lanto who was then temporarily residing in Quezon City. it is admitted that the libelous articles were published and printed in Cotabato City. 4363. . respondent Lanto was a consultant of the Secretary of the DENR and. however. . Unfortunately. Significantly. as defendant in the court below. the venue though technically wrong may yet be considered acceptable to the parties for whose convenience the rules on venue had been devised. respondent Abedin was the Chief of the Legal Division of the DENR Regional Office in Cotabato City. the venue cannot truly be said to have been improperly laid since. as amended. pursuant to Sec. 9 Petitioner Diaz then. (who) does not hold office in the City of Manila. as averred in the complaint. in their complaint in civil Case No. Consequently. The third paragraph of Art. Marawi City is not among those where venue can be laid. . respondents were limited in their choice of venue for their action for damages only to Cotabato City where Macumbal. Government officials by occupation and residents of Marawi City. However. . Apparently. Private respondents thus appear to have misread the provisions of Art. . was temporarily residing in Quezon City. respondent Indol was the Provincial Environment and Natural Resources Officer of Lanao del Norte and held office in that province. it is indubitable that venue was improperly laid. private respondents do not deny that their main place of work was not in Marawi City. Moreover. when they filed their criminal and civil complaints in Marawi City. 385-91 respondents simply alleged that they were residents of Marawi City. the action shall be filed in the Court of First Instance (Regional Trial Court) of the province or city where he held office at the time of the commission of the offense or where the libelous article is printed and first published and in case one of the the offended parties is a private individual. as amended by R. " (emphasis supplied) From the foregoing provision. 7 Indeed.of the DENR and held office in Cotabato City. 360 of the Revised Penal Code. 360 of the Revised Penal Code. the action shall be filed in the Court of First Instance of the province or city where he actually resides at the time of the commission of the offense or where the libelous matter is printed and first published . This averment is not enough to vest jurisdiction upon the Regional Trial Court of Marawi City and may be properly assailed in a motion to dismiss. shall be filed simultaneously or separately with the Court of First Instance (now Regional Trial Court) of the province or city where the libelous article is printed and first published or where any of the offended parties actually resides at the time of the commission of the offense: Provided. Lanto and Abedin had their office and Lanao del Norte where Indol worked. petitioner had already submitted himself to the jurisdiction of the trial court when he filed his Answer to the Complaint with Counterclaim. although they had sub-offices therein. the claim of private respondents that they maintained sub-offices in Marawi City is a mere afterthought. of the Rules of Court. and. all married. 4. should have timely challenged the venue laid in Marawi City in a motion to dismiss. The Comment of private respondents that Lanto was at the time of the commission of the offense actually holding office in Marawi City as consultant of LASURECO can neither be given credence because this is inconsistent with their allegation in their complaint that respondent Lanto." 8 But they are wrong. considering that it was made following the dismissal of their criminal complaint by the City Prosecutor of Marawi City. it is clear that an offended party who is at the same time a public official can only institute an action arising from libel in two (2) venues: the place where he holds office. They deemed as sufficient to vest jurisdiction upon the Regional Trial Court of Marawi City the allegation that "plaintiffs are all of legal age. as consultant of the Secretary of the DENR.

Reyes. the defendant therein moved to dismiss the case without first submitting to the jurisdiction of the lower court. while the alleged libelous articles were published abroad. RODOLFO M. COURT OF APPEALS.: . vs. No. " 13 Manila SECOND DIVISION G. SO ORDERED. Presiding Judge of Branch 11. it does not. not in Rizal. Finally. having already submitted his person to the jurisdiction of the trial court. Responsive pleadings are those which seek affirmative relief and set up defenses. RTC-Cebu and FRANCISCO TESORERO. although mandatory in the instant case. Consequently.. 4363 should be deemed mandatory for the party bringing the action. and where it confers jurisdiction upon a particular court. otherwise. . the laying of venue is procedural rather than substantive. 14 Venue relates to trial and not to jurisdiction. unless the question of venue should be waived by the defendant .. improper venue must be seasonably raised. Petitioner was obviously aware of this rule when he anchored his motion to dismiss on lack of cause of action over the subject matter. petitioner. More. v. Thus — Republic of the Philippines SUPREME COURT "The rule is that where a statute creates a right and provides a remedy for its enforcement. WHEREFORE. As August 20. Well-settled is the rule that improper venue may be waived and such waiver may occur by laches. JR.His motion to dismiss was therefore belatedly filed and could no longer deprive the trial court of jurisdiction to hear and decide the instant civil action for damages. 2001 DAVAO LIGHT & POWER CO. 1 of Rule 16 provides that objections to improper venue must be made in a motion to dismiss before any responsive pleading is filed. INC. relying on this Court's ruling in Time. This case is remanded to the court of origin for further proceedings. It may be noted that in Time. relating as it does to jurisdiction of the court over the person rather than the subject matter. Hence. Inc. after all. venue in an action arising from libel is only mandatory if it is not waived by defendant.. BELLAFLOR. objections to venue in civil actions arising from libel may be waived. . . 11 such. the venue provisions of Republic Act No. for lack of merit. involve a question of jurisdiction. 111685 Withal. it may be deemed waived. which is not the case before Us. the Petition for Certiorari is DISMISSED and the Temporary Restraining Order heretofore issued is LIFTED. petitioner may no longer object to the venue which. is nevertheless waivable. the remedy is exclusive. Inc. Sec. DE LEON. that jurisdiction is likewise exclusive. THE HON. v. 12 Therein. We declared that the Court of First Instance of Rizal was without jurisdiction to take cognizance of Civil Case No. 10403 because the complainants held office in Manila. unless otherwise provided.R. respondents. HON. Indeed. J. Reyes.

However. In lieu of an answer. in defendant's motion to dismiss. private respondent filed a motion to dismiss3 claiming that: (a) the complaint did not state a cause of action. and (d) venue was improperly laid. Reyes Street. On August 3. Inc. the complaint prayed for damages in the amount of P11. He may be impelled by some ulterior motivation in choosing to file a case in a court even if not allowed by the rules of venue. Reyes Street... 1992. the dispositive portion of which states: borne out by the Contract of Lease (Annex 2 of the motion) and another Contract of Lease of Generating Equipment (Annex 3 of the motion) executed by the plaintiff with the NAPOCOR.000.00. SO ORDERED. is hereby DENIED DUE COURSE and the same is DISMISSED. IT IS SO ORDERED. Hence. the Court is of the opinion that the principal office of plaintiff is at Davao City which for purposes of venue is the residence of plaintiff. filed a complaint for damages2 against private respondent Francisco Tesorero before the Regional Trial Court of Cebu City. SP No.R. as well as the convenience of the parties for which the rules of procedure and venue were formulated x x x. 29996. x x x. Considering the foregoing. The antecedent facts are: The choice of venue should not be left to plaintiff's whim or caprises [sic]. 1992. petitioner Davao Light & Power Co. (b) the plaintiff's claim has been extinguished or otherwise rendered moot and academic. 1992. The plaintiff being a private corporation undoubtedly Banilad. the trial court issued a Resolution4 dismissing petitioner's complaint on the ground of improper venue. 1993 rendered by the Sixteenth Division1 of the Court of Appeals in CA-G. it is alleged and submitted that the principal office of plaintiff is at "163-165 P. Inc. Of these four (4) grounds. . Docketed as CEB-11578. Branch 11. the case should be filed in Davao City. The representation made by the plaintiff in the 2 aforementioned Lease Contracts stating that its principal office is at "163-165 P. Another factor considered by the Courts in deciding controversies regarding venue are considerations of judicial economy and administration. WHEREFORE. the last mentioned is most material in this case at bar. Davao City" bars the plaintiff from denying the same.Before us is a petition for review on certiorari assailing the Decision dated August 31. the petition for review filed by Davao Light & Power Co. On April 10.000. (c) there was non-joinder of indispensable parties. Davao City as Petitioner's motion for reconsideration5 was denied in an Order6 dated October 1. The trial court stated that: The motion on the ground of improper venue is granted and the complaint DISMISSED on that ground. Cebu City is the plaintiff's principal place of business as alleged in the complaint and which for purposes of venue is considered as its residence.

as follows: Venue and jurisdiction are entirely distinct matters. assailing the judgment of the Court of Appeals on the following grounds: 5. as given in the contracts. is an admission which should bind petitioner. 1993. the Court of Appeals rendered the assailed judgment9 denying due course and dismissing the petition. Reyes St. Counsel for petitioner received a copy of the decision on September 6. 29996. 1993. 1992 a petition for review on certiorari docketed as G.10 Without filing a motion for reconsideration. and in a Resolution dated January 11. private respondent adverts to several contracts12 entered into by petitioner with the National Power Corporation (NAPOCOR) where in the description of personal circumstances. According to the appellate tribunal. 5. or where the plaintiff or any of the plaintiffs resides. It is to be distinguished from jurisdiction. the defendant therein sought the dismissal of an action filed by the plaintiff. before the Regional Trial Court of Cebu City. whether or not a prohibition exists against their alteration. on the ground of improper venue." According to private respondent the petitioner's address in Davao City. petitioner filed the instant petition.01. CEB-11578. Petitioner's right to file its action for damages against private respondent in Cebu City where its principal office is located. On August 31.8 referred the same to the Court of Appeals for resolution.13 Practically the same issue was addressed in Young Auto Supply Co. . private respondent points out that petitioner made several judicial admissions as to its principal office in Davao City consisting principally of allegations in pleadings filed by petitioner in a number of civil cases pending before the Regional Trial Court of Davao in which it was either a plaintiff or a defendant. The trial court denied the motion to dismiss. and private respondent's action or inaction based thereon of such character as to change his position or status to his injury.R.02. In either case. the court may render a valid judgment. on certiorari before the Court of Appeals. 107381.11 It is private respondent's contention that the proper venue is Davao City.R. as evidenced by a contract of sale. detriment or prejudice. No. the former states that its principal office is at "163-165 P.14 In the aforesaid case. On appeal. We reasoned out thus: In the Regional Trial Courts. SP No.50 in docket fees. Jurisdiction may not be conferred by consent or waiver upon a court which otherwise would have no jurisdiction over the subject-matter of an action. and for which it paid P55. all personal actions are commenced and tried in the province or city where the defendant or any of the defendants resides or may be found. at the election of the plaintiff x x x. the denial was reversed and the case was dismissed.. a corporation. Court of Appeals. we reversed the Court of Appeals. in view of contradictory statements made by petitioner prior to the filing of the action for damages. venue was improperly laid since the address of the plaintiff was supposedly in Pasay City. In addition. 1993.398. may not be negated by a supposed estoppel absent the essential elements of the false statement having been made to private respondent and his reliance on good faith on the truth thereof. The principal issue in the case at bar involves a question of venue. Rules as to jurisdiction can never be left to the consent or agreement of the parties.7 We declined to take immediate cognizance of the case. v. First. petitioner originally filed before this Court on November 20. even though the plaintiff's articles of incorporation stated that its principal office was in Cebu City. Respondent Court of Appeals denied petitioner procedural due process by failing to resolve the third of the above-stated issues. but the venue of an action as fixed by statute may be changed by the consent of the parties and an objection that the plaintiff brought his suit in the wrong county may be waived by the failure of the defendant to make a timely objection. and not Cebu City where petitioner filed Civil Case No. The petition was docketed in the appellate court as CA-G. Private respondent argues that petitioner is estopped from claiming that its residence is in Cebu City. Davao City. letters and several commercial documents sent by the plaintiff to the defendant.From the aforesaid resolution and order.

Philippines (as amended on December 20. on the rather flimsy ground that he is a member of the public for whose benefit the electric generating equipment subject of the contracts were leased or acquired. No pronouncement as to costs. The Corporation Code precisely requires each corporation to specify in its articles of incorporation the "place where the principal office of the corporation is to be located which must be within the Philippines" (Sec. No. But this is not the case before us. per its amended articles of incorporation15 and by-laws. this Court explained why actions cannot be filed against a corporation in any place where the corporation maintains its branch offices. 34 Phil. . But for practical purposes. CEB11578 with all deliberate dispatch. The Court ruled that to allow an action to be instituted in any place where the corporation has branch offices. 1984)" x x x. The purpose of this requirement is to fix the residence of a corporation in a definite place. The appealed decision is hereby REVERSED and SET ASIDE. Antillon. despite his protestations that he is privy thereto.There are two plaintiffs in the case at bench: a natural person and a domestic corporation. Ltd. By the same token. to wit: Venue of personal actions. We are likewise not persuaded by his argument that the allegation or representation made by petitioner in either the complaints or answers it filed in several civil cases that its residence is in Davao City should estop it from filing the damage suit before the Cebu courts. instead of allowing it to be ambulatory. 22083) states: "THIRD. or in the case of a nonresident defendant where he may be found.16 An action for damages being a personal action. 19 SCRA 379 [1967]). the instant petition is hereby GRANTED. it becomes unnecessary to decide whether Garcia is also a resident of Cebu City and whether Roxas was in estoppel from questioning the choice of Cebu City as the venue. 19 SCRA 379 ([1967]). section 2 of the Rules of Court. Branch 11 is hereby directed to proceed with Civil Case No. thus: Roxas could argue that YASCO was in estoppel because it misled Roxas to believe that Pasay City was its principal place of business. It cannot be disputed that petitioner's principal office is in Cebu City.. — All other actions may be commenced and tied where the plaintiff or any of the principal plaintiffs resides. WHEREFORE. Antillo. The Regional Trial Court of Cebu City. 526 [1916] Clavecilla Radio System v. [emphasis supplied] xxx xxx The Article of Incorporation of YASCO (SEC Reg. xxx With the finding that the residence of YASCO for purposes of venue is in Cebu City. Besides there is no showing that private respondent is a party in those civil cases or that he relied on such representation by petitioner. A corporation has no residence in the same sense in which this term is applied to a natural person. Benguet Commercial Co. or where the defendant or any of the principal defendants resides. Both plaintiffs aver in their complaint that they are residents of Cebu City. would create confusion and work untold inconvenience to said entity.17 venue is determined pursuant to Rule 4. That the place where the principal office of the corporation is to be established or located is at Cebu City.. If it was Roxas who sued YASCO in Pasay City and the latter questioned the venue on the ground that its principal place of business was in Cebu City. a corporation cannot be allowed to file personal actions in a place other than its principal place of business unless such a place is also the residence of a co-plaintiff or a defendant. He is a complete stranger to the covenants executed between petitioner and NAPOCOR. where its principal place of business is located. In Clavecilla Radio System v. at the election of the plaintiff.18 Private respondent is not a party to any of the contracts presented before us. The same considerations apply to the instant case. a corporation is in a metaphysical sense a resident of the place where its principal office is located as stated in the articles of incorporation (Cohen v. 14[3]). 1980 and further amended on December 20.

1988. petitioner requested for seven days within which to pay private respondent. for the next three shipments.3 On the first shipment. 125027 August 12. The Case This is a petition fore review on certiorari under Rule 45 of the Rules of Court. On September 26. on September 13. the sheriff filed his Sheriff‘s Return showing that summons was not served on petitioner. No. 2002 ANITA MANGILA. Sometime in January 1988. SO ORDERED.95. Thus. However. 25 percent attorney‘s fees and costs of suit. 1988. the trial . March 17. vs. seeking to set aside the Decision1 of the Court of Appeals affirming the Decision2 of the Regional Trial Court. Pasay City. CARPIO. to Guam (USA) where petitioner maintains an outlet. private respondent filed Civil Case No.The Facts WE CONCUR: Petitioner Anita Mangila ("petitioner" for brevity) is an exporter of sea foods and doing business under the name and style of Seafoods Products. J. Petitioner agreed to pay private respondent cash on delivery. petitioner never paid private respondent. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. 1988. respondents. petitioner failed to pay private respondent shipping charges amounting to P109. a single registered proprietorship engaged in the freight forwarding business. the same invoice stipulates attorney‘s fees equivalent to 25 percent of the amount due plus costs of suit.R. private respondent filed a Motion for Preliminary Attachment. Branch 108.376. In case of suit. petitioner contracted the freight forwarding services of private respondent for shipment of petitioner‘s products. such as crabs. petitioner.95 plus 18 percent interest per annum. A woman found at petitioner‘s house informed the sheriff that petitioner transferred her residence to Sto. On August 1. prawns and assorted fishes. 24 and 31.: Despite several demands.5 Thus. Private respondent Loreta Guina ("private respondent" for brevity) is the President and General Manager of Air Swift International. on June 10. 376. 1988. Guagua. Pampanga. Niño. 1988. Private respondent‘s invoice stipulates a charge of 18 percent interest per annum on all overdue accounts. 5875 before the Regional Trial Court of Pasay City for collection of sum of money. construing petitioner‘s departure from the Philippines as done with intent to defraud her creditors. The sheriff found out further that petitioner had left the Philippines for Guam.4 COURT OF APPEALS and LORETA GUINA. The trial court upheld the writ of attachment and the declaration of default on petitioner while ordering her to pay private respondent P109.

the pre-trial was considered terminated. 1989 at 8:30 a. Private respondent‘s invoice for the freight forwarding service stipulates that "if court litigation becomes necessary to enforce collection xxx the agreed venue for such action is Makati. Petitioner explained that her counsel arrived 5 minutes after the second call. Thus. she had not been served a copy of the Complaint and the summons.court issued an Order of Preliminary Attachment6 against petitioner. 1988. maintaining her contention that the venue was improperly laid. On motion of petitioner. private respondent‘s counsel did not appear. Petitioner claims that the lower court erred in allowing private respondent to present evidence ex-parte since there was no Order considering the petitioner as in default. did not rule on the question of jurisdiction and on the validity of the writ of preliminary attachment. On December 26.m. the trial court issued an Order setting the pre-trial for July 18.18 . Metro Manila. 1989. petitioner filed a Motion to Dismiss the Complaint on the ground of improper venue. Meanwhile.m. Affidavit and Bond. 1989. 1988. the day of the pre-trial. 1989.9 In the hearing of the Urgent Motion to Discharge Attachment on November 11. the trial court issued a Writ of Preliminary Attachment. petitioner filed an Urgent Motion to Discharge Attachment8 without submitting herself to the jurisdiction of the trial court. private respondent sought and was granted a re-setting to December 9. 1989 did not state that petitioner was declared as in default but still the court allowed private respondent to present evidence ex-parte. She pointed out that up to then."13 Private respondent filed an Opposition asserting that although "Makati" appears as the stipulated venue. and was late because of heavy traffic. On June 26. private respondent claimed that petitioner knew that private respondent was holding office in Pasay City and not in Makati. Petitioner contends that the Order of August 24.7 On November 7. denied the Motion to Dismiss and gave petitioner five days to file her Answer. 1989 at 8:30 a. finding credence in private respondent‘s assertion.. private respondent applied for an alias summons. 1989 to August 24.. as shown by the transcript of stenographic notes. which the trial court issued on January 19. the trial court issued an Order17 terminating the pre-trial and allowing the private respondent to present evidence ex-parte on September 12. Petitioner filed her Answer16 on June 16. Sheriff Alfredo San Miguel of RTC Pampanga served on petitioner‘s household help in San Fernando. Petitioner filed a Motion for Reconsideration but this too was denied.12 On February 9. On that date. 1989 upon filing of petitioner‘s counter-bond. Moreover. Thus. 1989. upon motion of private respondent. The Order stated that when the case was called for pre-trial at 8:31 a. The trial court granted the request of its sheriff for assistance from their counterparts in RTC. only the counsel for private respondent appeared. and requiring the parties to submit their pre-trial briefs. the trial court issued an Order resetting the pre-trial from July 18. Pampanga. On August 24. 1988. 1989. 1988. Upon the trial court‘s second call 20 minutes later. 1989 that summons was finally served on petitioner. however. petitioner claimed the court had not acquired jurisdiction over her person. on October 28. 1989 at 8:30 a. On September 12.m. The trial court. private respondent filed a Motion to Sell Attached Properties but the trial court denied the motion.10 The trial court granted the Motion to Discharge Attachment on January 13. the same was merely an inadvertence by the printing press whose general manager executed an affidavit14 admitting such inadvertence. petitioner filed her Motion for Reconsideration of the Order terminating the pre-trial. petitioner‘s counsel was still nowhere to be found.m. 1989. so the Urgent Motion to Discharge Attachment was deemed submitted for resolution.15 The lower court. the Notice of Levy with the Order.11 It was only on January 26.. The following day. Hence. 1988. Pampanga.

IV.20 The Ruling of the Court Improper Issuance and Service of Writ of Attachment . this petition. The Court of Appeals also affirmed the declaration of default on petitioner and concluded that the trial court did not commit any reversible error. III. On November 20. 1995. Private respondent filed a Motion for Execution Pending Appeal but the trial court denied the same.376. 1996. 1989. 1989. the Court of Appeals rendered a decision affirming the decision of the trial court. the trial court denied the Omnibus Motion.The Issues On October 6.95 plus 18 percent interest per annum. WHETHER THERE WAS A VALID DECLARATION OF DEFAULT.1âwphi1. 25 percent attorney‘s fees and costs of suit. 1996 but the Court of Appeals denied the same in a Resolution dated May 20.19 II. the petitioner received a copy of the Decision of November 10. The issues raised by petitioner may be re-stated as follows: I. Petitioner filed a Motion for Reconsideration on January 5.nêt On October 10. PLUS ATTORNEY‘S FEES. The Ruling of the Court of Appeals WHETHER THERE WAS IMPROPER VENUE. Hence. ordering petitioner to pay respondent P109. 1989. 1989. WHETHER RESPONDENT COURT ERRED IN DECLARING THAT PETITIONER IS OBLIGED TO PAY P109. 1989. 1989. 376.95. but merely late. On December 15. the trial court denied the Motion for Reconsideration and scheduled the presentation of private respondent‘s evidence ex-parte on October 10. On October 18. The Court of Appeals upheld the validity of the issuance of the writ of attachment and sustained the filing of the action in the RTC of Pasay. WHETHER RESPONDENT COURT ERRED IN NOT HOLDING THAT THE WRIT OF ATTACHMENT WAS IMPROPERLY ISSUED AND SERVED. petitioner filed an Omnibus Motion stating that the presentation of evidence ex-parte should be suspended because there was no declaration of petitioner as in default and petitioner‘s counsel was not absent.

