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Contents

RULE 1- GENERAL PROVISIONS........................................................................3


Sec. 1. Title of the Rules of Court.................................................................3
Alvero v. de la Rosa, G.R. No. L-286, March 29, 1946 (Supra.)..................3
Primicias v. Ocampo, G.R. No. L-6120, June 30, 1953................................6
Sec. 4. In what case not applicable............................................................11
GSIS v. Villaviza, G.R. No. 180291, July 27, 2010.....................................11
Reyes v. Barrios, G.R. No. 172841, December 15, 2010..........................18
Sec. 3. Cases governed..............................................................................18
B. Kinds of Civil Actions in the Rules of Court............................................18
b)

Special Civil Action.............................................................................18

DBM v. Manilas Finest Retirees, G.R. No. 169466, May 9, 2007.............18


Amberti v. Court of Appeals, G.R. No. 79981, 2 April 1991......................25
C. Kinds of Civil Actions as to Cause.........................................................28
a)

Real Actions........................................................................................28

Fortune Motors v. Court of Appeals, G.R. No. 76431, October 16, 1989..28
b)

Personal Actions.................................................................................30

Chua v. Total Office Products, G.R. No. 152808, September 30, 2005....30
Paderanga v. Hon. Buissan, G.R. No. L-49475, September 28, 1993.......34
c) Mixed Actions........................................................................................36
De la Cruz v. El Seminario, G.R. No. L-5402, January 28, 1911................36
Emergency Loan Pawnshop v. Court of Appeals, G.R. No. 129184,
February 28, 2010...................................................................................39
D.

Kinds of Civil Actions as to Object......................................................41

a)

Action in Personam.............................................................................41

Spouses Yu v. Pacleb, G.R. No. 172172, February 24, 2009....................41


b)

Action in Rem.....................................................................................47

Gomez v. Court of Appeals, G.R. No. 127692, March 10, 2004................47


c) Action Quasi in Rem..............................................................................52
Spouses Yu v. Pacleb, G.R. No. 172172, February 24, 2009 (Supra.).......52
Asiavest Ltd. v. Court of Appeals, G.R. No. 128803, September 25, 1998
................................................................................................................52
d)

Mixed Action.......................................................................................61

BA Finance v. Court of Appeals, G.R. No. 102998, July 5, 1996...............61


Sec. 5. Commencement of action..................................................................65
Board of Liquidators v. Zulueta, G.R. No. L-30738, July 30, 1982............65
Sotelo vs. Dizon, 67 Phil. 537;.................................................................70
Cabrera vs. Tianco, 8 SCRA 582..............................................................72
Manchester Development v. Court of Appeals, G.R. No. 75919, May 7,
1987 (Supra.)..........................................................................................72
Nestle Phils. v. FY Sons, G.R. No. 150780, May 5, 2006..........................74

Sun Insurance v. Asuncion, G.R. Nos. 79937-38, February 13, 1989.......79


Phil. First Insurance v. Paramount Gen. Insurance, G.R. No. 165147, July
9, 2008....................................................................................................85
Home Guaranty Corp. v. R-11 Home Guaranty Corp. v. R-11 Builders, G.R.
No. 192649, March 9, 2011 (Supra.).......................................................91
Unicapital v. Consing, G.R. Nos. 175277 & 175285, September 11, 2013
..............................................................................................................102
Sec. 6. Construction..................................................................................110
Anama v. Phil. Savings Bank, G.R. No. 187021, January 25, 2012.........110
Tan v. Court of Appeals, G.R. No. 130314, September 22, 1998...........119
Baylon v. Fact-finding Intelligence, G.R. No. 150870, December 11, 2002
..............................................................................................................124
Republic v. Kenrick Development, G.R. No. 149567, August 8, 2006....131
Building Care Corp. v. Macaraeg, G.R. No. 198357, December 10, 2012
..............................................................................................................135
Uy v. Chua, G.R. No. 183965, September 18, 2009...............................139
Llamas v. Court of Appeals, G.R. No. 149588, August 16, 2010............146
RULE 2- CAUSE OF ACTION..........................................................................150
Sec. 1. Ordinary civil actions, basis of......................................................150
Turner v. Lorenzo Shipping, G.R. No. 157479, November 24, 2010.......150
Sec. 2. Cause of action, defined...............................................................159
Heirs of Ypon v. Ricaforte, G.R. No. 198680, July 8, 2013......................159
Swagman Hotels v. Court of Appeals, G.R. No. 161135, April 8, 2005...161
Joseph v. Bautista, G.R. No. L-41423, February 23, 1989......................167
Sec. 3. One suit for a single cause of action.............................................170
Phil. Bank of Comm. v. Lim, G.R. No. 158138, April 12, 2005................170
Sec. 4. Splitting a single cause of action; effect of...................................173
Chua v. Metrobank, G.R. No. 182311, August 19, 2009.........................173
Chu v. Spouses Cunanan, G.R. No. 156185, September 12, 2011.........181
Pantranco v. Standard Insurance, G.R. No. 140746, March 16, 2005....186
Umale v. Canoga Park, G.R. No. 167246, July 20, 2011.........................190
Spouses Plaza v. Lustiva, G.R. No. 172909, March 5, 2014...................194
Bayang v. Court of Appeals, G.R. No. L-53564, February 27, 1987........198
De Larena v. Villanueva, G.R. No. L-29155, November 5, 1928.............201
Blossom & Company v. Manila Gas Corp., G.R. No. L-32958, November 8,
1930......................................................................................................205
See:Danfoss v. Continental Cement, G.R. No. 143788, September 9, 2005
..............................................................................................................215
Bank of America v. American Realty, G.R. No. 133876, December 29,
1999......................................................................................................220
Alandale Sportsline v. Good Development Corp, G.R. No. 164521,
December 18, 2008...............................................................................230
Enriquez v. Ramos, G.R. No. L-16797, February 27, 1963.....................238
Tarnate v. Garcia, G.R. No. L-26266, December 29, 1972.....................239

Sec. 5. Joinder of causes of action............................................................241


Ada v. Baylon, G.R. No. 182435, August 13, 2012.................................241
Pantranco v. Standard Insurance, G.R. No. 140746, March 16, 2005
(Supra.).................................................................................................251
Union Glass Corp. v. SEC, G.R. No. 64013, November 28, 1983............251
Flores v. Hon. Mallare-Philipps, G.R. No. L-66620, September 24, 1986261
Genesis Investment v. Heirs of Ebarasabal, G.R. No. 181622, November
20, 2013................................................................................................264
Uniwide Holdings v. Cruz, G.R. No. 171456, August 9, 2007.................268
Unicapital v. Consing, G.R. Nos. 175277 & 175285, September 11, 2013
..............................................................................................................272
Iniego v. Hon. Purganan, G.R. No. 166876, March 24, 2006..................280
Sec. 6, Rules of Procedure on Small Claims (A.M. 08-8-7-SC, October 27,
2009).....................................................................................................285
Sec. 6. Misjoinder of causes of action.......................................................293
Ada v. Baylon, G.R. No. 182435, August 13, 2012 (Supra.)...................293

I.

CIVIL PROCEDURE
Brief History
Code of Civil Procedure or Act No. 190- August 7, 1901
(Old) Rules of Court- July 1, 1940
Revised Rules of Court- January 1, 1964
(New) Rules of Court- July 1, 1997
Rules 1-71

RULE 1- GENERAL PROVISIONS


Sec. 1. Title of the Rules of Court
Alvero v. de la Rosa, G.R. No. L-286, March 29, 1946 (Supra.)

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[1946V69E] FREDESVINDO S. ALVERO, petitioner, vs. M. L. DE LA ROSA Judge of First
Instance of Manila, JOSE R. VICTORIANO and MARGARITA VILLARICA.,
respondents.1946 Mar 29En BancG.R. No. L-286D E C I S I O N
DE JOYA, J:
This is all original petition for certiorari filed in this court.
The record shows that, on June 26, 1945, respondent Jose R. Victoriano had filed a
complaint, in the Court of First Instance of the City of Manila, against petitioner
Fredesvindo S. Alvero and one Margarita Villarica, alleging two causes of action, to
wit, (1) to declare in force the contract of sale, made on October 1, 1940, between
said Jose R. Victoriano and Margarita Villarica, of two (2) parcels of land in the
Manotoc subdivision, Balintawak, in the barrio of Calaanan, municipality of
Caloocan, Province of Rizal, with a combined area of 480 square meters, which land
was subsequently sold by said Margarita Villarica, in favor of petitioner Fredesvindo
S. Alvero, on December 31, 1944, for the sum of P100,000 in Japanese military
notes; and (2) to declare said subsequent sale null and void.

On July 7, 1945, Margarita Villarica filed an answer to said complaint, expressly


admitting having sold said land to Fredesvindo S. Alvero, for P100,000, in
December, 1944, due to the imperative necessity of raising funds with which to
provide for herself and family, and that she did not remember the previous sale; at
the same time, offering to repurchase said land from Fredesvindo S. Alvero in the
sum of P5,000, but that the latter refused to accept the offer.
On July 13, 1945, Fredesvindo S. Alvero, in answering said complaint, denied the
allegations made therein, and claimed exclusive ownership of the land in question,
and at the same time set up a counterclaim and cross-claim in his answer,
demanding from Jose R. Victoriano a P200 monthly rent on said property, beginning
from February, 1945, plus P2,000 as damages.
On July 21, 1945, Jose R. Victoriano filed an answer to said counterclaim, denying
Fredesvindo S. Alvero's alleged ownership over said land, and the other allegations
contained in Alvero's answer.
After the trial of the case before the Hon. Mariano L. de la Rosa, Judge of the Court
of First Instance of the City of Manila, one of the respondents in this case, on
November 16, 1945, said respondent judge rendered his decision, in which it was
declared that the two (2) parcels of land in question, with a combined area of 480
square meter had been sold by Margarita Villarica to Jose R. Victoriano, since
October 1, 1940, for the sum of P6,000, on the condition that the purchaser should
make a down payment of P1,700, and a monthly payment of P76.86 in 120 equal
monthly installments; that Jose R. Victoriano continued making said monthly
payments until December, 1941t, but that owing to the war-time conditions then
existing, Margarita Villarica agreed verbally to suspend such payments until the
restoration of peace; that immediately after said sale of said land to him, Jose R.
Victoriano took possession thereof and made improvements thereon to the amount
of P800, and continued occupying said property until December, 1944, when he
abandoned the same to go to evacuation places, but returned thereto in February,
1945; that Margarita Villarica, having forgotten the sale of said land to Jose R.
Victoriano, sold the same for P100,000 in Japanese military notes, on December 31,
1944, to Fredesvindo S. Alvero, but afterwards offered to repurchase said property
from him, for the sum of P8,000 in genuine Philippine currency, after liberation; that
Fredesvindo S. Alvero presented the deed of sale, executed in his favor, to the
Register of Deeds of the City of Manila, on January 3, 1945, and took possession of
said property in December, 1944, but afterwards found Jose R. Victoriano in the
premises in February, 1945; that in the contract of sale executed by Margarita
Villarica, in favor of Jose R: Victoriano, it was agreed that, upon failure of the
purchaser to make payments of three (3) successive monthly installments, the
vendor would be free to sell the property again, forfeiting the payments made,
except in case of force majeure; that there was really a verbal agreement between
Margarita Villarica and Jose R. Victoriano, made in February, 1942, for the
suspension of the payment of the monthly installments until the restoration of
peace; and that although Jose R. Victoriano had presented the deed of sale,
executed in his favor, to the Register of Deeds, in Pasig, Rizal, like Fredesvindo S.
Alvero, he had also failed to secure the transfer of title to his name. And considering
that Jose R. Victoriano's document was older than that of Fredesvindo S. Alvero, and
that he had taken possession of said property, since October 1, 1940, the
respondent judge rendered his decision in favor of Jose R. Victoriano, adjudging to
him the title over the property in question, including all the improvements existing
thereon, and dismissed the counterclaim.
On November 28, 1945, Fredesvindo S. Alvero was notified of said decision; and on
December 27, 1945, he filed a petition for reconsideration and new trial, which was
denied on January 3, 1946; and of said order he was notified on January 7, 1946.
On January 8, 1946, Fredesvindo S. Alvero filed his notice of appeal and record on'
appeal simultaneously in the lower court, without filing the P60 appeal bond.

On January 14, 1946, Jose R. Victoriano filed a petition to dismiss the appeal, and at
the same time, asked for the execution of the judgment.
On January 15, 1946, Fredesvindo S. Alvero filed an opposition to said motion to
dismiss, alleging that on the very same day, January 15, 1946, said appeal bond for
P60 had been actually filed, and alleged as an excuse, for not filing the said appeal
bond, in due time, the illness of his lawyer's wife, who died on January 10, 1946,
and buried the following day.
On January 17, 1946, the respondent judge, Hon. Mariano L. de la Rosa, ordered the
dismissal of the appeal, declaring that, although the notice of appeal and record on
appeal had been filed in due time, the P60-appeal bond was filed too late.
On January 23, 1946, Fredesvindo S. Alvero filed a petition for the reconsideration of
the said order dated January 17, 1946, dismissing his appeal; and said petition for
reconsideration was denied on January 29, 1946. Hence, this petition for certiorari.
On February 11, 1946, the respondents filed their answer to the petition for
certiorari, alleging (1) that said petition is defective in form as well as in substance;
(2) that there has been no excusable negligence, on the part of the petitioner, or
grave abuse of discretion on the part of the respondent judge, in the instant case.
As already stated, the decision rendered by the respondent judge, Hon. Mariano L.
de la Rosa, was dated November 16, 1945, of which counsel for Fredesvindo S.
Alvero was notified on November 28, 1945; that his motion for reconsideration and
new trial was filed on December 27, 1945, and denied on January 3, 1946, and that
said counsel for Alvero was notified of said order on January 7, 1946; and that he
filed his notice of appeal and record on appeal the following day, to wit, January 8,
1946, and that the P60-appeal bond w as filed only on January 15, 1946.
According to the computation erroneously made by the trial court, the last day for
filing and perfecting the appeal, in this case, was January 8, 1946, on which date,
Fredesvindo S. Alvero should have filed his (1) notice of appeal, (2) record on
appeal, and (3) appeal bond. But the P60-appeal bond was filed only on January 15,
1946.
Failure to perfect the appeal, within the time prescribed by the rules of court, will
cause the judgment to become final, and the certification of the record on appeal
thereafter, cannot restore the jurisdiction which has been lost. (Roman Catholic
Bishop of Tuguegarao vs. Director of Lands, 34 Phil., 623; Estate of Cordoba and
Zarate vs. Alabado, 34 Phil., 920; and Bermudez vs. Director of Lands, 36 Phil., 774.)
The period within which the record on appeal and appeal bond should be perfected
and filed may, however, be extended by order of the court, upon application made,
prior to the expiration of the original period. (Layda vs. Legaspi, 39 Phil., 83.)
Rules of courts, promulgated by authority of law, have the force and effect of law;
and rules of court prescribing the time within which certain acts must be done, or
certain proceedings taken, are considered absolutely indispensable to the
prevention of needless delays and to the orderly and speedy discharge of judicial
business. (Shioji vs. Harvey, 43 Phil., 333.)
Strict compliance with the rules of court has been held mandatory and imperative,
so that failure to pay the docket fee in the Supreme Court, within the period fixed
for that purpose, will cause the dismissal of the appeal. (Salaveria vs. Albindo, 39
Phil., 922.)
In the same manner, on failure of the appellant in a civil case to serve his brief,
within the time prescribed by said rules, on motion of the appellee and notice to the

appellant, or on its own motion, the court may dismiss the appeal. (Shioji vs.
Harvey, 43 Phil., 333.)
Counsel for the petitioner Fredesvindo Alvero alleges as an excuse, for his failure to
perfect and file his appeal, in due time, the illness of his wife, which ended in her
death on January 10, 1946, and by which he was greatly affected.
How little, indeed, does one realize that in life he lives in the midst of death; and
that every moment that passes is a step nearer towards eternity. Yet,
notwithstanding the inexorable laws of human destiny, every mortal fears death,
and such fear is worse than death itself. That is perhaps the reason why those
feeling its approach, in their last moments, want to be surrounded by the ones
dearest to their heart, to hear from them words of tenderness and eternal truth, and
thus receive as balm their love and the cheering influence of the traditional faith,
and the consolation of religious hope.
The virtuous and loving wife is the peculiar gift of heaven, and Mother is the name
for God in the innocent lips and hearts of adoring children. "She looketh well to the
ways of her household, and eateth not the bread of idleness." "And her daughters
arise up and call her blessed." And when she dies in the bosom of God, her children
find solace in the contemplation of her eternal bliss, as mirrored in her tranquil
beauty.
It is not, therefore, difficult to understand the state of mind of the attorney, and his
intense devotion and ardent affection towards his dying wife.
Unfortunately, counsel for petitioner has created a difficult situation. In his motion
for reconsideration and new trial, dated December 27, 1945, he did not point out
specifically the findings or conclusions in the judgment, which are not supported by
the evidence or which are contrary to law, making express reference to the
pertinent evidence or legal provisions, as expressly required by Rule 37, section 2,
paragraph (c) of the Rules of Court. Motions of that kind have been considered as
motions pro forma intended merely to delay the proceeding, and, as such, they
cannot and will not interrupt or suspend the period of time for the perfection of the
appeal. (Valdez vs. Jugo, 74 Phil., 49, and Reyes vs. Court of Appeals and Bautista,
74 Phil., 235.) Hence, the period for perfecting herein petitioner's appeal
commenced from November 28, 1945, when he was notified of the judgment
rendered in the case, and expired on December 28, 1945; and, therefore, his notice
of appeal and record on appeal filed on January 8, 1946, were filed out of time, and
much more so his appeal bond, which was only filed on January 15, 1946.
It is futile to speak of hospitals, doctors and nurses to minister alone to the needs of
the sick and the dying, who are dearest to us, for our reasoning powers are of little
avail when sorrow or despair rages within.
But human laws are inflexible and no personal consideration should stand in the
way of performing a legal duty.
The attorney for petitioner Fredesvindo S. Alvero could have asked for an extension
of time, within which to file and perfect his appeal, in the court below; but he had
failed to do so, and he must bear the consequences of his act. A strict observance of
the rules of court, which have been considered indispensable to the prevention of
needless delays and to the orderly and speedy dispatch of judicial business, is an
imperative necessity.
It may not be amiss to state in this connection that no irreparable damage has been
caused to the petitioner Fredesvindo S. Alvero, as Margarita Villarica, the vendor to
the two, of the land in question, has shown readiness to repair the damage done.
No showing having been made that there had been merely an excusable
negligence, on the part of the attorney for petitioner Fredesvindo S. Alvero, and that

there had been grave abuse of sound judicial discretion, on the part of the
respondent judge, the petition for certiorari filed in this case, is, therefore, hereby
dismissed, without costs. So ordered.
Moran, C.J., Ozaeta, Paras, Jaranilla, Feria, Pablo, Perfecto, Hilado, Bengzon and
Briones JJ., concur.
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([1946V69E] FREDESVINDO S. ALVERO, petitioner, vs. M. L. DE LA ROSA Judge of
First Instance of Manila, JOSE R. VICTORIANO and MARGARITA VILLARICA.,
respondents., G.R. No. L-286, 1946 Mar 29, En Banc)
Primicias v. Ocampo, G.R. No. L-6120, June 30, 1953

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[1953V201E] CIPRIANO P. PRIMICIAS, petitioner, vs. FELICISIMO OCAMPO, as Judgeat-large presiding over Branch C of the Court of First Instance of Manila and
EUGENIO ANGELES, as City Fiscal of Manila, representing the PEOPLE OF THE
PHILIPPINES, respondents.1953 Jun 30En BancG.R. No. L-6120D E C I S I O N
BAUTISTA ANGELO, J.:
This is a petition which seeks to prohibit respondent Judge from proceeding with the
trial of two criminal cases which were then pending against petitioner without the
assistance of assessors in accordance with the provisions of section 49 of Republic
Act No. 409 in relation to section 154 of Act No. 190, and as an auxiliary remedy, to
have a writ of preliminary injunction issued so that the trial may be held pending
until further orders of this court.
This petition was originally filed with the Court of Appeals, but was later certified to
this court on the ground that the main basis of the petition is section 49 of Republic
Act No. 409, otherwise known as Revised Charter of the City of Manila, approved on
June 18, 1949, and respondents assail the constitutionality of said section in that it
contravenes the constitutional provision that the rules of court "shall be uniform for
all courts of the same grade . . . " (Section 13, Article VIII of the Constitution.)
Petitioner was charged before the Court of First Instance of Manila with two
statutory offenses, namely, (1) with a violation of Commonwealth Act No. 606,
which was docketed as criminal case No. 18374, in that he knowingly chartered a
vessel of Philippine registry to an alien without the approval of the President of the
Philippines and (2) with a violation of section 129 in relation to section 2713 of the
Revised Administrative Code, which was docketed as Criminal Case No. 18375, in
that he failed to submit to the Collector of Customs the manifests and certain
authenticated documents for the vessel "Antarctic" and failed to obtain the
necessary clearance from the Bureau of Customs prior to the departure of said
vessel for a foreign port.
On April 23, 1952, before the trial of said criminal cases, petitioner filed a motion
praying that assessors be appointed to assist the court in considering the questions
of fact involved in said cases as authorized by section 49 of Republic Act No. 409,
otherwise known as Revised Charter of the City of Manila, which provides that "the
aid of assessors in the trial of any civil or criminal action in the Municipal Court, or
the Court of First Instance, within the City, may be invoked in the manner provided
in the Code of Civil Procedure." This motion was opposed by the City Fiscal who
appeared for the People of the Philippines.
On April 28, 1952, the court issued an order denying the motion holding in effect
that with the promulgation of the Rules of Court by the Supreme Court, which
became effective on July 1, 1940, all rules concerning pleading, practice and

procedure in all courts of the Philippines previously existing were not only
superseded but expressly repealed, that the Supreme Court, having been vested
with the rule- making power, expressly omitted the portions of the Code of Civil
Procedure regarding assessors in said Rules of Court, and that the reference to said
statute by section 49 of Republic Act No. 409 on the provisions regarding assessors
should be deemed as a mere surplusage. Believing that this order is erroneous,
petitioner now comes to this court imputing abuse of discretion to the respondent
Judge.
The issues now posed by petitioner are:
"I. The right of the petitioner to a trial with the aid of assessors is an absolute
substantive right, and the duty of the court to provide assessors is mandatory.
"II. The right to trial with the aid of assessors, being substantive right, cannot be
impaired by this court in the exercise of its rule-making power.
"III. Section 154 of the Code of Civil Procedure and Section 2477 of the Old Charter
of Manila, creating the right to trial with the aid of assessors, are substantive law
and were not repealed by Rules of Court.
"IV. Granting without admitting that the provisions on assessors of the Code of Civil
Procedure and the old Charter of Manila were impliedly repealed, nevertheless, the
same provisions were later reenacted by reference in section 49 of the Revised
Charter of Manila, which is now the source of the right to trial with the aid of
assessors and which refers to the Code of Civil Procedure merely to indicate the
procedure for appointing assessors.
"V. Section 49 of the Revised Charter of Manila is not invalid class legislation and
does not violate the constitutional provision that the rules of pleading, practice and
procedure 'shall be uniform for all courts of the same grade.'"
A brief summary of the historical background of the legislation regarding trial with
the aid of assessors in the Philippines may be of help in the determination of the
issues posed by petitioner. The first provision which allowed trial with the aid of
assessors in civil cases in inferior courts and Courts of First Instance is contained in
Act No. 190 of the Philippine Commission, otherwise known as the Code of Civil
Procedure, which took effect on October 1, 1901 (Sections 58-62; 154-161). Almost
simultaneously, or on October 17, 1901, the trial with the aid of assessors both in
civil and criminal cases was allowed in the Manila courts upon the enactment of Act
No. 267, amending Act No. 183, the original Charter of Manila. In 1914, the trial by
assessors was allowed in criminal cases in the courts of first instance in the
provinces with the enactment of Act No. 2369. And in 1915, Act No. 2520 was
passed extending the same trial by assessors to the courts of first instance and
justice of the peace courts in the Department of Mindanao and Sulu.
In connection with the use of assessors in Manila, section 44 of Act No. 183, the
original Charter of Manila, as amended by section 13 of Act No. 267, was reenacted
as section 2449 of the Administrative Code 1916, Act No. 2657. Section 2449 of the
Administrative Code of 1916 became section 2477 of Act No. 2711, otherwise
known as the Revised Administrative Code of 1917. And section 2477 in turn
became section 49 of the Republic Act No. 409, which is the present Charter of the
City of Manila. This section 49 is the law now invoked by petitioner in support of his
claim to a trial With the aid of assessors in the two criminal cases now pending
against him. Its pertinent provisions are quoted hereunder for ready reference:
"SEC. 49. Assessors in the courts in the city. - The aid of assessors in the trial of
any civil or criminal action in the municipal court, or the Court of First Instance,
within the city, may be invoked in the manner provided in the Code of Civil
Procedure. It shall be the duty of the Municipal Board to prepare one list of the
names of twenty-five residents of the City best fitted by education, natural ability

and reputation for probity to sit as assessors in the trial of actions in the municipal
court and a like list of persons to sit as assessors in the trial of the action in the
Court of First Instance. The Board may at any time strike any name from the list so
prepared, by reason of the death, permanent disability, or unfitness of the person
named; and in case names are so stricken out, other names shall be added in their
place, to be selected as in this section provided. Parties desiring to avail themselves
of the use of assessors in the municipal or Court of First Instance shall proceed as
provided for by law or rules of court; and the method of summoning assessors,
enforcing their attendance, excusing them from attendance, their compensation,
oath duties and effect of dissent from the opinion of the judges shall be as provided
in those laws or rules."
A careful analysis of the above provisions is interesting. Their most salient features
are: The aid of assessors in the trial of any civil or criminal action in the Municipal
Court for the Court of First Instance may be invoked in the manner provided in the
Code of Civil Procedure. The parties desiring to avail themselves of the use of
assessors "shall proceed as provided for by law or rules of court", and "the method
of summoning assessors, enforcing their attendance, excusing them from
attendance, their compensation, oath, duties, and effect of the dissent from the
opinion of the judge shall be as provided in those laws or rules." If we are to be
guided merely by these provisions, the right to trial with the aid of assessor would
seem to be beyond dispute. These provisions are simple and clear and appear to be
mandatory. But where the difficulty arises is in their relation or bearing on the
directive of the Constitution which provides that "the existing laws on pleading,
practice, and procedure are hereby repealed as statutes, and are declared rules of
courts subject to the power of the Supreme Court to alter and modify the same."
Pursuant to this rule-making power, the Supreme Court promulgated the present
Rules of Court, which became effective on July 1, 1940, but because it failed to
incorporate therein the provisions of the Code of Civil Procedure on assessors,
respondents now contend that the right to trial with the aid of assessors, with all its
concomitant provisions, cannot now be invoked because, being procedural in
nature, the same must be deemed to have been impliedly eliminated.
This claim would be correct if we were to hold that the right to trial with the aid of
assessors is not substantive but procedural or adjective in nature. If it were merely
procedural, not having been incorporated in the Rules of Court, the logical
conclusion is that the rule-making power has deemed wise to eliminate it. But no
such presumption, nor conclusion, can be drawn for the reason that the right to a
trial by assessors is substantive in the sense that it must be created and defined by
express enactment as opposed to a mere remedy devised to enforce such right or
obtain redress therefor. "Rules of procedure should be distinguished from
substantive law. A substantive law creates, defines or regulates rights concerning
life, liberty or property, or the powers of agencies or instrumentalities for the
administration of public affairs, whereas rules of procedure are provisions
prescribing the method by which substantive rights may be enforced in courts of
justice." (Moran, Comments on the Rules of Court, Vol. I, 1952 ed., p. 4.)
In Bustos vs. Lucero, * (46 Off. Gaz., January Supp., pp. 445, 448), this Court cited
with approval the following definitions of substantive law:
"Substantive law creates substantive rights and the two terms in this respect may
be said to be synonymous. Substantive rights in a term which includes those rights
which one enjoys under the legal system prior to the disturbance of normal
relations. (60 C. J. 980.)
"Substantive law is that part of the law which creates, defines and regulates rights,
or which regulates the right and duties which give rise to a cause of action; that
part of the law which courts are established to administer; as opposed to adjective
or remedial law, which prescribes the method of enforcing rights or obtain redress
for their invasions (36 C. J. 27; 52 C. J. S. 1026)."

The trial with the aid of assessors as granted by section 154 of the Code of Civil
Procedure and section 2477 of the old Charter of Manila are parts of substantive law
and as such are not embraced by the rule making power of the Supreme Court. This
is so because in said section 154 this matter is referred to as a right given by law to
a party litigant. Section 2477 of the Administrative Code of 1917 is couched in such
a manner that a similar right is implied when invoked by a party litigant. It says that
the aid may be invoked in the manner provided in the Code of Civil Procedure. And
this right has been declared absolute and substantial by this Court in several cases
where the aid of assessors had been invoked (Berbari vs. Concepcion, et al., 40
Phil., 320; Colegio de San Jose vs. Sison, 54 Phil., 344). Thus, it was there said that
these provisions "necessarily lead to the conclusion that the intervention of the
assessors is not an empty formality which may be disregarded without violating
either the letter or the spirit of the law. It is another security given by the law to the
litigants, and as such, it is a substantial right of which they cannot be deprived
without vitiating all the proceedings. Were we to agree that for one reason or
another the trial by assessors may be done away with, the same line of reasoning
would force us to admit that the parties litigant may be deprived of their right to be
represented by counsel, to appear and be present at the hearings, and so on, to the
extent of omitting the trial in a civil case, and thus set at naught the essential rights
granted by the law to the parties, with consequent nullity of the proceedings."
(Colegio de San Jose vs. Sison, 54 Phil., 344, 349.)
Being substantive in nature, it is not difficult to see why the provisions concerning
trial by assessors embodied in the Code of Civil Procedure have not been
incorporated by the Supreme Court in the present Rules of Court. To have done so, it
would have been a travesty of its rule-making power which, by direct mandate of
the Constitution, is limited to matters referring to pleading, practice and procedure.
The application that the respondents draw from the failure to incorporate these
provisions in the present Rules of Court to the effect that the intention was to
eliminate them or repeal them all together cannot, therefore, stand in the light of
the observations and authorities we have above adverted to.
There is a point in the claim that the provisions concerning trial by assessors
embodied in the Code of Civil Procedure are not wholly substantive but portions
thereof are remedial such as those which refer to the method of summoning
assessors, enforcing their attendance, excusing them from attendance, their
compensation, oath, duties and effect of dissent from the opinion of the judge, as to
which no cogent reason is seen for their non-incorporation if the intent is not to
eliminate them from the Rules of Court. This is true; but it is likewise true that
because said remedial provisions are inextricably interwoven with the substantive
part, it must have been deemed wise and proper to leave them as they were for
reasons of coordination and expediency, it being a truism that the one cannot be
detached from the other. Ubi jus ibi remedium. Remedial measures are but
implementary in character and they must be appended to the portion of the law to
which they belong. Mention should be made here that not all of the provisions
appearing in the Code of Civil Procedure are remedial in nature, such as those
pertaining to prescription, the requisites for making a will, and the succession of the
estate of an adopted child, which are admittedly substantive in character and for
that reason were not incorporated in the Rules of Court. To this group belong the
provisions under consideration.
Granting arguendo that the provisions on assessors of the Code of Civil Procedure
and even in the old Charter of Manila are purely remedial in nature and because of
the failure to incorporate them in the Rules of Court they are deemed to have been
impliedly repealed as claimed by respondents, we are of the opinion that they can
still he invoked by a litigant upon the theory that they had been reaffirmed and
reenacted by Republic Act No. 409, which was approved in 1949, or nine years after
the Rules of Court became effective. As already stated, section 49 of said Act states
that the aid of assessors may be invoked in the manner provided in the Code of Civil
Procedure. It likewise states that the parties desiring to avail themselves of the use
of assessors shall proceed as provided for by law. The mention made of the Code of

10

Civil Procedure in said section indicates in itself a re-enactment or incorporation by


reference of the provisions concerning assessors contained in said law. Congress,
whose members were mostly lawyers, must be presumed to know that at the time
said Act was approved the Rules of Court had already been promulgated without
incorporating therein the provisions concerning the aid to assessors, and fully
cognizant of this situation, and not desiring to omit this right granted to a litigant,
they must have deemed it wise and proper to re-enact them by reference in said
section 49. This Congress can do, for, while our Constitution has given the power to
adopt rules of procedure to the Supreme Court, such grant did not preclude
Congress from enacting any procedural law or altering, amending, or supplementing
any of the rules that may be promulgated by the Supreme Court (Section 13, Article
VIII, Philippine Constitution).
The practice of making such reference has long been sanctioned. Our Congress did
this not only in connection with courts in the City of Manila. It also did it in
connection with courts in Quezon City (Republic Act No. 537). Statutes which refer
to other statutes and make them applicable to the subject for legislation are called
"reference statutes". These statutes are frequently used "to avoid encumbering the
statute books by unnecessary repetition, and they have frequently been recognized
as an approved method of legislation, in the absence of constitutional restrictions."
[50 Am. Jur. 57; Gruen vs. Tax Commission, 211 P. (2d) (1949) 651, 666.]
Again, it has been held that "The adoption of an earlier statute by reference makes
it as much as a part of the latter act as though it had been incorporated at full
length. This is true of a legislative act which refers to another act for the procedure
to be taken." (50 Am. Jur. 58.) The reference in Republic Act No. 409 to the
provisions on assessors must be deemed, therefore, to have incorporated therein
the pertinent provisions on the matter contained in the Code of Civil Procedure in
much the same manner as if the whole provisions had been reproduced. Consistent
with this theory, we cannot but hold that the observations made by respondents to
the effect that the reference made to said provisions in section 49 is a mere
surplusage, or was due to a mere oversight, has no legal basis, as such innuendo
would be tantamount to imputing lack of foresight, if not brazen negligence, to our
legislative body.
It is finally contended that section 49 of Republic Act No. 409 is unconstitutional
because it violates the constitutional provisions that procedural rules "shall be
uniform for all courts of the same grade" and, therefore, it is a class legislation. This
contention cannot be entertained: firstly, because it is raised for the first time in this
instance, a procedural defect which would bar any further discussion on the matter
following well-known precedents 1 and, secondly, because it is not correct that at
present only in Manila trial with the aid of assessors may be invoked if we will
sustain the theory that the promulgation of the Rules of Court did not have the
effect of repealing the provisions on assessors embodied in the Code of Civil
Procedure.
The contention of respondents - we reckon - is predicated on the assumption that
the provisions on assessors of the Code of Civil Procedure had been impliedly
repealed. Such is not the case. We have already pointed out that the basic
provisions on the matter partake of the nature of substantive law and as such they
were left intact by the Supreme Court. The corollary to this conclusion is that this
remedy may be invoked out only in Manila but in all other places where it existed
prior to the promulgation of the Rules of Court. This is true in civil cases. With
regard to criminal cases, we have seen that they are allowed by Act No. 2369; and
we have already said that the same remedy may be invoked in the cities of Cebu,
Iloilo and Quezon, with the particularity that their charters make express reference,
either directly or indirectly, to the provisions of the code of Civil Procedure. With this
historical background, the claim that under the theory we have entertained the trial
with the aid of assessors can only be invoked in the City of Manila is certainly
without merit.

11

In view of the foregoing, we hold that the provisions on assessors embodied in the
Code of Civil Procedure are still in force and that the same may still be invoked in
the light of the provisions of section 49 of Republic Act No. 409. It is therefore our
opinion that the respondent Judge acted with abuse of discretion in denying
petitioner his right to the aid of assessors in the trial of the two criminal cases now
pending in the Court of First Instance of Manila.
Wherefore, petition is hereby granted, without pronouncement as to costs.
Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Montemayor, Jugo and Labrador, JJ.,
concur.
Separate Opinions
REYES, J., concurring:
In view of section 49 of Republic Act No. 409, approved June 18, 1949, authorizing
the use of assessors in the trial of civil and criminal cases in the city of Manila, I
concur in the result.
--------------Footnotes
* 81 Phil. 640.
1. De Leon vs. Santiago Syjuco, Inc., 90 Phil. 311; McGirr vs. Hamilton and Abreu,
30 Phil. 563; Yangco vs. Board of Public Utility Commissioners, 36 Phil. 116; Walter
E. Olsen & Co. vs. Aldanese and Trinidad, 43 Phil. 259; Macondray & Co. vs. Benito
and Ocampo, 62 Phil. 137; Go Chiong vs. Dinglasan, 45 Off. Gaz., 703, 79 Phil. 122;
Willoughby, Vol. 1, p. 19; People vs. Vera, 65 Phil. 56.
\---!e-library! 6.0 Philippines Copyright 2000 by Sony Valdez---/
([1953V201E] CIPRIANO P. PRIMICIAS, petitioner, vs. FELICISIMO OCAMPO, as Judgeat-large presiding over Branch C of the Court of First Instance of Manila and
EUGENIO ANGELES, as City Fiscal of Manila, representing the PEOPLE OF THE
PHILIPPINES, respondents., G.R. No. L-6120, 1953 Jun 30, En Banc)

Sec. 2. In what courts applicable


Sec. 4. In what case not applicable
GSIS v. Villaviza, G.R. No. 180291, July 27, 2010

Republic of the Philippines


Supreme Court
Manila

EN BANC

12

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS) and WINSTON F. GARCIA, in his


capacity as PRESIDENT and GENERAL MANAGER
of the GSIS,
Petitioners,

- versus -

DINNAH VILLAVIZA, ELIZABETH DUQUE,


ADRONICO A. ECHAVEZ,
RODEL RUBIO, ROWENA THERESE B. GRACIA, PILAR LAYCO, and ANTONIO JOSE
LEGARDA,
Respondents.
G.R. No. 180291
Present:
CORONA, C.J.,
CARPIO,
CARPIO MORALES,
VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ, and

13

MENDOZA, JJ.

Promulgated:
July 27, 2010

x -------------------------------------------------------------------------------------------------------x

DECISION

MENDOZA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking
to reverse and set aside the August 31, 2007 Decision[1] of the Court of Appeals
(CA), in CA-G.R. SP No. 98952, dismissing the petition for certiorari of Government
Service Insurance System (GSIS) assailing the Civil Service Commissions Resolution
No. 062177.
THE FACTS:
Petitioner Winston Garcia (PGM Garcia), as President and General Manager of the
GSIS, filed separate formal charges against respondents Dinnah Villaviza, Elizabeth
Duque, Adronico A. Echavez, Rodel Rubio, Rowena Therese B. Gracia, Pilar Layco,
and Antonio Jose Legarda for Grave Misconduct and/or Conduct Prejudicial to the
Best Interest of the Service pursuant to the Rules of Procedure in Administrative
Investigation (RPAI) of GSIS Employees and Officials, III, D, (1, c, f) in relation to
Section 52A (3), (20), Rule IV, of the Uniform Rules on Administrative Cases in the
Civil Service (URACCS), in accordance with Book V of the Administrative Code of
1987, committed as follows:
That on 27 May 2005, respondent, wearing red shirt together with some employees,
marched to or appeared simultaneously at or just outside the office of the
Investigation Unit in a mass demonstration/rally of protest and support for Messrs.
Mario Molina and Albert Velasco, the latter having surreptitiously entered the GSIS
premises;
xxx

xxx

xxx

That some of these employees badmouthed the security guards and the GSIS
management and defiantly raised clenched fists led by Atty. Velasco who was barred
by Hearing Officer Marvin R. Gatpayat in an Order dated 24 May 2005 from
appearing as counsel for Atty. Molina pursuant to Section 7 (b) (2) of R.A. 6713
otherwise known as the Code of Conduct and Ethical Standards for Public Officials
and Employees;

14

That respondent, together with other employees in utter contempt of CSC


Resolution No. 021316, dated 11 October 2002, otherwise known as Omnibus Rules
on Prohibited Concerted Mass Actions in the Public Sector caused alarm and
heightened some employees and disrupted the work at the Investigation Unit during
office hours.[2]

This episode was earlier reported to PGM Garcia, through an office memorandum
dated May 31, 2005, by the Manager of the GSIS Security Department (GSIS-SD),
Dennis Nagtalon. On the same day, the Manager of the GSIS Investigation Unit
(GSIS-IU), Atty. Lutgardo Barbo, issued a memorandum to each of the seven (7)
respondents requiring them to explain in writing and under oath within three (3)
days why they should not be administratively dealt with.[3]
Respondents Duque, Echavez, Rubio, Gracia, Layco, and Legarda, together with two
others, submitted a letter-explanation to Atty. Barbo dated June 6, 2005. Denying
that there was a planned mass action, the respondents explained that their act of
going to the office of the GSIS-IU was a spontaneous reaction after learning that
their former union president was there. Aside from some of them wanting to show
their support, they were interested in that hearing as it might also affect them. For
her part, respondent Villaviza submitted a separate letter explaining that she had a
scheduled pre-hearing at the GSIS-IU that day and that she had informed her
immediate supervisor about it, attaching a copy of the order of pre-hearing. These
letters were not under oath.[4]
PGM Garcia then filed the above-mentioned formal charges for Grave Misconduct
and/or Conduct Prejudicial to the Best Interest of the Service against each of the
respondents, all dated June 4, 2005. Respondents were again directed to submit
their written answers under oath within three (3) days from receipt thereof.[5]
None was filed.
On June 29, 2005, PGM Garcia issued separate but similarly worded decisions
finding all seven (7) respondents guilty of the charges and meting out the penalty of
one (1) year suspension plus the accessory penalties appurtenant thereto.
On appeal, the Civil Service Commission (CSC) found the respondents guilty of the
lesser offense of Violation of Reasonable Office Rules and Regulations and reduced
the penalty to reprimand. The CSC ruled that respondents were not denied their
right to due process but there was no substantial evidence to hold them guilty of
Conduct Prejudicial to the Best Interest of the Service. Instead,
x x x. The actuation of the appellants in going to the IU, wearing red shirts, to
witness a public hearing cannot be considered as constitutive of such offense.
Appellants (respondents herein) assembly at the said office to express support to
Velasco, their Union President, who pledged to defend them against any oppression
by the GSIS management, can be considered as an exercise of their freedom of
expression, a constitutionally guaranteed right.[6] x x x
PGM Garcia sought reconsideration but was denied. Thus, PGM Garcia went to the
Court of Appeals via a Petition for Review under Rule 43 of the Rules on Civil
Procedure.[7] The CA upheld the CSC in this wise:
The Civil Service Commission is correct when it found that the act sought to be
punished hardly falls within the definition of a prohibited concerted activity or mass
action. The petitioners failed to prove that the supposed concerted activity of the
respondents resulted in work stoppage and caused prejudice to the public service.
Only about twenty (20) out of more than a hundred employees at the main office,
joined the activity sought to be punished. These employees, now respondents in
this case, were assigned at different offices of the petitioner GSIS. Hence, despite
the belated claim of the petitioners that the act complained of had created
substantial disturbance inside the petitioner GSIS premises during office hours,
15

there is nothing in the record that could support the claim that the operational
capacity of petitioner GSIS was affected or reduced to substantial percentage when
respondents gathered at the Investigation Unit. Despite the hazy claim of the
petitioners that the gathering was intended to force the Investigation Unit and
petitioner GSIS to be lenient in the handling of Atty. Molinas case and allow Atty.
Velasco to represent Atty. Molina in his administrative case before petitioner GSIS,
there is likewise no concrete and convincing evidence to prove that the gathering
was made to demand or force concessions, economic or otherwise from the GSIS
management or from the government. In fact, in the separate formal charges filed
against the respondents, petitioners clearly alleged that respondents marched to
or appeared simultaneously at or just outside the office of the Investigation Unit in a
mass demonstration/rally of protest and support for Mssrs. Mario Molina and Albert
Velasco, the latter surreptitiously entered the GSIS premises. Thus, petitioners are
aware at the outset that the only apparent intention of the respondents in going to
the IU was to show support to Atty. Mario Molina and Albert Velasco, their union
officers. The belated assertion that the intention of the respondents in going to the
IU was to disrupt the operation and pressure the GSIS administration to be lenient
with Atty. Mario Molina and Albert Velasco, is only an afterthought.[8]
Not in conformity, PGM Garcia is now before us via this Petition for Review
presenting the following:
STATEMENT OF THE ISSUES
I
WHETHER AN ADMINISTRATIVE TRIBUNAL MAY APPLY SUPPLETORILY
PROVISIONS OF THE RULES OF COURT ON THE EFFECT OF FAILURE TO DENY
ALLEGATIONS IN THE COMPLAINT AND FAILURE TO FILE ANSWER, WHERE
RESPONDENTS IN THE ADMINISTRATIVE PROCEEDINGS DID NOT FILE
RESPONSIVE PLEADING TO THE FORMAL CHARGES AGAINST THEM.

THE
THE
THE
ANY

II
WHETHER THE RULE THAT ADMINISTRATIVE DUE PROCESS CANNOT BE EQUATED
WITH DUE PROCESS IN JUDICIAL SENSE AUTHORIZES AN ADMINISTRATIVE TRIBUNAL
TO CONSIDER IN EVIDENCE AND GIVE FULL PROBATIVE VALUE TO UNNOTARIZED
LETTERS THAT DID NOT FORM PART OF THE CASE RECORD.
III
WHETHER A DECISION THAT MAKES CONCLUSIONS OF FACTS BASED ON EVIDENCE
ON RECORD BUT MAKES A CONCLUSION OF LAW BASED ON THE ALLEGATIONS OF A
DOCUMENT THAT NEVER FORMED PART OF THE CASE RECORDS IS VALID.
IV
WHETHER FURTHER PROOF OF SUSBTANTIAL REDUCTION OF THE OPERATIONAL
CAPACITY OF AN AGENCY, DUE TO UNRULY MASS GATHERING OF GOVERNMENT
EMPLOYEES INSIDE OFFICE PREMISES AND WITHIN OFFICE HOURS, IS REQUIRED TO
HOLD THE SAID EMPLOYEES LIABLE FOR CONDUCT PREJUDICIAL TO THE BEST
INTEREST OF THE SERVICE PURSUANT TO CSC RESOLUTION NO. 021316.
V
WHETHER AN UNRULY MASS GATHERING OF TWENTY EMPLOYEES, LASTING FOR
MORE THAN AN HOUR DURING OFFICE HOURS, INSIDE OFFICE PREMISES AND

16

WITHIN A UNIT TASKED TO HEAR AN ADMINISTRATIVE CASE, TO PROTEST THE


PROHIBITION AGAINST THE APPEARANCE OF THEIR LEADER AS COUNSEL IN THE
SAID ADMINISTRATIVE CASE, FALLS WITHIN THE PURVIEW OF THE CONSTITUTIONAL
GUARANTEE TO FREEDOM OF EXPRESSION AND PEACEFUL ASSEMBLY.
VI
WHETHER THE CONCERTED ABANDONMENT OF EMPLOYEES OF THEIR POSTS FOR
MORE THAN AN HOUR TO HOLD AN UNRULY PROTEST INSIDE OFFICE PREMISES
ONLY CONSTITUTES THE ADMINISTRATIVE OFFENSE OF VIOLATION OF REASONABLE
OFFICE RULES AND REGULATIONS.[9]
The Court finds no merit in the petition.
Petitioners primarily question the probative value accorded to respondents letters
of explanation in response to the memorandum of the GSIS-IU Manager. The
respondents never filed their answers to the formal charges. The petitioners argue
that there being no answers, the allegations in the formal charges that they filed
should have been deemed admitted pursuant to Section 11, Rule 8 of the Rules of
Court which provides:
SECTION 11. Allegations not specifically denied deemed admitted. Material
averment in the complaint, other than those as to the amount of liquidated
damages, shall be deemed admitted when not specifically denied. Allegations of
usury in a complaint to recover usurious interest are deemed admitted if not denied
specifically and under oath.
According to the petitioners, this rule is applicable to the case at bench pursuant to
Rule 1, Section 4 of the Rules of Court which reads:
SECTION 4. In what cases not applicable. These Rules shall not apply to election
cases, land registration, cadastral, naturalization and insolvency proceedings, and
other cases not herein provided for, except by analogy or in a suppletory character
and whenever practicable and convenient. (underscoring supplied)
The Court does not subscribe to the argument of the petitioners. Petitioners own
rules, Rule XI, Section 4 of the GSIS Amended Policy and Procedural Guidelines No.
178-04, specifically provides:
If the respondent fails to file his Answer within five (5) working days from receipt of
the Formal Charge for the supporting evidence, when requested, he shall be
considered to have waived his right to file an answer and the PGM or the Board of
Trustees, in proper cases, shall render judgment, as may be warranted by the facts
and evidence submitted by the prosecution.

A perusal of said section readily discloses that the failure of a respondent to file an
answer merely translates to a waiver of his right to file an answer. There is
nothing in the rule that says that the charges are deemed admitted. It has not done
away with the burden of the complainant to prove the charges with clear and
convincing evidence.
It is true that Section 4 of the Rules of Court provides that the rules can be applied
in a suppletory character. Suppletory is defined as supplying deficiencies.[10] It
means that the provisions in the Rules of Court will be made to apply only where
there is an insufficiency in the applicable rule. There is, however, no such
deficiency as the rules of the GSIS are explicit in case of failure to file the required
answer. What is clearly stated there is that GSIS may render judgment as may be
warranted by the facts and evidence submitted by the prosecution.

17

Even granting that Rule 8, Section 11 of the Rules of Court finds application in this
case, petitioners must remember that there remain averments that are not deemed
admitted by the failure to deny the same. Among them are immaterial allegations
and incorrect conclusions drawn from facts set out in the complaint.[11] Thus, even
if respondents failed to file their answer, it does not mean that all averments found
in the complaint will be considered as true and correct in their entirety, and that the
forthcoming decision will be rendered in favor of the petitioners. We must not
forget that even in administrative proceedings, it is still the complainant, or in this
case the petitioners, who have the burden of proving, with substantial evidence, the
allegations in the complaint or in the formal charges.[12]
A perusal of the decisions of the CA and of the CSC will reveal that the case was
resolved against petitioners based, not on the absence of respondents evidence,
but on the weakness of that of the petitioners. Thus, the CA wrote:
Petitioners correctly submitted the administrative cases for resolution without the
respondents respective answer to the separate formal charges in accordance with
Section 4, Rule XI of the RPAI. Being in full control of the administrative proceeding
and having effectively prevented respondents from further submitting their
responsive answer and evidence for the defense, petitioners were in the most
advantageous position to prove the merit of their allegations in the formal charges.
When petitioner Winston Garcia issued those similarly worded decisions in the
administrative cases against the respondents, it is presumed that all evidence in
their favor were duly submitted and justly considered independent of the weakness
of respondents evidence in view of the principle that the burden of proof belongs
to the one who alleges and not the one who denies.[13]

On the merits, what needs to be resolved in the case at bench is the question of
whether or not there was a violation of Section 5 of CSC Resolution No. 02-1316.
Stated differently, whether or not respondents actions on May 27, 2005 amounted
to a prohibited concerted activity or mass action. Pertinently, the said provision
states:
Section 5. As used in this Omnibus Rules, the phrase prohibited concerted activity
or mass action shall be understood to refer to any collective activity undertaken by
government employees, by themselves or through their employees organizations,
with intent of effecting work stoppage or service disruption in order to realize their
demands of force concession, economic or otherwise, from their respective agencies
or the government. It shall include mass leaves, walkouts, pickets and acts of
similar nature. (underscoring supplied)
In this case, CSC found that the acts of respondents in going to the GSIS-IU office
wearing red shirts to witness a public hearing do not amount to a concerted activity
or mass action proscribed above. CSC even added that their actuations can be
deemed an exercise of their constitutional right to freedom of expression. The CA
found no cogent reason to deviate therefrom.
As defined in Section 5 of CSC Resolution No. 02-1316 which serves to regulate the
political rights of those in the government service, the concerted activity or mass
action proscribed must be coupled with the intent of effecting work stoppage or
service disruption in order to realize their demands of force concession. Wearing
similarly colored shirts, attending a public hearing at the GSIS-IU office, bringing
with them recording gadgets, clenching their fists, some even badmouthing the
guards and PGM Garcia, are acts not constitutive of an (i) intent to effect work
stoppage or service disruption and (ii) for the purpose of realizing their demands of
force concession.
Precisely, the limitations or qualifications found in Section 5 of CSC Resolution No.
02-1316 are there to temper and focus the application of such prohibition. Not all
collective activity or mass undertaking of government employees is prohibited.

18

Otherwise, we would be totally depriving our brothers and sisters in the government
service of their constitutional right to freedom of expression.
Government workers, whatever their ranks, have as much right as any person in the
land to voice out their protests against what they believe to be a violation of their
rights and interests. Civil Service does not deprive them of their freedom of
expression. It would be unfair to hold that by joining the government service, the
members thereof have renounced or waived this basic liberty. This freedom can be
reasonably regulated only but can never be taken away.
A review of PGM Garcias formal charges against the respondents reveals that he
himself was not even certain whether the respondents and the rest of the twenty or
so GSIS employees who were at the GSIS-IU office that fateful day marched there or
just simply appeared there simultaneously.[14] Thus, the petitioners were not even
sure if the spontaneous act of each of the twenty or so GSIS employees on May 27,
2005 was a concerted one. The report of Manager Nagtalon of the GSIS-SD which
was the basis for PGM Garcias formal charges reflected such uncertainty. Thus,
Of these red shirt protesters, only Mr. Molina has official business at the
Investigation Unit during this time. The rest abandoned their post and duties for the
duration of this incident which lasted until 10:55 A.M. It was also observed that the
protesters, some of whom raised their clenched left fists, carefully planned this
illegal action as evident in their behavior of arrogance, defiance and provocation,
the presence of various recording gadgets such as VCRs, voice recorders and digital
cameras, the bad mouthing of the security guards and the PGM, the uniformity in
their attire and the collusion regarding the anomalous entry of Mr. Albert Velasco to
the premises as reported earlier.[15]
The said report of Nagtalon contained only bare facts. It did not show respondents
unified intent to effect disruption or stoppage in their work. It also failed to show
that their purpose was to demand a force concession.
In the recent case of GSIS v. Kapisanan ng mga Manggagawa sa GSIS,[16] the Court
upheld the position of petitioner GSIS because its employees, numbering between
300 and 800 each day, staged a walkout and participated in a mass protest or
demonstration outside the GSIS for four straight days. We cannot say the same for
the 20 or so employees in this case. To equate their wearing of red shirts and going
to the GSIS-IU office for just over an hour with that four-day mass action in
Kapisanan ng mga Manggagawa sa GSIS case and to punish them in the same
manner would most certainly be unfair and unjust.
Recent analogous decisions in the United States, while recognizing the
governments right as an employer to lay down certain standards of conduct, tend
to lean towards a broad definition of public concern speech which is protected by
their First Amendment. One such case is that of Scott v. Meters.[17] In said case,
the New York Transit Authority (NYTA), responsible for operation of New York Citys
mass transit service, issued a rule prohibiting employees from wearing badges or
buttons on their uniforms. A number of union members wore union buttons
promoting their opposition to a collective bargaining agreement. Consequently, the
NYTA tried to enforce its rule and threatened to subject these union members to
discipline.
The court, though recognizing the governments right to impose
reasonable restrictions, held that the NYTAs rule was unconstitutionally
overboard.
In another case, Communication Workers of America v. Ector County Hospital
District,[18] it was held that,
A county hospital employees wearing of a Union Yes lapel pin during a union
organization drive constituted speech on a matter of public concern, and the
countys proffered interest in enforcing the anti-adornment provision of its dress

19

code was outweighed by the employees interest in exercising his First Amendment
speech and associational rights by wearing a pro-union lapel button.[19]
Thus, respondents freedom of speech and of expression remains intact, and CSCs
Resolution No. 02-1316 defining what a prohibited concerted activity or mass action
has only tempered or regulated these rights. Measured against that definition,
respondents actuations did not amount to a prohibited concerted activity or mass
action. The CSC and the CA were both correct in arriving at said conclusion.
WHEREFORE, the assailed August 31, 2007 Decision of the Court of Appeals as well
as its October 16, 2007 Resolution in CA G.R. SP No. 98952 are hereby AFFIRMED.
SO ORDERED.

JOSE CATRAL MENDOZA


Associate Justice

Reyes v. Barrios, G.R. No. 172841, December 15, 2010

Sec. 3. Cases governed


A. Kinds of Actions in the Rules of Court
a) Civil Action
b) Criminal Action
c) Special Proceedings
B. Kinds of Civil Actions in the Rules of Court
a) Ordinary Civil Action
b) Special Civil Action
DBM v. Manilas Finest Retirees, G.R. No. 169466, May 9, 2007

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[2007V550E] DEPARTMENT OF BUDGET AND MANAGEMENT, represented by
SECRETARY ROMULO L. NERI, PHILIPPINE NATIONAL POLICE, represented by POLICE
DIRECTOR GENERAL ARTURO L. LOMIBAO, NATIONAL POLICE COMMISSION,
represented by CHAIRMAN ANGELO T. REYES, AND CIVIL SERVICE COMMISSION,
represented by CHAIRPERSON KARINA C. DAVID,
Petitioners, versus MANILAS FINEST RETIREES ASSOCIATION, INC., represented by
P/COL. FELICISIMO G. LAZARO (RET.), AND ALL THE OTHER INP RETIREES,
Respondents.2007 May 9En BancG.R. No. 169466D E C I S I O N
GARCIA, J.:
Assailed and sought to be set aside in this petition for review on certiorari under
Rule 45 of the Rules of Court are the following issuances of the Court of Appeals
(CA) in CA-G.R. CV No. 78203, to wit:
1.
Decision[1] dated July 7, 2005 which affirmed in toto the decision of
the Regional Trial Court of Manila, Branch 32, in Civil Case No. 02-103702, a suit for
declaratory relief, declaring the herein respondents entitled to the same retirement
benefits accorded upon retirees of the Philippine National Police (PNP) under
Republic Act (R.A.) No. 6975, as amended by R.A. No. 8551, and ordering the herein

20

petitioners to implement the proper adjustments on respondents retirement


benefits; and
2.
Resolution[2] dated August 24, 2005 which denied the petitioners
motion for reconsideration.
The antecedent facts:
In 1975, Presidential Decree (P.D.) No. 765 was issued constituting the Integrated
National Police (INP) to be composed of the Philippine Constabulary (PC) as the
nucleus and the integrated police forces as components thereof. Complementing
P.D. No. 765 was P.D. No. 1184[3] dated August 26, 1977 (INP Law, hereinafter)
issued to professionalize the INP and promote career development therein.
On December 13, 1990, Republic Act (R.A.) No. 6975, entitled AN ACT
ESTABLISHING THE PHILIPPINE NATIONAL POLICE UNDER A REORGANIZED
DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT, AND FOR OTHER
PURPOSES, hereinafter referred to as PNP Law, was enacted. Under Section 23 of
said law, the Philippine National Police (PNP) would initially consist of the members
of the INP, created under P.D. No. 765, as well as the officers and enlisted personnel
of the PC. In part, Section 23 reads:
SEC. 23. Composition. Subject to the limitation provided for in this Act, the
Philippine National Police, hereinafter referred to as the PNP, is hereby established,
initially consisting of the members of the police forces who were integrated into the
Integrated National Police (INP) pursuant to Presidential Decree No. 765, and the
officers and enlisted personnel of the Philippine Constabulary (PC).
A little less than eight (8) years later, or on February 25, 1998, R.A. No. 6975
was amended by R.A. No. 8551, otherwise known as the PHILIPPINE NATIONAL
POLICE REFORM AND REORGANIZATION ACT OF 1998. Among other things, the
amendatory law reengineered the retirement scheme in the police organization.
Relevantly, PNP personnel, under the new law, stood to collect more retirement
benefits than what INP members of equivalent rank, who had retired under the INP
Law, received.
The INP retirees illustrated the resulting disparity in the retirement benefits between
them and the PNP retirees as follows:[4]
Retirement Rank
INP
Corporal
Captain
Brig. Gen.

PNP
SPO3
P. Sr. Insp.
P. Chief Supt.

Monthly Pension
INP

Difference

PNP

P 3,225.00
P 11,310.00
P 8,095.00
P 5,248.00
P 15,976.00
P10,628.00
P 10,054.24
P 18,088.00
P 8,033.76

Hence, on June 3, 2002, in the Regional Trial Court (RTC) of Manila, all INP retirees,
spearheaded by the Manilas Finest Retirees Association, Inc., or the MFRAI
(hereinafter collectively referred to as the INP Retirees), filed a petition for
declaratory relief,[5] thereunder impleading, as respondents, the Department of
Budget and Management (DBM), the PNP, the National Police Commission
(NAPOLCOM), the Civil Service Commission (CSC) and the Government Service
Insurance System (GSIS). Docketed in the RTC as Civil Case No. 02-103702, which
was raffled to Branch 22 thereof, the petition alleged in gist that INP retirees were
equally situated as the PNP retirees but whose retirement benefits prior to the
enactment of R.A. No. 6975, as amended by R.A. No. 8551, were unconscionably
and arbitrarily excepted from the higher rates and adjusted benefits accorded to the
PNP retirees. Accordingly, in their petition, the petitioning INP retirees pray that a

21

DECLARATORY JUDGMENT be rendered in their favor, DECLARING with certainty that


they, as INP-retirees, are truly absorbed and equally considered as PNP-retirees and
thus, entitled to enjoy the SAME or IDENTICAL retirement benefits being bestowed
to PNP-retirees by virtue of said PNP Law or Republic Act No. 6975, as amended by
Republic Act 8551, with the corollary mandate for the respondents-government
agencies to effect the immediate adjustment on their previously received disparate
retirement benefits, retroactive to its effectivity, and with due payment thereof.
The GSIS moved to dismiss the petition on grounds of lack of jurisdiction and cause
of action. On the other hand, the CSC, DBM, NAPOLCOM and PNP, in their respective
answers, asserted that the petitioners could not claim the more generous
retirement benefits under R.A. No. 6975 because at no time did they become PNP
members, having retired prior to the enactment of said law. DBM, NAPOLCOM and
PNP afterwards filed their respective pre-trial briefs.
The ensuing legal skirmish is not relevant to the disposition of the instant case. The
bottom line is that, on March 21, 2003, the RTC came out with its decision[6]
holding that R.A. No. 6975, as amended, did not abolish the INP but merely provided
for the absorption of its police functions by the PNP, and accordingly rendered
judgment for the INP retirees, to wit:
WHEREFORE, this Court hereby renders JUDGMENT DECLARING the INP Retirees
entitled to the same or identical retirement benefits and such other benefits being
granted, accorded and bestowed upon the PNP Retirees under the PNP Law (RA No.
6975, as amended).
The respondents Government Departments and Agencies shall IMMEDIATELY EFFECT
and IMPLEMENT the proper adjustments on the INP Retirees retirement and such
other benefits, RETROACTIVE to its date of effectivity, and RELEASE and PAY to the
INP Retirees the due payments of the amounts.
SO ORDERED.
On April 2, 2003, the trial court issued what it denominated as Supplement to the
Decision whereunder it granted the GSIS motion to dismiss and thus considered the
basic petition as withdrawn with respect to the latter.
From the adverse decision of the trial court, the remaining respondents, namely,
DBM, PNP, NAPOLCOM and CSC, interposed an appeal to the CA whereat their
appellate recourse was docketed as CA-G.R. CV No. 78203.
As stated at the threshold hereof, the CA, in its decision of July 7, 2005,[7] affirmed
that of the trial court upholding the entitlement of the INP retirees to the same or
identical retirement benefits accorded upon PNP retirees under R.A. No. 6975, as
amended.
Their motion for reconsideration having been denied by the CA in` its equally
assailed resolution of August 24, 2005,[8] herein petitioners are now with this Court
via the instant recourse on their singular submission that THE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN LAW IN AFFIRMING THE
DECISION OF THE TRIAL COURT NOTWITHSTANDING THAT IT IS CONTRARY TO LAW
AND ESTABLISHED JURISPRUDENCE.
We DENY.
In the main, it is petitioners posture that R.A. No. 6975 clearly abolished the INP
and created in its stead a new police force, the PNP. Prescinding therefrom,
petitioners contend that since the PNP is an organization entirely different from the
INP, it follows that INP retirees never became PNP members. Ergo, they cannot

22

avail themselves of the retirement benefits accorded to PNP members under R.A.
No. 6975 and its amendatory law, R.A. No. 8551.
A flashback at history is proper.
As may be recalled, R.A. No. 6975 was enacted into law on December 13, 1990, or
just about four (4) years after the 1986 Edsa Revolution toppled down the
dictatorship regime. Egged on by the current sentiment of the times generated by
the long period of martial rule during which the police force, the PC-INP, had a
military character, being then a major service of the Armed Forces of the
Philippines, and invariably moved by a fresh constitutional mandate for the
establishment of one police force which should be national in scope and, most
importantly, purely civilian in character,[9] Congress enacted R.A. No. 6975
establishing the PNP and placing it under the Department of Interior and Local
Government. To underscore the civilian character of the PNP, R.A. No. 6975 made it
emphatically clear in its declaration of policy the following:
Section 2. Declaration of policy - It is hereby declared to be the policy of the State
to promote peace and order, ensure public safety and further strengthen local
government capability aimed towards the effective delivery of the basic services to
the citizenry through the establishment of a highly efficient and competent police
force that is national in scope and civilian in character. xxx.
The police force shall be organized, trained and equipped primarily for the
performance of police functions. Its national scope and civilian character shall be
paramount. No element of the police force shall be military nor shall any position
thereof be occupied by active members of the [AFP]. (Emphasis and word in bracket
supplied.)
Pursuant to Section 23, supra, of R.A. No. 6975, the PNP initially consisted of the
members of the police forces who were integrated into the INP by virtue of P.D. No.
765, while Section 86[10] of the same law provides for the assumption by the PNP
of the police functions of the INP and its absorption by the former, including its
appropriations, funds, records, equipment, etc., as well as its personnel.[11] And to
govern the statutes implementation, Section 85 of the Act spelled out the following
absorption phases:
Phase I Exercise of option by the uniformed members of the [PC], the PC
elements assigned with the Narcotics Command, CIS, and the personnel of the
technical services of the AFP assigned with the PC to include the regular CIS
investigating agents and the operatives and agents of the NAPOLCOM Inspection.
Investigation and Intelligence Branch, and the personnel of the absorbed National
Action Committee on Anti-Hijacking (NACAH) of the Department of National Defense
to be completed within six (6) months from the date of the effectivity of this Act. At
the end of this phase, all personnel from the INP, PC, AFP Technical Services,
NACAH, and NAPOLCOM Inspection, Investigation and Intelligence Branch shall have
been covered by official orders assigning them to the PNP, Fire and Jail Forces by
their respective units.
Phase II Approval of the table of organization and equipment of all bureaus
and offices created under this Act, preparation and filling up of their staffing pattern,
transfer of assets to the [DILG] and organization of the Commission, to be
completed within twelve (12) months from the effectivity date hereof. At the end of
this phase, all personnel to be absorbed by the [DILG] shall have been issued
appointment papers, and the organized Commission and the PNP shall be fully
operational.
The PC officers and enlisted personnel who have not opted to join the PNP shall be
reassigned to the Army, Navy or Air Force, or shall be allowed to retire under
existing AFP rules and regulations. Any PC-INP officer or enlisted personnel may,
within the twelve-month period from the effectivity of this Act, retire and be paid

23

retirement benefits corresponding to a position two (2) ranks higher than his
present grade, subject to the conditions that at the time he applies for retirement,
he has rendered at least twenty (20) years of service and still has, at most, twentyfour (24) months of service remaining before the compulsory retirement age as
provided by existing law for his office.
Phase III Adjustment of ranks and establishment of one (1) lineal roster of officers
and another for non-officers, and the rationalization of compensation and retirement
systems; taking into consideration the existing compensation schemes and
retirement and separation benefit systems of the different components of the PNP,
to ensure that no member of the PNP shall suffer any diminution in basic longevity
and incentive pays, allowances and retirement benefits due them before the
creations of the PNP, to be completed within eighteen (18) months from the
effectivity of this Act. xxx.
Upon the effectivity of this Act, the [DILG] Secretary shall exercise administrative
supervision as well as operational control over the transferred, merged and/or
absorbed AFP and INP units. The incumbent Director General of the PC-INP shall
continue to act as Director General of the PNP until replaced . (Emphasis and
words in brackets supplied.)
From the foregoing, it appears clear to us that the INP was never, as posited by the
petitioners, abolished or terminated out of existence by R.A. No. 6975. For sure,
nowhere in R.A. No. 6975 does the words abolish or terminate appear in
reference to the INP. Instead, what the law provides is for the absorption,
transfer, and/or merger of the INP, as well as the other offices comprising the
PC-INP, with the PNP. To abolish is to do away with, to annul, abrogate or destroy
completely;[12] to absorb is to assimilate, incorporate or to take in.[13] Merge
means to cause to combine or unite to become legally absorbed or extinguished by
merger[14] while transfer denotes movement from one position to another.
Clearly, abolition cannot be equated with absorption.
True it is that Section 90[15] of R.A. No. 6975 speaks of the INP [ceasing] to exist
upon the effectivity of the law. It ought to be stressed, however, that such cessation
is but the logical consequence of the INP being absorbed by the PNP.
Far from being abolished then, the INP, at the most, was merely transformed to
become the PNP, minus of course its military character and complexion.
Even the petitioners effort at disclosing the legislative intent behind the enactment
of R.A. No. 6975 cannot support their theory of abolition. Rather, the Senate and
House deliberations on the bill that eventually became R.A. No. 6975 reveal what
has correctly been held by the CA in its assailed decision: that the PNP was precisely
created to erase the stigma spawned by the militarization of the police force under
the PC-INP structure. The rationale behind the passage of R.A. No. 6975 was
adequately articulated by no less than the sponsor[16] of the corresponding House
bill in his sponsorship speech, thus:
By removing the police force from under the control and supervision of military
officers, the bill seeks to restore and underscore the civilian character of police work
- an otherwise universal concept that was muddled up by the martial law years.
Indeed, were the legislative intent was for the INPs abolition such that nothing
would be left of it, the word abolish or what passes for it could have easily found
its way into the very text of the law itself, what with the abundant use of the word
during the legislative deliberations. But as can be gleaned from said deliberations,
the lawmakers concern centered on the fact that if the entire PC-INP corps join the
PNP, then the PC-INP will necessarily be abolished, for who then would be its
members? Of more consequence, the lawmakers were one in saying that there
should never be two national police agencies at the same time.

24

With the conclusion herein reached that the INP was not in fact abolished but was
merely transformed to become the PNP, members of the INP which include the
herein respondents are, therefore, not excluded from availing themselves of the
retirement benefits accorded to PNP retirees under Sections 74[17] and 75[18] of
R.A. No. 6975, as amended by R.A. No. 8551. It may be that respondents were no
longer in the government service at the time of the enactment of R.A. No. 6975.
This fact, however, without more, would not pose as an impediment to the
respondents entitlement to the new retirement scheme set forth under the
aforecited sections. As correctly ratiocinated by the CA to which we are in full
accord:
For sure, R.A. No. 6975 was not a retroactive statute since it did not impose a new
obligation to pay the INP retirees the difference between what they received when
they retired and what would now be due to them after R.A. No. 6975 was enacted.
Even so, that did not render the RTCs interpretation of R.A. No. 6975 any less valid.
The [respondents] retirement prior to the passage of R.A. No. 6975 did not exclude
them from the benefits provided by R.A. No. 6975, as amended by R.A. No. 8551,
since their membership in the INP was an antecedent fact that nonetheless allowed
them to avail themselves of the benefits of the subsequent laws. R.A. No. 6975
considered them as PNP members, always referring to their membership and
service in the INP in providing for their retirement benefits. [19]
Petitioners maintain, however, that NAPOLCOM Resolution No. 8,[20] particularly
Section 11[21] thereof, bars the payment of any differential in retirement pay to
officers and non-officers who are already retired prior to the effectivity of R.A. No.
6975.
The contention does not commend itself for concurrence.
Under the amendatory law (R.A. No. 8551), the application of rationalized retirement
benefits to PNP members who have meanwhile retired before its (R.A. No. 8551)
enactment was not prohibited. In fact, its Section 38[22] explicitly states that the
rationalized retirement benefits schedule and program shall have retroactive effect
in favor of PNP members and officers retired or separated from the time specified in
the law. To us, the aforesaid provision should be made applicable to INP members
who had retired prior to the effectivity of R.A. No. 6975. For, as afore-held, the INP
was, in effect, merely absorbed by the PNP and not abolished.
Indeed, to bar payment of retirement pay differential to INP members who were
already retired before R.A. No. 6975 became effective would even run counter to the
purpose of NAPOLCOM Resolution No. 8 itself, as expressed in its preambulatory
clause, which is to rationalize the retirement system of the PNP taking into
consideration existing retirement and benefit systems (including R.A. No. 6975 and
P.D. No. 1184) of the different components thereof to ensure that no member of
the PNP shall suffer any diminution in the retirement benefits due them before the
creation of the PNP.[23]
Most importantly, the perceived restriction could not plausibly preclude the
respondents from asserting their entitlement to retirement benefits adjusted to the
level when R.A. No. 6975 took effect. Such adjustment hews with the constitutional
warrant that the State shall, from time to time, review to upgrade the pensions
and other benefits due to retirees of both the government and private sectors,[24]
and the implementing mandate under the Senior Citizens Law[25] that to the
extent practicable and feasible, retirement benefits xxx shall be upgraded to be at
par with the current scale enjoyed by those in actual service.
Certainly going for the respondents in their bid to enjoy the same retirement
benefits granted to PNP retirees, either under R.A. No. 6975 or R.A. No. 8551, is
Section 34 of the latter law which amended Section 75 of R.A. No. 6975 by adding
thereto the following proviso:

25

Section 75. Retirement benefits. x x x: Provided, finally, That retirement pay of the
officers/non-officers of the PNP shall be subject to adjustments based on the
prevailing scale of base pay of police personnel in the active service.
Then, too, is the all familiar rule that:
Retirement laws should be liberally construed in favor of the retiree because their
intention is to provide for his sustenance and hopefully, even comfort, when he no
longer has the stamina to continue earning his livelihood. The liberal approach aims
to achieve the humanitarian purposes of the law in order that efficiency, security
and well-being of government employees may be enhanced.[26]
The petitioners parlay the notion of prospective application of statutes, noting in
this regard that R.A. No. 6975, as amended, cannot be applied retroactively, there
being no provision to that effect.
We are not persuaded.
As correctly found by the appellate court, R.A. No. 6975 itself contextually provides
for its retroactive application to cover those who had retired prior to its effectivity.
In this regard, we invite attention to the three (3) phases of implementation under
Section 85 for the absorption and continuation in the service of, among others, the
INP members under the newly-established PNP.
In a further bid to scuttle respondents entitlement to the desired retirement
benefits, the petitioners fault the trial court for ordering the immediate adjustments
of the respondents retirement benefits when the basic petition filed before it was
one for declaratory relief. To the petitioners, such petition does not essentially entail
an executory process, the only relief proper under that setting being a declaration of
the parties rights and duties.
Petitioners above posture is valid to a point. However, the execution of judgments
in a petition for declaratory relief is not necessarily indefensible. In Philippine
Deposit Insurance Corporation[PDIC] v. Court of Appeals,[27] wherein the Court
affirmed the order for the petitioners therein to pay the balance of the deposit
insurance to the therein respondents, we categorically ruled:
Now, there is nothing in the nature of a special civil action for declaratory relief that
proscribes the filing of a counterclaim based on the same transaction, deed or
contract subject of the complaint. A special civil action is after all not essentially
different from an ordinary civil action, which is generally governed by Rules 1 to 56
of the Rules of Court, except that the former deals with a special subject matter
which makes necessary some special regulation. But the identity between their
fundamental nature is such that the same rules governing ordinary civil suits may
and do apply to special civil actions if not inconsistent with or if they may serve to
supplement the provisions of the peculiar rules governing special civil actions.[28]
Similarly, in Matalin Coconut Co., Inc. v. Municipal Council of Malabang, Lanao del
Sur:[29] the Court upheld the lower courts order for a party to refund the amounts
paid by the adverse party under the municipal ordinance therein questioned,
stating:
x x x Under Sec. 6 of Rule 64, the action for declaratory relief may be
converted into an ordinary action and the parties allowed to file such pleadings as
may be necessary or proper, if before the final termination of the case "a breach or
violation of an ordinance, should take place." In the present case, no breach or
violation of the ordinance occurred. The petitioner decided to pay "under protest"
the fees imposed by the ordinance. Such payment did not affect the case; the
declaratory relief action was still proper because the applicability of the ordinance
to future transactions still remained to be resolved, although the matter could also
be threshed out in an ordinary suit for the recovery of taxes paid . In its petition

26

for declaratory relief, petitioner-appellee alleged that by reason of the enforcement


of the municipal ordinance by respondents it was forced to pay under protest the
fees imposed pursuant to the said ordinance, and accordingly, one of the reliefs
prayed for by the petitioner was that the respondents be ordered to refund all the
amounts it paid to respondent Municipal Treasurer during the pendency of the case.
The inclusion of said allegation and prayer in the petition was not objected to by
the respondents in their answer. During the trial, evidence of the payments
made by the petitioner was introduced. Respondents were thus fully aware of the
petitioner's claim for refund and of what would happen if the ordinance were to be
declared invalid by the court.
The Court sees no reason for treating this case differently from PDIC and Matalin.
This disposition becomes all the more appropriate considering that
the
respondents, as petitioners in the RTC, pleaded for the immediate adjustment of
their retirement benefits which, significantly, the herein petitioners, as respondents
in the same court, did not object to. Being aware of said prayer, the petitioners then
already knew the logical consequence if, as it turned out, a declaratory judgment is
rendered in the respondents favor.
At bottom then, the trial courts judgment forestalled multiplicity of suits which,
needless to stress, would only entail a long and arduous process. Considering their
obvious advanced years, the respondents can hardly afford another protracted
proceedings. It is thus for this Court to already write finis to this case.
WHEREFORE, the instant petition is DENIED and the assailed decision and resolution
of the CA, respectively dated July 7, 2005 and August 24, 2005, are AFFIRMED.
No costs.
SO ORDERED.
CANCIO C. GARCIA
Associate Justice

Amberti v. Court of Appeals, G.R. No. 79981, 2 April 1991

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[1991V241] ENGRACIA BACATE AMBERTI, petitioner, vs. HONORABLE COURT OF
APPEALS, HONORABLE EFICIO B. ACOSTA, Presiding Judge of Branch CLV, Regional
Trial Court, Pasig, Metro Manila, and MARIA TERESA AMBERTI TALAG, represented by
her husband attorney-in-fact WILFREDO M. TALAG, respondents.
Jose Oliver Cortes for petitioner.
Benjamin Quitoriano collaborating counsel for petitioner.
Nicolas M. De Guzman for private respondent.1991 Apr 23rd DivisionG.R. No.
79981D E C I S I O N
FERNAN, J.:
For review is the decision dated September 16, 1987 of the Court of Appeals which
dismissed Engracia Bacate Amberti's petition for annulment of the orders of the
Regional Trial Court, Branch 155 (Pasig) dated January 10, 1986 and November 4,
1986, respectively in CA-G.R. SP No. 10991.
The case at bar is another lamentable instance of a mother and her only daughter
clashing with each other in bitter controversy over inheritance.

27

Pietro (Piero) Amberti, an Italian citizen, married petitioner Engracia V. Bacate on


September 16, 1965. They have one child, herein private respondent Maria Teresa
Amberti, now married to Wilfredo M. Talag. In June, 1970, Pietro, then a resident of
Antipolo, Rizal, died in Torino, Italy, leaving behind considerable properties in the
Philippines and a holographic will designating Maria Teresa as his universal heir in
accordance with the laws of Italy. The will was subsequently admitted to probate in
the Philippines on August 2, 1971 and the widow Engracia was named the executrix,
only to be removed after eight (8) years by the same probate court for
maladministration of the Amberti estate, failure to submit an inventory or render an
accounting for more than eight (8) years and to account for the money received by
the estate totalling more than P7,000,000.00. She was ordered replaced by her
daughter, Maria Teresa, upon the latter's motion. 1
Petitioner then filed a petition for certiorari, prohibition and mandamus in the
Appellate Court to protest her removal and replacement. 2 In its decision dated
April 10, 1980, the Appellate Court noted the various anomalies and irregularities
committed by petitioner in her administration of her husband's estate particularly
her failure to render an accounting thereof for eight (8) years. Finding thus the
probate court to have acted properly, it dismissed the petition for lack of merit.
After payment of the estate and inheritance taxes due, private respondent Maria
Teresa, as the new administratrix, filed a motion with the probate court to terminate
the administration proceedings and to declare her as the universal heir of the
deceased Pietro Amberti and the absolute owner of all the real and personal
properties of his estate. In compliance with the court's order of November 29, 1985,
she submitted an inventory listing of all the real and personal properties of the
subject estate which disclosed, among others, that petitioner had already sold onehalf (1/2) of the 975-square meter West Avenue (Quezon City) property and had
disposed of the various mining equipment used in the once thriving marble business
of the deceased in the reported total amount of P687,500.00. 3
On January 10, 1986, the lower court rendered judgment in Special Proceedings No.
5958 awarding ownership of the residue of the entire Amberti estate consisting of
real and personal properties to the decedent's universal heir, private respondent
Maria Teresa. 4
On April 14, 1986, petitioner moved for a reconsideration of the January 10, 1986
decision, questioning for the first time the provisions of the holographic will and
asserting her alleged right of usufruct over one-half (1/2) of the estate.
The trial court denied said motion on November 4, 1986 for having been filed long
after the judgment of January 10, 1986 had acquired finality. 5
Petitioner again sought recourse in the Court of Appeals, 6 this time to seek the
annulment of the orders of January 10, 1986 and November 4, 1986 on the ground
that the notice of the January 10, 1986 order sent by registered mail was not
"actually" received by her counsel of record resulting in "deprivation of due
process."
7 But before private respondent could comment on the petition,
petitioner filed a motion to withdraw CA-G.R. SP No. 10786 stating that she was no
longer interested in pursuing her action.
Consequently, the Appellate Court dismissed CA-G.R. SP No. 10786 in its resolution
of January 9, 1987 which read:
"The petition is dismissed, petitioner having expressed that she is no longer
pursuing it to judgment." 8
However, it would appear that petitioner had a change of heart for on January 12,
1987 she instituted another action before the Court of Appeals 9 to annul and

28

reverse the orders dated January 10, 1986 and November 4, 1986 of the Regional
Trial Court, the very same orders subject of CA-G.R. SP No. 10786.
Petitioner claimed that the act of private respondent in furnishing petitioner with a
copy of the motion to terminate the administration proceedings through her former
counsel (Atty. Rogelio Velarde) and not through her new counsel of record (Atty.
Antonio P. Coronel) constituted extrinsic fraud calculated to deprive her of her day in
court. She likewise sought the invalidation of the inventory submitted by her
daughter on the ground that said inventory included properties allegedly belonging
to her exclusively or to the conjugal partnership with the deceased Pietro Amberti.
On March 24, 1987, the Appellate Court issued another resolution declaring as final
the dismissal of the petition in CA-G.R. SP No. 10786:
"Considering that the resolution dismissing the appeal dated January 9, 1987 has
become final as of January 31, 1987, the Court Resolved: Let the corresponding
entry of judgment issue and the case remanded to the court of origin for execution
of judgment." 10
Finally, on September 16, 1987, the Court of Appeals rendered in CA-G.R. SP No.
10991 the decision under review which reads in the main:
"Significantly, and as the Comment filed by private respondent cited, the petition
filed omitted to mention the fact that on December 8, 1986, the same petitioner
filed certiorari proceedings with prayer for preliminary injunction in this Court,
docketed as CA-G.R. SP No. 10786 against same respondents herein, to annul the
judgment of January 10, 1986 and the order of denial of November 4, 1986 on
grounds of alleged lack of due process, or abuse of discretion. . . .
"xxx

xxx

xxx

"Although in the dismissal of CA-G.R. SP No. 10786, there was no opportunity for
this Court to go over the merits of the grounds alleged, since the petitioner filed a
motion to withdraw before private respondents can file their comment to the
petition, the dismissal of the same is binding on the petitioner. Certainly, she is now
estopped from disputing the order of dismissal by bringing another action and
pretending that it is different from the other which was earlier dismissed upon her
instance. Indeed, such dismissal is with prejudice. To hold otherwise is to allow
petitioner to trifle with this Court and waste its precious time which could be utilized
to decide cases brought by other litigants who are more earnest and serious with
their cases.
"Certainly, the question of whether or not the decision of January 10, 1986 has been
served on petitioner's counsel of record can no longer be raised since by her
withdrawal of CA-G.R. SP No. 10786, petitioner is deemed to have waived any right
to raise the issue.
"xxx

xxx

xxx

"WHEREFORE, the instant petition should be, as it is hereby DISMISSED. . . " 11


The ultimate issue raised in this petition for review is whether or not the dismissal of
CA-G.R. SP No. 10786 by respondent Appellate Court amounts to a dismissal with
prejudice such that petitioner is now precluded from bringing a second action (CAGR SP No. 10991) based on the same subject matter.
A careful scrutiny of the records shows that CA-G.R. SP No. 10786 is a special civil
action for certiorari with prayer for preliminary injunction under Rule 65 of the
Revised Rules of Court which petitioner filed on December 8, 1986 to annul the
judgment of the trial court of January 10, 1986 and the order of denial of petitioner's
motion for reconsideration of November 4, 1986 on the grounds of lack of due

29

process and grave abuse of discretion. 12 As above related, before respondents


could submit their comment, petitioner filed a motion to withdraw the petition
stating that she was no longer interested in pursuing the case. The motion was
granted by the Appellate Court in its resolution of January 9, 1987. On March 24,
1987, said resolution having become final, entry of judgment was issued and the
case was remanded to the court of origin for execution of judgment.
Section 1, Rule 62 of the Rules of Court under the heading SPECIAL CIVIL ACTIONS
provides as follows:
"SECTION 1.
Preceding rules applicable in special civil actions. The provisions of
the preceding rules shall apply in special actions for interpleader, declaratory relief
and similar remedies, certiorari, prohibition, mandamus, quo warranto, eminent
domain, foreclosure of mortgage, partition, forcible entry and detainer, and
contempt, which are not inconsistent with or may serve to supplement the
provisions of the rules relating to such special civil actions."
From the foregoing, it is clearly stated that in special civil actions the preceding
rules are applicable in a supplementary manner. More specifically, under Sections 2
and 4, Rule 50 of Rules of Court, relating to DISMISSAL OF APPEAL in the Court of
Appeals, the following are provided:
"SECTION 2.
Effect of dismissal.
Fifteen (15) days after the dismissal of an
appeal, the clerk shall return to the court below the record on appeal with a
certificate under the seal of the court showing that the appeal has been dismissed.
Upon the receipt of such certificate in the lower court the case shall stand there as
though no appeal had ever been taken, and the judgment of the said court may be
enforced with the additional costs allowed by the appellate court upon dismissing
the appeal."
"SECTION 4.
Withdrawal of appeal.
An appeal may be withdrawn as of right at
any time before the filing of appellee's brief. After the brief is filed the withdrawal
may be allowed by the court in its discretion. The withdrawal of an appeal shall
have the same effect as that of a dismissal in accordance with Section 2 of this
rule."
Applying the foregoing rules in a supplementary manner, upon the withdrawal of a
petition in a special civil action before the answer or comment thereto has been
filed, the case shall stand as though no appeal has been taken, so that the
judgment or order of the lower court being questioned becomes immediately final
and executory. Thus, a resolution granting the withdrawal of such a petition is with
prejudice and petitioner is precluded from bringing a second action based on the
same subject matter.
The subsequent petition in CA-G.R. SP No. 10991 is an original action for annulment
of judgment filed by petitioner in the Court of Appeals in accordance with Section 9
of the Judiciary Reorganization Act of 1980 (B.P. Blg. 129) which vests upon the
Intermediate Appellate Court (now Court of Appeals) the original exclusive
jurisdiction over actions for annulment of judgments of the Regional Trial Courts. No
doubt that second petition is barred by res judicata, as the dismissal of the earlier
petition for certiorari in C.A. G.R. SP No. 10786 was with prejudice and on the
merits. It has not escaped this Court's attention that these two petitions are based
on the same ground of the alleged deprivation of due process and sought the same
reliefs, i.e., the annulment or setting aside of the January 10, 1986 judgment and
November 4, 1986 order of the trial court. A party cannot evade the effects of res
judicata by varying the form of his action or adopting a different method of
presenting his case as petitioner attempted to do in instituting an original action for
annulment of judgment to obtain the same relief sought in the petition for certiorari
earlier withdrawn from the Court of Appeals. 13

30

This should now put an end to the travails of a daughter whose mother, after having
dissipated so much of the estate of her late husband, still proposes to share in what
little is left of the inheritance of their daughter.
WHEREFORE, the petition is dismissed, with costs against petitioner. This decision is
immediately executory.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Davide, Jr., JJ., concur.

