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RULES 1 - 5

A. Action Commencement (Sections 3 and 5, Rule 1)

Cases:
1. Alday vs. FGU Insurance, G.R. No. 138822

THIRD DIVISION

[G.R. No. 138822. January 23, 2001.]

EVANGELINE ALDAY, petitioner, vs. FGU INSURANCE


CORPORATION, respondent.

Cruz Durian Alday & Cruz-Matters for petitioner.


Jacinto Jimenez for respondent.

SYNOPSIS

On 5 May 1989, respondent FGU Insurance Corporation filed a complaint with


the Regional Trial Court of Makati alleging that petitioner Evangeline K. Alday
owed it P114,650.76 representing unliquidated cash advances, unremitted costs
of her work as an insurance agent for respondent. Petitioner filed her answer and
by way of counterclaim, asserted her right for the payment of P104,893.45,
representing direct commissions, profit commissions, and contingent bonuses
earned from 1 July 1986 to 7 December 1986, and for accumulated premium,
reserves amounting to P500,000. In addition, petitioner prayed for attorney's
fees, litigation expenses, moral damages and exemplary damages for the
allegedly unfounded action filed by respondent. On 11 April 1990, respondent
filed a motion top dismiss petitioner's counterclaim, contending that the trial court
never acquired jurisdiction over the same because of the non-payment of docket
fees by petitioner. In response, petitioner asked the trial court to declare her
counterclaim as exempt from payment of docket fees since it is compulsory and
that respondent be declared in default for having failed to answer such
counterclaim. The trial court granted respondent's motion to dismiss petitioner's
counterclaim and consequently denied petitioner's motion. The court found
petitioner's counterclaim to be merely permissive in nature and held that
petitioner's failure to pay docket fees prevented the court from acquiring
jurisdiction over the same. The Court of Appeals sustained the trial court's
findings. Hence, this petition.
cHCIDE
The Court ruled that petitioner's counterclaim for commissions, bonuses, and
accumulated premium reserves is merely permissive. The evidence required to
prove petitioner's claim differred from that needed to establish respondent's
demands for the recovery of cash accountabilities from petitioner, such as cash
advances and costs of premium. The recovery of respondent's claim is not
contingent or dependent upon establishing petitioner's counterclaim, such that
conducting separate trials will not result in the substantial duplicate of the time
and effort of the court and the parties. However, petitioner's claims for damages,
allegedly suffered as a result of the filing by respondent of its complaint, are
compulsory. There is no need for petitioner to pay docket fees for her compulsory
counterclaim. On the other hand, in order for the trial court to acquire jurisdiction
over her permissive counterclaim, petitioner is bound to pay the prescribed
docket fees. There is obviously no need to file an answer until petitioner has paid
the prescribed docket fees for only then shall the court acquire jurisdiction over
such claim. Meanwhile, the compulsory counterclaim of petitioner for damages
based on the filing by respondent of an allegedly unfounded and malicious suit
need not be answered since it is inseparable from the claims of respondent. If
respondent will not answer the compulsory counterclaim of petitioner, it would
merely result in the former pleading the same facts raised in its complaint. ADaSEH

SYLLABUS

1. REMEDIAL LAW; COURTS; JURISDICTION; ESTOPPEL; NOT APPLICABLE


WHEN THE PARTY ASSAILING THE TRIAL COURT'S JURISDICTION RAISED
IT WITH THE TRIAL COURT ITSELF EVEN BEFORE THE PRESENTATION
OF ANY EVIDENCE. — Estoppel by laches arises from the negligence or
omission to assert a right within a reasonable time, warranting a presumption that
the party entitled to assert it either has abandoned or declined to assert it. In the
case at bar, respondent cannot be considered as estopped from assailing the
trial court's jurisdiction over petitioner's counterclaim since this issue was raised
by respondent with the trial court itself — the body where the action is pending —
even before the presentation of any evidence by the parties and definitely, way
before any judgment could be rendered by the trial court. cEaDTA

2. ID.; ID.; ID.; ID.; APPLICABLE WHEN THE PARTY RAISING IT HAS
ACTIVELY TAKEN PART IN THE VERY PROCEEDING WHICH HE
QUESTIONS; CASE AT BAR. — Meanwhile, respondent questions the
jurisdiction of the Court of Appeals over the appeal filed by petitioner from the 18
September 1990 and 28 February 1991 orders of the trial court. It is significant to
note that this objection to the appellate court's jurisdiction is raised for the first
time before this Court; respondent never having raised this issue before the first
time before the appellate court. Although the lack of jurisdiction of a court may be
raised at any stage of the action, a party may be estopped from raising such
question if he has actively taken part in the very proceedings which he questions,
belatedly objecting to the court's jurisdiction in the event that that the judgment or
order subsequently rendered is adverse to him. In this case, respondent actively
took part in the proceedings before the Court of Appeals by filing its appellee's
brief with the same. Its participation, when taken together with is failure to object
to the appellate court's jurisdiction during the entire duration of the proceedings
before such court, demonstrates a willingness to abide by the resolution of the
case by such tribunal and accordingly, respondent is now most decidedly
estopped from objecting to the Court of Appeals' assumption of jurisdiction over
petitioner's appeal.
3. ID.; CIVIL PROCEDURE; PLEADINGS; COUNTERCLAIM; COMPULSORY
COUNTERCLAIM; DEFINED. — A compulsory counterclaim is one which, being
cognizable by the regular courts of justice, arises out of or is connected with the
transaction or occurrence constituting the subject matter of the opposing party's
claim and does not require for its adjudication the presence of third parties of
whom the court cannot acquire jurisdiction. caSEAH

4. ID.; ID.; ID.; ID.; TESTS WHETHER IT IS COMPULSORY OR PERMISSIVE.


— In Valencia v. Court of Appeals, this Court capsulized the criteria or tests that
may be used in determining whether a counterclaim is compulsory or permissive,
summarized as follows: 1. Are the issue of fact and law raised by the claim and
counterclaim largely the same? 2. Would res judicata bar a subsequent suit on
defendant's claim absent the compulsory counterclaim rule? 3. Will substantially
the same evidencesupport or refute plaintiff's claim as well as defendant's
counterclaim? 4. Is there any logical relation between the claim and the
counterclaim? Another test, applied in the recent case of Quintanilla v. Court of
Appeals, is the "compelling test of compulsoriness" which requires "a logical
relationship between the claim and counterclaim, that is, where conducting
separate trials of the respective claims of the parties would entail a substantial
duplication of effort and time by the parties and the court."
5. ID.; ID.; ID.; ID.; PERMISSIBLE COUNTERCLAIM; DEFENDANT IS BOUND
TO PAY THE PRESCRIBED DOCKET FEES IN ORDER FOR THE TRIAL
COURT TO ACQUIRE JURISDICTION. — Petitioner's counterclaim for
commission, bonuses, and accumulated premium reserves is merely permissive.
The evidence required to prove petitioner's claims differs from that needed to
establish respondent's demands for the recovery of cash accountabilities from
petitioner, such as cash advances and costs of premiums. The recovery of
respondent's claims is not contingent or dependent upon establishing petitioner's
counterclaim, such that conducting separate trials will not result in the substantial
duplication of the time and effort of the court and the parties. One would search
the records in vain for a logical connection between the parties' claims. This
conclusion is further reinforced by petitioner's own admissions since she
declared in her answer that respondent's cause of action, unlike her own, was
not based upon the Special Agent's Contract. . . . In order for the trial court to
acquire jurisdiction over her permissive counterclaim, petitioner is bound to pay
the prescribed docket fees. EHTIDA

6. ID.; ID.; ID.; ID.; COMPULSORY COUNTERCLAIM; NO NEED FOR


DEFENDANT TO PAY DOCKET FEES. — [P]etitioner's claims for damages,
allegedly suffered as a result of the filing by respondent of its complaint, are
compulsory. There is no need for petitioner to pay docket fees for her compulsory
counterclaim.
7. ID.; LEGAL FEES; RULE ON PAYMENT OF FILING FEES. — The rule on the
payment of filing fees has been laid down by the Court in the case of Sun
Insurance Office, Ltd. v. Hon. Maximiano Asuncion — 1. It is not simply the filing
of the complaint or appropriate initiatory pleading, but the payment of the
prescribed docket fee, that vests a trial court with jurisdiction over the subject-
matter or nature of the action. Where the filing of the initiatory pleading is not
accompanied by payment of the docket fee, the court may allow payment of the
fee within a reasonable time but in no case beyond the applicable prescriptive or
reglementary period. 2. The same rule applies to permissive counterclaims, third-
party claims and similar pleadings, which shall not be considered filed until and
unless the filing fee prescribed therefor is paid. The court may allow payment of
said fee within a reasonable time but also in no case beyond its applicable
prescriptive or reglementary period. 3. Where the trial court acquires jurisdiction
over a claim by the filing of the appropriate pleading and payment of the
prescribed filing fee but, subsequently, the judgment awards a claim not specified
in the pleading, or if specified the same has been left for determination by the
court, the additional filing fee therefor shall constitute a lien on the judgment. It
shall be the responsibility of the Clerk of Court or his duly authorized deputy to
enforce said lien and assess and collect the additional fee. cTECIA

8. ID.; ID.; ID.; NON-PAYMENT DOES NOT RESULT IN THE AUTOMATIC


DISMISSAL OF THE CASE PROVIDED THE DOCKET FEES ARE PAID
WITHIN THE APPLICABLE PRESCRIPTIVE OR REGLEMENTARY PERIOD. —
The above mentioned ruling is Sun Insurance has been reiterated in the recent
case of Suson v. Court of Appeals. InSuson, the Court explained that although
the payment of the prescribed docket fees is a jurisdictional requirement, its non-
payment does not result in the automatic dismissal of the case provided the
docket fees are paid within the applicable prescriptive or reglementary period.
9. ID.; ID.; ID.; ID.; APPLICABLE IN CASE AT BAR. — Coming now to the case
at bar, it has not been alleged by respondent and there is nothing in the records
to show that petitioner has attempted to evade the payment of the proper docket
fees for her permissive counterclaim. As a matter of fact, after respondent filed its
motion to dismiss petitioner's counterclaim based on her failure to pay docket
fees, petitioner immediately filed a motion with the trial court, asking it to declare
her counterclaim as compulsory in nature and therefore exempt from docket fees
and, in addition, to declare that respondent was in default for its failure to answer
her counterclaim. However, the trial court dismissed petitioner's counterclaim.
Pursuant to this Court's ruling in Sun Insurance, the trial court should have
instead given petitioner a reasonable time, but in no case beyond the applicable
prescriptive or reglementary period, to pay the filing fees for her permissive
counterclaim.
10. ID.; CIVIL PROCEDURE; PLEADINGS; COUNTERCLAIM; PERMISSIVE
COUNTERCLAIM; NO NEED TO FILE AN ANSWER UNTIL THE DEFENDANT
HAS PAID THE PRESCRIBED DOCKET FEES. — Insofar as the permissive
counterclaim of petitioner is concerned, there is obviously no need to file an
answer until petitioner has paid the prescribed docket fees for only then shall the
court acquire jurisdiction over such claim. ASHICc

11. ID.; ID.; ID.; ID.; COMPULSORY COUNTERCLAIM; DAMAGES BASED ON


THE FILING OF AN ALLEGEDLY UNFOUNDED AND MALICIOUS SUIT NEED
NOT BE ANSWERED. — The compulsory counterclaim of petitioner for
damages based on the filing by respondent of an allegedly unfounded and
malicious suit need not be answered since it is inseparable from the claims of
respondent. If respondent were to answer the compulsory counterclaim of
petitioner, it would merely result in the former pleading the same facts raised in
its complaint.

DECISION

GONZAGA-REYES, J : p

On 5 May 1989, respondent FGU Insurance Corporation filed a complaint with


the Regional Trial Court of Makati, 1 alleging that petitioner Evangeline K. Alday
owed it P114,650.76, representing unliquidated cash advances, unremitted costs
of premiums and other charges incurred by petitioner in the course of her work
as an insurance agent for respondent. 2 Respondent also prayed for exemplary
damages, attorney's fees, and costs of suit. 3 Petitioner filed her answer and by
way of counterclaim, asserted her right for the payment of P104,893.45,
representing direct commissions, profit commissions and contingent bonuses
earned from 1 July 1986 to 7 December 1986, and for accumulated premium
reserves amounting to P500,000.00. In addition, petitioner prayed for attorney's
fees, litigation expenses, moral damages and exemplary damages for the
allegedly unfounded action filed by respondent. 4 On 23 August 1989, respondent
filed a "Motion to Strike Out Answer With Compulsory Counterclaim And To
Declare Defendant In Default" because petitioner's answer was allegedly filed out
of time. 5 However, the trial court denied the motion on 25 August 1989 and
similarly rejected respondent's motion for reconsideration on 12 March 1990. 6 A
few weeks later, on 11 April 1990, respondent filed a motion to dismiss
petitioner's counterclaim, contending that the trial court never acquired
jurisdiction over the same because of the non-payment of docket fees by
petitioner. 7 In response, petitioner asked the trial court to declare her
counterclaim as exempt from payment of docket fees since it is compulsory and
that respondent be declared in default for having failed to answer such
counterclaim. 8
In its 18 September 1990 Order, the trial court 9 granted respondent's motion to
dismiss petitioner's counterclaim and consequently, denied petitioner's motion.
The court found petitioner's counterclaim to be merely permissive in nature and
held that petitioner's failure to pay docket fees prevented the court from acquiring
jurisdiction over the same. 10 The trial court similarly denied petitioner's motion for
reconsideration on 28 February 1991. DCcAIS

On 23 December 1998, the Court of Appeals 11 sustained the trial court, finding
that petitioner's own admissions, as contained in her answer, show that her
counterclaim is merely permissive. The relevant portion of the appellate court's
decision 12 is quoted herewith —
Contrary to the protestations of appellant, mere reading of the
allegations in the answer a quo will readily show that her counterclaim
can in no way be compulsory. Take note of the following numbered
paragraphs in her answer:
"(14) That, indeed, FGU's cause of action which is not supported
by any document other than the self-serving 'Statement of
Account' dated March 28,1988 . . .
(15) That it should be noted that the cause of action of FGU is not
the enforcement of the Special Agent's Contract but the alleged
cash accountabilities which are not based on written agreement . .
..
xxx xxx xxx
(19) . . . A careful analysis of FGU's three-page complaint will
show that its cause of action is not for specific performance or
enforcement of the Special Agent's Contract rather, it is for the
payment of the alleged cash accountabilities incurred by
defendant during the period form [sic] 1975 to 1986 which claim is
executory and has not been ratified. It is the established rule that
unenforceable contracts, like this purported money claim of FGU,
cannot be sued upon or enforced unless ratified, thus it is as if
they have no effect. . . . ."
To support the heading "Compulsory Counterclaim" in her answer and
give the impression that the counterclaim is compulsory appellant
alleged that "FGU has unjustifiably failed to remit to defendant despite
repeated demands in gross violation of their Special Agent's Contract . .
. ." The reference to said contract was included purposely to mislead.
While on one hand appellant alleged that appellee's cause of action had
nothing to do with the Special Agent's Contract, on the other hand, she
claim that FGU violated said contract which gives rise of [sic] her cause
of action. Clearly, appellants cash accountabilities cannot be the offshoot
of appellee's alleged violation of the aforesaid contract.
On 19 May 1999, the appellate court denied petitioner's motion for
reconsideration, 13 giving rise to the present petition.
Before going into the substantive issues, the Court shall first dispose of some
procedural matters raised by the parties. Petitioner claims that respondent is
estopped from questioning her non-payment of docket fees because it did not
raise this particular issue when it filed its first motion — the "Motion to Strike out
Answer With Compulsory Counterclaim And To Declare Defendant In Default" —
with the trial court; rather, it was only nine months after receiving petitioner's
answer that respondent assailed the trial court's lack of jurisdiction over
petitioner's counterclaims based on the latter's failure to pay docket
fees. 14 Petitioner's position is unmeritorious. Estoppel by laches arises from the
negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned or declined
to assert it. 15 In the case at bar, respondent cannot be considered as estopped
from assailing the trial court's jurisdiction over petitioner's counterclaim since this
issue was raised by respondent with the trial court itself — the body where the
action is pending — even before the presentation of any evidence by the parties
and definitely, way before any judgment could be rendered by the trial court. DaTEIc

Meanwhile, respondent questions the jurisdiction of the Court of Appeals over the
appeal filed by petitioner from the 18 September 1990 and 28 February 1991
orders of the trial court. It is significant to note that this objection to the appellate
court's jurisdiction is raised for the first time before this Court; respondent never
having raised this issue before the appellate court. Although the lack of
jurisdiction of a court may be raised at any stage of the action, a party may be
estopped from raising such questions if he has actively taken part in the very
proceedings which he questions, belatedly objecting to the court's jurisdiction in
the event that the judgment or order subsequently rendered is adverse to
him. 16 In this case, respondent actively took part in the proceedings before the
Court of Appeals by filing its appellee's brief with the same. 17 Its participation,
when taken together with its failure to object to the appellate court's jurisdiction
during the entire duration of the proceedings before such court, demonstrates a
willingness to abide by the resolution of the case by such tribunal and
accordingly, respondent is now most decidedly estopped from objecting to the
Court of Appeals' assumption of jurisdiction over petitioner's appeal. 18
The basic issue for resolution in this case is whether or not the counterclaim of
petitioner is compulsory or permissive in nature. A compulsory counterclaim is
one which, being cognizable by the regular courts of justice, arises out of or is
connected with the transaction or occurrence constituting the subject matter of
the opposing party's claim and does not require for its adjudication the presence
of third parties of whom the court cannot acquire jurisdiction. 19

In Valencia v. Court of Appeals, 20 this Court capsulized the criteria or tests that
may be used in determining whether a counterclaim is compulsory or permissive,
summarized as follows:
1. Are the issues of fact and law raised by the claim and counterclaim
largely the same?
2. Would res judicata bar a subsequent suit on defendant's claim absent
the compulsory counterclaim rule?
3. Will substantially the same evidence support or refute plaintiff's claim
as well as defendant's counterclaim?
4. Is there any logical relation between the claim and the counterclaim?
Another test, applied in the more recent case of Quintanilla v. Court of
Appeals, 21 is the "compelling test of compulsoriness" which requires "a logical
relationship between the claim and counterclaim, that is, where conducting
separate trials of the respective claims of the parties would entail a substantial
duplication of effort and time by the parties and the court."
As contained in her answer, petitioner's counterclaims are as follows:
(20) That defendant incorporates and repleads by reference all the
foregoing allegations as may be material to her Counterclaim against
FGU.
(21) That FGU is liable to pay the following just, valid and legitimate
claims of defendant:
(a) the sum of at least P104,893.45 plus maximum interest
thereon representing, among others, direct commissions, profit
commissions and contingent bonuses legally due to defendant;
and
(b) the minimum amount of P500,000.00 plus the maximum
allowable interest representing defendant's accumulated premium
reserve for 1985 and previous years,
which FGU has unjustifiably failed to remit to defendant despite repeated
demands in gross violation of their Special Agent's Contract and in
contravention of the principle of law that "every person must, in the
exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith."
(22) That as a result of the filing of this patently baseless, malicious and
unjustified Complaint, and FGU's unlawful, illegal and vindictive
termination of their Special Agent's Contract, defendant was
unnecessarily dragged into this litigation and to defense [sic] her side
and assert her rights and claims against FGU, she was compelled to hire
the services of counsel with whom she agreed to pay the amount of
P30,000.00 as and for attorney's fees and stands to incur litigation
expenses in the amount estimated to at least P20,000.00 and for which
FGU should be assessed and made liable to pay defendant. IEDHAT

(23) That considering further the malicious and unwarranted action of


defendant in filing this grossly unfounded action, defendant has suffered
and continues to suffer from serious anxiety, mental anguish, fright and
humiliation. In addition to this, defendant's name, good reputation and
business standing in the insurance business as well as in the community
have been besmirched and for which FGU should be adjudged and
made liable to pay moral damages to defendant in the amount of
P300,000.00 as minimum.
(24) That in order to discourage the filing of groundless and malicious
suits like FGU's Complaint, and by way of serving [as] an example for
the public good, FGU should be penalized and assessed exemplary
damages in the sum of P100,000.00 or such amount as the Honorable
Court may deem warranted under the circumstances. 22
Tested against the abovementioned standards, petitioner's counterclaim for
commissions, bonuses, and accumulated premium reserves is merely
permissive. The evidence required to prove petitioner's claims differs from that
needed to establish respondent's demands for the recovery of cash
accountabilities from petitioner, such as cash advances and costs of premiums.
The recovery of respondent's claims is not contingent or dependent upon
establishing petitioner's counterclaim, such that conducting separate trials will not
result in the substantial duplication of the time and effort of the court and the
parties. One would search the records in vain for a logical connection between
the parties' claims. This conclusion is further reinforced by petitioner's own
admissions since she declared in her answer that respondent's cause of action,
unlike her own, was not based upon the Special Agent's Contract. 23 However,
petitioner's claims for damages, allegedly suffered as a result of the filing by
respondent of its complaint, are compulsory. 24
There is no need for petitioner to pay docket fees for her compulsory
counterclaim. 25 On the other hand, in order for the trial court to acquire
jurisdiction over her permissive counterclaim, petitioner is bound to pay the
prescribed docket fees. 26 The rule on the payment of filing fees has been laid
down by the Court in the case ofSun Insurance Office, Ltd. v. Hon. Maximiano
Asuncion 27
1. It is not simply the filing of the complaint or appropriate initiatory
pleading, but the payment of the prescribed docket fee, that vests a trial
court with jurisdiction over the subject-matter or nature of the action.
Where the filing of the initiatory pleading is not accompanied by payment
of the docket fee, the court may allow payment of the fee within a
reasonable time but in no case beyond the applicable prescriptive or
reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims
and similar pleadings, which shall not be considered filed until and
unless the filing fee prescribed therefor is paid. The court may allow
payment of said fee within a reasonable time but also in no case beyond
its applicable prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of
the appropriate pleading and payment of the prescribed filing fee but,
subsequently, the judgment awards a claim not specified in the pleading,
or if specified the same has been left for determination by the court, the
additional filing fee therefor shall constitute a lien on the judgment. It
shall be the responsibility of the Clerk of Court or his duly authorized
deputy to enforce said lien and assess and collect the additional fee.
The above mentioned ruling in Sun Insurance has been reiterated in the recent
case of Suson v. Court of Appeals. 28 In Suson, the Court explained that although
the payment of the prescribed docket fees is a jurisdictional requirement, its non-
payment does not result in the automatic dismissal of the case provided the
docket fees are paid within the applicable prescriptive or reglementary period.
Coming now to the case at bar, it has not been alleged by respondent and there
is nothing in the records to show that petitioner has attempted to evade the
payment of the proper docket fees for her permissive counterclaim. As a matter
of fact, after respondent filed its motion to dismiss petitioner's counterclaim based
on her failure to pay docket fees, petitioner immediately filed a motion with the
trial court, asking it to declare her counterclaim as compulsory in nature and
therefore exempt from docket fees and, in addition, to declare that respondent
was in default for its failure to answer her counterclaim. 29 However, the trial court
dismissed petitioner's counterclaim. Pursuant to this Court's ruling in Sun
Insurance, the trial court should have instead given petitioner a reasonable time,
but in no case beyond the applicable prescriptive or reglementary period, to pay
the filing fees for her permissive counterclaim.
Petitioner asserts that the trial court should have declared respondent in default
for having failed to answer her counterclaim. 30 Insofar as the permissive
counterclaim of petitioner is concerned, there is obviously no need to file an
answer until petitioner has paid the prescribed docket fees for only then shall the
court acquire jurisdiction over such claim. 31 Meanwhile, the compulsory
counterclaim of petitioner for damages based on the filing by respondent of an
allegedly unfounded and malicious suit need not be answered since it is
inseparable from the claims of respondent. If respondent were to answer the
compulsory counterclaim of petitioner, it would merely result in the former
pleading the same facts raised in its complaint. 32
WHEREFORE, the assailed Decision of the Court of Appeals promulgated on 23
December 1998 and its 19 May 1999 Resolution are hereby MODIFIED. The
compulsory counterclaim of petitioner for damages filed in Civil Case No. 89-
3816 is ordered REINSTATED. Meanwhile, the Regional Trial Court of Makati
(Branch 134) is ordered to require petitioner to pay the prescribed docket fees for
her permissive counterclaim (direct commissions, profit commissions, contingent
bonuses and accumulated premium reserves), after ascertaining that the
applicable prescriptive period has not yet set in. 33
SO ORDERED.
(Alday v. FGU Insurance Corp., G.R. No. 138822, [January 23, 2001], 402
|||

PHIL 962-976)

2. Korea Technologies vs. Lerma, G.R. No. 143581

SECOND DIVISION

[G.R. No. 143581. January 7, 2008.]

KOREA TECHNOLOGIES CO., LTD., petitioner, vs. HON.


ALBERTO A. LERMA, in his capacity as Presiding Judge of
Branch 256 of Regional Trial Court of Muntinlupa City, and
PACIFIC GENERAL STEEL MANUFACTURING
CORPORATION, respondents.

DECISION
VELASCO, JR., J : p

In our jurisdiction, the policy is to favor alternative methods of resolving


disputes, particularly in civil and commercial disputes. Arbitration along with
mediation, conciliation, and negotiation, being inexpensive, speedy and less
hostile methods have long been favored by this Court. The petition before us
puts at issue an arbitration clause in a contract mutually agreed upon by the
parties stipulating that they would submit themselves to arbitration in a foreign
country. Regrettably, instead of hastening the resolution of their dispute, the
parties wittingly or unwittingly prolonged the controversy.
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean
corporation which is engaged in the supply and installation of Liquefied
Petroleum Gas (LPG) Cylinder manufacturing plants, while private respondent
Pacific General Steel Manufacturing Corp. (PGSMC) is a domestic
corporation.
On March 5, 1997, PGSMC and KOGIES executed a
Contract 1 whereby KOGIES would set up an LPG Cylinder Manufacturing
Plant in Carmona, Cavite. The contract was executed in the Philippines. On
April 7, 1997, the parties executed, in Korea, an Amendment for Contract No.
KLP-970301 dated March 5, 1997 2amending the terms of payment. The
contract and its amendment stipulated that KOGIES will ship the machinery
and facilities necessary for manufacturing LPG cylinders for which PGSMC
would pay USD 1,224,000. KOGIES would install and initiate the operation of
the plant for which PGSMC bound itself to pay USD 306,000 upon the plant's
production of the 11-kg. LPG cylinder samples. Thus, the total contract price
amounted to USD 1,530,000.
On October 14, 1997, PGSMC entered into a Contract of Lease 3 with
Worth Properties, Inc. (Worth) for use of Worth's 5,079-square meter property
with a 4,032-square meter warehouse building to house the LPG
manufacturing plant. The monthly rental was PhP322,560 commencing on
January 1, 1998 with a 10% annual increment clause. Subsequently, the
machineries, equipment, and facilities for the manufacture of LPG cylinders
were shipped, delivered, and installed in the Carmona plant. PGSMC paid
KOGIES USD 1,224,000.
However, gleaned from the Certificate 4 executed by the parties on
January 22, 1998, after the installation of the plant, the initial operation could
not be conducted as PGSMC encountered financial difficulties affecting the
supply of materials, thus forcing the parties to agree that KOGIES would be
deemed to have completely complied with the terms and conditions of the
March 5, 1997 contract. SDHacT
For the remaining balance of USD306,000 for the installation and initial
operation of the plant, PGSMC issued two postdated checks: (1) BPI Check
No. 0316412 dated January 30, 1998 for PhP4,500,000; and (2) BPI Check
No. 0316413 dated March 30, 1998 for PhP4,500,000. 5
When KOGIES deposited the checks, these were dishonored for the
reason "PAYMENT STOPPED." Thus, on May 8, 1998, KOGIES sent a
demand letter 6 to PGSMC threatening criminal action for violation of Batas
Pambansa Blg. 22 in case of nonpayment. On the same date, the wife of
PGSMC's President faxed a letter dated May 7, 1998 to KOGIES' President
who was then staying at a Makati City hotel. She complained that not only did
KOGIES deliver a different brand of hydraulic press from that agreed upon but
it had not delivered several equipment parts already paid for.
On May 14, 1998, PGSMC replied that the two checks it issued
KOGIES were fully funded but the payments were stopped for reasons
previously made known to KOGIES. 7
On June 1, 1998, PGSMC informed KOGIES that PGSMC was
canceling their Contract dated March 5, 1997 on the ground that KOGIES had
altered the quantity and lowered the quality of the machineries and equipment
it delivered to PGSMC, and that PGSMC would dismantle and transfer the
machineries, equipment, and facilities installed in the Carmona plant. Five
days later, PGSMC filed before the Office of the Public Prosecutor an
Affidavit-Complaint for Estafa docketed as I.S. No. 98-03813 against Mr. Dae
Hyun Kang, President of KOGIES.
On June 15, 1998, KOGIES wrote PGSMC informing the latter that
PGSMC could not unilaterally rescind their contract nor dismantle and transfer
the machineries and equipment on mere imagined violations by KOGIES. It
also insisted that their disputes should be settled by arbitration as agreed
upon in Article 15, the arbitration clause of their contract.
On June 23, 1998, PGSMC again wrote KOGIES reiterating the
contents of its June 1, 1998 letter threatening that the machineries,
equipment, and facilities installed in the plant would be dismantled and
transferred on July 4, 1998. Thus, on July 1, 1998, KOGIES instituted an
Application for Arbitration before the Korean Commercial Arbitration Board
(KCAB) in Seoul, Korea pursuant to Art. 15 of the Contract as amended.
On July 3, 1998, KOGIES filed a Complaint for Specific Performance,
docketed as Civil Case No. 98-117 8 against PGSMC before the Muntinlupa
City Regional Trial Court (RTC). The RTC granted a temporary restraining
order (TRO) on July 4, 1998, which was subsequently extended until July 22,
1998. In its complaint, KOGIES alleged that PGSMC had initially admitted that
the checks that were stopped were not funded but later on claimed that it
stopped payment of the checks for the reason that "their value was not
received" as the former allegedly breached their contract by "altering the
quantity and lowering the quality of the machinery and equipment" installed in
the plant and failed to make the plant operational although it earlier certified to
the contrary as shown in a January 22, 1998 Certificate. Likewise, KOGIES
averred that PGSMC violated Art. 15 of their Contract, as amended, by
unilaterally rescinding the contract without resorting to arbitration. KOGIES
also asked that PGSMC be restrained from dismantling and transferring the
machinery and equipment installed in the plant which the latter threatened to
do on July 4, 1998.
On July 9, 1998, PGSMC filed an opposition to the TRO arguing that
KOGIES was not entitled to the TRO since Art. 15, the arbitration clause, was
null and void for being against public policy as it ousts the local courts of
jurisdiction over the instant controversy.
On July 17, 1998, PGSMC filed its Answer with Compulsory
Counterclaim 9 asserting that it had the full right to dismantle and transfer the
machineries and equipment because it had paid for them in full as stipulated
in the contract; that KOGIES was not entitled to the PhP9,000,000 covered by
the checks for failing to completely install and make the plant operational; and
that KOGIES was liable for damages amounting to PhP4,500,000 for altering
the quantity and lowering the quality of the machineries and equipment.
Moreover, PGSMC averred that it has already paid PhP2,257,920 in rent
(covering January to July 1998) to Worth and it was not willing to further
shoulder the cost of renting the premises of the plant considering that the LPG
cylinder manufacturing plant never became operational. EcaDCI

After the parties submitted their Memoranda, on July 23, 1998, the RTC
issued an Order denying the application for a writ of preliminary injunction,
reasoning that PGSMC had paid KOGIES USD 1,224,000, the value of the
machineries and equipment as shown in the contract such that KOGIES no
longer had proprietary rights over them. And finally, the RTC held that Art. 15
of the Contract as amended was invalid as it tended to oust the trial court or
any other court jurisdiction over any dispute that may arise between the
parties. KOGIES' prayer for an injunctive writ was denied. 10 The dispositive
portion of the Order stated:
WHEREFORE, in view of the foregoing consideration, this Court
believes and so holds that no cogent reason exists for this Court to
grant the writ of preliminary injunction to restrain and refrain defendant
from dismantling the machineries and facilities at the lot and building of
Worth Properties, Incorporated at Carmona, Cavite and transfer the
same to another site: and therefore denies plaintiff's application for a
writ of preliminary injunction.
On July 29, 1998, KOGIES filed its Reply to Answer and Answer to
Counterclaim. 11 KOGIES denied it had altered the quantity and lowered the
quality of the machinery, equipment, and facilities it delivered to the plant. It
claimed that it had performed all the undertakings under the contract and had
already produced certified samples of LPG cylinders. It averred that whatever
was unfinished was PGSMC's fault since it failed to procure raw materials due
to lack of funds. KOGIES, relying on Chung Fu Industries (Phils.), Inc. v.
Court of Appeals, 12 insisted that the arbitration clause was without question
valid.
After KOGIES filed a Supplemental Memorandum with Motion to
Dismiss 13 answering PGSMC's memorandum of July 22, 1998 and seeking
dismissal of PGSMC's counterclaims, KOGIES, on August 4, 1998, filed its
Motion for Reconsideration 14 of the July 23, 1998 Order denying its
application for an injunctive writ claiming that the contract was not merely for
machinery and facilities worth USD 1,224,000 but was for the sale of an "LPG
manufacturing plant" consisting of "supply of all the machinery and facilities"
and "transfer of technology" for a total contract price of USD 1,530,000 such
that the dismantling and transfer of the machinery and facilities would result in
the dismantling and transfer of the very plant itself to the great prejudice of
KOGIES as the still unpaid owner/seller of the plant. Moreover, KOGIES
points out that the arbitration clause under Art. 15 of the Contract as amended
was a valid arbitration stipulation under Art. 2044 of the Civil Code and as
held by this Court in Chung Fu Industries (Phils.), Inc. 15
In the meantime, PGSMC filed a Motion for Inspection of Things 16 to
determine whether there was indeed alteration of the quantity and lowering of
quality of the machineries and equipment, and whether these were properly
installed. KOGIES opposed the motion positing that the queries and issues
raised in the motion for inspection fell under the coverage of the arbitration
clause in their contract.
On September 21, 1998, the trial court issued an Order (1) granting
PGSMC's motion for inspection; (2) denying KOGIES' motion for
reconsideration of the July 23, 1998 RTC Order; and (3) denying KOGIES'
motion to dismiss PGSMC's compulsory counterclaims as these
counterclaims fell within the requisites of compulsory counterclaims.
On October 2, 1998, KOGIES filed an Urgent Motion for
Reconsideration 17 of the September 21, 1998 RTC Order granting inspection
of the plant and denying dismissal of PGSMC's compulsory counterclaims.
Ten days after, on October 12, 1998, without waiting for the resolution
of its October 2, 1998 urgent motion for reconsideration, KOGIES filed before
the Court of Appeals (CA) a petition for certiorari 18 docketed as CA-G.R. SP
No. 49249, seeking annulment of the July 23, 1998 and September 21, 1998
RTC Orders and praying for the issuance of writs of prohibition, mandamus,
and preliminary injunction to enjoin the RTC and PGSMC from inspecting,
dismantling, and transferring the machineries and equipment in the Carmona
plant, and to direct the RTC to enforce the specific agreement on arbitration to
resolve the dispute.
In the meantime, on October 19, 1998, the RTC denied KOGIES' urgent
motion for reconsideration and directed the Branch Sheriff to proceed with the
inspection of the machineries and equipment in the plant on October 28,
1998. 19
Thereafter, KOGIES filed a Supplement to the Petition 20 in CA-G.R. SP
No. 49249 informing the CA about the October 19, 1998 RTC Order. It also
reiterated its prayer for the issuance of the writs of prohibition, mandamus and
preliminary injunction which was not acted upon by the CA. KOGIES asserted
that the Branch Sheriff did not have the technical expertise to ascertain
whether or not the machineries and equipment conformed to the
specifications in the contract and were properly installed.
TaISDA

On November 11, 1998, the Branch Sheriff filed his Sheriff's


Report 21 finding that the enumerated machineries and equipment were not
fully and properly installed.
The Court of Appeals affirmed the trial court and declared
the arbitration clause against public policy
On May 30, 2000, the CA rendered the assailed Decision 22 affirming
the RTC Orders and dismissing the petition for certiorari filed by KOGIES. The
CA found that the RTC did not gravely abuse its discretion in issuing the
assailed July 23, 1998 and September 21, 1998 Orders. Moreover, the CA
reasoned that KOGIES' contention that the total contract price for USD
1,530,000 was for the whole plant and had not been fully paid was contrary to
the finding of the RTC that PGSMC fully paid the price of USD 1,224,000,
which was for all the machineries and equipment. According to the CA, this
determination by the RTC was a factual finding beyond the ambit of a petition
for certiorari.
On the issue of the validity of the arbitration clause, the CA agreed with
the lower court that an arbitration clause which provided for a final
determination of the legal rights of the parties to the contract by arbitration
was against public policy.
On the issue of nonpayment of docket fees and non-attachment of a
certificate of non-forum shopping by PGSMC, the CA held that the
counterclaims of PGSMC were compulsory ones and payment of docket fees
was not required since the Answer with counterclaim was not an initiatory
pleading. For the same reason, the CA said a certificate of non-forum
shopping was also not required.
Furthermore, the CA held that the petition for certiorari had been filed
prematurely since KOGIES did not wait for the resolution of its urgent motion
for reconsideration of the September 21, 1998 RTC Order which was the
plain, speedy, and adequate remedy available. According to the CA, the RTC
must be given the opportunity to correct any alleged error it has committed,
and that since the assailed orders were interlocutory, these cannot be the
subject of a petition forcertiorari.
Hence, we have this Petition for Review on Certiorari under Rule 45.
The Issues
Petitioner posits that the appellate court committed the following errors:
a. PRONOUNCING THE QUESTION OF OWNERSHIP OVER
THE MACHINERY AND FACILITIES AS "A QUESTION OF FACT"
"BEYOND THE AMBIT OF A PETITION
FOR CERTIORARI" INTENDED ONLY FOR CORRECTION OF
ERRORS OF JURISDICTION OR GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF (SIC) EXCESS OF JURISDICTION, AND
CONCLUDING THAT THE TRIAL COURT'S FINDING ON THE SAME
QUESTION WAS IMPROPERLY RAISED IN THE PETITION BELOW;
b. DECLARING AS NULL AND VOID THE ARBITRATION
CLAUSE IN ARTICLE 15 OF THE CONTRACT BETWEEN THE
PARTIES FOR BEING "CONTRARY TO PUBLIC POLICY" AND FOR
OUSTING THE COURTS OF JURISDICTION;
c. DECREEING PRIVATE RESPONDENT'S
COUNTERCLAIMS TO BE ALL COMPULSORY NOT
NECESSITATING PAYMENT OF DOCKET FEES AND
CERTIFICATION OF NON-FORUM SHOPPING;
d. RULING THAT THE PETITION WAS FILED PREMATURELY
WITHOUT WAITING FOR THE RESOLUTION OF THE MOTION FOR
RECONSIDERATION OF THE ORDER DATED SEPTEMBER 21,
1998 OR WITHOUT GIVING THE TRIAL COURT AN OPPORTUNITY
TO CORRECT ITSELF; aHIEcS

e. PROCLAIMING THE TWO ORDERS DATED JULY 23 AND


SEPTEMBER 21, 1998 NOT TO BE PROPER SUBJECTS
OF CERTIORARI AND PROHIBITION FOR BEING
"INTERLOCUTORY IN NATURE;"
f. NOT GRANTING THE RELIEFS AND REMEDIES PRAYED
FOR IN HE (SIC) PETITION AND, INSTEAD, DISMISSING THE
SAME FOR ALLEGEDLY "WITHOUT MERIT." 23
The Court's Ruling
The petition is partly meritorious.
Before we delve into the substantive issues, we shall first tackle the
procedural issues.
The rules on the payment of docket fees for counterclaims
and cross claims were amended effective August 16, 2004
KOGIES strongly argues that when PGSMC filed the counterclaims, it
should have paid docket fees and filed a certificate of non-forum shopping,
and that its failure to do so was a fatal defect.
We disagree with KOGIES.
As aptly ruled by the CA, the counterclaims of PGSMC were
incorporated in its Answer with Compulsory Counterclaim dated July 17, 1998
in accordance with Section 8 of Rule 11, 1997 Revised Rules of Civil
Procedure, the rule that was effective at the time the Answer with
Counterclaim was filed. Sec. 8 on existing counterclaim or cross-claim states,
"A compulsory counterclaim or a cross-claim that a defending party has at the
time he files his answer shall be contained therein."
On July 17, 1998, at the time PGSMC filed its Answer incorporating its
counterclaims against KOGIES, it was not liable to pay filing fees for said
counterclaims being compulsory in nature. We stress, however, that effective
August 16, 2004 under Sec. 7, Rule 141, as amended by A.M. No. 04-2-04-
SC, docket fees are now required to be paid in compulsory counterclaim or
cross-claims.
As to the failure to submit a certificate of forum shopping, PGSMC's
Answer is not an initiatory pleading which requires a certification against
forum shopping under Sec. 5 24 of Rule 7, 1997 Revised Rules of Civil
Procedure. It is a responsive pleading, hence, the courts a quo did not commit
reversible error in denying KOGIES' motion to dismiss PGSMC's compulsory
counterclaims.
Interlocutory orders proper subject of certiorari
Citing Gamboa v. Cruz, 25 the CA also pronounced that "certiorari and
Prohibition are neither the remedies to question the propriety of an
interlocutory order of the trial court." 26 The CA erred on its reliance
on Gamboa. Gamboa involved the denial of a motion to acquit in a criminal
case which was not assailable in an action for certiorari since the denial of a
motion to quash required the accused to plead and to continue with the trial,
and whatever objections the accused had in his motion to quash can then be
used as part of his defense and subsequently can be raised as errors on his
appeal if the judgment of the trial court is adverse to him. The general rule is
that interlocutory orders cannot be challenged by an appeal. 27 Thus,
in Yamaoka v. Pescarich Manufacturing Corporation, we held:
The proper remedy in such cases is an ordinary appeal from an
adverse judgment on the merits, incorporating in said appeal the
grounds for assailing the interlocutory orders. Allowing appeals from
interlocutory orders would result in the 'sorry spectacle' of a case being
subject of a counterproductive ping-pong to and from the appellate
court as often as a trial court is perceived to have made an error in any
of its interlocutory rulings. However, where the assailed interlocutory
order was issued with grave abuse of discretion or patently erroneous
and the remedy of appeal would not afford adequate and expeditious
relief, the Court allowscertiorari as a mode of redress. 28
Also, appeals from interlocutory orders would open the floodgates to
endless occasions for dilatory motions. Thus, where the interlocutory order
was issued without or in excess of jurisdiction or with grave abuse of
discretion, the remedy is certiorari. 29HDcaAI

The alleged grave abuse of discretion of the respondent court


equivalent to lack of jurisdiction in the issuance of the two assailed orders
coupled with the fact that there is no plain, speedy, and adequate remedy in
the ordinary course of law amply provides the basis for allowing the resort to a
petition for certiorari under Rule 65.
Prematurity of the petition before the CA
Neither do we think that KOGIES was guilty of forum shopping in filing
the petition for certiorari. Note that KOGIES' motion for reconsideration of the
July 23, 1998 RTC Order which denied the issuance of the injunctive writ had
already been denied. Thus, KOGIES' only remedy was to assail the RTC's
interlocutory order via a petition for certiorari under Rule 65.

While the October 2, 1998 motion for reconsideration of KOGIES of the


September 21, 1998 RTC Order relating to the inspection of things, and the
allowance of the compulsory counterclaims has not yet been resolved, the
circumstances in this case would allow an exception to the rule that
before certiorari may be availed of, the petitioner must have filed a motion for
reconsideration and said motion should have been first resolved by the court
a quo. The reason behind the rule is "to enable the lower court, in the first
instance, to pass upon and correct its mistakes without the intervention of the
higher court." 30
The September 21, 1998 RTC Order directing the branch sheriff to
inspect the plant, equipment, and facilities when he is not competent and
knowledgeable on said matters is evidently flawed and devoid of any legal
support. Moreover, there is an urgent necessity to resolve the issue on the
dismantling of the facilities and any further delay would prejudice the interests
of KOGIES. Indeed, there is real and imminent threat of irreparable
destruction or substantial damage to KOGIES' equipment and machineries.
We find the resort to certiorari based on the gravely abusive orders of the trial
court sans the ruling on the October 2, 1998 motion for reconsideration to be
proper.
The Core Issue: Article 15 of the Contract
We now go to the core issue of the validity of Art. 15 of the Contract,
the arbitration clause. It provides:
Article 15. Arbitration. — All disputes, controversies, or
differences which may arise between the parties, out of or in relation to
or in connection with this Contract or for the breach thereof, shall finally
be settled by arbitration in Seoul, Korea in accordance with the
Commercial Arbitration Rules of the Korean Commercial Arbitration
Board. The award rendered by the arbitration(s) shall be final and
binding upon both parties concerned. (Emphasis supplied.)
Petitioner claims the RTC and the CA erred in ruling that the arbitration
clause is null and void.
Petitioner is correct.
Established in this jurisdiction is the rule that the law of the place where
the contract is made governs. Lex loci contractus. The contract in this case
was perfected here in the Philippines. Therefore, our laws ought to govern.
Nonetheless, Art. 2044 of the Civil Code sanctions the validity of mutually
agreed arbitral clause or the finality and binding effect of an arbitral award.
Art. 2044 provides, "Any stipulation that the arbitrators' award or decision
shall be final, is valid, without prejudice to Articles 2038, 2039 and 2040."
(Emphasis supplied.)
Arts. 2038, 31 2039, 32 and 2040 33 abovecited refer to instances where
a compromise or an arbitral award, as applied to Art. 2044 pursuant to Art.
2043, 34 may be voided, rescinded, or annulled, but these would not denigrate
the finality of the arbitral award.
The arbitration clause was mutually and voluntarily agreed upon by the
parties. It has not been shown to be contrary to any law, or against morals,
good customs, public order, or public policy. There has been no showing that
the parties have not dealt with each other on equal footing. We find no reason
why the arbitration clause should not be respected and complied with by both
parties. In Gonzales v. Climax Mining Ltd., 35 we held that submission to
arbitration is a contract and that a clause in a contract providing that all
matters in dispute between the parties shall be referred to arbitration is a
contract. 36 Again in Del Monte Corporation-USA v. Court of Appeals, we
likewise ruled that "[t]he provision to submit to arbitration any dispute arising
therefrom and the relationship of the parties is part of that contract and is itself
a contract." 37CAacTH

Arbitration clause not contrary to public policy


The arbitration clause which stipulates that the arbitration must be done
in Seoul, Korea in accordance with the Commercial Arbitration Rules of the
KCAB, and that the arbitral award is final and binding, is not contrary to public
policy. This Court has sanctioned the validity of arbitration clauses in
a catena of cases. In the 1957 case of Eastboard Navigation Ltd. v. Juan
Ysmael and Co., Inc., 38 this Court had occasion to rule that an arbitration
clause to resolve differences and breaches of mutually agreed contractual
terms is valid. In BF Corporation v. Court of Appeals, we held that "[i]n this
jurisdiction, arbitration has been held valid and constitutional. Even before the
approval on June 19, 1953 of Republic Act No. 876, this Court has
countenanced the settlement of disputes through arbitration.Republic Act No.
876 was adopted to supplement the New Civil Code's provisions on
arbitration." 39 And in LM Power Engineering Corporation v. Capitol Industrial
Construction Groups, Inc., we declared that:
Being an inexpensive, speedy and amicable method of settling
disputes, arbitration — along with mediation, conciliation and
negotiation — is encouraged by the Supreme Court. Aside from
unclogging judicial dockets, arbitration also hastens the resolution of
disputes, especially of the commercial kind. It is thus regarded as the
"wave of the future" in international civil and commercial disputes.
Brushing aside a contractual agreement calling for arbitration between
the parties would be a step backward.
Consistent with the above-mentioned policy of encouraging
alternative dispute resolution methods, courts should liberally construe
arbitration clauses. Provided such clause is susceptible of an
interpretation that covers the asserted dispute, an order to arbitrate
should be granted. Any doubt should be resolved in favor of
arbitration. 40
Having said that the instant arbitration clause is not against public
policy, we come to the question on what governs an arbitration clause
specifying that in case of any dispute arising from the contract, an arbitral
panel will be constituted in a foreign country and the arbitration rules of the
foreign country would govern and its award shall be final and binding.
RA 9285 incorporated the UNCITRAL Model law
to which we are a signatory
For domestic arbitration proceedings, we have particular agencies to
arbitrate disputes arising from contractual relations. In case a foreign arbitral
body is chosen by the parties, the arbitration rules of our domestic arbitration
bodies would not be applied. As signatory to the Arbitration Rules of the
UNCITRAL Model Law on International Commercial Arbitration 41 of the
United Nations Commission on International Trade Law (UNCITRAL) in the
New York Convention on June 21, 1985, the Philippines committed itself to be
bound by the Model Law. We have even incorporated the Model Law
in Republic Act No. (RA) 9285, otherwise known as the Alternative Dispute
Resolution Act of 2004 entitled An Act to Institutionalize the Use of an
Alternative Dispute Resolution System in the Philippines and to Establish the
Office for Alternative Dispute Resolution, and for Other Purposes,
promulgated on April 2, 2004. Secs. 19 and 20 of Chapter 4 of the Model Law
are the pertinent provisions:
CHAPTER 4 — INTERNATIONAL COMMERCIAL
ARBITRATION
SEC. 19. Adoption of the Model Law on International
Commercial Arbitration. — International commercial arbitration shall be
governed by the Model Law on International Commercial Arbitration
(the "Model Law") adopted by the United Nations Commission on
International Trade Law on June 21, 1985 (United Nations Document
A/40/17) and recommended for enactment by the General Assembly in
Resolution No. 40/72 approved on December 11, 1985, copy of which
is hereto attached as Appendix "A".cEATSI

SEC. 20. Interpretation of Model Law. — In interpreting the


Model Law, regard shall be had to its international origin and to the
need for uniformity in its interpretation and resort may be made to
the travaux preparatories and the report of the Secretary General of
the United Nations Commission on International Trade Law dated
March 25, 1985 entitled, "International Commercial Arbitration:
Analytical Commentary on Draft Trade identified by reference number
A/CN. 9/264."
While RA 9285 was passed only in 2004, it nonetheless applies in the
instant case since it is a procedural law which has a retroactive effect.
Likewise, KOGIES filed its application for arbitration before the KCAB on July
1, 1998 and it is still pending because no arbitral award has yet been
rendered. Thus, RA 9285 is applicable to the instant case. Well-settled is the
rule that procedural laws are construed to be applicable to actions pending
and undetermined at the time of their passage, and are deemed retroactive in
that sense and to that extent. As a general rule, the retroactive application of
procedural laws does not violate any personal rights because no vested right
has yet attached nor arisen from them. 42
Among the pertinent features of RA 9285 applying and incorporating
the UNCITRAL Model Law are the following:
(1) The RTC must refer to arbitration in proper cases
Under Sec. 24, the RTC does not have jurisdiction over disputes that
are properly the subject of arbitration pursuant to an arbitration clause, and
mandates the referral to arbitration in such cases, thus:
SEC. 24. Referral to Arbitration. — A court before which an
action is brought in a matter which is the subject matter of an
arbitration agreement shall, if at least one party so requests not later
than the pre-trial conference, or upon the request of both parties
thereafter, refer the parties to arbitration unless it finds that the
arbitration agreement is null and void, inoperative or incapable of being
performed.
(2) Foreign arbitral awards must be confirmed by the RTC
Foreign arbitral awards while mutually stipulated by the parties in the
arbitration clause to be final and binding are not immediately enforceable or
cannot be implemented immediately. Sec. 35 43 of the UNCITRAL Model Law
stipulates the requirement for the arbitral award to be recognized by a
competent court for enforcement, which court under Sec. 36 of the
UNCITRAL Model Law may refuse recognition or enforcement on the grounds
provided for. RA 9285 incorporated these provisos to Secs. 42, 43, and 44
relative to Secs. 47 and 48, thus:
SEC. 42. Application of the New York Convention. — The New
York Convention shall govern the recognition and enforcement of
arbitral awards covered by said Convention.
The recognition and enforcement of such arbitral awards shall
be filed with the Regional Trial Court in accordance with the rules of
procedure to be promulgated by the Supreme Court. Said procedural
rules shall provide that the party relying on the award or applying for its
enforcement shall file with the court the original or authenticated copy
of the award and the arbitration agreement. If the award or agreement
is not made in any of the official languages, the party shall supply a
duly certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign
arbitration award was made in party to the New York Convention.
xxx xxx xxx
SEC. 43. Recognition and Enforcement of Foreign Arbitral
Awards Not Covered by the New York Convention. — The recognition
and enforcement of foreign arbitral awards not covered by the New
York Convention shall be done in accordance with procedural rules to
be promulgated by the Supreme Court. The Court may, on grounds of
comity and reciprocity, recognize and enforce a non-convention award
as a convention award. IEHaSc

SEC. 44. Foreign Arbitral Award Not Foreign Judgment. — A


foreign arbitral award when confirmed by a court of a foreign country,
shall be recognized and enforced as a foreign arbitral award and not
as a judgment of a foreign court.
A foreign arbitral award, when confirmed by the Regional Trial
Court, shall be enforced in the same manner as final and executory
decisions of courts of law of the Philippines.
xxx xxx xxx
SEC. 47. Venue and Jurisdiction. — Proceedings for recognition
and enforcement of an arbitration agreement or for vacations, setting
aside, correction or modification of an arbitral award, and any
application with a court for arbitration assistance and supervision shall
be deemed as special proceedings and shall be filed with the Regional
Trial Court (i) where arbitration proceedings are conducted; (ii) where
the asset to be attached or levied upon, or the act to be enjoined is
located; (iii) where any of the parties to the dispute resides or has his
place of business; or (iv) in the National Judicial Capital Region, at the
option of the applicant.
SEC. 48. Notice of Proceeding to Parties. — In a special
proceeding for recognition and enforcement of an arbitral award, the
Court shall send notice to the parties at their address of record in the
arbitration, or if any part cannot be served notice at such address, at
such party's last known address. The notice shall be sent al least
fifteen (15) days before the date set for the initial hearing of the
application.
It is now clear that foreign arbitral awards when confirmed by the RTC
are deemed not as a judgment of a foreign court but as a foreign arbitral
award, and when confirmed, are enforced as final and executory decisions of
our courts of law.
Thus, it can be gleaned that the concept of a final and binding arbitral
award is similar to judgments or awards given by some of our quasi-judicial
bodies, like the National Labor Relations Commission and Mines Adjudication
Board, whose final judgments are stipulated to be final and binding, but not
immediately executory in the sense that they may still be judicially reviewed,
upon the instance of any party. Therefore, the final foreign arbitral awards are
similarly situated in that they need first to be confirmed by the RTC.
(3) The RTC has jurisdiction to review foreign arbitral awards
Sec. 42 in relation to Sec. 45 of RA 9285 designated and vested the
RTC with specific authority and jurisdiction to set aside, reject, or vacate a
foreign arbitral award on grounds provided under Art. 34 (2) of the UNCITRAL
Model Law. Secs. 42 and 45 provide:
SEC. 42. Application of the New York Convention. — The New
York Convention shall govern the recognition and enforcement of
arbitral awards covered by said Convention.
The recognition and enforcement of such arbitral awards shall
be filed with the Regional Trial Court in accordance with the rules of
procedure to be promulgated by the Supreme Court. Said procedural
rules shall provide that the party relying on the award or applying for its
enforcement shall file with the court the original or authenticated copy
of the award and the arbitration agreement. If the award or agreement
is not made in any of the official languages, the party shall supply a
duly certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign
arbitration award was made is party to the New York Convention.
If the application for rejection or suspension of enforcement of
an award has been made, the Regional Trial Court may, if it considers
it proper, vacate its decision and may also, on the application of the
party claiming recognition or enforcement of the award, order the party
to provide appropriate security. ADHcTE

xxx xxx xxx


SEC. 45. Rejection of a Foreign Arbitral Award. — A party to a
foreign arbitration proceeding may oppose an application for
recognition and enforcement of the arbitral award in accordance with
the procedures and rules to be promulgated by the Supreme Court
only on those grounds enumerated under Article V of the New York
Convention. Any other ground raised shall be disregarded by the
Regional Trial Court.
Thus, while the RTC does not have jurisdiction over disputes governed
by arbitration mutually agreed upon by the parties, still the foreign arbitral
award is subject to judicial review by the RTC which can set aside, reject, or
vacate it. In this sense, what this Court held in Chung Fu Industries (Phils.),
Inc. relied upon by KOGIES is applicable insofar as the foreign arbitral
awards, while final and binding, do not oust courts of jurisdiction since these
arbitral awards are not absolute and without exceptions as they are still
judicially reviewable. Chapter 7 of RA 9285 has made it clear that all arbitral
awards, whether domestic or foreign, are subject to judicial review on specific
grounds provided for.
(4) Grounds for judicial review different in domestic and foreign arbitral
awards
The differences between a final arbitral award from an international or
foreign arbitral tribunal and an award given by a local arbitral tribunal are the
specific grounds or conditions that vest jurisdiction over our courts to review
the awards.
For foreign or international arbitral awards which must first be confirmed
by the RTC, the grounds for setting aside, rejecting or vacating the award by
the RTC are provided under Art. 34 (2) of the UNCITRAL Model Law.
For final domestic arbitral awards, which also need confirmation by the
RTC pursuant to Sec. 23 of RA 876 44 and shall be recognized as final and
executory decisions of the RTC, 45 they may only be assailed before the RTC
and vacated on the grounds provided under Sec. 25 of RA 876. 46
(5) RTC decision of assailed foreign arbitral award appealable
Sec. 46 of RA 9285 provides for an appeal before the CA as the
remedy of an aggrieved party in cases where the RTC sets aside, rejects,
vacates, modifies, or corrects an arbitral award, thus:
SEC. 46. Appeal from Court Decision or Arbitral Awards. — A
decision of the Regional Trial Court confirming, vacating, setting aside,
modifying or correcting an arbitral award may be appealed to the Court
of Appeals in accordance with the rules and procedure to be
promulgated by the Supreme Court.
The losing party who appeals from the judgment of the court
confirming an arbitral award shall be required by the appellate court to
post a counterbond executed in favor of the prevailing party equal to
the amount of the award in accordance with the rules to be
promulgated by the Supreme Court.
Thereafter, the CA decision may further be appealed or reviewed
before this Court through a petition for review under Rule 45 of the Rules of
Court.
PGSMC has remedies to protect its interests
Thus, based on the foregoing features of RA 9285, PGSMC must
submit to the foreign arbitration as it bound itself through the subject contract.
While it may have misgivings on the foreign arbitration done in Korea by the
KCAB, it has available remedies under RA 9285. Its interests are duly
protected by the law which requires that the arbitral award that may be
rendered by KCAB must be confirmed here by the RTC before it can be
enforced.
With our disquisition above, petitioner is correct in its contention that an
arbitration clause, stipulating that the arbitral award is final and binding, does
not oust our courts of jurisdiction as the international arbitral award, the award
of which is not absolute and without exceptions, is still judicially reviewable
under certain conditions provided for by the UNCITRAL Model Law on ICA as
applied and incorporated in RA 9285. aHSCcE

Finally, it must be noted that there is nothing in the subject Contract


which provides that the parties may dispense with the arbitration clause.
Unilateral rescission improper and illegal
Having ruled that the arbitration clause of the subject contract is valid
and binding on the parties, and not contrary to public policy; consequently,
being bound to the contract of arbitration, a party may not unilaterally rescind
or terminate the contract for whatever cause without first resorting to
arbitration.
What this Court held in University of the Philippines v. de Los
Angeles 47 and reiterated in succeeding cases, 48 that the act of treating a
contract as rescinded on account of infractions by the other contracting party
is valid albeit provisional as it can be judicially assailed, is not applicable to
the instant case on account of a valid stipulation on arbitration. Where an
arbitration clause in a contract is availing, neither of the parties can
unilaterally treat the contract as rescinded since whatever infractions or
breaches by a party or differences arising from the contract must be brought
first and resolved by arbitration, and not through an extrajudicial rescission or
judicial action.

The issues arising from the contract between PGSMC and KOGIES on
whether the equipment and machineries delivered and installed were properly
installed and operational in the plant in Carmona, Cavite; the ownership of
equipment and payment of the contract price; and whether there was
substantial compliance by KOGIES in the production of the samples, given
the alleged fact that PGSMC could not supply the raw materials required to
produce the sample LPG cylinders, are matters proper for arbitration. Indeed,
we note that on July 1, 1998, KOGIES instituted an Application for Arbitration
before the KCAB in Seoul, Korea pursuant to Art. 15 of the Contract as
amended. Thus, it is incumbent upon PGSMC to abide by its commitment to
arbitrate.
Corollarily, the trial court gravely abused its discretion in granting
PGSMC's Motion for Inspection of Things on September 21, 1998, as the
subject matter of the motion is under the primary jurisdiction of the mutually
agreed arbitral body, the KCAB in Korea.
In addition, whatever findings and conclusions made by the RTC
Branch Sheriff from the inspection made on October 28, 1998, as ordered by
the trial court on October 19, 1998, is of no worth as said Sheriff is not
technically competent to ascertain the actual status of the equipment and
machineries as installed in the plant.
For these reasons, the September 21, 1998 and October 19, 1998 RTC
Orders pertaining to the grant of the inspection of the equipment and
machineries have to be recalled and nullified.
Issue on ownership of plant proper for arbitration
Petitioner assails the CA ruling that the issue petitioner raised on
whether the total contract price of USD 1,530,000 was for the whole plant and
its installation is beyond the ambit of a Petition for Certiorari.
Petitioner's position is untenable.
It is settled that questions of fact cannot be raised in an original action
for certiorari. 49 Whether or not there was full payment for the machineries and
equipment and installation is indeed a factual issue prohibited by Rule 65.
However, what appears to constitute a grave abuse of discretion is the
order of the RTC in resolving the issue on the ownership of the plant when it
is the arbitral body (KCAB) and not the RTC which has jurisdiction and
authority over the said issue. The RTC's determination of such factual issue
constitutes grave abuse of discretion and must be reversed and set aside.
RTC has interim jurisdiction to protect the rights of the parties
Anent the July 23, 1998 Order denying the issuance of the injunctive
writ paving the way for PGSMC to dismantle and transfer the equipment and
machineries, we find it to be in order considering the factual milieu of the
instant case.AcDaEH

Firstly, while the issue of the proper installation of the equipment and
machineries might well be under the primary jurisdiction of the arbitral body to
decide, yet the RTC under Sec. 28 of RA 9285 has jurisdiction to hear and
grant interim measures to protect vested rights of the parties. Sec. 28
pertinently provides:
SEC. 28. Grant of interim Measure of Protection. — (a) It is not
incompatible with an arbitration agreement for a party to request,
before constitution of the tribunal, from a Court to grant such
measure. After constitution of the arbitral tribunal and during arbitral
proceedings, a request for an interim measure of protection, or
modification thereof, may be made with the arbitral or to the extent
that the arbitral tribunal has no power to act or is unable to act
effectivity, the request may be made with the Court. The arbitral
tribunal is deemed constituted when the sole arbitrator or the third
arbitrator, who has been nominated, has accepted the nomination and
written communication of said nomination and acceptance has been
received by the party making the request.
(b) The following rules on interim or provisional relief shall be
observed:
Any party may request that provisional relief be granted against
the adverse party.
Such relief may be granted:
(i) to prevent irreparable loss or injury;
(ii) to provide security for the performance of any obligation;
(iii) to produce or preserve any evidence; or
(iv) to compel any other appropriate act or omission.
(c) The order granting provisional relief may be conditioned
upon the provision of security or any act or omission specified in the
order.
(d) Interim or provisional relief is requested by written
application transmitted by reasonable means to the Court or arbitral
tribunal as the case may be and the party against whom the relief is
sought, describing in appropriate detail the precise relief, the party
against whom the relief is requested, the grounds for the relief, and the
evidence supporting the request.
(e) The order shall be binding upon the parties.
(f) Either party may apply with the Court for assistance in
implementing or enforcing an interim measure ordered by an arbitral
tribunal.
(g) A party who does not comply with the order shall be liable for
all damages resulting from noncompliance, including all expenses, and
reasonable attorney's fees, paid in obtaining the order's judicial
enforcement. (Emphasis ours.)
Art. 17 (2) of the UNCITRAL Model Law on ICA defines an "interim
measure" of protection as:
Article 17. Power of arbitral tribunal to order interim measures
xxx xxx xxx
(2) An interim measure is any temporary measure, whether in
the form of an award or in another form, by which, at any time prior to
the issuance of the award by which the dispute is finally decided, the
arbitral tribunal orders a party to:
(a) Maintain or restore the status quo pending determination of
the dispute;
(b) Take action that would prevent, or refrain from taking action
that is likely to cause, current or imminent harm or prejudice to the
arbitral process itself;
DTISaH

(c) Provide a means of preserving assets out of which a


subsequent award may be satisfied; or
(d) Preserve evidence that may be relevant and material to the
resolution of the dispute.
Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and
jurisdiction to issue interim measures:
Article 17 J. Court-ordered interim measures
A court shall have the same power of issuing an interim
measure in relation to arbitration proceedings, irrespective of whether
their place is in the territory of this State, as it has in relation to
proceedings in courts. The court shall exercise such power in
accordance with its own procedures in consideration of the specific
features of international arbitration.
In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro
Corporation, we were explicit that even "the pendency of an arbitral
proceeding does not foreclose resort to the courts for provisional reliefs." We
explicated this way:
As a fundamental point, the pendency of arbitral proceedings
does not foreclose resort to the courts for provisional reliefs. The Rules
of the ICC, which governs the parties' arbitral dispute, allows the
application of a party to a judicial authority for interim or conservatory
measures. Likewise, Section 14 of Republic Act (R.A.) No. 876 (The
Arbitration Law) recognizes the rights of any party to petition the court
to take measures to safeguard and/or conserve any matter which is the
subject of the dispute in arbitration. In addition, R.A. 9285, otherwise
known as the "Alternative Dispute Resolution Act of 2004," allows the
filing of provisional or interim measures with the regular courts
whenever the arbitral tribunal has no power to act or to act
effectively. 50
AacCIT

It is thus beyond cavil that the RTC has authority and jurisdiction to
grant interim measures of protection.
Secondly, considering that the equipment and machineries are in the
possession of PGSMC, it has the right to protect and preserve the equipment
and machineries in the best way it can. Considering that the LPG plant was
non-operational, PGSMC has the right to dismantle and transfer the
equipment and machineries either for their protection and preservation or for
the better way to make good use of them which is ineluctably within the
management discretion of PGSMC.
Thirdly, and of greater import is the reason that maintaining the
equipment and machineries in Worth's property is not to the best interest of
PGSMC due to the prohibitive rent while the LPG plant as set-up is not
operational. PGSMC was losing PhP322,560 as monthly rentals or PhP3.87M
for 1998 alone without considering the 10% annual rent increment in
maintaining the plant.
Fourthly, and corollarily, while the KCAB can rule on motions or
petitions relating to the preservation or transfer of the equipment and
machineries as an interim measure, yet on hindsight, the July 23, 1998 Order
of the RTC allowing the transfer of the equipment and machineries given the
non-recognition by the lower courts of the arbitral clause, has accorded an
interim measure of protection to PGSMC which would otherwise been
irreparably damaged.
Fifth, KOGIES is not unjustly prejudiced as it has already been paid a
substantial amount based on the contract. Moreover, KOGIES is amply
protected by the arbitral action it has instituted before the KCAB, the award of
which can be enforced in our jurisdiction through the RTC. Besides, by our
decision, PGSMC is compelled to submit to arbitration pursuant to the valid
arbitration clause of its contract with KOGIES.
PGSMC to preserve the subject equipment and machineries
Finally, while PGSMC may have been granted the right to dismantle
and transfer the subject equipment and machineries, it does not have the right
to convey or dispose of the same considering the pending arbitral
proceedings to settle the differences of the parties. PGSMC therefore must
preserve and maintain the subject equipment and machineries with the
diligence of a good father of a family 51 until final resolution of the arbitral
proceedings and enforcement of the award, if any.
WHEREFORE, this petition is PARTLY GRANTED, in that:
(1) The May 30, 2000 CA Decision in CA-G.R. SP No. 49249 is
REVERSED and SET ASIDE;
(2) The September 21, 1998 and October 19, 1998 RTC Orders in Civil
Case No. 98-117 are REVERSED and SET ASIDE;
(3) The parties are hereby ORDERED to submit themselves to the
arbitration of their dispute and differences arising from the subject Contract
before the KCAB; and
(4) PGSMC is hereby ALLOWED to dismantle and transfer the
equipment and machineries, if it had not done so, and ORDERED to preserve
and maintain them until the finality of whatever arbitral award is given in the
arbitration proceedings.
No pronouncement as to costs. IEAHca

SO ORDERED.
(Korea Technologies Co., Ltd. v. Lerma, G.R. No. 143581, [January 7, 2008],
|||

566 PHIL 1-39)

3. Mercado vs. CA, G.R. No. 169576

FIRST DIVISION

[G.R. No. 169576. October 17, 2008.]