) Furthermore. Hence. Quezon City or at her new address in Guagua. order of attachment and writ of attachment . and third. acquired jurisdiction over the petitioner.issuance of summons. the trial court should have. the alias summons was served only on January 26. the writ is implemented. the crux of petitioner‘s arguments rests on the question of the validity of the writ of attachment. the court has no power and authority to act in any manner against the defendant." Private respondent asserts that when she commenced this action. A party to a suit may. 1988. Court of Appeals. the court must have acquired jurisdiction over the defendant for without such jurisdiction. as explicitly required by Section 5 of Rule 57. It is necessary to distinguish between the two to determine when jurisdiction over the person of the defendant should be acquired to validly implement the writ. second. either by service on him of summons or other coercive process or his voluntary submission to the court‘s authority. there was no ground for the issuance of the writ since the intent to defraud her creditors had not been established. on the day the writ was implemented. it is essential that he serve on the defendant not only a copy of the applicant‘s affidavit and attachment bond. As a preliminary note. Among such exceptions are "where the summons could not be served personally or by substituted service despite diligent efforts or where the defendant is a resident temporarily absent therefrom x x x. Because of failure to serve summons on her before or simultaneously with the writ‘s implementation."21 This phrase refers to the date of filing of the complaint which is the moment that marks "the commencement of the action. the value of the properties levied exceeded the value of private respondent‘s claim.Petitioner ascribes several errors to the issuance and implementation of the writ of attachment. Any order issuing from the Court will not bind the defendant. However. the summons was actually served on petitioner several months after the writ had been implemented. 1988 and implemented on October 28. . However. nevertheless. v. For the initial two stages. Private respondent. and of the order of attachment. However. we have held that the grant of the provisional remedy of attachment involves three stages: first. at any time after filing the complaint. avail of the provisional remedies under the Rules of Court." (Emphasis supplied. claims that the prior or contemporaneous service of summons contemplated in Section 5 of Rule 57 provides for exceptions. but also the summons addressed to said defendant as well as a copy of the complaint xxx. the Writ of Preliminary Attachment was issued on September 27." The reference plainly is to a time before summons is served on the defendant. Rule 57 on preliminary attachment speaks of the grant of the remedy "at the commencement of the action or at any time thereafter. This distinction is crucial in resolving whether there is merit in petitioner‘s argument. petitioner claims that the trial court had not acquired jurisdiction over her person and thus the service of the writ is void. it is not necessary that jurisdiction over the person of the defendant be first obtained. when the sheriff or other proper officer commences implementation of the writ of attachment.22 this Court clarified the actual time when jurisdiction should be had: "It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the person of defendant ." However. as was shown in the records of the case. Among petitioner‘s arguments are: first. Yet. Inc. second. the writ of attachment issues pursuant to the order granting the writ.23 In the instant case. previously or simultaneously with the implementation of the writ. Specifically. or even before summons issues. The trial court had the authority to issue the Writ of Attachment on September 27 since a motion for its issuance can be filed "at the commencement of the action. once the implementation of the writ commences. This Court has long settled the issue of when jurisdiction over the person of the defendant should be acquired in cases where a party resorts to provisional remedies.these do not and cannot bind and affect the defendant until and unless jurisdiction over his person is eventually obtained by the court.. 1989 or almost three months after the implementation of the writ of attachment. a distinction should be made between issuance and implementation of the writ of attachment. the court issues the order granting the application. In Davao Light & Power Co. she tried to serve summons on petitioner but the latter could not be located at her customary address in Kamuning.

"28 Based on this provision. this made petitioner a resident who is temporarily out of the country. We therefore agree with private respondent that Makati is not the only venue where this case could be filed. Rule 14 of the Rules of Court provides that whenever the defendant‘s "whereabouts are unknown and cannot be ascertained by diligent inquiry.32 In the instant case. In conclusion. Private respondent never showed that she effected substituted service on petitioner after her personal service failed. The agreed venue for such action is Makati.27 The subsequent service of summons does not confer a retroactive acquisition of jurisdiction over her person because the law does not allow for retroactivity of a belated service. This is the exact situation contemplated in Section 16. an additional equivalent (sic) to 25% of the principal amount will be charged. if petitioner‘s whereabouts could not be ascertained after the sheriff had served the summons at her given address. The rules provide for certain remedies in cases where personal service could not be effected on a party. do not as a rule supersede the general rule set forth in Rule 4 of the Revised Rules of Court. absent words that show the parties‘ intention to restrict the filing of a suit in a particular place. the stipulation does not limit the venue exclusively to Makati. Petitioner assails the filing of this case in the RTC of Pasay and points to a provision in private respondent‘s invoice which contains the following: "3. Thus.30 The parties must be able to show that such stipulation is exclusive. courts will allow the filing of a case in any venue. Venue stipulations in a contract.31 In the absence of qualifying or restrictive words. then respondent could have immediately asked the court for service of summons by publication on petitioner. as private respondent also claims that petitioner was abroad at the time of the service of summons. There are no qualifying or restrictive words in the invoice that would evince the intention of the parties that Makati is the "only or exclusive" venue where the action could be instituted. petitioner contends that the action should have been instituted in the RTC of Makati and to do otherwise would be a ground for the dismissal of the case. The Rules of Court provide that parties to an action may agree in writing on the venue on which an action should be brought. as long as jurisdictional requirements are followed. Metro Manila.Pampanga. still she had some other recourse under the Rules of Civil Procedure. respondent claims that petitioner was not even in Pampanga. we hold that Pasay is not the proper venue for this case. they should be considered merely as an agreement on additional forum." Thus. . Improper Venue Nevertheless. The preliminary writ of attachment must be served after or simultaneous with the service of summons on the defendant whether by personal service. if it were true that private respondent could not ascertain the whereabouts of petitioner after a diligent inquiry. a mere stipulation on the venue of an action is not enough to preclude parties from bringing a case in other venues.29 However. she was in Guam purportedly on a business trip. If court litigation becomes necessary to enforce collection. we hold that the alias summons belatedly served on petitioner cannot be deemed to have cured the fatal defect in the enforcement of the writ.25 Moreover. Likewise. by leave of court. be effected upon him by publication in a newspaper of general circulation x x x. not as limiting venue to the specified place. rather. service may. The trial court cannot enforce such a coercive process on petitioner without first obtaining jurisdiction over her person.24 Furthermore.26 Rule 14 of the Rules of Civil Procedure. Section 14. substituted service or by publication as warranted by the circumstances of the case. Philippines. We resolve to dismiss the case on the ground of improper venue but not for the reason stated by petitioner. providing for service of summons by publication. while considered valid and enforceable.

36 However. Logically then. At that time. Parañaque City. does not have a separate juridical personality that could enable it to file a suit in court. the general rule is venue in personal actions is "where the defendant or any of the defendants resides or may be found. the Court ruled that there was no question that venue was improperly laid in that case and held that the place of business of Tyson Enterpises.Under the 1997 Rules of Civil Procedure. after petitioner was declared in default. following the general rule. Anita Mangila v. However. Loreta Guina. not being vested with legal personality to file this case. it is the residence of private respondent Guina. The Court there held that the evident purpose of alleging the address of the corporation‘s president and manager was to justify the filing of the suit in Rizal.42 Thus. and rightly so. or where the plaintiff or any of the plaintiffs resides. the Court held that the residence of its president is not the residence of the corporation because a corporation has a personality separate and distinct from that of its officers and stockholders. but rather Anita Mangila v. we hold that the case should be dismissed on the ground of improper venue. the residence of private respondent (plaintiff in the lower court) was not alleged in the complaint. private respondent should have filed this case either in San Fernando. Pampanga (petitioner‘s residence) or Parañaque (private respondent‘s residence). where the business of private respondent is found. and pay taxes to the national government. petitioner timely filed a Motion to Dismiss44 on the ground of improper venue. there is no law authorizing sole proprietorships to file a suit in court. Pasig instead of in Manila. The title of the petition before us does not state. is considered as its residence for purposes of venue. Since private respondent (complainant below) filed this case in Pasay. Inc. respectively. register its business name. Air Swift International. It was only when private respondent testified in court. the complaint in the lower court acknowledges in its caption that the plaintiff and defendant are Loreta Guina and Anita Mangila."33 The exception to this rule is when the parties agree on an exclusive venue other than the places mentioned in the rules.34 the reverse happened. the sole proprietorship is not the plaintiff in this case but rather Loreta Guina in her personal capacity. Although petitioner filed an Urgent Motion to Discharge Attachment in the lower court. This would have been permissible had private respondent‘s business been a corporation. In the earlier case of Sy v. at the election of the plaintiff. the proprietor with the juridical personality. The plaintiff in that case was Tyson Enterprises. which was in Binondo. Inc.40 The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual and requires its proprietor or owner to secure licenses and permits. Rizal. Tyson Enterprises. petitioner expressly stated that she was filing the motion without submitting to the jurisdiction of the court.43 Thereafter. this exception is not applicable in this case.41 The law does not vest a separate legal personality on the sole proprietorship or empower it to file or defend an action in court.. The complaint. that she mentioned her residence to be in Better Living Subdivision. her business is a sole proprietorship. The case was filed in the Court of First Instance of Rizal. Air Swift International. Inc. Section 1 of the Rules of Court provides that a motion to dismiss may be filed "[W]ithin the time for but before filing the answer to the complaint or pleading asserting a claim. what was alleged was the postal address of her sole proprietorship. In fact. Hence. Furthermore. however. did not allege the office or place of business of the corporation. just like the case in Sy v. Rather. this case was brought in Pasay City. as admitted by private respondent in her Complaint37 in the lower court. Rule 16.39 A sole proprietorship does not possess a juridical personality separate and distinct from the personality of the owner of the enterprise. Pasig. Pampanga35 while private respondent resides in Parañaque City.38 In fact. Inc. What was alleged was the residence of Dominador Ti. the instant case may be brought in the place of residence of the plaintiff or defendant." Petitioner even raised the issue of improper venue in his . Tyson Enterprises. In the instant case. at the election of the plaintiff (private respondent herein). Manila. All these considered. who lived in San Juan. as we have discussed. it was established in the lower court that petitioner resides in San Fernando.. and as such. which should be considered as one of the proper venues for this case. Thus. But. petitioner had not been served the summons and a copy of the complaint. a corporation owned and managed by Dominador Ti. In the instant case.

No. SO ORDERED.. 2005 FIRST DIVISION x ... Petitioner also continued to raise the issue of improper venue in her Petition for Review46 before this Court.. Quisumbing. Jr...versus Present: We find no reason petitioner.. WHEREFORE.. (Chairman)...... this objective will not be attained if the plaintiff is given unrestricted freedom to choose where to file the complaint or petition. Civil Case No. 152808 .. and Azcuna.J....... Respondent...R. Promulgated: September 30.. CHUA.. the petition is GRANTED on the grounds of improper venue and invalidity of the service of the writ of attachment.... Ynares-Santiago... INC... Carpio. The attached properties of petitioner are ordered returned to her immediately. TOTAL OFFICE PRODUCTS AND SERVICES (TOPROS).Answer45 as a special and affirmative defense... G... 5875 is hereby dismissed without prejudice to refiling it in the proper venue.1âwphi1. DECISION ..47 Petitioner.....-x ANTONIO T. JJ.. Obviously. are designed to insure a just and orderly administration of justice or the impartial and evenhanded determination of every action and proceeding. The decision of the Court of Appeals and the order of respondent judge denying the motion to dismiss are REVERSED and SET ASIDE.... We thus hold that the dismissal of this case on the ground of improper venue is warranted....nêt to rule on the other issues raised by Davide. like other procedural rules... C. The rules on venue...

J. However. It held that the authorities relied upon by petitioner. The appellate court instead applied Hernandez v. PASCUAL REGARDING THE RULE ON PROPER VENUE. based on the records. Judge Pahimna issued an order denying the motion to dismiss. Chua before the Regional Trial Court of Pasig City. the venue was properly laid in the RTC of Pasig City where the parties reside. On February 28. SP No. Rural Bank of Lucena. (TOPROS) lodged a complaint for annulment of contracts of loan and real estate mortgage against herein petitioner Antonio T. Undeterred. with absolutely no consideration.R. 67736. however. are as follows: On December 28. 2000. He argued that it should thus have been filed in the Regional Trial Court of Quezon City where the encumbered real properties are located. 2002 in CA-G.400. He insists that the Pascual case should be applied instead. 67736 and was raffled to the sala of Judge Lorifel Lacap Pahimna.QUISUMBING. Hence. It appeared on the face of the subject contracts that TOPROS was represented by its president John Charles Chang. The pertinent facts. Inc. 2001 of the Court of Appeals and its resolution[2] of April 1. Inc. namely Pascual v. Dissatisfied. The assailed decision and resolution dismissed the special civil action for certiorari against the orders of August 9. petitioner now comes to us on a petition for review raising the following issues: WHETHER AN ACTION TO ANNUL A LOAN AND MORTGAGE CONTRACT DULY ALLEGED AS ‗FICTITIOUS‘ FOR BEING WITH ABSOLUTELY NO CONSIDERATION IS A PERSONAL ACTION OR REAL ACTION? WHETHER IN AN ACTION TO ANNUL A LOAN AND MORTGAGE CONTRACT DULY ALLEGED AS ‗FICTITIOUS‘ FOR BEING WITH ABSOLUTELY NO CONSIDERATION. The said suit sought to annul a loan contract allegedly extended by petitioner to respondent TOPROS in the amount of ten million four hundred thousand pesos (P10. He invokes our pronouncement in Pascual. 2002. not even its president.. 2000[3] and October 6. there is in truth nothing to annul by action. as neither the mortgagor‘s title to nor possession of the property is disputed. AND CONSEQUENTLY ADJUDGING TO BE A PERSONAL ACTION A CIVIL COMPLAINT FOR THE ANNULMENT OF AN ALLEGEDLY FICTITIOUS CONTRACT. 1999. not merely null. that the sale is alleged to be fictitious. 2000. petitioner filed a motion for reconsideration. 2000[4] issued by Judge Lorifel Lacap Pahimna in Civil Case No. contract…. to wit: … It appearing. 62592. 2000. instead of Pasig City where the parties reside.[7] are inapplicable in the instant case. She reasoned that the action to annul the loan and mortgage contracts is a personal action and thus. And there being no contract between the deceased and the defendants. which the Court of Appeals denied for lack of merit in its resolution of April 1. Jr. and (3) the plaintiff sought to compel acceptance by the defendant of plaintiff‘s payment of the latter‘s mortgage debt. to enter into said transaction. petitioner filed with the Court of Appeals a special civil action for certiorari alleging: THE RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION IN DISREGARDING THE RULING OF THE SUPREME COURT IN PASCUAL VS. Petitioner moved for a reconsideration of the said order.[8] wherein we ruled that an action for the cancellation of a real estate mortgage is a personal action if the mortgagee has not foreclosed the mortgage and the mortgagor is in possession of the premises. Pascual[6] and Banco Español-Filipino v. TOPROS alleged that the purported loan and real estate mortgage contracts were fictitious. THE PERSON ALLEGED TO HAVE ‗[LACKED] AUTHORITY‘ TO ENTER INTO SAID CONTRACTS IS AN INDISPENSABLE PARTY?[9] Petitioner contends that Hernandez should not be applied here because in the said case: (1) venue was improperly laid at the outset. On August 9. He contended that the action filed by TOPROS affects title to or possession of the parcels of land subject of the real estate mortgage. 2001. petitioner filed a motion to dismiss on the ground of improper venue. respondent Total Office Products and Services. which Judge Pahimna denied in its order of October 6. The case was docketed as Civil Case No. it should be regarded as a non-existent.: For review on certiorari is the decision[1] dated November 28. since it never authorized anybody. but is one for recovery of a .[5] The Court of Appeals dismissed said petition in its decision dated November 28. The action brought cannot thus be for annulment of contract. (2) the complaint recognized the validity of the principal contract involved. Palanca.000) and the accessory real estate mortgage contract covering two parcels of land situated in Quezon City as collateral.

– (a) Real actions. Venue in Courts of First Instance. The Court pointed out in the Hernandez case that with respect to mortgage. cannot be acquired. the plaintiff seeks the recovery of real property. Hence. In the first place. shall be commenced and tried in the province where the property or any part thereof lies. however. or for partition or condemnation of..fishpond. real property. as it has been. a real action is an action affecting title to real property or for the recovery of possession. a real action that should be. provides the proper precedent in this case. or for partition or condemnation of. title to and possession of the subject fishpond had already passed to the vendee. In the second place. or. the president of TOPROS. We find no reason to apply here our ruling in Banco Español-Filipino. TOPROS further contends that Banco Español-Filipino is also inapplicable since the personal action filed therein was one which affected the personal status of a nonresident defendant. in a real action. or foreclosure of mortgage on. We held that there being no contract to begin with. with respect to which the jurisdiction of the court is based upon the fact that the property is located within the district and that the court. Jr. we deemed the action for annulment of the said fictitious contract therein as one constituting a real action for the recovery of the fishpond subject thereof. – Actions affecting title to. Note that in Pascual. Inc. which should have been filed in the place where the mortgaged lots were situated. is vested with the power to subject the property to the obligation created by the mortgage. none of the parties here is a nonresident. apply the foregoing doctrine to the instant case. as indicated in Section 2 (a). TOPROS. Petitioner‘s reliance on the Banco Español-Filipino case is likewise misplaced. or for recovery of possession. in fact. Section 2 (a). TOPROS argues that Pascual is inapplicable because the subject contract therein was a contract of sale of a parcel of land where title and possession were already transferred to the defendant.[13] In the Pascual case. the plaintiff seeks the recovery of personal property. We cannot. real property.[10] Petitioner likewise cites the Banco Español-Filipino case. Rule 4 of the then Rules of Court. the jurisdiction of the latter is limited to the mortgaged property. Rule 4. We held therein that jurisdiction is determined by the place where the real property is located and that personal jurisdiction over the nonresident defendant is nonessential and. this is not an action involving foreclosure of real estate mortgage. But in the instant case. brought in Pampanga. Needless to stress. Considering the facts and the submission of the parties. where the property is located…. the contract of sale of the fishpond was assailed as fictitious for lack of consideration. no real action for the recovery of real property is involved. In a personal action. appellants contended that the action of the Hernandez spouses for the cancellation of the mortgage on their lots was a real action affecting title to real property. therefore. but remained with TOPROS. was applied. who allegedly entered into the questioned loan and real estate mortgage contracts.[11] Petitioner also alleges that John Charles Chang. is an indispensable party who has not been properly impleaded. a need to recover the said fishpond. In such case personal jurisdiction over the nonresident defendant is nonessential and in fact cannot be acquired. Well-settled is the rule that an action to annul a contract of loan and its accessory real estate mortgage is a personal action. That case involved a foreclosure of real estate mortgage against a nonresident. there is nothing to annul. or foreclosure of mortgage on. It does not include an action for the cancellation of a real . however. In Hernandez. thus: Where the defendant in a mortgage foreclosure lives out of the Islands and refuses to appear or otherwise submit himself to the authority of the court. TOPROS‘ action for annulment of the contracts of loan and real estate mortgage remains a personal action. the enforcement of a contract or the recovery of damages. we find the petition bereft of merit. ownership of the parcels of land subject of the questioned real estate mortgage was never transferred to petitioner. maintains that the appellate court correctly sustained the lower court‘s finding that the instant complaint for annulment of loan and real estate mortgage contracts is a personal action. 2. the rule on real actions only mentions an action for foreclosure of a real estate mortgage. The Court of Appeals finds that Hernandez v. to wit: SEC. relied upon by petitioner.[12] In contrast. under the provisions of law applicable in such cases. TOPROS points out that a complaint for the declaration of nullity of a loan contract for lack of consent and consideration remains a personal action even if the said action will necessarily affect the accessory real estate mortgage. the instant case bears no resemblance to the Banco Español-Filipino case. There was. This being the case. Rural Bank of Lucena. of the then Rules of Court. Thus.

to wit: SEC. Pasig City. Section 7. Jr. We note that although it is Chang‘s signature that appears on the assailed real estate mortgage contract. the action for annulment of a real estate mortgage in the present case must fall under Section 2 of Rule 4. The document[18] which constitutes as the contract of real estate mortgage clearly points to petitioner and TOPROS as the sole parties-in-interest to the agreement as mortgagee and mortgagor therein.[14] Thus. because of that court‘s want of authority to act. 2 (b) Personal actions. Anent the second issue.. Jr. (Emphasis ours) We thus hold that John Charles Chang. or where the defendant or any of the principal defendants resides.[17] Republic of the Philippines SUPREME COURT Manila . Certainly. Exclusio unios est inclusio alterius. if his interest in the controversy or subject matter is separable from the interest of the other parties. 2001 and resolution dated April 1. – All other actions may be commenced and tried where the defendant or any of the defendants resides or may be found.. 7. however. nor does he incur any liabilities. is not an indispensable party in Civil Case No. Chang. his participation is limited to being a representative of TOPROS. This is without prejudice to any separate action TOPROS may institute against Chang. Compulsory joinder of indispensable parties. No pronouncement as to costs. at the election of the plaintiff. 2. WHEREFORE. Any rights or liabilities arising from the said contract would therefore bind only the petitioner and TOPROS as principal parties. an indispensable party in this case? SEC. Rule 3 of the Revised Rules of Court provides: SEC. In the same vein. the president of TOPROS who allegedly entered into the disputed contracts of loan and real estate mortgage.[15] Thus. The assailed decision dated November 28. whenever it appears to the court in the course of a proceeding that an indispensable party has not been joined. is the proper venue of the action to nullify the subject loan and real estate mortgage contracts. where the parties reside. – All other actions may be commenced and tried where the plaintiff or any of the principal plaintiffs resides. Jr. The latter thus falls under the catch-all provision on personal actions under paragraph (b) of the above-cited section. or in the case of a non-resident defendant where he may be found. The absence of an indispensable party renders all subsequent actuations of the court null and void.estate mortgage. The presence of indispensable parties is necessary to vest the court with jurisdiction. acting as mere representative of TOPROS. or where the plaintiff or any of the plaintiffs resides. the petition is DENIED. The Court of Appeals committed no reversible error in upholding the orders of the Regional Trial Court denying petitioner‘s motion to dismiss the case on the ground of improper venue. 67736. the only indispensable parties to the mortgage contract are petitioner and TOPROS alone. 2002 of the Court of Appeals upholding the Orders of Judge Lorifel Lacap Pahimna are AFFIRMED.[16] A person is not an indispensable party. acquires no rights whatsoever. in a proper proceeding. it is the duty of the court to stop the trial and order the inclusion of such party. in our view. arising from the said contract between petitioner and TOPROS. to wit: Is John Charles Chang. respectively. so that it will not necessarily be directly or injuriously affected by a decree which does complete justice between them. not only as to the absent parties but even as to those present. – Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants. Venue of personal actions. SO ORDERED. allegedly without authority.. at the election of the plaintiff.

for petitioner-appellant. within one year. petitioner-appellant. hence. (so that) the total loan of the respondents from the petitioner aggregates P810. alleged. the ownership over the land involved had become consolidated in him. the vendee. daughter of the respondents. but said petitioner refused to receive the same and to cancel the document of mortgage. May 26. the vendee filed with the Court of First Instance of Sorsogon the present case against the vendors by way of a petition for consolidation of ownership of the land described and involved in the "Deed of Pacto de Retro Sale. the respondents executed a mortgage in favor of the petitioner on a parcel of coconut land described in Annex A of the petition. "the fact of the matter being. 1952. the respondents obtained a cash load of P750. Gerona. Annex A. Goyala together with his now deceased wife Antonina Almoguera. vs. Agustin Frivaldo for respondents-appellees. that only on July 26.R. and that for the purpose of recording in the Registry of Property the said consolidation of ownership. he and his wife went to the house of the petitioner and tendered to him the sum of P810. He therein alleged that his wife Antonina Almoguera had died in the year 1959 and denied the allegation in the petition regarding the pacto de retro sale. Appeal from the favorable decision of the Court of First Instance of Sorsogon on the counterclaim of respondents (herein appellees) in its Civil Case No. that the date for repurchase. the said Dolores Goyala received from the petitioner another amount of P10. herein appellant." In his petition. 1961.00. one year without interest. He further alleged that in the evening of May 26.:. appellee Segundo. "that on May 26. making a total loan of P810. who was also named respondent or defendant in the complaint or petition in the court below. respondents- Fernando P. 1970 FAUSTINO GOJO. 1951. for his failure to submit an amended complaint as required of him in the court a quo's earlier order. 1951. obtained from the petitioner the sum of P50. 1657-84 — the complaint (petition) of therein petitioner (herein appellant) having beet previously dismissed. BARREDO. sold to appellant by a "Deed of Pacto de Retro Sale" a certain parcel of agricultural land having an area of approximately two and one-half hectares for P750.00. The record shows that on 26 May 1951. to be precise. and then on August 25. the true and real intention of the parties thereto was that the same was a mere mortgage to secure the payment of the original loan of P750. payable within. About ten (10) years after the execution of the said document. inter alia. The said appellee also reiterated by way of counterclaim the foregoing allegations of his answer and prayed thus:. It also appears from said deed that on July 4.00 Philippine Currency" and that to guarantee the payment of the said loan. L-26768 October 30.00 to be added to and credited to the account of the respondents.00 as addition to the purchase price.00 to be added and credited to the account of the respondents. 1961. WHEREFORE. GOYALA and ANTONINA ALMOGUERA. it was necessary that a judicial order be issued to that effect and accordingly prayed for such an order. SEGUNDO appellees. having expired and the vendors not having been able to repurchase the same under the terms and conditions of the agreement. the repurchase to be made. or on April 12. altho the deed was executed or drawn in the form of a pacto de retro sale. 1951. No. 1952. appellee Segundo Goyala filed an opposition or answer to the petition. Dolores Goyala. J. 1951. Sr.00 from the petitioner payable in one year without interest.00 to pay the debt. without prejudice. the vendee paid another P100. according to the deed. . On May 26." according to him.00 together with the additional amount received thereafter. the respondent Segundo Goyala respectfully prays this Honorable Court to dismiss the petition and render judgment in favor of the respondents as follows:.EN BANC G.

