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BORLONGAN VS BDO

Nature of the Case

Before the Court are two consolidated petitions invariably assailing the foreclosure sale of a property without properly
serving the summons upon its owners.

Factual Antecedents

Sometime in 1976, Eliseo Borlongan, Jr. (Eliseo) and his wife Carmelita, acquired a real property located at No. 111,
Sampaguita St., Valle Verde II, Pasig City covered by Transfer Certificate of Title (TCT) No. 0421 (the subject property). In
2012, they went to the Registry of Deeds of Pasig City to obtain a copy of the TCT in preparation for a prospective sale of
the subject property. To their surprise, the title contained an annotation that the property covered thereby was the
subject of an execution sale in Civil Case (CC) No. 03-0713 pending before Branch 134 of the Regional Trial Court of
Makati City (Makati RTC).

Petitioner immediately procured a copy of the records of CC No. 03- 0713 and found out that respondent Banco de Oro
(BDO), formerly Equitable PCI Bank, filed a complaint for sum of money against Tancho

Corporation, the principal debtor of loan obligations obtained from the bank. Likewise impleaded were several persons,
including Carmelita, who supposedly signed four (4) security agreements totaling ₱l3,500,000 to guarantee the
obligations of Tancho Corporation.

It appears from the records of CC No. 03-0713 that on July 2, 2003, the Makati R TC issued an Order directing the service
of summons to all the defendants at the business address of Tancho Corporation provided by BDO: Fumakilla
Compound, Amang Rodriguez Avenue, Brgy. Dela Paz, Pasig City (Fumakilla Compound).

Parenthetically, the records of CC No. 03-0713 show that respondent BDO already foreclosed the Fumakilla Compound
as early as August 21, 2000, following Tancho Corporation's failure to pay its obligation, and BDO already consolidated its
ownership of the property on November 16, 2001.

Understandably, on July 31, 2003, the process server filed an Officer's Return stating that summons remained unserved as
the "defendants are no longer holding office at [Fumakilla Compound]."

On October 27, 2003, after the single attempt at personal service on Carmelita and her co-defendants, BDO moved for
leave to serve the summons by publication. On October 28, 2003, the RTC granted the motion.

On August 10, 2004, BDO filed an ex-parte Motion for the Issuance of a Writ of Attachment against the defendants,
including Carmelita. During the hearing on the motion, BDO submitted a copy of the title of the subject property. The
Makati RTC thereafter granted BDO's motion and a Writ of Attachment was issued against the defendants in CC No. 03-
0713, effectively attaching the subject property on behalf of BDO.

On December 20, 2005, BDO filed an ex-parte motion praying, among others, that the summons and the complaint be
served against Carmelita at the subject property. The Makati RTC granted the motion. On February 9, 2006, the Sheriff
filed a return stating that no actual personal service was made as Carmelita "is no longer residing at the given address
and the said address is for 'rent,' as per information gathered from the security guard on duty."

On May 30, 2006, however, BDO filed a manifestation stating that it had complied with the October 28, 2003 Order of the
Makati RTC having caused the publication of the alias summons and the complaint in People's Taliba on May 15, 2006.

Thereafter, upon BDO's motion, the Makati RTC declared the defendants in CC No. 03-0713, including Carmelita, in
default. BDO soon after proceeded to present its evidence ex-parte.

On November 29, 2007, the Makati RTC rendered a Decision holding the defendants in CC No. 03-0713 liable to pay BDO
₱32,543,856.33 plus 12% interest per annum from the time of the filing of the complaint until fully paid and attorney's fees.
The Makati RTC decision was published on June 9, 2008.
On August 20, 2008, the Makati RTC issued a Writ of Execution upon BDO's motion. The Order states that in the event that
the judgment obligors cannot pay all or part of the obligation, the sheriff shall levy upon the properties of the defendants
to satisfy the award.

On October 28, 2008, the Makati R TC' s sheriff filed a Report stating that he tried to serve the Writ of Execution upon the
defendants at Fumakilla Compound but he was not able to do so since the defendants were no longer holding office
thereat. The Sheriff also reported that, on the same day, he went to the subject property to serve the execution but
likewise failed in his attempt since Carmelita was no longer residing at the said address.

On November 11, 2008, BDO filed a Motion to Conduct Auction of the subject property. The motion was granted by the
Makati RTC on May 5, 2009 so that the subject property was sold to BDO, as the highest bidder, on October 6, 2009.

Following the discovery of the sale of their property, Eliseo executed an affidavit of adverse claim and, on January 21,
2013, filed a Complaint for Annulment of Surety Agreements, Notice of Levy on Attachment, Auction Sale and Other
Documents, docketed as CC No. 73761, with the Regional Trial Court of Pasig City (Pasig RTC). 1

He alleged in his Complaint that the subject property is a family home that belongs to the conjugal partnership of gains
he established with his wife. He further averred that the alleged surety agreements upon which the attachment of the
property was anchored were signed by his wife without his consent and did not redound to benefit their family. Thus, he
prayed that the surety agreements and all other documents and processes, including the ensuing attachment, levy and
execution sale, based thereon be nullified.

BDO filed a Motion to Dismiss the Complaint, asserting that the Pasig RTC has no jurisdiction to hear Eliseo's Complaint,
the case was barred by res judicata given the Decision and orders of the Makati RTC, and, finally, the Complaint failed
to state a cause of action.

In an Order dated May 31, 2013, the Pasig R TC dismissed the case citing lack of jurisdiction. The RTC held that it could
not pass upon matters already brought before the R TC Makati and, citing Spouses Ching v.Court of Appeals,2the
husband of a judgment debtor is not a stranger to a case who can file a separate and independent action to
determine the validity of the levy and sale of a property.

On a motion for reconsideration filed by Eliseo, the Pasig RTC reinstated the case with qualification. Relying on Buado v.
Court of Appeals,3 the Pasig RTC held that since majority of Eliseo's causes of action were premised on a claim that the
obligation contracted by his wife has not redounded to their family, and, thus, the levy on their property was illegal, his
filing of a separate action is not an encroachment on the jurisdiction of the Makati R TC, which ordered the attachment
and execution in the first place.

The Pasig RTC clarified, however, that it cannot annul the surety agreements supposedly signed by Carmelita since Eliseo
was not a party to those agreements and the validity and efficacy of these contracts had already been decided by the
Makati RTC.

Both Eliseo and BDO referred the Pasig RTC's Decision to the Court of Appeals (CA).

In its petition, docketed as CA-G.R. SP No. 133994, BDO contended that it was an error for the Pasig RTC to apply Buado
as it does not apply squarely to the circumstances of the case and has not superseded Ching. BDO maintained that by
reinstating the complaint, Pasig R TC has violated the rule prohibiting non-interference by one court with the orders of a
coequal court.

In its January 20, 2015 Decision,4 the appellate court granted BDO's petition and ordered the Pasig RTC to cease from
hearing CC No. 73761 commenced by Eliseo. In so ruling, the CA held that Eliseo is not a stranger who can initiate an
action independent from the case where the attachment and execution sale were ordered. Thus, the CA concluded
that in opting to review the validity of the levy and execution sale of the subject property pursuant to the judgment of
the Makati RTC, the Pasig RTC acted without jurisdiction.

Eliseo moved for, but was denied, reconsideration by the appellate court. Hence, he came to this Court via a Petition for
Review on Certiorari under Rule 45 of the Rules of Court, docketed as G.R. No. 218540.

On August 19, 2015, the Court issued a Resolution denying Eliseo's petition. Eliseo begs to differ and takes exception from
the said holding in his motion for reconsideration dated October 5, 2015, which is presently for Resolution by this Court.
Meanwhile, on an ex-parte omnibus motion filed by BDO, the Makati RTC ordered the issuance of a Writ of Possession
and the issuance of a new TCT covering the subject property in favor of the respondent bank.

Arguing that the Makati R TC had not acquired jurisdiction over her person as the service of the summons and the other
processes of the court was defective, Carmelita filed a Petition for Annulment of Judgment (With Urgent Prayer for
Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction) with the CA, docketed as CA-G.R. SP No.
134664.

Before the CA can act on the Petition for Annulment, the Borlongans found posted on the subject property a Writ of
Possession dated August 1, 2014 and a Notice to Vacate dated August 29, 2014.

In its Resolution dated November 12, 2014,5 the appellate court denied Carmelita's prayer for the issuance of a
Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction (WPI).

Aggrieved, Carmelita interposed a motion for the reconsideration of the CA's November 12, 2014 Resolution. On March
23, 2015, however, the appellate court denied her motion for reconsideration, holding that "upon the expiration of the
redemption period, the right of the purchaser to the possession of the foreclosed property becomes absolute."

Thus, on April 27, 2015, Carmelita filed a Petition for Review, docketed as G.R. No. 217617, before this Court, ascribing to
the appellate court the commission of serious reversible errors. The Court denied the petition on June 22, 2015. Hence, on
September 1, 2015, Carmelita interposed a Motion for Reconsideration urging the Court to take a second hard look at
the facts of the case and reconsider its stance.

Considering that both cases originated from the same facts and involved interrelated issues, on January 25, 2016, the
Court resolved to consolidate G.R. No. 218540 with G.R. No. 217617.

Issues

The question posed in G.R. No. 217617 is whether or not the CA erred in refusing to issue a TRO and/or WPI stopping the
consolidation of BDO's ownership over the subject property. On the other hand, the issue in G.R. No. 218540 revolves
around whether the Pasig RTC has jurisdiction to hear and decide a case filed by the non-debtor husband to annul the
levy and execution sale of the subject property ordered by the Makati RTC against his wife.

Our Ruling

A reexamination of the antecedents and arguments in G.R. Nos. 217617 and 218540 compels the reversal of the
appellate court's resolutions in both cases.

G.R. No. 217617

The Issuance of a TRO/WPI is not a


prejudgment of the main case

On the propriety of CA' s refusal to issue a TRO/WPI, it is worthy to note that Section 3, Rule 58 of the Rules of Court
provides the grounds for the issuance of a preliminary injunction, viz:

Section 3. Grounds for issuance of preliminary injunction. - A preliminary injunction may be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring the performance of
an act or acts either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the
litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or
suffering to be done some act or acts probably in violation of the rights of the applicant respecting the subject
of the action or proceeding, and tending to render the judgment ineffectual.
From the foregoing provision, it is clear that a writ of preliminary injunction is warranted where there is a showing that
there exists a right to be protected and that the acts against which the writ is to be directed violate an established right.
Otherwise stated, for a court to decide on the propriety of issuing a TRO and/or a WPI, it must only inquire into the
existence of two things: (1) a clear and unmistakable right that must be protected; and (2) an urgent and paramount
necessity for the writ to prevent serious damage.

In Levi Strauss (Phils.) Inc. v. Vogue Traders Clothing Company,6 the Court already explained that the issuance of a TRO is
not conclusive of the outcome of the case as it requires but a sampling of the evidence, viz:

Indeed, a writ of preliminary injunction is generally based solely on initial and incomplete evidence adduced by the
applicant (herein petitioner). The evidence submitted during the hearing of the incident is not conclusive, for only a
"sampling" is needed to give the trial court an idea of the justification for its issuance pending the decision of the case on
the merits. As such, the findings of fact and opinion of a court when issuing the writ of preliminary injunction are
interlocutory in nature. Moreover, the sole object of a preliminary injunction is to preserve the status quo until the merits
of the case can be heard. Since Section 4 of Rule 58 of the Rules of Civil Procedure gives the trial courts sufficient
discretion to evaluate the conflicting claims in an application for a provisional writ which often involves a factual
determination, the appellate courts generally will not interfere in the absence of manifest abuse of such discretion. A writ
of preliminary injunction would become a prejudgment of a case only when it grants the main prayer in the complaint or
responsive pleading, so much so that there is nothing left for the trial court to try except merely incidental matters.
(emphasis supplied)

Notably, the primary prayer of the Petition for Annulment before the appellate court is the declaration of the nullity of
the proceedings in the R TC and its Decision dated November 29, 2007; it is not merely confined to the prevention of the
issuance of the writ of possession and the consolidation of the ownership of the subject property in BDO's name-the
concerns of the prayer for the TRO and/or WPI.

Indeed, the petitioner's prayer for the issuance of a TRO and/or WPI was intended to preserve the status quo ante, 7and
not to pre-empt the appellate court's decision on the merits of her petition for annulment. Thus, it was a grievous error on
the part of the CA to deny her of this provisional remedy.

The appellate court's error is readily apparent given the stark existence of the grounds for the issuance of a writ of
preliminary injunction.

On the first ground, petitioner has a clear and unmistakable right that must be protected. This right is not just her
proprietary rights over the subject property but her constitutionally protected right to due process before she can be
deprived of her property. No less than Section 1 of the Bill of Rights of the 1987 Constitution mandates that:

No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the
equal protection of the laws. (emphasis supplied)

In its classic formulation, due process means that any person with interest to the thing in litigation must be
notifiedand given an opportunity to def end that interest. 8 Thus, as the essence of due process lies in the reasonable
opportunity to be heard and to submit any evidence the defendant may have in support of her defense, she must be
properly served the summons of the court. In other words, the service of summons is a vital and indispensable ingredient
of due process 9 and compliance with the rules regarding the service of the summons is as much an issue of due process
as it is of jurisdiction. 10 Unfortunately, as will be discussed, it would seem that the Constitutional right of the petitioner to
be properly served the summons and be notified has been disregarded by the officers of the trial court.

At this very juncture, the existence of the second ground for the issuance of a TRO and/or WPI is self-evident. Without a
TRO and/or WPI enjoining the respondent bank from continuing in the possession and consolidating the ownership of the
subject property, petitioner's right to be afforded due process will unceasingly be violated.