LEONIDES MERCADO, represented by his heirs: RACQUEL D.


MERCADO, JIMMY D. MERCADO, HENRY D. MERCADO,
LOURICAR D. MERCADO and VIRGILIO D.
MERCADO, petitioners, vs. COURT OF APPEALS and SAN
MIGUEL CORPORATION, respondents.

RESOLUTION

CORONA, J : p

Leonides Mercado had been distributing respondent San Miguel


Corporation's (SMC's) beer products in Quiapo, Manila since 1967. In 1991,
SMC extended to him a P7.5 million credit line allowing him to withdraw goods
on credit. To secure his purchases, Mercado assigned three China Banking
Corporation (CBC) certificates of deposit amounting to P5 million 1 to SMC
and executed a continuing hold-out agreement stating: DcCITS

Any demand made by [SMC] on [CBC], claiming default on


my/our part shall be conclusive on [CBC] and shall serve as absolute
authority for [CBC] to encash the [CBC certificates of deposit] in
accordance with the third paragraph of this Hold-Out Agreement,
whether or not I/we have in fact defaulted on any of my/our obligations
with [SMC], it being understood that the issue of whether or not there
was factual default must be threshed out solely between me/us and
[SMC]
He also submitted three surety bonds from Eastern Assurance and Surety
Corporation (EASCO) totaling P2.6 million. 2
On February 10, 1992, SMC notified CBC that Mercado failed to pay for
the items he withdrew on credit. Consequently, citing the continuing hold-out
agreement, it asked CBC to release the proceeds of the assigned certificates
of deposit. CBC approved SMB's request and informed Mercado. SacTCA

On March 2, 1992, Mercado filed an action to annul the continuing hold-


out agreement and deed of assignment in the Regional Trial Court (RTC) of
Manila, Branch 55. 3 He claimed that the continuing hold-out agreement
allowed forfeiture without the benefit of foreclosure. It was therefore void
pursuant to Article 2088 of the Civil Code. 4 Moreover, Mercado argued that
he had already settled his recent purchases on credit but SMC erroneously
applied the said payments to his old accounts not covered by the continuing
hold-out agreement (i.e., purchases made prior to the extension of the credit
line).
On March 18, 1992, SMC filed its answer with counterclaim against
Mercado. It contended that Mercado delivered only two CBC certificates of
deposit amounting to P4.5 million 5 and asserted that the execution of the
continuing hold-out agreement and deed of assignment was a recognized
business practice. Furthermore, because Mercado admitted his outstanding
liabilities, SMC sought payment of the lees products he withdrew (or
purchased on credit) worth P7,468,153.75. 6
On April 23, 1992, SMC filed a third-party complaint against
EASCO. 7 It sought to collect the proceeds of the surety bonds submitted by
Mercado. CcEHaI

On September 14, 1994, Mercado filed an urgent manifestation and


motion seeking the dismissal of the complaint. He claimed that he was no
longer interested in annulling the continuing hold-out agreement and deed of
assignment. The RTC, however, denied the motion. 8 Instead, it set the case
for pre-trial. Thereafter, trial ensued.
During trial, Mercado acknowledged the accuracy of SMC's
computation of his outstanding liability as of August 15, 1991. Thus, the RTC
dismissed the complaint and ordered Mercado and EASCO (to the extent of
P2.6 million or the value of its bonds) to jointly and severally pay SMC the
amount of P7,468,153.75. 9
Aggrieved, Mercado and EASCO appealed to the Court of Appeals
(CA) 10 insisting that Mercado did not default in the payment of his obligations
to SMC. CAIaHS

On December 14, 2004, the CA affirmed the RTC decision in


toto. 11 Mercado and EASCO both moved for reconsideration but their
respective motions were denied. 12
On October 28, 2005, EASCO filed a petition for review on certiorari in
this Court 13 but eventually agreed to settle its liability with SMC. 14 The
petition was terminated on September 19, 2007. 15
Meanwhile, Mercado passed away and was substituted by his heirs,
petitioners Racquel D. Mercado, Jimmy D. Mercado, Henry D. Mercado,
Louricar D. Mercado and Virgilio D. Mercado. TEDaAc

Petitioners subsequently filed this petition asserting that the CA erred in


affirming the RTC decision in toto. The said decision (insofar as it ordered
Mercado to pay SMC P7,468,153.75) was void. SMC's counterclaim was
permissive in nature. Inasmuch as SMC did not pay docket fees, the RTC
never acquired jurisdiction over the counterclaim.
We deny the petition.
A counterclaim (or a claim which a defending party may have against
any party) 16 may be compulsory 17 or permissive. A counterclaim that (1)
arises out of (or is necessarily connected with) the transaction or occurrence
that is the subject matter of the opposing party's claim; (2) falls within the
jurisdiction of the court and (3) does not require for its adjudication the
presence of third parties over whom the court cannot acquire jurisdiction, is
compulsory. 18 Otherwise, a counterclaim is merely permissive.
When Mercado sought to annul the continuing hold-out agreement and
deed of assignment (which he executed as security for his credit purchases),
he in effect sought to be freed from them. While he admitted having
outstanding obligations, he nevertheless asserted that those were not covered
by the assailed accessory contracts. For its part, aside from invoking the
validity of the said agreements, SMC therefore sought to collect the payment
for the value of goods Mercado purchased on credit. Thus, Mercado's
complaint and SMC's counterclaim both touched the issues of whether the
continuing hold-out agreement and deed of assignment were valid and
whether Mercado had outstanding liabilities to SMC. The same evidence
would essentially support or refute Mercado's claim and SMC's
counterclaim. SDTIHA

Based on the foregoing, had these issues been tried separately, the
efforts of the RTC and the parties would have had to be duplicated. Clearly,
SMC's counterclaim, being logically related to Mercado's claim, was
compulsory in nature. 19 Consequently, the payment of docket fees was not
necessary for the RTC to acquire jurisdiction over the subject matter.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioners.
SO ORDERED.
(Mercado v. Court of Appeals, G.R. No. 169576 (Resolution), [October 17,
|||

2008], 590 PHIL 524-530)

4. Navarro v MBTC 429 SCRA 439

SECOND DIVISION

[G.R. No. 138031. May 27, 2004.]

ANTONIO NAVARRO and GRAHMMS, INC., petitioners, vs.


METROPOLITAN BANK & TRUST COMPANY, THE HON.
COURT OF APPEALS, and THE HON. ZEUS C. ABROGAR
(Presiding Judge of the Regional Trial Court of Makati City,
Branch 150), respondents.

DECISION

CALLEJO, SR., J : p

This is a petition for review on certiorari under Rule 45 of the Rules of


Court, as amended, assailing the Decision 1 of the Court of Appeals, which
affirmed the denial by the Regional Trial Court of Makati City, Branch 150, in Civil
Case No. 94-2913, of the petitioners' appeal for non-payment of docket fees, as
well as the appellate court's March 29, 1999 Resolution which denied the
petitioners' motion for reconsideration.
The facts are undisputed:
On November 3, 1994, the private respondent Metropolitan Bank and Trust
Company (respondent MBTC) filed with the RTC of Makati City a petition for the
judicial foreclosure of the real estate mortgage executed by the petitioners in its
favor. 2 The case was docketed as Civil Case No. 94-2913 and was raffled to
Branch 150 of the same court.
After due proceedings, the RTC rendered judgment on January 16,
1998, 3 the dispositive portion of which reads:
WHEREFORE, the court hereby grants the right of the plaintiff
bank to foreclose the properties belonging to defendant Antonio Navarro
covered by TCT Nos. 155256, 155257, 155258 particularly described as
follows:
xxx xxx xxx
to be sold at public auction the proceeds of which to be applied in
payment of the P3,500,000.00 loan, plus interest and penalty charges
until fully paid. In case of deficiency on the proceeds of the aforesaid
sale, execution on the defendant's property shall be implemented.
Likewise, 10% of the total amount due shall be awarded as attorney's
fees. 4
The petitioners received a copy of the Decision on February 10, 1998 and
on February 18, 1998 filed a Motion for Reconsideration of the decision. 5 On
March 25, 1998, the trial court issued an Order denying the said motion. 6 The
petitioners received their copy of the order on April 7, 1998.
On April 14, 1998, the last day of the reglementary period, the petitioners
filed with the RTC a Notice of Appeal 7 from its January 16, 1998 Decision and
March 25, 1998 Order. However, the petitioners failed to pay the requisite docket
and other lawful fees.
On April 21, 1998, the respondent MBTC filed a Motion to Deny Due
Course to Notice of Appeal with Motion for Execution 8 on the ground that the
notice of appeal was not timely filed. Acting on the motion, the RTC, while ruling
in favor of the timeliness of the petitioners' notice of appeal, nevertheless denied
the appeal for not being accompanied by the required docket fees. Hence, in its
Order dated May 27, 1998, 9 the RTC granted the motion of the respondents for
the issuance of a writ of execution for the enforcement of the decision. The RTC
held that:
. . . From the sequence of dates and events, it is clear that
defendants filed their Notice of Appeal within the reglementary period
from the date of their receipt of the denial of their motion for
reconsideration since they had still seven days left to file an appeal.
However, since Section 4, Rule 41 of the New Rules of Civil Procedure,
states that:ACTIcS

"Within the period for taking an appeal, the appellant shall


pay to the clerk of court which rendered the judgment or final
order appealed from, the full amount of the appellate court docket
and other lawful fees. Proof of payment of said fees shall be
transmitted to the appellate court together with the original record
or the record on appeal."
It is also incumbent upon the appellants to pay the required
appeal fee within the reglementary period. Up to the present, the court
has not yet received any evidence of payment of the appellate docket
fee to be attached to the record of this case, in accordance with the New
Rules, to the prejudice of the other party.
Wherefore, from the foregoing, the notice of appeal is hereby
DENIED for not being accompanied by the required docket fees, and let
a writ of execution be issued for the enforcement of the decision.
On June 2, 1998, the RTC correspondingly issued the Writ of
Execution 10 prayed for by the respondent MBTC.
On June 11, 1998, the counsel for the petitioners informed the court by
letter that on June 9, 1998, he sent his messenger to the court to pay the docket
fees on the notice of appeal but was refused by the receiving clerk. 11 In a Letter-
Response dated June 19, 1998, the trial court instructed the counsel for the
petitioners, to wit:
In response to your letter dated June 11, 1998, please be
informed that as a matter of policy, courts do not receive payments of
docket fees. This should be made to the Office of the Clerk of Court, with
only the official receipts and/or proofs of payment filed in court to be
attached to the record of the case to be forwarded to the Court of
Appeals. Moreover, the court has already resolved all pending incidents
before it, the last one in its Order dated May 27, 1998 so that, if the
receiving clerk refused receipt of the docket fee on the nature (sic) of
appeal, it is only in consonance with the above-mentioned order. 12
On June 29, 1998, the petitioner filed with the CA a petition
for certiorari assailing the May 27, 1998 Order of the RTC for having been issued
with grave abuse of discretion amounting to lack or excess of jurisdiction. 13 In
their reply to the comment, the petitioners, for the first time, proffered to the
appellate court an explanation for their admitted failure to pay the appellate
docket fees within the prescribed reglementary period. The petitioners, thus,
averred:
6. Petitioners' failure to pay the appellate docket fee is not without
a valid explanation. At the time of the filing of Notice of Appeal,
petitioners' counsel's lone secretary, without informing in advance the
undersigned, decided to migrate to another country for "greener
pasture," leaving the undersigned the responsibility to tend to all the
cases in his office. The undersigned's operation was literally disabled
and in shambles;
7. Thus, when the undersigned discovered this inadvertence, he
immediately tried to remedy the situation and can only hope that this
Honorable Court can understand the undersigned's predicament. 14
On September 30, 1998, the CA promulgated its Decision dismissing the
petitioner's appeal. 15 The petitioner's motion for reconsideration 16 and its
supplement17 thereto was, likewise, denied by the appellate court in its
Resolution dated March 29, 1999. 18
Hence, the petition at bar.
The petitioners assail the decision of the CA grounded on the following:
A. THE APPEAL OF PETITIONER WAS DULY AND
SEASONABLY PERFECTED; HENCE, THE HON. CA ACTED WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN RENDERING THE ASSAILED DECISION (ANNEX
"M") THAT SUSTAINED THE ORDER OF THE RTC DENYING,
DISALLOWING AND DISMISSING THE APPEAL;
B. THE ORDER [OF THE RTC] DIRECTING THE EXECUTION
OF ITS JUDGMENT [BEFORE THE EXPIRY OF THE 90-DAY PERIOD
FROM RECEIPT THEREOF BY THE PETITIONERS] IS PREMATURE,
BECAUSE (1) THE COURT HAD LOST JURISDICTION OVER THE
CASE UPON THE FILING OF THE NOTICE OF APPEAL AND (2)
RULE 68 PROVIDES FOR THE PROCEDURE HOW TO ENFORCE A
JUDGMENT IN A PETITION FOR FORECLOSURE;
C. THE HONORABLE COURT OF APPEALS ERRED IN
SUSTAINING THE ORDER OF THE RTC THAT DISMISSED THE
THIRD-PARTY COMPLAINT OF PETITIONER NAVARRO AGAINST
THE ERRANT AND FRAUDULENT BRANCH MANAGER DANILO
MENESES OF RESPONDENT METROBANK;
D. THE JUDGMENT BINDING THE CONJUGAL PROPERTY OF
SPOUSES CLARITA PARAGAS AND ANTONIO NAVARRO ON THE
ALLEGED DEBT OF THE HUSBAND IS AGAINST THE LAW; 19
The petition is denied due course.
The petitioners contend that the appellate court erred in sustaining the
RTC's denial of their notice of appeal on the ground of their failure to pay the
docket and other legal fees. The petitioners aver that the payment of the said
fees is not a prerequisite for the perfection of an appeal. They contend that
having seasonably filed their notice of appeal from the RTC's January 16, 1998
Decision and March 25, 1998 Order, the appeal therefrom was deemed
perfected; thus, divesting the RTC of jurisdiction over the case. Hence, when the
RTC issued its March 25, 1998 Order, it had no jurisdiction to do so. The
petitioners cited the rulings of this Court in Santos v. Court of Appeals 20 and
in Manila Mandarin Employees Union v. NLRC 21 to bolster its stance. HAEDCT

We are not convinced. Time and time again, this Court has consistently
held that the "payment of docket fees within the prescribed period is mandatory
for the perfection of an appeal. Without such payment, the appeal is not
perfected. The appellate court does not acquire jurisdiction over the subject
matter of the action and the decision sought to be appealed from becomes final
and executory." 22
It bears stressing that appeal is not a right, but a mere statutory
privilege. 23 Corollary to this principle is that the appeal must be exercised strictly
in accordance with the provisions set by law. Rule 41 of the Rules of Court
provides that an appeal to the CA from a case decided by the RTC in the
exercise of the latter's original jurisdiction shall be taken within fifteen (15) days
from the notice of judgment or final order appealed from. Such appeal is
perfected by filing a notice of appeal thereof with the court that rendered the
judgment or final order and, by serving a copy of that notice upon the adverse
party, 24 and by paying within this same period the full amount of the appellate
court docket and other lawful fees to the clerk of court. 25
The payment of the docket fees within this period is a condition sine qua
non to the perfection of the appeal. Contrary to the petitioners' predication, the
payment of the appellate docket and other lawful fees is not a mere technicality
of law or procedure. It is an essential requirement, without which the decision or
final order appealed from would become final and executory as if no appeal was
filed at all.

We have consistently ruled that litigation is not a game of technicalities and


that every case must be prosecuted in accordance with the prescribed procedure
so that issues may be properly presented and justly resolved. 26 However, we
have also ruled that rules of procedure must be faithfully followed except only
when, for persuasive and weighting reasons, they may be relaxed to relieve a
litigant of an injustice commensurate with his failure to comply with the
prescribed procedure.Concomitant to a liberal interpretation of the rules of
procedure should be an effort on the part of the party invoking liberality to
adequately explain his failure to abide by the rules. 27
Our ruling in this case is not antithetical to our ruling in La Salette College
v. Victor Pilotin, 28 viz:
Notwithstanding the mandatory nature of the requirement of
payment of appellate docket fees, we also recognize that its strict
application is qualified by the following: first, failure to pay those fees
within the reglementary period allows only discretionary, not automatic,
dismissal; second, such power should be used by the court in
conjunction with its exercise of sound discretion in accordance with the
tenets of justice and fair play, as well as with a great deal of
circumspection in consideration of all attendant circumstances.
In Mactan Cebu International Airport Authority v. Mangubat, the
payment of the docket fees was delayed by six (6) days, but the late
payment was accepted, because the party showed willingness to abide
by the Rules by immediately paying those fees. Yambao v. Court of
Appeals, saw us again relaxing the Rules when we declared therein that
"the appellate court may extend the time for the payment of the docket
fees if appellant is able to show that there is a justifiable reason for . . .
the failure to pay the correct amount of docket fees within the prescribed
period, like fraud, accident, mistake, excusable negligence, or a similar
supervening casualty, without fault on the part of the appellant."
In the present case, the petitioners failed to establish any sufficient and
satisfactory reason to warrant a relaxation of the mandatory rule on the payment
of appellate docket and other lawful fees. The explanation given by the
petitioners' counsel for the non-payment was that his secretary, who migrated to
another country, inadvertently failed to pay the docket and other fees when she
filed the petitioners' notice of appeal with the court. The said counsel came to
know of the inadvertence only when he received a copy of the RTC's May 27,
1998 Order which denied due course to the appeal for failure to pay the required
docket fees. The explication deserves scant consideration. We have reviewed
the records and find that the petitioners failed to show how and when their
counsel's secretary left the country. Neither did the petitioners submit any
explanation why their counsel failed to ascertain immediately after April 14, 1998
if the requisite appellate docket and other lawful fees had been paid by the said
secretary before her departure.
Thus, putting the blame on the counsel's secretary for her failure to perfect
the petitioners' appeal to the CA is unjustified. As aptly declared by the appellate
court:
The reason given for movants' failure to pay the docket fees, i.e.,
that their counsel's employee had left his office has been debunked by
the Supreme Court as "a hackneyed and habitual subterfuge employed
by litigants who fail to observe the procedural requirements prescribed
by the Rules of Court. (Lanting vs. Guevarra, 27 SCRA 974) The
Supreme Court has also often repeated that the negligence of clerks
which adversely affect the case handled by lawyers, is binding upon the
latter." (Negros Stevedoring Co., Inc. vs. Court of Appeals, 162 SCRA
371.) 29
Indeed, this Court has admonished law offices to adopt a system of
distributing and receiving pleadings and notices, so that the lawyers will be
promptly informed of the status of their cases. 30 Hence, the negligence of clerks
which adversely affect the cases handled by lawyers is binding upon the latter.
IN LIGHT OF ALL THE FOREGOING, the petition is hereby DENIED. The
assailed decision of the Court of Appeals is AFFIRMED. Costs against the
petitioners.cEaDTA

SO ORDERED.
(Navarro v. Metropolitan Bank & Trust Company, G.R. No. 138031, [May 27,
|||

2004], 473 PHIL 472-482)

5. Proton Pilipinas vs. Banque Nationale de Paris, G.R. No. 151242

THIRD DIVISION

[G.R. No. 151242. June 15, 2005.]

PROTON PILIPINAS CORPORATION, AUTOMOTIVE


PHILIPPINES, ASEA ONE CORPORATION and
AUTOCORP, petitioners, vs. BANQUE NATIONALE DE
PARIS, 1 respondent.

DECISION

CARPIO MORALES, J : p

It appears that sometime in 1995, petitioner Proton Pilipinas Corporation


(Proton) availed of the credit facilities of herein respondent, Banque Nationale de
Paris (BNP). To guarantee the payment of its obligation, its co-petitioners
Automotive Corporation Philippines (Automotive), Asea One Corporation (Asea)
and Autocorp Group (Autocorp) executed a corporate guarantee 2 to the extent of
US$2,000,000.00. BNP and Proton subsequently entered into three trust receipt
agreements dated June 4, 1996, 3 January 14, 1997, 4 and April 24, 1997. 5
Under the terms of the trust receipt agreements, Proton would receive
imported passenger motor vehicles and hold them in trust for BNP. Proton would
be free to sell the vehicles subject to the condition that it would deliver the
proceeds of the sale to BNP, to be applied to its obligations to it. In case the
vehicles are not sold, Proton would return them to BNP, together with all the
accompanying documents of title.
Allegedly, Proton failed to deliver the proceeds of the sale and return the
unsold motor vehicles.
Pursuant to the corporate guarantee, BNP demanded from Automotive,
Asea and Autocorp the payment of the amount of
US$1,544,984.40 6 representing Proton's total outstanding obligations. These
guarantors refused to pay, however. Hence, BNP filed on September 7, 1998
before the Makati Regional Trial Court (RTC) a complaint against petitioners
praying that they be ordered to pay (1) US$1,544,984.40 plus accrued interest
and other related charges thereon subsequent to August 15, 1998 until fully paid
and (2) an amount equivalent to 5% of all sums due from petitioners as attorney's
fees.
The Makati RTC Clerk of Court assessed the docket fees which BNP paid
at P352,116.30 7 which was computed as follows: 8

First Cause of Action $844,674.07


Second Cause of Action 171,120.53
Third Cause of Action 529,189.80
–––––––––––––
$1,544,984.40
5% as Attorney's Fees $77,249.22
–––––––––––––
TOTAL $1,622,233.62
Conversion rate to peso x 43
–––––––––––––
TOTAL P69,756,000.00 (round-off)

Computation based on Rule 141:

COURT JDF

P69,756,000.00 P69,606,000.00
- 150,000.00 x .003
–––––––––––– –––––––––––––
69,606,000.00 208,818.00
x .002 + 450.00
–––––––––––– –––––––––––––
139,212.00 P209,268.00
+ 150.00
––––––––––––
P139,362.00
LEGAL: P139,362.00
+ 209,268.00
–––––––––––
P348,630.00 x 1% = P3,486.30
P139,362.00
+ 209,268.00
3,486.00
––––––––––
P352,116.30 — Total fees paid by the plaintiff
To the complaint, the defendants-herein petitioners filed on October 12,
1998 a Motion to Dismiss 9 on the ground that BNP failed to pay the correct
docket fees to thus prevent the trial court from acquiring jurisdiction over the
case. 10 As additional ground, petitioners raised prematurity of the complaint,
BNP not having priorly sent any demand letter. 11
By Order 12 of August 3, 1999, Branch 148 of the Makati RTC denied
petitioners' Motion to Dismiss, viz:
Resolving the first ground relied upon by the defendant, this court
believes and so hold that the docket fees were properly paid. It is the
Office of the Clerk of Court of this station that computes the correct
docket fees, and it is their duty to assess the docket fees correctly, which
they did.EICSTa

Even granting arguendo that the docket fees were not properly
paid, the court cannot just dismiss the case. The Court has not yet
ordered (and it will not in this case) to pay the correct docket fees, thus
the Motion to dismiss is premature, aside from being without any legal
basis.
As held in the case of National Steel Corporation vs. CA, G.R. No.
123215, February 2, 1999, the Supreme Court said:
xxx xxx xxx
Although the payment of the proper docket fees is a
jurisdictional requirement, the trial court may allow the plaintiff in
an action to pay the same within a reasonable time within the
expiration of applicable prescription or reglementary period. If the
plaintiff fails to comply with this requirement, the defendant should
timely raise the issue of jurisdiction or else he would be
considered in estoppel. In the latter case, the balance between
appropriate docket fees and the amount actually paid by the
plaintiff will be considered a lien or (sic) any award he may obtain
in his favor.
As to the second ground relied upon by the defendants, in that a
review of all annexes to the complaint of the plaintiff reveals that there is
not a single formal demand letter for defendants to fulfill the terms and
conditions of the three (3) trust agreements.
In this regard, the court cannot sustain the submission of
defendant. As correctly pointed out by the plaintiff, failure to make a
formal demand for the debtor to pay the plaintiff is not among the legal
grounds for the dismissal of the case. Anyway, in the appreciation of the
court, this is simply evidentiary.
xxx xxx xxx
WHEREFORE, for lack of merit, the Motion to Dismiss interposed
by the defendants is hereby DENIED. 13 (Underscoring supplied)
Petitioners filed a motion for reconsideration 14 of the denial of their Motion
to Dismiss, but it was denied by the trial court by Order 15 of October 3, 2000.
Petitioners thereupon brought the case on certiorari and mandamus 16 to
the Court of Appeals which, by Decision 17 of July 25, 2001, denied it in this wise:
. . . Section 7(a) of Rule 141 of the Rules of Court excludes
interest accruing from the principal amount being claimed in the pleading
in the computation of the prescribed filing fees. The complaint was
submitted for the computation of the filing fee to the Office of the Clerk of
Court of the Regional Trial Court of Makati City which made an
assessment that respondent paid accordingly. What the Office of the
Clerk of Court did and the ruling of the respondent Judge find support in
the decisions of the Supreme Court in Ng Soon vs. Alday and Tacay vs.
RTC of Tagum, Davao del Norte. In the latter case, the Supreme Court
explicitly ruled that "where the action is purely for recovery of money or
damages, the docket fees are assessed on the basis of the aggregate
amount claimed, exclusive only of interests and costs."
Assuming arguendo that the correct filing fees was not made, the
rule is that the court may allow a reasonable time for the payment of the
prescribed fees, or the balance thereof, and upon such payment, the
defect is cured and the court may properly take cognizance of the action
unless in the meantime prescription has set in and consequently barred
the right of action. Here respondent Judge did not make any finding, and
rightly so, that the filing fee paid by private respondent was insufficient.
On the issue of the correct dollar-peso rate of exchange, the
Office of the Clerk of Court of the RTC of Makati pegged it at P43.21 to
US$1. In the absence of any office guide of the rate of exchange which
said court functionary was duty bound to follow, the rate he applied is
presumptively correct. THADEI

Respondent Judge correctly ruled that the matter of demand letter


is evidentiary and does not form part of the required allegations in a
complaint. Section 1, Rule 8 of the 1997 Rules of Civil Procedure
pertinently provides:
"Every pleading shall contain in a methodical and logical
form, a plain, concise and direct statement of the ultimate facts on
which the party pleading relies for his claim or defense, as the
case may be, omitted the statement of mere evidentiary facts."
Judging from the allegations of the complaint particularly
paragraphs 6, 12, 18, and 23 where allegations of imputed demands
were made upon the defendants to fulfill their respective obligations,
annexing the demand letters for the purpose of putting up a sufficient
cause of action is not required.
In fine, respondent Judge committed no grave abuse of discretion
amounting to lack or excess of jurisdiction to
warrant certiorari and mandamus. 18(Underscoring supplied)
Their Motion for Reconsideration 19 having been denied by the Court of
Appeals, 20 petitioners filed the present petition for review on certiorari 21 and
pray for the following reliefs:
WHEREFORE, in view of all the foregoing, it is most respectfully
prayed of this Honorable Court to grant the instant petition by
REVERSING and SETTING ASIDE the questioned Decision of July 25,
2001 and the Resolution of December 18, 2001 for being contrary to law,
to Administrative Circular No. 11-94 and Circular No. 7 and instead
direct the court a quo to require Private Respondent Banque to pay the
correct docket fee pursuant to the correct exchange rate of the dollar to
the peso on September 7, 1998 and to quantify its claims for interests on
the principal obligations in the first, second and third causes of actions in
its Complaint in Civil Case No. 98-2180. 22 (Underscoring supplied)
Citing Administrative Circular No. 11-94, 23 petitioners argue that BNP
failed to pay the correct docket fees as the said circular provides that in the
assessment thereof, interest claimed should be included. There being an
underpayment of the docket fees, petitioners conclude, the trial court did not
acquire jurisdiction over the case.
Additionally, petitioners point out that the clerk of court, in converting
BNP's claims from US dollars to Philippine pesos, applied the wrong exchange
rate of US $1 = P43.00, the exchange rate on September 7, 1998 when the
complaint was filed having been pegged at US $1 = P43.21. Thus, by petitioners'
computation, BNP's claim as of August 15, 1998 was actually
P70,096,714.72, 24 not P69,756,045.66.
Furthermore, petitioners submit that pursuant to Supreme Court Circular
No. 7, 25 the complaint should have been dismissed for failure to specify the
amount of interest in the prayer.
Circular No. 7 reads:
TO: JUDGES AND CLERKS OF COURT OF THE COURT OF TAX
APPEALS, REGIONAL TRIAL COURTS,
METROPOLITAN TRIAL COURTS IN CITIES,
MUNICIPAL TRIAL COURTS, MUNICIPAL CIRCUIT
TRIAL COURTS, SHARI'A DISTRICT COURTS; AND THE
INTEGRATED BAR OF THE PHILIPPINES
SUBJECT: ALL COMPLAINTS MUST SPECIFY AMOUNT OF
DAMAGES SOUGHT NOT ONLY IN THE BODY OF THE
PLEADING, BUT ALSO IN THE PRAYER IN ORDER TO
BE ACCEPTED AND ADMITTED FOR FILING. THE
AMOUNT OF DAMAGES SO SPECIFIED IN THE
COMPLAINT SHALL BE THE BASIS FOR ASSESSING
THE AMOUNT OF THE FILING FEES. IaEHSD

In Manchester Development Corporation vs. Court of Appeals,


No. L-75919, May 7, 1987, 149 SCRA 562, this Court condemned the
practice of counsel who in filing the original complaint omitted from the
prayer any specification of the amount of damages although the amount
of over P78 million is alleged in the body of the complaint. This Court
observed that "(T)his is clearly intended for no other purpose than to
evade the payment of the correct filing fees if not to mislead the docket
clerk, in the assessment of the filing fee. This fraudulent practice was
compounded when, even as this Court had taken cognizance of the
anomaly and ordered an investigation, petitioner through another
counsel filed an amended complaint, deleting all mention of the amount
of damages being asked for in the body of the complaint. . . ."
For the guidance of all concerned, the WARNING given by the
court in the afore-cited case is reproduced hereunder:
"The Court serves warning that it will take drastic action
upon a repetition of this unethical practice.
To put a stop to this irregularity, henceforth all complaints,
petitions, answers and other similar pleadings should specify
the amount of damages being prayed for not only in the body
of the pleading but also in the prayer, and said damages
shall be considered in the assessment of the filing fees in
any case. Any pleading that fails to comply with this
requirement shall not be accepted nor admitted, or shall
otherwise be expunged from the record.
The Court acquires jurisdiction over any case only upon
the payment of the prescribed docket fee. An amendment of the
complaint or similar pleading will not thereby vest jurisdiction in
the Court, much less the payment of the docket fee based on the
amount sought in the amended pleading. The ruling in the
Magaspi case (115 SCRA 193) in so far as it is inconsistent with
this pronouncement is overturned and reversed."
Strict compliance with this Circular is hereby enjoined.
Let this be circularized to all the courts hereinabove named and to
the President and Board of Governors of the Integrated Bar of the
Philippines, which is hereby directed to disseminate this Circular to all its
members.
March 24, 1988.
(Sgd). CLAUDIO TEEHANKEE
Chief Justice
(Emphasis and underscoring supplied)
On the other hand, respondent maintains that it had paid the filing fee
which was assessed by the clerk of court, and that there was no violation of
Supreme Court Circular No. 7 because the amount of damages was clearly
specified in the prayer, to wit:
2. On the FIRST CAUSE OF ACTION —
(c) Defendant PROTON be ordered to pay the sum of (i) US
DOLLARS EIGHT HUNDRED FORTY FOUR THOUSAND SIX
HUNDRED SEVENTY FOUR AND SEVEN CENTS (US$ 844,674.07),
plus accrued interests and other related charges thereon subsequent to
August 15, 1998, until fully paid; and (ii) an amount equivalent to 5% of
all sums due from said Defendant, as and for attorney's fees;
3. On the SECOND CAUSE OF ACTION —
(d) Defendant PROTON be ordered to pay the sum of (i) US
DOLLARS ONE HUNDRED TWENTY AND FIFTY THREE CENTS
(US$171,120.53), plus accrued interests and other related charges
thereon subsequent to August 15, 1998 until fully paid; and (ii) an
amount equivalent to 5% of all sums due from said Defendant, as and
for attorney's fees;
DHAcET

4. On the THIRD CAUSE OF ACTION —


(e) Defendant PROTON be ordered to pay the sum of (i) US
DOLLARS FIVE HUNDRED TWENTY NINE THOUSAND ONE
HUNDRED EIGHTY NINE AND EIGHTY CENTS (US$529,189.80), plus
accrued interests and other related charges thereon subsequent to
August 15, 1998 until fully paid; and (ii) an amount equivalent to 5% or
all sums due from said Defendant, as and for attorney's fees;
5. On ALL THE CAUSES OF ACTION —
Defendants AUTOMOTIVE CORPORATION PHILIPPINES,
ASEA ONE CORPORATION and AUTOCORP GROUP to be ordered to
pay Plaintiff BNP the aggregate sum of (i) US DOLLARS ONE MILLION
FIVE HUNDRED FORTY FOUR THOUSAND NINE HUNDRED EIGHTY
FOUR AND FORTY CENTS (US$1,544,984.40) (First through Third
Causes of Action), plus accrued interest and other related charges
thereon subsequent to August 15, 1998 until fully paid; and (ii) an
amount equivalent to 5% of all sums due from said Defendants, as and
for attorney's fees. 26
Moreover, respondent posits that the amount of US$1,544,984.40
represents not only the principal but also interest and other related charges
which had accrued as of August 15, 1998. Respondent goes even further by
suggesting that in light of Tacay v. Regional Trial Court of Tagum, Davao del
Norte 27 where the Supreme Court held,
Where the action is purely for the recovery of money or damages,
the docket fees are assessed on the basis of the aggregate amount
claimed, exclusive only of interests and costs. 28 (Emphasis and
underscoring supplied),
it made an overpayment.
When Tacay was decided in 1989, the pertinent rule applicable was
Section 5 (a) of Rule 141 which provided for the following:
SEC. 5. Clerks of Regional Trial Courts. — (a) For filing an action
or proceeding, or a permissive counter-claim or cross-claim not arising
out of the same transaction subject of the complaint, a third-party
complaint and a complaint in intervention and for all services in the
same, if the sum claimed, exclusive of interest, of the value of the
property in litigation, or the value of the estate, is:
1. Less than P5,000.00 P32.00
2. P5,000.00 or more but less than P10,000.00 48.00
3. P10,000.00 or more but less than P20,000.00 64.00
4. P20,000.00 or more but less than P40,000.00 80.00
5. P40,000.00 or more but less than P60,000.00 120.00
6. P60,000.00 or more but less than P80,000.00 160.00
7. P80,000.00 or more but less than P150,000.00 200.00
8. And for each P1,000.00 in excess of P150,000.00 4.00
9. When the value of the case cannot be estimated 400.00
10. When the case does not concern property
(naturalization, adoption, legal separation, etc.) 64.00
11. In forcible entry and illegal detainer cases appealed
from inferior courts 40.00
If the case concerns real estate, the assessed value thereof shall
be considered in computing the fees. cSIHCA

In case the value of the property or estate or the sum claim is less
or more in accordance with the appraisal of the court, the difference of
fees shall be refunded or paid as the case may be.
When the complaint in this case was filed in 1998, however, as correctly
pointed out by petitioners, Rule 141 had been amended by Administrative
Circular No. 11-94 29 which provides:
BY RESOLUTION OF THE COURT, DATED JUNE 28, 1994,
PURSUANT TO SECTION 5 (5) OF ARTICLE VIII OF THE
CONSTITUTION, RULE 141, SECTION 7 (a) AND (d), and SECTION 8
(a) and (b) OF THE RULES OF COURT ARE HEREBY AMENDED TO
READ AS FOLLOWS:
RULE 141
LEGAL FEES
xxx xxx xxx
Sec. 7. Clerks of Regional Trial Courts
(a) For filing an action or a permissive counterclaim or money
claim against an estate not based on judgment, or for filing with leave of
court a third-party, fourth-party, etc. complaint, or a complaint in
intervention, and for all clerical services in the same, if the total sum
claimed, inclusive of interest, damages of whatever kind, attorney's
fees, litigation expenses, and costs, or the stated value of the
property in litigation, is:
1. Not more than P100,000.00 P400.00
2. P100,000.00, or more but not more than P150,000.00 600.00
3. For each P1,000.00 in excess of P150,000.00 5.00
xxx xxx xxx
Sec. 8. Clerks of Metropolitan and Municipal Trial Courts
(a) For each civil action or proceeding, where the value of the
subject matter involved, or the amount of the demand, inclusive of
interest, damages or whatever kind, attorney's fees, litigation
expenses, and costs, is:
1. Not more than P20,000.00 P120.00
2. More than P20,000.00 but not more than P100,000.00 400.00
3. More than P100,000.00 but not more than P200,000.00 850.00
(Emphasis and underscoring supplied)
The clerk of court should thus have assessed the filing fee by taking into
consideration "the total sum claimed, inclusive of interest, damages of whatever
kind, attorney's fees, litigation expenses, and costs, or the stated value of the
property in litigation." Respondent's and the Court of Appeals' reliance then
on Tacay was not in order.
Neither was, for the same reason, the Court of Appeals' reliance on
the 1989 case of Ng Soon v. Alday, 30 where this Court held:
. . . The failure to state the rate of interest demanded was not
fatal not only because it is the Courts which ultimately fix the same, but
also because Rule 141, Section 5(a) of the Rules of Court, itemizing
the filing fees, speaks of "the sum claimed, exclusive of interest."
This clearly implies that the specification of the interest rate is not
that indispensable.
Factually, therefore, not everything was left to "guesswork" as
respondent Judge has opined. The sums claimed were ascertainable,
sufficient enough to allow a computation pursuant to Rule 141, section
5(a).
Furthermore, contrary to the position taken by respondent
Judge, the amounts claimed need not be initially stated with
mathematical precision. The same Rule 141, section 5(a) (3rd
paragraph), allows an appraisal "more or less." 31 Thus:

"In case the value of the property or estate or the sum claimed is
less or more in accordance with the appraisal of the court, the difference
of fee shall be refunded or paid as the case may be."
In other words, a final determination is still to be made by the
Court, and the fees ultimately found to be payable will either be
additionally paid by the party concerned or refunded to him, as the case
may be. The above provision clearly allows an initial payment of the filing
fees corresponding to the estimated amount of the claim subject to
adjustment as to what later may be proved.
". . . there is merit in petitioner's claim that the third paragraph of
Rule 141, Section 5(a) clearly contemplates a situation where an amount
is alleged or claimed in the complaint but is less or more than what is
later proved. If what is proved is less than what was claimed, then a
refund will be made; if more, additional fees will be exacted. Otherwise
stated, what is subject to adjustment is the difference in the fee and not
the whole amount" (Pilipinas Shell Petroleum Corp., et als., vs. Court of
Appeals, et als., G.R. No. 76119, April 10, 1989). 32 (Emphasis and
underscoring supplied) IaEACT

Respecting the Court of Appeals' conclusion that the clerk of court did not
err when he applied the exchange rate of US$1 = P43.00 "[i]n the absence of any
office guide of the rate of exchange which said court functionary was duty bound
to follow,[hence,] the rate he applied is presumptively correct," the same does not
lie. The presumption of regularity of the clerk of court's application of the
exchange rate is not conclusive. 33 It is disputable. 34 As such, the presumption
may be overturned by the requisite rebutting evidence. 35 In the case at bar,
petitioners have adequately proven with documentary evidence 36 that the
exchange rate when the complaint was filed on September 7, 1998 was US$1 =
P43.21.
In fine, the docket fees paid by respondent were insufficient.
With respect to petitioner's argument that the trial court did not acquire
jurisdiction over the case in light of the insufficient docket fees, the same does
not lie.
True, in Manchester Development Corporation v. Court of Appeals, 37 this
Court held that the court acquires jurisdiction over any case only upon the
payment of the prescribed docket fees, 38 hence, it concluded that the trial court
did not acquire jurisdiction over the case.
It bears emphasis, however, that the ruling in Manchester was clarified
in Sun Insurance Office, Ltd. (SIOL) v. Asuncion 39 when this Court held that in
the former there was clearly an effort to defraud the government in avoiding to
pay the correct docket fees, whereas in the latter the plaintiff demonstrated his
willingness to abide by paying the additional fees as required.
The principle in Manchester could very well be applied in the
present case. The pattern and the intent to defraud the government of
the docket fee due it is obvious not only in the filing of the original
complaint but also in the filing of the second amended complaint.
However, in Manchester, petitioner did not pay any additional
docket fee until the case was decided by this Court on May 7,
1987. Thus, in Manchester, due to the fraud committed on the
government, this Court held that the court a quo did not acquire
jurisdiction over the case and that the amended complaint could
not have been admitted inasmuch as the original complaint was
null and void.
In the present case, a more liberal interpretation of the rules
is called for considering that, unlike Manchester, private
respondent demonstrated his willingness to abide by the rules by
paying the additional docket fees as required. The promulgation of
the decision in Manchester must have had that sobering influence on
private respondent who thus paid the additional docket fee as ordered by
the respondent court. It triggered his change of stance by manifesting his
willingness to pay such additional docket fee as may be ordered.
Nevertheless, petitioners contend that the docket fee that was
paid is still insufficient considering the total amount of the claim. This is a
matter which the clerk of court of the lower court and/or his duly
authorized docket clerk or clerk in charge should determine and,
thereafter, if any amount is found due, he must require the private
respondent to pay the same.
Thus, the Court rules as follows:
1. It is not simply the filing of the complaint or appropriate
initiatory pleading, but the payment of the prescribed docket fee, that
vests a trial court with jurisdiction over the subject-matter or nature of the
action. Where the filing of the initiatory pleading is not accompanied by
payment of the docket fee, the court may allow payment of the fee within
a reasonable time but in no case beyond the applicable prescriptive or
reglementary period.
2. The same rule applies to permissive counterclaims, third-party
claims and similar pleadings, which shall not be considered filed until
and unless the filing fee prescribed therefor is paid. The court may also
allow payment of said fee within a reasonable time but also in no case
beyond its applicable prescriptive or reglementary period. ASHaTc

3. Where the trial court acquires jurisdiction over a claim by the


filing of the appropriate pleading and payment of the prescribed filing fee
but, subsequently, the judgment awards a claim not specified in the
pleading, or if specified the same has been left for determination by the
court, the additional filing fee therefor shall constitute a lien on the
judgment. It shall be the responsibility of the Clerk of Court or his duly
authorized deputy to enforce said lien and assess and collect the
additional fee. 40 (Emphasis and underscoring supplied)
The ruling in Sun Insurance Office was echoed in the 2005 case of Heirs of
Bertuldo Hinog v. Hon. Achilles Melicor: 41
Plainly, while the payment of the prescribed docket fee is a
jurisdictional requirement, even its non-payment at the time of filing does
not automatically cause the dismissal of the case, as long as the fee is
paid within the applicable prescriptive or reglementary period, more so
when the party involved demonstrates a willingness to abide by the rules
prescribing such payment. Thus, when insufficient filing fees were
initially paid by the plaintiffs and there was no intention to defraud
the government, the Manchester rule does not apply. (Emphasis and
underscoring supplied; citations omitted)
In the case at bar, respondent merely relied on the assessment made by
the clerk of court which turned out to be incorrect. Under the circumstances, the
clerk of court has the responsibility of reassessing what respondent must pay
within the prescriptive period, failing which the complaint merits dismissal.
Parenthetically, in the complaint, respondent prayed for "accrued interest .
. . subsequent to August 15, 1998 until fully paid." The complaint having been
filed on September 7, 1998, respondent's claim includes the interest from August
16, 1998 until such date of filing.
Respondent did not, however, pay the filing fee corresponding to its claim
for interest from August 16, 1998 until the filing of the complaint on September 7,
1998. As priorly discussed, this is required under Rule 141, as amended
by Administrative Circular No. 11-94, which was the rule applicable at the time.
Thus, as the complaint currently stands, respondent cannot claim the interest
from August 16, 1998 until September 7, 1998, unless respondent is allowed by
motion to amend its complaint within a reasonable time and specify the precise
amount of interest petitioners owe from August 16, 1998 to September 7,
1998 42 and pay the corresponding docket fee therefor.
With respect to the interest accruing after the filing of the complaint, the
same can only be determined after a final judgment has been handed down.
Respondent cannot thus be made to pay the corresponding docket fee
therefor. Pursuant, however, to Section 2, Rule 141, as amended
by Administrative Circular No. 11-94, respondent should be made to pay
additional fees which shall constitute a lien in the event the trial court adjudges
that it is entitled to interest accruing after the filing of the complaint.
Sec. 2. Fees as lien. — Where the court in its final judgment
awards a claim not alleged, or a relief different or more than that claimed
in the pleading, the party concerned shall pay the additional fees which
shall constitute a lien on the judgment in satisfaction of said lien. The
clerk of court shall assess and collect the corresponding fees.
In Ayala Corporation v. Madayag, 43 in interpreting the third rule laid down
in Sun Insurance regarding awards of claims not specified in the pleading, this
Court held that the same refers only to damages arising after the filing of the
complaint or similar pleading as to which the additional filing fee therefor
shall constitute a lien on the judgment.
. . . The amount of any claim for damages, therefore, arising on or
before the filing of the complaint or any pleading should be specified.
While it is true that the determination of certain damages as exemplary
or corrective damages is left to the sound discretion of the court, it is the
duty of the parties claiming such damages to specify the amount sought
on the basis of which the court may make a proper determination, and
for the proper assessment of the appropriate docket fees. The
exception contemplated as to claims not specified or to claims
although specified are left for determination of the court is limited
only to any damages that may arise after the filing of the complaint
or similar pleading for then it will not be possible for the claimant to
specify nor speculate as to the amount thereof. 44 (Emphasis and
underscoring supplied; citation omitted) DaIACS

WHEREFORE, the petition is GRANTED in part. The July 25, 2001


Decision and the December 18, 2001 Resolution of the Court Appeals are hereby
MODIFIED. The Clerk of Court of the Regional Trial Court of Makati City is
ordered to reassess and determine the docket fees that should be paid by
respondent, BNP, in accordance with the Decision of this Court, and direct
respondent to pay the same within fifteen (15) days, provided the applicable
prescriptive or reglementary period has not yet expired. Thereafter, the trial court
is ordered to proceed with the case with utmost dispatch.
SO ORDERED.
(Proton Pilipinas Corp. v. Banque Nationale de Paris, G.R. No. 151242,
|||

[June 15, 2005], 499 PHIL 247-267)

6. Bautista v Unangat 557 SCRA 256

THIRD DIVISION

[G.R. No. 173002. July 4, 2008.]

BENJAMIN BAUTISTA, petitioner, vs. SHIRLEY G. UNANGST


and OTHER UNKNOWN PERSONS, respondents.

DECISION

REYES, R.T., J : p

THE presumption of equitable mortgage imposes a burden on the buyer


to present clear evidence to rebut it. He must overthrow it, lest it persist. 1 To
overturn thatprima facie presumption, the buyer needs to adduce substantial
and credible evidence to prove that the contract was a bona fide deed of sale
with right to repurchase.
This petition for review on certiorari impugns the Decision 2 of the Court
of Appeals (CA) in CA-G.R. CV No. 85942 3 which reversed and set aside
that 4 of the Regional Trial Court (RTC) in an action for specific performance
or recovery of possession, for sum of money, for consolidation of ownerships
and damages.
The Facts
On November 15, 1996, Hamilton Salak rented a car from GAB Rent-A-
Car, a car rental shop owned by petitioner Benjamin Bautista. The lease was
for three (3) consecutive days at a rental fee of P1,000.00 per day. 5 However,
Salak failed to return the car after three (3) days prompting petitioner to file a
complaint against him for estafa, violation of Batas Pambansa Blg. 22 and
carnapping. 6
On February 2, 1997, Salak and his common-law wife, respondent
Shirley G. Unangst, were arrested by officers of the Criminal Investigation
Service Group (CISG) of the Philippine National Police while riding the rented
car along Quezon City. The next day, petitioner demanded from Salak at the
CISG Office the sum of P232,372.00 as payment for car rental fees, fees
incurred in locating the car, attorney's fees, capital gains tax, transfer tax, and
other incidental expenses. 7 EcDTIH

Salak and respondent expressed willingness to pay but since they were
then short on cash, Salak proposed to sell to petitioner a house and lot titled
in the name of respondent. Petitioner welcomed the proposal after consulting
his wife, Cynthia. Cynthia, on the other hand, further agreed to pay the
mortgage loan of respondent over the subject property to a certain Jojo Lee in
the amount of P295,000.00 as the property was then set to be publicly
auctioned on February 17, 1997.8
To formalize their amicable settlement, Cynthia, Salak and respondent
executed a written agreement. 9 They stipulated that respondent would sell,
subject to repurchase, her residential property in favor of Cynthia for the total
amount of P527,372.00 broken down, as follows: (1) P295,000.00 for the
amount paid by Cynthia to Lee to release the mortgage on the property; and
(2) P232,372.00, which is the amount due to GAB Rent-A-Car. Cynthia also
agreed to desist from pursuing the complaint against Salak and respondent. 10
Respondent and petitioner also executed a separate deed of sale with
right to repurchase, 11 specifying, among others, that: (1) respondent, as
vendor, shall pay capital gains tax, current real estate taxes and utility bills
pertaining to the property; (2) if respondent fails to repurchase the property
within 30 days from the date of the deed, she and her assigns shall
immediately vacate the premises and deliver its possession to petitioner
without need of a judicial order; and (3) respondent's refusal to do so will
entitle petitioner to take immediate possession of the property. 12
Respondent failed to repurchase the property within the stipulated
period. As a result, petitioner filed, on June 5, 1998, a complaint for specific
performance or recovery of possession, for sum of money, for consolidation of
ownership and damages against respondent and other unnamed persons
before the RTC of Olongapo City. 2005jur

In his complaint, 13 petitioner alleged, among others, that after


respondent failed to repurchase the subject realty, he caused the registration
of the deed of sale with the Register of Deeds and the transfer of the tax
declarations in his name; that respondent failed to pay the capital gains taxes
and update the real estate taxes forcing him to pay said amounts in the sum
of P71,129.05 and P11,993.72, respectively; and that respondent violated the
terms of the deed when she, as well as the other unnamed persons, refused
to vacate the subject property despite repeated demands. 14
Petitioner prayed before the RTC that an order be issued in his favor
directing respondents to: (1) surrender the possession of the property; (2) pay
P150,000.00 for the reasonable compensation for its use from March 7, 1997
to June 7, 1998, plus P10,000.00 per month afterward; (3) pay the amount
advanced by petitioner, to wit: P71,129.05 and P11,993.72 for the payment of
capital gains tax and real estate taxes, respectively; and P70,000.00 for
attorney's fees. 15
On June 16, 1998, petitioner filed an amended complaint, 16 reiterating
his previous allegations but with the added prayer for consolidation of
ownership pursuant to Article 1607 of the Civil Code. 17
On the other hand, respondents controverted the allegations in the
complaint and averred in their Answer, 18 among others, that plaintiff had no
cause of action inasmuch as respondent Unangst signed the subject deed of
sale under duress and intimidation employed by petitioner and his cohorts;
that, assuming that her consent was freely given, the contract of sale was
simulated and fictitious since the vendor never received the stipulated
consideration; that the sale should be construed as an equitable mortgage
pursuant to Articles 1602 and 1604 of the Civil Code because of its onerous
conditions and shockingly low consideration; that their indebtedness in the
form of arrears in car rentals merely amounts to P90,000.00; and that the
instant action was premature as plaintiff had not yet consolidated ownership
over the property. Defendants counterclaimed for moral damages in the
amount of P500,000.00 and attorney's fees in the amount of P50,000.00, plus
P500.00 per appearance. 19
On July 29, 2004, after due proceedings, the RTC rendered a decision
in favor of petitioner, disposing as follows: aHATDI

WHEREFORE, judgment is rendered finding the Deed of Sale


with Right to Repurchase (Exh. "C") as, indeed, a document of sale
executed by the defendant in favor of the plaintiff covering the parcel of
land house (sic) situated at Lot 3-B, Blk. 10, Waterdam Road, Gordon
Heights, Olongapo City, declared under Tax Declaration Nos. 004-
7756R and 7757R (Exhs. "I" and "I-1"). The defendant and any person
taking rights from her is (sic) ordered to immediately vacate from the
place and turn over its possession to the plaintiff. They are likewise
directed not to remove any part of the building on the lot.
The ownership of the said property is properly consolidated in
the name of the plaintiff.
The defendant is further ordered to pay to the plaintiff the
amount of P10,000.00 a month from March 7, 1997 up to the time
possession of the lot and house is restored to the plaintiff representing
the reasonable value for the use of the property; the amount of
P71,129.05 representing the payment made by the plaintiff on the
capital gain taxes and the further amount of P70,000.00 for attorney's
fees and the costs of suit. AaIDCS

SO ORDERED. 20
Respondents failed to interpose a timely appeal. However, on
September 10, 2004, respondent Unangst filed a petition for relief pursuant to
Section 38 of the 1997 Rules on Civil Procedure. She argued that she learned
of the decision of the RTC only on September 6, 2004 when she received a
copy of the motion for execution filed by petitioner. 21
Petitioner, on the other hand, moved for the dismissal of respondent's
petition on the ground that the latter paid an insufficient sum of P200.00 as
docket fees. 22
It appears that respondent Unangst initially paid P200.00 as docket
fees as this was the amount assessed by the Clerk of Court of the
RTC. 23 Said amount was insufficient as the proper filing fees amount to
P1,715.00. Nevertheless, the correct amount was subsequently paid by said
respondent on February 22, 2005. 24
In their comment, 25 respondents countered that they should not be
faulted for paying deficient docket fees as it was due to an erroneous
assessment of the Clerk of Court. 26
The RTC granted the petition for relief. Subsequently, it directed
respondents to file a notice of appeal within twenty-four (24) hours from
receipt of the order.27 Accordingly, on February 23, 2005, respondents filed
their notice of appeal. 28
Respondents contended before the CA that the RTC erred in: (1) not
annulling the deed of sale with right to repurchase; (2) declaring that the deed
of sale with right to repurchase is a real contract of sale; (3) ordering the
consolidation of ownership of the subject property in the name of
petitioner. 29 They argued that respondent Unangst's consent to the deed of
sale with right to repurchase was procured under duress and that even
assuming that her consent was freely given, the contract partakes of the
nature of an equitable mortgage. 30
On the other hand, petitioner insisted, among others, that although the
petition for relief of respondents was filed on time, the proper filing fees for
said petition were paid beyond the 60-day reglementary period. He posited
that jurisdiction is acquired by the court over the action only upon full payment
of prescribed docket fees. 31 IAEcaH

CA Disposition
In a Decision 32 dated April 7, 2006, the CA reversed and set aside the
RTC judgment. 33 The dispositive part of the appellate court's decision reads,
thus:
IN VIEW OF ALL THE FOREGOING, the instant appeal is
hereby GRANTED, the challenged Decision dated July 29, 2004
hereby (sic) REVERSED and SET ASIDE, and a new one entered
declaring the Deed of Sale With Right of Repurchase dated February
4, 1997 as an equitable mortgage. No cost.
SO ORDERED. 34
The CA declared that the Deed of Sale with Right of Repurchase
executed by the parties was an equitable mortgage. On the procedural aspect
pertaining to the petition for relief filed by respondent Unangst, the CA ruled
that "the trial court, in opting to apply the rules liberally, cannot be faulted for
giving due course to the questioned petition for relief which enabled
appellants to interpose the instant appeal." 35 It ratiocinated:
Appellee recognizes the timely filing of appellants' petition for
relief to be able to appeal judgment but nonetheless points out that the
proper filing fees were paid beyond the 60-day reglementary period.
Arguing that the court acquires jurisdiction over the action only upon
full payment of the prescribed docket fees, he submits that the trial
court erred in granting appellants' petition for relief despite the late
payment of the filing fees.
While this Court is fully aware of the mandatory nature of the
requirement of payment of appellate docket fee, the High Court has
recognized that its strict application is qualified by the following: first,
failure to pay those fees within the reglementary period allows only
discretionary, not automatic, dismissal; second, such power should be
used by the court in conjunction with its exercise of sound discretion in
accordance with the tenets of justice and fair play, as well as with a
great deal of circumspection in consideration of all attendant
circumstances ( Meatmasters International Corporation v. Lelis
Integrated Development Corporation,452 SCRA 626 [2005], citing La
Salette College v. Pilotin, 418 SCRA 380 [2003]). DHEcCT

Applied in the instant case, the docket fees were admittedly paid
only on February 22, 2005, or a little less than two (2) months after the
period for filing the petition lapsed. Yet, this matter was sufficiently
explained by appellants. The records bear out that appellants initially
paid P200.00 as docket fees because this was the amount assessed
by the Clerk of Court of the RTC of Olongapo City (p. 273, Records).
As it turned out, the fees paid was insufficient, the proper filing fees
being P1,715.00, which was eventually paid by appellants on February
1, 2005 (p. 296, Records). As such, appellants cannot be faulted for
their failure to pay the proper docket fees for, given the prevailing
circumstances, such failure was clearly not a dilatory tactic nor
intended to circumvent the Rules of Court. On the contrary, appellants
demonstrated their willingness to pay the docket fees when they
subsequently paid on the same day they were assessed the correct
fees (p. 299, Records). Notably, in Yambao v. Court of Appeals (346
SCRA 141 [2000]), the High Court declared therein that "the appellate
court may extend the time for the payment of the docket fees if
appellants is able to show that there is a justifiable reason for his
failure to pay the correct amount of docket fees within the prescribed
period, like fraud, accident, mistake, excusable negligence, or a similar
supervening casualty, without fault on the part of appellant." Verily, the
trial court, in opting to apply the rules liberally, cannot be faulted for
giving due course to the questioned petition for relief which enabled
appellants to interpose the instant appeal. 36
On the substantial issues, the CA concluded that "While the records is
bereft of any proof or evidence that appellee employed unlawful or improper
pressure against appellant Unangst to give her consent to the contract of sale,
there is, nevertheless, sufficient basis to hold the subject contract as one of
equitable mortgage." 37 It explained: TaDAHE

Jurisprudence has consistently held that the nomenclature used


by the contracting parties to describe a contract does not determine its
nature. The decisive factor in determining the true nature of the
transaction between the parties is the intent of the parties, as shown
not necessarily by the terminology used in the contract but by all the
surrounding circumstances, such as the relative situations of the
parties at that time; the attitudes, acts, conduct, and declarations of the
parties; the negotiations between them leading to the deed; and
generally, all pertinent facts having a tendency to fix and determine the
real nature of their design and understanding ( Legaspi v. Ong, 459
SCRA 122 [2005]).
It must be stressed, however, that there is no conclusive test to
determine whether a deed absolute on its face is really a simple loan
accommodation secured by a mortgage. In fact, it is often a question
difficult to resolve and is frequently made to depend on the surrounding
circumstances of each case. When in doubt, courts are generally
inclined to construe a transaction purporting to be a sale as an
equitable mortgage, which involves a lesser transmission of rights and
interests over the property in controversy (Legaspi, ibid.).
Article 1602 of the Civil Code enumerates the instances where a
contract shall be presumed to be an equitable mortgage when — (a)
the price of a sale with right to repurchase is unusually inadequate; (b)
the vendor remains in possession as lessee or otherwise; (c) upon or
after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is
executed; (d) the purchaser retains for himself a part of the purchase
price; (e) the vendor binds himself to pay taxes on the thing sold; and,
(f) in any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the payment
of a debt or the performance of any other obligation ( Legaspi, supra;
Martinez v. Court of Appeals, 358 SCRA 38 [2001]).
For the presumption of an equitable mortgage to arise under
Article 1602, two (2) requisites must concur: (a) that the parties
entered into a contract denominated as a contract of sale; and, (b) that
their intention was to secure an existing debt by way of a mortgage.
Any of the circumstance laid out in Article 1602, not the concurrence
nor an overwhelming number of the circumstances therein
enumerated, suffices to construe a contract of sale to be one of
equitable mortgage ( Lorbes v. Court of Appeals, 351 SCRA 716
[2001]).IESTcD

Applying the foregoing considerations in the instant case, there


is hardly any doubt that the true intention of the parties is that the
transaction shall secure the payment of a debt. It is not contested that
before executing the subject deed, Unangst and Salak were under
police custody and were sorely pressed for money. Such urgent
prospect of prolonged detention helps explain why appellants would
subscribe to an agreement like the deed in the instant case. This might
very well explain appellants' insistence that Unangst was not truly free
when she signed the questioned deed. Besides, there is no gainsaying
that when appellee allowed appellants to retain possession of the
realty sold for 30 days, as part of the agreement, that period of time
surely signaled a time allotted to Salak and Unangst, as debtors, within
which to pay their mortgage indebtedness.
The High Court, in several cases involving similar situations,
has declared that "while it was true that plaintiffs were aware of the
contents of the contracts, the preponderance of the evidence showed,
however, that they signed knowing that said contracts did not express
their real intention, and if they did so notwithstanding this, it was due to
the urgent necessity of obtaining funds. Necessitous men are not, truly
speaking, free men; but to answer a present emergency, will submit to
any terms that the crafty may impose upon them" ( Lorbes, ibid.; Reyes
v. Court of Appeals, 339 SCRA 97 [2000]; Lao v. Court of Appeals, 275
SCRA 237 [1997]; Zamora v. Court of Appeals, 260 SCRA 10
[1996]; Labasan v. Lacuesta, 86 SCRA 16 [1978]).
After all, Article 1602(6) provides that a contract of sale with
right to repurchase is presumed to be an equitable mortgage in any
other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the
performance of any obligation. In fine, a careful review of the records
convincingly shows that the obtaining facts in this case qualify the
controversial agreement between the parties as an equitable mortgage
under Article 1602 of the New Civil Code. 38
Issues
Petitioner has resorted to the present recourse under Rule 45,
assigning to the CA the following errors:
(a) The Honorable Court of Appeals committed grave error in
finding that the respondent perfected an appeal via Petition for Relief
To Be Able To Appeal Judgment even when the proper docket fees
were paid beyond the period prescribed to bring such action under
Section 3 of Rule 38 of the 1997 Rules of Civil Procedure in relation to
the pronouncements by the Honorable Court in the cases of Philippine
Rabbit Bus Lines, Inc. v. Arciaga [148 SCRA 433], Philippine Pryce
Assurance Corp. v. Court of Appeals [148 SCRA 433] and Sun
Insurance Office, Ltd. v. Asuncion [170 SCRA 274]. ISADET

(b) The Honorable Court of Appeals erred on a question of law


in reversing the Decision of the Court a quo finding the Deed of Sale
with Right to Repurchase a document of sale executed by the
respondent in favor of the petitioner and in further holding such
contract as one of equitable mortgage. 39
Our Ruling
On the first issue, petitioner contends that respondents' "Petition for
Relief to Be Able to Appeal Judgment", which paved the way for the
allowance of respondents' appeal of the RTC decision, was filed within the
prescriptive period but the proper docket fees for it were belatedly paid. 40 He
thus posits that the RTC did not acquire jurisdiction over said petition. Having
no jurisdiction, the RTC could not have allowed respondents to appeal.
On this issue, respondent counters that the belated payment of proper
docket fees was not due to their fault but to the improper assessment by the
Clerk of Court. Respondent asserts the ruling of the CA that the court may
extend the time for the payment of the docket fees if there is a justifiable
reason for the failure to pay the correct amount. Moreover, respondent argues
that petitioner failed to contest the RTC Order dated February 21, 2004 that
allowed the payment of supplementary docket fees. Petitioner failed to file a
motion for reconsideration or a petition for certiorari to the higher court to
question said order.
We agree with respondents. Their failure to pay the correct amount of
docket fees was due to a justifiable reason.
The right to appeal is a purely statutory right. Not being a natural right
or a part of due process, the right to appeal may be exercised only in the
manner and in accordance with the rules provided therefor. 41 For this reason,
payment of the full amount of the appellate court docket and other lawful fees
within the reglementary period is mandatory and
jurisdictional. 42 Nevertheless, as this Court ruled in Aranas v. Endona, 43 the
strict application of the jurisdictional nature of the above rule on payment of
appellate docket fees may be mitigated under exceptional circumstances to
better serve the interest of justice. It is always within the power of this Court to
suspend its own rules, or to except a particular case from their operation,
whenever the purposes of justice require it. 44 DTAHEC

In not a few instances, the Court relaxed the rigid application of the
rules of procedure to afford the parties the opportunity to fully ventilate their
cases on the merits. This is in line with the time-honored principle that cases
should be decided only after giving all parties the chance to argue their
causes and defenses. 45 For, it is far better to dispose of a case on the merit
which is a primordial end, rather than on a technicality, if it be the case, that
may result in injustice. 46 The emerging trend in the rulings of this Court is to
afford every party-litigant the amplest opportunity for the proper and just
determination of his cause, free from the constraints of technicalities. 47
As early as 1946, in Segovia v. Barrios, 48 the Court ruled that where an
appellant in good faith paid less than the correct amount for the docket fee
because that was the amount he was required to pay by the clerk of court,
and he promptly paid the balance, it is error to dismiss his appeal because
"(e)very citizen has the right to assume and trust that a public officer charged
by law with certain duties knows his duties and performs them in accordance
with law. To penalize such citizen for relying upon said officer in all good faith
is repugnant to justice." 49
Technicality and procedural imperfections should thus not serve as
bases of decisions. 50 In that way, the ends of justice would be better served.
For, indeed, the general objective of procedure is to facilitate the application
of justice to the rival claims of contending parties, bearing always in mind that
procedure is not to hinder but to promote the administration of justice. 51
We go now to the crux of the petition. Should the deed of sale with right
to repurchase executed by the parties be construed as an equitable
mortgage? This is the pivotal question here.
According to petitioner, the deed should not be construed as an
equitable mortgage as it does not fall under any of the instances mentioned in
Article 1602 of the Civil Code where the agreement can be construed as an
equitable mortgage. He added that the "language and terms of the Deed of
Sale with Right to Repurchase executed by respondent in favor of the petition
are clear and unequivocal. Said contract must be construed with its literal
sense." 52 HIEASa
We cannot agree.
Respondent is correct in alleging that the deed of sale with right to
repurchase qualifies as an equitable mortgage under Article 1602. She merely
secured the payment of the unpaid car rentals and the amount advanced by
petitioner to Jojo Lee.
The transaction between the parties is one of equitable mortgage and
not a sale with right to purchase as maintained by petitioners. Article 1602 of
the New Civil Code provides that the contract is presumed to be an equitable
mortgage in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually
inadequate;
(2) When the vendor remains in possession as lessee or
otherwise;
(3) When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or granting a
new period is executed;
(4) When the purchaser retains for himself a part of the
purchase price;
(5) When the vendor binds himself to pay the taxes on the thing
sold; DSEIcT

(6) In any other case where it may be fairly inferred that the
real intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit
to be received by the vendee as rent or otherwise shall be considered
as interest which shall be subject to the usury laws. 53 (Emphasis ours)
The conclusion that the deed of sale with right to repurchase is an
equitable mortgage is buttressed by the following:
First, before executing the deed, respondent and Salak were under
police custody due to the complaint lodged against them by petitioner. They
were sorely pressed for money, as they would not be released from custody
unless they paid petitioner. It was at this point that respondent was
constrained to execute a deed of sale with right to repurchase. Respondent
was in no position whatsoever to bargain with their creditor, petitioner. Nel
consensui tam contrarium est quam vis atqui metus. There can be no consent
when under force or duress. Bale wala ang pagsang-ayon kung ito'y
nakuha sa pamimilit o paraang di malaya. cDHAES

It is established that respondent signed the deed only because of the


urgent necessity of obtaining funds. When the vendor is in urgent need of
money when he executes the sale, the alleged sale with pacto de retro will be
construed as an equitable mortgage. 54 "Necessitous men are not, truly
speaking, free men; but to answer a present emergency will submit to any
terms that the crafty may impose upon them." 55
Second, petitioner allowed respondent and Salak to retain the
possession of the property despite the execution of the deed. In fact,
respondent and Salak were not bound to deliver the possession of the
property to petitioner if they would pay him the amount he demanded. 56
Where in a contract of sale with pacto de retro, the vendor remains in
possession, as a lessee or otherwise, the contract shall be presumed to be an
equitable mortgage. 57 The reason for the presumption lies in the fact that in a
contract of sale with pacto de retro, the legal title to the property is
immediately transferred to the vendee, subject to the vendor's right to redeem.
Retention, therefore, by the vendor of the possession of the property is
inconsistent with the vendee's acquisition of the right of ownership under a
true sale. 58 It discloses, in the alleged vendee, a lack of interest in the
property that belies the truthfulness of the sale a retro. 59
Third, it is likewise undisputed that the deed was executed by reason
of: (1) the alleged indebtedness of Salak to petitioner, that is, car rental
payments; and (2) respondent's own obligation to petitioner, that is,
reimbursement of what petitioner paid to the mortgagee, Jojo Lee. Fact is, the
purchase price stated in the deed was the amount of the indebtedness of both
respondent and Salak to petitioner. 60 TaIHEA

Apparently, the deed purports to be a sale with right to purchase.


