G.R. No. L-45543 May 17, 1939 Surigao Consolidated Mining Co., Inc.
Surigao Consolidated Mining Co., Inc., and Otto Weber, the original defendants,
SURIGAO MINE EXPLORATION CO., INC., plaintiff-appellant,
vs.
C. HARRIS, SURIGAO-MAINIT MINING SYNDICATE, SURIGAO CONSOLIDATED
MINING CO., INC., OTTO WEBER, ET AL., defendants-appellees.
Hipolito Alo for appellant.
Vicente J. Francisco for appellees.
LAUREL, J.:
On October 24, 1935, the original complaint in this case was filed in the Court of First
Instance of Surigao in which the plaintiff, a domestic private corporation domiciled in
Cebu, sought a judicial pronouncement (a) adjudging the plaintiff to be the owner and
possessor of the fourteen placer mining claims mentioned in the complaint and
located in the barrio of Tubod, municipality of Mainit, Province of Surigao; (b) annulling
the forty-three lode mining claims of the defendants, C. Harris, Surigao-Mainit Mining
Syndicate, Surigao Consolidated Mining Co., Inc., and Otto Weber, and cancelling
the registration of said lode claims in the records of the mining recorder of Surigao
and in all other official records; (c) prohibiting the defendants and their agents,
employees and laborers from interfering with plaintiff's ownership and possession of
its placer claims; (d) sentencing the defendants to pay jointly and severally to the
plaintiff the sum of P47,000 by way of damages; (e) assessing the costs of the action
against the defendants; and (f) awarding the plaintiff such other proper, just and
equitable relief. The theory of the plaintiff, under the complaint, is that it is the owner
by purchase of the aforesaid placer claims and that the lode claims complained of
were staked and located by the defendants on plaintiff's placer claims after the latter
had been validly and duly staked and located by the plaintiff or its grantors and
predecessors in interest.
On November 23, 1935, the defendants C. Harris, Surigao-Mainit Mining Syndicate,
Surigao Consolidated Mining Co., Inc., and Otto Weber demurred to the complaint on
the grounds (1) that there was a misjoinder of parties in that Otto Weber had been
included as defendant; (2) that the complaint did not state facts sufficient to constitute
a cause of action, because it merely alleged that the plaintiff was the owner by
purchase of the placer claims named therein; and (3) that the complaint was
ambiguous and unintelligible. On January 9, 1936 the Court of First Instance of
Surigao entered an order finding merit in the third ground of the demurrer and
requiring the plaintiff to amend its complaint so as to contain a detailed description of
its placer claims.
On January 13, 1936 an amended complaint was filed to which another demurrer was
interposed on January 22, 1936. In the order of January 27, 1936 the Court of First
Instance of Surigao overruled the demurrer and required the defendants to file their
answer within the reglementary period. Pursuant to the order of the Court of First
Instance of Surigao of June 5, 1936, the plaintiff filed, on June 11, 1936, a third
amended complaint in which, additional to C. Harris, Surigao-Mainit Mining Syndicate,
thirty-two other individual's were included as parties defendant. In this third amended
complaint the placer claims alleged to be owned by the plaintiff were reduced to
eleven, and the relief prayed for was about the same as that asked in the original
complaint, although the amount sought to be recovered as damages was increased
to P49,000.
On August 3, 1936 the defendants, other than Surigao-Mainit Mining Syndicate,
Surigao Consolidated Mining Co., Inc., and Otto Weber, filed an answer, which was
amended on September 10, 1936, containing a general denial, setting up five special
defenses and praying that the location of the alleged placer claims described in
paragraph 4 of the third amended complaint and of any placer claim which might be
shown in the trial to have been located by the plaintiff or its predecessors in interest
illegally and in fraud of the government, be declared null and void and that the
registration of said claims in the office of the mining recorder of Surigao be ordered
cancelled.
On August 24, 1936 the defendants Surigao-Mainit Mining Syndicate, Surigao
Consolidated Mining Co., Inc., and Otto Weber filed an answer containing a general
denial, five special defenses and a counterclaim in the sum of P40,000 and praying
the Court of First Instance of Surigao (a) to declare the nullity of the registration in the
office of the mining recorder of Surigao of the placer claims specified in paragraphs 3
and 4 of the third amended complaint and to order the cancellation of said registration;
(b) to declare the defendants the lawful owners and possessors of the of the lode
claims enumerated in paragraph 6 of the third amended complaint; (c) to restrain the
plaintiff and its agents, employees and laborers from interfering with the ownership,
possession and enjoyment of the defendants of their lode claims; and (d) to sentence
the plaintiff to pay to the defendants the sum of P40,000 as damages.
In the course of the adduction of plaintiff's evidence in the Court of First Instance of
Surigao, Exhibits O and O-1 to O-9 were presented. With the exception of Exhibit O-
7, all of said exhibits are deeds of sale in favor of the plaintiff covering, among others,
the placer claims here in question and bear dates posterior to October 24, 1935, the
date of the filing of the original complaint. Exhibit 0-7 is a deed of sale executed by
Pablo S. Atillo in favor of Maximo Borromeo on January 23, 1935. A perusal of this
Exhibit O-7 in connection with Exhibit O-9 reveals the fact that the mining claims
conveyed by Maximo Borromeo to the plaintiff under said Exhibit O-9, dated
December 21, 1935, were the same claims acquired by Maximo Borromeo under
Exhibit O-7.
Whereupon, before the plaintiff could close its evidence, the defendants moved for
the dismissal of the complaint on the ground that, when the action was commenced,
plaintiff's right of action had not yet accrued, since, under its own Exhibits O and O-1
to O-9, the plaintiff did not become the owner of the claims in dispute until after the
original complaint was filed in the Court of First Instance of Surigao on October 24,
1935.
1
The present appeal is from the order of the Court of First Instance of Surigao entered
on September 12, 1936 dismissing the complaint, with costs against the plaintiff, the
latter alleging that the trial court erred and abused its discretion in so ordering the
dismissal of the complaint.
No pretense is here made by the plaintiff-appellant that it became the owner and
possessor of the claims in question by virtue of muniments of title other than Exhibits
O and O-1 to O-9, and this appeal will be disposed of on the assumption that the
alleged rights of the appellant to said claims had been conferred solely by said
Exhibits O and O-1 to O-9. In other words, this case must be decided on the premise
that the deeds of sale in favor of the appellant were executed after the filing of the
original complaint. Exhibit O-7, executed on January 23, 1935, will not affect the
situation, for the reason that said exhibit evidences a deed of sale in favor of Maximo
Borromeo, who conveyed the claims acquired by him thereunder to the plaintiff by
virtue of Exhibit O-9, executed on December 21, 1935, or after the filing of the original
complaint.
Subject to certain qualifications, and except as otherwise provided by law, an action
commenced before the cause of action has accrued is prematurely brought and
should be dismissed, provided an objection on this ground is properly and seasonably
interposed. The fact that the cause of action accrues after the action is commenced
and while it is pending is of no moment. In the present case, timely objection was
made by counsel for the appellees upon discovery of the immaturity of the action a a
result of the presentation by plaintiff-appellant of certain exhibits hereinabove
mentioned. The date when a civil action is deemed commenced is determined by
section 389 of the Code of Civil Procedure. Without the need of commenting on this
section in relation to allied sections of the same Code, it is sufficient to observe that
here summons was issued by the Court of First Instance of Surigao on October 25,
1935 and was served on the defendants C. Harris, Surigao-Mainit Mining Syndicate
and Surigao Consolidated Mining Co., Inc., on October 28, 1935, and on the
defendant Otto Weber on November 11, 1935. Under section 389, which was taken
from section 405 of the Code of Civil Procedure of California, the action is deemed
commenced upon the "filing of a complaint in the office of the clerk of the court in
which the action is to be instituted" (Sotelo vs. Dizon, G.R. No. 46492, promulgated
April 26, 1939, and authorities therein cited). The original complaint was filed in the
present case on October 24, 1935. But although it be assumed that, under said
section 389, the date or dates of the issuance and service of the summons might
affect the true date of the commencement of the action, the points is of no legal
consequence because whether the date of the filing of the original complaint, or the
date of the issuance of the summons, or the date of the service of said summons, is
considered as the time of the commencement of the suit, it is clear that any of said
dates is anterior to those of Exhibits O and O-1 to O-9.
Notwithstanding divergence of authorities and the apparent confusion that has arisen
in the country of origin of our procedural system, we believe that certain principles are
well settled. Primarily, the right to amend a pleading is not an absolute and
unconditional right. It is to be allowed in furtherance of justice under a sound judicial
discretion. This judicial discretion, upon the other hand, is of course not without any
restriction. The cause of action must exist at the time the action was begun, and the
plaintiff will not be allowed by an amendment to introduce a cause of action which had
no existence when the action was commenced. As soon as an action is brought and
the complaint is filed, the proceedings thus initiated are not subject to the arbitrary
control of the parties or of the court, but must be dealt with in accordance with
recognized rules of pleading and practice. Amendments "must be such, and only
such, as are necessary to promote the completion of the action begun — all parties
necessary for that purpose may come or be brought into it, and so also, any and all
such amendments may be made as to the cause of action, as may be necessary to
its completeness in all respects. But neither general principles of practice, nor the
statute providing for amendments, authorize amendments that reach beyond these
purposes. Especially, the court has no authority to allow such amendments as to
parties, or as to the cause of action, as make new, or substancially a new action,
unless by the consent of the parties. Indeed, this would not be to amend, in any proper
sense, but to substitute a new action by order, for and in place of a pending one,
which the court cannot do. General principles of procedure, and, as well, the statutory
regulations upon the subject, contemplate and intend that an action shall embrace
but one litigation or matter, and only such parties, matters and things, as are
necessary, germane, and incident to it, except that several causes of action may be
united in the same action, as specially provided by statute. Any other rule or method
would certainly be subversive of orderly and intelligent procedure, and lead to
intolerable confusion, as well as injustice to litigants. (Grant vs. Burgwyn, 88 N.C., 95;
Merrill vs. Merrill, 92 N.C., 657; McNair vs. Commissioners, 93 N.C., 364; Ely vs.
Early, 94 N.C., 1.)" (Clendenin vs. Turner [1887], 96 N.C., 304, 306.)
It is a rule of law to which there is, perhaps, no exception, either at law or in equity,
that to recover at all there must be some cause of action at the commencement of the
suit. As observed by counsel for appellees, there are reasons of public policy why
there should be no needless haste in bringing up litigation, and why people who are
in no default and against whom there is as yet no cause of action should not be
summoned before the public tribunals to answer complaints which are groundless.
We say groundless because if the action is immature, it should not be entertained,
and an action prematurely brought is a groundless suit.
It is true, that an amended complaint and the answer thereto take the place of the
originals which are thereby regarded as abandoned (Reynes vs. Compañia General
de Tabacos [1912], 21 Phil., 416; Ruyman and Farris vs. Director of Lands [1916], 34
Phil., 428) and that "the complaint and answer having been superseded by the
amended complaint and the answer thereto, and the answer to the original complaint
not having been presented in evidence as an exhibit, the trial court was not authorized
to take it into account." (Bastida vs. Menzi & Co. [1933], 58 Phil., 188.) But in none of
these cases or in any other case have we held that if a right of action did not exist
when the original complaint was filed, one could be created by filing an amended
complaint. In some jurisdictions in the United States what was termed an "imperfect
cause of action" could be perfected by suitable amendment (Brown vs. Galena Mining
& Smelting Co., 32 Kan., 528; Hooper vs. City of Atlanta, 26 Ga. App., 221) and this
is virtually what we also permitted in Banzon and Rosauro vs. Sellner ([1933], 58 Phil.,
453); Asiatic Petroleum Co. vs. Veloso ([1935], 62 Phil., 683); and recently in Ramos
2
vs. Gibbon (38 Off. Gaz., 241). That, however, which is no cause of action whatsoever
cannot by amendment or supplemental pleading be converted into a cause of action:
Nihil de re accrescit ei qui nihil in re quando jus accresceret habet.

We are therefore of the opinion, and so hold, that unless the plaintiff has a valid and
subsisting cause of action at the time his action is commenced, the defect cannot be
cured or remedied by the acquisition or accrual of one while the action is pending,
and a supplemental complaint or an amendment setting up such after-accrued cause
of action is not permissible (Cf. Compañia gral. de Tabacos vs. Araza [1907], 7 Phil.,
455; Santos vs. Marquez [1909], 13 Phil., 207; Barretto vs. Lane [1915], 29 Phil., 487;
National Bank vs. De la Viña [1924], 46 Phil., 63; Hodges vs. Locsin [1933], 58 Phil.,
607; Limpangco vs. Mercado [1908], 10 Phil., 508).

The order appealed from is affirmed, without prejudice, with costs against the
appellant. So ordered.

3
UNIVERSAL AQUARIUS, INC. G.R. NO. 155990 about seventy-four (74) temporary workers to assist Universal in the
and CONCHITA TAN, operation of its chemical plant in Antipolo City.
Petitioners,
On December 13, 2000, Rodolfo Capocyan (Capocyan), claiming to be the
Present: general counsel/national president of the labor organization called Obrero
YNARES-SANTIAGO, J., Pilipino (Universal Aquarius Chapter), hereinafter referred to as Obrero
Chairperson, Filipino, sent a Notice of Strike to Universal.

- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Q.C. HUMAN RESOURCES
MANAGEMENT CORPORATION, Promulgated:
Respondent.* September 12, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court assailing the Decision[1] dated August 23, 2002 of the Court
of Appeals (CA) in CA-G.R. SP No. 65570 and the CA Resolution[2] dated
October 22, 2002 which denied petitioners' Motion for Reconsideration.
The facts:
Universal Aquarius, Inc. (Universal) is engaged in the manufacture and
distribution of chemical products in Metro Manila. It operates a chemical
plant in Antipolo City. Conchita Tan (Tan), as a proprietor under the name
and style of Marman Trading (Marman), is engaged in the trading, delivery
and distribution of chemical products in Metro Manila, with a depot in
Antipolo City adjoining Universal's chemical plant.
Q.C. Human Resources Management Corporation (Resources) is engaged in
supplying manpower to various establishments. It supplied Universal with
On the same date, Resources informed the Regional Office of the
Department of Labor and Employment that the officers and members of
Obrero Pilipino are its employees and not employees of Universal.
Five days later, or on December 19, 2000, Capocyon and 36 other union
officers and members[3] of Obrero Pilipino, picketed, barricaded and
obstructed the entry and exit of Universal's Antipolo City chemical plant and
intercepted Universal's delivery trucks thereby disrupting its business
operations. Marman's depot, which adjoined Universal's plant, suffered a
similar fate.
On December 27, 2000, Universal and Tan filed a Complaint against the
strikers and Resources before the Regional Trial Court, Branch 74, Antipolo
City (RTC) for breach of contract and damages suffered due to the disruption
of their respective business operations, docketed as Civil Case No. 00-
6029.[4] The Complaint alleges, in part:
(17) On December 19, 2000, at about 2:00 o'clock in the morning, in gross
violation of all applicable laws, rules and regulations, defendants Capocyan,
et al., willfully, unlawfully and feloniously picketed, barricaded and
otherwise obstructed entry and exit to and from the main gate of plaintiff
Universal's plant; x x x
(23) In a parallel move, and a companion activity to their unlawful
obstruction of plaintiff Universal's premises, Capocyan, et al., likewise
picketed , obstructed and otherwise barricaded the premises of plaintiff
Marman, whose depot adjoined that of plaintiff Universal; x x x
(26) As a consequence of the companion blockade on plaintiff Marman's
premises, its business operations were paralyzed;

4
(27) Plaintiff Universal's and plaintiff Marman's operations continue to be
at a standstill, causing damages in the form of unearned sales x x x
(31) Defendant Resources represented itself to be able to provide
temporary workers who are competent to assist in plaintiff Universal's plant
operations; it held itself out as a manpower firm with a pool of what can
generally be described as law-abiding workers, as that is essential in its
business of job-contracting;
(32) Defendant Resources instead sent a band of scoundrels who allowed
themselves to be misdirected and misguided by Capocyan, an attorney (?),
and national president of Obrero Pilipino (?)
x x x[5]
On January 3, 2001, Universal forged an Agreement (To End Labor Dispute)
with Obrero Pilipino.[6] Thus, the strike which affected the business
operations of Universal and Marman ended. Universal and Tan then filed a
Notice of Dismissal as against the strikers.[7]
On January 8, 2001, Resources filed a Motion to Dismiss on the grounds
that the complaint stated no cause of action against it; that, assuming the
existence of such cause of action, the same was lost upon dismissal of the
case against the individual defendants; and lack of jurisdiction.[8]
In an Order dated February 2, 2001, the RTC denied the Motion to
Dismiss.[9] Resources filed a Motion for Reconsideration[10] but it was
denied by the RTC in its Order dated May 11, 2001.[11]
On July 11, 2001, Resources filed a petition for certiorari and prohibition
with the CA.[12] On August 23, 2002, the CA rendered a Decision which set
aside the Orders dated February 2, 2001 and May 11, 2001 of the RTC and
dismissed the complaint for lack of cause of action.[13] The CA held that:
It was very clear from the allegations in the complaint that the claims of
plaintiffs (private respondents in this case) stemmed from the strike, which
resulted in the disruption of their business operations. From the four
corners of the complaint, it was apparent that the right of the plaintiffs to
operate their business was violated when the defendants, Rodolfo
Capocyan and company, staged the strike in the premises of Universal
Aquarius and Marman, thereby disrupting the plant's operations. Q.C.
Human Resources Management Corporation (the petitioner in this case)
was made defendant in the complaint only because it was the employer of
the strikers. However, subsequent events erased the cause of action of
plaintiffs, that is, when Universal Aquarius agreed to end the dispute by
giving financial assistance to the striking workers and the dismissal of the
case against them. With this turn of events, the trial court had no more issue
to resolve, and the dismissal of the complaint against the strikers necessarily
warranted the dismissal of the complaint against Q.C. Human Resources
Management Corporation because plaintiffs had no more cause of action
against it.[14]
Universal and Tan filed a Motion for Reconsideration[15] but it was denied
by the CA in its Resolution dated October 22, 2002.[16]
The present petition is anchored on the following grounds:
The Honorable Court of Appeals seriously erred in dismissing Civil Case No.
00-6829 for lack of cause of action.
The Honorable Court of Appeals seriously erred in holding that the lower
court committed grave abuse of discretion tantamount to lack of
jurisdiction when he denied the motion to dismiss filed by respondent
Resources.[17]
Universal and Tan aver that the complaint stated a cause of action against
Resources that would warrant cognizance by the RTC; the allegations of the
complaint clearly point out that Universal is suing Resources for the latter's
failure to supply the former with temporary workers who will help in its
business.
On the other hand, Resources contends that the complaint stated no cause
of action against it since there is nothing in the allegations thereof that it
participated in the acts committed by its employees.
The petition is partly impressed with merit.
5
 Section 1(g) Rule 16[18] of the 1997 Rules of Civil Procedure makes it clear
that failure to make a sufficient allegation of a cause of action in the
complaint warrants the dismissal thereof. Section 2, Rule 2 of the 1997 Rules
of Civil Procedure defines a cause of action as the act or omission by which
a party violates the right of another. It is the delict or the wrongful act or
omission committed by the defendant in violation of the primary right of
the plaintiff.[19] Its essential elements are as follows:
1. A right in favor of the plaintiff by whatever means and under whatever
law it arises or is created;
2. An obligation on the part of the named defendant to respect or not to
violate such right; and
3. Act or omission on the part of such defendant in violation of the right of
the plaintiff or constituting a breach of the obligation of the defendant to
the plaintiff for which the latter may maintain an action for recovery of
damages or other appropriate relief.[20]
It is only upon the occurrence of the last element that a cause of action
arises, giving the plaintiff the right to maintain an action in court for
recovery of damages or other appropriate relief.[21]
In Hongkong and Shanghai Banking Corporation Limited v. Catalan,[22] this
Court held:
The elementary test for failure to state a cause of action is whether the
complaint alleges facts which if true would justify the relief demanded.
Stated otherwise, may the court render a valid judgment upon the facts
alleged therein? The inquiry is into the sufficiency, not the veracity of the
material allegations. If the allegations in the complaint furnish sufficient
basis on which it can be maintained, it should not be dismissed regardless
of the defense that may be presented by the defendants.[23]
Verily, it is beside the point whether or not the allegations in the complaint
are true, for with a motion to dismiss complaint based on lack of cause of
action, the movant only hypothetically admits the truth of the facts alleged
in the complaint; that is, assuming arguendo that the facts alleged are true,
those allegations are insufficient for the court to render a valid judgment
upon the same in accordance with the prayer of the complaint.[24]
The complaint does not have to establish or allege facts proving the
existence of a cause of action at the outset; this will have to be done at the
trial on the merits of the case.[25] To sustain a motion to dismiss for lack of
cause of action, the complaint must show that the claim for relief does not
exist, rather than that a claim has been defectively stated, or is ambiguous,
indefinite or uncertain.[26]
Anent Universal's claim for breach for contract and damages, the Court is
convinced that the Complaint sufficiently states a cause of action against
Resources. The Complaint alleged that Universal had a contract of
employment of temporary workers with Resources; and that Resources
violated said contract by supplying it with unfit, maladjusted individuals who
staged a strike and disrupted its business operations. Given these
hypothetically admitted facts, the RTC, in the exercise of its original and
exclusive jurisdiction,[27] could have rendered judgment over the dispute.
However, with regard to Tan's claim for damages, the Court finds that she
has no cause of action against Resources. A thorough reading of the
allegations of the Complaint reveals that Tan's claim for damages clearly
springs from the strike effected by the employees of Resources. It is settled
that an employer's liability for acts of its employees attaches only when the
tortious conduct of the employee relates to, or is in the course of, his
employment.[28] The question then is whether, at the time of the damage
or injury, the employee is engaged in the affairs or concerns of the employer
or, independently, in that of his own. An employer incurs no liability when
an employees conduct, act or omission is beyond the range of
employment.[29] Unquestionably, when Resources' employees staged a
strike, they were acting on their own, beyond the range of their
employment. Thus, Resources cannot be held liable for damages caused by
the strike staged by its employees.
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated August
23, 2002 and Resolution dated October 22, 2002 of the Court of Appeals in
CA-G.R. SP No. 65570 are REVERSED and SET ASIDE insofar only as the
dismissal of the complaint in Civil Case No. 00-6029 for lack of cause of
6
action of Universal Aquarius, Inc. against Q.C. Human Resources
Management Corporation is concerned. The complaint against the latter is
REINSTATED. The Regional Trial Court, Branch 74, Antipolo City is DIRECTED
to continue with the proceedings on the cause of action of Universal
Aquarius, Inc. against Q.C. Human Resources Management Corporation.

The dismissal of the complaint in Civil Case No. 00-6029 for lack of cause of
action of Conchita Tan against Q.C. Human Resources Management
Corporation is AFFIRMED.

SO ORDERED.

7
HEIRS OF TOMAS DOLLETON, HERACLIO ORCULLO, REMEDIOS SAN PEDRO, In October 1997, petitioners Heirs of Tomas Dolleton,[3] Heraclio Orcullo,
HEIRS OF BERNARDO MILLAMA, HEIRS OF AGAPITO VILLANUEVA, HEIRS Remedios San Pedro, et al.,[4] Heirs of Bernardo Millama, et al.,[5] Heirs of
OF HILARION GARCIA, SERAFINA SP ARGANA, and HEIRS OF MARIANO Agapito Villanueva, et al.,[6] Heirs of Hilarion Garcia, et al.,[7] Serafina SP
VILLANUEVA, Argana, et al.,[8] and Heirs of Mariano Villanueva, et al.[9] filed before the
Petitioners, RTC separate Complaints for Quieting of Title and/or Recovery of Ownership
and Possession with Preliminary Injunction/Restraining Order and Damages
- versus – against respondents Fil-Estate Management Inc., Spouses Arturo E. Dy and
Susan Dy, Megatop Realty Development, Inc.,[10] and the Register of Deeds
FIL-ESTATE MANAGEMENT INC., ET AL. AND THE REGISTER OF DEEDS OF of Las Pias. The Complaints, which were later consolidated, were docketed
LAS PIAS CITY, as follows:
Respondents.
1. Civil Case No. L-97-0228, which was filed by the Heirs of Tomas
G.R. No. 170750 Dolleton covering a parcel of land with an area of 17,681 square meters,
Present: located in Magasawang Mangga, Barrio Pugad Lawin, Las Pias, Rizal under
Psu-235279 approved by the Director of the Bureau of Lands on 20 February
QUISUMBING,* 1959;
YNARES-SANTIAGO, J.,
Chairperson, 2. Civil Case No. L-97-0229, which was filed by Heraclio Orcullo
CARPIO MORALES,** covering two (2) parcels of land with the total areas of 14,429 square meters
CHICO-NAZARIO, and and 2,105 square meters, respectively, located in Magasawang Mangga,
PERALTA, JJ. Barrio Pugad Lawin, Las Pias, Rizal under Lots 1 and 2, Psu-169404 approved
Promulgated: by the Director of the Bureau of Lands on 4 December 1959;
April 7, 2009
x-------------------------------------------------x 3. Civil Case No. L-97-0230, which was filed by Remedios San
DECISION Pedro, et al., covering a parcel of land with an area of 17,159 square meters,
CHICO-NAZARIO, J.: located in Barrio Pugad Lawin, Las Pias, Rizal under Psu-96901 approved by
the Director of the Bureau of Lands on 21 July 1933;

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
assailing (1) the Decision[1] dated 16 September 2005, rendered by the
Court of Appeals in CA-G.R. CV No. 80927, which affirmed the Resolutions[2]
dated 8 September 2000 and 30 June 2003, of the Regional Trial Court (RTC),
Branch 253, of Las Pias City, dismissing the Complaints in Civil Cases No. LP-
97-0228, No. LP-97-0229, No. LP-97-0230, No. LP-97-0231, No. LP-97-0236,
No. LP-97-0237, No. LP-97-0238, and No. LP-97-0239; and (2) the Resolution
dated 9 December 2005 of the same court denying petitioners Motion for
Reconsideration.
4. Civil Case No. L-97-0231, which was filed by the Heirs of Bernardo
Millama, et al., covering a parcel of land with an area of 23,359 square
meters, located in Magasawang Mangga, Barrio Pugad Lawin, Las Pias, Rizal
under Psu-96905 approved by the Director of the Bureau of Lands on 16
January 1933;
5. Civil Case No. L-97-0236, which was filed by the Heirs of Agapito
Villanueva covering a parcel of land with an area of 10,572 square meters,
located in Magasawang Mangga, Barrio Pugad Lawin, Las Pias, Rizal;