C. Kinds of Civil Actions as to Cause


a) Real Actions

Fortune Motors v. Court of Appeals, G.R. No. 76431, October 16, 1989

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[1989V837] FORTUNE MOTORS, (PHILS.), INC., petitioner, vs. THE HONORABLE
COURT OF APPEALS, METROPOLITAN BANK and TRUST COMPANY, respondents.1989
Oct 162nd DivisionG.R. No. 76431D E C I S I O N
PARAS, J.:
This is a petition for review on certiorari seeking the reversal of: (a) the July 30,
1986 decision of the Court of Appeals in AC-G.R. SP No. 09255 entitled "Metropolitan
Bank & Trust Co. v. Hon. Herminio C. Mariano, et al." dismissing Civil Case No. 8533218 entitled "Fortune Motors (Phils.) Inc. v. Metropolitan Bank & Trust Co." filed in
the Regional Trial Court of Manila, Branch IV for improper venue and (b) the
resolution dated October 30, 1986 denying petitioner's motion for reconsideration.
The undisputed facts of the case are as follows:
On March 29, 1982 up to January 6, 1984, private respondent Metropolitan Bank
extended various loans to petitioner Fortune Motors in the total sum of
P32,500,000.00 (according to the borrower; or P34,150,000.00 according to the
Bank) which loan was secured by a real estate mortgage on the Fortune building
and lot in Makati, Rizal. (Rollo, pp. 60-62)
Due to financial difficulties and the onslaught of economic recession, the petitioner
was not able to pay the loan which became due. (Rollo, p. 62)
For failure of the petitioner to pay the loans, the respondent bank initiated
extrajudicial foreclosure proceedings. After notices were served, posted, and
published, the mortgaged property was sold at public auction for the price of
P47,899,264.91 to mortgagee Bank as the highest bidder. (Rollo, p. 11)
The sheriff s certificate of sale was registered on October 24, 1984 with the oneyear redemption period to expire on October 24, 1985. (Rollo, p. 12)
On October 21, 1985, three days before the expiration of the redemption period,
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, the publication of the notice of sale was incomplete,
there was no public auction, and the price for which the property was sold was
"shockingly low". (Rollo, pp. 60-68)

31

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,
therefore the action to annul the foreclosure sale should be filed in the Regional Trial
Court of Makati. (Rollo, pp. 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. (Rollo, pp. 7273)
On January 8, 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. (Rollo, p. 81)
The Bank filed a motion for reconsideration of the order dated January 8, 1986 but it
was denied by the lower court in its order dated May 28, 1986. (Rollo, Annex "L" pp.
93-96; Annex "N" p. 99)
On June 11, 1986 the respondent Bank filed a petition for certiorari and prohibition
in the Court of Appeals. (Rollo, Annex "O" pp. 100-115)
And on July 30, 1986, a decision was issued by the Court of Appeals, the dispositive
part of which reads as follows:
"WHEREFORE, the petition for certiorari and prohibition is granted. The complaint in
the Civil Case No. 85-33218 is dismissed without prejudice to its being filed in the
proper venue. Costs against the private respondent."
SO ORDERED. (Rollo, p. 15)
A motion for reconsideration was filed on August 11, 1986 on the said decision and
on October 30, 1986 a resolution was issued denying such motion for
reconsideration. (Rollo, Annex "O" pp. 121-123; Annex "S" p. 129)
Hence, the petition for review on certiorari.
On June 10, 1987 the Court gave due course to the petition, required the parties to
file their respective memoranda within twenty (20) days from the notice hereof, and
pay deposit for costs in the amount of P80.40.
Both parties have filed their respective memoranda, and the case was submitted for
Court's resolution in the resolution dated December 14, 1987. (Rollo, Metrobank's
Memorandum pp. 45-59; petitioner's memorandum pp. 130-136 Res. p. 138)
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.
In a real action, the plaintiff seeks the recovery of real property, or as indicated in
Sec. 2 (a) of Rule 4, a real action is an action affecting title to real property, or for
the recovery of possession, or for the partition or condemnation of, or foreclosure of
a mortgage on real property. (Comments on the Rules of Court by Moran, Vol. I, p.
122)
Real actions or actions affecting title to, or for the recovery of possession, or for the
partition or condemnation of, or foreclosure of mortgage on real property, must be
instituted in the Court of First Instance of the province where the property or any
part thereof lies. (Enriquez v. Macadaeg, 84 Phil. 674, 1949; Garchitorena v. Register
of Deeds, 101 Phil. 1207, 1957)

32

Personal actions upon the other hand, may be instituted in the Court of First
Instance where the defendant or any of the defendants resides or may be found, or
where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff (Sec.
1, Rule 4, Revised Rules of Court).
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. (Inton, et al., v.
Quintan, 81 Phil. 97, 1948)
An action for the annulment or rescission of a sale of real property is a real action.
Its prime objective is to recover said real property. (Gavieres v. Sanchez, 94 Phil.
760, 1954)
An action to annul a real estate mortgage foreclosure sale is no different from an
action to annul a private sale of real property. (Muoz v. Llamas, 87 Phil. 737, 1950)
While it is true that petitioner does not directly seek the recovery of title or
possession of the property in question, his action for annulment of sale and his
claim for damages are closely intertwined with the issue of ownership of the
building which, under the law, is considered immovable property, the recovery of
which is petitioner's primary objective. 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, which is to recover said
real property. It is a real action. Respondent Court, therefore, did not err in
dismissing the case on the ground of improper venue (Sec. 2, Rule 4) which was
timely raised (Sec. 1, Rule 16). (Punzalan, Jr. v. Vda. de Lacsamana, 121 SCRA 336,
[1983]).
Thus, 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.
Grio-Aquino, 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, an action to annul the foreclosure sale is necessarily an action
affecting the title of the property sold. It is therefore a real action which should be
commenced and tried in the province where the property or part thereof lies."
PREMISES CONSIDERED, the instant petition is DENIED for lack of merit and the
assailed decision of the respondent Court of Appeals is AFFIRMED.
SO ORDERED.
Melencio-Herrera (Chairman), Padilla, Sarmiento and Regalado, JJ., concur.
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([1989V837] FORTUNE MOTORS, (PHILS.), INC., petitioner, vs. THE HONORABLE
COURT OF APPEALS, METROPOLITAN BANK and TRUST COMPANY, respondents., G.R.
No. 76431, 1989 Oct 16, 2nd Division)

See Rule 4, Sec. 1

b) Personal Actions
Chua v. Total Office Products, G.R. No. 152808, September 30, 2005

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33

[2005V1136] ANTONIO T. CHUA, Petitioner, versus TOTAL OFFICE PRODUCTS AND


SERVICES (TOPROS), INC., Respondent.2005 Sep 301st DivisionG.R. No. 152808D E
CISION
QUISUMBING, J.:
For review on certiorari is the decision[1] dated November 28, 2001 of the
Court of Appeals and its resolution[2] of April 1, 2002 in CA-G.R. SP No. 62592. The
assailed decision and resolution dismissed the special civil action for certiorari
against the orders of August 9, 2000[3] and October 6, 2000[4] issued by Judge
Lorifel Lacap Pahimna in Civil Case No. 67736.
The pertinent facts, based on the records, are as follows:
On December 28, 1999, respondent Total Office Products and Services, Inc.,
(TOPROS) lodged a complaint for annulment of contracts of loan and real estate
mortgage against herein petitioner Antonio T. Chua before the Regional Trial Court
of Pasig City. The case was docketed as Civil Case No. 67736 and was raffled to the
sala of Judge Lorifel Lacap Pahimna.
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
(P10,400,000) and the accessory real estate mortgage contract covering two
parcels of land situated in Quezon City as collateral.
It appeared on the face of the subject contracts that TOPROS was represented
by its president John Charles Chang, Jr. However, TOPROS alleged that the
purported loan and real estate mortgage contracts were fictitious, since it never
authorized anybody, not even its president, to enter into said transaction.
On February 28, 2000, petitioner filed a motion to dismiss on the ground of
improper venue. He contended that the action filed by TOPROS affects title to or
possession of the parcels of land subject of the real estate mortgage. He argued
that it should thus have been filed in the Regional Trial Court of Quezon City where
the encumbered real properties are located, instead of Pasig City where the parties
reside.
On August 9, 2000, Judge Pahimna issued an order denying the motion to
dismiss. She reasoned that the action to annul the loan and mortgage contracts is a
personal action and thus, the venue was properly laid in the RTC of Pasig City where
the parties reside.
Petitioner moved for a reconsideration of the said order, which Judge Pahimna
denied in its order of October 6, 2000. Hence, 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. PASCUAL
REGARDING THE RULE ON PROPER VENUE, AND CONSEQUENTLY ADJUDGING TO BE
A PERSONAL ACTION A CIVIL COMPLAINT FOR THE ANNULMENT OF AN ALLEGEDLY
FICTITIOUS CONTRACT.[5]
The Court of Appeals dismissed said petition in its decision dated November
28, 2001. It held that the authorities relied upon by petitioner, namely Pascual v.
Pascual[6] and Banco Espaol-Filipino v. Palanca,[7] are inapplicable in the instant
case. The appellate court instead applied Hernandez v. Rural Bank of Lucena, Inc.
[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, as neither the mortgagors title to nor
possession of the property is disputed.

34

Dissatisfied, petitioner filed a motion for reconsideration, which the Court of


Appeals denied for lack of merit in its resolution of April 1, 2002.
Undeterred, 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
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; (2) the complaint recognized
the validity of the principal contract involved; and (3) the plaintiff sought to compel
acceptance by the defendant of plaintiffs payment of the latters mortgage debt.
He insists that the Pascual case should be applied instead. He invokes our
pronouncement in Pascual, to wit:
It appearing, however, that the sale is alleged to be fictitious, with
absolutely no consideration, it should be regarded as a non-existent, not merely
null, contract. And there being no contract between the deceased and the
defendants, there is in truth nothing to annul by action. The action brought cannot
thus be for annulment of contract, but is one for recovery of a fishpond, a real
action that should be, as it has been, brought in Pampanga, where the property is
located.[10]
Petitioner likewise cites the Banco Espaol-Filipino case, 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, the
jurisdiction of the latter is limited to the mortgaged property, 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, under the provisions of law applicable in such cases,
is vested with the power to subject the property to the obligation created by the
mortgage. In such case personal jurisdiction over the nonresident defendant is
nonessential and in fact cannot be acquired.[11]
Petitioner also alleges that John Charles Chang, Jr., the president of TOPROS,
who allegedly entered into the questioned loan and real estate mortgage contracts,
is an indispensable party who has not been properly impleaded.
TOPROS, however, maintains that the appellate court correctly sustained the
lower courts finding that the instant complaint for annulment of loan and real
estate mortgage contracts is a personal action. 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.
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. TOPROS further contends that Banco EspaolFilipino is also inapplicable since the personal action filed therein was one which
affected the personal status of a nonresident defendant.
Considering the facts and the submission of the parties, we find the petition
bereft of merit.

35

Well-settled is the rule that an action to annul a contract of loan and its
accessory real estate mortgage is a personal action. In a personal action, the
plaintiff seeks the recovery of personal property, the enforcement of a contract or
the recovery of damages.[12] In contrast, in a real action, the plaintiff seeks the
recovery of real property, or, as indicated in Section 2 (a), Rule 4 of the then Rules
of Court, a real action is an action affecting title to real property or for the recovery
of possession, or for partition or condemnation of, or foreclosure of mortgage on,
real property.[13]
In the Pascual case, relied upon by petitioner, the contract of sale of the
fishpond was assailed as fictitious for lack of consideration. We held that there
being no contract to begin with, there is nothing to annul. Hence, 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.
We cannot, however, apply the foregoing doctrine to the instant case. Note
that in Pascual, title to and possession of the subject fishpond had already passed to
the vendee. There was, therefore, a need to recover the said fishpond. But in the
instant case, ownership of the parcels of land subject of the questioned real estate
mortgage was never transferred to petitioner, but remained with TOPROS. Thus, no
real action for the recovery of real property is involved. This being the case,
TOPROS action for annulment of the contracts of loan and real estate mortgage
remains a personal action.
Petitioners reliance on the Banco Espaol-Filipino case is likewise misplaced.
That case involved a foreclosure of real estate mortgage against a nonresident. 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, in fact, cannot be acquired.
Needless to stress, the instant case bears no resemblance to the Banco EspaolFilipino case. In the first place, this is not an action involving foreclosure of real
estate mortgage. In the second place, none of the parties here is a nonresident.
We find no reason to apply here our ruling in Banco Espaol-Filipino.
The Court of Appeals finds that Hernandez v. Rural Bank of Lucena, Inc. provides the
proper precedent in this case. In Hernandez, 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, which should have been filed in the place
where the mortgaged lots were situated. Rule 4, Section 2 (a), of the then Rules of
Court, was applied, to wit:
SEC. 2. Venue in Courts of First Instance. (a) Real actions. Actions affecting title
to, or for recovery of possession, or for partition or condemnation of, or foreclosure
of mortgage on, real property, shall be commenced and tried in the province where
the property or any part thereof lies.
The Court pointed out in the Hernandez case that with respect to mortgage, the rule
on real actions only mentions an action for foreclosure of a real estate mortgage. It
does not include an action for the cancellation of a real estate mortgage. Exclusio
unios est inclusio alterius. The latter thus falls under the catch-all provision on
personal actions under paragraph (b) of the above-cited section, to wit:
SEC. 2 (b) Personal actions. All other actions may be commenced and tried where
the defendant or any of the defendants resides or may be found, or where the
plaintiff or any of the plaintiffs resides, at the election of the plaintiff.
In the same vein, the action for annulment of a real estate mortgage in the present
case must fall under Section 2 of Rule 4, to wit:

36

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

37

Paderanga v. Hon. Buissan, G.R. No. L-49475, September 28, 1993

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[1993V777] JORGE C. PADERANGA, petitioner, vs. Hon. DIMALANES B. BUISSAN,
Presiding Judge, Court of First Instance of Zamboanga del Norte, Branch III and
ELUMBA INDUSTRIES COMPANY, represented by its General Manager, JOSE J.
ELUMBA, respondents.1993 Sep 281st DivisionG.R. No. 49475D E C I S I O N
BELLOSILLO, J.:
We are called upon in this case to determine the proper venue of an action to fix the
period of a contract of lease which, in the main, also prays for damages.
Sometime in 1973, petitioner JORGE C. PADERANGA and private respondent ELUMBA
INDUSTRIES COMPANY, a partnership represented by its General Manager JOSE J.
ELUMBA, entered into an oral contract of lease for the use of a commercial space
within a building owned by petitioner in Ozamiz City. 1 The lease was for an
indefinite period although the rent of P150.00 per month was paid on a month-tomonth basis. ELUMBA INDUSTRIES COMPANY utilized the area under lease as the
Sales Office of Allied Air Freight in Ozamiz City.
On 4 April 1977, PADERANGA subdivided the leased premises into two (2) by
constructing a partition wall in between. He then took possession of the other half,
which repossession was said to have been undertaken with the acquiescence of the
local manager of ELUMBA, 2 although private respondent maintains that this is not
the case. 3 At any rate, the validity of the repossession is not here in issue.
On 18 July 1977, private respondent instituted an action for damages 4 which, at
the same time, prayed for the fixing of the period of lease at five (5) years, before
the then Court of First Instance of Zamboanga del Norte based in Dipolog City. 5
Petitioner, a resident of Ozamiz City, moved for its dismissal contending that the
action was a real action which should have been filed with the Court of First
Instance of Misamis Occidental stationed in Ozamiz City where the property in
question was situated.
On 6 November 1978, respondent Judge Dimalanes B. Buissan denied the Motion to
Dismiss and held that Civil Case No. 2901 merely involved the enforcement of the
contract of lease, and while affecting a portion of real property, there was no
question of ownership raised. 6 Hence, venue was properly laid.
Petitioner pleaded for reconsideration of the order denying his Motion to Dismiss. He
contended that while the action did not involve a question of ownership, it was
nevertheless seeking recovery of possession; thus, it was a real action which,
consequently, must be filed in Ozamiz City. 7
On 4 December 1978, respondent judge denied reconsideration. 8 While admitting
that Civil Case No. 2901 did pray for recovery of possession, he nonetheless ruled
that this matter was not the main issue at hand; neither was the question of
ownership raised. Not satisfied, petitioner instituted the present recourse.
PADERANGA argues that inasmuch as ELUMBA seeks to recover possession of the
portion surrendered to him by the local manager of private respondent, as well as to
fix the period of lease at five (5) years, Dipolog City could not be the proper venue
of the action. It being a real action, venue is laid in the court having jurisdiction over
the territory in which the property lies.
ELUMBA counters that the present action is chiefly for damages arising from an
alleged breach in the lease contract; hence, the issue of recovery of possession is

38

merely incidental. ELUMBA further argues that the action is one in personam and
not in rem. Therefore venue may be laid in the place where plaintiff or defendant
resides at the option of plaintiff.
Private respondent appears to be confused over the difference between personal
and real actions vis-a-vis actions in personam and in rem. The former determines
venue; the latter, the binding effect of a decision the court may render over a party,
whether impleaded or not.
In the case before us, it is indubitable that the action instituted by private
respondent against petitioner affects the parties alone, not the whole world. Hence,
it is an action in personam, i.e., any judgment therein is binding only upon the
parties properly impleaded. 9 However, this does not automatically mean that the
action for damages and to fix the period of the lease contract is also a personal
action. For, a personal action may not necessarily be an action in personam and a
real action may not at the same time be an action in rem. In Hernandez v. Rural
Bank of Lucena, Inc., 10 we held thus -In a personal action, the plaintiff seeks the recovery of personal property, the
enforcement of a contract or the recovery of damages. In a real action, the plaintiff
seeks the recovery of real property, or, as indicated in section 2(a) of Rule 4, a real
action is an action affecting title to real property or for the recovery of possession,
or for partition or condemnation of, or foreclosure of a mortgage on, real property.
An action in personam is an action against a person on the basis of his personal
liability, while an action in rem is an action against the thing itself, instead of
against the person. Hence, a real action may at the same time be an action in
personam and not necessarily an action in rem.
Consequently, the distinction between an action in personam and an action in rem
for purposes of determining venue is irrelevant. Instead, it is imperative to find out if
the action filed is a personal action or a real action. After all, personal actions may
be instituted in the Regional Trial Court (then Court of First Instance) where the
defendant or any of the defendants resides or may be found, or where the plaintiff
or any of the plaintiffs resides, at the election of the plaintiff. 11 On the other
hand, real actions should be brought before the Regional Trial Court having
jurisdiction over the territory in which the subject property or part thereof lies. 12
While the instant action is for damages arising from an alleged breach of the lease
contract, it likewise prays for the fixing of the period of lease at five (5) years. If
found meritorious, private respondent will be entitled to remain not only as lessee
for another five (5) years but also to the recovery of the portion earlier taken from
him as well. This is because the leased premises under the original contract was the
whole commercial space itself and not just the subdivided portion thereof.
While it may be that the instant complaint does not explicitly pray for recovery of
possession, such is the necessary consequence thereof.
13 The instant action
therefore does not operate to efface the fundamental and prime objective of the
nature of the case which is to recover the one-half portion repossessed by the
lessor, herein petitioner.
14 Indeed, where the ultimate purpose of an action
involves title to or seeks recovery of possession, partition or condemnation of, or
foreclosure of mortgage on, real property, 15 such an action must be deemed a
real action and must perforce be commenced and tried in the province where the
property or any part thereof lies.
Respondent judge, therefore, in denying petitioner's Motion to Dismiss gravely
abused his discretion amounting to lack or excess of jurisdiction.
WHEREFORE, the Petition for Prohibition is GRANTED. The Orders of 6 November
1978 and 4 December 1978 of respondent Judge Dimalanes B. Buissan are SET
ASIDE. The branch of the Regional Trial Court of Dipolog City where Civil Case No.

39

2901 may be presently assigned is DIRECTED to DISMISS the case for improper
venue. This decision is immediately executory.
Costs against private respondent ELUMBA INDUSTRIES COMPANY.
SO ORDERED.
Cruz, J., Chairman, Davide, Jr., and Quiason, JJ., concur.

See Rule 4, Sec. 2


c) Mixed Actions
De la Cruz v. El Seminario, G.R. No. L-5402, January 28, 1911

/---!e-library! 6.0 Philippines Copyright 2000 by Sony Valdez---\


[1911V30] CAYETANO DE LA CRUZ, plaintiff-appellee, vs. EL SEMINARIO DE LA
ARCHDIOCESES DE MANILA, ET AL., defendants-appellants.1911 Jan 28En BancG.R.
No. L-5402D E C I S I O N
TRENT, J.:
The appellee, Cayetano de la Cruz, was a member and the president of a Methodist
Episcopal religious association at Dinalupijan, Province of Bataan, Philippine Islands.
The members of this association, including Cayetano de la Cruz, having decided to
lease a building site and erect thereon a chapel, made voluntary contributions for
that purpose, Cayetano de la Cruz being among those who contributed. Cayetano
de la Cruz, as such member and president, was then authorized by the association
to lease a certain building site and to use the funds contributed for the purpose of
constructing a chapel. So on the 17th of May, 1907, he leased from one J. C. Miller,
the agent of the appellant, His Grace Jeremiah J. Harty, Archbishop of Manila and
administrator of the hacienda of Dinalupijan, for a period of two years, a certain lot
or parcel of land, being a part of that hacienda and which is fully described in the
written contract of lease, agreeing to pay as rental P2 per year, the first year's rent
to be paid in advance. On the execution of this lease Cayetano de la Cruz, as
member and president of the Methodist Episcopal association, was placed in
possession of this lot or building site and proceeded to construct thereon a chapel
for the use of the said religious association. About the time this chapel was
completed an action of forcible entry and detainer was commenced by one
Raymundo Sinsuangco in the justice of the peace court of Dinalupijan, in which
Cayetano de la Cruz, as lessee of the lot upon which the chapel was constructed,
and J. C. Miller, as agent and representative of the appellants, who, in such capacity
executed said lease, as lessor, were made defendants. Judgment was rendered
against the defendants in the action. The appellants in the case at bar were duly
notified of the judgment of the justice of the peace and were requested to appeal to
the Court of First Instance. No appeal was taken and the judgment becoming final
was executed in such a manner that the above-mentioned chapel was completely
destroyed. Subsequently thereto, and on the 21st of October, 1907, Cayetano de la
Cruz commenced this action in the Court of First Instance of the city of Manila
against the appellants to recover the sum of P2,000 as damages for a breach of the
rental contract. To this complaint the appellants, through their attorneys, presented
a demurrer, based upon the following grounds: (1) That the Court of First Instance of
the city of Manila was without jurisdiction to try and determine this action for the
reason that damages for injuries caused to real property situated in the Province of
Bataan is sought to be recovered; and (2) the complaint fails to allege facts
sufficient to constitute a cause of action. This demurrer was overruled, the
appellants duly noting their exception.
After all the evidence had been submitted by both parties, the appellee, after due
notice to the appellants, presented an amended complaint, to conform, as he

40

alleged, with the agreed statement of facts and the admissions made by the
appellants in their answer. This amended complaint was admitted by the court
without objection on the part of the appellants. The amended complaint is the same
as the original complaint, with the following exceptions: (1) A number of unnamed
person were made parties plaintiff; (2) in paragraph 2 of the amended complaint it
is alleged that Cayetano de la Cruz was the president, agent, and member of the
Methodist Episcopal religious association: and (3) a judgment for only P402 was
asked.
The court below on the 29th of March, 1909, rendered judgment in favor of the
appellees and against the appellants for the sum of P402, P2 being the rent for the
first year paid in advance, and the P400 being the agreed value of the chapel which
was destroyed by the sheriff in executing the judgment rendered by the justice of
the peace.
The appellants after noting their exception to the judgment and making a motion for
a new trial, which motion was overruled and exception thereto noted, appealed to
this court, and now insist:
1. That as this action is one for damages to real estate situated in the Province of
Bataan, under the provisions of section 377 of the Code of Civil Procedure the Court
of First Instance of the city of Manila had no jurisdiction;
2. The court below erred in admitting the amended complaint by which the other
members of the religious association, jointly interested with Cayetano de la Cruz,
were made parties plaintiff; and,
3. That the appellants are not liable for the consequences of the judgment of the
justice of the peace.
The demurrer was properly overruled. This is not an action to recover damages to
real estate; it is an action for breach of covenant in a lease. The fact that the
damages to real estate are involved, as an incident to the breach of the contract,
does not change the character of the action. Such an action is personal and
transistory. The rule is well stated in the case of Neil vs. Owen (3 Tex., 145), wherein
the court said (p. 146):
"If the action is founded on privity of contract between the parties, then the action
whether debt or covenant, is transitory. But if there is no privity of contract and the
action is founded on privity of estate only, such a covenant that runs with the land
in the hands of the remote grantees, then the action is local and must be brought in
the country wherein the land lies.
"In an action on a covenant contained in a lease, whether begun by the lessor
against the lessee, or by the lessee against the lessor, the action is transitory
because it is founded on a mere privity of contract. (Thursby vs. Plant, cited in vol.
5, Ency. Plead. & Prac., p. 362.)
"In general, also, actions which are founded upon contracts are transitory. In an
action upon a lease for nonpayment of rent or other breach of covenants, when the
action is founded on the privity of contract it is transitory and the venue may laid in
any county. (22 Ency. Plead. & Prac., pp. 782-783.)"
Therefore, section 377 of the Code of Civil Procedure, which provides, among other
things, that actions to recover damages for injuries to real estate shall be brought in
the province where the land, or a part thereof, is situated, is not applicable. (Molina
vs. De la Riva, 6 Phil. Rep., 12.) The amended complaint clearly states facts
sufficient to constitute a cause of action. (Sec. 90, Code of Civil Procedure.)
The defendants in the second assignment of error assert that the plaintiff ought not
to have been allowed to amend his complaint so as to make him the representative

41

of all the persons interested in the subject matter of this action. We are of the
opinion that such amendment was properly allowed. Section 110 of the Code of Civil
Procedure is exceedingly broad in its term and there is no disposition in this court to
narrow its term or meaning. We are also of the opinion that this is particularly the
class of action to which section 118 of the Code of Civil Procedure refers. It would be
exceedingly difficult and expensive to require that all persons interested be made
parties plaintiff. To avoid this was the very purpose in enacting section 118. The
plaintiff, as appears from the record, is the person chosen by the members of the
association in question to look after and represent their interest and it is
correspondingly appropriate that he should represent and act for them in this
action. In permitting this court is not thwarting their will or endangering their
interest, but, rather, is carrying out their desires and purposes as they have already
expressed them.
In the third assignment of error it is insisted that the appellants are not liable for the
consequences of the judgment of the justice of the peace, for the reason that
according to that judgment the plaintiff, in violation of the rights of Raymundo
Sinsuangco, entered upon the lot in question. It is argued that the plaintiff should
not have entered into possession of this lot in violation of the rights of Sinsuangco,
but that he should have acquired possession by due judicial process, and that
having entered into possession in this manner he must suffer the consequences of
his illegal acts. In this we can not agree. When this rental contract was executed the
lot in question was vacant. The agent, Miller, led the plaintiff to believe that he
could place him in legal possession of the lot. It was upon this theory that the
plaintiff entered into this contract and paid the rent for the first year. The record
does not affirmatively show that Miller placed the plaintiff in possession of this lot,
but in the absence of proof to the contrary we think it fair to presume that this
occurred. Miller then placed the plaintiff in possession of this lot, but not in the legal
possession of same. He himself did not have the legal possession as was shown by
the proof before the justice of the peace. Sinsuangco was the person who was in the
actual possession and Miller should have known this and he should have known at
the time he entered into the contract with the plaintiff that he could not place the
plaintiff in legal, peaceful, and quiet possession of this lot. The plaintiff took
possession under these circumstances and proceeded to construct the chapel,
which was afterwards destroyed in the execution of the judgment of the justice of
the peace. In the contract entered into between Miller and the plaintiff, it was
Miller's duty to place the plaintiff legally in possession of this lot and maintain him in
the peaceful and quiet possession of the same during the entire period of the
contract.
The rights and obligations of lessor and lessee are treated in articles 1554 to 1574,
inclusive, of the Civil Code. Article 1554 provides:
"The lessor is obligated:
xxx

xxx

xxx

"3. To maintain the lessee in the peaceful enjoyment of the premises for the entire
period of the contract.
Article 1568 is as follows:
"If the thing leased is lost or any of the contracting parties do not comply with what
has been stipulated, the provisions of article 1182 and 1183 shall be respectively
observed."
Article 1101 provides:
"Those who in fulfilling their obligations are guilty of fraud, negligence, or delay, and
those who in any manner whatsoever act in contravention of the stipulations of the
same, shall be subject to indemnify for the losses and damages caused thereby."

42

Under this contract of lease it was the duty of the defendants to give the plaintiff
the legal possession of the premises. This they did not do.
The defendants failed in the performance of their contract, and, as we have seen by
article 1101 of the Civil Code, the person who fails in the performance of his
obligations shall be subject to indemnify for the losses and damages caused
thereby. "The true measure of damages for the breach of such a contract is what
the plaintiff has lost by the breach." (Lock vs. Furze, L. R. 1, C. P., 441; Dexter vs.
Manley, 4 Cush. (Mass.), 14.)
The sum of P402, in our opinion, not being excessive damages for the injuries
caused by the breach of contract on the part of the defendants, the judgment
should be and the same is hereby affirmed, with costs against the appellants. So
ordered.
Arellano, C.J., Mapa, Carson and Moreland, JJ., concur.
\---!e-library! 6.0 Philippines Copyright 2000 by Sony Valdez---/
([1911V30] CAYETANO DE LA CRUZ, plaintiff-appellee, vs. EL SEMINARIO DE LA
ARCHDIOCESES DE MANILA, ET AL., defendants-appellants., G.R. No. L-5402, 1911
Jan 28, En Banc)

Emergency Loan Pawnshop v. Court of Appeals, G.R. No. 129184, February 28,
2010

FIRST DIVISION
[G.R. No. 129184. February 28, 2001]
EMERGENCY LOAN PAWNSHOP INCORPORATED and DANILO R. NAPALA, petitioners,
vs. THE COURT OF APPEALS (Tenth Division) and TRADERS ROYAL BANK,
respondents.
DECISION
PARDO, J.:
May an appeal be taken from a decision of the Regional Trial Court denying a motion
to dismiss the complaint on the ground of improper venue? If not, will certiorari lie?
The case before the Court is a petition for review on certiorari assailing the decision
of the Court of Appeals,[1] granting respondents petition for certiorari and
dismissing the complaint below on the ground of improper venue.
On January 18, 1996, Traders Royal Bank (TRB for brevity) sold in favor of petitioner
Emergency Loan Pawnshop Incorporated (ELPI for brevity) a parcel of land located
at Km. 3 Asin, Baguio City for Five Hundred Thousand Pesos (P500,000.00).[2]
At the time of the sale, TRB misrepresented to ELPI that the subject property was a
vacant residential lot valued at P600.00 to P800.00 per square meters, with a
usable land area of 1,143.75 square meters (approximately 75% of the land area of
1,525 sq.m.) without any illegal occupants or squatters, when it truth the subject
property was dominantly a public road with only 140 square meters usable area.
ELPI, after having spent to fully ascertain the actual condition of the property,
demanded from TRB the rescission and cancellation of the sale of the property. TRB

43

refused, hence, on April 16, 1996, ELPI filed with the Regional Trial Court, Davao,
Branch 17, a complaint for annulment of sale and damages against TRB.[3]
On August 27, 1996, TRB filed a Motion to Dismiss[4] the complaint on the ground
of improper venue. On September 18, 1996 the trial court denied the motion to
dismiss.[5] On October 21, 1996, TRB filed a motion for reconsideration.[6] On
November 14, 1996, the trial court denied the motion.[7]
On January 15, 1997, TRB elevated the case to the Court of Appeals by petition for
certiorari and prohibition with preliminary injunction or temporary restraining order,
contending that the trial court committed a grave abuse of discretion in denying its
motion to dismiss the complaint on the ground of improper venue.[8]
After due proceedings, on March 11, 1997, the Court of Appeals promulgated its
decision, the dispositive portion of which reads:
WHEREFORE, finding merit in the petition, the Orders dated September 18,1996
and November 14, 1996 are hereby ANNULED and SET ASIDE and Civil Case No.
24,317-96 is hereby DISMISSED on ground of improper venue.[9]
Hence, this petition.[10]
Petitioners seek to set aside the decision of the Court of Appeals alleging that:
1. The Court of Appeals erred in entertaining the petition for certiorari and
prohibition, for lack of jurisdiction;
2. The Court of Appeals erred in ruling that the Regional Trial Court erred in not
dismissing the complaint for improper venue.[11]
According to petitioners, the determination of whether the venue of an action was
improperly laid was a question of law, thus, the Court of Appeals had no jurisdiction
to entertain the petition for certiorari and prohibition, which involves pure questions
of law.
Petitioners further alleged that an order denying a motion to dismiss is interlocutory
in nature that can not be the subject of an appeal and can not be even reviewed by
a special civil action for certiorari.
We find the petition not meritorious.
The general rule is that the denial of a motion to dismiss a complaint is an
interlocutory order and, hence, cannot be appealed or questioned via a special civil
action of certiorari until a final judgment on the merits of the case is rendered.[12]
The remedy of the aggrieved party is to file an answer to the complaint and to
interpose as defenses the objections raised in his motion to dismiss, proceed to
trial, and in case of an adverse decision, to elevate the entire case by appeal in due
course. However, the rule is not ironclad. Under certain situations, recourse to
certiorari or mandamus is considered appropriate, that is, (a) when the trial court
issued the order without or in excess of jurisdiction; (b) where there is patent grave
abuse of discretion by the trial court; or, (c) appeal would not prove to be a speedy
and adequate remedy as when an appeal would not promptly relieve a defendant
from the injurious effects of the patently mistaken order maintaining the plaintiffs
baseless action and compelling the defendant needlessly to go through a protracted
trial and clogging the court dockets by another futile case."[13]
In the case at bar, we agree with the Court of Appeals that the trial court erred
grievously amounting to ousting itself of jurisdiction. The motion of respondent TRB
was well founded because venue was clearly improperly laid. The action in the
Regional Trial Court was for annulment of sale involving a parcel of land located at

44

Km. 3 Asin Road, Baguio City. The venue of such action is unquestionably within the
territorial jurisdiction of the proper court where the real property or part thereof lies.
[14] An action affecting title to real property, or for recovery of, or foreclosure of
mortgage on real property, shall be commenced and tried in the proper court
having jurisdiction over the area where the real property or any part thereof lies.
[15]
Hence, the case at bar clearly falls within the exceptions to the rule. The Regional
Trial Court has committed a palpable and grievous error amounting to lack or excess
of jurisdiction in denying the motion to dismiss the complaint on the ground of
improper venue.
WHEREFORE, the Court denies the petition and affirms the decision of the Court of
Appeals in CA-G. R. SP No. 43095, in toto.
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur.

D. Kinds of Civil Actions as to Object


a) Action in Personam
Spouses Yu v. Pacleb, G.R. No. 172172, February 24, 2009

FIRST DIVISION

SPS. ERNESTO V. YU AND


ELSIE ONG YU,
Petitioners,
- versus -

G.R. No. 172172


Present:
PUNO, C.J., Chairperson,
CARPIO,
CORONA,
LEONARDO-DE CASTRO, and
BRION, JJ.

BALTAZAR N. PACLEB,
(Substituted by ANTONIETA S.
PACLEB, LORNA PACLEBPromulgated :
GUERRERO, FLORENCIO C.
PACLEB, and MYRLA C. PACLEB),
Respondents.
February 24, 2009
x------------------------------------------------x
DECISION
PUNO, C.J.:

Before the Court is a Petition filed under Rule 45 of the Rules of Court
assailing: (i) the Decision[1] dated August 31, 2005 of the Court of Appeals in CAG.R. CV No. 78629 setting aside the Decision[2] dated December 27, 2002 of the
Regional Trial Court in Civil Case No. 1325-96; and (ii) the Resolution[3] dated April
3, 2006 of the Court of Appeals denying reconsideration of the said decision.
The facts are well established.

45

Respondent Baltazar N. Pacleb and his late first wife, Angelita Chan, are the
registered owners of an 18,000-square meter parcel of land in Barrio Langcaan,
Dasmarias, Cavite, covered by Transfer Certificate of Title (TCT) No. T-118375[4]
(Langcaan Property).
In 1992, the Langcaan Property became the subject of three (3) documents
purporting to transfer its ownership. On February 27, 1992, a Deed of Absolute
Sale[5] was entered into between Spouses Baltazar N. Pacleb and Angelita Chan
and Rebecca Del Rosario. On May 7, 1992, a Deed of Absolute Sale[6] was entered
into between Rebecca Del Rosario and Ruperto L. Javier (Javier). On November 10,
1992, a Contract to Sell[7] was entered into between Javier and petitioner spouses
Ernesto V. Yu and Elsie Ong Yu. In their contract, petitioner spouses Yu agreed to pay
Javier a total consideration of P900,000. Six hundred thousand pesos (P600,000)
(consisting of P200,000 as previous payment and P400,000 to be paid upon
execution of the contract) was acknowledged as received by Javier and P300,000
remained as balance. Javier undertook to deliver possession of the Langcaan
Property and to sign a deed of absolute sale within thirty (30) days from execution
of the contract.
All the aforementioned sales were not registered.
On April 23, 1993, petitioner spouses Yu filed with the Regional Trial Court of
Imus, Cavite, a Complaint[8] for specific performance and damages against Javier,
docketed as Civil Case No. 741-93, to compel the latter to deliver to them ownership
and possession, as well as title to the Langcaan Property. In their Complaint, they
alleged that Javier represented to them that the Langcaan Property was not
tenanted. However, after they already paid P200,000 as initial payment and
entered into an Agreement dated September 11, 1992 for the sale of the Langcaan
Property, they discovered it was tenanted by Ramon C. Pacleb (Ramon).[9]
Petitioner spouses demanded the cancellation of their agreement and the return of
their initial payment. Thereafter, petitioner spouses and Javier verified from Ramon
if he was willing to vacate the property and the latter was agreeable. Javier then
promised to make arrangements with Ramon to vacate the property and to pay the
latter his disturbance compensation. Hence, they proceeded to enter into a
Contract to Sell canceling the Agreement mentioned. However, Javier failed to
comply with his obligations.
Javier did not appear in the proceedings and was declared in default. On
September 8, 1994, the trial court rendered a Decision,[10] the dispositive portion
of which reads:
WHEREFORE, judgment is hereby rendered for the plaintiff and against the
defendant based on the sale of subject parcel of land to the former who is entitled
thereby to the ownership and possession thereof from the said defendant who is
further directed to pay damages of Thirty Thousand Pesos (P30,000.00) including
attorneys fees and expenses incurred by the plaintiff in this case as a consequence.
The defendant is further directed to deliver the certificate of title of the land to the
plaintiff who is entitled to it as transferee and new owner thereof upon payment by
the plaintiff of his balance of the purchase price in the sum of Three Hundred
Thousand Pesos (P300,000.00) with legal interest from date.
SO ORDERED.
The said Decision and its Certificate of Finality[11] were annotated on TCT No.
T-118375 as Entry No. 2676-75[12] and Entry No. 2677-75,[13] respectively.
On March 10, 1995, petitioner spouses and Ramon and the latters wife,
Corazon Bodino, executed a Kusangloob na Pagsasauli ng Lupang Sakahan at
Pagpapahayag ng Pagtalikod sa Karapatan.[14]
Under the said agreement,

46

petitioner spouses paid Ramon the amount of P500,000 in exchange for the waiver
of his tenancy rights over the Langcaan Property.
On October 12, 1995, respondent filed a Complaint[15] for annulment of deed
of sale and other documents arising from it, docketed as Civil Case No. 1199-95. He
alleged that the deed of sale purportedly executed between him and his late first
wife and Rebecca Del Rosario was spurious as their signatures thereon were
forgeries. Respondent moved to have summons served upon Rebecca Del Rosario
by publication since the latters address could not be found. The trial court,
however, denied his motion.[16] Respondent then moved to dismiss the case, and
the trial court granted the motion in its Order[17] dated April 11, 1996, dismissing
the case without prejudice.
Meanwhile, on November 23, 1995, petitioner spouses filed an action for forcible
entry against respondent with the Municipal Trial Court (MTC). They alleged that
they had prior physical possession of the Langcaan Property through their trustee,
Ramon, until the latter was ousted by respondent in September 1995. The MTC
ruled in favor of petitioner spouses, which decision was affirmed by the Regional
Trial Court.[18] However, the Court of Appeals set aside the decisions of the lower
courts and found that it was respondent who had prior physical possession of the
property as shown by his payment of real estate taxes thereon.[19]
On May 29, 1996, respondent filed the instant case for removal of cloud from title
with damages to cancel Entry No. 2676-75 and Entry No. 2677-75, the annotated
Decision in Civil Case No. 741-93 and its Certificate of Finality, from the title of the
Langcaan Property.[20] Respondent alleged that the deed of sale between him and
his late first wife and Rebecca Del Rosario, who is not known to them, could not
have been possibly executed on February 27, 1992, the date appearing thereon. He
alleged that on said date, he was residing in the United States[21] and his late first
wife, Angelita Chan, died twenty (20) years ago.[22]
On May 28, 1997, during the pendency of the instant case before the trial
court, respondent died without having testified on the merits of his case. Hence, he
was substituted by his surviving spouse, Antonieta S. Pacleb, and Lorna PaclebGuerrero, Florencio C. Pacleb and Myrla C. Pacleb representing the children with the
first wife.[23]
On December 27, 2002, the trial court dismissed respondents case and held
that petitioner spouses are purchasers in good faith.[24] The trial court ratiocinated
that the dismissal of respondents complaint for annulment of the successive sales
at his instance sealed the regularity of the purchase[25] by petitioner spouses
and that he in effect admits that the said salewas valid and in order.[26]
Further, the trial court held that the Decision in Civil Case No. 741-93 on petitioner
spouses action for specific performance against Javier is already final and can no
longer be altered. Accordingly, the trial court ordered the cancellation of TCT No. T118375 in the name of respondent and the issuance of a new title in the name of
petitioner spouses. The trial court also ordered the heirs of respondent and all
persons claiming under them to surrender possession of the Langcaan Property to
petitioner spouses.
On appeal by respondent, the Court of Appeals reversed and set aside the
decision of the trial court.[27] The Court of Appeals ruled that petitioner spouses
are not purchasers in good faith and that the Decision in Civil Case No. 741-93 did
not transfer ownership of the Langcaan Property to them. Accordingly, the appellate
court ordered the cancellation of the annotation of the Decision in Civil Case No.
741-93 on the title of the Langcaan Property. The Court of Appeals denied
reconsideration of said decision.[28]
Hence, this Petition.

47

Two issues are involved in the instant petition. The first is whether petitioner
spouses are innocent purchasers for value and in good faith. The second is whether
ownership over the Langcaan Property was properly vested in petitioner spouses by
virtue of the Decision in Civil Case No. 741-93.
Petitioner spouses argue that they are purchasers in good faith. Further, they
contend that the Court of Appeals erred in finding that: Ramon told him [Ernesto V.
Yu] that the property is owned by his father, Baltazar, and that he is the mere
caretaker thereof[29] since Ramon clarified that his father was the former owner of
the Langcaan Property. In support of their stance, they cite the following testimony
of petitioner Ernesto V. Yu:
Atty. Abalos:
Mr. Witness, you testified during the direct that you acquired the
subject property from one Ruperto Javier, when for the first time have you come to
know Mr. Ruperto Javier?
A:
I first came to
know him in the year 1992 when he was
accompanied by Mr. Kalagayan. He showed me some papers to the office.
Q:

Do you know the exact date Mr. Witness?

A:

I forgot the exact date, maam.

Q:

More or less can you estimate what month?

A:

Sometime in February or March 1992.

Q:
When you said that the subject property was offered to you for sale,
what did you do Mr. Witness, in preparation for a transaction?
A:
I asked my lawyer Atty. Florencio Paredes to check and verify the
Deed of Sale.
Q:
And after Atty. Florencio Paredes verified the document you decided
to buy the property?
A:

No, maam. We visited the place.

Q:

When was that?

A:
I could not remember the exact date but I visited the place and I met
the son, Ramon Pacleb. I went there in order to verify if the property is existing.
When I verified that the property is existing Mr. Javier visited me again to follow-up
what decision I have but I told him that I will wait for my lawyers advi[c]e.
Q:

Mr. Witness, what particular instruction did you give to your lawyer?

A:

To verify the title and the documents.

Court:

Documents for the title?

A:

Yes, Your Honor.

Atty. Abalos:
registered?
A:

When you were able to get the title in whose name the title was
It was registered in the name of the older Pacleb.

Court:
By the way Mr. Witness, when you said you met Ramon Pacleb the
son of the owner of the property, was he residing there or he was (sic) just went

48

there? When you visited the property did you find him to be residing in that
property?
A:

No, Your Honor.

Atty. Abalos:
You mean to say Mr. Witness, you just met Mr. Ramon Pacleb in the
place at the time you went there?
A:
No, maam. He went to my office with Mr. Kalagayan. He was
introduced to me at the Kelly Hardware. I do not know Mr. Ruperto Javier. He told
me that there is a property that [is] tenanted and occupied by the son Ramon
Pacleb after that I went with them to visit the place. On (sic) there he introduced
me [to] Mr. Ramon Pacleb the caretaker of the property and I told them that I will
still look at the property and he gave me some documents and that (sic) documents
I gave it to my lawyer for verification.
Q:
You said that Mr. Ruperto Javier went to your office with Mr.
Kalagayan, so the first time you visited the property you did not see Mr. Ramon
Pacleb there?
A:
No, maam. When I went there I met Ramon Pacleb the caretaker
and he was the one who showed the place to us.
Q:
Mr. Witness, since you visited the place you were able to see the
allege[d] caretaker Mr. Ramon Pacleb, did you ask him regarding the property or the
whereabouts of the registered owner, did you ask him?
A:
When Ruperto introduced me to Mr. Ramon Pacleb he told me that
he is the son of the owner and he is the caretaker and his father is in the States. He
showed me the place, I verified and I saw the monuments and I told him I will come
back to check the papers and if it is okay I will bring with me the surveyor.
Q:
Could you estimate Mr. Witness, more or less what was the month
when you were able to talk to Mr. Ramon Pacleb?
A:

I am not sure but it was morning of February.

Q:

So it was in February, Mr. Witness?

A:

I am not sure if February or March.

Q:

But definitely

A:

Before I purchased the property I checked the property.

Q:
But that was definitely after Mr. Ruperto offered to you for sale the
subject property?
xxx
Atty. Abalos: Okay, Mr. Witness, you said that you talked to Mr. Ramon Pacleb and
he told you that his father is the owner of the property?
A:
He told me that property is their former property and it was owned
by them. Now, he is the tenant of the property.[30] (Emphasis ours)

Petitioner spouses conclude that based on their personal inspection of the property
and the representations of the registered tenant thereon, they had no reason to
doubt the validity of the deeds of absolute sale since these were duly notarized.
49

Consequently, the alleged forgery of Angelita Chans signature is of no moment


since they had no notice of any claim or interest of some other person in the
property despite their diligent inquiry.
We find petitioner spouses contentions without merit.
At the outset, we note that in petitioner Ernesto V. Yus testimony, he stated
that he inspected the Langcaan Property and talked with the tenant, Ramon, before
he purchased the same. However, in his Complaint for specific performance and
damages which he filed against Javier, he alleged that it was only after he had
entered into an Agreement for the sale of the property and his initial payment of
P200,000 that he discovered that the property was indeed being tenanted by
Ramon who lives in the said farm, viz.:
8.
Sometime on September 11, 1992, defendant came again to the Office of
plaintiff reiterating his offer to sell said Lot No. 6853-D, containing an area of 18,000
square meters, at P75.00 per square meters (sic). Defendant manifested to the
plaintiff that if his offer is acceptable to the plaintiff, he binds and obligates himself
to pay the capital gains of previous transactions with the BIR and register subject
Lot No. 6853-D in his name (defendant). On these conditions, plaintiff accepted the
offer and made [the] initial payment of TWO HUNDRED THOUSAND PESOS
(P200,000.00) to defendant by issuance and delivery of plaintiffs personal check.
9.
Sometime on September 11, 1992, plaintiff and defendant signed an
AGREEMENT on the sale of Lot No. 6853-D of the subdivision plan (LRC) Psd-282604,
containing an area of 18,000 square meters, more or less, located at Bo. Langcaan,
Municipality of Dasmarinas, Province of Cavite, at a selling price of P75.00 per
square meter. A xerox copy of this AGREEMENT signed by the parties thereto is
hereto attached and marked as ANNEX D of this complaint.
10.
Thereafter, however, plaintiff and defendant, with their surveyor
discovered that subject Lot No. 6853-D offered for sale to the plaintiff is indeed
being tenanted by one RAMON PACLEB who lives in the said farm.
11.
In view of the foregoing developments, plaintiff informed defendant that
he wanted the Agreement be cancelled and for the defendant to return the sum of
TWO HUNDRED THOUSAND PESOS (P200,000.00).[31] (Emphasis supplied)
This inconsistency casts grave doubt as to whether petitioner spouses personally
inspected the property before purchasing it.
More importantly, however, several facts should have put petitioner spouses on
inquiry as to the alleged rights of their vendor, Javier, over the Langcaan Property.
First, it should be noted that the property remains to be registered in the name of
respondent despite the two (2) Deeds of Absolute Sale[32] purporting to transfer
the Langcaan Property from respondent and his late first wife, Angelita Chan, to
Rebecca Del Rosario then from the latter to Javier. Both deeds were not even
annotated in the title of the Langcaan Property.
Second, a perusal of the two deeds of absolute sale reveals that they were executed
only about two (2) months apart and that they contain identical provisions.
Third, it is undisputed that the Langcaan Property is in the possession of Ramon, the
son of the registered owner. Regardless of the representations given by the latter,
this bare fact alone should have made petitioner spouses suspicious as to the
veracity of the alleged title of their vendor. Moreover, as noted by the Court of
Appeals, petitioner spouses could have easily verified the true status of the
Langcaan Property from Ramons wife, since the latter is their relative, as averred in
paragraph 13 of their Answer in Civil Case No. 1199-95.[33] The case law is well
settled, viz.:

50

The law protects to a greater degree a purchaser who buys from the registered
owner himself. Corollarily, it requires a higher degree of prudence from one who
buys from a person who is not the registered owner, although the land object of the
transaction is registered. While one who buys from the registered owner does not
need to look behind the certificate of title, one who buys from one who is not the
registered owner is expected to examine not only the certificate of title but all
factual circumstances necessary for him to determine if there are any flaws in the
title of the transferor, or in his capacity to transfer the land.
This Court has consistently applied the stricter rule when it comes to deciding the
issue of good faith of one who buys from one who is not the registered owner, but
who exhibits a certificate of title.[34] (Emphasis supplied)
Finally, as correctly pointed out by the Court of Appeals, the dismissal of Civil Case
No. 1199-95 (the action to annul the successive sales of the property) cannot serve
to validate the sale to petitioner spouses since the dismissal was ordered because
Rebecca Del Rosario and Javier could no longer be found. Indeed, the dismissal was
without prejudice.
Based on the foregoing, therefore, petitioner spouses cannot be considered as
innocent purchasers in good faith.
We now go to the second issue.
Petitioner spouses argue that the decision of the Regional Trial Court in Civil
Case No. 741-93 as to the rightful owner of the Langcaan Property is conclusive and
binding upon respondent even if the latter was not a party thereto since it involved
the question of possession and ownership of real property, and is thus not merely
an action in personam but an action quasi in rem.
In Domagas v. Jensen,[35] we distinguished between actions in personam and
actions quasi in rem.
The settled rule is that the aim and object of an action determine its character.
Whether a proceeding is in rem, or in personam, or quasi in rem for that matter, is
determined by its nature and purpose, and by these only. A proceeding in personam
is a proceeding to enforce personal rights and obligations brought against the
person and is based on the jurisdiction of the person, although it may involve his
right to, or the exercise of ownership of, specific property, or seek to compel him to
control or dispose of it in accordance with the mandate of the court. The purpose of
a proceeding in personam is to impose, through the judgment of a court, some
responsibility or liability directly upon the person of the defendant. Of this character
are suits to compel a defendant to specifically perform some act or actions to fasten
a pecuniary liability on him. An action in personam is said to be one which has for
its object a judgment against the person, as distinguished from a judgment against
the propriety (sic) to determine its state. It has been held that an action in
personam is a proceeding to enforce personal rights or obligations; such action is
brought against the person.
xxx
On the other hand, a proceeding quasi in rem is one brought against persons
seeking to subject the property of such persons to the discharge of the claims
assailed. In an action quasi in rem, an individual is named as defendant and the
purpose of the proceeding is to subject his interests therein to the obligation or loan
burdening the property. Actions quasi in rem deal with the status, ownership or
liability of a particular property but which are intended to operate on these
questions only as between the particular parties to the proceedings and not to

51

ascertain or cut off the rights or interests of all possible claimants. The judgments
therein are binding only upon the parties who joined in the action.

Civil Case No. 741-93 is an action for specific performance and damages filed
by petitioner spouses against Javier to compel performance of the latters
undertakings under their Contract to Sell. As correctly held by the Court of Appeals,
its object is to compel Javier to accept the full payment of the purchase price, and to
execute a deed of absolute sale over the Langcaan Property in their favor. The
obligations of Javier under the contract to sell attach to him alone, and do not
burden the Langcaan Property.[36]
We have held in an unbroken string of cases that an action for specific performance
is an action in personam.[37]
In Cabutihan v. Landcenter Construction and
Development Corporation,[38] we ruled that an action for specific performance
praying for the execution of a deed of sale in connection with an undertaking in a
contract, such as the contract to sell, in this instance, is an action in personam.
Being a judgment in personam, Civil Case No. 741-93 is binding only upon the
parties properly impleaded therein and duly heard or given an opportunity to be
heard.[39] Therefore, it cannot bind respondent since he was not a party therein.
Neither can respondent be considered as privy thereto since his signature and that
of his late first wife, Angelita Chan, were forged in the deed of sale.
All told, we affirm the ruling of the Court of Appeals finding that, as between
respondent and petitioner spouses, respondent has a better right over the Langcaan
Property as the true owner thereof.
IN VIEW WHEREOF, the petition is DENIED. The decision of the Court of Appeals is
affirmed. Costs against petitioners.
SO ORDERED.

REYNATO S. PUNO
Chief Justice

b) Action in Rem
Gomez v. Court of Appeals, G.R. No. 127692, March 10, 2004

/---!e-library! 6.0 Philippines Copyright 2000 by Sony Valdez---\


[2004V270] FORTUNATO GOMEZ and AURORA GOMEZ, petitioners, vs. COURT OF
APPEALS, ADOLFO TROCINO and MARIANO TROCINO, respondents.2004 Mar 102nd
DivisionG.R. No. 127692D E C I S I O N
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court assailing the decision[1] of the Court of Appeals dated September 30, 1996, in
CA-G.R. SP No. 40067, nullifying the decision and orders of the Regional Trial Court
of Cebu City (Branch 10) in Civil Case No. CEB-11103, for want of jurisdiction.
Civil Case No. CEB-11103 is an action for specific performance and/or rescission
filed by herein petitioners, spouses Fortunato and Aurora Gomez, against the heirs
of Jesus J. Trocino, Sr., which include herein respondents and their mother Caridad
Trocino.[2]

52

Filed on December 16, 1991, the complaint alleges: Some time in 1975, the
spouses Jesus and Caridad Trocino mortgaged two parcels of land covered by TCT
Nos. 10616 and 31856 to Dr. Clarence Yujuico. The mortgage was subsequently
foreclosed and the properties sold at public auction on July 11, 1988, and before the
expiry of the redemption period, the spouses Trocino sold the property to petitioners
on December 12, 1989, who in turn, redeemed the same from Dr. Yujuico. The
spouses Trocino, however, refused to convey ownership of the properties to
petitioners, hence, the complaint.
On January 10, 1992, the trial courts Process Server served summons on
respondents, in the manner described in his Return of Service, to wit:
Respectfully returned to the Branch Clerk of Court, Regional Trial Court of Cebu,
Branch 10, the herein attached original summons issued in the above-entitled case
with the information that on January 8, 1992 summons and copies of the complaint
were served to the defendants Jacob, Jesus Jr., Adolfo, Mariano, Consolacion, Alice,
Racheal thru defendant Caridad Trocino at their given address at Maria Cristina
Extension (besides Sacred Heart School for Girls), Cebu City, evidence by her
signature found at the lower portion of the original summons.[3]
WHEREFORE I, respectfully return the original summons duly served to the court of
origin.
Cebu City, Philippines, January 10, 1992.
(signed)
DELFIN D. BARNIDO
RTC Process Server
On January 27, 1992, the defendants, through their counsel Atty. Expedito P.
Bugarin, filed their Answer. Defendant Caridad A. Trocino, respondents mother,
verified said pleading.[4]
After trial on the merits, the RTC rendered its decision on March 1993, with the
following disposition:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiffs and against the defendants.
The latter are hereby ordered to jointly and severally execute a Deed of Sale in
favor of the plaintiffs and to deliver the owners duplicate copies of TCT Nos. 10616
and 31856, covering the properties sold, to the plaintiffs within ten (10) days from
the finality of the judgment, after which plaintiffs shall pay in turn to the defendants
the balance of P2,000,000.00. Otherwise, the sale is rescinded and revoked and the
defendants are directed to return to the plaintiffs the amount of P500,000.00, with
interest of 12% per annum computed from December 6, 1989, until the full amount
is paid.
In addition thereto, defendants are to pay jointly and severally to the plaintiffs, the
amount of P50,000.00 as moral damages; P20,000.00 as exemplary damages;
P40,000.00 by way of attorneys fees; and P10,000.00 as litigation expenses.
SO ORDERED.[5]
Due to the defendants failure to deliver the owners duplicate of TCT Nos. 10616
and 31856, the RTC issued an order on August 29, 1995 declaring said titles null
and void, and ordering the Register of Deeds of Cebu City to issue new titles in the
name of herein petitioners.[6]

53

Thereafter, or on March 13, 1996, respondents Adolfo and Mariano Trocino filed with
the Court of Appeals, a petition for the annulment of the judgment rendered by the
RTC-Cebu (Branch 10) in Civil Case No. CEB-11103. Private respondents alleged
that the trial courts decision is null and void on the ground that it did not acquire
jurisdiction over their persons as they were not validly served with a copy of the
summons and the complaint. According to them, at the time summons was served
on them, Adolfo Trocino was already in Ohio, U.S.A., and has been residing there for
25 years, while Mariano Trocino was in Talibon, Bohol, and has been residing there
since 1986. They also refuted the receipt of the summons by Caridad A. Trocino,
and the representation made by Atty. Bugarin in their behalf. Respondents also
contended that they have a meritorious defense.[7] Petitioners filed their
Comment/Answer to the petition.[8]
On September 30, 1996, the Court of Appeals issued the assailed Decision granting
the petition and annulling the decision of the RTC-Cebu (Branch 10). The decretal
portion of the decision reads:
WHEREFORE, the decision of the Regional Trial Court of Cebu City, Branch 10, in
Civil Case No. CEB-11103 as well as all Orders issued to implement the same are
hereby ANNULLED AND SET ASIDE. The Register of Deeds of Cebu City is hereby
ENJOINED from cancelling Transfer Certificates of Title Nos. 10616 and 31856. No
pronouncement as to costs.
SO ORDERED.[9]
Their motion for reconsideration having been denied by the Court of Appeals,
petitioners filed the present petition, setting forth the following assignment of
errors:
I. THE COURT OF APPEALS ERRED IN FINDING LACK OF PRIOR KNOWLEDGE ON THE
PART OF RESPONDENTS TROCINO, REGARDING THE PROCEEDINGS BEFORE THE RTC
OF CEBU CITY AND IN NOT DISMISSING THE PETITION FOR VIOLATION OF SUPREME
COURT CIRCULAR 04-94.
II. THE COURT OF APPEALS ERRED IN DECLARING THE NEED FOR PERSONAL
AND/OR EXTRATERRITORIAL SERVICE OF SUMMONS, DESPITE THE NATURE OF THE
CAUSE OF ACTION BEING ONE IN REM.
III. THE COURT OF APPEALS ERRED IN ANNULLING THE JUDGMENT, CAUSING
FURTHER USELESS LITIGATION AND UNNECESSARY EXPENSE ON PETITIONERS AND
RESPONDENTS, ESPECIALLY SINCE RESPONDENTS HAVE NOT SHOWN ANY VALID
DEFENSE AS GROUND FOR REVERSAL OF JUDGMENT OF THE RTC.
IV. THE COURT OF APPEALS ERRED IN RULING THAT ITS JUDGMENT IS APPLICABLE IN
FAVOR OF CARIDAD TROCINO.[10]
Summons is a writ by which the defendant is notified of the action brought against
him. Service of such writ is the means by which the court acquires jurisdiction over
his person.[11] Any judgment without such service in the absence of a valid waiver
is null and void.[12]
The resolution of the present petition hinges on the issue of whether or not
summons was effectively served on respondents. If in the affirmative, the trial court
had validly acquired jurisdiction over their persons and therefore its judgment is
valid.
To resolve whether there was valid service of summons on respondents, the nature
of the action filed against them must first be determined. As the Court explained in
Asiavest Limited vs. Court of Appeals, it will be helpful to determine first whether
the action is in personam, in rem, or quasi in rem because the rules on service of

54

summons under Rule 14 of the Rules of Court of the Philippines apply according to
the nature of the action.[13]
In actions in personam, summons on the defendant must be served by handing a
copy thereof to the defendant in person, or, if he refuses to receive it, by tendering
it to him. This is specifically provided in Section 7, Rule 14 of the Rules of Court,[14]
which states:
SEC. 7. Personal service of summons.-- The summons shall be served by handing a
copy thereof to the defendant in person or, if he refuses to receive it, by tendering it
to him.
If efforts to find defendant personally makes prompt service impossible, substituted
service may be effected by leaving copies of the summons at the defendant's
dwelling house or residence with some person of suitable age and discretion then
residing therein, or by leaving the copies at the defendant's office or regular place
of business with some competent person in charge thereof.[15] In substituted
service, it is mandated that the fact of impossibility of personal service should be
explained in the proof of service.[16]
When the defendant in an action in personam is a non-resident who does not
voluntarily submit himself to the authority of the court, personal service of
summons within the State is essential to the acquisition of jurisdiction over his
person. This cannot be done if the defendant is not physically present in the
country, and thus, the court cannot acquire jurisdiction over his person and
therefore cannot validly try and decide the case against him.[17] An exception was
accorded in Gemperle vs. Schenker wherein service of summons through the nonresidents wife, who was a resident of the Philippines, was held valid, as the latter
was his representative and attorney-in-fact in a prior civil case filed by the nonresident, and the second case was merely an offshoot of the first case.[18]
Meanwhile, in actions in rem or quasi in rem, jurisdiction over the person of the
defendant is not a prerequisite to confer jurisdiction on the court provided that the
court acquires jurisdiction over the res, although summons must be served upon the
defendant in order to satisfy the due process requirements.[19] Thus, where the
defendant is a non-resident who is not found in the Philippines, and (1) the action
affects the personal status of the plaintiff; (2) the action relates to, or the subject
matter of which is property in the Philippines in which the defendant has or claims a
lien or interest; (3) the action seeks the exclusion of the defendant from any interest
in the property located in the Philippines; or (4) the property of the defendant has
been attached in the Philippines, summons may be served extraterritorially by (a)
personal service out of the country, with leave of court; (b) publication, also with
leave of court; or (c) any other manner the court may deem sufficient.[20]
In the present case, petitioners cause of action in Civil Case No. CEB-11103 is
anchored on the claim that the spouses Jesus and Caridad Trocino reneged on their
obligation to convey ownership of the two parcels of land subject of their sale.
Thus, petitioners pray in their complaint that the spouses Trocino be ordered to
execute the appropriate deed of sale and that the titles be delivered to them
(petitioners); or in the alternative, that the sale be revoked and rescinded; and
spouses Trocino ordered to return to petitioners their down payment in the amount
of P500,000.00 plus interests. The action instituted by petitioners affect the parties
alone, not the whole world. Hence, it is an action in personam, i.e., any judgment
therein is binding only upon the parties properly impleaded.[21]
Contrary to petitioners belief, the complaint they filed for specific performance
and/or rescission is not an action in rem. While it is a real action because it affects
title to or possession of the two parcels of land covered by TCT Nos. 10616 and
31856, it does not automatically follow that the action is already one in rem. In
Hernandez vs. Rural Bank of Lucena, Inc., the Court made the following distinction:

55

In a personal action, the plaintiff seeks the recovery of personal property, the
enforcement of a contract or the recovery of damages. In a real action, the plaintiff
seeks the recovery of real property, or, as indicated in section 2(a) of Rule 4, a real
action is an action affecting title to real property or for the recovery of possession,
or for partition or condemnation of, or foreclosure of a mortgage on, real property.
An action in personam is an action against a person on the basis of his personal
liability, while an action in rem is an action against the thing itself, instead of
against the person. Hence, a real action may at the same time be an action in
personam and not necessarily an action in rem.[22]
The objective sought in petitioners complaint was to establish a claim against
respondents for their alleged refusal to convey to them the title to the two parcels
of land that they inherited from their father, Jesus Trocino, who was one of the
sellers of the properties to petitioners. Hence, to repeat, Civil Case No. CEB-11103
is an action in personam because it is an action against persons, namely, herein
respondents, on the basis of their personal liability. As such, personal service of
summons upon the defendants is essential in order for the court to acquire of
jurisdiction over their persons.[23]
A distinction, however, must be made with regard to service of summons on
respondents Adolfo Trocino and Mariano Trocino. Adolfo Trocino, as records show, is
already a resident of Ohio, U.S.A. for 25 years. Being a non-resident, the court
cannot acquire jurisdiction over his person and validly try and decide the case
against him.
On the other hand, Mariano Trocino has been in Talibon, Bohol since 1986. To validly
acquire jurisdiction over his person, summons must be served on him personally, or
through substituted service, upon showing of impossibility of personal service. Such
impossibility, and why efforts exerted towards personal service failed, should be
explained in the proof of service. The pertinent facts and circumstances attendant
to the service of summons must be stated in the proof of service or Officers Return.
Failure to do so would invalidate all subsequent proceedings on jurisdictional
grounds.[24]
In the present case, the process server served the summons and copies of the
complaint on respondents Jacob, Jesus, Jr., Adolfo, Mariano, Consolacion, Alice and
Racheal,[25] through their mother, Caridad Trocino.[26] The return did not contain
any particulars as to the impossibility of personal service on Mariano Trocino within
a reasonable time. Such improper service renders the same ineffective.
Due process of law requires personal service to support a personal judgment, and,
when the proceeding is strictly in personam brought to determine the personal
rights and obligations of the parties, personal service within the state or a voluntary
appearance in the case is essential to the acquisition of jurisdiction so as to
constitute compliance with the constitutional requirement of due process.[27]
Moreover, inasmuch as the sheriffs return failed to state the facts and
circumstances showing the impossibility of personal service of summons upon
respondents within a reasonable time, petitioners should have sought the issuance
of an alias summons. Under Section 5, Rule 14 of the Rules of Court, alias summons
may be issued when the original summons is returned without being served on any
or all of the defendants.[28] Petitioners, however, did not do so, and they should
now bear the consequences of their lack of diligence.
The fact that Atty. Expedito Bugarin represented all the respondents without any
exception does not transform the ineffective service of summons into a valid one. It
does not constitute a valid waiver or even a voluntary submission to the trial courts
jurisdiction. There was not even the slightest proof showing that respondents
authorized Atty. Bugarins appearance for and in their behalf. As found by the Court
of Appeals:

56

While Caridad Trocino may have engaged the services of Atty. Bugarin, it did not
necessarily mean that Atty. Bugarin also had the authority to represent the
defendant heirs. The records show that in all the pleadings which required
verification, only Caridad Trocino signed the same. There was never a single
instance where defendant heirs signed the pleading. The fact that a pleading is
signed by one defendant does not necessarily mean that it is binding on a codefendant. Furthermore, Caridad Trocino represented herself as the principal
defendant in her Motion to Withdraw Appeal. (Rollo, p. 80)
Since the defendant heirs are co-defendants, the trial court should have verified the
extent of Atty. Bugarins authority when petitioners failed to appear as early as the
pre-trial stage, where the parties are required to appear. The absence of the
defendant heirs should have prompted the trial court to inquire from the lawyer
whether he was also representing the other petitioners. As co-defendant and coheirs over the disputed properties, the defendant heirs had every right to be
present during the trial. Only Caridad Trocino appeared and testified on her own
behalf. All the defenses raised were her own, not the defendant heirs.[29]
Consequently, the judgment sought to be executed against respondents were
rendered without jurisdiction as there was neither a proper service of summons nor
was there any waiver or voluntary submission to the trial courts jurisdiction.
Hence, the same is void, with regard to private respondents except Caridad Trocino.
It must be pointed out that while it was the spouses Jesus and Caridad Trocino who
sold the properties to petitioners, their right to proceed against Jesus Trocino when
he died was passed on to his heirs, which includes respondents and Caridad Trocino.
Such transmission of right occurred by operation of law, more particularly by
succession, which is a mode of acquisition by virtue of which the property, rights
and obligations to the extent of the value of the inheritance of a person are
transmitted.[30] When the process server personally served the summons on
Caridad Trocino, the trial court validly acquired jurisdiction over her person alone.
Hence, the trial courts decision is valid and binding with regard to her, but only in
proportion to Caridad Trocinos share. As aptly stated by the Court of Appeals:
This Courts decision is therefore applicable to all the defendant heirs with the
exception of defendant Caridad Trocino considering that it was the latter who
entered into the alleged sale without the consent of her husband. She is therefore
estopped from questioning her own authority to enter into the questioned sale.
Moreover, Caridad Trocino was validly served with summons and was accorded due
process.[31]
WHEREFORE, the petition for review is DENIED.
Appeals in CA-G.R. SP No. 40067 is AFFIRMED.

The decision of the Court of

Costs against petitioners.


SO ORDERED.
Quisumbing, (Acting Chairman), Callejo, Sr., and Tinga, JJ., concur.
Puno, (Chairman), J., on leave.

c) Action Quasi in Rem


Spouses Yu v. Pacleb, G.R. No. 172172, February 24, 2009 (Supra.)

57

Asiavest Ltd. v. Court of Appeals, G.R. No. 128803, September 25, 1998

/---!e-library! 6.0 Philippines Copyright 2000 by Sony Valdez---\


[1998V648] ASIAVEST LIMITED, petitioner, vs. THE COURT OF APPEALS AND
ANTONIO HERAS, respondents.1998 Sep 251st DivisionG.R. No. 128803D E C I S I O
N
DAVIDE, JR., J.:
In issue is the enforceability in the Philippines of a foreign judgment. The
antecedents are summarized in the 24 August 1990 Decision1 [Annex "B" of
Petition; Rollo, 66-74. Per Judge (now Associate Justice of the Court of Appeals)
Delilah Vidallon Magtolis.] of Branch 107 of the Regional Trial Court of Quezon City
in Civil Case No. Q-52452; thus:
The plaintiff Asiavest Limited filed a complaint on December 3, 1987 against the
defendant Antonio Heras praying that said defendant be ordered to pay to the
plaintiff the amounts awarded by the Hong Kong Court Judgment dated December
28, 1984 and amended on April 13, 1987, to wit:
1) US$1,810,265.40 or its equivalent in Hong Kong currency at the time of
payment with legal interest from December 28, 1984 until fully paid;
2) interest on the sum of US$1,500.00 at 9.875% per annum from October 31,
1984 to December 28, 1984; and
3) HK$905.00 at fixed cost in the action; and
4) at least $80,000.00 representing attorneys fees, litigation expenses and cost,
with interest thereon from the date of the judgment until fully paid.
On March 3, 1988, the defendant filed a Motion to Dismiss. However, before the
court could resolve the said motion, a fire which partially razed the Quezon City Hall
Building on June 11, 1988 totally destroyed the office of this Court, together with all
its records, equipment and properties. On July 26, 1988, the plaintiff, through
counsel filed a Motion for Reconstitution of Case Records. The Court, after allowing
the defendant to react thereto, granted the said Motion and admitted the annexes
attached thereto as the reconstituted records of this case per Order dated
September 6, 1988. Thereafter, the Motion to Dismiss, the resolution of which had
been deferred, was denied by the Court in its Order of October 4, 1988.
On October 19, 1988, defendant filed his Answer. The case was then set for pre-trial
conference. At the conference, the parties could not arrive at any settlement.
However, they agreed on the following stipulations of facts:
1) The defendant admits the existence of the judgment dated December 28, 1984
as well as its amendment dated April 13, 1987, but not necessarily the authenticity
or validity thereof;
2) The plaintiff is not doing business and is not licensed to do business in the
Philippines;
3) The residence of defendant, Antonio Heras, is New Manila, Quezon City.
The only issue for this Court to determine is, whether or not the judgment of the
Hong Kong Court has been repelled by evidence of want of jurisdiction, want of
notice to the party, collusion, fraud or clear mistake of law or fact, such as to
overcome the presumption established in Section 50, Rule 39 of the Rules of Court
in favor of foreign judgments.

58

In view of the admission by the defendant of the existence of the aforementioned


judgment (Pls. See Stipulations of Facts in the Order dated January 5, 1989 as
amended by the Order of January 18, 1989), as well as the legal presumption in
favor of the plaintiff as provided for in paragraph (b), Sec. 50, (Ibid.), the plaintiff
presented only documentary evidence to show rendition, existence, and
authentication of such judgment by the proper officials concerned (Pls. See Exhibits
"A" thru "B", with their submarkings). In addition, the plaintiff presented testimonial
and documentary evidence to show its entitlement to attorneys fees and other
expenses of litigation -- .
On the other hand, the defendant presented two witnesses, namely, Fortunata dela
Vega and Russel Warren Lousich.
The gist of Ms. dela Vegas testimony is to the effect that no writ of summons or
copy of a statement of claim of Asiavest Limited was ever served in the office of the
Navegante Shipping Agency Limited and/or for Mr. Antonio Heras, and that no
service of the writ of summons was either served on the defendant at his residence
in New Manila, Quezon City. Her knowledge is based on the fact that she was the
personal secretary of Mr. Heras during his JD Transit days up to the latter part of
1972 when he shifted or diversified to shipping business in Hong Kong; that she was
in-charge of all his letters and correspondence, business commitments,
undertakings, conferences and appointments, until October 1984 when Mr. Heras
left Hong Kong for good; that she was also the Officer-in-Charge or Office Manager
of Navegante Shipping Agency LTD, a Hong Kong registered and based company
acting as ships agent, up to and until the company closed shop sometime in the first
quarter of 1985, when shipping business collapsed worldwide; that the said
company held office at 34-35 Connaught Road, Central Hong Kong and later
transferred to Caxton House at Duddel Street, Hong Kong, until the company closed
shop in 1985; and that she was certain of such facts because she held office at
Caxton House up to the first quarter of 1985.
Mr. Lousich was presented as an expert on the laws of Hong Kong, and as a
representative of the law office of the defendants counsel who made a verification
of the record of the case filed by the plaintiff in Hong Kong against the defendant,
as well as the procedure in serving Court processes in Hong Kong.
In his affidavit (Exh. "2") which constitutes his direct testimony, the said witness
stated that:
The defendant was sued on the basis of his personal guarantee of the obligations of
Compania Hermanos de Navegacion S.A. There is no record that a writ of summons
was served on the person of the defendant in Hong Kong, or that any such attempt
at service was made. Likewise, there is no record that a copy of the judgment of the
High Court was furnished or served on the defendant; anyway, it is not a legal
requirement to do so under Hong Kong laws;
a) The writ of summons or claim can be served by the solicitor (lawyer) of the
claimant or plaintiff. In Hong Kong there are no Court personnel who serve writs of
summons and/or most other processes.
b) If the writ of summons or claim (or complaint) is not contested, the claimant or
the plaintiff is not required to present proof of his claim or complaint nor present
evidence under oath of the claim in order to obtain a Judgment.
c) There is no legal requirement that such a Judgment or decision rendered by the
Court in Hong Kong [to] make a recitation of the facts or the law upon which the
claim is based.
d) There is no necessity to furnish the defendant with a copy of the Judgment or
decision rendered against him.

