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Republic of the Philippines

Supreme Court
Baguio City

FIRST DIVISION
FAUSTINO REYES, ESPERIDION G.R. No. 162956
REYES, JULIETA C. RIVERA, and
EUTIQUIO DICO, JR.,
Petitioners,
Present:
PUNO, C.J., Chairperson,
- versus - CARPIO,
CORONA,
*AZCUNA, and
LEONARDO-DE CASTRO, JJ.
PETER B. ENRIQUEZ, for himself
and Attorney-in-Fact of his daughter Promulgated:
DEBORAH ANN C. ENRIQUEZ, and
SPS. DIONISIO FERNANDEZ and
CATALINA FERNANDEZ,
Respondents. April 10, 2008
x------------------------------------------------x
DECISION
PUNO, C.J.:
This case is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of
Court from the decision of the Court of Appeals (CA) dated September 29, 2003 in CA G.R. CV
No. 68147, entitled Peter B. Enriquez, et al. v. Faustino Reyes, et al., reversing the decision of
the Regional Trial Court (RTC) of Cebu City, Branch XI dated June 29, 2000, which dismissed
the complaint filed by the respondents herein.[1]
The subject matter of the present case is a parcel of land known as Lot No. 1851 Flr-133
with an aggregate area of 2,017 square meters located in Talisay, Cebu.[2]

According to petitioners Faustino Reyes, Esperidion Reyes, Julieta C. Rivera, and


Eutiquio Dico, Jr., they are the lawful heirs of Dionisia Reyes who co-owned the subject parcel
of land with Anacleto Cabrera as evidenced by Transfer Certificate of Title (TCT) No. RT-3551
(T-8070). On April 17, 1996, petitioners executed an Extrajudicial Settlement with Sale of the
Estate of Dionisia Reyes (the Extra Judicial Settlement) involving a portion of the subject parcel
of land. On March 21, 1997, the petitioners and the known heirs of Anacleto Cabrera executed a
Segregation of Real Estate and Confirmation of Sale (the Segregation and Confirmation) over
the same property. By virtue of the aforestated documents, TCT No. RT-35551 (T-8070) was
cancelled and new TCTs were issued: (1) TCT No. T-98576 in the name of Anacleto Cabrera
covering Lot 1851-A; (2) TCT No. T-98577 covering Lot 1851-B in the name of petitioner
Eutiquio Dico, Jr.; (3) TCT No. T-98578 covering Lot 1851-C in the name of petitioner
Faustino Reyes; (4) TCT No. T-98579 covering Lot 1851-D in the name of petitioner
Esperidion Reyes; (5) TCT No. T-98580 covering Lot 1851-E in the name of petitioner Julieta
G. Rivera; (6) TCT No. T-98581 covering Lot 1851-F in the name of Felipe Dico; and (7) TCT
No. T-98582 covering Lot 1851-G in the name of Archimedes C. Villaluz.[3]
Respondents Peter B. Enriquez (Peter) for himself and on behalf of his minor daughter
Deborah Ann C. Enriquez (Deborah Ann), also known as Dina Abdullah Enriquez Alsagoff, on
the other hand, alleges that their predecessor-in-interest Anacleto Cabrera and his wife Patricia
Seguera Cabrera (collectively the Spouses Cabrera) owned pro-indiviso share in the subject
parcel of land or 1051 sq. m. They further allege that Spouses Cabrera were survived by two
daughters Graciana, who died single and without issue, and Etta, the wife of respondent Peter
and mother of respondent Deborah Ann who succeeded their parents rights and took possession
of the 1051 sq. m. of the subject parcel of land. During her lifetime, Graciana sold her share
over the land to Etta. Thus, making the latter the sole owner of the one-half share of the subject
parcel of land. Subsequently, Etta died and the property passed on to petitioners Peter and
Deborah Ann by virtue of an Extra-Judicial Settlement of Estate. On June 19, 1999, petitioners
Peter and Deborah Ann sold 200 sq. m. out of the 1051 sq. m. for P200,000.00 to Spouses
Dionisio and Catalina Fernandez (Spouses Fernandez), also their co-respondents in the case at
bar. After the sale, Spouses Fernandez took possession of the said area in the subject parcel of
land.[4]
When Spouses Fernandez, tried to register their share in the subject land, they discovered
that certain documents prevent them from doing so: (1) Affidavit by Anacleto Cabrera dated
March 16, 1957 stating that his share in Lot No. 1851, the subject property, is approximately
369 sq. m.; (2) Affidavit by Dionisia Reyes dated July 13, 1929 stating that Anacleto only
owned of Lot No. 1851, while 302.55 sq. m. belongs to Dionisia and the rest of the property is
co-owned by Nicolasa Bacalso, Juan Reyes, Florentino Reyes and Maximiano Dico; (3) ExtraJudicial Settlement with Sale of the Estate of Dionisia Reyes dated April 17, 1996; (4)
certificates of title in the name of the herein petitioners; and (5) Deed of Segregation of Real

Estate and Confirmation of Sale dated March 21, 1997 executed by the alleged heirs of Dionisia
Reyes and Anacleto Cabrera. Alleging that the foregoing documents are fraudulent and
fictitious, the respondents filed a complaint for annulment or nullification of the aforementioned
documents and for damages. [5]They likewise prayed for the repartition and resubdivision of the
subject property.[6]
The RTC, upon motion of the herein petitioners, dismissed the case on the ground that the
respondents-plaintiffs were actually seeking first and foremost to be declared heirs of Anacleto
Cabrera since they can not demand the partition of the real property without first being declared
as legal heirs and such may not be done in an ordinary civil action, as in this case, but through a
special proceeding specifically instituted for the purpose.[7]
On appeal, the Court of Appeals (CA) reversed the RTC and directed the trial court to
proceed with the hearing of the case.[8] The Motion for Reconsideration filed by the herein
petitioners was similarly denied.[9]
Hence this petition.
The primary issue in this case is whether or not the respondents have to institute a special
proceeding to determine their status as heirs of Anacleto Cabrera before they can file an
ordinary civil action to nullify the affidavits of Anacleto Cabrera and Dionisia Reyes, the ExtraJudicial Settlement with the Sale of Estate of Dionisia Reyes, and the Deed of Segregation of
Real Estate and Confirmation of Sale executed by the heirs of Dionisia Reyes and the heirs of
Anacleto Cabrera, as well as to cancel the new transfer certificates of title issued by virtue of
the above-questioned documents.
We answer in the affirmative.
An ordinary civil action is one by which a party sues another for the enforcement or
protection of a right, or the prevention or redress of a wrong. [10] A special proceeding, on the
other hand, is a remedy by which a party seeks to establish a status, a right or a particular fact.
[11]

The Rules of Court provide that only a real party in interest is allowed to prosecute and
defend an action in court.[12] A real party in interest is the one who stands to be benefited or
injured by the judgment in the suit or the one entitled to the avails thereof. [13] Such interest, to
be considered a real interest, must be one which is present and substantial, as distinguished
from a mere expectancy, or a future, contingent, subordinate or consequential interest. [14] A
plaintiff is a real party in interest when he is the one who has a legal right to enforce or protect,
while a defendant is a real party in interest when he is the one who has a correlative legal
obligation to redress a wrong done to the plaintiff by reason of the defendants act or omission
which had violated the legal right of the former.[15] The purpose of the rule is to protect persons

against undue and unnecessary litigation.[16] It likewise ensures that the court will have the
benefit of having before it the real adverse parties in the consideration of a case. [17] Thus, a
plaintiffs right to institute an ordinary civil action should be based on his own right to the relief
sought.
In cases wherein alleged heirs of a decedent in whose name a property was registered sue
to recover the said property through the institution of an ordinary civil action, such as a
complaint for reconveyance and partition,[18] or nullification of transfer certificate of titles and
other deeds or documents related thereto,[19] this Court has consistently ruled that a declaration
of heirship is improper in an ordinary civil action since the matter is within the exclusive
competence of the court in a special proceeding. [20] In the recent case of Portugal v. PortugalBeltran,[21] the Court had the occasion to clarify its ruling on the issue at hand, to wit:
The common doctrine in Litam, Solivio and Guilas in which the adverse parties
are putative heirs to the estate of a decedent or parties to the special proceedings for
its settlement is that if the special proceedings are pending, or if there are no special
proceedings filed but there is, under the circumstances of the case, a need to file
one, then the determination of, among other issues, heirship should be raised and
settled in said special proceedings. Where special proceedings had been instituted
but had been finally closed and terminated, however, or if a putative heir has lost the
right to have himself declared in the special proceedings as co-heir and he can no
longer ask for its re-opening, then an ordinary civil action can be filed for his
declaration as heir in order to bring about the annulment of the partition or distribution
or adjudication of a property or properties belonging to the estate of the deceased. [22]

In the instant case, while the complaint was denominated as an action for the Declaration
of Non-Existency[sic], Nullity of Deeds, and Cancellation of Certificates of Title, etc., a review
of the allegations therein reveals that the right being asserted by the respondents are their right
as heirs of Anacleto Cabrera who they claim co-owned one-half of the subject property and not
merely one-fourth as stated in the documents the respondents sought to annul. As correctly
pointed out by the trial court, the ruling in the case ofHeirs of Guido Yaptinchay v. Hon. Roy
del Rosario[23] is applicable in the case at bar. In the said case, the petitioners therein, claiming
to be the legal heirs of the late Guido and Isabel Yaptinchay filed for annulment of the transfer
certificates of title issued in the name of Golden Bay Realty Corporation on the ground that the
subject properties rightfully belong to the petitioners predecessor and by virtue of succession
have passed on to them. In affirming the trial court therein, this Court ruled:
...(T)he plaintiffs who claimed to be the legal heirs of the said Guido and Isabel
Yaptinchay have not shown any proof or even a semblance of it except the allegations
that they are the legal heirs of the aforementioned Yaptinchays that they have been
declared the legal heirs of the deceased couple. Now, the determination of who are the
legal heirs of the deceased couple must be made in the proper special proceedings in

court, and not in an ordinary suit for reconveyance of property. This must take
precedence over the action for reconveyance. [24]

In the same manner, the respondents herein, except for their allegations, have yet to
substantiate their claim as the legal heirs of Anacleto Cabrera who are, thus, entitled to the
subject property. Neither is there anything in the records of this case which would show that a
special proceeding to have themselves declared as heirs of Anacleto Cabrera had been
instituted. As such, the trial court correctly dismissed the case for there is a lack of cause of
action when a case is instituted by parties who are not real parties in interest.While a declaration
of heirship was not prayed for in the complaint, it is clear from the allegations therein that the
right the respondents sought to protect or enforce is that of an heir of one of the registered coowners of the property prior to the issuance of the new transfer certificates of title that they seek
to cancel. Thus, there is a need to establish their status as such heirs in the proper forum.
Furthermore, in Portugal,[25] the Court held that it would be superfluous to still subject
the estate to administration proceedings since a determination of the parties' status as heirs
could be achieved in the ordinary civil case filed because it appeared from the records of the
case that the only property left by the decedent was the subject matter of the case and that the
parties have already presented evidence to establish their right as heirs of the decedent. In the
present case, however, nothing in the records of this case shows that the only property left by
the deceased Anacleto Cabrera is the subject lot, and neither had respondents Peter and Deborah
Ann presented any evidence to establish their rights as heirs, considering especially that it
appears that there are other heirs of Anacleto Cabrera who are not parties in this case that had
signed one of the questioned documents.Hence, under the circumstances in this case, this Court
finds that a determination of the rights of respondents Peter and Deborah Ann as heirs of
Anacleto Cabrera in a special proceeding is necessary.
IN VIEW WHEREOF, the petition is GRANTED. The decision of the Court of
Appeals is hereby REVERSED and the decision of the Regional Trial Court dated June 29,
2000 DISMISSING the complaint is REINSTATED.
No costs.
SO ORDERED.

SECOND DIVISION

ARTURO SARTE FLORES, G.R. No. 183984


Petitioner,
Present:
CARPIO, J., Chairperson,
- versus -

NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

SPOUSES ENRICO L. LINDO, JR. Promulgated:


and EDNA C. LINDO,
Respondents. April 13, 2011
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review 1 assailing the 30 May 2008 Decision2 and the 4 August
2008 Resolution3 of the Court of Appeals in CA-G.R. SP No. 94003.
The Antecedent Facts
The facts, as gleaned from the Court of Appeals Decision, are as follows:
On 31 October 1995, Edna Lindo (Edna) obtained a loan from Arturo Flores (petitioner) amounting
to P400,000 payable on 1 December 1995 with 3% compounded monthly interest and 3% surcharge

in case of late payment. To secure the loan, Edna executed a Deed of Real Estate Mortgage 4 (the
Deed) covering a property in the name of Edna and her husbandEnrico (Enrico) Lindo, Jr.
(collectively, respondents). Edna also signed a Promissory Note 5 and the Deed for herself and
for Enrico as his attorney-in-fact.
Edna issued three checks as partial payments for the loan. All checks were dishonored for
insufficiency of funds, prompting petitioner to file a Complaint for Foreclosure of Mortgage with
Damages against respondents. The case was raffled to the Regional Trial Court of Manila, Branch
33 (RTC, Branch 33) and docketed as Civil Case No. 00-97942.
In its 30 September 2003 Decision,6 the RTC, Branch 33 ruled that petitioner was not entitled to
judicial foreclosure of the mortgage. The RTC, Branch 33 found that the Deed was executed by
Edna without the consent and authority of Enrico. The RTC, Branch 33 noted that the Deed was
executed on 31 October 1995 while the Special Power of Attorney (SPA) executed by Enrico was
only dated 4 November 1995.
The RTC, Branch 33 further ruled that petitioner was not precluded from recovering the loan from
Edna as he could file a personal action against her. However, the RTC, Branch 33 ruled that it had
no jurisdiction over the personal action which should be filed in the place where the plaintiff or the
defendant resides in accordance with Section 2, Rule 4 of the Revised Rules on Civil Procedure.
Petitioner filed a motion for reconsideration. In its Order 7 dated 8 January 2004, the RTC, Branch
33 denied the motion for lack of merit.
On 8 September 2004, petitioner filed a Complaint for Sum of Money with Damages against
respondents. It was raffled to Branch 42 (RTC, Branch 42) of the Regional Trial Court of Manila,
and docketed as Civil Case No. 04-110858.
Respondents filed their Answer with Affirmative Defenses and Counterclaims where they admitted
the loan but stated that it only amounted to P340,000. Respondents further alleged that Enrico was
not a party to the loan because it was contracted by Edna without Enricos signature. Respondents
prayed for the dismissal of the case on the grounds of improper venue, res judicata and forumshopping, invoking the Decision of the RTC, Branch 33. On 7 March 2005, respondents also filed a
Motion to Dismiss on the grounds of res judicata and lack of cause of action.
The Decision of the Trial Court
On 22 July 2005, the RTC, Branch 42 issued an Order 8 denying the motion to dismiss. The RTC,
Branch 42 ruled that res judicata will not apply to rights, claims or demands which, although
growing out of the same subject matter, constitute separate or distinct causes of action and were not
put in issue in the former action. Respondents filed a motion for reconsideration. In its Order 9 dated
8 February 2006, the RTC, Branch 42 denied respondents motion. The RTC, Branch 42 ruled that
the RTC, Branch 33 expressly stated that its decision did not mean that petitioner could no longer
recover the loan petitioner extended to Edna.
Respondents filed a Petition for Certiorari and Mandamus with Prayer for a Writ of Preliminary
Injunction and/or Temporary Restraining Order before the Court of Appeals.

