You are on page 1of 53

[G.R. No. 138497.

January 16, 2002] It was further alleged that defendant Lopez and petitioner Relucio,
during their period of cohabitation since 1976, have amassed a
IMELDA RELUCIO, petitioner, vs. fortune consisting mainly of stockholdings in Lopez-owned or
controlled corporations, residential, agricultural, commercial lots,
ANGELINA MEJIA LOPEZ, respondent. houses, apartments and buildings, cars and other motor vehicles,
bank accounts and jewelry. These properties, which are in the names
The Case of defendant Lopez and petitioner Relucio singly or jointly or their
dummies and proxies, have been acquired principally if not solely
through the actual contribution of money, property and industry of
The case is a petition for review on certiorari[1] seeking to set
defendant Lopez with minimal, if not nil, actual contribution from
aside the decision[2] of the Court of Appeals that denied a petition
petitioner Relucio.
for certiorari assailing the trial courts order denying petitioners
motion to dismiss the case against her inclusion as party defendant
therein. In order to avoid defendant Lopez obligations as a father and
husband, he excluded the private respondent and their four children
from sharing or benefiting from the conjugal properties and the
income or fruits there from. As such, defendant Lopez either did not
The Facts
place them in his name or otherwise removed, transferred, stashed
away or concealed them from the private-respondent. He placed
The facts, as found by the Court of Appeals, are as follows: substantial portions of these conjugal properties in the name of
petitioner Relucio.
On September 15, 1993, herein private respondent Angelina Mejia
Lopez (plaintiff below) filed a petition for APPOINTMENT AS SOLE It was also averred that in the past twenty five years since defendant
ADMINISTRATRIX OF CONJUGAL PARTNERSHIP OF Lopez abandoned the private-respondent, he has sold, disposed of,
PROPERTIES, FORFEITURE, ETC., against defendant Alberto Lopez alienated, transferred, assigned, canceled, removed or stashed away
and petitioner Imelda Relucio, docketed as Spec. Proc. M-3630, in the properties, assets and income belonging to the conjugal partnership
Regional Trial Court of Makati, Branch 141. In the petition, private- with the private-respondent and either spent the proceeds thereof
respondent alleged that sometime in 1968, defendant Lopez, who is for his sole benefit and that of petitioner Relucio and their two
legally married to the private respondent, abandoned the latter and illegitimate children or permanently and fraudulently placed them
their four legitimate children; that he arrogated unto himself full and beyond the reach of the private-respondent and their four children.
exclusive control and administration of the conjugal properties,
spending and using the same for his sole gain and benefit to the total On December 8, 1993, a Motion to Dismiss the Petition was filed by
exclusion of the private respondent and their four children; that herein petitioner on the ground that private respondent has no cause
defendant Lopez, after abandoning his family, maintained an illicit of action against her.
relationship and cohabited with herein petitioner since 1976.
An Order dated February 10, 1994 was issued by herein respondent
Judge denying petitioner Relucios Motion to Dismiss on the ground
that she is impleaded as a necessary or indispensable party because
some of the subject properties are registered in her name and First issue: whether a cause of action exists against petitioner in
defendant Lopez, or solely in her name. the proceedings below. A cause of action is an act or omission of one
party the defendant in violation of the legal right of the other.[10] The
Subsequently thereafter, petitioner Relucio filed a Motion for elements of a cause of action are:
Reconsideration to the Order of the respondent Judge
(1) a right in favor of the plaintiff by whatever means and
dated February 10, 1994 but the same was likewise denied in the
under whatever law it arises or is created;
Order dated May 31, 1994.[3]
(2) an obligation on the part of the named defendant to
On June 21, 1994, petitioner filed with the Court of Appeals a respect or not to violate such right; and
petition for certiorari assailing the trial courts denial of her motion to
(3) an act or omission on the part of such defendant in
dismiss.[4]
violation of the right of the plaintiff or constituting a
On May 31, 1996, the Court of Appeals promulgated a decision breach of the obligation of the defendant to the plaintiff
denying the petition.[5] On June 26, 1996, petitioner filed a motion for for which the latter may maintain an action for recovery
reconsideration.[6] However, on April 6, 1999, the Court of Appeals of damages.[11]
denied petitioners motion for reconsideration.[7]
A cause of action is sufficient if a valid judgment may be
Hence, this appeal.[8] rendered thereon if the alleged facts were admitted or proved. [12]
In order to sustain a motion to dismiss for lack of cause of
action, the complaint must show that the claim for relief does not
The Issues exist, rather than that a claim has been merely defectively stated or is
ambiguous, indefinite or uncertain.[13]
1. Whether respondents petition for appointment as sole Hence, to determine the sufficiency of the cause of action
administratrix of the conjugal property, accounting, etc. alleged in Special Proceedings M-3630, we assay its allegations.
against her husband Alberto J. Lopez established a
cause of action against petitioner. In Part Two on the Nature of [the] Complaint, respondent
Angelina Mejia Lopez summarized the causes of action alleged in
2. Whether petitioners inclusion as party defendant is the complaint below.
essential in the proceedings for a complete adjudication
of the controversy.[9] The complaint is by an aggrieved wife against her husband.
Nowhere in the allegations does it appear that relief is sought
against petitioner. Respondents causes of action were all against her
The Courts Ruling husband.
The first cause of action is for judicial appointment of
We grant the petition. We resolve the issues in seriatim. respondent as administratrix of the conjugal partnership or absolute
community property arising from her marriage to Alberto J.
Lopez. Petitioner is a complete stranger to this cause of Respondents asserted right to forfeit extends to Alberto J. Lopez
action. Article 128 of the Family Code refers only to spouses, to wit: share alone. Failure of Alberto J. Lopez to surrender such share,
assuming the trial court finds in respondents favor, results in a
If a spouse without just cause abandons the other or fails to comply breach of an obligation to respondent and gives rise to a cause of
with his or her obligations to the family, the aggrieved spouse may action.[16] Such cause of action, however, pertains to Alberto J. Lopez,
petition the court for receivership, for judicial separation of property, not petitioner.
or for authority to be the sole administrator of the conjugal
The respondent also sought support. Support cannot be
partnership property xxx
compelled from a stranger.

The administration of the property of the marriage is entirely The action in Special Proceedings M-3630 is, to use respondent
between them, to the exclusion of all other persons. Respondent Angelina M. Lopez own words, one by an aggrieved wife against her
alleges that Alberto J. Lopez is her husband. Therefore, her first husband.[17] References to petitioner in the common and specific
cause of action is against Alberto J. Lopez. There is no right-duty allegations of fact in the complaint are merely incidental, to set forth
relation between petitioner and respondent that can possibly facts and circumstances that prove the causes of action alleged
support a cause of action. In fact, none of the three elements of a against Alberto J. Lopez.
cause of action exists.
Finally, as to the moral damages, respondents claim for moral
The second cause of action is for an accounting by respondent damages is against Alberto J. Lopez, not petitioner.
husband.[14] The accounting of conjugal partnership arises from or is
To sustain a cause of action for moral damages, the complaint
an incident of marriage.
must have the character of an action for interference with marital or
Petitioner has nothing to do with the marriage between family relations under the Civil Code.
respondent Alberto J. Lopez. Hence, no cause of action can exist
A real party in interest is one who stands to be benefited or
against petitioner on this ground.
injured by the judgment of the suit.[18] In this case, petitioner would
Respondents alternative cause of action is for forfeiture of not be affected by any judgment in Special Proceedings M-3630.
Alberto J. Lopez share in the co-owned property acquired during his
If petitioner is not a real party in interest, she cannot be an
illicit relationship and cohabitation with [petitioner] [15] and for the
indispensable party. An indispensable party is one without whom
dissolution of the conjugal partnership of gains between him
there can be no final determination of an action.[19]Petitioners
[Alberto J. Lopez] and the [respondent].
participation in Special Proceedings M-3630 is not
The third cause of action is essentially for forfeiture of Alberto J. indispensable. Certainly, the trial court can issue a judgment
Lopez share in property co-owned by him and petitioner. It does not ordering Alberto J. Lopez to make an accounting of his conjugal
involve the issue of validity of the co-ownership between Alberto J. partnership with respondent, and give support to respondent and
Lopez and petitioner. The issue is whether there is basis in law to their children, and dissolve Alberto J. Lopez conjugal partnership
forfeit Alberto J. Lopez share, if any there be, in property co-owned with respondent, and forfeit Alberto J. Lopez share in property co-
by him with petitioner. owned by him and petitioner. Such judgment would be perfectly
valid and enforceable against Alberto J. Lopez.
Nor can petitioner be a necessary party in Special Proceedings
M-3630. A necessary party as one who is not indispensable but who
ought to be joined as party if complete relief is to be accorded those
already parties, or for a complete determination or settlement of the
claim subject of the action.[20] In the context of her petition in the
lower court, respondent would be accorded complete relief if
Alberto J. Lopez were ordered to account for his alleged conjugal
partnership property with respondent, give support to respondent
and her children, turn over his share in the co-ownership with
petitioner and dissolve his conjugal partnership or absolute
community property with respondent.

The Judgment

WHEREFORE, the Court GRANTS the petition and REVERSES


the decision of the Court of Appeals.[21] The Court DISMISSES
Special Proceedings M-3630 of the Regional Trial Court, Makati,
Branch 141 as against petitioner.
No costs.
SO ORDERED.
G.R. No. 115838 July 18, 2002 "x x x. Appellants5 were co-owners of four (4) lots located at
EDSA corner New York and Denver Streets in Cubao,
CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE Quezon City. In a letter dated January 24, 1984 (Exhibit "A-1,
CASTRO, petitioners, p. 144, Records), appellee6 was authorized by appellants to
vs. act as real estate broker in the sale of these properties for the
COURT OF APPEALS and FRANCISCO ARTIGO, respondents. amount of P23,000,000.00, five percent (5%) of which will be
given to the agent as commission. It was appellee who first
The Case found Times Transit Corporation, represented by its
president Mr. Rondaris, as prospective buyer which desired
Before us is a Petition for Review on Certiorari1 seeking to annul the to buy two (2) lots only, specifically lots 14 and 15.
Decision of the Court of Appeals2 dated May 4, 1994 in CA-G.R. CV Eventually, sometime in May of 1985, the sale of lots 14 and
No. 37996, which affirmed in toto the decision3 of the Regional Trial 15 was consummated. Appellee received from
Court of Quezon City, Branch 80, in Civil Case No. Q-89-2631. The appellants P48,893.76 as commission.
trial court disposed as follows:
It was then that the rift between the contending parties soon
"WHEREFORE, the Court finds defendants Constante and emerged. Appellee apparently felt short changed because
Corazon Amor de Castro jointly and solidarily liable to according to him, his total commission should
plaintiff the sum of: be P352,500.00 which is five percent (5%) of the agreed price
of P7,050,000.00 paid by Times Transit Corporation to
appellants for the two (2) lots, and that it was he who
a) P303,606.24 representing unpaid commission;
introduced the buyer to appellants and unceasingly
facilitated the negotiation which ultimately led to the
b) P25,000.00 for and by way of moral damages;
consummation of the sale. Hence, he sued below to collect
the balance of P303,606.24 after having received P48,893.76
c) P45,000.00 for and by way of attorney's fees; in advance.1âwphi1.nêt

d) To pay the cost of this suit. On the other hand, appellants completely traverse appellee's
claims and essentially argue that appellee is selfishly asking
Quezon City, Metro Manila, December 20, 1991." for more than what he truly deserved as commission to the
prejudice of other agents who were more instrumental in the
The Antecedent Facts consummation of the sale. Although appellants readily
concede that it was appellee who first introduced Times
On May 29, 1989, private respondent Francisco Artigo ("Artigo" for Transit Corp. to them, appellee was not designated by them
brevity) sued petitioners Constante A. De Castro ("Constante" for as their exclusive real estate agent but that in fact there were
brevity) and Corazon A. De Castro ("Corazon" for brevity) to collect more or less eighteen (18) others whose collective efforts in
the unpaid balance of his broker's commission from the De the long run dwarfed those of appellee's, considering that
Castros.4 The Court of Appeals summarized the facts in this wise: the first negotiation for the sale where appellee took active
participation failed and it was these other agents who Third. The Court of Appeals likewise declared that the trial court did
successfully brokered in the second negotiation. But despite not err in admitting parol evidence to prove the true amount paid by
this and out of appellants' "pure liberality, beneficence and Times Transit to the De Castros for the two lots. The Court of
magnanimity", appellee nevertheless was given the largest Appeals ruled that evidence aliunde could be presented to prove that
cut in the commission (P48,893.76), although on the principle the actual purchase price was P7.05 million and not P3.6 million as
of quantum meruit he would have certainly been entitled to appearing in the deed of sale. Evidence aliunde is admissible
less. So appellee should not have been heard to complain of considering that Artigo is not a party, but a mere witness in the deed
getting only a pittance when he actually got the lion's share of sale between the De Castros and Times Transit. The Court of
of the commission and worse, he should not have been Appeals explained that, "the rule that oral evidence is inadmissible
allowed to get the entire commission. Furthermore, the to vary the terms of written instruments is generally applied only in
purchase price for the two lots was only P3.6 million as suits between parties to the instrument and strangers to the contract
appearing in the deed of sale and not P7.05 million as are not bound by it." Besides, Artigo was not suing under the deed of
alleged by appellee. Thus, even assuming that appellee is sale, but solely under the contract of agency. Thus, the Court of
entitled to the entire commission, he would only be getting Appeals upheld the trial court's finding that the purchase price was
5% of the P3.6 million, or P180,000.00." P7.05 million and not P3.6 million.

Ruling of the Court of Appeals Hence, the instant petition.

The Court of Appeals affirmed in toto the decision of the trial court. The Issues

First. The Court of Appeals found that Constante authorized Artigo According to petitioners, the Court of Appeals erred in -
to act as agent in the sale of two lots in Cubao, Quezon City. The
handwritten authorization letter signed by Constante clearly I. NOT ORDERING THE DISMISSAL OF THE
established a contract of agency between Constante and Artigo. COMPLAINT FOR FAILURE TO IMPLEAD
Thus, Artigo sought prospective buyers and found Times Transit INDISPENSABLE PARTIES-IN-INTEREST;
Corporation ("Times Transit" for brevity). Artigo facilitated the
negotiations which eventually led to the sale of the two lots. II. NOT ORDERING THE DISMISSAL OF THE
Therefore, the Court of Appeals decided that Artigo is entitled to the COMPLAINT ON THE GROUND THAT ARTIGO'S CLAIM
5% commission on the purchase price as provided in the contract of HAS BEEN EXTINGUISHED BY FULL PAYMENT,
agency. WAIVER, OR ABANDONMENT;

Second. The Court of Appeals ruled that Artigo's complaint is not III. CONSIDERING INCOMPETENT EVIDENCE;
dismissible for failure to implead as indispensable parties the other
co-owners of the two lots. The Court of Appeals explained that it is IV. GIVING CREDENCE TO PATENTLY PERJURED
not necessary to implead the other co-owners since the action is TESTIMONY;
exclusively based on a contract of agency between Artigo and
Constante.
V. SANCTIONING AN AWARD OF MORAL DAMAGES There is no dispute that Constante appointed Artigo in a
AND ATTORNEY'S FEES; handwritten note dated January 24, 1984 to sell the properties of the
De Castros for P23 million at a 5 percent commission. The authority
VI. NOT AWARDING THE DE CASTRO'S MORAL AND was on a first come, first serve basis. The authority reads in full:
EXEMPLARY DAMAGES, AND ATTORNEY'S FEES.
"24 Jan. 84
The Court's Ruling

The petition is bereft of merit. To Whom It May Concern:

First Issue: whether the complaint merits dismissal for failure to This is to state that Mr. Francisco Artigo is authorized as our
implead other co-owners as indispensable parties real estate broker in connection with the sale of our property
located at Edsa Corner New York & Denver, Cubao, Quezon
The De Castros argue that Artigo's complaint should have been City.
dismissed for failure to implead all the co-owners of the two lots.
The De Castros claim that Artigo always knew that the two lots were Asking price P 23,000,000.00 with 5% commission as agent's
co-owned by Constante and Corazon with their other siblings Jose fee.
and Carmela whom Constante merely represented. The De Castros
contend that failure to implead such indispensable parties is fatal to
the complaint since Artigo, as agent of all the four co-owners, would C.C. de Castro
be paid with funds co-owned by the four co-owners. owner & representing
co-owners
The De Castros' contentions are devoid of legal basis.
This authority is on a first-come
An indispensable party is one whose interest will be affected by the
court's action in the litigation, and without whom no final First serve basis –CAC"
determination of the case can be had.7 The joinder of indispensable
parties is mandatory and courts cannot proceed without their Constante signed the note as owner and as representative of the
presence.8 Whenever it appears to the court in the course of a other co-owners. Under this note, a contract of agency was clearly
proceeding that an indispensable party has not been joined, it is the constituted between Constante and Artigo. Whether Constante
duty of the court to stop the trial and order the inclusion of such appointed Artigo as agent, in Constante's individual or
party.9 representative capacity, or both, the De Castros cannot seek the
dismissal of the case for failure to implead the other co-owners as
However, the rule on mandatory joinder of indispensable parties is indispensable parties. The De Castros admit that the other co-
not applicable to the instant case. owners are solidarily liable under the contract of agency,10 citing
Article 1915 of the Civil Code, which reads:
Art. 1915. If two or more persons have appointed an agent Indeed, Article 1216 of the Civil Code provides that a creditor may
for a common transaction or undertaking, they shall be sue any of the solidary debtors. This article reads:
solidarily liable to the agent for all the consequences of the
agency. Art. 1216. The creditor may proceed against any one of the
solidary debtors or some or all of them simultaneously. The
The solidary liability of the four co-owners, however, militates demand made against one of them shall not be an obstacle to
against the De Castros' theory that the other co-owners should be those which may subsequently be directed against the
impleaded as indispensable parties. A noted commentator explained others, so long as the debt has not been fully collected.
Article 1915 thus –
Thus, the Court has ruled in Operators Incorporated vs. American
"The rule in this article applies even when the appointments Biscuit Co., Inc.13 that –
were made by the principals in separate acts, provided that
they are for the same transaction. The solidarity arises from "x x x solidarity does not make a solidary obligor an
the common interest of the principals, and not from the act indispensable party in a suit filed by the creditor. Article
of constituting the agency. By virtue of this solidarity, the 1216 of the Civil Code says that the creditor `may proceed
agent can recover from any principal the whole against anyone of the solidary debtors or some or all of them
compensation and indemnity owing to him by the simultaneously'." (Emphasis supplied)
others. The parties, however, may, by express agreement,
negate this solidary responsibility. The solidarity does not Second Issue: whether Artigo's claim has been extinguished by full
disappear by the mere partition effected by the principals payment, waiver or abandonment
after the accomplishment of the agency.
The De Castros claim that Artigo was fully paid on June 14, 1985,
If the undertaking is one in which several are interested, but that is, Artigo was given "his proportionate share and no longer
only some create the agency, only the latter are solidarily entitled to any balance." According to them, Artigo was just one of
liable, without prejudice to the effects of negotiorum the agents involved in the sale and entitled to a "proportionate share"
gestio with respect to the others. And if the power granted in the commission. They assert that Artigo did absolutely nothing
includes various transactions some of which are common during the second negotiation but to sign as a witness in the deed of
and others are not, only those interested in each transaction sale. He did not even prepare the documents for the transaction as
shall be liable for it."11 an active real estate broker usually does.