00 per annum beginning May 26. and that her surviving nearest kin are her children. As prayed for in the manifestation of Atty. Pedro. the complaint is hereby dismissed without prejudice. and the trial court. The matter under consideration is the motion to dismiss filed by the defendants on the ground that the plaintiff has failed and neglected to submit the amended complaint as required in the order of this Court dated December 4. Mamerta. 1962. On February 6. Camarines Norte on March 27. resolving the incident. . within the reglementary period. it is hereby prayed that the petitioner be ordered to execute a deed of resale or repurchase of said property in favor of the respondents in accordance with Art. under date of December 4. and although plaintiff has requested for a reasonable extension of time within which to file the said pleading. Salvador. after which the trial court. the plaintiff is hereby declared in default on the counterclaim filed by said defendant Segundo Goyala.00 tendered or deposited by the respondents in full settlement of their debts to him. This motion was granted by the trial court in its order of July 11. however. said appellant had failed and neglected to submit the amended complaint required of him. to wit:. counsel for respondent Goyala filed a manifestation informing the trial court that the named defendant (respondent) Antonina Almoguera was already dead. From December 13. 1962. appellee filed a motion to declare appellant in default in respect of said appellee's counterclaim. and ordering the same cancelled and with no more force and effect. there should be deducted however. namely: Leonor. WHEREFORE. 1963 when the plaintiff has again failed to file together with said opposition the required amended complaint. 1951 until the final termination of this case as the reasonable monetary value of the products for the said property. on the ground stated therein. issued the following order on February 15. dated December 1. of the remote possibility that this Court should find the said instrument (Annex A) to be a true pacto de retro sale. on January 26. despite the fact that the plaintiff's counsel was duly served with a copy thereof. Elegio — all surnamed Goyala — with residences at Bulan. The motion was opposed by appellant. 1963:. 1963. 1963. (b) Declaring the document marked Annex A of the petition to be mortgage and not a pacto de retro sale.800. which the plaintiff has received on December 18. Valentina. Felipe. (c) Ordering the petitioner to pay the respondents the sum of P1. Penya.(a) Ordering the petitioner to receive the sum of P810. contained in his answer (opposition) to the dismissed complaint petition) of appellant. it is regretable to state that up to the present has neglected to do so. issued the following order:." On December 1. and not a mere mortgage. and (d) In case. she having died at Labo. Sorsogon. and the plaintiff's complaint was already dismissed by this Court in its order of February 15. Soledad. 1962 when the motion to dismiss was filed. 1962. 1962. Genesa. 1962. Upon petition of the counsel for the defendant Segundo Goyala to declare the plaintiff in default on the ground of failure on the part of the plaintiff to answer the counterclaim filed by said defendant Segundo Goyala within the reglementary period. Antonina Almoguera. the counsel for the plaintiff is hereby required to submit an amended Complaint substituting therein for one of the defendants. 1962. appellee Goyala filed a motion to dismiss the complaint or petition on the ground that notwithstanding the lapse of 43 days after appellant's receipt of a copy of the above-quoted order of the trial court. Dolores. Subsequently. 1959. Thereafter. the corresponding legal interest annually on said loans. 1963 on the ground of neglect to submit the amended complaint as required in the Court order of December 4. and from this amount. Hearing was had on that manifestation. now deceased her successors in interest as party defendants. Agustin Frivaldo counsel for the defendant. 1606 third paragraph of the Civil Code. on July 10. 1963. Juliana. 43 days have elapsed.

Dissatisfied with the decision referred to.Let the defendant Segundo Goyala submit his evidence before the Clerk of Court. THE LOWER COURT ERRED IN DEPUTIZING OR COMMISSIONING THE CLERK OF COURT TO RECEIVE THE EVIDENCE OF THE DEFENDANT SEGUNDO GOYALA. 1. "A") an equitable mortgage and respondents Segundo Goyala and the heirs of Antonina Almoguera are allowed to redeem the property. 1951. In his brief. thereafter. tendered the amount of P810.00.00 from the petitioner.00 to herein petitioner in complete payment of the loan and to release the property securing the said loan. 1952. 1951. one of the daughters of respondents. As directed in the order above-quoted. "A-1") and another P10. (Exh. 2.00 on July 26. 1963. 1951. In the late afternoon of May 26. It is shown further that the land is a productive coconut land and has a fair market value of P5. which was made a Deed of Pacto de Retro Sale (Exh. 1963 the trial court rendered favorable judgment on appellee's counterclaim. 3. and was advised instead to return the following day. respondents obtained a loan of P750. To secure the loan. the last day to redeem the property. THE LOWER COURT ERRED IN DECLARING PLAINTIFF IN DEFAULT WITH RESPECT TO DEFENDANT'S COUNTERCLAIM. after the execution of Exhibit "A" up to the present time and had appropriated to himself the products during the period. "A").00 with an annual yield of P1. It appears further that the petitioner is in possession of the land since May 26. certified the same to this Court for resolution.00 on August 19.800. on suggestion of petitioner to exempt himself from liabilities under the Usury Law. but was refused because it was already night time.00 deposited with the Clerk of Court in full settlement of the loan. on November 15. (Exh. as follows:. who is hereby commissioned to receive the same. respondents executed a document. Segundo Goyala. Segundo Goyala testified further that he tried no less than three times to redeem the property but each time petitioner refused the redemption money. obtained an additional loan of P50. The respondents are not however entitled to be reimbursed of the value of the products obtained by the petitioner who acted in the belief that the agreement was a Pacto de Retro Sale which turned out to be otherwise as the Court now so declares. WHEREFORE. "A-3") from the petitioner which amounts were duly authorized and acknowledged by respondent Segundo Goyala. orders Faustino Gojo to withdraw the amount of P810. appellant assigns the following errors allegedly committed by the trial court:. It appearing that in the dispositive part of the decision there was no directive to restore the possession to the defendants upon execution. The pertinent portions of the decision referred to read thus:. Dolores Goyala. the Clerk of Court received the evidence of appellee in respect of his counterclaim and. the dispositive portion of the said decision is hereby amended to include therein an additional directive ordering the plaintiff to deliver and restore the possession of the land in question to the defendants. in view of the foregoing the Court hereby declares the Deed of Pacto de Retro Sale (Exh. It appears that on May 26. THE LOWER COURT ERRED IN RENDERING JUDGMENT IN FAVOR OF THE RESPONDENT SEGUNDO GOYALA AND THE HEIRS OF .000. 1951. Without costs. When Segundo Goyala returned the following day to redeem the property he was told by petitioner that the period to redeem has already expired. appellant appealed to the Court of Appeals which upon its finding that the said appeal involves purely questions of law. The above-quoted decision was subsequently amended in an order of December 19. and hereby cancels and declares without force and effect the aforementioned Deed of Pacto de Retro Sale executed by the spouses Segundo Goyala and Antonina Almoguera in favor of Faustino Gojo.

there can be no doubt that appellant's counterclaim was a compulsory one in as much as it arises out of or is necessarily connected with transaction or occurrence that is the subject matter of the complaint. It is true that under Section 3 of Rule 17. this Court held that an order to amend the complaint.. 718." In the case of Barrameda vs. If the legal representative fails to appear within said time. No. a complaint may be dismissed for failure to prosecute if the plaintiff fails to comply with an order of the court. on the other hand. would similarly be void. may be recovered as costs. before the proper substitution of parties as directed by the aforequoted rule has been effected. and (b) the dismissal of the complaint in this case without prejudice carried with it the dismissal of the said counterclaim. without such party having been validly substituted in accordance with the rules. the incorrectness of the trial court's order declaring the appellant in default in regard to said counterclaim is evident. the whole theory and basic allegations of the complaint. and the representative shall immediately appear for and on behalf of the interest of the deceased.R. Regarding the dismissal of petitioner's complaint. as in this case. In consequence. the legal representative of the deceased to appear and to be substituted for the deceased. The first assignment of error of appellant is well taken. et al. The court charges involved in procuring such appointment. or within such time as may be granted. the court shall order. amounts to a "lack of jurisdiction". et al. July 17. et al. but it is obvious that the said provision cannot apply when the order supposedly ignored is a void one. Death of party. the court directing that the plaintiff should name the heirs of the deceased as defendants in lieu of said deceased. "SECTION 17. The heirs of the deceased may be allowed to be substituted for the deceased. during the pendency of (the) civil case. as in Barrameda.1 In the instant case. for such non-compliance. this Court affirmed a similar conclusion on the determination that the continuance of a proceedings during the pendency of which a party thereto dies. Barbara. The facts of this case fit four square into the Barrameda case above-cited. save for the minor variance that in the former two of the litigants died while only one predeceased the case in Barrameda. L-11567.00. but the appearance of the legal representatives of the deceased in accordance with the procedure and manner outlined in Rule 3. 261 died and due notice thereof was given to the trial court. 2 which is squarely applicable to the Situation herein obtaining. It is now settled that a plaintiff who fails or chooses not to answer a compulsory counterclaim may not be declared in default. 1958. for the reasons that: (a) the said counterclaim "falls within the category of compulsory counterclaim" which does not call for an independent answer as the complaint already denies its material allegations. notice was given to the trial court of the . is void and imposes upon the plaintiff no duty to comply therewith to the end that an order dismissing the said complaint. if defrayed by the opposing party. appellant's counterclaim was for reformation of the deed claiming that it was only a mortgage. Ferriera. the trial court ordered petitioner to amend the complaint only because it was informed that one of the defendants had died. principally because the issues raised in the counterclaim are deemed automatically joined by the allegations of the complaint. — After a party dies and the claim is not thereby extinguished. hence. the complaint alleged that the right of appellee to repurchase the property in question had already expired and asked for an order of consolidation. that the trial court committed reversible error in ordering the same. vs. it devolved on the said court to order. G. 90 Phil. We hold also. Here. the court may order the opposing party to procure the appointment of a legal representative of the deceased within a time to be specified by the court. within a period of thirty (30) days.ANTONINA ALMOGUERA ALLOWING THEM TO REDEEM THE LAND IN QUESTION FROM THE PETITIONER FAUSTINO GOJO FOR THE SUM OF P810. not the amendment of the complaint. When certain of the parties to Civil Case No. Gonzales. which provide:. Thus the counterclaim was clearly inconsistent with and directly controverted. upon proper notice. Here. Resales. Section 17 of the Rules of Court. In a subsequent case. Such an order runs counter to the ruling of this Court in Caseñas vs. without requiring the appointment of an executor or administrator and the court may appoint guardian ad litem for the minor heirs. appellant's complaint stood as the answer to appellee's counterclaim. We held:. In that case. The thrust of appellant's argument in respect of the first assignment of error is to the effect that there is no occasion for the trial court to declare him in default in respect of appellee's counterclaim in this case.

etc. L-21766 September 30. Jose. will not prevent the undesirable multiplication of suits and reventilation of the same issues in the subsequent action that may be filed by virtue of the reservation made in the disputed order of dismissal.. SUPREME COURT Manila EN BANC G. it becomes unnecessary to discuss the other two assigned errors. the said court dismissed the complaint for such noncompliance. as the trial court has done in this case. therefore. The same considerations would obtain. Bernardo and Berba for respondents. it is not proper to dismiss a complaint when a compulsory counterclaim has been pleaded by defendant. the decision appealed from is set aside and this case is remanded to the court below for further proceedings in consonance with the above opinion. 1966 FELICISIMA BALLECER and JOSE S. Branch XIII of the Court of First Instance of Manila. The reason is obvious. see World Wide Insurance & Surety Co. . the dismissal was itself void. Dismissing the complaint without prejudice. vs. 261. if the defendant were the one to ask for dismissal. Instead of ordering the substitution of the deceased's legal representatives in accordance with Rule 3. No. is not purely discretionary. 50). Under the cited provision. Presiding Judge. Rosendo N. JESUS P. Sec. 45. We must hold. albeit upon motion of the defendant. respondents. the power of the court to dismiss the complaint upon motion of plaintiff. as We did in Barrameda that inasmuch as there was no obligation on the part of the plaintiff-appellant herein to amend his complaint in Civil Case No. Having arrived at the foregoing conclusions. petitioners. with costs against appellee. the right of the plaintiff to move for the dismissal of an action after the defendant has filed his answer is qualified by the clause providing that: "If a counterclaim has been pleaded by a defendant prior to the service upon him of the plaintiff's motion to dismiss. possibility of conflict and inconsistency in the resolution of the same questions." With this limitation. Tecson. in line with the principle underlying Sec. 96 Phil. AGAWIN. v. WHEREFORE. the action shall not be dismissed against the defendant's objection unless the counterclaim can remain pending for independent adjudication by the court." (To the same effect. The Hon. Feleo for petitioners. MORFE.deaths of one of the plaintiffs and one of the defendants in it. which is usually without prejudice. JOSE BERNARDO. what is worse. his failure to comply with such an order did not justify the dismissal of his complaint. and the Sheriff of Manila. et al.R. 17 of the Rules of Court. Republic of the Philippines Besides.3 The purpose is to avoid multiplicity of suits over the same matter which would necessarily entail unnecessary expense and. the trial court directed the surviving plaintiff to amend the complaint and when the latter failed to comply therewith. Grounded as it was upon a void order. 2 of Rule 17. The best interests of justice require that conflicting claims regarding the same matter should be decided in one single proceeding. any such imposition being void..

the defendant the following sums. namely: (1) that petitioners were the parties who had encroached upon and occupied a portion of Bernardo's property. 1948 to May. that portion of said defendant's property consisting of 3. the court rendered a decision the dispositive part of which reads: WHEREFORE.000. as well as to recover possession of a portion of petitioners' aforementioned lot. uncalled for. 1960. jointly and severally. and On the last day of the reglementary period to answer the counterclaim. on motion of petitioners herein. corresponding to the period from May. Bernardo filed his answer denying petitioners' averments. petitioners filed ex parte urgent motion for extension of time therefor.00 as moral damages. the court declared petitioners in default as to the counterclaim and ordered Bernardo to present his evidence thereon before (e) P1.00.70 square meters. and to pay damages aggregating P48. Then. with an area of 0. and (2) that petitioners' complaint is premature.00 as actual damages incurred by the defendant. that the demolition and destruction made by him had taken place within the boundary of his own property. Bernardo set up two (2) causes of action. capricious and without any justifiable cause. with interest thereon at the legal rate from the date of filing of the answer with counterclaim until fully paid.00 for each month thereafter until the premises in question are actually delivered to the possession and occupation of the defendant. without his consent and against his will. Ordering the plaintiffs and/or their agents and representatives including all persons claiming under them to deliver and restore the possession thereof to the defendant. 2. plus the sum of P25. along the common boundary line of their lot and that of Bernardo. In due course.000.00 as compensatory damages which the defendant failed to realize in the form of rentals from that portion of his property subject matter of the counterclaim. 43073 thereof. to wit: (a) P3.000. which was allegedly encroached upon by the wall subsequently erected by Bernardo in place of the one he had destroyed. as well as an alias writ of execution and a notice of sale issued in connection therewith. at Felix Huertas Street. Upon the filing of the petition and the submission and approval of a bond in the sum of P1. and alleging. (d) P2.625. Manila.CONCEPCION. On May 4.00 as attorney's fees.m.J.. Ordering plaintiffs to pay. C.80 square meters. said Civil Case No. . (b) P541. on June 13. 43073 against respondent Jose Bernardo. for which reason Bernardo prayed that they be sentenced to vacate his aforementioned portion of land allegedly encroached upon by them and to turn it over to him. the Court hereby renders judgment on the counterclaim in favor of the defendant-counterclaimant and against the plaintiffs. as follows: 1.: This is an original action to set aside several orders of the Court of First Instance of Manila. Agawin and Felicisima Ballecer. 1960. in Civil Case No.000.7 square meters which is being encroached upon and occupied by or in possession of the plaintiffs. they instituted. which Bernardo did. 1960. or on June 6. By way of counterclaim. with an area of about 3.000.00.00 as exemplary damages. in turn. but on June 11 the motion was denied and ordered stricken off the record. to recover damages allegedly caused by him in consequence of the destruction and demolition of a portion of a wall of the petitioners. at 9: 00 a. we issued a writ of preliminary injunction enjoining respondent Judge and the Sheriff of Manila from carrying out the aforementioned writ of execution. On June 20. (c) P10. Petitioners herein are the spouses Jose S. the Deputy Clerk of Court on June 15.

with a prayer for a writ of preliminary injunction. . but the motion was denied. Sept. but also the right to possess. It is obvious that the answer must be in the affirmative. as above stated. petitioners moved for a reconsideration of the orders of June 11 and 13. Hence. was ordered. In the language of Mr. there are motions that may be heard and granted ex parte. On March 18. Cayetano. . on February 18. After denying this petition. hence. for lack of merit. only to deny it once more. 1 and paragraph No. and petitioners' aforementioned motion belongs to such class. Sept. 1952). the issues raised in the counterclaim were inseparable from those posed in the complaint. . on petitioner's motion for reconsideration. it should be noted that Bernardo had. considering that plaintiffs. A reconsideration of this order having been denied. controverted by. according to the complaint.1awphîl. . Section 2 of Rule 27 provides that "every motion other than one which may be heard ex-parte . the Sheriff of Manila caused to be published a notice of sale at public auction of a property of petitioners herein. 1954. encroached upon petitioners' property. the allegations in petitioners' complaint. In this connection. and that the court has. or on February 8. 1960.B. But. and served upon the parties affected thereby. Thereupon. .. which petitioners are entitled to prove.). but. Soon thereafter.nèt To begin with. the execution of the decision of June 20. whereas Bernardo maintained the exact opposite in his counterclaim — not only that petitioners' allegation was not true. that they were the ones encroaching upon the property of Bernardo. The main reason for the lower court's adverse action thereon would seem to be petitioners' failure to set it for hearing as provided in the Rules of Court. Rosario vs. the Judge of the lower court and the Sheriff of Manila. and. on April 11. but the motion was denied on July 1. the present case against Bernardo. shall be filed with the Court. L-6673. 833) it was held: With respect to the other ground. in their complaint. the Court. granted it on January 18. On motion of Bernardo. 30. Martinez. to restrain the Clerk of Court from issuing a writ of execution.L. whether they had answered Bernardo's counterclaim or not. and so it was not absolutely necessary for the petitioners to file an answer to the counterclaim (Arejola vs. of Bernardo can not be decided without passing upon the truth of the allegations in the complaint. 1962. the motion for extension filed in the present case may be considered as one which may be heard ex-parte." Taking into consideration that the extension of time applied for may be shorter than the time required to have a motion set for hearing and acted on by the court. . defendants. Bernardo's counterclaim was predicated upon allegations of fact which are inconsistent with. and the flood and inclement weather that had followed. 1961. set aside and the issuance of a writ of execution "only as to paragraph No. this contention. 831. . In other words. a motion for extension of time to file an answer to the counterclaim had been filed within the reglementary period and plausible reasons were given in support thereof: counsel for petitioners had been unable to contact them owing to a typhoon that had just hit Manila. L-4473. On June 28. 6588): There was no need for petitioners to answer respondents' counterclaim.G. on February 4. but. speaking for the Court in Navarro v. the parcels in question. alleging that sometime in May. 2-a of the dispositive part" of the aforementioned decision. in pursuance thereof." What is more. 8. the Court ordered the issuance of a writ of execution. petitioners filed their notice of appeal. through force and intimidation. Bello (54 O. The main question for determination in this case is whether the lower court has gravely abused its discretion in declaring the petitioners in default and in rendering judgment against them on Bernardo's counterclaim after an ex parte hearing. and that it was upon a writ of possession issued by the Court of First Instance of Pangasinan that they were placed back in possession by the provincial sheriff. on January 29. petitioners filed a petition for relief from judgment. Forthwith. petitioners sought an extension of time to file their appeal bond and their record on appeal. discretion to grant the petition. 1963. claimed not only ownership of.With costs against the plaintiffs. on motion for reconsideration filed by Bernardo. wrested possession thereof from their tenants. These averments . dated December 19. 1954. also. said order was. was ordered stayed pending trial on the merits on petitioners' complaint. Certainly. the Clerk of Court issued an alias writ of execution and. Justice Reyes (J. Barton (76 Phil. Thus in Moya v.

even if not specifically challenged by plaintiffs in a reply. No. It is so ordered. wherein they asserted ownership in themselves and illegal deprivation of their possession by plaintiffs. 1960. and said counterclaim is based on the very defenses pleaded in the answer. WHEREFORE. then the court must dismiss defendants' counterclaim for damages. ROMERO. 79 Phil. the issues of the counterclaim are so inseparable from those of the complaint and the answer that such counterclaim partakes of the nature of a special defense which. the orders complained of. and in rendering a decision in default against them on said counterclaim. in declaring the petitioners in default as regards the counterclaim. therefore. accordingly. vs. Lama v.: . would not have been proved. and the order of the court below declaring them in default. THE COURT OF APPEALS and PHILIPPINE AIRLINES. Rosario v. whether or not plaintiffs have answered defendants' counterclaim. 1952. including their claim that it was by court order that they secured possession of the parcels in question from defendants. September 30. and the notice of sale adverted to above. are hereby annulled and set aside. and. therefore. To answer such counterclaim would require plaintiffs to replead the same facts already alleged in their complaint. 107356 March 31. with costs against herein respondent Jose Bernardo. It thus appears that the issues of the counterclaim are the very issues raised in the complaint and in the answer. There was. and notice of sale issued by the Sheriff in pursuance thereof. petitioner.were denied by defendants in their answer. prayed for damages allegedly suffered because of plaintiffs' alleged usurpation of the premises. 1995 SINGAPORE AIRLINES LIMITED. as well as said writ of execution and alias writ of execution. no occasion for plaintiffs' default on defendants' counterclaim. and so are the aforementioned writ of execution. 1. alias writ of execution. And if plaintiffs are able to prove such allegations. Martinez. and the writ of preliminary injunction heretofore issued by this Court is.R. as well as the judgment by default.1awphîl. The lower court committed. L-4473. since the illegal usurpation of defendants' possession allegedly committed by plaintiffs. said decision is null and void. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. J. Rules of Court.nèt But in any event. as a consequence. a grave abuse of discretion. In short. J. including the decision of June 20. which is the basis of the counterclaim. amounting to excess of jurisdiction. they have the right to prove the averments of their complaint. is improper and void. and as counterclaim. Sec. made permanent. respondents. is deemed controverted (Rule 11. Apacible. 68).