The Decision of the Court of Appeals


In its 30 May 2008 Decision, the Court of Appeals set aside the 22 July 2005 and 8 February 2006
Orders of the RTC, Branch 42 for having been issued with grave abuse of discretion.
The Court of Appeals ruled that while the general rule is that a motion to dismiss is interlocutory
and not appealable, the rule admits of exceptions. The Court of Appeals ruled that the RTC, Branch
42 acted with grave abuse of discretion in denying respondents motion to dismiss.
The Court of Appeals ruled that under Section 3, Rule 2 of the 1997 Rules of Civil Procedure, a
party may not institute more than one suit for a single cause of action. If two or more suits are
instituted on the basis of the same cause of action, the filing of one on a judgment upon the merits
in any one is available ground for the dismissal of the others. The Court of Appeals ruled that on a
nonpayment of a note secured by a mortgage, the creditor has a single cause of action against
the debtor, that is recovery of the credit with execution of the suit. Thus, the creditor may institute
two alternative remedies: either a personal action for the collection of debt or a real action to
foreclose the mortgage, but not both. The Court of Appeals ruled that petitioner had only one cause
of action against Edna for her failure to pay her obligation and he could not split the single cause of
action by filing separately a foreclosure proceeding and a collection case. By filing a petition for
foreclosure of the real estate mortgage, the Court of Appeals held that petitioner had already waived
his personal action to recover the amount covered by the promissory note.
Petitioner filed a motion for reconsideration. In its 4 August 2008 Resolution, the Court of Appeals
denied the motion.
Hence, the petition before this Court.
The Issue
The sole issue in this case is whether the Court of Appeals committed a reversible error in
dismissing the complaint for collection of sum of money on the ground of multiplicity of suits.
The Ruling of this Court
The petition has merit.
The rule is that a mortgage-creditor has a single cause of action against a mortgagor-debtor, that is,
to recover the debt.10 The mortgage-creditor has the option of either filing a personal action for
collection of sum of money or instituting a real action to foreclose on the mortgage security. 11 An
election of the first bars recourse to the second, otherwise there would be multiplicity of suits in
which the debtor would be tossed from one venue to another depending on the location of the
mortgaged properties and the residence of the parties. 12
The two remedies are alternative and each remedy is complete by itself. 13 If the mortgagee opts to
foreclose the real estate mortgage, he waives the action for the collection of the debt, and vice
versa.14 The Court explained:

x x x in the absence of express statutory provisions, a mortgage creditor may institute against
the mortgage debtor either a personal action for debt or a real action to foreclose the
mortgage. In other words, he may pursue either of the two remedies, but not both. By such
election, his cause of action can by no means be impaired, for each of the two remedies is
complete in itself. Thus, an election to bring a personal action will leave open to him all the
properties of the debtor for attachment and execution, even including the mortgaged property
itself. And, if he waives such personal action and pursues his remedy against the mortgaged
property, an unsatisfied judgment thereon would still give him the right to sue for deficiency
judgment, in which case, all the properties of the defendant, other than the mortgaged
property, are again open to him for the satisfaction of the deficiency. In either case, his
remedy is complete, his cause of action undiminished, and any advantages attendant to the
pursuit of one or the other remedy are purely accidental and are all under his right of
election. On the other hand, a rule that would authorize the plaintiff to bring a personal
action against the debtor and simultaneously or successively another action against the
mortgaged property, would result not only in multiplicity of suits so offensive to justice
(Soriano v. Enriques, 24 Phil. 584) and obnoxious to law and equity (Osorio v. San Agustin,
25 Phil. 404), but also in subjecting the defendant to the vexation of being sued in the place
of his residence or of the residence of the plaintiff, and then again in the place where the
property lies.15
The Court has ruled that if a creditor is allowed to file his separate complaints simultaneously or
successively, one to recover his credit and another to foreclose his mortgage, he will, in effect, be
authorized plural redress for a single breach of contract at so much costs to the court and with so
much vexation and oppressiveness to the debtor.16
In this case, however, there are circumstances that the Court takes into consideration.
Petitioner filed an action for foreclosure of mortgage. The RTC, Branch 33 ruled that petitioner was
not entitled to judicial foreclosure because the Deed of Real Estate Mortgage was executed
without Enricos consent. The RTC, Branch 33 stated:
All these circumstances certainly conspired against the plaintiff who has the burden of
proving his cause of action. On the other hand, said circumstances tend to support the claim
of defendant EdnaLindo that her husband did not consent to the mortgage of their conjugal
property and that the loan application was her personal decision.
Accordingly, since the Deed of Real Estate Mortgage was executed by defendant
Edna Lindo lacks the consent or authority of her husband Enrico Lindo, the Deed of Real
Estate Mortgage is void pursuant to Article 96 of the Family Code.
This does not mean, however, that the plaintiff cannot recover the P400,000 loan plus
interest which he extended to defendant Edna Lindo. He can institute a personal action
against the defendant for the amount due which should be filed in the place where the
plaintiff resides, or where the defendant or any of the principal defendants resides at the
election of the plaintiff in accordance with Section 2, Rule 4 of the Revised Rules on Civil
Procedure. This Court has no jurisdiction to try such personal action. 17

Edna did not deny before the RTC, Branch 33 that she obtained the loan. She claimed, however,
that her husband did not give his consent and that he was not aware of the transaction. 18Hence, the
RTC, Branch 33 held that petitioner could still recover the amount due from Edna through a
personal action over which it had no jurisdiction.
Edna also filed an action for declaratory relief before the RTC, Branch 93 of San Pedro Laguna
(RTC, Branch 93), which ruled:
At issue in this case is the validity of the promissory note and the Real Estate Mortgage
executed by Edna Lindo without the consent of her husband.
The real estate mortgage executed by petition Edna Lindo over their conjugal property is
undoubtedly an act of strict dominion and must be consented to by her husband to be
effective. In the instant case, the real estate mortgage, absent the authority or consent of the
husband, is necessarily void. Indeed, the real estate mortgage is this case was executed on
October 31, 1995 and the subsequent special power of attorney dated November 4, 1995
cannot be made to retroact to October 31, 1995 to validate the mortgage previously made by
petitioner.
The liability of Edna Lindo on the principal contract of the loan however subsists
notwithstanding the illegality of the mortgage. Indeed, where a mortgage is not valid, the
principal obligation which it guarantees is not thereby rendered null and void. That
obligation matures and becomes demandable in accordance with the stipulation pertaining to
it. Under the foregoing circumstances, what is lost is merely the right to foreclose the
mortgage as a special remedy for satisfying or settling the indebtedness which is the
principal obligation. In case of nullity, the mortgage deed remains as evidence or proof of a
personal obligation of the debtor and the amount due to the creditor may be enforced in an
ordinary action.
In view of the foregoing, judgment is hereby rendered declaring the deed of real estate
mortgage as void in the absence of the authority or consent of petitioners spouse therein. The
liability of petitioner on the principal contract of loan however subsists notwithstanding the
illegality of the real estate mortgage. 19
The RTC, Branch 93 also ruled that Ednas liability is not affected by the illegality of the real estate
mortgage.
Both the RTC, Branch 33 and the RTC, Branch 93 misapplied the rules.
Article 124 of the Family Code provides:
Art. 124. The administration and enjoyment of the conjugal partnership property shall belong
to both spouses jointly. In case of disagreement, the husbands decision shall prevail, subject
to recourse to the court by the wife for proper remedy, which must be availed of within five
years from the date of contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include disposition or encumbrance without authority of
the court or the written consent of the other spouse. In the absence of such authority or
consent the disposition or encumbrance shall be void. However, the transaction shall be
construed as a continuing offer on the part of the consenting spouse and the third
person, and may be perfected as a binding contract upon the acceptance by the other
spouse or authorization by the court before the offer is withdrawn by either or
both offerors. (Emphasis supplied)
Article 124 of the Family Code of which applies to conjugal partnership property, is a reproduction
of Article 96 of the Family Code which applies to community property.
Both Article 96 and Article 127 of the Family Code provide that the powers do not include
disposition or encumbrance without the written consent of the other spouse. Any disposition or
encumbrance without the written consent shall be void. However, both provisions also state that the
transaction shall be construed as a continuing offer on the part of the consenting spouse and the
third person, and may be perfected as a binding contract upon the acceptance by the other
spouse x x x before the offer is withdrawn by either or both offerors.
In this case, the Promissory Note and the Deed of Real Estate Mortgage were executed on 31
October 1995. The Special Power of Attorney was executed on 4 November 1995. The execution
of the SPA is the acceptance by the other spouse that perfected the continuing offer as a
binding contract between the parties, making the Deed of Real Estate Mortgage a valid
contract.
However, as the Court of Appeals noted, petitioner allowed the decisions of the RTC, Branch 33
and the RTC, Branch 93 to become final and executory without asking the courts for an alternative
relief. The Court of Appeals stated that petitioner merely relied on the declarations of these courts
that he could file a separate personal action and thus failed to observe the rules and settled
jurisprudence on multiplicity of suits, closing petitioners avenue for recovery of the loan.
Nevertheless, petitioner still has a remedy under the law.
In Chieng v. Santos,20 this Court ruled that a mortgage-creditor may institute against the mortgagedebtor either a personal action for debt or a real action to foreclose the mortgage. The Court ruled
that the remedies are alternative and not cumulative and held that the filing of a criminal action for
violation of Batas Pambansa Blg. 22 was in effect a collection suit or a suit for the recovery of the
mortgage-debt.21 In that case, however, this Court pro hac vice, ruled that respondents could still be
held liable for the balance of the loan, applying the principle that no person may unjustly enrich
himself at the expense of another.22
The principle of unjust enrichment is provided under Article 22 of the Civil Code which provides:
Art. 22. Every person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without just or
legal ground, shall return the same to him.

There is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a
person retains money or property of another against the fundamental principles of justice, equity
and good conscience.23 The principle of unjust enrichment requires two conditions: (1) that a person
is benefited without a valid basis or justification, and (2) that such benefit is derived at the expense
of another.24

The main objective of the principle against unjust enrichment is to prevent one from enriching
himself at the expense of another without just cause or consideration. 25 The principle is applicable
in this case considering that Edna admitted obtaining a loan from petitioners, and the same has not
been fully paid without just cause. The Deed was declared void erroneously at the instance of Edna,
first when she raised it as a defense before the RTC, Branch 33 and second, when she filed an
action for declaratory relief before the RTC, Branch 93. Petitioner could not be expected to ask the
RTC, Branch 33 for an alternative remedy, as what the Court of Appeals ruled that he should have
done, because the RTC, Branch 33 already stated that it had no jurisdiction over any personal action
that petitioner might have against Edna.
Considering the circumstances of this case, the principle against unjust enrichment, being a
substantive law, should prevail over the procedural rule on multiplicity of suits. The Court of
Appeals, in the assailed decision, found that Edna admitted the loan, except that she claimed it only
amounted to P340,000. Edna should not be allowed to unjustly enrich herself because of the
erroneous decisions of the two trial courts when she questioned the validity of the Deed. Moreover,
Edna still has an opportunity to submit her defenses before the RTC, Branch 42 on her claim as to
the amount of her indebtedness.
WHEREFORE, the 30 May 2008 Decision and the 4 August 2008 Resolution of the Court of
Appeals in CA-G.R. SP No. 94003 are SET ASIDE. The Regional Trial Court of Manila, Branch
42 is directed to proceed with the trial of Civil Case No. 04-110858.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
THIRD DIVISION

HEIRS OF EDUARDO
SIMON,
Petitioners,

-versus -

G.R. No. 157547


Present:
BRION, Acting Chairperson,**
BERSAMIN,
ABAD,***
VILLARAMA, JR., and
SERENO, JJ.