However, since it was executed in consideration of the aforesaid loans and/or
indebtedness, said contract is indubitably an equitable mortgage. The rule is
firmly settled that whenever it is clearly shown that a deed of sale with pacto
de retro, regular on its face, is given as security for a loan, it must be regarded
as an equitable mortgage. 61
The above-mentioned circumstances preclude the Court from declaring
that the parties intended the transfer of the property from one to the other by
way of sale. They are more than sufficient to show that the true intention of
the parties is to secure the payment of said debts. Verily, an equitable
mortgage under paragraphs 2 and 6 of Article 1602 exists here. Settled is the
rule that to create the presumption enunciated by Article 1602, the existence
of one circumstance is enough. 62
Moreover, under Article 1603 of the Civil Code it is provided that: "(i)n
case of doubt, a contract purporting to be a sale with right to repurchase shall
be construed as an equitable mortgage." In this case, We have no doubt that
the transaction between the parties is that of a loan secured by said property
by way of mortgage.
In Lorbes v. Court of Appeals, 63 the Court held that:
The decisive factor in evaluating such agreement is the intention
of the parties, as shown not necessarily by the terminology used in the
contract but by all the surrounding circumstances, such as the relative
situation of the parties at that time, the attitude, acts, conduct,
declarations of the parties, the negotiations between them leading to
the deed, and generally, all pertinent facts having a tendency to fix and
determine the real nature of their design and understanding. As such,
documentary and parol evidence may be submitted and admitted to
prove the intention of the parties.
Sales with rights to repurchase, as defined by the Civil Code, are not
favored. We will not construe instruments to be sales with a right to
repurchase, with the stringent and onerous effects which follow, unless the
terms of the document and the surrounding circumstances require it.
Whenever, under the terms of the writing, any other construction can fairly
and reasonably be made, such construction will be adopted and the contract
will be construed as a mere loan unless the court can see that, if enforced
according to its terms, it is not an unconscionable one. 64 AcICTS

Article 1602 of the Civil Code is designed primarily to curtail the evils
brought about by contracts of sale with right of repurchase, such as the
circumvention of the laws against usury and pactum commissorium. 65
WHEREFORE, the petition is DENIED for lack of merit.
SO ORDERED.
||| (Bautista v. Unangst, G.R. No. 173002, [July 4, 2008], 579 PHIL 528-548)

7. Ruby Shelter Builders vs. Formaran, G.R. No. 175914

THIRD DIVISION

[G.R. No. 175914. February 10, 2009.]

RUBY SHELTER BUILDERS AND REALTY DEVELOPMENT


CORPORATION, petitioner, vs. HON. PABLO C. FORMARAN III,
Presiding Judge of Regional Trial Court Branch 21, Naga City,
as Pairing Judge for Regional Trial Court Branch 22, Formerly
Presided By HON. NOVELITA VILLEGAS-LLAGUNO (Retired
01 May 2006), ROMEO Y. TAN, ROBERTO L. OBIEDO and
ATTY. TOMAS A. REYES, respondents.

DECISION

CHICO-NAZARIO, J : p

Before this Court is a Petition for Review on Certiorari under Rule 45 of


the Rules of Court seeking the reversal of the Decision 1 dated 22 November
2006 of the Court of Appeals in CA-G.R. SP No. 94800. The Court of
Appeals, in its assailed Decision, affirmed the Order 2 dated 24 March 2006 of
the Regional Trial Court (RTC), Branch 22, of Naga City, in Civil Case No.
RTC-2006-0030, ordering petitioner Ruby Shelter Builders and Realty
Development Corporation to pay additional docket/filing fees, computed
based on Section 7 (a) of Rule 141 of the Rules of Court, as amended.
The present Petition arose from the following facts:
Petitioner obtained a loan 3 in the total amount of P95,700,620.00 from
respondents Romeo Y. Tan (Tan) and Roberto L. Obiedo (Obiedo), secured
by real estate mortgages over five parcels of land, all located in Triangulo,
Naga City, covered by Transfer Certificates of Title (TCTs) No. 38376, 4 No.
29918, 5 No. 38374, 6No. 39232, 7 and No. 39225, 8 issued by the Registry of
Deeds for Naga City, in the name of petitioner. When petitioner was unable to
pay the loan when it became due and demandable, respondents Tan and
Obiedo agreed to an extension of the same. CHATEa

In a Memorandum of Agreement 9 dated 17 March 2005, respondents


Tan and Obiedo granted petitioner until 31 December 2005 to settle its
indebtedness, and condoned the interests, penalties and surcharges accruing
thereon from 1 October 2004 to 31 December 2005 which amounted to
P74,678,647.00. The Memorandum of Agreement required, in turn, that
petitioner execute simultaneously with the said Memorandum, "by way
of dacion en pago", Deeds of Absolute Sale in favor of respondents Tan and
Obiedo, covering the same parcels of land subject of the mortgages. The
Deeds of Absolute Sale would be uniformly dated 2 January 2006, and state
that petitioner sold to respondents Tan and Obiedo the parcels of land for the
following purchase prices:
TCT No. Purchase Price

38376 P9,340,000.00
29918 P28,000,000.00
38374 P12,000,000.00
39232 P1,600,000.00
39225 P1,600,000.00
Petitioner could choose to pay off its indebtedness with individual or all five
parcels of land; or it could redeem said properties by paying respondents Tan
and Obiedo the following prices for the same, inclusive of interest and penalties:
TCT No. Redemption Price

38376 P25,328,939.00
29918 P35,660,800.00
38374 P28,477,600.00
39232 P6,233,381.00
39225 P6,233,381.00
In the event that petitioner is able to redeem any of the afore-mentioned
parcels of land, the Deed of Absolute Sale covering the said property shall be
nullified and have no force and effect; and respondents Tan and Obiedo shall
then return the owner's duplicate of the corresponding TCT to petitioner and
also execute a Deed of Discharge of Mortgage. However, if petitioner is
unable to redeem the parcels of land within the period agreed upon,
respondents Tan and Obiedo could already present the Deeds of Absolute
Sale covering the same to the Office of the Register of Deeds for Naga City
so respondents Tan and Obiedo could acquire TCTs to the said properties in
their names. ACDTcE

The Memorandum of Agreement further provided that should petitioner


contest, judicially or otherwise, any act, transaction, or event related to or
necessarily connected with the said Memorandum and the Deeds of Absolute
Sale involving the five parcels of land, it would pay respondents Tan and
Obiedo P10,000,000.00 as liquidated damages inclusive of costs and
attorney's fees. Petitioner would likewise pay respondents Tan and Obiedo
the condoned interests, surcharges and penalties. 10 Finally, should a contest
arise from the Memorandum of Agreement, Mr. Ruben Sia (Sia), President of
petitioner corporation, personally assumes, jointly and severally with
petitioner, the latter's monetary obligation to respondent Tan and Obiedo.
Respondent Atty. Tomas A. Reyes (Reyes) was the Notary Public who
notarized the Memorandum of Agreement dated 17 March 2005 between
respondent Tan and Obiedo, on one hand, and petitioner, on the other.
Pursuant to the Memorandum of Agreement, petitioner, represented by
Mr. Sia, executed separate Deeds of Absolute Sale, 11 over the five parcels of
land, in favor of respondents Tan and Obiedo. On the blank spaces provided
for in the said Deeds, somebody wrote the 3rd of January 2006 as the date of
their execution. The Deeds were again notarized by respondent Atty. Reyes
also on 3 January 2006.
Without payment having been made by petitioner on 31 December
2005, respondents Tan and Obiedo presented the Deeds of Absolute Sale
dated 3 January 2006 before the Register of Deeds of Naga City on 8 March
2006, as a result of which, they were able to secure TCTs over the five
parcels of land in their names.
On 16 March 2006, petitioner filed before the RTC a
Complaint 12 against respondents Tan, Obiedo, and Atty. Reyes, for
declaration of nullity of deeds of sales and damages, with prayer for the
issuance of a writ of preliminary injunction and/or temporary restraining order
(TRO). The Complaint was docketed as Civil Case No. 2006-0030.
On the basis of the facts already recounted above, petitioner raised two
causes of action in its Complaint. cSIACD

As for the first cause of action, petitioner alleged that as early as 27


December 2005, its President already wrote a letter informing respondents
Tan and Obiedo of the intention of petitioner to pay its loan and requesting a
meeting to compute the final amount due. The parties held meetings on 3 and
4 January 2006 but they failed to arrive at a mutually acceptable computation
of the final amount of loan payable. Respondents Tan and Obiedo then
refused the request of petitioner for further dialogues. Unbeknownst to
petitioner, despite the ongoing meetings, respondents Tan and Obiedo, in
evident bad faith, already had the pre-executed Deeds of Absolute Sale
notarized on 3 January 2006 by respondent Atty. Reyes. Atty. Reyes, in
connivance with respondents Tan and Obiedo, falsely made it appear in the
Deeds of Absolute Sale that Mr. Sia had personally acknowledged/ratified the
said Deeds before Atty. Reyes.
Asserting that the Deeds of Absolute Sale over the five parcels of land
were executed merely as security for the payment of its loan to respondents
Tan and Obiedo; that the Deeds of Absolute Sale, executed in accordance
with the Memorandum of Agreement, constituted pactum commisorium and
as such, were null and void; and that the acknowledgment in the Deeds of
Absolute Sale were falsified, petitioner averred:
13. That by reason of the fraudulent actions by the [herein respondents],
[herein petitioner] is prejudiced and is now in danger of being deprived,
physically and legally, of the mortgaged properties without benefit of
legal processes such as the remedy of foreclosure and its attendant
procedures, solemnities and remedies available to a mortgagor, while
[petitioner] is desirous and willing to pay its obligation and have the
mortgaged properties released. 13
In support of its second cause of action, petitioner narrated in its
Complaint that on 18 January 2006, respondents Tan and Obiedo forcibly
took over, with the use of armed men, possession of the five parcels of land
subject of the falsified Deeds of Absolute Sale and fenced the said properties
with barbed wire. Beginning 3 March 2006, respondents Tan and Obiedo
started demolishing some of the commercial spaces standing on the parcels
of land in question which were being rented out by petitioner. Respondents
Tan and Obiedo were also about to tear down a principal improvement on the
properties consisting of a steel-and-concrete structure housing a motor
vehicle terminal operated by petitioner. The actions of respondents Tan and
Obiedo were to the damage and prejudice of petitioner and its
tenants/lessees. Petitioner, alone, claimed to have suffered at least
P300,000.00 in actual damages by reason of the physical invasion by
respondents Tan and Obiedo and their armed goons of the five parcels of
land.SIcEHC

Ultimately, petitioner's prayer in its Complaint reads:


WHEREFORE, premises considered, it is most respectfully prayed of
this Honorable Court that upon the filing of this complaint, a 72-hour
temporary restraining order be forthwith issued ex parte:
(a) Restraining [herein respondents] Tan and Obiedo, their agents,
privies or representatives, from committing act/s tending to alienate the
mortgaged properties from the [herein petitioner] pending the resolution
of the case, including but not limited to the acts complained of in
paragraph "14", above;
(b) Restraining the Register of Deeds of Naga City from entertaining
moves by the [respondents] to have [petitioner's] certificates of title to
the mortgaged properties cancelled and changed/registered in
[respondents] Tan's and Obiedo's names, and/or released to them;
(c) After notice and hearing, that a writ of preliminary injunction be
issued imposing the same restraints indicated in the next preceding two
paragraphs of this prayer; and
(d) After trial, judgment be rendered:
1. Making the injunction permanent;
2. Declaring the provision in the Memorandum of Agreement requiring
the [petitioner] to execute deed of sales (sic) in favor of the [respondents
Tan and Obiedo] as dacion en pago in the event of non-payment of the
debt as pactum commissorium; TEaADS

3. Annulling the Deed[s] of Sale for TCT Nos. 29918, 38374, 38376,
39225 and 39232, all dated January 3, 2006, the same being in
contravention of law;
4. Ordering the [respondents] jointly and solidarily to pay the [petitioner]
actual damages of at least P300,000.00; attorney's fees in the amount of
P100,000.00 plus P1,000.00 per court attendance of counsel as
appearance fee; litigation expenses in the amount of at least P10,000.00
and exemplary damages in the amount of P300,000.00, plus the costs.
[Petitioner] further prays for such other reliefs as may be proper, just and
equitable under the premises. 14
Upon filing its Complaint with the RTC on 16 March 2006, petitioner
paid the sum of P13,644.25 for docket and other legal fees, as assessed by
the Office of the Clerk of Court. The Clerk of Court initially considered Civil
Case No. 2006-0030 as an action incapable of pecuniary estimation and
computed the docket and other legal fees due thereon according to Section 7
(b) (1), Rule 141 of the Rules of Court.
Only respondent Tan filed an Answer 15 to the Complaint of petitioner.
Respondent Tan did admit that meetings were held with Mr. Sia, as the
representative of petitioner, to thresh out Mr. Sia's charge that the
computation by respondents Tan and Obiedo of the interests, surcharges and
penalties accruing on the loan of petitioner was replete with errors and
uncertainties. However, Mr. Sia failed to back up his accusation of errors and
uncertainties and to present his own final computation of the amount due.
Disappointed and exasperated, respondents Tan and Obiedo informed Mr.
Sia that they had already asked respondent Atty. Reyes to come over to
notarize the Deeds of Absolute Sale. Respondent Atty. Reyes asked Mr. Sia
whether it was his signature appearing above his printed name on the Deeds
of Absolute Sale, to which Mr. Sia replied yes. On 4 January 2006, Mr. Sia still
failed to establish his claim of errors and uncertainties in the computation of
the total amount which petitioner must pay respondent Tan and Obiedo. Mr.
Sia, instead, sought a nine-month extension for paying the loan obligation of
petitioner and the reduction of the interest rate thereon to only one percent
(1%) per month. Respondents Tan and Obiedo rejected both demands. HASDcC

Respondent Tan maintained that the Deeds of Absolute Sale were not
executed merely as securities for the loan of petitioner. The Deeds of
Absolute Sale over the five parcels of land were the consideration for the
payment of the total indebtedness of petitioner to respondents Tan and
Obiedo, and the condonation of the 15-month interest which already accrued
on the loan, while providing petitioner with the golden opportunity to still
redeem all or even portions of the properties covered by said Deeds.
Unfortunately, petitioner failed to exercise its right to redeem any of the said
properties.
Belying that they forcibly took possession of the five parcels of land,
respondent Tan alleged that it was Mr. Sia who, with the aid of armed men, on
board a Sports Utility Vehicle and a truck, rammed into the personnel of
respondents Tan and Obiedo causing melee and disturbance. Moreover, by
the execution of the Deeds of Absolute Sale, the properties subject thereof
were, ipso jure, delivered to respondents Tan and Obiedo. The demolition of
the existing structures on the properties was nothing but an exercise of
dominion by respondents Tan and Obiedo.
Respondent Tan, thus, sought not just the dismissal of the Complaint of
petitioner, but also the grant of his counterclaim. The prayer in his Answer is
faithfully reproduced below:
Wherefore, premises considered, it is most respectfully prayed that, after
due hearing, judgment be rendered dismissing the complaint, and on the
counterclaim, [herein petitioner] and Ruben Sia, be ordered to indemnify,
jointly and severally [herein respondents Tan and Obiedo] the amounts
of not less than P10,000,000.00 as liquidated damages and the further
sum of not less than P500,000.00 as attorney's fees. In the alternative,
and should it become necessary, it is hereby prayed that [petitioner] be
ordered to pay herein [respondents Tan and Obiedo] the entire principal
loan of P95,700,620.00, plus interests, surcharges and penalties
computed from March 17, 2005 until the entire sum is fully paid,
including the amount of P74,678,647.00 foregone interest covering the
period from October 1, 2004 to December 31, 2005 or for a total of
fifteen (15) months, plus incidental expenses as may be proved in court,
in the event that Annexes "G" to "L" be nullified. Other relief and
remedies as are just and equitable under the premises are hereby
prayed for. 16CacTIE

Thereafter, respondent Tan filed before the RTC an Omnibus Motion in


which he contended that Civil Case No. 2006-0030 involved real properties,
the docket fees for which should be computed in accordance with Section 7
(a), not Section 7 (b) (1), of Rule 141 of the Rules of Court, as amended
by A.M. No. 04-2-04-SC which took effect on 16 August 2004. Since petitioner
did not pay the appropriate docket fees for Civil Case No. 2006-0030, the
RTC did not acquire jurisdiction over the said case. Hence, respondent Tan
asked the RTC to issue an order requiring petitioner to pay the correct and
accurate docket fees pursuant to Section 7 (a), Rule 141 of the Rules of
Court, as amended; and should petitioner fail to do so, to deny and dismiss
the prayer of petitioner for the annulment of the Deeds of Absolute Sale for
having been executed in contravention of the law or of the Memorandum of
Agreement as pactum commisorium.
As required by the RTC, the parties submitted their Position Papers on
the matter. On 24 March 2006, the RTC issued an Order 17 granting
respondent Tan's Omnibus Motion. In holding that both petitioner and
respondent Tan must pay docket fees in accordance with Section 7 (a), Rule
141 of the Rules of Court, as amended, the RTC reasoned:
It must be noted that under paragraph (b) 2. of the said Section 7, it is
provided that QUIETING OF TITLE which is an action classified as
beyond pecuniary estimation "shall be governed by paragraph (a)".
Hence, the filing fee in an action for Declaration of Nullity of Deed which
is also classified as beyond pecuniary estimation, must be computed
based on the provision of Section 7(A) herein-above, in part, quoted. SHDAEC

Since [herein respondent], Romeo Tan in his Answer has a counterclaim


against the plaintiff, the former must likewise pay the necessary
filling (sic) fees as provided for under Section 7 (A) of Amended
Administrative Circular No. 35-2004 issued by the Supreme Court. 18
Consequently, the RTC decreed on the matter of docket/filing fees:
WHEREFORE, premises considered, the [herein petitioner] is hereby
ordered to pay additional filing fee and the [herein respondent], Romeo
Tan is also ordered to pay docket and filing fees on his counterclaim,
both computed based on Section 7(a) of the Supreme Court Amended
Administrative Circular No. 35-2004 within fifteen (15) days from receipt
of this Order to the Clerk of Court, Regional Trial Court, Naga City and
for the latter to compute and to collect the said fees accordingly. 19
Petitioner moved 20 for the partial reconsideration of the 24 March 2006
Order of the RTC, arguing that Civil Case No. 2006-0030 was principally for
the annulment of the Deeds of Absolute Sale and, as such, incapable of
pecuniary estimation. Petitioner submitted that the RTC erred in applying
Section 7 (a), Rule 141 of the Rules of Court, as amended, to petitioner's first
cause of action in its Complaint in Civil Case No. 2006-0030.
In its Order 21 dated 29 March 2006, the RTC refused to reconsider its
24 March 2006 Order, based on the following ratiocination:
Analyzing, the action herein pertains to real property, for as admitted by
the [herein petitioner], "the deeds of sale in question pertain to real
property" . . . . The Deeds of Sale subject of the instant case have
already been transferred in the name of the [herein respondents Tan and
Obiedo]. STIEHc

Compared with Quieting of Title, the latter action is brought when there
is cloud on the title to real property or any interest therein or to prevent a
cloud from being cast upon title to the real property (Art. 476, Civil Code
of the Philippines) and the plaintiff must have legal or equitable title to
or interest in the real property which is the subject matter of the
action (Art. 447, ibid.), and yet plaintiff in QUIETING OF TITLE is
required to pay the fees in accordance with paragraph (a) of Section 7 of
the said Amended Administrative Circular No. 35-2004, hence, with
more reason that the [petitioner] who no longer has title to the real
properties subject of the instant case must be required to pay the
required fees in accordance with Section 7(a) of the Amended
Administrative Circular No. 35-2004 afore-mentioned.
Furthermore, while [petitioner] claims that the action for declaration of
nullity of deed of sale and memorandum of agreement is one incapable
of pecuniary estimation, however, as argued by the [respondent Tan],
the issue as to how much filing and docket fees should be paid was
never raised as an issue in the case ofRussell vs. Vestil, 304 SCRA
738. aSITDC

xxx xxx xxx


WHEREFORE, the Motion for Partial Reconsideration is hereby
DENIED. 22
In a letter dated 19 April 2006, the RTC Clerk of Court computed, upon
the request of counsel for the petitioner, the additional docket fees petitioner
must pay for in Civil Case No. 2006-0030 as directed in the afore-mentioned
RTC Orders. Per the computation of the RTC Clerk of Court, after excluding
the amount petitioner previously paid on 16 March 2006, petitioner must still
pay the amount of P720,392.60 as docket fees. 23
Petitioner, however, had not yet conceded, and it filed a Petition
for Certiorari with the Court of Appeals; the petition was docketed as CA-G.R.
SP No. 94800. According to petitioner, the RTC 24 acted with grave abuse of
discretion, amounting to lack or excess of jurisdiction, when it issued its
Orders dated 24 March 2006 and 29 March 2006 mandating that the
docket/filing fees for Civil Case No. 2006-0030, an action for annulment of
deeds of sale, be assessed under Section 7 (a), Rule 141 of the Rules of
Court, as amended. If the Orders would not be revoked, corrected, or
rectified, petitioner would suffer grave injustice and irreparable damage.

On 22 November 2006, the Court of Appeals promulgated its Decision wherein it


held that:
Clearly, the petitioner's complaint involves not only the annulment of the
deeds of sale, but also the recovery of the real properties identified in the
said documents. In other words, the objectives of the petitioner in filing
the complaint were to cancel the deeds of sale and ultimately, to recover
possession of the same. It is therefore a real action.
Consequently, the additional docket fees that must be paid cannot be
assessed in accordance with Section 7(b). As a real action, Section 7(a)
must be applied in the assessment and payment of the proper docket
fee.EIDTAa
Resultantly, there is no grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the court a quo. By grave abuse of
discretion is meant capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction, and mere abuse of discretion is not
enough — it must be grave. The abuse must be grave and patent, and it
must be shown that the discretion was exercised arbitrarily and
despotically.
Such a situation does not exist in this particular case. The evidence is
insufficient to prove that the court a quo acted despotically in rendering
the assailed orders. It acted properly and in accordance with law. Hence,
error cannot be attributed to it. 25
Hence, the fallo of the Decision of the appellate court reads:
WHEREFORE, the petition for certiorari is DENIED. The assailed Orders
of the court a quo are AFFIRMED. 26
Without seeking reconsideration of the foregoing Decision with the
Court of Appeals, petitioner filed its Petition for Review on Certiorari before
this Court, with a lone assignment of error, to wit:
18. The herein petitioner most respectfully submits that the Court of
Appeals committed a grave and serious reversible error in affirming the
assailed Orders of the Regional Trial Court which are clearly contrary
to the pronouncement of this Honorable Court in the case of
Spouses De Leon v. Court of Appeals, G.R. No. 104796, March 6,
1998, not to mention the fact that if the said judgment is allowed to stand
and not rectified, the same would result in grave injustice and irreparable
damage to herein petitioner in view of the prohibitive amount assessed
as a consequence of said Orders. 27 CcADHI

In Manchester Development Corporation v. Court of Appeals, 28 the


Court explicitly pronounced that "[t]he court acquires jurisdiction over any
case only upon the payment of the prescribed docket fee". Hence, the
payment of docket fees is not only mandatory, but also jurisdictional.
In Sun Insurance Office, Ltd. (SIOL) v. Asuncion, 29 the Court laid down
guidelines for the implementation of its previous pronouncement
in Manchester under particular circumstances, to wit:
1. It is not simply the filing of the complaint or appropriate initiatory
pleading, but the payment of the prescribed docket fee, that vests a trial
court with jurisdiction over the subject matter or nature of the action.
Where the filing of the initiatory pleading is not accompanied by payment
of the docket fee, the court may allow payment of the fee within a
reasonable time but in no case beyond the applicable prescriptive or
reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims
and similar pleadings, which shall not be considered filed until and
unless the filing fee prescribed therefor is paid. The court may also allow
payment of said fee within a reasonable time but also in no case beyond
its applicable prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of
the appropriate pleading and payment of the prescribed filing fee but,
subsequently, the judgment awards a claim not specified in the pleading,
or if specified the same has been left for determination by the court, the
additional filing fee therefor shall constitute a lien on the judgment. It
shall be the responsibility of the Clerk of Court or his duly authorized
deputy to enforce said lien and assess and collect the additional fee. aIHCSA

In the Petition at bar, the RTC found, and the Court of Appeals affirmed,
that petitioner did not pay the correct amount of docket fees for Civil Case No.
2006-0030. According to both the trial and appellate courts, petitioner should
pay docket fees in accordance with Section 7 (a), Rule 141 of the Rules of
Court, as amended. Consistent with the liberal tenor of Sun Insurance, the
RTC, instead of dismissing outright petitioner's Complaint in Civil Case No.
2006-0030, granted petitioner time to pay the additional docket fees. Despite
the seeming munificence of the RTC, petitioner refused to pay the additional
docket fees assessed against it, believing that it had already paid the correct
amount before, pursuant to Section 7 (b) (1), Rule 141 of the Rules of Court,
as amended.
Relevant to the present controversy are the following provisions under
Rule 141 of the Rules of Court, as amended by A.M. No. 04-2-04-SC 30 and
Supreme Court Amended Administrative Circular No. 35-2004: 31
SEC. 7. Clerks of Regional Trial Courts. —
(a) For filing an action or a permissive OR COMPULSORY counterclaim,
CROSS-CLAIM, or money claim against an estate not based on
judgment, or for filing a third-party, fourth-party, etc. complaint, or a
complaint-in-intervention, if the total sum claimed, INCLUSIVE OF
INTERESTS, PENALTIES, SURCHARGES, DAMAGES OF
WHATEVER KIND, AND ATTORNEY'S FEES, LITIGATION
EXPENSES AND COSTS and/or in cases involving property, the FAIR
MARKET value of the REAL property in litigation STATED IN THE
CURRENT TAX DECLARATION OR CURRENT ZONAL VALUATION
OF THE BUREAU OF INTERNAL REVENUE, WHICHEVER IS
HIGHER, OR IF THERE IS NONE, THE STATED VALUE OF THE
PROPERTY IN LITIGATION OR THE VALUE OF THE PERSONAL
PROPERTY IN LITIGATION OR THE VALUE OF THE PERSONAL
PROPERTY IN LITIGATION AS ALLEGED BY THE CLAIMANT, is: IHcSCA

[Table of fees omitted.]


If the action involves both a money claim and relief pertaining to
property, then THE fees will be charged on both the amounts claimed
and value of property based on the formula prescribed in this paragraph
a.
(b) For filing:
1. Actions where the value of the subject matter cannot be
estimated
2. Special civil actions, except judicial foreclosure of mortgage,
EXPROPRIATION PROCEEDINGS, PARTITION AND
QUIETING OF TITLE which will *
3. All other actions not involving property
[Table of fees omitted.]
The docket fees under Section 7 (a), Rule 141, in cases involving real
property depend on the fair market value of the same: the higher the value of
the real property, the higher the docket fees due. In contrast, Section 7 (b) (1),
Rule 141 imposes a fixed or flat rate of docket fees on actions incapable of
pecuniary estimation. HCDAcE

In order to resolve the issue of whether petitioner paid the correct


amount of docket fees, it is necessary to determine the true nature of its
Complaint. Thedictum adhered to in this jurisdiction is that the nature of an
action is determined by the allegations in the body of the pleading or
Complaint itself, rather than by its title or heading. 32 However, the Court finds
it necessary, in ascertaining the true nature of Civil Case No. 2006-0030, to
take into account significant facts and circumstances beyond the Complaint of
petitioner, facts and circumstances which petitioner failed to state in its
Complaint but were disclosed in the preliminary proceedings before the
court a quo.
Petitioner persistently avers that its Complaint in Civil Case No. 2006-
0030 is primarily for the annulment of the Deeds of Absolute Sale. Based on
the allegations and reliefs in the Complaint alone, one would get the
impression that the titles to the subject real properties still rest with petitioner;
and that the interest of respondents Tan and Obiedo in the same lies only in
the Deeds of Absolute Sale sought to be annulled.
What petitioner failed to mention in its Complaint was that respondents
Tan and Obiedo already had the Memorandum of Agreement, which clearly
provided for the execution of the Deeds of Absolute Sale, registered on the
TCTs over the five parcels of land, then still in the name of petitioner. After
respondents Tan and Obiedo had the Deeds of Absolute Sale notarized on 3
January 2006 and presented the same to Register of Deeds for Naga City on
8 March 2006, they were already issued TCTs over the real properties in
question, in their own names. Respondents Tan and Obiedo have also
acquired possession of the said properties, enabling them, by petitioner's own
admission, to demolish the improvements thereon.
It is, thus, suspect that petitioner kept mum about the afore-mentioned
facts and circumstances when they had already taken place before it filed its
Complaint before the RTC on 16 March 2006. Petitioner never expressed
surprise when such facts and circumstances were established before the
RTC, nor moved to amend its Complaint accordingly. Even though the
Memorandum of Agreement was supposed to have long been registered on
its TCTs over the five parcels of land, petitioner did not pray for the removal of
the same as a cloud on its title. In the same vein, although petitioner alleged
that respondents Tan and Obiedo forcibly took physical possession of the
subject real properties, petitioner did not seek the restoration of such
possession to itself. And despite learning that respondents Tan and Obiedo
already secured TCTs over the subject properties in their names, petitioner
did not ask for the cancellation of said titles. The only logical and reasonable
explanation is that petitioner is reluctant to bring to the attention of the Court
certain facts and circumstances, keeping its Complaint safely worded, so as
to institute only an action for annulment of Deeds of Absolute Sale. Petitioner
deliberately avoided raising issues on the title and possession of the real
properties that may lead the Court to classify its case as a real action.
No matter how fastidiously petitioner attempts to conceal them, the
allegations and reliefs it sought in its Complaint in Civil Case No. 2006-0030
appears to be ultimately a real action, involving as they do the recovery by
petitioner of its title to and possession of the five parcels of land from
respondents Tan and Obiedo. AcSEHT

A real action is one in which the plaintiff seeks the recovery of real
property; or, as indicated in what is now Section 1, Rule 4 of the Rules of
Court, a real action is an action affecting title to or recovery of possession of
real property. 33
Section 7, Rule 141 of the Rules of Court, prior to its amendment
by A.M. No. 04-2-04-SC, had a specific paragraph governing the assessment
of the docket fees for real action, to wit:
In a real action, the assessed value of the property, or if there is none,
the estimated value thereof shall be alleged by the claimant and shall be
the basis in computing the fees.
It was in accordance with the afore-quoted provision that the Court,
in Gochan v. Gochan, 34 held that although the caption of the complaint filed
by therein respondents Mercedes Gochan, et al. with the RTC was
denominated as one for "specific performance and damages", the relief
sought was the conveyance or transfer of real property, or ultimately, the
execution of deeds of conveyance in their favor of the real properties
enumerated in the provisional memorandum of agreement. Under these
circumstances, the case before the RTC was actually a real action, affecting
as it did title to or possession of real property. Consequently, the basis for
determining the correct docket fees shall be the assessed value of the
property, or the estimated value thereof as alleged in the complaint. But
sinceMercedes Gochan failed to allege in their complaint the value of the real
properties, the Court found that the RTC did not acquire jurisdiction over the
same for non-payment of the correct docket fees. EASIHa

Likewise, in Siapno v. Manalo, 35 the Court disregarded the


title/denomination of therein plaintiff Manalo's amended petition as one
for Mandamus with Revocation of Title and Damages; and adjudged the same
to be a real action, the filing fees for which should have been computed based
on the assessed value of the subject property or, if there was none, the
estimated value thereof. The Court expounded in Siapno that:
In his amended petition, respondent Manalo prayed that NTA's sale of
the property in dispute to Standford East Realty Corporation and the title
issued to the latter on the basis thereof, be declared null and void. In a
very real sense, albeit the amended petition is styled as one
for "Mandamus with Revocation of Title and Damages", it is, at bottom, a
suit to recover from Standford the realty in question and to vest in
respondent the ownership and possession thereof. In short, the
amended petition is in reality an action in res or a real action. Our
pronouncement in Fortune Motors (Phils.), Inc. vs. Court of Appeals is
instructive. There, we said:
ADcHES

A prayer for annulment or rescission of contract does not


operate to efface the true objectives and nature of the action
which is to recover real property. (Inton, et al., v. Quintan, 81
Phil. 97, 1948)
An action for the annulment or rescission of a sale of real
property is a real action. Its prime objective is to recover said
real property. (Gavieres v. Sanchez, 94 Phil. 760, 1954)
An action to annul a real estate mortgage foreclosure sale is no
different from an action to annul a private sale of real
property. (Muñoz v. Llamas, 87 Phil. 737, 1950).
While it is true that petitioner does not directly seek the
recovery of title or possession of the property in question,
his action for annulment of sale and his claim for damages
are closely intertwined with the issue of ownership of the
building which, under the law, is considered immovable
property, the recovery of which is petitioner's primary
objective. The prevalent doctrine is that an action for the
annulment or rescission of a sale of real property does not
operate to efface the fundamental and prime objective and
nature of the case, which is to recover said real property. It is
a real action.
Unfortunately, and evidently to evade payment of the correct amount of
filing fee, respondent Manalo never alleged in the body of his amended
petition, much less in the prayer portion thereof, the assessed value of
the subject res, or, if there is none, the estimated value thereof, to serve
as basis for the receiving clerk in computing and arriving at the proper
amount of filing fee due thereon, as required under Section 7 of this
Court's en banc resolution of 04 September 1990 (Re: Proposed
Amendments to Rule 141 on Legal Fees). aCTHEA

Even the amended petition, therefore, should have been expunged from
the records.
In fine, we rule and so hold that the trial court never acquired jurisdiction
over its Civil Case No. Q-95-24791. 36
It was in Serrano v. Delica, 37 however, that the Court dealt with a
complaint that bore the most similarity to the one at bar. Therein respondent
Delica averred that undue influence, coercion, and intimidation were exerted
upon him by therein petitioners Serrano, et al. to effect transfer of his
properties. Thus, Delica filed a complaint before the RTC against Serrano, et
al., praying that the special power of attorney, the affidavit, the new titles
issued in the names of Serrano, et al., and the contracts of sale of the
disputed properties be cancelled; that Serrano, et al. be ordered to pay
Delica, jointly and severally, actual, moral and exemplary damages in the
amount of P200,000.00, as well as attorney's fee of P200,000.00 and costs of
litigation; that a TRO and a writ of preliminary injunction be issued ordering
Serrano, et al. to immediately restore him to his possession of the parcels of
land in question; and that after trial, the writ of injunction be made permanent.
The Court dismissed Delica's complaint for the following reasons:
A careful examination of respondent's complaint is that it is a real action.
In Paderanga vs. Buissan, we held that "in a real action, the plaintiff
seeks the recovery of real property, or, as stated in Section 2(a), Rule 4
of the Revised Rules of Court, a real action is one 'affecting title to real
property or for the recovery of possession of, or for partition or
condemnation of, or foreclosure of a mortgage on a real property.'"
Obviously, respondent's complaint is a real action involving not only the
recovery of real properties, but likewise the cancellation of the titles
thereto.
Considering that respondent's complaint is a real action, the Rule
requires that "the assessed value of the property, or if there is none, the
estimated value thereof shall be alleged by the claimant and shall be the
basis in computing the fees."ECSHAD

We note, however, that neither the "assessed value" nor the "estimated
value" of the questioned parcels of land were alleged by respondent in
both his original and amended complaint. What he stated in his
amended complaint is that the disputed realties have a "BIR zonal
valuation" of P1,200.00 per square meter. However, the alleged "BIR
zonal valuation" is not the kind of valuation required by the Rule. It is
the assessed value of the realty. Having utterly failed to comply with the
requirement of the Rule that he shall allege in his complaint the
assessed value of his real properties in controversy, the correct docket
fee cannot be computed. As such, his complaint should not have been
accepted by the trial court. We thus rule that it has not acquired
jurisdiction over the present case for failure of herein respondent to pay
the required docket fee. On this ground alone, respondent's complaint is
vulnerable to dismissal. 38
Brushing aside the significance of Serrano, petitioner argues that said
decision, rendered by the Third Division of the Court, and not by the Court en
banc,cannot modify or reverse the doctrine laid down in Spouses De Leon v.
Court of Appeals. 39 Petitioner relies heavily on the declaration of this Court
in Spouses De Leon that an action for annulment or rescission of a contract of
sale of real property is incapable of pecuniary estimation.
The Court, however, does not perceive a contradiction
between Serrano and the Spouses De Leon. The Court calls attention to the
following statement inSpouses De Leon: "A review of the jurisprudence of this
Court indicates that in determining whether an action is one the subject matter
of which is not capable of pecuniary estimation, this Court has adopted the
criterion of first ascertaining the nature of the principal action or remedy
sought". Necessarily, the determination must be done on a case-to-case
basis, depending on the facts and circumstances of each. What petitioner
conveniently ignores is that in Spouses De Leon, the action therein that
private respondents instituted before the RTC was "solely for annulment or
rescission" of the contract of sale over a real property. 40 There appeared to
be no transfer of title or possession to the adverse party. Their complaint
simply prayed for:
1. Ordering the nullification or rescission of the Contract of Conditional
Sale (Supplementary Agreement) for having violated the rights of
plaintiffs (private respondents) guaranteed to them under Article 886 of
the Civil Code and/or violation of the terms and conditions of the said
contract.ADHaTC

2. Declaring void ab initio the Deed of Absolute Sale for being absolutely
simulated; and
3. Ordering defendants (petitioners) to pay plaintiffs (private
respondents) attorney's fees in the amount of P100,000.00. 41
As this Court has previously discussed herein, the nature of Civil Case
No. 2006-0030 instituted by petitioner before the RTC is closer to that
of Serrano, rather than of Spouses De Leon, hence, calling for the application
of the ruling of the Court in the former, rather than in the latter.
It is also important to note that, with the amendments introduced
by A.M. No. 04-2-04-SC, which became effective on 16 August 2004, the
paragraph in Section 7, Rule 141 of the Rules of Court, pertaining specifically
to the basis for computation of docket fees for real actions was deleted.
Instead, Section 7 (1) of Rule 141, as amended, provides that "in cases
involving real property, the FAIR MARKET value of the REAL property in
litigation STATED IN THE CURRENT TAX DECLARATION OR CURRENT
ZONAL VALUATION OF THE BUREAU OF INTERNAL REVENUE, WHICH
IS HIGHER, OR IF THERE IS NONE, THE STATED VALUE OF THE
PROPERTY IN LITIGATION . . ." shall be the basis for the computation of the
docket fees. Would such an amendment have an impact on Gochan,
Siapno, and Serrano? The Court rules in the negative.
A real action indisputably involves real property. The docket fees for a
real action would still be determined in accordance with the value of the real
property involved therein; the only difference is in what constitutes the
acceptable value. In computing the docket fees for cases involving real
properties, the courts, instead of relying on the assessed or estimated value,
would now be using the fair market value of the real properties (as stated in
the Tax Declaration or the Zonal Valuation of the Bureau of Internal Revenue,
whichever is higher) or, in the absence thereof, the stated value of the same.
In sum, the Court finds that the true nature of the action instituted by
petitioner against respondents is the recovery of title to and possession of real
property. It is a real action necessarily involving real property, the docket fees
for which must be computed in accordance with Section 7 (1), Rule 141 of the
Rules of Court, as amended. The Court of Appeals, therefore, did not commit
any error in affirming the RTC Orders requiring petitioner to pay additional
docket fees for its Complaint in Civil Case No. 2006-0030. TAcSaC

The Court does not give much credence to the allegation of petitioner
that if the judgment of the Court of Appeals is allowed to stand and not
rectified, it would result in grave injustice and irreparable injury to petitioner in
view of the prohibitive amount assessed against it. It is a sweeping assertion
which lacks evidentiary support. Undeniably, before the Court can conclude
that the amount of docket fees is indeed prohibitive for a party, it would have
to look into the financial capacity of said party. It baffles this Court that herein
petitioner, having the capacity to enter into multi-million transactions, now
stalls at paying P720,392.60 additional docket fees so it could champion
before the courts its rights over the disputed real properties. Moreover, even
though the Court exempts individuals, as indigent or pauper litigants, from
paying docket fees, it has never extended such an exemption to a corporate
entity.
WHEREFORE, premises considered, the instant Petition for Review is
hereby DENIED. The Decision, dated 22 November 2006, of the Court of
Appeals in CA-G.R. SP No. 94800, which affirmed the Orders dated 24 March
2006 and 29 March 2006 of the RTC, Branch 22, of Naga City, in Civil Case
No. RTC-2006-0030, ordering petitioner Ruby Shelter Builders and Realty
Development Corporation to pay additional docket/filing fees, computed
based on Section 7 (a), Rule 141 of the Rules of Court, as amended, is
hereby AFFIRMED. Costs against the petitioner. IcADSE

SO ORDERED.
(Ruby Shelter Builders and Realty Development Corporation v. Formaran III,
|||

G.R. No. 175914, [February 10, 2009], 598 PHIL 105-131)

8. St. Louis University vs. Cobarrubias, G.R. No. 187104

THIRD DIVISION

[G.R. No. 187104. August 3, 2010.]

SAINT LOUIS UNIVERSITY, INC., petitioner, vs. EVANGELINE C.


COBARRUBIAS, respondent.

DECISION

BRION, J : p

We resolve the present petition for review on certiorari 1 filed by


petitioner Saint Louis University, Inc. (SLU), to challenge the decision 2 and
the resolution 3 of the Court of Appeals (CA) in CA-G.R. SP No. 101708. 4 DaTISc

The Factual Background


The facts of the case, gathered from the records, are briefly summarized below.
Respondent Evangeline C. Cobarrubias is an associate professor of the
petitioner's College of Human Sciences. She is an active member of the
Union of Faculty and Employees of Saint Louis University (UFESLU).
The 2001-2006 5 and 2006-2011 6 Collective Bargaining
Agreements (CBAs) between SLU and UFESLU contain the following
common provision on forced leave:
Section 7.7. For teaching employees in college who fail the yearly
evaluation, the following provisions shall apply:
(a) Teaching employees who are retained for three (3) cumulative
years in five (5) years shall be on forced leave for one (1)
regular semester during which period all benefits due them
shall be suspended. 7
SLU placed Cobarrubias on forced leave for the first semester of
School Year (SY) 2007-2008 when she failed the evaluation for SY 2002-
2003, SY 2005-2006, and SY 2006-2007, with the rating of 85, 77, and 72.9
points, respectively, below the required rating of 87 points.
To reverse the imposed forced leave, Cobarrubias sought recourse
from the CBA's grievance machinery. Despite the conferences held, the
parties still failed to settle their dispute, prompting Cobarrubias to file a case
for illegal forced leave or illegal suspension with the National Conciliation and
Mediation Board of the Department of Labor and Employment, Cordillera
Administrative Region, Baguio City. When circulation and mediation again
failed, the parties submitted the issues between them for voluntary arbitration
before Voluntary Arbitrator (VA) Daniel T. Fariñas.
Cobarrubias argued that the CA already resolved the forced leave issue
in a prior case between the parties, CA-G.R. SP No. 90596, 8 ruling that the
forced leave for teachers who fail their evaluation for three (3) times within a
five-year period should be coterminous with the CBA in force during the same
five-year period. 9
SLU, for its part, countered that the CA decision in CA-G.R. SP No.
90596 cannot be considered in deciding the present case since it is presently
on appeal with this Court (G.R. No. 176717) 10 and, thus, is not yet final. It
argued that the forced leave provision applies irrespective of which CBA is
applicable, provided the employee fails her evaluation three (3) times in five
(5) years. 11
The Voluntary Arbitrator Decision
On October 26, 2007, VA Daniel T. Fariñas dismissed the case. 12 He
found that the CA decision in CA-G.R. SP No. 90596 is not yet final because
of the pending appeal with this Court. He noted that the CBA clearly
authorized SLU to place its teaching employees on forced leave when they
fail in the evaluation for three (3) years within a five-year period, without a
distinction on whether the three years fall within one or two CBA periods.
Cobarrubias received the VA' s decision on November 20, 2007. 13
On December 5, 2007, Cobarrubias filed with the CA a petition for
review under Rule 43 of the Rules of Court, but failed to pay the required filing
fees and to attach to the petition copies of the material portions of the
record. 14
Thus, on January 14, 2008, the CA dismissed the petition outright for
Cobarrubias' procedural lapses. 15 Cobarrubias received the CA resolution,
dismissing her petition, on January 31, 2008. 16
On February 15, 2008, Cobarrubias filed her motion for reconsideration,
arguing that the ground cited is technical. She, nonetheless, attached to her
motion copies of the material portions of the record and the postal money
orders for P4,230.00. She maintained that the ends of justice and fair play are
better served if the case is decided on its merits. 17
On July 30, 2008, the CA reinstated the petition. It found that
Cobarrubias substantially complied with the rules by paying the appeal fee in
full and attaching the proper documents in her motion for reconsideration. 18
SLU insisted that the VA decision had already attained finality for
Cobarrubias' failure to pay the docket fees on time.
The CA Decision
The CA brushed aside SLU's insistence on the finality of the VA
decision and annulled it, declaring that the "three (3) cumulative years in five
(5) years" phrase in Section 7.7 (a) of the 2006-2011 CBA means within the
five-year effectivity of the CBA. Thus, the CA ordered SLU to pay all the
benefits due Cobarrubias for the first semester of SY 2007-2008, when she
was placed on forced leave. 19
When the CA denied 20 the motion for reconsideration that
followed, 21 SLU filed the present petition for review on certiorari. 22
The Petition
SLU argues that the CA should not have reinstated the appeal since
Cobarrubias failed to pay the docket fees within the prescribed period, and
rendered the VA decision final and executory. Even if Cobarrubias' procedural
lapse is disregarded, SLU submits that Section 7.7 (a) of the 2006-2011 CBA
should apply irrespective of the five-year effectivity of each CBA. 23
The Case for Cobarrubias
Cobarrubias insists that the CA settled the appeal fee issue, in its July 30, 2008
resolution, when it found that she had substantially complied with the rules by
subsequently paying the docket fees in full. She submits that the CA's
interpretation of Section 7.7 (a) of the 2006-2011 CBA is more in accord with law
and jurisprudence. 24
The Issues
The core issues boil down to whether the CA erred in reinstating
Cobarrubias' petition despite her failure to pay the appeal fee within the
reglementary period, and in reversing the VA decision. To state the obvious,
the appeal fee is a threshold issue that renders all other issues unnecessary if
SLU's position on this issue is correct.
The Court's Ruling
We find the petition meritorious.
Payment of Appellate Court Docket Fees
Appeal is not a natural right but a mere statutory privilege, thus, appeal
must be made strictly in accordance with the provision set by law. 25 Rule 43
of theRules of Court provides that appeals from the judgment of the VA shall
be taken to the CA, by filing a petition for review within fifteen (15) days from
the receipt of the notice of judgment. 26 Furthermore, upon the filing of the
petition, the petitioner shall pay to the CA clerk of court the docketing and
other lawful fees; 27 non-compliance with the procedural requirements shall be
a sufficient ground for the petition's dismissal. 28 Thus, payment in full of
docket fees within the prescribed period is not only mandatory, but also
jurisdictional. 29 It is an essential requirement, without which, the decision
appealed from would become final and executory as if no appeal has been
filed. 30
DCScaT

As early as the 1932 case of Lazaro v. Endencia and Andres, 31 we


stressed that the payment of the full amount of the docket fee is an
indispensable step for the perfection of an appeal. In Lee v. Republic, 32 we
decided that even though half of the appellate court docket fee was deposited,
no appeal was deemed perfected where the other half was tendered after the
period within which payment should have been made. In Aranas v.
Endona, 33 we reiterated that the appeal is not perfected if only a part of the
docket fee is deposited within the reglementary period and the remainder is
tendered after the expiration of the period.
The rulings in these cases have been consistently reiterated in
subsequent cases: Guevarra v. Court of Appeals, 34 Pedrosa v. Spouses
Hill, 35 Gegare v. Court of Appeals, 36 Lazaro v. Court of Appeals, 37 Sps.
Manalili v. Sps. de Leon, 38 La Salette College v. Pilotin, 39 Saint Louis
University v. Spouses Cordero, 40 M.A. Santander Construction, Inc. v.
Villanueva, 41 Far Corporation v. Magdaluyo, 42 Meatmasters Int'l. Corp. v.
Lelis Integrated Dev't. Corp., 43 Tamayo v. Tamayo, Jr., 44 Enriquez v.
Enriquez, 45 KLT Fruits, Inc. v. WSR Fruits, Inc., 46 Tan v. Link, 47 Ilusorio v.
Ilusorio-Yap, 48 and most recently in Tabigue v. International Copra Export
Corporation (INTERCO), 49 and continues to be the controlling doctrine.
In the present case, Cobarrubias filed her petition for review on
December 5, 2007, fifteen (15) days from receipt of the VA decision on
November 20, 2007, but paid her docket fees in full only after seventy-two
(72) days, when she filed her motion for reconsideration on February 15, 2008
and attached the postal money orders for P4,230.00. Undeniably, the docket
fees were paid late, and without payment of the full docket fees, Cobarrubias'
appeal was not perfected within the reglementary period.
Exceptions to the Rule on Payment of
Appellate Court Docket Fees not applicable
Procedural rules do not exist for the convenience of the litigants; the
rules were established primarily to provide order to and enhance the efficiency
of our judicial system. 50 While procedural rules are liberally construed, the
provisions on reglementary periods are strictly applied, indispensable as they
are to the prevention of needless delays, and are necessary to the orderly and
speedy discharge of judicial business. 51
Viewed in this light, procedural rules are not to be belittled or dismissed
simply because their non-observance may have prejudiced a party's
substantive rights; like all rules, they are required to be followed. However,
there are recognized exceptions to their strict observance, such as: (1) most
persuasive and weighty reasons; (2) to relieve a litigant from an injustice not
commensurate with his failure to comply with the prescribed procedure; (3)
good faith of the defaulting party by immediately paying within a reasonable
time from the time of the default; (4) the existence of special or compelling
circumstances; (5) the merits of the case; (6) a cause not entirely attributable
to the fault or negligence of the party favored by the suspension of the rules;
(7) a lack of any showing that the review sought is merely frivolous and
dilatory; (8) the other party will not be unjustly prejudiced thereby; (9) fraud,
accident, mistake or excusable negligence without the appellant's fault; (10)
peculiar, legal and equitable circumstances attendant to each case; (11) in the
name of substantial justice and fair play; (12) importance of the issues
involved; and (13) exercise of sound discretion by the judge, guided by all the
attendant circumstances. 52 Thus, there should be an effort, on the part of the
party invoking liberality, to advance a reasonable or meritorious explanation
for his/her failure to comply with the rules.
In Cobarrubias' case, no such explanation has been advanced.
Other than insisting that the ends of justice and fair play are better served if
the case is decided on its merits, Cobarrubias offered no excuse for her
failure to pay the docket fees in full when she filed her petition for review. To
us, Cobarrubias' omission is fatal to her cause.
We, thus, find that the CA erred in reinstating Cobarrubias' petition for
review despite the nonpayment of the requisite docket fees within the
reglementary period. The VA decision had lapsed to finality when the docket
fees were paid; hence, the CA had no jurisdiction to entertain the appeal
except to order its dismissal.
WHEREFORE, the present petition is GRANTED. The assailed
decision and resolution of the Court of Appeals in CA-G.R. SP No. 101708
are hereby DECLARED VOID and are consequently SET ASIDE. The
decision of the voluntary arbitrator, that the voided Court of Appeals decision
and resolution nullified, stands. No pronouncement as to costs.
SO ORDERED.
(Saint Louis University, Inc. v. Cobarrubias, G.R. No. 187104, [August 3,
|||

2010], 640 PHIL 682-693)

9. Gipa v Southern Luzon Institute 726 SCRA June 18, 2014

SECOND DIVISION

[G.R. No. 177425. June 18, 2014.]

ALONZO GIPA, IMELDA MAROLLANO, JUANITO LUDOVICE,


VIRGILIO GOJIT, DEMAR BITANGCOR, FELIPE MONTALBAN
AND DAISY M.
PLACER, 1petitioners, vs. SOUTHERN LUZON INSTITUTE as
represented by its Vice-President for Operations and
Corporate Secretary, RUBEN G. ASUNCION,respondent.