with interest at the legal rate from the date of the filing of the complaint until fully paid. 4. Judge Jesus O. Aramco gave Rayos his travel documents without a return visa. On April 1980. Rayos learned that he was one of several employees being investigated by Aramco for fraudulent claims. On August 5. 1981. Rayos took a Singapore Airlines (SIA) flight to report for his new assignment. His employment contract was not renewed. sentencing the latter to pay the former the following: In so ruling. Rayos' salary. countered that its personnel did not collect any charges for excess baggage. SIA claimed that it was not liable to the Rayoses because the tampering was committed by its handling agent. 1980. The sum of Four Thousand One Hundred Forty-Seven Pesos and Fifty Centavos (P4. 1981. Philippine Airlines (PAL). The sum of Four Hundred Thirty Thousand Nine Hundred Pesos and Eighty Centavos (P430. SIA issued the certification requested by the spouses Rayos only on April 8. that it had no participation in the tampering of any excess baggage ticket. Saudi Arabia from Manila are allowed to claim reimbursement for amounts paid for excess baggage of up to 50 kilograms. PAL. sued it for damages. 1981. convinced that SIA was responsible for the non-renewal of Rayos' employment contract with Aramco.00) as moral damages. 1980. On December 10.147. In December 1980. the court a quo concluded that the excess baggage ticket of Rayos was tampered with by the employees of PAL and that the fraud was the direct and proximate cause of the non-renewal of Rayos' contract with Aramco. with a 50-kilogram excess baggage for which he paid P4. 1981. Aramco reimbursed said. SIA's manager. the spouses Rayos. 2. also with legal rate of interest from the filing of the complaint until paid in full. It then filed a third-party complaint against PAL. . threatened it with a lawsuit. The defendant's counterclaim is hereby dismissed. to April 15. The sum of Fifty Thousand Pesos (P50. 1988.Sancho Rayos was an overseas contract worker who had a renewed contract with the Arabian American Oil Company (Aramco) for the period covering April 16. in favor of the plaintiffs. and that if any tampering was made. judgment is hereby rendered in favor of the plaintiffs and against the defendant Singapore Airlines Limited.50) as reimbursement for the amount deducted from Mr. as long as it is properly supported by receipt. He immediately asked his wife Beatriz in Manila to seek a written confirmation from SIA that he indeed paid for an excess baggage of 50 kilograms. The cost of suit. rendered judgment on September 9. Branch 30.50. On April 14. 1. assisted by a lawyer. Johnny Khoo. the dispositive portion of which reads thus: WHEREFORE. notified Beatriz of their inability to issue the certification requested because their records showed that only three kilograms were entered as excess and accordingly charged. 3.900. The sum equivalent to ten Per Cent (10th) of the total amount due as and for attorney's fees. Ibay of the Regional Trial Court of Manila. its employees returning to Dhahran. in turn. SO ORDERED. it was done by SIA's personnel. after its investigation of the anomaly and after Beatriz. As part of Aramco's policy. amount upon presentation of the excess baggage ticket. and 5.147. the third-party defendant PAL is ordered to pay defendant and third-party plaintiff SIA whatever the latter has paid the plaintiffs.80) as actual damages. ON THE THIRD PARTY COMPLAINT.000.

since this was no longer an issue on account of the finality and. indemnity. SIA argued that the only issue in the said appeal is whether or not it was entitled to reimbursement from PAL. he renders judgment on the principal complaint in favor of plaintiff against defendant and renders another judgment on the third-party complaint in favor of defendant as third-party plaintiff. the Court expounded on the nature of a third-party complaint and the effect of a judgment in favor of the Surprisingly. and not the alleged tampering of his excess bagged ticket On the other hand. SIA set up the defense that the excess baggage ticket was indeed tampered with but it was committed by PAL's personnel. however. and the latter may challenge the lower court's findings against SIA in favor of plaintiffs-appellees (the Rayos spouses) for the purpose of defeating SIA's claim against it. may be brought into the case with leave of court. 1 The appellate court disagreed with SIA's contention that PAL could no longer raise the issue of SIA's liability to the Rayoses and opined "that SIA's answer to the complaint should inure to the benefit of PAL. in respect of the plaintiff's claim. . by the defendant. It must be noted that in the proceedings below. ultimately. which dismissal was eventually sustained by this Court. In response to PAL's appeal.435. The instant appeal is impressed with merit. as this was the only issue raised by SIA in its third-party complaint against PAL. In its appeal. The petitioner correctly pointed out that the case of Firestone squarely applies to the case at bench. the third-party defendant. The Rayos spouses withdrew their appeal when SIA satisfied the judgment totaling P802. the Court renders in effect two judgments in the same case. It added that the appellate court should have restricted its ruling on the right of SIA to seek reimbursement from PAL. one on the plaintiff's complaint and the other on the third-party complaint. an appeal by one party from such judgment does not inure to the benefit of the other party who has not appealed nor can it be deemed to be an appeal of such other party from the judgment against him. the appellate court granted PAL's appeal and absolved it from any liability to SIA. When leave to file the third-party complaint is properly granted. PAL changed its theory and averred that the spouses Rayos had no valid claim against SIA on the around that the non-renewal of Sancho's contract with Aramco was his unsatisfactory performance rather than the alleged tampering of his excess baggage ticket. who acts as third-party plaintiff to enforce against such third-party defendant a right for contribution. On appeal. ordering the third-party defendant to reimburse the defendant whatever amount said defendant is ordered to pay plaintiff in the case. PAL claimed that the spouses Rayos had no valid claim against SIA because it was the inefficiency of Rayos which led to the non-renewal of his contract with Aramco. 1992. subrogation or any other relief. . plaintiff against the defendant and in favor of such defendant as third-party plaintiff against. SIA's appeal was dismissed for non-payment of docket fees. SIA argued that it was improper for PAL to question SIA's liability to the plaintiff.All parties appealed to the Court of Appeals. in fact. SIA argues that PAL cannot validly assail for the first time on appeal the trial court's decision sustaining the validity of plaintiff's complaint against SIA if PAL did not raise this issue in the lower court. the appellate court ignored the Court's pronouncements in Firestone and declared: . the Court stated: The third-party complaint is. satisfaction of the judgment. In said case. therefore. By the same token. On September 21. a procedural device whereby a "third party" who is neither a party nor privy to the act or deed complained of by the plaintiff. citing the case of Firestone Tire and Rubber Company of the Philippines v. as in this case. The third-party complaint is actually independent of and separate and distinct from the plaintiff's complaint. Failure of any of said parties in such a case to appeal the judgment as against him makes such judgment final and executory. In this petition for review. Speaking through then Justice and later Chief Justice Claudio Teehankee. Tempongko. When he finds favorably on both complaints. and not for the purpose of altering in any way the executed judgment against SIA. .34. PAL disclaimed any liability to the Rayoses and imputed the alleged tampering to SIA's personnel." In its answer to the main complaint.

This simply cannot be allowed. The trial court's decision. PAL's liability here is premised on the liability of SIA to plaintiffs-appellees. it had no valid claim against SIA. has already gained finality. This is especially true here where SIA lost the capability to defend itself on the technicality of failure to pay docket fee. While the third-party defendant. This situation is not. PAL tried to exonerate itself by arguing that the Rayoses had no valid claim against SIA. however. or directly by so stating in unequivocal terms in its answer to SIA's complaint that SIA and PAL were both blameless. This is where the rule laid down in Firestone becomes applicable. analogous to a case where there are several defendants against whom a complaint is filed stating a common cause of action. On appeal. From PAL's viewpoint. a thirdparty complaint involves an action separate and distinct from. this seemed to be the only way to extricate itself from a mess which the court a quo ascribed to it. as far as the Rayoses and SIA are concerned. is whether it is entitled to reimbursement from PAL. To hold otherwise would be to open the door to a possible collusion between the plaintiff and defendant which would leave the thirdparty defendant holding the bag. What remains to be resolved. as claimed by the appellate court. For its part. it should have so stated in its answer as one of its defenses. although . and they were even blaming each other for the fiasco. rather than on the merits of its appeal. and enforcing separate judgments therefor. including specific denials of allegations in the main complaint which implicated it along with SIA. Such a proceeding obviates the need of trying two cases. considering that PAL appealed that part of the decision to the appellate court. While such a complaint speaks of a single suit. PAL opted to deny any liability which it imputed to SIA's personnel. although adverse to SIA as defendant. One of the defenses available to SIA was that the plaintiffs had no cause of action. made PAL ultimately answerable for the judgment by ordering the latter to reimburse the former for the entire monetary award. not by its personnel but by PAL's. This became its defense as well as its main cause of action in the third-party complaint it filed against PAL. instead of waiting for an adverse judgment and raising it for the first time on appeal. The judgment. The prudent thing that PAL should have done was to state in its answer to the third-party complaint filed by SIA against it everything that it may conceivably interpose by way of its defense.[T]here is nothing in the citation which would suggest that the appellant cannot avail of the defenses which would have been available to the nonappealing party against the prevailing party which would be beneficial to the appellant. special circumstances present in this case which preclude third-party defendant PAL from benefiting from the said principle. be allowed because it was neither raised by SIA in its answer to the main complaint nor by PAL in its answer to the third-party complaint. indeed. the defendant and third-party defendant had no common defense against the plaintiffs' complaint. it should have the right to avail of defenses of SIA against plaintiffs-appellees which would redound to its benefit. as correctly pointed out by petitioner. It was only on appeal — in a complete turn around of theory — that PAL raised the issue of no valid claim by the plaintiff against SIA. The stand of SIA as against the plaintiffs' claim was transparent from the beginning. SIA investigated the matter and discovered that tampering was. and if it was convinced that SIA should have raised the defense of no valid claim by the plaintiffs. this is true only when the third-party plaintiff and third-party defendant have non-contradictory defenses. committed. This could be done indirectly by adopting such a defense in its answer to the third-party complaint if only SIA had raised the same in its answer to the main complaint. PAL was aware of SIA's defense. receiving the same or similar evidence for both. however. would benefit from a victory by the third-party plaintiff against the plaintiff. PAL could have used the defense that the plaintiffs had no valid claim against it or against SIA. that is. There is no question that a third-party defendant is allowed to set up in his answer the defenses which the third-party plaintiff (original defendant) has or may have to the plaintiff's claim. Here. Yet. therefore. where the answer of some of the defendants inures to the benefit of those who did not file an answer. The appellate court was in error when it opined that SIA's answer inured to the benefit of PAL for the simple reason that the complaint and the third-party complaint are actually two separate cases involving the same set of facts which is allowed by the court to be resolved in a single proceeding only to avoid a multiplicity of actions. In its own defense. After all. This cannot. There are. Fear of collusion between the third-party plaintiff and the plaintiffs aired by the appellate court is misplaced if not totally unfounded.

and this has not been adequately rebutted by PAL. fair. 1992. on April 8. it failed to consider that the immediate cause of such non-renewal was SIA's delayed transmittal of the certification needed by Rayos to prove his innocence to his employer. WHEREFORE. While the trial court found. by way of contribution. is hereby REVERSED and a new one is entered ordering private respondent Philippine Airlines to pay. also answer the main complaint. 3 and the sharing as between such solidary debtors is pro-rata. representing unliquidated cash advances. J. aside from answering the third-party complaint. 142252. the decision of the respondent Court of Appeals in CA-G. the defendant may file a third-party complaint against a joint tort-feasor for contribution. vs. Alday owed it P114. 20488 dated September 21. 1988. The fact that the Rayos spouses had to be assisted by counsel who threatened to file a damage suit against SIA if the certification they urgently needed was not immediately issued only strengthens the suspicion that SIA was not dealing with them in utmost good faith. Former Chief Justice and noted remedial law expert Manuel V. . Moran opined that "in an action upon a tort. however. liable for a quasi-delict is joint and several. A third-party defendant who feels aggrieved by some allegations in the main complaint should. Inasmuch as the responsibility of two or more persons. PAL. The non-renewal of Rayos employment contract was the natural and probable consequence of the separate tortious acts of SIA and PAL. No. Surely. or tort-feasors. SIA was informed of the anomaly in December 1980 but only issued the certification four months later or. 2001 EVANGELINE ALDAY. and equitable to require PAL to contribute to the amount GONZAGA-REYES.R. dated September 9.76. 138822 January 23." 2 Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. more specifically. 4 it is but logical. Rayos is entitled to be compensated for such damages. SO ORDERED. instead of totally indemnifying the latter.R. a few days before the expiration of Rayos' contract. agree with the petitioner that PAL is solely liable for the satisfaction of the judgment. 1981. The effect of SIA's mishandling of Beatriz Rayos' request became instantly apparent when her husband's contract was not renewed in spite of his performance which was constantly "highly regarded" by the manager of Aramco's equipment services department. awarded to the Rayos spouses and already paid by SIA. FGU INSURANCE CORPORATION. kept the record purposes.: On 5 May 1989. respondent. petitioner. the investigation conducted by SIA could not have lasted for four months as the information needed by the Rayoses could easily be verified by comparing the duplicate excess baggage tickets which they and their handling agent. Under mandate of Article 2176 of the Civil Code. respondent FGU Insurance Corporation filed a complaint with the Regional Trial Court of Makati1 alleging that petitioner Evangeline K. that the proximate cause of the non-renewal of Rayos' employment contract with Aramco was the tampering of his excess baggage ticket by PAL's personnel. petitioner Singapore Airlines one-half (1/2) of the amount it actually paid to Sancho and Beatriz Rayos in satisfaction of the judgment in Civil Case No.related to the main complaint.650. We do not. CV No.

8 In its 18 September 1990 Order. petitioner asked the trial court to declare her counterclaim as exempt from payment of docket fees since it is compulsory and that respondent be declared in default for having failed to answer such counterclaim.unremitted costs of premiums and other charges incurred by petitioner in the course of her work as an insurance agent for respondent. moral damages and exemplary damages for the allegedly unfounded action filed by respondent. profit commissions and contingent bonuses earned from 1 July 1986 to 7 December 1986. show that her counterclaim is merely permissive.45.6 A few weeks later. x x x." The reference to said contract was included purposely to mislead. On 19 May 1999. petitioner prayed for attorney's fees. the appellate court denied petitioner's motion for reconsideration. It is the established rule that unenforceable contracts. asserted her right for the payment of P104.10 The trial court similar denied petitioner's motion for reconsideration on 28 February 1991. respondent filed a motion to dismiss petitioner's counterclaim. the Court of Appeals11 sustained the trial court. she claim that FGU violated said contract which gives rise of [sic] her cause of action. and for accumulated premium reserves amounting to P500. x x x x (19) x x x A careful analysis of FGU's three-page complaint will show that its cause of action is not for specific performance or enforcement of the Special Agent's Contract rather. Contrary to the protestations of appellant.000. and costs of suit. litigation expenses. Take note of the following numbered paragraphs in her answer: Before going into the substantive issues. on the other hand. Clearly. attorney's fees. mere reading of the allegations in the answer a quo will readily show that her counterclaim can in no way be compulsory. like this purported money claim of FGU.5 However. representing direct commissions. respondent filed a "Motion to Strike Out Answer With Compulsory Counterclaim And To Declare Defendant In Default" because petitioner's answer was allegedly filed out of time. denied petitioner's motion. 1988 x x x (15) That it should be noted that the cause of action of FGU is not the enforcement of the Special Agent's Contract but the alleged 'cash accountabilities which are not based on written agreement x x x.1âwphi1. While on one hand appellant alleged that appellee's cause of action had nothing to do with the Special Agent's Contract.4 On 23 August 1989. FGU's cause of action which is not supported by any document other than the self-serving 'Statement of Account' dated March 28. it is for the payment of the alleged cash accountabilities incurred by defendant during the period form [sic] 1975 to 1986 which claim is executory and has not been ratified. thus it is as if they have no effect." To support the heading "Compulsory Counterclaim" in her answer and give the impression that the counterclaim is compulsory appellant alleged that "FGU has unjustifiably failed to remit to defendant despite repeated demands in gross violation of their Special Agent's Contract x x x.00. cannot be sued upon or enforced unless ratified. the Court shall first dispose of some procedural matters raised by the parties.nêt On 23 December 1998. finding that petitioner's own admissions.2 Respondent also prayed for exemplary damages. contending that the trial court never acquired jurisdiction over the same because of the non-payment of docket fees by petitoner. Petitioner claims that respondent is .13 giving rise to the present petition. In addition. appellant's cash accountabilities cannot be the offshoot of appellee's alleged violation of the aforesaid contract. the trial court9 granted respondent's motion to dismiss petitioner's counterclaim and consequently.7 In response. the trial court denied the motion on 25 August 1989 and similarly rejected respondent's motion for reconsideration on 12 March 1990. The court found petitioner's counterclaim to be merely permissive in nature and held that petitioner's failure to pay docket fees prevented the court from acquiring jurisdiction over the same. The relevant portion of the appellate court's decision12 is quoted herewith - "(14) That.3 Petitioner filed her answer and by way of counterclaim. indeed. on 11 April 1990. as contained in her answer.893.

respondent is now most decidedly estopped from objecting to the Court of Appeals' assumption of jurisdiction over petitioner's appeal. respondent questions the jurisdiction of the Court of Appeals over the appeal filed by petitioner from the 18 September 1990 and 28 February 1991 orders of the trial court.18 The basic issue for resolution in this case is whether or not the counterclaim of petitioner is compulsory or permissive in nature. when taken together with its failure to object to the appellate court's jurisdiction during the entire duration of the proceedings before such court. Court of Appeals. Estoppel by laches arises from the negligence or omission to assert a right within a reasonable time. It is significant to note that this objection to the appellate court's jurisdiction is raised for the first time before this Court. demonstrates a willingness to abide by the resolution of the case by such tribunal and accordingly. belatedly objecting to the court's jurisdiction in the event that the judgment or order subsequently rendered is adverse to him. Although the lack of jurisdiction of a court may be raised at any stage of the action. a party may be estopped from raising such questions if he has actively taken part in the very proceedings which he questions. that is. respondent actively took part in the proceedings before the Court of Appeals by filing its appellee's brief with the same. Will substantially the same evidence support or refute plaintiff's claim as well s defendant's counterclaim? Meanwhile. warranting a presumption that the party entitled to assert it either has abandoned or declined to assert it.16 In this case. Would res judicata bar a subsequent suit on defendant's claim absent the compulsory counterclaim rule? 3. summarized as follows: 1. Are the issues of fact and law raised by the claim and counterclaim largely the same? 2. Court of Appeals. petitioner's counterclaims are as follows: (20) That defendant incorporates and repleads by reference all the foregoing allegations as may be material to her Counterclaim against FGU. Is there any logical relation between the claim and the counterclaim? Another test. it was only nine months after receiving petitioner's answer that respondent assailed the trial court's lack of jurisdiction over petitioner's counterclaims based on the latter's failure to pay docket fees. respondent never having raised this issue before the appellate court. (21) That FGU is liable to pay the following just.14 Petitioner's position is unmeritorious.19 4. arises out of or is connected with the transaction or occurrence constituting the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.even before the presentation of any evidence by the parties and definitely. where conducting separate trials of the respective claims of the parties would entail a substantial duplication of effort and time by the parties and the court. In Valencia v. applied in the more recent case of Quintanilla v. valid and legitimate claims of defendant: . A compulsory counterclaim is one which.21 is the "compelling test of compulsoriness" which requires "a logical relationship between the claim and counterclaim. way before any judgment could be rendered by the trial court.15 In the case at bar.the "Motion to Strike out Answer With Compulsory Counterclaim And To Declare Defendant In Default" .17 Its participation. respondent cannot be considered as estopped from assailing the trial court's jurisdiction over petitioner's counterclaim since this issue was raised by respondent with the trial court itself .the body where the action is pending ." As contained in her answer.20 this Court capsulized the criteria or tests that may be used in determining whether a counterclaim is compulsory or permissive.with the trial court. rather. being cognizable by the regular courts of justice.estopped from questioning her non-payment of docket fees because it did not raise this particular issue when it filed its motion .

but the payment of the prescribed docket fee. The court may allow payment of said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period. give everyone his due.000. the court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period. such as cash advances and costs of premiums. which shall not be considered filed until and unless the filing fee prescribed therefor is paid. petitioner's counterclaim for commissions. and (b) the minimum amount of P500.23 However.000.(a) the sum of at least P104. petitioner is bound to pay the prescribed docket fees. (24) That in order to discourage the filing of groundless and malicious suits like FGU's Complaint. malicious and unjustified Complaint. The same rule applies to permissive counterclaims. defendant's name. direct commissions.00 and for which FGU should be assessed and made liable to pay defendant. Maximiano Asuncion27- (23) That considering further the malicious and unwarranted action of defendant in filing this grossly unfounded action.000.25 On the other hand. .00 or such amount as the Honorable Court may deem warranted under the circumstances.893. act with justice. was not based upon the Special Agent's Contract. defendant was unnecessarily dragged into this litigation and to defense [sic] her side and assert her rights and claims against FGU. The evidence required to prove petitioner's claims differs from that needed to establish respondent's demands for the recovery of cash accountabilities from petitioner. Hon. mental anguish. unlike her own. illegal and vindictive termination of their Special Agent's Contract.00 as minimum. The recovery of respondent's claims is not contingent or dependent upon establishing petitioner's counterclaim." (22) That as a result of the filing of this patently baseless.26 The rule on the payment of filing fees has been laid down by the Court in the case of Sun Insurance Office.24 There is no need for need for petitioner to pay docket fees for her compulsory counterclaim. One would search the records in vain for a logical connection between the parties' claims. petitioner's claims for damages. This conclusion is further reinforced by petitioner's own admissions since she declared in her answer that respondent's cause of action. defendant has suffered and continues to suffer from serious anxiety. FGU should be penalized and assessed exemplary damages in the 2. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee. allegedly suffered as a result of the filing by respondent of its complaint. sum of P100. 1. good reputation and business standing in the insurance business as well as in the community have been besmirched and for which FGU should be adjudged and made liable to pay moral damages to defendant in the amount of P300.45 plus maximum interest thereon representing. in the exercise of his rights and in the performance of his duties. are compulsory. In addition to this. that vests a trial court with jurisdiction over the subject-matter or nature of the action. bonuses. and by way of serving [as] an example for the public good. It is not simply the filing of the complaint or appropriate initiatory pleading.22 Tested against the abovementioned standards. among others.000. which FGU has unjustifiably failed to remit to defendant despite repeated demands in gross violation of their Special Agent's Contract and in contravention of the principle of law that "every person must. she was compelled to hire the services of counsel with whom she agreed to pay the amount of P30. third-party claims and similar pleadings. and FGU's unlawful. in order for the trial court to acquire jurisdiction over her permissive counterclaim.000. such that conducting separate trials will not result in the substantial duplication of the time and effort of the court and the parties.00 plus the maximum allowable interest representing defendant's accumulated premium reserve for 1985 and previous years.00 as and for attorney's fees and stands to incur litigation expenses in the amount estimated to at least P20. fright and humiliation. profit commissions and contingent bonuses legally due to defendant. Ltd. and observe honesty and good faith. and accumulated premium reserves is merely permissive. V.