Promulgated:
ELVIN* CHAN AND THE
COURT OF APPEALS,
February 23, 2011
Respondent.
x-----------------------------------------------------------------------------------------x
DECISION
BERSAMIN, J.:
There is no independent civil action to recover the civil liability arising from the issuance
of an unfunded check prohibited and punished under Batas Pambansa Bilang 22(BP 22).
Antecedents
On July 11, 1997, the Office of the City Prosecutor of Manila filed in the Metropolitan
Trial Court of Manila (MeTC) an information charging the late Eduardo Simon (Simon) with a
violation of BP 22, docketed as Criminal Case No. 275381 entitled People v. Eduardo
Simon. The accusatory portion reads:
That sometime in December 1996 in the City of Manila, Philippines, the said
accused, did then and there willfully, unlawfully and feloniously make or draw and

issue to Elvin Chan to apply on account or for value Landbank Check No. 0007280
dated December 26, 1996 payable to cash in the amount of P336,000.00 said
accused well knowing that at the time of issue she/he/they did not have sufficient
funds in or credit with the drawee bank for payment of such check in full upon its
presentment, which check when presented for payment within ninety (90) days from
the date thereof was subsequently dishonored by the drawee bank for Account Closed
and despite receipt of notice of such dishonor, said accused failed to pay said Elvin
Chan the amount of the check or to make arrangement for full payment of the same
within five (5) banking days after receiving said notice.
CONTRARY TO LAW. [1]

More than three years later, or on August 3, 2000, respondent Elvin Chan commenced in
the MeTC in Pasay City a civil action for the collection of the principal amount ofP336,000.00,
coupled with an application for a writ of preliminary attachment (docketed as Civil Case No.
915-00).[2] He alleged in his complaint the following:
xxx
2. Sometime in December 1996 defendant employing fraud, deceit, and
misrepresentation encashed a check dated December 26, 1996 in the amount
of P336,000.00 to the plaintiff assuring the latter that the check is duly funded and
that he had an existing account with the Land Bank of the Philippines, xerox copy of
the said check is hereto attached as Annex A;
3. However, when said check was presented for payment the same was
dishonored on the ground that the account of the defendant with the Land Bank of the
Philippines has been closed contrary to his representation that he has an existing
account with the said bank and that the said check was duly funded and will be
honored when presented for payment;
4. Demands had been made to the defendant for him to make good the payment
of the value of the check, xerox copy of the letter of demand is hereto attached as
Annex B, but despite such demand defendant refused and continues to refuse to
comply with plaintiffs valid demand;
5. Due to the unlawful failure of the defendant to comply with the plaintiffs valid
demands, plaintiff has been compelled to retain the services of counsel for which he
agreed to pay as reasonable attorneys fees the amount of P50,000.00 plus additional
amount of P2,000.00 per appearance.
ALLEGATION IN SUPPORT OF PRAYER
FOR PRELIMINARY ATTACHMENT

6. The defendant as previously alleged has been guilty of fraud in contracting the
obligation upon which this action is brought and that there is no sufficient security for
the claims sought in this action which fraud consist in the misrepresentation by the
defendant that he has an existing account and sufficient funds to cover the check when
in fact his account was already closed at the time he issued a check;
7. That the plaintiff has a sufficient cause of action and this action is one which
falls under Section 1, sub-paragraph (d), Rule 57 of the Revised Rules of Court of the
Philippines and the amount due the plaintiff is as much as the sum for which the
plaintiff seeks the writ of preliminary attachment;
8. That the plaintiff is willing and able to post a bond conditioned upon the
payment of damages should it be finally found out that the plaintiff is not entitled to
the issuance of a writ of preliminary attachment. [3]

On August 9, 2000, the MeTC in Pasay City issued a writ of preliminary attachment,
which was implemented on August 17, 2000 through the sheriff attaching a Nissan vehicle of
Simon.[4]
On August 17, 2000, Simon filed an urgent motion to dismiss with application to charge
plaintiffs attachment bond for damages,[5] pertinently averring:
xxx
On the ground of litis pendentia, that is, as a consequence of the pendency of
another action between the instant parties for the same cause before the Metropolitan
Trial Court of Manila, Branch X (10) entitled People of the Philippines vs. Eduardo
Simon, docketed thereat as Criminal Case No. 275381-CR, the instant action is
dismissable under Section 1, (e), Rule 16, 1997 Rules of Civil Procedure, xxx
xxx
While the instant case is civil in nature and character as contradistinguished from
the said Criminal Case No. 915-00 in the Metropolitan Trial Court of Manila, Branch
X (10), the basis of the instant civil action is the herein plaintiffs criminal complaint
against defendant arising from a charge of violation of Batas Pambansa Blg. 22 as a
consequence of the alleged dishonor in plaintiffs hands upon presentment for payment
with drawee bank a Land Bank Check No. 0007280 dated December 26, 1996 in the
amount of P336,000- drawn allegedly issued to plaintiff by defendant who is the
accused in said case, a photocopy of the Criminal information filed by the Assistant
City Prosecutor of Manila on June 11, 1997 hereto attached and made integral part
hereof as Annex 1.
It is our understanding of the law and the rules, that, when a criminal action is
instituted, the civil action for recovery of civil liability arising from the offense
charged is impliedly instituted with the criminal action, unless the offended party
expressly waives the civil action or reserves his right to institute it separately xxx.

On August 29, 2000, Chan opposed Simons urgent motion to dismiss with application to
charge plaintiffs attachment bond for damages, stating:
1. The sole ground upon which defendant seeks to dismiss plaintiffs complaint is
the alleged pendency of another action between the same parties for the same cause,
contending among others that the pendency of Criminal Case No. 275381-CR entitled
People of the Philippines vs. Eduardo Simon renders this case dismissable;
2. The defendant further contends that under Section 1, Rule 111 of the Revised
Rules of Court, the filing of the criminal action, the civil action for recovery of civil
liability arising from the offense charged is impliedly instituted with the criminal
action which the plaintiff does not contest; however, it is the submission of the
plaintiff that an implied reservation of the right to file a civil action has already been
made, first, by the fact that the information for violation of B.P. 22 in Criminal Case
No. 2753841 does not at all make any allegation of damages suffered by the plaintiff
nor is there any claim for recovery of damages; on top of this the plaintiff as private
complainant in the criminal case, during the presentation of the prosecution evidence
was not represented at all by a private prosecutor such that no evidence has been
adduced by the prosecution on the criminal case to prove damages; all of these we
respectfully submit demonstrate an effective implied reservation of the right of the
plaintiff to file a separate civil action for damages;
3. The defendant relies on Section 3 sub-paragraph (a) Rule 111 of the Revised
Rules of Court which mandates that after a criminal action has been commenced the
civil action cannot be instituted until final judgment has been rendered in the criminal
action; however, the defendant overlooks and conveniently failed to consider that
under Section 2, Rule 111 which provides as follows:
In the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil
Code of the Philippines, an independent civil action entirely separate and
distinct from the criminal action, may be brought by the injured party during
the pendency of criminal case provided the right is reserved as required in the
preceding section. Such civil action shall proceed independently of the
criminal prosecution, and shall require only a preponderance of evidence.
In as much as the case is one that falls under Art. 33 of the Civil Code of
the Philippines as it is based on fraud, this action therefore may be prosecuted
independently of the criminal action;
4. In fact we would even venture to state that even without any reservation at all
of the right to file a separate civil action still the plaintiff is authorized to file this
instant case because the plaintiff seeks to enforce an obligation which the defendant
owes to the plaintiff by virtue of the negotiable instruments law. The plaintiff in this

case sued the defendant to enforce his liability as drawer in favor of the plaintiff as
payee of the check. Assuming the allegation of the defendant of the alleged
circumstances relative to the issuance of the check, still when he delivered the check
payable to bearer to that certain Pedro Domingo, as it was payable to cash, the same
may be negotiated by delivery by who ever was the bearer of the check and such
negotiation was valid and effective against the drawer;
5. Indeed, assuming as true the allegations of the defendant regarding the
circumstances relative to the issuance of the check it would be entirely impossible for
the plaintiff to have been aware that such check was intended only for a definite
person and was not negotiable considering that the said check was payable to bearer
and was not even crossed;
6. We contend that what cannot be prosecuted separate and apart from the
criminal case without a reservation is a civil action arising from the criminal offense
charged. However, in this instant case since the liability of the defendant are imposed
and the rights of the plaintiff are created by the negotiable instruments law, even
without any reservation at all this instant action may still be prosecuted;
7. Having this shown, the merits of plaintiffs complaint the application for
damages against the bond is totally without any legal support and perforce should be
dismissed outright.[6]

On October 23, 2000, the MeTC in Pasay City granted Simons urgent motion to dismiss
with application to charge plaintiffs attachment bond for damages,[7] dismissing the complaint
of Chan because:
xxx
After study of the arguments of the parties, the court resolves to GRANT the
Motion to Dismiss and the application to charge plaintiffs bond for damages.
For litis pendentia to be a ground for the dismissal of an action, the following
requisites must concur: (a) identity of parties or at least such as to represent the same
interest in both actions; (b) identity of rights asserted and relief prayed for, the relief
being founded on the same acts; and (c) the identity in the two (2) cases should be
such that the judgment, which may be rendered in one would, regardless of which
party is successful, amount to res judicata in the other. xxx
A close perusal of the herein complaint denominated as Sum of Money and the
criminal case for violation of BP Blg. 22 would readily show that the parties are not
only identical but also the cause of action being asserted, which is the recovery of the
value of Landbank Check No. 0007280 in the amount of P336,000.00. In both civil
and criminal cases, the rights asserted and relief prayed for, the reliefs being founded
on the same facts, are identical.

Plaintiffs claim that there is an effective implied waiver of his right to pursue this
civil case owing to the fact that there was no allegation of damages in BP Blg. 22 case
and that there was no private prosecutor during the presentation of prosecution
evidence is unmeritorious. It is basic that when a complaint or criminal Information is
filed, even without any allegation of damages and the intention to prove and claim
them, the offended party has the right to prove and claim for them, unless a waiver or
reservation is made or unless in the meantime, the offended party has instituted a
separate civil action. xxx The over-all import of the said provision conveys that the
waiver which includes indemnity under the Revised Penal Code, and damages arising
under Articles 32, 33, and 34 of the Civil Code must be both clear and express. And
this must be logically so as the primordial objective of the Rule is to prevent the
offended party from recovering damages twice for the same act or omission of the
accused.
Indeed, the evidence discloses that the plaintiff did not waive or made a
reservation as to his right to pursue the civil branch of the criminal case for violation
of BP Blg. 22 against the defendant herein. To the considered view of this court, the
filing of the instant complaint for sum of money is indeed legally barred. The right to
institute a separate civil action shall be made before the prosecution starts to present
its evidence and under circumstances affording the offended party a reasonable
opportunity to make such reservation. xxx
Even assuming the correctness of the plaintiffs submission that the herein case
for sum of money is one based on fraud and hence falling under Article 33 of the Civil
Code, still prior reservation is required by the Rules, to wit:
In the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil
Code of the Philippines, an independent civil action entirely separate and
distinct from the criminal action, may be brought by the injured party during
the pendency of criminal case provided the right is reserved as required in the
preceding section. Such civil action shall proceed independently of the
criminal prosecution, and shall require only a preponderance of evidence.
xxx
WHEREFORE, premises considered, the court resolves to:
1. Dismiss the instant complaint on the ground of litis pendentia;
2. Dissolve/Lift the Writ of Attachment issued by this court on August 14,
2000;
3. Charge the plaintiffs bond the amount of P336,000.00 in favor of the
defendant for the damages sustained by the latter by virtue of the
implementation of the writ of attachment;

4. Direct the Branch Sheriff of this Court to RESTORE with utmost dispatch to
the defendants physical possession the vehicle seized from him on August 16,
2000; and
5. Direct the plaintiff to pay the defendant the sum of P5,000.00 by way of
attorneys fees.
SO ORDERED.

Chans motion for reconsideration was denied on December 20, 2000,[8] viz:
Considering that the plaintiffs arguments appear to be a mere repetition of his
previous submissions, and which submissions this court have already passed upon;
and taking into account the inapplicability of the ratio decidendi in the Tactaquin vs.
Palileo case which the plaintiff cited as clearly in that case, the plaintiff therein
expressly made a reservation to file a separate civil action, the Motion for
Reconsideration is DENIED for lack of merit.
SO ORDERED.

On July 31, 2001, the Regional Trial Court (RTC) in Pasay City upheld the dismissal of
Chans complaint, disposing:[9]
WHEREFORE, finding no error in the appealed decision, the same is hereby
AFFIRMED in toto.
SO ORDERED.

On September 26, 2001, Chan appealed to the Court of Appeals (CA) by petition for
review,[10] challenging the propriety of the dismissal of his complaint on the ground of litis
pendentia.
In his comment, [11] Simon countered that Chan was guilty of bad faith and malice in
prosecuting his alleged civil claim twice in a manner that caused him (Simon) utter
embarrassment and emotional sufferings; and that the dismissal of the civil case because of the
valid ground of litis pendentia based on Section 1 (e), Rule 16 of the 1997 Rules of Civil
Procedure was warranted.
On June 25, 2002, the CA promulgated its assailed decision,[12] overturning the RTC, viz:
xxx
As a general rule, an offense causes two (2) classes of injuries. The first is the
social injury produced by the criminal act which is sought to be repaired through the

imposition of the corresponding penalty, and the second is the personal injury caused
to the victim of the crime which injury is sought to be compensated through indemnity
which is also civil in nature. Thus, every person criminally liable for a felony is also
civilly liable.
The offended party may prove the civil liability of an accused arising from the
commission of the offense in the criminal case since the civil action is either deemed
instituted with the criminal action or is separately instituted.
Rule 111, Section 1 of the Revised Rules of Criminal Procedure, which became
effective on December 1, 2000, provides that:
(a) When a criminal action is instituted, the civil action for the recovery of
civil liability arising from the offense charged shall be deemed instituted
with the criminal action unless the offended party waives the civil action,
reserves the right to institute it separately or institute the civil action
prior to the criminal action.
Rule 111, Section 2 further states:
After the criminal action has been commenced, the separate civil action
arising therefrom cannot be instituted until final judgment has been
entered in the criminal action.
However, with respect to civil actions for recovery of civil liability under Articles
32, 33, 34 and 2176 of the Civil Code arising from the same act or omission, the rule
has been changed.
In DMPI Employees Credit Association vs. Velez, the Supreme Court
pronounced that only the civil liability arising from the offense charged is deemed
instituted with the criminal action unless the offended party waives the civil action,
reserves his right to institute it separately, or institutes the civil action prior to the
criminal action. Speaking through Justice Pardo, the Supreme Court held:
There is no more need for a reservation of the right to file the
independent civil action under Articles 32, 33, 34 and 2176 of the Civil
Code of the Philippines. The reservation and waiver referred to refers only
to the civil action for the recovery of the civil liability arising from the
offense charged. This does not include recovery of civil liability under
Articles 32, 33, 34, and 2176 of the Civil Code of the Philippines arising
from the same act or omission which may be prosecuted separately
without a reservation.
Rule 111, Section 3 reads:

Sec. 3. When civil action may proceed independently. In the cases


provided in Articles 32, 33, 34, and 2176 of the Civil Code of
the Philippines, the independent civil action may be brought by the
offended party. It shall proceed independently of the criminal action
and shall require only a preponderance of evidence. In no case,
however, may the offended party recover damages twice for the same
act or omission charged in the criminal action.
The changes in the Revised Rules on Criminal Procedure pertaining to
independent civil actions which became effective on December 1,
2000 are applicable to this case.
Procedural laws may be given retroactive effect to actions pending and
undetermined at the time of their passage. There are no vested rights in the
rules of procedure. xxx
Thus, Civil Case No. CV-94-124, an independent civil action for
damages on account of the fraud committed against respondent Villegas
under Article 33 of the Civil Code, may proceed independently even if
there was no reservation as to its filing.
It must be pointed that the abovecited case is similar with the instant suit. The
complaint was also brought on allegation of fraud under Article 33 of the Civil Code
and committed by the respondent in the issuance of the check which later bounced. It
was filed before the trial court, despite the pendency of the criminal case for violation
of BP 22 against the respondent. While it may be true that the changes in the Revised
Rules on Criminal Procedure pertaining to independent civil action became effective
on December 1, 2000, the same may be given retroactive application and may be
made to apply to the case at bench, since procedural rules may be given retroactive
application. There are no vested rights in the rules of procedure.