When the law expressly provides for solidarity of the obligation, as The De Castros' arguments are flimsy.
in the liability of co-principals in a contract of agency, each obligor
may be compelled to pay the entire obligation.12 The agent may
A contract of agency which is not contrary to law, public order,
recover the whole compensation from any one of the co-principals,
public policy, morals or good custom is a valid contract, and
as in this case.
constitutes the law between the parties.14 The contract of agency
entered into by Constante with Artigo is the law between them and
both are bound to comply with its terms and conditions in good In any event, we find that the 5 percent real estate broker's
faith. commission is reasonable and within the standard practice in the
real estate industry for transactions of this nature.
The mere fact that "other agents" intervened in the consummation of
the sale and were paid their respective commissions cannot vary the The De Castros also contend that Artigo's inaction as well as failure
terms of the contract of agency granting Artigo a 5 percent to protest estops him from recovering more than what was actually
commission based on the selling price. These "other agents" turned paid him. The De Castros cite Article 1235 of the Civil Code which
out to be employees of Times Transit, the buyer Artigo introduced to reads:
the De Castros. This prompted the trial court to observe:
Art. 1235. When the obligee accepts the performance,
"The alleged `second group' of agents came into the picture knowing its incompleteness and irregularity, and without
only during the so-called `second negotiation' and it is expressing any protest or objection, the obligation is deemed
amusing to note that these (sic) second group, prominent fully complied with.
among whom are Atty. Del Castillo and Ms. Prudencio,
happened to be employees of Times Transit, the buyer of the The De Castros' reliance on Article 1235 of the Civil Code is
properties. And their efforts were limited to convincing misplaced. Artigo's acceptance of partial payment of his commission
Constante to 'part away' with the properties because the neither amounts to a waiver of the balance nor puts him in estoppel.
redemption period of the foreclosed properties is around the This is the import of Article 1235 which was explained in this wise:
corner, so to speak. (tsn. June 6, 1991).
"The word accept, as used in Article 1235 of the Civil Code,
xxx means to take as satisfactory or sufficient, or agree to an
incomplete or irregular performance. Hence, the mere receipt
To accept Constante's version of the story is to open the of a partial payment is not equivalent to the required
floodgates of fraud and deceit. A seller could always pretend acceptance of performance as would extinguish the whole
rejection of the offer and wait for sometime for others to obligation."16(Emphasis supplied)
renew it who are much willing to accept a commission far
less than the original broker. The immorality in the instant There is thus a clear distinction between acceptance and
case easily presents itself if one has to consider that the mere receipt. In this case, it is evident that Artigo merely received
alleged `second group' are the employees of the buyer, Times the partial payment without waiving the balance. Thus, there is no
Transit and they have not bettered the offer secured by Mr. estoppel to speak of.
Artigo for P7 million.
The De Castros further argue that laches should apply because
It is to be noted also that while Constante was too particular Artigo did not file his complaint in court until May 29, 1989, or
about the unrenewed real estate broker's license of Mr. almost four years later. Hence, Artigo's claim for the balance of his
Artigo, he did not bother at all to inquire as to the licenses of commission is barred by laches.
Prudencio and Castillo. (tsn, April 11, 1991, pp. 39-
40)."15 (Emphasis supplied)
Laches means the failure or neglect, for an unreasonable and collection suit filed within the prescriptive period mandated
unexplained length of time, to do that which by exercising due by the Civil Code."22
diligence could or should have been done earlier. It is negligence or
omission to assert a right within a reasonable time, warranting a Clearly, the De Castros' defense of laches finds no support in law,
presumption that the party entitled to assert it either has abandoned equity or jurisprudence.
it or declined to assert it.17
Third issue: whether the determination of the purchase price was
Artigo disputes the claim that he neglected to assert his rights. He made in violation of the Rules on Evidence
was appointed as agent on January 24, 1984. The two lots were
finally sold in June 1985. As found by the trial court, Artigo The De Castros want the Court to re-examine the probative value of
demanded in April and July of 1985 the payment of his commission the evidence adduced in the trial court to determine whether the
by Constante on the basis of the selling price of P7.05 million but actual selling price of the two lots was P7.05 million and not P3.6
there was no response from Constante.18 After it became clear that million. The De Castros contend that it is erroneous to base the 5
his demands for payment have fallen on deaf ears, Artigo decided to percent commission on a purchase price of P7.05 million as ordered
sue on May 29, 1989. by the trial court and the appellate court. The De Castros insist that
the purchase price is P3.6 million as expressly stated in the deed of
Actions upon a written contract, such as a contract of agency, must sale, the due execution and authenticity of which was admitted
be brought within ten years from the time the right of action during the trial.
accrues.19 The right of action accrues from the moment the breach of
right or duty occurs. From this moment, the creditor can institute the The De Castros believe that the trial and appellate courts committed
action even as the ten-year prescriptive period begins to run.20 a mistake in considering incompetent evidence and disregarding the
best evidence and parole evidence rules. They claim that the Court of
The De Castros admit that Artigo's claim was filed within the ten- Appeals erroneously affirmed sub silentio the trial court's reliance on
year prescriptive period. The De Castros, however, still maintain that the various correspondences between Constante and Times Transit
Artigo's cause of action is barred by laches. Laches does not apply which were mere photocopies that do not satisfy the best evidence
because only four years had lapsed from the time of the sale in June rule. Further, these letters covered only the first negotiations
1985. Artigo made a demand in July 1985 and filed the action in between Constante and Times Transit which failed; hence, these are
court on May 29, 1989, well within the ten-year prescriptive period. immaterial in determining the final purchase price.
This does not constitute an unreasonable delay in asserting one's
right. The Court has ruled, "a delay within the prescriptive period is The De Castros further argue that if there was an undervaluation,
sanctioned by law and is not considered to be a delay that would Artigo who signed as witness benefited therefrom, and being equally
bar relief."21 In explaining that laches applies only in the absence of a guilty, should be left where he presently stands. They likewise claim
statutory prescriptive period, the Court has stated - that the Court of Appeals erred in relying on evidence which were
not offered for the purpose considered by the trial court. Specifically,
"Laches is recourse in equity. Equity, however, is applied Exhibits "B", "C", "D" and "E" were not offered to prove that the
only in the absence, never in contravention, of statutory purchase price was P7.05 Million. Finally, they argue that the
law. Thus, laches, cannot, as a rule, be used to abate a courts a quo erred in giving credence to the perjured testimony of
Artigo. They want the entire testimony of Artigo rejected as a absence of any showing that the findings complained of are
falsehood because he was lying when he claimed at the outset that totally devoid of support in the record, or that they are so
he was a licensed real estate broker when he was not. glaringly erroneous as to constitute serious abuse of
discretion, such findings must stand, for this court is not
Whether the actual purchase price was P7.05 Million as found by the expected or required to examine or contrast the oral and
trial court and affirmed by the Court of Appeals, or P3.6 Million as documentary evidence submitted by the parties. (Morales
claimed by the De Castros, is a question of fact and not of law. vs. Court of Appeals, 197 SCRA 391 [1991] citing Santa Ana
Inevitably, this calls for an inquiry into the facts and evidence on vs. Hernandez, 18 SCRA 973 [1966])."
record. This we can not do.
We find no reason to depart from this principle. The trial and
It is not the function of this Court to re-examine the evidence appellate courts are in a much better position to evaluate properly
submitted by the parties, or analyze or weigh the evidence the evidence. Hence, we find no other recourse but to affirm their
again.23 This Court is not the proper venue to consider a factual issue finding on the actual purchase price.1âwphi1.nêt
as it is not a trier of facts. In petitions for review on certiorari as a
mode of appeal under Rule 45, a petitioner can only raise questions Fourth Issue: whether award of moral damages and attorney's fees
of law. Our pronouncement in the case of Cormero vs. Court of is proper
Appeals24 bears reiteration:
The De Castros claim that Artigo failed to prove that he is entitled to
"At the outset, it is evident from the errors assigned that the moral damages and attorney's fees. The De Castros, however, cite no
petition is anchored on a plea to review the factual concrete reason except to say that they are the ones entitled to
conclusion reached by the respondent court. Such task damages since the case was filed to harass and extort money from
however is foreclosed by the rule that in petitions for them.
certiorari as a mode of appeal, like this one, only questions
of law distinctly set forth may be raised. These questions Law and jurisprudence support the award of moral damages and
have been defined as those that do not call for any attorney's fees in favor of Artigo. The award of damages and
examination of the probative value of the evidence attorney's fees is left to the sound discretion of the court, and if such
presented by the parties. (Uniland Resources vs. discretion is well exercised, as in this case, it will not be disturbed on
Development Bank of the Philippines, 200 SCRA 751 [1991] appeal.25 Moral damages may be awarded when in a breach of
citing Goduco vs. Court of appeals, et al., 119 Phil. 531; contract the defendant acted in bad faith, or in wanton disregard of his
Hernandez vs. Court of Appeals, 149 SCRA 67). And when contractual obligation.26 On the other hand, attorney's fees are
this court is asked to go over the proof presented by the awarded in instances where "the defendant acted in gross and
parties, and analyze, assess and weigh them to ascertain if evident bad faith in refusing to satisfy the plaintiff's plainly valid,
the trial court and the appellate court were correct in just and demandable claim."27 There is no reason to disturb the trial
according superior credit to this or that piece of evidence court's finding that "the defendants' lack of good faith and unkind
and eventually, to the totality of the evidence of one party or treatment of the plaintiff in refusing to give his due commission
the other, the court cannot and will not do the same. (Elayda deserve censure." This warrants the award of P25,000.00 in moral
vs. Court of Appeals, 199 SCRA 349 [1991]). Thus, in the damages and P 45,000.00 in attorney's fees. The amounts are, in our
view, fair and reasonable. Having found a buyer for the two lots, clearly established a contract of agency between Constante and
Artigo had already performed his part of the bargain under the Artigo. Therefore, the Court of Appeals decided that Artigo is entitled
contract of agency. The De Castros should have exercised fairness to the 5% commission on the purchase price as provided in the
and good judgment in dealing with Artigo by fulfilling their own contract of agency. The Court of Appeals likewise ruled that Artigo's
part of the bargain - paying Artigo his 5 percent broker's commission complaint is not dismissible for failure to implead as indispensable
parties the other co-owners of the two lots. The Court of Appeals
based on the actual purchase price of the two lots.
explained that it is not necessary to implead the other co-owners
since the action is exclusively based on a contract of agency
WHEREFORE, the petition is denied for lack of merit. The Decision between Artigo and Constante.
of the Court of Appeals dated May 4, 1994 in CA-G.R. CV No. 37996
is AFFIRMED in toto. The Issue

SO ORDERED. WHETHER OR NOT THE COMPLAINT MAY BE DISMISSED FOR


FAILURE TO IMPLEAD INDISPENSABLE PARTIES-IN-INTEREST;
CASE DIGEST:
The Court's Ruling
CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE
CASTRO, petitioners, The De Castros' contentions are devoid of legal basis.
vs.
COURT OF APPEALS and FRANCISCO ARTIGO, respondents.
An indispensable party is one whose interest will be affected by the
court's action in the litigation, and without whom no final
The Antecedent Facts determination of the case can be had. The joinder of indispensable
parties is mandatory and courts cannot proceed without their
Appellants were co-owners of four (4) lots. In a letter, appellee was presence. Whenever it appears to the court in the course of a
authorized by appellants to act as real estate broker in the sale of proceeding that an indispensable party has not been joined, it is the
these properties, five percent (5%) of which will be given to the agent duty of the court to stop the trial and order the inclusion of such
as commission. It was appellee who first found Times Transit party.However, the rule on mandatory joinder of indispensable
Corporation as prospective buyer which desired to buy two (2) lots parties is not applicable to the instant case.
only. Eventually, the sale of lots was consummated. Appellee
received from appellants P48,893.76 as commission. There is no dispute that Constante appointed Artigo in a handwritten
note to sell the properties of the De Castros at a 5 percent
Appellee apparently felt short changed because according to him, his commission. Constante signed the note as owner and as
total commission should be P352,500.00 which is five percent (5%) representative of the other co-owners. Under this note, a contract of
of the agreed price paid by Times Transit Corporation to appellants. agency was clearly constituted between Constante and Artigo.
Hence, he sued to collect the balance of P303,606.24 after having Whether Constante appointed Artigo as agent, in Constante's
received P48,893.76 in advance.1âwphi1.nêt individual or representative capacity, or both, the De Castros cannot
seek the dismissal of the case for failure to implead the other co-
The Court of Appeals found that Constante authorized Artigo to act owners as indispensable parties. The De Castros admit that the
as agent in the sale of two lots. The handwritten authorization letter other co-owners are solidarily liable under the contract of
agency, the solidary liability of the four co-owners, however,
militates against the De Castros' theory that the other co-owners
should be impleaded as indispensable parties.

When the law expressly provides for solidarity of the obligation, as in


the liability of co-principals in a contract of agency, each obligor may
be compelled to pay the entire obligation. The agent may recover the
whole compensation from any one of the co-principals, as in this
case. Indeed, Article 1216 of the Civil Code provides that a creditor
may sue any of the solidary debtors.

Thus, the Court has ruled in Operators Incorporated vs. American


Biscuit Co., Inc.that –"x x x solidarity does not make a solidary
obligor an indispensable party in a suit filed by the creditor.
Article 1216 of the Civil Code says that the creditor `may proceed
against anyone of the solidary debtors or some or all of them
simultaneously'."
[G.R. No. 141463. August 6, 2002] Regina St., Regina Village, Tandang Sora, Quezon City. The other
VICTOR ORQUIOLA and HONORATA ORQUIOLA, petitioners, portions were registered in the name of the heirs of Pedro, heirs of
vs. HON. COURT OF APPEALS, HON. VIVENCIO S. Lising, and other third persons.
BACLIG, Presiding Judge, Regional Trial Court, Branch 77,
Quezon City, THE SHERIFF OF QUEZON CITY and Sometime in 1969, Pura Kalaw Ledesma filed a complaint,
HIS/HER DEPUTIES and PURA KALAW LEDESMA, docketed as Civil Case No. Q-12918, with the Regional Trial Court of
substituted by TANDANG SORA DEVELOPMENT Quezon City against Herminigilda Pedro and Mariano Lising for
CORPORATION, respondents. allegedly encroaching upon Lot 689. During the pendency of the
action, Tandang Sora Development Corporation replaced Pura
DECISION Kalaw Ledesma as plaintiff by virtue of an assignment of Lot 689
made by Ledesma in favor of said corporation. Trial continued for
QUISUMBING, J.: three decades.
On August 21, 1991, the trial court finally adjudged defendants
This petition for review seeks the reversal of the decision[1] of
Pedro and Lising jointly and severally liable for encroaching on
the Court of Appeals dated January 28, 1999 in CA-G.R. SP No.
plaintiffs land and ordered them:
47422, which dismissed the petition to prohibit Judge Vivencio
Baclig of the Regional Trial Court of Quezon City, Branch 77, from
issuing a writ of demolition against petitioners, and the sheriff and (a) to solidarily pay the plaintiff Tandang Sora Dev. Corp. actual
deputy sheriff of the same court from implementing an alias writ of damages in the amount of P20,000 with interest from date of filing of
execution. Also assailed is the resolution[2] of the Court of Appeals the complaint;
dated December 29, 1999 which denied petitioners motion for
reconsideration. (b) to remove all construction, including barbed wires and fences,
illegally constructed by defendants on plaintiffs property at
The facts are as follows: defendants expense;
Pura Kalaw Ledesma was the registered owner of Lot 689,
covered by TCT Nos. 111267 and 111266, in Tandang Sora, Quezon (c) to replace the removed concrete monuments removed by
City. This parcel of land was adjacent to certain portions of Lot 707 defendants, at their own expense;
of the Piedad Estates, namely, Lot 707-A and 707-B, registered in the
name of Herminigilda Pedro under TCT Nos. 16951 and 16952, (d) to pay attorneys fees in the amount of FIVE THOUSAND PESOS
respectively. On October 29, 1964, Herminigilda sold Lot 707-A and (P5,000.00) with interest computed from the date of filing of the
707-B to Mariano Lising who then registered both lots and Lot 707-C complaint;
in the name of M.B. Lising Realty and subdivided them into smaller
lots. (e) to relocate the boundaries to conform with the Commissioners
Report, particularly, Annexes A and B thereof, at the expense of the
Certain portions of the subdivided lots were sold to third
defendants.[3]
persons including herein petitioners, spouses Victor and Honorata
Orquiola, who purchased a portion of Lot 707-A-2, Lot 5, Block 1 of
the subdivision plan (LRC), Psd-42965. The parcel is now #33 Doa
As a result, in February 1998, the Deputy Sheriff of Quezon City for a restraining order and preliminary injunction on April 17,
directed petitioners, through an alias writ of execution, to remove the 1998.[5] Petitioners alleged that they bought the subject parcel of land
house they constructed on the land they were occupying. in good faith and for value, hence, they were parties in interest. Since
they were not impleaded in Civil Case No. Q-12918, the writ of
On April 2, 1998, petitioners received a Special Order dated
demolition issued in connection therewith cannot be enforced
March 30, 1998, from the trial court stating as follows:
against them because to do so would amount to deprivation of
property without due process of law.
Before the Court for resolution is the Ex-Parte Motion For The
Issuance of A Writ of Demolition, filed by plaintiff, through counsel, The Court of Appeals dismissed the petition on January 28,
praying for the issuance of an Order directing the Deputy Sheriff to 1999. It held that as buyers and successors-in-interest of Mariano
cause the removal and/or demolition of the structures on the Lising, petitioners were considered privies who derived their rights
plaintiffs property constructed by defendants and/or the present from Lising by virtue of the sale and could be reached by the
occupants. The defendants-heirs of Herminigilda Pedro filed their execution order in Civil Case No. Q-12918. Thus, for lack of merit,
comment on the said Motion. the petition was ordered dismissed.[6]
Petitioners motion for reconsideration was denied. Hence, this
Considering that the decision rendered in the instant case had petition, where petitioners aver that:
become final and executory, the Court, in its Order of November 14,
1997, directed the issuance of an alias writ of execution for the I.
enforcement of the said decision. However, despite the service of the
said writ to all the defendants and the present occupants of the THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
subject property, they failed to comply therewith, as per the Partial THAT THE DECISION IN CIVIL CASE NO. Q-12918 CAN ALSO BE
Sheriffs Return, dated February 9, 1998, issued by the Deputy Sheriff ENFORCED AGAINST THE PETITIONERS EVEN IF THEY WERE
of this branch of the Court. Thus, there is now a need to demolish the NOT IMPLEADED AS PARTIES THERETO.
structures in order to implement the said decision.
II.
WHEREFORE, the defendants are hereby directed to remove, at their
expense, all constructions, including barbed wires and fences, which THE HONORABLE COURT OF APPEALS ERRED IN NOT
defendants constructed on plaintiffs property, within fifteen (15) UPHOLDING PETITIONERS TITLE DESPITE THEIR BEING
days from notice of this Order; otherwise, this Court will issue a writ BUILDER IN GOOD FAITH AND INNOCENT PURCHASER AND
of demolition against them. FOR VALUE.