8
6. Civil Case No. L-97-0237, which was filed by the Heirs of Hilarion
Garcia, et al., covering a parcel of land with an area of 15,372 square meters,
located in Magasawang Mangga, Barrio Pugad Lawin, Las Pias, Rizal under
Psu-96920 approved by the Director of the Bureau of Lands on 16 January
1933;
7. Civil Case No. L-97-0238, which was filed by Serafina SP Argana,
et al., covering a parcel of land with an area of 29,391 square meters,
located in Magasawang Mangga, Barrio Pugad Lawin, Las Pias, Rizal under
Psu-96909 approved by the Director of the Bureau of Lands on 18 January
1933; and
8. Civil Case No. L-97-0239, which was filed by the Heirs of Mariano
Villanueva, et al., covering a parcel of land with an area of 7,454 square
meters, located in Magasawang Mangga, Barrio Pugad Lawin, Las Pias, Rizal
under Psu-96910 approved by the Director of the Bureau of Lands on 16
January 1933.
The eight Complaints[11] were similarly worded and contained
substantially identical allegations. Petitioners claimed in their Complaints
that they had been in continuous, open, and exclusive possession of the
afore-described parcels of land (subject properties) for more than 90 years
until they were forcibly ousted by armed men hired by respondents in 1991.
They had cultivated the subject properties and religiously paid the real
estate taxes for the same. Respondents cannot rely on Transfer Certificates
of Title (TCTs) No. 9176, No. 9177, No. 9178, No. 9179, No. 9180, No. 9181
and No. 9182,[12] issued by the Registry of Deeds of Las Pias in their names,
to support their claim over the subject properties since, petitioners averred,
the subject properties were not covered by said certificates. Petitioners also
alleged that said TCTs, purportedly derived from Original Certificate of Title
(OCT) No. 6122, issued in favor of Jose Velasquez, were spurious.
To support their narration of facts, petitioners cited Vda. de Cailles v.
Mayuga[13] and Orosa v. Migrino,[14] which both involved the parcel of
land referred to as Lot 9, Psu-11411, Amd-2. In these cases, the Court
adjudicated said piece of land to Dominador Mayuga, who later transferred
it to Marciano Villanueva, who sold it to Nicolas Orosa. Pending a
controversy between the Heirs of Nicolas Orosa and Jose Velasquez, Delta
Motors Corporation somehow acquired the rights over their conflicting
claims to the land and managed to obtain certificates of title over the same.
Delta Motors Corporation sold the land to Goldenrod, Inc., which finally
transferred it to a consortium composed of respondents, Peaksun
Enterprises and Export Corporation, and Elena Jao.
Petitioners stressed, however, that in Vda. de Cailles and Orosa, the land
that was transferred was Lot 9, Psu-11411, Amd-2, measuring 53 hectares,
which was only a portion of the entire Lot 9, Psu-11411, with a total area of
119.8 hectares. And respondents TCTs, derived from OCT No. 6122 in the
name of Jose Velasquez, covered only 26.44 hectares or roughly half of Lot
9, Psu-11411, Amd-2. Petitioners averred that the subject properties were
not included in the 53 hectares of Lot 9, Psu-11411, adjudicated to
Dominador Mayuga.
Petitioners thus sought from the RTC that an order be issued enjoining
respondents from making any developments on the subject properties, and
that after hearing, judgment be rendered as follows:
A. [Herein respondents] be ordered to recognize the rights of [herein
petitioners]; to vacate the subject lot and peacefully surrender possession
thereof to [petitioners]; and that Transfer Certificate of Title Numbers 9176,
9177, 9178, 9179, 9180 and 9182 be cancelled by the Register of Deeds for
Las Pinas, Metro Manila, insofar as they are or may be utilized to deprive
[petitioners] of the possession and ownership of said lot.
B. Making the preliminary injunctions permanent.
C. An order be issued directing [respondents] to pay [petitioners] the sums
of:
a. P500,000.00 as moral damages;
b. P150,000.00 as exemplary damages;
c. P100,000.00 as attorneys fees; and,
d. Cost of suit.
9
[Petitioners] further pray for such other affirmative reliefs as are deemed
just and equitable in the premises.[15]
Respondents filed before the RTC a Motion to Dismiss and Opposition to
Application for a Temporary Restraining Order/Writ of Preliminary
Injunction.[16] They moved for the dismissal of the eight Complaints on the
grounds of (1) prescription; (2) laches; (3) lack of cause of action; and (4) res
judicata.[17]
Respondents argued that the Complaints sought the annulment of the
certificates of title that were issued in their names. Section 32 of
Presidential Decree No. 1529, otherwise known as the Property Registration
Decree,[18] provides that the decree of registration and the certificate of
title issued pursuant thereto can only be nullified on the ground of fraud
within one year after the entry of such decree of registration. Respondents
TCTs could be traced back to the decree/s of registration entered in
1966/1967, which resulted in the issuance of OCT No. 6122 in the name of
Jose Velasquez, respondents predecessor-in-interest. Hence, the filing of
the Complaints only in October 1997 was made beyond the prescription
period for assailing a decree of registration and/or the certificate of title
issued pursuant thereto. Additionally, petitioners Complaints were actions
for reconveyance of the subject properties based on implied trust, the filing
of which prescribes after 10 years from the time said properties were first
registered under the Torrens system, in accordance with Articles 1144 and
1456 of the Civil Code.[19] Since the subject properties were first registered
in 1966/1967, then the actions for their reconveyance, instituted only in
1997 or 30 years later, should be dismissed on the ground of
prescription.[20]
Respondents also contended that petitioners were guilty of laches. Despite
their alleged possession of the subject properties for 90 years, petitioners
failed to take any steps to oppose the land registration cases involving the
same properties or to seek the nullification of the decrees of registration
and certificates of title which were entered and issued as early as 1966 and
1967.[21]
Moreover, respondents maintained that the Complaints should be
dismissed for failure to state a cause of action. Even assuming that
petitioners were able to prove their allegations of longtime possession and
payment of realty taxes on the subject properties, and to submit a sketch
plan of the same, these cannot defeat a claim of ownership over the parcels
of land, which were already registered under the Torrens system in the
name of respondents and the other consortium members.[22]
Lastly, respondents insisted that the Complaints should be dismissed on the
ground of res judicata.[23] By virtue of the decided cases Vda. de Cailles and
Orosa, which petitioners themselves cited in their Complaints, any claims to
all portions of Lot 9, Psu 11411, Amd-2 are barred by res judicata. In said
cases, respondents predecessors-in-interest were declared owners of Lot 9,
Psu 11411, Amd-2. Respondents also referred to a Decision[24] dated 17
December 1991 rendered by the Metropolitan Trial Court (MTC) of Las Pias,
Branch 79, in Civil Case No. 3271, entitled Heirs of Benito Navarro v. Fil-
Estate Management Inc.[25] In its Decision, the MTC declared that therein
plaintiffs were not in possession of the land, which it found to belong to
respondent Fil-Estate Management Inc.
On 11 June 1998, the Heirs of Jose Velasquez (intervenors) filed a Motion
for Intervention with Leave of Court and a Complaint-in-Intervention,
alleging that the subject properties, covered by TCTs No. 9176, No. 9177,
No. 9178, No. 9179, No. 9180, and No. 9181, were once owned by the
Spouses Jose Velasquez and Loreto Tiongkiao. Without settling the conjugal
partnership after the death of his wife Loreto Tiongkiao, and without
obtaining the intervenors consent, Jose Velasquez, together with J.V.
Development Corporation, Delta Motors Corporation, and Nicolas Orosa,
transferred all their rights to the subject properties to Goldenrod, Inc., from
which respondents acquired the same. The intervenors sought the
cancellation and nullification of respondents certificates of title insofar as
their mothers share in the subject properties was concerned.[26]
On 8 September 2000, the RTC issued a Resolution[27] in Civil Case No. LP-
97-0228 granting respondents Motion to Dismiss. The trial court
determined that the subject properties were already registered in the
names of respondents, and that petitioners were unable to prove by clear
and convincing evidence their title to the said properties. The dispositive
part of the RTC Resolution reads:
On the basis of the foregoing reasons alone, the instant complaint should
immediately be DISMISSED. Accordingly, the prayer for a temporary
10
restraining order and preliminary injunction is DENIED. This, however, is
without prejudice to the complaint-in-intervention filed by intervenors over
the disputed properties, their undivided interests being intertwined and
attached to the disputed properties wherever it goes and whoever is in
possession of the same, their right to bring action to pursue the same being
imprescriptible.[28]
On 12 August 2002, respondents filed a Motion for Clarification[29] asking
the RTC whether the order of dismissal of Civil Case No. LP-97-0228,
included Civil Cases No. LP-97-0229, No. LP-97-0230, No. LP-97-0231, No.
LP-97-0236, No. LP-97-0237, No. LP-97-0238, and No. LP-97-0239. In a
Resolution[30] dated 30 June 2003, the RTC reiterated its Resolution dated
8 September 2000 dismissing the Complaint of petitioners Heirs of Tomas
Dolleton in Civil Case No. LP-97-0228; and declared that the other cases Civil
Cases No. LP-97-0229, No. LP-97-0230, No. LP-97-0231, No. LP-97-0236, No.
LP-97-0237, No. LP-97-0238, and No. LP-97-0239 were similarly dismissed
since they involved the same causes of action as Civil Case No. LP-97-0228.
On 9 July 2003, petitioners filed a consolidated Notice of Appeal
questioning the 30 June 2003 Resolution of the RTC.[31] They accordingly
filed an appeal of the said Resolution of the trial court with the Court of
Appeals, docketed as CA-G.R. CV No. 80927.
In its Decision dated 16 September 2005 in CA-G.R. CV No. 80927, the Court
of Appeals denied petitioners appeal and affirmed the RTC Resolutions
dated 8 September 2000 and 30 June 2003. The appellate court found that
respondents titles to the subject properties were indefeasible because they
were registered under the Torrens system. Thus, petitioners could not say
that any claim on the subject properties casts a cloud on their title when
they failed to demonstrate a legal or an equitable title to the same. The
Court of Appeals also ruled that petitioners actions had already prescribed.
Section 32 of Presidential Decree No. 1529 requires that an action assailing
a certificate of title should be filed within one year after its issuance.
Moreover, actions assailing fraudulent titles should be filed within 10 years
after the said titles were issued. The appellate court further decreed that
the cases for quieting of title should be dismissed based on the allegation of
petitioners themselves that the parcels of land covered by respondents
certificates of title were not the subject properties which petitioners
claimed as their own.[32]
Petitioners filed a Motion for Reconsideration of the afore-mentioned
Decision,[33] which the Court of Appeals denied in a Resolution dated 9
December 2005.[34]
Hence, the present Petition, where petitioners made the following
assignment of errors:
I
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT AFFIRMED
THE RESOLUTION OF THE COURT A QUO, DATED SEPTEMBER 8, 2000 AND
THE RESOLUTION DATED JUNE 30, 2003, BASED PURELY ON THE
TECHNICALITY OF THE LAW RATHER THAN THE LAW THAT PROTECT[S] THE
PROPERTY RIGHTS OF THE PETITIONERS WHO WERE FORCIBLY EVICTED
FROM THEIR RESPECTIVE LANDHOLDINGS BY THE USED (sic) OF BRUTE
FORCE OF ARMED MEN ON THE BASIS OF THE TITLES OF THE PRIVATE
RESPONDENTS, IN VIOLATION OF THEIR PROPERTY RIGHTS AND OF DUE
PROCESS.
II
THAT THE COURT OF APPEALS GRAVELY ERRED WHEN IT AFFIRMED THE
RESOLUTION OF THE COURT A QUO, DESPITE THE FACT THAT A FULL BLOWN
HEARING ON THE MERIT[S] IS NECESSARY TO DETERMINE THE ACTUAL
LOCATION ON THE ACTUAL GROUND [OF] THE LOTS COVERED BY THE
PRIVATE RESPONDENT (sic) TITLES, LOTS COVERED BY ITS TITLES ARE MORE
THAN THREE HUNDRED (300 m) METERS AWAY TO THE WEST-NORTHWEST
FROM THE CONSOLIDATED LOTS OF THE HEREIN PETITIONERS AND
THEREFORE PRIVATE RESPONDENTS BRUTAL ACTION IN FORCIBLY EVICTING
THE PETITIONERS FROM THEIR RESPECTIVE LANDHOLDINGS BY THE USED
(sic) OF BRUTE FORCE OF ARMED MEN, ARE PURELY CASES OF
LANDGRABBING.[35]
This Petition is meritorious.
The main issue in this case is whether the RTC properly granted
respondents motion to dismiss. This Court finds that the trial court erred in
dismissing petitioners Complaints.
Complaints sufficiently stated a cause of action.
11
Respondents seek the dismissal of petitioners Complaints for failure to state
a cause of action. Even assuming as true that the subject properties have
been in the possession of petitioners and their predecessors-in-interest for
90 years; that petitioners have been paying the realty taxes thereon; and
that petitioners are able to submit a sketch plan of the subject properties,
respondents maintain that their ownership of the subject properties,
evidenced by certificates of title registered in their names, cannot be
defeated. This contention is untenable.
Respondents mistakenly construe the allegations in petitioners Complaints.
What petitioners alleged in their Complaints was that while the subject
properties were not covered by respondents certificates of title,
nevertheless, respondents forcibly evicted petitioners therefrom. Hence, it
is not simply a question of whether petitioners possession can defeat
respondents title to registered land. Instead, an initial determination has to
be made on whether the subject properties were in fact covered by
respondents certificates of title.
Section 2, Rule 2 of the Rules of Civil Procedure defines a cause of action as
the act or omission by which a party violates the right of another. Its
essential elements are as follows: (1) a right in favor of the plaintiff by
whatever means and under whatever law it arises or is created; (2) an
obligation on the part of the named defendant to respect or not to violate
such right; and (3) 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 or other appropriate relief. [36]
The elementary test for failure to state a cause of action is whether the
complaint alleges facts which if true would justify the relief demanded. The
inquiry is into the sufficiency, not the veracity, of the material allegations. If
the allegations in the complaint furnish sufficient basis on which it can be
maintained, it should not be dismissed regardless of the defense that may
be presented by the defendant.[37]
This Court is convinced that each of the Complaints filed by petitioners
sufficiently stated a cause of action. The Complaints alleged that petitioners
are the owners of the subject properties by acquisitive prescription. As
owners thereof, they have the right to remain in peaceful possession of the
said properties and, if deprived thereof, they may recover the same. Section
428 of the Civil Code provides that:
Article 428. The owner has the right to enjoy and dispose of a thing without
other limitations than those established by law.
The owner has also a right of action against the holder and possessor of the
thing in order to recover it.
Petitioners averred that respondents had violated their rights as owner of
the subject properties by evicting the former therefrom by means of force
and intimidation. Respondents allegedly retained possession of the subject
properties by invoking certificates of title covering other parcels of land.
Resultantly, petitioners filed the cases before the RTC in order to recover
possession of the subject properties, to prevent respondents from using
their TCTs to defeat petitioners rights of ownership and possession over said
subject properties, and to claim damages and other reliefs that the court
may deem just and equitable.
The Court notes that petitioners prayer for the cancellation of respondents
certificates of title are inconsistent with their allegations. Petitioners prayed
for in their Complaints that, among other reliefs, judgment be rendered so
that Transfer Certificate of Title Numbers 9176, 9177, 9178, 9179, 9180,
9181, and 9182 be cancelled by the Register of Deeds for Las Pias, Metro
Manila, insofar as they are or may be utilized to deprive plaintiffs of
possession and ownership of said lot. Yet, petitioners also made it plain that
the subject properties, of which respondents unlawfully deprived them,
were not covered by respondents certificates of title. It is apparent that the
main concern of petitioners is to prevent respondents from using or
invoking their certificates of title to deprive petitioners of their ownership
and possession over the subject properties; and not to assert a superior
right to the land covered by respondents certificates of title. Admittedly,
while petitioners can seek the recovery of the subject properties, they
cannot ask for the cancellation of respondents TCTs since petitioners failed
to allege any interest in the land covered thereby. Still, the other reliefs
sought by petitioners, i.e., recovery of the possession of the subject
properties and compensation for the damages resulting from respondents
forcible taking of their property, are still proper.
12
Petitioners Complaints should not have been dismissed despite the seeming
error made by petitioners in their prayer. To sustain a motion to dismiss for
lack of cause of action, the complaint must show that the claim for relief
does not exist, rather than that a claim has been defectively stated, or is
ambiguous, indefinite or uncertain.[38]
Complaints are not barred by prescription and laches.
In their Motion to Dismiss, respondents argued that petitioners cases were
barred by prescription, in accordance with Section 32 of the Property
Registration Decree and Articles 1144(2) and 1456 of the Civil Code.
Respondents relied on the premise that the actions instituted by petitioners
before the RTC were for the reopening and review of the decree of
registration and reconveyance of the subject properties.
Section 32 of the Property Registration Decree provides that a decree of
registration may be reopened when a person is deprived of land or an
interest therein by such adjudication or confirmation obtained by actual
fraud. On the other hand, an action for reconveyance respects the decree
of registration as incontrovertible but seeks the transfer of property, which
has been wrongfully or erroneously registered in other persons names, to
its rightful and legal owners, or to those who claim to have a better
right.[39] In both instances, the land of which a person was deprived should
be the same land which was fraudulently or erroneously registered in
another persons name, which is not the case herein, if the Court considers
the allegations in petitioners Complaints.
As previously established, petitioners main contention is that the subject
properties from which they were forcibly evicted were not covered by
respondents certificates of title. Stated differently, the subject properties
and the land registered in respondents names are not identical.
Consequently, petitioners do not have any interest in challenging the
registration of the land in respondents names, even if the same was
procured by fraud.
While petitioners improperly prayed for the cancellation of respondents
TCTs in their Complaints, there is nothing else in the said Complaints that
would support the conclusion that they are either petitions for reopening
and review of the decree of registration under Section 32 of the Property
Registration Decree or actions for reconveyance based on implied trust
under Article 1456 of the Civil Code. Instead, petitioners Complaints may be
said to be in the nature of an accion reivindicatoria, an action for recovery
of ownership and possession of the subject properties, from which they
were evicted sometime between 1991 and 1994 by respondents. An accion
reivindicatoria may be availed of within 10 years from dispossession.[40]
There is no showing that prescription had already set in when petitioners
filed their Complaints in 1997.
Furthermore, the affirmative defense of prescription does not
automatically warrant the dismissal of a complaint under Rule 16 of the
Rules of Civil Procedure. An allegation of prescription can effectively be used
in a motion to dismiss only when the Complaint on its face shows that
indeed the action has already prescribed. [41] If the issue of prescription is
one involving evidentiary matters requiring a full-blown trial on the merits,
it cannot be determined in a motion to dismiss.[42] In the case at bar,
respondents must first be able to establish by evidence that the subject
properties are indeed covered by their certificates of title before they can
argue that any remedy assailing the registration of said properties or the
issuance of the certificates of title over the same in the names of
respondents or their predecessors-in-interest has prescribed.
Neither can the Court sustain respondents assertion that petitioners
Complaints were barred by laches.
Laches has been defined as the failure of 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; or to assert a right within
reasonable time, warranting a presumption that the party entitled thereto
has either abandoned it or declined to assert it. Thus, the doctrine of laches
presumes that the party guilty of negligence had the opportunity to do what
should have been done, but failed to do so. Conversely, if the said party did
not have the occasion to assert the right, then, he cannot be adjudged guilty
of laches. Laches is not concerned with the mere lapse of time; rather, the
party must have been afforded an opportunity to pursue his claim in order
that the delay may sufficiently constitute laches.[43]
Again, going back to petitioners chief claim that the subject properties are
distinct from the land covered by respondents certificates of title, then,
13
petitioners would have no standing to oppose the registration of the latter
property in the names of respondents or their predecessors-in-interest, or
to seek the nullification of the certificates of title issued over the same.
It also appears from the records that the RTC did not conduct a hearing to
receive evidence proving that petitioners were guilty of laches. Well-settled
is the rule that the elements of laches must be proven positively. Laches is
evidentiary in nature, a fact that cannot be established by mere allegations
in the pleadings and cannot be resolved in a motion to dismiss. At this stage,
therefore, the dismissal of petitioners Complaints on the ground of laches is
premature. Those issues must be resolved at the trial of the case on the
merits, wherein both parties will be given ample opportunity to prove their
respective claims and defenses.[44]
Complaints are not barred by res judicata.
Lastly, respondents argued in their Motion to Dismiss that petitioners
Complaints are barred by res judicata, citing Vda. de Cailles and Orosa.
Likewise, petitioners are barred from instituting any case for recovery of
possession by the MTC Decision in Civil Case No. 3271.
Res judicata refers to the rule that 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 on all points and matters determined in the
former suit. Res judicata has two concepts: (1) bar by prior judgment as
enunciated in Rule 39, Section 47 (b) of the Rules of Civil Procedure; and (2)
conclusiveness of judgment in Rule 39, Section 47 (c).
There is bar by prior judgment when, as between the first case where the
judgment was rendered, and the second case that is sought to be barred,
there is identity of parties, subject matter, and causes of action. But where
there is identity of parties and subject matter in the first and second cases,
but no identity of causes of action, the first judgment is conclusive only as
to those matters actually and directly controverted and determined and not
as to matters merely involved therein. There is conclusiveness of judgment.
Under the doctrine of conclusiveness of judgment, facts and issues actually
and directly resolved in a former suit cannot again be raised in any future
case between the same parties, even if the latter suit may involve a different
claim or cause of action. The identity of causes of action is not required but
merely identity of issues.[45]
Vda. de Cailles and Orosa cannot bar the filing of petitioners Complaints
before the RTC under the doctrine of conclusiveness of judgment, since they
involve entirely different subject matters. In both cases, the subject matter
was a parcel of land referred to as Lot 9 Psu-11411 Amd-2, while subject
matter of the petitioners Complaints are lots which are not included in the
said land.
It follows that the more stringent requirements of res judicata as bar by
prior judgment will not apply to petitioners Complaints. In Vda. de Cailles,
the Court confirmed the ownership of Dominador Mayuga over a 53-
hectare parcel of land located in Las Pias, Rizal, more particularly referred
to as Lot 9, Psu-11411, Amd-2. The Court also recognized that Nicolas Orosa
was Dominador Mayugas successor-in-interest. However, the judgment in
said case was not executed because the records of the Land Registration
Authority revealed that the property had previously been decreed in favor
of Jose T. Velasquez, to whom OCT No. 6122 was issued. During the
execution proceedings, Goldenrod Inc. filed a motion to intervene, the
granting of which by the trial court was challenged in Orosa. The Court held
in Orosa that Goldenrod, Inc., despite having acquired the opposing rights
of Nicolas Orosa and Jose T. Velasquez to the property sometime in 1987,
no longer had any interest in the same as would enable it to intervene in the
execution proceedings, since it had already sold its interest in February 1989
to the consortium composed of respondents, Peaksun Enterprises and
Export Corporation, and Elena Jao.
The adjudication of the land to respondents predecessors-in-interest in
Vda. de Cailles and Orosa is not even relevant to petitioners Complaints.
According to petitioners allegations in their Complaints, although the
subject properties were derived from the 119.8-hectare parcel of land
referred to as Lot 9, Psu-11411, they are not included in the 53-hectare
portion thereof, specifically identified as Lot 9, Psu-11411, Amd-2, subject
of Vda. de Cailles and Orosa. This was the reason why petitioners had to cite
Vda. de Cailles and Orosa: to distinguish the subject properties from the
land acquired by respondents and the other members of the consortium.
There clearly being no identity of subject matter and of parties, then, the
rulings of this Court in Vda. de Cailles and Orosa do not bar by prior
14
judgment Civil Cases No. LP-97-0228, No. LP-97-0229, No. LP-97-0230, No.
LP-97-0231, No. LP-97-0236, No. LP-97-0237, No. LP-97-0238, and No. LP-
97-0239 instituted by petitioners in the RTC.
The Court is aware that petitioners erroneously averred in their Complaints
that the subject properties originated from Psu-11411, Lot 9, Amd-2,
instead of stating that the said properties originated from Psu-11411, Lot 9.
However, this mistake was clarified in later allegations in the same
Complaints, where petitioners stated that Psu-114, Lot 9 consists of 1,
198,017 square meters, or 119.8 hectares when converted, while Psu-
11411, Lot 9, Amd-2 referred to a 53-hectare parcel. Petitioners pointed out
that in Vda. de Cailles and Orosa, the Court acknowledged the ownership
[of respondents predecessor-in-interest] only over a fifty-three (53) hectare
parcel, more particularly referred to as Lot 9 Psu-11411, Amd-2. Thus,
petitioners argued that the rights which respondents acquired from Mayuga
and Orosa cover[ed] only 531, 449 square meters or 53 hectares of Psu-
11411, Lot 9. They do not extend to the latters other portion of 1,198, 017
square meters part of which [petitioners] had been occupying until they
were forcibly evicted by [respondents]. Accordingly, the single statement in
the Complaints that the subject properties originated from Lot 9, Psu-
11411, Amd-2, is an evident mistake which cannot prevail over the rest of
the allegations in the same Complaints.
Similarly, the Decision dated 17 December 1991 of the MTC in Civil Case No.
3271 cannot bar the filing of petitioners Complaints before the RTC because
they have different subject matters. The subject matter in Civil Case No.
3271 decided by the MTC was the parcel of land covered by TCTs No. 9176,
No. 9177, No. 9178, No. 9179, No. 9180, and No. 9181, in the name of
respondents and the other consortium members; while, according to
petitioners allegations in their Complaints, the subject matters in Civil Cases
No. LP-97-0228, No. LP-97-0229, No. LP-97-0230, No. LP-97-0231, No. LP-
97-0236, No. LP-97-0237, No. LP-97-0238, and No. LP-97-0239, before the
RTC, are the subject properties which are not covered by respondents
certificates of title.
The MTC, in its 17 December 1991 Decision in Civil Case No. 3271 found
that:
The subject parcels of land are covered by (TCT) Nos. 9176, 9177, 9178,
9179, [9180], [9181] and 9182 (Exhs. 1 to 7, Defendants) all issued in the
name of defendant Fil-Estate Management, Inc. It appears from the
evidence presented that defendant Fil-Estate purchased the said property
from Goldenrod, Inc. It also appears from the evidence that the subject
property at the time of the purchase was then occupied by
squatters/intruders. By reason thereof, the Municipality of Las Pias
conducted in 1989 a census of all structures/shanties on subject property.
Those listed in the census were relocated by defendant, which relocation
program started in 1990 up to the present. Interestingly, however, all of the
plaintiffs herein except the Almas, were not listed as among those in
possession of defendants land as of November 1989.
xxxx
In fine, plaintiffs have not clearly established their right of possession over
the property in question. They claim ownership, but no evidence was ever
presented to prove such fact. They claim possession from time immemorial.
But the Census prepared by Las Pias negated this posture.[46] (Emphasis
provided.)
The determination by the MTC that petitioners were not occupants of the
parcels of land covered by TCTs No. 9176, No. 9177, No. 9178, No. 9179, No.
9180, and No. 9181 cannot bar their claims over another parcel of land not
covered by the said TCTs. It should also be noted that petitioners Heirs of
Agapito Villanueva do not appear to be plaintiffs in Civil Case No. 3271 and,
therefore, cannot be bound by the MTC Decision therein.
In all, this Court pronounces that respondents failed to raise a proper
ground for the dismissal of petitioners Complaints. Petitioners claims and
respondents opposition and defenses thereto are best ventilated in a trial
on the merits of the cases.
IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The Decision
dated 16 September 2005 and Resolution dated 9 December 2005 of the
Court of Appeals in CA-G.R. CV No. 80927 are REVERSED and SET ASIDE. Let
the records of the case be remanded for further proceedings to the Regional
15
Trial Court, Branch 253, of Las Pias City, which is hereby ordered to try and
decide the case with deliberate speed.

SO ORDERED.

16
J MARKETING CORPORATION represented by its Branch Manager respondent a Memorandum[4] requiring him to submit a formal resignation
ELMUNDO DADOR, letter. On February 15, 1993, respondent filed his resignation letter.[5]
Petitioner,
On July 26, 1993, respondent filed with the National Labor Relations
- versus - Commission (NLRC), Regional Arbitration Branch No. VIII, Tacloban City a
complaint[6] for illegal dismissal and holiday differential. He claimed that
CESAR L. TARAN, there was a verbal arrangement between him and petitioner whereby the
Respondent. latter would pay him 100% separation pay and other benefits, provided that
he would formally tender his resignation from the company.[7] But after
G.R. No. 163924 several follow-ups, petitioner failed to pay respondent his monetary
Present: claims;[8] hence, the latter was constrained to file a complaint.
YNARES-SANTIAGO, J.,
Chairperson, Petitioner, on the other hand, postulated that respondent, as credit
CHICO-NAZARIO, collector/investigator, was given a collection quota per month. However, in
VELASCO, JR., 1991 and 1992, he failed to meet the same.[9] It added that respondent was
NACHURA, and also subjected to an investigation for illegal custody of a colored television
PERALTA, JJ. unit in violation of the company rules or policies.[10] In February 1993,
Promulgated: respondent verbally informed petitioner of his decision to resign.[11] On
June 18, 2009 February 15, 1993, he sent a letter of voluntary resignation, stating that he
x---------------------------------------------------x was resigning due to ill health effective March 1, 1993.[12] Petitioner
DECISION contended that respondent's dismissal was justified, because he failed to
PERALTA, J.: meet his collection quota, in which poor performance compelled him to
voluntarily resign due to inefficiency.[13]
The instant petition[1] for review assails the Decision[2] and Resolution[3]
of the Court of Appeals dated September 4, 2003 and March 8, 2004, On March 20, 1995, the Labor Arbiter rendered a Decision[14] in favor of
respectively, in CA-G.R. SP No. 71155. respondent and ordered petitioner to pay him P39,600.00 as separation
pay, P8,126.13 representing 30% of rest day pay from February 1984 to
February 1993, plus 10% attorney's fees; or a total award of P52,498.74.
The facts, as culled from the records, follow.
On petitioner's appeal,[15] the NLRC rendered a Decision[16] affirming with
From February 1981 to February 28, 1993, Cesar L. Taran (respondent) modification the Labor Arbiter's Decision by reducing the amount of rest
worked as credit investigator/collector for J Marketing Corporation day pay to P2,970.00 for the period February 1990 to February 1993 only.
(petitioner), an appliance and motorcycle dealer with a branch in Tacloban Petitioner moved for reconsideration,[17] but the NLRC denied the same in
City. its Resolution[18] dated March 15, 2002.

Sometime in February 1993, respondent informed petitioner's then Officer-

in-Charge (OIC) Branch Manager Hector L. Caludac (Caludac) of his intention
to resign effective March 1, 1993. On February 13, 1993, Caludac sent Undaunted, petitioner filed with the Court of Appeals (CA) a petition for
certiorari[19] contending that the NLRC committed grave abuse of
17
discretion in ordering the payment of separation pay, rest day pay and
attorney's fees to respondent in spite of the latter's voluntary resignation
from his job. In its Decision[20] dated September 4, 2003, the CA denied the
petition for lack of merit in fact and in law. Petitioner filed a motion for
reconsideration,[21] but the same was denied in the Resolution[22] dated
March 8, 2004.
Hence, the present petition.
Instead of alleging reversible error, petitioner imputes grave abuse of
discretion to the CA when it affirmed the NLRC Decision because, in truth
and in fact respondent is not entitled to any benefit having resigned from
petitioner voluntarily.[23]
Such erroneous imputation, notwithstanding, the Court shall still proceed
to resolve the present petition. Although the Rules of Court specify
reversible errors as grounds for a petition for review under Rule 45, the
Court will lay aside for the nonce this procedural lapse and consider the
allegations of grave abuse as statements of reversible errors of law.[24]
Essentially, the Court is tasked to resolve the sole question of whether or
not respondent is entitled to any benefit under the law after having resigned
voluntarily.
Respondent claimed that his resignation was not voluntary in the sense that
he would not have tendered his resignation letter if not for the verbal
arrangement he had with Caludac that petitioner would pay him 100%
separation pay and other benefits. He maintained that without such an
assurance, he would not have agreed to terminate his services, as [n]o one
who is in his right senses and having served [the] management for more
than 11 years will resign from his job if he cannot avail the benefits due
him.[25] He also stated that, in fact, it was the management that prepared
the resignation letter, and he merely affixed his signature thereto. He
explained that he allowed the resignation letter[26] to be worded as such
because Caludac assured him that such would pave the way for the early
grant of all the benefits due him.[27]
Petitioner, on the other hand, countered that respondent's resignation was
voluntary, and that he was neither coerced nor forced to resign. It
contended that respondent's resignation was triggered by his physical
illness, which made him inefficient in his assigned work. It also denied the
existence of a verbal agreement between respondent and Caludac or any of
its officials, claiming that the initiative to resign came from respondent
alone.[28] As for respondent's claim for rest day differential, petitioner
argued that the same had no basis, considering that it had already paid all
the monetary benefits due to all its employees under the law.[29]
The Labor Arbiter, the NLRC, and the CA all agreed that there was a verbal
agreement between Caludac and respondent, without which the latter
would not have tendered his resignation letter. The CA Decision quoted the
Labor Arbiter's disquisition on this matter, to wit:
That complainant submitted a resignation letter is uncontroverted. Our
findings reveal that before complainant submitted his resignation letter, he
had verbal agreement with the Regional Manager that he had to formally
tender his resignation from the company to entitle him to a grant of 100%
separation pay. This verbal agreement can be inferred from the tenor of the
letter sent to him on February 13, 1993, by Mr. J (sic) Caludac, Branch OIC,
which states:
Upon receipt of this memo. Head Office requires you to submit a formal
Resignation letter [in] which you verbally inform the Regional Manager of
your intention to resign.
In this connection[,] you have 24 hours to prepare and submit for final
review and proper evaluation to Head Office your main duty and
responsibility as CI/collector.
For your strict compliance.
(Annex 'A', p. 24, Record).
A reading of the memorandum especially the phrase which you verbally
inform the Regional Manager of your intention to resign, positively suggests
that there was a prior arrangement between complainant and the Regional
Manager of the former's intention to resign. Why would complainant inform
18
the Regional Manager beforehand of his intention to resign? The
presumption that can be drawn from the said statement is that he had been
given some sort of an assurance of some benefits from the company. Notice
again the tenor of the last paragraph of his resignation letter, as it seeks the
indulgence of management.
x--------------
'I hope my resignation be granted and whatever help the management can
extend to me and my family, I would highly appreciate it.'
xxxx
Moreover, one further proof that there was a prior arrangement to grant
complainant his separation pay is the letter (Annex 'B') of Regional
Manager-Visayas, Vicente Chan to Asst. Gen. Manager Eduardo S. Go, that
the reason why complainant filed the instant case was the failure of
respondent to pay the separation pay as previously agreed upon. (Annex 'B',
p. 57, Record).
Complainant had complied with the requirement of respondent to file a
formal letter of resignation before the benefit of separation pay could be
given to him. Unfortunately[,] and for unknown reasons, respondent
reneged on that promise. He was thus virtually left hanging on to an empty
bag of false promises and deceit.[30]
We do not see any reason to depart from the findings of the three (3)
tribunals regarding the existence of a verbal agreement between
respondent and Caludac, which agreement was the underlying reason for
respondent's submission of his resignation letter.
We have held time and again that factual findings of labor administrative
officials that are supported by substantial evidence are accorded great
respect and finality, absent a showing that they arbitrarily disregarded or
misapprehended evidence of such nature as to compel a contrary
conclusion if properly appreciated. The Supreme Court does not review
supposed errors in the decisions of quasi-judicial agencies that raise factual
issues because this Court is essentially not a trier of facts.[31]
Well-settled is the rule that the jurisdiction of this Court in a petition for
review on certiorari under Rule 45 of the Revised Rules of Court is limited to
reviewing only errors of law, not of fact, unless the factual findings
complained of are completely devoid of support from the evidence on
record, or the assailed judgment is based on a gross misapprehension of
facts.[32] None of the exceptions to the general rule is present in this case.
Having said that, We shall now determine whether petitioner is liable to pay
respondent his separation pay and other benefits due him.
It is well to note that there is no provision in the Labor Code that grants
separation pay to voluntarily resigning employees. Separation pay may be
awarded only in cases when the termination of employment is due to (a)
installation of labor-saving devices, (b) redundancy, (c) retrenchment, (d)
closing or cessation of business operations, (e) disease of an employee and
his continued employment is prejudicial to himself or his co-employees, or
(f) when an employee is illegally dismissed but reinstatement is no longer
feasible. In fact, the rule is that an employee who voluntarily resigns from
employment is not entitled to separation pay, except when it is stipulated
in the employment contract or collective bargaining agreement (CBA), or it
is sanctioned by established employer practice or policy.[33]
Here, respondent was separated from his employment not on the grounds
mentioned above. Neither was there a stipulation in his employment
contract or CBA or even a company practice or policy that would grant
separation pay to employees who voluntarily resigned. Nevertheless, the
labor tribunals as well as the CA resolved to grant respondent his prayer for
separation pay, explaining that he deserved to receive the same as a gratuity
for his loyalty and long service to the company, not to mention the
representation of Caludac that he would be given all the benefits due him.
We agree. Clearly, the primary consideration that impelled respondent to
tender his resignation letter was the assurance that he would be paid his
separation pay. It is thus unlikely for someone to just leave his employer for
whom he has worked for twelve (12) years without any expectation of
financial assistance. This We can glean from respondent's resignation letter
stating: I hope my resignation be granted and whatever help the
management can extend to me and my family, I would highly appreciate it.
19
In Alfaro v. Court of Appeals,[34] We held that as a general rule, separation
pay need not be paid to an employee who voluntarily resigns. However, an
employer who agrees to expend such benefit as an incident of the
resignation should not be allowed to renege on the fulfillment of such
commitment. In this case, Caludac, as OIC Branch Manager in Tacloban City,
represented petitioner and was responsible for overseeing respondent's
work in pursuance of the company's goal of an increase in sales and
customer satisfaction. Such control was manifested through the
communications of Caludac to respondent regarding the latter's
performance.[35] Corollarily, We cannot fault respondent for relying on
Caludac's representations and promises, as in fact it was to him that he first
verbally relayed his plan to resign from the company. Not only the CA, but
also the Labor Arbiter and the NLRC, that was convinced that without the
assurance of payment of benefits, respondent would not have tendered his
resignation letter.
Significantly, respondent initially filed a complaint for illegal dismissal.
However, he did not pursue such course of action and focused instead on
his claim for separation pay. It is thus immaterial that petitioner ventilates
the issue of dismissal or the matter of respondent's failure to meet his sales
quota. And even assuming that these matters are relevant here, We are in
accord with the NLRC's finding that Caludac must have initiated the talk
regarding respondent's resignation in view of his recent poor performance.
In one case,[36] We held that there is nothing illegal with this approach.
Indeed, the practice of allowing an employee to resign, instead of
terminating him for just cause so as not to smear his employment record, is
commonly practiced in some companies.
As aptly held by the NLRC, petitioner, through Caludac, sweetened the pot
by promising respondent not only an alternative venue for exit voluntary
resignation but also the payment of his separation benefits. There could
have been no other reason for respondent to leave his employment other
than the promise of payment of almost P40,000.00 by way of separation
benefits, which, back in 1993, was already a substantial amount. In the end,
it will all boil down to Caludac's representation that respondent would be
given his separation benefits, and sooner would it be awarded to him, only
if he would tender his resignation letter at the pretext that he was physically
ill, a condition that made him inefficient in his assigned work.
Anent respondent's claim for rest day pay differential, We likewise uphold
the disposition of the NLRC, thus:
Finally, We are also not convinced by respondent's position that being a
monthly paid employee, complainant is not entitled to rest day pay. An
examination of the vouchers submitted by respondent showed that while
complainant was paid bi-monthly, he was actually paid on the number of
days worked. Thus, every time he is absent, he will not be paid for the day.
He is for all intents and purposes, a daily paid employee. As such, he has to
be paid rest day pay when he works on his rest days. With complainant's
categorical assertion that he worked during his rest days especially in the
month of December, the Labor arbiter did not err in awarding him rest day
pay. There is however a need to modify this award to cover only the period
from July 1990 up to July 1993 as the claim before 1990 had already
prescribed.
Under Article 291 of the Labor Code, all money claims arising from
employer-employee relations shall be filed within three (3) years from the
time the cause of action accrued; otherwise, they shall forever be barred. It
is settled jurisprudence that a cause of action has three elements, to wit, (1)
a right in favor of the plaintiff by whatever means and under whatever law
it arises or is created; (2) an obligation on the part of the named defendant
to respect or not to violate such right; and (3) an act or omission on the part
of such defendant violative of the right of the plaintiff or constituting a
breach of the obligation of the defendant to the plaintiff.[37]
In the computation of the three-year prescriptive period, a determination
must be made as to the time when the act constituting a violation of the
workers right to the benefits being claimed was committed. For if the cause
of action accrued more than three (3) years before the filing of the money
claim, said cause of action has already prescribed in accordance with Article
291 of the Labor Code.
Respondent filed his claim for rest day differential in July 1993. It follows
then that he is only entitled to his rest day pay within the three-year period
counted from the time of the filing of his complaint, or from July 1990. Thus,
the NLRC correctly ruled that respondent's claim before July 1990 had
already prescribed in accordance with Article 291 of the Labor Code.
20
WHEREFORE, premises considered, the instant Petition is DENIED. The
Court of Appeals Decision dated September 4, 2003 and Resolution dated
March 8, 2004, in CA-G.R. SP No. 71155, are hereby AFFIRMED.

SO ORDERED.

21
[ G.R. No. 3019, February 09, 1907 ]
LA COMPAÑIA GENERAL DE TABACOS DE FILIPINAS, PLAINTIFF AND
APPELLEE, VS. VICENTE ARAZA, DEFENDANT AND APPELLANT.
DECISION
WILLARD, J.:
The plaintiff brought this action in the court below to foreclose a mortgage
for 8,000 pesos upon certain land in the Province of Leyte. A demurrer to
the complaint was overruled, but to the order overruling it the defendant
did not except. The defendant answered, alleging that the document, the
basis of the plaintiff's claim, was executed through error on his part and
through fraud on the part of the plaintiff. A trial was had and judgment was
entered for the plaintiff as prayed for in its complaint. The defendant moved
for a new trial on the ground that the decision was not justified by the
evidence, this motion was denied, to its denial the defendant excepted, and
he has brought the case here for review.
Upon the questions of fact raised by the answer, the findings of the court
below are sustained by the evidence, and in no event can they be said to be
plainly and manifestly against the weight of the evidence. Those findings
include a finding that there was no fraud on the part of the plaintiff, no
mistake on the part of the defendant, and that there was a sufficient
consideration for the contract. As has been said, there was evidence in the
case to support all of these conclusions.
The court below gave no credit for the payment of 400 pesos admitted by
the complaint to have been received by the plaintiff. It also allowed interest
upon the entire debt from the 1st day of July, 1901. The contract does not
provide for the payment of any interest. There is no provision in it declaring
expressly that the failure to pay when due should put the debtor in default.
There was therefore no default which would make him liable for interest
until a demand was made. (Civil Code, art. 1100; Manresa, Com. on Civil
Code, vol 8, p. 56.) The transaction did not constitute a mercantile loan and
article 316 of the Code of Commerce is not applicable. There was no
evidence of any demand prior to the presentation of the complaint. The
plaintiff is therefore entitled to interest only from the commencement of
the action.
The judgment is set aside and the case is remanded to the court below with
directions to determine the amount due in accordance with the views
hereinbefore expressed and to enter judgment for such amount. No costs
will be allowed to either party in this court. So ordered.

Upon one point, however, we think that the judgment was erroneous. The
contract sued upon was executed on the 11th day of June, 1901. By the
terms thereof the defendant promised to pay the plaintiff 8,000 pesos as
follows: 500 pesos on the 30th of June, 1901, and the remainder at the rate
of 100 pesos a month, payable on the 30th day of each month, until the
entire 8,000 pesos was paid. The defendant paid 400 pesos and no more.

This suit was commenced on the 12th day of June, 1903. There was no
provision in the contract by which, upon failure to pay one installment of
the debt, the whole debt should thereupon become at once payable. We
are of the opinion that the obligation can be enforced in this action only for
the amount due and payable on the 12th day of June, 1903.