In view of the ruling on the first assigned error, it is therefore an error to adjudge
damages in favor of the petitioner.
WHEREFORE, the petition is hereby GRANTED. The Decision dated July 13,
2001 rendered by the Regional Trial Court of Pasay City, Branch 108 affirming the
dismissal of the complaint filed by petitioner is hereby REVERSED and SET ASIDE.
The case is hereby REMANDED to the trial court for further proceedings.
SO ORDERED.

On March 14, 2003, the CA denied Simons motion for reconsideration.[13]

Hence, this appeal, in which the petitioners submit that the CA erroneously premised its
decision on the assessment that the civil case was an independent civil action under Articles 32,
33, 34, and 2176 of the Civil Code; that the CAs reliance on the ruling in DMPI Employees
Credit Cooperative Inc. v. Velez[14] stretched the meaning and intent of the ruling, and was
contrary to Sections 1 and 2 of Rule 111 of the Rules of Criminal Procedure; that this case was
a simple collection suit for a sum of money, precluding the application of Section 3 of Rule 111
of the Rules of Criminal Procedure.[15]
In his comment,[16] Chan counters that the petition for review should be denied because the
petitioners used the wrong mode of appeal; that his cause of action, being based on fraud, was
an independent civil action; and that the appearance of a private prosecutor in the criminal case
did not preclude the filing of his separate civil action.
Issue
The lone issue is whether or not Chans civil action to recover the amount of the unfunded check
(Civil Case No. 915-00) was an independent civil action.
Ruling
The petition is meritorious.
A
Applicable Law and Jurisprudence on the
Propriety of filing a separate civil action based on BP 22
The Supreme Court has settled the issue of whether or not a violation of BP 22 can give
rise to civil liability in Banal v. Judge Tadeo, Jr.,[17] holding:
xxx
Article 20 of the New Civil Code provides:
Every person who, contrary to law, wilfully or negligently causes damage to
another, shall indemnify the latter for the same.
Regardless, therefore, of whether or not a special law so provides, indemnification of
the offended party may be had on account of the damage, loss or injury directly
suffered as a consequence of the wrongful act of another. The indemnity which a
person is sentenced to pay forms an integral part of the penalty imposed by law for
the commission of a crime (Quemel v. Court of Appeals, 22 SCRA 44, citing Bagtas
v. Director of Prisons, 84 Phil 692). Every crime gives rise to a penal or criminal
action for the punishment of the guilty party, and also to civil action for the

restitution of the thing, repair of the damage, and indemnification for the losses
(United States v. Bernardo, 19 Phil 265).
xxx
Civil liability to the offended party cannot thus be denied. The payee of the check is
entitled to receive the payment of money for which the worthless check was
issued. Having been caused the damage, she is entitled to recompense.
Surely, it could not have been the intendment of the framers of Batas Pambansa Blg.
22 to leave the offended private party defrauded and empty-handed by excluding the
civil liability of the offender, giving her only the remedy, which in many cases
results in a Pyrrhic victory, of having to file a separate civil suit. To do so may leave
the offended party unable to recover even the face value of the check due her,
thereby unjustly enriching the errant drawer at the expense of the payee. The
protection which the law seeks to provide would, therefore, be brought to naught.
xxx

However, there is no independent civil action to recover the value of a bouncing check issued in
contravention of BP 22. This is clear from Rule 111 of the Rules of Court,effective December 1,
2000, which relevantly provides:
Section 1. Institution of criminal and civil actions. - (a) When a criminal action is
instituted, the civil action for the recovery of civil liability arising from the offense
charged shall be deemed instituted with the criminal action unless the offended party
waives the civil action, reserves the right to institute it separately or institutes the civil
action prior to the criminal action.
The reservation of the right to institute separately the civil action shall be made
before the prosecution starts presenting its evidence and under circumstances
affording the offended party a reasonable opportunity to make such reservation.
When the offended party seeks to enforce civil liability against the accused by
way of moral, nominal, temperate, or exemplary damages without specifying the
amount thereof in the complaint or information, the filing fees therefor shall constitute
a first lien on the judgment awarding such damages.
Where the amount of damages, other than actual, is specified in the complaint or
information, the corresponding filing fees shall be paid by the offended party upon the
filing thereof in court.
Except as otherwise provided in these Rules, no filing fees shall be required for
actual damages.
No counterclaim, cross-claim or third-party complaint may be filed by the
accused in the criminal case, but any cause of action which could have been the
subject thereof may be litigated in a separate civil action. (1a)

(b) The criminal action for violation of Batas Pambansa Blg. 22 shall be
deemed to include the corresponding civil action. No reservation to file such civil
action separately shall be allowed.[18]
Upon filing of the aforesaid joint criminal and civil actions, the offended party
shall pay in full the filing fees based on the amount of the check involved, which shall
be considered as the actual damages claimed. Where the complaint or information also
seeks to recover liquidated, moral, nominal, temperate or exemplary damages, the
offended party shall pay the filing fees based on the amounts alleged therein. If the
amounts are not so alleged but any of these damages are subsequently awarded by the
court, the filing fees based on the amount awarded shall constitute a first lien on the
judgment.
Where the civil action has been filed separately and trial thereof has not yet
commenced, it may be consolidated with the criminal action upon application with the
court trying the latter case. If the application is granted, the trial of both actions shall
proceed in accordance with section 2 of the Rule governing consolidation of the civil
and criminal actions.
Section 3. When civil action may proceed independently. In the cases provided in
Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines, the independent
civil action may be brought by the offended party. It shall proceed independently of
the criminal action and shall require only a preponderance of evidence. In no case,
however, may the offended party recover damages twice for the same act or omission
charged in the criminal action.

The aforequoted provisions of the Rules of Court, even if not yet in effect when Chan
commenced Civil Case No. 915-00 on August 3, 2000, are nonetheless applicable. It is
axiomatic that the retroactive application of procedural laws does not violate any right of a
person who may feel adversely affected, nor is it constitutionally objectionable. The reason is
simply that, as a general rule, no vested right may attach to, or arise from, procedural laws.
[19]
Any new rules may validly be made to apply to cases pending at the time of their
promulgation, considering that no party to an action has a vested right in the rules of procedure,
[20]
except that in criminal cases, the changes do not retroactively apply if they permit or require
a lesser quantum of evidence to convict than what is required at the time of the commission of
the offenses, because such retroactivity would be unconstitutional for being ex post facto under
the Constitution.[21]
Moreover, the application of the rule would not be precluded by the violation of any
assumed vested right, because the new rule was adopted from Supreme Court Circular 57-97
that took effect on November 1, 1997.

Supreme Court Circular 57-97 states:


Any provision of law or Rules of Court to the contrary notwithstanding, the
following rules and guidelines shall henceforth be observed in the filing and
prosecution of all criminal cases under Batas Pambansa Blg. 22 which penalizes the
making or drawing and issuance of a check without funds or credit:
1. The criminal action for violation of Batas Pambansa Blg. 22 shall be
deemed to necessarily include the corresponding civil action, and no reservation
to file such civil action separately shall be allowed or recognized. [22]
2. Upon the filing of the aforesaid joint criminal and civil actions, the offended
party shall pay in full the filing fees based upon the amount of the check involved
which shall be considered as the actual damages claimed, in accordance with the
schedule of fees in Section 7 (a) and Section 8 (a), Rule 141 of the Rules of Court as
last amended by Administrative Circular No. 11-94 effective August 1, 1994. Where
the offended party further seeks to enforce against the accused civil liability by way of
liquidated, moral, nominal, temperate or exemplary damages, he shall pay the
corresponding filing fees therefor based on the amounts thereof as alleged either in the
complaint or information. If not so alleged but any of these damages are subsequently
awarded by the court, the amount of such fees shall constitute a first lien on the
judgment.
3. Where the civil action has heretofore been filed separately and trial thereof has
not yet commenced, it may be consolidated with the criminal action upon application
with the court trying the latter case. If the application is granted, the trial of both
actions shall proceed in accordance with the pertinent procedure outlined in Section 2
(a) of Rule 111 governing the proceedings in the actions as thus consolidated.
4. This Circular shall be published in two (2) newspapers of general circulation
and shall take effect on November 1, 1997.

The reasons for issuing Circular 57-97 were amply explained in Hyatt Industrial
Manufacturing Corporation v. Asia Dynamic Electrix Corporation,[23] thus:

xxx
We agree with the ruling of the Court of Appeals that upon filing of the criminal
cases for violation of B.P. 22, the civil action for the recovery of the amount of the
checks was also impliedly instituted under Section 1(b) of Rule 111 of the 2000 Rules
on Criminal Procedure. Under the present revised Rules, the criminal action for
violation of B.P. 22 shall be deemed to include the corresponding civil action. The
reservation to file a separate civil action is no longer needed. The Rules provide:

Section 1. Institution of criminal and civil actions.


(a)

xxx

(b) The criminal action for violation of Batas Pambansa Blg. 22 shall be
deemed to include the corresponding civil action. No reservation to file such
civil action separately shall be allowed.
Upon filing of the aforesaid joint criminal and civil actions, the offended
party shall pay in full the filing fees based on the amount of the check
involved, which shall be considered as the actual damages claimed. Where
the complaint or information also seeks to recover liquidated, moral, nominal,
temperate or exemplary damages, the offended party shall pay additional
filing fees based on the amounts alleged therein. If the amounts are not so
alleged but any of these damages are subsequently awarded by the court, the
filing fees based on the amount awarded shall constitute a first lien on the
judgment.
Where the civil action has been filed separately and trial thereof has not
yet commenced, it may be consolidated with the criminal action upon
application with the court trying the latter case. If the application is granted,
the trial of both actions shall proceed in accordance with section 2 of this
Rule governing consolidation of the civil and criminal actions.
The foregoing rule was adopted from Circular No. 57-97 of this Court. It
specifically states that the criminal action for violation of B.P. 22 shall be deemed to
include the corresponding civil action. It also requires the complainant to pay in full
the filing fees based on the amount of the check involved. Generally, no filing fees are
required for criminal cases, but because of the inclusion of the civil action in
complaints for violation of B.P. 22, the Rules require the payment of docket fees upon
the filing of the complaint. This rule was enacted to help declog court dockets
which are filled with B.P. 22 cases as creditors actually use the courts as
collectors. Because ordinarily no filing fee is charged in criminal cases for actual
damages, the payee uses the intimidating effect of a criminal charge to collect his
credit gratis and sometimes, upon being paid, the trial court is not even informed
thereof. The inclusion of the civil action in the criminal case is expected to
significantly lower the number of cases filed before the courts for collection based
on dishonored checks. It is also expected to expedite the disposition of these
cases. Instead of instituting two separate cases, one for criminal and another for
civil, only a single suit shall be filed and tried. It should be stressed that the
policy laid down by the Rules is to discourage the separate filing of the civil
action. The Rules even prohibit the reservation of a separate civil action, which
means that one can no longer file a separate civil case after the criminal
complaint is filed in court. The only instance when separate proceedings are
allowed is when the civil action is filed ahead of the criminal case. Even then, the
Rules encourage the consolidation of the civil and criminal cases. We have

previously observed that a separate civil action for the purpose of recovering the
amount of the dishonored checks would only prove to be costly, burdensome and
time-consuming for both parties and would further delay the final disposition of
the case. This multiplicity of suits must be avoided. Where petitioners rights
may be fully adjudicated in the proceedings before the trial court, resort to a
separate action to recover civil liability is clearly unwarranted. In view of this
special rule governing actions for violation of B.P. 22, Article 31 of the Civil Code
cited by the trial court will not apply to the case at bar.[24]

