You are on page 1of 9

CIVIL PROCEDURE (Atty.

Catherine Guerzo-Barrion) 1
2ND EXAM COVERAGE CASE ASSIGNMENT
RULE 10, SEC. 2 and 3
LISAM v. BANCO DE ORO
Republic of the Philippines
SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 143264

April 23, 2012

LISAM ENTERPRISES, INC. represented by LOLITA A.


SORIANO, and LOLITA A. SORIANO, Petitioners,
vs.
BANCO DE ORO UNIBANK, INC. (formerly PHILIPPINE
COMMERCIAL INTERNATIONAL BANK),* LILIAN S.
SORIANO, ESTATE OF LEANDRO A. SORIANO, JR.,
REGISTER OF DEEDS OF LEGASPI CITY, and JESUS L.
SARTE, Respondents.

DECISION
PERALTA, J.:
This resolves the Petition for Review on Certiorari under
Rule 45 of the Rules of Court, praying that the Resolution 1 of
the Regional Trial Court of Legaspi City (RTC), dated
November 11, 1999, dismissing petitioners complaint, and
its Order2 dated May 15, 2000, denying herein petitioners
Motion for Reconsideration and Motion to Admit Amended
Complaint, be reversed and set aside.
The records reveal the following antecedent facts.
On August 13, 1999, petitioners filed a Complaint against
respondents for Annulment of Mortgage with Prayer for
Temporary Restraining Order & Preliminary Injunction with
Damages with the RTC of Legaspi City. Petitioner Lolita A.
Soriano alleged that she is a stockholder of petitioner Lisam
Enterprises, Inc. (LEI) and a member of its Board of
Directors, designated as its Corporate Secretary. The
Complaint also alleged the following:
4. Sometime in 1993, plaintiff LEI, in the course of its
business operation, acquired by purchase a parcel of
residential land with improvement situated at Legaspi City,
covered by Transfer Certificate of Title No. 37866, copy
attached as Annex "A," which property is more particularly
described as follows:
xxxx
5. On or about 28 March 1996, defendant Lilian S. Soriano
and the late Leandro A. Soriano, Jr., as husband and wife
(hereafter "Spouses Soriano"), in their personal capacity and
for their own use and benefit, obtained a loan from defendant

PCIB (Legaspi Branch) (now known as Banco de Oro


Unibank, Inc.) in the total amount of P20 Million;
6. That as security for the payment of the aforesaid credit
accommodation, the late Leandro A. Soriano, Jr. and
defendant Lilian S. Soriano, as president and treasurer,
respectively of plaintiff LEI, but without authority and consent
of the board of said plaintiff and with the use of a falsified
board resolution, executed a real estate mortgage on 28
March 1996, over the above-described property of plaintiff
LEI in favor of defendant PCIB, and had the same registered
with the Office of the Registry of Deeds, Legaspi City, copy
of the Real Estate Mortgage is hereto attached and marked
as Annex "B," and made part hereof, to the prejudice of
plaintiffs;
7. That specifically, the Spouses Soriano, with intent to
defraud and prejudice plaintiff LEI and its stockholders,
falsified the signatures of plaintiff Lolita A. Soriano as
corporate secretary and director of plaintiff LEI, in a
document denominated as board resolution purportedly
issued by the board of plaintiff LEI on 6 November 1995,
making it appear that plaintiff LEI's Board met and passed a
board resolution on said date authorizing the Spouses
Soriano to mortgage or encumber all or substantially all of
the properties of plaintiff LEI, when in fact and in truth, no
resolution of that nature was ever issued by the board of
plaintiff LEI, nor a meeting was called to that effect, copy of
the resolution in question is hereto attached and marked as
Annex "C," and made part hereof;
8. That plaintiff Lolita A. Soriano as Corporate Secretary of
plaintiff LEI, had never signed a board resolution nor issued
a Secretary's Certificate to the effect that on 6 November
1995 a resolution was passed and approved by plaintiff LEI
authorizing the Spouses Soriano as president and treasurer,
respectively, to mortgage the above-described property of
plaintiff LEI, neither did she appear personally before a
notary public on 28 March 1996 to acknowledge or attest to
the issuance of a supposed board resolution issued by
plaintiff LEI on 6 November 1995;
9. That defendant PCIB, knowing fully well that the property
being mortgaged by the Spouses Soriano belongs to plaintiff
LEI, a corporation, negligently and miserably failed to
exercise due care and prudence required of a banking
institution. Specifically, defendant PCIB failed to investigate
and to delve into the propriety of the issuance of or due
execution of subject board resolution, which is the very
foundation of the validity of subject real estate mortgage.
Further, it failed to verify the genuineness of the signatures
appearing in said board resolution nor to confirm the fact of
its issuance with plaintiff Lolita A. Soriano, as the corporate
secretary of plaintiff LEI. Furthermore, the height of its
negligence was displayed when it disregarded or failed to
notice that the questioned board resolution with a Secretary's
Certificate was notarized only on 28 March 1996 or after the
lapse of more than four (4) months from its purported date of
issue on 6 November 1995. That these circumstances
should have put defendant PCIB on notice of the flaws and