It need not be stressed that a continuous violation of constitutional rights is by itself a grave and irreparable injury that this
or any court cannot plausibly tolerate.

Without a doubt, the appellate court should have acted intrepidly and issued the TRO and/or WPI posthaste to protect
the constitutional rights of petitioner, as it is duty-bound to do.

The performance of official duty was


not regular
Regrettably, the appellate court fell short in the fulfillment of its mandate and instead relied on the disputable
presumption that "official duty has been regularly performed." The Court cannot subscribe to the position taken by the
appellate court.

As a rule, summons should be personally served on a defendant. When summons cannot be served personally within a
reasonable period of time, substituted service may be resorted to. Service of summons by publication can be resorted to
only if the defendant's "whereabouts are unknown and cannot be ascertained by diligent inquiry." The relevant sections
of Rule 14 of the Rules of Court provide, thus:

SEC. 6. Service in person on defendant. - Whenever practicable, the summons shall be served by handing a copy
thereof to the defendant in person, or, if he refuses to receive and sign for it, by tendering it to him.

SEC. 7. Substituted service. - If, for justifiable causes, the defendant cannot be served within a reasonable time as
provided in the preceding section, service may be effected (a) by leaving copies of the summons at the defendant's
residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copies at
defendant's office or regular place of business with some competent person in charge thereof.

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SEC. 14. Service upon defendant whose identity or whereabouts are unknown. - In any action where the defendant is
designated as an unknown owner, or the like, or whenever his whereabouts are unknown and cannot be ascertained by
diligent inquiry, service may, by leave of court, be effected upon him by publication in a newspaper of general
circulation and in such places and for such time as the court may order.

It is, therefore, proper to state that the hierarchy and rules in the service of summons are as follows:

(1) Personal service;

(2) Substituted service, if for justifiable causes the defendant cannot be served within a reasonable time; and

(3) Service by publication, whenever the defendant's whereabouts are unknown and cannot be ascertained
by diligent inquiry.

Simply put, personal service of summons is the preferred mode. And, the rules on the service of summons other than by
personal service may be used only as prescribed and only in the circumstances authorized by statute. Thus, the
impossibility of prompt personal service must be shown by stating that efforts have been made to find the defendant
personally and that such efforts have failed before substituted service may be availed. 11Furthermore, their rules must be
followed strictly, faithfully and fully as they are extraordinary in character and considered in derogation of the usual
method of service.

In Manotoc v. Court of Appeals, 12 the Court enumerated and explained the requirements to effect a valid service of
summons other than by personal service, viz:

(1) Impossibility of Prompt Personal Service

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Sheriffs are asked to discharge their duties on the service of summons with due care, utmost diligence, and reasonable
promptness and speed so as not to prejudice the expeditious dispensation of justice. Thus, they are enjoined to try their
best efforts to accomplish personal service on defendant. On the other hand, since the defendant is expected to try to
avoid and evade service of summons, the sheriff must be resourceful, persevering, canny, and diligent in serving the
process on the defendant. For substituted service of summons to be available, there must be several attempts by the
sheriff to personally serve the summons within a reasonable period [of one month) which eventually resulted in failure to
prove impossibility of prompt service. "Several attempts" means at least three (3) tries, preferably on at least two different
dates. In addition, the sheriff must cite why such efforts were unsuccessful. It is only then that impossibility of service can
be confirmed or accepted.

(2) Specific Details in the Return


The sheriff must describe in the Return of Summons the facts and circumstances surrounding the attempted personal
service. The efforts made to find the defendant and the reasons behind the failure must be clearly narrated in detail in
the Return. The date and time of the attempts on personal service, the inquiries made to locate the defendant, the
name/s of the occupants of the alleged residence or house of defendant and all other acts done, though futile, to serve
the summons on defendant must be specified in the Return to justify substituted service. The form on Sheriffs Return of
Summons on Substituted Service prescribed in the Handbook for Sheriffs published by the Philippine Judicial Academy
requires a narration of the efforts made to find the defendant personally and the fact of failure. Supreme Court
Administrative Circular No. 5 dated November 9, 1989 requires that "impossibility of prompt service should be shown by
stating the efforts made to find the defendant personally and the failure of such efforts," which should be made in the
proof of service.

In the case now before Us, the summons was served on the petitioner by publication. Yet, the circumstances surrounding
the case do not justify the resort.

Consider: in July 2003, the sheriff attempted to serve the summons on the defendants, including petitioner Carmelita, at
Fumakilla Compound, i.e., at the property already foreclosed, acquired, and possessed by the respondent bank as early
as August 2001. Immediately after this single attempt at personal service in July 2003, the respondent bank moved in
October 2003 for leave to serve the summons by publication (and not even substituted service), which motion the RTC
granted.

Clearly, there was no diligent effort made to find the petitioner and properly serve her the summons before the service
by publication was allowed. Neither was it impossible to locate the residence of petitioner and her whereabouts.

It should be noted that the principal obligor in CC No. 03-0713 was Tancho Corporation and petitioner Carmelita was
impleaded only because she supposedly signed a surety agreement as a director. As a juridical person, Tancho
Corporation is required to file mandatory corporate papers with the Securities and Exchange Commission (SEC), such as
its General Information Sheet (GIS). In 1997 and 2000, the GIS filed by Tancho Corporation with the SEC provided the
names of its directors and their addresses. One of these directors included petitioner Carmelita with her address listed at
41 Chicago St., Quezon City. The GIS of Tancho Corporation was readily available to the public including the RTC's
process server and respondent bank.

Patently, it cannot be plausibly argued that it was impossible to find the petitioner and personally serve her with
summons. In like manner, it can hardly be stated that the process server regularly performed his duty.

The subject property was not


foreclosed by the respondent bank;
right of BDO to the possession of the
subject property is questionable

Still unwilling to issue the TRO and/or WPI fervently prayed for by petitioner, the appellate court held that "upon the
expiration of the redemption period, the right of the purchaser to the possession of the foreclosed property becomes
absolute." This Court cannot affirm the appellate court's ruling.

At the outset, it must be pointed out that the subject property was never mortgaged to, much less foreclosed by, the
respondent bank. Thus, it was error for the CA to refer to the subject property as "foreclosed property."

Rather, as disclosed by the records, the possession of the subject property was acquired by BDO through attachment
and later by execution sale. However, it is presumptive to state that the right of BDO over the possession of the subject
property is now absolute considering that there is an action that questions the validity of the bank's acquisition over the
same property.

In Cometa v. Intermediate Appellate Court, 13 we explained that the expiration of the redemption period does not
automatically vest in the auction purchaser an absolutely possessory right over the property, viz:

From the foregoing discussion, it can be seen that the writ of possession may issue in favor of a purchaser in an execution
sale when the deed of conveyance has been executed and delivered to him after the period of redemption has
expired and no redemption has been made by the judgment debtor.

A writ of possession is complementary to a writ of execution (see Vda. de Bogacki v. Inserto, 111 SCRA 356, 363), and in
an execution sale, it is a consequence of a writ of execution, a public auction sale, and the fulfillment of several other
conditions for conveyance set by law. The issuance of a writ of possession is dependent on the valid execution of the
procedural stages preceding it. Any flaw afflicting any of its stages, therefore, could affect the validity of its issuance.

In the case at bar, the validity of the levy and sale of the properties is directly put in issue in another case by the
petitioners. This Court finds it an issue which requires pre-emptive resolution. For if the respondent acquired no interest in
the property by virtue of the levy and sale, then, he is not entitled to its possession.

The respondent appellate court's emphasis on the failure of The petitioner to redeem the properties within the period
required by law is misplaced because redemption, in this case, is inconsistent with the petitioner's claim of invalidity of
levy and sale. Redemption is an implied admission of the regularity of the sale and would estop the petitioner from later
impugning its validity on that ground. (emphasis supplied)

Thus, even given the expiration of the redemption period, a TRO and/or WPI is still obtainable and warranted where the
validity of the acquisition of the possession is afflicted by Constitutional and procedural infirmities.

G.R. No. 218540


Eliseo can file an independent action
for the annulment of the attachment
of their conjugal property

As to the question of the Pasig RTC' s jurisdiction to hear Eliseo's complaint, we cannot subscribe to BDO' s contention
that Eliseo cannot file a separate and independent action for the annulment of the levy on their conjugal property.

Section 16, Rule 39 of the Rules of Court allows third-party claimants of properties under execution to vindicate their
claims to the property in a separate action with another court. It states, thus:

SECTION 16. Proceedings Where Property Claimed by Third Person. - If the property levied on is claimed by any person
other than the judgment obligor or his agent, and such person makes an affidavit of his title thereto or right to the
possession thereof, stating the grounds of such right or title, and serves the same upon the officer making the levy and a
copy thereof upon the judgment obligee, the officer shall not be bound to keep the property, unless such judgment
obligee, on demand of the officer, files a bond approved by the court to indemnify the third-party claimant in a sum not
less than the value of the property levied on. In case of disagreement as to such value, the same shall be determined by
the court issuing the writ of execution. No claim for damages for the taking or keeping of the property may be enforced
against the bond unless the action therefor is filed within one hundred twenty (120) days from the date of the filing of the
bond.

The officer shall not be liable for damages for the taking or keeping of the property, to any third-party claimant if such
bond is filed. Nothing herein contained shall prevent such claimant or any third person from vindicating his claim to the
property in a separate action, or prevent the judgment obligee from claiming damages in the same or a separate
action against a third-party claimant who filed a frivolous or plainly spurious claim. (emphasis supplied)

Clearly, the availability of the remedy provided under the foregoing provision requires only that that the claim is a third-
party or a "stranger" to the case. The poser then is this: is the husband, who was not a party to the suit but whose
conjugal property was executed on account of the other spouse's debt, a "stranger" to the suit? In Buado v. Court of
Appeals,14 this Court had the opportunity to clarify that, to resolve the issue, it must first be determined whether the debt
had redounded to the benefit of the conjugal partnership or not. In the negative, the spouse is a stranger to the suit who
can file an independent separate action, distinct from the action in which the writ was issued. We held, thus:

A third-party claim must be filed [by] a person other than the judgment debtor or his agent. In other words, only a
stranger to the case may file a third-party claim.

This leads us to the question: Is the husband, who was not a party to the suit but whose conjugal property is being
executed on account of the other spouse being the judgment obligor, considered a "stranger?"

xxxx

Pursuant to Mariano however, it must further be settled whether the obligation of the judgment debtor redounded to the
benefit of the conjugal partnership or not.
Petitioners argue that the obligation of the wife arising from her criminal liability is chargeable to the conjugal
partnership.1âwphi1 We do not agree.

There is no dispute that contested property is conjugal in nature. Article 122 of the Family Code explicitly provides that
payment of personal debts contracted by the husband or the wife before or during the marriage shall not be charged
to the conjugal partnership except insofar as they redounded to the benefit of the family.

xxxx

Parenthetically, by no stretch of imagination can it be concluded that the civil obligation arising from the crime of
slander committed by Erlinda redounded to the benefit of the conjugal partnership.

To reiterate, conjugal property cannot be held liable for the personal obligation contracted by one spouse, unless some
advantage or benefit is shown to have accrued to the conjugal partnership.

xxxx

Hence, the filing of a separate action by respondent is proper and jurisdiction is thus vested on Branch 21. (emphasis
supplied)

In the present case, it is not disputed that the conjugal property was attached on the basis of a surety
agreement allegedly signed by Carmelita for and in behalf of Tancho Corporation. In our 2004 Decision in Spouses Ching
v. Court of Appeals, 15 we elucidated that there is no presumption that the conjugal partnership is benefited when a
spouse enters into a contract of surety, holding thusly:

In this case, the private respondent failed to prove that the conjugal partnership of the petitioners was benefited by the
petitioner-husband's act of executing a continuing guaranty and suretyship agreement with the private respondent for
and in behalf of PBMCI. The contract of loan was between the private respondent and the PBMCI, solely for the benefit
of the latter. No presumption can be inferred from the fact that when the petitioner-husband entered into an
accommodation agreement or a contract of surety, the conjugal partnership would thereby be benefited. The private
respondent was burdened to establish that such benefit redounded to the conjugal partnership.

It could be argued that the petitioner-husband was a member of the Board of Directors of PBMCI and was one of its top
twenty stockholders, and that the shares of stocks of the petitioner-husband and his family would appreciate if the
PBMCI could be rehabilitated through the loans obtained; that the petitioner-husband's career would be enhanced
should PBMCI survive because of the infusion of fresh capital. However, these are not the benefits contemplated by
Article 161 of the New Civil Code. The benefits must be those directly resulting from the loan. They cannot merely be a
by-product or a spin-off of the loan itself.

This is different from the situation where the husband borrows money or receives services to be used for his own business
or profession. In the Ayala case, we ruled that it is such a contract that is one within the term "obligation for the benefit of
the conjugal partnership." Thus:

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The Court held in the same case that the rulings of the Court in Cobb-Perez and G-Tractors, Inc. are not controlling
because the husband, in those cases, contracted the obligation for his own business. In this case, the petitioner-husband
acted merely as a surety for the loan contracted by the PBMCI from the private respondent. (emphasis supplied)

Furthermore, it is not apparent from the records of this case that BDO had established the benefit to the conjugal
partnership flowing from the surety agreement allegedly signed by Carmelita. Thus, Eliseo's claim over the subject
property lodged with the RTC Pasig is proper, with the latter correctly exercising jurisdiction thereon.