The CAs reliance on DMPI Employees Credit Association v. Velez [25] to give due course to
the civil action of Chan independently and separately of Criminal Case No. 275381
was unwarranted. DMPI Employees, which involved a prosecution for estafa, is not on all fours
with this case, which is a prosecution for a violation of BP 22. Although the Court has ruled that
the issuance of a bouncing check may result in two separate and distinct crimes of estafa and
violation of BP 22,[26] the procedures for the recovery of the civil liabilities arising from these
two distinct crimes are different and non-interchangeable. In prosecutions of estafa, the
offended party may opt to reserve his right to file a separate civil action, or may institute an
independent action based on fraud pursuant to Article 33 of the Civil Code,[27] as DMPI
Employees has allowed. In prosecutions of violations of BP 22, however, the Court has adopted
a policy to prohibit the reservation or institution of a separate civil action to claim the civil
liability arising from the issuance of the bouncing check upon the reasons delineated in Hyatt
Industrial Manufacturing Corporation, supra.
To repeat, Chans separate civil action to recover the amount of the check involved in the
prosecution for the violation of BP 22 could not be independently maintained under both
Supreme Court Circular 57-97 and the aforequoted provisions of Rule 111 of the Rules of
Court, notwithstanding the allegations of fraud and deceit.
B
Aptness of the dismissal of the civil action
on the ground of litis pendentia
Did the pendency of the civil action in the MeTC in Manila (as the civil aspect in
Criminal Case No. 275381) bar the filing of Civil Case No. 915-00 in the MeTC
in PasayCity on the ground of litis pendentia?
For litis pendentia to be successfully invoked as a bar to an action, the concurrence of the
following requisites is necessary, namely: (a) there must be identity of parties or at least such as
represent the same interest in both actions; (b) there must be identity of rights asserted and
reliefs prayed for, the reliefs being founded on the same facts; and, (c) the identity in the two
cases should be such that the judgment that may be rendered in one would, regardless of which

party is successful, amount to res judicata in respect of the other. Absent the first two requisites,
the possibility of the existence of the third becomes nil.[28]
A perusal of Civil Case No. 01-0033 and Criminal Case No. 275381 ineluctably shows
that all the elements of litis pendentia are attendant. First of all, the parties in the civil action
involved in Criminal Case No. 275381 and in Civil Case No. 915-00, that is, Chan and Simon,
are the same. Secondly, the information in Criminal Case No. 275381 and the complaint in Civil
Case No. 915-00 both alleged that Simon had issued Landbank Check No. 0007280
worth P336,000.00 payable to cash, thereby indicating that the rights asserted and the reliefs
prayed for, as well as the facts upon which the reliefs sought were founded, were identical in all
respects. And, thirdly, any judgment rendered in one case would necessarily bar the other by res
judicata; otherwise, Chan would be recovering twice upon the same claim.
It is clear, therefore, that the MeTC in Pasay City properly dismissed Civil Case No. 91500 on the ground of litis pendentia through its decision dated October 23, 2000; and that the
RTC in Pasay City did not err in affirming the MeTC.
WHEREFORE, we grant the petition for review on certiorari, and, accordingly, we reverse
and set aside the decision promulgated by the Court of Appeals on June 25, 2002. We reinstate
the decision rendered on October 23, 2000 by the Metropolitan Trial Court, Branch 45,
in Pasay City.
Costs of suit to be paid by the respondent.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 108017 April 3, 1995


MARIA BENITA A. DULAY, in her own behalf and in behalf of the minor children
KRIZTEEN ELIZABETH, BEVERLY MARIE and NAPOLEON II, all surnamed
DULAY, petitioners,
vs.
THE COURT OF APPEALS, Former Eighth Division, HON. TEODORO P. REGINO, in
his capacity as Presiding Judge of the Regional Trial Court National Capital Region,
Quezon City, Br. 84, SAFEGUARD INVESTIGATION AND SECURITY CO., INC., and
SUPERGUARD SECURITY CORPORATION, respondents.

BIDIN, J.:
This petition for certiorari prays for the reversal of the decision of the Court of Appeals dated
October 29, 1991 in CA-G.R. CV No. 24646 which affirmed the order of the Regional Trial
Court dismissing Civil Case No. Q-89-1751, and its resolution dated November 17, 1991
denying herein, petitioner's motion for reconsideration.
The antecedent facts of the case are as follows:
On December 7, 1988, an altercation between Benigno Torzuela and Atty. Napoleon Dulay
occurred at the "Big Bang Sa Alabang," Alabang Village, Muntinlupa as a result of which
Benigno Torzuela, the security guard on duty at the said carnival, shot and killed Atty. Napoleon
Dulay.

Herein petitioner Maria Benita A. Dulay, widow of the deceased Napoleon Dulay, in her own
behalf and in behalf of her minor children, filed on February 8, 1989 an action for damages
against Benigno Torzuela and herein private respondents Safeguard Investigation and Security
Co., Inc., ("SAFEGUARD") and/or Superguard Security Corp. ("SUPERGUARD"), alleged
employers of defendant Torzuela. The complaint, docketed as Civil Case No. Q-89-1751 among
others alleges the following:
1. . . .
Defendants SAFEGUARD INVESTIGATION AND SECURITY CO., INC.,
(Defendant Safeguard) and SUPERGUARD SECURITY CORPORATION
(Defendant Superguard) are corporations duly organized and existing in
accordance with Philippine laws, with offices at 10th Floor, Manufacturers
Building, Inc., Plaza Santa Cruz, Manila. They are impleaded as alternative
defendants for, while the former appears to be the employer of defendant
BENIGNO TORZUELA (defendant TORZUELA), the latter impliedly
acknowledged responsibility for the acts of defendant TORZUELA by extending
its sympathies to plaintiffs.
Defendant BENIGNO TORZUELA is of legal age, an employee of defendant
SAFEGUARD and/or defendant SUPERGUARD and, at the time of the incident
complained of, was under their control and supervision. . . .
3. On December 7, 1988 at around 8:00 a.m., defendant TORZUELA, while he
was on duty as security guard at the "Big Bang sa Alabang," Alabang Village,
Muntinlupa, Metro Manila shot and killed NAPOLEON V. DULAY with a .38
caliber revolver belonging to defendant SAFEGUARD, and/or SUPERGUARD
(per Police Report dated January 7, 1989, copy attached as Annex A);
4. The incident resulting in the death of NAPOLEON V. DULAY was due to the
concurring negligence of the defendants. Defendant TORZUELA'S wanton and
reckless discharge of the firearm issued to him by defendant SAFEGUARD and/or
SUPERGUARD was the immediate and proximate cause of the injury, while the
negligence of defendant SAFEGUARD and/or SUPERGUARD consists in its
having failed to exercise the diligence of a good father of a family in the
supervision and control of its employee to avoid the injury.
xxx xxx xxx
(Rollo, pp. 117-118)

Petitioners prayed for actual, compensatory, moral and exemplary damages, and attorney's fees.
The said Civil Case No. Q-89-1751 was raffled to Branch 84 of the Regional Trial Court of
Quezon City, presided by respondent Judge Teodoro Regino.
On March 2, 1989, private respondent SUPERGUARD filed a Motion to Dismiss on the ground
that the complaint does not state a valid cause of action. SUPERGUARD claimed that
Torzuela's act of shooting Dulay was beyond the scope of his duties, and that since the alleged
act of shooting was committed with deliberate intent (dolo), the civil liability therefor is
governed by Article 100 of the Revised Penal Code, which states:
Art. 100. Civil liability of a person guilty of a felony. Every person criminally
liable for a felony is also civilly liable.
Respondent SUPERGUARD further alleged that a complaint for damages based on negligence
under Article 2176 of the New Civil Code, such as the one filed by petitioners, cannot lie, since
the civil liability under Article 2176 applies only to quasi-offenses under Article 365 of the
Revised Penal Code. In addition, the private respondent argued that petitioners' filing of the
complaint is premature considering that the conviction of Torzuela in a criminal case is a
condition sine qua non for the employer's subsidiary liability (Rollo, p. 55-59).
Respondent SAFEGUARD also filed a motion praying that it be excluded as defendant on the
ground that defendant Torzuela is not one of its employees (Rollo, p. 96).
Petitioners opposed both motions, stating that their cause of action against the private
respondents is based on their liability under Article 2180 of the New Civil Code, which
provides:
Art. 2180. The obligation imposed by Article 2176 is demandable not only for
one's own acts or omissions, but also for those of persons for whom one is
responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or an industry.
xxx xxx xxx
(Emphasis supplied)
Petitioners contended that a suit against alternative defendants is allowed under Rule 3, Section
13 of the Rules of Court. Therefore, the inclusion of private respondents as alternative

defendants in the complaint is justified by the following: the Initial Investigation Report
prepared by Pat. Mario Tubon showing that Torzuela is an employee of SAFEGUARD; and
through overt acts, SUPERGUARD extended its sympathies to petitioners (Rollo, pp. 64 and
98).
Meanwhile, an Information dated March 21, 1989 charging Benigno Torzuela with homicide
was filed before the Regional Trial Court of Makati and was docketed as Criminal Case No. 891896.
On April 13, 1989, respondent Judge Regino issued an order granting SUPERGUARD'S motion
to dismiss and SAFEGUARD'S motion for exclusion as defendant. The respondent judge held
that the complaint did not state facts necessary or sufficient to constitute a quasi-delict since it
does not mention any negligence on the part of Torzuela in shooting Napoleon Dulay or that the
same was done in the performance of his duties. Respondent judge ruled that mere allegations
of the concurring negligence of the defendants (private respondents herein) without stating the
facts showing such negligence are mere conclusions of law (Rollo, p. 106). Respondent judge
also declared that the complaint was one for damages founded on crimes punishable under
Articles 100 and 103 of the Revised Penal Code as distinguished from those arising from, quasidelict. The dispositive portion of the order dated April 13, 1989 states:
WHEREFORE, this Court holds that in view of the material and ultimate facts
alleged in the verified complaint and in accordance with the applicable law on the
matter as well as precedents laid down by the Supreme Court, the complaint
against the alternative defendants Superguard Security Corporation and Safeguard
Investigation and Security Co., Inc., must be and (sic) it is hereby dismissed.
(Rollo, p. 110)
The above order was affirmed by the respondent court and petitioners' motion for
reconsideration thereof was denied.
Petitioners take exception to the assailed decision and insist that quasi-delicts are not limited to
acts of negligence but also cover acts that are intentional and voluntary, citing Andamo v. IAC
(191 SCRA 195 [1990]). Thus, petitioners insist that Torzuela' s act of shooting Napoleon Dulay
constitutes a quasi-delict actionable under Article 2176 of the New Civil Code.
Petitioners further contend that under Article 2180 of the New Civil Code, private respondents
are primarily liable for their negligence either in the selection or supervision of their employees.
This liability is independent of the employee's own liability for fault or negligence and is
distinct from the subsidiary civil liability under Article 103 of the Revised Penal Code. The civil
action against the employer may therefore proceed independently of the criminal action
pursuant to Rule 111 Section 3 of the Rules of Court. Petitioners submit that the question of

whether Torzuela is an employee of respondent SUPERGUARD or SAFEGUARD would be


better resolved after trial.
Moreover, petitioners argue that Torzuela's act of shooting Dulay is also actionable under
Article 33 of the New Civil Code, to wit:
Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for
damages, entirely separate and distinct from the criminal action, may be brought
by the injured party. Such civil action shall proceed independently of the criminal
prosecution, and shall require only a preponderance of evidence. (Emphasis
supplied)
In the same vein, petitioners cite Section 3, Rule 111 of the Rules of Court which provides:
Rule 111. . . . .
Sec. 3. When civil action may proceed independently In the cases provided for
in Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines, the
independent civil action which has been reserved may be brought by the offended
party, shall proceed independently of the criminal action, and shall require only a
preponderance of evidence. (Emphasis supplied)
The term "physical injuries" under Article 33 has been held to include consummated, frustrated
and attempted homicide. Thus, petitioners maintain that Torzuela's prior conviction is
unnecessary since the civil action can proceed independently of the criminal action. On the
other hand, it is the private respondents' argument that since the act was not committed with
negligence, the petitioners have no cause of action under Articles 2116 and 2177 of the New
Civil Code. The civil action contemplated in Article 2177 is not applicable to acts committed
with deliberate intent, but only applies to quasi-offenses under Article 365 of the Revised Penal
Code. Torzuela's act of shooting Atty. Dulay to death, aside from being purely personal, was
done with deliberate intent and could not have been part of his duties as security guard. And
since Article 2180 of the New Civil Code covers only: acts done within the scope of the
employee's assigned tasks, the private respondents cannot be held liable for damages.
We find for petitioners.
It is undisputed that Benigno Torzuela is being prosecuted for homicide for the fatal shooting of
Napoleon Dulay. Rule 111 of the Rules on Criminal Procedure provides:
Sec. 1. Institution of criminal and civil actions. When a criminal action is
instituted, the civil action for the recovery of civil liability is impliedly instituted
with the criminal action, unless the offended party waives the civil action , reserves

his right to institute it separately or institutes the civil action prior to the criminal
action.
Such civil action includes recovery of indemnity under the Revised Penal Code,
and damages under Articles 32, 33, 34, and 2176 of the Civil Code of the
Philippines arising from the same act or omission of the accused. (Emphasis
supplied)
It is well-settled that the filing of an independent civil action before the prosecution in the
criminal action presents evidence is even far better than a compliance with the requirement of
express reservation (Yakult Philippines v. Court of Appeals, 190 SCRA 357 [1990]). This is
precisely what the petitioners opted to do in this case. However, the private respondents
opposed the civil action on the ground that the same is founded on a delict and not on a quasidelict as the shooting was not attended by negligence. What is in dispute therefore is the nature
of the petitioner's cause of action.
The nature of a cause of action is determined by the facts alleged in the complaint as
constituting the cause of action (Republic v. Estenzo, 158 SCRA 282 [1988]). The purpose of an
action or suit and the law to govern it is to be determined not by the claim of the party filing the
action, made in his argument or brief, but rather by the complaint itself, its allegations and
prayer for relief. (De Tavera v. Philippine Tuberculosis Society, 112 SCRA 243 [1982]). An
examination of the complaint in the present case would show that the plaintiffs, petitioners
herein, are invoking their right to recover damages against the private respondents for their
vicarious responsibility for the injury caused by Benigno Torzuela's act of shooting and killing
Napoleon Dulay, as stated in paragraphs 1 and 2 of the complaint.
Article 2176 of the New Civil Code provides:
Art. 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties is called a quasidelict and is governed by the provisions of this Chapter.
Contrary to the theory of private respondents, there is no justification for limiting the scope of
Article 2176 of the Civil Code to acts or omissions resulting from negligence. Well-entrenched
is the doctrine that article 2176 covers not only acts committed with negligence, but also acts
which are voluntary and intentional. As far back as the definitive case of Elcano v. Hill (77
SCRA 98 [1977]), this Court already held that:
. . . Article 2176, where it refers to "fault or negligence," covers not only acts "not
punishable by law" but also acts criminal in character; whether intentional and
voluntary or negligent. Consequently, a separate civil action against the offender