SO ORDERED.[4] III.

To prohibit Judge Vivencio Baclig of the Regional Trial Court of PETITIONERS ARE ENTITLED TO INJUNCTIVE RELIEF
Quezon City from issuing a writ of demolition and the Quezon City CONSIDERING THAT THEY STAND TO SUFFER GRAVE AND
sheriff from implementing the alias writ of execution, petitioners IRREPARABLE INJURY IF ALIAS WRIT OF EXECUTION AND
filed with the Court of Appeals a petition for prohibition with prayer THE SPECIAL ORDER ISSUED BY THE COURT A QUO IN CIVIL
CASE NO. Q-12918 FOR THE DEMOLITION OF ALL THE San Pedro y Esteban. The latter held the land by virtue of a Titulo de
STRUCTURES ON THE DISPUTED PROPERTY WERE ENFORCED Composicion Con El Estado Num. 4136, dated April 29, 1894. In
AGAINST THE PETITIONERS WHO WERE NOT EVEN GIVEN opposing the execution, Medina argued that the trial court did not
THEIR DAY IN COURT.[7] acquire jurisdiction over her, claiming that she was not a party in
Civil Case No. C-120, thus, she could not be considered as a person
For our resolution are the following issues: (1) whether claiming under Ramos and Mangahas.
the alias writ of execution may be enforced against petitioners; and
When Medina reached this Court, we held that the decision in
(2) whether petitioners were innocent purchasers for value and
Civil Case No. C-120, which had long become final and executory,
builders in good faith.
could be enforced against petitioner even though she was not a party
On the first issue, petitioners claim that the alias writ of thereto. We found that the houses on the subject lot were formerly
execution cannot be enforced against them. They argue that the owned by Mangahas and Ramos who sold them to spouses de
appellate court erred when it relied heavily on our ruling in Vda. de Guzman, who in turn sold them to Medina. Under the
Medina vs. Cruz[8] in holding that petitioners are successors-in- circumstances, petitioner was privy to the two judgment debtors
interest of Mariano Lising, and as such, they can be reached by the Mangahas and Ramos, and thus Medina could be reached by the
order of execution in Civil Case No. Q-12918 even though they were order of execution and writ of demolition issued against the two. As
not impleaded as parties thereto. Petitioners submit that Medina is to the lot under dispute, we sustained Magbanuas ownership over it,
not applicable in this case because the circumstances therein are she being the holder of a Torrens title. We declared that a Torrens
different from the circumstances in the present case. title is generally conclusive evidence of ownership of the land
referred to therein, and a strong presumption exists that a Torrens
In Medina, the property in dispute was registered under Land title was regularly issued and valid. A Torrens title is
Registration Act No. 496 in 1916 and Original Certificate of Title No. incontrovertible against any informacion possessoria, or other title
868 was issued in the name of Philippine Realty Corporation existing prior to the issuance thereof not annotated on the Torrens
(PRC). In 1949, Benedicta Mangahas and Francisco Ramos occupied title. Moreover, persons dealing with property covered by a Torrens
and built houses on the lot without the PRCs consent. In 1959, PRC certificate of title are not required to go beyond what appears on its
sold the lot to Remedios Magbanua.Mangahas and Ramos opposed face.
and instituted Civil Case No. C-120 to annul the sale and to compel
PRC to execute a contract of sale in their favor. The trial court Medina markedly differs from the present case on major
dismissed the complaint and ordered Mangahas and Ramos to points. First, the petitioner in Medina acquired the right over the
vacate the lot and surrender possession thereof to Magbanua. The houses and lot subject of the dispute after the original action was
judgment became final and executory. When Magbanua had paid for commenced and became final and executory. In the present case,
the land in full, PRC executed a deed of absolute sale in her favor petitioners acquired the lot before the commencement of Civil Case
and a new title was consequently issued in her name. Magbanua No. Q-12918. Second, the right over the disputed land of the
then sought the execution of the judgment in Civil Case No. C- predecessors-in-interest of the petitioner in Medina was based on a
120.This was opposed by petitioner Medina who alleged that she title of doubtful authenticity, allegedly a Titulo de Composicion Con El
owned the houses and lot subject of the dispute. She said that she Estado issued by the Spanish Government in favor of one Don
bought the houses from spouses Ricardo and Eufrocinia de Guzman, Mariano San Pedro y Esteban, while the right over the land of the
while she purchased the lot from the heirs of the late Don Mariano predecessors-in-interest of herein petitioners is based on a fully
recognized Torrens title.Third, petitioners in this case acquired the petitioners acquired the land subject of this dispute in good faith and
registered title in their own names, while the petitioner for value.
in Medina merely relied on the title of her predecessor-in-interest and
The final question now is: could we consider petitioners
tax declarations to prove her alleged ownership of the land.
builders in good faith? We note that this is the first time that
We must stress that where a case like the present one involves a petitioners have raised this issue. As a general rule, this could not be
sale of a parcel of land under the Torrens system, the applicable rule done. Fair play, justice, and due process dictate that parties should
is that a person dealing with the registered property need not go not raise for the first time on appeal issues that they could have
beyond the certificate of title; he can rely solely on the title and he is raised but never did during trial and even during proceedings before
charged with notice only of such burdens and claims as are the Court of Appeals.[13] Nevertheless, we deem it proper that this
annotated on the title.[9] It is our view here that the petitioners, issue be resolved now, to avoid circuitous litigation and further
spouses Victor and Honorata Orquiola, are fully entitled to the legal delay in the disposition of this case. On this score, we find that
protection of their lot by the Torrens system, unlike the petitioner in petitioners are indeed builders in good faith.
the Medina case who merely relied on a mere Titulo de Composicion.
A builder in good faith is one who builds with the belief that the
Coming now to the second issue, were petitioners purchasers in land he is building on is his, and is ignorant of any defect or flaw in
good faith and for value? A buyer in good faith is one who buys the his title.[14] As earlier discussed, petitioner spouses acquired the land
property of another without notice that some other person has a in question without knowledge of any defect in the title of Mariano
right to or interest in such property. He is a buyer for value if he Lising. Shortly afterwards, they built their conjugal home on said
pays a full and fair price at the time of the purchase or before he has land. It was only in 1998, when the sheriff of Quezon City tried to
notice of the claim or interest of some other person in the execute the judgment in Civil Case No. Q-12918, that they had notice
property.[10] The determination of whether one is a buyer in good of private respondents adverse claim. The institution of Civil Case
faith is a factual issue which generally is outside the province of this No. Q-12918 cannot serve as notice of such adverse claim to
Court to determine in a petition for review. An exception is when the petitioners since they were not impleaded therein as parties.
Court of Appeals failed to take into account certain relevant facts
As builders in good faith and innocent purchasers for value,
which, if properly considered, would justify a different
petitioners have rights over the subject property and hence they are
conclusion.[11] The instant case is covered by this exception to the
proper parties in interest in any case thereon.[15]Consequently,
general rule. As found by the Court of Appeals and not refuted by
private respondents should have impleaded them in Civil Case No.
private respondent, petitioners purchased the subject land in 1964
Q-12918. Since they failed to do so, petitioners cannot be reached by
from Mariano Lising.[12]Civil Case No. Q-12918 was commenced
the decision in said case. No man shall be affected by any proceeding
sometime in 1969. The Court of Appeals overlooked the fact that the
to which he is a stranger, and strangers to a case are not bound by
purchase of the land took place prior to the institution of Civil Case
any judgment rendered by the court. In the same manner, a writ of
No. Q-12918. In other words, the sale to petitioners was made before
execution can be issued only against a party and not against one who
Pura Kalaw Ledesma claimed the lot. Petitioners could reasonably
did not have his day in court. Only real parties in interest in an
rely on Mariano Lisings Certificate of Title which at the time of
action are bound by the judgment therein and by writs of execution
purchase was still free from any third party claim. Hence,
and demolition issued pursuant thereto.[16] In our view, the spouses
considering the circumstances of this case, we conclude that
Victor and Honorata Orquiola have valid and meritorious cause to
resist the demolition of their house on their own titled lot, which is
tantamount to a deprivation of property without due process of law.
WHEREFORE, the petition is GRANTED. The decision of the
Court of Appeals dated January 28, 1999, and its resolution dated
December 29, 1999, in CA-G.R. SP No. 47422, are REVERSED and
SET ASIDE. Respondents are hereby enjoined from enforcing the
decision in Civil Case No. Q-12918 through a writ of execution and
order of demolition issued against petitioners. Costs against private
respondent.
SO ORDERED.
G.R. No. 135796 October 3, 2002 Malakas Street, Diliman, Quezon City. For brevity, she is hereafter
referred to as "Oliver One."
CHINA BANKING CORPORATION, petitioner,
vs. On November 18, 1996, respondent claiming that she is Mercedes M.
MERCEDES M. OLIVER, respondent. Oliver with postal office address at No. 40 J.P. Rizal St., San Pedro,
Laguna, filed an action for annulment of mortgage and cancellation
RESOLUTION of title with damages against Chinabank, Register of Deeds Atty.
Mila G. Flores, and Deputy Register of Deeds Atty. Ferdinand P.
QUISUMBING, J.: Ignacio. Respondent, whom we shall call as "Oliver Two," claimed
that she was the registered and lawful owner of the land subject of
This petition for review1 seeks the reversal of the decision dated June the real estate mortgage; that the owner’s duplicate copy of the title
1, 1998, of the Court of Appeals in CA-G.R. SP No. 43836, dismissing had always been in her possession; and that she did not apply for a
China Banking Corporation’s petition for certiorari to annul the two loan or surrender her title to Chinabank.2 She prayed that: (1) the
orders of the Regional Trial Court of Muntinlupa City, Branch 276, owner’s duplicate copy surrendered to Chinabank as well as the
which earlier denied petitioner’s motion to dismiss and then original title with the Registry of Deeds be cancelled; (2) the
declared the bank in default in Civil Case No. 96-219. The appellate mortgage be declared null and void; and (3) the Registry of Deeds be
court also denied petitioner’s motion for reconsideration in a ordered to issue a new and clean title in her name. 3
resolution dated September 30, 1998.
On January 31, 1997, Chinabank moved to dismiss the case for lack
The facts of this case are culled from the records. of cause of action and non-joinder of an indispensable party, the
mortgagor.
In August 1995, Pangan Lim, Jr. and a certain Mercedes M. Oliver
opened a joint account in China Banking Corporation (hereinafter On March 13, 1997, Judge Norma C. Perello issued an order denying
Chinabank) at EDSA Balintawak Branch. Lim introduced Oliver to the motion to dismiss, stating that:
the bank’s branch manager as his partner in the rice and palay
trading business. Thereafter, Lim and Oliver applied for a P17 A reading of the COMPLAINT which of course is hypothetically
million loan, offering as collateral a 7,782 square meter lot located in admitted, will show that a valid judgment can be rendered against
Tunasan, Muntinlupa and covered by TCT No. S-50195 in the name defendant. Plaintiff having sufficiently averred that defendants
of Oliver. The bank approved the application. On November 17, negligently failed to ascertain the genuineness or not (sic) of the title
1995, Lim and Oliver executed in favor of Chinabank a promissory of the land mortgaged to it upon the claim of ownership by the
note for P16,650,000, as well as a Real Estate Mortgage on the mortgagors. Furthermore, the matters alleged in the MOTION TO
property. The mortgage was duly registered and annotated on the DISMISS are all evidentiary which Defendants may substantiate at
original title under the custody of the Registry of Deeds of Makati the appointed hours.4
and on the owner’s duplicate copy in the bank’s possession. The
mortgage document showed Mercedes Oliver’s address to be No. 95 On April 7, 1997, Chinabank filed with the Court of Appeals a
petition for certiorari with prayer for the issuance of a writ of
preliminary injunction and/or restraining order to enjoin
enforcement of the March 13, 1997 order and further action on the Appeals interrupted the proceedings before the trial court, thereby
case. The Court of Appeals directed respondent Oliver Two to file staying the period for filing the answer.
her comment and deferred action on the prayer for the issuance of
the preliminary injunction pending submission of the comment. On June 1, 1998, the Court of Appeals promulgated the assailed
decision, finding no grave abuse of discretion committed by the trial
On June 30, 1997, respondent Oliver Two moved to declare judge in ruling that the Rules of Court provided the manner of
petitioner Chinabank in default. She pointed out that since petitioner impleading parties to a case and in suggesting that petitioner file an
received the order denying the motion to dismiss on March 21, 1997, appropriate action to bring the mortgagor within the court’s
it had only until April 7, 1997 to file its answer to the complaint. jurisdiction. The appellate court said that Rule 6, Section 11 of the
However, until the filing of the motion for default, no answer had Rules of Court allows petitioner to file a third-party complaint
been filed yet. The trial court granted the motion and declared against the mortgagor. As to the judgment by default, the Court of
petitioner in default in its order dated July 17, 1997, thus: Appeals said that an order denying the motion to dismiss is
interlocutory and may not be questioned through a special civil
Acting on the Motion To Declare Defendant Bank in Default, and action for certiorari. The defendant must proceed with the case and
finding the same to be legally tenable is granted. raise the issues in his motion to dismiss when he appeals to a higher
court. In this case, petitioner Chinabank should have filed its answer
Accordingly, the Defendant Bank is declared in default as summons when it received the March 13, 1997 order denying the motion to
was served on It as early as December 16, 1996, but until date they dismiss. The special civil action for certiorari with the Court of
have not filed an Answer nor any responsive pleading and instead, It Appeals did not interrupt the period to file an answer, there being
filed a Motion to Dismiss, which was denied by this Court on March no temporary restraining order or writ of preliminary injunction
13, 1997. issued.

The filing of a CERTIORARI to question the Orders by this Court did The Court of Appeals denied petitioner’s motion for reconsideration.
not toll the period for Defendants to answer the complaint. Hence, this petition anchored on the following grounds:

Therefore, the reglementary period for the filing of responsive I


pleading has long expired.
SEC. 11, RULE 3, OF THE 1997 RULES OF CIVIL PROCEDURE
Let the case be submitted for Decision based on the complaint. DOES NOT APPLY WHERE THE PARTY WHO WAS NOT
IMPLEADED IS AN INDISPENSABLE PARTY; INSTEAD,
It is SO ORDERED.5 SECTION 7, RULE 3 THEREOF, APPLIES.