59

e) In an action based on a guarantee, there is no established legal requirement or


obligation under Hong Kong laws that the creditor must first bring proceedings
against the principal debtor. The creditor can immediately go against the guarantor.
On cross examination, Mr. Lousich stated that before he was commissioned by the
law firm of the defendants counsel as an expert witness and to verify the records of
the Hong Kong case, he had been acting as counsel for the defendant in a number
of commercial matters; that there was an application for service of summons upon
the defendant outside the jurisdiction of Hong Kong; that there was an order of the
Court authorizing service upon Heras outside of Hong Kong, particularly in Manila or
any other place in the Philippines (p. 9, TSN, 2/14/90); that there must be adequate
proof of service of summons, otherwise the Hong Kong Court will refuse to render
judgment (p. 10, ibid); that the mere fact that the Hong Kong Court rendered
judgment, it can be presumed that there was service of summons; that in this case,
it is not just a presumption because there was an affidavit stating that service was
effected in [sic] a particular man here in Manila; that such affidavit was filed by one
Jose R. Fernandez of the firm Sycip Salazar on the 21st of December 1984, and
stated in essence that "on Friday, the 23rd of November 1984 he served the 4th
defendant at No. 6 First Street, Quezon City by leaving it at that address with Mr.
Dionisio Lopez, the son-in-law of the 4th defendant the copy of the writ and Mr.
Lopez informed me and I barely believed that he would bring the said writ to the
attention of the 4th defendant" (pp. 11-12, ibid.); that upon filing of that affidavit,
the Court was asked and granted judgment against the 4th defendant; and that if
the summons or claim is not contested, the claimant of the plaintiff is not required
to present proof of his claim or complaint or present evidence under oath of the
claim in order to obtain judgment; and that such judgment can be enforced in the
same manner as a judgment rendered after full hearing.
The trial court held that since the Hong Kong court judgment had been duly proved,
it is a presumptive evidence of a right as between the parties; hence, the party
impugning it had the burden to prove want of jurisdiction over his person. HERAS
failed to discharge that burden. He did not testify to state categorically and under
oath that he never received summons. Even his own witness Lousich admitted that
HERAS was served with summons in his Quezon City residence. As to De la Vegas
testimony regarding non-service of summons, the same was hearsay and had no
probative value.
As to HERAS contention that the Hong Kong court judgment violated the
Constitution and the procedural laws of the Philippines because it contained no
statements of the facts and the law on which it was based, the trial court ruled that
since the issue related to procedural matters, the law of the forum, i.e., Hong Kong
laws, should govern. As testified by the expert witness Lousich, such legalities were
not required under Hong Kong laws. The trial court also debunked HERAS
contention that the principle of excussion under Article 2058 of the Civil Code of the
Philippines was violated. It declared that matters of substance are subject to the law
of the place where the transaction occurred; in this case, Hong Kong laws must
govern.
The trial court concluded that the Hong Kong court judgment should be recognized
and given effect in this jurisdiction for failure of HERAS to overcome the legal
presumption in favor of the foreign judgment. It then decreed; thus:
WHEREFORE, judgment is hereby rendered ordering defendant to pay to the plaintiff
the following sums or their equivalents in Philippine currency at the time of
payment: US$1,810,265.40 plus interest on the sum of US$1,500,000.00 at 9.875%
per annum from October 31, 1984 to December 28, 1984, and HK$905 as fixed cost,
with legal interests on the aggregate amount from December 28, 1984, and to pay
attorneys fees in the sum of P80,000.00.
ASIAVEST moved for the reconsideration of the decision. It sought an award of
judicial costs and an increase in attorneys fees in the amount of US$19,346.45 with

60

interest until full payment of the said obligations. On the other hand, HERAS no
longer opposed the motion and instead appealed the decision to the Court of
Appeals, which docketed the appeal as CA-G.R. CV No. 29513.
In its order2 [Original Record (OR), 326.] of 2 November 1990, the trial court
granted ASIAVESTs motion for reconsideration by increasing the award of
attorneys fees to "US$19,345.65 OR ITS EQUIVALENT IN PHILIPPINE CURRENCY,
AND TO PAY THE COSTS OF THIS SUIT," provided that ASIAVEST would pay the
corresponding filing fees for the increase. ASIAVEST appealed the order requiring
prior payment of filing fees. However, it later withdrew its appeal and paid the
additional filing fees.
On 3 April 1997, the Court of Appeals rendered its decision3 [Annex "A" of Petition;
Rollo, 49-65. Per Mabutas, R., Jr., J., with the concurrence of Imperial, J., and AlioHormachuelos, P., JJ.] reversing the decision of the trial court and dismissing
ASIAVESTs complaint without prejudice. It underscored the fact that a foreign
judgment does not of itself have any extraterritorial application. For it to be given
effect, the foreign tribunal should have acquired jurisdiction over the person and the
subject matter. If such tribunal has not acquired jurisdiction, its judgment is void.
The Court of Appeals agreed with the trial court that matters of remedy and
procedure such as those relating to service of summons upon the defendant are
governed by the lex fori, which was, in this case, the law of Hong Kong. Relative
thereto, it gave weight to Lousichs testimony that under the Hong Kong law, the
substituted service of summons upon HERAS effected in the Philippines by the clerk
of Sycip Salazar Hernandez & Gatmaitan firm would be valid provided that it was
done in accordance with Philippine laws. It then stressed that where the action is in
personam and the defendant is in the Philippines, the summons should be
personally served on the defendant pursuant to Section 7, Rule 14 of the Rules of
Court.4 [This section (now Section 6, Rule 14 of the 1997 Rules of Civil Procedure)
provided:
SEC. 7. Personal Service of Summons. - The summons shall be served by handing a
copy thereof to the defendant in person, or, if he refuses to receive it, by tendering
it to him.] Substituted service may only be availed of where the defendant cannot
be promptly served in person, the fact of impossibility of personal service should be
explained in the proof of service. It also found as persuasive HERAS argument that
instead of directly using the clerk of the Sycip Salazar Hernandez & Gatmaitan law
office, who was not authorized by the judge of the court issuing the summons,
ASIAVEST should have asked for leave of the local courts to have the foreign
summons served by the sheriff or other court officer of the place where service was
to be made, or for special reasons by any person authorized by the judge.
The Court of Appeals agreed with HERAS that "notice sent outside the state to a
non-resident is unavailing to give jurisdiction in an action against him personally for
money recovery." Summons should have been personally served on HERAS in Hong
Kong, for, as claimed by ASIAVEST, HERAS was physically present in Hong Kong for
nearly 14 years. Since there was not even an attempt to serve summons on HERAS
in Hong Kong, the Hong Kong Supreme Court did not acquire jurisdiction over
HERAS. Nonetheless, it did not totally foreclose the claim of ASIAVEST; thus:
While We are not fully convinced that [HERAS] has a meritorious defense against
[ASIAVESTs] claims or that [HERAS] ought to be absolved of any liability,
nevertheless, in view of the foregoing discussion, there is a need to deviate from
the findings of the lower court in the interest of justice and fair play. This, however,
is without prejudice to whatever action [ASIAVEST] might deem proper in order to
enforce its claims against [HERAS].
Finally, the Court of Appeals also agreed with HERAS that it was necessary that
evidence supporting the validity of the foreign judgment be submitted, and that our

61

courts are not bound to give effect to foreign judgments which contravene our laws
and the principle of sound morality and public policy.
ASIAVEST forthwith filed the instant petition alleging that the Court of Appeals erred
in ruling that
I.
-- IT WAS NECESSARY FOR [ASIAVEST] TO PRESENT EVIDENCE SUPPORTING THE
VALIDITY OF THE JUDGMENT;
II.
-- THE SERVICE OF SUMMONS ON [HERAS] WAS DEFECTIVE UNDER PHILIPPINE LAW;
III.
-- SUMMONS SHOULD HAVE BEEN PERSONALLY SERVED ON HERAS IN HONG KONG;
IV.
-- THE HONG KONG SUMMONS SHOULD HAVE BEEN SERVED WITH LEAVE OF
PHILIPPINE COURTS;
V.
-- THE FOREIGN JUDGMENT CONTRAVENES PHILIPPINE LAWS, THE PRINCIPLES OF
SOUND MORALITY, AND THE PUBLIC POLICY OF THE PHILIPPINES.
Being interrelated, we shall take up together the assigned errors.
Under paragraph (b) of Section 50, Rule 39 of the Rules of Court,5 [This Section is
now Section 48 of Rule 39 of the 1997 Rules of Civil Procedure with the following
amendments: (1) inclusion of final orders of a tribunal of a foreign country; and (2)
clarification that the grounds to repel a foreign judgment or final order are
applicable to both judgment or final order upon a title to a specific thing and one
against a person.] which was the governing law at the time this case was decided
by the trial court and respondent Court of Appeals, a foreign judgment against a
person rendered by a court having jurisdiction to pronounce the judgment is
presumptive evidence of a right as between the parties and their successors in
interest by the subsequent title. However, the judgment may be repelled by
evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact.
Also, Section 3(n) of Rule 131 of the New Rules of Evidence provides that in the
absence of proof to the contrary, a court, or judge acting as such, whether in the
Philippines or elsewhere, is presumed to have acted in the lawful exercise of
jurisdiction.
Hence, once the authenticity of the foreign judgment is proved, the burden to repel
it on grounds provided for in paragraph (b) of Section 50, Rule 39 of the Rules of
Court is on the party challenging the foreign judgment -- HERAS in this case.
At the pre-trial conference, HERAS admitted the existence of the Hong Kong
judgment. On the other hand, ASIAVEST presented evidence to prove rendition,
existence, and authentication of the judgment by the proper officials. The judgment
is thus presumed to be valid and binding in the country from which it comes, until
the contrary is shown.6 [Northwest Orient Airlines, Inc. v. Court of Appeals, 241
SCRA 192, 199 (1995)] Consequently, the first ground relied upon by ASIAVEST has
merit. The presumption of validity accorded foreign judgment would be rendered
meaningless were the party seeking to enforce it be required to first establish its
validity.
The main argument raised against the Hong Kong judgment is that the Hong Kong
Supreme Court did not acquire jurisdiction over the person of HERAS. This involves
the issue of whether summons was properly and validly served on HERAS. It is

62

settled that matters of remedy and procedure such as those relating to the service
of process upon the defendant are governed by the lex fori or the law of the forum,7
[Ibid.] i.e., the law of Hong Kong in this case. HERAS insisted that according to his
witness Mr. Lousich, who was presented as an expert on Hong Kong laws, there was
no valid service of summons on him.
In his counter-affidavit,8 [Exhibit "2," OR, Civil Case No. Q-52452, 197-200.] which
served as his direct testimony per agreement of the parties,9 [TSN, 14 February
1990, 5] Lousich declared that the record of the Hong Kong case failed to show that
a writ of summons was served upon HERAS in Hong Kong or that any such attempt
was made. Neither did the record show that a copy of the judgment of the court was
served on HERAS. He stated further that under Hong Kong laws (a) a writ of
summons could be served by the solicitor of the claimant or plaintiff; and (b) where
the said writ or claim was not contested, the claimant or plaintiff was not required to
present proof under oath in order to obtain judgment.
On cross-examination by counsel for ASIAVEST, Lousich testified that the Hong Kong
court authorized service of summons on HERAS outside of its jurisdiction,
particularly in the Philippines. He admitted also the existence of an affidavit of one
Jose R. Fernandez of the Sycip Salazar Hernandez & Gatmaitan law firm stating that
he (Fernandez) served summons on HERAS on 13 November 1984 at No. 6, 1st St.,
Quezon City, by leaving a copy with HERASs son-in-law Dionisio Lopez.10 [Id., 1112.] On redirect examination, Lousich declared that such service of summons would
be valid under Hong Kong laws provided that it was in accordance with Philippine
laws.11 [Id., 13-15.]
We note that there was no objection on the part of ASIAVEST on the qualification of
Mr. Lousich as an expert on the Hong Kong law. Under Sections 24 and 25, Rule 132
of the New Rules of Evidence, the record of public documents of a sovereign
authority, tribunal, official body, or public officer may be proved by (1) an official
publication thereof or (2) a copy attested by the officer having the legal custody
thereof, which must be accompanied, if the record is not kept in the Philippines,
with a certificate that such officer has the custody. The certificate may be issued by
a secretary of the embassy or legation, consul general, consul, vice consul, or
consular agent, or any officer in the foreign service of the Philippines stationed in
the foreign country in which the record is kept, and authenticated by the seal of his
office. The attestation must state, in substance, that the copy is a correct copy of
the original, or a specific part thereof, as the case may be, and must be under the
official seal of the attesting officer.
Nevertheless, the testimony of an expert witness may be allowed to prove a foreign
law. An authority12 [JOVITO R. SALONGA, PRIVATE INTERNATIONAL LAW 101-102
(1995)] on private international law thus noted:
Although it is desirable that foreign law be proved in accordance with the above
rule, however, the Supreme Court held in the case of Willamette Iron and Steel
Works v. Muzzal,13 [61 Phil. 471 (1935)] that Section 41, Rule 123 (Section 25, Rule
132 of the Revised Rules of Court) does not exclude the presentation of other
competent evidence to prove the existence of a foreign law. In that case, the
Supreme Court considered the testimony under oath of an attorney-at-law of San
Francisco, California, who quoted verbatim a section of California Civil Code and who
stated that the same was in force at the time the obligations were contracted, as
sufficient evidence to establish the existence of said law. Accordingly, in line with
this view, the Supreme Court in the Collector of Internal Revenue v. Fisher et al.,14
[1 SCRA 93 (1961)] upheld the Tax Court in considering the pertinent law of
California as proved by the respondents witness. In that case, the counsel for
respondent "testified that as an active member of the California Bar since 1951, he
is familiar with the revenue and taxation laws of the State of California. When asked
by the lower court to state the pertinent California law as regards exemption of
intangible personal properties, the witness cited Article 4, Sec. 13851 (a) & (b) of
the California Internal and Revenue Code as published in Derrings California Code,

63

a publication of Bancroft-Whitney Co., Inc. And as part of his testimony, a full


quotation of the cited section was offered in evidence by respondents." Likewise, in
several naturalization cases, it was held by the Court that evidence of the law of a
foreign country on reciprocity regarding the acquisition of citizenship, although not
meeting the prescribed rule of practice, may be allowed and used as basis for
favorable action, if, in the light of all the circumstances, the Court is "satisfied of the
authenticity of the written proof offered."15 [Citing Pardo v. Republic, 85 Phil. 323
(1950); Delgado v. Republic, G.R. No. L-2546, January 28, 1950.] Thus, in a number
of decisions, mere authentication of the Chinese Naturalization Law by the Chinese
Consulate General of Manila was held to be competent proof of that law.16 [Citing
Yap v. Solicitor General, 81 Phil. 468; Yee Bo Mann v. Republic, 83 Phil. 749; Go v.
Anti-Chinese League, 47 O.G. 716; Leelin v. Republic, 47 O.G. 694.]
There is, however, nothing in the testimony of Mr. Lousich that touched on the
specific law of Hong Kong in respect of service of summons either in actions in rem
or in personam, and where the defendant is either a resident or nonresident of Hong
Kong. In view of the absence of proof of the Hong Kong law on this particular issue,
the presumption of identity or similarity or the so-called processual presumption
shall come into play. It will thus be presumed that the Hong Kong law on the matter
is similar to the Philippine law.17 [Northwest Orient Airlines, Inc. v. Court of Appeals,
supra note 6, at 200.]
As stated in Valmonte vs. Court of Appeals,18 [252 SCRA 92, 99 (1996)] it will be
helpful to determine first whether the action is in personam, in rem, or quasi in rem
because the rules on service of summons under Rule 14 of the Rules of Court of the
Philippines apply according to the nature of the action.
An action in personam is an action against a person on the basis of his personal
liability. An action in rem is an action against the thing itself instead of against the
person.19 [Dial Corp. v. Soriano, 161 SCRA 737 [1988] An action quasi in rem is one
wherein an individual is named as defendant and the purpose of the proceeding is
to subject his interest therein to the obligation or lien burdening the property.20
[Brown v. Brown, 3 SCRA 451, 456 (1961)]
In an action in personam, jurisdiction over the person of the defendant is necessary
for the court to validly try and decide the case. Jurisdiction over the person of a
resident defendant who does not voluntarily appear in court can be acquired by
personal service of summons as provided under Section 7, Rule 14 of the Rules of
Court. If he cannot be personally served with summons within a reasonable time,
substituted service may be made in accordance with Section 8 of said Rule. If he is
temporarily out of the country, any of the following modes of service may be
resorted to: (1) substituted service set forth in Section 8;21 [Montalban v. Maximo,
22 SCRA 1070, 1078-1081 (1968); Valmonte v. Court of Appeals, supra note 18, at
100; 1 MANUEL V. MORAN, COMMENTS ON THE RULES OF COURT 459 (1979)
(hereafter 1 MORAN)] (2) personal service outside the country, with leave of court;
(3) service by publication, also with leave of court;22 [Section 18 in relation to
Section 17, Rule 14 of the Rules of Court; Montalban v. Maximo, supra note 21 at
1080-1081; Valmonte v. Court of Appeals, supra note 18, at 100; 1 MORAN 459.] or
(4) any other manner the court may deem sufficient.23 [Section 18 in relation to
Section 17, Rule 14 of the Rules of Court. These provisions read:
SEC. 18. Residents temporarily out of the Philippines. - When an action is
commenced against a defendant who ordinarily resides within the Philippines, but
who is temporarily out of it, service may, by leave of court, be effected out of the
Philippines, as under the preceding section.
SEC. 17. Extraterritorial service. - When the defendant does not reside and is not
found in the Philippines and the action affects the personal status of the plaintiff or
relates to, or the subject of which is, property within the Philippines, in which the
defendant has or claims a lien or interest, actual or contingent, or in which the relief
demanded consists, wholly or in part, in excluding the defendant from any interest

64

therein, or the property of the defendant has been attached within the Philippines,
service may, by leave of court, be effected out of the Philippines by personal service
as under section 7; or by publication in a newspaper of general circulation in such
places and for such time as the court may order, in which case a copy of the
summons and order of the court shall be sent by registered mail to the last known
address of the defendant, or in any other manner the court may deem sufficient.
Any order granting such leave shall specify a reasonable time, which shall not be
less than sixty (60) days after notice, within which the defendant must answer.]
However, in an action in personam wherein the defendant is a non-resident who
does not voluntarily submit himself to the authority of the court, personal service of
summons within the state is essential to the acquisition of jurisdiction over her
person.24 [Boudart v. Tait, 67 Phil. 170, 174-175 1 (1939)] This method of service is
possible if such defendant is physically present in the country. If he is not found
therein, the court cannot acquire jurisdiction over his person and therefore cannot
validly try and decide the case against him.25 [1 MORAN 456.] An exception was
laid down in Gemperle v. Schenker26 [19 SCRA 45 (1967)] wherein a non-resident
was served with summons through his wife, who was a resident of the Philippines
and who was his representative and attorney-in-fact in a prior civil case filed by him;
moreover, the second case was a mere offshoot of the first case.
On the other hand, in a proceeding in rem or quasi in rem, jurisdiction over the
person of the defendant is not a prerequisite to confer jurisdiction on the court
provided that the court acquires jurisdiction over the res. Nonetheless, summons
must be served upon the defendant not for the purpose of vesting the court with
jurisdiction but merely for satisfying the due process requirements.27 [Valmonte v.
Court of Appeals, supra note 18 at 100-101.] Thus, where the defendant is a nonresident who is not found in the Philippines and (1) the action affects the personal
status of the plaintiff; (2) the action relates to, or the subject matter of which is
property in the Philippines in which the defendant has or claims a lien or interest;
(3) the action seeks the exclusion of the defendant from any interest in the property
located in the Philippines; or (4) the property of the defendant has been attached in
the Philippines -- service of summons may be effected by (a) personal service out of
the country, with leave of court; (b) publication, also with leave of court; or (c) any
other manner the court may deem sufficient.28 [Section 17, Rule 14 of the Rules of
Court.]
In the case at bar, the action filed in Hong Kong against HERAS was in personam,
since it was based on his personal guarantee of the obligation of the principal
debtor. Before we can apply the foregoing rules, we must determine first whether
HERAS was a resident of Hong Kong.
Fortunata de la Vega, HERASs personal secretary in Hong Kong since 1972 until
1985,29 [TSN, 5 July 1989, 7, 13-14, 23.] testified that HERAS was the President and
part owner of a shipping company in Hong Kong during all those times that she
served as his secretary. He had in his employ a staff of twelve.30 [Id., 13-14, 20-23.]
He had "business commitments, undertakings, conferences, and appointments until
October 1984 when [he] left Hong Kong for good."31 [Exhibit, "1," OR, 189.]
HERASs other witness, Russel Warren Lousich, testified that he had acted as
counsel for HERAS "for a number of commercial matters."32 [TSN, 14 February
1990, 7.] ASIAVEST then infers that HERAS was a resident of Hong Kong because he
maintained a business there.
It must be noted that in his Motion to Dismiss,33 [OR, 31-40.] as well as in his
Answer34 [Id., 101-110.] to ASIAVESTs complaint for the enforcement of the Hong
Kong court judgment, HERAS maintained that the Hong Kong court did not have
jurisdiction over him because the fundamental rule is that jurisdiction in personam
over non-resident defendants, so as to sustain a money judgment, must be based
upon personal service of summons within the state which renders the judgment.35
[Citing Boudart v. Tait, supra note 24.]

65

For its part, ASIAVEST, in its Opposition to the Motion to Dismiss36 [OR, 47-53.]
contended: "The question of Hong Kong courts want of jurisdiction is therefore a
triable issue if it is to be pleaded by the defendant to repel the foreign judgment.
Facts showing jurisdictional lack (e.g. that the Hong Kong suit was in personam, that
defendant was not a resident of Hong Kong when the suit was filed or that he did
not voluntarily submit to the Hong Kong courts jurisdiction) should be alleged and
proved by the defendant."37 [Id., 52.]
In his Reply (to the Opposition to Motion to Dismiss),38 [OR, 61-69.] HERAS argued
that the lack of jurisdiction over his person was corroborated by ASIAVESTs
allegation in the complaint that he "has his residence at No. 6, 1st St., New Manila,
Quezon City, Philippines." He then concluded that such judicial admission amounted
to evidence that he was and is not a resident of Hong Kong.
Significantly, in the pre-trial conference, the parties came up with stipulations of
facts, among which was that "the residence of defendant, Antonio Heras, is New
Manila, Quezon City."39 [OR, 127.]
We note that the residence of HERAS insofar as the action for the enforcement of
the Hong Kong court judgment is concerned, was never in issue. He never
challenged the service of summons on him through a security guard in his Quezon
City residence and through a lawyer in his office in that city. In his Motion to
Dismiss, he did not question the jurisdiction of the Philippine court over his person
on the ground of invalid service of summons. What was in issue was his residence
as far as the Hong Kong suit was concerned. We therefore conclude that the
stipulated fact that HERAS "is a resident of New Manila, Quezon City, Philippines"
refers to his residence at the time jurisdiction over his person was being sought by
the Hong Kong court. With that stipulation of fact, ASIAVEST cannot now claim that
HERAS was a resident of Hong Kong at the time.
Accordingly, since HERAS was not a resident of Hong Kong and the action against
him was, indisputably, one in personam, summons should have been personally
served on him in Hong Kong. The extraterritorial service in the Philippines was
therefore invalid and did not confer on the Hong Kong court jurisdiction over his
person. It follows that the Hong Kong court judgment cannot be given force and
effect here in the Philippines for having been rendered without jurisdiction.
Even assuming that HERAS was formerly a resident of Hong Kong, he was no longer
so in November 1984 when the extraterritorial service of summons was attempted
to be made on him. As declared by his secretary, which statement was not disputed
by ASIAVEST, HERAS left Hong Kong in October 1984 "for good."40 [Exhibit "1."] His
absence in Hong Kong must have been the reason why summons was not served on
him therein; thus, ASIAVEST was constrained to apply for leave to effect service in
the Philippines, and upon obtaining a favorable action on the matter, it
commissioned the Sycip Salazar Hernandez & Gatmaitan law firm to serve the
summons here in the Philippines.
In Brown v. Brown,41 [Supra note 20.] the defendant was previously a resident of
the Philippines. Several days after a criminal action for concubinage was filed
against him, he abandoned the Philippines. Later, a proceeding quasi in rem was
instituted against him. Summons in the latter case was served on the defendants
attorney-in-fact at the latters address. The Court held that under the facts of the
case, it could not be said that the defendant was "still a resident of the Philippines
because he ha[d] escaped to his country and [was] therefore an absentee in the
Philippines." As such, he should have been "summoned in the same manner as one
who does not reside and is not found in the Philippines."
Similarly, HERAS, who was also an absentee, should have been served with
summons in the same manner as a non-resident not found in Hong Kong. Section
17, Rule 14 of the Rules of Court providing for extraterritorial service will not apply
because the suit against him was in personam. Neither can we apply Section 18,

66

which allows extraterritorial service on a resident defendant who is temporarily


absent from the country, because even if HERAS be considered as a resident of
Hong Kong, the undisputed fact remains that he left Hong Kong not only
"temporarily" but "for good."
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered DENYING the
petition in this case and AFFIRMING the assailed judgment of the Court of Appeals in
CA-G.R. CV No. 29513.
No costs.
SO ORDERED.
Bellosillo, Vitug, and Panganiban, JJ., concur.
Quisumbing, J., took no part., being a former partner of a counsel.
\---!e-library! 6.0 Philippines Copyright 2000 by Sony Valdez---/
([1998V648] ASIAVEST LIMITED, petitioner, vs. THE COURT OF APPEALS AND
ANTONIO HERAS, respondents., G.R. No. 128803, 1998 Sep 25, 1st Division)

d) Mixed Action
BA Finance v. Court of Appeals, G.R. No. 102998, July 5, 1996

/---!e-library! 6.0 Philippines Copyright 2000 by Sony Valdez---\


[1996V369] BA FINANCE CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS and ROBERTO M. REYES, respondents.1996 Jul 51st
DivisionG.R. No. 102998VITUG, J.:
The case at bar is a suit for replevin and damages. The petition for review on
certiorari assails the decision of the Court of Appeals 1 in CA-G.R. CV No. 23605
affirming that of the Regional Trial Court of Manila, BranchXX, 2 which has disposed
of its Civil Case No. 87-42270 in this wise:
WHEREFORE, the case against defendant-spouses (sic) Reynaldo Manahan is hereby
dismissed without prejudice, for failure to prosecute. Plaintiff having failed to show
the liability of defendant John Doe in the person of Roberto M. Reyes, the case
against the latter should likewise be dismissed. Moreover, plaintiff is hereby
directed to return the vehicle seized by virtue of the order of seizure issued by this
Court with all its accessories to the said Roberto M. Reyes. 3
The decisions of both the appellate court and the court a quo are based on a like
finding of the facts hereinafter briefly narrated.
The spouses Reynaldo and Florencia Manahan executed, on 15 May 1980, a
promissory note 4 binding themselves to pay Carmasters, Inc., the amount of
P83,080.00 in thirty-six monthly installments commencing 01 July 1980. To secure
payment, the Manahan spouses executed a deed of chattel mortgage 5 over a
motor vehicle, a Ford Cortina 1.6 GL, with motor and serial number CUBFWE801010. Carmasters later assigned 6 the promissory note and the chattel mortgage
to petitioner BA Finance Corporation with the conformity of the Manahans. When the
latter failed to pay the due installments, petitioner sent demand letters. The

67

demands not having been heeded, petitioner, on 02 October 1987, filed a complaint
for replevin with damages against the spouses, as well as against a John Doe,
praying for the recovery of the vehicle with an alternative prayer for the payment of
a sum of money should the vehicle not be returned. Upon petitioner's motion and
the filing of a bond in the amount of P169,161.00 the lower court issued a writ of
replevin. The court, however, cautioned petitioner that should summons be not
served on the defendants within thirty (30) days from the writ's issuance, the case
would be dismissed to failure to prosecute. 7 The warning was based on what the
court perceived to be the deplorable practice of some mortgagees of "freezing (the)
foreclosure or replevin cases" which they would so "conveniently utilize as a
leverage for the collection of unpaid installments on mortgaged chattels." 8
The service of summons upon the spouses Manahan was caused to be served by
petitioner at No. 35 Lantana St., Cubao, Quezon City. The original of the summons
had the name and the signature of private respondent Roberto M. Reyes indicating
that he received, on 14 October 1987, a copy of the summons and the complaint. 9
Forthwith, petitioner, through its Legal Assistant, Danilo E. Solano, issued a
certification to the effect that it had received from Orson R. Santiago, the deputy
sheriff of the Regional Trial Court of Manila, Branch 20, the Ford Cortina seized from
private respondent Roberto M. Reyes, the John Doe referred to in the complaint, 10
in Sorsogon, Sorsogon. 11 On 20 October 1987, the lower court came out with an
order of seizure.
Alleging possession in good faith, private respondent filed, on 26 October 1987, a
motion for an extension of time within which to file his answer and/or a motion for
intervention. The court granted the motion.
A few months later, or on 18 February 1988, the court issued an order which, in
part, stated:
Perusal of the record shows that an order for the seizure of personal property was
issued on October 20, 1987 in pursuance to a previous order of the Court dated
October 13, 1987. However, to date, there is no showing that the principal
defendants were served with summons inspite of the lapse of four (4) months.
Considering, this is a replevin case and to forestall the evils that arise from this
practice, plaintiff failing to heed the Order dated October 13, 1987, particularly
second paragraph thereof, the above-entitled case is hereby ordered DISMISSED for
failure to prosecute and further ordering the plaintiff to return the property seized
with all its accessories to defendant John Doe in the person of Roberto M. Reyes.
SO ORDERED. 12
On 26 February 1988, petitioner filed a notice of dismissal of the case "without
prejudice and without pronouncement as to costs, before service of Summons and
Answer, under Section 1, Rule 17, of the Rules of Court." 13 It also sought in another
motion the withdrawal of the replevin bond. In view of the earlier dismissal of the
case (for petitioner's failure to prosecute), the court, on 02 March 1988, merely
noted the notice of dismissal and denied the motion to withdraw the replevin bond
considering that the writ of replevin had meanwhile been implemented. 14
On 09 March 1988, private respondent filed a motion praying that petitioner be
directed to comply with the court order requiring petitioner to return the vehicle to
him. In turn, petitioner filed, on 14 March 1988, a motion for the reconsideration of
the orders of 18 February 1988 and 02 March 1988 contending that: (a) the
dismissal of the case was tantamount to adjudication on the merits that thereby
deprived it with the remedy to enforce the promissory note, the chattel mortgage
and the deed of assignment, under Section 3, Rule 117, of the Rules of Court; (b)
the order to return the vehicle to private respondent was a departure from
jurisprudence recognizing the right of the mortgagor to foreclose the property to
respond to the unpaid obligation secured by the chattel mortgage, and (c) there

68

were no legal and factual bases for the court's view that the filing of the replevin
case was "characterized (by) evil practices." 15
On 20 April 1988, the court granted petitioner's motion for reconsideration and
accordingly recalled the order directing the return of the vehicle to private
respondent, set aside the order dismissing the case, directed petitioner "to cause
the service of summons together with a copy of the complaint on the principal
defendants within five (5) days from receipt" 16 thereof at petitioner's expense, and
ordered private respondent to answer the complaint.
A few months later, or on 02 August 1988, petitioner filed a motion to declare
private respondent in default. The court granted the motion on that same day and
declared private respondent "in default for his failure to file the . . . answer within
the reglementary period." 17 The court likewise granted petitioner's motion to set
the case for the presentation, ex parte, of evidence. Petitioner, thereupon,
submitted the promissory note, the deed of chattel mortgage, the deed of
assignment, a statement of account in the name of Florencia Manahan and two
demand letters.
On 27 February 1989, the trial court rendered a decision dismissing the complaint
against the Manahans for failure of petitioner to prosecute the case against them. It
also dismissed the case against private respondent for failure of petitioner to show
any legal basis for said respondent's liability. The court ratiocinated:
. . . . Roberto M. Reyes is merely ancillary debtor in this case. The defendant
spouses Manahan being the principal debtor(s) and as there is no showing that the
latter has been brought before the jurisdiction of this court, it must necessarily
follow that the plaintiff has no cause of action against said Roberto M. Reyes herein
before referred to as defendant John Doe. Under the circumstances, it is incumbent
upon the plaintiff to return the seized vehicle unto the said Roberto M. Reyes. 18
In its appeal to the Court of Appeals, petitioner has asserted that a suit for replevin
aimed at the foreclosure of the chattel is an action quasi in rem which does not
necessitate the presence of the principal obligors as long as the court does not
render any personal judgment against them. This argument did not persuade the
appellate court, the latter holding that
. . . . In action quasi in rem an individual is named as defendant and the purpose of
the proceeding is to subject his interest therein to the obligation or lien burdening
the property, such as proceedings having for their sole object the sale or disposition
of the property of the defendant, whether by attachment, foreclosure, or other form
of remedy (Sandejas vs. Robles, 81 Phil. 421). In the case at bar, the court cannot
render any judgment binding on the defendants spouses for having allegedly
violated the terms and conditions of the promissory note and the contract of chattel
mortgage on the ground that the court has no jurisdiction over their persons no
summons having been served on them. That judgment, it rendered, is void for
having denied the defendants spouses due process of law which contemplates
notice and opportunity to be heard before judgment is rendered, affecting one's
person or property (Macabingkil vs. Yatco, 26 SCRA 150, 157).
It is next contended by appellant that as between appellant, as mortgagee, and
John Doe, whose right to possession is dubious if not totally non-existent, it is the
former which has the superior right of possession.
We cannot agree.
It is an undisputed fact that the subject motor vehicle was taken from the
possession of said Roberto M. Reyes, a third person with respect to the contract of
chattel mortgage between the appellant and the defendants spouses Manahan.

69

The Civil Code expressly provides that every possessor has a right to be respected
in his possession (Art. 539, New Civil Code); that good faith is always presumed, and
upon him who alleges bad faith on the part of a possessor rests the burden of proof
(Art. 527, ibid.); and that the possession of movable property acquired in good faith
is equivalent to a title; nevertheless, one who has lost any movable or has been
unlawfully deprived thereof, may recover it from the person in possession of the
same (Art. 559, ibid.). Thus, it has been held that a possessor in good faith is
entitled to be respected and protected in his possession as if he were the true
owner thereof until a competent court rules otherwise (Chus Hai vs. Kapunan, 104
Phil. 110; Yu, et al. vs. Hon. Honrado, etc., et al., 99 SCRA 237). In the case at bar,
the trial court did not err in holding that the complaint does not state any cause of
action against Roberto M. Reyes, and in ordering the return of the subject chattel to
him. 19
The appellate court, subsequently, denied petitioner's motion for reconsideration.
In the instant appeal, petitioner insists that a mortgagee can maintain an action for
replevin against any possessor of the object of a chattel mortgage even if the latter
were not a party to the mortgage.
Replevin, broadly understood, is both a form of principal remedy and of a provisional
relief. It may refer either to the action itself, i.e., to regain the possession of
personal chattels being wrongfully detained from the plaintiff by another, or to the
provisional remedy that would allow the plaintiff to retain the thing during the
pendency of the action and hold it pendente lite. 20 The action is primarily
possessory in nature and generally determines nothing more than the right of
possession. Replevin is so usually described as a mixed action, being partly in rem
and partly in personam in rem insofar as the recovery of specific property is
concerned, and in personam as regards to damages involved. As an "action in rem,"
the gist of the replevin action is the right of the plaintiff to obtain possession of
specific personal property by reason of his being the owner or of his having a
special interest therein. 21 Consequently, the person in possession of the property
sought to be replevied is ordinary the proper and only necessary party defendant,
and the plaintiff is not required to so join as defendants other persons claiming a
right on the property but not in possession thereof. Rule 60 of the Rules of Court
allows an application for the immediate possession of the property but the plaintiff
must show that he has a good legal basis, i.e., a clear title thereto, for seeking such
interim possession.
Where the right of the plaintiff to the possession of the specific property is so
conceded or evident, the action need only be maintained against him who so
possesses the property. In rem actio est per quam rem nostram quae ab alio
possidetur petimus, et semper adversus eum est qui rem possidet. In Northern
Motors, Inc. vs. Herrera, 22 the Court has said:
There can be no question that persons having a special right of property in the
goods the recovery of which is sought; such as a chattel mortgagee, may maintain
an action for replevin therefor. Where the mortgage authorizes the mortgagee to
take possession of the property on default, he may maintain an action to recover
possession of the mortgaged chattels from the mortgagor or from any person in
whose hands he may find them. 23
In effect then, the mortgagee, upon the mortgagor's default, is constituted an
attorney-in-fact of the mortgagor enabling such mortgagee to act for and in behalf
of the owner. Accordingly, that the defendant is not privy to the chattel mortgage
should be inconsequential. By the fact that the object of replevin is traced to his
possession, one properly can be a defendant in an action for replevin. It is here
assumed that the plaintiffs right to possess the thing is not or cannot be disputed.
In case the right of possession on the part of the plaintiff, or his authority to claim
such possession or that of his principal, is put to great doubt (a contending party

70

might contest the legal bases for plaintiffs cause of action or an adverse and
independent claim of ownership or right of possession is raised by that party), it
could become essential to have other persons involved and accordingly impleaded
for a complete determination and resolution of the controversy. For instance, in
Servicewide Specialists, Inc., vs. Court of Appeals, et al., G.R. No. 103301, 08
December 1995, this Court ruled.
While, in its present petition for review on certiorari, Servicewide has raised a
number of points, the crucial issue still remains, however, 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.
Rule 60 of the Rules of Court allows a plaintiff, in an action for the recovery of
possession of personal property, to apply for a writ of replevin if it can be shown
that he is the owner of the property claimed . . . or is entitled to the possession
thereof.' 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. The question then,
insofar as the matter finds relation to the instant case, 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.
The answer has to be in the affirmative. In a suit for replevin, a clear right of
possession must be established. 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. The replevin in the instant case has been
sought to pave the way for the foreclosure of the object covered by the chattel
mortgage. The conditions essential for that foreclosure would be to show, firstly, the
existence of the chattel mortgage and, secondly, the default of the mortgagor.
These requirements must be established since the validity of the plaintiffs exercise
of the right of foreclosure are inevitably dependent thereon. It would thus seem,
considering particularly an adverse and independent claim of ownership by private
respondent that the lower court acted improvidently when it granted the dismissal
of the complaint against Dollente, albeit on petitioner's (then plaintiff) plea, on the
ground that the "non-service of summons upon Ernesto Dollente (would) only delay
the determination of the merits of the case, to the prejudice of the parties." In
Imson v. Court of Appeals, we have explained:
. . . . An indispensable party is one whose interest will be affected by the court's
action in the litigation, and without whom no final determination of the case can be
had. 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, complete,
or equitable.
Conversely, 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. 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.
Without the presence of indispensable parties to a suit or proceeding, a judgment of
a court cannot attain real finality.
A chattel mortgagee, unlike a pledgee, need not be in, nor entitled to the
possession of the property unless and until the mortgagor defaults and the
mortgagee thereupon seeks to foreclose thereon. Since the mortgagee's right of
possession is conditioned upon the actual fact of default which itself may be

71

controverted, the inclusion of other parties like the debtor or the mortgagor himself,
may be required in order to allow a full and conclusive determination of the case.
When the mortgagee seeks a replevin in order to effect the eventual foreclosure of
the mortgage, it is not only the existence of, but also the mortgagor's default on,
the chattel mortgage that, among other things, can properly uphold the right to
replevy the property. The burden to establish a valid justification for that action lies
with the plaintiff. An adverse possessor, who is not the mortgagor, cannot just be
deprived of his possession, let alone be bound by the terms of the chattel mortgage
contract, simply because the mortgagee brings up an action for replevin.
The appellate court, accordingly, acted well in arriving at its now questioned
judgment.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED No costs.
SO ORDERED.
Padilla, Bellosillo, Kapunan and Hermosisima, Jr., JJ., concur.
\---!e-library! 6.0 Philippines Copyright 2000 by Sony Valdez---/
([1996V369] BA FINANCE CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS and ROBERTO M. REYES, respondents., G.R. No. 102998,
1996 Jul 5, 1st Division)

E. Kinds of Actions as to Place of Filing of Complaint


a) Local Action
b) Transitory Action

Sec. 5. Commencement of action


Board of Liquidators v. Zulueta, G.R. No. L-30738, July 30, 1982

/---!e-library! 6.0 Philippines Copyright 2000 by Sony Valdez---\


[1982V355] BOARD OF LIQUIDATORS, TRUSTEE OF THE LAND SETTLEMENT AND
DEVELOPMENT CORPORATION, plaintiff-appellant, vs. JOSE ZULUETA, defendantappellee.1982 Jul 301st DivisionG.R. No. L-30738D E C I S I O N
VASQUEZ, J.:
This is an appeal by petition for review from a decision of the Court of First Instance
of Manila dismissing the complaint filed by plaintiff-appellant against defendantappellee in Civil Case No. 65341.
On November 23, 1955, a decision was rendered by the Court of First Instance of
Manila, Branch VII, in Civil Case No. 22237, entitled "Land Settlement and
Development Corporation, Plaintiff, versus Jose Zulueta, Defendant", based on an
amicable settlement between the parties, pursuant to which defendant-appellee
was ordered to pay the Land Settlement and Development Corporation the sum of
P10,391.62 with interest at four (4%) per cent per annum from January 13, 1948
until the same is fully paid in the manner stated in the amicable settlement and
subject to the terms thereof, without pronouncement as to costs.

72

On March 5, 1965, herein plaintiff-appellant, as trustee of the Land Settlement and


Development Corporation, filed a complaint in the Court of First Instance of Manila
against defendant-appellee, docketed as Civil Case No. 60112 to revive the
judgment rendered in Civil Case No. 22237 which had not been enforced by that
time. Difficulty was encountered in serving summons on defendant-appellee,
thereby prompting the trial court to dismiss Civil Case No. 60112 in an order dated
March 12, 1966, reading as follows:
"It appearing that this case has long been pending with this Court, the same having
been filed way back on March 5, 1965, and since then defendant has not yet been
served with summons, and notwithstanding such fact, no further action has been
taken by plaintiff; for lack of interest to prosecute, the instant case is hereby
DISMISSED without prejudice, and without pronouncement as to costs.
IT IS SO ORDERED." (Rollo, p. 27.)
Plaintiff-appellant's motion for reconsideration of the order of dismissal having been
denied, plaintiff-appellant filed a new complaint, docketed as Civil Case No. 66341
which is the present action and which is also for revival and enforcement of the
judgment rendered in Civil Case No. 22237.
Defendant-appellee filed a motion to dismiss the complaint in Civil Case No. 65341
on the ground that plaintiff-appellant's cause of action had already prescribed. On
January 12, 1967, the trial court denied the motion to dismiss for the reason that
the filing of Civil Case No. 60112 on March 5, 1965 interrupted the running of the
period of prescription, and it started to run again only after its dismissal on March
12, 1966; and, therefore, when Civil Case No. 65341 was filed on May 10, 1966, only
9 years, 5 months and 11 days had expired from the time that the judgment in Civil
Case No. 22237 had become final and executory. Defendant-appellee's repeated
attempts to secure a reconsideration of the denial of his motion to dismiss failed to
achieve a favorable result. Defendant-appellee filed an answer to the complaint with
a counterclaim.
On September 19, 1968, after plaintiff-appellant had presented its evidence, the
trial court reset the continuation of the hearing on November 28, 1968 for the
presentation of the evidence of defendant-appellee. On the last mentioned date, the
defendant-appellee failed to appear and the trial court declared the case submitted
for decision.
In a decision dated December 27, 1968, the trial court dismissed Civil Case No.
65341. The said dismissal was reasoned out as follows:
"The plaintiff contends that the filing on March 5, 1965 of the first action for revival
of judgment interrupted the period of prescription. Upon the other hand, the
defendant, arguing that the dismissal of the said action for lack of prosecution did
not stop the period of prescription, which is ten years from November 23, 1955, has
cited the decision in Conspecto vs. Fruto, et al., 31 Phil. 144, wherein it was held
that
'While the commencement of the action would of course, stop the running of the
statute of limitations, its dismissal or voluntary abandonment by plaintiff would
leave the parties in exactly the same position as if no action had been commenced
at all. Said action by reason of its dismissal or abandonment took no time out of the
period of prescription.' and the decision in Oriental Commercial Co., Inc. vs.
Jureidini, Inc., et al., 71 Phil. 25, to the effect that
'Cuando se entabla una accion dentro del plazo de prescripcion y se desiste de ella
despues, o se sobresee sin condiciones, por una razon u otra, no hace que la
accion's que se entable mas tarde, pero ya fuera del periodo de prescripcion, se
pueda considerar como presentada dentro de dicho periodo porque quiere contares

73

con la accion entablada con anterioridad. La falta de gestion de la recurrente por


cuya causa de desestimaron sus demandas segunda y tercera, no puede
interpretarse sino como una renuncia de su parte; y, al ejercitar su ultima accion no
se ha colocado en la misma situacion en que antes se hallaba al ejercitar sus tres
anteriores acciones. Este es el mismo criterio que expresamos cuando se nos
presento una cuestion analoga en la causa de Conspecto contra Fruto, 31 Jur. Fil.,
155.'
In the opinion of the Court, the stand of the defendant is well taken. It has not been
intimated by the plaintiff that the authorities relied upon by the defendant had been
overruled by any subsequent pronouncement of the Supreme Court. As the decision
sought to be revived was rendered and became final and executory on November
23, 1955, and the present action was instituted on May 10, 1966, or more than the
ten-year period provided for in Article 1144 of the Civil Code, the said action has
already prescribed. As held in Conspecto vs. Fruto, et al., cited, in Commercial Co.,
Inc. vs. Jureidini, Inc., et al., the dismissal of the action filed on March 5, 1965 left
the parties in exactly the same position as if no action had been commenced at all,
and took no time out of the period of prescription.
WHEREFORE, the complaint is dismissed without pronouncement as to costs.
SO ORDERED."
A motion for the reconsideration of the said decision was denied by the trial court.
On August 4, 1969, plaintiff-appellant filed the present petition for review. The
petition was given due course in Our Resolution of August 6, 1969 and the
petitioner filed its brief as plaintiff-appellant. No brief was filed in behalf of
defendant-appellee.
The only issue raised in this appeal is whether or not plaintiff-appellant's cause of
action in Civil Case No. 65341 had already prescribed.
Article 1144 of the New Civil Code provides that an action based upon a judgment
"must be brought within ten (10), years from the time the right of action accrues."
The prescriptive period starts from the time that the judgment becomes final and
executory. In the case at bar, the decision sought to be enforced, to wit, that
rendered in Civil Case No. 22237, being based on a compromise agreement, the
same became final and executory on the date of its rendition on November 23,
1955.
There is no question that when the first revival action, docketed as Civil Case No.
60112, was filed on March 5, 1965, only 9 years, 3 months and 12 days had elapsed
from November 23, 1955. It is also a fact that when the second action to revive
judgment was filed on May 10, 1965, it was already more than 10 years from the
finality of the decision rendered in Civil Case No. 22237 which is sought to be
revived therein. These circumstances render it necessary to determine whether the
filing of Civil Case No. 60112, the first action to revive judgment tolled the running
of the 10-year prescriptive period to enforce the subject judgment. In the affirmative
case, it would follow that the filing of Civil Case No. 65341 on May 10, 1966 was well
within the period allowed by the statute of limitations.
Article 1155 of the New Civil Code expressly provides that the "prescription of action
is interrupted when they are filed before the court . . ." (Sotelo vs. Dizon, 67 Phil.
537; Cabrera vs. Tianco, 8, SCRA 582.) Such interruption lasts during the pendency
of the action. (FIorendo vs. Organo, 9 Phil. 483.)
These principles apply to the prescription of the action to revive or enforce a
judgment. (Marc Donnelly vs. Court of First Instance of Manila, 44 SCRA 381.) The
facts in the last cited case are almost similar to the present action. In Marc
Donnelly, a judgment was rendered by the Court of First Instance of Manila which
became final on August 5, 1957. On July 8, 1967, an action was filed to revive the

74

judgment. Due to the fact that summons could not be served on the defendant
despite the exercise of due diligence by the plaintiff, the revival action was
dismissed "for failure to prosecute, but the dismissal shall be without prejudice."
Copy of the order of dismissal was received by the plaintiff on March 19, 1969.
Twelve (12) days later or on March 31, 1969, a second action for revival was filed.
The second action was dismissed by the trial court on the ground that the said
revival action was instituted after the lapse of 10 years from the time that the
decision sought to be revived had become final and executory.
Resolving the issue of whether or not the first action for revival of judgment
interrupted the period of prescription, We reversed the dismissal of the second
action to revive judgment upon the following considerations:
"The sole issue to be resolved herein is whether or not prescription has set in to bar
the filing by petitioner of his second action to revive the judgment in Civil Case No.
23466. An action for the revival of a judgment prescribes in ten (10) years (Art.
1144[3], Civil Code). The ten-year period is counted either from the date the
judgment became final or from the date of its entry (Vda. de Decena vs. De los
Angeles, etc., et al., L-29317, May 29, 1971, 39 SCRA 95, 99). The prescription of an
action is interrupted, among others, by its filing before the court (Art. 1155, Civil
Code).
Applying the foregoing tenets to the case at bar, we find that petitioner's filing of
the first action for revival of the judgment in Civil Case No. 23466 was well within
the ten-year prescriptive period. Final judgment was entered by the Court of
Appeals on August 5, 1957. Petitioners filed Civil Case No. 70028 (his first action to
revive the judgment) on July 8, 1967. Therefore, as of the latter date, only nine (9)
years, eleven (11) months and three (3) days had elapsed. The ten-year prescriptive
period was effectively suspended by the filing of Civil Case No. 70028.
Let us now consider the second complaint (Civil Case No. 76166) for revival of the
same judgment in Civil Case No. 23466, in which complaint petitioner also alleged
that final entry of the judgment was made on August 5, 1957. The first such action
(Civil Case No. 70028) was dismissed by the court without prejudice; and copy of
the dismissal order was received by petitioner on March 19, 1969. On March 31,
1969, petitioner filed the second action for revival of the judgment. When a case is
ordered dismissed without prejudice, the plaintiff may file his complaint against the
same defendant in a separate action, even if the order has already become final
and executory (Rapadaz Vda. de Rapisura vs. Nicolas, etc., et al., L-22594, April 29,
1966, 16 SCRA 798, 801). As it is, the second case to revive the judgment was filed
even before the order of dismissal in the first case could become final, for only
twelve (12) days had expired between March 19, 1969, when petitioner received
notice of the dismissal order, and March 31, 1969, when he filed the second motion.
In any event, the dismissal of the first case being without prejudice, the filing of the
second action was still within the original period of ten (10) years. At any rate, when
the defendant's address cannot with due diligence be ascertained and no property
of his can be found, the period of prescription is tolled under article 1108(2) of the
new Civil Code. In the premises, our conclusion must necessarily be that the trial
court committed a reversible error in dismissing Civil Case No. 76166 on the ground
of prescription." (44 SCRA pp. 383-384.)
As may be noted from the decision dismissing Civil Case No. 65341, the trial court
relied on the rulings in Conspecto vs. Fruto, et al., 31 Phil. 148 and Oriental
Commercial Co. Inc. vs. Jureidini, Inc., et al. 71 Phil. 25. Said reliance is misplaced,
the facts in the said cases being different from those appearing in the one under
consideration. In Fruto, it was held that the running of the period of limitation was
not interrupted by an action filed within the said period because the said action was
discontinued by "its dismissal or voluntary abandonment by the plaintiff." The
decision went on to state that "the real reason for the said dismissal does not
clearly appear of record."

75

In the case under consideration, the first action for revival, Civil Case No. 60112,
was dismissed not by reason of abandonment. As in the case of Marc Donnelley, the
dismissal of the first revival action as due to the inability to serve summons on the
defendant-appellee. This was because, as stated in the petition for review, the
defendant-appellee was so elusive that when summons was forwarded to his
address at Iloilo City, the same was returned unserved because defendant-appellee
was in Manila; and when it was attempted to be served in Manila, he was supposed
to be in Iloilo City. (Rollo, p. 14.)
In Fruto, it is also recognized that the dismissal of an action filed within the
prescriptive period does not necessarily result in the non-interruption of the period
of limitation. Thus, it was declared:
"Where a suit, commenced within the period of limitation, is abandoned or
dismissed by reason of the death of the plaintiff, the operation of the statute is
prevented if the suit is recommenced, within a reasonable time, by the
representatives of the deceased. (Martin vs. Archer, 3 Hill, [S.C.] 211.)".
The plaintiff-appellant may not be accused of having abandoned Civil Case No.
60112. They asserted due diligence in trying to serve summons on defendantappellee but unfortunately, their efforts were thwarted due to the ability of the
defendant-appellee to evade service of such court process on him. Neither may
plaintiff-appellant be charged with failure to recommence its suit within a
reasonable time after its dismissal. The record reveals that plaintiff-appellant
received notice of the dismissal of Civil Case No. 60112 on March 21, 1966. Four (4)
days later, or on March 25, 1966, plaintiff-appellant filed a motion for
reconsideration of said order of dismissal. Plaintiff-appellant received the order
denying the motion for reconsideration on April 26, 1966. On May 10, 1966,
plaintiff-appellant filed its second action for revival, docketed as Civil Case No.
65341.
Nor may the ruling in Jureidini defeat herein plaintiff-appellant's cause of action. In
Jureidini the plaintiff filed three (3) cases within the period of prescription, all of
which were dismissed, the first on motion of the plaintiff, and the other two (2) for
failure to prosecute. When the fourth action was filed beyond the prescriptive
period, it was held that the act of the plaintiff in failing to prosecute his first three
(3) cases may not be interpreted except as a waiver on its part and did not place
the plaintiff on the same situation where it was before the filing of the first of the
three actions; and, following the view expressed in the analogous case of Conspecto
vs. Fruto, 31 Phil. 150, the fourth action should be dismissed on the ground of
prescription. It is to be noted that as in Fruto, the filing of the actions within the
prescriptive period was considered as not interrupting the running of the period of
limitation due to the circumstance that the plaintiff is deemed to have abandoned
or waived its claim.
As already stated above, herein plaintiff-appellant may not be faulted with having
abandoned its claim against the defendant-appellee which the former had asserted
in filing Civil Case No. 60112. The said case was dismissed primarily due to the
failure to serve summons on defendant-appellee who had somehow managed to
evade being placed under the jurisdiction of the Court. Subsequent acts of plaintiffappellant after the dismissal of Civil Case No. 60112 adequately negated any
supposed intention to waive or abandon its claim against defendant-appellee.
It will be noted that the two cases relied upon by the trial court were both decided
when the statute of limitations was contained in the old Code of Civil Procedure, Act
No. 190. In said law, there was no specific provision, as that now contained in Article
1155 of the Civil Code, that "the prescription of actions is interrupted when they are
filed in court." (Florendo vs. Organo, 90 Phil. 483.) It is accordingly extremely
doubted if the rulings in Fruto and Jureidini may still be availed of to uphold the view
that the period of prescription is not interrupted by an action which the plaintiff shall
abandon or otherwise fail to prosecute. The language of Article 1155 is unqualified

76

and does not give room for making a distinction as to the effect of the filing of an
action in court or the running of the period of prescription.
The record further reveals that plaintiff-appellant made written extra-judicial
demands upon defendant-appellee by means of letters marked as Exhibits "E-2" and
"F", respectively. Such written extrajudicial demand also produced the result of
interrupting the period of prescription. (Art. 1155, Civil Code; Marella vs. Agoncillo,
44 Phil;. 844.)
We are accordingly of the considered view that the trial court erred in dismissing
Civil Case No. 65341. We do not find it necessary, however, to remand the case to
the court of origin for further proceedings. In the decision rendered by the trial
court, it made a finding of the material fact upon which the plaintiff's cause of
action is based. It stated the following:
"It appears from the evidence presented by the plaintiff (the defendant did not
present any evidence) that under date of November 23, 1965, a decision was
rendered in Civil Case No. 22237 of the Court of First Instance of Manila, Land
Settlement and Development Corporation versus Jose Zulueta, based on an
amicable settlement, ordering the defendant to pay to the plaintiff the sum of
P10,391.62, with interest at 4% per annum from January 13, 1948 (Exhibit 'A'); that
the said judgment has not as yet been satisfied; that as of February 15, 1965, the
outstanding obligation of the defendant is P18,501.97 (Exhibit 'E'); that demands for
payment were made on the defendant on January 6, 1956 (Exhibit 'E-2') and on
January 18, 1965 (Exhibit 'F').
There can be no serious dispute that the plaintiff Board of Liquidators can prosecute
this action as trustee of the abolished Land Settlement and Development
Corporation, known for short as LASEDECO. The principal issue is whether or not the
action has prescribed." (Decision, Rollo, pp. 79-80.)
The defendant-appellee presented no contradictory evidence, he having failed to
appear for the trial of the case scheduled on November 28, 1968 despite notice,
thereby prompting the trial court to consider the case submitted for decision on the
basis of the evidence presented by the plaintiff. The facts found by the trial court
suffice to justify the rendition of a decision on the merits which the trial court failed
to do in view of its ruling that the action is barred by the statute of limitations.
WHEREFORE, the judgment appealed from is hereby REVERSED AND SET ASIDE. In
lieu thereof, another one is rendered ordering defendant-appellee to pay plaintiffappellant the sum of P10,391.62 with interest at four (4%) per cent per annum from
January 13, 1948 until full payment, with costs against defendant-appellee.
SO ORDERED.
Teehankee (Chairman), Makasiar, Melencio-Herrera, Plana, and Relova Jr. JJ., concur.
Gutierrez, Jr. J., is on leave.
\---!e-library! 6.0 Philippines Copyright 2000 by Sony Valdez---/
([1982V355] BOARD OF LIQUIDATORS, TRUSTEE OF THE LAND SETTLEMENT AND
DEVELOPMENT CORPORATION, plaintiff-appellant, vs. JOSE ZULUETA, defendantappellee., G.R. No. L-30738, 1982 Jul 30, 1st Division)
Sotelo vs. Dizon, 67 Phil. 537;

G.R. No. L-46492 April 26, 1939


RAMON SOTELO, Petitioner, vs. ARSENIO P. DIZON, Judge of First Instance of Manila,
L. PASICOLAN, Sheriff of the City of Manila, and HARRIE S. EVERETT, Respondents.
Jose Sotelo for petitioner.

77

Duran and Lim for respondents.


IMPERIAL, J.: chanrobles virtual law library
This petition for certiorari assails the legality of the order issued by the respondent
judge on January 5, 1939, directing the sheriff or any of his agents to execute the
order of the 3d of said month appointing R. Marino Corpus receiver, by placing him
in possession of the cinematograph business established in the Savory Theatre,
together with its equipment and existing funds.chanroblesvirtualawlibrary
chanrobles virtual law library
On July 22, 1938, the respondent Harrie S. Everett brought civil case No. 53411 in
the Court of First Instance of Manila against Lazarus Joseph, to recover the
ownership and possession of the cinematograph business established in the Fox and
Savory theatres, with the equipment and existing funds. The respondent asked in
his complaint that a writ of preliminary injunction be issued. As the then defendant
alleged that the cinematograph business had been transferred by him to the
partnership Joseph Brothers, the respondent Everett amended his complaint by
including as defendants the said partnership and its partners, John Joseph and
George Joseph. Everett dropped out his prayer for preliminary injunction and in his
amended complaint asked that R. Marino Corpus be appointed receiver to take
charge of the properties in litigation during the pendency of the case. On December
16, 1938 the court appointed R. Marino Corpus receiver of the cinematograph
business known as Savoy as well as all its equipment and existing funds, ordering
him to take possession thereof and administer them in accordance with law after
having qualified and filed a bond for P2,000. When the receiver tried to take
possession of the properties entrusted to him, he was met by the petitioner's
allegation that he is the owner thereof by purchase from Joseph Brothers on
December 15, 1938. In view of this and of the fact that the petitioner had refused to
deliver the properties, Everett filed a supplementary complaint on December 23,
1938 including the petitioner as defendant and asking that the order of December
16th appointing a receiver be confirmed. On January 3, 1939 the respondent judge
issued an order allowing the supplementary complaint and at the same time
reiterating the order of December 16, 1938 appointing a receiver. On the 4th of the
same month the receiver looked for the petitioner to require him to give up the
properties under receivership, but we unable to locate him either in his office or in
his house as he was informed that the petitioner was sick in the province. On the
same date, January 4, 1939, Everett filed a motion asking that the court order the
sheriff or his agent to place the receiver in possession of the properties. On the 5th
of the said month, the court favorably acted upon the motion, and on the following
day, January 6th, the deputy sheriff went to the Savoy Theatre to make deliver
thereof to the receiver, but the petitioner refused to make delivery and forthwith
filed this petition. The petitioner was served wityh the supplementary complaint in
the morning of January 6, 1939 and when he filed the petition for certiorari in this
case he had already been duly summoned. In the same morning of January 6, 1939
and before his petition for certiorari was filed, the petitioner was likewise notified of
the order of the respondent judge issued on the 5th of the said month directing the
sheriff
to
place
the
properties
in
the
receiver's
possession.chanroblesvirtualawlibrary chanrobles virtual law library
The petitioner contends that the order of January 5, 1939, providing for the
execution of the other order of the 3d of the same month and for the placing of the
properties in the possession of the receiver, is illegal because on said date there
was yet no pending action against him and bacause he was not duly served with the
supplementary complaint, citing in his support sections 173 and 389 of the Code of
Civil Procedure reading as follows:
SEC. 173. Receivers, who may appoint. - A judge of the Supreme Court, or a judge of
the Court of First Instance in which the action is pending, may appoint one or more
receivers of the property, real, personal, or mixed, which is the subject of the action,

78

in
the
manner
and
under
the
conditions
provided.chanroblesvirtualawlibrary chanrobles virtual law library

hereinafter

SEC. 389. Commencement of actions. - Civil actions must be commenced by filing a


complaint with the clerk of the court in which the action is to be instituted. The date
of the filing of the complaint upon which process is issued and duly served shall be
deemed to be the true time of the commencement of the action.
The first contention is not justified by the facts because it appears that the
supplementary complaint had been admitted by the court on January 3, 1939,
hence, when the order of the 5th of said month was issued directing the sheriff to
place the receiver in possession of the properties, there was already an action in
court against the petitioner.chanroblesvirtualawlibrary chanrobles virtual law library
As to the second legal question before us, the petitioner argues that he was not yet
duly served with the supplementary complaint when the order of January 5, 1939
was issued, because the summons only took place on the 6th of the said month,
and under section 389 no action in court was yet pending against him. We find no
merit in this contention. Under section 389, a civil action is deemed legally
commenced from the date of the filing and docketing of the complaingt with the
clerk of the Court of First Instance, without taking into account the issuance and
service of the summons. Section 389 of the Code of Civil Procedure is taken from
section 405 of the California Code of Civil Procedure, and the Supreme Court of said
State has so interpreted it in Tinn vs. United States District Attorney (148 Cal., 773);
Dowling vs. Comerford (99 Cal., 204); Ex parte Fil Ki (79 Cal., 584); and Nash vs. El
Dorado
County
(24
Fed.
252;
1
C.
J.,
sec.
403,
pp.
1155,
1156).chanroblesvirtualawlibrary chanrobles virtual law library
Under the facts the respondent judge had jurisdiction to issue the orders of January
3 and 5, 1939, and he did not exceed the same or the discretion conferred upon him
by law in such cases. From the same facts it follows that the preliminary injunction
obtained by the petitioner in these proceedings was issued without just cause,
wherefor, the petitioner is answerable for damages which he might have caused the
respondent Everett. We reserve to the latter the right to claim and substantiate said
damages in the Court of First Instance where the principal cause is pending, upon
petition which he may present for that purpose.chanroblesvirtualawlibrary
chanrobles virtual law library
For the foregoing reasons, the remedy prayed for is denied, with the cost to the
petitioner. The preliminary injunction issued in this case is set aside. So ordered.
Avancea, C. J., Villa-Real, Diaz, Laurel, Concepcion, and Moran, JJ., concur.
Cabrera vs. Tianco, 8 SCRA 582
Manchester Development v. Court of Appeals, G.R. No. 75919, May 7, 1987
(Supra.)

G.R. No. 75919

May 7, 1987

MANCHESTER DEVELOPMENT CORPORATION, ET AL., petitioners,


vs.
COURT OF APPEALS, CITY LAND DEVELOPMENT CORPORATION, STEPHEN ROXAS,
ANDREW LUISON, GRACE LUISON and JOSE DE MAISIP, respondents.
Tanjuatco, Oreta and Tanjuatco for petitioners.
Pecabar Law Offices for private respondents.
RESOLUTION

79

GANCAYCO, J.:
Acting on the motion for reconsideration of the resolution of the Second Division of
January 28,1987 and another motion to refer the case to and to be heard in oral
argument by the Court En Banc filed by petitioners, the motion to refer the case to
the Court en banc is granted but the motion to set the case for oral argument is
denied.
Petitioners in support of their contention that the filing fee must be assessed on the
basis of the amended complaint cite the case of Magaspi vs. Ramolete. 1 They
contend that the Court of Appeals erred in that the filing fee should be levied by
considering the amount of damages sought in the original complaint.
The environmental facts of said case differ from the present in that
1.
The Magaspi case was an action for recovery of ownership and possession of
a parcel of land with damages. 2 While the present case is an action for torts and
damages and specific performance with prayer for temporary restraining order, etc.
3
2.
In the Magaspi case, the prayer in the complaint seeks not only the
annulment of title of the defendant to the property, the declaration of ownership
and delivery of possession thereof to plaintiffs but also asks for the payment of
actual moral, exemplary damages and attorney's fees arising therefrom in the
amounts specified therein. 4 However, in the present case, the prayer is for the
issuance of a writ of preliminary prohibitory injunction during the pendency of the
action against the defendants' announced forfeiture of the sum of P3 Million paid by
the plaintiffs for the property in question, to attach such property of defendants that
maybe sufficient to satisfy any judgment that maybe rendered, and after hearing, to
order defendants to execute a contract of purchase and sale of the subject property
and annul defendants' illegal forfeiture of the money of plaintiff, ordering
defendants jointly and severally to pay plaintiff actual, compensatory and
exemplary damages as well as 25% of said amounts as maybe proved during the
trial as attorney's fees and declaring the tender of payment of the purchase price of
plaintiff valid and producing the effect of payment and to make the injunction
permanent. The amount of damages sought is not specified in the prayer although
the body of the complaint alleges the total amount of over P78 Million as damages
suffered by plaintiff. 5
3. Upon the filing of the complaint there was an honest difference of opinion as to
the nature of the action in the Magaspi case. The complaint was considered as
primarily an action for recovery of ownership and possession of a parcel of land. The
damages stated were treated as merely to the main cause of action. Thus, the
docket fee of only P60.00 and P10.00 for the sheriff's fee were paid. 6
In the present case there can be no such honest difference of opinion. As maybe
gleaned from the allegations of the complaint as well as the designation thereof, it
is both an action for damages and specific performance. The docket fee paid upon
filing of complaint in the amount only of P410.00 by considering the action to be
merely one for specific performance where the amount involved is not capable of
pecuniary estimation is obviously erroneous. Although the total amount of damages
sought is not stated in the prayer of the complaint yet it is spelled out in the body of
the complaint totalling in the amount of P78,750,000.00 which should be the basis
of assessment of the filing fee.
4.
When this under-re assessment of the filing fee in this case was brought to
the attention of this Court together with similar other cases an investigation was
immediately ordered by the Court. Meanwhile plaintiff through another counsel with
leave of court filed an amended complaint on September 12, 1985 for the inclusion
of Philips Wire and Cable Corporation as co-plaintiff and by emanating any mention

80

of the amount of damages in the body of the complaint. The prayer in the original
complaint was maintained. After this Court issued an order on October 15, 1985
ordering the re- assessment of the docket fee in the present case and other cases
that were investigated, on November 12, 1985 the trial court directed plaintiffs to
rectify the amended complaint by stating the amounts which they are asking for. It
was only then that plaintiffs specified the amount of damages in the body of the
complaint in the reduced amount of P10,000,000.00. 7 Still no amount of damages
were specified in the prayer. Said amended complaint was admitted.
On the other hand, in the Magaspi case, the trial court ordered the plaintiffs to pay
the amount of P3,104.00 as filing fee covering the damages alleged in the original
complaint as it did not consider the damages to be merely an or incidental to the
action for recovery of ownership and possession of real property. 8 An amended
complaint was filed by plaintiff with leave of court to include the government of the
Republic as defendant and reducing the amount of damages, and attorney's fees
prayed for to P100,000.00. Said amended complaint was also admitted. 9
In the Magaspi case, the action was considered not only one for recovery of
ownership but also for damages, so that the filing fee for the damages should be
the basis of assessment. Although the payment of the docketing fee of P60.00 was
found to be insufficient, nevertheless, it was held that since the payment was the
result of an "honest difference of opinion as to the correct amount to be paid as
docket fee" the court "had acquired jurisdiction over the case and the proceedings
thereafter had were proper and regular." 10 Hence, as the amended complaint
superseded the original complaint, the allegations of damages in the amended
complaint should be the basis of the computation of the filing fee. 11
In the present case no such honest difference of opinion was possible as the
allegations of the complaint, the designation and the prayer show clearly that it is
an action for damages and specific performance. The docketing fee should be
assessed by considering the amount of damages as alleged in the original
complaint.
As reiterated in the Magaspi case the rule is well-settled "that a case is deemed
filed only upon payment of the docket fee regardless of the actual date of filing in
court . 12 Thus, in the present case the trial court did not acquire jurisdiction over
the case by the payment of only P410.00 as docket fee. Neither can the amendment
of the complaint thereby vest jurisdiction upon the Court. 13 For an legal purposes
there is no such original complaint that was duly filed which could be amended.
Consequently, the order admitting the amended complaint and all subsequent
proceedings and actions taken by the trial court are null and void.
The Court of Appeals therefore, aptly ruled in the present case that the basis of
assessment of the docket fee should be the amount of damages sought in the
original complaint and not in the amended complaint.
The Court cannot close this case without making the observation that it frowns at
the practice of counsel who filed the original complaint in this case of omitting any
specification of the amount of damages in the prayer although the amount of over
P78 million is alleged in the body of the complaint. This is clearly intended for no
other purpose than to evade the payment of the correct filing fees if not to mislead
the docket clerk in the assessment of the filing fee. This fraudulent practice was
compounded when, even as this Court had taken cognizance of the anomaly and
ordered an investigation, petitioner through another counsel filed an amended
complaint, deleting all mention of the amount of damages being asked for in the
body of the complaint. It was only when in obedience to the order of this Court of
October 18, 1985, the trial court directed that the amount of damages be specified
in the amended complaint, that petitioners' counsel wrote the damages sought in
the much reduced amount of P10,000,000.00 in the body of the complaint but not in
the prayer thereof. The design to avoid payment of the required docket fee is
obvious.

81

The Court serves warning that it will take drastic action upon a repetition of this
unethical practice.
To put a stop to this irregularity, henceforth all complaints, petitions, answers and
other similar pleadings should specify the amount of damages being prayed for not
only in the body of the pleading but also in the prayer, and said damages shall be
considered in the assessment of the filing fees in any case. Any pleading that fails
to comply with this requirement shall not bib accepted nor admitted, or shall
otherwise be expunged from the record.
The Court acquires jurisdiction over any case only upon the payment of the
prescribed docket fee. An amendment of the complaint or similar pleading will not
thereby vest jurisdiction in the Court, much less the payment of the docket fee
based on the amounts sought in the amended pleading. The ruling in the Magaspi
case 14 in so far as it is inconsistent with this pronouncement is overturned and
reversed.
WHEREFORE, the motion for reconsideration is denied for lack of merit.
SO ORDERED.
Teehankee, C.J., Yap, Fernan, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras,
Feliciano, Bidin, Sarmiento and Cortes, JJ., concur.
Paras, J., took no part.
Nestle Phils. v. FY Sons, G.R. No. 150780, May 5, 2006

SECOND DIVISION
NESTLE PHILIPPINES, INC.,
Petitioner,
Present :
PUNO, J., Chairperson,*
SANDOVAL-GUTIERREZ,**
-versusAZCUNA and

G.R. No. 150780

CORONA,
GARCIA, JJ.

FY SONS, INCORPORATED,
Respondent.
Promulgated
May 5, 2006
x-----------------------------------------x
DECISION
CORONA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 57299 dated
January 11, 2001 which in turn affirmed with modification the decision of Branch 57
of the Regional Trial Court (RTC) of Makati City in Civil Case No. 90-3169,[2] as well
as the CAs resolution[3] dated November 14, 2001 which denied petitioners
motion for reconsideration.
The antecedent facts follow.

82

Petitioner is a corporation engaged in the manufacture and distribution of all Nestle


products nationwide. Respondent, on the other hand, is a corporation engaged in
trading, marketing, selling and distributing food items to restaurants and food
service outlets. On December 23, 1998, petitioner and respondent entered into a
distributorship agreement (agreement) whereby petitioner would supply its
products for respondent to distribute to its food service outlets. A deed of
assignment was also executed by respondent in favor of petitioner on December 13,
1988, assigning the time deposit of a certain Calixto Laureano in the amount of
P500,000 to secure respondents credit purchases from petitioner. A special power
of attorney was likewise executed by Laureano authorizing the respondent to use
the time deposit as collateral.
The areas covered by the agreement were Baguio, Dagupan, Angeles, Bulacan,
Pampanga, Urdaneta, La Union, Tarlac and Olongapo. At the end of 1989, the
agreement expired and the parties executed a renewal agreement on January 22,
1990. A supplemental agreement was executed on June 27, 1990, to take effect on
July 1, 1990.
On July 2, 1990, petitioner fined respondent P20,000 for allegedly selling 50 cases
of Krem-Top liquid coffee creamer to Lu Hing Market, a retail outlet in Tarlac. This
was purportedly proscribed by the agreement. Respondent paid the fine. In
September 1990, Krem-Top liquid coffee creamer was sold to Augustus Bakery and
Grocery, an act again allegedly in violation of the agreement. Petitioner imposed a
P40,000 fine which respondent refused to pay.
On October 19, 1990, respondent, through counsel, wrote petitioner to complain
about the latters breaches of their agreement and the various acts of bad faith
committed by petitioner against respondent. Respondent demanded the payment of
damages. In turn, on November 5, 1990, petitioner sent respondent a demand letter
and notice of termination, alleging that the latter had outstanding accounts of
P995,319.81. When the alleged accounts were not settled, petitioner applied the
P500,000 time deposit as partial payment.
Respondent filed a complaint for damages against petitioner, alleging bad faith.[4]
According to respondent:
[petitioner] made representations and promises of rendering support, including
marketing support, assignment of representatives by way of assistance in its
development efforts, and assurances of income in a marketing area not previously
developed. Thus, [respondent] was lured into executing a distributorship agreement
with the [petitioner]. [Respondent] thereby invested huge sums of money, time
and efforts to abide by such distributorship agreement, and to develop market areas
for [petitioners] products. Thereafter, the [petitioner] breached the distributorship
agreement by committing various acts of bad faith such as: failing to provide
promotional support; deliberately failing to promptly supply the [respondent] with
the stocks for its orders; intentionally diminishing the [respondents] sales by
supporting a non-distributor; and concocting falsified charges to cause the
termination of the distributorship agreement without just cause.
By such
termination, [petitioner] would be able to obtain the market gains made by
[respondent] at the latters own efforts and expenses.
When [respondent]
complained to [petitioner] about the latters acts of bad faith, the latter terminated
the agreement on the allegation that [respondent] did not pay its accounts.
[Petitioner] also seized [respondents] time deposit collateral without basis;
penalized [respondent] with monetary penalty for the concocted charge; and
unilaterally suspended the supply of stocks to [respondent].[5]

Respondent sought actual damages of P1,000,000, moral damages of P200,000,


exemplary damages of P100,000, attorneys fees of P100,000, plus the return of the
P500,000 time deposit and costs of suit. In its answer, petitioner interposed a

83

counterclaim for P495,319.81 representing the balance of respondents overdue


accounts, with interest of 2% per month from the date of default until fully paid,
moral damages of P100,000, exemplary damages of P200,000, attorneys fees of
P120,000 and costs of suit.
In a decision dated November 10, 1997, the Makati City RTC ruled in favor of the
respondent:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiff and against the defendant ordering the defendant to pay plaintiff the
following:
1.
The amount of P1,000,000.00 as actual damages sustained by the plaintiff by
reason of the unwarranted and illegal acts of the defendant in terminating the
distributorship agreement;
2.

The amount of P100,000.00 as exemplary damages;

3.

The amount of P100,000.00 as attorneys fees;

The plaintiff however, is hereby ordered to pay the defendant the amount of
P53,214,26 (sic) which amount has been established as the amount the defendant
is entitled from the plaintiff.
Three-fourths costs against the defendant.
.
SO ORDERED.[6]
Petitioner appealed the decision to the CA. On January 11, 2001, the CA rendered a
decision affirming the RTCs decision with modification:
WHEREFORE, the judgment appealed from is AFFIRMED with the following
MODIFICATIONS: (1) the actual damages is INCREASED from P1,000,000.00 to
P1,500,000.00;[7] and (2) the amount of P53,214.26 payable by the appellee to the
appellant is DELETED.
SO ORDERED.[8]
Both the CA and the RTC found, among others, that petitioner indeed failed to
provide support to respondent, its distributor; that petitioner unjustifiably refused to
deliver stocks to respondent; that the imposition of the P20,000 fine was void for
having no basis; that petitioner failed to prove respondents alleged outstanding
obligation; that petitioner terminated the agreement without sufficient basis in law
or equity and in bad faith; and that petitioner should be held liable for damages.
Hence this petition raising the following grounds:
(1)
THE [CA] COMMITTED A GRAVE ERROR IN LAW WHEN IT RULED THAT: THE
RATIOCINATIONS OF THE APPELLANT AS TO THE APPELLEES ALLEGED VIOLATION OF
THE CONTRACT ARE THUS WEAK AND UNCONVINCING AND THE APPELLEES
ALLEGED NON-PAYMENT AND OUTSTANDING BALANCE OF P995,319.81 WAS NOT
SUFFICIENTLY PROVEN DESPITE THE FACT THAT FLORENTINO YUE, JR., THE
MANAGER OF THE RESPONDENT ADMITTED IN OPEN COURT IN ANSWER TO THE
QUESTION OF THEN PRESIDING JUDGE PHINNY C. ARAQUIL THAT THE
DISTRIBUTORSHIP AGREEMENT WAS TERMINATED BY YOUR PETITIONER BECAUSE
OF THE UNPAID BALANCE OF THE RESPONDENT OF AROUND P900,000.00.
(2)

84

THE [CA] COMMITTED A GRAVE ERROR IN LAW IN DISREGARDING THE


TESTIMONY OF THE WITNESS FOR THE PETITIONER, CRISTINA RAYOS WHO
PREPARED THE STATEMENT OF ACCOUNT (EXHIBIT 11) ON THE GROUNDS THAT SHE
WAS NOT INVOLVED IN THE DELIVERY AS SHE WAS ONLY IN CHARGE OF THE
RECORDS AND DOCUMENTS OF ALL ACCOUNTS RECEIVABLES AS PART OF HER
DUTIES AS CREDIT AND COLLECTION MANAGER CONSIDERING THAT THE EVIDENCE
PRESENTED WAS AN EXCEPTION TO THE HEARSAY RULE UNDER SECTION 45 (SIC),
RULE 130, OF THE REVISED RULES ON EVIDENCE.
(3)
THE [CA] COMMITTED A GRAVE ERROR IN LAW IN AWARDING TO THE
RESPONDENT ACTUAL DAMAGES IN THE AMOUNT OF P1,000,000.00 AND ORDERING
THE REFUND OF THE AMOUNT OF P500,000.00 REPRESENTING THE TIME DEPOSIT
OF THE RESPONDENT WHICH WAS ASSIGNED AS SECURITY FOR THE RESPONDENTS
CREDIT LINE BECAUSE THE PETITIONER HAD THE RIGHT TO TERMINATE THE
DISTRIBUTORSHIP AGREEMENT UNDER ART. 1191 OF THE CIVIL CODE AND
PARAGRAPHS 5 AND 22 OF THE DISTRIBUTORSHIP AGREEMENT BECAUSE OF THE
FAILURE OF THE RESPONDENT TO SETTLE ITS ACCOUNT IN THE AMOUNT OF
P995,319.81 AND THAT THE EVIDENCE SUBMITTED BY THE RESPONDENT ON THE
ALLEGED ACTUAL DAMAGES IT SUSTAINED AS A RESULT OF THE TERMINATION OF
THE DISTRIBUTORSHIP AGREEMENT (EXHIBIT 5) AND COMPANION EXHIBITS WERE
MERELY SPECULATIVE AND DID NOT HAVE PROBATIVE VALUE.
(4)
THE [CA] COMMITTED A GRAVE ERROR IN LAW FOR NOT AWARDING TO THE
PETITIONER ITS COUNTERCLAIM.[9]

On the first issue, petitioner asserts that respondents witness, Florentino Yue, Jr., a
director and officer of respondent corporation, admitted in open court that the
respondent had an unpaid obligation to petitioner in the amount of around
P900,000.[10]
Respondent counters that this statement was merely in answer to the question of
the presiding judge on what ground petitioner supposedly terminated the
agreement. The witness was not being asked, nor was he addressing, the truth of
such ground. In fact, this witness later testified that (petitioner) wrote us back
saying that they (had) terminated my contract and that I owe(d) them something
like P900,000.[11]
Petitioners argument is palpably without merit and deserves scant consideration. It
quoted Mr. Yues statement in isolation from the rest of his testimony and took it out
of context. Obviously, Yues statement cannot be considered a judicial admission
that respondent had an unpaid obligation of P900,000 and that the agreement had
been terminated for this reason.
On the second issue, petitioner argues that the CA should not have disregarded the
testimony of petitioners witness, Cristina Rayos, who prepared the statement of
account on the basis of the invoices and delivery orders corresponding to the
alleged overdue accounts of respondent.[12] The CA ruled that petitioner was not
able to prove that respondent indeed had unpaid accounts, saying, among others,
that the testimony of Rayos constituted incompetent evidence:
xxx the appellees alleged non-payment and outstanding balance of P995,319.81
was not sufficiently proven.
xxx

xxx

xxx

85

Anyway, the appellants Statement of Account showing such alleged unpaid balance
is undated, and it does not show receipt thereof by the appellee, and when, if such
indeed was received. Moreover, there are no supporting documents to sustain such
unpaid accounts.
The witness for the appellant who prepared the Statement,
Cristina Rayos, in fact admitted that the Invoices corresponding to the alleged
overdue accounts are not signed. Her explanation was that there were DOs or
Delivery Orders covering the transactions. However, she did not identify the
signatures appearing on the Delivery Orders marked as Exhibits 13-A, 14-A, 15A and 16-A as the persons who received the goods for the appellant. In any case,
she could not have identified the same, for she was not involved in the delivery, as
she is only in charge of the records and documents on all accounts receivables as
part of her duties as Credit and Collection Manager.[13]
Petitioner contends that the testimony of Rayos was an exception to the hearsay
rule under Section 43, Rule 130 of the Rules of Court:[14]
Entries in the course of business. Entries made at, or near the time of the
transactions to which they refer, by a person deceased, or unable to testify, who
was in a position to know the facts therein stated, may be received as prima facie
evidence, if such person made the entries in his professional capacity or in the
performance of duty and in the ordinary or regular course of business or duty.

Petitioners contention has no merit.


The provision does not apply to this case because it does not involve entries made
in the course of business. Rayos testified on a statement of account she prepared
on the basis of invoices and delivery orders which she, however, knew nothing
about. She had no personal knowledge of the facts on which the accounts were
based since, admittedly, she was not involved in the delivery of goods and was
merely in charge of the records and documents of all accounts receivable as part of
her duties as credit and collection manager.[15] She thus knew nothing of the truth
or falsity of the facts stated in the invoices and delivery orders, i.e., whether such
deliveries were in fact made in the amounts and on the dates stated, or whether
they were actually received by respondent. She was not even the credit and
collection manager during the period the agreement was in effect.[16] This can only
mean that she merely obtained these documents from another without any personal
knowledge of their contents.
The foregoing shows that Rayos was incompetent to testify on whether or not the
invoices and delivery orders turned over to her correctly reflected the details of the
deliveries made. Thus, the CA correctly disregarded her testimony.
Furthermore, the invoices and delivery orders presented by petitioner were selfserving. Having generated these documents, petitioner could have easily fabricated
them. Petitioners failure to present any competent witness to identify the
signatures and other information in those invoices and delivery orders cast doubt on
their veracity.
Petitioner next argues that respondent did not deny during the trial that it received
the goods covered by the invoices and was therefore deemed to have admitted the
same.[17] This argument cannot be taken seriously. From the very beginning,
respondents position was that petitioner concocted falsified charges of nonpayment to justify the termination of their agreement.[18] In no way could
respondent be deemed to have admitted those deliveries.
On the third issue, petitioner questions the award of actual damages in the amount
of P1,000,000 and the refund of the P500,000 time deposit, contending that it
validly terminated the agreement because of respondents failure to pay its overdue
accounts.

86

As discussed above, the CA declared that petitioner was not able to prove that
respondent had unpaid accounts, thus debunking the claim of a valid termination.
The CA also held petitioner guilty of various acts which violated the provisions of the
agreement.[19] Consequently, for petitioners breach of the agreement, the CA
awarded actual damages to respondent in the amount of P1,000,000. Petitioner,
other than claiming that it validly terminated the agreement, did not challenge the
findings of the CA that it committed various violations of the agreement. Hence,
there was legal basis for the grant of actual damages.
Petitioner asserts that the documentary evidence presented by respondent to prove
actual damages in the amount of P4,246,015.60 should not have been considered
because respondents complaint only prayed for an award of P1,000,000. It further
contends that the court acquires jurisdiction over the claim only upon payment of
the prescribed docket fee.[20]
Indeed, a court acquires jurisdiction over the claim of damages upon payment of
the correct docket fees.[21] In this case, it is not disputed that respondent paid
docket fees based on the amounts prayed for in its complaint. Respondent adduced
evidence to prove its losses. It was proper for the CA and the RTC to consider this
evidence and award the sum of P1,000,000. Had the courts below awarded a sum
more than P1,000,000, which was the amount prayed for, an additional filing fee
would have been assessed and imposed as a lien on the judgment.[22] However,
the courts limited their award to the amount prayed for.
Both the RTC and CA found that respondent had satisfactorily proven the factual
bases for the damages adjudged against the petitioner. This is a factual matter
binding and conclusive upon this Court.[23] It is well-settled that
. . . findings of fact of the trial court, when affirmed by the Court of Appeals, are
binding upon the Supreme Court. This rule may be disregarded only when the
findings of fact of the Court of Appeals are contrary to the findings and conclusions
of the trial court, or are not supported by the evidence on record. But there is no
ground to apply this exception to the instant case. This Court will not assess all over
again the evidence adduced by the parties particularly where as in this case the
findings of both the trial court and the Court of Appeals completely coincide.[24]
Likewise, the determination of the amount of damages commensurate with the
factual findings upon which it is based is primarily the task of the trial court.[25]
Considering that the amount adjudged is not excessive, we affirm its correctness.
Moreover, given that petitioner was not able to prove that respondent had unpaid
accounts in the amount of P995,319.81, the seizure of the P500,000 time deposit
was improper. As a result, the refund of this amount with interest is also called for.
Finally, petitioners counterclaims are necessarily without merit. It failed to prove
the alleged outstanding accounts of respondent. Accordingly, it is not entitled to
the supposed unpaid balance of P495,319.81 with interest.
Petitioner, being at fault and in bad faith, and there being no proof that respondent
was guilty of any wrongdoing, cannot claim moral and exemplary damages and
attorneys fees from respondent.
In fine, we find no error in the assailed decision and resolution of the CA.
therefore affirm them.

We

WHEREFORE, the petition is hereby DENIED for lack of merit. The decision of the
Court of Appeals dated January 11, 2001 and resolution dated November 14, 2001
in CA-G.R. CV No. 57299 are hereby AFFIRMED.
Costs against petitioner.

87

SO ORDERED.

RENATO C. CORONA
Associate Justice

Sun Insurance v. Asuncion, G.R. Nos. 79937-38, February 13, 1989

G.R. Nos. 79937-38 February 13, 1989


SUN INSURANCE OFFICE, LTD., (SIOL), E.B. PHILIPPS and D.J. WARBY, petitioners,
vs.
HON. MAXIMIANO C. ASUNCION, Presiding Judge, Branch 104, Regional Trial Court,
Quezon City and MANUEL CHUA UY PO TIONG, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles Law Offices for
petitioners. Tanjuatco, Oreta, Tanjuatco, Berenguer & Sanvicente Law Offices for
private respondent.

GANCAYCO, J.:
Again the Court is asked to resolve the issue of whether or not a court acquires
jurisdiction over a case when the correct and proper docket fee has not been paid.
On February 28, 1984, petitioner Sun Insurance Office, Ltd. (SIOL for brevity) filed a
complaint with the Regional Trial Court of Makati, Metro Manila for the consignation
of a premium refund on a fire insurance policy with a prayer for the judicial
declaration of its nullity against private respondent Manuel Uy Po Tiong. Private
respondent as declared in default for failure to file the required answer within the
reglementary period.
On the other hand, on March 28, 1984, private respondent filed a complaint in the
Regional Trial Court of Quezon City for the refund of premiums and the issuance of a
writ of preliminary attachment which was docketed as Civil Case No. Q-41177,
initially against petitioner SIOL, and thereafter including E.B. Philipps and D.J. Warby
as additional defendants. The complaint sought, among others, the payment of
actual, compensatory, moral, exemplary and liquidated damages, attorney's fees,
expenses of litigation and costs of the suit. Although the prayer in the complaint did
not quantify the amount of damages sought said amount may be inferred from the
body of the complaint to be about Fifty Million Pesos (P50,000,000.00).
Only the amount of P210.00 was paid by private respondent as docket fee which
prompted petitioners' counsel to raise his objection. Said objection was disregarded
by respondent Judge Jose P. Castro who was then presiding over said case. Upon the
order of this Court, the records of said case together with twenty-two other cases
assigned to different branches of the Regional Trial Court of Quezon City which were
under investigation for under-assessment of docket fees were transmitted to this
Court. The Court thereafter returned the said records to the trial court with the
directive that they be re-raffled to the other judges in Quezon City, to the exclusion
of Judge Castro. Civil Case No. Q-41177 was re-raffled to Branch 104, a sala which
was then vacant.
On October 15, 1985, the Court en banc issued a Resolution in Administrative Case
No. 85-10-8752-RTC directing the judges in said cases to reassess the docket fees
and that in case of deficiency, to order its payment. The Resolution also requires all

88

clerks of court to issue certificates of re-assessment of docket fees. All litigants were
likewise required to specify in their pleadings the amount sought to be recovered in
their complaints.
On December 16, 1985, Judge Antonio P. Solano, to whose sala Civil Case No. Q41177 was temporarily assigned, issuedan order to the Clerk of Court instructing
him to issue a certificate of assessment of the docket fee paid by private
respondent and, in case of deficiency, to include the same in said certificate.
On January 7, 1984, to forestall a default, a cautionary answer was filed by
petitioners. On August 30,1984, an amended complaint was filed by private
respondent including the two additional defendants aforestated.
Judge Maximiano C. Asuncion, to whom Civil Case No. Q41177 was thereafter
assigned, after his assumption into office on January 16, 1986, issued a
Supplemental Order requiring the parties in the case to comment on the Clerk of
Court's letter-report signifying her difficulty in complying with the Resolution of this
Court of October 15, 1985 since the pleadings filed by private respondent did not
indicate the exact amount sought to be recovered. On January 23, 1986, private
respondent filed a "Compliance" and a "Re-Amended Complaint" stating therein a
claim of "not less than Pl0,000,000. 00 as actual compensatory damages" in the
prayer. In the body of the said second amended complaint however, private
respondent alleges actual and compensatory damages and attorney's fees in the
total amount of about P44,601,623.70.
On January 24, 1986, Judge Asuncion issued another Order admitting the second
amended complaint and stating therein that the same constituted proper
compliance with the Resolution of this Court and that a copy thereof should be
furnished the Clerk of Court for the reassessment of the docket fees. The
reassessment by the Clerk of Court based on private respondent's claim of "not less
than P10,000,000.00 as actual and compensatory damages" amounted to
P39,786.00 as docket fee. This was subsequently paid by private respondent.
Petitioners then filed a petition for certiorari with the Court of Appeals questioning
the said order of Judie Asuncion dated January 24, 1986.
On April 24, 1986, private respondent filed a supplemental complaint alleging an
additional claim of P20,000,000.00 as d.qmages so the total claim amounts to about
P64,601,623.70. On October 16, 1986, or some seven months after filing the
supplemental complaint, the private respondent paid the additional docket fee of
P80,396.00. 1
On August 13, 1987, the Court of Appeals rendered a decision ruling, among others,
as follows:
WHEREFORE, judgment is hereby rendered:
1.
Denying due course to the petition in CA-G.R. SP No. 1, 09715 insofar as it
seeks annulment of the order
(a)

denying petitioners' motion to dismiss the complaint, as amended, and

(b)
granting the writ of preliminary attachment, but giving due course to the
portion thereof questioning the reassessment of the docketing fee, and requiring
the Honorable respondent Court to reassess the docketing fee to be paid by private
respondent on the basis of the amount of P25,401,707.00. 2
Hence, the instant petition.