in a criminal act, whether or not he is criminally prosecuted and found guilty or


acquitted, provided that the offended party is not allowed, if he is actually charged
also criminally, to recover damages on both scores, and would be entitled in such
eventuality only to the bigger award of the two, assuming the awards made in the
two cases vary. In other words, the extinction of civil liability referred to in Par. (e)
of Section 3, Rule 111, refers exclusively to civil liability founded on Article 100
of the Revised Penal Code, whereas the civil liability for the same act considered
as quasi-delict only and not as a crime is not extinguished even by a declaration in
the criminal case that the criminal act charged has not happened or has not been
committed by the accused. Briefly stated, We here hold, in reiteration of Garcia,
that culpa aquiliana includes voluntary and negligent acts which may be
punishable by law. (Emphasis supplied)
The same doctrine was echoed in the case of Andamo v. Intermediate Appellate Court (191
SCRA 195 [1990]), wherein the Court held:
Article 2176, whenever it refers to "fault or negligence," covers not only acts
criminal in character, whether intentional and voluntary or negligent.
Consequently, a civil action lies against the offender in a criminal act, whether or
not he is prosecuted or found guilty or acquitted, provided that the offended party
is not allowed, (if the tortfeasor is actually also charged criminally), to recover
damages on both scores, and would be entitled in such eventuality only to the
bigger award of the two, assuming the awards made in the two cases vary. [citing
Virata v. Ochoa, 81 SCRA 472] (Emphasis supplied)
Private respondents submit that the word "intentional" in the Andamo case is inaccurate obiter,
and should be read as "voluntary" since intent cannot be coupled with negligence as defined by
Article 365 of the Revised Penal Code. In the absence of more substantial reasons, this Court
will not disturb the above doctrine on the coverage of Article 2176.
Private respondents further aver that Article 33 of the New Civil Code applies only to injuries
intentionally committed pursuant to the ruling in Marcia v. CA (120 SCRA 193 [1983]), and
that the actions for damages allowed thereunder are ex-delicto. However, the term "physical
injuries" in Article 33 has already been construed to include bodily injuries causing death
(Capuno v. Pepsi-Cola Bottling Co. of the Philippines, 121 Phil. 638 [1965); Carandang v.
Santiago, 97 Phil. 94 [1955]). It is not the crime of physical injuries defined in the Revised
Penal Code. It includes not only physical injuries but also consummated, frustrated, and
attempted homicide (Madeja v. Caro, 126 SCRA 293 [1983]). Although in the Marcia case
(supra), it was held that no independent civil action may be filed under Article 33 where the
crime is the result of criminal negligence, it must be noted however, that Torzuela, the accused
in the case at bar, is charged with homicide, not with reckless imprudence, whereas the

defendant in Marcia was charged with reckless imprudence. Therefore, in this case, a civil
action based on Article 33 lies.
Private respondents also contend that their liability is subsidiary under the Revised Penal Code;
and that they are not liable for Torzuela's act which is beyond the scope of his duties as a
security guard. It having been established that the instant action is not ex-delicto, petitioners
may proceed directly against Torzuela and the private respondents. Under Article 2180 of the
New Civil Code as aforequoted, when an injury is caused by the negligence of the employee,
there instantly arises a presumption of law that there was negligence on the part of the master or
employer either in the selection of the servant or employee, or in supervision over him after
selection or both (Layugan v. Intermediate Appellate Court, 167 SCRA 363 [1988]). The
liability of the employer under Article 2180 is direct and immediate; it is not conditioned upon
prior recourse against the negligent employee and a prior showing of the insolvency of such
employee (Kapalaran Bus Lines v. Coronado, 176 SCRA 792 [1989]). Therefore, it is
incumbent upon the private respondents to prove that they exercised the diligence of a good
father of a family in the selection and supervision of their employee.
Since Article 2176 covers not only acts of negligence but also acts which are intentional and
voluntary, it was therefore erroneous on the part of the trial court to dismiss petitioner's
complaint simply because it failed to make allegations of attendant negligence attributable to
private respondents.
With respect to the issue of whether the complaint at hand states a sufficient cause of action, the
general rule is that the allegations in a complaint are sufficient to constitute a cause of action
against the defendants if, admitting the facts alleged, the court can render a valid judgment upon
the same in accordance with the prayer therein. A cause of action exist if the following elements
are present, namely: (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) an act or omission on the part of such defendant violative 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 (Del Bros Hotel Corporation v.
CA, 210 SCRA 33 [1992]); Development Bank of the Philippines v. Pundogar, 218 SCRA 118
[1993])
This Court finds, under the foregoing premises, that the complaint sufficiently alleged an
actionable breach on the part of the defendant Torzuela and respondents SUPERGUARD and/or
SAFEGUARD. It is enough that the complaint alleged that Benigno Torzuela shot Napoleon
Dulay resulting in the latter's death; that the shooting occurred while Torzuela was on duty; and
that either SUPERGUARD and/or SAFEGUARD was Torzuela's employer and responsible for
his acts. This does not operate however, to establish that the defendants below are liable.
Whether or not the shooting was actually reckless and wanton or attended by negligence and
whether it was actually done within the scope of Torzuela's duties; whether the private

respondents SUPERGUARD and/or SAFEGUARD failed to exercise the diligence of a good


father of a family; and whether the defendants are actually liable, are questions which can be
better resolved after trial on the merits where each party can present evidence to prove their
respective allegations and defenses. In determining whether the allegations of a complaint are
sufficient to support a cause of action, it must be borne in mind that the complaint does not have
to establish or allege the facts proving the existence of a cause of action at the outset; this will
have to be done at the trial on the merits of the case (Del Bros Hotel Corporation v. CA, supra).
If the allegations in a complaint can furnish a sufficient basis by which the complaint can be
maintained, the same should not be dismissed regardless of the defenses that may be assessed
by the defendants (Rava Dev't. Corp. v. CA, 211 SCRA 152 [1992] citing Consolidated Bank &
Trust Corporation v. Court of Appeals, 197 SCRA 663 [1991]). To sustain a motion to dismiss
for lack of cause of action, the complaint must show that the claim for relief does not exist
rather than that a claim has been defectively stated, is ambiguous, indefinite or uncertain (Azur
v. Provincial Board, 27 SCRA 50 [1969]). Since the petitioners clearly sustained an injury to
their rights under the law, it would be more just to allow them to present evidence of such
injury.
WHEREFORE, premises considered, the petition for review is hereby GRANTED. The
decision of the Court of Appeals as well as the Order of the Regional Trial Court dated April 13,
1989 are hereby REVERSED and SET ASIDE. Civil Case No. Q-89-1751 is remanded to the
Regional Trial Court for trial on the merits. This decision is immediately executory.
SO ORDERED.

FIRST DIVISION

MULTI-REALTY DEVELOPMENT G.R. No. 146726


CORPORATION,
Petitioner,
Present:
PANGANIBAN, C.J.,
- versus - Chairperson,
YNARES-SANTIAGO, AUSTRIA-MARTINEZ, CALLEJO, SR., and
THE MAKATI TUSCANY CHICO-NAZARIO, JJ.
CONDOMINIUM
CORPORATION,
Respondent.
Promulgated:
June 16, 2006
x-----------------------------------------------------------------------------------------x
DECISION
CALLEJO, SR., J.:
Before this Court is a petition for review on certiorari of the Decision[1] of the Court of
Appeals in CA-G.R. CV No. 44696 dismissing the appeal of Multi-Realty Development
Corporation on the ground of prescription.
Multi-Realty is a domestic corporation engaged in the real estate business, and the
construction and development of condominiums. It developed, among others, the Ritz Towers
Condominium, and the former Galeria de Magallanes, both built in the Municipality (now city)
of Makati.
In the 1970s, Multi-Realty constructed a 26-storey condominium at the corner of Ayala
Avenue and Fonda
Street in Makati City,
known
as
the Makati TuscanyCondominium Building (Makati Tuscany, for short). The building was one
of the Philippines first condominium projects, making it necessary for Multi-Realty and the
government agencies concerned with the project, to improve and formulate rules and
regulations governing the project as construction progressed.

Makati Tuscany consisted of 160 condominium units, with 156 units from the 2 nd to the
25th floors, and 4 penthouse units in the 26th floor. Two hundred seventy (270) parking slots
were built therein for apportionment among its unit owners. One hundred sixty-four (164) of the
parking slots were so allotted, with each unit at the 2nd to the 25 thfloors being allotted one (1)
parking slot each, and each penthouse unit with two slots. Eight (8) other parking slots, found
on the ground floor of the Makati Tuscany were designated as guest parking slots, while the
remaining 98 were to be retained by Multi-Realty for sale to unit owners who would want to
have additional slots.
According to Multi-Realty, the intention to allocate only 8 parking slots to
the Makati Tuscanys common areas was reflected in its color-coded ground floor plan, upper
basement plan and lower basement plan prepared by its architect, C.D. Arguelles and
Associates. These plans, which depict common areas as yellow zones and areas reserved for
unit owners as red zones, clearly show that, of the 270 parkings slots, 262 were designated red
zones, and only 8 first-floor parking slots were designated yellow zones or common areas.
Pursuant to Republic Act No. 4726, otherwise known as the Condominium Act, the
Makati Tuscany Condominium Corporation (MATUSCO) was organized and established to
manage the condominium units.
In 1975, Multi-Realty executed a Master Deed and Declaration of Restrictions[2] (Master
Deed, for short) of the Makati Tuscany. Sections 5 and 7 provide:
SEC. 5. Accessories to Units. To be considered as part of each unit and reserved for the
exclusive use of its owner are the balconies adjacent thereto and the parking lot or lots which are
to be assigned to each unit.
xxxx
SEC. 7. The Common Areas. The common elements or areas of the Makati Tuscany shall
comprise of all the parts of the project other than the units, including without limitation the
following:
xxxx
(d) All driveways, playgrounds, garden areas and PARKING AREAS OTHER THAN
THOSE ASSIGNED TO EACH UNIT UNDER SEC. 5 ABOVE;[3]

The Master Deed was filed with the Register of Deeds in 1977. Multi-Realty executed a Deed
of Transfer in favor of MATUSCO over these common areas. However, the Master Deed and
the Deed of Transfer did not reflect or specify the ownership of the 98 parking slots.
Nevertheless, Multi-Realty sold 26 of them in 1977 to 1986 to condominium unit buyers who
needed additional parking slots. MATUSCO did not object, and certificates of title were later
issued by the Register of Deeds in favor of the buyers. MATUSCO issued Certificates of
Management covering the condominium units and parking slots which Multi-Realty had sold.

At a meeting of MATUSCOs Board of Directors on March 13, 1979, a resolution was


approved, authorizing its President, Jovencio Cinco, to negotiate terms under which MATUSCO
would buy 36 of the unallocated parking slots from Multi-Realty. During another meeting of the
Board of Directors on June 14, 1979, Cinco informed the Board members of Multi-Realtys
proposal to sell all of the unassigned parking lots at a discounted price of P15,000.00 per lot, or
some 50% lower than the then prevailing price ofP33,000.00 each. The Board agreed to hold in
abeyance any decision on the matter to enable all its members to ponder upon the matter.
In the meantime, the fair market value of the unallocated parking slots reached P250,000.00
each, or a total of P18,000,000.00 for the 72 slots.
In September 1989, Multi-Realty, through its President, Henry Sy, who was also a member of
the Board of Directors of MATUSCO, requested that two Multi-Realty executives be allowed to
park their cars in two of Makati Tuscanys remaining 72 unallocated parking slots. In a letter,
through its counsel, MATUSCO denied the request, asserting, for the first time, that the
remaining unallocated parking slots were common areas owned by it. In another letter,
MATUSCO offered, by way of goodwill gesture, to allow Multi-Realty to use two unallocated
parking slots, which offer was rejected by the latter.
On April 26, 1990, Multi-Realty, as plaintiff, filed a complaint, docketed as Civil Case No. 901110, against MATUSCO, as defendant, for Damages and/or Reformation of Instrument with
prayer for temporary restraining order and/or preliminary injunction. The case was raffled to
Branch 59 of the Makati RTC.
Multi-Realty alleged therein that it had retained ownership of the 98 unassigned parking slots.
Considering, however, that Makati Tuscany was one of its first condominium projects in
the Philippines, this was not specified in Section 7(d) of the Master Deed since the
documentation and the terms and conditions therein were all of first impression. It was further
alleged that the mistake was discovered for the first time when MATUSCO rejected its request
to allow its (Multi-Realtys) executives to park their cars in two of the unassigned parking lots.
In its Answer with counterclaim, MATUSCO alleged that Multi-Realty had no cause of
action against it for reformation of their contract. By its own admission, Multi-Realty sold
various parking slots to third parties despite its knowledge that the parking areas, other than
those mentioned in Sec. 5 of the Master Deed, belonged to MATUSCO. MATUSCO prayed that
judgment be rendered in its favor dismissing the complaint; and, on its counterclaim, to order
the plaintiff to render an accounting of the proceeds of the sale of the parking slots other than
those described in Sec. 5 of the Master Deed; to pay actual damages equivalent to the present
market value of the parking areas other than those described in Sec. 5 of the Master Deed,
amounting to no less than P250,000.00 per slot plus reasonable rentals thereon at no less
than P400.00 per slot per month from date of sale until payment by plaintiff to defendant of the
market value of these parking areas.
After trial, the RTC rendered a decision, the dispositive portion of which reads:

Premises considered, this case is dismissed. Defendants counterclaim is, likewise,


dismissed, the same not being compulsory and no filing fee having been paid. Plaintiff is,
however, ordered to pay defendant attorneys fees in the amount of P50,000.00.
Cost against plaintiff.
SO ORDERED.[4]

The trial court ruled that Multi-Realty failed to prove any ground for the reformation of
its agreement with MATUSCO relative to the ownership of the common areas.There is no
evidence on record to prove that the defendant acted fraudulently or inequitably to the prejudice
of the plaintiff, and the latter was estopped, by deed, from claiming that it owned the common
areas. It also held that the defendant was not estopped from assailing plaintiffs ownership over
the disputed parking slots.
Multi-Realty appealed the decision to the CA via a petition under Rule 41 of the Rules of
Court, contending that:
THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT AND DISALLOWING
THE PLAINTIFF-APPELLANT FROM REFORMING THE MASTER DEED BECAUSE:
I
THERE IS VALID GROUND FOR REFORMATION OF THE MASTER DEED
SINCE THE MASTER DEED DID NOT REFLECT THE TRUE INTENTION
OF THE PARTIES REGARDING THE OWNERSHIP OF THE EXTRA
NINETY-EIGHT PARKING [SLOTS] DUE TO MISTAKE.
II
THE REGISTRATION OF THE MASTER DEED WITH THE REGISTER OF
DEEDS DID NOT MAKE PLAINTIFF-APPELLANT GUILTY OF ESTOPPEL
BY DEED.
III
THE TRIAL COURT ERRED IN FINDING THAT DEFENDANT-APPELLEE
IS NOT ESTOPPED FROM QUESTIONING THE OWNERSHIP OF
PLAINTIFF-APPELLANT OVER THE DISPUTED PARKING LOTS.[5]

In support of its appeal, Multi-Realty reiterated its contentions in the trial court, insisting
that it had adduced evidence to prove all the requisites for the reformation of Section 7(d) of the
Master Deed under Article 1359 of the New Civil Code. It was never its intention to designate
the 98 unassigned parking slots as common areas, and, as shown by the evidence on record, this
was known to MATUSCO. Under Article 1364 of the New Civil Code, an instrument may be
reformed if, due to lack of skill on the part of the drafter, the deed fails to express the true
agreement or intention of the parties therein. Since MATUSCO knew that it (Multi-Realty)
owned the 98 parking slots when the Master Deed was executed, its registration did not make

Multi-Realty guilty of estoppel by deed. In fact, MATUSCO failed to object to the sale of some
of the parking slots to third parties. It was also pointed out that Multi-Realty remained in
possession thereof.
Multi-Realty further claimed that the trial court erred in not declaring that MATUSCO
was estopped from assailing the ownership over the parking slots, as it not only conformed to
the sale of some of the unassigned parking slots but likewise failed to assail the ownership
thereon for a period of 11 years. It insisted that the sale of the said parking slots was made in
accord with law, morals and public order, and that MATUSCOs claim of ownership of the
unassigned parking slots was merely an afterthought.
MATUSCO, for its part, appealed the trial courts dismissal of its counterclaim.
On Multi-Realtys appeal, MATUSCO countered that the 270 parking slots were to be
apportioned as follows:
1 parking lot for each ordinary unit - 156
2 parking lots for each of the 4 Penthouse
Apartment Units - 8
of the remaining 106 parking lots, 34 parking lots were designated and allocated as part
of common areas which would be allocated purely for visitors, while the remaining 72
units would become part of the Condominium Corporations income-earning common
areas - 106
---270[6]

====
It was further averred that Multi-Realty, through Henry Sy, executed the Master Deed in
July 1975 and the Deed of Transfer in 1977, in which the ownership of the common areas was
unconditionally transferred to MATUSCO; Multi-Realty sold 26 of the 34 parking slots in bad
faith, which had been allocated purposely for visitors of unit owners, amounting to millions of
pesos; the action for reformation has no legal basis because the transfer of the 106 unassigned
parking slots which form part of the common areas is contrary to Section 16 [7] of the
Condominium Act.
MATUSCO further pointed out that the unassigned parking slots could be transferred
only by the affirmative votes of all the members of Multi-Realty, and that the Master Deed and
the Deed of Transfer were prepared by the latter with the assistance of its renowned lawyers. If
there was a mistake in the drafting of the Master Deed in 1975, the deed should have been
corrected in 1977 upon the execution of the Deed of Transfer. With the social and economic
status of Henry Sy, Multi-Realtys President, it is incredible that the Master Deed and the Deed
of Transfer failed to reflect the true agreement of the parties. MATUSCO went on to state that
Multi-Realty failed to adduce a preponderance of evidence to prove the essential requirements
for reformation of the questioned documents. Even if there was a mistake in drafting the deeds,
reformation could not be given due course absent evidence that defendant-appellee acted
fraudulently or inequitably.

On its claim of ownership over the unassigned parking slots, MATUSCO averred that it is
not estopped to do so because the sales thereof were illegal, and it had no knowledge that MultiRealty had been selling the same. Having acted fraudulently and illegally, Multi-Realty cannot
invoke estoppel against it.
On the RTC decision dismissing its counterclaim, MATUSCO averred that said decision
is erroneous, as it had adduced evidence to prove its entitlement to said counterclaim.
In reply, Multi-Realty averred that MATUSCOs counterclaim had already prescribed
because it was filed only in 1990, long after the period therefor had elapsed in 1981.
On August 21, 2000, the CA rendered its decision dismissing Multi-Realtys appeal on the
ground that its action below had already prescribed. The dispositive portion of the decision
reads:
WHEREFORE, foregoing premises considered, the appeal having no merit in fact and in
law, is hereby ORDERED DISMISSED, and the judgment of the trial court is MODIFIED by
deleting the award of attorneys fees not having been justified but AFFIRMED as to its Order
dismissing both the main complaint of plaintiff-appellant and the counterclaim of defendantappellant. With costs against both parties.[8]

The appellate court ruled that it was justified in dismissing Multi-Realtys appeal on the
ground of prescription as it was clothed with ample authority to review the lower courts rulings
even those not assigned as errors on appeal, especially if the consideration of the matter is
necessary to arrive at a just decision of the case, and to avoid dispensing piecemeal justice. The
CA cited the rulings of this Court in Servicewide Specialists, Inc. v. Court of Appeals,
[9]
and Dinio v. Laguesma.[10]
Multi-Realty filed a motion for reconsideration of the decision, contending that:
THIS HONORABLE COURT VIOLATED SECTION 8 OF RULE 51 OF THE RULES OF
COURT TO MRDCS SUBSTANTIAL AND UNFAIR PREJUDICE BY RESOLVING MRDCS
APPEAL ON THE GROUND OF PRESCRIPTION, EVEN THOUGH NEITHER PARTY HAD
ASSIGNED OR ARGUED AS AN ERROR THE TRIAL COURTS FAILURE TO DISMISS
THE ACTION FILED BY MRDC BELOW AS PRESCRIBED.
THIS HONORABLE COURT ERRED IN COUNTING THE RUNNING OF THE
PRESCRIPTIVE PERIOD FROM THE DATE OF EXECUTION OF THE MASTER DEED IN
1975,
BECAUSE
UNDER
ARTICLE 1150 OF THE CIVIL CODE, AND THE SUPREME COURTS DECISIONS
IN TORMON VS. CUTANDA, AND VELUZ VS. VELUZ, MRDCS PERIOD TO FILE A SUIT
FOR REFORMATION ONLY BEGAN RUNNING IN 1989, AFTER DEFENDANTAPPELLANT MAKATI TUSCANY CONDOMINIUM CORPORATIONS REPUDIATION OF
THE PARTIES TRUE AGREEMENT GAVE RISE TO MRDCS RIGHT OF ACTION.[11]

Multi-Realty further averred that the appellate court misapplied Rule 51, Section 8 of the
1997 Rules of Court as well as the ruling of this Court in the Servicewide Specialists case. It
pointed out that, when it filed its Brief, as appellee, Rule 51, Section 7 of the 1964 Rules of

Court was still in effect, under which an error which does not affect the jurisdiction over the
subject matter will not be considered unless stated in the assignment of error and properly
assigned in the Brief, as the court may pass upon plain and clerical errors only. Multi-Realty
insisted that the parties did not raise the issue of whether its action had already prescribed when
it filed its complaint in their pleadings below and in the respondents Brief. It claimed that it was
deprived of its right to due process when the appellate court denied its appeal based on a ruling
of this Court under the 1997 Rules of Civil Procedure. It insisted that the ruling of this Court
in Servicewide Specialist, Inc. was promulgated when the 1997 Rules of Civil Procedure was in
effect.
On January 18, 2001, the CA issued a Resolution denying Multi-Realtys motion for
reconsideration. The appellate court cited the ruling of this Court in Rosello-Bentir v.
Hon. Leanda,[12] to support its ruling that the action of petitioner had already prescribed when it
was filed with the RTC. Multi-Realty received its copy of said Order of denial on January 29,
2001.
Multi-Realty, now petitioner, filed the instant petition for review on certiorari, alleging
that:
THE HONORABLE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE IN A
MANNER INCONSISTENT WITH LAW, AND DEPARTED WITH UNFAIRLY
PREJUDICIAL EFFECT FROM THE USUAL COURSE OF JUDICIAL PROCEEDINGS
LAID DOWN IN SECTION 8 OF RULE 51 OF THE RULES OF COURT WHEN IT
DISMISSED MULTI-REALTYS APPEAL ON THE BASIS OF PRESCRIPTION, EVEN
THOUGH NEITHER PARTY RAISED [NOR] DISCUSSED THE TRIAL COURTS FAILURE
TO ENFORCE THE ALLEGEDLY APPLICABLE TIME BAR AS AN ERROR IN THEIR
BRIEFS.

THE HONORABLE COURT OF APPEALS DECIDED A MATTER OF SUBSTANCE IN A


MANNER PROBABLY NOT IN ACCORD WITH ARTICLE 1150 OF THE CIVIL CODE,
WHEN IT DISREGARDED THIS HONORABLE COURTS RULINGS IN TORMON V.
CUTANDA AND VELUZ V. VELUZ, AND RULED THAT THE PRESCRIPTIVE
PERIODAPPLICABLE
TO
AN
ACTION
FOR
REFORMATION
BEGINS TO RUN FROM THE DATE THE INSTRUMENT TO BE REFORMED IS
EXECUTED, RATHER THAN FROM THE DATE ON WHICH THE TRUE AGREEMENT
THE REFORMATION IS MEANT TO EXPRESS IS VIOLATED.
THE HONORABLE COURT OF APPEALS OVERLOOKED RELEVANT FACTS
SUSTAINING A DECISION ALLOWING REFORMATION OF THE MASTER DEED WHEN
IT FAILED TO REVERSE THE TRIAL COURTS DECISION AND FIND THAT MATUSCOS
CONSISTENT RECOGNITION OF, AND PARTICIPATION IN, THE SALES OF
UNALLOCATED PARKING SLOTS MADE BY MULTI-REALTY, AND ITS EFFORTS TO
BUY THE UNALLOCATED PARKING SLOTS FROM MULTI-REALTY, ESTOP IT FROM
ASSERTING TITLE TO THE UNALLOCATED PARKING SLOTS.[13]

The Court is to resolve two issues: (1) whether the CA erred in dismissing petitioners appeal on
the ground of prescription; and (2) whether petitioners action had already prescribed when it
was filed in 1990.
On the issue of prescription, petitioner asserts that under Article 1150 in relation to
Article 1144 of the New Civil Code, its action for reformation of the Master Deed accrued only
in 1989, when respondent, by overt acts, made known its intention not to abide by their true
agreement; since the complaint below was filed in 1990, the action was filed within the
prescriptive period therefor. Petitioner cites the rulings of this Court in Tormon v. Cutanda,
[14]
Veluz v. Veluz,[15] and Espaol v. Chairman, Philippine Veterans Administration [16] to bolster its
claim.
In its comment on the petition, respondent avers that, as held by this Court in RoselloBentir v. Hon. Leanda,[17] the prescriptive period for the petitioner to file its complaint
commenced in 1975, upon the execution of the Master Deed in its favor. Considering that the
action was filed only in 1990, the same, by then, had already prescribed.
On the first issue, we sustain petitioners contention that the CA erred in dismissing its
appeal solely on its finding that when petitioner filed its complaint below in 1990, the action
had already prescribed. It bears stressing that in respondents answer to petitioners complaint,
prescription was not alleged as an affirmative defense. Respondent did not raise the issue
throughout the proceedings in the RTC. Indeed, the trial court did not base its ruling on the
prescription of petitioners action; neither was this matter assigned by respondent as an error of
the RTC in its brief as defendant-appellant in the CA.
Settled is the rule that no questions will be entertained on appeal unless they have been
raised below. Points of law, theories, issues and arguments not adequately brought to the
attention of the lower court need not be considered by the reviewing court as they cannot be
raised for the first time on appeal. Basic considerations of due process impel this rule.[18]
Truly, under Section 7, Rule 51 of the 1964 Rules of Court, no error which does not affect
the jurisdiction over the subject matter will be considered unless stated in the assignment of
errors and properly argued in the brief, save as the Court, at its option, may pass upon plain
errors not specified, and clerical errors. Even at that time, the appellate court was clothed with
ample authority to review matters even if not assigned as errors in their appeal if it finds that
their consideration is necessary in arriving at a just decision of the case. [19] It had ample
authority to review and resolve matters not assigned and specified as errors by either of the
parties on appeal if it found that the matter was essential and indispensable in order to arrive at
a just decision of the case. It has broad discretionary power, in the resolution of a controversy,
to take into consideration matters on record unless the parties fail to submit to the court specific
questions for determination. Where the issues already raised also rest on other issues not
specifically presented, as long as the latter issues bear relevance and close relation to the former
and as long as they arise from matters on record, the appellate court has authority to include
them in its discussion of the controversy as well as to pass upon them. In brief, in those cases
wherein questions not particularly raised by the parties surface as necessary for the complete
adjudication of the rights and obligations of the parties and such questions fall within the issues

already framed by the parties, the interests of justice dictate that the court consider and resolve
them.[20]
When the appeals of the petitioner and that of the respondent were submitted to the CA
for decision, the 1997 Rules of Civil Procedure was already in effect. Section 8,Rule 51 of said
Rules, reads:
SEC. 8. Questions that may be decided. No error which does not affect the jurisdiction
over the subject matter or the validity of the judgment appealed from or the proceedings therein
will be considered unless stated in the assignment of errors, or closely related to or dependent on
an assigned error and properly argued in the brief, save as the court may pass upon plain errors
and clerical errors.