Consequently, petitioner Chinabank filed a supplemental petition on II


August 11, 1997, seeking annulment of the July 17, 1997 order. It
argued that the special civil action for certiorari filed in the Court of THE MORTGAGOR MERCEDES M. OLIVER IS AN
INDISPENSABLE PARTY UNDER SECTION 7, RULE 3, OF THE
1997 RULES OF CIVIL PROCEDURE, AND MUST THEREFORE THE CASE OF CHURCH OF CHRIST VS. VALLESPIN, G.R. NO.
INDISPENSABLY BE JOINED AS A PARTY-DEFENDANT. 53726, AUGUST 15, 1988, DOES NOT APPLY INASMUCH AS THE
USE OF TERM "INDISPENSABLE PARTY" IN SAID CASE WAS
III LOOSELY USED AND IN TRUTH WAS INTENDED TO MEAN
"PARTIES-IN-INTEREST" AS CONTEMPLATED BY SECTION 2,
RESPONDENT’S CAUSE OF ACTION IS ANCHORED ON HER RULE 3 OF THE RULES OF COURT.
CLAIM AS THE REGISTERED AND LAWFUL OWNER OF THE
PROPERTY IN QUESTION AND THAT HER OWNER’S VII
DUPLICATE COPY OF THE TITLE (ANNEX "A") IS THE TRUE
AND GENUINE TITLE. THUS, THE ACTION BEFORE THE THE HONORABLE COURT OF APPEALS GRAVELY ERRED
HONORABLE COURT-A-QUO IS A LAND DISPUTE BETWEEN WHEN IT SANCTIONED THE TRIAL COURT’S ERROR IN
TWO (2) PERSONS CLAIMING OWNERSHIP. DECLARING DEFENDANT CBC IN DEFAULT FOR FAILURE TO
FILE AN ANSWER, NOTWITHSTANDING THE SETTLED
IV DOCTRINE THAT WHERE AN INDISPENSABLE PARTY IS NOT
IN COURT, THE TRIAL COURT SHOULD NOT PROCEED BUT
THE ANNULMENT OF THE MORTGAGE AND THE INSTEAD SHOULD DISMISS THE CASE.
CANCELLATION OF ANNEXES "B" AND "C" AS PRAYED FOR IN
THE COMPLAINT IN CIVIL CASE NO. 96-219 ARE VIII
INEXTRICABLY INTERTWINED WITH THE ISSUE OF
OWNERSHIP. HENCE, THE LATTER MUST FIRST BE RESOLVED THE DISMISSAL/WITHDRAWAL OF THE COMPLAINT
TO DETERMINE THE FORMER. AGAINST DEFENDANTS REGISTER AND DEPUTY REGISTER OF
DEEDS NECESSARILY GIVE RISE TO, AND BOLSTERS, THE
V CONCLUSION THAT THE OWNER’S DUPLICATE COPY OF TCT
NO. S-50195 OF MORTGAGOR MERCEDES M. OLIVER IS THE
THE OWNER’S DUPLICATE COPY OF THE TITLE OF GENUINE AND AUTHENTIC COPY.6
MORTGAGOR MERCEDES M. OLIVER OWNER’S DUPLICATE
COPY CANNOT, IN HER ABSENCE, BE DECLARED NULL AND For a clearer discussion of the issues in this controversy, we may
VOID. CONSEQUENTLY, INASMUCH AS THE MORTGAGE IN state them as follows:
FAVOR OF PETITIONER IS DEPENDENT UPON THE OWNER’S
DUPLICATE COPY OF THE MORTGAGOR, THE COMPLAINT IN 1. Is the mortgagor who goes by the name of Mercedes M.
CIVIL CASE NO. 96-219 CAN NOT RESOLVE THE Oliver, herein called Oliver One, an indispensable party in
CONTROVERSY WITH FINALITY. Civil Case No. 96219?

VI 2. Should Section 7 Rule 3 of the 1997 Rules of Civil


Procedure7 apply in this case?
3. Did the Court of Appeals err when it sustained the trial One’s absence from the case does not hamper the trial court in
court’s declaration that petitioner was in default? resolving the dispute between respondent Oliver Two and
petitioner. A perusal of Oliver Two’s allegations in the complaint
4. Were the withdrawal and consequent dismissal of the below shows that it was for annulment of mortgage due to
complaint against the Registry of Deeds’ officials indicative petitioner’s negligence in not determining the actual ownership of
of the authenticity of mortgagor Oliver One’s copy of TCT the property, resulting in the mortgage’s annotation on TCT No. S-
No. S-50195? 50195 in the Registry of Deeds’ custody. To support said allegations,
respondent Oliver Two had to prove (1) that she is the real Mercedes
Petitioner Chinabank alleges that there are two owner’s duplicate M. Oliver referred to in the TCT, and (2) that she is not the same
copies of TCT No. S-50195 involved in this case and two persons person using that name who entered into a deed of mortgage with
claiming to be the real "MERCEDES MARAVILLA OLIVER." One is the petitioner. This, respondent Oliver Two can do in her complaint
the mortgagor, Oliver One. The other is the respondent, Oliver Two. without necessarily impleading the mortgagor Oliver One. Hence,
Respondent’s complaint before the trial court was one for Oliver One is not an indispensable party in the case filed by Oliver
cancellation of the transfer certificate of title in petitioner’s Two.
possession (Annex B). According to petitioner, the issue below is the
genuineness of the titles, which is intertwined with the issue of In Noceda vs. Court of Appeals, et al., 313 SCRA 504 (1999), we held
ownership. This being the case, said the petitioner, the mortgagor that a party is not indispensable to the suit if his interest in the
Oliver One must necessarily be impleaded for she is the registered controversy or subject matter is distinct and divisible from the
owner under Annex "B." Petitioner argues that mortgagor Oliver interest of the other parties and will not necessarily be prejudiced by
One is in a better position to defend her title. She stands to suffer if it a judgment which does complete justice to the parties in court. In
is declared fake. Further, petitioner claims that the validity and this case, Chinabank has interest in the loan which, however, is
enforceability of the mortgage entirely depends on the validity and distinct and divisible from the mortgagor’s interest, which involves
authenticity of Annex "B." The mortgage cannot be declared a nullity the land used as collateral for the loan.
without the trial court declaring Annex "B" a nullity. Hence,
mortgagor Oliver One’s participation in the suit is indispensable, Further, a declaration of the mortgage’s nullity in this case will not
according to petitioner. In brief, what petitioner Chinabank is saying necessarily prejudice mortgagor Oliver One. The bank still needs to
is that it was indispensable for respondent Oliver Two to implead initiate proceedings to go after the mortgagor, who in turn can raise
mortgagor Oliver One in the case before the trial court. Failing to do other defenses pertinent to the two of them. A party is also not
that, the complaint of herein respondent Oliver Two should have indispensable if his presence would merely permit complete relief
been dismissed. between him and those already parties to the action, or will simply
avoid multiple litigation, as in the case of Chinabank and mortgagor
Petitioner’s contention is far from tenable. An indispensable party is Oliver One.10 The latter’s participation in this case will simply enable
a party in interest, without whom no final determination can be had petitioner Chinabank to make its claim against her in this case, and
of an action.8 It is true that mortgagor Oliver One is a party in hence, avoid the institution of another action. Thus, it was the bank
interest, for she will be affected by the outcome of the case. She who should have filed a third-party complaint or other action versus
stands to be benefited in case the mortgage is declared valid, or the mortgagor Oliver One.
injured in case her title is declared fake.9 However, mortgagor Oliver
As to the second issue, since mortgagor Oliver One is not an 1998 of the Court of Appeals in CA-G.R. SP No. 43836 are
indispensable party, Section 7, Rule 3 of the 1997 Rules of Civil AFFIRMED. Costs against petitioner.
Procedure, which requires compulsory joinder of indispensable
parties in a case, does not apply. Instead, it is Section 11, Rule 3, that SO ORDERED.
applies.11 Non-joinder of parties is not a ground for dismissal of an
action. Parties may be added by order of the court, either on its own CASE DIGEST
initiative or on motion of the parties.12 Hence, the Court of Appeals
committed no error when it found no abuse of discretion on the part CHINA BANKING CORPORATION, petitioner, vs. MERCEDES M.
of the trial court for denying Chinabank’s motion to dismiss and,
OLIVER, respondent.
instead, suggested that petitioner file an appropriate action against
mortgagor Oliver One. A person who is not a party to an action may
be impleaded by the defendant either on the basis of liability to
himself or on the ground of direct liability to the plaintiff. 13 FACTS
In August 1995, Pangan Lim, Jr. and a certain Mercedes M.
Now, the third issue, did the Court of Appeals err when it sustained Oliver opened a joint account in China Banking Corporation
the trial court’s ruling that petitioner Chinabank was in default? As (hereinafter Chinabank) at EDSA Balintawak Branch. Lim introduced
found by the Court of Appeals, petitioner did not file its answer, Oliver to the banks branch manager as his partner in the rice
although it received the March 13, 1997 order denying the motion to and palay trading business. Thereafter, Lim and Oliver applied for a
dismiss. Instead, petitioner filed a petition for certiorari under Rule P17 million loan, offering as collateral a 7,782 square meter lot
65 of the Rules of Court. Said petition, however, does not interrupt located in Tunasan, Muntinlupa and covered by TCT No. S-50195 in
the course of the principal case unless a temporary restraining order the name of Oliver. The bank approved the application. On
or writ of preliminary injunction is issued.14 No such order or writ November 17, 1995, Lim and Oliver executed in favor of Chinabank
a promissory note for P16,650,000, as well as a Real Estate
was issued in this case. Hence, Chinabank as defendant below was
Mortgage on the property. The mortgage was duly registered and
properly declared in default by the trial court, after the 15-day annotated on the original title under the custody of the Registry of
period to file its answer or other responsive pleading lapsed. Deeds of Makati and on the owners duplicate copy in the banks
possession. The mortgage document showed Mercedes Olivers
Lastly, were the withdrawal and consequent dismissal of the address to be No. 95 Malakas Street, Diliman, Quezon City. For
complaint against officials of the Registry of Deeds conclusive of the brevity, she is hereafter referred to as Oliver One.
authenticity of mortgagor Oliver One’s copy of TCT No. S-50195?
On November 18, 1996, respondent claiming that she is
This is a question of fact, which is not a proper subject for review in
Mercedes M. Oliver with postal office address at No. 40 J.P. Rizal
this petition. Here, we are limited only to questions of law,15 as a St., San Pedro, Laguna, filed an action for annulment of mortgage
general rule. Petitioner failed to show that this case falls under any and cancellation of title with damages against Chinabank, Register of
of the exceptions to this rule. We need not tarry on this issue now. Deeds Atty. Mila G. Flores, and Deputy Register of Deeds Atty.
Ferdinand P. Ignacio. Respondent, whom we shall call as Oliver
WHEREFORE, the petition is DENIED for lack of merit. The assailed Two, claimed that she was the registered and lawful owner of the
decision dated June 1, 1998 and the resolution dated September 30, land subject of the real estate mortgage; that the owners duplicate
copy of the title had always been in her possession; and that she did
[2]
not apply for a loan or surrender her title to Chinabank. She prayed Petitioners contention is far from tenable. An indispensable
that: (1) the owners duplicate copy surrendered to Chinabank as well party is a party in interest, without whom no final determination can
[8]
as the original title with the Registry of Deeds be cancelled; (2) the be had of an action. It is true that mortgagor Oliver One is a party in
mortgage be declared null and void; and (3) the Registry of Deeds interest, for she will be affected by the outcome of the case. She
[3]
be ordered to issue a new and clean title in her name. stands to be benefited in case the mortgage is declared valid, or
[9]
injured in case her title is declared fake. However, mortgagor Oliver
On January 31, 1997, Chinabank moved to dismiss the case for Ones absence from the case does not hamper the trial court in
lack of cause of action and non-joinder of an indispensable party, the resolving the dispute between respondent Oliver Two and
mortgagor. petitioner. A perusal of Oliver Twos allegations in the complaint
ISSUE below shows that it was for annulment of mortgage due to petitioners
negligence in not determining the actual ownership of the property,
Whether or not the mortgagor who goes by the name of resulting in the mortgages annotation on TCT No. S-50195 in the
Mercedes M. Oliver, herein called Oliver One, an indispensable Registry of Deeds custody. To support said allegations, respondent
party? Oliver Two had to prove (1) that she is the real Mercedes M. Oliver
referred to in the TCT, and (2) that she is not the same person using
HELD
that name who entered into a deed of mortgage with the
YES.Petitioner Chinabank alleges that there are two owners petitioner.This, respondent Oliver Two can do in her complaint
duplicate copies of TCT No. S-50195 involved in this case and two without necessarily impleading the mortgagor Oliver One.Hence,
persons claiming to be the real MERCEDES MARAVILLA Oliver One is not an indispensable party in the case filed by Oliver
OLIVER. One is the mortgagor, Oliver One. The other is the Two.
respondent, Oliver Two. Respondents complaint before the trial court
was one for cancellation of the transfer certificate of title in
petitioners possession (Annex B). According to petitioner, the issue
below is the genuineness of the titles, which is intertwined with the
issue of ownership. This being the case, said the petitioner, the
mortgagor Oliver One must necessarily be impleaded for she is the
registered owner under Annex B.Petitioner argues that mortgagor
Oliver One is in a better position to defend her title. She stands to
suffer if it is declared fake. Further, petitioner claims that the validity
and enforceability of the mortgage entirely depends on the validity
and authenticity of Annex B. The mortgage cannot be declared a
nullity without the trial court declaring Annex B a nullity. Hence,
mortgagor Oliver Ones participation in the suit is indispensable,
according to petitioner. In brief, what petitioner Chinabank is saying
is that it was indispensable for respondent Oliver Two to implead
mortgagor Oliver One in the case before the trial court.Failing to do
that, the complaint of herein respondent Oliver Two should have
been dismissed.
[G.R. No. 166302. July 28, 2005] However, either in October, 1999 or on February 9, 2000, private
LOTTE PHIL. CO., INC., petitioner, vs. ERLINDA DELA CRUZ, respondent dispensed with their services allegedly due to the
LEONOR MAMAUAG, LOURDES CAUBA, JOSEPHINE expiration/termination of the service contract by respondent with 7J.
DOMANAIS, ARLENE CAGAYAT, AMELITA YAM, They were either told hwag muna kayong pumasok at tatawagan na lang
VIVIAN DOMARAIS, MARILYN ANTALAN, kung may gawa; or were asked to wait pag magrereport sila sa trabaho.
CHRISTOPHER RAMIREZ, ARNOLD SAN PEDRO, Unfortunately, petitioners were never called back to work again.
MARISSA SAN PEDRO, LORELI JIMENEZ, JEFFREY
BUENO, CHRISTOPHER CAGAYAT, GERARD Aggrieved, petitioners lodged a labor complaint against both private
CABILES, JOAN ENRIQUEZ, JOSEPH DE LA CRUZ, respondent Lotte and 7J, for illegal dismissal, regularization,
NELLY CLERIGO, DULCE NAVARETTE, ROWENA
payment of corresponding backwages and related employment
BELLO, DANIEL RAMIREZ, AILEEN BAUTISTA and
benefits, 13thmonth pay, service incentive leave, moral and
BALTAZAR FERRERA, respondents.
exemplary damages and attorneys fees based on total judgment
award.[4]
DECISION
YNARES-SANTIAGO, J.: On February 28, 2001, Labor Arbiter Cresencio G. Ramos, Jr.,
rendered judgment[5] declaring 7J as employer of respondents.[6] The
This petition for review on certiorari[1] assails the July 9, 2004 arbiter also found 7J guilty of illegal dismissal[7] and ordered to
decision[2] of the Court of Appeals in CA-G.R. SP No. 72732 and its reinstate respondents,[8] pay P2,374,710.00 as backwages, P713,648.00
November 26, 2004 resolution[3] denying reconsideration thereof. as 13th month pay and P117,000.00 as service incentive leave pay. [9]

The established facts of this case are as follows: Respondents appealed to the National Labor Relations
Commission (NLRC) praying that Lotte be declared as their direct
Private respondent (petitioner herein) Lotte Phils., Inc. (Lotte) is a employer because 7J is merely a labor-only contractor. In its
domestic corporation. Petitioners (respondents herein) are among decision[10] dated April 24, 2002, the NLRC found no cogent reason
those who were hired and assigned to the confectionery facility to disturb the findings of the labor arbiter and affirmed its ruling
operated by private respondent. that 7J is the employer of respondents and solely liable for their
claims.
On December 14, 1995 and yearly thereafter until the year 2000 7J Respondents motion for reconsideration was denied by the
Maintenance and Janitorial Services (7J) entered into a contract with NLRC in a resolution dated June 18, 2002.
private respondent to provide manpower for needed maintenance,
utility, janitorial and other services to the latter. In compliance with Undaunted, they filed a petition for certiorari in the Court of
the terms and conditions of the service contract, and to Appeals[11] against the NLRC and Lotte, insisting that their employer
accommodate the needs of private respondent for is Lotte and not 7J.
personnel/workers to do and perform piece works, petitioners, Lotte, however, denied that respondents were its employees. It
among others, were hired and assigned to private respondent as prayed that the petition be dismissed for failure to implead 7J who is
repackers or sealers. a party interested in sustaining the proceedings in court, pursuant to
Section 3, Rule 46 of the Revised Rules of Civil Procedure.
On July 9, 2004, the Court of Appeals reversed and set aside the the court null and void for want of authority to act, not only as to the
rulings of the Labor Arbiter and the NLRC. In its decision, the Court absent parties but even as to those present.[20]
of Appeals declared Lotte as the real employer of respondents and
In the case at bar, 7J is an indispensable party. It is a party in
that 7J who engaged in labor-only contracting was merely the agent
interest because it will be affected by the outcome of the case. The
of Lotte. Respondents who performed activities directly related to
Labor Arbiter and the NLRC found 7J to be solely liable as the
Lottes business were its regular employees under Art. 280 of the
employer of respondents. The Court of Appeals however rendered
Labor Code. As such, they must be accorded security of tenure and
Lotte jointly and severally liable with 7J who was not impleaded by
their services terminated only on just and authorized causes.
holding that the former is the real employer of respondents. Plainly,
Lottes motion for reconsideration was denied, hence this its decision directly affected 7J.
petition, on the following issues:
In Domingo v. Scheer,[21] we held that the non-joinder of
indispensable parties is not a ground for the dismissal of an
8. Whether or not petitioner herein had the burden of proof to
action[22] and the remedy is to implead the non-party claimed to be
establish before the proceedings in the Court of Appeals that 7J
indispensable.[23] Parties may be added by order of the court on
Maintenance and Janitorial Service was not a labor-only contractor.
motion of the party or on its own initiative at any stage of the action
and/or such times as are just. If the petitioner refuses to implead an
8.1. Whether or not the Petition in CA-G.R. SP No. 72732 is indispensable party despite the order of the court, the latter may
dismissible for failure to comply with Section 3, Rule 46 in relation to dismiss the complaint/petition for the petitioner/plaintiffs failure to
Section 5, Rule 65 of the 1997 Rules of Civil Procedure.[12] comply therefor.[24]

We first resolve the procedural issue raised by petitioner. Lotte Although 7J was a co-party in the case before the Labor Arbiter
asserts that 7J is an indispensable party and should have been and the NLRC, respondents failed to include it in their petition
impleaded in respondents petition in the Court of Appeals. It claims for certiorari in the Court of Appeals. Hence, the Court of Appeals
that the petition before the Court of Appeals was dismissible for did not acquire jurisdiction over 7J. No final ruling on this matter
failure to comply with Section 3,[13] Rule 46 in relation to Section can be had without impleading 7J, whose inclusion is necessary for
5[14] of Rule 65 of the Revised Rules of Civil Procedure. the effective and complete resolution of the case and in order to
accord all parties with due process and fair play.
Petitioners contention is tenable.
In light of the foregoing, the Court sees no need to discuss the
An indispensable party is a party in interest without whom no second issue raised by petitioner.
final determination can be had of an action, [15] and who shall be
joined either as plaintiffs or defendants.[16] The joinder of WHEREFORE, the July 9, 2004 decision of the Court of Appeals
indispensable parties is mandatory.[17] The presence of indispensable in CA-G.R. SP No. 72732 and the November 26, 2004 resolution, are
parties is necessary to vest the court with jurisdiction, which is the SET ASIDE. Let the case be REMANDED to the Court of Appeals to
authority to hear and determine a cause, the right to act in a include 7J Maintenance and Janitorial Services as an indispensable
case.[18] Thus, without the presence of indispensable parties to a suit party to the case for further proceedings.
or proceeding, judgment of a court cannot attain real finality. [19] The SO ORDERED.
absence of an indispensable party renders all subsequent actions of
G.R. No. 190823 April 4, 2011 Sometime in 1994, respondents learned that the alleged problem
over the land had been settled and that petitioner had caused its
DOMINGO CARABEO, Petitioner, registration in his name on December 21, 1993 under Transfer
vs. Certificate of Title No. 161806. They thereupon offered to pay the
SPOUSES NORBERTO and SUSAN DINGCO, Respondents. balance but petitioner declined, drawing them to file a complaint
before the Katarungan Pambarangay. No settlement was reached,
DECISION however, hence, respondent filed a complaint for specific
performance before the Regional Trial Court (RTC) of Balanga,
CARPIO MORALES, J.: Bataan.