89

During the pendency of this petition and in conformity with the said judgment of
respondent court, private respondent paid the additional docket fee of P62,432.90
on April 28, 1988. 3
The main thrust of the petition is that the Court of Appeals erred in not finding that
the lower court did not acquire jurisdiction over Civil Case No. Q-41177 on the
ground of nonpayment of the correct and proper docket fee. Petitioners allege that
while it may be true that private respondent had paid the amount of P182,824.90 as
docket fee as herein-above related, and considering that the total amount sought to
be recovered in the amended and supplemental complaint is P64,601,623.70 the
docket fee that should be paid by private respondent is P257,810.49, more or less.
Not having paid the same, petitioners contend that the complaint should be
dismissed and all incidents arising therefrom should be annulled. In support of their
theory, petitioners cite the latest ruling of the Court in Manchester Development
Corporation vs. CA, 4 as follows:
The Court acquires jurisdiction over any case only upon the payment of the
prescribed docket fee. An amendment of the complaint or similar pleading will not
thereby vest jurisdiction in the Court, much less the payment of the docket fee
based on the amounts sought in the amended pleading. The ruling in the Magaspi
Case in so far as it is inconsistent with this pronouncement is overturned and
reversed.
On the other hand, private respondent claims that the ruling in Manchester cannot
apply retroactively to Civil Case No. Q41177 for at the time said civil case was filed
in court there was no such Manchester ruling as yet. Further, private respondent
avers that what is applicable is the ruling of this Court in Magaspi v. Ramolete, 5
wherein this Court held that the trial court acquired jurisdiction over the case even if
the docket fee paid was insufficient.
The contention that Manchester cannot apply retroactively to this case is untenable.
Statutes regulating the procedure of the courts will be construed as applicable to
actions pending and undetermined at the time of their passage. Procedural laws are
retrospective in that sense and to that extent. 6
In Lazaro vs. Endencia and Andres, 7 this Court held that the payment of the full
amount of the docket fee is an indispensable step for the perfection of an appeal. In
a forcible entry and detainer case before the justice of the peace court of Manaoag,
Pangasinan, after notice of a judgment dismissing the case, the plaintiff filed a
notice of appeal with said court but he deposited only P8.00 for the docket fee,
instead of P16.00 as required, within the reglementary period of appeal of five (5)
days after receiving notice of judgment. Plaintiff deposited the additional P8.00 to
complete the amount of the docket fee only fourteen (14) days later. On the basis of
these facts, this court held that the Court of First Instance did notacquire jurisdiction
to hear and determine the appeal as the appeal was not thereby perfected.
In Lee vs. Republic, 8 the petitioner filed a verified declaration of intention to
become a Filipino citizen by sending it through registered mail to the Office of the
Solicitor General in 1953 but the required filing fee was paid only in 1956, barely
5V2 months prior to the filing of the petition for citizenship. This Court ruled that the
declaration was not filed in accordance with the legal requirement that such
declaration should be filed at least one year before the filing of the petition for
citizenship. Citing Lazaro, this Court concluded that the filing of petitioner's
declaration of intention on October 23, 1953 produced no legal effect until the
required filing fee was paid on May 23, 1956.
In Malimit vs. Degamo, 9 the same principles enunciated in Lazaro and Lee were
applied. It was an original petition for quo warranto contesting the right to office of
proclaimed candidates which was mailed, addressed to the clerk of the Court of First
Instance, within the one-week period after the proclamation as provided therefor by
law. 10 However, the required docket fees were paid only after the expiration of said

90

period. Consequently, this Court held that the date of such payment must be
deemed to be the real date of filing of aforesaid petition and not the date when it
was mailed.
Again, in Garica vs, Vasquez, 11 this Court reiterated the rule that the docket fee
must be paid before a court will act on a petition or complaint. However, we also
held that said rule is not applicable when petitioner seeks the probate of several
wills of the same decedent as he is not required to file a separate action for each
will but instead he may have other wills probated in the same special proceeding
then pending before the same court.
Then in Magaspi, 12 this Court reiterated the ruling in Malimit and Lee that a case is
deemed filed only upon payment of the docket fee regardless of the actual date of
its filing in court. Said case involved a complaint for recovery of ownership and
possession of a parcel of land with damages filed in the Court of First Instance of
Cebu. Upon the payment of P60.00 for the docket fee and P10.00 for the sheriffs
fee, the complaint was docketed as Civil Case No. R-11882. The prayer of the
complaint sought that the Transfer Certificate of Title issued in the name of the
defendant be declared as null and void. It was also prayed that plaintiff be declared
as owner thereof to whom the proper title should be issued, and that defendant be
made to pay monthly rentals of P3,500.00 from June 2, 1948 up to the time the
property is delivered to plaintiff, P500,000.00 as moral damages, attorney's fees in
the amount of P250,000.00, the costs of the action and exemplary damages in the
amount of P500,000.00.
The defendant then filed a motion to compel the plaintiff to pay the correct amount
of the docket fee to which an opposition was filed by the plaintiff alleging that the
action was for the recovery of a parcel of land so the docket fee must be based on
its assessed value and that the amount of P60.00 was the correct docketing fee. The
trial court ordered the plaintiff to pay P3,104.00 as filing fee.
The plaintiff then filed a motion to admit the amended complaint to include the
Republic as the defendant. In the prayer of the amended complaint the exemplary
damages earlier sought was eliminated. The amended prayer merely sought moral
damages as the court may determine, attorney's fees of P100,000.00 and the costs
of the action. The defendant filed an opposition to the amended complaint. The
opposition notwithstanding, the amended complaint was admitted by the trial court.
The trial court reiterated its order for the payment of the additional docket fee
which plaintiff assailed and then challenged before this Court. Plaintiff alleged that
he paid the total docket fee in the amount of P60.00 and that if he has to pay the
additional fee it must be based on the amended complaint.
The question posed, therefore, was whether or not the plaintiff may be considered
to have filed the case even if the docketing fee paid was not sufficient. In Magaspi,
We reiterated the rule that the case was deemed filed only upon the payment of the
correct amount for the docket fee regardless of the actual date of the filing of the
complaint; that there was an honest difference of opinion as to the correct amount
to be paid as docket fee in that as the action appears to be one for the recovery of
property the docket fee of P60.00 was correct; and that as the action is also one, for
damages, We upheld the assessment of the additional docket fee based on the
damages alleged in the amended complaint as against the assessment of the trial
court which was based on the damages alleged in the original complaint.
However, as aforecited, this Court overturned Magaspi in Manchester. Manchester
involves an action for torts and damages and specific performance with a prayer for
the issuance of a temporary restraining order, etc. The prayer in said case is for the
issuance of a writ of preliminary prohibitory injunction during the pendency of the
action against the defendants' announced forfeiture of the sum of P3 Million paid by
the plaintiffs for the property in question, the attachment of such property of
defendants that may be sufficient to satisfy any judgment that may be rendered,
and, after hearing, the issuance of an order requiring defendants to execute a

91

contract of purchase and sale of the subject property and annul defendants' illegal
forfeiture of the money of plaintiff. It was also prayed that the defendants be made
to pay the plaintiff jointly and severally, actual, compensatory and exemplary
damages as well as 25% of said amounts as may be proved during the trial for
attorney's fees. The plaintiff also asked the trial court to declare the tender of
payment of the purchase price of plaintiff valid and sufficient for purposes of
payment, and to make the injunction permanent. The amount of damages sought is
not specified in the prayer although the body of the complaint alleges the total
amount of over P78 Millon allegedly suffered by plaintiff.
Upon the filing of the complaint, the plaintiff paid the amount of only P410.00 for
the docket fee based on the nature of the action for specific performance where the
amount involved is not capable of pecuniary estimation. However, it was obvious
from the allegations of the complaint as well as its designation that the action was
one for damages and specific performance. Thus, this court held the plaintiff must
be assessed the correct docket fee computed against the amount of damages of
about P78 Million, although the same was not spelled out in the prayer of the
complaint.
Meanwhile, plaintiff through another counsel, with leave of court, filed an amended
complaint on September 12, 1985 by the inclusion of another co-plaintiff and
eliminating any mention of the amount of damages in the body of the complaint.
The prayer in the original complaint was maintained.
On October 15, 1985, this Court ordered the re-assessment of the docket fee in the
said case and other cases that were investigated. On November 12, 1985, the trial
court directed the plaintiff to rectify the amended complaint by stating the amounts
which they were asking for. This plaintiff did as instructed. In the body of the
complaint the amount of damages alleged was reduced to P10,000,000.00 but still
no amount of damages was specified in the prayer. Said amended complaint was
admitted.
Applying the principle in Magaspi that "the case is deemed filed only upon payment
of the docket fee regardless of the actual date of filing in court," this Court held that
the trial court did not acquire jurisdiction over the case by payment of only P410.00
for the docket fee. Neither can the amendment of the complaint thereby vest
jurisdiction upon the Court. For all legal purposes there was no such original
complaint duly filed which could be amended. Consequently, the order admitting
the amended complaint and all subsequent proceedings and actions taken by the
trial court were declared null and void. 13
The present case, as above discussed, is among the several cases of underassessment of docket fee which were investigated by this Court together with
Manchester. The facts and circumstances of this case are similar to Manchester. In
the body of the original complaint, the total amount of damages sought amounted
to about P50 Million. In the prayer, the amount of damages asked for was not
stated. The action was for the refund of the premium and the issuance of the writ of
preliminary attachment with damages. The amount of only P210.00 was paid for the
docket fee. On January 23, 1986, private respondent filed an amended complaint
wherein in the prayer it is asked that he be awarded no less than P10,000,000.00 as
actual and exemplary damages but in the body of the complaint the amount of his
pecuniary claim is approximately P44,601,623.70. Said amended complaint was
admitted and the private respondent was reassessed the additional docket fee of
P39,786.00 based on his prayer of not less than P10,000,000.00 in damages, which
he paid.
On April 24, 1986, private respondent filed a supplemental complaint alleging an
additional claim of P20,000,000.00 in damages so that his total claim is
approximately P64,601,620.70. On October 16, 1986, private respondent paid an
additional docket fee of P80,396.00. After the promulgation of the decision of the
respondent court on August 31, 1987 wherein private respondent was ordered to be

92

reassessed for additional docket fee, and during the pendency of this petition, and
after the promulgation of Manchester, on April 28, 1988, private respondent paid an
additional docket fee of P62,132.92. Although private respondent appears to have
paid a total amount of P182,824.90 for the docket fee considering the total amount
of his claim in the amended and supplemental complaint amounting to about
P64,601,620.70, petitioner insists that private respondent must pay a docket fee of
P257,810.49.
The principle in Manchester could very well be applied in the present case. The
pattern and the intent to defraud the government of the docket fee due it is obvious
not only in the filing of the original complaint but also in the filing of the second
amended complaint.
However, in Manchester, petitioner did not pay any additional docket fee until] the
case was decided by this Court on May 7, 1987. Thus, in Manchester, due to the
fraud committed on the government, this Court held that the court a quo did not
acquire jurisdiction over the case and that the amended complaint could not have
been admitted inasmuch as the original complaint was null and void.
In the present case, a more liberal interpretation of the rules is called for
considering that, unlike Manchester, private respondent demonstrated his
willingness to abide by the rules by paying the additional docket fees as required.
The promulgation of the decision in Manchester must have had that sobering
influence on private respondent who thus paid the additional docket fee as ordered
by the respondent court. It triggered his change of stance by manifesting his
willingness to pay such additional docket fee as may be ordered.
Nevertheless, petitioners contend that the docket fee that was paid is still
insufficient considering the total amount of the claim. This is a matter which the
clerk of court of the lower court and/or his duly authorized docket clerk or clerk incharge should determine and, thereafter, if any amount is found due, he must
require the private respondent to pay the same.
Thus, the Court rules as follows:
1.
It is not simply the filing of the complaint or appropriate initiatory pleading,
but the payment of the prescribed docket fee, that vests a trial court with
jurisdiction over the subject matter or nature of the action. Where the filing of the
initiatory pleading is not accompanied by payment of the docket fee, the court may
allow payment of the fee within a reasonable time but in no case beyond the
applicable prescriptive or reglementary period.
2.
The same rule applies to permissive counterclaims, third party claims and
similar pleadings, which shall not be considered filed until and unless the filing fee
prescribed therefor is paid. The court may also allow payment of said fee within a
reasonable time but also in no case beyond its applicable prescriptive or
reglementary period.
3.
Where the trial court acquires jurisdiction over a claim by the filing of the
appropriate pleading and payment of the prescribed filing fee but, subsequently,
the judgment awards a claim not specified in the pleading, or if specified the same
has been left for determination by the court, the additional filing fee therefor shall
constitute a lien on the judgment. 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.
WHEREFORE, the petition is DISMISSED for lack of merit. The Clerk of Court of the
court a quo is hereby instructed to reassess and determine the additional filing fee
that should be paid by private respondent considering the total amount of the claim
sought in the original complaint and the supplemental complaint as may be gleaned

93

from the allegations and the prayer thereof and to require private respondent to pay
the deficiency, if any, without pronouncement as to costs.
SO ORDERED.
Fernan (C.J), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Padilla,
Bidin, Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.
Phil. First Insurance v. Paramount Gen. Insurance, G.R. No. 165147, July 9, 2008

SECOND DIVISION
PHILIPPINE FIRST INSURANCE CO., INC. and PARAMOUNT GENERAL INSURANCE
CORPORATION,
Petitioners,

- versus -

PYRAMID LOGISTICS AND TRUCKING CORPORATION (formerly PANACOR INTEGRATED


WAREHOUSING AND TRUCKING CORPORATION),
Respondent.
G.R. No.

165147

Present:
QUISUMBING, J., Chairperson,
CARPIO MORALES,
TINGA,
VELASCO, JR. and
BRION, JJ.

Promulgated:
July 9, 2008
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CARPIO MORALES, J.:
The issue, in the main, in the present case is whether respondent, Pyramid Logistics
and Trucking Corporation (Pyramid), which filed on November 7, 2001 a complaint,
[1] denominated as one for specific performance and damages, against petitioners
Philippine First Insurance Company, Inc. (Philippine First) and Paramount General
Insurance Corporation (Paramount) before the Regional Trial Court (RTC) of Makati,
docketed as Civil Case No. 01-1609, paid the correct docket fee; if in the negative,
whether the complaint should be dismissed or Pyramid can still be ordered to pay
the fee.
Pyramid sought to recover the proceeds of two insurance policies issued to it, Policy
No. IN-002904 issued by petitioner Paramount, and Policy No. MN-MCL-HO-000000007-00 issued by petitioner Philippine First. Despite demands, petitioners
allegedly failed to settle them, hence, it filed the complaint subject of the present
petition.

94

In its complaint, Pyramid alleged that on November 8, 2000, its delivery van bearing
license plate number PHL-545 which was loaded with goods belonging to California
Manufacturing Corporation (CMC) valued at PESOS NINE HUNDRED SEVEN
THOUSAND ONE HUNDRED FORTY NINE AND SEVEN/100 (P907,149.07) left the CMC
Bicutan Warehouse but the van, together with the goods, failed to reach its
destination and its driver and helper were nowhere to be found, to its damage and
prejudice; that it filed a criminal complaint against the driver and the helper for
qualified theft, and a claim with herein petitioners as co-insurers of the lost goods
but, in violation of petitioners undertaking under the insurance policies, they
refused without just and valid reasons to compensate it for the loss; and that as a
direct consequence of petitioners failure, despite repeated demands, to comply
with their respective undertakings under the Insurance Policies by compensating for
the value of the lost goods, it suffered damages and was constrained to engage the
services of counsel to enforce and protect its right to recover compensation under
said policies, for which services it obligated itself to pay the sum equivalent to
twenty-five (25%) of any amount recovered as and for attorneys fees and legal
expenses.[2]
Pyramid thus prayed
. . . that after due proceedings, judgment be rendered, ordering [herein petitioners]
to comply with their obligation under their respective Insurance Policies by paying
to [it] jointly and severally, the claims arising from the subject losses.
THAT, [herein petitioners] be adjudged jointly and severally to pay to [it], in addition
to the foregoing, the following:
1.
The sum of PHP 50,000.00 plus PHP 1,500.00 for each Court session
attended by counsel until the instant [case] is finally terminated, as and for
attorneys fees;
2.

The costs of suit[;][3] (Underscoring supplied)

and for other reliefs just and equitable in the premises.[4]


Pyramid was assessed P610 docket fee, apparently on the basis of the amount of
P50,000 specified in the prayer representing attorneys fees, which it duly paid.[5]
Pyramid later filed a 1st Amended Complaint[6] containing minor changes in its
body[7] but bearing the same prayer.[8] Branch 148 of the Makati RTC to which the
complaint was raffled admitted the Amended Complaint.[9]
Petitioners filed a Motion to Dismiss on the ground of, inter alia, lack of jurisdiction,
Pyramid not having paid the docket fees in full, arguing thus:
xxxx
In the body of the Amended Complaint, plaintiff alleged that the goods belonging to
California Manufacturing Co., Inc. (CMC) is [sic] valued at Php907,149.07 and
consequently, plaintiff incurred expenses, suffered damages and was constrained
to engage the services of counsel to enforce and protect its right to recover
compensation under the said policies and for which services, it obligated itself to
pay the sum equivalent to twenty-five (25%) of any recovery in the instant action,
as and for attorneys fees and legal expenses.
On the other hand, in the prayer in the Complaint, plaintiff deliberately omitted to
specify what these damages are. x x x
xxxx

95

Verily, this deliberate omission by the plaintiff is clearly intended for no other
purposes than to evade the payment of the correct filing fee if not to mislead the
docket clerk, in the assessment of the filing fee. In fact, the docket clerk in the
instant case charged the plaintiff a total of Php610.00 only as a filing fee, which she
must have based on the amount of Php50,000.00 [attorneys fees] only.[10]
(Emphasis in the original; italics and underscoring supplied)

Petitioners cited[11] Manchester Development Corporation v. Court of Appeals[12]


which held:
x x x [A]ll complaints, petitions, answers and other similar pleadings should specify
the amount of damages being prayed for not only in the body of the pleading but
also in the prayer, and said damages shall be considered in the assessment of the
filing fees in any case. Any pleading that fails to comply with this requirement shall
not be accepted or admitted, or shall otherwise be expunged from the record.[13]
(Emphasis and underscoring supplied)

They cited too Sun Insurance Office, Ltd. v. Asuncion[14] which held that [i]t is not
simply the filing of the complaint or appropriate pleading, but the payment of the
prescribed docket fee, that vests a trial court with jurisdiction over the subjectmatter or nature of the action.[15]
Petitioners thus concluded:
With the above cases as a backdrop, the Supreme Court, in revising the rules of
pleading and practice in the 1997 Rules of Civil Procedure, added a tenth ground to
a Motion to Dismiss to wit, [t]hat a condition precedent for filing claim [sic] has
not been complied with.[]
On the contrary, if plaintiff would insist that its claim against the defendants is only
Php50,000.00 plus Php 1,500.00 as appearance fee per court hearing, then it
follows that it is the Metropolitan Trial Court which has jurisdiction over this case,
not this Honorable Court. Such amount is way below the minimum jurisdictional
amount prescribed by the rules in order to confer jurisdiction to the Regional Trial
Court.[16] (Underscoring supplied)

To the Motion to Dismiss Pyramid filed its Opposition,[17] alleging that if there was a
mistake in the assessment of the docket fees, the trial court was not precluded from
acquiring jurisdiction over the complaint as it has the authority to direct the
mistaken party to complete the docket fees in the course of the
proceedings . . .[18] The Opposition merited a Reply[19] from petitioners.
By Order of June 3, 2002, the trial court[20] denied the Motion to Dismiss in this
wise:
xxxx
Indeed, a perusal of the Complaint reveals that while plaintiff made mention of the
value of the goods, which were lost, the prayer of plaintiff did not indicate its exact
claim from the defendants. The Complaint merely prayed defendants to comply
with their obligation under their respective insurance policies by paying to plaintiff
jointly and severally, the claims arising from the subject losses and did not mention
the amount of PHP907,149.07, which is the value of the goods and which is also the
subject of insurance. This resulted to the assessment and payment of docket fees
in the amount of P610 only. The Court, even without the Motion to Dismiss filed by
defendant, actually noted such omission which is actually becoming a practice for
some lawyers. For whatever purpose it may be, the Court will not dwell into it. In

96

this instant case, this being for specific performance, it is not dismissible on that
ground but unless proper docket fees are paid, the Court can only grant what was
prayed for in the Complaint.
x x x x[21] (Emphasis and underscoring supplied)

Petitioners Motion for Reconsideration[22] of the denial of their Motion to Dismiss


having been denied[23] by Order of August 1, 2002, they filed their Answer with
Compulsory Counterclaim ad Cautelam,[24] alleging that they intended to file a
Petition for Certiorari with the Court of Appeals.[25]
Petitioners did indeed eventually file before the Court of Appeals a Petition for
Certiorari (With Preliminary Injunction and Urgent Prayer for Restraining Order)[26]
posing the following two of three queries, viz:
First. Does [Pyramids] deliberate omission to pay the required correct docket and
filing fee vest the trial court [with] jurisdiction to entertain the subject matter of the
instant case?
Second. [Is] the instant case an action for specific performance or simply one for
damages or recovery of a sum of money?
x x x x[27]

By Decision of June 3, 2004,[28] the Court of Appeals partially granted petitioners


petition for certiorari by setting aside the trial judges assailed orders and ordering
Pyramid to file the correct docket fees within a reasonable time, it holding that while
the complaint was denominated as one for specific performance, it sought to
recover from petitioners Pyramids claims arising from the subject losses. The
appellate court ratiocinated:
xxxx
Indeed, it has been held that it is not simply the filing of the complaint or
appropriate initiatory pleading, but the payment of the prescribed docket fee that
vests a trial court with jurisdiction over the subject matter or nature of the action.
To determine the docket fees, it is necessary to determine the true nature of the
action by examining the allegations of the complaint. x x x
xxxx
While the captions of the complaint and 1st amended complaint denominated the
case as one for Specific Performance and Damages, the allegations and prayer
therein show that the specific performance sought by private respondent was for
petitioners to comply with their obligation under their respective Insurance Policies
by paying to plaintiff jointly and severally, the claims arising from the subject
losses as well as the attorneys fees and costs of suit. Obviously, what constitutes
specific performance is the payment itself by petitioners of private respondents
claims arising from the losses it allegedly incurred. x x x[29]
xxxx
Public respondent should have ordered private respondent to pay the correct docket
fees on the basis of the allegations of the complaint.
xxx
xxxx

97

While it has been held in Manchester Development Corporation vs. Court of Appeals
x x x that any pleading that fails to comply with this requirement of specifying the
amount of damages not only in the body of the pleading but also in the prayer shall
not be accepted nor admitted, or shall otherwise be expunged from the record, this
rule was relaxed in subsequent cases, wherein payment of the correct docket fees
was allowed within a reasonable time. . .
x x x x[30] (Emphasis and underscoring supplied)
Thus the appellate court disposed:
WHEREFORE, the petition is partially granted. The Orders dated June 3, 2002 and
August 1, 2002 of public respondent are partially set aside insofar as they
dispensed with the payment of the correct docket fees. Consequently, [Pyramid] is
hereby directed to pay the correct docket fees on the basis of the losses alleged in
the body of the complaint, plus the attorneys fees mentioned in the prayer, within a
reasonable time which should not go beyond the applicable prescriptive or
reglementary period. In all other respects, the said Orders are affirmed.[31]
(Underscoring supplied)

Petitioners filed a Motion for Reconsideration[32] of the appellate courts decision.


Pyramid filed its Comment and Opposition to the Motion for Reconsideration,[33]
arguing thus:
xxxx
In the present case, [Pyramid] thru its Complaint simply sought from petitioners
compliance with their contractual undertaking as insurers of the goods insured
which were lost in [its] custody. Private respondent did not specify the extent of
petitioners obligation as it left the matter entirely in the judgment of the trial court
to consider.
Thus, the Complaint was labeled Specific Performance which
[Pyramid] submitted to the Clerk of Court for assessment of the docket fee, after
which, it paid the same based on the said assessment. There was no indication
whatsoever that [Pyramid] had refused to pay; rather, it merely argued against
petitioners submissions as it maintained the correctness of the assessment made.
[34] (Underscoring supplied)

By Resolution of August 23, 2004, the Court of Appeals denied petitioners Motion
for Reconsideration;[35] hence, the present Petition for Review on Certiorari,[36]
raising the issues of whether the appellate court erred:
. . . WHEN IT APPLIED IN THE INSTANT CASE THE LIBERAL RULE ENUNCIATED IN SUN
INSURANCE OFFICE, LTD. (SIOL) VS. ASUNCION, 170 SCRA 274 AND NATIONAL STEEL
CORPORATION VS. COURT OF APPEALS, 302 SCRA 523 (1999) IN RESPECT TO THE
PAYMENT OF THE PRESCRIBED FILING AND DOCKET FEES DESPITE CLEAR SHOWING
OF RESPONDENTS INTENTION TO EVADE THE PAYMENT OF THE CORRECT DOCKET
FEE WHICH WARRANTS THE APPLICATION OF THE DOCTRINE LAID DOWN IN
MANCHESTER DEVELOPMENT CORPORATION VS. COURT OF APPEALS, 149 SCRA 562.
. . . WHEN IT DID NOT APPLY THE RULING OF THIS HONORABLE TRIBUNAL IN
MARCOPPER MINING CORPORATION VS. GARCIA, 143 SCRA 178, TAN VS. DIRECTOR
OF FORESTRY, 125 SCRA 302, AND CHINA ROAD AND BRIDGE CORPORATION VS.
COURT OF APPEALS, 348 SCRA 401.[37] (Underscoring supplied)

Petitioners invoke the doctrine in Manchester Development Corporation v. Court of


Appeals[38] that a pleading which does not specify in the prayer the amount

98

sought shall not be admitted or shall otherwise be expunged, and that the court
acquires jurisdiction only upon the payment of the prescribed docket fee.[39]
Pyramid, on the other hand, insists, in its Comment on the Petition,[40] on the
application of Sun Insurance Office, Ltd. (SIOL) v. Asuncion[41] and subsequent
rulings relaxing the Manchester ruling by allowing payment of the docket fee within
a reasonable time, in no case beyond the applicable prescriptive or reglementary
period, where the filing of the initiatory pleading is not accompanied by the
payment of the prescribed docket fee.[42]
In Tacay v. Regional Trial Court of Tagum, Davao del Norte,[43] the Court clarified
the effect of the Sun Insurance ruling on the Manchester ruling as follows:
As will be noted, the requirement in Circular No. 7 [of this Court which was issued
based on the Manchester ruling[44]] that complaints, petitions, answers, and similar
pleadings should specify the amount of damages being prayed for not only in the
body of the pleading but also in the prayer, has not been altered. What has been
revised is the rule that subsequent amendment of the complaint or similar
pleading will not thereby vest jurisdiction in the Court, much less the payment of
the docket fee based on the amount sought in the amended pleading, the trial
court now being authorized to allow payment of the fee within a reasonable time
but in no case beyond the applicable prescriptive period or reglementary period.
Moreover, a new rule has been added, governing the awards of claims not specified
in the pleading i.e., damages arising after the filing of the complaint or similar
pleading as to which the additional filing fee therefore shall constitute a lien on
the judgment.
Now, under the Rules of Court, docket or filing fees are assessed on the basis of the
sum claimed, on the one hand, or the value of the property in litigation or the
value of the estate, on the other. . .
Where the action is purely for the recovery of money or damages, the docket fees
are assessed on the basis of the aggregate amount claimed, exclusive only of
interests and costs. In this case, the complaint or similar pleading should, according
to Circular No. 7 of this Court, specify the amount of damages being prayed for not
only in the body of the pleading but also in the prayer, and said damages shall be
considered in the assessment of filing fees in any case.
Two situations may arise. One is where the complaint or similar pleading sets out a
claim purely for money and damages and there is no statement of the amounts
being claimed. In this event the rule is that the pleading will not be accepted nor
admitted, or shall otherwise be expunged from the record. In other words, the
complaint or pleading may be dismissed, or the claims as to which amounts are
unspecified may be expunged, although as aforestated the Court may, on motion,
permit amendment of the complaint and payment of the fees provided the claim
has not in the meantime become time-barred. The other is where the pleading does
specify the amount of every claim, but the fees paid are insufficient; and here again,
the rule now is that the court may allow a reasonable time for the payment of the
prescribed fees, or the balance thereof, and upon such payment, the defect is cured
and the court may properly take cognizance of the action, unless in the meantime
prescription has set in and consequently barred the right of action.[45] (Emphasis
and underscoring supplied)

Indeed, Pyramid captioned its complaint as one for specific performance and
damages even if it was, as the allegations in its body showed, seeking in the main
the collection of its claims-sums of money representing losses the amount of which
it, by its own admission, knew.[46] And, indeed, it failed to specify in its prayer in
the complaint the amount of its claims/damages.

99

When Pyramid amended its complaint, it still did not specify, in its prayer, the
amount of claims/damages it was seeking. In fact it has the audacity to inform this
Court, in its Comment on the present Petition, that
x x x In the natural order of things, when a litigant is given the opportunity to spend
less for a docket fee after submitting his pleading for assessment by the Office of
the Clerk of Court, he would not decline it inasmuch as to request for a higher
assessment under the circumstances [for such] is against his interest and would be
senseless. Placed under the same situation, petitioner[s] would certainly do
likewise. To say otherwise would certainly be dishonest,[47]

which comment drew petitioners to conclude as follows:


[This] only shows respondents dishonesty and lack of regard of the rules. Following
this line of reasoning, respondent would do everything if only for it to spend less for
the filing fee, even to the extent of circumventing and defying the rule on the
payment of the filing fee.
In spite of the fact that the respondent was already caught in the quagmire of its
own cobweb of deception, it further justified its unethical act by ratiocinating that
placed under the same situation, petitioner would certainly do likewise, to say
otherwise would certainly be dishonest. This attitude of the respondent is very
alarming! Having been caught red-handed, the honorable thing that respondent
should have done is admit its own violation rather than justify an act which it knows
is a clear contravention of the rules and jurisprudence.[48] (Italics and emphasis in
the original)

Pyramids following justification for omitting to specify in the prayer of its complaint
the amount of its claims/damages, viz:
xxxx
x x x While respondent knew its losses and alleged them in the body of the
Complaint, it was not aware of the extent of petitioners respective liability under
the two insurance policies. The allegation of respondents losses, albeit, without
repeating them in its prayer for relief was not motivated by an intention to mislead,
cheat or defraud the Court. It just left the matter of liability arising from two
separate and distinct Insurance Policies covering the same insurable risk for the trial
courts determination, hence, respondent came up with an action for specific
performance[,][49] (Emphasis and underscoring supplied)

fails to impress.
As the salient allegations of Pyramids complaint show and as priorly stated, they
constitute, in the main, an action for collection of its claims it admittedly knew.
Assuming arguendo that Pyramid has other claims the amounts of which are yet to
be determined by the trial court, the rule established in Manchester which was
embodied in this Courts Circular No. 7-88 issued on March 24, 1988, as modified by
the Sun Insurance ruling, still applies. Consider this Courts pronouncement bearing
on the matter in Ayala Corporation v. Madayag:[50]
xxxx
Apparently, the trial court misinterpreted paragraph 3 of the [Sun Insurance] ruling
of this Court wherein it stated that where the judgment awards a claim not
specified in the pleading, or if specified, the same has been left for the

100

determination of the court, the additional filing fee therefor shall constitute a lien on
the judgment by considering it to mean that where in the body and prayer of the
complaint there is a prayer xxx the amount of which is left to the discretion of the
Court, there is no need to specify the amount being sought, and that any award
thereafter shall constitute a lien on the judgment.
x x x While it is true that the determination of certain damages x x x is left to the
sound discretion of the court, it is the duty of the parties claiming such damages to
specify the amount sought on the basis of which the court may make a proper
determination, and for the proper assessment of the appropriate docket fees. The
exception contemplated as to claims not specified or to claims although specified
are left for determination of the court is limited only to any damages that may arise
after the filing of the complaint or similar pleading for then it will not be possible for
the claimant to specify nor speculate as to the amount thereof. (Emphasis and
underscoring supplied)

If respondent Pyramids counsel had only been forthright in drafting the complaint
and taking the cudgels for his client and the trial judge assiduous in applying
Circular No. 7 vis a vis prevailing jurisprudence, the precious time of this Court, as
well as of that of the appellate court, would not have been unnecessarily sapped.
The Court at this juncture thus reminds Pyramids counsel to observe Canon 12 of
the Code of Professional Ethics which enjoins a lawyer to exert every effort and
consider it his duty to assist in the speedy and efficient administration of justice,
and Rule 12.04 of the same Canon which enjoins a lawyer not [to] unduly delay a
case, impede the execution of a judgment or misuse court processes. And the
Court reminds too the trial judge to bear in mind that the nature of an action is
determined by the allegations of the pleadings[51] and to keep abreast of all laws
and prevailing jurisprudence, consistent with the standard that magistrates must be
the embodiments of competence, integrity and independence.[52]
WHEREFORE, in light of the foregoing discussions, the petition is DENIED.
SO ORDERED.
CONCHITA CARPIO MORALES
Associate Justice

Home Guaranty Corp. v. R-11 Home Guaranty Corp. v. R-11 Builders, G.R. No.
192649, March 9, 2011 (Supra.)

G.R. No. 192649

March 9, 2011

HOME GUARANTY CORPORATION, Petitioner,


vs.
R-II BUILDERS INC., and NATIONAL HOUSING AUTHORITY, Respondents.
DECISION
PEREZ, J.:
Primarily assailed in this petition for review filed pursuant to Rule 45 of the 1997
Rules of Civil Procedure, is the Decision dated 21 January 2010 rendered by the
Former Fifteenth Division of the Court of Appeals (CA) in CA-G.R. SP No. 111153,1
the dispositive portion of which states as follows:
WHEREFORE, the petition for certiorari and prohibition is hereby DENIED.

101

The assailed Orders, dated March 3, 2009 and September 29, 2009, of the Regional
Trial Court of Manila, Branch 22 are hereby AFFIRMED.
Consequently, the injunction earlier issued on December 4, 2009, restraining the
proceedings in Civil Case No. 05-113407, is hereby DISSOLVED.2
The Facts
On 19 March 1993, a Joint Venture Agreement (JVA) was entered into between
respondents National Housing Authority (NHA) and R-II Builders, Inc. (R-II Builders)
for the implementation of the Smokey Mountain Development and Reclamation
Project (SMDRP). Amended and restated on 21 February 19943 and 11 August
1994,4 the JVA was aimed at implementing a two-phase conversion of the Smokey
Mountain Dumpsite "into a habitable housing project inclusive of the reclamation of
the area across Radial Road 10 (R-10)".5 By the terms of the JVA, R-II Builders, as
developer, was entitled to own 79 hectares of reclaimed land and the 2.3 hectare
commercial area at the Smokey Mountain. As landowner/implementing agency,
NHA, on the other hand, was entitled to own the 2,992 temporary housing units
agreed to be built in the premises, the cleared and fenced incinerator site consisting
of 5 hectares, 3,520 units of permanent housing to be awarded to qualified on site
residents, the industrial area consisting of 3.2 hectares and the open spaces, roads
and facilities within the Smokey Mountain Area.6
On 26 September 1994, NHA and R-II Builders, alongside petitioner Housing
Guaranty Corporation (HGC) as guarantor and the Philippine National Bank (PNB) as
trustee, entered into an Asset Pool Formation Trust Agreement which provided the
mechanics for the implementation of the project.7 To back the project, an Asset Pool
was created composed of the following assets: (a) the 21.2 hectare Smokey
Mountain Site in Tondo, Manila; (b) the 79-hectare Manila Bay foreshore property in
the name of the NHA; (c) the Smokey Mountain Project Participation Certificates
(SMPPCs) to be issued, or their money proceeds; (d) disposable assets due to R-II
Builders and/or its proceeds as defined in the JVA; (e) the resulting values inputted
by R-II Builders for pre-implementation activities and some start-up works
amounting to P300,000,000.00; (f) the 2,992 temporary housing facilities/units to be
constructed by R-II Builders; and, (g) all pertinent documents and records of the
project.8
On the same date, the parties likewise executed a Contract of Guaranty whereby
HGC, upon the call made by PNB and conditions therein specified, undertook to
redeem the regular SMPPCs upon maturity and to pay the simple interest thereon to
the extent of 8.5% per annum.9 The foregoing agreements led to the securitization
of the project through the issuance of 5,216 SMPPCs upon the Asset Pool, with a par
value of 1 Million each, classified and to be redeemed by the trustee or, in case of
call on its guaranty, by HGC, in the following order of priority:
a) Regular SMPPCs worth P2.519 Billion, issued for value to the general public at
specified interests and maturity dates. These were to be redeemed by the PNB
which was obliged to exhaust all liquid assets of the Asset Pool before calling on the
HGC guarantee;
b) Special SMPPCs worth P1.403 Billion, issued exclusively to the NHA for
conveyance of the Smokey Mountain Site and Manila Bay foreshore property to the
Asset Pool, redeemable upon turnover of the developed project; and
c) Subordinated SMPPCs worth P1.294 Billion, issued exclusively to R-II Builders for
its rights and interests in the JVA, redeemable with the turnover of all residual
values, assets and properties remaining in the Asset Pool after both the Regular and
Special SMPPCs are redeemed and all the obligations of the Asset Pool are
settled.10

102

Subsequent to R-II Builders' infusion of P300 Million into the project, the issuance of
the SMPPCs and the termination of PNBs services on 29 January 2001, NHA, R-II
Builders and HGC agreed on the institution of Planters Development Bank (PDB) as
trustee on 29 January 2001.11 By 24 October 2002, however, all the Regular
SMPPCs issued had reached maturity and, unredeemed, already amounted to an
aggregate face value of P2.513 Billion. The lack of liquid assets with which to effect
redemption of the regular SMPPCs prompted PDB to make a call on HGCs guaranty
and to execute in the latters favor a Deed of Assignment and Conveyance (DAC) of
the entire Asset Pool, consisting of: (a) 105 parcels of land comprising the Smokey
Mountain Site and the Reclamation Area, with a total area of 539,471.47 square
meters, and all the buildings and improvements thereon; (b) shares of stock of
Harbour Centre Port Terminal, Inc. (HCPTI); and, (c) other documents.12
On 1 September 2005, R-II Builders filed the complaint against HGC and NHA which
was docketed as Civil Case No. 05-113407 before Branch 24 of the Manila Regional
Trial Court, a Special Commercial Court (SCC). Contending that HGCs failure to
redeem the outstanding regular SMPPCs despite obtaining possession of the Asset
Pool ballooned the stipulated interests and materially prejudiced its stake on the
residual values of the Asset Pool, R-II Builders alleged, among other matters, that
the DAC should be rescinded since PDB exceeded its authority in executing the
same prior to HGCs redemption and payment of the guaranteed SMPPCs; that while
the estimated value of Asset Pool amounted to P5,919,716,618.62 as of 30 June
2005, its total liabilities was estimated at P2,796,019,890.41; and, that with the
cessation of PDBs functions as a trustee and HGCs intention to use the Asset Pool
to settle its obligations to the Social Security System (SSS), it was best qualified to
be appointed as new trustee in the event of the resolution of the DAC. Assessed
docket fees corresponding to an action incapable of pecuniary estimation, the
complaint sought the grant of the following reliefs: (a) a temporary restraining
order/preliminary and permanent injunction, enjoining disposition/s of the properties
in the Asset Pool; (b) the resolution or, in the alternative, the nullification of the
DAC; (c) R-II Builders' appointment as trustee pursuant to Rule 98 of the Rules of
Court; (d) HGCs rendition of an accounting of the assets and the conveyance
thereof in favor of R-II Builders; and, (e) P500,000.00 in attorneys fees.13
On 26 October 2005, Branch 24 of the Manila RTC issued the writ of preliminary
injunction sought by R-II Builders which, upon the challenge thereto interposed by
HGC, was later affirmed by the CA in the 17 December 2007 decision rendered in
CA-G.R. SP No. 98953.14 Having filed its answer to the complaint, in the meantime,
HGC went on to move for the conduct of a preliminary hearing on its affirmative
defenses which included such grounds as lack of jurisdiction, improper venue and
the then pendency before this Court of G.R. No. 164537, entitled Francisco Chavez
vs. National Housing Authority, et al., a case which challenged, among other
matters, the validity of the JVA and its subsequent amendments.15 On 2 August
2007, R-II Builders, in turn, filed a motion to admit16 its Amended and Supplemental
Complaint which deleted the prayer for resolution of the DAC initially prayed for in
its original complaint. In lieu thereof, said pleading introduced causes of action for
conveyance of title to and/or possession of the entire Asset Pool, for NHA to pay the
Asset Pool the sum of P1,803,729,757.88 representing the cost of the changes and
additional works on the project and for an increased indemnity for attorneys fees in
the sum of P2,000,000.00.17
Consistent with its joint order dated 2 January 2008 which held that R-II Builders
complaint was an ordinary civil action and not an intra-corporate controversy,18
Branch 24 of the Manila RTC issued a clarificatory order dated 1 February 2008 to
the effect, among other matters, that it did not have the authority to hear the
case.19 As a consequence, the case was re-raffled to respondent Branch 22 of the
Manila RTC (respondent RTC) which subsequently issued the 19 May 2008 order
which, having determined that the case is a real action, admitted the aforesaid
Amended and Supplemental Complaint, subject to R-II Builders payment of the
"correct and appropriate" docket fees.20 On 15 August 2008, however, R-II Builders
filed a motion to admit it Second Amended Complaint, on the ground that its

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previous Amended and Supplemental Complaint had not yet been admitted in view
of the non-payment of the correct docket fees therefor.21 Said Second Amended
Complaint notably resurrected R-II Builders cause of action for resolution of the
DAC, deleted its causes of action for accounting and conveyance of title to and/or
possession of the entire Asset Pool, reduced the claim for attorneys fees to
P500,000.00, sought its appointment as Receiver pursuant to Rule 59 of the Rules of
Court and, after an inventory in said capacity, prayed for approval of the liquidation
and distribution of the Asset Pool in accordance with the parties agreements.22
On 2 September 2008, HGC filed its opposition to the admission of R-II Builders
Second Amended Complaint on the ground that respondent RTC had no jurisdiction
to act on the case until payment of the correct docket fees and that said pleading
was intended for delay and introduced a new theory inconsistent with the original
complaint and the Amended and Supplemental Complaint. Claiming that R-II
Builders had defied respondent courts 19 May 2008 order by refusing to pay the
correct docket fees, HGC additionally moved for the dismissal of the case pursuant
to Section 3, Rule 17 of the 1997 Rules of Civil Procedure.23 On 24 November 2008,
R-II Builders also filed an Urgent Ex-Parte Motion for Annotation of Lis Pendens on
the titles of the properties in the Asset Pool, on the ground that HGC had sold and/or
was intending to dispose of portions thereof, in violation of the writ of preliminary
injunction issued in the premises.24 Finding that jurisdiction over the case was
already acquired upon payment of the docket fees for the original complaint and
that the Second Amended Complaint was neither intended for delay nor
inconsistent with R-II Builders previous pleadings, respondent RTC issued its first
assailed order dated 3 March 2009 which: (a) denied HGCs motion to dismiss; (b)
granted R-II Builders motion to admit its Second Amended Complaint; and, (c)
noted R-II Builders Urgent Ex-Parte Motion for Annotation of Lis Pendens, to which
the attention of the Manila Register of Deeds was additionally called.25
Undaunted, HGC filed its 22 March 2009 motion for reconsideration of the foregoing
order, arguing that: (a) the case is real action and the docket fees paid by R-II
Builders were grossly insufficient because the estimated value of properties in the
Asset Pool exceeds P5,000,000,000.00; (b) a complaint cannot be amended to
confer jurisdiction when the court had none; (c) the RTC should have simply denied
the Urgent Ex-Parte Motion for Annotation of Lis Pendens instead of rendering an
advisory opinion thereon. In addition, HGC faulted R-II Builders with forum shopping,
in view of its 10 September 2008 filing of the complaint docketed as Civil Case No.
08-63416 before Branch 91 of the Quezon City RTC, involving a claim for receivables
from the NHA.26 In turn, R-II Builders opposed the foregoing motion27 and, on the
theory that the Asset Pool was still in danger of dissipation, filed an urgent motion
to resolve its application for the appointment of a receiver and submitted its
nominees for said position.28
On 29 September 2009, respondent RTC issued its second assailed order which (a)
denied HGCs motion for reconsideration; (b) granted R-II Builders application for
appointment of receiver and, for said purpose: [i] appointed Atty. Danilo Concepcion
as Receiver and, [ii] directed R-II Builders to post a bond in the sum of
P10,000,000.00.29 Imputing grave abuse of discretion against the RTC for not
dismissing the case and for granting R-II Builders application for receivership, HGC
filed the Rule 65 petition for certiorari and prohibition docketed as CA-G.R. SP No.
111153 before the CA30 which, thru its Former Special Fifteenth Division, rendered
the herein assailed 21 January 2010 decision,31 upon the following findings and
conclusions:
a) Irrespective of whether it is real or one incapable of pecuniary estimation, the
action commenced by R-II Builders indubitably falls squarely within the jurisdiction
of respondent RTC;
b) From the allegations of R-II Builders original complaint and amended complaint
the character of the relief primarily sought, i.e., the declaration of nullity of the DAC,

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the action before respondent RTC is one where the subject matter is incapable of
pecuniary estimation;
c) R-II Builders need not pay any deficiency in the docket fees considering its
withdrawal of its Amended and Supplemental Complaint;
d) A receiver may be appointed without formal hearing, particularly when it is within
the interest of both parties and does not result in the delay of any government
infrastructure projects or economic development efforts;
e) Respondent RTCs act of calling the attention of the Manila Registrar of Deeds to
R-II Builders Urgent Ex-Parte Motion for Annotation of Lis Pendens is well-within its
residual power to act on matters before it; and
f) The withdrawal of R-II Builders Amended and Supplemental Complaint discounted
the forum shopping imputed against it by HGC.32
HGCs motion for reconsideration of the foregoing decision33 was denied for lack of
merit in the CAs resolution dated 21 June 2010, hence, this petition.
The Issues
HGC urges the affirmative of the following issues in urging the grant of its petition,
to wit:
"Did the Honorable Court of
Appeals Seriously Err When It
Failed to Rule That:
I. The Regional Trial Court a quo had no jurisdiction to proceed with the case
considering that:
(1) the original court was without authority to hear the case and;
(2) despite an unequivocal order from the trial court a quo, Private Respondent (R-II
Builders) failed and refused to pay the correct and proper docket fees, whether it be
for a real or personal action, based on the values of the properties or claims subject
of the complaints.
II. Since the Honorable Court of Appeals had characterized the case as a personal
action, the action before the Regional Trial Court a quo should have been dismissed
for improper venue.
III. The order appointing a receiver was made with grave abuse of discretion as
amounting to lack of jurisdiction for having been issued under the following
circumstances:
(1) It was made without a hearing and without any evidence of its necessity;
(2) It was unduly harsh and totally unnecessary in view of other available remedies,
especially considering that Petitioner HGC is conclusively presumed to be solvent;
(3) It effectively prevented the performance of HGCs functions in recovering upon
its guaranty exposure and was in contravention of Presidential Decree Nos. 385 and
1818, Republic Act No. 8927 and Supreme Court Circular Nos. 2-91, 13-93, 68-94
and Administrative Circular No. 11-00."34
Acting on HGCs motion for resolution of its application for a temporary restraining
order and/or preliminary injunction,35 the Court issued the resolution dated 23
August 2010, enjoining the enforcement of respondent RTCs assailed orders.36

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The Courts Ruling


We find the petition impressed with merit.
Jurisdiction is defined as the authority to hear and determine a cause or the right to
act in a case.37 In addition to being conferred by the Constitution and the law,38
the rule is settled that a courts jurisdiction over the subject matter is determined
by the relevant allegations in the complaint,39 the law in effect when the action is
filed,40 and the character of the relief sought irrespective of whether the plaintiff is
entitled to all or some of the claims asserted.41 Consistent with Section 1, Rule 141
of the Revised Rules of Court which provides that the prescribed fees shall be paid
in full "upon the filing of the pleading or other application which initiates an action
or proceeding", the well-entrenched rule is to the effect that a court acquires
jurisdiction over a case only upon the payment of the prescribed filing and docket
fees.42
The record shows that R-II Builders original complaint dated 23 August 2005 was
initially docketed as Civil Case No. 05-113407 before Branch 24 of the Manila, a
designated Special Commercial Court.43 With HGCs filing of a motion for a
preliminary hearing on the affirmative defenses asserted in its answer44 and R-II
Builders filing of its Amended and Supplemental Complaint dated 31 July 2007,45
said court issued an order dated 2 January 2008 ordering the re-raffle of the case
upon the finding that the same is not an intra-corporate dispute.46 In a clarificatory
order dated 1 February 2008,47 the same court significantly took cognizance of its
lack of jurisdiction over the case in the following wise:
At the outset, it must be stated that this Court is a designated Special Commercial
Court tasked to try and hear, among others, intra-corporate controversies to the
exclusion of ordinary civil cases.
When the case was initially assigned to this Court, it was classified as an intracorporate case. However, in the ensuing proceedings relative to the affirmative
defences raised by defendants, even the plaintiff conceded that the case is not an
intra-corporate controversy or even if it is, this Court is without authority to hear the
same as the parties are all housed in Quezon City.
Thus, the more prudent course to take was for this Court to declare that it does not
have the authority to hear the complaint it being an ordinary civil action. As to
whether it is personal or civil, this Court would rather leave the resolution of the
same to Branch 22 of this Court. (Italics supplied).
We find that, having squarely raised the matter in its Rule 65 petition for certiorari
and prohibition docketed as CA-G.R. SP No. 111153,48 HGC correctly faults the CA
for not finding that Branch 24 of the Manila RTC had no authority to order the
transfer of the case to respondent RTC.49 Being outside the jurisdiction of Special
Commercial Courts, the rule is settled that cases which are civil in nature, like the
one commenced by R-II Builders, should be threshed out in a regular court.50 With
its acknowledged lack of jurisdiction over the case, Branch 24 of the Manila RTC
should have ordered the dismissal of the complaint, since a court without subject
matter jurisdiction cannot transfer the case to another court.51 Instead, it should
have simply ordered the dismissal of the complaint, considering that the affirmative
defenses for which HGC sought hearing included its lack of jurisdiction over the
case.
Calleja v. Panday,52 while on facts the other way around, i.e., a branch of the RTC
exercising jurisdiction over a subject matter within the Special Commercial Courts
authority, dealt squarely with the issue:
Whether a branch of the Regional Trial Court which has no jurisdiction to try and
decide a case has authority to remand the same to another co-equal Court in order
to cure the defects on venue and jurisdiction.

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Calleja ruled on the issue, thus:


Such being the case, RTC Br. 58 did not have the requisite authority or power to
order the transfer of the case to another branch of the Regional Trial Court. The only
action that RTC-Br. 58 could take on the matter was to dismiss the petition for lack
of jurisdiction.
Certainly, the pronouncement of Br. 24, the Special Commercial Court, in its Joint
Order of 2 January 2008 that the case is not an intracorporate controversy,
amplified in its Order of 1 February 2008 that it "does not have the authority to hear
the complaint it being an ordinary civil action" is incompatible with the directive for
the re-raffle of the case and to "leave the resolution of the same to Branch 22 of this
Court." Such a directive is an exercise of authority over the case, which authority it
had in the same breath declared it did not have. What compounds the jurisdictional
error is the fact that at the time of its surrender of jurisdiction, Br. 24 had already
acted on the case and had in fact, on 26 October 2005, issued the writ of
preliminary injunction sought by herein respondent R-II Builders. At that point, there
was absolutely no reason which could justify a re-raffle of the case considering that
the order that was supposed to have caused the re-raffle was not an inhibition of
the judge but a declaration of absence of jurisdiction. So faulty was the order of reraffle that it left the impression that its previously issued preliminary injunction
remained effective since the case from which it issued was not dismissed but
merely transferred to another court. A re-raffle which causes a transfer of the case
involves courts with the same subject matter jurisdiction; it cannot involve courts
which have different jurisdictions exclusive of the other. More apt in this case, a reraffle of a case cannot cure a jurisdictional defect.
Prescinding from the foregoing considerations, and to show that the proceedings
below was error upon error, we find that the CA also gravely erred in not ruling that
respondent RTCs (Branch 22, the regular court) jurisdiction over the case was
curtailed by R-II Builders failure to pay the correct docket fees. In other words, the
jurisdictionally flawed transfer of the case from Branch 24, the SCC to Branch 22,
the regular court, is topped by another jurisdictional defect which is the nonpayment of the correct docket fees. In its order dated 19 May 2008 which admitted
R-II Builders Amended and Supplemental Complaint, respondent RTC distinctly
ruled that the case was a real action and ordered the re-computation and payment
of the correct docket fees.53 In patent circumvention of said order, however, R-II
Builders filed its 14 August 2008 motion to admit its Second Amended Complaint
which effectively deleted its causes of action for accounting and conveyance of title
to and/or possession of the entire Asset Pool and, in addition to reducing the claim
for attorneys fees and seeking its appointment as a receiver, reinstated its cause of
action for resolution of the DAC.54 Acting on said motion as well as the opposition
and motion to dismiss interposed by HGC,55 respondent RTC ruled as follows in its
assailed 3 March 2009 order,56 to wit:
1. The docket fees of the original complaint has been paid, thus, the Court already
acquired jurisdiction over the instant case. The admission of the Amended and
Supplemental Complaint, is subject to the payment of docket fees pursuant to the
Order of this Court dated May 18, 2008. The non-payment of the docket fees stated
in the Order dated May 18, 2008 will result only in the non-admission of the
Amended and Supplemental Complaint, which means that the Original Complaint
remains. However, since the Amended and Supplemental Complaint is being
withdrawn and in lieu thereof a new Amended Complaint is sought to be admitted,
there is no more need to pay the docket fees as provided for in the said Order.
2. It is settled that once jurisdiction is acquired and vested in a Court, said Court
maintains its jurisdiction until judgment is had (Aruego, Jr., et al. vs. CA). Such
acquired jurisdiction is not lost by the amendment of a pleading that raises
additional/new cause(s) of action. The jurisdiction of a Court is not even lost even if
the additional docket fees are required by reason of the amendment.

107

Indeed, the Supreme Court held in PNOC vs. Court of Appeals (G.R. No. 107518,
October 8, 1998) that:
"Its failure to pay the docket fee corresponding to its increased claim for damages
under the amended complaint should not be considered as having curtailed the
lower courts jurisdiction. Pursuant to the ruling in Sun Insurance Office, Ltd. (SIOL)
v. Asuncion, the unpaid docket fees should be considered as a lien on the judgment
even though private respondent specified the amount of P600,000.00 as its claim
for damages in its amended complaint.
Thus, even on the assumption that additional docket fees are required as a
consequence of any amended complaint, its non-payment will not result in the
courts loss of jurisdiction over the case.57
Distinctly, the principal reference remained to be the "original complaint," in which
R-II Builders itself submitted that the case "is a real action as it affects title and
possession of real property or interest therein." It was precisely this submission
which was the basis of the conclusion of the SCC court, Br. 24 that the case is not an
intra-corporate controversy and therefore is outside its authority.
We see from the assailed Order that the regular court accepted the case on the
reason that "the docket fees of the original complaint has been paid," so that,
furthermore, the Amended and Supplemental Complaint may be admitted "subject
to the payment of docket fees." When the required fees were not paid, the court
considered it as resulting in the non-admission of the Amended and Supplemental
Complaint such that "the original complaint remains." That remaining original
complaint can then be amended by "a new Amended Complaint" which is no longer
subject to the conditions attached to the unadmitted Amended and Supplemental
Complaint.
The Order of 3 March 2009, with its logic and reason, is wholly unacceptable.
In upholding the foregoing order as well as its affirmance in respondent RTCs 29
September 2009 order,58 the CA ruled that the case being one primarily instituted
for the resolution/nullification of the DAC involved an action incapable of pecuniary
estimation. While it is true, however, that R-II Builder's continuing stake in the Asset
Pool is "with respect only to its residual value after payment of all the regular
SMPPCs holders and the Asset Pool creditors",59 the CA failed to take into account
the fact that R-II Builders original complaint and Amended and Supplemental
Complaint both interposed causes of action for conveyance and/or recovery of
possession of the entire Asset Pool. Indeed, in connection with its second cause of
action for appointment as trustee in its original complaint,60 R-II Builders distinctly
sought the conveyance of the entire Asset Pool61 which it consistently estimated to
be valued at P5,919,716,618.62 as of 30 June 2005.62 In its opposition to HGCs
motion to dismiss, R-II Builders even admitted that the case is a real action as it
affects title to or possession of real property or an interest therein.63 With R-II
Builders' incorporation of a cause of action for conveyance of title to and/or
possession of the entire Asset Pool in its Amended and Supplemental Complaint,64
on the other hand, no less than respondent RTC, in its 19 May 2008 order, directed
the assessment and payment of docket fees corresponding to a real action.
Admittedly, this Court has repeatedly laid down the test in ascertaining whether the
subject matter of an action is incapable of pecuniary estimation by determining the
nature of the principal action or remedy sought. While a claim is, on the one hand,
considered capable of pecuniary estimation if the action is primarily for recovery of
a sum of money, the action is considered incapable of pecuniary estimation where
the basic issue is something other than the right to recover a sum of money, the
money claim being only incidental to or merely a consequence of, the principal
relief sought.65 To our mind, the application of foregoing test does not, however,
preclude the further classification of actions into personal actions and real action,

108

for which appropriate docket fees are prescribed. In contrast to personal actions
where the plaintiff seeks the recovery of personal property, the enforcement of a
contract, or the recovery of damages, real actions are those which affect title to or
possession of real property, or interest therein.66 While personal actions should be
commenced and tried where the plaintiff or any of the principal plaintiffs resides, or
where the defendant or any of the principal defendants resides, or in the case of a
non-resident defendant where he may be found, at the election of the plaintiff,67
the venue for real actions is the court of the place where the real property is
located.68
Although an action for resolution and/or the nullification of a contract, like an action
for specific performance, fall squarely into the category of actions where the subject
matter is considered incapable of pecuniary estimation,69 we find that the causes
of action for resolution and/or nullification of the DAC was erroneously isolated by
the CA from the other causes of action alleged in R-II Builders' original complaint
and Amended and Supplemental Complaint which prayed for the conveyance and/or
transfer of possession of the Asset Pool. In Gochan v. Gochan,70 this Court held that
an action for specific performance would still be considered a real action where it
seeks the conveyance or transfer of real property, or ultimately, the execution of
deeds of conveyance of real property. More to the point is the case of Ruby Shelter
Builders and Realty Development Corporation v. Hon. Pablo C. Formaran III71 where,
despite the annulment of contracts sought in the complaint, this Court upheld the
directive to pay additional docket fees corresponding to a real action in the following
wise, to wit:
x x x [I]n Siapno v. Manalo, the Court disregarded the title/denomination of therein
plaintiff Manalo's amended petition as one for Mandamus with Revocation of Title
and Damages; and adjudged the same to be a real action, the filing fees for which
should have been computed based on the assessed value of the subject property or,
if there was none, the estimated value thereof. The Court expounded in Siapno that:
In his amended petition, respondent Manalo prayed that NTA's sale of the property
in dispute to Standford East Realty Corporation and the title issued to the latter on
the basis thereof, be declared null and void. In a very real sense, albeit the
amended petition is styled as one for "Mandamus with Revocation of Title and
Damages", it is, at bottom, a suit to recover from Standford the realty in question
and to vest in respondent the ownership and possession thereof. In short, the
amended petition is in reality an action in res or a real action. Our pronouncement
in Fortune Motors (Phils.), Inc. vs. Court of Appeals is instructive. There, we said:
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. (Inton, et al., v.
Quintan, 81 Phil. 97, 1948)
An action to annul a real estate mortgage foreclosure sale is no different from an
action to annul a private sale of real property. (Muoz v. Llamas, 87 Phil. 737, 1950).
While it is true that petitioner does not directly seek the recovery of title or
possession of the property in question, his action for annulment of sale and his
claim for damages are closely intertwined with the issue of ownership of the
building which, under the law, is considered immovable property, the recovery of
which is petitioner's primary objective. 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, which is to recover said
real property. It is a real action.72
Granted that R-II Builders is not claiming ownership of the Asset Pool because its
continuing stake is, in the first place, limited only to the residual value thereof, the
conveyance and/or transfer of possession of the same properties sought in the
original complaint and Amended and Supplemental Complaint both presuppose a
real action for which appropriate docket fees computed on the basis of the assessed

109

or estimated value of said properties should have been assessed and paid. In
support of its original complaints second cause of action for appointment as trustee
and conveyance of the properties in the Asset Pool, R-II Builders distinctly alleged as
follows:
5.12. As the Court-appointed Trustee, R-II Builders shall have and exercise the same
powers, rights and duties as if [it] had been originally appointed, having the
principal duty of redeeming and buying back the Regular SMPPCs and thereafter
liquidating the Asset Pool, which are also the end goals of the Agreement.
5.12.1. R-II Builders, as the Trustee, shall have the power and right to invest,
transfer, convey or assign any of the assets of the Asset Pool, whether funds,
receivables, real or personal property, in exchange for shares of stocks, bonds,
securities, real or personal properties of any kind, class or nature, provided that any
such investment, transfer, conveyance or assignment shall not impair the value of
the Asset Pool.
5.12.2. R-II Builders, as the Trustee, shall have the power and right to sell, change,
assign or otherwise dispose of any stocks, bonds, securities, real or personal
properties or other assets constituting the Asset Pool.
5.12. 3. R-II Builders, as the Trustee, shall have the power and right to enter into
lease agreements as lessor or any other related contract for the benefit of the Asset
Pool; and
5.12.4. It is understood that the aforecited powers and rights of R-II Builders as the
court-appointed Trustee, are non-exclusive; and is deemed to include all the rights
and powers necessary and incidental to achieve the goals and objectives of the
Agreement.73
From the foregoing allegations in its original complaint, it cannot be gainsaid that RII Builders was unquestionably seeking possession and control of the properties in
the Asset Pool which predominantly consisted of real properties. Having admitted
that "the case is a real action as it affects title to or possession of real property or
(an) interest therein",74 R-II Builders emphasized the real nature of its action by
seeking the grant of the following main reliefs in the Amended and Supplemental
Complaint it subsequently filed, to wit:
5. After trial on the merits, render judgment:
(i) Declaring the annulment of the Deed of Assignment and conveyance executed by
PDB in favor of HGC; or in the alternative, declaring the nullity of the said
instrument;
(ii) Appointing R-II Builders as the Trustee of the Asset Pool Properties, with powers
and responsibilities including but not limited to those stated in 5.12.1, 5.12.2, 5.12.3
and 5.12.4 herein and those spelled out in the Re-Stated Smokey Mountain Asset
Pool Formation Trust Agreement;
(iii) Ordering HGC to render an accounting of all properties of the Asset Pool
transferred thereto under the Deed of Assignment and Conveyance and thereafter
convey title to and/or possession of the entire Asset Pool to R-II Builders as the
Trustee thereof which assets consist of, but is not limited to the following:
(a) 105 parcels of land comprising the Smokey Mountain Site, and, the Reclamation
Area, consisting of the 539,471.47 square meters, and all the buildings and
improvements thereon, with their corresponding certificates of title;
(b) shares of stock of Harbour Center Port Terminal, Inc. which are presently
registered in the books of the said company in the name of PDB for the account of
the Smokey Mountain Asset Pool; and

110

(c) other documents as listed in Annex E of the Contract of Guaranty.


(iv) Ordering NHA to pay the Asset Pool the amount of Php1,803,729,757.88
including the direct and indirect cost thereon as may be found by this Honorable
Court to be due thereon;
(v) Making the injunction permanent;
(vi) Ordering HGC and the NHA to pay Attorneys fees in the amount of P2,000,000
and the costs of suit.75
For failure of R-II Builders to pay the correct docket fees for its original complaint or,
for that matter, its Amended and Supplemental Complaint as directed in respondent
RTC's 19 May 2008 order, it stands to reason that jurisdiction over the case had yet
to properly attach. Applying the rule that "a case is deemed filed only upon
payment of the docket fee regardless of the actual date of filing in court" in the
landmark case of Manchester Development Corporation v. Court of Appeals,76 this
Court ruled that jurisdiction over any case is acquired only upon the payment of the
prescribed docket fee which is both mandatory and jurisdictional. To temper said
ruling, the Court subsequently issued the following guidelines in Sun Insurance
Office, Ltd. v. Hon. Maximiano Asuncion,77 viz.:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but
the payment of the prescribed docket fee, that vests a trial court with jurisdiction
over the subject matter or nature of the action. Where the filing of the initiatory
pleading is not accompanied by payment of the docket fee, the court may allow
payment of the fee within a reasonable time but in no case beyond the applicable
prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee
prescribed therefor is paid. The court may also allow payment of said fee within a
reasonable time but also in no case beyond its applicable prescriptive or
reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the
appropriate pleading and payment of the prescribed filing fee but, subsequently,
the judgment awards a claim not specified in the pleading, or if specified the same
has been left for determination by the court, the additional filing fee therefor shall
constitute a lien on the judgment. 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.
True to the foregoing guidelines, respondent RTC admitted R-II Builders Amended
and Supplemental Complaint and directed the assessment and payment of the
appropriate docket fees in the order dated 19 May 2008. Rather than complying
with said directive, however, R-II Builders manifested its intent to evade payment of
the correct docket fees by withdrawing its Amended and Supplemental Complaint
and, in lieu thereof, filed its Second Amended Complaint which deleted its cause of
action for accounting and conveyance of title to and/or possession of the entire
Asset Pool, reduced its claim for attorneys fees, sought its appointment as Receiver
and prayed for the liquidation and distribution of the Asset Pool.78 In upholding the
admission of said Second Amended Complaint in respondent RTCs assailed 3 March
2009 Order, however, the CA clearly lost sight of the fact that a real action was
ensconced in R-II Builders original complaint and that the proper docket fees had
yet to be paid in the premises. Despite the latters withdrawal of its Amended and
Supplemental Complaint, it cannot, therefore, be gainsaid that respondent RTC had
yet to acquire jurisdiction over the case for non-payment of the correct docket fees.

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In the 15 February 2011 Resolution issued in the case of David Lu v. Paterno Lu Ym,
Sr.,79 this Court, sitting En Banc, had occasion to rule that an action for declaration
of nullity of share issue, receivership and corporate dissolution is one where the
value of the subject matter is incapable of pecuniary estimation. Subsequent to the
trial court's rendition of a decision on the merits declared to be immediately
executory and the CA's denial of their application for a writ of preliminary injunction
and/or temporary restraining order to enjoin enforcement of said decision, the
defendants questioned the sufficiency of the docket fees paid a quo which
supposedly failed take into consideration the value of the shares as well as the real
properties involved for which the plaintiff additionally caused notices of lis pendens
to be annotated. Finding that defendants were already estopped in questioning the
jurisdiction of the trial court on the ground of non-payment of the correct docket
fees, the Court discounted intent to defraud the government on the part of the
plaintiff who can, at any rate, be required to pay the deficiency which may be
considered a lien on the judgment that may be rendered, without automatic loss of
the jurisdiction already acquired, in the first instance, by the trial court.1avvphi1
The factual and legal milieus of the case at bench could not, however, be more
different. While R-II Builders styled its original complaint and Amended and
Supplemental Complaint as one primarily for the resolution and/or declaration of the
DAC, it simultaneously and unmistakably prayed for the conveyance, possession
and control of the Asset Pool. Alongside the fact that HGC has consistently
questioned the sufficiency of the docket fees paid by R-II Builders, estoppel cannot
be said to have set in since, the lapse of more than five years from the
commencement of the complaint notwithstanding, it appears that the case has yet
to be tried on the merits. Having admitted that its original complaint partook the
nature of a real action and having been directed to pay the correct docket fees for
its Amended and Supplemental Complaint, R-II Builders is, furthermore, clearly
chargeable with knowledge of the insufficiency of the docket fees it paid.
Unmistakably manifesting its intent to evade payment of the correct docket fees,
moreover, R-II Builders withdrew its Amended and Supplemental Complaint after its
admission and, in lieu thereof, filed its Second Amended Complaint on the ground
that said earlier pleading cannot be considered admitted in view of its non-payment
of the docket and other fees it was directed to pay. In so doing, however, R-II
Builders conveniently overlooked the fact that the very same argument could very
well apply to its original complaint for which given its admitted nature as a real
action - the correct docket fees have also yet to be paid.
The importance of filing fees cannot be over-emphasized for they are intended to
take care of court expenses in the handling of cases in terms of costs of supplies,
use of equipment, salaries and fringe benefits of personnel, and others, computed
as to man-hours used in the handling of each case. The payment of said fees,
therefore, cannot be made dependent on the result of the action taken without
entailing tremendous losses to the government and to the judiciary in particular.80
For non-payment of the correct docket fees which, for real actions, should be
computed on the basis of the assessed value of the property, or if there is none, the
estimated value thereof as alleged by the claimant,81 respondent RTC should have
denied admission of R-II Builders Second Amended Complaint and ordered the
dismissal of the case. Although a catena of decisions rendered by this Court
eschewed the application of the doctrine laid down in the Manchester case,82 said
decisions had been consistently premised on the willingness of the party to pay the
correct docket fees and/or absence of intention to evade payment of the correct
docket fees. This cannot be said of R-II Builders which not only failed to pay the
correct docket fees for its original complaint and Amended and Supplemental
Complaint but also clearly evaded payment of the same by filing its Second
Amended Complaint.
By itself, the propriety of admitting R-II Builders Second Amended Complaint is also
cast in dubious light when viewed through the prism of the general prohibition
against amendments intended to confer jurisdiction where none has been acquired
yet. Although the policy in this jurisdiction is to the effect that amendments to

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pleadings are favored and liberally allowed in the interest of justice, amendment is
not allowed where the court has no jurisdiction over the original complaint and the
purpose of the amendment is to confer jurisdiction upon the court.83 Hence, with
jurisdiction over the case yet to properly attach, HGC correctly fault the CA for
upholding respondent RTCs admission of R-II Builders Second Amended Complaint
despite non-payment of the docket fees for its original complaint and Amended and
Supplemental Complaint as well as the clear intent to evade payment thereof.
With the determination of the jurisdictional necessity of the dismissal of the
complaint of R-II Builders docketed as Civil Case No. 05-113407, first before Br. 24
and later before Br. 22 both of the RTC of Manila, we no longer find any reason to go
into a discussion of the remaining issues HGC proffers for resolution. In view,
particularly, of its non-acquisition of jurisdiction over the case, respondent RTC
clearly had no authority to grant the receivership sought by R-II Builders. It needs
pointing out though that the prayer for receivership clearly indicates that the R-II
Builders sought the transfer of possession of property consisting of the assets of the
JVA from HGC to the formers named Receiver. As already noted, said transfer of
possession was sought by respondent R-II Builders since the very start, overtly at
the first two attempts, covertly in the last, the successive amendments betraying
the deft maneuverings to evade payment of the correct docket fees.
WHEREFORE, premises considered, the assailed Decision dated 21 January 2010 is
REVERSED and SET ASIDE. In lieu thereof, another is entered NULLIFYING the
regular courts, RTC Branch 22s Orders dated 3 March 2009 and 29 September
2009 as well as the SCCs, RTC Branch 24s Order dated 26 October 2005 which was
rendered void by the SCCs subsequent declaration of absence of authority over the
case. The complaint of R-II Builders docketed as Civil Case No. 05-113407 first
before Br. 24 and thereafter before Br. 22 both of the RTC of Manila is hereby
DISMISSED.
SO ORDERED.
JOSE PORTUGAL PEREZ
Associate Justice
Unicapital v. Consing, G.R. Nos. 175277 & 175285, September 11, 2013

G.R. Nos. 175277 & 175285

September 11, 2013

UNICAPITAL, INC., UNICAPITAL REALTY, INC., and JAIME J. MARTINEZ, Petitioners,


vs.
RAFAEL JOSE CONSING, JR., and THE PRESIDING JUDGE OF THE REGIONAL TRIAL
COURT OF PASIG CITY, BRANCH 168, Respondents.
x-----------------------x
G.R. No. 192073
RAFAEL JOSE CONSING, JR., Petitioner,
vs.
HON. MARISSA MACARAIG-GUILLEN, in her capacity as the Presiding Judge of the
Regional Trial Court of Makati City, Branch 60 and UNICAPITAL, INC., Respondents.
DECISION
PERLAS-BERNABE, J.:
Before the Court are consolidated petitions for review on certiorari1 assailing
separate issuances of the Court of Appeals (CA) as follows:
(a) The petitions in G.R. Nos. 175277 and 175285 filed by Unicapital, Inc.,
(Unicapital), Unicapital Realty, Inc. (URI), and Unicapital Director and Treasurer
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Jaime J. Martirez (Martirez)assail the CAs Joint Decision2 dated October 20, 2005
and Resolution3 dated October 25, 2006 in CA-G.R. SP Nos. 64019and 64451 which
affirmed the Resolution4 dated September 14,1999 and Order5 dated February 15,
2001 of the Regional Trial Court (RTC) of Pasig City, Branch 68 (RTC-Pasig City) in
SCA No. 1759, upholding the denial of their motion to dismiss; and
(b) The petition in G.R. No. 192073 filed by Rafael Jose Consing, Jr. (Consing, Jr.)
assails the CAs Decision6 dated September 30, 2009 and Resolution7 dated April
28, 2010 inCA-G.R. SP No. 101355 which affirmed the Orders dated July16, 20078
and September 4, 20079 of the RTC of Makati City, Branch 60 (RTC-Makati City) in
Civil Case No. 99-1418,upholding the denial of his motion for consolidation.
The Facts
In 1997, Consing, Jr., an investment banker, and his mother, Cecilia Dela Cruz (Dela
Cruz), obtained an P18,000,000.00 loan from Unicapital,P12,000,000.00 of which
was acquired on July 24, 1997 and the remainingP6,000,000.00 on August 1, 1997.
The said loan was secured by Promissory Notes10 and a Real Estate Mortgage11
over a 42,443 square meter-parcel of land located at Imus, Cavite, registered in the
name of Dela Cruz as per Transfer Certificate of Title (TCT) No. T-687599 (subject
property).12 Prior to these transactions, Plus Builders, Inc. (PBI), a real estate
company, was already interested to develop the subject property into a residential
subdivision.13 In this regard, PBI entered into a joint venture agreement with
Unicapital, through its real estate development arm, URI. In view of the foregoing,
the loan and mortgage over the subject property was later on modified into an
Option to Buy Real Property14 and, after further negotiations, Dela Cruz decided to
sell the same to Unicapital and PBI. For this purpose, Dela Cruz appointed Consing,
Jr. as her attorney-in-fact.15
Eventually, Unicapital, through URI, purchased one-half of the subject property for a
consideration of P21,221,500.00 (against which Dela Cruzs outstanding loan
obligations were first offset), while PBI bought the remaining half for the price of
P21,047,000.00.16 In this relation, Dela Cruz caused TCT No. T-687599 to be divided
into three separate titles as follows: (a) TCT No. T-851861 for URI;17 (b) TCT No. T851862 for PBI;18 and (c)TCT No. T-51863 which was designated as a road lot.19
However, even before URI and PBI were able to have the titles transferred to their
names, Juanito Tan Teng (Teng) and Po Willie Yu (Yu) informed Unicapital that they
are the lawful owners of the subject property as evidenced by TCT No.T-114708;20
that they did not sell the subject property; and that Dela Cruzs title, i.e., TCT No. T687599, thereto was a mere forgery.21 Prompted by Teng and Yus assertions, PBI
conducted further investigations on the subject property which later revealed that
Dela Cruz's title was actually of dubious origin. Based on this finding, PBI and
Unicapital sent separate demand letters22 to Dela Cruz and Consing, Jr., seeking the
return of the purchase price they had paid for the subject property.
From the above-stated incidents stemmed the present controversies as detailed
hereunder.
The Proceedings Antecedent to G.R. Nos. 175277 & 175285
On May 3, 1999, Consing, Jr. filed a complaint, denominated as a Complex Action for
Declaratory Relief23 and later amended to Complex Action for Injunctive Relief24
(Consing, Jr.s complaint) before the RTC-Pasig City against Unicapital, URI, PBI,
Martirez, PBI General Manager Mariano Martinez (Martinez), Dela Cruz and Does 120, docketed as SCA No. 1759. In his complaint, Consing, Jr. claimed that the
incessant demands/recovery efforts made upon him by Unicapital and PBI to return
to them the purchase price they had paid for the subject property constituted
harassment and oppression which severely affected his personal and professional
life.25 He also averred that he was coerced to commit a violation of Batas
Pambansa Blg. 2226 as Unicapital and PBI, over threats of filing acase against him,
kept on forcing him to issue a post-dated check in the amount sought to be

114

recovered, notwithstanding their knowledge that he had no funds for the same.27
He further alleged that Unicapital and URI required him to sign blank deeds of sale
and transfers without cancelling the old one sin violation of the laws on land
registration and real estate development.28 Likewise, Consing, Jr. added that
Unicapital and PBIs representatives were" speaking of him in a manner that was
inappropriate and libelous,"29 and that some John Does "deliberately engaged in a
fraudulent scheme to compromise Consing, Jr.s honor, integrity and fortune x x x
consisting of falsifying or causing to be falsified, or attempting to present as falsified
certain transfers of Land Titles and Deeds for profit,"30 classifying the foregoing as
ultra vires acts which should warrant sanctions under the corporation law, Revised
Securities Act and related laws.31 Accordingly, Consing, Jr. prayed that: (a) he be
declared as a mere agent of Dela Cruz, and as such, devoid of any obligation to
Unicapital, URI, and PBI for the transactions entered into concerning the subject
property; (b) Unicapital, URI, and PBI be enjoined from harassing or coercing him,
and from speaking about him in a derogatory fashion; and (c) Unicapital, URI, and
PBI pay him actual and consequential damages in the amount of P2,000,000.00,
moral damages of at least P1,000,000.00, exemplary damages of P1,000,000.00, all
per month, reckoned from May 1, 1999 and until the controversy is resolved, and
attorney's fees and costs of suit.32
For their part, Unicapital, URI, and Martirez (Unicapital, et al.) filed separate Motions
to Dismiss33 Consing, Jr.s complaint (Unicapital, et al.s motion to dismiss) on the
ground of failure to state a cause of action, considering that: (a) no document was
attached against which Consing, Jr. supposedly derived his right and against which
his rights may be as certained; (b) the demands to pay against Consing, Jr. and for
him to tender post-dated checks to cover the amount due were well within the
rights of Unicapital as an unpaid creditor, as Consing, Jr. had already admitted his
dealings with them; (c) the utterances purportedly constituting libel were not set
out in the complaint; and (d) the laws supposedly violated were not properly
identified. Moreover, Unicapital, et al. posited that the RTC-PasigCity did not acquire
jurisdiction over the case given that Consing, Jr. failed to pay the proper amount of
docket fees. In the same vein, they maintained that the RTC-Pasig City had no
jurisdiction over their supposed violations of the Corporation Code and Revised
Securities Act, which, discounting its merits, should have been supposedly lodged
with the Securities and Exchange Commission. Finally, they pointed out that
Consing, Jr.s complaint suffers from a defective verification and, thus,
dismissible.34
Similar to Unicapital et al.s course of action, PBI and its General Manager, Martinez
(Unicapital and PBI, et al.), sought the dismissal of Consing, Jr.s complaint on the
ground that it does not state a cause of action. They also denied having singled out
Consing, Jr. because their collection efforts were directed at both Consing, Jr. and
Dela Cruz, which should be deemed as valid and, therefore, should not be
restrained.35
On September 14, 1999, the RTC-Pasig City issued a Resolution36 denying the
above mentioned motions to dismiss, holding that Consing, Jr.s complaint
sufficiently stated a cause of action for tort and damages pursuant to Article 19 of
the Civil Code. It ruled that where there is abusive behavior, a complainant, like
Consing, Jr., has the right to seek refuge from the courts. It also noted that the
elements of libel in a criminal case are not the same as those for a civil action
founded on the provisions of the Civil Code, and therefore, necessitates a different
treatment. It equally refused to dismiss the action on the ground of non-payment of
docket fees, despite Consing, Jr.s escalated claims for damages therein, as
jurisdiction was already vested in it upon the filing of the original complaint.
Moreover, it resolved to apply the liberal construction rule as regards the subject
complaints verification and certification, despite its improper wording, considering
further that such defect was not raised at the first opportunity. Consequently, it
ordered Unicapital and PBI, et al. to file their Answer and, in addition, to submit" any
Comment or Reaction within five (5) days from receipt hereof on the allegations of
Consing, Jr. in his rejoinder of September 9, 1999regarding the supposed filing of an

115

identical case in Makati City,"37 i.e., Civil Case No. 99-1418. Unperturbed,
Unicapital and PBI, et al. moved for reconsideration therefrom which was, however,
denied by the RTC-Pasig City in an Order38 dated February 15, 2001 for lack of
merit. Aggrieved, they elevated the denial of their motions to dismiss before the CA
via a petition for certiorari and prohibition,39 docketed as CA-G.R. SP Nos. 64019
and 64451.
On October 20, 2005, the CA rendered a Joint Decision40 holding that no grave
abuse of discretion was committed by the RTC-Pasig City in refusing to dismiss
Consing, Jr.'s complaint.1wphi1 At the outset, it ruled that while the payment of the
prescribed docket fee is a jurisdictional requirement, its non-payment will not
automatically cause the dismissal of the case. In this regard, it considered that
should there be any deficiency in the payment of such fees, the same shall
constitute a lien on the judgment award.41 It also refused to dismiss the complaint
for lack of proper verification upon a finding that the copy of the amended
complaint submitted to the RTC-Pasig City was properly notarized.42 Moreover, it
upheld the order of the RTC-Pasig City for Unicapital and PBI, et al. to submit their
comment due to the alleged existence of a similar case filed before the RTC-Makati
City.43
Anent the substantive issues of the case, the CA concurred with the RTC-Pasig City
that Consing Jr.'s complaint states a cause of action. It found that Unicapital and PBI,
et al.s purportedly abusive manner in enforcing their claims against Consing, Jr.
was properly constitutive of a cause of action as the same, if sufficiently proven,
would have subjected him to "defamation of his name in business circles, the
threats and coercion against him to reimburse the purchase price, fraud and
falsification and breach of fiduciary obligation." It also found that the fact that
Consing Jr.'s complaint contains "nebulous" allegations will not warrant its dismissal
as any vagueness therein can be clarified through a motion for a bill of
particulars."44 Furthermore, it noted that Consing, Jr. does not seek to recover his
claims against any particular provision of the corporation code or the securities act
but against the actions of Unicapital and PBI, et al.; hence, Consing, Jr.s complaint
was principally one for damages over which the RTC has jurisdiction, and, in turn,
there lies no misjoinder of causes of action.45
Dissatisfied, only Unicapital, et al. sought reconsideration therefrom but the same
was denied by the CA in a Resolution46 dated October 25,2006. Hence, the present
petitions for review on certiorari in G.R. Nos.175277 and 175285.
The Proceedings Antecedent to G.R. No. 192073
On the other hand, on August 4, 1999, Unicapital filed a complaint47 for sum of
money with damages against Consing, Jr. and Dela Cruz before the RTC-Makati City,
docketed as Civil Case No. 99-1418, seeking to recover (a) the amount of
P42,195,397.16, representing the value of their indebtedness based on the
Promissory Notes (subject promissory notes) plus interests; (b) P5,000,000.00 as
exemplary damages; (c) attorney's fees; and (d) costs of suit.48
PBI also filed a complaint for damages and attachment against Consing, Jr. and Dela
Cruz before the RTC of Manila, Branch 12, docketed as Civil Case No. 99-95381, also
predicated on the same set of facts as above narrated.49 In its complaint, PBI
prayed that it be allowed to recover the following: (a) P13,369,641.79, representing
the total amount of installment payments made as actual damages plus interests;
(b) P200,000.00 as exemplary damages; (c) P200,000.00 as moral damages; (d)
attorney's fees; and (e) costs of suit.50 Civil Case No. 99-95381 was subsequently
consolidated with SCA No. 1759 pending before the RTC-Pasig City.51
For his part, Consing, Jr. filed a Motion to Dismiss Civil Case No. 99-1418 which was,
however, denied by the RTC-Makati City in an Order52 dated November 16, 1999.
Thereafter, he filed a Motion for Consolidation53 (motion for consolidation) of Civil

116

Case No. 99-1418 with his own initiated SCA No. 1759 pending before the RTC-Pasig
City.
In an Order54 dated July 16, 2007, the RTC-Makati City dismissed Consing, Jr.s
motion for consolidation and, in so doing, ruled that the cases sought to be
consolidated had no identity of rights or causes of action and the reliefs sought for
by Consing, Jr. from the RTC-Pasig City will not bar Unicapital from pursuing its
money claims against him. Moreover, the RTC-Makati City noted that Consing, Jr.
filed his motion only as an after thought as it was made after the mediation
proceedings between him and Unicapital failed. Consing, Jr.'s motion for
reconsideration therefrom was denied in an Order55 dated September 4, 2007.
Hence, he filed a petition for certiorari before the CA, docketed as CA-G.R. SP No.
101355, ascribing grave abuse of discretion on the part of the RTC-Makati City in
refusing to consolidate Civil Case No. 99-1418 with SCA No. 1759 in Pasig City.
On September 30, 2009, the CA rendered a Decision56 sustaining the Orders dated
July 16, 2007 and September 4, 2007 of the RTC-Makati City which denied Consing,
Jr.s motion for consolidation. It held that consolidation is a matter of sound
discretion on the part of the trial court which could be gleaned from the use of the
word "may" in Section 1, Rule38 of the Rules of Court. Considering that preliminary
steps (such as mediation) have already been undertaken by the parties in Civil Case
No.99-1418 pending before the RTC-Makati City, its consolidation with SCA No. 1759
pending before the RTC-Pasig City "would merely result in complications in the work
of the latter court or squander the resources or remedies already utilized in the
Makati case."57 Moreover, it noted that the records of the consolidated Pasig and
Manila cases, i.e., SCA No. 1759 and Civil Case No. 99-95381, respectively, had
already been elevated to the Court, that joint proceedings have been conducted in
those cases and that the pre-trial therein had been terminated as early as October
23, 2007.Therefore, due to these reasons, the consolidation prayed for would be
impracticable and would only cause a procedural faux pas. Undaunted, Consing, Jr.
filed a motion for reconsideration therefrom but was denied by the CA in a
Resolution58 dated April 28, 2010. Hence, the present petition for review on
certiorari in G.R. No. 192073.
The Proceedings Before the Court
After the filing of the foregoing cases, the parties were required to file their
respective comments and replies. Further, considering that G.R. No.192073 (Makati
case) involves the same parties and set of facts with those in G.R. Nos. 175277 &
175285 (Pasig case), these cases were ordered consolidated per the Court's
Resolution59 dated November 17, 2010. On March 9, 2011, the Court resolved to
give due course to the instant petitions and required the parties to submit their
respective memoranda.60
The Issues Before the Court
The essential issues in these cases are as follows: (a) in G.R. Nos.175277 and
175285, whether or not the CA erred in upholding the RTC-Pasig Citys denial of
Unicapital, et al.s motion to dismiss; and (b) in G.R. No. 192073, whether or not the
CA erred in upholding the RTC-Makati Citys denial of Consing, Jr.s motion for
consolidation.
The Courts Ruling
A. Propriety of the denial of
Unicapital, et al.s motion to
dismiss and ancillary issues.
A cause of action is defined as the act or omission by which a party violates a right
of another.61 It is well-settled that the existence of a cause of action is determined
by the allegations in the complaint.62 In this relation, a complaint is said to