Besides, BDO's reliance on Spouses Ching v. Court of Appeals16 (2003) is improper. In the present case, Eliseo and his wife
discovered the attachment of their conjugal property only after the finality of the decision by the R TC Makati. There
was, therefore, no opportunity for Eliseo to intervene in the case before the R TC Makati which attached the conjugal
property, as a motion to intervene can only be filed "at any time before rendition of judgment by the trial court." 17 This
spells the whale of difference between the case at bar and the earlier Spouses Ching. Unlike in the present case, the
debtor in the case cited by BDO was properly informed of the collection suit and his spouse had the opportunity to
question the attachment of their conjugal property before the court that issued the levy on attachment, but simply
refused to do so. Thus, to now deny Eliseo the opportunity to question the attachment made by the R TC Makati in a
separate and independent action will be to, again, refuse him the due process of law before their property is taken. As
this Court is duty-bound to protect and enforce Constitutional rights, this we cannot allow.

WHEREFORE, the petitions are GRANTED.

(1) The January 20, 2015 Decision and May 26, 2015 Resolution of the Court of Appeals in CA-G.R. SP No. 133994
are hereby REVERSED and SETASIDE. The Regional Trial Court of Pasig, Branch 155 is ordered to continue with the
proceedings and decide Civil Case No. 73761 with reasonable dispatch.

(2) The November 12, 2014 and March 23, 2015 Resolutions of the appellate court in CA-G.R. SP No. 134664
are REVERSED and SETASIDE.

Accordingly, let a Temporary Restraining Order (TRO) be issued enjoining, prohibiting, and preventing respondent Banco
De Oro, its assigns, transferees, successors, or any and all other persons acting on its behalf from possessing, selling,
transferring, encumbering or otherwise exercising acts of ownership over the property subject of the controversy. Said
TRO shall remain valid and effective until such time as the rights and interests of the parties in CA-G.R. SP No. 134664 shall
have been determined and finally resolved.

SO ORDERED.
SUN INSURANCE VS ASUNCION

Again the Court is asked to resolve the issue of whether or not a court acquires jurisdiction over a case when the correct
and proper docket fee has not been paid.

On February 28, 1984, petitioner Sun Insurance Office, Ltd. (SIOL for brevity) filed a complaint with the Regional Trial Court
of Makati, Metro Manila for the consignation of a premium refund on a fire insurance policy with a prayer for the judicial
declaration of its nullity against private respondent Manuel Uy Po Tiong. Private respondent as declared in default for
failure to file the required answer within the reglementary period.

On the other hand, on March 28, 1984, private respondent filed a complaint in the Regional Trial Court of Quezon City for
the refund of premiums and the issuance of a writ of preliminary attachment which was docketed as Civil Case No. Q-
41177, initially against petitioner SIOL, and thereafter including E.B. Philipps and D.J. Warby as additional defendants. The
complaint sought, among others, the payment of actual, compensatory, moral, exemplary and liquidated damages,
attorney's fees, expenses of litigation and costs of the suit. Although the prayer in the complaint did not quantify the
amount of damages sought said amount may be inferred from the body of the complaint to be about Fifty Million Pesos
(P50,000,000.00).

Only the amount of P210.00 was paid by private respondent as docket fee which prompted petitioners' counsel to raise
his objection. Said objection was disregarded by respondent Judge Jose P. Castro who was then presiding over said
case. Upon the order of this Court, the records of said case together with twenty-two other cases assigned to different
branches of the Regional Trial Court of Quezon City which were under investigation for under-assessment of docket fees
were transmitted to this Court. The Court thereafter returned the said records to the trial court with the directive that they
be re-raffled to the other judges in Quezon City, to the exclusion of Judge Castro. Civil Case No. Q-41177 was re-raffled
to Branch 104, a sala which was then vacant.

On October 15, 1985, the Court en banc issued a Resolution in Administrative Case No. 85-10-8752-RTC directing the
judges in said cases to reassess the docket fees and that in case of deficiency, to order its payment. The Resolution also
requires all clerks of court to issue certificates of re-assessment of docket fees. All litigants were likewise required to
specify in their pleadings the amount sought to be recovered in their complaints.

On December 16, 1985, Judge Antonio P. Solano, to whose sala Civil Case No. Q-41177 was temporarily assigned,
issuedan order to the Clerk of Court instructing him to issue a certificate of assessment of the docket fee paid by private
respondent and, in case of deficiency, to include the same in said certificate.

On January 7, 1984, to forestall a default, a cautionary answer was filed by petitioners. On August 30,1984, an amended
complaint was filed by private respondent including the two additional defendants aforestated.

Judge Maximiano C. Asuncion, to whom Civil Case No. Q41177 was thereafter assigned, after his assumption into office
on January 16, 1986, issued a Supplemental Order requiring the parties in the case to comment on the Clerk of Court's
letter-report signifying her difficulty in complying with the Resolution of this Court of October 15, 1985 since the pleadings
filed by private respondent did not indicate the exact amount sought to be recovered. On January 23, 1986, private
respondent filed a "Compliance" and a "Re-Amended Complaint" stating therein a claim of "not less than Pl0,000,000. 00
as actual compensatory damages" in the prayer. In the body of the said second amended complaint however, private
respondent alleges actual and compensatory damages and attorney's fees in the total amount of about P44,601,623.70.

On January 24, 1986, Judge Asuncion issued another Order admitting the second amended complaint and stating
therein that the same constituted proper compliance with the Resolution of this Court and that a copy thereof should be
furnished the Clerk of Court for the reassessment of the docket fees. The reassessment by the Clerk of Court based on
private respondent's claim of "not less than P10,000,000.00 as actual and compensatory damages" amounted to
P39,786.00 as docket fee. This was subsequently paid by private respondent.

Petitioners then filed a petition for certiorari with the Court of Appeals questioning the said order of Judie Asuncion dated
January 24, 1986.

On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim of P20,000,000.00 as
d.qmages so the total claim amounts to about P64,601,623.70. On October 16, 1986, or some seven months after filing
the supplemental complaint, the private respondent paid the additional docket fee of P80,396.00.1

On August 13, 1987, the Court of Appeals rendered a decision ruling, among others, as follows:
WHEREFORE, judgment is hereby rendered:

1. Denying due course to the petition in CA-G.R. SP No. 1, 09715 insofar as it seeks annulment of the
order

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

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

Hence, the instant petition.

During the pendency of this petition and in conformity with the said judgment of respondent court, private respondent
paid the additional docket fee of P62,432.90 on April 28, 1988. 3

The main thrust of the petition is that the Court of Appeals erred in not finding that the lower court did not acquire
jurisdiction over Civil Case No. Q-41177 on the ground of nonpayment of the correct and proper docket fee. Petitioners
allege that while it may be true that private respondent had paid the amount of P182,824.90 as docket fee as herein-
above related, and considering that the total amount sought to be recovered in the amended and supplemental
complaint is P64,601,623.70 the docket fee that should be paid by private respondent is P257,810.49, more or less. Not
having paid the same, petitioners contend that the complaint should be dismissed and all incidents arising therefrom
should be annulled. In support of their theory, petitioners cite the latest ruling of the Court in Manchester Development
Corporation vs. CA, 4 as follows:

The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An
amendment of the complaint or similar pleading will not thereby vest jurisdiction in the Court, much
less the payment of the docket fee based on the amounts sought in the amended pleading. The
ruling in the Magaspi Case in so far as it is inconsistent with this pronouncement is overturned and
reversed.

On the other hand, private respondent claims that the ruling in Manchester cannot apply retroactively to Civil Case No.
Q41177 for at the time said civil case was filed in court there was no such Manchester ruling as yet. Further, private
respondent avers that what is applicable is the ruling of this Court in Magaspi v. Ramolete, 5 wherein this Court held that
the trial court acquired jurisdiction over the case even if the docket fee paid was insufficient.

The contention that Manchester cannot apply retroactively to this case is untenable. Statutes regulating the procedure
of the courts will be construed as applicable to actions pending and undetermined at the time of their passage.
Procedural laws are retrospective in that sense and to that extent. 6

In Lazaro vs. Endencia and Andres, 7 this Court held that the payment of the full amount of the docket fee is an
indispensable step for the perfection of an appeal. In a forcible entry and detainer case before the justice of the peace
court of Manaoag, Pangasinan, after notice of a judgment dismissing the case, the plaintiff filed a notice of appeal with
said court but he deposited only P8.00 for the docket fee, instead of P16.00 as required, within the reglementary period
of appeal of five (5) days after receiving notice of judgment. Plaintiff deposited the additional P8.00 to complete the
amount of the docket fee only fourteen (14) days later. On the basis of these facts, this court held that the Court of First
Instance did notacquire jurisdiction to hear and determine the appeal as the appeal was not thereby perfected.

In Lee vs. Republic, 8 the petitioner filed a verified declaration of intention to become a Filipino citizen by sending it
through registered mail to the Office of the Solicitor General in 1953 but the required filing fee was paid only in 1956,
barely 5V2 months prior to the filing of the petition for citizenship. This Court ruled that the declaration was not filed in
accordance with the legal requirement that such declaration should be filed at least one year before the filing of the
petition for citizenship. Citing Lazaro, this Court concluded that the filing of petitioner's declaration of intention on
October 23, 1953 produced no legal effect until the required filing fee was paid on May 23, 1956.

In Malimit vs. Degamo, 9 the same principles enunciated in Lazaro and Lee were applied. It was an original petition
for quo warranto contesting the right to office of proclaimed candidates which was mailed, addressed to the clerk of
the Court of First Instance, within the one-week period after the proclamation as provided therefor by law.10However, the
required docket fees were paid only after the expiration of said period. Consequently, this Court held that the date of
such payment must be deemed to be the real date of filing of aforesaid petition and not the date when it was mailed.

Again, in Garica vs, Vasquez, 11 this Court reiterated the rule that the docket fee must be paid before a court will act on
a petition or complaint. However, we also held that said rule is not applicable when petitioner seeks the probate of
several wills of the same decedent as he is not required to file a separate action for each will but instead he may have
other wills probated in the same special proceeding then pending before the same court.

Then in Magaspi, 12 this Court reiterated the ruling in Malimit and Lee that a case is deemed filed only upon payment of
the docket fee regardless of the actual date of its filing in court. Said case involved a complaint for recovery of
ownership and possession of a parcel of land with damages filed in the Court of First Instance of Cebu. Upon the
payment of P60.00 for the docket fee and P10.00 for the sheriffs fee, the complaint was docketed as Civil Case No. R-
11882. The prayer of the complaint sought that the Transfer Certificate of Title issued in the name of the defendant be
declared as null and void. It was also prayed that plaintiff be declared as owner thereof to whom the proper title should
be issued, and that defendant be made to pay monthly rentals of P3,500.00 from June 2, 1948 up to the time the
property is delivered to plaintiff, P500,000.00 as moral damages, attorney's fees in the amount of P250,000.00, the costs of
the action and exemplary damages in the amount of P500,000.00.

The defendant then filed a motion to compel the plaintiff to pay the correct amount of the docket fee to which an
opposition was filed by the plaintiff alleging that the action was for the recovery of a parcel of land so the docket fee
must be based on its assessed value and that the amount of P60.00 was the correct docketing fee. The trial court
ordered the plaintiff to pay P3,104.00 as filing fee.

The plaintiff then filed a motion to admit the amended complaint to include the Republic as the defendant. In the
prayer of the amended complaint the exemplary damages earlier sought was eliminated. The amended prayer merely
sought moral damages as the court may determine, attorney's fees of P100,000.00 and the costs of the action. The
defendant filed an opposition to the amended complaint. The opposition notwithstanding, the amended complaint was
admitted by the trial court. The trial court reiterated its order for the payment of the additional docket fee which plaintiff
assailed and then challenged before this Court. Plaintiff alleged that he paid the total docket fee in the amount of
P60.00 and that if he has to pay the additional fee it must be based on the amended complaint.

The question posed, therefore, was whether or not the plaintiff may be considered to have filed the case even if the
docketing fee paid was not sufficient. In Magaspi, We reiterated the rule that the case was deemed filed only upon the
payment of the correct amount for the docket fee regardless of the actual date of the filing of the complaint; that there
was an honest difference of opinion as to the correct amount to be paid as docket fee in that as the action appears to
be one for the recovery of property the docket fee of P60.00 was correct; and that as the action is also one, for
damages, We upheld the assessment of the additional docket fee based on the damages alleged in the amended
complaint as against the assessment of the trial court which was based on the damages alleged in the original
complaint.

However, as aforecited, this Court overturned Magaspi in Manchester. Manchester involves an action for torts and
damages and specific performance with a prayer for the issuance of a temporary restraining order, etc. The prayer in
said case is for the issuance of a writ of preliminary prohibitory injunction during the pendency of the action against the
defendants' announced forfeiture of the sum of P3 Million paid by the plaintiffs for the property in question, the
attachment of such property of defendants that may be sufficient to satisfy any judgment that may be rendered, and,
after hearing, the issuance of an order requiring defendants to execute a contract of purchase and sale of the subject
property and annul defendants' illegal forfeiture of the money of plaintiff. It was also prayed that the defendants be
made to pay the plaintiff jointly and severally, actual, compensatory and exemplary damages as well as 25% of said
amounts as may be proved during the trial for attorney's fees. The plaintiff also asked the trial court to declare the tender
of payment of the purchase price of plaintiff valid and sufficient for purposes of payment, and to make the injunction
permanent. The amount of damages sought is not specified in the prayer although the body of the complaint alleges
the total amount of over P78 Millon allegedly suffered by plaintiff.