DECISION

DEL CASTILLO, J : p

Suffice it to say that "[c]oncomitant to the liberal interpretation of the rules of


procedure should be an effort on the part of the party invoking liberality to
adequately explain his failure to abide by the rules." 2 Those who seek exemption
from the application of the rule have the burden of proving the existence of
exceptionally meritorious reasons warranting such departure. 3
Assailed in this Petition for Review on Certiorari is the December 20, 2006
Resolution 4 of the Court of Appeals (CA) in CA-G.R. CV No. 85215 which
dismissed for non-perfection herein petitioners' appeal from the January 5, 2005
Decision 5 of the Regional Trial Court (RTC), Branch 65, Sorsogon City in Civil
Case No. 547-37. Likewise questioned is the CA Resolution 6 dated March 30,
2007 which denied the Motion for Reconsideration thereto.
Factual Antecedents
On February 26, 1996, respondent Southern Luzon Institute (SLI), an educational
institution in Bulan, Sorsogon, filed a Complaint 7 for Recovery of Ownership and
Possession with Damages against petitioners Alonzo Gipa, Imelda Marollano,
Juanito Ludovice, Demar Bitangcor, Virgilio Gojit, Felipe Montalban and four
others namely, Arturo Rogacion, Virgilio Gracela, Rosemarie Alvarez and Rosita
Montalban (Rosita). During trial, defendant Rosita executed a Special Power of
Attorney 8 in favor of her sister Daisy M. Placer (Placer) authorizing the latter to
represent her in the case and to sign any and all papers in relation thereto.
SLI alleged that it is the absolute owner of a 7,516-square meter parcel of land
situated in Brgy. Poblacion, Bulan, Sorsogon covered by Original Certificate of
Title (OCT) No. P-28928. However, petitioners and their co-defendants who had
been informally occupying a portion of the said property refused to vacate the
same despite demand. Hence, SLI sought that they be ordered to immediately
vacate the premises, turn over the same to SLI, and pay compensatory
damages, attorney's fees and cost of suit. ETAICc

In their Answer with Counterclaim, 9 petitioners and their co-defendants asserted


that they did not heed SLI's demand to vacate as they believed that they have
the right to stay on the said property. They relied on their occupation thereof and
that of their predecessors-in-interest which, according to them, dates back to as
early as 1950. Impugning SLI's claims, petitioners and their co-defendants
averred that SLI had not even for a single moment taken possession of the
subject property and was merely able to procure a title over the same thru fraud,
bad faith and misrepresentation. By way of counterclaim, they prayed that they
be declared the lawful possessors of the property; that OCT No. P-28928 be
declared null and void; and, that SLI be ordered to pay them moral damages and
litigation expenses.
Ruling of the Regional Trial Court
Finding SLI to have proven its ownership of the property by preponderance of
evidence, the RTC rendered a Decision 10 in its favor on January 5, 2005. The
said court gave weight to SLI's documentary evidence showing the grant of its
Miscellaneous Sales Application (MSA) over the subject property which became
the basis for the issuance of title under its name, and the testimony of the
Supervising Draftsman of the National Housing Authority (NHA) who
categorically stated that the houses occupied by petitioners and their co-
defendants were within the property of SLI per NHA's survey. It rejected, on the
other hand, petitioners and their co-defendants' claim of title to the property. For
one, the fact that SLI had an existing MSA over the property as far back as 1969
could not have been unknown to them. This is because several of the petitioners
and their co-defendants filed Revocable Permit Applications over the same
property which were denied on March 4, 1964, precisely because the areas
applied for were already included in SLI's MSA. For another, the documentary
evidence submitted by them consisted mostly of tax declarations and other
documents which were self-serving and could not be considered as conclusive
evidence of ownership. Hence, the RTC ruled:
WHEREFORE, premises considered, judgment is hereby rendered —
a) Declaring plaintiff-SLI as absolute owner of that portion of Lot
4705 containing an area of SEVEN THOUSAND FIVE
HUNDRED SIXTEEN (7,516) SQUARE METERS covered
by "Katibayan ng Orihinal na Titulo Blg. P-28928".
b) Ordering herein defendants to vacate and relinquish the
portions of lot 4705 belonging to the SLI that they are
presently occupying illegally and to demolish the residential
houses existing thereon at their own expense.
c) To pay attorney's fee in the amount of Php10,000.00 jointly.
d) And to pay the costs.
SO ORDERED. 11
Petitioners and their co-defendants filed a Notice of Appeal 12 which was granted
by the RTC in its Order 13 of January 27, 2005.
Ruling of the Court of Appeals
The CA, however, dismissed the appeal in its Resolution 14 of August 26, 2005
since it was not shown that the appellate court docket fees and other lawful fees
were paid. 15 Petitioners and their co-defendants promptly filed a Motion for
Reconsideration 16 to which they attached a Certification 17 from the RTC that
they paid the appeal fee in the amount of P3,000.00 under Official Receipt No.
18091130 dated January 25, 2005. In view of this, the CA granted the said
motion and consequently reinstated the appeal through a Resolution 18 dated
November 2, 2005. HAEDCT

Subsequently, however, the CA further required petitioners and their co-


defendants, through a Minute Resolution 19 dated March 1, 2006, to remit within
ten days from notice the amount of P30.00 for legal research fund, which
apparently was not included in the P3,000.00 appeal fee previously paid by them.
Copy of the said resolution was received on March 13, 2006 by petitioners'
counsel, Atty. Jose G. Gojar of the Public Attorney's Office. 20
Despite the lapse of nine months from their counsel's receipt of the said
resolution, petitioners and their co-defendants, however, failed to comply with the
CA's directive. Hence, the said court dismissed the appeal through its
Resolution 21 of December 20, 2006 in this wise:
Jurisprudence is replete that the nonpayment of the docket and other
lawful fees within the reglementary period as provided under Section 4 of
Rule 41 of the Revised Rules of [C]ourt is a ground for the dismissal of
an appeal, as provided for under Section 1(c)[,] Rule 50 of the same
Rule. We quote:
SECTION 1. Grounds for dismissal of appeal. — An appeal may
be dismissed by the Court of Appeals, on its own motion or
on that of the appellee, on the following grounds:
xxx xxx xxx
c. Failure of the appellant to pay the docket and other lawful
fees as provided in Section 4 of Rule 41; . . .
xxx xxx xxx
In the instant case, appellants were given sufficient time to complete the
payment of the appeal fees. Unfortunately, appellants still failed to
comply with the said directive [despite the fact] that the amount of
P30.00 involved is very little. Hence, appellants failed to perfect their
appeal for failure to fully pay the appeal fees. They are deemed to have
lost interest over the instant appeal.
xxx xxx xxx
WHEREFORE, premises considered, the instant Appeal is
hereby DISMISSED.
SO ORDERED. 22
Petitioners and their co-defendants filed a Motion for Reconsideration 23 invoking
the principle of liberality in the application of technical rules considering that they
have paid the substantial amount of P3,000.00 for docket and other legal fees
and fell short only by the meager amount of P30.00. As compliance, they
attached to the said motion a postal money order in the sum of P30.00 payable
to the Clerk of Court of the CA. 24
The CA, however, was not swayed, hence, the denial of the Motion for
Reconsideration in its Resolution 25 of March 30, 2007.
Issue
Petitioners and Placer now file this Petition for Review on Certiorari raising the
lone issue of:
WHETHER THE COURT OF APPEALS GRAVELY ERRED IN
DISMISSING THE APPEAL FILED BY THE PETITIONERS FOR
FAILURE TO REMIT THE MEAGER AMOUNT OF THIRTY PESOS
(P30.00) AFTER HAVING ADVANCED A SUBSTANTIAL PORTION
OF THE DOCKET FEES. 26
It must, however, be noted at the outset that the caption of the present Petition
includes Placer as one of the petitioners. In fact, the other petitioners even
authorized her to sign the verification and certification of non-forum shopping in
their behalf. 27 A review of the records, however, shows that she was not one of
the defendants before the RTC. Her only participation therein was that she
represented her sister Rosita as one of the defendants by virtue of a Special
Power of Attorney which the latter executed in her favor. 28 Notably in the present
Petition, Placer appears to have been impleaded in her personal capacity and
not as Rosita's representative. This cannot be done. It bears emphasizing that an
appeal on certiorari, as in this case, is a continuation of the original
suit. 29 Hence, the parties in the original suit must also be the parties in such an
appeal. 30 Placer, therefore, not being a party in the complaint before the RTC
has no personality to continue the same on appeal and cannot be considered as
a petitioner. At the most, her only role in this Petition was to sign the verification
and certification of non-forum shopping for and in behalf of petitioners. ESTCDA

The Parties' Arguments


Initially, petitioners invoke the liberal application of technical rules 31 and contend
that the fact that only the amount of P30.00 was not paid justifies relaxation of
the same. Later in their Reply, 32 however, petitioners concede that the payment
of docket fees is not a mere technicality. Nevertheless, they point out that while
full payment of docket fees is indispensable in the perfection of an appeal, the
same admits of exceptions. 33 Their case falls under one of the exceptions, that
is, in the name of substantial justice and fair play. According to petitioners, the
dismissal of their appeal for failure to pay P30.00 runs counter to substantial
justice and fair play as the same would deprive them of their right to justice and
render ineffective the amount of P3,000.00, which despite being indigents, they
undertook to pay. To support their case, petitioners cited Andrea Camposagrado
v. Pablo Camposagrado 34 and Spouses Gutierrez v. Spouses
Valiente 35 wherein the Court excused the insufficient payment of docket fees.
Moreover, petitioners raise in the said Reply, albeit for the first time, the
argument that while Republic Act (RA) No. 9406 36 was still inexistent at the time
their appeal was filed before the CA, Section 6 37 thereof which exempts PAO
clients like themselves from the payment of docket and other fees should be
given retroactive application.
For its part, SLI argues that since petitioners' appeal was not perfected due to
insufficient payment of docket and other legal fees, the January 5, 2005 Decision
of the RTC had already become final and executory. Further, the CA correctly
dismissed petitioners' appeal because aside from the fact that petitioners failed to
comply with the CA's directive to pay the lacking amount of P30.00 for a period of
more than nine months from their counsel's receipt of notice, no plausible
explanation was tendered by them for such failure.
Our Ruling
The Petition fails.
Payment of the full amount of appellate
court docket and lawful fees is
mandatory and jurisdictional;
Relaxation of the rule on payment of
appeal fee is unwarranted in this case.
Section 4, Rule 41 of the Rules of Court provides:
Sec. 4. Appellate court docket and other lawful fees. — Within the
period for taking an appeal, the appellant shall pay to the clerk of court
which rendered the judgment or final order appealed from, the full
amount of the appellate court docket and other lawful fees. Proof of
payment of said fees shall be transmitted to the appellate court together
with the original record or the record on appeal. (Emphases supplied)
In Gonzales v. Pe, 38 the Court's explanation anent the requirement of full
payment of docket and other lawful fees under the above-quoted provision was
iterated, viz.:
In Far Corporation v. Magdaluyo, as with other subsequent cases of the
same ruling, the Court explained that the procedural requirement under
Section 4 of Rule 41 is not merely directory, as the payment of the
docket and other legal fees within the prescribed period is both
mandatory and jurisdictional. It bears stressing that an appeal is not a
right, but a mere statutory privilege. An ordinary appeal from a decision
or final order of the RTC to the CA must be made within 15 days from
notice. And within this period, the full amount of the appellate court
docket and other lawful fees must be paid to the clerk of the court which
rendered the judgment or final order appealed from. The requirement of
paying the full amount of the appellate docket fees within the prescribed
period is not a mere technicality of law or procedure. The payment of
docket fees within the prescribed period is mandatory for the perfection
of an appeal. Without such payment, the appeal is not perfected. The
appellate court does not acquire jurisdiction over the subject matter of
the action and the Decision sought to be appealed from becomes final
and executory. Further, under Section 1 (c), Rule 50, an appeal may be
dismissed by the CA, on its own motion or on that of the appellee, on the
ground of the non-payment of the docket and other lawful fees within the
reglementary period as provided under Section 4 of Rule 41. The
payment of the full amount of the docket fee is an indispensable step for
the perfection of an appeal. In both original and appellate cases, the
court acquires jurisdiction over the case only upon the payment of the
prescribed docket fees. 39aITDAE

Here, petitioners concede that payment of the full amount of docket fees within
the prescribed period is not a mere technicality of law or procedure but a
jurisdictional requirement. Nevertheless, they want this Court to relax the
application of the rule on the payment of the appeal fee in the name of
substantial justice and equity.
The Court is not persuaded.
The liberality which petitioners pray for has already been granted to them by the
CA at the outset. It may be recalled that while petitioners paid a substantial part
of the docket fees, they still failed to pay the full amount thereof since their
payment was short of P30.00. Based on the premise that the questioned
Decision of the RTC has already become final and executory due to non-
perfection, the CA could have dismissed the appeal outright. But owing to the
fact that only the meager amount of P30.00 was lacking and considering that the
CA may opt not to proceed with the case until the docket fees are paid, 40 it still
required petitioners, even if it was already beyond the reglementary period, to
complete their payment of the appeal fee within 10 days from notice. Clearly, the
CA acted conformably with the pronouncement made in Camposagrado, a case
cited by petitioners, that "[a] party's failure to pay the appellate docket fee within
the reglementary period confers only a discretionary and not a mandatory power
to dismiss the proposed appeal. Such discretionary power should be used in the
exercise of the court's sound judgment in accordance with the tenets of justice
and fair play with great deal of circumspection, considering all attendant
circumstances and must be exercised wisely and prudently, never capriciously,
with a view to substantial justice." 41
The CA's leniency over petitioners' cause did not end there. Although they were
given only 10 days to remit the P30.00 deficiency, the said court allowed an even
longer period of nine months to lapse, apparently in the hope that petitioners'
compliance would be on its way. But as no payment was remitted, it was
constrained to finally dismiss the appeal for non-perfection. Surprisingly,
petitioners were again heard of when they filed a Motion for Reconsideration to
which they attached a postal money order of P30.00. Nevertheless, they did not
offer any plausible explanation either as to why they, at the start, failed to pay the
correct docket fees or why they failed to comply with the CA's directive for them
to remit the P30.00-deficiency. Instead, they focused on begging the CA for
leniency, arguing that the meager amount of the deficiency involved justifies
relaxation of the rules. What is worse is that even if the CA already took note of
the lack of such explanation in its Resolution denying petitioners' motion for
reconsideration, petitioners, up to now, have not attempted to tender one in this
Petition and instead continue to capitalize on substantial justice, fair play and
equity to secure a reversal of the dismissal of their appeal. The Court cannot,
therefore, help but conclude that there is really no plausible reason behind the
said omission.
Suffice it to say that "[c]oncomitant to the liberal interpretation of the rules of
procedure should be an effort on the part of the party invoking liberality to
adequately explain his failure to abide by the rules." 42 Those who seek
exemption from the application of the rule have the burden of proving the
existence of exceptionally meritorious reason warranting such
departure. 43 Petitioners' failure to advance any explanation as to why they failed
to pay the correct docket fees or to complete payment of the same within the
period allowed by the CA is thus fatal to their cause. Hence, a departure from the
rule on the payment of the appeal fee is unwarranted.
Neither do the cases cited by petitioners help because they are not in point.
Unlike in this case, the CA in Camposagrado no longer required the petitioners
therein to complete the payment of the appeal fee by remitting the P5.00
deficiency but just dismissed the appeal outright. Moreover, a justifiable reason
for the insufficient payment was tendered by petitioners in the said case, i.e., that
they relied on the assessment made by the collection officer of the court and
honestly believed that the amount collected from them was that which is
mandated by the Rules.
The same thing goes true with Gutierrez. In fact, the pronouncement made
in Sun Insurance Office, Ltd. v. Asuncion, 44 as cited in Gutierrez, even militates
against petitioners. It was reiterated therein that the rule that "a court acquires
jurisdiction over any case only upon payment of the prescribed docket fees does
not apply where the party does not deliberately intend to defraud the court in
payment of docket fees, and manifests its willingness to abide by the rules by
paying additional docket fees when required by the court." 45 As may be
recalled, petitioners in this case did not immediately remit the deficient amount of
P30.00 when required by the CA and only did so after the lapse of more than
nine months when their appeal was already dismissed. SaAcHE

The Court need not belabor the issue of


the retroactive application of Section 6
of RA 9406.
"The purpose of a reply is to deny or allege facts in denial of new matters alleged
by way of defense in the answer," 46 or in this case, in the comment to the
petition. "It is not the office or function of a reply to set up or introduce a new
[issue] or to amend or amplify the [Petition]." 47 The issue of whether Section 6
of RA 9406 should be given retroactive application in order to exempt petitioners
from payment of docket fees was therefore improperly introduced in petitioners'
Reply. Moreover, "[t]he rule in pleadings and practice is that no new issue in a
case can be raised in a pleading which by due diligence could have been raised
in previous pleadings." 48 Here, petitioners at the outset could have very well
raised the said issue in the Petition since at the time of its filing on June 7,
2007, RA 9406 was already in effect. 49 However, they failed to do so. Besides,
for this Court to take cognizance of the same is to offend the basic rules of fair
play, justice and due process since SLI had no chance to propound its argument
in connection thereto. This is because even if it wanted to, SLI could not anymore
do so in its Memorandum as no new issues or arguments may be raised in the
said pleading, it being only the summation of the parties' previous
pleadings. 50 For these reasons, the Court sees no need to belabor the issue of
the retroactive application of Section 6 of RA 9406.
All told, the Court finds the CA's dismissal of the appeal interposed by petitioners
in order.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed
Resolutions dated December 20, 2006 and March 30, 2007 of the Court of
Appeals in CA-G.R. CV No. 85215 are AFFIRMED.
SO ORDERED.
(Gipa v. Southern Luzon Institute, G.R. No. 177425, [June 18, 2014], 736
|||

PHIL 515-531)

10. Reyes v People 763 SCRA 226 (2015)

THIRD DIVISION

[G.R. No. 193034. July 20, 2015.]

RODGING REYES, petitioner, vs. PEOPLE OF THE


PHILIPPINES and SALUD M. GEGATO, respondents.

DECISION

PERALTA, J : p
For this Court's resolution is the Petition for Review
on Certiorari under Rule 45 of the Rules of Court, dated August 17, 2010, of
petitioner Rodging Reyes assailing the Resolution 1 dated November 23, 2009
of the Court of Appeals in CA-G.R. CR No. 00421-MIN.
The facts are the following:
Petitioner, in a complaint filed by private respondent Salud M. Gegato,
was charged with Grave Threats before the Municipal Circuit Trial
Court (MCTC) of Bayugan and Sibagat, Bayugan, Agusan del Sur, which
reads as follows:
That on or about the 16th day of October 2001, at about 5:10
o'clock in the afternoon, more or less, in the premises and vicinity,
particularly at Avon Store, situated at Atis Street, Poblacion, in the
municipality of Bayugan, province of Agusan del Sur, Philippines, and
within the jurisdiction of this Honorable Court, the above-named
Accused, with deliberate intent, moved by personal resentment and
hatred, did then and there willfully, unlawfully and feloniously
threatened the life of Mrs. Salud Gegato, speak and utter by telephone
the following threatening words, to wit; "SALUD, UNDANGA ANG
IMONG PAGSIGI UG TSISMIS SA AKONG ASAWA, KAY
MAULAWAN ANG AKONG ASAWA. WARNINGAN TAKA AYAW
PANG HILABOT SA AMONG KINABUHI KAY BASIN PATYON
TAKA," meaning (Salud, stop your rumor against my wife because she
will be embarrassed. I'm warning you, don't mind our lives for I might
kill you), which acts cast fear and danger upon the life of the victim
Salud Gegato, to the damage and prejudice consisting of actual, moral
and compensatory damages.
CONTRARY TO LAW.
Bayugan, Agusan del Sur, Philippines, October 23, 2001. 2
Before arraignment, petitioner filed a Motion to Quash based on the
ground of jurisdiction and that the crime is not Grave Threats under Article
282 of theRevised Penal Code, but Other Light Threats under Article 285,
paragraph 2 of the same Code. IAETDc

The MCTC, in its Order dated June 3, 2002, denied the motion.
Petitioner's motion for reconsideration was also denied by the same court in
an Order dated July 25, 2002.
On September 13, 2002, petitioner filed a Motion to Inhibit the presiding
judge on the ground that private respondent is the Court Interpreter of the
same court, but it was denied in the court's Order dated September 16, 2002
based on the Order of this Court dated July 3, 2002 regarding the same
motion for inhibition of the same presiding judge filed earlier by the petitioner
with this Court. Based on that Order of this Court, the basis of the inhibition
does not fall within the absolute disqualification rule under Section 1, Rule 137
of the Rules of Court,and neither does it appear to be a just or valid reason
under paragraph 2 thereof. This Court also ordered the presiding judge to set
aside the Order of Inhibition and directed the same presiding judge to hear
and decide the case with dispatch applying the Rules on Summary
Procedure. 3
The MCTC, in a Decision 4 dated August 10, 2005, found petitioner
guilty beyond reasonable doubt of the crime charged. The dispositive portion
of the Decision reads:
In view of the foregoing, this Court finds the Accused GUILTY
beyond reasonable doubt of the crime of GRAVE THREATS under
Paragraph 1 (2) imposing condition, without the offender attaining his
purpose, and is hereby sentenced to suffer imprisonment, considering
one (1) mitigating circumstance, the medium period of arresto mayor or
a period of two (2) months and one (1) day to four (4) months.
In addition, he is ordered to pay Private Complainant [the]
following civil liabilities.
a. The amount of ONE HUNDRED THOUSAND (P100,000.00)
Pesos as moral damages.
b. the amount of TWENTY THOUSAND (P20,000.00) Pesos for
litigation expenses and for Attorney's Fees as it is clear from the trials
that complainant was assisted by a Private Prosecutor for a fee.
SO ORDERED.
On appeal, the Regional Trial Court, in its Decision 5 dated April 2,
2007, denied petitioner's appeal but found petitioner guilty beyond reasonable
doubt of the crime of Other Light Threats under Article 285, par. 2 of
the Revised Penal Code, instead of Grave Threats as originally adjudged by
the MCTC. The RTC ruled that:
WHEREFORE, accused is hereby sentenced to suffer
imprisonment of 10 days of arresto menor and the moral damages of
P100,000.00 be reduced to P50,000.00, attorney's fee of P20,000.00
stands.
The original decision is hereby modified.
If accused does not file an appeal within the reglementary
period, let the entire records be returned back to the Court of origin for
proper disposition thereat. 6
Petitioner filed a Motion for Reconsideration, and in its Amended
Decision 7 dated May 16, 2007, the RTC denied the motion and modified its
original decision reducing the amount of moral damages to P10,000.00 and
the attorney's fees to P10,000.00.
Thus, petitioner filed with the Court of Appeals a Motion for Extension of
Time to File a Petition for Review. However, instead of filing a petition for
review within the 15-day period allowed by the CA, petitioner filed a second
Motion for Extension of Time asking for another 15 days within which to file
his petition for review. Afterwhich, petitioner filed his petition.
Thereafter, the CA, in its Resolution 8 dated August 2, 2007, dismissed
the petition. The Resolution partly reads, as follows:
Petitioner's first Motion for Extension of Time to File Petition for
Review asking for fifteen (15) days from June 6, 2007 or until June 21,
2007 is DENIED for failure to pay the full amount of the docket fees
pursuant to Sec. 1, Rule 42 of the Rules of Court. His second motion
for extension is likewise DENIED as no further extension may be
granted except for most compelling reason.
The petition subsequently filed is, however, NOTED but
DISMISSED on the following grounds:
1. Filed beyond the reglementary period;
2. Failure of petitioner to pay complete docket fees
as prescribed by law. It is deficient by P3,530.00;
3. Failure of petitioner to indicate a complete
statement of material dates as required under the Rules.
Petitioner did not mention in the body of the petition when
he received the RTC's Order dated May 16, 2007
denying his Motion for Reconsideration;
4. Failure of petitioner to attach pertinent
documents material in the petition. No copy of the May
16, 2007 Order denying his Motion for Reconsideration
was attached to the petition.
On August 14, 2007, petitioner filed a Motion for Reconsideration, but it
was denied by the CA in its Resolution dated October 17, 2008 for failure of
the petitioner to furnish copies to the Solicitor General and the private
respondent. DcHSEa

Thus, petitioner filed a Second Motion for Reconsideration. The CA, in


its Resolution dated November 23, 2009, denied the said motion, the
dispositive portion of which, reads:
ACCORDINGLY, the Court RESOLVES to:
1. DISPENSE with the Offices of the Solicitor
General's comment on the petitioner's second Motion for
Reconsideration dated 13 November 2008;
2. GRANT the petitioner's second Motion for
Reconsideration dated 13 November 2008, and
RECONSIDER and SET ASIDE the Court's 17 October
2008 Resolution dismissing the petitioner's first Motion
for Reconsideration dated 13 August 2007; and
3. DENY the petitioner's first Motion for
Reconsideration dated 13 August 2007; and
4. DISMISS with finality the instant petition for
review.
SO ORDERED. 9
On December 28, 2009, petitioner filed a third Motion for
Reconsideration, but was resolved by the CA on June 24, 2010, as follows:
The Court RESOLVES to merely NOTE WITHOUT ACTION the
petitioner's third Motion for Reconsideration, in view of Our 23
November 2009 Resolution dismissing this petition with finality. 10
Hence, the present petition.
Petitioner insists that the CA erred in favoring procedural technicalities
over his constitutional right to due process.
It must be remembered that petitioner filed three (3) successive Motions
for Reconsideration before the CA on August 14, 2007, November 13, 2008,
and December 28, 2009.
In its Resolution dated November 23, 2009, the CA granted the
petitioner's second Motion for Reconsideration setting aside its previous
Resolution dated October 17, 2008 and dismissing the first Motion for
Reconsideration dated August 13, 2007. The CA, in the same Resolution,
discussed the other grounds for the dismissal of the petition as contained in
its first Resolution dated August 2, 2007. Thus, the CA not only denied the
first Motion for Reconsideration dated August 13, 2007 but also dismissed the
Petition for Review filed earlier.
However, as keenly pointed out by the OSG in its Comment 11 dated
January 11, 2011, instead of elevating the present case before this Court
within the period provided under Rule 45 of the Rules of Court, petitioner
opted to file a third motion for reconsideration, which was filed without leave of
court and notwithstanding the express declaration of the CA that petitioner's
first Motion for Reconsideration dated August 13, 2007 was denied and the
case already dismissed with finality. 12
At the outset, the Court emphasizes that second and subsequent
motions for reconsideration are, as a general rule, prohibited. Section 2, Rule
52 of the Rules of Court provides that "no second motion for reconsideration
of a judgment or final resolution by the same party shall be entertained." The
rule rests on the basic tenet of immutability of judgments. "At some point, a
decision becomes final and executory and, consequently, all litigations must
come to an end." 13
The general rule, however, against second and subsequent motions for
reconsideration admits of settled exceptions. In Neypes v. Court of
Appeals, 14 the Court declared:
In setting aside technical infirmities and thereby giving due
course to tardy appeals, we have not been oblivious to or unmindful of
the extraordinary situations that merit liberal application of the Rules. In
those situations where technicalities were dispensed with, our
decisions were not meant to undermine the force and effectivity of the
periods set by law. But we hasten to add that in those rare cases
where procedural rules were not stringently applied, there always
existed a clear need to prevent the commission of a grave injustice.
Our judicial system and the courts have always tried to maintain a
healthy balance between the strict enforcement of procedural laws and
the guarantee that every litigant be given the full opportunity for the just
and proper disposition of his cause. 15
The circumstances surrounding this case do not warrant the relaxation
of the rules. Petitioner failed to present compelling justification or reason to
relax the rules of procedure. The CA ruled that, "[t]he petitioner's attribution to
inadvertence (as the cause) of his failure to indicate a complete statement of
material dates and to attach pertinent documents material to the petition is not
compelling or reasonable enough for the Court to disregard the mandate in
Rule 42, Sec. 3 of the Rules, . . . ." 16
It must be noted that the CA has acted favorably upon petitioner's
second motion for reconsideration. However, that does not mean that
petitioner is already right in arguing that the reglementary period for the filing
of the present petition before this Court should be reckoned from his receipt of
the denial of his third Motion for Reconsideration. As correctly observed by
the OSG, "[t]o condone such a procedurally irregular practice would lead into
an absurd situation where petitioner would, in effect, be rewarded for
unilaterally suspending the running of the reglementary period to appeal by
filing prohibited pleadings." 17 This is in consonance with this Court's ruling
in Securities and Exchange Commission v. PICOP Resources, Inc., 18 thus:
The same issue was the focal point in Obando v. Court of
Appeals. 19 In Obando, this Court maintained the prohibitory nature of
a second motion for reconsideration and its gnawing implications in the
appeal process. Said the court: SCaITA

. . . [T]he Rules of Court are explicit that a second motion


for reconsideration shall not be allowed. In this case,
petitioners filed not only a second motion for
reconsideration, but a third motion for reconsideration as
well. Since the period to appeal began to run from the
denial of the first motion for reconsideration, the
notice of appeal which petitioners filed six months after
the denial of their first motion for reconsideration was
correctly denied for having been filed late. (Emphasis
supplied)
Since the second motion for reconsideration was not allowed,
this Court ruled that it did not toll the running of the period to appeal.
More so, would a third motion for reconsideration.
In Dinglasan v. Court of Appeals, 20 this Court explained the
reason why it is unwise to reckon the period of finality of judgment from
the denial of the second motion for reconsideration.
To rule that finality of judgment shall be reckoned
from the receipt of the resolution or order denying the
second motion for reconsideration would result to an
absurd situation whereby courts will be obliged to issue
orders or resolutions denying what is a prohibited motion
in the first place, in order that the period for finality of
judgments shall run, thereby, prolonging the disposition
of cases. Moreover, such a ruling would allow a party to
forestall the running of the period for finality of judgments
by virtue of filing a prohibited pleading; such a situation is
not only illogical but also unjust to the winning party.
xxx xxx xxx
The overt consequence of the introduction of a prohibited
pleading was pointed out succinctly by this Court in Land Bank of the
Phillipines v. Ascot Holdings and Equities, Inc.: 21
It is obvious that a prohibited pleading cannot toll
the running of the period to appeal since such pleading
cannot be given any legal effect precisely because of its
being prohibited.
Clearly, a second motion for reconsideration does not suspend
the running of the period to appeal and neither does it have any legal
effect. 22
Hence, the CA did not commit any error when it properly noted without
action the petitioner's third motion for reconsideration for being a prohibited
pleading, as well as merely a reiteration of his arguments in his first motion for
reconsideration. Therefore, the said motion for reconsideration is a mere
scrap of paper that does not deserve any consideration and the filing of the
same did not toll the running of the prescriptive period for filing a petition
based on Rule 45. 23
It is significant to emphasize that the CA dismissed the petition due to
the following procedural infirmities: (1) it was filed beyond the reglementary
period; (2) petitioner failed to pay the complete docket fee; (3) the petition
failed to indicate a complete statement of material dates since petitioner did
not mention in the body of the petition when he received the RTC's Order
dated May 16, 2007 denying his Motion for Reconsideration; and (4) petitioner
failed to attach pertinent documents material in the petition as no copy of the
May 16, 2007 Amended Decision was attached to the petition.
Section 1, Rule 42 of the Rules of Court states the need to pay docket
fees, thus:
Section 1. How appeal taken; time for filing. — A party desiring
to appeal from a decision of the Regional Trial Court rendered in the
exercise of its appellate jurisdiction may file a verified petition for
review with the Court of Appeals, paying at the same time to the clerk
of said court the corresponding docket and other lawful fees,
depositing the amount of P500.00 for costs, . . . .
The rule is that payment in full of the docket fees within the prescribed
period is mandatory. 24 In Manchester v. Court of Appeals, 25 it was held that a
court acquires jurisdiction over any case only upon the payment of the
prescribed docket fee. The strict application of this rule was, however, relaxed
two (2) years after in the case of Sun Insurance Office, Ltd. v.
Asuncion, 26 wherein the Court decreed that where the initiatory pleading is
not accompanied by the payment of the docket fee, the court may allow
payment of the fee within a reasonable period of time, but in no case beyond
the applicable prescriptive or reglementary period. This ruling was made on
the premise that the plaintiff had demonstrated his willingness to abide by the
rules by paying the additional docket fees required. 27 Thus, in the more
recent case of United Overseas Bank v. Ros, 28 the Court explained that
where the party does not deliberately intend to defraud the court in payment
of docket fees, and manifests its willingness to abide by the rules by paying
additional docket fees when required by the court, the liberal doctrine
enunciated in Sun Insurance Office, Ltd., and not the strict regulations set in
Manchester, will apply.
Admittedly, this rule is not without recognized qualifications. The Court
has declared that in appealed cases, failure to pay the appellate court docket
fee within the prescribed period warrants only discretionary as opposed to
automatic dismissal of the appeal and that the court shall exercise its power to
dismiss in accordance with the tenets of justice and fair play, and with great
deal of circumspection considering all attendant circumstances. 29
In that connection, the CA, in its discretion, may grant an additional
period of fifteen (15) days only within which to file the petition for review upon
proper motion and the payment of the full amount of the docket and other
lawful fees and the deposit for costs before the expiration of the reglementary
period and that no further extension shall be granted except for the most
compelling reason and in no case to exceed fifteen (15) days. 30 Therefore,
the grant of any extensions for the filing of the petition is discretionary and
subject to the condition that the full amount of the docket and lawful fees are
paid before the expiration of the reglementary period to file the petition. In its
Resolution dated November 23, 2009, the CA clearly explained its denial of
petitioner's motion for extension of time to file a petition for review, thus: aTHCSE

Clearly, there are pre-requisites before a motion for extension to


file a Rule 42 petition for review could even be granted. The petitioner
must pay the full amount of the docket and other lawful fees and the
deposit for costs before the expiration of the reglementary period. This
requirement was not met by the petitioner as the docket fees he had
paid are actually deficient by Three Thousand Five Hundred Thirty
Pesos (3,530.00). Granting the petitioner's two (2) motions for
extension of time to file petition for review would have been beyond the
pale of the limits allowed by the Rules for the Court in that instance,
considering that the petitioner failed to fulfill a requirement. 31
Petitioner now begs this Court for leniency in the interest of justice.
While there is a crying need to unclog court dockets, on the one hand, there
is, on the other, a greater demand for resolving genuine disputes fairly and
equitably, 32 for it is far better to dispose of a case on the merit which is a
primordial end, rather than on a technicality that may result in
injustice. 33 However, [i]t is only when persuasive reasons exist that the Rules
may be relaxed to spare a litigant of an injustice not commensurate with his
failure to comply with the prescribed procedure. 34 In the present case,
petitioner failed to convince this Court of the need to relax the rules and the
eventual injustice that he will suffer if his prayer is not granted.
Nevertheless, granting that this Court would decide the merits of this
case, the petition would still be denied. In its petition, the arguments
presented by petitioners are factual in nature. The well-entrenched rule is that
only errors of law and not of fact are reviewable by this Court in petitions for
review on certiorariunder Rule 45 under which this petition is filed. It is not the
Court's function under Rule 45 to review, examine and evaluate or weigh once
again the probative value of the evidence presented. 35
WHEREFORE, the Petition for Review on Certiorari under Rule 45 of
the Rules of Court, dated August 17, 2010, of petitioner Rodging Reyes is
hereby DENIEDfor lack of merit. Thus, the Resolution dated November 23,
2009 of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
||| (Reyes v. People, G.R. No. 193034, [July 20, 2015])

B. One suit for one action (Section 3, Rule 2)


Splitting a single cause of action (Section 4, Rule 2)
Joinder of causes of action (Section 3, Rule 2)

Case: Dynamic Builders v Presbitero 755 SCRA 90 (2015)

EN BANC

[G.R. No. 174202. April 7, 2015.]

DYNAMIC BUILDERS & CONSTRUCTION CO. (PHIL.),


INC., petitioner, vs. HON. RICARDO P. PRESBITERO, JR.,
MAYOR AND HEAD OF PROCURING UNIT OF THE
MUNICIPALITY OF VALLADOLID, NEGROS OCCIDENTAL;
BIDS AND AWARDS COMMITTEE, MUNICIPALITY OF
VALLADOLID, NEGROS OCCIDENTAL; AND HENRY L.
JORDAN AND/OR HLJ CONSTRUCTION AND
ENTERPRISE, respondents.

DECISION

LEONEN, J : p

Republic Act No. 8975 does not sanction splitting a cause of action in
order for a party to avail itself of the ancillary remedy of a temporary
restraining order from this court. Also, this law covers only national
government infrastructure projects. This case involves a local government
infrastructure project.
For local government infrastructure projects, Regional Trial Courts may
issue provisional injunctive reliefs against government infrastructure projects
only when (1) there are compelling and substantial constitutional violations;
(2) there clearly exists a right in esse; (3) there is a need to prevent grave and
irreparable injuries; (4) there is a demonstrable urgency to the issuance of the
injunctive relief; and (5) when there are public interest at stake in restraining
or enjoining the project while the action is pending that far outweighs (a) the
inconvenience or costs to the party to whom the project is awarded and (b)
the public benefits that will result from the completion of the project. The time
periods for the validity of temporary restraining orders issued by trial courts
should be strictly followed. No preliminary injunction should issue unless the
evidence to support the injunctive relief is clear and convincing.
We are asked by Dynamic Builders & Construction Co. (Phil.), Inc.
(Dynamic Builders) through this Petition for prohibition with application for
issuance of a temporary restraining order and/or writ of preliminary
injunction 1 that:
1. Upon the filing of this petition, a temporary restraining order
and/or writ of preliminary injunction be immediately issued restraining
and enjoining:
(a) the enforcement or execution of the 12 June 2006 Decision
and the 30 June 2006 Resolution by the Hon. Ricardo P.
Presbitero, Jr., Mayor of the Municipality of Valladolid and
Head of the Procuring Entity in Protest Case No. BPC-01-
06 entitled "Dynamic Builders & Construction Company
(Phil.), Inc. v. Bids and Awards Committee, Municipality of
Valladolid, Negros Occidental" by the respondents, or their
agents, or anyone acting in their behalf, or anyone who
stands to benefit from such order, in any manner, during
the pendency of the proceedings in Civil Case No. 1459 in
order not to render further proceedings in Civil Case No.
1459 moot and academic and any judgment in the said
case ineffectual;
(b) the implementation of the award of the Construction Shoreline
Protection Project subject of Protest Case No. BPC-01-06,
during the pendency of Civil Case No. 1459, by the
respondents, or their agents, or anyone acting in their
behalf, or anyone who stands to benefit from such
implementation, in any manner, during the pendency of the
proceedings in Civil Case No. 1459 in order not to render
further proceedings in Civil Case No. 1459 moot and any
judgment in the said case ineffectual; and
2. Thereafter, a writ of prohibition be issued and/or the
preliminary injunction be made permanent and continuing, during the
pendency of Civil Case No. 1459 before the Regional Trial Court of
Bago City.
Other reliefs just and equitable in the premises are likewise
prayed for. 2
On December 28, 2005, the Municipality of Valladolid, Negros
Occidental, through its Bids and Awards Committee, published an invitation to
bid for the construction of a 1,050-lineal-meter rubble concrete seawall along
the municipality's shoreline. 3 This infrastructure venture is known as the
"Construction Shoreline Protection Project." 4
On January 17, 2006, the Bids and Awards Committee conducted a
pre-bid conference attended by six (6) prospective contractors including
Dynamic Builders.5
On January 31, 2006, three (3) out of the seven (7) contractors that had
secured bidding documents in order to bid "submitted letters of
withdrawal." 6 Thus, only the remaining four (4) bidders "were considered
during the opening of the bids." 7 The prices offered were the following: 8
Mig-wells Const. Corp. P35,561,015.33 Highest Bidder
ADP Const. & Supply P34,778,496.72 3rd Lowest Bidder
Dynamic Builders & Const. P29,750,000.00 Lowest Bidder
HLJ Const. & Ent. P31,922,420.27 2nd Lowest Bidder

On March 27, 2006, the Bids and Awards Committee issued Resolution
No. 6 recommending the award in favor of HLJ Construction and Enterprise. 9
On April 18, 2006, the Municipality of Valladolid received its "NO
OBJECTION" letter from World Bank through the LOGOFIND 10 project
director, advising the Bids and Awards Committee to proceed with the
issuance of the notice of award, letter of acceptance, signing of contract, and
notice to proceed. 11
On April 21, 2006, the Bids and Awards Committee issued Resolution
No. 7 affirming the award of contract to HLJ Construction and Enterprise for
the construction of the 1,050-lineal-meter Construction Shoreline Protection
Project amounting to P31,922,420.37. 12
On April 25, 2006, Bids and Awards Committee Chairperson Celina C.
Segunla wrote Engr. Raul F. Balandra of Dynamic Builders and the other
participating losing bidders, ADP Construction and Mig-Wells Construction
Corporation, to inform them of the Bids and Awards Committee's findings and
decision. 13 Dynamic Builders was informed that "its bid proposal had been
found to be 'not substantially responsive.'" 14 Dynamic Builders received this
decision on May 11, 2006. 15
Dynamic Builders alleged that on May 5, 2006, it submitted the letter
dated April 7, 2006 containing a request for the Bids and Awards Committee
to furnish it with all submitted bid documents and relevant Bids and Awards
Committee resolutions, but this was denied by the letter dated May 5, 2006
invoking confidentiality under Section 2.46 of the LOGOFIND guidelines. 16
On May 15, 2006, the Bids and Awards Committee received the letter
from Dynamic Builders seeking reconsideration of the April 25, 2006 decision
declaring Dynamic Builders' bid as not substantially responsive. 17
On May 22, 2006, the Bids and Awards Committee wrote Dynamic
Builders denying the request for reconsideration. It informed Dynamic Builders
of the post-evaluation examination results showing Dynamic Builders' failure
in its Financial Contracting Capability. 18
On June 6, 2006, Dynamic Builders lodged a formal protest with the
head of the procuring entity, Mayor Ricardo P. Presbitero, Jr. (Mayor
Presbitero), to set aside the Bids and Awards Committee decision declaring
Dynamic Builders' bid as not substantially responsive. 19
Mayor Presbitero dismissed the protest in the Decision 20 dated June
12, 2006.
According to Mayor Presbitero's June 12, 2006 Decision, the bidders
underwent preliminary examination and were "subjected to the criteria of
Verification, Eligibility, Bid Security, Completeness of Bid, Substantial
Responsiveness, and Acceptance for Detailed Examination[.]" 21 Mig-wells
Construction Corporation did not pass the preliminary examination, while the
remaining three that passed were subjected to detailed examination. All three
passed and qualified for post-evaluation examination. 22
The June 12, 2006 Decision also stated that during the post-evaluation
examination, the three bidders submitted their financial statements for the last
five (5) years and other documents expressly provided in Volume 2 of the
Procurement Guidelines Manual of LOGOFIND World Bank. 23 The
examination showed that Dynamic Builders had a negative Financial
Contracting Capability of P64,579,119.13 due to numerous other contractual
commitments or balance of works. 24 HLJ Construction and Enterprise had a
positive Financial Contracting Capability of P30,921,063.86, while ADP
Construction had a positive Financial Contracting Capability of only
P12,770,893.78. 25 Section 4.5.e of the Instruction to Bidders requires a
minimum Financial Contracting Capability of P13,000,000.00. 26
Mayor Presbitero denied Dynamic Builders' Motion for Reconsideration
in the Resolution 27 dated June 30, 2006.
On September 4, 2006 and pursuant to Article XVII, Section 58
of Republic Act No. 9184, otherwise known as the Government Procurement
Reform Act, Dynamic Builders filed the Petition for Certiorari before the
Regional Trial Court of Bago City, Negros Occidental, assailing Mayor
Presbitero's Decision and Resolution. 28
Simultaneously, Dynamic Builders filed this Petition 29 dated September
4, 2006 for prohibition with application for temporary restraining order and/or
writ of preliminary injunction before this court. 30 This was received by this
court on September 6, 2006. 31
Petitioner Dynamic Builders submits that Article XVII, Section 58
of Republic Act No. 9184 implicitly allowed it to simultaneously file a Petition
for Certioraribefore the Regional Trial Court assailing the protest case on the
merits, and another Petition before this court for injunctive remedies. 32
Petitioner argues that in Section 58, the "law conferring on the Supreme
Court the sole jurisdiction to issue temporary restraining orders and
injunctions relating to Infrastructure Project of Government" refers to Republic
Act No. 8975 33 in relation to Presidential Decree No. 1818. 34 Petitioner then
submits that "whileR.A. No. 8975 appears to apply only to national
government infrastructure projects . . . the resulting amendment to P.D. No.
1818 (by virtue of Sections 3 and 9 ofR.A. No. 8975) removing any restriction
upon the Honorable Supreme Court to issue injunctive relief, would similarly
apply to the infrastructure projects . . . subject of, or covered by, P.D. No.
1818, which would include those infrastructure projects undertaken for or by
local governments." 35
Petitioner asserts that J.V. Lagon Construction v.
Pangarungan 36 clarified that Regional Trial Courts can issue injunctive relief
when it is of "extreme urgency involving a constitutional
issue." 37 Nevertheless, petitioner argues that this ruling was an obiter
dictum, and J.V. Lagon involved a national government project. 38Thus, it only
exercised prudence when it took twin remedial routes. 39
The Petition alleges that respondent HLJ Construction and Enterprise
already commenced construction and "obtained the release of the 15%
advance . . . for mobilization costs as well as partial payments for the portion .
. . completed." 40 Petitioner argues that the issuance of a temporary
restraining order and/or preliminary injunction was of extreme urgency, as it
was illegally deprived of its constitutional rights to due process and equal
protection of law. 41
The Petition then incorporates by reference its Civil Case No. 1459
Petition's discussion on the following arguments:
(1) Petitioner was denied due process when the contract was awarded to
private respondent HLJ Construction and Enterprise without first
giving the former an opportunity to avail itself of the remedies
under R.A. No. 9184[;]
(2) The award of the contract to private respondent HLJ Construction
and Enterprise violated Section 57 of R.A. No. 9184[;]
(3) Contrary to the findings of public respondents, the bid submitted by
petitioner was responsive[;] [and]
(4) For having in fact submitted the Lowest Calculated Responsive Bid,
petitioner should be awarded the contract for the Construction of
1,050 Lineal Meter Rubble Concrete Seawall of the Municipality of
Valladolid, Negros Occidental. 42
By Resolution dated September 18, 2006, this court ordered the parties
to "MAINTAIN THE STATUS QUO as of September 18, 2006 effective
immediately until further orders from the Court." 43
In their Comment 44 on the Petition, public respondents counter that
petitioner "grossly violated the rules against splitting a single cause of action,
multiplicity of suits, and forum shopping . . . [and] availed of an improper
remedy and disregarded the rule on 'hierarchy of courts[.]"' 45 The project
undertaken by HLJ Construction and Enterprise was almost near completion,
and prohibition "[was] not intended to provide a remedy for acts already
executed or accomplished." 46Petitioner should have asked for injunctive relief
in Civil Case No. 1459 filed before the trial court. 47
Public respondents argue that Article XVII, Section 58 of Republic Act
No. 9184, Presidential Decree No. 1818, and Republic Act No. 8975 do not
envision simultaneous resort to remedies before the trial court and this
court. 48 They submit that Section 58 provides for alternative remedies
between an action under Rule 65 before the Regional Trial Court and a proper
action directly before this court. 49
Public respondents agree that Republic Act No. 8975 only governs
national government projects but disagree insofar as petitioner's submission
that sinceRepublic Act No. 8975 amended Presidential Decree No. 1818 by
removing the restriction on this court to issue injunctive relief, it now covers
local government projects. 50
Respondent HLJ Construction and Enterprise similarly raises the issue
of petitioner's forum shopping. 51 It adds that due process was not denied, as
public respondent notified petitioner of its findings and decision, heard
petitioner's arguments, and entertained petitioner's motion for
reconsideration. 52 Respondent HLJ Construction and Enterprise stresses that
the Construction Shoreline Protection Project's delay will only result in grave
injustice and irreparable injury affecting the people of the Municipality of
Valladolid, Negros Occidental. 53
On December 13, 2006, petitioner filed a verified Petition to Cite
Respondents for Contempt, 54 alleging that respondents did not cease work
on the project in disregard of this court's status quo order. 55 Respondents
filed their respective comments. 56
The issues for our resolution are as follows:
First, whether Article XVII, Section 58 of Republic Act No.
9184 contemplates simultaneous filing of a petition for prohibition seeking
injunctive reliefs from this court and a petition for certiorari before the
Regional Trial Court; consequently:
a) Whether petitioner violated the rules against the splitting of a cause
of action, multiplicity of suits, and forum shopping;
b) Whether petitioner violated the doctrine on hierarchy of courts; and
c) Whether petitioner resorted to an improper remedy when it filed a
petition for prohibition with this court.
Second, whether Article XVII, Section 58 of Republic Act No. 9184, in
relation to Republic Act No. 8975 and Presidential Decree No. 1818, allows
Regional Trial Courts to issue injunctive relief subject to the presence of
certain conditions; and
Lastly, whether respondents violated this court's September 18,
2006 status quo Order in relation to the ongoing Construction Shoreline
Protection Project.
I
We proceed with the procedural issue of whether petitioner availed
itself of the wrong remedy in simultaneously filing (1) a petition
for certiorari before the trial court alleging that public respondent gravely
abused its discretion in rendering its June 12, 2006 Decision and June 30,
2006 Resolution and (2) a petition for prohibition seeking injunctive reliefs
from this court to enjoin the enforcement of public respondent's June 12, 2006
Decision and June 30, 2006 Resolution during the pendency of the case
before the trial court.
Public respondents submit that a simple reading of the Petition in Civil
Case No. 1459 readily reveals that petitioner also asked the trial court to
nullify the same Decision and Resolution on the identical ground of grave
abuse of discretion amounting to lack or excess of jurisdiction. 57
Petitioner counters that it was compelled to file the separate petitions
pursuant to, and in view of, Article XVII, Section 58 of Republic Act No.
9184: 58
Sec. 58. Report to Regular Courts; Certiorari. — Court action may be
resorted to only after the protests contemplated in this Article shall
have been completed. Cases that are filed in violation of the process
specified in this Article shall be dismissed for lack of jurisdiction. The
regional trial court shall have jurisdiction over final decisions of
the head of the procuring entity. Court actions shall be governed
by Rule 65 of the 1997 Rules of Civil Procedure.
This provision is without prejudice to any law conferring on the
Supreme Court the sole jurisdiction to issue temporary
restraining orders and injunctions relating to Infrastructure
Projects of Government. (Emphasis supplied)
Section 58 could not have envisioned a simultaneous resort to this
court by one that had already filed an action before the Regional Trial Court
without violating the basic rules on proscription against the splitting of a cause
of action, multiplicity of suits, and forum shopping.
Rule 2, Section 3 of the Rules of Court provides that "[a] party may not
institute more than one suit for a single cause of action." Moreover, Section 4
discusses the splitting of a single cause of action in that "if two or more suits
are instituted on the basis of the same cause of action, the filing of one or a
judgment upon the merits in any one is available as a ground for the dismissal
of the others." The splitting of a cause of action "violate[s] the policy against
multiplicity of suits, whose primary objective [is] to avoid unduly burdening the
dockets of the courts." 59
This Petition seeks to enjoin the execution of public respondent's
Decision and Resolution on the protest — the same Decision and Resolution
sought to be set aside in the Petition before the Regional Trial Court. In
essence, petitioner seeks the same relief through two separate Petitions filed
before separate courts. This violates the rule against forum shopping.
Rule 7, Section 5 of the Rules of Court requires the plaintiff or principal
party to certify under oath that he or she has not commenced any action
involving the same issues in any court. This court has discussed this rule
against forum shopping:
In essence, forum shopping is the practice of litigants resorting
to two different fora for the purpose of obtaining the same relief, to
increase their chances of obtaining a favorable judgment. In
determining whether forum shopping exists, it is important to consider
the vexation caused to the courts and the parties-litigants by a person
who asks appellate courts and/or administrative entities to rule on the
same related causes and/or to grant the same or substantially the
same relief, in the process creating the possibility of conflicting
decisions by the different courts or fora on the same issues. We have
ruled that forum shopping is present when, in two or more cases
pending, there is identity of (1) parties (2) rights or causes of action
and reliefs prayed for and (3) the identity of the two preceding
particulars is such that any judgment rendered in the other action, will,
regardless of which party is successful, amount to res judicata in the
action under consideration. 60
Private respondent alleges that petitioner did not even notify the
Regional Trial Court of Bago City, Negros Occidental, of its Petition filed
before this court. 61
The second paragraph of Article XVII, Section 58 of Republic Act No.
9184 simply means it does not preclude a direct filing before this court in
proper cases.
The Rules of Court provides for original concurrent jurisdiction by the
Regional Trial Court, the Court of Appeals, and this court in entertaining
petitions forcertiorari, prohibition, or mandamus. 62 However, parties must
adhere to the principle of hierarchy of courts. This was discussed in Dimson
(Manila), Inc., et al. v. Local Water Utilities Administration: 63
Clearly, the proper recourse to a court action from decisions of
the BAC, such as this one, is to file a certiorari not before the Supreme
Court but before the regional trial court which is vested by R.A. No.
9184 with jurisdiction to entertain the same. In the recent case of First
United Constructors Corporation v. Poro Point Management
Corporation, we held that while indeed the certiorari jurisdiction of the
regional trial court is concurrent with this Court's, that fact alone does
not allow an unrestricted freedom of choice of the court forum. But
since this is not an iron-clad rule and the full discretionary power to
take cognizance of and assume jurisdiction over special civil actions
for certiorari directly filed with the Court may actually be exercised by
it, it is nevertheless imperative that the Court's intervention be called
for by exceptionally compelling reasons or be warranted by the nature
of the issues involved. In other words, a direct invocation of the
Supreme Court's original jurisdiction to issue the writ will be allowed
only when there are special and important reasons clearly and
specifically set out in the petition. 64 (Citations omitted)
The hierarchy of courts must be respected. The doctrine with respect to
hierarchy of courts was designed so that this court will have more time to
focus on its constitutional tasks without the need to deal with causes that also
fall within the lower courts' competence. 65 This court acts on petitions for
extraordinary writs under Rule 65 "only when absolutely necessary or when
serious and important reasons exist to justify an exception to the policy." 66
Consistent with these rules and doctrines, the remedy contemplated by
Article XVII, Section 58 of Republic Act No. 9184 is either an action under
Rule 65 before the Regional Trial Court or the proper action filed before this
court. However, direct resort to this court can prosper only when the requisites
for direct invocation of this court's original jurisdiction are present.
II
Prohibition is a preventive remedy. This court has held that injunctive
remedies will not lie for acts already accomplished. 67
The acts sought to be enjoined in this case included the implementation
of the Construction Shoreline Protection Project awarded to private
respondent HLJ Construction and Enterprise. The project had already
commenced and had been ongoing at the time petitioner filed this case.
Moreover, the issue of whether these acts infringed on petitioner's
rights is a matter interrelated with the issues raised in the Petition before the
trial court, emphasizing the existence of the splitting of a cause of action.
In any case, this court has stressed that extraordinary writs
of certiorari, prohibition, and mandamus are "prerogative writs of equity[.]" 68 It
is within the court's sound discretion whether these writs should be granted,
and it will need to ensure that there is a clear right to the relief. 69
Prohibition is defined as "an extraordinary remedy available to compel
any tribunal, corporation, board, or person exercising judicial or ministerial
functions, to desist from further [proceeding] in an action or matter when the
proceedings in such tribunal, corporation, board or person are without or in
excess of jurisdiction or with grave abuse of discretion[.]" 70
Grave abuse of discretion will prosper as a ground for prohibition when
it is shown that "there was . . . capricious and whimsical exercise of judgment.
. . equivalent to lack of jurisdiction or that the tribunal, corporation, board or
person has exercised its power in an arbitrary or despotic manner by reason
of passion or personal hostility." 71
First, public respondent had jurisdiction to rule on the protest since it
was then head of the procuring entity. 72
Second, this court need not look into petitioner's allegation that its
Petition before the Regional Trial Court raised grounds warranting the
reversal of public respondent's Decision. 73 The merits of whether there was
grave abuse of discretion by public respondent were already subject of the
Petition before the trial court. Petitioner cannot be allowed to seek the same
relief from this court.
Rule 65 likewise requires that there be "no appeal or any . . . plain,
speedy, [or] adequate remedy in the ordinary course of law." 74 Section 3
of Republic Act No. 8975 provides for such a remedy when it gave an
exception to the general rule prohibiting lower courts from issuing provisional
injunctive relief against national government projects:
Sec. 3. Prohibition on the Issuance of Temporary Restraining Orders,
Preliminary Injunctions and Preliminary Mandatory Injunctions. — No
court, except the Supreme Court, shall issue any temporary restraining
order, preliminary injunction or preliminary mandatory injunction
against the government, or any of its subdivisions, officials or any
person or entity, whether public or private, acting under the
government's direction, to restrain, prohibit or compel the following
acts:
xxx xxx xxx
This prohibition shall apply in all cases, disputes or
controversies instituted by a private party, including but not limited to
cases filed by bidders or those claiming to have rights through such
bidders involving such contract/project. This prohibition shall not apply
when the matter is of extreme urgency involving a constitutional issue,
such that unless a temporary restraining order is issued, grave
injustice and irreparable injury will arise. The applicant shall file a bond,
in an amount to be fixed by the court, which bond shall accrue in favor
of the government if the court should finally decide that the applicant
was not entitled to the relief sought. (Emphasis supplied)
When the matter is of "extreme urgency involving a constitutional
issue," even Regional Trial Courts may grant injunctive reliefs as explained
in Republic v. Nolasco: 75
Republic Act No. 8975 definitively enjoins all courts, except the
Supreme Court, from issuing any temporary restraining order,
preliminary injunction, or preliminary mandatory injunction against the
government, or any of its subdivisions, officials or any person or entity
to restrain, prohibit or compel the bidding or awarding of a contract or
project of the national government, precisely the situation that obtains
in this case with respect to the Agno River Project. The only
exception would be if the matter is of extreme urgency involving a
constitutional issue, such that unless the temporary restraining
order is issued, grave injustice and irreparable injury will
arise. 76 (Emphasis supplied, citations omitted)
Considering that petitioner alleges that this matter is "of extreme
urgency, involving as it does the . . . constitutional right[s] to due process and
equal protection of the law," 77 it should have prayed for injunctive relief before
the trial court where its Petition for Certiorari via Rule 65 was pending,
together with a bond fixed by the court.
Mere allegation or invocation that constitutionally protected rights were
violated will not automatically result in the issuance of injunctive relief. The
plaintiff or the petitioner should discharge the burden to show a clear and
compelling breach of a constitutional provision. Violations of constitutional
provisions are easily alleged, but trial courts should scrutinize diligently and
deliberately the evidence showing the existence of facts that should support
the conclusion that a constitutional provision is clearly and convincingly
breached. In case of doubt, no injunctive relief should issue. In the proper
cases, the aggrieved party may then avail itself of special civil actions and
elevate the matter.
This court adheres to the policy behind the prohibition under Republic
Act No. 8975 and even issued Administrative Circular No. 11-
2000 entitled Re: Ban on the Issuance of Temporary Restraining Orders or
Writs of Preliminary Prohibitory or Mandatory Injunctions in Cases Involving
Government Infrastructure Projects.This circular enjoins lower court judges to
strictly comply with Republic Act No. 8975.
However, the issue here does not involve the propriety of a lower
court's issuance or non-issuance of provisional injunctive relief, but
petitioner's insistence that only this court can issue such injunctive relief in
justifying its simultaneous Petitions before the Regional Trial Court and this
court.
Petitioner hinges its erroneous simultaneous Petitions on its reading
of Republic Act No. 8975 in relation to Presidential Decree No. 1818.
III
Petitioner submits that only this court has the power to issue injunctions
to enjoin government infrastructures including those of local government. 78
Petitioner explains that the "laws" referred to in Article XVII, Section 58
of Republic Act No. 9184 refer to Republic Act No. 8975 that prohibits
courts, except the Supreme Court, from issuing temporary restraining orders
and injunctions against government infrastructure projects. It adds
that Republic Act No. 8975 must be taken in relation to Presidential Decree
No. 1818 prohibiting the issuances by the courts of restraining orders or
injunctions involving infrastructure projects. 79 The full text of Presidential
Decree No. 1818 promulgated in 1981 reads:
PRESIDENTIAL DECREE NO. 1818
PROHIBITING COURTS FROM ISSUING RESTRAINING ORDERS
OR PRELIMINARY INJUNCTIONS IN CASES INVOLVING
INFRASTRUCTURE AND NATURAL RESOURCE DEVELOPMENT
PROJECTS OF, AND PUBLIC UTILITIES OPERATED BY, THE
GOVERNMENT
WHEREAS, Presidential Decree No. 605 prohibits the issuance
by the courts of restraining orders or injunctions in cases involving
concessions, licenses, and other permits issued by administrative
officials or bodies for the exploitation, development and utilization of
natural resources of the country;
WHEREAS, it is in the public interest to adopt a similar
prohibition against the issuance of such restraining orders or
injunctions in other areas of activity equally critical to the economic
development effort of the nation, in order not to disrupt or hamper the
pursuit of essential government projects;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of
the Philippines, by virtue of the powers vested in me by the
Constitution, do hereby decree and order as follows:
Section 1. No court in the Philippines shall have jurisdiction to
issue any restraining order, preliminary injunction, or preliminary
mandatory injunction in any case, dispute, or controversy involving an
infrastructure project, or a mining, fishery, forest or other natural
resource development project of the government, or any public utility
operated by the government, including among others public utilities for
the transport of the goods or commodities, stevedoring and arrastre
contracts, to prohibit any person or persons, entity or government
official from proceeding with, or continuing the execution or
implementation of any such project, or the operation of such public
utility, or pursuing any lawful activity necessary for such execution,
implementation or operation.
Section 2. This decree shall take effect immediately. (Emphasis
supplied)
In 2000, Republic Act No. 8975 was passed. Section 3 of the law
provides:
Sec. 3. Prohibition on the Issuance of Temporary Restraining Orders,
Preliminary Injunctions and Preliminary Mandatory Injunctions. — No
court, except the Supreme Court, shall issue any temporary restraining
order, preliminary injunction or preliminary mandatory injunction
against the government or any of its subdivisions, officials or any
person or entity, whether public or private, acting under the
government's direction, to restrain, prohibit or compel the following
acts:
(a) Acquisition, clearance and development of the right-of-way
and/or site or location of any national government project;
(b) Bidding or awarding of contract/project of
the national government as defined under Section 2
hereof;
(c) Commencement, prosecution, execution, implementation,
operation of any such contract or project;
(d) Termination or rescission of any such contract/project; and
(e) The undertaking or authorization of any other lawful activity
necessary for such contract/project.
This prohibition shall apply in all cases, disputes or controversies
instituted by a private party, including but not limited to cases filed by
bidders or those claiming to have rights through such bidders involving
such contract/project. This prohibition shall not apply when the matter
is of extreme urgency involving a constitutional issue, such that unless
a temporary restraining order is issued, grave injustice and irreparable
injury will arise. The applicant shall file a bond, in an amount to be
fixed by the court, which bond shall accrue in favor of the government
if the court should finally decide that the applicant was not entitled to
the relief sought.
If after due hearing the court finds that the award of the contract is null
and void, the court may, if appropriate under the circumstances, award
the contract to the qualified and winning bidder or order a rebidding of
the same, without prejudice to any liability that the guilty party may
incur under existing laws. (Emphasis supplied)
Petitioner submits that since the repealing clause of Republic Act No.
8975 has "amended accordingly" Presidential Decree No. 1818, the
prohibition no longer extends to this court. 80 Section 9 reads:
Sec. 9. Repealing Clause. — All laws, decrees, including Presidential
Decree Nos. 605, 1818 and Republic Act No. 7160, as amended,
orders, rules and regulations or parts thereof inconsistent with this Act
are hereby repealed or amended accordingly. 81
Petitioner argues that even if Republic Act No. 8975 only
mentions national government infrastructure projects, Section 9 has
accordingly amendedPresidential Decree No. 1818, such that the projects
covered by this earlier law, like those undertaken by local governments, are
similarly covered by the removal of the prohibition against this court. 82
In other words, petitioner contends that based on these laws, only this
court can issue injunctive relief against local government infrastructure
projects. Thus, it was constrained to simultaneously file two separate Petitions
before the Regional Trial Court and this court.
We cannot agree.
There is nothing in Republic Act No. 8975 or in Presidential Decree No.
1818 that allows the simultaneous availment of legal remedies before the
Regional Trial Court and this court.
Republic Act No. 8975, even when read with Presidential Decree No.
1818, does not sanction the splitting of a cause of action in order for a party to
avail itself of the ancillary remedy of a temporary restraining order from this
court.
Petitioner's reading of Republic Act No. 8975's repealing clause, such
that only this court can issue injunctive relief, fails to persuade.
This court has set the limit on the prohibition found in Presidential
Decree No. 1818 by explaining that lower courts are not prohibited from
enjoining administrative acts when questions of law exist and the acts do not
involve administrative discretion in technical cases:
Although Presidential Decree No. 1818 prohibits any court from
issuing injunctions in cases involving infrastructure projects, the
prohibition extends only to the issuance of injunctions or restraining
orders against administrative acts in controversies involving facts or
the exercise of discretion in technical cases. On issues clearly outside
this dimension and involving questions of law, this Court declared that
courts could not be prevented from exercising their power to restrain or
prohibit administrative acts. In such cases, let the hammer fall and let it
fall hard. 83 (Emphasis supplied, citations omitted)
We also consider the second paragraph of Republic Act No. 8975,
Section 3 on the exception to the prohibition:
This prohibition shall apply in all cases, disputes or controversies
instituted by a private party, including but not limited to cases filed by
bidders or those claiming to have rights through such bidders involving
such contract/project. This prohibition shall not apply when the matter
is of extreme urgency involving a constitutional issue, such that unless
a temporary restraining order is issued, grave injustice and irreparable
injury will arise. The applicant shall file a bond, in an amount to be
fixed by the court, which bond shall accrue in favor of the government
if the court should finally decide that the applicant was not entitled to
the relief sought. (Emphasis supplied)
In other words, the Regional Trial Court can issue injunctive relief
against government infrastructure projects, even those undertaken by local
governments, considering that the prohibition in Section 3 of Republic Act No.
8957 only mentions national government projects. These courts can issue
injunctive relief when there are compelling constitutional violations — only
when the right is clear, there is a need to prevent grave and irreparable
injuries, and the public interest at stake in restraining or enjoining the project
while the action is pending far outweighs the inconvenience or costs to the
party to whom the project is awarded.
Republic Act No. 8975 mentions the constitutional provision in that
"[t]he use of property bears a social function, and all economic agents shall
contribute to the common good." 84
Statute cannot be interpreted as to violate protected rights. Thus, the
above conditions safeguard against lower court issuances of provisional
injunctive relief in cases not falling within the exception.
These safeguards are also consistent with the law's policy for the
expeditious implementation of government projects that ultimately benefit the
public:
Section 1. Declaration of Policy. — Article XII, Section 6 of the
Constitution states that the use of property bears a social function, and
all economic agents shall contribute to the common good. Towards this
end, the State shall ensure the expeditious and efficient
implementation and completion of government infrastructure
projects to avoid unnecessary increase in construction, maintenance
and/or repair costs and to immediately enjoy the social and economic
benefits therefrom. 85(Emphasis supplied)
There is no need for this court to labor on petitioner's arguments
regarding violations of due process and equal protection of the law and the
alleged grave injustice and irreparable injury petitioner suffered. The Petition's
incorporation of its discussion on these arguments, as made in its Petition
before the Regional Trial Court docketed as Civil Case No. 1459, only
emphasizes the splitting of a cause of action committed.
In any event, the general rule of prohibition under Republic Act No.
8975 does not preclude lower courts from assuming jurisdiction when the
ultimate relief prayed for is to nullify a national government infrastructure
project and its implementation:
However, it must be clarified that Republic Act No. 8975 does
not ordinarily warrant the outright dismissal of any complaint or petition
before the lower courts seeking permanent injunctive relief from the
implementation of national government infrastructure projects. What is
expressly prohibited by the statute is the issuance of the provisional
reliefs of temporary restraining orders, preliminary injunctions, and
preliminary mandatory injunctions. It does not preclude the lower
courts from assuming jurisdiction over complaints or petitions that seek
as ultimate relief the nullification or implementation of a national
government infrastructure project. A statute such as Republic Act No.
8975 cannot diminish the constitutionally mandated judicial power to
determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of government. Section 3 of the law in fact mandates,
thus:
If after due hearing the court finds that the award
of the contract is null and void, the court may, if
appropriate under the circumstances, award the contract
to the qualified and winning bidder or order a rebidding of
the same, without prejudice to any liability that the guilty
party may incur under existing laws.
Thus, when a court is called upon to rule on an initiatory
pleading assailing any material aspect pertinent to a national
government infrastructure project, the court ordinarily may not dismiss
the action based solely on Republic Act No. 8975 but is merely
enjoined from granting provisional reliefs. If no other ground obtains to
dismiss the action, the court should decide the case on the
merits. 86 (Emphasis supplied, citation omitted)
IV
We decide on petitioner's verified Petition to Cite Respondent for
Contempt alleging violation of this court's September 18, 2006 status
quo Order.
In its Comment, private respondent HLJ Construction and Enterprise
explains that it has no intention to disobey the Resolution. Its decision to
continue the Construction Shoreline Protection Project was based on the
definition of "status quo," meaning the "present, current, existing state of
affairs." 87
"The present[,] existing condition on September 18, 2006, was the
ongoing construction." 88 Moreover, petitioner's rights were not violated as its
bid was declared as "not substantially responsive." 89 In the absence of a
clear legal right, no injunction can be granted. 90
Similarly, public respondent contends in its Comment that the
Construction Shoreline Protection Project commenced as early as May 8,
2006. 91 At the time the Petition was filed in September 2006, the
Construction Shoreline Protection Project had been ongoing for four (4)
months. 92 Thus, the status quo as of the September 18, 2006 Resolution was
that the project was ongoing. 93
This court has explained that status quo should be the one existing at
the time of the filing of the case:
The status quo should be that existing at the time of the filing of
the case. The status quo usually preserved by a preliminary injunction
is the last actual, peaceable and uncontested status which preceded
the actual controversy. The status quo ante litem is, ineluctably, the
state of affairs which is existing at the time of the filing of the case.
Indubitably, the trial court must not make use of its injunctive power to
alter such status. 94 (Emphasis supplied, citations omitted)
The ordinary meaning of status quo is "the existing state of
affairs[,]" 95 while status quo ante refers to "the state of affairs that
existed previously." 96
Relying in good faith on the ordinary meaning of status quo as
differentiated from status quo ante, respondents pushed through with the
construction, which had been the existing state of affairs at the time the
September 18, 2006 Resolution was issued.
This is consistent with Republic Act No. 8975's policy that "the State
shall ensure the expeditious and efficient implementation and completion of
government infrastructure projects to avoid unnecessary increase in
construction, maintenance and/or repair costs and to immediately enjoy the
social and economic benefits therefrom." 97 This policy declaration does not
distinguish between national and local government infrastructure projects.
Delay in the project will only mean additional costs for the government and
prejudice to the people of the Municipality of Valladolid who will directly
benefit from the Construction Shoreline Protection Project.
WHEREFORE, considering the foregoing, the Petition
is DISMISSED for lack of merit. The verified Petition to Cite Respondents for
Contempt dated December 11, 2006 is likewise DISMISSED for lack of merit.
SO ORDERED.
(Dynamic Builders & Construction Co. (Phil.), Inc. v. Presbitero, Jr., G.R. No.
|||

174202, [April 7, 2015])

C. Parties to Civil Action (Section 1, Rule 3)


Joinder of Parties (Sections 6 and 7, Rule 3)
Indispensable and Necessary Parties (Sections 7 and 8, Rule 3)
Class Suit (Section 12, Rule 3)
Death or Separation of a Party (Sections 16, 17 and 18, Rule 3)
Transfer of Interest (Section 19, Rule 3)
Contractual Money Claims (Section 20, Rule 3)

Cases:
1. Relucio vs. Lopez, G.R. No. 138497

FIRST DIVISION

[G.R. No. 138497. January 16, 2002.]