CIVIL PROCEDURE (Atty. Catherine Guerzo-Barrion) 2


2ND EXAM COVERAGE CASE ASSIGNMENT
infirmities of the questioned board resolution. Unfortunately,
it negligently failed to exercise due care and prudence
expected of a banking institution;
10. That having been executed without authority of the board
of plaintiff LEI said real estate mortgage dated 28 March
1996 executed by the Spouses Soriano, as officers of
plaintiff LEI in favor of defendant PCIB, is the null and void
and has no legal effect upon said plaintiff. Consequently,
said mortgage deed cannot be used nor resorted to by
defendant PCIB against subject property of plaintiff LEI as no
right or rights whatsoever were created nor granted
thereunder by reason of its nullity;
11. Worst, sometime in August 1998, in order to remedy the
defects in the mortgage transaction entered by the Spouses
Soriano and defendant PCIB, the former, with the unlawful
instigation of the latter, signed a document denominated as
"Deed of Assumption of Loans and Mortgage Obligations
and Amendment of Mortgage"; wherein in said document,
plaintiff LEI was made to assume the P20 Million personal
indebtedness of the Spouses Soriano with defendant PCIB,
when in fact and in truth it never so assumed the same as no
board resolution duly certified to by plaintiff Lolita A. Soriano
as corporate secretary was ever issued to that effect, copy of
said Deed is hereto attached and marked as Annex "D," and
made part hereof;
12. Moreover, to make it appear that plaintiff LEI had
consented to the execution of said deed of assumption of
mortgage, the Spouses Soriano again, through the unlawful
instigation and connivance of defendant PCIB, falsified the
signature of plaintiff Lolita A. Soriano as corporate secretary
of plaintiff LEI in a document denominated as "Corporate
Resolution to Borrow," to make it appear that plaintiff LEI so
authorized the Spouses Soriano to perform said acts for the
corporation, when in fact and in truth no such authority or
resolution was ever issued nor granted by plaintiff LEI, nor a
meeting called and held for said purpose in accordance with
its By-laws; copy of which is hereto attached and marked as
Annex "E" and made part hereof;
13. That said irregular transactions of defendant Lilian S.
Soriano and her husband Leandro A. Soriano, Jr., on one
hand, and defendant PCIB, on the other, were discovered by
plaintiff Lolita A. Soriano sometime in April 1999. That
immediately upon discovery, said plaintiff, for herself and on
behalf and for the benefit of plaintiff LEI, made demands
upon defendants Lilian S. Soriano and the Estate of Leandro
A. Soriano, Jr., to free subject property of plaintiff LEI from
such mortgage lien, by paying in full their personal
indebtedness to defendant PCIB in the principal sum of P20
Million. However, said defendants, for reason only known to
them, continued and still continue to ignore said demands, to
the damage and prejudice of plaintiffs;
14. Hence, on 25 June 1999, plaintiffs commenced a
derivative suit against defendants Lilian S. Soriano and the
Estate of Leandro A. Soriano, Jr., before the Securities and
Exchange Commission, docketed as SEC Case No. 06-99-

6339 for "Fraudulent Scheme and Unlawful Machination with


Damages" in order to protect and preserve the rights of
plaintiffs, copy of said complaint is hereto attached as
Annex"F";
15. That plaintiffs, in order to seek complete relief from the
unauthorized mortgage transaction between the Spouses
Soriano and defendant PCIB, were further compelled to
institute this instant case to seek the nullification of the real
estate mortgage dated 28 March 1999. Consequently,
plaintiffs were forced to retain the services of a lawyer with
whom they contracted to pay P100,000.00 as and for
attorney's fee;
16. That unfortunately, the plaintiffs learned that on 30 July
1999, defendant Sarte, in his capacity as Notary Public of
Daraga, Albay and upon application of defendant PCIB,
issued a notice of Auction/Foreclosure Sale of the property
subject of the mortgage in question and has set the auction
sale on 7 September 1999 x x x;
17. That by reason of the fraudulent and surreptitious
schemes perpetrated by defendant Lilian S. Soriano and her
husband, the late Leandro A. Soriano, Jr., in unlawful
connivance and through the gross negligence of defendant
PCIB, plaintiff Lolita A. Soriano, as stockholder, suffered
sleepless nights, moral shock, wounded feeling, hurt pride
and similar injuries, hence, should be awarded moral
damages in the amount of P200,000.00.
After service of summons on all defendants, the RTC issued
a temporary restraining order on August 25, 1990 and, after
hearing, went on to issue a writ of preliminary injunction
enjoining respondent PCIB (now known as Banco de Oro
Unibank, Inc.) from proceeding with the auction sale of the
subject property.
Respondents Lilian S. Soriano and the Estate of Leandro A.
Soriano, Jr. filed an Answer dated September 25, 1999,
stating that the Spouses Lilian and Leandro Soriano, Jr. were
duly authorized by LEI to mortgage the subject property; that
proceeds of the loan from respondent PCIB were for the use
and benefit of LEI; that all notarized documents submitted to
PCIB by the Spouses Soriano bore the genuine signature of
Lolita Soriano; and that although the Spouses Soriano
indeed received demands from petitioner Lolita Soriano for
them to pay the loan, they gave satisfactory explanations to
the latter why her demands could not be honored. It was,
likewise, alleged in said Answer that it was respondent Lilian
Soriano who should be entitled to moral damages and
attorney's fees.
On September 28, 1999, respondent PCIB filed a Motion to
Dismiss the Complaint on grounds of lack of legal capacity to
sue, failure to state cause of action, and litis pendencia.
Petitioners filed an Opposition thereto, while PCIB's codefendants filed a Motion to Suspend Action.
On November 11, 1999, the RTC issued the first assailed
Resolution dismissing petitioners' Complaint. Petitioners then