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sufficiently assert a cause of action if, admitting what appears solely on its face to
be correct, the plaintiff would be entitled to the relief prayed for.63 Thus, if the
allegations furnish adequate basis by which the complaint can be maintained, then
the same should not be dismissed, regardless of the defenses that may be averred
by the defendants.64 As edified in the case of Pioneer Concrete Philippines, Inc. v.
Todaro,65 citing Hongkong and Shanghai Banking Corporation, Limited. v. Catalan66
(HSBC):
The elementary test for failure to state a cause of action is whether the complaint
alleges facts which if true would justify the relief demanded. Stated otherwise, may
the court render a valid judgment upon the facts alleged therein? The inquiry is into
the sufficiency, not the veracity of the material allegations. If the allegations in the
complaint furnish sufficient basis on which it can be maintained, it should not be
dismissed regardless of the defense that may be presented by the defendants.67
(Emphasis supplied)
Stated otherwise, the resolution on this matter should stem from an analysis on
whether or not the complaint is able to convey a cause of action; and not that the
complainant has no cause of action. Lest it be misunderstood, failure to state a
cause of action is properly a ground for a motion to dismiss under Section 1(g), Rule
1668 of the Rules of Court(Rules), while the latter is not a ground for dismissal
under the same rule.
In this case, the Court finds that Consing, Jr.s complaint in SCA No.1759 properly
states a cause of action since the allegations there insufficiently bear out a case for
damages under Articles 19 and 26 of the Civil Code.
Records disclose that Consing, Jr.s complaint contains allegations which aim to
demonstrate the abusive manner in which Unicapital and PBI, et al. enforced their
demands against him. Among others, the complaint states that Consing, Jr. "has
constantly been harassed and bothered by Unicapital and PBI, et al.; x x x besieged
by phone calls from them; x x x has had constant meetings with them variously,
and on a continuing basis, such that he is unable to attend to his work as an
investment banker."69 In the same pleading, he also alleged that Unicapital and
PBI, et al.s act of "demanding a postdated check knowing fully well that he does
not have the necessary funds to cover the same, nor is he expecting to have them
is equivalent to asking him to commit a crime under unlawful coercive force."70
Accordingly, these specific allegations, if hypothetically admitted, may result into
the recovery of damages pursuant to Article 19 of the Civil Code which states that
"every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith."
As explained in the HSBC case:
When a right is exercised in a manner which does not conform with the norms
enshrined in Article 19 and results in damage to another, a legal wrong is thereby
committed for which the wrongdoer must beheld responsible. But a right, though by
itself legal because it is recognized or granted by law as such, may nevertheless
become the source of some illegality. A person should be protected only when he
acts in the legitimate exercise of his right, that is, when he acts with prudence and
in good faith; but not when he acts with negligence or abuse. There is an abuse of
right when it is exercised for the only purpose of prejudicing or injuring another. The
exercise of a right must be in accordance with the purpose for which it was
established, and must not be excessive or unduly harsh; there must be no intention
to injure another.71 (Emphasis supplied)
Likewise, Consing, Jr.s complaint states a cause of action for damages under Article
26 of the Civil Code which provides that:
Article 26. Every person shall respect the dignity, personality, privacy and peace of
mind of his neighbors and other persons. The following and similar acts, though

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they may not constitute a criminal offense, shall produce a cause of action for
damages, prevention and other relief:
(1) Prying into the privacy of another's residence;
(2) Meddling with or disturbing the private life or family relations of another;
(3) Intriguing to cause another to be alienated from his friends;
(4) Vexing or humiliating another on account of his religious beliefs, lowly station in
life, place of birth, physical defect, or other personal condition.
The rationale therefor was explained in the case of Manaloto v. Veloso III,72 citing
Concepcion v. CA,73 to wit:
The philosophy behind Art. 26 underscores the necessity for its inclusion in our civil
law. The Code Commission stressed in no uncertain terms that the human
personality must be exalted. The sacredness of human personality is a concomitant
consideration of every plan for human amelioration. The touchstone of every
system of law, of the culture and civilization of every country, is how far it dignifies
man. If the statutes insufficiently protect a person from being unjustly humiliated, in
short, if human personality is not exalted - then the laws are indeed defective. Thus,
under this article, the rights of persons are amply protected, and damages are
provided for violations of a person's dignity, personality, privacy and peace of
mind.74
To add, a violation of Article 26 of the Civil Code may also lead to the payment of
moral damages under Article 2219(10)75 of the Civil Code.
Records reveal that Consing, Jr., in his complaint, alleged that "he has come to
discover that Unicapital and PBI, et al. are speaking of him in a manner that is
inappropriate and libelous; and that they have spread their virulent version of
events in the business and financial community such that he has suffered and
continues to suffer injury upon his good name and reputation which, after all, is the
most sacred and valuable wealth he possesses - especially considering that he is an
investment banker."76 In similar regard, the hypothetical admission of these
allegations may result into the recovery of damages pursuant to Article 26, and
even Article2219(10), of the Civil Code.
Corollary thereto, Unicapital, et al.s contention77 that the case should be dismissed
on the ground that it failed to set out the actual libelous statements complained
about cannot be given credence. These incidents, as well as the specific
circumstances surrounding the manner in which Unicapital and PBI, et al. pursued
their claims against Consing, Jr. may be better ventilated during trial. It is a standing
rule that issues that require the contravention of the allegations of the complaint, as
well as the full ventilation, in effect, of the main merits of the case, should not be
within the province of a mere motion to dismiss,78 as in this case. Hence, as what is
only required is that the allegations furnish adequate basis by which the complaint
can be maintained, the Court in view of the above-stated reasons finds that the
RTC-Pasig Citys denial of Unicapital, et al.s motion to dismiss on the ground of
failure to state a cause of action was not tainted with grave abuse of discretion
which would necessitate the reversal of the CAs ruling. Verily, for grave abuse of
discretion to exist, the abuse of discretion must be patent and gross so as to
amount to an evasion of a positive duty or a virtual refusal to perform a duty
enjoined by law, or to act at all in contemplation of law.79 This the Court does not
perceive in the case at bar.
Further, so as to obviate any confusion on the matter, the Court equally finds that
the causes of action in SCA No. 1759 were not as Unicapital, et al. claim
misjoined even if Consing, Jr. averred that Unicapital and PBI, et al. violated certain
provisions of the Corporation Law and the Revised Securities Act.80

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The rule is that a partys failure to observe the following conditions under Section 5,
Rule 2 of the Rules results in a misjoinder of causes of action:81
SEC. 5. Joinder of causes of action . - A party may in one pleading assert, in the
alternative or otherwise, as many causes of action as he may have against an
opposing party, subject to the following conditions:
(a) The party joining the causes of action shall comply with the rules on joinder of
parties;
(b) The joinder shall not include special civil actions governed by special rules;
(c) Where the causes of action are between the same parties but pertain to different
venues or jurisdictions, the joinder may be allowed in the Regional Trial Court
provided one of the causes of action falls within the jurisdiction of said court and the
venue lies therein; and
(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. (Emphasis supplied)
A careful perusal of his complaint discloses that Consing, Jr. did not seek to hold
Unicapital and PBI, et al. liable for any specific violation of the Corporation Code or
the Revised Securities Act. Rather, he merely sought damages for Unicapital and
PBI, et al.s alleged acts of making him sign numerous documents and their use of
the same against him. In this respect, Consing, Jr. actually advances an injunction
and damages case82 which properly falls under the jurisdiction of the RTC-Pasig
City.83 Therefore, there was no violation of Section 5, Rule 2 of the Rules,
particularly, paragraph (c) thereof. Besides, even on the assumption that there was
a misjoinder of causes of action, still, such defect should not result in the dismissal
of Consing, Jr.s complaint. Section 6, Rule 2 of the Rules explicitly states that a
"misjoinder of causes of action is not a ground for dismissal of an action" and that
"a misjoined cause of action may, on motion of a party or on the initiative of the
court, be severed and proceeded with separately."
Neither should Consing, Jr.s failure to pay the required docket fees lead to the
dismissal of his complaint.1wphi1 It has long been settled that while the court
acquires jurisdiction over any case only upon the payment of the prescribed docket
fees, its non-payment at the time of the filing of the complaint does not
automatically cause the dismissal of the complaint provided that the fees are paid
within a reasonable period.84 Consequently, Unicapital, et al.s insistence that the
stringent rule on non-payment of docket fees enunciated in the case of Manchester
Development Corporation v. CA85 should be applied in this case cannot be
sustained in the absence of proof that Consing, Jr. intended to defraud the
government by his failure to pay the correct amount of filing fees. As pronounced in
the case of Heirs of Bertuldo Hinog v. Hon. Melicor:86
Plainly, while the payment of the prescribed docket fee is a jurisdictional
requirement, even its
non-payment at the time of filing does not automatically cause the dismissal of the
case, as long as the fee is paid within the applicable prescriptive or reglementary
period, more so when the party involved demonstrates a willingness to abide by the
rules prescribing such payment.
Thus, when insufficient filing fees were initially paid by the plaintiffs and there was
no intention to defraud the government, the Manchester rule does not apply.87
(Emphasis and italics in the original)
Indeed, while the Court acknowledges Unicapital, et al.'s apprehension that
Consing, Jr.'s "metered" claim for damages to the tune of around P2,000,000.00 per

120

month88 may balloon to a rather huge amount by the time that this case is finally
disposed of, still, any amount that may by then fall due shall be subject to
assessment and any additional fees determined shall constitute as a lien against
the judgment as explicitly provided under Section 2,89 Rule 141 of the Rules.
Finally, on the question of whether or not Consing, Jr.'s complaint was properly
verified, suffice it to state that since the copy submitted to the trial court was duly
notarized by one Atty. Allan B. Gepty and that it was only Unicapital, et al.s copy
which lacks the notarization, then there was sufficient compliance with the
requirements of the rules on pleadings.90
In fine, the Court finds no reversible error on the part of the CA in sustaining the
RTC-Pasig Citys denial of Unicapital et al.s motion to dismiss. As such, the petitions
in G.R. Nos. 175277 and 175285 must be denied.
B. Propriety of the denial of
Consing, Jr.s motion for
consolidation.
The crux of G.R. No. 192073 is the propriety of the RTC-Makati Citys denial of
Consing, Jr.s motion for the consolidation of the Pasig case, i.e., SCA No. 1759, and
the Makati case, i.e., Civil Case No. 99-1418.Records show that the CA upheld the
RTC-Makati Citys denial of the foregoing motion, finding that the consolidation of
these cases was merely discretionary on the part of the trial court. It added that it
was "impracticable and would cause a procedural faux pas
"if it were to "allow the RTC-Pasig City to preside over the Makati case."91
The CAs ruling is proper.
It is hornbook principle that when or two or more cases involve the same parties
and affect closely related subject matters, the same must be consolidated and
jointly tried, in order to serve the best interest of the parties and to settle the issues
between them promptly, thus, resulting in a speedy and inexpensive determination
of cases. In addition, consolidation serves the purpose of avoiding the possibility of
conflicting decisions rendered by the courts in two or more cases, which otherwise
could be disposed of in a single suit.92 The governing rule is Section 1, Rule 31 of
the Rules which provides:
SEC. 1. Consolidation. - When actions involving a common question of law or fact
are pending before the court, it may order a joint hearing or trial of any or all the
matters in issue in the actions; it may order all the actions consolidated; and it may
make such orders concerning proceedings therein as may tend to avoid
unnecessary costs or delay.
In the present case, the Court observes that the subject cases, i.e., SCA No. 1759
and Civil Case No. 99-1418, although involving the same parties and proceeding
from a similar factual milieu, should remain unconsolidated since they proceed from
different sources of obligations and, hence, would not yield conflicting dispositions.
SCA No. 1759 is an injunction and damages case based on the Civil Code provisions
on abuse of right and defamation, while Civil Case No. 99-1418 is a collection and
damages suit based on actionable documents, i.e., the subject promissory notes. In
particular, SCA No. 1759 deals with whether or not Unicapital and BPI, et al, abused
the manner in which they demanded payment from Consing, Jr., while Civil Case No.
99-1418 deals with whether or not Unicapital may demand payment from Consing,
Jr. based on the subject promissory notes. Clearly, a resolution in one case would
have no practical effect as the core issues and reliefs sought in each case are
separate and distinct from the other.
Likewise, as the CA correctly pointed out, the RTC-Makati City could not have been
failured in retaining Civil Case No. 99-1418 in its dockets since pre-trial procedures

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have already been undertaken therein and, thus, its consolidation with SCA No.
1759 pending before the RTC-Pasig City would merely result in complications on the
part of the latter court or squander the resources or remedies already utilized in
Civil Case No. 99-1418.93 In this light, aside from the perceived improbability of
having conflicting decisions, the consolidation of SCA No. 1759 and Civil Case No.
99-1418 would, contrary to its objective, only delay the proceedings and entail
unnecessary costs.
All told, the Court finds the consolidation of SCA No. 1759 and Civil Case No. 991418 to be improper, impelling the affirmance of the CAs ruling. Consequently, the
petition in G.R. No. 192073 must also be denied.
WHEREFORE, the petitions in G.R. Nos. 175277, 175285 and 192073 are DENIED.
Accordingly, the Court of Appeals Joint Decision dated October 20, 2005 and
Resolution dated October 25, 2006 in CA-G.R. SP Nos. 64019 and 64451 and the
Decision dated September 30, 2009 and Resolution dated April 28, 2010 in CA-G.R.
No. 101355 are hereby AFFIRMED.
ESTELA M. PERLAS-BERNABE
Associate Justice

Sec. 6. Construction
Anama v. Phil. Savings Bank, G.R. No. 187021, January 25, 2012

Republic of the Philippines


Supreme Court
Manila

THIRD DIVISION

DOUGLAS F. ANAMA,
Petitioner,

- versus -

COURT OF APPEALS,
PHILIPPINE SAVINGS BANK, SPOUSES SATURNINA BARIA &TOMAS CO and THE
REGISTER OF DEEDS, METRO MANILA,
DISTRICT II,
Respondents.

G.R. No. 187021


Present:

122

VELASCO, JR., J., Chairperson,


PERALTA,
ABAD,
MENDOZA, and
PERLAS-BERNABE, JJ.

Promulgated:

January 25, 2012


X ----------------------------------------------------------------------------------------------------- X
DECISION
MENDOZA, J.:

This is a petition for review under Rule 45 assailing the March 31, 2008 Decision[1]
of the Court of Appeals (CA) and its February 27, 2009 Resolution,[2] in CA G.R. No.
SP-94771, which affirmed the November 25, 2005 Order of the Regional Trial Court,
Branch 167, Pasig City (RTC), granting the motion for issuance of a writ of execution
of respondents.

The Facts
The factual and procedural backgrounds of this case were succinctly recited by the
CA in its decision as follows:
Sometime in 1973, the Petitioner, Douglas F. Anama (Anama), and the Respondent,
Philippine Savings Bank (PSB), entered into a Contract to Buy, on installment
basis, the real property owned and covered by Transfer Certificate of Title (TCT) No.
301276 in the latters name. However, Anama defaulted in paying his obligations
thereunder, thus, PSB rescinded the said contract and title to the property remained
with the latter. Subsequently, the property was sold by PSB to the Spouses
Saturnina Baria and Tomas Co (Co Spouses) who, after paying the purchase price in
full, caused the registration of the same in their names and were, thus, issued TCT
No. 14239.
Resultantly, Anama filed before the Respondent Court a complaint for declaration of
nullity of the deed of sale, cancellation of transfer certificate of title, and specific

123

performance with damages against PSB, the Co Spouses, and the Register of Deeds
of Metro Manila, District II.
On August 21, 1991 and after trial on the merits, the Respondent Court dismissed
Anamas complaint and upheld the validity of the sale between PSB and the Co
Spouses. Undaunted, Anama appealed, at first, to this Court, and after failing to
obtain a favorable decision, to the Supreme Court.
On January 29, 2004, the Supreme Court rendered judgment denying Anamas
petition and sustaining the validity of the sale between PSB and the Co Spouses. Its
decision became final and executory on July 12, 2004. Pursuant thereto, the Co
Spouses moved for execution, which was granted by the Respondent Court per its
Order, dated November 25, 2005.
Aggrieved, Anama twice moved for the reconsideration of the Respondent Courts
November 25, 2005 Order arguing that the Co Spouses motion for execution is
fatally defective. He averred that the Spouses motion was pro forma because it
lacked the required affidavit of service and has a defective notice of hearing, hence,
a mere scrap of paper. The Respondent Court, however, denied Anamas motion(s)
for reconsideration.

Dissatisfied, the petitioner questioned the RTC Order before the CA for taking
judicial cognizance of the motion for execution filed by spouses Tomas Co and
Saturnina Baria (Spouses Co) which was (1) not in accord with Section 4 and Section
15 of the Rules of Court because it was without a notice of hearing addressed to the
parties; and (2) not in accord with Section 6, Rule 15 in conjunction with Section 13,
Rule 13 of the Rules of Court because it lacks the mandatory affidavit of service.
On March 31, 2008, the CA rendered a decision dismissing the petition. It reasoned
out, among others, that the issue on the validity of the deed of sale between
respondents, Philippine Savings Bank (PSB) and the Spouses Co, had long been laid
to rest considering that the January 29, 2004 Decision of this Court became final
and executory on July 12, 2004. Hence, execution was already a matter of right on
the part of the respondents and the RTC had the ministerial duty to issue a writ of
execution enforcing a final and executory decision.
The CA also stated that although a notice of hearing and affidavit of service in a
motion are mandatory requirements, the Spouses Cos motion for execution of a
final and executory judgment could be acted upon by the RTC ex parte, and
therefore, excused from the mandatory requirements of Sections 4, 5 and 6 of Rule
15 of the Rules of Court.
The CA was of the view that petitioner was not denied due process because he was
properly notified of the motion for execution of the Spouses Co. It stated that the
act of the Spouses Co in resorting to personal delivery in serving their motion for
execution did not render the motion pro forma. It refused to apply a rigid application
of the rules because it would result in a manifest failure of justice considering that
petitioners position was nothing but an obvious dilatory tactic designed to prevent
the final disposition of Civil Case No. 44940.

Not satisfied with the CAs unfavorable disposition, petitioner filed this petition
praying for the reversal thereof presenting the following
ARGUMENTS:

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THE RESPONDENT APPELLATE COURT DID NOT TAKE INTO CONSIDERATION THE
CLEAR TEACHING OF THE HONORABLE COURT WITH REGARD TO THE REQUISITE
NOTICE OF HEARING IT SHOULD BE ADDRESSED TO THE PARTIES NOT TO THE
CLERK OF COURT, THE LATEST (THEN) BEING GARCIA V. SANDIGANBAYAN, G.R. NO.
167103, AUGUST 31, 2006, 500 SCRA 361; DE JESUS V. JUDGE DILAG, A.M. NO. RTJ05-1921, SEPTEMBER 30, 2005, 471 SCRA 176; LAND BANK OF THE PHILIPPINES V.
NATIVIDAD, G.R. NO. 127198, MAY 16, 2005, 458 SCRA 441; ATTY. JULIUS NERI V.
JUDGE JESUS S. DE LA PEA, A.M NO. RTJ-05-1896, APRIL 29, 2005, 457 SCRA 538;
AND ALVAREZ V. DIAZ, A.M. NO. MTJ-00-1283, MARCH 3, 2004, 424 SCRA 213;

THE RESPONDENT APPELLATE COURT DID NOT TAKE INTO CONSIDERATION THE
CLEAR TEACHING OF THE HONORABLE COURT WITH REGARD TO THE REQUISITE
AFFIDAVIT OF SERVICE IT SHOULD BE IN THE PROPER FORM AS PRESCRIBED IN
THE RULES AND IT SHOULD BE ATTACHED TO THE MOTION, THE LATEST (THEN)
BEING ELLO V. COURT OF APPEALS, G.R. NO. 141255, JUNE 21, 2005, 460 SCRA 406;
LOPEZ DELA ROSA DEVELOPMENT CORPORATION V. COURT OF APPEALS, G.R. NO.
148470, APRIL 29, 2005, 457 SCRA 614; ALVAREZ V. DIAZ, A.M. NO. MTJ-00-1283,
MARCH 3, 2004, 424 SCRA 213; EL REYNO HOMES, INC. V. ERNESTO ONG, 397 SCRA
563; CRUZ V. COURT OF APPEALS, 388 SCRA 72, 80-81; AND MERIS V. OFILADA, 293
SCRA 606;

THE RESPONDENT APPELLATE COURT DID NOT TAKE APPROPRIATE ACTION ON THE
FRAUD PERPETRATED UPON THE COURT BY RESPONDENT-SPOUSES AND THEIR
LEAD COUNSEL.

SINCE THE RESPONDENT APPELLATE COURT REFUSED


CONSIDERATION THE RESPONDENT BANKS ACTION THAT OF:

TO

TAKE

INTO

ENGAGING IN A DAGDAG-BAWAS (LEGALLY INTERCALATION) OPERATION OF A


PORTION OF THE TRANSCRIPT OF STENOGRAPHIC NOTES (TSN), OCTOBER 12, 1984,
OF THE REGIONAL TRIAL COURT, BRANCH 167, PASIG CITY, IN CIVIL CASE NO.
44940, PAGES 54-55, AND

PRESENTING IT IN ITS APPELLEES BRIEF (IN THE OWNERSHIP CASE, CA-G.R. NO. CV42663, LIKEWISE, BEFORE THE RESPONDENT APPELLATE COURT) BY CITING IT ON
PAGE 14 OF SAID BRIEF, AS IMPLIEDLY COMING FROM THE TSN OF THE TRIAL
COURT.

THINKING THAT THEIR FALSIFIED APPELLEES BRIEF WAS MATERIAL IN SAID CA-G.R.
NO. CV-42663.

IT COULD NOT RULE THAT THE SAME HAS BROUGHT ABOUT A CRUCIAL MATERIAL
CHANGE IN THE SITUATION OF THE PARTIES WHICH MAKES EXECUTION
INEQUITABLE (PUNCIA V. GERONA, 252 SCRA 424, 430-431), OR, IN THE WORDS OF
DEVELOPMENT BANK OF RIZAL V. CA, G.R. NO. 75964, DECEMBER 1, 1987, 156
SCRA 84, 90, THERE EXISTS A COMPELLING REASON FOR STAYING THE EXECUTION
OF JUDGMENT.

125

Basically, petitioner argues that the respondents failed to substantially comply with
the rule on notice and hearing when they filed their motion for the issuance of a writ
of execution with the RTC. He claims that the notice of hearing in the motion for
execution filed by the Spouses Co was a mere scrap of paper because it was
addressed to the Clerk of Court and not to the parties. Thus, the motion for
execution did not contain the required proof of service to the adverse party. He adds
that the Spouses Co and their counsel deliberately misserved the copy of their
motion for execution, thus, committing fraud upon the trial court.
Additionally, he claims that PSB falsified its appellees brief by engaging in a
dagdag-bawas (intercalation) operation in pages 54 to 55 of the TSN, dated
October 12, 1984.
Position of the Spouses Co
The Spouses Co counter that the petition should be dismissed outright for raising
both questions of facts and law in violation of Section 1, Rule 45 of the Rules of
Court. The Spouses Co aver that petitioner attempts to resurrect the issue that PSB
cheated him in their transaction and that the RTC committed a dagdag-bawas.
According to the Spouses Co, these issues had long been threshed out by this Court.
At any rate, they assert that they have substantially complied with the requirements
of notice and hearing provided under Sections 4 and 5 of Rule 15 and Section 13,
Rule 13 of the Rules of Court. Contrary to petitioners allegations, a copy of the
motion for the issuance of a writ of execution was given to petitioner through his
principal counsel, the Quasha Law Offices. At that time, the said law office had not
formally withdrawn its appearance as counsel for petitioner. Spouses Co argue that
what they sought to be executed was the final judgment of the RTC duly affirmed by
the CA and this Court, thus, putting the issues on the merits to rest. The issuance
of a writ of execution then becomes a matter of right and the courts duty to issue
the writ becomes ministerial.
Position of respondent PSB
PSB argues that the decision rendered by the RTC in Civil Case No. 44940 entitled
Douglas F. Anama v. Philippine Savings Bank, et. al.[3] had long become final and
executory as shown by the Entry of Judgment made by the Court on July 12, 2004.
The finality of the said decision entitles the respondents, by law, to the issuance of
a writ of execution. PSB laments that petitioner relies more on technicalities to
frustrate the ends of justice and to delay the enforcement of a final and executory
decision.
As to the principal issue, PSB points out that the notice of hearing appended to the
motion for execution filed by the Spouses Co substantially complied with the
requirements of the Rules since petitioners then counsel of record was duly notified
and furnished a copy of the questioned motion for execution. Also, the motion for
execution filed by the Spouses Co was served upon and personally received by said
counsel.
The Courts Ruling
The Court agrees with the Spouses Co that petitioners allegations on the dagdagbawas operation of the Transcript of Stenographic Notes, the fraud perpetuated
upon the Court by said spouses and their lead counsel, the ownership, and
falsification had long been laid to rest in the case of Douglas F. Anama v.
Philippine Savings Bank, et. al.[4] For said reason, the Court cannot review those
final pronouncements. To do so would violate the rules as it would open a final
judgment to another reconsideration which is a prohibited procedure.

126

On the subject procedural question, the Court finds no compelling reason to


stay the execution of the judgment because the Spouses Co complied with the
notice and hearing requirements under Sections 4, 5 and 6 of Rule 15. Said sections,
as amended, provide:
SECTION 4. Hearing of motion. Except for motions which the court may act upon
without prejudicing the rights of the adverse party, every written motion shall be set
for hearing by the applicant.
Every written motion required to be heard and the notice of the hearing thereof
shall be served in such a manner as to ensure its receipt by the other party at least
three (3) days before the date of hearing, unless the court for good cause sets the
hearing on shorter notice.
SECTION 5. Notice of hearing. The notice of hearing shall be addressed to all
parties concerned, and shall specify the time and date of the hearing which must
not be later than ten (10) days after the filing of the motion.
SECTION 6. Proof of service necessary. No written motion set for hearing shall be
acted upon by the court without proof of service thereof.

Pertinently, Section 13 of Rule 13 of the 1997 Rules of Civil Procedure, as amended,


provides:
SEC. 13. Proof of service. Proof of personal service shall consist of a written
admission of the party served, or the official return of the server, or the affidavit of
the party serving, containing a full statement of the date, place, and manner of
service. If the service is by ordinary mail, proof thereof shall consist of an affidavit of
the person mailing of facts showing compliance with section 7 of this Rule. If service
is made by registered mail, proof shall be made by such affidavit and the registry
receipt issued by the mailing office. The registry return card shall be filed
immediately upon its receipt by the sender, or in lieu thereof the unclaimed letter
together with the certified or sworn copy of the notice given by the postmaster to
the addressee.

Elementary is the rule that every motion must contain the mandatory requirements
of notice and hearing and that there must be proof of service thereof. The Court has
consistently held that a motion that fails to comply with the above requirements is
considered a worthless piece of paper which should not be acted upon. The rule,
however, is not absolute. There are motions that can be acted upon by the court ex
parte if these would not cause prejudice to the other party. They are not strictly
covered by the rigid requirement of the rules on notice and hearing of motions.
The motion for execution of the Spouses Co is such kind of motion. It cannot be
denied that the judgment sought to be executed in this case had already become
final and executory. As such, the Spouses Co have every right to the issuance of a
writ of execution and the RTC has the ministerial duty to enforce the same. This
right on the part of the Spouses Co and duty on the part of the RTC are based on
Section 1 and Section 2 of Rule 39 of the 1997 Revised Rules of Civil Procedure
provides, as follows:
Section 1. Execution upon judgments or final orders. Execution shall issue as a
matter of right, on motion, upon a judgment or order that disposes of the action or
proceeding upon the expiration of the period to appeal therefrom if no appeal has
been duly perfected.
If the appeal has been duly perfected and finally resolved, the execution may
forthwith be applied for in the court of origin, on motion of the judgment obligee,

127

submitting therewith certified true copies of the judgment or judgments or final


order or orders sought to be enforced and of the entry thereof, with notice to the
adverse party.

The appellate court may, on motion in the same case, when the interest of justice
so requires, direct the court of origin to issue the writ of execution.
SEC. 2. Discretionary execution.
(a) Execution of a judgment or final order pending appeal. On motion of the
prevailing party with notice to the adverse party filed in the trial court while it has
jurisdiction over the case and is in possession of either the original record or the
record on appeal, as the case may be, at the time of the filing of such motion, said
court may, in its discretion, order execution of a judgment or final order even before
the expiration of the period to appeal.
After the trial court has lost jurisdiction, the motion for execution pending appeal
may be filed in the appellate court.
Discretionary execution may only issue upon good reasons to be stated in a special
order after due hearing.
(b) Execution of several, separate or partial judgments.A several, separate or
partial judgment may be executed under the same terms and conditions as
execution of a judgment or final order pending appeal. (2a) [Emphases and
underscoring supplied]

As can be gleaned therefrom, under Paragraph 1 of Section 1 of Rule 39 of the 1997


Revised Rules of Civil Procedure, the Spouses Co can have their motion for
execution executed as a matter of right without the needed notice and hearing
requirement to petitioner. This is in contrast to the provision of Paragraph 2 of
Section 1 and Section 2 where there must be notice to the adverse party. In the
case of Far Eastern Surety and Insurance Company, Inc. v. Virginia D. Vda. De
Hernandez,[5] it was written:
It is evident that Section 1 of Rule 39 of the Revised Rules of Court does not
prescribe that a copy of the motion for the execution of a final and executory
judgment be served on the defeated party, like litigated motions such as a motion
to dismiss (Section 3, Rule 16), or motion for new trial (Section 2, Rule 37), or a
motion for execution of judgment pending appeal (Section 2, Rule 39), in all of
which instances a written notice thereof is required to be served by the movant on
the adverse party in order to afford the latter an opportunity to resist the
application.
It is not disputed that the judgment sought to be executed in the case at bar had
already become final and executory. It is fundamental that the prevailing party in a
litigation may, at any time within five (5) years after the entry thereof, have a writ
of execution issued for its enforcement and the court not only has the power and
authority to order its execution but it is its ministerial duty to do so. It has also been
held that the court cannot refuse to issue a writ of execution upon a final and
executory judgment, or quash it, or order its stay, for, as a general rule, the parties
will not be allowed, after final judgment, to object to the execution by raising new
issues of fact or of law, except when there had been a change in the situation of the
parties which makes such execution inequitable or when it appears that the
controversy has ever been submitted to the judgment of the court; or when it
appears that the writ of execution has been improvidently issued, or that it is
defective in substance, or is issued against the wrong party, or that judgment debt
has been paid or otherwise satisfied; or when the writ has been issued without
authority. Defendant-appellant has not shown that she falls in any of the situations
afore-mentioned. Ordinarily, an order of execution of a final judgment is not
appealable. Otherwise, as was said by this Court in Molina v. de la Riva, a case could

128

never end. Once a court renders a final judgment, all the issues between or among
the parties before it are deemed resolved and its judicial function as regards any
matter related to the controversy litigated comes to an end. The execution of its
judgment is purely a ministerial phase of adjudication. The nature of its duty to see
to it that the claim of the prevailing party is fully satisfied from the properties of the
loser is generally ministerial.
In Pamintuan v. Muoz, We ruled that once a judgment becomes final and
executory, the prevailing party can have it executed as a matter of right, and the
judgment debtor need not be given advance notice of the application for execution.
Also of the same stature is the rule that once a judgment becomes final and
executory, the prevailing party can have it executed as a matter of right and the
granting of execution becomes a ministerial duty of the court. Otherwise stated,
once sought by the prevailing party, execution of a final judgment will just follow as
a matter of course. Hence, the judgment debtor need not be given advance notice
of the application for execution nor he afforded prior hearing.
Absence of such advance notice to the judgment debtor does not constitute an
infringement of the constitutional guarantee of due process.
However, the established rules of our system of jurisprudence do not require that a
defendant who has been granted an opportunity to be heard and has had his day in
court should, after a judgment has been rendered against him, have a further notice
and hearing before supplemental proceedings are taken to reach his property in
satisfaction of the judgment. Thus, in the absence of a statutory requirement, it is
not essential that he be given notice before the issuance of an execution against his
tangible property; after the rendition of the judgment he must take "notice of what
will follow," no further notice being "necessary to advance justice." [Emphases and
underscoring supplied]
Likewise, in the case of Leonardo Lim De Mesa v. Hon. Court of Appeals,[6] it was
stated:
In the present case, the decision ordering partition and the rendition of accounting
had already become final and executory. The execution thereof thus became a
matter of right on the part of the plaintiffs, herein private respondents, and is a
mandatory and ministerial duty on the part of the court. Once a judgment becomes
final and executory, the prevailing party can have it executed as a matter of right,
and the judgment debtor need not be given advance notice of the application for
execution nor be afforded prior hearings thereon.
On the bases of the foregoing considerations, therefore, the Court of Appeals acted
correctly in holding that the failure to serve a copy of the motion for execution on
petitioner is not a fatal defect. In fact, there was no necessity for such service.
[Emphases and underscoring supplied]

At any rate, it is not true that the petitioner was not notified of the motion for
execution of the Spouses Co.
The records clearly show that the motion for
execution was duly served upon, and received by, petitioners counsel-of-record, the
Quasha Ancheta Pena Nolasco Law Offices, as evidenced by a signed stamped
received mark appearing on said pleading.[7] The records are bereft of proof
showing any written denial from petitioners counsel of its valid receipt on behalf of
its client. Neither is there proof that the Quasha Ancheta Pena Nolasco Law Offices
has formally withdrawn its appearance as petitioners counsel-of-record.
Considering that there is enough proof shown on record of personal delivery in
serving the subject motion for execution, there was a valid compliance with the
Rules, thus, no persuasive reason to stay the execution of the subject final and
executory judgment.

129

Moreover, this Court takes note that petitioner was particularly silent on the ruling
of the CA that he was notified, through his counsel, of the motion for execution of
the Spouses Co when he filed a motion for reconsideration of the RTCs order dated
June 28, 2005, holding in abeyance said motion pending the resolution of
petitioners pleading filed before this Court. He did not dispute the ruling of the CA
either that the alleged defect in the Spouses Cos motion was cured when his new
counsel was served a copy of said motion for reconsideration of the RTCs June 28,
2005 Order.[8]
The three-day notice rule is not absolute. A liberal construction of the procedural
rules is proper where the lapse in the literal observance of a rule of procedure has
not prejudiced the adverse party and has not deprived the court of its authority.
Indeed, Section 6, Rule 1 of the Rules of Court provides that the Rules should be
liberally construed in order to promote their objective of securing a just, speedy and
inexpensive disposition of every action and proceeding. Rules of procedure are tools
designed to facilitate the attainment of justice, and courts must avoid their strict
and rigid application which would result in technicalities that tend to frustrate rather
than promote substantial justice.

In Somera Vda. De Navarro v. Navarro, the Court held that there was substantial
compliance of the rule on notice of motions even if the first notice was irregular
because no prejudice was caused the adverse party since the motion was not
considered and resolved until after several postponements of which the parties
were duly notified.
Likewise, in Jehan Shipping Corporation v. National Food Authority, the Court held
that despite the lack of notice of hearing in a Motion for Reconsideration, there was
substantial compliance with the requirements of due process where the adverse
party actually had the opportunity to be heard and had filed pleadings in opposition
to the motion. The Court held:
This Court has indeed held time and again, that under Sections 4 and 5 of Rule 15 of
the Rules of Court, mandatory is the requirement in a motion, which is rendered
defective by failure to comply with the requirement. As a rule, a motion without a
notice of hearing is considered pro forma and does not affect the reglementary
period for the appeal or the filing of the requisite pleading.
As an integral component of the procedural due process, the three-day notice
required by the Rules is not intended for the benefit of the movant. Rather, the
requirement is for the purpose of avoiding surprises that may be sprung upon the
adverse party, who must be given time to study and meet the arguments in the
motion before a resolution of the court. Principles of natural justice demand that the
right of a party should not be affected without giving it an opportunity to be heard.
The test is the presence of opportunity to be heard, as well as to have time to study
the motion and meaningfully oppose or controvert the grounds upon which it is
based.[9] [Emphases and underscoring supplied]

Likewise, in the case of KKK Foundation, Inc. v. Hon. Adelina Calderon-Bargas,[10]


this Court stated:
Anent the second issue, we have consistently held that a motion which does not
meet the requirements of Sections 4 and 5 of Rule 15 of the Rules of Court is
considered a worthless piece of paper, which the Clerk of Court has no right to

130

receive and the trial court has no authority to act upon. Service of a copy of a
motion containing a notice of the time and the place of hearing of that motion is a
mandatory requirement, and the failure of movants to comply with these
requirements renders their motions fatally defective. However, there are exceptions
to the strict application of this rule. These exceptions are: (1) where a rigid
application will result in a manifest failure or miscarriage of justice especially if a
party successfully shows that the alleged defect in the questioned final and
executory judgment is not apparent on its face or from the recitals contained
therein; (2) where the interest of substantial justice will be served; (3) where the
resolution of the motion is addressed solely to the sound and judicious discretion of
the court; and (4) where the injustice to the adverse party is not commensurate
with the degree of his thoughtlessness in not complying with the procedure
prescribed.
A notice of hearing is an integral component of procedural due process to afford the
adverse parties a chance to be heard before a motion is resolved by the court.
Through such notice, the adverse party is given time to study and answer the
arguments in the motion. Records show that while Angeless Motion for Issuance of
Writ of Execution contained a notice of hearing, it did not particularly state the date
and time of the hearing. However, we still find that petitioner was not denied
procedural due process. Upon receiving the Motion for Issuance of Writ of Execution,
the trial court issued an Order dated September 9, 2002 giving petitioner ten (10)
days to file its comment. The trial court ruled on the motion only after the
reglementary period to file comment lapsed. Clearly, petitioner was given time to
study and comment on the motion for which reason, the very purpose of a notice of
hearing had been achieved.
The notice requirement is not a ritual to be followed blindly. Procedural due process
is not based solely on a mechanical and literal application that renders any
deviation inexorably fatal. Instead, procedural rules are liberally construed to
promote their objective and to assist in obtaining a just, speedy and inexpensive
determination of any action and proceeding. [Emphases supplied]
At any rate, it is undisputed that the August 21, 1991 RTC Decision[11] in Civil Case
No. 44940 is already final and executory. Once a judgment becomes final and
executory, all the issues between the parties are deemed resolved and laid to rest.
All that remains is the execution of the decision which is a matter of right. The
prevailing party is entitled to a writ of execution, the issuance of which is the trial
courts ministerial duty.[12]
The Court agrees with the respondents that petitioner mainly relies on mere
technicalities to frustrate the ends of justice and further delay the execution process
and enforcement of the RTC Decision that has been affirmed by the CA and this
Court. The record shows that the case has been dragging on for almost 30 years
since petitioner filed an action for annulment of sale in 1982. From the time the
Spouses Co bought the house from PSB in 1978, they have yet to set foot on the
subject house and lot.
To remand the case back to the lower court would further prolong the agony
of the Spouses Co. The Court should not allow this to happen. The Spouses Co
should not be prevented from enjoying the fruits of the final judgment in their favor.
In another protracted case, the Court wrote:

As a final note, it bears to point out that this case has been dragging for more than
15 years and the execution of this Courts judgment in PEA v. CA has been delayed
for almost ten years now simply because De Leon filed a frivolous appeal against
the RTCs order of execution based on arguments that cannot hold water. As a
consequence, PEA is prevented from enjoying the fruits of the final judgment in its
favor. The Court agrees with the Office of the Solicitor General in its contention that
every litigation must come to an end once a judgment becomes final, executory and
unappealable. Just as a losing party has the right to file an appeal within the
prescribed period, the winning party also has the correlative right to enjoy the

131

finality of the resolution of his case by the execution and satisfaction of the
judgment, which is the "life of the law." To frustrate it by dilatory schemes on the
part of the losing party is to frustrate all the efforts, time and expenditure of the
courts. It is in the interest of justice that this Court should write finis to this
litigation.[13]
WHEREFORE, the petition is DENIED.
SO ORDERED.

JOSE CATRAL MENDOZA


Associate Justice

Tan v. Court of Appeals, G.R. No. 130314, September 22, 1998

FIRST DIVISION
[G.R. No. 130314. September 22, 1998]
ANNIE TAN, petitioner, vs. COURT OF APPEALS and BLOOMBERRY EXPORT
MANUFACTURING, INC., respondents.
DECISION
PANGANIBAN, J.:
Before a trial court, a motion for reconsideration that does not contain the requisite
notice of hearing does not toll the running of the period of appeal. It is a mere
scrap of paper which the trial court and the opposite party may ignore.
The Case
Petitioner seeks to set aside the August 22, 1997 Decision of the Court of
Appeals[1] in CA-GR SP No. 43293, the dispositive portion of which reads:[2]
WHEREFORE, [i]n view of all the foregoing considerations, the petition for certiorari
and prohibition is granted. The Order dated October 4, 1996, of public respondent
is hereby SET ASIDE and public respondent is ordered to desist from further
proceeding with the hearing of the Motion for Reconsideration. The Decision dated
July 18, 1996, of public respondent is declared final and executory.
The Facts
Petitioner Annie Tan, doing business under the name and style AJ & T Trading,
leased a portion of the ground floor of her building, more specifically described as
Stall No. 623, Carvajal Street, Binondo, Manila, in favor of Bloomberry Export
Manufacturing, Inc. The lease was for a period of five years starting on February 17,
1995 and ending on February 17, 2000, at a monthly rental of P20,000 for the first
three years.[3] For several alleged violations of the lease contract, petitioners filed
against private respondent a complaint for ejectment, docketed as Civil Case No.
148798-CV.[4] As its rental payment was refused by petitioner, private respondent
instituted on July 13, 1995 a case for consignation, docketed as Civil Case No.
148814-CV.[5]
The two cases were consolidated. In due course, the Metropolitan Trial Court (MTC)
of Manila, Branch I, rendered on February 1, 1996 a Decision[6] which disposed as
follows:[7]

132

WHEREFORE, in Civil Case No. 148798-CV for [b]reach of [c]ontract, failure to pay
rentals on time, encroachment on the adjacent premises without the consent of
[petitioner], [she] failed to substantiate her case with that degree of proof required
by law. For this reason, except for the costs of suit, this Court hereby orders the
dismissal of the complaint of [petitioner]. The counterclaim and damages sought by
[private respondent are] likewise ordered dismissed. The case for consignation in
Civil Case No. 148814-CV has become moot and academic for failure of [petitioner]
to appeal the decision of the Metropolitan [Trial] Court, Branch 15, Manila, allowing
the [private respondent] to consign rental payments to the Court of Manila.
Besides, the [c]omplaint for consignation being in conformity with law, [private
respondent] is allowed to continue consigning with this Court all rentals that [may
be] due.
On appeal, the Regional Trial Court (RTC) of Manila, Branch 2, in its Decision dated
July 18, 1996, affirmed the aforementioned MTC Decision thus:
WHEREFORE, finding no cogent reasons to disturb the joint decision dated
February 1, 1996 of the Metropolitan Trial Court of Manila, Branch 1, the Court
sustains and affirms in toto the said decision.
Respondent Court related the incidents that ensued, as follows:[8]
xxx [F]rom the Decision of the [RTC] dated July 18, 1996, [petitioner] filed a Motion
for Reconsideration of the aforesaid decision. The Motion for Reconsideration did
not contain any notice of hearing as required under Section 5, Rule 15 of the
Revised Rules of Court.
On August 23, 1996, [private respondent] filed an ex-parte Motion for Entry of
Judgment upon the ground that said motion for reconsideration is a mere scrap of
paper which should not merit the attention of the [RTC] and in support thereof, cited
the case of Traders Royal Bank vs. Court of Appeals, 208 SCRA 199. [Private
respondent] contends that since the Motion for Reconsideration is a mere scrap of
paper aside from being pro forma, said Motion for Reconsideration did not toll the
period of appeal[;] hence, the Decision dated July 18, 1996, had become final and
executory.
"On September 3, 1996, [petitioner] filed a Motion to Set for Hearing the Motion for
Reconsideration which was vehemently opposed by [private respondent] on
September 23, 1996.
On October 4, 1996, [the RTC] issued an Order granting the motion to set for
hearing [petitioners] Motion for Reconsideration and set[ting] the hearing [for]
October 21, 1996, at 8:30 oclock in the morning. On October 20, 1996, [private
respondent] filed a Motion for Reconsideration of the Order dated October 4, 1996,
which was set for hearing on October 25, 1996.
On November 11, 1996, [the RTC] issued an Order denying [private respondents]
Motion for Reconsideration. Hence, the Petition for Certiorari and Prohibition. xxx.
In the assailed Decision, Respondent Court of Appeals reversed the trial courts
Order setting for hearing petitioners Motion for Reconsideration.
The Ruling of the Court of Appeals
Respondent Court held that the trial court acted with grave abuse of discretion in
setting for hearing petitioners Motion for Reconsideration, notwithstanding the fact
that said Motion contained no notice of hearing.
Citing a litany of cases, it ruled that petitioners failure to comply with the
mandatory provisions of Sections 4 and 5, Rule 15 of the Rules of Court, reduced her
motion to a mere scrap of paper which did not merit the attention of the court.

133

Respondent Court also held that those cases in which the Court allowed a motion for
reconsideration that had not been set for hearing -- Galvez v. Court of Appeals,[9]
Tamargo v. Court of Appeals[10] and Que v. Intermediate Appellate Court[11]-- were
inapplicable.
Respondent Court held that the facts in Galvez drastically differ from those in the
present case. Galvez involved a motion to withdraw the information -- not a motion
for reconsideration -- that was filed ex parte before the arraignment of the accused.
In that case, the Court held that there was no imperative need of notice and hearing
because, first, the withdrawal of an information rests on the discretion of the trial
court; and, second, the accused was not placed in jeopardy. On the other hand, the
subject of the present controversy is a motion for reconsideration directed against
the Decision of the RTC; thus, the motion affects the period to perfect an appeal.
Que is not applicable, either. In said case, the trial court set the Motion for
Reconsideration (MR) for hearing, which was actually attended by the counsel for
the adverse party. This was not so in the case at bar; petitioners MR was set for
hearing, because she belatedly moved for it upon the filing of private respondents
Motion for Entry of Judgment. Likewise, the present case differs from Tamargo,
wherein the application of the aforesaid mandatory provisions was suspended. The
Court did so in order to give substantial justice to the petitioner and in view of the
nature of the issues raised which were found to be highly meritorious.
Hence, this petition.[12]
The Issue
In her Memorandum,[13] petitioner presents a fairly accurate statement of the main
issue to be resolved:[14]
Whether xxx the omission [through] inadvertence of a notice of hearing of a
motion for reconsideration filed with the trial court xxx is a fatal defect which did
not stop the running of the period to appeal[,] thus rendering the assailed decision
final [and] executory.
The Courts Ruling
The petition is devoid of merit.
Sole Issue:
Omission of Notice of Hearing Fatal
Petitioner admits the categorical and mandatory character of the directives in
Sections 4 and 5 of Rule 15 of the Rules of Court, which read:[15]
SEC. 4. Hearing of motion.Except for motions which the court may act upon
without prejudicing the rights of the adverse party, every written motion shall be set
for hearing by the applicant.
Every written motion required to be heard and the notice of the hearing thereof
shall be served in such a manner as to ensure its receipt by the other party at least
three (3) days before the date of hearing, unless the court for good cause sets the
hearing on shorter notice.(4a)
SEC. 5. Notice of hearing.The notice of hearing shall be addressed to all parties
concerned, and shall specify the time and date of the hearing which must not be
later than ten (10) days after the filing of the motion.(5a)
In De la Pea v. De la Pea,[16] the Court presented a resume of earlier decisions
regarding the necessity of the notice of hearing in motions for reconsideration:

134

In Pojas v. Gozo-Dadole,[17] we had occasion to rule on the issue of whether a


motion for reconsideration without any notice of hearing tolls the running of the
prescriptive period. In Pojas, petitioner received copy of the decision in Civil Case
No. 3430 of the Regional Trial Court of Tagbilaran on 15 April 1986. The decision
being adverse to him petitioner filed a motion for reconsideration. For failing to
mention the date when the motion was to be resolved as required in Sec. 5, Rule 15,
of the Rules of Court, the motion for reconsideration was denied. A second motion
for reconsideration met the same fate. On 2 July 1986 petitioner filed a notice of
appeal but the same was denied for being filed out of time as the motion for
reconsideration which the Court ruled as pro forma did not stop the running of the
15-day period to appeal.[18]
In resolving the issue of whether there was grave abuse of discretion in denying
petitioners notice of appeal, this Court ruled
Section 4 of Rule 15 of the Rules of Court requires that notice of motion be served
by the movant on all parties concerned at least three (3) days before its hearing.
Section 5 of the same Rule provides that the notice shall be directed to the parties
concerned, and shall state the time and place for the hearing of the motion. A
motion which does not meet the requirements of Section 4 and 5 of Rule 15 of the
Rules of Court is considered a worthless piece of paper which the clerk has no right
to receive and the court has no authority to act upon. Service of copy of a motion
containing notice of the time and place of hearing of said motion is a mandatory
requirement and the failure of the movant to comply with said requirements renders
his motion fatally defective.[19]
In New Japan Motors, Inc. v. Perucho,[20] defendant filed a motion for
reconsideration which did not contain any notice of hearing. In a petition for
certiorari, we affirmed the lower court in ruling that a motion for reconsideration
that did not contain a notice of hearing was a useless scrap of paper. We held
further
Under Sections 4 and 5 of Rule 15 of the Rules of Court, xxx a motion is required to
be accompanied by a notice of hearing which must be served by the applicant on all
parties concerned at least three (3) days before the hearing thereof. Section 6 of
the same rule commands that (n)o motion shall be acted upon by the Court,
without proof of service of the notice thereof xxx. It is therefore patent that the
motion for reconsideration in question is fatally defective for it did not contain any
notice of hearing. We have already consistently held in a number of cases that the
requirements of Sections 4, 5 and 6 of Rules 15 of the Rules of Court are mandatory
and that failure to comply with the same is fatal to movants cause.[21]
In Sembrano v. Ramirez,[22] we declared that
(A) motion without notice of hearing is a mere scrap of paper. It does not toll the
running of the period of appeal. This requirement of notice of hearing equally
applies to a motion for reconsideration. Without such notice, the motion is pro
forma. And a pro forma motion for reconsideration does not suspend the running of
the period to appeal.
In In re Almacen,[23] defendant lost his case in the lower court. His counsel then
filed a motion for reconsideration but did not notify the adverse counsel of the time
and place of hearing of said motion. The Court of Appeals dismissed the motion for
the reason that the motion for reconsideration dated July 5, 1966 does not contain
a notice of time and place of hearing thereof and is, therefore a useless piece of
paper which did not interrupt the running of the period to appeal, and,
consequently, the appeal was perfected out of time. When the case was brought to
us, we reminded counsel for the defendant that
As a law practitioner who was admitted to the bar as far back as 1941, Atty.
Almacen knew or ought to have known that [for] a motion for reconsideration to

135

stay the running of the period of appeal, the movant must not only serve a copy of
the motion upon the adverse party x x x but also notify the adverse party of the
time and place of hearing x x x.
Also, in Manila Surety and Fidelity Co., Inc. v. Bath Construction and Company,[24]
we ruled-The written notice referred to evidently is that prescribed for motions in general by
Rule 15, Sections 4 and 5 (formerly Rule 26), which provide that such notice shall
state the time and place of hearing and shall be served upon all the parties
concerned at least three days in advance. And according to Section 6 of the same
Rule no motion shall be acted upon by the court without proof of such notice.
Indeed, it has been held that in such a case the motion is nothing but a useless
piece of paper. The reason is obvious; unless the movant sets the time and place of
hearing the court would have no way to determine whether that party agrees to or
objects to the motion, and if he objects, to hear him on his objection, since the
Rules themselves do not fix any period within [which] he may file his reply or
opposition.'[25]
In fine, the abovecited cases confirm that the requirements laid down in Sec. 5 of
Rule 15 of the Rules of Court that the notice shall be directed to the parties
concerned, and shall state the time and place for the hearing of the motion, are
mandatory. If not religiously complied with, they render the motion pro forma. As
such the motion is a useless piece of paper that will not toll the running of the
prescriptive period.
For failing to attach a notice of hearing to the Motion for Reconsideration, petitioner
proffers the following excuses: (1) her former counsels messenger, due to an
honest mistake, inadvertently omitted the fourth page of the motion containing the
crucial Notice of Hearing; and (2) because of the pressure of work, her former
counsel was unable to follow up such motion until the day said counsel requested
the setting of a hearing.[26]
We are not in the least convinced. First, it is unfair to place the blame for such
omission on the messenger. The burden of preparing a complete pleading falls on
counsels shoulders, not on the messengers. The counsel is ultimately responsible
for the acts or omissions of his agents. Hence, the messengers conduct can neither
justify the counsels mistake nor warrant a departure from the mandate of the
aforesaid procedural rules.
Second, it is incredible that the fourth page containing the Notice of Hearing was
left behind due to honest mistake. In fact, there was no such page. Petitioners
claim is belied by the following pertinent portions of the subject Motion for
Reconsideration:[27]
WHEREFORE, premises considered, it is respectfully prayed that the Honorable
Court cause a further REVIEW and RECONSIDERATION of its decision on the abovecaptioned consolidated cases.
Quezon City for Manila, August 12, 1996.
(Sgd.)ANGELINA ARANDIA-VILLANUEVA
Counsel for Plaintiff-Appellant
39-L T. Morato Avenue, Quezon City
IBP No. 407450 6-26-96
PTR No. 227013 1-5-96 Manila
Copy furnished:
Atty. Arnel Zaragoza Dolendo
Counsel for Defendant
Rm 408, 413 First United Bldg.
Escolta, Manila

136

The normal practice is to note, at the end of the pleading, that a copy was
furnished to the adverse party. Thus, petitioners motion ended exactly at the
bottom of the third page as evidenced by the copy-furnished notation. It is safe to
conclude that there was no accidental or excusable neglect in not including a fourth
page in this case. In other words, petitioners counsel simply failed to include a
notice of hearing.
Finally, the fact that petitioners former counsel calendared the motion for hearing
for August 23, 1996[28] belies the excuse that an alleged fourth page had been left
behind. In the first place, if a notice of hearing had been included in the Motion for
Reconsideration, there would have been no need for petitioner to file the Motion to
set the time and date of hearing. What is clear is that said counsel filed the latter
Motion, only after private respondent had submitted its Motion for Entry of
Judgment[29] -- with copy furnished petitioners counsel[30]-- on the ground that
petitioners Motion for Reconsideration was a mere scrap of paper that did not stop
the period for appeal.
Petitioner pleads for liberal construction of the rule on notice of hearing, citing
Tamargo, Galvez and Que. In rebuttal, we adopt by reference the CAs excellent
disquisition, cited earlier, on why these cases are inapplicable.
Petitioner further alleges that, first, the nonadmission of her Motion for
Reconsideration would result in a miscarriage of justice, as the main case
(ejectment), which was tried under summary procedure, had been unnecessarily
prolonged; and, second, the tenant lessee would be occupying the premises without
paying rentals. She also relies on People v. Leviste,[31] in which the Court held:
While it is true that any motion that does not comply with the requirements of Rule
15, Rules of Court should not be accepted for filing and, if filed, is not entitled to
judicial cognizance, the Supreme Court has likewise held that where rigid
application of the rule will result in manifest failure or miscarriage of justice,
technicalities may be disregarded in order to resolve the case.
Liberal construction of this rule has been allowed by this Court in the following
cases: (1) where a rigid application will result in a manifest failure or miscarriage of
justice,[32] especially if a party successfully shows that the alleged defect in the
questioned final and executory judgment is not apparent on its face or from the
recitals contained therein;[33] (2) where the interest of substantial justice will be
served;[34] (3) where the resolution of the motion is addressed solely to the sound
and judicious discretion of the court;[35] and (4) where the injustice to the adverse
party is not commensurate with the degree of his thoughtlessness in not complying
with the procedure prescribed.[36] Petitioner has failed to demonstrate that the
case at bar falls under any of these exceptions.
Finally, petitioner claims that she will be deprived of property without due process,
as private respondent has accumulated P348,800 in unpaid rentals and accrued
interests.
We disagree. Petitioner can obtain proper payment of rentals through a motion for
execution in the case below. The MTC may have dismissed her ejectment case, but
it did not exculpate private respondent from its liabilities. Petitioner is, therefore,
not being deprived of her property without due process.
Indeed, there is no miscarriage of justice to speak of. Having failed to observe very
elementary rules of procedure which are mandatory, petitioner caused her own
predicament. To exculpate her from the compulsory coverage of such rules is to
undermine the stability of the judicial process, as the bench and bar will be
confounded by such irritating uncertainties as when to obey and when to ignore the
Rules. We have to draw the line somewhere.[37]

137

WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED.
Costs against the petitioner.
SO ORDERED.
Davide, Jr. (Chairman), Bellosillo, Vitug and Quisumbing, JJ., concur.

Baylon v. Fact-finding Intelligence, G.R. No. 150870, December 11, 2002

EN BANC
[G.R. No. 150870. December 11, 2002]
DRA. HONORATA G. BAYLON, petitioner, vs. FACT-FINDING INTELLIGENCE BUREAU
represented by DIRECTOR AGAPITO ROSALES and the OFFICE OF THE OMBUDSMAN,
respondents.
DECISION
CARPIO-MORALES, J.:
By the present petition for review on certiorari, petitioner prays this Court to give
due course to her appeal and to ultimately set aside the Office of the Ombudsmans
order for her suspension from public office.
The following facts are not disputed:
Sometime in 1993, Dr. Honorata G. Baylon (petitioner), Head of the Division of
Hematology and Transfusion Medicine at the National Kidney and Transplant
Institute (NKTI), was designated as Program Manager of the governments National
Voluntary Blood Donation Program (Blood Donation Program) with NKTI as the lead
agency in the implementation thereof.
The Blood Donation Program later became a component of the project STOP
D.E.A.T.H (Disasters, Epidemics, and Trauma for Health): Hospitals for Philippines
2000 which was launched on February 18, 1994 by the Department of Health
(DOH) headed by the then Secretary Juan M. Flavier (Flavier).[1] Petitioner remained
at the helm of the Blood Donation Program.[2]
On February 24, 1994, Flavier publicly disclosed the results of the United States
Agency for International Development (USAID)-sponsored study on the safety of the
countrys blood banking system which found out that the Philippines blood
transfusion service failed to adequately meet the demand for safe blood and that
the blood sourced from commercial blood banks had a contamination rate of four
percent.[3] Flavier thus ordered the closure of provincial retail outlets of commercial
blood banks as a result of which an acute shortage of transfused blood ensued
because of the blood banks refusal to sell blood in retaliation to the said closure
order.
Flavier accordingly directed the full operation of the Blood Donation Program, which
apparently served as the then only viable system from which blood could be
sourced.
On March 8 and 17, 1994, the NKTI, through petitioner, issued Requisition and Issue
Vouchers[4] for the purpose of purchasing blood bags for immediate distribution to
DOH hospitals or medical centers where the system of voluntary blood donation
would then be put in place. As Terumo blood bags were believed to be the finest
in the market, the NKTI obtained a quotation therefor dated March 16, 1994[5] from
their exclusive distributor, the FVA EX-IM Trading, Inc. (FVA), as follows:
1. [Blood Bag], Single Capacity = P 72.29 [per piece]
2. Double Capacity

= P171.00

138

3. Triple Capacity

= P263.70

Another quotation dated March 29, 1994[6] was later furnished by FVA reflecting the
following reduced prices:
1. Single = P 63.54
2. Double = P150.00
3. Triple

= P209.09

Petitioner signified her conformity to the second quotation. The NKTI subsequently
purchased Terumo blood bags from FVA under the following purchase orders with
their corresponding dates, the respective amounts involved in each sale transaction,
and the names of the approving authority:[7]
Date
Order No.

Purchase

Amount

Approving

Authority

1. April 11, 1994

94-00943

P1,270,800.00

Juan M. Flavier,
Jaime Galvez-Tan
Juan R. Nanagas

2. May 25, 1994

94-00132

P536,025.00

Filoteo A. Alano
(recommended

by
Aileen R. Javier)
3. August 12, 1994

94-00147

P1,702,687.65

Juan M. Flavier

4. November 14, 1994

94-00172

P2,209,915.00

Juan M. Flavier

5. December 6, 1994

94-00182

P 506,585.45

Juan M. Flavier

In March 1995, the Commission on Audit (COA) disallowed in post audit the sale
transactions entered into by the NKTI with FVA on the ground that the blood bags
were purchased without public bidding, contrary to the applicable laws or rules,
thereby allegedly resulting to overpricing.[8] The COA found that FVA sold Terumo
blood bags to the Philippine National Red Cross (PNRC) and to blood banks Our Lady
of Fatima and Mother Seaton at prices lower than those at which it sold to the NKTI,
leading to a consequent total loss to the government in the amount of
P1,964,304.70.
The Auditor of the NKTI accordingly ordered the suspension of purchases of blood
bags from FVA and eventually disallowed the payment of blood bags amounting to
P6,006,133.54.
A criminal complaint, docketed as OMB-0-97-0242, for violation of Section 3(e) and
(g) of Republic Act (R. A.) No. 3019 (THE ANTI-GRAFT AND CORRUPT PRACTICES
ACT), was thus filed by the Office of the Ombudsman against petitioner, Flavier,
then DOH Undersecretaries Dr. Jaime Galvez-Tan and Dr. Juan R. Naagas, NKTI
Executive Director Dr. Filoteo A. Alano, NKTI Deputy Executive Director Dr. Aileen R.
Javier, NKTI Property Division Chief Diana Jean F. Prado and NKTI Accounting Division
Chief Maribel U. Estrella. At the same time, an administrative complaint for gross
misconduct was lodged against petitioner and the same respondents except Flavier
and Galvez-Tan.
The administrative complaint was docketed as OMB-ADM-0-97-0165, now the
subject of the present petition.

139

Petitioner disclaimed administrative liability. Adopting[9] her May 20, 1997 counteraffidavit[10] filed in the criminal complaint, petitioner claimed that the acquisition of
the blood bags via negotiated purchase came under the exceptions to public
bidding as provided for by law, citing the following pertinent provision of Executive
Order No. 301 (DECENTRALIZING ACTIONS ON GOVERNMENT NEGOTIATED
CONTRACTS, LEASE CONTRACTS AND RECORDS DISPOSAL):
SECTION 1. Guidelines for Negotiated Contracts. Any provision of law, decree,
executive order or other issuances to the contrary notwithstanding, no contract for
public services or for furnishing supplies, materials and equipment to the
government or any of its branches, agencies or instrumentalities shall be renewed
or entered into without public bidding, except under any of the following situations:
xxx
b.
Whenever the supplies are to be used in connection with a project or
activity which cannot be delayed without causing detriment to the public service;
c.
Whenever the materials are sold by an exclusive distributor or
manufacturer who does not have sub-dealers selling at lower prices and for which
no suitable substitute can be obtained elsewhere at more advantageous terms to
the government;
xxx
e.
In cases where it is apparent that the requisition of the needed supplies
through negotiated purchase is most advantageous to the government to be
determined by the Department Head concerned;
x x x (Underscoring supplied).
Thus she explained: firstly, the blood bags were used in the Blood Donation
Program which had to be implemented immediately to address the scarcity of blood
at the time; secondly, FVA was the only exclusive distributor without subdealers of
Terumo blood bags; and thirdly, negotiated purchase of the blood bags was most
advantageous to the government for the prices at which the NKTI obtained them
from FVA were the lowest compared to those at which they were acquired by other
government hospitals, as the following shows:[11]
HOSPITALS
Single

BLOOD BAGS
Double

Triple

NKTI

P63.54

P150.00

P209.00

Philippine General Hospital

P78.00

P185.40

P285.00

Jose Reyes Memorial Medical


Center

P85.05

Dr. Jose Fabella Memorial


Hospital

P85.00

--P199.00

Philippine Children's Medical


Center

P64.00

---

Philippine Heart Center

P78.00

P190.00

P209.09
---.

Petitioner submitted certifications[12] from various medical establishments


attesting to the superior quality and features of Terumo blood bags which have
made them the most widely used among hospitals and blood banks; the counter-

140

affidavit filed in the same criminal complaint of FVA President Francisco V. Abalos,
[13] who was subsequently dropped as respondent therein upon his death on
January 31, 1998; and Flaviers December 3, 1999 sworn statement submitted also
in the criminal complaint.
In his counter-affidavit, Abalos explained that the lower prices at which the FVA sold
blood bags to PNRC, Mother Seaton and Our Lady of Fatima, were meant to aid
these blood banks to reduce their operational costs so that they would sell at low
prices to their buyers who were mostly the poor, as well as to reduce FVAs excess
inventory then.
In his December 3, 1999 sworn statement, Flavier declared that the negotiated
purchase of the blood bags was justified by the conditions obtaining at the time; the
NKTIs transactions with FVA were not tainted with any irregularities; petitioner and
the other NKTI officials were responsible for successfully implementing a 100%
voluntary blood donation system in ten regional hospitals and medical centers; and
that were it not for petitioners work as Program Manager of the Blood Donation
Program, disastrous consequences would have befallen patients, the DOH, and the
Blood Donation Program itself.
By Memorandum Review of June 13, 2000,[14] Assistant Ombudsman Abelardo L.
Aportadera (Aportadera) recommended the exoneration of the respondents
Naagas and Estrella. Taking note, of the Ombudsmans finding of probable cause
to criminally hale petitioner and company into court, Aportadera recommended, by
the same Review Memorandum, that herein petitioner and the rest of her corespondents be held guilty of Grave Misconduct for which they should be meted a
penalty of SIX (6) MONTHS SUSPENSION.
Aportaderas recommendation was approved by the Ombudsman on June 16, 2000.
A motion for reconsideration of this June 16, 2000 approved Memorandum Review
having been denied by the Memorandum Review of July 19, 2000 which the
Ombudsman approved on July 28, 2000,[15] petitioner filed on October 4, 2000 a
petition with this Court for certiorari and prohibition with prayer for a temporary
restraining order (TRO) and/or writ of preliminary injunction, docketed as G. R. No.
145000, seeking the nullification of the Ombudsmans above-said Memorandum
Reviews.
By Resolution of October 16, 2000, this Court dismissed the petition for having been
brought to the wrong forum in light of the ruling in Fabian v. Desierto[16] that
appeals from the decision of the Ombudsman should be made to the Court of
Appeals by a petition for review under Rule 43 of the 1997 Rules of Civil Procedure.
Unlike the Fabian, this Court did not order the transfer of the petition to the Court of
Appeals for proper disposition pursuant to this Courts Resolution in A. M. No. 99-202-SC dated February 9, 1999 declaring that any appeal filed with this Court after
March 15, 1999 from a decision, resolution or order of the Ombudsman in an
administrative case would no longer be referred to the Court of Appeals.
Petitioners Motion for Reconsideration of this Courts October 16, 2000 Resolution
was denied on January 22, 2001.
Petitioner thus elevated the Ombudsmans Memorandum Reviews to the Court of
Appeals by a petition for review filed on April 18, 2001, docketed as CA-G. R. SP No.
64332. By Resolution of May 2, 2001,[17] however, the Court of Appeals dismissed
the petition for having been filed beyond the fifteen-day reglementary period,
reckoned from petitioners receipt of the Ombudsmans second Memorandum
Review on August 7, 2000.
Petitioner filed a Motion for Reconsideration of the May 2, 2001 Resolution of the
Court of Appeals. Pending resolution thereof or on July 6, 2001, petitioner filed a
motion for leave to submit a copy of the COA Decision No. 2001-11 dated June 21
2001[18] which lifted the audit disallowance of the payments made for the
purchases by the NKTI of the Terumo blood bags from FVA. In said decision, the

141

COA held that the purchase of blood bags without public bidding was not violative of
the law, was not disadvantageous to the government, and did not accord undue
preference to FVA. In a Resolution of November 21, 2001,[19] the Court of Appeals
denied petitioners Motion for Reconsideration.
Hence, the present petition for review on certiorari with an application for a TRO
and/or an injunctive writ which was filed on December 21, 2001. Public respondents
filed their Comment,[20] to which petitioner filed her Reply.[21]
Petitioner imputes to the Court of Appeals the commission of grave error in
dismissing her petition for review on a mere technicality.
She invokes
considerations of substantial justice for this Court to give her petition due course
and essentially prays that the Resolutions of the Court of Appeals be set aside and
that the Memorandum Reviews of the Ombudsman be nullified.
During the pendency of the present petition or on March 14, 2002, petitioner filed a
motion[22] to grant her leave to file a Manifestation informing that this Court
rendered on December 14, 2001 a decision[23] in G. R. No. 142738, Dr. Honorata
Baylon v. Office of the Ombudsman and Sandiganbayan, reversing and setting
aside the Ombudsmans February 28, 2000 Resolution finding probable cause to
criminally prosecute her before the Sandiganbayan arising from the same acts
subject of the Ombudsmans Memorandum Reviews finding her administratively
liable, and that the said decision be considered persuasive to the instant
proceeding. At the same time, petitioner filed the Manifestation.[24]
By Resolution of April 10, 2002, this Court Resolved to
(a) GRANT the motion of petitioner to admit the copy of the courts decision in G.
R. No. 142738 through a manifestation as said decision of December 14, 2001
should be considered persuasive to the instant proceeding; and
(b)

NOTE the said manifestation.

Petitioner submits that the dismissal by the Court of Appeals of her petition for
review by mere technicality would cause a miscarriage of justice for, so she
contends, she has raised meritorious arguments, adduced evidence, and presented
special circumstances proving her innocence of the charge of grave misconduct.
This Court finds that the Court of Appeals correctly dismissed petitioners petition
for review for having been filed beyond the reglementary period.
The correctness of the Court of Appeals dismissal of petitioners petition for review
notwithstanding, this Court cannot write finis to the case at bar by the strict
application of the rules of procedure governing appeals. For judicial cases do not
come and go through the portals of a court of law by the mere mandate of
technicalities.
After going over all the pleadings, evidence, and all other documents bearing on
this case, this Court has resolved to spare the present petition from dismissal to
which it should have been consigned as a matter of procedure.
The allowance of the filing of appeals or actions even when everything is lost due to
non-compliance with rules or technicalities is not a novel phenomenon for this
Court. In the case of Cortes v. Court of Appeals,[25] counsel for a party in a case
before the trial court failed to withdraw his appearance as such when he was
appointed as judge of the Dumaguete Regional Trial Court in January 1983. Thus,
after the lower court rendered a decision on February 16, 1983, the same was
served on February 28, 1983 upon said counsel, who was then in his judicial station,
at his Cebu City address. Having learned of the decision only on March 8, 1983, he
immediately informed his client who learned of the adverse judgment a few days
later after being out on official business. On March 22, 1983, the concerned partys

142

new counsel accordingly filed a notice of appeal which the lower court denied due
course for having been filed beyond the 15-day reglementary period. This Court
ruled that the seven-day delay did not warrant the outright dismissal of the appeal,
taking into account the peculiar circumstances of the case and the appeals
ostensible merit.
Likewise, in Legasto v. Court of Appeals,[26] a decision in an action for ejectment
was rendered against therein private respondents by the Metropolitan Trial Court
and the Regional Trial Court. Appeal via a petition for review was subsequently filed
with the Court of Appeals which initially dismissed the petition for having been filed
two days beyond the reglementary period. On motion for reconsideration, however,
the Court of Appeals gave due course to the appeal after accepting counsels
explanation that the making of the petition was delayed by brownouts. Declaring
that a delay in the filing of an appeal under exceptional circumstances may be
excused on grounds of substantial justice and equity, this Court affirmed the Court
of Appeals decision to give due course to the belated appeal as it raised an
important legal question bearing upon many similarly situated tenants and
landlords in the country.
The same failure to file an appeal on time was excused in Philippine National Bank
v. Court of Appeals[27] where this Court allowed an appeal filed three days late in
the higher interest of justice, as barring the said appeal would be inequitable and
unjust in light of certain circumstances therein.
The foregoing jurisprudence and similar other cases indeed constitute a testament
to what C. Viuda de Ordoveza v. Raymundo28 described as . . . the power of the
court to suspend its own rules, or to except a particular case from its operation,
whenever the purposes of justice require it. Ginete v. Court of Appeals29
specifically laid down the range of reasons which may provide justifications for a
court to resist a strict adherence to procedure, enumerating, thus, the following
elements for an appeal to be given due course by a suspension of the enforcement
of procedural rules: (1) matters of life, liberty, honor or property; (2) counsels
negligence without any participatory negligence on the part of the client; (3) the
existence of special or compelling circumstances; (4) the merits of the case; (5) a
cause not entirely attributable to the fault or negligence of the party favored by the
suspension of the rules; (6) a lack of any showing that the review sought is merely
frivolous and dilatory; and (7) the other party will not be unjustly prejudiced thereby.
We find attendant in the case at bar transcendental considerations which outweigh
rules of procedure thereby providing justification for the suspension of their
application. Petitioners evidence and arguments in support of her claim of
innocence of the charge of grave misconduct have indeed cast doubt on the
veracity of the Ombudsmans factual conclusions in the subject administrative case
against her. We cannot thus simply brush aside petitioners protestations of lack of
administrative culpability for the sake of sticking to technicalities when the merits of
her cause are crying out for proper judicial determination.
The tardiness of the appeal of petitioner before the Court of Appeals undoubtedly
stemmed from her counsels faux pas in the remedy pursued to assail the
Ombudsmans questioned Memorandum Reviews. In the normal course of things,
petitioner would have been covered by the general rule that a client is bound by the
negligence or mistakes of his counsel. Yet, the patent merits of petitioners cause
for the nullification of her suspension from public office nag the Court towards the
realization that to deny her the instant petition now based merely on the fiction that
the counsels negligence binds the client is to unjustly seal petitioners fate without
the benefit of a review of the correctness and justness of her imposed
administrative liability. Hers, thus, is a case of an extremely different kind; the
exception to the rule on the effects of the counsels mistake or negligence, for the
application of the rule would result in serious injustice30 to petitioner. Especially in
this case where she had nothing to do with her counsels mistake and negligence,

143

thus clearly falling within the ambit of the reasons provided for by Ginete for the
relaxation of the rules.
This Court takes note of special circumstances relative to the case at bar. The
Decision of this Court in G. R. No. 142738 categorically declared the lack of probable
cause to indict petitioner for the same acts constitutive of the administrative charge
against her, hence, it ordered the Sandiganbayan to dismiss the criminal case
against petitioner and her co-accused. In the same vein, the COA Decision No.
2001-11 found no irregularity in the purchases by the NKTI of the blood bags from
FVA and thus it lifted its previous disallowance of the payments to said purchases.
Such determinations in favor of petitioner by other fora, independent they may be
from the administrative action against her, serve as added reasons to warrant the
taking of a hard look at the Ombudsmans Memorandum Reviews.
Suspension from public office is a serious incident that definitely blemishes a
persons record in government service. It is an injury to ones reputation and honor
which produces irreversible effects on ones career and private life. If only to assure
the judicial mind that no injustice is allowed to take place due to a blind adherence
to rules of procedure, the dismissal on technicality of petitioners action, which is
aimed at establishing not just her innocence but the truth, cannot stand. That the
Ombudsmans Memorandum Reviews may have attained finality due to petitioners
belated appeal therefrom to the Court of Appeals does not preclude a modification
or an alteration thereof, for if the execution of a decision becomes impossible or
unjust, it may be modified or altered to harmonize it with justice and the facts.31
On the suspension of the enforcement of procedural rules to give way to matters of
greater value, this Court could not have more eloquently defined its stance, thus:
In the interest of substantial justice, procedural rules of the most mandatory
character in terms of compliance, may be relaxed. In other words, if strict
adherence to the letter of the law would result in absurdity and manifest injustice or
where the merit of a partys cause is apparent and outweighs consideration of noncompliance with certain formal requirements, procedural rules should definitely be
liberally construed. A party-litigant is to be given the fullest opportunity to establish
the merits of his complaint or defense rather than for him to lose life, liberty, honor
or property on mere technicalities.32 x x x
Prescinding from the foregoing, the Court resolved to give due course to the present
petition and set aside the challenged Resolutions of May 2, 2001 and November 21,
2001 of the Court of Appeals. We will not, however, remand the case to the
appellate court, a remand not being necessary where, as in this case, We are in a
position to resolve the dispute based on the records before it and the ends of justice
would not be subserved thereby.33
While factual findings of administrative and quasi-judicial agencies are generally
accorded not only respect but at times finality,34 this holds true only when they are
supported by substantial evidence.
The Ombudsmans finding in its questioned Memorandum Reviews that petitioner is
guilty of grave misconduct was anchored principally on the fact that FVA sold the
same Terumo blood bags to PNRC and the Mother Seaton and Our Lady of Fatima
blood banks at lower prices. Such fact, however, cannot be regarded substantial
evidence proving that petitioner is guilty of grave misconduct.
Petitioners countervailing evidence shows that the acquisitions of blood bags for
government use were negotiated purchases which were justified by proven reasons
for their lawful execution under Executive Order No. 30135 even without the
required public bidding. It is an undisputed fact that the blood bags were utilized
for the Blood Donation Program the immediate implementation of which program
was then necessitated by circumstances of public notice so that the urgency for the
blood bags acquisition warranted negotiated purchase instead of by public bidding.

144

It is undisputed that FVA was then the sole exclusive distributor of Terumo blood
bags, thus providing another reason for the purchases to be exempted from public
bidding.
Petitioners evidence too shows that the negotiated purchase was not
disadvantageous to the government, considering, among other factors, the quality
of the blood bags and the price at which they were purchased as compared to those
purchased by other government hospitals, and the time element.
The Ombudsmans conclusion that petitioner and her co-respondents did not
negotiate with FVA to obtain the best possible terms and conditions of purchase
finds no support in the evidence on record. On the contrary, as reflected above, the
NKTI through petitioner sought two quotations from FVA for the blood bags with the
second quotation offering lower prices.
In grave misconduct, the elements of corruption, clear intent to violate the law or
flagrant disregard of established rule must be manifest.36 Petitioners actuations in
the procurement of the blood bags were clearly antithetical to what constitutes
grave misconduct.
What appears from the questioned Memorandum Reviews of the Ombudsman is
that they merely relied on the singular circumstance that certain medical
institutions were allowed to purchase the blood bags at lower prices, without taking
into account petitioners countervailing evidence.
While substantial evidence, which is more than a mere scintilla but is such relevant
evidence as a reasonable mind might accept as adequate to support a
conclusion,37 suffices to hold one administratively liable, the substantial evidence
rule does not authorize any finding to be made just as long as there is any evidence
to support it; it does not excuse administrative agencies from taking into account
countervailing evidence which fairly detracts from the evidence supporting a
finding.38 The evidence in support of the Ombudsmans findings does not amount
to substantial evidence.
WHEREFORE, the petition at bar is hereby GRANTED. The assailed May 2, 2001 and
November 21, 2001 Resolutions of the Court of Appeals, as well as the June 16,
2000 and July 28, 2000-approved Memorandum Reviews of the Ombudsman, are
hereby SET ASIDE. The respondent is hereby ABSOLVED from any administrative
liability in connection with the purchases in question.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Ynares-Santiago, Sandoval-Gutierrez, Carpio, AustriaMartinez, Callejo, Sr., and Azcuna, JJ., concur.
Puno, Vitug, Mendoza, Panganiban, and Quisumbing, JJ., in the result.
Corona, J., on official leave.

Republic v. Kenrick Development, G.R. No. 149567, August 8, 2006

SECOND DIVISION
REPUBLIC OF THE PHILIPPINES,
represented by the Land
Registration Authority,
Petitioner,
Present:
PUNO, J., Chairman,
- versus -

G.R. No. 149576

SANDOVAL-GUTIERREZ,
CORONA,

145

AZCUNA and
GARCIA, JJ.
KENRICK DEVELOPMENT
CORPORATION,
Respondent. Promulgated:
August 8, 2006
x------------------------------------------x
DECISION
CORONA, J.:
The Republic of the Philippines assails the May 31, 2001 decision[1] and
August 20, 2001 resolution of the Court of Appeals in CA-G.R. SP No. 52948 in this
petition for review under Rule 45 of the Rules of Court.
This case stemmed from the construction by respondent Kenrick Development
Corporation of a concrete perimeter fence around some parcels of land located
behind the Civil Aviation Training Center of the Air Transportation Office (ATO) in
1996. As a result, the ATO was dispossessed of some 30,228 square meters of prime
land. Respondent justified its action with a claim of ownership over the property. It
presented Transfer Certificate of Title (TCT) Nos. 135604, 135605 and 135606
issued in its name and which allegedly originated from TCT No. 17508 registered in
the name of one Alfonso Concepcion.
ATO verified the authenticity of respondents titles with the Land Registration
Authority (LRA). On May 17, 1996, Atty. Jose Loriega, head of the Land Title
Verification Task Force of the LRA, submitted his report. The Registrar of Deeds of
Pasay City had no record of TCT No. 17508 and its ascendant title, TCT No. 5450.
The land allegedly covered by respondents titles was also found to be within
Villamor Air Base (headquarters of the Philippine Air Force) in Pasay City.
By virtue of the report, the Office of the Solicitor General (OSG), on September 3,
1996, filed a complaint for revocation, annulment and cancellation of certificates of
title in behalf of the Republic of the Philippines (as represented by the LRA) against
respondent and Alfonso Concepcion. It was raffled to Branch 114 of the Regional
Trial Court of Pasay City where it was docketed as Civil Case No. 96-1144.
On December 5, 1996, respondent filed its answer which was purportedly signed by
Atty. Onofre Garlitos, Jr. as counsel for respondent.
Since Alfonso Concepcion could not be located and served with summons, the trial
court ordered the issuance of an alias summons by publication against him on
February 19, 1997.
The case was thereafter punctuated by various incidents relative to modes of
discovery, pre-trial, postponements or continuances, motions to dismiss, motions to
declare defendants in default and other procedural matters.
During the pendency of the case, the Senate Blue Ribbon Committee and
Committee on Justice and Human Rights conducted a hearing in aid of legislation on
the matter of land registration and titling. In particular, the legislative investigation
looked into the issuance of fake titles and focused on how respondent was able to
acquire TCT Nos. 135604, 135605 and 135606.
During the congressional hearing held on November 26, 1998, one of those
summoned was Atty. Garlitos, respondents former counsel. He testified that he
prepared respondents answer and transmitted an unsigned draft to respondents
president, Mr. Victor Ong. The signature appearing above his name was not his. He

146

authorized no one to sign in his behalf either. And he did not know who finally
signed it.
With Atty. Garlitos revelation, the Republic promptly filed an urgent motion on
December 3, 1998 to declare respondent in default,[2] predicated on its failure to
file a valid answer. The Republic argued that, since the person who signed the
answer was neither authorized by Atty. Garlitos nor even known to him, the answer
was effectively an unsigned pleading. Pursuant to Section 3, Rule 7 of the Rules of
Court,[3] it was a mere scrap of paper and produced no legal effect.
On February 19, 1999, the trial court issued a resolution granting the Republics
motion.[4] It found respondents answer to be sham and false and intended to
defeat the purpose of the rules. The trial court ordered the answer stricken from the
records, declared respondent in default and allowed the Republic to present its
evidence ex parte.
The Republic presented its evidence ex parte, after which it rested its case and
formally offered its evidence.
Meanwhile, respondent sought reconsideration of the February 19, 1999 resolution
but the trial court denied it.
Aggrieved, respondent elevated the matter to the Court of Appeals via a petition for
certiorari[5] seeking to set aside the February 19, 1999 resolution of the trial court.
Respondent contended that the trial court erred in declaring it in default for failure
to file a valid and timely answer.
On May 31, 2001, the Court of Appeals rendered the assailed decision. It found Atty.
Garlitos statements in the legislative hearing to be unreliable since they were not
subjected to cross-examination. The appellate court also scrutinized Atty. Garlitos
acts after the filing of the answer[6] and concluded that he assented to the signing
of the answer by somebody in his stead. This supposedly cured whatever defect
the answer may have had. Hence, the appellate court granted respondents petition
for certiorari. It directed the lifting of the order of default against respondent and
ordered the trial court to proceed to trial with dispatch. The Republic moved for
reconsideration but it was denied. Thus, this petition.
Did the Court of Appeals err in reversing the trial courts order which declared
respondent in default for its failure to file a valid answer? Yes, it did.
A party may, by his words or conduct, voluntarily adopt or ratify anothers
statement.[7] Where it appears that a party clearly and unambiguously assented to
or adopted the statements of another, evidence of those statements is admissible
against him.[8] This is the essence of the principle of adoptive admission.
An adoptive admission is a partys reaction to a statement or action by another
person when it is reasonable to treat the partys reaction as an admission of
something stated or implied by the other person.[9] By adoptive admission, a third
persons statement becomes the admission of the party embracing or espousing it.
Adoptive admission may occur when a party:
(a) expressly agrees to or concurs in an oral statement made by another;[10]
(b) hears a statement and later on essentially repeats it;[11]
(c) utters an acceptance or builds upon the assertion of another;[12]
(d) replies by way of rebuttal to some specific points raised by another but ignores
further points which he or she has heard the other make[13] or
(e) reads and signs a written statement made by another.[14]
Here, respondent accepted the pronouncements of Atty. Garlitos and built its case
on them. At no instance did it ever deny or contradict its former counsels
statements. It went to great lengths to explain Atty. Garlitos testimony as well as its
implications, as follows:

147

1.
While Atty. Garlitos denied signing the answer, the fact was that the answer
was signed. Hence, the pleading could not be considered invalid for being an
unsigned pleading. The fact that the person who signed it was neither known to
Atty. Garlitos nor specifically authorized by him was immaterial. The important thing
was that the answer bore a signature.
2.
While the Rules of Court requires that a pleading must be signed by the party
or his counsel, it does not prohibit a counsel from giving a general authority for any
person to sign the answer for him which was what Atty. Garlitos did. The person who
actually signed the pleading was of no moment as long as counsel knew that it
would be signed by another. This was similar to addressing an authorization letter
to whom it may concern such that any person could act on it even if he or she was
not known beforehand.
3.
Atty. Garlitos testified that he prepared the answer; he never disowned its
contents and he resumed acting as counsel for respondent subsequent to its filing.
These circumstances show that Atty. Garlitos conformed to or ratified the signing of
the answer by another.
Respondent repeated these statements of Atty. Garlitos in its motion for
reconsideration of the trial courts February 19, 1999 resolution. And again in the
petition it filed in the Court of Appeals as well as in the comment[15] and
memorandum it submitted to this Court.
Evidently, respondent completely adopted Atty. Garlitos statements as its own.
Respondents adoptive admission constituted a judicial admission which was
conclusive on it.
Contrary to respondents position, a signed pleading is one that is signed either by
the party himself or his counsel. Section 3, Rule 7 is clear on this matter. It requires
that a pleading must be signed by the party or counsel representing him.
Therefore, only the signature of either the party himself or his counsel operates to
validly convert a pleading from one that is unsigned to one that is signed.
Counsels authority and duty to sign a pleading are personal to him. He may not
delegate it to just any person.
The signature of counsel constitutes an assurance by him that he has read the
pleading; that, to the best of his knowledge, information and belief, there is a good
ground to support it; and that it is not interposed for delay.[16] Under the Rules of
Court, it is counsel alone, by affixing his signature, who can certify to these matters.
The preparation and signing of a pleading constitute legal work involving practice of
law which is reserved exclusively for the members of the legal profession. Counsel
may delegate the signing of a pleading to another lawyer[17] but cannot do so
in favor of one who is not. The Code of Professional Responsibility provides:
Rule 9.01 A lawyer shall not delegate to any unqualified person the performance
of any task which by law may only be performed by a member of the Bar in good
standing.