Upon the filing of the complaint, the plaintiff paid the amount of only P410.00 for the docket fee based on the nature of
the action for specific performance where the amount involved is not capable of pecuniary estimation. However, it was
obvious from the allegations of the complaint as well as its designation that the action was one for damages and
specific performance. Thus, this court held the plaintiff must be assessed the correct docket fee computed against the
amount of damages of about P78 Million, although the same was not spelled out in the prayer of the complaint.

Meanwhile, plaintiff through another counsel, with leave of court, filed an amended complaint on September 12, 1985
by the inclusion of another co-plaintiff and eliminating any mention of the amount of damages in the body of the
complaint. The prayer in the original complaint was maintained.
On October 15, 1985, this Court ordered the re-assessment of the docket fee in the said case and other cases that were
investigated. On November 12, 1985, the trial court directed the plaintiff to rectify the amended complaint by stating the
amounts which they were asking for. This plaintiff did as instructed. In the body of the complaint the amount of damages
alleged was reduced to P10,000,000.00 but still no amount of damages was specified in the prayer. Said amended
complaint was admitted.

Applying the principle in Magaspi that "the case is deemed filed only upon payment of the docket fee regardless of the
actual date of filing in court," this Court held that the trial court did not acquire jurisdiction over the case by payment of
only P410.00 for the docket fee. Neither can the amendment of the complaint thereby vest jurisdiction upon the Court.
For all legal purposes there was no such original complaint duly filed which could be amended. Consequently, the order
admitting the amended complaint and all subsequent proceedings and actions taken by the trial court were declared
null and void.13

The present case, as above discussed, is among the several cases of under-assessment of docket fee which were
investigated by this Court together with Manchester. The facts and circumstances of this case are similar to Manchester.
In the body of the original complaint, the total amount of damages sought amounted to about P50 Million. In the prayer,
the amount of damages asked for was not stated. The action was for the refund of the premium and the issuance of the
writ of preliminary attachment with damages. The amount of only P210.00 was paid for the docket fee. On January 23,
1986, private respondent filed an amended complaint wherein in the prayer it is asked that he be awarded no less than
P10,000,000.00 as actual and exemplary damages but in the body of the complaint the amount of his pecuniary claim is
approximately P44,601,623.70. Said amended complaint was admitted and the private respondent was reassessed the
additional docket fee of P39,786.00 based on his prayer of not less than P10,000,000.00 in damages, which he paid.

On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim of P20,000,000.00 in
damages so that his total claim is approximately P64,601,620.70. On October 16, 1986, private respondent paid an
additional docket fee of P80,396.00. After the promulgation of the decision of the respondent court on August 31, 1987
wherein private respondent was ordered to be reassessed for additional docket fee, and during the pendency of this
petition, and after the promulgation of Manchester, on April 28, 1988, private respondent paid an additional docket fee
of P62,132.92. Although private respondent appears to have paid a total amount of P182,824.90 for the docket fee
considering the total amount of his claim in the amended and supplemental complaint amounting to about
P64,601,620.70, petitioner insists that private respondent must pay a docket fee of P257,810.49.

The principle in Manchester could very well be applied in the present case. The pattern and the intent to defraud the
government of the docket fee due it is obvious not only in the filing of the original complaint but also in the filing of the
second amended complaint.

However, in Manchester, petitioner did not pay any additional docket fee until] the case was decided by this Court on
May 7, 1987. Thus, in Manchester, due to the fraud committed on the government, this Court held that the court a
quo did not acquire jurisdiction over the case and that the amended complaint could not have been admitted
inasmuch as the original complaint was null and void.

In the present case, a more liberal interpretation of the rules is called for considering that, unlike Manchester, private
respondent demonstrated his willingness to abide by the rules by paying the additional docket fees as required. The
promulgation of the decision in Manchester must have had that sobering influence on private respondent who thus paid
the additional docket fee as ordered by the respondent court. It triggered his change of stance by manifesting his
willingness to pay such additional docket fee as may be ordered.

Nevertheless, petitioners contend that the docket fee that was paid is still insufficient considering the total amount of the
claim. This is a matter which the clerk of court of the lower court and/or his duly authorized docket clerk or clerk in-
charge should determine and, thereafter, if any amount is found due, he must require the private respondent to pay the
same.

Thus, the Court rules as follows:

1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket
fee, that vests a trial court with jurisdiction over the subject matter or nature of the action. Where the filing of the initiatory
pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a
reasonable time but in no case beyond the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third party claims and similar pleadings, which shall not be
considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment of said fee
within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period.

3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the
prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if specified the
same has been left for determination by the court, the additional filing fee therefor shall constitute a lien on the
judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess
and collect the additional fee.

WHEREFORE, the petition is DISMISSED for lack of merit. The Clerk of Court of the court a quo is hereby instructed to
reassess and determine the additional filing fee that should be paid by private respondent considering the total amount
of the claim sought in the original complaint and the supplemental complaint as may be gleaned from the allegations
and the prayer thereof and to require private respondent to pay the deficiency, if any, without pronouncement as to
costs.

SO ORDERED.
POWER SECTOR ASSETS AND LIABILITIES MGT CORP VS MAUNLAD HOME INC

Respondent Maunlad Homes, Inc. filed with the Municipal Trial Court in Cities (MTCC), Malolos City, Bulacan, an unlawful
detainer case with damages against National Power Corporation (NPC), raffled-off to Branch 1. After trial, the MTCC
issued its Decision3 dated October 26, 2009, ordering NPC to vacate the subject premises and surrender physical
possession thereof to respondent; to pay reasonable compensation equivalent to Php20.00 per square meter per month
of respondent's 25,896-sq. m. properties, reckoned from the date of demand on October 6, 2008, until complete
vacation and surrender of the subject premises; and to pay Php20,000.00 as and for attorney's fees and cost of suit.

The NPC appealed the decision to the Regional Trial Court (RTC) of Malolos City, Bulacan, and was raffled-off to Branch
78. The RTC rendered its Decision4 dated May 18, 2010 affirming in toto the MTCC decision.

Respondent filed a Motion for Execution which was opposed by the NPC. The NPC also filed a motion for reconsideration
of the RTC decision. In an Order dated August 5, 2010, the RTC denied the NPC's motion for reconsideration and granted
respondent's motion for execution. On August 25, 2010, a Writ of Execution pending appeal was issued. 5 And on
September 6, 2010, the sheriff served a Notice of Demand6 of payment to the NPC.

Respondent then filed an urgent motion for issuance of a Break Open Order since the sheriff who tried to implement the
writ of execution, by serving the notice of levy on the NPC Warehouse at Barangay Lagundi, Mexico, Pampanga, was
prevented by the security guards assigned therein. The NPC argued that the warehouse is being used both by it and the
Power Sector Assets and Liabilities Management Corporation (herein petitioner PSALM), an entity created and existing
by virtue of Republic Act No. 9136, the Electric Power Industry Reform Act of 2001 (EPIRA Law); that the said law provides
that the ownership and all generation assets, IPP contracts and other NPC disposable assets are transferred to PSALM;
and that as of the moment, the ownership of the said items stored in the said warehouse cannot be established with
certainty as they are in the process of determining what properties may be retained by the latter.

On October 26, 2010, the RTC issued a Break Open Order7 authorizing the sheriff and his deputies, police officers/escorts,
representatives from both parties to enter/break open into the NPC's warehouse facilities located at Barangay Lagundi,
Mexico, Pampanga.

On November 4, 2010, the sheriff issued a Notice of Levy8 on execution pending appeal of personal properties/sale of
seven (7) units transformer radiator fins, one (1) unit power transformer with Serial No. 77740395, and four (4) pieces angle
bars.

The fallo of the notice states:ChanRoblesVirtualawlibrary

NOW WHEREFORE, by virtue of said writ of execution pending appeal and in accordance with Rule 39, Section 9 of the
Rules of Court, the undersigned sheriff IV will sell at public auction to the highest bidder for CASH and in Philippine
Currency, on November 12, 2010 at 10:00 in the morning or soon thereafter, at No. 120 Gapan Olongapo Road,
Barangay Lagundi, Mexico, Pampanga, the above-described properties to satisfy the said Writ of Execution pending
Appeal.9chanroblesvirtuallawlibrary
On November 9, 2010, petitioner filed an Affidavit10 of third-party claim with the sheriff pursuant to Section 16, Rule 39 of
the Rules of Court, and alleging that it is the owner of the levied properties pursuant to the EPIRA Law. On November 10,
2010, petitioner filed a Manifestation11 with Urgent Ex Parte Motion for Issuance of Status Quo Order with the RTC arguing
that it is the owner of the subject properties pulled out by the sheriff by operation of law; that it is not a party to the
instant case and therefore cannot be bound by the judgment therein; that the obligation to pay respondent had not
been transferred to it. Petitioner also prayed for the nullification of the levy of its properties and restoring their immediate
possession to it.

On November 11, 2010, the RTC issued an Order12 holding in abeyance the public sale of the subject levied properties
until further orders.

On February 1, 2011, the RTC issued an Order,13 the dispositive portion of which reads:ChanRoblesVirtualawlibrary

WHEREFORE, the foregoing considered, the motion for issuance of Status Quo Order is hereby DENIED. The third-party
claim filed by PSALM is likewise denied.

Further PSALM's prayer to nullify the levy of seven units transformers radiator fins, one unit power transformer with serial
number E-77740395 and four pieces of angle bars and restoring its immediate possession to the same is DENIED.

Accordingly, the Sheriff of this Court is DIRECTED to proceed with the implementation of the writ of execution issued in this
case in accordance with law and without further delay.
SO ORDERED.14chanroblesvirtuallawlibrary
On February 21, 2011, the sheriff issued a notice15 of sale on execution of personal properties.

Petitioner filed with the CA a petition for certiorari assailing the October 26, 2010 Break Open Order, the November 4,
2010 notice of levy on execution pending appeal, the Order dated February 1, 2011 denying the motion for issuance
of Status Quo Order and the third-party claim, and the February 21, 2011 notice of sale on execution of personal
properties. It alleged that it has no adequate remedy available from the writs and processes issued by the RTC, and that
it acted without or in excess of jurisdiction in issuing the assailed orders despite the fact that petitioner is the owner of the
subject properties.

On July 30, 2012, the CA issued its assailed Decision dismissing the petition for certiorari for being an incorrect remedy.

The CA found, among others, that contrary to the allegation of petitioner that there exists no plain, speedy and
adequate remedy obtaining under the circumstances, Section 16, Rule 39 of the Rules of Court provides a more
expeditious and encompassing recourse in case a property belonging to a third person is placed under the coverage of
the writ of execution and, thereafter, sold at public auction.

Petitioner filed a motion for reconsideration, which was denied by the CA in a Resolution dated December 10, 2014.

Petitioner filed the instant petition for review on certiorari alleging the following:ChanRoblesVirtualawlibrary

THE CA, IN DISMISSING PSALM'S PETITION ON PROCEDURAL GROUNDS, OVERLOOKED PSALM'S PREVIOUSLY FILED THIRD
PARTY CLAIM.

II

PSALM OWNS THE PROPERTIES SUBJECT MATTER OF THE ORDERS OF JUDGE SAMPAGA ISSUED AND THE PROCESSES SHERIFF
ESGUERRA ISSUED.

III

THE JUDGMENT OBLIGATION IS NOT AMONG THE OBLIGATIONS PSALM ASSUMED.

IV

PSALM WAS NOT A PARTY TO THE CASE IN WHICH THE DECISION THEREIN IS THE SUBJECT OF THE EXECUTION
PROCEEDINGS.16chanroblesvirtuallawlibrary
Petitioner claims that the CA erred in overlooking the fact that it filed a third party claim as provided under Section 16 of
Rule 39 of the 1997 Rules of Civil Procedure. Petitioner contends that the CA should have taken consideration of the
substantive issues raised in its petition reiterating its ownership of the levied properties. It claims that upon the effectivity
of the EPIRA law on June 26, 2001, the ownership of all existing generation assets, IPP contracts, real estate and all other
disposable assets of NPC were transferred to it; and that all existing liabilities and outstanding financial obligations of NPC
as of June 26, 2001 arising from loans, Issuance of bonds, securities and other instrument of indebtedness were then and
there likewise legally transferred and assumed by it. However, since respondent's claim is not among those existing
obligations that were transferred to it upon the effectivity of the EPIRA law, it cannot be held liable for the claim even if it
were made a party in the case. It contends that there is sufficient ground to annul the levy and sale made by the sheriff
since it is not a party in the case, and therefore, not bound by the judgment rendered.

The pivotal issue for resolution is whether the CA erred in dismissing petitioner's petition for certiorariassailing the denial of
the latter's third party claim for being a wrong remedy.

We find no.merit in the petition.

The power of the court in executing judgments extends only to properties unquestionably belonging to the judgment
debtor alone.17 An execution can be issued only against a party and not against one who did not have his day in
court.18 The duty of the sheriff is to levy the property of the judgment debtor not that of a third person. For, as the saying
goes, one man's goods shall not be sold for another man's debts.19 Thus, if the property levied by virtue of a writ of
execution is claimed by a third person who is not the judgment obligor, Section 16 of Rule 39 of the 1997 Rules of Civil
Procedure provides for the remedy of such third party claimant, to wit:ChanRoblesVirtualawlibrary

Sec. 16. Proceedings where property claimed by third person. - If the property levied on is claimed by any person other
than the judgment obligor or his agent, and such person makes an affidavit of his title thereto or right to the possession
thereof, stating the grounds of such right or title, and serves the same upon the officer making the levy and a copy
thereof upon the judgment obligee, the officer shall not be bound to keep the property, unless such judgment obligee,
on demand of the officer, files a bond approved by the court to indemnify the third-party claimant in a sum not less than
the value of the property levied on. In case of disagreement as to such value, the same shall be determined by the
court issuing the writ of execution. No claim for damages for the taking or keeping of the property may be enforced
against the bond unless the action therefor is filed within one hundred twenty (120) days from the date of the filing of the
bond.