WHEREFORE. and (2) the resolution[2] of November 15.. after ascertaining that the applicable prescriptive period has not yet set in. we shall also inquire into the merits of said special civil action. its non-payment does not result in the automatic dismissal of the case provided the docket fees are paid within the applicable prescriptive or reglementary period. it has not been alleged by respondent and there is nothing in the records to show that petitioner has attempted to evade the payment of the proper docket fees for her permissive counterclaim.30 Insofar as the permissive counterclaim of petitioner is concerned. or if specified the same has been left for determination by the court. No. .R. profit commissions.32 QUISUMBING. LIM and HON. LASCANO. If respondent were to answer the compulsory counterclaim of petitioner. Meanwhile. UNIVERSAL STEEL SMELTING CO. SP No. the trial court should have instead given petitioner a reasonable time. INC.28 In Suson. Court of Appeals. June 8. REGIONAL TRIAL COURT OF QUEZON CITY. the additional filing fee therefor shall constitute a lien on the judgment.31 Meanwhile. 2000. the Court explained that although the payment of the prescribed docket fees is a jurisdictional requirement. it would merely result in the former pleading the same facts raised in its complaint. The above mentioned ruling in Sun Insurance has been reiterated in the recent case of Susan v.33 SO ORDERED. the Regional Trial Court of Makati (Branch 134) is ordered to require petitioner to pay the prescribed docket fees for her permissive counterclaim (direct commissions. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the additional fee.3.R. J. contingent bonuses and accumulated premium reserves). which dismissed petitioner‘s special civil action for certiorari because of late filing. As a matter of fact. subsequently. Pursuant to this Court's ruling in Sun Insurance.: For review are (1) the resolution[1] dated August 7.1âwphi1. The compulsory counterclaim of petitioner for damages filed in Civil Case No. the judgment awards a claim not specified in the pleading. REYNALDO U. Coming now to the case at bar. in addition. 2004] ARMANDO M. DECISION Petitioner asserts that the trial court should have declared respondent in default for having failed to answer her counterclaim. the assailed Decision of the Court of Appeals promulgated on 23 December 1998 and its 19 May 1999 Resolution are hereby MODIFIED. but in no case beyond the applicable prescriptive or reglementary period. asking it to declare her counterclaim as compulsory in nature and therefore exempt from docket fees and. denying petitioner‘s motion for reconsideration.29 However. 89-3816 is ordered REINSTATED. petitioner. after respondent filed its motion to dismiss petitioner's counterclaim based on her failure to pay docket fees. vs. to declare that respondent was in default for its failure to answer her counterclaim. the compulsory counterclaim of petitioner for damages based on the filing by respondent of an allegedly unfounded and malicious suit need not be answered since it is inseparable from the claims of respondent. respondents..nêt SECOND DIVISION [G. In the interest of the speedy administration of justice. to pay the filing fees for her permissive counterclaim. 59972. 2000 of the Court of Appeals in CA-G. petitioner immediately filed a motion with the trial court. the trial court dismissed petitioner's counterclaim. 146019. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the prescribed filing fee but. there is obviously no need to file an answer until petitioner has paid the prescribed docket fees for only then shall the court acquire jurisdiction over such claim.

On the counterclaim. In both news items. P104. 1995. the Manila Bulletin in its August 23.000. The complaint was dismissed on September 5. Project 8. 1990 until fully paid.000. Rule 50 in relation to Section 4 of Rule 41 of the 1997 Rules of Civil Procedure.00 for moral damages. In the meantime. P50. Quezon City. the instant appeal is hereby DISMISSED for failure of the appellant to pay the docket and other lawful fees. the Court hereby dismisses the complaint for failure of plaintiff to establish his causes of action by preponderant evidence.[4] . When the amount due thereon was not paid. thus: 3. which was approved by the trial court in an Order dated January 25. another news item. SO ORDERED. Costs of suit. 1991 and its petition for review filed with the Department of Justice was also dismissed per resolution dated June 19. Instead of complying. 1994.. 1992. Branch 93. on August 25. petitioner Armando Lascano had a construction project at No. the trial court dismissed the complaint. the school owner referred to was petitioner Armando Lascano. (USSCI). 18 Dalsol Street. 1992.[3] Petitioner received said Decision on January 16. However. petitioner filed with public respondent Regional Trial Court of Quezon City. Inc. and 5. P100. Q-92-13212 and on December 27. 1991. USSCI demanded payment. GSIS Village.‖ was published. USSCI‘s motion for reconsideration was denied on November 14. Upon advice of its lawyer. P35. that he was being sued for estafa. The case was docketed as Civil Case No. SO ORDERED. this time by Tempo. the Court orders plaintiff to pay the defendants the following: 1. the Court of Appeals dismissed the appeal in its Resolution dated August 13. 1991 issue. 2. Hence. which petitioner ordered from private respondent Universal Steel Smelting Co. On August 30. ―School Owner Faces Rap. This project required a number of steel bars of various grades.00 as and for reasonable attorney‘s fees. 1990. a complaint for damages against private respondents USSCI and its Vice-President Reynaldo Lim. premises considered. WHEREFORE. petitioner denied that he ordered the steel bars from USSCI. as amended.000. in this wise: Pursuant to Section 1 (c).268 were received by petitioner‘s representative. 1998.00 for exemplary damages. published a news item entitled ―School Owner in QC Sued. Rolando Nanquil.268.The antecedent facts are as follows: Sometime in 1990. the steel bars valued at P104. Petitioner‘s counsel then filed a Notice of Appeal on January 20. USSCI filed a criminal complaint for estafa against petitioner with the Quezon City Prosecutor‘s Office. 1995.‖ On August 27. 4. for alleged malicious prosecution and allegedly causing the publication in two (2) newspapers of general circulation. 1995. 1991.00 with interest thereon at 14% per annum from August 30.

Petitioner then filed a motion for reconsideration. or in the Sandiganbayan if it is in aid of its jurisdiction. in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. petitioner had the remaining period of fortyeight (48) days within which to file the special civil action for certiorari with the Court of Appeals. 2000. Records show that petitioner received on March 3. 1998. petitioner filed a special civil action for certiorari with the Court of Appeals. 4. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction. No extension of time to file petition shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days. order or resolution. 1998. If the petitioner had filed a motion for new trial or reconsideration in due time after notice of said judgment. On September 5. (Underscoring ours). the aggrieved party may file the petition within the remaining period. . the period herein fixed shall be interrupted. He filed the motion for reconsideration on March 15. 1994 judgment. we find merit in the petition. 2000 or twelve (12) days after notice of the assailed Order. 2000 a copy of respondent trial court‘s February 9. 2000. 2000. reckoned from notice of such denial. However. officer or person. If it involves the acts or omissions of a quasijudicial agency. if it relates to the acts or omissions of a lower court or of a corporation. Thus. said Resolution became final and executory and the Court of Appeals issued an entry of judgment thereon.[5] In finding that the special civil action for certiorari was filed out of time. 39-98. but the same was denied on April 28. the instant petition ascribing to the appellate court the following errors: I THE COURT OF APPEALS GRAVELY ERRED IN STRICTLY APPLYING THE RULES IN THE FILING OF PETITION FOR CERTIORARI CONTRARY TO THE LIBERAL CONSTRUCTION RULE AS ECHOED IN SEVERAL SUPREME COURT DECISIONS.[6] which took effect on September 1. Rule 65 of the 1997 Rules of Civil Procedure as follows: Sec. the Court of Appeals. which was denied in the appellate court‘s Resolution dated November 15. the original 60day period was interrupted when petitioner filed a motion for reconsideration. board. 2000 Order granting the motion for execution of the December 27.On the procedural aspect. Said circular amended Section 4. II THE COURT OF APPEALS GRAVELY ERRED IN DISREGARDING THE RULE ON INTEREST OF JUSTICE AND EQUITY IN FAVOR OF TECHNICALITY WHERE THE RTC DECISION SUBJECT OF EXECUTION WAS UNJUST AND VOID HAVING BEEN RENDERED ON PURE SPECULATION AND CONJECTURE WITHOUT CITATION OF SPECIFIC EVIDENCE. on July 31. but which shall not be less than five (5) days in any event. petitioner filed a motion for reconsideration of the trial court‘s Order granting the motion for execution. the Court of Appeals applied Supreme Court Circular No. the petition shall be filed in and cognizable only by the Court of Appeals. order or resolution sought to be assailed in the Supreme Court or. 2000. consistent with SC Circular No. 2000 a motion for execution of the December 27. 1994 judgment. On March 15. Hence. and unless otherwise provided by law or these Rules. 2000. which the court a quo granted on February 9. Where and when petition to be filed. – The petition may be filed not later than sixty (60) days from notice of the judgment. If the motion is denied. Private respondents then promptly filed on January 10. Since the motion was denied. Thus. 2000. in its Resolution of August 7. dismissed said petition on the ground of late filing. 39-98.

the sole issue for our consideration in this case is whether or not said circular may be applied retroactively. the sixty (60) day period shall be counted from notice of the denial of the said motion. Court of Appeals. In an analogous case. we could direct the Court of Appeals to decide on the merits the issues raised in petitioner‘s special civil action for certiorari. Therefore.[9] We see no reason why we should treat the instant case differently. 56-2000. petitioner‘s special civil action for certiorari was filed with the Court of Appeals on January 7. Therefore. Considering the circumstances in this case.[10] In the petition for certiorari. San Luis v. the Court of Appeals should not have dismissed the same on the ground of late filing. it bears stressing. pursuant to SC Circular No. 2000 of the Order of April 28.The petition shall be filed not later than sixty (60) days from notice of the judgment. 56-2000 took effect. the special civil action for certiorari having been filed on July 31. 2000. was twelve (12) days beyond the reglementary period. The present question does not pose a novel issue. whether such motion is required or not. and held that the remaining period resumed to run on the date petitioner received the Order denying his motion for reconsideration. We must point out. When and where petition filed. however. long before SC Circular No. the 60-day period within which to file the special civil action for certiorari starts to run from receipt of notice of the denial of the motion for reconsideration. Procedural laws are construed to be applicable to actions pending and undetermined at the time of their passage. Following the San Luis decision. it is preferable to settle the entire controversy now in a single proceeding. Under the second amendment. which do not create new rights or take away vested rights but only operate in furtherance of the remedy or confirmation of rights already existing. petitioner‘s 60-day period to file the special civil action for certiorari should be counted from his receipt on June 1. 2000. instead of remanding the case to the lower court for further proceedings. petitioner assigns the following errors to the trial court: I . Nonetheless. at the time of petitioner‘s filing of the special civil action for certiorari with the Court of Appeals on July 31. .[8] the Court of Appeals likewise reckoned the counting of the 60-day period from petitioner‘s receipt of a copy of the assailed Order. However. In said case of San Luis. However. As a general rule. SC Circular No. We said therein: Settled is the rule that remedial statutes or statutes relating to remedies or modes of procedure. and are deemed retroactive in that sense and to that extent. the dispute could be resolved by us.[7] which took effect on September 1. 39-98. that Supreme Court Circular No. In case a motion for reconsideration or new trial is timely filed. considered the interruption of the running of the period by the filing of the motion for reconsideration. conformably with SC Circular No. we will do so to serve the ends of justice. we applied the circular retroactively and held that the appellate court erred in dismissing the special civil action for certiorari on the ground of late filing. 2000. leaving no root or branch to bear the seeds of future litigation. that would only result in further delay before the resolution of this case. Hence. (Underscoring ours). if based on the records including the pleadings and the evidence. Thus. 2000 a copy of the trial court‘s April 28. denying his motion for reconsideration. do not come within the purview of the general rule against the retroactive operation of statutes. or on the 60th day. 2000. 2000 further amended Section 4 of Rule 65 as follows: Sec 4. 56-2000 was not yet in effect. 2000 Order denying his motion for reconsideration. 2000.Evidence on record shows petitioner received on June 1. order or resolution. or the last day before the reglementary period expired. the retroactive application of procedural laws cannot be considered violative of any personal rights because no vested right may attach to nor arise therefrom. In our view. the filing of the special civil action for certiorari with the Court of Appeals on July 31. 56-2000.

Petitioner misses the point that the court a quo ordered the payment of moral damages not because he filed the complaint in bad faith. but it did not preclude the fact that private respondents had delivered steel bars to petitioner. although the same cannot be recovered as a matter of right. not with private respondents.THE RESPONDENT COURT GRAVELY ABUSED ITS DISCRETION IN GRANTING THE ISSUANCE OF WRIT OF EXECUTION. we could not conclude that the trial court erred when it ordered petitioner to pay private respondents the value of said steel bars. and that there was no proof he acted in a wanton.000 and P50. Such cold refusal to pay a just debt amounts to a breach of contract in bad faith. under the circumstances. as duly authorized agent of petitioner. 2220. Delivery of subject steel bars to petitioner having been established by preponderance of evidence. According to petitioner. II THE RESPONDENT COURT GRAVELY ABUSED ITS DISCRETION IN UPHOLDING THAT IT IS THE MINISTERIAL DUTY THE (sic) COURT TO ISSUE THE WRIT OF EXECUTION. such damages are justly due. as to justify exemplary damages. (Underscoring ours). the order to pay moral damages is in accordance with law. reckless. it must first be shown that an award of moral. He maintains that he filed the complaint in good faith. instead of complying with his obligation.[13] In our view.[14] In the instant . as contemplated by the aforecited provision. The fact of delivery to petitioner of the subject steel bars is evidenced by delivery receipts signed by As to exemplary damages. He protests the order to pay private respondents P104. A corporation cannot suffer nor be entitled to moral damages. 1994 judgment is devoid of factual and legal bases. that petitioner transacted with LNG Marketing for the purchase of steel bars might well be true. petitioner. but because of his unjustified refusal to pay a just debt.[12] When payment on the delivered steel bars was demanded. but only with regard to respondent individual (Reynaldo Lim) and not to respondent corporation (USSCI). IV THE RESPONDENT COURT GRAVELY ABUSED ITS DISCRETION IN DISREGARDING THE RULE THAT A WRIT OF EXECUTION MAY BE DISALLOWED ON EQUITABLE GROUNDS. fraudulent.000 as moral and exemplary damages. Petitioner questions the trial court‘s order to pay private respondents P100. he transacted business with LNG Marketing. they need not be proved. temperate or compensatory damages obtains. Hence. which is inconsistent with the order to pay moral damages. Petitioner contends that the December 27. Article 2220 of the Civil Code provides: ART. III THE RESPONDENT COURT GRAVELY ABUSED ITS DISCRETION IN UPHOLDING THAT THE EXECUTION OF WHATEVER JUDGMENT THAT MAY HAVE BEEN RENDERED WILL PUT THE (SIC) REST THE CONTROVERSY BETWEEN PARTY LITIGANTS. While petitioner denied knowing said Rolando Nanquil. denied having transacted with private respondents. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. the delivery receipts of LNG Marketing were signed by the same Rolando Nanquil. oppressive and malevolent manner.[11] one Rolando Nanquil acting as petitioner‘s agent. Willful injury to property may be a legal ground for awarding moral damages if the court should find that.268 representing the value of the steel bars delivered to him. but that both could not compete for one client. He claims that LNG Marketing was a dealer of private respondents. respectively. But before considering whether exemplary damages should be awarded.

R. Compulsory counterclaim. 2004 LAFARGE CEMENT PHILIPPINES. considering the amount of the unpaid debt at issue in this case. WHEREFORE.000 as moral damages and P5. respectively. The resolution of the latter issue does not require the presence of third parties of whom the court a quo cannot acquire jurisdiction. MARIANO. before the trial court may acquire jurisdiction over permissive counterclaims. 155173 November 23. the court a quo ordered payment of P100.000. Indeed. dated December 27. – A compulsory counterclaim is one which. DECISION In sum. CONTINENTAL CEMENT CORPORATION. INC. GREGORY T.case.00. particularly with regard to damages as herein elucidated. 59972 are SET ASIDE. except that in an original action before the Regional Trial Court.000. Thus. Branch 93. SP No. docket fees thereon must first be paid. the award to private respondents of damages as part of their counterclaims against the petitioner. we find that the counterclaims herein are not permissive. No pronouncement as to costs.). petitioner argues private respondents‘ counterclaims are merely permissive. except as to the amounts of moral and exemplary damages. it follows that the adjudication of exemplary damages on that basis is also in order.000 for moral damages and P50. arises out of or is connected with the transaction or occurrence constituting the subject matter of the opposing party‘s claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. the resolutions of the appellate court dated August 7. being cognizable by the regular courts of justice. Q-92-13212. ought to be modified accordingly. Finally. we are of the considered view that P10. [16] On this point. Therefore. CONTINENTAL OPERATING CORPORATION and PHILIP ROSEBERG. Section 7. respondents. However..000 in exemplary damages would suffice under the circumstances. The assailed decision of the Regional Trial Court of Quezon City. non-payment of docket fees does not affect the jurisdiction of the trial court to rule thereon. 1994. Rule 6 of the Revised Rules of Civil Procedure is pertinent: SEC.R. But . petitioners.00 and P5. as the order to pay moral damages to private individual respondent is proper. but compulsory. which require payment of docket fees. (formerly Lafarge Philippines. LIM and ANTHONY A. is AFFIRMED. Such a counterclaim must be within the jurisdiction of the court both as to the amount and the nature thereof. we find no error nor grave abuse of discretion on the part of public respondent in rendering the assailed judgment dismissing the complaint. 2000 in CA-G. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. which are MODIFIED and reduced to only P10. Inc. SO ORDERED. As to the amount of damages. The alleged malicious filing of estafa against petitioner is necessarily connected with the non-payment of the value of steel bars delivered to petitioner.000 for exemplary damages. LUZON CONTINENTAL LAND CORPORATION. 2000 and November 15. the counterclaim may be considered compulsory regardless of the amount. vs. in Civil Case No.[15] However. 7. the counterclaims raised by private respondents are clearly compulsory in nature. No.

which involved the same parties and which was filed earlier before the International Chamber of Commerce. the parties.by way of compulsory counterclaims against Respondent CCC. 119712. Lim. The decretal portion of the first assailed Order reads: "WHEREFORE. whereby Petitioner Lafarge Cement Philippines. 2002 Orders3 of the Regional Trial Court (RTC) of Quezon City (Branch 80) in Civil Case No. Q-0041103. petitioners were well aware that CCC had a case pending with the Supreme Court.PANGANIBAN. the plaintiff's motion to dismiss claims is granted. a "Complaint with Application for Preliminary Attachment" against petitioners. Mariano -. However.000. The case was docketed as GR No.000. the Complaint prayed.84 -. (Lafarge) -. petitioners elevated the matter before the Court of Appeals in CA-GR SP No. seeking to nullify the May 22. to avoid being in default and without prejudice to the outcome of their appeal. petitioners filed their Answer and Compulsory Counterclaims ad Cautelam before the trial court in Civil Case No. 119712 in favor of the latter and the repeated instructions of Respondent CCC. both parties entered into a Sale and Purchase Agreement (SPA).140.700. 1998. Docketed as Civil Case No. J. In the meantime.000 each as actual damages.for the sums of (a) P2. Accordingly.on behalf of its affiliates and other qualified entities. Q-00-41103. In anticipation of the liability that the High Tribunal might adjudge against CCC. The Facts Briefly. they denied the allegations in the Complaint. petitioners allegedly refused to apply the sum to the payment to APT. its majority stockholder and president Gregory T. (c) P100.846. This amount was to be deposited in an interest-bearing account in the First National City Bank of New York (Citibank) for payment to APT.agreed to purchase the cement business of Respondent Continental Cement Corporation (CCC). allegedly agreed to retain from the purchase price a portion of the contract price in the amount of P117. despite the subsequent finality of the Decision in GR No. 20022 and the September 3. the defendants' claims against Mr. not just of its properties covered by the SPA with Lafarge but of several other properties as well. under Clause 2 (c) of the SPA. Respondent CCC had allegedly made the same claim it was raising in Civil Case No. including Petitioner Luzon Continental Land Corporation (LCLC) -.799. entitled Asset Privatization Trust (APT) v. 119712. and its corporate secretary Anthony A. Petitioners moved to dismiss the Complaint on the ground that it violated the prohibition on forum-shopping. . Q-00-41103. Lim and Mr. Fearful that nonpayment to APT would result in the foreclosure.: May defendants in civil cases implead in their counterclaims persons who were not parties to the original complaints? This is the main question to be answered in this controversy. In their Answer. 1998. in the light of the foregoing as earlier stated.000 each as attorney's fees plus costs of suit.the equivalent of US$2. (b) P100. The Case Before us is a Petition for Review1 under Rule 45 of the Rules of Court. that petitioners be directed to pay the "APT Retained Amount" referred to in Clause 2 (c) of the SPA. Mariano captioned as their counterclaims are dismissed.000. They prayed -. Inc. 2000. 2000 Order. among others. the origins of the present controversy can be traced to the Letter of Intent (LOI) executed by both parties on August 11.020.000 each as exemplary damages. Q-00-41103 in another action. On October 21. the petitioner in GR No.000 each as moral damages. Court of Appeals and Continental Cement Corporation. At the time of the foregoing transactions. and (d) P5. After the trial court denied the Motion to Dismiss in its November 14."4 The second challenged Order denied petitioners' Motion for Reconsideration. 68688. CCC filed before the Regional Trial Court of Quezon City on June 20.

particularly in its pronouncement that their counterclaim had been pleaded against Lim and Mariano only. among which were the following: a) the counterclaims against Respondents Lim and Mariano were not compulsory. the trial court -in an Amended Order dated September 3. 2002.5 petitioners prayed that both Lim and Mariano be held "jointly and solidarily" liable with Respondent CCC. CCC moved to dismiss petitioners' compulsory counterclaims on grounds that essentially constituted the very issues for resolution in the instant Petition." They are generally allowed in order to avoid a multiplicity of suits and to facilitate the disposition of the whole controversy in a single action. CA. had filed the "baseless" Complaint in Civil Case No. through Lim and Mariano. 20027 -. Q-00-41103 and procured the Writ of Attachment in bad faith. The only limitations to this principle are (1) that the court should have jurisdiction over the subject matter of the counterclaim. "[a] Whether or not the RTC gravely erred in refusing to rule that Respondent CCC has no personality to move to dismiss petitioners' compulsory counterclaims on Respondents Lim and Mariano's behalf.Petitioners alleged that CCC.admitted some errors in its May 22. First Issue: Acting on the Motion for Reconsideration filed by petitioners. (ii) Sapugay v. 2002 Order. Hence this Petition. On behalf of Lim and Mariano who had yet to file any responsive pleading. Petitioners' Counterclaims Compulsory Counterclaims are defined in Section 6 of Rule 6 of the Rules of Civil Procedure as "any claim which a defending party may have against an opposing party. and (iii) petitioners violated the rule on joinder of causes of action.8 Issues In their Memorandum. the RTC clarified that it was dismissing the counterclaim insofar as it impleaded Respondents Lim and Mariano. Court of Appeals is inapplicable here. However."9 Ruling of the Trial Court For clarity and coherence. On May 22. the Court will resolve the foregoing in reverse order. Relying on this Court's pronouncement in Sapugay v.10 . and (2) that it could acquire jurisdiction over third parties whose presence is essential for its adjudication. petitioners raise the following issues for our consideration: Counterclaims and Joinder of Causes of Action.6 The Court's Ruling The Petition is meritorious. "[b] Whether or not the RTC gravely erred in ruling that (i) petitioners' counterclaims against Respondents Lim and Mariano are not compulsory. and c) petitioners' Answer with Counterclaims violated procedural rules on the proper joinder of causes of action. b) the ruling in Sapugay was not applicable. the Regional Trial Court of Quezon City (Branch 80) dismissed petitioners' counterclaims for several reasons. even if it included CCC. such that the defendant's demand may be adjudged by a counterclaim rather than by an independent suit.