22
[ GR No. 120639, Sep 25, 1998 ]
BPI EXPRESS CARD CORPORATION v. CA +
DECISION
357 Phil. 262
KAPUNAN, J.:
The question before this Court is whether private respondent can recover
moral damages arising from the cancellation of his credit card by petitioner
credit card corporation.
The facts of the case are as stated in the decision of the respondent court,[1]
to wit:
The case arose from the dishonor of the credit card of the plaintiff Atty.
Ricardo J. Marasigan by Cafe Adriatico, a business establishment accredited
with the defendant-appellant BPI Express Card Corporation (BECC for
brevity) on December 8, 1989 when the plaintiff entertained some guests
thereat.
The records of this case show that plaintiff, who is a lawyer by profession
was a complimentary member of BECC from February 1988 to February
1989 and was issued Credit Card No. 100-012-5534 with a credit limit of
P3,000.00 and with a monthly billing every 27th of the month (Exh. N),
subject to the terms and conditions stipulated in the contract (Exh. 1-b). His
membership was renewed for another year or until February 1990 and the
credit limit was increased to P5,000.00 (Exh. A). The plaintiff oftentimes
exceeded his credit limits (Exhs. I, I-1 to I-12) but this was never taken
against him by the defendant and even his mode of paying his monthly bills
in check was tolerated. Their contractual relations went on smoothly until
his statement of account for October, 1989 amounting to P8,987.84 was not
paid in due time. The plaintiff admitted having inadvertently failed to pay
his account for the said month because he was in Quezon province
attending to some professional and personal commitments. He was
informed by his secretary that defendant was demanding immediate
payment of his outstanding account, was requiring him to issue a check for
P15,000.00 which would include his future bills, and was threatening to
suspend his credit card. Plaintiff issued Far East Bank and Trust Co. Check
No. 494675 in the amount of P15,000.00, postdated December 15, 1989
which was received on November 23, 1989 by Tess Lorenzo, an employee
of the defendant (Exhs. J and J-1), who in turn gave the said check to Jeng
Angeles, a co-employee who handles the account of the plaintiff. The check
remained in the custody of Jeng Angeles. Mr. Roberto Maniquiz, head of the
collection department of defendant was formally informed of the postdated
check about a week later. On November 28, 1989, defendant served plaintiff
a letter by ordinary mail informing him of the temporary suspension of the
privileges of his credit card and the inclusion of his account number in their
Caution List. He was also told to refrain from further use of his credit card
to avoid any inconvenience/embarrassment and that unless he settles his
outstanding account with the defendant within 5 days from receipt of the
letter, his membership will be permanently cancelled (Exh. 3). There is no
showing that the plaintiff received this letter before December 8, 1989.
Confident that he had settled his account with the issuance of the postdated
check, plaintiff invited some guests on December 8, 1989 and entertained
them at Café Adriatico. When he presented his credit card to Café Adriatico
for the bill amounting to P735.32, said card was dishonored. One of his
guests, Mary Ellen Ringler, paid the bill by using her own credit card, a
Unibankard (Exhs. M, M-1 and M-2).
In a letter addressed to the defendant dated December 12, 1989, plaintiff
requested that he be sent the exact billing due him as of December 15, 1989,
to withhold the deposit of his postdated check and that said check be
returned to him because he had already instructed his bank to stop the
payment thereof as the defendant violated their agreement that the
plaintiff issue the check to the defendant to cover his account amounting to
only P8,987.84 on the condition that the defendant will not suspend the
effectivity of the card (Exh. D). A letter dated December 16, 1989 was sent
by the plaintiff to the manager of FEBTC, Ramada Branch, Manila requesting
the bank to stop the payment of the check (Exhs. E, E-1). No reply was
received by plaintiff from the defendant to his letter dated December 12,
1989. Plaintiff sent defendant another letter dated March 12, 1990
reminding the latter that he had long rescinded and cancelled whatever
arrangement he entered into with defendant and requesting for his correct
billing, less the improper charges and penalties, and for an explanation
within five (5) days from receipt thereof why his card was dishonored on
December 8, 1989 despite assurance to the contrary by defendant's
personnel-in-charge, otherwise the necessary court action shall be filed to
hold defendant responsible for the humiliation and embarrassment
suffered by him (Exh. F). Plaintiff alleged further that after a few days, a
23
certain Atty. Albano, representing himself to be working with office of Atty.
Lopez, called him inquiring as to how the matter can be threshed out
extrajudicially but the latter said that such is a serious matter which cannot
be discussed over the phone. The defendant served its final demand to the
plaintiff dated March 21, 1990 requiring him to pay in full his overdue
account, including stipulated fees and charges, within 5 days from receipt
thereof or face court action also to replace the postdated check with cash
within the same period or face criminal suit for violation of the Bouncing
Check Law (Exh. G/Exh. 13). The plaintiff, in a reply letter dated April 5, 1990
(Exh. H), demanded defendant's compliance with his request in his first
letter dated March 12, 1990 within three (3) days from receipt, otherwise
the plaintiff will file a case against them, x x x.[2]
Thus, on May 7, 1990 private respondent filed a complaint for damages
against petitioner before the Regional Trial Court of Makati, Branch 150,
docketed as Civil Case No. 90-1174.
After trial, the trial court ruled for private respondent, finding that herein
petitioner abused its right in contravention of Article 19 of the Civil Code.[3]
The dispositive portion of the decision reads:
Wherefore, judgment is hereby rendered ordering the defendant to pay
plaintiff the following:
1. P100,000.00 as moral damages;
2. P50,000.00 as exemplary damages; and
3. P20,000.00 by way of attorney's fees.
On the other hand, plaintiff is ordered to pay defendant its outstanding
obligation in the amount of P14,439.41, amount due as of December 15,
1989.[4]
The trial court's ruling was based on its findings and conclusions, to wit:
There is no question that plaintiff had been in default in the payment of his
billings for more than two months, prompting defendant to call him and
reminded him of his obligation. Unable to personally talk with him, this
Court is convinced that somehow one or another employee of defendant
called him up more than once.
However, while it is true that, as indicated in the terms and conditions of
the application for BPI credit card, upon failure of the cardholder to pay his
outstanding obligation for more than thirty (30) days, the defendant can
automatically suspend or cancel the credit card, that reserved right should
not have been abused, as it was in fact abused, in plaintiff's case. What is
more peculiar here is that there have been admitted communications
between plaintiff and defendant prior to the suspension or cancellation of
plaintiff's credit card and his inclusion in the caution list. However, nowhere
in any of these communications was there ever a hint given to plaintiff that
his card had already been suspended or cancelled. In fact, the Court
observed that while defendant was trying its best to persuade plaintiff to
update its account and pay its obligation, it had already taken steps to
suspend/cancel plaintiff's card and include him in the caution list. While the
Court admires defendant's diplomacy in dealing with its clients, it cannot
help but frown upon the backhanded way defendant dealt with plaintiff's
case. For despite Tess Lorenzo's denial, there is reason to believe that
plaintiff was indeed assured by defendant of the continued honoring of his
credit card so long as he pays his obligation of P15,000.00. Worst, upon
receipt of the postdated check, defendant kept the same until a few days
before it became due and said check was presented to the head of the
collection department, Mr. Maniquiz, to take steps thereon, resulting to the
embarrassing situation plaintiff found himself in on December 8, 1989.
Moreover, Mr. Maniquiz himself admitted that his request for plaintiff to
replace the check with cash was not because it was a postdated check but
merely to tally the payment with the account due.
Likewise, the Court is not persuaded by the sweeping denials made by Tess
Lorenzo and her claim that her only participation was to receive the subject
check. Her immediate superior, Mr. Maniquiz testified that he had
instructed Lorenzo to communicate with plaintiff once or twice to request
the latter to replace the questioned check with cash, thus giving support to
the testimony of plaintiff's witness, Dolores Quizon, that it was one Tess
Lorenzo who she had talked over the phone regarding plaintiff's account
and plaintiff's own statement that it was this woman who assured him that
his card has not yet been and will not be cancelled/suspended if he would
pay defendant the sum of P15,000.00.
24
Now, on the issue of whether or not upon receipt of the subject check,
defendant had agreed that the card shall remain effective, the Court takes
note of the following:
1. An employee of defendant corporation unconditionally accepted the
subject check upon its delivery, despite its being a postdated one; and the
amount did not tally with plaintiff's obligation;
2. Defendant did not deny nor controvert plaintiff's claim that all his
payments were made in checks;
3. Defendant's main witness, Mr. Maniquiz, categorically stated that the
request for plaintiff to replace his postdated check with cash was merely for
the purpose of tallying plaintiff's outstanding obligation with his payment
and not to question the postdated check;
4. That the card was suspended almost a week after receipt of the postdated
check;
5. That despite the many instances that defendant could have informed
plaintiff over the phone of the cancellation or suspension of his credit card,
it did not do so, which could have prevented the incident of December 8,
1989, the notice allegedly sent thru ordinary mail is not only unreliable but
takes a long time. Such action as suspension of credit card must be
immediately relayed to the person affected so as to avoid embarrassing
situations.
6. And that the postdated check was deposited on December 20, 1989.
In view of the foregoing observations, it is needless to say that there was
indeed an arrangement between plaintiff and the defendant, as can be
inferred from the acts of the defendant's employees, that the subject credit
card is still good and could still be used by the plaintiff as it would be
honored by the duly accredited establishment of defendant.[5]
Not satisfied with the Regional Trial Court's decision, petitioner appealed to
the Court of Appeals, which, in a decision promulgated on March 9, 1995
ruled in its dispositive portion:
WHEREFORE, premises considered, the decision appealed from is hereby
AFFIRMED with the MODIFICATION that the defendant-appellant shall pay
the plaintiff-appellee the following: P50,000.00 as moral damages;
P25,000.00 as exemplary damages; and P10,000.00 by way of attorney's
fees.
SO ORDERED.[6]
Hence, the present petition on the following assignment of errors:
I
THE LOWER COURT ERRED IN DECLARING THAT THERE WAS INDEED AN
AGREEMENT OR ARRANGEMENT ENTERED INTO BETWEEN THE PARTIES
WHEREIN THE DEFENDANT REQUIRED THE PLAINTIFF TO ISSUE A
POSTDATED CHECK IN ITS FAVOR IN THE AMOUNT OF P15,000.00 AS
PAYMENT FOR HIS OVERDUE ACCOUNTS, WITH THE CONDITION THAT THE
PLAINTIFF'S CREDIT CARD WILL NOT BE SUSPENDED OR CANCELLED.
II
THE LOWER COURT ERRED IN HOLDING DEFENDANT LIABLE FOR DAMAGES
AND ATTORNEY'S FEES ARISING OUT FROM THE DISHONOR OF THE
PLAINTIFF'S CREDIT CARD.[7]
We find the petition meritorious.
The first issue to be resolved is whether petitioner had the right to suspend
the credit card of the private respondent.
Under the terms and conditions of the credit card, signed by the private
respondent, any card with outstanding balances after thirty (30) days from
original billing/statement shall automatically be suspended, thus:
PAYMENT OF CHARGES - BECC shall furnish the Cardholder a monthly
statement of account made through the use of the CARD and the Cardholder
agrees that all charges made through the use of the CARD shall be paid by
the Cardholder on or before the last day for payments, which is twenty (20)
days from the date of the said statement of account, and such payment due
date may be changed to an earlier date if the Cardholder's account is
considered overdue and/or with balances in excess of the approved credit
limit; or to such other date as may be deemed proper by the CARD issuer
with notice to the Cardholder on the same monthly statement of account.
25
If the last day for payment falls on a Saturday, Sunday or Holiday, the last his original billing/statement dated 27 September 1989. Neither did he
day for payment automatically becomes the last working day prior to said make payment for his original billing/statement dated 27 October 1989.
payment date. However, notwithstanding the absence or lack of proof of Consequently, as early as 28 October 1989, thirty days from the non-
service of the statement of charges to the Cardholder, the latter shall pay payment of his billing dated 27 September 1989, petitioner corporation
any or all charges made through the use of the CARD within thirty (30) days could automatically suspend his credit card.
from the date or dates thereof. Failure of Cardholder to pay any and all
charges made through the CARD within the payment period as stated in the The next issue is whether prior to the suspension of private respondent's
statement of charges or within thirty (30) days from actual date or dates credit card on 28 November 1989, the parties entered into an agreement
whichever occur earlier, shall render him in default without the necessity of whereby the card could still be used and would be duly honored by duly
demand from BECC, which the Cardholder expressly waives. These charges accredited establisments.
or balance thereof remaining unpaid after the payment due date indicated
on the monthly statement of account shall bear interest at the rate of 3% We agree with the findings of the respondent court, that there was an
per month and an additional penalty fee equivalent to another 3% of the arrangement between the parties, wherein the petitioner required the
amount due for every month or a fraction of a month's delay. PROVIDED, private respondent to issue a check worth P15,000 as payment for the
that if there occurs any change on the prevailing market rates. BECC shall latter's billings. However, we find that the private respondent was not able
have the option to adjust the rate of interest and/or penalty fee due on the to comply with his obligation.
outstanding obligation with prior notice to the Cardholder.
As the testimony of private respondent himself bears out, the agreement
xxx xxx xxx was for the immediate payment of the outstanding account:
Q
Any CARD with outstanding balances unpaid after thirty (30) days from In said statement of account that you are supposed to pay the P8,974.84
original billing/statement date shall automatically be suspended, and those the charge of interest and penalties, did you note that?
with accounts unpaid after sixty (60) days from said original A
billing/statement date shall automatically be cancelled, without prejudice Yes, sir. I noted the date.
to BECC's right to suspend or cancel any CARD any time and for whatever Q
reason. In case of default in his obligation as provided for in the preceding When?
paragraph, Cardholder shall surrender his CARD to BECC and shall in A
addition to the interest and penalty charges aforementioned, pay the When I returned from the Quezon province, sir.
following liquidated damages and/or fees (a) a collection fee of 25% of the Q
amount due if the account is referred to a collection agency or attorney; (b) When?
a service fee of P100 for every dishonored check issued by the Cardholder A
in payment of his account, with prejudice, however, to BECC's right of I think November 22, sir.
considering Cardholder's obligation unpaid, cable cost for demanding Q
payment or advising cancellation of membership shall also be for So that before you used again the credit card you were not able to pay
Cardholder's account; and (c) a final fee equivalent to 25% of the unpaid immediately this P8,987.84 in cash?
balance, exclusive of litigation expenses and judicial costs, if the payment of A
the account is enforced through court action.[8] I paid P15,000.00, sir.
The aforequoted provision of the credit card cannot be any clearer. By his Q
own admission, private respondent made no payment within thirty days for
26
My question Mr. Witness is, did you pay this P8,987.84 in charge of interest Clearly, the purpose of the arrangement between the parties on November
and penalties immediately in cash? 22, 1989, was for the immediate payment of the private respondent's
A outstanding account, in order that his credit card would not be suspended.
In cash no, but in check, sir.
Q As agreed upon by the parties, on the following day, private respondent did
You said that you noted the word "immediately" in bold letters in your issue a check for P15,000. However, the check was postdated 15 December
statement of account, why did you not pay immediately? 1989. Settled is the doctrine that a check is only a substitute for money and
A not money, the delivery of such an instrument does not, by itself operate as
Because I received that late, sir. payment.[9] This is especially true in the case of a postdated check.
Q
Yes, on November 22 when you received from the secretary of the Thus, the issuance by the private respondent of the postdated check was
defendant telling you to pay the principal amount of P8,987.84, why did you not effective payment. It did not comply with his obligation under the
not pay? arrangement with Miss Lorenzo. Petitioner corporation was therefore
A justified in suspending his credit card.
There was a communication between me and the defendant, I was required
to pay P8,000.00 but I paid in check for P15,000.00, sir. Finally, we find no legal and factual basis for private respondent's assertion
Q that in canceling the credit card of the private respondent, petitioner
Do you have any evidence to show that the defendant required you to pay abused its right under the terms and conditions of the contract.
in check for P15,000.00?
A To find the existence of an abuse of right under Article 19 the following
Yes, sir. elements must be present: (1) There is a legal right or duty; (2) which is
Q exercised in bad faith; (3) for the sole intent of prejudicing or injuring
Where is it? another.[10]
A
It was by telecommunication, sir. Time and again this Court has held that good faith is presumed and the
Q burden of proving bad faith is on the party alleging it.[11] This private
So there is no written communication between you and the defendant? respondent failed to do. In fact, the action of the petitioner belies the
A existence of bad faith. As early as 28 October 1989, petitioner could have
There was none, sir. suspended private respondent's card outright. Instead, petitioner allowed
Q private respondent to use his card for several weeks. Petitioner had even
There is no written agreement which says that P8,987.84 should be paid for notified private respondent of the impending suspension of his credit card
P15,000.00 in check, there is none? and made special accommodations for him for settling his outstanding
A account. As such, petitioner cannot be said to have capriciously and
Yes, no written agreement, sir. arbitrarily canceled the private respondent's credit card.
Q
And you as a lawyer you know that a check is not considered as cash We do not dispute the findings of the lower court that private respondent
specially when it is postdated sent to the defendant? suffered damages as a result of the cancellation of his credit card. However,
A there is a material distinction between damages and injury. Injury is the
That is correct, sir. illegal invasion of a legal right; damage is the loss, hurt, or harm which
27
results from the injury; and damages are the recompense or compensation
awarded for the damage suffered. Thus, there can be damage without injury
in those instances in which the loss or harm was not the result of a violation
of a legal duty. In such cases, the consequences must be borne by the
injured person alone, the law affords no remedy for damages resulting from
an act which does not amount to a legal injury or wrong. These situations
are often called damnum absque injuria.[12]
In other words, in order that a plaintiff may maintain an action for the
injuries of which he complains, he must establish that such injuries resulted
from a breach of duty which the defendant owed to the plaintiff - a
concurrence of injury to the plaintiff and legal responsibility by the person
causing it. The underlying basis for the award of tort damages is the premise
that an individual was injured in contemplation of law. Thus, there must first
be a breach of some duty and the imposition of liability for that breach
before damages may be awarded;[13] and the breach of such duty should
be the proximate cause of the injury.
We therefore disagree with the ruling of the respondent court that the
dishonor of the credit card of the private respondent by Café Adriatico is
attributable to petitioner for its willful or gross neglect to inform the private
respondent of the suspension of his credit card, the unfortunate
consequence of which brought social humiliation and embarrassment to the
private respondent.[14]
It was petitioner's failure to settle his obligation which caused the
suspension of his credit card and subsequent dishonor at Café Adriatico. He
can not now pass the blame to the petitioner for not notifying him of the
suspension of his card. As quoted earlier, the application contained the
stipulation that the petitioner could automatically suspend a card whose
billing has not been paid for more than thirty days. Nowhere is it stated in
the terms and conditions of the application that there is a need of notice
before suspension may be effected as private respondent claims.[15]
This notwithstanding, on November 28, 1989, the day of the suspension of
private respondent's card, petitioner sent a letter by ordinary mail notifying
private respondent that his card had been temporarily suspended. Under
the Rules on Evidence, there is a disputable presumption that letters duly
directed and mailed were received on the regular course of mail.[16] Aside
from the private respondent's bare denial, he failed to present evidence to
rebut the presumption that he received said notice. In fact upon cross
examination, private respondent admitted that he did received the letter
notifying him of the cancellation:
Q
Now you were saying that there was a first letter sent to you by the
defendant?
A
Your letter, sir.
Q
Was that the first letter that you received?
A
Yes, sir.
Q
Is it that there was a communication first between you and the defendant?
A
There was none, sir. I received a cancellation notice but that was after
November 27.[17]
As it was private respondent's own negligence which was the proximate
cause of his embarrassing and humiliating experience, we find the award of
damages by the respondent court clearly unjustified. We take note of the
fact that private respondent has not yet paid his outstanding account with
petitioner.
IN VIEW OF THE FOREGOING, the decision of the Court of Appeals ordering
petitioner to pay private respondent P100,000.00 as moral damages,
P50,000.00 as exemplary damages and P20,000.00 as attorney's fees, is SET
ASIDE. Private respondent is DIRECTED to pay his outstanding obligation
with the petitioner in the amount of P14,439.41.
SO ORDERED.
28
[G.R. No. 142313. March 1, 2001]
SPOUSES MANUEL CHU, SR. and CATALINA B. CHU, the former substituted
by THEANLYN B. CHU, THEAN CHING LEE B. CHU, THEAN LEEWN B. CHU
and MARTIN LAWRENCE B. CHU, the latter represented by his mother and
guardian ad litem, petitioner CATALINA B. CHU, petitioners, vs. BENELDA
ESTATE DEVELOPMENT CORPORATION, respondent.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the Decision[1] and
Resolution[2]of the Court of Appeals[3], dated November 29, 1999 and
March 14, 2000, respectively, which reversed the Order[4] dated March 30,
1998 of the Regional Trial Court of Pampanga, Branch 52, denying
respondents motion to dismiss as well as the Order denying respondents
motion for reconsideration, dated May 26, 1998.
The petitioners spouses Manuel Chu, Sr. and Catalina Chu (the former
substituted by Theanlyn Chu, Thean Ching Lee Chu, Thean Leewn Chu, and
Martin Lawrence Chu) were the registered owners of five (5) parcels of land
situated in Barrio Saguin, San Fernando, Pampanga, covered and described
in Transfer Certificate of Title Nos. 198470-R, 198471-R, 198472-R, 198473-
R and 199556-R of the Registry of Deeds of the province of Pampanga.
On September 30, 1986, the petitioners executed a deed of sale with
assumption of mortgage in favor of Trinidad N. Cunanan in consideration of
P5,161,090.00. Although Cunanan has actually an unpaid balance of
P2,561,090.00, it was made to appear in the deed of sale that the total
consideration had been fully paid to enable Cunanan to have the parcels of
land registered in her name so that she could mortgage the same to secure
a loan and thereupon pay from the proceeds of the loan the said balance of
P2,561,090.00. Their agreement, however, was that the ownership of the
properties shall remain with the petitioners until full payment of the
balance of the total purchase price. Trinidad N. Cunanan was thus able to
cause the cancellation of the said titles registered in the name of the
petitioners spouses Manuel Chu, Sr. and Catalina Chu and in lieu thereof the
issuance of TCTs No. 239278-R, No. 239376-R, No. 239279-R, No. 239277-R,
and No. 239280-R which are all registered in her name.
Cunanan failed to pay the balance of the total purchase price to the
petitioners. Without the knowledge of the petitioners, Cunanan sold the
three (3) parcels of land to Cool Town Realty and Development Corporation,
and the two (2) other parcels of land subject of the instant case and covered
by TCT Nos. 239276-R and 239277-R to the spouses Amado and Gloria
Carlos. The spouses Carlos, in turn, sold these two (2) properties to the
respondent Benelda Estate Development Corporation.
Petitioners commenced Civil Case No. G-1936 before the Regional Trial
Court of Pampanga against Trinidad N. Cunanan, Cool Town Realty and
Development Corporation and the Register of Deeds of Pampanga. The
petitioners amended their complaint to include respondent Benelda Estate
Development Corporation as a defendant, alleging, insofar as the latter is
concerned that:
13. That in order to cause financial damage and irreparable injury to the
original plaintiffs, defendant Trinidad N. Cunanan without any lawful right
and authority whatsoever sold the remaining two (2) parcels of land
involved in this case previously covered by Transfer Certificates of Title Nos.
239276-R and 239277-R registered in her name (formerly embraced by
Transfer Certificates of Titles Nos. 198471-R and 198472-R in the names of
the original plaintiffs) in favor of the spouses AMADO E. CARLOS and GLORIA
A. CARLOS, who like defendant Cool Town Realty and Development
Corporation are not also buyers for value and in good faith of the subject
two (2) parcels of land as shown by Transfer Certificates of Titles Nos.
247026-R and 246947-R both of the Register of Deeds of Pampanga, whose
xerox copies are hereto attached respectively as Annexes G, G-1, G-2, H, and
H-1 hereof.
14. That likewise in order to cause further financial damage and prejudice
to the plaintiffs, the spouses AMADO E. CARLOS AND GLORIA A. CARLOS,
who have never acquired valid titles over the two (2) parcels of land
previously embraced by Transfer Certificates of Titles Nos. 247026-R and
246947-R both of the Registry of Deeds of Pampanga registered in their
names referred to in the immediately preceding paragraph sold the same
two (2) parcels of land on November 13, 1995 in favor of defendant
29
BENELDA ESTATE DEVELOMENT CORPORATION as shown by the
corresponding Deed of Absolute Sale, whose xerox copy is hereto attached
as Annexes I and I-2 hereof.
15. That in view of the fact that the ownership of the five (5) parcels of land
in issue in this case legally remains with the plaintiffs, the deed of
conveyances executed by defendant Trinidad N. Cunanan relative to the
subject five (5) parcels of land in litigation in favor of defendant Cool Town
Realty & Development Corporation and in favor of the spouses Amado L.
Carlos and Gloria A. Carlos and the deed of absolute sale dated November
13, 1995 executed by the spouses Amado E. Carlos and Gloria A. Carlos on
lot 4224-A-2 of the subdivision plan previously covered by Transfer
Certificate of Title No. 246947-R and Lot 4224-A-3 of the subdivision plan
formerly embraced by Transfer Certificate of Title No. 247026-R both of the
Registry of Deeds of Pampanga in favor of defendant BENELDA ESTATE
DEVELOPMENT CORPORATION, which are among the five (5) parcels of land
involved in this case are all null and void, consequently the said deed of
conveyances did not vest valid title of ownership over the said five (5)
parcels of land in controversy in favor of defendant COOL TOWN REALTY
DEVELOPMENT CORPORATION and BENELDA ESTATE DEVELOPMENT
CORPORATION because defendant Trinidad N. Cunanan, who has never
been an owner of any of the five (5) parcels of land in dispute cannot validly
and legally transfer the ownership thereof in favor of any person
whomsoever.
16. That despite demands made by the plaintiffs to the defendants, the
latter unjustifiably failed and refused as they still fail and refuse to reconvey
the five (5) parcels of land to the said plaintiffs.[5]
The respondent filed its answer with a motion to dismiss on the ground,
among others, that the amended complaint states no cause of action
against herein respondent. It alleged that respondent corporation, through
its officers, acted in good faith in buying the properties inasmuch as it
exerted all efforts to verify the authenticity of the titles and that no defect
was found therein. After the petitioner filed an opposition to the motion to
dismiss, the trial court rendered a decision denying the motion to dismiss.
The respondent filed a petition for certiorari under Rule 65 of the Rules of
Court before the Court of Appeals alleging that the trial court committed
grave abuse of discretion in denying its motion to dismiss the amended
complaint. The Court of Appeals reversed the order of the trial court and
dismissed the case as against herein respondent on the ground of lack of
cause of action and for failure of the petitioners to include the spouses
Carlos as indispensable parties in the complaint.
Petitioner raises the following assignments of error:
I
WITH ALL DUE RESPECT TO THIS HONORABLE COURT CONTRARY TO ITS
CONCLUSION IN ITS DECISION SOUGHT TO BE SET ASIDE, PETITIONERS
AMENDED COMPLAINT DATED JUNE 9, 1997 STATES A VALID CAUSE OF
ACTION AGAINST RESPONDENT BENELDA ESTATE DEVELOPMENT
CORPORATION.
II
WITH ALL DUE RESPECT TO THIS HONORABLE COURT THE SPOUSES AMADO
E. CARLOS AND GLORIA A. CARLOS ARE NOT REAL AND INDISPENSABLE
PARTIES IN THE CASE AT BENCH.
III
IT IS RESPECTFULLY SUBMITTED THAT THE AVERMENTS MADE IN THAT
DEED OF ABSOLUTE SALE, WHOSE XEROX COPY IS ATTACHED AS ANNEXES
1 AND 1-2 OF THE AMENDED COMPLAINT INVOLVED IN THIS CASE TO THE
EFFECT THAT THE SPOUSES AMADO E. CARLOS AND GLORIA A. CARLOS
WARRANTED VALID TITLES TO AND POSSESSION OF THE PROPERTIES SOLD
AND CONVEYED AND THAT THEIR TITLES THERETO ARE FREE AND CLEAR OF
ALL LIENS AND ENCUMBRANCES OF ANY KIND WHATSOEVER CANNOT BE
VALIDLY CONSIDERED IN DETERMINING WHETHER OR NOT PETITIONERS
AMENDED COMPLAINT DATED JUNE 9, 1997 STATES A VALID CAUSE OF
ACTION AGAINST RESPONDENT.
IV
IT IS RESPECTFULLY SUBMITTED THAT THE SPOUSES AMADO E. CARLOS AND
GLORIA A. CARLOS CANNOT TRANSFER VALID TITLE TO THE TWO (2)
30
PARCELS OF LAND INVOLVED IN THIS PETITION WHICH THEY THEMSELVES
DO NOT HAVE.
V xxx
IT IS RESPECTFULLY SUBMITTED THAT THE EXTRAORDINARY WRIT OF
CERTIORARI IS NOT AVAILABLE TO CHALLENGE THE ASSAILED ORDERS OF
MARCH 30, 1998 AND MAY 26, 1998 WHICH ARE BOTH INTERLOCUTORY IN
CHARACTER.
A cause of action is defined as an act or omission by which a party violates
a right of another.[6] The test of the sufficiency of the facts found in a
petition as constituting a cause of action is whether or not, admitting the
facts alleged, the court can render a valid judgment upon the same in
accordance with the prayer thereof.[7]
In land title cases, this Court has time and again held that a person dealing
with registered land may safely rely on the correctness of the certificate of
title issued therefor and the law will in no way oblige him to go behind the
certificate to determine the condition of the property.[8] This person is
considered in law as an innocent purchaser for value who is defined as one
who buys the property of another, without notice that some other person
has a right or interest in such property and pays a full price for the same, at
the time of such purchase or before he has notice of the claims or interest
of some other person in the property.[9] In this connection, Section 53 of
Presidential Decree No. 1529, otherwise known as the Property Registration
Decree, provides that:
Presentation of owners duplicate upon entry of new certificates. -No
voluntary instrument shall be registered by the Register of Deeds, unless the
owners duplicate certificate is presented with such instrument, except in
cases expressly provided for in this Decree or upon order of the court, for
cause shown.
The production of the owners duplicate certificate, whenever any voluntary
instrument is presented for registration, shall be conclusive authority from
the registered owner to the Register of Deeds to enter a new certificate or
to make a memorandum of registration in accordance with such instrument,
and the new certificate or memorandum shall be binding upon the
registered owner and upon all persons claiming under him, in favor of every
purchaser for value and in good faith. [Italics Supplied]
Thus, a title procured through fraud and misrepresentation can still be the
source of a completely legal and valid title if the same is in the hands of an
innocent purchaser for value.[10]
In a case for annulment of title, therefore, the complaint must allege that
the purchaser was aware of the defect in the title so that the cause of action
against him will be sufficient. Failure to do so, as in the case at bar, is fatal
for the reason that the court cannot render a valid judgment against the
purchaser who is presumed to be in good faith in acquiring the said
property. Failure to prove, much less impute, bad faith on said purchaser
who has acquired a title in his favor would make it impossible for the court
to render a valid judgment thereon due to the indefeasibility and
conclusiveness of his title.
We find that the Court of Appeals did not err in dismissing the amended
complaint insofar as the respondent is concerned. The amended complaint
and the annexes thereto did not allege bad faith on the part of the
respondent corporation. In fact, respondents claim that it bought the two
(2) parcels of land in good faith are supported by the Annexes I and I-2
(Deeds of Absolute Sale) attached to petitioners amended complaint. These
deeds executed by the spouses Carlos in favor of herein private respondent
state that the spouses Carlos warranted valid title(s) to and possession of
the properties sold and conveyed, and furthermore declare that their titles
thereto are free and clear of all liens and encumbrances of any kind
whatsoever.[11] There is no way for the trial court to render judgment
against herein respondent whose title to the subject parcels of land remains
indefeasible and conclusive, there being no allegation in the amended
complaint that it allegedly acquired the said properties in bad faith.
Petitioners contend that since the ground of respondents motion to dismiss
is lack of cause of action, the allegations in the amended complaint are
hypothetically assumed to be true or admitted, and consequently the
respondents claim of good faith is defeated by its knowledge of the allegedly
admitted facts in the amended complaint regarding the fraudulent
31
circumstances involving the passing of the titles. We find that the technical
or assumed admission on the part of respondent, in such an event, does not
defeat its status as an innocent purchaser for value. The defense of good
faith of respondent is valid for the reason that such mental disposition was
present at the time it purchased those two (2) parcels of land from the
Carlos spouses up to the time the corresponding two (2) transfer certificates
of title thereto were issued in its favor. What is important is that when
respondent bought the subject properties, it was not aware of any defect in
the covering certificates of title thereto at the time of such purchase. There
is no allegation to the contrary in the amended complaint. Therefore, the
title of respondent, being that of an innocent purchaser for value, remains
valid.
discretion amounting to lack or excess of jurisdiction, as in the case at bar,
the aggrieved party may assail the order of denial on certiorari. A wide
breadth of discretion is granted in certiorari proceedings in the interest of
substantial justice and to prevent a substantial wrong.[13] The appellate
court therefore was correct in entertaining the petition for the reason that
the trial court committed a grave abuse of discretion when it refused to
dismiss the case as against herein respondent, despite the obvious
insufficiency of the amended complaint against the respondent. To implead
the herein respondent in the case at bar, absent an allegation of bad faith
on its part, is to undermine a well-settled rule protecting innocent
purchasers for value and the indefeasibility and conclusiveness of
certificates of title issued under the Torrens System.

By allowing the cancellation of their certificates of title and the issuance of In view of the foregoing, there is no need to discuss the assignment of error
new ones in lieu thereof in the name of Trinidad N. Cunanan despite alleged as to whether the spouses Amado E. Carlos and Gloria A. Carlos (sellers of
non-payment of the full purchase price for their subject two (2) parcels of the subject titled parcels of land to respondent) are real and indispensable
land, the petitioners took the risk of losing their titles on the said properties parties in the case at bar.
inasmuch as the subject deed of sale with assumption of mortgage
constitutes their consent and announcement to the whole world that WHEREFORE, the petition is DENIED for lack of cause of action. With costs
Cunanan was indeed the legal owner of the properties by virtue of the said against the petitioners.
deed which is a public document.
SO ORDERED.
Petitioners reliance on Mathay v. Court of Appeals[12] which held that No
one can transfer a greater right to another than he himself has is not
applicable to the instant case for the reason that the said legal maxim,
according to the same case, only holds true if the same land had already
been registered and an earlier certificate for the same is in existence. In the
case at bar, the petitioners no longer have any title to the subject two (2)
parcels of land inasmuch as petitioners spouses Manuel Chu, Sr. and
Catalina B. Chu, as sellers, have consented to the cancellation of their
certificates of title in favor of Cunanan, as buyer. Thus, the conclusiveness
of respondents certificates of title is binding on the whole world including
the petitioners.