The officer shall not be liable for damages for the taking or keeping of the property, to any third-party claimant if such
bond is filed. Nothing herein contained shall prevent such claimant or any third person from vindicating his claim to the
property in a separate action, or prevent the judgment obligee from claiming damages in the same or a separate
action against a third-party claimant who filed a frivolous or plainly spurious claim.

When the writ of execution is issued in favor of the Republic of the Philippines, or any officer duly representing it, the filing
of such bond shall not be required, and in case the sheriff or levying officer is sued for damages as a result of the levy, he
shall be represented by the Solicitor General and if held liable therefor, the actual damages adjudged by the court shall
be paid by the National Treasurer out of such funds as may be appropriated for the purpose.
Under the above-quoted provision, the third-party claimant may execute an affidavit of his title or right to the possession
of the property levied, and serve the same to the officer making the levy and a copy thereof to the judgment creditor.
This remedy is known as terceria.20 The officer shall not be bound to keep the property, unless the judgment creditor files
a bond approved by the court to indemnify the third-party claimant in a sum not less than the value of the property
levied on. An action for damages may be brought against the officer within one hundred twenty (120) days from the
date of the filing of the bond. The same section also provides that a third-party claimant may file a proper action to
vindicate his claim to the levied property. The proper action mentioned in Section 16 would have for its object the
recovery of ownership or possession of the property seized by the sheriff, as well as damages resulting from the allegedly
wrongful seizure and detention thereof despite the third party claim and it may be brought against the sheriff and such
other parties as may be alleged to have colluded with him in the supposedly wrongful execution proceedings, such as
the judgment creditor himself. If instituted by a stranger to the suit in which execution has issued, such proper action
should be a totally separate and distinct action from the former suit.21

In this case, petitioner had filed an affidavit of third-party claim with the sheriff and a motion for issuance of status
quo order with the RTC to prevent the sale of the levied properties at public auction, nullification of the levy and
restoration of the subject properties to it, which were denied by the RTC and, consequently, the sheriff was directed to
proceed with the implementation of the issued writ of execution.

The RTC denied the third-party claim as follows:ChanRoblesVirtualawlibrary

As to the third-party claim by movant PSALM, this Court also resolves to deny the same for lack of merit.

Section 16 of Rule 39 of the Rules of Court provides:chanRoblesvirtualLawlibrary

x x x

In this present case, aside from serving said affidavit of third-party claim to the Sheriff of this Court, claimant PSALM also
filed this instant motion for issuance of status quo order to prevent the sale of the levied properties at public auction,
nullification of the levy and restoration of the subject properties in the possession of PSALM. In effect, instead of the Sheriff
requiring the plaintiff-obligee to file an indemnity bond, the Court is constrained to resolve the merit of the third-party
claim filed by PSALM.

However, it must be emphasized that the resolution of this Court is limited only to a determination of whether the Sheriff
acted correctly in the performance of his duties. It cannot pass upon the question of title to the property, with any
character of finality. It only treats of that matter in so far as may be necessary to decide if the sheriff acted correctly or
not.

After giving an opportunity to vindicate their claim and after a judicious examination of the arguments posed by all of
the parties, this Court finds that PSALM has not been able to satisfactorily establish their claim of ownership over the
subject properties.

First, claimant PSALM has not presented sufficient proof of ownership over the said levied properties. It merely claimed
that the subject properties were transferred by operation of law in view of the passage of EPIRA in 2001. It did not submit
any document evidencing ownership. It even failed to present any document that the levied property is among those
included in the inventoried property of PSALM. The doctrine of "Ei incumbit probatio qui dicit, non qui negat" or "He who
asserts, not he who denies, must prove" is applicable in this present case.

Second, a careful perusal of EPIRA, particularly Sections 49, 50, 51 and 56, in relation to Section 1 of Rule 21 of its
Implementing Rules and Regulations, would show that ownership of NPC's assets, herein levied properties included, is
not ipso jure or by operation of law as there is the need to execute certain documents evidencing transfer of ownership
and possession. This Court agrees with the plaintiff-appellee that these documents are conditions precedent that are
needed to be performed and executed in order to have a valid transfer.

Section 1, Rule 21 of the IRR provides:chanRoblesvirtualLawlibrary

NPC and PSALM shall take such measures and execute such documents to effect the transfer of ownership and
possession of all assets, rights and privileges, liabilities required by the Act to be transferred by NPC to PSALM.

Third, even if the transfer is by operation of law, it would be an injustice and inequitable, to say the least, to interpret the
aforesaid provision as to effect the transfer only of the assets and properties of NPC but not its obligation and liabilities.
The assets and properties transferred should also account for the liabilities and obligations incurred by NPC. In fact,
Section 49 of the said law explicitly states that PSALM should not only assume and take ownership of all existing NPC
generations assets, liabilities and 3PP contracts, real estate and other disposable assets.

In the instant case, plaintiff Maunlad Homes, Inc. is already on the stage of reaping the fruits of its labor after it had
judiciously battled the case with the court a quo and this Court. Injustice is manifest if they would not be awarded what
is due them merely on the ground of technicalities and evasive measures undertaken by its
adversary.22chanroblesvirtuallawlibrary
In Spouses Sy v. Hon. Discaya,23 We held that for the remedy of terceria to prosper, the claim of ownership or right of
possession to the levied property by the third-party claimant must first be unmistakably established,
thus:ChanRoblesVirtualawlibrary

x x x A third person whose property was seized by a sheriff to answer for the obligation of the judgment debtor may
invoke the supervisory power of the court which authorized such execution. Upon due application by the third person
and after summary hearing, the court may command that the property be released from the mistaken levy and restored
to the rightful owner or possessor. What said court can do in these instances, however, is limited to a determination of
whether the sheriff has acted rightly or wrongly in the performance of his duties in the execution of judgment, more
specifically, if he has indeed taken hold of property not belonging to the judgment debtor. The court does not and
cannot pass upon the question of title to the property, with any character of finality. It can treat of the matter only
insofar as may be necessary to decide if the sheriff has acted correctly or not. It can require the sheriff to restore the
property to the claimant's possession if warranted by the evidence. However, if the claimant's proofs do not persuade
the court of the validity of his title or right of possession thereto, the claim will be denied. 24

Independent of the above-stated recourse, a third-party claimant may also avail of the remedy known as "terceria,"
provided in Section 17, Rule 39, by serving on the officer making the levy an affidavit of his title and a copy thereof upon
the judgment creditor. The officer shall not be bound to keep the property, unless such judgment creditor or his agent,
on demand of the officer, indemnifies the officer against such claim by a bond in a sum not greater than the value of
the property levied on. An action for damages may be brought against the sheriff within one hundred twenty (120) days
from the filing of the bond.

The aforesaid remedies are nevertheless without prejudice to "any proper action" that a third-party claimant may deem
suitable to vindicate "his claim to the property." Such a "proper action" is, obviously, entirely distinct from that explicitly
prescribed in Section 17 of Rule 39, which is an action for damages brought by a third-party claimant against the officer
within one hundred twenty (120) days from the date of the filing of the bond for the taking or keeping of the property
subject of the "terceria."
Since the RTC denied the third-party claim for failure of petitioner to satisfactorily establish its claim of ownership over the
subject properties, the latter filed with the CA a petition for certiorari assailing such denial and claimed that there is no
plain, speedy and adequate remedy in the ordinary course of law. The petition for certiorari was dismissed by the CA for
being a wrong remedy.

We affirm the dismissal.

A petition for certiorari under Rule 65 of the Rules of Court may be filed when any tribunal, board or officer exercising
judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the
ordinary course of law. An adequate remedy has been defined as a remedy which is equally beneficial, speedy and
sufficient, not merely a remedy which at some time in the future will bring about a revival of the judgment of the lower
court complained of in the certiorari proceeding, but a remedy which will promptly relieve the petitioner from the
injurious effects of that judgment and the acts of the inferior court or tribunal.25cralawred

Notably, petitioner cannot appeal from the denial of its third-party claim since it is not one of the parties in the action
where the writ of execution was issued,26 as the unlawful detainer case was between respondent and the NPC. Also, the
denial of the third-party claim is not appealable as provided under the above-quoted Section 16, Rule 39 of the Rules of
Court since the remedy of a third party claimant is to file a separate and independent action to vindicate his claim of
ownership or right of possession of the levied properties against the judgment creditor or the purchaser of the property at
the public auction sale. It is in this separate and independent action that the issue of the third-party claimant's title to the
levied properties can be resolved with finality.

In Queblar v. Garduño,27 we declared:ChanRoblesVirtualawlibrary

The appeal interposed by the third-party claimant-appellant is improper, because she was not one of the parties in the
action who were exclusively Venancio Queblar as plaintiff and Leonardo Garduno as defendant. Considering the
provisions of said section 451 of the Code of Civil Procedure, as amended by Act No. 4108, 28 the appealed order was
not appealable. The appeal that should have been interposed by her, if the term "appeal" may properly be employed,
is a separate reinvidicatory action against the execution creditor or the purchaser of her property after the sale at public
auction, or a complaint for damages to be charged against the bond filed by the judgment creditor in favor of the
sheriff.29chanroblesvirtuallawlibrary
Hence, petitioner's claim in their jurisdictional allegations in its petition for certiorari filed with the CA that it was
constrained to file the petition for certiorari under Rule 65 to protect its rights and interest over the subject properties
because of the absence of a plain, speedy and adequate remedy, is contradicted by the procedure laid down under
Section 16 of Rule 39, i.e., the third-party claimant may file an independent action to vindicate its claim of ownership to
the levied property. Where a specific remedy has been laid down by our rules for the protection or enforcement of
rights, the same should be resorted to. In Solidum v. CA,30 We held:ChanRoblesVirtualawlibrary

We have held that neither an appeal nor a petition for certiorari is the proper remedy from the denial of a third-party
claim. In the case of Northern Motors, Inc. v. Coquia, the petitioner filed, among others, a third-party claim which was
denied by the respondent judge in the disputed resolution. Northern Motors, Inc. thereafter filed a petition for certiorari to
nullify the resolution and order of the respondent judge. In resolving whether the respondent judge acted with grave
abuse of discretion in denying petitioner's third-party claim, the Court held:chanRoblesvirtualLawlibrary

Pursuant to [Section 17, Rule 39 of the Revised Rules of Court], a third-party claimant has two remedies, such as, an
action for damages against the sheriff to be brought within 120 days from the filing of the bond, and a separate and
independent action to vindicate his claim to the property. In the case at bar, petitioner's and intervenor's remedy
against the bond proved to be unavailing because of the disputed order of the respondent Judge canceling the
indemnity bond. Such an order as well as the order denying a motion to reconsider the same in effect discarded or
quashed the third-party claims. What then would the remedy be of the third-party claimants?

In the recent case of Serra vs. Rodriguez, x x x this Court (First Division), thru Mr. Justice Makasiar,
ruled:ChanRoblesVirtualawlibrary
From the denial of a third-party claim to defeat the attachment caused to be levied by a creditor, neither an appeal
nor a petition for certiorari is the proper remedy. The remedy of petitioner would be to file a separate and independent
action to determine the ownership of the attached property or to file a complaint for damages chargeable against the
bond filed by the judgment creditor in favor of the provincial sheriff.
In Lara vs. Bayona, L-7920, May 10, 1955, this Court, thru Mr. Justice Concepcion, later Chief Justice, in denying the
petition for certiorari to set aside the order of the lower court quashing the third-party claim of a chattel mortgagee,
held:ChanRoblesVirtualawlibrary
Pursuant to this provision, nothing contained therein shall prevent petitioner "from vindicating his claim to the property by
any proper action." Neither does the order complained of deprive petitioner herein of the opportunity to enforce his
alleged rights by appropriate proceedings. In short, he has another "plain, speedy and adequate remedy in the ordinary
course of law," and, hence is not entitled either to a writ of certiorari or to a writ of prohibition.
The Court further held that since the third-party claimant is not one of the parties to the action, he could not, strictly
speaking, appeal from the order denying its claim, but should file a separate reinvidicatory action against the execution
creditor or a complaint for damages against the bond filed by the judgment creditor in favor of the sheriff. The rights of a
third-party claimant should be decided in a separate action to be instituted by the third person. In fine, the appeal that
should be interposed, if the term appeal may be properly employed, is a separate reinvidicatory action against the
execution creditor or complaint for damages to be charged against the bond filed by the judgment creditor in favor of
the sheriff.31chanroblesvirtuallawlibrary

And in such separate action, the court may issue a writ of preliminary injunction against the sheriff enjoining him from
proceeding with the execution sale,32 which is a speedy and adequate remedy to immediately relieve petitioner from
the adverse effects of the lower court's judgment. Thus, the CA did not err in saying that Section 16 of Rule 39 provides a
more expeditious and encompassing recourse from the denial of its third-party claim.

Considering our foregoing discussions, We need not address the other issues raised by petitioner regarding its right to
ownership and possession of the levied properties.

WHEREFORE, the petition is DENIED. The Decision dated July 30, 2012 and the Resolution dated December 10, 2014 issued
by the Court of Appeals in CA-G.R. SP No. 118302 are hereby AFFIRMED.