15 the "compelling test of compulsoriness" characterizes a counterclaim as compulsory if there should exist a "logical relationship" between the main claim and the counterclaim. In taking such bad faith actions. but in no case less than P5 million for each of them and for which plaintiff Gregory T. FGU Insurance Corporation. both Gregory T. Mariano was motivated by his sense of personal loyalty to Gregory T. they would be barred forever. compulsory counterclaims should be set up in the same action. otherwise. Gregory T. "Consequently. absent the compulsory counterclaim rule? 3) Will substantially the same evidence support or refute plaintiff's claim as well as defendant's counterclaim? 4) Is there any logical relation between the claim and the counterclaim? A positive answer to all four questions would indicate that the counterclaim is compulsory. Mariano should be held jointly and solidarily liable. Gregory T. We shall now examine the nature of petitioners' counterclaims against respondents with the use of the foregoing parameters. "Gregory T. NAMARCO v. bad faith litigation. when the multiple claims involve the same factual and legal issues. Mariano's bad faith filing of this baseless case has compelled the defendants to engage the services of counsel for a fee and to incur costs of litigation. notwithstanding their knowledge that plaintiff has no right to bring it or to secure the writ. Mariano's actions have damaged the reputations of the defendants and they should be held jointly and solidarily liable to them for moral damages of P100 million each. "The plaintiff's. Mariano are the plaintiff's co-joint tortfeasors in the commission of the acts complained of in this answer and in the compulsory counterclaims pleaded below. and causing plaintiff to file this baseless suit and to procure an unwarranted writ of attachment. A counterclaim is compulsory when its object "arises out of or is necessarily connected with the transaction or occurrence constituting the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. for which reason he disregarded the fact that plaintiff is without any valid cause. CA14 and reiterated in Alday v. in amounts to be proved at trial. Gregory T. Lim and Anthony A. Lim's and Anthony A." 16 . Lim and Anthony A. xxx xxx xxx "The plaintiff's. Lim. the plaintiff. Gregory T. Lim and Anthony A."11 A permissive counterclaim is essentially an independent claim that may be filed separately in another case."12 Unlike permissive counterclaims. There exists such a relationship when conducting separate trials of the respective claims of the parties would entail substantial duplication of time and effort by the parties and the court. Mariano were the persons responsible for making the bad faith decisions for. Lim was motivated by his personal interests as one of the owners of plaintiff while Anthony A.Petitioners base their counterclaim on the following allegations: A counterclaim may either be permissive or compulsory. "In order to serve as an example for the public good and to deter similar baseless. Mobil. It is permissive "if it does not arise out of or is not necessarily connected with the subject matter of the opposing party's claim. As such they should be held jointly and solidarily liable as plaintiff's co-defendants to those compulsory counterclaims pursuant to the Supreme Court's decision in Sapugay v. Mariano should be held jointly and solidarily liable to the defendants for exemplary damages of P100 million each. Lim and Anthony A. or when the claims are offshoots of the same basic controversy between the parties. Adopted in Quintanilla v. Lim and Anthony A. Federation of United Namarco Distributors13 laid down the following criteria to determine whether a counterclaim is compulsory or permissive: 1) Are issues of fact and law raised by the claim and by the counterclaim largely the same? 2) Would res judicata bar a subsequent suit on defendant's claim.

it must be set up in the same action. Court of Appeals finds application in the present case." "Aside from the fact that petitioners' counterclaim for damages cannot be the subject of an independent action.000. thus. who was not a party to the original action.19 Sapugay v. The Complaint arose from the supposed failure of the couple to keep their end of their Dealership Agreement."18 Moreover. it would meet the same fate on the ground of res judicata. actual and exemplary damages and attorney's fees against respondents on account of their "malicious and unfounded" complaint was compulsory.as defendants. holding both jointly and severally liable for preoperation expenses. otherwise. The spouses exerted all efforts to secure a bond. In that case. petitioners filed a "Motion to Declare Plaintiff and its Manager Ricardo P." Among the issues raised in Sapugay was whether Cardenas. but the bonding companies required a copy of the Dealership Agreement. We disposed of this issue as follows: . storage. petitioners impleaded in the counterclaim Mobil Philippines and its manager -. Respondent Mobil Philippines filed before the trial court of Pasig an action for replevin against Spouses Marino and Lina Joel Sapugay. using the "compelling test of compulsoriness. Ricardo P. In their Answer with Counterclaim. It claimed that they still had to post a surety bond which.The above allegations show that petitioners' counterclaims for damages were the result of respondents' (Lim and Mariano) act of filing the Complaint and securing the Writ of Attachment in bad faith. Later. it would be abated on the ground of litis pendentia. it would be barred forever. which respondent continued to withhold from them. After both Mobil and Cardenas failed to respond to their Answer to the Counterclaim. They prayed that judgment be rendered. They are damages claimed to have been suffered by petitioners as a consequence of the action filed against them. In their Answer. They have to be pleaded in the same action. Since the counterclaim for damages is compulsory. Banaag (17 SCRA 1081) (1966) is in point: "Compensatory. rental. This is an additional factor that characterizes petitioners' counterclaim as compulsory. the recovery of petitioners' counterclaims is contingent upon the case filed by respondents. they requested the plaintiff to allow them to get gas. In Sapugay. Cardenas in Default on Defendant's Counterclaim. otherwise. conducting separate trials thereon will result in a substantial duplication of the time and effort of the court and the parties. clearly. moral and exemplary damages. If it is filed concurrently with the main action but in a different proceeding. it is the same evidence that sustains petitioners' counterclaim that will refute private respondent's own claim for damages. might nevertheless be impleaded in the counterclaim. Bautista17 involved the issue of whether the counterclaim that sought moral. are also compulsory counterclaim barred by the dismissal of the debtor's action. but that it had refused. allegedly suffered by the creditor in consequence of the debtor's action. Court of Appeals Applicable to the Case at Bar Sapugay v. initially fixed at P200. had intended all along to award the dealership to Island Air Product Corporation. was later raised to P700. and unrealized profit including damages. Tiu Po v." we find that. we held as follows: "Petitioners' counterclaim for damages fulfills the necessary requisites of a compulsory counterclaim. Cardenas. guarding fees. petitioners would be precluded by the judgment from invoking the same in an independent action. petitioners alleged that after incurring expenses in anticipation of the Dealership Agreement. They cannot be claimed in a subsequent action by the creditor against the debtor.Ricardo P. Cardenas -.000. The pronouncement in Papa vs. petitioners discovered that respondent and its manager. if filed subsequently.

of Cardenas in petitioners' counterclaim is sanctioned by the rules. The filing of a responsive pleading is deemed a voluntary submission to the jurisdiction of the court. . Rather. IAC23 has stressed that while a corporation is an entity separate and distinct from its stockholders. protect fraud. there is no debate on whether. based on the alleged facts. Remo Jr. will merge them into one. a new party impleaded by the plaintiff in a compulsory counterclaim cannot be considered to have automatically and unknowingly submitted to the jurisdiction of the court. v. While the Court does rule that the counterclaims against Respondent CCC's president and manager may be properly filed.is not premised on the assumption that the plaintiff corporation does not have the financial ability to answer for damages. as it is deemed to have adopted the allegations in the complaint as its answer -. or defend crime. both are clearly parties in interest to the counterclaim. These allegations may warrant the piercing of the veil of corporate fiction. therefore. if jurisdiction over them can be obtained."A counterclaim is defined as any claim for money or other relief which a defending party may have against an opposing party. in alleging bad faith on the part of Lim and Mariano the counterclaims had in effect made them "indispensable parties" thereto.22 the Court held that generally. while a compulsory counterclaim may implead persons not parties to the original complaint." In these instances.' The inclusion. if the said individual is found guilty of bad faith or gross negligence in directing corporate affairs. the determination of whether both can in fact be held jointly and severally liable with respondent corporation is entirely another issue that should be ruled upon by the trial court. is a matter of defense that should be threshed out during the trial. They add that "[i]n the present case. however. it should only be the corporation that could properly be held liable. so that the said individual may not seek refuge therein.26 Suability and liability are two distinct matters. circumstances may warrant the inclusion of the personal liability of a corporate director. Rule 6 which provides that 'when the presence of parties other than those to the original action is required for the granting of complete relief in the determination of a counterclaim or cross-claim. This is because Respondent CCC as a corporation with a separate [legal personality] has the juridical capacity to indemnify petitioners even without Messrs. A contrary ruling would result in mischievous consequences whereby a party may be indiscriminately impleaded as a defendant in a compulsory counterclaim. the corporate fiction may be disregarded if "used to defeat public convenience. "the law will regard the corporation as an association of persons." Thus. Lim and Mariano cannot be held personally liable [because their assailed acts] are within the powers granted to them by the proper board resolutions. Lim and Mariano. However. much less participation in the proceedings. However."25 The foregoing assertion. therefore. However. and judgment rendered against it without its knowledge. trustee. the court shall order them to be brought in as defendants.a defendant in a compulsory counterclaim need not file any responsive pleading."20 The prerogative of bringing in new parties to the action at any stage before judgment is intended to accord complete relief to all of them in a single action and to avert a duplicity and even a multiplicity of suits thereby. In insisting on the inapplicability of Sapugay. In Tramat Mercantile v. The inclusion of a corporate officer or stockholder -. or in case of two corporations. Court of Appeals. the general rule that a defendant cannot by a counterclaim bring into the action any claim against persons other than the plaintiff admits of an exception under Section 14. Messrs. or officer.Cardenas in Sapugay or Lim and Mariano in the instant case -. the general rule -. such inclusion is based on the allegations of fraud and bad faith on the part of the corporate officer or stockholder. respondents argue that new parties cannot be included in a counterclaim. it is not a personal decision but rather that of the corporation as represented by its board of directors.does not apply. except when no complete relief can be had. whether or not "fraud" is extant under the circumstances is an issue that must be established by convincing evidence."21 We disagree. Lim and Mariano are not necessary for petitioners to obtain complete relief from Respondent CCC as plaintiff in the lower court. but may be held individually and personally liable for his or her actions.24 Respondents further assert that "Messrs. justify a wrong. such that it has to share its liability with individual defendants. in blatant disregard of rudimentary due process requirements.

join as plaintiffs or be joined as defendants in one complaint. as evidenced by his failure to make any objection despite his active participation in the proceedings. the court a quo -. particularly the trial court's treatment of the Complaint as the Answer of Cardenas to the compulsory counterclaim and of his seeming acquiescence thereto.unlike in Sapugay -. Cardenas is deemed to have recognized the jurisdiction of the trial court over his person and submitted thereto.28 In its Motion to Dismiss. it was this ratiocination which led the trial court to deny the motion to declare Mobil and Cardenas in default. both as to Mobil and Cardenas on the ground that Mobil's complaint should be considered as the answer to petitioners' compulsory counterclaim.cannot be said to have treated Respondent CCC's Motion to Dismiss as having been filed on their behalf. which we quote: "Section 5. – A party may in one pleading assert. It was held thus: "It is noteworthy that Cardenas did not file a motion to dismiss the counterclaim against him on the ground of lack of jurisdiction. x x x" Section 6. as many causes of action as he may have against an opposing party. Permissive joinder of parties. While it is a settled rule that the issue of jurisdiction may be raised even for the first time on appeal. Cardenas was not unaware of said incidents and the proceedings therein as he testified and was present during trial.The correct procedure in instances such as this is for the trial court. Rules on Permissive Joinder of Causes of Action or Parties Not Applicable Respondent CCC contends that petitioners' counterclaims violated the rule on joinder of causes of action. if jurisdiction over them can be obtained. except as otherwise provided in these Rules." . Obviously. in the alternative or otherwise. Cardenas was furnished a copy of the Answer with Counterclaim. to "order [such impleaded parties] to be brought in as defendants. the fact that the trial court denied said motion. Only upon service of summons can the trial court obtain jurisdiction over them. or in the alternative. In this manner. The records do not show that Respondents Lim and Mariano are either aware of the counterclaims filed against them. subject to the following conditions: (a) The party joining the causes of action shall comply with the rules on joinder of parties. Although it was only Mobil which filed an opposition to the motion to declare in default. Joinder of causes of action. In Sapugay. they can be properly appraised of and answer the charges against them. per Section 12 of Rule 6 of the Rules of Court. may. It argues that while the original Complaint was a suit for specific performance based on a contract. – All persons in whom or against whom any right to relief in respect to or arising out of the same transaction or series of transactions is alleged to exist whether jointly. but he did not file any responsive pleading to the counterclaim leveled against him. leads us to the inescapable conclusion that the trial court treated the opposition as having been filed in behalf of both Mobil and Cardenas and that the latter had adopted as his answer the allegations raised in the complaint of Mobil. "By adopting as his answer the allegations in the complaint which seeks affirmative relief. CCC cites Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules of Civil Procedure." by directing that summons be served on them. where any question of law or fact common to all such plaintiffs or to all such defendants may arise in the action. the Court gave due consideration to certain factual circumstances. Furthermore."27 Such factual circumstances are unavailing in the instant case. Further. in dismissing the counterclaims against the individual respondents. Nevertheless. He may not now be heard to repudiate or question that jurisdiction. severally. or that they have actively participated in the proceedings involving them. not to speak of the fact that as manager of Mobil he would necessarily be interested in the case and could readily have access to the records and the pleadings filed therein. this does not obtain in the instant case. but the court may make such orders as may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection with any proceedings in which he may have no interest. the counterclaim for damages was based on the tortuous acts of respondents.

Other reliefs just and equitable are likewise prayed for.00.700." petitioners prayed: Obligations may be classified as either joint or solidary. only to have it possibly re-filed in a separate proceeding. Gregory T. petitioners' usage of the term "joint and solidary" is confusing and ambiguous." "3. "x x x The difficulty in the contention of the appellants is that they fail to recognize that the basis of the present action is tort. Exemplary damages of P100 million each. Lim and Mariano as "joint and solidary. in joining Lim and Mariano in the compulsory counterclaim. However. by their nature. it is respectfully prayed that after trial judgment be rendered: "1. "b.30 in which we held: "WHEREFORE."29 Moreover. More important. This objective is negated by insisting -. They fail to recognize the universal doctrine that each joint tort feasor is not only individually liable for the tort in which he participates. if proven. except when otherwise expressly stated or when the law or the nature of the obligation requires solidarity. always solidary. The ambiguity in petitioners' counterclaims notwithstanding.that the compulsory counterclaim for damages be dismissed. COC and Roseberg: "a. Lim and Anthony A. is solidary. We have assiduously maintained this legal principle as early as 1912 in Worcester v. as we have stated earlier. Respondents Lim and Mariano are real parties in interest to the compulsory counterclaim. "solidary obligations" may be used interchangeably with "joint and several" or "several. Lim and Anthony A. Mariano jointly and solidarily to pay the defendants LPI. Second Issue: CCC's Personality to Move to Dismiss the Compulsory Counterclaims Characterizing their counterclaim for damages against Respondents CCC. it is imperative that they be joined therein. respondents' liability.as the court a quo has done -. Section 7 of Rule 3 provides: "Compulsory joinder of indispensable parties. "2. They are meant to discourage duplicity and multiplicity of suits. Moral damages of P100 million each. x x x ." Thus. Ordering the plaintiff. Ordering the plaintiff. Attorney's fees and costs of suit of at least P5 million each. Mariano jointly and solidarily to pay defendant actual damages in the sum of at least P2. on the other hand. but is also jointly liable with his tort feasors. This characterization finds basis in Article 1207 of the Civil Code.000. obligations arising from tort are. Ocampo. Dismissing the complaint in its entirety.The foregoing procedural rules are founded on practicality and convenience. "Joint" or "jointly" or "conjoint" means mancum or mancomunada or pro rata obligation. petitioners are being consistent with the solidary nature of the liability alleged therein. – Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants. Gregory T. and "c. which provides that obligations are generally considered joint. LCLC.

" (Emphasis supplied)."It may be stated as a general rule that joint tort feasors are all the persons who command. Respondent CCC cannot be declared in default. With respect to those which personally belong to the others. nor is it any excuse for him that his participation in the tort was insignificant as compared to that of the others. And this is true even though they are charged jointly and severally." The act of Respondent CCC as a solidary debtor -. Each is liable for the whole damages caused by all. The release of one of the joint tort feasors by agreement generally operates to discharge all. According to such assertion. aid or abet the commission of a tort. They are jointly and severally liable for the whole amount. Article 1222 of the Civil Code provides: "Joint tort feasors are not liable pro rata.32 In cases filed by the creditor. Be that as it may. except among themselves.is therefore allowed. and all together are jointly liable for the whole damage. Respondent CCC cannot move to dismiss the counterclaims on grounds that pertain solely to its individual co-debtors. to the same extent and in the same manner as if they had performed the wrongful act themselves. The courts may release some for lack of evidence while condemning others of the alleged tort feasors. countenance. if done for their benefit. advise. he may avail himself thereof only as regards that part of the debt for which the latter are responsible. for the purpose of each paying an aliquot part. such issues are deemed automatically joined. each obligor answers only for a part of the whole liability. The persons injured may sue all of them or any number less than all. of course satisfies any claim which might exist against the others. x x x "A solidary debtor may. However. It is no defense for one sued alone. from circumstances personal to it." In a "joint" obligation. while that sought against the individual respondents is based solely on tort does not negate the solidary nature of their liability for tortuous acts "Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. x x x "Of course the court during trial may find that some of the alleged tort feasors are liable and that others are not liable. The damages can not be apportioned among them. They are each liable as principals. a solidary debtor may invoke defenses arising from the nature of the obligation. avail itself of all defenses which are derived from the nature of the obligation and of those which are personal to him. it did not pray that the counterclaim against it be dismissed.31 The fact that the liability sought against the CCC is for specific performance and tort. "A payment in full for the damage done. that the others who participated in the wrongful act are not joined with him as defendants. Article 1211 of the Civil Code is explicit on this point: "Joint tort feasors are jointly and severally liable for the tort which they commit. or pertain to his own share. in a "solidary" or "joint and several" obligation. in actions filed by the creditor. They cannot insist upon an apportionment. There can be but satisfaction. the relationship between the active and the passive subjects is so close that each of them must comply with or demand the fulfillment of the whole obligation. instigate. a perusal of its Motion to Dismiss the counterclaims shows that Respondent CCC filed it on behalf of Co-respondents Lim and Mariano. encourage. Jurisprudence teaches that if the issues raised in the compulsory counterclaim are so intertwined with the allegations in the complaint.that of filing a motion to dismiss the counterclaim on grounds that pertain only to its individual codebtors -. or who approve of it after it is done. by one of the joint tort feasors.33 Counterclaims that are only for damages and attorney's fees and that arise from the filing of the complaint shall be considered as special defenses and need not be answered. or even from those personal to its co-debtors. x x x alleged in the counterclaims. cooperate in.34 . promote. x x x The solidary character of respondents' alleged liability is precisely why credence cannot be given to petitioners' assertion.

WHEREFORE. vs. While Respondent CCC can move to dismiss the counterclaims against it by raising grounds that pertain to individual defendants Lim and Mariano. without being so authorized. As much as practicable. RAMON T. assailing the July 12. The court of origin is hereby ORDERED to take cognizance of the counterclaims pleaded in petitioners' Answer with Compulsory Counterclaims and to cause the service of summons on Respondents Gregory T.R. Represented by Its Chairman. The first Resolution dismissed petitioner‘s original action for certiorari as follows: . A corporation has a legal personality entirely separate and distinct from that of its officers and cannot act for and on their behalf. The Case Before us is a Petition for Review[1] under Rule 45 of the Rules of Court. Mariano. Thus. nevertheless. 59544. 146125. even if both were not parties in the original Complaint. No costs. Respondent CCC or any of the three solidary debtors (CCC. the Petition is GRANTED and the assailed Orders REVERSED. we make the following pronouncements: [G. COURT OF APPEALS. unless expressly adopted by Lim and Mariano. Lim and Anthony A. JIMENEZ.. NOVELTY PHILIPPINES. Mariano are compulsory. 4. 2000[2] and the November 21. defenses available to their codefendants. Summons must be served on Respondents Lim and Mariano before the trial court can obtain jurisdiction over them. and REFORM THE UNION MOVEMENT IN NOVELTY (RUMN). in a Motion to Dismiss. September 17. litigations should be decided on their merits and not on procedural technicalities. petitioner. the Motion to Dismiss the compulsory counterclaim filed by Respondent CCC has no force and effect as to them. THIRD DIVISION In summary. INC.CCC's Motion to Dismiss the Counterclaim on Behalf of Respondents Lim and Mariano Not Allowed SO ORDERED. Lim and Anthony A. DECISION PANGANIBAN. No. Mariano. Lim or Mariano) may include. The counterclaims against Respondents CCC. This statement holds true especially in labor cases like the present one.: 3. Lim and Anthony A. 2003] 1. Gregory T. it cannot file the same Motion on their behalf for the simple reason that it lacks the requisite authority to do so. PANEL OF VOLUNTARY ARBITRATORS. The counterclaims may properly implead Respondents Gregory T. J. in which the defect has been cured by the motion for reconsideration. 2000[3] Resolutions of the Court of Appeals (CA) in CA-GR SP No. 2. respondents. the same Motion cannot be deemed to have been filed on behalf of the said co-defendants.

) For failure to comply with Sec. (Novelty) and Reform the Union Movement in Novelty (RUMN) arose when the latter started assessing penalties against its erring members.) For failure to comply with Sec. the CBA provisions between the parties and the check-off authorization form executed by the . Rule 13 of the same Rules. 2000 is REITERATED. Ventura when the petition was filed. RUMN continued to insist on the implementation of the checkoff on the special assessments. 2000. On November 19. 2000. 13.―This instant petition is hereby DISMISSED outright: a. After the submission of the necessary pleadings by the parties. which referred the controversy to voluntary arbitration. Mr. with a penalty equivalent to their salary for one day. It was only submitted when the instant motion was filed and the Special Power of Attorney was executed only on July 26. Nevertheless. Consequently. 1997. for the payroll period November 16 to 22. Rule 65 in relation to Sec. b. Hence. RUMN raised the matter for grievance. who signed the petition did not attach the alleged authority from petitioner to institute the same. petitioner temporarily held in abeyance the implementation of the checkoff on the special assessment made by RUMN. ―WHEREFORE. Rule 46 of the 1997 Rules of Civil Procedure. Steven Young. pertinent portions of which are reproduced hereunder: ―In the case at bench. citing an Opinion rendered by the legal office of the DOLE. This move notwithstanding. Since no settlement was reached during the grievance procedure. a close scrutiny of the records reveal that the affidavit of service was attached after the annexes x x x.‖[5] Petitioner‘s Motion for Reconsideration was denied in the second assailed Resolution. petitioner rejected RUMN‘s persistent demand for a checkoff. petitioner issued a Memorandum announcing that. 3. the Panel of Voluntary Arbitrators rendered a Decision[8] dated April 26. at the time the case was filed. 1997. there being no attachment of the required affidavit proof of service. in view of the foregoing. 1997. According to it. the dispositive portion of which reads: ―WHEREFORE. Sadly. 1. On June 26. it would deduct from the salaries of union members who had failed to attend the mobilization on July 28. RUMN‘s executive board adopted a Resolution[7] sanctioning union officers and members who had failed to join big rallies. amounts equivalent to their one-day salary. 1997. despite such compliance. petitioner failed to attach the required authority to file the instant petition. the instant motion must still be denied for reasons above-stated. the instant motion for reconsideration is hereby DENIED for lack of merit. When some members of the union allegedly complained of the salary deduction. Petitioner also requested from the Office of the Secretary of the Department of Labor and Employment (DOLE) its opinion on the matter. no authority was given to Mr.[4] allegedly the personnel officer of petitioner. ―Anent the issue of failure to attach the required affidavit of proof of service. the Panel hereby declares that there has been sufficient compliance [with] the provisions of the Labor Code. Inc. the checkoff was being done pursuant to the Resolution of the RUMN executive board and existing individual checkoff authorizations. we had to dismiss the instant petition.‖[6] The Facts The dispute between Novelty Philippines. the case was elevated to the National Conciliation and Mediation Board. Our resolution dated July 18. 2000 while the instant petition was filed on July 6. Nevertheless.

this recourse. 2000. with the Procedural Requirements Petitioner avers that it has substantially complied with the requirements of Section 1 of Rule 65 in relation to Section 3 of Rule 46 of the 1997 Rules of Civil Procedure.Union members or. Thereafter. The Panel therefore confirms the right of the Union to demand from Management the check-off of one day‘s pay against erring members who had violated the Union directive for members to attend and participate in the protest rally during the [State of the Nation Address] SONA of July 1997. ratified Ventura‘s authority to file the Petition for and on behalf of the company.[11] Issues Petitioner submits the following issues for our consideration: ―I. According to petitioner. The Honorable Respondent Court of Appeals committed grave abuse of discretion when it dismissed the Petition for Certiorari despite petitioner‘s substantial compliance with the requirements of the rules. The Panel of Voluntary Arbitrators committed grave abuse of discretion when it rendered the assailed majority Decision and assailed Resolution without factual or legal basis and patently contrary to law. private respondent insists that the authority to verify and certify is an essential requirement in the filing of a . Moreover. It further claims that the pertinent provisions of the aforementioned rules do not specify any requirement pertaining to the authority of the representative of the company to file the Petition. private respondent counters that Ventura had no authority to file the Petition before the CA or to sign the Verification and Certificate of Non-Forum Shopping. It has allegedly done so particularly with regard to the authority of Ventura. II. it contends that its subsequent submission of a Special Power of Attorney constituted substantial compliance with the subject rules and. Hence.‖[12] The Court‘s Ruling The Petition is meritorious.[13] its personnel officer. more specifically. when Ventura represented the company at the voluntary arbitration level. On the other hand. Main Issue: Substantial Compliance Ruling of the Court of Appeals The CA denied due course to the Petition for failure of the personnel officer of petitioner to attach (1) his authority to institute the action and (2) the required proof of service. The Motion for Reconsideration was likewise denied by the appellate court. which was denied in a Resolution[10] dated June 19. since he was neither the president nor a corporate officer of the company. the former elevated the matter to the CA by way of a Petition for Certiorari under Rule 65. It argues that such authority should have been conferred to him through an appropriate board resolution of Novelty or a special power of attorney. to file the Petition for Certiorari before the CA. in effect. special assessments effected by authority of the Union‘s resolution duly adopted and approved by the majority of the Union in a general membership meeting. because the required authority to file it had been executed only after 20 days from its filing. his authority to act for and on its behalf was never questioned.‖[9] Petitioner filed with the Panel of Voluntary Arbitrators a Motion for Reconsideration. Moreover.