CIVIL PROCEDURE (Atty. Catherine Guerzo-Barrion) 3


2ND EXAM COVERAGE CASE ASSIGNMENT
filed a Motion for Reconsideration of said Resolution. While
awaiting resolution of the motion for reconsideration,
petitioners also filed, on January 4, 2000, a Motion to Admit
Amended Complaint, amending paragraph 13 of the original
complaint to read as follows:

FOURTH, WHETHER OR NOT THE COURT COMMITTED


A REVERSIBLE ERROR WHEN IT DENIED THE
ADMISSION OF PETITIONERS' AMENDED COMPLAINT
FILED AS A MATTER OF RIGHT, AFTER THE ORDER OF
DISMISSAL WAS ISSUED BUT BEFORE ITS FINALITY.

13. That said irregular transactions of defendant Lilian S.


Soriano and her husband Leandro A. Soriano, Jr., on one
hand, and defendant PCIB, on the other, were discovered by
plaintiff Lolita A. Soriano sometime in April 1999. That
immediately upon discovery, said plaintiff, for herself and on
behalf and for the benefit of plaintiff LEI, made demands
upon defendant Lilian S. Soriano and the Estate of Leandro
A. Soriano, Jr., to free subject property of plaintiff LEI from
such mortgage lien, by paying in full their personal
indebtedness to defendant PCIB in the principal sum of P20
Million. However, said defendants, for reason only known to
them, continued and still continue to ignore said demands, to
the damage and prejudice of plaintiffs; that plaintiff Lolita A.
Soriano likewise made demands upon the Board of Directors
of Lisam Enterprises, Inc., to make legal steps to protect the
interest of the corporation from said fraudulent transaction,
but unfortunately, until now, no such legal step was ever
taken by the Board, hence, this action for the benefit and in
behalf of the corporation;

FIFTH, WHETHER OR NOT THE COURT ERRED IN


DISMISSING THE ACTION, INSTEAD OF MERELY
SUSPENDING THE SAME FOLLOWING THE DOCTRINE
LAID DOWN IN UNION GLASS. 3

On May 15, 2000, the trial court issued the questioned Order
denying both the Motion for Reconsideration and the Motion
to Admit Amended Complaint. The trial court held that no
new argument had been raised by petitioners in their motion
for reconsideration to address the fact of plaintiffs' failure to
allege in the complaint that petitioner Lolita A. Soriano made
demands upon the Board of Directors of Lisam Enterprises,
Inc. to take steps to protect the interest of the corporation
against the fraudulent acts of the Spouses Soriano and
PCIB. The trial court further ruled that the Amended
Complaint can no longer be admitted, because the same
absolutely changed petitioners' cause of action.
Petitioners filed the present petition with this Court, alleging
that what are involved are pure questions of law, to wit:
FIRST, WHETHER OR NOT THE COURT COMMITTED A
REVERSIBLE ERROR WHEN IT DISMISSED THE ACTION
ON THE GROUND THAT PETITIONER LOLITA A.
SORIANO HAS NO LEGAL CAPACITY TO SUE AS SHE IS
NOT A REAL PARTY-IN-INTEREST;
SECOND, WHETHER OR NOT THE COURT COMMITTED
A REVERSIBLE ERROR WHEN IT DISMISSED THE
ACTION ON THE GROUND THAT THERE IS ANOTHER
ACTION PENDING BETWEEN THE SAME PARTIES FOR
THE SAME CAUSE;
THIRD, WHETHER OR NOT THE COURT COMMITTED A
REVERSIBLE ERROR WHEN IT DISMISSED THE ACTION
ON THE GROUND THAT THE COMPLAINT STATES NO
CAUSE OF ACTION;

The petition is impressed with merit.


The Court shall first delve into the matter of the propriety of
the denial of the motion to admit amended complaint.
Pertinent provisions of Rule 10 of the Rules of Court provide
as follows:
Sec. 2. Amendments as a matter of right. A party may
amend his pleadings once as a matter of right at any time
before a responsive pleading is served x x x.
Sec. 3. Amendments by leave of court. Except as provided
in the next preceding section, substantial amendments may
be made only upon leave of court. But such leave may be
refused if it appears to the court that the motion was made
with intent to delay. x x x
It should be noted that respondents Lilian S. Soriano and the
Estate of Leandro A. Soriano, Jr. already filed their Answer,
to petitioners' complaint, and the claims being asserted were
made against said parties. A responsive pleading having
been filed, amendments to the complaint may, therefore, be
made only by leave of court and no longer as a matter of
right. However, in Tiu v. Philippine Bank of Communications,4
the Court discussed this rule at length, to wit:
x x x [A]fter petitioners have filed their answer, Section 3,
Rule 10 of the Rules of Court specifically allows amendment
by leave of court. The said Section states:
SECTION 3. Amendments by leave of court. - Except as
provided in the next preceding section, substantial
amendments may be made only upon leave of court. But
such leave may be refused if it appears to the court that the
motion was made with intent to delay. Orders of the court
upon the matters provided in this section shall be made upon
motion filed in court, and after notice to the adverse party,
and an opportunity to be heard.
This Court has emphasized the import of Section 3, Rule 10
of the 1997 Rules of Civil Procedure in Valenzuela v. Court of
Appeals, thus:
Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil
Procedure amended the former rule in such manner that the
phrase "or that the cause of action or defense is substantially
altered" was stricken-off and not retained in the new rules.
The clear import of such amendment in Section 3, Rule 10 is