On July 10, 1990, Domingo Carabeo (petitioner) entered into a Petitioner countered in his Answer to the Complaint that the sale
contract denominated as "Kasunduan sa Bilihan ng Karapatan sa was void for lack of object certain, the kasunduan not having
Lupa"1 (kasunduan) with Spouses Norberto and Susan Dingco specified the metes and bounds of the land. In any event, petitioner
(respondents) whereby petitioner agreed to sell his rights over a 648 alleged that if the validity of the kasunduan is upheld, respondents’
square meter parcel of unregistered land situated in Purok III, failure to comply with their reciprocal obligation to pay the balance
Tugatog, Orani, Bataan to respondents for ₱38,000. of the purchase price would render the action premature. For,
contrary to respondents’ claim, petitioner maintained that they failed
to pay the balance of ₱28,000 on September 1990 to thus constrain
Respondents tendered their initial payment of ₱10,000 upon signing
him to accept installment payments totaling ₱9,100.
of the contract, the remaining balance to be paid on September 1990.

After the case was submitted for decision or on January 31,


Respondents were later to claim that when they were about to hand
2001,2 petitioner passed away. The records do not show that
in the balance of the purchase price, petitioner requested them to
petitioner’s counsel informed Branch 1 of the Bataan RTC, where the
keep it first as he was yet to settle an on-going "squabble" over the
complaint was lodged, of his death and that proper substitution was
land.
effected in accordance with Section 16, Rule 3, Rules of Court. 3
Nevertheless, respondents gave petitioner small sums of money
By Decision of February 25, 2001,4 the trial court ruled in favor of
from time to time which totaled ₱9,100, on petitioner’s request
respondents, disposing as follows:
according to them; due to respondents’ inability to pay the amount
of the remaining balance in full, according to petitioner.
WHEREFORE, premises considered, judgment is hereby rendered
ordering:
By respondents’ claim, despite the alleged problem over the land,
they insisted on petitioner’s acceptance of the remaining balance of
₱18,900 but petitioner remained firm in his refusal, proffering as 1. The defendant to sell his right over 648 square meters of
reason therefor that he would register the land first. land pursuant to the contract dated July 10, 1990 by
executing a Deed of Sale thereof after the payment of
P18,900 by the plaintiffs;
2. The defendant to pay the costs of the suit. [t]he death of herein petitioner causes the dismissal of the
action filed by respondents; respondents’ cause of action
SO ORDERED.5 being an action in personam. (underscoring supplied)

Petitioner’s counsel filed a Notice of Appeal on March 20, 2001. The petition fails.

By the herein challenged Decision dated July 20, 2009, 6 the Court of The pertinent portion of the kasunduan reads:8
Appeals affirmed that of the trial court.
xxxx
Petitioner’s motion for reconsideration having been denied by
Resolution of January 8, 2010, the present petition for review was Na ako ay may isang partial na lupa na matatagpuan sa Purok 111,
filed by Antonio Carabeo, petitioner’s son,7 faulting the appellate Tugatog, Orani Bataan, na may sukat na 27 x 24 metro kuwadrado,
court: ang nasabing lupa ay may sakop na dalawang punong santol at
isang punong mangga, kaya’t ako ay nakipagkasundo sa mag-
(A) asawang Norby Dingco at Susan Dingco na ipagbili sa kanila ang
karapatan ng nasabing lupa sa halagang ₱38,000.00.
… in holding that the element of a contract, i.e., an object
certain is present in this case. x x x x (underscoring supplied)

(B) That the kasunduan did not specify the technical boundaries of the
property did not render the sale a nullity. The requirement that a
… in considering it unfair to expect respondents who are not sale must have for its object a determinate thing is satisfied as long
lawyers to make judicial consignation after herein petitioner as, at the time the contract is entered into, the object of the sale is
allegedly refused to accept payment of the balance of the capable of being made determinate without the necessity of a new or
purchase price. further agreement between the parties.9 As the above-quoted portion
of the kasunduan shows, there is no doubt that the object of the sale
(C) is determinate.

… in upholding the validity of the contract, "Kasunduan sa Clutching at straws, petitioner proffers lack of spousal consent. This
Bilihan ng Karapatan sa Lupa," despite the lack of spousal was raised only on appeal, hence, will not be considered, in the
consent, (underscoring supplied) present case, in the interest of fair play, justice and due process. 10

and proffering that Respecting the argument that petitioner’s death rendered
respondents’ complaint against him dismissible, Bonilla v.
Barcena11 enlightens:
(D)
The question as to whether an action survives or not depends on
the nature of the action and the damage sued for. In the causes of
action which survive, the wrong complained [of] affects primarily
and principally property and property rights, the injuries to the
person being merely incidental, while in the causes of action which
do not survive, the injury complained of is to the person, the
property and rights of property affected being incidental. (emphasis
and underscoring supplied)

In the present case, respondents are pursuing a property right


arising from the kasunduan, whereas petitioner is invoking nullity of
the kasunduan to protect his proprietary interest.
Assuming arguendo, however, that the kasunduan is deemed void,
there is a corollary obligation of petitioner to return the money paid
by respondents, and since the action involves property rights, 12 it
survives.1avvphi1

It bears noting that trial on the merits was already concluded before
petitioner died. Since the trial court was not informed of petitioner’s
death, it may not be faulted for proceeding to render judgment
without ordering his substitution. Its judgment is thus valid and
binding upon petitioner’s legal representatives or successors-in-
interest, insofar as his interest in the property subject of the action is
concerned.13

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


of authority.14 Thus, in filing a Notice of Appeal, petitioner’s counsel
of record had no personality to act on behalf of the already deceased
client who, it bears reiteration, had not been substituted as a party
after his death. The trial court’s decision had thereby become final
and executory, no appeal having been perfected.

WHEREFORE, the petition is DENIED.

SO ORDERED.
[G.R. No. 162788. July 28, 2005] b) ordering the plaintiff to pay the defendants the sum
Spouses JULITA DE LA CRUZ and FELIPE DE LA of P9,000.00 by way of repurchasing the land in
CRUZ, petitioners, vs. PEDRO JOAQUIN, respondent. question;

DECISION c) ordering the defendants to execute a deed of reconveyance


of said land in favor of the plaintiff after the latter has
PANGANIBAN, J.: paid them the amount of P9,000.00 to repurchase the
land in question;
The Rules require the legal representatives of a dead litigant to
be substituted as parties to a litigation. This requirement is d) ordering the defendants to yield possession of the subject
necessitated by due process. Thus, when the rights of the legal land to the plaintiff after the latter has paid them the
representatives of a decedent are actually recognized and protected, amount of P9,000.00 to repurchase the property from
noncompliance or belated formal compliance with the Rules cannot them; and
affect the validity of the promulgated decision. After all, due process
had thereby been satisfied. e) ordering the defendants to pay the plaintiff the amount
of P10,000.00 as actual and compensatory damages;
the amount of P5,000[.00] as exemplary damages; the
The Case amount of P5,000.00 as expenses of litigation and the
amount of P5,000.00 by way of attorneys fees.[5]

Before us is a Petition for Review[1] under Rule 45 of the Rules


of Court, assailing the August 26, 2003 Decision [2] and the March 9, The Facts
2004 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No.
34702. The challenged Decision disposed as follows:
The case originated from a Complaint for the recovery of
WHEREFORE, the foregoing considered, the appeal is DISMISSED possession and ownership, the cancellation of title, and damages,
and the assailed decision accordingly AFFIRMED in toto. No costs. [4] filed by Pedro Joaquin against petitioners in the Regional Trial Court
of Baloc, Sto. Domingo, Nueva Ecija.[6] Respondent alleged that he
On the other hand, the trial courts affirmed Decision disposed had obtained a loan from them in the amount of P9,000 on June 29,
as follows: 1974, payable after five (5) years; that is, on June 29, 1979. To secure
the payment of the obligation, he supposedly executed a Deed of
WHEREFORE, judgment is hereby rendered: Sale in favor of petitioners. The Deed was for a parcel of land in
Pinagpanaan, Talavera, Nueva Ecija, covered by TCT No. T-111802.
a) declaring the Deed of Absolute Sale (Exh. D) and The parties also executed another document entitled Kasunduan. [7]
Kasunduan (Exhibit B), to be a sale with right of Respondent claimed that the Kasunduan showed the Deed of
repurchase; Sale to be actually an equitable mortgage.[8] Spouses De la Cruz
contended that this document was merely an accommodation to
allow the repurchase of the property until June 29, 1979, a right that II. Public Respondent Twelfth Division of the Honorable Court of
he failed to exercise.[9] Appeals likewise erred in denying [petitioners] Motion for
Reconsideration given the facts and the law therein presented. [17]
On April 23, 1990, the RTC issued a Decision in his favor. The
trial court declared that the parties had entered into a sale with a
Succinctly, the issues are whether the trial court lost jurisdiction
right of repurchase.[10] It further held that respondent had made a
over the case upon the death of Pedro Joaquin, and whether
valid tender of payment on two separate occasions to exercise his
respondent was guilty of forum shopping.[18]
right of repurchase.[11] Accordingly, petitioners were required to
reconvey the property upon his payment.[12]

The Courts Ruling


Ruling of the Court of Appeals
The Petition has no merit.
Sustaining the trial court, the CA noted that petitioners had
given respondent the right to repurchase the property within five (5)
years from the date of the sale or until June 29, 1979. Accordingly, First Issue:
the parties executed the Kasunduan to express the terms and Jurisdiction
conditions of their actual agreement.[13] The appellate court also
found no reason to overturn the finding that respondent had validly
Petitioners assert that the RTCs Decision was invalid for lack of
exercised his right to repurchase the land.[14]
jurisdiction.[19] They claim that respondent died during the pendency
In the March 9, 2004 Resolution, the CA denied reconsideration of the case. There being no substitution by the heirs, the trial court
and ordered a substitution by legal representatives, in view of allegedly lacked jurisdiction over the litigation.[20]
respondents death on December 24, 1988.[15]
Hence, this Petition.[16]
Rule on Substitution

The Issues When a party to a pending action dies and the claim is not
extinguished,[21] the Rules of Court require a substitution of the
deceased. The procedure is specifically governed by Section 16 of
Petitioners assign the following errors for our consideration: Rule 3, which reads thus:

I. Public Respondent Twelfth Division of the Honorable Court of Section 16. Death of a party; duty of counsel. Whenever a party to a
Appeals seriously erred in dismissing the appeal and affirming in pending action dies, and the claim is not thereby extinguished, it
toto the Decision of the trial court in Civil Case No. SD-838; shall be the duty of his counsel to inform the court within thirty (30)
days after such death of the fact thereof, and to give the name and
address of his legal representative or representatives. Failure of participate in the case, and present evidence in defense of the
counsel to comply with this duty shall be a ground for disciplinary deceased.[27] These actions negate any claim that the right to due
action. process was violated.
The Court is not unaware of Chittick v. Court of Appeals,[28] in
The heirs of the deceased may be allowed to be substituted for the
which the failure of the heirs to substitute for the original plaintiff
deceased, without requiring the appointment of an executor or
upon her death led to the nullification of the trial courts Decision.
administrator and the court may appoint a guardian ad litem for the
The latter had sought to recover support in arrears and her share in
minor heirs.
the conjugal partnership. The children who allegedly substituted for
her refused to continue the case against their father and vehemently
The court shall forthwith order said legal representative or objected to their inclusion as parties.[29] Moreover, because he died
representatives to appear and be substituted within a period of thirty during the pendency of the case, they were bound to substitute for
(30) days from notice. the defendant also. The substitution effectively merged the persons
of the plaintiff and the defendant and thus extinguished the
If no legal representative is named by the counsel for the deceased obligation being sued upon.[30]
party, or if the one so named shall fail to appear within the specified
period, the court may order the opposing party, within a specified Clearly, the present case is not similar, much less identical, to
time, to procure the appointment of an executor or administrator for the factual milieu of Chittick.
the estate of the deceased, and the latter shall immediately appear Strictly speaking, the rule on the substitution by heirs is not a
for and on behalf of the deceased. The court charges in procuring matter of jurisdiction, but a requirement of due process. Thus, when
such appointment, if defrayed by the opposing party, may be due process is not violated, as when the right of the representative or
recovered as costs. heir is recognized and protected, noncompliance or belated formal
compliance with the Rules cannot affect the validity of a
The rule on the substitution of parties was crafted to protect promulgated decision.[31] Mere failure to substitute for a deceased
every partys right to due process.[22] The estate of the deceased party plaintiff is not a sufficient ground to nullify a trial courts decision.
will continue to be properly represented in the suit through the duly The alleging party must prove that there was an undeniable
appointed legal representative.[23] Moreover, no adjudication can be violation of due process.
made against the successor of the deceased if the fundamental right
to a day in court is denied.[24]
The Court has nullified not only trial proceedings conducted Substitution in
without the appearance of the legal representatives of the deceased, the Instant Case
but also the resulting judgments.[25] In those instances, the courts
acquired no jurisdiction over the persons of the legal representatives
or the heirs upon whom no judgment was binding.[26] The records of the present case contain a Motion for
Substitution of Party Plaintiff dated February 15, 2002, filed before
This general rule notwithstanding, a formal substitution by heirs the CA. The prayer states as follows:
is not necessary when they themselves voluntarily appear,
WHEREFORE, it is respectfully prayed that the Heirs of the Forum Shopping Defined
deceased plaintiff-appellee as represented by his daughter Lourdes
dela Cruz be substituted as party-plaintiff for the said Pedro Joaquin.
Forum shopping is the institution of two or more actions or
proceedings involving the same parties for the same cause of action,
It is further prayed that henceforth the undersigned counsel[32] for
either simultaneously or successively, on the supposition that one or
the heirs of Pedro Joaquin be furnished with copies of notices,
the other court would make a favorable disposition.[37] Forum
orders, resolutions and other pleadings at its address below.
shopping may be resorted to by a party against whom an adverse
judgment or order has been issued in one forum, in an attempt to
Evidently, the heirs of Pedro Joaquin voluntary appeared and
seek a favorable opinion in another, other than by an appeal or a
participated in the case. We stress that the appellate court had
special civil action for certiorari.[38]
ordered[33] his legal representatives to appear and substitute for him.
The substitution even on appeal had been ordered correctly. In all Forum shopping trifles with the courts, abuses their processes,
proceedings, the legal representatives must appear to protect the degrades the administration of justice, and congests court
interests of the deceased.[34] After the rendition of judgment, further dockets.[39] Willful and deliberate violation of the rule against it is a
proceedings may be held, such as a motion for reconsideration or a ground for the summary dismissal of the case; it may also constitute
new trial, an appeal, or an execution.[35] direct contempt of court.[40]
Considering the foregoing circumstances, the Motion for The test for determining the existence of forum shopping is
Substitution may be deemed to have been granted; and the heirs, to whether the elements of litis pendentia are present, or whether a final
have substituted for the deceased, Pedro Joaquin. There being no judgment in one case amounts to res judicata in another.[41] We note,
violation of due process, the issue of substitution cannot be upheld however, petitioners claim that the subject matter of the present case
as a ground to nullify the trial courts Decision. has already been litigated and decided. Therefore, the applicable
doctrine is res judicata.[42]

Second Issue:
Forum Shopping Applicability of Res Judicata

Petitioners also claim that respondents were guilty of forum Under res judicata, a final judgment or decree on the merits by a
shopping, a fact that should have compelled the trial court to dismiss court of competent jurisdiction is conclusive of the rights of the
the Complaint.[36] They claim that prior to the commencement of the parties or their privies, in all later suits and on all points and matters
present suit on July 7, 1981, respondent had filed a civil case against determined in the previous suit.[43] The term literally means a matter
petitioners on June 25, 1979. Docketed as Civil Case No. SD-742 for adjudged, judicially acted upon, or settled by judgment. [44] The
the recovery of possession and for damages, it was allegedly principle bars a subsequent suit involving the same parties, subject
dismissed by the Court of First Instance of Nueva Ecija for lack of matter, and cause of action. Public policy requires that controversies
interest to prosecute. must be settled with finality at a given point in time.
The elements of res judicata are as follows: (1) the former
judgment or order must be final; (2) it must have been rendered on
the merits of the controversy; (3) the court that rendered it must have
had jurisdiction over the subject matter and the parties; and (4) there
must have been -- between the first and the second actions -- an
identity of parties, subject matter and cause of action.[45]