Moreover, a signature by agents of a lawyer amounts to signing by unqualified


persons,[18] something the law strongly proscribes.
Therefore, the blanket authority respondent claims Atty. Garlitos entrusted to just
anyone was void. Any act taken pursuant to that authority was likewise void. There
was no way it could have been cured or ratified by Atty. Garlitos subsequent acts.

148

Moreover, the transcript of the November 26, 1998 Senate hearing shows that Atty.
Garlitos consented to the signing of the answer by another as long as it conformed
to his draft. We give no value whatsoever to such self-serving statement.
No doubt, Atty. Garlitos could not have validly given blanket authority for just
anyone to sign the answer. The trial court correctly ruled that respondents answer
was invalid and of no legal effect as it was an unsigned pleading. Respondent was
properly declared in default and the Republic was rightly allowed to present
evidence ex parte.
Respondent insists on the liberal application of the rules. It maintains that even
if it were true that its answer was supposedly an unsigned pleading, the defect was
a mere technicality that could be set aside.
Procedural requirements which have often been disparagingly labeled as mere
technicalities have their own valid raison d etre in the orderly administration of
justice. To summarily brush them aside may result in arbitrariness and injustice.[19]
The Courts pronouncement in Garbo v. Court of Appeals[20] is relevant:
Procedural rules are [tools] designed to facilitate the adjudication of cases. Courts
and litigants alike are thus [enjoined] to abide strictly by the rules. And while the
Court, in some instances, allows a relaxation in the application of the rules, this, we
stress, was never intended to forge a bastion for erring litigants to violate the rules
with impunity. The liberality in the interpretation and application of the rules applies
only in proper cases and under justifiable causes and circumstances. While it is true
that litigation is not a game of technicalities, it is equally true that every case must
be prosecuted in accordance with the prescribed procedure to insure an orderly and
speedy administration of justice.

Like all rules, procedural rules should be followed except only when, for the
most persuasive of reasons, they may be relaxed to relieve a litigant of an injustice
not commensurate with the degree of his thoughtlessness in not complying with the
prescribed procedure.[21] In this case, respondent failed to show any persuasive
reason why it should be exempted from strictly abiding by the rules.
As a final note, the Court cannot close its eyes to the acts committed by Atty.
Garlitos in violation of the ethics of the legal profession. Thus, he should be made to
account for his possible misconduct.
WHEREFORE, the petition is hereby GRANTED. The May 31, 2001 decision and
August 20, 2001 resolution of the Court of Appeals in CA-G.R. SP No. 52948 are
REVERSED and SET ASIDE and the February 19, 1999 resolution of the Regional Trial
Court of Pasay City, Branch 114 declaring respondent in default is hereby
REINSTATED.
Let a copy of this decision be furnished the Commission on Bar Discipline of
the Integrated Bar of the Philippines for the commencement of disbarment
proceedings against Atty. Onofre Garlitos, Jr. for his possible unprofessional conduct
not befitting his position as an officer of the court.
SO ORDERED.
RENATO C. CORONA
Associate Justice

149

Building Care Corp. v. Macaraeg, G.R. No. 198357, December 10, 2012

Today is Monday, November 24, 2014


search
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 198357

December 10, 2012

BUILDING CARE CORPORATION / LEOPARD SECURITY & INVESTIGATION AGENCY


and/or RUPERTO PROTACIO, Petitioners,
vs.
MYRNA MACARAEG, Respondent.
DECISION
PERALTA, J.:
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of
Court, praying that the Decision1 of the Court of Appeals (CA) promulgated on
March 24, 2011, and its Resolution2 dated August 19, 2011, denying petitioner's
Motion for Reconsideration be reversed and set aside.
Petitioners are in the business of providing security services to their clients. They
hired respondent as a security guard beginning August 25, 1996, assigning her at
Genato Building in Caloocan City. However, on March 9, 2008, respondent was
relieved of her post. She was re-assigned to Bayview Park Hotel from March 9-13,
2008, but after said period, she was allegedly no longer given any assignment.
Thus, on September 9, 2008, respondent filed a complaint against petitioners for
illegal dismissal, underpayment of salaries, non-payment of separation pay and
refund of cash bond. Conciliation and mediation proceedings failed, so the parties
were ordered to submit their respective position papers.3
Respondent claimed that petitioners failed to give her an assignment for more than
nine months, amounting to constructive dismissal, and this compelled her to file the
complaint for illegal dismissal.4
On the other hand, petitioners alleged in their position paper that respondent was
relieved from her post as requested by the client because of her habitual tardiness,
persistent borrowing of money from employees and tenants of the client, and
sleeping on the job. Petitioners allegedly directed respondent to explain why she
committed such infractions, but respondent failed to heed such order. Respondent
was nevertheless temporarily assigned to Bayview Park Hotel from March 9-13,
2008, but she also failed to meet said client's standards and her posting thereat
was not extended.5
Respondent then filed an administrative complaint for illegal dismissal with the PNPSecurity Agencies and Guard Supervision Division on June 18, 2008, but she did not
attend the conference hearings for said case. Petitioners brought to the conference
hearings a new assignment order detailing respondent at the Ateneo de Manila
University but, due to her absence, petitioners failed to personally serve respondent
said assignment order. Petitioners then sent respondent a letter ordering her to
report to headquarters for work assignment, but respondent did not comply with

150

said order. Instead, respondent filed a complaint for illegal dismissal with the Labor
Arbiter.6
On May 13, 2009, the Labor Arbiter rendered a Decision, the dispositive portion of
which reads as follows:
WHEREFORE, judgment is hereby made dismissing the charge of illegal dismissal as
wanting in merit but, as explained above, ordering the Respondents Leopard
Security and Investigation Agency and Rupert Protacio to pay complainant a
financial assistance in the amount of P5,000.00.
Other claims are DISMISSED for lack of merit.
SO ORDERED.7
Respondent then filed a Notice of Appeal with the National Labor Relations
Commission (NLRC), but in a Decision dated October 23, 2009, the NLRC dismissed
the appeal for having been filed out of time, thereby declaring that the Labor
Arbiter's Decision had become final and executory on June 16, 2009.8
Respondent elevated the case to the CA via a petition for certiorari, and on March
24, 2011, the CA promulgated its Decision, the dispositive portion of which reads as
follows:
WHEREFORE, the petition for certiorari is GRANTED. The Decision dated October 23,
2009 and Resolution dated March 2, 2010 rendered by public respondent in NLRC
LAC No. 07-001892-09 (NLRC Case No. NCR-09-12628-08) are REVERSED and SET
ASIDE, and in lieu thereof, a new judgment is ENTERED declaring petitioner to have
been illegally dismissed and DIRECTING private respondents to reinstate petitioner
without loss of seniority rights, benefits and privileges; and to pay her backwages
and other monetary benefits during the period of her illegal dismissal up to actual
reinstatement.
Public respondent NLRC is DIRECTED to conduct further proceedings, for the sole
purpose of determining the amount of private respondent's monetary liabilities in
accordance with this decision.
SO ORDERED.9
Petitioners' motion for reconsideration of the aforequoted Decision was denied per
Resolution dated August 19, 2011. Hence, the present petition, where the main
issue for resolution is whether the CA erred in liberally applying the rules of
procedure and ruling that respondent's appeal should be allowed and resolved on
the merits despite having been filed out of time.
The Court cannot sustain the CA's Decision.
It should be emphasized that the resort to a liberal application, or suspension of the
application of procedural rules, must remain as the exception to the well-settled
principle that rules must be complied with for the orderly administration of justice.
In Marohomsalic v. Cole,10 the Court stated:
While procedural rules may be relaxed in the interest of justice, it is well-settled that
these are tools designed to facilitate the adjudication of cases. The relaxation of
procedural rules in the interest of justice was never intended to be a license for
erring litigants to violate the rules with impunity. Liberality in the interpretation and
application of the rules can be invoked only in proper cases and under justifiable
causes and circumstances. While litigation is not a game of technicalities, every
case must be prosecuted in accordance with the prescribed procedure to ensure an
orderly and speedy administration of justice.11

151

The later case of Daikoku Electronics Phils., Inc. v. Raza,12 further explained that:
To be sure, the relaxation of procedural rules cannot be made without any valid
reasons proffered for or underpinning it. To merit liberality, petitioner must show
reasonable cause justifying its non-compliance with the rules and must convince the
Court that the outright dismissal of the petition would defeat the administration of
substantial justice. x x x The desired leniency cannot be accorded absent valid and
compelling reasons for such a procedural lapse. x x x
We must stress that the bare invocation of "the interest of substantial justice" line is
not some magic want that will automatically compel this Court to suspend
procedural rules. Procedural rules are not to be belittled, let alone dismissed simply
because their non-observance may have resulted in prejudice to a party's
substantial rights. Utter disregard of the rules cannot be justly rationalized by
harping on the policy of liberal construction.13
In this case, the justifications given by the CA for its liberality by choosing to
overlook the belated filing of the appeal are, the importance of the issue raised, i.e.,
whether respondent was illegally dismissed; and the belief that respondent should
be "afforded the amplest opportunity for the proper and just determination of his
cause, free from the constraints of technicalities,"14 considering that the belated
filing of respondent's appeal before the NLRC was the fault of respondent's former
counsel. Note, however, that neither respondent nor her former counsel gave any
explanation or reason citing extraordinary circumstances for her lawyer's failure to
abide by the rules for filing an appeal. Respondent merely insisted that she had not
been remiss in following up her case with said lawyer.
It is, however, an oft-repeated ruling that the negligence and mistakes of counsel
bind the client. A departure from this rule would bring about never-ending suits, so
long as lawyers could allege their own fault or negligence to support the clients
case and obtain remedies and reliefs already lost by the operation of law.15 The
only exception would be, where the lawyer's gross negligence would result in the
grave injustice of depriving his client of the due process of law.16 In this case, there
was no such deprivation of due process. Respondent was able to fully present and
argue her case before the Labor Arbiter. She was accorded the opportunity to be
heard. Her failure to appeal the Labor Arbiter's Decision cannot, therefore, be
deemed as a deprivation of her right to due process. In Heirs of Teofilo Gaudiano v.
Benemerito,17 the Court ruled, thus:
The perfection of an appeal within the period and in the manner prescribed by law is
jurisdictional and non-compliance with such legal requirements is fatal and has the
effect of rendering the judgment final and executory. The limitation on the period of
appeal is not without reason. They must be strictly followed as they are considered
indispensable to forestall or avoid unreasonable delays in the administration of
justice, to ensure an orderly discharge of judicial business, and to put an end to
controversies. x x x
xxxx
The right to appeal is not a natural right or part of due process; it is merely a
statutory privilege and may be exercised only in the manner and in accordance with
the provisions of law. Thus, one who seeks to avail of the right to appeal must
strictly comply with the requirements of the rules, and failure to do so leads to the
loss of the right to appeal."18
In Ocampo v. Court of Appeals (Former Second Division),19 the Court declared that:
x x x we cannot condone the practice of parties who, either by their own or their
counsel's inadvertence, have allowed a judgment to become final and executory
and, after the same has become immutable, seek iniquitous ways to assail it. The

152

finality of a decision is a jurisdictional event which cannot be made to depend on


the convenience of the parties.20
Clearly, allowing an appeal, even if belatedly filed, should never be taken
lightly.1wphi1 The judgment attains finality by the lapse of the period for taking an
appeal without such appeal or motion for reconsideration being filed.21 In Ocampo
v. Court of Appeals (Former Second Division),22 the Court reiterated the basic rule
that "when a party to an original action fails to question an adverse judgment or
decision by not filing the proper remedy within the period prescribed by law, he
loses the right to do so, and the judgment or decision, as to him, becomes final and
binding."23 The Decision of the Labor Arbiter, therefore, became final and executory
as to respondent when she failed to file a timely appeal therefrom. The importance
of the concept of finality of judgment cannot be gainsaid. As elucidated in Pasiona,
Jr. v. Court of Appeals,24 to wit:
The Court re-emphasizes the doctrine of finality of judgment. In Alcantara v. Ponce,
the Court, citing its much earlier ruling in Arnedo v. Llorente, stressed the
importance of said doctrine, to wit:
x x x controlling and irresistible reasons of public policy and of sound practice in the
courts demand that at the risk of occasional error, judgments of courts determining
controversies submitted to them should become final at some definite time fixed by
law, or by a rule of practice recognized by law, so as to be thereafter beyond the
control even of the court which rendered them for the purpose of correcting errors
of fact or of law, into which, in the opinion of the court it may have fallen. The very
purpose for which the courts are organized is to put an end to controversy, to
decide the questions submitted to the litigants, and to determine the respective
rights of the parties. With the full knowledge that courts are not infallible, the
litigants submit their respective claims for judgment, and they have a right at some
time or other to have final judgment on which they can rely as a final disposition of
the issue submitted, and to know that there is an end to the litigation.
xxxx
It should also be borne in mind that the right of the winning party to enjoy the
finality of the resolution of the case is also an essential part of public policy and the
orderly administration of justice. Hence, such right is just as weighty or equally
important as the right of the losing party to appeal or seek reconsideration within
the prescribed period.25
When the Labor Arbiter's Decision became final, petitioners attained a vested right
to said judgment. They had the right to fully rely on the immutability of said
Decision. In Sofio v. Valenzuela,26 it was amply stressed that:
The Court will not override the finality and immutability of a judgment based only on
the negligence of a partys counsel in timely taking all the proper recourses from
the judgment. To justify an override, the counsels negligence must not only be
gross but must also be shown to have deprived the party the right to due process.
In sum, the Court cannot countenance relaxation of the rules absent the showing of
extraordinary circumstances to justify the same. In this case, no compelling reasons
can be found to convince this Court that the CA acted correctly by according
respondent such liberality.
IN VIEW OF THE FOREGOING, the Petition is GRANTED. The Decision of the Court of
Appeals dated March 24, 2011, and its Resolution dated August 19, 2011 in CA-G.R.
SP No. 114822 are hereby SET ASIDE, and the Decision of the National Labor
Relations Commission in NLRC-LAC No. 07-001892-09 (NLRC Case No. NCR-0912628-08), ruling that the Decision of the Labor Arbiter has become final and
executory, is REINSTATED.

153

SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice
Uy v. Chua, G.R. No. 183965, September 18, 2009

THIRD DIVISION

JOANIE SURPOSA UY,


Petitioner,

- versus -

JOSE NGO CHUA,


Respondent.
G.R. No. 183965
Present:
YNARES-SANTIAGO, J.,
Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.
Promulgated:
September 18, 2009
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review under Rule 45 of the Rules of Court assailing the
Resolution dated 25 June 2008 of the Regional Trial Court (RTC) of Cebu City, Branch
24, which granted the demurrer to evidence of respondent Jose Ngo Chua, resulting
in the dismissal of Special Proceeding No. 12562-CEB.
Petitioner Joanie Surposa Uy filed on 27 October 2003 before the RTC a Petition[1]
for the issuance of a decree of illegitimate filiation against respondent. The

154

Complaint was docketed as Special Proceeding No. 12562-CEB, assigned to RTCBranch 24.
Petitioner alleged in her Complaint that respondent, who was then married, had an
illicit relationship with Irene Surposa (Irene). Respondent and Irene had two
children, namely, petitioner and her brother, Allan. Respondent attended to Irene
when the latter was giving birth to petitioner on 27 April 1959, and instructed that
petitioners birth certificate be filled out with the following names: ALFREDO F.
SURPOSA as father and IRENE DUCAY as mother. Actually, Alfredo F. Surposa was
the name of Irenes father, and Ducay was the maiden surname of Irenes mother.
Respondent financially supported petitioner and Allan. Respondent had consistently
and regularly given petitioner allowances before she got married. He also provided
her with employment. When petitioner was still in high school, respondent required
her to work at the Cebu Liberty Lumber, a firm owned by his family. She was later
on able to work at the Gaisano- Borromeo Branch through respondents efforts.
Petitioner and Allan were introduced to each other and became known in the
Chinese community as respondents illegitimate children.
During petitioners
wedding, respondent sent his brother Catalino Chua (Catalino) as his representative,
and it was the latter who acted as father of the bride. Respondents relatives even
attended the baptism of petitioners daughter.[2]
In his Answer[3] to the Complaint, filed on 9 December 2003, respondent denied
that he had an illicit relationship with Irene, and that petitioner was his daughter.[4]
Hearings then ensued during which petitioner testified that respondent was the only
father she knew; that he took care of all her needs until she finished her college
education; and that he came to visit her on special family occasions. She also
presented documentary evidence to prove her claim of illegitimate filiation.
Subsequently, on 27 March 2008, respondent filed a Demurrer to Evidence[5] on the
ground that the Decision dated 21 February 2000 of RTC-Branch 9 in Special
Proceeding No. 8830-CEB had already been barred by res judicata in Special
Proceeding No. 12562-CEB before RTC-Branch 24.
It turned out that prior to instituting Special Proceeding No. 12562-CEB on 27
October 2003, petitioner had already filed a similar Petition for the issuance of a
decree of illegitimate affiliation against respondent. It was docketed as Special
Proceeding No. 8830-CEB, assigned to RTC-Branch 9. Petitioner and respondent
eventually entered into a Compromise Agreement in Special Proceeding No. 8830CEB, which was approved by RTC-Branch 9 in a Decision[6] dated 21 February 2000.
The full contents of said Decision reads:
Under consideration is a Compromise Agreement filed by the parties on February
18, 2000, praying that judgment be rendered in accordance therewith, the terms
and conditions of which follows:
1.
Petitioner JOANIE SURPOSA UY declares, admits and acknowledges that there
is no blood relationship or filiation between petitioner and her brother Allan on one
hand and [herein respondent] JOSE NGO CHUA on the other. This declaration,
admission or acknowledgement is concurred with petitioners brother Allan, who
although not a party to the case, hereby affixes his signature to this pleading and
also abides by the declaration herein.
2.
As a gesture of goodwill and by way of settling petitioner and her brothers
(Allan) civil, monetary and similar claims but without admitting any liability,
[respondent] JOSE NGO CHUA hereby binds himself to pay the petitioner the sum of
TWO MILLION PESOS (P2,000,000.00) and another TWO MILLION PESOS
(P2,000,000.00) to her brother, ALLAN SURPOSA. Petitioner and her brother hereby
acknowledge to have received in full the said compromise amount.
3.
Petitioner and her brother (Allan) hereby declare that they have absolutely
no more claims, causes of action or demands against [respondent] JOSE NGO CHUA,
his heirs, successors and assigns and/or against the estate of Catalino Chua, his

155

heirs, successors and assigns and/or against all corporations, companies or business
enterprises including Cebu Liberty Lumber and Joe Lino Realty Investment and
Development Corporation where defendant JOSE NGO CHUA or CATALINO NGO
CHUA may have interest or participation.
4.
[Respondent] JOSE NGO CHUA hereby waives all counterclaim or counterdemand with respect to the subject matter of the present petition.
5.
Pursuant to the foregoing, petitioner hereby asks for a judgment for the
permanent dismissal with prejudice of the captioned petition. [Respondent] also
asks for a judgment permanently dismissing with prejudice his counterclaim.
Finding the said compromise agreement to be in order, the Court hereby approves
the same.
Judgment is rendered in accordance with the provisions of the
compromise agreement. The parties are enjoined to comply with their respective
undertakings embodied in the agreement.[7]

With no appeal having been filed therefrom, the 21 February 2000 Decision of RTCBranch 9 in Special Proceeding 8830-CEB was declared final and executory.
Petitioner filed on 15 April 2008 her Opposition[8] to respondents Demurrer to
Evidence in Special Proceeding No. 12562-CEB. Thereafter, RTC-Branch 24 issued
its now assailed Resolution dated 25 June 2008 in Special Proceeding No. 12562CEB, granting respondents Demurrer.
RTC-Branch 24 summarized the arguments of respondent and petitioner in the
Demurrer and Opposition, respectively, as follows:
This is to resolve the issues put across in the Demurrer to the Evidence submitted to
this Court; the Opposition thereto; the Comment on the Opposition and the
Rejoinder to the Comment.
xxxx
1.
The instant case is barred by the principle of res judicata because there was
a judgment entered based on the Compromise Agreement approved by this
multiple-sala Court, branch 09, on the same issues and between the same parties.
2.
That such decision of Branch 09, having attained finality, is beyond review,
reversal or alteration by another Regional Trial Court and not even the Supreme
Court, no matter how erroneous.
3.
Judicial Admissions or admission in petitioners pleadings to the effect that
there is no blood relationship between petitioner and respondent, which is a
declaration against interest, are conclusive on her and she should not be permitted
to falsify.
4.
That the Certificate of Live Birth showing that petitioners father is Alfredo
Surposa is a public document which is the evidence of the facts therein stated,
unless corrected by judicial order.
5.
After receiving the benefits and concessions pursuant to their compromise
agreement, she is estopped from refuting on the effects thereof to the prejudice of
the [herein respondent].
The summary of the Opposition is in this wise:
1.
That the illegitimate filiation of petitioner to respondent is established by the
open, and continuous possession of the status of an illegitimate child.

156

2.
The Demurrer to the evidence cannot set up the affirmative grounds for a
Motion to Dismiss.
3.
The question on the civil status, future support and future legitime can not
be subject to compromise.
4.
The decision in the first case does not bar the filing of another action asking
for the same relief against the same defendant.[9]

Taking into consideration the aforementioned positions of the parties, RTC-Branch


24 held that:
Looking at the issues from the viewpoint of a judge, this Court believes that
its hands are tied. Unless the Court of Appeals strikes down the Compromise
Judgment rendered by Branch 09 of the Regional Trial Court of Cebu City, this Court
will not attempt to vacate, much more annul, that Judgment issued by a co-equal
court, which had long become final and executory, and in fact executed.
This court upholds the Policy of Judicial Stability since to do otherwise would
result in patent abuse of judicial discretion amounting to lack of jurisdiction. The
defense of lack of jurisdiction cannot be waived. At any rate, such is brought forth
in the Affirmative Defenses of the Answer.
This Court, saddled with many cases, suffers the brunt of allowing herein
case involving same parties to re-litigate on the same issues already closed.[10]

In the end, RTC-Branch 24 decreed:

WHEREFORE, in view of the foregoing, the Demurrer to the Evidence is


hereby given due course, as the herein case is hereby ordered DISMISSED.[11]

RTC-Branch 24 denied petitioners


Resolution[13] dated 29 July 2008.

Motion

for

Reconsideration[12]

in

Petitioner then filed the instant Petition raising the following issues for resolution of
this Court:
I
Whether or not the principle of res judicata is applicable to judgments predicated
upon a compromise agreement on cases enumerated in Article 2035 of the Civil
Code of the Philippines;

II
Whether or not the compromise agreement entered into by the parties
herein before the Regional Trial Court, Branch 09 of Cebu City effectively bars the
filing of the present case.[14]

157

At the outset, the Court notes that from the RTC Resolution granting respondents
Demurrer to Evidence, petitioner went directly to this Court for relief. This is only
proper, given that petitioner is raising pure questions of law in her instant Petition.
Section 1, Rule 45 of the Rules of Court provides:
SECTION 1. Filing of petition with Supreme Court. A party desiring to appeal by
certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by
law, may file with the Supreme Court a verified petition for review on certiorari. The
petition shall raise only questions of law which must be distinctly set forth.

Clearly, a party may directly appeal to this Court from a decision or final order or
resolution of the trial court on pure questions of law. A question of law lies, on one
hand, when the doubt or difference arises as to what the law is on a certain set of
facts; a question of fact exists, on the other hand, when the doubt or difference
arises as to the truth or falsehood of the alleged facts. Here, the facts are not
disputed; the controversy merely relates to the correct application of the law or
jurisprudence to the undisputed facts.[15]
The central issue in this case is whether the Compromise Agreement entered into
between petitioner and respondent, duly approved by RTC-Branch 9 in its Decision
dated 21 February 2000 in Special Proceeding No. 8830-CEB, constitutes res
judicata in Special Proceeding No. 12562-CEB still pending before RTC-Branch 24.
The doctrine of res judicata is a rule that pervades every well- regulated system of
jurisprudence and is founded upon two grounds embodied in various maxims of the
common law, namely: (1) public policy and necessity, which makes it in the interest
of the State that there should be an end to litigation, interest reipublicae ut sit finis
litium, and (2) the hardship of the individual that he should be vexed twice for the
same cause, nemo debet bis vexari pro eadem causa.[16]
For res judicata, to serve as an absolute bar to a subsequent action, the following
requisites must concur: (1) there must be a final judgment or order; (2) the court
rendering it must have jurisdiction over the subject matter and the parties; (3) it
must be a judgment or order on the merits; and (4) there must be, between the two
cases, identity of parties, subject matter, and causes of action.[17]
It is undeniable that Special Proceeding No. 8830-CEB, previously before RTC-Branch
9, and Special Proceeding No. 12562-CEB, presently before RTC-Branch 24, were
both actions for the issuance of a decree of illegitimate filiation filed by petitioner
against respondent. Hence, there is apparent identity of parties, subject matter,
and causes of action between the two cases. However, the question arises as to
whether the other elements of res judicata exist in this case.
The court rules in the negative.
A compromise is a contract whereby the parties, by making reciprocal concessions,
avoid a litigation or put an end to one already commenced.[18] In Estate of the late
Jesus S. Yujuico v. Republic,[19] the Court pronounced that a judicial compromise
has the effect of res judicata. A judgment based on a compromise agreement is a
judgment on the merits.
It must be emphasized, though, that like any other contract, a compromise
agreement must comply with the requisites in Article 1318 of the Civil Code, to wit:
(a) consent of the contracting parties; (b) object certain that is the subject matter of
the contract; and (c) cause of the obligation that is established. And, like any other
contract, the terms and conditions of a compromise agreement must not be
contrary to law, morals, good customs, public policy and public order. Any

158

compromise agreement that is contrary to law or public policy is null and void, and
vests no rights in and holds no obligation for any party. It produces no legal effect
at all.[20]
In connection with the foregoing, the Court calls attention to Article 2035 of the Civil
Code, which states:
ART. 2035. No compromise upon the following questions shall be valid:
(1)

The civil status of persons;

(2)

The validity of a marriage or a legal separation;

(3)

Any ground for legal separation;

(4)

Future support;

(5)

The jurisdiction of courts;

(6)

Future legitime. (Emphases ours.)

The Compromise Agreement between petitioner and respondent, executed on 18


February 2000 and approved by RTC-Branch 9 in its Decision dated 21 February
2000 in Special Proceeding No. 8830-CEB, obviously intended to settle the question
of petitioners status and filiation, i.e., whether she is an illegitimate child of
respondent. In exchange for petitioner and her brother Allan acknowledging that
they are not the children of respondent, respondent would pay petitioner and Allan
P2,000,000.00 each. Although unmentioned, it was a necessary consequence of
said Compromise Agreement that petitioner also waived away her rights to future
support and future legitime as an illegitimate child of respondent. Evidently, the
Compromise Agreement dated 18 February 2000 between petitioner and
respondent is covered by the prohibition under Article 2035 of the Civil Code.
Advincula v. Advincula[21] has a factual background closely similar to the one at
bar. Manuela Advincula (Manuela) filed, before the Court of First Instance (CFI) of
Iloilo, Civil Case No. 3553 for acknowledgment and support, against Manuel
Advincula (Manuel). On motion of both parties, said case was dismissed. Not very
long after, Manuela again instituted, before the same court, Civil Case No. 5659 for
acknowledgment and support, against Manuel. This Court declared that although
Civil Case No. 3553 ended in a compromise, it did not bar the subsequent filing by
Manuela of Civil Case No. 5659, asking for the same relief from Manuel. Civil Case
No. 3553 was an action for acknowledgement, affecting a persons civil status,
which cannot be the subject of compromise.
It is settled, then, in law and jurisprudence, that the status and filiation of a child
cannot be compromised. Public policy demands that there be no compromise on
the status and filiation of a child.[22] Paternity and filiation or the lack of the same,
is a relationship that must be judicially established, and it is for the Court to declare
its existence or absence. It cannot be left to the will or agreement of the parties.
[23]
Being contrary to law and public policy, the Compromise Agreement dated 18
February 2000 between petitioner and respondent is void ab initio and vests no
rights and creates no obligations. It produces no legal effect at all. The void
agreement cannot be rendered operative even by the parties' alleged performance
(partial or full) of their respective prestations.[24]
Neither can it be said that RTC-Branch 9, by approving the Compromise Agreement,
in its Decision dated 21 February 2000 in Special Proceeding No. 8830-CEB, already

159

made said contract valid and legal. Obviously, it would already be beyond the
jurisdiction of RTC-Branch 9 to legalize what is illegal. RTC-Branch 9 had no
authority to approve and give effect to a Compromise Agreement that was contrary
to law and public policy, even if said contract was executed and submitted for
approval by both parties. RTC-Branch 9 would not be competent, under any
circumstances, to grant the approval of the said Compromise Agreement. No court
can allow itself to be used as a tool to circumvent the explicit prohibition under
Article 2035 of the Civil Code. The following quote in Francisco v. Zandueta[25] is
relevant herein:
It is a universal rule of law that parties cannot, by consent, give a court, as such,
jurisdiction in a matter which is excluded by the laws of the land. In such a case the
question is not whether a competent court has obtained jurisdiction of a party
triable before it, but whether the court itself is competent under any circumstances
to adjudicate a claim against the defendant. And where there is want of jurisdiction
of the subject-matter, a judgment is void as to all persons, and consent of parties
can never impart to it the vitality which a valid judgment derives from the sovereign
state, the court being constituted, by express provision of law, as its agent to
pronounce its decrees in controversies between its people. (7 R. C. L., 1039.)

A judgment void for want of jurisdiction is no judgment at all. It cannot be the


source of any right or the creator of any obligation. All acts performed pursuant to it
and all claims emanating from it have no legal effect. Hence, it can never become
final, and any writ of execution based on it is void. It may be said to be a lawless
thing that can be treated as an outlaw and slain on sight, or ignored wherever and
whenever it exhibits its head.[26]
In sum, Special Proceeding No. 12562-CEB before RTC-Branch 24 is not barred by
res judicata, since RTC-Branch 9 had no jurisdiction to approve, in its Decision dated
21 February 2000 in Special Proceeding No. 8830-CEB, petitioner and respondents
Compromise Agreement, which was contrary to law and public policy; and,
consequently, the Decision dated 21 February 2000 in Special Proceeding No. 8830CEB, being null and void for having been rendered by RTC-Branch 9 without
jurisdiction, could not have attained finality or been considered a judgment on the
merits.
Nevertheless, the Court must clarify that even though the Compromise Agreement
between petitioner and respondent is void for being contrary to law and public
policy, the admission petitioner made therein may still be appreciated against her in
Special Proceeding No. 12562-CEB. RTC-Branch 24 is only reminded that while
petitioners admission may have evidentiary value, it does not, by itself,
conclusively establish the lack of filiation.[27]
Proceeding from its foregoing findings, the Court is remanding this case to the RTCBranch 24 for the continuation of hearing on Special Proceedings No. 12562-CEB,
more particularly, for respondents presentation of evidence.
Although respondents pleading was captioned a Demurrer to Evidence, it was more
appropriately a Motion to Dismiss on the ground of res judicata.
Demurrer to Evidence is governed by Rule 33 of the Rules of Court, Section 1 of
which is reproduced in full below:
SECTION 1.
Demurrer to evidence. After the plaintiff has completed the
presentation of his evidence, the defendant may move for dismissal on the ground
that upon the facts and the law the plaintiff has shown no right to relief. If his
motion is denied, he shall have the right to present evidence. If the motion is
granted but on appeal the order of dismissal is reversed he shall be deemed to have
waived the right to present evidence.

160

Demurrer to evidence authorizes a judgment on the merits of the case without the
defendant having to submit evidence on his part, as he would ordinarily have to do,
if plaintiff's evidence shows that he is not entitled to the relief sought. Demurrer,
therefore, is an aid or instrument for the expeditious termination of an action,
similar to a motion to dismiss, which the court or tribunal may either grant or deny.
[28]
The Court has recently established some guidelines on when a demurrer to
evidence should be granted, thus:
A demurrer to evidence may be issued when, upon the facts and the law, the
plaintiff has shown no right to relief. Where the plaintiff's evidence together with
such inferences and conclusions as may reasonably be drawn therefrom does not
warrant recovery against the defendant, a demurrer to evidence should be
sustained. A demurrer to evidence is likewise sustainable when, admitting every
proven fact favorable to the plaintiff and indulging in his favor all conclusions fairly
and reasonably inferable therefrom, the plaintiff has failed to make out one or more
of the material elements of his case, or when there is no evidence to support an
allegation necessary to his claim. It should be sustained where the plaintiff's
evidence is prima facie insufficient for a recovery.[29]

The essential question to be resolved in a demurrer to evidence is whether


petitioner has been able to show that she is entitled to her claim, and it is
incumbent upon RTC-Branch 24 to make such a determination. A perusal of the
Resolution dated 25 June 2008 of RTC-Branch 24 in Special Proceeding No. 12562CEB shows that it is barren of any discussion on this matter. It did not take into
consideration any of the evidence presented by petitioner.
RTC-Branch 24
dismissed Special Proceedings No. 12562-CEB on the sole basis of res judicata,
given the Decision dated 21 February 2000 of RTC-Branch 9 in Special Proceeding
No. 8830-CEB, approving the Compromise Agreement between petitioner and
respondent. Hence, the Resolution dated 25 June 2008 of RTC-Branch 24 should be
deemed as having dismissed Special Proceeding No. 12562-CEB on the ground of
res judicata rather than an adjudication on the merits of respondents demurrer to
evidence. Necessarily, the last line of Section 1, Rule 33 of the Rules of Court
should not apply herein and respondent should still be allowed to present evidence
before RTC-Branch 24 in Special Proceedings No. 12562-CEB.
It must be kept in mind that substantial justice must prevail. When there is a strong
showing that grave miscarriage of justice would result from the strict application of
the Rules, this Court will not hesitate to relax the same in the interest of substantial
justice. The Rules of Court were conceived and promulgated to set forth guidelines
in the dispensation of justice but not to bind and chain the hand that dispenses it,
for otherwise, courts will be mere slaves to or robots of technical rules, shorn of
judicial discretion. That is precisely why courts in rendering real justice have always
been, as they in fact ought to be, conscientiously guided by the norm that when on
the balance, technicalities take backseat against substantive rights, and not the
other way around.[30]
WHEREFORE, premises considered, the Resolution dated 25 June 2008 of the
Regional Trial Court of Cebu City, Branch 24, in Special Proceeding No. 12562-CEB is
REVERSED and SET ASIDE. This case is ordered REMANDED to the said trial court
for further proceedings in accordance with the ruling of the Court herein. No costs.
SO ORDERED.

161

MINITA V. CHICO-NAZARIO
Associate Justice

Llamas v. Court of Appeals, G.R. No. 149588, August 16, 2010

Republic of the Philippines


Supreme Court
Manila
SPECIAL THIRD DIVISION

FRANCISCO R. LLAMAS and


CARMELITA C. LLAMAS,
Petitioners,

- versus -

THE HONORABLE COURT OF APPEALS, BRANCH 66 OF THE REGIONAL TRIAL COURT


OF MAKATI CITY and THE PEOPLE OF THE PHILIPPINES,
Respondents.
G.R. No. 149588
Present:
CORONA, C.J.,
Chairperson,
NACHURA,
BRION,
PERALTA, and
VILLARAMA*, JJ.
Promulgated:
August 16, 2010
x------------------------------------------------------------------------------------x

RESOLUTION
NACHURA, J.:

Before this Court is a Motion for Reconsideration filed by herein petitioner-spouses


Francisco R. Llamas and Carmelita C. Llamas. On September 29, 2009, this Court
promulgated a Decision[1] in the above-captioned case, denying the petition for
Annulment of Judgment and Certiorari, with Preliminary Injunction filed by
petitioners. Petitioners are assailing the decision of the Regional Trial Court (RTC) of

162

Makati City convicting them of the offense Other Forms of Swindling punishable
under Article 316, paragraph 2, of the Revised Penal Code (RPC).
Briefly, the antecedent facts are as follows:
On August 14, 1984, petitioners were charged before the Regional Trial
Court (RTC) of Makati with, as aforesaid, the crime of other forms of swindling in
the Information, docketed as Criminal Case No. 11787, which reads:
That on or about the 20th day of November, 1978, in the Municipality of Paraaque,
Metro Manila, Philippines, and within the jurisdiction of this Honorable Court, the
above-named accused, conspiring and confederating together and mutually helping
and aiding one another, well knowing that their parcel of land known as Lot No. 11,
Block No. 6 of the Subdivision Plan (LRC) Psd 67036, Cadastral Survey of Paraaque,
LRC Record No. N-26926, Case No. 4896, situated at Barrio San Dionisio,
Municipality of Paraaque, Metro Manila, was mortgaged to the Rural Bank of Imus,
did then and there willfully, unlawfully and feloniously sell said property to one
Conrado P. Avila, falsely representing the same to be free from all liens and
encumbrances whatsoever, and said Conrado P. Avila bought the aforementioned
property for the sum of P12,895.00 which was paid to the accused, to the damage
and prejudice of said Conrado P. Avila in the aforementioned amount of P12,895.00.
Contrary to law.

After trial on the merits, the RTC rendered its Decision on June 30, 1994,
finding petitioners guilty beyond reasonable doubt of the crime charged and
sentencing them to suffer the penalty of imprisonment for two months and to pay
the fine of P18,085.00 each.
On appeal, the Court of Appeals, in its February 19, 1999 Decision in CA-G.R.
No. CR No. 18270, affirmed the decision of the trial court. In its December 22, 1999
Resolution, the appellate court further denied petitioners motion for
reconsideration.
Assailing the aforesaid issuances of the appellate court, petitioners filed
before this Court, on February 11, 2000, their petition for review, docketed as G.R.
No. 141208. The Court, however, on March 13, 2000, denied the same for
petitioners failure to state the material dates. Since it subsequently denied
petitioners motion for reconsideration on June 28, 2000, the judgment of conviction
became final and executory.
With the consequent issuance by the trial court of the April 19, 2001 Warrant
of Arrest, the police arrested, on April 27, 2001, petitioner Carmelita C. Llamas for
her to serve her 2-month jail term. The police, nevertheless, failed to arrest
petitioner Francisco R. Llamas because he was nowhere to be found.
On July 16, 2001, petitioner Francisco moved for the lifting or recall of the
warrant of arrest, raising for the first time the issue that the trial court had no
jurisdiction over the offense charged.
There being no action taken by the trial court on the said motion, petitioners
instituted, on September 13, 2001, the instant proceedings for the annulment of the
trial and the appellate courts decisions.
The Court initially dismissed on technical grounds the petition in the
September 24, 2001 Resolution, but reinstated the same, on motion for
reconsideration, in the October 22, 2001 Resolution. [2]

163

In its September 29, 2009 Decision, this Court held that, following the ruling
in People v. Bitanga,[3] the remedy of annulment of judgment cannot be availed of
in criminal cases. The Court likewise rejected petitioners contention that the trial
court had no jurisdiction over the case.
Petitioners are now before this Court seeking the reversal of the September 29,
2009 Decision and, consequently, the annulment of their conviction by the trial
court. In their Verified Motion for Reconsideration,[4] petitioners ask this Court to
revisit and take a second look at the issues in the case without being unduly
hampered by any perceived technical shortfalls of a beleaguered innocent litigant.
In particular, they raise the following issues:
1.
WITH ALL DUE RESPECT, AND IN LIGHT OF THE CORRECT
APPLICATIONS OF DOCTRINAL JURISPRUDENCE, PETITIONERS HAD PURSUED THEIR
MORE THAN TWENTY FIVE (25) YEARS QUEST FOR JUSTICE AS INNOCENT MEN, AND
HAD HONESTLY MAINTAINED THAT THEIR RESORT TO REVERSE, SET ASIDE AND/OR
ANNUL, IS IN LINE WITH JURISPRUDENCE AND LAW, ANY TECHNICAL SHORTFALLS
[OR] DEFECTS NOTWITHSTANDING[;]
2.
WITH ALL DUE RESPECT, AGAIN IN LIGHT OF APPLICABLE
JURISPRUDENCE ON THE ISSUE OF JURISDICTION, PETITIONERS ARE NOT BARRED
FROM RAISING SUCH QUESTION OF JURISDICTION AT ANY TIME AND IN FACT
MAINTAIN THAT RESPONDNET COURTS HAD NO JURISDICTION IN LAW AND
ENLIGHTENING DOCTRINES TO TRY AND DECIDE THIS CASE;
3.
AGAIN WITH ALL DUE RESPECT AND UNFORTUNATELY, THE
VERY JUSTIFYING MERITS OF PETITIONERS APPROPRIATE INSTANT REMEDY; HAD
NOT CONSEQUENTLY BEEN PASSED UPON, TO UPHOLD THE PARAMOUNT
CONSTITUTIONAL CHERISED MANDATE, THE PRESUMPTION OF INNOCENCE MUST
BE UPHELD, EXCEPT ONLY UPON ESTABLISHED AND ADMISSIBLE EVIDENCE BEYOND
REASONABLE DOUBT; AND
4.
PETITIONERS VERY HUMBLY BESEECH THIS HONORABLE
COURTS HIGHEST SENSE OF MAGNANIMITY, UNDERSTANDING, JUDICIOUS WISDOM
AND COMPASSION, SO THAT JUSTICE MAY TRULY AND JUSTLY BE RENDERED IN
FAVOR OF PETITIONERS AS IT MUST, GIVEN THE VERY UNIQUE AND COMPELLING
JUSTIFICATIONS HEREOF[.][5]
Petitioners likewise pray for a referral of the case to the Court En Banc for oral
argument or to be allowed to submit written supplementary pleadings for them to
state the compelling reasons why their motion for reconsideration should be
allowed.
In the interest of justice and for humanitarian reasons, the Court deems it necessary
to re-examine this case.
Admittedly, petitioners took many procedural missteps in this case, from the
time it was pending in the trial court until it reached this Court, all of which could
serve as enough basis to dismiss the present motion for reconsideration. However,
considering petitioners advanced age, the length of time this case has been
pending, and the imminent loss of personal liberty as a result of petitioners
conviction, the Court resolves to grant pro hac vice the motion for reconsideration.
This Court has, on occasion, suspended the application of technical rules of
procedure where matters of life, liberty, honor or property, among other instances,
are at stake.[6] It has allowed some meritorious cases to proceed despite inherent
procedural defects and lapses on the principle that rules of procedure are mere
tools designed to facilitate the attainment of justice. The strict and rigid application
of rules that tend to frustrate rather than promote substantial justice must always
be avoided. It is far better and more prudent for the court to excuse a technical

164

lapse and afford the parties a review of the case to attain the ends of justice, rather
than dispose of the case on technicality and cause grave injustice to the parties.[7]
This Court notes that the case was allowed to run its course as a petition for
certiorari, such that in its April 12, 2004 Resolution, it said Considering the
allegations, issues and arguments adduced in the petition for review on certiorari x
x x. Likewise, in its February 10, 2003 Resolution,[8] the Court said, It appearing
that Atty. Francisco R. Llamas, in his own behalf and as counsel for petitioners, has
failed to file their reply to the Solicitor Generals comment on the petition for review
on certiorari within the extended period x x x.
Thus, the Court, at the first instance, had recognized that the petition, although
captioned differently, was indeed one for certiorari.
Since we have resolved to treat the petition as one for certiorari, the doctrine
in People v. Bitanga[9] no longer finds application in this case.
Next, we proceed to resolve the substantive issues raised by petitioners.

Article 316 (2) of the Revised Penal Code states:


ART. 316. Other forms of swindling. The penalty of arresto mayor in its minimum
and medium periods and a fine of not less than the value of the damage caused and
not more than three times such value, shall be imposed upon:
xxx
2. Any person who, knowing that real property is encumbered, shall dispose of the
same, although such encumbrance be not recorded;
xxx
In every criminal prosecution, the State must prove beyond reasonable doubt all the
elements of the crime charged and the complicity or participation of the accused.
[10]
For petitioners to be convicted of the crime of swindling under Article 316 (2) of the
Revised Penal Code, the prosecution had the burden to prove the confluence of the
following essential elements of the crime:
1. that the thing disposed of be real property;
2. that the offender knew that the real property was encumbered,
whether the encumbrance is recorded or not;
3. that there must be express representation by the offender that the real property
is free from encumbrance; and
4. that the act of disposing of the real property be made to the damage of another.
[11]

One of the essential elements of swindling under Article 316, paragraph 2, is that
the act of disposing the encumbered real property is made to the damage of
another. In this case, neither the trial court nor the CA made any finding of any
damage to the offended party. Nowhere in the Decision of the RTC or that of the CA
is there any discussion that there was damage suffered by complainant Avila, or any
finding that his rights over the property were prejudiced.
On the contrary, complainant had possession and control of the land even as the
cases were being heard. His possession and right to exercise dominion over the
property was not disturbed. Admittedly, there was delay in the delivery of the title.
This, however, was the subject of a separate case, which was eventually decided in
petitioners favor.[12]

165

If no damage should result from the sale, no crime of estafa would have been
committed by the vendor, as the element of damage would then be lacking.[13] The
inevitable conclusion, therefore, is that petitioners should be acquitted of the crime
charged.
WHEREFORE, the foregoing premises considered, the Motion for Reconsideration is
GRANTED. The assailed Decision dated September 29, 2009 is SET ASIDE and a new
one is entered ACQUITTING petitioners of the crime charged on the ground of the
prosecutions failure to prove their guilt beyond reasonable doubt.
SO ORDERED.

ANTONIO EDUARDO B. NACHURA


Associate Justice

RULE 2- CAUSE OF ACTION


Sec. 1. Ordinary civil actions, basis of
Turner v. Lorenzo Shipping, G.R. No. 157479, November 24, 2010

Republic of the Philippines


Supreme Court
Manila
THIRD DIVISION

PHILIP TURNER and ELNORA TURNER,


Petitioners,

-versus -

LORENZO SHIPPING
CORPORATION,
Respondent.
G.R. No. 157479
Present:
CARPIO MORALES, Chairperson,
BRION,
BERSAMIN,
VILLARAMA, JR., and
ARANAL-SERENO, JJ.
Promulgated:
November 24, 2010
x-----------------------------------------------------------------------------------------x

166

DECISION

BERSAMIN, J.:

This case concerns the right of dissenting stockholders to demand payment of


the value of their shareholdings.
In the stockholders suit to recover the value of their shareholdings from the
corporation, the Regional Trial Court (RTC) upheld the dissenting stockholders,
herein petitioners, and ordered the corporation, herein respondent, to pay.
Execution was partially carried out against the respondent. On the respondents
petition for certiorari, however, the Court of Appeals (CA) corrected the RTC and
dismissed the petitioners suit on the ground that their cause of action for collection
had not yet accrued due to the lack of unrestricted retained earnings in the books of
the respondent.
Thus, the petitioners are now before the Court to challenge the CAs decision
promulgated on March 4, 2003 in C.A.-G.R. SP No. 74156 entitled Lorenzo Shipping
Corporation v. Hon. Artemio S. Tipon, in his capacity as Presiding Judge of Branch 46
of the Regional Trial Court of Manila, et al.[1]

Antecedents
The petitioners held 1,010,000 shares of stock of the respondent, a domestic
corporation engaged primarily in cargo shipping activities. In June 1999, the
respondent decided to amend its articles of incorporation to remove the
stockholders pre-emptive rights to newly issued shares of stock. Feeling that the
corporate move would be prejudicial to their interest as stockholders, the
petitioners voted against the amendment and demanded payment of their shares at
the rate of P2.276/share based on the book value of the shares, or a total of
P2,298,760.00.
The respondent found the fair value of the shares demanded by the
petitioners unacceptable. It insisted that the market value on the date before the
action to remove the pre-emptive right was taken should be the value, or
P0.41/share (or a total of P414,100.00), considering that its shares were listed in the
Philippine Stock Exchange, and that the payment could be made only if the
respondent had unrestricted retained earnings in its books to cover the value of the
shares, which was not the case.
The disagreement on the valuation of the shares led the parties to constitute
an appraisal committee pursuant to Section 82 of the Corporation Code, each of
them nominating a representative, who together then nominated the third member
who would be chairman of the appraisal committee. Thus, the appraisal committee
came to be made up of Reynaldo Yatco, the petitioners nominee; Atty. Antonio
Acyatan, the respondents nominee; and Leo Anoche of the Asian Appraisal
Company, Inc., the third member/chairman.
On October 27, 2000, the appraisal committee reported its valuation of P2.54/share,
for an aggregate value of P2,565,400.00 for the petitioners.[2]
Subsequently, the petitioners demanded payment based on the valuation of the
appraisal committee, plus 2%/month penalty from the date of their original demand
for payment, as well as the reimbursement of the amounts advanced as
professional fees to the appraisers.[3]

167

In its letter to the petitioners dated January 2, 2001,[4] the respondent refused
the petitioners demand, explaining that pursuant to the Corporation Code, the
dissenting stockholders exercising their appraisal rights could be paid only when the
corporation had unrestricted retained earnings to cover the fair value of the shares,
but that it had no retained earnings at the time of the petitioners demand, as borne
out by its Financial Statements for Fiscal Year 1999 showing a deficit of
P72,973,114.00 as of December 31, 1999.
Upon the respondents refusal to pay, the petitioners sued the respondent for
collection and damages in the RTC in Makati City on January 22, 2001. The case,
docketed as Civil Case No. 01-086, was initially assigned to Branch 132.[5]
On June 26, 2002, the petitioners filed their motion for partial summary
judgment, claiming that:
7) xxx the defendant has an accumulated unrestricted retained earnings of ELEVEN
MILLION NINE HUNDRED SEVENTY FIVE THOUSAND FOUR HUNDRED NINETY
(P11,975,490.00) PESOS, Philippine Currency, evidenced by its Financial Statement
as of the Quarter Ending March 31, 2002; xxx
8) xxx the fair value of the shares of the petitioners as fixed by the Appraisal
Committee is final, that the same cannot be disputed xxx
9) xxx there is no genuine issue to material fact and therefore, the plaintiffs are
entitled, as a matter of right, to a summary judgment. xxx [6]

The respondent opposed the motion for partial summary judgment,


stating that the determination of the unrestricted retained earnings should be made
at the end of the fiscal year of the respondent, and that the petitioners did not have
a cause of action against the respondent.
During the pendency of the motion for partial summary judgment,
however, the Presiding Judge of Branch 133 transmitted the records to the Clerk of
Court for re-raffling to any of the RTCs special commercial courts in Makati City due
to the case being an intra-corporate dispute. Hence, Civil Case No. 01-086 was reraffled to Branch 142.
Nevertheless, because the principal office of the respondent was in Manila, Civil
Case No. 01-086 was ultimately transferred to Branch 46 of the RTC in Manila,
presided by Judge Artemio Tipon,[7] pursuant to the Interim Rules of Procedure on
Intra-Corporate Controversies (Interim Rules) requiring intra-corporate cases to be
brought in the RTC exercising jurisdiction over the place where the principal office of
the corporation was found.
After the conference in Civil Case No. 01-086 set on October 23, 2002,
which the petitioners counsel did not attend, Judge Tipon issued an order,[8]
granting the petitioners motion for partial summary judgment, stating:
As to the motion for partial summary judgment, there is no question that the 3-man
committee mandated to appraise the shareholdings of plaintiff submitted its
recommendation on October 27, 2000 fixing the fair value of the shares of stocks of
the plaintiff at P2.54 per share. Under Section 82 of the Corporation Code:
The findings of the majority of the appraisers shall be final, and the award shall be
paid by the corporation within thirty (30) days after the award is made.
The only restriction imposed by the Corporation Code is

168

That no payment shall be made to any dissenting stockholder unless the


corporation has unrestricted retained earning in its books to cover such payment.
The evidence submitted by plaintiffs shows that in its quarterly financial statement
it submitted to the Securities and Exchange Commission, the defendant has
retained earnings of P11,975,490 as of March 21, 2002. This is not disputed by the
defendant. Its only argument against paying is that there must be unrestricted
retained earning at the time the demand for payment is made.
This certainly is a very narrow concept of the appraisal right of a stockholder. The
law does not say that the unrestricted retained earnings must exist at the time of
the demand. Even if there are no retained earnings at the time the demand is made
if there are retained earnings later, the fair value of such stocks must be paid. The
only restriction is that there must be sufficient funds to cover the creditors after the
dissenting stockholder is paid. No such allegations have been made by the
defendant.[9]

On November 12, 2002, the respondent filed a motion for


reconsideration.
On the scheduled hearing of the motion for reconsideration on November 22, 2002,
the petitioners filed a motion for immediate execution and a motion to strike out
motion for reconsideration. In the latter motion, they pointed out that the motion for
reconsideration was prohibited by Section 8 of the Interim Rules. Thus, also on
November 22, 2002, Judge Tipon denied the motion for reconsideration and granted
the petitioners motion for immediate execution.[10]
Subsequently, on November 28, 2002, the RTC issued a writ of execution.[11]
Aggrieved, the respondent commenced a special civil action for
certiorari in the CA to challenge the two aforecited orders of Judge Tipon, claiming
that:
A.
JUDGE TIPON GRAVELY ABUSED HIS DISCRETION IN GRANTING SUMMARY JUDGMENT
TO THE SPOUSES TURNER, BECAUSE AT THE TIME THE COMPLAINT WAS FILED,
LSC HAD NO RETAINED EARNINGS, AND THUS WAS COMPLYING WITH THE LAW, AND
NOT VIOLATING ANY RIGHTS OF THE SPOUSES TURNER, WHEN IT REFUSED TO PAY
THEM THE VALUE OF THEIR LSC SHARES. ANY RETAINED EARNINGS MADE A YEAR
AFTER THE COMPLAINT WAS FILED ARE IRRELEVANT TO THE SPOUSES TURNERS
RIGHT TO RECOVER UNDER THE COMPLAINT, BECAUSE THE WELL-SETTLED RULE,
REPEATEDLY BROUGHT TO JUDGE TIPONS ATTENTION, IS IF NO RIGHT EXISTED AT
THE TIME (T)HE ACTION WAS COMMENCED THE SUIT CANNOT BE MAINTAINED,
ALTHOUGH SUCH RIGHT OF ACTION MAY HAVE ACCRUED THEREAFTER.

B.
JUDGE TIPON IGNORED CONTROLLING CASE LAW, AND THUS GRAVELY ABUSED HIS
DISCRETION, WHEN HE GRANTED AND ISSUED THE QUESTIONED WRIT OF
EXECUTION DIRECTING THE EXECUTION OF HIS PARTIAL SUMMARY JUDGMENT IN
FAVOR OF THE SPOUSES TURNER, BECAUSE THAT JUDGMENT IS NOT A FINAL
JUDGMENT UNDER SECTION 1 OF RULE 39 OF THE RULES OF COURT AND
THEREFORE CANNOT BE SUBJECT OF EXECUTION UNDER THE SUPREME COURTS
CATEGORICAL HOLDING IN PROVINCE OF PANGASINAN VS. COURT OF APPEALS.
Upon the respondents application, the CA issued a temporary restraining order
(TRO), enjoining the petitioners, and their agents and representatives from
enforcing the writ of execution. By then, however, the writ of execution had been
partially enforced.

169

The TRO lapsed without the CA issuing a writ of preliminary injunction to prevent
the execution. Thereupon, the sheriff resumed the enforcement of the writ of
execution.
The CA promulgated its assailed decision on March 4, 2003,[12] pertinently holding:
However, it is clear from the foregoing that the Turners appraisal right is subject to
the legal condition that no payment shall be made to any dissenting stockholder
unless the corporation has unrestricted retained earnings in its books to cover such
payment. Thus, the Supreme Court held that:
The requirement of unrestricted retained earnings to cover the shares is based on
the trust fund doctrine which means that the capital stock, property and other
assets of a corporation are regarded as equity in trust for the payment of corporate
creditors. The reason is that creditors of a corporation are preferred over the
stockholders in the distribution of corporate assets. There can be no distribution of
assets among the stockholders without first paying corporate creditors. Hence, any
disposition of corporate funds to the prejudice of creditors is null and void. Creditors
of a corporation have the right to assume that so long as there are outstanding
debts and liabilities, the board of directors will not use the assets of the corporation
to purchase its own stock.
In the instant case, it was established that there were no unrestricted retained
earnings when the Turners filed their Complaint. In a letter dated 20 August 2000,
petitioner informed the Turners that payment of their shares could only be made if it
had unrestricted earnings in its books to cover the same. Petitioner reiterated this
in a letter dated 2 January 2001 which further informed the Turners that its Financial
Statement for fiscal year 1999 shows that its retained earnings ending December
31, 1999 was at a deficit in the amount of P72,973,114.00, a matter which has not
been disputed by private respondents. Hence, in accordance with the second
paragraph of sec. 82, BP 68 supra, the Turners right to payment had not yet
accrued when they filed their Complaint on January 22, 2001, albeit their appraisal
right already existed.
In Philippine American General Insurance Co. Inc. vs. Sweet Lines, Inc., the Supreme
Court declared that:
Now, before an action can properly be commenced all the essential elements of the
cause of action must be in existence, that is, the cause of action must be complete.
All valid conditions precedent to the institution of the particular action, whether
prescribed by statute, fixed by agreement of the parties or implied by law must be
performed or complied with before commencing the action, unless the conduct of
the adverse party has been such as to prevent or waive performance or excuse nonperformance of the condition.
It bears restating that a right of action is the right to presently enforce a cause of
action, while a cause of action consists of the operative facts which give rise to such
right of action. The right of action does not arise until the performance of all
conditions precedent to the action and may be taken away by the running of the
statute of limitations, through estoppel, or by other circumstances which do not
affect the cause of action. Performance or fulfillment of all conditions precedent
upon which a right of action depends must be sufficiently alleged, considering that
the burden of proof to show that a party has a right of action is upon the person
initiating the suit.
The Turners right of action arose only when petitioner had already retained
earnings in the amount of P11,975,490.00 on March 21, 2002; such right of action
was inexistent on January 22, 2001 when they filed the Complaint.
In the doctrinal case of Surigao Mine Exploration Co. Inc., vs. Harris, the Supreme
Court ruled:
170

Subject to certain qualifications, and except as otherwise provided by law, an action


commenced before the cause of action has accrued is prematurely brought and
should be dismissed. The fact that the cause of action accrues after the action is
commenced and while it is pending is of no moment. It is a rule of law to which
there is, perhaps, no exception, either at law or in equity, that to recover at all there
must be some cause of action at the commencement of the suit. There are reasons
of public policy why there should be no needless haste in bringing up litigation, and
why people who are in no default and against whom there is as yet no cause of
action should not be summoned before the public tribunals to answer complaints
which are groundless. An action prematurely brought is a groundless suit. Unless
the plaintiff has a valid and subsisting cause of action at the time his action is
commenced, the defect cannot be cured or remedied by the acquisition or accrual
of one while the action is pending, and a supplemental complaint or an amendment
setting up such after-accrued cause of action is not permissible.

The afore-quoted ruling was reiterated in Young vs Court of Appeals and Lao vs.
Court of Appeals.
The Turners apprehension that their claim for payment may prescribe if they wait
for the petitioner to have unrestricted retained earnings is misplaced. It is the legal
possibility of bringing the action that determines the starting point for the
computation of the period of prescription. Stated otherwise, the prescriptive period
is to be reckoned from the accrual of their right of action.
Accordingly, We hold that public respondent exceeded its jurisdiction when it
entertained the herein Complaint and issued the assailed Orders. Excess of
jurisdiction is the state of being beyond or outside the limits of jurisdiction, and as
distinguished from the entire absence of jurisdiction, means that the act although
within the general power of the judge, is not authorized and therefore void, with
respect to the particular case, because the conditions which authorize the exercise
of his general power in that particular case are wanting, and hence, the judicial
power is not in fact lawfully invoked.
We find no necessity to discuss the second ground raised in this petition.
WHEREFORE, upon the premises, the petition is GRANTED. The assailed Orders and
the corresponding Writs of Garnishment are NULLIFIED. Civil Case No. 02-104692 is
hereby ordered DISMISSED without prejudice to refiling by the private respondents
of the action for enforcement of their right to payment as withdrawing stockholders.
SO ORDERED.
The petitioners now come to the Court for a review on certiorari of the CAs
decision, submitting that:
I.
THE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW WHEN IT GRANTED
THE PETITION FOR CERTIORARI WHEN THE REGIONAL TRIAL COURT OF MANILA DID
NOT ACT BEYOND ITS JURISDICTION AMOUNTING TO LACK OF JURISDICTION IN
GRANTING THE MOTION FOR PARTIAL SUMMARY JUDGMENT AND IN GRANTING THE
MOTION FOR IMMEDIATE EXECUTION OF JUDGMENT;
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW WHEN IT ORDERED
THE DISMISSAL OF THE CASE, WHEN THE PETITION FOR CERTIORARI MERELY
SOUGHT THE ANNULMENT OF THE ORDER GRANTING THE MOTION FOR PARTIAL

171

SUMMARY JUDGMENT AND OF THE ORDER GRANTING THE MOTION FOR IMMEDIATE
EXECUTION OF THE JUDGMENT;
III.
THE HONORABLE COURT OF APPEALS HAS DECIDED QUESTIONS OF SUBSTANCE
NOT THEREFORE DETERMINED BY THIS HONORABLE COURT AND/OR DECIDED IT IN
A WAY NOT IN ACCORD WITH LAW OR WITH JURISPRUDENCE.

Ruling

The petition fails.


The CA correctly concluded that the RTC had exceeded its jurisdiction in
entertaining the petitioners complaint in Civil Case No. 01-086, and in rendering
the summary judgment and issuing writ of execution.
A.
Stockholders Right of Appraisal, In General

A stockholder who dissents from certain corporate actions has the right to demand
payment of the fair value of his or her shares. This right, known as the right of
appraisal, is expressly recognized in Section 81 of the Corporation Code, to wit:
Section 81. Instances of appraisal right. - Any stockholder of a corporation shall
have the right to dissent and demand payment of the fair value of his shares in the
following instances:
1. In case any amendment to the articles of incorporation has the effect of changing
or restricting the rights of any stockholder or class of shares, or of authorizing
preferences in any respect superior to those of outstanding shares of any class, or
of extending or shortening the term of corporate existence;
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition
of all or substantially all of the corporate property and assets as provided in the
Code; and
3. In case of merger or consolidation. (n)

Clearly, the right of appraisal may be exercised when there is a fundamental change
in the charter or articles of incorporation substantially prejudicing the rights of the
stockholders. It does not vest unless objectionable corporate action is taken.[13] It
serves the purpose of enabling the dissenting stockholder to have his interests
purchased and to retire from the corporation.[14]
Under the common law, there were originally conflicting views on whether a
corporation had the power to acquire or purchase its own stocks. In England, it was
held invalid for a corporation to purchase its issued stocks because such purchase
was an indirect method of reducing capital (which was statutorily restricted), aside
from being inconsistent with the privilege of limited liability to creditors.[15] Only a
few American jurisdictions adopted by decision or statute the strict English rule
forbidding a corporation from purchasing its own shares. In some American states
where the English rule used to be adopted, statutes granting authority to purchase
out of surplus funds were enacted, while in others, shares might be purchased even
out of capital provided the rights of creditors were not prejudiced.[16] The reason
underlying the limitation of share purchases sprang from the necessity of imposing

172

safeguards against the depletion by a corporation of its assets and against the
impairment of its capital needed for the protection of creditors.[17]
Now, however, a corporation can purchase its own shares, provided payment
is made out of surplus profits and the acquisition is for a legitimate corporate
purpose.[18] In the Philippines, this new rule is embodied in Section 41 of the
Corporation Code, to wit:

Section 41. Power to acquire own shares. - A stock corporation shall have the power
to purchase or acquire its own shares for a legitimate corporate purpose or
purposes, including but not limited to the following cases: Provided, That the
corporation has unrestricted retained earnings in its books to cover the shares to be
purchased or acquired:
1.

To eliminate fractional shares arising out of stock dividends;

2. To collect or compromise an indebtedness to the corporation, arising out of


unpaid subscription, in a delinquency sale, and to purchase delinquent shares sold
during said sale; and
3. To pay dissenting or withdrawing stockholders entitled to payment for their
shares under the provisions of this Code. (n)

The Corporation Code defines how the right of appraisal is exercised, as well as the
implications of the right of appraisal, as follows:
1.
The appraisal right is exercised by any stockholder who has voted against the
proposed corporate action by making a written demand on the corporation within
30 days after the date on which the vote was taken for the payment of the fair value
of his shares. The failure to make the demand within the period is deemed a waiver
of the appraisal right.[19]
2.
If the withdrawing stockholder and the corporation cannot agree on the fair
value of the shares within a period of 60 days from the date the stockholders
approved the corporate action, the fair value shall be determined and appraised by
three disinterested persons, one of whom shall be named by the stockholder,
another by the corporation, and the third by the two thus chosen. The findings and
award of the majority of the appraisers shall be final, and the corporation shall pay
their award within 30 days after the award is made. Upon payment by the
corporation of the agreed or awarded price, the stockholder shall forthwith transfer
his or her shares to the corporation.[20]
3.
All rights accruing to the withdrawing stockholders shares, including voting
and dividend rights, shall be suspended from the time of demand for the payment
of the fair value of the shares until either the abandonment of the corporate action
involved or the purchase of the shares by the corporation, except the right of such
stockholder to receive payment of the fair value of the shares.[21]
4.
Within 10 days after demanding payment for his or her shares, a dissenting
stockholder shall submit to the corporation the certificates of stock representing his
shares for notation thereon that such shares are dissenting shares. A failure to do so
shall, at the option of the corporation, terminate his rights under this Title X of the
Corporation Code. If shares represented by the certificates bearing such notation
are transferred, and the certificates are consequently canceled, the rights of the
transferor as a dissenting stockholder under this Title shall cease and the transferee
shall have all the rights of a regular stockholder; and all dividend distributions that
would have accrued on such shares shall be paid to the transferee.[22]

173

5.
If the proposed corporate action is implemented or effected, the corporation
shall pay to such stockholder, upon the surrender of the certificates of stock
representing his shares, the fair value thereof as of the day prior to the date on
which the vote was taken, excluding any appreciation or depreciation in anticipation
of such corporate action.[23]

Notwithstanding the foregoing, no payment shall be made to any dissenting


stockholder unless the corporation has unrestricted retained earnings in its books to
cover the payment. In case the corporation has no available unrestricted retained
earnings in its books, Section 83 of the Corporation Code provides that if the
dissenting stockholder is not paid the value of his shares within 30 days after the
award, his voting and dividend rights shall immediately be restored.
The trust fund doctrine backstops the requirement of unrestricted retained
earnings to fund the payment of the shares of stocks of the withdrawing
stockholders. Under the doctrine, the capital stock, property, and other assets of a
corporation are regarded as equity in trust for the payment of corporate creditors,
who are preferred in the distribution of corporate assets.[24] The creditors of a
corporation have the right to assume that the board of directors will not use the
assets of the corporation to purchase its own stock for as long as the corporation
has outstanding debts and liabilities.[25] There can be no distribution of assets
among the stockholders without first paying corporate debts. Thus, any disposition
of corporate funds and assets to the prejudice of creditors is null and void.[26]
B.
Petitioners cause of action was premature

That the respondent had indisputably no unrestricted retained earnings in its


books at the time the petitioners commenced Civil Case No. 01-086 on January 22,
2001 proved that the respondents legal obligation to pay the value of the
petitioners shares did not yet arise. Thus, the CA did not err in holding that the
petitioners had no cause of action, and in ruling that the RTC did not validly render
the partial summary judgment.
A cause of action is the act or omission by which a party violates a right of
another.[27] The essential elements of a cause of action are: (a) the existence of a
legal right in favor of the plaintiff; (b) a correlative legal duty of the defendant to
respect such right; and (c) an act or omission by such defendant in violation of the
right of the plaintiff with a resulting injury or damage to the plaintiff for which the
latter may maintain an action for the recovery of relief from the defendant.[28]
Although the first two elements may exist, a cause of action arises only upon the
occurrence of the last element, giving the plaintiff the right to maintain an action in
court for recovery of damages or other appropriate relief.[29]
Section 1, Rule 2, of the Rules of Court requires that every ordinary civil
action must be based on a cause of action. Accordingly, Civil Case No. 01-086 was
dismissible from the beginning for being without any cause of action.
The RTC concluded that the respondents obligation to pay had accrued by its
having the unrestricted retained earnings after the making of the demand by the
petitioners. It based its conclusion on the fact that the Corporation Code did not
provide that the unrestricted retained earnings must already exist at the time of the
demand.
The RTCs construal of the Corporation Code was unsustainable, because it did not
take into account the petitioners lack of a cause of action against the respondent.
In order to give rise to any obligation to pay on the part of the respondent, the
petitioners should first make a valid demand that the respondent refused to pay

174

despite having unrestricted retained earnings. Otherwise, the respondent could not
be said to be guilty of any actionable omission that could sustain their action to
collect.
Neither did the subsequent existence of unrestricted retained earnings after
the filing of the complaint cure the lack of cause of action in Civil Case No. 01-086.
The petitioners right of action could only spring from an existing cause of action.
Thus, a complaint whose cause of action has not yet accrued cannot be cured by an
amended or supplemental pleading alleging the existence or accrual of a cause of
action during the pendency of the action.[30] For, only when there is an invasion of
primary rights, not before, does the adjective or remedial law become operative.
[31] Verily, a premature invocation of the courts intervention renders the complaint
without a cause of action and dismissible on such ground.[32] In short, Civil Case
No. 01-086, being a groundless suit, should be dismissed.
Even the fact that the respondent already had unrestricted retained
earnings more than sufficient to cover the petitioners claims on June 26, 2002
(when they filed their motion for partial summary judgment) did not rectify the
absence of the cause of action at the time of the commencement of Civil Case No.
01-086. The motion for partial summary judgment, being a mere application for
relief other than by a pleading,[33] was not the same as the complaint in Civil Case
No. 01-086. Thereby, the petitioners did not meet the requirement of the Rules of
Court that a cause of action must exist at the commencement of an action, which is
commenced by the filing of the original complaint in court.[34]
The petitioners claim that the respondents petition for certiorari sought only
the annulment of the assailed orders of the RTC (i.e., granting the motion for partial
summary judgment and the motion for immediate execution); hence, the CA had no
right to direct the dismissal of Civil Case No. 01-086.
The claim of the petitioners cannot stand.
Although the respondents petition for certiorari targeted only the RTCs
orders granting the motion for partial summary judgment and the motion for
immediate execution, the CAs directive for the dismissal of Civil Case No. 01-086
was not an abuse of discretion, least of all grave, because such dismissal was the
only proper thing to be done under the circumstances. According to Surigao Mine
Exploration Co., Inc. v. Harris:[35]
Subject to certain qualification, and except as otherwise provided by law, an
action commenced before the cause of action has accrued is prematurely brought
and should be dismissed. The fact that the cause of action accrues after the action
is commenced and while the case is pending is of no moment. It is a rule of law to
which there is, perhaps no exception, either in law or in equity, that to recover at all
there must be some cause of action at the commencement of the suit. There are
reasons of public policy why there should be no needless haste in bringing up
litigation, and why people who are in no default and against whom there is as yet no
cause of action should not be summoned before the public tribunals to answer
complaints which are groundless. An action prematurely brought is a groundless
suit. Unless the plaintiff has a valid and subsisting cause of action at the time his
action is commenced, the defect cannot be cured or remedied by the acquisition or
accrual of one while the action is pending, and a supplemental complaint or an
amendment setting up such after-accrued cause of action is not permissible.
Lastly, the petitioners argue that the respondents recourse of a special
action for certiorari was the wrong remedy, in view of the fact that the granting of
the motion for partial summary judgment constituted only an error of law correctible
by appeal, not of jurisdiction.

175

The argument of the petitioners is baseless. The RTC was guilty of an error of
jurisdiction, for it exceeded its jurisdiction by taking cognizance of the complaint
that was not based on an existing cause of action.
WHEREFORE, the petition for review on certiorari is denied for lack of merit.
We affirm the decision promulgated on March 4, 2003 in C.A.-G.R. SP No. 74156
entitled Lorenzo Shipping Corporation v. Hon. Artemio S. Tipon, in his capacity as
Presiding Judge of Branch 46 of the Regional Trial Court of Manila, et al.
Costs of suit to be paid by the petitioners.
SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

Sec. 2. Cause of action, defined


Heirs of Ypon v. Ricaforte, G.R. No. 198680, July 8, 2013

G.R. No. 198680

July 8, 2013

HEIRS OF MAGDALENO YPON, NAMELY, ALVARO YPON, ERUDITA Y. BARON, CICERO


YPON, WILSON YPON, VICTOR YPON, AND HINIDINO Y. PEALOSA, PETITIONERS,
vs.
GAUDIOSO PONTERAS RICAFORTE A.K.A. "GAUDIOSO E. YPON," AND THE REGISTER
OF DEEDS OF TOLEDO CITY, RESPONDENTS.
RESOLUTION
PERLAS-BERNABE, J.:
This is a direct recourse to the Court from the Regional Trial Court of Toledo City,
Branch 59 (RTC), through a petition for review on certiorari1 under Rule 45 of the
Rules of Court, raising a pure question of law. In particular, petitioners assail the July
27, 20112 and August 31, 20113 Orders of the RTC, dismissing Civil Case No. T-2246
for lack of cause of action.
The Facts
On July 29, 2010, petitioners, together with some of their cousins,4 filed a complaint
for Cancellation of Title and Reconveyance with Damages (subject complaint)
against respondent Gaudioso Ponteras Ricaforte a.k.a. "Gaudioso E. Ypon"
(Gaudioso), docketed as Civil Case No. T-2246.5 In their complaint, they alleged that
Magdaleno Ypon (Magdaleno) died intestate and childless on June 28, 1968, leaving
behind Lot Nos. 2-AA, 2-C, 2-F, and 2-J which were then covered by Transfer
Certificates of Title (TCT) Nos. T-44 and T-77-A.6 Claiming to be the sole heir of
Magdaleno, Gaudioso executed an Affidavit of Self-Adjudication and caused the
cancellation of the aforementioned certificates of title, leading to their subsequent
transfer in his name under TCT Nos. T-2637 and T-2638,7 to the prejudice of
petitioners who are Magdalenos collateral relatives and successors-in-interest.8
In his Answer, Gaudioso alleged that he is the lawful son of Magdaleno as evidenced
by: (a) his certificate of Live Birth; (b) two (2) letters from Polytechnic School; and

176

(c) a certified true copy of his passport.9 Further, by way of affirmative defense, he
claimed that: (a) petitioners have no cause of action against him; (b) the complaint
fails to state a cause of action; and (c) the case is not prosecuted by the real
parties-in-interest, as there is no showing that the petitioners have been judicially
declared as Magdalenos lawful heirs.10
The RTC Ruling
On July 27, 2011, the RTC issued the assailed July 27, 2011 Order,11 finding that the
subject complaint failed to state a cause of action against Gaudioso. It observed
that while the plaintiffs therein had established their relationship with Magdaleno in
a previous special proceeding for the issuance of letters of administration,12 this
did not mean that they could already be considered as the decedents compulsory
heirs. Quite the contrary, Gaudioso satisfactorily established the fact that he is
Magdalenos son and hence, his compulsory heir through the documentary
evidence he submitted which consisted of: (a) a marriage contract between
Magdaleno and Epegenia Evangelista; (b) a Certificate of Live Birth; (c) a Letter
dated February 19, 1960; and (d) a passport.13
The plaintiffs therein filed a motion for reconsideration which was, however, denied
on August 31, 2011 due to the counsels failure to state the date on which his
Mandatory Continuing Legal Education Certificate of Compliance was issued.14
Aggrieved, petitioners, who were among the plaintiffs in Civil Case No. T-2246,15
sought direct recourse to the Court through the instant petition.
The Issue Before the Court
The core of the present controversy revolves around the issue of whether or not the
RTCs dismissal of the case on the ground that the subject complaint failed to state
a cause of action was proper.
The Courts Ruling
The petition has no merit.
Cause of action is defined as the act or omission by which a party violates a right of
another.16 It is well-settled that the existence of a cause of action is determined by
the allegations in the complaint.17 In this relation, a complaint is said to assert a
sufficient cause of action if, admitting what appears solely on its face to be correct,
the plaintiff would be entitled to the relief prayed for.18Accordingly, if the
allegations furnish sufficient basis by which the complaint can be maintained, the
same should not be dismissed, regardless of the defenses that may be averred by
the defendants.19
As stated in the subject complaint, petitioners, who were among the plaintiffs
therein, alleged that they are the lawful heirs of Magdaleno and based on the same,
prayed that the Affidavit of Self-Adjudication executed by Gaudioso be declared null
and void and that the transfer certificates of title issued in the latters favor be
cancelled. While the foregoing allegations, if admitted to be true, would
consequently warrant the reliefs sought for in the said complaint, the rule that the
determination of a decedents lawful heirs should be made in the corresponding
special proceeding20 precludes the RTC, in an ordinary action for cancellation of
title and reconveyance, from granting the same. In the case of Heirs of Teofilo
Gabatan v. CA,21 the Court, citing several other precedents, held that the
determination of who are the decedents lawful heirs must be made in the proper
special proceeding for such purpose, and not in an ordinary suit for recovery of
ownership and/or possession, as in this case:
Jurisprudence dictates that the determination of who are the legal heirs of the
deceased must be made in the proper special proceedings in court, and not in an

177

ordinary suit for recovery of ownership and possession of property.1wphi1 This


must take precedence over the action for recovery of possession and ownership.
The Court has consistently ruled that the trial court cannot make a declaration of
heirship in the civil action for the reason that such a declaration can only be made
in a special proceeding. Under Section 3, Rule 1 of the 1997 Revised Rules of Court,
a civil action is defined as one by which a party sues another for the enforcement or
protection of a right, or the prevention or redress of a wrong while a special
proceeding is a remedy by which a party seeks to establish a status, a right, or a
particular fact. It is then decisively clear that the declaration of heirship can be
made only in a special proceeding inasmuch as the petitioners here are seeking the
establishment of a status or right.
In the early case of Litam, et al. v. Rivera, this Court ruled that the declaration of
heirship must be made in a special proceeding, and not in an independent civil
action. This doctrine was reiterated in Solivio v. Court of Appeals x x x:
In the more recent case of Milagros Joaquino v. Lourdes Reyes, the Court reiterated
its ruling that matters relating to the rights of filiation and heirship must be
ventilated in the proper probate court in a special proceeding instituted precisely for
the purpose of determining such rights. Citing the case of Agapay v. Palang, this
Court held that the status of an illegitimate child who claimed to be an heir to a
decedent's estate could not be adjudicated in an ordinary civil action which, as in
this case, was for the recovery of property.22 (Emphasis and underscoring supplied;
citations omitted)
By way of exception, the need to institute a separate special proceeding for the
determination of heirship may be dispensed with for the sake of practicality, as
when the parties in the civil case had voluntarily submitted the issue to the trial
court and already presented their evidence regarding the issue of heirship, and the
RTC had consequently rendered judgment thereon,23 or when a special proceeding
had been instituted but had been finally closed and terminated, and hence, cannot
be re-opened.24
In this case, none of the foregoing exceptions, or those of similar nature, appear to
exist. Hence, there lies the need to institute the proper special proceeding in order
to determine the heirship of the parties involved, ultimately resulting to the
dismissal of Civil Case No. T-2246.
Verily, while a court usually focuses on the complaint in determining whether the
same fails to state a cause of action, a court cannot disregard decisions material to
the proper appreciation of the questions before it.25 Thus, concordant with
applicable jurisprudence, since a determination of heirship cannot be made in an
ordinary action for recovery of ownership and/or possession, the dismissal of Civil
Case No. T-2246 was altogether proper. In this light, it must be pointed out that the
RTC erred in ruling on Gaudiosos heirship which should, as herein discussed, be
threshed out and determined in the proper special proceeding. As such, the
foregoing pronouncement should therefore be devoid of any legal effect.
WHEREFORE, the petition is DENIED. The dismissal of Civil Case No. T-2246 is
hereby AFFIRMED, without prejudice to any subsequent proceeding to determine the
lawful heirs of the late Magdaleno Ypon and the rights concomitant therewith.
SO ORDERED.
Carpio, (Chairperson), Del Castillo, Perez, and Mendoza,* JJ., concur.
Swagman Hotels v. Court of Appeals, G.R. No. 161135, April 8, 2005

FIRST DIVISION
[G.R. No. 161135. April 8, 2005]

178

SWAGMAN HOTELS AND TRAVEL, INC., petitioner, vs. HON. COURT OF APPEALS, and
NEAL B. CHRISTIAN, respondents.
DECISION
DAVIDE, JR., C.J.:
May a complaint that lacks a cause of action at the time it was filed be cured by the
accrual of a cause of action during the pendency of the case? This is the basic issue
raised in this petition for the Courts consideration.
Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc., through
Atty. Leonor L. Infante and Rodney David Hegerty, its president and vice-president,
respectively, obtained from private respondent Neal B. Christian loans evidenced by
three promissory notes dated 7 August 1996, 14 March 1997, and 14 July 1997.
Each of the promissory notes is in the amount of US$50,000 payable after three
years from its date with an interest of 15% per annum payable every three months.
[1] In a letter dated 16 December 1998, Christian informed the petitioner
corporation that he was terminating the loans and demanded from the latter
payment in the total amount of US$150,000 plus unpaid interests in the total
amount of US$13,500.[2]
On 2 February 1999, private respondent Christian filed with the Regional Trial Court
of Baguio City, Branch 59, a complaint for a sum of money and damages against the
petitioner corporation, Hegerty, and Atty. Infante. The complaint alleged as follows:
On 7 August 1996, 14 March 1997, and 14 July 1997, the petitioner, as well as its
president and vice-president obtained loans from him in the total amount of
US$150,000 payable after three years, with an interest of 15% per annum payable
quarterly or every three months. For a while, they paid an interest of 15% per
annum every three months in accordance with the three promissory notes.
However, starting January 1998 until December 1998, they paid him only an interest
of 6% per annum, instead of 15% per annum, in violation of the terms of the three
promissory notes. Thus, Christian prayed that the trial court order them to pay him
jointly and solidarily the amount of US$150,000 representing the total amount of
the loans; US$13,500 representing unpaid interests from January 1998 until
December 1998; P100,000 for moral damages; P50,000 for attorneys fees; and the
cost of the suit.[3]
The petitioner corporation, together with its president and vice-president, filed an
Answer raising as defenses lack of cause of action and novation of the principal
obligations. According to them, Christian had no cause of action because the three
promissory notes were not yet due and demandable. In December 1997, since the
petitioner corporation was experiencing huge losses due to the Asian financial crisis,
Christian agreed (a) to waive the interest of 15% per annum, and (b) accept
payments of the principal loans in installment basis, the amount and period of
which would depend on the state of business of the petitioner corporation. Thus,
the petitioner paid Christian capital repayment in the amount of US$750 per month
from January 1998 until the time the complaint was filed in February 1999. The
petitioner and its co-defendants then prayed that the complaint be dismissed and
that Christian be ordered to pay P1 million as moral damages; P500,000 as
exemplary damages; and P100,000 as attorneys fees.[4]
In due course and after hearing, the trial court rendered a decision[5] on 5 May
2000 declaring the first two promissory notes dated 7 August 1996 and 14 March
1997 as already due and demandable and that the interest on the loans had been
reduced by the parties from 15% to 6% per annum. It then ordered the petitioner
corporation to pay Christian the amount of $100,000 representing the principal
obligation covered by the promissory notes dated 7 August 1996 and 14 March
1997, plus interest of 6% per month thereon until fully paid, with all interest
payments already paid by the defendant to the plaintiff to be deducted therefrom.
The trial court ratiocinated in this wise:

179

(1) There was no novation of defendants obligation to the plaintiff. Under Article
1292 of the Civil Code, there is an implied novation only if the old and the new
obligation be on every point incompatible with one another.
The test of incompatibility between the two obligations or contracts, according to an
imminent author, is whether they can stand together, each one having an
independent existence. If they cannot, they are incompatible, and the subsequent
obligation novates the first (Tolentino, Civil Code of the Philippines, Vol. IV, 1991 ed.,
p. 384). Otherwise, the old obligation will continue to subsist subject to the
modifications agreed upon by the parties. Thus, it has been written that accidental
modifications in an existing obligation do not extinguish it by novation. Mere
modifications of the debt agreed upon between the parties do not constitute
novation. When the changes refer to secondary agreement and not to the object or
principal conditions of the contract, there is no novation; such changes will produce
modifications of incidental facts, but will not extinguish the original obligation. Thus,
the acceptance of partial payments or a partial remission does not involve novation
(id., p. 387). Neither does the reduction of the amount of an obligation amount to a
novation because it only means a partial remission or condonation of the same
debt.
In the instant case, the Court is of the view that the parties merely intended to
change the rate of interest from 15% per annum to 6% per annum when the
defendant started paying $750 per month which payments were all accepted by the
plaintiff from January 1998 onward. The payment of the principal obligation,
however, remains unaffected which means that the defendant should still pay the
plaintiff $50,000 on August 9, 1999, March 14, 2000 and July 14, 2000.
(2) When the instant case was filed on February 2, 1999, none of the promissory
notes was due and demandable. As of this date however, the first and the second
promissory notes have already matured. Hence, payment is already due.
Under Section 5 of Rule 10 of the 1997 Rules of Civil Procedure, a complaint which
states no cause of action may be cured by evidence presented without objection.
Thus, even if the plaintiff had no cause of action at the time he filed the instant
complaint, as defendants obligation are not yet due and demandable then, he may
nevertheless recover on the first two promissory notes in view of the introduction of
evidence showing that the obligations covered by the two promissory notes are now
due and demandable.
(3) Individual defendants Rodney Hegerty and Atty. Leonor L. Infante can not be
held personally liable for the obligations contracted by the defendant corporation it
being clear that they merely acted in representation of the defendant corporation in
their capacity as General Manager and President, respectively, when they signed
the promissory notes as evidenced by Board Resolution No. 1(94) passed by the
Board of Directors of the defendant corporation (Exhibit 4).[6]
In its decision[7] of 5 September 2003, the Court of Appeals denied petitioners
appeal and affirmed in toto the decision of the trial court, holding as follows:
In the case at bench, there is no incompatibility because the changes referred to by
appellant Swagman consist only in the manner of payment. . . .
Appellant Swagmans interpretation that the three (3) promissory notes have been
novated by reason of appellee Christians acceptance of the monthly payments of
US$750.00 as capital repayments continuously even after the filing of the instant
case is a little bit strained considering the stiff requirements of the law on novation
that the intention to novate must appear by express agreement of the parties, or by
their acts that are too clear and unequivocal to be mistaken. Under the
circumstances, the more reasonable interpretation of the act of the appellee
Christian in receiving the monthly payments of US$750.00 is that appellee Christian
merely allowed appellant Swagman to pay whatever amount the latter is capable of.