IMELDA RELUCIO, petitioner, vs. ANGELINA MEJIA


LOPEZ, respondent.

Roco Buñag Kapunan & Migallos, R. T. Capulong & Associates and Benitez
Parlade Africa & Barinaga Law Office for petitioner.
Abello Concepcion Regala & Cruz for private respondent.

SYNOPSIS
Respondent Angelina Lopez filed a petition for Appointment as Sole
Administratrix of Conjugal Partnership of Properties, Forfeiture, etc. against
Alberto Lopez and petitioner Imelda Relucio. Allegedly, when Alberto abandoned
his legal wife Angelina and their children, Alberto maintained an illicit relationship
with Imelda and used the conjugal property of Angelina and Alberto in amassing
properties. Angelina and her children, however, never benefited from the same.
The issue is whether Angelina has a cause of action against Imelda. The Court
ruled in the negative. The causes of the action here are for the judicial
appointment of Angelina as administratrix of the conjugal partnership arising from
her marriage to Alberto; for the accounting of the conjugal partnership; for the
forfeiture of Alberto's share in the co-owned property acquired during his illicit
relationship with Imelda; for support and moral damages. To all these, Imelda is
a complete stranger. The administration of the property of the marriage is entirely
between the spouses, to the exclusion of all other persons. Hence, the cause of
action pertains only to Alberto. Imelda is not a real party in interest, neither can
she be an indispensable party, nor a necessary party in the petition filed by
Angelina.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; CAUSE OF ACTION; ELUCIDATED.


— First issue: whether a cause of action exists against petitioner in the
proceedings below. "A cause of action is an act or omission of one party the
defendant in violation of the legal right of the other." The elements of a cause of
action are: 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 in violation of the right of the plaintiff or constituting a
breach of the obligation of the defendant to the plaintiff for which the latter may
maintain an action for recovery of damages. A cause of action is sufficient if a
valid judgment may be rendered thereon if the alleged facts were admitted or
proved. In order 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 merely defectively stated or is ambiguous, indefinite or uncertain.
2. ID.; ID.; ID.; NOT PRESENT AGAINST A COMPLETE STRANGER IN AN
ACTION FOR JUDICIAL APPOINTMENT OF ABANDONED WIFE AS
ADMINISTRATRIX OF THE CONJUGAL PARTNERSHIP. — The first cause of
action is for judicial appointment of respondent as administratrix of the conjugal
partnership or absolute community property arising from her marriage to Alberto
J. Lopez. Petitioner is a complete stranger to this cause of action. Article 128 of
the Family Code refers only to spouses, to wit: "If a spouse without just cause
abandons the other or fails to comply with his or her obligations to the family, the
aggrieved spouse may petition the court for receivership, for judicial separation of
property, or for authority to be the sole administrator of the conjugal partnership
property . . ." The administration of the property of the marriage is entirely
between them, to the exclusion of all other persons. Respondent alleges that
Alberto J. Lopez is her husband. Therefore, her first cause of action is against
Alberto J. Lopez. There is no right-duty relation between petitioner and
respondent that can possibly support a cause of action. In fact, none of the three
elements of a cause of action exists. cDAEIH

3. ID.; ID.; ID.; NOT PRESENT AGAINST A COMPLETE STRANGER IN AN


ACTION FOR ACCOUNTING OF CONJUGAL PARTNERSHIP. — The second
cause of action is for an accounting "by respondent husband." The accounting of
conjugal partnership arises from or is an incident of marriage. Petitioner has
nothing to do with the marriage between respondent Alberto J. Lopez. Hence, no
cause of action can exist against petitioner on this ground.
4. ID.; ID.; ID.; NOT PRESENT AGAINST A COMPLETE STRANGER IN AN
ACTION FOR FORFEITURE OF HUSBAND'S SHARE IN PROPERTY CO-
OWNED WITH THE STRANGER. — Respondent's alternative cause of action is
for forfeiture of Alberto J. Lopez' share in the co-owned property "acquired during
his illicit relationship and cohabitation with [petitioner]" and for the "dissolution of
the conjugal partnership of gains between him [Alberto J. Lopez] and the
[respondent]." The third cause of action is essentially for forfeiture of Alberto J.
Lopez' share in property co-owned by him and petitioner. It does not involve the
issue of validity of the co-ownership between Alberto J. Lopez and petitioner. The
issue is whether there is basis in law to forfeit Alberto J. Lopez' share, if any
there be, in property co-owned by him with petitioner. Respondent's asserted
right to forfeit extends to Alberto J. Lopez' share alone. Failure of Alberto J.
Lopez to surrender such share, assuming the trial court finds in respondent's
favor, results in a breach of an obligation to respondent and gives rise to a cause
of action. Such cause of action, however, pertains to Alberto J. Lopez, not
petitioner.
5. ID.; ID.; ID.; NOT PRESENT AGAINST A COMPLETE STRANGER IN AN
ACTION FOR SUPPORT, MORAL DAMAGES. — The respondent also sought
support. Support cannot be compelled from a stranger. As to the moral damages,
respondent's claim for moral damages is against Alberto J. Lopez, not petitioner.
To sustain a cause of action for moral damages, the complaint must have the
character of an action for interference with marital or family relations under the
Civil Code.
6. ID.; ID.; PARTIES; ONE WHO IS NOT A REAL PARTY IN INTEREST
CANNOT BE AN INDISPENSABLE PARTY, NOR BE A NECESSARY PARTY.
— A real party in interest is one who stands "to be benefited or injured by the
judgment of the suit." In this case, petitioner would not be affected by any
judgment in Special Proceedings No. M-3630. If petitioner is not a real party in
interest, she cannot be an indispensable party. An indispensable party is one
without whom there can be no final determination of an action. Petitioner's
participation in Special Proceedings M-3630 is not indispensable. Nor can
petitioner be a necessary party in Special Proceedings M-3630. A necessary
party as one who is not indispensable but who ought to be joined as party if
complete relief is to be accorded those already parties, or for a complete
determination or settlement of the claim subject of the action.

DECISION

PARDO, J : p

The Case
The case is a petition for review on certiorari 1 seeking to set aside the
decision 2 of the Court of Appeals that denied a petition for certiorari assailing the
trial court's order denying petitioner's motion to dismiss the case against her
inclusion as party defendant therein.
The Facts
The facts, as found by the Court of Appeals, are as follows:
"On September 15, 1993, herein private respondent Angelina Mejia
Lopez (plaintiff below) filed a petition for "APPOINTMENT AS SOLE
ADMINISTRATRIX OF CONJUGAL PARTNERSHIP OF PROPERTIES,
FORFEITURE, ETC.," against defendant Alberto Lopez and petitioner
Imelda Relucio, docketed as Spec. Proc. M-3630, in the Regional Trial
Court of Makati, Branch 141. In the petition, private-respondent alleged
that sometime in 1968, defendant Lopez, who is legally married to the
private respondent, abandoned the latter and their four legitimate
children; that he arrogated unto himself full and exclusive control and
administration of the conjugal properties, spending and using the same
for his sole gain and benefit to the total exclusion of the private
respondent and their four children; that defendant Lopez, after
abandoning his family, maintained an illicit relationship and cohabited
with herein petitioner since 1976.
"It was further alleged that defendant Lopez and petitioner Relucio,
during their period of cohabitation since 1976, have amassed a fortune
consisting mainly of stockholdings in Lopez-owned or controlled
corporations, residential, agricultural, commercial lots, houses,
apartments and buildings, cars and other motor vehicles, bank accounts
and jewelry. These properties, which are in the names of defendant
Lopez and petitioner Relucio singly or jointly or their dummies and
proxies, have been acquired principally if not solely through the actual
contribution of money, property and industry of defendant Lopez with
minimal, if not nil, actual contribution from petitioner Relucio.
"In order to avoid defendant Lopez obligations as a father and husband,
he excluded the private respondent and their four children from sharing
or benefiting from the conjugal properties and the income or fruits there
from. As such, defendant Lopez either did not place them in his name or
otherwise removed, transferred, stashed away or concealed them from
the private-respondent. He placed substantial portions of these conjugal
properties in the name of petitioner Relucio.
"It was also averred that in the past twenty five years since defendant
Lopez abandoned the private-respondent, he has sold, disposed of,
alienated, transferred, assigned, canceled, removed or stashed away
properties, assets and income belonging to the conjugal partnership with
the private-respondent and either spent the proceeds thereof for his sole
benefit and that of petitioner Relucio and their two illegitimate children or
permanently and fraudulently placed them beyond the reach of the
private-respondent and their four children.
"On December 8, 1993, a Motion to Dismiss the Petition was filed by
herein petitioner on the ground that private respondent has no cause of
action against her.

"An Order dated February 10, 1994 was issued by herein respondent
Judge denying petitioner Relucio's Motion to Dismiss on the ground the
she is impleaded as a necessary or indispensable party because some
of the subject properties are registered in her name and defendant
Lopez, or solely in her name.
"Subsequently thereafter, petitioner Relucio filed a Motion for
Reconsideration to the Order of the respondent Judge dated February
10, 1994 but the same was likewise denied in the Order dated May 31,
1994." 3
On June 21, 1994, petitioner filed with the Court of Appeals a petition
for certiorari assailing the trial court's denial of her motion to dismiss. 4
On May 31, 1996, the Court of Appeals promulgated a decision denying the
petition. 5 On June 26, 1996, petitioner filed a motion for
reconsideration. 6 However, on April 6, 1999, the Court of Appeals denied
petitioner's motion for reconsideration. 7
Hence, this appeal. 8
The Issues
1. Whether respondent's petition for appointment as sole
administratrix of the conjugal property, accounting, etc.
against her husband Alberto J. Lopez established a cause of
action against petitioner.
2. Whether petitioner's inclusion as party defendant is essential in
the proceedings for a complete adjudication of the
controversy. 9
The Court's Ruling
We grant the petition. We resolve the issues in seriatim.
First issue: whether a cause of action exists against petitioner in the proceedings
below. "A cause of action is an act or omission of one party the defendant in
violation of the legal right of the other." 10 The elements of a cause of action are:
(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 in violation of
the right of the plaintiff or constituting a breach of the
obligation of the defendant to the plaintiff for which the latter
may maintain an action for recovery of damages. 11
A cause of action is sufficient if a valid judgment may be rendered thereon if the
alleged facts were admitted or approved. 12
In order 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 merely defectively stated or is ambiguous, indefinite or uncertain. 13
Hence, to determine the sufficiency of the cause of action alleged in Special
Proceedings M-3630, we assay its allegations.
In Part Two on the "Nature of [the] Complaint," respondent Angelina Mejia Lopez
summarized the causes of action alleged in the complaint below.
The complaint is by an aggrieved wife against her husband.
Nowhere in the allegations does it appear that relief is sought against petitioner.
Respondent's causes of action were all against her husband.
The first cause of action is for judicial appointment of respondent as
administratrix of the conjugal partnership or absolute community property arising
from her marriage to Alberto J. Lopez. Petitioner is a complete stranger to this
cause of action. Article 128 of the Family Code refers only to spouses, to wit: cSTHAC

"If a spouse without just cause abandons the other or fails to comply with
his or her obligations to the family, the aggrieved spouse may petition
the court for receivership, for judicial separation of property, or for
authority to be the sole administrator of the conjugal partnership property
. . ."
The administration of the property of the marriage is entirely between them, to
the exclusion of all other persons. Respondent alleges that Alberto J. Lopez is
her husband. Therefore, her first cause of action is against Alberto J. Lopez.
There is no right-duty relation between petitioner and respondent that can
possibly support a cause of action. In fact, none of the three elements of a cause
of action exists.
The second cause of action is for an accounting "by respondent husband." 14 The
accounting of conjugal partnership arises from or is an incident of marriage.
Petitioner has nothing to do with the marriage between respondent Alberto J.
Lopez. Hence, no cause of action can exist against petitioner on this ground.
Respondent's alternative cause of action is for forfeiture of Alberto J. Lopez'
share in the co-owned property "acquired during his illicit relationship and
cohabitation with [petitioner]" 15 and for the "dissolution of the conjugal
partnership of gains between him [Alberto J. Lopez] and the [respondent]."
The third cause of action is essentially for forfeiture of Alberto J. Lopez' share in
property co-owned by him and petitioner. It does not involve the issue of validity
of the co-ownership between Alberto J. Lopez and petitioner. The issue is
whether there is basis in law to forfeit Alberto J. Lopez' share, if any there be, in
property co-owned by him with petitioner.
Respondent's asserted right to forfeit extends to Alberto J. Lopez' share alone.
Failure of Alberto J. Lopez to surrender such share, assuming the trial court finds
in respondent's favor, results in a breach of an obligation to respondent and gives
rise to a cause of action. 16 Such cause of action, however, pertains to Alberto J.
Lopez, not petitioner.
The respondent also sought support. Support cannot be compelled from a
stranger.
The action in Special Proceedings M-3630 is, to use respondent Angelina M.
Lopez' own words, one by "an aggrieved wife against her
husband." 17 References to petitioner in the common and specific allegations of
the fact in the complaint are merely incidental, to set forth facts and
circumstances that prove the causes of action alleged against Alberto J. Lopez.
Finally, as to the moral damages, respondent's claim for moral damages is
against Alberto J. Lopez, not petitioner.
To sustain a cause of action for moral damages, the complaint must have the
character of an action for interference with marital or family relations under the
Civil Code.
A real party in interest is one who stands "to be benefited or injured by the
judgment of the suit." 18 In this case, petitioner would not be affected by any
judgment in Special Proceedings M-3630.
If petitioner is not a real party in interest, she cannot be an indispensable party.
An indispensable party is one without whom there can be no final determination
of an action. 19 Petitioner's participation in Special Proceedings M-3630 is not
indispensable. Certainly, the trial court can issue a judgment ordering Alberto J.
Lopez to make an accounting of his conjugal partnership with respondent, and
give support to respondent and their children, and dissolve Alberto J. Lopez'
conjugal partnership with respondent, and forfeit Alberto J. Lopez' share in
property co-owned by him and petitioner. Such judgment would be perfectly valid
and enforceable against Alberto J. Lopez.
Nor can petitioner be a necessary party in Special Proceedings M-3630.
A necessary party is one who is not indispensable but who ought to be joined as
party if complete relief is to be accorded those already parties, or for a complete
determination or settlement of the claim subject of the action. 20 In the context of
her petition in the lower court, respondent would be accorded complete relief if
Alberto J. Lopez were ordered to account for his alleged conjugal partnership
property with respondent, give support to respondent and her children, turn over
his share in the co-ownership with petitioner and dissolve his conjugal
partnership or absolute community property with respondent.
The Judgment
WHEREFORE, the Court GRANTS the petition and REVERSES the decision of
the Court of Appeals. 21 The Court DISMISSES Special Proceedings M-3630 of
the Regional Trial Court, Makati Branch 141 as against petitioner. cHDAIS

No costs.
SO ORDERED.
||| (Relucio v. Lopez, G.R. No. 138497, [January 16, 2002], 424 PHIL 617-627)

2. De Castro vs. CA, G.R. No. 115838

THIRD DIVISION
[G.R. No. 115838. July 18, 2002.]

CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE


CASTRO, petitioners, vs. COURT OF APPEALS and
FRANCISCO ARTIGO, respondents.

Bocobo Rondain Mendiola Cruz & Formoso for petitioners.


Inocentes and Asso. Law Offices for private respondent.

SYNOPSIS

Petitioners Constante and Corazon Amor de Castro were co-owners of four lots
located in Cubao, Quezon City. In a letter dated January 24, 1984, they
authorized respondent Francisco Artigo to act as real estate broker in the sale of
these properties for the amount of P23,000,000.00 at a 5% commission. It was
private respondent who first found Times Transit Corporation as a prospective
buyer of two lots. Sometime in May 1985, the sale was consummated. Artigo
received P48,893.76 as commission. However, he felt aggrieved because
according to him, his total commission should be P352,500.00 which is 5% of the
agreed price of P7,050,000. Thus, he sued the petitioners in order to collect the
unpaid balance of his broker's commission. Petitioners, on the other hand,
argued that private respondent was selfishly asking more than what he truly
deserved as commission to the prejudice of other agents who were more
instrumental in the consummation of the sale. The trial court ruled in favor of
private respondent and it was affirmed in toto by the Court of Appeals. Hence,
this petition.
The petition was bereft of merit. A contract of agency which is not contrary to law,
public order, public policy, morals or good custom is a valid contract, and
constitutes the law between the parties. The contract of agency entered into by
Constante with Artigo was the law between them and both were bound to comply
with its terms and conditions in good faith. The mere fact that "other agents"
intervened in the consummation of the sale and were paid their respective
commissions cannot vary the terms of the contract of agency. In any event, the
Court found that the 5% real estate broker's commission was reasonable and
within the standard practice in the real estate industry for transactions of this
nature.

SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; INDISPENSABLE PARTY;
ELUCIDATED. — An indispensable party is one whose interest will be affected
by the court's action in the litigation, and without whom no final determination of
the case can be had. The joinder of indispensable parties is mandatory and
courts cannot proceed without their presence. Whenever it appears to the court
in the course of a proceeding that an indispensable party has not been joined, it
is the duty of the court to stop the trial and order the inclusion of such party.
2. ID.; ID.; MANDATORY JOINDER OF INDISPENSABLE PARTIES; NOT
APPLICABLE IN CASE AT BAR. — [T]he rule on mandatory joinder of
indispensable parties is not applicable to the instant case. There is no dispute
that Constante appointed Artigo in a handwritten note dated January 24, 1984 to
sell the properties of the De Castros for P23 million at a 5 percent commission.
The authority was on a first come, first serve basis. . . . Constante signed the
note as owner and as representative of the other co-owners. Under this note, a
contract of agency was clearly constituted between Constante and Artigo.
Whether Constante appointed Artigo as agent, in Constante's individual or
representative capacity, or both, the De Castros cannot seek the dismissal of the
case for failure to implead the other co-owners as indispensable parties. The De
Castros admit that the other co-owners are solidarily liable under the contract of
agency, citing Article 1915 of the Civil Code, which reads: "Art. 1915. If two or
more persons have appointed an agent for a common transaction or undertaking,
they shall be solidarily liable to the agent for all the consequences of the agency."
3. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; AGENT MAY
RECOVER THE WHOLE COMPENSATION FROM ANY ONE OF THE CO-
PRINCIPALS. — The solidary liability of the four co-owners, however, militates
against the De Castros' theory that the other co-owners should be impleaded as
indispensable parties. A noted commentator explained Article 1915 thus — "The
rule in this article applies even when the appointments were made by the
principals in separate acts, provided that they are for the same transaction. The
solidarity arises from the common interest of the principals, and not from the act
of constituting the agency. By virtue of this solidarity, the agent can recover from
any principal the whole compensation and indemnity owing to him by the others.
The parties, however, may, by express agreement, negate this solidary
responsibility. The solidarity does not disappear by the mere partition effected by
the principals after the accomplishment of the agency. If the undertaking is one in
which several are interested, but only some create the agency, only the latter are
solidarily liable, without prejudice to the effects ofnegotiorum gestio with respect
to the others. And if the power granted includes various transactions some of
which are common and others are not, only those interested in each transaction
shall be liable for it." When the law expressly provides for solidarity of the
obligation, as in the liability of co-principals in a contract of agency, each obligor
may be compelled to pay the entire obligation. The agent may recover the whole
compensation from any one of the co-principals, as in this case. Indeed, Article
1216 of the Civil Code provides that a creditor may sue any of the solidary
debtors. DaACIH

4. ID.; ID.; ID.; CONTRACT OF AGENCY IS THE LAW BETWEEN PARTIES;


5% REAL ESTATE BROKER'S COMMISSION IS WITHIN THE STANDARD
PRACTICE IN THE REAL ESTATE INDUSTRY. — A contract of agency which is
not contrary to law, public order, public policy, morals or good custom is a valid
contract, and constitutes the law between the parties. The contract of agency
entered into by Constante with Artigo is the law between them and both are
bound to comply with its terms and conditions in good faith. The mere fact that
"other agents" intervened in the consummation of the sale and were paid their
respective commissions cannot vary the terms of the contract of agency granting
Artigo a 5 percent commission based on the selling price. . . . In any event, we
find that the 5 percent real estate broker's commission is reasonable and within
the standard practice in the real estate industry for transactions of this nature.
5. ID.; ID.; PAYMENT; RECEIPT OF PARTIAL PAYMENT OF COMMISSION BY
AN AGENT NEITHER AMOUNTS TO A WAIVER OF THE BALANCE NOR
PUTS HIM IN ESTOPPEL; CASE AT BAR. — Artigo's acceptance of partial
payment of his commission neither amounts to a waiver of the balance nor puts
him in estoppel. This is the import of Article 1235 which was explained in this
wise: "The word accept, as used in Article 1235 of the Civil Code, means to take
as satisfactory or sufficient, or agree to an incomplete or irregular
performance. Hence, the mere receipt of a partial payment is not equivalent to
the required acceptance of performance as would extinguish the whole
obligation." There is thus a clear distinction between acceptance and mere
receipt. In this case, it is evident that Artigo merely received the partial payment
without waiving the balance. Thus, there is no estoppel to speak of.
6. ID.; LACHES; ELUCIDATED. — Laches means the failure or neglect, for an
unreasonable and unexplained length of time, to do that which by exercising due
diligence could or should have been done earlier. It is negligence or omission to
assert a right within a reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert it.
7. ID.; ID.; APPLIES ONLY IN THE ABSENCE OF STATUTORY
PRESCRIPTIVE PERIOD. — The De Castros admit that Artigo's claim was filed
within the ten-year prescriptive period. The De Castros, however, still maintain
that Artigo's cause of action is barred by laches. Laches does not apply because
only four years had lapsed from the time of the sale in June 1985. Artigo made a
demand in July 1985 and filed the action in court on May 29, 1989, well within the
ten-year prescriptive period. This does not constitute an unreasonable delay in
asserting one's right. The Court has ruled, "a delay within the prescriptive period
is sanctioned by law and is not considered to be a delay that would bar relief." In
explaining that laches applies only in the absence of a statutory prescriptive
period, the Court has stated — "Laches is recourse in equity. Equity, however, is
applied only in the absence, never in contravention, of statutory law. Thus,
laches, cannot, as a rule, be used to abate a collection suit filed within the
prescriptive period mandated by the Civil Code." Clearly, the De Castros'
defense of laches finds no support in law, equity or jurisprudence.
8. ID.; MODES OF ACQUIRING OWNERSHIP; PRESCRIPTION OF ACTIONS;
ACTIONS UPON A WRITTEN CONTRACT MUST BE BROUGHT WITHIN TEN
YEARS FROM THE TIME THE RIGHT OF ACTION ACCRUES. — Actions upon
a written contract, such as a contract of agency, must be brought within ten years
from the time the right of action accrues. The right of action accrues from the
moment the breach of right or duty occurs. From this moment, the creditor can
institute the action even as the ten-year prescriptive period begins to run.
9. REMEDIAL LAW; CIVIL PROCEDURE; APPEAL; PETITION FOR REVIEW
ON CERTIORARI; SUPREME COURT IS NOT THE PROPER VENUE TO
CONSIDER A FACTUAL ISSUE. — It is not the function of this Court to re-
examine the evidence submitted by the parties, or analyze or weight the
evidence again. This Court is not the proper venue to consider a factual issue as
it is not a trier of facts. In petitions for review on certiorari as a mode of appeal
under Rule 45, a petitioner can only raise questions of law. . . . We find no
reason to depart from this principle. The trial and appellate courts are in a much
better position to evaluate properly the evidence. Hence, we find no other
recourse but to affirm their finding on the actual purchase price.

10. CIVIL LAW; DAMAGES; LEFT TO THE SOUND DISCRETION OF THE


TRIAL COURT AND IF WELL EXERCISED, WILL NOT BE DISTURBED ON
APPEAL; APPLIED IN CASE AT BAR. — Law and jurisprudence support the
award of moral damages and attorney's fees in favor of Artigo. The award of
damages and attorney's fees is left to the sound discretion of the court, and if
such discretion is well exercised, as in this case, it will not be disturbed on
appeal. Moral damages may be awarded when in a breach of contract the
defendant acted in bad faith, or in wanton disregard of his contractual obligation.
On the other hand, attorney's fees are awarded in instances where "the
defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's
plainly valid, just and demandable claim." There is no reason to disturb the trial
court's finding that "the defendant's lack of good faith and unkind treatment of the
plaintiff in refusing to give his due commission deserve censure." This warrants
the award of P25,000.00 in moral damages and P45,000.00 in attorney's fees.
The amounts are, in our view, fair and reasonable. Having found a buyer for the
two lots, Artigo had already performed his part of the bargain under the contract
of agency. The De Castros should have exercised fairness and good judgment in
dealing with Artigo by fulfilling their own part of the bargain — paying Artigo his 5
percent broker's commission based on the actual purchase price of the two
lots.IaHSCc

DECISION

CARPIO, J : p

The Case
Before us is a Petition for Review on Certiorari 1 seeking to annul the Decision of
the Court of Appeals 2 dated May 4, 1994 in CA-G.R. CV No. 37996, which
affirmed in toto the decision 3 of the Regional Trial Court of Quezon City, Branch
80, in Civil Case No. Q-89-2631. The trial court disposed as follows:
"WHEREFORE, the Court finds defendants Constante and Corazon
Amor de Castro jointly and solidarily liable to plaintiff the sum of:
a) P303,606.24 representing unpaid commission;
b) P25,000.00 for and by way of moral damages;
c) P45,000.00 for and by way of attorney's fees;
d) To pay the cost of this suit.
Quezon City, Metro Manila, December 20, 1991."
The Antecedent Facts
On May 29, 1989, private respondent Francisco Artigo ("Artigo" for brevity) sued
petitioners Constante A. De Castro ("Constante" for brevity) and Corazon A. De
Castro ("Corazon" for brevity) to collect the unpaid balance of his broker's
commission from the De Castros. 4 The Court of Appeals summarized the facts in
this wise:
". . .. Appellants 5 were co-owners of four (4) lots located at EDSA corner
New York and Denver Streets in Cubao, Quezon City. In a letter dated
January 24, 1984 (Exhibit "A-1", p. 144, Records), appellee 6 was
authorized by appellants to act as real estate broker in the sale of these
properties for the amount of P23,000,000.00, five percent (5%) of which
will be given to the agent as commission. It was appellee who first found
Times Transit Corporation, represented by its president Mr. Rondaris, as
prospective buyer which desired to buy two (2) lots only, specifically lots
14 and 15. Eventually, sometime in May of 1985, the sale of lots 14 and
15 was consummated. Appellee received from appellants P48,893.76 as
commission.
It was then that the rift between the contending parties soon emerged.
Appellee apparently felt short changed because according to him, his
total commission should be P352,500.00 which is five percent (5%) of
the agreed price of P7,050,000.00 paid by Times Transit Corporation to
appellants for the two (2) lots, and that it was he who introduced the
buyer to appellants and unceasingly facilitated the negotiation which
ultimately led to the consummation of the sale. Hence, he sued below to
collect the balance of P303,606.24 after having received P48,893.76 in
advance.
On the other hand, appellants completely traverse appellee's claims and
essentially argue that appellee is selfishly asking for more than what he
truly deserved as commission to the prejudice of other agents who were
more instrumental in the consummation of the sale. Although appellants
readily concede that it was appellee who first introduced Times Transit
Corp. to them, appellee was not designated by them as their exclusive
real estate agent but that in fact there were more or less eighteen (18)
others whose collective efforts in the long run dwarfed those of
appellee's, considering that the first negotiation for the sale where
appellee took active participation failed and it was these other agents
who successfully brokered in the second negotiation. But despite this
and out of appellants' "pure liberality, beneficence and magnanimity",
appellee nevertheless was given the largest cut in the commission
(P48,893.76), although on the principle of quantum meruit he would
have certainly been entitled to less. So appellee should not have been
heard to complain of getting only a pittance when he actually got the
lion's share of the commission and worse, he should not have been
allowed to get the entire commission. Furthermore, the purchase price
for the two lots was only P3.6 million as appearing in the deed of sale
and not P7.05 million as alleged by appellee. Thus, even assuming that
appellee is entitled to the entire commission, he would only be getting
5% of the P3.6 million, or P180,000.00."
Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the decision of the trial court.
First. The Court of Appeals found that Constante authorized Artigo to act as
agent in the sale of two lots in Cubao, Quezon City. The handwritten
authorization letter signed by Constante clearly established a contract of agency
between Constante and Artigo. Thus, Artigo sought prospective buyers and
found Times Transit Corporation ("Times Transit" for brevity). Artigo facilitated
the negotiations which eventually led to the sale of the two lots. Therefore, the
Court of Appeals decided that Artigo is entitled to the 5% commission on the
purchase price as provided in the contract of agency.
Second. The Court of Appeals ruled that Artigo's complaint is not dismissible for
failure to implead as indispensable parties the other co-owners of the two lots.
The Court of Appeals explained that it is not necessary to implead the other co-
owners since the action is exclusively based on a contract of agency between
Artigo and Constante.
Third. The Court of Appeals likewise declared that the trial court did not err in
admitting parol evidence to prove the true amount paid by Times Transit to the
De Castros for the two lots. The Court of Appeals ruled that
evidence aliunde could be presented to prove that the actual purchase price was
P7.05 million and not P3.6 million as appearing in the deed of sale.
Evidence aliunde is admissible considering that Artigo is not a party, but a mere
witness in the deed of sale between the De Castros and Times Transit. The
Court of Appeals explained that, "the rule that oral evidence is inadmissible to
vary the terms of written instruments is generally applied only in suits between
parties to the instrument and strangers to the contract are not bound by it."
Besides, Artigo was not suing under the deed of sale, but solely under the
contract of agency. Thus, the Court of Appeals upheld the trial court's finding that
the purchase price was P7.05 million and not P3.6 million.
Hence, the instant petition.
The Issues
According to petitioners, the Court of Appeals erred in —
I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR
FAILURE TO IMPLEAD INDISPENSABLE PARTIES-IN-
INTEREST;
II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON THE
GROUND THAT ARTIGO'S CLAIM HAS BEEN EXTINGUISHED
BY FULL PAYMENT, WAIVER, OR ABANDONMENT;
III. CONSIDERING INCOMPETENT EVIDENCE;
IV. GIVING CREDENCE TO PATENTLY PERJURED TESTIMONY;
V. SANCTIONING AN AWARD OF MORAL DAMAGES AND
ATTORNEY'S FEES;
VI. NOT AWARDING THE DE CASTRO'S MORAL AND EXEMPLARY
DAMAGES, AND ATTORNEY'S FEES.
The Court's Ruling
The petition is bereft of merit.
First Issue: whether the complaint merits dismissal for failure to implead other
co-owners as indispensable parties
The De Castros argue that Artigo's complaint should have been dismissed for
failure to implead all the co-owners of the two lots. The De Castros claim that
Artigo always knew that the two lots were co-owned by Constante and Corazon
with their other siblings Jose and Carmela whom Constante merely represented.
The De Castros contend that failure to implead such indispensable parties is fatal
to the complaint since Artigo, as agent of all the four co-owners, would be paid
with funds co-owned by the four co-owners.
The De Castros' contentions are devoid of legal basis.
An indispensable party is one whose interest will be affected by the court's action
in the litigation, and without whom no final determination of the case can be
had. 7The joinder of indispensable parties is mandatory and courts cannot
proceed without their presence. 8 Whenever it appears to the court in the course
of a proceeding that an indispensable party has not been joined, it is the duty of
the court to stop the trial and order the inclusion of such party. 9
However, the rule on mandatory joinder of indispensable parties is not applicable
to the instant case.
There is no dispute that Constante appointed Artigo in a handwritten note dated
January 24, 1984 to sell the properties of the De Castros for P23 million at a 5
percent commission. The authority was on a first come, first serve basis. The
authority reads in full:
"24 Jan. 84
To Whom It May Concern:
This is to state that Mr. Francisco Artigo is authorized as our real estate
broker in connection with the sale of our property located at Edsa Corner
New York & Denver, Cubao, Quezon City.
Asking price P23,000,000.00 with
5% commission as agent's fee.
C.C. de Castro
owner & representing
co-owners
This authority is on a first-come
First serve basis – CAC"

Constante signed the note as owner and as representative of the other co-
owners. Under this note, a contract of agency was clearly constituted between
Constante and Artigo. Whether Constante appointed Artigo as agent, in
Constante's individual or representative capacity, or both, the De Castros cannot
seek the dismissal of the case for failure to implead the other co-owners as
indispensable parties. The De Castros admit that the other co-owners are
solidarily liable under the contract of agency, 10 citing Article 1915 of the Civil
Code, which reads:
Art. 1915. If two or more persons have appointed an agent for a common
transaction or undertaking, they shall be solidarily liable to the agent for
all the consequences of the agency.
The solidary liability of the four co-owners, however, militates against the De
Castros' theory that the other co-owners should be impleaded as
indispensable parties. A noted commentator explained Article 1915 thus —
"The rule in this article applies even when the appointments were made
by the principals in separate acts, provided that they are for the same
transaction. The solidarity arises from the common interest of the
principals, and not from the act of constituting the agency. By virtue of
this solidarity, the agent can recover from any principal the whole
compensation and indemnity owing to him by the others. The parties,
however, may, by express agreement, negate this solidary responsibility.
The solidarity does not disappear by the mere partition effected by the
principals after the accomplishment of the agency.
If the undertaking is one in which several are interested, but only some
create the agency, only the latter are solidarily liable, without prejudice to
the effects ofnegotiorum gestio with respect to the others. And if the
power granted includes various transactions some of which are common
and others are not, only those interested in each transaction shall be
liable for it." 11
When the law expressly provides for solidarity of the obligation, as in the liability
of co-principals in a contract of agency, each obligor may be compelled to pay
the entire obligation. 12 The agent may recover the whole compensation from any
one of the co-principals, as in this case.
Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the
solidary debtors. This article reads:
Art. 1216. The creditor may proceed against any one of the solidary
debtors or some or all of them simultaneously. The demand made
against one of them shall not be an obstacle to those which may
subsequently be directed against the others, so long as the debt has not
been fully collected.
Thus, the Court has ruled in Operators Incorporated vs. American Biscuit Co.,
Inc. 13 that —
". . . solidarity does not make a solidary obligor an indispensable party in
a suit filed by the creditor. Article 1216 of the Civil Code says that the
creditor 'may proceed against anyone of the solidary debtors or some or
all of them simultaneously.'" (Emphasis supplied)
Second Issue: whether Artigo's claim has been extinguished by full payment,
waiver or abandonment
The De Castros claim that Artigo was fully paid on June 14, 1985, that is, Artigo
was given "his proportionate share and no longer entitled to any balance."
According to them, Artigo was just one of the agents involved in the sale and
entitled to a "proportionate share" in the commission. They assert that Artigo did
absolutely nothing during the second negotiation but to sign as a witness in the
deed of sale. He did not even prepare the documents for the transaction as an
active real estate broker usually does.
The De Castros' arguments are flimsy.
A contract of agency which is not contrary to law, public order, public policy,
morals or good custom is a valid contract, and constitutes the law between the
parties. 14The contract of agency entered into by Constante with Artigo is the law
between them and both are bound to comply with its terms and conditions in
good faith.
The mere fact that "other agents" intervened in the consummation of the sale and
were paid their respective commissions cannot vary the terms of the contract of
agency granting Artigo a 5 percent commission based on the selling price. These
"other agents" turned out to be employees of Times Transit, the buyer Artigo
introduced to the De Castros. This prompted the trial court to observe:
"The alleged 'second group' of agents came into the picture only during
the so-called 'second negotiation' and it is amusing to note that these
(sic) second group, prominent among whom are Atty. Del Castillo and
Ms. Prudencio, happened to be employees of Times Transit, the buyer
of the properties. And their efforts were limited to convincing Constante
to 'part away' with the properties because the redemption period of the
foreclosed properties is around the corner, so to speak. (tsn, June 6,
1991).
xxx xxx xxx
To accept Constante's version of the story is to open the floodgates of
fraud and deceit. A seller could always pretend rejection of the offer and
wait for sometime for others to renew it who are much willing to accept a
commission far less than the original broker. The immorality in the
instant case easily presents itself if one has to consider that the alleged
'second group' are the employees of the buyer, Times Transit and they
have not bettered the offer secured by Mr. Artigo for P7 million.
It is to be noted also that while Constante was too particular about the
unrenewed real estate broker's license of Mr. Artigo, he did not bother at
all to inquire as to the licenses of Prudencio and Castillo. (tsn, April 11,
1991, pp. 39-40)." 15 (Emphasis supplied)
In any event, we find that the 5 percent real estate broker's commission is
reasonable and within the standard practice in the real estate industry for
transactions of this nature.
The De Castros also contend that Artigo's inaction as well as failure to protest
estops him from recovering more than what was actually paid him. The De
Castros cite Article 1235 of the Civil Code which reads:
Art. 1235. When the obligee accepts the performance, knowing its
incompleteness and irregularity, and without expressing any protest or
objection, the obligation is deemed fully complied with.
The De Castros' reliance on Article 1235 of the Civil Code is misplaced.
Artigo's acceptance of partial payment of his commission neither amounts to a
waiver of the balance nor puts him in estoppel. This is the import of Article
1235 which was explained in this wise:
"The word accept, as used in Article 1235 of the Civil Code, means to
take as satisfactory or sufficient, or agree to an incomplete or irregular
performance. Hence, the mere receipt of a partial payment is not
equivalent to the required acceptance of performance as would
extinguish the whole obligation." 16 (Emphasis supplied)
There is thus a clear distinction between acceptance and mere receipt. In this
case, it is evident that Artigo merely received the partial payment without waiving
the balance. Thus, there is no estoppel to speak of.
The De Castros further argue that laches should apply because Artigo did not file
his complaint in court until May 29, 1989, or almost four years later. Hence,
Artigo's claim for the balance of his commission is barred by laches.
Laches means the failure or neglect, for an unreasonable and unexplained length
of time, to do that which by exercising due diligence could or should have been
done earlier. It is negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it. 17
Artigo disputes the claim that he neglected to assert his rights. He was appointed
as agent on January 24, 1984. The two lots were finally sold in June 1985. As
found by the trial court, Artigo demanded in April and July of 1985 the payment of
his commission by Constante on the basis of the selling price of P7.05 million but
there was no response from Constante. 18 After it became clear that his demands
for payment have fallen on deaf ears, Artigo decided to sue on May 29, 1989.
Actions upon a written contract, such as a contract of agency, must be brought
within ten years from the time the right of action accrues. 19 The right of action
accrues from the moment the breach of right or duty occurs. From this moment,
the creditor can institute the action even as the ten-year prescriptive period
begins to run. 20
The De Castros admit that Artigo's claim was filed within the ten-year prescriptive
period. The De Castros, however, still maintain that Artigo's cause of action is
barred by laches. Laches does not apply because only four years had lapsed
from the time of the sale in June 1985. Artigo made a demand in July 1985 and
filed the action in court on May 29, 1989, well within the ten-year prescriptive
period. This does not constitute an unreasonable delay in asserting one's right.
The Court has ruled, "a delay within the prescriptive period is sanctioned by law
and is not considered to be a delay that would bar relief." 21 In explaining that
laches applies only in the absence of a statutory prescriptive period, the Court
has stated —
"Laches is recourse in equity. Equity, however, is applied only in the
absence, never in contravention, of statutory law. Thus, laches, cannot,
as a rule, be used to abate a collection suit filed within the prescriptive
period mandated by the Civil Code." 22
Clearly, the De Castros' defense of laches finds no support in law, equity or
jurisprudence.
Third issue: whether the determination of the purchase price was made in
violation of the Rules on Evidence
The De Castros want the Court to re-examine the probative value of the evidence
adduced in the trial court to determine whether the actual selling price of the two
lots was P7.05 million and not P3.6 million. The De Castros contend that it is
erroneous to base the 5 percent commission on a purchase price of P7.05 million
as ordered by the trial court and the appellate court. The De Castros insist that
the purchase price is P3.6 million as expressly stated in the deed of sale, the due
execution and authenticity of which was admitted during the trial.

The De Castros believe that the trial and appellate courts committed a mistake in
considering incompetent evidence and disregarding the best evidence and parole
evidence rules. They claim that the Court of Appeals erroneously affirmed sub
silentio the trial court's reliance on the various correspondences between
Constante and Times Transit which were mere photocopies that do not satisfy
the best evidence rule. Further, these letters covered only the first negotiations
between Constante and Times Transit which failed; hence, these are immaterial
in determining the final purchase price.
The De Castros further argue that if there was an undervaluation, Artigo who
signed as witness benefited therefrom, and being equally guilty, should be left
where he presently stands. They likewise claim that the Court of Appeals erred in
relying on evidence which were not offered for the purpose considered by the
trial court. Specifically, Exhibits "B", "C", "D" and "E" were not offered to prove
that the purchase price was P7.05 Million. Finally, they argue that the courts a
quo erred in giving credence to the perjured testimony of Artigo. They want the
entire testimony of Artigo rejected as a falsehood because he was lying when he
claimed at the outset that he was a licensed real estate broker when he was not.
Whether the actual purchase price was P7.05 Million as found by the trial court
and affirmed by the Court of Appeals, or P3.6 Million as claimed by the De
Castros, is a question of fact and not of law. Inevitably, this calls for an inquiry
into the facts and evidence on record. This we can not do.
It is not the function of this Court to re-examine the evidence submitted by the
parties, or analyze or weigh the evidence again. 23 This Court is not the proper
venue to consider a factual issue as it is not a trier of facts. In petitions for review
on certiorari as a mode of appeal under Rule 45, a petitioner can only raise
questions of law. Our pronouncement in the case of Cormero vs. Court of
Appeals 24 bears reiteration:
"At the outset, it is evident from the errors assigned that the petition is
anchored on a plea to review the factual conclusion reached by the
respondent court. Such task however is foreclosed by the rule that in
petitions for certiorari as a mode of appeal, like this one, only questions
of law distinctly set forth may be raised. These questions have been
defined as those that do not call for any examination of the probative
value of the evidence presented by the parties. (Uniland Resources vs.
Development Bank of the Philippines, 200 SCRA 751 [1991]
citing Goduco vs. Court of Appeals, et al., 119 Phil. 531; Hernandez vs.
Court of Appeals, 149 SCRA 67). And when this court is asked to go
over the proof presented by the parties, and analyze, assess and weigh
them to ascertain if the trial court and the appellate court were correct in
according superior credit to this or that piece of evidence and eventually,
to the totality of the evidence of one party or the other, the court cannot
and will not do the same. (Elayda vs. Court of Appeals, 199 SCRA 349
[1991]). Thus, in the absence of any showing that the findings
complained of are totally devoid of support in the record, or that they are
so glaringly erroneous as to constitute serious abuse of discretion, such
findings must stand, for this court is not expected or required to examine
or contrast the oral and documentary evidence submitted by the parties.
(Morales vs. Court of Appeals, 197 SCRA 391 [1991] citing Santa Ana
vs. Hernandez, 18 SCRA 973 [1966])."
We find no reason to depart from this principle. The trial and appellate courts are
in a much better position to evaluate properly the evidence. Hence, we find no
other recourse but to affirm their finding on the actual purchase price.
Fourth Issue: whether award of moral damages and attorney's fees is proper
The De Castros claim that Artigo failed to prove that he is entitled to moral
damages and attorney's fees. The De Castros, however, cite no concrete reason
except to say that they are the ones entitled to damages since the case was filed
to harass and extort money from them.
Law and jurisprudence support the award of moral damages and attorney's fees
in favor of Artigo. The award of damages and attorney's fees is left to the sound
discretion of the court, and if such discretion is well exercised, as in this case, it
will not be disturbed on appeal. 25 Moral damages may be awarded when in a
breach of contract the defendant acted in bad faith, or in wanton disregard of his
contractual obligation. 26 On the other hand, attorney's fees are awarded in
instances where "the defendant acted in gross and evident bad faith in refusing
to satisfy the plaintiff's plainly valid, just and demandable claim." 27 There is no
reason to disturb the trial court's finding that "the defendants' lack of good faith
and unkind treatment of the plaintiff in refusing to give his due commission
deserve censure." This warrants the award of P25,000.00 in moral damages and
P45,000.00 in attorney's fees. The amounts are, in our view, fair and reasonable.
Having found a buyer for the two lots, Artigo had already performed his part of
the bargain under the contract of agency. The De Castros should have exercised
fairness and good judgment in dealing with Artigo by fulfilling their own part of the
bargain — paying Artigo his 5 percent broker's commission based on the actual
purchase price of the two lots.
WHEREFORE, the petition is denied for lack of merit. The Decision of the Court
of Appeals dated May 4, 1994 in CA-G.R. CV No. 37996 is AFFIRMED in
toto. CAIaHS

SO ORDERED.
(De Castro v. Court of Appeals, G.R. No. 115838, [July 18, 2002], 434 PHIL
|||

53-72)

3. Orquiola vs. CA, G.R. No. 141463

SECOND DIVISION

[G.R. No. 141463. August 6, 2002.]

VICTOR ORQUIOLA and HONORATA


ORQUIOLA, petitioners, vs. HON. COURT OF APPEALS, HON.
VIVENCIO S. BACLIG, Presiding Judge, Regional Trial Court,
Branch 77, Quezon City, THE SHERIFF OF QUEZON CITY and
HIS/HER DEPUTIES and PURA KALAW LEDESMA, substituted
by TANDANG SORA DEVELOPMENT
CORPORATION, respondents.

Rene V. Sarmiento for petitioners.


Ongkiko Kalaw Manhit & Acorda Law Offices for respondent P.K. Ledesma.

SYNOPSIS

Petitioners purchased a registered parcel of land from Mariano Lising.


Subsequently, private respondent, the registered owner of Lot 689, filed Civil
Case No. Q-12918 against Herminigilda Pedro and Mariano Lising for allegedly
encroaching upon her lot. The trial court adjudged Pedro and Lising to pay
damages, remove all constructions and relocate the boundaries. Petitioners filed
a petition for prohibition with the CA to prohibit the judge from issuing a writ of
demolition and the sheriff from implementing the alias writ of execution against
their property. They claimed that they were not impleaded in Civil Case No. Q-
12918, hence, they would be deprived of their property without due process of
law. The CA dismissed the petition ruling that as buyers of Mariano Lising,
petitioners were privies and could be reached by the execution order. EHCaDS

The Supreme Court granted the petition and thereby reversed and set aside the
assailed decision. The Court noted that petitioners acquired the lot before the
commencement of Civil Case No. Q-12918. They could reasonably rely on
Mariano Lising's certificate of title because at the time of purchase, it was still
free from any third party claim. As builders in good faith and innocent purchasers
for value, petitioners are proper parties in any case involving subject property.
But since private respondents failed to implead them in Civil Case No. Q-12918,
petitioners cannot be reached by the decision in said case.

SYLLABUS

1. CIVIL LAW; LAND REGISTRATION; PERSON DEALING WITH


REGISTERED PROPERTY IS CHARGED WITH NOTICE ONLY OF CLAIMS AS
ARE ANNOTATED ON THE TITLE; CASE AT BAR. — Where a case like the
present one involves a sale of a parcel of land under the Torrens system, the
person dealing with the registered property need not go beyond the certificate of
title; he can rely solely on the title and he is charged with notice only of such
burdens and claims as are annotated on the title. It is our view here that the
petitioners, spouses Victor and Honorata Orquiola, are fully entitled to the legal
protection of their lot by the Torrens system.
2. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; WRIT OF EXECUTION
MAY ISSUE ONLY AGAINST A PARTY AND NOT AGAINST ONE WHO DID
NOT HAVE HIS DAY IN COURT; CASE AT BAR. — As builders in good faith
and innocent purchasers for value, petitioners have rights over the subject
property and hence are proper parties in interest in any case thereon.
Consequently, private respondents should have impleaded them in Civil Case
No. Q-12918. Since they failed to do so, petitioners cannot be reached by the
decision in said case. No man shall be affected by any proceeding to which he is
a stranger, and strangers to a case are not bound by any judgment rendered by
the court. In the same manner, a writ of execution can be issued only against a
party and not against one who did not have his day in court. Only real parties in
interest in an action are bound by the judgment therein and by writs of execution
and demolition issued pursuant thereto. In our view, the spouses Victor and
Honorata Orquiola have valid and meritorious cause to resist the demolition of
their house on their own titled lot, which is tantamount to a deprivation of property
without due process of law. STaCcA

DECISION

QUISUMBING, J : p

This petition for review seeks the reversal of the decision 1 of the Court of
Appeals dated January 28, 1999 in CA-G.R. SP No. 47422, which dismissed the
petition to prohibit Judge Vivencio Baclig of the Regional Trial Court of Quezon
City, Branch 77, from issuing a writ of demolition against petitioners, and the
sheriff and deputy sheriff of the same court from implementing an alias writ of
execution. Also assailed is the resolution 2 of the Court of Appeals dated
December 29, 1999 which denied petitioners' motion for reconsideration. SEDICa

The facts are as follows:


Pura Kalaw Ledesma was the registered owner of Lot 689, covered by TCT Nos.
111267 and 111266, in Tandang Sora, Quezon City. This parcel of land was
adjacent to certain portions of Lot 707 of the Piedad Estates, namely, Lot 707-A
and 707-B, registered in the name of Herminigilda Pedro under TCT Nos. 16951
and 16952, respectively. On October 29, 1964, Herminigilda sold Lot 707-A and
707-B to Mariano Lising who then registered both lots and Lot 707-C in the name
of M.B. Lising Realty and subdivided them into smaller lots.
Certain portions of the subdivided lots were sold to third persons including herein
petitioners, spouses Victor and Honorata Orquiola, who purchased a portion of
Lot 707-A-2, Lot 5, Block 1 of the subdivision plan (LRC), Psd-42965. The parcel
is now #33 Doña Regina St., Regina Village, Tandang Sora, Quezon City. The
other portions were registered in the name of the heirs of Pedro, heirs of Lising,
and other third persons.
Sometime in 1969, Pura Kalaw Ledesma filed a complaint, docketed as Civil
Case No. Q-12918, with the Regional Trial Court of Quezon City against
Herminigilda Pedro and Mariano Lising for allegedly encroaching upon Lot 689.
During the pendency of the action, Tandang Sora Development Corporation
replaced Pura Kalaw Ledesma as plaintiff by virtue of an assignment of Lot 689
made by Ledesma in favor of said corporation. Trial continued for three decades.
On August 21, 1991, the trial court finally adjudged defendants Pedro and Lising
jointly and severally liable for encroaching on plaintiff's land and ordered them:
(a) to solidarily pay the plaintiff Tandang Sora Dev. Corp. actual
damages in the amount of P20,000 with interest from date of filing
of the complaint;
(b) to remove all construction, including barbed wires and fences,
illegally constructed by defendants on plaintiff's property at
defendants' expense;
(c) to replace the removed concrete monuments removed by
defendants, at their own expense;
(d) to pay attorney's fees in the amount of FIVE THOUSAND PESOS
(P5,000.00) with interest computed from the date of filing of the
complaint;
(e) to relocate the boundaries to conform with the Commissioners'
Report, particularly, Annexes "A" and "B" thereof, at the expense
of the defendants. 3
As a result, in February 1998, the Deputy Sheriff of Quezon City directed
petitioners, through an alias writ of execution, to remove the house they
constructed on the land they were occupying.
On April 2, 1998, petitioners received a Special Order dated March 30, 1998,
from the trial court stating as follows:
Before the Court for resolution is the "Ex-Parte Motion For The Issuance
of A Writ of Demolition," filed by plaintiff, through counsel, praying for the
issuance of an Order directing the Deputy Sheriff to cause the removal
and/or demolition of the structures on the plaintiff's property constructed
by defendants and/or the present occupants. The defendants-heirs of
Herminigilda Pedro filed their comment on the said Motion.
Considering that the decision rendered in the instant case had become
final and executory, the Court, in its Order of November 14, 1997,
directed the issuance of analias writ of execution for the enforcement of
the said decision. However, despite the service of the said writ to all the
defendants and the present occupants of the subject property, they
failed to comply therewith, as per the Partial Sheriff's Return, dated
February 9, 1998, issued by the Deputy Sheriff of this branch of the
Court. Thus, there is now a need to demolish the structures in order to
implement the said decision.
WHEREFORE, the defendants are hereby directed to remove, at their
expense, all constructions, including barbed wires and fences, which
defendants constructed on plaintiff's property, within fifteen (15) days
from notice of this Order; otherwise, this Court will issue a writ of
demolition against them.
SO ORDERED. 4
To prohibit Judge Vivencio Baclig of the Regional Trial Court of Quezon City from
issuing a writ of demolition and the Quezon City sheriff from implementing
the alias writ of execution, petitioners filed with the Court of Appeals a petition for
prohibition with prayer for a restraining order and preliminary injunction on April
17, 1998. 5Petitioners alleged that they bought the subject parcel of land in good
faith and for value, hence, they were parties in interest. Since they were not
impleaded in Civil Case No. Q-12918, the writ of demolition issued in connection
therewith cannot be enforced against them because to do so would amount to
deprivation of property without due process of law.
The Court of Appeals dismissed the petition on January 28, 1999. It held that as
buyers and successors-in-interest of Mariano Lising, petitioners were considered
privies who derived their rights from Lising by virtue of the sale and could be
reached by the execution order in Civil Case No. Q-12918. Thus, for lack of
merit, the petition was ordered dismissed. 6
Petitioners' motion for reconsideration was denied. Hence, this petition, where
petitioners aver that:
I.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
THE DECISION IN CIVIL CASE NO. Q-12918 CAN ALSO BE
ENFORCED AGAINST THE PETITIONERS EVEN IF THEY WERE
NOT IMPLEADED AS PARTIES THERETO.
II.
THE HONORABLE COURT OF APPEALS ERRED IN NOT
UPHOLDING PETITIONERS' TITLE DESPITE THEIR BEING BUILDER
IN GOOD FAITH AND INNOCENT PURCHASER AND FOR VALUE.
III.
PETITIONERS ARE ENTITLED TO INJUNCTIVE RELIEF
CONSIDERING THAT THEY STAND TO SUFFER GRAVE AND
IRREPARABLE INJURY IF ALIAS WRIT OF EXECUTION AND THE
SPECIAL ORDER ISSUED BY THE COURT A QUO IN CIVIL CASE
NO. Q-12918 FOR THE DEMOLITION OF ALL THE STRUCTURES ON
THE DISPUTED PROPERTY WERE ENFORCED AGAINST THE
PETITIONERS WHO WERE NOT EVEN GIVEN THEIR DAY IN
COURT. 7

For our resolution are the following issues: (1) whether the alias writ of execution
may be enforced against petitioners; and (2) whether petitioners were innocent
purchasers for value and builders in good faith.
On the first issue, petitioners claim that the alias writ of execution cannot be
enforced against them. They argue that the appellate court erred when it relied
heavily on our ruling in Vda. de Medina vs. Cruz 8 in holding that petitioners are
successors-in-interest of Mariano Lising, and as such, they can be reached by
the order of execution in Civil Case No. Q-12918 even though they were not
impleaded as parties thereto. Petitioners submit that Medina is not applicable in
this case because the circumstances therein are different from the circumstances
in the present case.
In Medina, the property in dispute was registered under Land Registration
Act No. 496 in 1916 and Original Certificate of Title No. 868 was issued in the
name of Philippine Realty Corporation (PRC). In 1949, Benedicta Mangahas and
Francisco Ramos occupied and built houses on the lot without the PRC's
consent. In 1959, PRC sold the lot to Remedios Magbanua. Mangahas and
Ramos opposed and instituted Civil Case No. C-120 to annul the sale and to
compel PRC to execute a contract of sale in their favor. The trial court dismissed
the complaint and ordered Mangahas and Ramos to vacate the lot and surrender
possession thereof to Magbanua. The judgment became final and executory.
When Magbanua had paid for the land in full, PRC executed a deed of absolute
sale in her favor and a new title was consequently issued in her name.
Magbanua then sought the execution of the judgment in Civil Case No. C-120.
This was opposed by petitioner Medina who alleged that she owned the houses
and lot subject of the dispute. She said that she bought the houses from spouses
Ricardo and Eufrocinia de Guzman, while she purchased the lot from the heirs of
the late Don Mariano San Pedro y Esteban. The latter held the land by virtue of
a Titulo de Composicion Con El Estado Num. 4136, dated April 29, 1894. In
opposing the execution, Medina argued that the trial court did not acquire
jurisdiction over her, claiming that she was not a party in Civil Case No. C-120,
thus, she could not be considered as "a person claiming under" Ramos and
Mangahas.
When Medina reached this Court, we held that the decision in Civil Case No. C-
120, which had long become final and executory, could be enforced against
petitioner even though she was not a party thereto. We found that the houses on
the subject lot were formerly owned by Mangahas and Ramos who sold them to
spouses de Guzman, who in turn sold them to Medina. Under the circumstances,
petitioner was privy to the two judgment debtors Mangahas and Ramos, and thus
Medina could be reached by the order of execution and writ of demolition issued
against the two. As to the lot under dispute, we sustained Magbanua's ownership
over it, she being the holder of a Torrens title. We declared that a Torrens title is
generally conclusive evidence of ownership of the land referred to therein, and a
strong presumption exists that a Torrens title was regularly issued and valid. A
Torrens title is incontrovertible against any informacion possessoria, or other title
existing prior to the issuance thereof not annotated on the Torrens title.
Moreover, persons dealing with property covered by a Torrens certificate of title
are not required to go beyond what appears on its face.
Medina markedly differs from the present case on major points. First, the
petitioner in Medina acquired the right over the houses and lot subject of the
dispute afterthe original action was commenced and became final and executory.
In the present case, petitioners acquired the lot before the commencement of
Civil Case No. Q-12918. Second, the right over the disputed land of the
predecessors-in-interest of the petitioner in Medina was based on a title of
doubtful authenticity, allegedly aTitulo de Composicion Con El Estado issued by
the Spanish Government in favor of one Don Mariano San Pedro y Esteban,
while the right over the land of the predecessors-in-interest of herein petitioners
is based on a fully recognized Torrens title. Third, petitioners in this case
acquired the registered title in their own names, while the petitioner
in Medina merely relied on the title of her predecessor-in-interest and tax
declarations to prove her alleged ownership of the land.
We must stress that where a case like the present one involves a sale of a parcel
of land under the Torrens system, the applicable rule is that a person dealing
with the registered property need not go beyond the certificate of title; he can rely
solely on the title and he is charged with notice only of such burdens and claims
as are annotated on the title. 9 It is our view here that the petitioners, spouses
Victor and Honorata Orquiola, are fully entitled to the legal protection of their lot
by the Torrens system, unlike the petitioner in the Medina case who merely relied
on a mere Titulo de Composicion.
Coming now to the second issue, were petitioners purchasers in good faith and
for value? A buyer in good faith is one who buys the property of another without
notice that some other person has a right to or interest in such property. He is a
buyer for value if he pays a full and fair price at the time of the purchase or
before he has notice of the claim or interest of some other person in the
property. 10 The determination of whether one is a buyer in good faith is a factual
issue which generally is outside the province of this Court to determine in a
petition for review. An exception is when the Court of Appeals failed to take into
account certain relevant facts which, if properly considered, would justify a
different conclusion. 11 The instant case is covered by this exception to the
general rule. As found by the Court of Appeals and not refuted by private
respondent, petitioners purchased the subject land in 1964 from Mariano
Lising. 12 Civil Case No. Q-12918 was commenced sometime in 1969. The Court
of Appeals overlooked the fact that the purchase of the land took place prior to
the institution of Civil Case No. Q-12918. In other words, the sale to petitioners
was made before Pura Kalaw Ledesma claimed the lot. Petitioners could
reasonably rely on Mariano Lising's Certificate of Title which at the time of
purchase was still free from any third party claim. Hence, considering the
circumstances of this case, we conclude that petitioners acquired the land
subject of this dispute in good faith and for value.
The final question now is: could we consider petitioners builders in good faith?
We note that this is the first time that petitioners have raised this issue. As a
general rule, this could not be done. Fair play, justice, and due process dictate
that parties should not raise for the first time on appeal issues that they could
have raised but never did during trial and even during proceedings before the
Court of Appeals. 13 Nevertheless, we deem it proper that this issue be resolved
now, to avoid circuitous litigation and further delay in the disposition of this case.
On this score, we find that petitioners are indeed builders in good faith.
A builder in good faith is one who builds with the belief that the land he is building
on is his, and is ignorant of any defect or flaw in his title. 14 As earlier discussed,
petitioner spouses acquired the land in question without knowledge of any defect
in the title of Mariano Lising. Shortly afterwards, they built their conjugal home on
said land. It was only in 1998, when the sheriff of Quezon City tried to execute
the judgment in Civil Case No. Q-12918, that they had notice of private
respondent's adverse claim. The institution of Civil Case No. Q-12918 cannot
serve as notice of such adverse claim to petitioners since they were not
impleaded therein as parties.
As builders in good faith and innocent purchasers for value, petitioners have
rights over the subject property and hence they are proper parties in interest in
any case thereon. 15 Consequently, private respondents should have impleaded
them in Civil Case No. Q-12918. Since they failed to do so, petitioners cannot be
reached by the decision in said case. No man shall be affected by any
proceeding to which he is a stranger, and strangers to a case are not bound by
any judgment rendered by the court. In the same manner, a writ of execution can
be issued only against a party and not against one who did not have his day in
court. Only real parties in interest in an action are bound by the judgment therein
and by writs of execution and demolition issued pursuant thereto. 16 In our view,
the spouses Victor and Honorata Orquiola have valid and meritorious cause to
resist the demolition of their house on their own titled lot, which is tantamount to
a deprivation of property without due process of law. ACTaDH

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals


dated January 28, 1999, and its resolution dated December 29, 1999, in CA-G.R.
SP No. 47422, are REVERSED and SET ASIDE. Respondents are hereby
enjoined from enforcing the decision in Civil Case No. Q-12918 through a writ of
execution and order of demolition issued against petitioners. Costs against
private respondent.
SO ORDERED.
(Orquiola v. Court of Appeals, G.R. No. 141463, [August 6, 2002], 435 PHIL
|||

323-333)

4. China Banking Corp vs. Oliver, G.R. No. 135796

SECOND DIVISION

[G.R. No. 135796. October 3, 2002.]

CHINA BANKING CORPORATION, petitioner, vs. MERCEDES


M. OLIVER, respondent.

Lim Vigilia Alcala Dumlao and Orencia for petitioner.


The Law Firm of Antonio A. Navarro III & Assoc. for private respondent M. Oliver.