Failure to Support Allegation

The onus of proving allegations rests upon the party raising


them.[46] As to the matter of forum shopping and res judicata,
petitioners have failed to provide this Court with relevant and clear
specifications that would show the presence of an identity of parties,
subject matter, and cause of action between the present and the
earlier suits. They have also failed to show whether the other case
was decided on the merits. Instead, they have made only bare
assertions involving its existence without reference to its facts. In
other words, they have alleged conclusions of law without stating
any factual or legal basis. Mere mention of other civil cases without
showing the identity of rights asserted and reliefs sought is not
enough basis to claim that respondent is guilty of forum shopping,
or that res judicata exists.[47]
WHEREFORE, the Petition is DENIED and the assailed
Decision and Resolution are AFFIRMED. Costs against petitioners.
SO ORDERED
ROGER V. NAVARRO, Petitioner, legal age, a resident of 62 Dolores Street, Nazareth,
vs. Cagayan de Oro City, where he may be served with
HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37, summons and other processes of the Honorable
Cagayan de Oro City, and KAREN T. GO, doing business under Court; that defendant "JOHN DOE" whose real
the name KARGO ENTERPRISES, Respondents. name and address are at present unknown to
plaintiff is hereby joined as party defendant as he
DECISION may be the person in whose possession and custody
the personal property subject matter of this suit may
BRION, J.: be found if the same is not in the possession of
defendant ROGER NAVARRO;
This is a petition for review on certiorari1 that seeks to set aside the
Court of Appeals (CA) Decision2 dated October 16, 2001 and 2. That KARGO ENTERPRISES is in the business of,
Resolution3 dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA among others, buying and selling motor vehicles,
rulings affirmed the July 26, 20004 and March 7, 20015 orders of the including hauling trucks and other heavy
Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, equipment;
denying petitioner Roger V. Navarro’s (Navarro) motion to dismiss.
3. That for the cause of action against defendant
BACKGROUND FACTS ROGER NAVARRO, it is hereby stated that on
August 8, 1997, the said defendant leased [from]
On September 12, 1998, respondent Karen T. Go filed two plaintiff a certain motor vehicle which is more
complaints, docketed as Civil Case Nos. 98-599 (first complaint)6 and particularly described as follows –
98-598 (second complaint),7 before the RTC for replevin and/or sum
of money with damages against Navarro. In these complaints, Karen Make/Type FUSO WITH MOUNTED CRANE
Go prayed that the RTC issue writs of replevin for the seizure of two
(2) motor vehicles in Navarro’s possession. Serial No. FK416K-51680
Motor No. 6D15-338735
The first complaint stated: Plate No. GHK-378

1. That plaintiff KAREN T. GO is a Filipino, of legal as evidenced by a LEASE AGREEMENT WITH OPTION TO
age, married to GLENN O. GO, a resident of PURCHASE entered into by and between KARGO ENTERPRISES,
Cagayan de Oro City and doing business under the then represented by its Manager, the aforementioned GLENN O.
trade name KARGO ENTERPRISES, an entity duly GO, and defendant ROGER NAVARRO xxx; that in accordance with
registered and existing under and by virtue of the the provisions of the above LEASE AGREEMENT WITH OPTION
laws of the Republic of the Philippines, which has its TO PURCHASE, defendant ROGER NAVARRO delivered unto
business address at Bulua, Cagayan de Oro City; plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX
that defendant ROGER NAVARRO is a Filipino, of THOUSAND THREE HUNDRED THIRTY-THREE & 33/100 PESOS
(₱66,333.33) which were supposedly in payment of the agreed
rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK The second complaint contained essentially the same allegations as
OF COMMUNICATIONS – CAGAYAN DE ORO BRANCH the first complaint, except that the Lease Agreement with Option to
CHECKS NOS. 017112 and 017113, respectively dated January 8, Purchase involved is dated October 1, 1997 and the motor vehicle
1998 and February 8, 1998, were presented for payment and/or leased is described as follows:
credit, the same were dishonored and/or returned by the drawee
bank for the common reason that the current deposit account against Make/Type FUSO WITH MOUNTED CRANE
which the said checks were issued did not have sufficient funds to Serial No. FK416K-510528
cover the amounts thereof; that the total amount of the two (2) Motor No. 6D14-423403
checks, i.e. the sum of ONE HUNDRED THIRTY-TWO THOUSAND
SIX HUNDRED SIXTY-SIX & 66/100 PESOS (₱132,666.66) therefore The second complaint also alleged that Navarro delivered three post-
represents the principal liability of defendant ROGER NAVARRO dated checks, each for the amount of ₱100,000.00, to Karen Go in
unto plaintiff on the basis of the provisions of the above LEASE payment of the agreed rentals; however, the third check was
AGREEMENT WITH RIGHT TO PURCHASE; that demands, dishonored when presented for payment.8
written and oral, were made of defendant ROGER NAVARRO to
pay the amount of ONE HUNDRED THIRTY-TWO THOUSAND On October 12, 19989 and October 14, 1998,10 the RTC issued writs of
SIX HUNDRED SIXTY-SIX & 66/100 PESOS (₱132,666.66), or to replevin for both cases; as a result, the Sheriff seized the two vehicles
return the subject motor vehicle as also provided for in the LEASE and delivered them to the possession of Karen Go.
AGREEMENT WITH RIGHT TO PURCHASE, but said demands
were, and still are, in vain to the great damage and injury of herein
In his Answers, Navarro alleged as a special affirmative defense that
plaintiff; xxx
the two complaints stated no cause of action, since Karen Go was not
a party to the Lease Agreements with Option to Purchase
4. That the aforedescribed motor vehicle has not been the subject of (collectively, the lease agreements) – the actionable documents on
any tax assessment and/or fine pursuant to law, or seized under an which the complaints were based.
execution or an attachment as against herein plaintiff;
On Navarro’s motion, both cases were duly consolidated on
xxx December 13, 1999.

8. That plaintiff hereby respectfully applies for an order of the In its May 8, 2000 order, the RTC dismissed the case on the ground
Honorable Court for the immediate delivery of the above-described that the complaints did not state a cause of action.
motor vehicle from defendants unto plaintiff pending the final
determination of this case on the merits and, for that purpose, there
In response to the motion for reconsideration Karen Go filed dated
is attached hereto an affidavit duly executed and bond double the
May 26, 2000,11 the RTC issued another order dated July 26, 2000
value of the personal property subject matter hereof to answer for
setting aside the order of dismissal. Acting on the presumption that
damages and costs which defendants may suffer in the event that the
Glenn Go’s leasing business is a conjugal property, the RTC held that
order for replevin prayed for may be found out to having not been
Karen Go had sufficient interest in his leasing business to file the
properly issued.
action against Navarro. However, the RTC held that Karen Go
should have included her husband, Glenn Go, in the complaint Even worse, according to Navarro, the inclusion of Glenn Go as co-
based on Section 4, Rule 3 of the Rules of Court (Rules). 12 Thus, the plaintiff drastically changed the theory of the complaints, to his great
lower court ordered Karen Go to file a motion for the inclusion of prejudice. Navarro claims that the lower court gravely abused its
Glenn Go as co-plaintiff.1avvphi1 discretion when it assumed that the leased vehicles are part of the
conjugal property of Glenn and Karen Go. Since Karen Go is the
When the RTC denied Navarro’s motion for reconsideration on registered owner of Kargo Enterprises, the vehicles subject of the
March 7, 2001, Navarro filed a petition for certiorari with the CA, complaint are her paraphernal properties and the RTC gravely erred
essentially contending that the RTC committed grave abuse of when it ordered the inclusion of Glenn Go as a co-plaintiff.
discretion when it reconsidered the dismissal of the case and
directed Karen Go to amend her complaints by including her Navarro likewise faults the lower court for setting the trial of the
husband Glenn Go as co-plaintiff. According to Navarro, a case in the same order that required Karen Go to amend her
complaint which failed to state a cause of action could not be complaints, claiming that by issuing this order, the trial court
converted into one with a cause of action by mere amendment or violated Rule 10 of the Rules.
supplemental pleading.
Even assuming the complaints stated a cause of action against him,
On October 16, 2001, the CA denied Navarro’s petition and affirmed Navarro maintains that the complaints were premature because no
the RTC’s order.13 The CA also denied Navarro’s motion for prior demand was made on him to comply with the provisions of the
reconsideration in its resolution of May 29, 2002, 14 leading to the lease agreements before the complaints for replevin were filed.
filing of the present petition.
Lastly, Navarro posits that since the two writs of replevin were
THE PETITION issued based on flawed complaints, the vehicles were illegally seized
from his possession and should be returned to him immediately.
Navarro alleges that even if the lease agreements were in the name
of Kargo Enterprises, since it did not have the requisite juridical Karen Go, on the other hand, claims that it is misleading for Navarro
personality to sue, the actual parties to the agreement are himself to state that she has no real interest in the subject of the complaint,
and Glenn Go. Since it was Karen Go who filed the complaints and even if the lease agreements were signed only by her husband,
not Glenn Go, she was not a real party-in-interest and the complaints Glenn Go; she is the owner of Kargo Enterprises and Glenn Go
failed to state a cause of action. signed the lease agreements merely as the manager of Kargo
Enterprises. Moreover, Karen Go maintains that Navarro’s insistence
Navarro posits that the RTC erred when it ordered the amendment that Kargo Enterprises is Karen Go’s paraphernal property is
of the complaint to include Glenn Go as a co-plaintiff, instead of without basis. Based on the law and jurisprudence on the matter, all
dismissing the complaint outright because a complaint which does property acquired during the marriage is presumed to be conjugal
not state a cause of action cannot be converted into one with a cause property. Finally, Karen Go insists that her complaints sufficiently
of action by a mere amendment or a supplemental pleading. In established a cause of action against Navarro. Thus, when the RTC
effect, the lower court created a cause of action for Karen Go when ordered her to include her husband as co-plaintiff, this was merely to
there was none at the time she filed the complaints. comply with the rule that spouses should sue jointly, and was not
meant to cure the complaints’ lack of cause of action.
THE COURT’S RULING underlies the transaction between the plaintiff and the defendant.
Again, the name KARGO ENTERPRISES entered the picture as this
We find the petition devoid of merit. Lease Agreement provides:

Karen Go is the real party-in-interest This agreement, made and entered into by and between:

The 1997 Rules of Civil Procedure requires that every action must be GLENN O. GO, of legal age, married, with post office address at xxx,
prosecuted or defended in the name of the real party-in-interest, i.e., herein referred to as the LESSOR-SELLER; representing KARGO
the party who stands to be benefited or injured by the judgment in ENTERPRISES as its Manager,
the suit, or the party entitled to the avails of the suit.15
xxx
Interestingly, although Navarro admits that Karen Go is the
registered owner of the business name Kargo Enterprises, he still thus, expressly pointing to KARGO ENTERPRISES as the principal
insists that Karen Go is not a real party-in-interest in the case. that Glenn O. Go represented. In other words, by the express terms
According to Navarro, while the lease contracts were in Kargo of this Lease Agreement, Glenn Go did sign the agreement only as
Enterprises’ name, this was merely a trade name without a juridical the manager of Kargo Enterprises and the latter is clearly the real
personality, so the actual parties to the lease agreements were party to the lease agreements.
Navarro and Glenn Go, to the exclusion of Karen Go.
As Navarro correctly points out, Kargo Enterprises is a sole
As a corollary, Navarro contends that the RTC acted with grave proprietorship, which is neither a natural person, nor a juridical
abuse of discretion when it ordered the inclusion of Glenn Go as co- person, as defined by Article 44 of the Civil Code:
plaintiff, since this in effect created a cause of action for the
complaints when in truth, there was none. Art. 44. The following are juridical persons:

We do not find Navarro’s arguments persuasive. (1) The State and its political subdivisions;

The central factor in appreciating the issues presented in this case is (2) Other corporations, institutions and entities for
the business name Kargo Enterprises. The name appears in the title public interest or purpose, created by law; their
of the Complaint where the plaintiff was identified as "KAREN T. personality begins as soon as they have been
GO doing business under the name KARGO ENTERPRISES," and constituted according to law;
this identification was repeated in the first paragraph of the
Complaint. Paragraph 2 defined the business KARGO (3) Corporations, partnerships and associations for
ENTERPRISES undertakes. Paragraph 3 continued with the private interest or purpose to which the law grants a
allegation that the defendant "leased from plaintiff a certain motor juridical personality, separate and distinct from that
vehicle" that was thereafter described. Significantly, the Complaint of each shareholder, partner or member.
specifies and attaches as its integral part the Lease Agreement that
Thus, pursuant to Section 1, Rule 3 of the Rules,16 Kargo Enterprises case. Thus, contrary to Navarro’s contention, Karen Go is the real
cannot be a party to a civil action. This legal reality leads to the party-in-interest, and it is legally incorrect to say that her Complaint
question: who then is the proper party to file an action based on a does not state a cause of action because her name did not appear in
contract in the name of Kargo Enterprises? the Lease Agreement that her husband signed in behalf of Kargo
Enterprises. Whether Glenn Go can legally sign the Lease Agreement
We faced a similar question in Juasing Hardware v. Mendoza, 17 in his capacity as a manager of Kargo Enterprises, a sole
where we said: proprietorship, is a question we do not decide, as this is a matter for
the trial court to consider in a trial on the merits.
Finally, there is no law authorizing sole proprietorships like
petitioner to bring suit in court. The law merely recognizes the Glenn Go’s Role in the Case
existence of a sole proprietorship as a form of business organization
conducted for profit by a single individual, and requires the We find it significant that the business name Kargo Enterprises is in
proprietor or owner thereof to secure licenses and permits, register the name of Karen T. Go,19 who described herself in the Complaints
the business name, and pay taxes to the national government. It does to be "a Filipino, of legal age, married to GLENN O. GO, a resident
not vest juridical or legal personality upon the sole proprietorship of Cagayan de Oro City, and doing business under the trade name
nor empower it to file or defend an action in court. KARGO ENTERPRISES."20 That Glenn Go and Karen Go are married
to each other is a fact never brought in issue in the case. Thus, the
Thus, the complaint in the court below should have been filed in the business name KARGO ENTERPRISES is registered in the name of a
name of the owner of Juasing Hardware. The allegation in the body married woman, a fact material to the side issue of whether Kargo
of the complaint would show that the suit is brought by such person Enterprises and its properties are paraphernal or conjugal properties.
as proprietor or owner of the business conducted under the name To restate the parties’ positions, Navarro alleges that Kargo
and style Juasing Hardware. The descriptive words "doing business Enterprises is Karen Go’s paraphernal property, emphasizing the
as Juasing Hardware" may be added to the title of the case, as is fact that the business is registered solely in Karen Go’s name. On the
customarily done.18 [Emphasis supplied.] other hand, Karen Go contends that while the business is registered
in her name, it is in fact part of their conjugal property.
This conclusion should be read in relation with Section 2, Rule 3 of
the Rules, which states: The registration of the trade name in the name of one person – a
woman – does not necessarily lead to the conclusion that the trade
SEC. 2. Parties in interest. – A real party in interest is the party who name as a property is hers alone, particularly when the woman is
stands to be benefited or injured by the judgment in the suit, or the married. By law, all property acquired during the marriage, whether
party entitled to the avails of the suit. Unless otherwise authorized the acquisition appears to have been made, contracted or registered
by law or these Rules, every action must be prosecuted or defended in the name of one or both spouses, is presumed to be conjugal
in the name of the real party in interest. unless the contrary is proved.21 Our examination of the records of
the case does not show any proof that Kargo Enterprises and the
As the registered owner of Kargo Enterprises, Karen Go is the party properties or contracts in its name are conjugal. If at all, only the bare
who will directly benefit from or be injured by a judgment in this allegation of Navarro to this effect exists in the records of the case.
As we emphasized in Castro v. Miat:22
Petitioners also overlook Article 160 of the New Civil Code. It primarily by Chapter 4 on Conjugal Partnership of Gains of the
provides that "all property of the marriage is presumed to be Family Code and, suppletorily, by the spouses’ marriage settlement
conjugal partnership, unless it be prove[n] that it pertains and by the rules on partnership under the Civil Code. In the absence
exclusively to the husband or to the wife." This article does not of any evidence of a marriage settlement between the spouses Go,
require proof that the property was acquired with funds of the we look at the Civil Code provision on partnership for guidance.
partnership. The presumption applies even when the manner in
which the property was acquired does not appear.23 [Emphasis A rule on partnership applicable to the spouses’ circumstances is
supplied.] Article 1811 of the Civil Code, which states:

Thus, for purposes solely of this case and of resolving the issue of Art. 1811. A partner is a co-owner with the other partners of specific
whether Kargo Enterprises as a sole proprietorship is conjugal or partnership property.
paraphernal property, we hold that it is conjugal property.
The incidents of this co-ownership are such that:
Article 124 of the Family Code, on the administration of the conjugal
property, provides: (1) A partner, subject to the provisions of this Title and to any
agreement between the partners, has an equal right with his
Art. 124. The administration and enjoyment of the conjugal partners to possess specific partnership property for partnership
partnership property shall belong to both spouses jointly. In case purposes; xxx
of disagreement, the husband’s decision shall prevail, subject to
recourse to the court by the wife for proper remedy, which must be Under this provision, Glenn and Karen Go are effectively co-owners
availed of within five years from the date of the contract of Kargo Enterprises and the properties registered under this name;
implementing such decision. hence, both have an equal right to seek possession of these
properties. Applying Article 484 of the Civil Code, which states that
xxx "in default of contracts, or special provisions, co-ownership shall be
governed by the provisions of this Title," we find further support in
This provision, by its terms, allows either Karen or Glenn Go to Article 487 of the Civil Code that allows any of the co-owners to
speak and act with authority in managing their conjugal property, bring an action in ejectment with respect to the co-owned property.
i.e., Kargo Enterprises. No need exists, therefore, for one to obtain the
consent of the other before performing an act of administration or While ejectment is normally associated with actions involving real
any act that does not dispose of or encumber their conjugal property. property, we find that this rule can be applied to the circumstances
of the present case, following our ruling in Carandang v. Heirs of De
Under Article 108 of the Family Code, the conjugal partnership is Guzman.24 In this case, one spouse filed an action for the recovery of
governed by the rules on the contract of partnership in all that is not credit, a personal property considered conjugal property, without
in conflict with what is expressly determined in this Chapter or by including the other spouse in the action. In resolving the issue of
the spouses in their marriage settlements. In other words, the whether the other spouse was required to be included as a co-
property relations of the husband and wife shall be governed plaintiff in the action for the recovery of the credit, we said:
Milagros de Guzman, being presumed to be a co-owner of the have been filed for the benefit of his co-owners. In the latter case and
credits allegedly extended to the spouses Carandang, seems to be in that of De Guia v. Court of Appeals, we also held that Article 487 of
either an indispensable or a necessary party. If she is an the Civil Code, which provides that any of the co-owners may bring
indispensable party, dismissal would be proper. If she is merely a an action for ejectment, covers all kinds of action for the recovery of
necessary party, dismissal is not warranted, whether or not there possession.
was an order for her inclusion in the complaint pursuant to Section
9, Rule 3. In sum, in suits to recover properties, all co-owners are real parties in
interest. However, pursuant to Article 487 of the Civil Code and
Article 108 of the Family Code provides: relevant jurisprudence, any one of them may bring an action, any
kind of action, for the recovery of co-owned properties. Therefore,
Art. 108. The conjugal partnership shall be governed by the rules on only one of the co-owners, namely the co-owner who filed the suit
the contract of partnership in all that is not in conflict with what is for the recovery of the co-owned property, is an indispensable party
expressly determined in this Chapter or by the spouses in their thereto. The other co-owners are not indispensable parties. They are
marriage settlements. not even necessary parties, for a complete relief can be accorded in
the suit even without their participation, since the suit is presumed
This provision is practically the same as the Civil Code provision it to have been filed for the benefit of all co-owners.25 [Emphasis
superseded: supplied.]