180

This interpretation is supported by the letter of demand dated December 16, 1998
wherein appellee Christian demanded from appellant Swagman to return the
principal loan in the amount of US$150,000 plus unpaid interest in the amount of
US$13,500.00
...
Appellant Swagman, likewise, contends that, at the time of the filing of the
complaint, appellee Christian ha[d] no cause of action because none of the
promissory notes was due and demandable.
Again, We are not persuaded.
...
In the case at bench, while it is true that appellant Swagman raised in its Answer
the issue of prematurity in the filing of the complaint, appellant Swagman
nonetheless failed to object to appellee Christians presentation of evidence to the
effect that the promissory notes have become due and demandable.
The afore-quoted rule allows a complaint which states no cause of action to be
cured either by evidence presented without objection or, in the event of an
objection sustained by the court, by an amendment of the complaint with leave of
court (Herrera, Remedial Law, Vol. VII, 1997 ed., p. 108).[8]
Its motion for reconsideration having been denied by the Court of Appeals in its
Resolution of 4 December 2003,[9] the petitioner came to this Court raising the
following issues:
I.
WHERE THE DECISION OF THE TRIAL COURT DROPPING TWO DEFENDANTS
HAS BECOME FINAL AND EXECUTORY, MAY THE RESPONDENT COURT OF APPEALS
STILL STUBBORNLY CONSIDER THEM AS APPELLANTS WHEN THEY DID NOT APPEAL?
II.
WHERE THERE IS NO CAUSE OF ACTION, IS THE DECISION OF THE LOWER
COURT VALID?
III.
MAY THE RESPONDENT COURT OF APPEALS VALIDLY AFFIRM A DECISION OF
THE LOWER COURT WHICH IS INVALID DUE TO LACK OF CAUSE OF ACTION?
IV.
WHERE THERE IS A VALID NOVATION, MAY THE ORIGINAL TERMS OF
CONTRACT WHICH HAS BEEN NOVATED STILL PREVAIL?[10]
The petitioner harps on the absence of a cause of action at the time the private
respondents complaint was filed with the trial court. In connection with this, the
petitioner raises the issue of novation by arguing that its obligations under the three
promissory notes were novated by the renegotiation that happened in December
1997 wherein the private respondent agreed to waive the interest in each of the
three promissory notes and to accept US$750 per month as installment payment for
the principal loans in the total amount of US$150,000. Lastly, the petitioner
questions the act of the Court of Appeals in considering Hegerty and Infante as
appellants when they no longer appealed because the trial court had already
absolved them of the liability of the petitioner corporation.
On the other hand, the private respondent asserts that this petition is a mere ploy
to continue delaying the payment of a just obligation. Anent the fact that Hegerty
and Atty. Infante were considered by the Court of Appeals as appellants, the private
respondent finds it immaterial because they are not affected by the assailed
decision anyway.

181

Cause of action, as defined in Section 2, Rule 2 of the 1997 Rules of Civil Procedure,
is the act or omission by which a party violates the right of another. Its essential
elements are as follows:
1. A right in favor of the plaintiff by whatever means and under whatever law it
arises or is created;
2. An obligation on the part of the named defendant to respect or not to violate
such right; and
3. Act or omission on the part of such defendant in violation of the right of the
plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for
which the latter may maintain an action for recovery of damages or other
appropriate relief.[11]
It is, thus, only upon the occurrence of the last element that a cause of action
arises, giving the plaintiff the right to maintain an action in court for recovery of
damages or other appropriate relief.
It is undisputed that the three promissory notes were for the amount of P50,000
each and uniformly provided for (1) a term of three years; (2) an interest of 15 %
per annum, payable quarterly; and (3) the repayment of the principal loans after
three years from their respective dates. However, both the Court of Appeals and
the trial court found that a renegotiation of the three promissory notes indeed
happened in December 1997 between the private respondent and the petitioner
resulting in the reduction not waiver of the interest from 15% to 6% per annum,
which from then on was payable monthly, instead of quarterly. The term of the
principal loans remained unchanged in that they were still due three years from the
respective dates of the promissory notes. Thus, at the time the complaint was filed
with the trial court on 2 February 1999, none of the three promissory notes was due
yet; although, two of the promissory notes with the due dates of 7 August 1999 and
14 March 2000 matured during the pendency of the case with the trial court. Both
courts also found that the petitioner had been religiously paying the private
respondent US$750 per month from January 1998 and even during the pendency of
the case before the trial court and that the private respondent had accepted all
these monthly payments.
With these findings of facts, it has become glaringly obvious that when the
complaint for a sum of money and damages was filed with the trial court on 2
February 1999, no cause of action has as yet existed because the petitioner had not
committed any act in violation of the terms of the three promissory notes as
modified by the renegotiation in December 1997. Without a cause of action, the
private respondent had no right to maintain an action in court, and the trial court
should have therefore dismissed his complaint.
Despite its finding that the petitioner corporation did not violate the modified terms
of the three promissory notes and that the payment of the principal loans were not
yet due when the complaint was filed, the trial court did not dismiss the complaint,
citing Section 5, Rule 10 of the 1997 Rules of Civil Procedure, which reads:
Section 5. Amendment to conform to or authorize presentation of evidence. When
issues not raised by the pleadings are tried with the express or implied consent of
the parties, they shall be treated in all respects as if they had been raised in the
pleadings. Such amendment of the pleadings as may be necessary to cause them to
conform to the evidence and to raise these issues may be made upon motion of any
party at any time, even after judgment; but failure to amend does not affect the
result of the trial of these issues. If evidence is objected to at the trial on the ground
that it is not within the issues made by the pleadings, the court may allow the
pleadings to be amended and shall do so with liberality if the presentation of the
merits of the action and the ends of substantial justice will be subserved thereby.
The court may grant a continuance to enable the amendment to be made.

182

According to the trial court, and sustained by the Court of Appeals, this Section
allows a complaint that does not state a cause of action to be cured by evidence
presented without objection during the trial. Thus, it ruled that even if the private
respondent had no cause of action when he filed the complaint for a sum of money
and damages because none of the three promissory notes was due yet, he could
nevertheless recover on the first two promissory notes dated 7 August 1996 and 14
March 1997, which became due during the pendency of the case in view of the
introduction of evidence of their maturity during the trial.
Such interpretation of Section 5, Rule 10 of the 1997 Rules of Civil Procedure is
erroneous.
Amendments of pleadings are allowed under Rule 10 of the 1997 Rules of Civil
Procedure in order that the actual merits of a case may be determined in the most
expeditious and inexpensive manner without regard to technicalities, and that all
other matters included in the case may be determined in a single proceeding,
thereby avoiding multiplicity of suits.[12] Section 5 thereof applies to situations
wherein evidence not within the issues raised in the pleadings is presented by the
parties during the trial, and to conform to such evidence the pleadings are
subsequently amended on motion of a party. Thus, a complaint which fails to state
a cause of action may be cured by evidence presented during the trial.
However, the curing effect under Section 5 is applicable only if a cause of action in
fact exists at the time the complaint is filed, but the complaint is defective for
failure to allege the essential facts. For example, if a complaint failed to allege the
fulfillment of a condition precedent upon which the cause of action depends,
evidence showing that such condition had already been fulfilled when the complaint
was filed may be presented during the trial, and the complaint may accordingly be
amended thereafter.[13] Thus, in Roces v. Jalandoni,[14] this Court upheld the trial
court in taking cognizance of an otherwise defective complaint which was later
cured by the testimony of the plaintiff during the trial. In that case, there was in
fact a cause of action and the only problem was the insufficiency of the allegations
in the complaint. This ruling was reiterated in Pascua v. Court of Appeals.[15]
It thus follows that a complaint whose cause of action has not yet accrued cannot
be cured or remedied by an amended or supplemental pleading alleging the
existence or accrual of a cause of action while the case is pending.[16] Such an
action is prematurely brought and is, therefore, a groundless suit, which should be
dismissed by the court upon proper motion seasonably filed by the defendant. The
underlying reason for this rule is that a person should not be summoned before the
public tribunals to answer for complaints which are immature. As this Court
eloquently said in Surigao Mine Exploration Co., Inc. v. Harris:[17]
It is a rule of law to which there is, perhaps, no exception, either at law or in equity,
that to recover at all there must be some cause of action at the commencement of
the suit. As observed by counsel for appellees, there are reasons of public policy
why there should be no needless haste in bringing up litigation, and why people
who are in no default and against whom there is yet no cause of action should not
be summoned before the public tribunals to answer complaints which are
groundless. We say groundless because if the action is immature, it should not be
entertained, and an action prematurely brought is a groundless suit.
It is true that an amended complaint and the answer thereto take the place of the
originals which are thereby regarded as abandoned (Reynes vs. Compaa General
de Tabacos [1912], 21 Phil. 416; Ruyman and Farris vs. Director of Lands [1916], 34
Phil., 428) and that the complaint and answer having been superseded by the
amended complaint and answer thereto, and the answer to the original complaint
not having been presented in evidence as an exhibit, the trial court was not
authorized to take it into account. (Bastida vs. Menzi & Co. [1933], 58 Phil., 188.)
But in none of these cases or in any other case have we held that if a right of action

183

did not exist when the original complaint was filed, one could be created by filing an
amended complaint. In some jurisdictions in the United States what was termed an
imperfect cause of action could be perfected by suitable amendment (Brown vs.
Galena Mining & Smelting Co., 32 Kan., 528; Hooper vs. City of Atlanta, 26 Ga. App.,
221) and this is virtually permitted in Banzon and Rosauro vs. Sellner ([1933], 58
Phil., 453); Asiatic Potroleum [sic] Co. vs. Veloso ([1935], 62 Phil., 683); and recently
in Ramos vs. Gibbon (38 Off. Gaz., 241). That, however, which is no cause of action
whatsoever cannot by amendment or supplemental pleading be converted into a
cause of action: Nihil de re accrescit ei qui nihil in re quando jus accresceret habet.
We are therefore of the opinion, and so hold, that unless the plaintiff has a valid and
subsisting cause of action at the time his action is commenced, the defect cannot
be cured or remedied by the acquisition or accrual of one while the action is
pending, and a supplemental complaint or an amendment setting up such afteraccrued cause of action is not permissible. (Emphasis ours).
Hence, contrary to the holding of the trial court and the Court of Appeals, the defect
of lack of cause of action at the commencement of this suit cannot be cured by the
accrual of a cause of action during the pendency of this case arising from the
alleged maturity of two of the promissory notes on 7 August 1999 and 14 March
2000.
Anent the issue of novation, this Court observes that the petitioner corporation
argues the existence of novation based on its own version of what transpired during
the renegotiation of the three promissory notes in December 1997. By using its
own version of facts, the petitioner is, in a way, questioning the findings of facts of
the trial court and the Court of Appeals.
As a rule, the findings of fact of the trial court and the Court of Appeals are final and
conclusive and cannot be reviewed on appeal to the Supreme Court[18] as long as
they are borne out by the record or are based on substantial evidence.[19] The
Supreme Court is not a trier of facts, its jurisdiction being limited to reviewing only
errors of law that may have been committed by the lower courts. Among the
exceptions is when the finding of fact of the trial court or the Court of Appeals is not
supported by the evidence on record or is based on a misapprehension of facts.
Such exception obtains in the present case.[20]
This Court finds to be contrary to the evidence on record the finding of both the trial
court and the Court of Appeals that the renegotiation in December 1997 resulted in
the reduction of the interest from 15% to 6% per annum and that the monthly
payments of US$750 made by the petitioner were for the reduced interests.
It is worthy to note that the cash voucher dated January 1998[21] states that the
payment of US$750 represents INVESTMENT PAYMENT. All the succeeding cash
vouchers describe the payments from February 1998 to September 1999 as
CAPITAL REPAYMENT.[22] All these cash vouchers served as receipts evidencing
private respondents acknowledgment of the payments made by the petitioner: two
of which were signed by the private respondent himself and all the others were
signed by his representatives.
The private respondent even identified and
confirmed the existence of these receipts during the hearing. [23] Significantly,
cognizant of these receipts, the private respondent applied these payments to the
three consolidated principal loans in the summary of payments he submitted to the
court.[24]
Under Article 1253 of the Civil Code, if the debt produces interest, payment of the
principal shall not be deemed to have been made until the interest has been
covered. In this case, the private respondent would not have signed the receipts
describing the payments made by the petitioner as capital repayment if the
obligation to pay the interest was still subsisting. The receipts, as well as private
respondents summary of payments, lend credence to petitioners claim that the
payments were for the principal loans and that the interests on the three

184

consolidated loans were waived by the private respondent during the undisputed
renegotiation of the loans on account of the business reverses suffered by the
petitioner at the time.
There was therefore a novation of the terms of the three promissory notes in that
the interest was waived and the principal was payable in monthly installments of
US$750. Alterations of the terms and conditions of the obligation would generally
result only in modificatory novation unless such terms and conditions are
considered to be the essence of the obligation itself.[25] The resulting novation in
this case was, therefore, of the modificatory type, not the extinctive type, since the
obligation to pay a sum of money remains in force.
Thus, since the petitioner did not renege on its obligation to pay the monthly
installments conformably with their new agreement and even continued paying
during the pendency of the case, the private respondent had no cause of action to
file the complaint. It is only upon petitioners default in the payment of the monthly
amortizations that a cause of action would arise and give the private respondent a
right to maintain an action against the petitioner.
Lastly, the petitioner contends that the Court of Appeals obstinately included its
President Infante and Vice-President Hegerty as appellants even if they did not
appeal the trial courts decision since they were found to be not personally liable for
the obligation of the petitioner. Indeed, the Court of Appeals erred in referring to
them as defendants-appellants; nevertheless, that error is no cause for alarm
because its ruling was clear that the petitioner corporation was the one solely liable
for its obligation. In fact, the Court of Appeals affirmed in toto the decision of the
trial court, which means that it also upheld the latters ruling that Hegerty and
Infante were not personally liable for the pecuniary obligations of the petitioner to
the private respondent.
In sum, based on our disquisition on the lack of cause of action when the complaint
for sum of money and damages was filed by the private respondent, the petition in
the case at bar is impressed with merit.
WHEREFORE, the petition is hereby GRANTED. The Decision of 5 September 2003 of
the Court of Appeals in CA-G.R. CV No. 68109, which affirmed the Decision of 5 May
2000 of the Regional Trial Court of Baguio, Branch 59, granting in part private
respondents complaint for sum of money and damages, and its Resolution of 4
December 2003, which denied petitioners motion for reconsideration are hereby
REVERSED and SET ASIDE. The complaint docketed as Civil Case No. 4282-R is
hereby DISMISSED for lack of cause of action.
No costs.
SO ORDERED.
Quisumbing, Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

Joseph v. Bautista, G.R. No. L-41423, February 23, 1989

G.R. No. L-41423

February 23, 1989

LUIS JOSEPH, petitioner


vs.
HON. CRISPIN V. BAUTISTA, PATROCINIO PEREZ, ANTONIO SIOSON, JACINTO
PAGARIGAN, ALBERTO CARDENO and LAZARO VILLANUEVA, respondents.
Jose M. Castillo for petitioner.
Arturo Z. Sioson for private respondent, Patrocinio Perez.
185

Cipriano B. Farrales for private respondents except P. Perez.

REGALAD0, J.:
Petitioner prays in this appeal by certiorari for the annulment and setting aside of
the order, dated July 8, 1975, dismissing petitioner's complaint, as well as the order,
dated August 22, 1975, denying his motion for reconsideration of said dismissal,
both issued by respondent Judge Crispin V. Bautista of the former Court of First
Instance of Bulacan, Branch III.
Petitioner herein is the plaintiff in Civil Case No. 50-V-73 entitled "Luis Joseph vs.
Patrocinio Perez, Domingo Villa y de Jesus, Rosario Vargas, Antonio Sioson, Lazaro
Villanueva and Jacinto Pagarigan", filed before the Court of First Instance of Bulacan,
Branch III, and presided over by respondent Judge Crispin V. Bautista; while private
respondents Patrocinio Perez, Antonio Sioson, Jacinto Pagarigan and Lazaro
Villanueva are four of the defendants in said case. Defendant Domingo Villa y de
Jesus did not answer either the original or the amended complaint, while defendant
Rosario Vargas could not be served with summons; and respondent Alberto Cardeno
is included herein as he was impleaded by defendant Patrocinio Perez, one of
respondents herein, in her cross-claim.
The generative facts of this case, as culled from the written submission of the
parties, are as follows:
Respondent Patrocinio Perez is the owner of a cargo truck with Plate No. 25-2 YT
Phil. '73 for conveying cargoes and passengers for a consideration from Dagupan
City to Manila. On January 12, 1973, said cargo truck driven by defendant Domingo
Villa was on its way to Valenzuela, Bulacan from Pangasinan. Petitioner, with a cargo
of livestock, boarded the cargo truck at Dagupan City after paying the sum of P 9.00
as one way fare to Valenzuela, Bulacan. While said cargo truck was negotiating the
National Highway proceeding towards Manila, defendant Domingo Villa tried to
overtake a tricycle likewise proceeding in the same direction. At about the same
time, a pick-up truck with Plate No. 45-95 B, supposedly owned by respondents
Antonio Sioson and Jacinto Pagarigan, then driven by respondent Lazaro Villanueva,
tried to overtake the cargo truck which was then in the process of overtaking the
tricycle, thereby forcing the cargo truck to veer towards the shoulder of the road
and to ram a mango tree. As a result, petitioner sustained a bone fracture in one of
his legs. 1
The following proceedings thereafter took place: 2
Petitioner filed a complaint for damages against respondent Patrocinio Perez, as
owner of the cargo truck, based on a breach of contract of carriage and against
respondents Antonio Sioson and Lazaro Villanueva, as owner and driver,
respectively, of the pick-up truck, based on quasi-delict.
Respondent Sioson filed his answer alleging that he is not and never was an owner
of the pick-up truck and neither would he acquire ownership thereof in the future.
On September 24, 1973, petitioner, with prior leave of court, filed his amended
complaint impleading respondents Jacinto Pagarigan and a certain Rosario Vargas as
additional alternative defendants. Petitioner apparently could not ascertain who the
real owner of said cargo truck was, whether respondents Patrocinio Perez or Rosario
Vargas, and who was the real owner of said pick-up truck, whether respondents
Antonio Sioson or Jacinto Pagarigan.
Respondent Perez filed her amended answer with crossclaim against her codefendants for indemnity and subrogation in the event she is ordered to pay

186

petitioner's claim, and therein impleaded cross-defendant Alberto Cardeno as


additional alternative defendant.
On September 27, 1974, respondents Lazaro Villanueva, Alberto Cardeno, Antonio
Sioson and Jacinto Pagarigan, thru their insurer, Insurance Corporation of the
Philippines, paid petitioner's claim for injuries sustained in the amount of P
1,300.00. By reason thereof, petitioner executed a release of claim releasing from
liability the following parties, viz: Insurance Corporation of the Philippines, Alberto
Cardeno, Lazaro Villanueva, Antonio Sioson and Jacinto Pagarigan.
On December 2, 1974, respondents Lazaro Villanueva, Alberto Cardeno and their
insurer, the Insurance Corporation of the Philippines, paid respondent Patrocinio
Perez' claim for damages to her cargo truck in the amount of P 7,420.61.
Consequently, respondents Sioson, Pagarigan, Cardeno and Villanueva filed a
"Motion to Exonerate and Exclude Defs/ Cross defs. Alberto Cardeno, Lazaro
Villanueva, Antonio Sioson and Jacinto Pagarigan on the Instant Case", alleging that
respondents Cardeno and Villanueva already paid P 7,420.61 by way of damages to
respondent Perez, and alleging further that respondents Cardeno, Villanueva, Sioson
and Pagarigan paid P 1,300.00 to petitioner by way of amicable settlement.
Thereafter, respondent Perez filed her "Opposition to Cross-defs.' motion dated Dec.
2, 1974 and Counter Motion" to dismiss. The so-called counter motion to dismiss
was premised on the fact that the release of claim executed by petitioner in favor of
the other respondents inured to the benefit of respondent Perez, considering that all
the respondents are solidarity liable to herein petitioner.
On July 8, 1975, respondent judge issued the questioned order dismissing the case,
and a motion for the reconsideration thereof was denied. Hence, this appeal,
petitioner contending that respondent judge erred in declaring that the release of
claim executed by petitioner in favor of respondents Sioson, Villanueva and
Pagarigan inured to the benefit of respondent Perez; ergo, it likewise erred in
dismissing the case.
We find the present recourse devoid of merit.
The argument that there are two causes of action embodied in petitioner's
complaint, hence the judgment on the compromise agreement under the cause of
action based on quasi-delict is not a bar to the cause of action for breach of contract
of carriage, is untenable.
A cause of action is understood to be the delict or wrongful act or omission
committed by the defendant in violation of the primary rights of the plaintiff. 3 It is
true that a single act or omission can be violative of various rights at the same time,
as when the act constitutes juridically a violation of several separate and distinct
legal obligations. However where there is only one delict or wrong, there is but a
single cause of action regardless of the number of rights that may have been
violated belonging to one person. 4
The singleness of a cause of action lies in the singleness of the- delict or wrong
violating the rights of one person. Nevertheless, if only one injury resulted from
several wrongful acts, only one cause of action arises. 5 In the case at bar, there is
no question that the petitioner sustained a single injury on his person. That vested
in him a single cause of action, albeit with the correlative rights of action against
the different respondents through the appropriate remedies allowed by law.
The trial court was, therefore, correct in holding that there was only one cause of
action involved although the bases of recovery invoked by petitioner against the
defendants therein were not necessarily Identical since the respondents were not
identically circumstanced. However, a recovery by the petitioner under one remedy
necessarily bars recovery under the other. This, in essence, is the rationale for the

187

proscription in our law against double recovery for the same act or omission which,
obviously, stems from the fundamental rule against unjust enrichment.
There is no question that the respondents herein are solidarily liable to petitioner.
On the evidence presented in the court below, the trial court found them to be so
liable. It is undisputed that petitioner, in his amended complaint, prayed that the
trial court hold respondents jointly and severally liable. Furthermore, the allegations
in the amended complaint clearly impleaded respondents as solidary debtors. We
cannot accept the vacuous contention of petitioner that said allegations are
intended to apply only in the event that execution be issued in his favor. There is
nothing in law or jurisprudence which would countenance such a procedure.
The respondents having been found to be solidarity liable to petitioner, the full
payment made by some of the solidary debtors and their subsequent release from
any and all liability to petitioner inevitably resulted in the extinguishment and
release from liability of the other solidary debtors, including herein respondent
Patrocinio Perez.
The claim that there was an agreement entered into between the parties during the
pre-trial conference that, after such payment made by the other respondents, the
case shall proceed as against respondent Perez is both incredible and
unsubstantiated. There is nothing in the records to show, either by way of a pre-trial
order, minutes or a transcript of the notes of the alleged pre-trial hearing, that there
was indeed such as agreement.
WHEREFORE, the challenged orders of the respondent judge are hereby AFFIRMED.
SO ORDERED.
Melencio-Herrera, (Chairperson), Paras, Padilla, and Sarmiento, JJ., concur.

Sec. 3. One suit for a single cause of action


Phil. Bank of Comm. v. Lim, G.R. No. 158138, April 12, 2005

THIRD DIVISION
[G.R. No. 158138. April 12, 2005]

PHILIPPINE BANK OF, COMMUNICATIONS, petitioner, vs. ELENA LIM, RAMON


CALDERON, and TRI-ORO INTERNATIONAL TRADING & MANUFACTURING
CORPORATION, respondents.
DECISION
PANGANIBAN, J.:
A restrictive stipulation on the venue of actions contained in a promissory note
applies to the surety agreement supporting it, because the nature of the two
contracts and the factual circumstances surrounding their execution are intertwined
or interconnected. The surety agreement is merely an accessory to the principal
loan agreement embodied in the promissory note. Hence, the enforcement of the
former depends upon the latter.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing
the April 29, 2003 Decision[2] of the Court of Appeals (CA) in CA-GR SP No. 69786.
The challenged Decision disposed as follows:
WHEREFORE, based on the foregoing, the instant petition is hereby GRANTED. The
assailed Orders dated June 9, 2000 and January 9, 2002 are hereby ANNULED and

188

SET ASIDE. Civil Case No. 99-94976 is hereby ordered DISMISSED without prejudice
to the filing thereof in the venue exclusively stipulated by the parties.[3]
The Facts
The facts are related by the CA as follows:
On September 3, 1999, the Philippine Bank of Communications (hereinafter
[petitioner]) filed a complaint against [Respondents Elena Lim, Ramon Calderon
and Tri-Oro International Trading & Manufacturing Corporation (Tri-Oro for brevity)]
with the Regional Trial Court of Manila for the collection of a deficiency amounting to
P4,014,297.23 exclusive of interest. [Petitioner] alleged therein that [respondents]
obtained a loan from it and executed a continuing surety agreement dated
November 16, 1995 in favor of [petitioner] for all loans, credits, etc., that were
extended or may be extended in the future to [respondents]. [Petitioner] granted a
renewal of said loan upon [respondents] request, the most recent being on January
21, 1998 as evidenced by Promissory Note Renewal BD-Variable No. 8298021001 in
the amount of P3,000,000.00. It was expressly stipulated therein that the venue for
any legal action that may arise out of said promissory note shall be Makati City, to
the exclusion of all other courts x x x. [Respondents allegedly] failed to pay said
obligation upon maturity. Thus, [petitioner] foreclosed the real estate mortgage
executed by [respondents] valued at P1,081,600.00 leaving a deficiency balance of
P4,014,297.23 as of August 31, 1999.
[Respondents] moved to dismiss the complaint on the ground of improper venue,
invoking the stipulation contained in the last paragraph of the promissory note with
respect to the restrictive/exclusive venue. [The trial court] denied said motion
asseverating that [petitioner] ha[d] separate causes of action arising from the
promissory note and the continuing surety agreement. Thus, [under] Rule 4,
Section 2, of the 1997 Rules of Civil Procedure, as amended, x x x venue was
properly laid in Manila. [The trial court] supported [its] order with cases where
venue was held to be merely permissive. A motion for reconsideration of said order
was likewise denied.[4]
Ruling of the Court of Appeals
On appeal, the CA ruled that respondents alleged debt was based on the
Promissory Note, which had provided an exclusionary stipulation on venue to the
exclusion of all other courts.[5] The parties Surety Agreement, though silent as to
venue, was an accessory contract that should have been interpreted in consonance
with the Promissory Note.[6]
Hence, this Petition.[7]
The Issue
Petitioner raises the following issue for our consideration:
Whether or not the Honorable Court of Appeals had decided the issue of venue in a
way not in accord with law and applicable decisions of this Honorable Court and had
thereby departed from the accepted and usual course of judicial proceedings, as to
call for this Honorable Supreme Courts power of supervision and appellate
review.[8]
The Courts Ruling
The Petition is unmeritorious.
Sole Issue:
Venue

189

At the outset, this Court observes that petitioner took liberties with the stipulated
facts to suit its allegations in the present Petition. In its Complaint, petitioner bank
averred that respondents had entered into the Surety Agreement (SA) to guarantee
existing and future credit facilities, and that they had executed the Promissory Note
(PN) to document their loan.[9] Now, the bank is claiming that Tri-Oro issued the PN
on which the other respondents should be made liable as sureties.[10]
This strategy is obviously intended to disconnect the SA from the PN and to support
the claim of petitioner that the stipulation on venue does not apply to the SA.
However, as will be discussed below, the cause of action to recover on the basis of
the SA is inseparable from that which is based on the PN.
Rule on Venue
Section 2 of Rule 4 of the Rules of Court provides that personal actions[11] must be
commenced and tried (1) in the place where the plaintiff resides, or (2) where the
defendant resides, or (3) in case of non-resident defendants, where they may be
found, at the choice of the plaintiff.[12] This rule on venue does not apply when the
law specifically provides otherwise, or when -- before the filing of the action -- the
contracting parties agree in writing on the exclusive venue thereof.[13] Venue is
not jurisdictional and may be waived by the parties.[14]
A stipulation as to venue does not preclude the filing of the action in other places,
unless qualifying or restrictive words are used in the agreement.[15]
In the instant case, the stipulation on the exclusivity of the venue as stated in the
PN is not at issue. What petitioner claims is that there was no restriction on the
venue, because none was stipulated in the SA on which petitioner had allegedly
based its suit.[16] Accordingly, the action on the SA may be filed in Manila,
petitioners place of residence.
Petitioner adds that its Complaint filed in the trial court had two causes of action:
the first was founded on a breach of the PN; and the second, on a violation of the
SA.[17] Consequently, it was allegedly correct to join the causes of action and to file
the case in Manila, per Section 5 of Rule 2 of the Rules of Court, which reads:[18]
Section 5. Joinder of Causes of Action. A party may in one pleading assert, in the
alternative or otherwise, as many causes of action as he may have against an
opposing party, subject to the following conditions:
xxx

xxx

xxx

(c)
Where the causes of action are between the same parties but pertain to
different venue or jurisdictions, the joinder may be allowed in the Regional Trial
Court provided one of the causes of action falls within the jurisdiction of the said
court and venue lies therein.[19]
Surety Agreement
Suretyship arises upon the solidary binding of a person -- deemed the surety -- with
the principal debtor, for the purpose of fulfilling an obligation.[20] The prestation is
not an original and direct obligation for the performance of the suretys own act, but
merely accessory or collateral to the obligation contracted by the principal.[21]
Although the surety contract is secondary to the principal obligation, the surety
assumes liability as a regular party to the undertaking.[22]
In enforcing a surety contract, the complementary-contracts-construed-together
doctrine finds application.[23] According to this principle, an accessory contract
must be read in its entirety and together with the principal agreement.[24] This
principle is used in construing contractual stipulations in order to arrive at their true
meaning; certain stipulations cannot be segregated and then made to control.[25]

190

This no-segregation principle is based on Article 1374 of the Civil Code, which we
quote:
Art. 1374. The various stipulations of a contract shall be interpreted together,
attributing to the doubtful ones that sense which may result from all of them taken
jointly.
The aforementioned doctrine is applicable to the present case. Incapable of
standing by itself, the SA can be enforced only in conjunction with the PN. The
latter documents the debt that is sought to be collected in the action against the
sureties.
The factual milieu of the present case shows that the SA was entered into to
facilitate existing and future loan agreements. Petitioner approved the loan covered
by the PN, partly because of the SA that assured the payment of the principal
obligation. The circumstances that related to the issuance of the PN and the SA are
so intertwined that neither one could be separated from the other. It makes no
sense to argue that the parties to the SA were not bound by the stipulations in the
PN.
Notably, the PN was a contract of adhesion that petitioner required the principal
debtor to execute as a condition of the approval of the loan. It was made in the
form and language prepared by the bank. By inserting the provision that Makati
City would be the venue for any legal action [that] may arise out of [the]
Promissory Note,[26] petitioner also restricted the venue of actions against the
sureties. The legal action against the sureties arose not only from the SA, but also
from the PN.
Cause of Action
Petitioner correctly argues that there are two causes of action contained in its
Complaint. A cause of action is a partys act or omission that violates the rights of
the other.[27] Only one suit may be commenced for a single cause of action.[28] If
two or more suits are instituted on the basis of the same cause of action, only one
case should remain and the others must be dismissed.[29]
As against Tri-Oro International Trading & Manufacturing Corporation, petitioners
cause of action is the alleged failure to pay the debt in violation of the PN; as
against Elena Lim and Ramon Calderon, in violation of the SA.
Because of the variance between the causes of action, petitioner could have filed
separate actions against respondents to recover the debt, on condition that it could
not recover twice from the same cause. It could have proceeded against only one
or all of them,[30] as full payment by any one of them would have extinguished the
obligation.[31] By the same token, respondents could have been joined as
defendants in one suit, because petitioners alleged right of relief arose from the
same transaction or series of transactions that had common questions of fact.[32]
To avoid a multiplicity of suits, joinder of parties is encouraged by the law.
The cause of action, however, does not affect the venue of the action. The vital
issue in the present case is whether the action against the sureties is covered by
the restriction on venue stipulated in the PN. As earlier stated, the answer is in the
affirmative. Since the cases pertaining to both causes of action are restricted to
Makati City as the proper venue, petitioner cannot rely on Section 5 of Rule 2 of the
Rules of Court.
Liberal Construction
Petitioners final plea for liberality in applying the rules on venue must be rejected.
As earlier discussed, the PN was a contract of adhesion. Ambiguities therein are to
be construed against the party that prepared the contract.[33] On the same

191

principle, petitioner can no longer disavow the stipulation on venue, considering


that it drafted the Surety Agreement. Besides, this alleged technicality caused no
miscarriage of substantial justice, as petitioner may refile the case.[34] The
inconveniences brought about by its failure to observe the rules on venue sprang
from its own acts. Hence, it cannot blame the courts or anyone else for the
resulting delay in the adjudication of the merits of its cause.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED.
Costs against petitioner.
SO ORDERED.
Sandoval-Gutierrez, Corona, Carpio-Morales, and Garcia, JJ., concur.

Sec. 4. Splitting a single cause of action; effect of


Chua v. Metrobank, G.R. No. 182311, August 19, 2009

THIRD DIVISION

FIDEL O. CHUA and FILIDEN REALTY AND DEVELOPMENT CORPORATION,


Petitioners,

- versus -

METROPOLITAN BANK & TRUST COMPANY, ATTY. ROMUALDO CELESTRA, ATTY.


ANTONIO V. VIRAY, ATTY. RAMON MIRANDA and ATTY. POMPEYO MAYNIGO,
Respondents.
G.R. No. 182311

Present:
CORONA, J.,*
CARPIO MORALES,**
CHICO-NAZARIO,***
Acting Chairperson,
VELASCO, JR., and
NACHURA, JJ.

Promulgated:
August 19, 2009
x---------------------------- ---------------------x

DECISION

192

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
assailing the Decision,[1] dated 31 January 2008, later upheld in a Resolution[2]
dated 28 March 2008, both rendered by the Court of Appeals in CA-G.R. CV No.
88087. The Court of Appeals, in its assailed Decision, affirmed the Order[3] dated 3
July 2006 of Branch 258 of the Regional Trial Court of Paraaque City (RTC-Branch
258), dismissing the action for damages, docketed as Civil Case No. CV-05-0402,
filed by petitioners Fidel O. Chua (Chua) and Filiden Realty and Development
Corporation (Filiden), on the ground of forum shopping.
Petitioner Chua is president of co-petitioner Filiden, a domestic corporation,
engaged in the realty business.[4] Respondent Metropolitan Bank and Trust Co.
(respondent Metrobank) is a domestic corporation and a duly licensed banking
institution.[5]
Sometime in 1988, petitioners obtained from respondent Metrobank a loan of
P4,000,000.00, which was secured by a real estate mortgage (REM) on parcels of
land covered by Transfer Certificates of Title (TCTs) No. (108020)1148, No. 93919,
and No. 125185, registered in petitioner Chuas name (subject properties).[6] Since
the value of the collateral was more than the loan, petitioners were given an open
credit line for future loans. On 18 September 1995, 17 January 1996, 31 July 1996,
21 January 1997, and 12 October 1998, petitioners obtained other loans from
respondent Metrobank, and the real estate mortgages were repeatedly amended in
accordance with the increase in petitioners liabilities.[7]
Having failed to fully pay their obligations, petitioners entered into a Debt
Settlement Agreement[8] with respondent Metrobank on 13 January 2000, whereby
the loan obligations of the former were restructured. The debt consisted of a total
principal amount of P79,650,000.00, plus unpaid interest of P7,898,309.02, and
penalty charges of P552,784.96. Amortization payments were to be made in
accordance with the schedule attached to the agreement.
In a letter[9] dated 28 February 2001, the lawyers of respondent Metrobank
demanded that petitioners fully pay and settle their liabilities, including interest and
penalties, in the total amount of P103,450,391 as of 16 January 2001, as well as the
stipulated attorneys fees, within three days from receipt of said letter.
When petitioners still failed to pay their loans, respondent Metrobank sought to
extra-judicially foreclose the REM constituted on the subject properties. Upon a
verified Petition for Foreclosure filed by respondent Metrobank on 25 April 2001,
respondent Atty. Romualdo Celestra (Atty. Celestra) issued a Notice of Sale dated 26
April 2001, wherein the mortgage debt was set at P88,101,093.98, excluding unpaid
interest and penalties (to be computed from 14 September 1999), attorneys fees,
legal fees, and other expenses for the foreclosure and sale. The auction sale was
scheduled on 31 May 2001.[10] On 4 May 2001, petitioners received a copy of the
Notice of Sale.[11]
On 28 May 2001, petitioner Chua, in his personal capacity and acting on behalf of
petitioner Filiden, filed before Branch 257 of the Regional Trial Court of Paraaque
(RTC-Branch 257), a Complaint for Injunction with Prayer for Issuance of Temporary
Restraining Order (TRO), Preliminary Injunction and Damages,[12] against
respondents Atty. Celestra, docketed as Civil Case No. CV-01-0207.
Upon the
motion of petitioners, RTC-Branch 257 issued a TRO enjoining respondents
Metrobank and Atty. Celestra from conducting the auction sale of the mortgaged
properties on 31 May 2001.[13]

193

After the expiration of the TRO on 18 June 2001, and no injunction having been
issued by RTC-Branch 257, respondent Atty. Celestra reset the auction sale on 8
November 2001. On 8 November 2001, the rescheduled date of the auction sale,
RTC-Branch 257 issued an Order directing that the said sale be reset anew after 8
November 2001. The Order was served on 8 November 2001, on respondent Atty.
Celestras daughter, Arlene Celestra, at a coffee shop owned by the formers other
daughter, Grace Celestra Aguirre. The auction sale, however, proceeded on 8
November 2001, and a Certificate of Sale was accordingly issued to respondent
Metrobank as the highest bidder of the foreclosed properties. [14]
On 13 February 2002, petitioners filed with RTC-Branch 257 a Motion to Admit
Amended Complaint[15] in Civil Case No. CV-01-0207. The Amended Verified
Complaint,[16] attached to the said Motion, impleaded as additional defendant the
incumbent Register of Deeds of Paraaque City. Petitioners alleged that the
Certificate of Sale was a falsified document since there was no actual sale that took
place on 8 November 2001. And, even if an auction sale was conducted, the
Certificate of Sale would still be void because the auction sale was done in
disobedience to a lawful order of RTC-Branch 257. Relevant portions of the
Amended Complaint of petitioners read:
12-E. There was actually no auction sale conducted by [herein respondent] Atty.
Celestra on November 8, 2001 and the CERTIFICATE OF SALE (Annex K-2) is
therefore a FALSIFIED DOCUMENT and for which the appropriate criminal complaint
for falsification of official/public document will be filed against the said [respondent]
Celestra and the responsible officers of [herein respondent] Metrobank, in due time;
12-F. But even granting that an auction sale was actually conducted and that the
said Certificate of Sale is not a falsified document, the same document is a NULLITY
simply because the auction sale was done in disobedience to a lawful order of this
Court and that therefore the auction sale proceeding is NULL AND VOID AB INITIO.
[17]

Petitioners additionally prayed in their Amended Complaint for the award of


damages given the abuse of power of respondent Metrobank in the preparation,
execution, and implementation of the Debt Settlement Agreement with petitioners;
the bad faith of respondent Metrobank in offering the subject properties at a price
much lower than its assessed fair market value; and the gross violation by
respondents Metrobank and Atty. Celestra of the injunction.
Petitioners also sought, in their Amended Complaint, the issuance of a TRO or a writ
of preliminary injunction to enjoin respondent Atty. Celestra and all other persons
from proceeding with the foreclosure sale, on the premise that no auction sale was
actually held on 8 November 2001.
In an Order dated 6 March 2002, RTC-Branch 257 denied petitioners application for
injunction on the ground that the sale of the foreclosed properties rendered the
same moot and academic. The auction sale, which was conducted by respondents
Metrobank and Atty. Celestra, after the expiration of the TRO, and without
knowledge of the Order dated 8 November 2001 of RTC-Branch 257, was considered
as proper and valid.[18]
Petitioners filed a Motion for Reconsideration of the 6 March 2002 Order of RTCBranch 257. When RTC-Branch 257 failed to take any action on said Motion,
petitioners filed with the Court of Appeals a Petition for Certiorari, docketed as CAG.R. No. 70208. In a Decision dated 26 July 2002, the Court of Appeals reversed the
6 March 2002 Order of RTC-Branch 257 and remanded the case for further
proceedings. The Supreme Court dismissed the appeal of respondents with finality.
Thus, on 27 September 2005, RTC-Branch 257 set the hearing for the presentation
of evidence by respondent Metrobank for the application for preliminary injunction
on 9 November 2005.[19]

194

On 2 November 2005, petitioners sought the inhibition of Acting Executive Judge


Rolando How of RTC-Branch 257, who presided over Civil Case No. CV-01-0207.
Their motion was granted and the case was re-raffled to RTC-Branch 258.[20]
On 28 October 2005, petitioners filed with Branch 195 of the Regional Trial Court of
Paraaque (RTC-Branch 195) a Verified Complaint for Damages against respondents
Metrobank, Atty. Celestra, and three Metrobank lawyers, namely, Atty. Antonio Viray,
Atty. Ramon Miranda and Atty. Pompeyo Maynigo. The Complaint was docketed as
Civil Case No. CV-05-0402. Petitioners sought in their Complaint the award of
actual, moral, and exemplary damages against the respondents for making it
appear that an auction sale of the subject properties took place, as a result of
which, the prospective buyers of the said properties lost their interest and petitioner
Chua was prevented from realizing a profit of P70,000,000.00 from the intended
sale.[21]
Petitioners filed with RTC-Branch 195 a Motion to Consolidate[22] dated 27
December 2005, seeking the consolidation of Civil Case No. CV-05-0402, the action
for damages pending before said court, with Civil Case No. CV-01-0207, the
injunction case that was being heard before RTC-Branch 258, based on the following
grounds:
2. The above-captioned case is a complaint for damages as a result of the [herein
respondents] conspiracy to make it appear as if there was an auction sale
conducted on November 8, 2001 when in fact there was none. The properties
subject of the said auction sale are the same properties subject of Civil Case No. 010207.
3. Since the subject matter of both cases are the same properties and the parties of
both cases are almost the same, and both cases have the same central issue of
whether there was an auction sale, then necessarily, both cases should be
consolidated.

On 3 January 2006, respondents filed with RTC-Branch 195 an Opposition to Motion


to Consolidate with Prayer for Sanctions, praying for the dismissal of the Complaint
for Damages in Civil Case No. CV-05-0402, on the ground of forum shopping.[23]
In an Order dated 23 January 2006, RTC-Branch 195 granted the Motion to
Consolidate, and ordered that Civil Case No. CV-05-0402 be transferred to RTCBranch 258, which was hearing Civil Case No. 01-0207.[24]
After the two cases were consolidated, respondents filed two motions before RTCBranch 258: (1) Motion for Reconsideration of the Order dated 23 January 2006 of
RTC-Branch 195, which granted the Motion to Consolidate of petitioners; and (2)
Manifestation and Motion raising the ground of forum shopping, among the
affirmative defenses of respondents.[25] RTC-Branch 258 issued an Order on 3 July
2006, granting the first Motion of respondents, thus, dismissing Civil Case No. CV05-0402 on the ground of forum shopping,[26] and consequently, rendering the
second Motion of respondents moot. RTC-Branch 258 declared that the facts or
claims submitted by petitioners, the rights asserted, and the principal parties in the
two cases were the same. RTC-Branch 258 held in its 3 July 2006 Order[27] that:
It is, therefore, the honest belief of the Court that since there is identity of parties
and the rights asserted, the allegations of the defendant are found meritorious and
with legal basis, hence, the motion is GRANTED and this case is DISMISSED due to
forum shopping.
As regards the second motion, the same has already been mooted by the dismissal
of this case.

195

WHEREFORE, premises considered, the Motion for Reconsideration filed by the


defendants whereby this case is DISMISSED due to forum shopping and the
Manifestation and Motion likewise filed by the defendants has already been
MOOTED by the said dismissal.

From the foregoing Order of RTC-Branch 258, petitioners filed a Petition for Review
on Certiorari with the Court of Appeals, docketed as CA-G.R. CV No. 88087.
In a Decision dated 31 January 2008, the Court of Appeals affirmed the 3 July 2006
Order of RTC-Branch 258.
The appellate court observed that although the
defendants in the two cases were not identical, they represented a community of
interest. It also declared that the cause of action of the two cases, upon which the
recovery of damages was based, was the same, i.e., the feigned auction sale, such
that the nullification of the foreclosure of the subject properties, which petitioners
sought in Civil Case No. CV-01-0207, would render proper the award for damages,
claimed by petitioners in Civil Case No. CV-05-0402. Thus, judgment in either case
would result in res judicata. The Court of Appeals additionally noted that petitioners
admitted in their Motion for Consolidation that Civil Case No. CV-01-0207 and Civil
Case No. CV-05-0402 involved the same parties, central issue, and subject
properties.[28] In its Decision,[29] the appellate court decreed:
All told, the dismissal by the RTC-Br. 258 of the second case, Civil Case No. CV-050402, on the ground of forum shopping should be upheld as it is supported by law
and jurisprudence.
WHEREFORE, the assailed order is AFFIRMED. Costs against the [herein petitioners].

Petitioners filed a Motion for Reconsideration of the afore-mentioned Decision, which


the Court of Appeals denied in a Resolution dated 28 March 2008.[30]
Hence, the present Petition, in which the following issues are raised[31]:
I
WHETHER OR NOT THE FIRST AND THE SECOND CASES HAVE THE SAME
ULTIMATE OBJECTIVE, I.E., TO HAVE THE AUCTION SALE BE DECLARED AS NULL AND
VOID.
II
WHETHER OR NOT THE OUTCOME OF THE FIRST CASE WOULD AFFECT THE
SECOND CASE.

The only issue that needs to be determined in this case is whether or not
successively filing Civil Case No. CV-01-0207 and Civil Case No. CV-05-0402
amounts to forum shopping.
The Court answers in the affirmative.
The proscription against forum shopping is found in Section 5, Rule 7 of the 1997
Rules of Court, which provides that:
SEC. 5. Certification against forum shopping.The plaintiff or principal party shall
certify under oath in the complaint or other initiatory pleading asserting a claim for
relief, or in a sworn certification annexed thereto and simultaneously filed therewith:
(a) that he has not theretofore commenced any action or filed any claim involving

196

the same issues in any court, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein; (b) if there is such
other pending action or claim, a complete statement of the present status thereof;
and (c) if he should thereafter learn that the same or similar action or claim has
been filed or is pending, he shall report that fact within five (5) days therefrom to
the court wherein his aforesaid complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and
after hearing. The submission of a false certification or non-compliance with any of
the undertakings therein shall constitute indirect contempt of court, without
prejudice to the corresponding administrative and criminal actions. If the acts of
the party or his counsel clearly constitutes willful and deliberate forum shopping,
the same shall be ground for summary dismissal with prejudice and shall constitute
direct contempt, as well as a cause for administrative sanctions.

Forum shopping exists when a party repeatedly avails himself of several judicial
remedies in different courts, simultaneously or successively, all substantially
founded on the same transactions and the same essential facts and circumstances,
and all raising substantially the same issues either pending in or already resolved
adversely by some other court.[32]
Ultimately, what is truly important in determining whether forum shopping exists or
not is the vexation caused the courts and party-litigant by a party who asks
different courts to rule on the same or related causes and/or to grant the same or
substantially the same reliefs, in the process creating the possibility of conflicting
decisions being rendered by the different fora upon the same issue.[33]
Forum shopping can be committed in three ways: (1) filing multiple cases based on
the same cause of action and with the same prayer, the previous case not having
been resolved yet (where the ground for dismissal is litis pendentia); (2) filing
multiple cases based on the same cause of action and the same prayer, the
previous case having been finally resolved (where the ground for dismissal is res
judicata); and (3) filing multiple cases based on the same cause of action, but with
different prayers (splitting of causes of action, where the ground for dismissal is also
either litis pendentia or res judicata).[34]
In the present case, there is no dispute that petitioners failed to state in the
Certificate of Non-Forum Shopping, attached to their Verified Complaint in Civil Case
No. CV-05-0402 before RTC-Branch 195, the existence of Civil Case No. CV-01-0207
pending before RTC-Branch 258. Nevertheless, petitioners insist that they are not
guilty of forum shopping, since (1) the two cases do not have the same ultimate
objective Civil Case No. CV-01-0207 seeks the annulment of the 8 November 2001
public auction and certificate of sale issued therein, while Civil Case No. CV-05-0402
prays for the award of actual and compensatory damages for respondents tortuous
act of making it appear that an auction sale actually took place on 8 November
2001; and (2) the judgment in Civil Case No. CV-01-0207, on the annulment of the
foreclosure sale, would not affect the outcome of Civil Case No. CV-05-0402, on the
entitlement of petitioners to damages. The Court, however, finds these arguments
refuted by the allegations made by petitioners themselves in their Complaints in
both cases.
Petitioners committed forum shopping by filing multiple cases based on the same
cause of action, although with different prayers.
Sections 3 and 4, Rule 2 of the Rules of Court proscribe the splitting of a single
cause of action:
Section 3. A party may not institute more than one suit for a single cause of action.
197

Section 4. Splitting a single cause of action; effect of.If two or more suits are
instituted on the basis of the same cause of action, the filing of one or a judgment
upon the merits in any one is available as a ground for the dismissal of the others.

Forum shopping occurs although the actions seem to be different, when it can be
seen that there is a splitting of a cause of action. [35] A cause of action is
understood to be the delict or wrongful act or omission committed by the defendant
in violation of the primary rights of the plaintiff. It is true that a single act or
omission can violate various rights at the same time, as when the act constitutes
juridically a violation of several separate and distinct legal obligations. However,
where there is only one delict or wrong, there is but a single cause of action
regardless of the number of rights that may have been violated belonging to one
person.[36]
Petitioners would like to make it appear that Civil Case No. CV-01-0207 was solely
concerned with the nullification of the auction sale and certification of sale, while
Civil Case No. CV-05-0402 was a totally separate claim for damages. Yet, a review
of the records reveals that petitioners also included an explicit claim for damages in
their Amended Complaint[37] in Civil Case No. CV-01-0207, to wit:
20-A. The abovementioned acts of [herein respondents] Metrobank and Atty.
Celestra are in gross violation of the injunction made under Article 19 of the Civil
Code, thereby entitling the [herein petitioners] to recover damages from the said
[respondents] in such amount as may be awarded by the Court. (Emphasis ours.)

The abovementioned acts on which petitioners anchored their claim to recover


damages were described in the immediately preceding paragraph in the same
Amended Complaint, as follows [38]:
20. To reiterate, the [herein respondent] is fully aware that the assessed fair market
value of the real properties they seek to foreclose and sell at public auction yet they
have knowingly offered the said properties for sale at the amount of EIGHTY EIGHT
MILLION ONE HUNDRED ONE THOUSAND NINETY THREE PESOS AND 98/100
(PhP88,101,093.98), obviously because they know that the [petitioners] or any
other third person would not be able to seasonably raise the said amount and that
said [respondent] Bank would be the winner by default at the said sale at public
auction.

Petitioners averred in their Amended Complaint in Civil Case No. CV-01-0207 that
the assessed fair market value of the subject properties was P176,117,000.00.[39]
The Court observes that the damages being claimed by petitioners in their
Complaint in Civil Case No. CV-05-0402 were also occasioned by the supposedly
fictitious 8 November 2001 foreclosure sale, thus [40]:
24. The acts of [herein respondents] in making it appear that there was an auction
sale conducted on 8 November 2001 and the subsequent execution of the fictitious
Certificate of Sale is TORTIOUS, which entitles the [herein petitioners] to file this
instant action under the principles of Human Relations, more particularly Articles 19,
20 and 21 of the Civil Code which provide that:
xxxx
25. As a result of the aforesaid acts of the [respondents], [petitioners] buyers of
the mortgaged properties had lost their interest anymore (sic) in buying the said
mortgaged properties for not less than P175,000,000.00 as per appraisal report of

198

the Philippine Appraisal Co., Inc., a copy of which is hereto attached as Annex R
and made an integral part hereof;
26. The aborted sale of the [petitioners] mortgaged properties for the said amount
of not less than P175,000,000.00 could have paid off [petitioners] loan obligation
with [respondent] Metrobank for the principal amount of P79,650,000.00 or even
the contested restructured amount of P103,450,391.84 (as stated in the petition for
foreclosure), which would have thus enabled the plaintiff to realize a net amount of
not less than SEVENTY MILLION PESOS, more or less;
27. By reason of the aforesaid acts of [respondents], [petitioners] suffered and will
continue to suffer actual or compensatory, moral and exemplary or corrective
damages, the nature, extent and amount of compensation of which will (sic) proven
during the trial but not less than SEVENTY MILLION PESOS.

There is no question that the claims of petitioners for damages in Civil Case No. CV01-0207 and Civil Case No. CV-05-0402 are premised on the same cause of action,
i.e., the purportedly wrongful conduct of respondents in connection with the
foreclosure sale of the subject properties.
At first glance, said claims for damages may appear different. In Civil Case No. CV01-0207, the damages purportedly arose from the bad faith of respondents in
offering the subject properties at the auction sale at a price much lower than the
assessed fair market value of the said properties, said to be P176,117,000.00. On
the other hand, the damages in Civil Case No. CV-05-0402, allegedly resulted from
the backing out of prospective buyers, who had initially offered to buy the subject
properties for not less than P175,000,000.00, because respondents made it
appear that the said properties were already sold at the auction sale. Yet, it is
worthy to note that petitioners quoted closely similar values for the subject
properties in both cases, against which they measured the damages they
supposedly suffered. Evidently, this is due to the fact that petitioners actually
based the said values on the single appraisal report of the Philippine Appraisal
Company on the subject properties. Even though petitioners did not specify in their
Amended Complaint in Civil Case No. CV-01-0207 the exact amount of damages
they were seeking to recover, leaving the same to the determination of the trial
court, and petitioners expressly prayed that they be awarded damages of not less
than P70,000,000.00 in their Complaint in Civil Case No. CV-05-0402, petitioners
cannot deny that all their claims for damages arose from what they averred was a
fictitious public auction sale of the subject properties.
Petitioners contention that the outcome of Civil Case No. CV-01-0207 will not
determine that of Civil Case No. CV-05-0402 does not justify the filing of separate
cases. Even if it were assumed that the two cases contain two separate remedies
that are both available to petitioners, these two remedies that arose from one
wrongful act cannot be pursued in two different cases. The rule against splitting a
cause of action is intended to prevent repeated litigation between the same parties
in regard to the same subject of controversy, to protect the defendant from
unnecessary vexation; and to avoid the costs and expenses incident to numerous
suits. It comes from the old maxim nemo debet bis vexari, pro una et eadem causa
(no man shall be twice vexed for one and the same cause).[41]
Moreover, petitioners admitted in their Motion to Consolidate[42] dated 27
December 2005 before RTC-Branch 195 that both cases shared the same parties,
the same central issue, and the same subject property, viz:
2. The above-captioned case is a complaint for damages as a result of the [herein
respondents] conspiracy to make it appear as if there was an auction sale
conducted on November 8, 2001 when in fact there was none. The properties
subject of the said auction sale are the same properties subject of Civil Case No. 010207.

199

3. Since the subject matter of both cases are the same properties and the parties of
both cases are almost the same, and both cases have the same central issue of
whether there was an auction sale, then necessarily, both cases should be
consolidated.

If the forum shopping is not considered willful and deliberate, the subsequent case
shall be dismissed without prejudice, on the ground of either litis pendentia or res
judicata. However, if the forum shopping is willful and deliberate, both (or all, if
there are more than two) actions shall be dismissed with prejudice..[43] In this
case, petitioners did not deliberately file Civil Case No. CV-05-0402 for the purpose
of seeking a favorable decision in another forum. Otherwise, they would not have
moved for the consolidation of both cases. Thus, only Civil Case No. CV-05-0402 is
dismissed and the hearing of Civil Case No. CV-01-0207 before RTC-Branch 258 will
be continued.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The Decision dated 31
January 2008 and Resolution dated 28 March 2008 of the Court of Appeals in CAG.R. CV No. 88087, affirming the Order dated 3 July 2006 of Branch 258 of the
Regional Trial Court of Paraaque City, dismissing Civil Case No. CV-05-0402, is
AFFIRMED, without prejudice to the proceedings in Civil Case No. CV-01-0207. Costs
against petitioners.
SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice
Acting Chairperson

Chu v. Spouses Cunanan, G.R. No. 156185, September 12, 2011

Republic of the Philippines


Supreme Court
Manila
FIRST DIVISION

CATALINA B. CHU,
THEANLYN B. CHU,
THEAN CHING LEE B.
CHU, THEAN LEEWN
B. CHU, and MARTIN LAWRENCE B. CHU,
Petitioners,

- versus -

SPOUSES FERNANDO C. CUNANAN and TRINIDAD


N. CUNANAN, BENELDA ESTATE DEVELOPMENT CORPORATION, and
SPOUSES AMADO E.
CARLOS and GLORIA
A. CARLOS,

200

Respondents.
G.R. No. 156185

Present:

CORONA, C.J., Chairperson,


LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
PEREZ,* JJ.

Promulgated:

September 12, 2011


x-----------------------------------------------------------------------------------------x
DECISION

BERSAMIN, J.:
If two or more suits are instituted on the basis of the same cause of action, the filing
of one or a judgment upon the merits in any one is available as a ground for the
dismissal of the others.[1]
We review the decision promulgated on November 19, 2002,[2] whereby the Court
of Appeals (CA) dismissed the petitioners amended complaint in Civil Case No.
12251 of the Regional Trial Court, Branch 41, in San Fernando City, Pampanga (RTC)
for being barred by res judicata.
Antecedents
On September 30, 1986, Spouses Manuel and Catalina Chu (Chus) executed a deed
of sale with assumption of mortgage[3] involving their five parcels of land situated
in Saguin, San Fernando City, Pampanga, registered under Transfer Certificate of
Title (TCT) No. 198470-R, TCT No. 198471-R, TCT No. 198472-R, TCT No. 198473-R,
and TCT No. 199556-R, all of the Office of the Registry of Deeds of the Province of
Pampanga, in favor of Trinidad N. Cunanan (Cunanan) for the consideration
ofP5,161,090.00. They also executed a so-called side agreement, whereby they
clarified that Cunanan had paid only P1,000,000.00 to the Chus despite the Chus, as
vendors, having acknowledged receiving P5,161,090.00; that the amount of
P1,600,000.00 was to be paid directly to Benito Co and to Security Bank and Trust
Company (SBTC) in whose favor the five lots had been mortgaged; and that
Cunanan would pay the balance of P2,561.90.00 within three months, with a grace
period of one month subject to 3%/month interest on any remaining unpaid amount.
The parties further stipulated that the ownership of the lots would remain with the
Chus as the vendors and would be transferred to Cunanan only upon complete
payment of the total consideration and compliance with the terms of the deed of
sale with assumption of mortgage.[4]
Thereafter, the Chus executed a special power of attorney authorizing Cunanan to
borrow P5,161,090.00 from any banking institution and to mortgage the five lots as
security, and then to deliver the proceeds to the Chus net of the balance of the
mortgage obligation and the downpayment.[5]

201

Cunanan was able to transfer the title of the five lots to her name without the
knowledge of the Chus, and to borrow money with the lots as security without
paying the balance of the purchase price to the Chus. She later transferred two of
the lots to Spouses Amado and Gloria Carlos (Carloses) on July 29, 1987. As a result,
on March 18, 1988, the Chus caused the annotation of an unpaid vendors lien on
three of the lots. Nonetheless, Cunanan still assigned the remaining three lots to
Cool Town Realty on May 25, 1989 despite the annotation.[6]
In February 1988, the Chus commenced Civil Case No. G-1936 in the RTC to recover
the unpaid balance from Spouses Fernando and Trinidad Cunanan (Cunanans). Five
years later, on April 19, 1993, the Chus amended the complaint to seek the
annulment of the deed of sale with assumption of mortgage and of the TCTs issued
pursuant to the deed, and to recover damages. They impleaded Cool Town Realty
and Development Corporation (Cool Town Realty), and the Office of the Registry of
Deeds of Pampanga as defendants in addition to the Cunanans.[7]
Considering that the Carloses had meanwhile sold the two lots to Benelda Estate
Development Corporation (Benelda Estate) in 1995, the Chus further amended the
complaint in Civil Case No. G-1936 to implead Benelda Estate as additional
defendant. In due course, Benelda Estate filed its answer with a motion to dismiss,
claiming, among others, that the amended complaint stated no cause of action
because it had acted in good faith in buying the affected lots, exerting all efforts to
verify the authenticity of the titles, and had found no defect in them. After the RTC
denied its motion to dismiss, Benelda Estate assailed the denial on certiorari in the
CA, which annulled the RTCs denial for being tainted with grave abuse of discretion
and dismissed Civil Case No. G-1936 as against Benelda Estate. On March 1, 2001,
the Court upheld the dismissal of Civil Case No. G-1936 in G.R. No. 142313 entitled
Chu, Sr. v. Benelda Estate Development Corporation.[8]
On December 2, 1999, the Chus, the Cunanans, and Cool Town Realty entered into a
compromise agreement,[9] whereby the Cunanans transferred to the Chus their
50% share in all the parcels of land situated in Saguin, San Fernando, Pampanga
registered in the name of Cool Town Realty for and in consideration of the full
settlement of their case. The RTC approved the compromise agreement in a partial
decision dated January 25, 2000.[10]
Thereafter, on April 30, 2001, the petitioners herein (i.e., Catalina Chu and her
children) brought another suit, Civil Case No. 12251, against the Carloses and
Benelda Estate,[11] seeking the cancellation of the TCTs of the two lots in the name
of Benelda Estate, and the issuance of new TCTs in their favor, plus damages.
The petitioners amended their complaint in Civil Case No. 12251 on February 4,
2002 to implead the Cunanans as additional defendants.[12]
The Cunanans moved to dismiss the amended complaint based on two grounds,
namely: (a) bar by prior judgment, and (b) the claim or demand had been paid,
waived, and abandoned. Benelda Estate likewise moved to dismiss the amended
complaint, citing as grounds: (a) forum shopping; (b) bar by prior judgment, and (c)
failure to state a cause of action. On their part, the Carloses raised affirmative
defenses in their answer, namely: (a) the failure to state a cause of action; (b) res
judicata or bar by prior judgment; and (c) bar by statute of limitations.
On April 25, 2002, the RTC denied both motions to dismiss,[13] holding that
the amended complaint stated a cause of action against all the defendants; that the
action was not barred by res judicata because there was no identity of parties and
subject matter between Civil Case No.12251 and Civil Case No. G-1936; and that
the Cunanans did not establish that the petitioners had waived and abandoned their
claim or that their claim had been paid by virtue of the compromise agreement,
pointing out that the compromise agreement involved only the three parcels of land
registered in the name of Cool Town Realty.[14]

202

The Cunanans sought reconsideration, but their motion was denied on May 31,
2002.[15]
On September 2, 2002, the Cunanans filed a petition for certiorari in the CA (SP72558), assailing the RTCs denial of their motion to dismiss and motion for
reconsideration.[16]
On November 19, 2002, the CA promulgated its decision,[17] granting the petition
for certiorari and nullifying the challenged orders of the RTC. The CA ruled that the
compromise agreement had ended the legal controversy between the parties with
respect to the cause of action arising from the deed of sale with assumption of
mortgage covering all the five parcels of land; that Civil Case No. G-1936 and Civil
Case No.12251 involved the violation by the Cunanans of the same legal right under
the deed of sale with assumption of mortgage; and that the filing of Civil Case
No.12251 contravened the rule against splitting of a cause of action, and rendered
Civil Case No.12251 subject of a motion to dismiss based on bar by res judicata. The
CA disposed thusly:
WHEREFORE, premises considered, the present petition for certiorari is hereby
GIVEN DUE COURSE and the writ prayed for, accordingly GRANTED. Consequently,
the challenged Orders of the respondent court denying the motions to dismiss are
hereby ANNULLED and SET ASIDE and a new one is hereby rendered DISMISSING
the Amended Complaint in Civil Case No. 12251.
No costs.
SO ORDERED.[18]
Hence, this appeal.
Issue
Was Civil Case No. 12251 barred by res judicata although the compromise
agreement did not expressly include Benelda Estate as a party and although the
compromise agreement made no reference to the lots now registered in Benelda
Estates name?
Ruling
We deny the petition for review.
I
The petitioners contend that the compromise agreement did not apply or
extend to the Carloses and Benelda Estate; hence, their Civil Case No. 12251 was
not barred by res judicata.
We disagree.
A compromise agreement is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already commenced.
[19] It encompasses the objects specifically stated therein, although it may include
other objects by necessary implication,[20] and is binding on the contracting
parties, being expressly acknowledged as a juridical agreement between them.[21]
It has the effect and authority of res judicata upon the parties.[22]
In the construction or interpretation of a compromise agreement, the
intention of the parties is to be ascertained from the agreement itself, and effect
should be given to that intention.[23] Thus, the compromise agreement must be
read as a whole.

203

The following pertinent portions of the compromise agreement indicate that the
parties intended to thereby settle all their claims against each other, to wit:
1.
That the defendants SPOUSES TRINIDAD N.CUNANAN and FERNANDO
C.CUNANAN for and in consideration of the full settlement of their case in the
above-entitled case, hereby TRANSFER, DELIVER, and CONVEY unto the plaintiffs all
their rights, interest, benefits, participation, possession and ownership which
consists of FIFTY (50%) percent share on all the parcels of land situated in Saguin,
San Fernando Pampanga now registered in the name of defendant, COOL TOWN
REALTY & DEVELOPMENT CORPORATION, as particularly evidenced by the
corresponding Transfer Certificates of Titles xxx
xxxx
6. That the plaintiffs and the defendant herein are waiving, abandoning,
surrendering, quitclaiming, releasing, relinquishing any and all their respective
claims against each other as alleged in the pleadings they respectively filed in
connection with this case.[24] (bold emphasis supplied)

The intent of the parties to settle all their claims against each other is expressed in
the phrase any and all their respective claims against each other as alleged in the
pleadings they respectively filed in connection with this case, which was broad
enough to cover whatever claims the petitioners might assert based on the deed of
sale with assumption of mortgage.
There is no question that the deed of sale with assumption of mortgage covered all
the five lots, to wit:
WHEREAS, the VENDORS are willing to sell the above-described properties and the
VENDEE is willing to buy the same at FIFTY FIVE (P55.00) PESOS, Philippine
Currency, per square meter, or a total consideration of FIVE MILLION ONE HUNDRED
SIXTY ONE THOUSAND and NINETY (P5,161,090.00) PESOS, Philippine Currency.[25]
To limit the compromise agreement only to the three lots mentioned therein would
contravene the avowed objective of Civil Case No. G-1936 to enforce or to rescind
the entire deed of sale with assumption of mortgage. Such interpretation is akin to
saying that the Cunanans separately sold the five lots, which is not the truth. For
one, Civil Case No. G-1936 did not demand separate amounts for each of the
purchased lots. Also, the compromise agreement did not state that the value being
thereby transferred to the petitioners by the Cunanans corresponded only to that of
the three lots.
Apparently, the petitioners were guilty of splitting their single cause of action to
enforce or rescind the deed of sale with assumption of mortgage. Splitting a single
cause of action is the act of dividing a single or indivisible cause of action into
several parts or claims and instituting two or more actions upon them.[26] A single
cause of action or entire claim or demand cannot be split up or divided in order to
be made the subject of two or more different actions.[27] Thus, Section 4, Rule 2 of
the Rules of Court expressly prohibits splitting of a single cause of action, viz:
Section 4. Splitting a single cause of action; effect of. If two or more suits are
instituted on the basis of the same cause of action, the filing of one or a judgment
upon the merits in any one is available as a ground for the dismissal of the others.
(4a)

The petitioners were not at liberty to split their demand to enforce or rescind
the deed of sale with assumption of mortgage and to prosecute piecemeal or
present only a portion of the grounds upon which a special relief was sought under
the deed of sale with assumption of mortgage, and then to leave the rest to be
presented in another suit; otherwise, there would be no end to litigation.[28] Their

204

splitting violated the policy against multiplicity of suits, whose primary objective
was to avoid unduly burdening the dockets of the courts. Their contravention of the
policy merited the dismissal of Civil Case No. 12251 on the ground of bar by res
judicata.
Res judicata means a matter adjudged, a thing judicially acted upon or decided; a
thing or matter settled by judgment.[29] The doctrine of res judicata is an old axiom
of law, dictated by wisdom and sanctified by age, and founded on the broad
principle that it is to the interest of the public that there should be an end to
litigation by the same parties over a subject once fully and fairly adjudicated. It has
been appropriately said that the doctrine is a rule pervading every well-regulated
system of jurisprudence, and is put upon two grounds embodied in various maxims
of the common law: the one, public policy and necessity, which makes it to the
interest of the State that there should be an end to litigation interest reipublicae ut
sit finis litium; the other, the hardship on the individual that he should be vexed
twice for one and the same cause nemo debet bis vexari pro una et eadem causa.
A contrary doctrine would subject the public peace and quiet to the will and neglect
of individuals and prefer the gratification of the litigious disposition on the part of
suitors to the preservation of the public tranquillity and happiness.[30]
Under the doctrine of res judicata, a final judgment or decree on the merits
rendered by a court of competent jurisdiction is conclusive of the rights of the
parties or their privies in all later suits and on all points and matters determined in
the previous suit.[31] The foundation principle upon which the doctrine rests is that
the parties ought not to be permitted to litigate the same issue more than once;
that when a right or fact has been judicially tried and determined by a court of
competent jurisdiction, so long as it remains unreversed, should be conclusive upon
the parties and those in privity with them in law or estate.[32]
Yet, in order that res judicata may bar the institution of a subsequent action, the
following requisites must concur: (a) the former judgment must be final; (b) it must
have been rendered by a court having jurisdiction of the subject matter and the
parties; (c) it must be a judgment on the merits; and (d) there must be between the
first and second actions (i) identity of parties, (ii) identity of the subject matter, and
(iii) identity of cause of action.[33]
The first requisite was attendant. Civil Case No. G-1936 was already terminated
under the compromise agreement, for the judgment, being upon a compromise, was
immediately final and unappealable. As to the second requisite, the RTC had
jurisdiction over the cause of action in Civil Case No. G-1936 for the enforcement or
rescission of the deed of sale with assumption of mortgage, which was an action
whose subject matter was not capable of pecuniary estimation. That the
compromise agreement explicitly settled the entirety of Civil Case No. G-1936 by
resolving all the claims of the parties against each other indicated that the third
requisite was also satisfied.[34]
But was there an identity of parties, of subject matter, and of causes of action
between Civil Case No.G-1936 and Civil Case No. 12251?
There is identity of parties when the parties in both actions are the same, or there is
privity between them, or they are successors-in-interest by title subsequent to the
commencement of the action litigating for the same thing and under the same title
and in the same capacity.[35] The requirement of the identity of parties was fully
met, because the Chus, on the one hand, and the Cunanans, on the other hand,
were the parties in both cases along with their respective privies. The fact that the
Carloses and Benelda Estate, defendants in Civil Case No. 12251, were not parties
in the compromise agreement was inconsequential, for they were also the privies of
the Cunanans as transferees and successors-in-interest. It is settled that the
absolute identity of parties was not a condition sine qua non for res judicata to
apply, because a shared identity of interest sufficed.[36] Mere substantial identity of

205

parties, or even community of interests between parties in the prior and subsequent
cases, even if the latter were not impleaded in the first case, was sufficient.[37]
As to identity of the subject matter, both actions dealt with the properties involved
in the deed of sale with assumption of mortgage. Identity of the causes of action
was also met, because Case No. G-1936 and Civil Case No. 12251 were rooted in
one and the same cause of action the failure of Cunanan to pay in full the
purchase price of the five lots subject of the deed of sale with assumption of
mortgage. In other words, Civil Case No. 12251 reprised Civil Case No. G-1936, the
only difference between them being that the petitioners alleged in the former that
Benelda Estate was not also a purchaser for value and in good faith.[38]
In fine, the rights and obligations of the parties vis--vis the five lots were all
defined and governed by the deed of sale with assumption of mortgage, the only
contract between them. That contract was single and indivisible, as far as they were
concerned. Consequently, the Chus could not properly proceed against the
respondents in Civil Case No. 12251, despite the silence of the compromise
agreement as to the Carloses and Benelda Estate, because there can only be one
action where the contract is entire, and the breach total, and the petitioners must
therein recover all their claims and damages.[39] The Chus could not be permitted
to split up a single cause of action and make that single cause of action the basis of
several suits.[40]
WHEREFORE, we deny the petition for review on certiorari, and affirm the
decision promulgated in CA-G.R. SP No. 72558.
The petitioners shall pay the costs of suit.
SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

Pantranco v. Standard Insurance, G.R. No. 140746, March 16, 2005

THIRD DIVISION
[G.R. No. 140746. March 16, 2005]
PANTRANCO NORTH EXPRESS, INC., and ALEXANDER BUNCAN, petitioners, vs.
STANDARD INSURANCE COMPANY, INC., and MARTINA GICALE, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari assailing the Decision[1] dated July 23
1999 and Resolution[2] dated November 4, 1999 of the Court of Appeals in CA-G.R.
CV No. 38453, entitled Standard Insurance Company, Inc., and Martina Gicale vs.
PANTRANCO North Express, Inc., and Alexander Buncan.
In the afternoon of October 28, 1984, Crispin Gicale was driving the passenger
jeepney owned by his mother Martina Gicale, respondent herein. It was then
raining. While driving north bound along the National Highway in Talavera, Nueva
Ecija, a passenger bus, owned by Pantranco North Express, Inc., petitioner, driven
by Alexander Buncan, also a petitioner, was trailing behind. When the two vehicles
were negotiating a curve along the highway, the passenger bus overtook the
jeepney. In so doing, the passenger bus hit the left rear side of the jeepney and
sped away.

206

Crispin reported the incident to the Talavera Police Station and respondent Standard
Insurance Co., Inc. (Standard), insurer of the jeepney. The total cost of the repair
was P21,415.00, but respondent Standard paid only P8,000.00. Martina Gicale
shouldered the balance of P13,415.00.
Thereafter, Standard and Martina, respondents, demanded reimbursement from
petitioners Pantranco and its driver Alexander Buncan, but they refused. This
prompted respondents to file with the Regional Trial Court (RTC), Branch 94, Manila,
a complaint for sum of money.
In their answer, both petitioners specifically denied the allegations in the complaint
and averred that it is the Metropolitan Trial Court, not the RTC, which has jurisdiction
over the case.
On June 5, 1992, the trial court rendered a Decision[3] in favor of respondents
Standard and Martina, thus:
WHEREFORE, and in view of the foregoing considerations, judgment is hereby
rendered in favor of the plaintiffs, Standard Insurance Company and Martina Gicale,
and against defendants Pantranco Bus Company and Alexander Buncan, ordering
the latter to pay as follows:
(1)
to pay plaintiff Standard Insurance the amount of P8,000.00 with interest due
thereon from November 27, 1984 until fully paid;
(2)
to pay plaintiff Martina Gicale the amount of P13,415.00 with interest due
thereon from October 22, 1984 until fully paid;
(3)

to pay the sum of P10,000.00 for attorneys fees;

(4)

to pay the expenses of litigation and the cost of suit.

SO ORDERED.
On appeal, the Court of Appeals, in a Decision[4] dated July 23, 1999, affirmed the
trial courts ruling, holding that:
The appellants argue that appellee Gicales claim of P13,415.00 and appellee
insurance companys claim of P8,000.00 individually fell under the exclusive original
jurisdiction of the municipal trial court. This is not correct because under the
Totality Rule provided for under Sec. 19, Batas Pambansa Bilang 129, it is the sum of
the two claims that determines the jurisdictional amount.
xxx
In the case at bench, the total of the two claims is definitely more than P20,000.00
which at the time of the incident in question was the jurisdictional amount of the
Regional Trial Court.
Appellants contend that there was a misjoinder of parties. Assuming that there
was, under the Rules of Court (Sec. 11, Rule 7) as well as under the Rules of Civil
Procedure (ditto), the same does not affect the jurisdiction of the court nor is it a
ground to dismiss the complaint.
xxx
It does not need perspicacity in logic to see that appellees Gicales and insurance
companys individual claims against appellees (sic) arose from the same vehicular
accident on October 28, 1984 involving appellant Pantrancos bus and appellee
Gicales jeepney. That being the case, there was a question of fact common to all
the parties: Whose fault or negligence caused the damage to the jeepney?

207

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. This is incorrect. Of course, 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. 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, they should blame nobody but themselves. They
failed to be present during the scheduled hearing for the reception of their evidence
despite notice and without any motion or explanation. They did not even file any
motion for reconsideration of the order considering the case submitted for decision.
Finally, contrary to the assertion of the defendant-appellants, the evidence
preponderantly established their liability for quasi-delict under Article 2176 of the
Civil Code.
Petitioners filed a motion for reconsideration but was denied by the Appellate Court
in a Resolution dated November 4, 1999.
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.
II
WHETHER OR NOT PETITIONERS ARE LIABLE TO RESPONDENTS CONSIDERING THAT
BASED ON THE EVIDENCE ADDUCED AND LAW APPLICABLE IN THE CASE AT BAR,
RESPONDENTS HAVE NOT SHOWN ANY RIGHT TO THE RELIEF PRAYED FOR.
III
WHETHER OR NOT PETITIONERS WERE DEPRIVED OF THEIR RIGHT TO DUE
PROCESS.
For their part, respondents contend that their individual claims arose out of the
same vehicular accident and involve a common question of fact and law. Hence,
the RTC has jurisdiction over the case.
I
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. Section 6, Rule 3
of the Revised Rules of Court,[5] provides:
Sec. 6. Permissive joinder of parties. All persons in whom or against whom any
right to relief in respect to or arising out of the same transaction or series of
transactions is alleged to exist, whether jointly, severally, or in the alternative, may,
except as otherwise provided in these Rules, join as plaintiffs or be joined as
defendants in one complaint, where any question of law or fact common to all such
plaintiffs or to all such defendants may arise in the action; but the court may make
such orders as may be just to prevent any plaintiff or defendant from being

208

embarrassed or put to expense in connection with any proceedings in which he may


have no interest.
Permissive joinder of parties requires that: (a) the right to relief arises out of the
same transaction or series of transactions; (b) there is a question of law or fact
common to all the plaintiffs or defendants; and (c) such joinder is not otherwise
proscribed by the provisions of the Rules on jurisdiction and venue.[6]
In this case, there is a single transaction common to all, that is, Pantrancos bus
hitting the rear side of the jeepney. There is also a common question of fact, that is,
whether petitioners are negligent. There being a single transaction common to both
respondents, consequently, they have the same cause of action against petitioners.
To determine identity of cause of action, 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.[7] Here, had respondents filed
separate suits against petitioners, the same evidence would have been presented to
sustain the same cause of action. Thus, the filing by both respondents of the
complaint with the court below is in order. Such joinder of parties avoids multiplicity
of suit and ensures the convenient, speedy and orderly administration of justice.
Corollarily, Section 5(d), Rule 2 of the same Rules provides:
Sec. 5. Joinder of causes of action. A party may in one pleading assert, in the
alternative or otherwise, as many causes of action as he may have against an
opposing party, 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.
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.[8] The issue of whether respondents
claims shall be lumped together is determined by paragraph (d) of the above
provision. This paragraph embodies the totality rule as exemplified by Section 33
(1) of B.P. Blg. 129[9] which states, among others, that where there are several
claims or causes of action between the same or different parties, embodied in the
same complaint, the amount of the demand shall be the totality of the claims in all
the causes of action, irrespective of whether the causes of action arose out of the
same or different transactions.
As previously stated, respondents cause of action against petitioners arose out of
the same transaction. Thus, the amount of the demand shall be the totality of the
claims.
Respondent Standards claim is P8,000.00, while that of respondent Martina Gicale
is P13,415.00, or a total of P21,415.00. Section 19 of B.P. Blg. 129 provides that the
RTC has exclusive original jurisdiction over all other cases, in which the demand,
exclusive of interest and cost or the value of the property in controversy, amounts
to more than twenty thousand pesos (P20,000.00). Clearly, it is the RTC that has
jurisdiction over the instant case. It bears emphasis that when the complaint was
filed, R.A. 7691 expanding the jurisdiction of the Metropolitan, Municipal and
Municipal Circuit Trial Courts had not yet taken effect. It became effective on April
15, 1994.
II
The finding of the trial court, affirmed by the Appellate Court, that petitioners are
negligent and thus liable to respondents, is a factual finding which is binding upon

209

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

Umale v. Canoga Park, G.R. No. 167246, July 20, 2011

SECOND DIVISION

GEORGE LEONARD S. UMALE,


Petitioner,

- versus -

210

CANOGA PARK DEVELOPMENT CORPORATION,


Respondent.
G.R. No. 167246
Present:
CARPIO, J.,
Chairperson,
LEONARDO-DE CASTRO,*
BRION,
PERALTA,*
PEREZ, and
SERENO, JJ.
Promulgated:
July 20, 2011
x------------------------------------------------------------------------------------x

DECISION
BRION, J.:

Before us is a petition for review on certiorari[1] filed by George Leonard S.


Umale (petitioner), challenging the August 20, 2004 Decision[2] of the Court of
Appeals (CA) in CA-G.R. SP. No. 78836 and its subsequent February 23, 2005
Resolution[3] that denied his motion for reconsideration. The CA reversed the
Decision[4] of the Regional Trial Court (RTC)-Branch 68, Pasig City, that dismissed
Canoga Park Development Corporations complaint for unlawful detainer on the
ground of litis pendentia.
ANTECEDENTS

On January 4, 2000, the parties entered into a Contract of Lease[5] whereby


the petitioner agreed to lease, for a period of two (2) years starting from January 16,
2000, an eight hundred sixty (860)-square-meter prime lot located in Ortigas
Center, Pasig City owned by the respondent. The respondent acquired the subject
lot from Ortigas & Co. Ltd. Partnership through a Deed of Absolute Sale, subject to
the following conditions: (1) that no shopping arcades or retail stores, restaurants,
etc. shall be allowed to be established on the property, except with the prior written
consent from Ortigas & Co. Ltd. Partnership and (2) that the respondent and/or its
successors-in-interest shall become member/s of the Ortigas Center Association,
Inc. (Association), and shall abide by its rules and regulations.[6]
On October 10, 2000, before the lease contract expired, the respondent filed
an unlawful detainer case against the petitioner before the Metropolitan Trial Court
(MTC)-Branch 68, Pasig City, docketed as Civil Case No. 8084.[7] The respondent
used as a ground for ejectment the petitioners violation of stipulations in the lease

211

contract regarding the use of the property. Under this contract, the petitioner shall
use the leased lot as a parking space for light vehicles and as a site for a small
drivers canteen,[8] and may not utilize the subject premises for other purposes
without the respondents prior written consent.[9] The petitioner, however,
constructed restaurant buildings and other commercial establishments on the lot,
without first securing the required written consent from the respondent, and the
necessary permits from the Association and the Ortigas & Co. Ltd. Partnership. The
petitioner also subleased the property to various merchants-tenants in violation of
the lease contract.
The MTC-Branch 68 decided the ejectment case in favor of the respondent.
On appeal, the RTC-Branch 155, Pasig City affirmed in toto the MTC-Branch 68
decision.[10] The case, however, was re-raffled to the RTC-Branch 267, Pasig City
because the Presiding Judge of the RTC-Branch 155, upon motion, inhibited himself
from resolving the petitioners motion for reconsideration.[11] The RTC-Branch 267
granted the petitioners motion, thereby reversing and setting aside the MTC-Branch
68 decision. Accordingly, Civil Case No. 8084 was dismissed for being prematurely
filed.[12] Thus, the respondent filed a petition for review with the CA on April 10,
2002.[13]
During the pendency of the petition for review, the respondent filed on May 3,
2002 another case for unlawful detainer against the petitioner before the MTCBranch 71, Pasig City. The case was docketed as Civil Case No. 9210.[14] This time,
the respondent used as a ground for ejectment the expiration of the parties lease
contract.
On December 4, 2002, the MTC-Branch 71 rendered a decision[15] in favor of
the respondent, the dispositive portion of which read, as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff [referring
to the respondent] and against the defendant and all persons claiming rights under
him, as follows:
1.
Defendant and all persons claiming rights under him are ordered to peacefully
vacate the premises located at Lot 9, Block 5, San Miguel Avenue, Ortigas Center,
Pasig City, covered by Transfer Certificate of Title No. 488797 of the Registry of
Deeds of Pasig City and to surrender the possession thereof to the plaintiff;
2.

Defendant is ordered to pay unto plaintiff the following:

a.
Damages for the use of the property after the expiration of the lease contract
therefor in the amount of One Hundred Fifty Thousand Pesos (P150,000.00) a
month, beginning 16 January 2002 until he and all those claiming rights under him
have vacated and peacefully turned over the subject premises to the plaintiff; and
b.
One Hundred Thousand Pesos (P100,000.00) as and for attorneys fees
together with costs of suit.
3.
With respect to the commercial units built by [the] defendant on the subject
land, he is hereby ordered to remove the same from the subject land and to restore
the subject land in the same condition as it was received unto the plaintiff, at his
exclusive account, failing which the same shall be removed by the plaintiff, with
expenses therefor chargeable to the defendant.