Petitioners also claim that since the orders of the trial court denying their
motion to dismiss are merely interlocutory, the same cannot be the subject
of a petition for certiorari. However, as correctly pointed out by the
respondent, the rule admits of an exception. Thus, where the denial of the
motion to dismiss by the trial court was tainted with grave abuse of
32
[ G.R. NO. 172175, October 09, 2006 ]
SPS. EXPEDITO ZEPEDA AND ALICE D. ZEPEDA, PETITIONERS, VS. CHINA
BANKING CORPORATION, RESPONDENT.
DECISION
YNARES-SANTIAGO, J.:
This petition for review under Rule 45 of the Rules of Court assails the
January 24, 2006 Decision[1] of the Court of Appeals in CA-G.R. SP No. 89148
granting respondent China Banking Corporation's (Chinabank) petition to
annul the Orders dated April 1, 2004[2] and October 22, 2004[3] of the
Regional Trial Court of San Jose, Camarines Sur, Branch 30,[4] in Civil Case
No. T-947. Also assailed is the March 31, 2006 Resolution[5] denying
petitioners' motion for reconsideration.
The facts are as follows.
On February 18, 2003, spouses Expedito and Alice Zepeda filed a complaint
for nullification of foreclosure proceedings and loan documents with
damages[6] against respondent Chinabank before the Regional Trial Court
of San Jose, Camarines Sur, which was docketed as Civil Case No. T-947 and
raffled to Branch 30. They alleged that on June 28, 1995, they obtained a
loan in the amount of P5,800,000.00 from respondent secured by a Real
Estate Mortgage over a parcel of land covered by Transfer Certificate of Title
(TCT) No. T-23136.
Petitioners subsequently encountered difficulties in paying their loan
obligations hence they requested for restructuring which was allegedly
granted by Chinabank. Hence, they were surprised when respondent bank
extrajudicially foreclosed the subject property on October 9, 2001 where it
emerged as the highest bidder. Respondent bank was issued a Provisional
Certificate of Sale and upon petitioners' failure to redeem the property,
ownership was consolidated in its favor.
According to petitioners, the foreclosure proceedings should be annulled
for failure to comply with the posting and publication requirements. They
also claimed that they signed the Real Estate Mortgage and Promissory Note
in blank and were not given a copy and the interest rates thereon were
unilaterally fixed by the respondent.
Respondent bank's motion to dismiss was denied, hence it filed an answer
with special affirmative defenses and counterclaim. It also filed a set of
written interrogatories with 20 questions.
In an Order dated April 1, 2004, the trial court denied Chinabank's
affirmative defenses for lack of merit as well as its motion to expunge the
complaint for being premature. The trial court reiterated its denial of
Chinabank's affirmative defenses in its Order dated October 22, 2004 and
directed the Clerk of Court to set the pre-trial conference for the marking of
the parties' documentary evidence.
Aggrieved, respondent bank filed a petition for certiorari under Rule 65
which was granted by the Court of Appeals. It held that the trial court
gravely abused its discretion in issuing the two assailed Orders. It ruled that
compelling reasons warrant the dismissal of petitioners' complaint because
they acted in bad faith when they ignored the hearings set by the trial court
to determine the veracity of Chinabank's affirmative defenses; they failed
to answer Chinabank's written interrogatories; and the complaint states no
cause of action.
On March 31, 2006, petitioners' motion for reconsideration was denied
hence, the instant petition raising the following issues:
THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT ISSUED THE ASSAILED DECISION DECLARING THAT THE
PETITIONER[S'] COMPLAINT DATED 12 FEBRUARY 2003 HAS NO CAUSE OF
ACTION.
CAUSE OF ACTION HAS BEEN SUFFICIENTLY ESTABLISHED IN THE
COMPLAINT AND THE GROUND RELIED UPON BY THE PRIVATE
RESPONDENT BANK ARE MERE EVIDENTIARY MATTERS.[7]
The issues for resolution are: a) whether the complaint states a cause of
action and b) whether the complaint should be dismissed for failure of
petitioners to answer respondent's written interrogatories as provided for
in Section 3(c), Rule 29 of the Rules of Court.
The petition is meritorious.
33
Anent the first issue, the Court of Appeals ruled that the complaint failed to
state a cause of action because petitioners admitted that they failed to
redeem the property and that ownership of the same was consolidated in
the name of Chinabank.
A cause of action is a formal statement of the operative facts that give rise
to a remedial right. The question of whether the complaint states a cause
of action is determined by its averments regarding the acts committed by
the defendant. Thus it "must contain a concise statement of the ultimate
or essential facts constituting the plaintiff's cause of action." Failure to make
a sufficient allegation of a cause of action in the complaint "warrants its
dismissal."[8]
As defined in Section 2, Rule 2 of the Rules of Court, a cause of action is the
act or omission by which a party violates the right of another. Its essential
elements are as follows:
A right in favor of the plaintiff by whatever means and under whatever law
it arises or is created;
An obligation on the part of the named defendant to respect or not to
violate such right; and
Act or omission on the part of such defendant in violation of the right of the
plaintiff or constituting a breach of the obligation of the defendant to the
plaintiff for which the latter may maintain an action for recovery of damages
or other appropriate relief.
It is, thus, only upon the occurrence of the last element that a cause of
action arises, giving the plaintiff the right to maintain an action in court for
recovery of damages or other appropriate relief.[9] In determining whether
an initiatory pleading states a cause of action, "the test is as follows:
admitting the truth of the facts alleged, can the court render a valid
judgment in accordance with the prayer?" To be taken into account are only
the material allegations in the complaint; extraneous facts and
circumstances or other matters aliunde are not considered. The court may
consider in addition to the complaint the appended annexes or documents,
other pleadings of the plaintiff, or admissions in the records.[10]
In the instant case, petitioners specifically alleged that respondent bank
acted in bad faith when it extrajudicially foreclosed the mortgaged property
notwithstanding the approval of the restructuring of their loan obligation.
They claimed that with such approval, respondent bank made them believe
that foreclosure would be held in abeyance. They also alleged that the
proceeding was conducted without complying with the posting and
publication requirements.
Assuming these allegations to be true, petitioners can validly seek the
nullification of the foreclosure since the alleged restructuring of their debt
would effectively modify the terms of the original loan obligations and
accordingly supersede the original mortgage thus making the subsequent
foreclosure void. Similarly, the allegation of lack of notice if subsequently
proven renders the foreclosure a nullity in line with prevailing
jurisprudence.[11]
We find the allegations in the complaint sufficient to establish a cause of
action for nullifying the foreclosure of the mortgaged property. The fact
that petitioners admitted that they failed to redeem the property and that
the title was consolidated in respondent bank's name did not preclude them
from seeking to nullify the extrajudicial foreclosure. Precisely, petitioners
seek to nullify the proceedings based on circumstances obtaining prior to
and during the foreclosure which render it void.
Anent the second issue, we do not agree with the Court of Appeals' ruling
that the complaint should be dismissed for failure of petitioners to answer
respondent bank's written interrogatories.
It should be noted that respondent bank filed a motion to expunge the
complaint based on Section 3(c) of Rule 29 which states:
SEC. 3. Other consequences. - If any party or an officer or managing agent
of a party refuses to obey an order made under section 1[12] of this Rule
requiring him to answer designated questions, or an order under Rule 27 to
produce any document or other thing for inspection, copying, or
photographing or to permit it to be done, or to permit entry upon land or
other property, or an order made under Rule 28 requiring him to submit to
a physical or mental examination, the court may make such orders in regard
to the refusal as are just, and among others the following:
xxxx
34
(c) An order striking out pleadings or parts thereof, or staying further
proceedings until the order is obeyed, or dismissing the action or
proceeding or any part thereof, or rendering a judgment by default against
the disobedient party; and
x x x x.[13]
As we have explained in Arellano v. Court of First Instance of Sorsogon,[14]
the consequences enumerated in Section 3(c) of Rule 29 would only apply
where the party upon whom the written interrogatories is served, refuses
to answer a particular question in the set of written interrogatories and
despite an order compelling him to answer the particular question, still
refuses to obey the order.
In the instant case, petitioners refused to answer the whole set of written
interrogatories, not just a particular question. Clearly then, respondent
bank should have filed a motion based on Section 5 and not Section 3(c) of
Rule 29. Section 5 of Rule 29 reads:
SEC. 5. Failure of party to attend or serve answers. - If a party or an officer
or managing agent of a party willfully fails to appear before the officer who
is to take his deposition, after being served with a proper notice, or fails to
serve answers to interrogatories submitted under Rule 25 after proper
service of such interrogatories, the court on motion and notice, may strike
out all or any part of any pleading of that party, or dismiss the action or
proceeding or any part thereof, or enter a judgment by default against that
party, and in its discretion, order him to pay reasonable expenses incurred
by the other, including attorney's fees.
Due to respondent bank's filing of an erroneous motion, the trial court
cannot be faulted for ruling that the motion to expunge was premature for
lack of a prior application to compel compliance based on Section 3.
This Court has long encouraged the availment of the various modes or
instruments of discovery as embodied in Rules 24 to 29 of the Rules of
Court.[15] In the case of Hyatt Industrial Manufacturing Corporation v. Ley
Construction and Development Corporation,[16] we declared:
Indeed, the importance of discovery procedures is well recognized by the
Court. It approved A.M. No. 03-1-09-SC on July 13, 2004 which provided for
the guidelines to be observed by trial court judges and clerks of court in the
conduct of pre-trial and use of deposition-discovery measures. Under A.M.
No. 03-1-09-SC, trial courts are directed to issue orders requiring parties to
avail of interrogatories to parties under Rule 45 and request for admission
of adverse party under Rule 26 or at their discretion make use of depositions
under Rule 23 or other measures under Rule 27 and 28 within 5 days from
the filing of the answer. The parties are likewise required to submit, at least
3 days before the pre-trial, pre-trial briefs, containing among others a
manifestation of the parties of their having availed or their intention to avail
themselves of discovery procedures or referral to commissioners.
The imposition of sanctions under Section 5 is within the sound discretion
of the trial court. Thus, in Insular Life Assurance Co., Ltd. v. Court of
Appeals,[17] we held:
The matter of how, and when, the above sanctions should be applied is one
that primarily rests on the sound discretion of the court where the case
pends, having always in mind the paramount and overriding interest of
justice. For while the modes of discovery are intended to attain the
resolution of litigations with great expediency, they are not contemplated,
however, to be ultimate causes of injustice. It behooves trial courts to
examine well the circumstances of each case and to make their considered
determination thereafter. x x x
WHEREFORE, the petition is GRANTED. The January 24, 2006 Decision and
the March 31, 2006 Resolution of the Court of Appeals in CA-G.R. SP No.
89148, which granted respondent China Banking Corporation's petition to
annul the April 1, 2004 and October 22, 2004 Orders of the Regional Trial
Court of San Jose, Camarines Sur, Branch 30 denying respondent bank's
affirmative defenses without a hearing as well as its motion to expunge the
complaint because of petitioners' failure to answer the written
interrogatories are REVERSED and SET ASIDE. The instant case is
REMANDED to the Regional Trial Court of San Jose, Camarines Sur, Branch
30, for further proceedings.
SO ORDERED.
35
G.R. No. 167181 December 23, 2008
SPS. CARLOS MUNSALUD and WINNIE MUNSALUD, petitioners,
vs.
NATIONAL HOUSING AUTHORITY, respondent.
DECISION
REYES, R.T., J.:
INSUFFICIENCY in form and substance, as a ground for dismissal of the
complaint, should not be based on the title or caption, especially when the
allegations of the pleading support an action.
In pursuit of a reversal of the Decision1 of the Court of Appeals (CA)
affirming the order of dismissal2 of the Regional Trial Court (RTC) in a
complaint for mandamus,3 petitioners-spouses Carlos Munsalud and
Winnie Munsalud lodged before this Court a petition for review on
certiorari.
The Facts
Laid bare from the records are the following facts:
Petitioner Winnie Munsalud is the daughter and one of the compulsory
heirs of the late Lourdes Bulado (Bulado) who died on December 8, 1985.
During the lifetime of Bulado, respondent National Housing Authority (NHA)
awarded her a lot located at 942 R. Higgins St., CAA Compound, Bgy. 185,
Pasay City. The award was made pursuant to the "Land for the Landless"
program of respondent. She resided at the said property until her death.
When Bulado died, petitioner Winnie assumed the obligation to pay the
monthly amortizations. Respondent NHA recognized petitioner spouses’
assumption of obligations as their names were reflected in the receipts.
They were allowed to occupy the lot up to the present. To prove their
occupancy over the lot, petitioners offered as evidence the following
documents, viz.:
1. Tag Card No. 77-02830-03 issued by then Pasay City Mayor Pablo Cuneta
and then NHA General Manager Gaudencio Tobias;
2. Application and Contract for Water Services No. 295319 in the name of
Bulado but the same was signed by petitioner Winnie;
3. Tax Declaration No. B-007-27566 over the land issued by the Assessor’s
Office of Pasay City in the name of defendant recognizing its beneficial use
in favor of petitioners;
4. Tax Declaration No. B-007-27667 over the residential structure erected
on the land and issued by the Assessor’s Office of Pasay City in the names
of petitioners;
5. ‘Pagpapatunay’ dated September 5, 1989 signed by neighbors and
acquaintances of petitioners attesting to their long time residence in the
property;
6. Deposit Receipt No. 286444 dated September 27, 1989 issued by the
Manila Electric Company attesting to the installation of electric service in
the name of petitioner Winnie on the property.4
On September 14, 1989, petitioners completed the payments of the
amortizations due on the property. Reflected on the left side portion of the
official receipt evidencing full payment is the annotation "full payment."
Consequently, petitioners demanded that respondent NHA issue in their
favor a deed of sale and a title over the property. Respondent, however,
refused.
On January 28, 2003, petitioners, by counsel, sent respondent a letter to
issue a deed of sale and title. Despite receipt, respondent did not issue the
requested documents. On March 6, 2003, respondent wrote petitioners
informing them that petitioner Winnie’s name does not appear as
beneficiary. Petitioners replied that Winnie was representing her mother,
the late Lourdes Bulado. Respondent did not respond to the reply.
Left with no recourse, petitioners instituted a complaint for mandamus
before the court a quo.
36
RTC Order
On April 22, 2003, the RTC dismissed the complaint for mandamus,
disposing thus:
Considering that the petition is insufficient in form and substance, there
being no reference to any law which the respondent by reason of its office,
trust or station is especially enjoined as a duty to perform or any allegation
that respondent is unlawfully excluding petitioners from using or enjoying
any right or office which said petitioners are entitled to, the above-entitled
petition is hereby DISMISSED, pursuant to Section 3 Rule 65 of the 1997
Rules of Civil Procedure.
SO ORDERED.5
Petitioners moved for reconsideration but they did not succeed. Thus,
petitioners seasonably appealed to the CA.
CA Disposition
On August 23, 2004, the CA affirmed the RTC dismissal of the mandamus
petition.
WHEREFORE, the instant appeal is hereby DISMISSED. Accordingly, the
assailed Order of Dismissal is AFFIRMED.
SO ORDERED.6
In agreeing with the court a quo, the appellate court rationalized as follows:
It is essential to the issuance of the writ of mandamus that the petitioner
should have a clear legal right to the thing demanded and it must be the
imperative duty of the respondent to perform the act required. It is a
command to exercise a power already possessed and to perform a duty
already imposed.
It well settled that the legal right of petitioner to the performance of the
particular act which is sought to be compelled must be clear and complete.
A clear legal right within the meaning of the rule means a right which is
clearly founded in, or granted by law; a right which is inferable as a matter
of law. Likewise, mandamus refers only to acts enjoined by law to be done.
The duties to be enforced must be such as are clearly peremptorily enjoined
by law or by reason of official station. However, appellants failed to point
out in their petition the specific law by which defendant is duty bound to
perform the act sought to be performed, as well as the law which would
grant them the clear legal right to the issuance of the writ of mandamus.
Foregoing discussed, we find no error on the part of the court a quo in
dismissing the petition for mandamus filed by plaintiffs-appellants.
On September 20, 2004, petitioners moved for reconsideration but it was
denied by the CA on February 22, 2005. Hence, the present recourse.
Issues
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
AFFIRMING THE ORDERS OF THE HONORABLE REGIONAL TRIAL COURT OF
QUEZON CITY DATED APRIL 22, 2003 AND SEPTEMBER 25, 2003 WHERE THE
LATTER COURT - RELYING UPON THE APPELLATION AND/OR LABEL THAT
PETITIONERS GAVE THEIR COMPLAINT (I.E., MANDAMUS) IN CIVIL CASE NO.
Q-03-492 - DISMISSED THE COMPLAINT THEREIN PURPORTEDLY BECAUSE
THE SAID COMPLAINT FAILED TO COMPLY WITH SECTION 3, RULE 65 OF THE
1997 RULES OF CIVIL PROCEDURE.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DENYING
PETITIONERS’ MOTION FOR RECONSIDERATION OF ITS DECISION DATED
AUGUST 23, 2004.7 (Underscoring supplied)
Poring over the arguments presented, the focal issue is whether in giving
due course to an action, the court is fenced within the parameters of the
title given by plaintiff to the case without regard to the averments of the
pleading.
37
Elsewise stated, does the trial court have absolute discretion to dismiss an
action on the ground that it is insufficient in form and substance based alone
on its designation when, from the body and the relief prayed for, it could
stand as an action sufficient in form and substance?
Our Ruling
Petitioners’ action designated as mandamus was dismissed by the trial court
on the ground that it is insufficient in form and substance. This begs the
question: when is an action sufficient in form and when is it sufficient in
substance?
To begin with, form is the methodology used to express rules of practice and
procedure.8 It is the order or method of legal proceedings.9 It relates to
technical details.10 It is ordinarily the antithesis of substance.11 It is an
established method of expression or practice. It is a fixed or formal way of
proceeding.12
A pleading is sufficient in form when it contains the following:
1. A Caption, setting forth the name of the court, the title of the action
indicating the names of the parties, and the docket number which is usually
left in blank, as the Clerk of Court has to assign yet a docket number;
2. The Body, reflecting the designation, the allegations of the party’s claims
or defenses, the relief prayed for, and the date of the pleading;
3. The Signature and Address of the party or counsel;13
4. Verification. This is required to secure an assurance that the allegations
have been made in good faith, or are true and correct and not merely
speculative;14
5. A Certificate of Non-forum Shopping, which although not jurisdictional,
the same is obligatory;15
6. An Explanation in case the pleading is not filed personally to the Court.
Likewise, for pleading subsequent to the complaint, if the same is not served
personally to the parties affected, there must also be an explanation why
service was not done personally.16
Likewise, for all other pleadings, not initiatory in nature, there must be:
A Proof of Service, which consists in the written admission of the party
served, or the official return of the server, or the affidavit of the party
serving, containing a full statement of the date, place and manner of service.
If the service is by ordinary mail, proof thereof shall consist of an affidavit
of the person mailing. If service is by registered mail, proof shall be made by
such affidavit and the registry receipt issued by the mailing office.17
In case a party is represented by counsel de parte, additional requirements
that go into the form of the pleading should be incorporated, viz.:
1. The Roll of Attorney’s Number;
2. The Current Professional Tax Receipt Number; and
3. The IBP Official Receipt No. or IBP Lifetime Membership Number.18
4. MCLE Compliance or Exemption Certificate Number and Date of Issue
(effective January 1, 2009).19
In the case at bench, a naked perusal of the complaint docketed as Civil Case
No. Q03- 49278 designated by petitioners as mandamus reveals that it is
sufficient in form. It has the caption with the name of the court, the name
of the parties, and the docket number. The complaint contains allegations
of petitioners’ claims. It has a prayer and the date when it was prepared.
The signature page shows the signature and name of petitioners’ counsel,
the counsel’s IBP, PTR and Roll of Attorney’s Numbers. The complaint was
also verified and accompanied by a certificate of non-forum shopping and
signed by petitioners as plaintiffs. It was filed personally with the office of
the clerk of court.
Now, is the petition insufficient in substance?
Substance is that which is essential and is used in opposition to form.20 It is
the most important element in any existence, the characteristic and
38
essential components of anything, the main part, the essential import, and
the purport.21 It means not merely subject of act, but an intelligible abstract
or synopsis of its material and substantial elements, though it may be stated
without recital of any details.22 It goes into matters which do not
sufficiently appear or prejudicially affect the substantial rights of parties
who may be interested therein and not to mere informalities.23
As used in reference to substance of common-law actions, substance
comprehends all of the essential or material elements necessary to
sufficiently state a good cause of action invulnerable to attack by general
demurrer.24
Substance is one which relates to the material allegations in the pleading. It
is determinative of whether or not a cause of action exists. It is the central
piece, the core, and the heart constituting the controversy addressed to the
court for its consideration. It is the embodiment of the essential facts
necessary to confer jurisdiction upon the court.
The court a quo anchored the dismissal of petitioners’ complaint on the
basis of Rule 65, Section 325 of the 1997 Rules of Civil Procedure. It found
that there was no reference to any law which respondent NHA, by reason
of its office, trust or station, is specifically enjoined as a duty to perform. It
declared that there was no allegation in the petition below that respondent
is unlawfully excluding petitioners from using or enjoying any right or office
which said petitioners are entitled to.
Although the complaint was captioned as Mandamus, petitioners’
averments, as well as the relief sought, called for an action for specific
performance. Pertinent portions of the complaint for mandamus provide:
3. Plaintiff Winnie Munsalud is the daughter of the late LourdesBulado, and
as such is one of Bulado’s compulsory heirs. x x x;
4. During the lifetime of Bulado, she was awarded a parcel of landat a "land
for the landless" program of the defendant;
xxxx
6. When Bulado died in 1985, Plaintiffs assumed her obligations over the
aforesaid property, particularly the payment of the amortizations therein;
7. Defendant recognized this assumption of Bulado’s obligations by the
Plaintiffs considering that in the receipts covering the amortizations, the
names of the Plaintiffs as the ones paying the Defendant were indicated
therein;
8. In fact, Defendant also allowed Plaintiffs to move into, and occupy, as
they continue to occupy up to now, the above described premises;
xxxx
10. On September 14, 1989, Plaintiffs completed the payment of the
amortizations due over the property in question, and this is evidenced by an
official receipt, numbered 19492, which Defendant’s cashier, Yasmin D.
Aquino, issued to the Plaintiffs themselves, although the official name of the
payor indicated therein was still that of the deceased Lourdes Bulado;
xxxx
12. Significantly, that receipt contained the annotation appearing on the left
side thereof, that the amount paid thereon constituted "full payment";
13. Since then, Plaintiffs have been demanding from the Defendant the
issuance of the deed of sale and the title over the property in question, but,
inexplicably, and without any legal justification whatsoever, Defendant has
refused to issue that deed of sale and title;
14. On January 28, 2003, Plaintiffs, through counsel, sent a letter to the
Defendant seeking the issuance of that deed of sale and title but, despite
receipt thereof, Defendant again refused and failed [to] act favorably
thereon;
xxxx
20. At this point that the lot in question had already been fully paid for by
the Plaintiffs, there is now a need to compel the Defendant to comply with
its duty to issue a deed of sale in favor of the heirs of the deceased Lourdes
39
Bulado, particularly Plaintiffs Carlos and Winnie Munsalud, as well to issue
a title over the same property in favor of the same heirs.
WHEREFORE, it is most respectfully prayed that judgment be rendered
commanding the Defendant, after due notice and hearing, to issue a deed
of sale and/or a title, in favor of the heirs of the deceased Lourdes Bulado,
particularly Plaintiffs Carlos and Winnie Munsalud, over the property
subject of this action.26 (Underscoring supplied)
A plain reading of the allegations of the complaint reveals that petitioner
Winnie Munsalud assumed the obligations of her deceased mother, the
original awardee of respondent’s "Land for the Landless Program." One of
the obligations of an awardee is to pay the monthly amortizations.
Petitioners complied with said obligation and religiously paid the
amortizations until these were fully paid.
Indeed, petitioners have complied with what is incumbent upon them under
the program. Hence, it is now the turn of respondent to comply with what
is incumbent upon it.
In a letter dated February 21, 2003,27 respondent informed petitioners’
counsel that per its records, the name of petitioner Winnie Munsalud does
not appear as a beneficiary. For the guidance of respondent, Winnie
Munsalud is not actually a beneficiary. The beneficiary of its program is
Lourdes Bulado, her deceased mother. This fact was made known to
respondent when another letter dated March 6, 200328 was sent by the
counsel of the heirs of Lourdes Bulado. In the same letter, respondent was
informed that petitioner Winnie is representing her deceased mother,
Lourdes Bulado, viz.:
In view of the contents of that letter, we would like to notify youthat Ms.
Munsalud is actually representing her deceased mother,Lourdes Bulado,
who, on September 14, 1989 completed herpayment for Lot 12, Block 79 of
the Maricaban Estate. A copy of the receipt evidencing that completed is
attached hereto as Annex B for your easy reference.
In view thereof, may we reiterate our request for the issuance ofthe title
over the aforesaid property in the name of Lourdes Bulado.29
(Underscoring supplied)
The letter was received by respondent on March 12, 2003. On account of
this second letter, respondent could have easily verified if the name of
Lourdes Bulado appears as a beneficiary and awardee of its "Land for the
Landless Program." However, respondent never responded to the second
letter. This left petitioners with no recourse but to bring the action to the
trial court.
Evidently, the action commenced by petitioners before the trial court,
although designated as mandamus, is in reality an action to perform a
specific act. The averments of the complaint are clear. The essential facts
are sufficiently alleged as to apprise the court of the nature of the case. The
relief sought to be obtained aims to compel respondent to issue a deed of
sale and the corresponding title over the property awarded to Bulado. Thus,
the Court finds the complaint sufficient in substance.
The designation or caption is not controlling, more than the allegations in
the complaint, for it is not even an indispensable part of the complaint.
Instead of focusing on what an action for mandamus should contain, the
court a quo should have proceeded to examine the essential facts alleged in
petitioners’ complaint. For what determines the nature of the action and
which court has jurisdiction over it are the allegations in the complaint and
the character of the relief sought.30
The cause of action in a complaint is not determined by the designation
given to it by the parties. The allegations in the body of the complaint define
or describe it. The designation or caption is not controlling more than the
allegations in the complaint. It is not even an indispensable part of the
complaint.31
There is no need to make reference to any law which respondent by reason
of its office is enjoined as a duty to perform. Respondent’s duty arose from
its contractual obligation under the "Land for the Landless Program."
The trial court is reminded that the caption of the complaint is not
determinative of the nature of the action.32 The caption of the pleading
should not be the governing factor, but rather the allegations in it should
determine the nature of the action, because even without the prayer for a
40
specific remedy, the courts may nevertheless grant the proper relief as may
be warranted by the facts alleged in the complaint and the evidence
introduced.33

All told, whether or not petitioner Winnie, in her capacity as a compulsory

heir of the awardee, becomes a beneficiary of the program is a question
best ventilated during trial on the merits. The conditions, terms, and
provisions of the program in case an awardee dies are evidentiary and
should be presented for determination of the court. Even the effect and the
consequence of the assumption of obligation of the awardee as well as the
presence of other compulsory heirs are issues that should be addressed for
the court’s evaluation on the basis of the evidence to be laid down before
its eyes.

WHEREFORE, the appealed Decision is REVERSED AND SET ASIDE. The case
is REMANDED to the Regional Trial Court which is ORDERED to reinstate the
case and to conduct trial on the merits with dispatch.

No costs.

SO ORDERED.