Art. 147. The conjugal partnership shall be governed by the rules on Under this ruling, either of the spouses Go may bring an action
the contract of partnership in all that is not in conflict with what is against Navarro to recover possession of the Kargo Enterprises-
expressly determined in this Chapter. leased vehicles which they co-own. This conclusion is consistent
with Article 124 of the Family Code, supporting as it does the
In this connection, Article 1811 of the Civil Code provides that "[a] position that either spouse may act on behalf of the conjugal
partner is a co-owner with the other partners of specific partnership partnership, so long as they do not dispose of or encumber the
property." Taken with the presumption of the conjugal nature of the property in question without the other spouse’s consent.
funds used to finance the four checks used to pay for petitioners’
stock subscriptions, and with the presumption that the credits On this basis, we hold that since Glenn Go is not strictly an
themselves are part of conjugal funds, Article 1811 makes Quirino indispensable party in the action to recover possession of the leased
and Milagros de Guzman co-owners of the alleged credit. vehicles, he only needs to be impleaded as a pro-forma party to the
suit, based on Section 4, Rule 4 of the Rules, which states:
Being co-owners of the alleged credit, Quirino and Milagros de
Guzman may separately bring an action for the recovery thereof. In Section 4. Spouses as parties. – Husband and wife shall sue or be
the fairly recent cases of Baloloy v. Hular and Adlawan v. Adlawan, we sued jointly, except as provided by law.
held that, in a co-ownership, co-owners may bring actions for the
recovery of co-owned property without the necessity of joining all Non-joinder of indispensable parties not ground to dismiss action
the other co-owners as co-plaintiffs because the suit is presumed to
Even assuming that Glenn Go is an indispensable party to the action, In arguing that prior demand is required before an action for a writ
we have held in a number of cases26 that the misjoinder or non- of replevin is filed, Navarro apparently likens a replevin action to an
joinder of indispensable parties in a complaint is not a ground for unlawful detainer.
dismissal of action. As we stated in Macababbad v. Masirag: 27
For a writ of replevin to issue, all that the applicant must do is to file
Rule 3, Section 11 of the Rules of Court provides that neither an affidavit and bond, pursuant to Section 2, Rule 60 of the Rules,
misjoinder nor nonjoinder of parties is a ground for the dismissal of which states:
an action, thus:
Sec. 2. Affidavit and bond.
Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder
nor non-joinder of parties is ground for dismissal of an action. The applicant must show by his own affidavit or that of some other
Parties may be dropped or added by order of the court on motion of person who personally knows the facts:
any party or on its own initiative at any stage of the action and on
such terms as are just. Any claim against a misjoined party may be (a) That the applicant is the owner of the property
severed and proceeded with separately. claimed, particularly describing it, or is entitled to
the possession thereof;
In Domingo v. Scheer, this Court held that the proper remedy when
a party is left out is to implead the indispensable party at any stage (b) That the property is wrongfully detained by the
of the action. The court, either motu proprio or upon the motion of a adverse party, alleging the cause of detention
party, may order the inclusion of the indispensable party or give the thereof according to the best of his knowledge,
plaintiff opportunity to amend his complaint in order to include information, and belief;
indispensable parties. If the plaintiff to whom the order to include
the indispensable party is directed refuses to comply with the order (c) That the property has not been distrained or
of the court, the complaint may be dismissed upon motion of the taken for a tax assessment or a fine pursuant to law,
defendant or upon the court's own motion. Only upon unjustified or seized under a writ of execution or preliminary
failure or refusal to obey the order to include or to amend is the attachment, or otherwise placed under custodia legis,
action dismissed. or if so seized, that it is exempt from such seizure or
custody; and
In these lights, the RTC Order of July 26, 2000 requiring plaintiff
Karen Go to join her husband as a party plaintiff is fully in order. (d) The actual market value of the property.

Demand not required prior The applicant must also give a bond, executed to the adverse party
to filing of replevin action in double the value of the property as stated in the affidavit
aforementioned, for the return of the property to the adverse party if
such return be adjudged, and for the payment to the adverse party of
such sum as he may recover from the applicant in the action.
We see nothing in these provisions which requires the applicant to Navarro filed a petition for certiorari with the CA, essentially
make a prior demand on the possessor of the property before he can contending that RTC committed grave abuse of discretion when it
file an action for a writ of replevin. Thus, prior demand is not a reconsidered the dismissal of the case and directed Karen to amend
condition precedent to an action for a writ of replevin. her complaints by including her husband Glenn as co-plaintiff.
According to Navarro, a complaint which failed to state a cause of
action could not be converted into one with a cause of action by
More importantly, Navarro is no longer in the position to claim that mere amendment or supplemental pleading. CA denied Navarro’s
a prior demand is necessary, as he has already admitted in his petition and affirmed the RTC’s order.
Answers that he had received the letters that Karen Go sent him,
demanding that he either pay his unpaid obligations or return the ISSUE:
leased motor vehicles. Navarro’s position that a demand is necessary
and has not been made is therefore totally unmeritorious.
1. Whether a complaint which failed to state a cause of action could
not be converted into one with a cause of action by mere
WHEREFORE, premises considered, we DENY the petition for amendment or supplemental pleading.
review for lack of merit. Costs against petitioner Roger V. Navarro.
2. Whether Karen is the real party-in-interest.
SO ORDERED.
RULING:
FACTS:
1. Yes
Respondent Karen complaints before the RTC for replevin and/or
sum of money with damages against Navarro. Navarro alleged as a Non-joinder of indispensable parties not ground to dismiss action,
special affirmative defense that the complaints stated no cause of thus, even assuming that Glenn is an indispensable party to the
action, since Karen was not a party to the Lease Agreements with action, it was held in a number of cases that the misjoinder or non-
Option to Purchase (collectively, the lease agreements) – the joinder of indispensable parties in a complaint is not a ground for
actionable documents on which the complaints were based. dismissal of action.

RTC dismissed the case on the ground that the complaints did not Rule 3, Section 11 of the Rules of Court provides that neither
state a cause of action. In response to the motion for reconsideration misjoinder nor nonjoinder of parties is a ground for the dismissal of
Karen filed, RTC issued another order setting aside the order of an action, thus:
dismissal. Acting on the presumption that Glenn’s leasing business is
a conjugal property, the RTC held that Karen had sufficient interest Sec. 11. Misjoinder and non-joinder of parties. Neither
in his leasing business to file the action against Navarro. However, misjoinder nor non-joinder of parties is ground for dismissal
the RTC held that Karen should have included her husband, Glenn, of an action. Parties may be dropped or added by order of
in the complaint based on Section 4, Rule 3 of the Rules of Court the court on motion of any party or on its own initiative at any
(Rules). Thus, the lower court ordered Karen to file a motion for the stage of the action and on such terms as are just. Any claim
inclusion of Glenn as co-plaintiff. against a misjoined party may be severed and proceeded
with separately.
In these lights, the RTC Order requiring plaintiff Karen to join her Enterprises. Whether Glenn can legally sign the Lease Agreement in
husband as a party plaintiff is fully in order. As it was held in a prior his capacity as a manager of Kargo Enterprises, a sole
case, the proper remedy when a party is left out is to implead the proprietorship, is a question we do not decide, as this is a matter for
indispensable party at any stage of the action. The court, either motu the trial court to consider in a trial on the merits.
proprio or upon the motion of a party, may order the inclusion of the
indispensable party or give the plaintiff opportunity to amend his WHEREFORE, premises considered, we DENY the petition for
complaint in order to include indispensable parties. If the plaintiff to review for lack of merit.
whom the order to include the indispensable party is directed refuses
to comply with the order of the court, the complaint may be
dismissed upon motion of the defendant or upon the court's own
motion. Only upon unjustified failure or refusal to obey the order to
include or to amend is the action dismissed

2. Yes

The 1997 Rules of Civil Procedure requires that every action must be
prosecuted or defended in the name of the real party-in-interest, i.e.,
the party who stands to be benefited or injured by the judgment in
15
the suit, or the party entitled to the avails of the suit.

Section 2, Rule 3 of the Rules, states:

SEC. 2. Parties in interest. – A real party in interest is the


party who stands to be benefited or injured by the judgment
in the suit, or the party entitled to the avails of the suit.
Unless otherwise authorized by law or these Rules, every
action must be prosecuted or defended in the name of the
real party in interest.

Kargo Enterprises is a sole proprietorship, which is neither a natural


person, nor a juridical person. Thus, pursuant to Section 1, Rule 3 of
the Rules, Kargo Enterprises cannot be a party to a civil action.

As the registered owner of Kargo Enterprises, Karen is the party who


will directly benefit from or be injured by a judgment in this case.
Thus, contrary to Navarro’s contention, Karen is the real party-in-
interest, and it is legally incorrect to say that her Complaint does not
state a cause of action because her name did not appear in the
Lease Agreement that her husband signed in behalf of Kargo
G.R. No. 191667 April 17, 2013 November 21, 2005, Land Bank extended a ₱4,000,000.00 loan in
favor of the Municipality (First Loan),7 the proceeds of which were
LAND BANK OF THE PHILIPPINES, Petitioner, used to construct ten (10) kiosks at the northern and southern
vs. portions of the Imelda Garden. After completion, these kiosks were
EDUARDO M. CACAYURAN, Respondent. rented out.8

DECISION On March 7, 2006, the SB passed Resolution No. 58-2006,9 approving


the construction of a commercial center on the Plaza Lot as part of
PERLAS-BERNABE, J.: phase II of the Redevelopment Plan. To finance the project, Mayor
Eriguel was again authorized to obtain a loan from Land Bank,
Assailed in this Petition for Review on Certiorari1 is the March 26, posting as well the same securities as that of the First Loan. All
2010 Decision2 of the Court of Appeals (CA) in CA-G.R. CV. No. previous representations and warranties of Mayor Eriguel related to
89732 which affirmed with modification the April 10, 2007 the negotiation and obtention of the new loan10were ratified on
Decision3 of the Regional Trial Court (RTC) of Agoo, La Union, September 5, 2006 through Resolution No. 128-2006.11 In
Branch 31, declaring inter alia the nullity of the loan agreements consequence, Land Bank granted a second loan in favor of the
entered into by petitioner Land Bank of the Philippines (Land Bank) Municipality on October 20, 2006 in the principal amount of
and the Municipality of Agoo, La Union (Municipality). ₱28,000,000.00 (Second Loan).12

The Facts Unlike phase 1 of the Redevelopment Plan, the construction of the
commercial center at the Agoo Plaza was vehemently objected to by
some residents of the Municipality. Led by respondent Eduardo
From 2005 to 2006, the Municipality’s Sangguniang Bayan (SB)
Cacayuran (Cacayuran), these residents claimed that the conversion
passed certain resolutions to implement a multi-phased plan
of the Agoo Plaza into a commercial center, as funded by the
(Redevelopment Plan) to redevelop the Agoo Public Plaza (Agoo
proceeds from the First and Second Loans (Subject Loans), were
Plaza) where the Imelda Garden and Jose Rizal Monument were
"highly irregular, violative of the law, and detrimental to public
situated.
interests, and will result to wanton desecration of the said historical
and public park."13 The foregoing was embodied in a
To finance phase 1 of the said plan, the SB initially passed Resolution
Manifesto,14 launched through a signature campaign conducted by
No. 68-20054 on April 19, 2005, authorizing then Mayor Eufranio
the residents and Cacayuran.
Eriguel (Mayor Eriguel) to obtain a loan from Land Bank and
incidental thereto, mortgage a 2,323.75 square meter lot situated at
In addition, Cacayuran wrote a letter15 dated December 8, 2006
the southeastern portion of the Agoo Plaza (Plaza Lot) as collateral.
addressed to Mayor Eriguel, Vice Mayor Antonio Eslao (Vice Mayor
To serve as additional security, it further authorized the assignment
Eslao), and the members of the SB namely, Violeta Laroya-Balbin,
of a portion of its internal revenue allotment (IRA) and the monthly
Jaime Boado, Jr., Rogelio De Vera, James Dy, Crisogono Colubong,
income from the proposed project in favor of Land Bank. 5 The
Ricardo Fronda, Josephus Komiya, Erwina Eriguel, Felizardo
foregoing terms were confirmed, approved and ratified on October
Villanueva, and Gerard Mamuyac (Implicated Officers), expressing
4, 2005 through Resolution No. 139-2005.6 Consequently, on
the growing public clamor against the conversion of the Agoo Plaza
into a commercial center. He then requested the foregoing officers to proscribed from collateralization given its nature as property for
furnish him certified copies of various documents related to the public use.24
aforementioned conversion including, among others, the resolutions
approving the Redevelopment Plan as well as the loan agreements Aggrieved, Land Bank filed its Notice of Appeal on April 23,
for the sake of public information and transparency. 2007.25 On the other hand, the Implicated Officers’ appeal was
deemed abandoned and dismissed for their failure to file an
Unable to get any response, Cacayuran, invoking his right as a appellants’ brief despite due notice.26 In this regard, only Land
taxpayer, filed a Complaint16 against the Implicated Officers and Bank’s appeal was given due course by the CA.
Land Bank, assailing, among others, the validity of the Subject Loans
on the ground that the Plaza Lot used as collateral thereof is Ruling of the CA
property of public dominion and therefore, beyond the commerce of
man.17 In its Decision dated March 26, 2010,27 the CA affirmed with
modification the RTC’s ruling, excluding Vice Mayor Eslao from any
Upon denial of the Motion to Dismiss dated December 27, 2006,18 the personal liability arising from the Subject Loans.28
Implicated Officers and Land Bank filed their respective Answers.
It held, among others, that: (1) Cacayuran had locus standi to file his
For its part, Land Bank claimed that it is not privy to the Implicated complaint, considering that (a) he was born, raised and a bona fide
Officers’ acts of destroying the Agoo Plaza. It further asserted that resident of the Municipality; and (b) the issue at hand involved
Cacayuran did not have a cause of action against it since he was not public interest of transcendental importance;29 (2) Resolution Nos.
privy to any of the Subject Loans.19 68-2005, 139-2005, 58-2006, 128-2006 and all other related resolutions
(Subject Resolutions) were invalidly passed due to the SB’s non-
During the pendency of the proceedings, the construction of the compliance with certain sections of Republic Act No. 7160, otherwise
commercial center was completed and the said structure later known as the "Local Government Code of 1991" (LGC); (3) the Plaza
became known as the Agoo’s People Center (APC). Lot, which served as collateral for the Subject Loans, is property of
public dominion and thus, cannot be appropriated either by the State
On May 8, 2007, the SB passed Municipal Ordinance No. 02- or by private persons;30 and (4) the Subject Loans are ultra vires
2007,20 declaring the area where the APC stood as patrimonial because they were transacted without proper authority and their
property of the Municipality. collateralization constituted improper disbursement of public funds.

The Ruling of the RTC Dissatisfied, Land Bank filed the instant petition.

In its Decision dated April 10, 2007,21 the RTC ruled in favor of Issues Before the Court
Cacayuran, declaring the nullity of the Subject Loans.22 It found that
the resolutions approving the said loans were passed in a highly The following issues have been raised for the Court’s resolution: (1)
irregular manner and thus, ultra vires; as such, the Municipality is whether Cacayuran has standing to sue; (2) whether the Subject
not bound by the same.23 Moreover, it found that the Plaza Lot is
Resolutions were validly passed; and (3) whether the Subject Loans funds derived from taxation are bound to be expended as the
are ultra vires. Municipality assigned a portion of its IRA as a security for the
foregoing loans. Needless to state, the Municipality’s IRA, which
The Court’s Ruling serves as the local government unit’s just share in the national
taxes,32 is in the nature of public funds derived from taxation. The
The petition lacks merit. Court believes, however, that although these funds may be posted as
a security, its collateralization should only be deemed effective
A. Cacayuran’s standing to sue during the incumbency of the public officers who approved the
same, else those who succeed them be effectively deprived of its use.
Land Bank claims that Cacayuran did not have any standing to
contest the construction of the APC as it was funded through the In any event, it is observed that the proceeds from the Subject Loans
proceeds coming from the Subject Loans and not from public funds. had already been converted into public funds by the Municipality’s
Besides, Cacayuran was not even a party to any of the Subject Loans receipt thereof. Funds coming from private sources become
and is thus, precluded from questioning the same. impressed with the characteristics of public funds when they are
under official custody.33
The argument is untenable.
Accordingly, the first requisite has been clearly met.
It is hornbook principle that a taxpayer is allowed to sue where there
is a claim that public funds are illegally disbursed, or that public Second, as a resident-taxpayer of the Municipality, Cacayuran is
money is being deflected to any improper purpose, or that there is directly affected by the conversion of the Agoo Plaza which was
wastage of public funds through the enforcement of an invalid or funded by the proceeds of the Subject Loans. It is well-settled that
unconstitutional law. A person suing as a taxpayer, however, must public plazas are properties for public use34 and therefore, belongs to
show that the act complained of directly involves the illegal the public dominion.35 As such, it can be used by anybody and no
disbursement of public funds derived from taxation. In other words, one can exercise over it the rights of a private owner. 36 In this light,
for a taxpayer’s suit to prosper, two requisites must be met namely, Cacayuran had a direct interest in ensuring that the Agoo Plaza
(1) public funds derived from taxation are disbursed by a political would not be exploited for commercial purposes through the APC’s
subdivision or instrumentality and in doing so, a law is violated or construction. Moreover, Cacayuran need not be privy to the Subject
some irregularity is committed; and (2) the petitioner is directly Loans in order to proffer his objections thereto. In Mamba v. Lara, it
affected by the alleged act.31 has been held that a taxpayer need not be a party to the contract to
challenge its validity; as long as taxes are involved, people have a
right to question contracts entered into by the government.37
Records reveal that the foregoing requisites are present in the instant
case.
Therefore, as the above-stated requisites obtain in this case,
Cacayuran has standing to file the instant suit.
First, although the construction of the APC would be primarily
sourced from the proceeds of the Subject Loans, which Land Bank
insists are not taxpayer’s money, there is no denying that public B. Validity of the Subject Resolutions
Land Bank avers that the Subject Resolutions provided ample merely declarations of the sentiment or opinion of a lawmaking
authority for Mayor Eriguel to contract the Subject Loans. It posits body on a specific matter and are temporary in nature.39 As opposed
that Section 444(b)(1)(vi) of the LGC merely requires that the to ordinances, "no rights can be conferred by and be inferred from a
municipal mayor be authorized by the SB concerned and that such resolution."40 In this accord, it cannot be denied that the SB violated
authorization need not be embodied in an ordinance. 38 Section 444(b)(1)(vi) of the LGC altogether.