On appeal, the RTC-Branch 68 reversed and set aside the decision of the MTCBranch 71, and dismissed Civil Case No. 9210 on the ground of litis pendentia.[16]
The petitioner, however, was still ordered to pay rent in the amount of seventy-one
thousand five hundred pesos (P71,500.00) per month beginning January 16, 2002,
which amount is the monthly rent stipulated in the lease contract.

212

Aggrieved by the reversal, the respondent filed a Petition for Review under Rule 42
of the Rules of Court with the CA. The respondent argued that there exists no litis
pendentia between Civil Case Nos. 8084 and 9210 because the two cases involved
different grounds for ejectment, i.e., the first case was filed because of violations of
the lease contract, while the second case was filed due to the expiration of the
lease contract. The respondent emphasized that the second case was filed based on
an event or a cause not yet in existence at the time of the filing of the first case.[17]
The lease contract expired on January 15, 2002,[18] while the first case was filed on
October 10, 2000.
On August 20, 2004, the CA nullified and set aside the assailed decision of the
RTC-Branch 68, and ruled that there was no litis pendentia because the two civil
cases have different causes of action. The decision of the MTC- Branch 71 was
ordered reinstated. Subsequently, the petitioners motion for reconsideration was
denied; hence, the filing of the present petition for review on certiorari.
In presenting his case before this Court, the petitioner insists that litis
pendentia exists between the two ejectment cases filed against him because of
their identity with one another and that any judgment on the first case will amount
to res judicata on the other. The petitioner argues that the respondent reiterated the
ground of violations of the lease contract, with the additional ground of the
expiration of the lease contract in the second ejectment case. Also, the petitioner
alleges that all of the elements of litis pendentia are present in this case, thus, he
prays for the reversal and setting aside of the assailed CA decision and resolution,
and for the dismissal of the complaint in Civil Case No. 9210 on the ground of litis
pendentia and/or forum shopping.
THE COURTS RULING
We disagree with the petitioner and find that there is no litis pendentia.
As a ground for the dismissal of a civil action, litis pendentia refers to a situation
where two actions are pending between the same parties for the same cause of
action, so that one of them becomes unnecessary and vexatious.[19]
Litis pendentia exists when the following requisites are present: identity of the
parties in the two actions; substantial identity in the causes of action and in the
reliefs sought by the parties; and the identity between the two actions should be
such that any judgment that may be rendered in one case, regardless of which
party is successful, would amount to res judicata in the other.[20]
In the present case, the parties bone of contention is whether Civil Case Nos. 8084
and 9210 involve the same cause of action. The petitioner argues that the causes of
action are similar, while the respondent argues otherwise. If an identity, or
substantial identity, of the causes of action in both cases exist, then the second
complaint for unlawful detainer may be dismissed on the ground of litis pendentia.
We rule that Civil Case Nos. 8084 and 9210 involve different causes of action.
Generally, a suit may only be instituted for a single cause of action.[21] If two or
more suits are instituted on the basis of the same cause of action, the filing of one
or a judgment on the merits in any one is ground for the dismissal of the others.[22]
Several tests exist to ascertain whether two suits relate to a single or common
cause of action, such as whether the same evidence would support and sustain both
the first and second causes of action[23] (also known as the same evidence test),
[24] or whether the defenses in one case may be used to substantiate the
complaint in the other.[25] Also fundamental is the test of determining whether the
cause of action in the second case existed at the time of the filing of the first
complaint.[26]

213

Of the three tests cited, the third one is especially applicable to the present
case, i.e., whether the cause of action in the second case existed at the time of the
filing of the first complaint and to which we answer in the negative. The facts
clearly show that the filing of the first ejectment case was grounded on the
petitioners violation of stipulations in the lease contract, while the filing of the
second case was based on the expiration of the lease contract. At the time the
respondent filed the first ejectment complaint on October 10, 2000, the lease
contract between the parties was still in effect. The lease was fixed for a period of
two (2) years, from January 16, 2000, and in the absence of a renewal agreed upon
by the parties, the lease remained effective until January 15, 2002. It was only at
the expiration of the lease contract that the cause of action in the second ejectment
complaint accrued and made available to the respondent as a ground for ejecting
the petitioner. Thus, the cause of action in the second case was not yet in existence
at the time of filing of the first ejectment case.
In response to the petitioners contention that the similarity of Civil Case Nos.
8084 and 9210 rests on the reiteration in the second case of the cause of action in
the first case, we rule that the restatement does not result in substantial identity
between the two cases. Even if the respondent alleged violations of the lease
contract as a ground for ejectment in the second complaint, the main basis for
ejecting the petitioner in the second case was the expiration of the lease contract. If
not for this subsequent development, the respondent could no longer file a second
complaint for unlawful detainer because an ejectment complaint may only be filed
within one year after the accrual of the cause of action,[27] which, in the second
case, was the expiration of the lease contract.
Also, contrary to petitioners assertion, there can be no conflict between the
decisions rendered in Civil Case Nos. 8084 and 9210 because the MTC-Branch 71
decided the latter case on the sole issue of whether the lease contract between the
parties had expired. Although alleged by the respondent in its complaint, the MTCBranch 71 did not rule on the alleged violations of the lease contract committed by
the petitioner. We note that the damages awarded by the MTC-Branch 71 in Civil
Case No. 9210 were for those incurred after the expiration of the lease contract,[28]
not for those incurred prior thereto.
Similarly, we do not find the respondent guilty of forum shopping in filing
Civil Case No. 9210, the second civil case. To determine whether a party violated
the rule against forum shopping, the test applied is whether the elements of litis
pendentia are present or whether a final judgment in one case will amount to res
judicata in another.[29] Considering our pronouncement that not all the requisites of
litis pendentia are present in this case, the CA did not err in declaring that the
respondent committed no forum shopping. Also, a close reading of the
Verification and Certification of Non-Forum Shopping[30] (attached to the second
ejectment complaint) shows that the respondent did disclose that it had filed a
former complaint for unlawful detainer against the petitioner. Thus, the respondent
cannot be said to have committed a willful and deliberate forum shopping.
WHEREFORE, the instant petition is DENIED. The assailed Decision dated August 20,
2004 and Resolution dated February 23, 2005 of the Court of Appeals in CA-G.R. SP.
No. 78836 are AFFIRMED.
SO ORDERED.

ARTURO D. BRION
Associate Justice

214

Spouses Plaza v. Lustiva, G.R. No. 172909, March 5, 2014

G.R. No. 172909

March 5, 2014

SPOUSES SILVESTRE O. PLAZA AND ELENA Y. PLAZA, Petitioners,


vs.
GUILLERMO LUSTIVA, ELEODORA VDA. DE MARTINEZ AND
GOLOSENO, Respondents.

VICKY

SAYSON

DECISION
BRION, J.:
Through a petition for review on certiorari,1 filed under Rule 45 of the Rules of
Court, the petitioners, spouses Silvestre O. Plaza and Elena Y. Plaza, seek the
reversal of the decision2 dated October 24, 2005 and the Resolution3 dated April 6,
2006 of the Court of Appeals (CA) in CA-G.R. SP No. 59859.
THE FACTS
On August 28, 1997, the CA4 ruled that among the Plaza siblings, namely:
Aureliano, Emiliana, Vidal, Marciano, and Barbara, Barbara was the owner of the
subject agricultural land. The decision became final and executory and Barbara's
successors, respondents Guillermo Lustiva, Eleodora Vda. de Martinez and Vicky
Sayson Goloseno, have continued occupying the property.
On September 14, 1999, Vidals son and daughter-in-law, the petitioners, filed a
Complaint for Injunction, Damages, Attorneys Fees with Prayer for the Issuance of
the Writ of Preliminary Injunction and/or Temporary Restraining Order against the
respondents and the City Government of Butuan. They prayed that the respondents
be enjoined from unlawfully and illegally threatening to take possession of the
subject property. According to the petitioners, they acquired the land from Virginia
Tuazon in 1997; Tuazon was the sole bidder and winner in a tax delinquency sale
conducted by the City of Butuan on December 27, 1996.
In their answer, the respondents pointed out that they were never delinquent in
paying the land taxes and were in fact not aware that their property had been
offered for public auction. Moreover, Tuazon, being a government employee, was
disqualified to bid in the public auction, as stated in Section 89 of the Local
Government Code of 1991.5 As Tuazons participation in the sale was void, she
could have not transferred ownership to the petitioners. Equally important, the
petitioners merely falsified the property tax declaration by inserting the name of the
petitioners father, making him appear as a co-owner of the auctioned land. Armed
with the falsified tax declaration, the petitioners, as heirs of their father,
fraudulently redeemed the land from Tuazon. Nonetheless, there was nothing to
redeem as the land was not sold. For these irregularities, the petitioners had no
right to the Writ of Preliminary Injunction and/or Temporary Restraining Order
prayed for against them.
THE RTCS RULING
In its December 14, 1999 order,6 the Regional Trial Court (RTC) of Butuan City,
Branch 5, reconsidered its earlier order,7 denied the prayer for a Writ of Preliminary
Injunction, and ordered that the possession and occupation of the land be returned
to the respondents. The RTC found that the auction sale was tainted with irregularity
as the bidder was a government employee disqualified in accordance with Section
89 of the Local Government Code of 1991. The petitioners are not buyers in good
faith either. On the contrary, they were in bad faith for having falsified the tax
declaration they redeemed the property with.
THE CAS RULING
215

Through a petition for review on certiorari under Rule 65, the petitioners challenged
the RTCs order before the CA.
While the petition for review on certiorari was pending before the CA, the petitioners
filed an action for specific performance8 against the City Government of Butuan.
According to the petitioners, they acquired possession and ownership over the
auctioned property when they redeemed it from Tuazon. The City Government of
Butuan must therefore issue them a certificate of sale.9
In its October 24, 2005 decision,10 the CA affirmed the RTCs ruling, found the
petitioners guilty of forum shopping, dismissed the case, and referred the case to
the Court and to the Integrated Bar of the Philippines for investigation and
institution of the appropriate administrative action.11 The CA, after legal analysis,
similarly concluded that for being disqualified to bid under Section 89 of the Local
Government Code of 1991, Tuazon never obtained ownership over the property;
much less transmit any proprietary rights to the petitioners. Clearly, the petitioners
failed to establish any clear and unmistakable right enforceable by the injunctive
relief.
On April 6, 2006, the CA rejected the petitioners motion for reconsideration.
THE PARTIES ARGUMENTS
The petitioners filed the present petition for review on certiorari with this Court to
challenge the CA rulings. The petitioners maintain that they did not falsify the tax
declaration in acquiring the auctioned property. Moreover, assuming that Tuazon,
the sole bidder, was indeed disqualified from participating in the public auction,
Section 18112 of the Local Government Code of 1991 finds application. Applying the
law, it is as if there was no bidder, for which the City Government of Butuan was to
be considered the purchaser of the land in auction. Therefore, when the petitioners
bought the land, they bought it directly from the purchaser - City Government of
Butuan - and not from Tuazon, as redeemers.
Also, the respondents may not question the validity of the public auction for failing
to deposit with the court the amount required by Section 26713 of the Local
Government Code of 1991.
Finally, the petitioners argue that they did not commit forum shopping, as the reliefs
prayed for in the present case and in the specific performance case are not the
same. In the present case, they merely impleaded the City Government of Butuan
as a nominal party to pay for the value of the land only if possession of the land was
awarded to the respondents. On the other hand, the complaint for specific
performance prayed that the City Government of Butuan execute the necessary
certificate of sale and other relevant documents pertaining to the auction.
The respondents, for their part, reiterate the lower courts findings that there could
have been no legal redemption in favor of the petitioners as the highest bidder was
disqualified from bidding. Moreover, the CA correctly applied the law in finding the
petitioners guilty of forum shopping. Most importantly, the grant of preliminary
injunction lies in the sound discretion of the court and the petitioners failed to show
proof that they are entitled to it.
Meanwhile, on August 8, 2013, the RTC dismissed the main action and ordered the
petitioners to pay the respondents attorneys fees and litigation expenses.14
THE COURTS RULING
We resolve to deny the petition for lack of merit.
The petitioners may not

216

raise factual issues


The petitioners maintain that they did not falsify the tax declaration they
reimbursed the property with. According to them, the document already existed in
1987, way before they acquired the land in 1997. Contrary likewise to the lower
courts finding, they did not purchase the land from Tuazon as redemptioners; they
directly bought the property from the City Government of Butuan.
These factual contests are not appropriate for a petition for review on certiorari
under Rule 45. The Court is not a trier of facts.15 The Court will not revisit, reexamine, and re-evaluate the evidence and the factual conclusions arrived at by the
lower courts.16 In the absence of compelling reasons, the Court will not disturb the
rule that factual findings of the lower tribunals are final and binding on this Court.17
Sections 181 and 267 of the Local Government Code of 1991 are inapplicable; these
provisions do not apply to the present case
The petitioners may not invoke Section 18118 of the Local Government Code of
1991 to validate their alleged title. The law authorizes the local government unit to
purchase the auctioned property only in instances where "there is no bidder" or "the
highest bid is xxx insufficient." A disqualified bidder is not among the authorized
grounds. The local government also never undertook steps to purchase the property
under Section 181 of the Local Government Code of 1991, presumably because it
knew the invoked provision does not apply.
Neither can the Court agree with the petitioners stance that the respondents
defense the petitioners defective title must fail for want of deposit to the court
the amount required by Section 267 of the Local Government Code. The provision
states:
Section 267. Action Assailing Validity of Tax Sale. - No court shall entertain any
action assailing the validity or any sale at public auction of real property or rights
therein under this Title until the taxpayer shall have deposited with the court the
amount for which the real property was sold, together with interest of two percent
(2%) per month from the date of sale to the time of the institution of the action. The
amount so deposited shall be paid to the purchaser at the auction sale if the deed is
declared invalid but it shall be returned to the depositor if the action fails.
Neither shall any court declare a sale at public auction invalid by reason or
irregularities or informalities in the proceedings unless the substantive rights of the
delinquent owner of the real property or the person having legal interest therein
have been impaired. [underscores ours; italics supplied]
A simple reading of the title readily reveals that the provision relates to actions for
annulment of tax sales. The section likewise makes use of terms "entertain" and
"institution" to mean that the deposit requirement applies only to initiatory actions
assailing the validity of tax sales. The intent of the provision to limit the deposit
requirement to actions for annulment of tax sales led to the Courts ruling in
National Housing Authority v. Iloilo City, et al.19 that the deposit requirement is
jurisdictional a condition necessary for the court to entertain the action:
As is apparent from a reading of the foregoing provision, a deposit equivalent to the
amount of the sale at public auction plus two percent (2%) interest per month from
the date of the sale to the time the court action is instituted is a condition a
"prerequisite," to borrow the term used by the acknowledged father of the Local
Government Code which must be satisfied before the court can entertain any
action assailing the validity of the public auction sale. The law, in plain and
unequivocal language, prevents the court from entertaining a suit unless a deposit
is made. xxx. Otherwise stated, the deposit is a jurisdictional requirement the
nonpayment of which warrants the failure of the action.

217

xxxx
Clearly, the deposit precondition is an ingenious legal device to guarantee the
satisfaction of the tax delinquency, with the local government unit keeping the
payment on the bid price no matter the final outcome of the suit to nullify the tax
sale.20
The Court would later reiterate the jurisdictional nature of the deposit in Wong v.
City of Iloilo,21 and pronounce:
In this regard, National Housing Authority v. Iloilo City holds that the deposit
required under Section 267 of the Local Government Code is a jurisdictional
requirement, the nonpayment of which warrants the dismissal of the action.
Because petitioners in this case did not make such deposit, the RTC never acquired
jurisdiction over the complaints.22
These rulings clearly render inapplicable the petitioners insistence that the
respondents should have made a deposit to the court. The suit filed by the
petitioners was an action for injunction and damages; the issue of nullity of the
auction was raised by the respondents themselves merely as a defense and in no
way converted the action to an action for annulment of a tax sale.
The petitioners failed to show clear
and unmistakable rights to be protected
by the writ; the present action has been
rendered moot and academic by the
dismissal of the main action
As the lower courts correctly found, Tuazon had no ownership to confer to the
petitioners despite the latters reimbursement of Tuazons purchase expenses.
Because they were never owners of the property, the petitioners failed to establish
entitlement to the writ of preliminary injunction. "[T]o be entitled to an injunctive
writ, the right to be protected and the violation against that right must be shown. A
writ of preliminary injunction may be issued only upon clear showing of an actual
existing right to be protected during the pendency of the principal action. When the
complainants right or title is doubtful or disputed, he does not have a clear legal
right and, therefore, the issuance of injunctive relief is not proper."23
Likewise, upon the dismissal of the main case by the RTC on August 8, 2013, the
question of issuance of the writ of preliminary injunction has become moot and
academic. In Arevalo v. Planters Development Bank,24 the Court ruled that a case
becomes moot and academic when there is no more issue between the parties or
object that can be served in deciding the merits of the case. Upon the dismissal of
the main action, the question of the non-issuance of a writ of preliminary injunction
automatically died with it. A writ of preliminary injunction is a provisional remedy; it
is auxiliary, an adjunct of, and subject to the determination of the main action. It is
deemed lifted upon the dismissal of the main case, any appeal therefrom
notwithstanding.25
The petitioners are guilty
of forum shopping
We agree with the CA that the petitioners committed forum shopping when they
filed the specific performance case despite the pendency of the present case before
the CA. In the recent case of Heirs of Marcelo Sotto, etc., et al. v. Matilde S.
Palicte,26 the Court laid down the three ways forum shopping may be committed: 1)
through litis pendentia filing multiple cases based on the same cause of action
and with the same prayer, the previous case not having been resolved yet; 2)
through res judicata filing multiple cases based on the same cause of action and
the same prayer, the previous case having been finally resolved; and 3) splitting of
causes of action filing multiple cases based on the same cause of action but with

218

different prayers the ground to dismiss being either litis pendentia or res judicata.
"The requisites of litis pendentia are: (a) the identity of parties, or at least such as
representing the same interests in both actions; (b) the identity of rights asserted
and relief prayed for, the relief being founded on the same facts; and (c) the identity
of the two cases such that judgment in one, regardless of which party is successful,
would amount to res judicata in the other."27
Noticeable among these three types of forum shopping is the identity of the cause
of action in the different cases filed. Cause of action is "the act or omission by which
a party violates the right of another."28
The cause of action in the present case (and the main case) is the petitioners claim
of ownership of the land when they bought it, either from the City Government of
Butuan or from Tuazon. This ownership is the petitioners basis in enjoining the
respondents from dispossessing them of the property. On the other hand, the
specific performance case prayed that the City Government of Butuan be ordered to
issue the petitioners the certificate of sale grounded on the petitioners ownership
of the land when they had bought it, either from the City Government of Butuan or
from Tuazon. While it may appear that the main relief prayed for in the present
injunction case is different from what was prayed for in the specific performance
case, the cause of action which serves as the basis for the reliefs remains the same
the petitioners alleged ownership of the property after its purchase in a public
auction.
Thus, the petitioners' subsequent filing of the specific performance action is forum
shopping of the third kind-splitting causes of action or filing multiple cases based on
the same cause of action, but with different prayers. As the Court has held in the
past, "there is still forum shopping even if the reliefs prayed for in the two cases are
different, so long as both cases raise substantially the same issues."29
Similarly, the CA correctly found that the petitioners and their counsel were guilty of
forum shopping based on litis pendentia. Not only were the parties in both cases the
same insofar as the City Government of Butuan is concerned, there was also
identity of rights asserted and identity of facts alleged. The cause of action in the
specific performance case had already been ruled upon in the present case,
although it was still pending appeal before the CA. Likewise, the prayer sought in
the specific performance case-for the City Government ofButuan to execute a deed
of sale in favor of the petitioners - had been indirectly ruled upon in the present
case when the R TC declared that no certificate of sale could be issued because
there had been no valid sale.
WHEREFORE, premises considered, the Court DENIES the petition for review on
certiorari.1wphi1 The decision dated October 24, 2005 and the resolution dated
April 6, 2006 of the Court of Appeals in CA-G.R. SP No. 59859 are hereby AFFIRMED.
SO ORDERED.
ARTURO D. BRION
Associate Justice
Bayang v. Court of Appeals, G.R. No. L-53564, February 27, 1987

G.R. No. L-53564

February 27, 1987

JUAN BAYANG, petitioner,


vs.
HON. COURT OF APPEALS and BENIGNO BIONG, respondents.
Rodrigo Matutina for petitioner.
Luceniano E. Lancin for private respondent.

219

CRUZ, J.:
Sometime in November 1969, Juan Bayang filed a complaint for quieting of title with
damages against Benigno Biong in the Court of First Instance of Surigao del Norte,
Branch 1, docketed as Civil Case No. 1892. 1 In 1970, while the case was pending,
Biong succeeded in dispossessing the plaintiff of the land in question and remained
there until January 25, 1978. 2 On February 21, 1972, the case was decided in favor
of Biong, but the Court of Appeals on December 8, 1977, reversed the trial court,
declaring in the dispositive portion of its decision:
WHEREFORE, the judgment appealed from is reversed and appellants are hereby
declared owner of the property in litigation, and defendant-appellee are (sic) hereby
ordered to pay appellant the sum of P56.40 as the latter's share in the proceeds
from the sale of the copra derived from the third harvest of coconuts from the same
land, and P1,000.00 as attorney's fees, and costs of Litigation. 3
This decision became final on February 2, 1978.
On February 6, 1978, Bayang filed a second case, docketed as Civil Case No. 2589,
with the CFI of Surigao del Norte, Branch II, seeking to recover from Biong the
incomes earned from the same land from 1970 up to the quarterly incomes from
1978 until the said land was delivered to the plaintiff. 4 At the pre-trial conference
held on July 10, 1978, the counsel for Bayang admitted that as of January 25, 1978,
Biong had already surrendered possession of the land in question to Bayang. 5 On
August 16, 1978, Biong filed a motion for summary judgment, reiterating the
affirmative defense of res judicata raised in his answer dated April 12, 1978, insofar
as it related to the incidents concerning the case prior to January 25, 1978. 6 An
opposition to this motion was duly filed by Bayang. 7
The trial court, after considering the arguments of the parties, granted the motion
and rendered a summary judgment on October 30, 1978. 8 The said decision was
sustained by the Court of Appeals, and Bayang is now before us in this petition for
review by certiorari under Rule 45 of the Rules of Court.
His assignment of errors raises two basic submissions, to wit:
1.

Civil Case No. 2589 should not have been decided by summary judgment.

2.
The judgment in CA-G.R. No. 54720-R (appeal from judgment in Civil Case No.
1892) did not constitute res judicata as to bar Civil Case No. 2589.
Both contentions are incorrect. We rule for the respondents.
In its decision, the Court of Appeals quoted the following excerpt from Singleton v.
Philippine Trust Co. 9 on the nature and functions of the summary judgment:
Summary judgment is one of the methods sanctioned in the present Rules of Court
for a prompt disposition of civil actions wherein there exists no serious controversy.
The procedure may be availed of not only by claimants, but also by defending
parties who may be the object of unfounded claims. A motion for summary
judgment assumes that scrutinizing of the facts will disclose that the issues
presented by the pleadings need not be tried because they are so patently
unsubstantial as not to be genuine issues, or that there is no genuine issue as to
any material facts or where the facts appear undisputed and certain from the
pleadings, depositions, admissions and affidavits.
We hold that there was no genuine or triable issue of fact raised by the parties, in
view particularly of the affirmative defense of res judicata invoked by the private
respondent. That defense is sustained.

220

A long line of decisions has consistently held that for res judicata to apply: a) the
former judgment must be final; b) it must have been rendered by a court having
jurisdiction over the subject matter and the parties; c) it must be a judgment on the
merits; and d) there must be between the first case and the second case identity of
parties, identity of subject matter and Identity of cause of action. 10
The decision in Civil Case No. 1892 became final and executory on February 2,
1978. There is no dispute that the trial court which rendered that decision had
jurisdiction over the subject-matter and the parties to the proceeding. The case was
tried on the merits. The parties to Civil Case No. 1892 and the subsequent Civil Case
No. 2589 are the same petitioner and private respondent now before us.
The petitioner would draw a distinction between the land in dispute in Civil Case No.
1892 and the income from that land being claimed in Civil Case No. 2589. But that
is in our view splitting hairs to split a cause of action. The subject-matter is
essentially the same in both cases as the income is only a consequence or
accessory of the disputed property. We cannot agree that there are involved here
two causes of action calling for two separate cases. The claim for the income from
the land was incidental to, and should have been raised by Bayang in his earlier
claim for, ownership of the land.
We note that while the first case was pending, the private respondent, by the
petitioner's own account, "succeeded in dispossessing" him of the disputed land 11
and that at the pretrial conference on Civil Case No. 2589, Bayang's counsel
admitted that Biong had vacated the said property as of January 25, 1978. 12 This
means that from 1970 to the date the respondent surrendered the property in 1978,
Biong was presumably collecting and enjoying the income therefrom to the
exclusion of the petitioner.
Civil Case No. 1892 was commenced in November 1969 and was finally decided
only on February 2, 1978. The private respondent entered the disputed property in
1970 and left it only in 1978. For about seven years, therefore, the petitioner made
no move at all to amend his complaint to include a claim for the income supposedly
received by the private respondent during that period.
Under Rule 10, Section 6, of the Rules of Court.
Sec. 6.
Matters subject of supplemental pleadings. Upon motion of a party
the court may, upon reasonable notice and upon such terms as are just, permit him
to serve a supplemental pleading setting forth transactions, occurrence or events
which have happened since the date of the pleading sought to be supplemented. If
the court deems it advisable that the adverse party should plead thereto, it shall so
order, specifying the time therefor.
In the case of Jalandoni v. Martin-Guanzon, 13 this Court declared through Justice
J.B.L. Reyes:
As to the value of the plaintiff's share in the products of the land during the time
that the former action was pending (which are the damages claimed under the
second cause of action), their recovery is now barred by the previous judgment.
These damages are but the result of the original cause of action, viz., the continuing
refusal by defendants in 1941 to recognize the plaintiff's right to an interest in the
property. In the same way that plaintiffs claimed for their share of the produce from
1941 to 1947, these later damages could have been claimed in the first action,
either in the original camplaint (for their existence could be anticipated when the
first complaint was filed) or else by supplemental pleading. To allow them to be
recovered by subsequent suit would be a violation of the rule against multiplicity of
suits, and specifically of sections 3 and 4 of Rules 2 of the Rules of Court, against
the splitting of causes of action, since these damages spring from the same cause
of action that was pleading (sic) in the former case No. 573 between the same

221

parties (Blossom & Co., Inc. v. Manila Gas Corporation, 55 Phil. 226; Santos v. Moir,
36 Phil. 350; Pascua v. Sideco 24 Phil. 26; Bachrach Motor Co. v. Icarangal 68 Phil.
287).
And in another case, 14 the same jurist declared:
Urtula, as defendant in the expropriation case, could have raised the matter of
interest before the trial court even if there had been no actual taking yet by the
Republic and the said court could have included the payment of interest in its
judgment but conditioned upon the actual taking, because the rate of interest upon
the amount of just compensation (6%) is a known factor, and it can reasonably be
expected that at some future time, the expropriator would take possession of the
property, though the date be not fixed. In this way, multiple suits would be avoided.
Moreover, nothing prevented appellee from calling the attention of the appellate
courts (even by motion to reconsider before judgment became final) to the
subsequent taking of possession by the condemnor, and asking for allowance of
interest on the indemnity since that followed the taking as a matter of course, and
raised no issue requiring remand of the records to the Court of origin.
As the issue of interest could have been raised in the former case but was not
raised, res judicata blocks the recovery of interest in the present case. (Tejedor vs.
Palet, 61 Phil. 494; Phil. Engineering Corp., et al. vs. Ceniza, etc., et al., L-17834, 29
Sept. 1962). It is settled that a former judgment constitutes a bar, as between the
parties, not only as to matters expressly adjudged, but all matters that could have
been adjudged at the time (Rule 39, sec. 49; Corda vs. Maglinti L-17476, November
30, 1961; Rodriguez vs. Tan, 48 Off. Gaz. 3330).
Clearly, then, Civil Case No. 2589 is barred by the previous judgment in Civil Case
No. 1892. This being so, it should follow that the trial judge committed no grave
abuse of discretion in deciding the latter case by summary judgment.
We are not unmindful of the argument that affirmance of the challenged decision of
the respondent court will result in the unjust enrichment of Biong at the expense of
Bayang. This assumes, of course, that the petitioner could have proved his right to
the income he now claims belatedly. The point is that he did not make the proper
claim at the proper time and in the proper proceedings, and he cannot do it now.
Whatever right he might have had is now deemed waived because of his neglect.
Nemo debet bis vexare pro una et eadem causa. This has to be so if litigants are to
be spared the annoyance, anxiety and expense that could otherwise be inflicted
upon them endlessly by capricious, malicious or vindictive suitors.
WHEREFORE, the petition is dismiss and the appealed decision is affirmed. Costs
against the petitioner.
SO ORDERED.
Yap (Chairman), Narvasa, Melencio-Herrera, Feliciano, Gancayco and Sarmiento JJ.,
concur.

De Larena v. Villanueva, G.R. No. L-29155, November 5, 1928

G.R. No. L-29155

November 5, 1928

JOSEFINA RUBIO DE LARENA, plaintiff-appellant,


vs.
HERMENEGILDO VILLANUEVA, defendant-appellee.
Abad Santos, Camus and Delgado and Jose Montano for appellant.

222

Del Rosario and Del Rosario for appellee.

OSTRAND, J.:
The case at bar is a sequel to case G. R. No. 21706, Josefina Rubio de Larena vs.
Hermenegildo Villanueva, decided on March 26, 1924. 1 In that case we affirmed a
decision of the Court of First Instance ordering the rescission of a lease of the
Tacgajan Sugar Plantation and the payment by the defendant-lessee of the unpaid
balance of the rent for the agricultural year 1920-1922 in the sum of P5,949.28 with
interest from August 26, 1922, an for P8,000 in rent for the agricultural year 19211923. The decision also provided that the possession of the leased land be delivered
to the plaintiff.
Shortly after the record was returned to the court below, a writ of execution was
issued, but before levy was made the parties came to an agreement, under which
the money judgment was to be satisfied by the payment of P10,500 in cash and the
transfer to the plaintiff of a dwelling house situated in the municipality of Bais. The
agreement was carried out in accordance with its terms, and on September 30,
1924, the following document was executed by the plaintiff:
Habiendo llegado a un convenio entre la que subscribe, ejecutante, en la causa civil
No. 67 decidida por la Corte Suprema, y el ejecutado, Don Hermenegildo Villanueva,
por la presente declaro haber recibido del Sheriff Provincial de Negros Oriental, y mi
entera satisfaccion la suma de diez mil quinientos pesos (P10,500), mas una casa
residencial con su solar, situada en la plaza del Municipio de Bais, Provincia de
Negros Oriental, cuyas descripciones aparecen an un ocumento aparte, por el
importnte de la ejecusacion expidida por el Jusgado de Negros Oriental al 14 de
mayo de 1924, en vitud de una decision de la Corte Suprema. Con este queda
definitivamente cumplimentada esta ejecucion.
Y para que asi conste, firmo la presente en el Municipio de Bais, Provincia de Negros
Oriental, I. F., ante el Sheriff Provincial de esta Provincia de Negros Oriental y el
Notario Publico Don Francisco Romero, que ratifica este compromiso.
(Fda.) JOSEFINA RUBIO, Vda. DE LARENA
Firmado en presencia de:
(Fdos.) BRAULIO RUBIO
FRANCISCO PINERO
(ACKNOWLEDGMENT)
In the meantime, the defendant had harvested the sugarcane crop produced in the
agricultural year 1922-1924, and after having satisfied the aforesaid money
judgment, he also continued in possession of the plantation long enough to
appropriate to himself the following ratoon cane crop.
The present action was brought on April 13, 1925, but the last amended complaint,
setting forth three causes of action, was not filed until June 17, 1927. As her first
cause of action the plaintiff, after a preliminary statement of the origin of the
controversy, alleges that while case G. R. No. 21706 was on appeal to the Supreme
Court, the defendant knew positively that the aforesaid lease was declared
rescinded by the Court of First Instance on September 8, 1923, and that he, the
defendant, also knew that he thereafter was not entitled to the possession of the
aforesaid hacienda; that he, nevertheless, in bad faith continued in such possession
during the agricultural year 1922-1924 and appropriated to himself the cane
harvest for that year, which after deducting the share of the sugar central, produced

223

1,679.02 piculs for his own benefit, which sugar was sold by him for the sum of P13
a picul; that the plaintiff has demanded payment to her of the total value of said
1,679.02 piculs, amounting to P21,827.26, but that the defendant refuses to pay.
The plaintiff, therefore, asks judgment for the sum of P21,827.26 upon the first
cause of action.
For the second cause of action the plaintiff alleges that under the contract of lease
of the Tacgajan Hacienda, one of the obligations assumed by the defendant was
that he would use the care of a good father of the family in conserving the tools,
agricultural implements, draft animals, and other effects enumerated in an
inventory made at the time the defendant entered in possession under the lease;
that he was further obligated to return said property to the plaintiff, but that he
return said property to the plaintiff, but that he returned only a part that he returned
only a part thereof and failed to returned only a part thereof and failed to return 4
carabaos, 4 vacunos, 1 corn mill, 4 wagons, 106 steel rails, 14 plows, 1 table, 1
scale, an 1 telephone, the total value of the property enumerated being P3,596 for
which amount, plus P500 in damages, the plaintiff asks judgment under her second
cause of action.
As a third cause of action the plaintiff alleges that the harvest of sugar cane illegally
made by the defendant in 1924 left ratoon sugar cane in the fields of the hacienda,
which sugar can was the property of the plaintiff, and that during the year 1925, the
defendant illegally harvested said ratoon cane together with some recently planted
cane, which harvested after deducting the share of the sugar central, produced
1,613.25 piculs of sugar, which the defendant sold for his own benefit at the price of
P13 per picul, the total amount received by him being P20,962.25 for which the
plaintiff demands judgment. lawphi1.net
In his answer to the first and third causes of action, the defendants alleges that
according to the pleadings in case G. R. No. 21706, the two causes of action were
included in that case and, therefore, must be considered res adjudicata. In regard to
the second cause of action the defendant pleads the general issue and sets up as a
special defense that assuming that the property referred to in said cause of action
was missing, it loss was due to its total extinction by ordinary use, for which the
defendant could not be held responsible. For all three causes of action, the
defendant sets up as a special defense the document executed by the plaintiff on
September 30, 1924, acknowledging the satisfaction of the judgment in case G. R.
No. 21706.
Upon trial the Court of First Instance sustained the defendant's special defense and
absolved him from the complaint with the cost against the plaintiff, whereupon the
latter appealed to this court.
We do not think that the court below erred in absolving the defendant from liability
upon the second cause of action. It is not without significance that in her original
complaint the plaintiff claimed only 5 plows, 6 carts, 3 carabaos an 4 vacunos, the
total value of which was alleged to be P1,360; in the first amended complaint filed
over two years later, the same claim was made, but in the last amended complaint
a number of other articles were included, thus increasing the claim to P3,596. The
court below found that the weight of the evidence showed that the missing draft
animals died from rinderpest and that the other personal property was turned over
to the provincial sheriff for delivery to the plaintiff before the writ of execution was
returned to the court. If so, the action would lie against the sheriff rather than
against the defendant.
As to the first cause of action the defendant argues that it was included in the
prayer of an amended complaint filed in case G. R. No. 21706 and that, although no
express determination thereof was made in the decision of the case, it must,
nevertheless, be regarded as res judicata. That such is not the case is very clear.
The Code of Civil Procedure says:

224

That only is deemed to have been so adjudged in a former judgment which appears
upon its face to have been so adjudged, or which was actually and necessarily
included therein or necessary thereto. (Sec. 307, Code of Civil Proc.)
But the defendant maintains that the plaintiff having had an opportunity to ventilate
the matter in the former case, she cannot now enforce the same cause of action in
the present case. Properly speaking, this argument does not involve the doctrine of
res judicata but rests on the well-known an, in American law, firmly established
principle that a party will not be permitted to split up a single cause of action an
make it the basis for several suits. But that is not this case. The rule is well
established that when a lease provides for the payment of the rent in separate
installments, each installment is an independent cause of action, though it has been
held and is good law, that in an action upon such a lease for the recovery of rent,
the installments due at the time the action brought must be included in the
complaint an that failure to o so will constitute a bar to a subsequent action for the
payment of that rent. The aforesaid action, G. R. No. 21706, was brought on August
23, 1922, the plaintiff demanding payment of then sue rent in addition to the
rescission of the lease. On July 27, 1923, the plaintiff filed a motion for an
amendment to paragraph 6 of the complaint adding to that paragraph the following
sentence:
Que tambien ha vencido ya el tercer ano el arrendamiento de la finca en cuestion y
que tampoco ha pagado el demandao el canon correspondiente a icho ano.
The plaintiff also amended the prayer of the complaint by asking judgment for rent
for years subsequent to 1922. The motion was granted, and the case came up for
trial on July 30, 1923, and on September 8, 1923, the trial court rendered its
decision giving judgment for rent up to and including the rent for the agricultural
year ending in 1923. The lease did not provide for payment of rent in advance or at
any definite time, an it appears plainly from the record that the rent for an
agricultural year was not considered due until the end of the corresponding year. It
follows that the rent for the agricultural year 1922-1924 ha not become sue time of
the trial of the case and that consequently the trial court could not render judgment
therefore. The action referred to is, therefore, no bar to the first cause of action in
the present litigation.
The defendant places much weigh upon the document of September 30, 1924,
hereinbefore quoted. The document speaks for itself, and it will be readily seen that
it is merely a receipt for the satisfaction of the money judgment in the case G. R.
No. L-21706 and has nothing to with the present case.
The only question in regard to the first cause of action relates to the amount of the
damages. The plaintiff contends that the defendant was a possessor in bad faith,
and therefore, must pay the value of the fruits of the land in accordance with article
455 of the Civil Code. Under the circumstances of the case, we cannot so hold. The
defendant held possession under the contract of lease until said contract was
rescinded. The contract contained no special provision for the procedure in effecting
the rescission, and it follows that it could only be accompanied by a final judgment
of the court. The judgment in case G. R. No. L-210706 did not become final until
March 27, 192, when our decision on appeal was rendered. As that must have been
close to the end of the harvest and milling of the sugar crop for the period to which
the first cause of action refers, we do not think that the defendant should be
required to pay more than the amount of the stipulated rent for the period, i. e., the
sum of P8,000 with interest rent for that period, i. e., the sum of P8,000 with
interest. (Lerma vs. De la Cruz, 7 Phil., 581.)
The action for terminating the lease was brought under article 1124 of the Civil
Code, an it may, perhaps, he said that properly speaking, the subject matter of the
action was a resolution of the contract an not a rescission. That may be true, but it
is a distinction without a difference; in their case a judicial declaration would be

225

necessary for the cancellation of the contract in the absence of a special


agreement.
Very little need be said in regard to the third cause of action. It relates to a period
subsequent to the complete termination of the lease by final judicial order. The
defendant had then no right whatever to the possession of the land or to the fruits
thereof, and in removing the fruits, he acted in bad faith. This being the case, he
must pay for the fruits received by him, less the necessary expenses of production.
(Arts. 455 and 453 of the Civil Code.) As his bad faith commence long before the
fruits in question were produced, he is not entitled to any part of the net proceeds
of the crop. The evidence shows that the net ratoon crop of the year 1924-1925 was
1,613.25 piculs of sugar, and according to the defendant's own statement, the
market value of the sugar was in the neighborhood of P11 per picul an the costs of
production about P4.50. The net result is that under the third cause of action, the
defendant must pay to the plaintiff the sum of P10,486.13 with interest.
For the reason stated, the judgment of the court below is affirmed in regard to the
second cause of action. It is reversed as to the first and third causes of action, and it
is hereby ordered that the plaintiff have and recover from the defendant the sum of
P18,486.13 with interest at the rate of 6 per cent per annum from April 13, 1925,
the date of the filing of the complaint. No costs will be allowed. So ordered.
Avancea, C. J., Johnson Street, Malcolm, Villamor, Romualdez, an Villa-Real, JJ.,
concur.
ORDER AMENDING DECISION
December 10, 1928
OSTRAND, J.:
In the motion filed by the defendant on November 14, 1928 our attention is called
to a mathematical error in that we, in discussing the plaintiff's third cause of action,
failed to take into consideration the fact that one-half of the gross ratoon crop
produced on the land in question in the agricultural year 1924-1925 was ceded to
the sugar central as compensation for the milling of the cane and that the
defendant paid the expenses of the production of the total or gross crop. Page 8 of
the aforesaid decision is therefore amended so as to read as follows:
Very little need be said in regard to the third cause of action. It relates to a period
subsequent to complete termination of the lease by final judicial order. The
defendant had then no right whatever to the possession of the land or to the fruits
thereof, and in removing the fruits, he acted in bad faith. This being the case, he
must pay for the fruits received by him, less the necessary expenses of production
(Arts. 455 and 453 of the Civil Code.) As his bad faith commenced long before the
fruits in question were produced, he is not entitled to any part of the net proceeds
of the crop. The evidence shows that the gross ratoon crop for the year 1924-1925
was 3,226.50 piculs of sugar, and according to the defendant's own statement, the
market value of the sugar was in the neighborhood of P11 per picul and the cost of
production about P4.50. The defendant received only one-half of the gross crop, the
other half going to the sugar central as compensation for the milling of the cane,
but the defendant paid the cost of production both of his share of the sugar and that
of the sugar central. The net result is that under the third cause of action, the
defendant must pay to the plaintiff the sum of P3,226.50 with interest.
"For the reasons stated, the judgment of the court below is affirmed in regard to the
second cause of action. It is reversed as to the first an third causes of action, an it is
hereby ordered that the plaintiff have and recover from the defendant the sum of
P11,226.50 with interest at the rate of 6 per cent per annum from April 13, 1925,
the date of the filing of the complaint. No costs will be allowed." So ordered.

226

Avancea, C. J., Johnson, Street, Malcolm, Villamor, Romualdez, and Villa-Real, JJ.,
concur.
Blossom & Company v. Manila Gas Corp., G.R. No. L-32958, November 8, 1930

G.R. No. L-32958

November 8, 1930

BLOSSOM AND COMPANY, INC., plaintiff-appellant,


vs.
MANILA GAS CORPORATION, defendant-appellee.
Harvey and O'Brien for appellant.
Ross, Lawrence and Selph and John B. Miller for appellee.
STATEMENT
In its complaint filed March 3, 1927, the plaintiff alleges that on September 10,
1918, it entered into a contract with the defendant in which the plaintiff promised
and undertook to purchase and receive from the defendant and the defendant
agreed to sell and deliver to the plaintiff, for a period of four years, three tons of
water gas tar per month from September to January 1, 1919 and twenty tons per
month after January 1, 1919, for the remaining period of the contract; one-half ton
of coal gas tar a month from September to January 1, 1919, and six tons per month
after January 1, 1919, for the remainder of the contract, delivery to be made at the
plant of the defendant in the City of Manila, without containers and at the price of
P65 per ton for each kind of gas tar, it being agreed that this price should prevail
only so long as the raw materials coal and crude oil used by the defendant in
the manufacture of gas should cost the defendant the same price as that prevailing
at the time of the contract, and that in the event of an increase or decrease in the
cost of raw material there would be a corresponding increase or decrease in the
price of the tar. That on January 31, 1919, this contract was amended so that it
should continue to remain in force for a period of ten years from January 1, 1919,
and it was agreed that the plaintiff should not be obliged to take the qualities of the
tars required during the year 1919, but that it might purchase tars in such
quantities as it could use to advantage at the stipulated price. That after the year
1919 the plaintiff would take at least the quantities specified in the contract of
September 10, 1918, to be taken from and after January 1, 1919, and that at its
option it would have the right to take any quantity of water gas tar in excess of the
minimum quantity specified in that contract and up to the total amount of output of
that tar of defendant's plant and also to take any quantity of coal gas tar in excess
of the minimum quantity specified in that contract and up to 50 per cent of
defendant's entire output of coal gas tar, and that by giving the defendant ninety
days' notice, it would have the right at its option to take the entire output of
defendant's coal gas tar, except such as it might need for its own use in and about
its plant. That in consideration of this modification of the contract of September 10,
1918, plaintiff agreed to purchase from the defendant of certain piece of land lying
adjacent to its plant at the price of P5 per square meter, the proof of which is
evidenced by Exhibit C. That pursuant to Exhibit C, defendant sold and conveyed
the land to the plaintiff which in turn executed a mortgage thereon to the defendant
for P17,140.20, to secure the payment of the balance of the purchase price.
It is then alleged:
VIII. That about the last part of July, 1920 the defendant herein, the Manila Gas
Corporation willfully, and deliberately breached its said contract, Exhibit C, with the
plaintiff by ceasing to deliver any coal and water gas tar to it thereunder solely
because of the increased price of its tar products and its desire to secure better
prices therefor than plaintiff was obliged to pay to it, notwithstanding the frequent
and urgent demands made by the plaintiff upon it to comply with its aforesaid
contract by continuing to deliver the coal and water gas tar to the plaintiff
thereunder, but the said defendant flatly refused to make any deliveries under said
contract, and finally on November 23, 1923, the plaintiff was forced to commence
227

action against the defendant herein in the Court of First Instance of Manila, being
case No. 25352, of that court entitled 'Blossom & Co., plaintiff, vs. Manila Gas
Corporation, defendant,' to recover the damages which it had up to that time
suffered by reason of such flagrant violation of said contract on the part of the
defendant herein, and to obtain the specific performance of the said contract and
after due trial of that action, judgment was entered therein in favor of the plaintiff
herein and against the said defendant, the Manila Gas Corporation, for the sum of
P26,119.08, as the damages suffered by this plaintiff by the defendant's breach of
said contract from July, 1920, up to and including September, 1923, with legal
interest thereon from November 23, 1923, and for the costs but the court refused to
order the said defendant to resume the delivery of the coal and water gas tar to the
plaintiff under said contract, but left the plaintiff with its remedy for damages
against said defendant for the subsequent breaches of said contract, which said
decision, as shown by the copy attached hereto as Exhibit G, and made a part
hereof, was affirmed by our Supreme Court on March 3, 1926;
IX. That after the defendant had willfully and deliberately violated its said contract
as herein-before alleged, and the plaintiff suffered great damage by reason thereof,
the plaintiff claimed the right to off- set its damages against the balance due from it
to said defendant on account of the purchase of said land from the defendant, and
immediately thereupon and notwithstanding said defendant was justly indebted to
the plaintiff at that time as shown by the judgment of the Court Exhibit G, in more
that four times the amount due to it from the plaintiff, the said defendant caused to
be presented against the plaintiff a foreclosure action, known as the Manila Gas
Corporation versus Blossom & Company, No. 24267, of the Court of First Instance of
Manila, and obtained judgment therein ordering that Blossom & Company pay the
last installment and interest due on said land or else the land and improvements
placed thereon by the plaintiff would be sold as provided by law in such cases to
satisfy the same, and the said defendant proceeded with the sale of said property
under said judgment and did everything in its power to sell the same for the sole
purpose of crushing and destroying the plaintiff's business and thus rendering it
impossible for the plaintiff herein to continue with its said contract in the event that
said defendant might in the future consider it more profitable to resume
performance of the same, but fortunately the plaintiff was able to redeem its
property as well as to comply with its contract and continued demanding that the
defendant performed its said contract and deliver to it the coal and water gas tar
required thereby.
That the defendant made no deliveries under its contract, Exhibit C, from July, 1920
to March 26, 1926, or until after the Supreme Court affirmed the judgment of the
lower court for damages in the sum of P26, 119.08. 1
It is then alleged that:
. . . On March 26, 1926 the said defendant offered to resume delivery to the plaintiff
from that date of the minimum monthly quantities of tars stated in its contract ,and
the plaintiff believing that the said defendant was at least going to try to act in good
faith in the further performance of its said contract, commenced to accept deliveries
of said tars from it, and at once ascertained that the said defendant was
deliberately charging it prices much higher than the contract price, and while the
plaintiff accepted deliveries of the minimum quantities of tars stated in said
contract up to and including January, 1927, (although it had demanded deliveries of
larger quantities thereunder, as hereinafter alleged) and paid the increased prices
demanded by the defendant, in the belief that it was its duty to minimize the
damages as much as possible which the defendant would be required to pay to it by
reason of its violation of said contract, it has in all cases done so under protest and
with the express reservation of the right to demand from the said defendant an
adjustment of the prices charged in violation of its contract, and the right to the
payment of the losses which it had and would suffer by reason of its refusal to make
additional deliveries under said contract, and it also has continuously demanded
that the said defendant furnish to it statements supported by its invoices showing

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the cost prices if its raw materials coal and crude oil upon which the contract
price of the tars in question is fixed, which is the only way the plaintiff has to
calculate the true price of said tars, but said defendant has and still refuses to
furnish such information, and will continue to refuse to do so, unless ordered to
furnish such information to the plaintiff by the court, and the plaintiff believes from
the information which it now has and so alleges that the said defendant has
overcharged it on the deliveries of said tars mentioned in the sum of at least
P10,000, all in violation of the rights of the plaintiff under its said contract with the
defendant.
That on January 31, 1926 and pursuant to Exhibit C. plaintiff notified the defendant
in writing that commencing with the month of August, 1926 it desired to take
delivery of 50 per cent of defendant's coal tar production for that month and that on
November 1, 1926, it desired to take the entire output of defendant's coal gas tar,
but that the defendant refused and still refuses to make such deliveries unless
plaintiff would take all of its water gas tar production with the desired quantity of
coal gas tar which refusal was a plain violation of the contract. That on January 29,
1927, and in accord with Exhibit C, plaintiff notified the defendant in writing that
within ninety days after the initial delivery to it of its total coal gas tar production or
in February, 1927, it would require 50 per cent of its total water gas tar production
and that in April 1927, it would require the total output of the defendant of both coal
and water gas tars, and that it refused to make either of such deliveries.
It is then alleged:
XIV. That as shown by the foregoing allegations of this complaint, it is apparent that
notwithstanding the plaintiff in this case has at all times faithfully performed all the
terms and conditions of said contract, Exhibit C, on its part of be performed, and
has at all times and is now ready, able and willing to accept and pay for the
deliveries of said coal and water gas tars required by said contract and the notices
given pursuant thereto, the said defendant, the Manila Gas Corporation, does not
intend to comply with its said contract, Exhibit C, and deliver to the plaintiff at the
times and under the terms and conditions stated therein the quantities of coal and
water gas tars required by said contract, and the several notices given pursuant
thereto, and that it is useless for the plaintiff to insist further upon its performance
of the said contract, and for that reason he only feasible course for the plaintiff to
pursue is to ask the court for the rescission of said contract and for the full damages
which the plaintiff has suffered from September, 1923, and will suffer for the
remainder of said contract by reason of the defendant's failure and refusal to
perform the same, and the plaintiff has so notified the said defendant.
That since September, 1923, by reason of the bad faith of the defendant, the
plaintiff has been damaged in the sum of P300,000, for which it prays a
corresponding judgment, and that the contract, Exhibit C, be rescinded and
declared void and without force and effect.
After the filing and overruling of its demurrer, the defendant filed an answer in the
nature of a general and specific denial and on April 10, 1928, and upon stipulation
of the parties, the court appointed W. W. Larkin referee, "to take the evidence and,
upon completion of the trial, to report his findings of law and fact to the court."
July 18, 1928, the defendant filed an amended answer in which it alleged as an
affirmative defense, first, that the complaint does not state facts sufficient to
constitute cause of action the reason that a prior adjudication has been had of all
the issues involved in this action, and, second, "that on or about the 16th day of
June, 1925, in an action brought in the Court of First Instance of the City on Manila,
Philippine Islands, before the Honorable Geo. R. Harvey, Judge, by Blossom &
Company, plaintiff, vs. Manila Gas Corporation, defendant, being civil case No.
25353, of said court, for the same cause of action as that set fourth in the complaint
herein, said plaintiff recovered judgment upon the merits thereof, against said
defendant decreeing a breach of the contract sued upon herein, and awarding

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damages therefor in the sum of P26,119.08 with legal interest from November 23,
1923, and costs of suit, which judgment was upon appeal affirmed by the Supreme
Court of the Philippine Islands, in case G. R. No. 24777 of said court, on the 3d day
of March, 1926 and reported in volume 48 Philippines Reports at page 848," and it
prays that plaintiff's complaint be dismissed with costs.
After the evidence was taken the referee made an exhaustive report of sixty-pages
in which he found that the plaintiff was entitled to P56,901.53 damages, with legal
interest from the date of the filing on the complaint, to which both parties filed
numerous exceptions
In its decision the court says:
Incidental references have been made to the referee's report. It was admirably
prepared. Leaving aside the question of damages and the facts upon which the
referee assessed them, the facts are not in dispute at least not in serious dispute.
They appear in the documentary evidence and this decision is based upon
documents introduced into evidence by plaintiff. If I could have agreed with the
referee in respect to the question of law, I should have approved his report in toto. If
defendant is liable for the damages accruing from November 23, 1923, the date the
first complaint was filed, to April 1st, 1926, the date of resumption of relations; and
if defendant, after such resumption of relations, again violated the contract, the
damages assessed by the referee, are, to my way of thinking, as fair as could be
estimated. He went to tremendous pains in figuring out the details upon which he
based his decision. Unfortunately, I cannot agree with his legal conclusions and the
report is set aside except wherein specifically approved.
It is unnecessary to resolve specifically the many exceptions made by both partied
to the referee's report. It would take much time to do so. Much time has already
been spent in preparing this decision. Since both parties have informed me that in
case of adverse judgment ,and appeal would be taken, I desire to conclude the case
so that delay will be avoided.
Let judgment be entered awarding damages to plaintiff in the sum of P2,219.60,
with costs.
From which plaintiff only appealed and assigns twenty-four different errors, of which
the following are material to this opinion:
I. The trial court erred in holding that this suit in so far as the damages from
November, 1923, to March 31, 1926, are concerned , is res adjudicata.
II. The trial court erred in holding that the defendant repudiated the contract in
question as a whole, and that the plaintiff when it brought its first suit to collect
damages had already elected and consented to the dissolution of the contract, and
its choice once made, being final, it was estopped to claim that the contract was
alive when that suit was brought.
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VII. The trial court erred in refusing to sustain plaintiff's third exception to the legal
interpretation placed on the contract in this case by the referee with reference to
quantity of tars and his conclusion with respect to the terms thereof that:
"1. Plaintiff must take and defendant must deliver either the minimum or maximum
quantity of water gas tar and not any quantity from the minimum to the maximum
and/or
"2. Plaintiff must take either the minimum and any quantity up to fifty per cent of
entire output of coal gas tar.

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"3. With ninety days' notice by plaintiff to defendant the former must take and the
latter must deliver total output of both tars, except such as might be needed by
defendant for use in and about its plants and not any quantity from the minimum up
to total output of both tars." (See page 47, Referee's report.)
And in holding that the option contained in said contract, taking into consideration
the purposes of both parties in entering into the contract, was a claimed by
defendant: all the water gas tar and 50 per cent of the coal gas tar upon immediate
notice and all tars upon ninety day's notice.
VIII. The trial court erred in refusing to sustain plaintiff's fourth exception to the
finding and conclusion of the referee that from the correspondence between the
parties it was apparent that plaintiff did not make a right use of its option, and that
the letter of June 25, 1926, and the subsequent demands, with exception of the
letter of July 31, 1926, were not made in pursuance to the terms of the contract,
and that defendant had no liability in refusing to comply therewith, and in allowing
plaintiff damages only for the failure of the defendant to deliver quantities shown in
Exhibits Ref. 21 and 22. (See pages 51, 52, Referee's report.)
IX. The trial court erred in finding and holding that the demands of plaintiff for
additional tars under its contract with the defendant were extravagant and not
made in good faith, and that when it wrote to defendant that it desired maximum
quantities of coal gas tars and only minimum of water gas tars, but with the
reservation of going back to minimum quantities of both at any time it chose, it
announced its intention f breaching the contract, and defendant was under no
obligation to deliver maximum quantities of either tars, and since this was the
efficient cause of the failure of defendant to deliver or plaintiff to accept tars, the
blame is attribute to plaintiff, and it cannot recover for a rescission.
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xxx

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XXIII. The trial court erred in refusing to sustain plaintiff's seventeenth exception to
the finding and conclusion of the referee that the plaintiff is entitled to recover from
the defendant only the following sums:
Water gas tar (Exhibit Ref. 21) P38,134.60
Coal gas tar (Exhibit Ref. 22)
16,547.33
Overcharges on deliveries (Exhibit Ref. 23)
2,219.60
or a total of
56,901.53
with interest, and in not awarding to the plaintiff as damages in this case the sum of
P319,253.40, with legal interest thereon from the date of filing the complaint in this
case, in the manner and form computed but it, and in awarding damages to the
plaintiff for the sum of only P2,219.60. with costs.
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JOHNS, J.:
In this action plaintiff seeks to recover damages from the defendant which it claims
to have sustained after September, 1923, arising from, and growing out of, its
original contract of September 10, 1918, as modified on January 1, 1919, to
continue for a period of ten years from that date.
In paragraph VIII of its complaint, plaintiff alleges that about the last part of July,
1920, the defendant "willfully and deliberately breached its said contract," and that
it "flatly refused to make any deliveries under said contract, and finally on
November 23, 1923," it was forced to commence action in the Court of First
Instance against the defendant known as case No. 25352, to recover the damages

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which it had then sustained by reason of such flagrant violation of said contract on
the part of the defendant, in which judgment was rendered in favor of the plaintiff
and against the defendant for P26,1119.08, as damages suffered by this plaintiff by
the defendant's breach of said contract from July 1920, up to and including
September, 1923, with legal interest thereon from November 23, 1923, and for the
costs," in which the court refused to order the defendant to resume the delivery of
the coal and water gas tar to the plaintiff, in accord with said contract, but left it
with its remedy for damages against the defendant for any subsequent breaches of
the contract. A copy of that judgment, which was later affirmed by this court, is
attached to, marked Exhibit G, and made a part of, the complaint in this action.
In their respective briefs, opposing counsel have much to say about the purpose
and intent of the judgment, and it is vigorously asserted that it was never intended
that it should be or become a bar to another action by the plaintiff to recover any
damages it may have sustained after September, 1923, during the remainder of the
ten-year period of that contract. Be that as it may, it must be conceded that the
question as to what would be the legal force and effect of that judgment in that
case was never presented to, or decided by, the lower court or this court. In the
very nature of things, neither court in that case would have the power to pass upon
or decided the legal force and effect of its own judgment, for the simple reason that
it would be premature and outside of the issues of any pleading, and could not be
raised or presented until after the judgment became final and then only by an
appropriate plea, as in this case.
Plaintiff specifically alleges that the defendant willfully and deliverately breached
the contract and "flatly refused to make any deliveries under said contract," by
reason of. which it was forced to and commenced its former action in which it was
awarded P26,119.08 damages against the defendant by reason of its breach of the
contract from July, 1920, to September, 1923.
In the final analysis, plaintiff in this action seeks to recover damages growing out of,
and arising from, other and different breaches of that same contract after
November, 1923, for the remainder of the ten-year period, and the question is thus
squarely presented as to whether the rendition of the former judgment is a bar to
the right of the plaintiff to recover damages from and after September, 1923,
arising from, and growing out of, breaches of the original contract of September 10,
1918, as modified on January 1, 1919. That is to say, whether the plaintiff, in a
former action, having recovered judgment for the damages which it sustained by
reason of a breach of its contract by the defendant up to September, 1923, can now
in this action recover damages it may have sustained after September, 1923,
arising from, and growing out of, a breach of the same contract, upon and for which
it recovered its judgment in the former action.
In the former action in which the judgment was rendered, it is alleged in the
compliant:
"7. That about the last part of July or the first part of August, 1920, the Manila Gas
Corporation, the defendant herein, without any cause ceased delivering coal and
water gas tar to the plaintiff herein; and that from that time up to the present date,
the plaintiff corporation, Blossom & Company, has frequently and urgently
demanded of the defendant, the Manila Gas Corporation, that it comply with its
aforesaid contract Exhibit A by continuing to deliver coal and water gas tar to this
plaintiff but that the said defendant has refused and still refuses, to deliver to the
plaintiff any coal and water gas tar whatsoever under the said contract Exhibit A,
since the said month of July 1920.
"9. That owing to the bad faith of the said Manila Gas Corporation, defendant
herein, in not living up to its said contract Exhibit A, made with this plaintiff, and
refusing now to carry out the terms of the same, be delivering to this plaintiff the
coal and water gas tar mentioned in the said Exhibit A, has caused to this plaintiff
great and irreparable damages amounting to the sum total of one hundred twenty-

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four thousand eight hundred forty eight pesos and seventy centavos
(P124,848,70);and that the said defendant corporation has refused, and still
refuses, to pay to this plaintiff the whole or any part of the aforesaid sum.
"10. That the said contract Exhibit A, was to be in force until January 1, 1929, that is
to say ten (10) years counted from January 1, 1929; and that unless the defendant
again commence to furnish and supply this plaintiff with coal and water gas tar, as
provided for in the said contract Exhibit A, the damages already suffered by this
plaintiff will continually increase and become larger and larger in the course of
years preceding the termination of the said contract on January 1, 1929."
In that action plaintiff prays for judgment against the defendant:
"(a) That upon trial of this this cause judgment be rendered in favor of the plaintiff
and against the defendant for the sum of P124,8484.70), with legal interest thereon
from November 23, 1923;
"(b) That the court specifically order the defendant to resume the delivery of the
coal and water gas tar to the plaintiff under the terms of the said contract Exhibit A
of this complaint."
In the final analysis, plaintiff must stand or fall on its own pleadings, and tested by
that rule it must be admitted that the plaintiff's original cause of action, in which it
recovered judgment for damages, was founded on the ten-year contract, and that
the damages which it then recovered were recovered for a breach of that contract.
Both actions are founded on one and the same contract. By the terms of the original
contract of September 10, 1018, the defendant was to sell and the plaintiff was to
purchase three tons of water gas tar per month form September to January 1, 1919,
and twenty tons of water gas tar per month after January 1, 1919, one-half ton of
coal gas tar per month from September to January 1, 1919, and six tons of coal gas
tar per month after January 1, 1919. That from and after January 1, 1919, plaintiff
would take at least the quantities specified in the contract of September 10, 1918,
and that at its option, it would have the right to take the total output of water gas
tar of defendant's plant and 50 per cent of the gross output of its coal gas tar, and
upon giving ninety days' notice, it would have the right to the entire output of coal
gas tar, except such as the defendant might need for its own use. That is to say, the
contract provided for the delivery to the plaintiff from month to month of the
specified amounts of the different tars as ordered and requested by the plaintiff. In
other words, under plaintiff's own theory, the defendant was to make deliveries
from month to month of the tars during the period of ten years, and it is alleged in
both complaints that the defendant broke its contract, and in bad faith refused to
make any more deliveries.
In 34 Corpus Juris, p. 839, it is said:
As a general rule a contract to do several things at several times in its nature, so as
to authorize successive actions; and a judgment recovered for a single breach of a
continuing contract or covenant is no bar to a suit for a subsequent breach thereof.
But where the covenant or contract is entire, and the breach total, there can be only
one action, and plaintiff must therein recover all his damages.
In the case of Rhoelm vs, Horst, 178 U. U., 1; 44 Law. ed., 953, that court said:
An unqualified and positive refusal to perform a contract, though the performance
thereof is not yet due, may, if the renunciation goes to the whole contract, be
treated as a complete breach which will entitle the injured party to bring his action
at once.
15 Ruling Case Law, 966, 967, sec. 441 says:

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Similarly if there is a breach by the vendor of a contract for the sale of goods to be
delivered and paid for in installments, and the vendee maintains an action therefor
and recovers damages, he cannot maintain a subsequent action to recover for the
failure to deliver later installments.
In Pakas vs. Hollingshead, 184 N. Y., 211; 77 N. E., 40; 3 L. R. A. (N. S.), 1024, the
syllabus says:
Upon refusal, by the seller, after partial performance, longer to comply with his
contract to sell and deliver a quantity of articles in installments the buyer cannot
keep the contract in force and maintain actions for breaches as they occur but must
recover all his damages in one suit.
And on page 1044 of its opinion, the court say:
The learned counsel for the plaintiff contends that the former judgment did not
constitute a bar to the present action but that the plaintiff had the right to elect to
waive or disregard the breach, keep the contract in force, and maintain successive
actions for time to time as the installments of goods were to be delivered, however
numerous these actions might be. It is said that this contention is supported in
reason and justice, and has the sanction of authority at least in other jurisdictions.
We do not think that the contention can be maintained. There is not as it seems to
us any judicial authority in this state that gives it any substantial support. On the
contrary, we think that the cases, so far as we have been able to examine them, are
all the other way, and are to the effect that, inasmuch as there was a total breach of
the contract by the defendant's refusal to deliver, the plaintiff cannot split up his
demand and maintain successive actions, but must either recover all his damages
in the first suit or wait until the contract matured or the time for the delivery of all
the goods had arrived. In other words, there can be but one action for damages for
a total breach of an entire contract to deliver goods, and the fact that they were to
be delivered in installment from time to time does not change the general rule.
The case of L. Bucki & Son Lumber Co. vs. Atlantic Lumber Co. (109 Federal, 411), of
the United States Circuit Court of Appeals for the Fifth Circuit, is very similar.
The syllabus says:
1. CONTRACTS CONSTRUCTION ENTIRE CONTRACT. A contract was made for
the sale of a large quantity of logs to be delivered in monthly installments during a
period of eight years, payments to be made also in installments at times having
relation tot he deliveries. It contained stipulations as to such payments, and
guaranties as to the average size of the logs to be delivered in each installment.
Held, that it was an entire contract, and not a number of separate and independent
agreements for the sale of the quantity to be delivered and paid for each month,
although there might be breaches of the minor stipulations and warranties with
reference thereto which would warrant suits without a termination of the contract.
2. JUDGMENTS MATTERS
CONCLUDED ACTION FOR BREACH OF INDIVISIBLE
CONTRACT. The seller declared the contract terminated for alleged breaches by
the purchaser, and brought suit for general and special damages the latter covering
payments due for installments of logs delivered. By way of set-off and recoupment
against this demand, the purchaser pleaded breaches of the warranty as to the size
of the logs delivered during the months for which payment had not been made.
Held, that the judgment in such action was conclusive as to all claims or demands
or either party against the other growing out of the entire contract, and was a bar to
a subsequent suit brought by the purchaser to recover for other breaches of the
same warranty in relation to deliveries made in previous months.
On page 415 of the opinion, the court says:

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When the contract was ended, the claims of each party for alleged breaches and
damages therefor constituted an indivisible demand; and when the same, or any
part of the same, was pleaded, litigation had, and final judgment rendered, such
suit and judgment constitute a bar to subsequent demands which were or might
have been litigated (Baird vs. U. S., 96 U. S., 430; 24 L. ed., 703.)
In Watts vs. Weston (238 Federal, 149), Circuit Court of Appeals, Second Circuit, the
syllabus says:
1. JUDGMENTS 593 JUDGMENT AS BAR MATTERS CONCLUDED. Where a
continuing contract was terminated by the absolute refusal of the party whose
action was necessary to further perform, a claim for damages on account of the
breach constituted as indivisible demand, and when the same or any part of the
same was pleaded, litigated, and final judgment rendered, such suit and judgment
constitute a bar to subsequent demands which were or might have been litigated
therein.
And on page 150 of the opinion, the court says:
It is enough to show the lack of merit in the present contention to point out as an
inexorable rule of law that, when Kneval's contract was discharged by his total
repudiation thereof, Watt's claims for breaches and damages therefor constituted an
indivisible demand, and when the same, or any part of the same, was pleaded,
litigation had and final judgment rendered, such suit and judgment constitute a bar
to subsequent demands which were or might have been litigated." (Bucki, etc., Co.
vs. Atlantic, etc., Co., 109 Fed. at page 415; 48 C. C. A., 459; Cf. Landon vs. Bulkley,
95 Fed., 344; 337 C. C. A., 96.)
The rule is usually applied in cases of alleged or supposed successive breaches, and
consequently severable demands for damages; but if the contract has been
discharged by breach, if suit for damages is all that is left, the rule is applicable, and
every demand arising form that contract and possessed by any given plaintiff must
be presented (at least as against any given defendant) in one action; what the
plaintiff does not advance he foregoes by conclusive presumption.
Inn Abbott vs. 76 Land and Water Co. (118 Pac., 425; 161 Cal., 42), at page 428, the
court said:
In Fish vs. Folley, 6 Hill (N. Y.), 54, it was held, in accord with the rule we have
discussed, that, where the defendant had covenanted that plaintiff should have a
continual supply of water for his mill from a dam, and subsequently totally failed to
perform for nine years, and plaintiff brought an action for the breach and recovered
damages sustained by him to that time, the judgment was a bar to a second action
arising from subsequent failure to perform, on the theory that, although he
covenant was a continuing one in one sense, it was an entire contract, and a total
breach put an end to it, and gave plaintiff the right to sue for an equivalent in
damages.
In such a case it is no warrant for a second action that the party may not be able to
actually prove in the first action all the items of the demand, or that all the damage
may not then have been actually suffered. He is bound to prove in the first action
not only such damages as has been actually suffered, but also such prospective
damage by reason of the breach as he may be legally entitled to, for the judgment
he recovers in such action will be a conclusive adjudication as to the total damage
on account of the breach.
It will thus be seen that, where there is a complete and total breach of a continuous
contract for a term of years, the recovery of a judgment for damages by reason of
the breach is a bar to another action on the same contract for and on account of the
continuous breach.

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In the final analysis is, there is no real dispute about any material fact, and the
important and decisive question is the legal construction of the pleadings in the
former case and in this case, and of the contract between the plaintiff and the
defendant of January 1, 1920.
The complaint on the former case specifically alleges that the defendant "has
refused and still refuses, to deliver to the plaintiff any coal and water gas tar
whatsoever under the said contract Exhibit A, since the said month of July, 1920." "
That owing to the bad faith of the said Manila Gas Corporation, defendant herein, in
not living up to its said contract Exhibit A, made with this plaintiff, and refusing now
to carry out the terms of the same." That is a specific allegation not only a breach of
the contract since the month of July, 1920, but of the faith of the defendant in its
continuous refusal to make deliveries of any coal and water gas tar. That amended
complaint was filed on July 11, 1924, or four years after the alleged bad faith in
breaking the contract.
Having recovered damages against it, covering a period of four years, upon the
theory that the defendant broke the contract, and in bad faith refused to make
deliveries of either of the tars, how can the plaintiff now claim and assert that the
contract is still in fierce and effect? In the instant case the plaintiff alleges and relies
upon the ten year contract on January 11, 1920, which in bad faith was broken by
the defendant. If the contract was then broken, how can it be enforced in this
action?
It is admitted that the defendant never made any deliveries of any tar from July,
1920, to April, 1936. Also that it made nine deliveries to plaintiff of the minimum
quantities of coal and water gas tar from April 7, 1926, to January 5, 1927.
Plaintiff contends that such deliveries were made under and in continuation of the
old contract.
March 26, 1926, after the decision of this court affirming the judgment in the
original action, plaintiff wrote the defendant:
. . . It is our desire to take deliveries of at least the minimum quantities set forth
therein and shall appreciate to have you advise us how soon you will be in a
position to make deliveries; . . .
. . . In view of the fact that you have only effected settlement up to November 23,
1923, please inform us what adjustment you are willing to make for the period of
time that has since elapsed without your complying with the contract.
In response to which on March 31, 1926, the defendant wrote this letter to the
plaintiff:
In reply to your letter of March 26th, 1926, in regard to tar, we beg to advise you
that we are prepared to furnish the minimum quantities of coal and water gas tars
as per your letter, viz: twenty tons of water gas tar and six tons of coal gas tar. The
price figured on present costs of raw materials is P39.01 ) Thirty-nine and 01/100
Pesos) per ton of water gas and P33.59 (Thirty-three and 59/100 Pesos) per ton of
coal tar.
We shall expect you to take delivery and pay for the above amount of tars at our
factory on or before April 7th prox.
Thereafter we shall be ready to furnish equal amounts on the first of each month.
Kindly make your arrangements accordingly.
On January 29, 1927, the plaintiff wrote the defendant that:

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On July 31st last, we made demand upon you, under the terms of our tar contract
for 50 per cent of your total coal tar production for that month and also served
notice on you that beginning 90 days from August 1st we would require you total
output of coal tar monthly; this in addition to the 20 tons of water gas tar provided
for in the contract to be taken monthly.
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We are here again on your for your total output of coal tar immediately and the
regular minimum monthly quantity of water gas tar. In this connection we desire to
advise you that within 90 days of your initial delivery to us of your total coal tar
output we will require 50 per cent of your total water gas tar output, and, further,
that two months thereafter we will require your total output of both tars.
February 2, 1927, the defendant wrote the plaintiff:
Replying to your letter of Jan. 29, we would sat that we have already returned to you
the check enclosed there with. As we have repeatedly informed you we disagree
with you as to the construction of your contract and insist that you take the whole
output of both tars if you wish to secure the whole of the coal tar.
With regard to your threat of further suits we presume that you will act as advised.
If you make it necessary we shall do the same.lawphil.net
From an analysis of these letters it clearly appears that the plaintiff then sought to
reply upon and enforce the contract of January 1, 1920, and that defendant denied
plaintiff's construction of the contract, and insisted "that you take the whole output
of both tars if you wish to secure the whole of the coal tar."
February 28, 1927, the plaintiff wrote the defendant:
In view of your numerous violations of and repeated refusal and failure to comply
with the terms and provisions of our contract dated January 30-31, 1919, for the
delivery to us of water and coal gas tars, etc., we will commence action," which it
did.
The record tends to show that tars which the defendant delivered after April 7,
1926, were not delivered under the old contract of January 1, 1920, and that at all
times since July 1920, the defendant has consistently refused to make any
deliveries of any tars under that contract.
The referee found as a fact that plaintiff was entitled to P2,219.60 for and on
account of overcharges which the defendant made for the deliveries of fifty-four
tons of coal gas tar, and one hundred eighty tons of water gas tar after April, 1926,
and upon that point the lower says:
The fourth charge that plaintiff makes is meritorious. The price was to be fixed on
the basis of raw materials. The charge for deliveries during 1926 were too high. In
this I agree with entirely with the referee and adopt his findings of fact and
calculations. (See Referee's report, p. 83) The referee awarded for overcharge
during the period aforesaid, the sum of P2,219.60. The defendant was trying to
discharge plaintiff from buying tars and made the price of raw material appear as
high as possible.
That finding is sustained upon the theory that the defendant broke its contract
which it made with the plaintiff for the sale and delivery of the tars on and after
April, 1926.
After careful study of the many important questions presented on this appeal in the
exhaustive brief of the appellant, we are clearly of the opinion that, as found by the

237

lower court, the plea of res judicata must be sustained. The judgment of the lower
court is affirmed.
It is so ordered, with costs against the appellant.
Johnson, Street, Malcolm, Villamor, Ostrand, Romualdez, and Villa-Real, JJ., concur.
See:Danfoss v. Continental Cement, G.R. No. 143788, September 9, 2005

THIRD DIVISION
DANFOSS, INC.,
Petitioner,

G.R. No. 143788


Present :
PANGANIBAN, Acting C.J.,
SANDOVAL-GUTIERREZ,
CORONA,
CARPIO MORALES* and
GARCIA, JJ.

-versus -

CONTINENTAL CEMENT
CORPORATION,
Respondent.

Promulgated :

September 9, 2005
x---------------------------------------- x

DECISION

CORONA, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules on
Civil Procedure of the February 11, 2000 decision[1] of the Court of Appeals in CAG.R. No. SP-55645, and its resolution dated June 7, 2000 denying petitioners motion
for reconsideration.
The antecedents show that on November 5, 1998, respondent Continental Cement
Corporation (CCC) filed a complaint for damages against petitioner DANFOSS and
Mechatronics Instruments and Controls, Inc. (MINCI) before the Regional Trial Court
of Quezon City, Branch 80, alleging that:
xxx

xxx

xxx

6.
On 1 September 1997, Plaintiff CCC
purchased from defendant MINCI two (2) unit 132 KW Danfoss Brand Frequency
Converter/Inverter for use in the Finish Mill of its Cement Plant located in Barrio
Bigte, Norzagaray, Bulacan. The said purchase is covered by a Purchase [Order]
(PO) No. 36625.
6.1
Under
the terms and conditions of the purchase order, the delivery of the two (2) unit
Frequency Converter are to be delivered within eight (8) to ten (10) weeks from the
opening of the letter of credit;

238

7.
Defendant MINCI, immediately relayed the
purchase order of plaintiff CCC to the other defendant DANFOSS, represented by
Messrs. Klaus Stove and Hans Vigaard, who in turn forwarded the same to their
Asian Regional Office in Singapore and Head Office in Denmark for the shipment of
the orders to the Philippines.
7.1
Defendant DANFOSS commitment to deliver the two (2) unit Danfoss Brand
Frequency Converter/Inverter to plaintiff CCC was relayed by defendant MINCI to
CCC upon the assurance of Messrs. Stove and Vigaard of DANFOSS.
8.
On September 1997, plaintiff CCC received
the pro-forma invoice of defendant MINCI through fax transmission dated 2
September 1998, indicating the mode of payment through irrevocable letter of
credit in favor of Danfoss Industries Pte. Ltd.
8.1
Plaintiff CCC executed and opened a letter of credit under LC No. 970884 in favor of
DANFOSS INDUSTRIES PTE. LTD., with address at 6 Jalan Pesawat, Singapore
619364, which is the Asian Regional Office of defendant DANFOSS
9.
Defendant MINCI informed plaintiff CCC
through fax transmission dated 17 September 1997, that the two (2) unit Frequency
Converter/Inverter are ready for shipment, and at the same time requested for the
amendments of the letter of credit changing the port of origin/loading from
Singapore to Denmark.
9.1
In
compliance, plaintiff CCC amended the letter of credit changing the port of origin
from Singapore to Denmark.
10.
On 6 November 1997, defendant MINCI
informed plaintiff CCC that Danfoss Industries Pte. Ltd. was still checking the status
of the shipment of the two (2) unit Frequency Converter/Inverter with Danfoss
Denmark.
10.1
In
reply, plaintiff CCC through a letter dated 7 November 1997, reiterated its demand
that every delay in the shipment of the two (2) unit Frequency Converter/Inverter
will cause substantial losses in its operations and requested for the early work out
and the immediate shipment of the frequency converter to avoid further loss to the
company.
11.
However, on 9 November 1997, defendant
DANFOSS, informed the other defendant MINCI through fax transmission, copy
furnished plaintiff CCC, that the reason why DANFOSS has delivery problems was
that some of the supplied components for the new VLT 5000 series did not meet the
agreed quality standard. That means that their factory was canvassing for another
supplier. And at that moment, there was no clear message when normal production
will resume.
12.
Due to this information received, plaintiff CCC
surmised that defendants MINCI and DANFOSS could not be able to deliver the two
(2) unit Frequency Converter within the maximum period of ten (10) weeks period
from the opening of the Letter of Credit, as one of the conditions in the Purchase
Order dated 1 September 1997.
12.1
Thereafter, no definite commitment was received by plaintiff CCC from defendants
MINCI and DANFOSS for the delivery of the two (2) unit Frequency Converter.

239

13.
By reason of the delay of the defendants
MINCI and DANFOSS to deliver the two (2) unit Frequency Converter/Inverter under
PO No. 36625, plaintiff CCC, through its Purchasing Manager, informed defendant
MINCI in a letter dated 13 November 1997, of the plaintiffs intention to cancel the
said order.
13.1
As a
consequence thereof, plaintiff CCC has suffered an actual substantial production
losses in the amount of Eight Million Sixty-four Thousand Pesos (P8,064,000.00) due
to the time lost and delay in the delivery of the said two (2) unit Frequency
Converter/Inverter. Likewise, plaintiff CCC was compelled to look for another
supplier.
xxx

xxx

xxx[2]

On February 17, 1999, petitioner DANFOSS filed a motion to dismiss the


complaint on the ground that it did not state a cause of action:
xxx
xxx
xxx
The above allegations of the complaint clearly establish the following key
constitutive facts:
1.
Defendants period of delivery is from 8 to 10
weeks from the opening of the letter of credit on September 9, 1997 or until
November 19, 1997.
2.
Defendant Danfoss, although having problems with
its supplier during the period prior to defendants cancellation, nevertheless,
plaintiff never alleged that Danfoss Denmark cannot perform its obligation to deliver
by the 10th week or on November 20, 1997. Admittedly, plaintiff only surmised that
defendant Danfoss could not deliver.
3.
Before the period for delivery has expired on
November 19, 1997, the plaintiff cancelled its order on November 13, 1997. The
cancellation took place seven (7) days before the expiry of the defendants
obligation to deliver on November 19, 1997.
4.
Neither plaintiff nor defendant Danfoss changed
the date of delivery, what plaintiff changed in the letter of credit was only the port
of origin/loading from Singapore to Denmark. The period of delivery as stipulated in
the pro forma invoice issued by defendant MINCI remained intact, that is for a
period of 6 to 10 weeks from the opening of the letter of credit on September 9,
1997 or until November 19, 1997 was still in force when the plaintiff cancelled its
order on November 13, 1997. Defendant Danfoss has not incurred in delay and has
7 days more within which to make delivery. Plaintiff, having cancelled the order on
November 13, 1997 before the expiry of defendant Danfoss delivery commitment,
defendant Danfosss principal could not have been in default.
5.
Plaintiff never made an extrajudicial demand for
the delivery of two (2) units Frequency Converter on its due date. On the contrary,
as above alleged, plaintiff cancelled its order on November 13, 1997.
6.
Plaintiffs claim for damages could not have
accrued until after defendant incurred in delay.
The above allegations neither prove any right of the plaintiffs arising from the
transactions nor a violation of such right. It is submitted that this Honorable Court
based on the complaint, cannot render a valid judgment against the defendant

240

Danfoss. The plaintiffs cause of action against Danfoss or plaintiffs right to demand
delivery cannot arise earlier than November 19, 1997, which is the last day for the
defendant Danfosss principal (Danfoss Denmark) to deliver the two (2) units
Frequency Converter. As admitted by the plaintiff, it cancelled its order on
November 13, 1997, or six (6) days before the expiry of the defendants obligation
to deliver. Indeed, defendant Danfosss obligation to deliver is not yet demandable.
The period of 8 to 10 weeks for the delivery of plaintiffs purchase order of two (2)
units Frequency Converter was established for the benefit of both the plaintiff and
the defendant Danfoss. As such, plaintiff cannot demand delivery before the period
stipulated.
xxx

xxx

xxx

From the allegations of the complaint, there is also no clear and categorical demand
for the fulfillment of the plaintiffs obligation to deliver by the 10th week or on
November 19, 1997.
WHEREFORE, it is respectfully prayed of this Honorable Court that the Complaint be
dismissed for failure to state a cause of action.[3]

The court a quo denied the motion to dismiss in its order[4] dated May 28,
1999, holding that:
xxx

xxx

xxx

In the Courts opinion, the issue of whether or not the defendants incur
delay in the delivery of the equipment in question within the period stipulated is a
debatable question which necessitates actual trial on the merits where the parties
have to adduce evidence in support of their respective stance.
While the defendants contend that the stipulated period of delivery had not
lapsed yet when the plaintiff cancelled its order of the two equipments in question
as the cancellation took place seven (7) days before the expiry date of the
defendants obligation to deliver, the plaintiffs position is that the acts of the
defendants had made compliance with their obligation to deliver within the period
stipulated, impossible, hence, there was no need for a demand as the law provides
that when demand would be useless, as when the obligor has rendered it beyond
his power to perform. The plaintiffs contention if properly and strongly supported
by evidence during the hearing of the merits of the case may well negates (sic) the
defendants contrary stand.
As to the argument of the defendant MINCI that it cannot be held liable
jointly with the defendant Danfoss due to the fact that it was merely an agent of
Danfoss, the Court finds the same a debatable issue considering the stand of
plaintiff that the defendant MINCI dealt with the former not as an agent but also as
a principal. The issue at hand necessitates the presentation of evidence which has
to be done during the hearing on the merits of the case where the issue of damages
incurred by either of the parties may well be taken up and judgment be rendered
after presentation of evidence by the parties.
WHEREFORE, premises considered, the two motions to dismiss, interposed
separately by the defendants as earlier stated, are both denied.
SO ORDERED.[5]
Danfoss filed a motion for reconsideration of the order but it was denied. On appeal
to the Court of Appeals, the latter also denied Danfoss petition for lack of merit.
The CA likewise denied petitioners motion for reconsideration, hence, this appeal.

241

The only issue for our consideration is whether or not the CA erred in affirming the
denial by the court a quo of petitioners motion to dismiss the complaint for
damages on the ground that it failed to state a cause of action.
Section 1 (g), Rule 16 of the 1997 Revised Rules on Civil Procedure provides that:
Section 1. Grounds Within the time for but before filing the answer to the
complaint or pleading asserting a claim, a motion to dismiss may be made on any of
the following grounds:
xxx
(g)
of action;

xxx

xxx
That the pleading asserting the claim states no cause

A cause of action is defined under Section 2, Rule 2 of the same Rules as:
Sec. 2. Cause of action, defined. A cause of action is the act or omission by
which a party violates a right of another.

It is the delict or wrongful act or omission committed by the defendant in violation


of the primary right of the plaintiff.[6]
In order to sustain a dismissal on the ground of lack of cause of action, the
insufficiency must appear on the face of the complaint. And the test of the
sufficiency of the facts alleged in the complaint to constitute a cause of action is
whether or not, admitting the facts alleged, the court can render a valid judgment
thereon in accordance with the prayer of the complaint. For this purpose, the
motion to dismiss must hypothetically admit the truth of the facts alleged in the
complaint.[7]
After a careful perusal of the allegations in respondents complaint for damages
against petitioner, we rule that the same failed to state a cause of action. When
respondent sued petitioner for damages, petitioner had not violated any right of
respondent from which a cause of action had arisen. Respondent only surmised
that petitioner would not be able to deliver the two units frequency
converter/inverter on the date agreed upon by them. Based on this apprehension, it
cancelled its order six days prior to the agreed date of delivery. How could
respondent hold petitioner liable for damages (1) when petitioner had not yet
breached its obligation to deliver the goods and (2) after respondent made it
impossible for petitioner to deliver them by cancelling its order even before the
agreed delivery date?
The trial court erred in ruling that the issue of whether or not the defendants
incurred delay in the delivery of the equipment within the period stipulated was a
debatable question. It said that trial on the merits was necessa