41
G.R. No. 180765 February 27, 2009
FORT BONIFACIO DEVELOPMENT CORPORATION, Petitioner,
vs.
MANUEL N. DOMINGO, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the
Revised Rules of Court, filed by petitioner Fort Bonifacio Development
Corporation, seeking to reverse and set aside the Decision dated 19 July
20071 and the Resolution dated 10 December 20072 of the Court of Appeals
in CA-G.R. SP No. 97731. The appellate court, in its assailed Decision,
affirmed the Order3 of the Regional Trial Court (RTC) of Pasay City, Branch
109, in Civil Case No. 06-2000-CFM, denying the Motion to Dismiss of
petitioner; and in its assailed Resolution, refused to reconsider its decision.
Petitioner, a domestic corporation duly organized under Philippine laws, is
engaged in the real estate development business. Respondent is the
assignee of L and M Maxco Specialist Engineering Construction (LMM
Construction) of its receivables from petitioner.
On 5 July 2000, petitioner entered into a Trade Contract with LMM
Construction for partial structural and architectural works on one of its
projects, the Bonifacio Ridge Condominium. According to the said Contract,
petitioner had the right to withhold the retention money equivalent to 5%
of the contract price for a period of one year after the completion of the
project. Retention money is a portion of the contract price, set aside by the
project owner, from all approved billings and retained for a certain period
to guarantee the performance by the contractor of all corrective works
during the defect-liability period.4
Due to the defect and delay in the work of LMM Construction on the
condominium project, petitioner unilaterally terminated the Trade
Contract5 and hired another contractor to finish the rest of the work left
undone by LMM Construction. Despite the pre-termination of the Trade
Contract, petitioner was liable to pay LMM Construction a fraction of the
contract price in proportion to the works already performed by the latter.6
On 30 July 2004, petitioner received the first Notice of Garnishment against
the receivables of LMM Construction issued by the Construction Industry
Arbitration Commission (CIAC) in connection with CIAC Case No. 11-2002
filed by Asia-Con Builders against LMM Construction, wherein LMM
Construction was adjudged liable to Asia-Con Builders for the amount of
₱5,990,927.77.
On 30 April 2005, petitioner received a letter dated 18 April 2005 from
respondent inquiring on the retention money supposedly due to LMM
Construction and informing petitioner that a portion of the amount
receivable by LMM Construction therefrom was already assigned to him as
evidenced by the Deed of Assignment executed by LMM Construction in
respondent’s favor on 28 February 2005. LMM Construction assigned its
receivables from petitioner to respondent to settle the alleged unpaid
obligation of LMM Construction to respondent amounting to ₱804,068.21.
Through its letter dated 11 October 2005, addressed to respondent,
petitioner acknowledged that LMM Construction did have receivables still
with petitioner, consisting of the retention money; but petitioner also
advised respondent that the retention money was not yet due and
demandable and may be ascertained only after the completion of the
corrective works undertaken by the new contractor on the condominium
project. Petitioner also notified respondent that part of the receivables was
also being garnished by the other creditors of LMM Construction.
Unsatisfied with the reply of petitioner, respondent sent another letter
dated 14 October 2005 asserting his ownership over a portion of the
retention money assigned to him and maintaining that the amount thereof
pertaining to him can no longer be garnished to satisfy the obligations of
LMM Construction to other persons since it already ceased to be the
property of LMM Construction by virtue of the Deed of Assignment.
Attached to respondent’s letter was the endorsement of LMM Construction
dated 17 January 2005 approving respondent’s claim upon petitioner in the
amount of ₱804,068.21 chargeable against the retention money that may
be received by LMM Construction from the petitioner.
42
Before respondent’s claim could be fully addressed, petitioner, on 6 June
2005, received the second Notice of Garnishment against the receivables of
LMM Construction, this time, issued by the National Labor Relations
Commission (NLRC) to satisfy the liability of LMM Construction to Nicolas
Consigna in NLRC Case No. 00-07-05483-2003.
On 13 July 2005, petitioner received an Order of Delivery of Money issued
by the Office of the Clerk of Court and Ex-Officio Sheriff enforcing the first
Notice of Garnishment and directing petitioner to deliver to Asia-Con
Builders, through the Sheriff, the amount of ₱5,990,227.77 belonging to
LMM Construction. In compliance with the said Order, petitioner was able
to deliver to Asia-Con Builders on 22 July 2005 and on 11 August 2005 partial
payments amounting to ₱1,170,601.81, covered by the appropriate
Acknowledgement Receipts.
A third Notice of Garnishment against the receivables of LMM Construction,
already accompanied by an Order of Delivery of Money, both issued by the
RTC of Makati, Branch 133, was served upon petitioner on 26 January 2006.
The Order enjoined petitioner to deliver the amount of ₱558,448.27 to the
Sheriff to answer for the favorable judgment obtained by Concrete Masters,
Inc. (Concrete Masters) against LMM Construction in Civil Case No. 05-164.
Petitioner, in a letter dated 31 January 2006, categorically denied
respondent’s claim on the retention money, reasoning that after the
completion of the rectification works on the condominium project and
satisfaction of the various garnishment orders, there was no more left of
the retention money of LMM Construction.
It would appear, however, that petitioner fully satisfied the first Notice of
Garnishment in the amount of ₱5,110,833.44 only on 31 January 2006,7 the
very the same date that it expressly denied respondent’s claim. Also,
petitioner complied with the Notice of Garnishment and its accompanying
Order of Delivery of Money in the amount of ₱558,448.27 on 8 February
2006, a week after its denial of respondent’s claim.8
The foregoing events prompted respondent to file a Complaint for collection
of sum of money, against both LMM Construction and petitioner, docketed
as Civil Case No. 06-0200-CFM before the RTC of Pasay City, Branch 109.
Instead of filing an Answer, petitioner filed a Motion to Dismiss Civil Case
No. 06-0200-CFM on the ground of lack of jurisdiction over the subject
matter. Petitioner argued that since respondent merely stepped into the
shoes of LMM Construction as its assignor, it was the CIAC and not the
regular courts that had jurisdiction over the dispute as provided in the Trade
Contract.
On 6 June 2006, the RTC issued an Order denying the Motion to Dismiss of
petitioner, ruling that a full-blown trial was necessary to determine which
one between LMM Construction and petitioner should be made
accountable for the sum due to respondent.
Petitioner sought remedy from the Court of Appeals by filing a Petition for
Certiorari, docketed as CA-G.R. SP No. 97731, challenging the RTC Order
dated 6 June 2006 for having been rendered by the trial court with grave
abuse of discretion.
In its Decision promulgated on 19 July 2007, the Court of Appeals dismissed
the Petition for Certiorari and affirmed the 6 June 2006 Order of the RTC
denying the Motion to Dismiss of petitioner. The appellate court rejected
the argument of petitioner that respondent, as the assignee of LMM
Construction, was bound by the stipulation in the Trade Contract that
disputes arising therefrom should be brought before the CIAC. The Court of
Appeals declared that respondent was not privy, but a third party, to the
Trade Contract; and money claims of third persons against the contractor,
developer, or owner of the project are lodged in the regular courts and not
in the CIAC.
Similarly ill-fated was petitioner’s Motion for Reconsideration, which was
denied by the Court of Appeals in its Resolution dated 10 December 2007.
Petitioner now comes to this Court via this instant Petition for Review on
Certiorari praying for the reversal of the 19 July 2007 Decision of the Court
of Appeals and 6 June 2006 Order of the RTC and, ultimately, for the
dismissal of Civil Case No. 06-0200-CFM pending before the RTC.
For the resolution of this Court is the sole issue of:
43
WHETHER OR NOT THE RTC HAS JURISDICTION OVER CIVIL CASE NO. 06-
0200-CFM.
The jurisdiction of CIAC is defined under Executive Order No. 1008 as
follows:
SECTION 4. Jurisdiction.—The CIAC shall have original and exclusive
jurisdiction over disputes arising from, or connected with, contracts entered
into by parties involved in construction in the Philippines, whether the
disputes arises before or after the completion of the contract, or after the
abandonment or breach thereof. These disputes may involve government
or private contracts. For the Board to acquire jurisdiction, the parties to a
dispute must agree to submit the same to voluntary arbitration.
The jurisdiction of the CIAC may include but is not limited to violation of
specifications for materials and workmanship; violation of the terms of
agreement; interpretation and/or application of contractual provisions;
amount of damages and penalties; commencement time and delays;
maintenance and defects; payment default of employer or contractor and
changes in contract cost.
Excluded from the coverage of this law are disputes arising from employer-
employee relationships which shall continue to be covered by the Labor
Code of the Philippines.
In assailing the 19 July 2007 Decision of the Court of Appeals, petitioner
invoked Article 1311 of the Civil Code on relativity of contracts. According
to said provision, all contracts shall only take effect between the contracting
parties, their assigns and heirs except when the rights and obligations
arising from the contract are not transmissible. Petitioner argues that the
appellate court, in recognizing the existence of the Deed of Assignment
executed by LMM Construction -- in favor of respondent -- of its receivables
under the Trade Contract, should have considered the concomitant result
thereof, i.e., that respondent became a party to the Trade Contract and,
therefore, bound by the arbitral clause therein.
Respondent counters that the CIAC is devoid of jurisdiction over money
claims of third persons against the contractor, developer or owner of the
project. The jurisdiction of the CIAC is limited to settling disputes arising
among contractors, developers and/or owners of construction projects. It
does not include the determination of who among the many creditors of the
contractor should enjoy preference in payment of its receivables from the
developer/owner.
It is an elementary rule of procedural law that jurisdiction of the court over
the subject matter is determined by the allegations of the complaint,
irrespective of whether or not the plaintiff is entitled to recover upon all or
some of the claims asserted therein. As a necessary consequence, the
jurisdiction of the court cannot be made to depend upon the defenses set
up in the answer or upon the motion to dismiss; for otherwise, the question
of jurisdiction would almost entirely depend upon the defendant. What
determines the jurisdiction of the court is the nature of the action pleaded
as appearing from the allegations in the complaint. The averments therein
and the character of the relief sought are the ones to be consulted.9
Accordingly, the issues in the instant case can only be properly resolved by
an examination and evaluation of respondent’s allegations in his Complaint
in Civil Case No. 06-0200-CFM.
The allegations in respondent’s Complaint are clear and simple: That LMM
Construction had an outstanding obligation to respondent in the amount of
₱804,068.21; that in payment of the said amount, LMM Construction
assigned to respondent its receivables from petitioner, which assignment
was properly made known to petitioner as early as 18 April 2005; that
despite due notice of such assignment, petitioner still refused to deliver the
amount assigned to respondent, giving preference, instead, to the
garnishing creditors of LMM Construction; that at the time petitioner was
notified of the assignment, only one notice of garnishment, the first Notice
of Garnishment, was received by it; that had petitioner properly recognized
respondent’s right as an assignee of a portion of the receivables of LMM
Construction, there could have been sufficient residual amounts to satisfy
respondent’s claim; and that, uncertain over which one between LMM
Construction and petitioner he may resort to for payment, respondent
named them both as defendants in Civil Case No. 06-0200-CFM. A
scrupulous examination of the aforementioned allegations in respondent’s
Complaint unveils the fact that his cause of action springs not from a
violation of the provisions of the Trade Contract, but from the non-payment
of the monetary obligation of LMM Construction to him.
44
A cause of action is a party’s act or omission that violates the rights of the
other.10 The right of the respondent that was violated, prompting him to
initiate Civil Case No. 06-0200-CFM, was his right to receive payment for the
financial obligation incurred by LMM Construction and to be preferred over
the other creditors of LMM Construction, a right which pre-existed and,
thus, was separate and distinct from the right to payment of LMM
Construction under the Trade Contract.
Petitioner’s unceasing reliance on Article 131111 of the Civil Code on
relativity of contracts is unavailing. It is true that respondent, as the assignee
of the receivables of LMM Construction from petitioner under the Trade
Contract, merely stepped into the shoes of LMM Construction. However, it
bears to emphasize that the right of LMM Construction to such receivables
from petitioner under the Trade Contract is not even in dispute in Civil Case
No. 06-0200-CFM. What respondent puts in issue before the RTC is the
purportedly arbitrary exercise of discretion by the petitioner in giving
preference to the claims of the other creditors of LMM Construction over
the receivables of the latter.
It is encouraged that disputes arising from construction contracts be
referred first to the CIAC for their arbitration and settlement, since such
cases would often require expertise and technical knowledge in
construction. Hence, some of the matters over which the CIAC may exercise
jurisdiction, upon agreement of the parties to the construction contract,
"include but [are] not limited to violation of specifications for materials and
workmanship; violation of the terms of agreement; interpretation and/or
application of contractual provisions; amount of damages and penalties;
commencement time and delays; maintenance and defects; payment
default of employer or contractor and changes in contract cost."12 Although
the jurisdiction of the CIAC is not limited to the afore-stated enumeration,
other issues which it could take cognizance of must be of the same or a
closely related kind or species applying the principle of ejusdem generis in
statutory construction.
Respondent’s claim is not even construction-related at all. Construction is
defined as referring to all on-site works on buildings or altering structures,
from land clearance through completion including excavation, erection and
assembly and installation of components and equipment.13 Petitioner’s
insistence on the application of the arbitration clause of the Trade Contract
to respondent is clearly anchored on an erroneous premise that respondent
is seeking to enforce a right under the same. Again, the right to the
receivables of LMM Construction from petitioner under the Trade Contract
is not being impugned herein. In fact, petitioner readily conceded that LMM
Construction still had receivables due from petitioner, and respondent did
not even have to refer to a single provision in the Trade Contract to assert
his claim. What respondent is demanding is that a portion of such
receivables amounting to ₱804,068.21 should have been paid to him first
before the other creditors of LMM Construction, which, clearly, does not
require the CIAC’s expertise and technical knowledge of construction.
The adjudication of Civil Case No. 06-0200-CFM necessarily involves the
application of pertinent statutes and jurisprudence to matters such as
obligations, contracts of assignment, and, if appropriate, even preference
of credits, a task more suited for a trial court to carry out after a full-blown
trial, than an arbitration body specifically devoted to construction contracts.
This Court recognizes the laudable objective of voluntary arbitration to
provide a speedy and inexpensive method of settling disputes by allowing
the parties to avoid the formalities, delay, expense and aggravation which
commonly accompany ordinary litigation, especially litigation which goes
through the entire hierarchy of courts. It cannot, however, altogether
surrender to arbitration those cases, such as the one at bar, the extant facts
of which plainly call for the exercise of jurisdiction by the regular courts for
their resolution.
WHEREFORE, premises considered, the instant Petition is DENIED. The
Decision dated 19 July 2007 and the Resolution dated 10 December 2007 of
the Court of Appeals in CA-G.R. SP No. 97731 are hereby AFFIRMED in toto.
Costs against the petitioner.
SO ORDERED.
45
[G.R. NO. 168139 : January 20, 2009]
FERDINAND S. AGUSTIN, Petitioner, v. SPS. MARIANO and PRESENTACION
DELOS SANTOS, Respondents.
DECISION
PUNO, C.J.:
Before us is a Petition for Review on Certiorari under Rule 45 seeking a
review of the Decision1 and Resolution2 of the Court of Appeals (CA) in CA
G.R. SP No. 80586 partly reversing the decision3 of the Regional Trial Court
(RTC), Branch 33, Manila.
As borne by the records, respondent spouses Mariano delos Santos and
Presentacion delos Santos are the lawful owners of apartment units located
at 230 Manrique Street, Sampaloc, Manila.4 On the other hand, petitioner
Ferdinand Agustin has continuously occupied one of respondents'
apartment units since 1990 for a monthly rent of two thousand pesos
(P2,000.00). The monthly rental was increased to two thousand three
hundred pesos (P2,300.00) in May 1999.5
On May 10, 2000, respondents filed a complaint for ejectment against
petitioner before Branch 22 of the Metropolitan Trial Court (MeTC) of
Manila docketed as Civil Case No. 167142-CV. Respondents alleged that
they needed to repossess the apartment unit occupied by the petitioner
because their daughter's children would be studying at the University of Sto.
Tomas in Manila.6
In a decision dated January 9, 2002, the MeTC, Branch 22 held:
Based on the evidence adduced by both parties, this Court is of the opinion,
and so holds that the instant complaint for ejectment lodged by the
plaintiffs against the defendants, MUST BE DISMISSED for lack of cause of
action, it appearing that plaintiffs failed to comply with the requirements
when the ground for ejectment is personal need of the premises.
WHEREFORE, premises considered, the instant complaint is hereby
DISMISSED without prejudice to the right of the plaintiffs to collect the
monthly rental of two thousand three hundred pesos (P2,300.00) agreed
upon in the Lease Contract and the corresponding fifteen percent (15%)
increase thereof, in accordance with the new rent control law with costs
against the plaintiff.
The counterclaim is likewise dismissed.
SO ORDERED.7
The decision lapsed into finality and was enforced by the respondents
through the imposition and collection of the monthly rent and the
corresponding fifteen percent (15%) increase thereon. A few months
thereafter, respondents, in a Notice of Termination dated October 10, 2002,
informed petitioner of the termination of the verbal month-to-month
contract of lease and gave him thirty (30) days within which to vacate and
peacefully surrender the premises.8
The petitioner failed to vacate the premises despite notice. Thus,
respondents again filed a complaint for ejectment against petitioner on the
ground of termination of the contract of lease. The second ejectment case,
which is the subject of the instant petition, was docketed as Civil Case No.
174168 in Branch 15 of the MeTC of Manila.
In a decision dated June 12, 2003, the MeTC, Branch 15 ruled that
petitioner's reliance on res judicatawas misplaced because the cause of
action in Civil Case No. 174168 is anchored on a different ground.9
According to the MeTC, the verbal lease contract that existed between the
parties on a month-to-month basis pursuant to Article 1687 of the Civil Code
is one with a fixed term, and terminates at the end of each month, if notice
to vacate is properly given. Accordingly, the lease period had already
expired. Hence:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiffs and against defendant, ordering the latter and all persons claiming
right under him, to vacate the subject premises and surrender peaceful
possession thereof to the plaintiffs, and for defendant to pay plaintiffs:
a) the fair rental value or reasonable compensation for the continued use
and occupation of the premises at the rate of P5,000.00 per month effective
46
upon the date of filing of the complaint on November 19, 2002 and until the
premises shall have been totally vacated; andcralawlibrary
b) attorney's fees in the amount of Ten Thousand (P10,000.00) Pesos, plus
the costs of suit.
SO ORDERED.10
On appeal, the RTC of Manila reversed the MeTC decision, thus:
The Court agrees with the first error cited by the defendant-appellant.
Indeed, the Court a quo cannot require the defendant-appellant to pay the
plaintiffs-appellees the amount of Php5,000.00 per month as the fair rental
value or a reasonable compensation for the continued use and occupation
of the premises because before the termination of the month to month
verbal contract of lease, the rental being paid was P2,530.00 per month.
xxx
The court a quo was in error when it ruled that res judicatadoes not apply
in this case.
The court a quo ruled that there is no res judicata because there is no
identity of cause of action. The Court stated that in the first ejectment case
decided by Hon. Hipolito dela Vega the ground for ejectment was based on
the need by the lessor of the leased premises, while the case at bar is based
on the expiration or termination. This is erroneous because there is only one
cause of action unlawful detainer although this cause of action may give the
plaintiffs several reliefs. They may eject the defendant on the ground of
'need of premises by owner' or 'expiration of the period of verbal lease
agreement'. And when the plaintiffs-appellees filed two separate
complaints for these reliefs against the defendant-appellant, such acts
constitute splitting up of the cause of action. Thus, under Section 4, Rule 2
of the Revised Rules of Civil Procedure, '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.
Consequently, since the ejectment case based on 'the use of the premises
by the owner' filed by the plaintiffs-appellees was dismissed on the merits
by the Honorable Judge Hipolito dela Vega, the filing of the case at bar
against the defendant-appellant may be dismissed on the ground of res
judicata.
xxx
WHEREFORE, the judgment appealed from is REVERSED on the ground of
res judicata. The Clerks of Court of the Regional Trial Court and the
Metropolitan Trial Court of Manila are ordered to return to the appellant
the excess of P5,000.00 a month or the sum of P2,217 a month beginning
August 2003. The supersedeas bond put up by the appellant is ordered
cancelled and the appellees are ordered to pay the cost of the supersedeas
bond; and to pay the cost of suit.
SO ORDERED.11
Respondents repaired to the CA, which partially reversed the findings of the
RTC. In its decision, the CA found that the acts and omissions complained of
and involved in the two civil cases were not the same.12 Likewise, the
appellate court applied the "same evidence" test and decided that there
was no identity of causes of action between the first and second cases of
ejectment as different facts and evidence were needed for the resolution of
each case, and consequently, the principle of res judicataas a bar by prior
judgment was inapplicable.13 It was also found that res judicata in the
concept of "conclusiveness of judgment" will not apply since the "personal
need" issue decided upon in the first case is different from and does not
encompass any element of the "expiration of lease contract" at issue in the
second case.14 Lastly, the CA declared that the lease contract between the
parties was on a month-to-month basis and that petitioner should vacate
the subject premises because his lease had already expired.15 Thus, the
dispositive portion of the decision reads:
WHEREFORE, premises considered, the Decision dated October 14, 2003 of
the Regional Trial Court, Branch 33, Manila is PARTLY REVERSED as follows:
a) Appellees-petitioners' complaint for Ejectment is GRANTED;
47
b) Appellant-respondent and all persons claiming right under him are
hereby ORDERED TO VACATE the subject premises and to surrender
peaceful possession thereof to appellees-petitioners; andcralawlibrary
c) The appellees-petitioners must reimburse the appellant-respondent the
amount in excess of the monthly rental of P2,530.00 that the appellees-
petitioners can charge until the appellant-respondent surrenders peaceful
possession of the premises to them.
SO ORDERED.16
Petitioner filed a motion for reconsideration of said Decision, which was also
denied by the appellate court.
Persisting in his position that the principle of res judicata in its concept of
bar by prior judgment should apply in the instant case and that therefore,
the first suit for ejectment should operate as a bar to the present action for
ejectment, petitioner is now before us questioning the order of the CA for
him to vacate the leased premises.
Res judicata is defined as "a matter adjudged; a thing judicially acted upon
or decided; a thing or matter settled by judgment."17 According to the
doctrine of res judicata, an existing final judgment or decree rendered on
the merits, and without fraud or collusion, by a court of competent
jurisdiction, upon any matter within its jurisdiction, is conclusive of the
rights of the parties or their privies, in all other actions or suits in the same
or any other judicial tribunal of concurrent jurisdiction on the points and
matters in issue in the first suit.18 To state simply, 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 on all points and
matters determined in the former suit.19
The principle of res judicata is applicable by way of: 1) "bar by prior
judgment" and 2) "conclusiveness of judgment." We have had occasion to
explain the difference between these two aspects of res judicata as follows:
There is "bar by prior judgment" when, as between the first case where the
judgment was rendered and the second case that is sought to be barred,
there is identity of parties, subject matter, and causes of action. In this
instance, the judgment in the first case constitutes an absolute bar to the
second action. Otherwise put, the judgment or decree of the court of
competent jurisdiction on the merits concludes the litigation between the
parties, as well as their privies, and constitutes a bar to a new action or suit
involving the same cause of action before the same or other tribunal.
But where there is identity of parties in the first and second cases, but no
identity of causes of action, the first judgment is conclusive only as to those
matters actually and directly controverted and determined and not as to
matters merely involved therein. This is the concept of res judicata known
as "conclusiveness of judgment." Stated differently, any right, fact or matter
in issue directly adjudicated or necessarily involved in the determination of
an action before a competent court in which judgment is rendered on the
merits is conclusively settled by the judgment therein and cannot again be
litigated between the parties and their privies whether or not the claim,
demand, purpose, or subject matter of the two actions is the same.20
In the case at bar, petitioner seeks to apply the principle of res judicata in
its concept of "bar by prior judgment" by pointing out that the final decision
rendered in the first case for ejectment, Civil Case No. 167142-CV,
constitutes a bar to the litigation of the second ejectment suit, the subject
of the instant petition.21
We find no merit in the argument of the petitioner.
Res judicata applies in the concept of "bar by prior judgment" if the
following requisites concur: (1) the former judgment or order must be final;
(2) the judgment or order must be on the merits; (3) the decision must have
been rendered by a court having jurisdiction over the subject matter and
the parties; and (4) there must be, between the first and the second action,
identity of parties, of subject matter and of causes of action.22
In the case before us, the existence of and compliance with the first three
elements is undisputed. Likewise, there is no issue as to the identity of the
parties in the two actions for ejectment. Hence, the identity of subject
matter and the identity of causes of action between the first and second
ejectment cases are the only remaining bones of contention in need of our
final determination concerning the issue of res judicata.
48
As to the subject matter, we find that there is no identity. The subject matter
of an action is "the matter or thing with respect to which the controversy
has arisen, concerning which the wrong has been done, and this ordinarily
is the property, or the contract and its subject matter, or the thing in
dispute."23 In an unlawful detainer case, the subject matter is the contract
of lease between the parties while the breach thereof constitutes the suit's
cause of action.24 In the present case, the lease contract subject of the
controversy is verbal and on a monthly basis. In these instances, it is well
settled that the lease is one with a definite period which expires after the
last day of any given thirty-day period.25 Following this reasoning, it
becomes apparent that what exists between the parties is not just one
continuous contract of lease, but a succession of lease contracts, each
spanning a period of one month. Hence, to be accurate, each action for
ejectment each referring to a unique thirty-day period of occupation of
respondents' property by the petitioner deals with a separate and distinct
lease contract corresponding to a separate and distinct juridical relation
between the parties. Considering, therefore, that the subject matter of Civil
Case No. 167142-CV is a different contract of lease from the subject matter
of the instant case, it is obvious that there is no identity of subject matter
between the first ejectment suit and the ejectment suit subject of the
present action.
Since there is no identity of subject matter between the two cases, it is but
logical to conclude that there is likewise no identity of causes of action. A
cause of action is the act or omission by which a party violates the legal right
of the other.26 Here, petitioner argues that there is but one single cause of
action in both ejectment suits as "the alleged acts of dispossession or
unlawful withholding of possessions were the same delict or wrong that
were alleged and prayed for by the respondents in both complaints for
ejectment."27 Petitioner is mistaken. In the first action for ejectment,
respondents' cause of action consists of petitioner's continued possession
of the premises in violation of respondents' legal rights under the provisions
of the amended Rent Control Act, which rights were deemed included into
the lease contract existing at the time of the filing of the case in May
2000.28 On the other hand, the cause of action in the second suit only
materialized when petitioner refused to vacate the premises despite receipt
of the notice of termination of lease sent by respondents on October 10,
2002 and the expiration of the 30-day grace period given him. From that
moment on, petitioner's possession of the leased premises became
unlawful and a new cause of action accrued. Hence, the cause of action in
the present case for ejectment only arose subsequent to the dismissal of
the first ejectment suit dated January 9, 2002. Therefore, while the causes
of action in the first and second ejectment suits are similar in that both
consist of unlawful possession by petitioner, they are not identical. Each act
of refusal to vacate by petitioner one in May 2000 and another in October
2002 breached separate and distinct lease contracts which consequently
gave birth to separate and distinct causes of action. Petitioner's contention
that there is but one single cause of action in the two ejectment suits must
perforce fail.
We have previously employed various tests in determining whether or not
there is identity of causes of action as to warrant the application of the
principle of res judicata. One test of identity is the "absence of inconsistency
test" where it is determined whether the judgment sought will be
inconsistent with the prior judgment. If no inconsistency is shown, the prior
judgment shall not constitute a bar to subsequent actions.29 In one case,30
we held that the failure of the petitioner to secure an injunction to prevent
the respondents from entering the land and gathering nuts is not
inconsistent with the petitioner's being adjudged the owner of the land. In
another case,31 we found that affirmative relief in a subsequent action for
specific performance and recovery of ownership and possession with
damages against the petitioner would be inconsistent with a prior judgment
holding the same petitioner the owner of the lot under litigation.
Applying the same test to the case before us, we are convinced that a finding
in the instant case that the lease contract has already expired would not be
inconsistent with the finding of lack of cause of action in the first ejectment
case. Petitioner asserts that the expiration of the lease contract is one of the
requisites of ejectment on the ground of "need of premises," and that
necessarily, the issue of expiration of the lease contract had already been
disposed of in the first ejectment case. Accordingly, petitioner contends that
a decision in favor of respondents in the instant case would in effect be
inconsistent with the decision rendered in the first ejectment case.
Petitioner's contention is bereft of merit. We reiterate that the subject
matter of the first ejectment suit, on the one hand, and the subject matter
of the second ejectment suit, on the other, are two separate and distinct
contracts of lease. Given these facts, the issue of expiration of lease contract
involved in the first case is different and far removed from the issue of
49
expiration of the lease contract subject of the instant case. Logically, any
ruling on the expiration of lease contract in the earlier ejectment case will
never be conclusive on this subsequent case.
Conceding, for the sake of argument, petitioner's premise that the first and
second ejectment cases involve the same lease contract, petitioner's
argument still does not hold water, but even serves to boost respondents'
case. It is to be noted that by singling out the issue of the expiration of the
lease contract, petitioner invoked the application of res judicata in the
concept of "conclusiveness of judgment." Well settled is the rule that where
there is identity of parties in the first and second cases, but no identity of
causes of action, the first judgment is conclusive only as to those matters
actually and directly controverted and determined and not as to matters
merely involved therein.32 In the first case for ejectment, it bears stressing
that the dismissal of the complaint only declared that the respondents failed
to comply with the requirements when the ground for ejectment is personal
need of premises. Notably, no express pronouncement can be found in the
decision of the MeTC of Manila, Branch 22 as to whether or not the lease
contract subsisting between the parties had already expired. The decision
therefore only directly attests to respondents' lack of cause of action when
the ground for ejectment is personal need of premises, and not to the
particular issue of expiration of the contract of lease subsisting between the
parties. Hence, we cannot sustain petitioner's reliance on the doctrine of
conclusiveness of judgment as regards the expiration of the purportedly
subsisting lease contract.
The more common approach in ascertaining identity of causes of action is
the "same evidence test," whereby the following question serves as a
sufficient criterion: "would the same evidence support and establish both
the present and former causes of action?"33 If the answer is in the
affirmative, then the prior judgment is a bar to the subsequent action;
conversely, it is not.
In our view, a simple application of this test to the facts of the instant case
readily reveals that the evidence necessary to obtain affirmative relief in the
present action for ejectment based on expiration of lease contract is not the
same as that in the first ejectment case based on "need of premises." At this
juncture, we again stress that there is no identity of subject matter between
the previous and present ejectment suits. This finding necessarily translates
to the utter difference in the pieces of evidence necessary to prove the
causes of action in the two actions.
Aside from the "absence of inconsistency test" and "same evidence test,"
we have also ruled that a previous judgment operates as a bar to a
subsequent one when it had "touched on [a] matter already decided,"34 or
if the parties are in effect "litigating for the same thing."35 Under these
tests, however, petitioner's reliance on the applicability of the principle of
res judicata is still for naught, given that the two cases for ejectment do not
share the same subject matter. We have consistently held that a judgment
in a previous case of ejectment could not serve as a bar to a subsequent one
if the latter is predicated on a new factual and juridical situation. As a
consequence, even in cases where the dismissal of a suit brought for the
ejectment of the lessee for nonpayment of rentals for a given period
becomes final and executory, the lessor is still not precluded from making a
new demand upon the tenant to vacate should the latter again fail to pay
the rents due or should another ground for ejectment arise, in which case
such subsequent demand and refusal of the tenant to vacate shall constitute
a new cause of action.36
Finally, the circumstances of the case at bar are comparable to those in
Siapian v. Court of Appeals, which likewise involved a monthly verbal
contract of lease. We disposed of the issue of identity of causes of action in
the following manner:
The first ejectment case had for a cause of action based on the need for the
premises. The second ejectment case involved a different cause of action,
that is, for non-payment of rentals up to February 1982. In the third case,
the cause of action was the need for the premises and non-payment of
rentals from November 1987 up to May 1988. In this latest ejectment suit,
the cause of action is the non-payment of rentals from December 1987
accumulating to P17,064.65. Clearly, the cause of action and the
circumstances present in the instant case are not the same but differ
markedly from those in previous suits cited. Reliance on the doctrine of res
judicata by petitioner is sadly misplaced.37
We are not unaware of authorities that tend to widen rather than to restrict
the doctrine of res judicata for the reason that public interest, as well as
private interest, demands an end to litigation as well as the protection of
50
the individual from being vexed twice for the same cause'.38 Indeed, to
adhere otherwise would "subject the public peace and quiet to the will and
neglect of individuals and prefer the gratification of the litigious disposition
on the part of suitors to the preservation of the public tranquility and
happiness."39 However, as in this case, we do not see how untempered
overzealousness can help work justice into a situation where an application
of the principle of res judicatais clearly not proper.

As to the issue of novation raised by petitioner, we are not persuaded by

the latter's theory that the acceptance of rental payments by respondents
pending the final determination of the instant petition amounts to a
novation of the decision of the CA ordering petitioner to vacate the subject
leased premises. In the first place, there is nothing to novate because as
petitioner himself pounds on, the judgment to vacate has not yet become
final. Furthermore, it bears stressing that novation is never presumed, and
the animus novandi, whether totally or partially, must appear by express
agreement of the parties, or by acts that are too clear and unequivocal to
be mistaken.40 In the present case, no intent to novate can be gleaned from
the parties' actuations as they entered into the subsequent lease contracts
with the qualification that the instant petition is pending before this Court.
Hence, the final outcome of the judgment in this case will only operate as a
resolutory condition to the existing contract between the parties as regards
the leased premises.

IN VIEW WHEREOF, the instant petition is DENIED. The decision of the Court
of Appeals is AFFIRMED.

SO ORDERED.

51
[G.R. No. 128349. September 25, 1998]
BACHRACH CORPORATION, petitioner, vs. THE HONORABLE COURT OF
APPEALS and PHILIPPINE PORTS AUTHORITY, respondents.
DECISION
VITUG, J.:
Bachrach Corporation (Bachrach), in its petition for review on certiorari,
questions the decision of the Court of Appeals in CA-G.R. SP No. 38763,
promulgated on 12 November 1996, the dispositive part of which reading -
WHEREFORE, the petition is granted. The assailed RTC orders are hereby
NULLIFIED and SET ASIDE and public respondent is ordered to dismiss the
subject action before him under Civil Case No. 95-73399. No
pronouncement as to costs.[1] on several counts; viz:
I. THE COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING CA-G.R. SP
NO. 38673 DESPITE THE FACT THAT A SIMILAR PETITION EARLIER FILED BY
PPA WAS DISMISSED FOR BEING INSUFFICIENT NOT ONLY IN FORM BUT
ALSO IN SUBSTANCE WHICH DISMISSAL CONSTITUTES RES JUDICATA
INSOFAR AS THE ISSUES RAISED THEREIN ARE CONCERNED.
II. THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE DECISION
IN THE UNLAWFUL DETAINER CASE CONSTITUTES RES JUDICATA WHICH
BARS THE SPECIFIC PERFORMANCE CASE.
III. THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE FILING OF
THE SPECIFIC PERFORMANCE CASE VIOLATES THE RULE AGAINST FORUM
SHOPPING.
IV. THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE WRIT OF
PRELIMINARY INJUNCTION ISSUED BY THE TRIAL COURT CONSTITUTES
INTERFERENCE WITH ITS JUDGMENT IN THE UNLAWFUL DETAINER CASE.
V. THE COURT OF APPEALS GRAVELY ERRED IN ORDERING THE DISMISSAL
OF CIVIL CASE NO. 95-73399 THEREBY RULING ON THE MERITS OF THE CASE
WHEN IN FACT, THE ONLY ISSUES FOR ITS RESOLUTION WERE THE
PROPRIETY OF THE WRIT OF PRELIMINARY INJUNCTION ISSUED BY THE
TRIAL COURT AND THE DENIAL OF PPAS MOTION FOR PRELIMINARY
HEARING ON AFFIRMATIVE DEFENSES.[2]
It would appear that petitioner corporation entered into two lease contracts
with the Philippine government covering two specified areas, Block 180 and
Block 185, located at the Manila Port Area, then under the control and
management of the Director of Lands, for a term of ninety-nine years each,
the first lease to expire on 19 June 2017 and the other on 14 February 2018.
During her tenure, President Corazon Aquino issued Executive Order No.
321 transferring the management and administration of the entire Port
Area to herein respondent Philippine Ports Authority (PPA). Shortly after its
take-over, PPA issued a Memorandum increasing the rental rates of
Bachrach by 1,500%. Bachrach refused to pay the substantial increased
rates demanded by PPA.
On 23 March 1992, PPA initiated unlawful detainer proceedings, docketed
Civil Case No. 138838 of the Metropolitan Trial Court (MeTC) of Manila,
against Bachrach for non-payment of rent. On 27 April 1993, MeTC rendered
a decision ordering the eviction of Bachrach from the leased premises.
Bachrach appealed to the Regional Trial Court (RTC) of Manila which, on 21
September 1993, affirmed the decision of the lower court in toto.[3]
Bachrach elevated the case to the Court of Appeals by way of a petition for
review. On 29 July 1994, the appellate court affirmed the decision of the
RTC. A motion for reconsideration was filed by Bachrach; however, the
resolution of the motion was put on hold pending submission of a
compromise agreement.[4] When the parties failed to submit the promised
compromise agreement, the Court of Appeals, on 15 May 1995, denied
Bachrachs motion for reconsideration. The decision of the appellate court
in the ejectment suit became final and executory on 20 May 1995.[5]
Meanwhile on 28 March 1995, while the motion for reconsideration was yet
pending with the appellate court, Bachrach filed a complaint against PPA
with the Manila RTC, docketed Civil Case No. 95-73399 (hereinafter referred
to also as the specific performance case), for refusing to honor a
compromise agreement said to have been perfected between Bachrach and
PPA during their 04 February 1994 conference that superseded the
ejectment case. In its complaint, Bachrach prayed for specific performance.
52

On 08 June 1995, PPA filed a motion for a writ of execution/garnishment in
the ejectment case. The next day, 09 June 1995, Bachrach filed an
application in the specific performance case for the issuance of a temporary
restraining order and/or a writ of preliminary injunction to enjoin the MeTC
from issuing the writ of execution/garnishment. PPA countered by filing a
motion for preliminary hearing on its affirmative defenses along the same
grounds mentioned in its motion to dismiss the specific performance case,
to wit: (a) the pendency of another action between the same parties for the
same cause; (b) the violation of the anti-forum-shopping rule; (c) the
complaints lack of cause of action; and (d) the unenforceable character of
the compromise agreement invoked by Bachrach. On 13 July 1995, the trial
court issued an omnibus order, granting the application of Bachrach for a
writ of preliminary injunction, in this tenor -
PREMISES CONSIDERED, this Court is of the opinion and so holds (1) that
plaintiff (Bachrach) is entitled to the injunctive relief prayed for and upon
the posting of a bond in the amount of P300,000.00, let a writ of preliminary
injunction be issued enjoining the defendant (PPA), the Presiding Judge of
the Metropolitan Trial Court of Manila, Branch 2 from issuing a writ of
execution/garnishment in Civil Case No. 238838-CV entitled `Philippine
Ports Authority vs. Bachrach Corporation; (2) lifting/setting aside the order
dated June 5, 1995 and (3) denying defendants motion for a preliminary
hearing on affirmative defenses.[6]
PPA moved for reconsideration of the above order but the trial court denied
the plea in its order of 29 August 1995.
On 25 September 1995, PPA filed a petition for certiorari and prohibition,
with application for the issuance of a temporary restraining order and/or
writ of preliminary injunction, docketed CA-G.R. SP No. 38508, before the
Court of Appeals. The petition was dismissed by resolution, dated 28
September 1995, of the appellate court for being insufficient in form and
substance, i.e., the failure of PPA to properly attach a certified true copy
each of the assailed order of 13 July 1995 and 29 August 1995 of the trial
court. PPA received on 05 October 1995[7] a copy of the resolution, dated
28 September 1995, of the appellate court. Undaunted, PPA filed a new
petition on 11 October 1995, now evidently in proper form, asseverating
that since it had received a copy of the assailed resolution of the trial court
only on 07 September 1995, the refiling of the petition with the Court of
Appeals within a period of less than two months from the date of such
receipt was well within the reasonable time requirement under the Rules
for a special civil action for certiorari.[8] In the meantime, the resolution,
dated 28 September 1995, of the Court of Appeals which dismissed CA-G.R.
No. 38508 became final on 21 October 1995.[9]
In its newly filed petition, docketed CA-G.R. SP No. 38673, PPA invoked the
following grounds for its allowance:
I. That respondent Judge acted without, or in excess of jurisdiction, or with
grave abuse of discretion when it issued a writ of preliminary injunction
against the final and executory resolution of the Honorable Court of Appeals
(Annex `I) inspite of the well-established rule that courts are not allowed to
interfere with each others judgment or decrees by injunction, and worse, in
this case, against the execution of the judgment of a superior or collegiate
court which had already become final and executory.
II. That respondent Judge acted without, or in excess of jurisdiction, or with
grave abuse of discretion when it also denied petitioners motion for a
preliminary hearing on its affirmative defenses or in failing to have the case
below outrightly dismissed on the grounds stated in its affirmative defenses,
when respondent Judge pronounced there is no identity as to the causes of
action between the case decided by the Court of Appeals (CA-G.R. SP No.
32630) and the case below (Civil Case No. 95-73399) when clearly the causes
of action in both cases revolve on the same issue of possession of the
subject leased premises.
III. That respondent Judge acted without, or in excess of jurisdiction, or with
grave abuse of discretion in refusing to take cognizance (of), abide (by) and
acknowledge the final judgment of the Court of Appeals which, on said
ground alone, is enough justification for the dismissal of the case grounded
on res judicata. Moreover private respondent is guilty of forum-shopping
and the penalty therefor is the dismissal of its case.[10]
On 12 November 1996, the Court of Appeals rendered the assailed decision
nullifying and setting aside the orders of the RTC and ordering the latter to
dismiss the specific performance case.
53
The Court finds merit in the instant appeal interposed by petitioner.
Verily, the decisive issue raised by the parties before the Court in the instant
petition is whether or not the specific performance case (Civil Case No.
73399) should be held barred by the unlawful detainer case on the ground
of res judicata. There are four (4) essential conditions which must concur in
order that res judicata may effectively apply, viz: (1) The judgment sought
to bar the new action must be final; (2) the decision must have been
rendered by a court having jurisdiction over the subject matter and the
parties; (3) the disposition of the case must be a judgment or order on the
merits; and (4) there must be between the first and second action identity
of parties, identity of subject matter, and identity of causes of action.[11]
There is no question about the fact that all the first three elements of res
judicata are here extant; it is the final condition requiring an identity of
parties, of subject matter and of causes of action, particularly the last two,
i.e., subject matter and cause of action, that presents a problem.
A cause of action, broadly defined, is an act or omission of one party in
violation of the legal right of the other.[12] The subject matter, on the other
hand, is the item with respect to which the controversy has arisen, or
concerning which the wrong has been done, and it is ordinarily the right, the
thing, or the contract under dispute.[13] In a breach of contract, the
contract violated is the subject matter while the breach thereof by the
obligor is the cause of action. It would appear quite plain then that the RTC
did act aptly in taking cognizance of the specific performance case. In Civil
Case No. 138838 of the MeTC, the unlawful detainer case, the subject
matter is the contract of lease between the parties while the breach
thereof, arising from petitioners non-payment of rentals, constitutes the
suits cause of action. In Civil Case No. 73399 of the RTC, the specific
performance case, the subject matter is the compromise agreement
allegedly perfected between the same parties while the cause of action
emanates from the averred refusal of PPA to comply therewith. The
ultimate test in ascertaining the identity of causes of action is said to be to
look into whether or not the same evidence fully supports and establishes
both the present cause of action and the former cause of action. In the
affirmative, the former judgment would be a bar; if otherwise, then that
prior judgment would not serve as such a bar to the second.[14] The
evidence needed to establish the cause of action in the unlawful detainer
case would be the lease contract and the violation of that lease by Bachrach.
In the specific performance case, what would be consequential is evidence
of the alleged compromise agreement and its breach by PPA.
The next thing to ask, of course, would be the question of whether or not
the issuance by the trial court of the writ of preliminary injunction was an
improper interference with the judgment in the unlawful detainer suit. It
could be argued that, instead of filing a separate action for specific
performance, Bachrach should just have presented the alleged compromise
agreement in the unlawful detainer case. Unfortunately, the refusal of PPA
to honor the agreement after its alleged perfection effectively prevented
Bachrach from seeking the coercive power of the court to enforce the
compromise in the unlawful detainer case. The situation virtually left
Bachrach with but the remedy of independently initiating the specific
performance case in a court of competent jurisdiction. In its challenged
decision, the Court of Appeals, on its part, has said that respondent PPAs
prayer for the issuance of a writ of execution and garnishment is but the
necessary and legal consequence of its affirmance of the lower courts
decision in the unlawful detainer case which has by then become final and
executory.[15] The rule indeed is, and has almost invariably been, that after
a judgment has gained finality, it becomes the ministerial duty of the court
to order its execution.[16] No court, perforce, should interfere by injunction
or otherwise to restrain such execution. The rule, however, concededly
admits of exceptions; hence, when facts and circumstances later transpire
that would render execution inequitable or unjust, the interested party may
ask a competent court to stay its execution or prevent its enforcement.[17]
So, also, a change in the situation of the parties can warrant an injunctive
relief.[18] Evidently, in issuing its orders of 13 July 1995 and 29 August 1995
assailed by PPA in the latters petition for certiorari and prohibition before
the Court of Appeals, the trial court in the case at bar would want to
preserve status quo pending its disposition of the specific performance case
and to prevent the case from being mooted by an early implementation of
the ejectment writ. In holding differently and ascribing to the trial court
grave abuse of discretion amounting to lack or excess of jurisdiction, the
appellate court, in our considered view, has committed reversible error.
Having reached the above conclusions, other incidental issues raised by
petitioner no longer need to be passed upon.
54
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals
is reversed and set aside; Civil Case No. 73399 along with the assailed orders
of the Regional Trial Court, aforedated, are hereby reinstated. No costs.

SO ORDERED.

55
ROMBE EXIMTRADE (PHILS.), G.R. No. 164479 There is no interference by one co-equal court with another when the case
filed in one involves corporate rehabilitation and suspension of extrajudicial
INC. and SPOUSES ROMEO foreclosure in the other.

PERALTA and MARRIONETTE Present:

PERALTA, The Case Background

Petitioners, QUISUMBING, J., Chairperson,

CARPIO, Rombe Eximtrade (Phils.), Inc. (Rombe) is a corporation organized and

existing under Philippine laws with its main office in the City of
CARPIO MORALES, Mandaluyong. It is represented in this petition by the spouses Romeo and
Marrionette Peralta. It owned some real properties in Malolos, Bulacan.
- versus - TINGA, and

VELASCO, JR., JJ.