Court of Appeals. This Court. Finally. Diaz and Piglas-Kamao vs. The policy of our judicial system is to encourage full adjudication of the merits of an appeal. National Labor Relations Commission. rules of procedure may be relaxed to relieve a part of an injustice not commensurate with the degree of noncompliance with the process required. considering that the person who was in the best position to ascertain the truthfulness and the correctness of the allegations in the . stressing the ruling that by precipitately dismissing the petitions ‗the appellate court clearly put a premium on technicalities at the expense of a just resolution of the case. Based on the second assailed Resolution. As pointed out by the MCIAA. who was authorized to file the Petition through a Special Power of Attorney. because the document had been executed by the general manager and not by the president of Novelty.[17] this Court held that the subsequent submission of requisite documents constituted substantial compliance with procedural rules. the alleged lack of authority of petitioner‘s personnel officer to sign the Verification and Certificate of NonForum Shopping became the CA‘s sole basis for dismissing the certiorari action. It explained: ―There is ample jurisprudence holding that the subsequent and substantial compliance of an appellant may call for the relaxation of the rules of procedure. we ruled that the subsequent submission of the missing documents with the motion for reconsideration amounts to substantial compliance.[14] Moreover.petition for certiorari. The reasons behind the failure of the petitioners in these two cases to comply with the required attachments were no longer scrutinized.[16] The foregoing judicial policy acquires greater significance where there has been subsequent compliance with the requirements of the rules.[19] recognized the authority not only of a general manager but even of an acting general manager to sign a verification and certificate against non-forum shopping. in Mactan-Cebu International Airport Authority v.[15] Indeed. pursuant to Office Order No. In the exercise of its equity jurisdiction. not as an annex or attachment to the Motion for Reconsideration. Court of Appeals. In Cusi-Hernandez vs. This was a logical and practical decision of management. as in this case in which petitioner has submitted the Special Power of Attorney together with its Motion for Reconsideration. Colonel Cordova signed the Verification and Certification against forum shopping as Acting General Manager of the MCIAA. We ordered the remand of the petitions in these cases to the Court of Appeals. In Jaro v. In this case. 5322-99 dated September 10. even after petitioner had submitted a Special Power of Attorney granting such authority to Ventura. procedural niceties should be avoided in labor cases in which the provisions of the Rules of Court are applied only in a suppletory manner. Alfonso Allere. it was Ventura.‖[20] The authority of the general manager to sue on behalf of the corporation and to sign the requisite verification and certification of non-forum shopping may be delegated to any other officer of the company through a board resolution or a special power of attorney. The appellate court refused to give due course to the Petition. the personnel officer of petitioner company. 1999 issued by the General Manager of MCIAA. x x x. respondent claims that petitioner‘s subsequent submission of a Special Power of Attorney was still defective. especially when petitioner is a corporation that can act only through its president or any other officer authorized by a board resolution. since it had been signed by the general manager and not by the president of petitioner company. What we found noteworthy in each case was the fact that the petitioners therein substantially complied with the formal requirements. this Court may reverse the dismissal of appeals that are grounded merely on technicalities. ―We are not persuaded by CHIONGBIAN‘s claim that the Verification and Certification against forum shopping accompanying MCIAA‘s petition was insufficient for allegedly having been signed by one who was not qualified to do so. The CA reasoned that this authorization should have been submitted together with the initiatory pleading.‘‖[18] We find equally untenable private respondent‘s argument that the Special Power of Attorney authorizing Ventura to file the Petition was still defective.

‖[24] Indeed. merely acting for and in behalf of petitioner Pfizer when she signed the verification. explained the nature and purpose of a verification. We then ruled that the subsequent submission of a proof of authority to act on behalf of petitioner corporation justified the relaxation of the Rules for the purpose of allowing its Petition to be given due course. ―On the other hand. as pointed out by petitioners. being a corporate entity. Rule 45 of the 1997 Rules of Civil Procedure provides that the failure of the petitioner to submit the required documents that should accompany the petition. As such. nonetheless the requirements must not be interpreted too literally and thus defeat the objective of preventing the undesirable practice of forum-shopping. It then upheld the validity of a verification signed by an ―employment specialist‖ who had not even presented any proof of her authority to represent the petitioner company. failing only to show proof that the signatory was authorized to do so. technical rules of procedure should be used to promote. and Uy. speaking through Chief Justice Hilario G.‖[22] Likewise.[21] this Court. not frustrate justice. as much as possible. the lack of certification against forum shopping is generally not curable by the submission thereof after the filing of the petition. while the right to appeal is a statutory and not a natural right. Legaspi. Litigants should have the amplest opportunity for a proper and just disposition of their cause -. Ms. Legaspi was an Employment Specialist of petitioner Pfizer. While the swift unclogging of court dockets is a laudable objective.. xxx xxx xxx ―In the instant case. The same rule applies to certifications against forum shopping signed by a person on behalf of a corporation which are unaccompanied by proof that said signatory is authorized to file a petition on behalf of the corporation.Petition was its personnel officer. ―We firmly believe that the purpose of verification was served in the instant case wherein the verification of the petition filed with the Court of Appeals was done by Ms.. ―It must also be kept in mind that while the requirement of the certificate of non-forum shopping is mandatory. That petitioner subsequently submitted a secretary‘s certificate attesting that Balbin was authorized to file an action on behalf of petitioner likewise mitigates this oversight. It remains undisputed that Ms. in Loyola. Pfizer. who knew the status of any personnel and any labor-related suit of the company.[23] we elucidated on the necessity of a certificate of non-forum shopping. she was in a position to verify the truthfulness and correctness of the allegations in the petition. In Pfizer v. who ‗coordinated and actually took part in the investigation‘ of the administrative charges against respondent Galan. who was an officer having personal knowledge of the case. can only act through an officer. Generally.free. it is nonetheless an essential part of our judicial system. not mere speculations. therefore. Moreover. Roadway. With more reason should we allow the instant petition since petitioner herein did submit a certification on non-forum shopping. the disputed verification is in compliance with the Rules. Legaspi.[25] . Thus. The court may order the correction of the pleading or act on the unverified pleading if the attending circumstances are such that strict compliance with the rule may be dispensed with in order to serve the ends of justice. in Shipside v. Inc. Besides. the granting of substantial justice is an even more urgent ideal. so as not to deprive a party of the right to appeal. Galan. Section 5. shall be sufficient ground for the dismissal thereof. ―Verification is intended to assure that the allegations in the pleading have been prepared in good faith or are true and correct. Courts are therefore advised to proceed with caution. from the constraints of procedural technicalities. lack of verification is merely a formal defect that is neither jurisdictional nor fatal. was. Lastly. including the certification against forum shopping. the Court excused non-compliance with the requirement as to the certificate of non-forum shopping. Davide Jr. Cleofe R. Court of Appeals. the merits of petitioner‘s case should be considered special circumstances or compelling reasons that justify tempering the requirement in regard to the certificate of non-forum shopping.

GALVEZ. U. respondent. SUPREME COURT Manila Petitioner Rosemarie Wee and respondent Rosario D. alleged that Rosario and Rosemarie entered into an agreement whereby Rosario would send Rosemarie US$20. The present controversy stemmed from an investment agreement between the two sisters. Branch 80. vs. The complaint. Manolito Galvez. On April 20. DATE .R. 1999 denying their motion for reconsideration. ROSARIO D. DECISION Rosario claimed that pursuant to their agreement. 1999. Republic of the Philippines The antecedent facts in this case are not complicated. Also assailed by the Wees is the Resolution2 of the Court of Appeals. 2001. and mandamus filed by petitioners Manuel and Rosemarie Wee. denying their prayer to dismiss Civil Case No.3 Rosemarie lives with her husband.S. (2) order the trial court to desist from further proceedings in Civil Case No. The interest to be earned therefrom would be given to Rosario's son. which denied special civil action for certiorari.R.30 per dollar. 1999 of the Regional Trial Court (RTC) of Quezon City. Bataan. No. the Wees sought to (1) annul and set aside the Order dated July 29. filed a complaint before the RTC of Quezon City to collect a sum of money from Manuel and Rosemarie Wee. namely: QUISUMBING. The case is REMANDED to the Court of Appeals for further proceedings on the merits. the Petition is hereby GRANTED and the assailed Resolutions SET ASIDE. prohibition. five (5) Chemical Bank checks. represented by Grace Galvez as her attorney-infact. Q-9937372. 147394 August 11. in Balanga. denying their motion for reconsideration. as his allowance.000. which was docketed as Civil Case No. as well as the Order of September 20. SP No.000 at the exchange rate of P38. Galvez are sisters. 2004 SPOUSES MANUEL and ROSEMARIE WEE.SO ORDERED. petitioner Manuel Wee. Q-99-37372. promulgated March 7. In said petition. 2000 of the Court of Appeals in CA-G. Q-99-37372. which had gone sour along the way. FIRST DIVISION G. WHEREFORE. No pronouncement as to costs. J. half of said amount to be deposited in a savings account while the balance could be invested in the money market. while Rosario resides in New York. The amount for collection was US$20. Rosario.A. 55415.: CHECK No. and (3) order the trial court to dismiss the said action. For review is the Decision1 dated December 4. petitioners. she sent to Rosemarie on various dates in 1993 and 1994.

000 to P4. which was issued to one Zenedes Mariano. 5. 1999.000 and for an accounting. Chemical Bank Check No. . 101 US$20.00 US$1.000 to Rosemarie.050. sent Rosemarie a written demand for her US$20. 97.004 6/11/93 Rosario further alleged that all of the aforementioned checks were deposited and encashed by Rosemarie. 97 3/3/94 5/24/93 1.000. the Wees moved to dismiss Civil Case No. 105 2/1/94 2. through her attorney-in-fact. the action being premature in the absence of previous earnest efforts toward a compromise.00 In January 1999. except for the first check. (2) failure to state a valid cause of action.000 a month from 1993 to January 1999.00 TOTAL CB No.00 CB No. Grace Galvez. 123 CB No. Again. However. Rosario. Rosario asked for the return of the US$20.550.000 and an accounting.00 CB No. Q-99-37372 on the following grounds: (1) the lack of allegation in the complaint that earnest efforts toward a compromise had been made in accordance with Article 1515 of the Family Code. Rosemarie gave Manolito his monthly allowance ranging from P2. On May 18. thus causing Rosario to file suit.000.500. and (3) the certification against forum shopping was defective.000. 10.AMOUNT CB No. sometime in 1995. Rosemarie promised to comply with the demand but failed to do so. Rosemarie ignored the demand. 104 11/12/93 In accordance with her agreement with Rosario. who gave the cash equivalent of US$2.

9 WHEREFORE. plaintiff thru her daughter as Attorney-In-Fact caused the sending of a Demand Letter dated January 4.13 The Court of Appeals held that the complaint in Civil Case No. On December 4. but this was denied on March 7. the appellate court decided CA-G.R. SP No. sufficiently stated a cause of action. Section 410 of the 1997 Rules of Civil Procedure and for having the notice of hearing addressed to the Clerk of Court and not to the adverse party as required by Section 511 of the same Rule.. 2001.R. 55415. 1999. Rosario amended her complaint with the addition of the following paragraph: 9-A. Hence. 1999. instead of dismissing Civil Case No. but the motion was denied on September 20. Conformably with Rule 10. It likewise held that the questioned certification against forum shopping appended thereto was not so defective as to warrant the dismissal of the complaint. Earnest efforts towards (sic) have been made but the same have failed. . Q-99-37372 outright." thus: WHEREFORE. Section 56 of the 1997 Rules of Civil Procedure. 2001.12 SO ORDERED. as amended. The Wees opposed Rosario's motion to have the Amended Complaint admitted. 1999 and the last paragraph of which reads as follows: The Wees duly moved for reconsideration. SP No. The petition assailed the trial court for having acted with grave abuse of discretion amounting to lack or excess of jurisdiction for issuing the interlocutory orders of July 29. docketed as CA-G. 2000. Sections 17 and 38 of the 1997 Rules of Civil Procedure. 1999. Defendant-spouses are hereby directed to file their Answer within the reglementary period provided by the Rules of Court. premises considered. the Wee couple brought the matter to the Court of Appeals via a special civil action for certiorari. 1999. On October 18. WHETHER OR NOT THE INSTANT PETITION FOR REVIEW ON CERTIORARI UNDER RULE 45 OF THE REVISED RULES OF COURT IS . raising the following issues: 1. SO ORDERED. On January 9. Q-99-37372. and mandamus. 1999 and September 20. the petitioners herein moved for reconsideration of the appellate court's decision. the trial court came out with an Order denying the Wees' motion to dismiss for being "moot and academic. 55415 in this wise: Trusting this will merit your utmost preferential attention and consideration in as much as you and our client are sisters and in order that [earnest] efforts toward a compromise could be obtained. for lack of merit. prohibition and mandamus is DENIED. the amended complaint is hereby admitted.having been executed by an attorney-in-fact and not the plaintiff. as required by Rule 7. prohibition. They contended that said motion was a mere scrap of paper for being in violation of the three-day notice requirement of Rule 15. the instant petition for certiorari.. the instant petition. On July 29. As a matter of fact.

Q-99-37372.15 of the 1997 Rules of Civil Procedure could be brought before us. according to petitioners. regardless of whether the assailed decision of the appellate court involves an appeal on the merits from the trial court's judgment or the dismissal of a special civil action questioning an interlocutory order of the trial court. 55415 did not dispose of the case on the merits. and mandamus by the appellate court is meritorious. SP No. Respondent contends that the appellate court's ruling in CA-G. SP No. 55415. and mandamus that petitioners sought. 55415 in a manner contrary to law or established jurisprudence remains precisely for us to determine in this review on certiorari. and mandamus in CA-G. In other words.R. a petition for review under Rule 45. prohibition. SP No.R. 55415 now. 55415 as far as the appellate court is concerned. SP No. SP No. WHETHER OR NOT THE CERTIFICATION OF NON-FORUM SHOPPING EXECUTED BY THE PLAINTIFF'S ATTORNEY-IN-FACT IS DEFECTIVE. or with grave abuse of discretion amounting to lack or excess of jurisdiction.R. prohibition. a petition for review on certiorari will not lie to assail the judgment of the Court of Appeals in CA-G. In other words. precisely decided the matter on the merits. prohibition. the petitioners argue that the present appeal by certiorari filed with this Court assailing the dismissal of their special civil action for certiorari. it found that the special civil action of petitioners before it had no merit.R. What is important under Rule 45. the Court of Appeals.R. there is nothing more left to be done in CA-G. as to whether the Court of Appeals decided the matter in CA-G. having dismissed the said action. and mandamus is interlocutory in nature. 55415. 55415 were all interlocutory. Respondent. In other words. 2. 55415 is not on the merits. Q-99-37372. in a certiorari petition the appellate court is not tasked to adjudicate the merits of the respondent's claims before the trial court. Q-99-37372. Section 1. prohibition. SP No. Now.R. the ruling of the appellate court did not put an end to Civil Case No. In special civil actions for certiorari. which is still pending before the trial court. Nor can we sustain respondent's argument that the appellate court's decision in CA-G. This is because. as the orders of the trial court subject of CA-G. 55415 is not the final judgment or order. SP No. in turn. AND 3. or award on the merits.R. SP No. We find no basis for respondent's contention that the decision of the Court of Appeals in CA-G. On the first issue. prohibition. final order. Section 1. SP No. certiorari as a mode of appeal involves the review of a judgment. dismissing the petitioners' special civil action for certiorari. SP No. After all. such as CA-G.R. SP No.THE PROPER REMEDY FOR PETITIONERS UPON THE DENIAL OF THEIR PETITION FOR CERTIORARI. according to respondent.R. is that the assailed decision of the appellate court is final and that the petition before this Court should raise only questions of law. according to respondent. in CA-G. Stated differently. the present petition is petitioners' proper remedy to challenge the appellate court's judgment in CAG. point out that the dismissal by the Court of Appeals of herein petitioners' special civil action for certiorari.R. Resolving such claims on the merits remains the proper province of the trial court in Civil Case No. SP No.R. which could be the subject of an appeal by certiorari under Rule 45. WHETHER OR NOT THE AMENDED COMPLAINT BEFORE THE REGIONAL TRIAL COURT SUFFICIENTLY STATES A CAUSE OF ACTION AGAINST THE DEFENDANTS. .14 We shall now resolve these issues seriatim. Hence. In so limiting itself to and addressing squarely only the issue of grave abuse of discretion or lack or excess of jurisdiction. the only issue before the appellate court is whether the lower court acted without or in excess of jurisdiction. Considering the factual and procedural circumstances of this case. The appellate court properly ruled in CA-G. 55415 that the trial court committed no grave abuse of discretion amounting to lack or excess of jurisdiction so as to warrant the issuance of writs of certiorari. 55415. The CA's decision on said petition is final for it disposes of the original action for certiorari.R. 55415. PROHIBITION AND MANDAMUS BY THE COURT OF APPEALS. and mandamus directed against the interlocutory orders of the trial court in Civil Case No.

2. To attend hearings and/or Preliminary Conference[s]. documents. Galvez. Petitioners insist that there was nothing in the special power of attorney executed by Rosario D. and not of the Philippines. Grace Galvez. categorically and clearly authorizes the latter to do the following: 1. The Special Power of Attorney executed by her in favor of Grace Galvez. Section 318 of the 1997 Rules of Civil Procedure. as an attorney-in-fact. Grace Galvez is deemed to be a party. as required by Santos v. They rely on our ruling in BA Savings Bank v. By virtue of said document. Section 5 of the 1997 Rules of Civil Procedure. We find for the respondent. to settle and/or enter into Compromise Agreement[s]. and interests in this jurisdiction. the petitioners aver that the Court of Appeals gravely erred in finding that the certification against forum shopping in Civil Case No. Rosario D. it is indisputable that Grace Galvez. To ask. and where a representative is allowed in case of artificial persons. 3. to act as her attorney-in-fact in the Philippines. juridical and/or corporation in the Philippines. Pursuant to Administrative Circular No. Grace Galvez. adjust claims. Petitioners point out that under Rule 7. documents and pleadings necessary for the accomplishment of the above purposes. the certificate of non-forum shopping. Hence.20 which extended the requirement of a certification on non-forum shopping to all initiatory pleadings filed in all courts and quasi-judicial agencies. which expressly conferred upon the latter the authority to execute and sign. Corollary with this power is the authority to sign all papers. to enforce and protect the respondent's rights."22 In our jurisdiction. as attorney-in-fact of the respondent. [and] 4. the aforementioned papers and documents. Court of Appeals. Respondent likewise stresses that since Grace Galvez is the one authorized to file any action in the Philippines on behalf of her principal. on behalf of the former. natural or juridical. to make stipulations. To sign all papers. which Grace Galvez was authorized and empowered to sign. 04-94. was duly authorized and empowered not just to initiate complaints. but is specifically authorized to sign all "papers. who executed and signed the same. if subjected to careful scrutiny would clearly show that the authority given to the latter is not only broad but also all encompassing. to litigate and to terminate such proceedings. petitioners' argument that Grace Galvez is not specifically authorized to execute and sign the certification of non-forum shopping deserves scant consideration. and pleadings necessary for the accomplishment of the said purpose. To conclude otherwise would render nugatory the Special Power of Attorney and also render respondent's constitution of an attorney-in-fact inutile.Anent the second issue. notwithstanding that it was not the plaintiff below. documents. Sia.17 Respondent counters that petitioners' contention has no basis. demand and claim any sum of money that is duly [due] from any person natural. she is in the best position to know whether there are other cases involving the same parties and the same subject matter instituted with or pending before any other court or tribunal in this jurisdiction. Galvez in favor of Grace Galvez. must necessarily include the certification on non-forum shopping. it is the "plaintiff" or "principal party" who must sign the certification. Grace Galvez. he must be specifically authorized to execute and sign the certification. Grace Galvez is given the power and authority to institute both civil and criminal actions against any person. Moreover. Noteworthy. and pleadings" necessarily connected with the filing of a complaint. To file criminal and/or civil complaints before the courts of justice in the Philippines to enforce my rights and interest[s]. Hence.16 that where the parties in an action are natural persons. Q-99-37372 was valid. whether criminal or civil. but her attorney-in-fact. the party himself is required to sign the certification. Forum shopping "occurs when a party attempts to have his action tried in a particular court or jurisdiction where he feels he will receive the most favorable judgment or verdict. instead of herself as the party.19 From the foregoing. respondent in the instant case is already a resident of the United States. The Special Power of Attorney granted by the respondent to her attorney-in-fact. Galvez failed to show any justifiable reason why her attorney-in-fact should be the one to sign the certification against forum shopping. pursuant to Rule 3. who may be obliged or answerable to the respondent. claims. it has taken the form of filing multiple petitions or complaints involving the same issues before two or . according to respondent.21 as well as Rule 7. The petitioners stress that Rosario D. Section 5 of the 1997 Rules of Civil procedure. it was proper for her to appoint her daughter.