SO ORDERED.
NORTH GREENHILLS ASSOCIATION VS ATTY. MORALES

In this petition for review on certiorari with application for temporary restraining order and writ of preliminary
injunction[1] filed under Rule 45 of the Rules of Court, petitioner North Greenhills Association, Inc. (NGA) seeks the review
of the March 13, 2015 Decision[2] and February 3, 2016 Resolution[3] of the Court of Appeals (CA) in CA-G.R. SP No.
131707, which affirmed the February 17, 2010 Decision[4]and August 8, 2013 Resolution[5] of the Office of the
President (OP) in O.P. Case No. 08-1-004. The CA ruled in favor of respondent Atty. Narciso Morales (Atty. Morales), a
resident of North Greenhills Subdivision, who filed a Complaint before the Housing and Land Use Regulatory
Board (HLURB), docketed as HLURB Case No. HOA-A-050425-0014, against the NGA for allegedly blocking his side access
to the community park.
Factual Antecedents

Atty. Morales is a resident of North Greenhills Subdivision in San Juan City. His house is located alongside Club Filipino
Avenue and adjacent to McKinley Park, an open space/playground area owned and operated by NGA. He also has a
personal access door, which he built through a wall separating his house from the park. This access door, when
unlocked, opens directly into the park.

On the other hand, NGA, an association composed of members of the subdivision, organized to promote and advance
the best interests, general welfare, prosperity, and safeguard the well-being of the owners, lessees and occupants of
North Greenhills, is the undisputed owner of the park. It has acquired ownership thereof through a donation made by the
original owner, Ortigas &. Co. Ltd.

In June 2003, NGA started constructing a pavilion or kiosk occupying the side of the park adjacent to the residence of
Atty. Morales. Part of the design was a public restroom intended to serve the needs of park guests and members of NGA.
Said restroom was constructed alongside the concrete wall separating the house of Atty. Morales from the park.

Objecting to the construction of the restroom, Atty. Morales filed on July 23, 2003 a complaint before the HLURB,
docketed as HLURB Case No. NCRHOA-072303-309. On August 13, 2013, he amended his complaint and additionally
sought the demolition of the pavilion which was then being built.

In his Amended Complaint, Atty. Morales alleged that for a period spanning 33 years, he had an open, continuous,
immediate, and unhampered access to the subdivision park through his side door, which also served as an exit door in
case of any eventuality; that having such access to the park was one of the considerations why he purchased the lot;
that the construction of the pavilion was illegal because it violated his right to immediate access to the park, Presidential
Decree No. 957 and the Deed of Donation of Ortigas & Co. Ltd., which required the park to be maintained as an open
area; and that the restroom constructed by NGA was a nuisance per se.

NGA, in its Answer with Compulsory Counterclaim, rejected the assertions of Atty. Morales. It contended that as the
absolute owner of the park, it had the absolute right to fence the property and impose reasonable conditions for the use
thereof by both its members and third parties; that the construction of the restroom was for the use and benefit of all
NGA members, including Atty. Morales; and that Atty. Morales' use of a side entrance to the park for 33 years could not
have ripened into any right because easement of right of way could not be acquired by prescription. NGA likewise
sought the payment of P878,778.40 corresponding to the annual membership dues which Atty. Morales had not been
paying since 1980.

On April 13, 2003, the HLURB Arbiter conducted an ocular inspection of the park and noted that the construction started
by NGA blocked Atty. Morales' side access to the park.

On February 16, 2005, the HLURB Arbiter rendered a Decision,[6] the decretal portion of which reads:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered ordering respondents of the removal of the pavilion
and the relocation of the common toilet in a place where it will not be a nuisance to any resident. Respondents are
further directed to remove the obstruction to the side door of the complainant. All other claims and counterclaims are
hereby dismissed for lack of merit.

IT IS SO ORDERED.[7]

NGA appealed to the HLURB Board of Commissioners (HLURB Board). In its November 22, 2007 Decision,[8] the HLURB
Board modified the ruling of the HLURB Arbiter, thus:

Further, the complaint against respondent Alviar should be dropped as no acts have been particularly attributed to him
in his personal capacity.

WHEREFORE, premises considered, the decision of the Regional Office is hereby MODIFIED. Accordingly, respondent NGA
is ordered to relocate the restroom constructed or being constructed in the McKinley Park away from the walls of any
resident and where it will not block complainant's side door access to the park.

SO ORDERED.[9]
NGA appealed to the Office of the President (OP).

On February 17, 2010, the OP rendered its decision, affirming in toto the ruling of the HLURB Board.

NGA moved for reconsideration, but its motion was denied by the OP in its August 8, 2013 Resolution.

Aggrieved, NGA filed a petition for review under Rule 43 of the Rules of Court before the CA, arguing that the OP erred
in its findings.

Ruling of the CA

In its March 13, 2015 Decision,[10] the CA affirmed the ruling of the OP. It found no error on the part of the OP in affirming
the characterization of the restrooms built as nuisance per accidens considering that the structure posed sanitary issues
which could adversely affect not only Atty. Morales, but also his entire household; that even if there existed a perimeter
wall between the park and Atty. Morales' home, the odor emanating from the restroom could easily find its way to the
dining area, and the foul and noxious smell would make it very difficult and annoying for the residents of the house to
eat; and that the proximity of the restroom to Atty. Morales' house placed the people residing therein at a greater risk of
contracting diseases both from improperly disposed waste and human excrements, as well as from flies, mosquitoes and
other insects, should NGA fail to maintain the cleanliness of the structures.

The CA stated that NGA's fear of being exposed to outsiders and criminals because Atty. Morales' access was
unfounded. It pointed out that the door had been in existence for more than three decades and that if dangers truly
existed, NGA should have taken immediate action and blocked the side access years earlier. It then pointed out other
ways to remedy the security concerns of NGA, such as placing a wall strategically placed at the border of the park or
additional guards to patrol the vicinity.

As to the counterclaim of NGA for association dues, the CA held that the claim was in the nature of a permissive
counterclaim, which was correctly dismissed by the OP.

NGA moved for reconsideration, but its motion was denied by the CA in its February 3, 2016 Resolution.

Hence, this petition.

GROUNDS:

I.

THE COURT OF APPEALS SERIOUSLY ERRED IN COMPLETELY DISREGARDING THE HLURB'S LACK OF JURISDICTION OVER THE
INSTANT CASE.

(1)

RESPONDENT MORALES FAILED TO ALLEGE IN HIS COMPLAINT (OR AMENDED COMPLAINT) THAT HE IS A MEMBER OF NGA -
A FATAL JURISDICTIONAL DEFECT FOR FAILURE TO PROPERLY LAY THE PREDICATE THAT WOULD HAVE ENABLED THE HLURB TO
ACQUIRE JURISDICTION OVER THE INSTANT ACTION.

(2)

IN THE CASE OF STA. CLARA HOMEOWNERS' ASSOCIATION V. GASTON (G.R. NO. 141961, JANUARY 23, 2002), THE
HONORABLE COURT RULED THAT WHERE THE BODY OF THE COMPLAINT FILED IN THE NOW HLURB FAILS TO MENTION THAT THE
COMPLAINANT IS A MEMBER OF THE ASSOCIATION HE IS SUING, SUCH COMPLAINT MUST BE DISMISSED FOR LACK OF
JURISDICTION.

(3)

PETITIONER NGA'S CLAIM FOR UNPAID ASSOCIATION DUES DOES NOT PRECLUDE IT FROM ASSAILING RESPONDENT'S
MEMBERSHIP IN THE NGA.

(4)

IN THE CASE OF GREGORIO C. JAVELOSA V. COURT OF APPEALS (G.R. NO. 124292, DECEMBER 10, 1996), THE HONORABLE
COURT RULED THAT "IT IS SETTLED THAT THE JURISDICTION OF COURTS OVER THE SUBJECT MATTER OF LITIGATION IS
DETERMINED BY THE ALLEGATIONS IN THE COMPLAINT. IT IS EQUALLY SETTLED THAT AN ERROR OF JURISDICTION CAN BE
RAISED AT ANY TIME AND EVEN FOR THE FIRST TIME ON APPEAL."

II.

THE COURT OF APPEALS SERIOUSLY ERRED AND IS MANIFESTLY MISTAKEN IN RULING THAT THE TOILET BUILT BY NGA AT THE
MCKINLEY PARK IS A NUISANCE PER ACCIDENS, ON THE BASIS OF MERE SPECULATION, SUPPOSITION AND PURE
CONJECTURE, CONSIDERING THE TOTAL LACK OF EVIDENCE ON RECORD TO PROVE SO.
(1)

RESPONDENT ATTY. MORALES DID NOT SET OUT TO PROVE THAT THE TOILET ADJACENT HIS HOUSE INJURED HIM OR THAT FOUL
ODOR EMANATED FROM IT BECAUSE HE MISTAKENLY ALLEGED THAT THE TOIILET WAS A NUISANCE PER SE.

(2)

BY FAILING TO ADDUCE EVIDENCE THAT THE TOILET, IN ANY WAY, ANNOYED RESPONDENT'S SENSES, OR THAT FOUL ODOR
EMANATED FROM IT, OR THAT IT POSED SANITARY ISSUES DETRIMENTAL TO HIS FAMILY'S HEALTH - THE SUBJECT TOILET
CANNOT BE LEGALLY CONSIDERED NUISANCE PER ACCIDENS.

(3)

INDEED, A CURSORY VIEW OF THE PERTINENT DISCUSSION IN THE ASSAILED DECISION REVEALS THAT THE COURT OF APPEALS
SADLY TOOK THE PATH OF SPECULATION, SUPPOSITION AND PURE CONJECTURE IN JUSTIFYING ITS DECISION.

III.

THE ASSAILED 13 MARCH 2015 DECISION IS PATENTLY ERRONEOUS AS IT IS BASED ON GRAVE MISAPPREHENSION OF FACTS
AND OF THE EVIDENCE - OR THE TOTAL LACK OF IT - ON RECORD.

(1)

INDEED, A PERUSAL OF THE RECORDS WOULD REVEAL THAT THERE WAS NO EVIDENCE WHATSOEVER ADDUCED BY THE
RESPONDENT DEMONSTRATING THAT THE SUBJECT TOILET HAS CAUSED PHYSICAL ANNOYANCE OR DISCOMFORT TO HIM.
NO TESTIMONY HAS EVER BEEN BROUGHT TO THE HLURB OR THE OFFICE OF THE PRESIDENT SHOWING THAT THE TOILET
EMITTED ANY FOUL SMELL, OR ODOR, OR AT THE VERY LEAST, ANNOYED RESPONDENT MORALES EVERY TIME HE WOULD EAT
IN HIS DINING AREA.

(2)

AS A MATTER OF FACT, IT IS WORTH TO NOTE THAT THE RESPONDENT DID NOT EVEN SUBMIT A POSITION PAPER BEFORE THE
HLURB TO ATTEST TO AND PROVE SUCH FACTUAL MATTERS.

(3)

IN THE VERY CASE CITED BY THE COURT OF APPEALS, SMART COMMUNICATIONS V. ALDECOA (G.R. NO. 166330, SEPTEMBER
11, 2013), THE HONORABLE COURT STRUCK DOWN THE RULING OF THE LOWER COURT AND PRONOUNCED THAT A DECISION
THAT DECLARES A THING TO BE A NUISANCE PER ACCIDENS MUST BE SUPPORTED BY FACTUAL EVIDENCE AND NOT BY MERE
CONJECTURES OR SUPPOSITIONS.

IV.

THE COURT OF APPEALS SERIOUSLY ERRED IN UPHOLDING RESPONDENT ATTY. MORALES' UNBRIDLED ACCESS TO MCKINLEY
PARK, EFFECTIVELY CONSTITUTING AN EASEMENT OF RIGHT OF WAY WITHOUT ANY BASIS - AS AGAINST THE CLEAR
STATUTORY RIGHT OF PETITIONER NGA, AS THE OWNER OF MCKINLEY PARK TO FENCE AND PROTECT ITS PROPERTY, GRANTED
UNDER ARTICLES 429 AND 430 OF THE CIVIL CODE.

(1)

CONTRARY TO THE ASSAILED DECISION, IT IS NOT INCUMBENT UPON PETITIONER NGA TO PROVE THE LEGALITY OF ITS ACT
OF CONSTRUCTING THE SUBJECT TOILET ON ITS OWN PROPERTY. INDEED, THIS IS A BASIS STATUTORY RIGHT OF NGA AS AN
"OWNER".

(2)

RESPONDENT, ON THE OTHER HAND, BEING THE PROPONENT OF THE ACTION TO DECLARE THE TOILET A NUISANCE, IS THE
ONE SADDLED BY LAW WITH THE RESPONSIBILITY OF PROVING THAT THE STRUCTURE BUILT BY NGA IS A NUISANCE. AS
DISCUSSED, HOWEVER, RESPONDENT UTTERLY FAILED TO DISCHARGE SUCH BURDEN.

(3)

ARTICLE 430 OF THE CIVIL CODE GRANTS PETITIONER NGA OF ITS STATUTORY RIGHT TO FENCE OFF HIS PROPERTY. ART. 430
STATES THAT "EVERY OWNER MAY ENCLOSE OR FENCE HIS LAND OR TENEMENTS BY MEANS OF WALLS, DITCHES, LIVE OR
DEAD HEDGES, OR BY ANY OTHER MEANS WITHOUT DETRIMENT TO SERVITUDES CONSTITUTED THEREON."

(4)

MOREOVER, ARTICLE 429 OF THE CIVIL CODE LIKEWISE GRANTS PETITIONER NGA THE RIGHT TO EXCLUDE OTHERS FROM
ACCESS TO AND ENJOYMENT OF ITS PROPERTY.
V.