CIVIL PROCEDURE (Atty. Catherine Guerzo-Barrion) 4


2ND EXAM COVERAGE CASE ASSIGNMENT
that under the new rules, "the amendment may (now)
substantially alter the cause of action or defense." This
should only be true, however, when despite a substantial
change or alteration in the cause of action or defense, the
amendments sought to be made shall serve the higher
interests of substantial justice, and prevent delay and equally
promote the laudable objective of the rules which is to
secure a "just, speedy and inexpensive disposition of every
action and proceeding."
The granting of leave to file amended pleading is a matter
particularly addressed to the sound discretion of the trial
court; and that discretion is broad, subject only to the
limitations that the amendments should not substantially
change the cause of action or alter the theory of the case, or
that it was not made to delay the action. Nevertheless, as
enunciated in Valenzuela, even if the amendment
substantially alters the cause of action or defense, such
amendment could still be allowed when it is sought to serve
the higher interest of substantial justice, prevent delay, and
secure a just, speedy and inexpensive disposition of actions
and proceedings.
The courts should be liberal in allowing amendments to
pleadings to avoid a multiplicity of suits and in order
that the real controversies between the parties are
presented, their rights determined, and the case decided
on the merits without unnecessary delay. This liberality
is greatest in the early stages of a lawsuit, especially in
this case where the amendment was made before the
trial of the case, thereby giving the petitioners all the
time allowed by law to answer and to prepare for
trial.1wphi1
Furthermore, amendments to pleadings are generally
favored and should be liberally allowed in furtherance of
justice in order that every case, may so far as possible, be
determined on its real facts and in order to speed up the trial
of the case or prevent the circuitry of action and unnecessary
expense. That is, unless there are circumstances such as
inexcusable delay or the taking of the adverse party by
surprise or the like, which might justify a refusal of
permission to amend.5
Since, as explained above, amendments are generally
favored, it would have been more fitting for the trial court to
extend such liberality towards petitioners by admitting the
amended complaint which was filed before the order
dismissing the original complaint became final and
executory. It is quite apparent that since trial proper had not
yet even begun, allowing the amendment would not have
caused any delay. Moreover, doing
so would have served the higher interest of justice as this
would provide the best opportunity for the issues among all
parties to be thoroughly threshed out and the rights of all
parties finally determined. Hence, the Court overrules the
trial court's denial of the motion to admit the amended
complaint, and orders the admission of the same.

With the amendment stating "that plaintiff Lolita A. Soriano


likewise made demands upon the Board of Directors of
Lisam Enterprises, Inc., to make legal steps to protect the
interest of the corporation from said fraudulent transaction,
but unfortunately, until now, no such legal step was ever
taken by the Board, hence, this action for the benefit and in
behalf of the corporation," does the amended complaint now
sufficiently state a cause of action? In Hi-Yield Realty,
Incorporated v. Court of Appeals,6 the Court enumerated the
requisites for filing a derivative suit, as follows:
a) the party bringing the suit should be a shareholder as of
the time of the act or transaction complained of, the number
of his shares not being material;
b) he has tried to exhaust intra-corporate remedies, i.e., has
made a demand on the board of directors for the appropriate
relief but the latter has failed or refused to heed his plea; and
c) the cause of action actually devolves on the corporation,
the wrongdoing or harm having been, or being caused to the
corporation and not to the particular stockholder bringing the
suit.7
A reading of the amended complaint will reveal that all the
foregoing requisites had been alleged therein. Hence, the
amended complaint remedied the defect in the original
complaint and now sufficiently states a cause of action.
Respondent PCIB should not complain that admitting the
amended complaint after they pointed out a defect in the
original complaint would be unfair to them. They should have
been well aware that due to the changes made by the 1997
Rules of Civil Procedure, amendments may now
substantially alter the cause of action or defense. It should
not have been a surprise to them that petitioners would
redress the defect in the original complaint by substantially
amending the same, which course of action is now allowed
under the new rules.
The next question then is, upon admission of the amended
complaint, would it still be proper for the trial court to dismiss
the complaint? The Court answers in the negative.
Saura v. Saura, Jr.8 is closely analogous to the present case.
In Saura,9 the petitioners therein, stockholders of a
corporation, sold a disputed real property owned by the
corporation, despite the existence of a case in the Securities
and Exchange Commission (SEC) between stockholders for
annulment of subscription, recovery of corporate assets and
funds, etc. The sale was done without the knowledge of the
other stockholders, thus, said stockholders filed a separate
case for annulment of sale, declaration of nullity of deed of
exchange, recovery of possession, etc., against the
stockholders who took part in the sale, and the buyer of the
property, filing said case with the regular court (RTC).
Petitioners therein also filed a motion to dismiss the
complaint for annulment of sale filed with the RTC, on the
ground of forum shopping, lack of jurisdiction, lack of cause
of action, and litis pendentia among others. The Court held