This provision was taken from the former rule with the addition of errors affecting the validity
of the judgment or closely related to or dependent on an assigned error.[21] The authority of the
appellate court to resolve issues not raised in the briefs of the parties is even broader.
Nevertheless, given the factual backdrop of the case, it was inappropriate for the
CA, motu proprio, to delve into and resolve the issue of whether petitioners action had already
prescribed. The appellate court should have proceeded to resolve petitioners appeal on its merits
instead of dismissing the same on a ground not raised by the parties in the RTC and even in
their pleadings in the CA.
Even if we sustain the ruling of the CA that it acted in accordance with the Rules of Court in
considering prescription in denying petitioners appeal, we find and so rule that it erred in
holding that petitioners action had already prescribed when it was filed in the RTC on April 26,
1990.
Prescription is rightly regarded as a statute of repose whose object is to suppress
fraudulent and stale claims from springing up at great distances of time and surprising the
parties or their representatives when the facts have become obscure from the lapse of time or
the defective memory or death or removal of witnesses. The essence of the statute of limitations
is to prevent fraudulent claims arising from unwarranted length of time and not to defeat actions
asserted on the honest belief that they were sufficiently submitted for judicial determination.
[22]
Our laws do not favor property rights hanging in the air, uncertain, over a long span of time.
[23]

Article 1144 of the New Civil Code provides that an action upon a written contract must be
brought within ten (10) years from the time the right of action accrues:
Art. 1144. The following actions must be brought within ten years from the time the right of
action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.

In relation thereto, Article 1150 of the New Civil Code provides that the time for
prescription of all actions, when there is no special provision which ordains otherwise, shall be
counted from the day they may be brought. It is the legal possibility of bringing the action that
determines the starting point for the computation of the period of prescription.[24]
The term right of action is the right to commence and maintain an action. In the law of
pleadings, right of action is distinguished from a cause of action in that the former is a remedial
right belonging to some persons while the latter is a formal statement of the operational facts
that give rise to such remedial right. The former is a matter of right and depends on the
substantive law while the latter is a matter of statute and is governed by the law of
procedure. The right of action springs from the cause of action, but does not accrue until all the
facts which constitute the cause of action have occurred.[25]
A cause of action must always consist of two elements: (1) the plaintiffs primary right
and the defendants corresponding primary duty, whatever may be the subject to which they
relate person, character, property or contract; and (2) the delict or wrongful act or omission of
the defendant, by which the primary right and duty have been violated.[26]
To determine when all the facts which constitute a cause of action for reformation of an
instrument may be brought and when the right of the petitioner to file such action accrues, the
second paragraph of Section 1, Rule 63, must be considered because an action for the
reformation of an instrument may be brought under said Rule:
SECTION 1. Who may file petition. Any person interested under a deed, will, contract or
other written instrument, whose rights are affected by a statute, executive order or regulation,
ordinance, or any other governmental regulation may, before breach or violation thereof, bring an
action in the appropriate Regional Trial Court to determine any question of construction or
validity arising, and for a declaration of his rights or duties, thereunder.
An action for the reformation of an instrument, to quiet title to real property or remove
clouds therefrom, or to consolidate ownership under Article 1607 of the Civil Code, may be
brought under this Rule (emphasis supplied).

Such a petition is a special civil action determinative of the rights of the parties to the
case. It is permitted on the theory that courts should be allowed to act, not only when harm is
actually done and rights jeopardized by physical wrongs or physical attack upon existing legal
relations, but also when challenge, refusal, dispute or denial thereof is made amounting to a
live controversy. The uncertainty and insecurity which may thereby be avoided may hamper or
disturb the freedom of the parties to transact business or to make improvements on their
property rights. A situation is thus created when a judicial declaration may serve to prevent a
dispute from ripening into violence or destruction.[27]
The concept and meaning of the term cause of action in proceedings for declaratory
relief, vis--vis an ordinary civil action, is broadened. It is not, as in ordinary civil action, the

wrong or delict by which the plaintiffs rights are violated, but it is extended to a mere denial,
refusal or challenge raising at least an uncertainty or insecurity which is injurious to plaintiffs
rights.[28]
For a petition for declaratory relief to prosper, the following conditions sine qua non must
concur: (1) there must be a justiciable controversy; (2) the controversy must be between persons
whose interests are adverse; (3) the party seeking declaratory relief must have a legal interest in
the controversy; and (4) the issue involved must be ripe for judicial determination.[29]
To controvert is to dispute; to deny, to oppose or contest; to take issue on. [30] The
controversy must be definite and concrete, touching on the legal relations of the parties having
adverse legal interests. It must be a real and substantial controversy admitting of specific relief
through a decree of a conclusive character as distinguished from an opinion advising what the
law would be upon a hypothetical state of facts.[31]
The fact that the plaintiffs desires are thwarted by its own doubts, or by the fears of
others, does not confer a cause of action. No defendant has wronged the plaintiff or has
threatened to do so.[32] However, the doubt becomes a justiciable controversy when it is
translated into a claim of right which is actually contested.[33] As explained by this Court, a
dispute between the parties is justiciable when there is an active antagonistic assertion of a legal
right on one side and a denial thereof on the other, concerning a real, not merely a theoretical
question or issue.[34]
In sum, one has a right of action to file a complaint/petition for reformation of an
instrument when his legal right is denied, challenged or refused by another; or when there is an
antagonistic assertion of his legal right and the denial thereof by another concerning a real
question or issue; when there is a real, definitive and substantive controversy between the
parties touching on their legal relations having adverse legal interests. This may occur shortly
after the execution of the instrument or much later.[35]
A party to an instrument is under no obligation to seek a reformation of an instrument
while he is unaware that any opposition will be made to carry out the actual agreement. [36] The
statute of limitations does not begin to run against an equitable cause of action for the
reformation of an instrument because of mistake until the mistake has been discovered or ought
to have been discovered.[37] The mere recording of a deed does not charge the grantor with
constructive notice of a mistake therein, but is to be considered with other facts and
circumstances in determining whether the grantor be charged with notice actual or constructive.
[38]

In State ex rel. Pierce County v. King County,[39] the appellate court ruled that:
In equitable actions for reformation on the ground of mistake the rule on the question of
when the period of limitation or laches commences to run is as stated by this Court in State v.
Lorenz, 22 Wash. 289, 60 P. 644, 647:

* * * that the statute did not begin to run against the right of appellant to reform the deed
[because of a mistake therein] until the assertion on the part of respondents of their adverse
claim.
In Chebalgoity v. Branum, 16 Wash.2d 251, 133 P.2d 288, 290, we said:
Nor is his right to maintain it [an action for reformation grounded on mistake] impaired by lapse
of time, for the bar of the statue of limitations does not begin to run until the assertion of an
adverse claim against the party seeking reformation.
The rule is also stated in 53 C.J. 1003, reformation of instruments, as follows:
[ 155] C. Time for Bringing Action. An action to reform an instrument may be brought as soon
as the cause of action accrues. * * * On the other hand, a party to an instrument is under no
obligation to seek its correction before his cause of action is finally vested or while he is unaware
that any opposition will be made in carrying out the actual agreement, where for a long time the
rights and duties of the parties are the same under the writing and under the terms which it is
alleged were intended, and the failure to take any action toward reformation until his right vests
or opposition is manifest does not prejudice his suit.[40]

In this case, before petitioner became aware of respondents denial of its right under their true
contract, petitioner could not be expected to file an action for the reformation of the Master
Deed. As Justice Jose BL Reyes, ratiocinated in Tormon v. Cutanda:[41]
It follows that appellants cause of action arose only when the appellees made known their
intention, by overt acts, not to abide by the true agreement; and the allegations of the complaint
establish that this happened when the appellees executed the affidavit of consolidation of the title
allegedly acquired by appellees under the fictitious pacto de retro sale. It was then, and only
then, that the appellants cause of action arose to enforce the true contract and have the apparent
one reformed or disregarded, and the period of extinctive prescription began to run against
her.Since the consolidation affidavit was allegedly made only in September 1960, and the
complaint was filed in Court the following November 1960, just two months afterward, the
action of appellant had not prescribed.[42]

The Courts ruling in the Tormon case was reiterated in Veluz v. Veluz.[43]
In the more recent case of Naga Telephone Co., Inc. v. Court of Appeals,[44] the Court
made the following declaration:
Article 1144 of the New Civil Code provides, inter alia, that an action upon a written
contract must be brought within ten (10) years from the time the right of action accrues. Clearly,
the ten (10) years period is to be reckoned from the time the right of action accrues which is not
necessarily the date of execution of the contract. As correctly ruled by respondent court, private
respondents right of action arose sometime during the latter part of 1982 or in 1983 when
according to Atty. Luis General, Jr. x x x, he was asked by (private respondents) Board of
Directors to study said contract as it already appeared disadvantageous to (private respondent) (p.
31, tsn, May 8, 1989). Private respondents cause of action to ask for reformation of said contract
should thus be considered to have arisen only in 1982 or 1983, and from 1982 to January 2,
1989 when the complaint in this case was filed, ten (10) years had not yet elapsed.[45]

This ruling was reiterated in Pilipinas Shell Petroleum Corporation v. John Bordman Ltd.
of Iloilo, Inc., [46] where the Court declared that the cause of action of respondent therein arose
upon its discovery of the short deliveries with certainty, since prior thereto, it had no indication
that it was not getting what it was paying for. The Court declared that before then, there was yet
no issue to speak of, and as such, respondent could not have brought an action against
petitioner. It was stressed that it was only after the discovery of the short deliveries that
respondent got into position to bring an action for specific performance. Thus, the Court
declared that the action was brought within the prescriptive period.[47]
In the present case, petitioner executed the Master Deed in 1975. However, petitioner had
no doubt about its ownership of the unassigned parking lots, and even sold some of
them. Respondent did not even object to these sales, and even offered to buy some of the
parking slots. Respondent assailed petitioners ownership only in 1989 and claimed ownership
of the unassigned parking slots, and it was then that petitioner discovered the error in the Master
Deed; the dispute over the ownership of the parking slots thereafter ensued. It was only then
that petitioners cause of action for a reformation of the Master Deed accrued. Since petitioner
filed its complaint in 1990, the prescriptive period had not yet elapsed.
The CA erred in relying on the ruling of this Court in Rosello-Bentir v. Hon. Leanda.[48] In that
case, the Leyte Gulf Traders, Inc. leased a parcel of land owned by YolandoRosello-Bentir. The
lease agreement was entered into on May 5, 1968 and was for a period of 20 years. The parties
therein agreed, inter alia, that:
4. IMPROVEMENT. The lessee shall have the right to erect on the leased premises any building
or structure that it may desire without the consent or approval of the Lessor x x x provided that
any improvements existing at the termination of the lease shall remain as the property of the
Lessor without right to reimbursement to the Lessee of the cost or value thereof.[49]

On May 5, 1989, the lessor Rosello-Bentir sold the property and the corporation questioned the
sale, alleging that they had a verbal agreement that the lessor has the right to equal the offers of
prospective buyers of the property. It insisted, however, that the said agreement was
inadvertently omitted in the contract. On May 15, 1992, the corporation filed a complaint for
reformation of instrument, specific performance, annulment of conditional sale and damages
with a prayer for a writ of preliminary injunction, alleging that the contract of lease failed to
reflect the true agreement of the parties.
In his answer to the complaint, the lessor alleged that the corporation was guilty of laches
for not bringing the case for reformation of the lease contract within the prescriptive period of
10 years from its execution. On December 15, 1995, the trial court issued an Order dismissing
the complaint on the ground that the action had already prescribed. Plaintiff filed a motion for
the reconsideration of the Order and, on May 10, 1996, the trial court granted the motion and set
aside its Order, this time, declaring that its Order dated December 15, 1995 dismissing the
complaint was premature and precipitate and denied the corporation its right to due process. The
trial court declared that, aside from plaintiffs cause of action for reformation of lease contract,

plaintiff had other causes of action such as specific performance, annulment of conditional sale
and damages, which must first be resolved before the trial on the merits of its case.
On appeal to the CA, the lessor alleged that the RTC committed grave abuse of discretion
amounting to excess or lack of jurisdiction in setting aside the December 15, 1995 Order of the
RTC. For its part, the CA rendered judgment dismissing the petition for certiorari on its finding
that the complaint had not yet prescribed when it was filed in the court below. The CA declared
that the prescriptive period for the action for reformation of the lease contract should be
reckoned not from the execution of the contract of lease in 1968, but from the date of the fouryear extension of the lease contract after it expired in 1988. According to the CA, the extended
period of the lease was an implied new lease within the contemplation of Article 1670 of the
New Civil Code under which provision, the other terms of the original contract were deemed
revived in the implied new lease.
However, we reversed this CA decision and declared that the action for reformation of the
lease contract was inappropriate because petitioner had already breached the deed. [50] Even
supposing that the four-year extended lease could be considered as an implied new lease under
Article 1670 of the New Civil Code, the other terms contemplated therein were only those terms
which are germane to the lessees right of continued enjoyment of the leased property. We
concluded that the prescriptive period of 10 years, as provided for in Article 1144 of the Civil
Code, applies by operation of law and not by the will of the parties, and that, therefore, the right
of action for reformation accrues from the date of the execution of the contract of lease in 1968.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of
the Court of Appeals in CA-G.R. CV No. 44696 is SET ASIDE. The Court of Appeals is
directed to resolve petitioners appeal with reasonable dispatch. No costs.
ORDERED.