SYNOPSIS

Pangan Lim, Jr. and a certain Mercedes M. Oliver obtained a loan from petitioner
bank secured by a real estate mortgage on the property covered by TCT No. S-
50195 in the name of Oliver. Thereafter, respondent, claiming that she is
Mercedes M. Oliver, filed an action for annulment of mortgage and cancellation
of title with damages against petitioner bank. She alleged that she is the
registered and lawful owner of the subject property and that she did not apply for
a loan or surrender her title to petitioner bank. Petitioner moved to dismiss the
case for lack of cause of action and non-joinder of an indispensable party, the
mortgagor Oliver. The trial court, however, dismissed petitioner's motion to
dismiss. Instead of filing an answer, petitioner filed a petition for certiorari with the
Court of Appeals. On motion of respondent Oliver, the trial court declared
petitioner bank in default for failure to file an answer within the reglementary
period. Consequently. petitioner filed a supplemental petition seeking annulment
of the trial court's order of default. It argued that the special civil action
for certiorari filed in the Court of Appeals interrupted the proceedings before the
trial court, thereby staying the period for filing the answer. The Court of Appeals,
however, sustained the dismissal of petitioner's motion to dismiss ruling that Rule
6, Section 11 of the Rules of Court allows petitioner bank to file a third-party
complaint against mortgagor Oliver. Anent the default order, the appellate court
affirmed the same holding that the special civil action for certiorari did not
interrupt the period to file an answer, there being no temporary restraining order
or writ of preliminary injunction issued. Hence, this petition for review. SCHIcT

An indispensable party is a party in interest, without whom no final determination


can be had on an action. In denying the petition, the Supreme Court held that
mortgagor Oliver is not an indispensable party in the case filed by respondent
Oliver. It is true that mortgagor Oliver is a party in interest, for she will be affected
by the outcome of the case. However, mortgagor Oliver's absence from the case
does not hamper the trial court in resolving the dispute between respondent
Oliver and petitioner bank. A perusal of respondent Oliver's allegations in the
complaint below showed that it was for annulment of mortgage due to petitioner's
negligence in determining the actual ownership of the property, resulting in the
mortgage's annotation on TCT No. S-50195 in the Registry of Deeds' custody. To
support said allegations, respondent Oliver had to prove (1) that she is the real
Mercedes M. Oliver referred to in the TCT, and (2) that she is not the same
person using the name who entered into a deed of mortgage with the petitioner.
This, respondent Oliver can do in her complaint without necessarily impleading
the mortgagor Oliver. Thus, since mortgagor Oliver is not an indispensable party,
the Court held that Section 11, Rule 3 of the Rules of Court applies.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; PARTIES; INDISPENSABLE PARTY;


DEFINED; CASE AT BAR. — An indispensable party is a party in interest,
without whom no final determination can be had of an action. It is true that
mortgagor Oliver One is a party in interest, for she will be affected by the
outcome of the case. She stands to be benefited in case the mortgage is
declared valid, or injured in case her title is declared fake. However, mortgagor
Oliver One's absence from the case does not hamper the trial court in resolving
the dispute between respondent Oliver Two and petitioner. A perusal of Oliver
Two's allegations in the complaint below shows that it was for annulment of
mortgage due to petitioner's negligence in not determining the actual ownership
of the property, resulting in the mortgage's annotation on TCT No. S-50195 in the
Registry of Deeds' custody. To support said allegations, respondent Oliver Two
had to prove (1) that she is the real Mercedes M. Oliver referred to in the TCT,
and (2) that she is not the same person using that name who entered into a deed
of mortgage with the petitioner. This, respondent Oliver Two can do in her
complaint without necessarily impleading the mortgagor Oliver One. Hence,
Oliver One is not an indispensable party in the case filed by Oliver Two. EcDSHT

2. ID.; ID.; ID.; PARTY IS NOT INDISPENSABLE IF HIS INTEREST IN THE


CONTROVERSY IS DISTINCT AND DIVISIBLE FROM INTEREST OF THE
OTHER PARTIES. — InNoceda vs. Court of Appeals, et al., 313 SCRA 504
(1999), we held that a party is not indispensable to the suit if his interest in the
controversy or subject matter is distinct and divisible from the interest of the other
parties and will not necessarily be prejudiced by a judgment which does
complete justice to the parties in court. In this case, Chinabank has interest in the
loan which, however, is distinct and divisible from the mortgagor's interest, which
involves the land used as collateral for the loan.
3. ID.; ID.; ID.; A PARTY IS NOT INDISPENSABLE IF HIS PRESENCE WILL
SIMPLY AVOID MULTIPLE LITIGATION; CASE AT BAR. — Further, a
declaration of the mortgage's nullity in this case will not necessarily prejudice
mortgagor Oliver One. The bank still needs to initiate proceedings to go after the
mortgagor, who in turn can raise other defenses pertinent to the two of them. A
party is also not indispensable if his presence would merely permit complete
relief between him and those already parties to the action, or will simply avoid
multiple litigation, as in the case of Chinabank and mortgagor Oliver One. The
latter's participation in this case will simply enable petitioner Chinabank to make
its claim against her in this case, and hence, avoid the institution of another
action. Thus, it was the bank who should have filed a third-party complaint or
other action versus the mortgagor Oliver One.
4. ID.; ID.; ID.; NON-JOINDER OF PARTIES; NOT A GROUND FOR
DISMISSAL OF AN ACTION; PERSON NOT A PARTY TO AN ACTION MAY BE
IMPLEADED BY THE DEFENDANT EITHER ON THE BASIS OF LIABILITY TO
HIMSELF OR ON THE GROUND OF DIRECT LIABILITY TO THE PLAINTIFF.
— As to the second issue, since mortgagor Oliver One is not an indispensable
party, Section 7, Rule 3 of the 1997 Rules of Civil Procedure, which requires
compulsory joinder of indispensable parties in a case, does not apply. Instead, it
is Section 11, Rule 3, that applies. Nonjoinder of parties is not a ground for
dismissal of an action. Parties may be added by order of the court, either on its
own initiative or on motion of the parties. Hence, the Court of Appeals committed
no error when it found no abuse of discretion on the part of the trial court for
denying Chinabank's motion to dismiss and, instead, suggested that petitioner
file an appropriate action against mortgagor Oliver One. A person who is not a
party to an action may be impleaded by the defendant either on the basis of
liability to himself or on the ground of direct liability to the plaintiff.
DISaEA

5. ID.; SPECIAL CIVIL ACTIONS; PETITION FOR CERTIORARI; FILING


THEREOF DOES NOT INTERRUPT THE COURSE OF THE PRINCIPAL CASE
UNLESS AN INJUNCTIVE RELIEF IS ISSUED. — Now, the third issue, did the
Court of Appeals err when it sustained the trial court's ruling that petitioner
Chinabank was in default? As found by the Court of Appeals, petitioner did not
file its answer, although it received the March 13, 1997 order denying the motion
to dismiss. Instead, petitioner filed a petition for certiorari under Rule 65 of the
Rules of Court. Said petition, however, does not interrupt the course of the
principal case unless a temporary restraining order or writ of preliminary
injunction is issued. No such order or writ was issued in this case. Hence,
Chinabank as defendant below was properly declared in default by the trial court,
after the 15-day period to file its answer or other responsive pleading lapsed.
6. ID.; APPEAL; PETITION FOR REVIEW; LIMITED ONLY TO QUESTIONS OF
LAW. — Lastly, were the withdrawal and consequent dismissal of the complaint
against officials of the Registry of Deeds conclusive of the authenticity of
mortgagor Oliver One's copy of TCT No. S-50195? This is a question of fact,
which is not a proper subject for review in this petition. Here, we are limited only
to questions of law, as a general rule. Petitioner failed to show that this case falls
under any of the exceptions to this rule. We need not tarry on this issue now.

RESOLUTION

QUISUMBING, J : p

This petition for review 1 seeks the reversal of the decision dated June 1, 1998,
of the Court of Appeals in CA-G.R. SP No. 43836, dismissing China Banking
Corporation's petition for certiorari to annul the two orders of the Regional Trial
Court of Muntinlupa City, Branch 276, which earlier denied petitioner's motion to
dismiss and then declared the bank in default in Civil Case No. 96-219. The
appellate court also denied petitioner's motion for reconsideration in a resolution
dated September 30, 1998.
The facts of this case are culled from the records.
In August 1995, Pangan Lim, Jr. and a certain Mercedes M. Oliver opened a joint
account in China Banking Corporation (hereinafter Chinabank) at EDSA
Balintawak Branch. Lim introduced Oliver to the bank's branch manager as his
partner in the rice and palay trading business. Thereafter, Lim and Oliver applied
for a P17 million loan, offering as collateral a 7,782 square meter lot located in
Tunasan, Muntinlupa and covered by TCT No. S-50195 in the name of Oliver.
The bank approved the application. On November 17, 1995, Lim and Oliver
executed in favor of Chinabank a promissory note for P16,650,000, as well as a
Real Estate Mortgage on the property. The mortgage was duly registered and
annotated on the original title under the custody of the Registry of Deeds of
Makati and on the owner's duplicate copy in the bank's possession. The
mortgage document showed Mercedes Oliver's address to be No. 95 Malakas
Street, Diliman, Quezon City. For brevity, she is hereafter referred to as "Oliver
One."

On November 18, 1996, respondent claiming that she is Mercedes M. Oliver with
postal office address at No. 40 J.P. Rizal St., San Pedro, Laguna, filed an action
for annulment of mortgage and cancellation of title with damages against
Chinabank, Register of Deeds Atty. Mila G. Flores, and Deputy Register of
Deeds Atty. Ferdinand P. Ignacio. Respondent, whom we shall call as "Oliver
Two," claimed that she was the registered and lawful owner of the land subject of
the real estate mortgage; that the owner's duplicate copy of the title had always
been in her possession; and that she did not apply for a loan or surrender her
title to Chinabank. 2 She prayed that: (1) the owner's duplicate copy surrendered
to Chinabank as well as the original title with the Registry of Deeds be cancelled;
(2) the mortgage be declared null and void; and (3) the Registry of Deeds be
ordered to issue a new and clean title in her name. 3
On January 31, 1997, Chinabank moved to dismiss the case for lack of cause of
action and non-joinder of an indispensable party, the mortgagor.
On March 13, 1997, Judge Norma C. Perello issued an order denying the motion
to dismiss, stating that:
A reading of the COMPLAINT which of course is hypothetically admitted,
will show that a valid judgment can be rendered against defendant.
Plaintiff having sufficiently averred that defendants negligently failed to
ascertain the genuineness or not (sic) of the title of the land mortgaged
to it upon the claim of ownership by the mortgagors. Furthermore, the
matters alleged in the MOTION TO DISMISS are all evidentiary which
Defendants may substantiate at the appointed hours. 4
On April 7, 1997, Chinabank filed with the Court of Appeals a petition
for certiorari with prayer for the issuance of a writ of preliminary injunction and/or
restraining order to enjoin enforcement of the March 13, 1997 order and further
action on the case. The Court of Appeals directed respondent Oliver Two to file
her comment and deferred action on the prayer for the issuance of the
preliminary injunction pending submission of the comment.
On June 30, 1997, respondent Oliver Two moved to declare petitioner Chinabank
in default. She pointed out that since petitioner received the order denying the
motion to dismiss on March 21, 1997, it had only until April 7, 1997 to file its
answer to the complaint. However, until the filing of the motion for default, no
answer had been filed yet. The trial court granted the motion and declared
petitioner in default in its order dated July 17, 1997, thus:
Acting on the Motion To Declare Defendant Bank in Default, and finding
the same to be legally tenable is granted.
Accordingly, the Defendant Bank is declared in default as summons was
served on It as early as December 16, 1996, but until date they have not
filed an Answer nor any responsive pleading and instead, It filed a
Motion to Dismiss, which was denied by this Court on March 13, 1997.
The filing of a CERTIORARI to question the Orders by this Court did not
toll the period for Defendants to answer the complaint.
Therefore, the reglementary period for the filing of responsive pleading
has long expired.
Let the case be submitted for Decision based on the complaint.
It is SO ORDERED. 5
Consequently, petitioner Chinabank filed a supplemental petition on August 11,
1997, seeking annulment of the July 17, 1997 order. It argued that the special
civil action for certiorari filed in the Court of Appeals interrupted the proceedings
before the trial court, thereby staying the period for filing the answer.
On June 1, 1998, the Court of Appeals promulgated the assailed decision, finding
no grave abuse of discretion committed by the trial judge in ruling that the Rules
of Court provided the manner of impleading parties to a case and in suggesting
that petitioner file an appropriate action to bring the mortgagor within the court's
jurisdiction. The appellate court said that Rule 6, Section 11 of the Rules of Court
allows petitioner to file a third-party complaint against the mortgagor. As to the
judgment by default, the Court of Appeals said that an order denying the motion
to dismiss is interlocutory and may not be questioned through a special civil
action forcertiorari. The defendant must proceed with the case and raise the
issues in his motion to dismiss when he appeals to a higher court. In this case,
petitioner Chinabank should have filed its answer when it received the March 13,
1997 order denying the motion to dismiss. The special civil action
for certiorari with the Court of Appeals did not interrupt the period to file an
answer, there being no temporary restraining order or writ of preliminary
injunction issued.
The Court of Appeals denied petitioner's motion for reconsideration. Hence, this
petition anchored on the following grounds:
I
SEC. 11, RULE 3, OF THE 1997 RULES OF CIVIL PROCEDURE
DOES NOT APPLY WHERE THE PARTY WHO WAS NOT
IMPLEADED IS AN INDISPENSABLE PARTY; INSTEAD, SECTION 7,
RULE 3 THEREOF, APPLIES.
II
THE MORTGAGOR MERCEDES M. OLIVER IS AN INDISPENSABLE
PARTY UNDER SECTION 7, RULE 3, OF THE 1997 RULES OF CIVIL
PROCEDURE, AND MUST THEREFORE INDISPENSABLY BE
JOINED AS A PARTY-DEFENDANT.
III
RESPONDENT'S CAUSE OF ACTION IS ANCHORED ON HER CLAIM
AS THE REGISTERED AND LAWFUL OWNER OF THE PROPERTY IN
QUESTION AND THAT HER OWNER'S DUPLICATE COPY OF THE
TITLE (ANNEX "A") IS THE TRUE AND GENUINE TITLE. THUS, THE
ACTION BEFORE THE HONORABLE COURT-A-QUO IS A LAND
DISPUTE BETWEEN TWO (2) PERSONS CLAIMING OWNERSHIP. aHSTID

IV
THE ANNULMENT OF THE MORTGAGE AND THE CANCELLATION
OF ANNEXES "B" AND "C" AS PRAYED FOR IN THE COMPLAINT IN
CIVIL CASE NO. 96-219 ARE INEXTRICABLY INTERTWINED WITH
THE ISSUE OF OWNERSHIP, HENCE, THE LATTER MUST FIRST BE
RESOLVED TO DETERMINE THE FORMER.
V
THE OWNER'S DUPLICATE COPY OF THE TITLE OF MORTGAGOR
MERCEDES M. OLIVER OWNER'S DUPLICATE COPY CANNOT, IN
HER ABSENCE, BE DECLARED NULL AND VOID. CONSEQUENTLY,
INASMUCH AS THE MORTGAGE IN FAVOR OF PETITIONER IS
DEPENDENT UPON THE OWNER'S DUPLICATE COPY OF THE
MORTGAGOR, THE COMPLAINT IN CIVIL CASE NO. 96-219 CAN
NOT RESOLVE THE CONTROVERSY WITH FINALITY.
VI
THE CASE OF CHURCH OF CHRIST VS. VALLESPIN, G.R. NO.
53726, AUGUST 15, 1988, DOES NOT APPLY INASMUCH AS THE
USE OF TERM "INDISPENSABLE PARTY" IN SAID CASE WAS
LOOSELY USED AND IN TRUTH WAS INTENDED TO MEAN
"PARTIES-IN-INTEREST" AS CONTEMPLATED BY SECTION 2, RULE
3 OF THE RULES OF COURT.
VII
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT
SANCTIONED THE TRIAL COURT'S ERROR IN DECLARING
DEFENDANT CBC IN DEFAULT FOR FAILURE TO FILE AN ANSWER,
NOTWITHSTANDING THE SETTLED DOCTRINE THAT WHERE AN
INDISPENSABLE PARTY IS NOT IN COURT, THE TRIAL COURT
SHOULD NOT PROCEED BUT INSTEAD SHOULD DISMISS THE
CASE.
VIII
THE DISMISSAL/WITHDRAWAL OF THE COMPLAINT AGAINST
DEFENDANTS REGISTER AND DEPUTY REGISTER OF DEEDS
NECESSARILY GIVE RISE TO, AND BOLSTERS, THE CONCLUSION
THAT THE OWNER'S DUPLICATE COPY OF TCT NO. S-50195 OF
MORTGAGOR MERCEDES M. OLIVER IS THE GENUINE AND
AUTHENTIC COPY. 6
For a clearer discussion of the issues in this controversy, we may state them as
follows:
1. Is the mortgagor who goes by the name of Mercedes M. Oliver,
herein called Oliver One, an indispensable party in Civil
Case No. 96219?
2. Should Section 7 Rule 3 of the 1997 Rules of Civil
Procedure 7 apply in this case?
3. Did the Court of Appeals err when it sustained the trial court's
declaration that petitioner was in default?
4. Were the withdrawal and consequent dismissal of the complaint
against the Registry of Deeds' officials indicative of the
authenticity of mortgagor Oliver One's copy of TCT No. S-
50195?
Petitioner Chinabank alleges that there are two owner's duplicate copies of TCT
No. S-50195 involved in this case and two persons claiming to be the real
"MERCEDES MARAVILLA OLIVER." One is the mortgagor, Oliver One. The
other is the respondent, Oliver Two. Respondent's complaint before the trial court
was one for cancellation of the transfer certificate of title in petitioner's
possession (Annex B). According to petitioner, the issue below is the
genuineness of the titles, which is intertwined with the issue of ownership. This
being the case, said the petitioner, the mortgagor Oliver One must necessarily be
impleaded for she is the registered owner under Annex "B". Petitioner argues
that mortgagor Oliver One is in a better position to defend her title. She stands to
suffer if it is declared fake. Further, petitioner claims that the validity and
enforceability of the mortgage entirely depends on the validity and authenticity of
Annex "B". The mortgage cannot be declared a nullity without the trial court
declaring Annex "B" a nullity. Hence, mortgagor Oliver One's participation in the
suit is indispensable, according to petitioner. In brief, what petitioner Chinabank
is saying is that it was indispensable for respondent Oliver Two to implead
mortgagor Oliver One in the case before the trial court. Failing to do that, the
complaint of herein respondent Oliver Two should have been dismissed.
Petitioner's contention is far from tenable. An indispensable party is a party in
interest, without whom no final determination can be had of an action. 8 It is true
that mortgagor Oliver One is a party in interest, for she will be affected by the
outcome of the case. She stands to be benefited in case the mortgage is
declared valid, or injured in case her title is declared fake. 9 However, mortgagor
Oliver One's absence from the case does not hamper the trial court in resolving
the dispute between respondent Oliver Two and petitioner. A perusal of Oliver
Two's allegations in the complaint below shows that it was for annulment of
mortgage due to petitioner's negligence in not determining the actual ownership
of the property, resulting in the mortgage's annotation on TCT No. S-50195 in the
Registry of Deeds' custody. To support said allegations, respondent Oliver Two
had to prove (1) that she is the real Mercedes M. Oliver referred to in the TCT,
and (2) that she is not the same person using that name who entered into a deed
of mortgage with the petitioner. This, respondent Oliver Two can do in her
complaint without necessarily impleading the mortgagor Oliver One. Hence,
Oliver One is not an indispensable party in the case filed by Oliver Two.

In Noceda vs. Court of Appeals, et al., 313 SCRA 504 (1999), we held that a
party is not indispensable to the suit if his interest in the controversy or subject
matter is distinct and divisible from the interest of the other parties and will not
necessarily be prejudiced by a judgment which does complete justice to the
parties in court. In this case, Chinabank has interest in the loan which, however,
is distinct and divisible from the mortgagor's interest, which involves the land
used as collateral for the loan.
Further, a declaration of the mortgage's nullity in this case will not necessarily
prejudice mortgagor Oliver One. The bank still needs to initiate proceedings to go
after the mortgagor, who in turn can raise other defenses pertinent to the two of
them. A party is also not indispensable if his presence would merely permit
complete relief between him and those already parties to the action, or will simply
avoid multiple litigation, as in the case of Chinabank and mortgagor Oliver
One. 10 The latter's participation in this case will simply enable petitioner
Chinabank to make its claim against her in this case, and hence, avoid the
institution of another action. Thus, it was the bank who should have filed a third-
party complaint or other action versus the mortgagor Oliver One.
As to the second issue, since mortgagor Oliver One is not an indispensable
party, Section 7, Rule 3 of the 1997 Rules of Civil Procedure, which requires
compulsory joinder of indispensable parties in a case, does not apply. Instead, it
is Section 11, Rule 3, that applies. 11 Non-joinder of parties is not a ground for
dismissal of an action. Parties may be added by order of the court, either on its
own initiative or on motion of the parties. 12 Hence, the Court of Appeals
committed no error when it found no abuse of discretion on the part of the trial
court for denying Chinabank's motion to dismiss and, instead, suggested that
petitioner file an appropriate action against mortgagor Oliver One. A person who
is not a party to an action may be impleaded by the defendant either on the basis
of liability to himself or on the ground of direct liability to the plaintiff. 13
Now, the third issue, did the Court of Appeals err when it sustained the trial
court's ruling that petitioner Chinabank was in default? As found by the Court of
Appeals, petitioner did not file its answer, although it received the March 13,
1997 order denying the motion to dismiss. Instead, petitioner filed a petition
for certiorari under Rule 65 of the Rules of Court. Said petition, however, does
not interrupt the course of the principal case unless a temporary restraining order
or writ of preliminary injunction is issued. 14 No such order or writ was issued in
this case. Hence, Chinabank as defendant below was properly declared in
default by the trial court, after the 15-day period to file its answer or other
responsive pleading lapsed.
Lastly, were the withdrawal and consequent dismissal of the complaint against
officials of the Registry of Deeds conclusive of the authenticity of mortgagor
Oliver One's copy of TCT No. S-50195? This is a question of fact, which is not a
proper subject for review in this petition. Here, we are limited only to questions of
law, 15 as a general rule. Petitioner failed to show that this case falls under any of
the exceptions to this rule. We need not tarry on this issue now.
WHEREFORE, the petition is DENIED for lack of merit. The assailed decision
dated June 1, 1998 and the resolution dated September 30, 1998 of the Court of
Appeals in CA-G.R. SP No. 43836 are AFFIRMED. Costs against petitioner.
SO ORDERED.
(China Banking Corp. v. Oliver, G.R. No. 135796, [October 3, 2002], 439
|||

PHIL 50-62)

5. David v Paragas Jr. 751 SCRA 648

SECOND DIVISION
[G.R. No. 176973. February 25, 2015.]

DAVID M. DAVID, petitioner, vs. FEDERICO M. PARAGAS,


JR., respondent.

DECISION

MENDOZA, J : p

This is a petition for review on certiorari under Rule 45 seeking to annul and set
aside the July 31, 2006 Decision 1 and the February 23, 2007 Resolution 2 of the
Court of Appeals (CA) in CA-G.R. SP No. 80942. The said issuances modified
the July 21, 2003 Order 3 of the Regional Trial Court, Branch 200, Las Piñas
City (RTC) in Civil Case No. LP-02-0165, a case for Declaratory Relief and Sum
of Money with Damages filed by petitioner David M. David (David) against Philam
Plans, Inc. (PPI), Severo Henry G. Lobrin (Lobrin), respondent Federico M.
Paragas, Jr. (Paragas), Rodelio S. Datoy (Datay), Rizal Commercial Banking
Corporation, Parañaque Branch (RCBC), and Gerald P.S. Agarra (Agarra).
The RTC Order resolved the Motion to Admit Supplemental Complaint filed by
David and the Joint Omnibus Motion 4 filed by David, Lobrin and Datoy. In the
said Order, the RTC admitted the attached supplemental complaint and
approved the compromise agreement. 5 The questioned CA decision nullified the
approval by the RTC of the compromise agreement.
The Antecedents
Sometime in 1995, David, Paragas and Lobrin agreed to venture into a business
in Hong Kong (HK). They created Olympia International, Ltd. (Olympia) under HK
laws. Olympia had offices in HK and the Philippines. David handled the
marketing aspect of the business while Lobrin and Datoy were in charge of
operations. In late 1995, Olympia started with "selling, through catalogs,
consumer products such as appliances, furniture and electronic equipment to the
OFWs in Hong Kong, to be delivered to their addresses in the Philippines. They
coined the name Kayang-Kaya for the venture." 6
In early 1998, Olympia became the exclusive general agent in HK of PPI's pre-
need plans through the General Agency Agreement. In late 2001, Olympia
launched thePares-Pares program by which planholders would earn points with
cash equivalents for successfully enlisting new subscribers. The cash
equivalents, in turn, would be used for the payment of monthly premiums of the
planholders. PPI authorized Olympia to accept the premium payments, including
the cash equivalent of the bonus points, and to remit the same, net of
commissions, to PPI in the Philippines. The money from HK was to be remitted
through Olympia's account in RCBC. In turn, Olympia was to pay the planholders'
bonuses as well as the share of profits for the directors. 7 David was tasked to
personally remit said amounts to PPI as he was the only signatory authorized to
transact on behalf of Olympia regarding the RCBC accounts.
As Paragas alleged, the amount remitted by Olympia to RCBC from September
2001 to May 25, 2002 reached P82,978,543.00, representing the total net
earnings from the pre-need plans, 30% of which comprised the bonus points
earned by the subscribers under the Pares-Pares program. The rest was to be
distributed among the four partners.
In 2002, the state of affairs among the partners went sour upon Lobrin's
discovery that David failed to remit to PPI the 30% cash equivalent of the bonus
points.
In a meeting held on June 1, 2002 in HK, David tried to explain his side, but no
settlement was reached.
Later, Lobrin discovered that only P19,302,902.13 remained of the
P82,978,543.00 remitted from HK to the RCBC account. As the Chairperson of
Olympia's Board of Directors (BOD), he demanded the return of the entire
P82,978,543.00. ADETca

On June 17, 2002, the BOD stripped David of his position as a director. It then
informed RCBC of his removal. In another letter, it also instructed RCBC to
prohibit any transaction regarding the funds or their withdrawal therefrom
pending the determination of their rightful owner/s.
Meanwhile, a Watch-List Order was issued against David pursuant to the letter
sent by Paragas' counsel to the Bureau of Immigration. As a result, he was
prevented from boarding a flight to Singapore on June 29, 2002.
Constrained by these circumstances, David filed a complaint for Declaratory
Relief, Sum of Money and Damages before the RTC. He insisted on his
entitlement to the commissions due under the regular and Pares-Pares programs
in his capacity as Principal Agent under the General Agency Agreement with PPI;
that he be allowed to hold the cash deposits of P19,302,902.00 to the extent of
P18,631,900.00 as a trust fund for the benefit of the subscribers of thePares-
Pares program; that RCBC be ordered to recognize no other signatory relative to
the said deposits except him; and that Paragas, Lobrin and Datoy be held liable
in an amount not less than P20,000,000.00, representing the missing amount
and/or unauthorized disbursements from the funds of Olympia, plus the payment
of moral damages, exemplary damages and attorney's fees.
Paragas and Lobrin filed their answers with compulsory counterclaims 8 against
David, to wit:
First Counterclaim — to mandate David to render an accounting of the
amounts mentioned;
Second Counterclaim — to require David to turn over such books of
accounts and other documents owned by Olympia as well as all records
pertaining to Olympia's business transactions in the Philippines;
Third Counterclaim — to make David pay the amount of P24,893,562.90
to Philam as cash bonuses of the respective original subscribers;
Fourth Counterclaim — to make David pay Lobrin and Paragas the
amount of P24,521,245.00 each, as and by way of actual damages,
representing (1) Lobrin and Paragas' respective shares as co-owners in
the net profit of Olympia from the sale of the Pre-need plan under
the pares-pares program in the amount of P14,521,245.00 and the
amount of P10,000,000.00 representing the cost of plane fares, living
allowances and unrealized profit;
Fifth Counterclaim — to hold David liable to pay Lobrin and Paragas the
amount of P20,000,000.00 each, as and by way of moral damages;
Sixth Counterclaim — to make David pay the amount of P10,000,000.00
as and by way of exemplary damages; and
Seventh Counterclaim — to hold David personally liable to pay Lobrin
and Paragas the amount of P1,000,000.00 as attorney's fees, plus such
amount as may be proved during the trial as litigation expenses and cost
of suit. 9
On March 5, 2003, David filed the supplemental complaint, with a manifestation
that an amicable settlement was struck with Lobrin and Datoy whereby they
agreed to withdraw the complaint and counterclaims against each other. On May
6, 2003, Lobrin and Olympia through their counsel, confirmed that on March 26,
2003, they had arrived at a compromise. 10 The agreement clearly stated that
Lobrin was acting on Olympia's behalf, on the basis of a resolution passed during
the board meeting held on March 21, 2003. The settlement reads:
COMPROMISE AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement, entered into by and between:
DAVID M. DAVID, of legal age, married, Filipino and with address at 23
Pablo Roman Street, BF Homes, Parañaque, hereinafter referred to as
DMD;
-and-
OLYMPIA INTERNATIONAL LIMITED, a corporation organized and
existing under the laws of Hong Kong, with principal office at 13/F Li
Dong Building, 7-11 Li Yuen Street East, Central, Hong Kong, and
herein represented by its Attorney-in-Fact, Henry G. Lobrin, and
herein after referred to as Olympia;
WITNESSETH: That —
WHEREAS, Olympia has passed a board resolution during the meeting
of its Board of Directors held in Hong Kong on 21 March 2003
constituting and appointing as such its herein Attorney-in-Fact for the
purposes stated in said resolution, a copy of which is hereto attached as
Annex "A";
WHEREAS, there is a pending case before Branch 200 of the Regional
Trial Court of Las Pi[ñ]as City docketed as Civil Case No. LP-02-0165
("the Case") and among the defendants in said Case are Henry G.
Lobrin, Federico M. Paragas, Jr. and Roberto S. Datoy who are
presently directors of Olympia;ICHAaT

WHEREAS, the causes of action in the complaint in said Case against


aforesaid Lobrin, Paragas, Jr. and Datoy are in their capacity as
shareholders/directors of Olympia, and likewise concern the relationship
and rights between DMD and Olympia International Ltd., including the
status of the latter's operations and financial position;
WHEREAS, another issue in said case is the respective rights of herein
parties DMD and Olympia under and pursuant to the General Agency
Agreement (GAA) with Philam Plans, Inc., ("PPI") dated 10 February
1998;
WHEREAS, corollary to the issue of the GAA is the respective obligation
of DMD and Olympia to the planholders of PPI under the regular
and pares pares program, specifically the binhing
yaman and pamilyaman benefits due to approximately 12,000
planholders of Philam Plans, Inc. ("PPI") as per the list attached to the
complaint in said Case;
WHEREAS, both DMD and Olympia are desirous of settling the Case
amicably under mutually acceptable terms and conditions:
NOW, THEREFORE, parties hereby agree as follows:
1. Olympia hereby waives its rights and interests to the trust fund
presently in Account Nos. 1-214-25224-0, 07214108903-003 and
0000005292 with the Rizal Commercial Banking Corporation
("RCBC") and Account No. 0301-01334-5 with the Equitable PCI
Bank pertaining to the cash benefits of the approximately 12,000
planholders of Philam Plans, Inc., per the list attached to the
complaint in the Case;
2. Olympia further agrees that the same shall be settled exclusively by
DMD, subject to the requirement that it shall be furnished a copy
of the Statement of Benefits pertaining to each planholder;
3. Olympia likewise no longer interposes any objection/opposition to the
payment of the cash benefits to the planholders from said trust
funds, and shall make of record in the Case the withdrawal of its
opposition;
4. DMD shall drop as party Defendants from the Case Severo Henry G.
Lobrin, Federico M. Paragas, Jr. and Rodelio S. Datoy;
5. Olympia shall withdraw its First Compulsory Counterclaim, Second
Compulsory Counterclaim and Third Compulsory Counterclaim as
stated in the "Answer with Compulsory Counterclaims" dated 3
October 2002 filed in said Case, because the subject matters of
said compulsory counterclaims are exclusively the concern of
Olympia as a corporation and are now the subject of this
Compromise Agreement;
6. Olympia shall likewise withdraw the Fourth Compulsory Counterclaim,
Fifth Compulsory Counterclaim, Sixth Compulsory Counterclaim
and Seventh Compulsory Counterclaim in so far as they refer to
claims to which the claimants will be entitled in their capacity as
shareholder and/or director of Olympia;
7. The Fourth Compulsory Counterclaim, Fifth Compulsory
Counterclaim, Sixth Compulsory Counterclaim and Compulsory
Counterclaim (sic) will also be withdrawn by Henry G. Lobrin in
his personal capacity;
8. For this purpose, the following motions shall be filed pursuant to this
Agreement;
a. A Joint Motion shall be filed in the case for the dismissal of the
complaint and compulsory counterclaims as above stated;
b. A Motion to Withdraw Opposition to the Motion to Release
Benefits and Supplemental Motion (to Release Benefits) be
filed by Olympia through its Attorney-in-Fact.
IN WITNESS WHEREOF, parties hereto set their hands this ____ day of
____________ in __________________________.

DAVID M. DAVID OLYMPIA


INTERNATIONAL
Ltd.

By:

HENRY G. LOBRIN
Attorney-in Fact
HENRY G. LOBRIN
In his personal capacity
[Emphases supplied] 11
On May 15, 2003, David and Lobrin filed the Joint Omnibus Motion to formally
inform the RTC of the compromise agreement. They asserted the following:
2. n Said agreement was executed between Plaintiff and Olympia, the
latter being represented by Defendant Lobrin as Olympia's
Attorney-in-Fact, pursuant to a resolution passed by a majority
vote during the board meeting held in Hong [Kong] on 21 March
2003 wherein Defendants Lobrin, Paragas, Jr. and Datoy were all
present, authorizing said Attorney-in-Fact to negotiate a
compromise settlement regarding instant case, the payment of
the accrued benefits due the planholders of Philam Plan, Inc.
under the regular and Pares-Pares program as well as the
disposition of the cash and other deposits with Rizal Commercial
Banking Corporation (RCBC) and other accounts in other banks.
Said resolution is appended to the Agreement as its Annex
"A"; SDHacT

3. By virtue of said Agreement, Olympia no longer questions and hereby


waives whatever rights and interest it may have to the deposits
constituting the trust fund pertaining to the cash benefits of the
approximately 12,000 planholders of Philam Plans, Inc., per the
list attached to the complaint in instant case in Account Nos. 1-
214-25224-0, 07214108903-003 and 0000005292 with RCBC and
Account No. 0301-01334-5 with the Equitable-PCI Bank;
4. Olympia further withdraws its objection/opposition to the payment of
the cash benefits to the planholders from said trust funds which
shall remain to be the sole responsibility/accountability of Plaintiff,
subject to the requirement that Olympia through its authorized
Attorney-in-Fact shall be furnished a copy of the Statement of
Benefits pertaining to each planholder;
5. As a consequence of the above, Defendants Severo Henry G. Lobrin,
Federico M. Paragas, Jr. and Rodelio S. Datoy shall be dropped
as party defendants in instant case, to which no objection will be
interposed by Plaintiff, and the motion to declare Defendant Datoy
in default for failure to file his Answer is similarly withdrawn for
having been rendered moot and academic by the Agreement;
6. Olympia hereby withdraw[s] its First, Second and Third Compulsory
Counterclaims against herein Plaintiff considering that the legal
and factual bases thereof are matters which are exclusively the
concern of Olympia as a corporation and have been the subject of
the Agreement;
7. Olympia likewise withdraws the Fourth, Fifth, Sixth and Seventh
Compulsory Counterclaim in so far as they refer to the claims
pertaining to Defendants Paragas, Lobrin and Datoy in their
capacity as shareholders and/or directors of Olympia;
8. Defendant Lobrin likewise withdraws the Fourth, Fifth, Sixth and
Seventh Compulsory Counterclaim in so far as they refer to
claims pertaining to him in his personal capacity;
9. Plaintiff likewise withdraws his complaint against Defendant Gera[l]d
P.S. Algarra based on the statements contained in the latter's
Answer, and said Defendant likewise withdraws his
Counterclaims against plaintiff, however, Plaintiff reserves his
right to implead the proper party Defendant; and
10. This motion is without prejudice to the right of Defendant Paragas to
join and/or avail of the benefits of the Agreement and instant
Motion hereinafter. 12
On May 8, 2003, Paragas questioned the existence of the cited BOD resolution
granting Lobrin the authority to settle the case, as well as the validity of the
agreement through an affidavit duly authenticated by the Philippine Consul,
Domingo Lucinario, Jr. He pointed to the fact that Olympia, as an entity, was
never a party in the controversy.
On July 21, 2003, the RTC granted David's Motion to Admit the Supplemental
Complaint and approved the compromise agreement, to wit:
Further, finding the agreement in the JOINT OMNIBUS MOTION to be
well-taken, not contrary to law, public policy and morals, the same is
hereby APPROVED and the motion GRANTED. The resolution is hereby
rendered based thereon, thus, the parties concerned are enjoined to
faithfully comply with all the terms and conditions stated therein. As
prayed for by the parties concerned in the JOINT OMNIBUS MOTION,
let Henry G. Lobrin, Rodelio S. Datoy and Gera[l]d PS Algarra BE
DROPPED as party defendants except defendant Federico Paragas, Jr.
who filed an Opposition thereto, and the compulsory counterclaims
between defendants Lobrin, Datoy and Algarra and plaintiff David
against each other DISMISSED. The withdrawal of the motion to declare
defendant Datoy is hereby noted. 13
On August 15, 2003, Paragas moved for reconsideration, 14 claiming that
although the parties had the prerogative to settle their differences amicably, the
intrinsic and extrinsic validity of the compromise agreement, as well as its basis,
may be questioned if illicit and unlawful.
In its September 30, 2003 Order, 15 the RTC denied the motion of Paragas.
Unperturbed, Paragas elevated the issue to the CA via a petition
for certiorari under Rule 65 of the Rules of Court.
In its July 31, 2006 Decision, the CA reversed the RTC's approval of the
compromise agreement. It explained that the agreement entered into by David,
Lobrin and Datoy was invalid for two reasons: First, the agreement was between
David and Olympia, which was not a party in the case; and second, assuming
that Olympia could be considered a party, there was no showing that the
signatory had the authority from Olympia or from the other parties being sued to
enter into a compromise.
David moved for reconsideration. In its February 23, 2007 Resolution, the CA
denied his motion. ADaECI

Hence, this petition.


GROUNDS OF THE PETITION
I. RESPONDENT COURT LACKED AND/OR EXCEEDED ITS
JURISDICTION WHEN IT MODIFIED THE ORDER OF THE
TRIAL COURT DATED JULY 21, 2003, DESPITE THE
ASSIGNMENT OF ERROR BEING SPECIFICALLY LIMITED TO
THE ORDER OF THE TRIAL COURT DATED SEPTEMBER 30,
2003 WHICH DENIED THE MOTION FOR RECONSIDERATION
FILED BY HEREIN PRIVATE RESPONDENT
II. OLYMPIA IS NOT A PARTY TO THE CASE BELOW, HENCE, THE
DISMISSAL OF THE COMPLAINT AND COMPULSORY
COUNTERCLAIMS ARE PERSONAL IN NATURE TO THE
PARTIES AND IS WITHIN THE PURVIEW OF SECTION 2 OF
RULE 17
III. THERE IS DENIAL OF DUE PROCESS OF LAW WHEN
RESPONDENT COURT ANNULLED THE COMPROMISE
AGREEMENT BASED ON UNSUBSTANTIATED
ALLEGATIONS OF FACT CONTAINED IN THE PETITION. 16
In his reply, 17 David limited his "discussion to the issue that still has a practical
bearing on the case below," 18 that is, whether or not the nullification of the
Compromise Agreement similarly nullified the dismissal of both the complaint as
against the defendants . . . . 19
In the Resolution, dated February 16, 2011, the Court gave due course to the
petition and directed the parties to file their respective memoranda. 20 While
Paragas was able to file his memorandum on May 16, 2011, David's
memorandum was dispensed with in a resolution, dated June 19, 2013, for his
failure to file one within the extended period granted by the Court. 21
Position of David
David charges the CA with grave abuse of discretion in dispensing a relief more
than what Paragas prayed for. According to David, the CA exceeded its
jurisdiction when it annulled the compromise agreement despite the fact that the
assignment of error in the petition of Paragas before the CA was limited only to
the review of the correctness of the RTC's September 30, 2003 Order denying
the motion for reconsideration and not the July 21, 2003 Order approving the
compromise agreement. In other words, David is of the view that because
Paragas did not assail the July 21, 2003 Order, the same should not have been
modified by the CA.
He further insists that the CA should not have annulled the compromise
agreement because the July 21, 2003 RTC Order did not refer to the approval of
the compromise agreement, but to the agreement of the parties to dismiss the
claims and counterclaims against each other. In support of this position, David
takes refuge in the RTC statement that the parties had the right to "amicably
settle their issues even if subject compromise agreement had not been entered
into." To him, it was not the "Compromise Agreement" that was approved, but the
"underlying agreement between the parties to withdraw their claims against each
other which are personal to them in nature."
Lastly, David submits that he was denied due process of law when the CA
annulled the compromise agreement based on unsubstantiated allegations of
fact, that is, the allegation that the board meeting granting Lobrin the authority to
enter into compromise with him on behalf of Olympia and on behalf of the other
parties did not take place. He believes that Paragas failed to prove his
allegations and, therefore, the meeting, as supported by the minutes signed by
one Flordeliza Sacapano, must be respected as a matter of fact.
The Court's Ruling
The Court denies the petition.
The CA did not exceed its
jurisdiction in modifying
the July 21, 2003 RTC Order
In his petition, David claims that the CA exceeded its jurisdiction when it modified
the July 21, 2003 Order of the RTC by admitting David's supplemental complaint
and approving the earlier mentioned compromise agreement even though
Paragas' petition for certiorari before the CA only questioned the September 30,
2003 Order of the RTC denying his motion for reconsideration. 22
This Court is unmoved by this position advocated by David.
In countless cases, the Court has allowed the consideration of other grounds or
matters not raised or assigned as errors. In the case of Cordero vs. F.S.
Management & Development Corporation, 23 the Court wrote:
While a party is required to indicate in his brief an assignment of errors
and only those assigned shall be considered by the appellate court in
deciding the case, appellate courts have ample authority to rule on
matters not assigned as errors in an appeal if these are indispensable or
necessary to the just resolution of the pleaded issues. Thus this Court
has allowed the consideration of other grounds or matters not raised
or assigned as errors, to wit: 1) grounds affecting jurisdiction over the
subject matter; 2) matters which are evidently plain or clerical errors
within the contemplation of the law; 3) matters the consideration of
which is necessary in arriving at a just decision and complete
resolution of the case or to serve the interest of justice or to avoid
dispensing piecemeal justice; 4) matters of record which were
raised in the trial court and which have some bearing on the issue
submitted which the parties failed to raise or which the lower court
ignored; 5) matters closely related to an error assigned; and 6) matters
upon which the determination of a question properly assigned is
dependent. [Emphases supplied] 24
In this case, while it is true that Paragas' petition for certiorari before the CA only
assailed the subsequent order of the RTC denying his August 15, 2003 Motion
for Reconsideration, he did pray in the said motion for reconsideration that it set
aside and reverse its approval of the Joint Omnibus Motion. The prayer reads: aEcHCD

WHEREFORE, it is respectfully prayed of this Honorable Court that the


Order dated 21 July 2003 be MODIFIED to SET ASIDE and REVERSE
the approval of the Joint Omnibus Motion dated 15 May 2003 and a new
one be issued DENYING said motion. 25
Obviously, the resolution of his motion for reconsideration necessarily involved
the July 21, 2003 Order of the RTC as it was indispensable and inextricably
linked with the September 30, 2003 Order being assailed.
The CA did not err in annulling the
compromise agreement.
At the outset, David asserts that the CA based the annulment of the compromise
agreement exclusively on the unsubstantiated allegations of Paragas.
The Court disagrees. A careful reading of the assailed CA decision reveals that it
did not merely rely on the claims of Paragas. What the CA did was to analyze
and appreciate the circumstances behind the compromise agreement. In
revisiting and delving deep into the records, the Court indeed agrees with the CA
that the RTC gravely abused its discretion in approving the agreement for the
following reasons:
First, the subject compromise agreement could not be the basis of the
withdrawal of the respective complaint and counterclaims of the parties
for it was entered into by David with a non-party in the proceedings.
Even if the Court interprets that the RTC approved the underlying
agreement to withdraw the claims and counterclaims between the
parties, the terms and conditions of the subject compromise agreement
cannot cover the interests of Olympia, being a non-party to the suit.
Second, the RTC had no authority to approve the said compromise
agreement because Olympia was not impleaded as a party, although its
participation was indispensable to the resolution of the entire
controversy.
A compromise agreement could not be
the basis of dismissal/withdrawal of a
complaint and counterclaims if it was
entered into with a non-party to the
suit.
A compromise agreement is a contract whereby the parties make reciprocal
concessions in order to resolve their differences and, thus, avoid or put an end to
a lawsuit. They adjust their difficulties in the manner they have agreed upon,
disregarding the possible gain in litigation and keeping in mind that such gain is
balanced by the danger of losing. It must not be contrary to law, morals, good
customs and public policy, and must have been freely and intelligently executed
by and between the parties. 26 A compromise agreement may be executed in and
out of court. Once a compromise agreement is given judicial approval, however,
it becomes more than a contract binding upon the parties. Having been
sanctioned by the court, it is entered as a determination of a controversy and has
the force and effect of a judgment. 27
Verily, a judicially approved compromise agreement, in order to be binding upon
the litigants with the force and effect of a judgment, must have been executed by
them. In this case, the compromise agreement was signed by David in his
capacity as the complainant in the civil case, and Olympia, through Lobrin as its
agent. The agreement made plain that the terms and conditions the "parties"
were to follow were agreed upon by David and Olympia. Datoy and Paragas
never appeared to have agreed to such terms for it was Olympia, despite not
being a party to the civil case, which was a party to the agreement. Despite this,
David claims that the concessions were made by Olympia on behalf of the non-
signatory parties and such should be binding on them.
David must note that Olympia is a separate being, or at least should be treated
as one distinct from the personalities of its owners, partners or even directors.
Under the doctrine of processual presumption, this Court has to presume that
Hong Kong laws is the same as that of the Philippines particularly with respect to
the legal characterization of Olympia's legal status as an artificial person.
Elementary is the rule that under Philippine corporate and partnership laws, a
corporation or a partnership possesses a personality separate from that of its
incorporators or partners. Olympia should, thus, be accorded the status of an
artificial being at least for the purpose of this controversy.
On that basis, Olympia's interest should be detached from those of directors
Paragas, Lobrin, Datoy, and even David. Their (individual directors) interest are
merely indirect, contingent and inchoate. Because Olympia's involvement in the
compromise was not the same as that of the other parties who were, in the first
place, never part of it, the compromise agreement could not have the force and
effect of a judgment binding upon the litigants, specifically Datoy and Paragas.
Conversely, the judicially approved withdrawal of the claims on the basis of that
compromise could not be given effect for such agreement did not concern the
parties in the civil case.
SaIEcA

David, nevertheless, points out that the validity of the dismissal of the claims and
counterclaims must remain on the argument that the compromise agreement was
made in their personal capacities inasmuch as he filed the complaint against
Paragas, Lobrin and Datoy also in their personal capacities. He draws support
from the Answer with Compulsory Counterclaims 28 filed by Paragas and Lobrin.
The counterclaims against him did not involve Olympia, save for the demand to
render an accounting as well as to turn over the books of account and records
pertaining to the latter. David, thus, stated:
It is very clear from the order of July 21, 2003 that the agreement being
referred to as having been approved is not the Compromise Agreement
but the agreement of the parties to dismiss the claims and counterclaims
against each other. This is obvious when the order stated that it is within
the right of the parties to amicably settle the issues even if subject
Compromise Agreement had not been entered into. Clearly, it was not
the Compromise Agreement that was approved, because precisely it
involved Olympia, but the underlying agreement between the parties to
withdraw their claims against each other which are personal to them in
nature. As noted by the trial court, even without the Compromise
Agreement, parties could still settle the case amicably and withdraw the
claims against one another which is precisely what the parties did. 29
His contention is devoid of merit.
While David repeatedly claims that his complaint against Paragas, Lobrin and
Datoy was personal in character, a review of the causes of action raised by him
in his complaint shows that it primarily involved Olympia. As defined, a cause of
action is an act or omission by which a party violates a right of another. It
requires the existence of a legal right on the part of the plaintiff, a correlative
obligation of the defendant to respect such right and an act or omission of such
defendant in violation of the plaintiff's rights. 30
In his complaint, David raised three causes of action. The first one dealt with the
alleged omission on the part of the other venture partners to respect his right,
being Olympia's beneficial owner and PPI's principal agent under the GAA, over
the income generated from the sale PPI's pre-need plans. The second dealt with
his right over all amounts that the venture partners disbursed in excess of those
authorized by him, under the premise that he remained Olympia's beneficial
owner. The third dealt with the acts of the venture partners in causing undue
humiliation and shame when he was prevented from boarding his Singapore-
bound plane pursuant to the Watch-List Order issued by the Bureau of
Immigration at the behest of a letter sent by the counsel of Paragas. Accordingly,
David prayed that the RTC:
a. Declare him as the one entitled to the commission due under the
regular and Pares-Pares programs net of the agents' commission
in his capacity as Principal Agent under the General Agency
Agreement with Philam Plans, Inc.;
b. Hold the cash deposits of P19,302,902.00 to the extent of
P18,631,900.00 as a trust fund for the benefit of the subscribers
of the Pares-Pares Program and validly held in-trust by [him];
c. Order Defendant RCBC to recognize no other signatory to said
deposits except [him].
xxx xxx xxx 31
Essentially, David was asking for judicial determination of his rights over
Olympia's revenues, funds in the RCBC bank accounts and the amounts used
and expended by Olympia through the acts of its directors/defendants. Nothing
therein can be said to be "personal" claims against Paragas, Lobrin and Datoy,
except for his claim for damages resulting from the humiliation he suffered when
he was prevented from boarding his Singapore-bound plane. Obviously, the
argument that they executed the compromise agreement in their personal
capacities does not hold water.
For even if the Court looks closer at the concessions made, many provisions deal
with Olympia's interests instead of the personal claims they have against one
another. A review of the Joint Omnibus Motion would also show that the
compromise agreement dealt more with David and Olympia. Given this, Olympia
did not have the standing in court to enter into a compromise agreement unless
impleaded as a party. The RTC did not have the authority either to determine
Olympia's rights and obligations. Furthermore, to allow the compromise
agreement to stand is to deprive Olympia of its properties and interest for it was
never shown that the person who signed the agreement on its behalf had any
authority to do so.
More importantly, Lobrin, who signed the compromise agreement, failed to
satisfactorily prove his authority to bind Olympia. The CA observed, and this
Court agrees, that the "board resolution" allegedly granting authority to Lobrin to
enter into a compromise agreement on behalf of Olympia was more of a part of
the "minutes" of a board meeting containing a proposal to settle the case with
David or to negotiate a settlement. It should be noted that the said document was
not prepared or issued by the Corporate Secretary of Olympia but by a
"Secretary to the Meeting." Moreover, the said resolution was neither
acknowledged before a notarial officer in Hong Kong nor authenticated before
the Philippine Consul in Hong Kong. 32 Considering these facts, the RTC should
have denied the Joint Omnibus Motion and disapproved the compromise
agreement. In fine, Olympia was not shown to have properly consented to the
agreement, for the rule is, a corporation can only act through its Board of
Directors or anyone with the authority of the latter. To allow the compromise
agreement to stand is to deprive Olympia of its properties and interest for it was
never shown that Lobrin had the necessary authority to sign the agreement on
Olympia's behalf. DETACa

Olympia is an indispensable party


In Lotte Phil. Co., Inc. v. Dela Cruz, 33 the Court reiterated that an indispensable
party is a party-in-interest without whom no final determination can be had of an
action, and who shall be joined either as plaintiffs or defendants. The joinder of
indispensable parties is mandatory. The presence of indispensable parties is
necessary to vest the court with jurisdiction, which is "the authority to hear and
determine a cause, the right to act in a case." 34
Considering that David was asking for judicial determination of his rights in
Olympia, it is without a doubt, an indispensable party as it stands to be injured or
benefited by the outcome of the main proceeding. It has such an interest in the
controversy that a final decree would necessarily affect its rights. Not having
been impleaded, Olympia cannot be prejudiced by any judgment where its
interests and properties are adjudicated in favor of another even if the latter is a
beneficial owner. It cannot be said either to have consented to the judicial
approval of the compromise, much less waived substantial rights, because it was
never a party in the proceedings.
Moreover, Olympia's absence did not confer upon the RTC the jurisdiction or
authority to hear and resolve the whole controversy. This lack of authority on the
part of the RTC which flows from the absence of Olympia, being an
indispensable party, necessarily negates any binding effect of the subject
judicially-approved compromise agreement.
Time and again, the Court has held that the absence of an indispensable party
renders all subsequent actions of the court null and void for want of authority to
act, not only as to the absent parties but even to those present. The failure to
implead an indispensable party is not a mere procedural matter. Rather, it brings
to fore the right of a disregarded party to its constitutional rights to due process.
Having Olympia's interest being subjected to a judicially-approved agreement,
absent any participation in the proceeding leading to the same, is procedurally
flawed. It is unfair for being violative of its right to due process. In fine, a holding
that is based on a compromise agreement that springs from a void proceeding
for want of jurisdiction over the person of an indispensable party can never
become binding, final nor executory and it may be "ignored wherever and
whenever it exhibits its head." 35
Lest it be misunderstood, after the remand of this case to the RTC, the parties
can still enter into a compromise agreement on matters which are personal to
them. That is their absolute right. They can dismiss their claims and
counterclaims against each other, but the dismissal should not be dependent or
contingent on a compromise agreement, one signatory to which is not a party. It
should not also involve or affect the rights of Olympia, the non-party, unless it is
properly impleaded as one. Needless to state, a judicial determination of the
rights of Olympia, when it is not a party, would necessarily affect the rights of its
shareholders or partners, like Paragas, without due process of law.
WHEREFORE, the petition is DENIED. The July 31, 2006 Decision of the Court
of Appeals and its February 23, 2007 Resolution in CA-G.R. SP No. 80942 are
herebyAFFIRMED. DCcIaE

SO ORDERED.
||| (David v. Paragas, Jr., G.R. No. 176973, [February 25, 2015])

6. Land Bank v Cacayuran 757 SCRA April 22, 2015

SPECIAL SECOND DIVISION

[G.R. No. 191667. April 22, 2015.]

LAND BANK OF THE PHILIPPINES, petitioner, vs. EDUARDO


M. CACAYURAN, respondent.

MUNICIPALITY OF AGOO, LA UNION, intervenor.


AMENDED DECISION

PERLAS-BERNABE, J : p

Before the Court are the following motions: (a) the Motion for
Reconsideration 1 dated May 22, 2013, filed by petitioner Land Bank of the
Philippines (LBP) assailing the Decision 2 dated April 17, 2013 of the Court
(April 17, 2013 Decision), which upheld the Decision 3 dated March 26, 2010
of the Court of Appeals (CA) in CA-G.R. CV. No. 89732 affirming with
modification the Decision 4 dated April 10, 2007 of the Regional Trial Court of
Agoo, La Union, Branch 31 in Civil Case No. A-2473; (b) the Motion for Leave
to Intervene with Pleading-in-Intervention Attached 5 dated July 8, 2013, filed
by the Municipality of Agoo, La Union (Municipality) praying that it be allowed
to intervene in this case; and (c) the Motion for Reconsideration-in-
Intervention 6 dated July 8, 2013, filed by the Municipality seeking that the
Court set aside its April 17, 2013 Decision and promulgate a new one in its
stead dismissing the case (subject motions).
The Facts
The instant case arose from two (2) loans (Subject Loans) entered into
by the Municipality with LBP in order to finance the Redevelopment Plan of
the Agoo Public Plaza (Public Plaza). Through Resolution Nos. 68-2005 7 and
139-2005, 8 the Sangguniang Bayan of the Municipality (Sangguniang Bayan)
authorized its then-Mayor Eufranio Eriguel (Mayor Eriguel) to enter into a
P4,000,000.00-loan with LBP, the proceeds of which were used to construct
ten (10) kiosks at the Public Plaza. Around a year later, the SB issued
Resolution Nos. 58-2006 9 and 128-2006, 10 this time authorizing Mayor
Eriguel to obtain a P28,000,000.00-loan from LBP for the construction of a
commercial center named "Agoo People's Center" within the premises of the
Public Plaza. In order to secure the Subject Loans, the Municipality used as
collateral, among others, a 2,323.75-square meter lot situated at the south
eastern portion of the Public Plaza (Plaza Lot). 11
However, a group of residents, led by respondent Eduardo
M. Cacayuran (Cacayuran), opposed the redevelopment of the Public Plaza,
as well as the funding therefor thru the Subject Loans, claiming that these
were "highly irregular, violative of the law, and detrimental to public interests,
and will result to wanton desecration of the [Public
Plaza]." 12 Further, Cacayuran requested the municipal officers to furnish him
with the various documents relating to the Public Plaza's redevelopment,
which, however, went unheeded. 13 Thus, Cacayuran, invoking his right as a
taxpayer, filed a complaint 14 against LBP and various officers of the
Municipality, including Mayor Eriguel (but excluding the Municipality itself as
party-defendant), assailing the validity of the aforesaid loan agreements and
praying that the commercialization of the Public Plaza be enjoined. 15
Initially, the municipal officers moved for the outright dismissal of the
complaint, which was denied, thus constraining them to file their respective
answers. For its part, LBP asserted, inter alia, that Cacayuran did not have
any cause of action since he was not privy to the loan agreements entered
into by LBP and the Municipality. 16
During the pendency of the proceedings, the construction of the Agoo
People's Center was completed. Later on, the Sangguniang Bayan passed
Municipal Ordinance No. 02-2007 17 declaring the area where such building
stood as patrimonial property of the Municipality. 18
The RTC Ruling
In a Decision 19 dated April 10, 2007, the RTC declared the Subject
Loans null and void, finding that the resolutions approving the procurement of
the same were passed in a highly irregular manner and thus, ultra vires. As
such, it pronounced that the Municipality was not bound by the Subject Loans
and that the municipal officers should, instead, be held personally liable for
the same. Further, it ruled that since the Plaza Lot is a property for public use,
it cannot be used as collateral for the Subject Loans. 20
Aggrieved, LBP and the municipal officers appealed 21 to the CA.
However, the appeal of the municipal officers was deemed abandoned and
dismissed for their failure to file an appellants' brief despite due
notice. 22 Thus, only LBP's appeal was given due course by the CA. 23
The CA Ruling
In a Decision 24 dated March 26, 2010, the CA affirmed the ruling of the
RTC, with modification excluding then-Vice Mayor Antonio Eslao from
personal liability arising from the Subject Loans. It held
that: (a) Cacayuran had locus standi to file the instant complaint, considering
that he is a resident of the Municipality and the issue at hand involved public
interest of transcendental importance; (b) Resolution Nos. 68-2005, 138-2005,
58-2006, 126-2006 were invalidly passed due to non-compliance with certain
provisions of Republic Act No. 7160, 25 otherwise known as the Local
Government Code of 1991 (LGC); (c) the Plaza Lot is property of public
dominion, and thus, cannot be used as collateral; and (d) the procurement of
the Subject Loans were ultra vires acts for having been entered into without
proper authority and that the collaterals used therefor constituted improper
disbursement of public funds. 26
Dissatisfied, LBP filed a petition for review on certiorari 27 before this
Court.
Proceedings Before the Court
In a Decision 28 dated April 17, 2013 the Court denied LBP's petition,
and accordingly, affirmed the ruling of the CA. Agreeing with the CA, the
Court held that:(a) Cacayuran had legal standing to institute a taxpayer's
suit; 29 (b) Resolution Nos. 68-2005, 139-2005, 58-2006, 126-2006 cannot be
relied upon to validate the Subject Loans, as the LGC requires the passing of
an ordinance in order for any loan agreement to be valid; 30 and (c) the
procurement of the Subject Loans are ultra vires acts of the municipal officers
who approved the same, and thus, liability therefor shall devolve upon
them. 31
Undaunted, LBP moved for reconsideration, basically reiterating its
earlier position that Cacayuran had no legal standing to sue, and that
Resolution Nos. 68-2005, 139-2005, 58-2006, and 126-2006 may be relied
upon in validating the Subject Loans. 32
Meanwhile, the Municipality filed a Motion for Leave to Intervene with
Pleading-In-Intervention Attached 33 dated July 8, 2013 and a Motion for
Reconsideration in-Intervention 34 of even date, praying that it be included as
a party-litigant to the instant case. It contends that as a contracting party to
the Subject Loans, it is an indispensable party to the action filed
by Cacayuran. As such, there cannot be any "real disposition" of the instant
suit by reason of its exclusion from the same.
In opposition, 35 Cacayuran maintains that LBP did not raise any new
matter to warrant reconsideration of the April 17, 2013 Decision. Anent the
Municipality's motion to intervene, Cacayuran insists that the Municipality is
not a real party-in-interest to the instant case as his complaint is against the
municipal officers in their personal capacity for their ultra vires acts which are
not binding on the Municipality.
Finally, in its Comment on the Motion for Leave to Intervene and Motion
for Reconsideration-in-Intervention 36 dated May 6, 2014, LBP agrees with the
Municipality that the latter is an indispensable party to the instant case and as
such, should be included herein.
The Issue Before the Court
The core issue for the Court's resolution is whether or not the
Municipality should be deemed as an indispensable party to the instant case,
and thus, be ordered impleaded herein.
The Court's Ruling
The Court rules in the affirmative.
Section 7, Rule 3 of the Rules of Court mandates that all indispensable
parties should be joined in a suit, viz.:
SEC. 7. Compulsory joinder of indispensable parties. — Parties-
in-interest without whom no final determination can be had of an action
shall be joined either as plaintiffs or defendants.
"An indispensable party is one whose interest will be affected by the
court's action in the litigation, and without whom no final determination of the
case can be had. The party's interest in the subject matter of the suit and in
the relief sought are so inextricably intertwined with the other parties' that his
legal presence as a party to the proceeding is an absolute necessity. In his
absence, there cannot be a resolution of the dispute of the parties before the
court which is effective, complete, or equitable." 37 Thus, the absence of an
indispensable party renders all subsequent actions of the court null and void,
for want of authority to act, not only as to the absent parties but even as to
those present. 38
Nevertheless, it must be stressed that the failure to implead any
indispensable party to a suit does not necessarily result in the outright
dismissal of the complaint. In Heirs of Mesina v. Heirs of Fian, Sr., 39 the
Court definitively explained that in instances of non-joinder of indispensable
parties, the proper remedy is to implead them and not to dismiss the case:
The non-joinder of indispensable parties is not a ground for
the dismissal of an action. At any stage of a judicial proceeding
and/or at such times as are just, parties may be added on the motion
of a party or on the initiative of the tribunal concerned. If the plaintiff
refuses to implead an indispensable party despite the order of the
court, that court may dismiss the complaint for the plaintiff's failure to
comply with the order. The remedy is to implead the non-party
claimed to be indispensable. 40 (Emphases and underscoring
supplied)
In this case, a judicious review of the records reveals that Cacayuran's
complaint against LBP and the municipal officers primarily prays that the
commercialization of the Public Plaza be enjoined and also, that the Subject
Loans be declared null and void for having been unlawfully entered into by the
said officers. However, Cacayuran failed to implead in his complaint the
Municipality, a real party-in-interest 41 and an indispensable party that stands
to be directly affected by any judicial resolution on the case, considering
that: (a) the contracting parties to the Subject Loans are LBP and the
Municipality; and (b) the Municipality owns the Public Plaza as well as the
improvements constructed thereon, including the Agoo People's Center. As
the Municipality aptly points out: 42
3. To recapitulate: The case had its beginnings in the two (2)
Loans obtained by [the Municipality] from [LBP] and by the Board
Resolutions passed and adopted by the Sangguniang Bayan of Agoo,
La Union, together with the Mayor and Vice-Mayor of the Municipality.
xxx xxx xxx
3d. The two (2) Loans were covered and evidenced by separate
Loan Agreements and Mortgage/Assignment Documents. The parties
which entered into and executed the covering documents were
[LBP] as lender and [the Municipality] as borrower.
3e. When the construction was about 40% complete,
[Cacayuran] as a taxpayer filed the case against the: (i) Mayor; (ii)
Vice-Mayor; and (iii) Ten (10) Members [of] the Sangguniang Bayan
[of] Agoo, La Union, as defendants. [The Municipality] was excluded,
and was not impleaded as a defendant in the case.
xxx xxx xxx
Indeed, [the Municipality] [on whose lands stands and is
found the Agoo Public Plaza, where the Kiosks and Commercial
Building were under construction and which constructions were
sought to be restrained] stands to be benefited or injured by the
judgment in the case so filed or the party entitled to the avails of
the case and is, therefore, the real party-in-interest.
xxx xxx xxx
3k. Without having to say so, the RTC dispositions as
affirmed with modification by the CA Decision which, in turn was
affirmed by the SC Decision must not be binding upon [the
Municipality], the real party-in-interest, the indispensable party in
fact, not impleaded as defendant in this case.43 (Emphases and
underscoring supplied).
The Court observes that it is only now that the issue of the
Municipality's exclusion from the instant case, despite its status as an
indispensable party, became apparent. This recent finding may be credited to
the fact that the initial parties before the Court, i.e., LBP and Cacayuran, have
dissimilar interests from that of the Municipality, and, hence, had no incentive
to raise the issue of the latter's status as an indispensable party. On the one
hand, Cacayuran's interest to the case is centered on the declaration of nullity
of the Subject Loans, as well as the enjoinment of the commercialization of
the Public Plaza; and on the other hand, LBP's interest to the case is
anchored on its capacity as creditor to the Subject Loans. To the mind of the
Court, the municipal officers would have been in the best position to raise this
issue; however, they were unable to do so because their appeal before the
CA was deemed abandoned for their failure to file an appellants' brief on time.
Be that as it may, the Court is not precluded from taking cognizance of
the Municipality's status as an indispensable party even at this stage of the
proceedings. Indeed, the presence of indispensable parties is necessary to
vest the court with jurisdiction 44 and, corollarily, the issue on jurisdiction may
be raised at any stage of the proceedings. 45 Thus, as it has now come to the
fore that any resolution of this case would not be possible and, hence, not
attain any real finality due to the non-joinder of the Municipality, the Court is
constrained to set aside all subsequent actuations of the courts a quo in this
case, including that of the Court's, and remand the case all the way back to
the RTC for the inclusion of all indispensable parties to the case and its
immediate disposition on the merits. 46 With this, the propriety of the
Municipality's present intervention is now mooted.
WHEREFORE, the subject motions are PARTLY GRANTED. The
Decision dated April 17, 2013 of the Court, which upheld the Decision dated
March 26, 2010 of the Court of Appeals in CA-G.R. CV. No. 89732 affirming
with modification the Decision dated April 10, 2007 of the Regional Trial Court
of Agoo, La Union, Branch 31 in Civil Case No. A-2473 is hereby SET ASIDE.
Accordingly, the instant case is REMANDED to the court a quo, which is
hereby DIRECTED to order respondent Eduardo M. Cacayuran to implead all
indispensable parties and thereafter, PROCEED with the resolution of the
case on the merits WITH DISPATCH.
SO ORDERED.
||| (Land Bank of the Phils. v. Cacayuran, G.R. No. 191667, [April 22, 2015])

7. Lotte Phil. Co. Inc vs. De la Cruz, G.R. No. 166302

FIRST DIVISION

[G.R. No. 166302. July 28, 2005.]

LOTTE PHIL. CO., INC., petitioner, vs. ERLINDA DELA CRUZ,


LEONOR MAMAUAG, LOURDES CAUBA, JOSEPHINE
DOMANAIS, ARLENE CAGAYAT, AMELITA YAM, VIVIAN
DOMARAIS, MARILYN ANTALAN, CHRISTOPHER RAMIREZ,
ARNOLD SAN PEDRO, MARISSA SAN PEDRO, LORELI
JIMENEZ, JEFFREY BUENO, CHRISTOPHER CAGAYAT,
GERARD CABILES, JOAN ENRIQUEZ, JOSEPH DE LA CRUZ,
NELLY CLERIGO, DULCE NAVARETTE, ROWENA BELLO,
DANIEL RAMIREZ, AILEEN BAUTISTA and BALTAZAR
FERRERA, respondents.