CIVIL PROCEDURE (Atty. Catherine Guerzo-Barrion) 5


2ND EXAM COVERAGE CASE ASSIGNMENT
that the complaint for annulment of sale was properly filed
with the regular court, because the buyer of the property had
no intra-corporate relationship with the stockholders, hence,
the buyer could not be joined as party-defendant in the SEC
case. To include said buyer as a party-defendant in the case
pending with the SEC would violate the then existing rule on
jurisdiction over intra-corporate disputes. The Court also
struck down the argument that there was forum shopping,
ruling that the issue of recovery of corporate assets and
funds pending with the SEC is a totally different issue from
the issue of the validity of the sale, so a decision in the SEC
case would not amount to res judicata in the case before the
regular court. Thus, the Court merely ordered the suspension
of the proceedings before the RTC until the final outcome of
the SEC case.
The foregoing pronouncements of the Court are exactly in
point with the issues in the present case.1wphi1 Here, the
complaint is for annulment of mortgage with the mortgagee
bank as one of the defendants, thus, as held in Saura,10
jurisdiction over said complaint is lodged with the regular
courts because the mortgagee bank has no intra-corporate
relationship with the stockholders. There can also be no
forum shopping, because there is no identity of issues. The
issue being threshed out in the SEC case is the due
execution, authenticity or validity of board resolutions and
other documents used to facilitate the execution of the
mortgage, while the issue in the case filed by petitioners with
the RTC is the validity of the mortgage itself executed
between the bank and the corporation, purportedly
represented by the spouses Leandro and Lilian Soriano, the
President and Treasurer of petitioner LEI, respectively. Thus,
there is no reason to dismiss the complaint in this case.
IN VIEW OF THE FOREGOING, the Resolution of the
Regional Trial Court of Legaspi City, Branch 4, dated
November 11, 1999, dismissing petitioners complaint in Civil
Case No. 9729, and its Order dated May 15, 2000, denying
herein petitioners Motion for Reconsideration and Motion to
Admit Amended Complaint, are hereby REVERSED and
SET ASIDE. The Regional Trial Court of Legaspi City,
Branch 4, is hereby DIRECTED to ADMIT the Amended
Complaint.
Considering further, that this case has been pending for
some time and, under R.A. No. 8799, it is now the regular
courts which have jurisdiction over intra-corporate disputes,
the Regional Trial Court of Legaspi City, Branch 4 is hereby
DIRECTED to PROCEED with dispatch in trying Civil Case
No. 9729.
SO ORDERED.

RULE 14, SEC. 11


ATIKO TRANS v. PRUDENTIAL
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 167545

August 17, 2011

ATIKO TRANS, INC. and CHENG LIE NAVIGATION CO.,


LTD., Petitioners,
vs.
PRUDENTIAL GUARANTEE AND ASSURANCE, INC.,
Respondent.

DECISION
DEL CASTILLO, J.:
Where service of summons upon the defendant principal is
coursed thru its co-defendant agent, and the latter happens
to be a domestic corporation, the rules on service of
summons upon a domestic private juridical entity1 must be
strictly complied with. Otherwise, the court cannot be said to
have acquired jurisdiction over the person of both
defendants. And insofar as the principal is concerned, such
jurisdictional flaw cannot be cured by the agents subsequent
voluntary appearance.
This Petition for Review on Certiorari assails the December
10, 2004 Decision2 of the Court of Appeals (CA) in CA-G.R.
SP No. 82547 which affirmed the April 8, 2003 Decision 3 of
the Regional Trial Court (RTC), Branch 150, Makati City.
Said Decision of the RTC affirmed the August 6, 2002
Decision4 of the Metropolitan Trial Court (MeTC), Branch 63,
Makati City, which disposed as follows:
WHEREFORE, judgment is rendered declaring defendants
Cheng Lie Navigation Co., Ltd. and Atiko Trans, Inc.
solidarily liable to pay plaintiff Prudential Guarantee &
Assurance, Inc. the following amounts:
1. P205,220.97 as actual damages with interest of 1% per
month from 14 December 1999 until full payment;
2. P10,000.00 as Attorneys fees; and
3. Costs of suit.
SO ORDERED.5
Likewise assailed is the CAs Resolution 6 dated March 16,
2005 which denied the Motion for Reconsideration of the
said December 10, 2004 Decision.