Sometime in 2002, Rombe filed a Petition for the Declaration of a State of
Suspension of Payments with Approval of Proposed Rehabilitation Plan
ASIATRUST DEVELOPMENT Promulgated: docketed as Civil Case No. 325-M-2002 with the Malolos, Bulacan Regional
Trial Court (RTC), Branch 7.
BANK,

Respondent. February 13, 2008 On May 3, 2002, in accordance with Section 6, Rule 4 of the Interim Rules of
Procedure on Corporate Rehabilitation (IRPCR), the RTC issued a Stay Order
x-----------------------------------------------------------------------------------------x suspending the enforcement of all claims whether for money or otherwise
judicial or extrajudicial against Rombe.

The Securities and Exchange Commission and Rombes other creditors, the
DECISION Bank of the Philippine Islands and creditor-respondent Asiatrust
Development Bank (Asiatrust), opposed the petition.

VELASCO, JR., J.:

Thereafter, on September 24, 2002, the Malolos, Bulacan RTC, Branch 7
issued an Order dismissing Civil Case No. 325-M-2002, and the May 3, 2002
Stay Order suspending all the claims against Rombe was lifted. According to
56
the trial court, Rombe misrepresented its true financial status in its petition of Rombe. Asiatrusts Motion for Reconsideration with Motion to Dissolve
for suspension of payments. It found that: (1) Rombe did not submit an Writ of Preliminary Injunction was rejected in the April 3, 2003 Order.
audited financial statement as required by the IRPCR; (2) Rombe made it
appear that it had sufficient assets to fully pay its outstanding obligations
when it submitted copies of certificates of title over real properties, but
when examined, these were registered in the names of other persons and Aggrieved, Asiatrust filed before the Court of Appeals (CA) a Petition for
only two were unencumbered; (3) Rombe misdeclared the value of its Certiorari under Rule 65 docketed as CA-G.R. SP No. 77471 with the CA,
assets, violating the provisions of the IRPCR; (4) Rombe gave only general alleging grave abuse of discretion on the part of the RTC, Branch 15 in issuing
references to the location of its properties without mention of the book the TRO.
values nor condition of the properties in its Inventory of Assets; (5) Rombe
did not attach any evidence of title or ownership to the properties
enumerated in the Inventory of Assets contrary to the IRPCR; (6) Rombe did
not attach nor provide a Schedule of Accounts Receivable indicating the
amount of each receivable, from whom due, the maturity date, and the
degree of collectivity, as required by the IRPCR; (7) Rombe also had not been The Court of Appeals ruled Rombe misrepresented itself
complying with its reportorial duty in filing its General Information Sheet
from 1992 to 2002, nor its Financial Statement (FS) from 1992 to 1995 and
2001, while its FSs for 1999 and 2000 were filed late; (8) Rombes Balance
Sheet claimed it had receivables but it did not indicate the nature, basis, and On March 29, 2004, the CA issued the Decision[2] in favor of Asiatrust
other information of the receivables; (9) Rombe grossly exaggerated assets stating, as follows:
claiming properties it did not own; and (10) Rombe did not have a feasible
rehabilitation plan.[1] The RTC concluded that Rombe made numerous
material misrepresentations and was insolvent.
IN VIEW OF ALL THE FOREGOING, finding merit in this Petition, the same is
GRANTED and the assailed Orders dated January 8, 2003 and April 3, 2003
are hereby ANNULLED and SET ASIDE, for having been issued with grave
Since Rombe did not appeal, Asiatrust initiated foreclosure proceedings abuse of discretion amounting to lack or excess of jurisdiction. Costs against
against Rombes properties. private respondents.

On December 17, 2002, anticipating the foreclosure, Rombe filed a SO ORDERED.

Complaint for Annulment of Documents and Damages with Prayer for a
Temporary Restraining Order (TRO) and Injunction docketed as Civil Case
No. 906-M-2002 and raffled to the Malolos, Bulacan RTC, Branch 15. In this
case, Rombe asked that Asiatrust and the Ex-Officio Provincial Sheriff of
Bulacan be stopped from proceeding with the extra-judicial foreclosure of
mortgage on its properties initiated by Asiatrust. The RTC, Branch 15 issued The CA found that the May 3, 2002 Stay Order of the Malolos, Bulacan RTC,
the January 8, 2003 Order granting the writ of preliminary injunction in favor Branch 7 in Civil Case No. 325-M-2002 could not be clearer. The Stay Order
57
was lifted by the trial court because of Rombes insolvency,
misrepresentations, and infeasible rehabilitation plan. The appellate court
observed that the January 8, 2003 Order of the RTC, Branch 15 granting the
TRO in Civil Case No. 906-M-2002 interfered with and set aside the earlier
September 24, 2002 Order of the RTC, Branch 7; and such intervention
thwarted the foreclosure of Rombes assets.
Rombes Motion for Reconsideration was denied on July 2, 2004.
Hence, this petition is filed with us. Rombe raises the following issues:
(a)
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT
ORDERED THE ANNULMENT OF THE ORDERS OF THE TRIAL COURT FOR THE
ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION AGAINST HEREIN
RESPONDENT DESPITE THE FACT THAT CIVIL CASE NO. 906-M-2002, A CASE
FOR ANNULMENT OF DOCUMENTS FILED BEFORE BRANCH 15 OF THE
REGIONAL TRIAL COURT OF MALOLOS, BULACAN, INVOLVES A TOTALLY
SEPARATE AND DISTINCT CAUSE OF ACTION FROM THAT OF CIVIL CASE NO.
325-M-2002, A PETITION FOR DECLARATION OF STATE OF SUSPENSION OF
PAYMENTS WITH APPROVAL OF PROPOSED REHABILITATION FILED BEFORE
BRANCH 7 OF THE REGIONAL TRIAL COURT OF MALOLOS, BULACAN
(b)
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT
ORDERED THE ANNULMENT OF THE ORDERS OF THE TRIAL COURT FOR THE
ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION AGAINST HEREIN
RESPONDENT DESPITE THE FACT THAT THE PURPOSE OF THE RESTRAINING
ORDER ISSUED BY BRANCH 15 REGIONAL TRIAL COURT OF MALOLOS,
BULACAN IN CIVIL CASE NO. 906-M-2002 IS ENTIRELY SEPARATE AND
DISTINCT FROM THE PURPOSE OF THE STAY ORDER ISSUED BY BRANCH 7
OF THE REGIONAL TRIAL COURT OF MALOLOS, BULACAN IN CIVIL CASE NO.
325-M-2002
(c)
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT
ORDERED THE ANNULMENT OF THE ORDERS OF THE TRIAL COURT FOR THE
ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION AGAINST HEREIN
RESPONDENT DESPITE THE ABSENCE OF ANY FINDING OF GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION EXERCISED
BY THE TRIAL COURT IN THE [ISSUANCE] OF THE SAID ORDERS
(d)
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT DID
NOT EVEN BOTHER TO ADDRESS THE FACT THAT THE PETITION FILED
BEFORE IT IS FATALLY DEFECTIVE
The Courts Ruling
We shall first address what Rombe claims are fatal defects in Asiatrusts
petition before the CA. According to Rombe, the signatory of the petition,
Esmael C. Ferrer, Asiatrusts Manager and Head of the Acquired Assets Unit,
was not authorized by Asiatrusts Board of Directors to sign Asiatrusts
petition and the CA, therefore, should have dismissed the petition outright.
Citing Premium Marble Resources, Inc. v. Court of Appeals (Premium),[3]
58
Rombe avers that the power of a corporation to sue and be sued in any court
is lodged with the board of directors and, absent any board resolution, no
one can act on behalf of the corporation. Any action without this
authorization cannot bind the corporation.
Rombes reliance on Premium is misplaced. The issue in Premium is not the
authority of the president of Premium to sign the verification and
certification against forum shopping in the absence of a valid authority from
the board of directors. The real issue in Premium is, who between the two
sets of officers, both claiming to be the legal board of directors, had the
authority to file the suit for and on behalf of the company. Premium is
inapplicable to this case.
On the matter of verification, the purpose of the verification requirement is
to assure that the allegations in a petition were made in good faith or are
true and correct, not merely speculative. The verification requirement is
deemed substantially complied with when one who has ample knowledge
to swear to the truth of the allegations in the petition signed the verification
attached to it, and when matters alleged in the petition have been made in
good faith or are true and correct.[4] In this case, we find that the position,
knowledge, and experience of Ferrer as Manager and Head of the Acquired
Assets Unit of Asiatrust, and his good faith, are sufficient compliance with
the verification and certification requirements. This is in line with our ruling
in Iglesia ni Cristo v. Ponferrada,[5] where we said that it is deemed
substantial compliance when one with sufficient knowledge swears to the
truth of the allegations in the complaint. However, to forestall any challenge
to the authority of the signatory to the verification, the better procedure is
to attach a copy of the board resolution of the corporation empowering its
official to sign the petition on its behalf.
Now, as to the core of the petition, Rombe vigorously asserts that the writ
of preliminary injunction issued by Branch 15 does not affect in any way the
earlier September 24, 2002 Order of Branch 7 since the two cases involve
separate and distinct causes of action.
Rombes thesis is correct but for a different reason.
The rehabilitation case (Civil Case No. 325-M-2002) is distinct and dissimilar
from the annulment of foreclosure case (Civil Case No. 906-M-2002), in that
the first case is a special proceeding while the second is a civil action.
A civil action is one by which a party sues another for the enforcement or
protection of a right or the prevention or redress of a wrong.[6] Strictly
speaking, it is only in civil actions that one speaks of a cause of action. A
cause of action is defined as the act or omission by which a party violates a
right of another.[7] Thus, in the annulment of foreclosure case, the cause of
action of Rombe is the act of Asiatrust in foreclosing the mortgage on
Rombes properties by which the latters right to the properties was allegedly
violated.
On the other hand, the rehabilitation case is treated as a special proceeding.
Initially, there was a difference in opinion as to what is the nature of a
petition for rehabilitation. The Court, on September 4, 2001, issued a
Resolution in A.M. No. 00-8-10-SC to clarify the ambiguity, thus:
On the other hand, a petition for rehabilitation, the procedure for which is
provided in the Interim Rules of Procedure on Corporate Recovery, should
be considered as a special proceeding. It is one that seeks to establish the
status of a party or a particular fact. As provided in section 1, Rule 4 of the
Interim Rules on Corporate Recovery, the status or fact sought to be
established is the inability of the corporate debtor to pay its debts when
59
they fall due so that a rehabilitation plan, containing the formula for the case, therefore, did not interfere with the September 24, 2002 Order
successful recovery of the corporation, may be approved in the end. It does dismissing the rehabilitation petition and lifting the May 3, 2002 Stay Order.
not seek a relief from an injury caused by another party.

More importantly, it cannot be argued that the RTC, Branch 15 intervened

Thus, a petition for rehabilitation need not state a cause of action and,
hence, Rombes contention that the two cases have distinct causes of action
is incorrect.
Indeed, the two cases are different with respect to their nature, purpose,
and the reliefs sought such that the injunctive writ issued in the annulment
of foreclosure case did not interfere with the September 24, 2002 Order in
the rehabilitation case.
The rehabilitation case is a special proceeding which is summary and non-
adversarial in nature. The annulment of foreclosure case is an ordinary civil
action governed by the regular rules of procedure under the 1997 Rules of
Civil Procedure.
with the rehabilitation case before the RTC, Branch 7 when the former
issued the January 8, 2003 injunctive writ since the rehabilitation petition
was already dismissed on September 24, 2002, which eventually attained
finality. After September 2002, there was no rehabilitation case pending
before any court to speak of. Hence, the Malolos, Bulacan RTC, Branch 15
did not commit grave abuse of discretion in issuing the January 8, 2003
Order.
WHEREFORE, the petition is GRANTED. The CA Decision in CA-G.R. SP No.
77471, annulling and setting aside the January 8, 2003 and April 3, 2003
Orders of the Malolos Bulacan RTC, Branch 15, is hereby REVERSED and SET
ASIDE. The Malolos, Bulacan RTC, Branch 15 is ordered to conduct further
proceedings in Civil Case No. 906-M-2002 with dispatch.

SO ORDERED.

The purpose of the rehabilitation case and the reliefs prayed for by Rombe
are the suspension of payments because it foresees the impossibility of
meeting its debts when they respectively fall due,[8] and the approval of its
proposed rehabilitation plan. The objective and the reliefs sought by Rombe
in the annulment of foreclosure case are, among others, to annul the
unilateral increase in the interest rate and to cancel the auction of the
mortgaged properties.

Being dissimilar as to nature, purpose, and reliefs sought, the January 8,

2003 Order granting the injunctive writ in the annulment of foreclosure

60
LUISA KHO MONTAER, ALEJANDRO MONTAER, JR., LILLIBETH MONTAER-
BARRIOS, AND RHODORA ELEANOR MONTAER-DALUPAN, CORONA,

Petitioners, AZCUNA, and

LEONARDO-DE CASTRO, JJ.

- versus -

Promulgated:

SHARIA DISTRICT COURT, FOURTH SHARIA JUDICIAL DISTRICT, MARAWI

CITY, LILING DISANGCOPAN, AND ALMAHLEEN LILING S. MONTAER,
JANUARY 20, 2009
Respondents.
x-----------------------------------------------------------------------------------------x

DECISION
G.R. No. 174975

PUNO, C.J.:

This Petition for Certiorari and Prohibition seeks to set aside the Orders of
Present: the Sharia District Court, Fourth Sharia Judicial District, Marawi City, dated
August 22, 2006[1] and September 21, 2006.[2]

On August 17, 1956, petitioner Luisa Kho Montaer, a Roman Catholic,

PUNO, C.J., Chairperson, married Alejandro Montaer, Sr. at the Immaculate Conception Parish in
Cubao, Quezon City.[3] Petitioners Alejandro Montaer, Jr., Lillibeth
CARPIO,
61
Montaer-Barrios, and Rhodora Eleanor Montaer-Dalupan are their
children.[4] On May 26, 1995, Alejandro Montaer, Sr. died.[5]
On August 19, 2005, private respondents Liling Disangcopan and her
daughter, Almahleen Liling S. Montaer, both Muslims, filed a Complaint for
the judicial partition of properties before the Sharia District Court.[6] The
said complaint was entitled Almahleen Liling S. Montaer and Liling M.
Disangcopan v. the Estates and Properties of Late Alejandro Montaer, Sr.,
Luisa Kho Montaer, Lillibeth K. Montaer, Alejandro Kho Montaer, Jr., and
Rhodora Eleanor K. Montaer, and docketed as Special Civil Action No. 7-
05.[7] In the said complaint, private respondents made the following
allegations: (1) in May 1995, Alejandro Montaer, Sr. died; (2) the late
Alejandro Montaer, Sr. is a Muslim; (3) petitioners are the first family of the
decedent; (4) Liling Disangcopan is the widow of the decedent; (5)
Almahleen Liling S. Montaer is the daughter of the decedent; and (6) the
estimated value of and a list of the properties comprising the estate of the
decedent.[8] Private respondents prayed for the Sharia District Court to
order, among others, the following: (1) the partition of the estate of the
decedent; and (2) the appointment of an administrator for the estate of the
decedent.[9]
the said motion for reconsideration lacked notice of hearing, the district
court held that such defect was cured as petitioners were notified of the
existence of the pleading, and it took cognizance of the said motion.[15] The
Sharia District Court also reset the hearing for the motion for
reconsideration.[16]
In its first assailed order dated August 22, 2006, the Sharia District Court
reconsidered its order of dismissal dated November 22, 2005.[17] The
district court allowed private respondents to adduce further evidence.[18]
In its second assailed order dated September 21, 2006, the Sharia District
Court ordered the continuation of trial, trial on the merits, adducement of
further evidence, and pre-trial conference.[19]
Seeking recourse before this Court, petitioners raise the following issues:
I.
RESPONDENT SHARIA DISTRICT COURT MARAWI CITY LACKS JURISDICTION
OVER PETITIONERS WHO ARE ROMAN CATHOLICS AND NON-MUSLIMS.

Petitioners filed an Answer with a Motion to Dismiss mainly on the following

grounds: (1) the Sharia District Court has no jurisdiction over the estate of II.
the late Alejandro Montaer, Sr., because he was a Roman Catholic; (2)
private respondents failed to pay the correct amount of docket fees; and (3)
private respondents complaint is barred by prescription, as it seeks to
establish filiation between Almahleen Liling S. Montaer and the decedent, RESPONDENT SHARIA DISTRICT COURT MARAWI CITY DID NOT ACQUIRE
pursuant to Article 175 of the Family Code.[10] JURISDICTION OVER THE ESTATES AND PROPERTIES OF THE LATE
ALEJANDRO MONTAER, SR. WHICH IS NOT A NATURAL OR JURIDICAL
On November 22, 2005, the Sharia District Court dismissed the private PERSON WITH CAPACITY TO BE SUED.
respondents complaint. The district court held that Alejandro Montaer, Sr.
was not a Muslim, and its jurisdiction extends only to the settlement and
distribution of the estate of deceased Muslims.[11]
III.
On December 12, 2005, private respondents filed a Motion for
Reconsideration.[12] On December 28, 2005, petitioners filed an Opposition
to the Motion for Reconsideration, alleging that the motion for
reconsideration lacked a notice of hearing.[13] On January 17, 2006, the
Sharia District Court denied petitioners opposition.[14] Despite finding that
62
RESPONDENT SHARIA DISTRICT COURT DID NOT ACQUIRE JURISDICTION
OVER THE COMPLAINT OF PRIVATE RESPONDENTS AGAINST PETITIONERS
DUE TO NON-PAYMENT OF THE FILING AND DOCKETING FEES.
IV.
RESPONDENT SHARIA DISTRICT COURTMARAWI CITY COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT
DENIED THE OPPOSITION OF PETITIONERS AND THEN GRANTED THE
MOTION FOR RECONSIDERATION OF RESPONDENTS LILING DISANGCOPAN,
ET AL. WHICH WAS FATALLY DEFECTIVE FOR LACK OF A NOTICE OF
HEARING.
V.
RESPONDENT SHARIA DISTRICT COURTMARAWI CITY COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT
SET SPL. CIVIL ACTION 7-05 FOR TRIAL EVEN IF THE COMPLAINT PLAINLY
REVEALS THAT RESPONDENT ALMAHLEEN LILING S. MONTAER SEEKS
RECOGNITION FROM ALEJANDRO MONTAER, SR. WHICH CAUSE OF ACTION
PRESCRIBED UPON THE DEATH OF ALEJANDRO MONTAER, SR. ON MAY 26,
1995.
In their Comment to the Petition for Certiorari, private respondents stress
that the Sharia District Court must be given the opportunity to hear and
decide the question of whether the decedent is a Muslim in order to
determine whether it has jurisdiction.[20]
Jurisdiction: Settlement of the Estate of Deceased Muslims
Petitioners first argument, regarding the Sharia District Courts jurisdiction,
is dependent on a question of fact, whether the late Alejandro Montaer, Sr.
is a Muslim. Inherent in this argument is the premise that there has already
been a determination resolving such a question of fact. It bears emphasis,
however, that the assailed orders did not determine whether the decedent
is a Muslim. The assailed orders did, however, set a hearing for the purpose
of resolving this issue.
Article 143(b) of Presidential Decree No. 1083, otherwise known as the Code
of Muslim Personal Laws of the Philippines, provides that the Sharia District
Courts have exclusive original jurisdiction over the settlement of the estate
of deceased Muslims:
ARTICLE 143. Original jurisdiction. (1) The Shari'a District Court shall have
exclusive original jurisdiction over:
xxxx
(b) All cases involving disposition, distribution and settlement of the estate
of deceased Muslims, probate of wills, issuance of letters of administration
or appointment of administrators or executors regardless of the nature or
the aggregate value of the property.
The determination of the nature of an action or proceeding is controlled by
the averments and character of the relief sought in the complaint or
petition.[21] The designation given by parties to their own pleadings does
not necessarily bind the courts to treat it according to the said designation.
Rather than rely on a falsa descriptio or defective caption, courts are guided
by the substantive averments of the pleadings.[22]
Although private respondents designated the pleading filed before the
Sharia District Court as a Complaint for judicial partition of properties, it is a
petition for the issuance of letters of administration, settlement, and
distribution of the estate of the decedent. It contains sufficient jurisdictional
facts required for the settlement of the estate of a deceased Muslim,[23]
such as the fact of Alejandro Montaer, Sr.s death as well as the allegation
that he is a Muslim. The said petition also contains an enumeration of the
63
names of his legal heirs, so far as known to the private respondents, and a
probable list of the properties left by the decedent, which are the very
properties sought to be settled before a probate court. Furthermore, the
reliefs prayed for reveal that it is the intention of the private respondents
to seek judicial settlement of the estate of the decedent.[24] These include
the following: (1) the prayer for the partition of the estate of the decedent;
and (2) the prayer for the appointment of an administrator of the said
estate.
We cannot agree with the contention of the petitioners that the district
court does not have jurisdiction over the case because of an allegation in
their answer with a motion to dismiss that Montaer, Sr. is not a Muslim.
Jurisdiction of a court over the nature of the action and its subject matter
does not depend upon the defenses set forth in an answer[25] or a motion
to dismiss.[26] Otherwise, jurisdiction would depend almost entirely on the
defendant[27] or result in having a case either thrown out of court or its
proceedings unduly delayed by simple stratagem.[28] Indeed, the defense
of lack of jurisdiction which is dependent on a question of fact does not
render the court to lose or be deprived of its jurisdiction.[29]
The same rationale applies to an answer with a motion to dismiss.[30] In the
case at bar, the Sharia District Court is not deprived of jurisdiction simply
because petitioners raised as a defense the allegation that the deceased is
not a Muslim. The Sharia District Court has the authority to hear and receive
evidence to determine whether it has jurisdiction, which requires an a priori
determination that the deceased is a Muslim. If after hearing, the Sharia
District Court determines that the deceased was not in fact a Muslim, the
district court should dismiss the case for lack of jurisdiction.
Special Proceedings
The underlying assumption in petitioners second argument, that the
proceeding before the Sharia District Court is an ordinary civil action against
a deceased person, rests on an erroneous understanding of the proceeding
before the court a quo. Part of the confusion may be attributed to the
proceeding before the Sharia District Court, where the parties were
designated either as plaintiffs or defendants and the case was denominated
as a special civil action. We reiterate that the proceedings before the court
a quo are for the issuance of letters of administration, settlement, and
distribution of the estate of the deceased, which is a special proceeding.
Section 3(c) of the Rules of Court (Rules) defines a special proceeding as a
remedy by which a party seeks to establish a status, a right, or a particular
fact. This Court has applied the Rules, particularly the rules on special
proceedings, for the settlement of the estate of a deceased Muslim.[31] In
a petition for the issuance of letters of administration, settlement, and
distribution of estate, the applicants seek to establish the fact of death of
the decedent and later to be duly recognized as among the decedents heirs,
which would allow them to exercise their right to participate in the
settlement and liquidation of the estate of the decedent.[32] Here, the
respondents seek to establish the fact of Alejandro Montaer, Sr.s death and,
subsequently, for private respondent Almahleen Liling S. Montaer to be
recognized as among his heirs, if such is the case in fact.
Petitioners argument, that the prohibition against a decedent or his estate
from being a party defendant in a civil action[33] applies to a special
proceeding such as the settlement of the estate of the deceased, is
misplaced. Unlike a civil action which has definite adverse parties, a special
proceeding has no definite adverse party. The definitions of a civil action
and a special proceeding, respectively, in the Rules illustrate this difference.
A civil action, in which a party sues another for the enforcement or
protection of a right, or the prevention or redress of a wrong[34] necessarily
has definite adverse parties, who are either the plaintiff or defendant.[35]
On the other hand, a special proceeding, by which a party seeks to establish
a status, right, or a particular fact,[36] has one definite party, who petitions
or applies for a declaration of a status, right, or particular fact, but no
definite adverse party. In the case at bar, it bears emphasis that the estate
of the decedent is not being sued for any cause of action. As a special
proceeding, the purpose of the settlement of the estate of the decedent is
to determine all the assets of the estate,[37] pay its liabilities,[38] and to
distribute the residual to those entitled to the same.[39]
Docket Fees
Petitioners third argument, that jurisdiction was not validly acquired for
non-payment of docket fees, is untenable. Petitioners point to private
respondents petition in the proceeding before the court a quo, which
contains an allegation estimating the decedents estate as the basis for the
conclusion that what private respondents paid as docket fees was
64
insufficient. Petitioners argument essentially involves two aspects: (1)
whether the clerk of court correctly assessed the docket fees; and (2)
whether private respondents paid the correct assessment of the docket
fees.
Filing the appropriate initiatory pleading and the payment of the prescribed
docket fees vest a trial court with jurisdiction over the subject matter.[40] If
the party filing the case paid less than the correct amount for the docket
fees because that was the amount assessed by the clerk of court, the
responsibility of making a deficiency assessment lies with the same clerk of
court.[41] In such a case, the lower court concerned will not automatically
lose jurisdiction, because of a partys reliance on the clerk of courts
insufficient assessment of the docket fees.[42] As every 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, the party filing
the case cannot be penalized with the clerk of courts insufficient
assessment.[43] However, the party concerned will be required to pay the
deficiency.[44]
In the case at bar, petitioners did not present the clerk of courts assessment
of the docket fees. Moreover, the records do not include this assessment.
There can be no determination of whether private respondents correctly
paid the docket fees without the clerk of courts assessment.
Exception to Notice of Hearing
Petitioners fourth argument, that private respondents motion for
reconsideration before the Sharia District Court is defective for lack of a
notice of hearing, must fail as the unique circumstances in the present case
constitute an exception to this requirement. The Rules require every written
motion to be set for hearing by the applicant and to address the notice of
hearing to all parties concerned.[45] The Rules also provide that no written
motion set for hearing shall be acted upon by the court without proof of
service thereof.[46] However, the Rules allow a liberal construction of its
provisions in order to promote [the] objective of securing a just, speedy, and
inexpensive disposition of every action and proceeding.[47] Moreover, this
Court has upheld a liberal construction specifically of the rules of notice of
hearing in cases where a rigid application will result in a manifest failure or
miscarriage of justice especially if a party successfully shows that the alleged
defect in the questioned final and executory judgment is not apparent on
its face or from the recitals contained therein.[48] In these exceptional
cases, the Court considers that no party can even claim a vested right in
technicalities, and for this reason, cases should, as much as possible, be
decided on the merits rather than on technicalities.[49]
The case at bar falls under this exception. To deny the Sharia District Court
of an opportunity to determine whether it has jurisdiction over a petition
for the settlement of the estate of a decedent alleged to be a Muslim would
also deny its inherent power as a court to control its process to ensure
conformity with the law and justice. To sanction such a situation simply
because of a lapse in fulfilling the notice requirement will result in a
miscarriage of justice.
In addition, the present case calls for a liberal construction of the rules on
notice of hearing, because the rights of the petitioners were not affected.
This Court has held that an exception to the rules on notice of hearing is
where it appears that the rights of the adverse party were not affected.[50]
The purpose for the notice of hearing coincides with procedural due
process,[51] for the court to determine whether the adverse party agrees
or objects to the motion, as the Rules do not fix any period within which to
file a reply or opposition.[52] In probate proceedings, what the law prohibits
is not the absence of previous notice, but the absolute absence thereof and
lack of opportunity to be heard.[53] In the case at bar, as evident from the
Sharia District Courts order dated January 17, 2006, petitioners counsel
received a copy of the motion for reconsideration in question. Petitioners
were certainly not denied an opportunity to study the arguments in the said
motion as they filed an opposition to the same. Since the Sharia District
Court reset the hearing for the motion for reconsideration in the same
order, petitioners were not denied the opportunity to object to the said
motion in a hearing. Taken together, these circumstances show that the
purpose for the rules of notice of hearing, procedural process, was duly
observed.
Prescription and Filiation
Petitioners fifth argument is premature. Again, the Sharia District Court has
not yet determined whether it has jurisdiction to settle the estate of the
decedent. In the event that a special proceeding for the settlement of the
65
estate of a decedent is pending, questions regarding heirship, including
prescription in relation to recognition and filiation, should be raised and
settled in the said proceeding.[54] The court, in its capacity as a probate
court, has jurisdiction to declare who are the heirs of the decedent.[55] In
the case at bar, the determination of the heirs of the decedent depends on
an affirmative answer to the question of whether the Sharia District Court
has jurisdiction over the estate of the decedent.

IN VIEW WHEREOF, the petition is DENIED. The Orders of the Sharia District
Court, dated August 22, 2006 and September 21, 2006 respectively, are
AFFIRMED. Cost against petitioners.

SO ORDERED.

66
TEGIMENTA CHEMICAL G.R. No. 176466 This is a petition for review on certiorari of the November 28, 2006
Decision[1] of the Court of Appeals in CA-G.R. SP No. 92810, which reversed
PHILS./VIVIAN D. GARCIA, and set aside the Resolutions[2] of the National Labor Relations Commission
(NLRC) in NLRC-NCR CA No. 041042-04, affirming the Order[3] of Labor
Petitioner, Present: Arbiter Antonio A. Cea dismissing the complaint filed by respondent Rolan
E. Buensalida for constructive illegal dismissal on the ground of forum-
shopping.
Ynares-Santiago, J. (Chairperson),

- versus - Austria-Martinez,
Tegimenta Chemical Philippines is a sole proprietorship owned by petitioner
Chico-Nazario, Vivian D. Garcia. It is engaged in the business of providing manpower for the
servicing and maintenance of air conditioning and air handling units that it
Reyes, and likewise provides to its clients. On September 8, 1997, petitioner hired
respondent Buensalida as an aircon maintenance technician.
Brion,* JJ.

ROLAN E. BUENSALIDA,
On February 26, 2003, respondent injured his left ring finger while repairing
Respondent. Promulgated: the air handling units at the SM Department Store in Davao City. As a result,
respondent underwent a surgical debridgement procedure and was
confined in the hospital for two days.

June 17, 2008

x ---------------------------------------------------------------------------------------- x SM Prime Holdings initially shouldered respondents hospitalization

expenses which amounted to P30,331.61 but it subsequently collected the
amount from petitioner who, in turn, informed respondent that the amount
would be deducted from his salary. Thus, on April 20, 2003, petitioner began
DECISION deducting P300.00 from respondents weekly earnings or a monthly
deduction of P1,200.00.

YNARES-SANTIAGO, J.:

According to respondent, he wanted to avail of the SSS benefits thus he

accomplished an Employee Notification Form (SSS Form B-300 [8/75]) which
he mailed to petitioner for completion but the latter did not send it back
because it was allegedly filed beyond the allowable period. Petitioner also

67
ignored respondents PhilHealth Form 1 which the latter sent together with
the SSS form.[4]
Thereafter, respondent demanded for the restoration of the deducted
amounts but was denied by petitioner; hence, on May 16, 2003, he filed a
complaint[5] for constructive dismissal with money claims against
petitioner before the Regional Arbitration Branch No. XI of the NLRC-Davao
City docketed as NLRC Case No. RAB-XI-05-00537-03 (Davao case).
Meanwhile, respondent was recalled to the Head Office at Quezon City per
Memorandum[6] dated September 25, 2003. Respondent averred that his
transfer was purposely done by petitioner to harass him, in view of their
estranged relationship brought about by the filing of the Davao case. He was
not advanced any travel fare in going back to Manila. He was also instructed
to attend seminars conducted by the SSS and Philhealth to be held on
October 21, 2003.
On October 3, 2003, petitioner issued another Memorandum[7] informing
respondent that he would be re-assigned to Manila as night shift supervisor
effective October 6, 2003. However, respondent refused the new
assignment because it would allegedly affect his gross income and other
benefits.[8] The night shift had no fixed work schedule in contrast to
respondents previous six-days-a-week schedule. Respondent would then be
deprived of a fixed or regular income.
On October 16, 2003, petitioner again issued a Memorandum[9] stating that
respondents re-assignment was for the good interest of the company. The
move was allegedly aimed to stop the increasing polarization among the
personnel in Davao City and the result of cost-cutting measures
implemented by the company in all SM branches and establishments.
Thus, on October 27, 2003, respondent filed another Complaint[10] for
constructive illegal dismissal against petitioner before the NLRC-NCR-North
Sector in Quezon City, docketed as NLRC-NCR NORTH SEC Case No. 00-01-
12481-03 (NCR case).
Subsequently, respondent amended his Complaint[11] in the NCR case to
include underpayment or non-payment of salaries, service incentive leave,
13th month pay and boarding house rental. He claimed that petitioner failed
to pay his boarding expenses arising from his assignment to Davao City,
contrary to the promise of petitioner. His ECOLA, 13th month pay and
service incentive leave pay were also not paid in the manner provided by
law.
Thereafter, respondent submitted his Position Paper[12] in the NCR case.
Petitioner filed a Motion to Dismiss[13] the NCR case on the ground of
forum-shopping. Petitioner alleged that the Davao case was a pending case
similar to the NCR case and that the latter should be dismissed pursuant to
Section 14 (a) of the NLRC Rules of Procedure as well as Supreme Court
Administrative Circular No. 04-94.
Respondent opposed the motion to dismiss contending that the two cases
had different causes of action. While the Davao case was for illegal
deduction, the NCR case was for constructive illegal dismissal as shown by
the distinct issues raised by respondent in his position papers filed in the
two cases.[14]
On July 15, 2004, Labor Arbiter Antonio A. Cea dismissed respondents
complaint in the NCR case on the ground that the cause of action therein
68
was embraced in the Davao case.[15] The NLRC affirmed the decision of the
Labor Arbiter in a resolution dated July 7, 2005.[16]
On appeal, the Court of Appeals reversed and set aside the NLRC resolution
in a Decision[17] dated November 28, 2006. It held that respondent was not
guilty of forum-shopping considering that the two cases had distinct causes
of action; that while the complaints in the two cases appeared to allege on
its face the same cause of action, respondents position papers in the two
cases show that the causes of action are actually different; that in
determining the cause of action in NLRC cases, reliance on the face of the
complaint is insufficient since the same consists only of a printed blank form
that does not contain specific allegations and prayers, unlike those filed
before the regular courts. Thus, an evaluation of the position paper is
necessary in ascertaining the cause of action raised in a complaint before
the NLRC.
Petitioner filed a motion for reconsideration but was denied by the
appellate court in a Resolution[18] dated January 29, 2007. Hence, the
instant petition alleging that the Court of Appeals abused its discretion in
allowing the simultaneous prosecution of the two cases, as it would expose
the parties to unnecessary expenses by attending in Quezon City and in
Davao City and there is a great danger in dispensing two decisions which are
contradictory to each other and are prejudicial to the parties.[19]
The petition lacks merit.
The Court of Appeals correctly relied not only on the face of the complaints,
but also on the position papers submitted by respondent in determining the
causes of action raised in the two cases. It correctly observed that a
complaint in a case filed before the NLRC consists only of a blank form which
provides a checklist of possible causes of action that the employee may have
against the employer. The check list was designed to facilitate the filing of
complaints by employees and laborers even without the intervention of
counsel. It allows the complainant to expediently set forth his grievance in
a general manner, but is not solely determinative of the ultimate cause of
action that he may have against the employer.
Section 3, Rule V of the New Rules of Procedure of the NLRC, as amended
by NLRC Resolution No. 01-02 (Series of 2002),[20] provides:
SECTION 4. SUBMISSION OF POSITION PAPERS/MEMORANDA. Without
prejudice to the provisions of the last paragraph, Section 2 of this Rule, the
Labor Arbiter shall direct both parties to submit simultaneously their
position papers with supporting documents and affidavits within an
inextendible period of ten (10) days from notice of termination of the
mandatory conference.
These verified position papers to be submitted shall cover only those claims
and causes of action raised in the complaint excluding those that may have
been amicably settled, and shall be accompanied by all supporting
documents including the affidavits of their respective witnesses which shall
take the place of the latters direct testimony. The parties shall thereafter
not be allowed to allege facts, or present evidence to prove facts, not
referred to and any cause or causes of action not included in the complaint
or position papers, affidavits and other documents.
Thus, the complaint is not the only document from which the complainants
cause of action is determined in a labor case. Any cause of action that may
not have been included in the complaint or position paper, can no longer be
alleged after the position paper is submitted by the parties. In other words,
the filing of the position paper is the operative act which forecloses the
raising of other matters constitutive of the cause of action. This necessarily
69
implies that the cause of action is finally ascertained only after both the
complaint and position paper are properly evaluated.
A cause of action is the delict or wrongful act or omission committed by the
defendant in violation of the primary right of the plaintiff.[21] A complaint
before the NLRC does not contain specific allegations of these wrongful acts
or omissions which constitute the cause of action. All that it contains is the
term by which such acts or omissions complained of are generally known. It
cannot therefore be considered as the final determinant of the cause of
action.
The complaint in the Davao case shows that respondent indicated, as causes
of action, constructive illegal dismissal, illegal deductions, non-payment of
premium pay, holiday pay and service incentive leave pay. On the other
hand, the complaint in the NCR case had, for its cause of action, constructive
illegal dismissal only. Later, the complaint in the NCR case was amended to
include underpayment of salaries and wages, service incentive leave and
13th month pay as well as non-payment of boarding house rental fees. At
face value, it would seem that the causes of action set forth in the two
complaints are indeed similar, if not, identical.
However, the position papers filed in the two cases raise distinct causes of
action, issues and prayers for relief. In respondents position paper in the
Davao case, the following issues were clearly spelled out: (1) whether the
injury sustained by respondent was work-related; (2) whether the salary
deductions made by petitioner was proper; and (3) whether petitioner was
justified in refusing to complete respondents SSS and Philhealth forms.[22]
While the complaint in the Davao case also indicated constructive illegal
dismissal, non-payment of premium pay, holiday pay and service incentive
leave pay as causes of action, these were not mentioned or discussed in
respondents position paper.
In contrast, the amended complaint in the NCR case is one for constructive
illegal dismissal and underpayment of monetary benefits. The issues raised
therein are: (1) whether complainant was illegally dismissed; (2) whether
complainant is entitled to all his monetary claims; (3) whether complainant
is entitled to full backwages and separation pay; and (4) whether
complainant is entitled to moral and exemplary damages.[23]
Thus, the causes of action pleaded in the two cases are not the same. The
Davao case was clearly one for illegal deductions and the NCR case was for
constructive illegal dismissal and money claims. The issue of respondents
alleged constructive illegal dismissal could not have been subsumed in the
first case considering that the facts constitutive of this offense arose only
after the first complaint was filed. In fact, respondent alleged in the Davao
case that he was informed through a phone call of his re-assignment to
Manila but did not know whether he will be terminated soon.
Needless to say, the factual allegations that support the causes of action in
the two cases are likewise dissimilar. The Davao case involved factual
circumstances related to petitioners refusal to shoulder respondents
hospitalization costs as well as the validity of the salary deductions made by
the former.[24] On the other hand, the NCR case pertained to alleged facts
dealing with the aftermath of the filing of the Davao case, particularly the
tactics petitioner allegedly employed to harass respondent and ease him
out of his regular employment, as well as averments involving
underpayment of monetary benefits.[25]
The two cases are not founded on the same set of facts, although the factual
circumstances of the Davao case are undoubtedly related to the matters
asserted in the NCR case. The two cases would require the appreciation of
factual matters that are connected, but are not necessarily alike. The
evidence required to prove the first case would not be the same as that
needed to substantiate the second case, such that the outcome of either
case will not automatically decide the result of the other.
70