THE COURT OF APPEALS SERIOUSLY ERRED IN RULING THAT PETITIONER NGA'S COUNTERCLAIM TO COLLECT ON
RESPONDENT'S UNPAID ASSOCIATION DUES FOR THE PAST THIRTY-THREE (33) YEARS, IS NOT COMPULSORY BUT MERELY
PERMISSIVE.

(1)

AS A PERSON SUING NGA FOR THE EXERCISE OF HIS RIGHTS AS AN ALLEGED MEMBER THEREOF, NGA'S DEFENSE WILL, AS A
MATTER OF COURSE, INVOLVE THE CONTEST OF SUCH RIGHT. IN ORDER FOR NGA TO CONTEST RESPONDENT'S RIGHT TO USE
THE PARK AS A MEMBER OF NGA, THE LATTER HAS NO OTHER ALTERNATIVE BUT TO RAISE HIS NON-PAYMENT OF MEMBERSHIP
DUES IN ORDER TO ATTACK HIS RIGHT TO USE THE PARK, WHICH RIGHT INEXTRICABLY ARISES OUT OF HIS STANDING AS AN
ALLEGED MEMBER OF NGA.

(2)

AS A MATTER OF FACT, REPUBLIC ACT NO. 9904, OTHERWISE KNOWN AS THE "MAGNA CARTA FOR HOMEOWNERS AND
HOMEOWNERS' ASSOCIATIONS" MAKES IT A CONDITION SINE QUA NON THAT THE HOMEOWNER MUST PAY THE
ASSOCIATION FEES AND CHARGES BEFORE HE CAN ENJOY ITS FACILITIES.[11]

In its Resolution,[12] dated May 30, 2016, the Court required respondent to file his Comment on the petition. To date, no
Comment has been filed. For said reason, the Court deemed, as it hereby deems, that respondent had waived his right
to file one.

ISSUES

1. WHETHER THE CA CORRECTLY RULED THAT THE HLURB HAD JURISDICTION OVER THE COMPLAINT FILED BY ATTY. MORALES;
WHETHER THE CA CORRECTLY RULED THAT THE RESTROOM BUILT BY NGA INSIDE THE MCKINLEY PARK IS A NUISANCE PER
2.
ACCIDENS;
3. WHETHER NGA HAS THE RIGHT TO BLOCK ATTY. MORALES' ACCESS TO THE PARK; AND
WHETHER THE CA CORRECTLY RULED THAT THE COUNTERCLAIM OF NGA AGAINST ATTY. MORALES FOR UNPAID
4.
ASSOCIATION DUES WAS A PERMISSIVE COUNTERCLAIM.
The Ruling of the Court

The Court partly grants the petition.

On Jurisdiction

Basic is the rule that jurisdiction over the subject matter of a case is conferred by law and determined by the allegations
in the complaint which comprise a concise statement of the ultimate facts constituting the plaintiff's cause of action. The
nature of an action, as well as which court or body has jurisdiction over it, is determined from the allegations contained
in the complaint, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted
therein. Once vested by the allegations in the complaint, jurisdiction remains vested irrespective of whether or not the
plaintiff is entitled to recover upon all or some of the claims asserted therein.[13]

Relative thereto is the rule that lack of jurisdiction over the subject matter may be raised at any stage of the
proceedings.[14] Jurisdiction over the subject matter is conferred only by the Constitution or the law. [15] It cannot be
acquired through a waiver or enlarged by the omission of the parties or conferred by the acquiescence of the court.
Consequently, questions of jurisdiction may be cognizable even if raised for the first time on appeal.[16]

NGA claims that the HLURB never had jurisdiction over the complaint filed by Atty. Morales considering that there was no
allegation that he was member of the association, entitling him to claim the use of the latter's facilities including the right
of access to McKinley Park. Citing Sta. Clara Homeowner's Association v. Gaston,[17] NGA asserts that for HLURB to
acquire jurisdiction over disputes among members of an association, it is a requirement that the allegation of
membership must be clear in the complaint, otherwise, no authority to hear and decide the case is vested in the
concerned agency. Membership in a homeowners' association is voluntary and cannot be unilaterally forced by a
provision in the association's articles of incorporation or by-laws, which the alleged member did not agree to be bound
to.[18]

In this case, it appears that Atty. Morales, by filing his complaint as a member whose rights have been allegedly violated,
has satisfied such requirement. His status as a member has not been questioned. It is worthy to note that NGA, in its
counterclaim, demanded the payment of association dues from Atty. Morales as he has been refusing to pay his dues
for more than three decades. In sum, there is no dispute that Atty. Morales is a member of NGA, albeit a delinquent
member. In Tumpag v. Tumpag,[19] the Court said:

Generally, the court should only look into the facts alleged in the complaint to determine whether a suit is within its
jurisdiction. There may be instances, however, when a rigid application of this rule may result in defeating substantial
justice or in prejudice to a party's substantial right. In Marcopper Mining Corp. v. Garcia, we allowed the RTC to consider,
in addition to the complaint, other pleadings submitted by the parties in deciding whether or not the complaint should
be dismissed for lack of cause of action. In Guaranteed Homes, Inc. v. Heirs of Valdez, et al., we held that the factual
allegations in a complaint should be considered in tandem with the statements and inscriptions on the documents
attached to it as annexes or integral parts.[20] [Citations omitted]

Considering that the requirement of membership is present, jurisdiction over the subject matter of the case was properly
vested in the HLURB.

On the finding that the restroom


was a nuisance per accidens

The CA in disposing the case, ruled that the restroom posed sanitary issues to Atty. Morales and is, therefore, a
nuisance per accidens. Such is a finding of fact, which is generally conclusive upon the Court, because it is not its
function to analyze and weigh the evidence all over again.

There are, however, well-recognized exceptions. These are (1) when the findings are grounded entirely on speculations,
surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is
grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact
are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are
contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to that of the trial
court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondent; (10)
when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on
record; or (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different conclusion.[21]

NGA avers that the case falls under the said exceptions considering that no proof was ever presented to prove that the
restroom was a nuisance per accidens. Absent such evidence, the CA's finding was only speculative, resulting in a grave
misapprehension of facts.

The Court agrees.

A nuisance per accidens is one which depends upon certain conditions and circumstances, and its existence being a
question of fact, it cannot be abated without due hearing thereon in a tribunal authorized to decide whether such a
thing does in law constitute a nuisance.[22] Obviously, it requires a determination of such circumstances as to warrant the
abatement of the nuisance. That can only be done with reasonable notice to the person alleged to be maintaining or
doing the same of the time and place of hearing before a tribunal authorized to decide whether such a thing or act
does in law constitute a nuisance per accidens.[23]

In other words, it requires a proper appreciation of evidence before a court or tribunal rules that the property being
maintained is a nuisance per accidens.

A reading of the CA's decision would easily reveal that its conclusions were merely speculative. It wrote:

The said toilet, to Our mind, poses sanitary issues which could adversely affect not only the Respondent but his entire
household as well. Even if there exists a perimeter wall between Respondent's house and the toilet, the odor emanating
from the latter could easily find its way to the dining area, and the foul and noxious smell would make it very difficult and
annoying for the residents of the house to eat. Moreover, the proximity of the toilet to Respondent's house places the
people residing therein at greater risk of contracting diseases both from improperly disposed waste and human
excrements, as well as from flies, mosquitoes, and other insects, should petitioner NGA fail to maintain the cleanliness in
the said structure. Verily, the determining factor when the toilet is the cause of the complaint is not how much it smells or
stinks but where it is located as to produce actual physical discomfort and annoyance to a person of ordinary
sensibilities.[24]

By the use of the words "would, should, could," it can be discerned that the CA was not even sure that the restroom has
caused such annoyance to Atty. Morales or his family. Its declaration that the restroom is a nuisance per accidens had
no basis in evidence. There is nothing in the records which discloses that Atty. Morales had introduced any evidence,
testimonial or documentary, to prove that the restroom annoyed his senses, that foul odor emanated from it, or that it
posed sanitary issues detrimental to his family's health. No certification by the City Health Officer was even submitted to
the HLURB to attest on such matters.

It was improper on the part of the CA to assume those negative effects because modern day restrooms, even those for
the use of the public, are clean, safe and emitting no odor as these are regularly maintained. For said reason, it was an
error on the part of the CA to rule that the restroom was a nuisance per accidens and to sustain the order that it should
be relocated.

Clearly, its finding was based on speculations, and not evidence.


On the finding that Atty.
Morales had no access to
to McKinley Park

NGA claims that the CA erred in upholding Atty. Morales' unbridled access to the park, which effectively constituted an
easement of right of way without any basis as against the clear statutory right of NGA, as the owner of the park, to fence
and protect its property on the basis of Articles 429 and 430 of the Civil Code.

The Court agrees with NGA.

Under the Civil Code, NGA, as owner of the park, has the right to enclose or fence his land or tenements by means of
walls, ditches, live or dead hedges, or by any other means without detriment to servitudes constituted thereon. It also has
a right to exclude others from access to, and enjoyment of its property.

NGA's legal right to block the access door is beyond doubt. Courts have no business in securing the access of a person
to another property absent any clear right on the part of the latter.

The CA essentially violated the right of NGA. Atty. Morales never introduced any evidence that he had acquired any
right by prescription or by agreement or legal easement to access the park through his side door. Moreover, he never
claimed that his side door was his only access to the park. He has other means and, being adjacent to the park, going
through other means is not cumbersome.

The conditions[25] set forth under the Deed of Donation by Ortigas & Co. Ltd. to NGA could not be used by Atty. Morales
in his favor. Assuming that he has a right as a member to use the park, it does not mean that he can assert that his
access to the park could only be done through his side door. Atty. Morales knows very well that he can access the park
through some other parts of the park.
Counterclaim for unpaid dues was a
permissive one and, therefore, the
affirmation of its dismissal was proper

A compulsory counterclaim is any claim for money or any relief, which a defending party may have against an opposing
party, which at the time of suit arises out of, or is necessarily connected with, the same transaction or occurrence that is
the subject matter of the plaintiffs complaint. It is compulsory in the sense that it is within the jurisdiction of the court, does
not require for its adjudication the presence of third parties over whom the court cannot acquire jurisdiction, and will be
barred in the future if not set up in the answer to the complaint in the same case. Any other counterclaim is permissive. [26]

The Court has held that the compelling test of compulsoriness characterizes a counterclaim as compulsory if there
should exist a logical relationship between the main claim and the counterclaim. The Court further ruled that there exists
such a relationship when conducting separate trials of the respective claims of the parties would entail substantial
duplication of time and effort by the parties and the court; when the multiple claims involve the same factual and legal
issues; or when the claims are offshoots of the same basic controversy between the parties.[27]

The criteria to determine whether the counterclaim is compulsory or permissive are as follows:

(a) Are issues of fact and law raised by the claim and by the counterclaim largely the same?
(b) Would res judicata bar a subsequent suit on defendants claim absent the compulsory rule?
(c) Will substantially the same evidence support or refute plaintiffs claim as well as defendant's counterclaim?
(d) Is there any logical relations between the claim and the counterclaim?
A positive answer to all four questions would indicate that the counterclaim is compulsory.[28] Otherwise, the same is
permissive.

Here, the main issues in the complaint are limited only to the propriety of barring Atty. Morales from accessing the park
through the side door and whether the restroom constructed by NGA is a nuisance per se. On the other hand, the
counterclaim is simply concerned with collecting from Atty. Morales his unpaid association dues for the past thirty (30)
years. Suffice it to state that payment or non-payment of association dues are distinct matters that do not relate to
whether the main cause of Atty. Morales against NGA was proper. Whether there was payment or otherwise is irrelevant
to the main issues considering that the pleadings filed by the parties essentially reflected an admission of membership of
Atty. Morales in the association. The failure to raise the issue of unpaid association dues in this case or its dismissal if
properly raised will not be a bar to the filing of the appropriate separate action to collect it.

WHEREFORE, the petition is PARTLY GRANTED. The March 13, 2015 Decision and the February 3, 2016 Resolution of the
Court of Appeals in CA-G.R. SP No. 131707, are REVERSED insofar as it affirmed (1) Atty. Morales' entitlement to an
unbridled access to the park through his side door; and (2) the order to relocate the restroom to another area.

SO ORDERED.
PLANTERS DEVELOPMENT BANK VS SPS. VICTORIANO AND MELANIE RAMOS

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision[1]dated
July 5, 2016 and Resolution[2] dated December 7, 2016 of the Court of Appeals (CA) in CA-G.R. SP No. 140264.

Antecedent Facts

The facts show that in July 2012, Spouses Victoriano and Melanie Ramos (Spouses Ramos) applied for several credit lines
with Planters Development Bank (PDB) for the construction of a warehouse in Barangay Santo Tomas, Nueva Ecija.[3] The
said application was approved for P40,000,000.00, secured by Real Estate Mortgage[4] dated July 25, 2012 over
properties owned by the spouses, particularly covered by Transfer Certificate of Title (TCT) Nos. 048-2011000874 and 048-
2011000875.
Subsequently, Spouses Ramos requested for additional loan and PDB allegedly promised to extend them a further loan
of P140,000,000.00, the amount they supposed was necessary for the completion of the construction of the warehouse
with a capacity of 250,000 cavans of palay.[5] Despite the assurance of the bank, only P25,000,000.00 in additional loan
was approved and released by PDB, which was secured by a Real Estate Mortgage [6] over four (4) real properties
covered by TCT Nos. 048-2012000909, 048-2012000443, 048-2012000445, and 048-2012000446.

Due to financial woes, Spouses Ramos were not able to pay their obligations as they fell due. They appealed to PDB for
the deferment of debt servicing and requested for a restructuring scheme but the parties failed to reach an agreement.