Francisco Gerardo C. Llamas & Paul A. Bernardino for petitioner.


Tagle-Chua Cruz & Aquino for respondents.

SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; PARTIES TO CIVIL ACTIONS;
INDISPENSABLE PARTIES; THE PRESENCE OF INDISPENSABLE PARTIES
IS NECESSARY TO VEST THE COURT WITH JURISDICTION; CASE AT BAR.
— An indispensable party is a party in interest without whom no final
determination can be had of an action, and who shall be joined either as plaintiffs
or defendants. The joinder of indispensable parties is mandatory. The presence
of indispensable parties is necessary to vest the court with jurisdiction, which is
"the authority to hear and determine a cause, the right to act in a case". Thus,
without the presence of indispensable parties to a suit or proceeding, judgment of
a court cannot attain real finality. The absence of an indispensable party renders
all subsequent actions of the court null and void for want of authority to act, not
only as to the absent parties but even as to those present. In the case at bar, 7J
is an indispensable party. It is a party in interest because it will be affected by the
outcome of the case. The Labor Arbiter and the NLRC found 7J to be solely
liable as the employer of respondents. The Court of Appeals however rendered
Lotte jointly and severally liable with 7J who was not impleaded by holding that
the former is the real employer of respondents. Plainly, its decision directly
affected 7J.
2. ID.; ID.; ID.; ID.; COMPULSORY JOINDER OF INDISPENSABLE
PARTIES; NON-JOINDER OF INDISPENSABLE PARTIES IS NOT A GROUND
FOR THE DISMISSAL OF THE ACTION. — In Domingo v. Scheer, we held that
the non-joinder of indispensable parties is not a ground for the dismissal of an
action and the remedy is to implead the non-party claimed to be indispensable.
Parties may be added by order of the court on motion of the party or on its own
initiative at any stage of the action and/or such times as are just. If the petitioner
refuses to implead an indispensable party despite the order of the court, the latter
may dismiss the complaint/petition for the petitioner/plaintiff's failure to comply
therefor.
3. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. — Although 7J was a co-party
in the case before the Labor Arbiter and the NLRC, respondents failed to include
it in their petition for certiorari in the Court of Appeals. Hence, the Court of
Appeals did not acquire jurisdiction over 7J. No final ruling on this matter can be
had without impleading 7J, whose inclusion is necessary for the effective and
complete resolution of the case and in order to accord all parties with due
process and fair play.

DECISION
YNARES-SANTIAGO, J : p

This petition for review on certiorari 1 assails the July 9, 2004 decision 2 of
the Court of Appeals in CA-G.R. SP No. 72732 and its November 26, 2004
resolution 3denying reconsideration thereof.
The established facts of this case are as follows:
Private respondent (petitioner herein) Lotte Phils., Inc. (Lotte) is a
domestic corporation. Petitioners (respondents herein) are among those
who were hired and assigned to the confectionery facility operated by
private respondent.
On December 14, 1995 — and yearly thereafter until the year
2000 — 7J Maintenance and Janitorial Services ("7J") entered into a
contract with private respondent to provide manpower for needed
maintenance, utility, janitorial and other services to the latter. In
compliance with the terms and conditions of the service contract, and to
accommodate the needs of private respondent for personnel/workers to
do and perform "piece works," petitioners, among others, were hired and
assigned to private respondent as repackers or sealers.
However, either in October, 1999 or on February 9, 2000, private
respondent dispensed with their services allegedly due to the
expiration/termination of the service contract by respondent with 7J.
They were either told "hwag muna kayong pumasok at tatawagan na
lang kung may gawa"; or were asked to wait "pag magrereport sila sa
trabaho." Unfortunately, petitioners were never called back to work
again.
Aggrieved, petitioners lodged a labor complaint against
both private respondent Lotte and 7J, for illegal dismissal, regularization,
payment of corresponding backwages and related employment benefits,
13th month pay, service incentive leave, moral and exemplary damages
and attorney's fees based on total judgment award. 4
On February 28, 2001, Labor Arbiter Cresencio G. Ramos, Jr., rendered
judgment 5 declaring 7J as employer of respondents. 6 The arbiter also found 7J
guilty of illegal dismissal 7 and ordered to reinstate respondents, 8 pay
P2,374,710.00 as backwages, P713,648.00 as 13th month pay and P117,000.00
as service incentive leave pay. 9
Respondents appealed to the National Labor Relations Commission
(NLRC) praying that Lotte be declared as their direct employer because 7J is
merely a labor-only contractor. In its decision 10 dated April 24, 2002, the NLRC
found no cogent reason to disturb the findings of the labor arbiter and affirmed its
ruling that 7J is the employer of respondents and solely liable for their claims.
Respondents' motion for reconsideration was denied by the NLRC in a
resolution dated June 18, 2002.
Undaunted, they filed a petition for certiorari in the Court of
Appeals 11 against the NLRC and Lotte, insisting that their employer is Lotte and
not 7J.
Lotte, however, denied that respondents were its employees. It prayed that
the petition be dismissed for failure to implead 7J who is a party interested in
sustaining the proceedings in court, pursuant to Section 3, Rule 46 of the
Revised Rules of Civil Procedure.
On July 9, 2004, the Court of Appeals reversed and set aside the rulings of
the Labor Arbiter and the NLRC. In its decision, the Court of Appeals declared
Lotte as the real employer of respondents and that 7J who engaged in labor-only
contracting was merely the agent of Lotte. Respondents who performed activities
directly related to Lotte's business were its regular employees under Art. 280 of
the Labor Code. As such, they must be accorded security of tenure and their
services terminated only on "just" and "authorized" causes. DSHcTC

Lotte's motion for reconsideration was denied, hence this petition, on the
following issues:
8. Whether or not petitioner herein had the burden of proof to
establish before the proceedings in the Court of Appeals that 7J
Maintenance and Janitorial Service was not a labor-only contractor.
8.1. Whether or not the Petition in CA-G.R. SP No. 72732 is
dismissible for failure to comply with Section 3, Rule 46 in relation to
Section 5, Rule 65 of the 1997 Rules of Civil Procedure. 12
We first resolve the procedural issue raised by petitioner. Lotte asserts that
7J is an indispensable party and should have been impleaded in respondents'
petition in the Court of Appeals. It claims that the petition before the Court of
Appeals was dismissible for failure to comply with Section 3, 13 Rule 46 in
relation to Section 5 14of Rule 65 of the Revised Rules of Civil Procedure. cITCAa

Petitioner's contention is tenable.


An indispensable party is a party in interest without whom no final
determination can be had of an action, 15 and who shall be joined either as
plaintiffs or defendants. 16 The joinder of indispensable parties is
mandatory. 17 The presence of indispensable parties is necessary to vest the
court with jurisdiction, which is "the authority to hear and determine a cause, the
right to act in a case". 18 Thus, without the presence of indispensable parties to a
suit or proceeding, judgment of a court cannot attain real finality. 19 The absence
of an indispensable party renders all subsequent actions of the court null and
void for want of authority to act, not only as to the absent parties but even as to
those present. 20
In the case at bar, 7J is an indispensable party. It is a party in interest
because it will be affected by the outcome of the case. The Labor Arbiter and the
NLRC found 7J to be solely liable as the employer of respondents. The Court of
Appeals however rendered Lotte jointly and severally liable with 7J who was not
impleaded by holding that the former is the real employer of respondents. Plainly,
its decision directly affected 7J.
In Domingo v. Scheer, 21 we held that the non-joinder of indispensable
parties is not a ground for the dismissal of an action 22 and the remedy is to
implead the non-party claimed to be indispensable. 23 Parties may be added by
order of the court on motion of the party or on its own initiative at any stage of the
action and/or such times as are just. If the petitioner refuses to implead an
indispensable party despite the order of the court, the latter may dismiss the
complaint/petition for the petitioner/plaintiff's failure to comply therefor. 24
Although 7J was a co-party in the case before the Labor Arbiter and the
NLRC, respondents failed to include it in their petition for certiorari in the Court of
Appeals. Hence, the Court of Appeals did not acquire jurisdiction over 7J. No
final ruling on this matter can be had without impleading 7J, whose inclusion is
necessary for the effective and complete resolution of the case and in order to
accord all parties with due process and fair play. IaTSED

In light of the foregoing, the Court sees no need to discuss the second
issue raised by petitioner.
WHEREFORE, the July 9, 2004 decision of the Court of Appeals in CA-
G.R. SP No. 72732 and the November 26, 2004 resolution, are SET ASIDE. Let
the case be REMANDED to the Court of Appeals to include 7J Maintenance and
Janitorial Services as an indispensable party to the case for further proceedings.
SO ORDERED.
(Lotte Phil. Co., Inc. v. Dela Cruz, G.R. No. 166302, [July 28, 2005], 502
|||

PHIL 816-822)

8. Carabeo v Dingco 647 SCRA 200

THIRD DIVISION

[G.R. No. 190823. April 4, 2011.]


DOMINGO CARABEO, petitioner, vs. SPOUSES NORBERTO
and SUSAN DINGCO, respondents.

DECISION

CARPIO MORALES, J : p

On July 10, 1990, Domingo Carabeo (petitioner) entered into a contract


denominated as "Kasunduan sa Bilihan ng Karapatan sa
Lupa" 1 (kasunduan) with Spouses Norberto and Susan Dingco (respondents)
whereby petitioner agreed to sell his rights over a 648 square meter parcel of
unregistered land situated inPurok III, Tugatog, Orani, Bataan to respondents
for P38,000.
Respondents tendered their initial payment of P10,000 upon signing of
the contract, the remaining balance to be paid on September 1990.
Respondents were later to claim that when they were about to hand in
the balance of the purchase price, petitioner requested them to keep it first as
he was yet to settle an on-going "squabble" over the land.
Nevertheless, respondents gave petitioner small sums of money from
time to time which totaled P9,100, on petitioner's request according to them;
due to respondents' inability to pay the amount of the remaining balance in
full, according to petitioner.
By respondents' claim, despite the alleged problem over the land, they
insisted on petitioner's acceptance of the remaining balance of P18,900 but
petitioner remained firm in his refusal, proffering as reason therefor that he
would register the land first.
Sometime in 1994, respondents learned that the alleged problem over
the land had been settled and that petitioner had caused its registration in his
name on December 21, 1993 under Transfer Certificate of Title No. 161806.
They thereupon offered to pay the balance but petitioner declined, drawing
them to file a complaint before the Katarungan Pambarangay. No settlement
was reached, however, hence, respondent filed a complaint for specific
performance before the Regional Trial Court (RTC) of Balanga, Bataan. AEIHCS

Petitioner countered in his Answer to the Complaint that the sale was
void for lack of object certain, the kasunduan not having specified the metes
and bounds of the land. In any event, petitioner alleged that if the validity of
the kasunduan is upheld, respondents' failure to comply with their reciprocal
obligation to pay the balance of the purchase price would render the action
premature. For, contrary to respondents' claim, petitioner maintained that they
failed to pay the balance of P28,000 on September 1990 to thus constrain him
to accept installment payments totaling P9,100.
After the case was submitted for decision or on January 31,
2001, 2 petitioner passed away. The records do not show that petitioner's
counsel informed Branch 1 of the Bataan RTC, where the complaint was
lodged, of his death and that proper substitution was effected in accordance
with Section 16, Rule 3, Rules of Court. 3
By Decision of February 25, 2001, 4 the trial court ruled in favor of
respondents, disposing as follows:
WHEREFORE, premises considered, judgment is hereby rendered
ordering:
1. The defendant to sell his right over 648 square meters of land
pursuant to the contract dated July 10, 1990 by executing a Deed
of Sale thereof after the payment of P18,900 by the plaintiffs;
2. The defendant to pay the costs of the suit.
SO ORDERED. 5
Petitioner's counsel filed a Notice of Appeal on March 20, 2001.
By the herein challenged Decision dated July 20, 2009, 6 the Court of
Appeals affirmed that of the trial court.
Petitioner's motion for reconsideration having been denied by
Resolution of January 8, 2010, the present petition for review was filed by
Antonio Carabeo, petitioner's son, 7 faulting the appellate court:
(A)
. . . in holding that the element of a contract, i.e., an object certain is
present in this case.
(B)
. . . in considering it unfair to expect respondents who are not lawyers to
make judicial consignation after herein petitioner allegedly refused to
accept payment of the balance of the purchase price.
(C)
. . . in upholding the validity of the contract, "Kasunduan sa Bilihan ng
Karapatan sa Lupa," despite the lack of spousal consent, (underscoring
supplied) TCaEIc

and proffering that


(D)
[t]he death of herein petitioner causes the dismissal of the action filed by
respondents; respondents' cause of action being an action in personam.
(underscoring supplied)
The petition fails.
The pertinent portion of the kasunduan reads: 8
xxx xxx xxx
Na ako ay may isang partial na lupa na matatagpuan sa Purok 111,
Tugatog, Orani Bataan, na may sukat na 27 x 24 metro kuwadrado, ang
nasabing lupa ay maysakop na dalawang punong santol at isang
punong mangga, kaya't ako ay nakipagkasundo sa mag-asawang Norby
Dingco at Susan Dingco na ipagbili sa kanila ang karapatan ng nasabing
lupa sa halagang P38,000.00.
xxx xxx xxx (underscoring supplied)
That the kasunduan did not specify the technical boundaries of the
property did not render the sale a nullity. The requirement that a sale must
have for its object a determinate thing is satisfied as long as, at the time the
contract is entered into, the object of the sale is capable of being made
determinate without the necessity of a new or further agreement between the
parties. 9 As the above-quoted portion of the kasunduan shows, there is no
doubt that the object of the sale is determinate.
Clutching at straws, petitioner proffers lack of spousal consent. This
was raised only on appeal, hence, will not be considered, in the present case,
in the interest of fair play, justice and due process. 10
Respecting the argument that petitioner's death rendered respondents'
complaint against him dismissible, Bonilla v. Barcena 11 enlightens:
The question as to whether an action survives or not depends on
the nature of the action and the damage sued for. In the causes of
action which survive, the wrong complained [of] affects primarily and
principally property and property rights, the injuries to the person being
merely incidental, while in the causes of action which do not survive,
the injury complained of is to the person, the property and rights of
property affected being incidental. (emphasis and underscoring supplied)
In the present case, respondents are pursuing a property right arising
from the kasunduan, whereas petitioner is invoking nullity of the kasunduan to
protect his proprietary interest. Assuming arguendo, however, that
the kasunduan is deemed void, there is a corollary obligation of petitioner to
return the money paid by respondents, and since the action involves property
rights, 12 it survives.
It bears noting that trial on the merits was already
concluded before petitioner died. Since the trial court was not informed of
petitioner's death, it may not be faulted for proceeding to render judgment
without ordering his substitution. Its judgment is thus valid and binding upon
petitioner's legal representatives or successors-in-interest, insofar as his
interest in the property subject of the action is concerned. 13
SAaTHc

In another vein, the death of a client immediately divests the counsel of


authority. 14 Thus, in filing a Notice of Appeal, petitioner's counsel of record
had no personality to act on behalf of the already deceased client who, it
bears reiteration, had not been substituted as a party after his death. The trial
court's decision had thereby become final and executory, no appeal having
been perfected.
WHEREFORE, the petition is DENIED.
SO ORDERED.
(Carabeo v. Spouses Dingco, G.R. No. 190823, [April 4, 2011], 662 PHIL
|||

565-571)

9. De la Cruz vs. Joaquin, G.R. No. 162788

THIRD DIVISION

[G.R. No. 162788. July 28, 2005.]

Spouses JULITA DE LA CRUZ and FELIPE DE LA


CRUZ, petitioners, vs. PEDRO JOAQUIN, respondent.

George Erwin M. Garcia for petitioners.


Nicolas P. Lapena, Jr. for respondent.

SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; PARTIES TO CIVIL ACTIONS;
WHEN A PARTY TO A PENDING ACTION DIES AND THE CLAIM IS NOT
EXTINGUISHED, SUBSTITUTION OF THE DECEASED IS REQUIRED;
PURPOSE. — When a party to a pending action dies and the claim is not
extinguished, the Rules of Court require a substitution of the deceased. The
procedure is specifically governed by Section 16 of Rule 3, . . . . The rule on the
substitution of parties was crafted to protect every party's right to due process.
The estate of the deceased party will continue to be properly represented in the
suit through the duly appointed legal representative. Moreover, no adjudication
can be made against the successor of the deceased if the fundamental right to a
day in court is denied.
2. ID.; ID.; ID.; ID.; A FORMAL SUBSTITUTION BY HEIRS IS NOT
NECESSARY WHEN THEY THEMSELVES VOLUNTARILY APPEAR,
PARTICIPATE IN THE CASE, AND PRESENT EVIDENCE IN DEFENSE OF
THE DECEASED. — The Court has nullified not only trial proceedings conducted
without the appearance of the legal representatives of the deceased, but also the
resulting judgments. In those instances, the courts acquired no jurisdiction over
the persons of the legal representatives or the heirs upon whom no judgment
was binding. This general rule notwithstanding, a formal substitution by heirs is
not necessary when they themselves voluntarily appear, participate in the case,
and present evidence in defense of the deceased. These actions negate any
claim that the right to due process was violated.
3. ID.; ID.; ID.; ID.; RULE ON SUBSTITUTION BY HEIRS IS NOT A
MATTER OF JURISDICTION BUT A REQUIREMENT OF DUE PROCESS. —
Strictly speaking, the rule on the substitution by heirs is not a matter of
jurisdiction, but a requirement of due process. Thus, when due process is not
violated, as when the right of the representative or heir is recognized and
protected, noncompliance or belated formal compliance with the Rules cannot
affect the validity of a promulgated decision. Mere failure to substitute for a
deceased plaintiff is not a sufficient ground to nullify a trial court's decision. The
alleging party must prove that there was an undeniable violation of due process.
4. ID.; ID.; ACTIONS; FORUM SHOPPING; DEFINED. — Forum shopping
is the institution of two or more actions or proceedings involving the same parties
for the same cause of action, either simultaneously or successively, on the
supposition that one or the other court would make a favorable disposition.
Forum shopping may be resorted to by a party against whom an adverse
judgment or order has been issued in one forum, in an attempt to seek a
favorable opinion in another, other than by an appeal or a special civil action for
certiorari.
5. ID.; ID.; ID.; ID.; WILLFUL AND DELIBERATE VIOLATION OF THE
RULE ON FORUM SHOPPING IS A GROUND FOR THE SUMMARY
DISMISSAL OF CASE AND CONSTITUTES DIRECT CONTEMPT OF COURT.
— Forum shopping trifles with the courts, abuses their processes, degrades the
administration of justice, and congests court dockets. Willful and deliberate
violation of the rule against it is a ground for the summary dismissal of the case;
it may also constitute direct contempt of court.
6. ID.; ID.; ID.; ID.; TEST TO DETERMINE ITS EXISTENCE. — The test
for determining the existence of forum shopping is whether the elements of litis
pendentia are present, or whether a final judgment in one case amounts to res
judicata in another.
7. ID.; ID.; JUDGMENTS; RES JUDICATA; BARS A SUBSEQUENT SUIT
INVOLVING THE SAME PARTIES, SUBJECT MATTER, AND CAUSE OF
ACTION. — Under res judicata, a final judgment or decree on the merits by a
court of competent jurisdiction is conclusive of the rights of the parties or their
privies, in all later suits and on all points and matters determined in the previous
suit. The term literally means a "matter adjudged, judicially acted upon, or settled
by judgment." The principle bars a subsequent suit involving the same parties,
subject matter, and cause of action. Public policy requires that controversies
must be settled with finality at a given point in time.
8. ID.; ID.; ID.; ID.; ELEMENTS OF RES JUDICATA. — The elements of
res judicata are as follows: (1) the former judgment or order must be final; (2) it
must have been rendered on the merits of the controversy; (3) the court that
rendered it must have had jurisdiction over the subject matter and the parties;
and (4) there must have been — between the first and the second actions — an
identity of parties, subject matter and cause of action.

DECISION

PANGANIBAN, J : p

The Rules require the legal representatives of a dead litigant to be


substituted as parties to a litigation. This requirement is necessitated by due
process. Thus, when the rights of the legal representatives of a decedent are
actually recognized and protected, noncompliance or belated formal compliance
with the Rules cannot affect the validity of the promulgated decision. After all,
due process had thereby been satisfied.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court,
assailing the August 26, 2003 Decision 2 and the March 9, 2004 Resolution 3 of
the Court of Appeals (CA) in CA-GR CV No. 34702. The challenged Decision
disposed as follows:
"WHEREFORE, the foregoing considered, the appeal is
DISMISSED and the assailed decision accordingly AFFIRMED in toto.
No costs." 4
On the other hand, the trial court's affirmed Decision disposed as follows:
"WHEREFORE, judgment is hereby rendered:
"a) declaring the Deed of Absolute Sale (Exh. 'D') and
'Kasunduan' (Exhibit B), to be a sale with right of
repurchase;
"b) ordering the plaintiff to pay the defendants the sum of
P9,000.00 by way of repurchasing the land in question;
"c) ordering the defendants to execute a deed of reconveyance of
said land in favor of the plaintiff after the latter has paid
them the amount of P9,000.00 to repurchase the land in
question;
"d) ordering the defendants to yield possession of the subject land
to the plaintiff after the latter has paid them the amount of
P9,000.00 to repurchase the property from them; and
"e) ordering the defendants to pay the plaintiff the amount of
P10,000.00 as actual and compensatory damages; the
amount of P5,000[.00] as exemplary damages; the amount
of P5,000.00 as expenses of litigation and the amount of
P5,000.00 by way of attorney's fees." 5
The Facts
The case originated from a Complaint for the recovery of possession and
ownership, the cancellation of title, and damages, filed by Pedro Joaquin against
petitioners in the Regional Trial Court of Baloc, Sto. Domingo, Nueva
Ecija. 6 Respondent alleged that he had obtained a loan from them in the amount
of P9,000 on June 29, 1974, payable after five (5) years; that is, on June 29,
1979. To secure the payment of the obligation, he supposedly executed a Deed
of Sale in favor of petitioners. The Deed was for a parcel of land in Pinagpanaan,
Talavera, Nueva Ecija, covered by TCT No. T-111802. The parties also executed
another document entitled "Kasunduan." 7
Respondent claimed that the Kasunduan showed the Deed of Sale to be
actually an equitable mortgage. 8 Spouses De la Cruz contended that this
document was merely an accommodation to allow the repurchase of the property
until June 29, 1979, a right that he failed to exercise. 9
On April 23, 1990, the RTC issued a Decision in his favor. The trial court
declared that the parties had entered into a sale with a right of repurchase. 10 It
further held that respondent had made a valid tender of payment on two separate
occasions to exercise his right of repurchase. 11 Accordingly, petitioners were
required to reconvey the property upon his payment. 12
Ruling of the Court of Appeals
Sustaining the trial court, the CA noted that petitioners had given
respondent the right to repurchase the property within five (5) years from the date
of the sale or until June 29, 1979. Accordingly, the parties executed
the Kasunduan to express the terms and conditions of their actual
agreement. 13 The appellate court also found no reason to overturn the finding
that respondent had validly exercised his right to repurchase the land. 14
In the March 9, 2004 Resolution, the CA denied reconsideration and
ordered a substitution by legal representatives, in view of respondent's death on
December 24, 1988. 15
Hence, this Petition. 16
The Issues
Petitioners assign the following errors for our consideration:
"I. Public Respondent Twelfth Division of the Honorable Court of
Appeals seriously erred in dismissing the appeal and affirming in toto the
Decision of the trial court in Civil Case No. SD-838;
CHDAEc

"II. Public Respondent Twelfth Division of the Honorable Court of


Appeals likewise erred in denying [petitioners'] Motion for
Reconsideration given the facts and the law therein presented." 17
Succinctly, the issues are whether the trial court lost jurisdiction over the
case upon the death of Pedro Joaquin, and whether respondent was guilty of
forum shopping. 18
The Court's Ruling
The Petition has no merit.
First Issue:
Jurisdiction
Petitioners assert that the RTC's Decision was invalid for lack of
jurisdiction. 19 They claim that respondent died during the pendency of the case.
There being no substitution by the heirs, the trial court allegedly lacked
jurisdiction over the litigation. 20
Rule on Substitution
When a party to a pending action dies and the claim is not
extinguished, 21 the Rules of Court require a substitution of the deceased. The
procedure is specifically governed by Section 16 of Rule 3, which reads thus:
"Section 16. Death of a party; duty of counsel. — Whenever a
party to a pending action dies, and the claim is not thereby extinguished,
it shall be the duty of his counsel to inform the court within thirty (30)
days after such death of the fact thereof, and to give the name and
address of his legal representative or representatives. Failure of counsel
to comply with this duty shall be a ground for disciplinary action.
"The heirs of the deceased may be allowed to be substituted for
the deceased, without requiring the appointment of an executor or
administrator and the court may appoint a guardian ad litem for the
minor heirs.
"The court shall forthwith order said legal representative or
representatives to appear and be substituted within a period of thirty (30)
days from notice.
"If no legal representative is named by the counsel for the
deceased party, or if the one so named shall fail to appear within the
specified period, the court may order the opposing party, within a
specified time, to procure the appointment of an executor or
administrator for the estate of the deceased, and the latter shall
immediately appear for and on behalf of the deceased. The court
charges in procuring such appointment, if defrayed by the opposing
party, may be recovered as costs."
The rule on the substitution of parties was crafted to protect every party's
right to due process. 22 The estate of the deceased party will continue to be
properly represented in the suit through the duly appointed legal
representative. 23 Moreover, no adjudication can be made against the successor
of the deceased if the fundamental right to a day in court is denied. 24 HcTDSA

The Court has nullified not only trial proceedings conducted without the
appearance of the legal representatives of the deceased, but also the resulting
judgments. 25 In those instances, the courts acquired no jurisdiction over the
persons of the legal representatives or the heirs upon whom no judgment was
binding. 26
This general rule notwithstanding, a formal substitution by heirs is not
necessary when they themselves voluntarily appear, participate in the case, and
present evidence in defense of the deceased. 27 These actions negate any claim
that the right to due process was violated.
The Court is not unaware of Chittick v. Court of Appeals, 28 in which the
failure of the heirs to substitute for the original plaintiff upon her death led to the
nullification of the trial court's Decision. The latter had sought to recover support
in arrears and her share in the conjugal partnership. The children who allegedly
substituted for her refused to continue the case against their father and
vehemently objected to their inclusion as parties. 29 Moreover, because he died
during the pendency of the case, they were bound to substitute for the defendant
also. The substitution effectively merged the persons of the plaintiff and the
defendant and thus extinguished the obligation being sued upon. 30
Clearly, the present case is not similar, much less identical, to the factual
milieu of Chittick.
Strictly speaking, the rule on the substitution by heirs is not a matter of
jurisdiction, but a requirement of due process. Thus, when due process is not
violated, as when the right of the representative or heir is recognized and
protected, noncompliance or belated formal compliance with the Rules cannot
affect the validity of a promulgated decision. 31 Mere failure to substitute for a
deceased plaintiff is not a sufficient ground to nullify a trial court's decision. The
alleging party must prove that there was an undeniable violation of due
process. TECIaH

Substitution in
the Instant Case
The records of the present case contain a "Motion for Substitution of Party
Plaintiff" dated February 15, 2002, filed before the CA. The prayer states as
follows:
"WHEREFORE, it is respectfully prayed that the Heirs of the
deceased plaintiff-appellee as represented by his daughter Lourdes dela
Cruz be substituted as party-plaintiff for the said Pedro Joaquin.
"It is further prayed that henceforth the undersigned counsel 32 for
the heirs of Pedro Joaquin be furnished with copies of notices, orders,
resolutions and other pleadings at its address below."
Evidently, the heirs of Pedro Joaquin voluntary appeared and participated
in the case. We stress that the appellate court had ordered 33 his legal
representatives to appear and substitute for him. The substitution even on appeal
had been ordered correctly. In all proceedings, the legal representatives must
appear to protect the interests of the deceased. 34 After the rendition of judgment,
further proceedings may be held, such as a motion for reconsideration or a new
trial, an appeal, or an execution. 35

Considering the foregoing circumstances, the Motion for Substitution may


be deemed to have been granted; and the heirs, to have substituted for the
deceased, Pedro Joaquin. There being no violation of due process, the issue of
substitution cannot be upheld as a ground to nullify the trial court's Decision.
Second Issue:
Forum Shopping
Petitioners also claim that respondents were guilty of forum shopping, a
fact that should have compelled the trial court to dismiss the Complaint. 36 They
claim that prior to the commencement of the present suit on July 7, 1981,
respondent had filed a civil case against petitioners on June 25, 1979. Docketed
as Civil Case No. SD-742 for the recovery of possession and for damages, it was
allegedly dismissed by the Court of First Instance of Nueva Ecija for lack of
interest to prosecute.
Forum Shopping Defined
Forum shopping is the institution of two or more actions or proceedings
involving the same parties for the same cause of action, either simultaneously or
successively, on the supposition that one or the other court would make a
favorable disposition. 37 Forum shopping may be resorted to by a party against
whom an adverse judgment or order has been issued in one forum, in an attempt
to seek a favorable opinion in another, other than by an appeal or a special civil
action forcertiorari. 38
Forum shopping trifles with the courts, abuses their processes, degrades
the administration of justice, and congests court dockets. 39 Willful and deliberate
violation of the rule against it is a ground for the summary dismissal of the case;
it may also constitute direct contempt of court. 40
The test for determining the existence of forum shopping is whether the
elements of litis pendentia are present, or whether a final judgment in one case
amounts to res judicata in another. 41 We note, however, petitioners' claim that
the subject matter of the present case has already been litigated and decided.
Therefore, the applicable doctrine is res judicata. 42
Applicability of Res Judicata
Under res judicata, a final judgment or decree on the merits by a court of
competent jurisdiction is conclusive of the rights of the parties or their privies, in
all later suits and on all points and matters determined in the previous suit. 43 The
term literally means a "matter adjudged, judicially acted upon, or settled by
judgment."44 The principle bars a subsequent suit involving the same parties,
subject matter, and cause of action. Public policy requires that controversies
must be settled with finality at a given point in time.
IDcHCS

The elements of res judicata are as follows: (1) the former judgment or
order must be final; (2) it must have been rendered on the merits of the
controversy; (3) the court that rendered it must have had jurisdiction over the
subject matter and the parties; and (4) there must have been — between the first
and the second actions — an identity of parties, subject matter and cause of
action. 45
Failure to Support Allegation
The onus of proving allegations rests upon the party raising them. 46 As to
the matter of forum shopping and res judicata, petitioners have failed to provide
this Court with relevant and clear specifications that would show the presence of
an identity of parties, subject matter, and cause of action between the present
and the earlier suits. They have also failed to show whether the other case was
decided on the merits. Instead, they have made only bare assertions involving its
existence without reference to its facts. In other words, they have alleged
conclusions of law without stating any factual or legal basis. Mere mention of
other civil cases without showing the identity of rights asserted and reliefs sought
is not enough basis to claim that respondent is guilty of forum shopping, or
that res judicata exists. 47
WHEREFORE, the Petition is DENIED and the assailed Decision and
Resolution are AFFIRMED. Costs against petitioners. ASETHC

SO ORDERED.
(Spouses De la Cruz v. Joaquin, G.R. No. 162788, [July 28, 2005], 502 PHIL
|||

803-815)

10. Navarro vs. Escobido, G.R. No. 153788

SECOND DIVISION

[G.R. No. 153788. November 27, 2009.]

ROGER V. NAVARRO, petitioner, vs. HON. JOSE L. ESCOBIDO,


Presiding Judge, RTC Branch 37, Cagayan de Oro City, and
KAREN T. GO, doing business under the name KARGO
ENTERPRISES, respondents.

DECISION

BRION, J : p

This is a petition for review on certiorari 1 that seeks to set aside the
Court of Appeals (CA) Decision 2 dated October 16, 2001 and
Resolution 3 dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA
rulings affirmed the July 26, 2000 4 and March 7, 2001 5 orders of the
Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, denying
petitioner Roger V. Navarro's (Navarro) motion to dismiss.
BACKGROUND FACTS
On September 12, 1998, respondent Karen T. Go filed two complaints,
docketed as Civil Case Nos. 98-599 (first complaint) 6 and 98-598 (second
complaint), 7before the RTC for replevin and/or sum of money with damages
against Navarro. In these complaints, Karen Go prayed that the RTC issue
writs of replevin for the seizure of two (2) motor vehicles in Navarro's
possession.
The first complaint stated:
1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to
GLENN O. GO, a resident of Cagayan de Oro City and doing business
under the trade name KARGO ENTERPRISES, an entity duly
registered and existing under and by virtue of the laws of the Republic of
the Philippines, which has its business address at Bulua, Cagayan de
Oro City; that defendant ROGER NAVARRO is a Filipino, of legal age, a
resident of 62 Dolores Street, Nazareth, Cagayan de Oro City, where he
may be served with summons and other processes of the Honorable
Court; that defendant "JOHN DOE" whose real name and address are at
present unknown to plaintiff is hereby joined as party defendant as he
may be the person in whose possession and custody the personal
property subject matter of this suit may be found if the same is not in the
possession of defendant ROGER NAVARRO;
2. That KARGO ENTERPRISES is in the business of, among others,
buying and selling motor vehicles, including hauling trucks and other
heavy equipment; SEHACI

3. That for the cause of action against defendant ROGER NAVARRO, it


is hereby stated that on August 8, 1997, the said defendant leased [from]
plaintiff a certain motor vehicle which is more particularly described as
follows —
FUSO WITH MOUNTED
Make/Type
CRANE
Serial No. FK416K-51680
Motor No. 6D15-338735
Plate No. GHK-378
as evidenced by a LEASE AGREEMENT WITH OPTION TO
PURCHASE entered into by and between KARGO ENTERPRISES,
then represented by its Manager, the aforementioned GLENN O.
GO, and defendant ROGER NAVARRO . . .; that in accordance with the
provisions of the above LEASE AGREEMENT WITH OPTION TO
PURCHASE, defendant ROGER NAVARRO delivered unto plaintiff six
(6) post-dated checks each in the amount of SIXTY-SIX THOUSAND
THREE HUNDRED THIRTY-THREE & 33/100 PESOS (P66,333.33)
which were supposedly in payment of the agreed rentals; that when
the fifth and sixth checks, i.e., PHILIPPINE BANK OF
COMMUNICATIONS-CAGAYAN DE ORO BRANCH CHECKS NOS.
017112 and 017113, respectively dated January 8, 1998 and February
8, 1998, were presented for payment and/or credit, the same
were dishonored and/or returned by the drawee bank for the common
reason that the current deposit account against which the said checks
were issued did not have sufficient funds to cover the amounts thereof;
that the total amount of the two (2) checks, i.e., the sum of ONE
HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX &
66/100 PESOS (P132,666.66) therefore represents the principal liability
of defendant ROGER NAVARRO unto plaintiff on the basis of the
provisions of the above LEASE AGREEMENT WITH RIGHT TO
PURCHASE; that demands, written and oral, were made of
defendant ROGER NAVARRO to pay the amount of ONE HUNDRED
THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100
PESOS (P132,666.66), or to return the subject motor vehicle as also
provided for in the LEASE AGREEMENT WITH RIGHT TO PURCHASE,
but said demands were, and still are, in vain to the great damage and
injury of herein plaintiff; . . .
4. That the aforedescribed motor vehicle has not been the subject of any
tax assessment and/or fine pursuant to law, or seized under an
execution or an attachment as against herein plaintiff;
xxx xxx xxx
8. That plaintiff hereby respectfully applies for an order of the Honorable
Court for the immediate delivery of the above-described motor vehicle
from defendants unto plaintiff pending the final determination of this case
on the merits and, for that purpose, there is attached hereto an affidavit
duly executed and bond double the value of the personal property
subject matter hereof to answer for damages and costs which
defendants may suffer in the event that the order for replevin prayed for
may be found out to having not been properly issued.
The second complaint contained essentially the same allegations as the
first complaint, except that the Lease Agreement with Option to Purchase
involved is dated October 1, 1997 and the motor vehicle leased is described
as follows:
FUSO WITH MOUNTED
Make/Type
CRANE
Serial No. FK416K-510528
Motor No. 6D14-423403
The second complaint also alleged that Navarro delivered three post-
dated checks, each for the amount of P100,000.00, to Karen Go in payment
of the agreed rentals; however, the third check was dishonored when
presented for payment. 8 SAHIDc
On October 12, 1998 9 and October 14, 1998, 10 the RTC issued writs
of replevin for both cases; as a result, the Sheriff seized the two vehicles and
delivered them to the possession of Karen Go.
In his Answers, Navarro alleged as a special affirmative defense
that the two complaints stated no cause of action, since Karen Go was
not a party to the Lease Agreements with Option to Purchase (collectively,
the lease agreements) — the actionable documents on which the complaints
were based.
On Navarro's motion, both cases were duly consolidated on December
13, 1999.
In its May 8, 2000 order, the RTC dismissed the case on the ground
that the complaints did not state a cause of action.
In response to the motion for reconsideration Karen Go filed dated May
26, 2000, 11 the RTC issued another order dated July 26, 2000 setting aside
the order of dismissal. Acting on the presumption that Glenn Go's leasing
business is a conjugal property, the RTC held that Karen Go had sufficient
interest in his leasing business to file the action against Navarro. However,
the RTC held that Karen Go should have included her husband, Glenn Go, in
the complaint based on Section 4, Rule 3 of the Rules of
Court (Rules). 12 Thus, the lower court ordered Karen Go to file a motion for
the inclusion of Glenn Go as co-plaintiff.
When the RTC denied Navarro's motion for reconsideration on March 7,
2001, Navarro filed a petition for certiorari with the CA, essentially contending
that the RTC committed grave abuse of discretion when it reconsidered the
dismissal of the case and directed Karen Go to amend her complaints by
including her husband Glenn Go as co-plaintiff. According to Navarro, a
complaint which failed to state a cause of action could not be converted into
one with a cause of action by mere amendment or supplemental pleading.
On October 16, 2001, the CA denied Navarro's petition and affirmed the
RTC's order. 13 The CA also denied Navarro's motion for reconsideration in its
resolution of May 29, 2002, 14 leading to the filing of the present petition.
THE PETITION
Navarro alleges that even if the lease agreements were in the name of
Kargo Enterprises, since it did not have the requisite juridical personality to
sue, the actual parties to the agreement are himself and Glenn Go. Since it
was Karen Go who filed the complaints and not Glenn Go, she was not a real
party-in-interest and the complaints failed to state a cause of action.
Navarro posits that the RTC erred when it ordered the amendment of
the complaint to include Glenn Go as a co-plaintiff, instead of dismissing the
complaint outright because a complaint which does not state a cause of action
cannot be converted into one with a cause of action by a mere amendment or
a supplemental pleading. In effect, the lower court created a cause of action
for Karen Go when there was none at the time she filed the complaints.
Even worse, according to Navarro, the inclusion of Glenn Go as co-
plaintiff drastically changed the theory of the complaints, to his great
prejudice. Navarro claims that the lower court gravely abused its discretion
when it assumed that the leased vehicles are part of the conjugal property of
Glenn and Karen Go. Since Karen Go is the registered owner of Kargo
Enterprises, the vehicles subject of the complaint are her paraphernal
properties and the RTC gravely erred when it ordered the inclusion of Glenn
Go as a co-plaintiff.
Navarro likewise faults the lower court for setting the trial of the case in
the same order that required Karen Go to amend her complaints, claiming that
by issuing this order, the trial court violated Rule 10 of the Rules.
Even assuming the complaints stated a cause of action against him,
Navarro maintains that the complaints were premature because no prior
demand was made on him to comply with the provisions of the lease
agreements before the complaints for replevin were filed.
Lastly, Navarro posits that since the two writs of replevin were issued
based on flawed complaints, the vehicles were illegally seized from his
possession and should be returned to him immediately.
Karen Go, on the other hand, claims that it is misleading for Navarro to
state that she has no real interest in the subject of the complaint, even if the
lease agreements were signed only by her husband, Glenn Go; she is the
owner of Kargo Enterprises and Glenn Go signed the lease agreements
merely as the manager of Kargo Enterprises. Moreover, Karen Go maintains
that Navarro's insistence that Kargo Enterprises is Karen Go's paraphernal
property is without basis. Based on the law and jurisprudence on the matter,
all property acquired during the marriage is presumed to be conjugal property.
Finally, Karen Go insists that her complaints sufficiently established a cause
of action against Navarro. Thus, when the RTC ordered her to include her
husband as co-plaintiff, this was merely to comply with the rule that spouses
should sue jointly, and was not meant to cure the complaints' lack of cause of
action.
THE COURT'S RULING
We find the petition devoid of merit.
Karen Go is the real party-in-interest
The 1997 Rules of Civil Procedure requires that every action must be
prosecuted or defended in the name of the real party-in-interest, i.e., the party
who stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit. 15
Interestingly, although Navarro admits that Karen Go is the registered
owner of the business name Kargo Enterprises, he still insists that Karen Go
is not a real party-in-interest in the case. According to Navarro, while the
lease contracts were in Kargo Enterprises' name, this was merely a trade
name without a juridical personality, so the actual parties to the lease
agreements were Navarro and Glenn Go, to the exclusion of Karen Go.
As a corollary, Navarro contends that the RTC acted with grave abuse
of discretion when it ordered the inclusion of Glenn Go as co-plaintiff, since
this in effect created a cause of action for the complaints when in truth, there
was none.
We do not find Navarro's arguments persuasive.
The central factor in appreciating the issues presented in this case is
the business name Kargo Enterprises. The name appears in the title of the
Complaint where the plaintiff was identified as "KAREN T. GO doing business
under the name KARGO ENTERPRISES", and this identification was
repeated in the first paragraph of the Complaint. Paragraph 2 defined the
business KARGO ENTERPRISES undertakes. Paragraph 3 continued with
the allegation that the defendant "leased from plaintiff a certain motor vehicle"
that was thereafter described. Significantly, the Complaint specifies and
attaches as its integral part the Lease Agreement that underlies the
transaction between the plaintiff and the defendant. Again, the name KARGO
ENTERPRISES entered the picture as this Lease Agreement provides:
This agreement, made and entered into by and between: AHDaET

GLENN O. GO, of legal age, married, with post office address at . . .,


herein referred to as the LESSOR-SELLER; representing KARGO
ENTERPRISES as its Manager,
xxx xxx xxx
thus, expressly pointing to KARGO ENTERPRISES as the principal that
Glenn O. Go represented. In other words, by the express terms of this Lease
Agreement, Glenn Go did sign the agreement only as the manager of Kargo
Enterprises and the latter is clearly the real party to the lease agreements.
As Navarro correctly points out, Kargo Enterprises is a sole
proprietorship, which is neither a natural person, nor a juridical person, as
defined by Article 44 of the Civil Code:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest
or purpose, created by law; their personality begins as
soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private
interest or purpose to which the law grants a juridical
personality, separate and distinct from that of each
shareholder, partner or member.
Thus, pursuant to Section 1, Rule 3 of the Rules, 16 Kargo Enterprises
cannot be a party to a civil action. This legal reality leads to the question: who
then is the proper party to file an action based on a contract in the name of
Kargo Enterprises?
We faced a similar question in Juasing Hardware v. Mendoza, 17 where
we said:
Finally, there is no law authorizing sole proprietorships like petitioner to
bring suit in court. The law merely recognizes the existence of a sole
proprietorship as a form of business organization conducted for profit by
a single individual, and requires the proprietor or owner thereof to secure
licenses and permits, register the business name, and pay taxes to the
national government. It does not vest juridical or legal personality upon
the sole proprietorship nor empower it to file or defend an action in court.
Thus, the complaint in the court below should have been filed in the
name of the owner of Juasing Hardware. The allegation in the body of
the complaint would show that the suit is brought by such person as
proprietor or owner of the business conducted under the name and
style Juasing Hardware. The descriptive words "doing business as
Juasing Hardware" may be added to the title of the case, as is
customarily done. 18 [Emphasis supplied.]
This conclusion should be read in relation with Section 2, Rule 3 of the
Rules, which states: DECSIT

SEC. 2. Parties in interest. — A real party in interest is the party who


stands to be benefited or injured by the judgment in the suit, or
the party entitled to the avails of the suit. Unless otherwise authorized
by law or these Rules, every action must be prosecuted or defended in
the name of the real party in interest.
As the registered owner of Kargo Enterprises, Karen Go is the party
who will directly benefit from or be injured by a judgment in this case. Thus,
contrary to Navarro's contention, Karen Go is the real party-in-interest, and it
is legally incorrect to say that her Complaint does not state a cause of action
because her name did not appear in the Lease Agreement that her husband
signed in behalf of Kargo Enterprises. Whether Glenn Go can legally sign the
Lease Agreement in his capacity as a manager of Kargo Enterprises, a sole
proprietorship, is a question we do not decide, as this is a matter for the trial
court to consider in a trial on the merits.
Glenn Go's Role in the Case
We find it significant that the business name Kargo Enterprises is in the
name of Karen T. Go, 19 who described herself in the Complaints to be "a
Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro
City, and doing business under the trade name KARGO
ENTERPRISES". 20 That Glenn Go and Karen Go are married to each other is
a fact never brought in issue in the case. Thus, the business name KARGO
ENTERPRISES is registered in the name of a married woman, a fact material
to the side issue of whether Kargo Enterprises and its properties are
paraphernal or conjugal properties. To restate the parties' positions, Navarro
alleges that Kargo Enterprises is Karen Go's paraphernal property,
emphasizing the fact that the business is registered solely in Karen Go's
name. On the other hand, Karen Go contends that while the business is
registered in her name, it is in fact part of their conjugal property.
The registration of the trade name in the name of one person — a
woman — does not necessarily lead to the conclusion that the trade name as
a property is hers alone, particularly when the woman is married. By law, all
property acquired during the marriage, whether the acquisition appears to
have been made, contracted or registered in the name of one or both
spouses, is presumed to be conjugal unless the contrary is proved. 21 Our
examination of the records of the case does not show any proof that Kargo
Enterprises and the properties or contracts in its name are conjugal. If at all,
only the bare allegation of Navarro to this effect exists in the records of the
case. As we emphasized in Castro v. Miat: 22
Petitioners also overlook Article 160 of the New Civil Code. It provides
that "all property of the marriage is presumed to be conjugal partnership,
unless it be prove[n] that it pertains exclusively to the husband or to the
wife". This article does not require proof that the property was
acquired with funds of the partnership. The presumption applies even
when the manner in which the property was acquired does not
appear. 23 [Emphasis supplied.]
Thus, for purposes solely of this case and of resolving the issue of whether
Kargo Enterprises as a sole proprietorship is conjugal or paraphernal
property, we hold that it is conjugal property.
Article 124 of the Family Code, on the administration of the conjugal
property, provides:
Art. 124. The administration and enjoyment of the conjugal
partnership property shall belong to both spouses jointly. In case of
disagreement, the husband's 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 the contract implementing such
decision. ESTDcC

xxx xxx xxx


This provision, by its terms, allows either Karen or Glenn Go to speak
and act with authority in managing their conjugal property, i.e., Kargo
Enterprises. No need exists, therefore, for one to obtain the consent of the
other before performing an act of administration or any act that does not
dispose of or encumber their conjugal property.
Under Article 108 of the Family Code, the conjugal partnership is
governed by the rules on the contract of partnership in all that is not in conflict
with what is expressly determined in this Chapter or by the spouses in their
marriage settlements. In other words, the property relations of the husband
and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of
Gains of the Family Code and, suppletorily, by the spouses' marriage
settlement and by the rules on partnership under the Civil Code. In the
absence of any evidence of a marriage settlement between the spouses Go,
we look at the Civil Code provision on partnership for guidance.
A rule on partnership applicable to the spouses' circumstances is Article
1811 of the Civil Code, which states:
Art. 1811. A partner is a co-owner with the other partners of specific
partnership property.
The incidents of this co-ownership are such that:
(1) A partner, subject to the provisions of this Title and to any
agreement between the partners, has an equal right with
his partners to possess specific partnership
property for partnership purposes; . . .
Under this provision, Glenn and Karen Go are effectively co-owners of
Kargo Enterprises and the properties registered under this name; hence, both
have an equal right to seek possession of these properties. Applying Article
484 of the Civil Code, which states that "in default of contracts, or special
provisions, co-ownership shall be governed by the provisions of this Title", we
find further support in Article 487 of the Civil Code that allows any of the co-
owners to bring an action in ejectment with respect to the co-owned property.
While ejectment is normally associated with actions involving real
property, we find that this rule can be applied to the circumstances of the
present case, following our ruling in Carandang v. Heirs of De Guzman. 24 In
this case, one spouse filed an action for the recovery of credit, a personal
property considered conjugal property, without including the other spouse in
the action. In resolving the issue of whether the other spouse was required to
be included as a co-plaintiff in the action for the recovery of the credit, we
said:
Milagros de Guzman, being presumed to be a co-owner of the credits
allegedly extended to the spouses Carandang, seems to be either an
indispensable or a necessary party. If she is an indispensable party,
dismissal would be proper. If she is merely a necessary party, dismissal
is not warranted, whether or not there was an order for her inclusion in
the complaint pursuant to Section 9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed by the rules
on the contract of partnership in all that is not in conflict with what
is expressly determined in this Chapter or by the spouses in their
marriage settlements. CDcaSA

This provision is practically the same as the Civil Code provision it


superseded:
Art. 147. The conjugal partnership shall be governed by the rules
on the contract of partnership in all that is not in conflict with what
is expressly determined in this Chapter.
In this connection, Article 1811 of the Civil Code provides that "[a]
partner is a co-owner with the other partners of specific partnership
property". Taken with the presumption of the conjugal nature of the
funds used to finance the four checks used to pay for petitioners' stock
subscriptions, and with the presumption that the credits themselves are
part of conjugal funds, Article 1811 makes Quirino and Milagros de
Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman
may separately bring an action for the recovery thereof. In the fairly
recent cases of Baloloy v. Hular and Adlawan v. Adlawan, we held
that, in a co-ownership, co-owners may bring actions for the
recovery of co-owned property without the necessity of joining all
the other co-owners as co-plaintiffs because the suit is presumed
to have been filed for the benefit of his co-owners. In the latter case
and in that ofDe Guia v. Court of Appeals, we also held that Article 487
of the Civil Code, which provides that any of the co-owners may bring
an action for ejectment, covers all kinds of action for the recovery of
possession.
In sum, in suits to recover properties, all co-owners are real parties in
interest. However, pursuant to Article 487 of the Civil Code and relevant
jurisprudence, any one of them may bring an action, any kind of action,
for the recovery of co-owned properties. Therefore, only one of the co-
owners, namely the co-owner who filed the suit for the recovery of
the co-owned property, is an indispensable party thereto. The other
co-owners are not indispensable parties. They are not even necessary
parties, for a complete relief can be accorded in the suit even without
their participation, since the suit is presumed to have been filed for the
benefit of all co-owners. 25 [Emphasis supplied.]
Under this ruling, either of the spouses Go may bring an action against
Navarro to recover possession of the Kargo Enterprises-leased vehicles
which they co-own. This conclusion is consistent with Article 124 of the Family
Code, supporting as it does the position that either spouse may act on behalf
of the conjugal partnership, so long as they do not dispose of or encumber the
property in question without the other spouse's consent.
On this basis, we hold that since Glenn Go is not strictly an
indispensable party in the action to recover possession of the leased vehicles,
he only needs to be impleaded as a pro-forma party to the suit, based on
Section 4, Rule 4 of the Rules, which states:
Section 4. Spouses as parties. — Husband and wife shall sue or be
sued jointly, except as provided by law.
Non-joinder of indispensable parties
not ground to dismiss action
Even assuming that Glenn Go is an indispensable party to the action,
we have held in a number of cases 26 that the misjoinder or non-joinder of
indispensable parties in a complaint is not a ground for dismissal of action. As
we stated in Macababbad v. Masirag: 27
Rule 3, Section 11 of the Rules of Court provides that neither misjoinder
nor nonjoinder of parties is a ground for the dismissal of an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. — Neither
misjoinder nor non-joinder of parties is ground for dismissal of an
action. Parties may be dropped or added by order of the court on
motion of any party or on its own initiative at any stage of the
action and on such terms as are just. Any claim against a
misjoined party may be severed and proceeded with
separately. TAHIED

In Domingo v. Scheer, this Court held that the proper remedy when a
party is left out is to implead the indispensable party at any stage of the
action. The court, eithermotu proprio or upon the motion of a party, may
order the inclusion of the indispensable party or give the plaintiff
opportunity to amend his complaint in order to include indispensable
parties. If the plaintiff to whom the order to include the indispensable
party is directed refuses to comply with the order of the court, the
complaint may be dismissed upon motion of the defendant or upon the
court's own motion. Only upon unjustified failure or refusal to obey the
order to include or to amend is the action dismissed.
In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to
join her husband as a party plaintiff is fully in order.
Demand not required prior
to filing of replevin action
In arguing that prior demand is required before an action for a writ of
replevin is filed, Navarro apparently likens a replevin action to an unlawful
detainer.
For a writ of replevin to issue, all that the applicant must do is to file an
affidavit and bond, pursuant to Section 2, Rule 60 of the Rules, which states:
Sec. 2. Affidavit and bond. —
The applicant must show by his own affidavit or that of some other
person who personally knows the facts:
(a) That the applicant is the owner of the property claimed,
particularly describing it, or is entitled to the
possession thereof;
(b) That the property is wrongfully detained by the adverse party,
alleging the cause of detention thereof according to the best of his
knowledge, information, and belief;
(c) That the property has not been distrained or taken for a tax
assessment or a fine pursuant to law, or seized under a writ of
execution or preliminary attachment, or otherwise placed
under custodia legis, or if so seized, that it is exempt from such
seizure or custody; and
(d) The actual market value of the property.
The applicant must also give a bond, executed to the adverse party in
double the value of the property as stated in the affidavit
aforementioned, for the return of the property to the adverse party if such
return be adjudged, and for the payment to the adverse party of such
sum as he may recover from the applicant in the action.
We see nothing in these provisions which requires the applicant to
make a prior demand on the possessor of the property before he can file an
action for a writ of replevin. Thus, prior demand is not a condition precedent to
an action for a writ of replevin.
More importantly, Navarro is no longer in the position to claim that a
prior demand is necessary, as he has already admitted in his Answers that he
had received the letters that Karen Go sent him, demanding that he either pay
his unpaid obligations or return the leased motor vehicles. Navarro's position
that a demand is necessary and has not been made is therefore totally
unmeritorious. acCITS

WHEREFORE, premises considered, we DENY the petition for review


for lack of merit. Costs against petitioner Roger V. Navarro.
SO ORDERED.
(Navarro v. Escobido, G.R. No. 153788, [November 27, 2009], 621 PHIL 1-
|||

21)

11. Divinagracia v Parilla 753 SCRA 87

FIRST DIVISION

[G.R. No. 196750. March 11, 2015]

MA. ELENA R. DIVINAGRACIA, as Administratrix of the


ESTATE OF THE LATE SANTIAGO C.
DIVINAGRACIA, petitioner, vs. CORONACION PARILLA,
CELESTIAL NOBLEZA, CECILIA LELINA, CELEDONIO
NOBLEZA, and MAUDE NOBLEZA, respondents.

DECISION

PERLAS-BERNABE, J : p

Assailed in this petition for review on certiorari 1 are the


Decision 2 dated March 26, 2009 and the Resolution 3 dated April 6, 2011 of
the Court of Appeals (CA) in CA-G.R. CV. No. 80167, which set aside the
Decision 4 dated November 29, 2002 and the Order 5 dated April 4, 2003 of
the Regional Trial Court of Iloilo City, Branch 31 (RTC) in Civil Case No.
19003 and, consequently, dismissed Santiago C. Divinagracia's (Santiago)
complaint for judicial partition.
The Facts
Conrado Nobleza, Sr. (Conrado, Sr.) owned a 313-square meter parcel
of land located at Cor. Fuentes-Delgado Streets, Iloilo City denominated as
Lot 133-B-1-A and covered by Transfer Certificate of Title (TCT) No. T-12255
(subject land). 6 During his lifetime, he contracted two marriages: (a) the first
was with Lolita Palermo with whom he had two (2) children, namely,
Cresencio and Conrado, Jr.; and (b) the second was with Eusela Niangar with
whom he had seven (7) children, namely, Mateo, Sr., Coronacion, Cecilia,
Celestial, Celedonio, Ceruleo, 7 and Cebeleo, Sr. Conrado, Sr. also begot
three (3) illegitimate children, namely, Eduardo, Rogelio, and
Ricardo. 8 Mateo, Sr. pre-deceased Conrado, Sr. and was survived by his
children Felcon, Landelin, Eusela, Giovanni, Mateo, Jr., Tito, and Gaylord.
Cebeleo, Sr. also pre-deceased his father and was survived by his wife,
Maude, and children Cebeleo, Jr. and Neobel. 9
According to Santiago, upon Conrado, Sr.'s death, Cresencio, Conrado,
Jr., Felcon (in representation of his father, Mateo, Sr., and his siblings),
Coronacion, Celestial, Cecilia, Rogelio, Eduardo, and Ricardo sold their
respective interests over the subject land to Santiago for a consideration of
P447,695.66, as embodied in a Deed of Extrajudicial Settlement or
Adjudication with Deed of Sale 10 dated November 22, 1989 (subject
document), 11 which was, however, not signed by the other heirs who did not
sell their respective shares, namely, Ceruleo, Celedonio, and Maude (in
representation of his husband, Cebeleo, Sr., and their children). 12 On
December 22, 1989, the same parties executed a Supplemental
Contract 13 whereby the vendors-heirs and Santiago agreed that out of the
aforesaid consideration, only P109,807.93 will be paid up front, and that
Santiago will only pay the remaining balance of P337,887.73 upon the
partition of the subject land. 14 However, Santiago was not able to have TCT
No. T-12255 cancelled and the subject document registered because of
Ceruleo, Celedonio, and Maude's refusal to surrender the said title. This fact,
coupled with Ceruleo, Celedonio, and Maude's failure to partition the subject
land, prompted Santiago to file a Complaint 15 dated January 3, 1990 for
judicial partition and for receivership. 16
For their part, Ceruleo, Celedonio, and Maude maintained that Santiago
had no legal right to file an action for judicial partition nor compel them to
surrender TCT No. T-12255 because, inter alia: (a) Santiago did not pay the
full purchase price of the shares sold to him; and (b) the subject land is a
conjugal asset of Conrado Sr. and Eusela Niangar and, thus, only their
legitimate issues may validly inherit the same. 17
The RTC Ruling
In a Decision 18 dated November 29, 2002, the RTC ordered, among
others, the partition of the subject land between Santiago on the one hand,
and Ceruleo, Celedonio, Maude, and the heirs of Mateo, Sr. (i.e., Felcon, et
al.) on the other hand and, consequently, the cancellation of TCT No. T-12255
and the issuance of a new owner's duplicate certificate in favor of Santiago
and the group of Ceruleo, Celedonio, Maude, and the heirs of Mateo,
Sr. 19 The RTC found that through the subject document, Santiago became a
co-owner of the subject land and, as such, has the right to demand the
partition of the same. However, the RTC held that Santiago did not validly
acquire Mateo, Sr.'s share over the subject land, considering that Felcon
admitted the lack of authority to bind his siblings with regard to Mateo, Sr.'s
share thereon. 20
On reconsideration 21 of Ceruleo and herein respondents Celedonio,
Maude, Celestial, Coronacion, and Cecilia (respondents), the RTC issued an
Order 22 dated April 4, 2003 further ordering Santiago to comply with the
provisions of the Supplemental Contract dated December 22, 1989 by paying
the amount of P337,887.73 upon the partition of the subject land.
Dissatisfied, respondents appealed 23 to the CA. Records are bereft of
any showing that the other heirs made similar appeals thereto.
The CA Ruling
In a Decision 24 dated March 26, 2009, the CA set aside the RTC
Rulings and, consequently, dismissed Santiago's complaint for judicial
partition. 25 It held that Felcon's siblings, as well as Maude's children, are
indispensable parties to the judicial partition of the subject land and, thus,
their non-inclusion as defendants in Santiago's complaint would necessarily
result in its dismissal. 26
Aggrieved, the heirs of Santiago 27 moved for reconsideration 28 which
was, however, denied in a Resolution 29 dated April 6, 2011, hence, this
petition instituted by herein petitioner, Ma. Elena R. Divinagracia, as
administratrix of Santiago's estate.
The Issues Before the Court
The issues for the Court's resolution are whether or not the CA
correctly: (a) ruled that Felcon's siblings and Cebeleo, Sr. and Maude's
children are indispensable parties to Santiago's complaint for judicial partition;
and (b) dismissed Santiago's complaint for his failure to implead said omitted
heirs.
The Court's Ruling
The petition is partly meritorious.
An indispensable party is one whose interest will be affected by the
court's action in the litigation, and without whom no final determination of the
case can be had. The party's interest in the subject matter of the suit and in
the relief sought are so inextricably intertwined with the other parties' that his
legal presence as a party to the proceeding is an absolute necessity. In his
absence, there cannot be a resolution of the dispute of the parties before the
court which is effective, complete, or equitable. 30 Thus, the absence of an
indispensable party renders all subsequent actions of the court null and void,
for want of authority to act, not only as to the absent parties but even as to
those present. 31
With regard to actions for partition, Section 1, Rule 69 of the Rules of
Court requires that all persons interested in the property shall be joined as
defendants,viz.:
SEC. 1. Complaint in action for partition of real estate. — A
person having the right to compel the partition of real estate may do so
as provided in this Rule, setting forth in his complaint the nature and
extent of his title and an adequate description of the real estate of
which partition is demanded and joining as defendants all other
persons interested in the property. (Emphasis and underscoring
supplied)
Thus, all the co-heirs and persons having an interest in the property are
indispensable parties; as such, an action for partition will not lie without the
joinder of the said parties. 32
In the instant case, records reveal that Conrado, Sr. has the following
heirs, legitimate and illegitimate, who are entitled to a pro-indiviso share in the
subject land, namely: Conrado, Jr., Cresencio, Mateo, Sr., Coronacion,
Cecilia, Celestial, Celedonio, Ceruleo, Cebeleo, Sr., Eduardo, Rogelio, and
Ricardo. However, both Mateo, Sr. and Cebeleo, Sr. pre-deceased Conrado,
Sr. and, thus, pursuant to the rules on representation under the Civil
Code,33 their respective interests shall be represented by their children,
namely: (a) for Mateo, Sr.: Felcon, Landelin, Eusela, Giovanni, Mateo, Jr.,
Tito, and Gaylord; and (b) for Cebeleo, Sr.: Cebeleo, Jr. and Neobel. 34
The aforementioned heirs — whether in their own capacity or in
representation of their direct ascendant — have vested rights over the subject
land and, as such, should be impleaded as indispensable parties in an action
for partition thereof. However, a reading of Santiago's complaint shows that as
regards Mateo, Sr.'s interest, only Felcon was impleaded, excluding therefrom
his siblings and co-representatives. Similarly, with regard to Cebeleo, Sr.'s
interest over the subject land, the complaint impleaded his wife, Maude, when
pursuant to Article 972 35 of the Civil Code,the proper representatives to his
interest should have been his children, Cebeleo, Jr. and Neobel. Verily,
Santiago's omission of the aforesaid heirs renders his complaint for partition
defective.
Santiago's contention that he had already bought the interests of the
majority of the heirs and, thus, they should no longer be regarded as
indispensable parties deserves no merit. As correctly noted by the CA, in
actions for partition, the court cannot properly issue an order to divide the
property, unless it first makes a determination as to the existence of co-
ownership. The court must initially settle the issue of ownership, which is the
first stage in an action for partition. 36Indubitably, therefore, until and unless
this issue of co-ownership is definitely and finally resolved, it would be
premature to effect a partition of the disputed properties. 37
In this case, while it is conceded that Santiago bought the interests of
majority of the heirs of Conrado, Sr. as evidenced by the subject document,
as a vendee, he merely steps into the shoes of the vendors-heirs. Since his
interest over the subject land is merely derived from that of the vendors-heirs,
the latter should first be determined as co-owners thereof, thus necessitating
the joinder of all those who have vested interests in such land, i.e., the
aforesaid heirs of Conrado, Sr., in Santiago's complaint.
In fine, the absence of the aforementioned indispensable parties in the
instant complaint for judicial partition renders all subsequent actions of the
RTC null and void for want of authority to act, not only as to the absent
parties, but even as to those present. 38 Therefore, the CA correctly set aside
the November 29, 2002 Decision and the April 4, 2003 Order of the RTC.
However, the CA erred in ordering the dismissal of the complaint on
account of Santiago's failure to implead all the indispensable parties in his
complaint. InHeirs of Mesina v. Heirs of Fian, Sr., 39 the Court definitively
explained that in instances of non-joinder of indispensable parties, the proper
remedy is to implead them and not to dismiss the case, to wit:
The non-joinder of indispensable parties is not a ground for
the dismissal of an action. At any stage of a judicial proceeding
and/or at such times as are just, parties may be added on the motion
of a party or on the initiative of the tribunal concerned. If the plaintiff
refuses to implead an indispensable party despite the order of the
court, that court may dismiss the complaint for the plaintiff's failure to
comply with the order. The remedy is to implead the non-party
claimed to be indispensable. . . . 40 (Underscoring supplied;
emphases in the original)
In view of the foregoing, the correct course of action in the instant case
is to order its remand to the RTC for the inclusion of those indispensable
parties who were not impleaded and for the disposition of the case on the
merits. 41
WHEREFORE, the petition is PARTLY GRANTED. Accordingly, the
Decision dated March 26, 2009 and the Resolution dated April 6, 2011 of the
Court of Appeals in CA-G.R. CV. No. 80167, setting aside the Decision dated
November 29, 2002 and the Order dated April 4, 2003 of the Regional Trial
Court of Iloilo City, Branch 31 in Civil Case No. 19003, are
hereby AFFIRMED with MODIFICATION REMANDING the instant case to
the court a quo, which is hereby DIRECTED to implead all indispensable
parties and, thereafter, PROCEED with the resolution of the case on the
merits WITH DISPATCH.
SO ORDERED.
||| (Divinagracia v. Parilla, G.R. No. 196750, [March 11, 2015])

D. Venue of Actions: real actions, personal actions

Cases:
1. Pacific Consultants International Asia v Schonfeld, G.R. No. 166920

THIRD DIVISION

[G.R. No. 166920. February 19, 2007.]

PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. and


JENS PETER HENRICHSEN, petitioners, vs. KLAUS K.
SCHONFELD, respondent.

DECISION

CALLEJO, SR., J : p

Before us is a Petition for Review on Certiorari under Rule 45 of the


Revised Rules of Court of the Decision 1 of the Court of Appeals (CA) in CA-G.R.
SP No. 76563. The CA decision reversed the Resolution of the National Labor
Relations Commission (NLRC) in NLRC NCR CA No. 029319-01, which, in turn,
affirmed the Decision of the Labor Arbiter in NLRC NCR Case No. 30-12-04787-
00 dismissing the complaint of respondent Klaus K. Schonfeld.
The antecedent facts are as follows:
Respondent is a Canadian citizen and was a resident of New Westminster,
British Columbia, Canada. He had been a consultant in the field of environmental
engineering and water supply and sanitation. Pacicon Philippines, Inc. (PPI) is a
corporation duly established and incorporated in accordance with the laws of the
Philippines. The primary purpose of PPI was to engage in the business of
providing specialty and technical services both in and out of the Philippines. 2 It is
a subsidiary of Pacific Consultants International of Japan (PCIJ). The president
of PPI, Jens Peter Henrichsen, who was also the director of PCIJ, was based in
Tokyo, Japan. Henrichsen commuted from Japan to Manila and vice versa, as
well as in other countries where PCIJ had business.
In 1997, PCIJ decided to engage in consultancy services for water and
sanitation in the Philippines. In October 1997, respondent was employed by
PCIJ, through Henrichsen, as Sector Manager of PPI in its Water and Sanitation
Department. However, PCIJ assigned him as PPI sector manager in the
Philippines. His salary was to be paid partly by PPI and PCIJ.
On January 7, 1998, Henrichsen transmitted a letter of employment to
respondent in Canada, requesting him to accept the same and affix his
conformity thereto. Respondent made some revisions in the letter of employment
and signed the contract. 3 He then sent a copy to Henrichsen. The letter of
employment reads:
Mr. Klaus K. Schonfeld
II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Tokyo 7 January 1998
Dear Mr. Schonfeld,
Letter of Employment
This Letter of Employment with the attached General Conditions of
Employment constitutes the agreement under which you will be engaged
by our Company on the terms and conditions defined hereunder. In case
of any discrepancies or contradictions between this Letter of
Employment and the General Conditions of Employment, this Letter of
Employment will prevail. THDIaC

You will, from the date of commencement, be ["seconded"] to our


subsidiary Pacicon Philippines, Inc. in Manila, hereinafter referred as
Pacicon. Pacicon will provide you with a separate contract, which will
define that part of the present terms and conditions for which Pacicon is
responsible. In case of any discrepancies or contradictions between the
present Letter of Employment and the contract with Pacicon Philippines,
Inc. or in the case that Pacicon should not live up to its obligations, this
Letter of Employment will prevail.
1. Project Country: The Philippines with possible short-term
assignments in other countries.
2. Duty Station: Manila, the Philippines.
3. Family Status: Married.
4. Position: Sector Manager, Water and Sanitation.
5. Commencement: 1st October 1997.
6. Remuneration: US$7,000.00 per month. The amount will be
paid partly as a local salary (US$2,100.00
per month) by Pacicon and partly as an
offshore salary (US$4,900.00) by PCI to bank
accounts to be nominated by you.
A performance related component
corresponding to 17.6% of the total annual
remuneration, subject to satisfactory
performance against agreed tasks and targets,
paid offshore.
7. Accommodation: The company will provide partly furnished
accommodation to a rent including association
fees, taxes and VAT not exceeding the Pesos
equivalent of US$2,900.00 per month.
8. Transportation: Included for in the remuneration.
9. Leave Travels: You are entitled to two leave travels per year.
10. Shipment of Personal
Effects: The maximum allowance is US$4,000.00.
11. Mobilization
Travel: Mobilization travel will be from New
Westminster, B.C., Canada.
This letter is send (sic) to you in duplicate; we kindly request you to sign
and return one copy to us.
Yours sincerely,
Pacific Consultants International
Jens Peter Henrichsen
Above terms and conditions accepted
Date: 2 March 1998
(Sgd.)
Klaus Schonfeld
as annotated and initialed 4
Section 21 of the General Conditions of Employment appended to the
letter of employment reads:
21 Arbitration
Any question of interpretation, understanding or fulfillment of the
conditions of employment, as well as any question arising
between the Employee and the Company which is in
consequence of or connected with his employment with the
Company and which can not be settled amicably, is to be finally
settled, binding to both parties through written submissions, by
the Court of Arbitration in London. 5
Respondent arrived in the Philippines and assumed his position as PPI
Sector Manager. He was accorded the status of a resident alien.
As required by Rule XIV (Employment of Aliens) of the Omnibus Rules
Implementing the Labor Code, PPI applied for an Alien Employment Permit
(Permit) for respondent before the Department of Labor and Employment
(DOLE). It appended respondent's contract of employment to the application. IHAcCS

On February 26, 1999, the DOLE granted the application and issued the
Permit to respondent. It reads:
Republic of the Philippines
Department of Labor & Employment
National Capital Region
ALIEN EMPLOYMENT PERMIT
ISSUED TO: SCHONFELD, KLAUS KURT
DATE OF BIRTH: January 11, 1942 NATIONALITY: Canadian
POSITION: VP — WATER & SANITATION
EMPLOYER: PACICON PHILIPPINES, INC.
ADDRESS: 27/F Rufino Pacific Towers Bldg.,
Ayala Ave., Makati City
PERMIT
ISSUED ON: February 26, 1999 SIGNATURE OF BEARER:
VALID UNTIL: January 7, 2000 (Sgd.)
APPROVED: BIENVENIDO S. LAGUESMA
By: MAXIMO B. ANITO
REGIONAL DIRECTOR
(Emphasis supplied) 6
Respondent received his compensation from PPI for the following periods:
February to June 1998, November to December 1998, and January to August
1999. He was also reimbursed by PPI for the expenses he incurred in connection
with his work as sector manager. He reported for work in Manila except for
occasional assignments abroad, and received instructions from Henrichsen. 7
On May 5, 1999, respondent received a letter from Henrichsen informing
him that his employment had been terminated effective August 4, 1999 for the
reason that PCIJ and PPI had not been successful in the water and sanitation
sector in the Philippines. 8 However, on July 24, 1999, Henrichsen, by electronic
mail, 9 requested respondent to stay put in his job after August 5, 1999, until such
time that he would be able to report on certain projects and discuss all the
opportunities he had developed. 10 Respondent continued his work with PPI until
the end of business hours on October 1, 1999.
Respondent filed with PPI several money claims, including unpaid salary,
leave pay, air fare from Manila to Canada, and cost of shipment of goods to
Canada. PPI partially settled some of his claims (US$5,635.99), but refused to
pay the rest.
On December 5, 2000, respondent filed a Complaint 11 for Illegal Dismissal
against petitioners PPI and Henrichsen with the Labor Arbiter. It was docketed as
NLRC-NCR Case No. 30-12-04787-00.
In his Complaint, respondent alleged that he was illegally dismissed; PPI
had not notified the DOLE of its decision to close one of its departments, which
resulted in his dismissal; and they failed to notify him that his employment was
terminated after August 4, 1999. Respondent also claimed for separation pay
and other unpaid benefits. He alleged that the company acted in bad faith and
disregarded his rights. He prayed for the following reliefs:
1. Judgment be rendered in his favor ordering the respondents to
reinstate complainant to his former position without loss of seniority and
other privileges and benefits, and to pay his full backwages from the time
compensation was with held (sic) from him up to the time of his actual
reinstatement. In the alternative, if reinstatement is no longer feasible,
respondents must pay the complainant full backwages, and separation
pay equivalent to one month pay for every year of service, or in the
amount of US$16,400.00 as separation pay;
2. Judgment be rendered ordering the respondents to pay the
outstanding monetary obligation to complainant in the amount of
US$10,131.76 representing the balance of unpaid salaries, leave pay,
cost of his air travel and shipment of goods from Manila to Canada;
and SHCaEA

3. Judgment be rendered ordering the respondent company to


pay the complainant damages in the amount of no less than US
$10,000.00 and to pay 10% of the total monetary award as attorney's
fees, and costs.
Other reliefs just and equitable under the premises are, likewise,
prayed for. 12
Petitioners filed a Motion to Dismiss the complaint on the following
grounds: (1) the Labor Arbiter had no jurisdiction over the subject matter; and (2)
venue was improperly laid. It averred that respondent was a Canadian citizen, a
transient expatriate who had left the Philippines. He was employed and
dismissed by PCIJ, a foreign corporation with principal office in Tokyo, Japan.
Since respondent's cause of action was based on his letter of employment
executed in Tokyo, Japan dated January 7, 1998, under the principle of lex loci
contractus, the complaint should have been filed in Tokyo, Japan. Petitioners
claimed that respondent did not offer any justification for filing his complaint
against PPI before the NLRC in the Philippines. Moreover, under Section 12 of
the General Conditions of Employment appended to the letter of employment
dated January 7, 1998, complainant and PCIJ had agreed that any employment-
related dispute should be brought before the London Court of Arbitration. Since
even the Supreme Court had already ruled that such an agreement on venue is
valid, Philippine courts have no jurisdiction. 13

Respondent opposed the Motion, contending that he was employed by PPI


to work in the Philippines under contract separate from his January 7, 1998
contract of employment with PCIJ. He insisted that his employer was PPI, a
Philippine-registered corporation; it is inconsequential that PPI is a wholly-owned
subsidiary of PCIJ because the two corporations have separate and distinct
personalities; and he received orders and instructions from Henrichsen who was
the president of PPI. He further insisted that the principles of forum non
conveniens and lex loci contractus do not apply, and that although he is a
Canadian citizen, Philippine Labor Laws apply in this case.
Respondent adduced in evidence the following contract of employment
dated January 9, 1998 which he had entered into with Henrichsen:
Mr. Klaus K. Schonfeld
II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Manila 9 January, 1998
Dear Mr. Schonfeld,
Letter of Employment
This Letter of Employment with the attached General Conditions of
Employment constitutes the agreement, under which you will be
engaged by Pacicon Philippines, Inc. on the terms and conditions
defined hereunder.
1. Project Country: The Philippines with possible
assignments in other countries.
2. Duty Station: Manila, the Philippines.

3. Family Status: Married.

4. Position: Sector Manager — Water and Sanitation


Sector.

5. Commencement: 1 January, 1998.

6. Remuneration: US$3,100.00 per month payable to a bank


account to be nominated by you.

7. Accommodation: The company will provide partly


furnished accommodation to a rent
including association fees, taxes and
VAT not exceeding the Pesos equivalent
of US$2300.00 per month.

8. Transportation: Included for in the remuneration.

9. Shipment of Personal The maximum allowance is US$2500.00


Effects: in connection with initial shipment of
personal effects from Canada.

10. Mobilization Travel: Mobilization travel will be from New


Westminster, B.C., Canada.
This letter is send (sic) to you in duplicate; we kindly request you to sign
and return one copy to us.
Yours sincerely,
Pacicon Philippines, Inc.
Jens Peter Henrichsen
President 14
According to respondent, the material allegations of the complaint, not
petitioners' defenses, determine which quasi-judicial body has jurisdiction.
Section 21 of the Arbitration Clause in the General Conditions of Employment
does not provide for an exclusive venue where the complaint against PPI for
violation of the Philippine Labor Laws may be filed. Respondent pointed out that
PPI had adopted two inconsistent positions: it was first alleged that he should
have filed his complaint in Tokyo, Japan; and it later insisted that the complaint
should have been filed in the London Court of Arbitration. 15
In their reply, petitioners claimed that respondent's employer was PCIJ,
which had exercised supervision and control over him, and not PPI. Respondent
was dismissed by PPI via a letter of Henrichsen under the letterhead of PCIJ in
Japan. 16 The letter of employment dated January 9, 1998 which respondent
relies upon did not bear his (respondent's) signature nor that of Henrichsen.
On August 2, 2001, the Labor Arbiter rendered a decision granting
petitioners' Motion to Dismiss. The dispositive portion reads:
WHEREFORE, finding merit in respondents' Motion to Dismiss,
the same is hereby granted. The instant complaint filed by the
complainant is dismissed for lack of merit.
SO ORDERED. 17
The Labor Arbiter found, among others, that the January 7, 1998 contract
of employment between respondent and PCIJ was controlling; the Philippines
was only the "duty station" where Schonfeld was required to work under the
General Conditions of Employment. PCIJ remained respondent's employer
despite his having been sent to the Philippines. Since the parties had agreed that
any differences regarding employer-employee relationship should be submitted
to the jurisdiction of the court of arbitration in London, this agreement is
controlling.
On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and
affirmed the latter's decision in toto. 18
Respondent then filed a petition for certiorari under Rule 65 with the CA
where he raised the following arguments:
I
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
AFFIRMED THE LABOR ARBITER'S DECISION CONSIDERING THAT:
A. PETITIONER'S TRUE EMPLOYER IS NOT PACIFIC
CONSULTANTS INTERNATIONAL OF JAPAN BUT
RESPONDENT COMPANY, AND THEREFORE, THE
LABOR ARBITER HAS JURISDICTION OVER THE
INSTANT CASE; AND cHCIEA

B. THE PROPER VENUE FOR THE PRESENT COMPLAINT IS


THE ARBITRATION BRANCH OF THE NLRC AND NOT
THE COURT OF ARBITRATION IN LONDON.
II
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
AFFIRMED THE DISMISSAL OF THE COMPLAINT CONSIDERING
THAT PETITIONER'S TERMINATION FROM EMPLOYMENT IS
ILLEGAL:
A. THE CLOSURE OF RESPONDENT COMPANY'S WATER
AND SANITATION SECTOR WAS NOT BONA FIDE.
B. ASSUMING ARGUENDO THAT THE CLOSURE OF
RESPONDENT COMPANY'S WATER AND SANITATION
SECTOR WAS JUSTIFIABLE, PETITIONER'S
DISMISSAL WAS INEFFECTUAL AS THE DEPARTMENT
OF LABOR AND EMPLOYMENT (DOLE) AND
PETITIONER WAS NOT NOTIFIED THIRTY (30) DAYS
BEFORE THE ALLEGED CLOSURE. 19
Respondent averred that the absence or existence of a written contract of
employment is not decisive of whether he is an employee of PPI. He maintained
that PPI, through its president Henrichsen, directed his work/duties as Sector
Manager of PPI; proof of this was his letter-proposal to the Development Bank of
the Philippines for PPI to provide consultancy services for the Construction
Supervision of the Water Supply and Sanitation component of the World Bank-
Assisted LGU Urban Water and Sanitation Project. 20 He emphasized that as
gleaned from Alien Employment Permit (AEP) No. M-029908-5017 issued to him
by DOLE on February 26, 1999, he is an employee of PPI. It was PPI president
Henrichsen who terminated his employment; PPI also paid his salary and
reimbursed his expenses related to transactions abroad. That PPI is a wholly-
owned subsidiary of PCIJ is of no moment because the two corporations have
separate and distinct personalities.
The CA found the petition meritorious. Applying the four-fold test 21 of
determining an employer-employee relationship, the CA declared that
respondent was an employee of PPI. On the issue of venue, the appellate court
declared that, even under the January 7, 1998 contract of employment, the
parties were not precluded from bringing a case related thereto in other venues.
While there was, indeed, an agreement that issues between the parties were to
be resolved in the London Court of Arbitration, the venue is not exclusive, since
there is no stipulation that the complaint cannot be filed in any other forum other
than in the Philippines.
On November 25, 2004, the CA rendered its decision granting the petition,
the decretal portion of which reads:
WHEREFORE, the petition is GRANTED in that the assailed
Resolutions of the NLRC are hereby REVERSED and SET ASIDE. Let
this case be REMANDED to the Labor Arbiter a quo for disposition of the
case on the merits.
SO ORDERED. 22
A motion for the reconsideration of the above decision was filed by PPI
and Henrichsen, which the appellate court denied for lack of merit. 23
In the present recourse, PPI and Henrichsen, as petitioners, raise the
following issues:
I
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT AN
EMPLOYMENT RELATIONSHIP EXISTED BETWEEN PETITIONERS
AND RESPONDENT DESPITE THE UNDISPUTED FACT THAT
RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY A
FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT
CONTRACT ABROAD, AND WAS MERELY "SECONDED" TO
PETITIONERS SINCE HIS WORK ASSIGNMENT WAS IN MANILA. AScTaD

II
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE
LABOR ARBITER A QUO HAS JURISDICTION OVER
RESPONDENT'S CLAIM DESPITE THE UNDISPUTED FACT THAT
RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY A
FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT
CONTRACT ABROAD, AND HAD AGREED THAT ANY DISPUTE
BETWEEN THEM "SHALL BE FINALLY SETTLED BY THE COURT OF
ARBITRATION IN LONDON." 24
Petitioners fault the CA for reversing the findings of the Labor Arbiter and
the NLRC. Petitioners aver that the findings of the Labor Arbiter, as affirmed by
the NLRC, are conclusive on the CA. They maintain that it is not within the
province of the appellate court in a petition for certiorari to review the facts and
evidence on record since there was no conflict in the factual findings and
conclusions of the lower tribunals. Petitioners assert that such findings and
conclusions, having been made by agencies with expertise on the subject matter,
should be deemed binding and conclusive. They contend that it was the PCIJ
which employed respondent as an employee; it merely seconded him to
petitioner PPI in the Philippines, and assigned him to work in Manila as Sector
Manager. Petitioner PPI, being a wholly-owned subsidiary of PCIJ, was never the
employer of respondent.
Petitioners assert that the January 9, 1998 letter of employment which
respondent presented to prove his employment with petitioner PPI is of doubtful
authenticity since it was unsigned by the purported parties. They insist that PCIJ
paid respondent's salaries and only coursed the same through petitioner PPI.
PPI, being its subsidiary, had supervision and control over respondent's work,
and had the responsibilities of monitoring the "daily administration" of
respondent. Respondent cannot rely on the pay slips, expenses claim forms, and
reimbursement memoranda to prove that he was an employee of petitioner PPI
because these documents are of doubtful authenticity.
Petitioners further contend that, although Henrichsen was both a director
of PCIJ and president of PPI, it was he who signed the termination letter of
respondent upon instructions of PCIJ. This is buttressed by the fact that PCIJ's
letterhead was used to inform him that his employment was terminated.
Petitioners further assert that all work instructions came from PCIJ and that
petitioner PPI only served as a "conduit." Respondent's Alien Employment Permit
stating that petitioner PPI was his employer is but a necessary consequence of
his being "seconded" thereto. It is not sufficient proof that petitioner PPI is
respondent's employer. The entry was only made to comply with the DOLE
requirements.

There being no evidence that petitioner PPI is the employer of respondent,


the Labor Arbiter has no jurisdiction over respondent's complaint.
Petitioners aver that since respondent is a Canadian citizen, the CA erred
in ignoring their claim that the principlesof forum non conveniens and lex loci
contractus are applicable. They also point out that the principal office, officers
and staff of PCIJ are stationed in Tokyo, Japan; and the contract of employment
of respondent was executed in Tokyo, Japan.
Moreover, under Section 21 of the General Conditions for Employment
incorporated in respondent's January 7, 1998 letter of employment, the dispute
between respondent and PCIJ should be settled by the court of arbitration of
London. Petitioners claim that the words used therein are sufficient to show the
exclusive and restrictive nature of the stipulation on venue.
Petitioners insist that the U.S. Labor-Management Act applies only to U.S.
workers and employers, while the Labor Code of the Philippines applies only to
Filipino employers and Philippine-based employers and their employees, not to
PCIJ. In fine, the jurisdictions of the NLRC and Labor Arbiter do not extend to
foreign workers who executed employment agreements with foreign employers
abroad, although "seconded" to the Philippines. 25
In his Comment, 26 respondent maintains that petitioners raised factual
issues in their petition which are proscribed under Section 1, Rule 45 of the
Rules of Court. The finding of the CA that he had been an employee of petitioner
PPI and not of PCIJ is buttressed by his documentary evidence which both the
Labor Arbiter and the NLRC ignored; they erroneously opted to dismiss his
complaint on the basis of the letter of employment and Section 21 of the General
Conditions of Employment. In contrast, the CA took into account the evidence on
record and applied case law correctly. SETAcC

The petition is denied for lack of merit.


It must be stressed that in resolving a petition for certiorari, the CA is not
proscribed from reviewing the evidence on record. Under Section 9 of Batas
Pambansa Blg. 129, as amended by R.A. No. 7902, the CA is empowered to
pass upon the evidence, if and when necessary, to resolve factual issues. 27 If it
appears that the Labor Arbiter and the NLRC misappreciated the evidence to
such an extent as to compel a contrary conclusion if such evidence had been
properly appreciated, the factual findings of such tribunals cannot be given great
respect and finality. 28
Inexplicably, the Labor Arbiter and the NLRC ignored the documentary
evidence which respondent appended to his pleadings showing that he was an
employee of petitioner PPI; they merely focused on the January 7, 1998 letter of
employment and Section 21 of the General Conditions of Employment.
Petitioner PPI applied for the issuance of an AEP to respondent before the
DOLE. In said application, PPI averred that respondent is its employee. To show
that this was the case, PPI appended a copy of respondent's employment
contract. The DOLE then granted the application of PPI and issued the permit.
It bears stressing that under the Omnibus Rules Implementing the Labor
Code, one of the requirements for the issuance of an employment permit is the
employment contract. Section 5, Rule XIV (Employment of Aliens) of the
Omnibus Rules provides:
SECTION 1. Coverage. — This rule shall apply to all aliens
employed or seeking employment in the Philippines and the present or
prospective employers.
SECTION 2. Submission of list. — All employers employing
foreign nationals, whether resident or non-resident, shall submit a list of
nationals to the Bureau indicating their names, citizenship, foreign and
local address, nature of employment and status of stay in the
Philippines.
SECTION 3. Registration of resident aliens. — All employed
resident aliens shall register with the Bureau under such guidelines as
may be issued by it.
SECTION 4. Employment permit required for entry. — No
alien seeking employment, whether as a resident or non-resident, may
enter the Philippines without first securing an employment permit from
the Ministry. If an alien enters the country under a non-working visa and
wishes to be employed thereafter, he may only be allowed to be
employed upon presentation of a duly approved employment permit.
SECTION 5. Requirements for employment permit applicants.
— The application for an employment permit shall be accompanied by
the following:
(a) Curriculum vitae duly signed by the applicant indicating
his educational background, his work experience and other data
showing that he possesses technical skills in his trade or
profession.
(b) Contract of employment between the employer and the
principal which shall embody the following, among others:
1. That the non-resident alien worker shall comply with all
applicable laws and rules and regulations of the Philippines;
2. That the non-resident alien worker and the employer
shall bind themselves to train at least two (2) Filipino understudies
for a period to be determined by the Minister; and
3. That he shall not engage in any gainful employment
other than that for which he was issued a permit. IcAaSD

(c) A designation by the employer of at least two (2)


understudies for every alien worker. Such understudies must be
the most ranking regular employees in the section or department
for which the expatriates are being hired to insure the actual
transfer of technology.
Under Section 6 of the Rule, the DOLE may issue an alien employment
permit based only on the following:
(a) Compliance by the applicant and his employer with the
requirements of Section 2 hereof;
(b) Report of the Bureau Director as to the availability or non-
availability of any person in the Philippines who is competent and willing
to do the job for which the services of the applicant are desired;
(c) His assessment as to whether or not the employment of the
applicant will redound to the national interest;
(d) Admissibility of the alien as certified by the Commission on
Immigration and Deportation;
(e) The recommendation of the Board of Investments or other
appropriate government agencies if the applicant will be employed in
preferred areas of investments or in accordance with the imperative of
economic development.
Thus, as claimed by respondent, he had an employment contract with
petitioner PPI; otherwise, petitioner PPI would not have filed an application for a
Permit with the DOLE. Petitioners are thus estopped from alleging that the PCIJ,
not petitioner PPI, had been the employer of respondent all along.
We agree with the conclusion of the CA that there was an employer-
employee relationship between petitioner PPI and respondent using the four-fold
test. Jurisprudence is firmly settled that whenever the existence of an
employment relationship is in dispute, four elements constitute the reliable
yardstick: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the
employee's conduct. It is the so-called "control test" which constitutes the most
important index of the existence of the employer-employee relationship — that is,
whether the employer controls or has reserved the right to control the employee
not only as to the result of the work to be done but also as to the means and
methods by which the same is to be accomplished. Stated otherwise, an
employer-employee relationship exists where the person for whom the services
are performed reserves the right to control not only the end to be achieved but
also the means to be used in reaching such end. 29 We quote with approval the
following ruling of the CA:
[T]here is, indeed, substantial evidence on record which would
erase any doubt that the respondent company is the true employer of
petitioner. In the case at bar, the power to control and supervise
petitioner's work performance devolved upon the respondent company.
Likewise, the power to terminate the employment relationship was
exercised by the President of the respondent company. It is not the
letterhead used by the company in the termination letter which controls,
but the person who exercised the power to terminate the employee. It is
also inconsequential if the second letter of employment executed in the
Philippines was not signed by the petitioner. An employer-employee
relationship may indeed exist even in the absence of a written contract,
so long as the four elements mentioned in theMafinco case are all
present. 30
The settled rule on stipulations regarding venue, as held by this Court in
the vintage case of Philippine Banking Corporation v. Tensuan, 31 is that while
they are considered valid and enforceable, venue stipulations in a contract do
not, as a rule, supersede the general rule set forth in Rule 4 of the Revised Rules
of Court in the absence of qualifying or restrictive words. They should be
considered merely as an agreement or additional forum, not as limiting venue to
the specified place. They are not exclusive but, rather permissive. If the intention
of the parties were to restrict venue, there must be accompanying language
clearly and categorically expressing their purpose and design that actions
between them be litigated only at the place named by them. 32
In the instant case, no restrictive words like "only," "solely," "exclusively in
this court," "in no other court save —," "particularly," "nowhere else but/except —
," or words of equal import were stated in the contract. 33 It cannot be said that
the court of arbitration in London is an exclusive venue to bring forth any
complaint arising out of the employment contract. aITDAE

Petitioners contend that respondent should have filed his Complaint in his
place of permanent residence, or where the PCIJ holds its principal office, at the
place where the contract of employment was signed, in London as stated in their
contract. By enumerating possible venues where respondent could have filed his
complaint, however, petitioners themselves admitted that the provision on venue
in the employment contract is indeed merely permissive.

Petitioners' insistence on the application of the principle of forum non


conveniens must be rejected. The bare fact that respondent is a Canadian citizen
and was a repatriate does not warrant the application of the principle for the
following reasons:
First. The Labor Code of the Philippines does not include forum non
conveniens as a ground for the dismissal of the complaint. 34
Second. The propriety of dismissing a case based on this principle
requires a factual determination; hence, it is properly considered as defense. 35
Third. In Bank of America, NT&SA, Bank of America International, Ltd. v.
Court of Appeals, 36 this Court held that:
. . . [a] Philippine Court may assume jurisdiction over the case if it
chooses to do so; provided, that the following requisites are met: (1) that
the Philippine Court is one to which the parties may conveniently resort
to; (2) that the Philippine Court is in a position to make an intelligent
decision as to the law and the facts; and, (3) that the Philippine Court
has or is likely to have power to enforce its decision. . . .
Admittedly, all the foregoing requisites are present in this case.
WHEREFORE, the petition is DENIED. The Decision of the Court of
Appeals in CA-G.R. SP No. 76563 is AFFIRMED. This case is REMANDED to
the Labor Arbiter for disposition of the case on the merits. Cost against
petitioners.
SO ORDERED.
(Pacific Consultants International Asia, Inc. v. Schonfeld, G.R. No. 166920,
|||

[February 19, 2007], 545 PHIL 116-137)

2. Biaco v Countryside Rural Bank 515 SCRA 106


SECOND DIVISION

[G.R. No. 161417. February 8, 2007.]

MA. TERESA CHAVES BIACO, petitioner, vs. PHILIPPINE


COUNTRYSIDE RURAL BANK, respondent.

DECISION

TINGA, J :
p

Petitioner, Ma. Teresa Chaves Biaco, seeks a review of the Decision 1 of


the Court of Appeals in CA-G.R. No. 67489 dated August 27, 2003, which denied
her petition for annulment of judgment, and the Resolution 2 dated December 15,
2003 which denied her motion for reconsideration.
The facts as succinctly stated by the Court of Appeals are as follows:
Ernesto Biaco is the husband of petitioner Ma. Teresa Chaves
Biaco. While employed in the Philippine Countryside Rural Bank (PCRB)
as branch manager, Ernesto obtained several loans from the respondent
bank as evidenced by the following promissory notes:
Feb. 17, 1998 P65,000.00
Mar. 18, 1998 30,000.00
May 6, 1998 60,000.00
May 20, 1998 350,000.00
July 30, 1998 155,000.00
Sept. 8, 1998 40,000.00
Sept. 8, 1998 120,000.00
As security for the payment of the said loans, Ernesto executed a
real estate mortgage in favor of the bank covering the parcel of land
described in Original Certificate of Title (OCT) No. P-14423. The real
estate mortgages bore the signatures of the spouses Biaco.
When Ernesto failed to settle the above-mentioned loans on its
due date, respondent bank through counsel sent him a written demand
on September 28, 1999. The amount due as of September 30, 1999 had
already reached ONE MILLION EIGHTY THOUSAND SIX HUNDRED
SEVENTY SIX AND FIFTY CENTAVOS (P1,080,676.50).
The written demand, however, proved futile.
On February 22, 2000, respondent bank filed a complaint for
foreclosure of mortgage against the spouses Ernesto and Teresa Biaco
before the RTC of Misamis Oriental. Summons was served to the
spouses Biaco through Ernesto at his office (Export and Industry Bank)
located at Jofelmor Bldg., Mortola Street, Cagayan de Oro City. EASCDH

Ernesto received the summons but for unknown reasons, he


failed to file an answer. Hence, the spouses Biaco were declared in
default upon motion of the respondent bank. The respondent bank was
allowed to present its evidence ex parte before the Branch Clerk of Court
who was then appointed by the court as Commissioner.
Arturo Toring, the branch manager of the respondent bank,
testified that the spouses Biaco had been obtaining loans from the bank
since 1996 to 1998. The loans for the years 1996-1997 had already
been paid by the spouses Biaco, leaving behind a balance of
P1,260,304.33 representing the 1998 loans. The amount being claimed
is inclusive of interests, penalties and service charges as agreed upon
by the parties. The appraisal value of the land subject of the mortgage is
only P150,000.00 as reported by the Assessor's Office.
Based on the report of the Commissioner, the respondent judge
ordered as follows:
WHEREFORE, judgment is hereby rendered ordering
defendants spouses ERNESTO R. BIACO and MA. THERESA
[CHAVES] BIACO to pay plaintiff bank within a period of not less
than ninety (90) days nor more than one hundred (100) days from
receipt of this decision the loan of ONE MILLION TWO
HUNDRED SIXTY THOUSAND THREE HUNDRED FOUR
PESOS and THIRTY THREE CENTAVOS (P1,260,304.33) plus
litigation expenses in the amount of SEVEN THOUSAND SIX
HUNDRED FORTY PESOS (P7,640.00) and attorney's fees in
the amount of TWO HUNDRED FIFTY TWO THOUSAND
THIRTY PESOS and FORTY THREE CENTAVOS (P252,030.43)
and cost of this suit.
In case of non-payment within the period, the Sheriff of this
Court is ordered to sell at public auction the mortgaged Lot, a
parcel of registered land (Lot 35802, Cad. 237 {Lot No. 12388-B,
Csd-10-002342-D}), located at Gasi, Laguindingan, Misamis
Oriental and covered by TCT No. P-14423 to satisfy the mortgage
debt, and the surplus if there be any should be delivered to the
defendants spouses ERNESTO and MA. THERESA [CHAVES]
BIACO. In the event however[,] that the proceeds of the auction
sale of the mortgage[d] property is not enough to pay the
outstanding obligation, the defendants are ordered to pay any
deficiency of the judgment as their personal liability.
SO ORDERED.
On July 12, 2000, the sheriff personally served the above-
mentioned judgment to Ernesto Biaco at his office at Export and Industry
Bank. The spouses Biaco did not appeal from the adverse decision of
the trial court. On October 13, 2000, the respondent bank filed an ex
parte motion for execution to direct the sheriff to sell the mortgaged lot at
public auction. The respondent bank alleged that the order of the court
requiring the spouses Biaco to pay within a period of 90 days had
passed, thus making it necessary to sell the mortgaged lot at public
auction, as previously mentioned in the order of the court. The motion for
execution was granted by the trial court per Order dated October 20,
2000.
On October 31, 2000, the sheriff served a copy of the writ of
execution to the spouses Biaco at their residence in #92 9th Street,
Nazareth, Cagayan de Oro City. The writ of execution was personally
received by Ernesto. By virtue of the writ of execution issued by the trial
court, the mortgaged property was sold at public auction in favor of the
respondent bank in the amount of ONE HUNDRED FIFTY THOUSAND
PESOS (P150,000.00).
The amount of the property sold at public auction being
insufficient to cover the full amount of the obligation, the respondent
bank filed an "ex parte motion for judgment" praying for the issuance of a
writ of execution against the other properties of the spouses Biaco for
the full settlement of the remaining obligation. Granting the motion, the
court ordered that a writ of execution be issued against the spouses
Biaco to enforce and satisfy the judgment of the court for the balance of
ONE MILLION THREE HUNDRED SIXTY NINE THOUSAND NINE
HUNDRED SEVENTY FOUR PESOS AND SEVENTY CENTAVOS
(P1,369,974.70). ITcCSA

The sheriff executed two (2) notices of levy against properties


registered under the name of petitioner Ma. Teresa Chaves Biaco.
However, the notices of levy were denied registration because Ma.
Teresa had already sold the two (2) properties to her daughters on April
11, 2001. 3
Petitioner sought the annulment of the Regional Trial Court decision
contending that extrinsic fraud prevented her from participating in the judicial
foreclosure proceedings. According to her, she came to know about the judgment
in the case only after the lapse of more than six (6) months after its finality. She
claimed that extrinsic fraud was perpetrated against her because the bank failed
to verify the authenticity of her signature on the real estate mortgage and did not
inquire into the reason for the absence of her signature on the promissory notes.
She moreover asserted that the trial court failed to acquire jurisdiction because
summons were served on her through her husband without any explanation as to
why personal service could not be made.
The Court of Appeals considered the two circumstances that kept
petitioner in the dark about the judicial foreclosure proceedings: (1) the failure of
the sheriff to personally serve summons on petitioner; and (2) petitioner's
husband's concealment of his knowledge of the foreclosure proceedings. On the
validity of the service of summons, the appellate court ruled that judicial
foreclosure proceedings are actions quasi in rem. As such, jurisdiction over the
person of the defendant is not essential as long as the court acquires jurisdiction
over the res. Noting that the spouses Biaco were not opposing parties in the
case, the Court of Appeals further ruled that the fraud committed by one against
the other cannot be considered extrinsic fraud.
Her motion for reconsideration having been denied, petitioner filed the
instant Petition for Review, 4 asserting that even if the action is quasi in rem,
personal service of summons is essential in order to afford her due process. The
substituted service made by the sheriff at her husband's office cannot be deemed
proper service absent any explanation that efforts had been made to personally
serve summons upon her but that such efforts failed. Petitioner contends that
extrinsic fraud was perpetrated not so much by her husband, who did not inform
her of the judicial foreclosure proceedings, but by the sheriff who allegedly
connived with her husband to just leave a copy of the summons intended for her
at the latter's office.
Petitioner further argues that the deficiency judgment is a personal
judgment which should be deemed void for lack of jurisdiction over her person.
Respondent Philippine Countryside Rural Bank (PCRB) filed its
Comment, 5 essentially reiterating the appellate court's ruling. Respondent avers
that service of summons upon the defendant is not necessary in actions quasi in
rem it being sufficient that the court acquire jurisdiction over the res. As regards
the alleged conspiracy between petitioner's husband and the sheriff, respondent
counters that this is a new argument which cannot be raised for the first time in
the instant petition.
We required the parties to file their respective memoranda in the
Resolution 6 dated August 18, 2004. Accordingly, petitioner filed her
Memorandum 7 dated October 10, 2004, while respondent filed its Memorandum
for Respondent 8 dated September 9, 2004.
Annulment of judgment is a recourse equitable in character, allowed only
in exceptional cases as where there is no available or other adequate remedy.
Jurisprudence and Sec. 2, Rule 47 of the 1997 Rules of Civil Procedure (Rules of
Court) provide that judgments may be annulled only on grounds of extrinsic fraud
and lack of jurisdiction or denial of due process. 9
Petitioner asserts that extrinsic fraud consisted in her husband's
concealment of the loans which he obtained from respondent PCRB; the filing of
the complaint for judicial foreclosure of mortgage; service of summons; rendition
of judgment by default; and all other proceedings which took place until the writ
of garnishment was served. 10

Extrinsic fraud exists when there is a fraudulent act committed by


the prevailing party outside of the trial of the case, whereby the defeated
party was prevented from presenting fully his side of the case by fraud or
deception practiced on him by the prevailing party. 11 Extrinsic fraud is present
where the unsuccessful party had been prevented from exhibiting fully his case,
by fraud or deception practiced on him by his opponent, as by keeping him away
from court, a false promise of a compromise; or where the defendant never had
knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or
where an attorney fraudulently or without authority assumes to represent a party
and connives at his defeat; or where the attorney regularly employed corruptly
sells out his client's interest to the other side. The overriding consideration is that
the fraudulent scheme of the prevailing litigant prevented a party from having his
day in court. 12
With these considerations, the appellate court acted well in ruling that
there was no fraud perpetrated by respondent bank upon petitioner, noting that
the spouses Biaco were co-defendants in the case and shared the same interest.
Whatever fact or circumstance concealed by the husband from the wife cannot
be attributed to respondent bank.
Moreover, petitioner's allegation that her signature on the promissory notes
was forged does not evince extrinsic fraud. It is well-settled that the use of forged
instruments during trial is not extrinsic fraud because such evidence does not
preclude the participation of any party in the proceedings. 13
The question of whether the trial court has jurisdiction depends on the
nature of the action, i.e., whether the action is in personam, in rem, or quasi in
rem. The rules on service of summons under Rule 14 of the Rules of Court
likewise apply according to the nature of the action.
An action in personam is an action against a person on the basis of his
personal liability. An action in rem is an action against the thing itself instead of
against the person. An action quasi in rem is one wherein an individual is named
as defendant and the purpose of the proceeding is to subject his interest therein
to the obligation or lien burdening the property. 14
In an action in personam, jurisdiction over the person of the defendant is
necessary for the court to validly try and decide the case. In a proceeding in
rem orquasi in rem, jurisdiction over the person of the defendant is not a
prerequisite to confer jurisdiction on the court provided that the court acquires
jurisdiction over theres. Jurisdiction over the res is acquired either (1) by the
seizure of the property under legal process, whereby it is brought into actual
custody of the law; or (2) as a result of the institution of legal proceedings, in
which the power of the court is recognized and made effective. 15
Nonetheless, summons must be served upon the defendant not for the
purpose of vesting the court with jurisdiction but merely for satisfying the due
process requirements. 16
A resident defendant who does not voluntarily appear in court, such as
petitioner in this case, must be personally served with summons as provided
under Sec. 6, Rule 14 of the Rules of Court. If she cannot be personally served
with summons within a reasonable time, substituted service may be effected (1)
by leaving copies of the summons at the defendant's residence with some person
of suitable age and discretion then residing therein, or (2) by leaving the copies
at defendant's office or regular place of business with some competent person in
charge thereof in accordance with Sec. 7, Rule 14 of the Rules of Court.
In this case, the judicial foreclosure proceeding instituted by respondent
PCRB undoubtedly vested the trial court with jurisdiction over the res. A judicial
foreclosure proceeding is an action quasi in rem. As such, jurisdiction over the
person of petitioner is not required, it being sufficient that the trial court is vested
with jurisdiction over the subject matter. DCAHcT

There is a dimension to this case though that needs to be delved into.


Petitioner avers that she was not personally served summons. Instead, summons
was served to her through her husband at his office without any explanation as to
why the particular surrogate service was resorted to. The Sheriff's Return of
Service dated March 21, 2000 states:
xxx xxx xxx
That on March 16, 2000, the undersigned served the copies of
Summons, complaint and its annexes to the defendants Sps. Ernesto R.
& Ma. Teresa Ch. Biacothru Ernesto R. Biaco[,] defendant of the
above-entitled case at his office EXPORT & INDUSTRY BANK,
Jofelmore Bldg.[,] Mortola St., Cagayan de Oro City and he
acknowledged receipt thereof as evidenced with his signature appearing
on the original copy of the Summons. 17 [Emphasis supplied]
Without ruling on petitioner's allegation that her husband and the sheriff
connived to prevent summons from being served upon her personally, we can
see that petitioner was denied due process and was not able to participate in the
judicial foreclosure proceedings as a consequence. The violation of petitioner's
constitutional right to due process arising from want of valid service of summons
on her warrants the annulment of the judgment of the trial court.
There is more, the trial court granted respondent PCRB's ex-parte motion
for deficiency judgment and ordered the issuance of a writ of execution against
the spouses Biaco to satisfy the remaining balance of the award. In short, the
trial court went beyond its jurisdiction over the res and rendered a personal
judgment against the spouses Biaco. This cannot be countenanced.
In Sahagun v. Court of Appeals, 18 suit was brought against a non-resident
defendant, Abelardo Sahagun, and a writ of attachment was issued and
subsequently levied on a house and lot registered in his name. Claiming
ownership of the house, his wife, Carmelita Sahagun, filed a motion to intervene.
For failure of plaintiff to serve summons extraterritorially upon Abelardo, the
complaint was dismissed without prejudice.
Subsequently, plaintiff filed a motion for leave to serve summons by
publication upon Abelardo. The trial court granted the motion. Plaintiff later filed
an amended complaint against Abelardo, this time impleading Carmelita and
Rallye as additional defendants. Summons was served on Abelardo through
publication in the Manila Evening Post. Abelardo failed to file an answer and was
declared in default. Carmelita went on certiorari to the Court of Appeals assailing
as grave abuse of discretion the declaration of default of Abelardo. The Court of
Appeals dismissed the petition and denied reconsideration.
In her petition with this Court, Carmelita raised the issue of whether the
trial court acquired jurisdiction over her husband, a non-resident defendant, by
the publication of summons in a newspaper of general circulation in the
Philippines. The Court sustained the correctness of extrajudicial service of
summons by publication in such newspaper.
The Court explained, citing El Banco Español-Filipino v. Palanca, 19 that
foreclosure and attachment proceedings are both actions quasi in rem. As such,
jurisdiction over the person of the (non-resident) defendant is not essential.
Service of summons on a non-resident defendant who is not found in the country
is required, not for purposes of physically acquiring jurisdiction over his person
but simply in pursuance of the requirements of fair play, so that he may be
informed of the pendency of the action against him and the possibility that
property belonging to him or in which he has an interest may be subjected to a
judgment in favor of a resident, and that he may thereby be accorded an
opportunity to defend in the action, should he be so minded. CDaTAI

Significantly, the Court went on to rule, citing De Midgely v. Ferandos, et


al. 20 and Perkins v. Dizon, et al., 21 that in a proceeding in rem or quasi in rem,
the only relief that may be granted by the court against a defendant over whose
person it has not acquired jurisdiction either by valid service of summons or by
voluntary submission to its jurisdiction, is limited to the res.
Similarly, in this case, while the trial court acquired jurisdiction over the res,
its jurisdiction is limited to a rendition of judgment on the res. It cannot extend its
jurisdiction beyond the res and issue a judgment enforcing petitioner's personal
liability. In doing so without first having acquired jurisdiction over the person of
petitioner, as it did, the trial court violated her constitutional right to due process,
warranting the annulment of the judgment rendered in the case.
WHEREFORE, the instant petition is GRANTED. The Decision dated
August 27, 2003 and the Resolution dated December 15, 2003 of the Court of
Appeals in CA-G.R. SP No. 67489 are SET ASIDE. The Judgment dated July 11,
2000 and Order dated February 9, 2001 of the Regional Trial Court of Cagayan
de Oro City, Branch 20, are likewise SET ASIDE.
SO ORDERED.
(Biaco v. Philippine Countryside Rural Bank, G.R. No. 161417, [February 8,
|||

2007], 544 PHIL 45-58)

3. BPI Savings Bank v Sps. Yujuico 763 SCRA 486 (July 2015)

FIRST DIVISION

[G.R. No. 175796. July 22, 2015.]

BPI FAMILY SAVINGS BANK, INC., petitioner, vs. SPOUSES


BENEDICTO & TERESITA YUJUICO, respondents.

DECISION

BERSAMIN, ** J : p

An action to recover the deficiency after extrajudicial foreclosure of a


real property mortgage is a personal action because it does not affect title to
or possession of real property, or any interest therein.
The Case
This appeal is taken by the petitioner to overturn the decision
promulgated on March 31, 2006, 1 whereby the Court of Appeals (CA) set
aside the orders issued by the Regional Trial Court, Branch 60, in Makati City
(Makati RTC) on October 17, 2003 2 and February 1, 2005 3 dismissing their
action against the respondents to recover the deficiency after the extrajudicial
foreclosure of their mortgage (Civil Case No. 03-450) on the ground of
improper venue. IAETDc

Antecedents
On August 22, 1996, the City of Manila filed a complaint against the
respondents for the expropriation of five parcels of land located in Tondo,
Manila and registered in the name of respondent Teresita Yujuico. Two of the
parcels of land, covered by Transfer Certificate of Title (TCT) No. 261331 and
TCT No. 261332, were previously mortgaged to Citytrust Banking
Corporation, the petitioner's predecessor-in-interest, under a First Real Estate
Mortgage Contract. 4 On June 30, 2000, the Regional Trial Court in Manila
(Manila RTC) rendered its judgment declaring the five parcels of land
expropriated for public use. The judgment became final and executory on
January 28, 2001 and was entered in the book of entries of judgment on
March 23, 2001. 5 The petitioner subsequently filed a Motion to Intervene in
Execution with Partial Opposition to Defendant's Request to Release, but the
RTC denied the motion for having been "filed out of time." Hence, the
petitioner decided to extrajudicially foreclose the mortgage constituted on the
two parcels of land subject of the respondents' loan. After holding the public
auction, the sheriff awarded the two lots to the petitioner as the highest bidder
at P10,000,000.00. 6
Claiming a deficiency amounting to P18,522,155.42, the petitioner sued
the respondents to recover such deficiency in the Makati RTC (Civil Case No.
03-450). The respondents moved to dismiss the complaint on several
grounds, namely: that the suit was barred by res judicata; that the complaint
stated no cause of action; and that the plaintiff's claim had been waived,
abandoned, or extinguished. 7
In its order issued on October 17, 2003, the Makati RTC denied the
respondents' motion to dismiss, ruling that there was no res judicata; that the
complaint stated a sufficient cause of action to recover the deficiency; and
that there was nothing to support the claim that the obligation had been
abandoned or extinguished apart from the respondents' contention that the
properties had been subjected to expropriation by the City of Manila. 8
On November 4, 2003, the respondents moved for reconsideration,
reiterating their grounds earlier made in their motion to dismiss. 9
In turn, the petitioner adopted its comment/opposition to the motion to
dismiss. 10
The respondents then filed their reply, 11 in which they raised for the
first time their objection on the ground of improper venue. They contended
that the action for the recovery of the deficiency, being a supplementary
action of the extrajudicial foreclosure proceedings, was a real action that
should have been brought in the Manila RTC because Manila was the place
where the properties were located. 12
On February 1, 2005, the Makati RTC denied the respondents' motion
for reconsideration for its lack of merit; and held on the issue of improper
venue that:
It would be improper for this Court to dismiss the plaintiff's
complaint on the ground of improper venue, assuming that the venue
is indeed improperly laid, since the said ground was not raised in the
defendant's Motion to Dismiss. On this point, it was held in the case
of Malig, et al., vs. Bush, L-22761, May 31, 1969 that "an action cannot
be dismissed on a ground not alleged in the motion therefore even if
said ground, e.g., prescription, is provided in Role 16. 13
Decision of the CA
Not satisfied, the respondents assailed the orders dated October 17,
2003 and February 1, 2005 by petition for certiorari. 14 They submitted for
consideration by the CA the following issues, namely:
. . . (WHETHER OR NOT) RESPONDENT TRIAL COURT
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION WHEN IT ISSUED ITS
ASSAILED ORDERS CONSIDERING THAT:
A. THE COMPLAINT A QUO IS BARRED BY RES
JUDICATA.
B. THE COMPLAINT STATED NO CAUSE OF
ACTION.
C. PRIVATE RESPONDENT'S CLAIM HAS BEEN
WAIVED, ABANDONED OR OTHERWISE
EXTINGUISHED.
D. VENUE WAS IMPROPERLY LAID. 15
On March 31, 2006, the CA granted the petition for certiorari of the
respondents on the basis of the fourth issue, opining:
xxx xxx xxx
Thus, a suit for recovery of the deficiency after the
foreclosure of a mortgage is in the nature of a mortgage action
because its purpose is precisely to enforce the mortgage
contract; it is upon a written contract and upon an obligation of
the mortgage-debtor to pay the deficiency which is created by
law. As such, the venue of an action for recovery of deficiency must
necessarily be the same venue as that of the extrajudicial foreclosure
of mortgage.
xxx xxx xxx
In this regard, We take note that the parcels of land subject of
the mortgage contract are located in Tondo, Manila, under Transfer
Certificates of Title Nos. 216331 and 216332. On the other hand, the
extrajudicial foreclosure of the real estate mortgage took place at the
RTC of Manila on January 28, 2003. Thus, the suit for judgment on
the deficiency filed by respondent BPI against petitioners Yujuico,
being an action emanating from the foreclosure of the real estate
mortgage contract between them, must necessarily be filed also
at the RTC of Manila, not at the RTC of Makati.
xxx xxx xxx 16
The CA denied the respondents' Motion for Partial Reconsideration and
the petitioner's Partial Motion for Reconsideration on December 7, 2006. 17
Issues
Hence, this appeal by the petitioner, to assail the CA's dismissal of Civil
Case No. 03-450 on the ground of improper venue upon the following
grounds, 18namely:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS'
DENIAL OF THE PETITIONER'S PARTIAL MOTION FOR
RECONSIDERATION ON THE GROUND OF IMPROPER VENUE AS
A RESULT DISMISSED THE COMPLAINT FOR SUM OF MONEY IS
CONTRARY TO LAW.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS['] ACT
OF APPRECIATING THE ADDITIONAL GROUND OF IMPROPER
VENUE, ONLY RAISED IN THE MOTION FOR RECONSIDERATION
FILED IN THE LOWER COURT AFTER IT DENIED RESPONDENTS'
MOTION TO DISMISS, IS CONTRARY TO LAW AND
JURISPRUDENCE. 19
Ruling of the Court
We grant the petition for review on certiorari.
It is basic that the venue of an action depends on whether it is a real or
a personal action. The determinants of whether an action is of a real or a
personal nature have been fixed by the Rules of Court and relevant
jurisprudence. According to Section 1, Rule 4 of the Rules of Court, a real
action is one that affects title to or possession of real property, or an interest
therein. Thus, an action for partition or condemnation of, or foreclosure of
mortgage on, real property is a real action.20 The real action is to be
commenced and tried in the proper court having jurisdiction over the area
wherein the real property involved, or a portion thereof, is situated, which
explains why the action is also referred to as a local action. In contrast,
the Rules of Court declares all other actions as personal actions. 21 Such
actions may include those brought for the recovery of personal property, or for
the enforcement of some contract or recovery of damages for its breach, or
for the recovery of damages for the commission of an injury to the person or
property. 22 The venue of a personal action is the place where the plaintiff or
any of the principal plaintiffs resides, or where the defendant or any of the
principal defendants resides, or in the case of a non-resident defendant where
he may be found, at the election of the plaintiff, 23 for which reason the action
is considered a transitory one. SaCIDT

Based on the distinctions between real and personal actions, an action


to recover the deficiency after the extrajudicial foreclosure of the real property
mortgage is a personal action, for it does not affect title to or possession of
real property, or any interest therein.
It is true that the Court has said in Caltex Philippines, Inc. v.
Intermediate Appellate Court 24 that "a suit for the recovery of the deficiency
after the foreclosure of a mortgage is in the nature of a mortgage action
because its purpose is precisely to enforce the mortgage contract." However,
the CA erred in holding, upon the authority of Caltex Philippines, Inc., that the
venue of Civil Case No. 03-450 must necessarily be Manila, the same venue
as that of the extrajudicial foreclosure of mortgage. An examination of Caltex
Philippines, Inc. reveals that the Court was thereby only interpreting the
prescriptive period within which to bring the suit for the recovery of the
deficiency after the foreclosure of the mortgage, and was not at all ruling
therein on the venue of such suit or on the nature of such suit being either a
real or a personal action.
Given the foregoing, the petitioner correctly brought Civil Case No. 03-
450 in the Makati RTC because Makati was the place where the main office of
the petitioner was located.
Moreover, the Makati RTC observed, and the observation is correct in
our view, that it would be improper to dismiss Civil Case No. 03-450 on the
ground of improper venue, assuming that the venue had been improperly laid,
considering that the respondents had not raised such ground in their Motion to
Dismiss. As earlier indicated, they came to raise the objection of improper
venue for the first time only in their reply to the petitioner's comment on
their Motion for Reconsideration. They did so belatedly.
We underscore that in civil proceedings, venue is procedural, not
jurisdictional, and may be waived by the defendant if not seasonably raised
either in a motion to dismiss or in the answer. 25 Section 1, Rule 9 of
the Rules of Court thus expressly stipulates that defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived. As
it relates to the place of trial, indeed, venue is meant to provide convenience
to the parties, rather than to restrict their access to the courts. 26 In other
words, unless the defendant seasonably objects, any action may be tried by a
court despite its being the improper venue.
WHEREFORE, we GRANT the petition for review
on certiorari; REVERSE and SET ASIDE the decision promulgated by the
Court of Appeals on March 31, 2006;REINSTATE the orders dated October
17, 2003 and February 1, 2005 of the Regional Trial Court, Branch 60, in
Makati City; and ORDER the respondents to pay the costs of suit.
SO ORDERED.
(BPI Family Savings Bank, Inc. v. Spouses Yujuico, G.R. No. 175796, [July
|||

22, 2015])

E. Summary Procedure v Small Claims suit


- What are their salient characteristics
- How to determine if the case is summary or under small claims

Case: A.L. Ang Network Inc v Mondejar 714 SCRA (January 28, 2014)

SECOND DIVISION

[G.R. No. 200804. January 22, 2014.]

A.L. ANG NETWORK, INC., petitioner, vs. EMMA MONDEJAR,


accompanied by her husband,
EFREN MONDEJAR, respondent.

RESOLUTION

PERLAS-BERNABE, J : p
This is a direct recourse 1 to the Court from the Decision 2 dated November 23,
2011 and Order 3 dated February 16, 2012 of the Regional Trial Court of Bacolod
City, Branch 45 (RTC) in RTC Case No. 11-13833 which dismissed, on the
ground of improper remedy, petitioner A.L. Ang Network, Inc.'s (petitioner)
petition for certiorarifrom the Decision 4 dated June 10, 2011 of the Municipal
Trial Court in Cities of Bacolod City, Branch 4 (MTCC) in Civil Case No. SCC-
1436, a small claims case for sum of money against respondent
Emma Mondejar (respondent).
The Facts
On March 23, 2011, petitioner filed a complaint 5 for sum of money under
the Rule of Procedure for Small Claims Cases 6 before the MTCC, seeking to
collect from respondent the amount of P23,111.71 which represented her unpaid
water bills for the period June 1, 2002 to September 30, 2005. 7SAHEIc

Petitioner claimed that it was duly authorized to supply water to and collect
payment therefor from the homeowners of Regent Pearl Subdivision, one of
whom is respondent who owns and occupies Lot 8, Block 3 of said subdivision.
From June 1, 2002 until September 30, 2005, respondent and her family
consumed a total of 1,150 cubic meters (cu. m.) of water, which upon application
of the agreed rate of P113.00 for every 10 cu. m. of water, plus an additional
charge of P11.60 for every additional cu. m. of water, amounted to
P28,580.09. 8 However, respondent only paid the amount of P5,468.38, thus,
leaving a balance of P23,111.71 which was left unpaid despite petitioner's
repeated demands. 9
In defense, respondent contended that since April 1998 up to February 2003, she
religiously paid petitioner the agreed monthly flat rate of P75.00 for her water
consumption. Notwithstanding their agreement that the same would be adjusted
only upon prior notice to the homeowners, petitioner unilaterally charged her
unreasonable and excessive adjustments (at the average of 40 cu. m. of water
per month or 1.3 cu. m. of water a day) far above the average daily water
consumption for a household of only 3 persons. She also questioned the
propriety and/or basis of the aforesaid P23,111.71 claim. 10
In the interim, petitioner disconnected respondent's water line for not paying the
adjusted water charges since March 2003 up to August 2005. 11
The MTCC Ruling
On June 10, 2011, the MTCC rendered a Decision 12 holding that since petitioner
was issued a Certificate of Public Convenience (CPC) 13 by the National Water
Resources Board (NWRB) only on August 7, 2003, then, it can only charge
respondent the agreed flat rate of P75.00 per month prior thereto or the sum of
P1,050.00 for theperiod June 1, 2002 to August 7, 2003. Thus, given that
respondent had made total payments equivalent to P1,685.99 for the same
period, she should be considered to have fully paid petitioner. 14 HScCEa

The MTCC disregarded petitioner's reliance on the Housing and Land Use
Regulatory Board's (HLURB) Decision 15 dated August 17, 2000 in HLURB Case
No. REM C6-00-001 entitled Nollie B. Apura, et al. v. Dona Carmen I
Subdivision, et al., as source of its authority to impose new water consumption
rates for water consumed from June 1, 2002 to August 7, 2003 in the absence of
proof (a) that petitioner complied with the directive to inform the HLURB of the
result of its consultation with the concerned homeowners as regards the rates to
be charged, and (b) that the HLURB approved of the same. 16
Moreover, the MTCC noted that petitioner failed to submit evidence
showing (a) the exact date when it actually began imposing the NWRB approved
rates; and (b) that the parties had a formal agreement containing the terms and
conditions thereof, without which it cannot establish with certainty respondent's
obligation. 17Accordingly, it ruled that the earlier agreed rate of P75.00 per month
should still be the basis for respondent's water consumption charges for
the period August 8, 2003 to September 30, 2005. 18 Based on petitioner's
computation, respondent had only paid P300.00 of her P1,500.00 obligation for
said period. Thus, it ordered respondent to pay petitioner the balance thereof,
equivalent to P1,200.00 with legal interest at the rate of 6% per annum from date
of receipt of the extrajudicial demand on October 14, 2010 until fully paid. 19
Aggrieved, petitioner filed a petition for certiorari 20 under Rule 65 of the Rules of
Court before the RTC, ascribing grave abuse of discretion on the part of the
MTCC in finding that it (petitioner) failed to establish with certainty respondent's
obligation, and in not ordering the latter to pay the full amount sought to be
collected.AHDacC

The RTC Ruling


On November 23, 2011, the RTC issued a Decision 21 dismissing the petition
for certiorari, finding that the said petition was only filed to circumvent the non-
appealable nature of small claims cases as provided under Section 23 22 of the
Rule of Procedure on Small Claims Cases. To this end, the RTC ruled that it
cannot supplant the decision of the MTCC with another decision directing
respondent to pay petitioner a bigger sum than that which has been awarded.
Petitioner moved for reconsideration 23 but was denied in an Order 24 dated
February 16, 2012, hence, the instant petition.
The Issue Before the Court
The sole issue in this case is whether or not the RTC erred in dismissing
petitioner's recourse under Rule 65 of the Rules of Court assailing the propriety
of the MTCC Decision in the subject small claims case.
The Court's Ruling
The petition is meritorious.
Section 23 of the Rule of Procedure for Small Claims Cases states that:
SEC. 23. Decision. — After the hearing, the court shall render its
decision on the same day, based on the facts established by the
evidence (Form 13-SCC). The decision shall immediately be entered by
the Clerk of Court in the court docket for civil cases and a copy thereof
forthwith served on the parties. ADSTCa

The decision shall be final and unappealable.


Considering the final nature of a small claims case decision under the above-
stated rule, the remedy of appeal is not allowed, and the prevailing party may,
thus, immediately move for its execution. 25 Nevertheless, the proscription on
appeals in small claims cases, similar to other proceedings where appeal is not
an available remedy, 26 does not preclude the aggrieved party from filing a
petition for certiorari under Rule 65 of the Rules of Court. This general rule has
been enunciated in the case of Okada v. Security Pacific Assurance
Corporation, 27 wherein it was held that:
In a long line of cases, the Court has consistently ruled that "the
extraordinary writ of certiorari is always available where there is no
appeal or any other plain, speedy and adequate remedy in the
ordinary course of law." In Jaca v. Davao Lumber Co., the Court ruled:
. . . Although Section 1, Rule 65 of the Rules of Court provides
that the special civil action of certiorari may only be invoked when
"there is no appeal, nor any plain, speedy and adequate remedy
in the course of law," this rule is not without exception. The
availability of the ordinary course of appeal does not constitute
sufficient ground to prevent a party from making use of the
extraordinary remedy of certiorari where appeal is not an
adequate remedy or equally beneficial, speedy and sufficient. It is
the inadequacy — not the mere absence — of all other legal
remedies and the danger of failure of justice without the writ that
usually determines the propriety of certiorari. IEAHca

This ruling was reiterated in Conti v. Court of Appeals:


Truly, an essential requisite for the availability of the extraordinary
remedies under the Rules is an absence of an appeal nor any
"plain, speedy and adequate remedy" in the ordinary course of
law, one which has been so defined as a "remedy which (would)
equally (be) beneficial, speedy and sufficient not merely a remedy
which at some time in the future will bring about a revival of the
judgment . . . complained of in the certiorari proceeding, but a
remedy which will promptly relieve the petitioner from the injurious
effects of that judgment and the acts of the inferior court or
tribunal" concerned. . . . (Emphasis supplied)
In this relation, it may not be amiss to placate the RTC's apprehension that
respondent's recourse before it (was only filed to circumvent the non-appealable
nature of [small claims cases], because it asks [the court] to supplant the
decision of the lower [c]ourt with another decision directing the private
respondent to pay the petitioner a bigger sum than what has been
awarded." 28 Verily, a petition for certiorari, unlike an appeal, is an original
action 29 designed to correct only errors of jurisdiction and not of judgment.
Owing to its nature, it is therefore incumbent upon petitioner to establish that
jurisdictional errors tainted the MTCC Decision. The RTC, in turn, could either
grant or dismiss the petition based on an evaluation of whether or not the MTCC
gravely abused its discretion by capriciously, whimsically, or arbitrarily
disregarding evidence that is material to the controversy. 30 HaTSDA

In view of the foregoing, the Court thus finds that petitioner correctly availed of
the remedy of certiorari to assail the propriety of the MTCC Decision in the
subject small claims case, contrary to the RTC's ruling.
Likewise, the Court finds that petitioner filed the said petition before the proper
forum (i.e., the RTC). To be sure, the Court, the Court of Appeals and the
Regional Trial Courts have concurrent jurisdiction to issue a writ
of certiorari. 31 Such concurrence of jurisdiction, however, does not give a party
unbridled freedom to choose the venue of his action lest he ran afoul of the
doctrine of hierarchy of courts. Instead, a becoming regard for judicial hierarchy
dictates that petitions for the issuance of writs of certiorari against first level
courts should be filed with the Regional Trial Court, and those against the latter,
with the Court of Appeals, before resort may be had before the Court. 32 This
procedure is also in consonance with Section 4, Rule 65 of the Rules of Court. 33
Hence, considering that small claims cases are exclusively within the jurisdiction
of the Metropolitan Trial Courts, Municipal Trial Courts in Cities, Municipal Trial
Courts, and Municipal Circuit Trial Courts, 34 certiorari petitions assailing its
dispositions should be filed before their corresponding Regional Trial Courts.
This petitioner complied with when it instituted its petition for certiorari before the
RTC which, as previously mentioned, has jurisdiction over the same. In fine, the
RTC erred in dismissing the said petition on the ground that it was an improper
remedy, and, as such, RTC Case No. 11-13833 must be reinstated and
remanded thereto for its proper disposition. AHCcET

WHEREFORE, the petition is GRANTED. The Decision dated November 23,


2011 and Resolution dated February 16, 2012 of the Regional Trial Court of
Bacolod City, Branch 45 are REVERSED and SET ASIDE. RTC Case No. 11-
13833 is hereby REINSTATED and the court a quo is ordered to resolve the
same with dispatch.
SO ORDERED.
(A.L. Ang Network, Inc. v. Mondejar, G.R. No. 200804 (Resolution), [January
|||

22, 2014], 725 PHIL 288-298)