Thus, respondent was not guilty of forum shopping when he filed the NCR
case despite the pendency of the Davao case. Forum shopping consists of
filing multiple suits involving the same parties for the same cause of action,
either simultaneously or successively, for the purpose of obtaining a
favorable judgment.[26] There is forum shopping where the elements of litis
pendentia are present, namely: (a) there is identity of parties, or at least
such parties as represent the same interest in both actions; (b) there is
identity of rights asserted and relief prayed for, the relief being founded on
the same set of facts; and (c) the identity of the two preceding particulars is
such that any judgment rendered in the pending case, regardless of which
party is successful would amount to res judicata in the other.[27] While the
first requisite concededly exists in the instant case, the second and third
requisites do not.
We are not unaware of the provision in Section 1 (b), Rule 3 of the NLRC
Rules of Procedure which states that a party having more than one cause of
action against the other party arising out of the same relationship shall
include all of them in one complaint or petition. As stated earlier, however,
the inclusion of respondents cause of action for constructive illegal dismissal
in the Davao case could not have been possible since the same arose only
after the latter case was filed. At the time of the filing of the Davao case,
respondent could not have yet claimed that petitioner committed acts that
would amount to constructive illegal dismissal. Thus, the aforementioned
rule has no application in this case.
Finally, it would be more in keeping with the orderly and efficient
disposition of respondents complaints to order the consolidation of the two
cases; however, Section 3, Rule IV of the NLRC Rules of Procedure states:
SECTION 3. CONSOLIDATION OF CASES/COMPLAINTS. Where there are two
or more cases/complaints pending before different Labor Arbiters in the
same Regional Arbitration Branch involving the same employer and
common principal causes of action or the same parties with different causes
of action, the subsequent cases/complaints shall be consolidated with the
first to avoid unnecessary costs or delay. Such consolidated
cases/complaints shall be disposed of by the Labor Arbiter to whom the first
case was assigned.
In case of objection to the consolidation, the same shall be resolved by the
Executive Labor Arbiter. An order resolving the motion shall be
inappealable.
Based on the above, it is plain that the two cases here cannot be
consolidated because they were filed and are pending before different
regional arbitration branches of the NLRC the first, in Davao City and the
second, in the National Capital Region. Considering that respondent was
recalled to Manila from his former station in Davao City, it is understandable
that he would seek to ventilate his claim of constructive illegal dismissal in
Manila, as it would be costly and impractical to go all the way back to Davao
City where he merely rented boarding space and had no means of
employment. Besides, it appears that the material acts and events
complained of as constituting constructive illegal dismissal transpired in
Manila.
All told, the Court of Appeals did not err in reversing the resolution of the
NLRC affirming the Labor Arbiters order for the dismissal of the NCR case.
Respondent did not commit forum shopping as the two cases he filed
against petitioner pertained to different causes of action and involved
related but distinct sets of factual circumstances. The NLRCs Rules of
Procedure also sanction the filing of the NCR case independently of the
Davao case.
71
WHEREFORE, based on the foregoing, the instant petition is DENIED. The
Decision of the Court of Appeals in CA-G.R. SP No. 92810 which reversed
and set aside the resolutions of the National Labor Relations Commission in
NLRC-NCR CA No. 041042-04 is hereby AFFIRMED. The complaint of
respondent for constructive illegal dismissal in NLRC-NCR North Sector Case
No. 00-10-12481-03 is REINSTATED. Labor Arbiter Antonio A. Cea is thus
ordered to DECIDE the said case without further delay.

SO ORDERED.

72
SPOUSES ABELARDO BORBE and ROSITA LAJARCA-BORBE,
Petitioners, AZCUNA, and

GARCIA, JJ.

Promulgated:

- versus -

October 5, 2007

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

VIOLETA CALALO, DECISION

Respondent. SANDOVAL-GUTIERREZ, J.:

G.R. No. 152572

For our resolution is the instant Petition for Review on Certiorari under Rule
45 of the 1997 Rules of Civil Procedure, as amended, assailing the
Present: Decision[1] and Resolution of the Court of Appeals dated December 21,
2001 and March 13, 2002, respectively, in CA-G.R. CV No. 66359.

PUNO, C.J., Chairperson,

Records show that the late Jose Palo, during his lifetime, inherited from his
SANDOVAL-GUTIERREZ, parents a 400-square meter portion of Lot 8, Pcs-4A-0000101 situated in
San Carlos, Lipa City.
CORONA,
73

On September 28, 1981, Rosita Lajarca-Borbe, petitioner, and Violeta
Calalo, the surviving spouse of Jose Palo, respondent, executed an
agreement or Kasunduan. The agreement provides that petitioner has
purchased the 400-square meter lot inherited by respondent from her late
husband, covered by Transfer Certificate of Title (TCT) No. 24370 of the
Registry of Deeds of Lipa City; that petitioner shall pay respondent
P3,000.00 as down payment; and that she shall pay the balance of P3,000.00
the moment a new TCT shall have been issued in the name of respondent.
As efforts to settle the dispute before the barangay authorities failed,
petitioners, on August 15, 1995, filed with the Regional Trial Court, Branch
13, Lipa City, a complaint for specific performance against respondent,
docketed as Civil Case No. 95-556.
In its Decision dated October 22, 1999, the trial court ruled in favor of
petitioners, thus:

The Kasunduan was also signed by respondents children, namely: WHEREFORE, in view of the foregoing, the Court finds for the plaintiffs as
Mercedes, Aguida and Vivencio, all surnamed Palo. On the same day, against the defendant and hereby orders the latter as follows:
petitioner paid respondent the agreed down payment of P3,000.00.
Petitioner later paid respondent in various amounts totaling P2,500.00,
leaving an unpaid balance of P500.00.
1. to execute a deed of sale over the property covered by TCT No. T-51153
in favor of the plaintiffs upon payment by the latter of the amount of
P500.00 to the defendant;
On September 22, 1982, or one year after the parties executed the
Kasunduan, TCT No. T-51153 was issued by the Register of Deeds of Lipa City
in respondents name.
2. to pay plaintiff attorneys fees and appearance fees in the fixed amount of
P25, 000.00; and

After 13 years or in April 1995, petitioner spouses presented a prepared

deed of sale in Filipino indicating that respondent is selling to petitioners
the subject lot covered by TCT No. T-51153 in her name. However, 3. to pay the costs of the suit.
respondent and her children refused to sign the document, asking a higher
price for the lot.

SO ORDERED.[2]

Despite demand, respondent and her children still refused to execute a new
deed of absolute sale.

74

On appeal by respondent, the Court of Appeals rendered its Decision dated
December 21, 2001, reversing the trial courts judgment and dismissing the
complaint, thus:
WHEREFORE, premises considered, the present appeal is hereby GRANTED.
The decision appealed from in Civil Case No. 95-556 is hereby REVERSED and
SET ASIDE and a new judgment is hereby rendered DISMISSING the
complaint as well as defendant-appellants counterclaim.
No pronouncement as to costs.
SO ORDERED.[3]
In reversing the Decision of the trial court, the appellate court held:
However, despite the validity and enforceability of the KASUNDUAN, the
trial court erred in not considering that the present action was filed beyond
the ten-year prescriptive period under Art. 1144(1) of the Civil Code, a
ground which has been raised and invoked by the appellant in her Answer.
Art. 1144 provides that an action upon a written contract must be brought
within ten (10) years from the time the right of action accrues. In cases
where there is no special provision for such computation, recourse must be
had to the rule that the period must be counted from the day on which the
corresponding action could have been instituted, or the legal possibility of
bringing the action. In the present case, that period should be computed
from the date of the issuance of the certificate of title covering the subject
property in the name of appellant which was on September 22, 1982. This
is consistent with the agreement of the parties under the KASUNDUAN that
the balance of P3, 000.00 of the purchase price will be paid by the buyers
(appellees) once the land sold will be separately titled. As the complaint was
filed only on August 15, 1995, or almost thirteen (13) years later, it is clear
that appellees action had already prescribed.
Petitioners filed a motion for reconsideration but it was denied by the Court
of Appeals in its Resolution[4] dated March 13, 2002.
Hence, the present petition.
The sole issue for our resolution is whether petitioners action has
prescribed.
Petitioners contend that their cause of action accrued only in 1995, when
they tendered the remaining balance of P500.00 to respondent which the
latter refused to accept. Thus, the Court of Appeals erred when it dismissed
their complaint by reason of prescription.
75
Respondent, for her part, maintains that the petition should be denied for
lack of merit.
Under the terms of the Kasunduan, petitioners would pay the balance of
P3,000.00 once the land sold will be titled in the name of respondent. TCT
No. T-51153 covering the subject lot was issued in respondents name on
September 22, 1982. From this day, petitioners could have asked
respondent to accept the remaining balance of P500.00 and execute a new
deed of sale in their favor.

Article 1144 of the Civil Code provides:

Article 1144. The following actions must be brought within ten years from Unfortunately, it was only in 1995 when petitioners attempted to pay the
the time the right of action accrues: remaining balance of P500.00. And it was only on August 15, 1995, or 13
years after the lot was registered in respondents name, that petitioners filed
the complaint for specific performance. Clearly by then, petitioners cause of
action had prescribed.
(1) Upon a written contract;

(2) Upon an obligation created by law;

Petitioners contend that they filed the action only in 1995 because
respondent did not inform them of the issuance of TCT No. T-51153 in her
name. We are not convinced. The issuance of TCT No. T-51153 on
(3) Upon a judgment. September 22, 1982 was a constructive notice to the whole world that
respondent has become the owner of the lot described therein. Petitioners
are thus barred from claiming that they were not notified thereof.

In Multi-Realty Development Corporation v. The Makati Tuscany

Condominium Corporation,[5] we held that the term right of action is the WHEREFORE, we DENY the petition. The assailed Decision and Resolution of
right to commence and maintain an action. The right of action springs from the Court of Appeals in CA-G.R. CV No. 66359 are AFFIRMED. Costs against
the cause of action, but does not accrue until all the facts which constitute petitioners.
the cause of action have occurred. SO ORDERED.
76
G.R. No. 87434 August 5, 1992
PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUM
PLASTICS, INC., petitioners,
vs.
SWEET LINES, INC., DAVAO VETERANS ARRASTRE AND PORT SERVICES,
INC. and HON. COURT OF APPEALS, respondents.
De Lara, De Lunas & Rosales for petitioners.
Carlo L. Aquino for Sweet Lines, Inc.
REGALADO, J.:
A maritime suit 1 was commenced on May 12, 1978 by herein Petitioner
Philippine American General Insurance Co., Inc. (Philamgen) and Tagum
Plastics, Inc. (TPI) against private respondents Sweet Lines, Inc. (SLI) and
Davao Veterans Arrastre and Port Services, Inc. (DVAPSI), along with S.C.I.
Line (The Shipping Corporation of India Limited) and F.E. Zuellig, Inc., as co-
defendants in the court a quo, seeking recovery of the cost of lost or
damaged shipment plus exemplary damages, attorney's fees and costs
allegedly due to defendants' negligence, with the following factual backdrop
yielded by the findings of the court below and adopted by respondent court:
It would appear that in or about March 1977, the vessel SS "VISHVA YASH"
belonging to or operated by the foreign common carrier, took on board at
Baton Rouge, LA, two (2) consignments of cargoes for shipment to Manila
and later for transhipment to Davao City, consisting of 600 bags Low Density
Polyethylene 631 and another 6,400 bags Low Density Polyethylene 647,
both consigned to the order of Far East Bank and Trust Company of Manila,
with arrival notice to Tagum Plastics, Inc., Madaum, Tagum, Davao City. Said
cargoes were covered, respectively, by Bills of Lading Nos. 6 and 7 issued by
the foreign common carrier (Exhs. E and F). The necessary packing or Weight
List (Exhs. A and B), as well as the Commercial Invoices (Exhs. C and D)
accompanied the shipment. The cargoes were likewise insured by the
Tagum Plastics Inc. with plaintiff Philippine American General Insurance Co.,
Inc., (Exh. G).
In the course of time, the said vessel arrived at Manila and discharged its
cargoes in the Port of Manila for transhipment to Davao City. For this
purpose, the foreign carrier awaited and made use of the services of the
vessel called M/V "Sweet Love" owned and operated by defendant
interisland carrier.
Subject cargoes were loaded in Holds Nos. 2 and 3 of the interisland carrier.
These were commingled with similar cargoes belonging to Evergreen
Plantation and also Standfilco.
On May 15, 1977, the shipment(s) were discharged from the interisland
carrier into the custody of the consignee. A later survey conducted on July
8, 1977, upon the instance of the plaintiff, shows the following:
Of the cargo covered by Bill of Lading No. 25 or (2)6, supposed to contain
6,400 bags of Low Density Polyethylene 647 originally inside 160 pallets,
there were delivered to the consignee 5,413 bags in good order condition.
The survey shows shortages, damages and losses to be as follows:
Undelivered/Damaged bags as tallied during discharge from vessel-173
bags; undelivered and damaged as noted and observed whilst stored at the
pier-699 bags; and shortlanded-110 bags (Exhs. P and P-1).
Of the 600 bags of Low Density Polyethylene 631, the survey conducted on
the same day shows an actual delivery to the consignee of only 507 bags in
good order condition. Likewise noted were the following losses, damages
and shortages, to wit:
Undelivered/damaged bags and tally sheets during discharge from vessel-
17 bags.
Undelivered and damaged as noted and observed whilst stored at the pier-
66 bags; Shortlanded-10 bags.
Therefore, of said shipment totalling 7,000 bags, originally contained in 175
pallets, only a total of 5,820 bags were delivered to the consignee in good
order condition, leaving a balance of 1,080 bags. Such loss from this
particular shipment is what any or all defendants may be answerable to
(sic).
77
As already stated, some bags were either shortlanded or were missing, and
some of the 1,080 bags were torn, the contents thereof partly spilled or
were fully/partially emptied, but, worse, the contents thereof contaminated
with foreign matters and therefore could no longer serve their intended
purpose. The position taken by the consignee was that even those bags
which still had some contents were considered as total losses as the
remaining contents were contaminated with foreign matters and therefore
did not (sic) longer serve the intended purpose of the material. Each bag
was valued, taking into account the customs duties and other taxes paid as
well as charges and the conversion value then of a dollar to the peso, at
P110.28 per bag (see Exhs. L and L-1 M and O). 2
Before trial, a compromise agreement was entered into between
petitioners, as plaintiffs, and defendants S.C.I. Line and F.E. Zuellig, upon the
latter's payment of P532.65 in settlement of the claim against them.
Whereupon, the trial court in its order of August 12, 1981 3 granted
plaintiffs' motion to dismiss grounded on said amicable settlement and the
case as to S.C.I. Line and F.E. Zuellig was consequently "dismissed with
prejudice and without pronouncement as to costs."
The trial court thereafter rendered judgment in favor of herein petitioners
on this dispositive portion:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff
Philippine General American Insurance Company Inc. and against the
remaining defendants, Sweet Lines Inc. and Davao Veterans Arrastre Inc. as
follows:
Defendant Sweet Lines, Inc. is ordered to pay said plaintiff the sum of
P34,902.00, with legal interest thereon from date of extrajudicial demand
on April 28, 1978 (Exh. M) until fully paid;
Defendant Sweet Lines Inc. and Davao Veterans Arrastre and (Port) Services
Inc. are directed to pay jointly and severally, the plaintiff the sum of
P49,747.55, with legal interest thereon from April 28, 1978 until fully paid;
Each of said defendants are ordered to pay the plaintiffs the additional sum
of P5,000 is reimbursable attorney's fees and other litigation expenses;
Each of said defendants shall pay one-fourth (1/4) costs. 4
Due to the reversal on appeal by respondent court of the trial court's
decision on the ground of prescription, 5 in effect dismissing the complaint
of herein petitioners, and the denial of their motion for reconsideration, 6
petitioners filed the instant petition for review on certiorari, faulting
respondent appellate court with the following errors: (1) in upholding,
without proof, the existence of the so-called prescriptive period; (2)
granting arguendo that the said prescriptive period does exist, in not finding
the same to be null and void; and (3) assuming arguendo that the said
prescriptive period is valid and legal, in failing to conclude that petitioners
substantially complied therewith. 7
Parenthetically, we observe that herein petitioners are jointly pursuing this
case, considering their common interest in the shipment subject of the
present controversy, to obviate any question as to who the real party in
interest is and to protect their respective rights as insurer and insured. In
any case, there is no impediment to the legal standing of Petitioner
Philamgen, even if it alone were to sue herein private respondents in its own
capacity as insurer, it having been subrogated to all rights of recovery for
loss of or damage to the shipment insured under its Marine Risk Note No.
438734 dated March 31, 1977 8 in view of the full settlement of the claim
thereunder as evidenced by the subrogation receipt 9 issued in its favor by
Far East Bank and Trust Co., Davao Branch, for the account of petitioner TPI.
Upon payment of the loss covered by the policy, the insurer's entitlement
to subrogation pro tanto, being of the highest equity, equips it with a cause
of action against a third party in case of contractual breach. 10 Further, the
insurer's subrogatory right to sue for recovery under the bill of lading in case
of loss of or damage to the cargo is jurisprudentially upheld. 11 However, if
an insurer, in the exercise of its subrogatory right, may proceed against the
erring carrier and for all intents and purposes stands in the place and in
substitution of the consignee, a fortiori such insurer is presumed to know
and is just as bound by the contractual terms under the bill of lading as the
insured.
On the first issue, petitioners contend that it was error for the Court of
Appeals to reverse the appealed decision on the supposed ground of
78
prescription when SLI failed to adduce any evidence in support thereof and
that the bills of lading said to contain the shortened periods for filing a claim
and for instituting a court action against the carrier were never offered in
evidence. Considering that the existence and tenor of this stipulation on the
aforesaid periods have allegedly not been established, petitioners maintain
that it is inconceivable how they can possibly comply therewith. 12 In
refutation, SLI avers that it is standard practice in its operations to issue bills
of lading for shipments entrusted to it for carriage and that it in fact issued
bills of lading numbered MD-25 and MD-26 therefor with proof of their
existence manifest in the records of the case. 13 For its part, DVAPSI insists
on the propriety of the dismissal of the complaint as to it due to petitioners'
failure to prove its direct responsibility for the loss of and/or damage to the
cargo. 14
On this point, in denying petitioner's motion for reconsideration, the Court
of Appeals resolved that although the bills of lading were not offered in
evidence, the litigation obviously revolves on such bills of lading which are
practically the documents or contracts sued upon, hence, they are inevitably
involved and their provisions cannot be disregarded in the determination of
the relative rights of the parties thereto. 15
Respondent court correctly passed upon the matter of prescription, since
that defense was so considered and controverted by the parties. This issue
may accordingly be taken cognizance of by the court even if not inceptively
raised as a defense so long as its existence is plainly apparent on the face of
relevant pleadings. 16 In the case at bar, prescription as an affirmative
defense was seasonably raised by SLI in its answer, 17 except that the bills
of lading embodying the same were not formally offered in evidence, thus
reducing the bone of contention to whether or not prescription can be
maintained as such defense and, as in this case, consequently upheld on the
strength of mere references thereto.
As petitioners are suing upon SLI's contractual obligation under the contract
of carriage as contained in the bills of lading, such bills of lading can be
categorized as actionable documents which under the Rules must be
properly pleaded either as causes of action or defenses, 18 and the
genuineness and due execution of which are deemed admitted unless
specifically denied under oath by the adverse party. 19 The rules on
actionable documents cover and apply to both a cause of action or defense
based on said documents. 20
In the present case and under the aforestated assumption that the time
limit involved is a prescriptive period, respondent carrier duly raised
prescription as an affirmative defense in its answer setting forth paragraph
5 of the pertinent bills of lading which comprised the stipulation thereon by
parties, to wit:
5. Claims for shortage, damage, must be made at the time of delivery
to consignee or agent, if container shows exterior signs of damage or
shortage. Claims for non-delivery, misdelivery, loss or damage must be filed
within 30 days from accrual. Suits arising from shortage, damage or loss,
non-delivery or misdelivery shall be instituted within 60 days from date of
accrual of right of action. Failure to file claims or institute judicial
proceedings as herein provided constitutes waiver of claim or right of
action. In no case shall carrier be liable for any delay, non-delivery,
misdelivery, loss of damage to cargo while cargo is not in actual custody of
carrier. 21
In their reply thereto, herein petitioners, by their own assertions that —
2. In connection with Pars. 14 and 15 of defendant Sweet Lines, Inc.'s
Answer, plaintiffs state that such agreements are what the Supreme Court
considers as contracts of adhesion (see Sweet Lines, Inc. vs. Hon. Bernardo
Teves, et al., G.R. No. L-37750, May 19, 1978) and, consequently, the
provisions therein which are contrary to law and public policy cannot be
availed of by answering defendant as valid defenses. 22
thereby failed to controvert the existence of the bills of lading and the
aforequoted provisions therein, hence they impliedly admitted the same
when they merely assailed the validity of subject stipulations.
Petitioners' failure to specifically deny the existence, much less the
genuineness and due execution, of the instruments in question amounts to
an admission. Judicial admissions, verbal or written, made by the parties in
the pleadings or in the course of the trial or other proceedings in the same
case are conclusive, no evidence being required to prove the same, and
cannot be contradicted unless shown to have been made through palpable
79
mistake or that no such admission was made. 23 Moreover, when the due
execution and genuineness of an instrument are deemed admitted because
of the adverse party's failure to make a specific verified denial thereof, the
instrument need not be presented formally in evidence for it may be
considered an admitted fact. 24
Even granting that petitioners' averment in their reply amounts to a denial,
it has the procedural earmarks of what in the law on pleadings is called a
negative pregnant, that is, a denial pregnant with the admission of the
substantial facts in the pleading responded to which are not squarely
denied. It is in effect an admission of the averment it is directed to. 25 Thus,
while petitioners objected to the validity of such agreement for being
contrary to public policy, the existence of the bills of lading and said
stipulations were nevertheless impliedly admitted by them.
We find merit in respondent court's comments that petitioners failed to
touch on the matter of the non-presentation of the bills of lading in their
brief and earlier on in the appellate proceedings in this case, hence it is too
late in the day to now allow the litigation to be overturned on that score,
for to do so would mean an over-indulgence in technicalities. Hence, for the
reasons already advanced, the non-inclusion of the controverted bills of
lading in the formal offer of evidence cannot, under the facts of this
particular case, be considered a fatal procedural lapse as would bar
respondent carrier from raising the defense of prescription. Petitioners'
feigned ignorance of the provisions of the bills of lading, particularly on the
time limitations for filing a claim and for commencing a suit in court, as their
excuse for non-compliance therewith does not deserve serious attention.
It is to be noted that the carriage of the cargo involved was effected
pursuant to an "Application for Delivery of Cargoes without Original Bill of
Lading" issued on May 20, 1977 in Davao City 26 with the notation therein
that said application corresponds to and is subject to the terms of bills of
lading MD-25 and MD-26. It would be a safe assessment to interpret this to
mean that, sight unseen, petitioners acknowledged the existence of said
bills of lading. By having the cargo shipped on respondent carrier's vessel
and later making a claim for loss on the basis of the bills of lading, petitioners
for all intents and purposes accepted said bills. Having done so they are
bound by all stipulations contained therein. 27 Verily, as petitioners are
suing for recovery on the contract, and in fact even went as far as assailing
its validity by categorizing it as a contract of adhesion, then they necessarily
admit that there is such a contract, their knowledge of the existence of
which with its attendant stipulations they cannot now be allowed to deny.
On the issue of the validity of the controverted paragraph 5 of the bills of
lading above quoted which unequivocally prescribes a time frame of thirty
(30) days for filing a claim with the carrier in case of loss of or damage to the
cargo and sixty (60) days from accrual of the right of action for instituting an
action in court, which periods must concur, petitioners posit that the alleged
shorter prescriptive period which is in the nature of a limitation on
petitioners' right of recovery is unreasonable and that SLI has the burden of
proving otherwise, citing the earlier case of Southern Lines, Inc. vs. Court of
Appeals, et al. 28 They postulate this on the theory that the bills of lading
containing the same constitute contracts of adhesion and are, therefore,
void for being contrary to public policy, supposedly pursuant to the dictum
in Sweet Lines, Inc. vs. Teves, et al. 29
Furthermore, they contend, since the liability of private respondents has
been clearly established, to bar petitioners' right of recovery on a mere
technicality will pave the way for unjust enrichment. 30 Contrarily, SLI
asserts and defends the reasonableness of the time limitation within which
claims should be filed with the carrier; the necessity for the same, as this
condition for the carrier's liability is uniformly adopted by nearly all shipping
companies if they are to survive the concomitant rigors and risks of the
shipping industry; and the countervailing balance afforded by such
stipulation to the legal presumption of negligence under which the carrier
labors in the event of loss of or damage to the cargo. 31
It has long been held that Article 366 of the Code of Commerce applies not
only to overland and river transportation but also to maritime
transportation. 32 Moreover, we agree that in this jurisdiction, as viewed
from another angle, it is more accurate to state that the filing of a claim with
the carrier within the time limitation therefor under Article 366 actually
constitutes a condition precedent to the accrual of a right of action against
a carrier for damages caused to the merchandise. The shipper or the
consignee must allege and prove the fulfillment of the condition and if he
omits such allegations and proof, no right of action against the carrier can
accrue in his favor. As the requirements in Article 366, restated with a slight
modification in the assailed paragraph 5 of the bills of lading, are reasonable
80
conditions precedent, they are not limitations of action. 33 Being conditions
precedent, their performance must precede a suit for enforcement 34 and
the vesting of the right to file spit does not take place until the happening
of these conditions. 35
Now, before an action can properly be commenced all the essential
elements of the cause of action must be in existence, that is, the cause of
action must be complete. All valid conditions precedent to the institution of
the particular action, whether prescribed by statute, fixed by agreement of
the parties or implied by law must be performed or complied with before
commencing the action, unless the conduct of the adverse party has been
such as to prevent or waive performance or excuse non-performance of the
condition. 36
It bears restating that a right of action is the right to presently enforce a
cause of action, while a cause of action consists of the operative facts which
give rise to such right of action. The right of action does not arise until the
performance of all conditions precedent to the action and may be taken
away by the running of the statute of limitations, through estoppel, or by
other circumstances which do not affect the cause of action. 37
Performance or fulfillment of all conditions precedent upon which a right of
action depends must be sufficiently alleged, 38 considering that the burden
of proof to show that a party has a right of action is upon the person
initiating the suit. 39
More particularly, where the contract of shipment contains a reasonable
requirement of giving notice of loss of or injury to the goods, the giving of
such notice is a condition precedent to the action for loss or injury or the
right to enforce the carrier's liability. Such requirement is not an empty
formalism. The fundamental reason or purpose of such a stipulation is not
to relieve the carrier from just liability, but reasonably to inform it that the
shipment has been damaged and that it is charged with liability therefor,
and to give it an opportunity to examine the nature and extent of the injury.
This protects the carrier by affording it an opportunity to make an
investigation of a claim while the matter is fresh and easily investigated so
as to safeguard itself from false and fraudulent claims. 40
Stipulations in bills of lading or other contracts of shipment which require
notice of claim for loss of or damage to goods shipped in order to impose
liability on the carrier operate to prevent the enforcement of the contract
when not complied with, that is, notice is a condition precedent and the
carrier is not liable if notice is not given in accordance with the stipulation,
41 as the failure to comply with such a stipulation in a contract of carriage
with respect to notice of loss or claim for damage bars recovery for the loss
or damage suffered. 42
On the other hand, the validity of a contractual limitation of time for filing
the suit itself against a carrier shorter than the statutory period therefor has
generally been upheld as such stipulation merely affects the shipper's
remedy and does not affect the liability of the carrier. In the absence of any
statutory limitation and subject only to the requirement on the
reasonableness of the stipulated limitation period, the parties to a contract
of carriage may fix by agreement a shorter time for the bringing of suit on a
claim for the loss of or damage to the shipment than that provided by the
statute of limitations. Such limitation is not contrary to public policy for it
does not in any way defeat the complete vestiture of the right to recover,
but merely requires the assertion of that right by action at an earlier period
than would be necessary to defeat it through the operation of the ordinary
statute of limitations. 43
In the case at bar, there is neither any showing of compliance by petitioners
with the requirement for the filing of a notice of claim within the prescribed
period nor any allegation to that effect. It may then be said that while
petitioners may possibly have a cause of action, for failure to comply with
the above condition precedent they lost whatever right of action they may
have in their favor or, token in another sense, that remedial right or right to
relief had prescribed.44
The shipment in question was discharged into the custody of the consignee
on May 15, 1977, and it was from this date that petitioners' cause of action
accrued, with thirty (30) days therefrom within which to file a claim with the
carrier for any loss or damage which may have been suffered by the cargo
and thereby perfect their right of action. The findings of respondent court
as supported by petitioners' formal offer of evidence in the court below
show that the claim was filed with SLI only on April 28, 1978, way beyond
the period provided in the bills of lading 45 and violative of the contractual
provision, the inevitable consequence of which is the loss of petitioners'
remedy or right to sue. Even the filing of the complaint on May 12, 1978 is
81
of no remedial or practical consequence, since the time limits for the filing
thereof, whether viewed as a condition precedent or as a prescriptive
period, would in this case be productive of the same result, that is, that
petitioners had no right of action to begin with or, at any rate, their claim
was time-barred.
What the court finds rather odd is the fact that petitioner TPI filed a
provisional claim with DVAPSI as early as June 14, 1977 46 and, as found by
the trial court, a survey fixing the extent of loss of and/or damage to the
cargo was conducted on July 8, 1977 at the instance of petitioners. 47 If
petitioners had the opportunity and awareness to file such provisional claim
and to cause a survey to be conducted soon after the discharge of the cargo,
then they could very easily have filed the necessary formal, or even a
provisional, claim with SLI itself 48 within the stipulated period therefor,
instead of doing so only on April 28, 1978 despite the vessel's arrival at the
port of destination on May 15, 1977. Their failure to timely act brings us to
no inference other than the fact that petitioners slept on their rights and
they must now face the consequences of such inaction.
The ratiocination of the Court of Appeals on this aspect is worth
reproducing:
xxx xxx xxx
It must be noted, at this juncture, that the aforestated time limitation in the
presentation of claim for loss or damage, is but a restatement of the rule
prescribed under Art. 366 of the Code of Commerce which reads as follows:
Art. 366. Within the twenty-four hours following the receipt of the
merchandise, the claim against the carrier for damage or average which may
be found therein upon opening the packages, may be made, provided that
the indications of the damage or average which gives rise to the claim
cannot be ascertained from the outside part of the packages, in which case
the claims shall be admitted only at the time of the receipt.
After the periods mentioned have elapsed, or the transportation charges
have been paid, no claim shall be admitted against the carrier with regard
to the condition in which the goods transported were delivered.
Gleanable therefrom is the fact that subject stipulation even lengthened the
period for presentation of claims thereunder. Such modification has been
sanctioned by the Supreme Court. In the case of Ong Yet (M)ua Hardware
Co., Inc. vs. Mitsui Steamship Co., Ltd., et al., 59 O.G. No. 17, p. 2764, it ruled
that Art. 366 of the Code of Commerce can be modified by a bill of lading
prescribing the period of 90 days after arrival of the ship, for filing of written
claim with the carrier or agent, instead of the 24-hour time limit after
delivery provided in the aforecited legal provision.
Tested, too, under paragraph 5 of said Bill of Lading, it is crystal clear that
the commencement of the instant suit on May 12, 1978 was indeed fatally
late. In view of the express provision that "suits arising from
. . . damage or loss shall be instituted within 60 days from date of accrual of
right of action," the present action necessarily fails on ground of
prescription.
In the absence of constitutional or statutory prohibition, it is usually held or
recognized that it is competent for the parties to a contract of shipment to
agree on a limitation of time shorter than the statutory period, within which
action for breach of the contract shall be brought, and such limitation will
be enforced if reasonable . . . (13 C.J.S. 496-497)
A perusal of the pertinent provisions of law on the matter would disclose
that there is no constitutional or statutory prohibition infirming paragraph
5 of subject Bill of Lading. The stipulated period of 60 days is reasonable
enough for appellees to ascertain the facts and thereafter to sue, if need be,
and the 60-day period agreed upon by the parties which shortened the
statutory period within which to bring action for breach of contract is valid
and binding. . . . (Emphasis in the original text.) 49
As explained above, the shortened period for filing suit is not unreasonable
and has in fact been generally recognized to be a valid business practice in
the shipping industry. Petitioners' advertence to the Court's holding in the
Southern Lines case, supra, is futile as what was involved was a claim for
refund of excess payment. We ruled therein that non-compliance with the
requirement of filing a notice of claim under Article 366 of the Code of
Commerce does not affect the consignee's right of action against the carrier
because said requirement applies only to cases for recovery of damages on
account of loss of or damage to cargo, not to an action for refund of
82
overpayment, and on the further consideration that neither the Code of
Commerce nor the bills of lading therein provided any time limitation for
suing for refund of money paid in excess, except only that it be filed within
a reasonable time.
The ruling in Sweet Lines categorizing the stipulated limitation on venue of
action provided in the subject bill of lading as a contract of adhesion and,
under the circumstances therein, void for being contrary to public policy is
evidently likewise unavailing in view of the discrete environmental facts
involved and the fact that the restriction therein was unreasonable. In any
case, Ong Yiu vs. Court of Appeals, et al., 50 instructs us that "contracts of
adhesion wherein one party imposes a ready-made form of contract on the
other . . . are contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres he gives his
consent." In the present case, not even an allegation of ignorance of a party
excuses non-compliance with the contractual stipulations since the
responsibility for ensuring full comprehension of the provisions of a contract
of carriage devolves not on the carrier but on the owner, shipper, or
consignee as the case may be.
While it is true that substantial compliance with provisions on filing of claim
for loss of or damage to cargo may sometimes suffice, the invocation of such
an assumption must be viewed vis-a-vis the object or purpose which such a
provision seeks to attain and that is to afford the carrier a reasonable
opportunity to determine the merits and validity of the claim and to protect
itself against unfounded impositions. 51 Petitioners' would nevertheless
adopt an adamant posture hinged on the issuance by SLI of a "Report on
Losses and Damages," dated May 15, 1977, 52 from which petitioners
theorize that this charges private respondents with actual knowledge of the
loss and damage involved in the present case as would obviate the need for
or render superfluous the filing of a claim within the stipulated period.
Withal, it has merely to be pointed out that the aforementioned report
bears this notation at the lower part thereof: "Damaged by Mla. labor upon
unloading; B/L noted at port of origin," as an explanation for the cause of
loss of and/or damage to the cargo, together with an iterative note stating
that "(t)his Copy should be submitted together with your claim invoice or
receipt within 30 days from date of issue otherwise your claim will not be
honored."
Moreover, knowledge on the part of the carrier of the loss of or damage to
the goods deducible from the issuance of said report is not equivalent to
nor does it approximate the legal purpose served by the filing of the
requisite claim, that is, to promptly apprise the carrier about a consignee's
intention to file a claim and thus cause the prompt investigation of the
veracity and merit thereof for its protection. It would be an unfair
imposition to require the carrier, upon discovery in the process of preparing
the report on losses or damages of any and all such loss or damage, to
presume the existence of a claim against it when at that time the carrier is
expectedly concerned merely with accounting for each and every shipment
and assessing its condition. Unless and until a notice of claim is therewith
timely filed, the carrier cannot be expected to presume that for every loss
or damage tallied, a corresponding claim therefor has been filed or is
already in existence as would alert it to the urgency for an immediate
investigation of the soundness of the claim. The report on losses and
damages is not the claim referred to and required by the bills of lading for it
does not fix responsibility for the loss or damage, but merely states the
condition of the goods shipped. The claim contemplated herein, in whatever
form, must be something more than a notice that the goods have been lost
or damaged; it must contain a claim for compensation or indicate an intent
to claim. 53
Thus, to put the legal effect of respondent carrier's report on losses or
damages, the preparation of which is standard procedure upon unloading
of cargo at the port of destination, on the same level as that of a notice of
claim by imploring substantial compliance is definitely farfetched. Besides,
the cited notation on the carrier's report itself makes it clear that the filing
of a notice of claim in any case is imperative if carrier is to be held liable at
all for the loss of or damage to cargo.
Turning now to respondent DVAPSI and considering that whatever right of
action petitioners may have against respondent carrier was lost due to their
failure to seasonably file the requisite claim, it would be awkward, to say
the least, that by some convenient process of elimination DVAPSI should
proverbially be left holding the bag, and it would be pure speculation to
assume that DVAPSI is probably responsible for the loss of or damage to
cargo. Unlike a common carrier, an arrastre operator does not labor under
a presumption of negligence in case of loss, destruction or deterioration of
83
goods discharged into its custody. In other words, to hold an arrastre
operator liable for loss of and/or damage to goods entrusted to it there
must be preponderant evidence that it did not exercise due diligence in the
handling and care of the goods.
Petitioners failed to pinpoint liability on any of the original defendants and
in this seemingly wild goose-chase, they cannot quite put their finger down
on when, where, how and under whose responsibility the loss or damage
probably occurred, or as stated in paragraph 8 of their basic complaint filed
in the court below, whether "(u)pon discharge of the cargoes from the
original carrying vessel, the SS VISHVA YASH," and/or upon discharge of the
cargoes from the interisland vessel the MV "SWEET LOVE," in Davao City and
later while in the custody of defendant arrastre operator. 54
The testimony of petitioners' own witness, Roberto Cabato, Jr., Marine and
Aviation Claims Manager of petitioner Philamgen, was definitely
inconclusive and the responsibility for the loss or damage could still not be
ascertained therefrom:
Q In other words, Mr. Cabato, you only computed the loss on the basis
of the figures submitted to you and based on the documents like the survey
certificate and the certificate of the arrastre?
A Yes, sir.
Q Therefore, Mr. Cabato, you have no idea how or where these losses
were incurred?
A No, sir.
xxx xxx xxx
Q Mr. Witness, you said that you processed and investigated the claim
involving the shipment in question. Is it not a fact that in your processing
and investigation you considered how the shipment was transported?
Where the losses could have occurred and what is the extent of the
respective responsibilities of the bailees and/or carriers involved?
xxx xxx xxx
A With respect to the shipment being transported, we have of course
to get into it in order to check whether the shipment coming in to this port
is in accordance with the policy condition, like in this particular case, the
shipment was transported to Manila and transhipped through an interisland
vessel in accordance with the policy. With respect to the losses, we have a
general view where losses could have occurred. Of course we will have to
consider the different bailees wherein the shipment must have passed
through, like the ocean vessel, the interisland vessel and the arrastre, but
definitely at that point and time we cannot determine the extent of each
liability. We are only interested at that point and time in the liability as
regards the underwriter in accordance with the policy that we issued.
xxx xxx xxx
Q Mr. Witness, from the documents, namely, the survey of Manila
Adjusters and Surveyors Company, the survey of Davao Arrastre contractor
and the bills of lading issued by the defendant Sweet Lines, will you be able
to tell the respective liabilities of the bailees and/or carriers concerned?
A No, sir. (Emphasis ours.) 55
Neither did nor could the trial court, much less the Court of Appeals,
precisely establish the stage in the course of the shipment when the goods
were lost, destroyed or damaged. What can only be inferred from the
factual findings of the trial court is that by the time the cargo was discharged
to DVAPSI, loss or damage had already occurred and that the same could
not have possibly occurred while the same was in the custody of DVAPSI, as
demonstrated by the observations of the trial court quoted at the start of
this opinion.
ACCORDINGLY, on the foregoing premises, the instant petition is DENIED
and the dismissal of the complaint in the court a quo as decreed by
respondent Court of Appeals in its challenged judgment is hereby
AFFIRMED.
SO ORDERED.
84
G.R. No. L-13159 February 28, 1962
REMEDIOS QUIOGUE, ET AL., plaintiffs-appellees,
vs.
JACINTO BAUTISTA, ET AL., defendants-appellants.
T. Silverio for plaintiffs-appellees.
J. Serrano Espiritu for defendants-appellants.
BAUTISTA ANGELO, J.:
This is an action to foreclose two deeds of mortgage executed to secure the
payment of two loans, one for P2,000.00 and another for P6,000.00
covering two parcels of land situated in the City of Manila. The first deed
was executed on May 9, 1944 and the second on October 11, 1944 and it
was stipulated therein as a common provision that the two loans cannot be
repaid within one year from the date of the termination of the last world
war.
The defendants set up the defense that the present action is already barred
by Civil Case No. 11969 filed in the same court between the same parties,
and that if there is any amount recoverable from them the same shall be
computed in accordance with the Ballantyne schedule. They also set up a
counterclaim for moral damages in the amount of P10,000.00.
On August 27, 1957, the trial court rendered decision in favor of plaintiffs
sentencing defendants to pay the sum of P12,829.81, with interest at the
rates of 6% and 3% per annum on the amounts of P8,000.00 and P4,829.81,
respectively, from July 21, 1957, plus costs, and in default of payment, it was
ordered that the properties mortgaged be sold at public auction and the
proceeds thereof applied to the payment of the judgment.
Defendants have appealed to this Court on purely questions of law.
It appears that prior to the filing of the present complaint plaintiffs had
instituted before the Court of First Instance of Manila an action to foreclose
a first mortgage on the same properties and that on the date said action
was filed the two loans covered by the second and third mortgages which
are herein foreclosed had already matured (Civil Case No. 11969). It likewise
appears that judgment was duly entered in the first case and when a writ of
execution was issued to enforce it, it was fully satisfied by defendants on
August 18, 1952 by paying to the sheriff the sum of P9,000.00.
It is now contended that the trial court erred (1) in not dismissing this case
as premature; (2) in not finding that this case is barred by the decision
rendered in Civil Case No. 11969; and (3) in not converting the amounts
recoverable under the Ballantyne scale of values.
With regard to the first contention, the lower court said: .
Considering that the Japanese Peace Treaty terminating the Second World
War between Japan and the Allied Powers, of which the Philippines was a
signatory, was signed on September 8, 1951 at San Francisco. U.S.A., the
interpretation of counsel for the defendants that the war did not terminate
for the Philippines until July 23, 1956 is not tenable.
WHEREFORE, defendants' motion to set aside the decision rendered in this
case and to order a new trial is hereby denied.
Counsel for defendants argues that the trial court erred in not dismissing
this case as premature because since it was agreed that the loans cannot be
paid within one year from the termination of the last world war and
according to the treaty between Japan and the Allied Powers the same
should come into force for each State only after its ratification and from
date of the deposit of its instrument of ratification, it cannot be said that
the war has terminated when this action was brought on June 23, 1956, it
appearing that the instrument of ratification was deposited only on July 23,
1956.
This contention is untenable. In Navarre v. Barreto, et al., G.R. No. L-8660,
promulgated on May 21, 1956, we said that "in the legal sense, war formally
ended in the Philippines the moment President Harry S. Truman officially
issued a proclamation of peace on December 31, 1946 .... And if counsel
meant that there should be a formal treaty of peace, we may say that this
purpose has also been accomplished when the treaty of peace with Japan
had been signed in San Francisco, California on September 8, 1951 by the
United States and the Allied Powers, including the Philippines." At any rate,
even granting that the date of the deposit of the instrument of ratification
85
of the treaty should be reckoned with to determine when the last world war
should be deemed legally terminated, this point is now moot since said
instrument was deposited on July 23, 1956.