CIVIL PROCEDURE (Atty. Catherine Guerzo-Barrion) 6


2ND EXAM COVERAGE CASE ASSIGNMENT
Factual Antecedents
On December 11, 1998, 40 coils of electrolytic tinplates were
loaded on board M/S Katjana in Kaohsiung, Taiwan for
shipment to Manila. The shipment was covered by Bill of
Lading No. KNMNI-151267 issued by petitioner Cheng Lie
Navigation Co., Ltd. (Cheng Lie) with Oriental Tin Can &
Metal Sheet Manufacturing Co., Inc. (Oriental) as the notify
party. The cargoes were insured against all risks per Marine
Insurance Policy No. 20RN-18749/99 issued by respondent
Prudential Guarantee and Assurance, Inc. (Prudential).
On December 14, 1998, M/S Katjana arrived in the port of
Manila. Upon discharge of the cargoes, it was found that one
of the tinplates was damaged, crumpled and dented on the
edges. The sea van in which it was kept during the voyage
was also damaged, presumably while still on board the
vessel and during the course of the voyage.
Oriental then filed its claim against the policy. Satisfied that
Orientals claim was compensable, Prudential paid Oriental
P205,220.97 representing the amount of losses it suffered
due to the damaged cargo.
Proceedings before the Metropolitan Trial Court
On December 14, 1999, Prudential filed with the MeTC of
Makati City a Complaint8 for sum of money against Cheng
Lie and Atiko Trans, Inc. (Atiko). In addition to the above
undisputed facts, Prudential alleged that:
1. Plaintiff (Prudential) is a domestic insurance corporation
duly organized and existing under the laws of the Philippines
with office address at Coyiuto House, 119 Carlos Palanca[,]
Jr. St., Legaspi Village, Makati City;
2. Defendant Cheng Lie Navigation Co. Ltd., is [a] foreign
shipping company doing business in the Philippines [thru] its
duly authorized shipagent defendant Atiko Trans Inc. which
is a domestic corporation duly established and created under
the laws of the Philippines with office address at 7th Floor,
Victoria Bldg., United Nation[s] Ave., Ermita, Manila, where
both defendants may be served with summons and other
court processes;
3. At all times material to the cause of action of this
complaint, plaintiff was and still is engaged in, among others,
marine insurance business; Whereas Defendant Cheng Lie
Navigation Co. Ltd. was and still is engaged in, among
others, shipping, transportation and freight/cargo forwarding
business, and as such, owned, operated and/or chartered
the ocean going vessel M/S "Katjana" as common carrier to
and from any Philippine [port] in international trade [thru] its
duly authorized shipagent defendant Atiko Trans Inc. (Both
defendants are hereinafter referred to as the "CARRIER");
xxxx

9. Plaintiff, as cargo-insurer and upon finding that the


consignees insurance claim was in order and compensable,
paid the latters claim in the amount of P205,220.97 under
and by virtue of the aforesaid insurance policy, thereby
subrogating herein plaintiff to all the rights and causes of
action appertaining to the consignee against the
defendants;9
On March 20, 2000, Prudential filed a Motion to Declare
Defendant in Default,10 alleging among others that on March
1, 2000 a copy of the summons was served upon petitioners
thru cashier Cristina Figueroa and that despite receipt
thereof petitioners failed to file any responsive pleading.
Acting on the motion, the MeTC issued an Order 11 declaring
Cheng Lie and Atiko in default and allowing Prudential to
present its evidence ex-parte.
On August 6, 2002, the MeTC rendered its judgment by
default. Atiko then filed a Notice of Appeal 12 dated November
4, 2002.
Proceedings before the Regional Trial Court and the Court of
Appeals
In its Memorandum of Appeal, 13 Atiko argued that Prudential
failed to prove the material allegations of the complaint. Atiko
asserted that Prudential failed to prove by preponderance of
evidence that it is a domestic corporation with legal
personality to file an action; that Cheng Lie is a private
foreign juridical entity operating its shipping business in the
Philippines thru Atiko as its shipagent; that Cheng Lie is a
common carrier, which owns and operates M/S Katjana; that
Prudential was subrogated to the rights of Oriental; and, that
Atiko can be held solidarily liable with Cheng Lie.
Although assisted by the same counsel, Cheng Lie filed its
own Memorandum of Appeal14 maintaining that the MeTC
never acquired jurisdiction over its person.
On April 8, 2003, the RTC rendered its Decision dismissing
the appeal and affirming the Decision of the MeTC. Atiko and
Cheng Lie challenged the RTC Decision before the CA via a
Petition for Review15 under Rule 42 of the Rules of Court but
the appellate court affirmed the RTCs Decision.
Hence, this petition.
Issues
In their Memorandum,16 petitioners raised the following
issues:
1. WHETHER X X X THE DECISION OF MAKATI [MeTC]
WHICH WAS AFFIRMED BY MAKATI RTC AND THE
COURT OF APPEALS IS NULL AND VOID FOR FAILURE
TO ACQUIRE JURISDICTION OVER THE PERSONS OF
THE PETITIONERS-DEFENDANTS CONSIDERING THAT
THE SUMMONS WERE NOT PROPERLY SERVED ON

CIVIL PROCEDURE (Atty. Catherine Guerzo-Barrion) 7


2ND EXAM COVERAGE CASE ASSIGNMENT
THEM AS REQUIRED BY RULE 14 OF THE RULES OF
COURT.

respondents witnesses do not have personal knowledge of


the facts on which they were examined.