A careful perusal of Section 444(b)(1)(vi) of the LGC shows that Noticeably, the passage of the Subject Resolutions was also tainted
while the authorization of the municipal mayor need not be in the with other irregularities, such as (1) the SB’s failure to submit the
form of an ordinance, the obligation which the said local executive is Subject Resolutions to the Sangguniang Panlalawigan of La Union
authorized to enter into must be made pursuant to a law or for its review contrary to Section 56 of the LGC;41 and (2) the lack of
ordinance, viz: publication and posting in contravention of Section 59 of the LGC.42

Sec. 444. The Chief Executive: Powers, Duties, Functions and In fine, Land Bank cannot rely on the Subject Resolutions as basis to
Compensation. - validate the Subject Loans.

xxxx C. Ultra vires nature of the Subject

(b) For efficient, effective and economical governance the purpose of Loans
which is the general welfare of the municipality and its inhabitants
pursuant to Section 16 of this Code, the municipal mayor shall: Neither can Land Bank claim that the Subject Loans do not constitute
ultra vires acts of the officers who approved the same.
xxxx
Generally, an ultra vires act is one committed outside the object for
(vi) Upon authorization by the sangguniang bayan, represent the which a corporation is created as defined by the law of its
municipality in all its business transactions and sign on its behalf all organization and therefore beyond the powers conferred upon it by
bonds, contracts, and obligations, and such other documents made law.43 There are two (2) types of ultra vires acts. As held in
pursuant to law or ordinance; (Emphasis and underscoring Middletown Policemen's Benevolent Association v. Township of
supplied) Middletown:44

In the present case, while Mayor Eriguel’s authorization to contract There is a distinction between an act utterly beyond the jurisdiction
the Subject Loans was not contained – as it need not be contained – of a municipal corporation and the irregular exercise of a basic
in the form of an ordinance, the said loans and even the power under the legislative grant in matters not in themselves
Redevelopment Plan itself were not approved pursuant to any law jurisdictional. The former are ultra vires in the primary sense and
or ordinance but through mere resolutions. The distinction between void; the latter, ultra vires only in a secondary sense which does not
ordinances and resolutions is well-perceived. While ordinances are preclude ratification or the application of the doctrine of estoppel in
laws and possess a general and permanent character, resolutions are
the interest of equity and essential justice. (Emphasis and In this relation, Article 1409(1) of the Civil Code provides that a
underscoring supplied) contract whose purpose is contrary to law, morals, good customs,
public order or public policy is considered void50 and as such,
In other words, an act which is outside of the municipality’s creates no rights or obligations or any juridical
jurisdiction is considered as a void ultra vires act, while an act relations.51 Consequently, given the unlawful purpose behind the
attended only by an irregularity but remains within the Subject Loans which is to fund the commercialization of the Agoo
municipality’s power is considered as an ultra vires act subject to Plaza pursuant to the Redevelopment Plan, they are considered as
ratification and/or validation. To the former belongs municipal ultra vires in the primary sense thus, rendering them void and in
contracts which (a) are entered into beyond the express, implied or effect, non-binding on the Municipality.
inherent powers of the local government unit; and (b) do not comply
with the substantive requirements of law e.g., when expenditure of At this juncture, it is equally observed that the land on which the
public funds is to be made, there must be an actual appropriation Agoo Plaza is situated cannot be converted into patrimonial
and certificate of availability of funds; while to the latter belongs property – as the SB tried to when it passed Municipal Ordinance
those which (a) are entered into by the improper department, board, No. 02-200752 – absent any express grant by the national
officer of agent; and (b)do not comply with the formal requirements government.53 As public land used for public use, the foregoing lot
of a written contract e.g., the Statute of Frauds.45 rightfully belongs to and is subject to the administration and control
of the Republic of the Philippines.54 Hence, without the said grant,
Applying these principles to the case at bar, it is clear that the Subject the Municipality has no right to claim it as patrimonial property.
Loans belong to the first class of ultra vires acts deemed as void.
Nevertheless, while the Subject Loans cannot bind the Municipality
Records disclose that the said loans were executed by the for being ultra vires, the officers who authorized the passage of the
Municipality for the purpose of funding the conversion of the Agoo Subject Resolutions are personally liable. Case law states that public
Plaza into a commercial center pursuant to the Redevelopment Plan. officials can be held personally accountable for acts claimed to have
However, the conversion of the said plaza is beyond the been performed in connection with official duties where they have
Municipality’s jurisdiction considering the property’s nature as one acted ultra vires,55 as in this case.
for public use and thereby, forming part of the public dominion.
Accordingly, it cannot be the object of appropriation either by the WHEREFORE, the petition is DENIED. Accordingly, the March 26,
State or by private persons.46 Nor can it be the subject of lease or any 2010 Decision of the Court of Appeals in CA-G.R. CV. No. 89732 is
other contractual undertaking.47 In Villanueva v. Castañeda, hereby AFFIRMED.
Jr.,48 citing Espiritu v. Municipal Council of Pozorrubio,49 the Court
pronounced that: SO ORDERED.

x x x Town plazas are properties of public dominion, to be devoted


to public use and to be made available to the public in general. They
are outside the commerce of man and cannot be disposed of or even
leased by the municipality to private parties.1âwphi1
G.R. No. 196750 Gaylord. Cebeleo, Sr. also pre-deceased his father and was survived
by his wife, Maude, and children Cebeleo, Jr. and Neobel. 9
MA. ELENA R. DIVINAGRACIA, as Administratrix of the
ESTATE OF THE LATE SANTIAGO C. According to Santiago, upon Conrado, Sr.’s death, Cresencio,
DIVINAGRACIA, Petitioner, Conrado, Jr., Felcon (in representation of his father, Mateo, Sr., and
vs. his siblings), Coronacion, Celestial, Cecilia, Rogelio, Eduardo, and
CORONACION PARILLA, CELESTIAL NOBLEZA, CECILIA Ricardo sold their respective interests over the subject land to
LELINA, CELEDONIO NOBLEZA, MAUDE Santiago for a consideration of 447,695.66, as embodied in a Deed of
NOBLEZA, Respondents. Extrajudicial Settlement or Adjudication with Deed of Sale 10 dated
November 22, 1989 (subject document),11 which was, however, not
DECISION signed by the other heirs who did not sell their respective shares,
namely, Ceruleo, Celedonio, and Maude (in representation of his
PERLAS-BERNABE, J.: husband, Cebeleo, Sr., and their children).12 On December 22, 1989,
the same parties executed a Supplemental Contract13 whereby the
Assailed in this petition for review on certiorari1 are the vendors-heirs and Santiago agreed that out of the aforesaid
Decision2 dated March 26, 2009 and the Resolution3 dated April 6, consideration, only 109,807.93 will be paid up front, and that
2011 of the Court of Appeals (CA) in CA-G.R. CV. No. 80167, which Santiago will only pay the remaining balance of 337,887.73 upon the
set aside the Decision4 dated November 29, 2002 and the partition of the subject land.14 However, Santiago was not able to
Order5 dated April 4, 2003 of the Regional Trial Court of Iloilo City, have TCT No. T-12255 cancelled and the subject document registered
Branch 31 (RTC) in Civil Case No. 19003 and, consequently, because of Ceruleo, Celedonio, and Maude’s refusal to surrender the
dismissed Santiago C. Divinagracia's (Santiago) complaint for said title. This fact, coupled with Ceruleo, Celedonio, and Maude’s
judicial partition. failure to partition the subject land, prompted Santiago to file a
Complaint15 dated January 3, 1990 for judicial partition and for
The Facts receivership.16

Conrado Nobleza, Sr. (Conrado, Sr.) owned a 313-square meter For their part, Ceruleo, Celedonio, and Maude maintained that
parcel of land located at Cor. Fuentes-Delgado Streets, Iloilo City Santiago had no legal right to file an action for judicial partition nor
denominated as Lot 133-B-1-A and covered by Transfer Certificate of compel them to surrender TCT No. T-12255 because, inter alia: (a)
Title (TCT) No. T- 12255 (subject land).6 During his lifetime, he Santiago did not pay the full purchase price of the shares sold to
contracted two marriages: (a) the first was with Lolita Palermo with him; and (b) the subject land is a conjugal asset of Conrado Sr. and
whom he had two (2) children, namely, Cresencio and Conrado, Jr.; Eusela Niangar and, thus, only their legitimate issues may validly
and (b) the second was with Eusela Niangar with whom he had inherit the same.17
seven (7) children, namely, Mateo, Sr., Coronacion, Cecilia, Celestial,
Celedonio, Ceruleo,7 and Cebeleo, Sr. Conrado, Sr. also begot three The RTC Ruling
(3) illegitimate children, namely, Eduardo, Rogelio, and
Ricardo.8 Mateo, Sr. pre-deceased Conrado, Sr. and was survived by In a Decision18 dated November 29, 2002, the RTC ordered, among
his children Felcon, Landelin, Eusela, Giovanni, Mateo, Jr., Tito, and others, the partition of the subject land between Santiago on the one
hand, and Ceruleo, Celedonio, Maude, and the heirs of Mateo, Sr. The Issues Before the Court
(i.e., Felcon, et al.) on the other hand and, consequently, the
cancellation of TCT No. T- 12255 and the issuance of a new owner’s The issues for the Court’s resolution are whether or not the CA
duplicate certificate in favor of Santiago and the group of Ceruleo, correctly: (a) ruled that Felcon’s siblings and Cebeleo, Sr. and
Celedonio, Maude, and the heirs of Mateo, Sr. 19 The RTC found that Maude’s children are indispensable parties to Santiago’s complaint
through the subject document, Santiago became a co-owner of the for judicial partition; and (b) dismissed Santiago’s complaint for his
subject land and, as such, has the right to demand the partition of the failure to implead said omitted heirs.
same. However, the RTC held that Santiago did not validly acquire
Mateo, Sr.’s share over the subject land, considering that Felcon The Court’s Ruling
admitted the lack of authority to bind his siblings with regard to
Mateo, Sr.’s share thereon.20 The petition is partly meritorious.

On reconsideration21 of Ceruleo and herein respondents Celedonio, An indispensable party is one whose interest will be affected by the
Maude, Celestial, Coronacion, and Cecilia (respondents), the RTC court’s action in the litigation, and without whom no final
issued an Order22 dated April 4, 2003 further ordering Santiago to determination of the case can be had. The party’s interest in the
comply with the provisions of the Supplemental Contract dated subject matter of the suit and in the relief sought are so inextricably
December 22, 1989 by paying the amount of 337,887.73 upon the intertwined with the other parties’ that his legal presence as a party
partition of the subject land. to the proceeding is an absolute necessity. In his absence, there
cannot be a resolution of the dispute of the parties before the court
Dissatisfied, respondents appealed23 to the CA. Records are bereft of which is effective, complete, or equitable.30 Thus, the absence of an
any showing that the other heirs made similar appeals thereto. indispensable party renders all subsequent actions of the court null
and void, for want of authority to act, not only as to the absent
The CA Ruling parties but even as to those present.31

In a Decision24 dated March 26, 2009, the CA set aside the RTC With regard to actions for partition, Section 1, Rule 69 of the Rules of
Rulings and, consequently, dismissed Santiago’s complaint for Court requires that all persons interested in the property shall be
judicial partition.25 It held that Felcon’s siblings, as well as Maude’s joined as defendants, viz.:
children, are indispensable parties to the judicial partition of the
subject land and, thus, their non-inclusion as defendants in SEC. 1. Complaint in action for partition of real estate. – A person
Santiago’s complaint would necessarily result in its dismissal. 26 having the right to compel the partition of real estate may do so as
provided in this Rule, setting forth in his complaint the nature and
Aggrieved, the heirs of Santiago27 moved for reconsideration28 which extent of his title and an adequate description of the real estate of
was, however, denied in a Resolution29 dated April 6, 2011, hence, which partition is demanded and joining as defendants all other
this petition instituted by herein petitioner, Ma. Elena R. persons interested in the property. (Emphasis and underscoring
Divinagracia, as administratrix of Santiago’s estate. supplied)
Thus, all the co-heirs and persons having an interest in the property ownership is definitely and finally resolved, it would be premature
are indispensable parties; as such, an action for partition will not lie to effect a partition of the disputed properties.37
without the joinder of the said parties.32
In this case, while it is conceded that Santiago bought the interests of
In the instant case, records reveal that Conrado, Sr. has the following majority of the heirs of Conrado, Sr. as evidenced by the subject
heirs, legitimate and illegitimate, who are entitled to a pro-indiviso document, as a vendee, he merely steps into the shoes of the
share in the subject land, namely: Conrado, Jr., Cresencio, Mateo, Sr., vendors-heirs. Since his interest over the subject land is merely
Coronacion, Cecilia, Celestial, Celedonio, Ceruleo, Cebeleo, Sr., derived from that of the vendors- heirs, the latter should first be
Eduardo, Rogelio, and Ricardo. However, both Mateo, Sr. and determined as co-owners thereof, thus necessitating the joinder of all
Cebeleo, Sr. pre-deceased Conrado, Sr. and, thus, pursuant to the those who have vested interests in such land, i.e., the aforesaid heirs
rules on representation under the Civil Code,33 their respective of Conrado, Sr., in Santiago’s complaint.
interests shall be represented by their children, namely: (a) for
Mateo, Sr.: Felcon, Landelin, Eusela, Giovanni, Mateo, Jr., Tito, and In fine, the absence of the aforementioned indispensable parties in
Gaylord; and (b) for Cebeleo, Sr.: Cebeleo, Jr. and Neobel. 34 the instant complaint for judicial partition renders all subsequent
actions of the RTC null and void for want of authority to act, not
The aforementioned heirs – whether in their own capacity or in only as to the absent parties, but even as to those
representation of their direct ascendant – have vested rights over the present.38 Therefore, the CA correctly set aside the November 29,
subject land and, as such, should be impleaded as indispensable 2002 Decision and the April 4, 2003 Order of the RTC.
parties in an action for partition thereof. However, a reading of
Santiago’s complaint shows that as regards Mateo, Sr.’s interest, only However, the CA erred in ordering the dismissal of the complaint on
Felcon was impleaded, excluding therefrom his siblings and co- account of Santiago’s failure to implead all the indispensable parties
representatives. Similarly, with regard to Cebeleo, Sr.’s interest over in his complaint.1âwphi1 In Heirs of Mesina v. Heirs of Fian, Sr.,39 the
the subject land, the complaint impleaded his wife, Maude, when Court definitively explained that in instances of non-joinder of
pursuant to Article 97235 of the Civil Code, the proper indispensable parties, the proper remedy is to implead them and not
representatives to his interest should have been his children, to dismiss the case, to wit:
Cebeleo, Jr. and Neobel. Verily, Santiago’s omission of the aforesaid
heirs renders his complaint for partition defective. The non-joinder of indispensable parties is not a ground for the
dismissal of an action. At any stage of a judicial proceeding and/or
Santiago’s contention that he had already bought the interests of the at such times as are just, parties may be added on the motion of a
majority of the heirs and, thus, they should no longer be regarded as party or on the initiative of the tribunal concerned. If the plaintiff
indispensable parties deserves no merit. As correctly noted by the refuses to implead an indispensable party despite the order of the
CA, in actions for partition, the court cannot properly issue an order court, that court may dismiss the complaint for the plaintiff’s failure
to divide the property, unless it first makes a determination as to the to comply with the order.
existence of co- ownership. The court must initially settle the issue of
ownership, which is the first stage in an action for The remedy is to implead the non-party claimed to be indispensable.
partition.36 Indubitably, therefore, until and unless this issue of co- x x x40 (Underscoring supplied; emphases in the original)
In view of the foregoing, the correct course of action in the instant
case is to order its remand to the RTC for the inclusion of those
indispensable parties who were not impleaded and for the
disposition of the case on the merits.41

WHEREFORE, the petition is PARTLY GRANTED. Accordingly, the


Decision dated March 26, 2009 and the Resolution dated April 6,
2011 of the Court of Appeals in CA-G.R. CV. No. 80167, setting aside
the Decision dated November 29, 2002 and the Order dated April 4,
2003 of the Regional Trial Court of Iloilo City, Branch 31 in Civil
Case No. 19003, are hereby AFFIRMED with MODIFICATION
REMANDING the instant case to the court a quo, which is hereby
DIRECTED to implead all indispensable parties and, thereafter,
PROCEED with the resolution of the case on the merits WITH
DISPATCH.

SO ORDERED.