The contention that his action is already barred by the filing of Civil Case No.
11969 for the simple reason that the two loans herein involved could have
been included in said action because at the time it was filed they had already
matured, is likewise untenable, considering that the first case refers to a
transaction different from those covered in the present case. Section 3, Rule
2, of our Rules of Court, invoked by appellants, which provides that a single
cause of action cannot be split up into two or more parts so as to be made
the subject of different complaints, does not apply, for here there is not a
single cause of action that was split up, but several causes that refer to
different transactions. And it was held that a contract embraces only one
cause of action because it may be violated only once even if it contains
several stipulations.1 Thus, non-payment of a loan secured by mortgage
constitutes a single cause of action. The creditor cannot split up this single
cause of action into two separate complaints, one for payment of the debt
and another for the foreclosure of the mortgage. If he does so, the filing of
the first complaint will bar the second complaint. In other words, the
complaint filed for the payment of certain debt shall be considered as a
waiver of the right to foreclose the mortgage executed thereon.2 The lower
court, therefore, did not err in denying the motion to dismiss on this ground.
1äwphï1.ñët

The third contention that the recoverable amounts should be converted

into money according to the Ballantyne scale of values cannot also be
sustained it having been agreed between the parties that said loans shall be
payable after the termination of the last world war. The rule is well-settled
"that where the obligation incurred during the Japanese occupation was
made payable after a fixed period, the maturity falling after liberation, the
promissor must pay in Philippine currency the same amount stated in the
obligation, that is, the obligation must be settled peso for peso in Philippine
currency. He cannot discharge his debt by paying only the equivalent in
Philippine currency of the value of the military notes he had received."3

WHEREFORE, the decision appealed from is affirmed, with costs against

appellants.

86
G.R. No. L-16951 February 28, 1962
ROBERTO LAPERAL, JR. and PURIFICACION M. LAPERAL, plaintiffs-
appellees,
vs.
RAMON L. KATIGBAK, ET AL., defendants,
EVELINA KALAW-KATIGBAK, defendant-appellant.
William H. Quasha and Associates for plaintiffs-appellees.
Bausa, Ampil and Suarez for defendant-appellant.
LABRADOR, J.:
Appeal from an order of the Court of First Instance of Manila, the Hon.
Magno Gatmaitan presiding, holding that the decision rendered by this
Court in G.R. No. L-4299, promulgated January 31, 1952, dismissing the
action instituted by Roberto Laperal, Jr. and Purificacion M. Laperal against
Ramon L. Katigbak and Evelina Kalaw-Katigbak, Civil Case No. 11767 of the
Court of First Instance of Manila, insofar as Evelina Kalaw-Katigbak was
concerned does not bar the present action, Civil Case No. 25235, and finally
deciding this latter case, and sentencing Evelina Kalaw-Katigbak to pay unto
plaintiffs one-half of the sum of P14,000, with legal interest and one-half of
P97,500, also with legal interest.
A review of the facts and circumstances involved, as well as the proceedings
had in the case at bar and in the G.R. No. L-4299, is necessary for an
understanding of the issues involved. G.R. No. L-4299, Laperal, et al., vs.
Katigbak, et al., was filed in the Court of First Instance of Manila as Civil Case
No. 11767, to collect the sum of P14,000, with interest, and another sum of
P97,500, also with interest, against the defendants spouses Ramon L.
Katigbak and Evelina Kalaw-Katigbak. The complaint alleges as causes of
action that defendants are husband and wife; that from March 1, 1950 to
May 31, 1950, the husband Ramon L. Katigbak borrowed and received
various sums of money from plaintiffs amounting to P14,000; that on the
same dates defendant Ramon L. Katigbak received from plaintiffs jewelry
valued at P97,500; that notwithstanding demands made upon them they
have failed to pay the same. The promissory notes constituting the first
amount of P14,000 was signed by Ramon L. Katigbak alone; he also signed
a receipt for a jewelry the value of which totals P97,500, alone. Defendant
Evelina Kalaw-Katigbak thereupon filed a motion to dismiss on the ground
that since the receipts for the amount borrowed, as well as for the jewelry
received, were signed by Ramon L. Katigbak alone and without the
concurrence of his wife, the latter is not liable for the reason that she is not
bound by obligations contracted by her husband nor answerable in a suit
for the enforcement thereof. The court trying the case granted the motion
to dismiss on the ground that since the wife did not take part in the
execution of the documents sued upon, she is not responsible therefor. The
above resolution of the lower court was appealed to this Court, which on
January 31, 1952, affirmed the order of dismissal of the action against
Evelina Kalaw-Katigbak. We held, as to the first cause of action that as the
notes were not signed by Evelina, the latter is personally liable, as the
husband was not her agent; as to the second cause of action, that as it is not
alleged that the obligation contracted redounded to the benefit of the
family, the same rule applies, because the receipts for jewelry were not also
signed by Evelina.
On February 10, 1955, plaintiffs filed another action, Civil Case No. 25235,
against the same spouses, alleging that in the previous case, No. 11767,
defendant Ramon L. Katigbak confessed judgment, as a result of which said
defendant was ordered to pay P14,000, with interest, and P97,500, also
with interest until full payment. The other principal allegations of the
complaint are: that defendants were married since September 11, 1938;
that they did not execute any ante-nuptial contract before the celebration
of their marriage, so that they entered the marriage under the system of
conjugal partnership; that on December 18, 1950, Evelina Kalaw-Katigbak
filed an action for judicial separation of property and separate
administration by the wife; that on September 25, 1951, the defendants
submitted an agreement of facts wherein the parties to the action agreed
to dissolve the conjugal partnership; that all the proceedings and steps
leading to the dissolution of the conjugal partnership were made without
notice to the creditors of the conjugal partnership and especially the
plaintiffs herein and that said agreement was made to defraud creditors
and, therefore, void; that a certain real property on Evangelista Street, City
of Manila, described under Certificate of Title No. 57626, although in the
name of Evelina Kalaw-Katigbak, is in truth and at least the fruits thereof are
conjugal partnership property, that a theatre known as Center Theatre on
Quezon Boulevard, registered in the name of Teodoro Kalaw, Jr. is Evelina
Kalaw's property, the fruits of which are also conjugal partnership property;
87
that of the amount of the judgment plus 6% interest totalling P141.047.50,
only P20,000 has been paid, leaving a balance of P121,047.50 still unpaid.
As second cause of action it is alleged that the fruits of the conjugal
partnership properties, as well as the fruits of the paraphernal property of
Evelina Kalaw-Katigbak belonged to the conjugal partnership; that plaintiff's
cause of action arose before the effectivity of the new Civil Code and,
therefore, their liability as above described is chargeable against the
conjugal partnership of Katigbak and Kalaw, including the fruits of the
paraphernal property of the wife; that demand was made by plaintiffs upon
the defendant Katigbak as well as on defendant Evelina Kalaw-Katigbak, on
the fruits of the properties mentioned hereinbefore, but neither one nor
the other paid the same.
In the prayer it is demanded that the proceedings for the judicial separation
of the properties of the spouses be declared null and void or inefficacious
against the plaintiffs; that Evelina Kalaw-Katigbak be sentenced to render
an accounting and turn over to plaintiffs the net fruits of the Center Theatre,
the property covered by TCT No. 57626 and all other properties, as well as
the fruits of the paraphernal properties of Evelina Kalaw-Katigbak, until the
full amount of the judgment be paid. The last prayer is that the property
covered by TCT No. 57626 and improvements thereon, be declared conjugal
partnership property subject to the indebtedness in favor of the plaintiffs.
Evelina Kalaw-Katigbak answered the complaint denying the allegations as
to the existence of conjugal partnership properties alleged in the complaint
and the imputation to her that her properties were fraudulently registered
in the name of others. As special defenses, she alleged "that as a matter of
fact, the answering defendant in this case who was impleaded as one of the
defendants in Civil Case No. 11767 of the Court of First Instance of Manila
was absolved from said complaint which was dismissed insofar as it
concerns her; said dismissal having been confirmed by the Supreme Court;"
that she does not have in her possession property belonging to the conjugal
partnership nor fruits thereof derived from any paraphernal property,
which may be considered as conjugal; and that the fruits of any of her own
properties belonged to her, and neither her husband nor creditors have any
interest therein. As a counterclaim it is alleged that plaintiffs have registered
a notice of lis pendens in the office of the register of deeds of Manila on TCT
No. 25626, thus causing her damage to the extent of P10,000. She prays for
a dismissal of the complaint and that the plaintiffs be sentenced to pay the
amount of her counterclaim. On August 31, 1956, the Court of First Instance
of Manila rendered a decision on the issues presented by the answer of the
defendants in the following language:
One of the points in debate is whether plaintiffs have the right to insist that
notwithstanding the decree of judicial separation in Civil Case No. 12860
they can secure a pronouncement from this Court to the effect that the
conjugal properties of the spouses Ramon Katigbak and Evelina Kalaw
should answer for the judgment secured by plaintiff against Ramon
Katigbak; and in that eventuality what properties should be made to answer
therefor. Defendant Evelina Kalaw contends that the decision of the
Supreme Court absolving her of liability in Civil Case No. 11767 would be
enough to bar the present action as against her; the Court does not concur;
for what was decided in that case was whether on the promissory notes
signed by Ramon Katigbak, Evelina Kalaw could be personally liable with her
paraphernal properties and the Supreme Court said that she could not; it
was not there decided whether the conjugal property, this would include
the fruits of the paraphernal, could not be liable; in fact a reading of the
decision of the Supreme Court would show that the ratio decidendi there
was that her husband alone was liable with his private funds and at most
the assets of the conjugal partnership, ....
The court further held that for the reason that no proof was submitted to
show that the obligations contracted by Ramon Katigbak redounded to the
benefit of the family, the obligation subject to the complaint could not be
enforced upon the paraphernal properties or the fruits thereof, although
they could be enforced upon the conjugal partnership property; that since
the Civil Code has been amended and "the exemption from liability for
personal obligations of the husband is a right given to the conjugal
partnership for the first time by the amendment in the new Code, it should
be operative at once, unless it should impair a right vested under the old
legislation (Art. 2253), New Civil Code. But the right of the Laperals so far as
the judgment against Ramon Katigbak is concerned is one thing and their
right to proceed against the conjugal properties of Ramon and Evelina is
another, the first one was a property right vested under the Old Code; the
second was a right also under that but one that had not yet vested before
the New Code came into being. All vested rights are property but not all
rights are; the Legislature can come in and destroy rights not yet vested
88
without impairment of due process. Perhaps the case can be illustrated by
analogy to Article 2261 of the New Civil Code; that legislator there has
decreed that exemptions from liability under Article 302 were operative at
once; and as this is a case analogous it should under Article 2269, be solved
in the same manner. The result will be a "dismissal." Hence the court
dismissed the action, without costs.
The above decision of the court was appealed to Us in G.R. No. L-11418. In
this Court, the plaintiffs Roberto Laperal, Jr. and Purificacion M. Laperal
assigned the following errors: .
THE COURT BELOW ERRED IN HOLDING THAT THE OBLIGATIONS INCURRED
BY KATIGBAK DID NOT REDOUND TO THE BENEFIT OF THE FAMILY OF
KATIGBAK AND KALAW.
THE COURT BELOW ERRED IN HOLDING THAT THE OBLIGATIONS INCURRED
BY KATIGBAK CANNOT BE ENFORCED AGAINST THE FRUITS OF THE
PARAPHERNAL PROPERTY OF KALAW.
THE COURT BELOW ERRED IN NOT REQUIRING KALAW TO ACCOUNT AND
PAY TO THE LAPERALS THE NET FRUITS OF THE CENTER THEATRE BUILDING
ON QUEZON BOULEVARD, MANILA AND OF OTHER PARAPHERNAL
PROPERTY OF KALAW IN SATISFACTION OF DECISION IN FAVOR OF THE
LAPERALS. (G.R. No. L-11418, R.O.A., pp. 11-12.)
The defendants Ramon L. Katigbak and Evelina Kalaw-Katigbak did not
appeal from the decision of the lower court, evidently because the case
against them was dismissed by the lower court. In the decision rendered by
Us in the appealed case, the matters considered are those raised in the
briefs of the plaintiffs-appellants. After considering those points we held: .
The question is whether or not any vested or acquired right is involved in
the instant case. The answer, in our opinion, is in the affirmative. When the
Laperals granted the loans and delivered the jewelry to Katigbak to be paid
and accounted for by him, the law then in force (Article 1408, Old Civil Code)
made the conjugal partnership liable for the obligation. In other words, in
giving the loan and delivering the jewelry to Katigbak, the Laperals, for
purposes of security and assurances, presumably or undoubtedly looked to
the conjugal properties as security to answer for the obligation, should
Katigbak fail to make good his undertaking. Stated differently, the Laperals
acquired a sort of lien on said conjugal properties. ... The right of the
Laperals vested at the very moment the obligation was contracted, under
the provisions of the Old Civil Code. For this reason, the provisions of Article
161 of the New Civil Code cannot apply, and the trial court erred in applying
the same.
However, our holding does not write a finis to the case. Because the trial
court held that the conjugal partnership was not liable, it naturally saw no
reason or necessity for ruling upon the other issues involved, such as the
legality of the proceedings in Civil Case No. 12860 for the dissolution of the
conjugal partnership, and whether or not the property covered by Transfer
Certificate of Title 27626 belongs to the conjugal partnership.
In conclusion, we hold that while the fruits of the paraphernal property of
Kalaw are not liable for the enforcement of the obligation contracts by
Katigbak, nevertheless, the conjugal properties are." (G.R. No. L-11418, pp.
16-18, Decision.) .
When the case was returned to the trial court for determination of the
issues of facts pointed out by Us in our decision, the judge, after trial,
rendered the judgment appealed from in this case, which is as follows: .
With the finding that this property is paraphernal, what only remains is to
apply as plaintiffs desire, the rule in National Bank v. Quintos, 46 Phil. 370
under that, it was held that the spouses are subsidiarily liable with their
private properties in the event of insolvency of the conjugal assets; there is
no showing why that rule should not apply here; we should therefore apply
it since the insolvency is clear; the result will be a judgment against Evelina
for one-half (1/2) of the credit already settled in the decision. 1äwphï1.ñët
IN VIEW WHEREOF, judgment is rendered condemning Evelina Kalaw to pay
unto plaintiffs the sum of one-half (1/2) of P14,000.00 with legal interest
from August 8, 1950 until fully paid, plus another one-half (1/2) of
P97,500.00 also with legal interest from August 8, 1950 until full payment.
(G.R. No. L-16951, R.O.A. pp. 95-96.)
Upon the appeal to Us the defendant-appellant assigned the following
errors:
89

I THE "AGREEMENT OF FACTS" IN CASE II WAS PROMPTED, NOT BY THE
THE COURT A QUO ERRED IN CONDEMNING KALAW TO PAY ONE-HALF OF
THE CLAIMS OF THE LAPERALS, IT HAVING BEEN FINALLY AND
CONCLUSIVELY DECIDED BY THE SUPREME COURT IN DECISION 1-B (G.R.
NO. L-4299, January 31, 1952), AND DECISION III-A (G.R. No. L-11418,
December 27, 1958) THAT KALAW, NOR HER PARAPHERNAL PROPERTY OR
ITS FRUITS, lS NOT LIABLE FOR KATIGBAK'S PERSONAL OBLIGATION IN
FAVOR OF THE LAPERALS.
II
THAT THE COURT A QUO ERRED IN APPLYING TO THIS CASE THE DOCTRINE
OF NATIONAL BANK VERSUS QUINTOS, 46 PHIL. 370, THE FACTS AND THE
LAW INVOLVED IN SAID CASE BEING ABSOLUTELY DIFFERENT FROM THOSE
IN THIS CASE.
III
THE COURT A QUO ERRED IN SENTENCING KALAW TO PAY ONE-HALF OF
THE LAPERALS, SAID PRONOUNCEMENT BEING NOT INCLUDED WITHIN THE
DIRECTIVE OF THE SUPREME COURT IN DECISION III-A REMANDING THE
CASE TO THE LOWER COURT FOR FURTHER PROCEEDINGS.
IV
THE LOWER COURT ERRED IN SENTENCING KALAW TO PAY ONE-HALF OF
THE CLAIMS OF THE LAPERALS FOR THE REASON THAT SAID REMEDY IS NOT
SOUGHT IN THIS ACTION NOR COVERED BY THE ALLEGATIONS OF
COMPLAINT.
V In considering the operation of this judgment, it should be borne in mind,
THE COURT A QUO ERRED IN DECLARING THE DECISION IN CASE II AS "NOT
EFFECTIVE" INSOFAR AS THE LAPERALS ARE CONCERNED.
VI
THE COURT A QUO ERRED IN NOT ALLOWING KALAW TO ESTABLISH THAT
DESIRE OF THE PARTIES, BUT BY THE SUCCESSION OF THE PRESIDING JUDGE
OF THE COURT. (Brief of Defendant-Appellant, pp. 1-2.) .
It will be seen that the first error assigned is the ruling of the trial court in
its first decision, which is that the present action, which is the second one,
is barred by the judgment rendered by Us in G.R. No. L-2499, entitled
Roberto Laperal, Jr. and Purificacion M. Laperal, plaintiffs-appellants versus
Ramon L. Katigbak and Evelina Katigbak, defendants-appellees. The legal
provision involved in this supposed error is known as the bar by former
judgment or estoppel by former judgment, as set forth in Section 44, Rule
39 of the Rules of Court. This section should be distinguished from Section
45 of the same Rule, which is as follows: .
Section 45. — That only is deemed to have been adjudged in a former
judgment which appears upon its face to have been so adjudged, or which
was actually and necessarily included therein or necessary thereto.
The distinction between the first rule, which is the rule of bar by former
judgment, and the second one which is the rule of conclusiveness of
judgment, has been set forth by Mr. Justice Carson in Peñalosa vs. Tuason,
22 Phil. 303 thus —
xxx xxx xxx
The subject of res judicata or estoppel by judgment as known to Anglo-
American jurisprudence is governed by two main rules uniformly recognized
by the authorities, which are very distinctly laid down and defined by Mr.
Justice Field in the following citation from his opinion in the case of
Cromwell vs. Sac County (94 U.S. 351): .
as stated by counsel, that there is a difference between the effect of a
judgment as a bar or estoppel against the prosecution of a second action
upon the same claim or demand, and its effect as an estoppel in another
action between the same parties upon a different claim or cause of action.
In the former case, the judgment, if rendered upon the merits, constitutes
an absolute bar to a subsequent action. It is a finality as to the claim or
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demand in controversy, concluding parties and those in privity with them,
not only as to every matter which was offered and received to sustain or
defeat the claim or demand, but as to any other admissible matter which
might have been offered for that purpose. Thus for example; a judgment
rendered upon a promissory note is conclusive as to the validity of the
instrument and the amount due upon it, although it be subsequently alleged
that perfect defenses actually existed, of which no proof was offered, such
as forgery, want of consideration, or payment. If such defenses were not
presented in the action, and established by competent evidence, the
subsequent allegation of their existence is of no legal consequence. The
judgment is as conclusive, so far as future proceedings at law are concerned,
as though the defenses never existed. The language, therefore, which is so
often used, that a judgment estops not only as to every ground of recovery
or defense actually presented in the action, but also as to every ground
which might have been presented, is strictly accurate, when applied to the
demand or claim in controversy. Such demand or claim, having passed into
judgment, cannot again be brought into litigation between the parties in
proceedings at law upon any ground whatever.
But where the second action between the same parties is upon a different
claim or demand, the judgment in the prior action operates as an estoppel
only as to those matters in issue or points controverted upon the
determination of which the findings or verdict was rendered. In all cases,
therefore, where it is sought to apply the estoppel of a judgment rendered
upon one cause of action to matters arising in a suit upon a different cause
of action, the inquiry must always be as to the point or question actually
litigated and determined in the original action; not what might have been
thus litigated and determined. Only upon such matters is the judgment
conclusive in another action.
The rules thus referred to in the opinion of Mr. Justice Field may be
summarily stated as follows: .
1. A judgment rendered by a court of competent jurisdiction on the merits
is a bar to any future suit between the same parties or their privies upon the
same cause of action so long as it remains unreversed.
2. A point which was actually and directly in issue in a former suit and was
there judicially passed upon and determined by a domestic court of
competent jurisdiction cannot be again drawn in question in any future
action between the same parties or their privies, even when the causes of
action in the two suits are wholly different.
These two main rules mark a sharp distinction between the principles
governing the two typical cases in which a judgment may operate as
evidence. No intelligent discussion of the subject of res judicata or of the
multitude of authorities and varying statutes touching the subject can be
maintained without keeping clearly in mind the distinction between the
principles governing these two typical cases. Indeed, in speaking of these
cases the term 'bar by former judgment' is uniformly employed to indicate
the case governed by the first general rule above laid down; and the phrases
'conclusiveness of the judgment' in referring to the second. (Peñalosa vs.
Tuason, 22 Phil. 303, 311-313.) .
As stated in the above-quoted decision the issue depends upon the
following question: Is the claim or demand made in the second action, Civil
Case No. 25235, the same as the demand made in the original case, Civil
Case No. 11767. The trial court held that the second cause of action is a
different demand or claim, because what was decided in the different case
No. 11767 is whether or not Evelina Kalaw-Katigbak could be held
responsible with her paraphernal properties for the promissory notes and
the other obligation signed by Ramon Katigbak. We hold that the trial court
committed error in this respect; for the original claim or demand made upon
the spouses Katigbak and Kalaw was to hold them liable for the said
promissory notes and obligation. The prayer in the complaint of the original
case No. 11767 demands that a writ of attachment issue against the
properties of the defendants, or of any of them, and for any other relief is
may be legal and equitable. In this previous case, No. 11767, the claim or
demand was to make Evelina Kalaw-Katigbak liable in any capacity
whatsoever, whether personally or with her conjugal properties, or with the
fruits of her paraphernal property. If Evelina Kalaw-Katigbak was not
responsible in any manner under the cause of action, there is no cause or
reason why she could still be made responsible for the supposed fruits of
her paraphernal property. As indicated in the above quoted decision of ours
in the case of Peñalosa vs. Tuason, supra, the previous case No. 11767, is
final not only as to Evelina Kalaw-Katigbak's person liability for the
obligations sought to be enforced, but as to the liability of the properties of
the conjugal partnership or of the fruits of Evelina Kalaw-Katigbak's
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paraphernal properties. In the language of that decision, the judgment in
the previous case No. 11767 "estops not only as to every ground of recovery
or defense actually presented in the action, but also as to every ground
which might have been presented." The reason for the rule is because the
demand or claim on the obligations having passed into judgment, the said
claim or demand "cannot again be brought into litigation between the
parties in proceedings at law upon any ground whatever.".
The trial court seems to have believed that the original action is limited to
making Evelina Kalaw-Katigbak person responsible for the obligations, and
that the subsequent suit, which is to make the conjugal properties or the
fruits of the paraphernal property responsible, is of a different nature. This
view is incorrect. The demand or claim has always been against both
spouses, not only personally but also to make their properties or the fruits
thereof responsible. The prayer of the complaint is to make all their
properties liable. An action to make a wife personally responsible is not
different from one to make the paraphernal property of the wife subject to
the same obligation. But assuming that there is some difference, section 3
of Rule 2 of the Rules of Court, prohibits multiplicity of suits, and any party
is prohibited from dividing the causes of action that he has upon the same
claim or demand, or pursuing the remedies to which he is entitled by virtue
of the demand in one suit after another. The first action was to make Evelina
Kalaw-Katigbak and her properties responsible, and the second, was to
make the fruits of her paraphernal property responsible. Both actions are
against Evelina Kalaw-Katigbak on the same claim and demand. The rule
prohibiting multiplicity of suits prohibits Evelina Kalaw from being sued
personally in one suit then and making the fruits of her paraphernal
property responsible subsequently in another.
It is argued on behalf of the plaintiffs-appellees that our decision in G.R. No.
L-11418, to the effect that the conjugal properties of Evelina Kalaw and her
husband are responsible —
In conclusion, we hold that while the fruits of the paraphernal property of
Kalaw are not liable for the enforcement of the obligation contracted by
Katigbak, nevertheless, the conjugal properties are. (Record, p. 91;
emphasis ours; p. 4, Brief for Plaintiffs-Appellees.)
is the ratio decidendi of the case, evidently meaning, that the question of
bar by former judgment was passed upon by Us unfavorably. It is true that
the court did not consider the question of bar by former judgment raised by
defendant Kalaw in the case, but the reason why we did not pass upon the
same was because there was no occasion, no such question being raised on
appeal; Evelina Kalaw having won the suit in the court below, there was no
necessity for her to raise that question in the brief. Besides, our decision, by
declaring that the conjugal partnership of the spouses are responsible,
decided the main issue raised in the appeal by the spouses Laperals. We
could not have passed upon the issue of bar by former judgment because
that was not the issue on appeal and we did not have to decide it any way,
because there was no need to do so, as the case was being returned to the
lower court for determination of certain facts arising from questions raised
on the appeal, which questions refer to those raised by the appellants
Laperal in that case.
Furthermore, our decision in said case, G.R. No. L-11418, can not be
considered in deciding the question of bar by former judgment because,
according to the rule of conclusiveness of judgment, that which can be
considered as decided is what was actually decided in the case, in
accordance with Section 45 of Rule 39, Rules of Court. In other words,
nothing having been stated by Us in our decision in L-11418 on the matter
of bar by former judgment, said decision can not be considered as having
ruled upon said rule adversely in the appeal of Evelina Kalaw in the present
case.
In view of our resolution on the defense of bar by former judgment against
the action, it is unnecessary to consider the other questions involved in the
appeal.
FOR THE FOREGOING CONSIDERATIONS the order appealed from is hereby
set aside and defendant Evelina Kalaw-Katigbak, absolved from the action.
Without costs. So ordered.
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