2. WHETHER X X X THE RESPONDENT-PLAINTIFF IS


REQUIRED TO PROVE THE MATERIAL ALLEGATIONS IN
THE COMPLAINT EVEN IN DEFAULT JUDGMENT OR
WHETHER OR NOT IN DEFAULT JUDGMENT, ALL
ALLEGATIONS IN THE COMPLAINT ARE DEEMED
CONTROVERTED, HENCE, MUST BE PROVED BY
COMPETENT EVIDENCE.

Respondent, for its part, assails the propriety of the remedy


taken by the petitioners. It posits that petitioners advanced
factual matters which are not the proper subject of a petition
for review on certiorari. Besides, the lower courts
consistently held that the allegations in respondents
complaint are supported by sufficient evidence.
We agree with respondent.

2.1. WHETHER X X X RESPONDENT-PLAINTIFF IS


OBLIGED TO PROVE ITS LEGAL PERSONALITY TO SUE
EVEN IN DEFAULT JUDGMENT.
2.2. WHETHER X X X RESPONDENT-PLAINTIFF IS
OBLIGED TO PROVE THAT PETITIONER-DEFENDANT
ATIKO IS THE SHIPAGENT OF PETITIONER-DEFENDANT
CHENG LIE EVEN IN DEFAULT JUDGMENT.
2.3. WHETHER X X X THE TESTIMONIES OF THE
WITNESSES AND THE DOCUMENTARY EXHIBITS CAN
BE CONSIDERED FOR PURPOSES OTHER THAN THE
PURPOSE FOR WHICH THEY WERE OFFERED.
2.4. WHETHER X X X A MOTION TO DECLARE
DEFENDANT IN DEFAULT ADDRESSED AND SENT TO
ONLY ONE OF THE DEFENDANTS WOULD BIND THE
OTHER DEFENDANT TO WHOM THE MOTION WAS NOT
ADDRESSED AND NOT SENT.17
Our Ruling
The petition is partly meritorious. We shall first tackle the
factual matters involved in this case, then proceed with the
jurisdictional issues raised.
Petitioners raised factual matters which are not the proper
subject of this appeal.
Petitioners contend that the lower courts grievously erred in
granting the complaint because, even if they were declared
in default, the respondent still has the burden of proving the
material allegations in the complaint by preponderance of
evidence. Petitioners further argue that respondent
miserably failed to discharge this burden because it failed to
present sufficient proof that it is a domestic corporation.
Hence, respondent could not possibly maintain the present
action because only natural or juridical persons or entities
authorized by law can be parties to a civil action. Petitioners
also claim that respondent failed to present competent proof
that Cheng Lie is a foreign shipping company doing business
in the Philippines thru its duly authorized shipagent Atiko.
Lastly, petitioners assert that respondent failed to prove that
Cheng Lie is a common carrier which owned, operated
and/or chartered M/S Katjana thru its duly authorized
shipagent Atiko. Petitioners emphasize that there is no proof,
testimonial or otherwise, which would support the material
allegations of the complaint. They also insist that

A cursory reading of the issues raised readily reveals that


they involve factual matters which are not within the province
of this Court to look into. Well-settled is the rule that in
petitions for review on certiorari under Rule 45, only
questions of law can be raised. While there are recognized
exceptions to this rule,18 none is present in this case. "[A]s a
matter of x x x procedure, [this] Court defers and accords
finality to the factual findings of trial courts, [especially] when
such findings were [affirmed by the RTC and the CA. These]
factual determination[s], as a matter of long and sound
appellate practice, deserve great weight and shall not be
disturbed on appeal x x x. [I]t is not the function of the Court
to analyze and weigh all over again the evidence or
premises supportive of the factual holding of the lower
courts."19
MeTC properly acquired jurisdiction over the person of Atiko.
Petitioners also argue that the MeTC did not acquire
jurisdiction over the person of Atiko as the summons was
received by its cashier, Cristina Figueroa. They maintain that
under Section 11, Rule 14 of the Rules of Court, when the
defendant is a domestic corporation like Atiko, summons
may be served only upon its president, general manager,
corporate secretary, treasurer or in-house counsel.
We are not persuaded. True, when the defendant is a
domestic corporation, service of summons may be made
only upon the persons enumerated in Section 11, Rule 14 of
the Rules of Court.20 However, jurisdiction over the person of
the defendant can be acquired not only by proper service of
summons but also by defendants voluntary appearance
without expressly objecting to the courts jurisdiction, as
embodied in Section 20, Rule 14 of the Rules of Court, viz:
SEC. 20. Voluntary appearance. The defendants voluntary
appearance in the action shall be equivalent to service of
summons. The inclusion in a motion to dismiss of other
grounds aside from lack of jurisdiction over the person of the
defendant shall not be deemed a voluntary appearance.
In the case at bench, when Atiko filed its Notice of Appeal,21
Memorandum of Appeal,22 Motion for Reconsideration23 of
the April 8, 2003 Decision of the RTC, and Petition for
Review,24 it never questioned the jurisdiction of the MeTC
over its person. The filing of these pleadings seeking
affirmative relief amounted to voluntary appearance and,
hence, rendered the alleged lack of jurisdiction moot. In