On April 23, 2014, PDB filed a Petition for Extra-judicial Foreclosure of Real Estate Mortgage under Act 3135, as amended,
before the Regional Trial Court of San Jose City, Nueva Ecija, which was docketed as EJF-2014-112-SJC. A Notice to
Parties of Sheriff’s Public Auction Sale dated May 7, 2014 was thereafter issued.[7]

On June 18, 2014, Spouses Ramos filed a Complaint[8] for Annulment of Real Estate Mortgages and Promissory Notes,
Accounting and Application of Payments, Injunction with Preliminary Injunction and Temporary Restraining Order against
PDB and its officers, namely, Ma. Agnes J. Angeles, Virgilio I. Libunao, Carmina S. Magallanes and Norberto P. Siega, also
before the RTC of San Jose City, Nueva Ecija, which was docketed as Civil Case No. 2014-485-SJC.

Instead of filing an Answer, PDB filed an Urgent Motion[9] to Dismiss, alleging that the venue of the action was improperly
laid considering that the real estate mortgages signed by the parties contained a stipulation that any suit arising
therefrom shall be filed in Makati City only.[10] It further noted that the complaint failed to state a cause of action and
must therefore be dismissed.[11]

Ruling of the RTC

In an Omnibus Order[12] dated November 17, 2014, the RTC denied the Urgent Motion to Dismiss, the pertinent portions of
which read as follows:
I. The Venue is Improperly Laid

Pursuant to autonomy of contract, Venue can be waived. Rule 5, Section 4(d) of the 1997 Rules of Civil Procedure allows
parties to validly agree in writing before the filing of the action on the exclusive venue thereof. Indeed, on the
defendants they have the contract where the venue allegedly agreed upon by them with the plaintiffs is Makati City.
However, one of the contentions of the plaintiffs is that the contracts between them and the defendants take the form
of an adhesion contract (par. 20, Complaint). As such, this Court has to apply Section 1, Rule 4 of the 1997 Rules of Civil
Procedure regarding the venue of real actions to avoid ruling on the merits without any evidence that would sufficiently
support the same.

II. The Complaint Fails to State a Cause of Action.

With such an issue raised, the Court examined the records and it has to tell the defendants that in civil cases before the
Court orders the issuance of summons, it looks on whether or not the facts alleged on the Complaint are sufficient to
constitute a cause of action and not whether the allegations of fact are true. Hence, as summons were issued in this
case, the Court had already found that the allegations in the Complaint are sufficient to constitute a cause of action.

xxxx
FOREGOING CONSIDERED, the Motion to Dismiss is hereby DENIED.

xxxx

SO ORDERED.[13]

Unyielding, PDB filed a motion for reconsideration of the Omnibus Order dated November 17, 2014, instead of filing an
answer to the complaint. This prompted Spouses Ramos to file a motion to declare PDB in default. Subsequently, in an
Order[14] dated February 20, 2015, the RTC denied both motions, ratiocinating thus:

Necessarily, the defendants were allowed to Isle Motion to Dismiss before filing an Answer or responsive pleading. As a
consequence of the Motion to Dismiss that the defendants filed, the running of the period during which the rules required
her to file her Answer was deemed suspended. When the Court denied the Motion to Dismiss, therefore the defendants
had the balance of the period for filing an Answer under Section 4, Rule 16 within which to file the same but in no case
less than five days, computed from the receipt of the notice of denial of the Motion to Dismiss. x x x x

xxxx

However, after the Court denied the Motion to Dismiss, the defendants filed Motion for Reconsideration which is not
precluded by the rules. Only after this Court shall have denied it would the defendants become bound to file the Answer
to the Complaint. It is only if the defendants failed to file Answer after the period given by the foregoing rules would the
plaintiff be entitled to have the defendants be declared in default. This was the same ruling of the Supreme Court in the
case of Narciso v. Garcia, G.R. No. 196877, November 12, 2012.

With regard to the Motion for Reconsideration of the Omnibus Order dated November 17, 2014, there being no new
arguments presented, the Court finds no cogent reason to reconsider and reverse the said Omnibus Order.

WHEREFORE, the Motion to Declare Defendants in Default and the Motion for Reconsideration are hereby DENIED.

SO ORDERED.[15]

Aggrieved, PDB filed a petition for certiorari with the CA, imputing grave abuse of discretion on the RTC for denying its
motion to dismiss, despite the fact that the venue was clearly improperly laid.

Ruling of the CA

In a Decision[16] dated July 5, 2016, the CA denied the petition, the pertinent portion of which reads as follows:
The order of the public respondent in denying the motion to dismiss and the consequent denial of the motion for
reconsideration is correct and judicious. Petitioner anchors its claim on the validity of the mortgage, and thereby the
provisional therein on venue must be upheld. On the other hand, respondents anchor its claim on the invalidity of the
mortgage, and thereby the complaint is filed in the proper venue. Clearly, no valid judgment can be passed upon the
allegations of both parties.[17]

Thus, having found no grave abuse on the part of the public respondent in denying the motion to dismiss and the
resulting denial of the motion for reconsideration, We find no cogent reason to disturb or modify the assailed Decision.
What the petitioners should have done was to file an answer to the petition filed in the trial court, proceed to the hearing
and appeal the decision of the court if adverse to them.[18]

WHEREFORE, premises considered, the petition is DENIED. The Omnibus Order dated 17 November 2014 and the Order
dated 20 February 2015 is hereby AFFIRMED in TOTO.

IT IS SO ORDERED.[19]
PDB filed a motion for reconsideration but the CA denied the same in its Resolution dated December 7, 2016, the
dispositive portion of which reads, thus:

WHEREFORE, in view of the foregoing, the motion for reconsideration is hereby DENIED.

IT IS SO ORDERED.[20]

Unyielding, PDB filed the present petition with this Court, reiterating its claim that the CA erred in affirming the order of
the RTC, which denied the motion to dismiss despite the improper venue of the case. It argues that since there is a
stipulation on venue, the same should govern the parties.

Ruling of this Court

The petition is meritorious.


Rule 4 of the Rules of Civil Procedure provides the rules on venue in filing an action, to wit:

RULE 4
Venue of Actions
Section 1. Venue of real actions. — Actions affecting title to or possession of real property, or interest therein, shall be
commenced and tried in the proper court which has jurisdiction over the area wherein the real property involved, or a
portion thereof, is situated.
Forcible entry and detainer actions shall be commenced and tried in the municipal trial court of the municipality or city
wherein the real property involved, or a portion thereof, is situated.

Section 2. Venue of personal actions. — All other actions may be commenced and tried where the plaintiff or any of the
principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a non-
resident defendant where he may be found, at the election of the plaintiff.

xxxx

Section 4. When Rule not applicable. — This Rule shall not apply.

(a) In those cases where a specific rule or law provides otherwise; or

(b) Where the parties have validly agreed in writing before the filing of the action on the exclusive venue thereof

Based on the foregoing, the general rules on venue admit of exceptions in Section 4 thereof, i.e., where a specific rule or
law provides otherwise, or when the parties agreed in writing before the filing of the action on the exclusive venue
thereof.

Stipulations on venue, however, may either be permissive or restrictive. “Written stipulations as to venue may be
restrictive in the sense that the suit may be filed only in the place agreed upon, or merely permissive in that the parties
may file their suit not only in the place agreed upon but also in the places fixed by law. As in any other agreement, what
is essential is the ascertainment of the intention of the parties respecting the matter.”[21]

Further, in Unimasters Conglomeration, Inc. v. Court of Appeals,[22] the Court elaborated, thus:

Since convenience is the raison d’etre of the rules of venue, it is easy to accept the proposition that normally, venue
stipulations should be deemed permissive merely, and that interpretation should be adopted which most serves the
parties’ convenience. In other words, stipulations designating venues other than those assigned by Rule 4 should be
interpreted as designed to make it more convenient for the parties to institute actions arising from or in relation to their
agreements; that is to say, as simply adding to or expanding the venues indicated in said Rule 4.
On the other hand, because restrictive stipulations are in derogation of this general policy, the language of the parties
must be so clear and categorical as to leave no doubt of their intention to limit the place or places, or to fix places other
than those indicated in Rule 4, for their actions. x x x.[23]

In view of the predilection to view a stipulation on venue as merely permissive, the parties must therefore employ words
in the contract that would clearly evince a contrary intention. In Spouses Lantin v. Judge Lantion,[24] the Court
emphasized that “the mere stipulation on the venue of an action is not enough to preclude parties from bringing a case
in other venues. The parties must be able to show that such stipulation is exclusive. In the absence of qualifying or
restrictive words, the stipulation should be deemed as merely an agreement on an additional forum, not as limiting
venue to the specified place.”[25]

In the instant case, there is an identical stipulation in the real estate mortgages executed by the parties, pertaining to
venue. It reads as follows:

18. In the event of suit arising from out of or in connection with this mortgage and/or the promissory note/s secured by
this mortgage, the parties hereto agree to bring their causes of action exclusively in the proper court/s of Makati, Metro
Manila, the MORTGAGOR waiving for this purpose any other venue.[26] (Emphasis ours)

In Spouses Lantin, the Court ruled that “the words exclusively and waiving for this purpose any other venue are
restrictive.”[27] Therefore, the employment of the same language in the subject mortgages signifies the clear intention of
the parties to restrict the venue of any action or suit that may arise out of the mortgage to a particular place, to the
exclusion of all other jurisdictions.

In view of the foregoing, the RTC should have granted the Urgent Motion to Dismiss filed by PDB on the ground that the
venue was improperly laid. The complaint being one for annulment of real estate mortgages and promissory notes is in
the nature of a personal action, the venue of which may be fixed by the parties to the contract. In this case, it was
agreed that any suit or action that may arise from the mortgage contracts or the promissory notes must be filed and
tried in Makati only. Not being contrary to law or public policy, the stipulation on venue, which PDB and Spouses Ramos
freely and willingly agreed upon, has the force of law between them, and thus, should be complied with in good faith.[28]

The CA, however, ruled that the RTC correctly denied the motion to dismiss in view of the contradicting claim of the
parties on the validity of the mortgage contracts, which, in turn, affects the enforceability of the stipulation on venue.
The CA agreed with the RTC that the ruling on the validity of the stipulation on venue depends on whether the mortgage
is valid which means there has to be full-blown hearing and presentation of evidence. It added that what PDB should
have done was to file an answer to the complaint, proceed to trial and appeal the decision, if adverse to them. [29]

The ruling of the CA renders meaningless the very purpose of the stipulation on venue. In Unimasters, the Court
emphasized:

Parties may by stipulation waive the legal venue and such waiver is valid and effective being merely a personal
privilege, which is not contrary to public policy or prejudicial to third persons. It is a general principle that a person may
renounce any right which the law gives unless such renunciation would be against public policy.[30]

In the present case, Spouses Ramos had validly waived their right to choose the venue for any suit or action arising from
the mortgages or promissory notes when they agreed to the limit the same to Makati City only and nowhere else. True
enough, the stipulation on the venue was couched in a language showing the intention of the parties to restrict the filing
of any suit or action to the designated place only. It is crystal clear that the intention was not just to make the said place
an additional forum or venue but the only jurisdiction where any suit or action pertaining to the mortgage contracts may
be filed. There being no showing that such waiver was invalid or that the stipulation on venue was against public policy,
the agreement of the parties should be upheld. It is therefore a grave abuse of discretion on the part of the RTC to deny
the motion to dismiss filed by PDB on the ground of improper venue, especially when the said issue had been raised at
the most opportune time, that is, within the time for but before the filing of an answer. The CA should have given this
matter a more serious consideration and not simply brushed it aside.

Moreover, Spouses Ramos never really assailed the validity of the mortgage contracts and promissory notes. Apparently,
what they were only claiming was that the said contracts contain stipulations which are illegal, immoral and otherwise
contrary to customs or public policy.[31] For instance, they alleged that the interest was pegged at an excessive rate of
8% which the bank unilaterally increased to 9%. They likewise claimed that the penalty interest rate of 3% was
unconscionable. Further, they claimed that the escalation clause provided in the mortgage contracts was violative of
Presidential Decree No. 1684.[32] These matters, however, do not affect the validity of the mortgage contracts. Thus, with
all the more reason that the stipulation on venue should have been upheld pursuant to the ruling of the Court in Briones
v. Court of Appeals,[33] viz.:

[I]n cases where the complaint assails only the terms, conditions, and/or coverage of a written instrument and not its
validity, the exclusive venue stipulation contained therein shall still be binding on the parties, and thus, the complaint
may be properly dismissed on the ground of improper venue. Conversely, therefore, a complaint directly assailing the
validity of the written instrument itself should not be bound by the exclusive venue stipulation contained therein and
should be filed in accordance with the general rules on venue. To be sure, it would be inherently consistent for a
complaint of this nature to recognize the exclusive venue stipulation when it, in fact, precisely assails the validity of the
instrument in which such stipulation is contained.[34]

Spouses Ramos impliedly admitted the authenticity and due execution of the mortgage contracts. They do not claim to
have been duped into signing the mortgage contracts or that the same was not their free and voluntary act. While they
may have qualms over some of the terms stated therein, the same do not pertain to the lack of any of the essential
elements of a contract that would render it void altogether. Such being the case, the stipulation on venue stands and
should have been upheld by RTC and the CA.

WHEREFORE, the Decision dated July 5, 2016 and Resolution dated December 7, 2016 of the Court of Appeals in CA-G.R.
SP No. 140264 are REVERSED and SET ASIDE. Civil Case No. 2014-485-SJC is hereby DISMISSED on the ground of improper
venue.

SO ORDERED.