Specifically. because of an adverse decision in one forum.23 There is also forum shopping when. and not the respondent. The sentence is incomplete. the rule proscribing forum shopping seeks to promote candor and transparency among lawyers and their clients in the pursuit of their cases before the courts to promote the orderly administration of justice. Q-99-37372 violates Rule 8. Rule 7. according to petitioners. It is basic that the Rules "shall be liberally construed in order to promote their objective of securing a just. The rationale behind this is "because only the petitioner himself has actual knowledge of whether or not he has initiated similar actions or proceedings in different courts or agencies. We have examined said Certificate28 and find that under the circumstances. Said circumstance constitutes reasonable cause to allow the attorney-in-fact. petitioners contend that the allegation in paragraph 9-A34 of the amended complaint that "Earnest efforts towards have been made but the same have failed" is clearly insufficient. Filing multiple petitions or complaints constitutes abuse of court processes. as plaintiff in Civil Case No. The Special Power of Attorney in this instance was constituted precisely to authorize Grace Galvez to file and prosecute suits on behalf of respondent. As we previously held concerning Administrative Circular No. speedy and inexpensive disposition of every action and proceeding. unless it is alleged in the complaint or petition that the disputants have made earnest efforts to resolve their differences through compromise. prevent undue inconvenience upon the other party.more tribunals or agencies in the hope that one or the other court would make a favorable disposition. as attorney-in-fact for her. in their entirety."29 However. the rule requiring a certification of forum shopping to accompany every initiatory pleading. requires that the certification should be signed by the "petitioner or principal party" himself. according to respondent. who has actual and personal knowledge whether she initiated similar actions or proceedings before various courts on the same issue on respondent's behalf. Respondent rebuts petitioners' contention by stating that the amended complaint as well as the annexes attached to the pleadings should be taken in their entirety in determining whether a cause of action was validly stated in the complaint. who was no longer resident of the Philippines but of New York. 04-94: The fact that the Circular requires that it be strictly complied with merely underscores its mandatory nature in that it cannot be dispensed with or its requirements altogether disregarded. It also aims to prevent the embarrassing situation of two or more courts or agencies rendering conflicting resolutions or decisions upon the same issue. Under Article 151 of the Family Code. a party seeks a favorable opinion (other than by appeal or certiorari) in another. "should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective or the goal of all rules of procedure – which is to achieve substantial justice as expeditiously as possible. but these efforts have not succeeded. Under the circumstances of this case."31 Otherwise put. it is the attorney-in-fact who instituted the action. we hold that there has been proper compliance with the rule proscribing forum shopping. The attempt to compromise as well as its failure or inability to succeed is a condition .24 The rationale against forum shopping is that a party should not be allowed to pursue simultaneous remedies in two different fora. clearly show that a sufficient cause of action as it is shown and stated that earnest efforts towards a compromise have been made. Section 5 of the Rules of Court. but it does not thereby interdict substantial compliance with its provisions under justifiable circumstances. as in this case. as Rule 7.A. the amended complaint and the attachments to the original complaint. namely to promote and facilitate the orderly administration of justice. thus requires the reader of the pleading to engage in deductions or inferences in order to get a complete sense of the cause of action.S. the rationale does not apply where.25 which tends to degrade the administration of justice."32 On the third issue. 04-94 is now incorporated in the 1997 Rules of Civil Procedure. and adds to the congestion of the heavily burdened dockets of the courts.30 Administrative Circular No. as there is no plain and direct statement of the ultimate facts on which the plaintiff relies for her claim. it is Grace Galvez. U.26 Thus. petitioners submit that the amended complaint in Civil Case No. wreaks havoc upon orderly judicial procedure. Thus taken together. it does not negate but instead serves the purpose of the rule against forum shopping. As respondent points out. a suit between members of the same family shall not be entertained. and save the precious time of the courts. Q-99-37372 to personally sign the Certificate of Non-Forum Shopping. Section 133 of the 1997 Rules of Civil Procedure.27 It is in this light that we must look at the propriety and correctness of the Certificate of Non-Forum Shopping signed by Grace Galvez on the respondent's behalf. Section 5.

BASUBAS. LEONA COLINA. it is in this light that the defective lead sentence must be understood or construed. PINTOR. are hereby AFFIRMED. a lacking word like "compromise" could be supplied by the rest of the paragraph. SP No. FIDELA R. TAGALOG.39 we find that the respondent has properly set out her cause of action in Civil Case No. Q-99-37372. In the instant case. Petitioners. paragraph 9-A of the Amended Complaint deals with the topic of efforts made by the respondent to reach a compromise between the parties. HEIRS OF EPIFANIA R. SEVERINA R. ALMACEN. CABAHUG. which reads "Earnest efforts towards have been made but the same have failed" may be incomplete or even grammatically incorrect as there might be a missing word or phrase. MIGUEL RETUYA. Hence. forms a rhetorical unit (as by dealing with a particular point of the subject or by comprising the words of a distinct speaker). RUDOLFA RETUYA and ELISA RETUYA. we have to ask: Is there a sufficient general averment of the condition precedent required by the Family Code in the Amended Complaint in Civil Case No. namely. URSULINA S. that earnest efforts to compromise the differences between the disputants were made but to no avail. Mandaue City. DOLORES R. RAMIREZ. The petitioners' stance that the defective sentence in paragraph 9-A of the Amended Complaint fails to state a cause of action. Our examination of paragraph 9-A of the Amended Complaint shows that respondent has complied with this requirement of a general averment. HEIRS OF JUAN RETUYA. PREMILINO SEMBLANTE. BALBINA R. ULRIC CAÑETE as Presiding Judge of REGIONAL TRIAL COURT Branch 55. Contrary to what petitioners claim. as well as its Resolution dated March 7. there is no need for guesswork or complicated deductions in order to derive the point sought to be made by respondent in paragraph 9-A of the Amended Complaint. RELACION. BALDOMERO RETUYA. Republic of the Philippines Supreme Court Baguio City SECOND DIVISION HEIRS OF FRANCISCO RETUYA. namely. SOFIA RETUYA. A paragraph is "a distinct section or subdivision of a written or printed composition that consists of from one to many sentences. SO ORDERED. HON. FELIMON RETUYA. 2000 of the Court of Appeals in CA-G. MARTINA R. The Decision dated December 4. but to our mind. namely. NICOLAS RETUYA. HEIRS OF QUINTIN RETUYA."37 As a "short composition consisting of a group of sentences dealing with a single topic. the instant petition is DENIED for lack of merit. Having examined the Amended Complaint in its entirety as well as the documents attached thereto.R. following the rule that documents attached to a pleading are considered both as evidence and as part of the pleading. TEOPISTA R. HONORABLE COURT OF APPEALS. . ALESNA. Costs against the petitioners."38 a paragraph must necessarily be construed in its entirety in order to properly derive the message sought to be conveyed. SEMBLANTE. Applying the foregoing to the instant case. ELIZABETH V. FELICITAS R. HEIRS OF EULOGIO RETUYA. Q-99-37372? We find in the affirmative. 55415. Section 336 of the 1997 Rules of Civil Procedure provides that conditions precedent may be generally averred in the pleadings. TEOFILO RETUYA. FERNANDO RETUYA. thus. namely.35 Rule 8.versus WHEREFORE. . has no leg to stand on. It is true that the lead sentence of paragraph 9-A. LUCIFINA S. BASUBAS. RODRIGUEZ. SINFOROSA R. 2001. HEIRS OF RAFAELA VILLAMOR.precedent to the filing of a suit between members of the same family. ALBAÑO.

122-Y and 122-AA. 262374. . containing an area of Four Hundred Forty-Two (442) sq. J. ABAD. to wit: Present: CARPIO. MELANIO RETUYA. PERALTA. LRC Psd.. LRC Rec. April 6. 122-X. PIO RETUYA. Mandaue City. 25218 of the Office of the Registry of Land Title and Deeds of Mandaue City. Psd 07-05-12450. 4030. 122-U. LRC Rec. G. MENDOZA. (Hacienda Mandaue) LRC Rec. 122-S. 113. 122-T. 122-R. 76235. No. 122-AA. 121-1-10 of the subdivision plan. being a portion of Lot 121-1. A parcel of land. Mandaue City. 122-Q. 5 of the consolidation of Lot No. known as Lot No. 4030. LUTGARDA RETUYA and PROCOPIO VILLANUEVA. 113-U of the Subdivision Plan. 25213 of the Office of the Registry of Land Title and Deeds of Mandaue City. 122-T. Chairperson. containing an area of Five Hundred Seventy-Four (574) sq. II-5121 Amd. meters described in the Transfer Certificate of Title No. 163039 (CA) in CA-G.* JJ. AQUILINA RETUYA. 10 of the consolidation of Lot No. Lot No. 122-U. meters. SP No.500) sq. No. 122–R.R. Respondents. and SERENO. No. City of Mandaue. 122-U. 122-V. Psd 07-023191. 122-Q. 2003[1] and March 3. 26728 in the Office of the Registry of Land Title and Deeds of Mandaue City. Severo Retuya (Severo) and Maxima Mayol Retuya (Maxima) were husband and wife without any children. 2011 x-----------------------------------------------------------------------------------------x DECISION PERALTA. LRC Rec. 4030. respectively. No. described in the Transfer Certificate of Title No. Promulgated: A parcel of land located in Barangay Tipolo.R. described in the Transfer Certificate of Title No. Severo left several parcels of land registered under his name which are located in Mandaue City.: Assailed in this petition for review on certiorari are the Resolutions dated November 28. Mandaue City. LEONILA RETUYA. containing an area of Two Hundred and Eighty-One (281) sq. 122-W. J. 122-W. known as Lot No. 2004[2] of the Court of Appeals A parcel of land located in Barangay Tipolo. known as Lot No. containing an area of One Thousand Five Hundred (1. NICANOR RETUYA. GIL RETUYA. meters. meters described under TCT 32718 of the Registry of Land Title and Deeds of Mandaue City. which dismissed petitioners' Petition for Annulment of Judgment and their Motion for Reconsideration. A parcel of land situated in Barangay Tipolo. 122-S. 122-X. 122-V. 4030 located in Banilad. Psd 07-05-12450. Psd -07-016382 being a portion of Lot No.RAMON RETUYA.

meters.[3] Some of these parcels of land were covered by a lease contract. Lot No.48. an action[4] for judicial partition of the above-mentioned real properties registered under the names of Severo and Maxima. 07-05-012479. filed a Comment[10] manifesting that they will submit and abide by whatever resolution the RTC may adopt or render in relation to the Motion for Correction of Mathematical Computation. premises considered. survived by his wife Maxima and by Severo's full blood brothers and sisters. thus. 1961. Severo died intestate. Lot No. On October 23. Quintin. namely.[8] Respondents Heirs of Eulogio filed a Motion for Correction[9] of Mathematical Computation of their share in Lot 121-1-10 alleging that their correct share should be 255 sq. Atty. the RTC rendered a Decision[7] dated August 9. meters Lot 121-1-10-260 . namely. 21687. Francisco. Sometime in 1971. as respondents heirs are the owners of the same. covered by TCT No. Georgia and the Heirs of Juan Retuya (Severo‘s brother who had died earlier). Fructuoso. being a portion of Lot 47-11-5121 Amd Hacienda Mandaue LRC Rec. respondents Nicolas and his son Procopio Villanueva. 10 is a road right of way and should not be partitioned. Nicolas. Ruperto. Basilio Duaban. meters Lot 5 . Romeo.42 sq. petitioners have no right to ask for the partition of the subject properties. Severo and Maxima's siblings and their nephews and nieces. The other respondents. Leona. Benjamin. instead of 42 sq. represented by Atty. as well as the rental. be partitioned among the herein parties in accordance with law. 4030. while Lot No. 2001. and that they were willing to partition the properties but were opposed by their corespondents.65 sq. survived by her siblings. did not file any comment despite receipt of the Order[11] to do so. 47-L. Respondents Heirs of Eulogio filed their Answer[5] claiming that Severo had already sold the subject lands to their father Eulogio by virtue of a notarized Deed of Absolute Sale of Interests and Pro Indiviso Shares to Lands dated March 29. and Eulogio. respondents Nicolas and his son Procopio filed their Answer[6] admitting to have collected rentals on some of the subject properties and that such rentals were still intact and ready for partition. through their then counsel. the dispositive portion of which reads as follows: WHEREFORE. Mandaue City. Fidela. who was represented by the latter's heirs. Lorenzo. Rafaela. Concepcion and Teofila. In 1996. the RTC issued an Order.A parcel of land. meters. meters. Ernesto B. and the accounting of the rentals derived therefrom against Severo's two other brothers. filed with the Regional Trial Court (RTC) of Mandaue City. Esteban Retuya and which he sold to Eulogio Retuya as follows: Lot 113-U . was previously sold by the Heirs of Severo and Maxima Retuya to third persons. judgment is rendered declaring the heirs of Eulogio Retuya as owners of the 1/16 share of Severo Retuya to ½ of the subject properties representing the shares of the late Severo Retuya which he inherited from his deceased father. Petitioners. Maxima also died intestate. and that the remaining areas of these properties.[12] the dispositive portion of which reads: . 1961. Mayol. On the other hand. as well as Severo's half-blood siblings. Epifania.78 sq. herein petitioners. On June 14. namely. 47-L of the subdivision plan Psd.99. Eulogio. the rentals of which were received by respondents Nicolas Retuya and Procopio Villanueva. which have not been sold to defendants Heirs of Eulogio Retuya. Severina and Martina. covered by TCT 21687 in the Registry of Land Titles and Deeds for the City of Mandaue. situated in Barangay Banilad. No. Daniel. 2001. After trial.

WHEREFORE. amending the decision dated August 9. meters and that the remaining areas of these properties. through counsels. premises considered. In an Order[23] dated February 17. On February 24. filed a Motion to Hold in Abeyance the Implementation of the Writ of As the RTC was in receipt of a copy of the Petition for Annulment of Judgment filed with the CA. and in the interest of substantial justice. meters Lot 5 99. copy of this Order for their information. Respondents Heirs of Eulogio filed a Motion for the Issuance of a Writ of Execution. In an Order[18] dated June 14. meters for Lot No. meters to 255 sq. which the RTC granted in its Order[15] dated March 15. through Atty. Esteban Retuya and which he sold to Eulogio Retuya as follows: Lot 113-U 48. 2002. petitioners filed with the RTC a Manifestation[24] submitting the mathematical computation and/or mode of partitioning the shares of the opposing parties.[20] Petitioners were ordered by the RTC to file their Comment thereto.65 sq. 121-1-10260. after finding that what was at issue was just the matter of mathematical computation of the area adjudicated to the parties. Lot No. On April 30. it issued an Order[25] holding in abeyance the resolution of respondents‘ Motion to Authorize the Branch Clerk of Court to enforce the RTC decision pending such petition. meters. petitioners filed with the CA a Petition for Annulment of Judgment of the RTC Order dated October 23. judgment is rendered declaring the Heirs of Eulogio Retuya as owners of the 1/16 share of Severo Retuya to the ½ of the subject properties representing the shares of the late Severo Retuya. Respondents Heirs of Eulogio filed a Motion to Authorize the Branch Clerk of Court to Enforce the Amended Decision. claiming that the questioned Order was a patent nullity for want of jurisdiction and utter lack of due process.[14] Execution with Motion for Clarification and Precautionary Reservation to File Pertinent Pleadings and Legal Remedies. 2001. and the Writ of Execution[19] was issued. set a conference to settle once and for all the exact computation of the parties' respective shares. 2002. which have not been sold to defendants Heirs of Eulogio Retuya as well as the rental be partitioned among the herein parties in accordance with law. 2001 is amended by changing the area of 42 sq. and the dispositive portion of said decision will now read as follows: WHEREFORE. Furnish parties. 10 is a road right of way and should not be partitioned. 2003. the RTC. 2003. Petitioners. meters from the original award of 42 sq.. . as collaborating counsel.78 sq. meters Lot 121-1-10-260 255 sq. Jr.[13] The RTC decision became final and executory. Norberto Luna. the RTC denied the motion. [21] Petitioners filed their Comment with Prayer for the Issuance of a Clarificatory Order[22] as to how the RTC arrived at the new computation of 255 sq. which he inherited from his deceased father. 2001. the decision dated August 9. 2003.[16] Respondents Heirs of Eulogio filed their Opposition[17] thereto.

2003. Attached in the motion for reconsideration was the affidavit of the Heirs of Quintin acknowledging said mistake and submitted a verification and certification duly signed by the heirs. otherwise. records reveal that this Motion for reconsideration was signed by a certain Atty. as compared to his signature in the letter which respondents attached to the motion for reconsideration. one of the petitioners. In so ruling. 2003 and reinstated the petition. contending that there was substantial compliance with the rule on certification against forum shopping when majority of the principal parties were able to sign the verification and certification against forum shopping. Promilino Semblante. On March 3. A Motion for Reconsideration[29] was filed by Atty. Atty. 2003 Resolution. the CA granted respondents‘ Motion for Reconsideration and dismissed the petition. Atty. In a Resolution dated November 28. and that Romeo suffered a stroke in January 2003 and was bedridden until he died on April 28. it would cause the dismissal of the petition.[28] on the ground that it was made to appear in the Petition for Annulment of Judgment that Quintin Retuya. did not sign the certification of non-forum shopping. Salome Retuya and Fernando Retuya.00. The liberal interpretation of the rules cannot be accorded to parties who commit dishonesty and falsehood in court. as no Comment was filed by petitioners. Dela Cerna never entered his appearance as counsel for petitioner. xxxx There being no formal withdrawal or substitution of counsel made. the CA outrightly dismissed the Petition for Annulment of Judgment. Dela Cerna as counsel for the petitioners without the counsel of record.In a Resolution[26] dated April 24. when he had already died on July 29. respondents Heirs of Eulogio filed a Motion for Reconsideration of the July 3. Luna continuously represents the petitioners. Under Circular No. On July 22. Luna's formal withdrawal. 1996. that the signature of co-petitioner Romeo Retuya in the certification against forum shopping was not his. The issue is not the parties' substantial compliance. it could have been impossible for him to sign the Petition dated March 18. Atty. 2004. as the attestation requires personal knowledge by the party who executed the same. 1996. 2003. died on July 29. Rule 7 of the Rules of Court. Rule 7 of the Rules of Court provides that the principal party shall sign the certification against forum shopping. which the CA granted in a Resolution[27] dated July 3. but the dishonesty committed by the parties and/or their counsel when they made it appear that one of the listed parties signed the certification when in fact he died long before the petition was filed. petitioners' counsel failed to explain why a dead person/party was able to sign the certification against non-forum shopping. Luna remains the counsel of record for petitioners. 2003. Petitioners filed their Motion for Reconsideration. [30] . one of the parties to the petition. Hence. Norberto A. the attestation contained in the certification on non-forum shopping requires personal knowledge by the party who executed the same. It found that three of the petitioners. Considering that Quintin. the CA issued a Resolution denying petitioners' motion for reconsideration. Renante A. No notice of substitution of counsel was filed by the petitioners and Atty. had signed the certification against forum shopping on March 18. The CA said that Section 5. Luna may not be presumed substituted by Atty. namely. Second. 2003. the CA said: While it may be true that when majority of the parties have signed the certification against non-forum shopping would constitute ―substantial compliance. 28-91 of the Supreme Court and Section 5. and that the payment of the docket fee was short of P480. 2003. Renante Dela Cerna merely by the latter's filing or signing of the motion for reconsideration. In the absence of compliance with the essential requirements for valid substitution of counsel of record. 2003. Renante Dela Cerna has no right to represent the petitioners in this case. Atty. Norberto A. the court can presume that Atty.‖ this Court cannot apply the same rule to petitioners. Renante dela Cerna as counsel for petitioners. First.

1996. there was a signature above the typewritten name of Quintin without any showing that it was signed by another person for or in behalf of Quintin. 06570132. specially when majority of the principal parties had signed the same and who shared a common interest.[31] The CA dismissed the Petition for Annulment of Judgment after it found that Quintin. it would appear that Quintin. Luna to be meritorious. In the absence of such qualification. had already died on July 29. had no right to represent petitioners.Hence. Thus. Petitioners‘ actuation showed their lack of forthrightness to the CA which the latter correctly found to be a dishonest act committed against it. since as explained by Atty. As correctly observed by the CA. Atty. this petition wherein petitioners raise the sole ground that: THE RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN DISMISSING THE PETITIONERS‘ PETITION BY RULING AGAINST THE PETITIONERS' SUBSTANTIAL COMPLIANCE TO THE CERTIFICATION AGAINST NON-FORUM SHOPPING FOR THE ALLEGED DISHONESTY COMMITTED BY THE PARTIES AND/OR THEIR COUNSEL WHEN THEY MADE IT APPEAR THAT ONE OF THE LISTED PARTIES SIGNED THE CERTIFICATION. the RTC. We are not persuaded. to the show cause order issued by the CA to him that: (1) he had no intention to make it appear that a dead man in the person of Quintin was able to sign the verification and certification against forum shopping. The CA found petitioners to have committed dishonesty and falsehood to the court. Luna. it could not apply the liberal interpretation of the rule on certification against forum shopping. it appeared before the CA that Quintin was the one who signed the same. Renante dela Cerna. (3) that in his entry of appearance filed before the RTC. 2003 in Mandaue City. In fact. while we have in a number of cases[32] applied the substantial compliance rule on the filing of the certification of non-forum shopping. the co-petitioners and the other respondents. written below the signature of Quintin was Community Tax Certificate (CTC) No. In fact. Luna. Notwithstanding that the CA had found the explanation of Atty. 2003. thus. . had signed the verification and certification of non-forum shopping and he was even in possession of a CTC. it was Felimon. we do not find any sufficient explanation given by petitioners as to why there was a signature of Quintin appearing in the verification and certification against forum shopping. A perusal of the verification and certification against forum shopping attached to the petition for annulment of judgment filed in the CA would show that there was a signature above the typewritten name of Quintin. thus. WHEN IN FACT HE DIED BEFORE THE PETITION WAS FILED. all the parties and counsels knew of the death of Quintin. We agree with the CA that such leniency finds no applicability in this case because of petitioners‘ dishonesty committed against the appellate court. the lawyer who filed the motion for reconsideration. especially since the CA did not know of the fact of Quintin‘s death. one of Quintin's heirs. Notably. as well as their counsel. who was already dead at the time the petition was filed. petitioners claim that they also have no intention of deceiving respondents. were found by the CA to be meritorious and noted the same. who signed in the above typewritten name of Quintin. There was nothing in the petition for annulment of judgment which alleged such information. the CA did not err when it dismissed the petition. and in behalf of his siblings. Thus. (2) when he entered his appearance as counsel for petitioners before the RTC. it was impossible for him to have signed the verification and certification of non-forum shopping attached to the petition filed on March 18. knew of the fact of Quintin‘s death and the status of Felimon Retuya who immediately substituted his father. he. issued on January 8. one of the parties to the petition. Petitioners allege that the explanation of their former counsel on record. We also find that the CA correctly denied the motion for reconsideration on the ground that Atty. We found no reversible error committed by the CA.

Luna was still the counsel on record at the time Atty. 2003. Jorge Esparagosa as their new counsel and relieved Atty. petitioners failed to comply with the above requirements. filed a motion for substitution of counsels wherein they alleged that they engaged the services of Atty. Indeed. Dela Cerna filed his motion for reconsideration was established in Atty. (2) the client‘s written consent. there was no mention at all of Atty. Rule 138 of the Rules of Court and established jurisprudence. on April 30. Moreover. in case such written consent cannot be procured. (3) the consent of the substituted lawyer if such consent can be obtained. petitioners through their counsel on record. Dela Cerna to file the motion for reconsideration for petitioners. Luna. Notably. The Resolutions dated November 28. 2004 to the CA's Show Cause Order to him wherein he prayed therein that an Order be issued relieving him of his legal obligations to petitioners. If it has been held that courts may not presume that the counsel of record has been substituted by a second counsel merely from the filing of a formal appearance by the latter. filed the motion for reconsideration on December 22. as counsel for petitioners. he is not the counsel on record of petitioners.[33] In this case. there was no showing of the authority of Atty. 2004. Dela Cerna did not even file a notice of appearance. Dela Cerna. However. . Petitioners did not file a motion for substitution of counsel on record before the filing of the motion for reconsideration. 2004 of the Court of Appeals are AFFIRMED. The fact that Atty. Dela Cerna could not be considered to have substituted Atty. the petition is DENIED. Thus. a valid substitution of counsel has the following requirements: (1) the filing of a written application for substitution. Dela Cerna has no personality to represent petitioners and file the motion for reconsideration. the CA correctly found that Atty. Luna.[34] then with more reason that Atty. (4) a proof of service of notice of such motion on the attorney to be substituted in the manner required by the Rules. SO ORDERED. but Atty. It is worthy to mention that Atty. Atty. Luna of all his legal obligations to them. Luna's Explanation dated March 19. 2003 and March 3. Atty. and.Under Section 26. Dela Cerna. WHEREFORE. Luna as there was no notice of his entry of appearance at all.