CIVIL PROCEDURE (Atty. Catherine Guerzo-Barrion) 8


2ND EXAM COVERAGE CASE ASSIGNMENT
Palma v. Galvez,25 this Court reiterated the oft-repeated rule
that "the filing of motions seeking affirmative relief, such as,
to admit answer, for additional time to file answer, for
reconsideration of a default judgment, and to lift order of
default with motion for reconsideration, are considered
voluntary submission to the jurisdiction of the court."
Moreover, petitioners contention is a mere afterthought. It
was only in their Memorandum 26 filed with this Court where
they claimed, for the first time, that Atiko was not properly
served with summons. In La Naval Drug Corporation v. Court
of Appeals,27 it was held that the issue of jurisdiction over the
person of the defendant must be seasonably raised. Failing
to do so, a party who invoked the jurisdiction of a court to
secure an affirmative relief cannot be allowed to disavow
such jurisdiction after unsuccessfully trying to obtain such
relief.28
It may not be amiss to state too that in our February 13,
2006 Resolution,29 we reminded the parties that they are not
allowed to interject new issues in their memorandum.
MeTC did not acquire jurisdiction over the person of Cheng
Lie.
Petitioners likewise challenge the validity of the service of
summons upon Cheng Lie, thru Atiko. They claim that when
the defendant is a foreign private juridical entity which has
transacted business in the Philippines, service of summons
may be made, among others, upon its resident agent. In this
case, however, there is no proof that Atiko is the local agent
of Cheng Lie.
On this score, we find for the petitioners. Before it was
amended by A.M. No. 11-3-6-SC,30 Section 12 of Rule 14 of
the Rules of Court reads:
SEC. 12. Service upon foreign private juridical entity. When
the defendant is a foreign private juridical entity which has
transacted business in the Philippines, service may be made
on its resident agent designated in accordance with law for
that purpose, or, if there be no such agent, on the
government official designated by law to that effect, or on
any of its officers or agents within the Philippines.
Elucidating on the above provision of the Rules of Court, this
Court declared in Pioneer International, Ltd. v. Guadiz, Jr.31
that when the defendant is a foreign juridical entity, service of
summons may be made upon:

In the case at bench, no summons was served upon Cheng


Lie in any manner prescribed above. It should be recalled
that Atiko was not properly served with summons as the
person who received it on behalf of Atiko, cashier Cristina
Figueroa, is not one of the corporate officers enumerated in
Section 11 of Rule 14 of the Rules of Court. The MeTC
acquired jurisdiction over the person of Atiko not thru valid
service of summons but by the latters voluntary appearance.
Thus, there being no proper service of summons upon Atiko
to speak of, it follows that the MeTC never acquired
jurisdiction over the person of Cheng Lie. To rule otherwise
would create an absurd situation where service of summons
is valid upon the purported principal but not on the latters
co-defendant cum putative agent despite the fact that service
was coursed thru said agent. Indeed, in order for the court to
acquire jurisdiction over the person of a defendant foreign
private juridical entity under Section 12, Rule 14 of the Rules
of Court, there must be prior valid service of summons upon
the agent of such defendant.1avvphi1
Also, the records of this case is bereft of any showing that
cashier Cristina Figueroa is a government official designated
by law to receive summons on behalf of Cheng Lie or that
she is an officer or agent of Cheng Lie within the Philippines.
Hence, her receipt of summons bears no significance insofar
as Cheng Lie is concerned. At this point, we emphasize that
the requirements of the rule on summons must be strictly
followed,32 lest we ride roughshod on defendants right to due
process.33
With regard to Cheng Lies filing of numerous pleadings, the
same cannot be considered as voluntary appearance. Unlike
Atiko, Cheng Lie never sought affirmative relief other than
the dismissal of the complaint on the ground of lack of
jurisdiction over its person. From the very beginning, it has
consistently questioned the validity of the service of
summons and the jurisdiction of the MeTC over its person.
It does not escape our attention though that Cheng Lies
pleadings do not indicate that the same were filed by way of
special appearance. But these, to our mind, are mere
inaccuracies in the title of the pleadings. What is important
are the allegations contained therein which consistently
resisted the jurisdiction of the trial court. Thus, Cheng Lie
cannot be considered to have submitted itself to the
jurisdiction of the courts.34
In fine, since the MeTC never acquired jurisdiction over the
person of Cheng Lie, its decision insofar as Cheng Lie is
concerned is void.35

1. Its resident agent designated in accordance with law for


that purpose;

Cheng Lie was improperly declared in default.

2. The government official designated by law to receive


summons if the corporation does not have a resident agent;
or,

Applying the above disquisition, the MeTC likewise erred in


declaring Cheng Lie in default. Settled is the rule that a
defendant cannot be declared in default unless such
declaration is preceded by a valid service of summons.36

3. Any of the corporations officers or agents within the


Philippines.

WHEREFORE, the instant petition is PARTIALLY


GRANTED. The assailed December 10, 2004 Decision of the

CIVIL PROCEDURE (Atty. Catherine Guerzo-Barrion) 9


2ND EXAM COVERAGE CASE ASSIGNMENT
Court of Appeals in CA-G.R. SP No. 82547 is AFFIRMED
with the MODIFICATION that the judgment insofar as Cheng
Lie Navigation Co., Ltd. is concerned is declared VOID for
failure to acquire jurisdiction over its person as there was
improper service of summons.

SO ORDERED.